Friday, April 18, 2014

What are Industrial Funding Fees (IFF)?

Contractors offering products or services to the Government through GSA's (General Services Administration) MAS (Multiple Award Schedule) program must pay to GSA an Industrial Funding Fee (IFF). The IFF is added to the cost of the product or service and therefore paid by the customer. Contractor's in turn, must remit the IFF back to GSA on a quarterly basis. The IFF is a fee to cover GSA's cost of operating the Federal Supply Schedules program (e.g. MAS) but can also be used to cover other expenses of the Administration. The fee is 0.75 percent of sales and is included in the price that Government agencies pay the GSA contractor when they purchase items from a MAS contract.

Government agencies who buy goods and services have the option of buying off the GSA schedule or they can also buy directly. Buying off the GSA schedule is usually more cost-effective because the agency then does not need to incur the cost (i.e. labor costs) of soliciting, awarding, and administering separate contract actions. To help offset the cost of administering the MAS program, GSA adds the IFF to the negotiated price of the goods and services and the MAS contractors must, in turn, remit the money back to GSA. Using this mechanism, the various agencies are in effect, reimbursing GSA for the cost to administer the MAS program, using contractors as middle-men in the transaction.

Its not that uncommon to find contractors overpaying their IFF obligations. Primarily, this is a result of poor bookkeeping where contractors include Government sales that were not made off their GSA schedule but via other contracting actions.GSA has a robust audit function to ensure that contractors are remitting the correct amount of IFF. These audits have disclosed numerous instances where contractors have overpaid these fees (as well as underpaid them).

There are a number of compliance issues related to the IFF. First and foremost, once a contractor is on the MAS schedule, it must report quarterly sales, even if there were no sales for the quarter. Many contractors assume that if there were no sales, then a report is not required. That's not the case. Zero dollar reports are required.

If you have any questions concerning IFF compliance and reporting, don't expect much help from GSA. They are not staffed to render such assistance and they will recommend that you consult with MAS contracting professionals.

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