Barry McVay's


Federal Acquisition Developments, Guidance, and Opinions

Vol. I, No. 1


FAC 97-15: Foreign Acquisition, Bundling
FAR Changes Proposed
GAO Nixes Buy Not Set-Aside
DOE Proposes Mentor-Protege Program
NFS Addresses Cost Data, Evaluation
GSA Eyes 10 Industries for Smal Businesses
SBA Improves "U.S. Business Advisor"
Final FAIR Act Inventories Available
VAAR Part 813 Rewritten
Interest on Payments Set at 6 3/4%

FAC 97-15 Addresses Foreign Acquisition, Contract Bundling, Award Fee Determinations

On December 27, 1999, Federal Acquisition Circular (FAC) 97-15 was published. It addressed 10 items, the most significant being the rewrite of Federal Acquisition Regulation (FAR) Part 25, Foreign Acquisition. Other notable items in FAC 97-15 deal with the use of simplified acquisition procedures for commercial items up to $5,000,000, and award fee determinations. All changes are effective February 25, 2000, except items (3), (6), (7), and (8) are effective December 27, 1999.

(1) Clean Air and Water: FAR Subpart 23.1, Pollution Control and Clean Air and Water, as well as FAR 52.223-1, Clean Air and Water Certification, and FAR 52.223-2, Clean Air and Water, are removed. Offerors will no longer need to certify that their facilities do not violate the Clean Air Act or the Clean Water Act. Instead, since the Environmental Protection Agency (EPA) identifies violators on the General Services Administration's (GSA) List of Parties Excluded from Federal Procurement and Nonprocurement Programs, and contracting officers are required to check the List before awarding contracts, the certification requirement was considered to be superfluous. (The List is available at http://epls.arnet.gov.)

(2) Foreign Acquisition: Besides completely rewriting FAR Part 25 and the related provisions and clauses in FAR 52.225, this item seeks to harmonize the treatment of "domestic end products" under the Buy American Act and "U.S.-made end products" under the Trade Agreements Act. Under the Trade Agreements Act, a "U.S.-made end item" is not considered to be a "domestic end product" that is exempt from the Buy American Act if U.S.-made components constitute less than 50% of the cost of all components. In contrast, a product of an "eligible country" (that is, a signatory of the Agreement on Government Procurement) is exempt by the Trade Agreements act from the Buy American Act if it is "substantially transformed into a new and different article, without regard to the source of the components." This caused situations, particularly in computers, where the products of eligible countries, even those with more than 50% of their components from non-eligible countries, were exempt from the Buy American Act, but U.S.-made end products with less than 50% U.S.-made components had the Buy American Act evaluation factor applied even it the foreign components were from eligible countries. Now, FAR 25.502, Application, allows agencies to (1) give offers of U.S.-made end products that are not domestic end products the same consideration as eligible offers, or (2) provide alternate evaluation schemes in their FAR supplements.

(3) Contract Bundling: To implement the provisions of the Small Business Reauthorization Act of 1997 (Public Law 105-135) that require agencies to avoid unnecessary contract bundling (combining two or more small requirements into a single large one that is "likely to be unsuitable for award to a small business concern", the following revisions are made to the FAR:

(4) Deobligation Authority: Paragraph (a)(15) of FAR 4.804-5, Procedures for Closing Out Contract Files, is revised, and paragraph (a)(70) is added to FAR 42.302, Contract Administration Functions, to state that the deobligation of excess funds is a function normally delegated to the contract administration office.

(5) Financial Management System Software Program: FAR Subpart 8.9, Financial Management System Software Mandatory Multiple Award Schedules Contract Program, is deleted because recent changes to Office of Management and Budget (OMB) Circular A-127, Financial Management systems, eliminated the mandatory status of the schedule effective October 1, 1999. Also, paragraph (c) is added to FAR 39.101, Policy, which states that "agencies must follow OMB Circular A-127...when acquiring financial management systems. Agencies may acquire only core financial management software certified by the Joint Financial Management Improvement Program."

(6) Document Availability: Paragraph (d) of FAR 11.201, Identification and Availability of Specifications, and FAR 52.211-2, Availability of Specifications Listed in the DOD Index of Specifications and Standards (DODISS) and Descriptions Listed in the Acquisition Management Systems and Data Requirements Control List, DOD 5010.12-L, are updated to explain how the public may obtain DOD specifications and standards through the Internet (from the ASSIST (Acquisition Streamlining and Standardization Information System) database at http://assist.daps.mil) or by phone, fax, or mail (from the Department of Defense Single Stock Point (DODSSP), Building 4, Section D 700 Robbins Avenue, Philadelphia, PA 19111-5094, telephone 215-697-2667/2179, facsimile (215) 697-1462).

(7) 8(a) Business Development Program: An interim rule that was published in FAC 97-12 on June 17, 1999, is finalized without change. The interim rule made various changes throughout the FAR (particularly in FAR Subpart 19.8, Contracting with the Small Business Administration) so it would conform to the Small Business Administration's (SBA) June 30, 1998, revisions to the 8(a) program eligibility procedures.

(8) Simplified Procedures for Purchases of Commercial Items Between $100,000 and $5,000,000: Section 806 of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106-65) extended the expiration date of FAR Subpart 13.5, Test Program for Certain Commercial Items (which authorizes the use of simplified procedures to acquire commercial items valued between $100,000 and $5,000,000), from January 1, 2000, to January 1, 2002. Paragraph (d) of FAR 13.500, General, is revised accordingly.

(9) Award Fee Determinations: The U.S. Court of Appeals ruled in 1997, and the U.S. Court of Federal Claims ruled in 1998, that the Contract Disputes Act (and FAR 52.233-1, Disputes) applies to all disputes under government contracts unless a more specific statute provides for other remedies. Therefore, language such as "this [award] fee determination is made unilaterally by the government and is not subject to the Disputes clause" in paragraph (a) of FAR 16.405-2, Cost-Plus-Award-Fee Contracts, had to be replaced with "this determination and the methodology for determining the award fee are unilateral decisions made solely at the discretion of the government." Similar language had to be replaced in paragraph (e)(3) of FAR 16.406, Contract Clauses; paragraph (c) of FAR 48.103, Processing Value Engineering Change Proposals; paragraph (b) of FAR 52.219-10, Incentive Subcontracting Program; paragraph (b) of FAR 52.219-26, Small Disadvantaged Business Participation Program -- Incentive Subcontracting; paragraphs (e)(3) and (j) of FAR 52.248-1, Value Engineering, and paragraph (a) of Alternate II; and paragraphs (e)(3) and (g) of FAR 52.248-3, Value Engineering -- Construction.

(10) Nondisplacement of Qualified Workers -- Commercial Items: FAR Subpart 22.12, Nondisplacement of Qualified Workers Under Certain Contracts, and the corresponding clause at FAR 52.222-50 were added by FAC 97-01. However, FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders -- Commercial Items, did not list FAR 52.222-50 as a clause that could be referenced in solicitations and contracts for commercial services covered by the executive order. Therefore, FAR 52.222-50 is added to the list in FAR 52.212-5 as paragraph (c)(6).

FAR Changes Proposed: Construction, Competition Under Multiple-Award Contracts, Veterans' Employment

Now that FAC 97-15 is out, it's time to gear up for FAC 97-16. Five proposed FAR changes were proposed in December:

Application of Davis-Bacon Act to Construction Contract Options: Since the Davis-Bacon Act has no provisions regarding the incorporation of new or revised Davis-Bacon wage determinations when options are exercised in construction contracts, the Department of Labor published a memorandum in 1992 requiring such incorporation. Ensuing litigation required clarification of the memo, which was done on November 20, 1998.

To bring the FAR into compliance with the memo as clarified, FAR 22.404, Davis-Bacon Wage Determinations, would be revised to state that Davis-Bacon wage determinations must be requested before the issuance of a solicitation or exercise of an option. In addition, a new FAR 22.404-12, Labor Standards for Contracts Containing Construction Requirements and Options Provisions That Extend the Term of the Contract, would be added. It would allow the contracting officer to select one of four methods of adjusting the contract price when exercising an option:

  1. No adjustment because bidders had the opportunity to bid separate prices for each option period (would normally be used for construction-only contracts).
  2. An adjustment based on a separately specified pricing method (such as the application of a coefficient to an annually published unit pricing book).
  3. A percentage price adjustment based on a published economic indicator.
  4. An adjustment based on the contractor's actual increase or decrease in wages and fringe benefits (would normally be used when the contract requirements are predominately services subject to the Service Contract Act, and the construction requirements are substantial and segregable).

Comments should be submitted by February 1, 2000, to General Services Administration, FAR Secretariat (MVRS), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405, FAR Case 1997-613.

Construction Industry Payment Protection: The Miller Act requires government construction contractors that exceed $100,000 to furnish performance and payment bonds. Under the Miller Act, payment bonds were no more than 50% of the contract price, with a ceiling of $2.5 million. However, the Construction Industry Payment Protection Act of 1999 (Public Law 106-49) revised the Miller Act to require payment bonds equal to the contract price. Therefore, FAR 28.102-2, Amount Required, would be revised to require the contractor to provide payment bonds equal to 100% of the original contract price and, if the contract price is increased (through options, orders under indefinite-quantity contracts, etc.), to either increase the amount of existing bonds or provide additional bonds equal to 100% of the increase. The related clauses at FAR 52.228-13, FAR 52.228-15, and FAR 52.228-16 would be revised accordingly.

However, this 100% requirement would be extended to contracts between $25,000 and $100,000, even though they are not covered by the Miller Act, to add consistency to the rule and to provide added protection to subcontractors and suppliers on low value contracts.

Comments should be submitted by February 28, 2000, to GSA at the above address. Cite FAR Case 1999-302.

Competition Under Multiple-Award Contracts: Because Sections 1004 and 1054 of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355) prohibit protests against task or delivery orders (except when the order increases the scope, period, or maximum value of the contract), there has been growing concern that contracting officers have been using multiple-award task and delivery order contracts as vehicles for "sole source" awards in violation of the requirements in the Competition in Contracting Act. For example, Director of Defense Procurement Eleanor Spector issued a memorandum on April 30, 1999, expressing concern that DOD "may not be obtaining full benefit from the use of competition in multiple award task order arrangements."

To remedy this situation, the following changes are proposed to FAR Subpart 16.5, Indefinite-Delivery Contracts:

Comments should be submitted by February 14, 2000, to GSA at the above address. Cite FAR Case 1999-014.

Veterans' Employment: To implement provisions of the Veterans Employment Opportunities Act of 1998 (Public Law 105-339) and the Vietnam Era Veterans' Readjustment Assistance Act of 1974, as amended, FAR Subpart 22.13 would be completely rewritten and retitled "Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans" to expand its coverage from "special disabled veterans and veterans of the Vietnam era" to include "veterans who served on active duty during a war or in a campaign or expedition for which a campaign badge has been authorized." Also, the corresponding clauses in FAR 52.222 would be revised accordingly.

In addition, a new provision at FAR 52.222-38, Compliance with Veterans' Employment Requirements, would require each offeror to represent that it has submitted the most recent veterans' employment report (VETS-100). However, commercial items and acquisitions less than $100,000 would be exempt.

Comments should be submitted by February 1, 2000, to GSA at the above address. Cite FAR Case 1998-614.

Acquisitions from Afghanistan and Yugoslavia: FAR 25.701, Restrictions, and FAR 52.225-11, Restrictions on Certain Foreign Purchases, would be revised to add the territory of Afghanistan controlled by the Taliban, and Yugoslavia (Serbia and Montenegro) to the list of countries whose supplies or services may not be acquired by contractors and their subcontractors (the countries currently listed are Cuba, Iran, Iraq, Libya, North Korea, and Sudan).

Comments should be submitted by January 31, 2000, to GSA at the above address. Cite FAR Case 1999-008.

GAO Sustains Protest for Failure to Set-Aside Buy

The General Accounting Office (GAO) has sustained a protest in which a small business claimed an unrestricted acquisition should have been set-aside for small businesses because "the agency failed to undertake sufficient efforts to ascertain small business interest and capability to perform the contract" (Marketing & Management Information, Inc., B-283399.2; B-283399.3, November 30, 1999).

The Defense Commissary Agency (DeCA) issued a request for proposals for subscription access to a grocery information retrieval database on an unrestricted basis. Marketing & Management Information, Inc. (MMI), a small business with a DeCA contract for other data requirements, challenged the reasonableness of the contracting officer's determination that there was no reasonable expectation of receiving offers from at least two responsible small businesses, and contended that the market research was flawed and incomplete. Basically, the DeCA contracting officer asked the three subscribers to DeCA's comparable database (MMI and two large firms) whether they were capable of providing the required data and whether they were aware of any other potential competitors. The contracting officer decided to compete the RFP on an unrestricted basis because the two large firms incorrectly stated that "no other firms maintained the necessary commercial grocery data".

"We think the agency here was required to seek out more complete information than that which was obtained through limited communications with the current subscribers," rules GAO. And GAO dismissed DeCA's reliance on the small business specialist's concurrence in the contracting officer's decision because the concurrence was based on the contracting officer's representations regarding the potential for adequate competition.

DOE Proposes Formalizing Mentor-Protege Program

Since 1995, the Department of Energy (DOE) has encouraged its prime contractors to enter into mentor-protege agreements with small disadvantaged businesses (SDBs) and women-owned small businesses (WOSBs). Because of the initiative's success, DOE has decided to make the program permanent, and has proposed revising the DOE Acquisition Regulation (DEAR) to add a new DEAR Subpart 919.70, The Department of Energy Mentor-Protege Program.

The most important difference between DEAR Subpart 919.70 and the current operation of DOE's mentor-protege program is that historically black colleges and universities (HBCUs) and other minority institutions of higher learning (MIs) would be eligible to participate as proteges along with SDBs and WOSBs.

The following are the most significant provisions of the proposed DEAR Subpart 919.70:

Comments must be submitted no later than January 5, 2000, to ugene Tates, U.S. Department of Energy, Attn: Mentor-Protege Rulemaking, Office of Small and Disadvantaged Business Utilization, 1000 Independence Avenue, SW, Washington, DC 20585.

NFS Addresses Cost Data, Proposal Evaluation

The National Aeronautics and Space Administration (NASA) has published a final rule revising paragraph (b) of NASA FAR Supplement (NFS) 1815.403-3, Requiring Information Other Than Cost or Pricing Data, to point out an exception to NASA's prohibition against obtaining information other than cost or pricing data in a competitive firm-fixed-price solicitation. FAR 22.1103, Policy, Procedures, and Solicitation Provision, requires that FAR 52.222-46, Evaluation of Compensation for Professional Employees, be included in solicitations for negotiated service contracts over $500,000 that involve "meaningful numbers of professional employees." FAR 52.222-46 requires offerors to provide "a total compensation plan setting forth salaries and fringe benefits" for the professional employees. NASA considers this to be information other than cost or pricing data. Therefore, NASA has revised NFS 1815.403-3(b) to state "for firm-fixed price competitions, the contracting officer shall not request any cost information, except as required in FAR 22.1103..."

In addition, NASA is proposing to eliminate the term "elements" as a category in proposal evaluations because NASA no longer weights and scores "elements" (it evaluates "factors" and "subfactors"). This change would affect NFS 1815.303, Responsibilities; NFS 1815.304-70, NASA Evaluation Factors; NFS 1815.370, NASA Source Selection Boards; NFS 1819.7206, Incentives for Prime Contractor Participation; NFS 1852.217-71, Phased Acquisition Using Down-Selection Procedures; and NFS 1852.217-72, Phased Acquisition Using Progressive Competition Down-Selection Procedures.

Submit comments by February 14, 2000, to Paul Brundage, NASA Headquarters, Office of Procurement, Contract Management Division (Code HK), Washington, DC 20546.

GSA Targets 10 Industries for Small Businesses

GSA has published its revised list of the ten (10) targeted industry categories for expanded small business participation under the Small Business Competitiveness Demonstration Program (see FAR Subpart 19.10). These targeted industry categories, which are selected by each participating agency, represent supplies and services the agency buys in substantial quantities but less than 10% of which are provided by small businesses.

GSA had increased awards to small businesses in the previous 10 targeted industry categories to at least 10%, so it recognized the need to select 10 new targeted industry categories.

The following are GSA's 10 targeted industry categories, listed by Standard Industrial Classification (SIC) Code:

     2392   House Furnishings
     2393   Mattresses and Bedsprings
     2621   Paper Mills
     2656   Sanitary Food Containers
     2679   Converted Paper Products
     3519   Internal Combustion Engines
     3631   Household Cooking Equipment
     3633   Household Laundry Equipment
     3951   Pens and Mechanical Pencils
     4813   Telephone Communications (Except Radio)

SBA Introduces Improved "U.S. Business Advisor"

The Small Business Administration (SBA) has improved and redesigned its "U.S. Business Advisor" Internet site at http://www.business.gov. The U.S. Business Advisor is a source of information for small businesses on business development, financing, taxes, laws, and regulations. A more powerful search engine is being used, as well as a correspondence tracking system for better customer service.

Final FAIR Act Inventories Available to Public

On December 30, the OMB published a notice in the Federal Register that the third and final set of Fiscal Year 1999 "Commercial Activities Inventories" required by Section 2 of Public Law 105-270, the Federal Activities Inventory Reform Act of 1998 ("FAIR Act"), are available to the public from 11 agencies and 8 offices of inspector general (including the Departments of Defense, Justice, State, Transportation, Treasury, and Veterans Affairs). These inventories consist of "activities performed by federal government sources for the executive agency that, in the judgment of the head of the executive agency, are not inherently governmental functions." Interested parties have 30 days from the publication of the Federal Register notice (that is, until January 29, 2000) to challenge the omission or inclusion of an activity on the Commercial Activities Inventories list.

Previous announcements of FY 1999 Commercial Activities Inventories list availability were made on September 30, 1999, and October 21, 1999.

About 1 million federal positions are listed on the agencies' lists as "not inherently governmental functions."

VAAR Part 813 Rewritten, Conforms to FAR Part 13

The Department of Veterans Affairs (VA) has rewritten VA Acquisition Regulation (VAAR) Part 813, Simplified Acquisition Procedures, to conform to the format of FAR Part 13, which was reorganized on December 9, 1997, by FAC 97-03.

Besides changing the format, changes were made to the section titles, references, and to delete obsolete material.

In addition to the VAAR Part 813 rewrite and the related housekeeping changes, several other VAAR sections were amended to make miscellaneous revisions. The most significant is the addition of VAAR 852.102, Incorporating Provisions by Clauses and Reference, which lists the electronic addresses for FAR provisions and clauses (http://www.arnet.gov/far/) and VAAR provisions and clauses (http://www.va.gov/oa&mm/vaar/).

Interest on Payments Set at 6 3/4%

The Department of Treasury has established 6 3/4% (6.75%) as the interest rate for the computation of payments made between January 1 and June 30, 2000, under the Prompt Payment Act and the Contracts Disputes Act. This rate is also used in facilities capital cost of money calculations. The interest rate for the prior six-month period (July 1-December 31, 1999) was 6 1/2% (6.5%). The interest rate for January 1, 1999, through June 30, 1999, was 5% (5.0%).

Copyright 2000 by Panoptic Enterprises. All Rights Reserved.

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