[Federal Register Volume 83, Number 16 (Wednesday, January 24, 2018)]
[Rules and Regulations]
[Pages 3275-3281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01232]


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GENERAL SERVICES ADMINISTRATION

48 CFR Parts 515, 538, and 552

[GSAR Case 2016-G506; Docket No. 2016-0016; Sequence No. 1]
RIN 3090-AJ75


General Services Administration Acquisition Regulation (GSAR); 
Federal Supply Schedule, Order-Level Materials

AGENCY: Office of Acquisition Policy, General Services Administration.

ACTION: Final rule.

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SUMMARY: The General Services Administration (GSA) is amending the 
General Services Administration Acquisition Regulation (GSAR) to 
clarify the authority to acquire order-level materials (OLMs) when 
placing an individual task or delivery order against a Federal Supply 
Schedule (FSS) contract or FSS blanket purchase agreement (BPA). OLMs 
are supplies and/or services acquired in direct support of an 
individual task or delivery order placed against an FSS contract or 
BPA, when the supplies and/or services are not known at the time of 
contract or BPA award.

DATES: Effective: January 24, 2018.

FOR FURTHER INFORMATION CONTACT: Ms. Leah Price, GSA Acquisition Policy 
Division, Senior Policy Advisor, at <a href="/cdn-cgi/l/email-protection#2b474e4a43055b5942484e6b4c584a054c445d"><span class="__cf_email__" data-cfemail="0a666f6b62247a7863696f4a6d796b246d657c">[email protected]</span></a>. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite GSAR Case 2016-G506.

SUPPLEMENTARY INFORMATION: 

I. Background

    GSA's Federal Supply Schedule (FSS) program, commonly known as the 
GSA Schedules program or Multiple Award Schedule (MAS) program is the 
Government's most used commercial-item purchasing channel, accounting 
for approximately $33 billion of Federal contract awards in fiscal year 
2016 (not including the VA Schedules).
    GSA Schedules provide a convenient and effective option for both 
ordering activities and Schedule contractors. Ordering activities enjoy 
simplified ordering procedures and reduced prices, while Schedule 
contractors connect with federal business quickly and easily. 
Additional features of the Schedules program, including Blanket 
Purchase Agreements (BPAs) and Contractor Team Arrangements (CTAs), 
greatly enhance the flexibility of the program.
    These features offer:
    <bullet> Additional price discounts for ordering activities;
    <bullet> Expanded opportunities for contractors;
    <bullet> Elimination of redundant effort, with a single contracting 
vehicle fulfilling complex or ongoing needs;
    <bullet> Reductions in administrative time and paperwork;
    <bullet> Expanded business opportunities for socioeconomic groups; 
and
    <bullet> Help for ordering activities wishing to reach 
socioeconomic goals.
    The Schedules Program supports Federal Agencies' missions by 
providing access from simple commodities such as pens and pencils to 
complex services such as IT Modernization.

Authority for This Rulemaking

    41 U.S.C. 152(3)(B) deemed FSS procedures to meet the Competition 
in Contracting Act (CICA) requirement of full and open competition as 
long as participation has been open to all responsible sources; and 
orders and contracts under those procedures result in the lowest 
overall cost alternative to meet the needs of the Federal Government.
    GSA has long recognized the lowest overall cost alternative does 
not just include the actual price paid to the contractor, but also the 
administrative cost of conducting the acquisition. For example, GSA 
charges a low transactional fee for orders to be placed against a 
Schedule and the efficiency of the simplified acquisition process 
translates to time and cost savings. The administrative cost to acquire 
similar goods or services combined with possible fees on a new contract 
duplicates efforts resulting in a less efficient way to acquire those 
goods or services.
    This is also consistent with the Federal Acquisition System and its 
principle to minimize administrative operating costs (FAR 1.102(b)(2)). 
The Federal Acquisition System is designed to deliver the best value 
product or service to the customer in terms of cost, quality, and 
timeliness. By lowering the cost to conduct the acquisition, and 
simplifying the acquisition process, administrative savings can be 
achieved.

II. Discussion of the Proposed Rule

    The proposed rule published in the Federal Register at 81 FR 62445 
on September 9, 2016 and addressed the importance of providing the same 
flexibility for the FSS program that is currently authorized for other 
indefinite delivery, indefinite quantity (IDIQ) vehicles, which will 
help reduce contract duplication and the associated administrative 
costs and inefficiencies. GSA also discussed how the proposed changes 
would also reduce transaction costs by eliminating the need for 
additional contracts for ancillary work. The rule aimed at achieving 
parity between the FSS programs and other IDIQs, in terms of acquiring 
OLMs.
    The rule presented two price protections found in all IDIQ 
contracts which authorized OLMs plus three additional price protections 
not generally found in such contracts.
    All IDIQ contracts authorizing OLMs include two key government 
protections:
    1. The contracting officer must determine the prices are fair and 
reasonable.
    2. FAR Clause 52.212-4 Alternate 1 paragraph (i)(1)(ii) which 
addresses:

a. Paying for commercial items at prices not to exceed established 
catalog or market price
b. Conditions for reimbursing contractors for actual cost
c. Procedures for handling indirect cost reimbursement

    The three unique protections GSA included in the proposed rule 
were:
    1. The requirement to submit three quotes;
    2. Limitation of percentage of order which can be OLM; and
    3. Establishment of an OLM SIN, which requires reporting of OLM.
    Commenters noted that due to these three unique GSA protections, 
the proposed rule did not fully meet the parity objective. In the final 
rule, GSA maintained these three unique protections while simplifying 
and narrowing the three quote requirement. This is more fully discussed 
in the Analysis of Public Comments section. GSA agrees that this leaves 
the final rule close to, but not at full parity. However, the 
requirements are currently the best available means to ensure price 
reasonableness and provide confidence to customers when using the new 
OLM authority on Federal Supply Schedules. This is more fully discussed 
in the Analysis of Public Comments section.
    These price protections, when combined with the current design of 
the FSS program, are sufficient to ensure the Federal Supply Schedules 
continue

[[Page 3276]]

to offer the lowest overall cost alternative. Other key features of the 
FSS program include ordering procedures designed to promote 
competition, and, at certain dollar levels to increase competition, an 
existing deviation to FAR 51 (which authorizes GSA contractors, 
performing on a time-and-material or labor-hour basis, to purchase 
ancillary supplies and services from Schedule contractors or process 
requisitions through the GSA Global Supply Program) the Acquisition 
Gateway, (a logical home for a future GSA effort to publicize OLM best 
practices), and ongoing category management work to improve the 
acquisition of services and IT, all work together, with this final 
rule, to ensure Federal Supply Schedules remain open to all and are the 
lowest overall cost alternative.

A. Summary of Significant Changes

    Four respondents submitted comments on the proposed rule. The 
General Services Administration has reviewed the comments in the 
development of the final rule. A discussion of the comments and the 
changes made to the rule as a result of those comments are provided as 
follows:
    This final rule makes the following significant changes from the 
proposed rule:
    Eligible Schedules: GSAR 538.7201 has been revised to reference a 
website that lists the Federal Supply Schedules authorized to include 
OLMs.
    Indirect Costs: The instructions to contracting officers in GSAR 
538.7204 subparagraph (a)(3) have been revised to allow for indirect 
costs, consistent with the procedures in FAR clause 52.212-4 Alternate 
I(i)(1)(ii)(D)(2).
    Clause Text: GSAR clause 552.238-82, Special Ordering Procedures 
for the Acquisition of Order-Level Materials, has been revised as 
follows:
    <bullet> Vendors must obtain three quotes for each order-level 
material above the simplified acquisition threshold, for the ordering 
activity contracting officer to determine OLM prices fair and 
reasonable. Contractors with an approved purchasing system per FAR 44.3 
are exempt from the three quote requirement.
    <bullet> Provides procedures for the ordering activity contracting 
officer to make a determination that all indirect costs associated with 
OLMs are fair and reasonable.
    <bullet> Clarifies travel costs are governed by FAR 31.205-46 and 
exempts travel OLMs from certain requirements, including the \1/3\ of 
the order threshold, price reasonableness determination requirement, 
and GSAR clause 552.238-74 Industrial Funding Fee and Sales Reporting.
    <bullet> Clarifies the ordering activity contracting officer is 
required to follow the procedures found at FAR 8.404(h)(3)(iv) prior to 
an increase in the ceiling price of OLMs.

B. Analysis of Public Comments

    GSA received four comment letters in response to the proposed 
rule.\1\ All comments filed were considered, many of which led to the 
changes described in the previous section.\2\ Public comments are 
grouped into categories in order to provide clarification and to better 
respond to the issues raised.
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    \1\ See GSAR Case 2016-G506; Docket 2016-0016; Sequence 1 [81 FR 
62445 (Sep. 9, 2016)].
    \2\ See Section II.A, Summary of Changes Made at the Final Rule 
Stage.
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1. Three Quote Requirement
    Comment: Two commenters recommended GSA eliminate the proposed 
requirement for contractors to submit three quotes to the ordering 
activity contracting officer to determine price reasonableness.\3\ One 
commenter stated the requirement would be burdensome and unnecessary; 
that commenter also asked if the lowest priced quote would be the basis 
for the price evaluation.\4\ The other commenter asked if the same 
three quotes could be used for multiple orders.\5\
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    \3\ See e.g., CGP and ITAPS Letter and DM Letter.
    \4\ See CGP and ITAPS Letter.
    \5\ See DM Letter.
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    Response: GSA partially agreed with two of the commenter's 
recommended alternatives and revised and narrowed the three quote 
requirement for each OLM. First, the special ordering procedures at 
GSAR 552.238-82(d)(7)(i) has been revised to instruct contractors to 
obtain three quotes for each OLM above the simplified acquisition 
threshold. The three quotes are not submitted with the offer, but 
should be maintained in the contractor's file and are still subject to 
audit. The threshold has been increased from the micro-purchase 
threshold to the simplified acquisition threshold to be consistent with 
ordering procedures at FAR Subpart 8.4. Second, paragraph (d)(7)(i) has 
been revised to exempt contractors that have an approved purchasing 
system determined by a Contractor Purchasing System Review (CPSR) per 
FAR 44.3 from the three quote requirement. The contractor shall follow 
its purchasing system requirement instead of the three quote 
requirement identified in paragraphs (d)(7)(i)(A)-(C). The ordering 
activity contracting officer will make the determination that prices 
for all OLMs are fair and reasonable and may make this determination 
based on relevant pricing available, including the direct competition 
of offers received in response to their solicitation. Lastly, the 
addition of the OLM authority to the authorized Schedules provides an 
added flexibility through which industry can provide complete 
procurement solutions through the FSS program, reducing the need for 
contractors to prepare solutions for separate contracts. The reduction 
results in managing fewer open market contracts and decreasing proposal 
costs.
2. OLM Threshold of 33 Percent
    Comment: Two commenters recommended GSA remove the requirement that 
OLMs be limited to 33 percent of the order per the special ordering 
procedures at GSAR 552.238-82(d)(4).\6\ One commenter stated the 33 
percent threshold was arbitrary and may be difficult to maintain over 
time, noting that other direct cost (ODC) Special Item Numbers (SINs) 
currently used in the Schedules program have no such limits.\7\ The 
second commenter also stated the threshold was arbitrary and will 
invoke unnecessary consequences, citing examples where travel costs may 
exceed the OLM threshold.\8\
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    \6\ See e.g., CGP and ITAPS Letter and Jalad Letter.
    \7\ See CGP and ITAPS Letter.
    \8\ See Jalad Letter.
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    Response: GSA agrees that travel should not be included in the 
limitation and made this change in the final rule. However, GSA does 
not agree that the 33 percent cap on OLMs is arbitrary, although to 
make it easier to understand and remember, it is revising the threshold 
to 33.33 percent or \1/3\ of the order. 41 U.S.C. 152(3)(B) deemed FSS 
procedures to meet the Competition in Contracting Act (CICA) 
requirement of full and open competition as long as participation has 
been open to all responsible sources; and orders and contracts under 
those procedures result in the lowest overall cost alternative. This 
statutory language is not found in other IDIQ contracts.
    GSA determined that to meet the statutory requirement, additional 
levels of protection were required, one of which was a cap on order 
level materials.
    Having determined there must be a cap, GSA's next consideration is 
around the appropriate level. In large scale Engineering Services and 
IT buys, GSA is aware of customer agencies adding additional controls 
once materials top 10 percent. On the other hand, in advertising 
services, media time, a

[[Page 3277]]

single OLM, can easily exceed 25 percent of the cost of an order. To 
provide a reverse example, as a result of industry feedback associated 
with the Maximum Order Threshold in installation services for systems 
furniture, GSA learned that installation services often top 25 percent 
of the cost of the furniture.
    Thus, GSA concluded: (1) There has to be a cap, (2) the cap should 
be above 25 percent, and (3) the cap has to be below 50 percent, to 
ensure the principle purpose of the order was to acquire a service or 
product off of the Federal Supply Schedule. While any number between 26 
percent and 49 percent would fit, GSA also concluded that to be 
consistent the Federal Supply Schedules program, the cap has to be 
clear, has to be easy to explain to customer agencies, has to be easy 
for contractors to understand and follow, has to be easy for GSA to 
conduct needed training, and has to be easy for everyone to remember. 
There is only one number between \1/4\ and \1/2\ which meets all these 
criteria: \1/3\. Thus, GSA set the OLM cap at \1/3\, or 33.33 percent.
3. Travel Costs
    Comment: Two parties submitted comments relating to the application 
of certain OLM requirements and procedures to travel costs.\9\ One 
commenter asked if the OLM ordering procedures would contain the same 
flexibility as Schedule clause C-FSS-370 Contractor Tasks/Special 
Requirements.\10\ The other commenter stated applying the proposed OLM 
procedures to travel costs would be burdensome on ordering 
agencies.\11\
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    \9\ See e.g., CGP and ITAPS Letter and Jalad Letter.
    \10\ See CGP and ITAPS Letter.
    \11\ See Jalad Letter.
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    Response: The special ordering procedures at GSAR clause 552.238-82 
have been revised to allow the same flexibility as Schedules clause C-
FSS-370 Contractor Tasks/Special Requirements. For the authorized 
Schedules allowing for OLMs, the GSAR clause 552.238-82 Special 
Ordering Procedures for the Acquisition of Order-Level Materials will 
replace the travel portion (b) of the Schedules clause C-FSS-370 
Contractor Tasks/Special Requirements. Specifically, the final rule 
clarifies travel OLMs will continue to be handled in accordance with 
FAR Part 31.205-46 and exempts travel OLMs from the requirements in 
clause 552.238-74 Industrial Funding Fee and Sales Reporting, the 33.33 
percent threshold, and the price reasonableness determination in 
subparagraph (d)(7) of GSAR clause 552.238-82. However, if an order 
includes both travel and non-travel OLMs, the non-travel OLMs in the 
order must comply with all OLM requirements in GSAR clause 552.238-82.
4. Applicability of GSAR Clause 552.238-74 Industrial Funding Fee and 
Sales Reporting
    Comment: One party provided comments relating to the applicability 
of GSAR clause 552.238-74 Industrial Funding Fee and Sales Reporting on 
OLMs.\12\
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    \12\ See CGP Letter.
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    The basic version of the clause requires contractors to report 
Schedule sales within 30 days after the end of each quarter. Alternate 
I of the clause requires contractors to report transactional data 
within 30 days after the end of each month. Both versions of the clause 
require contractors to remit IFF payments within 30 days after the end 
of each quarter. The IFF, currently set at 0.75 percent, is charged to 
ordering activities for the use of the Schedules program but is 
remitted by the contractor; the amount of IFF due each quarter is based 
upon the amount of reported sales. The proposed rule treated all OLMs 
as reportable sales in regards to GSAR clause 552.238-74.
    The commenter stated reporting OLMs is an information collection 
burden that should be borne by the Government. The commenter also 
submitted three questions:
    <bullet> Is the IFF applicable to OLMs reported under the OLM SIN?
    <bullet> How will GSA use lump sum sales reported through the 72A 
Reporting System to evaluate appropriate OLM usage?
    <bullet> Do transactional data reporting requirements apply for 
OLMs under contracts that include Alternate I of clause 552.238.74?
    Response: Task or delivery orders line items that include OLMs are 
subject to the reporting and IFF remittance requirements of GSAR clause 
552.238-74, with the exception of travel costs. The information 
collection burden for both versions of that clause is already addressed 
by existing information collections that are approved by the Office of 
Management and Budget's Office of Information and Regulatory Affairs, 
in accordance with the Paperwork Reduction Act; \13\ those estimates 
are updated every three years to account for changes in the program 
over time.
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    \13\ Public Law 104-13, 109 Stat. 163.
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    As to the questions regarding OLM and sales reporting, GSA offers 
the following responses:
    <bullet> The IFF is applied to OLMs reported under the OLM SINs, 
except for travel.
    <bullet> Including OLMs (other than travel) in these information 
collections provides GSA a control mechanism to ensure that the Federal 
Supply Schedules continue to ensure the lowest overall cost 
alternative.
    <bullet> OLMs (other than travel) are subject to the transactional 
data reporting requirements of GSAR clause 552.238-74 Alternate I.
5. Parity With Other Government Contract Vehicles
    Comment: One commenter stated the proposed rule fails to meet its 
objective of establishing parity with other Government contract 
vehicles.\14\
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    \14\ See CGP and ITAPS Letter.
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    The proposed rule noted, ``Currently, [IDIQ] contracts provide the 
flexibility to easily acquire order-level materials; however the FSS 
program does not. This proposed rule aims to create parity between the 
FSS program and other commercial IDIQs . . .'' \15\ However, the 
commenter stated the proposed rule failed to provide parity with other 
programs because other programs do not have requirements to send three 
quotes or report OLMs, but do allow contractors to recover indirect 
costs.
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    \15\ See GSAR Case 2016-G506; Docket 2016-0016; Sequence 1 [81 
FR 62445 (Sep. 9, 2016)].
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    Response: As noted in the proposed rule and acknowledged by the 
commenter, other commercial-item IDIQ contracts allow for OLMs. 
Accordingly, this rule provides parity in that regard. However, this 
final rule requires OLMs (other than travel costs) to be reported in 
accordance with GSAR clause 552.238-74 to provide GSA insight into 
their use and to facilitate IFF collection.
6. Requirements of FAR Clause 52.212-4 Alternate I
    Comment: One commenter stated the FAR does not require the 
procedures proposed by this rule and the existing FAR clause 52.212-4 
Alternate I provides a mechanism to obtain OLMs that ensures the 
integrity of the Schedules program.\16\
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    \16\ See CGP and ITAPS Letter.
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    Response: Several changes have been made to the GSAR text as a 
result of comments received in response to the proposed rule. The 
intent of these changes, and the rule in general, is to align OLM 
ordering procedures with existing authorities, including the FAR, to 
the maximum extent possible. However, GSA received feedback from its 
customer agencies that special OLM ordering procedures would be needed 
in

[[Page 3278]]

order to ensure appropriate use of the authorized Schedules that allow 
for OLMs. In addition to special ordering procedures, customer agency 
feedback contributed to the 33.33 percent threshold for OLMs. GSA 
received feedback from customer agencies that a threshold over 50 
percent would be too high since over half of the order would be 
comprised of order-level materials and not be consistent with the 
intent of the OLM authority. OLMs are to be placed in direct support of 
a task or delivery order (and not the primary purpose), therefore the 
\1/3\ threshold struck a balance by encouraging the use of OLMs while 
enforcing a control mechanism at the same time.
7. Indirect Costs
    Comment: One commenter stated the GSAR rule should not preclude 
agencies from allowing indirect costs. Proposed GSAR 538.7103(a)(3) 
stated, ``Insert `none' in FAR clause 52.212-4(i)(1)(ii)(D)(2).'' The 
commenter indicated there are costs associated with contractors 
procuring OLMs separate from the fully burdened labor rate awarded on 
the Schedule contract, and the proposed rule does not provide a 
mechanism for recovering those costs.
    Response: The GSAR text at 552.238-82(d)(7) has been revised to be 
consistent with the current FAR fill-in found at 52.212-4 Alternate 1 
(i)(1)(ii)(D)(2) to allow the flexibility for vendors to recover 
indirect costs.
8. Existing Ancillary Products/Services SINs on Schedules
    Comment: One commenter inquired about the impact the proposed rule 
would have on SINs under existing Schedules for ancillary products/
services and other direct costs (ODCs).\17\
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    \17\ Ibid.
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    Response: GSA is implementing non-regulatory guidance for its FSS 
acquisition workforce in conjunction with this regulatory final rule, 
which will be viewable to the public in the General Services 
Administration Acquisition Manual (GSAM) posted on Acquisition.gov.\18\ 
The new non-regulatory GSAM guidance states items awarded under 
ancillary supplies or ODC SINs are not considered order-level 
materials.
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    \18\ https://www.acquisition.gov/?q=gsam_looseleaf.
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9. Special Ordering Procedures--Order Preference
    Comment: One commenter asked whether the OLM clause's requirement 
to follow the procedures at FAR 8.404(h) is intended to require 
ordering agencies to specify to Schedule contractors the type of 
request for quotations they must use in obtaining quotations for 
OLMs.\19\
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    \19\ See CGP and ITAPS Letter.
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    Response: The intent of the special ordering procedures at 552.238-
82(d)(6) clause is to provide guidance on the type of order preference 
for services and direction to the ordering activity on issuing time-
and-materials or labor hour orders including OLMs.
10. Special Ordering Procedures--OLM SIN
    Comment: One commenter inquired about the process for obtaining an 
OLM Special Item Number (SIN).
    Response: The OLM SIN will be added to all existing contracts for 
Schedules authorized to allow for OLMs by a Government-initiated 
bilateral modification. New contracts under any Schedule authorized to 
allow for OLMs will include the OLM SIN once the Schedule solicitation 
is updated. However, the OLM SIN cannot be the only awarded SIN on a 
FSS contract or a FSS BPA.
11. Special Ordering Procedures--Ceiling Price
    Comment: One commenter recommended GSA delete the proposed 
procedures at GSAR 552.238-82(d)(9), which required ordering activities 
to follow the procedures at FAR 8.405-6(d) in the event the ordering 
activity increases the ceiling price of an OLM above the micro-purchase 
threshold. The commenter indicated these procedures are a burdensome 
requirement that conflicts with the contracting officer's independent 
judgment to determine what constitutes a cardinal change.\20\
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    \20\ See Jalad Letter.
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    Response: The procedures in GSAR clause 552.238-82 have been 
revised to be consistent with the requirements at FAR 8.404(h)(3)(iv). 
The clause reiterates the procedures required when increasing the 
ceiling price for OLMs.
12. Open Market Items
    Comment: One commenter requested GSA define open market items in 
the GSAR rule.\21\
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    \21\ See CGP and ITAPS Letter.
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    Response: Open market items are procured in accordance with FAR 
8.402(f) and are purchased outside the authority of the Schedules 
program using open market procedures (e.g., FAR Parts 13, 14, and 15). 
The difference in authority is addressed in the OLM definition and the 
special ordering procedures of the final rule. Accordingly, GSA chose 
not to define open market items in the new GSAR provisions and GSAR 
clause.
13. Schedule Pricelists for OLMs
    Comment: One commenter asked whether contractors will be required 
to build a fixed burden into their Schedule pricelists for OLMS.\22\
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    \22\ See Jones Letter.
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    Response: The nature of the specific OLMs will not be known at the 
time of the FSS contract or FSS BPA award. Consequently, any potential 
indirect costs could not be specified in advance and included on the 
Schedule pricelist. However, the final rule allows indirect costs in 
accordance with the procedures at GSAR 538.7204, which is in alignment 
with FAR clause 52.212-4 Alternate I.

III. Expected Cost Savings of This Final Rule

    Data was gathered from GSA's Federal Acquisition Service (FAS) to 
estimate total annualized cost savings that will be achieved from the 
number of Schedule contracts that will authorize OLM. A 7 percent 
discount rate was used for all calculations.
    GSA reviewed active FY 2018 contracts for contractors that hold 
Schedule and non-Schedule contracts to understand the duplicate 
contract landscape. The total baseline population is 16,450 contracts 
that include Schedule and non-Schedule contracts. Of the total contract 
population, 14,674 were Schedule contracts and 1,776 were non-Schedule 
contracts. Small businesses were about 80 percent of this population 
with large businesses representing the remaining 20 percent of the 
total population. The data illustrated that 11 percent of the total 
contract population hold Schedule and non-Schedule contracts. Of the 11 
percent, about 59 percent of those contracts are duplicates. From the 
59 percent of duplicate contracts, it is estimated there will be a 50 
percent contract reduction, thus resulting in contract proposal and 
contract administrations savings for industry. It is understood, that 
one contractor may hold more than one duplicate contract among their 
Schedule and non-Schedule contracts. The estimated 50 percent reduction 
in duplicate contracts represents 421 small business contracts and 105 
large business contracts.

Government Cost Savings

    Allowing OLMs on authorized Schedules will help reduce contract 
duplication and associated administrative costs. By reducing the

[[Page 3279]]

amount of duplicate and ancillary contracts, cost savings will be 
achieved by a reduction in source selection procedures and contract 
administration. It was estimated that two source selection participants 
require an average of 24 hours to execute the source selection process 
per contract. Contract administration savings was calculated by 
estimating four hours per contract per year. By combining the savings 
achieved from the reduction of source selection procedures and contract 
administration, the estimated annualized cost savings for the 
Government is $109,434.

Public Cost Savings

    The addition of the OLMs on authorized Schedules will result in 
proposal preparation and contract administration savings for both small 
and large businesses. It was estimated that a senior and a journeyman 
level representative require 24 hours to prepare a proposal to acquire 
a new contract. Contract administration savings was calculated by 
estimating four hours per contract per year. By combining the savings 
achieved from the reduction of proposal preparation for new contracts 
and contract administration, the estimated annualized cost savings for 
the public is $164,559.
    The OLM authority adds GSAR clause 552.238-82, Special Ordering 
Procedures, which includes a requirement for the contractor proposing 
OLMs as part of a solution to obtain three quotes for each order above 
the simplified acquisition threshold to support the price 
reasonableness of the OLMs consistent with existing standard procedures 
at FAR 8.405-1(d). One of these quotes may be furnished by the 
contractor, and if the contractor has an approved purchasing system per 
FAR 44.3, they are exempt from the three quote requirement. It was 
estimated that 10 percent of the total Schedule population (1,467 
contracts) would require one hour to document their records that three 
quotes were obtained to support price reasonableness. The estimated 
annualized cost for the public is $35,076. The total net savings for 
the public is $121,012.
    The total annualized cost savings is estimated at $230,446.

IV. Executive Order 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

V. Executive Order 13771

    This final rule is considered an E.O. 13771 deregulatory action. 
Details on the estimated cost savings of this proposed rule can be 
found in the rule's economic analysis. Expected annualized cost savings 
are $230,446 (7 percent discount rate, in perpetuity).

VI. Executive Order 13777

    This final rule was identified by GSA's Regulatory Reform Task 
Force as a rule that improves efficiency by eliminating procedures with 
costs that exceed the benefits as described in section IV.

VII. Regulatory Flexibility Act

    This final rule will not have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule 
merely clarifies the authority to acquire OLMs when placing a task or 
delivery order against an authorized FSS contract or FSS BPA. The rule 
imposes no new reporting, recordkeeping, or other information 
collection requirements.
    Although this rule does not have a significant impact on a 
substantial number of small entities, GSA nonetheless opted to prepare 
an Initial Regulatory Flexibility Analysis (IRFA) in conjunction with 
the proposed rule. As a result, GSA has also prepared a Final 
Regulatory Flexibility Analysis (FRFA), consistent with 5 U.S.C. 603, 
which is summarized as follows:
    GSA does not expect this rule to have a significant economic impact 
on a substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
    GSA has prepared a Final Regulatory Flexibility Analysis (FRFA) 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA is summarized as follows:
    The rule clarifies the authority to acquire order-level materials 
when placing a task order or delivery order against an authorized FSS 
contract or FSS BPA. Task or delivery order line times that include 
OLMs are subject to the reporting and IFF remittance requirements of 
GSAR clause 552.238-74, with the exception of travel costs. The 
reporting and IFF remittance requirements of GSAR clause 552.238-74 is 
an existing requirement to those contractors that currently hold a GSA 
Schedule contract. There are over 15,000 (approximately 80 percent) 
small businesses that have GSA Schedule contracts, which already adhere 
to the required reporting and IFF remittance requirements of GSAR 
clause 552.238-74. The OLM authority will expand business opportunities 
for those small businesses that do not hold GSA Schedule contracts. 
Entities that do not hold GSA Schedule contracts, and are awarded task 
or delivery orders that include OLMs, are required to adhere to the 
reporting requirement at GSAR clause 552.238-74. There were no comments 
filed by the Chief Counsel for Advocacy of the Small Business 
Administration in response to the rule. Interested parties may obtain a 
copy of the FRFA from the Regulatory Secretariat. The Regulatory 
Secretariat has submitted a copy of the FRFA to the Chief Counsel for 
Advocacy of the Small Business Administration.

VIII. Paperwork Reduction Act

    The final rule does not contain any new information collection 
requirements that require the approval of the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. chapter 35). 
Order-level materials, excluding travel, are subject to the reporting 
requirements of GSAR clause 552.238-74 Industrial Funding Fee and Sales 
Reporting, which is already approved through the information collection 
tracked under OMB Control Number 3090-0121.

List of Subjects in 48 CFR Parts 515, 538, and 552

    Government procurement.

    Dated: January 19, 2018.
Jeffrey A. Koses,
Senior Procurement Executive, General Services Administration.

    Therefore, GSA amends 48 CFR parts 515, 538, and 552 as set forth 
below:

0
1. The authority citation for 48 CFR parts 515, 538, and 552 continues 
to read as follows:

    Authority: 40 U.S.C. 121(c).

PART 515--CONTRACTING BY NEGOTIATION

0
2. Amend section 515.408 by adding a sentence to the end of the 
introductory text of paragraph (c) to read as follows:

[[Page 3280]]

515.408  Solicitation provisions and contract clauses

* * * * *
    (c) * * * Offerors are not required to complete the commercial 
sales practices disclosure for order-level materials (See subpart 
538.72).
* * * * *

PART 538--FEDERAL SUPPLY SCHEDULE CONTRACTING

0
3. Add subpart 538.72 to read as follows:
Subpart 538.72--Order-Level Materials
Sec.
538.7200 Definitions.
538.7201 Applicability.
538.7202 [Reserved]
538.7204 Contract clauses.

Subpart 538.72--Order-Level Materials


538.7200  Definitions.

    As used in this subpart:
    Order-level materials means supplies and/or services acquired in 
direct support of an individual task or delivery order placed against 
an authorized (see GSAR 538.7201(b) Federal Supply Schedule (FSS) 
contract or FSS Blanket Purchase Agreement (BPA)), when the supplies 
and/or services are not known at the time of Schedule contract or FSS 
BPA award. The prices of order-level materials are not established in 
the FSS contract or FSS BPA. However, order-level materials are 
purchased under the authority of the FSS program, pursuant to 41 U.S.C. 
152(3), and are not open market items, which are discussed in FAR 
8.402(f).


538.7201  Applicability.

    (a) The GSA Senior Procurement Executive authorizes the use of 
order-level materials on Federal Supply Schedules.
    (b) The list of Federal Supply Schedules authorized to allow for 
order-level materials is available at https://www.gsa.gov/olm.


538.7202   [Reserved]


538.7204  Contract clauses.

    (a) Use FAR clause 52.212-4 Alternate I in all Federal Supply 
Schedules authorized for the acquisition of order-level materials (see 
538.7201(b)). Use the following language for the clause fill-in:
    (1) Insert ``Each order must list separately subcontracts for 
services excluded from the FSS Hourly Rates'' in paragraph 
(e)(1)(iii)(D).
    (2) Insert ``Each order must list separately the elements of other 
direct costs for that order'' in paragraph (i)(1)(ii)(D)(1).
    (3) Insert ``Each order must list separately the fixed amount for 
the indirect costs and payment schedule; if no indirect costs are 
approved, insert `None' '' in (i)(1)(ii)(D)(2).
    (b) Use 552.238-82, Special Ordering Procedures for the Acquisition 
of Order-Level Materials, in all Federal Supply Schedules authorized 
for the acquisition of order-level materials (see 538.7201).

PART 552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Add section 552.238-82 to read as follows:


552.238-82  Special Ordering Procedures for the Acquisition of Order-
Level Materials

    As prescribed in 538.7204(b), insert the following clause:

Special Ordering Procedures for the Acquisition of Order-Level 
Materials (JAN 2018)

    (a) Definitions.
    Order-level materials means supplies and/or services acquired in 
direct support of an individual task or delivery order placed 
against a Federal Supply Schedule (FSS) contract or FSS blanket 
purchase agreement (BPA), when the supplies and/or services are not 
known at the time of Schedule contract or FSS BPA award. The prices 
of order-level materials are not established in the FSS contract or 
FSS BPA. Order-level materials acquired following the procedures in 
paragraph (d) are done so under the authority of the FSS program, 
pursuant to 41 U.S.C. 152(3), and are not open market items, which 
are discussed in FAR 8.402(f).
    (b) FAR 8.403(b) provides that GSA may establish special 
ordering procedures for a particular FSS.
    (c) The procedures in FAR subpart 8.4 apply to this contract, 
with the exceptions listed in this clause. If a requirement in this 
clause is inconsistent with FAR subpart 8.4, this clause takes 
precedence pursuant to FAR 8.403(b).
    (d) Procedures for including order-level materials when placing 
an individual task or delivery order against an FSS contract or FSS 
BPA.
    (1) The procedures discussed in FAR 8.402(f) do not apply when 
placing task and delivery orders that include order-level materials.
    (2) Order-level materials are included in the definition of the 
term ``materials'' in [FAR] clause 52.212-4 Alternate I, and 
therefore all provisions of FAR clause 52.212-4 Alternate I that 
apply to ``materials'' also apply to order-level materials.
    (3) Order-level materials shall only be acquired in direct 
support of an individual task or delivery order and not as the 
primary basis or purpose of the order.
    (4) The cumulative value of order-level materials in an 
individual task or delivery order awarded under a FSS contract or 
FSS BPA shall not exceed 33.33 percent of the total value of the 
individual task or delivery order.
    (5) All order-level materials shall be placed under the Order-
Level Materials SIN.
    (6) Prior to the placement of an order that includes order-level 
materials, the Ordering Activity shall follow procedures in FAR 
8.404(h).
    (7) To support the price reasonableness of order-level 
materials,
    (i) The contractor proposing order-level materials as part of a 
solution shall obtain a minimum of three quotes for each order-level 
material above the simplified acquisition threshold.
    (A) One of these three quotes may include materials furnished by 
the contractor under FAR 52.212-4 Alt I (i)(1)(ii)(A).
    (B) If the contractor cannot obtain three quotes, the contractor 
shall maintain its documentation of why three quotes could not be 
obtained to support their determination.
    (C) A contractor with an approved purchasing system per FAR 44.3 
shall instead follow its purchasing system requirement and is exempt 
from the requirements in 552.238-82(d)(7)(i)(A)-(B).
    (ii) The Ordering Activity Contracting Officer must make a 
determination that prices for all order-level materials are fair and 
reasonable. The Ordering Activity Contracting Officer may base this 
determination on a comparison of the quotes received in response to 
the task or delivery order solicitation or other relevant pricing 
information available.
    (iii) If indirect costs are approved per [FAR 52.212-
4(i)(1)(ii)(D)(2) Alternate I), the Ordering Activity Contracting 
Officer must make a determination that all indirect costs approved 
for payment are fair and reasonable. Supporting data shall be 
submitted in a form acceptable to the Ordering Activity Contracting 
Officer.
    (8) Prior to an increase in the ceiling price of order-level 
materials, the Ordering Activity Contracting Officer shall follow 
the procedures at FAR 8.404(h)(3)(iv).
    (9) In accordance with GSAR clause 552.215-71 Examination of 
Records by GSA, GSA has the authority to examine the Contractor's 
records for compliance with the pricing provisions in FAR clause 
52.212-4 Alternate I, to include examination of any books, 
documents, papers, and records involving transactions related to the 
contract for overbillings, billing errors, and compliance with the 
IFF and the Sales Reporting clauses of the contract.
    (10) OLMs are exempt from the following clauses:
    (i) 552.216-70 Economic Price Adjustment--FSS Multiple Award 
Schedule Contracts.
    (ii) 552.238-71 Submission and Distribution of Authorized FSS 
Schedule Pricelists.
    (iii) 552.238-75 Price Reductions.
    (11) Exceptions for travel.
    (i) Travel costs are governed by FAR 31.205-46 and therefore the 
requirements in paragraph (d)(7) do not apply to travel costs.
    (ii) Travel costs do not count towards the 33.33% limitation 
described in paragraph (d)(4).

[[Page 3281]]

    (iii) Travel costs are exempt from clause 552.238-74 Industrial 
Funding Fee and Sales Reporting.

(End of Clause)

[FR Doc. 2018-01232 Filed 1-23-18; 8:45 am]
 BILLING CODE 6820-61-P


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