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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


January 2013
Vol. XIV, No. 1

CONTENTS


FAR Amended to Require Nondisplacement of Predecessor Service Contractor's Employees
FAR Implements Iranian Sanctions
Accelerated Subcontractor Payments Proposed
Mileage Reimbursement Set at 56.5¢/Mile for Autos
SBA Finalizes, Proposes More Size Standards
GSA Proposes Expanding Industrial Funding Fee Use
GSA Withdraws Proposed FSS Contracting Rewrite
DEAR Property Regulations Updated
HUDAR Brought Up-to-Date
Poland New Qualifying Country
Eight Categories Proposed for Biobased Designation
Prompt Payment Interest Rate Set at 1 3/8%



FAR Amended to Require Nondisplacement of
Predecessor Service Contractor's Employees

Federal Acquisition Circular (FAC) 2005-64 amends the Federal Acquisition Regulation (FAR) by adding FAR subpart 22.12, Nondisplacement of Qualified Workers Under Service Contracts, and contract clause FAR 52.222-17, Nondisplacement of Qualified Workers, to implement Executive Order (EO) 13495, Nondisplacement of Qualified Workers Under Service Contracts, and the Department of Labor’s (DOL’s) implementing regulations at Title 29 of the Code of Federal Regulations (CFR), Part 9, Nondisplacement Of Qualified Workers Under Service Contracts (29 CFR part 9). EO 13495 and 29 CFR part 9 require service contractors and their subcontractors under successor contracts to offer employees of the predecessor contractor and its subcontractors the right of first refusal of employment for positions for which they are qualified (see the March 2009 Federal Contracts Perspective article “Obama Issues Four Labor-Related Executive Orders” and the September 2011 Federal Contracts Perspective article “Displaced Service Workers Get Right of First Refusal”).

EO 13495 mandated that “service contracts and solicitations for such contracts shall include a clause that requires the contractor, and its subcontractors, under a contract that succeeds a contract for performance of the same or similar services at the same location, to offer those employees (other than managerial and supervisory employees) employed under the predecessor contract whose employment will be terminated as a result of the award of the successor contract, a right of first refusal of employment under the contract in positions for which they are qualified. There shall be no employment openings under the contract until such right of first refusal has been provided.”

EO 13495 prescribed the text of the clause to be included in all service contracts and solicitations exceeding the simplified acquisition threshold ($150,000). The EO went on to mandate that any contractor or subcontractor that fails to comply with this clause or commits willful violations, along with its responsible officers and any firm in which the contractor or subcontractor has a substantial interest, are to be debarred for up to three years.

A proposed FAR rule that would implement EO 13495 and the DOL’s regulations was issued for comment (see the June 2012 Federal Contracts Perspective article “FAR Rule Would Address Nondisplacement of Workers”). Twenty-seven respondents submitted comments on the proposed rule. In response to those comments, the following changes are made to this final rule:

In addition, cross-references throughout FAR subpart 22.12 to the applicable section of the DOL's implementing regulations have been added.

FAC 2005-64 and DOL’s regulations go into effect January 18, 2013. According to the FAC 2005-64 introduction: “Contracting officers are expected to work with their existing service contractors and bilaterally modify their contracts, to the extent feasible, to include the clause at FAR 52.222-17. As an alternative, contracting officers should consider entering into bilateral modifications with existing service contractors to agree to perform paragraph (c) of the clause at FAR 52.222-17, which: (1) informs the existing predecessor contractor's workforce of their right of first refusal; and (2) provides the list of service employees to the contracting officer no less than 30 days before contract completion. Contracting officers shall document the contract files of their existing service contracts to describe the steps that were taken.”

Also of note is the following introductory material: “On January 4, 2011, Public Law 111-350 enacted a new codified version of Title 41 United States Code (U.S.C.), entitled ‘Public Contracts.’ The CAAC [Civilian Agency Acquisition Council] and DARC [Defense Acquisition Regulations Council] published a proposed rule on September 18, 2012...to update all references to Title 41 in the FAR to conform to the positive law codification. As part of these changes, the proposed rule would replace the term ‘Service Contract Act’ with the term ‘Service Contract Labor Standards statute’ (SCLS statute). If this change is adopted through that rulemaking, similar conforming changes in the use of terms will be made in the text to this final rule."

FAR Implements Iranian Sanctions

FAC 2005-63 amends FAR 25.703, Prohibition on Contracting with Entities That Engage in Certain Activities or Transactions Relating to Iran, to implement provisions of the Iran Threat Reduction and Syria Human Rights Act of 2012 (Public Law 112-158) that expand sanctions relating to the energy sector of Iran and sanctions with respect to Iran's Revolutionary Guard Corps.

Sections 201 and 202 of Public Law 112-158 expand sanctions in the Iran Sanctions Act of 1996 (Public Law 104-172) with respect to the energy sector of Iran and impose sanctions with respect to transport of crude oil from Iran and evasion of sanctions by shipping companies.

Section 203 expands sanctions with respect to development by Iran of weapons of mass destruction.

Section 302 imposes sanctions with respect to persons that support or conduct certain transactions with Iran’s Revolutionary Guard Corps or other sanctioned persons.

Section 311 amends the Iran Sanctions Act to require a certification from each prospective contractor that it, and any person owned and controlled by the prospective contractor, does not knowingly engage in a significant transaction or transactions with Iran’s Revolutionary Guard Corps or any of its officials, agents or affiliates.

To implement these provisions of Public Law 112-158, this interim rule makes the following amendments to the FAR:

Comments on this interim rule must be submitted no later than February 8, 2013, identified as “FAC 2005-63, FAR Case 2012-030,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE, 7th Floor, Washington, DC 20417.



Accelerated Subcontractor Payments Proposed

To implement the temporary policy provided by Office of Management and Budget (OMB) Policy Memorandum M-12-16, Providing Prompt Payment to Small Business Subcontractors, a FAR amendment has been proposed that would add a new clause, FAR 52.232-XX, Providing Accelerated Payments to Small Business Subcontractors, that would will require the prime contractor, upon receipt of accelerated payments from the government, to make accelerated payments to small business subcontractors after receipt of a proper invoice and all proper documentation from small business subcontractors.

The clause is to be included in all solicitations and contracts. The clause requires contractors to include the clause in all subcontracts with small businesses, including those for the acquisition of commercial items.

OMB’s temporary policy of accelerating payments ends on July 10, 2013.

Comments on this proposed rule must be submitted no later than February 19, 2013, identified as “FAR Case 2012-031,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE, 7th Floor, Washington, DC 20417.

For more on OMB Policy Memorandum M-12-16, see the September 2012 Federal Contracts Perspective article “OMB Orders Prompt Payment to Small Subcontractors.”



Mileage Reimbursement Set at 56.5¢/Mile for Autos

The General Services Administration (GSA) is increasing the mileage reimbursement rate for use of a privately owned automobile on official travel from 55.5¢ per mile to 56.5¢ per mile; the rate for use of a motorcycle on official travel from 52.5¢ per mile to 53.5¢ per mile; and the rate for use of a privately owned aircraft from $1.31 per mile to $1.33 per mile. These revised rates are effective for travel performed on or after January 1, 2013, through December 31, 2013.

GSA formerly published the privately owned vehicle mileage reimbursement rates in the Federal Travel Regulation (FTR). However, it no longer does that, but instead posts the reimbursement rates on the Internet at http://www.gsa.gov/ftr in an FTR Travel/Per Diem Bulletin.



SBA Finalizes, Proposes More Size Standards

As part of its ongoing comprehensive small business size standards review, the Small Business Administration (SBA) has decided to increase the small business size standards for 52 industries in North American Industry Classification System (NAICS) Sector 51, Information, and Sector 56, Administrative and Support, Waste Management and Remediation Services.

In addition, SBA is proposing to increase the small business size standards for three industries in NAICS Subsector 213, Support Activities for Mining, within NAICS Sector 21, Mining, Quarrying, and Oil and Gas Extraction.

The following are the industries in Sectors 51 and 56 with their finalized small business size standards and their previous small business size standards:

NAICS Code Industry Title Previous Size Standard
($ million)
Revised Size Standard
($ million)
Sector 51
511210 Software Publishers $25.0 $35.5
512110 Motion Picture and Video Production $29.5 $30.0
512131 Motion Picture Theaters (except Drive-Ins) $7.0 $35.5
512199 Other Motion Picture and Video Industries $7.0 $19.0
512290 Other Sound Recording Industries $7.0 $10.0
515111 Radio Networks $7.0 $30.0
515112 Radio Stations $7.0 $35.5
515120 Television Broadcasting $14.0 $35.5
515210 Cable and Other Subscription Programming $15.0 $35.0
517410 Satellite Telecommunications $15.0 $30.0
517919 All Other Telecommunications $25.0 $30.0
518210 Data Processing, Hosting, and Related Services $25.0 $30.0
519110 News Syndicates $7.0 $25.5
519120 Libraries and Archives $7.0 $14.0
519190 All Other Information Services $7.0 $25.5
                    
Sector 56
561311 Employment Placement Agencies $7.0 $25.5
561312 Executive Search Services $7.0 $25.5
561320 Temporary Help Services $13.5 $25.5
561330 Professional Employer Organizations $13.5 $25.5
561410 Document Preparation Services $7.0 $14.0
561421 Telephone Answering Services $7.0 $14.0
561422 Telemarketing Bureaus and Other Contact Centers $7.0 $14.0
561431 Private Mail Centers $7.0 $14.0
561439 Other Business Service Centers (including Copy Shops) $7.0 $14.0
561440 Collection Agencies $7.0 $14.0
561450 Credit Bureaus $7.0 $14.0
561491 Repossession Services $7.0 $14.0
561492 Court Reporting and Stenotype Services $7.0 $14.0
561499 All Other Business Support Services $7.0 $14.0
561510 Travel Agencies $3.5 $19.0
561520 Tour Operators $7.0 $19.0
561591 Convention and Visitors Bureaus $7.0 $19.0
561599 All Other Travel Arrangement and Reservation Services $7.0 $19.0
561611 Investigation Services $12.5 $19.0
561612 Security Guards and Patrol Services $18.5 $19.0
561613 Armored Car Services $12.5 $19.0
561621 Security Systems Services (except Locksmiths) $12.5 $19.0
561622 Locksmiths $7.0 $19.0
561710 Exterminating and Pest Control Services $7.0 $10.0
561740 Carpet and Upholstery Cleaning Services $4.5 $5.0
561910 Packaging and Labeling Services $7.0 $10.0
561920 Convention and Trade Show Organizers $7.0 $10.0
561990 All Other Support Services $7.0 $10.0
562111 Solid Waste Collection $12.5 $35.5
562112 Hazardous Waste Collection $12.5 $35.5
562119 Other Waste Collection $12.5 $35.5
562211 Hazardous Waste Treatment and Disposal $12.5 $35.5
562212 Solid Waste Landfill $12.5 $35.5
562213 Solid Waste Combustors and Incinerators $12.5 $35.5
562219 Other Nonhazardous Waste Treatment and Disposal $12.5 $35.5
562910 Remediation Services $14.0 $19.0
562920 Materials Recovery Facilities $12.5 $19.0

SBA received two comments on the proposed increases to the Sector 51 size standards, and 21 comments on proposed increases to the Sector 56 size standards. However, after analysis, SBA decided to adopt all the proposed increases. For more on the changes that were proposed to Sectors 51 and 56, see the November 2011 Federal Contracts Perspective article “SBA Proposes Increasing Small Business Size Standards.”

The following are the industries in NAICS Subsector 213 with proposed revised small business size standards and their current small business size standards:

NAICS Code Industry Title Current Size Standard
($ million)
Proposed Size Standard
($ million)
Subsector 213
213112 Support Activities for Oil and Gas Operations $7.0 $35.5
213113 Support Activities for Coal Mining $7.0 $19.0
213114 Support Activities for Metal Mining $7.0 $19.0

Comments on the proposed changes to Subsector 213 size standards are to be submitted no later than February 4, 2013, identified as “RIN 3245-AG44,” 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, PhD, Chief, Size Standards Division, 409 Third Street, SW, Mail Code 6530, Washington, DC 20416. SBA will not accept comments by e-mail.



GSA Proposes Expanding Industrial Funding Fee Use

The General Services Administration (GSA) is proposing to amend GSA Acquisition Regulation (GSAR) 552.238-74, Industrial Funding Fee and Sales Reporting, to address the use of the Industrial Funding Fee (IFF) under the Federal Supply Schedules (FSS) Program. The proposed revisions would reflect the current use of the IFF by including the ability to use IFF monies to offset losses in other Federal Acquisition Service (FAS) programs and fund initiatives that benefit other FAS programs.

Federal Supply Schedule (FSS) contracts are negotiated by GSA’s FAS and are used by various federal agencies to purchase supplies and services directly from commercial entities. The IFF is a fee paid by customers to cover FAS’ cost of operating the FSS, and it is a percentage of reported sales under FSS contracts (currently 0.75%).

The current language in GSAR 552.238-74(b)(2) states, “The IFF reimburses FSS for the costs of operating the Federal Supply Schedules Program and recoups its operating costs from ordering activities.” To inform FSS customers that the IFF may be used to fund other programs or offset losses in other FAS programs, the following sentence would be added: “Net operating results generated by the IFF are also applied to offset losses or fund initiatives benefitting other FAS programs, in accordance with 40 U.S.C. 321 [Acquisition Services Fund].” According to GSA, this change will facilitate transparency and open government, and more accurately define the current FAS program operations.

Comments on this proposed rule must be submitted no later than February 26, 2013, identified as “GSAR Case 2012-G503,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE, 7th Floor, Washington, DC 20417.



GSA Withdraws Proposed FSS Contracting Rewrite

The GSA has decided to withdraw its proposed rewrite of GSAR Part 538, Federal Supply Schedule Contracting, “due to the variety of issues addressed...and strong stakeholder interest...”

There were 36 comments submitted on the proposed rewrite. The notice of withdrawal states, “GSA is opening a series of new GSAR cases to modernize the Federal Supply Schedules (FSS) program. The new GSAR cases will focus on the areas that require immediate modernization to maintain currency in the FSS program as well as strategically position the FSS program to meet the current and future needs of ordering activities.”

For more on the proposed GSAR Part 538 rewrite, see the February 2009 Federal Contracts Perspective article “GSA Proposes Rewriting Federal Supply Schedule Rules.”



DEAR Property Regulations Updated

The Department of Energy (DOE) is amending DOE Acquisition Regulation (DEAR) Part 908, Required Sources of Supplies and Services, DEAR Part 945, Government Property, and DEAR Part 970, Management and Operating Contracts, to conform to the FAR, remove out-of-date government property coverage, and update references.

Though no comments were submitted on the proposed rule, several administrative changes are made to the final rule, including correcting citations; correcting office names; updating vehicle license tag ordering procedures (DEAR 908.7101-7, Government License Tags); retaining the definition of “capital equipment,” which was proposed for deletion but determined to be necessary (DEAR 945.101, Definitions); revising the contractor’s reporting of sensitive item listing (DEAR 945.102-72, Reporting of Contractor Sensitive Property Inventory); and correcting the excess personal property screening timeframe (paragraph (a)(1) of DEAR 945.602-3, Screening). Also, it was discovered that DEAR 952.245-5, Government Property (Cost Reimbursement, Time-and-Materials, or Labor-Hour Contracts), referenced FAR 52.245-5 which is “Reserved” under the FAR Part 45 rewrite (see the June 2007 Federal Contracts Perspective article “FAR Coverage on Government Property Simplified, Clarified, Trimmed”). To correct this, “FAR 52.245-5” is replaced by “FAR 52.245-1” [Government Property].

For more on the proposed rule, see the April 2011 Federal Contracts Perspective article “Energy Proposes to Update Government Property Regs.”



HUDAR Brought Up-to-Date

The Department of Housing and Urban Development (HUD) is updating the HUD Acquisition Regulation (HUDAR), which was last revised on January 13, 2006. This revision removes provisions that are obsolete, refines provisions to approve requests for deviation from the HUDAR, updates provisions that address the organizational structure of HUD, and adds provisions on contractor record retention.

No comments were submitted on the proposed rule, so the proposed rule is adopted as final with a few editorial changes. For more on the proposed rule, see the April 2012 Federal Contract Perspective article “HUDAR Update Proposed.”



Poland New Qualifying Country

The Department of Defense (DOD) is amending the following Defense FAR Supplement (DFARS) clauses to add Poland to the list of qualifying countries:

A “qualifying country” is “a country with a reciprocal defense procurement memorandum of understanding or international agreement with the United States in which both countries agree to remove barriers to purchases of supplies produced in the other country or services performed by sources of the other country, and the memorandum or agreement complies, where applicable, with the requirements of section 36 of the Arms Export Control Act (22 U.S.C. 2776) and with 10 U.S.C. 2457.”

On August 27, 2011, the U.S. Secretary of Defense signed a new reciprocal defense procurement agreement with the Polish Minister of National 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. The agreement does not cover construction or construction material. Because of the execution of this agreement, Poland meets the criteria as a “qualifying country.”

In other recent changes to the DFARS:



Eight Categories Proposed for Biobased Designation

The United States Department of Agriculture (USDA) is proposing to add eight (8) 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:

3201.100,Aircraft and boat cleaners
3201.101,Automotive care products
3201.102,Engine crankcase oil
3201.103,Gasoline fuel additives
3201.104,Metal cleaners and corrosion removers
3201.105,Microbial cleaning products
3201.106,Paint removers
3201.107,Water turbine bearing oils

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 February 4, 2013, identified with the Regulatory Information Number (RIN) 0599-AA16, by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: biopreferred@usda.gov – include “RIN 0599-AA16” 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/.



Prompt Payment Interest Rate Set at 1 3/8%

The Treasury Department has established 1 3/8% (1.375%) as the interest rate for the computation of payments made between January 1, 2013, and June 30, 2013, 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 (July 1, 2012, through December 31, 2012) was 1 3/4% (1.75%). The interest rate for January 1, 2012, through June 30, 2012, was 2% (2.0%).

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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