One advantage of selling to the government through a GSA Multiple Award Schedule (MAS) is that your GSA Schedule contract comes with pre-negotiated pricing and terms and conditions. Of the terms and conditions included on MAS contracts, two that our clients frequently ask about are the maximum and minimum order limits. In this blog, we’ll discuss what the maximum and minimum order limits mean for you as a current or prospective GSA contractor, as well as how each limit is determined. Understanding the nuances of these terms will help you to maintain contract compliance.
Maximum Order Limit
To start with, the maximum order limit is a bit of a misnomer. The MAS Program does not have a ceiling for order size. Rather than acting as a limit for orders, the maximum order limit is a threshold at which the GSA terms and conditions undergo several changes. We’ll go over how to find your maximum order limit later, but keep in mind that it will be a specific dollar amount set by your Special Item Number (SIN).
Below are the ways in which the terms and conditions change for orders that exceed the maximum order limit.
No Obligation to Accept Orders from Executive Branch
A wide range of government customers purchase off of the GSA Schedule, including executive agencies. MAS contractors are obligated to accept orders from all buyers within the executive branch of the federal government, for orders that fall below the maximum order limit. However, per Federal Acquisition Regulation (FAR) Clause 52.216-19, contractors are permitted to refuse orders issued by the executive branch that exceed the maximum order limit.
When the government buyer issuing the order is not part of the executive branch, MAS contractors are permitted to refuse orders of any size. That said, GSA encourages contractors to accept orders from agencies and activities outside the executive branch. As a contractor, keep in mind that when you wish to refuse an order, you’ll need to return the order within 24 hours if the order was made using a purchase card, or within five days if it was not.
Additional Discounts Must Be Requested
Ordering agencies purchasing off of the GSA Schedule are always encouraged to ask for additional discounts from the contractor’s awarded prices, no matter the order size. However, above the maximum order limit, ordering agencies must seek additional discounts from the prices awarded on the contractor’s Schedule.
Contractors aren’t obligated to grant these additional discounts, but providing the discounts can help them become more competitive and meet sales goals. If a contractor doesn’t agree to grant the requested discount to the ordering agency, the ordering agency can still place the order at the original rate, since any pricing awarded on a GSA Schedule has already been determined to be fair and reasonable by government standards.
Price Reduction Clause No Longer Applies
If you’re a contractor who reports your commercial sales practices, you won’t be subject to the Price Reduction Clause for commercial sales that exceed the maximum order limit. The Price Reduction Clause ensures that the discount relationship between your Basis of Award (BOA) customer pricing and GSA pricing is kept the same. Adhering to this clause is an important part of contract compliance.
Ordinarily, per the Price Reduction Clause, if you were to increase the discount to your BOA customer, you would have to increase your discount to GSA by the same margin. But for orders that exceed the maximum order limit, you may give additional discounts to your BOA customers without activating this clause and being obligated to lower your GSA prices. The Price Reduction Clause (GSAM 552.238-81) itself states this exception: “there shall be no price reduction for sales—(1) To commercial customers under firm, fixed-price definite quantity contracts with specified delivery in excess of the maximum order threshold specified in this contract.”
If you report sales under Transactional Data Reporting (TDR), you aren’t subject to the Price Reduction Clause, regardless of whether your orders fall below or above the maximum order limit.
Determining Your Maximum Order Limit
The maximum order limit is not chosen by the contractor but instead is predetermined by the contractor’s SIN. Each SIN on a contractor’s Schedule will have its own maximum order limit. The maximum order limit for each SIN can be found in its corresponding Large Category Solicitation Attachment.
Different SINs within a Large Category will often have the same maximum order limit. For example, most SINs in the Information Technology Large Category have a maximum order limit of $500,000, and most SINs in the Professional Services Large Category have a maximum order limit of $1,000,000.
Minimum Order Limit
The minimum order limit is a bit more straightforward than the maximum order limit. The minimum order limit is simply the minimum dollar amount at which a contractor is willing to accept orders off of their GSA Schedule. The minimum order limit varies by contractor and should be the same as a contractor’s commercial minimum order limit, if one exists.
The minimum order limit is also the minimum dollar amount at which contractors are obligated to accept orders from buyers within the executive branch of the federal government. Below the minimum order limit, contractors have no obligation to accept orders from the executive branch.
Setting Your Minimum Order Limit
Since the minimum order limit is specific to each contractor and is not predetermined by SIN, contractors have more discretion in setting their minimum order limit. When setting your minimum order limit, keep in mind that if it’s too high, it will limit the range of GSA orders that you’ll receive. However, you should set your minimum order limit at an amount that’s commercially viable. It’s important to remember that you can always decline orders, unless they’re from the executive branch and fall between your minimum and maximum order limits.
Contractors preparing their Schedule offer should take into account that the minimum order limit is often a point of negotiation during the negotiations stage of the Schedule acquisition process. Contracting Officers may ask offerors to lower their minimum order limit during negotiations if they find their proposed limit to be too high.
Publishing Your Maximum and Minimum Order Limits
Per Clause I-FSS-600 of the MAS Solicitation, MAS contractors must include a set list of terms and conditions on their GSA pricelist, including their maximum and minimum order limits. Other terms and conditions required to appear on their pricelist are time of delivery and prompt payment terms, to name a few. Awarded GSA pricelists are publicly available and visible to ordering agencies on GSA eLibrary. Listing your maximum and minimum order limits on your published GSA pricelist allows potential government buyers to have a clearer picture of whether you’re a good match for their procurement needs, in addition to satisfying the Solicitation requirement.
Understanding Other Terms and Conditions of Your Schedule
We’ve examined the significance of GSA maximum and minimum order limits, but GSA Schedule contracts have many other terms and conditions that are important to understand. If you’re a prospective GSA contractor, we recommend familiarizing yourself with the terms and conditions that will be on your GSA pricelist. Like the minimum order limit, several of these terms and conditions may be the subject of pricing negotiations.
If you already have a GSA Schedule, it’s a good idea to know how GSA will be assessing your adherence to Schedule terms and conditions during Contractor Assessment Visits. And we advise contractors preparing for an option extension to review whether their terms and conditions need any updating. Wherever you are in your journey of navigating GSA terms and conditions, Winvale’s consultants are happy to answer any of your questions.
