Unmanned Aerial Vehicles (UAVs)–GSA Contracts

Interested in obtaining a GSA contract to enter the U.S. federal market for Unmanned Aerial Vehicles and services? This article provides some insights.

by Dave Alexander, Lincoln Strategies, LLC

Does your firm manufacture and/or sell unmanned aerial vehicles (UAVs) or hardware, software, and/or communications components? Do you provide support services, such as data collection and interpretation? You might be interested in obtaining a contract to sell such products or services to the federal government.

One method for entering the federal market is to obtain a contract with the U.S. General Services Administration (GSA). Under its “Schedules” program, GSA lists millions of products and services produced by commercial firms. All federal civilian and defense agencies and departments can purchase these products and services using streamlined methods.

In many cases, federal agencies and departments find that purchasing items off GSA Schedules is far easier than using other available acquisition procedures. In all, approximately $32 billion of goods and services are procured through the GSA Schedules program in a typical year. GSA has several dozen “Schedules”—each of which encompasses a different set of goods and services. Schedule 66, “Scientific Equipment and Services” is the one under which GSA typically issues contracts for UAVs (also referred to as “Unmanned Vehicle Systems”).

Each Schedule contains many different subcategories of products and services. Each such subcategory is called a “Special Item Number” or “SIN.” Several of the SINs in Schedule 66 include the following:

SIN 627-50: Unmanned Vehicle Systems, Operations Support, Data Collection, Analysis, Reporting, and Related Services. This SIN covers fully integrated, configurable, and operable UAV systems and all components, accessories, and repair parts. Specific examples of such items, in addition to the vehicles themselves, include:

•  Complete UAV systems.

•  Control stations.

•  Mission payloads.

•  Data link receivers and transmitters.

•  Power plants.

•  Guidance, control, and navigation equipment and subsystems.

•  Automatic landing subsystems.

The SIN also covers services, equipment, and tools required to operate and maintain an unmanned vehicle system for a specified period of time (e.g., manned control stations; data collection, interpretation, and reporting).

SIN 627-2005: Technical Training and Support.  Under this SIN, contractors can offer government customers an option to receive training in the use of UAVs and related equipment and technical support. Specific examples included in the definition of SIN 627-2005 include on site or off site training, basic operator training, hardware and/or software training, installation training, and applications development training.

GSA also has awarded contracts for UAVs and components under other Schedules and SINs.  For example, GSA has awarded a contract for lightweight antennas for UAV applications under Schedule 70 (Information Technology), within that Schedule’s SIN 132-8 (Equipment).

If you are interested in obtaining a GSA contract for UAV products or services, here are some tips and hints to consider.

1. There are no deadlines.

In general, a firm can submit a proposal for a GSA contract at any time, by responding to a Request for Proposals (RFP) for the appropriate GSA Schedule.  There is no limit on the number of contracts that GSA can issue under any Schedule.  GSA considers proposals in the order in which they are submitted, although in some cases GSA will move a proposal up in the queue (e.g., in the event that products included in the proposal are of pressing interest to the government).

2. GSA contracts are long-lasting.

Each contract has a Base Period of five years, and three successive Option Periods of five years apiece.  (It is at the discretion of the government as to whether to exercise each Option.)

3. There are no ceilings.

There is no cap on the number or size of orders that can be placed under a GSA Schedule contract.

4. There is no guarantee of sales.

If your firm is awarded a GSA Schedule contract, the UAV products and services included in the contract will be listed on GSA’s website, and available for purchase by any federal government agency or department.  But there is no guarantee of sales.  If your firm is interested in obtaining a GSA contract, this author’s advice is to first determine what your sales potential in the federal niche might be, and to think through the issue of whether you are willing to commit marketing and sales investments in this arena.

5. The place of manufacture is important.

All GSA Schedule contracts are subject to the Trade Agreements Act.  In brief, this means that products cannot be included in a GSA Schedule contract unless they are manufactured in the United States or in a Trade Agreements Act “designated country,” a few examples of which include Canada, Norway, France, and Taiwan.  A few examples of countries that are not “designated” include the People’s Republic of China, India, and Brazil.

Determining whether a particular product is Trade Agreements Act (TAA) compliant can be complicated.  For example, if you procure major components of a UAV from non-“designated” countries but you perform final manufacturing in the United States or a “designated country,” the end-user product might be TAA compliant.  The issue is whether the input components are “substantially transformed” in the manufacturing process.  Mere light assembly in the United States (or a “designated country”) generally will not qualify as a “substantial transformation.”

Note:  The Trade Agreements act also applies to services.  In general, a company that is neither established in the U.S. nor in a “designated” country cannot provide services under a GSA Schedule contract.

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If you are interested in pursuing a GSA Schedule contract, one of the first decisions you will have to make is whether to obtain a prime contract directly with GSA, or to become a supplier to a firm that already has its own GSA contract.

Firms that obtain their own GSA contracts often take this route because it can be more profitable than being a supplier under another firm’s contract.  In addition, firms sometimes find that potential federal customers are more comfortable dealing directly with the company that provides the goods and/or services.

To obtain a GSA Schedule contract, a firm is required to submit a proposal in response to one of GSA’s standing RFPs.  In this author’s experience, these proposals are not overly challenging.  They consist of many administrative steps (e.g., registering the company in the federal government’s System for Award Management).  The technical portion of the proposal is typically fairly straightforward.  The pricing section is typically the most difficult portion of the proposal.  Firms are required to describe relevant aspects of their commercial pricing practices, including disclosures of the lowest prices charged for the goods and services being proposed to GSA.  As part of the pricing proposed to GSA, the firm must demonstrate that these prices are “fair and reasonable” and “highly competitive.”

After a contract is awarded, the firm will be required to maintain compliance with the “Price Reductions Clause” (PRC).  In brief, this means that there are circumstances under which a GSA contractor will be required to reduce its GSA prices for unmanned aerial vehicles (and/or other items included in the relevant GSA contract) for certain periods of time.  This can occur if a firm’s pricing practices in the commercial markets change in certain ways after the award of a GSA contract.  For example, if a firm offers a greater discount to a commercial customer compared to the discounts that were in place prior to the award of the GSA contract, the Price Reductions Clause might be triggered.  If it is triggered, then the firm would have to offer proportionate additional discounts to GSA.  In effect, GSA’s Price Reductions Clause acts like a “most favored nation” clause that is sometimes found in the commercial world.

GSA certainly does not view a firm negatively if the Price Reductions Clause in its contract is triggered.  In fact, if it is invoked, it would benefit federal customers for unmanned aerial vehicles.

In deciding whether to obtain a GSA contract of its own, a firm’s management needs to think through the issue of how difficult (or not) it would be to manage compliance with the Price Reductions Clause.  There are also other types of administrative burdens and expenses associated with managing a GSA Schedule contract including, for example, periodic reporting of sales under the contract.

Reasons vary as to why some firms elect to become suppliers under another firm’s GSA contract (instead of obtaining their own GSA contract).  In some cases, a firm’s management might determine that becoming a supplier under another firm’s GSA contract is a better approach because the process can be completed more quickly.  A supplier does not have to submit a full-blown proposal in response to an RFP.  In general, the key requirement is to provide a “Letter of Supply” to an existing GSA Schedule contractor.  In addition, providing products or services as a supplier is typically substantially reduces administrative burdens compared to managing one’s own GSA contract.

On the other hand, being a supplier is almost always less profitable, and can substantially reduce the visibility of the supplier’s brand name in the federal marketplace.

This article’s author, Dave Alexander, has helped many firms participate in the GSA Schedules program.  Examples of his clients include manufacturers of radar and sonar products, flight recorders, portable solar generators, Internet tunneling hardware and software, and ship positioning systems.   Mr. Alexander can be reached at (978) 369-1140 or dave.alexander@LincolnStrategies.com.

 

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