General Services Administration Acquisition Regulation; Acquisition of Commercial Items

SUMMARY: On February 16, 1996, GSA published an interim rule revising

the General Services Administration Acquisition Regulation (GSAR) to

implement Items I and III of Federal Acquisition Circular 90-32 which

amended the Federal Acquisition Regulation (FAR) to implement the

portions of the Federal Acquisition Streamlining Act of 1994 (Pub. L.

103-355) dealing with the Truth in Negotiations Act and with the

acquisition of commercial items (61 FR 6164 and corrections published

at 61 FR 10846 and 61 FR 14032). The interim rule revised the GSAR to

conform to the FAR as revised by FAC 90-32 and to implement portions of

the FAR where necessary to provide agency procedures. The interim rule

also canceled the Multiple Award Schedule (MAS) Policy Statement of

October 1, 1982 (47 FR 50242, November 5, 1982). This final rule

modifies certain portions of the interim rule and adopts the balance of

rule as final.

DATES: Effective Date: August 21, 1997. Applicability Date: For

solicitations issued on or after August 21, 1997, use of the new

policies, provisions and clauses is optional for solicitations issued

before December 19, 1997, and mandatory for solicitations issued on or

after December 19, 1997. (See SUPPLEMENTARY INFORMATION for further

guidance.)

FOR FURTHER INFORMATION CONTACT: Al Matera, Office of Acquisition

Policy, (202) 501-1224.

SUPPLEMENTARY INFORMATION: All new solicitations for commercial items

and open season solicitations issued under the multiple award schedule

program after August 21, 1997 may use the policies, provisions and

clauses in this final rule on an optional basis and solicitations

issued on or after December 19, 1997 shall conform to this final rule.

To the maximum extent practical, solicitations for commercial items and

open season solicitations, that have been issued but where no contract

has been awarded shall be amended to conform to this final rule.

However, offerors shall not be required to resubmit information on

commercial sales practices and any requests for additional information

shall be limited to the minimum needed. Existing MAS contracts that

will expire more than three (3) years after the effective date of this

rule shall be modified to conform to the requirements of this final

rule.

A. Background

Recently, GSA has made a number of changes in the MAS program. This

final rule represents a continuation of GSA's efforts to reinvent the

MAS program in order to move the program to a future environment of

greater use of commercial practices, increased competition, and greater

responsibility for making smart buying decisions within the framework

of the MAS program by contracting personnel at the front-line closest

to the need. In moving toward this new environment, GSA is continuing

to promote policies regarding the solicitation, award, and

administration of MAS contracts that will allow GSA to continue to use

the collective leverage of the Federal Government to set up MAS

contracts, that will be easy for our customers to use and that will

provide a wide variety of quality supplies and services at competitive

prices.

GSA initiated this rule in order to simplify and streamline the

process for awarding and administering MAS contracts and to bring GSA's

policies and procedures for the MAS program in line with the Federal

Acquisition Regulation (FAR) as amended to implement the Federal

Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996.

This final rule makes changes in the program by:

(1) Reducing the information/data required of offerors seeking to

obtain MAS contracts and focusing whenever possible on the offeror's

written pricing policies, or standard commercial sales practices if the

offeror has no written policies, instead of on transactional sales

data.

(2) Emphasizing the use of pre-award audits of information

submitted in support of price negotiations and expressly limiting the

contractual right to conduct post-award audits of proposal information.

(3) Eliminating requirements for offerors to certify sales data as

current, accurate and complete while putting offerors on notice of the

Government's expectations for data submissions.

(4) Maintaining the Government's ability to make price adjustments

so that, in the event the Government learns that inaccurate, not

current or incomplete information was submitted, the Government will

have a contractual remedy to recover any overcharges.

(5) Maintaining a post-award audit provision for monitoring

compliance with specific contract provisions such as the Price

Reduction clause, the Industrial Funding Fee clause and for

overbillings.

GSA's Office of Acquisition Policy will continue to work with

procurement officials in GSA's Federal Supply Service and the

Department of Veterans Affairs (VA) and the Inspectors General of GSA

and VA to ensure that contracting personnel and contract auditors fully

understand the new rules, work together to protect the Government's

interests, and put the new policies into effective operation.

Contractors and prospective contractors have long expressed their

view that their participation in the Multiple Award Schedule (MAS)

Program is hampered by rules they believe are unduly burdensome and

difficult to implement. GSA believes that by making the changes

embodied in this final rule it has removed many of the barriers to

participation or full participation by both large and small business

concerns, including small disadvantaged and women-owned small business

concerns. By employing procedures that are more consistent with

commercial practice, GSA expects to increase competition and thereby

provide a wider range of choices at competitive prices to customer

agencies.

On February 16, 1996, GSA published an interim rule revising the

GSAR to implement Items I and III of Federal Acquisition Circular 90-32

which amended the FAR to implement the portions of the Federal

Acquisition Streamlining Act of 1994 (Pub. L. 103-355) dealing with the

Truth in Negotiations Act and with the acquisition of commercial items

(61 FR 6164). The interim rule revised the GSAR to conform to the FAR

as revised by FAC 90-32 and to implement portions of the FAR where

necessary to provide agency procedures. The interim rule also canceled

the Multiple Award Schedule (MAS) Policy Statement of October 1, 1982

(47 FR 50242, November 5, 1982).

On September 4, 1996, a notice was published in the Federal

Register to familiarize the public with the status of finalizing the

interim rule. The notice also extended the period for public

[[Page 44519]]

comment and provided notification of a public meeting to be held

September 19, 1996. GSA provided the public commentors with the

proposed final rule, a line-in-line out of the interim rule to

illustrate the specific changes reflected in the final rule, the

reconciliation of public comments, and an option paper that discussed

the options being considered on the issue of post-award audit rights

relating to information other than cost and pricing data submitted in

connection with the contract or modification. GSA made revisions to the

interim rule to address public comments and to take into account the

enactment of the Federal Acquisition Reform Act of 1996 (renamed the

Clinger-Cohen Act). Others in the public who did not comment during the

public comment period were invited to request a copy of the

information.

Comments on the interim rule were received from the American Bar

Association (ABA), AT&T, Canon U.S.A., Inc., the Coalition for

Government Procurement (CGP), the Council of Defense and Space Industry

Associations (CODSIA), the Department of Justice (DOJ), the Department

of Veterans Affairs (VA), the Federal Bar Association (FBA), Federal

Schedules Incorporated, Hewlett Packard (HP), the Information

Technology Association of America (ITAA), the Information Technology

Industry Council (ITI), the Office of Inspector General for GSA, the

Square D Company, and the Xerox Corp.

The major issues raised and GSA's resolution of those issues are

outlined below.

Most Favored Customer Pricing Goal

Several commentors suggested that the negotiation objective of

``most favored customer'' should be eliminated in favor of a goal of

``fair and reasonable'' prices. The commentors indicated that GSA's

pricing policy is inconsistent with the FAR and the goals of Congress

and the Administration. They also assert that the most favored customer

discount objective is inconsistent with FASA which defined fair and

reasonable pricing as the objective for the Federal Government.

Commentors argue that a fair and reasonable price does not have to be

an offeror's most favored price and GSA's insistence on this policy

runs counter to numerous actions that have been taken by Congress and

the Administration. Industry commentors indicate that such a policy is

not appropriate for an agency which has a history of pursuing civil

fraud settlements and judgments. They suggest that as long as this

policy remains, commercial companies must make a significant investment

in risk aversion infrastructure.

The final rule provides for GSA to continue to seek to obtain the

offeror's best price (most favored customer) based on its evaluation of

discounts, terms, conditions, and concessions offered to commercial

customers for similar purchases.

The suggestion that FASA created a new standard by referring to

``fair and reasonable pricing'' is not accurate. A ``fair and

reasonable'' price has long been the goal of the Federal procurement

system and has been reflected in regulations for years. The pursuit of

``most favored customer'' pricing as a goal is consistent with

commercial practice and totally consistent with the objective of

negotiating a fair and reasonable price. In fact, the GAO specifically

recommended that the GSA Administrator ``amend MAS policies to clearly

state that the price analysis GSA does to establish the Government's

MAS negotiation objective should start with the best discount given to

any of the vendor's customers but that GSA must consider legitimate

differences in terms and conditions identified and valued by the

offeror when negotiating the Government's MAS discount.'' (GAO/GGD-93-

123, Multiple Award Schedule Contracting, August 1993). The final rule

is consistent with GAO's recommendation.

GSA agrees that to be fair and reasonable a price does not have to

be the offeror's most favored price and the final rule reflects that

position. The final rule expressly states that the Government

recognizes that the terms and conditions of commercial sales vary and

that there may be legitimate reasons why the best price is not

achieved. The final rule also states that the contracting officer may

award a contract containing pricing which is less favorable than the

best price the offeror extends to any commercial customer making

similar purchases when the contracting officer determines that the

prices offered to the Government are fair and reasonable even though

comparable discounts were not negotiated, and award of a contract is

otherwise in the best interest of the Government.

GSA and its contracting officers have a fiduciary responsibility to

the taxpayers and to customer agencies to take full advantage of the

Government's leverage in the market in order to obtain the best price

(most favored customer) based on an evaluation of discounts, terms,

conditions and concessions offered to commercial customers for similar

purchases.

Pricing Disclosure/Information Submission Requirements

Industry commentors suggested the interim rule requires disclosures

of singular transactions at lower prices than those offered the

Government unless they involved erratic, ad hoc discounting. Commentors

also found the provisions on ad hoc discounting to be confusing and

subject to a wide range of interpretations. In addition, industry

commentors suggested that the requirement to distinguish ad hoc

discounts would require establishment of a database.

In addition, some commentors suggested that the requirement to

disclose information on discounts other than those given to commercial,

large volume end user customers was inappropriate.

Some commentors suggested the statement in the instructions for the

Commercial Sales Practices Format, which indicated that GSA expects

information submitted to be current, accurate, and complete, is an

implied or constructive (de facto) certification.

The interim rule has been revised to clarify GSA's intent to obtain

information on the offeror's written pricing policies, or standard

commercial sale practices if the offeror has no written policies, and a

general explanation of the circumstances and frequency of deviations

from those policies or standard practices. Generally, only in cases

where the offeror is deviating from its policies or practices to such

an extent that the policies or practices alone cannot be relied upon by

the contracting officer to make a determination that the prices offered

are fair and reasonable, will the contracting officer ask for

transactional information. In cases where information is requested, the

request will be targeted to limit the submission of sales data to that

needed by the contacting officer to establish whether the price is fair

and reasonable.

In the final rule, the use of the terminology ``ad hoc

discounting'' is eliminated. If the offeror deviates from its written

discount policies or standard commercial sales practices, the offeror

is requested to explain the circumstances surrounding the deviations

and to explain how often the deviations occur. The offeror is also

asked to describe the controls employed to assure the integrity of the

offeror's pricing. Generally, only in cases where the offeror is

deviating from its policies or practices to such an extent that the

policies or practices alone cannot be relied upon by the contracting

officer to make a determination that the prices

[[Page 44520]]

offered are fair and reasonable, will the contracting officer ask for

transactional information.

The final rule provides for GSA to continue to seek information on

the customer(s) or category of customer(s) that receives the offeror's

best discount as well as customers or categories of customers that

receive better prices (discounts and concessions in any combination)

than those offered to the Government. Contracting officers cannot

negotiate the best price for MAS products and services unless they

consider the discounts that MAS offerors give to their best customers.

Discounts offerors give to dealers, distributors, and original

equipment manufacturers (OEMs) should not be considered ``off limits''

simply because the Government does not perform certain functions that

those types of customers perform. GSA believes that an offeror's best

discount should generally be the starting point of the price analysis

GSA uses to establish the Government's MAS negotiation objective. GSA,

however, recognizes the need to consider legitimate differences in the

terms and conditions of sale between the Government's MAS purchases and

vendor's other customers.

The final rule maintains the statement regarding GSA's expectation

of receiving current, accurate, and complete data. GSA does not view a

statement putting offeror/contractors on notice of its expectations as

a de facto certification.

Post-Award Audit Rights

Industry commentors vigorously opposed the portions of GSA's

interim rule and proposed final rule made available in August 1996

which maintained authority for post-award audits of data provided in

support of price negotiations prior to award or contract modification.

The commentors argued that the post-award access to pre-award data

presented to support price negotiations is directly in conflict with

the intent of Congress as contained in the Federal Acquisition Reform

Act of 1996 (FARA) (renamed the Clinger-Cohen Act of 1996). In

addition, industry commentors suggested that it is not a commercial

practice to allow post-award audits of information provided during

negotiations concerning pricing. Contractors have also expressed the

view that the MAS contracts provide a relatively low profit margin and

make it difficult for contractors to justify the investment in

infrastructure required.

On the other hand, the Department of Justice (DOJ), GSA and VA

Inspectors General (IG's) argued for retention of the post-award audit

rights for data provided in support of price negotiations prior to

award or contract modification. DOJ and the IGs believe that retention

of the post-award audit is necessary to protect the Government from

fraudulent and inaccurate disclosures.

Some comments also were received on the post-award compliance audit

rights. The Information Technology Association of America indicated

that they agree that GSA needs to have access to records to determine

compliance with the administration of the contract; i.e., price

reductions, billing, etc. The Coalition for Government Procurement

expressed a willingness to work with GSA on ways to give GSA the

ability to check for billing errors if the post-award audit rights of

information submitted in support of price negotiations prior to award

or contract modification were eliminated.

The final rule deletes the contract clause that automatically

provides post-award audit rights for pricing information in every

schedule contract. GSA expects to shift its emphasis to use of pre-

award audits of information submitted in support of price negotiations.

In addition to other contract pricing tools, this shift will provide

the contracting officer a mechanism for verifying information submitted

by offerors and will help avoid the potential problem of overpricing by

revealing inaccurate, incomplete or defective data before the contract

is awarded. This approach is designed to avoid problems instead of

uncovering problems after contract award. Notwithstanding this shift to

pre-award audits, GSA recognizes that there may be circumstances which

warrant a contractual right to access in order to conduct post-award

audits of information provided during negotiations. However, GSA

anticipates such instances will involve a limited number of schedules.

Therefore, the final rule allows the contracting officer to modify the

Examination of Records by GSA (Multiple Award Schedule) clause to

provide for post-award access to records to verify the pre-award/

modification pricing, sales or other data submitted related to the

supplies or services offered under the contract which formed the basis

for award or modification was accurate, current, and complete. Such a

modification can only be made after the contracting officer makes a

determination that there is a likelihood of significant harm to the

Government without access to verify the information and obtains the

Senior Procurement Executive's approval. In such cases, the right to

access expires 2 years after the award or modification. Such

determinations must be made on a schedule-by-schedule basis. This

approach is expected to enhance the Government's relationship with its

contractors because it more nearly approximates commercial practice.

This change reflects a policy decision to make post-award audit

provisions for information submitted in support of price negotiations

prior to award or modification the exception rather than the general

rule. GSA believes, as a legal matter, that GSA can conduct post-award

audits of information submitted in support of price negotiations prior

to award or contract modification. Expressly limiting the contractual

post-award audit access for information provided during negotiations

concerning pricing does not impact the Inspector General's independent

authority under the Inspector General Act; nor would it preclude a

contractor from voluntarily providing audit access should circumstances

so warrant. It also does not impact independent authority granted by

virtue of other statutes, for example 38 U.S.C. 8126.

Post-award compliance audits for overbillings, billing errors,

compliance with the Price Reduction clause and the Industrial Funding

Fee clause are maintained for all schedule contracts in the final rule.

Price Adjustment Clause

Industry commentors suggest that GSA's inclusion of a price

adjustment clause, which covers situations after award in which

incomplete, not current, or inaccurate pricing information is

discovered, is not consistent with the spirit and intent of the Federal

Acquisition Streamlining Act and the Federal Acquisition Reform Act

(renamed the Clinger-Cohen Act), and is more restrictive than similar

provisions used in commercial practice.

The final rule retains the Price Adjustment clause. Even though GSA

has limited post-award audits of information submitted in support of

price negotiations, there are other circumstances that may result in

the Government discovering that the offeror/contractor submitted

inaccurate, not current or incomplete information. For example, the IG

may perform an audit based on its authority under the Inspector General

Act. The IG may not find fraud but may find that incomplete, not

current or inaccurate information was provided GSA and that the lack of

information impacted the price the contracting officer negotiated.

Without a clause, GSA has no recourse other than to try and convince

the contractor to

[[Page 44521]]

negotiate an equitable settlement. The contractor would be under no

contractual or legal obligation to do so.

B. Executive Order 12866

This final rule was submitted to the Office of Management and

Budget (OMB) under Executive Order 12866, Regulatory Planning and

Review. This rule is not a major rule under 5 U.S.C. 804.

C. Regulatory Flexibility Act

A Final Regulatory Flexibility Analysis (FRFA) has been prepared

and may be obtained from the Office of Acquisition Policy, 18th & F

Streets, NW., Washington, DC 20405. A copy of the FRFA has been

submitted to the Chief Counsel for Advocacy of the Small Business

Administration. The analysis is summarized as follows:

This rule revises the GSAR to bring it into conformance with the

Federal Acquisition Regulation (FAR) as amended by Items I and III of

Federal Acquisition Circular 90-32 which implemented portions of the

Federal Acquisition Streamlining Act of 1994 (Pub. L. 103-355) dealing

with the acquisition of commercial items and the Truth in Negotiations

Act. The two Final Regulatory Flexibility Analyses (one for Commercial

Items, FAR Case 94-790, and the other for TINA, FAR Case 94-721) that

support the FAR changes serve the same purpose for this implementation.

This regulatory flexibility analysis focuses on the GSAR changes

relating to the Multiple Award Schedule (MAS) Program.

MAS solicitations will require the submission of information from

each offeror on its pricing and discount policies, business practices,

commercial terms and conditions, and commercial pricelists. This

submission is in accordance with FAR 15.804-5, which provides for

submission of information other than cost or pricing data. Such

information is considered to be the least burdensome for offerors, yet

still provide sufficient information to determine price reasonableness.

This rule will apply to all offerors responding to MAS

solicitations and to MAS contractors. Of the estimated 4,000 offers

submitted annually in response to the various MAS solicitations,

approximately 75 percent are received from small businesses. Thus, this

rule is expected to have an impact on approximately 3,000 small

businesses.

This rule will not have a significant economic impact on small

businesses. As noted above, the commercial item and TINA changes merely

bring the GSAR into conformance with recent FAR changes. For the MAS

element, the policies and procedures are deemed to be the least onerous

and least intrusive ones for offerors and contractors, but still

provide GSA with sufficient information to fully evaluate offers and

determine price reasonableness.

Since the establishment of the MAS Improvement Project in 1990, GSA

has considered and tested numerous alternative data submissions under

the MAS Program. Of note are the pilot test solicitations conducted in

accordance with the Federal Register notice dated February 18, 1992,

two National Performance Review Reinvention Pilot test solicitations

issued by GSA's Information Technology Service, and the pilot test

solicitations issued pursuant to FSS Acquisition Letter FC-94-3. The

conduct of those procurement actions has been fully evaluated and

considered in developing this final rule. All public comments also have

been considered. The policies and procedures set forth herein are

deemed to be the least onerous and least intrusive ones for potential

contractors, but still provide GSA with sufficient information to fully

evaluate offers and determine price reasonableness.

This final rule is expected to have a beneficial impact on small

entities because the rule simplifies procedures for the MAS program,

reduces the amount of information provided to support price

negotiations and limits post-award audits of contractors records.

D. Paperwork Reduction Act

The Paperwork Reduction Act applies to this final rule. The

information collection requirements in 515.804-6 and related provisions

and clauses have been approved by the Office of Management and Budget

(OMB) under OMB Control Number 9000-0013. The information collection

requirements in 552.212-70, Preparation of Offer (Multiple Award

Schedule), represent customary commercial practice and are approved

under OMB Control Number 3090-0250.

List of Subjects in 48 CFR Parts 504, 507, 510, 511, 512, 514, 515,

538, 539, 543, 546, 552, and 570

Government procurement.

Accordingly, the interim rule amending 48 CFR Parts 504, 507, 510,

511, 512, 514, 515, 538, 539, 543, 546, and 552 and 570 published at 61

FR 6164, February 16, 1996, and corrections published at 61 FR 10846

(March 15, 1996) and 61 FR 14032 (March 29, 1996) is adopted as a final

rule with the following changes:

1. The authority citation for 48 CFR Parts 504, 507, 510, 511, 512,

514, 515, 538, 539, 543, 546, 552 and 570 continues to read as follows:

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

PART 515--CONTRACTING BY NEGOTIATION

2. Section 515.106-70 is revised to read as follows:

515.106-70 Examination of records by GSA clause.

(a) The contracting officer shall insert the clause at 552.215-70,

Examination of Records by GSA, in solicitations and contracts, other

than multiple award schedule contracts, that

(1) Involve the use and disposition of Government-furnished

property,

(2) Provide for advance payments, progress payments based on cost,

or guaranteed loan,

(3) Contain a price warranty or price reduction clause,

(4) Involve income to the Government where income is based on

operations that are under the control of the contractor,

(5) Include an economic price adjustment clause,

(6) Are requirements, indefinite-quantity, or letter type contracts

as defined in FAR part 16,

(7) Are subject to adjustment based on a negotiated cost escalation

base, or

(8) Contain the provision at FAR 52.223-4, Recovered Material

Certification. The contracting officer may modify the clause to define

the specific area of audit (e.g., the use or disposition of Government-

furnished property, compliance with the price reduction clause).

Counsel and the Assistant Inspector General--Auditing or Regional

Inspector General--Auditing, as appropriate, must concur in any

modifications to the clause.

(b) The contracting officer shall insert the clause at 552.215-71,

Examination of Records by GSA (Multiple Award Schedule), in

solicitations and multiple award schedule contracts. With the Senior

Procurement Executive's approval, the contracting officer may modify

the clause to also provide for post-award access to and the right to

examine records to verify that the pre-award/modification pricing,

sales or other data related to the supplies or services offered under

the contract which formed the basis for the award/modification was

accurate, current, and complete. Such a modification of the clause

shall provide for the right of access to expire 2 years after award or

modification. Before modifying the clause, the contracting officer

shall make a determination that absent such access there is a

likelihood of significant

[[Page 44522]]

harm to the Government and submit it to the Senior Procurement

Executive for approval. Such determinations must be made on a schedule-

by-schedule basis.

3. Section 515.804-6 is revised to read as follows:

515.804-6 Instructions for submission of cost or pricing data or

information other than cost or pricing data.

(a) Contracting officers should use Alternate IV of the FAR

provision at 52.215-41, Requirements for Cost or Pricing Data or

Information Other Than Cost or Pricing Data, to provide the format for

submission of information other than cost or pricing data for multiple

award schedule (MAS) contracts. To provide for uniformity in requests

under the MAS program, contracting officers should insert the following

in paragraph (b) of the provision.

(1) An offer prepared and submitted in accordance with the

clause at 552.212-70, Preparation of Offer (Multiple Award

Schedule);

(2) Commercial sales practices. The Offeror shall submit

information in the format provided in this solicitation in

accordance with the instructions at Table 515-1 of the GSA

Acquisition Regulation; or submit information in the Offeror's own

format.

(3) Any additional supporting information requested by the

Contracting Officer. The Contracting Officer may require additional

supporting information, but only to the extent necessary to

determine whether the price(s) offered is fair and reasonable.

(4) By submission of an offer in response to this solicitation,

the Offeror grants the Contracting Officer or an authorized

representative the right to examine, at any time before initial

award, books, records, documents, papers, and other directly

pertinent records to verify the pricing, sales and other data

related to the supplies or services proposed in order to determine

the reasonableness of price(s). Access does not extend to Offeror's

cost or profit information or other data relevant solely to the

Offeror's determination of the prices to be offered in the catalog

or marketplace.

(b) Contracting officers shall insert the following format for

commercial sales practices in the exhibits or attachments section of

the solicitation (see FAR 12.303).

COMMERCIAL SALES PRACTICES FORMAT

Name of Offeror ____________ SIN(S) ________

Note: Please refer to clause 552.212-70, PREPARATION OF OFFER

(MULTIPLE AWARD SCHEDULE), for additional information concerning

your offer. Provide the following information for each SIN (or group

of SINs or SubSIN) for which information is the same.

(1) Provide the dollar value of sales to the general public at

or based on an established catalog or market price during the

previous 12 month period or the offerors last fiscal year.

$________. State begining and ending of the 12 month period.

Beginning ________ Ending ____________. In the event that a dollar

value is not an appropriate measure of the sales, provide and

describe your own measure of the sales of the item(s).

(2) Show your total projected annual sales to the Government

under this contract for the contract term, excluding options, for

each SIN offered. If you currently hold a Federal Supply Schedule

contract for the SIN the total projected annual sales should be

based on your most recent 12 months of sales under that contract.

SIN ________ $ ________; SIN ________ $ ________; SIN ________ $

________

(3) Based on your written discounting policies (standard

commercial sales practices in the event you do not have written

discounting policies), are the discounts and any concessions which

you offer the Government equal to or better than your best price

(discount and concessions in any combination) offered to any

customer acquiring the same items regardless of quantity or terms

and conditions? YES ____ NO ____. (See definition of ``concession''

and ``discount'' in 552.212-70).

(4)(a) Based on your written discounting policies (standard

commercial sales practices in the event you do not have written

discounting policies), provide information as requested for each SIN

(or group of SINs for which the information is the same) in

accordance with the instructions at Table 515-1 which is provided in

this solicitation for your convenience. The information should be

provided in the chart below or in an equivalent format developed by

the offeror. Rows should be added to accommodate as many customers

as required. See definition of ``concession'' and ``discount'' in

552.212-70.

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Column 3 quantity/ Column 5

Column 1 Customer Column 2 discount volume Column 4 FOB term concessions

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(b) Do any deviations from your written policies or standard

commercial sales practices disclosed in the above chart ever result

in better discounts (lower prices) or concessions than indicated?

____YES ____NO. ____. If YES, explain deviations in accordance with

the instructions at Table 515-1 which is provided in this

solicitation for your convenience.

(5) If you are a dealer/reseller without significant sales to

the general public, you should provide manufacturers' information

required by paragraphs (1) through (4) above for each item/SIN

offered, if the manufacturer's sales under any resulting contract

are expected to exceed $500,000. You must also obtain written

authorization from the manufacturer(s) for Government access, at any

time before award or before agreeing to a modification, to the

manufacturer's sales records for the purpose of verifying the

information submitted by the manufacturer. The information is

required in order to enable the Government to make a determination

that the offered price is fair and reasonable. To expedite the

review and processing of offers, you should advise the

manufacturer(s) of this requirement. The contracting officer may

require the information be submitted on electronic media with

commercially available spreadsheet(s). The information may be

provided by the manufacturer directly to the Government. If the

manufacturer's item(s) is being offered by multiple dealers/

resellers, only one copy of the requested information should be

submitted to the Government. In addition, you must submit the

following information along with a listing of contact information

regarding each of the manufacturers whose products and/or services

are included in the offer (include the manufacturer's name, address,

the manufacturer's contact point, telephone number, and FAX number)

for each model offered by SIN:

(a) Manufacturer's Name

(b) Manufacturer's Part Number

(c) Dealer's/Reseller's Part Number

(d) Product Description

(e) Manufacturer's List Price

(f) Dealer's/Reseller's percentage discount from List Price or

net prices

(End of Format)

(c) The contracting officer should include the instructions for

completing

[[Page 44523]]

the commercial sales practices format in Table 515-1 in solicitations

issued under the multiple award schedule program.

TABLE 515-1--INSTRUCTIONS FOR COMMERCIAL SALES PRACTICES FORMAT

If you responded ``YES'' to question (3), on the COMMERCIAL

SALES PRACTICES FORMAT, complete the chart in question (4)(a) for

the customer(s) who receive your best discount. If you responded

``NO'' complete the chart in question (4)(a) showing your written

policies or standard sales practices for all customers or customer

categories to whom you sell at a price (discounts and concessions in

combination) that is equal to or better than the price(s) offered to

the Government under this solicitation or with which the Offeror has

a current agreement to sell at a discount which equals or exceeds

the discount(s) offered under this solicitation. Such agreement

shall be in effect on the date the offer is submitted or contain an

effective date during the proposed multiple award schedule contract

period. If your offer is lower than your price to other customers or

customer categories you will be aligned with the customer or

category of customer that receives your best price for purposes of

the Price Reduction clause at 552.238-76. The Government expects you

to provide information required by the format in accordance with

these instructions that is, to the best of your knowledge and

belief, current, accurate, and complete as of 14 calendar days prior

to its submission. You must also disclose any changes in your price

list(s), discounts and/or discounting policies which occur after the

offer is submitted, but before the close of negotiations. If your

discount practices vary by model or product line, the discount

information should be by model or product line as appropriate. You

may limit the number of models or product lines reported to those

which exceed 75% of actual historical Government sales (commercial

sales may be substituted if Government sales are unavailable) value

of the special item number (SIN).

Column 1--Identify the applicable customer or category of

customer. A ``customer'' is any entity, except the Federal

Government, which acquires supplies or services from the Offeror.

The term customer includes, but is not limited to original equipment

manufacturers, value added resellers, state and local governments,

distributors, educational institutions (an elementary, junior high,

or degree granting school which maintains a regular faculty and

established curriculum and an organized body of students), dealers,

national accounts, and end users. In any instance where the Offeror

is asked to disclose information for a customer, the Offeror may

disclose information by category of customer if the offeror's

discount policies or practices are the same for all customers in the

category. (Use a separate line for each customer or category of

customer.)

Column 2--Identify the discount. The term ``discount'' is as

defined in solicitation clause 552.212-70 Preparation of Offer

(Multiple Award Schedule). Indicate the best discount (based on your

written discounting policies or standard commercial discounting

practices if you do not have written discounting policies) at which

you sell to the customer or category of customer identified in

column 1, without regard to quantity; terms and conditions of the

agreements under which the discounts are given; and whether the

agreements are written or oral. Net prices or discounts off of other

price lists should be expressed as percentage discounts from the

price list which is the basis for your offer. If the discount

disclosed is a combination of various discounts (prompt payment,

quantity, etc.), the percentage should be broken out for each type

of discount. If the price lists which are the basis of the discounts

given to the customers identified in the chart are different than

the price list submitted upon which your offer is based, identify

the type or title and date of each price list. The contracting

officer may require submission of these price lists. To expedite

evaluation, offerors may provide these price lists at the time of

submission.

Column 3--Identify the quantity or volume of sales. Insert the

minimum quantity or sales volume which the identified customer or

category of customer must either purchase/order, per order or within

a specified period, to earn the discount. When purchases/orders must

be placed within a specified period to earn a discount indicate the

time period.

Column 4--Indicate the FOB delivery term for each identified

customer. (See FAR 47.3 for an explanation of FOB delivery terms.)

Column 5--Indicate concessions regardless of quantity granted to

the identified customer or category of customer. Concessions are

defined in solicitation clause 552.212-70 Preparation of Offers

(Multiple Award Schedule). If the space provided is inadequate, the

disclosure should be made on a separate sheet by reference.

If you respond ``YES'' to question 4(b) in the Commercial Sales

Practices Format, provide an explanation of the circumstances under

which you deviate from your written policies or standard commercial

sales practices disclosed in the chart on the Commercial Sales

Practices Format and explain how often they occur. Your explanation

should include a discussion of situations that lead to deviations

from standard practice, an explanation of how often they occur, and

the controls you employ to assure the integrity of your pricing.

Examples of typical deviations may include, but are not limited to,

one time goodwill discounts to charity organizations or to

compensate an otherwise disgruntled customer; a limited sale of

obsolete or damaged goods; the sale of sample goods to a new

customer; or the sales of prototype goods for testing purposes.

If deviations from your written policies or standard commercial

sales practices disclosed in the chart on the Commercial Sales

Practices Format are so significant and/or frequent that the

Contracting Officer cannot establish whether the price(s) offered is

fair and reasonable, then you may be asked to provide additional

information. The Contracting Officer may ask for information to

demonstrate that you have made substantial sales of the item(s) in

the commercial market consistent with the information reflected on

the chart on the Commercial Sales Practice Format, a description of

the conditions surrounding those sales deviations, or other

information that may be necessary in order for the Contracting

Officer to determine whether your offered price(s) is fair and

reasonable. In cases where additional information is requested, the

Contracting Officer will target the request in order to limit the

submission of data to that needed to establish the reasonableness of

the offered price.

(d) The contracting officer shall insert the clause at 48 CFR

552.215-72, Price Adjustment--Failure to Provide Accurate Information,

in solicitations and contracts to be awarded under the multiple award

schedule program.

(e) The contracting officer should use Alternate IV of the FAR

clause at 52.215-42, Requirements for Cost or Pricing Data or

Information Other Than Cost or Pricing Data--Modifications, to provide

for submission of information other than cost and pricing data for MAS

contracts. To provide for uniformity in requests under the MAS program,

the contracting officer should insert the following in paragraph (b) of

the clause.

(1) Information required by the clause at 552.243-72,

Modifications (Multiple Award Schedule);

(2) Any additional supporting information requested by the

Contracting Officer. The Contracting Officer may require additional

supporting information, but only to the extent necessary to

determine whether the price(s) offered is fair and reasonable.

(3) By submitting a request for modification, the Contractor

grants the Contracting Officer or an authorized representative the

right to examine, at any time before agreeing to a modification,

books, records, documents, papers, and other directly pertinent

records to verify the pricing, sales and other data related to the

supplies or services proposed in order to determine the

reasonableness of price(s). Access does not extend to Contractor's

cost or profit information or other data relevant solely to the

Contractor's determination of the prices to be offered in the

catalog or marketplace.

PART 538--FSS SCHEDULE CONTRACTING

4. Section 538.270 is revised to read as follows:

538.270 Evaluation of multiple award schedule offers.

(a) The Government will seek to obtain the offeror's best price

(the best price given to the most favored customer). However, the

Government recognizes that the terms and conditions of commercial sales

vary and that there may be legitimate reasons why the best price is not

achieved.

[[Page 44524]]

(b) The contracting officer will establish negotiation objectives

based on a review of relevant data and determine price reasonableness.

(c) When establishing negotiation objectives and determining price

reasonableness, contracting officers will compare the terms and

conditions of the MAS solicitation with the terms and conditions of

agreements with the offeror's commercial customers. The contracting

officer will consider the following factors when determining the

Government's price negotiation objectives:

(1) Aggregate volume of anticipated purchases;

(2) The purchase of a minimum quantity or a pattern of historic

purchases;

(3) Prices taking into consideration any combination of discounts

and concessions offered to commercial customers;

(4) Length of the contract period;

(5) Warranties, training and/or maintenance included in the

purchase price or provided at additional cost to the product prices;

(6) Ordering and delivery practices; and

(7) Any other relevant information including differences between

the MAS solicitation and commercial terms and conditions that may

warrant differentials between the offer and the best prices offered to

the most favored commercial customer(s). For example, if it is more

expensive for an offeror to sell to the Government than to the customer

who receives the offeror's best price or if the customer (e.g., dealer,

distributor, OEM, other reseller) who receives the best price performs

certain value-added functions for the offeror that the Government does

not perform, then some reduction in the discount given to the

Government may be appropriate. In cases where the best price is not

offered to the Government, the contracting officer should ask the

offeror to identify and explain the reason for any differences.

Offerors shall not be required to provide detailed cost breakdowns.

(c) The contracting officer may award a contract containing pricing

which is less favorable than the best price the offeror extends to any

commercial customer for similar purchases, when the contracting officer

makes a determination that:

(1) The prices offered to the Government are fair and reasonable

even though comparable discounts were not negotiated, and

(2) Award of a contract is otherwise in the best interest of the

Government.

5. Section 538.271 is amended by revising paragraph (a) to read as

follows:

538.271 MAS contract awards.

(a) MAS awards will be for commercial items as defined in FAR

2.101. Contracts will be negotiated as a discount from established

catalog prices.

* * * * *

PART 543--CONTRACT MODIFICATIONS

6. Section 543.205 is amended by revising paragraph (c) to read as

follows:

543.205 Contract clauses.

* * * * *

(c) The contracting officer shall insert the clause at 48 CFR

552.243-72, Modifications (Multiple Award Schedule), in solicitations

and multiple award schedule contracts.

PART 552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

7. Section 552.212-70 is revised to read as follows:

552.212-70 Preparation of Offer (Multiple Award Schedule)

As prescribed in 48 CFR 512.301(a)(1), insert the following clause:

PREPARATION OF OFFER (MULTIPLE AWARD SCHEDULE) (AUG 1997)

(a) Definitions. Concession, as used in this solicitation, means

a benefit, enhancement or privilege (other than a discount), which

either reduces the overall cost of a customer's acquisition or

encourages a customer to consummate a purchase. Concessions include,

but are not limited to freight allowance, extended warranty,

extended price guarantees, free installation and bonus goods.

Discount, as used in this solicitation, means a reduction to

catalog prices (published or unpublished). Discounts include, but

are not limited to, rebates, quantity discounts, purchase option

credits, and any other terms or conditions other than concessions)

which reduce the amount of money a customer ultimately pays for

goods or services ordered or received. Any net price lower than the

list price is considered a ``discount'' by the percentage difference

from the list price to the net price.

(b) For each Special Item Number (SIN) included in an offer, the

Offeror shall provide the information outlined in paragraph (c).

Offerors may provide a single response covering more than one SIN,

if the information disclosed is the same for all products under each

SIN. If discounts and concessions vary by model or product line,

offerors shall ensure that information is clearly annotated as to

item or items referenced.

(c) Provide information described below for each SIN:

(1) Two copies of the offeror's current published (dated or

otherwise identified) commercial descriptive catalogs and/or price

list(s) from which discounts are offered. If special catalogs or

price lists are printed for the purpose of this offer, such

descriptive catalogs or price lists shall include a statement

indicating the special catalog or price list represent a verbatim

extract from the Offeror's commercial catalog and/or price list and

identify the descriptive catalog and/or price list from which the

information has been extracted.

(2) Next to each offered item in the commercial catalog and/or

price list, the Offeror shall write the special item number (SIN)

under which the item is being offered. Unless a special catalog or

price list is submitted, all other items shall be marked

``excluded,'' lined out, and initialed by the offeror.

(3) The discount(s) offered under this solicitation. The

description of discounts offered shall include all discounts, such

as prompt payment discounts, quantity/dollar volume discounts

(indicate whether models/products can be combined within the SIN or

whether SINs can be combined to earn discounts), blanket purchase

agreement discounts, or purchase option credits. If the terms of

sale appearing in the commercial catalogs or price list on which an

offer is based are in conflict with the terms of this solicitation,

the latter shall govern.

(4) A description of concessions offered under this solicitation

which are not granted to other customers. Such concessions may

include, but are not limited to, an extended warranty, a return/

exchange goods policy, or enhanced or additional services.

(5) If the Offeror is a dealer/reseller or the Offeror will use

dealers to perform any aspect of contract awarded under this

solicitation, describe the functions, if any, that the dealer/

reseller will perform.

(End of Clause)

8. Section 552.212-71 is amended by revising the date of the

provision and revising the title of provision number 552.215-72 in the

body of the provision to read as follows:

552.212-71 Contract Terms and Conditions Applicable to GSA Acquisition

of Commercial Items.

* * * * *

CONTRACT TERMS AND CONDITIONS APPLICABLE TO GSA ACQUISITION OF

COMMERCIAL ITEMS (AUG 1997)

* * * * *

552.215-72 Price Adjustment--Failure to Provide Accurate Information

* * * * *

9. Section 552.212-73 is revised to read as follows:

552.212-73 Evaluation--Commercial Items (Multiple Award Schedule).

As prescribed in 48 CFR 512.301(a)(4), insert the following

provisions:

[[Page 44525]]

EVALUATION--COMMERCIAL ITEMS (MULTIPLE AWARD SCHEDULE) (AUG 1997)

(a) The Government may make multiple awards for the supplies or

services offered in response to this solicitation that meet the

definition of a ``commercial item'' in FAR 52.202-1. Awards may be

made to those responsible offerors that offer reasonable pricing,

conforming to the solicitation, and will be most advantageous to the

Government, taking into consideration the multiplicity and

complexity of items of various manufacturers and the differences in

performance required to accomplish or produce required end results,

production and distribution facilities, price, compliance with

delivery requirements, and other pertinent factors. By providing a

selection of comparable supplies or services, ordering activities

are afforded the opportunity to fulfill their requirements with the

item(s) that constitute the best value and that meet their needs at

the lowest overall cost.

(b) A written notice of award or acceptance of an offer, mailed

or otherwise furnished to the offeror within the time for acceptance

specified in the offer, shall result in a binding contract without

further action by either party. Before the offer's specified

expiration time, the Government may accept an offer (or part of an

offer), whether or not there are negotiations after its receipt,

unless a written notice of withdrawal is received before award.

(End of Provision)

Alternate I (AUG 1997):

When anticipating competition of identical items, add the

following paragraph after paragraph (b) of the basic provision.

(c) The Government reserves the right to award only one contract

for all or a part of a manufacturer's product line. When two or more

offerors (e.g., dealers/resellers) offer the identical product,

award may be made competitively to only one offeror on the basis of

the lowest price. (Discounts for early payment will not be

considered as an evaluation factor in determining the low offeror).

During initial open season for an option period, any offers that are

equal to or lower than the current contract price received for

identical items will be considered. Current contractors will also be

allowed to submit offers for identical items during this initial

open season. The current contractor which has the identical item on

contract will be included in the evaluation process. The Government

will evaluate all offers and may award only one contract for each

specified product or aggregate group.

10. Section 552.215-71 is revised to read as follows:

552.215-71 Examination of records by GSA (Multiple Award Schedule).

As prescribed in 48 CFR 515.106-70, insert the following clause:

EXAMINATION OF RECORDS BY GSA (MULTIPLE AWARD SCHEDULE) (AUG 1997)

The Contractor agrees that the Administrator of General Services

or any duly authorized representative shall have access to and the

right to examine any books, documents, papers and records of the

Contractor involving transactions related to this contract for

overbillings, billing errors, compliance with the Price Reduction

clause and compliance with the Industrial Funding Fee clause of this

contract. This authority shall expire 3 years after final payment.

The basic contract and each option shall be treated as separate

contracts for purposes of applying this clause.

(End of Clause)

11. Section 552.215-72 is revised to read as follows:

552.215-72 Price adjustment--Failure to provide accurate information.

As prescribed in 48 CFR 515.804-6(d), insert the following clause:

PRICE ADJUSTMENT--FAILURE TO PROVIDE ACCURATE INFORMATION: (AUG 1997)

(a) The Government, at its election, may reduce the price of

this contract or contract modification if the Contracting Officer

determines after award of this contract or contract modification

that the price negotiated was increased by a significant amount

because the Contractor failed to:

(1) provide information required by this solicitation/contract

or otherwise requested by the Government; or

(2) submit information that was current, accurate, and complete;

or

(3) disclose changes in the Contractor's commercial

pricelist(s), discounts or discounting policies which occurred after

the original submission and prior to the completion of negotiations.

(b) The Government will consider information submitted to be

current, accurate and complete if the data is current, accurate and

complete as of 14 calendar days prior to the date it is submitted.

(c) If any reduction in the contract price under this clause

reduces the price for items for which payment was made prior to the

date of the modification reflecting the price reduction, the

Contractor shall be liable to and shall pay the United States--

(1) The amount of the overpayment; and

(2) Simple interest on the amount of such overpayment to be

computed from the date(s) of overpayment to the Contractor to the

date the Government is repaid by the Contractor at the applicable

underpayment rate effective each quarter prescribed by the Secretary

of the Treasury under 26 U.S.C. 6621(a)(2).

(d) Failure to agree on the amount of the decrease shall be

resolved as a dispute.

(e) In addition to the remedy in paragraph (a) of this clause,

the Government may terminate this contract for default. The rights

and remedies of the Government specified herein are not exclusive,

and are in addition to any other rights and remedies provided by law

or under this contract.

(End of Clause)

12. Section 552.243-72 is amended by revising the date of the

clause, by revising paragraphs (a), (b)(1) introductory text, (b)(1)

(i), (ii) and (viii), (b)(3), and by deleting paragraph (b)(4) and

Alternate I to read as follows:

552.243-72 Modifications (Multiple Award Schedule).

* * * * *

MODIFICATIONS (MULTIPLE AWARD SCHEDULE) (AUG 1997)

(a) General. The Contractor may request a contract modification

by submitting a request to the Contracting Officer for approval,

except as noted in paragraph (d) of this clause. At a minimum, every

request shall describe the proposed change(s) and provide the

rationale for the requested change(s).

(b) * * *

(1) Additional items/additional SIN's. When requesting

additions, the following information must be submitted:

(i) Information requested in paragraphs (1) and (2) of the

Commercial Sales Practice Format to add SIN's.

(ii) Discount information for the new item(s) or new SIN(s).

Specifically, submit the information requested in paragraphs 3

through 5 as applicable of the Commercial Sales Practice Format. If

this information is the same as the initial award, a statement to

that effect may be submitted instead.

* * * * *

(viii) Any information requested by 52.212-3(f), Offerors

Representations and Certifications--Commercial Items, that may be

necessary to assure compliance with 552.225-9, Trade Agreements Act.

* * * * *

(3) Price Reduction. The Contractor shall indicate whether the

price reduction falls under the item (i), (ii), or (iii) of

subparagraph (c)(1) of the Price Reduction clause at 552.238-76. If

the Price reduction falls under item (i), the Contractor shall

submit a copy of the dated commercial price list. If the price

reduction falls under item (ii) or (iii), the Contractor shall

submit a copy of the applicable price list(s), bulletins or letters

or customer agreements which outline the effective date, duration,

terms and conditions of the price reduction.

* * * * *

PART 570--ACQUISITION OF LEASEHOLD INTERESTS IN REAL PROPERTY

13. Section 570.308-2 is amended by revising paragraph (e) to read

as follows:

570.308-2 Cost or pricing data.

* * * * *

(e) If the proposed lessor refuses to provide data when required,

the contracting officer shall follow the procedures in FAR 15.804-6(e).

Dated: August 15, 1997.

Ida M. Ustad,

Deputy Associate Administrator for Acquisition Policy.

[FR Doc. 97-22144 Filed 8-20-97; 8:45 am]

BILLING CODE 6820-61-P