GSA Issues New Rule for Other Direct Cost Material Purchases under Selected Schedules

GSA Issues New Rule for Other Direct Cost Material Purchases under Selected Schedules

By Global Services on February 2, 2018

On January 24, GSA released an Order making a revision to the GSA Acquisition Manual. The new rule clarifies how Order Level Materials (OLMs), also known as Other Direct Costs (ODCs), may be purchased through selected Federal Supplies Schedules (FSS or “Schedules”).

Background. As GSA explained in the original Proposed Rule released last year (a draft version of the Final Rule released in January), OLMs have long been a complicated problem under the Schedules:

…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.

GSA’s goal in providing the new guidance was to achieve parity between the Schedules and other Indefinite-Delivery/Indefinite Quantity (IDIQ) contracts, which allow for OLMs.

In the Federal Register description of the Final Rule, GSA notes that “the final rule [is] close to, but not at full parity” due to three unique requirements (discussed below) for the Schedules versus typical IDIQs. Nonetheless, GSA believes that “the requirements are currently the best available means to ensure price reasonableness and provide confidence to customers when using the new OLM authority on Federal Supply Schedules.”

The Rule. As explained in the fact sheet accompanying GSA’s announcement, the new rule does not apply to every Schedule. Instead, it applies only to the following Schedules:

  • Federal Supply Schedule 03 FAC: Facilities Maintenance and Management
  • Federal Supply Schedule 56: Buildings and Building Materials/Industrial Services and Supplies
  • Federal Supply Schedule 70: General Purpose Information Technology Equipment, Software, and Services
  • Federal Supply Schedule 71: Furniture
  • Federal Supply Schedule 84: Total Solutions for Law Enforcement, Security, Facilities Management, Fire, Rescue, Clothing, Marine Craft, and Emergency/Disaster Response
  • Federal Supply Schedule 00CORP: All Professional Services
  • Federal Supply Schedule 738X: Human Resources and EEO Services

Under the new rule, three unique GSA requirements apply to OLMs on the affected Schedules. (The Federal Register article linked above also includes detailed descriptions of GSA’s rationale for these rules vis-à-vis public comments on the Proposed Rule). These requirements are as follows:

  1. Three Quote Requirement. Contractors are required to obtain three quotes for each OLM above the simplified acquisition threshold. These quotes are not submitted with the offer, but must be kept on file and are subject to audit.
  2. OLM Threshold of 33.33%. OLMs are capped at 33.33% (one third) of the order. Travel is not included in this limitation.
  3. OLM SIN. For existing contracts under the affected Schedules, the Government will initiate the addition of the OLM SIN via bilateral modification. New contracts under affected Schedules will include the OLM SIN once the Schedule solicitation is updated; the OLM SIN cannot be the only awarded SIN. The OLM SIN will require reporting of OLMs, and OLMs (with the exception of travel costs) will be subject to the Industrial Funding Fee (IFF).

Benefits. GSA anticipates that the new rule will make it easier for the acquisition workforce to purchase through the Schedules; will allow federal customers to more easily purchase what they need; will minimize contract duplication; and will reduce the burden of bid/proposal costs on industry partners (as they will no longer need to pursue other commercial IDIQs) while allowing them to compete for more orders. GSA estimates hundreds of thousands of dollars in cost savings to the Government and the public as a result of the new rule.

Unsure how the new rule will affect your current or prospective GSA contract? Contact Global Services today to find out more!