Efforts to make it easier for agencies to purchase cloud services and align with industry standards continue with yet another acquisition avoidance move.
The General Services Administration has issued its second report. acquisition letter In just over two years, we have given contracting agents the green light to move closer to purchasing cloud services on a “per drink” or pay-as-you-go model.
Jeff Coces, GSA’s senior procurement officer, said contracting agents can use upfront payments to purchase software-as-a-service under certain conditions and do not violate federal procurement laws that prohibit upfront payments. writes.
“For software licenses delivered or accessed via SaaS, payment is often made on an “upfront” basis. This means that payment is made upon receipt of the software license and the beginning of the license service period. GSA contracting officials have been asked whether such advances would be considered advances. That’s not true,” Mr. Coces wrote. “The main difference is concurrent access.”
Corses said prepayment is a specific type of contract financing method where payment is made before the product or service is delivered or completed. This is not permitted under the Anti-Deficiency Act.
A technical workaround is required
Rich Beutel, founder of Cyrrus Analytics and federal procurement expert, said GSA is relying on technological workarounds given the lack of attention the issue has received from Congress.
He said, “The Acquisition Notice circumvents the Defects Act prohibition by emphasizing the requirement for simultaneous delivery of software. Therefore, absent an applicable existing allocation, advance procurements will not be delivered.” Ta.
Corses said acquisitions must meet six criteria so contracting officers don’t have to worry about upfront rules:
- Access to the software is granted upon payment (i.e., license delivery occurs upon payment).
- Licenses are acquired at a fixed price or a fixed price with economic price adjustments, even if the task order or other parts of the contract are not fixed price.
- Licenses are priced at single-seat, multi-seat, unit, or subscription prices covering a fixed period of time, defined as a “Limited Term.”
- The license pricing/billing model does not take into account any usage or consumption metrics other than quantity that affect the costs incurred over the negotiated period.
- Licenses require no upfront payments other than fixed seat, unit, or subscription costs as a prerequisite for access or price discounts.
- Within end user or other license agreements, license services are continuous and uninterrupted during the negotiated term of access to the license.
Larry Allen, president of Allen Federal Business Partners and procurement expert, praised GSA’s changes.
“I think this is a win for increased competition, especially for smaller companies that have traditionally had to fund software acquisitions and offer higher prices as a result,” he said. “This move should increase competition and improve pricing. This is a victory for common sense in government acquisitions.”
GSA acknowledged the problem
Beutel praised GSA’s 2021 Acquisition Letter, which created new ordering procedures that allow for the procurement of cloud products using a consumption-based pricing formula, and said Congress still needs to amend the Shortage Prevention Act to He said the industry needs to be able to bill cloud services in arrears. consumption based.
“Politically, the Appropriations Committee would be very skeptical of such a proposal, even though it has clear economic value,” he said. “In recent years, we have been addressing the need for governments to have the legal authority to adopt true consumption-based pricing, allowing them to purchase IT capacity on demand as needed. , which can be achieved through the use of working capital funding and other technical workarounds, as GSA has employed in the context of cloud procurement based on specific schedules.”
This particular issue forces agencies to pay up to 25% more for cloud services and causes them to be limited in their use of Defense Enterprise Office Solutions (DEOS) contracts from the Defense Information Systems Agency.
GSA became aware of this issue and sought feedback from the industry last July. it is, request information Seek industry feedback on SaaS pricing best practices and options to better align term-based software pricing and billing schedules with industry practices.
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