Subcontract (Purchase Order) for software license with term (duration) beyond the PoP of the Prime Contract

[Drew]

We have a Prime contract (task order award on an IDIQ contract) through GSA which requires consent for subcontracts and purchases against a cost-reimbursable CLIN.  This is formalized in a Consent to Purchase form, which includes a specification for "title shall vest with:_________."  We submit the form when we need to purchase more cloud capacity or software licenses, either for new packages, for new modules, for license renewals, or for maintenance agreements which provide for continuing software updates and support.

There are plenty of operational, budgetary, and market-standard business practices which give  us reason to buy the software licenses with terms (durations) that are not co-terminus with our Prime contract Period of Performance (PoP).  These reasons include simple things like vendors being unwilling to sell for terms less than a full year.  But they also include the Government's desire to use the installed software in exercising a persistent capability, one which may extend beyond our contract and any of its renewals.  Or it may be convenient to expend available funds before year-end price increases.

All of these reasons mean that the software license, maintenance, or renewal purchase could extend beyond our PoP.  As part of the purchase we ensure that assignment rights are present in the purchase agreement, End User License Agreement (EULA), and/or the Terms of Service (ToS), and that there is no cost to assign the user rights to the government at the end of our PoP.  The CTP is submitted with the "Title Shall Vest with Government" field specified.

Our GSA CO is insisting that all such purchases should be co-terminus with our PoP, asserting that if they extend beyond our PoP that an Anti-Deficiency Act violation occurs.  

I cannot see how.  Can anyone?

We hold that the combination of the CTP Vesting specification, along with the Assignments clause, commits us to turn over the software to the government at the end of our contract with no additional obligation of funds beyond the purchased license term, and that the full purchase of the license term is occurring with the funds already obligated to our contract.  (There is neither an obligation of funds not yet appropriated, nor an obligation of funds in excess of what is appropriated.)

Any idea of where else we should look to see if the CO is right?  Or are they just hitting the easy button and not walking through the logic to see that the Government's interests are being met?  I'm certainly willing to be schooled here...

Thanks in advance!

[C Culham]

I think at first blush that the GSA CO is not applying the Anti-Deficiancy Act appropriately.  As you have further conversation with the CO this reference might be an assist to better understand and sort out the CO's position.  The reference contains a link to GAO's "Red Book" and a detailed discussion of the Act.

https://www.gao.gov/legal/appropriations-law/resources

[Retreadfed]

Drew, is FAR 52.216-22 in your contract?  If so, see subsection (d) of that clause.  What date, if any, is inserted there?  I agree with Carl.  I do not see a potential ADA violation here.  In fact, 52.216-22 seems to authorize such continued performance.

On a side note, if you are getting software licenses, what title is transferred to the government?  A license does not confer title on the licensee, only a right to use the subject of the license.

[Drew]

@C Culham / @Retreadfed:  Thank you both;  you're affirming my perspective.  I will keep the Anti-Deficiency Act link handy as the discussions progress.

As to FAR 52.216-22, it is present in the IDIQ solicitation, which was a combined solicitation for both the IDIQ labor rates and the Task Order #1 proposal.  The solicitation is incorporated by reference into both the IDIQ award and the Task Order 1 award.  The date is specified in the solicitation as "May 09, 2029 (estimated)."  Which is well into the future, long beyond the term of the licenses or renewals that we're talking about.  And I agree with you, it would seem to permit continued performance. 

But I don't think we're talking about that....!  We're making the purchase and including a plan for assigning the end user license rights over to the government.  Once we exercise that assignment, say, at the end of our TO, our performance ends.  The software vendor's performance continues, but that is under the license agreement that continues with the government as the end user / assignee.  The license or renewal that was purchased was fully paid for with the properly obligated funds that were applied to our TO.  So I'm thinking the provisions of 52.216-22 are moot with respect to this issue.  But thank you for pointing me to that provision - it was definitely worth checking out to verify understanding.

As to your final question, re: "title," that's just the term in the form being used.  You are correct, the government is not getting "title" to the software. But they are getting recognized by the vendor as the end user, as the party who can log support tickets, who is responsible for on-going maintenance fees after this year (if they wish to continue beyond the term we're purchasing), who can access the documentation, who receive upgrades and patches, etc.  So in this context, yes, we are transferring "right to use."  Which we've effectively done during our TO PoP anyway, but we are mutually interpreting this form to mean that the right to use will persist with the Government, for the duration of that license (or renewal) purchase, even if extends beyond our PoP.

@anyone_else: other ideas or clauses to look at?  Again - thanks to both C Culham and Retreadfed!

 

[General.Zhukov]

I too would like to know the answer.  My instinct is that the CO is obviously wrong, but I can't specify why exactly without research.

If the software term/PoP of 1 year is a standard commercial practice, and the vendor is unwilling to negotiate post-award, how does the CO propose doing this? Ask him or her. I can think of 2 ways.  Partial termination for convenience.  Or just turning-off the software unilaterally - the software we have already paid for?  Don't these seem like rather extreme actions in response to a very common and mundane situation?     And doesn't that suggest (strongly) something isn't right.

 

 

[Drew]

@General.Zhukov: 

 

@C Culham pointed me to the ADA Redbook.  Obviously haven't consumed it all yet (....and really don't think I will...), but I did grab this nugget:

 Appropriations made for a definite period of time may be used only for expenses properly incurred during that time.  31 U.S.C. § 1502(a).       This is known as the bona fide needs statute...

This points to one mis-reading of the circumstances, that the CO may be incorrectly thinking that there is a future expense being incurred, when in fact there is none.

And your example is spot-on: what would the government do if we weren't in the middle, and they were purchasing this license or renewal directly?  Thanks for the reply.

Again, calling on anyone else for thoughts.  But if we finally reach a resolution on this I will post the update to this thread.