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Maquoketa

Is Rental Equipment a Service?

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I want to rent a backhoe to do some ground work on federal property with the Government purchase card (GPC).  The backhoe will be operated by a federal employee.  The rental costs will be $7000.  The GPC coordinator said that it is a service and that I can't use GPC since it is over $2500.  I contend that it is exempted from SCA since the federal employee will be operating it and I can use the GPC to pay for it.  I have been unsuccessful in finding any SCA guides to support my position.  The closest, I found was a vending machine rental is exempted from SCA.  Any guidance or references would be appreciated. 

 

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A backhoe is an item of supply, whether you purchase it or rent it.  

The SCA (and FAR subpart 22.10) “applies to all Government contracts, the principal purpose of which is to furnish services in the United States through the use of service employees....  This subpart does not apply to individual contract requirements for services in contracts not having as their principal purpose the furnishing of services.”  FAR 22.1003-1.

The principal purpose of your action is not the furnishing of services, it is the furnishing of an item of supply.  Even if a contractor employee delivers the backhoe to your worksite, SCA doesn’t cover the driver.

Think of it like this:  If we needed a camera to take a photo, we could buy or rent the camera.  Either way, we could require the contractor to deliver the camera to our office.  For a rental, we could also require the contractor to pick it up at the end of the rental period.  But the principal purpose of the action is to get a tangible object, a camera, an item of supply.  IMHO, this would not be a service.

IMHO, renting a backhoe for government use is not a service (based on the information shared in the original posting).

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IMHO, they are wrong.

You might persuade them, or elevate the matter, or abide their decision.  Or, use the GSA STR tool.  Best wishes!

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Renting or leasing an item is a partial acquisition of the item.  For example, the Navy through the Military Sealift Command charters (leases) vessels from private contractors.  Such charter party agreements are considered as supply contracts.  If you want to do some deep research on this, there have been some ASBCA cases where the nature of a lease has been discussed.

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One last thought -- the question is not whether or not you're taking possession of the backhoe -- that is an irrelevant question -- the correct and pertinent question is whether the principal purpose of the acquisition (purchase or rental) is to furnish services in the United States through the use of service employees.  Sometimes, you have to ask the right question to get the right answer.

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2 hours ago, ji20874 said:

IMHO, they are wrong.

You might persuade them, or elevate the matter, or abide their decision.  Or, use the GSA STR tool.  Best wishes!

Try this on your coordinator.

The company providing is a rental service.   I say this noting that NAICS Code 532 is titled "Rental and Leasing Services".

The reasoning I believe appropriate is this however based on FAR reference.

Rental of equipment is a service industry.  However its primary purpose is not the providing of labor as a service but furnishing of equipment.   As such applicable labor law is not SCA (FAR 22.10)  but Walsh Healy (FAR subpart 22.6)  

With SCA not applicable use of the GPC is appropriate as the $2500 threshold is related to application of labor laws.

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13 minutes ago, Maquoketa said:

Walsh Healy doesn't apply since the contract is under $15,000.

Walsh Healy applies but compliance is not required as under $15k.  SCA does not even apply.

Read the FAR carefully and note the "or" regarding manufacture OR furnish of.

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18 hours ago, Maquoketa said:

They contend that it isn't a supply since we are not taking possession of the backhoe.

Not that taking possession is a sole determining factor, but the Government is taking possession.  How else could it be used? 

 

Also, I would ask the GPC coordinator what labor category / wage rate this "SCA" acquisition falls under.  Then I'd ask how they came to their answer.

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Sheesh. Maybe a robot operator cones with the backhoe.  

Maybe it is construction work...

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2 hours ago, joel hoffman said:

Sheesh. Maybe a robot operator cones with the backhoe.  

Maybe it is construction work...

 

A federal employee will be operating the equipment.  The rental services contractor will at most be delivering the equipment and potentially coming back out to fix any breakdowns, or exchanging equipment.  Can you explain further your thoughts?

 

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On 7/25/2019 at 12:00 PM, ji20874 said:

The SCA (and FAR subpart 22.10) “applies to all Government contracts, the principal purpose of which is to furnish services in the United States through the use of service employees....  This subpart does not apply to individual contract requirements for services in contracts not having as their principal purpose the furnishing of services.”  FAR 22.1003-1.

 

I thought that ji expressed what a service  is pretty well. 

I was being facetious. 

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20 hours ago, Maquoketa said:

A federal employee will be operating the equipment.  The rental services contractor will at most be delivering the equipment and potentially coming back out to fix any breakdowns, or exchanging equipment. 

 After a fair amount of research, but not necessarily exhaustive, here is the closest I can get to the question as posted by the OP (see bold below).  Yes, it is an excerpt from a CFR citation I already posted but now sharing for the good of the order.   As thoughts dribble out as to what the OP is receiving as the "rental" what labor law would apply may very well change.  From this view the GPC coordinator may actually be on to something as together with the OP they know all the facts we do not.   From that view I suggest the OP ask the GPC coordinator to cite the actual references that leads him/her to the conclusion that SCA does apply and together they review all applicable regulations to determine the course. 

The following goes to whole of the discussion in this thread as to what exactly is being furnished.

 

"29 CFR 4.131 Furnishing services involving more than use of labor.

(a) If the principal purpose of a contract is to furnish services in the performance of which service employees will be used, the Act will apply to the contract, in the absence of an exemption, even though the use or furnishing of nonlabor items may be an important element in the furnishing of the services called for by its terms. The Act is concerned with protecting the labor standards of workers engaged in performing such contracts, and is applicable if the statutory coverage test is met, regardless of the form in which the contract is drafted. The proportion of the labor cost to the total cost of the contract and the necessity of furnishing or receiving tangible nonlabor items in performing the contract obligations will be considered but are not necessarily determinative. A procurement that requires tangible items to be supplied to the Government or the contractor as a part of the service furnished is covered by the Act so long as the facts show that the contract is chiefly for services, and that the furnishing of tangible items is of secondary importance.

(b) Some examples of covered contracts illustrating these principles may be helpful. One such example is a contract for the maintenance and repair of typewriters. Such a contract may require the contractor to furnish typewriter parts, as the need arises, in performing the contract services. Since this does not change the principal purpose of the contract, which is to furnish the maintenance and repair services through the use of service employees, the contract remains subject to the Act.

(c) Another example of the application of the above principle is a contract for the recurrent supply to a Government agency of freshly laundered items on a rental basis. It is plain from the legislative history that such a contract is typical of those intended to be covered by the Act. S. Rept. 798, 89th Cong., 1st Sess., p. 2; H. Rept. 948, 89th Cong., 1st Sess., p. 2. Although tangible items owned by the contractor are provided on a rental basis for the use of the Government, the service furnished by the contractor in making them available for such use when and where they are needed, through the use of service employees who launder and deliver them, is the principal purpose of the contract.

(d) Similarly, a contract in the form of rental of equipment with operators for the plowing and reseeding of a park area is a service contract. The Act applies to it because its principal purpose is the service of plowing and reseeding, which will be performed by service employees, although as a necessary incident the contractor is required to furnish equipment. For like reasons the contracts for aerial spraying and aerial reconnaissance listed in § 4.130 are covered, even though the use of airplanes, an expensive item of equipment, is essential in performing such services. In general, contracts under which the contractor agrees to provide the Government with vehicles or equipment on a rental basis with drivers or operators for the purpose of furnishing services are covered by the Act. Such contracts are not considered contracts for furnishing equipment within the meaning of the Walsh-Healey Public Contracts Act. On the other hand, contracts under which the contractor provides equipment with operators for the purpose of construction of a public building or public work, such as road resurfacing or dike repair, even where the work is performed under the supervision of Government employees, would be within the exemption in section 7(1) of the Act as contracts for construction subject to the Davis-Bacon Act. (See § 4.116.)..."

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The napkins case is interesting -- thanks for sharing it.  I can imagine that a government cafeteria contracts for linen service for a period of time -- every morning, the contractor delivers clean napkins, and every evening, it picks up the dirty napkins and launders them -- the linen service retains ownership of the napkins.  This is not a contract for a one-time rental of napkins, but is a contract for a full linen service. So yes, SCA applies.  The backhoe case is different.  It all hinges on the single "principal purpose" of the contract.

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As I said, the purpose for the machine may well be for construction. If the operator came with the machine, the operator would then be under the DB Act. 

As it is, they are renting construction equipment -no operator - no service being performed by a service employee. 

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