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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


MAY 2000
Vol. I, No. 5

CONTENTS

FAC 97-17 Tightens Task Order Rules
Travel Charge Card Revised Again
FAR Changes on CAS Administration Proposed
Foreign Acquisitions Subject of DFARS Change
NFS Changes on Tort Liability, R&D Reports
Mentor-Protege, M&O Fiancial Clauses in DEAR
Three "Greening" Executive Orders Issued
FPDC Announces Procurement Data on DVD-ROM
GSA Launches E-Commerce Site for 8(a) Firms
1000th HUBZone Concern Registered by SBA

FAC 97-17 Tightens Task Order Rules, Encourages Indian Subcontracting, Addresses U.S.-Flag Vessels

The Federal Acquisition Regulation (FAR) underwent a little "spring cleaning" on April 25 with the publication of Federal Acquisition Circular (FAC) 97-17. This FAC provides final rules on: (1) competition under multiple award contracts; (2) Department of Defense (DOD) incentives for subcontracting with Indian organizations; (3) applying the preference for U.S.-flag vessels to contracts awarded under FAR Part 13, Simplified Acquisition Procedures; and (4) extending the preferential treatment accorded to products of Caribbean Basin country end products until September 30, 2000, except for products of the Dominican Republic and Honduras.

The following are the significant changes made to the FAR by FAC 97-17:

Competition Under Multiple Award Contracts: There have been concerns that some contracting officers are using the loose rules on task and delivery order multiple award contracts to circumvent competition requirements and select "preferred" contractors. So Congress included a provision in the Fiscal Year 2000 National Defense Authorization Act (Public Law 106-65) requiring that the FAR be revised "to provide guidance to agencies on the appropriate use of task and delivery order contracts." This rule amends FAR Subpart 16.5, Indefinite-Delivery Contracts, to provide the required "guidance." FAR 16.504, Indefinite-Quantity Contracts, and FAR 16.505, Ordering, receive most of the attention.

FAR 16.504 requires that the name, address, telephone number, and e-mail address of the agency's task and delivery order ombudsman be included in each indefinite-quantity solicitation (this person reviews complaints from contractors and makes sure they have a fair opportunity to be considered for each order -- see FAR 16.505(b)(5)). FAR 16.504 also requires the contracting officer to "avoid situations in which awardees specialize exclusively in one or a few areas within the statement of work, thus creating the likelihood that orders in those areas will be awarded on a sole-source basis...the contracting officer must document the decision whether or not to use multiple awards in the acquisition plan or contract file."

FAR 16.505 requires the contracting officer to "develop placement procedures that will provide each awardee a fair opportunity to be considered for each order..." In addition, he or she must "consider price or cost under each order as one of the factors in the selection decision," and is encouraged to consider "past performance on earlier orders under the contract, including quality, timeliness and cost control; potential impact on other orders placed with the contractor; [and] minimum order requirements." Finally, the contracting officer "must document in the contract file the rationale for placement and price of each order."

EDITOR'S NOTE: The March 20, 2000, General Accounting Office (GAO) Report NSAID-00-56, Few Competing Proposals for Large DOD Information Technology Orders, is being evaluated to determine whether any additional changes should be made to the FAR (the report found that 16 of 22 orders over $5 million were awarded without competitive proposals). For more on this report, see the April 2000 FEDERAL CONTRACTS PERSPECTIVE article "DODIG, GAO Point Out Acquisition Deficiencies."


Utilizing Indian Organizations and Indian-Owned Economic Enterprises: Since 1974, contractors that subcontracted with Indian organizations and Indian-owned economic enterprises could receive an incentive payment of up to 5% of the subcontract value. This is implemented in FAR Subpart 26.1, Indian Incentive Program. However, annual appropriations acts had restricted DOD payments to contractors that submitted small business subcontracting plans (see FAR Subpart 19.7) or took part in the comprehensive small business subcontracting plan test program (see Defense FAR Supplement (DFARS) Subpart 219.7). Since small businesses are not required to submit small business subcontracting plans, they could not receive the 5% incentive for Indian subcontracting.

The Fiscal Year (FY) 1999 DOD Appropriations Act cut the link between the 5% incentive and small business subcontracting plans, so this rule removes obsolete language regarding the DOD restrictions from FAR 26.104, Contract Clauses, and FAR 52.226-1, Utilization of Indian Organizations and Indian-Owned Economic Enterprises ("for Defense contracts, this clause only applies if the contract includes a subcontracting plan...").

EDITOR'S NOTE: On April 13, DOD revised DFARS 226.104, Contract Clause, to require that FAR 52.226-1 be included in all solicitations and contracts for supplies or services of $500,000 or more, or construction for $1 million or more, that do not use the procedures in FAR Part 12, Acquisition of Commercial Items. In addition, contracting officers may use the clause in any solicitation or contract below these thresholds if subcontracting possibilities exist for Indian organizations or Indian-owned economic enterprises.


Ocean Transportation by U.S.-Flag Vessels: FAR Subpart 47.5, Ocean Transportation by U.S.-Flag Vessels, implements the Cargo Preference Act of 1954, which requires that at least 50% of any supplies transported by ocean vessels be transported on privately owned U.S.-flag commercial vessels to the extent such vessels are available at fair and reasonable rates. (EDITOR'S NOTE: FAR Subpart 47.5 does not apply to DOD. DOD is covered by the Cargo Preference Act of 1904, which is covered in DFARS Subpart 247.5.)

FAR 47.504, Exceptions, listed "contracts awarded using the simplified procedures in [FAR] Part 13 [Simplified Acquisition Procedures]" as an exception to the FAR Subpart 47.5 requirements. This final rule makes the provisions of FAR Subpart 47.5 applicable to contracts awarded using FAR Part 13 procedures by removing the exception from FAR 47.504 and FAR 52.247-64, Preference for Privately Owned U.S.-Flag Commercial Vessels (46 U.S.C. 1241). The rule also revises FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders -- Commercial Items, and FAR 52.213-4, Terms and Conditions -- Simplified Acquisitions (Other Than Commercial Items), to add FAR 52.247-64 as a clause that can be incorporated by reference when required.

EDITOR'S NOTE: The July 12, 1999, proposed rule also would have exempted subcontracts for commercial items and commercial components from FAR Subpart 47.5. However, the proposed exemption was not adopted at this time. Instead, it will be addressed under a separate FAR rule.

DOD had an exemption to the Cargo Preference Act of 1904 for subcontracted commercial items in DFARS Subpart 247.5. But DOD decided to require compliance with the Cargo Preference Act of 1904 for subcontracts of commercial items: (1) the contractor is selling to the government without adding value; (2) in support of contingency, humanitarian, or peacekeeping operations; or (3) for commissary or exchange cargoes transported outside the Defense Transportation System. See the April 2000 FEDERAL CONTRACTS PERSPECTIVE article "DOD Cargo Preference for Commercial Items Clarified

Caribbean Basin Trade Initiative: The U.S. Trade Representative has decided to renew the treatment of Caribbean Basin country end products as "eligible products" under the Trade Agreements Act through September 30, 2000, except for the products from the Dominican Republic and Honduras. This final rule removes the Dominican Republic and Honduras from the list of eligible Caribbean Basin countries in FAR 25.003, Definitions, and FAR 52.225-5, Trade Agreements, and amends FAR 25.404, Caribbean Basin Trade Initiative, to extend the date to September 30, 2000. (EDITOR'S NOTE: See FAR Subpart 25.4, Trade Agreements, for more on the Trade Agreements Act and the Caribbean Basin Trade Initiative. Also, on April 13, DOD amended DFARS 252.225-7007, Buy American Act -- Trade Agreements -- Balance of Payments Program, and DFARS 252.225-7021, Trade Agreements, to remove the Dominican Republic and Honduras from the list of eligible Caribbean Basin countries.)


In addition, FAC 97-17 finalized without change (except for the correction of a cross-reference) the interim rule published September 24, 1999, in FAC 97-14 which revised portions of FAR Subpart 15.4, Contract Pricing, to provide guidance on the evaluation of price reasonableness of commercial items and require compliance with the requirement to provide information other than certified cost or pricing data as a condition for contract or subcontract award.



Mandatory Use of Travel Charge Card Revised Again

The Travel and Transportation Reform Act of 1998 (Public Law 105-264) required that the General Services Administration (GSA) issue regulations making the use of the government travel charge card mandatory for official travel. GSA did so on July 16, 1999, making its use mandatory for travel performed after January 1, 2000. GSA postponed the mandatory date until February 19, 2000, but many agencies complained they could not implement the rules and change their travel software in time, so GSA has postponed the mandatory date until May 1, 2000. However, GSA has decided to exempt relocation expenses from the mandatory use requirement (except for en route travel and househunting expenses). In addition, the original July 19, 1999, rules gave agencies seven days to notify travelers of any errors in travel claims, but GSA has decided to give agencies until May 1, 2002, to comply with the seven day limit (agencies must provide notification "as soon as practicable" until May 1, 2002).



FAR Changes on CAS Administration, Discussions Proposed

Besides FAC 97-17, a couple of proposed FAR changes were published during April:

Cost Accounting Standards (CAS) Administration: The 19 CAS apply to large negotiated contracts awarded to large contractors (for more on the CAS, see the March 2000 FEDERAL CONTRACTS PERSPECTIVE article "Cost Accounting Standards Thresholds Increased, Competitive Firm-Fixed-Price Contracts Exempt). FAR Part 30, Cost Accounting Standards Administration, contains the policies and procedures for applying the CAS to covered contracts. However, the government does not uniformly apply the process for making contract price and cost adjustments when the contractor makes a change to a cost accounting practice, and the process is poorly understood and inadequately documented in FAR Part 30. Therefore, FAR Subpart 30.6, CAS Administration, would be revised to make the process easier to understand and reduce administrative effort.

The following are the primary proposed changes:

Submit comments no later than June 19, 2000, to GSA, FAR Secretariat (MVRS), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405. Cite FAR Case 1999-025.


Discussion Requirements: This proposed rule would revise FAR 15.306, Exchanges with Offerors After Receipt of Proposals, to clarify that the contracting officer is not required to discuss every area in which a proposal could be improved. Paragraph (d)(3) currently states that "the contracting officer shall...indicate to, or discuss with, each offeror still being considered for award, significant weaknesses, deficiencies, and other aspects of its proposal...that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal's potential for award." The proposed change would retain the requirement to indicate or discuss significant weaknesses and deficiencies, but would "encourage" the contracting officer "to discuss other aspects of the offeror's proposal...that could, in the opinion of the contracting officer, be altered or explained to enhance materially the proposal's potential for award. However, the contracting officer is not required to discuss every area where the proposal could be improved."

Submit comments no later than June 2, 2000, to the above address. Cite FAR case 1999-022.



Foreign Acquisitions Subject of DFARS Change

April 13 was a busy day for DOD. Besides amending the DFARS to address issues regarding the Caribbean Basin Trade Initiative and subcontracting with Indian organizations (see the earlier article in this issue on FAC 97-17), it revised DFARS Part 225, Foreign Acquisition, to conform to FAR Part 25, and finalized without change an interim rule that amended DFARS 235.006-70, Manufacturing Technology Program, to eliminate the program's mandatory cost-sharing requirements. DOD also proposed revising DFARS 204.804, Closeout of Contract Files, to expedite the closeout of Foreign Military Sales (FMS) contract line items, and withdrew a proposed rule that would have made it easier for contractors to release unclassified information to the public.


Foreign Acquisition: FAC 97-15 contained a complete rewrite of FAR Part 25 (see the January 2000 FEDERAL CONTRACTS PERSPECTIVE article "FAC 97-15 Addresses Foreign Acquisition, Contract Bundling, Award Fee Determinations"). FAR 1.303, Publication and Codification, states that "coverage in an agency acquisition regulation that implement a specific part, subpart, section, or subsection of the FAR shall be numbered and titled to correspond to the appropriate FAR number and title." Therefore, DOD rearranged DFARS Part 225 to correspond to the rewritten FAR Part 25. There are no substantive changes to DFARS policy in this rule. (EDITOR'S NOTE: DFARS Subparts 225.70 through 225.74 are unchanged because they have no corresponding subparts in the FAR. Also, because of FAR 1.303, the National Aeronautics and Space Administration (NASA) reorganized NASA FAR Supplement (NFS) Part 1825 to correspond to FAR Part 25. See the March 2000 FEDERAL CONTRACTS PERSPECTIVE article "NASA Issues Final Rules on Foreign Acquisition.")


Manufacturing Technology Program (MTP): On January 13, 2000, DOD issued an interim rule that removed the requirement in DFARS 235.006-70 that contractors share the costs of MTP contracts and replaced it with requirement that the amount of cost sharing proposed by offerors be included as an evaluation factor in all MTP solicitations. Since there were no comments, the interim rule is finalized without change. (EDITOR'S NOTE: See the February 2000 FEDERAL CONTRACTS PERSPECTIVE article "New DFARS Rules on ROTC Recruiting, Utility Privatization, Manufacturing Technology, and FPI Exceptions.")


Closeout of FMS Contract Line Items: To expedite the closeout of FMS line items under contracts with FMS and non-FMS items, this proposed rule would add a sentence to the introductory text DFARS 204.804, Closeout of Contract Files, that would state "...the FMS contract line items should be closed out as soon as the closeout requirements for those line items are satisfied in accordance with FAR 4.804 [Closeout of Contract Files]."

Submit comments by June 12, 2000, to the Defense Acquisition Regulation Council, ATTN: Ms. Melissa Rider, PDUSD (AT&L) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-2062. Cite DFARS Case 2000-D002.


Withdrawal of Proposed Disclosure of Information Rule: DOD is withdrawing an October 21, 1999, proposed rule that would have amended DFARS 252.204-7000, Disclosure of Information, to narrow the circumstances under which a contractor would have to obtain contracting officer approval to release unclassified information. It would have changed the term "unclassified information" to "unclassified information that may be sensitive and inappropriate for release to the public," and it would have permitted release to "a subcontractor or prospective subcontractor for performance of its subcontract." Instead, DOD intends to include this policy in a revision to DOD Regulation 5200.1-R, Information Security Program.



NFS Changes Proposed on Tort Liability, R&D Reports

NASA is proposing to make two amendments to the NASA FAR Supplement (NFS):

Immunity from Tort Liability for State Agencies and Charitable Organizations: This proposed rule would add to the NFS the FAR language that was deleted by FAC 90-37 in 1996 because NASA needs the deleted language and clauses.

FAC 90-37 deleted FAR 52.228-6, Insurance -- Immunity form Tort Liability, because it applied only to research and development (R&D) cost-reimbursement contracts with state agencies and charitable organizations that claimed partial or total immunity from tort liability. FAC 90-37 also deleted Alternates I and II of FAR 52.228-7, Insurance -- Liability to Third Persons, which were included in contracts with state agencies and charitable organizations that claimed partial immunity and total immunity from tort liability, respectively. Since NASA has awarded contracts to state agencies and charitable organizations that have claimed partial or total immunity from tort liability, NASA proposes adding a provision and two clauses to the NFS with language that is similar to that deleted by FAC 90-37.

The proposed rule would add a new provision, NFS 1852.228-80, Insurance -- Immunity from Tort Liability, which would require state agencies and charitable organizations claiming partial or total immunity to "offer a representation to that effect." In addition, it would add NFS 1852.228-81, Insurance -- Partial Immunity from Tort Liability (essentially the old Alternate I of FAR 52.228-7), and NFS 1852.228-82, Insurance -- Total Immunity from Tort Liability (essentially the old Alternate II of FAR 52.228-7). NFS 1852.228-81 would authorize the contractor to "obtain any insurance coverage deemed necessary, subject to the approval by the contracting officer...The contractor shall be reimbursed for the cost of such insurance..." NFS 1852.228-82 would require the contractor to notify the government of any claims, and authorize government representatives to settle or defend the claim, represent the contractor, and take charge of any litigation.

Submit comments by June 26, 2000, to Richard Kall, NASA Headquarters, Office of Procurement, Contract Management Division (Code HK), Washington, DC 20546.


Submission of Final Reports Under NASA R&D Contracts: NASA's Center for AeroSpace Information (CASI) is a repository of NASA's scientific and technical information (STI). Currently, NFS 1827.406-70, Reports of Work, requires that copies of monthly, quarterly, and final reports under R&D contracts be sent to CASI. NASA has decided that CASI only need the final reports, so NFS 1827.406-70 and 1852.235-70, Center for AeroSpace Information, would have all references to "reports" replaced with "final report."

In addition, NASA STI is subject to a document availability authorization (DAA) review and release determination before it can be released outside NASA. Therefore, to NFS 1827.406-70 and NFS 1852.235-70 would be added a paragraph stating that "the contractor shall not release the final report, outside of NASA, until the DAA review has been completed by NASA and availability of the report has been determined."

Finally, the Internet address of CASI (http://www.sti.nasa.gov) would be added to NFS 1827.406-70 and NFS 1852.235-70.

Submit comments by June 19, 2000, to Celeste Dalton at the above address.


Past Performance Database (PPDB): NASA issued Procurement Information Circular (PIC) 00-02 to announce that it was initiating an automated PPDB effective April 4, 2000, and that contracting officers must make sure that all past performance evaluations and award fee evaluations performed after October 1, 1998, are entered into the PPDB by July 10, 2000.



Mentor-Protege, M&O Financial Clauses Now in the DEAR

The Department of Energy (DOE) has modified its acquisition regulation (the DEAR) to formalize its Mentor-Protege Pilot Initiative and to designate certain management and operating (M&O) contract clauses as Standard Financial Management clauses that must be included in M&O contracts unless DOE's Chief Financial Officer concurs.


Mentor-Protege Program: Since 1995, DOE's Mentor-Protege Pilot Initiative has been intended to encourage its prime contractors to help 8(a), small disadvantaged, and small women-owned businesses enhance their capabilities. Because of the initiative's success, DOE decided to convert the initiative into a permanent program. On December 6, 1999, it published a proposed rule that would add a new DEAR Subpart 919.70, The Department of Energy Mentor-Protege Program (see the January 2000 FEDERAL CONTRACTS PERSPECTIVE article "DOE Proposes Formalizing Mentor-Protege Program"). The new subpart would have the same goals and objectives as the original pilot initiative, but add historically black colleges and universities and other minority institutions of higher learning (HBCU/MIs) as eligible to participate as proteges. In this final version, DEAR Subpart 919.70 includes HBCU/MIs as eligible proteges and small business concerns owned and controlled by service disabled veterans, as defined in the Veterans Entrepreneurship and Small Business Development Act of 1999 (Public Law 106-50).


Financial Management Clauses for M&O Contracts: On November 18, 1998, DOE published a proposed rule to amend DEAR Part 970, DOE Management and Operating Contracts, to implement provisions of the Chief Financial Officers Act of 1990 (Public Law 101-576), which requires each agency to improve its systems of accounting, financial management, and internal controls. DOE decided to apply the act's requirements to its M&O contracts, and this rule finalizes the proposed rule without change.

The primary change is to DEAR 970.3270, Standard Financial Management Clauses, which had only required that DEAR 970.5204-16, Payments and Advances, be included in M&O contracts. To this clause are added the following that must be included (new clauses are identified by an asterisk ("*")): DEAR 970.5204-9, Accounts, Records, and Inspection; DEAR 970.5204-15, Obligation of Funds; DEAR 970.5204-20, Management Controls; *DEAR 970.5204-92, Liability with Respect to Cost Accounting Standards; *DEAR 970.5204-93, Work for Others Funding Authorization; FAR 52.230-2, Cost Accounting Standards; and FAR 52.230-6, Administration of Cost Accounting Standards. In addition, the following two clauses are to be included in M&O contracts with integrated accounting systems: *DEAR 970.5204-90, Financial Management System; and *DEAR 970.5204-91, Integrated Accounting.


EDITOR'S NOTE: The DEAR is available on the Internet at http://pr.doe/gov/dear.html.



Three "Greening" Executive Orders Issued

On April 22, the 30th anniversary of Earth Day, President Clinton announced he had issued three "Greening the Government" executive orders intended to reduce energy use by the government and its employees. Executive Order 13148, Greening the Government Through Leadership in Environmental Management, requires that the FAR be revised to incorporate clauses requiring contractor cooperation, and that training be conducted for program managers, contracting personnel, procurement and acquisition personnel, contractors, and others as appropriate. Executive Order 13149, Greening the Government Through Federal Fleet and Transportation Efficiency, requires agencies operating fleets of vehicles to reduce petroleum consumption by at least 20% through conservation or acquisition of vehicles with higher fuel economy. Executive Order 13150, Federal Workforce Transportation, directs agencies in the Washington, DC area, and DOE, Department of Transportation, and EPA, to provide "transit passes" worth up to $65 to employees using mass transit beginning October 1, 2000.



FPDC Announces Decade of Procurement Data on DVD-ROM

The Federal Procurement Data Center (FPDC) has announced that it is making available on DVD-ROM its database of all contract actions of $25,000 or more awarded from FY 1990 through FY 1999. It contains four gigabits of data -- nearly four million contract actions worth about $1.6 trillion! The DVD-ROM costs $2,000.

The database contains all the information that agencies are required to submit on the Standard Form 279, Federal Procurement Data System (FPDS) -- Individual Contract Action Report: contract number, product or service, contract price, buying activity, name and address of the contractor, whether the contractor is large or small or non-profit or something else, solicitation method, degree of competition, type of contract, location of performance, etc. According to the FPDC, "the data can be loaded into the user's own database to be summarized or viewed as needed."

The FPDC is also offering quarterly ($150) and annual ($500) editions of the database on a downloadable CD-ROM. Orders may be faxed to 202-401-1546. Contact Jerry Varner at 202-401-8135 for more information. (EDITOR'S NOTE: See FAR Subpart 4.6, Contract Reporting, for more on FPDC.)



GSA Launches E-Commerce Web Site for 8(a) Firms

On April 3, GSA announced that is has launched a pilot web site specifically to give agencies an opportunity to shop for information technology products and services from 8(a) firms at http://www.SmallBizMall.gov. The pilot, which consists of nine 8(a) contractors with multiple award indefinite-delivery, indefinite-quantity (IDIQ) contracts with GSA's Federal Technology Service (FTS) Small Business Solution Development Center in Kansas City, MO, will be conducted through June 2000. After successful completion of the pilot, FTS intends to invite its other 155 8(a) multiple award IDIQ contractors to participate.

GSA decided to start the SmallBizMall because of concerns that the government's steady movement toward electronic commerce is excluding many 8(a) firms from participating in federal contracting.

1000th HUBZone Concern Registered by SBA

The Small Business Administration (SBA) announced that it has registered the 1,000th firm as an Historically Underutilized Business Zone (HUBZone) concern (see FAR Subpart 19.13). Qualified firms may apply for the HUBZone program at http://www.sba.gov/hubzone.

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