Preparing Commercial Sales Practices for Your GSA Schedule
Every business has its own standard Commercial Sales Practices that ensure the company remains competitive and successful within the marketplace. However, many businesses 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's smart to learn the Commercial Sales Practice disclosure requirements from the early stages. In this blog, we'll highlight what you need to know from the beginning of the GSA Schedule offer process to after award.
Commercial Sales Practices for Potential GSA Schedule Holders
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 and the GSA Startup Springboard Program in order for the government to rapidly obtain innovative solutions. However, regardless of a company’s experience in the field, the Commercial Sales Practice (CSP) disclosure documents are some of the most important in the pricing section of a GSA proposal.
The Pricing Section of the GSA Schedule Proposal
During the GSA Schedule Acquisition process, you have to complete three sections of the GSA Schedule proposal: administrative, technical, and pricing. The pricing section is the most involved section.
If you are opting into Commercial Sales Practices (we'll talk more about this below), 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. For example, offering a spot discount to a disgruntled customer or a loyal repeat customer.
Although these instances are not typical, you are still required to explain the situation to GSA and why it's 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's 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. However, you need to be very clear and meticulous when describing these exceptions and non-standard discounts.
Commercial Sales Practices for Current GSA Schedule Holders
Now that you have a GSA Schedule and have established your Commercial Sales Practices with GSA, it's 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's important to ensure that your CSP disclosure is current, accurate, and complete to avoid compliance problems that can arise through Contractor Assessment Visits (CAVs). Violation of the Price Reductions Clause can result in fines and/or legal issues, but if you make sure you understand the PRC and have a plan in place to manage your GSA Schedule properly or hire a consultant for help, you can easily avoid this.
You also have to make sure to report your GSA sales quarterly, even if the numbers are 0 for that quarter.
A Note on Transactional Data Reporting (TDR)
If you noticed earlier, I said "if you opt into Commercial Sales Practices." Doesn't every prospective contractor have to complete the CSP-1 document? Not necessarily.
Transactional Data Reporting (TDR) has had a major impact on the Commercial Sales Practices disclosure requirements for contractors. Right now it is only available to contractors under certain Special Item Numbers (SINs), but it will soon open up to all contractors.
Under TDR, you do not have to fill out a CSP document or report your Commercial Sales Practices. 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.
This may seem like TDR is the obvious choice, but you do have to report your sales more frequently and in depth, so it's not necessarily the best option for every company. If you want to learn more about the two, check out our blog on CSP vs. TDR.
Succeeding with Your GSA Schedule
Commercial Sales Practices can be tricky whether you are a prospective contractor or already have your contract, but with proper preparation and compliance management, your company can be sure to effectively manage its pricing and discounting policies. If you have questions about whether you should choose CSP or TDR, or if you need help obtaining or managing your GSA Schedule, we are here to help. Whatever it is you need, our expert consultants can answer your questions and direct you down the right path.