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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

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:

• Organize a union to negotiate with your employer concerning your wages, hours, and other terms and conditions of employment.
  
  
• Form, join or assist a union.
  
  
• Bargain collectively through representatives of employees’ own choosing for a contract with your employer setting your wages, benefits, hours, and other working conditions.
  
  
• Discuss your wages and benefits and other terms and conditions of employment or union organizing with your co-workers or a union.
  
  
• Take action with one or more co-workers to improve your working conditions by, among other means, raising work-related complaints directly with your employer or with a government agency, and seeking help from a union.
  
  
• Strike and picket, depending on the purpose or means of the strike or the picketing.
  
  
• Choose not to do any of these activities, including joining or remaining a member of a union.

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

• Prohibit you from talking about or soliciting for a union during non-work time, such as before or after work or during break times; or from distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms.
  
  
• Question you about your union support or activities in a manner that discourages you from engaging in that activity.
  
  
• Fire, demote, or transfer you, or reduce your hours or change your shift, or otherwise take adverse action against you, or threaten to take any of these actions, because you join or support a union, or because you engage in concerted activity for mutual aid and protection, or because you choose not to engage in any such activity.
  
  
• Threaten to close your workplace if workers choose a union to represent them.
  
  
• Promise or grant promotions, pay raises, or other benefits to discourage or encourage union support.
  
  
• Prohibit you from wearing union hats, buttons, t-shirts, and pins in the workplace except under special circumstances.
  
  
• Spy on or videotape peaceful union activities and gatherings or pretend to do so.

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.

• Phase 1 Implementation of System for Award Management (SAM) Name Changes: This final rule implements Phase I of the transition to the SAM. Phase I joins the Central Contractor Registration (CCR), Online Representations and Certification Application (ORCA), and Excluded Parties Listing System (EPLS) databases into the SAM (https://www.sam.gov). There are three additional phases planned for the SAM implementation, and those three phases will add the following databases to SAM: the electronic Subcontracting Reporting System (eSRS) (http://esrs.gov/)/Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS) (https://www.fsrs.gov/); the Catalog of Federal Domestic Assistance (CFDA) (https://www.cfda.gov/); Federal Business Opportunities (FBO) (https://www.fbo.gov/); Wage Determinations On Line (WDOL) (http://www.wdol.gov/); Federal Procurement Data System (FPDS) (https://www.fpds.gov); and the combination of Past Performance Information Retrieval System (PPIRS) (http://www.ppirs.gov/), Contractor Performance Assessment Reporting System (CPARS) (http://www.cpars.gov/), and the Federal Awardee Performance and Integrity Information System (FAPIIS) (http://www.cpars.gov/main/fapiismain.htm).
  
  This final rule substitutes “System for Award Management” or “SAM” wherever Central Contractor Registration (CCR), Online Representations and Certification Application (ORCA), or Excluded Parties Listing System (EPLS) is used in the DFARS, including in the title of DFARS subpart 204.11, Central Contractor Registration.
  
  For more on the SAM, see the August 2012 Federal Contracts Perspective article “Phase I of SAM Implemented,” and for more on the FAR implementation of SAM, see the February 2012 Federal Contracts Perspective article “FAC 2005-55 Finalizes Commercial Item T&M Contract Rule.”
  
  
• Clarification of “F” Orders in the Procurement Instrument Identification Number Structure: This final rule amends DFARS subpart 204.70, Uniform Procurement Instrument Identification Numbers, to update instructions for assigning basic and supplementary procurement instrument identification numbers (PIINs).
  
  This final rule eliminates the requirement to utilize an “F” in the 9th position of the PIIN to identify awards to certain vendors, including AbilityOne and Federal Prison Industries (UNICOR), and to other government organizations. These vendors are uniquely identified today by their DUNS number and/or CAGE code and, therefore, associated contract actions are easily tracked. There is no longer any need for DOD to uniquely identify contract actions with these vendors. With this final rule, contract actions with these vendors will be treated and identified in the same manner as those with any other vendor. This change limits the use of “F” in the 9th position of the PIIN to those task and delivery orders issued under a non-DOD issued contract or agreement.
  
  The following changes are made by this final rule:
  
  
  • In paragraph (a)(3) of DFARS 204.7003, Basic PII Number, which addresses Position 9 of the PIIN:
    
    
    • In subparagraph (iii), which addresses instrument type C (contracts), the exception for contracts placed with or through other government departments or agencies is removed.
      
      
    • In subparagraph (vi), which addresses instrument type F, coverage of contracting actions placed with or through other government departments or agencies or against contracts placed by such departments or agencies outside the DOD (including actions from nonprofit agencies employing people who are blind or severely disabled (AbilityOne), and the Federal Prison Industries (UNICOR)), is removed. Added to subparagraph (vi) is direction for use with blanket purchase agreement calls, orders under contracts, including Federal Supply Schedules, governmentwide acquisition contracts, and multi-agency contracts, basic ordering agreements issued by departments or agencies outside of DOD.
    
    
  • Paragraph (d)(2)(ii) of DFARS 204.7004, Supplementary PII numbers, is amended by adding direction to use “F” in position 9 for calls against blanket purchase agreements and orders placed under non-DOD issued contracts including Federal Supply Schedules, governmentwide acquisition contracts, and multi-agency contracts, or basic ordering agreements. Also, the direction states that a supplementary PIIN with an “F” in the 9th position is to be used only once, and not for more than one order.
  
  
• Government Support Contractor Access to Technical Data: This rule finalizes, with changes, the interim rule that amended DFARS subpart 227.71, Rights in Technical Data, and the corresponding clauses, to implement Section 821 of the National Defense Authorization Act for Fiscal Year 2010 (Public Law 111-84), which provides authority for certain types of government support contractors to have access to proprietary technical data belonging to prime contractors and other third parties, provided the technical data owner may require the support contractor to execute a non-disclosure agreement having certain restrictions and remedies.
  
  Because of the detail in Section 821, DOD decided to incorporate the original statutory language into DFARS 227.7102-2, Rights in Technical Data, and DFARS 227.7103-5, Government Rights, and the corresponding clauses in DFARS Part 252, Solicitation Provisions and Contract Clauses: DFARS 252.227-7013, Rights in Technical Data – Noncommercial Items; DFARS 252.227-7014, Rights in Noncommercial Computer Software and Noncommercial Computer Software Documentation; DFARS 252.227-7015, Technical Data – Commercial Items; DFARS 252.227-7018, Rights in Noncommercial Technical Data and Computer Software – Small Business Innovation Research (SBIR) Program; and DFARS 252.227-7025, Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends.
  
  Four respondents submitted comments on the interim rule. In response to those comments, DOD made the following changes to the final rule:
  
  
  • Paragraph (b) of DFARS 227.7104, Contracts under the Small Business Innovation Research (SBIR) Program, is revised to clarify the government's limited rights in technical data and restricted rights in computer software under the SBIR data rights license obtained under DFARS 252.227-7018.
    
    
  • The requirement that the covered government support contractor provide copies of any non-disclosure agreements executed with proprietary information owners, upon request of the contracting officer, is deleted from DFARS 209.505-4, Obtaining Access to Proprietary Information; DFARS 252.227-7013(b)(3)(iv)(E); DFARS 252.227-7014(b)(3)(iii)(E); DFARS 252.227-7015(b)(3)(v); DFARS 252.227-7018(b)(8)(v); and DFARS 252.227-7025(b)(1)(ii)(E) and (b)(4)(ii)(E). This is not a statutory requirement, and the benefit to the government in collecting these copies is outweighed by the administrative burden.
  
  For more on the interim rule, see the April 2011 Federal Contracts Perspective article “An Avalanche of DFARS Changes!”
  
  
• Detection and Avoidance of Counterfeit Electronic Parts: This proposed rule would partially implement Section 818 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112-81), Detection and Avoidance of Counterfeit Electronic Parts, and Section 833 of the National Defense Authorization Act for Fiscal Year 2013 (Public Law 112-239), Contractor Responsibilities in Regulations Relating to Detection and Avoidance of Counterfeit Electronic Parts, which amends Section 818 to provide exceptions to cost unallowability if contractors take specific steps.
  
  The intent of Sections 818 and 833 is to hold contractors responsible for detecting and avoiding the use or inclusion of counterfeit electronic parts or suspect counterfeit electronic parts. To implement these two sections, the following DFARS revisions are proposed:
  
  
  • To DFARS 202.101, Definitions, would be added definitions of “electronic part,” “counterfeit electronic part,” and “suspect counterfeit electronic part.” Also, a definition of “legally authorized source” would be added because it is contained in the “counterfeit part” definition and is an important component of DOD’s program to mitigate risks posed by counterfeit parts.
    
    
  • New policy on counterfeit parts would be added to DFARS subpart 246.8, Contractor Liability for Loss of or Damage to Property of the Government. The proposed new policy would be included in DFARS 246.870, Contractors’ Counterfeit Electronic Part Avoidance and Detection Systems, and new clause DFARS 252.246-70XX, Contractor Counterfeit Electronic Part Avoidance and Detection System. This policy would apply only to contractors supplying electronic components, parts, or materials under a contract that is subject to the Cost Accounting Standards (see proposed DFARS 246.870-3, Contract Clause).
    
    
  • DFARS 252.244-7001, Contractor Purchasing System Administration, would be modified to add requirements for identifying, avoiding, and reporting counterfeit parts to the existing requirements for the contractor’s purchasing system. Also, an alternate would be proposed for solicitations and contracts that include DFARS 252.246-70XX but not FAR 52.244-2, Subcontracts. The alternate would add systems criteria for a less comprehensive review of the contractor’s purchasing system that targets review of those elements relating to the detection and avoidance of counterfeit electronic parts and suspect counterfeit electronic parts.
    
    
  • DFARS 231.205-71, Cost of Remedy for Use or Inclusion of Counterfeit Electronic Parts and Suspect Counterfeit Electronic Parts, would be added. It would prohibit contractors from claiming, as a reimbursable cost under DOD contracts, the cost of counterfeit electronic parts or suspect counterfeit electronic parts or the cost of rework or corrective action that may be required to remedy the use or inclusion of such parts. However, Section 833 provides specific exceptions that would enable these costs to be reimbursed if: (i) a contractor has a DOD-approved operational system to detect and avoid counterfeit parts, or the suspect counterfeit parts were provided as government-furnished property; and (ii) the contractor has provided timely notice to the government. These exceptions would be included in DFARS 231.205-71(c).
    
    
  • Paragraph (b) would be added to DFARS 244.303, Extent of Review [of contractors’ purchasing systems]. Paragraph (b) would require the government to review and monitor the contractor’s processes and procedures for detecting and avoiding counterfeit or suspect counterfeit electronic parts.
  
  Comments on this proposed rule must be submitted no later than July 15, 2013, identified as “DFARS Case 2012-D055,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: dfars@osd.mil; (3) fax: 571-372-6094; or (4) mail: Defense Acquisition Regulations System, Attn: Meredith Murphy, OUSD(AT&L)DPAP/DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301-3060.
  
  
• Further Implementation of Only One Offer Policy: This proposed rule would further implement DOD policy relating to competitive acquisitions in which only one offer is received by providing additional exceptions and further addressing requests for data other than certified cost or pricing data from the Canadian Commercial Corporation (CCC). The proposed rule is a follow-on to two 2012 DFARS final rules: Only One Offer (see the July 2012 Federal Contracts Perspective article “DFARS Addresses Receipt of Only One Offer”); and Contracting with the Canadian Commercial Corporation.
  
  The “Only One Offer” rule implemented the initiative on promoting real competition that was in the Under Secretary of Defense for Acquisition, Technology & Logistics’ November 3, 2010, memorandum “Implementation Directive for Better Buying Power – Obtaining Greater Efficiency and Productivity in Defense Spending (see the December 2010 Federal Contracts Perspective article “Another Deluge of DFARS Changes”). The “Contracting with the CCC” rule clarified the requirements for the CCC to submit data other than certified cost or pricing data. Because these two cases were developed in parallel, DOD is proposing to revise the DFARS to further implement both rules, in particular as they relate to each other.
  
  This proposed rule would make the following changes to the DFARS:
  
  
  • Paragraph (b)(iv)(G) of DFARS 212.301, Solicitation Provisions and Contract Clauses for the Acquisition of Commercial Items, would clarify that DFARS 252.215-7003, Requirements for Data Other Than Certified Cost or Pricing Data – Canadian Commercial Corporation, or DFARS 252.215-7004, Requirement for Data Other Than Certified Cost or Pricing Data – Modifications – Canadian Commercial Corporation, must be included in acquisitions of commercial items when required to determine the price reasonableness of commercial items for acquisitions from the CCC.
    
    
  • Two additional exceptions to the policy on only one offer delineated DFARS 215.371-2, Promote Competition, would be added to DFARS 215.371-4, Exceptions: architect-engineer services (see FAR subpart 36.6, Architect-Engineer Services, and DFARS subpart 236.6); and set-asides offered to and accepted by the Small Business Administration (SBA) into the 8(a) Program (see FAR subpart 19.8, Contracting with the Small Business Administration (The 8(a) Program), and DFARS subpart 219.8).
    
    
  • Paragraph (c)(2) of DFARS 225.870-4, Contracting Procedures [with CCC], would be revised to add when approval is required to request data from the CCC. Also, paragraph (c)(2)(i) would state that no further approval is required to request data in competitive solicitations if: data other than certified cost or pricing data are required from all offerors; or the CCC submits the only offer in response to a competitive solicitation that meets the thresholds at DFARS 225.870-4(c)(2)(i)(A) or (B) [$700,000 for cost-reimbursement acquisitions, or $500,000,000 for fixed-price acquisitions].
    
    
  • DFARS 252.215-7008, Only One Offer, would be revised to remove the requirement to submit data requested by the contracting officer after receipt of only one offer in accordance with FAR 52.215-20, Requirements for Certified Cost or Pricing Data and Data Other Than Certified Cost or Pricing Data. Instead, DFARS 252.215-7008 would be revised to incorporate the appropriate requirements of FAR 52.215-20 if the offeror is other than the CCC (paragraph (b)), and then separately address the requirements for submission of data if the sole offeror is the CCC (paragraph (c)).
  
  Comments on this proposed rule must be submitted no later than July 15, 2013, identified as “DFARS Case 2013-D001,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: 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.
  
  
• Forward Pricing Rate Proposal Adequacy Checklist: This proposed rule would add DFARS 215.403-5, Instructions for Submissions of Certified Cost or Pricing Data or Data Other Than Cost or Pricing Data Pursuant to the Procedures in FAR 42.1701(b) [procedures for forward pricing rate agreements], to direct contracting officers to request contractors to Table 215-XX, Contractor Forward Pricing Rate Proposal Adequacy Checklist, with forward pricing rate proposals. This checklist would help ensure submission of thorough, accurate, and complete proposals.
  
  The checklist consists of 27 items, divided into the following sections: General Instructions; Direct Labor; Indirect Rates (Fringe, Overhead, General & Administrative, etc.); Cost of Money; and Other. For example, item 9 under “Direct Labor” is “Does the proposal include an explanation of the methodology used to develop the direct labor rates and identify the basis of estimate?” This is referenced as being required by FAR 15.408, Table 15-2, Section II.B. Next to this is a place to identify the proposal page number where this information is, and a place to provide an explanation if the information is not provided in the proposal.
  
  Comments on this proposed rule must be submitted no later than July 15, 2013, identified as “DFARS Case 2012-D035,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: dfars@osd.mil; (3) fax: 571-372-6094; or (4) mail: Defense Acquisition Regulations System, Attn: Mark Gomersall, OUSD(AT&L)DPAP/DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301-3060.
  
  
• Preparation of Letter of Offer and Acceptance: This proposed rule would revise and move the text in paragraph (1) of Procedures, Guidance, and Information (PGI) 225.7302, Guidance [on acquisitions for foreign military sales [FMS]), to DFARS 225.7302, Preparation of Letter of Offer and Acceptance (currently titled “Guidance”), because of the potential impact on contractors.
  
  The DFARS is the DOD supplement to the FAR intended for DOD personnel and contractors, and it contains requirements of law unique to DOD; DOD-wide policies; deviations from FAR requirements; and policies and procedures that have a significant effect beyond the internal operating procedures of DOD or a significant cost or administrative impact on contractors or offerors. The PGI is intended for DOD personnel only, and it contains internal procedures, guidance, and information.
  
  Because PGI 225.7302(1) states, “For FMS programs that will require an acquisition, the contracting officer will assist the DOD implementing agency responsible for preparing the LOA [letter of offer and acceptance] by (1) working with prospective contractors...”, it is more appropriately located in the DFARS.
  
  Comments on this proposed rule must be submitted no later than July 15, 2013, identified as “DFARS Case 2012-D048,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: 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.
  
  
• Updated Defense Acquisition Guidebook Chapter 4 (Systems Engineering): DOD has released a major update to the Defense Acquisition Guidebook (DAG) Chapter 4, Systems Engineering. The DAG Chapter 4 is the primary reference on the use of systems engineering throughout the system life cycle. With this release, the chapter has been restructured to provide program managers and systems engineers with life cycle phase and systems engineering technical review expectations, including a knowledge-based, technical-maturity table for key events. The chapter provides details on systems engineering technical and technical management processes and includes links to relevant policy, standards, and detailed guidance on key topics. The update reflects recent policy changes and Better Buying Power initiatives (see following) and emphasizes the role of systems engineering in providing balanced solutions (managing the system’s cost, schedule, performance, and risk) to deliver warfighter capability needs.
  
  The DAG Chapter 4 is available on the Defense Acquisition University website at https://acc.dau.mil/dag4.
  
  
• Implementation Directive for Better Buying Power 2.0: Under Secretary of Defense for Acquisition, Technology & Logistics Frank Kendall has issued a follow-up memorandum that provides implementing directives and guidance for “Better Buying Power 2.0,” which was introduced by his November 2012 memorandum (see the December 2012 Federal Contracts Perspective article “DOD Issues Preliminary ‘Better Buying Power 2.0’”).
  
  This memorandum expands on the seven focus areas originally identified in the November 2012 memorandum, providing guidance with specific actions:
  
  
  • Achieve Affordable Programs
    
    
  • Control Costs Throughout the Product Lifecycle
    
    
  • Incentivize Productivity and Innovation in Industry and Government
    
    
  • Eliminate Unproductive Processes and Bureaucracy
    
    
  • Promote Effective Competition
    
    
  • Improve Tradecraft in Acquisition of Services
    
    
  • Improve the Professionalism of the Total Acquisition Workforce
  
  In addition, Mr. Kendall provides “some key overarching principles that underlie Better Buying Power and all that we do”:
  
  
  1. "Think. The first responsibility of the acquisition workforce is to think. We need to be true professionals who apply our education, training, and experience through analysis and creative, informed thought to address our daily decisions…
     
     
  2. "People. Thinking does not do much good if we do not have the professional preparation to think well...
     
     
  3. "Start with the Basics...Any list of basics would include these items: (1) effective incentives to industry, especially competitive pressures; (2) thorough understanding and active management of technical risk; (3) insistence on demonstrated progress before major commitments; (4) getting the big early decisions, particularly requirements trade-offs, right; and (5) using the right contract type for the job…
     
     
  4. "Streamline Decisions. Finally, we must streamline our processes and oversight to provide value added. This includes promptly acquiring relevant data and directing differences of opinion to appropriate decision makers (emphasis in original). Our managers cannot be effective if process consumes all of their most precious resource – time.”
  
  
• Other Transaction Authority for Prototype Projects: This memorandum announces that Congress has extended the authority to enter into “other transactions” (or OTs) to September 30, 2018. OTs were originally authorized by Section 845 of the National Defense Authorization Act for Fiscal Year 1994 (Public Law 103-160), and they are generally not subject to procurement laws and regulations. OTs are intended to encourage “nontraditional defense contractors” to share their expertise with DOD outside of FAR-governed acquisitions. The statute defines a “nontraditional defense contractor” as “a business unit that has not, for a period of at least one year prior to the date of the OT agreement, entered into or performed on (1) any procurement contract that is subject to full coverage under the cost accounting standards...; or (2) any other procurement contract in excess of $500,000 to carry out prototype projects or to perform basic, applied, or advanced research projects for a federal agency.”
  
  
• FY 2013 Consolidated Appropriations Provisions - ACORN Restriction: This memorandum notifies the DOD acquisition workforce that the Consolidated and Further Continuing Appropriations Act, 2013 (Public Law 113-6) contain Section 8098 of Division C, Department of Defense Appropriations Act, 2013, and Section 510 of Division E, Military Construction and Veterans Affairs, and Related Agencies Appropriations Act, 2013, both of which state “none of the funds made available under this act may be distributed to the Association of Community Organizations for Reform Now (ACORN) or its subsidiaries." These restrictions are similar to those in the previous four DOD appropriations acts.
  
  Sections 8098 and 510 preclude contracting officers and grants officers from: (1) making new awards to ACORN or its subsidiaries using DOD or military construction appropriations; (2) obligating Fiscal Year 2013 DOD or military construction appropriations on awards made previously to ACORN or its subsidiaries; or (3) approving payments to ACORN or its subsidiaries using Fiscal Year 2013 DOD or military construction appropriations under existing awards. Also, Sections 8098 and 510 preclude contractors or grant recipients from making obligations or payments of those appropriations to ACORN or its subsidiaries as subcontractors, recipients of subawards, or contractors under grants or other assistance awards. Awards subject to this restriction include contracts, grants, or other acquisition or assistance transactions.
  
  NOTE: ACORN was the subject of undercover videos in 2009 in which two people, posing as a prostitute and pimp, were counseled by ACORN employees on how to avoid taxes and detection while engaging in child prostitution.

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:

• The clause prescription in DEAR 931.205-19, Insurance and Indemnification, for DEAR 952.231-71, Insurance – Litigation and Claims, is revised to require the clause’s inclusion instead of FAR 52.228-7, Insurance – Liability to Third Persons, in: (1) non-management and operating (M&O) cost-reimbursement contracts exceeding $100,000,000; and (2) non-M&O contracts exceeding $100,000,000 that include cost reimbursable elements exceeding $10,000,000.
  
  
• The clause prescription in DEAR 970.2803-2, Contract Clause, for DEAR 970.5228-1, Insurance – Litigation and Claims [for M&O contracts], is revised to require the clause’s inclusion instead of FAR 52.228-7, Insurance – Liability to Third Persons, in all M&O contracts.
  
  
• DEAR 952.231-71 and DEAR 970.5228-1 are revised to reflect the litigation requirements in 10 CFR part 719, and are simplified and clarified. Paragraph (a) of both clauses requires compliance with 10 CFR part 719, if applicable.
  
  
• DEAR 931.205-33, Professional and Consultant Service Costs, is revised to reflect the amended applicability of DEAR 952.231-71 and DEAR 970.5228-1, and to clarify the requirement for contractor compliance with 10 CFR part 719 when it is applicable to a particular contract.

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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