s/w maintenance agreements and commerciality

What is "s/w" and what does it have to do with subcontracting?

What is "s/w" and what does it have to do with subcontracting?

software.

We are a prime contractor placing a purchase order for annual maintenance.

How is the maintenance priced?

Also it is strange that the license doesn't meet the definition of commerciality per your post but you're asking about maintenance of teh same package. Or is the maintenance pretty much the same support that the contractor provides for s/w that is commercial?

Agree w/formerfed's comment wondering about the license not being commercial.

My FAR book happened to be open to 2.101 for something else when I read this thread, so it didn't take long to see that the commercial item definition explicitly includes, to summarize pertinent language, non-governmental items licensed, or offered for license, to the general public.

I won't get into the substance of whether the software maintenance is a commercial item, but consider this:

In the first instance, the higher-tier contractor needs to determine whether an exception to cost or pricing data applies. However, if the government CO does not concur, the CO is not powerless. See FAR 15.403-1©(3), including the language, "the contracting officer determines." If you are relying on "of a type," and since the maintenance is a service, see esp. FAR 15.403-1©(3)(ii).

If reasonable minds could differ on commerciality, and the CO did not concur with the contractor's commerciality determination, the CO's judgment wouldn't be arbitrary or capricious, so the government likely would not violate any obligation to negotiate in good faith if it insisted that the higher-tier contractor not rely on the commercial item exception.

If this is a DoD contract, consider also DFARS 244.402(a) & DFARS 244.303.

Agree w/formerfed's comment wondering about the license not being commercial.

My FAR book happened to be open to 2.101 for something else when I read this thread, so it didn't take long to see that the commercial item definition explicitly includes, to summarize pertinent language, non-governmental items licensed, or offered for license, to the general public.

this forum has had discussions where just being offered to general public does not meet criteria for commerciality. I happen to agree with that. I believe the end user (governemnt) and the intended use of the item overides sales data to commercial companies, or offered on GSA, or offered to general public.

Both the license, and maintenance are on GSA schedule, however this software is specific for government use.

The maintenance agreements however are a seperate procurement, performed on seperate purchase orders, and without getting into details of who and how software maintenance is performed, at least in my mind, is "general" or commercial in nature.

Why wouldn't the software maintenance be a commercial item? Would the contractor employ a special class of programmers used only for government work? Would it use techniques unique to government work? Tools? It is not clear to me how the nature of the program to be maintained effects the commerciality of the maintenance unless the contractor will use a special class of programmers, special techniques, or tools. It seems to me that software maintenance is software maintenance, no matter what program is being maintained. For that matter, I don't see how a software license would not be a commercial item, notwithstanding the nature of the program being licensed. Is there something about the license itself that makes it unique to the government? Is it an unusual license in some way?

Why wouldn't the software maintenance be a commercial item? Would the contractor employ a special class of programmers used only for government work? Would it use techniques unique to government work? Tools? It is not clear to me how the nature of the program to be maintained effects the commerciality of the maintenance unless the contractor will use a special class of programmers, special techniques, or tools. It seems to me that software maintenance is software maintenance, no matter what program is being maintained. For that matter, I don't see how a software license would not be a commercial item, notwithstanding the nature of the program being licensed. Is there something about the license itself that makes it unique to the government? Is it an unusual license in some way?

thanks Vern - I think you nailed it

thanks Vern - I think you nailed it

Vern

oops, I missed your last question.

Yes the software is specific and made specific for U.S. government use. The intened use cannot be for the general public.

Only hearing one side, there certainly isn't enough here to say that this software maintenance is not a commercial item. The only fact that causes one pause is that he concedes the software itself is not a commercial item. See the fifth heading under the definition of commercial item (maintenance services on commercial items are generally commercial items if similar services are offered to the general public under similar T&Cs). As this doesn't apply, are we limited to the sixth heading for these maintenance services?

That said, it seems that Vern is jumping straight to "of a type" when he says, "It seems to me that software maintenance is software maintenance." Shouldn't the analysis start with what is actually being purchased by the government? For instance, if the software here are algorithms that only have military utility, I wouldn't start with the assumption that this software is a commercial item, simply because there is such a thing as commercial software.

Maybe the way to get there would be to focus on "minor modifications" under the third major heading in the definition of commercial item. How, if at all, is the item offered to the government different from the commercial item in its "function or essential physical characteristics of an item or component"? How different?

Only hearing one side, there certainly isn't enough here to say that this software maintenance is not a commercial item. The only fact that causes one pause is that he concedes the software itself is not a commercial item. See the fifth heading under the definition of commercial item (maintenance services on commercial items are generally commercial items if similar services are offered to the general public under similar T&Cs). As this doesn't apply, are we limited to the sixth heading for these maintenance services?

That said, it seems that Vern is jumping straight to "of a type" when he says, "It seems to me that software maintenance is software maintenance." Shouldn't the analysis start with what is actually being purchased by the government? For instance, if the software here are algorithms that only have military utility, I wouldn't start with the assumption that this software is a commercial item, simply because there is such a thing as commercial software.

Maybe the way to get there would be to focus on "minor modifications" under the third major heading in the definition of commercial item. How, if at all, is the item offered to the government different from the commercial item in its "function or essential physical characteristics of an item or component"? How different?

Jacques - here is what I think.

S/W, and S/W licenses are one thing.

S/W maintenace renewals are different.

S/W can be created for military only, and the license that supports the S/W cannot be differentiated away from that.

What I think Vern and I agree on is the "exercise" of renewing software agreements, regardless if the S/W is to a military or to a military program, is a commercial service.

Do you agree to that?

Both the license, and maintenance are on GSA schedule, however this software is specific for government use.

I thought that if it was on a GSA schedule, then it was commercial. FAR 8.402(a) states:

The Federal Supply Schedule program is also known as the GSA Schedules Program or the Multiple Award Schedule Program. The Federal Supply Schedule program is directed and managed by GSA and provides Federal agencies (see 8.002) with a simplified process for obtaining commercial supplies and services at prices associated with volume buying...

[bold added].

What I think Vern and I agree on is the "exercise" of renewing software agreements, regardless if the S/W is to a military or to a military program, is a commercial service.

General,

I don't see the distinction you're trying to make. When the government buys software, a license is what it is buying. If the software isn't a commercial item, then the license is not a commercial item. How could the first time you buy the license be a noncommercial transaction, but the second time you buy it, it is commercial (assuming the facts don't change)?

While it is rank speculation on my part, I suspect you may have been too quick to concede that the software was not a commercial item. Simchak & Vogel have a great discussion of the intersection of commercial items and software/technical data in Licensing Software and Technology to the U.S. Government (2000), beginning at 288. You may want to take a look.

If I'm wrong, and the software doesn't qualify as a commercial item, then my "going in" position is that the only way the services related to that noncommercial item will be treated as a commercial item is if they qualify as such under the sixth heading of commercial item in FAR Part 2 as stand-alone services. The only way I can conceive to avoid this result would be to focus on the end result of the service rather than on the service itself, to make the results of the effort a "commercial item" under the first few headings. As I don't have a handle on the scope of what you call software maintenance, that may or may not be something that could be done with a straight face.

When the government buys software, a license is what it is buying. If the software isn't a commercial item, then the license is not a commercial item.?

Is the government buying software or a use right? Is it the features of the software that determines commerciality or the features of the use right?

If your are hiring someone to repair internal combustion engines, what does the nature of the vehicle--function and configuration--have to do with the commerciality of the service?

These are just questions, not assertions.

And what about Don's point? If the software is available on GSA schedule, why isn't it commercial? Didn't the GSA contracting officer already make that determination? Why revisit it?

If your are hiring someone to repair internal combustion engines, what does the nature of the vehicle--function and configuration--have to do with the commerciality of the service?

Vern, I couldn't tell if your questions were directed to anyone in particular or to all. I would suggest this is exactly what FAR Part 2 does with the fifth heading for commercial items.

"Commercial item" means...

(5) Installation services, maintenance services, repair services, training services, and other services if--

(i) Such services are procured for support of an item referred to in paragraph (1), (2), (3), or (4) of this definition, regardless of whether such services are provided by the same source or at the same time as the item; and

(ii) The source of such services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government;

(emphasis added).

For commercial items other than services, I would repeat my earlier suggestion that, in deciding whether what is being delivered under the contract is a commercial item, one focus on the delivered item itself. If that item, with all its peculiarities, in its own right qualifies as a commercial item under the first heading, great. If it doesn't, go to the second heading. If it doesn't qualify under the second, go to the third. If it doesn't qualify under the first three, go to the fourth. Don't begin the analysis by jumping to the fact that you can think of a commercial item that contains an internal combustion engine.

I agree that if the engine in your example is a commercial item, and the service relates solely to that engine, the fact the engine is housed in a noncommercial item wouldn't prevent that engine repair service from being a commercial service. I don't see how the analogy relates to maintenance of noncommercial software. Probably unlike engine repair, at least with software patches you can attempt to argue the patch is a deliverable commercial item, and therefore the transaction isn't for services.

On the one hand, the distinction between commercial items generally and commercial services specifically seems to have taken on greater importance with the recent changes to FAR 15.403-1?(3)(ii) brought on by the 2009 Defense Authorization Act. On the other, there seems to be greater flexibility for performance-based services under FAR 12.102(f)(1) and 15.403-1?(3)(iv).

Vern, I couldn't tell if your questions were directed to anyone in particular or to all. I would suggest this is exactly what FAR Part 2 does with the fifth heading for commercial items.

(emphasis added).

For commercial items other than services, I would repeat my earlier suggestion that, in deciding whether what is being delivered under the contract is a commercial item, one focus on the delivered item itself. If that item, with all its peculiarities, in its own right qualifies as a commercial item under the first heading, great. If it doesn't, go to the second heading. If it doesn't qualify under the second, go to the third. If it doesn't qualify under the first three, go to the fourth. Don't begin the analysis by jumping to the fact that you can think of a commercial item that contains an internal combustion engine.

I agree that if the engine in your example is a commercial item, and the service relates solely to that engine, the fact the engine is housed in a noncommercial item wouldn't prevent that engine repair service from being a commercial service. I don't see how the analogy relates to maintenance of noncommercial software. Probably unlike engine repair, at least with software patches you can attempt to argue the patch is a deliverable commercial item, and therefore the transaction isn't for services.

On the one hand, the distinction between commercial items generally and commercial services specifically seems to have taken on greater importance with the recent changes to FAR 15.403-1?(3)(ii) brought on by the 2009 Defense Authorization Act. On the other, there seems to be greater flexibility for performance-based services under FAR 12.102(f)(1) and 15.403-1?(3)(iv).

reinvesting revenue derived from maintenance agreements is to enhance, upgrade, create , better and new products. I suppose the argument can be that a non commercial item, and associated services therefore are non commercial too.

I too thought GSA was only commercial items and services. Is this true?

Jacques:

What about Don's point? Both the software and the service are on GSA schedule. Such items are commercial items as determined by the GSA contracting officer? Why is general revisiting the issue?

Duplicate.

Vern, I wouldn't suggest that the GSA CO has made a determination that the particular software is a commercial item. Rather, I would suggest that, for the order to be within scope of the FSS, the software has to be a commercial item. It sounds like the CO placing the order is talking a little bit out of both sides of his mouth, unless this is being treated as a nonschedule buy under FAR 8.402(f).

Jacques,

general said that both the license and the maintenance are on the GSA Schedule.

Jacques,

general said that both the license and the maintenance are on the GSA Schedule.

Don, I'm not an expert of the Federal Supply Schedule. I see the reference to "commercial supplies and services" both in FAR 8.402(a) & 38.101(a), but I don't see anything in the FAR to suggest that the commerciality decision by the GSA CO is conclusive as to all conceivable orders. It seems more likely that the GSA CO found the work to be generally commercial, and that each ordering activity should to be satisfied that the specific work ordered is commercial. While it seems very likely the ordering activity CO dropped the ball, aside from the nonschedule procedures previously discussed, it doesn't appear that the limitation on the use of the FSS to "commercial supplies and services" is statutory. There may be some other regulation or Executive Order that would prevent an individual deviation, but, let's not hang the government CO just yet. I assume, perhaps without foundation, that "commercial supplies and services" and "commercial items," should be used interchangably. If the basic contract was awarded under commercial item procedures, then, you would want to be sure that what you were buying was a commercial item. If you don't think the terms are interchangable, then at the very least you would want to make sure you could use commercial item procedures for your noncommercial item (FAR 12.102(g)).

Jacques,

This is the way the GSA multiple award process works. An offeror submits a proposal against the Schedule solicitation for commercial items. Part of the proposal consists of their commercial pricelist annotated to reflect all the products and services they wish to offer. They also submit a Commercial Sales Practice Format which states the dollar value of sales to the general public over the preceeding 12 months as well as the discounts provided off the commercial price for various categories of customers including what's proposed to GSA as part of the offer. So in effect, the contractor is saying everything they offer is commercial and submitting data to support that. The GSA CO reviews the data, accepts that it is commercial based upon what the offeror says, and uses the information to negotiate prices.

Vern, I wouldn't suggest that the GSA CO has made a determination that the particular software is a commercial item. Rather, I would suggest that, for the order to be within scope of the FSS, the software has to be a commercial item. It sounds like the CO placing the order is talking a little bit out of both sides of his mouth, unless this is being treated as a nonschedule buy under FAR 8.402(f).

FormerFed

You referenced FAR 8.402.

more text of 8.402 states "Additionally, the Department of Defense (DoD) manages similar systems of schedule-type contracting for military items; however, DoD systems are not covered by this subpart"

what does this mean ?

General_

That was Jacques that said that. But what it means is DoD puts it's own schedule like programs in place just for military items. FAR 8.4 doesn't apply to the DoD specific system; just FSS and VA ones.

Don, I'm not an expert of the Federal Supply Schedule. I see the reference to "commercial supplies and services" both in FAR 8.402(a) & 38.101(a), but I don't see anything in the FAR to suggest that the commerciality decision by the GSA CO is conclusive as to all conceivable orders. It seems more likely that the GSA CO found the work to be generally commercial, and that each ordering activity should to be satisfied that the specific work ordered is commercial. While it seems very likely the ordering activity CO dropped the ball, aside from the nonschedule procedures previously discussed, it doesn't appear that the limitation on the use of the FSS to "commercial supplies and services" is statutory. There may be some other regulation or Executive Order that would prevent an individual deviation, but, let's not hang the government CO just yet. I assume, perhaps without foundation, that "commercial supplies and services" and "commercial items," should be used interchangably. If the basic contract was awarded under commercial item procedures, then, you would want to be sure that what you were buying was a commercial item. If you don't think the terms are interchangable, then at the very least you would want to make sure you could use commercial item procedures for your noncommercial item (FAR 12.102(g)).

I don't think so, Jacques. You're making things much too hard, and needlessly so. Your position is unreasonable.

GSA FSS contracts are for commercial items as defined in FAR 2.101 and are awarded pursuant to the rules in FAR Part 12. See GSAM 512.203(a) and 538.271(a). COs of other agencies get to order off of them pursuant to the procedures in FAR 8.4, and now 17.5 (as of FAC 2005-47). That's the law. Neither FAR 8.4 nor 17.5 requires that agency COs make independent determinations of commerciality when buying off FSS schedules. It is pointless for you to note that there is no express statutory grounds for schedules to be for commercial items. There are express statutory grounds for little about GSA's FSS program. People have work to do. The rules are complex enough as it is. You want COs and contractors to revisit GSA commerciality decisions? That's over-the-top. Assuming that the software and services are on GSA schedule and are not off-schedule items, they are commercial items. On to the next procurement.

You want COs and contractors to revisit GSA commerciality decisions? That's over-the-top.

Vern, I don't want COs and contractors to have to revisit commerciality decisions. If what the ordering activity is ordering is obviously among those supplies and services that were contemplated at time of award of the GSA contract, then I think you can say with a straight face that the GSA CO must have considered the supply or service in question to be commercial. I am concerned, though, that, especially for services, there may be circumstances where the pricelist is so generic that both commercial and noncommercial services would appear to be within scope on their face. Only the ordering activity CO is in a position to assess whether that he is actually buying is a commercial item or not.

Certainly ordering activity COs are responsible for ensuring any order is within scope of the schedule contract. See the discussion on open market items in FAR 8.402(f). A reasonable reading of FAR 8.402(a) would suggest that part of that determination includes determining whether what is specifically being ordered is a commercial item. Maybe there is some flexibility here; maybe not. I tried in my last post to explore some possible flexibility.

Put in the context of this thread, either the software is a commercial item or it is not. If it is a commercial item, the CO could use the FSS. If it is not, then the CO probably improperly used the FSS. It does NOT follow, that because the CO used the schedule, the software MUST be commercial. You may argue that the CO should be estopped from claiming it is not, but that is a different discussion.

As I understand what you are saying now, if the software and service are listed on the schedule, then the ordering CO can consider them to be commercial items; if they are not on schedule, then they are open market items and may or may not be commercial, in which case the ordering CO has to make a determination. If that's your position, then I think everybody here will agree with you.

You continue to be confused about FSS, however. You now say:

If it is a commercial item, the CO could use the FSS. If it is not, then the CO probably improperly used the FSS.

What are you talking about? Look--if the item is on a GSA Schedule, then GSA determined it to be commercial. There is no issue for the ordering CO. It is not a matter of if it's commercial, then the CO can order it off the schedule. If the item is on schedule the ordering CO can safely assume that the item is commercial. If the item is not on the schedule, it may or may not be commercial, but that is irrelevaht, because a CO cannot use a schedule to buy items that are not on the schedule. And by the way, it is not a matter of what was "contemplated" at the time of award of the schedule contract. It is a matter of what is listed on the contract.

Then you say:

It does NOT follow, that because the CO used the schedule, the software MUST be commercial.

I think what you meant is that if the CO issued an order against a schedule for an item that is not on the schedule, then it does not follow that that item is commercial. If that is what you meant, then I agree, but why couldn't you be clearer? If that is not what you meant, then what do you mean?

You're causing confusion instead of clearing things up.

Please forgive my obtuseness, but I seem to be missing a couple of points here. The software and maintenance are both on the schedule, but was the purchase made using the schedule? If so, it seems, well, folly not to construe the task order in context of the underlying contract which, as Mr. Edwards pointed out, is decisive. I don't understand from the thread whether the procuring activity is claiming that one or the other of the items is not commercial, and to what end? What is the contractor or the PCO trying to accomplish or avoid in terms of the order for maintenance that's being impacted by a commerciality determination?

Vern,

I don't think the ordering activity PCO ever delegates his responsibility to ensure that what he is doing is consistent with law and regulation. By placing an order, the ordering activity PCO is concluding the order is within scope. To be within scope, you all have convinced me the item must be commercial. That ordering activity PCO would have to defend that decision should anyone be in a position to contest it. (Obviously, there are significant standing issues that severely limit the circumstances in which this could occur.) As a practical matter, the ordering activity PCO doesn't have to document his commerciality determination, and others may give weight to the GSA's implicit commerciality determination to the extent the specific item being purchased is on the schedule contract. However, the GSA's determination doesn't bind the ordering activity.

Look--if the item is on a GSA Schedule, then GSA determined it to be commercial. There is no issue for the ordering CO.

If all questions of scope of a FSS contract were easily resolved, then the whole "Get It Right" campaign from a few years ago would never have happened. Consider the GSA memo to Heads of Contracting Activities dtd 5 May 05, "Upcoming IG Reviews - Compliance Issues and Other Matters," at 7:

Out of Scope Work. In some situations it is not readily obvious whether a particular item is available under a vendor's schedule contract. In those cases where one cannot determine whether an order is within scope, call the schedule CO.

I took Don's suggestion regarding commercial items to suggest that only one result was possible: The software must be commercial. My point is that this result does not inevitably follow. Either the software is commercial, or the CO misused the FSS authority.

Please forgive my obtuseness, but I seem to be missing a couple of points here. The software and maintenance are both on the schedule, but was the purchase made using the schedule? If so, it seems, well, folly not to construe the task order in context of the underlying contract which, as Mr. Edwards pointed out, is decisive. I don't understand from the thread whether the procuring activity is claiming that one or the other of the items is not commercial, and to what end? What is the contractor or the PCO trying to accomplish or avoid in terms of the order for maintenance that's being impacted by a commerciality determination?

Heretalearn

would it matter? if offered on what most experts herein are saying that GSA itmes are indeed commercial items, if ordered from the schedule or not is irrelevant.

Jacques:

If we follow your argument to its logical conclusion, every CO contemplating placement of an order against a GSA schedule has an obligation to verify the GSA did everything right. That is not contemplated by the acquisition system and is ridiculous on its face. In any case, any CO placing an order against a GSA schedule contract is bound by the terms that GSA has negotiated with its contractor. As for being within scope, an order placed for an item that is on schedule is within scope by definition.

Since you are sticking to an absurd argument, I won't argue with you. As far as I'm concerned, you are simply wrong and I hope no one pays any attention to you, but that's up to them.

Heretalearn:

general_correspondent is a contractor. I don't think he is planning to place an order against a GSA schedule. I think he is buying the software and wants to treat the buy as one for a commercial item. What he would like to do--I'm not sure--is rely on the fact that the software is on GSA schedule to argue that the maintenance services are commercial items. If the item is on schedule, as he claimed earlier, I think he has a good argument.

What he would like to do--I'm not sure--is rely on the fact that the software is on GSA schedule to argue that the maintenance services are commercial items. If the item is on schedule, as he claimed earlier, I think he has a good argument.

Vern, isn't it just an argument, though? If what we have here is a prime contractor claiming an exemption from certified cost or pricing data for a subcontract, because the subcontractor has a FSS contract that includes arguably similar software maintenance services, the existence of the FSS contract doesn't bind the PCO in deciding whether the subcontractor's software maintenance qualifies as a commercial item and is therefore exempt.

If the software being supported here is a noncommercial item, wouldn't it be reasonable for the the government CO to ask the prime to explain how the software maintenance services qualify under the sixth heading of commercial item in Part 2?

Vern, isn't it just an argument, though? If what we have here is a prime contractor claiming an exemption from certified cost or pricing data for a subcontract, because the subcontractor has a FSS contract that includes arguably similar software maintenance services, the existence of the FSS contract doesn't bind the PCO in deciding whether the subcontractor's software maintenance qualifies as a commercial item and is therefore exempt.

I think this is what I was trying to get at, albeit too obliquely. If a task order is placed against a supply schedule for a scheduled item, there shouldn't be any question as to commerciality. I've never seen anything to indicate whether a GSA determination of commerciality would bind an agency procuring other than through a schedule & so have assumed it wouldn't; but as a pragmatic matter, though I think it's a good argument on its face, I've tried it unsuccessfully a number of times.

Jacques:

First, I have been responding to your comments, which have not been about a contractor awarding a subcontract, but about a CO placing an order against an FSS schedule. Until I laid out the case for Heretalearn, you never said you were talking about a contractor making a subcontract award.

Second, general_correspondent said nothing about "arguably similar" items. He said that the services are on schedule. You write as if the items in question are not or may not be on schedule. Why? Why introduce an uncertainty into the discussion when the discussion is not founded upon any such uncertainty? If general_correspondent had said that the services he wants to buy are not on schedule, but are only similar to services that are on schedule, we would not be talking about this. Why insert an uncertainty where none exists?

What we should be doing here is trying to answer questions in the clearest possible way, not muddying the waters.

Vern, I guess I'm willing to introduce the uncertainty because it seems inherent in the nature of Federal Supply Schedule contracting for services. The focus of a commerciality determination that General's PCO has to ultimately answer is focused on what is specifically being delivered. However, when a GSA CO awards a commercial services contract, the scope of that contract can be fairly broad. The GSA CO only has to satisfy himself that the services are generally commercial, not invariably commercial.

For sake of argument, take the uncertainty away: Is a CO on an unrelated contract bound by a different CO's earlier commerciality determination, even where the item is identical? I can't imagine.

Don't get me wrong: I'm not suggesting that the earlier determination is irrelevant. In fact, in seeking the FSS contract, the holder likely had to provide the GSA CO with information relevant to establishing the commerciality of the same or similar item in question. Presumably, it will be easy for the holder to make the same or similar showing now.

Jacques:

Your stance is completely out of line with acceptable and standard acquisition practice. Completely. The GSA CO's decision is conclusive for all COs who would use the schedule contract. Your argument is not valid. I reject it without reservation.

Vern

Jacques:

Your stance is completely out of line with acceptable and standard acquisition practice. Completely. The GSA CO's decision is conclusive for all COs who would use the schedule contract. You argument is murky and, as best as I can make it out, not valid. I reject it without reservation.

Vern

I must have been unclear in my recent posts. Mea culpa. Based on General's Post #31, I understand the facts to be as follows: A prime contract not awarded under the FSS has a subcontractor who also holds a FSS contract. That subcontract is between two private parties and was not awarded under the FSS. The subcontract is over $700,000. Presumably, no other exception to certified cost or pricing data applies other than the possibility that the subcontract is for commercial items. The sub argues to the prime, and the prime argues to the government, that the government PCO MUST find that the software maintenance services provided by the subcontractor are commercial items, because the sub offers the same or similar services under its FSS contract. Thus, the prime's price reasonableness evaluation can be based solely on price analysis. The government PCO has some reason to doubt this claim, because the software being supported is noncommercial, and wants the prime to further support why the item is commercial, and, if it can't, to perform a cost analysis.

Under these facts, I would assert the government PCO is not bound by any purported commerciality finding by a GSA CO.

Jacques:

You must have been unclear in your last post? You have been serially unclear for several days. At this point and after many posts you state the obvious. This is what you are now saying, I think:

An agency contracting officer administering one of the agency's own contracts, and who is reviewing a prime contractor's determination that FAR 15.403-1( c)(3) applies to subcontracted items, is not bound by a commerciality decision made by a GSA CO with respect to an FSS contract for the same items.

If that is what you are saying, who would argue?

I'm not going to engage you further on this topic. Maybe someone else will.

Vern

I must have been unclear in my recent posts. Mea culpa. Based on General's Post #31, I understand the facts to be as follows: A prime contract not awarded under the FSS has a subcontractor who also holds a FSS contract. That subcontract is between two private parties and was not awarded under the FSS. The subcontract is over $700,000. Presumably, no other exception to certified cost or pricing data applies other than the possibility that the subcontract is for commercial items. The sub argues to the prime, and the prime argues to the government, that the government PCO MUST find that the software maintenance services provided by the subcontractor are commercial items, because the sub offers the same or similar services under its FSS contract. Thus, the prime's price reasonableness evaluation can be based solely on price analysis. The government PCO has some reason to doubt this claim, because the software being supported is noncommercial, and wants the prime to further support why the item is commercial, and, if it can't, to perform a cost analysis.

Under these facts, I would assert the government PCO is not bound by any purported commerciality finding by a GSA CO.

Yes we are a Prime. We hold a letter from the CO allowing purchases off of GSA schedules. The subcontract is not over $700,000 however our customer is requiring us to make commerciality determinations at all dollar levels. We as the Prime, now have the conundrum of accepting valid, invalid, assertations from these suppliers, who may or may not care a whole lot about this paper work. The conundrum in my mind, not only for this specific procurement - is the aggregate of a lot of "roll up" subcontracts and suppliers, if we simply pass through the assertations of commerciality. On this procurement however, the software appears by nomenclature alone - to be strictly military. As we all know, a seller can "package" a product with military nomenclature, but when you peel the onion, you can see it can also be used in commercial applications. Herein lies the rub...we ask for sales data from these suppliers, usually in the form of redacted invoices to build a case for commerciality, but none of them are complying with this request. I personally do not see the issue with providing a redacted invoice, in fact, if I were a supplier, I would gladly do this in case of liability issues later on.

I do not think the FAR unequivocally states that by offering a item or service on GSA makes it a commercial item. In fact, what I have been researching I find it strongly can be argued, but never flat out confirms it to be so.

Now I understand your issue.

Isn't the bottom line determining cost/price reasonableness? If so, you have an order/subcontract based upon a GSA Schedule contract. The GSA CO has already determined the price to be fair and reasonable. You don't need to be concerned about commerciality.

We hold a letter from the CO allowing purchases off of GSA schedules.

Is THIS purchase off the FSS?

I do not think the FAR unequivocally states that by offering a item or service on GSA makes it a commercial item.

As to the relationship between the FSS and commerciality, I would offer the following: The GSA must only include items in a schedule contract it believes are commercial. GSAM 538.271(a) ("MAS awards will be for commercial items as defined in FAR 2.101.") I would suggest that the ordering activity must ensure that any modifications to the item (supply or service) are likewise within scope. Any modification that would result in the supply or service no longer qualifying as a commercial item would be out of scope.

In the absence of an order, each contract, and any determination surrounding it, stands on its own. If a CO is considering placing an order under the schedule, and that CO doesn't believe the item is commercial, he shouldn't use the schedule.

Yes we are a Prime. We hold a letter from the CO allowing purchases off of GSA schedules... I do not think the FAR unequivocally states that by offering a item or service on GSA makes it a commercial item. In fact, what I have been researching I find it strongly can be argued, but never flat out confirms it to be so.

general_correspondence:

You are making your life needlessly difficult. If you are ordering the software or the maintenance services off a GSA schedule contract pursuant to the authority of FAR Subpart 51.1 and FAR 52.251-1, as authorized by your CO, then you are the "ordering activity" and the software or services are commercial items. FAR does not have to make an unequivocal statement. Why? BECAUSE GSA SCHEDULE CONTRACTS ARE CONTRACTS FOR COMMERCIAL ITEMS. READ THE CONTRACT! You don't have to make an independent determination of commerciality if you are ordering off a schedule contract. In fact, you have no authority to make an independent determination of commerciality unless you decide to forego use of the GSA contract, in which case you are on your own.

I don't know many more ways to try to get through to you (and others) to make that point. To me, it does not seem especially complicated.

I can see now that the system has become so screwed up that some people are paralyzed by doubt even when confronted by a simple problem with a simple solution. How do people get anything done if they are spending so much time on such simple stuff? What on earth do they do when confronted by a hard problem?

general_correspondent:

You are making your life needlessly difficult. If you are ordering the software or the maintenance services off a GSA schedule contract pursuant to the authority of FAR Subpart 51.1 and FAR 52.251-1, as authorized by your CO, then you are the "ordering activity" and the software or services are commercial items. FAR does not have to make an unequivocal statement. Why? BECAUSE GSA SCHEDULE CONTRACTS ARE CONTRACTS FOR COMMERCIAL ITEMS. READ THE CONTRACT! You don't have to make an independent determination of commerciality if you are ordering off a schedule contract. In fact, you have no authority to make an independent determination of commerciality unless you decide to forego use of the GSA contract, in which case you are on your own.

I don't know many more ways to try to get through to you (and others) to make that point. To me, it does not seem especially complicated.

I can see now that the system has become so screwed up that some people are paralyzed by doubt even when confronted by a simple problem with a simple solution. How do people get anything done if they are spending so much time on such simple stuff? What on earth do they do when confronted by a hard problem?

Vern, what is your proof that an item on GSA schedule is a commercial items?

Now I understand your issue.

Isn't the bottom line determining cost/price reasonableness? If so, you have an order/subcontract based upon a GSA Schedule contract. The GSA CO has already determined the price to be fair and reasonable. You don't need to be concerned about commerciality.

Former,

fair and reasonable prices is not same as a commercial item? Please explain.

Vern, what is your proof that an item on GSA schedule is a commercial items?

Are you kidding? Have you read my posts in this thread?

I have explained it already and I won't do so again. I really don't care if you want to agonize about this needlessly and spend time doing your own determination. Better yet, simply decide that the items are not commercial items and proceed accordingly. Go ahead, it's your time and money to waste.

Former,

fair and reasonable prices is not same as a commercial item? Please explain.

The GSA KO makes a determination that Schedule pricing is fair and reasonable.

GSA KO also makes a determination of commerciality. I begin to understand why Mr. Edwards' patience occasionally ebbs.

GSA KO also makes a determination of commerciality. I begin to understand why Mr. Edwards' patience occasionally ebbs.

page 3 of this report, read footnote Number 2. The key word is "mostly". Why was the word "mostly" used by GAO?

http://www.ogc.doc.gov/ogc/contracts/cld/papers/GAO1-125.pdf

You are asking us about a footnote in a ten year old GAO report? Call GAO and ask them what they meant. Maybe the person who wrote the footnote is still around. Let us know what you find out. Take your time.

Plus the report was written well before the FAR covered and defined commercial items.

I'm not sure about Formerfed's chronology, but his point is certainly correct. The Federal Supply Schedule preceded the Federal Acquisition Streamlining Act of 1994. At some point, the GSA decided to rely on the new commercial item procedures. I couldn't tell you whether that was before or after this report. What I can tell you is, at the time the report was written in November 2000, FAR 8.401(a) & 38.101(a), instead of referring to "commercial supplies and services," referred to "commonly used supplies and services."

Today, it is clear that GSA uses Part 12 procedures for FSS contracts. As others have pointed out, a quick look at the subcontractor's schedule contract would make that apparent.

The GAO report was published in 2000. The FAR already covered commercial items by then. However, in 2000, FAR 38.101(a) read in part as follows:

The Federal Supply Schedule program, pursuant to 41 U.S.C. 259((3)(A), provides Federal agencies with a simplified process of acquiring commonly used supplies and services in varying quantities while obtaining volume discounts.

Emphasis added. Today, FAR 38.101(a) says:

The Federal Supply Schedule program, pursuant to 41 U.S.C. 259((3)(A), provides Federal agencies with a simplified process of acquiring commercial supplies and services in varying quantities while obtaining volume discounts.

Emphasis added.

Checking the Federal Register archives I found that GSAM 538.271 changed during the 1990s. Today, GSAM 538.271(a) reads in part as follows:

MAS awards will be for commercial items as defined in FAR 2.101.

However, in 1993 it read as follows:

MAS prices will, to the maximum extent practicable, be negotiated as a discount from established catalog prices of commercial items sold in substantial quantities to the general public.

Then, in 1996, it was changed to read as follows:

MAS awards will, to the maximum extent practicable, be commercial items negotiated as a discount from established catalog prices for items sold in substantial quantities to the general public.

It was changed again in 1997 by final rule to read as it does today. According to the Federal Register of February 16, 1996, at 61 FR 6164, GSA was beginning to change its schedule policies to conform with the Federal Acquisition Streamlining Act (FASA). On August 21, 1997, at 62 FR 44518, in the final rule that changed GSAM 538.271 to read as it does today, GSA said in the background statement:

Recently, GSA has made a number of changes in the MAS program. This final rule represents a continuation of GSA's efforts to reinvent the MAS program in order to move the program to a future environment of greater use of commercial practices, increased competition, and greater responsibility for making smart buying decisions within the framework of the MAS program by contracting personnel at the front-line closest to the need... GSA initiated this rule in order to simplify and streamline the process for awarding and administering MAS contracts and to bring GSA's policies and procedures for the MAS program in line with the Federal Acquisition Regulation (FAR) as amended to implement the Federal Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996... This final rule makes changes in the program by... Eliminating requirements for offerors to certify sales data as current, accurate and complete while putting offerors on notice of the Government's expectations for data submissions... .

It undoubtedly took GSA time after enactment of the Federal Acquisition Streamlining Act to ensure and declare that its schedule contracts are for commercial items and for old contracts to be closed out. It likely had not accomplished that by the time GAO conducted its study, hence, the footnote. However, I'm speculating based on the record. I don't know why the footnote in the ten year old GAO report says what it does and I don't care.

None of this matters, however, because general_correspondence does not want the software and services he needs to buy to be commercial items and is bound and determined to prove that they are not, which explains the resort to a footnote in a ten year old GAO report. He must be getting paid by the hour to produce paperwork.