[Federal Register Volume 68, Number 133 (Friday, July 11, 2003)]
[Rules and Regulations]
[Pages 41286-41289]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17552]


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GENERAL SERVICES ADMINISTRATION

48 CFR Parts 501, 538, and 552

[GSAR Amendment 2003-02; GSAR Case No. 2002-G507]
RIN 3090-AH79


General Services Administration Acquisition Regulation; 
Consolidation of Industrial Funding Fee and Sales Reporting Clauses; 
Reduction in Amount of Industrial Funding Fee

AGENCIES: General Services Administration (GSA), Office of Acquisition 
Policy.

ACTION: Final rule.

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SUMMARY: The General Services Administration (GSA) is amending the 
General Services Administration Acquisition Regulation (GSAR) to give 
GSA's Federal Supply Service (FSS) the unilateral right to change the 
percentage rate of the Industrial Funding Fee (IFF) in Multiple Award 
Schedule (MAS) contracts. The final rule also modifies and consolidates 
provisions of two existing GSA clauses that implement collection of the 
IFF by FSS on sales from all Federal Supply Schedule contracts. These 
clauses are Industrial Funding Fee and Contractor's Report of Sales. 
They have been consolidated into a single clause, Industrial Funding 
Fee and Sales Reporting. This new clause eliminates duplicative 
information from the preceding clauses, clarifies sales reporting 
procedures, and describes the procedures FSS will utilize to 
unilaterally effect future IFF rate changes.
    Additionally, while the GSAR does not specify the percentage rate 
of the IFF, GSA's Federal Supply Service intends to lower the current 
IFF rate from 1.0 percent to 0.75 percent of reported sales, effective 
January 1, 2004. The final rule gives GSA's Federal Supply Service the 
authority to change the IFF after consulting with OMB prior to 
effecting any future changes.
    The January 1, 2004, change will be implemented by means of a 
bilateral contract modification to be executed electronically. As 
consideration to Federal Supply Schedule contractors for any potential 
costs incurred as the direct result of this change, FSS will allow 
these vendors to continue to include the 1 percent IFF in their 
contract prices until December 31, 2003, but to forward to FSS an IFF 
of 0.75 percent for reported sales for the period of October 1, 2003, 
through December 31, 2003. Examples of the type of costs GSA 
anticipates contractors could incur include updating published prices 
and modifying accounting systems.

DATES: Effective Date: July 11, 2003.
    Applicability Date: Solicitations issued and contracts awarded 
after July 1, 2003, shall comply with this change. Existing FSS 
contracts shall be modified by December 31, 2003.

FOR FURTHER INFORMATION CONTACT: Ms. Laurie Duarte, Regulatory 
Secretariat, Room 4035, GS Building, Washington, DC, 20405, (202) 501-
4225, for information pertaining to status or publication schedules. 
For clarification of content, contact Vonda J. Sines, Procurement 
Analyst, at (703) 305-7542, or Linda Nelson, Procurement Analyst, at 
(202) 501-1900. Please cite GSAR Amendment 2003-02, GSAR case 2002-
G507. The TTY Federal Relay Number for further information is 1-800-
877-8973.

SUPPLEMENTARY INFORMATION: 

A. Background

    The General Services Administration published a proposed rule in 
the Federal Register at 68 FR 13212, March 18, 2003, with request for 
comments. Comments were received from 11 respondents, representing 
individual vendors as well as associations. GSA considered all comments 
and concluded that the proposed rule should be converted to a final 
rule with certain changes. Accordingly, the final rule:
    1. Revises the clause at 552.238-74(a)(3) to make clear that 
reportable sales do not include those made under FAR Part 14 or non-FAR 
contracts, but do include sales to states and localities under 
Cooperative Purchasing authority.
    2. Makes minor restructuring and editorial changes to the clause at 
552.238-74 to provide a clearer intent of the clause language.
    3. Adds the words ``and Sales Reporting'' to the clause at 552.215-
71, Examination of Records by GSA (Multiple Award Schedules).

B. Summary and Discussion of Significant Public Comments

    1. IFF not currently included. Five Schedule contractors indicated 
that they did not realize the IFF was intended to be passed on to their 
customers.
    Response: GSA intends that the IFF cost be borne by the customer 
and merely collected and remitted by Schedule contractors. All current 
Multiple Award Schedule (MAS) contracts contain the clause at 552.238-
76, Industrial Funding Fee. This clause requires that the IFF be 
included in the award price(s) and reflected in the total amount 
charged to ordering activities. GSA is consolidating and streamlining 
the current Industrial Funding Fee and Contractor's Report of Sales 
clauses to make doing business with the agency easier for Schedule 
contractors.
    2. Covered sales. Three respondents stated that a sale should be 
subject to the IFF only if the order references the vendor's GSA 
Schedule or both the vendor and the purchasing agency agree that the 
purchase is being made under the vendor's MAS contract. They further 
commented that GSA should not require a vendor to provide the burden of 
proof that a sale was made outside the Schedule.
    Response: Under current policy, GSA will consider the totality of 
the circumstances in determining if a sale is subject to the IFF. The 
final rule does not alter this policy, but recognizes various 
circumstances under which a sale would not be subject to the IFF (e.g., 
contracts awarded under FAR parts 12, 13, 14, or 15, or a non-FAR 
contract). This clarification is designed to help ensure that sales 
conducted outside the authority of the Schedules program are not made 
subject to the IFF, even if the product or service being purchased is 
also available on a Schedule contract.
    Since vendors always have the ability to make sales outside the 
Schedule, they need to establish with their customers at the time of 
order placement whether a sale is being conducted under or outside the 
Schedule. This distinction is important, since FSS, as a fee-for-
service operation, must rely on the fees generated from Schedule sales 
to cover expenses associated with the MAS program.
    3. Consideration. Five comments suggested that the costs of 
reprinting price lists/catalogs or of maintaining separate price lists 
are substantially greater than the consideration offered,

[[Page 41287]]

or that some unrecoverable vendor costs might not have been identified 
by GSA. Two respondents made suggestions regarding consideration to 
contractors for future IFF changes.
    Response: The consideration GSA offered takes into account the 
types of costs that GSA believes vendors, especially small businesses, 
would reasonably be expected to encounter. In an effort to minimize 
contractor costs associated with this action, the final rule requires 
only that vendors update catalogs or price lists; vendors need not 
reprint them. Contractors may utilize stickers to announce price 
changes until their supply of catalogs is exhausted. With respect to 
future consideration, GSA will make this determination based on the 
totality of circumstances of any future IFF change.
    4. Implementation schedule. Two comments suggested that GSA 
consider delaying the rule to permit further evaluation of a more 
reasonable implementation schedule or revise the proposed 
implementation schedule.
    Response: GSA believes the final implementation schedule is 
reasonable given the underlying policy objectives of the program and 
based on informal dialogue with industry during the development of the 
rule. Industry will have been on notice of the coming change nearly 9 
months before the changes take effect. To reduce disruption, the 
selected implementation schedule coincides with the beginning of a 
sales quarter.
    5. Advance notice. Four respondents requested that Schedule 
contractors be notified a specified number of months (e.g., 9 months) 
in advance of a change to the IFF.
    Response: GSA believes that the imposition of a mandatory minimum 
wait period would place an inappropriate constraint on its ability to 
effectively manage the schedules program. However, GSA appreciates 
vendors' need for sufficient notice of IFF rate changes and intends to 
provide notice as far in advance as is practicable under the 
circumstances surrounding any future changes to the IFF.
    6. Affected sales. Four respondents stated that the rule should (1) 
clarify that the change would be effective only on new sales after 
January 1, 2004, and (2) explain how delivery and task orders with 
extended delivery periods will be treated.
    Response: As stated in this Federal Register notice, the IFF rate 
change applies to sales made on or after January 1, 2004. With respect 
to purchase orders with extended delivery and task orders with extended 
delivery/performance periods, contractors will be expected to remit 
0.75 percent (rather than 1.0 percent) upon the effective date of the 
IFF rate change. However, prices in that order will stay the same 
through the remainder of performance. Orders may be renegotiated at the 
option of the applicable buying agency and the contractor. For example, 
a firm-fixed-price order placed on August 1, 2003, with a period of 
performance through July 31, 2004, would not need to be renegotiated 
during the order period, but the contractor would report and remit IFF 
at the reduced 0.75 percent rate beginning on January 1, 2004. Under 
certain circumstances, vendors will be expected to renegotiate Blanket 
Purchase Agreements (BPAs) with their customers in order to pass along 
a price reduction to the customer when the IFF is reduced. For example, 
if BPA pricing at award had been set at $100 per unit, it will have to 
be renegotiated. On the other hand, if the pricing had been discounted 
to be 10 percent below prices in the applicable MAS contract, there 
would be no need to renegotiate the BPA.
    7. Special pricing arrangements. Two comments stated that the draft 
rule is not explicit enough on the subject of existing leases, 
leasebacks, and other contractual pricing conditions and could lead to 
future questions and possible misinterpretations involving the proper 
IFF collection and remittance on October 1.
    Response: All leases established on or before December 31, 2003, 
will not have to be renegotiated. Renegotiation may occur at the option 
of the applicable buying agency and the contractor. Contractors will 
start remitting 0.75 percent vs. 1 percent IFF as of January 1, 2004. 
All new leases awarded on or after January 1, 2004, must contain the 
0.75 percent IFF rate.
    8. Voluntary pass-through reduction. One contractor suggested that 
GSA permit vendors, at their option, to continue charging the 1 percent 
IFF until the next negotiation for a price increase (or decrease), even 
though contractors would be remitting IFF to GSA at the reduced 0.75 
percent rate.
    Response: Reducing the IFF collected from vendors without requiring 
a corresponding reduction in the price charged to customers does not 
meet GSA's objective of helping customers meet mission needs at less 
expense to the taxpayer.
    9. Requiring IFF in contract prices. One respondent stated that 
while GSA has the unilateral right to revise the IFF, it does not have 
the unilateral right to require contractors to modify their contracts 
to reflect any IFF that GSA might choose to establish.
    Response: By executing the bilateral modification resulting from 
the rule, a contractor will agree to GSA's Federal Supply Service 
having the unilateral right to require that the contract contain prices 
that include the current IFF. To successfully manage the Schedules 
program, FSS needs to have the ability to manage its revenue and needs 
to retain this unilateral right. Upon implementation of any rate 
change, contractor prices will not move upward or downward; the 
published contract prices will change only according to the portion 
that is IFF.
    10. Web site content. One comment suggested that in addition to 
utilizing an agency website to publish the current IFF, GSA should use 
all other available means to publish the rate and should maintain 
additional, historic IFF data on the website.
    Response: The agency website will continuously post the current IFF 
rate, and the site's content will be periodically reviewed. FSS values 
its partnership with industry and related associations and will 
continue to work with them to take every practicable step to widely 
publicize any future changes.
    11. Transitioning electronic vendor registration. One respondent 
recommended that FSS develop a transition plan to phase out the 
registration requirements under its Vendor Support system and develop a 
mechanism linked to Central Contractor Registration (CCR).
    Response: While this comment does not pertain to the rule-making 
process, FSS appreciates the suggestion and will consider it in the 
future.
    12. Designated official. One comment cited the inconsistency in 
wording within the clause and in the explanatory material in the draft 
rule regarding the official designated the authority to change the IFF 
rate. The respondent recommended more uniform language.
    Response: Wherever possible in the clause and in other parts of the 
final rule, wording has been changed to use ``GSA's Federal Supply 
Service'' or ``FSS,'' as appropriate, as the authority for purposes of 
consistency.
    13. Clarifying clause wording. One comment suggested deleting 
``statutorily-based'' from paragraph (b)(2) of the clause at 552.238-
74, stating that the wording is confusing, unnecessary, and creates the 
impression that the IFF amount is set by statute.
    Response: This language has been deleted from the clause.

C. Executive Order 12866

    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive

[[Page 41288]]

Order 12866, Regulatory Planning and Review, dated September 30, 1993. 
This rule is not a major rule under 5 U.S.C. 804.

D. Regulatory Flexibility Act

    The General Services Administration certifies that this final rule 
will not have a significant economic impact on a substantial number of 
small entities within the meaning of the Regulatory Flexibility Act, 5 
U.S.C. 601, et seq., because the purpose of the rule is to assign to 
GSA the sole discretion to set the rate of the IFF and to clarify for 
contractors how to handle changes in the IFF. The rule also modifies 
and consolidates the provisions of two existing GSAR clauses in terms 
of sales reporting and procedures changes when the IFF rate changes. 
While some 78 percent of the Federal Supply Schedule contracts 
represent small business concerns, all contractors holding Federal 
Supply Schedules are already required to report quarterly sales and to 
periodically submit the Industrial Funding Fee to FSS. The final rule 
does not change these two requirements. It does require both small and 
large businesses to execute appropriate bilateral contract 
modifications and to make changes to published prices and accounting 
systems. GSA will mitigate the anticipated cost to contractors for 
these changes by offering consideration based on reported sales for the 
period of October 1, 2003, through December 31, 2003.

E. Paperwork Reduction Act

    Prior clause 552.238-74, Contractor's Report of Sales, contained an 
information requirement subject to the Paperwork Reduction Act (44 
U.S.C. 3501 et seq.) that was previously approved by the Office of 
Management and Budget (OMB) under the Paperwork Reduction Act and 
assigned control number 3090-0121. Prior clause 552.238-76, Industrial 
Funding Fee, also contains an information collection requirement that 
is subject to the Paperwork Reduction Act (44 U.S.C. 3501 et seq.). 
However, the estimated burden for this clause has been determined to be 
zero, and GSA has a blanket approval under control number 3090-0250 
from OMB for information collections with a zero burden estimate.
    The consolidation of information from these two clauses into a 
single clause results in no additional burden and, therefore, no 
additional approval from OMB is required.

List of Subjects in 48 CFR Parts 501, 538, and 552

    Government procurement.

    Dated: July 7, 2003.
David A. Drabkin,
Deputy Associate Administrator, Office of Acquisition Policy.

0
Therefore, GSA amends 48 CFR parts 501, 538, and 552 as set forth 
below:
0
1. The authority citation for 48 CFR parts 501, 538, and 552 continues 
to read as follows:

    Authority: 40 U.S.C. 486(c).

PART 501--GENERAL SERVICES ADMINISTRATION ACQUISITION REGULATION 
SYSTEM


501-106  [Amended]

0
2. Amend section 501.106 at GSAR reference 552.238-74 by removing the 
OMB Control Number ``3090-0121'' and adding ``3090-0121 & 3090-0250'' 
in its place.

0
3. Amend section 538.273 by revising paragraph (b)(1); and by removing 
paragraph (b)(3). The revised text reads as follows:


538.273  Contract clauses.

* * * * *
    (b) * * *
    (1) 552.238-74, Industrial Funding Fee and Sales Reporting.
* * * * *

PART 552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Amend section 552.212-71 by revising the date of the clause; and in 
paragraph (b) by revising entry 552.238-74 to read as follows:


552.212-71  Contract Terms and Conditions Applicable to GSA Acquisition 
of Commercial Items.

* * * * *
Contract Terms and Conditions Applicable to GSA Acquisition of 
Commercial Items (July 2003)
* * * * *
    (b) Clauses.
* * * * *
    ------552.238-74 Industrial Funding Fee and Sales Reporting
* * * * *


552.212-72  [Amended]

0
5. Amend section 552.212-72 by revising the date of the clause to read 
``(July 2003)''; and by removing from the end of paragraph (b) ``------
552.238-76 Industrial Funding Fee''.


552.215-71  [Amended]

0
6. Amend section 552.215-71 by revising the date of the clause to read 
``(JULY 2003)''; and in the first sentence of the clause by adding 
``and Sales Reporting'' after the word ``Fee''.

0
7. Revise section 552.238-74 to read as follows:


552.238-74  Industrial Funding Fee and Sales Reporting.

    As prescribed in 538.273(b)(1), insert the following clause:

Industrial Funding Fee and Sales Reporting (July 2003)

    (a) Reporting of Federal Supply Schedule Sales. The Contractor 
shall report all contract sales under this contract as follows:
    (1) The Contractor shall accurately report the dollar value, in 
U.S. dollars and rounded to the nearest whole dollar, of all sales 
under this contract by calendar quarter (January 1-March 31, April 
1-June 30, July 1-September 30, and October 1-December 31). The 
dollar value of a sale is the price paid by the Schedule user for 
products and services on a Schedule task or delivery order. The 
reported contract sales value shall include the Industrial Funding 
Fee (IFF). The Contractor shall maintain a consistent accounting 
method of sales reporting, based on the Contractor's established 
commercial accounting practice. The acceptable points at which sales 
may be reported include--
    (i) Receipt of order;
    (ii) Shipment or delivery, as applicable;
    (iii) Issuance of an invoice; or
    (iv) Payment.
    (2) Contract sales shall be reported to FSS within 30 calendar 
days following the completion of each reporting quarter. The 
Contractor shall continue to furnish quarterly reports, including 
``zero'' sales, through physical completion of the last outstanding 
task order or delivery order of the contract.
    (3) Reportable sales under the contract are those resulting from 
sales of contract items to authorized users unless the purchase was 
conducted pursuant to a separate contracting authority such as a 
Governmentwide Acquisition Contract (GWAC); a separately awarded FAR 
Part 12, FAR Part 13, FAR Part 14, or FAR Part 15 procurement; or a 
non-FAR contract. Sales made to state and local governments under 
Cooperative Purchasing authority shall be counted as reportable 
sales for IFF purposes.
    (4) The Contractor shall electronically report the quarterly 
dollar value of sales, including ``zero'' sales, by utilizing the 
automated reporting system at an Internet website designated by the 
General Services Administration (GSA)'s Federal Supply Service 
(FSS). Prior to using this automated system, the Contractor shall 
complete contract registration with the FSS Vendor Support Center 
(VSC). The website address, as well as registration instructions and 
reporting procedures, will be provided at the time of award. The 
Contractor shall report sales separately for each National Stock 
Number (NSN), Special Item Number (SIN), or sub-item.
    (5) The Contractor shall convert the total value of sales made 
in foreign currency to U.S. dollars using the ``Treasury Reporting 
Rates of Exchange'' issued by the U.S. Department of Treasury, 
Financial

[[Page 41289]]

Management Service. The Contractor shall use the issue of the 
Treasury report in effect on the last day of the calendar quarter. 
The report is available from Financial Management Service, 
International Funds Branch, Telephone: (202) 874-7994, Internet: 
http://www.fms.treas.gov/intn.html.
    (b) The Contractor shall remit the IFF at the rate set by GSA's 
FSS.
    (1) The Contractor shall remit the IFF to FSS in U.S. dollars 
within 30 calendar days after the end of the reporting quarter; 
final payment shall be remitted within 30 days after physical 
completion of the last outstanding task order or delivery order of 
the contract.
    (2) The IFF represents a percentage of the total quarterly sales 
reported. This percentage is set at the discretion of GSA's FSS. 
GSA's FSS has the unilateral right to change the percentage at any 
time, but not more than once per year. FSS will provide reasonable 
notice prior to the effective date of the change. The IFF reimburses 
FSS for the costs of operating the Federal Supply Schedules Program 
and recoups its operating costs from ordering activities. Offerors 
must include the IFF in their prices. The fee is included in the 
award price(s) and reflected in the total amount charged to ordering 
activities. FSS will post notice of the current IFF at http://72a.fss.gsa.gov/ or successor website as appropriate.
    (c) Within 60 days of award, an FSS representative will provide 
the Contractor with specific written procedural instructions on 
remitting the IFF. FSS reserves the unilateral right to change such 
instructions from time to time, following notification to the 
Contractor.
    (d) Failure to remit the full amount of the IFF within 30 
calendar days after the end of the applicable reporting period 
constitutes a contract debt to the United States Government under 
the terms of FAR Subpart 32.6. The Government may exercise all 
rights under the Debt Collection Improvement Act of 1996, including 
withholding or setting off payments and interest on the debt (see 
FAR clause 52.232-17, Interest). Should the Contractor fail to 
submit the required sales reports, falsify them, or fail to timely 
pay the IFF, this is sufficient cause for the Government to 
terminate the contract for cause.

(End of clause)


552.238-76  [Reserved]

0
8. Remove and reserve section 552.238-76.


552.238-79  [Amended]

0
9. Amend section 552.238-79 by revising the date of the clause to read 
``(July 2003)''; and in the first sentence of paragraph (c) of the 
clause by removing ``Contractor's Report of Sales'' and adding 
``Industrial Funding Fee and Sales Reporting'' in its place.

[FR Doc. 03-17552 Filed 7-8-03; 3:24 pm]
BILLING CODE 6820-BR-P