July 2016
To transform price disclosure and related policies for the General Services Administration’s (GSA) Federal Supply Schedule (FSS) contracts, governmentwide acquisition contracts (GWACs), and governmentwide indefinite-delivery, indefinite-quantity (IDIQ) contracts, GSA is phasing out the disclosures and tracking currently required by the Commercial Sales Practices (CSP) format (see General Services Administration Acquisition Regulation [GSAR] 515.408, Solicitation Provisions and Contract Clauses [for contract pricing]) and the Price Reductions clause (PRC – GSAR 552.238-75), and the associated practice of negotiating pricing based on a model where the government strives to secure the vendor's most favored pricing and maintain this position for the life of the contract. Instead, GSA is adopting a market driven pricing model where vendors submit prices paid by government customers through a new “Transactional Data Reporting” clause, and the government will use this data, along with other pricing information, to ensure a vendor’s offered price is competitive relative to other vendors selling the same or similar items or services. “Transactional Data Reporting is an attempt to embrace modern technology while moving away from outmoded practices,” writes GSA in the introduction to the rule. “When first introduced in the 1980s, the CSP and PRC helped GSA and its customer agencies maintain advantageous pricing from original equipment manufacturers that held the vast majority of FSS contracts. However, changes in what the government buys and shifts in the federal marketplace have eroded the effectiveness of these tools over time. Additionally, vendors repeatedly single out these pricing tools as among the most complicated and burdensome requirements in federal contracting. By contrast, Transactional Data Reporting provides a less burdensome alternative.” The CSP is the document through which a contractor relates the pricing, terms, and conditions it offers to its commercial (non-federal) customers. The PRC requires the contractor to maintain the government’s price or discount advantage in relation to the price or discount offered by the contractor to its commercial customers – if the contractor reduces the price of an item to its commercial customers and the item is on a schedule contract, the contractor must reduce the price of the item on the schedule contract similarly (this is called the “tracking customer” provision by GSA). Among the factors that have eroded the effectiveness of the CSP and PRC over time are: (i) the significant growth of contracts held by resellers with little or no commercial sales against which to negotiate most favored customer pricing; (ii) the prevalence of sales for commercial-off-the-shelf products or other commercial items for which the government is not a market driver; and (iii) the fact that these practices tie pricing for reductions to sales of single items and play little role in blanket purchase agreements and other higher-volume leveraged buying by agencies to achieve greater savings and reduce administrative costs. Schedule contractors have singled out these pricing tools as among the most complicated and burdensome requirements in federal contracting. The proliferation of resellers has occurred, in part, out of an effort by original equipment manufacturers to shield them from what they see as an overly complex and burdensome process that has created a punitive relationship between the government and its suppliers. In response, GSA issued a proposed rule that would require that transactional data be reported immediately for non-FSS contracts (GWACs and IDIQs) but rolled out on a pilot basis for the FSS program under select schedules, but FSS contractors under those select schedules would be required to participate (according to the introduction of the proposed rule, schedules for “commercial-off-the-shelf and related commercial products and commoditized services that experience high volume of repetitive purchasing under identical or substantially similar terms and conditions”). For FSS contracts, the requirement would have been paired with an alternate Price Reductions clause that did not include the tracking customer provision. However, FSS contractors would still be subject to the CSP requirements, and GSA would have had the right to request CSP disclosures at any time (for more on the proposed rule, see the April 2015 Federal Contracts Perspective article “GSA Proposing Transactional Data Reporting”). The following is the transactional data that would be reported for all sales under the contract (GSA would post the reporting instructions at https://vsc.gsa.gov/): GSA received comments on the proposed rule from 26 industry associations, contractors, individuals, government agencies, and other interested groups. In response to the comments, GSA decided to (1) retain the proposed transactional data elements to be reported; (2) authorize the phased elimination of both the CSP and the PRC; and (3) broaden the pilot to be more reflective of the varied goods and services offered and sold through the FSS program – the pilot will involve the following eight schedules and Special Item Numbers (SINs – groupings within schedules of like commodities or services), which account for more than 40% of the FSS sales volume:
For FSS contracts, the new Alternate I to GSAR 552.238-74, Industrial Funding Fee and Sales Reporting, is paired to the new Alternate II to the PRC (GSAR 552.238-75), which does not include the customer tracking requirement. Initially, participation in the pilot will be voluntary for FSS contractors with FSS contracts in the schedules/SINs, but they will be encouraged to participate by executing a bilateral modification with GSA. The new reporting clause and corresponding pricing disclosure changes will be applied to newly-awarded FSS contracts in the pilot Schedules/SINs and existing FSS contracts that are up for renewal/extension. New GSAR 552.216-75, Transactional Data Reporting, applies to all new GWACs and governmentwide IDIQs and may be applied, through a bilateral modification, to any existing GWACs and governmentwide IDIQ contracts that do not contain other transactional data clauses. NOTE: FSS contracts managed by the Department of Veterans Affairs (VA) are not included in the pilot and will not be affected by this rule. The Department of Defense (DOD) continued its burst of energy, publishing four final rules, one interim rule, four proposed rules (including a massive one that would revamp the regulations on rights in technical data and proprietary data restrictions), one class deviation, one memorandum, and one request for information (on rights in technical data and proprietary data restrictions). For the first time in years, the U.S. Supreme Court addressed issues that affect federal acquisition, and it did so twice: once regarding the “rule of two,” the other regarding the False Claims Act. Unlike the DOD, the Federal Acquisition Regulation (FAR) Council took it easy, only issuing three proposed rules that are relatively inconsequential. The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) has revised its equal employment opportunity regulations at Title 41 of the Code of Federal Regulations (CFR), part 60-20, Sex Discrimination Guidelines (41 CFR part 60-20), which have not been substantively updated since they were first promulgated in 1970. 41 CFR part 60-20 implements Executive Order 11246, Equal Employment Opportunity, September 24, 1965, which prohibits federal contractors and subcontractors that receive contracts of more than $10,000 during any 12-month period from discriminating “against any employee or applicant for employment because of race, creed, color, or national origin.” Executive Order 11246 was amended by Executive Order 11478, Equal Employment Opportunity in the Federal Government, August 8, 1969, to bar discrimination against federal employees on the basis of race, color, religion, sex, national origin, handicap, and age. Executive Order 13087, Further Amendment to Executive Order 11478, May 28, 1998, added “sexual orientation” to the list of protected categories. (NOTE: Executive Order 11246, as amended, is implemented in FAR subpart 22.8, Equal Employment Opportunity, and the corresponding clause FAR 52.222-26, Equal Opportunity.) On July 21, 2014, President Obama issued Executive Order 13672, Equal Employment Opportunity Amendments Regarding Sexual Orientation and Gender Identity, which further amended Executive Order 11246 to prohibit federal contractors from discriminating against lesbian, gay, bisexual, and transgender (LGBT) employees, and amended Executive Order 11478 to prohibit discrimination based on gender identity in federal employment (see the August 2014 Federal Contracts Perspective article “Sexual Orientation and Gender Identity Order Issued”). Considering all these changes made to Executive Order 11246 since 1970, OFCCP decided to update the guidelines, and it published a proposal to completely revise 41 CFR 60-20 (see the March 2015 Federal Contracts Perspective article “OFCCP Proposes Updates to Sex Discrimination Rules”). Proposed 41 CFR 60-20.2, General Prohibition, summarized the proscribed activities: “It is unlawful for a contractor to discriminate against any employee or applicant for employment because of sex. The term ‘sex’ includes, but is not limited to pregnancy, childbirth, or related medical conditions; gender identity; and transgender status.” 41 CFR 60-20.2 then provided 11 examples of unlawful sex-based discriminatory practices, and four examples of employment policies or practices that have an adverse impact on the basis of sex and are not job-related and consistent with business necessity. OFCCP received 553 comments on the proposal. They include 445 largely identical form-letter comments from 444 individuals expressing general support, apparently as part of an organized comment-writing effort. The 108 remaining comments represented diverse perspectives. In response to the comments, 41 CFR 60-20.2 is finalized with the inclusion of the following three additional examples of unlawful sex-based discriminatory practices: In addition, one of the four examples of employment policies or practices that have an adverse impact on the basis of sex (“a policy prohibiting large equipment operators from using a restroom while on the job, which adversely impacts women, who may require the use of restrooms more than men”) is replaced with “conditioning entry into an apprenticeship or training program on performance on a written test, interview, or other selection procedure that has an adverse impact on women where the contractor cannot establish the validity of the selection procedure consistent with the Uniform Guidelines on Employee Selection Procedures, 41 CFR part 60-3.” The Environmental Protection Agency (EPA) is tidying up the EPA Acquisition Regulation (EPAAR) by removing EPAAR 1536.201, Evaluation of Contracting Performance, which addressed the evaluation of contractor performance under construction contracts, because it was superseded by FAR 42.1502, Policy (see the September 2013 Federal Contracts Perspective article “FAC 2005-69 Establishes Standardized Past Performance Evaluation Factors and Ratings”). In addition, paragraph (c) of EPAAR 1537.110, Solicitation Provisions and Contract Clauses [for service contracts], is amended to permit contracting officers to increase the length of time key personnel must be committed to the contract (EPAAR 1552.237-72, Key Personnel, requires “the first 90 days of performance”). Paragraph (c) states, “The contracting officer shall insert the clause at [EPAAR] 1552.237-72, Key Personnel, in solicitations and contracts when it is necessary for contract performance to identify contractor key personnel.” To that is added the following: “Contracting officers have the flexibility to identify the required number of days of key personnel commitment during the early stages of contractor performance. The length of time will be based on the requirements of individual acquisitions when continued assignment is essential to the successful implementation of the program's mission. Therefore, contracting officers may use a clause substantially the same as in EPAAR 1552.237-72, regarding substitution of key personnel. Contracting officers may include a different number of days in excess of the ninety (90) days included in this 1552.237-72clause, if approved at one level above the contracting officer.” No comments were submitted on the proposed rule, so it is finalized without changes. For more on the proposed rule, see the September 2014 Federal Contracts Perspective article “EPA Proposes to Clean Up the EPAAR.” The General Services Administration (GSA) conducted a little housekeeping of its own on the GSA Acquisition Regulation (GSAR), updating two GSAR parts to reflect current regulations and correspond to the organization of the FAR, and to implement several statutory requirements pertaining to the use of GSA’s sources of supply by non-federal entities. The Office of Management and Budget (OMB) has issued the second in a series of information technology (IT) policies to make the acquisition and management of common IT goods and services more efficient and cost-effective (the first policy addressed the acquisition of laptops and desktops – see the November 2015 Federal Contracts Perspective article “OMB Establishes Standard Configurations for Laptop and Desktop Computers”). “Each year, the federal government spends more than $6 billion on software through more than 42,000 transactions, which results in a fragmented and inefficient marketplace,” wrote Anne Rung, Office of Federal Procurement Policy administrator, and Tony Scott, U.S. Chief Information Officer, in the memorandum with the subject “Category Management Policy 16-1: Improving the Acquisition and Management of Common Information Technology: Software Licensing,” to the 24 departments and agencies covered by the Chief Financial Officers (CFO) Act of 1990 (Public Law 101-576) [see below]. “A recent report by the Government Accountability Office (GAO) [GAO-14-413, Federal Software Licenses: Better Management Needed to Achieve Significant Savings Government-Wide] indicates that agencies buy and manage software licenses in a decentralized manner, struggle to create accurate inventories, often purchase unneeded capabilities, and generally do not share pricing, terms, and conditions across government to facilitate better purchasing. Furthermore, most agencies do not have a designated central oversight authority to manage software agreements.” Rung and Scott continue: “To fully leverage the government’s vast buying power and implement coordinated government-wide purchasing and usage strategies, improvements must be made at both the agency and the government-wide levels. Agencies need to move to a more centralized and collaborative software management approach so that they can optimize utilization of commercial and COTS [commercial-off-the-shelf] software licenses and maximize the use of best-in-class software purchasing and management solutions. In parallel, government-wide strategies are needed to reduce duplication of efforts, such as increasing the number and use of government-wide software agreements, improving software license management practices through automated IT asset discovery tools and business intelligence software. The success of these government-wide steps depends on the improvements that agencies make to integrate their own license management practices into the government-wide license offerings.” The following are the steps each participant in the process must take: “As a reminder, generally agencies should not agree to terms and conditions that prohibit the sharing of all prices, terms, and conditions for commercial and COTS software licenses with other government entities (including posting said information to the Acquisition Gateway [https://hallways.cap.gsa.gov/login-information – see the March 2016 Federal Contracts Perspective article “GSA Opens Federal Acquisition Gateway to Public”]). When terms or conditions are identified that seem to preclude an agency from sharing prices paid with other federal agencies, the covered agency shall ensure removal of these terms and conditions during the negotiation process for the contract or the option period renewal.” The policy memorandum applies only to commercial and COTS software, not custom services or the development of new software. OMB issued a draft memorandum in December 2015 for comments, and it was adopted, for the most part, in the final memorandum. For more on the draft memorandum, see the January 2016 Federal Contracts Perspective article “OMB Proposes New Software Licensing Policy.” NOTE: The following are the departments and agencies covered by the CFO Act: Departments: Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs. Agencies: Environmental Protection Agency, National Aeronautics and Space Administration, Agency for International Development, General Services Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management, Small Business Administration, and Social Security Administration.
Vol. XVII, No. 7
[pdf version]
GSA to Require Transactional Data Reporting For Federal Supply Schedule Orders
DOD on Rampage with DFARS Changes
Supreme Court Issues Two Acquisition-Related Decisions
Three Rules Proposed for the FAR
OFCCP Revises Sex Discrimination Rules
EPA Tidies Up the EPAAR
GSA Does Some Tidying Up, Too
OMB Establishes New Software Licensing Policy
For Federal Supply Schedule Orders
Federal Acquisition Circular (FAC) 2005-67 added FAR 52.225-26, Contractors Performing Private Security Functions Outside the United States, to address requirements for: (1) private security contractors performing DOD contracts in areas of contingency operations outside the United States; (2) private security contractors performing DOD and non-DOD contracts in areas of combat operations as designated by the Secretary of Defense; and (3) private security contractors performing DOD and non-DOD contracts in areas of other significant military operations as designated by the Secretary of Defense and the Secretary of State (see the July 2013 Federal Contracts Perspective article “FAC 2005-67 Removes Limits on WOSB Set-Asides, Addresses Concerns with Acquisition of Social Media”). Since then, the applicability of DOD’s policies regarding private security contracts have been expanded to cover peace operations or other military operations or exercises.
Rather than amending FAR 52.225-26 to reflect the expanded applicability of DOD’s policies regarding private security contracts, DOD proposed to amend DFARS 252.225-7039 to reflect that expanded applicability and remove all DOD-specific policies regarding contractors performing private security functions from FAR 52.225-26 (a corresponding FAR revision was proposed – see the June 2015 Federal Contracts Perspective article “FAC 2005-82 Finalizes Three Rules”).
In addition, the rule proposed to add the International Standard ISO 18788, Management System for Private Security Operations – Requirements with Guidance for Use, to DFARS 252.225-7039 as an approved alternative to the American National Standard ANSI/ASIS PSC.1-2012, Management System for Quality of Private Security Company Operations – Requirements with Guidance, because many foreign countries do not accept use of foreign national standards.
One respondent submitted comments on the proposed rule, but neither of the respondent's comments were adopted in the final rule. However, for consistency in the terminology used in DFARS 252.225-7039, the term “employees of the contractor” is removed from paragraphs (c)(1) and (2) and replaced with “contractor personnel”.
For more on the proposed rule, see the January 2016 Federal Contracts Perspective article “DOD Addresses Acquisition Policies Outside the U.S.”
For more on FAC 2005-88, see the June 2016 Federal Contracts Perspective article “FAC 2005-88 Requires Safeguards of Contractor Information Systems.”
FAR 25.003, Definitions [applicable to FAR part 25, Foreign Acquisition], defines “WTO GPA countries” as parties to the WTO GPA, and defines “designated country” as either a WTO GPA country, a Free Trade Agreement country, a least developed country, or a Caribbean Basin country. Since Ukraine is now a WTO GPA country and, therefore, a designated country, this rule adds Ukraine to the list of WTO GPA countries within the definition of “designated country” in DFARS 252.225-7017, Photovoltaic Devices; DFARS 252.225-7021, Trade Agreements (Basic and Alternate II), and DFARS 252.225-7045, Balance of Payments Program – Construction Material Under Trade Agreements (Basic and Alternates I, II, and III).
To implement Section 897, DOD proposed to amend DFARS 225.7002-2 to add the following exception as paragraph (o): “Acquisitions that are interagency, state, or local purchases that are executed by DOD as a result of the transfer of contracts from the General Services Administration or for which DOD serves as an item manager for products on behalf of the General Services Administration. According to Section 897 of the National Defense Authorization Act for Fiscal Year 2016 (Pub. L. 114-92), such contracts shall not be subject to requirements under Chapter 148 of Title 10, United States Code (including 10 USC 2533a), to the extent such contracts are for purchases of products by other federal agencies or state or local governments.” (NOTE: 10 USC 2533a is popularly known as the “Berry Amendment.”)
One respondent supported the proposed rule, so no changes were made to the final rule. For more on the proposed rule, see the April 2016 Federal Contracts Perspective article “DOD Awakens with Flurry of DFARS Changes.”
Section 866 established the pilot program to assess the feasibility and advisability of acquiring “military-purpose nondevelopmental items” (“a nondevelopmental item that meets a validated military requirement...and has been developed exclusively at private expense”) from “nontraditional defense contractors” (“an entity that is not currently performing and has not performed, for at least the one-year period...any of the following for the Department of Defense: (1) any contract or subcontract that is subject to full coverage under the cost accounting standards...or (2) any other contract in excess of the certified cost or pricing data threshold under which the contractor is required to submit certified cost or pricing data in accordance with streamlined procedures”). Section 866 required that acquisitions under the pilot program be awarded through competitive procedures, and that those acquisitions be limited to those that id not exceed $50,000,000. DFARS subpart 212.71 and the corresponding clause DFARS 252.212-7002, Pilot Program for Acquisition of Military-Purpose Nondevelopmental Items, were added to implement Section 866.
Section 892 deletes the requirement that contracts under the pilot program be with “nontraditional defense contractors,” deletes the requirement that such contracts be awarded through competitive procedures, and increases the limit on the size of such contracts from $50,000,000 to $100,000,000.
This interim rule amends DFARS subpart 212.71 to conform to the changes made to the pilot program by Section 892 accordingly. In addition, it removes the definitions of “military-purpose nondevelopmental item” and “nondevelopmental item” from DFARS 252.212-7002 and moves them to DFARS 212.7101, Definitions.
Comments on this interim rule must be submitted no later than August 29, 2016, identified as “DFARS Case 2016-D014,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: osd.dfars@mail.mil; (3) fax: 571-372-6094; or (4) mail: Defense Acquisition Regulations System, Attn: Dustin Pitsch, OUSD(AT&L)DPAP/ DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 20301-3060.
The Randolph-Sheppard (R-S) Act applies to contracts for the operation of military dining facilities. It is administered by the Department of Education but operated through state licensing agencies, which are responsible for recruiting, training, and licensing individuals who are blind or have a vision impairment to manage vending facilities (which are defined as “automatic vending machines, cafeterias, snack bars, cart service, shelters, counters, and such other appropriate auxiliary equipment which may be operated by blind licensees and which is necessary for the sale of newspapers, periodicals, confections, tobacco products, foods, beverages, and other articles or services dispensed automatically or manually and prepared on or off the premises”). Solicitations under the R-S Act are awarded under full and open competition, and state licensing agencies are given priority in award. For a state licensing agency’s proposal to be selected for award, the proposal must be in the competitive range and ranked among those proposals which have a reasonable chance of being selected. (NOTE: The Department of Education’s regulations implementing the R-S Act are at 34 CFR part 395, Vending Facility Program for the Blind on Federal and Other Property.)
The Committee for Purchase from People Who Are Blind or Severely Disabled (CFP) statute applies to contracts and subcontracts for dining support services (including mess attendant services). It requires government agencies to purchase certain products and services from a Procurement List maintained by the Committee under the AbilityOne program (http://www.abilityone.gov/). Because acquiring products and services on the Procurement List is mandatory for agencies, the CFP statute is exempt from the competition requirements of the Competition in Contracting Act. (NOTE: The Committee’s regulations are at 41 CFR part 51, Committee for Purchase from People Who Are Blind or Severely Disabled).
During the 1990s, confusion arose about whether contracts for food services at military dining facilities should be subject to the R-S Act or the CFP statute. To resolve the confusion, Section 848 of the NDAA for FY 2006, Statement of Policy and Report Relating to Contracting with Employers of Persons with Disabilities, required DOD, the Department of Education (because of school cafeterias), and the CFP to issue the Joint Policy Statement: “The joint statement of policy shall specifically address the application of those acts to both operation and management of all or any part of a military mess hall, military troop dining facility, or any similar dining facility operated for the purpose of providing meals to members of the Armed Forces...”
The resultant Joint Policy Statement provided that new contracts would be competed under the R-S Act when “the [DOD] solicits a contractor to exercise management responsibility and day-to-day decision making for the overall functioning of a military dining facility, including responsibility for its staff and subcontractors, where the DOD role is generally limited to contract administration functions described in FAR part 42 [Contract Administration and Audit Services]...In all other cases, the contracts will be set aside for JWOD performance (or small businesses if there is no JWOD nonprofit agency capable or interested) when [DOD] needs dining support services (e.g., food preparation services, food serving, ordering and inventory of food, meal planning, cashiers, mess attendants, or other services that support the operation of a dining facility) where [DOD] food service specialists exercise management responsibility over and above those contract administration functions described in FAR part 42.”
Since the issuance of the Joint Policy Statement, the definition of “operation of a military dining facility” has been interpreted inconsistently. In response, Section 856 of the NDAA for FY 2007, Contracting with Employers of Persons with Disabilities, went on to further define “military dining facility” as “a facility owned, operated, leased, or wholly controlled by the Department of Defense and used to provide dining services to members of the Armed Forces, including a cafeteria, military mess hall, military troop dining facility, or any similar dining facility operated for the purpose of providing meals to members of the Armed Forces.” In addition, Section 856 clarified the relationship between the R-S Act and the CFP statute.
While the CFP statute is addressed in FAR subpart 8.7, Acquisition from Nonprofit Agencies Employing People Who Are Blind or Severely Disabled, and DFARS subpart 208.7, the R-S Act, the Joint Policy Statement, and the clarifications in Section 856 of the NDAA for FY 2007 are not addressed in either the FAR or the DFARS. Therefore, DOD is proposing to locate the guidance for food services in DFARS part 237, Service Contracting, (which includes guidance for contracting for various types of services, such as educational services, laundry and dry cleaning, and mortuary services). DOD believes DFARS part 237 is the appropriate location for the food services policy.
The following are the main changes being proposed:
Comments on this proposed rule must be submitted no later than August 8, 2016, identified as “DFARS Case 2015-D012,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 571-372-6094; or (3) mail: Defense Acquisition Regulations System, Attn: Amy Williams, OUSD(AT&L)DPAP/ DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 20301-3060.
To implement Section 815, this proposed rule would make following significant changes to DFARS part 227:
Comments on this proposed rule must be submitted no later than September 14, 2016, identified as “DFARS Case 2012-D022,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: osd.dfars@mail.mil; (3) fax: 571-372-6094; or (4) mail: Defense Acquisition Regulations System, Attn: Amy Williams, OUSD (AT&L)DPAP/ DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 20301-3060.
In addition, Section 813 of the NDAA for FY 2016 (Public Law 114-92) requires DOD to establish the Government-Industry Advisory Panel for the purpose of reviewing 10 USC 2320 and 10 USC 2321 regarding rights in technical data and the validation of proprietary data restrictions, and the implementing regulations, to ensure that such statutory and regulatory requirements are best structured to serve the interests of the taxpayers and the national defense. (NOTE: The regulatory implementation of 10 USC 2320 and 10 USC 2321 are in DFARS subpart 227.71 and DFARS subpart 227.72, respectively – see above).
The Government-Industry Advisory Panel has been formed and is seeking information to facilitate a review of 10 USC 2320 and 10 USC 2321. To facilitate the panel’s review, comments are sought on the following:
Submit comments no later than July 21, 2016, by either of the following methods: (1) mail: Office of the Assistant Secretary of Defense (Acquisition), ATTN: LTC Andrew Lunoff, Designated Federal Officer (DFO), 3090 Defense Pentagon, Washington, DC 20301-3090; or (2) email: andrew.s.lunoff.mil@mail.mil.
The introduction to the proposed rule states, “DOD has determined that the use of such customary contract financing provides improved cash flow as an incentive for commercial companies to do business with DOD, is in DOD's best interest, and requires no further justification of its use.”
Comments on this proposed rule must be submitted no later than August 29, 2016, identified as “DFARS Case 2015-D026,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: osd.dfars@mail.mil; (3) fax: 571-372-6094; or (4) mail: Defense Acquisition Regulations System, Attn: Mark Gomersall, OUSD(AT&L)DPAP/ DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 20301-3060.
Comments on this proposed rule must be submitted no later than August 29, 2016, identified as “DFARS Case 2016-D020,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: osd.dfars@mail.mil; (3) fax: 571-372-6094; or (4) mail: Defense Acquisition Regulations System, Attn: Christopher Stiller, OUSD(AT&L) DPAP/DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC 20301-3060.
This deviation rescinds and supersedes Class Deviation 2016-O0006 (see the March 2016 Federal Contracts Perspective article “DFARS Revised to Conform to FAR PIINs”). The sole difference between the two class deviations is the addition of the following to the definition of “Non-CAAF [Contractors Authorized to Accompany the Force]”: “Government-furnished support to non-CAAF is typically limited to force protection, emergency medical care, and basic human needs (e.g., bottled water, latrine facilities, security, and food when necessary) when performing their jobs in the direct vicinity of U.S. Armed Forces. Non-CAAF status does not apply to contractor personnel in support of applicable operations within the boundaries and territories of the United States.”
Ms. Grady encourages each of the services to identify at least one opportunity to test this authority and nominate it for her approval using the template that is attached to the memorandum. “This pilot authority is not to be used prior to October 1, 2016, but you may wish to identify candidate programs now for sole source requests for proposals you intend to issue later this year.”
In 2012, the VA procured emergency notification services through the Federal Supply Schedule (FSS) for four medical centers for a one-year period, with an option to extend the agreement for two more, from a non-veteran-owned business. After the initial year, VA exercised its option for an additional year, and the agreement ended in 2013.
Kingdomware Technologies, Inc., filed a protest with the Government Accountability Office (GAO) alleging the VA procured multiple contracts through the FSS without employing the “rule of two” (paragraph (d) of 38 USC 8127, Small Business Concerns Owned and Controlled by Veterans: Contracting Goals and Preferences, states: “a contracting officer of the [VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States”). The VA sent a request for quotation to a non-veteran-owned company through the FSS, and it responded with a favorable price that the VA accepted. The VA argued that the “rule of two” did not apply to this particular situation because the VA had already achieved its annual minimum goal for awards to veteran-owned small businesses. The GAO determined that the VA’s actions were unlawful, but the VA declined to follow the GAO’s nonbinding recommendation.
Kingdomware filed suit in the Court of Federal Claims, which ruled in favor of the VA. Kingdomware appealed to the Court of Appeals for the Federal Circuit, which upheld the decision by the Court of Federal Claims.
The Supreme Court overturned the Court of Appeal's decision and ruled in favor of Kingdomware. “Unlike the word ‘may,’ which implies discretion, the word ‘shall’ usually connotes a requirement...Accordingly, the [VA] shall (or must) prefer veteran-owned small businesses when the rule of two is satisfied.”
Yarushka Rivera, a teenage beneficiary of Massachusetts’ Medicaid program, received counseling services for several years at Arbour Counseling Services, a mental health facility owned and operated by a subsidiary of petitioner Universal Health Services, Inc. She had an adverse reaction to a medication that a purported doctor at Arbour prescribed after diagnosing her with bipolar disorder. Her condition worsened, and she eventually died of a seizure.
Ms. Rivera’s mother and stepfather later discovered that few Arbour employees were actually licensed to provide mental health counseling or authorized to prescribe medications or offer counseling services without supervision. They filed a suit under 31 USC 3729 et seq. (the False Claims Act, which was enacted in 1863 to stop the massive frauds perpetrated by contractors during the Civil War) seeking to hold Universal Health liable under the “implied false certification” theory, claiming that Universal Health defrauded the Medicaid program by submitting reimbursement claims that made representations about the specific services provided by specific types of professionals, but that failed to disclose serious violations of Massachusetts Medicaid regulations pertaining to staff qualifications and licensing requirements for these services. The Massachusetts Medicaid program, unaware of these deficiencies, paid the claims. Universal Health thus allegedly defrauded the program, which would not have reimbursed the claims had it known that it was billed for mental health services that were performed by unlicensed and unsupervised staff.
The United States Court of Appeals for the First Circuit ruled in favor of Ms. Rivera’s parents, accepting the implied false certification theory. Since the United States of Appeals for the Seventh Circuit had rejected this theory in another case, the Supreme Court decided to resolve the disagreement.
“Implied false certification theory can, at least in some circumstances, provide a basis for liability,” ruled the court. “By punishing defendants who submit ‘false or fraudulent claims,’ the False Claims Act encompasses claims that make fraudulent misrepresentations, which include certain misleading omissions. When, as here, a defendant makes representations in submitting a claim but omits its violations of statutory, regulatory, or contractual requirements, those omissions can be a basis for liability if they render the defendant’s representations misleading with respect to the goods or services provided.”
Universal Health also asserted that Massachusetts did not expressly designate the qualifications of its employees as a condition of payment, so it should not face False Claims Act liability. The court ruled that the False Claims Act “imposes liability on those who present ‘false or fraudulent claims’ but does not limit such claims to misrepresentations about express conditions of payment…Nor does the common-law meaning of fraud tether liability to violating an express condition of payment. A statement that misleadingly omits critical facts is a misrepresentation irrespective of whether the other party has expressly signaled the importance of the qualifying information.”
However, the court went back to address the “materiality” standard in 31 USC 3729(a)(1)(B), which states a person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim” is liable to a civil penalty (italics added). The court opined that “the materiality standard is demanding. The False Claims Act is not “an all-purpose antifraud statute, or a vehicle for punishing garden-variety breaches of contract or regulatory violations. A misrepresentation cannot be deemed material merely because the government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the government would have the option to decline to pay if it knew of the defendant’s noncompliance. Materiality, in addition, cannot be found where noncompliance is minor or insubstantial...If the government required contractors to aver their compliance with the entire U.S. Code and Code of Federal Regulations, then under this view, failing to mention noncompliance with any of those requirements would always be material. The False Claims Act does not adopt such an extraordinarily expansive view of liability.”
The Supreme Court sent the case back to the Court of Appeals for the First Circuit for reconsideration. “We emphasize, however, that the False Claims Act is not a means of imposing treble damages and other penalties for insignificant regulatory or contractual violations. This case centers on allegations of fraud, not medical malpractice. Respondents have alleged that Universal Health misrepresented its compliance with mental health facility requirements that are so central to the provision of mental health counseling that the Medicaid program would not have paid these claims had it known of these violations. Respondents may well have adequately pleaded a violation...But we leave it to the courts below to resolve this.”
This terminology and way of communicating was incorporated into the FAR when it was issued in April 1, 1984. The emergence of electronic means of communication, starting with the facsimile machine, and then followed by email and mobile-phone text messages in the 1990s, resulted in the declining use of telegraph services and use of telegrams.
In addition, the proposed rule would make the following changes:
Comments on this proposed rule must be submitted no later than August 5, 2016, identified as “FAR Case 2015-035,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Ms. Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.
The introduction to the proposed rule states that “strategic sourcing is the structured and collaborative process of critically analyzing an organization’s spending patterns to better leverage its purchasing power, reduce costs, and improve overall performance.”
The FSSI is administered by the General Services Administration (GSA). According to the FSSI website (https://strategicsourcing.gov/), it is “a governmentwide program that allows agencies to work together to develop innovative sourcing strategies. FSSI enables the government to leverage its vast buying power, clarify requirements, improve vendor performance, better manage demand and business processes, and meet socioeconomic and environmental responsibilities. FSSI allows the government to approach vendors as a single, coordinated enterprise. Requirements are consolidated across agencies, and the government’s foremost experts on each commodity are brought together to share their experiences and develop solutions that are better than what could be achieved if each agency worked alone.” Currently, the FSSI includes “solutions” for office supplies; information services; janitorial and sanitation supplies; maintenance, repair, and operations; domestic delivery services; print management; and telecommunications expense management services.
To implement Section 836, the following would be added to FAR 8.004 as paragraph (b): “Documentation requirements relating to the Federal Strategic Sourcing Initiative (FSSI). When purchasing supplies or services that are offered under the FSSI, but the FSSI is not used, the contract file shall be documented to include a brief analysis of the comparative value, including price and nonprice factors, between the supplies and services offered under the FSSI and those offered under the source(s) to be used for the purchase (Section 836 of Pub. L. 113-291).”
In addition, this proposed rule would update FAR 13.301, Governmentwide Commercial Purchase Card, to clarify that for micropurchases made using the governmentwide purchase card, purchase card holders are to follow the documentation requirements of Office of Management and Budget (OMB) Circular A–123, Management’s Responsibility for Internal Control; Appendix B, Improving the Management of Government Charge Card Programs (available at https://www.whitehouse.gov/omb/circulars_default/).
Comments on this proposed rule must be submitted no later than August 19, 2016, identified as “FAR Case 2015-015,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Ms. Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.
The following would be revised to reflect this special emergency procurement authority: (1) the definition of “simplified acquisition threshold” in FAR 2.101, Definitions; (2) paragraph (b)(1) of FAR 13.003, Policy [for simplified acquisition procedures]; (3) paragraph (b) of FAR 19.203, Relationship Among Small Business Programs; and (4) paragraph (a) of FAR 19.502-2, Total Small Business Set-Asides.
Comments on this proposed rule must be submitted no later than August 19, 2016, identified as “FAR Case 2016-004,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Ms. Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.
A proposed rule was published in 2008 that sought to move language and clauses associated with Multiple Award Schedule (MAS) contracts from GSAR part 515 to GSAR part 538, Federal Supply Schedule Contracting (see the November 2008 Federal Contracts Perspective article “GSAR Rewrite Keeps Rolling Along”). However, of all the proposed changes in that proposed rule, only paragraphs (c) and (d) of GSAR 515.209-70, Examination of Records by GSA, and its associated clause GSAR 552.215-71, Examination of Records by GSA (Multiple Award Schedules), have been retained in the proposed rule that was published in 2014 and would consolidate all MAS provisions and clauses together in GSAR part 538 and GSAR 552.238 (as proposed paragraph (d)(9) of GSAR 538.273, FSS Solicitation Provisions and Contract Clauses, and GSAR 552.238-94, Examination of Records by GSA Federal Supply Schedules, respectively) (see the October 2014 Federal Contracts Perspective article “GSA to Update GSAR FSS Provisions/Clauses”). The remaining MAS provisions and clauses will be retained in GSAM part 515 and GSAR 552.215 until this GSAR part 538 rule is finalized.
A proposed rule was published in 2008 to update GSAM part 517 (see the July 2008 Federal Contracts Perspective article “GSAR Undergoing Rewrite”). Though no comments were submitted in response to the proposed rule, no action was taken to finalize it. In 2015, a second proposed rule was published because of additional edits to GSAR part 517 and the length of time since 2008. No comments were submitted in response to the second proposed rule, but the following proposals in the second rule are not adopted in the final rule:
This final rule amends GSAR subpart 538.70 and GSAR 552.238-78, Scope of Contract (Eligible Ordering Activities), to reflect the expansion of the FSS as authorized by these statutes. In addition, GSAR 552.238-76, Definition (Federal Supply Schedules) – Recovery Purchasing, and GSAR 552.238-80, Use of Federal Supply Schedule Contracts by Certain Entities – Recovery Purchasing, are removed.
Two respondents submitted comments on the proposed rule, and several editorial changes were made in response. For more on the proposed rule, see the May 2014 Federal Contracts Perspective article “GSA Expands Uses of Industrial Funding Fee.”
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