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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


March 2018
Vol. XIX, No. 3
[pdf version]

CONTENTS


CAAC Authorizes Deviation Increasing Simplified Acquisition and Micro-Purchase Thresholds
Unenforceable Commercial Terms Addressed in GSAR
DOD Seeks Comments on “PALT” Definition
FFP Cost or Pricing Data Exemption Clarified
Phase I of VAAR Update Finalized



CAAC Authorizes Deviation Increasing
Simplified Acquisition and Micro-Purchase Thresholds

The Civilian Agency Acquisition Council (CAAC) has issued a memorandum to all civilian agencies (except the National Aeronautics and Space Administration, which is a member of the Defense Acquisition Regulations Council [DAR Council]) authorizing them to issue a class deviation from the Federal Acquisition Regulation (FAR) to increase the micro-purchase threshold from $3,500 to $10,000, and the simplified acquisition threshold from $150,000 to $250,000. This is in response to Sections 806 and 805, respectively, of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91), which made the changes to the thresholds. (For more on the procurement-related provisions in Public Law 115-91, see the January 2018 Federal Contracts Perspective article “2018 Defense Authorization Act Increases Simplified Acquisition, Micro-Purchase Thresholds.”)

Attachment A of the memorandum highlights the appropriate FAR sections needing changes to implement the increased thresholds. The following are the FAR sections affected by the change in the micro-purchase threshold:

The following are the FAR sections affected by the change in the simplfied acquisition threshold:

Also, Attachment A includes the changes to the FAR 2.101 definitions of the micro-purchase and simplified acquisition thresholds that were made by Section 816, Amendments to Special Emergency Procurement Authority, and Section 1641, Special Emergency Procurement Authority to Facilitate the Defense Against or Recovery from a Cyber Attack, of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328), to Title 41 of the U.S. Code, Section 1903, Special Emergency Procurement Authority, paragraph (a), Authority (41 USC 1903(a)), but had not yet been officially incorporated into FAR 2.101. In italics are the changes made by Section 1641 (which added the word “cyber”) and Section 816 (all the rest) to paragraph (3) of the FAR 2.101 “micro-purchase threshold” definition and paragraph (a) of the FAR 2.101 “simplified acquisition threshold” definition:

For acquisitions of supplies or services that, as determined by the head of the agency, are to be used to support a contingency operation; to facilitate defense against or recovery from cyber, nuclear, biological, chemical or radiological attack; to support a request from the Secretary of State or the Administrator of the United States Agency for International Development to facilitate provision of international disaster assistance pursuant to 22 USC 2292 et seq.; or to support response to an emergency or major disaster (42 USC 5122)...

However, be aware that the micro-purchase thresholds are unchanged for: (1) acquisitions of construction (it remains $2,000); (2) acquisitions for services ($2,500); (3) construction contracts awarded and performed, or purchase to be made, inside the United States to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical or radiological attack ($20,000); and (4) construction contracts awarded and performed, or purchase to be made, outside the United States to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack ($30,000). This is because these thresholds are governed by other statutes (including 41 USC 1903(b)).

Similarly, the simplified acquisition thresholds are unchanged for: (1) acquisitions for supplies of services awarded and performed, or purchase to be made, inside the United States to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack ($750,000); and (4) acquisitions for supplies of services awarded and performed, or purchase to be made, outside the United States to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical or radiological attack ($1,500,000). Again, this is because these thresholds are governed by 41 USC 1903(b).

In addition, Attachment A includes as new paragraph (4) of the FAR 2.101 “micro-purchase threshold” definition the changes made by Section 217 of Public Law 114-328, Increased Micro-Purchase Threshold for Research Programs and Entities, which increased the threshold for institutions of higher education, related or affiliated nonprofit entities, nonprofit research organizations, and independent research institutes to “$10,000 or a higher threshold, as determined appropriate by the head of the agency and consistent with clean audit findings under 31 USC chapter 75, Requirements for Single Audits; an internal institutional risk assessment; or state law.”

Finally, the FAR 2.101 definition of “simplified acquisition threshold” for “acquisitions of supplies or services that, as determined by the head of the agency, are to be used to support a humanitarian or peacekeeping operation (10 USC 2302)” is increased from $300,000 to $500,000 for any contract to be awarded and performed, or purchase to be made, outside the United States. This is because this particular threshold is based on 41 USC 153, which states, “in the case of a contract to be awarded and performed, or purchase to be made, outside the United States in support of a humanitarian or peacekeeping operation, the term means an amount equal to two times the amount specified for that term in section 134 of this title.”

EDITOR’S NOTE: Section 821 of Public Law 114-328, Increased Micro-Purchase Threshold Applicable to Department of Defense Procurements, amended 10 USC 2338, Micro-Purchase Threshold, to increase the micro-purchase threshold for Department of Defense (DOD) acquisitions from $3,500 to $5,000 (“notwithstanding subsection (a) of section 1902 of title 41 [41 USC 1902, Procedures Applicable to Purchases Below Micro-Purchase Threshold], the micro-purchase threshold for the Department of Defense for purposes of such section is $5,000”). Though Section 806 of Public Law 115-91 increased the micro-purchase threshold by amending 41 USC 1902 (“by striking ‘$3,000’ and inserting ‘$10,000’”), and the intention was for the $10,000 threshold to apply throughout the government, the Director of Defense Pricing/Defense Procurement and Acquisition Policy issued a memorandum alerting the DOD acquisition community that DOD’s micro-purchase threshold remains $5,000 because “Section 806 did not repeal 10 USC 2338” (emphasis in original). This is an example of poor legislative drafting – this shows why it is preferable to define a term once in the U.S. Code and then refer to that definition when citing that term elsewhere instead of scattering definitions throughout the U.S. Code and hoping they don’t conflict or contradict each other.

For more on the acquisition-related provisions of Public Law 114-328, see the January 2017 Federal Contracts Perspective article “2017 Defense Authorization Act Increases Micro-Purchase Threshold, Extends SBIR/STTR.” For more on the DOD memorandum, see the February 2018 Federal Contracts Perspective article “DOD Provides Guidance on Commercial Item Procurement.”



Unenforceable Commercial Terms Addressed in GSAR

The General Services Administration (GSA) is amending the GSA Acquisition Regulation (GSAR) to address common commercial supplier agreement terms that are inconsistent with or create ambiguity with federal law.

Standard commercial supplier agreements (such as license agreements, terms of service [TOS], End User License Agreements [EULA], and terms of sale or purchase) contain terms and conditions that make sense when the purchaser is a private party but are inappropriate when the purchaser is the federal government. Discrepancies between commercial supplier agreements and federal law or the government’s needs create recurrent points of inconsistency. As a result, industry and government representatives must spend significant time and resources negotiating and tailoring commercial supplier agreements to comply with federal law and to ensure both parties have agreement on the contract terms. Explicitly addressing common unenforceable terms eliminates the need for negotiation on these identified terms.

To ameliorate this situation, GSA is revising the GSAR as follows:

A proposed rule was published in May 2016, and two respondents submitted comments. In response to the comments, the following changes are made to the final rule:

In addition, several editorial corrections and changes are made to the final rule.

For more on the proposed rule, see the June 2016 Federal Contracts Perspective article “GSA Addresses Unenforceable Supplier Terms.”



DOD Seeks Comments on “PALT” Definition

The Department of Defense (DOD) is seeking comments on a proposed definition for “Procurement Acquisition Lead Time” (PALT) that will apply DOD-wide and on DOD’s plan for measuring and publicly reporting data on PALT for DOD contracts and task orders above the simplified acquisition threshold (now $250,000 – see above article).

Section 886 of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91) requires DOD to “develop, make available for public comment, and finalize – (1) a definition of the term ‘Procurement Administrative Lead Time’ or ‘PALT’, to be applied Department of Defense-wide, that describes the amount of time from the date on which a solicitation is issued to the date of an initial award of a contract or task order of the Department of Defense; and (2) a plan for measuring and publicly reporting data on PALT for Department of Defense contracts and task orders above the simplified acquisition threshold.”

DOD is proposing to define PALT as “the time between the date on which the initial solicitation for a contract or task order of the Department of Defense is issued and the date of the award of the contract or task order.”

DOD plans to use Federal Procurement Data System – Next Generation (FPDS-NG), the authoritative source for government-wide contract award data, to measure PALT and make PALT data available to the public. This would require the addition of a new data field that reflects the PALT definition. Once the FPDS-NG system is updated (estimated to be completed in fiscal year 2019), the public will be able to utilize FPDS-NG to obtain the PALT information for any contract or task order issued by the DOD that is valued above the simplified acquisition threshold.

The public is invited to submit comments on this proposed definition and the plan as instructed no later than March 12, 2018, identified as “DARS-2018-0005,” by using either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail to: Defense Procurement and Acquisition Policy, Attn: Greg Snyder, 3060 Defense Pentagon, Room 5E621, Washington, DC 20301-3060.



FFP Cost or Pricing Data Exemption Clarified

The Cost Accounting Standards Board (CASB) is issuing a final rule revising the exemption from the Cost Accounting Standards (CAS) for firm-fixed-price (FFP) contracts and subcontracts awarded on the basis of adequate price competition without submission of cost or pricing data by adding the word “certified” before “cost or pricing data.”

In Title 48 of the Code of Federal Regulations (CFR), section 9903.201-1, CAS Applicability, paragraph (b) lists nine categories of contracts and subcontracts that are exempt from all CAS requirements. The following is the text of subparagraph (b)(15): “Firm-fixed-price contracts or subcontracts awarded on the basis of adequate price competition without submission of cost or pricing data.” However, Federal Acquisition Circular (FAC) 2005-45 revised the definition of “cost or pricing data” to include “certified cost or pricing data” and “data other than certified cost or pricing data” (see the September 2010 Federal Contracts Perspective article “Federal Acquisition-Related Thresholds Adjusted for Inflation”). Because the CASB believes this causes confusion over the applicability of the CAS to FFP contracts or subcontracts awarded on the basis of adequate price competition, the CASB is adding the word “certified” to “cost or pricing data in 48 CFR 9903.201-1(b)(15).



Phase I of VAAR Update Finalized

The Department of Veterans Affairs (VA) is issuing the first of several final rules that will conduct housekeeping on the VA Acquisition Regulation (VAAR) to: revise or remove any policy that has been superseded by changes in the Federal Acquisition Regulation (FAR); remove any procedural guidance that is internal to the VA; incorporate new regulations and policies; correct inconsistencies within the VAAR; remove redundant and duplicate material already covered by the FAR; delete outdated material or information; and renumber VAAR text, clauses, and provisions to conform to the FAR format, numbering, and arrangement.

Over time, acquisition regulations become outdated and require updating to incorporate additional policies, solicitation provisions, and contract clauses that implement and supplement the FAR to satisfy VA mission needs, and to incorporate changes in dollar and approval thresholds, definitions, and VA position titles and offices.

So far, three proposed rules have been published that would incrementally perform this task, with each increment revising the VAAR parts that address related topics.

This finalizes, with several technical non-substantive changes, the first of the proposed rules (see the April 2017 Federal Contracts Perspective article “Revision of VAAR to Adhere to FAR Proposed”). Besides conducting clean-up and maintenance, the final rule does the following:

For more on the second proposed rule, see the June 2017 Federal Contracts Perspective article “Phase Two of VAAR Revision Proposed”; for more on the third proposed rule, see the February 2018 Federal Contracts Perspective article “VAAR to be Revised to Align with the FAR.”





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