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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


February 2018
Vol. XIX, No. 2
[pdf version]

CONTENTS


GSA Authorizes Order-Level Materials on Federal Supply Schedule Orders
SBA Proposes SDVOSB Ownership and Control Rules
VAAR to be Revised to Align with the FAR
FAC 2005-97 Revises Trade Agreements Thresholds
DOD Provides Guidance on Commercial Item Procurement
Mileage Reimbursement Set at 54.5¢ Per Mile for Autos



GSA Authorizes Order-Level Materials
on Federal Supply Schedule Orders

The General Services Administration (GSA) is amending the GSA Acquisition Regulation (GSAR) by adding GSAR subpart 538.72, Order-Level Materials, and GSAR 552.238-82, Special Ordering Procedures for the Acquisition of Order-Level Materials, to clarify the authority to acquire order-level materials (OLMs) when placing an individual task- or delivery-order against a Federal Supply Schedule (FSS) contract or FSS blanket purchase agreement (BPA). Authorizing the acquisition of OLMs will provide the same flexibility for the FSS program that is currently authorized for other indefinite-delivery, indefinite-quantity (IDIQ) vehicles, which will reduce contract duplication and the associated administrative costs and inefficiencies. (EDITOR’S NOTE: The FSS program is commonly known as the “GSA Schedules” program or the “Multiple Award Schedule” [MAS] program; OLMs are also known as “Other Direct Costs” [ODCs].)

New GSAR 538.7200, Definitions, states that OLMs are “supplies and/or services acquired in direct support of an individual task or delivery order placed against an authorized Federal Supply Schedule (FSS) contract or FSS Blanket Purchase Agreement (BPA) , when the supplies and/or services are not known at the time of schedule contract award or FSS BPA. The prices of order-level materials are not established in the FSS contract or FSS BPA.”

Prior to 1997, it had been common practice for contracting officers issuing orders against FSS contracts to add “incidental” non-FSS items to the order for convenience – for example, adding non-FSS cables to an FSS order for computers. However, the U.S. Court of Federal Claims (COFC) ruled in ATA Defense Industries, Inc., No. 97-382C (June 27, 1997), that “it is fundamentally inconsistent with Congress’ unambiguous statutory mandate in the CICA [Competition in Contracting Act of 1984, which is Sections 2701-2753 of the Deficit Reduction Act of 1984 (Public Law 98-369)] to allow a contracting officer, when purchasing products against the FSS, to include in the purchase order ‘incidental’ products that are competitively available, unless the prices charged for these ‘incidental’ products are the product of full and open competition...The authority of an agency to purchase products against the FSS does not extend to incidentals.”

In response to the ATA Defense Industries decision, Federal Acquisition Circular (FAC) 2001-8 amended the Federal Acquisition Regulation (FAR) by adding paragraph (f) to FAR 8.402, General, to permit the addition of “items not on the Federal Supply Schedule (also referred to as open market items) to a Federal Supply Schedule blanket purchase agreement (BPA) or an individual task or delivery order only if (1) all applicable acquisition regulations have been followed (e.g., publicizing ([FAR] Part 5), competition requirements ([FAR] Part 6), acquisition of commercial items ([FAR] Part 12), contracting methods ([FAR] Parts 1314, and 15), and small business programs ([FAR] Part 19)); (2) the ordering office contracting officer has determined the price for the items not on the Federal Supply Schedule is reasonable; (3) the items are clearly labeled on the order as items not on the Federal Supply Schedule; and (4) all clauses applicable to items not on the Federal Supply Schedule are included in the order.” (EDITOR’S NOTE: For more on FAC 2001-8, see the July 2002 Federal Contracts Perspective article “FAC 2001-08 Restricts 'Incidental Items' on FSS Orders, Moves Definitions, Adds Relocation Costs.”)

The ATA Defense Industries decision has been costing GSA money. GSA assesses an “industrial funding fee” (IFF) of 0.75% of the cost of each FSS order – in essence, a 0.75% sales tax. Removing “incidentals” from FSS orders deprives GSA of 0.75% of the cost of the “incidentals” – $7,500,000 for every billion dollars that would have been spent on “incidentals” in FSS orders.

GSA has decided that it can get around the ATA Defense Industries decision by relying on Title 41 of the United States Code, Section 152, Competitive Procedures (41 USC 152), which states, “the term ‘competitive procedures’ means procedures under which an executive agency enters into a contract pursuant to full and open competition. The term also includes...(3) the procedures established by the Administrator of General Services for the multiple awards schedule program of the General Services Administration if...(B) orders and contracts under those procedures result in the lowest overall cost alternative to meet the needs of the federal government...”

The preamble to the final rule contains the logic: “GSA has long recognized the lowest overall cost alternative does not just include the actual price paid to the contractor, but also the administrative cost of conducting the acquisition. For example, GSA charges a low transactional fee for orders to be placed against a schedule and the efficiency of the simplified acquisition process translates to time and cost savings. The administrative cost to acquire similar goods or services combined with possible fees on a new contract duplicates efforts resulting in a less efficient way to acquire those goods or services.” Whether this reasoning holds up in a court if challenged remains to be seen.

GSA originally proposed four primary requirements:

Four respondents submitted comments on the proposed rule. In response, the final rule includes the following changes:

For more on the proposed rule, see the October 2016 Federal Contracts Perspective article “Acquisition of Order-Level Materials Proposed for FSS.”



SBA Proposes SDVOSB Ownership and Control Rules

The Small Business Administration (SBA) is proposing to amend its regulations at Title 13 of the Code of Federal Regulations (CFR), Part 125, Government Contracting Programs (13 CFR part 125) to implement Section 1832 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017 (Public Law 114-328), Uniformity in Service-Disabled Veteran Definitions, which standardizes the definitions for Veteran-Owned Small Businesses (VOSBs) and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). In addition, Section 1832 requires the Department of Veterans Affairs (VA) to use the regulations established by the SBA for establishing ownership and control of VOSBs and SDVOSBs. This proposed rule would establish those regulations. The VA would continue to determine whether individuals qualify as veterans or service-disabled veterans and would be responsible for verification of applicant firms.

In addition, VA proposes to remove all references to ownership and control of VOSBs and SDVOSBs in its regulations at 38 CFR part 74, Veterans Small Business Regulations, and to add and clarify certain terms and references that are currently part of the verification process.

The following are the significant changes SBA proposes to make 13 CFR part 125:

Comments on this proposed rule must be submitted no later than March 30, 2018, identified as “RIN 3245-AG85,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail, paper, disk, or CD/ROM submissions, or delivery by hand or courier: Brenda Fernandez, U.S. Small Business Administration, Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 20416.


The following are the significant changes VA proposes to make to 38 CFR part 74:

Comments on this proposed rule must be submitted no later than March 12, 2018, identified as “RIN 2900-AP97 – VA Veteran-Owned Small Business (VOSB) Verification Guidelines,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) mail or hand-delivery: Director, Regulation Policy and Management (00REG), Department of Veterans Affairs, 810 Vermont Ave. NW, Room 1063B, Washington, DC 20420; or (3) fax: (202) 273-9026.



VAAR to be Revised to Align with the FAR

Besides amending its VOSB/SDVOSB regulations (see preceding article), the VA is proposing to amend and update its VA Acquisition Regulation (VAAR) in increments to revise or remove any policy superseded by changes in the FAR, to remove procedural guidance internal to VA into the VA Acquisition Manual (VAAM), and to incorporate any new agency specific regulations or policies. These changes are intended to streamline and align the VAAR with the FAR and remove outdated and duplicative requirements. VA will rewrite the VAAR in a series of proposed rules, with each increment revising VAAR parts that address related topics.

This is the first proposed rule, and it would amend VAAR part 812, Acquisition of Commercial Items, VAAR part 813, Simplified Acquisition Procedures, and the corresponding clauses and provisions in VAAR Part 852, Solicitation Provisions and Contract Clauses, to reflect current FAR titles of parts, subparts, and sections; reflect current FAR format, numbering, and arrangement; reflect current FAR requirements and definitions; correct inconsistencies with the FAR; remove redundancies and duplicate material already covered by the FAR; and delete outdated material and information.

Comments on this proposed rule must be submitted no later than March 12, 2018, identified as “RIN 2900-AP58 – Revise and Streamline VA Acquisition Regulation to Adhere to Federal Acquisition Regulation Principles (VAAR Case 2014-V005 – Parts 812, 813),” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) mail or hand-delivery: Director, Regulation Policy and Management (00REG), Department of Veterans Affairs, 810 Vermont Ave. NW, Room 1063B, Washington, DC 20420; or (3) fax: (202) 273-9026.



FAC 2005-97 Revises Trade Agreements Thresholds

Federal Acquisition Circular (FAC) 2005-97 amends FAR subpart 25.4, Trade Agreements, other FAR sections that include trade agreements thresholds, and related provisions and clauses in FAR part 52, Solicitation Provisions and Contract Clauses, to incorporate revised thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements, as determined by the United States Trade Representative (see the January 2018 Federal Contracts Perspective article “Trade Agreements Thresholds Revised”).

Paragraph (b) of FAR 25.402, General, contains a table of all the trade agreements thresholds for supplies, services, and construction. This has been revised to reflect the new thresholds.

The following are the other sections, provisions, and clauses with revised thresholds:

Also, because the date of FAR 52.222-19 is changed, paragraph (b)(26) of FAR 52.212-5, Contract Terms and Conditions Required To Implement Statutes or Executive Orders – Commercial Items, and paragraph (b)(1)(ii) of FAR 52.213-4, Terms and Conditions – Simplified Acquisitions (Other Than Commercial Items), both of which reference FAR 52.222-19, must be revised to incorporate the new date. Finally, because of the changes made to the date of FAR 52.222-19 in FAR 52.212-5 and FAR 52.213-4, those two clauses’ dates must be changed to “(JAN 2018)” as well.



DOD Provides Guidance on Commercial Item Procurement

The Department of Defense (DOD) started 2018 with the publication of a rule implementing eight different sections of three different National Defense Authorization Acts (NDAAs) that address the procurement of commercial items. In addition, DOD reinstated North Korea as a “state sponsor of terrorism,” issued two class deviations, and published a memorandum addressing a provision of the FY 2018 NDAA.



Mileage Reimbursement Set at 54.5¢ Per Mile for Autos

The General Services Administration (GSA) is increasing the mileage reimbursement rate for use of a privately owned automobile on official travel from 53.5¢ per mile to 54.5¢ per mile, and the rate for use of a motorcycle on official travel from 50.5¢ per mile to 51.5¢ per mile. The rate for use of a privately owned aircraft is reduced from $1.15 per mile to $1.21 per mile. These revised rates are effective for travel performed on or after January 1, 2018, through December 31, 2018. The increased reimbursement rates reflect slightly higher fuel prices.





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