Why do some federal hardware purchases require related services?

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Sometimes services contracts require hardware to support them. Sometimes hardware buys require related services. That’s where companies get into what are known as order level materials (OLM). They’re important, but sometimes they’re confusing. The General Services Administration even held a recent webinar for industry about OLM. For the short version, Federal Drive with Tom Temin turned to Steve Sizemore, a GSA Federal Acquisition Service program manager.

Interview transcript:

Tom Temin: Now I gave my definition Why don’t you tell us what order level materials actually are.

Steve Sizemore: Sure you had it pretty close there. OLM are simply materials that supports an order they are products or services against product or services orders. In some cases, we’ve seen people have a little bit of a misunderstanding that, oh lm can only be products against the services order. But it can be products to support products or services and can be services to support products or services orders. So at its core, OLM is a process to buy what traditionally has been ODC or other direct costs, really just those material support items that you need to complete an order.

Tom Temin: Now many years ago on subjects dealing with, say the multiple award schedule program at GSA, people used to be worried about what they call bundling. That is if you bought related products along with another product, those had to be done separately with separate competition. Is this related to that or are we talking some different over procurement ballgame?

Steve Sizemore: Yeah, this is a bit different than bundling. Bundling is really where you’re taking multiple requirements and putting them together into a larger requirement and really where it substantially affects small business. And what we’re doing here under OLMs is buying those, again, those material support items that are needed for a services task. For example, if you have maybe an IT services tasks, and you need some ancillary products to support that task, it maybe that you need some servers, or you need some laptops or maybe a security gateway, for example, that item is normally going to be very small, and it’s going to be part of the the items necessary to complete the order. But in and of itself, it’s not an individual requirement. So it really doesn’t affect bundling at all.

Tom Temin: And so what is the right procedure for the OLM? Do you buy that right along with the main order? Or is that something you have to order separately?

Steve Sizemore: No, that’s the beauty of OLM is that you can now under this procedure under these new rules, you can add those items, those ancillary support items, you can add them to the GSA Schedule order at the order level, and when following the procedures, so when the contracting officer, the government buyer, when they follow the procedure for OLMs, those items then become scheduled items at the order level and so your complete order becomes a schedules order, and you’re no longer mixing in open market items, for example, with schedule, orders. And so it’s really something that we’ve needed for a long, long time under schedules. These materials, sometimes ODCs or simply call materials, the materials that you need to support an order these material buys has always been a challenge. Under the schedules program, I think OLM procedures simply, you know, give us a way now to accomplish this task of getting the ODC that we need to to support an order. And then in terms of process, I’ll just mention that there are procedures that must be followed. They’re outlined in the GSA supplement to the bar called the GSAR. We do have procedures who by the OLMs that the contracting officer must follow in order to properly place these orders.

Tom Temin: So for example, suppose I’m buying the installation services. printers and I need certain cables to go in order to hook them up to have them hooked up by the contractor. Those cables might be OLMs. But if I needed a table or a set of furniture to put the printers on, that would be a separate acquisition, correct?

Steve Sizemore: Well, possibly it depends on the need in it depends on whether or not those tables, you know whether they’re ancillary, or whether they’re integral to that service. The way you describe it, they probably aren’t necessary to the service. So it probably would be a separate procurement. But I think using the cables in the installation of the printers is a great example the cables or products layer supporting a product. Again, when we look at this and we think about where we’ve been over the last year and a half with this, and this has been around since 2018. But it has really kind of been a slow adaptation across the buyers and you’re one of the reasons we’re doing webinars and doing this training is to get people more familiar with the process. But looking at this example you gave with printers again, that’s an example of products supporting products. You could also have installation services against products. So maybe the contractor selling printers, maybe you have a large need for printers and copiers and you need to set up a whole network and the company traditionally doesn’t offer the installation services along with the product. They’re not available on the GSA schedule. That is the installation services aren’t available. So now you can buy those installation services, for example, as order level materials. And so that’s a great example. Another example that I’d like to throw out there is engineering services. We did see a lot of professional engineering services being bought across the schedules program to the tune of billions of dollars a year. Those services tend to have material requirements, whether it be some sort of supply or IT equipment needed or some sort of specialized testing equipment. That testing equipment can now be bought as an owner. And if you think about the companies that generally provide engineering services, they don’t sell product on their GSA contract to take a large services provider, maybe a federal integrator who is doing engineering work, but typically don’t sell the products on their GSA schedule. They’re a services provider. Now they can offer that testing equipment as an oil along with the services that they sell.

Tom Temin: And recently, you did have a webinar on this. And you’ve been doing training, not just for government buyers, but also the vendors have to know what to do. And so is the question that you’re getting in general is, how do I know exactly which necessary products I can include as OLM so that they become GSA Schedule orders at that point?

Steve Sizemore: Yeah, that’s a great question, Tom. And I think the things you need to remember is that it must be integral and necessary to the order it must be something that is needed. To complete the test, so back to my engineering test. Without the piece of testing equipment, the task could not be completed properly. Back to your example, with the copiers without the installation services, or maybe the cables that are needed, you could not complete the requirement. So that’s really going to be the test people need to look at is an integral and necessary to the order. What we don’t want is procurements being crammed together, then you might get into this issue. You mentioned up front bundling, we must have OLMs be integral unnecessary to the order in order for it to be properly administered.

Tom Temin: And one of the questions that you were going to answer in the webinar was for contractors to understand their responsibilities when quoting and administering OLM sales, and what’s the principal thing they need to make sure they do?

Steve Sizemore: Well, we’ve got a few things that we pointed out in the webinar and that we talked about a lot around this topic of contract or compliance. I think it’s important for contractors to understand the OLM procedures and make sure that they are in compliance with those procedures. All OLM sold through the contract are subject to the terms and conditions of the contract. And so I would urge contractors to review the GSAR, and you can simply google that. You could Google OLM GSAR, and find the reference. So I would just urge contractors to review that process. Also check out the website at gsa.gov/olm. Lots of information there. But let me give a few things that I believe are important to remember. OLM pricing must be inclusive of the industrial funding fee. And this is a responsibility of the contractor. So OLM items become schedule items at the order level. Therefore the industrial funding fee is required and must be reported to GSA through our cells reporting portal. So it’s important that the contractor include the industrial funding fee in their price. They are responsible for whatever price that they quote to the government and the government buys from them that they pay the industrial funding fee on that sale based on the price they sold it to the government. So if they forget to include the industrial funding fee in their pricing, that is still their responsibility to pay it.