The GSA inspector general found that the price reduction clause was “ineffective” in making sure that the government got the most competitive price in several audited contracts. Those findings may provide ammunition for ongoing efforts to scrap the controversial clause.

The price reduction clause requires that GSA schedule contractors give the government the “most favored customer” price—which is the lowest price offered to any customer. Contractors must provide evidence of what other federal and commercial customers pay. Contractors say the clause is antiquated and have been fighting to scrap it for years.

In the semiannual report to Congress, the IG said the clause had produced disappointing results in five recent audits of Multiple-Award Schedule contracts totaling more than $5.1 billion in government-wide sales. “All five of the audits showed that the price reduction clause was ineffective,” the IG wrote in the report.

The reasons given for the finding included too few sales for accurate comparisons and too many exclusions written into the contracts. Two of the audits also showed that customers with lower sales volume received higher discounts and better terms than the government.

The IG said $222 million from those contracts could have been better spent.

Larry Allen, a consultant with Allen Federal Business Partners, said the IG’s criticisms were “surprising” because the agency’s auditor generally has supported keeping the clause.

“The Price Reduction Clause has not been a significant factor in keeping Schedule prices competitive for two decades, if it ever was,” Allen wrote in his newsletter. “Competition and market transparency are much more effective. If even the IG doubts its utility, it is clearly time to do away with the Price Reductions Clause.”

A panel appointed by a former GSA administrator recommended in 2009 that the clause be removed and replaced with an alternative approach.