Most companies offer services to GSA on an hourly-rate basis. And then federal customers demand fixed-price bids based on your awarded hourly GSA rates. Most experienced federal contractors know that the hourly rate really doesn't matter that much unless a contract specifies time and material invoicing. It’s a dilemma that has always existed in federal contracting and it is becoming more of a dilemma as the federal government moves toward fixed-price service contracting.

There is no clear cut way out of the dilemma other than to negotiate the highest GSA rates you can with the knowledge that the actual rate is not that critical in the big picture. Rate amounts are also a double-edged sword in that the higher they are, the better you feel and the better you look to your employees and the outside world.

Yet if rates are too high, your customers may look at your company as too expensive. Our advice is to go for the highest rate you can negotiate with GSA but don't toss and turn at night over the few points they want off when they are trying to drive you lower than your "most favored customer" during rate negotiations.