The government often adds products and services to its existing contracts by executing contract modifications and amending the relevant terms. Under the General Services Administration (GSA) Federal Supply Schedule (FSS) program, a vendor’s schedule contract may be modified to add product or service offerings and revise its price list. Such modifications are generally considered matters of contract administration and therefore may not be challenged in a bid protest. However, an exception to this general rule may arise under the Competition in Contracting Act’s (CICA) full and open competition requirements, which remain applicable notwithstanding the FSS program’s streamlined acquisition procedures. Under this exception, a protester’s allegations that a contract modification changes the work beyond the scope of the original contract place the protest within the Government Accountability Office’s (GAO) bid protest jurisdiction. This is because the additional work covered by the modification is otherwise subject to CICA’s competition requirements, unless a valid determination is obtained that deems the work appropriate for procurement on a sole-source basis. However, as with any protest, the protester must satisfy the requirement of being an interested party. Notably, prospective suppliers or subcontractors who supply competing products or services to FSS vendors may not raise such protests, as their economic interests are not considered sufficiently direct to confer interested party status.
In B-423286, a decision issued on December 18, 2025, the GAO dismissed a protest alleging that an FSS contract modification adding a product offering violated competition requirements because the protester was not considered an interested party. As relevant to the protest, the GSA issued a notice in August 2025 that it would make OpenAI’s ChatGPT Enterprise generative artificial intelligence (AI) solution available to federal agencies at a deeply discounted rate of $1 for 1 year. When the protester requested additional information regarding this announcement, the GSA explained that the offering had been made available under a prominent software reseller’s FSS contract. On August 15, 2025, the protester, who supplies government agencies with a competing product to the ChatGPT Enterprise via the same FSS reseller, filed a protest with the GAO. In its protest, the protester argued that the $1 pricing structure undermined future competition because it did not align with standard commercial practices and could create an impermissible vendor lock-in scenario, presumably by making it difficult for agencies to later choose alternative solutions due to the high cost of switching or contractual restrictions.
During the briefing in response to GSA’s request for dismissal, the protester argued that the GAO should exercise jurisdiction because of the protester’s assertions that the modification materially expanded the scope of the software reseller’s FSS contract. Thus, the protester sought to invoke the exception under CICA’s competition requirements that permits GAO to review contract modification actions, which otherwise fall outside its protest jurisdiction as matters of contract administration. The GAO began its analysis by noting that the protester had already conceded that its protest sought to undo the modification to the software reseller’s FSS contract relating to the $1 license arrangement. Thus, for the GAO to exercise jurisdiction, the protester would need to invoke the exception under CICA’s competition requirements by alleging that the contract modification changed the work beyond the scope of the original contract. However, even though the protester had made such an allegation here, the GAO could not address it because, as a prospective supplier, the protester was not an interested party and thus lacked standing to raise the allegation in the first place. Stated another way, the protester would not be directly in line for the award for the modified requirement even if its protest were sustained. Consequently, the protest was dismissed because, as a prospective supplier, the protester did not possess the type of direct economic interests that would confer interested-party status.
Contractors may add new products or services to their GSA FSS contracts via modifications. As with other matters of contract administration, such modification actions may not generally be protested at the GAO. However, an exception to this general rule allows protesters to challenge contract modification actions if the new offerings are outside the scope of the underlying schedule contract. This exception notwithstanding, any protester filing a protest at the GAO must be an interested party. In this connection, the GAO has consistently held that prospective suppliers or subcontractors lack the direct economic interests necessary to satisfy the interested party standard. As demonstrated in this case, this is true even when the supplier or subcontractor identifies an interest in the potential adverse impacts of the modification on its sales as a supplier. Notably, had the supplier sold its generative AI solution to the government through its own FSS contract, the GAO would have addressed the merits of its arguments under the above-mentioned exception. However, as the supplier to the same GSA vendor whose contract modification it was challenging, the protester did not have the necessary direct economic interests. Nevertheless, it would be interesting to follow whether any of the terms associated with the $1 licensing arrangement are challenged as violating competition requirements in the future, especially for any follow-on orders placed by agencies after the deeply discounted year one of the ChatGPT licensing arrangement expires.
This Federal Procurement Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.
