The St. Patrick’s Day acquisition letter: Supporting the industrial base

This column was originally published on Roger Waldron’s blog at The Coalition for Government Procurement and was republished here with permission from the author.

On March 17, the General Services Administration issued Acquisition Letter MV-22-02, “Temporary Moratorium on Enforcement of Certain Limitations Contained in Certain GSA Economic Price (EPA) Contract Clauses” (the Acquisition Letter). Effective immediately, the Acquisition Letter brings pricing flexibility for Multiple Awards Schedule (MAS) contractors suffering the impact of inflation across their business operations. This inflation impact on government contractors cannot be overstated. In the context of the MAS program, contractors are in the untenable position of selling contracted items for a loss as prices for products, raw materials, transportation, energy, and labor have increased.

As a result, MAS contractors have deleted hundreds of thousands of items from their contracts rather than selling them at a loss.

For the government, the net effect has been a reduction in competition for task orders and reduced access to the commercial market via the Schedules for customer agencies. The impact of inflation is especially hard on small businesses, including small, disadvantaged businesses, which is why GSA’s efforts to reduce the administrative barriers for access to economic price adjustments is especially welcome news.

The Acquisition Letter reduces management approvals and provides contracting officers increased discretion to raise prices on GSA contracts that include certain Economic Price Adjustment (EPA) clauses. It also establishes a temporary moratorium on certain limitations imposed by those clauses. Those clauses are:

1. GSAR 552.216,70, EPA — Federal Supply Schedule (FSS) Multiple Award Schedule Contracts; Alternate I; and Deviation II
2. I-FSS-969, EPA — FSS Multiple Award Schedule; and Alternate II
3. GSAR 552.216-71, EPA — Special Order Program Contracts; Alternate I; and Alternate II. Although the Letter is mandatory for GSA and only discretionary for the Department of Veterans Affairs FSS contracts, we hope that the VA follows GSA’s prudent lead here.

In sum, for contracts including the covered clauses, the Acquisition Letter authorizes the following:

• It lowers the approval level for price increases above the EPA clause ceiling in 552.216-70 (including Alternate I and Deviation II) from the contracting director to one level above the contracting officer;
• It removes the limitation on the number of price increases allowed during the contract period;
• It allows contractors to request increases as soon as the contract period begins and up through the end of the contract period;
• It allows contractors to submit price increase requests without waiting 30 days from the last request;
• It allows contractors to submit price increase requests that will be effective prior to the end of the first 12 months of the contract period; and
• It clarifies that if a contractor has removed an item from its Schedule contract, GSA will not enforce the limitation on adding the same item back at a higher price.

The Coalition commends GSA for recognizing the impact of inflation on contractors and for taking this critical first step in addressing the negative effects of the continuing, historic rise in inflation. It is important to note, however, that communication and training steps remain if GSA’s efforts are to be successful in supporting the industrial base in mitigating the impact of inflation. This communication plan and training falls on the Federal Acquisition Service (FAS).

Specifically, the Acquisition Letter provides, in part, that “[t]o support the implementation of this Letter, FAS should take actions as deemed necessary, including developing a communication approach, training the acquisition workforce, and tracking usage of this temporary moratorium.” Swift, efficient, and effective rollout of training and operational guidance to FAS’s contracting officers is critical to promoting positive business outcomes for MAS contractors and, ultimately, MAS customer agencies. Transparency also is critically important. MAS contractors should be made aware of any new guidance included in the training. Likewise, providing an understanding of the changes in the process and how contracting officers will be handling EPAs will help MAS contractors prepare responsive pricing submissions for EPAs. This provision for focused information submissions can only serve to help reduce cycle times for processing EPA modifications.

Again, GSA should be commended for its recognition of the challenges facing the government’s contractors, as well as its efforts to address those challenges and maintain stability in its industrial base. The Coalition looks forward to working with FAS and all stakeholders in supporting the industrial base during these challenging times.

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