A short provision in the House and Senate Armed Services Committees’ “final negotiated language for” the National Defense Authorization Act (NDAA) for Fiscal Year 2026 (FY26) could have significant implications for the U.S. General Services Administration’s (GSA) Multiple Award Schedule (MAS) program, which is also known as the Federal Supply Schedule (FSS). If it becomes law—the House has already passed the bill—the provision would mark another phase in GSA’s multiyear effort to rid itself of the Price Reductions Clause, which both contractors and GSA (although not its inspector general) have found to be difficult to administer and a substantial barrier to entry to the large portion of the federal marketplace represented by the MAS program.
How does the MAS program’s Price Reductions Clause work again?
As we wrote in our explainer last year, the statutes and regulations governing the MAS program require GSA to ensure that prices offered to federal customers under MAS contracts are fair and reasonable. The traditional way GSA has accomplished this over time has been by implementing a most-favored-customer pricing scheme:
- When a company joins the MAS program, it discloses its Most Favored Customer(s) (MFC) in terms of pricing.
- GSA negotiates the pricing the company will offer in the program. In most cases, this has meant identifying a Basis of Award (BOA) customer or group of customers, i.e., one or a group of the company’s non-federal customers for which federal customers buying through the MAS program will receive the same or better pricing. Usually, GSA’s goal is for the company’s MFC to be the BOA (i.e., MAS customers receiving pricing that is the same as or better than that received by the company’s customer(s) that receives its best pricing).
- GSA inserts the Price Reductions Clause into the MAS contract, which basically says that if the company offers better terms or discounts to the BOA customer, it must flow the same or better terms/discounts through to all MAS customers.
What problems have GSA and industry identified with the Price Reductions Clause?
The clause can create significant compliance risk for MAS contractors, as a single salesperson’s decision to provide a one-time discount to the commercial BOA customer or customers could arguably trigger millions of dollars in price reductions on future MAS orders. The PRC is perennially described by MAS contractors as among the most burdensome requirements of the MAS program.
GSA has increasingly recognized and sought to mitigate this hardship in recent years, including because of concerns that it depresses the number of companies that would otherwise sell to the federal government through the MAS program. For example, GSA implemented its Transactional Data Reporting (TDR) pilot in 2016, under which MAS contractors do not negotiate a BOA or track BOA customer(s) for price reductions purposes, but instead electronically report on a monthly basis specified “transactional data elements” of MAS sales related to pricing.
Earlier this year, GSA renewed its prior calls for legislation that would clarify its authority to deviate from the Price Reductions Clause. GSA acknowledged that its “MAS pricing procedures are its most burdensome information collections under the Paperwork Reduction Act of 1995,” that the clause “pose[s] a barrier to entry for small businesses to the federal marketplace and can hinder GSA’s ability to add new products and services to GSA MAS when agencies need them,” and that “contractors also single out” the clause “as among the most complicated and burdensome requirements in federal contracting.”
If the Price Reductions Clause creates so many problems, why is it still in use?
One key reason for this is that there has been a long-simmering disagreement between GSA and its Office of the Inspector General (OIG) regarding the extent to which federal statute permits GSA to deviate from the Price Reductions Clause. Our prior explainer provided more detail, but in a nutshell, the OIG has felt that the federal statute requiring MAS contracts and orders to “result in the lowest overall cost alternative to meet the needs of the Federal Government” has effectively mandated the Price Reductions Clause, and that other procedures (such as the TDR pilot) do not fulfill this statutory mandate.
GSA has consistently (and very publicly) disagreed with its OIG on this question of statutory interpretation but has also simultaneously called on Congress to replace the “lowest overall cost alternative” standard with a “best value” standard to alleviate any concerns. Standalone bills on the topic appeared in Congress again this year.
How does the FY26 NDAA bill address the MAS program’s Price Reductions Clause?
Section 812 of the proposed FY26 NDAA would finally change the statutory standard for the MAS program from “lowest overall cost alternative” to “best value,” consistent with GSA’s legislative proposal in recent years. The bill states in this regard that “Title 10, United States Code, is amended … in section 3012(3)(B), by striking ‘lowest overall cost alternative’ and inserting ‘best value[.]’” Assuming this version of the FY26 NDAA is enacted, the relevant portion of the U.S. Code would therefore reflect the following change:
In this part, the term “competitive procedures” means procedures under which the head of an agency enters into a contract pursuant to full and open competition. Such term also includes … the procedures established by the Administrator of General Services for the multiple award schedule program of the General Services Administration if—
(A) participation in the program has been open to all responsible sources; and
(B) orders and contracts under such program result in the lowest overall cost alternative best value to meet the needs of the United States[.]
What are the implications for the MAS program of this provision in the proposed FY26 NDAA?
When GSA requested this change from Congress, GSA stated that the change “would expand opportunities for small businesses in the GSA MAS program, increase competition, and help GSA better fulfill public policy objectives that contribute to the price of a product or service, particularly in terms of supply chain risk management.” Of course, as is usually the case, the devil will be in the details. Contractors should keep several considerations in mind:
- The proposed FY26 NDAA would only change the MAS program standard in Title 10 of the U.S. Code, which addresses acquisition for the U.S. Department of Defense—but the same “lowest overall cost alternative” language appears in Title 41 of the U.S. Code, which addresses acquisition for civilian agencies as well. It would seem logical for Congress to revise Title 41 to be consistent with the new approach in Title 10, rather than forcing GSA to implement different standards depending on whether a MAS customer is a civilian or defense agency.
- GSA will still have to ensure “best value” when awarding MAS contracts, and so price will remain a key consideration. It seems likely that GSA will accomplish this by expanding the TDR pilot to the entire MAS program, even though federal statute would not necessarily require that approach. Coincidentally, GSA announced in June 2025 that TDR “will expand to all SINS (Special Item Numbers) beginning in FY26” and that “TDR participation will now be mandatory for SIN holders.” The FY26 NDAA appears to clear the way for GSA to continue down this path, even though GSA’s OIG claimed again in June 2025 that GSA “has never effectively implemented TDR and has never made it functional” and that “73 percent of FY 2025 sales reported as of June 2, 2025, remain unusable.” GSA recently confirmed that it intends to transition all GSA Schedule contractors away from the Price Reductions Clause and to TDR within the next year (see here and here).
- Contractors whose preexisting MAS contracts still incorporate the Price Reductions Clause should consider whether transitioning to TDR makes sense for their business and operations. While the Price Reductions Clause creates significant compliance risk and burdens, TDR has its own requirements and potential pitfalls. Contractors who decide to transition to TDR should contact their GSA contracting officer for details.
- Companies considering entry to the MAS program should familiarize themselves with the TDR framework. They should also understand that, even when submitting an offer under TDR instead of the Price Reductions Clause, the MAS solicitation still states that “if the Government cannot determine the prices offered to be fair and reasonable based on readily available data or market research, it may request the offeror provide other than certified cost or pricing data to facilitate the Government’s evaluation of the proposed pricing.” In other words, MAS applicants must still be prepared to show GSA that their pricing is fair and reasonable.
- Given its significance, compliance with the Price Reductions Clause has traditionally been a critical aspect of OIG audits of MAS contracts, resulting in large numbers of questioned costs and even allegations that contractors have violated the civil False Claims Act. As GSA continues its move away from the clause, MAS contractors might reasonably hope for a reduction in the burden sometimes associated with OIG audits. However, as noted above, the devil will be in the details, and to date, there has not been a consistent documented approach to the data required by contracting officers to confirm price reasonableness. It seems likely that GSA will develop a consistent standard, which could thereby create potential defective pricing and False Claims Act liability if not followed correctly.
Finally, companies with existing MAS contracts or that are assessing whether to join the program should consider consulting with legal practitioners experienced in MAS contracting, or signing up to receive Venable’s Government Contracts Practice Group’s alerts, if they want further information.