On Tuesday, March 10, 2015, the Court of Appeals for the Federal Circuit reversed and remanded a decision by the Court of Federal Claims, which permitted the Centers for Medicare and Medicare Services (CMS) to include contract clauses that deviated from federal government commercial contracting rules. By doing so, the Court of Federal Claims held that Federal Acquisition Regulation (FAR) Part 12 – Acquisition of Commercial Items – applies to Federal Supply Schedule (FSS) contracts.
Through a pre-award bid protest appeal, CGI Federal Inc. (CGI) challenged the payment terms of requests for quotes (RFQs) issued by CMS that were pursuant to an underlying FSS contract. Specifically, CGI alleged that CMS violated FAR Part 12 by including payment terms in an RFQ for commercial items in a manner that is inconsistent with customary commercial practice for the item being acquired. While the government did not dispute that FAR Part 12’s proscription against terms inconsistent with customary commercial practice applies to solicitations for the underlying FSS contracts, it argued that the proscription did not apply to orders made pursuant to existing FSS contracts.
Judge Williams of the Court of Federal Claims agreed with the Government and found that CMS’s inclusion of the new payment clause was permissible. The Court of Federal Claims reasoned that FAR Subpart 8.4, which governs the FSS program, does not expressly state that FAR Part 12 applies to orders made pursuant to an existing FSS contract or orders placed against it.
On appeal, the Federal Circuit disagreed. The Federal Circuit found that FAR Part 12’s proscription against terms inconsistent with customary commercial practices applied to the RFQ. While not explicitly stated in FAR Subpart 8.4, FAR Part 12, in fact, applies to orders made pursuant to existing FSS contracts by its terms. The Federal Circuit also stated that, to the extent there is any perceived inconsistency between FAR Subpart 8.4 and FAR Part 12, FAR Part 12 controls.