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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


April 2010
Vol. XI, No. 4

CONTENTS


Contracting Officers to Check Federal Awardee Performance and Integrity Information System
FAC 2005-39 Extends FAR Subpart 13.5 Through 2011
SBA Reproposes Women-Owned Small Business Program
Liquid Propane Gas Nonmanufacturer Waiver Proposed
HUBZone Preference Upheld by Court of Federal Claims
Multitude of DOD Regulations and Deviations Issued
SBIR Award Limitations Increased
Policy on Inherently Governmental Functions Proposed
Commerce Acquisition Regulation Rewritten



Contracting Officers to Check Federal Awardee
Performance and Integrity Information System

Federal Acquisition Circular (FAC) 2005-40 amends the Federal Acquisition Regulation (FAR) to require contracting officers to consider the information in the Federal Awardee Performance and Integrity Information System (FAPIIS) when making a responsibility determination before awarding a contract over the simplified acquisition threshold (the FAPIIS website is available at http://www.ppirs.gov/fapiis.html). FAPIIS is designed to significantly enhance the government’s ability to evaluate the business ethics and quality of prospective contractors competing for federal contracts and to protect taxpayers from doing business with contractors that are not responsible sources.

Section 872 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Public Law 110-181) requires the establishment of a data system containing specific information on the integrity and performance of covered federal agency contractors and grantees. The data system that was developed, FAPIIS, is intended to significantly enhance the scope of information available to contracting officers as they evaluate the integrity and performance of prospective contractors competing for federal contracts and to protect taxpayers from doing business with contractors that are not responsible sources.

Access to readily-available governmentwide information that a contracting officer would routinely consider when making a responsibility determination historically has been limited to debarment and suspension actions, which are maintained in the Excluded Parties List System (EPLS) (https://www.epls.gov). Since last summer, agencies have been required to submit electronic records of contractor performance into the Past Performance Information Retrieval System (PPIRS) (http://www.ppirs.gov) so the information can be reviewed and considered by contracting officers throughout the government (see the August 2009 Federal Contracts Perspective article “FAC 2005-34 Addresses Past Performance Information”).

FAPIIS is intended to enhance the scope of information available to contracting officers as they evaluate the integrity and performance of prospective contractors. In addition to providing one-stop access to EPLS and PPIRS, FAPIIS will also include contracting officers’ nonresponsibility determinations, contract terminations for default or cause, agency defective pricing determinations, administrative agreements entered into by suspension and debarment officials to resolve a suspension or debarment, and contractor self-reporting of criminal convictions, civil liability, and adverse administrative actions. The system will collect this information on an ongoing basis from EPLS and PPIRS, contracting officers (for determinations of nonresponsibility and contract terminations), suspension and debarment officials (for information on administrative agreements), and contractors (for information related to criminal, civil, and administrative proceedings). Making this information readily available contracting officers before they award contracts will motivate better contractor performance and reduce the likelihood that taxpayer resources will go to contractors with poor track records.

FAC 2005-40 adds FAR 9.104-6, Federal Awardee Performance and Integrity Information System, a solicitation provision FAR 52.209-7, Information Regarding Responsibility Matters, and a contract clause FAR 52.209-8, Updates of Information Regarding Responsibility Matters. FAC 2005-40 requires contracting officers to:

FAC 2005-40 requires the contractor to:

Contracting officers must give offerors an opportunity to provide additional information that demonstrates their responsibility before making a nonresponsibility determination based on information from FAPIIS if such information involves the following: criminal, civil, or administrative proceedings in connection with the award of a government contract, terminations for default or cause, or determinations of nonresponsibility because the contractor does not have a satisfactory performance record or a satisfactory record of integrity and business ethics, or comparable information relating to a grant.

An offeror submitting a proposal over $500,000 and having more than $10 million in active contracts and grants as of the time of proposal submission must report in FAPIIS information pertaining to criminal, civil, and administrative proceedings through which a requisite determination of fault was made.

The FAPIIS system will provide contractors with notification whenever the government posts new information to the contractor’s record. The contractor will have an opportunity to post comments regarding information that has been posted by the government, including nonresponsibility determinations, and such comments will be retained as long as the associated information is retained (for a total period of six years) and will remain part of the record unless the contractor revises the comments.

Sixteen respondents submitted comments on the proposed rule, and the final rule was revised to:

For more on the proposed rule, see the October 2009 Federal Contracts Perspective article “Federal Awardee Performance and Integrity Information System Proposed.”



FAC 2005-39 Extends FAR Subpart 13.5 Through 2011

Federal Acquisition Circular (FAC) 2005-39 contains six rule changes to the FAR, the most important being the extension of FAR Subpart 13.5, Test Program for Certain Commercial Items, for two years by extending the program’s expiration date from January 1, 2010, to January 1, 2012 in paragraph (d) of FAR 13.500, General. FAR Subpart 13.5 authorizes the use of simplified procedures for the acquisition of commercial items in amounts greater than the simplified acquisition threshold, but not exceeding $5.5 million, if the contracting officer can reasonably expect that offers will include commercial items. This extension was in Section 816 of the National Defense Authorization Act for Fiscal Year 2010 (Public Law 111-84) (for more on the acquisition-related provisions of Public Law 111-84, see the November 2009 Federal Contracts Perspective article “FY10 Defense Authorization Restricts A-76 Competitions”).

The other five FAR rule changes in FAC 2005-39 are:



SBA Reproposes Women-Owned Small Business Program

The Small Business Administration (SBA) is proposing to revamp its regulations in Title 13 of the Code of Federal Regulations (CFR), Part 127, Women-Owned Small Business Federal Contract Assistance Procedures, to expand the number of industries in which women-owned small businesses (WOSBs) and economically-disadvantaged women-owned small businesses (EDWOSBs) would be eligible for set-asides.

On October 1, 2008, SBA published 13 CFR Part 127, but did not identify any industries that would be eligible for WOSB and EDWOSB set-asides because of problems in the methodology used to identify these industries. Therefore, also on October 1, 2008, SBA published a proposed rule that identified 32 industries in which it determined WOSBs and EDWOSBs were either underrepresented or substantially underrepresented, using Bureau of the Census data data – the 2002 Survey of Business Owners (see the November 2008 Federal Contracts Perspective article “Women-Owned Business Assistance Program Instituted”).

SBA received 38 comments on the proposed rule. The majority of these comments generally opposed the use of the Census data. Therefore, SBA is withdrawing the October 1, 2008, proposed rule and publishing this one instead, which relies on data from the Central Contractor Registration (CCR – http://www.ccr.gov) and the Federal Procurement Data System (FPDS – https://www.fpds.gov). Using this data, SBA has identified 45 industries in which WOSBs are underpresented and 38 industries in which WOSBs are substantially underrepresented.

The following are the 45 industries in which WOSBs are considered underrepresented (preceded by the corresponding North American Industry Classification System (NAICS) code):

(NOTE: An industry is considered “underrepresented” if its “disparity ratio” – a measure comparing the utilization of WOSBs in federal contracting to their availability for such contracts – is between 0.5 and 0.8.)

The following are the 38 industries in which WOSBs are considered substantially underrepresented:

(NOTE: An industry is considered “substantially underrepresented” if its “disparity ratio” is less than 0.5.)

  • 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

    Acquisitions in these industries would be eligible to be set aside for WOSBs or EDWOSBs if:

    1. Two or more WOSBs or 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 an 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 (see Section 127.503, When is a contracting officer authorized to restrict competition under this part?).

    The following are two changes that would be made by this proposed rule:

    Comments on the proposed rule must be submitted no later than May 3, 2010, identified as “3245-AG06,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail, hand-delivery, or courier to: Dean Koppel, Assistant Director, Office of Policy and Research, Office of Government Contracting, U.S. Small Business Administration, 409 Third Street, SW, Washington, DC 20416.



    Liquid Propane Gas Nonmanufacturer Waiver Proposed

    The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for liquid propane gas (LPG), North American Industry Classification System (NAICS) code 325120, Product Service Code (PSC) 6830, Compressed and Liquefied Gases. SBA is inviting the public to comment on this proposed waiver or to provide information on potential small business sources for these products by April 7, 2010, to Amy Garcia, Program Analyst, Small Business Administration, Office of Government Contracting, 409 3rd Street, SW, Suite 8800, Washington, DC 20416.

    This is the second request for comments on this proposed waiver. The first request was made on January 12, 2010 (see the February 2010 Federal Contracts Perspective article “Nonmanufacturer Rule Waiver Proposed for Liquified Gases”), but it stated the nonmanufacturing rule waiver was being considered for “compressed and liquefied gases.” After reviewing the responses to the January 12, 2010, request, SBA has concluded that it should have been more specific. Therefore, SBA is issuing this request for comments on the proposed waiver of the nonmanufacturing rule for LPG.

    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.



    HUBZone Preference Upheld by Court of Federal Claims

    The United States Court of Federal Claims has ruled that the Small Business Administration’s (SBA’s) Historically Underutilized Business Zone (HUBZone) program has priority over the 8(a) program because “the mandatory language of the HUBZone statute requires that a contracting officer first determine whether the specified criteria [that is, the contracting officer has a reasonable expectation that offers will be received from two or more HUBZone small business concerns and award will be made at a fair market price] are met before awarding a contract under another small business program or on a sole-source basis” (No. 09-864C, Mission Critical Solutions v. the United States, February 26, 2010). In doing so, the Court of Federal Claims concurs with the Government Accountability Office (GAO) protest decision that the Office of Management and Budget (OMB) directed be ignored by contracting officers (B-401057, Mission Critical Solutions, Inc., May 4, 2009), and enjoins the Army “from awarding the information technology support services contract at issue in a manner that is not in compliance with the Small business Act as the court here interprets it.”

    Mission Critical Solutions (MCS), a HUBZone small business, protested to the GAO an Army contract award to an Alaska Native corporation under the 8(a) program, arguing that the Army should have competed the requirement among HUBZone small businesses because the HUBZone statute – Title 15 of the U.S. Code, Section 657a (15 U.S.C. 657a) – requires that the procurement be set aside for competition among HUBZone small businesses. MCS pointed out that paragraph (b)(2)(B) of 15 U.S.C. 657a 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 to the HUBZone statutory language is the 8(a) program statutory language in paragraph (a)(1)(A) of 15 U.S.C. 637: “In any case in which the [Small Business] Administration [SBA] certifies to any officer of the government having procurement powers that the [SBA] is competent and responsible to perform any specific government procurement contract to be let by any such officer, such officer shall be authorized in his discretion to let such procurement contract to the [SBA] upon such terms and conditions as may be agreed upon between the [SBA] and the procurement officer” (emphasis added).

    GAO’s agreed with MCS’ interpretation that the word “shall” in the HUBZone statute takes precedent over “in his discretion” in the 8(a) statute, and sustained MCS’ protest.

    This decision caused quite a bit of consternation in the federal contracting community because the Small Business Administration’s (SBA’s) regulations give the HUBZone, 8(a), and service-disabled veteran-owned small business (SDVOSB) programs parity. Paragraph (b) of Title 13 of the Code of Federal Regulations (CFR), Section 126.607 (13 CFR 126.607), 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.” In response, the Office of Management and Budget (OMB) issued a very unusual memorandum directing contracting agencies to disregard the GAO decision. Subsequently, the Department of Justice (DOJ) reaffirmed SBA’s regulations as correct in providing for parity among the HUBZone, 8(a), and SDVOSB programs. In response to the DOJ opinion, the SBA decided not to remove the contract from the 8(a) program and the Army decided not to follow GAO’s decision. MCS then appealed to the Court of Federal Claims.

              “The court interprets the language of the HUBZone competition provision – ‘shall be awarded’ – to be mandatory, such that a contract opportunity must be set aside for competition among qualified HUBZone small business concerns whenever the rule of two is met.
              “The court has examined the language of the Small Business Act, in particular the HUBZone and 8(a) statutes, to determine whether the statutory language provides for the prioritization of the HUBZone program over the 8(a) program or provides for parity between the programs. The court agrees with both parties in this case that Congress’s statements of policy and goals do not appear to distinguish between the programs or prioritize one over the other. However, the statutory language implementing the HUBZone and 8(a) programs indicate that the HUBZone program takes priority over the 8(a) program whenever the specified criteria found in 15 U.S.C. § 657a(b)(2)(B) are met. The court has concluded that the phrase ‘notwithstanding any other provision of law’ encompasses provisions found within the Small Business Act, including the provisions implementing the 8(a) program. The operative language of the HUBZone statute combines the phrases ‘notwithstanding any other provision of law’ and the directive that the ‘contract opportunity shall be awarded’ on the basis of competition among qualified HUBZone small business concerns whenever the specified criteria are met. The combination of these two phrases supports the conclusion that the statutory language is mandatory and that the plain meaning of the HUBZone statute requires a contract opportunity to be competed among qualified HUBZone small business concerns whenever the specified criteria are met, notwithstanding other provisions of law – including those found within the Small Business Act itself.”

    Though this case only applies to this Army contract, the decision could have an effect throughout the government. No directions from OMB have been issued on whether the rest of the government is to comply with the decision or not. The DOJ has not announced whether it will appeal the decision. If allowed to stand, the operations of these two programs (and the SDVOSB program) will be drastically altered.

    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.”



    Multitude of DOD Regulations and Deviations Issued

    The Department of Defense (DOD) was busy in March amending the Defense FAR Supplement (DFARS) with three interim rules. In addition, DOD issued two class deviations, one memorandum, and one proposed rule with a public meeting to discuss it.



    SBIR Award Limitations Increased

    The Small Business Administration (SBA) has increased the Small Business Innovative Research (SBIR) limitation on Phase I awards from $100,000 to $150,000, and on Phase II awards from $750,000 to $1,000,000. These limitation increases are intended to offset the effect of inflation that has occurred since the amounts were last set in 1992.

    These increases were proposed in 2008 (see the September 2008 Federal Contracts Perspective article “Increased Limits Proposed for SBIR Awards”). Two respondents expressed their agreement with the proposed increases, so the limitation on SBIR awards are adopted as final.

    The purpose of the SBIR Program is to: (1) stimulate technological innovation; (2) use small business to meet federal research or research and development (R/R&D) needs; (3) foster and encourage participation by socially and economically disadvantaged small businesses and women-owned businesses in technological innovation; and (4) increase private sector commercialization of innovations derived from federal R/R&D to increase competition, productivity and economic growth.

    To be eligible to participate in the SBIR program, a small business must have no more than 500 employees and be at least 51% owned by American citizens.

    The SBIR program is not addressed in the FAR. The regulatory guidelines for the SBIR program award amounts can be found in the SBIR Policy Directive that was published in the Federal Register on September 24, 2002 (see the October 2002 Federal Contracts Perspective article "SBA Revising SBIR Program Policies"). The SBA’s SBIR website is http://www.sba.gov/aboutsba/sbaprograms/sbir/index.html.

    The SBIR program consists of three phases:

    All agencies with R&D budgets of more than $100,000,000 are required to set aside 2.5% of their R&D budgets for the SBIR program. There are currently 11 agencies taking part in the SBIR program:



    Policy on Inherently Governmental Functions Proposed

    The Office of Federal Procurement Policy (OFPP) has published a proposed policy letter to provide guidance on circumstances when work must be reserved for performance by federal employees. The proposed policy letter would:

    Comments on the proposed policy letter must be submitted no later than June 1, 2010, identified as “Proposed OFPP Policy Letter," by any of the following methods: (1) e-mail: OFPPWorkReserved@omb.eop.gov; (2) facsimile: 202-395-5105; or (3) mail: Office of Federal Procurement Policy, Attn: Mathew Blum, New Executive Office Building, Room 9013, 724 17th Street, NW, Washington, DC 20503.



    Commerce Acquisition Regulation Rewritten

    The Department of Commerce (DOC) has rewritten its FAR supplement, the Commerce Acquisition Regulation (CAR), to bring its policies and procedures in alignment with the FAR through FAC 2005-21 (see the December 2007 Federal Contracts Perspective article “FAC 2005-21 Rewrites FAR Part 27 in Plain English"). The CAR was last updated on September 12, 1995.

    The following is a summary of the overall changes made to the CAR:



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