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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


September 2011
Vol. XII, No. 9

CONTENTS


Displaced Service Workers Get Right of First Refusal
A Few More Changes to the DFARS
Cost Accounting Standards' Foreign Exemption Repealed
NFS Award Fee Language Revision Finalized
Changes to DIAR Finalized



Displaced Service Workers Get
Right of First Refusal

The Department of Labor (DOL) has issued regulations to implement Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts, which mandates the inclusion of a contract clause requiring a successor contractor and its subcontractors to offer the employees employed under the predecessor contract the right of first refusal of employment under the successor contract in positions for which they are qualified. These regulations will apply to contracts subject to the Service Contract Act that require performance of the same or similar services at the same location. The regulations will go into effect when the Federal Acquisition Regulation (FAR) is amended, and will apply to covered contracts greater than the simplified acquisition threshold ($150,000). The regulations will become Title 29 of the Code of Federal Regulations, Part 9, Nondisplacement of Qualified Workers Under Service Contracts (29 CFR Part 9).

The executive order included the text of the contract clause that must be included in solicitations and contracts covered by the order, and that text is included in 29 CFR Part 9, Appendix A. The clause requires the contractor, no later than 10 days before completion of the contract, to furnish the contracting officer a certified list of the names of all service employees working under this contract and its subcontracts during the last month of contract performance. The contracting officer will provide the list to the successor contractor, and the list will be provided on request to employees or their representatives.

The successor contractor and subcontractors must offer the employees on the list the right of first refusal of employment in positions for which employees are qualified under the successor contract. “The contractor and its subcontractors shall determine the number of employees necessary for efficient performance of this contract and may elect to employ fewer employees than the predecessor contractor employed in connection with performance of the work…there shall be no employment opening under this contract, and the contractor and any subcontractors shall not offer employment under this contract, to any person prior to having complied fully with this obligation.” The contractor and its subcontractors must make an express offer of employment to each employee and provide at least 10 days for acceptance of the offer.

There are several exceptions to this requirement:

Even with the requirements of the executive order and DOL’s implementing regulations, a contractor or subcontractor determines the number of employees necessary for efficient performance of the contract or subcontract and may decide to employ fewer employees than the predecessor contractor employed to perform the work – the successor contractor need not offer employment on the contract to all employees on the predecessor contract, but must offer employment only to the number of eligible employees the successor contractor believes necessary to meet its anticipated staffing pattern (there are exceptions, of course).

For more on Executive Order 13495, see the March 2009 Federal Contracts Perspective article “Obama Issues Four Labor-Related Executive Orders.”



A Few More Changes to the DFARS

The Department of Defense (DOD) took a break in August, merely issuing three final rules, one interim rule, and a memorandum encouraging the solicitation of small businesses when acquiring supplies or services from the Federal Supply Schedules.



Cost Accounting Standards’ Foreign Exemption Repealed

The Cost Accounting Standards Board (CASB) has decided to eliminate the exemption from regulations regarding Cost Accounting Standards (CAS) for contracts executed and performed entirely outside the United States, its territories, and possessions. This exemption from CAS was in paragraph (b)(14) of Title 48 of the Code of Federal Regulations (CFR), Section 9903.201-1, CAS Applicability. It exempted from all CAS requirements “contracts and subcontracts to be executed and performed entirely outside the United States, its territories, and possessions.” This exemption has been in effect since 1973.

Section 823 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Public Law 110-417) required the CASB to (1) review the applicability of CAS to contracts and subcontracts which would be subject to CAS but for the fact that they are executed and performed entirely outside the United States, and (2) determine whether the government would benefit from the application of CAS to such contracts and subcontracts. Therefore, the CASB invited the public to comment and provide information on the exemption (see the May 2009 Federal Contracts Perspective article “Should Foreign Contracts Be Exempt from CAS?").

The CASB received comments from seven respondents and from the three government organizations, and the CASB concluded that the (b)(14) overseas exemption should be eliminated because (1) there is no accounting basis for the exemption – the place of contract execution and performance is not germane to the fundamental principles and methods used to account for the costs of contract performance, and (2) the volume of affected contractors and subcontractors is relatively small. So the CASB published a notice of proposed rule to eliminate the (b)(14) overseas exemption (see the November 2010 Federal Contracts Perspective article “Foreign Exemption to CAS Proposed for Removal”).

The CASB received comments on the notice of proposed rule from five respondents: a federal agency, a consultant, a public interest group, an industry association, and a trade association. Several of the respondents concurred with the proposed rule, and those who disagreed did not persuade the CASB to retain the exemption. Consequently, the CASB has removed 9903.201-1(b)(14).

In other CAS-related actions, the following rulemakings have been discontinued by the CASB:



NFS Award Fee Language Revision Finalized

The National Aeronautics and Space Administration (NASA) is finalizing, without changes, the interim rule that revised NASA FAR Supplement (NFS) Subpart 1816.4, Incentive Contracts, to bring it into conformance with the changes made to the FAR by Federal Acquisition Circular (FAC) 2005-46.

FAC 2005-46 revised FAR 16.305, Cost-Plus-Award-Fee Contracts, FAR 16.401, General [for Incentive Contracts], and FAR 16.405-2, Cost-Plus-Award-Fee Contracts, to incorporate new requirements on the use of award fee incentives as directed by Section 814 of the Fiscal Year (FY) 2007 National Defense Authorization Act (Public Law 109-364) and Section 867 of the FY 2009 National Defense Authorization Act (Public Law 110-417). These revisions in the FAR award fee guidance resulted in the need to make associated changes to the NFS award fee regulations. These changes were made by an interim rule (see the March 2011 Federal Contracts Perspective article “NFS Implements FAR Award Fee Revision”). No comments on the interim rule were submitted, so the interim rule is finalized without changes.

For more on FAC 2005-46, see the October 2010 Federal Contracts Perspective article “FAC 2005-46 Exempts Commercial IT from BAA.”



Changes to DIAR Finalized

The Department of the Interior (DOI) is finalizing changes it proposed to the DOI 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.

No comments were received in response to the proposed rule, so it is finalized without changes. For more on the proposed rule, see the April 2011 Federal Contracts Perspective article “Changes to DIAR Proposed.”



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