The Government Accountability 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, for a long time it was unclear whether the addition of non-Schedule, open market items was really legal. In an attempt to clarify this issue for Schedule users, GSA requires that the following statement be included in many GSA Schedule pricelists:
Note: Open Market Items are also known as incidental items, noncontract items, non-Schedule items, and items not on a Federal Supply Schedule contract. ODCs (Other Direct Costs) are not part of this contract and should be treated at open market purchases. Ordering Activities procuring open market items must follow FAR 8.401(d).
For administrative convenience, an ordering activity contracting officer may add items not on the Federal Supply Multiple Award Schedule (MAS) -- referred to as open market items -- to a Federal Supply Schedule blanket purchase agreement (BPA) or an individual task or delivery order, only if:
1) all applicable acquisition regulations pertaining to the purchase of the items not on the Federal Supply Schedule have been followed, such as publicizing (Part 5), competition requirements (Part 6), acquisition of commercial items (Part 12), contracting methods (Parts 13, 14, and 15), and small business programs (Part 19);
2) the ordering activity contracting officer has determined the price for the items not on the Federal Supply Schedule is fair and reasonable;
3) the items are clearly labeled on the order as items not on the Federal Supply Schedule; and
4) all clauses applicable to items not on the Federal Supply Schedule are included in the order.
While making it clear that GSA considered open market purchases legal, the added provision did little to clarify when an open market purchase was allowable under a GSA Schedule.
GAO went along with the GSA's interpretation holding in several cases that it was 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.
The GAO reversed course with its 1999 decision in Pyxis Corporation,
B-282469; B-282469.2, July 15, 1999, 1999 WL 510244. In Pyxis, GAO 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 Ôincidentals.'" 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's 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, see Part 2.
