Pentagon_000009496526LargeOn March 13, 2014, Defense Procurement and Acquisition Policy (DPAP) issued a Class Deviation to FAR 8.404(d) to change how DoD agencies use the Federal Supply Schedule (FSS).  By the Class Deviation, DPAP now requires that in placing FSS orders and awarding blanket purchase agreements (BPAs), DoD contracting officers (COs) may not rely on the presumption that order prices are fair and reasonable. Instead, COs must undertake a price analysis in accordance with FAR Part 15, which does not otherwise apply to FSS orders. This change may significantly impact both COs and contractors.

FAR 8.404(d) provides that FSS pricing has been determined to be fair and reasonable. This determination is based on the extensive disclosures made by a contractor about its pricing practices and procedures and the ensuing negotiations with GSA. As a result of this lengthy process, COs are not required to undertake price analyses to determine that order prices are fair and reasonable, although COs are encouraged to seek further discounts in certain circumstances. For services that require a statement of work, the CO is required to assess the number of hours and the mix of labor categories to ensure they are reasonable. A full price analysis, however, is not required. In short, COs generally can rely on GSA’s prior work, which simplifies the ordering process.

DoD has changed the rules with the Class Deviation. It provides that GSA’s determination about fair and reasonable pricing applies only to the establishment of the FSS contract and not to any orders or BPAs under it. For orders and BPAs, DoD COs must determine in each instance that the pricing is fair and reasonable. The COs must look to FAR 15.404-1, which identifies a variety of price analysis techniques, including gathering additional pricing information. While competition for orders may prove to be an adequate basis for making such a determination, the FAR does not require competition for FSS orders below the Simplified Acquisition Threshold ($150,000). Will COs increasingly rely on competition – even for smaller orders – to make the fair and reasonable price determination? It is unclear.

Will COs require contractors to provide additional information about their pricing to customers notwithstanding the extensive disclosures that led to the Schedule pricing? DPAP has not clarified how far COs may or must go in terms of requiring contractors to provide additional data. Will DoD modify the DFARS or otherwise provide further guidance? DoD has not said.

Contractors expend considerable effort to present the pricing information on which Schedule pricing is based. As a result of the competition now required for orders above the Simplified Acquisition Threshold, Schedule pricing is less relevant than it was several years ago. Due to the DPAP change, the relevance of Schedule pricing has been further diminished. Maybe it is time to revisit whether the burdens of the pricing disclosure are worth the effort.