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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

April 2012
Vol. XIII, No. 4

CONTENTS

FAC 2005-56 Finalizes Rules on Women-Owned Business
Set-Asides, Use of Cost-Reimbursement Contracts

Federal Acquisition Circular (FAC) 2005-56 is amending the Federal Acquisition Regulation (FAR) to finalize rules implementing the women-owned small business set-aside program; providing guidance on the proper use and management of cost-reimbursement contracts; mandate competition for orders placed against multiple-award contracts (including those against Federal Supply Schedule contracts); clarifying current reporting, reutilization, and disposal of government property; and adjusting trade agreements thresholds (along with adding Korea and Armenia as covered countries).

• Women-Owned Small Business (WOSB) Program: This finalizes, with changes, the interim rule in FAC 2005-51 that added FAR Subpart 19.15, Women-Owned Small Business Program, to institute set-asides for women-owned small businesses (WOSBs) and economically disadvantaged women-owned small businesses (EDWOSBs).
  
  The WOSB Program permits contracting officers to restrict competition for certain federal contracts to WOSBs and EDWOSBs to help federal agencies achieve the 5% statutory goal for contracting with WOSBs. Contracting officers may restrict competition to EDWOSBs in 211 industries identified by six-digit North American Industry Classification Systems (NAICS) codes where SBA has determined that WOSB concerns are underrepresented, and may restrict competition to WOSBs or EDWOSBs in 157 industries identified by six-digit NAICS codes where WOSB concerns are substantially underrepresented (see FAR 19.1505, Set-Aside Procedures). A list of the 368 industries is at http://www.sba.gov/sites/default/files/files/WOSB Program Applicable NAICS Codes.xlsx. In addition, the anticipated award price (including options) cannot exceed $6,500,000 for contracts assigned a manufacturing NAICS code, or $4,000,000 for all other contracts. Finally, the WOSBs and EDWOSBs must meet other eligibility criteria that are in the Small Business Administration’s (SBA’s) regulations at Title 13 of the Code of Federal Regulations, Part 127, Women-Owned Small Business Federal Contract Program (such as net worth of the owners).
  
  Seven respondents submitted comments on the interim rule and, in response, the term “WOSB concern” is changed to “WOSB concern eligible under the WOSB Program” throughout FAR Part 19, Small Business Programs; in the corresponding provisions and clauses in FAR Part 52, Solicitation Provisions and Contract Clauses; and in the following forms: Optional Form (OF) 347, Order for Supplies and Services; Standard Form (SF) 1447, Solicitation/Contract; and SF 1449, Solicitation/Contract/Order for Commercial Items.
  
  For more on the interim rule, see the May 2011 Federal Contracts Perspective article “Women-Owned Small Business Program Instituted by FAC 2005-51.”
  
  
• Proper Use and Management of Cost-Reimbursement Contracts: This finalizes, with changes, the interim rule in FAC 2005-50 that amended FAR Subpart 1.6, Career Development, Contracting Authority, and Responsibilities; FAR Subpart 7.1, Acquisition Plans; and FAR Subpart 16.3, Cost-Reimbursement Contracts, 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. In addition, the interim rule added a requirement that the contracting officer designate and authorize a properly trained contracting officer’s representative (COR) prior to award of a contract or order that is other than firm-fixed price.
  
  Six respondents submitted comments on the interim rule and, as a result, the following changes are made to the final rule:
  
  
  • Paragraph (d) of FAR 1.602-2, Responsibilities [of contracting officers], is revised to clarify that COR duties may be retained by contracting officers; the language previously in the second sentence has been revised and moved to the first sentence.
    
    
  • In FAR 1.602-2(d)(2), which addresses COR certification requirements, the word “current” has been added before “Office of Management and Budget memorandum on the Federal Acquisition Certification for Contracting Officer Representatives (FAC-COR) guidance”, and “dated November 26, 2007” have been removed. In addition, the phrase “or for DOD [Department of Defense], DOD Regulations as applicable” has been replaced by the phrase “or for DOD, in accordance with the current applicable DOD policy guidance.”
    
    
  • In paragraph (e) of FAR 7.104, General Procedures [for acquisition planning], the words “and designated and authorized by the contracting officer” are removed from “the planner shall ensure that a COR is nominated by the requirements official, and designated and authorized by the contracting officer” because they are redundant to language in the following sentence: “The contracting officer shall designate and authorize a COR as early as practicable after the nomination.”
    
    
  • Because the need to document the contract file regarding the selection of contract type is already addressed adequately in paragraph (d)(1) of FAR 16.103, Negotiating Contract Type, the second to last sentence in paragraph (b) of FAR 16.301-2, Application [of cost-reimbursement contracts], is removed: “If a written acquisition plan is not required, the contracting officer shall document the rationale in the contract file.”
    
    
  • To the beginning of paragraph (a)(4) of FAR 16.301-3, Limitations [on use of cost-reimbursement contracts], is added the following: “Prior to award of the contract or order” is added before “adequate government resources are available to award and manage a contract other than firm-fixed-priced…”
  
  For more on the interim rule, see the April 2011 Federal Contracts Perspective article “FAC 2005-50 Mandates Competition for MAC Orders, Socioeconomic Program Parity.”
  
  
• Requirements for Acquisitions Pursuant to Multiple-Award Contracts: This finalizes, with changes, the interim rule that amended FAR Subpart 8.4, Federal Supply Schedules, and FAR Subpart 16.5, Indefinite-Delivery Contracts, to mandate enhanced competition for orders exceeding the simplified acquisition threshold ($150,000) placed under multiple-award contracts (MACs), including the General Services Administration’s (GSA’s) Federal Supply Schedules (FSS).
  
  The primary provisions of the interim rule were: (1) the requirement for fair notice of orders under the FSS and other MACs to contract holders and the opportunity for contract holders to respond; and (2) posting a notice in FedBizOpps (https://www.fbo.gov) of certain orders placed under MACs, including FSS.
  
  Seven respondents submitted comments on the interim rule and, as a result, the following changes are made to the final rule:
  
  
  • The threshold amount for head of the agency approval for award of a single-award blanket purchase agreement in paragraph (a)(7)(v) of FAR 8.405-3, Blanket Purchase Agreements (BPAs), is corrected from $100,000,000 to $103,000,000. This now conforms with the correct threshold amount in paragraph (a)(3)(iii).
    
    
  • To the end of FAR 8.405-3(c)(3) is added the following: “The ordering activity is responsible for considering the level of effort and the mix of labor proposed to perform a specific task being ordered, and for determining that the total price is reasonable through appropriate analysis techniques, and documenting the file accordingly.” This is added to ensure the price of an order requiring a statement of work is being evaluated when placed under a BPA with hourly rate services. This language is consistent with the evaluation procedures for orders requiring a statement of work in paragraph (d) of FAR 8.405-2, Ordering Procedures for Services Requiring a Statement of Work.
    
    
  • FAR 8.405-3(e)(3) is removed: “If a single-award BPA is established, the ordering activity contracting officer’s annual determination must be approved by the ordering activity’s competition advocate prior to the exercise of an option to extend the term of the BPA.” This was determined to be too stringent a requirement for the exercise of an option, which is generally within a contracting officer’s authority.
  
  For more on the interim rule, see the April 2011 Federal Contracts Perspective article “FAC 2005-50 Mandates Competition for MAC Orders, Socioeconomic Program Parity.”
  
  
• Socioeconomic Program Parity: This finalizes, with changes, the interim rule that clarifies there is no order of precedence among the small business socioeconomic contracting programs, and that contracting officers may exercise discretion when determining whether an acquisition will be restricted to small businesses participating in the 8(a) Business Development Program (8(a)), Historically Underutilized Business Zones (HUBZone) Program, Service-Disabled Veteran-Owned Small Business (SDVOSB) Program, or the Women-Owned Small Business (WOSB) Program.
  
  Eighteen respondents submitted comments on the interim rule and, as a result, the following changes are made to the final rule:
  
  
  • Paragraph (b) of FAR 19.203, Relationship Among Small Business Programs, which addresses acquisitions at or below the simplified acquisition threshold ($150,000), is clarified to reflect that the paragraph applies to acquisitions with an anticipated value above the micro-purchase threshold but not exceeding the simplified acquisition threshold. In addition, the following sentence is deleted: “If the contracting officer does not proceed with a small business set-aside and purchases on an unrestricted basis, the contracting officer shall include in the contract file the reason for this unrestricted purchase.”
    
    
  • Paragraph (e) of FAR 19.800, General [for 8(a) program], is revised to clarify that the contracting officer shall consider 8(a) set-asides or sole source awards before considering a general small business set-aside.
    
    
  • Paragraph (a) of FAR 19.1306, HUBZone Sole Source Awards, is revised from “A contracting officer may award contracts to HUBZone small business concerns on a sole source basis...before considering small business set-asides” to “A contracting officer shall consider a contract award to a HUBZone small business concern on a sole source basis before considering a small business set-aside” (emphasis added).
    
    
  • Paragraph (a) of FAR 19.1406, Sole Source Awards to Service-Disabled Veteran-Owned Small Business Concerns, is revised from “A contracting officer may award contracts to service-disabled veteran-owned small business concerns on a sole source basis...before considering small business set-asides” to “A contracting officer shall consider a contract award to a SDVOSB concern on a sole source basis...before considering small business set-asides” (emphasis added).
    
    
  • An introductory statement is added to FAR 19.800(e), paragraph (a) of FAR 19.1305, HUBZone Set-Aside Procedures, and paragraph (a) of FAR 19.1405, Service-Disabled Veteran-Owned Small Business Set-Aside Procedures, to clarify that the contracting officer must comply with the priorities and considerations in FAR 19.203 when planning an acquisition under the 8(a), HUBZone, or SDVOSB programs.
  
  For more on the interim rule, see the April 2011 Federal Contracts Perspective article “FAC 2005-50 Mandates Competition for MAC Orders, Socioeconomic Program Parity.”
  
  
• Trade Agreements Thresholds: This final rule adjusts the thresholds for application of the World Trade Organization Government Procurement Agreement (WTO GPA) and the various free trade agreements (FTAs) as determined by the United States Trade Representative (see the January 2012 Federal Contracts Perspective article “Procurement Thresholds Adjusted for Trade Agreements Acts”).
  
  This rule revises the table in paragraph (b) of FAR 25.402, General [for trade agreements], to read as follows:
  
  

  Trade Agreement	Supply Contract (equal to or exceeding)	Service Contract (equal to or exceeding)	Construction Contract (equal to or exceeding)
  WTO GPA	$202,000	$202,000	$7,777,000
  FTAs:
  Australia FTA	$77,494	$77,494	$7,777,000
  Bahrain FTA	$202,000	$202,000	$10,074,262
  Central America FTA       (Costa Rica, Dominican Republic,       El Salvador, Guatemala,       Honduras, Nicaragua)	$77,494	$77,494	$7,777,000
  Chile FTA	$77,494	$77,494	$7,777,000
  Morocco FTA	$202,000	$202,000	$7,777,000
  North American FTA (NAFTA):
  Canada	$25,000	$77,494	$10,074,262
  Mexico	$77,494	$77,494	$10,074,262
  Oman FTA	$202,000	$202,000	$10,074,262
  Peru FTA	$202,000	$202,000	$7,777,000
  Singapore FTA	$77,494	$77,494	$7,777,000
  Israeli Trade Act	$50,000	–	–

  
  Corresponding changes are made to FAR 22.1503, Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor; FAR 25.202, Exceptions [for construction materials]; FAR 25.603, Exceptions [for construction materials under the American Recovery and Reinvestment Act; FAR 25.1101, Acquisition of Supplies [provisions and clauses]; FAR 25.1102, Acquisition of Construction [provisions and clauses]; FAR 52.204-8, Annual Representations and Certifications; and FAR 52.222-19, Child Labor – Cooperation with Authorities and Remedies.
  
  In a related development, FAC 2005-57 implements the United States-Korea FTA by adding the Korea FTA to the table in FAR 25.402(b) with the following entries: Supply Contract (equal to or exceeding): $100,000; Service Contract (equal to or exceeding): $100,000; and Construction Contract (equal to or exceeding): $7,777,000. The Republic of Korea is already party to the WTO GPA, so the Korea FTA now covers acquisition of supplies and services between $100,000 and the current WTO GPA threshold of $202,000.
  
  Because the $100,000 Korea FTA threshold for supplies and services is higher than the threshold for supplies and services for most of the FTAs ($77,494), but not as high as the $202,000 threshold for supplies and services in the Bahrain, Morocco, Oman, and Peru FTAs, new alternates are added to FAR 52.225-3, Buy American Act – Free Trade Agreements – Israeli Trade Act, and FAR 52.225-4, Buy American Act – Free Trade Agreements – Israeli Trade Act Certificate, to cover acquisitions valued at $77,494 or more but less than $100,000.
  
  Finally, the definitions of “designated country” and “Free Trade Agreement country” in FAR 25.003, Definitions, are amended to add Korea, and comparable changes are made to FAR 25.400, Scope of Subpart [trade agreements], FAR 52.225-5, Trade Agreements, FAR 52.225-11, Buy American Act – Construction Materials Under Trade Agreements, and FAR 52.225-23, Required Use of American Iron, Steel, and Manufactured Goods – Buy American Act – Construction Materials Under Trade Agreements.
  
  
• New Designated Country (Armenia) and Other Trade Agreements Updates: This final rule amends the definitions of “designated country” and “World Trade Organization Government Procurement Agreement (WTO GPA) country” in FAR 25.003, Definitions, to add Armenia. This permits contracting officers to purchase the goods and services of Armenia without application of the Buy American Act if the acquisition is covered by the WTO GPA.
  
  Also, this final rule updates the list of countries that are party to the Agreement on Trade in Civil Aircraft in FAR 25.407, Agreement on Trade in Civil Aircraft, and FAR 52.225-7, Waiver of Buy American Act for Civil Aircraft and Related Articles, by adding the following countries: Albania, Cyprus, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, and Taiwan (Chinese Taipei).
  
  
• Government Property: This finalizes, with changes, the proposal to amend FAR Part 45, Government Property, to clarify current reporting, reutilization, and disposal of government property under FAR 52.245-1, Government Property. In addition, a number of other changes were proposed to enhance the management of government contract property in the possession of contractors.
  
  The proposed rule would make the following significant changes:
  
  
  • The following definition of “surplus property” is added to FAR 2.101, Definitions: “Surplus property means excess personal property not required by any federal agency as determined by the Administrator of the General Services Administration (GSA). (See 41 CFR 102-36.40).”
    
    
  • Terminology is updated and used consistently throughout the FAR. For example, “loss of government property” is defined in FAR 45.101, Definitions, and “loss” is used consistently instead of “loss, damage, destruction, or theft.”
    
    
  • FAR 45.104, Responsibility and Liability for Government Property, is revised to clarify, and distinguished among, the responsibilities and authorities of the contracting officer, property administrator, plant clearance officer, and contractor.
    
    
  • FAR Subpart 45.6, Reporting, Reutilization, and Disposal, is reorganized, and procedures and responsibilities for government property disposal are clarified.
    
    
  • FAR 52.245-1 is reorganized, clarified, and updated to conform to the revisions to FAR Part 45.
  
  Eight respondents submitted comments on the proposed rule and, as a result, the following changes are made to the final rule:
  
  
  • Paragraph (d) of FAR 45.201, Solicitation, is revised to clarify that the contracting officer can provide additional instructions on property management, accountability, and use in a special provision. Prior to this change, such instructions were required to be included in the statement of work only.
    
    
  • Paragraph (a) of FAR 45.606, Contractor Scrap Procedures, is revised to require the property administrator to work in coordination with the plant clearance officer to ensure that contractor scrap disposal processes are effective and properly documented.
  
  For more on the proposed rule, see the May 2011 Federal Contracts Perspective article “Proposals on Service Contract, Property Reporting.”

HUDAR Update Proposed

The Department of Housing and Urban Development (HUD) is proposing to update the HUD Acquisition Regulation (HUDAR), which was last revised on January 13, 2006. This proposed revision would remove provisions that are obsolete, refine provisions to approve requests for deviation from the HUDAR, update provisions that address the organizational structure of HUD, and add provisions on contractor record retention.

The following are some of the more significant changes to the HUDAR that are being proposed:

• HUDAR 2401.403, Individual Deviations, and HUDAR 2401.404, Class Deviations, would be revised to remove procedural guidance on processing FAR and HUDAR deviations and merely state the designation of the Senior Procurement Executive (SPE) as the approving authority. The removed procedural guidance would be incorporated in new HUDAR 2401.471, Requests for Deviations – FAR and HUDAR.
  
  
• HUDAR 2402.101, Definitions, would be revised to add a definition of contracting activity (“means the Office of the Chief Procurement Officer”), and change the definitions of the head of the contracting activity (HCA) and legal counsel to reflect the current HUD organizational structure. The Office of the Chief Procurement Officer (OCPO) is now responsible for all HUD acquisition, and the Chief Procurement Officer (CPO) serves as the sole HCA. The revised HCA definition authorizes the CPO to delegate HCA authority down to, but not below, the level of the Assistant CPOs when the FAR and HUDAR permit such delegation.
  
  
• New HUDAR Subpart 2404.7, Contractor Records Retention, would consist of HUDAR 2404.7001, Contract Clause, which would consist of the prescription for new HUDAR 2452.204-70, Preservation of, and Access to, Contract Records (Tangible and Electronically Stored Information (ESI) Formats). HUDAR 2452.204-70 would ensure that contractors preserve information and provide it to HUD upon request for the purpose of discovery required by actual or anticipated litigation.
  
  
• HUDAR 2406.304-70, Approval of the Justification – Field Procurements, would be removed because all HUD contracting personnel are now part of a single OCPO. Consequently, the processing requirements for justifications are the same for all OCPO offices.
  
  
• New HUDAR 2415.203, Requests for Proposals, would authorize contracting officers to limit the size of technical and management portions of offers submitted in response to requests for proposals.
  
  
• HUDAR 2415.209, Solicitation Provisions [for negotiated procurements], would prescribe the use of new HUDAR 2452.215-71, Relative Importance of Technical Evaluation Factors to Cost or Price, in solicitations using the tradeoff selection method. The provision would notify offerors of the relative weight of the technical evaluation factors to cost or price when evaluating offers for contract award. The contracting officer would select the relative weighting to be used.
  
  
• Paragraph (b) of HUDAR 2415.303, Responsibilities [for source selection], would be revised to remove the specific number of participants to be used on a technical evaluation panel. This would permit contracting officers and requiring activities to determine the appropriate number of evaluation panelists on a case-by-case basis.
  
  
• Paragraph (d)(2) of HUDAR 2415.304, Evaluation Factors and Significant Subfactors, which requires numerical scoring of technical proposals when selecting awardees for negotiated contracts, would be removed. HUD’s policy is not to use numerical scoring.
  
  
• A new HUDAR Subpart 2416.3, Cost-Reimbursement Contracts, would be added. It would consist of HUDAR 2416.307, Contract Clauses, which would contain the prescriptions of two new contract clauses: HUDAR 2452.216-79, Estimated Cost (No Fee), which would be included in all cost-reimbursement (no fee) type solicitations and contracts; and HUDAR 2452.216-80, Estimated Cost and Fixed-Fee, which would be included in all cost-plus-fixed fee type solicitations and contracts. The clauses would provide standard contract language regarding total estimated cost, fee, and level of funding if the contract is funded incrementally.
  
  
• HUDAR Subpart 2419.8, Small Business Administration Section (8)(a) Program, would be revised to implement the terms of HUD’s current partnership agreement with the Small Business Administration (SBA), under which the SBA has delegated to HUD’s SPE the authority to enter into 8(a) prime contracts. The revised HUDAR Subpart 2419.8 would implement the specific terms and guidance contained in the agreement. Note that SBA provided HUD with the specific verbiage for use in implementing the agreement in HUD’s FAR supplement.
  
  
• HUDAR 2427.4, Rights in Data and Copyrights, would be added. It would consist of HUDAR 2427.470, Contract Clause, which would prescribe the use of new HUDAR 2452.227-70, Government Information, in solicitations and contracts when the federal government will provide information to the contractor or the contractor will obtain information on behalf of the federal government to perform work required under the contract.
  
  
• New HUDAR Subpart 2432.7, Contract Funding, would provide authority for, and limitations on the use of, incrementally funded fixed-price contracts. The use of incrementally funded fixed-price contracts is necessitated by recurring budget and funding uncertainties. However, HUDAR Subpart 2432.7 would limit the use of this method of contract funding to contracts for severable services not exceeding one year in length. Also, a new clause, HUDAR 2452.232-72, Limitation of Government’s Obligation, would be added.
  
  
• Paragraph (e) of HUDAR 2437.110, Solicitation Provisions and Contract Clauses [for service contracts], would be revised to clarify that the access requirements of HUDAR 2452.237-75, Access to HUD Facilities, apply to contractor personnel who require regular access to HUD facilities versus infrequent visitors to HUD facilities.
  
  
• HUDAR 2452.204-70, Preservation of, and Access to, Contract Records (Tangible and Electronically Stored Information (ESI) Formats), would be added to provide a standard contract clause that requires contractors to preserve, and upon the request of the contracting officer, provide to HUD any information generated or maintained under the contract that is related to matters concerning actual or anticipated litigation to which HUD is a party in accordance with the amendments to the Federal Rules of Civil Procedure concerning the discovery of electronically stored information.
  
  
• New HUDAR 2452.215-71, Relative Importance of Technical Evaluation Factors to Cost or Price, would notify offerors of the relative weight of the technical evaluation factors to cost or price when evaluating offers for contract award. The contracting officer selects the relative weighting to be used.
  
  
• New HUDAR 2452.215-72, Evaluation of Small Business Participation, would provide factors for use in evaluating proposed small business participation in offers for contracts requiring the use of FAR 52.219-9, Small Business Subcontracting Plan, that are to be awarded using the tradeoff source selection process.
  
  
• New HUDAR 2452.216-80, Estimated Cost and Fixed-Fee, would set forth the total estimated cost and fixed-fee in cost-plus-fixed fee type contracts, and the level of funding and the pro-rated amount of fixed-fee if the contract is incrementally funded.
  
  
• New HUDAR 2452.219-74, Small Business Subcontracting Goals, would provide offerors with HUD’s small business subcontracting goals. HUDAR 2452.219-74 would be used in solicitations for contracts that are required to include FAR 52.219-8, Utilization of Small Business Concerns, and FAR 52.219-9, Small Business Subcontracting Plan.
  
  
• HUDAR 2452.232-70, Payment Schedule and Invoice Submission (Fixed-Price), and HUDAR 2452.232-71, Voucher Submission (Cost-Reimbursement), would be revised to require contractors to submit copies of all invoices and vouchers to the contracting officer to that contracting offices and files contain a complete invoicing history. In addition, HUDAR 2452.232-70 and HUDAR 2452.232-71 would require the contracting officer's certification of the final invoice or completion voucher before final payment may be made to better ensure the contract closeout process is properly and promptly initiated.
  
  
• New HUDAR 2452.232-72, Limitation of Federal Government’s Obligation, would limit the government’s obligation under incrementally funded fixed-price contracts. The clause would set forth the authority and obligations of the government and contractor regarding work under the incrementally funded line items of the contract; require the contractor to notify the government when work under such line items has incurred 85% of the funds allotted; provide for termination of such line items if not fully funded; provide for an equitable adjustment in the contract price and/or performance schedule if the contractor incurs additional costs or is delayed in the performance of the work solely by reason of the failure of the government to allot additional funds in amounts sufficient for timely performance of the incrementally funded line items; and permits the government to allot additional funds for the performance of the incrementally funded line items at any time prior to termination.

NASA Updates Award Fee Clauses

The National Aeronautics and Space Administration (NASA) is amending the NASA FAR Supplement (NFS) to update NFS 1852.216-76, Award Fee for Service Contracts, to clarify that the amount of award fee held in reserve, if any, shall not exceed $100,000 for the contract. In addition, NFS 1852.216-77, Award Fee for End-Item Contracts, is being amended to add similar language so the contracting officer can withhold fee payments, at a not-to-exceed amount of $100,000 for the contract, in reserve to protect the government’s interests relative to an orderly and timely closeout of the contract.

Previously, NFS 1852.216-76 specified a not-to-exceed amount of 15% of the contract’s potential award fee. On large multi-million dollar procurements, this reserve could total millions of dollars, and that amount would greatly exceed the intended purpose of the reserve.

President Issues National Preparedness Order

President Obama has issued Executive Order 13603, National Defense Resources Preparedness, to “strengthen (the domestic industrial and technological base) and to ensure it is capable of responding to the national defense needs of the United States.”

The executive order expands on the authority granted the president (“commander in chief of the armed forces”) by the Defense Production Act of 1950 to establish priorities and allocations. This authority has been used to establish the Defense Priorities and Allocation System (DPAS), the Energy Priorities and Allocation System (EPAS), and the proposed Agriculture Priorities and Allocation System (APAS). These priorities and allocations systems require acceptance and priority performance of contracts or orders to promote the national defense over performance of any other contracts or orders, and to allocate materials, services, and facilities as deemed necessary or appropriate to promote the national defense.

With this executive order, the priorities and allocations authority is further delegated to the following:

• The Secretary of Agriculture with respect to food resources, food resource facilities, livestock resources, veterinary resources, plant health resources, and the domestic distribution of farm equipment and commercial fertilizer
  
  
• The Secretary of Energy with respect to all forms of energy
  
  
• The Secretary of Health and Human Services with respect to health resources
  
  
• The Secretary of Transportation with respect to all forms of civil transportation
  
  
• The Secretary of Defense with respect to water resources
  
  
• The Secretary of Commerce with respect to all other materials, services, and facilities, including construction materials

Each of these secretaries is to “plan for and issue regulations to prioritize and allocate resources and establish standards and procedures by which the authority shall be used to promote the national defense, under both emergency and non-emergency conditions.”

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