Avoid Overbillings: Understand The Role of GSA Schedule Ceiling Rates

At a glance

• The main takeaway: Rates charged on GSA task orders and Blanket Purchase Agreement (BPA) call orders cannot be greater than the approved ceiling rates on your GSA Schedule contract.
• The impact on your business: Charging higher rates than those awarded on the GSA schedule can result in substantial overcharges, including bid protests and repayments.
• Next Steps: Pay close attention to the potential pricing and escalation impacts of GSA schedule contract option renewals, cancellations, or expirations, on task or call order rates to avoid noncompliance and penalties.

The Full Story:

When your GSA Schedule is not based on a published commercial price list and contract contains clause I-FSS-969(b)(1), future price increases are based on a negotiated escalation percentage. Out-year pricing is a great approach for service companies to avoid missing out on an annual rate escalation.  While this is a great opportunity to put your rate escalations on auto-pilot, contractors have several considerations when incorporating these out-year rates in a GSA task order.   A GSA schedule contract holder with clause I-FSS-969(b)(1) should incorporate internal policies and procedures to ensure proper application of labor rates on GSA Schedule task orders and BPA call orders. Remember that the rates on a task order or BPA call order cannot be greater than the ceiling rates approved on your GSA Schedule.

GSA Option Period Renewals:

Contracts with a negotiated fixed escalation will include out-year pricing for the full 20 years.  However, GSA reserves the right to renegotiate the escalation percentage and resulting ceiling prices at each five-year option. The out-year pricing is not officially awarded until subsequent options are exercised by GSA.  Order-level pricing may need to be adjusted downward if GSA reduces the labor category ceiling rates during the option renewal. The exercising of every option triggers the need for contractors to review the pricing on all established task orders and BPA call orders to determine if downward adjustments are necessary. The call or task order terms determine if adjustments are required for current rates.

Orders Against Expired MAS Contracts

Although clause 52.216-22 Indefinite Quantity (OCT 1995) allows task orders issued during the effective period of the GSA schedule to continue for up to 60 months following expiration of the contract, you cannot increase the GSA ceiling prices after the GSA schedule expires. If awarded an order that extends beyond the GSA schedule ultimate expiration date, , contractors should not propose pricing or escalation that will lead to order rates exceeding the final GSA ceiling price.  The inability to escalate labor rates beyond the ultimate expiration date of the GSA schedule will likely have a significant financial impact.  This situation is one of the many reasons Aprio recommends that companies pursue their follow-on 20-year streamlined contract in conjunction with exercising the final option on their GSA schedule.

Contractors with Multiple MAS Contracts:

There are many reasons why a company may have multiple GSA MAS schedule contracts. 

Ensuring compliance with awarded out-year pricing is further complicated for these GSA schedule holders with multiple MAS contracts.  Each awarded task order must be monitored for potential over charges in line with the GSA MAS contract it was issued against and the applicable escalation methodology.  Monitoring should continue across options and the ultimate expiration date of the contract in line with the considerations identified above.

Rate escalations are one area of GSA compliance that can trip up a GSA Schedule contractor and cost real dollars when not executed correctly. One of the more frequent findings in GSA Office of Inspector General (OIG) audits is labor rate overbillings.  These situations can result in overcharges, which can be a huge liability for a GSA contractor.  As a result, Industrial Operations Analysts (IOA) have incorporated more detailed pricing review during the annual contractor assessments. Establish policies and procedures to regularly review the task or call orders rates once the GSA schedule option has been exercised to identify and remedy any resulting pricing adjustments. Don’t escalate rates on task orders beyond the final ceiling price of an expired GSA contract.

Contact Aprio GSA Consulting if you have questions regarding out-year pricing or need assistance in complying with this important GSA Schedule requirement.

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