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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

July 2012
Vol. XIII, No. 7

CONTENTS

OFPP, SBA Provide Guidance on Maximizing
Small Business Utilization

In one of his first acts as Office of Federal Procurement Policy (OFPP) administrator, Joseph Jordan joined with Karen Mills, administrator of the Small Business Administration (SBA), to issue a memorandum providing direction, guidance, and encouragement on “(1) maximiz[ing] opportunities for small businesses when making small dollar awards, (2) increas[ing] opportunities for small businesses under multiple award contracts, and (3) strengthen[ing] accountability for small business goal achievement...each agency should ensure program, contracting, and small business policy staff understand their agency’s small business contracting goals and the tools available for meeting their goals.” The memorandum was forwarded to agency deputy secretaries, chief acquisition officers, senior procurement executives, and small business directors.

The following is a summary of the direction, guidance, and encouragement provided by OFPP and SBA:

• Maximizing Opportunities for Small Businesses Under the Simplified Acquisition Threshold (SAT – $150,000): Agencies are required to set aside work for small businesses that is equal to or less than the SAT unless the contracting officer determines the “rule of two” cannot be met (that is, there is not a reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of market prices, quality, and delivery). “However, a third-party analysis of data in the Federal Procurement Data System suggests that a significant amount of work under the SAT is not going to small businesses, including for products and services in industries where small businesses are typically well represented. This suggests that opportunities for small businesses are being lost, and that agencies must take additional steps to consistently apply set-asides in the manner prescribed in law and regulation...agencies should remind their contracting components of responsibilities to set aside contracts whose value is equal to or less than the SAT unless the rule of two is not met, to properly document the contract file when a set-aside is not used, and to maintain appropriate internal controls that ensure consistent application of these requirements.”
  
  
• Increasing Small Business Utilization on Multiple Award Contracts (MACs): This portion of the memorandum discusses the implementation of Section 1331, Reservation of Prime Contract Awards for Small Businesses, of the Small Business Jobs Act of 2010 (Public Law 111-240), which directed the OFPP and SBA, in consultation with the General Services Administration (GSA), to issue regulations to increase consideration of small businesses in the establishment and use of MACs (“large ‘umbrella’ contracts that are awarded to a number of companies who then compete for specific orders after the umbrella contracts have been awarded”). In response to Section 1331, the Federal Acquisition Regulation (FAR) was amended (see the December 2011 Federal Contracts Perspective article “FAC 2005-54 Permits Small Business Set-Asides For Multiple-Award Contracts”), and SBA proposed amendments to its regulations (see the June 2012 Federal Contracts Perspective article “SBA Proposes Changes on Use of MACs”).
  
  “To ensure the benefits of the FAR interim rule are being maximized, we ask that agencies take the six steps listed in Attachment 1...” Those six steps are:
  
  
  1. Issue a memorandum to the acquisition workforce reminding them of the interim FAR rule on Section 1331 and encouraging use of the tools. A sample template is provided as Attachment 3 to the memorandum.
     
     
  2. Consider requiring order set-asides under MACs if the agency is not currently meeting its small business goals. “[T]he agency will have to decide whether to apply the tools [that is, set-asides] to all of the agency’s contracting activities, an identified set of contracting activities, or a discrete set of acquisitions defined by industry or dollar threshold.”
     
     
  3. Bilaterally modify existing multiple-award contracts to provide for order set-asides. “When the interim [FAR] rule was published, the FAR Council encouraged agencies to modify, on a bilateral basis, existing multiple-award contracts if the remaining period of performance extends at least six months after the effective date, and the amount of work or number of orders expected under the remaining performance period is substantial.”
     
     
  4. Strengthen internal controls. “Contract files should appropriately document how Section 1331 tools were considered. If the agency is not currently meeting its various small business contracting goals, contracting components should also consider sampling contract files to review market research and other documents explaining how Section 1331 tools were considered and, if not used, why the agency purchased the product or service on an unrestricted basis.”
     
     
  5. Review SBA’s proposed rule on Section 1331. SBA’s proposed rule amending its regulations would provide more specific guidance on considering set-asides and reserves in connection with the award of MACs and task and delivery orders placed under them, and that those tools are used in a consistent manner. “Agencies are strongly encouraged to review the rule and provide directly to SBA...any suggestions for improving the rule. SBA is especially interested in changes that will make the rule simpler, clearer, and more conducive to encouraging maximum use of the Section 1331 tools by the agencies.”
     
     
  6. Ensure the workforce is trained. GSA “has posted a set of ‘frequently asked questions’ (FAQs), available at http://www.gsa.gov/portal/content/113371, to explain how set-asides can be applied when placing orders under Multiple Award Schedules contracts. Agencies are encouraged to review the FAQs and also to take advantage of free training that GSA offers on order set-asides. To access GSA’s webinar training, please visit interact.gsa.gov and Continuous Learning Module (CLM), Basic Contracting for GSA Schedules (FAC023) at icatalog.dau.mil.”
  
  
  
• Strengthening Accountability for Small Business Goal Achievement. “We are asking each of you to hold senior leadership accountable for meeting your agency’s small business goals, including any of the statutory socio-economic goals (small disadvantaged business, HUBZone small business, woman-owned small business, and service-disabled veteran-owned small business). We encourage you to include agency small business contracting goals in the performance evaluations of all Senior Executive Service (SES) staff members who oversee your agency’s acquisition workforce.”

OFPP Proposes Value Engineering Revisions

The Office of Federal Procurement Policy (OFPP), a part of the Office of Management and Budget (OMB), is proposing to revise OMB Circular A-131, Value Engineering, to reflect current buying strategies and practices, such as performance-based service contracting, to ensure that the government is effectively considering and taking full advantage of value engineering (VE), whenever appropriate, to cut waste and inefficiency, and promote greater fiscal responsibility.

According to FAR Part 48, Value Engineering, VE is “the formal technique by which contractors may (1) voluntarily suggest methods for performing more economically and share in any resulting savings or (2) be required to establish a program to identify and submit to the government methods for performing more economically. Value engineering attempts to eliminate, without impairing essential functions or characteristics, anything that increases acquisition, operation, or support costs.” With VE, the government shares with the contractor the savings generated by the contractor’s VE change proposal.

The VE methodology originated during World War II in the industrial community as a means of continuing production despite shortages of critical materials. It was adopted by federal agencies that recognized its potential for yielding a large return on investment. VE has frequently been cited as an effective technique for fostering utilization of innovative practices, technologies, and products to lower cost while maintaining necessary quality and performance levels. VE has been applied to hardware and software; development, production, and manufacturing; specifications, standards, contract requirements, and other acquisition program documentation; and facilities design and construction.

As examples of savings that can be realized by the application of VE, the Department of Defense (DOD) reported savings of nearly $2 billion in fiscal year (FY) 2009 and $3.4 billion in FY 2010. The Department of Transportation’s Federal Highway Administration reports that annual savings for federally-funded state construction projects have ranged from $1.8 to $3.2 billion between 2005 and 2009. The State Department reports that it has used VE to identify hundreds of millions of dollars in total life cycle savings since FY 2008, saving an average of $46 for every dollar invested in VE studies.

OMB Circular A-131 requires agencies to establish VE programs so the agencies will realize the benefits of using VE techniques to reduce nonessential contract and program costs. OMB Circular A-131 specifically requires agencies to: (1) identify a focal point within each agency to monitor, manage and maintain data on agency VE programs; (2) establish criteria and guidelines for screening programs and projects that might benefit from the application of VE techniques; (3) develop guidelines to evaluate VE proposals; (4) actively solicit VE ideas from contractors; and (5) emphasize, through training and other means, the potential of VE to reduce unnecessary costs.

OMB Circular A-131 was first issued in January 1988 and last revised in May 1993. OFPP’s proposed revisions to OMB Circular A-131 would reflect changes in industry practices that have taken place in the past two decades.

The proposed revisions to OMB Circular A-131 are available at http://www.whitehouse.gov/sites/default/files/omb/procurement/a131-circular-changes-draft.pdf. The following is a summary of those proposed revisions:

• Reinforce the importance of giving meaningful consideration to VE to save money and improve performance. Proposed Section 1, Purpose, and Section 7, Policy, would state that VE should be considered for all appropriate agency program management activities and capital assets, as well as to appropriate supply, service, architect-engineering, and construction contracts. Through the use of VE, agencies successfully identify and remove nonessential functions and associated costs, ensure realistic budgets, and improve and maintain acceptable levels of quality.
  
  
• Explain that VE can be used with various contract types and methods of contracting. Proposed Section 4, Overview, would explain that VE can be incorporated into the acquisition strategy to improve results achieved from contracts. VE can be used when contracting for services, when using various contract delivery methods, such as design-build, or when using performance-based specifications.
  
  
• Explain that VE can be used with other management tools. Proposed Section 4 explains that VE can be used with other management tools designed to improve processes, such as lean six sigma.
  
  
• Increase the threshold for the application of VE. Proposed Section 8, Agency Responsibilities, would raise the threshold from $1 million to $2 million, primarily to take into account inflation since the $1 million level was adopted. Agencies would have the discretion to set lower thresholds for those projects that have a significant impact on agency operations.
  
  
• Strengthen training. Paragraph (d) of proposed Section 8 would state that agencies should provide training to appropriate program and contract staff in the application and implementation of VE on contracts.
  
  
• Reduce reporting requirements. Section 9 and the attachment would reduce the number of projects to be reported annually to OMB from 20 to 5, and would update the reporting format to include a description of the methodology used to calculate savings. In addition, Part III of the current reporting format, which requires a detailed cost summary of program results from inception, would be eliminated.
  
  
• Remove outdated terminology and update references. The proposed revision would remove outdated terminology and update references to include currently prevalent methodologies and techniques such as performance-based acquisition, the design-build project delivery process, and integrated product/project/process teams.
  
  
• Remove automatic Inspector General (IG) review. Finally, the proposed revision would remove the provision requiring agency IGs to conduct an automatic audit of VE programs every two years (current Section 10, Inspectors General Audits).

Comments on these proposed revisions must be submitted no later than August 7, 2012, identified as “Proposed Revision to OMB Circular A-131’, by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-395-5105; or (3) mail: Office of Federal Procurement Policy, ATTN: Curtina Smith, New Executive Office Building, Room 9013, 725 17th Street NW, Washington, DC 20503.

OMB Issues Guidance on Modular Development

OFPP Administrator Joseph Jordan and Federal Chief Information Officer Steven VanRoekel, both members of the Office of Management and Budget (OMB), issued “Contracting Guidance to Support Modular Development” to encourage modular development of information technology (IT), which “improve[s] investment manageability and budgetary feasibility; reduce[s] overall risk; and support[s] rapid delivery of incremental new functionality...This document provides guidance to agencies for adopting modular approaches, and presents a variety of factors that acquisition officials, in support of IT managers, will need to consider as they plan for modular development efforts.” “Contracting Guidance to Support Modular Development” was forwarded by memorandum to agency chief acquisition officers, senior procurement executives, chief information officers, and chief financial officers.

According to the definition of “modular contracting” in FAR 39.002, Definitions, it is the “use of one or more contracts to acquire information technology systems in successive, interoperable increments.” FAR 39.103, Modular Contracting, goes on to explain that, when using modular contracting, “an acquisition of a system of information technology may be divided into several smaller acquisition increments that: (1) are easier to manage individually than would be possible in one comprehensive acquisition; (2) address complex information technology objectives incrementally in order to enhance the likelihood of achieving workable systems or solutions for attainment of those objectives; (3) provide for delivery, implementation, and testing of workable systems or solutions in discrete increments, each of which comprises a system or solution that is not dependent on any subsequent increment in order to perform its principal functions; (4) provide an opportunity for subsequent increments to take advantage of any evolution in technology or needs that occur during implementation and use of the earlier increments; and (5) reduce risk of potential adverse consequences on the overall project by isolating and avoiding custom-designed components of the system.”

The following are the general principles identified in the guidance that agencies should apply to realize the intended benefits of modular development:

• Agencies should share first, focus on reusability, and leverage projects across the organization;
  
  
• Integrated Project Teams (IPTs) should be formed to identify the functional, technical, and other capabilities and characteristics required to make each project’s product or deliverable viable and useful;
  
  
• End users should be involved early and throughout the development process. Requirements and designs may mature as the understanding of the users’ needs matures;
  
  
• The IT project manager’s team and the contracting officer’s team should collaborate early in the requirements definition process. It is especially important for the teams to collaborate on the design of the modular development approach and to develop the acquisition strategy that can best be applied to deliver the intended results;
  
  
• The IT project manager should use the input from the IPT, end users, and contracting officer in the development of the agency’s justification for the investment;
  
  
• Proper governance should be provided to oversee the investments’ and projects’ progress and results. Agencies are required to establish cost, schedule and measurable performance goals for all major acquisition programs, and achieve, on average 90% of those goals;
  
  
• Cost and schedules should be managed at the project and activity levels, and cost and schedule targets should be developed for each activity; and
  
  
• Performance measures and outcomes should be defined early in the process, and should be monitored throughout the process through the established governance structure.

The guidance goes on to observe that indefinite-delivery indefinite-quantity (IDIQ) task and delivery order contracts “are likely to be the most popular contracting form as agencies migrate to modular development approaches. Under an IDIQ contract, the agency awards an ‘umbrella’ contract to one or more contractors with a statement of work that describes the general scope, nature, complexity and purposes of the goods or services to be procured. The agency then places orders for specific goods or services within this general scope of work as needs arise. IDIQ contracts may be particularly advantageous when the scope of all subsequent projects cannot be clearly defined when the contract is first awarded. Using IDIQ contracts in modular development can:

• Allow the agency to issue small orders for short time periods to fulfill specific project development needs within six month intervals as well as rapid response activities in 90 day periods (e.g., one release every 90 days rather than two releases together after six months). An order may provide for delivery of an individual project, negotiated with or competitively awarded to a qualified vendor or group of qualified vendors on the contract;
  
  
• Provide a high level of acquisition responsiveness, as agencies avoid the time and expense of having to compete and award a series of successive, stand-alone contracts (e.g., each with their own terms and conditions, pricing, and contractor qualification requirements);
  
  
• Accommodate the full spectrum of the system lifecycle with multiple contract line items (CLINs) that provide both development and operational products and services. Development activities may include requirements specification, architectural design, and software design and development;
  
  
• Mitigate the agency’s legal and financial exposure, as the government is only obligated for a stated minimum. Future obligations may be made when requirements are clearer or when the agency has resources to acquire additional functionality; [and]
  
  
• Increase opportunities to set aside orders for small businesses...”

However, single contracts with options, successive contracts, and performance-based work statements are suitable for modular development under certain circumstances.

The transmittal memorandum is available at http://www.whitehouse.gov/sites/default/files/omb/procurement/memo/contracting-guidance-to-support-modular-development.pdf, and the “Contracting Guidance to Support Modular Development” is available at http://www.whitehouse.gov/sites/default/files/omb/procurement/guidance/modular-approaches-for-information-technology.pdf.

DOD Drafts Version 2 of Contingency COR Handbook

The Department of Defense (DOD) has developed Version 2 of the “Defense Contingency COR [Contracting Officer’s Representative] Handbook” and an accompanying DVD that provide “essential information, tools, and training for DOD CORs to meet the challenges they may face, regardless of the mission environment.” This 222-page pocket-sized handbook has been revised “in significant and subtle ways based on recommendations from the user community and joint working group.” Version 1 of the handbook was issued on August 17, 2010 (see the September 2010 Federal Contracts Perspective article “Defense Acquisition-Related Thresholds Adjusted, Too”). (NOTE: According to FAR 2.101, Definitions, a “contingency operation” is one “in which members of the armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing military force...”).

The handbook provides basic knowledge and tools for CORs to perform effective contract quality surveillance. It is organized as follows:

“Chapters have been restructured to emphasize COR responsibilities and improve the flow, and text has been updated to reflect the current contingency environment,” writes Richard Ginman, Defense Procurement and Acquisition Policy director, in his memorandum to the services’ deputy assistant secretaries of acquisition and procurement. “In some cases content was added based on current needs or policy changes; in others, information was removed or reduced from the printed text and placed on the DVD, which is shipped with the handbook...”

The memorandum provides the following hyperlink for access to the draft handbook and supplemental materials for the handbook and DVD: http://www.acq.osd.mil/dpap/ccap/cc/corhb/v2draft.html. Comments are being sought on the draft handbook and DVD, and are to be placed on the comment matrix (a link to which is included with the supplemental materials) and submitted no later than June 25, 2012, to Lt. Col. Judy Anderson at 571-256-2949 or judy.anderson@osd.mil.

DFARS Addresses Receipt of Only One Offer

The Department of Defense (DOD) has amended the Defense FAR Supplement (DFARS) to address procedures when only one offer is received on a competitive solicitation. In addition are other DFARS changes addressing Wide Area Workflow, the acquisition of tents and other temporary structures, defining the Czech Republic as a “qualifying country,” shipping instructions, and the application of current hexavalent chromium policy to commercial items.

• Only One Offer: This final rule adds DFAR 215.371, Only One Offer, and two provisions to address acquisitions using competitive procedures in which only one offer is received. In general, the contracting officer must resolicit if the solicitation allowed fewer than 30 days for receipt of proposals and only one offer is received. If at least 30 days was allowed for receipt of proposals and only one offer is received, the contracting officer must either determine prices to be fair and reasonable through price or cost analysis or enter into negotiations with the offeror.
  
  The following are the significant changes contained in DFARS 215.371:
  
  
  • DFARS 215.371-2, Promote Competition, states that, with exceptions, “if only one offer is received when competitive procedures were used and the solicitation allowed fewer than 30 days for receipt of proposals, the contracting officer shall: (a) consult with the requiring activity as to whether the requirements document should be revised in order to promote more competition...; and (b) resolicit, allowing an additional period of at least 30 days for receipt of proposals.”
    
    
  • DFARS 215.371-3, Fair and Reasonable Price, states that a “reasonable expectation...that two or more offerors, competing independently, would submit priced offers” is not a justification for considering a sole offer received “unless an official at one level above the contracting officer approves the determination that the price is reasonable...” If the solicitation allowed at least 30 days for receipt of proposals, the contracting officer must “(1) determine through cost or price analysis that the offered price is fair and reasonable and that adequate price competition exists (with approval of the determination at one level above the contracting officer) or another exception to the requirement for certified cost or pricing data applies...; or (2)(i) obtain from the offeror cost or pricing data necessary to determine a fair and reasonable price and comply with the requirement for certified cost or pricing data at FAR 15.403-4 [Requiring Certified Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b)]...; and (ii) enter into negotiations with the offeror as necessary to establish a fair and reasonable price. The negotiated price should not exceed the offered price.”
    
    
  • DFARS 215.371-4, Exceptions, provides the following exceptions to DFARS 215.371-2 and DFARS 215.371-3: (1) acquisitions at or below the simplified acquisition threshold ($150,000); (2) acquisitions in support of contingency, humanitarian or peacekeeping operations, or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack; or (3) acquisitions of basic or applied research or development that use a broad agency announcement. Furthermore, DFARS 215.371-2 and DFARS 215.371-3 do not apply to set-asides under the HUBZone Program, the Service-Disabled Veteran-Owned Small Business Procurement Program, or the Woman-Owned Small Business Program.
    
    
  • DFARS 215.371-5, Waiver, authorizes the head of the contracting activity to waive the requirement in DFARS 215.371-2 to resolicit for an additional period of at least 30 days. This authority cannot be delegated below one level above the contracting officer.
  
  In addition, DFARS 252.215-7007, Notice of Intent to Resolicit, is added. It is to be included in competitive solicitations that will be solicited for fewer than 30 days, unless an exception at DFARS 215.371-4 applies or the requirement is waived in accordance with DFARS 215.371-5. The provision notifies the offeror that the solicitation “provides offerors fewer than 30 days to submit proposals. In the event that only one offer is received in response to this solicitation, the contracting officer may cancel the solicitation and resolicit for an additional period of at least 30 days in accordance with [DFARS] 215.371-2.”
  
  Also, DFARS 252.215-7008, Only One Offer, is added. It is to be included in competitive solicitations unless an exception in DFARS 215.371-4 applies. The provision states that FAR 52.215-20, Requirements for Certified Cost or Pricing Data and Data Other Than Certified Cost or Pricing Data, is in the solicitation but does not take effect unless the contracting officer notifies the offeror that only one offer was received, and additional cost or pricing data is required to determine whether the price is fair and reasonable or to comply with the statutory requirement for certified cost or pricing data.
  
  Finally, the following are amended to refer the offeror to DFARS 215.371 should only one offer be received:
  
  
  • DFARS 208.404, Use of Federal Supply Schedules (paragraph (a)(1))
    
    
  • DFARS 208.405-70, Additional Ordering Procedures (paragraph (c)(2))
    
    
  • DFARS 212.205, Offers [of commercial items] (paragraph (c))
    
    
  • DFARS 214.209, Cancellation of Invitations [for bids] Before Opening
    
    
  • DFARS 214.404-1, Cancellation of Invitations [for bids] After Opening (paragraph (2))
    
    
  • DFARS 214.408-1, General [awards of invitations for bids] (paragraph (b))
    
    
  • DFARS 216.505-70, Orders Under Multiple Award Contracts (paragraph (d)(3))
  
  
• Updates to Wide Area WorkFlow: This final rule amends DFARS Subpart 232.70, Electronic Submission and Processing of Payment Requests and Receiving Reports, and adds a corresponding clause DFARS 252.232-7006, Wide Area WorkFlow Payment Instructions, to update policies and procedures for electronic submission of payment requests and receiving reports through Wide Area WorkFlow (WAWF) and TRICARE Encounter Data System (TEDS). WAWF, which electronically interfaces with the primary DOD payment systems, is the accepted DOD system for generating invoices and receiving reports. TEDS is an accepted system for processing payment requests for rendered TRICARE health care services.
  
  The capabilities of WAWF have expanded to enable use in a wider variety of environments by a wider variety of users. As such, this rule makes the following changes to expand the use of WAWF for submission of payment requests and receiving reports and to standardize processes and instructions on the use of WAWF:
  
  
  • Paragraph (a)(2) of DFARS 232.7002, Policy, is revised to clarify that only payment requests (not receiving reports) for contracts paid for with the governmentwide commercial purchase card are excepted from using WAWF.
    
    
  • The exception in DFARS 232.7002(a)(2) to the use of WAWF for contracts awarded to foreign vendors is removed.
    
    
  • DFARS 232.7002(a)(3) is updated to specify a WAWF exception for contracts awarded by contracting officers for contingency, humanitarian, peacekeeping, or emergency response operations only when the use of WAWF is not feasible by the contractor.
    
    
  • DFARS 232.7002(a)(4) is updated to specify a WAWF exception for purchases made for an unusual or compelling need only when the use of WAWF is not feasible.
    
    
  • Paragraph (b) of DFARS 232.7003, Procedures, is removed, which gave the contracting officer authority to allow a contractor to submit a payment request and receiving report using an electronic form other than WAWF.
    
    
  • Added to DFARS 232.7003(c) is a statement that the use of TEDS is permitted for submitting and processing TRICARE payment requests and receiving reports for rendered health care services.
    
    
  • DFARS 252.232-7006, Wide Area WorkFlow Payment Instructions, is added. It provides definitions, access procedures, training instructions, and information necessary to use WAWF.
  
  
• Acquisition of Tents and Other Temporary Structures: This interim rule amends DFARS 225.7002-1, Restrictions on Food, Clothing, Fabrics, and Hand or Measuring Tools, and the associated clause at DFARS 252.225-7012, Preference for Certain Domestic Commodities, to implement Sections 368 and 821 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112-81). Section 368 requires award of contracts that provide the best value when acquiring tents and other temporary structures, regardless of whether purchased by DOD or by another agency on behalf of DOD. Section 821 amends 10 U.S.C. 2533a (the “Berry Amendment”), to extend the restriction requiring acquisition of domestic tents to include the structural components of tents, applicable to acquisitions that exceed the simplified acquisition threshold.
  
  This interim rule amends DFARS 225.7002-1, Restrictions, by adding paragraph (a)(3), which provides the following: “(i) When acquiring tents or other temporary structures for use by the Armed Forces, the contracting officer shall award contracts that provide the best value (see FAR 15.101). Temporary structures covered by this paragraph (a)(3)(i) are nonpermanent buildings, including tactical shelters, nonpermanent modular or pre-fabricated buildings, or portable or relocatable buildings, such as trailers or equipment configured for occupancy...Determination of best value includes consideration of the total life-cycle costs of such tents or structures, including the costs associated with any equipment, fuel, or electricity needed to heat, cool, or light such tents or structures...”
  
  In addition, the following definition of “structural component of a tent” is added to DFARS 252.225-7012: “Structural component of a tent (i) means a component that contributes to the form and stability of the tent (e.g., poles, frames, flooring, guy ropes, pegs); [but] (ii) does not include equipment such as heating, cooling, or lighting.”
  
  Comments on this interim rule must be submitted no later than August 28, 2012, identified as “DFARS Case 2012-D015,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: dfars@osd.mil; (3) fax: 571-372-6094; or (4) mail: Defense Acquisition Regulations System, Attn: Amy G. Williams, OUSD(AT&L)DPAP/ DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301-3060.
  
  
• New Qualifying Country – Czech Republic: This final rule amends DFARS Part 225, Foreign Acquisition, and corresponding clauses to add the Czech Republic as a qualifying country.
  
  On April 18, 2012, the Secretary of Defense signed a reciprocal defense procurement agreement with the Czech Minister of Defense. The agreement removes discriminatory barriers to procurements of supplies and services produced by industrial enterprises of the other country to the extent mutually beneficial and consistent with national laws, regulations, policies, and international obligations. However, the agreement does not cover construction or construction material.
  
  This final rule amends the definition of “qualifying country” by adding “Czech Republic” in alphabetical order in the following: paragraph (10) of DFARS 225.003, Definitions; paragraph (a) of DFARS 225.872-1, General [contracting with qualifying country sources]; paragraph (a) of DFARS 252.225-7001, Buy American and Balance of Payments Program; paragraph (a) of DFARS 252.225-7002, Qualifying Country Sources as Subcontractors; paragraph (a)(13) of DFARS 252.225-7012, Preference for Certain Domestic Commodities; paragraph (a) of DFARS 252.225-7017, Photovoltaic Devices; paragraph (a) of DFARS 252.225-7021, Trade Agreements; and paragraph (a) of DFARS 252.225-7036, Buy American – Free Trade Agreements – Balance of Payments Program.
  
  
• Shipping Instructions: This final rule updates DD Form 1659, Application for U.S. Government Shipping Documentation/Instructions, which is used by contractors to request shipping instructions; revises the associated contract clause, to cover both commercial and government bills of lading; and relocates the coverage within the DFARS to conform with the organization of the FAR.
  
  Since 1991, DOD has used DFARS 252.242-7003, Application for U.S. Government Shipping Documentation/Instructions, to instruct contractors to use the DD Form 1659 to request instructions for shipment from the transportation officer or contract administration office. However, DOD now primarily uses commercial bills of lading where use of government bills of lading is appropriate. Consequently, the preferred term is “bill(s) of lading,” which includes both commercial and government bills of lading.
  
  FAC 2005-07 contained a final rule that moved FAR Subpart 42.14, Traffic and Transportation Management, to FAR Part 47, Transportation (see the February 2006 Federal Contracts Perspective article “Performance-Based Acquisition Procedures Revised”). Therefore, this final rule makes the following changes to align the DFARS with the FAR and to update the DD Form 1659:
  
  
  • DFARS Subpart 242.14 is removed. This removes the obsolete requirement to use the DD Form 1659 when using either FAR 52.242-10, F.o.b. Origin – Government Bills of Lading or Prepaid Postage, or FAR 52.242-11, F.o.b. Origin – Government Bills of Lading or Indicia Mail (contained in removed DFARS 242.1404-2-70, Additional Clause).
    
    
  • DFARS Subpart 247.1, General, is added. It consists of DFARS 247.101, Policies, which supplements paragraph (h) of FAR 47.101, “Shipping documents covering f.o.b. origin shipments.” Paragraph (h) consists of the language that was included in the removed DFARS 242.1403, Shipping Documents Covering F.O.B. Origin Shipments (modified to reflect the redesignated clause number): “(i) Procedures for the contractor to obtain bills of lading are in the clause at [DFARS] 252.247-7028, Application for U.S. Government Shipping Documentation/Instructions; [and] (ii) the term ‘commercial bills of lading’ includes the use of any commercial form or procedure.”
    
    
  • DFARS 247.207, Solicitation Provisions, Contract Clauses, and Special Requirements, is amended to add the prescription for DFARS 252.247-7028, Application for U.S. Government Shipping Documentation/Instructions (which is the redesignated DFARS 252.242-7003 – see below): [use] “when shipping under Bills of Lading and Domestic Route Order under FOB origin contracts, Export Traffic Release regardless of FOB terms, or foreign military sales shipments.”
    
    
  • DFARS 252.242-7003, Application for U.S. Government Shipping Documentation/Instructions, is redesignated as DFARS 252.247-7028 and amended by adding the following as paragraph (b): “If an automated system is available for shipment requests, use service/agency systems (e.g., Navy's Global Freight Management-Electronic Transportation Acquisition (GFM-ETA) and Financial Air Clearance Transportation System (FACTS) Shipment Processing Module, Air Force's Cargo Movement Operations System, DCMA's Shipment Instruction Request (SIR) E-tool, and DLA's Distribution Standard System Vendor Shipment Module in lieu of DD Form 1659.”
  
  
• Applicability of Hexavalent Chromium Policy to Commercial Items: This final rule corrects a drafting oversight in a final rule that minimized the use of materials containing hexavalent chromium in items acquired by DOD but omitted commercial items from coverage. To remedy this, DFARS 252.244-7000, Subcontracts for Commercial Items and Commercial Components (DOD Contracts), is amended to add DFARS 252.223-7008, Prohibition of Hexavalent Chromium, to the list of clauses that contractors must include in applicable subcontracts for commercial items and components. (NOTE: Hexavalent chromium is a chemical that has been used in numerous DOD weapons systems platforms because of its corrosion protection properties. However, hexavalent chromium is a known carcinogen, so the original final rule was intended to minimize its use unless specified by the contracting officer.)

Twelve Categories Proposed for Biobased Designation

The United States Department of Agriculture (USDA) is proposing to add twelve (12) more sections to Title 7 of the Code of Federal Regulations (CFR), Part 3201, Guidelines for Designating Biobased Products for Federal Procurement (7 CFR Part 3201), to designate product categories that would be given preference in federal procurements as provided under Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA) (Public Law 107-171), and to specify the minimum level of biobased content to be contained in the procured products.

The following are the proposed new designated product categories and their Title 7 section numbers:

As a general rule, procuring agencies must purchase biobased products within these designated items where the purchase price of the procurement item exceeds $10,000 or where the quantity of such items or functionally equivalent items purchased over the preceding fiscal year equaled $10,000 or more, unless products within a designated item: (1) are not reasonably available within a reasonable period of time; (2) fail to meet the reasonable performance standards of the procuring agencies; or (3) are available only at an unreasonable price. The $10,000 threshold applies to federal agencies as a whole and not to agency subgroups such as regional offices or subagencies of the larger federal department or agency.

Comments on this proposal must be submitted no later than August 6, 2012, identified with the Regulatory Information Number (RIN) 0599-AA15, by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: biopreferred@usda.gov – include “RIN 0599-AA15” and “Proposed Designation of Product Categories” on the subject line; or (3) mail or commercial/hand delivery to: Ron Buckhalt, USDA, Office of Procurement and Property Management, Room 361, Reporters Building, 300 7th St. SW, Washington, DC 20024.

For more information on the biobased program, all the products in the program, and those proposed for inclusion, go to http://www.biopreferred.gov/. Also see the February 2005 Federal Contracts Perspective article “USDA Publishes Biobased Products Guidelines”; the August 2005 Federal Contracts Perspective article "Agriculture Proposes Six Biobased Items"; the April 2006 Federal Contracts Perspective article “USDA Designates Six Biobased Products for Procurement”; the September 2006 Federal Contracts Perspective article “USDA Proposes 20 More Biobased Products”; the November 2006 Federal Contracts Perspective article “10 More Biobased Items Proposed”; the June 2008 Federal Contracts Perspective article “USDA Adds 27 Items to Biobased Products List, Exempts DOD and NASA from Requirements”; the November 2008 Federal Contracts Perspective article “Nine More Biobased Items Proposed”; the November 2009 Federal Contracts Perspective article “USDA Adds Nine More Biobased Items”; the March 2010 Federal Contracts Perspective article “USDA Proposes Another Nine Biobased Items”; the November 2010 Federal Contracts Perspective article “Eight More Biobased Products Designated”; and ; the December 2010 Federal Contracts Perspective article “Fourteen More Items Proposed for Biobased Designation”; the October 2011 Federal Contracts Perspective article “Thirteen More Items Proposed for Biobased Designation”; and the May 2012 Federal Contracts Perspective article “FAC 2005-58 Addresses Biobased Procurements, Exports to Iran, Sole Source 8(a) Contracts."

Prompt Payment Interest Rate Set at 1 3/4%

The Treasury Department has established 1 3/4% (1.75%) as the interest rate for the computation of payments made between July 1, 2012, through December 31, 2012, under the Prompt Payment Act and the Contracts Disputes Act. This rate is also used in facilities capital cost of money calculations. The interest rate for the prior six-month period (January 1, 2012, and June 30, 2012) was 2% (2.0%). The interest rate for July 1, 2011, through December 31, 2011), was 2 1/2% (2.5%).

All prompt payment interest rates since 1980 (in six-month increments) are available at http://www.treasurydirect.gov/govt/rates/tcir/tcir_opdprmt2.htm.

FAR Subpart 32.9, Prompt Payment; FAR Subpart 33.2, Disputes and Appeals; FAR 31.205-10, Cost of Money; and Cost Accounting Standard (CAS) 9904.414, Cost of Money as an Element of the Cost of Facilities Capital, are affected by this interest rate.

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