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NenaLenz

How GSA Schedule Compliance Obligations Apply to Authorized Dealer Situation

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Company is large by virtue of affiliation with a network of affiliated companies with a common parent. Company has few staff. Those staff market for and manage national accounts for all affiliated companies.

Company holds a GSA Schedule to provide services.  GSA Schedule indicates that the company will "self-perform" the work, and includes a long list of affiliates that will do the work, calling them "authorized dealers". Company is 10 years into Schedule. KO and Company consider the work to be self-performed when affiliates do it. Company handles all billing and communications with GSA and government purchasers. Company provides work orders to affiliates. 

Company is working to understand how to communicate and manage compliance by all affiliates listed on the Schedule. I am advising. I am trying to understand how to think about the affiliates/authorized dealers. Do they have all the same compliance obligations as the Company? Are they considered part of the "prime"?

Thank you in advance for any insight. And please let me know what else you need to analyze this issue. 

Thanks!

 

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Guest Vern Edwards
11 minutes ago, NenaLenz said:

I am trying to understand how to think about the affiliates/authorized dealers. Do they have all the same compliance obligations as the Company? Are they considered part of the "prime"?

Did the prime enter into written subcontracts with them? If so, did it flow down clauses as required?

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2 minutes ago, Vern Edwards said:

Did the prime enter into written subcontracts with them? If so, did it flow down clauses as required?

No it did not enter into written subcontracts. The sister companies only receive work orders. 

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Guest Vern Edwards

Hmmm. Well, I think that by FAR definitions the work orders are subcontracts, the affiliates are subcontractors, and the subcontract clauses should have been flowed down to them somehow. If I'm right, and I'm not altogether certain that I am, then you have the answer to your question.

But since you are advising the prime (Is that right?), if I were you I'd ask the prime what their analysis is.

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Thanks @Vern Edwards

I am advising the prime. Unfortunately, they are reading the T&Cs in their contract for the first time, so there was no analysis. This is their first GSA award and they jumped in without counsel. 

Last year I helped them figure out whether the affiliates were subcontractors or not for purposes of SBA subcontracting goals. We determined that affiliates were not subcontractors for that specific purpose based on guidance from SBA.

But I do understand that you need to look at the definition of "subcontract" that applies to each specific contract T&C. And under the FAR, I agree that affiliates are separate companies and when they perform work for one another they do so as subcontractors. If that is the case, then there are far fewer compliance obligations on the affiliates than on the Company (good news). But is also means that we are taking an odd dual position - i.e., they are subcontractors on all issues, but for subcontracting goals under the small business subcontracting plan, in which case they are all the company. Is that a tenable position?

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Quote

Authorized Dealers

Some contract holders elect to authorize a dealer(s) to sell products under their GSA contract on their behalf. This is a relationship that occurs when a contract holder authorizes a separate legal business entity to utilize their Multiple Award Schedule contract on their behalf. This relationship allows a contract holder to utilize the sales expertise of their dealer network to increase their GSA contract sales.

An authorized dealer must be approved by the Procurement Contracting Officer and incorporated into the contract. The authorized dealer relationship allows the dealer to act as an agent of the contract holder – and therefore all contract terms and conditions that apply to the contract holder also apply to the dealer.

https://vsc.gsa.gov/administration/gsaSaleDetails.cfm#ad

The whole concept seems like a way for a schedule-holder to act as a front for less qualified entities, with the onus on the CO to certify the arrangement.  The obvious question is "why"?

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Guest Vern Edwards

Might as well quote the entire GSA comment. Here's the rest:

Quote

A distinction should be made between authorized dealers and resellers. Some contract holders simply purchase products wholesale and resell them under their own Multiple Award Schedule contract. This is not an authorized dealer relationship.

Having an authorized dealer can cause special challenges with some of the administrative and compliance aspect of the contract. For example, the contractor’s sales tracking system must be able to recognize, track and report eligible sales for all participating dealers. This can be challenging when there are two or more organizations making sales under the contract. Additionally, the dealer and contract holder need to carefully coordinate on invoicing and billing responsibilities. Because contract holders are ultimately responsible for their authorized dealers, contract holders should carefully consider the reputational and financial risks associated with this relationship. These aspects – among others – should be considered prior to establishing the relationship.

Contractors with authorized dealers or contractors considering such a relationship should carefully review the following clauses: 552.232-83, I-FSS-600, 552.232-82 and 552.216-73.

Emphasis added.

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@REA'n Maker and @Vern Edwards, thanks for the link re: authorized dealers. It confirms suspicion that the affiliates are subject to the same T&Cs and are not subcontractors. Agree?  

As for why - financials from all affiliates roll up to the parent and the Company was created as a separate legal entity for the sole purpose of marketing its affiliates and managing national contracts. The staff at the Company do not do any of the work. The Company won the GSA award because of the large network of experienced staff employed by dozens of affiliates spread throughout the country that can provide the contract services.

 

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