GSA Issues Final Rule Governing Negotiations of Common Commercial Terms
On February 22, 2018, the General Services Administration (GSA) issued a Final Rule to address common commercial supplier agreement terms that it contends are inconsistent with federal law. The purpose of this rule is to streamline negotiations over commercial supplier agreements (“CSAs”), end-user license agreements (“EULAs”), Terms of Sale (“TOSs”) or similar sets of standard terms and conditions. Significantly, the rule reverses several controversial provisions from the Proposed Rule and an earlier class deviation by reverting the order of precedence and eliminating the burdensome requirement of providing the full text of all provisions. Less controversially, but nonetheless important, the Final Rule also formalizes GSA’s longstanding position that certain terms and conditions are unenforceable under federal law.
Unenforceable Provision List Formalized.
The Final Rule adds a paragraph to GSAR 552.212-4, which identifies 15 common commercial terms which are unenforceable against the government. GSA views these terms as non-negotiable and required by federal law. For example, it prohibits automatic renewals and provides that the choice of law for disputes is federal law. It also negates any provision requiring the government to indemnify the Contractor if it would create an Anti-Deficiency Act violation (31 U.S.C. §1341). This change would thus allow GSA to ignore these clauses during negotiations, with the stated goal of reducing time and expense in negotiating CSAs/EULAs, and formalizes GSA’s long standing position on these clauses.
Changes from the Proposed Rule
GSA responded to industry complaints (and possibly our earlier blog posts on this topic found here and here) about the Proposed Rule’s changes to the order of precedence clause and its burdensome requirement that a contract incorporate the full text of all terms and conditions. The Proposed Rule altered the standard order of precedence to make solicitation provisions controlling over the negotiated terms of CSAs or EULAs. This meant that contract terms negotiated and agreed upon by GSA and the contractor would be superseded if they conflicted with the terms of the solicitation, drafted unilaterally by GSA. Recognizing the inherent unfairness and confusion this created, GSA reversed course, and the Final Rule restores the standard order of precedence while clarifying that a new Unenforceable Clause provision takes precedence over negotiated terms.
GSA also addressed concerns over the burdens imposed by requiring full text versions of all terms and conditions. The Final Rule permits contractors to incorporate its terms and conditions by reference. This means that the burden is on GSA contracting officers to ensure that the Government fully understands all of the terms and conditions in the contract and that those terms do not change materially during negotiations.
This Final Rule is an excellent example of GSA listening to the concerns of industry and addressing those concerns in a productive manner. And there is good reason to believe that it will achieve its intended purpose of reducing the burden the CSA/EULA negotiation process has historically imposed on both parties. Along with the new order-level materials rule, discussed here, it appears we are entering a new era of GSA contracting, which should benefit both the government and its contractors.