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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


March 2012
Vol. XIII, No. 3

CONTENTS


Size Standards Finalized for Professional, Technical Services and Transportation
USDA Withdraws Labor Law Violations Rule
Foreign Contractor Excise Tax Would Be Unallowable
Acquisition Thresholds in GSAR Adjusted
EPA Amends Prescription for Work Assignment Clause



Size Standards Finalized for Professional,
Technical Services and Transportation

The Small Business Administration (SBA) is increasing 37 small business size standards for 34 industries and three sub-industries (“exceptions” in SBA’s table of small business size standards) in North American Industry Classification System (NAICS) Sector 54, Professional, Technical, and Scientific Services. SBA is retaining the current standards for the remaining industries in NAICS Sector 54, except that SBA is removing “Map Drafting” as the exception to NAICS 541340, Drafting Services. Also, SBA is increasing the small business size standards for 22 industries in NAICS Sector 48, Transportation and Warehousing, and retaining the current standards for the remaining 37 industries in that sector. Finally, SBA is increasing the one size standard in NAICS Sector 81, Other Services, that it did not review in 2010: Computer and Office Repair and Maintenance.

The following are the previous and revised size standards in these sectors (in millions of dollars) (* indicates different from proposed size standard):

NAICS Code Industry Title Current Size Standard
($ million)
Revised Size Standard
($ million)
Sector 54
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 19.0*
541213 Tax Preparation Services 7.0 19.0*
541214 Payroll Services 8.5 19.0*
541219 Other Accounting Services 8.5 19.0*
541310 Architectural Services 4.5 7.0*
541320 Landscape Architectural Services 7.0 7.0*
541330 Engineering Services 4.5 14.0*
      except Military and Aerospace Equipment and Military Weapons 27.0 35.0*
      except Contracts and Subcontracts for Engineering Services Awarded
Under the National Energy Policy Act of 1992
27.0 35.5*
      except Marine Engineering and Naval Architecture 18.5 35.5*
541340 Drafting Services 7.0 7.0*
      except Map Drafting 4.5 Eliminated*
541350 Building Inspection Services 7.0 7.0*
541360 Geophysical Surveying and Mapping Services 4.5 14.0*
541370 Surveying and Mapping (except Geophysical) Services 4.5 14.0*
541380 Testing Laboratories 12.0 14.0*
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
541910 Marketing Research and Public Opinion Polling 7.0 14.0*
541990 All Other Professional, Scientific, and Technical Services 7.0 14.0*
                    
Sector 48
481219 Other Non-Scheduled Air Transportation 7.0 14.0
485111 Mixed Mode Transit Systems 7.0 14.0
485112 Commuter Rail Systems 7.0 14.0
485113 Bus and Other Motor Vehicle Transit Systems 7.0 14.0
485119 Other Urban Transit Systems 7.0 14.0
485210 Interurban and Rural Bus Transportation 7.0 14.0
485310 Taxi Service 7.0 14.0
485320 Limousine Service 7.0 14.0
485410 School and Employee Bus Transportation 7.0 14.0
485510 Charter Bus Industry 7.0 14.0
485991 Special Needs Transportation 7.0 14.0
485999 All Other Transit and Ground Passenger Transportation 7.0 14.0
486210 Pipeline Transportation of Natural Gas 7.0 25.5
488111 Air Traffic Control 7.0 30.0
488119 Other Airport Operations 7.0 30.0
488190 Other Support Activities for Air Transportation 7.0 30.0
488210 Support Activities for Rail Transportation 7.0 14.0
488310 Port and Harbor Operations 25.5 35.5
488320 Marine Cargo Handling 25.5 35.5
488330 Navigational Services to Shipping 7.0 35.5
488390 Other Support Activities for Water Transportation 7.0 35.5
488510 Freight Transportation Arrangement 7.0 14.0
                    
Sector 81
811212 Computer and Office Repair and Maintenance 25.0 25.5

See the April 2010 Federal Contracts Perspective article "Technical Services Size Standards Increase Proposed for more on SBA’s review of the NAICS Sector 54 size standards. November 2010 Federal Contracts Perspective article “SBA Increases Size Standards in 69 Industries” for more on SBA’s review of the NAICS Sector 81 size standards. See the June 2011 Federal Contracts Perspective article “Transportation Size Standard Increases Proposed” for more on SBA’s review of the NAICS Sector 48-49 size standards.

In addition, SBA is proposing to increase the small business size standards for the following 28 industries in NAICS Sector 62, Health Care and Social Assistance:

NAICS Code Industry Title Current Size Standard
($ million)
Revised Size Standard
($ million)
621420 Outpatient Mental Health and Substance Abuse Centers 10.0 14.0
621491 Health Maintenance Organization (HMO) Medical Centers 10.0 30.0
621492 Kidney Dialysis Centers 34.5 35.5
621493 Freestanding Ambulatory Surgical and Emergency Centers 10.0 14.0
621498 All Other Outpatient Care Centers 10.0 19.0
621511 Medical Laboratories 13.5 30.0
621512 Diagnostic Imaging Centers 13.5 14.0
621610 Home Health Care Services 13.5 14.0
621910 Ambulance Services 7.0 14.0
621991 Blood and Organ Banks 10.0 30.0
621999 All Other Miscellaneous Ambulatory Health Care Services 10.0 14.0
622110 General Medical and Surgical Hospitals 34.5 35.5
622210 Psychiatric and Substance Abuse Hospitals 34.5 35.5
622310 Specialty (except Psychiatric and Substance Abuse) Hospitals 34.5 35.5
623110 Nursing Care Facilities 13.5 25.5
623210 Residential Mental Retardation Facilities 10.0 14.0
623220 Residential Mental Health and Substance Abuse Facilities 7.0 14.0
623311 Continuing Care Retirement Communities 13.5 25.5
623312 Homes for the Elderly 7.0 10.0
623990 Other Residential Care Facilities 7.0 10.0
624110 Child and Youth Services 7.0 10.0
624120 Services for the Elderly and Persons with Disabilities 7.0 10.0
624190 Other Individual and Family Services 7.0 10.0
624210 Community Food Services 7.0 10.0
624221 Temporary Shelters 7.0 10.0
624229 Other Community Housing Services 7.0 14.0
624230 Emergency and Other Relief Services 7.0 30.0
624310 Vocational Rehabilitation Services 7.0 10.0

Comments on this proposed rule must be submitted no later than April 24, 2012, identified as “RIN RIN 3245-AG30,” by one of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail/hand delivery/courier: Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street, SW, Mail Code 6530, Washington, DC 20416. SBA will not accept comments on this proposed rule submitted by email.



USDA Withdraws Labor Law Violations Rule

The U.S. Department of Agriculture (USDA) is withdrawing its direct final rule that would have added a new clause to the Agriculture Acquisition Regulation (AGAR), AGAR 452.222-7001, Labor Law Violations, to ensure USDA contractors and subcontractors comply with all applicable labor laws.

The following is the text of the withdrawn clause: “In accepting this contract award, the contractor certifies that it is in compliance with all applicable labor laws and that, to the best of its knowledge, its subcontractors of any tier, and suppliers, are also in compliance with all applicable labor laws. The Department of Agriculture will vigorously pursue corrective action against the contractor and/or any tier subcontractor (or supplier) in the event of a violation of labor law made in the provision of supplies and/or services under this or any other government contract. The contractor is responsible for promptly reporting to the contracting officer when formal allegations or formal findings of non-compliance of labor laws are determined. The Department of Agriculture considers certification under this clause to be a certification for purposes of the False Claims Act. The Department will cooperate as appropriate regarding labor laws applicable to the contract which are enforced by other agencies.” The clause was to be included in all USDA contracts exceeding the simplified acquisition threshold ($150,000).

The clause would have been added to the AGAR on February 29, 2012, unless “any timely significant adverse comments” were received by January 30, 2012, in which case the direct final rule would be withdrawn. “On January 27, 2012, USDA received a comment. USDA interprets this comment as adverse and, therefore, USDA is withdrawing the direct final rule.”

Though 35 respondents submitted comments on USDA’s direct final rule, USDA did not identify which comment precipitated the withdrawal. However, the Equal Employment Advisory Council (EEAC), “a national nonprofit association…comprised of nearly 300 of the nation’s largest private sector companies, collectively providing employment to more than 20 million people throughout the United States”, submitted comments dated January 24, 2012, and those comments are similar to those submitted by many other respondents.

“The sheer breadth and practical infeasibility of the certification requirement, coupled with the specter of potential False Claims Act (FCA) liability, makes the proposed contract clause onerous and punitive in the extreme,” wrote Jeffrey Norris, EEAC president. “The reporting requirement is also vague and unduly burdensome, and potentially exposes contractors to ‘blacklisting’ by USDA contracting officers.”

Mr. Norris went on to subdivide EEAC’s objections into the following categories:

For more on the proposed clause, see the January 2012 Federal Contracts Perspective article “New AGAR Clause on Labor Law Violations.”



Foreign Contractor Excise Tax Would Be Unallowable

A revision to the FAR is being proposed that would impose on any foreign person that receives a specified federal procurement payment a 2% tax on the payment, and the tax would be unallowable for reimbursement.

Section 301 of the James Zadroga 9/11 Health and Compensation Act of 2010 (Public Law 111-347) adds a new Section 5000C, Imposition of Tax on Certain Foreign Procurement, to the Internal Revenue Code (Title 26 of the U.S. Code). It imposes a 2% tax on any foreign person (including any individual, partnership, corporation, or other form of association) who receives federal procurement payments pursuant to a contract with the government of the United States for the provision of goods, if such goods are manufactured or produced in a covered country, or for the provision of services if those services are provided in a covered country. A “covered country” is one that is not a party to an international procurement agreement with the United States. Furthermore, “the head of each executive agency shall take any and all measures necessary to ensure that no funds are disbursed to any foreign contractor in order to reimburse the tax imposed under Section 5000C of the Internal Revenue Code of 1986” – in other words, such 2% tax is “not allowable.”

This proposed rule would revise FAR 31.205-41, Taxes, to add that “any tax imposed under 26 U.S.C. 5000C” is not an allowable cost. In addition, the rule would add “Taxes imposed under 26 U.S.C. 5000C may not be (i) included in the contract price; nor (ii) reimbursed” to FAR 52.229-3, Federal, State, and Local Taxes; FAR 52.229-4, Federal, State, and Local Taxes (State and Local Adjustments); FAR 52.229-6, Taxes-Foreign Fixed – Price Contracts; and FAR 52.229-7, Taxes – Foreign Fixed-Price Contract With Foreign Governments.

Comments on this proposed rule must be submitted no later than April 23, 2012, identified as “FAR Case 2011-011,” 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, 7th Floor, Washington, DC 20417.



Acquisition Thresholds in GSAR Adjusted

The General Services Administration (GSA) is amending the GSA Acquisition Regulation (GSAR) to comply with changes made to acquisition-related thresholds by Federal Acquisition Circular (FAC) 2005-45 (see the September 2010 Federal Contracts Perspective article “Federal Acquisition-Related Thresholds Adjusted for Inflation”).

The changes are to two clauses: GSAR 552.219-71, Notice to Offerors of Subcontracting Plan Requirements, and GSAR 552.219-72, Preparation, Submission, and Negotiation of Subcontracting Plans. In both, the threshold for submission of subcontracting plans by prime contractors is increased from $500,000 to $650,000 (for construction contracts, from $1,000,000 to $1,500,000).

Section 807 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375) requires that acquisition-related thresholds be adjusted every five years (“on October 1 of each year that is evenly divisible by five”) for inflation using the Consumer Price Index for all urban consumers (except for Davis-Bacon Act, Service Contract Act, and trade agreements thresholds). FAC 2005-45 was the most recent required adjustment.



EPA Amends Prescription for Work Assignment Clause

The Environmental Protection Agency (EPA) is amending the EPA Acquisition Regulation (EPAAR) prescription for use of the clause at EPAAR 1552.211-74, Work Assignments, to provide further instructions on the use of the clause.

Recent contract file review activities revealed better guidance is needed for EPA contracting officers on the work plan and work assignment processes regarding when a contracting officer should provide the expected level of service needed to the contractor. As a result, clarifying policy is being added to EPAAR 1511.011-74, Work Assignments, on the proper issuance of work assignments.

Originally, EPAAR 1511.011-74 merely stated that EPAAR 1552.211-74 was to be inserted in cost-reimbursement type term form contracts when work assignments are used, and that one of two alternatives be inserted for Superfund contracts. This language being redesignated as paragraph (b) of EPAAR 1511.011-74, and the following is being added as new paragraph (a):

           (a) Policy. When issuing work assignments, the independent government cost estimate shall not be released to the contractor. In most cases the contracting officer (CO) should authorize the contractor to expend only the estimated labor hours necessary to develop the work plan and to initiate preliminary tasks which must be performed before work plan approval can be made. However, in cases where the uncertainties involved in the effort are of such a magnitude that there is no reasonable expectation that the contractor can estimate the level of effort required by the tasks, objectives, or outcomes of the requirement, the CO may provide a ceiling level of effort for the entire work assignment at the time of its issuance. In such cases, the specific uncertainties precluding reasonable estimation of the required level of effort on the contractor's part must be documented in the contract file.

A revision will not be required to EPAAR 1552.211-74 because this does not revise in any way the meaning of the clause. The revised language communicates to contract personnel and program staff that government cost-related estimates should not be provided to contractors prior to receiving the contractor's work plan (proposal); and how to address exceptions. The exceptions addressed in the policy involve circumstances where a contracting officer may need to be able to provide some of the expected level of service needed to the contractor prior to receipt of the work plan (proposal) due to the nature of the work.



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