The concept of parity is often about talked in professional and collegiate sports as if it’s good for the league and for competition. But parity is rarely talked about the ultra-competitive world of federal procurement outside of maybe socioeconomic programs for small and disadvantaged businesses.
That’s why the General Services Administration’s proposed rule on Aug. 8 is both so interesting and important.
GSA proposed to change its internal acquisition regulations to let agencies develop task orders under the schedules program to include other direct costs (ODCs) or order level materials (OLMs).
“Currently, most commercial indefinite-delivery/indefinite-quantity contracts provide the flexibility to easily acquire order-level materials; however the FSS program does not. This proposed rule aims to create parity between the FSS program and other commercial IDIQs while also ensuring an appropriate set of controls or safeguards are put in place,” GSA wrote in the proposed rule. “Providing the same flexibilities in the FSS program that are currently authorized for commercial IDIQ vehicles will help to reduce contract duplication and the associated administrative costs and inefficiencies for agencies. Simultaneously, it will reduce transaction costs for contractors, including small businesses, by eliminating the need for FSS contract holders to compete for and enter into additional contracts for this ancillary work.”
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ODCs or OLMs are basically costs that aren’t specifically identified in the contract, such as specialized tool or test equipment, computer services or travel, but are important for the final delivery of the product or service. For example, currently under the schedules program, an agency could buy a router for their network through a time-and-materials type of contract, but if the router needed another piece of software to work appropriately, it couldn’t be included in that task order.
The vendor would either eat those costs or have the agency go to a different contract.
And because of this limitation, agencies would have to use other multiple award contracts or governmentwide acquisition contracts to develop a task order with ODCs.
“We have been listening to our customers and industry partners and they really want to get this going,” said Kevin Youel Page deputy commissioner of the Federal Acquisition Service at GSA in an exclusive interview with Federal News Radio. “ODCs or OLMs are much more important for service contracts than for the old legacy product contracts or the things that schedules were mostly associated with in the old days. As we moved more and more to services, this became a more important function.”
GSA is proposing a cap on ODCs at 33 percent of the total value of the task or delivery order. It also is requiring agencies to purchase ODCs or OLMs under a special item number (SIN) to let GSA track sales and evaluate appropriate usage.
For vendors proposing ODCs or OLMs, they must get at least three quotes for anything over the micro-purchase threshold of $3,500.
GSA wants to test out the proposed rule initially across seven schedules:
“The rule does target some schedules that are service-centric. It’s not a particularly complicated rule,” Youel Page said. “GSA has been engaged in this conversation with industry and with our agency partners for some time, a number of years, frankly longer than we’d like to have been in the conversation. We’ve received a lot of input as to how to shape this rule, and how to make sure it provides best value and the easiest use.”
GSA is accepting comments on the proposed rule until Nov. 8.
Once the rule is finalized, GSA says it will issue guidance to its contracting officers outlining the procedures for structuring these schedules and how to administer contracts that can use this new approach for order-level materials.
Reaction to the proposed rule has been positive.
Roger Waldron president of the Coalition for Government Procurement, said the proposed rule is an important step for GSA and vendors.
“It provides increased flexibility to provide solutions to meet agency needs, including a greater opportunity for small businesses as both prime contractors and subcontractors so they can provide complete solution and specifics supplies or services,” Waldron said. “It should provide access to innovation as well. If a new capability is not on contract, but identified that could help support a task order, the agency could add it to that task order. Overall, it’s a good step forward.”
Larry Allen, president of Allen Federal Business Partners and a GSA expert, said keeping schedules competitive with other multiple award contracts is more important than ever but has gotten more difficult over the last decade.
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“I can see where people might have some concerns. One is requiring companies to provide three quotes for open market items. Though one quote can be for their own products, requiring industry to come up with three quotes seems like it would be a burden. Not sure how other IDIQ’s handle this, though,” Allen said. “It’s worth asking what mechanisms other contracts have for determining the price reasonableness of ODCs. I would guess a cost basis is used, but that’s not something you can do on GSA Schedule.”
Another concern Allen said is requiring contracting officers to determine reasonableness of ODC quotes.
“This seems like an extra step. While we DO want to ensure the government is paying a fair and reasonable price, do other IDIQs require this?” Allen said. “If not, how do contracting officers in those cases ensure the validity that even a cost-based quote is fair and reasonable? While the schedule clause may be an extra hurdle, it might also end up resulting in a better price.”
The other big question is why GSA is addressing ODCs and OLMs now. Industry has been asking for these changes since at least 2011 if not indirectly in the Services Acquisition Reform Act Panel recommendations in 2007.
The CGP wrote a white paper in 2011 making the case for GSA to update the schedules contracts by allowing ODCs.
Youel Page said the changes around ODCS or OLMs are part of the broader effort to modernize the schedules. He said the final rule will make the schedules easier to use and give agencies access to a larger set of services.
“This one has been discussed back and forth and fundamentally it’s a question of getting the balance right in the rule between making the contracts flexible and ensuring we have the right level of quality and oversight in the rule,” he said. “We’ve been engaged in understanding what our agency partners want from us, and now is the time we’ve earned back enough trust and faith that they see we are making strides in advancing the multiple award schedules program and this becomes another step in moving ahead.”