[Federal Register Volume 81, Number 175 (Friday, September 9, 2016)]
[Proposed Rules]
[Pages 62445-62448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21610]
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GENERAL SERVICES ADMINISTRATION
48 CFR Parts 515, 538, and 552
[GSAR Case 2016-G506; Docket No. 2016-0016; Sequence No. 1]
RIN 3090-AJ75
General Services Administration Acquisition Regulation (GSAR);
Federal Supply Schedule, Order-Level Materials
AGENCY: Office of Acquisition Policy, General Services Administration.
ACTION: Proposed rule.
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SUMMARY: The General Services Administration (GSA) is proposing to
amend the General Services Administration Acquisition Regulation (GSAR)
to clarify the authority to acquire order-level materials when placing
a task order or establishing a Blanket Purchase Agreement (BPA) against
a Federal Supply Schedule (FSS) contract. This proposed rule seeks to
provide clear and comprehensive implementation of the ability to
acquire order-level materials through the FSS program to create parity
between FSS contracts and commercial indefinite-delivery/indefinite-
quantity (IDIQ) contracts, reduce the need to conduct less efficient
procurement transactions, lower barriers of entry to the federal
marketplace and make it easier to do business the federal government.
DATES: Interested parties should submit written comments to the
Regulatory Secretariat Division at one of the addressees shown below on
or before November 8, 2016 to be considered in the formation of the
final rule.
ADDRESSES: Submit comments in response to GSAR Case 2016-G506 by any of
the following methods:
Regulations.gov: http://www.regulations.gov. Submit
comments by searching for ``GSAR Case 2016-G506.'' Select the link
``Comment Now'' that corresponds with GSAR Case 2016-G506. Follow the
instructions provided on the screen. Please include your name, company
name (if any), and ``GSAR Case 2016-G506'' on your attached document.
Mail: General Services Administration, Regulatory
Secretariat Division (MVCB), ATTN: Ms. Flowers, 1800 F Street NW., 2nd
Floor, Washington, DC 20405.
Instructions: Please submit comments only and cite GSAR Case 2016-
G506, in all correspondence related to this case. All comments received
will generally be posted without change to http://www.regulations.gov,
including any personal and/or business confidential information
provided. To confirm receipt of your comment(s), please check
www.regulations.gov, approximately two to three days after submission
to verify posting (except allow 30 days for posting of comments
submitted by mail).
FOR FURTHER INFORMATION CONTACT: Ms. Leah Price, Procurement Analyst,
at 703-605-2558, or Mr. Curtis Glover, Sr., Procurement Analyst, at
202-501-1448, for clarification of content. For information pertaining
to status or publication schedules, contact the Regulatory Secretariat
Division at 202-501-4755. Please cite GSAR Case 2016-G506.
SUPPLEMENTARY INFORMATION:
I. Background
GSA is proposing to amend the General Services Administration
Acquisition Regulation (GSAR) to establish special ordering procedures
(per FAR 8.403(b)). These special ordering procedures clarify the
authority to acquire order-level materials when placing an order or
establishing a BPA against an FSS contract. Currently, most commercial
indefinite-delivery/indefinite-quantity (IDIQ) 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.
Improving the acquisition of order level materials through the FSS
program was expressly cited in the Office of Federal Procurement
Policy's roadmap for simplifying the federal procurement process. (See
Transforming the Marketplace: Simplifying Federal Procurement to
Improve Performance, Drive Innovation, and Increase Savings, available
at https://www.whitehouse.gov/sites/default/files/omb/procurement/memo/simplifying-federal-procurement-to-improve-performance-drive-innovation-increase-savings.pdf.) 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. The
Government Accountability Office (GAO) reports the costs of being on
multiple contract vehicles ranged from $10,000 to $1,000,000 due to
increased bid and proposal, and administrative costs.
This proposed rule would achieve parity for the FSS program by
providing further clarification in the GSAR of regulatory changes made
by the Federal Acquisition Regulatory Council in years past to overcome
the holdings in a Court of Federal Claims decision, ATA Defense
Industries, Inc. v. United States, 38 Fed. Cl. 489 (1997) and a GAO
opinion, Pyxis Corporation, B-282469; B-282469.2. These decisions were
issued at a time when there was no guidance in the FAR about open
market items and served as impetus for opening Federal Acquisition
Regulation (FAR) Case 1999-614, bringing the guidance from the FSS
Contractor Guide into the FAR. The FAR Case stated:
[[Page 62446]]
It had been common practice to add ``incidental'' non-FSS items
to FSS orders for administrative convenience. However, on July 15,
1999, the General Accounting Office (GAO) ruled in a protest that
agencies ``may no longer rely on the `incidentals' test to justify
the purchase of non-FSS items in connection with an FSS buy; where
an agency buys non-FSS items, it must follow applicable acquisition
regulations'' (Pyxis Corporation, B-282469; B-282469.2). Therefore,
it is proposed that a paragraph (d) be added to FAR 8.401, General,
which would permit the addition of ``open market (noncontract)''
items to a FSS blanket purchase agreement or task or delivery order
only if ``(1) all applicable acquisition regulations have been
followed (e.g., publicizing ([FAR] Part 5), competition requirements
([FAR] Part 6), acquisition of commercial items ([FAR] Part 12), and
contracting methods ([FAR] Parts 13, 14, and 15)); (2) the ordering
office contracting officer has determined the price for the open
market items is reasonable; and (3) the items are clearly labeled as
open market (noncontract) items on the order.''
This FAR Case was finalized and included in Federal Acquisition
Circular 2001-08, effective July 29, 2002. With subsequent changes,
this text moved from FAR 8.401 to its present location in FAR 8.402.
Separately, FAR case 2003-027, Additional Commercial Contract
Types, published in the Federal Register at 71 FR 74667 on December 12,
2006, expressly provided the authority to acquire order-level materials
under commercial contracts. The case extended this authority to all
commercial IDIQ contract vehicles, including contracts awarded pursuant
to FAR part 12 and orders awarded pursuant to FAR subparts 16.5 and
8.4.
Alternate I of FAR clause 52.212-4 Contract Terms and Conditions--
Commercial Items was explicitly developed for contract vehicles where
Time and Materials (T&M) or Labor-Hour (L-H) orders are contemplated.
It defines ``materials'' to include direct materials, other direct
costs, subcontracts, and indirect costs, and provides a means to
acquire these materials within the scope of the FSS contract. It
includes detailed instructions for the handling of each, none of which
involves the competitive procedures required by FAR 8.402(f).
Despite this clarification, FAR 8.402(f), which addresses ``open
market items'' that are not on FSS, has been widely interpreted to mean
that ordering activity Contracting Officers must conduct a separate
open market competition for any and all materials not specifically
awarded on the underlying FSS contract. As a result, FSS ordering
activities have struggled with how to properly handle orders for which
the exact items and quantities of materials is unknown. Years of
confusion have, in turn, led to the creation of elaborate workarounds
and the application of inconsistent policies and procedures.
Providing clear and comprehensive implementation of this authority
in the GSAR will result in parity regarding the ability to acquire
order level materials from the FSS program and other commercial IDIQs.
As a result, agencies will be able to further utilize the FSS program
to meet their requirements rather than conducting separate open market
procurements or further contributing to contract duplication through
creating new commercial IDIQs that have a similar scope to existing FSS
offerors, but that allow for order level materials.
II. Discussion and Analysis
Amendments to GSAR parts 515, 538, and 552 are proposed by this
rule. Specifically, GSA is proposing the following amendments:
Add to GSAR 515.408(c) that ``offerors are not required to
complete the commercial sales practices disclosure for order-level
materials.
Add a new GSAR subpart 538.71, Order-Level Materials,
which clarifies the authority to acquire order-level materials when
placing a task order or establishing a BPA against an FSS contract.
This subpart defines order-level materials and lists the applicable
Federal Supply Schedules that authorized the use of order-level
materials. GSA will issue guidance to its contracting officers
outlining the procedures for structuring these Federal Supply Schedules
and how to administer FSS contracts where order-level materials are
authorized.
Add instructions in new GSAR subpart 538.71 for GSA
contracting officers to use FAR clause 52.212-4 Alternate I in Federal
Supply Schedules authorizing the use of order-level materials, with the
following instructions for the clause fill-ins:
[cir] Insert ``Each order must list separately subcontracts for
services excluded from the FSS Schedule Hourly Rates'' in FAR clause
52.212-4(e)(iii)(D).
[cir] Insert ``Each order must list separately elements of other
direct charge(s) for that order.'' in FAR clause 52.212-
4(i)(1)(ii)(D)(1).
[cir] Insert ``none'' in FAR clause 52.212-4(i)(1)(ii)(D)(2).
[cir] GSA is especially interested in comments on the clause fill-
in instructions.
Add a new GSAR clause 552.238-XX, Special Ordering
Procedures for the Acquisition of Order-Level Materials, which
clarifies the authority to acquire order-level materials when placing a
task order or establishing a BPA against an FSS contract. This new
clause should be read as a special ordering procedure, as authorized in
FAR 8.403(b). Operationally, it should be understood as an addition to
the ordering procedures outlined in FAR 8.404(h). This new clause
includes the special ordering procedures to be used when order-level
materials are authorized controls that GSA is establishing when
authorizing the use of ``order-level materials''. These controls
include--
Prohibiting order-level materials from being the primary
basis of the order;
Limiting the total value of order-level materials to 33
percent of the overall order value;
Requiring order-level materials to be purchased under a
separate Special Item Number (SIN) to enable GSA to monitor the sales
for order-level materials and evaluate the appropriate usage;
Requiring the ordering activity to follow FAR 8.404(h)
prior to placing an order including order-level materials;
Requiring contractors proposing order-level materials as
part of a solution to submit a minimum of three quotes for each order-
level material above the micro-purchase threshold. One of these three
quotes may include materials furnished by the contractor under FAR
52.212-4 Alternate I (i)(1)(ii)(A). The contractor shall submit the
information to the ordering activity contracting officer or provide
rationale for why three quotes cannot be obtained;
Requiring the ordering activity contracting officer to
determine all prices for order-level materials are fair and reasonable
prior to placing an order; and
Including controls to ensure any ceiling increase has been
appropriately justified and approved in accordance with FAR 8.405-6.
III. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is not a significant regulatory action and, therefore, was not
subject to review under section 6(b) of E.O. 12866, Regulatory Planning
and
[[Page 62447]]
Review, dated September 30, 1993. This proposed rule is not a major
rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
GSA does not expect this proposed rule to have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S. 601, et seq., because
the rule merely clarifies the authority to acquire order-level
materials when placing a task order or establishing a BPA against an
FSS contract; however, an Initial Regulatory Flexibility Analysis
(IRFA) has been prepared consistent with 5 U.S.C. 603, and is
summarized as follows:
This proposed rule amends the GSAR to clarify the authority to
acquire order-level materials when placing a task order or
establishing a BPA against an FSS contract. Currently, most
commercial indefinite-delivery/indefinite-quantity (IDIQ) contracts
provide the flexibility to easily acquire order-level materials;
however the FSS program does not.
Currently there are 13,850 small businesses that have GSA
Schedule contracts. While the rule is expected to have a beneficial
impact on these contractors by reducing bid and proposal preparation
costs and simplifying the process for selling order-level materials
to FSS customers, GSA does not expect this proposed rule to 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 rule merely clarifies the authority
to acquire order-level materials when placing a task order or
establishing a BPA against an authorized FSS contract.
The proposed rule imposes no reporting, recordkeeping, or other
information collection requirements.
The rule does not duplicate, overlap, or conflict with any other
Federal rules.
There are no known significant alternatives to the rule. The
impact of this rule on small business is not expected to be
significant.
The Regulatory Secretariat Division will be submitting a copy of
the Initial Regulatory Flexibility Analysis (IRFA) to the Chief Counsel
for Advocacy of the Small Business Administration. A copy of the IRFA
may be obtained from the Regulatory Secretariat Division. GSA invites
comments from small business concerns and other interested parties on
the expected impact of this rule on small entities.
GSA will also consider comments from small entities concerning the
existing regulations in subparts affected by this rule in accordance
with 5 U.S.C. 610. Interested parties must submit such comments
separately and should cite 5 U.S.C. 610 (GSAR Case 2016-G506) in
correspondence.
V. Paperwork Reduction Act
The proposed rule does not contain any information collection
requirements that require the approval of the Office of Management and
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subjects in 48 CFR Parts 515, 538, and 552
Government procurement.
Dated: September 2, 2016.
Jeffrey A. Koses,
Senior Procurement Executive, Office of Acquisition Policy, Office of
Government-wide Policy, General Services Administration.
Therefore, GSA proposes to amend 48 CFR parts 515, 538, and 552 as
set forth below:
0
1. The authority citation for 48 CFR parts 515, 538, and 552 continues
to read as follows:
Authority: 40 U.S.C. 121(c).
PART 515--CONTRACTING BY NEGOTIATION
0
2. Amend section 515.408 by adding a sentence to the end of paragraph
(c) introductory text to read as follows:
515.408 Solicitation provisions and contract clauses.
* * * * *
(c) * * * Offerors are not required to complete the commercial
sales practices disclosure for order-level materials (See subpart
538.71).
* * * * *
PART 538--FEDERAL SUPPLY SCHEDULE CONTRACTING
0
3. Add subpart 538.71 to read as follows:
Subpart 538.71--Order-Level Materials
538.7100 Definitions.
538.7101 Applicability.
538.7103 Contract clauses.
Subpart 538.71--Order-Level Materials
538.7100 Definitions.
Order-level materials means supplies and/or services acquired in
direct support of an individual task or delivery order placed against a
Federal Supply Schedule (FSS) contract, when the supplies and/or
services are not known at the time of Schedule contract award. The
prices of order-level materials are not established in the FSS
contract. Order-level materials are not open market items discussed in
FAR 8.402(f).
538.7101 Applicability.
Order-level materials are authorized under all of the following:
(a) Federal Supply Schedule 03 FAC.
(b) Federal Supply Schedule 56.
(c) Federal Supply Schedule 70.
(d) Federal Supply Schedule 71.
(e) Federal Supply Schedule 84.
(f) Professional Services Schedule 99.
(g) Federal Supply Schedule 738X.
538.7103 Contract clauses.
(a) Use FAR clause 52.212-4 Alternate I in all Federal Supply
Schedules authorized for the acquisition of order-level materials (see
538.7101). Use the following language for the clause fill-in:
(1) Insert ``Each order must list separately subcontracts for
services excluded from the FSS Hourly.
(2) Insert ``Each order must list separately the elements of other
direct charge(s) for that order'' in (i)(1)(ii)(D)(1).
(3) Insert ``none'' in (i)(1)(ii)(D)(2).
(b) Use 552.238-XX, Special Ordering Procedures for the Acquisition
of Order-Level Materials in all Federal Supply Schedules authorized for
the acquisition of order-level materials (see 538.7101).
PART 552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
4. Add section 552.238-XX to read as follows:
552.238-XX Special Ordering Procedures for the Acquisition of Order-
Level Materials.
As prescribed in 538.7103(b), insert the following clause:
Special Ordering Procedures for the Acquisition of Order-Level
Materials (DATE)
(a) Order-level materials means supplies and/or services
acquired in direct support of an individual task or delivery order
placed against a Federal Supply Schedule (FSS) contract or FSS BPA,
when the supplies and/or services are not known at the time of
Schedule contract award. The prices of order-level materials are not
established in the FSS contract. Order-level materials that are
acquired following the procedures in paragraph (d) of this clause
are not open market items discussed in FAR 8.402(f).
(b) FAR 8.403(b) provides that GSA may establish special
ordering procedures for a particular FSS or for some Special Item
Numbers (SINs) within a Schedule.
(c) The procedures in FAR Subpart 8.4 apply to this contract,
with the exceptions listed in this clause. If a requirement in this
clause is inconsistent with FAR Subpart 8.4, this clause takes
precedence.
(d) Procedures for including order-level materials when placing
an individual task or delivery order against an FSS contract or FSS
Blanket Purchase Agreement (BPA).
(1) The procedures discussed in FAR 8.402(f) do not apply when
placing task and delivery orders for order-level materials.
(2) Order-level materials are included in the definition of the
term ``materials'' in
[[Page 62448]]
GSAR clause 552.212-4 Alternate I, and therefore all provisions of
clause 552.212-4 Alternate I that apply to ``materials'' also apply
to order-level materials. The ordering activity shall follow
procedures under the Federal Travel Regulation and FAR Part 31 when
order-level materials include travel.
(3) Order-level materials shall only be acquired in direct
support of an order and not as the primary basis.
(4) The cumulative value of order-level materials awarded under
an FSS order shall not exceed 33 percent of the total value of the
order.
(5) All order-level materials shall be placed under the Order-
Level Materials SIN.
(6) Prior to the placement of an order that includes order-level
materials, the ordering activity shall follow procedures in FAR
8.404(h).
(7) To support the price reasonableness of order-level
materials, the contractor proposing order-level materials as part of
a solution shall submit a minimum of three quotes obtained by the
contractor for each order-level material above the micro-purchase
threshold. One of these three quotes may include materials furnished
by the contractor under FAR 52.212-4 Alternate I (i)(1)(ii)(A) If
the contractor cannot obtain three quotes, the contractor shall
provide the rationale for why they cannot obtain three quotes to
support the contracting officer's determination in (d)(7) of this
section.
(8) The ordering activity contracting officer must make a
determination that prices for all order-level materials are
determined fair and reasonable. The ordering activity contracting
officer may base their determination on a comparison of the quotes
received in response to the task or delivery order solicitation or
other relevant pricing information available.
(9) Prior to an increase in the ceiling price of order-level
materials above the micro-purchase threshold, the ordering activity
contracting officer shall--
(i) Conduct an analysis of pricing and other relevant factors to
determine if the action is in the best interest of the Government
and obtain the approval at the levels described in FAR 8.405-6(d);
or
(ii) Follow the procedures at FAR 8.405-6 for a change that
modifies the general scope of the order.
(10) In accordance with GSAR clause 552.215-71 Examination of
Records by GSA, GSA has the authority to examine the contractor's
records for compliance with the pricing provisions in FAR clause
52.212-4 Alternate I, to include examination of any books,
documents, papers, and records involving transactions related to the
contract for overbillings, billing errors, and compliance with the
IFF and the Sales Reporting clauses of the contract.
(11) Order-level materials are exempt from the following
clauses:
(i) 552.216-70 Economic Price Adjustment--FSS Multiple Award
Schedule Contracts.
(ii) 552.238-71 Submission and Distribution of Authorized FSS
Schedule Pricelists.
(iii) 552.238-75 Price Reductions.
(End of Clause)
[FR Doc. 2016-21610 Filed 9-8-16; 8:45 am]
BILLING CODE 6820-61-P