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Client Alert: GSA Finalizes Rule for Off-Schedule Acquisitions

On January 24, 2018, the General Services Administration (“GSA”) published a final rule for off-schedule acquisitions.  The new rule seeks greater parity between the GSA’s Federal Supply Schedule (“FSS”) programs and other Indefinite Delivery/Indefinite Quantity (“IDIQ”) procurement methods.  The final rule allows agencies to purchase off-schedule Order-Level Materials (“OLMs”) in task or delivery orders under existing FSS contracts.  

Federal Supply Schedules are contract vehicles that allow government agencies to purchase goods and services under simplified ordering procedures and reduced prices.  OLMs are “supplies and/or services acquired in direct support of an individual task or delivery order placed against an FSS contract or [Blanket Purchase Agreement], when the supplies and/or services are not known at the time of contract or [Blanket Purchase Agreement] award.”  The new rule allows agencies to order OLMs through existing FSS contracts, rather than under ancillary contracts.

In response to public comments that the proposed rule (first published on September 9, 2016) failed to meet the “parity” objective, the final rule incorporated several key changes, including: (1) amending the cap on OLMs; (2) allowing for indirect costs; and (3) limiting the requirement that vendors obtain three quotes for each OLM.

The final rule limits OLM acquisitions to one third the value of an order.  GSA implemented the cap to reinforce that OLMs “shall only be acquired in direct support of an individual task or delivery order and not as the primary basis or purpose of the order.”  

The final rule also allows contractors to collect certain indirect costs.  Vendors may generally collect indirect costs in other, non-FSS, IDIQ acquisitions. However, unlike other IDIQ acquisitions, the new GSA rule requires vendors to report OLM sales in accordance with GSAR clause 552.238-74.  The final rule provides procedures for contracting officers to make determinations that indirect costs associated with OLMs are fair and reasonable.  Travel cost OLMs are governed by FAR 31.205-46 and are, therefore, exempted from certain requirements, including the OLM cap, price reasonableness determinations, and GSAR 552.238-74 reporting. 

The new rule requires that vendors obtain three quotes for each OLM purchase above the federal simplified acquisition threshold.  Contractors with an approved purchasing system are exempted this requirement.

GSA will implement the new rule by authorizing certain Schedules to include OLM Special Item Numbers (SINs).  New contracts let under authorized Schedules will include OLM SINs.  GSA will issue bilateral contract modifications to add OLM SINs to authorized FSS contracts.  Contractors should check new and existing FSS contracts for OLM SINs.  Our firm is available to answer questions about the new GSA rules and to assess contractor compliance with GSA contracts.

By:  Nora Kelly and Kristin Tisdelle