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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


July 2011
Vol. XII, No. 7

CONTENTS


Energy Priorities and Allocations System Expanded to Promote the National Defense
DFARS Rules All Over the Place!
FAR Rules on Prioritizing Supply Sources, Performance
GAO Rules Limits on IDIQ Protests Have Expired
Nonmanufacturer Rule Retraction for Propellants
GSA Implementing IT Security Provision



Energy Priorities and Allocations System Expanded
To Promote the National Defense

The Department of Energy (DOE) has published standards and procedures establishing the Energy Priorities and Allocations System (EPAS) to comply with the Defense Production Act Reauthorization of 2009 requirement to publish regulations providing standards and procedures for prioritization of contracts and orders and for allocation of materials, services, and facilities to promote the national defense.

The EPAS has two principal components: priorities and allocations. Under the priorities component, certain contracts between the government and private parties or between private parties for the production or delivery of industrial resources are required to be given priority over other contracts to facilitate expedited delivery in promotion of the U.S. national defense. Under the allocations component, materials, services, and facilities may be allocated to promote the national defense. For both components, the term “national defense” is defined broadly and can include critical infrastructure protection and restoration, emergency preparedness, and recovery from natural disasters.

Title 10 of the Code of Federal Regulations (CFR), Part 216 (10 CFR Part 216), Materials Allocation and Priority Performance Under Contracts or Orders to Maximize Domestic Energy Supplies, implements DOE’s administration of priorities and allocations actions to maximize domestic energy supplies as authorized by under Section 101(c) of the Defense Production Act (Title 50 of the U.S. Code, Appendix Title I, Priorities and Allocations (Section 2071 et seq.)) (DPA). The Defense Production Act Reauthorization of 2009 (DPAR) (Public Law 111-67) required all agencies to which the president has delegated priorities and allocations authority under Title I of the DPA to publish regulations providing standards and procedures for prioritization of contracts and orders and for allocation of materials, services and facilities to promote the national defense.

This rule is DOE’s fulfillment of the DPAR’s requirement with regard contracts and orders that promote the national defense with regards to domestic energy supplies, and it expands upon 10 CFR Part 216 with the addition of 10 CFR Part 217, Energy Priorities and Allocations System.

10 CFR Part 217 is divided into nine subparts:

      Subpart A, General, states the purpose of the regulation.
      Subpart B, Definitions, provides definitions for the relevant regulatory terms.
      Subpart C, Placement of Rated Orders, addresses DOE’s priorities authorities.
      Subpart D, Special Priorities Assistance, describes instances in which DOE can provide assistance in resolving matters related to priority rated contracts and orders.
      Subpart E, Allocation Actions, provides detailed information on the procedures governing allocations actions. Allocations actions would most likely be used in extreme circumstances, such as in response to a national emergency.
      Subpart F, Official Actions, provides the specific official actions the DOE may take to implement the provisions of the EPAS. These official actions include Rating Authorizations, Directives, and Memoranda of Understanding.
      Subpart G, Compliance, provides DOE the authority to enforce the administration of the DPA and other applicable statutes, the EPAS regulation, or an official action. Willful violations of the provisions of Title I of the DPA, the EPAS regulation, or a DOE official action, are criminal acts punishable as provided in the DPA and Section 217.74, Violations, Penalties, and Remedies.
      Subpart H, Adjustments, Exceptions, and Appeals, establishes the procedures to request an adjustment or exception to the provisions of the EPAS on the grounds of exceptional hardship or compliance would be contrary to the intent of the DPA.
      Subpart I, Miscellaneous Provisions, addresses a number of remaining issues, including protection against claims, records and reports, applicability issues, and communications.

Under the EPAS, DOE or its Delegate Agency (“a federal government agency authorized by delegation from the Department of Energy to place priority ratings on contracts or orders needed to support approved programs”) designates certain orders as one of two possible priority levels: “DO” or “DX”. Once so designated, such orders are referred to as “rated orders.” All DO-rated orders have equal priority with each other and take precedence over unrated orders. All DX-rated orders have equal priority with each other and take precedence over DO-rated orders and unrated orders. The recipient of a rated order must give it priority over an unrated order or an order with a lower priority rating. A recipient of a rated order may place orders at the same priority level with suppliers and subcontractors for supplies and services necessary to fulfill the recipient’s rated order and the suppliers, and subcontractors must treat the request from the rated order recipient as a rated order with the same priority level as the original rated order. The rule does not require recipients to fulfill rated orders if the price or terms of sale are not consistent with the price or terms of sale of similar non-rated orders. The rule provides a defense from any liability for damages or penalties for actions taken in, or inactions required for, compliance with the rule.

The EPAS operates very similarly to the Defense Priorities and Allocations System (DPAS). For more information on DPAS, go to the DPAS website at http://www.bis.doc.gov/dpas.



DFARS Rules All Over the Place!

The Department of Defense (DOD) continues its revamping of the Defense Federal Acquisition Regulation Supplement (DFARS) during July, issuing eight final rules, four interim rules, three proposed rules, two class deviations, one determination cancellation, and two policy memoranda!



FAR Rules on Prioritizing Supply Sources, Performance

Two proposed rules to change the Federal Acquisition Regulation (FAR) were published in July:



GAO Rules Limits on IDIQ Protests Have Expired

The Government Accountability Office (GAO) has ruled that the expiration of its authority to hear protests concerning task or delivery orders under indefinite-delivery/indefinite-quantity (IDIQ) contracts that exceed $10,000,000 now allows it to hear all protests against orders under IDIQ contracts (B-405130, Technatomy Corporation, June 14, 2011).

Technatomy Corporation protested the Defense Information Systems Agency (DISA) award of a task order exceeding $10,000,000 under an IDIQ contract issued by the General Services Administration (GSA) on the grounds that DISA unreasonably evaluated vendors’ technical and cost quotations. DISA argued that GAO’s jurisdiction to hear protests concerning task orders under IDIQ contracts valued in excess of $10,000,000 was authorized under 41 U.S. Code 253j(e)(1), but that this authority expired on May 27, 2011, when a sunset provision in Section 253j(e)(3) took effect. [NOTE: On January 4, 2011, Title 41 of the U.S. Code was recodified, and 41 U.S.C. 253j(e) was recodified as 41 U.S.C. § 4106(f). For the sake of clarity, the GAO ruling refers to 41 U.S.C. 253j(e) throughout its decision.]

To understand GAO’s ruling, a bit of history is necessary:

The Competition in Contracting Act of 1984 (CICA) established GAO’s statutory authority to hear protests concerning challenges to the terms of solicitations and the award or proposed award of contracts. CICA did not distinguish between protests of contract awards and protests of task or delivery orders.

In 1994, Congress enacted the Federal Acquisition Streamlining Act (FASA), which amended CICA by limiting the jurisdiction of GAO to hear protests of task or delivery orders placed under IDIQ contracts under both Title 10 and Title 41 of the U.S. Code (Title 10 applies to the Department of Defense (DOD), the National Aeronautics and Space Administration (NASA), and the Coast Guard; Title 41 applies to all other departments and agencies). FASA’s bar on protests of orders applicable to IDIQ contracts under Title 41 (41 U.S.C. 253j(e)), which applies to orders against GSA IDIQ contracts, reads as follows:

      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.

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). Section 843(b) of Public Law 110-181 directs that the following be substituted for 41 U.S.C. 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 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.

Essentially, Section 843(b) of Public Law 110-181 expanded GAO’s jurisdiction to hear protests of task and delivery orders in excess of $10,000,000. The expiration for this provision was May 27, 2011 – three years plus 120 days after enactment of Public Law 110-181 (January 29, 2008).

GAO rules that the sunset provision applies to the entire 41 U.S.C. 253j(e), not just the expansion of GAO’s jurisdiction by Section 843(b) of Public Law 110-181. By placing an expiration date on “this subsection,” GAO’s jurisdiction reverts to that in CICA, which places no restrictions on GAO’s authority to hear protests concerning any task or delivery orders. “In sum, the plain meaning of 41 U.S.C. 253j(e)(3) eliminates any bar to our jurisdiction to hear and issue decisions concerning bid protests arising from task or delivery orders of any value. For this reason, we conclude that we have jurisdiction over the task order protest here.”

NOTE: The expiration date for the similar restriction applicable to DOD, NASA, and the Coast Guard on GAO hearing protests of task and delivery orders exceeding $10,000,000 (10 U.S.C. 2304c(e)) was extended from May 27, 2011, to September 30, 2016, by Section 825 of the National Defense Authorization Act for Fiscal Year 2011 (Public Law 111-383) (see the February 2011 Federal Contracts Perspective article “Defense Authorization Act Enacted”). Therefore, this GAO decision does not apply to DOD, NASA, or the Coast Guard.



Nonmanufacturer Rule Retraction for Propellants

The Small Business Administration (SBA) is proposing to retract the waiver of the nonmanufacturer rule for petroleum base liquid propellants under North American Industry Classification System (NAICS) code 324110, Petroleum Refineries, Product Service Code (PSC) 9130, Liquid Propellants, Petroleum Base, based on information SBA received from the Defense Logistics Agency, Defense Energy Support Center (DESC), Fort Belvoir, VA.

On May 11, 2009, SBA published a Notice of Intent to grant a waiver of the nonmanufacturer rule for petroleum base liquid propellants. SBA invited comments on the proposed waiver, but no comments were received, so SBA finalized the waiver on June 8, 2009 (see the July 2009 Federal Contracts Perspective article “One Nonmanufacturer Waiver Approved, One Proposed”). However, DESC was not aware of the notice until after the closing date for submission of comments. DESC has awarded prime contracts to, or received offers from, multiple small business refiners, so the waiver should not have been granted.

On August 4, 2009, SBA published a notice of intent to retract the petroleum base liquid propellants waiver, and sought comments (see the September 2009 Federal Contracts Perspective article “Retraction of Two Nonmanufacturer Waivers Proposed”). Yet a final notice of retraction was never published, so SBA is again proposing to retract the waiver of the nonmanufacturer rule for petroleum base liquid propellants under NAICS code 324110. Comments and source information must be submitted no later than June 20, 2011, to Amy Garcia, Procurement 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/sites/default/files/05262011_class_waivers.pdf.



GSA Implementing IT Security Provision

The General Services Administration (GSA) is amending the GSA Acquisition Regulation (GSAR) to add Subpart 539.70, Additional Requirements for Purchases Not in Support of National Security Systems, and a corresponding provision and clause, to implement policy and guidelines for contracts and orders that include information technology (IT) supplies, services and systems with security requirements.

New GSAR Subpart 539.70 requires that employees responsible for or procuring information technology supplies, services, and systems (including contracting officers, contract specialists, project/program managers, and contracting officer representatives) possess the appropriate security clearance associated with the level of security classification related to the acquisition, and that contracting activities coordinate with requiring activities and program officials to ensure the solicitation documents include the appropriate information security requirements. “The information security requirements must be sufficiently detailed to enable service providers to fully understand the information security regulations, mandates, and requirements that they will be subject to under the contract or task order” (paragraph (c) of GSAR 539.7001, Policy). Finally, it requires that the Chief Information Officer’s IT Security Procedural Guide 09-48, Security Language for Information Technology Acquisitions Efforts, be inserted in all solicitations and contracts or task orders where an information system is contractor owned and operated on behalf of the federal government (http://www.gsa.gov/portal/category/25690).

Both GSAR 552.239-70, Information Technology Security Plan and Security Authorization, and GSAR 552.239-71, Security Requirements for Unclassified Information Technology Resources, are to be included in solicitations and contracts that include IT supplies, services, or systems in which the contractor will have physical or electronic access to government information that directly supports the mission of GSA:

Comments on this A HREF="http://www.gpo.gov/fdsys/pkg/FR-2011-06-15/html/2011-14728.htm">interim rule must be submitted no later than August 15, 2011, identified as “GSAR Case 2011-G503,” 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.



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