GSA Panel: Drop Price Reduction Clause for Services A GSA advisory panel has recommended scrapping rules that require service contractors to give most-favored-customer discounts to GSA schedules customers. While urging GSA to eliminate the price reduction clause, the panel called for new rules to enhance competition for schedule task orders. The Multiple Award Schedules Advisory Panel was created by former GSA Administrator Lurita Doan. The panel, made up of government acquisition officials and industry representatives, plans to present its recommendations to GSA later this fall. The price reduction clause requires schedule contractors to offer the government the same price it offers to its best commercial customer. Panel member Alan Chvotkin, executive vice president of the Professional Services Council, said most members agreed that the clause is “a meaningless concept” when applied to services. Many in industry argue that services provided to different customers vary too much to set a fixed price. Agencies “don’t buy exactly the same (services) in exactly the same mix,” Chvotkin said. Several large companies, including Sun Microsystems and Canon, have given up their schedule contracts in disputes over pricing. GSA’s pricing policies were established decades ago, when the schedules sold primarily off-the-shelf products, but services now dominate the sales. To ensure that the government pays reasonable prices for services, the panel urged GSA to give all schedule contractors a chance to bid on all task orders, or take other steps to get at least three bids on each order. The recommendation is similar to the Defense Department’s Section 803 rule, which does not currently apply to civilian agencies. The panel said GSA should also give better guidance to its contracting officers on how to negotiate fair and reasonable prices. The commission heard conflicting arguments about the price reduction clause in a series of public meetings during the spring and summer. Some federal acquisition officials and contractors compared a company’s GSA schedule price to the sticker price posted by a car dealer: The buyer tries to negotiate a discount from the price on the sticker. Others, especially in government, argue that the price reduction clause ensures that the government will pay a reasonable price even if there is no additional discount. The panel plans to discuss the clause as it applies to purchases of products at an Oct. 6 meeting. The chairman, Elliott Branch of the Naval Sea Systems Command, has said it hopes to complete its recommendations by the end of October. One panel member, David Drabkin, GSA’s deputy chief acquisition officer, warned at the first meeting in May, “No matter what we do, [it] will be controversial.”