Death, taxes and some new acquisition regs

Joseph J. Petrillo

No matter what else happens in Washington, the bureaucracy keeps churning out new contracting rules. One recent change is of particular importance to the IT community.

Federal Acquisition Circular 2001-24 serves up the usual mulligan stew of new and reheated rules. New rules for ordering through the General Services Administration's Federal Supply Schedules are the meat of the stew, so to speak. The rules include long-awaited coverage of orders for services. (The Defense Department already applied special rules to service orders over $100,000 when it implemented the Section 803 rules in 2002.)

The regulations instruct an agency on how to specify services in an order. Logically enough, services that have a fixed price for a specific task don't need a statement of work, but those priced at hourly rates do.

The ordering procedures for fixed-task-price services are the same as those for supplies. Under the new rules, however, agencies are required to seek a price reduction for orders that exceed the schedule contract's maximum threshold.

The rules for hourly-rate services are more involved. For orders above the micropurchase level (usually $2,500) but below the schedule contract's maximum threshold, the agency must ask at least three schedule contractors for quotations. The request for quotes must include, at a minimum, the statement of work and the evaluation criteria.

When the order exceeds the maximum, the agency should provide the RFQ to additional schedule contractors, but it's up to the agency to decide how many more to solicit. In addition, the agency should seek price reductions from all invited contractors.

Best value

The rules for hourly-rate services include some rudiments of fair competition. For instance, the ordering activity must evaluate all responses to determine the best value. Losing offerors are entitled to timely notification and can request a 'brief explanation' of the basis for the award decision.

But these rules still fall short of a truly open competition. Participation is by invitation only. Contractors who don't get an RFQ don't need to be considered and probably won't even know about the competition. And, of course, those without a GSA schedule contract are never considered.

GSA's desire to retain customary government contract rights in the schedules program has been at odds with its goal of getting the full benefit of commercial discounts.

In the new rules, GSA declined to make two proposed changes that would have taken schedule buys beyond normal commercial practice. Under one proposal, the buying agency could make a unilateral reduction in the order price for performance it deemed inadequate. The other proposal would have permitted government inspection of services at any time and place, including the contractor's facilities. This would have been especially troublesome for contractors who service multiple customers and need to maintain confidentiality for their clients.

Two issues where GSA has postponed action are other direct costs, and orders placed on a time-and-materials or labor-hour basis. GSA will address those types of contracts later, when it implements last year's Services Acquisition Reform Act.

The new rules approve the practice of some agencies of making de facto set-asides, such as for small business concerns. The Federal Acquisition Regulation now permits ordering offices to consider socioeconomic status when selecting contractors. GSA declined, however, to make set-asides mandatory for orders under $100,000 when there are at least two qualified small businesses, as some had urged.

Since GSA schedules represent a large and growing portion of federal sales, the rules are important.

And, like death and taxes, more changes seem inevitable.

Joseph J. Petrillo is a lawyer with the Washington law firm of Petrillo & Powell. E-mail him at jp@petrillopowell.com.

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