FEDERAL CONTRACTS PERSPECTIVE
Federal Acquisition Developments, Guidance, and Opinions
Vol. I, No. 3
CAS Thresholds Increased, FFP Exempt
One FIPS Approved, 33 Withdrawn
DOD Extends Mentor-Protege Program
FMR Finalized as Successor to FPMR
NASA Issues Rules on Foreign Acquisition
DOE Flashes on Proposals, Small Businesses
Cost Accounting Standards Thresholds Increased, Competitive Firm-Fixed-Price Contracts Exempt
The Cost Accounting Standards Board (CASB) is revising its regulations governing the application of the Cost Accounting Standards (CAS) to negotiated government contracts awarded to large contractors. This is being done to implement the provisions of Section 802 of the National Defense Authorization Act of Fiscal Year 2000 (Public Law 106-65), which streamlined the applicability requirements for CAS coverage.
The 19 CAS are in Chapter 99 of Title 48 of the Code of Federal Regulations, and the most significant changes are to subsections of 48 CFR 9903.201, Contract Requirements.
The interim rule, which goes into effect April 2, 2000, makes the following changes:
- A $7.5 million "trigger contract" threshold is added to 48 CFR 9903.201-1, CAS Applicability. This exempts contracts and subcontracts from CAS coverage if "at the time of award, the business unit of the contractor or subcontractor is not currently performing any CAS-covered contracts or subcontracts valued at $7.5 million or greater."
- Also added to 48 CFR 9903.201-1 is an exemption from CAS coverage of "firm-fixed-price contracts or subcontracts awarded on the basis of adequate price competition without submission of cost or pricing data."
- In 48 CFR 9903.201-2, Types of CAS Coverage, the threshold for full CAS coverage is increased from $25 million to $50 million, and the requirement that the contractor or subcontractor have received at least one contract or subcontract over $1 million is deleted. Also, the definition of "modified CAS coverage" is revised to state that it "may be applied to a covered contract of less than $50 million awarded to a business unit that received less than $50 million in net CAS-covered awards in the immediately preceding cost accounting period." (EDITOR'S NOTE: "Full CAS coverage" requires compliance with all 19 CAS; "modified CAS coverage" only requires compliance with four CAS: CAS 9904.401, Consistency in Estimating, Accumulating, and Reporting Costs; CAS 9904.402, Consistency in Allocating Costs Incurred for the Same Purpose; CAS 9904.405, Accounting for Unallowable Costs; and CAS 9904.406, Cost Accounting Standard -- Cost Accounting Period.)
- 48 CFR 9903.201-5, Waiver, now permits the head of the agency to waive CAS applicability for a contract or subcontract less than $15 million if "the business unit of the contractor or subcontractor that will perform the work is primarily engaged in the sale of commercial items; and would not otherwise be subject to the Cost Accounting Standards..."
Comments on the interim rule must be submitted by April 7, 2000, to Richard C. Loeb, Executive Secretary, Cost Accounting Standards Board, Office of Federal Procurement Policy, 725 17th Street, NW, Room 9013, Washington, DC 20503, Attn: CASB Docket 00-01. No e-mail comments will be accepted.
One FIPS Approved, 33 Withdrawn
The Secretary of Commerce has approved Federal Information Processing Standard (FIPS) 186-2, Digital Signature Standard (DSS), which enables federal agencies to use two additional standards for the generation and verification of digital signatures: ANSI X9.31, Digital Signature Using Reversible Public Key Cryptograph, and ANSI X9.62, Elliptic Curve Digital Signature Algorithm. FIPS 186-2 adds these two standards to the Digital Signature Algorithm, which had already been approved for use. (EDITOR'S NOTE: Specifications for FIPS 186-2 are available at http://csrc.nist.gov/encryption.)
In addition, the Secretary of Commerce approved the withdrawal of 33 FIPS that are obsolete or have not been updated to adopt current voluntary industry standards. Among the withdrawn FIPS are the following:
- FIPS 21-4, COBOL (ANSI X3.23-1985, X3.23a-1989&X3.23b-1993)
- FIPS 29-3, Interpretation Procedures for Federal Information Processing Standards for Software
- FIPS 101, Guideline for Lifecycle Validation, Verification, and Testing of Computer Software
- FIPS 106, Guideline on Software Maintenance
- FIPS 119-1, Ada (ANSI/ISO/IEC 8652:1995)
- FIPS 151-2, Portable Operating System Interface (POSIX) -- System Application Program Interface [C Language] (ISO/IEC 9945-1:1990)
- FIPS 160, C (ANSI/ISO 9899:1992)
- FIPS 172-1, VHSIC Hardware Description Language (VHDL) (ANSI/IEEE 1076-1993)
- FIPS 175, Federal Building Standard for Telecommunications Pathways and Spaces (ANSI/EIA/TIA-569-1990)
- FIPS 176, Residential and Light Commercial Telecommunications Wiring Standard (ANSI/EIA/TIA-570-1991)
- FIPS 182, Integrated Services Digital Network (ISDN)
- FIPS 187, Administration Standard for the Telecommunications Infrastructure of Federal Buildings (ANSI/TIA/EIA-606-1993)
- FIPS 193, SQL Environments
- FIPS 194, Open Document Architecture (ODA) Raster Document Application Profile (DAP) (ISO/IEC 12064-1 ISP/FOD112)
- FIPS 195, Federal Building Grounding and Bonding Requirements for Telecommunications (ANSI/TIA/EIA-607-1994)
DOD Extends Mentor-Protege Program and FAR Deviations on Screening, Proposes Profit Policy Change
The Department of Defense (DOD) acquisition juggernaut continued in February, with the publication of three final rules, one interim rule, one proposed rule, and one notice of proposed rulemaking; the extension of two FAR deviations; the implementation of a Federal Prison Institute (FPI) pilot program on waiver processing; and additional exceptions to the mandatory use of the government travel card.
- Class Deviation Authority: Defense Federal Acquisition Regulation Supplement (DFARS) Subpart 201.4, Deviations from the FAR [Federal Acquisition Regulation], is revised to authorize the senior procurement executives for the Army, Navy, and Air Force, and the directors of the Defense Commissary Agency and the Defense Logistics Agency, to approve certain class deviations from the FAR and the DFARS. Previously, DFARS 201.402, Policy, stated that the Director of Defense Procurement was the approval authority for all class deviations and individual deviations from certain FAR and DFARS requirements (such as FAR Subpart 27.4 and DFARS Subpart 227.4, Rights in Data and Copyrights). Now, DFARS 201.404, Class Deviations, is revised to state that the senior procurement executives and directors are authorized to approve class deviations from the FAR and DFARS requirements not listed in DFARS 201.402 if the deviation does not "have a significant effect beyond the internal operating procedures of the department or agency; have a significant cost or administrative impact on contractors or offerors; diminish any preference given small business concerns by the FAR or DFARS; or extend to requirements imposed by statute or by regulations of other agencies such as the Small Business Administration and the Department of Labor." Also, individual deviations from FAR Part 30 or DFARS Part 230, Cost Accounting Standards Administration, are added to the DFARS 201.402 list of individual deviations for which the Director of Defense Procurement is the approval authority.
- OMB Circular A-119: Federal Acquisition Circular (FAC) 97-14 implemented OMB Circular A-119, Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities, by adding FAR 52.211-7, Alternatives to Government-Unique Standards, which invites offerors to propose alternatives to government-unique standards included in the solicitation. However, DOD uses the Single Process Initiative (SPI) to encourage offerors to propose alternatives to government-unique specifications and standards, so DFARS Subpart 211.1, Selecting and Developing Requirements Documents, is being added. DFARS Subpart 211.1 consists of DFARS 211.107, Solicitation Provision, which states, "Do not use the provision at FAR 52.211-7, Alternatives to Government-Unique Standards, in DOD solicitations."
- People's Republic of China: The DOD Appropriations Act for Fiscal Year 1999 (Public Law 105-262) placed restrictions on the award of contracts to companies owned or partially owned by the People's Republic of China or the People's Liberation Army (PLA). To implement this requirement, DOD issued an interim rule on February 23, 1999, that added DFARS 225.771, Prohibition on Acquisition from the People's Republic of China. Subsequently, the Omnibus Consolidated and Emergency Supplemental Appropriations Act of Fiscal Year 1999 (Public Law 105-277) amended Public Law 105-262 to restrict contract awards only if China or the PLA owns more than 50% of the company. Therefore, this final rule revises all the prohibitions in DFARS 225.771 (and the related clause at DFARS 252.225-7017, Prohibition on Award to Companies Owned by the People's Republic of China) to reflect the revisions made by Public Law 105-277. Also, DFARS 225.771-4, Procedures, is added (the current DFARS 225.771-4, Solicitation Provision, is redesignated as DFARS 225.771-5). It provides procedures for contracting officers to follow when they obtain information that a company is more than 50% owned by China or the PLA.
- Mentor-Protege Program Improvements: DOD issued an interim rule to extend the Mentor-Protege Program for three years as required by Section 811 of th National Defense Authorization Act for Fiscal Year 2000 (Public Law 106-65). The interim rule revises DFARS Subpart 219.71, Pilot Mentor-Protege Program, and DFARS Appendix I, Policy and Procedures for the DOD Pilot Mentor-Protege Program, to extend the period for entering into mentor-protege agreements from September 30, 1999, to September 30, 2002, and to extend the period during which mentor firms may incur costs under the program from September 30, 2002, to September 30, 2005 (DFARS I-103, Program Duration). In addition, DFARS 219.7103-2, Contracting Officer Responsibilities, limits reimbursement to a mentor of protege assistance costs to $1 million per fiscal year; DFARS I-107, Mentor-Protege Agreements, reduces the program participation term from nine years to three years, with the possibility of a two year extension; and DFARS I-112, Agreement Reviews, states that the Defense Contract Management Command (DCMC) will conduct annual reviews of mentor-protege agreements.
Comments on the interim rule must be submitted by April 10, 2000, to Defense Acquisition Regulations Council, Attn: Ms. Susan Schneider, PDUSD(AT&L)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062; e-mail: firstname.lastname@example.org; fax: 703-602-0350. Cite DFARS Case 99-D307 in all correspondence related to the interim rule.
- Construction Drawings and Specifications: This proposed rule would amend DFARS 252.236-7001, Contract Drawings, Maps, and Specifications, to state that the government will furnish the construction contractor, without charge, one set of large-scale drawings and specifications in electronic or paper media (at the contracting officer's option), and that the contractor would be responsible for reproducing and printing additional copies of the contract drawings and specifications.
Comments on the proposed rule must be submitted by April 10, 2000, to Ms. Amy Williams at the above address (same fax and e-mail). Cite DFARS Case 99-D025 in all correspondence related to the proposed rule.
- Profit Policy: DOD is soliciting comments on possible changes to its profit policy. Section 813 of Public Law 106-65 directed the secretary of defense to review the DOD profit guidelines to consider whether placing increased emphasis on technical risk as a factor for determining appropriate profit margins would provide increased incentive for contractor to develop and produce complex and innovative new technologies. DOD has prepared draft changes to its profit policy (the draft changes are not a proposed rule, but are provided for discussion purposes only), which are available at http://www.acq.osd.mil/dp/cpf in Microsoft Word 6.0 format, or in paper form from Robert Bemben, 703-695-9764. The primary draft changes are in DFARS 215.404-4, Profit, and DFARS 215.404-71-2, Performance Risk. DFARS 215.404-4 would be revised to state that the structured approach for developing profit or fee objectives would be restricted to "sole source" contract actions. DFARS 215.404-71-2 would be revised to delete cost control as a separate profit factor, while the cost control evaluation criteria would become management evaluation criteria; the assigned weighting for the technical factor would be increased from 30% to 60%, and the assigned weighting for the management factor would be increased from 30% to 40% (table in paragraph (b)(3)); and a new "technical incentive" value would be added for use in acquisitions that require extraordinary technical innovation (table in paragraph (c); 8% would be the normal value and the designated range would be between 6% and 10%).
Comments should be submitted to Mr. Robert Bemben, PDUSD(AT&L) DP/CPF, 3060 Defense Pentagon, Washington, DC 20301-3060; e-mail: email@example.com.
- Class Deviation Extension on General Services Administration (GSA) Utilization Screening for DOD Scrap: The FAR deviation that requires all military departments and defense agencies to deviate from the requirements regarding limited screening of scrap items in Table 45-1 in FAR 45.608-1, General, and FAR 45.608-4, Limited Screening, is extended from January 15, 2000, to July 31, 2000. The FAR provisions require that scrap be made available to GSA for limited screening, so the DOD FAR class deviation directs all military departments and defense agencies not to implement the FAR limited screening requirements.
- Class Deviation Extension on GSA Standard Screening Periods for DOD Property: The FAR deviation that reduces the GSA standard screening periods from those in paragraphs (b)(2) and (b)(3) of FAR 45.608-2, Standard Screening, is extended from February 28, 2000, until the FAR is revised. The FAR deviation revises the screening period in FAR 45.608-2(b)(2) (for screening by all federal agencies) from "31st through 75th day" to "31st through 51st day", and the screening period in FAR 45.608-2(b)(3) (screening by GSA for possible donation) from "76th through 90th day" to "52nd through 66th day".
- FPI Waiver Processing and Notification Pilot: On February 7, 2000, the FPI issued a memorandum to DOD procurement personnel notifying them that it is instituting an expedited waiver processing and notification pilot program for all DOD waiver requests of $2,500 or less. Federal agencies must purchase supplies listed in the Schedule of Products Made in Federal Penal and Correctional Institutions unless they obtain a clearance from FPI (FAR 8.605, Clearances). Under the pilot program, DOD customers who submit waiver requests through the web site of UNICOR (the FPI corporate-arm) at http://www.unicor.gov by the UNICOR close of business (8:00 p.m. eastern time) Monday through Friday can expect a decision from FPI by close of the next business day. If FPI does not respond by the close of the next business day, the waiver request is automatically approved. Waiver requests submitted after the 8:00 p.m. close of business will not be processed until the next business day. Waiver requests under this pilot program must be submitted through the UNICOR web site (a detailed list of required supporting information is included on the web site), and the pilot program is restricted to DOD waiver requests for standard catalog items totalling $2,500 or less.
- Exemptions to the Mandatory Use of the Travel Charge Card: GSA has mandated the use of the government travel card as of March 1, 2000 (see the February 2000 FEDERAL CONTRACTS PERSPECTIVE "FTR Amendments on Mileage Reimbursement, Conference Planning, Travel Charge Card"). There are several exceptions to this requirement (such as laundry and dry cleaning, taxi, tips, and new appointees), and agencies are authorized to make further exceptions. DOD Comptroller William J. Lynn has approved several additional exceptions for DOD, including:
- Members of the Reserve Officer Training Corps (ROTC) and service members undergoing basic training before reporting to their first permanent duty station.
- Military and DOD civilians denied travel cards.
- Military and DOD civilians traveling in a foreign country where the political, financial, or communications infrastructure does not support use of a travel card.
- Military and DOD civilians whose use of the travel card would pose a threat to national security, endanger the life or safety of themselves or others, or would compromise a law enforcement activity.
FMR Finalized as Successor to FPMR
On July 21, 1999, GSA issued an interim rule establishing the Federal Management Regulation (FMR) as Chapter 102 of Title 41 of the Code of Federal Regulations (CFR), and said that the various parts of the Federal Property Management Regulations (FPMR) (Chapter 101 of Title 41 of the CFR) would be updated, reorganized, and streamlined, and then transferred to the FMR as they are completed. To establish the framework for the FMR, the interim rule added Part 102-2, Federal Management Regulation System, and that was the entire contents of 41 CFR Chapter 102 at the time.
On February 25, GSA finalized the interim rule without changes. But that does not mean that GSA has been sitting idle since July 21, 1999. On November 2, 1999, FPMR 101-38, Motor Vehicle Management, was completely revised and redesignated as FMR 102-34, Motor Vehicle Management. And the following FPMR parts had been revised and proposed for transfer to the FMR: FPMR Part 101-43, Utilization of Personal Property, proposed on November 16, 1999 (and would be transferred to FMR Part 102-36, Transfer of Excess Personal Property); and FPMR Subpart 101-6.10, Federal Advisory Committee Management, proposed January 14, 2000 (and would be transferred to FMR Part 102-3, Federal Advisory Committee Management).
During February, GSA proposed revising two additional FPMR parts and transferring them to the FMR, both of which are transportation-related:
- Transportation Payment and Audit: FPMR Part 101-41, Transportation Documentation and Audit, would be revised and moved to FMR Part 102-118, Transportation Documentation and Audit. In addition, GSA proposes that FMR Part 102-118, Subpart B, Ordering and Paying for Transportation and Transportation Services, be revised to encourage agencies to expand their use of charge cards, commercial bills of lading, and electronic payments instead of Government Bills of Lading (GBL) and General Transportation Requests (GTR); Subpart D, Prepayment Audits of Transportation Services, be added to implement the mandatory use of prepayment audits as required by the Travel and Transportation Reform Act of 1998 (Public Law 105-264); and Subpart F, Claims and Appeals Procedures, be amended to require that the appeals process begin within an agency and be handled at an appropriate agency within the agency.
Comments must be submitted no later than March 23, 2000, to Mr. Ed Davis, Regulatory Secretariat (MVR), Office of Governmentwide Policy, General Services Administration, 1800 F Street, NW, Washington, DC 20405; e-mail to RIN.3090-AH15gsa.gov.
- Transportation Management: This would revise FPMR Part 101-40, Transportation and Traffic Management, and move it to FMR Part 102-117, Transportation Management. In addition, GSA is proposing that the emphasis of FMR Part 102-117 be shifted from detailed procedures that agencies must use to acquire transportation services from GSA as a mandatory source to policies reflecting what agencies should be doing now that GSA is a nonmandatory source of transportation services (this status change was made by the Treasury, Postal and General Government Appropriations Act of 1994 (Public Law 103-123)). Among the changes would be a broad policy that agencies are to develop transportation programs that best suit their needs; general business rules for transportation managers to consider before buying transportation services; and the introduction of performance measures to help agencies determine how well they are performing the transportation function.
Comments must be submitted no later than April 28, 2000, to Ms. Sharon Kiser, at the above address; e-mail to RIN.3090-AH16gsa.gov.
NASA Issues Final Rules on Foreign Acquisition
On February 25, the National Aeronautics and Space Administration (NASA) published a completely reorganized NASA FAR Supplement (NFS) Part 1825, Foreign Acquisition, which conforms to the rewritten FAR Part 25, Foreign Acquisition (see the January 2000 FEDERAL CONTRACTS PERSPECTIVE article "FAC 97-15 Addresses Foreign Acquisition, Contract Bundling, Award Fee Determinations"). The rewritten FAR Part 25 went into effect February 25, 2000, and the revised NFS Part 1825 went into effect simultaneously.
The new NFS Part 1825 subparts are:
- Introductory Material (NFS 1825.003, Definitions; and NFS 1825.003-70, NASA Definitions)
- Subpart 1825.1, Buy American Act -- Supplies
- Subpart 1825.4, Trade Agreements
- Subpart 1825.9, Customs and Duties
- Subpart 1825.10, Additional Foreign Acquisition Regulations
- Subpart 1825.11, Solicitation Provisions and Contract Clauses
- Subpart 1825.70, Foreign Contract and International Agreement Clearances
Besides reorganizing NFS Part 1825, the final rule added the following:
- NFS 1852.225-8, Duty-Free Entry of Space Articles (prescribed by NFS 1825.1101, Acquisition of Supplies);
- NFS 1853.225, Foreign Acquisition (Customs Form 7501) (the Customs Form 7501, Entry Summary, is prescribed by NFS 1825.903, Exempted Supplies);
and removed the following:
Part of this reorganization includes NFS 1825.1103-70, Export Control, which was added to the NFS on February 11, 2000, as NFS 1825.970, Export Control (it consisted of subsections NFS 1825.970-1, Background, and NFS 1825.970-2, Export Licenses). Paragraph (a) of NFS 1825.1103-70 is the former NFS 1825.970-1, and paragraph (b) is the former NFS 1825.970-2. NFS 1825.970 and the corresponding clause at NFS 1852.225-70, Export Licenses were added to notify NASA contractors and subcontractors that they "are subject to U.S. export control laws and regulations, including the International Traffic in Arms Regulations (ITAR), 22 CFR Parts 120 through 130, and the Export Administration Regulations (EAR), 15 CFR Parts 730 through 799. The contractor is responsible for obtaining the appropriate licenses or other approvals from the Department of State or the Department of Commerce when it exports hardware, technical data, or software, or provides technical assistance to a foreign destination or 'foreign person'...and there are no applicable or available exemptions/exceptions to the ITAR/EAR, respectively." In addition, NFS 1852.225-70 states that contractors are "responsible for obtaining export licenses, if required, before utilizing foreign persons in the performance of this contract...for all regulatory record keeping requirements associated with the use of licenses and license exemptions/exceptions...[and] for ensuring that the provisions of this clause apply to its subcontractors." (EDITOR'S NOTE: NFS 1852.225-70 was unaffected by the NFS Part 1825 reorganization, and it retained its NFS number.)
DOE Issues Policy Flashes on Unsolicited Proposals, Maximizing Small Business Utilization
The Department of Energy (DOE) issued two Policy Flashes during February: