Infotech and the law: Know rules of GSA schedule contracting with DOD

Walter Zenner

It has been almost two years since General Services Administration announced its "Get It Right" program to stamp out government misuse of GSA schedule contracts.

In the wake of that announcement, the Defense Department has issued a slew of policy pronouncements and rule changes to ensure that its employees use GSA schedule contracts in prudent, cost-effective, legally sound ways, both contractually and fiscally speaking.

Let's review the state of the law, particularly with respect to the principal competition rules that IT services contractors should be aware of in selling to the Defense Department, the single largest user of GSA schedule contracts.

For in-scope purchases, aside from those at or below the micropurchase threshold ($2,500), the Defense Department must compete almost all of the orders it issues under GSA schedule contracts, even those that are within the scope of those contracts.

For purchases of services worth more than the micropurchase threshold but less than the maximum order limitation, the Federal Acquisition Regulation requires the Defense Department to conduct a virtual competition. It is to survey offerings of at least three schedule contractors, and evaluate them by several factors, including past performance and special features required to meet the contract's needs.

For services that need a statement of work, the Defense Department must conduct an actual competition. It must prepare a request for quotation, including a statement of work and evaluation criteria, and offer it to at least three schedule contractors.

For orders that exceed the maximum order limitation, the Defense Department must provide the request for quotation to a flexibly defined additional number of contractors, and seek reductions in their hourly rates.

Most of these rules have been around for a while, even if they have not always been well understood.

Under a new final rule, effective in March, more stringent competition requirements kick in when the Defense Department wants to order more than $100,000 worth of services or supplies. With limited exceptions, justified in detail and approved in writing, (such as for urgent circumstances or follow-on orders subject to previous competition), the Defense Department must:

»Provide fair notice of the planned order to, and actually receive offers from, at least three schedule contractors, or explain in writing why it could not elicit responses from at least three contractors

»Provide fair notice to all contractors offering the required services under the schedule in question, such as through GSA's eBuy system, and give each one a "fair opportunity" to submit an offer and consider it.

It will be interesting to see how the Defense Department applies these new requirements in practice.

For out-of-scope purchases, the Defense Department may add "open-market" or "off-schedule" items to orders under GSA schedule contracts only if it complies with all statutory and regulatory requirements that would apply if it were purchasing the item on a standalone basis. From a contractor's point of view, that means the Defense Department must satisfy the competition requirements of FAR Part 6, must label the items in question as nonschedule items ? a point that contractors would do well to insist on for their own protection ? must make its own determination that the pricing is fair and reasonable (even if reimbursed only at cost, as under a time and materials contract), and must include applicable contract clauses not already found in the schedule contract.

Walter Zenner is a senior counsel in the government contracts group at Pillsbury Winthrop Shaw Pittman LLP in McLean, Va. He can be reached at walter.zenner@pillsburylaw.com.

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