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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


April 2011
Vol. XII, No. 4

CONTENTS


FAC 2005-50 Mandates Competition for MAC Orders, Socioeconomic Program Parity
An Avalanche of DFARS Changes!
Technical Services Size Standards Increase Proposed
EDAR Reissued
Changes to DIAR Proposed
GSA to Restore Construction Final Payments Guidance
Energy Proposes to Update Government Property Regs



FAC 2005-50 Mandates Competition for MAC Orders,
Socioeconomic Program Parity

Federal Acquisition Circular (FAC) 2005-50 contains some rather significant changes to the Federal Acquisition Regulation (FAR), particularly the rules on requirements for orders under multiple-award contracts (MACs); the establishment of parity among the 8(a) Business Development Program, the Historically Underutilized Business Zone (HUBZone) Program, and the Service-Disabled Veteran-Owned Small Business Program; justifications and approvals of sole-source 8(a) contracts over $20,000,000; and the proper use of cost-reimbursement contracts.

Comments on this interim rule must be submitted no later than May 16, 2011, identified as “FAC 2005-50, FAR Case 2009-038,” 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), ATTN: Hada Flowers, 1275 First Street, NE, Washington, DC 20417.

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.”

  • Proper Use and Management of Cost-Reimbursement Contracts: This interim rule amends FAR Subpart 7.1, Acquisition Plans, and FAR Subpart 16.3, Cost-Reimbursement Contracts, to implement Section 864 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Public Law 110-417). Section 864 requires that the FAR be revised to address: (1) when, and under what circumstances, cost-reimbursement contracts are appropriate; (2) the acquisition plan findings necessary to support a decision to use cost-reimbursement contracts; and (3) the acquisition workforce resources necessary to award and manage cost-reimbursement contracts.

    To implement Section 864, the following changes are made to the FAR:

    Comments on this interim rule must be submitted no later than May 16, 2011, identified as “FAC 2005-50, FAR Case 2008-030,” 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), ATTN: Hada Flowers, 1275 First Street, NE, Washington, DC 20417.

    For more on the acquisition-related provisions of Public Law 110-417, see the November 2008 Federal Contracts Perspective article “2009 Defense Authorization Act Includes Clean Contracting Act.”

  • Additional Requirements for Market Research: This finalizes, with changes, the interim rule that amended FAR Part 10, Market Research, FAR Subpart 44.4, Subcontracts for Commercial Items and Commercial Components, and FAR 52.244-6, Subcontracts for Commercial Items, to implement Section 826 the National Defense Authorization Act for Fiscal Year 2008 (Public Law 110-181). Section 826 requires agencies to: (1) conduct market research appropriate to the circumstances before awarding a task or delivery order in excess of the simplified acquisition threshold ($150,000); and (2) ensure that any contractor with a contract over $5,000,000 for the procurement of items other than commercial items, and under which the contractor is acting as a purchasing agent for the government with respect to a purchase that exceeds the simplified acquisition threshold, engages in market research.

    Three respondents submitted comments on the interim rule. As a result of these comments, coverage on market research is deleted from FAR Subpart 44.4, and Alternate I to FAR 52.244-6 (added by the interim rule) is relocated to new FAR 52.210-1, Market Research, because FAR Subpart 44.4 covers (and is titled) “Subcontracts for Commercial Items,” and Section 826 covers contracts over $5,000,000 for the procurement of items other than commercial items. Also, a prescription for the new FAR 52.210-1 is added to FAR 10.003, Contract Clause, and a cross-reference to FAR 52.210-1 is added as paragraph (h) to FAR 16.506, Solicitation Provisions and Contract Clauses, for when the contract is over $5,000,000 for the procurement of items other than commercial items.

    For more on the interim rule, see the July 2010 Federal Contracts Perspective article “FAC 2005-42 Addresses Disclosure of Noncompetitive Contract Justifications, Recovery Act.”

    For more on the acquisition-related provisions of Public Law 110-181, see the February 2008 Federal Contracts Perspective article “Defense Authorization Act Restricts A-76 Competitions, Extends FAR Subpart 13.5.”

  • Use of Commercial Services Item Authority: This finalizes, without changes, the interim rule that amended FAR 15.403-1, Prohibition on Obtaining Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b), to implement Section 868 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Public Law 110-417). Section 868 provides that purchases of commercial services that are not offered and sold competitively in substantial quantities in the commercial marketplace may be considered commercial items only if the contracting officer determines that the offeror has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price of such services. This provision was added as paragraph (c)(3)(ii) of FAR 15.403-1 by the interim rule.

    Four respondents submitted comments on the interim rule, but none of the comments were adopted, so the interim rule is finalized without changes. For more on the interim rule, see the November 2009 Federal Contracts Perspective article “FAC 2005-37 Provides Guidance on Use of Award Fees.”
    For more on the acquisition-related provisions of Public Law 110-417, see the November 2008 Federal Contracts Perspective article “2009 Defense Authorization Act Includes Clean Contracting Act.”

  • Trade Agreements Thresholds: This finalizes, without changes, the interim rule that amended FAR Part 25, Foreign Acquisition, to reflect the United States Trade Representative’s most recent determinations adjusting the thresholds for application of the World Trade Organization Government Procurement Agreement and the free trade agreements (see the January 2010 Federal Contracts Perspective article “Thresholds for Trade Agreements Adjusted”).

    No comments were submitted on the interim rule, so the interim rule is finalized without changes. For more on the interim rule, see the August 2010 Federal Contracts Perspective article “Trade Agreements Thresholds Increased.”

  • Disclosure and Consistency of Cost Accounting Practices for Contracts Awarded to Foreign Concerns: This finalizes, without changes, the interim rule that revised FAR 52.230-4, Disclosure and Consistency of Cost Accounting Practices – Foreign Concerns, and its prescription at FAR 30.201-4, Contract Clauses [regarding Cost Accounting Standards (CAS)], to reflect changes made in the CAS Board clause “Disclosure and Consistency of Cost Accounting Practices – Foreign Concerns.”

    The CAS Board required the use of a new clause “Disclosure and Consistency of Cost Accounting Practices – Foreign Concerns,” in CAS-covered contracts and subcontracts awarded to foreign concerns. This clause, at paragraph (f) of CAS 9903.201-4, Contract Clauses, was adopted because the clause previously used, CAS 9903.201-4(c), Disclosure and Consistency of Cost Accounting Practices, had to be modified whenever it was included in contracts and subcontracts with foreign firms to reflect the different CAS applicable to foreign firms. When the CAS Board adopted a new clause specifically for foreign firms subject to CAS, the FAR had to be amended to maintain consistency with the CAS. Therefore, FAR 52.230-4 was replaced to reflect the new CAS clause, and the FAR 52.230-4 prescription at FAR 30.201-4(c) was revised to specify the circumstances under which the clause is to be used.

    No comments were submitted on the interim rule, so the interim rule is finalized without changes. For more on the interim rule, see the July 2010 Federal Contracts Perspective article “FAC 2005-42 Addresses Disclosure of Noncompetitive Contract Justifications, Recovery Act.” For more on the CAS clause, see the April 2008 Federal Contracts Perspective article “New CAS Clause for Contracts with Foreign Concerns.”

  • Compensation for Personal Services: This finalizes, without changes, the interim rule that revised paragraph (q)(2)(ii) and deleted paragraph (q)(2)(i) of FAR 31.205-6, Compensation for Personal Services, to bring (q)(2) into conformance with the changes made by the CAS Board to CAS 412, Cost Accounting Standard for Composition and Measurement of Pension Cost, and CAS 415, Accounting for the Cost of Deferred Compensation.

    The CAS Board specified that the accounting of Employee Stock Ownership Plan (ESOP) costs, regardless of type, would be covered by the provisions of CAS 415 only and not by CAS 412. The CAS Board also provided criteria in CAS 415 for measuring ESOP costs and assigning these costs to cost accounting periods. To bring the FAR into conformance with the CAS Board changes, FAR 31.205-6(q)(2)(i) was deleted in its entirety (it addressed when ESOPs were to be covered by CAS 412), and FAR 31.205-6(q)(2)(ii) (now redesignated as subparagraph (q)(2)(i)) was revised by deleting “For ESOPs that do not meet the definition of a pension plan at [FAR] 31.001 [Definitions]...”, so all that remained was “the contractor measures, assigns, and allocates costs in accordance with 48 CFR 9904.415 [CAS 415].”

    No comments were submitted on the interim rule, so the interim rule is finalized without changes. For more on the interim rule, see the July 2010 Federal Contracts Perspective article “FAC 2005-42 Addresses Disclosure of Noncompetitive Contract Justifications, Recovery Act.” For more on the CAS Board changes, see the June 2008 Federal Contracts Perspective article “CAS Address Costs for Contractors’ ESOPs.”

    An Avalanche of DFARS Changes!

    The Department of Defense (DOD) continues its massive revamping of the Defense FAR Supplement (DFARS), issuing six final rules, two interim rules, five proposed rules, three class deviations, and five policy memoranda during March.



    Technical Services Size Standards Increase Proposed

    The Small Business Administration (SBA) is proposing to increase the small business size standards for 35 industries and one sub-industry in North American Industry Classification System (NAICS) Sector 54, Professional, Scientific and Technical Services and one industry in NAICS Sector 81, Other Services.

    The following are the industries, their current small business size standards, and their proposed small business size standards:

    NAICS Code Industry Title Current Size Standard
    ($ million)
    Proposed Size Standard
    ($ million)
    541110 Offices of Lawyers 7.0 10.0
    541191 Title Abstract and Settlement Offices 7.0 10.0
    541199 All Other Legal Services 7.0 10.0
    541211 Offices of Certified Public Accountants 8.5 14.0
    541213 Tax Preparation Services 7.0 14.0
    541214 Payroll Services 8.5 14.0
    541219 Other Accounting Services 8.5 14.0
    541310 Architectural Services 4.5 19.0
    541320 Landscape Architectural Services 7.0 19.0
    541330 Engineering Services 4.5 19.0
          Except Marine Engineering and Naval Architecture 18.5 25.5
    541340 Drafting Services 7.0 19.0
    541350 Building Inspection Services 7.0 19.0
    541360 Geophysical Surveying and Mapping Services 4.5 19.0
    541370 Surveying and Mapping (except Geophysical) Services 4.5 19.0
    541380 Testing Laboratories 12.0 19.0
    541511 Custom Computer Programming Services 25.0 25.5
    541512 Computer Systems Design Services 25.0 25.5
    541513 Computer Facilities Management Services 25.0 25.5
    541519 Other Computer Related Services 25.0 25.5
    541611 Administrative Management and General Management Consulting Services 7.0 14.0
    541612 Human Resources Consulting Services 7.0 14.0
    541613 Marketing Consulting Services 7.0 14.0
    541614 Process, Physical Distribution and Logistics Consulting Services 7.0 14.0
    541618 Other Management Consulting Services 7.0 14.0
    541620 Environmental Consulting Services 7.0 14.0
    541690 Other Scientific and Technical Consulting Services 7.0 14.0
    541720 Research and Development in the Social Sciences and Humanities 7.0 19.0
    541810 Advertising Agencies 7.0 14.0
    541820 Public Relations Agencies 7.0 14.0
    541830 Media Buying Agencies 7.0 14.0
    541840 Media Representatives 7.0 14.0
    541850 Display Advertising 7.0 14.0
    541860 Direct Mail Advertising 7.0 14.0
    541870 Advertising Material Distribution Services 7.0 14.0
    541890 Other Services Related to Advertising 7.0 14.0
    811212 Computer and Office Repair and Maintenance 25.0 25.5


    Comments on this proposed rule must be submitted no later than May 16, 2011, identified as “RIN 3245-AG07,” by one of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail/hand delivery/courier: Khem R. Sharma, PhD, Chief, Size Standards Division, 409 Third Street, SW., Mail Code 6530, Washington, DC 20416.



    EDAR Reissued

    The Department of Education has revised and reissued the Department of Education Acquisition Regulation (EDAR) for the first time since 1987. “In the years since then, the FAR has changed substantially,” noted the introduction to the proposed rule. “These changes caused a need for the department to update the EDAR so that it correctly implements the FAR and reflects department policy.” Among the significant changes that have taken place since 1987 are the enactment of the Federal Acquisition Streamlining Act, the Clinger-Cohen Act, and the Service Acquisition Reform Act; the establishment of the HUBZone and SDVOSB programs; and the advent of the Internet and electronic commerce.

    The most noteworthy changes in the proposed EDAR addressed the procurement flexibility authorized in 1998 by 20 U.S.C. 1018a for the department’s performance-based organization, the Office of Federal Student Aid (FSA).

    No comments were submitted in response to the proposed rule. However, the Department of Education’s contact telephone number for issues relating to human subjects changed, so the telephone number is updated in EDAR 3452.224-71, Notice About Research Activities Involving Human Subjects, and EDAR 3452.224-72, Research Activities Involving Human Subjects. In addition, a discrepancy was discovered between EDAR 3416.470, Award Term Contracting, and EDAR 3452.216-71, Award-Term. To eliminated this discrepancy, the following sentence is removed from EDAR 3416.470: “These decisions are not subject to the Disputes clause.” Finally, minor technical and editorial changes were made.

    For more on the proposed rule, see the September 2010 Federal Contracts Perspective article “Department of Education Proposes Reissuing EDAR.”



    Changes to DIAR Proposed

    The Department of the Interior (DOI) is proposing to revise the Department of the Interior Acquisition Regulation (DIAR) to make it consistent with the FAR; to update references to other federal and departmental directives; to remove obsolete material and references; and to add DIAR 1452.201-70, Authorities and Delegations, which would notify contractors of their roles and responsibilities in complying with technical direction given by authorized representatives of the contracting officer.

    Comments on this proposed rule must be submitted no later than May 23, 2011, identified as “RIN 1093-AA13,” through the Federal eRulemaking Portal at http://www.regulations.gov.



    GSA to Restore Construction Final Payments Guidance

    The General Services Administration (GSA) is proposing to restore guidance on making final payments under construction and building service contracts to the GSA Acquisition Regulation (GSAR). This guidance, which prescribed the use of GSA Form 1142, Release of Claims, for releases of claims under construction and building service contracts, was inadvertently deleted during the rewrite of GSAR Part 532, Contract Financing (see the November 2009 Federal Contracts Perspective article “GSAR Parts 503 and 532 Rewritten”).

    A release of claims is a requirement under GSAR 552.232-72, Final Payment, prior to making final payment under construction and building service contracts. GSA contracting officers relied upon GSA Form 1142 to obtain this release of claims under these contracts. GSA Form 1142 uses standard language for the contractor to attest that it is has no claims, or no claims except for those it may set forth where indicated on the form. The form requires a signature from the contractor and a witness. Additionally, there is a location for the firm’s seal.

    During the GSAR Part 532 rewrite, GSAR 532.905-71, Final Payment–Construction and Building Services Contracts, which prescribed the use of GSA Form 1142 and provided guidance on deductions to final payments under construction and building service contracts, was inadvertently deleted. GSA believes the GSA Form 1142 provides great value and accountability in providing uniformity and consistency for the release of claims process. Without the GSA Form 1142, GSA contracting officers are required to verify that contractor release of claims letter includes appropriate wording before final payment is made, increasing their administrative burden unnecessarily. Further, the coverage on deductions under GSAR 532.905-71 was useful in preventing overpayments to contractors.

    Consequently, GSA proposes to restore the language that had previously been in GSAR 532.905-71. Since the GSAR Part 532 rewrite also deleted GSAR 532.905-70, the reinstated language will become GSAR 532.905-70, Final Payment–Construction and Building Service Contracts.

    Comments on this proposed rule must be submitted no later than May 10, 2011, identified as “GSAR Case 2010-G509,” 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), ATTN: Hada Flowers, 1275 First Street, NE, Washington, DC 20417.



    Energy Proposes to Update Government Property Regs

    The Department of Energy (DOE) is proposing to amend the DOE Acquisition Regulation (DEAR) to conform to the FAR, remove out-of date government property coverage, and update references. Proposed for amendment are DEAR Part 908, Required Sources of Supplies and Services, DEAR Part 945, Government Property, and DEAR Part 970, Management and Operating Contracts.

    Of particular note is the proposed amendment of DEAR Part 945 to conform to FAR Part 45, Government Property, which was amended by FAC 2005-17 to simplify procedures, clarify language, and eliminate out-of-date requirements related to the management and disposition of government property in the possession of contractors by establishing a life-cycle approach to property management and sanctioning the use of consensus standards or industry-leading standards and practices for property management. FAC 2005-17 deleted outdated clauses and combined selected FAR property clauses into a single clause. This proposed rule updates corresponding sections in DEAR Part 945 to conform to the format and content of FAR Part 45 (for more on FAC 2005-17, see the June 2007 Federal Contracts Perspective article “FAR Coverage on Government Property Simplified, Clarified, Trimmed”).

    Comments on this proposed rule must be submitted no later than April 4, 2011, identified as “DEAR: Parts 908, 945 and 970 and RIN 1991-AB86,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: DEARrulemaking@hq.doe.gov (the preferred method); or (3) mail: U.S. Department of Energy, Office of Resource Management, MA-632, 1000 Independence Avenue, SW, Washington, DC 20585.



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