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Breaking the Monopoly: How DoD Reshaped Federal Procurement Over 40 Years
For decades, the General Services Administration (GSA) held a significant, often unchallenged, position in federal procurement, particularly with its Multiple Award Schedule (MAS) program. But a persistent, four-decade-long campaign by the Department of Defense (DoD) fundamentally transformed this landscape, breaking GSA’s traditional procurement monopoly and driving sweeping federal acquisition reform. This isn’t just a bureaucratic tussle; it’s a pivotal story of how systematic challenges can lead to measurable improvements in government efficiency and innovation.
The Cracks Begin: Early Pricing Problems Identified
The journey began in 1979 when a Government Accountability Office (GAO) report first systematically documented GSA’s pricing methodology failures. The audit revealed significant management deficiencies, noting that GSA’s Federal Supply Service wasn’t effectively managing pricing for commercial products, despite these representing 53% of its total sales. Most critically, GSA lacked adequate oversight to secure the best prices, directly impacting DoD’s procurement costs. This initial documentation laid the groundwork for DoD to question GSA’s pricing authority. Further technical analysis by GAO in 1986 pinpointed critical failures in contracting officers’ ability to determine pricing and prepare proper negotiation records, creating systematic risks that disproportionately affected DoD as the largest user of GSA schedules.
Legal Challenges and the Monopoly’s End
The Competition in Contracting Act (CICA) of 1984 introduced “full and open competition” requirements, creating a legal framework that challenged GSA’s centralized procurement model and paved the way for DoD to question its authority. This was followed by a more direct assault during the Clinton Administration under OFPP Administrator Steven Kelman, who famously identified GSA as a procurement monopoly that delivered “slow and indifferent service” and was “not an aggressive negotiator,” resulting in poor pricing, especially for DoD.
This era saw the creation of Governmentwide Acquisition Contracts (GWACs) as direct alternatives, allowing agencies to bypass GSA while maintaining bulk purchasing power. The Federal Acquisition Streamlining Act (FASA) of 1994 further reduced GSA’s mandatory use requirements, dealing a permanent blow to its monopoly and fostering a competitive environment between GSA and other acquisition vehicles. Adding to this, GSA’s own regulation changes in 1997 significantly limited pricing oversight capabilities, notably restricting post-award audit authority, which DoD and other agencies relied upon for fair pricing.
DoD Forges Independent Capabilities
In the early 2000s, DoD began promoting performance-based contracting, questioning whether GSA’s traditional pricing aligned with its new acquisition goals. A major GAO report in 2005 validated DoD’s long-standing concerns, revealing a “pricing methodology crisis” where nearly 60% of GSA contract files lacked proper documentation for effective price negotiation. As the primary user of MAS contracts, DoD found itself without assurance of fair and reasonable pricing, with GSA’s metrics focusing on speed over price quality.
This set the stage for DoD to develop its own robust pricing expertise. Under initiatives like Better Buying Power 1.0 (2010-2011), led by Secretary Robert Gates and Ashton Carter, DoD emphasized “Should Cost” analysis. This revolutionary approach shifted from merely accepting established prices to proactively identifying and reducing costs below budgeted estimates. DoD also developed its own Cost and Pricing Centers, enhanced pricing analysis, and implemented rigorous pricing education for its personnel, creating capabilities independent of GSA’s methodologies.
The Landmark Confrontation: Independent Pricing Mandate
The culmination of this four-decade struggle arrived on March 13, 2014, with the landmark DPAP Class Deviation to FAR 8.404(d). Issued by Richard Ginman, Director of Defense Procurement and Acquisition Policy, this deviation declared that “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”. This was the most direct challenge to GSA pricing authority in federal acquisition history.
DoD contracting officers were now mandated to conduct independent pricing analysis for all GSA Schedule orders, regardless of dollar value, using complex FAR techniques. The rationale was clear: concern over pricing variations, exemplified by a “$29 stapler on GSA Schedule creating significant risk” of overpayment. This effectively removed the primary benefit of the GSA Schedule program for DoD buyers—the pre-determined fair and reasonable pricing—leading to increased contract duplication as DoD sought alternatives.
A New Era: Revolutionary Transformation
The transformation continued with initiatives like Better Buying Power 3.0 (2014-2017), which recognized GSA schedules as inadequate for cutting-edge technology and innovation. In 2018, the National Defense Authorization Act for FY 2019 introduced Section 876 authority, which radically eliminated the requirement to consider price at the contract level for hourly services. This “unpriced master contracts” approach allowed awards based solely on technical qualifications, with pricing evaluation moved to the task order level, fostering enhanced competition. Significantly, GSA itself began to adopt these “unpriced schedules,” demonstrating DoD’s influence on government-wide procurement innovation.
Today, DoD continues to play an active role in reforming federal acquisition regulations, including GSA Schedule procedures, through a joint FAR overhaul initiative. The result is a federal acquisition system where DoD operates with complete independence from GSA pricing determinations, driving methodological innovations like “Should Cost” and unpriced contracts that are now adopted across the government. This shift has created new opportunities for commercial companies and resulted in measurable cost growth reduction and performance improvement for DoD.
Tags: Federal Acquisition, DoD Procurement, GSA Schedules, Procurement Monopoly, Acquisition Reform, Should Cost Analysis, Unpriced Contracts, Government Contracting, Fair and Reasonable Pricing, Policy Evolution