Friday, September 17, 2010

MDRP 2010 Conference - Minimizing Revenue Leakage in the Government Programs

Allison Pugsley – Hogan Lovells
Catrina Hirschauer - Xenodyne

There are several ways to manage and reduce the revenue leakage within your company. With Class of Trade being the foundation of the GP building this is a good place to start. In negotiating that CoT and evaluating the contract membership lists you can help to identify ways of reducing any leakage in your company. As well as monitoring the CoT for all government contracts. These entity lists change regularly, and while at one time there should have been a discount given, it may not be the case today. Not to mention that if a non-government entity is purchasing with a discount to which they are not entitled, you will then create a Best Price issue for your company. With a new lower Best Price you will see a reduction in revenue through bigger price concessions, while not catching a Best Price issue you run the risk of seeing a large settlement take a chunk out of your revenue.

Chargebacks are also an important way to ensure you are determining the sales as they should be captured. Was it a non-retail sale or a retail one? Was the transaction a sale or a return/reversal? Was the government entity entitled to that chargeback? Going back to the issue above; without maintaining and reconciling your chargebacks, how are you going to know if you are out of compliance by giving a discount where it was not supposed to be? The government is going to want to know if that was an error or if you were trying to commit fraud with by-passing the Best Price issue: either way you are out of compliance. You have spent a great deal of your company’s revenue to maintain your compliance programs and if you do not take the time to check the detail, you are just creating another revenue leak.

Another area is in your FSS contracts. There are entities that are entitled to FCP and others who are entitled to the OGA price. In addition, there are also situations where the entity is entitled to both. Are you paying attention to which entities are receiving the lower FCP price and which are not entitled to it? And you are required to offer the FCP, but have you avoided paying anything lower than the FCP? With the OGA price being a negotiated amount there is certainly movement possibilities there.

So, make sure you are looking at your contracts and detail. Yes, there is a lot of detail out there, but it could very well be worth the effort to “follow the money” and see if there are areas of savings.

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