General Services Administration Acquisition Regulation; Multiple Award Schedule Price Reductions Clause

GENERAL SERVICES ADMINISTRATION

48 CFR Parts 538 and 552

[APD 2800.12A, CHGE 57]

General Services Administration Acquisition Regulation; Multiple

Award Schedule Price Reductions Clause

AGENCY: Office of Acquisition Policy, GSA.

ACTION: Final rule.

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SUMMARY: The General Services Administration Acquisition Regulation

(GSAR) is amended to prescribe a Price Reductions clause for use in

multiple award schedule (MAS) solicitations and contracts. The clause

is a modification of that currently in use. The modifications clarify

the clause's applicability, reduce contractor reporting requirements

and eliminate MAS price reductions based on a lower price to an

individual Federal agency.

EFFECTIVE DATE: October 19, 1994.

FOR FURTHER INFORMATION CONTACT:

Ida M. Ustad, Office of GSA Acquisition Policy (202) 501-1224.

SUPPLEMENTARY INFORMATION:

A. Public Comment

A notice of proposed rulemaking was published in the Federal

Register on February 23, 1994 (59 FR 8590). Public comments and

comments received from other Federal agencies and GSA activities were

considered in formulating this final rule. The significant issues and

concerns raised during the comment period are summarized below:

Two organizations suggested the entire Price Reductions clause be

eliminated because it is confusing and inconsistent with commercial

practice. GSA has clarified the aspects of the clause that commentors

found to be confusing. GSA does not agree that the clause is

inconsistent with commercial practice. Some large commercial contracts

contain similar price protection provisions.

GSA believes the clause is necessary to assure that the Government

maintains the relative discount position, negotiated at the time of

contract award, throughout the term of the contract.

Two organizations offered comments in support of the change in the

Price Reductions clause that eliminates certain reporting requirements,

increases the time given contractors to notify the Government of price

reductions, and requires that the Government be extended price

reductions under the same terms and with the same effective dates which

the contractor extends to the commercial customers.

Comments were mixed on the elimination of paragraph (c) of the

current clause which deals with price reductions to Federal agencies.

Federal agencies submitted comments in support of the change, while

some contractors and associations representing them opposed the change

and argued the MAS price would become the starting point for

negotiation on orders and eliminate the need to negotiate a schedule

contract. GSA disagrees; the final rule provides that there shall be no

price reduction for sales to Federal agencies. GSA believes this

change, when combined with revised MAS ordering procedures, gives

agencies the flexibility to obtain reductions within the MAS

contractual framework and will lead to greater MAS usage.

Several organizations suggested the requirement in paragraph (d) of

the proposed clause to pass on general price reductions be deleted as

unnecessary. The suggestion was adopted and the provision is not

included in the final rule.

B. Executive Order 12866

This rule was submitted to the Office of Management and Budget

(OMB) in accordance with Executive Order 12866, Regulatory Planning and

Review.

C. Regulatory Flexibility Act

The rule is not expected to have an economic impact on a

substantial number of small entities as defined under the Regulatory

Flexibility Act. An initial regulatory flexibility analysis was

prepared and submitted to the Chief Counsel for Advocacy of the Small

Business Administration. Copies of the initial regulatory flexibility

analysis were made available for public comment. No comments were

received on the impact of the rule on small business. The final

regulatory flexibility analysis indicates that the rule will affect

contractors, including small businesses, that are awarded contracts

under GSA's MAS program. Historically, approximately seventy percent of

MAS contractors have been small businesses. Based on the number of MAS

contracts currently in effect, it is estimated that 4,288 small

businesses will be impacted by the new rule. The final regulatory

flexibility analysis has been submitted to the Chief Counsel for

Advocacy of the Small Business Administration. Copies of the final

regulatory analysis are available from the office identified above.

D. Paperwork Reduction Act

The Price Reductions clause contains an information collection

requirement which is subject to the Paperwork Reduction Act, 44 U.S.C.

3501 et sequentia. The information collection has been approved by OMB

and assigned OMB Control Number 3090-0235. The title of the information

collection is ``GSAR 552.238-75 Price Reductions.''

The Price Reductions clause is intended to ensure that the

Government maintains its price/discount (and/or term and condition)

advantage in relation to the contractor's commercial customer(s) upon

which the MAS contract is predicated. The customer or category of

customer upon which the award is predicated is identified at the

conclusion of negotiations and reflected in the MAS contract.

The Price Reductions clause requires MAS contractors to notify the

contracting officer of price reductions at the same time that

commercial customers are notified.

The Price Reductions clause is needed to assure that the Government

maintains the relative discount position, negotiated at the time of

contract award, throughout the term of the contract.

The estimated annual burden for the Price Reductions clause is

24,508 hours. This is based upon an estimated average burden per

response of 2 hours, a frequency of 2 responses per respondent, and an

estimated number of likely respondents of 6,127.

Any comments concerning the accuracy of the burden may be directed

to the Director, Office of GSA Acquisition Policy (VP), 18th & F

Streets, NW, Room 4006, Washington, DC, 20405 and to the Office of

Information and Regulatory Affairs of OMB, Attention Desk Officer for

GSA, Washington, DC 20503.

List of Subjects in CFR Parts 538 and 552

Government procurement.

Accordingly, 48 CFR parts 538 and 552 are amended to read as

follows:

PARTS 538 AND 552--[AMENDED]

1. The authority citation for 48 CFR parts 538 and 552 continues to

read as follows:

Authority: 40 U.S.C. 486(c).

2. Section 538.203-71 is amended by revising the heading and adding

paragraph (e) to read as follows:

538.203-71 Solicitation provisions and contract clauses.

* * * * *

(e) Contracting officers shall insert the clause at 552.238-76,

Price Reductions, in all MAS solicitations and contracts.

3. Section 538.272 is added to read as follows:

538.272 MAS price reductions.

(a) Prior to the award of a MAS contract, the contracting officer

and the offeror shall reach an agreement as to the customer (or

category of customers), price lists, and discounts which will serve as

the basis of contract award. The award document shall expressly state

the price/discount relationship between the Government and the

identified commercial customer which is the basis of contract award.

The Price Reductions clause is intended to maintain this price/discount

relationship (and/or term and condition relationship) between the

Government and the offeror's customer or category of customers upon

which the MAS contract was predicated for the contract period.

(b) During the term of the contract, any changes in discount/

pricing practices by the contractor which result or will result in a

less advantageous relationship between the Government and the customer

or category of customers upon which the MAS contract discount/price was

predicated, shall result in a price reduction to the Government to the

extent necessary to reflect the original relationship.

4. Section 552.238-76 is added to read as follows:

552.238-76 Price reductions.

As prescribed in 538.203-71(e), insert the following clause:

Price Reductions (Oct 1994)

(a) Before award of a contract, the Contracting Officer and the

Offeror will agree upon (1) The customer (or category of customers)

which will be the basis of award, and (2) the Government's price or

discount relationship to the identified customer (or category of

customers). This relationship shall be maintained throughout the

contract period. Any change in the Contractor's commercial pricing

or discount arrangement applicable to the identified customer (or

category of customers) which disturbs this relationship shall

constitute a price reduction.

(b) During the contract period, the Contractor shall report to

the Contracting Officer all price reductions to the customer (or

category of customers) that was the basis of award. The Contractor's

report shall include an explanation of the conditions under which

the reductions were made.

(c) (1) A price reduction shall apply to purchases under this

contract if, after the date negotiations conclude, the Contractor--

(i) Revises the commercial catalog, pricelist, schedule or other

document upon which contract award was predicated to reduce prices;

(ii) Grants more favorable discounts or terms and conditions

than those contained in the commercial catalog, pricelist, schedule

or other documents upon which contract award was predicated; or

(iii) Grants special discounts to the customer (or category of

customers) that was the basis of award, and the change disturbs the

price/discount relationship of the Government to the customer (or

category of customers) that was the basis of award.

(2) The Contractor shall offer the price reduction to the

Government with the same effective date, and for the same time

period, as extended to the commercial customer (or category of

customers).

(d) There shall be no price reduction for sales--

(1) To commercial customers under firm, fixed-price definite

quantity contracts with specified delivery in excess of the maximum

order limitation specified in this contract;

(2) To Federal agencies; or

(3) Caused by an error in quotation or billing, provided

adequate documentation is furnished by the Contractor to the

Contracting Officer.

(e) The Contractor may offer the Contracting Officer a voluntary

Governmentwide price reduction at any time during the contract

period.

(f) The Contractor shall notify the Contracting Officer of any

price reduction subject to this clause as soon as possible, but not

later than 15 calendar days after its effective date.

(g) The contract will be modified to reflect any price reduction

which becomes applicable in accordance with this clause.

(End of Clause)

Dated: August 18, 1994.

Arthur E. Ronkovich,

Acting Associate Administrator for Acquisition Policy.

[FR Doc. 94-25703 Filed 10-17-94; 8:45 am]

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