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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


May 2010
Vol. XI, No. 5

CONTENTS


President Establishes Task Forces for Small Businesses and Veteran-Owned Businesses
FAR Amended to Encourage Project Labor Agreements
Labor Organizing Costs Proposed to be Unallowed
President Orders Recovery Act Reporting Enforcement
Executive Compensation Benchmark Increased to $693,951
DOD Rolls Out More Policies and Regulations
Tactical Vest Nonmanufacturer Rule Waiver Proposed
DIAR Rewritten



President Establishes Task Forces for
Small Businesses and Veteran-Owned Businesses

On April 26, President Obama established two interagency task forces to prepare proposals and recommendations on (1) increasing federal contracting opportunities for small businesses, and (2) improving capital, business development opportunities, and achievement of federal contracting goals for small business concerns owned and controlled by veterans and service-disabled veterans. The task force for small businesses is to submit its proposals and recommendations to the president within 120 days of the date of the memorandum (that is, 120 days after April 26, or August 24, 2010), and the task force for veteran-owned small businesses is to submit its proposals and recommendations to the president within one year after the date of the executive order (that is, April 26, 2011).

FAR Amended to Encourage Project Labor Agreements

Federal Acquisition Circular (FAC) 2005-41 amends the Federal Acquisition Regulation (FAR) to add FAR Subpart 22.5, Use of Project Labor Agreements for Federal Construction Projects, to implement Executive Order 13502, Use of Project Labor Agreements for Federal Construction Projects, which encourages federal departments and agencies to consider requiring the use of project labor agreements (PLAs) for federal construction projects where the total cost to the government is more than $25 million. In addition, a new provision FAR 52.222-33, Notice of Requirement for Project Labor Agreement, and a new clause FAR 52.222-34, Project Labor Agreement, are required to be included in all solicitations and contracts associated with a project if the agency determines that a PLA will be required.

A PLA is a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project. The executive order establishes requirements and standards that must be met by federal agencies when using PLAs, specifically that they:

Section 7 of Executive Order 13502 directed that the FAR be amended to implement the executive order. A proposed rule was published, and more than 700 respondents submitted comments on the proposed rule, approximately 650 of the responses were in the form of a form letter or short e-mails that expressed opposition to the use of PLAs but did not address the proposed rule. About half of the remaining 50 responses expressed support of PLAs, and the other half expressed opposition. These 50 comments focused on: (1) the exercise of agency discretion in deciding whether to require a PLA; (2) the content of PLA generally and the role of federal agencies in developing the terms of the PLA; and (3) the timing of entering the PLA. As a result of the comments, several changes were made to the final rule:

For more on the proposed rule and PLAs in general, see the August 2009 Federal Contracts Perspective article “Prohibition on Project Labor Agreements Rescinded.”



Labor Organizing Costs Proposed to be Unallowed

To implement Executive Order 13494, Economy in Government Contracting, FAR 31.205-21, Labor Relations Costs, would be amended to provide that “costs of any activities undertaken to persuade employees, of any entity, to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees’ own choosing are unallowable. Examples of unallowable costs...include, but are not limited to, the costs of: (1) preparing and distributing materials; (2) hiring or consulting legal counsel or consultants; (3) meetings (including paying the salaries of the attendees at meetings held for this purpose); and (4) planning or conducting activities by managers, supervisors, or union representatives during work hours.” This proposed FAR change is consistent with government policy to remain impartial concerning any labor-management dispute involving government contractors.

Comments on the proposed rule must be submitted no later than June 14, 2010, identified as “FAR Case 2009-006,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (MVCB), 1800 F Street, NW, Room 4041, ATTN: Hada Flowers, Washington, DC 20405.



President Orders Recovery Act Reporting Enforcement

On April 6, President Obama issued a memorandum directing agencies to “further intensify their efforts to improve reporting compliance by prime recipients of Recovery Act funds, wherever authorized and appropriate, by terminating awards; pursuing measures such as suspension and debarment; reclaiming funds; and considering, initiating, and implementing punitive actions.”

The president went on to require agencies to “intensify efforts to timely report the identities of noncompliant prime recipients to the Office of Management and Budget (OMB) and specify to the OMB the detailed actions they have taken to respond to each instance of noncompliance.”

Contractors with contracts that are funded in whole or in part with Recovery Act funds (including governmentwide acquisition contracts (GWACs), multi-agency contracts (MACs), Federal Supply Schedule (FSS) contracts, and agency indefinite-delivery/indefinite-quantity (ID/IQ) contracts) have FAR 52.204-11, American Recovery and Reinvestment Act – Reporting Requirements, in their contracts. This clause requires that the contractor use the online reporting tool at http://www.FederalReporting.gov to report eight items of information about their contracts, seven items about their subcontractors with subcontracts exceeding $25,000, and requires the contractor to have its subcontractors report four items of information about their firms (see FAR 52.204-11(c) and (d)).

Because contractors receiving Recovery Act-funded contracts have not been very conscientious in reporting this information on a timely basis, the president has decided to crack the whip. It will be interesting to see how hard the president actually cracks that whip, and whether the government agencies will diligently check on their contractors’ compliance and go after noncompliant contractors with gusto. Only time will tell.



Executive Compensation Benchmark Increased to $693,951

Daniel Gordon, the Office of Federal Procurement Policy (OFPP) administrator, has decided to increase the “benchmark compensation amount” for senior executives by $9,770, from $684,181 to $693,951 – an 1.4% increase, far less than the $71,985 (11.8%) increase last year. This figure is “the median amount of the compensation provided for all senior executives of all benchmark corporations [those with annual sales in excess of $50 million] for the most recent year...” It was determined based on commercially available surveys made available by the Securities and Exchange Commission and after consultation with the director of the Defense Contract Audit Agency.

The $693,951 is the maximum amount of compensation (that is, wages, salary, bonuses, deferred compensation, and employer contributions to defined contribution pension plans) that is allowable under federal contracts for “the five most highly compensated employees in management positions at each home office and each segment of the contractor.” However, the benchmark compensation amount is not a limit on the compensation an executive may receive – $693,951 is the maximum allowable amount the government will reimburse contractors for their senior executives’ compensation. See paragraph (p) of FAR 31.205-6, Personal Compensation.

The benchmark compensation amount applies to contract costs incurred after January 1, 2010, for contractor fiscal year 2010 and subsequent contractor fiscal years unless and until revised by the Office of Management and Budget (OMB), which is required to set the benchmark compensation amount annually. (OFPP is part of OMB.)

Questions concerning this may be addressed to Raymond Wong, OFPP, at 202-395-6805.



DOD Rolls Out More Policies and Regulations

The Department of Defense (DOD) can’t seem to help itself. In April, it issued four final rules amending the Defense FAR Supplement (DFARS), five proposed rules, two DFARS class deviations, one memorandum, and made one announcement.



Tactical Vest Nonmanufacturer Rule Waiver Proposed

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for improved outer tactical vests and related accessories under North American Industry Classification System (NAICS) code 339113, Surgical Appliance and Supplies Manufacturing, Product Service Code (PSC) 8470, Armor Personal. SBA is inviting the public to comment on this proposed waiver or to provide information on potential small business sources for these products by May 6, 2010, to Pamela McClam, 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 Section 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.



DIAR Rewritten

The Department of the Interior (DOI) has revised its Acquisition Regulation, the DIAR, to update references to other federal and departmental directives, remove obsolete material and references, and clarify and streamline internal policies and procedures. This rewrite does not impose any new requirements on DOI contractors, and no DIAR clauses are being changed, with the exception of the removal of obsolete clauses.

DOI is giving the public an opportunity to comment on this interim rule, and DOI will consider and respond to any comments that it receives. DOI has decided to publish this interim rule without prior proposal because it would be impracticable, unnecessary, and contrary to the public interest to delay publication of this rule in final form pending an opportunity for public comment.

Comments are to be submitted no later than June 14, 2010, through the Federal eRulemaking Portal at http://www.regulations.gov. Identify all comments identified as “Regulation Identifier Number (RIN) 1093-AA11.” Follow the instructions on the website for submitting comments.



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