The finding supports/confirms FAS needs an evaluation approach that distinguishes between the reseller’s and the VAR’s value/price to the customer.
On June 2, the General Services Administration’s Federal Acquisition Service posted on its Interact Multiple Award Schedule (MAS) Community site a “Summary of Results of Request for Information (RFI) about IT Hardware procured through Value Added Resellers (VAR)” (the summary). The summary outlined key insights gleaned from the 136 responses received in response to FAS’s January RFI. The RFI sought commercial market information from stakeholders “to enhance the Government’s understanding of the Value-Added Reseller marketplace under SIN 33411” of the MAS solicitation.
The summary highlights nine insights from the 136 responses. The insights are divided into four topic areas and address the following: (1) Widely Accepted Commercial Definitions for Resellers and VARs; (2) Value is in the service, not product markup; (3) Recommended Pricing and Evaluation Framework; and (4) Government Work is more costly. Let’s unpack these insights.
First, FAS’s finding, based on responses to the RFI, that there are widely accepted commercial definitions of resellers and VARs is significant. The finding supports/confirms FAS needs an evaluation approach that distinguishes between the reseller’s and the VAR’s value/price to the customer. Second, FAS’s finding that value is in the service and not the markup sets the table for an evaluation approach that identifies and assesses the value of functions and/or services performed by a reseller or a VAR as part of the overall cost. What is not clear is whether FAS recognizes that the resellers, VARs and distributors also perform value added services on behalf of original equipment manufacturers (OEMs). These valued added services for the OEMs are reflected in the commercial pricing and support agreements/arrangements with their resellers, VARs and distributors. It is a complex, dynamic market.
Third, and most thought provoking, are the insights under the “Recommended Pricing and Evaluation Framework.” FAS makes it clear that it will pursue an evaluation methodology that assesses the value of the services performed by a VAR as part of the overall contract cost and performance. FAS also states that “evaluation frameworks should encourage line-item pricing for complex requirements to clearly separate product resale from value-added services.” This statement raises a host of questions for stakeholders across the procurement community. How does an approach that breaks out individual line-item pricing and cost elements promote firm-fixed pricing at the order level? How does it support firm-fixed price, outcome-based solutions at the order level? Does this approach add another layer of complexity that undermines access to the commercial market? Is GSA solely focusing on the internal, commercial processes of OEMs, VARs, and resellers while ignoring how commercial customers structure their purchases? What value is there in breaking down price and cost elements of commercial items and services when government and commercial customers do not buy that way?
Fourth, as FAS notes, government work is more costly. To the extent FAS takes a price evaluation approach that assesses the value-added services, how will FAS account for the higher costs in determining what is fair and reasonable?
Finally, the summary outlines the way forward, stating:
Based on this industry feedback, FAS has identified opportunities to strengthen its pricing practices through solicitation enhancements, workforce training, and additional resources for agency buyers. These actions will allow VARs to clearly communicate the value of their offerings while aligning with commercial practices and minimizing administrative burden.
Transparency and an opportunity for stakeholders to comment on any draft solicitation provisions and training materials will be important. FAS is to be commended for issuing the original RFI to the public in January. To the extent significant new terms or evaluation criteria are contemplated, those impacted by the new terms should have an opportunity to provide feedback on the proposed language. Transparency can only serve to improve the process, and ultimately, the final solicitation language enabling GSA to provide the federal government with access to the full extent of existing commercial products and services for agencies to achieve their missions.
Roger Waldron is president of The Coalition for Common Sense in Government Procurement.
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