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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


October 2011
Vol. XII, No. 10

CONTENTS


OFPP Issues Policy Letter on Inherently Governmental and Critical Functions
Thirteen More Items Proposed for Biobased Designation
Rule on Constitutionality of SDB Programs Proposed
COFC Agrees Limit on IDIQ Protests Has Expired
Approval of Certain GWACs, MACs, BPAs Now Required



OFPP Issues Policy Letter on Inherently
Governmental and Critical Functions

The Office of Federal Procurement Policy (OFPP) has released its long-awaited policy letter on managing the performance of inherently governmental and critical functions. The guidance is in response to the March 4, 2009, presidential memorandum titled “Government Contracting,” which directed the Office of Management and Budget (OMB) to “clarify when governmental outsourcing for services is and is not appropriate, consistent with Section 321 of Public Law 110-417 [the Fiscal Year 2009 National Defense Authorization Act]” [OFPP is part of OMB]. Section 321 requires OMB to: (1) create a single definition for the term “inherently governmental function” that addresses any deficiencies in the existing definitions and reasonably applies to all agencies; (2) establish criteria to be used by agencies to identify “critical functions” and positions that should only be performed by federal employees; and (3) provide guidance to improve internal agency management of functions that are inherently governmental or critical.

OFPP Policy Letter 11-01 provides the following guidance:

For more on the acquisition-related portions of Public Law 110-417, see the November 2008 Federal Contracts Perspective article “2009 Defense Authorization Act Includes Clean Contracting Act.” For more on the presidential memorandum, see the April 2009 Federal Contracts Perspective article “Obama Directs More Fixed-Price Contracts and Fewer Sole Source Contracts.”



Thirteen More Items Proposed for Biobased Designation

The United States Department of Agriculture (USDA) is proposing to add thirteen (13) more sections to Title 7 of the Code of Federal Regulations (CFR), Part 3201, Guidelines for Designating Biobased Products for Federal Procurement (7 CFR Part 3201), to be given preference in federal procurements as provided under Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA) (Public Law 107-171), and to specify the minimum level of biobased content to be contained in the procured products.

The following are the proposed new designated items and their Title 7 section numbers:

     3201.75, Air fresheners and deodorizers
     3201.76, Asphalt and tar removers
     3201.77, Asphalt restorers
     3201.78, Blast media
     3201.79, Candles and wax melts
     3201.80, Electronic components cleaners
     3201.81, Floor coverings (non-carpet)
     3201.82, Foot care products
     3201.83, Furniture cleaners and protectors
     3201.84, Inks
     3201.85, Packaging and insulating materials
     3201.86, Pneumatic equipment lubricants
     3201.87, Wood and concrete stains

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, all the products in the program, and those proposed for inclusion, 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”; the November 2009 Federal Contracts Perspective article “USDA Adds Nine More Biobased Items”; the March 2010 Federal Contracts Perspective article “USDA Proposes Another Nine Biobased Items”; the November 2010 Federal Contracts Perspective article “Eight More Biobased Products Designated”; and the December 2010 Federal Contracts Perspective article “Fourteen More Items Proposed for Biobased Designation.”

NOTE: On August 29, 2011, the USDA published in the Federal Register a rule relocating the regulations governing the biobased program from 7 CFR Chapter XXIX to 7 CFR Chapter XXXII effective October 28, 2011. As a result, all 2902 section numbers designated items for the biobased program are now 3201 section numbers; for example, Section 2902.65, Concrete and asphalt cleaners, is now Section 3201.65.



Rule on Constitutionality of SDB Programs Proposed

Changes to the FAR are being proposed to address the effect of the United States Court of Appeals for the Federal Circuit decision in Rothe Development Corporation vs. the Department of Defense [DOD] and the U.S. Department of the Air Force [USAF] (CAFC 2008-1017, November 4, 2008) on small disadvantaged businesses (SDBs) and certain institutions of higher education. The decision declared that Title 10 of the U.S. Code, Section 2323 (10 USC 2323), which is implemented by FAR Subpart 19.11, Price Evaluation Adjustment for Small Disadvantaged Business Concerns, by providing a 10% evaluation preference to offers submitted by SDBs, was unconstitutional on the grounds that it violates the right to equal protection by basing preferential treatment on race.

The proposed rule would remove FAR Subpart 19.11 and FAR Subpart 19.12, Small Disadvantaged Business Participation Program; remove the corresponding clauses at FAR 52.219-22, Small Disadvantaged Business Status, FAR 52.219-23, Notice of Price Evaluation Adjustment for Small Disadvantaged Business Concerns, FAR 52.219-24, Small Disadvantaged Business Participation Program – Targets, FAR 52.219-25, Small Disadvantaged Business Participation Program – Disadvantaged Status and Reporting, and FAR 52.219-26, Small Disadvantaged Business Participation Program – Incentive Subcontracting; and remove references to FAR Subpart 19.11, Subpart 19.12, and the corresponding clauses elsewhere in the FAR.

Regarding FAR Subpart 19.12 and supporting clauses addressing the award of subcontracts to SDBs, certain authorities are based on the Small Business Act and not 10 USC 2323, so they were not at issue in the Rothe decision and retain their legal status. These include FAR 19.1202, Evaluation Factor or Subfactor (to evaluate the participation of small businesses as subcontractors), and FAR 19.1203, Incentive Subcontracting with Small Disadvantaged Business Concerns (which permits award of monetary incentives to prime contractors to encourage subcontracting opportunities to SDBs). These are proposed to be moved to FAR Subpart 19.7, The Small Business Subcontracting Program, because FAR Subpart 19.7 addresses subcontracting issues in general, including the use of monetary incentives to encourage subcontracting opportunities. Therefore, this realignment would consolidate coverage on subcontracting with small businesses in one place.

Regarding FAR 19.1202, FAR Subpart 19.7 is silent on its use. Nothing in this rulemaking precludes an agency from using evaluation factors and subfactors for subcontracting during source selections. The Small Business Administration’s (SBA’s) regulations in paragraph (g) of Title 13 of the Code of Federal Regulations (CFR), Section 125.3, Subcontracting Assistance (13 CFR 125.3), allow the application of evaluation factors and subfactors to subcontracting with any of the small business programs, including, but not limited to, SDBs. The Federal Acquisition Regulatory Council will confer with SBA to evaluate the need for guidance in the FAR on the use of evaluation factors and subfactors for subcontracting.

Comments on this proposed rule must be submitted no later than November 8, 2011, identified as “FAR Case 2009-016,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail to: General Services Administration, Regulatory Secretariat (MVCB), Attn: Hada Flowers, 1275 First Street, NE, 7th Floor, Washington, DC 20417.

For more on Rothe, see the January 2009 Federal Contracts PerspectiveCourt Strikes Down DOD's Small and Disadvantaged Business Contract Goal,” and the April 2009 Federal Contracts Perspective article “DOD Ordered to Cease Giving Preference to SDBs.” For more on a FAR deviation that prohibits DOD contracting officers from using FAR Subpart 19.11, see the April 2010 Federal Contracts Perspective article “Multitude of DOD Regulations and Deviations Issued.”



COFC Agrees Limit on IDIQ Protests Has Expired

The United States Court of Federal Claims (COFC) agrees with the Government Accountability Office (GAO) that GAO’s exclusive authority to hear protests against task or delivery orders under indefinite-delivery/indefinite-quantity (IDIQ) contracts that exceed $10,000,000 has expired, and that the prohibition against COFC’s reviewing such protests has been eliminated (MED Trends, Inc., v. The United States and Microtechnologies, LLC, 11-420, September 13, 2011).

Title 28 of the United States Code, Section 1491, paragraph (b)(1) (28 USC 1491(b)(1)) provides the COFC the following jurisdiction to hear protests: “Both the United States Court of Federal Claims and the district courts of the United States shall have jurisdiction to render judgment on an action by an interested party objecting to a solicitation by a federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.”

However, in 1994, Congress enacted the Federal Acquisition Streamlining Act (FASA), which placed the following limits on protests of task or delivery orders placed under IDIQ contracts: “A protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order except for a protest on the ground that the order increases the scope, period, or maximum value of the contract under which the order is issued.” This was added to the U.S. Code as 41 USC 253j(e).

In 2008, Congress modified FASA’s bar on protests of task or delivery orders with the passage of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 110-181) (NDAA), to add another limited exception to FASA’s general bid protest preclusion: task orders valued over $10,000,000 could be protested to the GAO. Also, a three-year sunset provision was inserted. Section 843(b) of the NDAA directed that the following be substituted for 41 USC 253j(e):

     (e) Protests.

  1. A protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order except for: (A) a protest on the ground that the order increases the scope, period, or maximum value of the contract under which the order is issued; or (B) a protest of an order valued in excess of $10,000,000.
  2. ...the Comptroller General of the United States [that is, the GAO] shall have exclusive jurisdiction of a protest authorized under paragraph (1)(B).
  3. This subsection shall be in effect for three years, beginning on the date that is 120 days after the date of the enactment of the National Defense Authorization Act for Fiscal Year 2008 [that is, May 27, 2011, three years and 120 days after the January 29, 2008, enactment of the NDAA).

On January 4, 2011, 41 USC 253j(e) was recodified as 41 USC 4106(f).

On June 24, 2011, MED Trends, Inc., filed a protest against the award of a task order under the Veterans Technology Services Government-Wide Acquisition Contract (VETS GWAC), an IDIQ between the General Services Administration (GSA) and a pool of pre-qualified contractors. The question regarding jurisdiction had to be addressed first: (1) did the sunset provision, which was added by the NDAA, apply only to the expansion of GAO’s jurisdiction in 41 USC 4106(f)(1)(B) and (f)(2); or (2) did it apply to paragraph (f) in its entirety?

In June 2011, GAO ruled that the sunset provision applied to the entire 41 USC 4106(f), not just the expansion of GAO’s jurisdiction (see the July 2011 Federal Contracts Perspective article “GAO Rules Limits on IDIQ Protests Have Expired”). With the expiration of paragraph (f), GAO concluded that there were no limits on its ability to hear protests against any task or delivery order.

COFC agreed with GAO that all of paragraph (f) had expired on May 7, 2011, and since the case had been filed on June 24, 2011, COFC's authority to hear protests reverted to that specified in 28 USC 1491(b)(1), meaning there were no longer any restrictions:

     “There is no question that, had this protest been brought one month earlier, the court would not have been able to exercise jurisdiction. Under the Federal Acquisition Streamlining Act of 1994 (“FASA”), as amended, protests of FASA task orders (other than those challenging an increase in scope) could be brought only before the Government Accountability Office (“GAO”), and then only if the amount in controversy exceeded $10,000,000…Plaintiff contends that, because the time prescribed in subsection (f) expired on May 27, 2011, the jurisdictional bar to court review of such protests has been eliminated. In the absence of subsection (f), there is nothing that prevents this court from exercising its general bid protest jurisdiction under 28 USC 1491(b)(1).”

One final note about this decision: after deciding that it had jurisdiction to hear and decide the case, COFC ruled against MED Trends and in favor of the government.



Approval of Certain GWACs, MACs, BPAs Now Required

Daniel Gordon, Administrator of the Office of Federal Procurement Policy (OFPP), has issued a memorandum to all chief acquisition officers and senior procurement executives requiring the preparation and approval of business cases for new and renewed government-wide acquisition contracts (GWACs), multi-agency contracts (MACs), blanket purchase agreements (BPAs), and agency-specific IDIQ contracts. Administrator Gordon considers this necessary because “too often, agencies establish new overlapping and duplicative contracts for supplies or services, because the agencies have not adequately considered the suitability of existing interagency contract vehicles...”

The new business case procedures apply to acquisitions that enter the solicitation phase after December 31, 2011, and meet the following thresholds:



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