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JAG51

GSA MOBIS - Open Market Item - $150k Threshold

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Can a GSA Schedule be used to procure an open market item that is estimated internally to be $140k (for a computer software license which is based upon a name brand but the RFQ will be written as name brand or equal) and this name brand also has computer software training for an additional $30k, and software maintenance for an additional $30k for one year of maintenance, the total of which is $200k. Total estimate for entire RFQ is around $645k for a 12 month period of performance and this license is only a part of the whole effort.

If the total exceeds $150k for an open market item, I believe this would require full and open competition, thus the GSA schedule cannot be used for this particular open market item (unless I'm mistaken). In an effort to secure just the license only, can the internal estimate be revised so that it reflects only the price of the license and then estimate the training as a separate line item / task and the maintenance as a separate line item / task thereby making the training and maintenance discretionary and separate open market item buys? If not, why not? If yes, how?

The goal is to utilize the GSA Schedule to the maximum extent practical. This is not a sole source and competition is expected under the GSA Schedule. Customer is US Navy.

Guidance would be appreciated. Thanks.

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In an effort to secure just the license only, can the internal estimate be revised so that it reflects only the price of the license and then estimate the training as a separate line item / task and the maintenance as a separate line item / task thereby making the training and maintenance discretionary and separate open market item buys? If not, why not? If yes, how?

See FAR 8.402(f). Also, go to gsa.gov and from that page search for "open market". Also, see Desktop Alert, Inc., GAO B-408196, 2013 CPD ¶ 179, July 22, 2013, footnote 3:

As a general matter, FSS procedures provide agencies a simplified process for obtaining commonly used commercial supplies and services, and, although streamlined, satisfy the requirement for full and open competition. See 41 U.S.C. §152 (2006); FAR §6.102(d)(3). However, non-FSS products and services-frequently termed “open market”-may not be purchased using FSS procedures; their purchase requires compliance with otherwise applicable procurement laws and regulations, including those requiring the use of full competitive procedures. Symplicity Corp., B –291902, Apr. 29, 2003, 2003 CPD ¶89 at 4. Thus, where an agency announces its intention to order from an existing FSS, all items quoted and ordered are required to be on the vendor's schedule contract as a precondition to its receiving the order. Science Applications Int'l Corp., B–401773, Nov. 10, 2009, 2009 CPD ¶229 at 2 n.1. The sole exception to this requirement is for items that do not exceed the micro-purchase threshold of $3,000, since such items properly may be purchased outside the normal competition requirements. See FAR §2.101; Maybank Indus., LLC, B–403327, B–403327.2, Oct. 21, 2010, 2010 CPD ¶249 at 4.

You seem to think that you can buy open market under an FSS/MAS contract if the item to be purchased will cost less than the simplified acquisition threshold. As you should now be able to see, that is wrong, except for items under the micro-purchase threshold.

Are you an agency contracts attorney, JAG51? If so, then I'll add that this has long been "well established" in regulation and case law. You cannot get around it by manipulating your "internal estimate", unless you can (1) get it below the micro-purchase threshold and (2) do the manipulation in a way that does not violate the rules.

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Uh oh, there is a possible Eastern Pacific Hurricane brewing off the Coast of Oregon. :)

Just kidding, Vern...

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Thanks, Vern. Obviously, I need some training.

The crack above originated with our younger daughter who refers o her mother as "Billy". When Billy gets roused up, Jamie always warns me that "Tropical Storm Bill is forming in the Gulf"". Then, " Bill is now a Category I Hurricane", "Hurricane Bill is now Category 2" , ...striking Mobile, etc.

It always settles "Billy" down...

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Did I seem stormy in my response to JAG51? I didn't mean to.

I read your initial post before you edited it a couple of times. Reminded me of when "Billy's" ears twitch or when she raises that one eye brow...

You asked if OP was a 'Jag' for some organization. My translation: Hmm he/she ought to know better, let's see the reply...

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No, not a JAG. Those are my initials as opposed to my job title.

I read GAO decision B-401773 on SAIC which led me to the same conclusion as you've indicated above however there seemed to be a hole. The issue of the $150k arises in the context when the GAO indicated in B-401773 that anything more than $3k must go to "full and open" competition. It's my understanding, limited as it may be, that procurements between $3k and $150k (or SAT) are not required to go full and open competition and that other procurement avenues are available. Armed with this information, I incorrectly concluded that GSA could still be utilized for procurements $3k-$150k, even for open market, because they do not require full and open competition. I now see my error.

The speed of your reply(ies) were impressive, along with the content, and I thank each of you for that.

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It's not true that COs need not get full and open competition in procurements of less than $150K -- the simplified acquisition threshold (SAT)..

FAR 6.001says that FAR Part 6, which is what requires full and open competition, does not apply to "[c]ontracts awarded using the simplified acquisition procedures (SAP) of Part 13[.]" FAR 13.003 does not require the use of SAP for all acquisitions under the SAT. It requires their use "to the maximum extent practicable...." If for some reason an agency is conducting an acquisition worth less than the SAT and is not using the SAP, then the agency must obtain full and open competition.

Please don't ask why an agency would not use the SAP when conducting an acquisition under the SAT.

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Hate to re-open this, but I've since read a little more since the above was provided. According to NAVSUP 4200.85D (SAP instruction), Enclosure (1) 4-6, dated April 25, 2005 (I don't think it's been updated lately), it states:

"g. Delivery/Task Orders
(1) ...
(2) Combining FSS and Open Market Purchases. Items contained on FSS may be combined with nonschedule items provided the schedule allows you to combine the two and a delivery/task order is the document issued. Each item ordered must be identified as open market or FSS contract schedule order. The open market portion of the order may not exceed the SAT ($5 million dollars for the acquisition of commercial items) or your specific delegation of authority, whichever is less and must be issued per the terms and conditions of the schedule. Additionally, all applicable competitive purchase procedures must be followed for the nonscheduled items. (i.e., competition, synopsis, sole source, etc.). In addition, the required FAR Part 12 or Part 13 clauses should be included in the order and identified as only being applicable to those nonschedule Contract Line Item Numbers (CLINS)."
Does this change anything? Thanks again.

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Does this change anything?

No. Read it. That just let you do what FAR 8.402(f) lets you do, except that the Navy limited you to the SAT or to the commercial item test program limit in FAR Subpart 13.5 (as of some years ago). Is that document even still in effect?

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As far as I'm aware, yes, "D" is the latest version. It was supposed to be revised in 2012 but wasn't. We've decided to make the license a separate buy from the GSA RFQ. Thank you again.

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Suppose a GSA RFQ asks for a fixed price, and specifically asks bidders not to break the price out, just to quote a single line item for the FFP. Contractor's solution includes OMIs. Should contractor footnote the fixed price/ Given that the bid is fixed price, how does contractor determine the price of the OMIs? The micropurchase is how much the government pays, not how much the contractor buys the item for.

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You have not set out clearly all the facts in your case. How many and what types of supplies or services is the agency buying?

I infer that the agency is obtaining multiple items of supplies or services while asking for a single price covering the multiple items. I assume that each of the items sought by the agency is called out in the FSS schedule either as a line item or as a specification for a schedule line item.

When the agency issues a solicitation under the Federal Supply Schedule (FSS) system, every item must be on the schedule of the contractor selected for award. The only exception is an item whose value does not exceed the micro-purchase threshold of $3,000.

In the Rapiscan Systems, Inc., B-401773.2; B-401773.3, Mar 15, 2010 the GAO addressed a protest against the placement of an FSS order to a contractor that included non-FSS items priced at $0.

Quote

With respect to CLIN 7, freight, the agency concedes that SAIC’s FSS contract does not include an item for freight, but argues that it nevertheless properly issued the purchase order to SAIC because its quoted price for the item does not exceed the $3,000 micro‑purchase threshold.

We find that CLIN 7 did not qualify as a micro-purchase item. SAIC’s initial quotation for CLIN 7 indicated that freight was an open market--rather than an FSS contract--item, and showed a unit price of $6,832. SAIC Quotation sect. 4.1. SAIC then submitted a revised quotation on June 13 that again showed a unit price of $6,832 for CLIN 7, but further indicated that this price was being discounted by $6,832, resulting in a CLIN 7 price of $0. However, the quotation also expressly stated that the price for CLIN 7 was “included in unit price of Item #1,” indicating a shifting of the initially quoted price for line item 7 to line item 1. Revised Quotation sect. 4.1. Based on this evidence, while SAIC’s quotation showed a price of $0 for freight, this price, in effect, was illusory; its quoted total price actually included an amount for freight that exceeded the $3,000 micro-purchase threshold. Under these circumstances, we find that CLIN 7 freight cannot be considered a micro-purchase item under SAIC’s quotation. It follows that, since freight was a required item and was not included on SAIC’s FSS contract, the purchase order could not properly be issued to SAIC. The micro‑purchase exception is a narrow one and was not intended as a means for vendors to provide non-FSS items as micro‑purchase items to avoid the general rule that all items under an FSS solicitation must be included on the successful vendor’s FSS contract. See SMS Sys. Maint. Servs., Inc., supra.

Unquote

In your circumstance, each item of supply or service provided by the selected contractor valued at $3,000 or more must be on the contractor’s schedule and each item must meet the schedule’s spec for the item. In your case, for example, if the single line item must be delivered FOB destination, but the selected contractor’s schedule does not cover freight, I believe you would have a problem should a competitor protest. Or, if the single item calls for the delivery of “office materials” (i.e. books, 3 ring binders and printer paper) and the contractor’s schedule does not include binders or offers only binders with 2 rings, I believe you would also have a problem in the event of a protest.

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Thank you for the response and the interesting citation!

I am selling training, which includes:

1 labor to deliver the training,

2 preexisting courseware that is going to be adapted, and

3 labor to do the adaptation.

The labor for 1 and 3 is on my schedule. I am procuring the preexisting courseware from another vendor that has this courseware on its schedule.

In Rapiscan, the agency asked for separate quotes on eight CLINs. CLIN 7 was for an item (freight) that was not on SAIC's schedule. SAIC first showed a price of $6,832 for the freight, then revised its quote to show CLIN 7 was being discounted by $6. 832, to $0, while stating that CLIN 1 included the price for CLIN 7. From this it was clear that the price of the freight was more than the micropurchase threshold and that the government was paying for the freight.

My case differs from RapiScan in that the agency has not asked for a breakout of the fixed price and there is therefore no way to show that any OMI is greater than $3K.

The RFP has a single line item for "Training", broken down as follows:

Description - seminar for 200 participants, June 1, 2015-June 3, 2015

Unit - "Each"

Quantity - "One"

Price - For me to quote

When asked, agency said it did not require any support for the dollar value I am to enter in "Price."

As it happens, I can enter into a CTA with the vendor of the preexisting courseware, to cover a protest that the courseware isn't on my schedule.

But, is that necessary? How can it be determined that the courseware costs more than $3K? The price I pay the vendor for it is not relevant, because that is not the price the government is paying for it, and it is not possible to determine what the price is. Even the price shown on the vendor's schedule is not relevant, because they could be offering it to me at a discount (which might cause them a problem with their price reduction clause, but that is another issue.)

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When you said "Suppose a GSA RFQ asks for a fixed price", I inferred that you were responding to a RFQ issued by an agency under FAR 8.4? Are you, or are you responding to a FAR 13, 15 or 16.5 solicitation issued by GSA?

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In the GAO decisions I have found, and there are a number of them, each refers to a contract line item. If the solicitation to which you refer is asking for a single line item price, it would be difficult to demonstrate that a $3,000 limit has been broken. However, the specification must set out the content, format and language of the course and, perhaps, the qualifications of the individuals preparing the course. Your schedule must not describe a content, format, language and qualifications that are inconsistent with the requirements set out in the solicitation.

With regard to the CTA, there is a GSA page that poses and answers a number of questions on CTAs:

http://www.gsa.gov/portal/content/202257.

Here is one Q and A:

Quote

How does the ordering activity know that all quoted items are on GSA Schedule?

In providing a total solution to an agency's requirement under a Contractor Team Arrangement (CTA), the supplies and services proposed should be identified under each team member's GSA Schedule contract. Any proposed supplies and services that are not part of a GSA Schedule contract (i.e., open market items) can be included only after all applicable acquisition regulations have been followed (see Federal Acquisition Regulation (FAR) 8.402(f)) and must be clearly labeled as such.

Unquote

Did the solicitation specify a specific SIN? If so, it appears that each member of the CTA must have the SIN on its Schedule contract.

Quote

In response to our request, GSA provided the following comments on VHSS’s protest:

Ordinarily, Contractor Team Arrangement (CTA) members’ combined capabilities are aimed at a “total solution” and allow for the members collectively to meet government needs that each may not otherwise be capable of doing individually. In a conventional CTA, each CTA member would have at least one SIN on its respective schedule contract in furtherance of meeting the Government’s needs. Here, however, the VA is setting up a BPA for a single SIN only (the items to be procured are solely available under Schedule 65II-A, SIN A-50A).

* * * * *

If the procurement at issue is for a single SIN, then it would stand that both/all members of a CTA would need to have the particular SIN on their respective FSS contract . . . . [F]or the RFQ at issue, if a CTA is being used (which is permitted by the solicitation terms), both/all team members would need to hold a Schedule 65II-A contract with SIN A-50A.[6]

Unquote

See B-409888, Veterans Healthcare Supply Solutions, Inc., Sep 5, 2014:

http://www.gao.gov/products/D08720#mt=e-report.

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Good point. Thanks again. Just want to say, I am not trying to "get around the rules" on OMIs, just trying to figure out how to document the contract best for the GSA IOA visit.

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