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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


January 2017
Vol. XVIII, No. 1
[pdf version]

CONTENTS


2017 Defense Authorization Act Increases Micro-Purchase Threshold, Extends SBIR/STTR
FAC 2005-93 Puts FAC 2005-90 Fair Pay Rule on Hold
FAC 2005-94 Addresses Subcontractor Payments, Privacy
DOD Cleans House for New Administration
Multiple-Award Contract Set-Asides to be Revised
NASA Adds Financial Reporting of Property Requirement
SBA Allows Credit for Lower Tier Subcontracting
Mileage Reimbursement Set at 53.5¢/Mile for Autos
OFPP Seeks Comments on Anti-Trafficking Best Practices
OMB Adjusts Civil Penalties for Inflation



2017 Defense Authorization Act Increases
Micro-Purchase Threshold, Extends SBIR/STTR

On December 23, President Obama signed into law the $611 billion National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328). While Title VIII, Acquisition Policy, Acquisition Management, and Related Matters (Sections 801-899A), contains the sections that are usually the significant ones for the defense and civilian acquisition communities, a few snuck out of Title VIII and are found in other titles (Title II, Research, Development, Test, and Evaluation; and Title XVIII, Matters Relating to Small Business Procurement).



FAC 2005-93 Puts FAC 2005-90 Fair Pay Rule on Hold

In response to the preliminary injunction issued by the District Court for the Eastern District of Texas suspending implementation of the parts of Executive Order (EO) 13673, Fair Pay and Safe Workplaces, and its corresponding changes to the Federal Acquisition Regulation (FAR) in Federal Acquisition Circular (FAC) 2005-90 that impose new reporting requirements regarding labor law violations. FAC 2005-93 includes a rule that suspends the changes made by FAC 2005-90 to FAR subpart 9.1, Responsible Prospective Contractors; FAR 17.207, Exercise of Options; FAR part 22, Application of Labor Laws to Government Acquisitions; FAR subpart 42.15, Contractor Performance Information; FAR 52.204-8, Annual Representations and Certifications; FAR 52.212-3, Offeror Representations and Certifications – Commercial Items; FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders – Commercial Items; FAR 52.222-57, Representation Regarding Compliance with Labor Laws (Executive Order 13673); FAR 52.222-58, Subcontractor Responsibility Matters Regarding Compliance with Labor Laws (Executive Order 13673); FAR 52.222-59, Compliance with Labor Laws (Executive Order 13673); FAR 52.222-60, Paycheck Transparency (Executive Order 13673); FAR 52.222-61, Arbitration of Contractor Employee Claims (Executive Order 13673); and FAR 52.244-6, Subcontracts for Commercial Items.

The FAC 2005-93 rule adds the following note to each paragraph changed by FAC 2005-90 that addresses fair pay and safe workplaces: “Note to paragraph _____: By a court order issued on October 24, 2016, this paragraph ____ is enjoined indefinitely as of the date of the order. The enjoined paragraph will become effective immediately if the court terminates the injunction. At that time, DOD, GSA, and NASA will publish a document in the Federal Register advising the public of the termination of the injunction.”

For more on EO 13673, see the September 2014 Federal Contracts Perspective article “Obama Issues Order Requiring That Contractors Provide ‘Fair Pay and Safe Workplaces’.” For more on FAC 2005-90, see the September 2016 Federal Contracts Perspective article “FAC 2005-90 Establishes ‘Fair Pay and Safe Workplaces’ Representation.” For more on the preliminary injunction, see the November 2016 Federal Contracts Perspective article “Executive Order 13673, Fair Pay and Safe Workplaces, Put on Hold by Court.”

EDITOR’S NOTE: The FAC 2005-90 fair pay rule also implements the requirements in Section 5 of the EO, which addresses paycheck transparency. Section 5(a) of the EO requires contractors and subcontractors to provide wage statements to covered workers, giving them information on the hours they worked, overtime hours pay, and any additions to or deductions made from their pay. Section 5(b) requires contractors and subcontractors to provide a document to individuals performing work as independent contractors informing them of their status as independent contractors. These requirements are implemented in FAR 22.2005, Paycheck Transparency, and FAR 52.222-60. The court order does not prohibit the implementation of Section 5, stating “the court does not find that plaintiffs have established a substantial likelihood of success on their claims regarding the ‘paycheck transparency requirement’ and have failed to establish that they will suffer irreparable harm as to the implementation of those provisions...Therefore, the court declines to enjoin enforcement of the paycheck provisions.” So the paycheck transparency language in FAR 22.2005, FAR 52.222-60, and added elsewhere in the FAR by the FAC 2005-90 final rule take effect January 1, 2017.


In addition to the suspension of FAC 2005-90, FAC 2005-93 includes an interim rule amending the FAR to conform to the Department of Labor (DOL) rule implementing EO 13706, Establishing Paid Sick Leave for Federal Contractors, which requires federal contractors and subcontractors to provide their employees with up to seven days of paid sick leave annually, including paid leave allowing for family care (for more on EO 13706, see the October 2015 Federal Contracts Perspective article “President Orders Paid Sick Leave for Employees of Federal Contractors”; for more on the DOL implementation of EO 13706, see the October 2016 Federal Contracts Perspective article “Labor Finalizes Rule on Contractors’ Paid Sick Leave”).

This interim rule adds FAR subpart 22.21, Establishing Paid Sick Leave for Federal Contractors, and FAR 52.222-62, Paid Sick Leave Under Executive Order 13706. The significant portions of the interim rule are:

Comments on this interim rule must be submitted no later than February 14, 2017, identified as “FAC 2005-93, FAR Case 2017-001,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Ms. Flowers, 1800 F Street NW, 2nd floor, Washington, DC 20405.



FAC 2005-94 Addresses Subcontractor Payments, Privacy

Four days after the issuance of FAC 2005-93 (see the above article), the FAR Council issued FAC 2005-94, which addresses late or reduced payments to small business subcontractors, and training for employees who require access to a government system of records or handle personally identifiable information (PII).



DOD Cleans House for New Administration

As the Department of Defense (DOD) prepares for the new secretaries, assistant secretaries, deputy assistant secretaries, and others taking over for the Trump administration, DOD conducted some housecleaning by finalizing a proposed rule, issuing a final rule recognizing Estonia as a “qualifying country,” a proposed rule that would implement a section of last year’s National Defense Authorization Act (NDAA), a class deviation clarifying an earlier final rule, and a memorandum providing guidance on the evaluation of risk when negotiating contract profit or fee.



Multiple-Award Contract Set-Asides to be Revised

The FAR Council has published a proposed rule that would implement regulatory changes made by the Small Business Administration (SBA) that provide government-wide policy for partial set-asides and reserves, and setting aside orders for small business concerns under multiple-award contracts.

Section 1331 of the Small Business Jobs Act of 2010 (Public Law 111-240 – see the October 2010 Federal Contracts Perspective article “Parity Among Small Business Programs Mandated by Statute”) provided authority for three acquisition techniques to facilitate contracting with small businesses on multiple-award contracts: (1) setting aside part or parts of the requirement for small businesses; (2) reserving one or more contract awards for small business concerns under full and open multiple-award procurements; and (3) setting aside orders placed against multiple-award contracts, “notwithstanding the fair opportunity requirements” (see paragraph (b)(1) of FAR 16.505, Ordering [under indefinite-delivery contracts], which states “the contracting officer must provide each awardee a fair opportunity to be considered for each order exceeding $3,500 issued under multiple delivery-order contracts or multiple task-order contracts...”).

FAC 2005-54 included an interim rule that provided federal agencies with guidance they could use to implement Section 1331 while SBA completed the drafting and coordination of a rule that would provide specific guidance (see the December 2011 Federal Contracts Perspective article “FAC 2005-54 Permits Small Business Set-Asides For Multiple-Award Contracts”).

SBA eventually issued its final regulations implementing Section 1331 in 2013 (see the November 2013 Federal Contracts Perspective article “SBA Issues Rules for Setting Aside Task Order Contracts, Contract Consolidation, and Bundling”).

This proposed rule is based on the SBA’s regulations and comments on the FAC 2005-54 interim rule (though many of the comments on the interim rule were rendered moot with the issuance of the SBA regulations). The primary revisions are in FAR subpart 19.5, Set-Asides for Small Business, which this proposed rule would rename “Small Business Total Set-Asides, Partial Set-Asides, and Reserves”:

Also, the proposed rule would provide new guidance for assigning North American Industry Classification System (NAICS) codes in solicitations that will result in multiple-award contracts. FAR 19.102, Small Business Size Standards and North American Industry Classification System Codes (currently “Size Standards”), would give contracting officers the discretion to: (1) assign one NAICS code (and corresponding size standard) to the entire solicitation; or (2) when the procurement can be divided into portions or categories, assign each a NAICS code and corresponding size standard that best describes the principal purpose attributed to the part or category.

In addition, the limitations on subcontracting and the nonmanufacturer rule would be consolidated in FAR 19.505, Performance of Work. Limitations on subcontracting are the minimum percentages of work the prime small business contractor must itself perform under a contract awarded through a set-aside. The nonmanufacturer rule requires a concern that proposes to furnish a product it did not manufacture or produce under a small business set-aside to have fewer than 500 employees and provide the product of a small business manufacturer. A new clause FAR 52.219-YY, Nonmanufacturer Rule, would be added.

Finally, changes would be made throughout the FAR to reflect these changes and the SBA’s revised regulations, particularly in FAR subpart 16.5, Indefinite-Delivery Contracts; FAR subpart 19.3, Representations and Rerepresentations; FAR subpart 19.8, Contracting with the Small Business Administration (The 8(a) Program); FAR subpart 19.13, Historically Underutilized Business Zone (HUBZone) Program; FAR subpart 19.14, Service-Disabled Veteran-Owned Small Business Procurement Program; and FAR subpart 19.15, Women-Owned Small Business (WOSB) Program.

Comments on this proposed rule must be submitted no later than January 30, 2017, identified as “FAR Case 2014-002,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: General Services Administration, Regulatory Secretariat Division (MVCB), ATTN: Ms. Flowers, 1800 F Street NW, 2nd floor, Washington, DC 20405.



NASA Adds Financial Reporting of Property Requirement

The National Aeronautics and Space Administration (NASA) issued two final rules amending the NASA FAR Supplement (NFS) and one proposed rule during December.



SBA ALLOWS CREDIT FOR LOWER TIER SUBCONTRACTING

The Small Business Administration (SBA) is amending its regulations to give a prime contractor credit towards its subcontracting plan goals for awards made to small business concerns at any tier under the contract.

When a prime contractor awards a subcontract to a firm that firm is generally considered a first tier subcontractor. That subcontractor may award a subcontract, which would be considered a second tier subcontract, and so on. However, until this final rule, a prime contractor could not receive credit towards its small business subcontracting plan goals for awards made below the first tier (with a few exceptions).

Section 1614 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2014 (Public Law 113-66) amended the Small Business Act to provide that where a prime contractor has a subcontracting plan for a specific prime contract with an agency, the prime contractor will receive credit towards its subcontracting plan goals for awards made to small business concerns at any tier under the contract. However, the prime contractor can only take credit for awards by large business subcontractors with subcontracting plans to lower-tier small business subcontractors because only those large business subcontractors are required to report awards to small business subcontractors and the consequent attainment of their small business subcontracting goals. (EDITOR’S NOTE: The requirement to provide a subcontracting plan does not apply to small businesses or to contracts less than $700,000 [$1,500,000 for construction].)

The following are the significant changes being made by SBA to its regulations in Title 13 of the Code of Federal Regulations, Part 121, Small Business Size Standards, and Part 125, Government Contracting Programs, to implement Section 1614:



Mileage Reimbursement Set at 53.5¢/Mile for Autos

The General Services Administration (GSA) is reducing the mileage reimbursement rate for use of a privately owned automobile on official travel from 54¢ per mile to 53.5¢ per mile, and the rate for use of a motorcycle on official travel from 51¢ per mile to 50.5¢ per mile. The rate for use of a privately owned aircraft is reduced from $1.19 per mile to $1.15 per mile. These revised rates are effective for travel performed on or after January 1, 2017, through December 31, 2017. The reduced reimbursement rates reflect lower fuel prices.



OFPP SEEKS COMMENTS ON ANTI-TRAFFICKING BEST PRACTICES

The Office of Federal Procurement Policy (OFPP) (an office within the Office of Management and Budget [OMB]) is seeking comments on a draft memorandum it has developed in coordination with the Office to Monitor and Combat Trafficking in Persons in the Department of State (DOS) and the Department of Labor (DOL) to address anti-trafficking risk management best practices and mitigation considerations. This guidance is designed to help an agency determine if a contractor is taking adequate steps to meet its anti-trafficking responsibilities under Executive Order 13627, Strengthening Protections Against Trafficking in Persons in Federal Contracts, and FAR subpart 22.17, Combating Trafficking in Persons. The memorandum is available at https://obamawhitehouse.archives.gov/sites/default/files/omb/memoranda/2017/draft-anti_trafficking_0.pdf. (For more on Executive Order 13627, see the October 2012 Federal Contracts Perspective article “Order Strengthens Trafficking Protections”; for more on the subsequent amendment of FAR subpart 22.17, see the February 2015 Federal Contracts Perspective article “Trafficking in Persons, Uncompensated Overtime Subjects of FAC 2005-80.”)

“OMB, DOS, and DOL (‘Co-Chairs’) expect contractors to be proactive and forthcoming in their efforts to address and reduce the risk of human trafficking in their operations and supply chains. At the same time, OMB, DOS, and DOL recognize that not all contractors are similarly situated and some, such as those with large supply chains, may face more challenges than others in meeting their responsibilities. In addition, not all risks are equal in their impact. To this end, the Co-Chairs developed a set of best practices and mitigation considerations to help contracting officers determine if a contractor is taking adequate steps to meet its anti-trafficking responsibilities under the FAR. Also, to promote clarity and consistency in the implementation of anti-trafficking requirements, the Co-Chairs developed responses to a number of frequently asked questions posed by stakeholders following the publication of the final FAR rule.

“The Co-Chairs encourage feedback on the draft guidance. Comments are especially welcome on identified best practices and mitigating steps as well as any additional information that may be relevant to helping a contracting officer determine if an existing federal contractor who reports a trafficking incident has taken reasonable actions or if a prospective contractor is able to address trafficking challenges where the agency is planning an acquisition in an environment that is at high risk of trafficking.”

Comments on the draft memorandum must be submitted no later than January 9, 2017, identified as “Proposed Memo on Anti-Trafficking,” by either of the following methods: (1) email: OFPPData@omb.eop.gov; or (2) fax: 202-395-5105.



OMB ADJUSTS CIVIL PENALTIES FOR INFLATION

The Office of Management and Budget is adjusting civil monetary penalties, including several that are acquisition-related, to comply with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Section 701 of Public Law 114-74), which requires annual inflation adjustments to civil penalties.

The civil penalties are adjusted by 1.01636 to account for inflation during 2016.

The following are the adjustments made to acquisition-related civil monetary penalties:





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