OLMs Made Easier: GSA Removes 33% Cap
Order-Level Materials (OLMs) let contractors add supplies or services at the order level. These are items not anticipated at contract award, such as specialized repair work or additional training hours. GSA has now removed the 33% cap on OLMs, making them easier to use and more practical in real-world procurements. For example, if an agency needs extra training or a specialized subcontractor mid-project, contractors can add those costs without risking noncompliance or delays.
This post explains what OLMs are, what rules apply, and why the change matters for both contractors and agencies.
What Are Order-Level Materials?
OLM’s are supplies or services added to support a contractor’s work that were not known at the time of contract award. They are included when a task or delivery order is placed against a Federal Supply Schedule (FSS) contract or Blanket Purchase Agreement (BPA).
Examples of OLMs include:
Direct materials
Supplies or incidental services not tied to a labor category in the Schedule contract
Other direct costs
Indirect costs
OLMs are subject to a negotiated price ceiling, and contractors exceed that ceiling at their own risk.
It’s important to note:
OLMs do not include items awarded under Ancillary Supplies or ODC SINs.
The OLM SIN cannot stand alone on an FSS contract or BPA.
Pricing analysis is not conducted at the contract or BPA award stage (GSAM 538.270 and 538.271 do not apply).
Together, these rules ensure OLMs are used only to supplement an order, not replace the core of a contractor’s Schedule contract. Beyond these limits, GSA has also set mandatory requirements that govern how OLMs may be included in an order.
Mandatory Requirements for OLMs
To include OLMs in an order, three conditions must be met:
OLMs may not be the primary purpose of the order.
OLMs must be identified as items outside the contractor’s FSS contract or BPA.
OLMs must undergo a fair and reasonable price determination, though this does not need to occur before award of the order.
In practice, these requirements give contractors flexibility while preserving the safeguards agencies rely on for pricing and compliance.
Optional Requirements for OLMs
In addition to the mandatory rules, agencies may also impose optional practices depending on the order:
OLMs may be subject to industrial funding fees, based on the terms of the Schedule contract.
OLMs may require specific invoicing or reporting procedures to ensure transparency.
OLMs may call for agency-level approval or justification before being added to an order.
These optional requirements provide agencies with oversight tools while reminding contractors to confirm order-specific expectations before proceeding.
What Changed? Removal of the Cap on OLMs
The most significant update is GSA’s removal of the 33% cap on OLMs. Previously, contractors faced strict limits on how much of an order could be allocated to OLMs. If a project required more than 33%, they had to pause and modify the contract, which created delays, extra paperwork, and frustration for both contractors and agencies.
With the cap eliminated, contractors can now add the necessary materials or services without risking noncompliance or slowing down proposals. This update better reflects real-world procurement. Not every incidental item or service can be predicted at the time of contract award.
Removing the cap reduces red tape and increases flexibility, paving the way for faster, more complete solutions. This shift sets the stage for why the change matters in practice, both for contractors and for agencies.
Why This Matters
Removing the OLM cap isn’t just a policy tweak; in fact, it brings clear benefits for both contractors and agencies.
For contractors, the benefits include:
Greater flexibility in structuring proposals
Fewer delays from last-minute contract modifications
Reduced risk of noncompliance when unexpected needs arise
For agencies, the benefits include:
Faster access to complete solutions
Fewer procurement bottlenecks
Continued assurance of fair and reasonable pricing
By eliminating outdated restrictions, GSA is aligning policy with practice. Contractors gain speed and agility, while agencies get the right mix of services and materials without unnecessary red tape. Together, these changes create a more responsive acquisition environment: one that supports innovation while maintaining accountability.
The updated FAR and GSAM language on OLMs reflects GSA’s responsiveness to industry feedback and its commitment to reducing acquisition friction. By removing the cap and clarifying both mandatory and optional requirements, the government has made it easier for contractors to deliver solutions that meet evolving mission needs.
The benefits are clear: contractors gain flexibility and speed, while agencies gain timely access to the right mix of services and materials. Together, these improvements make OLMs easier to use in practice and better aligned with the realities of modern procurement.
