Winning a GSA contract is a desirable goal for many businesses. However, there is a potentially misleading school of thought that holding a GSA Schedule contract is all roses. Many business owners think of a GSA Schedule as if it were just another sales channel; very profitable, yes, but still very much the same as other ways of doing business. The truth is: GSA contracting has its pitfalls and drawbacks too. And some of them can literally ruin your profits.
The downside of GSA Schedules
Unlike the commercial market, the federal market has its own rules, compliance requirements and regulations, of which many are extremely detailed, strict and full of legal nuances that are easy to violate without even knowing it.
First of all, a GSA contract does have its many pros. A contract award is a real success for small and other than small businesses; this is straightforward. But there are cons, too. Let’s take a brief look at both.
Pros & cons of GSA contracts
Among the benefits of securing a GSA contract are:
- Free access to a multi-billion federal market. The GSA needs almost everything and buys almost everything. Whatever your product or service is, chances are the government needs it.
- Long-term contract. Once you are awarded, your contract allows you to sell to the government for a duration of 5 years. And then, you can renew the 5-year increments, up to three times, for a total of 20 years.
- Stable payments. The government is a very reputable client, so you will get your invoices paid, whatever it takes.
- High contract prices. Such MAS categories as Schedule 70 (IT) or Schedule 84 (Security) can yield you very profitable contracts.
- Guaranteed prices. As soon as you negotiate GSA prices, they won’t change anymore. You are guaranteed to sell at those prices. Okay, there are some exclusions like Price Reduction clauses, but normally there is no price negotiation after approval.
- Low competition. There are many federal vendors out there, but still far less than the competition on the conventional markets.
Well, the advantages of GSA Schedule contracts are already well-known, so we won’t review them at great length. There are already many articles in our blog that explain in detail all the benefits of obtaining a Schedule. Instead, let’s explore the drawbacks of GSA contracting.
Top compliance risks for GSA Schedule contractors
Among the major drawbacks of working with the government are the various compliance risks. Yes, there are other drawbacks like costs of obtaining and maintaining a Schedule, limited price marketing due to fixed prices, complex bidding rules, and so on. But what is the real reason for most of GSA contract failures are compliance issues.
What does it mean to be GSA compliant?
Your GSA Schedule contract must remain compliant to the General Services Administration rules and regulations at any time. And it is your responsibility to check for compliance and take all the necessary measures to remain in line. The top compliance risks for GSA Schedule contractors are:
- TAA compliance. Trade Agreement Acts compliance is a major concern for many companies that use parts and details manufactured outside of the United States. The purpose of the Act is to guarantee that the products sold to the government are either manufactured or substantially transformed in the U.S. or in one of the designated countries. If the product or a significant part of it was manufactured in a non-compliant country such as India, China, Pakistan, Malaysia, Russia or Iran, it cannot be sold to the government. Non-TAA compliant products can easily render the entire GSA contract void.
- GSA Pricing Compliance. When it comes to pricing, GSA Terms and Conditions are very clear: the government wants the best price. Technically, a vendor is required to negotiate a certain Basis of Award, along with the GSA’s discount. This price is to be held during the entire contract’s period. Increasing the GSA price or providing discounts to commercial customers is not allowed. Vendors have surprisingly many issues involving the GSA pricing compliance, including violation of the MFC (Most Favored Customer) principle, unreasonable price reductions, or stacking GSA and non-GSA items together within the same invoice.
- GSA’s Contractor Assistance Visit. During the 5-year period of validity of a GSA contract, a GSA Industrial Operations Analyst (IOA) will conduct a Contractor Assistance Visit (CAV). The purpose of the visit is to assess the compliance of the company which includes review of documents, working processes and employee working conditions. Many vendors fail to successfully pass CAV, and that results in the noncompliance stamp put over the company, which prevents further partnership with the government.
- GSA Terms and Conditions. Understanding of terms and conditions is crucial and must be enforced within the company. You should instruct and train employees that the GSA terms and conditions are different from the typical modus operandi of your business.
Pitfalls of GSA contracting in 2023
What to pay attention to in 2023? Are there any new challenges that GSA Schedule contractors may face? Here are top potential pitfalls that can become a concern for GSA vendors in 2023.
Compliance issues
The political and diplomatic landscape in 2023 is going to be complex and barely predictable. You should pay close attention to new regulations related to TAA compliance. As new countries may fall under sanctions, even the previously 100% compliant products may suddenly stop being such. Monitoring compliance changes is strongly suggested.
Greenhouse gas emissions
Year 2023 brings in the new green agenda. Companies are required to meet the greenhouse gas emission restrictions and mitigation requirements. Certain federal contractors are required to disclose their GHG emissions and take measures on reducing them.
New cybersecurity landscape
The course on improving National Cybersecurity introduces new requirements to GSA contractors on managing their computer and IT infrastructure, to guarantee security of data and information. GSA contractors are required to undergo security assessment to safeguard national security information against cyber attacks and breaches.
Non-compete agreements
Non-compete agreements between employees and companies that prevent the former from taking the same positions after conclusion of the contract in competing companies. The current trend in GSA contracting is to eliminate any non-compete clauses completely as being unfair. The way this would be done is being discussed now, but in any case, the GSA contractors should keep an eye on new laws and regulations in these spheres, in order to remain compliant.
Federal Contracting: Risks and Rewards!
As you see, getting a GSA contract is only the beginning of the road. And there are risks and rewards along the way. Before you achieve success with your GSA Schedule contract, you must do your homework. And hiring a GSA expert seems like a reasonable step at this stage. Indeed, you need to rework your documents, prepare agreements, adapt business processes to GSA requirements, set up separate accounting and invoicing for GSA contracts. Not to mention managing compliance and monitoring the regulatory front in order to understand the current environment of GSA contracting.
Price Reporter offers GSA contracting and Schedule management services to many businesses across the U.S. We have ready and tested GSA solutions for all kinds, when it comes to cooperation with the government and will gladly provide a consultation, whatever questions you may have.
