The head of the General Services Administration’s (GSA) Federal Acquisition Service (FAS) is asking 10 large value-added resellers (VARs) to the Federal government for a detailed breakdown of their open contracts with an aim to develop “taxpayer friendly pricing” for the government.
FAS Commissioner Josh Gruenbaum explained that request to the 10 firms in a May 28 letter that was viewed by MeriTalk.
In addition to seeking lower prices from VARs, Gruenbaum said GSA may use the data they submit to establish a “mark-up cap or other spend controls” for VAR contracts going forward.
Gruenbaum also maintained in a separate statement that some VAR contract pricing represents a “5%-7% tax on the American people for very little benefit.”
The letter was delivered to Dell Technologies Inc., FCN Inc., Thundercat Technology, TD Synnex Corporation, NANA Regional Corporation, OEP VIII GP (Mythics, LLC), Four Points Technology, V3Gate LLC, Carahsoft Technology Corporation, and CDW Corporation.
The Wall Street Journal reported on the letter earlier this week, but not the full list of firms that it was sent to.
Gruenbaum asked for responses from those firms by June 11 and emphasized he wants to see input on lower pricing levels.
“In order to strengthen the go forward relationship, it is imperative that you respond clearly and transparently, lean into developing taxpayer friendly pricing, and offer market discounts and creative solutions as appropriate,” the FAS commissioner said.
VAR Benefits Meet ‘OneGov’ Strategy
Broadly defined, VARs doing business with the Federal government are reselling third party technology services – including hardware, software, and cloud services – to government agencies while adding value beyond those original products, including integration, customization, training and support, security and compliance, and procurement services.
The advantages of buying from VARs include the ability to buy integrated and tested solutions instead of separate components from original equipment manufacturers (OEMs), faster procurement and deployment times, and specialization in Federal government times.
However, those services don’t come for free, and Gruenbaum’s letter to the 10 VARs is looking to drill further down into the costs of what they provide the government.
GSA’s latest letter to Federal contractors – the agency made similar cost-cutting overtures to the largest consulting firms earlier this year – aims squarely at breaking down costs and benefits to the government. It also aligns with the agency’s “OneGov” Strategy announced in April to modernize and streamline Federal IT acquisitions.
“The OneGov Strategy is a bold step forward for President Trump’s GSA and our mission to be responsible stewards of taxpayer dollars,” said GSA Acting Administrator Stephen Ehikian in a statement when the strategy was released earlier this year. “It’s about acting as one – aligning to our scale, standards, and security to meet the needs of today’s government while preparing for the future,” he said.
Letter Details
“We, alongside our partner agencies, have been reviewing all contracts with the federal government,” Gruenbaum said in the May 28 letter. “Notably, the U.S. Government procures approximately $82 billion annually in IT products and services. Historically complex procurement processes have led to excessive markups and increased costs to the taxpayer while also delaying delivery. This must change.”
The FAS commissioner stressed that GSA is prioritizing commercial off-the-shelf products and services and looking to buy from OEMs “where possible in order to reduce the total cost to the U.S. taxpayer.”
“Simplifying procurement processes is critical especially in light of the nation’s balance sheet,” Gruenbaum said, adding, “As part of this exercise, we are auditing IT product and services contracts and the associated mark-ups from Value-Added Resellers (VARs).”
“We are therefore requesting a detailed breakdown on all open contracts that includes OEM costs, VAR mark-ups and any additional fees for transparency,” he said.
“We intend to explore using this input as a scorecard to potentially establish a mark-up cap or other spend controls on OEM or vendor costs moving forward,” Gruenbaum continued.
He said all data submitted by the VARs should include “all contracts government-wide, and not just GSA contracts and vehicles,” and that the firms should identify “waste, synergy, and savings opportunities.”
“Evaluate whether the offered pricing is appropriate given best commercial industry comparables,” the letter instructs. “In addition, identify opportunities to reduce mark-ups or product costs to align with the Administration’s cost cutting goals on open contracts through consolidated buys or other mechanics.”
In a separate statement from GSA today, Gruenbaum said, “GSA’s OneGov initiative is transforming how the government does business with industry. Centralizing procurement and acting as one federal wallet will deliver better services to agencies, better value for the taxpayer, and better relationships with industry.”
“Simplifying historically complex procurement processes, reviewing Value Added Resellers and their mark-ups, which often amount to a 5%-7% tax on the American people for very little benefit, and making outcomes-based contracting the default will allow us to deliver on the Administration’s acute focus on efficiency and waste reduction, as well as return to commonsense procurement practices,” he said.