Economic Price Adjustment: 552.216-70

In June of this year, Clause 552.216-70 was changed, which may cause some headaches for GSA contractors. All economic price adjustments (EPAs) in Schedule contracts are made in accordance with clause I-FSS-969 or clause 552.216-70, depending on which clause you chose when you applied for your contract. In the past, the percentage of Economic Price Adjustment was set at a 10% increase every 12 months. As of June, this ceiling has been lowered to 4%. But what does that mean for contractors that need to increase pricing?

First, the maximum increase per 12 months has now been severely limited from what was allowed in the past. Contracting officers like to say that Contractors may ask for 4% but based on competitive research that does not mean that 4% will be granted. When increasing pricing, the most important thing is to do your research. If you are a service-based Labor Category company, take a look at the Contract-Awarded Labor Category (CALC) tool to help you determine whether your pricing falls within competitive range. CALC will allow you to narrow down your LCATs by schedule and experience levels to see at what prices other Contractors are actually winning work with similar LCATs. If you are a product based company, your best bet will eventually be the roll out of the Formatted Product Tool to your schedule. To learn more about the Formatted Product Tool, Click HERE.

The change to a 4% EPA increase under clause 552.216-70 puts pricing increase more in line with clause I-FSS-969 for escalation rates. Although the clause does not contain language specifying what the maximum allowed escalation rate is, standard practice has uncovered that more than 2.5% escalation per year isn’t being awarded at this time.

Overall, Contractors should be aware that they won’t be able to increase pricing as much year to year anymore and those of you applying for new schedules with LCATS should consider going with clause I-FSS-969 over clause 552.216-70 simply because the numbers are now so close and the escalation clause requires less work to increase (since its automatic). 

Consulting Firm Debarred by GSA

If you have done business with the Government long enough you have heard about companies getting debarred, or black listed, from doing business with the government. A Florida-based consulting firm, Federal Verification Co,, Inc., was the latest to get this exclusion from the General Services Administration (GSA).

In the past they have done business under at least 60 different names including GSA Applications, GSA Processors, and GSA Specialists, to name a few. Many complaints have been filed with the Florida Attorney General, more than one coming from some of our current clients who were unfortunately taken by the Florida Company.

The GSA cited the following as their reasoning for the indefinite exclusion:
"Preliminary ineligible based upon adequate evidence of conduct indicating a lack of business honesty or integrity, or a lack of business integrity, or regulation, statute, executive order or other legal authority, pending completion of an investigation and/or legal proceedings; or based upon initiation of proceedings to determine final ineligibility based upon regulation, statute, executive order or other legal authority or a lack of business integrity or a preponderance of the evidence of any other cause of a serious and compelling nature that it affects present responsibility."You can view the exclusion in it's entirety via SAM.

If you have been notified or believe you will be notified to remove their names from your GSA Contract give us a call and we will complete the modification on your behalf with no cost to you. Give us a call at 234-212-3400 and schedule a free consultation.

Also, we recommend taking a look at the training that the GSA offers: GSA Training

Is “Lowest Price, Technically Acceptable” really the best way?

The government has embraced the idea of “Lowest Price, Technically Acceptable” (LPTA) for procurement. The idea behind the phrase is simply this; when the government procures whatever it may need, they will look at the lowest price first and then continue to work their way up the price ladder until a technically acceptable option is achieved. Theoretically, this gives the government the lowest possible price for the best level of quality for products or services that they need.

According to Deltek, between fiscal year 2009-2014 the use of LPTA for purchasing grew 55% in civilian agencies and 24% within the DoD, so we know that the government is utilizing this option more and more. What kind of pressure does that put on vendors’ bottom line who are constantly competing for the government business? For example, if a service company is bidding on and wins a LPTA bid, the first cuts they typically make to meet their bidding price are salaries and benefits for those working on the project. With service companies’ margins getting tighter and tighter, some are deciding to exit the federal market altogether.

However, LPTA might potentially be on its way out as the main purchasing format due to the extra cost of restructuring contracts if services are not up to par at the low price that was accepted. Those kinds of changes cost the US government time and money, making it more frugal to start off with a slightly higher price in exchange for much better quality and technical acceptability.

It’s also important to note that total federal dollars spent on contracting is actually dropping. In 2008, total contracts awarded was at $541.3 billion, falling to $445.4 billion in fiscal 2014 and ending up (year to date FY 2015, which ends on October 1) at only $329 billion (USAspending.gov). Unfortunately, these figures don’t tell whether the government is really buying everything cheaper utilizing LPTA or just buying less.

In both products and services areas, contractors coming up against LPTA should focus on their technical acceptability and quality as factor number one of proposals. Your technical capabilities are what make your company unique and what really make you stand out. Once the government reaches the “Technically acceptable level, they will look for the highest return at that price point. Also, doing pricing research on your main government competitors and seeing where your pricing falls is quite important. Putting those two pieces of information together will put you on the path to conquering the LPTA proposal with success.