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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


September 2012
Vol. XIII, No. 9

CONTENTS


SBA Issues Amended Policy Directives on SBIR and STTR Programs
SBA Adopts 2012 NAICS for Small Business Size Standards
OMB Orders Prompt Payment to Small Subcontractors
Two FAR Changes Proposed
DHS Proposes “Consistent Approach” for T&M Contracts
Treasury Proposes Minority and Women Inclusion



SBA Issues Amended Policy Directives on
SBIR and STTR Programs

The Small Business Administration (SBA) reissued its Small Business Innovation Research (SBIR) program and Small Business Technology Transfer (STTR) program policy directives to implement the provisions of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112-81) that affect the programs. Those provisions are in Title LI, SBIR and STTR Reauthorization.

The SBIR program is a research and development (R&D) small business set-aside. It requires all agencies with R&D budgets of more than $100 million to set aside 2.5% of their R&D budgets for small businesses. The STTR program is similar to the SBIR program in that all agencies with R&D budgets of more than $1 billion are required to set aside 0.3% of their R&D budgets for small businesses. The primary difference between the SBIR and the STTR programs is that small businesses must have a research institution as a partner to participate in the STTR program.

Both programs utilize a uniform, three-phase process:

Public Law 112-81 extends both the SBIR and STTR programs until September 30, 2017; gradually increases the amount of awards each covered agency must make under the SBIR program from 2.5% to 3.2% of its R&D budget (in Fiscal Year 2017); and gradually increases the amount of awards each covered agency must make under the STTR program from 0.3% to 0.45% of its R&D budget (in Fiscal Year 2016).

In addition, the following are other major changes to the SBIR and STTR program policy directives:

Although the two program policy directives are intended for use by participating agencies, “SBA believes that public input on the directive[s] from all parties involved in the program[s] would be invaluable. Therefore, SBA is soliciting public comments on [these] final directive[s], and may amend [them] in response to these comments at a later time.” Therefore, comments on the SBIR and STTR program policy directives must be submitted no later than October 5, 2012, by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) by mail/hand delivery/courier to Edsel Brown, Assistant Director, Office of Technology, U.S. Small Business Administration, 409 Third Street SW, Washington, DC 20416. Identify comments on the SBIR program policy directive as “RIN: 3245-AF84,” and identify comments on the STTR program policy directive as “RIN: 3245-AF45.”



SBA Adopts 2012 NAICS for Small Business Size Standards

The Small Business Administration (SBA) is amending Title 13 of the Code of Federal Regulations (CFR), Part 121, Small Business Size Regulations (13 CFR Part 121) to incorporate the Office of Management and Budget’s (OMB) 2012 modifications of the North American Industry Classification System (NAICS 2012) into its table of small business size standards in Section 121.201, What size standards has SBA identified by North American Industry Classification System codes?

NAICS 2012 has created 76 new industry codes and reused 13 NAICS 2007 industry codes with additional or modified content. SBA’s adoption of NAICS 2012 results in changes to small business size standards for 41 NAICS 2007 industries. This will also result in changes to NAICS industry titles for eight industries.

The following are the new and revised industry codes:

NAICS Code Industry Title Size Standards
(millions of dollars)
Size Standards
(number of employees)
221114 Solar Electric Power Generation (see footnote 1)
221115 Wind Electric Power Generation (see footnote 1)
221116 Geothermal Electric Power Generation (see footnote 1)
221117 Biomass Electric Power Generation (see footnote 1)
221118 Other Electric Power Generation (see footnote 1)
311224 Soybean and Other Oilseed Processing 1,000
311313 Beet Sugar Manufacturing 750
311314Cane Sugar Manufacturing 750
311340 Nonchocolate Confectionery Manufacturing 500
311351 Chocolate and Confectionery Manufacturing from Cacao Beans 500
311352 Confectionery Manufacturing from Purchased Chocolate 500
311710 Seafood Product Preparation and Packaging 500
311824 Dry Pasta, Dough, and Flour Mixes Manufacturing from Purchased Flour500
312230 Tobacco Manufacturing 1,000
313110 Fiber, Yarn, and Thread Mills 500
313220 Narrow Fabric Mills and Schiffli Machine Embroidery500
313240 Knit Fabric Mills500
313310 Textile and Fabric Finishing Mills1,000
314120 Curtain and Linen Mills 500
314910 Textile Bag and Canvas Mills500
314994 Rope, Cordage, Twine, Tire Cord, and Tire Fabric Mills 1,000
315110 Hosiery and Sock Mills 500
315190 Other Apparel Knitting Mills 500
315210 Cut and Sew Apparel Contractors500
315220 Men’s and Boys’ Cut and Sew Apparel Contractors 500
315240 Women’s, Girls’, and Infants’ Cut and Sew Apparel Contractors 500
315280 Other Cut and Sew Apparel Contractors 500
315990 Apparel Accessories and Other Apparel Manufacturing 500
316210 Footwear Manufacturing 1,000
316998 All Other Leather Good and Allied Product Manufacturing500
322219 Other Paperboard Container Manufacturing750
322220 Paper Bag and Coated and Treated Paper Manufacturing 500
322230 Stationery Product Manufacturing 500
323120 Support Activities for Printing 500
325130 Synthetic Dye and Pigment Manufacturing1,000
325180 Other Basic Inorganic Chemical Manufacturing 1,000
325194 Cyclic Crude, Intermediate, and Gum and Wood Chemical Manufacturing750
325220 Artificial and Synthetic Fibers and Filaments Manufacturing 1,000
326199 All Other Plastic Product Manufacturing 750
327110 Pottery, Ceramics, and Plumbing Fixture Manufacturing 750
327120Clay Building Material and Refractories Manufacturing 750
331110 Iron and Steel Mills and Ferroalloy Manufacturing 1,000
331313 Alumina Refining and Primary Aluminum Production 1,000
331318 Other Aluminum Rolling, Drawing, and Extruding 750
331410 Nonferrous Metal (except Aluminum) Smelting and Refining 1,000
331420 Copper Rolling, Drawing, Extruding, and Alloying 1,000
331523 Nonferrous Metal Die-Casting Foundries500
331529 Other Nonferrous Metal Foundries (except Die-Casting)500
332119 Metal Crown, Closure, and Other Metal Stamping (except Automotive)500
332215 Metal Kitchen Cookware, Utensil, Cutlery, and Flatware (except Precious) Manufacturing500
332216 Saw Blade and Handtool Manufacturing 500
332613 Spring Manufacturing 500
332999 All Other Miscellaneous Fabricated Metal Product Manufacturing 750
333241 Food Product Machinery Manufacturing 500
333242 Semiconductor Machinery Manufacturing 500
333243 Sawmill, Woodworking, and Paper Machinery Manufacturing 500
333244 Printing Machinery and Equipment Manufacturing 500
333249 Other Industrial Machinery Manufacturing 500
333316 Photographic and Photocopying Equipment Manufacturing 1,000
333318 Other Commercial and Service Industry Machinery Manufacturing1,000
333413 Industrial and Commercial Fan and Blower and Air Purification Equipment Manufacturing 500
333517 Machine Tool Manufacturing500
333519 Rolling Mill and Other Metalworking Machinery Manufacturing 500
334118 Computer Terminal and Other Computer Peripheral Equipment Manufacturing1,000
334614 Software and Other Prerecorded Compact Disc, Tape, and Record Reproducing750
335210 Small Electrical Appliance Manufacturing 750
336310 Motor Vehicle Gasoline Engine and Engine Parts Manufacturing 750
336320 Motor Vehicle Electrical and Electrical Equipment Manufacturing750
336390 Other Motor Vehicle Parts Manufacturing 750
339910 Jewelry and Silverware Manufacturing 500
339930 Doll, Toy, and Game Manufacturing 500
339940 Office Supplies (except Paper) Manufacturing 500
441228 Motorcycle, ATV, and All Other Motor Vehicle Dealers $30.0
443141 Household Appliance Stores $10.0
443142 Electronics Stores $30.0
454310 Fuel Dealers 50
722511 Full-Service Restaurants $7.0
722513 Limited-Service Restaurants $10.0
722514 Cafeterias, Grill Buffets, and Buffets $25.5
722515 Snack and Nonalcoholic Beverage Bars $7.0

Footnote 1: NAICS codes 221111, 221112, 221113, 221114, 221115, 221116, 221117, 221118, 221121, and 221122 – A firm is small if, including its affiliates, it is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.

This interim final rule goes into effect October 1, 2012. Comments on this interim final rule must be submitted no later than October 19, 2012, identified as “RIN 3245-AG47,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail/hand delivery/courier to: Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third Street SW., Mail Code 6530, Washington, DC 20416. SBA will not accept comments submitted by email on this interim final rule.



OMB Orders Prompt Payment to Small Subcontractors

To further the temporary one-year policy established in the September 14, 2011, Office of Management and Budget (OMB) memorandum M-11-32 that “agencies shall make their payments to small business contractors as soon as practicable, with the goal of making payments within 15 days,” Jeffrey Zients, Acting Director of the OMB, issued memorandum M-12-16 to the heads of all departments and agencies directing them to “ensure that prime contractors are able to pay their small business subcontractors in a prompt fashion. In particular, agencies should, to the full extent permitted by law, temporarily accelerate payments to all prime contractors, in order to allow them to provide prompt payments to small business subcontractors.”

“Consistent with the policy for small business prime contractors established in Memorandum 11-32, agencies are encouraged to make payments to all prime contractors as soon as practicable, with a goal of paying all prime contractors within 15 days of receiving proper documentation. In accordance with the above, agencies should begin accelerating payments to all prime contractors as soon as practicable. While this temporary policy is in effect, agencies shall encourage prime contractors to:

To assist in this effort, OMB requested that the Federal Acquisition Regulatory Council (FAR Council) develop standard wording for a clause that would be included in the agency’s contract with the prime contractor.

To that end, both the Department of Defense and the Civilian Agency Acquisition Council have issued class deviations implementing OMB Memorandum M-12-16. These class deviations provide a new clause, Federal Acquisition Regulation (FAR) 52.232-99, Providing Accelerated Payment to Small Business Subcontractors (Deviation), and direct “contracting officers to insert the attached clause in all new solicitations and resultant contracts and, to the extent feasible, modify existing solicitations to insert the attached clause.”

The text of the clause is as follows:

     “This clause implements the temporary policy provided by OMB Policy Memorandum M-12-16, Providing Prompt Payment to Small Business Subcontractors, dated July 11, 2012.
               “(a) Upon receipt of accelerated payments from the government, the contractor is required to make accelerated payments to small business subcontractors to the maximum extent practicable after receipt of a proper invoice and all proper documentation from the small business subcontractor.
               “(b) Include the substance of this clause, including this paragraph (b), in all subcontracts with small business concerns.
               “(c) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act.”


Two FAR Changes Proposed

The Federal Acquisition Regulation Council took a break in August, publishing only two proposed rules: one addressing small business set-asides for research and development (R&D) contracts; the other imposing basic safeguarding requirements for contractor information systems that contain information provided by or generated for the government.



DHS Proposes “Consistent Approach” for T&M Contracts

The Department of Homeland Security (DHS) is proposing to amend Homeland Security Acquisition Regulation (HSAR) Subpart 3016.6, Time-and-Materials, Labor-Hour, and Letter Contracts, to require time and material (T&M) contracts and labor hour (LH) contracts to include separate labor hour rates for subcontractors and a description of the method that will be used to record and bill for labor hours for both contractors and subcontractors. This would create a “consistent approach” within DHS for awarding T&M and LH contracts.

Paragraph (c) of FAR 52.216-29, Time-and-Materials/Labor-Hour Proposal Requirements – Non-Commercial Item Acquisition with Adequate Price Competition, allows three approaches in structuring solicitations for T&M and LH contracts and orders:

  1. Separate rates for each category of labor to be performed by each subcontractor and for each category of labor to be performed by the offeror, and for each category of labor to be transferred between divisions, subsidiaries, or affiliates of the offeror under a common control.

  2. Blended rates for each category of labor to be performed by the offeror, including labor transferred between divisions, subsidiaries, or affiliates of the offeror under a common control, and all subcontractors.

  3. Any combination of separate and blended rates for each category of labor to be performed by the offeror, affiliates of the offeror under a common control, and subcontractors.

Paragraph (e)(1) of FAR 16.601, Time-and-Materials Contracts, permits agencies to require the use of one of these three approaches. DHS is proposing to standardize on the first approach, requiring separate rates for each labor category for DHS T&M and LH contracts and orders for non-commercial items using adequate price competition. This would ensure appropriate labor hour rates are paid under T&M and LH contracts and orders, and is intended to eliminate unintentional windfall payments to the prime contractor that might otherwise result from work performed by lower labor rate subcontracts or affiliates that is billed at a higher prime contractor labor hour rate.

In addition, the proposed rule would require each offeror seeking a T&M or LH contract or order to include a description of its method and its subcontractors’ methods of accounting for uncompensated overtime performed by employees who are exempt from the Fair Labor Standards Act (FLSA). Billings and payments under the resulting contracts or orders would be required to be consistent with that description. This would apply to all T&M and LH contracts and orders that exceed the simplified acquisition threshold ($150,000). It would eliminate potential disputes regarding the hours that can be billed under T&M and LH contracts and orders by clearly stating in the contract whether the contractor and each subcontractor will be reimbursed based on: (1) recording and billing for only the number of hours worked not in excess of a standard number of hours in a standard work period (such as a 40 hour workweek); or (2) recording all hours worked. This procedure would ensure that billings and payments under T&M and LH contracts and orders do not result in an unintended windfall to the contractor by ensuring that the contractor does not bill the government for all hours worked when its established practices are to record only the number of hours in a standard work period (such as a 40 hour workweek).

The HSAR would be amended to incorporate these requirements with the addition of the following:

Comments on this proposed rule must be submitted no later than October 22, 2012, identified as “DHS-2012-0050,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: Department of Homeland Security, Office of the Chief Procurement Officer, Acquisition Policy and Legislation Branch, ATTN: Jeremy Olson, 245 Murray Lane, Bldg. 410 (RDS), Washington, DC 20528.



Treasury Proposes Minority and Women Inclusion

The Department of the Treasury is proposing to amend the Department of the Treasury Acquisition Regulation (DTAR) to include a contract clause on minority and women inclusion, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Public Law 111-203). Section 342 of the Dodd-Frank Act established an Office of Minority and Women Inclusion in certain agencies, including the Department of the Treasury, and it requires those agencies to obtain from its contractors a written statement that the “contractor shall ensure, to the maximum extent possible, the fair inclusion of women and minorities in the workforce of the contractor and, as applicable, subcontractors.”

This proposed rule would require the inclusion of new clause DTAR 1052.222-70, Minority and Women Inclusion, in all solicitations and contracts for services that exceed the simplified acquisition threshold ($150,000). The clause would state:

     "Contractor confirms its commitment to equal opportunity in employment and contracting. To implement this commitment, the contractor shall ensure, to the maximum extent possible consistent with applicable law, the fair inclusion of minorities and women in its workforce. The contractor shall insert the substance of this clause in all subcontracts under this contract whose dollar value exceeds $150,000. Within ten business days of a written request from the contracting officer, or such longer time as the contracting officer determines, and without any additional consideration required from the agency, the contractor shall provide documentation, satisfactory to the agency, of the actions it (and as applicable, its subcontractors) has undertaken to demonstrate its good faith effort to comply with the aforementioned provisions. For purposes of this contract, “good faith effort” may include actions by the contractor intended to identify and, if present, remove barriers to minority and women employment or expansion of employment opportunities for minorities and women within its workforce. Efforts to remove such barriers may include, but are not limited to, recruiting minorities and women, providing job-related training, or other activity that could lead to those results.
     "The documentation requested by the contracting officer to demonstrate “good faith effort” may include, but is not limited to, one or more of the following:
               “1. The total number of contractor’s employees, and the number of minority and women employees, by race, ethnicity, and gender (e.g., an EEO-1 [form Equal Employment Opportunity-1]);
               “2. A list of subcontract awards under the contract that includes: dollar amount, date of award, and subcontractor's race, ethnicity, and/or gender ownership status;
               “3. Information similar to that required in item 1, above, with respect to each subcontractor; and/or
               “4. The contractor’s plan to ensure that minorities and women have appropriate opportunities to enter and advance within its workforce, including outreach efforts.
     “...Failure to...demonstrate such good faith efforts to include minorities and women in the contractor’s workforce (and as applicable, the workforce of its subcontractors), may result in termination of the contract for default, referral to the Office of Federal Contract Compliance Programs, or other appropriate action.”

Comments on this proposed rule must be submitted no later than October 22, 2012, by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: Department of the Treasury, Office of Minority and Women Inclusion, Attention: Contractor Clause, Room 2438, 1500 Pennsylvania Avenue NW., Washington, DC 20220.



Copyright 2012 by Panoptic Enterprises. All Rights Reserved.

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