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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
Compensation Benchmark Extended for DOD, NASA, CG
Multitude of Small Business Size Standards Revised
SBA Issues Small Business Size and Status Integrity Rule
DOD Implements Treaties with Australia and the UK
Uniform PIID Numbering System Proposed
Interior Issues Procedures for the Buy Indian Act
Export Control Requirements Proposed for DEAR
Eight More Biobased Products Designated
Prompt Payment Interest Rate Set at 1 3/4%



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.



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?):

NAICS Code Industry Title Previous Size Standard
($ million)
Revized Size Standard
($ million)
Sector 11
112112 Cattle Feedlots $2.0 $7.0
112310 Chicken Egg Production $12.5 $14.0
113110 Timber Tract Operations $7.0 $10.0
113210 Forest Nurseries and Gathering of Forest Products $7.0 $10.0
114111 Finfish Fishing $4.0 $19.0
114112 Shellfish Fishing $4.0 $5.0
114119 Other Marine Fishing $4.0 $7.0
114210 Hunting and Trapping $4.0 $5.0
115111 Cotton Ginning $7.0 $10.0
115114 Postharvest Crop Activities (except Cotton Ginning) $7.0 $25.5
115115 Farm Labor Contractors and Crew Leaders $7.0 $14.0
                    
Sector 21
213112 Support Activities for Oil and Gas Operations $7.0 $35.5
213113 Support Activities for Coal Mining $7.0 $19.0
213114 Support Activities for Metal Mining $7.0 $19.0
                    
Sector 52
522110 Commercial Banking $175 million in assets $500 million in assets
522120 Savings Institutes $175 million in assets $500 million in assets
522130 Credit Unions $175 million in assets $500 million in assets
522190 Other Depository Credit Intermediation $175 million in assets $500 million in assets
522210 Credit Card Issuing $175 million in assets $500 million in assets
522220 Sales Financing $7.0 $35.5
522291 Consumer Lending $7.0 $35.5
522292 Real Estate Credit $7.0 $35.5
522293 International Trade Financing $175 million in assets $35.5
522294 Secondary Market Financing $7.0 $35.5
522298 All Other Nondepository Credit Intermediation $7.0 $35.5
522320 Financial Transactions Processing, Reserve, and Clearing House Activities $7.0 $35.5
522390 Other Activities Related to Credit Intermediation $7.0 $19.0
523110 Investment Banking and Securities Dealing $7.0 $35.5
523120 Securities Brokerage $7.0 $35.5
523130 Commodity Contracts Dealing $7.0 $35.5
523140 Commodity Contracts Brokerage $7.0 $35.5
523210 Securities and Commodity Exchanges $7.0 $35.5
523910 Miscellaneous Intermediation $7.0 $35.5
523920 Portfolio Management $7.0 $35.5
523930 Investment Advice $7.0 $35.5
523991 Trust, Fiduciary and Custody Activities $7.0 $35.5
523999 Miscellaneous Financial Investment Activities $7.0 $35.5
524113 Direct Life Insurance Carriers $7.0 $35.5
524114 Direct Health and Medical Insurance Carriers $7.0 $ 35.5
524127 Direct Title Insurance Carriers $7.0 $35.5
524128 Other Direct Insurance (except Life, Health and Medical) Carriers $7.0 $35.5
524130 Reinsurance Carriers $7.0 $35.5
524291 Claims Adjusting $7.0 $19.0
524292 Third Party Administration of Insurance and Pension Funds $7.0 $30.0
524298 All Other Insurance Related Activities $7.0 $14.0
525110 Pension Funds $7.0 $30.0
525120 Health and Welfare Funds $7.0 $30.0
525190 Other Insurance Funds $7.0 $30.0
525910 Open-End Investment Funds $7.0 $30.0
525920 Trusts, Estates, and Agency Accounts $7.0 $30.0
525990 Other Financial Vehicles $7.0 $30.0
                    
Sector 55
551111 Offices of Bank Holding Companies $7.0 $19.0
551112 Offices of Other Holding Companies $7.0 $19.0
                    
Sector 71
711110 Theater Companies and Dinner Theaters $7.0 $19.0
711120 Dance Companies $7.0 $10.0
711130 Musical Groups and Artists $7.0 $10.0
711190 Other Performing Arts Companies $7.0 $25.5
711211 Sports Teams and Clubs $7.0 $35.5
711212 Race Tracks $7.0 $35.5
711219 Other Spectator Sports $7.0 $10.0
711310 Promoters of Performing Arts, Sports and Similar Events with Facilities $7.0 $30.0
711320 Promoters of Performing Arts, Sports and Similar Events without Facilities $7.0 $14.0
711410 Agents and Managers for Artists, Athletes, Entertainers and Other Public Figures $7.0 $10.0
712110 Museums $7.0 $25.5
712130 Zoos and Botanical Gardens $7.0 $25.5
713110 Amusement and Theme Parks $7.0 $35.5
713210 Casinos (except Casino Hotels) $7.0 $25.5
713290 Other Gambling Industries $7.0 $30.0
713910 Golf Courses and Country Clubs $7.0 $14.0
713920 Skiing Facilities $7.0 $25.5

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:

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:



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:

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:

     3201.100, Aircraft and Boat Cleaners
     3201.101, Automotive Care Products
     3201.102, Engine Crankcase Oil
     3201.103, Gasoline Fuel Additives
     3201.104, Metal Cleaners and Corrosion Removers
     3201.105, Microbial Cleaning Products
     3201.106, Paint Removers
     3201.107, Water Turbine Bearing Oils

As a general rule, procuring agencies must purchase biobased products within these designated items where the purchase price of the procurement item exceeds $10,000 or where the quantity of such items or functionally equivalent items purchased over the preceding fiscal year equaled $10,000 or more, unless products within a designated item: (1) are not reasonably available within a reasonable period of time; (2) fail to meet the reasonable performance standards of the procuring agencies; or (3) are available only at an unreasonable price. The $10,000 threshold applies to federal agencies as a whole and not to agency subgroups such as regional offices or subagencies of the larger federal department or agency.

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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