Variety is the spice of procurement training

To improve the contracting workforce, improve training

In recent years, considerable resources have been invested in hiring and educating our biggest asset, human capital. This additional staffing and education has so far met with mixed results. This is because people are only as effective as the experience and education they have received.

Contracting executives frequently mention the need to develop judgment, reasoning, and analytical skills, as well as to obtain real-world experience. These goals can be met through exposure to diverse acquisition and operational scenarios. Three years of varied contracting experience (simplified acquisition, major systems, source selection, and acquisition planning) is better than 10 years of doing the same, simplified, repetitive tasks over and over, yet still moving up the career ladder.

Effective contract management doesn’t involve memorizing policies and regulations. To no one’s surprise, regardless of legislation, business judgment and skills are best learned on the job or via the next best thing: scenario-based training. Professional certifications require the ability to know where to find the various and often conflicting sources of guidance on a particular problem and weigh the merits of all in arriving at a balanced and proper business solution. Rigorous testing that most pass, but many may fail, ensures good judgment is developed before its applicability to real-world situations.

However, there is a way this varied experience can be developed—through scenario-based learning and testing. This involves providing present and future acquisition specialists the ability to develop their skills on the simulator faster and less expensively before being thrown into real-world situations.

A profession that develops itself exclusively through passive class time, guaranteeing successful completion to everyone, is no better than maintaining existing business processes because “that’s the way we’ve always done it,” or “because I said so.” A rigorous, widely adopted, professional development process, combining education with “practical exams” for every government and industry organization must exist in today’s complex and collaborative acquisition system.

I often suggest to my procurement students at Guam Community College that they follow all the news they can on a wide range of procurement issues. It may not suffice for actual hands on experience, but it can represent a case study approach to issues they do not see in their limited roles in the system.

This blawg is an attempt to present such a resource, and I encourage my students to wander through its posts and come back to it from time to time.

Unfortunately, all one has to do is check the View My Stats link in the right-hand column, and compare it to the ClustrMap hits, to notice that there are not a lot of hits from Guam, not even following the announcements in class. You can lead a student to water, but ....

Are concessions procurements?

I have previously written about the limits of procurement law in state law ABA Model Procurement Code context. Attorney Aron C. Beezely of the firm Bradley Arant Boult Cummings LLP writes of another limitation in the federal context on the Lexology site. Please read the whole article at the link below because I tend to cut, excerpt and paste and at times rearrange articles reference in this blog. 

The key in both cases would seem to be in defining procurement in the context of the relevant law.

Limited remedies for concession-contract protesters

In a pair of recent decisions, the U.S. Court of Federal Claims clarified the source of its jurisdiction over bid protest actions that involve pure concession contracts as well as the scope of potential relief available to concession-contract protesters. See Jordan Pond Company, LLC v. United States, Case No. 13-913 C (Apr. 8, 2014); Eco Tour Adventures, Inc. v. United States, 114 Fed. Cl. 6 (2013).

These cases make clear that the jurisdictional basis for bid protests involving pure concession contracts is Section 1491(a)(1) of the Tucker Act, which permits suits alleging breach of the government’s implied duty to fairly and honestly consider proposals, and not Section 1491(b)(1), which is the source of the court’s jurisdiction over challenges to traditional procurement contract competitions.

The identity of the statutory source of the court’s jurisdiction over concession-contract protests is significant because it dictates the scope of potential remedies available to protesters. Given that the court now has held twice that its jurisdiction over concession-contract protests arises under Section 1491(a)(1), and not Section 1491(b)(1), it would appear to be the case that concession-contract protesters generally are not entitled to declaratory or injunctive relief. Instead, concession-contract protesters generally will be limited to recovering bid preparation and proposal costs.

In Eco Tour, the court explained that Section 1491(b)(1) grants the court jurisdiction “to render judgment on an action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.”[3] Thus, whether the court has jurisdiction under Section 1491(b)(1) depends on whether the solicitation at issue involves a “procurement.”

The court in Eco Tour further explained that, although Section 1491(b) does not define the term “procurement,” the U.S. Court of Federal Claims has held in nonbid-protest contexts that concession contracts are not procurement contracts. Among the reasons that concession contracts technically are not procurement contracts, according to the court, is that under pure concession contracts, “the government does not make payments to the contractor in exchange for the provision of goods or services to the government; instead, concessioners pay the government a fee for the privilege of charging the public for services provided to the public.”

Regardless of whether or not the distinction between federal procurement contracts and federal concession contracts is fair, the reality is that this distinction has practical consequences for federal concession-contract protesters that bring suit at the court.

 As I mentioned in my Limits of Procurement Law post mentioned and linked-to above, under Guam's version of the ABA Model Code, procurement is defined as the acquisition of supplies, services or construction by the government and is subject to the procurement law when the acquisition is made under a contract involving the expenditure of public funds. Concessions are generally public conveniences operated for the public. The governmental role is typically as a facilitator only, without any significant direct benefit to the government of the thing acquired, nor any expense to the public purse.

An example of such a situation arose on Guam a few years back. The government owns land which was developed by the government to house a local market and gathering place. It has become quite popular, with tourists often visiting and a special "night market" being established to enhance the visitor industry. The government, in providing this service, is responsible for keeping health and safety order, and to minimize the vehicular traffic, selected one taxi company to exclusively service the market area. 

There were calls to open the selection process to the bidding system of the procurement regime, but the matter was resolved otherwise. However, to me, this was never an acquisition of anything by the government nor did it entail the expenditure of government funds, thus was not a procurement issue. It was simply a regulatory means of providing an amenity to the public that enhanced the government's social and educational benefits being bestowed on the public.

Suspension mounts

The federal GAO (Government Accountability Office) has this month released a new report revealing a marked attempt by US government agencies to police the ranks of contractors and improve contractor responsibility standards.

The report, number GAO-14-513, is entitled FEDERAL CONTRACTS AND GRANTS, Agencies Have Taken Steps to Improve Suspension and Debarment Programs.

In the transmittal of the report to the House Committee on Oversight and Government Reform House of Representatives, William T. Woods said, by way of background:

Suspensions and debarments are tools that agencies may use to protect the government’s interests by excluding individuals, contractors, and grantees from receiving federal contracts, grants, and other forms of financial assistance based on various types of misconduct. In 2011, we reviewed suspension and debarment efforts at selected agencies and found that the agencies with the most procurement-related suspensions and debarments shared common characteristics, including a suspension and debarment program with dedicated staff, detailed policies and procedures, and practices that encourage an active referral process.

In the summary of what GAO found, it said:

The number of suspension and debarment actions government-wide has more than doubled from 1,836 in fiscal year 2009 to 4,812 in fiscal year 2013. The number of suspension and debarment actions for the six agencies increased from 19 in fiscal year 2009 to 271 in fiscal year 2013 (see table below). The six agencies generally experienced a notable increase starting in fiscal year 2011 when the agencies began to take action to incorporate the characteristics associated with active suspension and debarment programs.

The Office of Management and Budget (OMB) and the Interagency Suspension and Debarment Committee (ISDC) have taken action to strengthen government-wide suspension and debarment efforts. The ISDC has promoted best practices, coordinated mentoring and training, and helped coordinate lead agency responsibility when multiple agencies have an interest in pursuing suspension and debarment of the same entity. Reported increases in the number of suspension or debarment actions suggest that its efforts have been effective. ISDC officials emphasized that increased activity has been coupled with an increased capability to use suspension and debarment appropriately while adhering to the principles of fairness and due process.

The letter observed,

The six agencies we reviewed reported that they highly value the functions performed by the ISDC as a focal point for government-wide suspension and debarment efforts. For example, Treasury officials told us that they designed their suspension and debarment program around the best practices identified by the ISDC, taking advantage of templates, guidance, and mentoring available through the committee. Officials from several agencies noted that the ISDC is instrumental in managing an informal process to help agencies coordinate lead agency responsibility when multiple agencies have a potential interest in pursuing suspension and debarment of the same entity. According to officials from the agencies we reviewed, the ISDC regularly distributes information on new potential cases reported by the agencies. The agencies take into consideration factors such as financial, regulatory, and investigative interests in determining which agency should take the lead in the case. Several of the agencies we reviewed reported that this process helps identify the most appropriate lead, while also involving other agencies that may have a stake in a particular action. Officials from several agencies also reported that ISDC monthly meetings provide an important forum through which suspension and debarment officials can seek advice from agency counterparts on a range of issues.

In addition to speaking with officials from the six agencies we reviewed in 2011, we also reviewed the VA’s suspension and debarment program to determine if government-wide efforts had affected the program. Based on our review, we found that the VA currently has the characteristics associated with active suspension debarment programs. For example, VA has a Debarment and Suspension Committee with a staff of about 10 positions that review all referrals for procurement-related suspension and debarment actions, conduct fact-finding, and present facts and recommendations to the Suspension and Debarring Official. Officials reported that VA has taken action to improve its suspension and debarment program in part in response to government-wide efforts. For example, VA’s Suspension and Debarment Committee is currently drafting standard operating procedures to reflect leading practices. VA officials reported that the number of procurement-related suspension and debarment actions at VA has increased from 34 in fiscal year 2011 to 73 in fiscal year 2013.

Given the current uproar (not before time) regarding the failings in the Veterans Administration mishandling of veteran care, the finding in respect of the VA are particularly newsworthy.

Agency reaction to the report is described as follows: We provided a draft of this report to OMB and the Departments of Commerce, Health and Human Services, Justice, Homeland Security, State, the Treasury, and Veterans Affairs for review and comment. In an email response, the Associate Administrator of the Office of Federal Procurement Policy commented that OMB is pleased with the progress agencies have been making to strengthen their capabilities to consider the use of suspension and debarment when necessary. Further, OMB credits the work of the Interagency Suspension and Debarment Committee in helping to make many of the achievements possible. None of the seven agencies we reviewed provided substantive comments, but the Departments of Commerce, Health and Human Services, and Homeland Security provided technical comments which we incorporated, as appropriate.

It is regrettable that no substantive response from any of the agencies reviewed were received. An insider's view would be illuminating, shall we say.

See more at this WaPo article: GAO says U.S. government is suspending risky contractors more often, by Christian Davenport.

Emergencies: man made vs natural

Deval Patrick Awards Emergency Contract to Save Massachusetts Health Connector

Gov. Deval Patrick's administration will invoke emergency rules — reserved for “an unforeseen crisis” — to sidestep the state’s procurement laws and award a lucrative, no-bid Obama­care contract to Minnesota-based Optum to salvage the disastrous state exchange, the Herald has learned.

Health Connector spokes­man Jason Lefferts said the state is executing the unusual crisis clause “to avoid substantial harm to the functioning of government ... and since the health, welfare or safety of citizens of the Commonwealth is threatened without a functioning (state Obamacare exchange).”

But former state Inspector General Gregory Sullivan said the Patrick administration is abusing the emergency language. “It wasn’t unforeseeable,” said Sullivan, now at the Pioneer Institute. “It was just denied by the administration for months. The administration was well aware of the fact that the Connector project was behind schedule, over-­budget and dysfunctional ... I wouldn’t call this an emergency, and I think it should be competitively procured so everyone has a chance to bid.”

There's obviously more to the story, including what is available in the article at the link, but this snippet is all that is necessary to ask the question, what is an emergency in the context of procurement law?

The first and most obvious point must be made that procurement law is not universal, so your own applicable law must be examined. Thus, without knowing anything about Massachusetts law, you would want to see what "an unforeseen crisis" means, if that is the statutory language as mentioned in the article.

The second point I would make is that that word "emergency" does not mean what many executives believe it means. In my experience on Guam, the emergency procurement method of source selection view with sole source selection as the most abused method of source selection in the book.

Guam's Procurement Act uses the ABA Model Procurement Code as its base, as I've mentioned many times. Guam's emergency procurement provision (method of source selection requirements) is at 5 GCA § 5215. Guam's provision goes into greater detail that the Model Code (§ 3-206), but contains the exact same general requirement:

"Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, ... the head of a purchasing agency, or a designee of either officer may make or authorize others to make emergency procurements when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations ...; provided that such emergency procurements shall be made with such competition as is practicable under the circumstances...."

Note carefully that an emergency is not a situation where there "exists a threat to public health, welfare, or safety". Most issues government deals with concern situations where there exists a threat to public health, welfare or safety. The key is the "emergency conditions".

So what is an "emergency"? Here, the ABA Model Code regulation and Guam law (and regulation) differ somewhat.

The ABA Regulation (§ R3-206.01) defines "emergency conditions" as "a situation which creates a threat to public health, welfare, or safety such as may arise by reason of floods, epidemics, riots, equipment failures, or such other reason as may be proclaimed.... The existence of such condition creates an immediate and serious need...." § R3206-02 limits the quantity of supplies, services or construction items to that which is "necessary to meet the emergency", and § R3-206.03 provides a dollar limit on the amount of money that may be spent on an emergency procurement ($25,000 is suggested as an example), and requires approval from the highest procurement official in the jurisdiction.

Guam law differs most substantially from the Model Code in its definition of emergency to rule out man made "emergencies". Comment 3 to the Model Code allows emergency procurement to possibly be justified "because all bids submitted under the competitive sealed bid method are unreasonable, and there is no time to re-solicit...." Thus, the Model Code seems to justify an emergency procurement which was not planned sufficiently in advance of need to account for glitches in the solicitation. One such glitch would be a protest, but the comment itself does not contemplate that kind of routine glitch, only the glitch where all bids are unreasonably priced (a situation often observed in emergency conditions).

This suggests, then, that an emergency must not only affect health, welfare and safety but must be unforeseeable. Guam law specifically mentions this. 5 GCA § 5030 defines "emergency" to mean, in relevant part, "a condition posing an imminent threat to public health, welfare, or safety which could not have been foreseen through the use of reasonable and prudent management procedures". It does not provide the descriptive terminology of the Model Code, "such as may arise by reason of floods, epidemics, riots, equipment failures, or such other reason as may be proclaimed". Under Guam law, for instance, an equipment failure would not justify an emergency procurement if it could have been "foreseen through the use of reasonable and prudent management procedures".

Planning is the first of the four main principles of management (see, as one basic statement example of this notion The Foundation of Management; there are plenty of other more scholarly expositions -- indeed entire texts as studied in business management classes). At the US federal level, extensive guidance is given for procurement execution in the Federal Acquisition Regulations, beginning with FAR Part 7 (Acquisition Plans), with reference to Parts 10 (Market Research) and 11 (Describing Agency Needs). Guam law does not deal with these matters, so the FAR provides useful guidance on best practices in executing the planning principle.

Guam law does provide a planning principle, however, broadly specified in 5 GCA § 5010 (Policy in Favor of Planned Procurement). The policy is expressed in the statement, "All procurements of supplies and services shall, where possible, be made sufficiently in advance of need for delivery or performance to promote maximum competition and good management of resources." This statement is broad enough to encompass procurements conducted by the emergency method of source selection.

It is notable that this provision contemplates the use of competitive "bidding" even in emergency conditions. It says, "Except in emergency situations, lower price bids are generally preferable to shorten delivery or performance bids." In emergency procurement (§ 5215), the minimal requirement is the solicitation of at least three informal price quotations. Thus, Guam law would provide an emergency competitive sealed bid wherein price would be of secondary consideration to delivery time in appropriate circumstances (including the price and time differentials specified in § 5010).

There have been many instances of abused emergency procurements in Guam over the years, including serial/rolling monthly "emergencies" specifically excluded by § 5125 of the law. ("No emergency procurement or combination of emergency procurements may be made for an amount of goods or supplies greater than the amount of such goods and supplies which is necessary to meet an emergency for the thirty (30) day period immediately following the procurement.)

The similarity in these instances with the Massachusetts article above is that such abuse requires the tacit connivance of the Governor. On Guam "In addition to any other requirement, the Governor must approve in writing all authorizations for emergency procurement." But the Guam Legislature has also condoned and facilitated emergency procurement that failed to meet the definition of emergency, through special legislation, as reported by the Guam Public Auditor. The controversy arose from legislation passed to allow fire trucks to be procured outside the bounds of the procurement law. The Auditor's Report described the situation, and her response to what transpired:

In December 2003, the GFD Chief (Chief) requested and received an emergency declaration for the purchase of three fire trucks. In two days, the emergency purchase was awarded to Mid-Pacific Far East for $734,913. Morrico Equipment Corporation (Morrico), another local fire truck distributor, protested the emergency purchase and a lawsuit followed. In March 2004, the Superior Court of Guam issued a preliminary injunction (Civil Case No. CV0152-04) in favor of Morrico and GSA was enjoined from taking any actions to procure the fire trucks. The court further found that “the written determination of emergency by the Guam General Services Agency and the Guam Fire Department dated December 31, 2003, failed to comply with requirements of 5 G.C.A. §5425 for the procurement of Fire Trucks in this case and any actions taken in furtherance of the procurement is void pursuant to §5425(g).” To date, there have been no further proceedings on this case.

In June 2004, the Chief testified on Bill 295, which would appropriate $600,000 and waive procurement requirements for the emergency purchase of fire trucks. In his written testimony, the Chief did not disclose the preliminary injunction. Bill 295 was signed by the Governor and became Public Law 27-99; however, the Governor raised concern on Public Law 27-99 that GFD and GSA lacked guidance to make the necessary procurement because it waived all methods of procurement.

In September 2004, GSA issued requests for quotation for the purchase of fire trucks to three local vendors: Mid-Pacific Far East, International Equipment of Guam, and Morrico. GSA allowed only four days for the three vendors to respond to over 100 pages of specifications. Mid-Pacific Far East was the only vendor to submit a price proposal in the four-day time period allotted.

Four days for vendors to respond to over 100 pages of specifications was unreasonably short.

GFD has not been provided a consistent source of funding to replace fire trucks and ambulances. Because of this lack of consistent funding, GFD has had to resort to emergency requests whenever the number of fire trucks and ambulances are precariously low. The passage of P.L 27-99 permitted GFD to purchase two fire trucks without conforming to standard procurement practices, thus, setting a precedent allowing emergency purchases to be obtained without following emergency procurement regulations.

We recognize the Government of Guam’s current financial difficulty, unless a consistent funding source is provided to GFD for the purchase of necessary emergency vehicles and equipment, GFD will continue to resort to emergency requests for these purchases. We urge the Legislature to discontinue passing legislation that waives procurement regulations of any purchase. Even the Governor raised concern over the lack of procurement procedures in P.L. 27-99. We recommend that GFD develop a 5-year and 10-year capital replacement plan and submit the plans to the Legislature to ensure that GFD receives the needed funding for the purchase, maintenance and upkeep of its emergency vehicles and equipment.

There are many principles of procurement, including the fostering of competition to achieve maximum economic benefit to meet the basic needs of the public, and providing fairness, equal treatment, transparency and accountability -- and insisting on planning and other prudent management techniques. But to some extent many of them, in certain cases, conflict. We can insist on efficiency, for instance, at the expense of transparency and accountability.

The principle of planning is intended to ameliorate inefficiency. If we are going to excuse inefficiency, by for example resorting to emergency procurement of supplies or services whose need was well foreseeable, we need to counter-weigh the diminished application of the planning principle by increasing, for instance, the application of the accountability principle.

In simpler terms, management heads should roll.

One buyer's "fair and reasonable" is another's fair and reasonable -- "maybe"

The US government General Services Administration operates an Amazon-like online catalog service for its agencies, states, territories and certain NGOs and others to purchase routine, or commercially standard, supplies and services.

GSA awards Schedule Contracts to responsible companies that offer Commercial off-the-shelf (COTS) products and services falling within the descriptions of the Schedules. Combined, the GSA Schedules are a comprehensive, categorical offering of almost every product and service available. To date, there are over 11 million commercial products and services available through the GSA Schedules.

Acquisitions through GSA Schedules are issued using full and open competition. Prices have already been deemed fair and reasonable, and Contracts are in compliance with all applicable laws and regulations, reducing evaluation cycles. Purchases can be made directly from a contractor's GSA Schedule Contract, eliminating time-consuming responses to complex RFP’s and lengthy negotiations.

See source.

That's their story and GSA is sticking with it.

Fundamentally, the government is intended to purchase anything only if the price is "fair and reasonable". (See FAR Part 15.402.) And what does that mean; how is fair and reasonable determined?

"Supplies offered on the [GSA]schedule are listed at fixed prices. Services offered on the schedule are priced either at hourly rates, or at a fixed price for performance of a specific task (e.g., installation, maintenance, and repair)." (FAR Part 8.404(d).) Under a fixed price contract, "the contracting officer can establish fair and reasonable prices at the outset, such as when — (a) There is adequate price competition", etc. (FAR Part 16.202-2.) (Also see, for instance, 5 GCA 5232(c) under Guam procurement law (based on the ABA Model Procurement Code), which suggests cost or pricing supporting data is not required "where the contract is based on adequate price competition", etc.)

So, then, is the GSA schedule a list of the lowest priced contractors for each item of supply or service? No. It is, as mentioned, like Amazon, with multiple pre-vetted contractors, each with its own price and contract terms. Each approved contractor posts its own pricelist which contains the pricing and the terms and conditions pertaining to each Special Item Number that is on the contractor's schedule. (See FAR Part 8.402(b).)

Thus, the GSA schedule does not provide the lowest price (nor one necessarily associated with contract terms specified by an agency), but simply a catalog of contractors GSA has determined offer "fair and reasonable" prices. The prices simply reflect "prices associated with volume buying" (Part 8.402(a)). The implication is that each of these prices are fair and reasonable because they have been determined by arm wrestling with the largest monopsony in the US economy; in effect, it is fair and reasonable because it is determined by the same thing as monopoly power. Of course, in a market with a monopoly, or a monopsony, there is no effective competition. Thus, the GSA prices are not based on price competition, but unilateral market power by a party that the market power has determined is -- or should be -- the "most favored customer".

The GSA describes this benevolent rule this way: GSA's goal is to be the best value supplier of choice. GSA Schedule contracts are negotiated with the intent of achieving the contractors' "most favored customer" pricing/discounts under similar conditions. (See GSA FAQ #7 here.)

Critical observers have pointed out, this requirement (to obtain most favored customer pricing) is not based on any explicit mandate of law or regulation, and is problematic as a practical policy decision. For instance:

Most Favored Customer And Price Reductions Clause

The most favored customer (MFC) and price reductions clause (PRC) operate jointly - seldom will you see the MFC clause without the PRC, and the PRC has no meaning without the MFC clause. There simply does not exist a legal basis for these clauses to exist. The FAR standard at 15.4 is "fair and reasonable". Their inclusion in an IFB or RFP is clearly not proper. It is currently in the FTS 2001 RFP improperly.

GSA has imposed these clauses in the schedule program for decades without legal basis. But no one has taken GSA to court. So, the bluff wins. The MFC clause is based on the premise that the government deserves similar or better discounts than the best discount you offer to a particular customer category. When you apply for a GSA schedule, you are required to identify the best discounts you have granted the following customer categories: Dealers/retailers; distributors/wholesalers; educational institutions; state, county, city and local governments; OEMs; and others (national accounts, end users.) Based upon the information you provide, the government will identify the customer that you have granted the largest discount to as your most favored customer, such as the OEM category. It is up to you to negotiate with the government in identifying the category that is most similar to the government customer. This will usually be the end user customer category, which ordinarily receives a lesser discount than offered to other customer categories and is most similar to the government in the way it buys.

We would like to make the case that GSA does not deserve any special price consideration from vendors in schedule negotiations. The rules clearly require procurement from lowest price vendors or justification of higher prices. GSA should be content to let market forces determine price. If Vendor A gives GSA 3% and Vendor B offers 8% for a comparable product, Vendor B will get the business. If this does not occur, this means that the entire schedule program is not workable and should be abandoned. If GSA and GAO cannot enforce this simple concept then we can only conclude that the higher priced product is worth more. - See more at: http://www.captureplanning.com/articles/12118.cfm#sthash.9LJLHicN.dpuf

See also, GSA and Most Favored Customer Pricing and POGO's White Paper on GSA Multiple Award Schedule Pricing, which has a chapter specifically addressing the Most Favored Customer ("FMC") pricing issue.

It is an issue recognized in the GSA Acquisition Manual: "The Government will seek to obtain the offeror’s best price (the best price given to the most favored customer). However, the Government recognizes that the terms and conditions of commercial sales vary and there may be legitimate reasons why the best price is not achieved." (Part 538.270)

The Office of the Undersecretary of Defense has recently released new guidance, under the hand of Richard Ginman, Director of Defense Procurement and Acquisition Policy, directing DOD contracting officers to determine fair and reasonable pricing independent of the GSA scheduled prices:

GSA has determined the prices of supplies and fixed-price services, and rates for services offered at hourly rates, to be fair and reasonable for the purpose of establishing the schedule contract. GSA 's determination does not relieve the ordering activity contracting officer from the responsibility of making a determination of fair and reasonable pricing for individual orders, BP As, and orders under BP As, using the proposal analysis techniques at 15.404-1. The complexity and circumstances of each acquisition should determine the level of detail of the analysis required.

This directive is discussed in an Lexology-posted article written by Attorney J. Catherine Kunz of the law firm Crowell & Moring LLP:

GSA schedule contracting: has selling to DoD just gotten harder?

This memorandum directs DoD contracting officers to make their own determination of fair and reasonable pricing when using Federal Supply Schedules (also known as GSA or VA Schedule contracts), rather than rely on the fair and reasonable price determination made by GSA when GSA awards Schedule contracts. Specifically, the memorandum establishes a class deviation to FAR 8.404(d) that will be applicable to DoD entities buying off Schedule contracts.

The direction to use proposal analysis techniques at FAR 15.404-1 could mean that DoD contracting officers will (a) compare proposed prices received in response to an RFQ; (b) compare proposed prices to historical prices paid for the same or similar items; (c) use parametric estimating methods/application of rough yardsticks (e.g., dollars per pound); (d) compare proposed prices with competitive published price lists; (e) compare proposed prices with independent government cost estimates; (f) compare proposed prices with prices obtained through market research for the same or similar items; or (g) request and analyze “data other than certified cost or pricing data.”

Because “data other than certified cost or pricing data” is defined at FAR 2.101 as “pricing data, cost data, and judgmental information” and can include “the identical types of data as certified cost or pricing data [required pursuant to the Truth in Negotiations Act] . . . but without the certification,” it is possible that Schedule contractors will need to disclose their cost information in order to perform work for DoD.

The author suggests "This adds complexity and risk to Schedule contract performance and moves Schedule buys even further from the intent that the Schedule program mirror commercial buying practices." (Read the whole article for context I have left out.)  

But, if, as I suggest, the GSA Schedule is simply an Amazon for government buyers, wouldn't a commercial buyer also want independent assessment that the prices offered do, indeed, reflect fair and reasonable ones and not blindly take the first one to pop up on the screen?

Before leaving this topic, to follow up from the observation made above that the Schedules do not offer up the lowest price, rather a catalog of contractors at various prices, I note that the GSA Schedules program has evolved to now both offer and in circumstances require that any authorized government buyers ("ordering activities") to poll the list of contractors with an RFQ (Request for Quotes). The parameters of the e-Buy RFQ program are in FAR Part 8.402(d)

"E-Buy allows ordering activities to post requirements, obtain quotes, and issue orders electronically. Posting an RFQ on e-Buy — (i) Is one medium for providing fair notice to all schedule contractors offering such supplies and services as required by 8.405-1, 8.405-2, and 8.405-3; and (ii) Is required when an order contains brand-name specifications (see 8.405-6)".

See the GSA's Buyer's Guidance here. 

When ordering activities have been authorized to access the GSA Schedule, but are required to use the local source selection method competitive sealed bid to do so, as is the case with Guam agencies under 5 GCA 5122, it would not take a lot of tweaking of the system (laws or regulations) to allow a bid by the lowest contractor on the Schedule, determined by the e-Buy RFQ process, to be qualified for consideration under a local IFB, assuming the contract terms of the GSA Schedule contractor are consistent with the contract terms in the IFB.