DOD Class Deviation Further Complicates FSS Ordering

On March 13, 2014, the Director of Defense Procurement and Acquisition Policy issued a Class Deviation that alters the way DOD will utilize Federal Supply Schedule contracts.  Effective immediately, prior to awarding an order against an FSS contract, DOD ordering activity contracting officers must independently make a determination that the FSS order price is fair and reasonable.  This requirement applies regardless of whether the order is for supplies, fixed-price services, or services requiring a statement of work.  One might read the class deviation to signal DOD’s lack of confidence that GSA is securing fair and reasonable pricing when negotiating and awarding schedule contracts.

The class deviation comes on the heels of other changes to the FSS ordering requirements in FAR 8.4.  Specifically, a final rule issued on March 2, 2012, increased competition requirements for certain schedule orders.  Those changes were reminiscent of the DOD specific changes required by the 2002 NDAA (Pub. L. 107-107 § 803).  Thus, it is possible that the DOD deviation is a harbinger of broader changes to FSS ordering requirements in the FAR.  The class deviation certainly further complicates FSS ordering for DOD COs and, so, runs contrary to one of the FSS Program’s fundamental tenets.  Namely, that the schedules are to provide federal agencies with a simplified process of acquiring commonly used supplies and services.

As a result, contractors that sell to DOD through FSS contracts should be prepared to repeatedly justify their FSS order prices as fair and reasonable.  For example, FSS contractors frequently may be asked to respond to requests for other than cost or pricing data, all to support the CO’s price analysis under FAR 15.404-1.  Time will tell how this class deviation, which may ultimately be issued as a change to the DFARS, will impact FSS contractors.  As a practical matter, this deviation is likely to increase the administrative costs of holding a schedule contract and those with substantial DOD sales should be considering strategies to minimize the likely increased administrative burden.

Phillip Seckman

About Phillip Seckman

Phillip Seckman represents clients concerning government and commercial contract matters. His practice spans a broad range of subjects related to federal procurement law, state and local procurement law, and complex federal regulatory issues. He concentrates his practice in the areas of commercial item acquisitions, GSA schedule contracting, cybersecurity, compliance, internal investigations, and bid protests (both federal and state). A significant component of his practice involves government contract cost allowability, proper cost accounting, and contract cost and pricing issues.

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