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contractor100

Payment clauses in GSA schedules

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Just what is the current rule on indirect costs on materials in GSA task orders?

Quickly scanning through the current GSA solicitations and some of the mass mods, it seems the noncommercial payment clause, 52.232-7, has been removed from all of the schedules, in some cases fairly recently. (For example it seems it was just taken out of schedule 70 last year by a mass mod last year. )

So now 52.212-4 CONTRACT TERMS AND CONDITIONS –COMMERCIAL ITEMS (FEB 2012) (ALTERNATE I – AUG 2012) (DEVIATION I – FEB 2007), section (i) is the only clause applicable to time and materials order issued against GSA schedules?

Can anyone confirm that is true?

Some may remember that both 52.232-7 and 52.212-4 Alt I Dev I were both included in GSA schedule contracts for a while. Since 52.232-7 provides that contractors can apply their approved material handling costs to materials and 52.212-4 Alt I Dev I provides the CO must affirmatively list a lump sum indirect cost amount to be paid out pro rata, there was quite a bit of confusion on how to treat these costs. Wonder if anyone has any experience with ordering agencies' implementation of 52.212-4(1)(i)i(D)(2):

(2) Indirect Costs (Material Handling, Subcontract Administration, etc.).

The ordering activity will reimburse the Contractor for indirect costs on a

pro-rata basis over the period of contract performance at the following

fixed price: Each order must list separately the fixed amount for the

indirect costs and payment schedule or, if no reimbursement for indirect

costs, insert ‘None’.

Is anyone finding that ordering agencies using the schedules are ignoring this provision and neither directing vendors there will be no provision for indirect cost or specifying the amount of indirect costs that will be paid?

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GSA will not let you charge for indirect costs under their contracts in the same way it is done commercially.. I used to work at a GSA MAS acquisition office and it is stressed that all costs must be listed. I used to oversee a schedule where indirect costs are a normal course of business under non-Schedule purchases, but under the MAS program, they are not permitted unless all items were specifically listed in a FFP format. GSA instituted several Special Item Numbers (SINs) that have descriptions such as "Ancillary Supplies and Services" where contractors are required to list all of these types of items in a FFP format. It drove us nuts, as it did our Contractors and in fact the agencies which we served. However, this was (and is) required by GSA's policy office and is enforced by the OIG offices when they do audits.

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Thanks for answering, Desperado!

Let me clarify I am talking about ODCs that are either listed in the schedule, not OMI's. I suppose OMI markup would depend on how they had been purchased.

I see the current GSA schedule solicitations require the indirect costs to be negotiated upfront for ODCs that are listed in the schedule. So what does this presentation from KC GSA office mean, see slide 20

https://interact.gsa.gov/sites/default/files/kc_pbs-notes.pdf

Does that refer to instances in which the contractor didn't add indirect costs, e.g. "markup" to its ODCs upfront, because GSA had not made this policy clear at that point??

thanks for help again

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Let's go back in time a bit. FAR 52.212-4 Alt I was added effective February 2007. Prior to that, GSA had used the clause at 52.232-7 for payments under T&M contracts as there was no specific clause applicable to contracts for commercial items. Also,

effective february 2007, 52.232-7 was amended to incorporate 52.216-7. This latter clause requires contractors to submit proposals to establish final indirect cost rates and gives the government the right to audit T&M contracts in greater detail than previously under 52.232-7.

52.212-4 Alt I was intended to allow contractors to recover indirect costs on materials, including ODC's, under contracts for commercial items, but to avoid having those indirect costs subjected to audit. To do this indirect costs were to be stated in a sum certain instead of an indirect cost rate.

Because schedule contracts are supposed to be for commercial items, 52.232-7 was to be removed from schedule contracts and replaced by 52.212-4 Alt I. However, it has taken GSA time to do this. Nevertheless, it has been GSA policy since 2007 that 52.212-4 Alt I is the appropriate clause to use when T&M orders are issued against schedule contracts.

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C100 - That slideshow was dated June 2011. It was shortly after that time that GSA began to enforce the requirement as noted above. The office I was in had several issues with the policy (I imagine they still do, I have recently left GSA). Likewise, the agencies that use the Schedules programs also have issues because for services that have unforeseen ODCs this becomes a nightmare. The contractor has to get the new ODC added to their GSA contract under one of the Ancillary Supplies and Services SIN so that they can offer it to the end using agency. There are many times, that there just isn't a lot of time to get this accomplished. This has been one reason why some agencies are shying away from the Schedules program for these types of services.

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Thanks all, super helpful

Retreadfed, can you tell me where in 2007, or later, GSA announced the position that "that 52.212-4 Alt I is the appropriate clause to use when T&M orders are issued against schedule contracts."? Is it in writing someplace, I can't find it?

Leaving it in the schedule 70 contracts for six years doesn't seem consistent with such a policy

I notice a very large number of 70 schedule catalogs on Advantage are still stating that 52.232-7 applies, even though the list of clauses applicable to the schedule says it doesn't. For example:

http://www.gsaelibrary.gsa.gov/ElibMain/contractorInfo.do?contractNumber=GS-35F-0371N&contractorName=ACCENTURE+FEDERAL+SERVICES+LLC&executeQuery=NO

Also, look at this document (from GSA from July 2012):

http://www.gsa.gov/graphics/fas/2012_July_Schedule_70_Industry_Meet_QandA.pdf

Here's the relevant portion

"We were getting caught up on some of our IT Mass mods and noticed that in Mod 30 GSA appears to be adding clause 52.232-7 to IT Schedule 70. Am I missing something? Isn’t this the non commercial T&M clause which was replaced by 52.212-4 Alt I in all GSA schedule contracts? Wouldn’t this be in conflict with 52.212-4 Alt I?

Time and Materials and Labor-Hour contracts, both commercial and non-commercial are "best effort" contracts that may be used only when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of certainty. Service related MAS Solicitations and Contracts, such as Schedule 70, are required to use clause 52.232-7, as applicable. Payment on Time and Materials and Labor-Hour orders is in accordance with FAR Clause 52.232-7 (Feb 2007). The center will further discuss the applicability of this clause with GSA legal and policy office so that we can provide clear guidance in the near future."

Desperado, I have heard a lot of stories about misuse of open market items on GSA schedule in the olden days - people ordering one hour of financial analyst time and, incidentally, a new mainframe computer to help her do her work - but I agree with you, it doesn't seem consistent that a buyer can order ODCs on any other IDIQ and on GSA schedule they can't. I guess that is because ATA Defense Industries v. U.S., and Pyxis Corp., only apply to GSA schedules, not to other IDIQs?

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Contractor100, immediately after the changes to 52.232-7 and 52.212-4 Alt I went into effect in 2007, several entities were giving presentations concerning the new rules. Someone from the policy side of GSA gave one of these presentations. He announced the GSA policy at this presentation. I wish I still had a copy of his presentation, but it has been lost over the years.

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From Pyxis case the current FAR 8.402(f) was born. Then came SARA authorizing Commercial T&M and finally FAR 52.212-4 Alt 1. Now the conundrum: How can a CO at the FSS order level add costs that are not priced on the FSS contract under FAR 52.212-4 Alt I(i)(1)(ii)(D) without running afoul of FAR 8.402(f)? The greatest challenge is, that you may not even know what those costs are until you receive the quotes. Hence there is no way for you to comply with FAR 8.402(f) (you cannot separately compete that which you do not know will be). One method is to evaluate the FSS order quotes, determine who is getting the award, then issue a special notice in Fedbizopps that their ODCs are being sole sourced to them (thereby complying with FAR 8.402(f)'s part 5 and 6 requirements (of course, to comply with its FAR 19 requirement you would have to also dissolve the set-aside for those ODCs if your order was not set-aside). Wow this is just CRAZY, but what else can you do?

Another even crazier method:

1. Read FAR 12.102©

2. 12 trumps all

3. Commercial T&M orders are governed by a Part 12 clause

4. Document that FAR 8.402(f) is trumped by 12

(Yah, I know-good luck with getting legal to sign off on THAT).

Moving on to the indirect cost "fixed amount" challenge for contractors who almost all bill at % rates.

If you look back in the comments (do control F "fixed amount") on FAR case 2003-027 (the rule that promulgated SARA's commercial T&M into the FAR) I remember the FAR council disallowing a "rate" (e. g. G&A of X%) for indirect costs.

"The Councils believe it is important to provide as much flexibility as possible without violating the cost plus percentage of cost prohibition. The Councils believe use of a fixed rate violates the cost plus percentage of cost contract prohibition. Therefore, the rule does not permit application of a fixed rate. The Councils believe use of a fixed amount may be appropriate and revised the rule accordingly."

This stance was taken because commercial contracts cannot contain the allowable cost and payments clause FAR 52.216-7 to true up indirect rates at close out. Indeed until finalized, an indirect rate billed is considered a billing rate under FAR 42.7

A couple of methods to handle the "fixed amount" challenge. Assume the indirect cost is on Travel IAW the FSS clause C-FSS-370 By the way (unless explicitly prohibited in the FSS contract (rare)) this is the only time usually allowed to bill indirect costs without running afoul of FAR 8.402(f) as they are associated with travel.

Example for how to turn an indirect cost of 5% G&A on Travel to comply with the "fixed amount" in FAR 52.212-4 Alt1 (i)(1)(ii)(D)(2)
Assumption: Travel will be NTE $10,000 for order
CLIN 0002 Travel: NTE $10,000
CLIN 0003 Indirect Cost On travel: FFP amount of $500.00
CLIN 003 will be paid in conjunction with each approved travel voucher under CLIN 0002 and will be discounted to the fixed amount of $.05 for every $1.00 of approved travel under CLIN 0002.
Another example using a 5% G&A rate and making it fit into a "fixed amount"
Travel cost NTE 0-$100 Indirect cost "fixed amount" $5.00
Travel cost NTE $100-200 Indirect cost "fixed amount" $10.00
and so on...

At least GSA is attempting to address the issue. See Modernizing the Federal Supply Schedule Program; Order-Level Materials; Notice-FAS-2013-02

That's all folks. Sorry for the long post, but I just couldn't seem to stop once I started. :D

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