On September 17, 2024, the Office of Inspector General (OIG) for the General Services Administration (GSA) released its Audit Plan for the 2025 fiscal year, which includes, among other activities, certain, and potentially impactful, examinations of the Multiple Award Schedule (MAS) program. While we are not addressing all the audits proposed in this plan, we are highlighting two audits that could significantly impact the more than 20,000 contractors that currently hold MAS contracts.
The OIG Review of Economic Price Adjustments
First, the GSA OIG intends to review GSA's handling of MAS economic price adjustment (EPA) requests.
Where a contractor seeks to adjust their price under an MAS contract, the GSA's supplement to the Federal Acquisition Regulation (FAR), known as the GSA Manual or GSAM, requires that the contractor submit an EPA request, which GSA evaluates, deciding whether to approve or deny the request.
Before September of this year, EPA requests were governed by four different provisions of the GSAM, which imposed slightly different requirements, depending on the basis for the contractor's pricing. For example, GSAM 552.216-70 (ALT I), which applied to multiyear MAS contracts based on commercial price lists and without Transactional Data Reporting requirements, provided that GSA will consider upward adjustments to the award price at most three times during a twelve-month period and capped price increases at a certain percentage, irrespective of external market forces such as inflation.
However, in September, GSA enacted a new rule for MAS EPA requests in order to provide government contractors with greater flexibility and clarity in requesting price adjustments due to changing market conditions. The new rule consolidated the four previous GSAM clauses into a single clause, which applies to all MAS contracts, regardless of the contract's basis for establishing price. It also eliminated the strict limits on increasing price that were present under the previous GSAM clauses. When proposing this change, GSA was frank in stating that "the inflexibility of the existing Schedule EPA clauses" had led "some Schedule contractors [to] remove[] items from their Schedule contract to avoid selling those items at a loss," creating "an unnecessary negative impact on the Schedule program."
While the new GSAM clause should make it easier for MAS contractors to obtain government approval to increase their prices, the proposed audit by OIG will inquire into whether GSA contracting officers are obtaining sufficient information from contractors to justify their approval of EPA requests under MAS contracts.
Even though the primary focus of the OIG's planned examination is the conduct of GSA contracting personnel, this audit could have a significant impact on the MAS contracting community. In the past, when the OIG has claimed that contracting officers failed to drive the lowest cost approach, irrespective of other legitimate business factors, GSA has in many instances responded by adhering to OIG recommendations regardless of whether they made business sense as part of aggressive negotiating tactics with contractors. In the long run, this has harmed the MAS program by driving contractors away and disincentivizing new contractors and their goods and services from getting on Schedule. Now, in an environment with nearly unprecedented inflation, whereby the government has recognized a need for greater flexibility for contractors, the OIG is positioned to demonstrate that the MAS program is either a true partnership between GSA and tens of thousands of contractors with the goal of servicing federal agency needs, or whether the program will continue to disincentivize contractor participation, thereby weakening the Schedule in the long term.
The OIG Review of Trade Agreements Act Compliance
The second focus of the 2025 fiscal year will be the OIG's review of the country of origin for products sold through the MAS program pursuant to the Trade Agreements Act (TAA).
The Trade Agreements Act of 1978, at 19 U.S.C. § 2501 et seq., which serves as an exception to the Buy American Act, restricts the country of origin for products sold to the U.S. government to the United States or countries that have entered into international trade agreements with the U.S. For MAS contracts, the FAR rules direct the contracting officer to evaluate the country of origin for products provided to the government under federal contracts.
The GSA OIG's proposed audit would evaluate whether products sold by GSA contractors under MAS contracts list the correct country of origin. If the products list an incorrect country of origin, then OIG will inquire into whether the true country of origin violated the TAA.
The analysis of country of origin can be complicated and is not necessarily as simple as reviewing the "Made in…" labeling. Moreover, it has long been acceptable for contractors to rely on representations and certifications made by manufacturers, but it is unclear whether the OIG may hold MAS contractors to a new or heightened standard. As a result, it will be important for MAS contractors subject to a TAA audit to carefully review their supply chain, the supporting documentation, and how they respond to the OIG's inquiries.
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GSA OIG audits are nothing new; however, given the GSA's recent history of adopting many of the OIG's findings, this audit season could be particularly impactful for the MAS contracting community. Should you face a GSA OIG, please feel free to contact one of the authors of this article for counsel and assistance.
* Taylor Sorrells is a law clerk in the Government Contracts Practice Group. She contributed to this article, and we thank her for her assistance.