Basis of Award Customers, pricing for Non-Basis of Award Customers

[OldGray320i]

Good morning all.

After much lurking about this site the last couple years, I finally have questions the answers to which I haven't found on here.

First up:

We had a GSA schedule, on which is a software product, which was issued in 1997, with a contract update in 2005; in that update, "PRICE REDUCTIONS (GSAR 552.238-75) (SEP 1999) (ALTERNATE I – MAY 2004)" which states:

“The class of customer which is the basis of award for purposes of the Price Reduction

clause is State and Local Government. This clause applies to only those Business Units

or wholly owned subsidiaries within (the company) that utilize the schedule.”

“A price reduction shall apply to the resultant GSA schedule contract should any

Business Unit or wholly owned subsidiary within (the company), who utilizes the Schedule,

offer a lower price than is on the schedule to any State or Local Government. This

reduction shall apply regardless of the amount of sales recognized under such hourly

rate contract with the State or Local Government.”

“Under paragraph (d)(1), “commercial customers” are defined as State or Local

Government only. A price reduction does not apply if sales to State or Local

Governments are under firm fixed price, definite quantity contracts with specified

delivery in excess of the maximum order threshold as specified in the contract.

Under that language, if we sell the product to a "non-basis of award" customer (in this case a federal prime), at a price just higher than the GSA price, would we trigger a the price reduction clause? My understanding is that the "discount relationship" applies to the BOAwd customers, not just any customer set.

I think the rationale for selling at a just higher price than GSA was that we avoid violating the "do (you) sell at a level at or below the GSA price?" language, which seems to be an "absolute" no matter how the "customer set" is defined (i.e. BOAwd customers or not).

It doesn't feel entirely clear.

Next question(s):

The follow on GSA contract seems somewhat clearer, and on which we sell lots of software products, including the product referenced above; question as follows:

On the Commercial Sales Practices (CSP) chart, are the customers or customer sets listed in column 1 considered the BOAwd set?

If so, why would our CSP, on a different software product, list "re-sellers" with a deeper discount than is listed for "GSA discount" customers? Per the CSP, such re-sellers are offered a 27% discount, yet our proposed GSA discount is 17%.

This thread seems to indicate that "any customer", regardless of size, would suddenly set a new discount standard: http://www.wifcon.com/discussion/index.php?/topic/1174-discouting-gsa-rates/?hl=%2Bbasis+%2Baward+%2Bcustomer. The circumstances feel remarkably similar to the question I'm asking here.

Further, at this site below, the following is in the slides:

Basis of award (BOA) - The customer or customer class that most resembles the purchasing habits of the federal government upon which GSA pricing was negotiated

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwihu9PJlPDJAhUO52MKHUsDDmMQFggjMAA&url=http%3A%2F%2Fgtpac.org%2Fwp-content%2Fuploads%2F2011%2F10%2FContract-Administration-and-Compliance.pdf&usg=AFQjCNFNk-ycVj0N8iBu9xd86XuMhbxwVQ

All of which indicates to me that the BOAwd customer may indeed get "different" pricing from "other customer sets" (such as the difference in re-seller amount on our current schedule), I'm just struggling with how and when that might apply.

How many ways am I wrong?

[jlbdca]

Under that language, if we sell the product to a "non-basis of award" customer (in this case a federal prime), at a price just higher than the GSA price, would we trigger a the price reduction clause? My understanding is that the "discount relationship" applies to the BOAwd customers, not just any customer set.

The PRC won't be generally be triggered by selling at a higher price than the Schedule price, although that depends on your discount relationship. Only sales within your basis of award can trigger the PRC, exclusive of any deviations.

[jlbdca]

Sorry, regarding second question:

You decide how to structure your disclosures to GSA on the CSP. Generally, you would strategize so your disclosures guide the negotiation.

The basis of award is a customer or category of customers for purposes of the PRC. Ignore everything else you read about it. It may be your most-favored customer, or it may not.

[OldGray320i]

jlbdca, are the customers listed on the CSP by definition basis of award customers? I ask because of the discounts listed in the columns of our CSP being different in the instance of re-sellers and GSA customers - this confuses me. I thought GSA got "best price".

Sorry if I'm flat missing it.

[jlbdca]

One of the customers listed on the CSP is your basis of award; this is the result of your negotiation.

GSA tends to allow its contractor partners to believe they must offer GSA their "best price" (i.e., the most-favored customer and the basis of award customer must be the same), but this is not true. For example, why should GSA receive the same discount as a distributor who warehouses product and assists the offeror with marketing and sales?

[OldGray320i]

Ok, that helps a lot.

Thank you.

[Desparado]

Be very careful here. This is where GSA and the DOJ have a field day with the False Claims Act. If you withhold disclosure of a customer or group of customers that would have revealed a different BOA, then you can open yourself up to a FCA violation. Also, if you sell to a non-BOA and the price is lower than to your BOA and you did not disclose that information, you could be considered in violation of the FCA because the logic used is that if you had disclosed this other customer or category of customers, they would have been the BOA and not the one declared.

It is best to disclose all discount sales information. GSA will attempt to negotiate to their best advantage, but so will you. You can argue why a certain customer or category of customers should not be declared by BOA, but if you just withhold the information and it is discovered later in an audit or by a whistleblower, you could pay some hefty fines.

[OldGray320i]

On 1/11/2016 at 8:40 AM, Desparado said:

Be very careful here. This is where GSA and the DOJ have a field day with the False Claims Act. If you withhold disclosure of a customer or group of customers that would have revealed a different BOA, then you can open yourself up to a FCA violation. Also, if you sell to a non-BOA and the price is lower than to your BOA and you did not disclose that information, you could be considered in violation of the FCA because the logic used is that if you had disclosed this other customer or category of customers, they would have been the BOA and not the one declared.

It is best to disclose all discount sales information. GSA will attempt to negotiate to their best advantage, but so will you. You can argue why a certain customer or category of customers should not be declared by BOA, but if you just withhold the information and it is discovered later in an audit or by a whistleblower, you could pay some hefty fines.

I was just browsing through today and noticed this reply...  No, no withholding of anything, nor any prices better than GSA/BOA, just trying to understand the intricacies of BOA customers and those we'd listed on the CSP chart, and the relationship to the PRC.

[Whynot]

A dealer or re-seller (indirect sales) is a separate class of customer on the CSP. Customer does not refer to the enduser.