GSA's and Value-Added Resellers

February 4, 2026

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Drafting a response to the GSA’s Reseller RFI turned out to be a more challenging exercise than initially thought.  The information sought leads to a pre-determined conclusion or appears to be akin of advanced justification.  Rather than submitting an RFI privately that would be dismissed, I hope to elevate the issue at hand for public consumption.

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There are some at GSA who believe that ‘resellers’ offer no value to the transaction between government and industry. Why buy milk when you can get it from the cow for free? This was a common premise for how Schedules would like government and industry to engage in exchange with one another.  There is one problem with carrying this premise, however.  It just ain’t the way things work.

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                                                                         "Why buy the milk when you can get it from the cow for free?"

 

Using the cow analogy above, we would buy Cheerios from the General Mills store, milk directly from Organic Valley and butter from Land o’ Lakes.   Instead, we go to a place where we can buy all of them at reasonable prices – the supermarket.   This is the Value-Add of the channel partner/reseller world.

 

The RFI opens by requesting definitions for both “reseller” and “value-added reseller.” However, this frames the issue from the wrong perspective. The real question is not what constitutes a reseller, but rather what defines a “channel partner.” Clarifying the latter naturally establishes the definition of the former.

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                                                                                         Resellers are Channel Partners

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Simply put, a reseller is part of a commercial relationship between a supplier, often an Original Equipment Manufacturer (OEM), and its channel partners. A channel partner is an intermediary company that sells or delivers the manufacturer’s products or services. These reseller relationships can take many forms, including system integrators, distributors, value-added resellers, managed service providers, and IT consultants. Each qualifies as a reseller so long as it is selling the technology manufacturer’s offerings.

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A value-added reseller (VAR) is a company that purchases technology products and enhances them by bundling additional features or services before reselling the combined offering to customers. For example, a VAR might pair hardware with custom software, provide technical support, training, or installation, or deliver other enhancements defined in coordination with the OEM.

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What value do these companies provide to the OEMs?  The answer for the OEMs is…LOTS!

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Channel partners exist to create value for suppliers or original equipment manufacturers, and the nature of that value depends on the channel partner model the OEM adopts. Some OEMs select partners based on their contributions to efficiency and productivity. Others prioritize technical competence, ensuring they understand both the products and the markets they serve. Still others emphasize loyalty and compliance to support consistent product representation, while some view channel partners as an extension of their marketing and financial operations.

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Most importantly, channel partners are willing to deal directly with the government.  Setting up contractual relationships (GSA Schedules) and competing for limited award contracts (GWACs and IDIQs) costs money in Program Management and Bid resources.  In some cases, this is an investment that an OEM has no interest in.  Once a contract holder has sold to the government, the process of getting paid is another intricate process that is not like traditional commercial practices.  Compliance with government regulations is literally a value-add that resellers provide to both OEMs AND the federal government.

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For customers, this model delivers timely access to the products they need at fair prices and through secure transactions. When gaps arise between expectations and delivery, the VAR serves as the intermediary and steps in to resolve them.

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A recent post by Drew Jaehnig (Navy veteran, DISA) began with a telling observation.  This is an RFI written for a program who has had resellers on their vehicle for decades.  The business of government is not something new, and OEMs have been serving the government through their channel partners as long as commercial technology has been had by the public sector.  By asking the question GSA concedes that it doesn’t understand how prices are formed in the government marketplace.

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                                                            Fun Fact: Guy Fawkes used the pseudonym, Jon Johnson. I'm just sayin'.

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They believe the “V” in “VAR” should represent the “value” they deliver to the public sector—a reasonable and well-founded assumption. In fact, it makes perfect sense, and I am confident the channel partner community will help GSA understand what’s in it for them. They will highlight how government rules can influence channel partners, fostering partnerships, mentor-protégé arrangements, joint ventures, and other mechanisms that both government and industry must consider when engaging in exchanges. These dynamics inevitably lead to “channel spread,” which benefits competition but also demands resources to manage and steward responsibly.

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Federally focused channel partners ensure their agreements and operations align with the unique security requirements of the public sector, which are far more prescriptive than private-sector standards and practices (such as ISO). These considerations are critical aspects of the supply chain that channel partners, including resellers and value-added resellers, help address. The most effective channel partners have leadership with strong business acumen and dedicated federal practice. While they may also serve state, local, and international markets, having teams that specialize in federal work should be a prerequisite for engaging with the federal government. These teams must be staffed with professionals who inherently understand what it takes to operate effectively in a mission-oriented environment.

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Is this always the case?  No.  But that holds true across the board with any company in any market.

 

Another point that Mr. Jaehnig made involved the Multiple Award Schedules Program’s understanding of price reasonableness, the truth about pricing, category management, and what he anticipated will be the result of GSA’s inquiry.  I agree with Mr. Jaehnig’s point that this is a piece of a larger puzzle that GSA is attempting solve for as they attempt to ‘fix’ procurement.  (‘Fix’ meaning “to mend or repair” , “to hold or direct”, “to assign”, “to set in order” – hoping it is not meant “to get even with” or “to influence the actions, outcome, or effect of by improper or illegal methods”)

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The problem is the frame of reference of those who are advancing these ‘fixes’.

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I want to remind the marketplace of GSA’s cultural predispositions, particularly within its Multiple Award Schedules program - a legacy Federal Supply Schedule initiative originally transferred from the Department of the Treasury in 1949. Its early vision was for agencies to “shop” for supplies by flipping through catalog pages, much like a BestBuy, Costco, Amazon, or Micro Center flyer we receive in the mail today. That approach may work for household purchases, but it is not how the government procures enterprise IT.

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Pricing on Schedules reflects a unit ceiling price for a single item, like how a Dell, HP, or Apple laptop is priced at BestBuy, Costco, Amazon, or even MicroCenter. When you buy that product from any of these retailers, are you purchasing directly from the manufacturer or through a retail channel partner who resells these items? For hardware, the answer is obvious. But do we truly understand the costs behind these prices? Are these the latest models with cutting-edge features, or inventory nearing end-of-life that companies are eager to clear?

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The same questions apply to (Great American Made!!!) automobiles - or even Q-Tips (from Puerto Rico…so THAT COUNTS TOO!!!). Do we know the markups at each stage of the supply chain? Of course not. These examples illustrate the commercial retail marketplace, and GSA must move beyond its perception that it should act as a retail environment for government purchasing. They would rather function as the reseller through which the government buys.

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Our colleague Richard C. Howard, Lt Col (Ret) wrote an excellent article observing the same:

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“GSA’s criticism of resellers for imposing “5%-7% taxes” deserves scrutiny, particularly given GSA’s own fee structure and costs.  GSA characterizes reseller fees as uniformly "5% to 7%," but industry sources consistently report that reseller margins frequently run as low as 1% to 2% on commodity software transactions—far below GSA's stated range.

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Moreover, agencies routinely conduct competitions among GSA Schedule holders that drive prices below published rates. Schedule prices are ceilings—vendors regularly bid below those rates to win specific competitions. Actual transaction prices often fall well below published Schedule rates.”

 

Anyone want to bet the free market would play a better role?  Would it shock you to know that it is proven that it already does?

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                                                                                                                   Data Envy

 

In 2020 OFPP told the BIC solution owners (GSA, NITAAC, NASA, and the US Army) “Everyone over here is saying government pricing for hardware and software is higher than commercial rates.”  Working with NITAAC and the US Army Chess we looked at the transactional information housed within our systems to see what is really going on. What did we find? Government prices bettered commercial rates (including on Amazon Marketplace) 90%. When volume was considered, it was 100% of the time. When we accounted for frequency (how often they buy) it was 100% of the time. (*GSA data was not used for these purposes…because they didn’t have any).

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Just as Col. Howard noted in his article., this told us what we already knew – list pricing was a meaningless figure.  Volume and relationship mattered more. Who was at the point of the relationships that provided better than commercial rates?  The channel partner.

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GSA had the same data as NASA and NITAAC did (because the BIC solutions are required to give it to them).  Why were they not able to do the same analysis?  Because they didn’t have the data to begin with, so they didn’t know how to read the commercial data that came too them, and because it conflicted with their view of how schedules pricing should work – LPUF (Lowest Price Up Front).

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                                                                                                                     "We gotcha kid"

 

Last story on how many at GSA misunderstands market mechanisms.  This is a software example:

 

There was variance between what the government was paying for a set of Microsoft 365 licenses that were fit for government use.  Lots of time and energy was spent as GSA tried to convince Microsoft to standardize their pricing and terms for government-wide use.  GSA called together a sizable government-wide team that included the DOD, Interior, Energy, Transportation, State, Navy, Army, USAF, NASA, DOJ, DHS (all the bigs) to address this issue as a community.  Much of the conversation was spent time collecting the data and comparing receipts.  According to GSA “The Department of State has the best pricing for Microsoft product X, so we should all strive for the same.”  The State rep stood and said “Wait a minute.  I don’t think you understand.  You are asking us for our pricing for MS 365, but that only accounts for a 10% overall relationship we have with the company.”

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Oh….ok….well then….

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                                                                                         Guess who learned how to meme today?

 

Pricing is a dependent variable in the marketplace and GSA seems to have a difficult time understanding and accounting for it within their MAS program.  It was due to a historical lack of data through their own vehicles (TDR – or more reports from contract holders – is their , a legacy mentality around what a list price is (a ceiling), and under the false premise of enterprise government.

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Mr. Jaehnig was correct in pointing out GSA’s basic admission that they don’t understand how business works.  The RFI practically screamed it.  “Disclosure requirements, justification threshold, or markup triggers” may not be as inevitable as he thinks, as I am sure the OEMs will eventually push back (not publicly, but privately).  That said, “Smaller resellers may struggle.  Larger channel players may consolidate share.”  That appears to be an eventuality regardless of what GSA chooses to do with the channel partners under their MAS program.

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The Missed Opportunity for GSA…or…An Opportunity for Redemption

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I’m optimistic about the new appointee at GSA. Administrator Forst appears to be off to a strong start - meeting with staff who have endured a disruptive year, staying focused on the agency’s challenges, and putting the “service” back into the General Services Administration. His emphasis on providing services that agencies can opt in is a promising approach. Those intent on consolidating total control over the IT marketplace should take note and follow his example.

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We have not yet seen GSA at its best. The agency is at its worst when trying to “fix” a marketplace it doesn’t fully understand, while simultaneously marketing itself as the solution to every government procurement challenge. (A common internal mantra at GSA was: “We are the [insert topic] experts!!!” True expertise resides elsewhere - in NatSec, DefSec, Law Enforcement, and other sectors - where technology is deployed to execute mission-critical functions.)

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GSA shines when it acts as a facilitator, bringing government stakeholders together, enabling informed decision-making, and providing transparent counsel regardless of acquisition strategy. Vehicles like IT70, Alliant 3, NASA SEWP, Army CHESS, and Navy Spiral 4 are tools, not government-wide mandates. It’s the role of each of these respective programs to design these tools for specific purposes, and it’s up to agencies to decide, or opt-in, to the ones that best serve that mission need.

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What’s needed most, and what underpins strategic sourcing and category management, is data. And that’s the rub: GSA has been flying blind for years due to its inability to capture data at the point of transaction. TDR is a step forward, but it still relies on reporting rather than real-time data capture. Agencies need on-demand access to actionable data to interact efficiently with the marketplace and make informed decisions.  It is that lack of data that can illuminate what is happening in the marketplace, and the resulting inability to understand what that data means, is the cause for this ill-worded RFI.

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I am sure the reseller and OEM community will help them understand better with their responses.

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                                                                                                                                           ~ J Johnson

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