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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


June 2013
Vol. XIV, No. 6

CONTENTS


Court Declares NLRB Poster Requirement Invalid, Infringes on Businesses’ First Amendment Rights
SBA Proposes Waiving Nonmanufacturing Rule for Ovens
Dollar Limitations on WOSB Set-Asides Removed
Defense Regulation-Making Picks Up Pace
Removal of References to OFPP ILC Pamphlet Proposed
DOE Revises Contractor Legal Management Requirements
GSA Proposes Reinstating FSS Modification Clause



Court Declares NLRB Poster Requirement Invalid,
Infringes on Businesses’ First Amendment Rights

The United States Court of Appeals for the District of Columbia Circuit has ruled that a National Labor Relations Board (NLRB) requirement that nearly 6,000,000 employers post on their properties and on their websites a “Notification of Employee Rights Under the National Labor Relations Act” violates the First Amendment’s freedom of speech right not to speak. The suit, National Association of Manufacturers, et al, v. National Labor Relations Board, et al (No. 12-5068, May 7, 2013), was in response to an NLRB rule that requires the posting of an 11 inch by 17 inch poster informing “employees of their right to form, join, or assist a union; to bargain collectively through representatives of their choosing; to discuss wages, benefits, and other terms and conditions of employment with fellow employees or a union; to take action to improve working conditions; to strike and picket; or to choose not to engage in any of these activities.”

This poster requirement is implemented in federal contracts by Federal Acquisition Regulation (FAR) 52.222-40, Notification of Employee Rights under the National Labor Relations Act (see the January 2011 Federal Contracts Perspective article “FAC 2005-47 Revises HUBZone Program, Allows Subcontractor SDB Self-Certification," and the December 2011 Federal Contracts Perspective article “FAC 2005-54 Permits Small Business Set-Asides For Multiple-Award Contracts.” The poster is available at http://www.dol.gov/olms/regs/compliance/EmployeeRightsPoster11x17_Final.pdf.

The NLRB argued that this poster is required because “American workers are largely ignorant of their rights under the NLRA [National Labor Relations Act], and this ignorance stands as an obstacle to the effective exercise of such rights. For example, during union organizing campaigns, employees’ ignorance of the law hinders their ability to assess employer anti-union propaganda, thus diluting their right to organize...There are any number of reasons why such a knowledge gap could exist. The overwhelming majority of private sector employees are not represented by unions, and thus lack an important source of information about NLRA rights. Immigrants, who comprise an increasing proportion of the nation’s work force, are unlikely to be familiar with their workplace rights, including their rights under the NLRA. Several studies have suggested that high school students, many of whom are about to enter the labor force, are uninformed about labor law and labor relations...If employees are largely unaware of their NLRA rights, however, one reason surely is that, except in very limited circumstances, no one is required to inform them of those rights.” This poster requirement was to “inform them of those rights.” Failure to display the poster “may be found to be an unfair labor practice.”

The poster identifies the following rights available to employees under the NLRA:

The poster goes on to state that it is illegal for the employer to:

However, the court cited Section 8(c) of the NLRA, which states, “The expressing of any views, argument, or opinion, or the dissemination thereof, whether in written, printed, graphic, or visual form, shall not constitute or be evidence of an unfair labor practice under any of the provisions of this [Act], if such expression contains no threat of reprisal or force or promise of benefit.” In light of Section 8(c), the court asked the following question: “How can it be an unfair labor practice for an employer to refuse to post a government notice informing employees of their right to unionize (or to refuse to)? Like the freedom of speech guaranteed in the First Amendment, §8(c) necessarily protects...the right of employers (and unions) not to speak...For the reasons stated, the Board’s posting rule is vacated.”



SBA Proposes Waiving Nonmanufacturing Rule for Ovens

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for Commercial-Type Ovens, Gas Ranges, and Ranges, Product Service Code (PSC) 7310 (Food Cooking, Baking, and Serving Equipment), under the North American Industry Classification System (NAICS) code 333318, Other Commercial and Service Industry Machinery Manufacturing). SBA is inviting the public to comment on this proposed waiver or to provide information on potential small business sources for these products by July 8, 2013, identified as “SBA-2013-0005,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail/hand delivery/courier: Edward Halstead, Procurement Analyst, U.S. Small Business Administration, 409 3rd Street SW, Suite 8022, Washington, DC 20416.

EDITOR’S NOTE: Public Law 100-656, enacted November 15, 1988, requires those with federal contracts that are set-aside for small businesses or awarded through the 8(a) program to provide the product of a small business manufacturer or processor if the recipient is not the actual manufacturer or processor (see paragraph (f) of FAR 19.102, Size Standards). This is called the “nonmanufacturer rule.” However, SBA may waive this requirement if there are no small business manufacturers or processors.

The SBA regulation on the nonmanufacturer rule is in Title 13 of the Code of Federal Regulations (CFR), Business and Credit Administration; part 121, Small Business Size Standards; under paragraph (b) of 121.406, How does a small business concern qualify to provide manufactured products or other supply items under a small business set-aside, service-disabled veteran-owned small business set-aside, WOSB [women-owned small business] or EDWOSB [economically disadvantaged women-owned small business] set-aside, or 8(a) contract? The SBA regulation on the waiver of the nonmanufacturer rule is 13 CFR 121.1202, When Will a Waiver of the Nonmanufacturer Rule Be Granted for a Class of Products? A complete list of products for which the nonmanufacturer rule has been waived is available at http://www.sba.gov/sites/default/files/class_waiver.pdf.



Dollar Limitations on WOSB Set-Asides Removed

The Small Business Administration (SBA) is amending its regulations on women-owned small business (WOSB) set-asides to implement Section 1697 of the National Defense Authorization Act of Fiscal Year 2013 (Public Law 112-239), which removed the statutory limitation on the dollar amount of a contract set-aside for WOSBs. Now, contracting officers may set-aside contracts for WOSBs at any dollar level as long as the other requirements for a set-aside under the program are met. The dollar limitations had been $6,500,000 for contracts assigned a manufacturing North American Industry Classification Systems (NAICS) code, and $4,000,000 for all other contracts.

The SBA’s regulations are in Title 13 of the Code of Federal Regulations (CFR), Part 127, Women-Owned Small Business Federal Contract Program. The dollar limitations are removed from paragraphs (a)(1), (a)(2), (b)(1), and (b)(2) of 13 CFR 127.503, When is a contracting officer authorized to restrict competition under this part?

FAR subpart 19.15, Women-Owned Small Business Program, implements the SBA’s WOSB program, and paragraphs (b)(2) and (c)(2) of FAR 19.1505, Set-Aside Procedures, contain the dollar limitations. While a FAR case is being prepared to process this change through the regulatory process, the Civilian Agency Acquisition Council (CAAC) issued a blanket FAR deviation that can be used by all civilian agencies to delete FAR 19.1505(b)(2) and (c)(2), and the Department of Defense issued a FAR deviation doing likewise.

For more on FAR subpart 19.15, see the April 2012 Federal Contracts Perspective article “FAC 2005-56 Finalizes Rules on Women-Owned Business Set-Asides, Use of Cost-Reimbursement Contracts.”



Defense Regulation-Making Picks Up Pace

The Department of Defense (DOD) continued its Defense FAR Supplement (DFARS) housekeeping in May, but at an accelerated pace when it issued three final rules, four proposed rules, and four directives.



Removal of References to OFPP ILC Pamphlet Proposed

A proposed rule has been published that would amend FAR 28.204-3, Irrecovable Letter of Credit, to remove all references to Office of Federal Procurement Policy (OFPP) Pamphlet No. 7, Use of Irrevocable Letters of Credit, and to provide updated sources of data required to verify the credit worthiness of a financial entity issuing or confirming an irrevocable letter of credit (ILC).

OFPP Pamphlet No. 7 provided detailed guidance for implementing OFPP Policy Letter 91-4, Use of Irrevocable Letters of Credit (ILC), for government contracts. In 2000, OFPP rescinded 22 policy letters because they had been superseded by statutory changes, had been implemented in the FAR or other regulations, or were no longer necessary. Among the rescinded policy letters was Policy Letter 91-4 (see the April 2000 Federal Contracts Perspective article “OFPP Rescinds 22 Outdated Policy Letters”). Subsequently, references to OFPP Policy Letter 91-4 and the other rescinded policy letters were removed from the FAR (see the July 2000 Federal Contracts Perspective article “FAC 97-18 Revises Trade Agreements Thresholds and CAS Applicability, Addresses Recycled Products”). However, the reference to OFPP Pamphlet No. 7 in FAR part 28, Sureties and Other Security for Bonds, was retained because the information was considered relevant and provided, among other information, a listing of available quantitative and qualitative credit rating institutions and resources, formats for ILCs, and other useful data.

FAR 28.204-3 cites OFPP Pamphlet No. 7 in paragraphs (g)(1) and (h)(1) as an available resource that may be used to obtain information on credit rating services or investment grade ratings of financial entities issuing or confirming ILCs because it provides overarching policy and specific guidance on the use of ILCs, but some of the information is outdated. Therefore, instead of referencing OFPP Pamphlet No. 7, this rule proposes to: (1) extract from OFPP Pamphlet No. 7 the relevant and current information for inclusion in the FAR; and (2) provide additional sources of data required to verify the credit worthiness of a financial entity issuing or confirming an ILC, as summarized on the websites of the Federal Deposit Insurance Corporation (http://www2.fdic.gov/idasp/index.asp) and Securities and Exchange Commission (http://www.sec.gov/answers/nrsro.htm).

In addition, FAR 52.228-14, Irrevocable Letter of Credit, would be updated to reflect the current information in FAR 28.204-3.

Comments on this proposed rule must be submitted no later than July 8, 2013, identified as “FAR Case 2011-023,” 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.



DOE Revises Contractor Legal Management Requirements

The Department of Energy (DOE) is revising its regulations covering contractor legal management requirements (Title 10 of the Code of Federal Regulations [CFR], Part 719, Contractor Legal Management Requirements) to provide rules for handling legal matters and associated costs by: (1) certain contractors whose contracts exceed $100,000,000; and (2) legal counsel retained directly by DOE for matters in which costs exceed $100,000. In response to these revisions, conforming amendments are made to the Department of Energy Acquisition Regulation (DEAR).

These changes are intended to clarify and streamline existing requirements, improve efficiency of contractor legal management, and facilitate oversight over the expenditure of taxpayer dollars.

DOE’s contracts that include cost reimbursable elements generally allow reimbursement of legal costs, including the costs of litigation, if the costs are reasonable and incurred in accordance with the applicable cost principles and contract clauses. Consequently, DOE has an obligation to monitor and control the legal costs that it reimburses.

DOE has overseen its contractors’ management of legal matters and associated costs since 1994. In 2001, 10 CFR Part 719 was added to DOE’s regulations, and the DEAR was amended accordingly (see the February 2001 Federal Contracts Perspective article “DOE Rewrites DEAR Part 970, Mandates Legal Management”).

After a decade operating under the 2001 rules, DOE decided to review, update, and revise the regulations. In 2011, DOE issued a Notice of Proposed Rulemaking (see the January 2012 Federal Contracts Perspective article “DOE Proposes Legal Management Requirements”), and this final rule is the product of that proposed rule and comments on it submitted by 15 respondents.

The following are the changes made to the DEAR by this final rule:

DOE contracting officers are to include the applicable clause in solicitations, and modify existing contracts to include the applicable clause when extending them, exercising options under them, or adding additional term to them in accordance with award term provisions.

GSA Proposes Reinstating FSS Modification Clause

The General Services Administration (GSA) is proposing to amend the GSA Acquisition Regulation (GSAR) to reinstate a Modifications (Federal Supply Schedule) clause, and add an Alternate I version of the clause that will require electronic submission of modifications under Federal Supply Schedule (FSS) contracts managed by GSA.

The GSAR has been undergoing a complete rewrite since 2008 (see the July 2008 Federal Contracts Perspective article “GSAR Undergoing Rewrite”). Part of the rewrite has involved GSAR part 538, Federal Supply Schedule Contracting, and GSAR part 543, Contract Modifications. GSAR part 543 included a clause prescription for GSAR 552.243-72, Modifications (Multiple Award Schedule). Because GSAR 552.243-72 addressed modifications to the Multiple Award Schedule (also called the “Federal Supply Schedule”), the final rewrite of GSAR part 543 removed GSAR 552.243-72 and stated it was being relocated to GSAR part 538 (see the February 2009 Federal Contracts Perspective article “Two Rewritten GSAR Parts Finalized”). The proposed rewrite of GSAR part 538 stated that GSAR 552.243-77 would be relocated and redesignated as GSAR 552.238-67, Modifications (Multiple Award Schedule) (see the February 2009 Federal Contracts Perspective article “GSA Proposes Rewriting Federal Supply Schedule Rules”). However, the GSAR part 538 rewrite was withdrawn “due to the variety of issues addressed...and strong stakeholder interest...” (see the January 2013 Federal Contracts Perspective article “GSA Withdraws Proposed FSS Contracting Rewrite”), so there is currently no clause addressing FSS modification procedures in the GSAR.

This proposed rule would reinstate GSAR 552.243-72 as GSAR 552.238-81, Modifications (Federal Supply Schedule). In addition, an Alternate I to the clause would be added which would require electronic submission of modifications for FSS contracts managed by GSA via eMod (http://eoffer.gsa.gov/). “Use of eMod will streamline the modification submission process for both FSS contractors and contracting officers.”

Under Alternate I, current and new FSS contractors would be required to obtain a digital certificate to submit information via eMod. “A digital certificate is an electronic credential that asserts the identity of an individual and enables eMod to verify the identity of the individual entering the system and signing documents. The certificate will be valid for a period of two years, after which contractors must renew the certificate at the associated cost during that time. At present, two FSS vendors are authorized to issue digital certificates that facilitate the use of eMod, at a price of $119 per issuance and at renewals every two years.”

GSA has delegated authority to the Department of Veterans Affairs (VA) to establish its own schedules for medical supplies. VA does not have access to eMod, so it will not required to comply with the requirements of the Alternate I. VA will continue to utilize the basic version of the GSAR 552.238-81 in management of their FSS contracts.

Comments on this proposed rule must be submitted no later than July 29, 2013, identified as “GSAR Case 2012-G501,” 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.





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