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govt2310

Can you pay "subscription" contracts in advance?

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Example: Say an agency has a contract for a subscription to use a software (Software as a Service or SaaS).  The contractor submits the invoice for 100% advance payment up front.  Can the government pay this invoice up front?  If yes, where does it say that the agency can do that?  I'm aware of 31 USC 3324(d) which provides an exception for "periodicals," but that is not the type of "subscription" I am talking about.  

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The exception is actually for "publications", which the GAO has interpreted as:

Quote

Standing alone, Technet, Knowledgebase and the newsletter clearly would constitute publications under section 3324(d). The newsletter is a publication in the traditional sense. Technet and Knowledgebase, however, are published using electronic technology. Technet is published on CD- ROM; Knowledgebase is an online database of articles. Nevertheless, we conclude that they constitute publications for purposes of section 3324(d) as well. We believe that it is sensible to interpret federal law to accommodate technological advancements unless the law by its own terms expressly precludes such an interpretation, or sound policy reasons exist to do otherwise. 71 Comp.Gen. 109, 114 (1991). In this regard, for example, section 3324(d) covers materials printed on microfilm and microcards. 41 Comp.Gen. 211 (1961). Section 3324(d)(2) refers to materials "printed or recorded in any way for the auditory or visual use of the agency." We see no reason why it should not apply to electronic materials.

See https://www.gao.gov/products/403305#mt=e-report

Wouldn't it be sensible to interpret "publication" to accommodate a set of instructions or programs instructing a computer to do specific tasks (i.e., "software")?

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If you look at it as a license, then yes, you can pay upon delivery at the beginning of the license period.  

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To Don Mansfield:

Yes, you are right, the word the statute uses is "publications," not "periodicals."  And your point about interpreting "publication" to mean the technological advancement of computer software is interesting.  But I would feel better if this interpretation was supported by a GAO decision or a statute or federal regulation.  Here's another idea: what about considering a "subscription" to a software (a SaaS deal) to be a "product" instead of a "service"?  I realize, the phrase SaaS includes the word "service" (Subscription-as-a-Service).  But if the vendor provides the customer with an account/passcode to access the website for the subscription, then once the vendor has done that, then the vendor has "delivered" the "product," so the customer (the agency) must pay the vendor.  This would be "paying in arrears" instead of "advance payment," so it is not that this "subscription" is an exception to the general rule of paying in "arrears," but rather, it is paying "in arrears."  What do you think?

 

To ji20874:

There is no license.  I realize what you are talking about.  I am aware of the GSA rules allowing for annual software maintenance services with software licenses to be considered either a "product" (pay upon delivery at the beginning of the license period) or a "service" (pay at the end of the year).  But with a subscription for SaaS, there is no computer software license.  

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To FAR-flung 1102:

Thanks.  The DoD FMR does not address "subscription-as-a-service" or "SaaS" for like access to software online.  It only addresses subscriptions to periodicals/publications.

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govt2310,

Software as a Service (SaaS) is sometimes described as a software licensing and delivery model (the software is centrally hosted and licensed on a subscription basis).  So, YES, you may look at it as a license.  This is true because many SaaS offerings still require some software to reside on the customer's (agency's) computers.  But some SaaS offerings are pure SaaS, and zero software resides on customer (agency) computers -- if you are really doing a real SaaS offering (instead of a bastardized-for-the government approach), that's great!

The subscription business model is used far beyond periodicals.

In many cases, it makes sense to look on the purchase as a supply (with payment upon delivery of the access) rather than a service (with payment upon completion of the work).  You need to convince your finance and legal support -- if so, you should have no problem -- this has worked for me.  But will be ahead of the curve, setting the practice for others to follow -- the FAR and common cultural practice is still far behind you.

You simply cannot look on it as a service from a traditional cultural perspective -- if you do, you will never be able to buy SaaS.  Let FAR 12.101(a) and (b) be your friends.

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2 hours ago, ji20874 said:

govt2310,

Software as a Service (SaaS) is sometimes described as a software licensing and delivery model (the software is centrally hosted and licensed on a subscription basis).  So, YES, you may look at it as a license.  This is true because many SaaS offerings still require some software to reside on the customer's (agency's) computers.  But some SaaS offerings are pure SaaS, and zero software resides on customer (agency) computers -- if you are really doing a real SaaS offering (instead of a bastardized-for-the government approach), that's great!

The subscription business model is used far beyond periodicals.

In many cases, it makes sense to look on the purchase as a supply (with payment upon delivery of the access) rather than a service (with payment upon completion of the work).  You need to convince your finance and legal support -- if so, you should have no problem -- this has worked for me.  But will be ahead of the curve, setting the practice for others to follow -- the FAR and common cultural practice is still far behind you.

You simply cannot look on it as a service from a traditional cultural perspective -- if you do, you will never be able to buy SaaS.  Let FAR 12.101(a) and (b) be your friends.

I have seen SaaS characterized as "rental"as well.  This is not to suggest that as such it would overcome legal concerns regarding advance payment just noting how SaaS is portrayed.

 

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You can also find SaaS products on GSA Advantage classified as term software licenses (a product or supply).

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On 11/3/2018 at 9:45 PM, govt2310 said:

Here's another idea: what about considering a "subscription" to a software (a SaaS deal) to be a "product" instead of a "service"?  I realize, the phrase SaaS includes the word "service" (Subscription-as-a-Service).  But if the vendor provides the customer with an account/passcode to access the website for the subscription, then once the vendor has done that, then the vendor has "delivered" the "product," so the customer (the agency) must pay the vendor.  This would be "paying in arrears" instead of "advance payment," so it is not that this "subscription" is an exception to the general rule of paying in "arrears," but rather, it is paying "in arrears."  What do you think?

Sounds reasonable to me. ji seems to have dealt with this specific issue before. Whatever he did was probably thoughtful and efficient.

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govt2310,

You don't have to convince all the attorneys in your agency -- you just have to convince your one assigned attorney -- same with finance people and procurement reviewers and so forth.  It will be much easier to persuade them if you really are buying SaaS (a fixed price for a fixed period, maybe with some fixed-price add-ons if needed) instead of a government-bastardized-facsimile-trying-to-pass-off-as-SaaS.  If your program office is trying to disguise a real service contract as a SaaS subscription, it will be fair for your attorney or others to balk.

 

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