The Importance of Maintaining Accurate, Current, and Complete CSPs

In an earlier article, "Tending," we discussed, at a general level, the importance of paying attention to compliance matters in federal contracting. Here, we bore down into a specific area, examining the critical need for accurate, current, and complete commercial sales practices (CSP) disclosures in General Services Administration (GSA) contracting. Such disclosures are vital for maintaining compliance and avoiding significant legal and financial repercussions.

The GSA OIG's Use of the CSP

The GSA Office of Inspector General (GSA OIG) conducts contract audits that help contracting officers award and manage multiple award schedule contracts. The GSA OIG generally performs two types of audits: preaward audits, which provide information for negotiating fair and reasonable contract prices, and postaward audits, which assess a contractor’s compliance with contract terms and conditions.

In FY 2023, GSA OIG auditors reported over $346.5 million in cost savings. These audits claimed that contractors overcharged GSA customers, overstated proposed labor rates, assigned unqualified employees on task orders, did not properly calculate Industrial Funding Fee payments, and, most notably for this article, submitted CSP information that was not accurate, current, or complete.

GSA uses a CSP form (the CSP-1) to collect detailed information about a contractor's commercial pricing practices. This form requests information about a contractor’s commercial discounts, concessions, and other material terms and conditions. Although its use is declining somewhat due to Transactional Data Reporting, GSA still views the form as a crucial tool for securing fair and reasonable pricing. It plays a significant role in GSA OIG audits, investigations, and whistleblower actions. (For the purposes of this article, we will set aside the similarly important Price Reductions Clause.)

Lessons from Case Law and Settlements

Case Law

A recent case provides insights into the importance of maintaining accurate, current, and complete CSP disclosures. In United States ex rel. Morsell v. Gen Digital Inc., Civil Action No. 12-800, 2024 WL 166015 (D.D.C. Jan. 16, 2024), which involved CSP submissions under a GSA Schedule contract, the United States District Court for the District of Columbia found a company liable for around $53 million in damages and penalties for violations of the False Claims Act.

Earlier, in a January 2023 ruling, the same court found that the contractor's CSPs failed to describe the volume of non-published discounts, information about a points-reward discounting program, and other material information about one of its rebate programs. United States ex rel. Morsell v. NortonLifeLock Inc., 651 F. Supp. 3d 95 (D.D.C. 2023). The court determined, among other things, that these incomplete CSP disclosures fraudulently induced GSA to award the Schedule contract to the contractor at higher pricing than the agency would have had the disclosures been complete.

In its January 2024 ruling, the court reversed its prior decision that it was unable to ascertain the number of false statements to which penalties apply. After additional briefing (and perhaps more time to ponder), the court found that, because the undisclosed rebates could have impacted the price of every sale the contractor made under its Schedule contract, each sale arose from a false statement. The court determined that there were 3,352 such transactions, resulting in a total penalty of $36,872,000. The also court assessed treble damages in the amount of $16,121,696.04.

Settlements

A brief review of settlements also highlights the importance of maintaining accurate, current, and complete CSP disclosures. For example, in 2020, CA Technologies paid $11 million to the government, settling allegations of submitting false and misleading information about its commercial sales practices. In 2014, Hewlett-Packard paid $108 million to settle similar claims.

Six Ways to Maintain Accurate, Current, and Complete CSPs

Having represented numerous Schedule contractors in GSA OIG audits over the past 20 years, we have witnessed firsthand the importance of tending carefully and diligently to CSP disclosure activities. This experience underscores the value of implementing the following best practices.

1. Thorough, Accurate Disclosures

• Within the CSP form, describe general sales practices. For example, as a matter of practice, what is the deepest discount given to a given group of customers?
• Detail deviations (deeper discounts, rebates, promotions, better terms, etc.), if any, from general practices, including frequency and conditions for such deviations. These deviations are typically written in the form of footnotes that follow the form's chart. Err on the side of inclusion to help avoid an argument the CSP is not complete.
• Describe customer categories that fit your sales practices, rather than relying on examples from the form. This ensures that the information is tailored to your specific business operations and reduces the risk of confusion and misinterpretation.
• In essence, provide all information that GSA would consider material in negotiating fair and reasonable pricing.

2. Regular Review and Updates

• Conduct regular reviews of your company's CSP information to ensure accuracy and completeness.
• Treat the CSP as a living document, regularly updating it as pertinent changes occur.

3. Comprehensive Documentation

• Maintain thorough documentation of all pricing and discounting practices, including contracts, invoices, and sales records.
• Create a centralized digital repository to store these documents securely and make them easily accessible for CSP preparation and audits.

4. Training and Compliance Programs

• Implement comprehensive training programs for employees involved in GSA Schedule contracting.
• Provide ongoing education on the importance of proper CSP disclosures and the potential consequences of noncompliance. Include practical examples and case studies.

5. Whistleblower Protections and Reporting Mechanisms

• Implement systems that allow employees to report concerns or discrepancies in CSP disclosures without fear of retaliation.
• Regularly communicate to reinforce a culture of transparency and accountability.

6. Sales Team Engagement

• Meet regularly with your sales teams to gain visibility into their sales practices and ensure they understand the importance of maintaining an accurate, current, and complete CSP.
• Ensure that discounts have not gone (or will not go) deeper than those disclosed in the CSP.

Conclusion

To avoid legal issues and penalties, it is essential that Schedule contractors disclose accurate, current, and complete CSP information. By implementing the best practices discussed in this article, Schedule contractors can significantly mitigate the risk of facing allegations related to improper CSPs, ensuring compliance and safeguarding their business operations.

If you need assistance in government contracting, feel free to reach out. Email us at [email protected] or message us here on LinkedIn. Read more about our work at https://www.dhirubhai.net/in/eric-aaserud-40220618/. Check out more articles in our ongoing "Tending" series.

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This article is for informational purposes only. It does not constitute legal advice. Readers should consult with their own legal counsel to address specific compliance issues or concerns.