You may recall that last week's installment discussed selling directly to the federal government through GSA schedules. Although many have great success selling their products in the foregoing manner, the GSA schedule program is designed to accommodate almost any type of commercial sales practice including teaming, reselling, and multi-layered distribution systems. Our focus this week is on products sold by resellers. Your business might elect to use resellers for a number of reasons such as (i) your product is a component of a larger system or larger product, (ii) your commercial sales are made through resellers, and/or (iii) your company's budget doesn't allow for a direct sales force.

Participating Dealer Agreements (PDA's) are an effective mechanism to allow other parties to resell your products while you maintain control of your GSA pricing. A PDA is the written agreement between your company and the reseller that formalizes the business deal between the two parties. A PDA generally provides that the reseller will sell your product at the government-approved prices in your GSA schedule. The PDA establishes the sum the reseller will be paid for selling your product (usually as a percentage of the sale price of the product). The agreement also addresses order processing, invoicing, and payment procedures.

A PDA works best when a business holds its own GSA schedule and then uses multiple resellers to sell its products. A company that holds a GSA schedule can control its pricing and still retain the flexibility to strike deals with a number of resellers. Since each reseller your company works with may sell in a different federal market, the market for your products is greatly expanded. However, companies who work with multiple resellers often experience administrative headaches with respect to monitoring product pricing issues. Such headaches are nonexistent if your company is on the GSA schedule and enters into a PDA with a reseller since the prices are established by the schedule and are the same with respect to each reseller. In the event that your company enters into a PDA with a reseller, you must remember to modify your GSA schedule contract to incorporate the PDA and the corresponding reseller into your schedule.

The following article, by Steve Charles of the immix Group, is a comprehensive analysis of PDA's and the GSA schedule program. See "The Role of the GSA Schedule in your Channel Strategy: Authorizing Participating Dealers," http://www.immixgroup.com/pslibrary/eu_display.cfm?ID=104.