GSA’s New Policy Simplifies SaaS Purchasing
TL/DR –
The General Services Administration (GSA) issued its second acquisition letter allowing its contracting officers to buy cloud services through a consumption-based model. This new model means agencies can make upfront payments for software-as-a-service without violating federal procurement laws prohibiting advanced payments, as these are not considered advance payments. However, this workaround remains a temporary solution until Congress amends the Anti-Deficiency Act to allow industry to bill in arrears for cloud services on a consumption basis, according to procurement experts.
GSA Expedites Cloud Service Acquisition
In an ongoing effort to simplify cloud service procurement, the General Services Administration (GSA) issued their second acquisition letter in two years, aiming to move towards a consumption-based model where agencies buy services “by the drink”.
The letter, penned by Jeff Koses, GSA’s senior procurement executive, permits contracting officers to use upfront payments for software-as-a-service (SaaS) without violating federal procurement laws against advance payments. He clarified that this arrangement is not considered an advance payment because the software license is accessed right after the payment.
Koses outlined that advance payments, which involve payment before the delivery of a service or product, are not allowed under the Anti-Deficiency Act. However, the new GSA regulations side-step this issue by requiring the software’s delivery to be in sync with the payment.
Acquisition Criteria to Bypass Advance Payment Rule
The letter also includes six criteria that must be met for the acquisition to avoid conflicts with the advanced payment rule. These include contemporaneous access to software with payment, fixed-price acquisitions, pricing unaffected by metrics other than quantity, no upfront payment requirements beyond fixed costs, and continuous, uninterrupted license service for the negotiated term.
Larry Allen, a federal procurement expert, hailed these changes as a win for competition, claiming it would foster better pricing and benefit small businesses.
Further Revisions Required
Despite these improvements, Rich Beutel, Cyrrus Analytics founder and federal procurement authority, believes Congress needs to modify the Anti-Deficiency Act to allow industry to bill in arrears for cloud services on a consumption basis. This move, according to Beutel, would allow government agencies to buy IT capacity instantly when needed, though he anticipates potential resistance from appropriations committees.
The current situation forces agencies to pay up to 25% more for cloud services, hindering the use of Defense Enterprise Office Solutions (DEOS) contracts from the Defense Information Systems Agency. The GSA is seeking to rectify this issue by seeking industry feedback through a request for information on best practices for SaaS pricing.
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