New MAS policy promotes pre-award audits

But General Services Administration officials said the new MAS policy set for release
last Friday modifies schedule oversight rules to stress pre-contract award audits while
curbing requests for commercial sales records.

"I believe we have clarified a number of things," said Ida Ustad, deputy
associate GSA administrator for acquisition policy.

GSA is promoting the use of pre-award audits, she said, and it is requiring that
post-award audits get high-level approval and be noted in the solicitation at bidding
time.

But industry groups are worried that GSA will be able to rummage through vendor sales
data under the guise of verifying pricing discounts and industrial funding fees.

Some vendors also questioned whether GSA's adherence to the most-favored customer
pricing strategy complies with the fair and competitive pricing edict mandated by
Congress.

Schedule holders have long complained that GSA's negotiating objectives and pricing
methods are overly burdensome and ignore commercial market factors.

"GSA still has the right to go in and examine the data for errors. It's unclear at
this time how they plan to handle looking at commercial transactions," said Larry
Allen, executive director of the Coalition for Government Procurement in Washington.

"Perhaps the biggest disappointment is that GSA ignored the pricing standard set
by Congress," he said. "It raises the question of whether GSA is actually
picking and choosing how it will follow congressional directives."

Officials in GSA's Federal Supply Service and schedule vendors had been working under
an interim MAS policy since March 1996. Last year, GSA officials issued draft policy
revisions describing how they planned to update program oversight and contract negotiation
regulations to reflect procurement law changes.

Under the final refurbished policy, GSA will not require MAS vendors to submit
commercial transaction records unless government pricing deviates substantially from
commercial sales policies.

Ustad said the new audit language focuses more on pre-award reviews. But MAS
contracting officials can insert post-award audit requirements into contracts if they
think it will be necessary to protect the government buyers' interests.

Post-award audits, however, must be approved by senior MAS officials and vendors must
be made aware of the audit clause.

Audits should be exceptions based on particular situations, Ustad said.

But the government still will reserve the right to conduct post-award audits for
compliance with such things as standard price reduction clauses and proper remittance of
the industrial funding fee, she said.

Meanwhile, Congress seems ready to deny state and local governments access to the MAS
program without ever having tested the cooperative purchasing program it established
several years ago.

Before the summer recess, the House Appropriations Committee approved a measure to
repeal the MAS cooperative purchasing program established by the 1994 Federal Acquisition
Streamlining Act. The Senate Appropriations had passed a similar measure in late July.

Lawmakers originally created the cooperative purchasing option to leverage the
government's buying clout. But many small business groups complained that adding state and
local governments to the MAS client list would hurt sales and persuaded Congress to delay
the program until the General Accounting Office could assess its impact.

Earlier this year, GAO reported that cooperative purchasing would have little effect on
small business and that there was no way to predict how many state and local governments
would use the MAS contracts.

Sen. Christopher S. Bond (R-Mo.), chairman of the Senate Small Business Committee, then
used the Senate's supplemental appropriations bill to introduce language eliminating the
MAS cooperative purchasing format entirely.

White House officials later failed to persuade House and Senate leaders to give the
General Services Administration's Federal Supply Service a chance to run a cooperative
purchasing pilot program for information technology schedule products.

Several IT industry leaders have acknowledged that chances for saving cooperative
purchasing are dwindling. Yet some House lawmakers have promised to invoke parliamentary
procedures and yank the cooperative purchasing language out of their appropriations bill.

"Most people feel that one or two nails already have been hammered into the coffin
on cooperative purchasing. Several House members may raise a point of order when it comes
before the full House, but it's unclear how far that will go," Allen said. "A
number of our members were sitting on the fence on this issue a year ago. But as momentum
has built against it, a lot of companies are now saying that they would rather not change
anything."