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I posted this in the contract administration forum but had no response so I am trying here-

 

I haven't seen this exact question before so here goes....I would for a contractor with GSA schedules and other government contracts. We are a wholly owned subsidiary of Parent, and Parent is owned by a holding company. Immediate parent has two divisions - we'll call them finance and nonsense. There is an effort to combine sales, marketing and delivery efforts of the finance division with my subsidiary because we do similar work, but there is no plan to legally change the structure. We will remain a wholly owned sub. Finance will remain a division - not a subsidiary - of our immediate parent.

 

My questions are as follows: If we market and sell together under a "doing business as" name with no legal change to our corporate structure, do we run the risk of violating the price reduction clause of the false claims act? Suppose we have delivery people who go back and forth between the wholly owned sub and the division, but bill at different rates on different projects. Can a person in the division bill a division client at a rate less than the GSA rate? Does it depend on what their skillset, education and other labor category qualifications are? How similar does the work have to be to trigger the PRC? How similar does the division client need to be to sub's basis of award to trigger the PRC? In short ...can this allow the government to
"pierce the corporate veil" and start looking at the books of the parent company  when they are trying to determine a BOA or find a PRC violation?

I read this on another thread relating to a similar situation: >>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. << Is this something we need to worry about in the situation I described?

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First, the Price Reduction Clause is a clause in your underlying schedule contract, not part of the False Claims Act.

Two, it's not clear to me whether your question is around the disclosures on the CSP as part of a schedule proposal/modification or around compliance with an existing contract. The "similar situation" you describe deals with the former; I believe your question revolves around the latter.

If the latter, you should receive your schedule contract, including FPR, to determine your basis of award (BOA customer). Sales to customers outside your basis of award will not trigger a price reduction. Ideally, you've named a BOA such as "customers of X, excluding those of division Y."

It seems you have standard labor categories within, but not across, the divisions, is that right? Do the divisions compete with each other for the same type of work?

Finally, the BOA isn't triggered by pricing below the GSA rate. It's triggered when a contractor

(i) Revises the commercial catalog, pricelist, schedule or other document upon which
contract award was predicated to reduce prices;
(ii) Grants more favorable discounts or terms and conditions than those contained in the
commercial catalog, pricelist, schedule or other documents upon which contract award
was predicated; or
(iii) Grants special discounts to the customer (or category of customers) that formed the
basis of award, and the change disturbs the price/discount relationship of the Government
to the customer (or category of customers) that was the basis of award.

Note the trigger in (iii): disturbing the price/discount relationship between your GSA Schedule price and price to the basis of award customer.

Considering the above, I think you may want to retain a schedule consultant to help you understand and resolve any compliance issues.

Of course, the PRC will be eventually be removed from all PSS SINs and other schedule contracts, but as far as I know there's no timeline for that.

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I have one minor thing to point out.  jlbdca stated that sales to customers outside your basis of award will not trigger a price reduction.  That is not entirely true. If GSA determines that you mis-stated your BOA because you offer lower pricing to another customer or class of customers that can certainly result in issues. They can state that basically you changed your BOA and thereby kick in the PRC. I've seen it done.  The GSA OIG loves this.

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Thank you both, I am indeed asking about existing contracts. The divisions could compete against one another but I don't think that has been done. The divisions work cooperattively through intra-company agreements. My biggest worry is that the GSA OIG will make us change our BOA.

 

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