Price against FSS schedule/inconsistencies observed due to FSS schedule and award timing

[newtocontracting12]

All,

I am on the Sell side in which we proposed based on our GSA schedule back in 2022. At the time, our GSA schedule was in the middle of being revised to include future years. The contract was awarded on 2/1/22 and we assumed that the GSA schedule would keep our consistent escalation rate and priced the LCATs out to 2024. Unfortunately, we received an updated schedule in which several of the LCATs actually went down 2% from 5/1/22-9/30/22. Because we forecasted the rates to go up, it caused all of our LCATs to be about 2% higher per each fiscal year than our GSA schedule and this contract is still ongoing. We are currently billing rates above our GSA schedule.

The FSS schedule has the following language in it:

"The application of any new pricing in the Seller’s GSA Multiple Award Schedule Contract will not be retroactively applied to existing transactions issued under this Agreement, but rather to any new transactions from the date the new GSA Schedule contract pricing goes into effect."

My main concern is the pricing was never based off of a GSA schedule as the GSA schedule did not have these fiscal years priced out at the time of award. My secondary concern is that there have been modifications impacted the LCATs/funding/etc, a few months after the GSA schedule rates went down and if these would be deemed as new transactions.

The contract with our customer has the following language: "In the event of any inconsistency between the terms and conditions of this order and those of your DOE/GSA/ICP/SCMS and SEWP contract, the latter will govern."

Management seems to think because the original contract was awarded before the pricing for these fiscal years came out that we do not need to tell the customer.

What are your thoughts?

[formerfed]

Where potential problems might arise is with GSA auditors and customer agencies questioning this later.  You can save potential problems as well as promoting customer support by crediting your billing with the 2% reduction.  It’s difficult to assess your position but from what you said, it sounds like you should have adjusted the billing as soon as the new GSA revised award was made.

[Neil Roberts]

On 10/24/2023 at 8:15 PM, newtocontracting12 said:

My main concern is the pricing was never based off of a GSA schedule as the GSA schedule did not have these fiscal years priced out at the time of award.

What do you mean saying "pricing was never based off of a GSA Schedule?" Did you receive and accept a GSA Multiple Award Schedule Contract that had no pricing at all applicable to the contract? If so, there was no contract. Whose pricing?

I am also having difficulty assessing your post due to some underlined terms that seem to need further analysis.

1. "The contract with our customer has the following language: "In the event of any inconsistency between the terms and conditions of this order..."

2. The FSS schedule has the following language in it:

"The application of any new pricing in the Seller’s GSA Multiple Award Schedule Contract will not be retroactively applied to existing transactions issued under this Agreement, but rather to any new transactions from the date the new GSA Schedule contract pricing goes into effect."

Is this language included (and/or otherwise applicable) to the GSA Award Schedule Contract? If so, does your management contend that no transactions or orders were issued under or applicable to the GSA Multiple Awards Schedule Contract initial contract document?

 

Edited October 31, 2023 by Neil Roberts
change not to no

[newtocontracting12]

On 10/31/2023 at 12:31 AM, Neil Roberts said:

What do you mean saying "pricing was never based off of a GSA Schedule?" Did you receive and accept a GSA Multiple Award Schedule Contract that had no pricing at all applicable to the contract? If so, there was no contract. Whose pricing?

I am also having difficulty assessing your post due to some underlined terms that seem to need further analysis.

1. "The contract with our customer has the following language: "In the event of any inconsistency between the terms and conditions of this order..."

2. The FSS schedule has the following language in it:

"The application of any new pricing in the Seller’s GSA Multiple Award Schedule Contract will not be retroactively applied to existing transactions issued under this Agreement, but rather to any new transactions from the date the new GSA Schedule contract pricing goes into effect."

Is this language included (and/or otherwise applicable) to the GSA Award Schedule Contract? If so, does your management contend that no transactions or orders were issued under or applicable to the GSA Multiple Awards Schedule Contract initial contract document?

 

Neil,

The agreed upon GSA schedule pricing for that option year ended 4 months after the contract was awarded and the new rates for the newly agreed upon rates in the next option year took place. The issue is we had proposed prices against our GSA schedule that were not yet agreed upon in the subsequent option year.

The language pricing language was including in a follow on contract vehicle that incorporates our GSA Schedule T&C's by reference. We have 3 contracts here:

1. GSA Schedule

2. FSS schedule based off GSA Schedule for DOE

3. End customer contract that incorporates Contract #2.

[formerfed]

newtocontracting 12,  

I, for one, am having a difficult time following your situation.  It’s your terminology.  GSA Schedule contracts are typically awarded for a long time (often termed “evergreen” with up to a potential of 20 years in duration).  They usually have an economic price adjustment provision that allows for revising prices for out years.  So the only price adjustments are based on economic price indexes and GSA issues contract modifications reflecting contractors requests.

Federal Supply Service (FSS) contracts is a term that essentially is synonymous with GSA contracts - FSS is part of GSA.  Federal agencies are authorized to place orders under GSA/FSS contracts for supplies and/pr services at contract rates or discounted rates.  In that situation agencies don’t have “contracts” with agencies but “orders” with the contractors.   Orders are placed consistent with GSA contract established prices (less applicable discounts that ordering agencies using the contracts may negotiate).

Your explanation of the situation leads me to believe you have something different.  Did you enter into a contract with DOE that’s not an order under GSA but a DOE contract citing GSA prices?  Or some other action that is with still another agency using a DOE contract?

[Neil Roberts]

@newtocontracting, with respect to your terminology, the title of your post appears to be referring to what you call contract #2. The body of your post appears to be referring to facts related to what you call contract #1. The language you quote in your post regarding contract#2, does not seem to have anything to do with contract pricing for goods or services under contract #1. You would need to look at contract #1 language to determine that.   

[newtocontracting12]

On 11/1/2023 at 10:42 PM, formerfed said:

newtocontracting 12,  

I, for one, am having a difficult time following your situation.  It’s your terminology.  GSA Schedule contracts are typically awarded for a long time (often termed “evergreen” with up to a potential of 20 years in duration).  They usually have an economic price adjustment provision that allows for revising prices for out years.  So the only price adjustments are based on economic price indexes and GSA issues contract modifications reflecting contractors requests.

Federal Supply Service (FSS) contracts is a term that essentially is synonymous with GSA contracts - FSS is part of GSA.  Federal agencies are authorized to place orders under GSA/FSS contracts for supplies and/pr services at contract rates or discounted rates.  In that situation agencies don’t have “contracts” with agencies but “orders” with the contractors.   Orders are placed consistent with GSA contract established prices (less applicable discounts that ordering agencies using the contracts may negotiate).

Your explanation of the situation leads me to believe you have something different.  Did you enter into a contract with DOE that’s not an order under GSA but a DOE contract citing GSA prices?  Or some other action that is with still another agency using a DOE contract?

Apologies about the confusion as I am relatively inexperienced with Selling against a GSA schedule and or Agreements based off my GSA schedule. Let me rephrase this situation.

1. GSA Schedule

2. Agreement based off GSA Schedule which DOE is able to streamline purchases with. It is our GSA schedule pricing with an additional discount/terms.

3. End customer contract that incorporates Contract #2.

It probably would just be simpler for me to ask the question excluding the agreement on the pricing front which is, if your agreed upon GSA pricing for future fiscal years decreases after you are under contract that was proposed higher price, are you allowed to continue to charge the higher price for the labor categories if it exceeds your current agreed upon GSA rates? 

[newtocontracting12]

On 11/2/2023 at 12:31 PM, Neil Roberts said:

@newtocontracting, with respect to your terminology, the title of your post appears to be referring to what you call contract #2. The body of your post appears to be referring to facts related to what you call contract #1. The language you quote in your post regarding contract#2, does not seem to have anything to do with contract pricing for goods or services under contract #1. You would need to look at contract #1 language to determine that.   

Agreed. Thanks for guiding me towards the right direction.

[formerfed]

@newtocontracting12  Thanks for the explanation.  I’m just guessing here but it sounds like you proposed price escalations to GSA for future years and they didn’t accept the increases.  A typical negotiation strategy for GSA is to allow future year prices to be tied into economic price indexes and require offerors to propose option years at a constant base rate.  Option year prices are later adjusted via contract modifications.

I really don’t know the proper answer to your question without reading #2 and #3.

However from a business marketing and customer satisfaction perspective, I would contact the customer and explain the situation to them.  If they want a rebate or credit, I would give it to them.  Or perhaps negotiate something on middle ground.  Perhaps after looking closely at the contract, you may be on solid grounds to do nothing.  But often actions like this showing your company is fair and values the relationship goes a long way to ensure future business.  

[Neil Roberts]

@newtocontracting12 so, display the actual contract language in contract#1 that you think controls the pricing for each year and compare it to the pricing your company billed. Add it all up to see how many dollars are involved for the difference. If you want to share this information, you may get some more comments. You may be able to come to your own acceptable conclusion. It's about the actual contract language.

[newtocontracting12]

On 11/3/2023 at 11:17 PM, formerfed said:

@newtocontracting12  Thanks for the explanation.  I’m just guessing here but it sounds like you proposed price escalations to GSA for future years and they didn’t accept the increases.  A typical negotiation strategy for GSA is to allow future year prices to be tied into economic price indexes and require offerors to propose option years at a constant base rate.  Option year prices are later adjusted via contract modifications.

I really don’t know the proper answer to your question without reading #2 and #3.

However from a business marketing and customer satisfaction perspective, I would contact the customer and explain the situation to them.  If they want a rebate or credit, I would give it to them.  Or perhaps negotiate something on middle ground.  Perhaps after looking closely at the contract, you may be on solid grounds to do nothing.  But often actions like this showing your company is fair and values the relationship goes a long way to ensure future business.  

The interesting thing here is that every other LCAT was escalated at the 2.3% rate except this LCAT actually decreased. The turnover here is high so I don't have the story as to what happened. 

I guess my core assumption that is, you cannot bill higher than your GSA schedule rate if your contract pricing was based off your GSA schedule. Is there any example that you know of where this is not try? GSA auditing this contract and sees we are charging more than our approved rates is my primary concern. The customer utilizing our GSA pricing is a business with insanely high turnover and a very inexperienced work force on the buyer/contracts side so it is not really an issue there.

[newtocontracting12]

#1 is our GSA schedule. I assume that also GSA schedules limit people from billing more than the approved rates on your schedule when orders are placed against it or using it as pricing.

One thing I am curious about is, is simply incorporating by reference your GSA schedule in a business to business contract the same as a government agency placing an "order" against it? As a CO, I did a lot of buying via GSA but in this case, a private company is buying our services based off our GSA pricing.

[formerfed]

@newtocontracting12  The major consideration here is the relationship with your commercial business customer.  From your prior posts, I assume at some point you are selling to a commercial business citing your GSA Schedule contract.  See FAR 51 https://www.acquisition.gov/far/part-51#FAR_51_000. If you are using it under this authority, you can’t charge more than the contract rates.  However if you are selling to a commercial business referencing GSA pricing (or greater) and it’s not an order under your contract, that’s something different.

Edit.  One obscure thing to be aware of is GSA uses offeror pricing data to various types of customers to negotiate their contract prices.  When you submit your offer, you likely shared information on what you charge other customers.  GSAs goal in negotiations is obtaining prices equal to or more favorable than the offerors best customer.  If you are later selling to a contractor (non GSA contract transaction or under the GSA contract) but selling at lower prices than you disclosed, that might trigger an auditors interest.  Price reduction clause.

As an example, suppose your commercial labor rate is $120/hr.  You charge everyone that rate except GSA which is $100.  Your offer says that’s the best anyone gets.  But later after award let’s say you charge a commercial company that won’t be using your contract the same as GSAs $100 or $110 even.  If GSA finds out later, they may come back and seek something pursuant to the price reductions clause.

 

[Oyster]

I agree with formerfed, who has provided an excellent analysis.  

That said, I'm having a little difficulty following your fact pattern. 

Is your commercial customer a "[prime] contractor placing an order under your company's Federal Supply Schedule?"  If so, it appears to me that they would have needed to receive a "written authorization" to do that under FAR 51.102, which I assume they did. 

FAR 51.103 requires that such business-to-business orders include the following statement: "In the event of any inconsistency between the terms and conditions of this order and those of your Federal Supply Schedule contract, the latter will govern."  

Did your commercial contract include that statement? 

Here's the full text of 51.103:

51.103 Ordering from Government supply sources.

(a) Contractors placing orders under Federal Supply Schedules shall follow the terms of the applicable schedule and authorization and include with each order-

(1) A copy of the authorization (unless a copy was previously furnished to the Federal Supply Schedule contractor); and

(2) The following statement: This order is placed under written authorization from ______ dated ______. In the event of any inconsistency between the terms and conditions of this order and those of your Federal Supply Schedule contract, the latter will govern.

(b) Contractors placing orders for Government stock shall-

(1) Comply with the requirements of the contracting officer’s authorization, using FEDSTRIP or MILSTRIP procedures, as appropriate;

(2) Use only the Government activity address code obtained by the contracting officer in accordance with 51.102(e) along with the contractor’s assigned access code, when ordering from GSA Customer Supply Centers.

(3) Order only those items required in the performance of their contracts.

[newtocontracting12]

18 hours ago, Oyster said:

I agree with formerfed, who has provided an excellent analysis.  

That said, I'm having a little difficulty following your fact pattern. 

Is your commercial customer a "[prime] contractor placing an order under your company's Federal Supply Schedule?"  If so, it appears to me that they would have needed to receive a "written authorization" to do that under FAR 51.102, which I assume they did. 

FAR 51.103 requires that such business-to-business orders include the following statement: "In the event of any inconsistency between the terms and conditions of this order and those of your Federal Supply Schedule contract, the latter will govern."  

Did your commercial contract include that statement? 

Here's the full text of 51.103:

51.103 Ordering from Government supply sources.

(a) Contractors placing orders under Federal Supply Schedules shall follow the terms of the applicable schedule and authorization and include with each order-

(1) A copy of the authorization (unless a copy was previously furnished to the Federal Supply Schedule contractor); and

(2) The following statement: This order is placed under written authorization from ______ dated ______. In the event of any inconsistency between the terms and conditions of this order and those of your Federal Supply Schedule contract, the latter will govern.

(b) Contractors placing orders for Government stock shall-

(1) Comply with the requirements of the contracting officer’s authorization, using FEDSTRIP or MILSTRIP procedures, as appropriate;

(2) Use only the Government activity address code obtained by the contracting officer in accordance with 51.102(e) along with the contractor’s assigned access code, when ordering from GSA Customer Supply Centers.

(3) Order only those items required in the performance of their contracts.

Oyster,

 

Our prime contract does have this statement incorporated into our contract. The prime contractor is an O&M contractor operating a government facility on behalf of the government,

[Neil Roberts]

12 hours ago, newtocontracting12 said:

Our prime contract does have this statement incorporated into our contract. The prime contractor is an O&M contractor operating a government facility on behalf of the government,

@newtocontractng12, so now it now appears you are a subcontractor, not a prime contractor? If that is correct. and if you have taken no steps to comply with the statement above which appears to be applicable to your company, and with respect to all the questions you have had in these discussions, comments that have gone unanswered, and the apparent uncertainty/complexity of your contractual situation, perhaps your company should consider hiring an experienced government contracting/subcontracting attorney for advice as to your company's contractual rights and obligations?

[newtocontracting12]

12 hours ago, Neil Roberts said:

@newtocontractng12, so now it now appears you are a subcontractor, not a prime contractor? If that is correct. and if you have taken no steps to comply with the statement above which appears to be applicable to your company, and with respect to all the questions you have had in these discussions, comments that have gone unanswered, and the apparent uncertainty/complexity of your contractual situation, perhaps your company should consider hiring an experienced government contracting/subcontracting attorney for advice as to your company's contractual rights and obligations?

Thanks for the inputs. Ironically, when this mistake was made,  they had a government contracts attorney in house which is why they are fighting me suggesting the obvious..