NCMA Potomac_GSA Schedule Compliance Pitfalls

Report
GSA Schedule
Compliance Pitfalls
Presented by:
Jennifer N. Aubel
© 2012 | All Rights Reserved | 805 King Farm Boulevard | Suite 300 | Rockville , Maryland 20850 | 301.231.6200 P | 301.231.7630 F | www.aronsonllc.com
Agenda
• Understanding your Most Favored Customer (MFC) and
Basis of Award (BOA)
• The Price Reductions Clause
• Pro-Actively Administering your GSA Schedule Contract
• Frequently Overlooked Terms and Conditions
• Risks and Penalties Associated with Non-Compliance
• Recent GSA Inspector General Audit Actions and Findings
• Best Practices for Effective GSA Compliance Programs
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Slide: 2
Ways Failing to Comply with your GSA
Schedule Can Cost You Money
1. Not understanding the Basis of Award
2. Incomplete, inaccurate, and/or out-of-date
Commercial Sales Practices
3. Failing to reduce your prices when required
4. Failing to increase your prices when allowed
5. Failing to extend all negotiated discounts
(volume, quantity, prompt payment)
6. Violating the Trade Agreements Act (TAA) and/or
Service Contract Act (SCA)
Not educating the appropriate personnel on
contract requirements or establishing adequate
controls
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Slide: 3
Understanding the Most
Favored Customer and
Basis of Award
Managing Your Pricing Disclosures
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Slide: 4
Major Recurring Findings in OIG Audits
1. Commercial sales practices data submitted to
support proposed pricing reflected noncurrent, inaccurate, and/or incomplete
information (83.0%).
2. Commercial customers comprised <5.0% of
the contractor’s sales (43.0%).
3. Contractor charged employees to labor rates
for which they did not meet the minimum
requirements in the contract (27.0%).
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Slide: 5
Pricing Compliance Starts with
Commercial Sales Practices (CSP-1)
• Deceptively simple-looking
• The single most important document in your
contract!
• Designed for products companies; services
contractors will likely need to add information
• The advent of the “Document 8”
• When to update your CSP
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Slide: 6
CSP-1 Specifics
Any customer
means ANY
customer
Don’t let form
dictate content
Explain why GSA isn’t
entitled to deviationbased pricing
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Slide: 7
The Dreaded “Document 8”
• Used primarily in services Schedules
• Can add complexity to the Basis of Award
• What is meant by Most Favored Customer?
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Slide: 8
Most Favored Customer (MFC) vs.
Basis of Award Customer (BOA)
Most Favored Customer
The customer or class of
customers that receives
your best pricing, regardless
of the terms and conditions.
Basis of Award Customer
The customer or class of
customers upon which the
price reductions clause is
predicated.
These terms are frequently used interchangeably,
but they are not always the same.
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Slide: 9
The Basis of Award (BOA)
• Establishes a relationship between the BOA
customer’s discount and the GSA discount that must
be maintained for the life of the contract
Basis of Award
MSRP
BOA
Discount
BOA
Price
GSA
Discount
GSA Price
w/out IFF
Discount
Relationship
$500.00
10.0%
$450.00
15.0%
$425.00
5.0%
• When this discount relationship is disturbed, then a
PRICE REDUCTION has been triggered
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Slide: 10
How GSA Documents the BOA
Contractor’s price/discount relationship with the
Government and with the MFC shall remain throughout
the contract period no less favorable to the Government
than at the conclusion of negotiations, that is:
For the life of the contract, the Government’s
discount of X% [15%] will always be at least Y%
[5.0%] greater than the Z% [10%] discount to the
customer upon which this award is based.
© 2012 | All Rights Reserved | Aronson LLC | www.aronsonllc.com
Slide: 11
The Price Reductions Clause
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Slide: 12
Price Reductions, GSA Schedules
GSAR 552.238-75 Price Reductions
• Price Reductions are not really about price, rather they
are about the discount
• What transactions are monitored for price reductions?
MSRP
BOA
Discount
BOA
Price
GSA
Discount
GSA Price
Discount
Relationship
Basis of Award
$500.00
10.0%
$450.00
15.0%
$425.00
5.0%
Price Reduction
$500.00
12.0%
$440.00
15.0%
$425.00
3.0%
New GSA Discount
$500.00
12.0%
$440.00
17.0%
$415.00
5.0%
© 2012 | All Rights Reserved | Aronson LLC | www.aronsonllc.com
Slide: 13
Exceptions to Price Reductions
• Sales to eligible users of the GSA Schedules (ADM 4800.2G)
• Contracts with a guaranteed value in excess of the Maximum
Order Threshold (MOT)
• Price reductions caused by an error in bidding
• Dissimilar terms and conditions
– Pre-payment, trade-ins
– Marketing considerations, exclusivity
– Sales quotas, stocking requirements, customer support
• You must still disclose these transactions in your CSP
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Slide: 14
Keeping Your Contract Current
Administration and Maintenance
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Slide: 15
Administering your Contract
When do you need to initiate a modification?
• Price Reductions Clause is triggered
• Changes to your Commercial Sales Practices
• Changes to your Commercial Pricelist
• Administrative changes to the contract
• Change of ownership of the company or name
change
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Slide: 16
Administering your Contract
Types of Contract Modifications:
1. Contractor-Initiated Modifications
– Pricing changes (increases and decreases)
– Adding or deleting products and services
– Administrative or legal changes
2. GSA-Initiated Modifications
– Changes to terms and conditions in Solicitation
– Usually mandatory
– Notification sent to Contract Administrator
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Slide: 17
Sales Reporting and IFF Remittance
72A Sales Reporting and IFF Remittance
– Select method for reporting sales (cash vs. accrual)
– Generate a report that accurately captures GSA
sales by SIN while excluding Open Market items
and Other Direct Costs (ODCs)
– Verify GSA sales data against active GSA orders and
corresponding IFF amount
– Completion of sales reporting and IFF remittance
by the 30th of the month, even if you don’t have
any contract sales
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Slide: 18
Frequently Overlooked Terms
and Conditions
The Fine Print
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Slide: 19
Frequently Overlooked Terms and Conditions
•
•
•
•
•
•
Prompt Payment Discounts
Volume Discounts
Small Business Subcontracting Plan
Trade Agreements Act (TAA) monitoring
Service Contract Act Requirements
Minimum Sales Requirement
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Slide: 20
Frequently Overlooked Terms and Conditions
• Employment Eligibility Verification (E-Verify)
• Contractor Code of Business Ethics and
Conduct
• Reporting Executive Compensation and FirstTier Subcontract Awards
• VETS-100, Affirmative Action and EEO
Reporting
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Slide: 21
Risks and Penalties Associated
with Non-Compliance
Obey or you may Pay
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Slide: 22
Risks and Penalties for Non-Compliance
• Termination for Cause
• Payment of restitutions to
GSA customers
• Renegotiation of GSA
Discount / Basis of Award
• Significant fines and
penalties
•
•
•
•
Suspension or Debarment
Civil Prosecution
Criminal Prosecution
Civil False Claims Act=
$11K per invoice plus
treble damages
• Prison
The regret of knowing it was preventable!
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Slide: 23
How GSA Monitors Compliance
Contractor Assistance Visit (CAV)
Office of Inspector General (OIG) Audit
All contractors have these
Limited number conducted per year
No subpoena power
Subpoena power
Short visit and quick turnaround
Lengthy data collection and analysis
Review of many compliance areas
Focus on pricing issues
Process review and data sampling
Extensive testing of transactions
Pre-expiration and mid-term reviews
Pre-award or post-contract
Helping contractor succeed
Looking for mistakes
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Slide: 24
GSA’s Office of the Inspector General (OIG)
Sobering Statistics
GSA’s OIG Hotline
(800) 424-5210
[email protected]
http://www.gsaig.gov/index.cfm/hotline/-hotline-form/
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Slide: 25
GSA’s Office of the Inspector General (OIG)
Sobering Statistics
Comparing the last half of GFY11 to the first half
of GFY12, the GSA OIG had a:
• 67.8% increase in settlement recoveries ($)
• 56.0% increase in suspensions/debarments
• 31.7% increase in referrals for prosecution/
litigation
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Slide: 26
Significant GSA OIG Settlements
•
•
•
•
•
•
•
•
12/26/12 Grainger, $70M (faulty CSP disclosures)
07/09/12 ADC Telecommunications, $1.0M (TAA)
03/29/12 CXtec, $2.0M (Trade Agreements Act)
10/06/11 Oracle, $199.5M+interest (inaccurate and
incomplete CSP)
03/08/11 Black Box, $2.85M (failure to extend volume
discounts, improper freight charges)
01/31/11 Oracle/Sun, $46M (defective CSP disclosures)
10/10/06 Oracle/PeopleSoft, $98.5M (defective pricing
disclosures)
12/02/05 Science Engineering Associates, $9.5M
(using unqualified employees)
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Slide: 27
Civil False Claims Act (FCA)
31 U.S.C. §§ 3729–3733
• What is a False Claim?
– FCA make it a crime for any person or organization to
knowingly make a false record or file a false claim with the
government for payment
• What penalties are involved?
– Up to three times the value of the False Claim, plus from
$5,500 to $11,000 in fines, per claim (i.e. invoice).
• Justice Department has recovered more than $13.3B in
FCA violations since January 2009
• In 2012, the Justice Department brought an all-time
high of 647 relator (whistleblower) cases under the
False Claims Act
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Slide: 28
Small Businesses Have Risk, Too
• OIG reports do not reflect Industrial Operations
Analyst (IOA) referrals to the Schedule Contracting
Officer for remediation
• Concerns about compliance risks associated with
GSA Schedule contracts can impact merger and
acquisition activities
• Qui Tam, or whistleblower, provisions of the False
Claims Act incentivize disgruntled employees or
competitors to report compliance violations
© 2012 | All Rights Reserved | Aronson LLC | www.aronsonllc.com
Slide: 29
Best Practices for Effective
GSA Compliance Programs
Educate your Stakeholders
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Slide: 30
Contract Management Basics
• Maintain system for accurately identifying, tracking
and reporting GSA contract sales
• Report GSA contract sales and remit Industrial
Funding Fee (IFF) on time
• Monitor commercial sales for compliance with Basis
of Award discount relationship
• Maintain GSA price list on GSA Advantage!
• Update SAM on an annual basis
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Slide: 31
Elements of Successful Compliance Programs
• Executive Leadership
• Finance, Contracts and
Administrative
• Customer-Facing
Employees
• Sales Personnel
• Existing Customers
1. Educating
Stakeholders
© 2012 | All Rights Reserved | Aronson LLC | www.aronsonllc.com
• Commercial Contracts
• Basis of Award Customer
• Government Contracts
• GSA Sales
• Federal, Non-GSA Sales
2. Ability to Track
and Capture
Transactions
Slide: 32
Elements of Successful Compliance Programs
• Mandatory Modifications
• Contractor-Initiated
Modifications
• Changes to CPL
• Changes to Commercial
Sales Practices
• Administrative Changes
3. Modify the
Contract when
Required
© 2012 | All Rights Reserved | Aronson LLC | www.aronsonllc.com
• Task Orders and Master
Contract Documents
• Records should be retained
3 years after final payment
• Minimum 8 years
4.Document
Retention Policy
Slide: 33
How to Mitigate Compliance Risk
Promote culture
of compliance
Develop
comprehensive
compliance plan
Implement
policies and
procedures
Ensure checks
and balances
Establish
necessary
infrastructure
Communicate
policies broadly
Monitor and
track relevant
sales
Review
documents
carefully
Institute regular
internal audits
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Slide: 34
Elements of Successful Compliance Programs
Conduct Periodic Internal Reviews
GSA Task
Order
Compliance
Internal
Systems
Adequacy
Compliance
Processes
Review
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Master
Contract
Maintenance
Commercial
Pricing
Review
Slide: 35
Aronson’s Government-Focused Blog
www.aronsonblogs.com/gcsg
© 2012 | All Rights Reserved | Aronson LLC | www.aronsonllc.com
Slide: 36
About Aronson LLC
•
•
•
•
•
•
Multi-disciplined professionals focused
on Government and Technology Services
Team of professionals dedicated to GSA
Schedules provides a one-stop solution
for GSA Schedule contracting
Lead you through the process of
identifying, obtaining and maintaining a
GSA Schedule contract that is best suited
to achieve your specific goals
Premier GSA Schedule Services advisor
Proven track record helping companies
achieve their government contracting
goals
Ranked #4 in INSIDE Public Accounting’s
2012 “Best of the Best”
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Slide: 37
Contact Information
Jennifer Aubel
Managing Consultant
Aronson LLC
805 King Farm Boulevard, Suite 300
Rockville, MD 20850
[email protected]
Direct: (301) 231-6253
Connect with me on LinkedIn!
© 2012 | All Rights Reserved | Aronson LLC | www.aronsonllc.com
Slide: 38

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