By: Matthew Lewis on October 26th, 2020
Understanding Commercial Sales Practices
GSA Schedule | 4 Min Read
Once contractors acquire a GSA Schedule, they gain access to one of the largest buyers of goods and services in the world—the U.S. government. Since the U.S. government is one of the largest consumers, they want to receive the best values and prices available from contractors. This is where your Commercial Sales Practices (CSP) come in.
When preparing your GSA Multiple Award Schedule Offer, there are a number of important pieces of information GSA requires, including some administrative, technical, and pricing documents, but one of the most important documents GSA requires in an offer submission is your Commercial Sales Practices document. As consultants, we know it’s important you fully understand CSP and their role in your GSA Schedule contract.
What Are Commercial Sales Practices?
Commercial Sales Practices play a big role in the GSA Multiple Award Schedule (MAS) Program. Contractors use Commercial Sales Practices to determine the customer or customer class in which the lowest price is offered. This is referred to as the contractor's Most Favored Customer (MFC).
One of the key goals in completing a Commercial Sales Practices document is to determine who your MFC is. This is important because GSA compares the rates that contractors charge their MFC as its basis for price negotiation.
Commercial Sales Practices Chart
Contractors have the option to select an individual customer as their MFC, or an entire customer class. The chart below is an example of the CSP chart each contractor is required to complete with their offer submission.
The column titled “Type of Customer” on the left-hand side represents customer classes that contractors can designate as their Most Favored Customer. In this particular example, the contractor has determined that approximately 30% of their total commercial sales deal with “Value Added Resellers (VARs)” and 70% of their total commercial sales deal with “National and Corporate Accounts.”
Because this contractor offers a higher discount percentage to National and Corporate Accounts (as seen in Column 2, “Standard Discounts & Pricing Policies”) at 8%, National and Corporate Accounts is the contractor’s Most Favored Customer.
Although the CSP chart appears to be complex and has a high number of columns and rows to complete, it is rather straightforward. Contractors will move from left to right through each column that pertains to them. Contractors can fill in as many rows as is relevant to their commercial sales practices, as long as the Percentage of Gross in Column 9 add up to 100%.
Offerors are also expected to disclose any non-standard or “occasional” discounts that have been offered to certain customers or customer classes because of 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.
While GSA strives to have the lowest price possible, they also recognize that some abnormalities exist in the commercial pricing industry, and prices that companies do not charge on a regular basis are not subject to comparison.
Transaction Data Reporting (TDR)
One of the developments in the past few years that has a direct effect on Commercial Sales Practices is Transactional Data Reporting (TDR). Unlike traditional Commercial Sales Practices, in which contractors are required to denote their Most Favored Customer, TDR allows contractors to bypass these disclosure requirements. Contractors are still required to charge GSA at or below their awarded rates but are no longer required to disclose Commercial Sales Practices regarding MFC discounts.
On the flipside, contractors who participate in the TDR program are required to report their GSA sales monthly instead of quarterly. Additionally, the TDR program requires contractors to provide detailed information for each GSA sale, instead of only reporting the total amount for each Special Item Number (SIN).
Maintaining Contract Compliance with Commercial Sales Practices
After you have completed your Commercial Sales Practices and your contract is awarded, it is important to continue to maintain your GSA to MFC discount delta established at the time of award. Even after your GSA MAS has been awarded, commercial customers should still never receive a lower discount than GSA. This would be in direct violation of the Price Reduction Clause.
GSA should always receive at least the established discount off the MFC price. In other words, if the commercial rate offered to the Most Favored Customer changes, then the GSA rate should change as well, with the same discount percentage being reflected. For example, if you discount the commercial price of a laptop to your MFC by 25%, you need to take off 25% on the GSA rate as well.
However, as with anything with the government, you need to formally change the price through your Contracting Officer. You can add/delete and change the price of products through a contract modification. It’s important to make sure you disclose any CSP updates and that they are always current and accurate to maintain proper contract compliance.
Do You Need Help With Your Commercial Sales Practices or Maintaining Your GSA Schedule?
Although dealing with GSA can seem complex, the more you know about basic starting points such as Commercial Sales Practices and their use, the more comfortable you will be understanding the bigger picture. For more information on how you can maintain your GSA Schedule contract, check out our blog and our monthly government contracting newsletter.
Do you still have questions about Commercial Sales Practices or GSA Schedule contracting in general? One of our consultants is here to help you.