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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


December 2009
Vol. X, No. 12

CONTENTS


Proposed Rule Would Require Contractors to Prevent Employees' Personal Conflicts of Interest
DOD Ties Up Some Loose Ends
SBA Revises Definition of “HUBZone Employee”
50% SDVOSB Performance Does Not Apply to Preference
Social Media to Make Acquisition More Effective
HSAR Prohibits Felons from Providing Guard Services
Direct Hire Authority for Acquisition Positions Extended
Daniel Gordon Confirmed as New OFPP Administrator
Rewritten HHSAR Unveiled



Proposed Rule Would Require Contractors to
Prevent Employees' Personal Conflicts of Interest

A proposed change to the Federal Acquisition Regulation (FAR) would require each contractor that has employees performing acquisition functions closely associated with inherently governmental functions to identify and prevent personal conflicts of interest for such employees. In addition, the proposed rule would make contractors responsible for having procedures to screen for potential conflicts of interest, informing covered employees of their obligations with regard to these policies, maintaining effective oversight to verify compliance, reporting any personal conflict-of-interest violations to the contracting officer, and taking appropriate disciplinary action with employees who fail to comply with these policies.

This proposed FAR change would implement Section 841(a) of the Fiscal Year 2009 National Defense Authorization Act (Public Law 110-417), which addresses “Policy on Personal Conflicts of Interest by Employees of Federal Government Contractors.” Section 841(a) requires the Office of Federal Procurement Policy (OFPP) to “develop and issue a standard policy to prevent personal conflicts of interest by contractor employees performing acquisition functions closely associated with inherently governmental functions (including the development, award, and administration of government contracts) for or on behalf of a federal agency or department.” It goes on to require OFPP to develop and issue “a personal conflicts-of-interest clause or a set of clauses for inclusion in solicitations and contracts (and task or delivery orders) for the performance of acquisition functions closely associated with inherently governmental functions that sets forth the personal conflicts-of-interest policy developed under this subsection and that sets forth the contractor’s responsibilities under such policy.” For more on Section 841 of Public Law 110-417, see the November 2008 Federal Contracts Perspective article “2009 Defense Authorization Act Includes Clean Contracting Act.”

This proposed rule does not address personal conflicts of interest by contractor employees with respect to other functions, nor does it address the issue of additional FAR coverage addressing organizational conflicts of interest. Those issues will be addressed in a separate rule change (for more on this, see the April 2008 Federal Contracts Perspective article “Personal and Organizational Conflicts of Interest for Contractors Under Consideration”).

To implement Section 841(a), new FAR Subpart 3.11, Preventing Personal Conflicts of Interest for Contractor Employees Performing Acquisition Functions, would be added. FAR Subpart 3.11 would contain the following provisions and requirements:

FAR 52.203-16 would reflect all the requirements specified in FAR Subpart 3.11. In addition, FAR 52.203-16(e) would require that the clause be included in all subcontracts that exceed $100,000, and in which subcontractor employees may perform acquisition functions closely associated with inherently governmental functions.

Comments on this proposed rule must be submitted no later than January 12, 2010, by any of the following means: (1) http://www.regulations.gov (input “FAR Case 2008-025” under the heading “Comment or Submission,” select the link “Send a Comment or Submission” that corresponds with FAR Case 2008-025; follow the instructions provided to complete the “Public Comment and Submission Form”); (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (VPR), 1800 F Street, NW, Room 4041, ATTN: Hada Flowers, Washington, DC 20405. Cite “FAR Case 2008-025” in all correspondence.

Comments are welcomed “on additional controls or remedies to help deter noncompliance, such as annual reporting requirements to verify compliance with the clause requirements, or certification by the contractor or by the contractor’s employees.”

EDITOR'S NOTE: See the next article for information on the Department of Defense memorandum addressing personal conflicts-of-interest.)



DOD Ties Up Some Loose Ends

During November, the Department of Defense (DOD) finalized five interim rules, issued two new interim rules, announced the further extension of the 8(a) partnership with the Small Business Administration (SBA), issued two class deviations, and issued one guidance memorandum.



SBA Revises Definition of “HUBZone Employee”

The Small Business Administration (SBA) is revising the definition of “employee” as it pertains to the Historically Underutilized Business Zone (HUBZone) program to simplify it and increase employment of HUBZone residents.

Currently, 35% of a HUBZone concern’s employees must be residents of a HUBZone. SBA’s regulation at Title 13 of the Code of Federal Regulations (CFR), Section 126.103, What definitions are important in the HUBZone program?, had defined “employee” as “a person (or persons) employed by a HUBZone SBC [small business concern] on a full-time (or full-time equivalent), permanent basis. Full-time equivalent includes employees who work 30 hours per week or more. Full-time equivalent also includes the aggregate of employees who work less than 30 hours a week, where the work hours of such employees add up to at least a 40 hour work week…Temporary employees, independent contractors or leased employees are not employees for these purposes.” Section 126.103 then provides four examples of how to calculate “full-time equivalent employees.”

SBA wanted to eliminate the term “full-time equivalent” because it was confusing. However, that change would not count part-time or temporary employees, so SBA proposed to change the definition of “employee” to cover “all individuals employed on a full-time, part-time, or other basis, so long as that individual works a minimum of 40 hours per month. This includes employees obtained from a temporary employee agency, professional employee organization, leasing concern, or through a union agreement…Volunteers (i.e., individuals who receive no compensation, including no in-kind compensation, for work performed) are not considered employees. However, if an individual has an ownership interest in and works for the HUBZone SBC a minimum of 40 hours per month, that owner is considered an employee regardless of whether or not the individual receives compensation.”

Eight comments were received in response to the proposed rule, and, as a result, the final rule differs from the proposed rule with the removal of “professional employee organization” and the addition of the words in bold:

           “Employee means all individuals employed on a full-time, part-time, or other basis, so long as that individual works a minimum of 40 hours per month. This includes employees obtained from a temporary employee agency, leasing concern, or through a union agreement or co-employed pursuant to a professional employer organization agreement. Volunteers (i.e., individuals who receive deferred compensation or no compensation, including no in-kind compensation, for work performed) are not considered employees. However, if an individual has an ownership interest in and works for the HUBZone SBC a minimum of 40 hours per month, that owner is considered an employee regardless of whether or not the individual receives compensation.”

This rule goes into effect May 3, 2010.

For more on the proposed rule, see the February 2007 Federal Contracts Perspective article “SBA Proposes New Definition for ‘HUBZone Employee’.”



50% SDVOSB Performance Does Not Apply to Preference

The Government Accountability Office (GAO) has ruled that the requirement for a service-disabled veteran-owned small business (SDVOSB) to perform more than 50% of the contract requirements only applies to SDVOSB set-aside awards, not when an evaluation preference will be given to SDVOSBs (GAO B-401794; B-401794.2, Washington-Harris Group, November 16, 2009).

The protest involved an Army request for proposals (RFP) for case management and administrative services. The RFP stated that proposals would be evaluated on the basis of six evaluation factors, SDVOSB status being one of them. The SDVOSB evaluation factor stated that the agency would give favorable consideration to SDVOSB concerns:

           “The government will evaluate the offeror’s [SDVOSB] status. The federal government strongly supports the participation of SDVOSB concerns in the Federal Supply Schedule program. As such, the government has decided to evaluate whether an offeror is a [SDVOSB] as a primary evaluation factor when making the best valuate determination in this competition. In this regard, offerors will receive a rating as either “[SDVOSB] – Yes” or “[SDVOSB] – No.” An offeror does not have to be a SDVOSB in order to be considered for award.”

The RFP further advised offerors that they would receive credit as an SDVOSB under two conditions: (1) if the prime contractor was an SDVOSB concern; or (2) if the offeror was a joint venture where one of the joint venture partners was an SDVOSB concern that performed more than 50% of the contract requirements.

The Army received proposals from Washington-Harris Group (WHG) and Skyline Unlimited, Inc. (Skyline). Both claimed to be SDVOSBs, and both proposals were approximately $66 million. Skyline’s proposal stated that it would act as the prime contractor for the contract, and that Sterling Medical Associates (Sterling), a non-SDVOSB, would be a subcontractor to Skyline. However, Skyline’s proposal made it clear that Sterling would perform more than 50% of the contract. Nevertheless, Skyline received the award because its proposal was rated higher than WHG’s. WHG promptly protested the award, claiming that the Army improperly credited Skyline as being an SDVOSB offeror because, even though Skyline is an SDVOSB concern on its own, it will not perform more than 50% of the contract requirements.

WHG also argued that the Army’s interpretation of the solicitation was unreasonable because the RFP stated that an SDVOSB joint venture partner must perform more than 50% percent of the contract requirements to receive SDVOSB evaluation credit. WHG contended that there was no reasonable basis to distinguish between “SDVOSB joint venture partner” and “SDVOSB prime contractor,” and that the Army should have read the solicitation “as a whole” and applied the restriction to both offerors.

The GAO did not agree with WHG’s argument. GAO pointed out that FAR 52.219-27, Notice of Total Service-Disabled Veteran-Owned Small Business Set-Aside, contains the 50% requirement for services in paragraph (c)(1): “(a service-disabled veteran-owned small business concern agrees that in the performance of the contract, in the case of a contract for) services (except construction), at least 50% of the cost of personnel for contract performance will be spent for employees of the concern or employees of other service disabled veteran-owned small business concerns…” However, “FAR 52.219-27 was not included in the RFP, was not required to be included here, and has no application to this procurement. This RFP expressly states that this procurement was neither an SDVOSB set-aside nor an SDVOSB sole-source award.”

Regarding the 50% requirement for an SDVOSB joint venture partner, GAO decided “the solicitation explicitly stated that these two categories of business arrangements [prime contractor and joint venture partner] would be treated differently in the evaluation…To the extent that the protester believes these solicitation provisions were improper or inconsistent with the FAR requirements for SDVOSBs, it cannot now timely challenge them, as such a challenge must be raised prior to the time for submission of proposals.”

“In sum, we [GAO] think that the Army reasonably concluded that, under the terms of its proposal, Skyline was the prime contractor for this procurement, and was therefore entitled under the terms of the RFP to receive credit as an SDVOSB offeror.”



Social Media to Make Acquisition More Effective

The General Services Administration (GSA), in conjunction with the National Academy of Public Administration and the American Council for Technology-Industry Advisory Council, has launched the Better Buy Project (http://www.BetterBuyProject.com) in an attempt to “use collaboration and social media to make the federal acquisition process more efficient and effective…The Better Buy Project is asking for your best ideas on how to make it more open and collaborative! Promising ideas will be selected by GSA to be piloted on future acquisitions.”

For now, the Better Buy Project is primarily concerned with the pre-contract-award stages of the process – the activities that take place before the government buys a product or service. The three stages are:

GSA is looking for ideas to make federal acquisition more open, transparent, and collaborative:

Visitors are invited to register and submit their ideas for improving the acquisition process, and GSA will provide an e-mail summarizing any activity on the ideas: comments, status changes, administrative responses, etc. Also, each registered visitor is given 20 votes that can be used to indicate the ideas the visitors like the best.



HSAR Prohibits Felons from Providing Guard Services

The Department of Homeland Security (DHS) is amending the DHS Acquisition Regulation (HSAR) to add HSAR 3009.171, Prohibition on Federal Protective Service Guard Services Contracts with Business Concerns Owned, Controlled, or Operated by an Individual Convicted of a Felony, and the corresponding clause with the same title, HSAR 3052.209-76, to establish guidelines under which DHS will prohibit awards of Federal Protective Service (FPS) contract for guard services to a business concern that is owned, controlled, or operated by an individual who has been convicted of a serious felony. The rule implements the provisions of the Federal Protective Service Guard Contracting Reform Act of 2008 (Public Law 110-356).

The Federal Protective Service Guard Contracting Reform Act required DHS to publish regulations establishing guidelines for the prohibition of awards of FPS contracts for guard services to any business concern that is owned, controlled, or operated by an individual who has been convicted of a serious felony (as determined by DHS). This final rule implements the prohibition; identifies which felonies are serious and may prohibit a business concern from being awarded a contract; requires contractors to provide information regarding any felony convictions when submitting bids or proposals; provides guidelines for the contracting officer to assess present responsibility, mitigating factors, and the risk associated with the previous conviction; and allows the contracting officer to award a contract under certain circumstances, notwithstandng the conviction of a serious felony of an individual who owns, controls, or operates the contractor.

The following is the list of felonies (in paragraph (b) of HSAR 3009.171-5, Serious Felonies Prohibiting Award) that DHS has determined are serious enough to prevent award of an FPS guard contract:

HSAR 3009.171-4, Determination of Ownership, Control, or Operation, lists the types of positions that are considered constituting ownership, control, or operation of a business:

Paragraph (b) of HSAR 3009.171-3, Determination of Eligibility for Award of FPS Guard Service Contracts, requires contractors “to immediately notify the contracting officer in writing upon any felony conviction of personnel who own, control or operate a business concern…at any time during the duration of an indefinite delivery/indefinite quantity contract, blanket purchase agreements, or other contractual instrument that may result in the issuance of task orders or calls, or exercise of an option or options to extend the term of a contract. Upon notification of a felony conviction, the contracting officer shall review and make a new determination of eligibility prior to the issuance of any task order, call or exercise of an option.”

Paragraph (b) of HSAR 3009.171-7, Contract Award Approval Procedures for Contractors with Felony Convictions, authorizes a business concern owned, operated or controlled by an individual convicted of any felony to submit an award request to the contracting officer on the grounds that the felony is not a serious felony; that such individual does not or no longer owns, controls or operates the business concern; or that the commission of a serious felony no longer poses the contract risk the legislation and HSR 3009.171 are designed to guard against. If the contracting officer does not disapprove the award request, the request may be forwarded to the head of the contracting activity (HCA) for approval. The HCA has the sole authority to approve such award requests.

The clause at HSAR 3052.209-76 reflects the provisions of HSAR 3009.171. Paragraph (f) provides a disclosure statement in which the offeror whether it is or is not owned, controlled, or operated by an individual convicted of a felony.

Three comments were submitted in response to the proposed rule. As a result of these comments and further internal review by DHS, the final rule differs from the proposed rule in that:

For more on the proposed rule, see the April 2009 Federal Contracts Perspective article “DHS Proposes Prohibiting Guard Services by Felons.”



Direct Hire Authority for Acquisition Positions Extended

The Office of Personnel Management (OPM) has issued final regulations extending the direct hire authority for certain acquisition positions through September 30, 2012.

Section 853 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 110- ) extended through September 30, 2012, the direct-hire authority for acquisition positions under Section 1413 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136). This statutory change permits department and agencies (other than DOD) to determine, under regulations prescribed by OPM, when certain federal acquisition positions are shortage positions for purposes of direct-hire authority.

The eligible positions, listed in Title 41 of the U.S. Code, Section 433(g)(i)(A), are as follows:



Daniel Gordon Confirmed as New OFPP Administrator

On November 21, the Senate confirmed Daniel Gordon as the new Office of Federal Procurement Policy (OFPP) administrator. He has been a career employee of the Government Accountability Office (GAO), most recently as the deputy general counsel. Before that, he served as the managing associate general counsel, associate general counsel, and senior attorney for the GAO’s Procurement Law Division. Also, he has served as the assistant general counsel for the GAO’s Legal Services Division. He is an active member of the American Bar Association’s Section of Public Contract Law.

The position of OFPP administration has been unfilled since the resignation of Paul Denett in September 2008.



Rewritten HHSAR Unveiled

The Department of Health and Human Services (HHS) is revising the entire HHS Acquisition Regulation (HHSAR) to reflect changes since the last revision was published in December 2006 (see the January 2007 Federal Contracts Perspective article “HHSAR Updated, Brought Into Conformance with FAR”). The decision to revise the HHSAR in its entirety is based on the number of changes and not on their collective substance.

The changes fall into one of several categories: (1) changes to make the document easier to read (the majority of the changes fall into this category); (2) changes to reflect internal procedural matters that are administrative in nature and will not have a major effect on the general public or on contractors or offerors supporting HHS acquisition programs; (3) changes that HHS previously issued on an interim basis (and posted on its publicly available website), following coordination with the HHS Operating Divisions’ (OPDIVs) Heads of Contracting Activity; (4) changes that involve implementation of statutes or governmentwide mandates enacted or issued since December 2006; (5) necessary changes to conform to the FAR, such as addition of new or revised definitions; and (6) deletion of outdated material.

The following are the significant changes made to the HHSAR:

This is a “direct final rule,” which means it will go into effect on January 26, 2010, if no adverse comments are received. Comments must be submitted no later than December 28, 2009, by any of the following means: (1) http://www.regulations.gov; (2) fax: 202-690-8772; (3) e-mail: cheryl.howe@hhs.gov; or (4) mail: Cheryl Howe, Procurement Analyst, U.S. Department of Health and Human Services, Office of the Assistant Secretary for Financial Resources, Office of Grants and Acquisition Policy and Accountability, Division of Acquisition, Room 336-E, Hubert Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201.



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