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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


July 2016
Vol. XVII, No. 7
[pdf version]

CONTENTS


GSA to Require Transactional Data Reporting For Federal Supply Schedule Orders
DOD on Rampage with DFARS Changes
Supreme Court Issues Two Acquisition-Related Decisions
Three Rules Proposed for the FAR
OFCCP Revises Sex Discrimination Rules
EPA Tidies Up the EPAAR
GSA Does Some Tidying Up, Too
OMB Establishes New Software Licensing Policy



GSA to Require Transactional Data Reporting
For Federal Supply Schedule Orders

To transform price disclosure and related policies for the General Services Administration’s (GSA) Federal Supply Schedule (FSS) contracts, governmentwide acquisition contracts (GWACs), and governmentwide indefinite-delivery, indefinite-quantity (IDIQ) contracts, GSA is phasing out the disclosures and tracking currently required by the Commercial Sales Practices (CSP) format (see General Services Administration Acquisition Regulation [GSAR] 515.408, Solicitation Provisions and Contract Clauses [for contract pricing]) and the Price Reductions clause (PRC – GSAR 552.238-75), and the associated practice of negotiating pricing based on a model where the government strives to secure the vendor's most favored pricing and maintain this position for the life of the contract. Instead, GSA is adopting a market driven pricing model where vendors submit prices paid by government customers through a new “Transactional Data Reporting” clause, and the government will use this data, along with other pricing information, to ensure a vendor’s offered price is competitive relative to other vendors selling the same or similar items or services.

“Transactional Data Reporting is an attempt to embrace modern technology while moving away from outmoded practices,” writes GSA in the introduction to the rule. “When first introduced in the 1980s, the CSP and PRC helped GSA and its customer agencies maintain advantageous pricing from original equipment manufacturers that held the vast majority of FSS contracts. However, changes in what the government buys and shifts in the federal marketplace have eroded the effectiveness of these tools over time. Additionally, vendors repeatedly single out these pricing tools as among the most complicated and burdensome requirements in federal contracting. By contrast, Transactional Data Reporting provides a less burdensome alternative.”

The CSP is the document through which a contractor relates the pricing, terms, and conditions it offers to its commercial (non-federal) customers. The PRC requires the contractor to maintain the government’s price or discount advantage in relation to the price or discount offered by the contractor to its commercial customers – if the contractor reduces the price of an item to its commercial customers and the item is on a schedule contract, the contractor must reduce the price of the item on the schedule contract similarly (this is called the “tracking customer” provision by GSA).

Among the factors that have eroded the effectiveness of the CSP and PRC over time are: (i) the significant growth of contracts held by resellers with little or no commercial sales against which to negotiate most favored customer pricing; (ii) the prevalence of sales for commercial-off-the-shelf products or other commercial items for which the government is not a market driver; and (iii) the fact that these practices tie pricing for reductions to sales of single items and play little role in blanket purchase agreements and other higher-volume leveraged buying by agencies to achieve greater savings and reduce administrative costs.

Schedule contractors have singled out these pricing tools as among the most complicated and burdensome requirements in federal contracting. The proliferation of resellers has occurred, in part, out of an effort by original equipment manufacturers to shield them from what they see as an overly complex and burdensome process that has created a punitive relationship between the government and its suppliers.

In response, GSA issued a proposed rule that would require that transactional data be reported immediately for non-FSS contracts (GWACs and IDIQs) but rolled out on a pilot basis for the FSS program under select schedules, but FSS contractors under those select schedules would be required to participate (according to the introduction of the proposed rule, schedules for “commercial-off-the-shelf and related commercial products and commoditized services that experience high volume of repetitive purchasing under identical or substantially similar terms and conditions”). For FSS contracts, the requirement would have been paired with an alternate Price Reductions clause that did not include the tracking customer provision. However, FSS contractors would still be subject to the CSP requirements, and GSA would have had the right to request CSP disclosures at any time (for more on the proposed rule, see the April 2015 Federal Contracts Perspective article “GSA Proposing Transactional Data Reporting”).

The following is the transactional data that would be reported for all sales under the contract (GSA would post the reporting instructions at https://vsc.gsa.gov/):

GSA received comments on the proposed rule from 26 industry associations, contractors, individuals, government agencies, and other interested groups. In response to the comments, GSA decided to (1) retain the proposed transactional data elements to be reported; (2) authorize the phased elimination of both the CSP and the PRC; and (3) broaden the pilot to be more reflective of the varied goods and services offered and sold through the FSS program – the pilot will involve the following eight schedules and Special Item Numbers (SINs – groupings within schedules of like commodities or services), which account for more than 40% of the FSS sales volume:

For FSS contracts, the new Alternate I to GSAR 552.238-74, Industrial Funding Fee and Sales Reporting, is paired to the new Alternate II to the PRC (GSAR 552.238-75), which does not include the customer tracking requirement. Initially, participation in the pilot will be voluntary for FSS contractors with FSS contracts in the schedules/SINs, but they will be encouraged to participate by executing a bilateral modification with GSA. The new reporting clause and corresponding pricing disclosure changes will be applied to newly-awarded FSS contracts in the pilot Schedules/SINs and existing FSS contracts that are up for renewal/extension.

New GSAR 552.216-75, Transactional Data Reporting, applies to all new GWACs and governmentwide IDIQs and may be applied, through a bilateral modification, to any existing GWACs and governmentwide IDIQ contracts that do not contain other transactional data clauses.

NOTE: FSS contracts managed by the Department of Veterans Affairs (VA) are not included in the pilot and will not be affected by this rule.



DOD on Rampage with DFARS Changes

The Department of Defense (DOD) continued its burst of energy, publishing four final rules, one interim rule, four proposed rules (including a massive one that would revamp the regulations on rights in technical data and proprietary data restrictions), one class deviation, one memorandum, and one request for information (on rights in technical data and proprietary data restrictions).



Supreme Court Issues Two Acquisition-Related Decisions

For the first time in years, the U.S. Supreme Court addressed issues that affect federal acquisition, and it did so twice: once regarding the “rule of two,” the other regarding the False Claims Act.



Three Rules Proposed for the FAR

Unlike the DOD, the Federal Acquisition Regulation (FAR) Council took it easy, only issuing three proposed rules that are relatively inconsequential.



OFCCP Revises Sex Discrimination Rules

The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) has revised its equal employment opportunity regulations at Title 41 of the Code of Federal Regulations (CFR), part 60-20, Sex Discrimination Guidelines (41 CFR part 60-20), which have not been substantively updated since they were first promulgated in 1970.

41 CFR part 60-20 implements Executive Order 11246, Equal Employment Opportunity, September 24, 1965, which prohibits federal contractors and subcontractors that receive contracts of more than $10,000 during any 12-month period from discriminating “against any employee or applicant for employment because of race, creed, color, or national origin.” Executive Order 11246 was amended by Executive Order 11478, Equal Employment Opportunity in the Federal Government, August 8, 1969, to bar discrimination against federal employees on the basis of race, color, religion, sex, national origin, handicap, and age. Executive Order 13087, Further Amendment to Executive Order 11478, May 28, 1998, added “sexual orientation” to the list of protected categories. (NOTE: Executive Order 11246, as amended, is implemented in FAR subpart 22.8, Equal Employment Opportunity, and the corresponding clause FAR 52.222-26, Equal Opportunity.)

On July 21, 2014, President Obama issued Executive Order 13672, Equal Employment Opportunity Amendments Regarding Sexual Orientation and Gender Identity, which further amended Executive Order 11246 to prohibit federal contractors from discriminating against lesbian, gay, bisexual, and transgender (LGBT) employees, and amended Executive Order 11478 to prohibit discrimination based on gender identity in federal employment (see the August 2014 Federal Contracts Perspective article “Sexual Orientation and Gender Identity Order Issued”).

Considering all these changes made to Executive Order 11246 since 1970, OFCCP decided to update the guidelines, and it published a proposal to completely revise 41 CFR 60-20 (see the March 2015 Federal Contracts Perspective article “OFCCP Proposes Updates to Sex Discrimination Rules”). Proposed 41 CFR 60-20.2, General Prohibition, summarized the proscribed activities: “It is unlawful for a contractor to discriminate against any employee or applicant for employment because of sex. The term ‘sex’ includes, but is not limited to pregnancy, childbirth, or related medical conditions; gender identity; and transgender status.” 41 CFR 60-20.2 then provided 11 examples of unlawful sex-based discriminatory practices, and four examples of employment policies or practices that have an adverse impact on the basis of sex and are not job-related and consistent with business necessity.

OFCCP received 553 comments on the proposal. They include 445 largely identical form-letter comments from 444 individuals expressing general support, apparently as part of an organized comment-writing effort. The 108 remaining comments represented diverse perspectives. In response to the comments, 41 CFR 60-20.2 is finalized with the inclusion of the following three additional examples of unlawful sex-based discriminatory practices:

In addition, one of the four examples of employment policies or practices that have an adverse impact on the basis of sex (“a policy prohibiting large equipment operators from using a restroom while on the job, which adversely impacts women, who may require the use of restrooms more than men”) is replaced with “conditioning entry into an apprenticeship or training program on performance on a written test, interview, or other selection procedure that has an adverse impact on women where the contractor cannot establish the validity of the selection procedure consistent with the Uniform Guidelines on Employee Selection Procedures, 41 CFR part 60-3.”



EPA Tidies Up the EPAAR

The Environmental Protection Agency (EPA) is tidying up the EPA Acquisition Regulation (EPAAR) by removing EPAAR 1536.201, Evaluation of Contracting Performance, which addressed the evaluation of contractor performance under construction contracts, because it was superseded by FAR 42.1502, Policy (see the September 2013 Federal Contracts Perspective article “FAC 2005-69 Establishes Standardized Past Performance Evaluation Factors and Ratings”).

In addition, paragraph (c) of EPAAR 1537.110, Solicitation Provisions and Contract Clauses [for service contracts], is amended to permit contracting officers to increase the length of time key personnel must be committed to the contract (EPAAR 1552.237-72, Key Personnel, requires “the first 90 days of performance”). Paragraph (c) states, “The contracting officer shall insert the clause at [EPAAR] 1552.237-72, Key Personnel, in solicitations and contracts when it is necessary for contract performance to identify contractor key personnel.” To that is added the following: “Contracting officers have the flexibility to identify the required number of days of key personnel commitment during the early stages of contractor performance. The length of time will be based on the requirements of individual acquisitions when continued assignment is essential to the successful implementation of the program's mission. Therefore, contracting officers may use a clause substantially the same as in EPAAR 1552.237-72, regarding substitution of key personnel. Contracting officers may include a different number of days in excess of the ninety (90) days included in this 1552.237-72clause, if approved at one level above the contracting officer.”

No comments were submitted on the proposed rule, so it is finalized without changes. For more on the proposed rule, see the September 2014 Federal Contracts Perspective article “EPA Proposes to Clean Up the EPAAR.”



GSA Does Some Tidying Up, Too

The General Services Administration (GSA) conducted a little housekeeping of its own on the GSA Acquisition Regulation (GSAR), updating two GSAR parts to reflect current regulations and correspond to the organization of the FAR, and to implement several statutory requirements pertaining to the use of GSA’s sources of supply by non-federal entities.



OMB Establishes New Software Licensing Policy

The Office of Management and Budget (OMB) has issued the second in a series of information technology (IT) policies to make the acquisition and management of common IT goods and services more efficient and cost-effective (the first policy addressed the acquisition of laptops and desktops – see the November 2015 Federal Contracts Perspective article “OMB Establishes Standard Configurations for Laptop and Desktop Computers”).

“Each year, the federal government spends more than $6 billion on software through more than 42,000 transactions, which results in a fragmented and inefficient marketplace,” wrote Anne Rung, Office of Federal Procurement Policy administrator, and Tony Scott, U.S. Chief Information Officer, in the memorandum with the subject “Category Management Policy 16-1: Improving the Acquisition and Management of Common Information Technology: Software Licensing,” to the 24 departments and agencies covered by the Chief Financial Officers (CFO) Act of 1990 (Public Law 101-576) [see below]. “A recent report by the Government Accountability Office (GAO) [GAO-14-413, Federal Software Licenses: Better Management Needed to Achieve Significant Savings Government-Wide] indicates that agencies buy and manage software licenses in a decentralized manner, struggle to create accurate inventories, often purchase unneeded capabilities, and generally do not share pricing, terms, and conditions across government to facilitate better purchasing. Furthermore, most agencies do not have a designated central oversight authority to manage software agreements.”

Rung and Scott continue: “To fully leverage the government’s vast buying power and implement coordinated government-wide purchasing and usage strategies, improvements must be made at both the agency and the government-wide levels. Agencies need to move to a more centralized and collaborative software management approach so that they can optimize utilization of commercial and COTS [commercial-off-the-shelf] software licenses and maximize the use of best-in-class software purchasing and management solutions. In parallel, government-wide strategies are needed to reduce duplication of efforts, such as increasing the number and use of government-wide software agreements, improving software license management practices through automated IT asset discovery tools and business intelligence software. The success of these government-wide steps depends on the improvements that agencies make to integrate their own license management practices into the government-wide license offerings.”

The following are the steps each participant in the process must take:

“As a reminder, generally agencies should not agree to terms and conditions that prohibit the sharing of all prices, terms, and conditions for commercial and COTS software licenses with other government entities (including posting said information to the Acquisition Gateway [https://hallways.cap.gsa.gov/login-information – see the March 2016 Federal Contracts Perspective article “GSA Opens Federal Acquisition Gateway to Public”]). When terms or conditions are identified that seem to preclude an agency from sharing prices paid with other federal agencies, the covered agency shall ensure removal of these terms and conditions during the negotiation process for the contract or the option period renewal.”

The policy memorandum applies only to commercial and COTS software, not custom services or the development of new software.

OMB issued a draft memorandum in December 2015 for comments, and it was adopted, for the most part, in the final memorandum. For more on the draft memorandum, see the January 2016 Federal Contracts Perspective article “OMB Proposes New Software Licensing Policy.”

NOTE: The following are the departments and agencies covered by the CFO Act:

Departments: Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs.

Agencies: Environmental Protection Agency, National Aeronautics and Space Administration, Agency for International Development, General Services Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management, Small Business Administration, and Social Security Administration.





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