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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


JANUARY 2001
Vol. II, No. 1

CONTENTS

FAC 97-21 Implements Widely Opposed "Blacklisting" Regulations
Proposed FAR Changes on High Tech Employees
MMAS, Profit Incentives Revised in DFARS
OMB Issues Late Payment Penalties on Cost-Type Services
Prompt Payment Interest Rate Set at 6 3/8%
DOD Establishes "Share A-76!" Web Site
IT Accessibility Standards Published



FAC 97-21 Implements "Blacklisting" Regulations,
Widely Opposed by Industry and Agencies

On December 20, 2000, the Federal Acquisition Regulation (FAR) Council published Federal Acquisition Circular (FAC) 97-21 implementing new contractor responsibility rules requiring contracting officers to consider an offeror's compliance with tax, labor, employment, environmental, antitrust, and consumer protection laws when determining if the offeror is responsible enough for the contract award. The new rules, commonly referred to as "the blacklisting regulations," were opposed by industry groups such as the Chamber of Commerce and the National Association of Manufacturers, government agencies such as the Department of Defense (DOD) and the General Services Administration (GSA), and a host of congressmen and senators. The new rules were drafted in response to a pledge made in 1997 by Vice President Gore to the AFL-CIO, and they go into effect January 19, 2001, the last day of the Clinton administration.

A proposed rule was published July 9, 1999, and over 1,500 comments were submitted, many saying the proposed rule was vague and subjective. As a result, some additional guidance was provided in another proposed rule published June 30, 2000 (see the August 2000 Federal Contracts Perspective article "Cost or Pricing Data Threshold of $550,000 Proposed"). This proposed rule produced 300 comments. However, the final rule is little changed from the June 30, 2000, version.

The crux of the new rule is in the changes to FAR Part 9, Contractor Qualifications, specifically FAR 9.104, Standards. Paragraph (d) of FAR 9.104-1, General Standards, had required contractors to have "a satisfactory record of integrity and business ethics." To the end of that requirement is now added "including satisfactory compliance with the law including tax laws, labor and employment laws, environmental laws, antitrust laws, and consumer protection laws." (EDITOR'S NOTE: In the introductory material to FAC 97-21, the FAR Council states that it removed the word "federal" from "satisfactory compliance with federal laws" in order to allow the contracting officer to consider the offeror's compliance with state, local, and foreign laws!)

A new paragraph (c), Integrity and Ethics, is added to FAR 9.104-3, Application of Standards (paragraphs (c) and (d) are redesignated as paragraphs (d) and (e)). It requires contracting officers to "consider all relevant credible information," and recommends that contracting officers give "the greatest weight to violations of laws that have been adjudicated within the last three years preceding the offer. Normally, a single violation of law will not give rise to a determination of nonresponsibility, but evidence of repeated, pervasive, or significant violations of the law may indicate an unsatisfactory record of integrity and business ethics."

Paragraph (c) continues with a hierarchy of information to be considered:

"Also, contracting officers may consider other relevant information such as civil or administrative complaints or similar actions filed by or on behalf of a federal agency, board or commission, if such action reflects an adjudicated determination by the agency."

In addition, a new certification is added to FAR 52.209-5, Certification Regarding Debarment, Suspension, Proposed Debarment, and Other Responsibility Matters, and FAR 52.212-3, Offeror Representations and Certifications -- Commercial Items, which require an offeror to certify whether, in the previous three years, it has been convicted of any of the above felonies, had any adverse federal court judgments in civil cases, or been found by an administrative body to have violated any of the laws listed above. If the offeror responds affirmatively, it must provide additional information if requested by the contracting officer.

Finally, FAC 97-21 contains two other changes related to these:

EDITOR'S NOTE: Look for President-elect George W. Bush to review this FAC when he takes office.



Proposed FAR Changes on High Tech Employees

Despite the holidays and the impending departure of the Clinton administration (because of the impending departure?), there were several fairly significant proposed FAR changes:



MMAS, Profit Incentives Revised in DFARS

DOD was busy making last-minute changes to the DFARS before the new administration takes office, issuing five final rules and one interim rule:



OMB Imposes Late Payment Penalties on Cost-Type Services

In 1982, Congress enacted the Prompt Payment Act (PPA) to require federal agencies to pay their bills in a timely manner, to pay interest penalties when payments are made late, and to take discounts only when payments are made by the discount date. The Office of Management and Budget (OMB) has codified the provisions of the PPA in Title 5 of the Code of Federal Regulations (CFR), Part 1315, Prompt Payment.

Interim payments under cost-reimbursement service contracts had not been subject to PPA interest penalties. However, Section 1010 of the National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398) provides that "the head of an agency acquiring services from a business concern under a cost-reimbursement contract requiring interim payments who does not pay the concern a required interim payment by the date that is 30 days after the date of the receipt of a proper invoice shall pay an interest penalty to the concern on the amount of the payment due." To comply with Section 1010, OMB is amending its PPA regulations by adding Section 1315.20, Application of Section 1010 of the National Defense Authorization Act for Fiscal Year 2001, to require agencies to pay an interest penalty whenever they make an interim payment under a cost-reimbursement contract for services more than 30 days after the agency receives a proper invoice for payment from the contractor.

Because Section 1010 goes into effect December 15, 2000, the provisions of Section 1315.20 apply to interim payment requests received under cost-reimbursement service contracts awarded on or after December 15, 2000. Agencies may apply Section 1315.20 provisions to interim payment requests received under cost-reimbursement service contracts awarded before December 15, 2000, but may not pay interest for any interest for any delay in payment that occurred before December 15, 2000.

EDITOR'S NOTE: Copies of Section 1315 and other information pertaining to the PPA are available from the Prompt Payment web site at http://www.fms.treas.gov/prompt/index.html. Copies are also available from the Financial Management Service, Cash Management Policy and Planning Division, 401 14th Street, SW, Washington, DC 20227.



Prompt Payment Interest Rate Set at 6 3/8%

The Department of Treasury has established 6 3/8% (6.375%) as the interest rate for the computation of payments made between January 1 and June 30, 2001, under the PPA and the Contracts Disputes Act. This rate is also used in facilities capital cost of money calculations. The interest rate for the prior six-month period (July 1, 2000 -- December 31, 2000) was 7 1/4%. The interest rate for January 1, 2000, through June 30, 2000, was 6 3/4% (6.75%).



DOD Establishes "Share A-76!" Web Site

On December 1, 2000, DOD established a web site "SHARE A-76!" to provide information on competitions conducted under OMB Circular A-76, Performance of Commercial Activities. The web site is at http://emissary.acq.osd.mil/inst/share.nsf, and it is intended to be "a tool to deliver on-demand information that users may need to do their jobs or are interested in from an educational standpoint." The web site provides public laws, official policy, OMB and DOD updates, handbooks and other reference materials, best practices, lessons learned, and other resources related to A-76 cost comparisons. Keyword searches can be conducted of more than 35 A-76 sites, including the FAR and the General Accounting Office (GAO).



IT Accessibility Standards Published

On December 21, 2000, the Architectural and Transportation Barriers Compliance Board issued final accessibility standards for electronic and information technology covered by Section 508 of the Rehabilitation Act of 1973, as amended by the Rehabilitation Act Amendments of 1998. Section 508 requires federal agencies to develop, procure, maintain, and use electronic and information technology that allows federal employees and members of the public with disabilities to have access to information and data that is comparable to the access to information and data by those who are not individuals with disabilities, unless it would be an undue burden on the agency. The standards, which are in Title 36 of the Code of Federal Regulations (CFR), Part 1194, Electronic and Information Technology Accessibility Standards, go into effect six months from their publication -- June 21, 2001. After that date, individuals with disabilities will have the right to file complaints against agencies that procured noncompliant electronic and information technology. In addition, the FAR must be revised by that date to reflect the standards, and each agency must revise its policies and directives accordingly.

The standards cover various products, including computers, software, and electronic office equipment in the federal sector. Specific criteria covered controls, keyboards, and keypads; software applications and operating systems (non-embedded); web-based information or applications; telecommunications functions; video or multi-media products; and information kiosks and transaction machines.

Agencies are required to acquire compliant products "when such products are available in the commercial marketplace or when such products are developed in response to a government solicitation. Agencies cannot claim a product as a whole is not commercially available because no product in the marketplace meets all the standards. If products are commercially available that meet some but not all of the standards, the agency must procure the product that best meets the standards." Also, the standards apply to "electronic and information technology developed, procured, maintained, or used by agencies directly or used by a contractor under a contract with an agency which requires the use of such product, or requires the use, to a significant extent, of such product in the performance of a service or the furnishing of a product."

Exempt from coverage is "any electronic and information technology operated by agencies, the function, operation, or use of which involves intelligence activities, cryptologic activities related to national security, command and control of military forces, equipment that is an integral part of a weapon or weapons system, or systems which are critical to the direct fulfillment of military or intelligence missions." Also exempt is "electronic and information technology that is acquired by a contractor incidental to a contract."

Copyright 2001 by Panoptic Enterprises. All Rights Reserved.

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