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Member Since 08 Dec 2008
Offline Last Active Apr 24 2014 11:58 AM

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In Topic: IT Hardware Maintenance - supply or service

16 April 2014 - 01:07 PM

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.