The General Services Administration (GSA) has recently addressed the purchasing of cloud-based software with a strategic approach that could potentially provide a simpler path for government customers.

A GSA Acquisition Letter issued on March 15, 2024, addresses new purchasing guidance of cloud-based Software as a Services (SasS) for Contracting Officers. This memorandum states when specific conditions are met, an upfront payment will not be considered an advance payment and will allow agencies to purchase and receive cloud software licenses at the same time of the payment.

What is an Advanced Payment?

Advance payments are a specific type of contract financing method where payments are made prior to delivery or completion of the product or a service. Historically, advance payments are not authorized for the purchase of software licenses delivered or accessed through SaaS.

Acquisition of Software as a Service (SaaS)

Standard delivery of SaaS consists of any cloud software or licenses that can be accessed online, typically as a subscription. The purchaser receives download access to the license at the same time that payment is made. The purchased software license typically comes with a software license term that reflects the time period for which the license will grant users access to the software via SaaS delivery.

How Cloud Software Can Qualify for an Upfront Payment?

Upfront payments have the potential for price savings that benefit small businesses and meet market demands for products, services, and solutions and the desired acquisition approaches. What makes an upfront payment not an advance payment are the six criteria that the purchase must meet.

  • Access to the cloud software is granted contemporaneously with payment (i.e., delivery of the license is contemporaneous with payment);
  • The license is acquired on a fixed-price or fixed-price-with=economic-price adjustment basis even if other portions of the task order or contract are not fixed price;
  • The license is priced at a single seat, multi-seat, unit, or subscription price covering a fixed term, defined as “a limited period of time”;
  • The license’s pricing/billing model allows for no utilization or consumption metric other than quantity to affect the costs incurred over the negotiated term;
  • The license does not require any upfront payment other than the fixed seat, unit, or subscription cost as a prerequisite for access or a pricing discount; and
  • Within end user or other license agreements, the license service is continuous and uninterrupted for the negotiated term of access to the license.

The Acquisition Letter is currently in effect as of its date of issue, until rescinded or incorporated into the General Services Acquisition Manual.

Coley has over 23 years’ experience helping thousands of companies obtain a GSA Schedule. Reach out to Coley if you have an existing GSA contract and need help adding your software solutions to your GSA Schedule contract. Contact us by email at  hello@coleygsa.com, phone at 210-402- 6766 or  schedule a call to get started on obtaining your GSA Schedule—a critical step on your road to success in the government market.

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