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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: July 11, 2003

SUBJECT: General Services Administration Acquisition Regulation (GSAR); Consolidation of Industrial Funding Fee (IFF) and Sales Reporting Clauses, and Reduction in Amount of IFF

SOURCE: Federal Register; July 11, 2003, Vol. 68, No. 133, page 41286

AGENCIES: Office of Acquisition Policy, General Services Administration (GSA)

ACTION: Final Rule

SYNOPSIS: GSA is combining GSAR 552.238-74, Contractor's Report of Sales, and GSAR 552.238-76, Industrial Funding Fee, into a single clause -- GSAR 552.238-74, Industrial Funding Fee and Sales Reporting. This new clause gives GSA the unilateral right to change the percentage rate of the IFF in Federal Supply Schedule contracts. Also, GSA provides notice that it intends to reduce the IFF rate from 1.0% to 0.75%, effective January 1, 2004.

EDITOR'S NOTE The GSAR is the shaded part of the GSA Acquisition Manual, which is available on the Internet at http://www.acqnet.gov/GSAM/gsam.html.

For more on the proposed rule, see the March 18, 2003, FEDERAL CONTRACTS DISPATCH "General Services Administration Acquisition Regulation (GSAR); Consolidation of Industrial Funding Fee (IFF) and Sales Reporting Clauses, and Reduction in Amount of IFF."

DATES: This final rule is effective July 11, 2003. Solicitations issued and contracts awarded after July 1, 2003, shall comply with this final rule. Existing Federal Supply Schedule contracts shall be modified by December 31, 2003.

FOR FURTHER INFORMATION CONTACT: Vonda J. Sines at 703-305-7542, or Linda Nelson at 202-501-1900.

SUPPLEMENTAL INFORMATION: On March 18, 2003, GSA published a proposed rule that would combine GSAR 552.238-74 and GSAR 552.238-76 into a single clause, GSAR 552.238-74, to eliminate duplicative information, clarify sales reporting procedures, and describe the procedures the Federal Supply Service (FSS) will utilize to unilaterally make future IFF rate changes. In addition, though the GSAR does not specify the percentage rate of the IFF, the proposed rule included a notice that the FSS intends to lower the current rate from 1.0% to 0.75% of reported sales, effective January 1, 2004. The proposed IFF rate change was in direct response to the July 2002 General Accounting Office (GAO) report GAO-02-734, "Interagency Contract Program Fees Need More Oversight," which stated, "from fiscal year 1999 to 2001, the revenue generated by (IFF) fees exceeded (Federal Supply Schedule) program costs by 53.8%, or $151.3 million. Program customers are, in effect, being overcharged for the contract services they are buying. Nevertheless, program officials have not adjusted the fee."

Eleven respondents submitted comments in response to the proposed rule. As a result of the comments, GSA is adopting the proposed rule as final with minor restructuring and editorial changes to GSAR 552.238-74, and with a revision to GSAR 552.238-74(a)(3) which clarifies that reportable sales do not include those made under Federal Acquisition Regulation (FAR) Part 14, Sealed Bidding, or non-FAR contracts, but do include sales to states and localities under the authority of GSAR Subpart 538.70, Cooperative Purchasing (for more on cooperative purchasing, in which state and local governments are permitted to use Federal Supply Schedules for information technology supplies and services, see the May 7, 2003, FEDERAL CONTRACTS DISPATCH General Services Administration Acquisition Regulation (GSAR) Amendment 2003-01; Acquisition of Information Technology by State and Local Governments Through Federal Supply Schedules).

In addition, the introduction to the final rule states, "The January 1, 2004, change will be implemented by means of a bilateral contract modification to be executed electronically. As consideration to Federal Supply Schedule contractors for any potential costs incurred as the direct result of this change, FSS will allow these vendors to continue to include the 1 percent IFF in their contract prices until December 31, 2003, but to forward to FSS an IFF of 0.75 percent for reported sales for the period of October 1, 2003, through December 31, 2003. Examples of the type of costs GSA anticipates contractors could incur include updating published prices and modifying accounting systems."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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