Submission for OMB Review; Comment Request Entitled Price Reductions Clause

GENERAL SERVICES ADMINISTRATION

[OMB Control No. 3090-0235]

Submission for OMB Review; Comment Request Entitled Price

Reductions Clause

AGENCY: Office of Acquisition Policy, GSA.

ACTION: Notice of request for an extension to a previously approved OMB

Clearance (3090-0235).

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SUMMARY: Under the provisions of the Paperwork Reduction Act of 1995

(44 U.S.C. Chapter 35), the Office of Acquisition Policy has submitted

to the Office of Management and Budget (OMB) a request to review and

approve an extension of a previously approved information collection

requirement concerning Price Reductions clause. The information

collection was previously published in the Federal Register on June 19,

1998 at 63 FR 33667, allowing for a 60-day public comment period.

Public comments were received from the Coalition for Government

Procurement and the Information Technology Services Council.

Following is a summary of the comments GSA received and GSA's

response.

1. The Price Reduction clause is an administrative and financial

burden.

The clause was significantly streamlined when modified in 1994.

Other administrative requirements were also relaxed or deleted. The

clause requires submission of information in only very limited

circumstances. The only monitoring required by the clause is for sales

to the designated customer or class of customer. No special format or

periodic reporting is required. GSA contacted a sampling of potential

respondents (small and large business MAS contractors), from various

schedules to determine the estimated annual burden. It found the

average number of times the information is reported each year is 2

times with an estimated time of 15 hours. Several of the small

businesses consulted said the clause was not a burden. The Price

Reduction clause is a key safeguard that has been built into the MAS

procurement process to protect against loss of taxpayer dollars.

2. The Price Reduction clause is not necessary to ensure price

reasonableness on MAS contracts.

The clause simply assures that the government maintains throughout

the life of the contract the relative price/discount advantage

negotiated in relation to the contractor's commercial customer upon

which the contract award is predicated.

The clause provides that if a contractor sells any item covered by

a comparable type contract at a price below the negotiated MAS contract

price to the identified comparable customer, then the contractor must

give the government an equivalent price reduction on all subsequent

government orders for the balance of the contract period or until the

price is furthered reduced.

Without a mechanism such as the Price Reduction clause to ensure

that a balance between government prices and commercial prices is

maintained there are no assurances of continued price reasonableness

under the contract. The only reasonable alternative would be to have

shorter contracts and negotiate more frequently, imposing a greater

burden on the contractor. To eliminate such a clause would be to

eliminate an important means by which the government insures that it

receives the best pricing. Most MAS contracts are often three to five

years in length; price reductions insure that the government is

receiving current market prices in response to changes in market demand

and technology. The existence of the price reduction clause helps allow

MAS contracts to be of longer duration than the more typical one-year

supply contract. Absent such a clause, the government would be forced

to enter into contracts of shorter duration in order to maintain

current pricing. The administrative costs and other burdens associated

with more frequent negotiations would be increased for contractors and

government alike.

3. The Price Reduction clause is not consistent with commercial

practice.

GSA acknowledges that there are differences of opinion with

industry with regard to the Price Reductions clause being consistent

with commercial practice, however, there are similar type arrangements

in private industry. GSA's Office of Inspector General (OIG) has found

that price reduction requirements, in fact, are standard commercial

practice for many large volume purchasers. The OIG has found commercial

agreements that contained provisions by which a seller would commit to

giving the buyer the benefit of any decreases in prices for the subject

products during the term of the agreement.

DATES: Comment Due Date: December 23, 1998.

ADDRESSES: Additional comments regarding this burden estimate or any

other aspect of this collection of information, including suggestions

for reducing this burden, should be submitted to: Edward Springer, GSA

Desk Officer, Room 3235, NEOB, Washington, DC 20503 and also may be

submitted to Marjorie Ashby, General Services Administration (MVP),

1800 F Street NW, Washington, DC 20405.

FOR FURTHER INFORMATION CONTACT: Al Matera, Office of GSA Acquisition

Policy (202) 501-1224.

SUPPLEMENTARY INFORMATION:

A. Purpose

The GSA is requesting the Office of Management and Budget (OMB) to

review and approve information collection, 3090-0235, concerning the

Price Reductions clause. The Price

[[Page 64718]]

Reductions clause used in multiple award schedule contracts ensures

that the Government maintains its relationship with the contractor's

customer or category of customers, upon which the contract is

predicated.

B. Annual Reporting Burden

Respondents: 6,862; annual responses: 13,724; average hours per

response: 7.5; burden hours: 102,930.

Copy of Proposal: A copy of this proposal may be obtained from the

GSA Acquisition Policy Division (MVP), Room 4011, GSA Building, 1800 F

Street NW, Washington, DC 20405, or by telephoning (202) 501-3822, or

by faxing your request to (202) 501-3341.

Dated: November 17, 1998.

Ida M. Ustad,

Deputy Associate Administrator, Office of Acquisition Policy.

[FR Doc. 98-31264 Filed 11-20-98; 8:45 am]

BILLING CODE 6820-61-M