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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

March 2013
Vol. XIV, No. 3

CONTENTS

FAC 2005-66 Extends FAR Subpart 13.5 Procedures,
Addresses Raising T&M Ceiling Prices

Federal Acquisition Circular (FAC) 2005-66 amends the Federal Acquisition Regulation (FAR) to: (1) extend the expiration of the authority in FAR subpart 13.5, Test Program for Certain Commercial Items, from January 1, 2012, to January 1, 2015; (2) provide additional guidance on required actions prior to raising the ceiling price or otherwise changing the general scope of a time and materials or labor-hour contract or order; (3) expand the definition of “contingency operation”; and (4) correct the internet address of the “Interagency Contract Directory.”

• Extension of Authority for Use of Simplified Acquisition Procedures for Certain Commercial Items: This final rule implements Section 822 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013 (Public Law 112-239), which extends the authority at FAR subpart 13.5, Test Program for Certain Commercial Items, to January 1, 2015. FAR subpart 13.5 authorizes the use of simplified acquisition procedures described elsewhere in FAR part 13, Simplified Acquisition Procedures, for commercial items between $150,000 and $6,500,000.
  
  “The purpose of this test program is to vest contracting officers with additional procedural discretion and flexibility, so that commercial item acquisitions in this dollar range may be solicited, offered, evaluated, and awarded in a simplified manner that maximizes efficiency and economy and minimizes burden and administrative costs for both the government and industry…” (paragraph (a) of FAR 13.500, General).
  
  This final rule accomplishes this by changing the expiration date in FAR 13.500(d) from “January 1, 2012” to “January 1, 2015.”
  
  NOTE: The NDAA for FY 2012 (Public Law 112-81) did not extend the FAR subpart 13.5 authority past January 1, 2012 (it wasn’t mentioned in the law), so FAR subpart 13.5 was not in effect during 2012. Once Public Law 112-239, with Section 822, was signed by the president on January 3, 2013, FAR subpart 13.5 became effective once again. Soon after Public Law 112-239 was signed, the Department of Defense issued a class deviation extending the authority to use FAR subpart 13.5 until January 1, 2015, and the Civilian Agencies Acquisition Council (CAAC) issued a memorandum to all civilian agencies authorizing them to issue class deviations to change the expiration date of FAR subpart 13.5 to January 1, 2015. The CAAC memorandum went on to state that an expedited FAR case was being processed to change the expiration date. This final rule is the “expedited FAR case.” See the February 2013 Federal Contracts Perspective article “FY 2013 National Defense Authorization Act Extends FAR Subpart 13.5 Procedures Through 2014” for more on Section 822 of Public Law 112-239 and the subsequent actions.
  
  
• Changes to Time-and-Materials (T&M) and Labor-Hour (LH) Contracts and Orders: This finalizes, without changes, the proposed rule that would provide additional guidance on actions that are required when raising the ceiling price or otherwise changing the general scope of a T&M or LH contract or order.
  
  The proposed rule would amend FAR 8.404, Use of Federal Supply Schedules, FAR 12.207, Contract Type [authorized for acquisition of commercial items], and FAR 16.601, Time-and-Materials Contracts [that are indefinite-delivery type], to require analysis and documentation for changes in T&M or LH orders and to clarify that changes in the general scope of the contract or order should be justified as non-competitive new work. One respondent submitted a comment on the proposed rule and, since the comment agreed with the proposed rule, the proposed rule is finalized without changes.
  
  For more on the proposed rule, see the August 2012 Federal Contracts Perspective article “Additional Guidance on T&M and LH Contracts Proposed.”
  
  
• Definition of Contingency Operation: This interim rule revises the definition of “contingency operation” to address the statutory change to the definition made by Section 515 of the NDAA for FY 2012 (Public Law 112-81).
  
  Paragraph (a) of Section 515 amended United States Code Title 10, Armed Forces, Chapter 1209, Active Duty, to incorporate a new provision, Section 12304a, Army Reserve, Navy Reserve, Marine Corps Reserve, and Air Force Reserve: Order to Active Duty to Provide Assistance in Response to a Major Disaster or Emergency. Section 12304a provides for treatment of an operation as a contingency operation when the secretary of defense activates reserves under the terms of 10 U.S.C. 12304a in response to a governor’s request for federal assistance in responding to a major disaster or emergency declared by the president.
  
  This interim rule adds a reference to Section 12304a to the list of references in section (2) of “contingency operation” definitiion in FAR 2.101, Definitions ([“contingency operation” means a military operation that] “results in the call or order to, or retention on, active duty of members of the uniformed services under Sections 688, 12301(a), 12302, 12304, 12304a, 12305, or 12406 of Title 10 of the United States Code, Chapter 15 of Title 10 of the United States Code, or any other provision of law during a war or during a national emergency declared by the president or Congress” [emphasis added]).
  
  Comments on this interim rule must be submitted no later than April 29, 2013, identified as “FAC 2005-66, FAR Case 2013-003,” 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.
   
• Technical Amendments: This revises the website address for the Interagency Contract Directory from “http://www.contractdirectory.gov/contractdirectory/” to “https://www.contractdirectory.gov/contractdirectory/” in paragraphs (a), (b), and (b)(1) of FAR 5.601, Governmentwide Database of Contracts; paragraph (b)(1) of FAR 7.105, Contents of Written Acquisition Plans; and paragraph (b)(2)(iv) of FAR 10.002, Procedures [for market research].

DOD Issues Rules on Acquiring Tents, Alleged Crimes

The Department of Defense (DOD) conducted a little housecleaning during February, finalizing two interim rules, issuing another final rule, proposing two rules, issuing a class deviation, and waiving a statutory provision.

• Acquisition of Tents and Other Temporary Structures: This finalizes, with changes, the interim rule that amended DFARS 225.7002, 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 ($150,000).
  
  The interim rule amended DFARS 225.7002-1, Restrictions, by adding paragraph (a)(3), which provides the following: “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 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” was 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.”
  
  No comments were submitted on the interim rule. However, based on verbal questions, the following changes are made to the final rule:
  
  
  • To clarify that the term “structural components” applies just to tents but not to tarpaulins and covers, DFARS 225.7002-1(a)(3) and DFARS 252.225-7012(b)(3) are revised from “tents and structural components of tents, tarpaulins, or covers” to “(i) tents and the structural components of tents; (ii) tarpaulins; or (iii) covers.”
    
    
  • DFARS 225.7002 addresses the Berry Amendment, and DFARS 225.7002-1 addresses the domestic source restrictions of the Berry Act. DFARS 225.7002-1(a)(3) states, “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)” (see above). To clarify that temporary structures are not covered by the Berry Amendment, this language has been removed from DFARS 225.7002-1 and moved to a new DFARS 215.101, Best Value Continuum, which supplements FAR 15.101, Best Value Continuum (DFARS 215.101 consists of one subsection: DFARS 215.101-70, Best Value When Acquiring Tents or Other Temporary Structures). This removes any implication that temporary structures are covered by the Berry Amendment.
  
  For more on the interim rule, see the July 2012 Federal Contracts Perspective article “DFARS Addresses Receipt of Only One Offer.”
  
  
• Electronic Subcontracting Reporting System: This finalizes, with changes, the interim rule that amended DFARS 219.708, Contract Clauses; DFARS 252.212-7001, Contract Terms and Conditions Required to Implement Statutes or Executive Orders Applicable to Defense Acquisitions of Commercial Items; DFARS 252.219-7003, Small Business Subcontracting Plan (DOD Contracts); DFARS 252.219-7004, Small Business Subcontracting Plan (Test Program); and DFARS Appendix I, Policy and Procedures for the DOD Pilot Mentor-Protégé Program (specifically, DFARS I-105, Mentor Approval Process, and DFARS I-112, Reporting Requirements), to provide DOD-specific procedures and policies related to the Electronic Subcontracting Reporting System (eSRS) (http://www.esrs.gov/), and to conform to changes in FAC 2005-42 that reflected the use of the eSRS rather than Standard Form 294, Subcontract Report for Individual Contracts, and Standard Form 295, Summary Subcontract Report, for submission of small business subcontract reports.
  
  No comments were submitted on the interim rule, so the interim rule is adopted as final except for minor technical changes in DFARS 219.708.
  
  For more on the interim rule, see the November 2010 Federal Contracts Perspective article “The DFARS Continues to Metamorphose.”
  
  
• Alleged Crimes By or Against Contractor Personnel: This final rule amends paragraph (d) of DFARS 252.225-7040, Contractor Personnel Authorized to Accompany U.S. Armed Forces Deployed Outside the United States, to expand coverage on contractor requirements and responsibilities regarding alleged crimes by or against contractor personnel. The expanded coverage applies to contingency operations, humanitarian or peacekeeping operations, or other military operations when the latter are designated by the combatant commander. These requirements had applied only to DOD contracts performed in Iraq and Afghanistan. This change applies these requirements to all DOD contracts that authorize contractor personnel to accompany U.S. Armed Forces deployed outside the United States.
  
  
• Encouragement of Science, Technology, Engineering, and Mathematics (STEM) Programs: This proposed rule would add DFARS subpart 226.72, Encouragement of Science, Technology, Engineering, and Mathematics (STEM) Programs, and the related clause at DFARS 252.226-70XX, to implement Section 862 of the NDAA for FY 2012 (Public Law 112-81), which requires DOD to encourage contractors to develop STEM programs.
  
  New DFARS subpart 226.72 would include DFARS 226.7203, Policy, which would state: “DOD encourages contractors to undertake actions, to the maximum extent practicable, that –
  1. Enhance undergraduate, graduate, and doctoral programs in science, technology, engineering, and mathematics (referred to as 'STEM' disciplines);
  2. Make investments, such as programming and curriculum development, in STEM programs within elementary and secondary schools;
  3. Encourage employees to volunteer in Title I schools in order to enhance STEM education and programs;
  4. Make personnel available to advise and assist faculty at such colleges and universities in the performance of STEM research and disciplines critical to the functions of DOD;
  5. Establish partnerships between the contractor and historically black colleges and universities and minority institutions for the purpose of training students in scientific disciplines;
  6. Award scholarships and fellowships, and establish cooperative work-education programs in scientific disciplines; or
  7. Conduct recruitment activities at historically black colleges and universities and other minority-serving institutions or offer internships or apprenticeships.”
  
  Contract clause DFARS 252.226-70XX would repeat DFARS 226.7203 but with an additional paragraph on costs:
  
  
  1. The contractor shall assume the responsibility for all the costs and investments in support of the STEM disciplines.
     
     
  2. The contractor will not be reimbursed for any costs incurred or associated with the support of the STEM disciplines. Any costs incurred for supporting the STEM disciplines are unallowable under this contract.
  
  Comments on this proposed rule must be submitted no later than April 29, 2013, identified as “DFARS Case 2012-D027,” 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: Dustin Pitsch, OUSD(AT&L)DPAP/ DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301-3060.
  
  
• Unallowable Fringe Benefit Costs: This proposed rule would amend DFARS 231.205-6, Compensation for Personal Services, to explicitly state that fringe benefit costs incurred or estimated that are contrary to law, employer-employee agreement, or an established policy of the contractor are unallowable.
  
  Paragraph (m) of FAR 31.205-6 states that the costs of fringe benefits (which include employee health care benefits) are allowable to the extent that they are reasonable and are required by law, employer-employee agreement, or an established policy of the contractor. Although fringe benefit costs that do not meet these criteria are not allowable, the FAR does not make them expressly unallowable. Therefore, DFARS 231.205-6(m)(1) would be added, which would state, “Fringe benefit costs incurred or estimated that are contrary to law, employer-employee agreement, or an established policy of the contractor are unallowable.”
  
  Comments on this proposed rule must be submitted no later than April 29, 2013, identified as “DFARS Case 2012-D038,” 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 Williams, OUSD(AT&L)DPAP/DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301-3060.
  
  
• Class Deviation to Implement Temporary Authority to Acquire Products and Services Produced in Countries Along a Major Route of Supply to Afghanistan: This class deviation implements Section 841 of the NDAA for FY 2013 (Public Law 112-239), which provides temporary authority (until December 31, 2014) to limit competition to, or provide a preference for, products mined, produced, or manufactured in, or services from the Central Asian states of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan before considering other sourcing options that include Pakistan and the South Caucasus.
  
  Contracting officers are to do the following if the acquisition is in support of operations in Afghanistan:
  
  
  • Prepare and execute a determination in accordance with DFARS 225.7799-1, Acquisition Procedures (DEVIATION 2013-O0007), and DFARS 225.7799-2, Determination Requirements (DEVIATION 2013-O0007).
    
    
  • Evaluate offers in accordance with DFARS 225.7799-3, Evaluating Offers (DEVIATION 2013-O0007).
    
    
  • Include the appropriate provision and/or clause in the solicitation and contract in accordance with DFARS 225.7799-4, Solicitation Provisions and Contract Clauses (DEVIATION 2013-O0007): DFARS 252.225-7990, Preference for Products or Services from a Central Asian State (DEVIATION 2013-O0007); DFARS 252.225-7991, Requirement for Products or Services from a Central Asian State (DEVIATION 2013-O0007); DFARS 252.225-7992, Acquisition Restricted to Products or Services from a Central Asian State (DEVIATION 2013-O0007); DFARS 252.225-7996, Acquisition Restricted to Products or Services from Central Asia, Pakistan, or the South Caucasus (DEVIATION 2013-O0007); DFARS 252.225-7998, Preference for Products or Services from Central Asia, Pakistan, or the South Caucasus (DEVIATION 2013-O0007); and/or DFARS 252.225-7999, Requirement for Products or Services from Central Asia, Pakistan, or the South Caucasus (DEVIATION 2013-O0007).
  
  
• Waiver for Certain Defense Items Produced in the United Kingdom: The Under Secretary of Defense (Acquisition, Technology, and Logistics) (USD(AT&L)) is waiving the limitation of Title 10 of the U.S. Code (U.S.C.), Section 2534, Miscellaneous Limitations on the Procurement of Goods Other than United States Goods (10 U.S.C. 2534) for certain defense items produced in the United Kingdom (UK). 10 U.S.C. 2534 limits DOD procurement of certain items listed to sources in the national technology and industrial base. However, the secretary of defense may waive this restriction for a particular item listed in Section 2534 and for a particular foreign country if the secretary determines that application of the limitation “would impede the reciprocal procurement of defense items under a memorandum of understanding providing for reciprocal procurement of defense items” and if “that country does not discriminate against defense items produced in the United States to a greater degree than the United States discriminates against defense items produced in that country.” The secretary of defense has delegated this waiver authority to the USD(AT&L).
  
  The USD(AT&L) has extended for one year, from March 1, 2013, to February 28, 2014, the waiver of the limitation on procurement of the following products from the UK:
  
  
  • Air circuit breakers
  • Gyrocompasses
  • Electronic navigation chart systems
  • Steering controls
  • Pumps
  • Propulsion and machinery control systems
  • Totally enclosed lifeboats
  
  The USD(AT&L) granted this waiver because the UK does not discriminate against defense items produced in the United States to a greater degree than the United States discriminates against defense items produced in the UK, and the application of the limitation in 10 U.S.C. 2534 against defense items produced in the UK would impede the reciprocal procurement of defense items under the Reciprocal Defense Procurement Memorandum of Understanding (MOU) the DOD has had with the UK since 1975, most recently renewed on December 16, 2004.

Comments Sought on Performance Cost Comparisons

The Office of Federal Procurement Policy (OFPP) is seeking comments and suggestions from the public on comparing the relative cost of performance by federal employees versus contract performance to identify the most cost-effective source. Also, OFPP is seeking comments regarding the development of guidance required by Section 1655 of the NDAA for FY 2013 (Public Law 112-239). Section 1655 requires that the Office of Management and Budget (the parent organization of OFPP) publish guidance addressing the conversion of a function being performed by a small business concern to performance by a federal employee.

“OFPP seeks public comment on how agencies can best incorporate cost comparisons into their management practices and especially welcomes public comment on the following three issues: (1) when cost comparisons are likely to be beneficial; (2) what principles should guide the conduct of a cost comparison; and (3) what special considerations should be involved when work is currently being performed by a small business contractor.”

A public meeting will be conducted at the General Services Administration Auditorium located at 1800 F Street, NW, Washington, DC on Tuesday, March 5, 2013, at 2:00 pm eastern time and is expected to conclude not later than 5:00 pm eastern time. The public is asked to pre-register by Friday, March 1, 2013, due to security limitations. To pre-register, please send an email to Ms. Aisha Hasan of OFPP at ahasan@omb.eop.gov. Registration check-in will begin at 1:00 pm eastern time.

Parties wishing to make formal oral presentations at the public meeting must contact Ms. Aisha Hasan by email at ahasan@omb.eop.gov no later than Friday, March 1, 2013, to be placed on the public speaker list. Time allocations for oral presentations will be limited to five minutes. All formal oral public comments should be followed-up in writing and submitted to http://www.regulations.gov. When submitting comments, reference “Public Comments on the Use of Cost Comparisons.”

Instead of, or in addition to, participating in the public meeting, parties may submit written comments to http://www.regulations.gov by Monday, April 15, 2013. When submitting comments, reference “Public Comments on the Use of Cost Comparisons.” Parties wishing to share written statements at the public meeting must submit such statements to Ms. Hasan at ahasan@omb.eop.gov by Friday, March 1, 2013.

OPM to Adopt FAR Suspension and Debarment Procedures

The Office of Personnel Management (OPM) does not have its procurement rules in the Code of Federal Regulations (specifically, Title 48, Federal Acquisition Regulations System), so it intends to adopt the policies and procedures contained in FAR subpart 9.4, Debarment, Suspension, and Ineligibility, regarding the debarment, suspension, and ineligibility of government contractors. These new rules will be contained in an internal OPM document referred to as “Contracting Policy No. 9.4: OPM Suspension and Debarment Program.”

OPM proposes to adopt the following policy and incorporate it into its contracting policies:

• OPM will follow the policies and procedures in FAR subpart 9.4. OPM will not solicit offers from, award contracts to, or consent to subcontracts with contractors that are listed on the Excluded Parties List System of the System for Award Management (SAM/EPLS) (https://www.sam.gov) except as otherwise provided for in FAR subpart 9.4. OPM will report to the SAM/EPLS any contractor OPM debars, suspends, or proposes for debarment. Such action will have government-wide reciprocity. Notwithstanding the debarment, suspension, or proposed debarment of a contractor, OPM may continue contracts or subcontracts in existence at the time the contractor was debarred, suspended, or proposed for debarment, unless the OPM director or other designated debarment official directs otherwise.
  
  
• The OPM director or a designee will serve as the debarring official and suspending official (debarment/suspension official). The OPM director or designee will also decide (1) whether to solicit offers from, award contracts to, or consent to subcontracts with contractors who have been debarred, suspended, or proposed for debarment, and (2) whether to terminate a current contract or subcontract in existence at the time the contractor was debarred, suspended, or proposed for debarment.
  
  
• OPM’s Contracting Policy Office (CPO) will have primary responsibility for investigating and submitting potential debarment/suspension actions to the OPM Suspension and Debarment Committee (SDC), which will have the responsibility for reviewing and referring actions to the debarment/suspension official for consideration. As such, any person who believes there may be grounds to debar or suspend a person or entity from contracting with OPM should contact CPO and provide all relevant information.

Comments must be received on or before March 25, 2013. Address all comments concerning this proposed policy to: U.S. Office of Personnel Management, Contracting; ATTN: Contracting Policy, 1900 E Street NW, Washington, DC 20415; or by email to patricia.broome@opm.gov.

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