The VA Acquisition Academy provided a wonderful foundation for me as how to interpret the Federal Acquisition Regulations. My experience in the government allowed me practice of how they are to be applied to federal contracts. Life has taught me that you don’t truly understand something unless you can explain it in a manner that leads others to understand it, too.
The FSS provides great training by way of its Personnel Management Resource Service branch through Lydia McKay. If you are a FSS contract holder then go to those video-based trainings.
If you still don’t get the legalese explained then I’m here to make it make sense for you.
I-FSS-639 – Contract Sales Criteria
This is actually a provision and not a clause. What’s the difference? A clause is standard throughout the entire federal government or an entire federal agency and a provision only holds true to a single project, specific department or a recognized structured group like GSA.
Consequently, the sales criteria referenced was developed to be upheld by the COs within the VA’s Federal Supply Schedule program which serves the federal healthcare system and other eligible ordering facilities.
This one’s really simple. A offeror must display the capability and management to oversee a federal contract with at least $225,000 in sales on a ten-year full-length contract agreement. That’s $25k of sales in the first two years and at least $25k in sales every year thereafter. This is a baseline for your estimated contract value which is calculated by your assigned CO. I’m sure you will read more about that in an upcoming post. So, if that appeals to you and it should because it directly effects the project’s timeline, keep your eyes peeled.
Sales are important because they make you money. They also have a proportional relationship to your IFF payment (0.5% for commodities and 1% for services). Sales are the lifeline to you keeping a FSS contract. If you don’t meet the sales criteria then your CO will cancel the agreement by enacting GSAM clause 552.238-79.
Don’t get scared! The first year is a grace period for marketing (on the GSA platform) and the second year is go time. By then, you and your CO will have garnered an understanding of how you will perform inside the federal arena. Remember, the agreement is not set in stone after negotiations. As your company develops and the economy changes, you can modify your existing contract to add or delete products as well as increase or decrease prices of line-items attached to the living agreement. See how this stuff all works together? The government doesn’t set you up for failure. Eureka! They are the biggest customer base in the entire world. When else would you have the opportunity to advertise like that. If the perimeters of your agreement are competitive, sales will take care of themselves. Even if they don’t and your contract gets canceled you can just apply again. It’s an open and continuous solicitation.
FAR 52.225-5 – Trade Agreements
How does the FSS fit into the global economy? Glad you asked. Quite snuggly. There are requirements for production labor and end products. Thus, your company can possess an international arm and still do business with the Federal Government of the United States of America.
The World Trade Organization has drafted the Government Procurement Agreement and the country’s Free Trade Act applies to its government business practices. Simply put, I made a few foolproof rules with my vendors which also adheres to the Buy American Act as to avoid legal issues: 1.) At least 51% of the proposed commodity must be manufactured inside the United States or its underlying territories, 2.) Designated countries can be found inside the 03-Price Proposal portion of the present FSS solicitation. Just look for the tab in the Excel workbook. These countries have four designations but meat and potatoes are better than vegetables, anyway. If you’re interested then the clause lays it out nicely and 3.) The end product must be shipped from a designated state and territory of the USA.
Don’t forget that the majority of the end product must be manufactured and shipped from home soil. Don’t press your luck. You can consult the Customs and Border Protection for historical rulings and gather a determination pertaining to substantial transformation, but my methodology proved worthy and adherent abiding to common law.
Set-Asides and non-manufacturers (distributors) are also effected by this clause. See FAR 19.505 is applicable statute. Distributors of a designated small business status must ship an end product primarily manufactured in the United States or its outlying areas as well as ship products from small businesses in the same manner. Furthermore, concerning kit assembly, 50% or more of the cost of the kit’s components must be manufactured CONUS adhering to NAICS standards of the kit’s components that make up the whole. In short, at least half the kit must be produced inside the United States or one of its designated territories.
Services contracts are not excluded. The firm which provides the services mustbe be established in a designated country. That solicitation may also have a specified tab now. If not, snake the tab from the commodities solicitation because the countries are the same.
Non-Availability Determination
Remember, I said don’t press your luck? Well, you can. Especially with pharmaceuticals and here’s how. Consult FAR 25.7 for a list of countries you can’t manufacture in. Otherwise, you’re golden.
Examples of this rule inside the FSS are 42-2A (covered drugs), nitrile gloves and COVID-19 tests. Thus essentialness, material availability and worldwide pandemics need apply.
It is essential that companies monitor compliance and notify their CO if the country of origin changes to be non-compliant and in such a case such items must be removed through contract modification.
Keep in mind that as with anything involving FAR 52.225-5, you may need to provide a certificate. I would include information of the ilk even if your CO doesn’t ask for it. I always told vendors that too much is better than not enough.
FAR 52.238-81 – Price Reductions Clause (PRC)
The PRC hinges on the tracking customer or basis of award. This is a customer or category of customers parallel or somewhat parallel to the size of the government or similar in purchasing structure. It can be your most favored customer or the one with the best discounts but it doesn’t have to be. An example may be a large business or a hospital as well as an entire healthcare system. This component creates a tracking ratio which is proportionate of the awarded price compared to that price of the TC or BOA.
Three instances trigger the PRC: 1.) A change in the commercial pricelist, 2.) A change in the price of the TC/BOA and 3.) A disturbance in the tracking ratio.
The first one is simple. If your commercial prices lower than you have to lessen your government prices by atleast the same percentage change.
The second is just as simple. If your TC/BOA price lowers then same thing. Lower the price to the government by at least the same percentage change.
The third, maybe not so simple. Let’s see if I can help you. If the tracking ratio is disturbed unfavorably to the government then contract prices must be lowered. Doesn’t seem fair. Does it? COs call it price protection. The government calls it better buying power. You laugh all the way to the bank because you’re advertising and selling to the largest customer base in the entire world. Let them think they have control while you take three month exotic vacations and buy your employees luxury cars.
The tracking ratio must stay the same from the time of award and can be negotiated. I always told my vendors that 1.00 alleviates administrative burden but I would definitely agree to a funny number. Especially if it favored the government because they must like tracking and calculating data more than me but it could end up in backpayment if they forgot to track it for whatever reason.
For example,a tracking ratio of 1.00 means that prices are equal between the TC/BOA and contract pricing. Anything below means the government’s getting a better deal than the TC.
Now here’s an example of ratio disturbance that’s not disturbing. Thank Wayne Simpson. We were trained in-house the same way. Good job, Hannah Zerphey!
A ratio of 0.96 occurs when the TC price is $100 and the government price is $96. However, the ratio is disturbed if the item is sold at $98 by the TC. Whereas, the agreed to ratio must remain at 0.96 and not rise to 0.98 because the government discount is smaller than originally agreed to.
The price reduction must be designated upon company documents and displayed through company sales.
Keep in mind, if you don’t keep track then the government will and they have powerful software that crunches every number. We had training on that, too. I’ll never forget that because a gun wielding robber broke into my apartment, threaten to kill me, took a pee and walked out with my personal and government laptops the night before! Good thing God answers prayers because he neither saw my face or opened my bedroom door.
If you think I can help then email nicholas.s.robertson@outlook.com for your introductory email and free consultation.
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