FEDERAL CONTRACTS PERSPECTIVE
Federal Acquisition Developments, Guidance, and Opinions
Vol. XI, No. 11
SBA Establishes Women-Owned Small Business Contracting Program
SBA Increases Size Standards in 69 Industries
Eight More Biobased Products Designated
GTSI Suspended, Reinstated
The DFARS Continues to Metamorphose
Foreign Exemption to CAS Proposed for Removal
SBA Establishes Women-Owned Small Business
Eleven years after enactment of the Small Business Reauthorization Act of 2000 (Public Law 106-554), the Small Business Administration (SBA) finally implemented Section 811, Procurement Program for Women-Owned Small Business Concerns, which authorized contracting officers to restrict competition to eligible women-owned small businesses (WOSBs). The SBA’s WOSB contracting program permits contracting officers to set-aside acquisitions in 83 industries for exclusive participation by WOSBs and “economically disadvantaged WOSBs” (EDWOSBs). This program will help agencies attain the governmentwide 5% WOSB contracting goal, a goal the government has not been able to achieve.
It took SBA six years to propose a WOSB program, but the program would have restricted the program to four industries in which SBA considered WOSBs to be underrepresented with regard to federal procurement: North American Industry Classification System (NAICS) codes 3328, Coating, Engraving, Heat Treating, and Allied Activities; 3371, Household and Institutional Furniture and Kitchen Cabinet Manufacturing; 4412, Other Motor Vehicle Dealers; and 9281, National Security and International Affairs. In addition, an agency would have had to determine that it had taken part in discrimination against women in those four industries before it could set aside an acquisition for WOSBs.
This did not go over very well with the public – there were 1,720 comments, and 1,591 of those comments recommended that the proposed rule be withdrawn because they believed women had suffered discrimination in more than those four industries, and the majority of those against the proposed rule felt that agencies were not about to declare that they had discriminated against women.
The rule was subsequently revised to increase the number of industries covered by the WOSB program to 32, but the revised rule retained the requirement for agencies to make a determination that they had engaged in discrimination against women. SBA received 38 comments on the revised rule, and it decided to expand the number of covered industries to 83 and delete the requirement for agencies to execute discrimination determinations. This proposal received 998 comments, but almost all of them supported the changes, commended the SBA for its efforts, and urged the SBA to expeditiously promulgate final regulations since WOSBs have been waiting eleven years for the program.
Now, SBA has finalized the WOSB program in Title 13 of the Code of Federal Regulations (CFR), Part 127, Women-Owned Small Business Federal Contract Assistance Procedures. The regulations go into effect February 4, 2011.
The following are the key provisions of 13 CFR Part 127:
- Section 127.102, What are the definitions of the terms used in this part?, defines WOSBs and EDWOSBs as follows:
- “WOSB means a concern that is small pursuant to Part 121 of this chapter [Small Business Size Regulations], and that is at least 51% owned and controlled by one or more women who are citizens in accordance with Sections 127.200 [What are the requirements a concern must meet to qualify as an EDWOSB or WOSB?], 127.201 [What are the requirements for ownership of an EDWOSB and WOSB?] and 127.202 [What are the requirements for control of an EDWOSB or WOSB?].”
- “Economically Disadvantaged WOSB (EDWOSB) means a concern that is small pursuant to Part 121 of this chapter and that is at least 51% owned and controlled by one or more women who are citizens and who are economically disadvantaged in accordance with Sections 127.200, 127.201, 127.202 and 127.203 [What are the rules governing the requirement that economically disadvantaged women must own EDWOSBs?]. An EDWOSB automatically qualifies as a WOSB.”
- Section 127.202, What are the requirements for control of an EDWOSB or WOSB?, states, “A woman, or in the case of an EDWOSB an economically disadvantaged woman, must hold the highest officer position in the concern and must have managerial experience of the extent and complexity needed to run the concern…The woman or economically disadvantaged woman who holds the highest officer position of the concern must manage it on a full-time basis and devote full-time to the business concern during the normal working hours of business concerns in the same or similar line of business. The woman or economically disadvantaged woman who holds the highest officer position may not engage in outside employment that prevents her from devoting sufficient time and attention to the daily affairs of the concern to control its management and daily business operations.”
- Section 127.203, What are the rules governing the requirement that economically disadvantaged women must own EDWOSBs?, states, “a woman is economically disadvantaged if she can demonstrate that her ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business. SBA does not take into consideration community property laws when determining economic disadvantage when the woman has no direct, individual or separate ownership interest in the property…In order to be considered economically disadvantaged, the woman’s personal net worth must be less than $750,000, excluding her ownership interest in the concern and her equity interest in her primary personal residence…The personal financial condition of the woman claiming economic disadvantage, including her personal income for the past three years (including bonuses, and the value of company stock given in lieu of cash), her personal net worth and the fair market value of all of her assets, whether encumbered or not, will be considered in determining whether she is economically disadvantaged…SBA may consider a spouse’s financial situation in determining a woman's access to credit and capital…When considering a woman’s personal income, if the adjusted gross yearly income averaged over the three years preceding the certification exceeds $350,000, SBA will presume that she is not economically disadvantaged.”
- Section 127.300, How is a concern certified as an EDWOSB or WOSB?, requires WOSBs and EDWOSBs to be registered in the Central Contractor Registration (CCR) (https://www.bpn.gov/ccr/default.aspx), have a current representation posted on the Online Representations and Certifications Application (ORCA) (https://orca.bpn.gov/) that it qualifies as an EDWOSB or WOSB, and have provided the required documents to the WOSB Program Repository, or if the repository is unavailable, be prepared to submit the documents to the contracting officer if selected as the apparent successful offeror. These required documents include certifications of eligibility issued by the U.S. Department of Transportation’s (DOT) Disadvantaged Business Enterprise (DBE) Program, or by the SBA as an 8(a) business development participant. If the WOSB is not certified as eligible by a third-party (such as DOT or SBA), it must provide: (1) birth certificates, naturalization papers, or unexpired passports for owners who are women; (2) a copy of the joint venture agreement, if applicable; (3) for limited liability companies, articles of organization and operating agreements; (4) for corporations, articles of incorporation and any amendments; (ii) by-laws and any amendments; (iii) all issued stock certificates signed in accordance with the by-laws; (iv) stock ledger; and (v) voting agreements, if any; (5) for partnerships, the partnership agreement and any amendments; (6) for sole proprietorships (and corporations, limited liability companies and partnerships if applicable), the assumed/fictitious name certificate(s); and (7) a signed copy of the Women-Owned Small Business Program Certification – WOSBs. If the EDWOSB is not certified by a third party, it must provide the documents required of WOSBs and the following: (1) SBA Form 413, Personal Financial Statement (available at http://www.sba.gov/tools/Forms/index.html), for each woman claiming economic disadvantage; and (2) a signed copy of the Women-Owned Small Business Program Certification – EDWOSBs.
- Section 127.503, When is a contracting officer authorized to restrict competition under this part?, states that a contracting officer may restrict competition to EDWOSBs for requirements in industries designated by SBA as underrepresented if the contracting officer has a reasonable expectation based on market research that: (1) two or more EDWOSBs will submit offers for the contract; (2) the anticipated award price of the contract (including options) does not exceed $5,000,000, in the case of a contract assigned a North American Industry Classification System (NAICS) code for manufacturing, or $3,000,000, in the case of all other contracts; and (3) contract award may be made at a fair and reasonable price. It goes on to state that a contracting officer may restrict competition to WOSBs for requirements in industries designated by SBA as substantially underrepresented if the contracting officer has a reasonable expectation based on market research that: (1) two or more WOSBs will submit offers for the contract; (2) the anticipated award price of the contract (including options) does not exceed $5,000,000, in the case of a contract assigned a NAICS code for manufacturing, or $3,000,000, in the case of all other contracts; and (3) contract award may be made at a fair and reasonable price.
Section 127.503(d)(2)(i) states that there is no order of precedence among the 8(a) Business Development, HUBZone, service-disabled veteran-owned small business, or WOSB programs – a contracting officer must consider setting aside an acquisition under any of these programs before setting the acquisition aside for small businesses. (NOTE: For more on “parity” among the small business programs, see the October 2010 Federal Contracts Perspective article “Parity Among Small Business Programs Mandated by Statute.”)
- The following are the 45 industries in which WOSBs are underrepresented and for which contracting officers can set-aside acquisitions for EDWOSBs (by four-digit NAICS code):
- 2213 – Water, Sewage and Other Systems
- 2361 – Residential Building Construction
- 2371 – Utility System Construction
- 2381 – Foundation, Structure, and Building Exterior Contractors
- 2382 – Building Equipment Contractors
- 2383 – Building Finishing Contractors
- 2389 – Other Specialty Trade Contractors
- 3149 – Other Textile Product Mills
- 3159 – Apparel Accessories and Other Apparel Manufacturing
- 3219 – Other Wood Product Manufacturing
- 3222 – Converted Paper Product Manufacturing;
- 3321 – Forging and Stamping
- 3323 – Architectural and Structural Metals Manufacturing
- 3324 – Boiler, Tank, and Shipping Container Manufacturing
- 3333 – Commercial and Service Industry Machinery Manufacturing
- 3342 – Communications Equipment Manufacturing
- 3345 – Navigational, Measuring, Electromedical, and Control Instruments Manufacturing
- 3346 – Manufacturing and Reproducing Magnetic and Optical Media
- 3353 – Electrical Equipment Manufacturing
- 3359 – Other Electrical Equipment and Component Manufacturing
- 3369 – Other Transportation Equipment Manufacturing
- 4842 – Specialized Freight Trucking
- 4881 – Support Activities for Air Transportation
- 4884 – Support Activities for Road Transportation
- 4885 – Freight Transportation Arrangement
- 5121 – Motion Picture and Video Industries
- 5311 – Lessors of Real Estate
- 5413 – Architectural, Engineering, and Related Services
- 5414 – Specialized Design Services
- 5415 – Computer Systems Design and Related Services
- 5416 – Management, Scientific, and Technical Consulting Services
- 5419 – Other Professional, Scientific, and Technical Services
- 5611 – Office Administrative Services
- 5612 – Facilities Support Services
- 5614 – Business Support Services
- 5616 – Investigation and Security Services
- 5617 – Services to Buildings and Dwellings
- 6116 – Other Schools and Instruction
- 6214 – Outpatient Care Centers
- 6219 – Other Ambulatory Health Care Services
- 7115 – Independent Artists, Writers, and Performers
- 7223 – Special Food Services
- 8111 – Automotive Repair and Maintenance
- 8113 – Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance
- 8114 – Personal and Household Goods Repair and Maintenance
(A list of the industries further broken down into six-digit NAICS codes is available at http://sba.gov/sites/default/files/Current_Size_Standards_Table.pdf.)
- The following are the 38 industries in which WOSBs are substantially underrepresented and for which contracting officers can set-aside acquisitions for WOSBs:
- 2372 – Land Subdivision
- 3152 – Cut and Sew Apparel Manufacturing
- 3231 – Printing and Related Support Activities
- 3259 – Other Chemical Product and Preparation Manufacturing
- 3328 – Coating, Engraving, Heat Treating, and Allied Activities
- 3329 – Other Fabricated Metal Product Manufacturing
- 3371 – Household and Institutional Furniture and Kitchen Cabinet Manufacturing
- 3372 – Office Furniture (including Fixtures) Manufacturing
- 3391 – Medical Equipment and Supplies Manufacturing
- 4841 – General Freight Trucking
- 4889 – Other Support Activities for Transportation
- 4931 – Warehousing and Storage
- 5111 – Newspaper, Periodical, Book, and Directory Publishers
- 5112 – Software Publishers
- 5171 – Wired Telecommunications Carriers
- 5172 – Wireless Telecommunications Carriers (except Satellite)
- 5179 – Other Telecommunications
- 5182 – Data Processing, Hosting, and Related Services
- 5191 – Other Information Services
- 5312 – Offices of Real Estate Agents and Brokers
- 5324 – Commercial and Industrial Machinery and Equipment Rental and Leasing
- 5411 – Legal Services
- 5412 – Accounting, Tax Preparation, Bookkeeping, and Payroll Services
- 5417 – Scientific Research and Development Services
- 5418 – Advertising, Public Relations, and Related Services
- 5615 – Travel Arrangement and Reservation Services
- 5619 – Other Support Services
- 5621 – Waste Collection
- 5622 – Waste Treatment and Disposal
- 6114 – Business Schools and Computer and Management Training
- 6115 – Technical and Trade Schools
- 6117 – Educational Support Services
- 6242 – Community Food and Housing, and Emergency and Other Relief Services
- 6243 – Vocational Rehabilitation Services
- 7211 – Traveler Accommodation
- 8112 – Electronic and Precision Equipment Repair and Maintenance
- 8129 – Other Personal Services
- 8139 – Business, Professional, Labor, Political, and Similar Organizations
(A list of the industries further broken down into six-digit NAICS codes is available at http://sba.gov/sites/default/files/Current_Size_Standards_Table.pdf.)
To aid small businesses interested in learning about the WOSB program, including eligibility requirements, federal contracting opportunities, and how the program works in general, SBA has issued the “Small Entity Compliance Guide to the WOSB Program.”
To follow the history of the SBA’s WOSB program development, see the July 2006 Federal Contracts Perspective article “SBA Proposes Women-Owned Small Business Program”; the January 2008 Federal Contracts Perspective article “SBA Proposes Set-Aside Program for Women-Owned Small Businesses”; the November 2008 Federal Contracts Perspective article “Women-Owned Business Assistance Program Instituted”; and the April 2010 Federal Contracts Perspective article “SBA Reproposes Women-Owned Small Business Program.”
SBA Increases Size Standards in 69 Industries
The SBA is increasing 46 small business size standards for industries in North American Industry Classification System (NAICS) Sector 44-45, Retail Trade; five industries in NAICS Sector 72, Accommodation and Food Services; and 18 industries in NAICS Sector 81, Other Services. These actions are taken as part of its ongoing initiative to review all size standards.
The following are the previous and revised size standards (in millions of dollars):
|Sectors 44-45, Retail Trade||Previous|| Revised|
| || || |
|441210, Recreational Vehicle Dealers||7.0||30.0|
|441221, Motorcycle, ATV, and Personal Watercraft Dealers||7.0||30.0|
|441222, Boat Dealers||7.0||30.0|
|441229, Aircraft Dealers, Retail||10.0||25.5|
|441310, Automotive Parts and Accessories Stores||7.0||14.0|
|441320, Tire Dealers||7.0||14.0|
|442110, Furniture Stores||7.0||19.0|
|442299, All Other Home Furnishings Stores||7.0||19.0|
|443111, Household Appliance Stores||9.0||10.0|
|443112, Radio, Television and Other Electronics Stores||9.0||25.5|
|443120, Computer and Software Stores||9.0||25.5|
|443130, Camera and Photographic Supplies Stores||7.0||19.0|
|444110, Home Centers||7.0||35.5|
|444120, Paint and Wallpaper Stores||7.0||25.5|
|444190, Other Building Material Dealers||7.0||19.0|
|444220, Nursery and Garden Centers||7.0||10.0|
|445110, Supermarkets and Other Grocery (except Convenience) Stores||27.0||30.0|
|446110, Pharmacies and Drug Stores||7.0||25.5|
|446120, Cosmetics, Beauty Supplies and Perfume Stores||7.0||25.5|
|446130, Optical Goods Stores||7.0||19.0|
|446191, Food (Health) Supplement Stores||7.0||14.0|
|447190, Other Gasoline Stations||9.0||14.0|
|448110, Men’s Clothing Stores||9.0||10.0|
|448120, Women’s Clothing Stores||9.0||25.5|
|448130, Children’s and Infants’ Clothing Stores||7.0||30.0|
|448140, Family Clothing Stores||9.0||35.5|
|448150, Clothing Accessories Stores||7.0||14.0|
|448190, Other Clothing Stores||7.0||19.0|
|448210, Shoe Stores||9.0||25.5|
|448310, Jewelry Stores||7.0||14.0|
|448320, Luggage and Leather Goods Stores||7.0||25.5|
|451110, Sporting Goods Stores||7.0||14.0|
|451120, Hobby, Toy and Game Stores||7.0||25.5|
|451130, Sewing, Needlework and Piece Goods Stores||7.0||25.5|
|451140, Musical Instrument and Supplies Stores||7.0||10.0|
|451211, Book Stores||7.0||25.5|
|451220, Prerecorded Tape, Compact Disc and Record Stores||7.0||30.0|
|452111, Department Stores (except Discount Department Stores)||27.0||30.0|
|452990, All Other General Merchandise Stores||11.0||30.0|
|453210, Office Supplies and Stationery Stores||7.0||30.0|
|453910, Pet and Pet Supplies Stores||7.0||19.0|
|453930, Manufactured (Mobile) Home Dealers||13.0||14.0|
|454111, Electronic Shopping||25.0||30.0|
|454112, Electronic Auctions||25.0||35.5|
|454113, Mail Order Houses||25.0||35.5|
|454210, Vending Machine Operators||7.0||10.0|
| || || |
|Sector 72, Accommodation and Food Services||Previous|| Revised|
| || || |
|721110, Hotels (except Casino Hotels) and Motels||7.0||30.0|
|721120, Casino Hotels||7.0||30.0|
|722211, Limited Service Restaurants||7.0||10.0|
|722310, Food Service Contractors||20.5||35.5|
| || || |
|Sector 81, Other Services||Previous|| Revised|
| || || |
|811122, Automotive Glass Replacement Shops||7.0||10.0|
|811213, Communication Equipment Repair and Maintenance||7.0||10.0|
|811219, Other Electronic and Precision Equipment Repair and Maintenance||7.0||19.0|
|811412, Appliance Repair and Maintenance||7.0||14.0|
|812191, Diet and Weight Reducing Centers||7.0||19.0|
|812220, Cemeteries and Crematories||7.0||19.0|
|812320, Dry-cleaning and Laundry Services (except Coin-Operated)||4.5||5.0|
|812331, Linen Supply||14.0||30.0|
|812332, Industrial Launderers||14.0||35.5|
|812921, Photo Finishing Laboratories (except One-Hour)||7.0||19.0|
|812922, One-Hour Photo Finishing||7.0||14.0|
|812930, Parking Lots and Garages||7.0||35.5|
|813211, Grantmaking Foundations||7.0||30.0|
|813212, Voluntary Health Organizations||7.0||25.5|
|813219, Other Grant Making and Giving Services||7.0||35.5|
|813311, Human Rights Organizations||7.0||25.5|
|813312, Environment, Conservation and Wildlife Organizations||7.0||14.0|
|813920, Professional Organizations||7.0||14.0|
In addition, the size standard for NAICS 441110, New Car Dealers, is changed from $29.0 million to 200 employees because the high values and sale prices of new cars make a receipts-based size standard impractical and inappropriate for new car dealers.
Fourteen respondents submitted comments on the proposed changes to these NAICS sectors. In response to the comments, the New Car Dealers size standard was changed from the proposed $30.0 million to 200 employees; NAICS 441221, Motorcycle, ATV, and Personal Watercraft Dealers, was changed from the proposed $14.0 million to $30.0 million; and NAICS 41222, Boat Dealers, was changed from the proposed $14.0 million to $30.0 million.
Along with the proposed size standard changes, SBA published its “Size Standards Methodology” and asked for comments. No comments were submitted on the methodology.
For more on the proposed changes, see the November 2009 Federal Contracts Perspective article “SBA Proposes Small Business Size Standard Increases.”
Eight More Biobased Products Designated
The United States Department of Agriculture (USDA) is adding eight sections to Title 7 of the Code of Federal Regulations (CFR), Part 2902, Guidelines for Designating Biobased Products for Federal Procurement (7 CFR Part 2902), to add eight more biobased products to be given preference in federal procurements as provided under Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA), and to specify the minimum level of biobased content to be contained in the procured products.
The following are the new designated items and their Title 7 section numbers:
|2902.52, Disposable tableware|
|2902.53, Expanded polystyrene foam recycling products|
|2902.54, Heat transfer fluids|
|2902.55, Ink removers and cleaners|
|2902.56, Mulch and compost materials|
|2902.57, Multipurpose lubricants|
|2902.59, Topical pain relief products|
|2902.60, Turbine drip oils|
The USDA proposed adding nine items to the biobased program (see the March 2010 Federal Contracts Perspective article “USDA Proposes Another Nine Biobased Items”), and five respondents submitted comments. In response to several technical and policy issues raised by the respondents regarding office paper that need to be considered and resolved, USDA has withdrawn office paper from this rule. In addition, USDA has clarified the definition of disposable tableware by adding the italicized words: “products made from, or coated with, plastic resins and used in dining, such as drink ware and dishware, including but not limited to cups, plates, bowls, and serving platters, and that are designed for one-time use. This item does not include disposable cutlery, which is a separate item.”
As a general rule, procuring agencies must purchase biobased products within these designated items where the purchase price of the procurement item exceeds $10,000 or where the quantity of such items or functionally equivalent items purchased over the preceding fiscal year equaled $10,000 or more, unless products within a designated item: (1) are not reasonably available within a reasonable period of time; (2) fail to meet the reasonable performance standards of the procuring agencies; or (3) are available only at an unreasonable price. The $10,000 threshold applies to federal agencies as a whole and not to agency subgroups such as regional offices or subagencies of the larger federal department or agency.
For more information on the biobased program and all the products in the program, go to http://www.biopreferred.gov/. Also see the February 2005 Federal Contracts Perspective article “USDA Publishes Biobased Products Guidelines”; the August 2005 Federal Contracts Perspective article "Agriculture Proposes Six Biobased Items"; the April 2006 Federal Contracts Perspective article “USDA Designates Six Biobased Products for Procurement”; the September 2006 Federal Contracts Perspective article “USDA Proposes 20 More Biobased Products”; the November 2006 Federal Contracts Perspective article “10 More Biobased Items Proposed”; the June 2008 Federal Contracts Perspective article “USDA Adds 27 Items to Biobased Products List, Exempts DOD and NASA from Requirements”; the November 2008 Federal Contracts Perspective article "Nine More Biobased Items Proposed"; and the November 2009 Federal Contracts Perspective article “USDA Adds Nine More Biobased Items.”
GTSI Suspended, Reinstated
GTSI Corporation, a large systems integrator and information technology (IT) services provider, was suspended on October 1 by the Small Business Administration (SBA) from government contracting for using “fronts” to obtain government contracts reserved for small businesses. Three weeks later, it was reinstated after agreeing to the dismissal of its chief executive officer, general counsel, and the suspension of three other employees; agreeing to cooperate with ongoing investigations; and implementing corrective actions.
GTSI’s problems involve the Department of Homeland Security’s (DHS) FirstSource indefinite-delivery/indefinite-quantity (IDIQ) contracts for IT hardware, software, and associated services. FirstSource is reserved for small businesses. One of the clauses in the contract, FAR 52.219-14, Limitations on Subcontracting, states, “By submission of an offer and execution of a contract, the offeror/contractor agrees that in performance of the contract in the case of a contract for: (1) Services (except construction). At least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern; [and] (2) Supplies (other than procurement from a nonmanufacturer of such supplies). The concern shall perform work for at least 50 percent of the cost of manufacturing the supplies, not including the cost of materials.”
GTSI was a subcontractor for two FirstSource prime contractors. However, those two contractors had “little or no involvement in the performance of the contracts, in direct contravention of applicable laws and regulations regarding the award of small business contracts. The evidence shows that GTSI was an active participant in a scheme that resulted in contracts set-aside for small businesses being awarded to ineligible contractors, and with contracts not being performed in accordance with applicable law, regulations, and contract terms.”
In addition, SBA claimed that “(a) GTSI represented itself as a prime contractor to third parties; (b) employees of GTSI obtained email addresses from the prime contractor, so that employees of GTSI could appear to be employees of the prime contractor while conducting business with the government; (c) GTSI prepared proposals and sent quotes to the government as if it were the prime responding to bid requests sent to the prime contractor; and (d) GTSI created invoices and placed the letterhead of the prime contractor on the invoice before submitting it to the government, so the invoice would appear to have been created by the prime contractor rather than by GTSI.” In response to these actions, SBA suspended GTSI indefinitely from receiving contracts in accordance with FAR Subpart 9.4, Debarment, Suspension, and Ineligibility.
Then, on October 19, SBA lifted its suspension of GTSI, with conditions:
- Scott Friedlander, president and chief executive officer of GTSI, and a member of the GTSI board of directors, had to resign.
- Charles De Leon, senior vice president and general counsel of GTSI, had to resign.
- Tom Kennedy, vice president of civilian sales and general manager, was suspended from employment.
- Scott Schmader, senior sales manager, was suspended from employment.
- Patrick Berg, program manager, was suspended from employment.
- GTSI will provide all information and documents requested by the SBA.
- GTSI will not obtain or attempt to obtain any new federal contracts or subcontracts, whether directly or indirectly, which is intended to benefit small business, including task orders and options on existing contracts.
- GTSI will retain an independent monitor who will monitor GTSI’s compliance with the agreement. The monitor will have unfettered and immediate access to all GTSI documents, information, and personnel. The monitor will report to and be responsible to the SBA.
- GTSI will adopt, implement, and maintain a self-governance program that includes a business ethics program that covers all employees. The self-governance program will include the designation of an ethics officer and the development of a written code of business ethics.
- GTSI will cooperate, in any government inquiry, investigation, or prosecution relating to its practices and conduct while performing a government contract or subcontract.
- GTSI will report to the SBA and monitor any suspected breach or any misconduct that management has reasonable grounds to believe may constitute a violation of criminal or civil law. This includes misconduct by GTSI and any of GTSI’s subcontractors, prime contractors, suppliers, and employees.
- GTSI waives all claims, demands, or requests for monies from the government related to the October 1 suspension.
EDITOR’S NOTE: This might be a precursor to a widespread crackdown on large businesses that use small businesses as fronts to obtain government contracts – a practice that is allegedly widespread throughout the federal small business contracting program.
The DFARS Continues to Metamorphose
The Department of Defense (DOD) continued to issue rules revising the Defense FAR Supplement (DFARS) and the overall DOD acquisition process – seven rules and one DFARS deviation during the month of October. In addition, DOD proposed one more change to the DFARS.
- Continuation of Essential Contractor Services: This finalizes, with changes, the interim rule that added DFARS Subpart 237.76, Continuation of Essential Contractor Services, and a new clause DFARS 252.237-7023, Continuation of Essential Contractor Services, to ensure that essential contractor services are not interrupted.
Two respondents submitted comments on the interim rule and, as a result, the following changes are made in the final rule:
- The term “functional commander or equivalent” in the definition of “essential contractor services” is revised to “functional commander or civilian equivalent” because there was concern how non-military offices would interpret “equivalent” since they don’t have “functional commanders.” In addition, the definition of “mission-essential functions” is revised to add “functional commander or civilian equivalent”: “mission-essential functions means those organizational activities that must be performed under all circumstances to achieve DOD component missions or responsibilities, as determined by the appropriate functional commander or civilian equivalent.” Finally, these definitions have been moved from DFARS 237.7601, Definitions, to DFARS 252.237-7023, Continuation of Essential Contractor Services (titled “Continuation of Mission-Essential Functions” in the interim rule).
- Paragraphs (a) and (b) of DFARS 237.7602, Policy, have been revised to clarify that it is the role of the contracting officer, not the requiring activity, to provide direction to the contractor.
- DFARS 237.7602(b) is revised from requiring that contractors “have a written plan” for government-determined essential contractor services to “provide a written plan.”
- DFARS 252.237-7023(c)(2) is revised to require the contractor to provide all plan updates to the contracting officer for approval.
- DFARS 252.237-7023(d)(1) is added, which states, “Notwithstanding any other clause of this contract, the contractor shall be responsible to perform those services identified as essential contractor services during crisis situations (as directed by the contracting officer), in accordance with its Mission-Essential Contractor Services Plan.”
- DFARS 252.237-7023(f), which addresses changes, is revised to add “delivery schedule, or both” to the last sentence, so that it reads: “The parties shall negotiate an equitable price adjustment to the contract price, delivery schedule, or both as soon as is practicable after receipt of the contractor’s proposal.
- A new provision, DFARS 252.237-7024, Notice of Continuation of Essential Contractor Services, has been added to require the submission of the plan as part of the offeror’s proposal, and it will be evaluated as part of the technical evaluation of offers.
For more on the interim rule, see the April 2010 Federal Contracts Perspective article “Multitude of DOD Regulations and Deviations Issued.”
- New Trade Agreements Thresholds: This finalizes, without changes, the interim rule that amends the prescriptions at DFARS 225.1101, Acquisition of Supplies, and DFARS 225.7503, Contract Clauses, to reflect the increased thresholds for application of the trade agreements.
The interim rule amended: (1) DFARS 225.1101 by removing “$194,000” and replacing it with “$203,000” in paragraph (11)(i) introductory text; and by removing “$67,826” and replacing it with $70,079” in paragraphs (11)(i)(A) and (11)(i)(B); and (2) DFARS 225.7503 by removing “$7,443,000” and replacing it with “$7,804,000” in paragraph (a); by removing $7,443,000” and replacing it with “$7,804,000” in paragraph (b); and by removing “$8,817,449” and replacing it with “$9,110,318” in paragraph (b).
For more on the interim rule, see the July 2010 Federal Contracts Perspective article “A Plethora of Changes to DFARS in June.”
- Electronic Subcontracting Reporting System: This interim rule amends the DFARS to conform to the recent FAR change in FAC 2005-42 that reflected the use of the Electronic Subcontracting Reporting System (eSRS) (http://www.esrs.gov), rather than Standard Form 294, Subcontract Report for Individual Contracts, and Standard Form 295, Summary Subcontract Report, for submission of small business subcontract reports. This interim rule provides DOD-specific policy and procedures related to the eSRS. (EDITOR’S NOTE: For more on FAC 2005-42, see the July 2010 Federal Contracts Perspective article “FAC 2005-42 Addresses Disclosure of Noncompetitive Contract Justifications, Recovery Act.”)
Comments on this interim rule must be submitted no later than December 27, 2010, identified as “DFARS Case 2009-D002,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: email@example.com; (3) fax: 703-602-0350; or (4) mail: Defense Acquisition Regulations Council, Attn: Cassandra R. Freeman, OUSD (AT&L) DPAP (DARS), 3060 Defense Pentagon, Room 3B855, Washington, DC 20301-3060.
- Continuation of Current Contracts: This final rule removes DFARS 209.405-1, Continuation of Current Contracts, because the limitations on the placement of orders against contracts with contractors that have been debarred, suspended, or proposed for debarment were incorporated in FAR 9.405-1, Continuation of Current Contracts, by FAC 2001-18 (for more on FAC 2001-18, see the January 2004 Federal Contracts Perspective article “FAC 2001-18 Implements New A-E Qualifications Form, Electronic Procurement Data Reporting”). Because DFARS 209.405-1 is redundant to FAR 9.405-1, it is removed.
- Safety of Facilities, Infrastructure, and Equipment for Military Operations: This interim rule adds DFARS 246.270, Safety of Facilities, Infrastructure, and Equipment for Military Operations, and the identically titled clause at DFARS 252.246-7004 to implement Section 807 of the National Defense Authorization Act of 2010 (Public Law 111-84). Section 807 requires that facilities, infrastructure, and equipment that are intended for use by military or civilian personnel of the DOD, in current or future military operations, be inspected for safety and habitability prior to use, and that such facilities are brought into compliance with generally accepted standards for the safety and health of personnel to the maximum extent practicable consistent with the requirements of military operations and the best interests of DOD to minimize the safety and health risk posed to such personnel.
DFARS 246.270-2, Policy, provides that “contracts (including task and delivery orders) for the construction, installation, repair, maintenance, or operation of facilities, infrastructure, and equipment configured for occupancy, including but not limited to, existing host nation facilities, new construction, and relocatable buildings acquired for use by DOD military or civilian personnel, shall require a pre-occupancy safety and habitability inspection.” Covered contracts and orders will require compliance with the Unified Facilities Criteria (UFC) 1-200-01 and its referenced standards to meet generally accepted standards for fire protection, structural integrity, electrical systems, plumbing, water treatment, waste disposal, and telecommunications networks. Facilities, infrastructure, and equipment shall be inspected prior to use for compliance with UFC 1-200-01 to ensure safety and habitability.
DFARS 252.246-7004 reflects the requirements specified in DFARS 246.270-2.
Comments on this interim rule must be submitted no later than December 28, 2010, identified as “DFARS Case 2009-D029,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: firstname.lastname@example.org; (3) fax: 703-602-0350; or (4) mail: Defense Acquisition Regulations Council, Attn: Mary Overstreet, OUSD (AT&L) DPAP (DARS), 3060 Defense Pentagon, Room 3B855, Washington, DC 20301-3060.
- Defense Cargo Riding Gang Members: This interim rule amends DFARS Subpart 247.5, Ocean Transportation by U.S.-Flag Vessels, and adds a new clause, DFARS 252.247-7027, Riding Gang Member Requirements, to implement Section 3504 of the National Defense Authorization Act for Fiscal Year 2009 (Public Law 110-417), which addresses requirements that apply to “riding gang members” and DOD-exempted individuals who perform work on U.S.-flag vessels under defense contracts for transportation services.
U.S. law requires the crews aboard U.S.-flag vessels be predominantly U.S. citizens. For many years, foreign nationals have been utilized on U.S.-flag vessels as members of “riding gangs” who perform work beyond standard vessel maintenance and repair while ships are underway. In 2006, Congress prohibited the use of such foreign riding personnel on board vessels that are under contract with the DOD unless the DOD complied with certain limitations. However, the exceptions provided to DOD in 2006 did not match those applicable to other U.S.-flag vessels, so Public Law 110-417 made it clear that the exceptions available to DOD are complete exemptions both from the DOD-specific riding gang limitations and those generally applicable to U.S.-flag vessels.
DFARS 252.247-7027 requires all riding gang members to have holds a valid U.S. Merchant Mariner’s Document or a transportation security card. However, an individual is exempt from this requirement if the individual is on a vessel for purposes other than engaging in the operation or maintenance of the vessel and is “(i) one of the personnel who accompanies, supervises, guards, or maintains unit equipment aboard a ship, commonly referred to as supercargo personnel; (ii) one of the force protection personnel of the vessel; (iii) a specialized repair technician; or (iv) an individual who is otherwise required by the secretary of defense or designee to be aboard the vessel.” These exempt individuals must pass a DOD background check before going aboard the vessel.
Comments on this interim rule must be submitted no later than December 27, 2010, identified as “DFARS Case 2007-D002,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: email@example.com; (3) fax: 703-602-0350; or (4) mail: Defense Acquisition Regulations Council, Attn: Mary Overstreet, OUSD (AT&L) DPAP (DARS), 3060 Defense Pentagon, Room 3B855, Washington, DC 20301-3060.
- Balance of Payments Program Exemption for Commercial Information Technology – Construction Material: This finalizes, without changes, the proposed rule that would amend DFARS 252.225-7044, Balance of Payments Program – Construction Material, and DFARS 252.225-7045, Balance of Payments Program – Construction Material Under Trade Agreements, to implement the exemption from the Balance of Payments Program for construction material that is commercial information technology. This change implements a policy that has been in effect since Fiscal Year 2004 that the exemption from the Balance of Payments Program applies to supplies or construction material to be used overseas. However, the exemption was only implemented with regard to the acquisition of supplies.
For more on the proposed rule, see the July 2010 Federal Contracts Perspective article “A Plethora of Changes to DFARS in June.”
- Electronic Ordering Procedures: This proposed rule would establish a standard method for the electronic issuance of orders under indefinite-delivery contracts, thus making electronic distribution procedures a routine part of order issuance.
This rule would add DFARS 252.216-70XX, Ordering, which would be used in place of FAR 52.216-18, Ordering, in solicitations and contracts when a definite-quantity contract, a requirements contract, or an indefinite-quantity contract is contemplated. DFARS 252.216-70XX would retain most of the text of FAR 52.216-18 but would add the following as paragraph (c)(1): “If issued electronically, the order is considered ‘issued’ when a copy has been posted to the Electronic Document Access system, and notice has been sent to the contractor.”
Comments on this proposed rule must be submitted no later than November 30, 2010, identified as “DFARS Case 2009-D037,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: firstname.lastname@example.org; (3) fax: 703-602-0350; or (4) mail: Defense Acquisition Regulations Council, Attn: Julian Thrash, OUSD (AT&L) DPAP (DARS), 3060 Defense Pentagon, Room 3B855, Washington, DC 20301-3060.
- Congressional Notification on Significant Contract Terminations Class Deviation: The director of Defense Procurement and Acquisition Policy (DPAP) has authorized contracting officers to deviate from the requirements of DFARS 249.7001, Congressional Notification on Significant Contract Terminations, which requires congressional notification prior to executing any contract termination involving a reduction in employment of 100 or more contractor employees. This deviation applies to contracts performed in Iraq and Afghanistan by entities that are other than United States firms.
Foreign Exemption to CAS Proposed for Removal
The Cost Accounting Standards Board (CASB) is seeking comments on its notice of proposed rule (NPR) to eliminate the exemption from the Cost Accounting Standards (CAS) for contracts executed and performed entirely outside the United States, its territories, and possessions.
The exemption is in paragraph (b)(14) of Title 48 of the Code of Federal Regulations (CFR), Section 9903.201-1, CAS Applicability (the “(b)(14) overseas exemption”). The (b)(14) overseas exemption has been in effect since 1973.
On September 13, 2005, the CASB issued a staff discussion paper inviting comments regarding whether the (b)(14) 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. 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) required 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. In response, the CASB solicited comments and information on whether the (b)(14) overseas exemption should be retained, eliminated, or revised (see the May 2009 Federal Contracts Perspective article “Should Foreign Contracts Be Exempt from CAS?”). The CASB also solicited comments directly from three federal government organizations with a significant volume of contracts performed outside the United States – the DOD, the Department of State (DOS), and the United States Agency for International Development (USAID).
The CASB received comments from seven respondents and from the three government organizations. As a result of the comments, the CASB has concluded that the (b)(14) overseas exemption should be eliminated because: (1) there is no accounting basis for the (b)(14) overseas exemption – the place of contract execution and performance is not germane to the fundamental principles and methods used to account for the costs of contract performance; and (2) the volume of affected contractors and subcontractors to be relatively small.
The CASB is inviting interested parties to “identify, comment and provide information on any issues that they believe are important to the subject. This might include comment on whether there is a need to strengthen the CAS clauses to address the prime contractor’s oversight responsibility for ensuring its subcontractors are compliant with CAS where it is applicable.”
Comments on this NPR must be submitted no later than December 20, 2010, identified as “(b)(14) Overseas Exemption NPR,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: email@example.com; (3) fax: 202-395-5105; or (4) mail: Office of Federal Procurement Policy, ATTN: Raymond J.M. Wong, 725 17th Street, NW, Room 9013, Washington, DC 20503.
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