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IT Hardware Maintenance - supply or service


Richs

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I know this is a very general question, but is IT harware maintenance considered a supply or service. I have found nothing on the web. Most article seem to address IT software maintenance. Any information is appreciated. Thank you.

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If you buy it as a warranty or a maintenance agreement, it could be treated as a supply. If you're buying it as scheduled maintenance, maybe it should be a service.

Think of it this way -- if you buy health insurance, are you buying a supply or a service? Maybe you use it, maybe you don't. You're buying protection in case of illness, but you're not actually buying a nurse's services.

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Guest Jason Lent

If you buy it as a warranty or a maintenance agreement, it could be treated as a supply. If you're buying it as scheduled maintenance, maybe it should be a service.

Think of it this way -- if you buy health insurance, are you buying a supply or a service? Maybe you use it, maybe you don't. You're buying protection in case of illness, but you're not actually buying a nurse's services.

The health insurance example is excellent. That seems to be a great follow-up example when convincing someone of that position.

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As suggested by Retreadfed, look at the definition of a service contract in FAR 37.101. If that doesn’t answer your question, look at the definitions of services contained in the Product and Service Codes (PSC) Manual. In either case, I believe one would conclude that IT Hardware Maintenance is a service if that is the primary purpose of the contract.

FAR 37.101 describes areas in which service contracts are found. One area is “Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or modification of supplies, systems, or equipment”.

The PSC Manual provides categories and groups of codes to describe products, services, and research and development (R&D) purchased by the federal government. One uses these codes to describe what was bought for each contract action reported in the Federal Procurement Data System (FPDS).

The 2 broad categories that appear to be most appropriate as a descriptor of IT Hardware Services are services categories D3 and J0. Category D3 covers Information Technology and Telecommunication Services, and Category J0 covers Maintenance, Repair, and Rebuilding of Equipment.

Given the definitions in the FAR and in the PSC manual, one would expect to identify a contract for IT hardware maintenance as a service.

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All, thank you for the information. I have looked at the FAR definitions. My customer is agruing the the maintenance is a supply based on definitions of software maintenance found on the GSA website. GSA differenitates as follows:

Software maintenance as a product is used for the purpose of maintaining the operability and usability of the software product by utilizing published fixes to bugs via patches, updates, or upgrades. An example is the publishing of bugs or defect fixes via patches to keep the software current. This allows for Software Maintenance as a Product to be billed at the time of purchase.

Software maintenance as a service is purchased for the purpose of solving user identified problems using technical support outside the scope of software maintenance as a product — for example, when problems arise after implementation of software such as the software's incompatibility with the organization's IT infrastructure.

My problem is that I am not finding any guidance on IT hardware maintenance. For example, if I am buying servers and part of the requirement is installation and warranty. The GSA distinction for software maintenance as a supply seems to apply since it would be considered maintaining the operability and usability. The FAR 37.101 definition of a service (which includes maintenance) is when the "... primary purpose is to perform an identifiable task rather than to furnish an end item of supply". In my case, the primary purpose is the IT hardware buy. But I have found no specific guidance thus far.

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If the primary purpose of the contract is to furnish hardware or software, code it as a supply. See this extract from the PSC Code Manual:

These product/service codes are used to record the products and services being purchased by the Federal Government. In many cases, a given contract/task order/purchase order will include more than one product and/or service. In such cases, the ―Product or Service Code‖ data element code should be selected based on the predominant product or service that is being purchased.

If you are buying it from the GSA schedule, look at the contractor's Schedule Terms and Conditions. Frequently, they will identify the PSC Code.

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If you are buying servers, the your acquisition is a supply acquisition. If part of the same contract is installation and warranty, well, the installation and warranty are incidental to the purpose of the acquisition, which is supply. If you award a separate contract to someone else for installation, that's a service contract.

The GSA distinction for software maintenance makes sense to me.

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I am very familiar with this issue, as I deal with it at least weekly. The issue I deal with is not only purchasing a "maintenance agreement" when you purchase the hardware, but then also renewing the agreement upon expiration of the initial agreement. Unfortunately it is a murky area.

If you look at GAO Decision B-249006, GAO seems to draw a dividing line between maintenance and warranty based on whether periodic maintenance is provided under the agreement. However, if you are familiar with these IT equipment maintenance agreements, then you know that most only provide a break-fix type of arrangement. ji20874 provides a very good example when comparing these to health insurance.

If you look on GSA Advantage!, you will typically find these classified under Special Item Number (SIN) 132-12 (Equipment Maintenance). If you look at the terms and conditions for the schedule they are on, you will typically find that these cannot be paid for in advance, but the vendor must bill in arrears, which is typical for services versus products.

Whether this type of agreement is considered a product or a service does have some ramifications. For those of us who work for the Army, we have to do Service Contract Approvals (SCA) for service contracts. So, if these maintenance agreements are in fact classified as a service, then that mandates an SCA be completed. On the Army SCA form one of the FAQs is, "Is a Form required when a supply is purchased that also includes a service such as maintenance?" The answer given is, "The Form is applicable to “service contracts,” i.e. “tasks to be performed” rather than “supplies to be delivered.” If a product is being purchased and it comes with a “service,” such as a warranty, then the Form is not required. (However, a contract specifically for ongoing maintenance of equipment, vehicles, etc., does require a Form.)" Also, if the agreement is classified as a service, then up-front payments cannot be made, and payment needs to be made in arrears. Also, if these are services, then can we purchase multi-year (e.g. 5 year) agreements using 1 year funds? Obviously no. But if they are classified as a product, then we probably can purchase a multi-year maintenance agreement, and pay for the entire term up front.

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