The General Services Administration is struggling to keep prices fair and reasonable for some IT products because resellers are listing them at varying prices, often well above what they cost commercially, according to its inspector general.
As of last year, GSA’s IT Schedule 70 listed items with price variances of up to 88 percent, like a smart TV listed for $1,597 in one contract and $3,009 in another. In another case, one company offered a hard drive for 70 percent more than the commercial price.
Because GSA’s Schedules Program — governmentwide vehicles for agencies to place orders directly with vendors at consistent prices, typically lower than industry standard because of volume purchasing — allows sales from both original equipment manufacturers and resellers, it’s possible and likely for several listings of identical products.
And “for the majority of the schedule items we evaluated,” auditors said, they found prices were higher on IT 70 than other commercial offerings.
“Management action is needed to ensure the government receives competitive pricing at award as well as throughout the life of the contract and that GSA maximizes the government’s buying power,” the report said.
The Department of Defense, the GSA’s largest customer, similarly took issue with the schedules’ inconsistent pricing last year, according to an Acquisition, Technology and Logistics memorandum. The report stated the GSA could improve on finding discounts and determining the fairness of its pricing.
“DOD ordering activities cannot rely on GSA’s price reasonableness determination alone,” the memorandum said. “In calendar year 2014, DOD established a new requirement for Contracting Officers to make their own fair and reasonable price determination for all FSS orders.”
The GSA IG found that IT resellers in many cases are really hurting the agency’s business. From 2011 to 2014, three-quarters of IT reseller contracts’ sales were too low to cover GSA’s administrative costs; likewise, since 2007, FAS spent $25 million to administer contracts with low or no sales.
“While FAS management has agreed that schedule contracts with low or no schedule sales are a significant drain on resources, little progress has been made to correct the problem,” the audit says. “In FY 2014, 80 percent of the IT Center’s Industrial Funding Fee (IFF) revenue was generated by 5 percent of its contracts, and 90 percent of its revenue was generated by 10 percent of its contracts. This indicates substantial FAS resources are expended on contracts that generate little or no revenue.
The IG recommends not only creating more pricing procedures and performance measures, but also canceling any IT reseller contracts that don’t meet the $25,000 minimum sales to avoid burdensome low-revenue agreements.
GSA concurred with all of the recommendations, mentioning there had already been a lot of work to make prices more competitive.
“In conjunction with the aforementioned efforts, we fully intend to continue to take steps to address your concerns and continue to analyze pricing and reach out to vendors that are offering higher pricing to reduce the price variability currently on schedule,” GSA Deputy Assistant Commissioner of Integrated Technology Services Kay Ely said in the response.
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