One question we often get from our clients is how to tackle annual escalation rates on a multi-year GSA Schedule task order when your GSA Schedule price increases will be based on a market indicator and you do not know next year’s percentage increase.
Firstly, you must know how your GSA rates were awarded. Price increases for professional services on GSA Schedules are almost based on one of three options:
- Market indicator, such as a Bureau of Labor Statistics Consumer Price Index
- Fixed escalation rate that determines each out-year rate
- Commercial price list/rate card – least common
On multi-year task order, your Government customers may require that you include out-year rates on a task order awarded through a GSA Schedule. What you need to keep in mind is that the escalation rate on a task order cannot be greater than the rate approved on your GSA Schedule.
Each solicitation varies, but GSA typically allows up to three increases annually with a not to exceed cumulative percentage. If your Economic Price Adjustments are based on the CPI, GSA will allow you to modify your rates commensurate with the current market indicator, released semi-annually. The rates awarded through the modification process are the maximum rates that you can charge your customers on an open task order.
When you respond to a proposal that requires out-year escalations, you can estimate your GSA schedule escalation rates based on the current market indicator. However, if the escalation rate for a task is higher than the escalation rate approved through a GSA modification, you must adjust your rates on the task order accordingly. This reduction may require a modification of the task order or your customer may just allow you to charge the GSA ceiling rate. It is also important to know that you cannot officially escalate the task order rates and charge for that service until the modification on your Schedule has been approved. If the GSA modification change goes beyond the Task Order anniversary, you may request compensation for the rates that should have been charged had the GSA modification been awarded sooner – acceptance on the compensation request is at the discretion of the Government customer.
If your GSA Schedule prices are based on an established out-year percentage, you may include this out-year escalation rate on any multi-year GSA Schedule task orders.
On non-GSA Federal contracts, the connection between the negotiated GSA escalation rate and the escalation rate in the Federal contract doesn’t apply.
To put it simply, on a GSA task order you can never charge more than the rates that are currently awarded. This may be a complicated issue, with GSA anniversary dates occurring at different times then your task order anniversary.
For over 20 years, Coley GCS has helped companies worldwide successfully win and manage more than $3 Billion in Government Contracts. We specialize in GSA Schedules but support any contracting vehicle. We build long term relationships with clients –many who have put their trust in our advice for over two decades.