Prepare Your Commercial Sales Practices for a GSA Schedule
Every business has its own standard commercial sales practices that ensure the company remains competitive and successful within the marketplace. Many businesses have these successful commercial sales practices but do not track them in a way that easily translates to GSA’s requirements. Having a strong record of your commercial sales practices is a vital part of obtaining and maintaining a GSA Schedule. For companies considering entering the federal marketplace through the GSA Schedules Program, it is smart to start understanding the commercial sales practice disclosure requirements from the early stages.
Potential Schedule Holders
A Schedule holder’s GSA contract should model its commercial sales practices. This comes into play in a variety of ways. First and foremost, potential contractors should only propose products and services to GSA that their business has sold to its commercial customers. This may seem obvious, but contractors come across this issue surprisingly often. For example, your company is rolling out new software in a month and wants to get a head start by proposing it on your GSA Schedule before it has hit the commercial market.
While convenient, unfortunately GSA contracting officers are hesitant to allow this, especially for new offerors who are not established in the federal marketplace. GSA is not designed to be a company’s “first customer” when it comes to the products and services offered on Schedule. GSA wants to know that the company has successfully tested and sold their offering on the commercial market; i.e. is there a need for this product or service and is the price fair and reasonable?
That being said, there are a few exceptions that fall under programs like GSA FAStLane, in order for the government to rapidly obtain innovative solutions. However, regardless of a company’s experience in the field, the commercial sales practice disclosure documents are some of the most important in the pricing section of a GSA proposal.
GSA requires a document called the CSP-1 to be submitted with a GSA proposal which describes what types of customer classes you have sold to within the past 12 months and what kinds of discounts you offer these customers, including standard discounts, concessions, quantity/volume discounts or prompt payment discounts. From there, you will determine the customer or customer class that receives the best pricing, also known as the Most Favored Customer (MFC). GSA will negotiate a “fair and reasonable” discount based on what is offered to the MFC.
Offerors are also expected to disclose any non-standard or “occasional” discounts that have been offered to certain customers or customer classes due to special circumstances. Although these instances are not typical, you are still required to explain the situation to GSA and why it is not feasible for your company to offer these prices full time. GSA’s goal is to obtain the lowest prices possible, but they are certainly not there to put you out of business. It is important to disclose these non-standard discount occurrences, but this does not mean that GSA expects to receive these abnormally low prices.
Often, companies will provide deep discounts off commercial prices to the distributors or resellers of their products, because they provide added value that other customers do not. Value added resellers could provide services such as end user support, advertising, administrative tasks such as invoicing or guaranteed purchase minimums. Since GSA does not perform these types of added value services and their purchasing position is as the end-user, it makes sense that they would not receive the same price as this customer class. Providing an explanation of these value-added services, as well as disclosing the discounts offered to these customers, will simplify the pricing negotiation process with GSA.
Current Schedule Holders
Now that you have a GSA Schedule and have established your commercial sales practices with GSA, it is important to maintain contract compliance by disclosing any CSP updates and maintaining your GSA to MFC discount delta established at award. This means that you may not offer any discount to your commercial customers that is higher than that of GSA’s. GSA should always receive at least the established discount off the MFC price. If commercial customers received a lower price, you would be violating the Price Reductions Clause (PRC). It is important to ensure that your CSP disclosure is current, accurate and complete to avoid compliance problems that can arise through Contractor Assessment Visits (CAVs) or OIG Audits. Violation of the Price Reductions Clause can result in fines and/or legal issues.
A Note on Transactional Data Reporting
Transactional Data Reporting (TDR) is a relatively new development within GSA, but has had a major impact on the commercial sales practice disclosure requirements for contractors. TDR requires contractors to report sales monthly instead of quarterly. It also requires contractors to provide detailed information about each GSA sale, instead of only reporting the amount per SIN. While contractors do have to report additional information monthly, rather than quarterly, electing TDR eliminates the CSP disclosure requirements. Contractors may only charge GSA at or below their awarded rates, but are no longer required to disclose commercial sales practices regarding MFC discounts.
The commercial sales practice required disclosures of a GSA Schedule can be tricky, but with proper preparation and compliance management, your company can be sure to effectively manage its pricing and discounting policies. Not sure where to start with your CSP? Give us a call!
About Morgan Taylor
Morgan Taylor is a Consultant for Winvale’s Professional Services Department. Her career at Winvale began in 2017 as a Business Development and Consulting Intern. Since 2018, Morgan has served as a full time Consultant with Winvale where she provides GSA Schedule acquisition and maintenance support to her clients. Morgan is a graduate of James Madison University with a Bachelor of Arts Degree in International Affairs and Spanish Language and minors in Political Science and Latin American & Caribbean Studies. Morgan is currently a member of the National Contract Management Association (NCMA).