The terms & conditions of standard Commercial Supplier Agreements (CSA) have been a point of frustrated negotiations in federal procurement for years. GSA has tried numerous times to create “fail charts” of terms that are at odds with the requirements set by statute as well as in the Federal Acquisition Regulation (FAR).   To reduce government cost, time and frustration in negotiations; GSA has signed a final rule addressing certain contract provisions that are standard in commercial contracts are deemed “unenforceable” when applied to Federal contracts.

Commercial Supplier Agreements (CSA) and often called End User License Agreements (EULA), Terms of Service (TOS), Terms of Use (TOU), or simply, Software agreements.

GSA’s final rule addresses common commercial supplier agreement terms that are inconsistent, or create ambiguity, with Federal law. The primary alterations include a reordering of the Order of Precedence and the addition of the Unenforceable Clauses.

The change and addition will create clarity regarding several unenforceable clauses commonly found in CSA’s that will take precedence over the CSA terms.  The unenforceable clauses include elements that may be common in commercial contracts, but cannot be included in Government contracts, due to statutes and regulations contained in the FAR (Federal Acquisition Regulation).

Such Unenforceable Clauses include:

Any language, provision, or clause requiring the Government to pay any future fees, penalties, interest, legal costs or to indemnify the Contractor or any person or entity for damages, costs, fees, or any other loss or liability that would create an Anti-Deficiency Act violation

End User will be the ordering activity and not any employee or person.

Law and disputes. This agreement is governed by Federal law. No state, district, municipality, or territory’s laws will take precedence to Federal law. Additionally, the venue for dispute resolution will be in prescribed by Federal law

Federal law will mandate the time-frames for bringing an action or dispute

Continued performance. The supplier or licensor shall not unilaterally revoke, terminate or suspend any rights granted to the Government except as allowed by this contract. IF there is an issue, the vendor will follow the Contracts Dispute Act.

Agency will determine dispute relief regarding the use of arbitration

Vendors can unilaterally update terms, as long as they are immaterial

No automatic renewals. If any license or service tied to periodic payment is provided under this agreement, such license or service shall not renew automatically upon expiration of its current term without prior express consent by an authorized Government representative

Department of Justice will defend the end user in any indemnification claims

Vendors may audit end user compliance with terms but will do so at vendors costs. If additional charges need to be made, it will be handled through the Disputes clause, FAR 520233-2

 

General Services Administration’s Final Rule May Increase Contractor’s Cost.

The inclusion of the final rule will reduce time and costs in pre-award negotiations– assuming you accept all clauses without exception. As this clause will help to reduce time in negotiations (and therefore, cost) with the initial award of products or services requiring a CSA; there may be longer-term costs to consider with longer-time frames to resolve disputes and  difficult indemnification issues.

All clauses may be disputed, and exceptions requested, however the effort will be costly. With the cost of legal fees to request waivers with unlikely outcomes, the, acceptance of unenforceable clauses can be the cost of doing business with the Federal government.

GSA initially created a class deviation to solve the issues encountered with CSA; but this process was met with criticism as it does not allow for industry input or comments. The latest deviation opened to public comments in 2016 and has reached a final rule February 2018.

If you have questions on our CSA, contract modifications, or other schedule related concerns; please contact us at [email protected] or directly by phone at 210-402-6766.

Source: https://www.federalregister.gov/documents/2018/02/22/2018-03350/general-services-administration-acquisition-regulation-unenforceable-commercial-supplier-agreement

 

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Dan Coley

Dan Coley

Vice President for Coley Government Contracting Services, Dan leads the day-to-day Consulting Practice. He has more than a decade of experience with the acquisition, management, and marketing of Federal, State, and Local government contracts. Daniel specializes in all aspects of GSA Schedules management and marketing and has helped hundreds of Coley clients remain compliant with the terms of their GSA contract while helping them expand their business.

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