Optimizing Your GSA Pricing

GSA schedules are unlike other Government federal procurement vehicles because they have the following unique terms and conditions:

1. A proposal for a GSA schedule can be submitted at any time (other procurement vehicles have a specific proposal submittal window which closes after the proposal due date).


2. Any Government buyer can use them to make purchases.


3. They use a company's own pricing to negotiate Government prices.


4. They cover almost all products and services.

GSA schedule pricing for products is relatively straightforward. In contrast, pricing services is unusually difficult because GSA requires that companies propose a "labor category model," while at the same time demanding the lowest rate charged for a labor category.

General Services Administration (GSA) Schedule solicitations require that companies submitting a proposal must:

1. Propose the lowest hourly rates charged to commercial customers - known as Most Favored Customer (MFC) rates.


2. Substantiate MFC rates in their proposals by submitting invoices showing MFC pricing.


3. Propose fully loaded hourly rates for written Labor Categories (not rates for an individual employee's services).


4. Write and submit Labor Category descriptions that fit the company's employees (Labor Category descriptions are not specified by the Government.)


5. Write Labor Category descriptions that meet strict content specifications, including minimum years of experience, minimum education requirements, and functions and responsibilities. (Government auditors can check for contract staffing compliance to the specifications for time and material contracts.)


6. Indicate that the company's pricing is based on market conditions if the company does not have a published commercial price list and corresponding discounting polices based on the price list.

These six requirements impact the hourly rates that a company can be awarded as part of a GSA schedule contract.

Using an information technology example, a labor category description (specification) proposed to GSA must look like this.

Labor Category Name: Senior Computer Programmer

Minimum Years of Experience: 5

Minimum Education Level: Bachelor's Degree

Functions and Responsibilities:

• Accomplishes software requirements by developing and maintaining applications and databases.


• Enhances staff accomplishments and competence by planning delivery of solutions; answering technical and procedural questions for less experienced team members; teaching improved processes; mentoring team members.


• Identifies requirements by establishing personal rapport with potential and actual clients and with other persons in a position to understand service requirements.


• Arranges project requirements in programming sequence by analyzing requirements; preparing a work flow chart and diagram using knowledge of computer capabilities, subject matter, programming language, and logic.


• Programs the computer by encoding project requirements in computer language; entering coded information into the computer.

Transforming a Commercial Pricing Approach into GSA's Model

A company submitting a GSA proposal must define Labor Category descriptions to fit their company and submit invoice and other supporting documentation to show the fully loaded hourly rates the company charges for the labor categories.

Labor category descriptions are foreign to most commercial companies. This requires that a commercial company seeking a GSA schedule must transform its pricing model for GSA into a labor category model with fully loaded hourly rates. Companies may continue to use their commercial pricing model but the two models have to be consistent from a discounting and profit viewpoint.

Price Substantiation

The primary issues concerning price substantiation in GSA schedule proposals are:

1. The mechanism GSA uses for price substantiation are invoices from the company's accounting system.


2. Rate substantiation information submitted to GSA is subject to audit. Employees assigned to GSA schedule projects must meet the minimum years of experience and education requirements, and these are subject to audit based on employees’ resumes. Under-staffing can result in a refund of billed dollars to the Government and staffing with overly qualified employees is permitted.


3. How an invoice reads complicates the matter, e. g., titles, rates, salaries, cost information, fixed price?


4. A subcontract with a prime contractor is a commercial contract, not a Government contract, and this can complicate the issue of obtaining favorable GSA hourly rates even further. Commercial companies doing federal business through subcontracts with federal prime contractors are familiar with labor category based pricing, but prime contractors usually force the companies into a wide range of labor categories. The categories used for subcontracts with prime contractors are not necessarily the categories that the company wants to propose for a GSA schedule.

Price Substantiation Solutions

Price substantiation for a GSA schedule is a complex process with both quantitative and subjective elements. In general, GSA requires that you make a direct tie to invoices showing labor category names and fully loaded hourly rates backed by labor category descriptions. Ideally, the labor category name shown on the invoice should tie to labor category descriptions showing show minimum years of experience and minimum education level. And, as discussed earlier, the invoices have to show the lowest rate charged for a labor category.

Companies seldom have labor category descriptions required by GSA that tie to corresponding labor category names on invoices. Commercial companies that have direct federal service contracts can sometimes make the direct ties required by GSA for price substantiation.

If the description does not show these two key elements, then a company must reconcile labor category descriptions named on invoices with labor category descriptions for a GSA schedule. This requires an analysis of how you arrived at the rate on the invoice and how the rate compares to the rate you propose to GSA.

So it all boils down to what is shown on invoices, and the possibilities include:

• Employee's name and hourly rate with a consistent markup of salary.


• Employee's name and hourly rate with an inconsistent markup based on market conditions (GSA allows this approach as long as you are willing to propose the lowest markup shown on an invoice.)


• General employee classification (e.g., associate partner, etc.) with no back up labor category description.


• Cost reimbursement invoice with employee’s name, salary, overhead, G&A, and profit.


• Fixed prices by contract/project deliverable.


• Other.

For these types of invoices GSA requires a financial crosswalk of employee salaries with markup to proposed labor categories, or a cost buildup table by labor category name, including average salaries of employees in the labor category, indirect costs, and profits.