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GSA Schedules Subcontracting Issues
Breakout Session 2103 James S. Phillips, Esq.,
Centre Consulting, Inc. Barbara S. Kinosky, Esq.,
Centre Consulting, Inc. Date April 14,
2008 Time 300 pm 400 pm
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Challenging Issues

• Contractor Teaming Arrangements (CTAs) vs.
  Prime/Sub
• The Differences and Their Impacts
• The New TM Rule Its Impact on Subcontracting
• Mandatory vs. Non-mandatory Flow downs Audit
  Rights.
• Small Business Subcontracting Plan Compliance
  Reporting

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CTAs vs. Prime /Sub

• Whats the Difference?
• CTA All teammates are selling off their own
  Schedule
• Prime/Sub All teammates are selling off the
  Primes Schedule!

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CTAs vs. Prime /Sub

• Whats the Difference?
• Prime/Sub Only the prime has privity with the
  Govt customer.
• CTA All teammates are primes with privity
  to the Govt customer.
• But one may act as team leader for invoicing
  and management purposes of the convenience of
  the Govt

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CTAs vs. Prime /Sub

• Issues 1 - Who Pays/Reports IFF?
• Prime/Sub Prime reports all sales and pays IFF.
• CTA Presumption is that each teammate
  separately reports and pays IFF on their share
  of the sales
• Important to address this in the teaming
  agreement!

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CTAs vs. Prime /Sub

• Issue 2 Prime Markups
• Prime/Sub Prime sets the mark-up on teammate
  work subject to price limits of Primes Schedule.
• CTA Leader may bill for entire team but can
  never bill more than applicable teammates
  Schedule rate/price.
• Compensation to Leader Needs to be Addressed in
  Teaming Agreement.

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CTAs vs. Prime /Sub

• Issue 3 Is a Commercial Discount Involved?
• Problem GSA Considers Dealings Between a Sub
  a Prime to Be a Commercial Transaction
• If Sub Bills Prime Below its Own GSA Rate It May
  Trigger a Price Reduction!
• Unless Prime has LOA to Buy for Govt off Schedule

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CTAs vs. Prime /Sub

• Is A Commercial Discount Involved?
• Prime/Sub Clearly a Commercial Transaction that
  could trigger a Price Reduction.
• CTA Not a Commercial Transaction! But many
  Govt Auditors Get it Confused.

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CTAs vs. Prime /Sub

• Issue 4 Small Biz Set Asides
• Prime/Sub Prime must be small and must do gt50
  of work on TO or BPA
• CTA All teammates must be small and team must
  do gt50 of the work on TO or BPA.

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The New TM Rule Subcontracting

• New FAR Rules Provide Multiple Solutions
• Rule 1 TM for Commercial Services (FAR
  52.216-31)- Prime Subs Bill at Primes Rate.
• Rule 2 TM for Non Commercial Services with
  Competition (FAR 52.216-29) Prime Subs Bill
  at Blended Rate.
• Rule 3 TM for Non Commercial Services
  Without Competition (FAR 52.216-30) Establish
  Separate Bill Rates for Prime Each Sub.

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The New TM Rule Subcontracting
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The New TM Rule Subcontracting

• Whats the Rule for GSA Schedules?
• No formal position taken to date.
• GSA will almost certainly adopt Commercial Rule
  i.e, entire team bills at rate set by Prime.

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The New TM Rule Subcontracting

• Special DoD Issue
• 2008 DoD Authorization Act mandates new DFAR by
  late June limiting DoDs use of TM contracts for
  commercial services
• No Rule to date But expect Rule making it very
  hard for DoD to buy commercial services on TM
  basis
• If GSA adopts commercial TM rule then DoD
  Schedule Buys will likely have to be FFP or FFP
  LOE

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The New TM Rule Subcontracting

• Other Prime/Sub Issues
• Primes Invoices are Subject to Audit!
• Audit Focus extends to time records and labor
  qualifications
• Need to flow down ability to obtain and audit
  Subs time records and resumes
• If Subs Personnel dont meet Primes Qual Reqts,
  Sub Labor must be billed at Cost

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GSA Prime/Sub Flowdown Audit Issues

• Mandatory Flowdowns Per FAR Part 12
• Utilization of Small Business Concerns (FAR
  52.219-8)
• Equal Employment Opp (FAR 52.222-26)
• Affirm. Action for Disabled Vets (FAR 52.222-36)
• Affirm. Action for disabled Workers (FAR
  52.222-36)
• Preference for Privately Owned US Flagged Vessels
  (FAR 52.222-41)
• Service Contract Act (FAR 52.222-41)

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GSA Prime/Sub Flowdown Audit Issues

• Other Desirable Flowdowns
• Termination Rights
• Changes Rights
• Govt Audit Rights.
• Any Requirements Imposed on the Prime by the
  Government

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GSA Prime/Sub Flowdown Audit Issues

• Special Subcontractor Audit Issues
• Products Buy America Trade Agreements Act
  Compliance
• Services Time Keeping and Labor Qualification
  Compliance

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Small Biz Subcontracting Plans

• ISSUE1 - Compliance
• Applies to large businesses only.
• Plans Set Forth Goals That Contractor Is to
  Strive to Achieve In Performing GSA Task Order
  Awards
• GSA is Relatively Inflexible in Negotiating the
  Goals. Views Requirement as a SBA Mandate
• Plans Become a Contract Requirement Whereby Large
  Business Must Exercise Demonstrate Good Faith
  In Pursuing Socio-Economic Goals

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Small Biz Subcontracting Plans

• Compliance Response
• Annual Reports of Goal Achievement to Be
  Submitted to GSA Individual Subcontract Report
  (i.e., the former SF 294)
• Failure to Achieve Goals Subjects Contractor to
  Potential Audit of Whether It Exercised Good
  Faith in Pursuing Goals.
• Be Prepared to Demonstrate Outreach efforts if
  Goals arent met.

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Small Biz Subcontracting Plans

• SBA Regs Give The Following Examples Of Good
  Faith Efforts(13 CFR 1235.3(b))
• Break up work into small enough pieces for small
  businesses
• Do market research to look for small businesses
  in all appropriate places, including CCR, Pro-Net
• Attend matchmaking events
• Give small businesses plenty of time and help in
  preparing proposals
• Help small businesses finance contract work
• Participate in a mentor/protégé program

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Small Biz Subcontracting Plans

• Issue 2 Reporting
• Historical Issue. Ordering Agencies Want Credit
  For Subcontracting On GSA Task Orders
• GSAs Position Is That Ordering Agencies Should
  Not Require Subcontracting Plans On GSA Task
  Orders.
• GSA Claims Including A Subk Plan On A Task Order
  Is An Illegitimate Modification To The Terms Of
  The Schedule Contract - Double Counting

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Small Biz Subcontracting Plans

• Other Issues Summary Reporting
• The SF 295 is a summary form that covers all
  subcontracting at an agency. Now called a
  Summary Subcontract Report (SSR)
• Ktr must file a SSR if Ktr has SubK plan on any
  contract at that agency
• Issue Will a GSA TO at an agency trigger the
  requirement to submit a 295?
• GSA SBA maintain No.

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Small Biz Subcontracting Plans

• Other Issues FFATA Reporting
• New FAR 52.204-10 Reporting Subcontract Awards
• Implements the Federal Funding and Accountability
  Transparency Act
• Contractors required to report subcontracts over
  1 million to www.esrs.gov

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GSA Schedules Subcontracting Issues

• Questions?

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GSA Schedules Subcontracting Issues

• Thank You!
• bkinosky_at_centreconsult.com
• jphillips_at_centreconsult.com
• bcaney_at_centreconsult.com