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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


February 2010
Vol. XI, No. 2

CONTENTS


Proposed DFARS Changes Address Business Systems and Increased Acquisition Thresholds
Mileage Reimbursement Reduced to 50¢/Mile for Autos
President Issues Memo on Tax Delinquent Contractors
Nonmanufacturer Rule Waiver Proposed for Liquified Gases
Second Half of DEAR Proposed for Rewrite
Postal Service Revising Disagreement Resolution
Number of Bid Protests Increased 20% in FY 2009



Proposed DFARS Changes Address Business Systems
and Increased Acquisition Thresholds

Keeping up its torrid pace of the last few months, the Department of Defense (DOD) proposed two important changes to the Defense Federal Acquisition Regulation Supplement (DFARS): one would improve the oversight of six contractor business systems, and the other would adjust many DOD-specific acquisition-related thresholds. Another proposed rule would waive the provisions of the Trade Agreements Act and the Balance of Payments Program for states in central and southern Asia supporting operations in Afghanistan. In addition, two interim rules were finalized, one Federal Acquisition Regulation (FAR) class deviation was issued, two memoranda issuing acquisition policy were issued, and comments are sought on industry’s experience in participating in the Czech Republic’s public defense procurements as it considers entering into a reciprocal defense procurement agreement with the Czech Republic.



Mileage Reimbursement Reduced to 50¢/Mile for Autos

The Federal Travel Regulation (FTR) is amended to decrease the mileage reimbursement rate for use of a privately owned automobile on official travel from 55¢ per mile to 50¢ per mile, and the rate for use of a motorcycle on official travel from 52¢ per mile to 47¢ per mile. Also, GSA is increasing the reimbursement rate for use of a privately owned aircraft from $1.24 per mile to $1.29 per mile. These revised rates are effective for travel performed on or after January 1, 2010. Travel performed before January 1, 2010, will be reimbursed at the earlier rates.

By law, the automobile reimbursement rate cannot exceed the single standard mileage rate established by the Internal Revenue Service (IRS). The IRS announced a new mileage rate for automobiles of 50¢ per mile effective January 1, 2010, so GSA took action to decrease the automobile reimbursement rate as of January 1, 2010.



President Issues Memo on Tax Delinquent Contractors

One year to the day after his inauguration, President Obama issued a memorandum titled “Addressing Tax Delinquency by Government Contractors” to all department and agency heads. The president was concerned about the integrity of the federal acquisition process because “reports by the Government Accountability Office (GAO) state that federal contracts are awarded to tens of thousands of companies with serious tax delinquencies. The total amount in unpaid taxes owed by these contracting companies is estimated to be more than $5 billion.”

Because of this concern, the president is directing the Internal Revenue Service (IRS) to conduct a review of tax certifications in FAR 52.209-5, Certification Regarding Responsibility Matters (the offeror is required to certify that is has or has not “within a three-year period preceding this offer, been notified of any delinquent federal taxes in an amount that exceeds $3,000 for which the liability remains unsatisfied”). The commissioner of the IRS is to report the overall accuracy of the contractors’ certifications to the president within 90 days.

In addition, the president is directing the Office of Management and Budget (OMB), working with the Secretary of the Treasury and other agency heads, “to evaluate practices of contracting officers and debarring officials in response to contractors' certifications of serious tax delinquencies and to provide me, within 90 days, recommendations on process improvements to ensure these contractors are not awarded new contracts, including a plan to make contractor certifications available in a government-wide database, as is already being done with other information on contractors.



Nonmanufacturer Rule Waiver Proposed for Liquified Gases

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for compressed and liquefied gases, North American Industry Classification System (NAICS) code 325120, Product Service Code (PSC) 6830. SBA is inviting the public to comment on this proposed waiver or to provide information on potential small business sources for these products by January 27, 2010, to Amy Garcia, Program Analyst, Small Business Administration, Office of Government Contracting, 409 3rd Street, SW, Suite 8800, Washington, DC 20416.

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/class_waiver.pdf.



Second Half of DEAR Proposed for Rewrite

The Department of Energy (DOE) is proposing to amend Parts 928 through 952 of the DOE Acquisition Regulation (DEAR) to conform it to the FAR, to remove out-of-date coverage, and to update references. However, not all the second-half DEAR parts will be amended – no changes are proposed for DEAR Parts 927, 929, 930, 934, 938, 939, 940, 943, 944, 945, 946, 947, and 948. DOE will propose separate rules for changes to DEAR Parts 927 and 945, respectively.

The following are the significant proposed changes:

Comments on the proposed changes must be submitted no later than February 8, 2010, by any of the following means: (1) eRulemaking Portal: http://www.regulations.gov; (2) e-mail: DEARrulemaking@hq.doe.gov; or (3) mail: U.S. Department of Energy, Office of Procurement and Assistance Management, MA-611, 1000 Independence Avenue, SW, Washington, DC 20585. Identify comments as “DEAR: Subchapters E, F and G and RIN 1991-AB88.”



Postal Service Revising Disagreement Resolution

The U.S. Postal Service (USPS) is revising its regulations governing the supplier disagreement resolution (SDR) process to clarify and explain the purposes of that process, and to remove extraneous and duplicative language.

The USPS’ acquisition regulations are in Title 39 of the Code of Federal Regulations (CFR), Part 601, Purchasing of Property and Services. The USPS is revising 39 CFR 601.107, Initial Disagreement Resolution, and 39 CFR 601.108, SDR [Supplier Disagreement Resolution] Official Disagreement Resolution, which govern the SDR process, to clarify certain SDR procedures.

The following are the proposed changes:



Number of Bid Protests Increased 20% in FY 2009

The Government Accountability Office (GAO) submitted its annual report to Congress for Fiscal Year (FY) 2009, stating that the number of protests filed with it increased by 20% between FY 2008 and 2009, up from 1,652 cases to 1,989 cases. This is the highest number of protests filed with GAO since 1997, when 1,707 protests were filed. However, of these 1,989 cases, 168 are attributable to GAO’s recently expanded bid protest jurisdiction over task orders exceeding $10 million (139 filings), Office of Management and Budget (OMB) Circular A-76 protests (16 filings), and Transportation Security Administration protests (13 filings). These 168 filings represent 50% of the total increase in filings from FY 2008 to FY 2009 (337 filings). (EDITOR’S NOTE: For more on GAO’s expanded bid protest jurisdiction, see the February 2008 Federal Contracts Perspective article “Defense Authorization Act Restricts A-76 Competitions, Extends FAR Subpart 13.5,” and the FAR implementation in the October 2008 Federal Contracts Perspective article “FAC 2005-27 Requires ‘Enhanced Competition’ for Task and Delivery Orders.”)

In addition, the “effectiveness rate” (the number of protestors obtaining some form of relief) increased from 42% in FY 2008 to 45% in FY 2009. However, the number of protests sustained on their merits actually decreased from 60 to 57, resulting in a reduced sustain rate of 18% as opposed to 20% in FY08.

Most of the increase in protests can be attributed to the harsh economic times and the increased amount of money the government is spending for economic stimulus.

In addition, GAO is required to report to Congress each instance in which a federal agency did not fully implement one of its recommendations in connection with a bid protest decided the prior fiscal year. There was one such occurrence in FY 2009 – its recommendation in B-401057, Mission Critical Solutions, Inc., May 4, 2009. In the protest, GAO decided that the HUBZone program’s enabling legislation clearly states that the HUBZone program has priority over the service-disabled veteran-owned small business (SDVOSB) and 8(a) programs. However, OMB directed agencies to ignore GAO’s decision, and the Department of Justice reaffirmed that the Small Business Administration’s (SBA’s) regulations calling for parity among the programs 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.

For more on GAO’s FY 2008 protest statistics, see the January 2009 Federal Contracts Perspective article “GAO Protests Increase 17% in Fiscal Year 2008.” For more on the Mission Critical Solutions, Inc. protest decision, see the August 2009 Federal Contracts Perspective article “OMB Issues Five Memos Providing Contracting Guidance,” and the September 2009 Federal Contracts Perspective article “Department of Justice Reaffirms SBA’s Small Business Program Parity Regulations.”



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