Industrial Funding of Federal Supply Schedule Program

GENERAL SERVICES ADMINISTRATION

Industrial Funding of Federal Supply Schedule Program

AGENCY: General Services Administration, Federal Supply Service.

ACTION: Notice.

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This notice invites comments on proposed clauses that will

implement industrial funding of the Federal Supply Service, Federal

Supply Schedule Program. As directed by the House of Representatives'

Committee on Appropriations, the Federal Supply Service of GSA has

examined a number of alternatives for reimbursable funding of several

of its programs for which it currently receives appropriations. The

Federal Supply Schedule Program was identified as appropriate for

conversion to an industrially funded operation. It has been determined

that the most viable method of reimbursable funding of schedule program

would be through adjusting the schedule contract prices upward by 1%.

Under this concept, schedule pricelists would show the adjusted

price. Agencies would order from the contractor at the adjusted price;

the contractor would invoice GSA at the award price; GSA would bill

agencies the adjusted price and retain the difference to fund the

program. This method of funding is consistent with a National

Performance Review recommendation that GSA service operations be paid

for through customer revenues. Under this concept, agencies would

continue to submit purchase/delivery orders directly to the contractor;

however, contractor invoices would be sent to GSA for payment.

DATES: Comments should be submitted to the address shown below on or

before January 26, 1995 to be considered in the formulation of a final

notice.

ADDRESSES: Interested parties should submit written comments to

Nicholas M. Economou, Director, FSS Acquisition Management Center

(FCO), Crystal Mall Building #4, Room 716, Washington, DC 20406.

FOR FURTHER INFORMATION CONTACT:

Linda S. Hauenstein, FCO (703) 305-6566.

SUPPLEMENTARY INFORMATION:

A. Background

The Federal Supply Schedule Program is a major contracting program

used by the Federal Supply Service (FSS) to provide a variety of

commercial supplies and services to Federal Government agencies. The

program accounts for over $2.8 billion in sales annually, and provides

lucrative contracting opportunities for over 5,000 commercial

contractors, most of which are small business entities.

During the fiscal year 1994 budget process, Congress directed FSS

to review its appropriated activities for conversion to reimbursable

funding. Based upon that review, the schedules program was identified

as one of the programs suitable for reimbursable funding. The GSA

fiscal year 1995 budget, therefore, reflected a $7.8 million reduction

in operating expenses for the schedules program. The remaining

appropriated monies will be eliminated over the next two fiscal years.

The cost of providing supplies and services through this program must

therefore be included in the cost of those supplies and services. FSS

will accomplish this by adjusting each schedule contract award price

upwards by 1%. For example, a retail price for an item is $100.00. GSA

negotiates a discount of 10 percent resulting in an award price of

$90.00. The schedule pricelist will reflect an adjusted price of

$90.90. The contractor delivers the goods to the agency and invoices

GSA in the amount of $90.90 (the award price). GSA bills the agency the

adjusted schedule pricelist amount of $90.90. GSA retains the $.90

adjustment as it cost recovery allowance charge, thereby funding the

program.

Currently, schedule contractors must submit invoices to multiple

agencies' payment offices. FSS proposes to establish the GSA Kansas

City Finance office as the single payment point for all schedule

contractors' invoices. Implementation of industrial funding for the

schedules program will have minimal impact on the basic principles of

the program. Schedule offers will continue to be evaluated and

negotiated by GSA. The Government's pricing goal will continue to be

most favored customer status.

Agencies will continue to place orders directly with the schedule

contractors. Agencies will also continue to use Activity Address Codes

(AAC) and Fund codes that they are using in the current supply systems.

Agencies without AAC's can obtain them by following the simple

instructions in the GSA FEDSTRIP Operating Guide, or they can contact

the FSS System, Inventory, & Operations Management Center, (703) 305-

7083. Fund codes are assigned within each individual agency.

All contract administration matters relating to agencies' orders

remain the responsibility of the agencies placing the orders. As

envisioned, the only change in the process will be in the area of

payment. Instead of invoicing the individual agencies, contractors will

submit their invoices to GSA for payment.

GSA has planned a 3-year implementation period for converting all

schedules to a full cost recovery program; however, the implementation

plan may be expedited contingent and consistent with changes in GSA's

appropriations.

B. Paperwork Reduction Act

For purposes of the Paperwork Reduction Act, the proposed notice

would impose no new reporting or record keeping requirements.

C. The Following Proposed FSS Acquisition Letter Establishes a New

Clause and Notice for Inclusion in Basic Schedule Solicitations

Issued After Approval of this Acquisition Letter

FSS Acquisition Letter FC-94-

MEMORANDUM FOR ALL FSS PROGRAM OFFICES

From: William N. Gormley, CPPO, Assistant Commissioner for Commodity

Management (FC) (FCO)

Subject: Industrial Funding of Federal Supply Schedule Program.

1. Purpose. To provide guidance for industrial funding of the

Federal Supply Schedule program in order to recover associated

procurement and administrative costs incurred by the Federal Supply

Service (FSS) for contracting through the schedules program.

2. Background. During the fiscal 1994 budget process, Congress

directed FSS to review its appropriated activities for conversion to

reimbursable funding. Based upon that review, the schedules program was

identified as one of the programs suitable for reimbursable funding.

The GSA fiscal year 1995 budget, therefore, reflected a $7.8 million

reduction in operating expenses for the schedules program. The

remaining appropriated monies for the program will be eliminated over

the next two fiscal years. The cost of providing supplies and services

through this program must therefore be included in the cost of those

supplies and services.

The Federal Supply Schedule Program is FSS' largest supply support

program, accounting for over $2.8 billion in sales annually. The

program benefits the customer agencies, as well as the contractors who

participate in the program. Federal agencies benefit from the schedules

program because it provides an expedited means for acquiring quality

commercial products, including latest technology, at reasonable prices

based on the Government's aggregate buying power. Contractors benefit

from the program because it provides them a low cost entry into the

Federal market. By obtaining a schedule contract with GSA, contractors

avoid the administrative cost of responding to multiple solicitations

from many different agencies.

In order to better serve our customers and suppliers, FSS is

implementing a single payment office, GSA, to handle schedule invoices.

Agencies will continue to forward delivery/purchase orders directly to

the schedule contractors, who will in turn deliver requisitioned items

directly to the agencies. However, instead of invoicing the agencies,

the contractors will submit their invoices (for both supplies and

services) to the GSA Office of Finance for payment. GSA will bill the

agencies. (See attached Outline of Payment/Billing Steps.)

The new payment arrangement eliminates the agencies'

responsibilities related to processing and paying thousands of

invoices. Government payment offices will be billed twice a month by

GSA. Based on the above, agencies should enjoy substantial

administrative savings.

GSA, as the single paying office, will be able to maximize timely

payments, thus, avoiding interest charges and earning prompt payment

discounts.

Schedule contractors will benefit by not having to deal with

numerous agency accounts payable offices. Further, they will no longer

have to cope with a variety of different accounts payable procedures,

since they will only be subject to GSA's procedures. As the single

payment office, GSA's commendable record for timely payment of invoices

will result in contractors being paid much quicker than many are now

experiencing from some schedule users.

GSA will recover the costs associated with contracting, billing,

and payment of schedule purchases by adjusting the awarded price upward

by one percent. This adjusted price will be the price printed in the

schedule contract pricelist.

GSA's negotiation objectives will include consideration of the new

simplified payment terms and conditions and will seek discount

concessions recognizing the benefits to contractors of streamlined

payment procedures. Contractors will bill GSA at the negotiated

contract prices. GSA's billings to ordering activities will be at the

printed schedule pricelist amounts.

The present strategy calls for a 3-year implementation beginning in

fiscal year 1995. As current schedules expire, new basic solicitations

will include the new clauses which will provide for funding of the

program. At the completion of the 3-year implementation period, any

existing contracts that do not contain the new clauses will be modified

to incorporate these provisions. The implementation schedule may be

expedited contingent and consistent with changes in GSA's

appropriations.

3. Effective Date. This Acquisition Letter becomes effective two

weeks after its signature date.

4. Expiration Date. This Acquisition Letter expires one year from

the effective date, or upon inclusion in the Supply Operations

Handbook, FSS P 2901.2A, whichever occurs earlier.

5. Applicability. All Federal Supply Service schedule contracting

activities must implement the provisions of this acquisition letter.

All basic schedule solicitations issued on or after the effective date

of this letter must contain the new clause and notice shown in the

attachment. Schedule solicitations that have been issued, but not

opened/closed, must be amended to include the new schedule payment and

billing procedures. Appropriate solicitation extensions should be

provided to allow offerors sufficient time to consider the new

provisions. In addition, multiple award solicitations which have

closed, but have no awards against them yet, should be amended to

incorporate the new provisions. Offerors should be requested to

acknowledge, in writing, their acceptance of the new provisions within

the terms of their offer, prior to the award of a contract. If an

offeror is unwilling to accept the new single payment arrangements, he/

she will be allowed to withdraw his/her offer.

6. Reference to Regulations. HB, Supply Operations ch. 38, (FSS P

2901.2A.)

7. Instructions/procedures.

a. Promoting the advantages of a ``one-stop'' payment office will

be the responsibility of all persons involved with schedule

contracting. Benefits are realized by customer agencies, schedule

contractors, GSA, and the taxpayers. Every effort should be made to

inform contractors and agencies of the advantages of designating GSA as

the single payment point. Equally important is the need to encourage

both agencies and contractors to maximize their use of Electronic Data

Interchange (EDI) to transmit purchase/delivery orders and invoices.

Contractors may also receive Electronic Fund Transfer (EFT) payments,

whether they submit paper or electronic invoices.

b. In order to facilitate the payment and billing process by

Finance, agencies will be required to include the Activity Address Code

(AAC) to be billed, and a two digit Fund Code to be charged on each

purchase/delivery order submitted to contractors. These codes will

expedite GSA's process for billing the agencies for reimbursement of

monies paid by GSA to the contractors. Inclusion of the AAC and Fund

code on all purchase/delivery orders is required before invoicing GSA.

c. (1) The Catalogs and/or Pricelists clauses will be revised to

instruct schedule contractors to adjust the awarded schedule prices

upward by 1%. Purchase/delivery orders will show this adjusted price.

Contractors, on the other hand will invoice GSA at the awarded

(unadjusted) prices.) For example:

A retail price for a schedule item is......................... $100.00

GSA negotiated a discount of.................................. 10%

The GSA awarded contract price is............................. $90.00

The adjusted price published in the schedule pricelist is..... $90.90

The purchase/delivery order shows $90.90......................

The contractor invoices GSA at the awarded contract price of.. $90.90

GSA pays the contractor....................................... $90.00

GSA bills and collects from the agency........................ $90.90

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(2) Contractors will also be instructed to include a statement

substantially as follows on the cover page, or in order instructions on

the pricelist: ``Agencies are reminded to include the Activity Address

Code (AAC) to be billed and the Fund code to be charged on each

purchase/delivery order. These codes are needed to expedite payment of

invoices and billings by GSA to agencies.'' Contractors may also

include a sample order form for informational purposes to assist

agencies in including all pertinent information.

d. In addition to the AAC and Fund code and other standard

information included on the purchase/delivery order, agencies should

provide the following with each order:

1. Two agency contact points (including commercial phone number):

one from the ordering office, and, one from the office to receive the

billing from GSA.

2. Cite GSA as the office to be invoiced for payment.

e. During the initial phase of this changeover to a single payment

office, contracting officers may receive inquiries from agencies and

schedule contractors regarding the billing AAC and Fund code. The six-

digit AAC is a code assigned to an agency in order to establish an

account with GSA. The AAC identifies the agency to GSA. Agencies may

obtain AAC numbers by writing to: GSA/FSS, Inventory and Requisition

Management Division (FCSI), Washington, DC 20406, or calling (703) 305-

6978. Fund codes are not assigned by GSA but by each individual agency.

f. In addition to submitting purchase/delivery orders directly to

the contractor via hard copy or EDI, agencies may also obtain schedule

items by placing requisitions through MUFFIN (Multi-Use File for Inter-

Agency News), or normal FEDSTRIP/MILSTRIP ordering procedures.

g. Agencies shall forward an original and one copy of paper

purchase/delivery orders to schedule contractors. Any oral order placed

against a schedule contract must be confirmed with either an electronic

(EDI) or hard copy purchase/delivery order.

h. The Office of Finance, Kansas City, will be the payment office

for all schedule invoices. For paper invoices containing prompt payment

discount terms, the address is: General Services Administration, PO Box

419399, Kansas City, MO 64141-6399. All other paper invoices should be

sent to General Services Administration, PO Box 419029, Kansas City, MO

64141-6029. Initial invoices for each purchase/delivery order must be

accompanied with a copy of the customer paper or EDI order. Contractor

EDI submissions of order data and invoices must be in accordance with

Federal implementation conventions for EDI.

i. As is the current practice, ordering activities will resolve any

discrepancies concerning purchase/delivery orders and/or items

delivered against such orders directly with the schedule contractors.

The GSA contracting officer may need to intervene in order to settle

unresolved issues between an ordering activity, a contractor and/or the

Office of Finance. Any setoffs for collection of monies owed the

Government must be handled in accordance with FAR Subpart 32.6.

j. The contractor represents by submission of an invoice that the

supplies have been delivered or services performed satisfactorily. GSA

reserves the right to require proof of shipment or evidence of

delivery/performance prior to payment.

k. Pursuant to the clause, Examination of Records by GSA (552.215-

70) and FAR, Subpart 4.7, contractors are required to retain files,

records, and information relevant to this contract, including records

to support shipments and deliveries for up to 3 years after final

payment, or as specified in Subpart 4.705 through 4.705-3, whichever of

these periods expire first.

l. GSA, Office of Finance will implement a post payment

statistically reliable system to validate agency receipt of goods or

services.

m. The following clause and cover page notice must be included in

all new basic Federal Supply Schedule solicitations:

1. Contract Payment Information (I-FSS-XXX)

2. Single Payment Office (CP-FSS-XXX)

Attachments

New Solicitation clause/notice

Outline of Payment/Billing Steps

New Solicitation Clause

I-FSS-XXX (XXX 1994)

Contract Payment Information

a. The General Services Administration (GSA) will be the

centralized billing/payment office for all purchases/invoices issued

against the schedule contracts. Paper invoices (with related purchase/

delivery order copies) conforming to the requirements of the Prompt

Payment Clause (52.232-25) and the Invoice Requirements Clause

(552.232-72) should be submitted to either of the following mailing

addresses:

1. For paper invoices (with related purchase/delivery order copies)

containing prompt payment discounts: General Services Administration,

Office of Finance, P.O. Box 419399, Kansas City, MO 64141-6399.

2. For all other paper invoices (with related purchase/delivery

order copies): General Services Administration, Office of Finance, P.O.

Box 419029, Kansas City, MO 64141-6029.

b. Inclusion of the Activity Address Code (AAC) and Fund code on

all purchase/delivery orders is required before invoicing GSA. EDI

transactions must be submitted in accordance with Federal

implementation conventions.

c. Contractors shall submit invoices and copies of the agencies'

purchase/delivery orders either by Electronic Data Interchange (EDI),

or mail for non-/EDI transactions. Submission of invoices by EDI is

preferred because it is the most economic and efficient method for the

contractor and the Government.

d. Agencies will submit purchase/delivery orders to contractors in

an original and one copy. A copy of the customer agency EDI or paper

purchase/delivery order must accompany each initial invoice submitted

to GSA for payment. In the case of ongoing service arrangements like

rental or leasing, this means the contractor must include a copy of the

purchase/delivery order for such arrangements with the initial EDI or

paper invoice submitted for payment. It will not be necessary to submit

subsequent copies of the same order unless requested by GSA for a

particular case.

e. Proper invoices will be paid within the prompt payment discount

terms included in the contract or 30 day payment cycle.

f. Electronic submissions must conform to the American National

Standards Institute (ANSI) X12 standard and the Federal implementation

conventions. Request for these conventions and questions regarding

registration in the Government Electronic Commerce system should be

addressed to 1-800-EDI-3414. Registration is done via your value added

network and includes acceptance of the Government Trading Partner

Agreement (TPA).

g. Initial invoices (both paper and EDI) cannot be processed for

payment without submission of a copy of the corresponding agency

purchase/delivery order. Any data the ordering activity requests for

inclusion on the invoice must be included on the invoice sent to GSA.

Include applicable Special Item Numbers (SIN's) and/or part numbers if

not referenced in the customer's order. Pursuant to the Prompt Payment

Act, improper invoices will be returned to the contractor.

h. Ordering activities may purchase open market items on the same

purchase/delivery order form used to order items from the schedule

contract if the acquisition is made at the lowest overall cost. The

invoiced amount may include allowable nonschedule items. (However, the

invoiced amount for any nonschedule item will also be subject to a 1

percent charge to the ordering agency.)

i. All questions concerning invoices shall be addressed to the GSA

Office of Finance (816) 926-7356. Questions concerning purchase/

delivery orders shall be directed to the agency placing the order.

Questions regarding GSA billings shall be directed to the GSA Office of

Finance at (816) 926-7037.

j. In order to facilitate processing of invoices, contractors are

requested to include on the invoice the name and phone number of a

person to contract should questions arise regarding the invoice.

k. The contractor's submission of an invoice constitutes a

representation that the supplies have been delivered to a post office,

common carrier, or point of first receipt by the Government; and the

contractor agrees to replace, repair, or correct supplies not received

at destination, damaged in transit, or not conforming to the purchase/

delivery order. In the case of services, submission of the invoice

means that required services have been satisfactorily performed. GSA

and the ordering activities reserve the right to require proof of

shipment or evidence of delivery/performance prior to payment. GSA,

Office of Finance will implement a post payment satistically reliable

system to validate agency receipt of goods or services.

l. Ordering activities will continue to resolve delivery and other

performance problems concerning their schedule orders directly with the

contractors. When resolution of disputes remains unresolved, ordering

activities may charge back billings to GSA. GSA will offset claims from

future payments to suppliers after notification. Disputes will continue

to be resolved by the applicable GSA Contracting officer.

m. Pursuant to the clause, Examination of Records by GSA (552.215-

70) and FAR, Subpart 4.7, contractors are required to retain files,

records, and information relevant to this contract, including records

to support/confirm shipments, deliveries, invoices, and to verify

agencies' purchase/delivery orders, for up to 3 years after final

payment, or as specified in Subpart 4.705 through 4.705-3, whichever

periods expire first.

Cover Page Notice

Single Payment Office

The General Services Administration, Federal Supply Service is

pleased to announce the establishment of a single payment office for

receipt and payment of schedule invoices. Invoices submitted for

payment for all orders issued under this Federal Supply Schedule will

no longer be paid by the individual ordering activities. Instead, GSA

will be the single payment office for all invoices submitted against

contracts under this schedule. This new single payment procedure

relieves contractors of the burden of invoicing numerous billing

offices, resulting in a reduction in administrative costs for

contractors. See Clause I-FSS- , Contract Payment Information.

(End of Notice)

Industrial Funding of Schedules Program Payment/Billing Steps

The following is a brief outline of the steps for paying and

billing by the GSA Kansas City Finance Office:

1. Invoices with copies of purchase/delivery orders will be

accepted by GSA either through Electronic Data Interchange (EDI) or

paper.

2. Proper invoices, with accompanying purchase/delivery orders will

be entered into the Finance Information Network (FINET) data base.

3. GSA will pay proper invoices (check or electronic fund transfer

(EFT), at negotiated contract terms in accordance with the Prompt

Payment Act.

4. GSA will bill customer agencies for reimbursement. The amount

billed will be the contractor's published schedule price shown on the

customer purchase/delivery order. The price published in the schedule

pricelist is based on adjusting the negotiated award price upward by 1

percent (of the awarded price.) This adjustment is accomplished by

multiplying the schedule contract price by 1.01. (See attached

example).

5. Some data captured by GSA will be available to contractors and

ordering activities via a bulletin board. such data will include paying

and billing data plus a scanned image of any paper invoice and order in

the system. It will also facilitate communication with the GSA Finance

employees via electronic mail box or telephone for any other assistance

needed. Access to the system will require identification of the user by

vendor Tax Identification Number (TIN), or ordering activity paying

office Activity Address Code (AAC), and a unique password.

6. Ordering offices will continue to resolve delivery problems

directly with the contractors. When resolution of disputes is not

forthcoming, customers may charge back billings to GSA. GSA will offset

claims from future payments to suppliers after notification. Dispute

will continue to be resolved by the applicable GSA contracting

officers.

Example

The agency's purchase/delivery order reflected the adjusted

schedule price. The contractor's invoice reflects the negotiated award

price.

Retail pricelist.............................................. $100.00

GSA negotiated discount....................................... 10%

GSA contract award price...................................... 90.00

Adjusted schedule price (as shown in the authorized schedule

pricelist)................................................... *90.90

Agency purchase order price................................... 90.90

Contractor invoices GSA at the contract award price........... 90.00

GSA pays contractor........................................... 90.00

GSA bills and collects from agency............................ 90.90

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*GSA contract award price--$90.00x1.01 = adjusted schedule price of

$90.90.

Dated: December 21, 1994.

Nicholas M. Economou,

Director, FSS Acquisition Management Center.

[FR Doc. 94-31751 Filed 12-23-94; 8:45 am]

BILLING CODE 6820-24-M