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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

July 2013
Vol. XIV, No. 7

CONTENTS

FAC 2005-67 Removes Limits on WOSB Set-Asides,
Addresses Concerns with Acquisition of Social Media

Federal Acquisition Circular (FAC) 2005-67 consists of 10 separate amendments to the Federal Acquisition Regulation (FAR). Among the changes made by FAC 2005-67 are the removal of dollar limits on set-asides to economically disadvantaged women-owned small businesses and women-owned small businesses, the establishment of limitations on the use of unrestricted, open-ended indemnification clauses in acquisitions for social media applications, and the clarification of the contracting officer’s representative’s responsibilities to improve contract surveillance.

• Contracting with Women-Owned Small Business Concerns: This interim rule amends FAR 19.1505, Set-Aside Procedures [for women-owned small businesses], to remove the dollar limitation for set-asides to economically disadvantaged women-owned small businesses (EDWOSBs) and women-owned small businesses (WOSBs) eligible under the Women-Owned Small Business Program.
  
  The dollar limitations on set-asides for WOSBs and EDWOSBs 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. Section 1697 of the National Defense Authorization Act of Fiscal Year 2013 (Public Law 112-239) removed these statutory limitations, and the Small Business Administration (SBA) amended its regulations accordingly (see the June 2013 Federal Contracts Perspective article “Dollar Limitations on WOSB Set-Asides Removed”). In response to the SBA’s action, this interim rule removes FAR 19.1505(b)(2) and (c)(2), which contained the dollar limitations on EDWOSB and WOSB set-asides, respectively. Now, contracting officers may set-aside contracts for EDWOSBs and WOSBs at any dollar level as long as the other requirements for a set-aside under the program are met.
  
  Comments on this interim rule must be submitted no later than August 20, 2013, identified as “FAC 2005-67, FAR Case 2013-010,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: U.S. General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Hada Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.
  
  
• Terms of Service and Open-Ended Indemnification, and Unenforceability of Unauthorized Obligations: This interim rule addresses concerns raised in an opinion from the U.S. Department of Justice (DOJ) Office of Legal Counsel (OLC) involving the use of unrestricted, open-ended indemnification clauses in acquisitions for social media applications.
  
  In a recent memorandum to the Assistant General Counsel for Administration of the Department of Commerce, DOJ’s OLC noted that the Anti-Deficiency Act (31 U.S.C. 1341) is violated when a government contracting officer or other employee with authority to bind the government agrees, without statutory authorization or other exception, to an open-ended, unrestricted indemnification clause. The memorandum goes on to state that the Anti-Deficiency Act is violated under some circumstances when consent is given by a government employee to online terms of service agreements containing an open-ended indemnification clause.
  
  The OLC opinion discusses a situation where a government purchase card holder consented to an online terms of service (TOS) agreement in the course of registering for an account with a social media application on the Internet that holds the provider of the service harmless in the event harm is caused to a third party when the application is used by the government. OLC explained that an Anti-Deficiency Act violation had occurred because an agency’s agreement to an open-ended indemnification clause could result in the agency’s legal liability for an amount in excess of the agency’s appropriation.
  
  In response to the OLC opinion, the Office of Management and Budget (OMB) issued OMB Guidance M-13-10, Antideficiency Act Implications of Certain Online Terms of Service Agreements, which outlined a series of management actions to ensure agencies act in compliance with the Anti-Deficiency Act and in accordance with OLC’s opinion. These actions include consultation with agency counsel and review of a General Services Administration-maintained list of social media applications governed by TOS agreements that are compatible with federal law, regulation, and practice.
  
  The changes made to the FAR by this interim rule are designed to prevent these violations and other similar types of violations from occurring in future federal contracts. This interim rule focuses only on open-ended indemnification clauses to address the concern raised in OLC’s opinion. However, there are also other clauses in commercial End User License Agreements (EULAs) and TOS that could result in a violation of the Anti-Deficiency Act if executed by a contracting officer. For instance, a clause that automatically renews a subscription at its expiration would violate the Anti-Deficiency Act if it obligated the government to pay for supplies or services in advance of the agency’s appropriation. Additional coverage may be necessary to address these other instances of potential Anti-Deficiency Act (and other federal law) violations.
  
  This interim rule adds FAR 32.705, Unenforceability of Unauthorized Obligations, and requires the inclusion of new clause FAR 52.232-39, Unenforceability of Unauthorized Agreements, in all solicitations and contracts.
  
  
  • FAR 32.705 states, “Many supplies or services are acquired subject to supplier license agreements. These are particularly common in information technology acquisitions, but they may apply to any supply or service. For example, computer software and services delivered through the internet (web services) are often subject to license agreements, referred to as End User License Agreements (EULA), Terms of Service (TOS), or other similar legal instruments or agreements. Many of these agreements contain indemnification clauses that are inconsistent with federal law and unenforceable, but which could create a violation of the Anti-Deficiency Act (31 U.S.C. 1341) if agreed to by the government.” (To apply this to all micro-purchases [under $3,000], the language in FAR 32.705 is added as FAR 13.202, Unenforceability of Unauthorized Obligations in Micro-Purchases. In addition to the language in FAR 32.705, FAR 13.202 includes the following sentence: “The clause at 52.232-39, Unenforceability of Unauthorized Obligations, automatically applies to any micro-purchase, including those made with the governmentwide purchase card. This clause prevents such violations of the Anti-Deficiency Act.”)
    
    
  • FAR 52.232-39 states:
    
    

    	“(a) Except as stated in paragraph (b) of this clause, when any supply or service acquired under this contract is subject to any End User License Agreement (EULA), Terms of Service (TOS), or similar legal instrument or agreement, that includes any clause requiring the government to indemnify the contractor or any person or entity for damages, costs, fees, or any other loss or liability that would create an Anti-Deficiency Act violation (31 U.S.C. 1341), the following shall govern:
    	“(1) Any such clause is unenforceable against the government.
    	“(2) Neither the government nor any government authorized end user shall be deemed to have agreed to such clause by virtue of it appearing in the EULA, TOS, or similar legal instrument or agreement. If the EULA, TOS, or similar legal instrument or agreement is invoked through an “I agree” click box or other comparable mechanism (e.g., “click-wrap” or “browse-wrap” agreements), execution does not bind the government or any government authorized end user to such clause.
    	“(3) Any such clause is deemed to be stricken from the EULA, TOS, or similar legal instrument or agreement.
    	“(b) Paragraph (a) of this clause does not apply to indemnification by the government that is expressly authorized by statute and specifically authorized under applicable agency regulations and procedures.”

  
  In addition, FAR 52.212-4, Contract Terms and Conditions – Commercial Items, is modified to add paragraph (u), “Unauthorized Obligations,” which consists of similar language to that in FAR 52.232-39(a) and (b); and FAR 12.302, Tailoring of Provisions and Clauses for the Acquisition of Commercial Items, is revised to prohibit contracting officers from tailoring FAR 52.212-4(u).
  
  Comments on this interim rule must be submitted no later than August 20, 2013, identified as “FAC 2005-67, FAR Case 2013-005,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: U.S. General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Hada Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.
  
  
• Contracting Officer’s Representative (COR): This final rule clarifies the COR’s responsibilities to improve contract surveillance. These clarifications are in FAR 1.602-2, Responsibilities [of the contracting officer], and FAR 7.104, General Procedures [for acquisition planning].
  
  
  • In paragraph (d) of 1.602-2, which addresses CORs, subparagraph (d)(5) is amended to add the italicized language: “[A COR] has no authority to make any commitments or changes that affect price, quality, quantity, delivery, or other terms and conditions of the contract nor in any way direct the contractor or its subcontractors to operate in conflict with the contract terms and conditions...”
    
    
  • FAR 1.602-2(d)(5) is added, which states, “[A COR] shall be nominated either by the requiring activity or in accordance with agency procedures...”
    
    
  • The first sentence in FAR 7.104(e) is amended to add the italicized language: “The [acquisition] planner shall ensure that a COR is nominated as early as practicable in the acquisition process by the requirements official or in accordance with agency procedures.”
  
  
• Contractors Performing Private Security Functions Outside the United States: This final rule adds FAR 25.302, Contractors Performing Private Security Functions Outside the United States, and the clause FAR 52.225-26 to implement Title 32 of the Code of Federal Regulations (CFR), Part 159 (32 CFR Part 159), Private Security Contractors Operating in Contingency Operations (see the August 2009 Federal Contracts Perspective article “DOD Establishes Policy on Private Security Contractors”). 32 CFR Part 159 reflects the governmentwide requirements contained in Section 862 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2008 (Public Law 110-181), as amended by Section 853 of the NDAA for FY 2009 (Public Law 110-417) and Sections 831 and 832 of the NDAA for FY 2011 (Public Law 111-383).
  
  A proposed rule set forth the applicability, pertinent definitions, and underlying policy for minimum processes and requirements for personnel performing private security functions in designated areas outside the United States (that is, in combat operations, during certain contingency operations, or in an area of other significant military operations).
  
  Four respondents submitted comments on the proposed rule. In response to those comments, the following changes are made in the final rule:
  
  
  • Paragraph (a)(3) of FAR 25.302-3, Applicability, is revised to clarify that the Secretary of State is required to agree with the Secretary of Defense on the designation of an area of “other significant military operations” for purposes of applying this rule to a Department of Defense (DOD) acquisition.
    
    
  • An “Applicability” paragraph (b) is added to FAR 52.225-26 to address situations where contract performance is to take place partially in a designated area and partially in a different, non-designated area (“If this contract is performed both in a designated area and in an area that is not designated, the clause only applies to performance in the designated area”).
  
  For more on the proposed rule, see the August 2012 Federal Contracts Perspective article “FAR to Address Personnel Performing Security.”
  
  
• Phase 1 Implementation of System for Award Management (SAM) Name Change: 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). 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 FAR, including in the title of FAR subpart 4.11, Central Contractor Registration (retitled "System for Award Management").
  
  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.” For more on an similar action taken by DOD, see the June 2013 Federal Contracts Perspective article “Defense Regulation-Making Picks Up Pace.”
  
  
• Compliance by Nondefense Agencies with Defense Procurement Requirements for Interagency Acquisitions: This finalizes, with changes, the interim rule that added FAR subpart 17.7, Interagency Acquisitions: Acquisitions by Nondefense Agencies on Behalf of the Department of Defense, to add new requirements specific to the acquisition of supplies and services by nondefense agencies on behalf of the DOD. The rule implements Section 801 of the National Defense Authorization Act (NDAA) for Fiscal Year 2008 (Public Law 110-181), as amended. FAR subpart 17.7 supplements the regulations in FAR subpart 17.5, Interagency Acquisitions.
  
  Section 801 defines in general terms the “procurement policies, procedures, and internal controls” that constitute compliance with defense procurement requirements by a nondefense agency when it procures supplies and services on behalf of the DOD. Section 801(b) states that, unless waived, a DOD acquisition official may place an order, make a purchase, or otherwise procure property or services for DOD in excess of the simplified acquisition threshold ($150,000) through a nondefense agency only if the nondefense agency conducting the acquisition on DOD’s behalf has certified that it will comply with defense procurement requirements for that fiscal year.
  
  The interim rule in FAC 2005-62 added FAR subpart 17.7, which includes the following sections:
  
  
  • FAR 17.700, Scope of Subpart, which states that the subpart prescribes policies and procedures specific to acquisitions of supplies and services by nondefense agencies on behalf of DOD.
    
    
  • FAR 17.701, Definitions, which defines “DOD acquisition official,” “nondefense agency,” and “nondefense agency that is an element of the intelligence community.”
    
    
  • FAR 17.702, Applicability, which states that the subpart applies to “all acquisitions made by nondefense agencies on behalf of DOD...[except] contracts entered into by a nondefense agency that is an element of the intelligence community for the performance of a joint program conducted to meet the needs of DOD and the nondefense agency.”
    
    
  • FAR 17.703, Policy, which establishes the policies specified by the various NDAAs related to internal controls and compliance certification under which nondefense agencies may procure supplies and services on behalf of DOD. In addition, it identifies DOD acquisition official responsibilities when making acquisitions on behalf of DOD.
  
  Three respondents submitted comments on the interim rule. In response to the comments, the following changes are made to FAR 17.703:
  
  
  • In paragraph (a), the term “defense procurement” is changed to “applicable procurement” as required by Section 801 of the NDAA FY 2013 (Public Law 112-239) (“A DOD acquisition official may request a nondefense agency to conduct an acquisition on behalf of DOD in excess of the simplified acquisition threshold only if the head of the nondefense agency conducting the acquisition on DOD’s behalf has certified that the agency will comply with applicable procurement requirements for that fiscal year except when waived in accordance with paragraph (e) of this section”).
    
    
  • In paragraph (b)(2), DOD class deviations are included in the list of laws and regulations that apply to procurements of supplies and services made by DOD through other federal agencies (“Laws and regulations that apply to procurements of supplies and services made by DOD through other federal agencies, including DOD financial management regulations, the Defense Federal Acquisition Regulation Supplement (DFARS), DOD class deviations, and the DFARS Procedures, Guidance, and Information (PGI)”).
  
  For more on the interim rule, see the December 2012 Federal Contracts Perspective article “FAC 2005-62 Updates Policy on Reporting to FPDS, Limits Use of Generic DUNS Numbers.”
  
  
• Price Analysis Techniques: This final rule clarifies and provides a precise reference in paragraph (b)(2)(i) of FAR 15.404-1, Proposal Analysis Techniques, to the use of a price analysis technique to establish a fair and reasonable price.
  
  FAR 15.404-1(b)(2) addresses various price analysis techniques and procedures that the government may use to ensure a fair and reasonable price. The technique at FAR 15.404-1(b)(2)(i) describes the comparison of proposed prices received in response to a solicitation as an example of such techniques and procedures. FAR 15.404-1(b)(2)(i) references paragraph (c)(1) of FAR 15.403-1, Prohibition on Obtaining Certified Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b), which identifies the various standards of adequate price competition (and are exceptions from the certified cost or pricing data requirements). However, only FAR 15.403-1(c)(1)(i) addresses when two or more responsible offerors, competing independently, submit priced offers that satisfy the government’s expressed requirement – the rest of FAR 15.403-1(c)(1) addresses when only one offer is received and when price analysis clearly demonstrates the proposed price is fair and reasonable. Since FAR 15.404-1(b)(2)(i) deals with the price analysis technique of comparing proposed prices received in response to a solicitation, the reference is more appropriately identified as FAR 15.403-1(c)(1)(i).
  
  Therefore, this final rule amends FAR 15.404-1(b)(2)(i) by revising “15.403-1(c)(1)” to “15.403-1(c)(1)(i).”
  
  
• Deletion of Report to Congress on Foreign-Manufactured Products: This final rule deletes FAR 25.004, Reporting of Acquisition of End Products Manufactured Outside the United States, to eliminate an obsolete Congressional reporting requirement on acquisitions of end products manufactured outside the United States.
  
  Section 8306 of the United States Troops Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (Public Law 110-28), required each federal agency to submit a report to Congress on acquisitions of articles, materials, or supplies that were manufactured outside the United States for FY 2007 through FY 2011. The report to Congress is no longer required, so FAR 25.004 is removed. However, the collection of this data and reporting it in the Federal Procurement Data System (https://www.fpds.gov/) is still required (see FAR 52.225-18, Place of Manufacture), so paragraph (c) of FAR 25.001, General [The Buy American Act], is amended by removing “report on end products manufactured outside the United States (see 25.004)” and replacing it with “representation on end products manufactured outside the United States (see 52.225-18).” Finally, FAR 25.001(c)(3) is amended by removing “For the reporting requirement at 25.004” and replacing it with “For the representation at 52.225-18”.
  
  
• Implementation of the United States – Panama Trade Promotion Agreement: This finalizes, without change, the interim rule that implemented the United States-Panama Trade Promotion Agreement, which is a free trade agreement (FTA) that provides for mutually nondiscriminatory treatment of eligible products and services from Panama.
  
  The Panama FTA waives the applicability of the Buy American Act (see FAR subparts 25.1 and 25.2) for some foreign supplies and construction materials from Panama. The Panama FTA covers acquisitions of supplies and services equal to or exceeding $202,000, and construction contracts equal to or exceeding $7,777,000 (see the table in paragraph (b) of FAR 25.402, Policy [on trade agreements]).
  
  Two respondents submitted comments on the interim rule, but no changes were made to the rule in response to those comments.
  
  For more on the interim rule, see the December 2012 Federal Contracts Perspective article “FAC 2005-62 Updates Policy on Reporting to FPDS, Limits Use of Generic DUNS Numbers.”
  
  
• Updated Postretirement Benefit (PRB) References: This final rule removes references to paragraphs 110, 112, and 113 of Financial Accounting Standard (FAS) 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, that are in paragraph (o)(2)(iii)(A)(1) of FAR 31.205-6, Compensation for Personal Services, because FAS 106 was deleted by the FAS Board Accounting Standards Codification (ASC) of Generally Accepted Accounting Principles (GAAP) in 2009. The superseded references are replaced with explicit criteria that generally replicate the substance of the FAS 106 methodology so the substance of FAR 31.205-6(o)(2)(iii)(A)(1) does not change.

Compensation Benchmark Extended for DOD, NASA, CG

FAC 2005-68 consists of a single interim rule that amends paragraph (p) of FAR 31.205-6, Compensation for Personal Services, to expand the application of the existing executive compensation cap of $763,029 from “the five most highly compensated employees in management positions at each home office and each segment of the contractor” to “any contractor employee.” This change applies only to DOD, the National Aeronautics and Space Administration (NASA), and the Coast Guard (CG).

This rule implements Section 803 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112-81), which was signed into law on December 31, 2011. This interim rule applies the change to DOD, NASA, and CG contracts awarded on or after December 31, 2011, to the contractor compensation costs incurred after January 1, 2012.

Comments on this interim rule must be submitted no later than August 26, 2013, identified as “FAC 2005-68, FAR Case 2012-017,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: U.S. General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Hada Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.

In addition, a proposed rule is published that would amend FAR 31.205-6(p) to require that the compensation costs incurred after January 1, 2012, for all contractor employees on all DOD, NASA, and CG contracts awarded before December 31, 2011, be subject to the $763,029 benchmark compensation amount.

Comments on this proposed rule must be submitted no later than August 26, 2013, identified as “FAR Case 2012-025,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: U.S. General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Hada Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.

For more on the latest adjustment to the “benchmark compensation amount,” see the May 2012 Federal Contracts Perspective article “Executive Compensation Set at $763,029.”

Multitude of Small Business Size Standards Revised

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 69 industries in North American Industry Classification System (NAICS) Sector 11, Agriculture, Forestry, Fishing and Hunting; Section 21, Mining, Quarrying, and Oil and Gas Extraction; Sector 52, Finance and Insurance; Sector 55, Management of Companies and Enterprises; and Sector 71, Arts, Entertainment, and Recreation.

The following are the industries in Sectors 11, 21, 52, 55, and 71 with finalized small business size standards and their previous small business size standards (see 13 CFR 121.201, What size standards has SBA identified by North American Industry Classification System codes?):

Note that SBA has changed the basis for measuring size of industries in NAICS Subsector 522293, International Trade Financing, from assets ($175 million in assets) to annual receipts ($35.5 million). Also, SBA has deleted NAICS 525930, Real Estate Investment Trusts, from its table of size standards because the U.S. Office of Management and Budget (OMB) has moved the financial activities formerly in NAICS 525930 to NAICS 531110, Lessors of Residential Buildings and Dwellings; NAICS 531120, Lessors of Nonresidential Buildings (except Miniwarehouses); NAICS 531130, Lessors of Miniwarehouses and Self Storage Units; NAICS 531190, Lessors of Other Real Estate Property; and NAICS 525990, Other Financial Vehicles.

For more on the changes that were proposed to Sectors 11, 52, and 55, see the October 2012 Federal Contracts Perspective article “More Small Business Size Standards Changes.”

For more on the changes that were proposed to Sector 21, see the January 2013 Federal Contracts Perspective article “SBA Finalizes, Proposes More Size Standards.”

For more on the changes that were proposed to Sector 71, see the August 2012 Federal Contracts Perspective article “Changes to 27 Size Standards Proposed.”

SBA Issues Small Business Size and Status Integrity Rule

The SBA has adopted as final, with editorial changes, the proposed rule that would implement statutory provisions establishing that there is a presumption of loss equal to the value of the contract or other instrument when a concern willfully seeks and receives an award by misrepresentation. In addition, the rule provides that: (1) the submission of an offer or application for an award intended for small business concerns will be deemed a size or status certification or representation in certain circumstances; (2) an authorized official must sign in connection with a size or status certification or representation for a contract or other instrument; and (3) concerns that fail to update their size or status in the System for Award Management (SAM) database (https://www.sam.gov) at least annually shall no longer be identified in the database as small or some other socioeconomic status, until the representation is updated.

These changes are made to the socioeconomic programs covered in 13 CFR Part 121, Small Business Size Regulations; 13 CFR Part 124, 8(a) Business Development/Small Disadvantaged Business Status Determinations; 13 CFR Part 125, Government Contracting Programs [service-disabled veteran-owned small business program]; 13 CFR Part 126, HUBZone Program; and 13 CFR Part 127, Women-Owned Small Business Federal Contract Program.

Twenty respondents commented on the proposed rule and several editorial changes were made, such as changing “debarring official” to “suspension and debarment official” and replacing “solicitation” with the words “offer” and “proposal” to clarify it is the offer a contractor is signing, not the solicitation.

For more on the proposed rule, see the November 2011 Federal Contracts Perspective article “SBA Proposes Rules Implementing Small Business Jobs Act.”

DOD Implements Treaties with Australia and the UK

The Department of Defense (DOD) is adding Defense FAR Supplement (DFARS) subpart 225.79, Export Control, to implement the requirements of the Treaty Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland Concerning Defense Trade Cooperation, the Treaty Between the Government of the United States of America and the Government of Australia Concerning Defense Trade Cooperation, and the Security Cooperation Act of 2010 (Public Law 111-266). DFARS subpart 225.79, and the use of provision DFARS 252.225-7046, Exports by Approved Community Members in Response to the Solicitation, and clause DFARS 252.225-7047, Exports by Approved Community Members in Performance of the Contract, are intended to streamline the export control regulations between the United States and the United Kingdom and the United States and Australia under specified circumstances.

DFARS 225.7902-2, Purpose, states, “The DTC [Defense Trade Cooperation] Treaties permit the export of certain U.S. defense articles, technical data, and defense services, without U.S. export licenses or other written authorization under the International Traffic in Arms Regulation (ITAR) into and within the Approved Community, as long as the exports are in support of purposes specified in the DTC Treaties.” The “Approved Community” consists of the U.S. government, U.S. entities that are registered and eligible exporters, and certain government and industry facilities in the United Kingdom or Australia that are approved and listed by the U.S. government (see DFARS 252.225-7047, Exports by Approved Community Members in Performance of the Contract).

For more on these treaties and their implementations, see the Department of State website “Defense Trade Cooperation Treaties & Resources” at http://pmddtc.state.gov/treaties/index.html.

In addition, the DOD issued a final rule implementing Section 863 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2009 (Public Law 110-417), which repeals redundant provisions of Section 803 of the NDAA for FY 2002 (Public Law 107-107). The purpose of Section 803 was to achieve savings in expenditures through the use of competition in the purchase by DOD of services through multiple award contracts.

Section 863 applied the Section 803 requirement to the rest of the entire government, so Section 803 was repealed as redundant. This final rule removes from the DFARS all obsolete references to Section 803 and reconciles the DFARS with the FAR implementation of Section 863.

For more on the DFARS implementation of Section 803 of Public Law 107-107, see the November 2002 Federal Contracts Perspective article “DFARS Revised on Multiple Award Competitions, Enterprise Software Agreements, Honduras.”

For more on the FAR implementation of Section 863 of Public Law 110-417, see the April 2012 Federal Contracts Perspective article “FAC 2005-56 Finalizes Rules on Women-Owned Business Set-Asides, Use of Cost-Reimbursement Contracts.”

Uniform PIID Numbering System Proposed

A proposed rule has been issued that would require the use of Activity Address Codes (AACs) as the unique identifier for contracting offices and other offices to standardize procurement transactions across the federal government.

FAC 2005-53 added FAR subpart 4.16, Unique Procurement Instrument Identifiers, to standardize use of unique Procurement Instrument Identifiers (PIIDs) throughout the government. “The lack of consistent agency policies and procedures for PIIDs subjected users of contract data, including the federal government, contractors, and the public, to potential duplicate, overlapping, or conflicting information from the different federal agencies,” stated the introduction to the rule (see the August 2011 Federal Contracts Perspective article “FAC 2005-53 Extends Protests of Task/Delivery Orders, Standardizes Unique PIIDs”).

Though agencies have developed unique PIIDs, agencies and contracting offices within agencies have PIIDs of varying lengths, which may or may not contain spaces or hyphens. To ameliorate this situation, this proposed rule would add FAR 4.1603, Procedures, to provide instructions on the construct and configuration of the basic PIID and the supplementary PIID. These instructions would practically duplicate the instructions in DFARS subpart 204.70, Unique Procurement Instrument Identification Numbers, which applies to DOD PIIDs.

According to FAR 4.1603(a), the basic PIID would be made up of 13 to 17 alpha and/or numeric characters configured to convey certain information:

• Positions 1 through 6 of the PIID would be the AAC.
  
  
• Positions 7 and 8 would be the last two digits of the fiscal year of the date the procurement instrument is signed (that is, issued or awarded).
  
  
• Position 9 would be an alpha character that will indicate the type of instrument or action.
  
  
• Positions 10 through 17 would be the serial numbering of the PIID and would be issued sequentially. Positions 10 through 17 would be the agency-assigned numbers and may be alpha-numeric, but would not be permitted to contain special characters such as hyphens and dashes or spaces.

The following sample PIID is provided in the proposed rule: N00062-12-C-0001. “N00062” is the AAC for the Chief of Naval Education and Training, Pensacola, FL 32508-5100; “12” would indicate that the procurement instrument was signed in FY 2012; “C” would indicate the procurement instrument is a contract; and “0001” would be the agency number assigned to the procurement instrument.

Supplementary PIIDs are used to identify amendments and modifications. According to FAR 4.1603(b), supplementary PIIDs for solicitation amendments would be numeric, four positions, and issued sequentially beginning with 0001. Supplementary PIIDs for modifications to contracts or agreements may be alpha and/or numeric, six positions, and issued sequentially. Modifications issued by an administering contracting office would begin with the letter A, and modifications issued by a procuring contracting office would begin with the letter P.

Comments on this proposed rule must be submitted no later than August 5, 2013, identified as “FAR Case 2012-023,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: U.S. General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Hada Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405-0001.

Interior Issues Procedures for the Buy Indian Act

After three decades, the Department of the Interior (DOI) has finalized regulations implementing the Buy Indian Act, which provides the Bureau of Indian Affairs (IA) with authority to set aside procurement contracts for Indian-owned and controlled businesses. Those regulations, which describe uniform administrative procedures that IA will use to encourage procurement relationships with eligible Indian Economic Enterprises (IEEs), are in new DOI Acquisition Regulation (DIAR) part 1480, Acquisitions Under the Buy Indian Act.

The rule establishes the following policies and procedures:

• DIAR 1480.401, Requirement to Give Preference to Indian Economic Enterprises, states, “IA must use the negotiation authority of the Buy Indian Act, 25 U.S.C. 47, to give preference to Indians whenever the use of that authority is authorized and practicable. The Buy Indian Act provides that, 'so far as may be practicable, Indian labor shall be employed, and purchases of the products (including, but not limited to printing, notwithstanding any other law) of Indian industry may be made in open market at the discretion of the Secretary of the Interior.' Thus, IA may use the Buy Indian Act to give preference to IEEs through set-asides when acquiring supplies, services, and covered construction to meet IA needs and requirements. IA must contract for covered construction in accordance with FAR Part 36 [Construction and Architect-Engineer Contracts]...IA or any other bureau or office of the Department of the Interior delegated the authority to make acquisitions under the Buy Indian Act may not use the Buy Indian Act to give preference to IEEs through set-asides when acquiring construction that is not covered construction." (NOTE: DIAR 1480.201, Definitions, defines “covered construction” as “construction for road facilities on Indian-owned land; road facilities on an Indian reservation; road facilities that are primary access routes proposed by tribal governments, including roads between villages, roads to landfills, roads to drinking water sources, roads to natural resources identified for economic development; roads that provide access to intermodal termini, such as airports, harbors, or boat landings; bridges along these roads; planning and other needs and facilities associated with roads; and sidewalks along these roads.”)
  
  
• DIAR 1480.503, Commercial Item or Simplified Acquisitions, states, “Each acquisition of supplies, services, and covered construction that is subject to commercial item or simplified acquisition procedures in accordance with FAR Parts 12 [Acquisition of Commercial Items] or 13 [Simplified Acquisition Procedures] and DIAR part 1413 must be set aside exclusively for ISBEEs" [Indian small business economic enterprise, which is an IEE that is also a small business concern established in accordance with SBA small business criteria and size standards].
  
  
• DIAR 1480.504-1, Set-Asides for Indian Economic Enterprises, requires each acquisition of supplies or services with anticipated dollar value in excess of the simplified acquisition ($150,000) must be set aside exclusively for IEEs when there is a reasonable expectation that offers will be received from two or more responsible IEEs and award will be made at a reasonable price (except for non-covered construction or use of other than full and open competition has been justified and approved. Such a set-aside is called an “Indian Economic Enterprise Set-Aside.”
  
  When acquiring services to be performed in whole or in part on Indian land under a tribe’s jurisdiction, the contracting officer must notify the applicable Indian tribe simultaneously with publication of the synopsis in FedBizOpps (https://www.fbo.gov). The notice must state IA’s intent to solicit services or supplies using an IEE set-aside and provide the tribe with the opportunity to contract for the program within 15 calendar days from the date of the synopsis publication in FedBizOpps. If the tribe does not oppose the set-aside intention or advise IA by the established deadline of its intent to contract, IA will proceed with the solicitation.
  
  
• DIAR 1452.280-2, Notice of Indian Economic Enterprise Set-Aside, contains the following requirements:
  
  
  • The combined Indian or Indian Tribe ownership must constitute at least 51% of the enterprise; the Indians or Indian Tribes must, together, receive at least a majority of the earnings from the contract; and the management and daily business operations of an Indian economic enterprise must be controlled by one or more individuals who are members of an Indian Tribe.
    
    
  • In response to the solicitation, an offeror must provide the following:
    
    
    1. A description of the required percentage of the work/costs to be provided by the offeror over the contract term as required by DIAR 1452.280-3, Subcontracting Limitations (see below).
       
       
    2. A description of the source of human resources for the work to be performed by the offeror.
       
       
    3. A description of the method(s) of recruiting and training Indian employees, indicating the extent of soliciting employment of Indian persons, as required by DIAR 1452.226-70, Indian Preference, or DIAR 1452.226-71, Indian Preference Program.
       
       
    4. A description of how subcontractors (if any) will be selected in compliance with DIAR 1452.226-70 or DIAR 1452.226-71.
       
       
    5. The names, addresses, and descriptions of work to be performed by Indian persons or economic enterprises being considered for subcontracts (if any) and the percentage of the total direct project work/costs they would be performing.
       
       
    6. Qualifications of the key personnel (if any) who will be assigned to the contract.
       
       
    7. A description of method(s) for compliance with any supplemental Tribal employment preference requirements contained in the solicitation.
  
  
• DIAR 1452.280-3, Subcontracting Limitations, requires the contractor to comply with FAR 52.219-14, Limitations on Subcontracting, in allocating the percentage of work to subcontract. Of the work subcontracted, no more than 50% may be subcontracted to a concern other than a responsible IEE. In addition, the contractor agrees to give preference to Indian organizations and IEEs in awarding subcontracts under this contract in accordance with DIAR 1452.226-71, Indian Preference Program. (NOTE: The limitations on subcontracting in FAR 52.219-14 are: (1) for services [except construction], at least 50% of the cost of contract performance incurred for personnel must be expended for employees of the concern; (2) for supplies [other than procurement from a nonmanufacturer of such supplies], the concern must perform work for at least 50% of the cost of manufacturing the supplies, not including the cost of materials; and (3) for general construction, the concern must perform at least 15% of the cost of the contract, not including the cost of materials, with its own employees.)

Export Control Requirements Proposed for DEAR

The Department of Energy (DOE) is proposing to amend the Department of Energy Acquisition Regulation (DEAR) to add export control requirements that apply to the performance of DOE contracts.

The purpose of this rulemaking is to add new DEAR subpart 925.71, Export Control, and DEAR 970.2571, Export Control [applicable to DOE’s management and operating (M&O) contracts], to describe the requirements concerning compliance with export control laws, regulations, and directives that pertain to the performance of DOE contracts. In addition, these changes would bring the DEAR into consistency with the 2010 changes to the DFARS (see the May 2010 Federal Contracts Perspective article “DOD Rolls Out More Policies and Regulations”).

The following are the changes DOE is proposing to make to the DEAR:

• DEAR subpart 925.71 would be added to describe the requirements for contractors concerning the export control of items, including but not limited to unclassified information, materials, technology, equipment or software. DEAR 925.7101, Policy, would state, “DOE therefore requires its contractors to comply with all applicable export control laws, regulations, and directives, in effect on the date of contract award and as amended subsequently, including but not limited to: the Atomic Energy Act of 1954, as amended; the Arms Export Control Act (22 U.S.C. 2751 et seq.); the Export Administration Act of 1979 (50 U.S.C. app. 2401 et seq.), as continued under the International Emergency Economic Powers Act (Title II of Pub. L. 95-223, 91 Stat. 1626, October 28, 1977; 50 U.S.C. 1701 et seq.); Trading with the Enemy Act; (50 U.S.C. App. 5(b) as amended by the Foreign Assistance Act of 1961); Assistance to Foreign Atomic Energy Activities (Title 10 of the Code of Federal Regulations (CFR) part 810); Export Administration Regulations (15 CFR parts 730 through 774); International Traffic in Arms Regulations (22 CFR parts 120 through 130); Export and Import of Nuclear Equipment and Material (10 CFR part 110); regulations administered by the Office of Foreign Assets Control (31 CFR Subtitle B Chapter V); DOE Order 142.3A, Unclassified Foreign Visits and Assignments Program, October 14, 2010; DOE Order 551.1D, Official Foreign Travel, June 24, 2008; and DOE Order 580.1A, Department of Energy Personal Property Management Program, March 30, 2012; and the Espionage Act (37 U.S.C. 791 et seq.)...It is the contractor’s responsibility to comply with all applicable laws and regulations regarding export-controlled items.”
  
  DEAR 925.7101 would go on to state, “Contractors may contact the agencies responsible for administration of export laws, regulations or directives applicable to a particular export (e.g., Departments of State, Commerce, Treasury, and Energy, or the Nuclear Regulatory Commission). Questions regarding DOE Directives should be referred to the appropriate DOE program office.”
  
  The following are several agency websites cited in the introduction to the rule as helpful:
  
  
  • Department of Commerce: http://www.bis.doc.gov/licensing/exportingbasics.htm.
    
    
  • Department of State: http://www.pmddtc.state.gov/about/key_personnel.html and http://www.pmddtc.state.gov/documents/ddtc_getting_started.pdf.
    
    
  • Department of Treasury: http://www.treasury.gov/services/Pages/Foreign-Transaction-Licensing-and-Reporting.aspx.
    
    
  • Nuclear Regulatory Commission: http://www.nrc.gov/about-nrc/ip/export-import.html.
    
    
  • National Nuclear Security Administration: http://nnsa.energy.gov/aboutus/ourprograms/nonproliferation/programoffices/officenonproliferationinternationalsecurity.
  
  
• DEAR 952.225-XX, Compliance with Export Control Laws, Regulations and Directives, would be included “in any contract that may involve the export of items, including but not limited to unclassified information, materials, technology, equipment, or software.” It would reiterate the contents of DEAR subpart 925.71.
  
  
• DEAR 970.2571 would restate the contents of DEAR subpart 925.71, making the requirements and procedures applicable to M&O contracts.
  
  
• DEAR 970.5225-1, Compliance with Export Control Laws, Regulations and Directives, would restate the contents of DEAR 952.225-XX, making the requirements and procedures applicable to M&O contracts.

Comments on this proposed rule must be submitted no later than July 13, 2013, identified as “DEAR: Export Control and RIN 1991-AB99,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email:DEARrulemaking@hq.doe.gov; or (3) mail: U.S. Department of Energy, Office of Acquisition and Project Management, MA-611, 1000 Independence Avenue SW, Washington, DC 20585.

Eight More Biobased Products Designated

The United States Department of Agriculture (USDA) is adding eight 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 add eight more biobased products to be given preference in federal procurements as provided under Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA), and to specify the minimum level of biobased content to be contained in the procured products.

The following are the new designated items and their Title 7 section numbers:

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.

For more information on the biobased program and all the products in the program, go to http://www.biopreferred.gov/.

For more on the proposed designation of these eight product categories, see the January 2013 Federal Contracts Perspective article “Eight Categories Proposed for Biobased Designation.”

Prompt Payment Interest Rate Set at 1 3/4%

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

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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