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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


September 2009
Vol. X, No. 9

CONTENTS


Department of Justice Reaffirms SBA’s Small Business Program Parity Regulations
FAC 2005-36 Tidies Up Some Loose Ends
Three FAR Changes Proposed
GSA Establishes Mentor-Protégé Program
Retraction of Two Nonmanufacturer Waivers Proposed
Labor Proposes Employee Rights Notification
GSAR Definitions Revised
DHS Places Restrictions on Textile Acquisitions



Department of Justice Reaffirms
SBA’s Small Business Program Parity Regulations

The Department of Justice (DOJ) has reaffirmed that the Small Business Administration’s (SBA’s) regulations are correct in not giving the Historically Underutilized Business Zone (HUBZone) program priority over its 8(a) Business Development and Service-Disabled Veteran-Owned Small Business (SDVOSB) programs. The Government Accountability Office (GAO), in deciding two protests, decided that the wording of the statute that established the HUBZone program did, in fact, require contracting officers to give priority to making awards under the HUBZone program before making awards under the 8(a) and SDVOSB programs.

In the two protest decisions (B-400278, B-400308, International Program Group, Inc., September 19, 2008, and B-401057, Mission Critical Solutions, Inc., May 4, 2009), GAO cited language in the HUBZone program’s enabling legislation, which states, “Notwithstanding any other provision of law…a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price” (emphasis added). In contrast, the enabling legislation for the 8(a) and the SDVOSB programs is discretionary: “A contracting officer may award contracts on the basis of competition restricted to small business concerns owned and controlled by service-disabled veterans,” and “[a contracting] officer shall be authorized in his discretion to let such [8(a)] procurement contract to the [SBA]…” (emphasis added).

The GAO’s decisions called into question the validity of SBA’s regulations on the matter (Title 13 of the Code of Federal Regulations (CFR), Section 126.607, When must a contracting officer set aside a requirement for qualified HUBZone SBCs?, paragraph (b)), which states, “The contracting officer shall set aside the requirement for HUBZone, 8(a) or SDVOSB contracting before setting aside the requirement as a small business set-aside.”

The Office of Management and Budget (OMB) issued a memorandum directing agencies to ignore GAO’s decisions pending the conduct of “an executive branch review of the legal basis underlying the GAO’s decisions” (for more on OMB’s memorandum, see the August 2009 Federal Contracts Perspective article “OMB Issues Five Memos Providing Contracting Guidance”). The DOJ memorandum is the “executive branch review” mentioned by OMB.

In its memorandum, DOJ states, “Having carefully reviewed the relevant legal materials, including SBA’s own views, we conclude that the [Small Business] Act does not compel SBA to prioritize the HUBZone program in the manner GAO determined to be required. In our view, SBA’s regulations permissibly authorize contracting officers to exercise their discretion to choose among the three programs in setting aside contracts to be awarded to qualified small business concerns.”

DOJ does clarify the misconception that the SBA’s regulations require “parity” among the three programs: “The SBA’s regulations do not expressly provide for parity of treatment among the 8(a), HUBZone, or SDVOSB programs. Rather, by their plain terms, the regulations [i.e., 13 CFR 126.607(b)] require that the contracting officers prioritize these programs collectively by giving consideration to the group of them before a contracting officer may set aside an opportunity for small businesses generally and before the contracting officer may make the contract otherwise available…The regulations do not, therefore, single out one program for the kind of prioritization over the other two that the GAO decisions conclude is mandated under the HUBZone statute.”



FAC 2005-36 Tidies Up Some Loose Ends

Federal Acquisition Circular (FAC) 2005-36 tidies up the Federal Acquisition Regulation (FAR) with six small rules, the most significant of which is the inclusion of two clauses in time-and-material (T&M) and labor-hour (LH) contracts for services.



Three FAR Changes Proposed

Three rules were proposed in August that would revise the FAR regarding Buy American Act nonavailable articles, contract closeout procedures, and government property language.



GSA Establishes Mentor-Protégé Program

The General Services Administration (GSA) is implementing a mentor-protégé program to encourage GSA prime contractors to assist small business, including veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business, in enhancing their capabilities to perform contracts and subcontracts for GSA and other federal agencies.

GSA is adding GSA Acquisition Regulation (GSAR) Subpart 519.70, GSA Mentor-Protégé Program, which provides the following:

Twelve respondents submitted comments in response to the proposed rule. In response to those comments, the following are the changes made to the proposed rule when it became final:

For more on the proposed rule, see the July 2008 Federal Contracts Perspective article “GSAR Undergoing Rewrite.”

Retraction of Two Nonmanufacturer Waivers Proposed

The Small Business Administration (SBA) is proposing to retract two nonmanufacturer rule waivers: (1) radio telephones, (radio and television broadcasting and wireless communications equipment manufacturing), Product Service Code (PSC) 5805, under North American Industry Classification System (NAICS) code 334220, because of the discovery of a small business manufacturer; and (2) liquid propellants – petroleum base, PSC 9130, under NAICS code 324110, because the Defense Energy Support Center (DESC) was unaware of SBA’s intent to grant the nonmanufacturer rule waiver, and DESC has awarded prime contracts to, or received offers from, multiple small business refiners within the past 24 months (see the July 2009 Federal Contracts Perspective article “One Nonmanufacturer Waiver Approved, One Proposed”).

Comments and source information on either of these proposed retractions must be submitted no later than August 19, 2009, to the Small Business Administration, Office of Government Contracting, 409 3rd Street, SW., Suite 8800, Washington, DC 20416.



Labor Proposes Employee Rights Notification

The Department of Labor (DOL) is proposing rules to implement President Obama’s Executive Order 13496, Notification of Employee Rights Under Federal Labor Laws, which directs that a clause be included in all contracts exceeding the simplified acquisition threshold ($100,000), and all subcontracts of such contracts, that requires the contractor (or subcontractor) “to post a notice, of such size and in such form, and containing such content as the Secretary of Labor shall prescribe, in conspicuous places in and about its plants and offices where employees covered by the National Labor Relations Act engage in activities relating to the performance of the contract...” (for more on Executive Order 13496, see the March 2009 Federal Contracts Perspective article “Obama Issues Four Labor-Related Executive Orders”).

The proposed rule would establish the new regulations in Title 29 of the Code of Federal Regulations as Part 471, Obligations of Federal Contractors and Subcontractors; Notification of Employee Rights Under Federal Labor Laws (29 CFR Part 471).

The rule would prescribe the text of the required contract clause (which is specified in Section 2 of Executive Order 13496, and would be incorporated into the new regulations as Appendix A of 29 CFR Part 471), and the size, form, and content of the notice that must be posted by a contractor (which will be available at http://www.olms.dol.gov). The contract clause would be required to be included in every government contract, except for collective bargaining agreements and contracts for purchases under the simplified acquisition threshold, and except in those cases in which the Secretary of Labor exempts a contracting department or agency with respect to particular contracts or subcontracts or class of contracts or subcontracts. In addition, the new regulations would address sanctions, penalties, and remedies that may be imposed if the contractor or subcontractor fails to comply with its obligations under Executive Order 13496 and the implementing regulations at 29 CFR Part 471.

Comments on the proposed rule must be submitted no later than September 2, 2009, by either of the following methods: (1) Federal eRulemaking portal at http://www.regulations.gov; or (2) by mail to: Denise M. Boucher, Director of the Office of Policy, Reports and Disclosure, Office of Labor-Management Standards, U.S. Department of Labor, 200 Constitution Avenue, NW, Room N-5609, Washington, DC 20210. Identify all comments by referring to “1215-AB70.”

GSAR Definitions Revised

GSA is updating the definitions that are used in more than one place in the GSAR by revising GSAR 502.101, Definitions of Words and Terms, to reflect the merger of the Federal Technology Service and Federal Supply Service; creation of the Federal Acquisition Service; and deletion of the title Deputy Associate Administrator of Acquisition Policy, and introduction of Deputy Chief Acquisition Officer. No additional definitions were added.



DHS Places Restrictions on Textile Acquisitions

The Department of Homeland Security (DHS) is adding Homeland Security Acquisition Regulation (HSAR) Part 3025, Foreign Acquisition, and HSAR 3052.225-70, Requirement for Use of Certain Domestic Commodities, to implement Section 604 of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), which limits DHS’ acquisition of certain clothing and other textile items directly related to the national security interests of the United States if such items are not domestically grown, reprocessed, reused, or produced in the United States.

To implement Section 604, DHS is adding HSAR Part 3025, consisting of HSAR Subpart 3025.70, American Recovery and Reinvestment Act Restrictions on Foreign Acquisition. HSAR 3025.7002, Restrictions on Clothing, Fabrics, and Related Items, prohibits contracting officers from acquiring, either as end products or components, any of the following items if the item is directly related to the national security interests of the United States and the item has not been grown, reprocessed, reused, or produced in the United States:

HSAR 3025.7002-2, Exceptions, lists the following exceptions to the Section 604 prohibitions:

HSAR 3052.225-70 incorporates restrictions and exceptions for inclusion in solicitations, exercises of an option, contract modifications that add new items (or that make a cardinal change), and contracts with a value exceeding the simplified acquisition threshold when procuring any item covered under HSAR 3025.7002-1.

Comments on this interim rule must be submitted no later than September 16, 2009, by either of the following methods: (1) Federal eRulemaking portal at http://www.regulations.gov; or (2) by mail to: Department of Homeland Security, Office of the Chief Procurement Officer, Acquisition Policy and Legislation Branch, ATTN: Jeremy Olson, 245 Murray Drive, Bldg. 410 (RDS), Washington, DC 20528. Identify all comments by referring to “DHS Docket Number DHS-2009-0081.”



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