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Chrissy Frericks

Can a Subsidiary and the Parent Organization use the same GSA Schedule?

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Good Morning.

I have long consulted WIFCON when researching questions/topics, but this is my first post as a registered member. Glad to be an official part of the community!

My company is planning on breaking up our existing structure and creating several subsidiary organizations all tied to a parent organization. They will be independent subsidiaries, not divisions or departments. Some people in our company believe that the subsidiary organizations will all be able to continue to use the same GSA Schedule (currently on 70 and MOBIS) that will be help by the parent organization (ie, multiple subsidiaries all using the same schedule). Others believe that, since a subsidiary is supposed to be independent of the parent, our current GSA schedules will have to be novated to one of the subsidiaries and each subsidiary will need to obtain their own schedules (ie, no sharing of GSA schedules among parent or subsidiaries).

We plan on reaching out to our GSA contracting officer in the future, but I'd love to know if anyone has had any experience with this situation.

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Like everything else in government, it depends what the structure is.

On the surface the answer is no.

If you are breaking the company apart, that probably means that each will have its own DUNS and EIN. In that case, each new company must have their own contract.

Will the parent still exist? If so, their contract will stand.

Very important... even though it is not written anywhere, GSA imposes the 2-year rule for new companies.

We have, over the years, been able to bypass this, but it is a tough road to travel.

If this is an IT situation, you may want to rethink your decision before GSA imposes the proposed lock on new offers under IT70 and MOBIS.

I hope this helps.

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The interesting question here (to me) is the use of the phrase "independent subsidiary". I would ask an attorney about affiliation rules. I'm just a layperson, but I would think that it would be difficult to create a subsidiary that had a reporting relationship to the parent company and was truly independent at that same time.

I know there have been true spin-offs in the news recently (e.g., Northrop Grumman creating Huntington Ingalls) but if it was not a true-spin off, I don't see how it could be an "independent subsidiary". But I'm not the guy to ask. Ask an attorney who specializes in GSA stuff.

H2H

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We haven't been able to get that fly with a new LLC Joint Venture.

A potential solution is to hire your Corporate Parent schedule holder as a subcontractor--who can use the schedule.

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We haven't been able to get that fly with a new LLC Joint Venture.

A potential solution is to hire your Corporate Parent schedule holder as a subcontractor--who can use the schedule.

"subcontract to the parent" This makes no sense to me. If the prime is not the GSA Multiple Award Schedule (MAS) holder then it is pointless. I believe you meant the other way around. The parent (who holds the MAS), subs to its children. Otherwise (as MarketUS stated) GSA will require a novation to the child (if they can indeed pass the lawyers definition of "separate legal entity"). OR, if multiple entities, each will have to propose on its own merit to get its own MAS. I have seen companies try and snake their way around this by having the parent declare they have "multiple ordering offices" with different DUNS (I have even seen them try the ole "authorised dealer trick,") However, the real problem becomes apparent when they try and get paid. Most purchase order systems pull the DUNS of the MAS holder. No way to award a task to a different entity outside that which is shown in FPDS for that MAS contract. A possible loophole is to trick the system with a payment "remit to" address that has a differnt DUNS.

The most practical way is for the parent to hold the MAS and sub to their children. I am sure their are a variety of reasons why they are reluctant to do this, but it is the easiest way without having to be awarded multiple MAS contracts. It is certainly prefered by GSA as every MAS contract caries an admin cost burden for them.

My question for contractors is what is the the most common reason why they don't want to have the parent keep the MAS and sub to the children? Is it cost? Tax issues? or what? (i know this Q is a topic in and of itself, but would like to be educated on the most common reasons). Thanks.

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A subsidiary might be a separate profit center with its own products. A subsidiary is not the same as a division. It is a legally distinct entity. The subsidiary might be a larger company than the parent. The parent merely owns more than half of the subsidiary's stock.

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