GSA Issues Class Deviation to Address Conflicts Between Commercial Supplier Agreement Terms and Federal Law

federal-600On July 31, 2015, the General Services Administration (GSA) issued a Class Deviation to uniformly address certain commonly recurring conflicts between Commercial Supplier Agreement (CSA) terms and federal law.  The GSA’s Class Deviation purports to streamline the contract formation process by addressing fifteen of the most common CSA areas that conflict with federal law, thereby removing the need for subsequent negotiation between the contractor and GSA on these subject matters after the contractor has submitted its proposal.  The fifteen areas addressed by the deviation are:

  1. Definition of contracting parties
  2. Contract formation
  3. Vendor indemnity (vendor assumes control of proceedings)
  4. Automatic renewals of term-limited agreements
  5. Future fees or penalties
  6. Taxes
  7. Payment terms or invoicing (late payments)
  8. Automatic incorporation/deemed acceptance of third party terms
  9. State/foreign law governed contracts
  10. Equitable remedies, injunctions, binding arbitration
  11. Unilateral termination of supplier agreement by supplier
  12. Unilateral modification of supplier agreement by supplier
  13. Assignment of supplier agreement of government contract by supplier
  14. Confidentiality of supplier agreement terms and conditions
  15. Audits (automatic liability for payment)

The class deviation addresses these areas by creating GSA Regulation (GSAR) clause 552.212-4, which must be included in all new contracts for items with CSAs.  GSAR 552.212-4(w) renders unenforceable CSA clauses falling within the fifteen areas noted above that conflict with federal law and, instead, incorporates replacement language into CSAs to address those elements.

Importantly, GSAR 552.212-4 also contains a modified order of precedence subsection that lowers the priority previously given to CSA terms by Federal Acquisition Regulation (FAR) 52.212-4.  Whereas FAR 52.212-4 listed “Addenda to this solicitation or contract, including any license agreements for computer software”—which would include CSAs—fourth in the overall order of precedence and higher in the order of precedence than solicitation provisions and the provisions of FAR 52.212-4, GSAR 552.212-4 now lists that same item sixth and below both solicitation provisions and the FAR 52.212.-4 provisions.  Additionally, GSAR 552.212-4 identifies the list of unenforceable CSA clauses found at subsection (w) second in the order of precedence.  Taken together, these changes indicate that solicitation terms and the FAR 52.212-4 provisions generally will control over conflicting CSA terms, and suggest that CSA terms will be given very little importance.

GSA expects that the deviation will reduce risk and administrative costs for both contractors and the government, while making the acquisition process on the whole more efficient by eliminating at least some of the need for contract term negotiation.  However, it is possible, if not likely, that the changes to the order of precedence will temper such effects because of an increased need on the part of contractors to negotiate with the government over whether CSA terms are in conflict with solicitation provisions or the FAR 52.212-4 provisions and may be included in the contract.  The Class Deviation became effectively immediately and applies to all GSA acquisitions where the resultant contract is for items containing CSAs.

For more information, see the Memorandum for the Acquisition Workforce at https://interact.gsa.gov/sites/default/files/AL%20MV-15-03%20Signed.pdf.