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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


May 2009
Vol. X, No. 5

CONTENTS


FAR Changes Would Require Rerepresentation of Eligibility for SBA’S HUBZone Program
Should Foreign Contracts Be Exempt from CAS?
E-Verify Implementation Delayed for Third Time
Nonmanufacturing Rule Waiver Proposed for Propellants
GSAR Coverage on Bonds and Insurance Rewritten
Transportation Adjusts DBE Size Standards
FTR Addresses Meals



FAR Changes Would Require Rerepresentation of
Eligibility to Participate in SBA’S HUBZone Program

To implement the 2004 and 2005 changes the Small Business Administration (SBA) made to its Historically Underutilized Business Zone (HUBZone) regulations, the Federal Acquisition Regulation (FAR) would be revised to require HUBZone small businesses to represent, both at the time of their initial offers and again at the time of contract award, their HUBZone small business status. Small business offerors are already required to represent their HUBZone small business concern status at the time of their initial offers.

This change would be implemented in paragraph (d) of FAR 19.1303, Status as a HUBZone Small Business Concern (“To be eligible for a HUBZone contract under this section, a HUBZone small business concern must be a HUBZone small business concern both at the time of its initial offer and at the time of contract award”); paragraph (f) of retitled FAR 52.219-3, Notice of Total HUBZone Set-Aside or Sole Source Award [currently titled “Notice of Total HUBZone Set-Aside”], and paragraph (g) of FAR 52.219-4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns. In addition, FAR 52.219-3 and FAR 52.219-4 would require a HUBZone offeror to provide the contracting officer a copy of the notice required by Title 13 of the Code of Federal Regulations (CFR), Section 126.501, What are a qualified HUBZone SBC’s [small business concern's] ongoing obligations to SBA?, if material changes occur before contract award that could affect its HUBZone eligibility. 13 CFR 126.501 states that a “material change includes, but is not limited to, a change in the ownership, business structure, or principal office of the concern, or a failure to meet the 35% HUBZone residency requirement.”

The following are other FAR revisions that would be made to implement the SBA’s regulatory changes to the HUBZone program:

Finally, in a non-HUBZone related change, in the definition of “affiliates” in FAR 19.101, the term “acquisition and property sale assistance” would be removed from “joint venture – acquisition and property sales assistance” at paragraph (7)(iii) (currently paragraph (7)(ii)) because “acquisition” did not add any meaning and “property sales” are beyond the scope of the FAR. The proposed rule also deletes the other reference to a “property sale” in the same paragraph.

Comments on this proposed rule must be submitted no later than June 12, 2009, by any of the following means: (1) eRulemaking Portal: http://www.regulations.gov, by inputting “FAR Case 2006-005” under the heading “Comment or Submission,” selecting the link “Send a Comment or Submission” that corresponds with FAR Case 2006-005, then following the instructions provided to complete the “Public Comment and Submission Form,” making sure to include your name, company name (if any), and “FAR Case 2006-005” on your attached document; (2) fax: 202-501-4067; or (3) mail to: General Services Administration, Regulatory Secretariat (VPR), 1800 F Street, NW, Room 4041, ATTN: Hada Flowers, Washington, DC 20405. Identify comments as “FAR Case 2006-005.”

For more on SBA’s 2004 regulatory changes to its HUBZone regulations, see the May 24, 2004, Federal Register notice “Small Business Size Regulations; Government Contracting Programs; HUBZone Program.” For more on SBA's 2005 regulatory changes to its HUBZone regulations, see the October 2005 Federal Contracts Perspective article “SBA Amends HUBZone Eligibility Requirements.”



Should Foreign Contracts Be Exempt from CAS?

The Cost Accounting Standards (CAS) Board (CASB) is inviting the public to comment and provide information on the exemption from CAS for contracts and subcontracts that are executed and performed entirely outside the United States, its territories, and possessions. This exemption from CAS is in paragraph (b)(14) of Title 48 of the Code of Federal Regulations (CFR), Section 9903.201-1, CAS Applicability. It exempts from all CAS requirements “contracts and subcontracts to be executed and performed entirely outside the United States, its territories, and possessions.”

On September 13, 2005, the CASB issued a staff discussion paper inviting comments regarding whether the “overseas exemption” should be revised or eliminated (see the October 2005 Federal Contracts Perspective article “Should CAS Apply to Non-U.S. Contracts?”). The CASB received three sets of comments in response to the staff discussion paper, and none supported the revision or elimination of the exemption. In fact, all three of the comments offered arguments for why the CASB should retain the exemption. The CASB agreed that the exemption should not be deleted or revised, and decided to discontinue its review of the exemption (see the March 2008 Federal Contracts Perspective article “CAS Board Invites Comments on Home Office Expenses”).

However, Section 823 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Public Law 110-417) requires the CASB to (1) review the applicability of CAS to contracts and subcontracts which would be subject to CAS but for the fact that they are executed and performed entirely outside the United States, and (2) determine whether the government would benefit from the application of CAS to such contracts and subcontracts. A report is due to Congress by mid-July 2009 explaining what, if anything, will be done to revise the overseas exemption.

The CASB is soliciting information and comments on the overseas exemption. More specifically, the CASB is particularly interested in information and comments related to the following questions:

  1. What is your experience with the overseas exemption:

          a. As a procuring entity (e.g., procurement office, higher tier contractor) awarding contracts/subcontracts; or

          b. As the contractor/subcontractor claiming the applicability of the overseas exemption?

  2. How often (number of actions, dollar amounts, by fiscal year) has the overseas exemption been claimed?

  3. If the overseas exemption is eliminated, what problems will that cause you:

          a. As a procuring entity (e.g., procurement office, higher tier contractor) awarding contracts/subcontracts; or

          b. As the contractor/subcontractor claiming the applicability of the overseas exemption?

  4. How does the overseas exemption help, or not help, to implement the CASB’s mandate “to achieve uniformity and consistency in the cost accounting standards governing measurement, assignment, and allocation of costs to contracts with the United States”?

  5. What are the arguments for, and against, the requirement in the overseas exemption to require execution of the contract overseas?

  6. What are the arguments for, and against, the requirement in the overseas exemption to require performance of the contract overseas?

Comments must be submitted by May 26, 2009, by one of the following methods: (1) Federal eRulemaking Portal: http://www.regulations.gov; type “CAS 2009 Overseas Exemption” (without the quotes) in the “Comment” or “Submission” search box, click “Go,” and follow the online instructions for submitting responses; (2) by e-mail to casb2@omb.eop.gov, being sure to include your name, title, organization, and “CAS 2009 Overseas Exemption”; (3) by facsimile to 202-395-5105, being sure to include your name, title, organization, and “CAS 2009 Overseas Exemption”; or (4) by mail to the Office of Federal Procurement Policy, 725 17th Street, NW, Room 9013, Washington, DC 20503, ATTN: Raymond J. M. Wong, being sure to include your name, title, organization, and “CAS 2009 Overseas Exemption.”



E-Verify Implementation Delayed for Third Time

The effective date of Federal Acquisition Circular (FAC) 2005-29, which requires most contractors to use the free website E-Verify (http://www.dhs.gov/e-verify) to determine whether their employees are authorized to work in the United States, has been postponed for the third time: from May 21, 2009, to June 30, 2009, to give the Obama administration more time to review the rule. Originally, E-Verify was to go into effect on January 15, 2009, but its implementation was postponed to February 20, 2009, in response to pending litigation. The second implementation postponement was to May 21, 2009, at the request of President Obama to give his new administration time to review the rule.

As of June 30, 2009, FAR 52.222-54, Employment Eligibility Verification, must be included in contracts exceeding $100,000 that are 120 days or longer in duration. The clause requires the contractor to use E-Verify for all its employees working on the contract in the United States, and all of its newly-hired employees regardless of whether they are working on the contract or not. There are some exceptions to this: (1) contracts for “commercial off-the-shelf” (COTS) items and services, or items that would be COTS except for minor modifications (see FAR 22.1801, Definitions, for the definition of COTS – contracts for commercial items that do not meet the COTS definition are subject to E-Verify); and (2) contracts that will be performed outside the United States.

Contracting officers are not to use FAR 52.222-54 in any solicitation or contract prior to June 30, 2009.

However, on or after June 30, 2009, contracting officers “should modify, on a bilateral basis, existing indefinite-delivery/indefinite-quantity contracts...to include the clause for future orders if the remaining period of performance extends beyond December 30, 2009, and the amount of work or number of orders expected under the remaining performance period is substantial.”

For more on E-Verify and FAC 2005-29, see the December 2008 Federal Contracts Perspective article “FAC 2005-29 Requires Contractors to Verify Workers’ Eligibility for Employment”, and the February 2009 Federal Contracts Perspective article “E-Verify Put on Hold Until May 21.”



Nonmanufacturing Rule Waiver Proposed for Propellants

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for petroleum based liquid propellant under North American Industry Classification System (NAICS) code 324110, product service code 9130. SBA is inviting the public to comment on this proposed waiver or to provide information on potential small business sources for these products by May 26, 2009, to Pamela M. McClam, Program Analyst, Small Business Administration, Office of Government Contracting, 409 3rd Street, SW, Suite 8800, Washington, DC 20416.

EDITOR’S NOTE: Public Law 100-656, enacted November 15, 1988, requires those with federal contracts that are set-aside for small businesses or awarded through the 8(a) program to provide the product of a small business manufacturer or processor if the recipient is not the actual manufacturer or processor (see paragraph (f) of FAR 19.102, Size Standards). This is called the “nonmanufacturer rule.” However, SBA may waive this requirement if there are no small business manufacturers or processors.

The SBA regulation on the nonmanufacturer rule is in Title 13 of the Code of Federal Regulations (CFR), Business and Credit Administration; Part 121, Small Business Size Standards; under paragraph (b) of 121.406, How Does a Small Business Concern Qualify to Provide Manufactured Products Under Small Business Set-Aside or MED [Minority Enterprise Development] Procurements? The SBA regulation on the waiver of the nonmanufacturer rule is 13 CFR 121.1202, When Will a Waiver of the Nonmanufacturer Rule Be Granted for a Class of Products? A complete list of products for which the nonmanufacturer rule has been waived is available at http://www.sba.gov/idc/groups/public/documents/sba_program_office/gc_approved.htm.



GSAR Coverage on Bonds and Insurance Rewritten

The General Services Administration (GSA) is publishing a rewritten GSA Acquisition Regulation (GSAR) Part 528, Bonds and Insurance, as part of its GSAR rewrite effort. There were no comments submitted in response to the proposed rule, so it is adopted as final with some editorial changes produced by an internal review.

The following are the changes being made to GSAR Part 528:

For more on the proposed rule, see the September 2008 Federal Contracts Perspective article “GSAR Rewrite Begins to Show Results.”



Transportation Adjusts DBE Size Standards

The Department of Transportation (DOT) is amending the size or gross receipts limits under the DOT’s two disadvantaged business enterprise (DBE) programs to take inflation into account.

The DBE programs are very similar to SBA’s 8(a) program in that they are intended to provide contracting opportunities for small businesses owned and controlled by socially and economically disadvantaged individuals in DOT’s assistance programs. The two programs, which are based on different statutes, are: (1) the airport concessions DBE (ACDBE) program, which is designed to give business opportunities to small business concerns that operate at airports and are owned and controlled by socially and economically disadvantaged individuals; and (2) the DBE program, which is intended to ensure nondiscriminatory contracting opportunities for small business concerns owned and controlled by socially and economically disadvantaged individuals in DOT’s highway, mass transit, and airport financial assistance programs operated by the Federal Highway Administration (FHWA), the Federal Transit Administration (FTA), and the Federal Aviation Administration (FAA), respectively. The ACDBE is covered in Title 49 of the Code of Federal Regulations (49 CFR), Part 23, Participation of Disadvantaged Business Enterprise in Airport Concessions. The DBE program is covered in 49 CFR Part 26, Participation by Disadvantaged Business Enterprises in Department of Transportation Financial Assistance Programs.

The two DBE programs require state and local transportation agencies that receive DOT financial assistance to establish goals for the participation of DBEs – the overall goal is for DBEs to receive at least 10% of the financial assistance. Each DOT-assisted state and local transportation agency is required to establish annual DBE goals, and to review anticipated large prime contracts throughout the year and establish contract-specific DBE subcontracting goals.

On April 2, 2007, DOT revised 49 CFR Part 23 and 49 CFR Part 26 to adjust the gross receipts limits to reflect inflation since the previous adjustment, and to require that the gross receipts limits be adjusted every two years to reflect inflation (for more on the April 2, 2007, adjustments, see the May 2007 Federal Contracts Perspective article “Size Standards for Airport Concessions Adjusted”). This final rule adjusts the following gross receipts limits by 9.8% to reflect inflation for the two year period since May 2, 2007:

ACDBE Program (49 CFR 23.33, What size standards do recipients use to determine the eligibility of ACDBEs?)

Also, the size limitation for banks and financial institutions is increased from $750 million in assets to $1 billion in assets, and the size standard for automobile dealers is increased from 200 employees to 350 employees.

DBE Program (49 CFR 26.65, What rules govern business size determinations?): from $20,410,000 to $22,410,000.

In addition, DOT is proposing various changes to the DBE program in 49 CFR Part 26 to improve the DBE program and its administration:



FTR Addresses Meals

GSA is making two changes to the Federal Travel Regulations (FTR) regarding meals:



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