The General Accounting Office (GAO) and Court of Federal Claims
have clamped down on the commonplace practice of adding non-Schedule,
open market items to GSA Schedule orders. In the short run, the
stricture on open market items will make it somewhat harder for
agencies to buy complete solutions from a single GSA Schedule
contractor. In the long run, however, the constraint will accelerate
the development of GSA Schedule teaming arrangements among two
or more GSA Schedule contractors able to offer complete solutions
to complex requirements.
It has long been common practice to add non-Schedule, open market
items to GSA Schedule orders. This has usually been done by printing
the heading “open market items” on the face of the order
somewhere below the list of GSA Schedule items, and then listing
the open market items.
While tacitly tolerated by GSA in order to expand the use of
its Schedules program, it has been unclear whether the addition
of non-Schedule, open market items is really legal. GSA skirts
the issue in its standard Schedule pricelist language, requiring
only a statement that “incidental” items must be purchased
in accordance with applicable law:
For administrative convenience, open market (non-contract)
items may be added to the Federal Supply Schedule Blanket Purchase
Agreement (BPA) or the individual order, if the items are clearly
labeled as such, applicable regulations have been followed,
and price reasonableness has been determined for the items.
FSS Contractor Guide at Section B, emphasis added. A copy of
the FSS Contractor Guide can be found at http://pub.fss.gsa.gov/vendorguide/.
It is under this clause that most agencies justify their decisions
to purchase both Schedule and non-Schedule items on the same purchase
order. However, a close reading of the clause indicates that even
where incidental purchases are involved, the applicable acquisition
regulations must still be followed.
Until recently the GAO and court went along with the GSA’s
permissively vague requirements. It was generally believed permissible
under the so-called “incidental test” for an agency
to issue a purchase order under a Schedule contract containing
both Schedule and non-Schedule items, as long as the non-Schedule
goods and services were “incidental” to the goods and
services that were purchased under the Schedule contract. See
generally, Vion Corp., B-275063.3; B-275069,2, Feb. 4, 1997, 97-1
CPD ¶ 53; Raymond Corp., B-246410, 1992 WL 52427; Amray,
Inc., B-238682; B-238682.2, May 16, 1990, 90-1 CPD ¶ 480;
Rack and Stanley, B.205059, May 25, 1982, 82-1 CPD ¶ 494.
What precisely was meant by “incidental” was never very
clear.
Several months ago, however, the GAO in Pyxis Corporation, B-282469;
B-282469.2, July 15, 1999, 1999 WL 510244, held that there was
no statutory authority for the “incidentals” test enunciated
in past cases. In issuing its decision, the GAO relied heavily
on the United States Court of Federal Claims decision in ATA Defense
Indus., Inc. v. United States, 38 Fed. Cl. 489 (1997).
ATA involved a $673,376 GSA Schedule order placed by the Army
for the upgrade of two target ranges. Of the total order amount,
$444,391 was for Schedule items and $228,985, was for non-Schedule,
open market items. In ATA, the United States Court of Federal
Claims held that under applicable statute an agency is required
to “obtain full and open competition through the use of competitive
procedures,” and that there is “no exception that even
arguably covers ‘incidentals.’” ATA at 503. The
court further stated that unless a product or service falls within
an exception to the competition requirements (such as sole source)
or can be classified as de minimis, the law mandates that the
product be purchased on a competitive basis using a competitive
procedure. The court concluded by stating that there is no exception
covering “incidentals.” Id.
In the wake of both Pyxis and ATA, it would appear that only
non-Schedule goods and services classified as de minimis can still
be included on an order placed against a Schedule contract. What
exactly is considered to be de minimis is not clear, but it is
generally understood that the amount of non-Schedule goods and
services would cover only insignificant purchases such as cables,
wires, cartridges, and the like.
So what are the applicable regulations governing the procurement
of non-Schedule, open market items? What dollar limit, if any,
of non-Schedule items can be included on a GSA Schedule order?
Do the applicable requirements vary depending on the dollar amount
of the open market items? Does it matter what percentage of the
total order the non-Schedule items comprise? For the answers to
these and many more questions, tune in next month for Part Two,
the conclusion to Incidentally Yours.
