MEMORANDUM FOR OUR FRIENDS AND CLIENTS

FROM:     PETRILLO & POWELL, PLLC

DATE:    JUNE 2, 2003

There has been an unusual amount of regulatory activity in the GSA Schedule program. The rules for A co-operative@ purchasing B use of IT schedules by state and local governments B are now final.

• GSA dropped a controversial provision which would have made all dealer sales subject to the price reduction clause.
• State and local governments can add their own terms and conditions to orders if they are required by state law and not inconsistent with the schedule contract.
• If a state has a prompt payments rule, it would govern for an order. The Federal prompt payment clause is the A default@ rule if a state has none.
• As in the enabling legislation, the program is voluntary for the contractor.

The success of cooperative purchasing now depends upon states changing their buying laws and procedures to enable, or prefer, use of this program.

In addition, GSA has proposed a new clause dealing with sales reporting and the payment of Industrial Funding Fee. Under the new proposal:

• GSA can change the IFF rate, unilaterally, once a year.
• IFF must be included in prices, but there is no explicit statement in the clause that contractors will be able to adjust their prices to account for the new IFF rate. (Explanatory material makes clear that this is what GSA intends for the announced reduction in rate from 1% to 0.75%, after the last full quarter of 2003).
• There is a presumption that sales of contract items to authorized users are subject to IFF. The burden is now on the contractor to show that the purchase was made under some other contracting authority.

GSA is also proposing to change the basic rules in the FAR for schedule buys, and to add procedures for services. Among the changes:

• Continuing a trend toward tougher language, the rules will now add A shall@ to requirements for review of schedule sources before issuing an order.
• Confusingly, however, the new rules also include documentation requirements for sole source and restricted competition orders.
• For agencies with BPAs, the rules imply that ordering can be limited to schedule contractors holding a BPA.
• Although the rules on small business set-asides don= t apply to schedule buys, agencies should give a A preference@ to small business schedule vendors.
• There are special rules for services priced using hourly rates, including
  • Required statements of work
  • For orders between the micropurchase and maximum order amounts, the SOW must go to three schedule vendors for possible quote.
  • Over the maximum order amount, A additional@ vendors B beyond three B are necessary.
  • Performance-based contracts are preferred, but when used, the agency needs to do a quality assurance surveillance plan.

Finally, SBA is proposing to have small business schedule contractors recertify their status annually. The same rule will apply to other multiple-award contracts, including GWACs and multi-agency contracts. Both these certifications and size representations in connection with individual orders can be protested. The proposed timeliness rules for such protests are unclear, however.

Please let us know if you have any questions about the new or proposed rules, or wonder how they will affect your business.

Petrillo & Powell