In addition to implementing FSSI, the GSA is in the midst of a “supply transformation” initiative that essentially stops the agency from acting as a distributor — buying products, holding and delivering inventory — and places the those responsibilities onto the shoulders of the vendor.

The move, which includes shuttering GSA’s Eastern and Western distribution warehouses by the end of 2014, is expected to save taxpayers about $100 million, annually.

Instead, BPA winners will be responsible for owning and operating a network of on-site stores, manage inventory and ensure delivery, as well as agree to absorb those relative costs.

The eligibility provisions faced by potential GSA contractors are more stringent than requirements enforced in years past. Besides having to meet the agency’s environmentally sustainable goals, or its “fill or kill” requisite (in which an order must be filled in its entirety or get cancelled, altogether), distributors face other tough eligibility exigencies.

Bidding requires seamless integration with GSA IT systems; email capabilities; the use of National Stock Numbers (an official number applied to an item of supply that is repeatedly purchased, stocked, stored and issued); and other custom requisites affecting product packaging and labeling — and this is just to qualify for bidding.

Perhaps the biggest change is the requirement that contractors must provide — and pay for — sophisticated, “smart shopping” tools: e-commerce platforms to ensure meticulous data collection, fast ordering and swift deliveries (typically occurring in about four days).

These stipulations do not include the GSA’s request for “deep discounts.” Once a contractor chooses a core product BPA category — known as the market basket — to bid on, they must show the agency a discount from its schedule price. For example, if a pack of sponges cost $12.41, a distributor may submit a quote that lists an $11.29 sticker, or a discount of about 9 percent.

If the contractor is selected and given a BPA based on his or her discount, the GSA has contended it will apply the market basket discounts (in this example, 9 percent) to its entire inventory of products.

The discounts are also cumulative. If a GSA schedule holder has secured a BPA and experiences sales from GSA in excess of $6 million, the agency will enforce a greater discount across the scope of the contractor’s products. The discounts continue if, or when, a distributor reaches sales of $12 million, $18 million, etc., in government spend.

These discounts seem likely considering the small pool of vendors who will hold these lucrative contracts.
So far, the GSA has submitted a Request for Quotation to about 640 GSA schedule holders for the Requisition Channel.

“You might see a lot of companies who are saying it’s not worth bidding on anymore,” says Paul St. Germain, business development executive for wholesale distribution at IBM. “They might say, ‘I don’t need business for the sake of business.’ They need business to make money.”

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