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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


APRIL 2001
Vol. II, No. 4

CONTENTS

OMB Memo Establishes 20% Performance-Based Contracting Goal
Angela Styles Nominated as OFPP Administrator
FAC 97-22 Effective Date Delayed
GAO to Convene Panel on Contracting Out
DOE Seeks More Changes to M&O Contracts
Labor Removes Qualified Workers Nondisplacement Reg
GAO Rules On E-Mail Timeliness
Adarand Back to Supreme Court for Third Time
DOD to Hold Meeting on Cost Measurement and Allocation
EPA Adopts "Notice-to-Proceed" Letter Contract
New Database Has Davis-Bacon Wage Determinations
Grants Info on the Internet



OMB Memo Establishes 20% Performance-Based
Contracting Goal, A-76 Use on FAIR Act Inventories

On March 9, Office of Management and Budget (OMB) Deputy Director Sean O'Keefe issued a memorandum to all heads of departments and agencies providing guidance on the development of performance plans for the Fiscal Year (FY) 2002 budget. The memorandum lists three reform initiatives: greater use of performance-based contracts; expanding the application of on-line procurement; and requiring agencies to expand the use of OMB Circular A-76, Performance of Commercial Activities, to compete jobs on their Federal Activities Inventory Reform (FAIR) Act inventories. The performance plans are due in Congress on April 3.



Angela Styles Nominated as OFPP Administrator

On March 22, President Bush nominated Angela Barbee Styles as the new Office of Federal Procurement Policy (OFPP) administrator. That post has been unfilled since Deidre Lee left to become Director of Defense Procurement in June 2000. Dr. Kenneth Oscar was then named acting OFPP administrator until he returned to the Army in January 2001 (see the July 2000 Federal Contracts Perspective article "Dr. Kenneth Oscar Named Acting Administrator of OFPP").

Styles is serving in the Bush transition team assigned to the General Services Administration (GSA) as special assistant to the commissioner of the Public Buildings Service and to the associate administrator of the Governmentwide Policy Office. Before going to GSA in January, she was an associate with the Washington law firm Miller & Chevalier, concentrating in federal legislation and government procurement law and litigation. Her specialties include cost and accounting issues, defective pricing, procurement fraud matters, contract disputes and claims, contract drafting and negotiations, and compliance matters. Her practice has increasingly focused on government contract disputes involving Cost Accounting Standards compliance, cost allowability, and allocation. She was involved in the drafting of the FAIR Act (see the article on above) and changes to the Contract Disputes Act.

Ms. Styles graduated from the University of Virginia in 1990, and received her law degree from the University of Texas Law School in 1994. Before practicing law, she was a legislative aide to Congressman Joe Barton (R-TX) and to former Governor William P. Clements in the Texas Office of State -- Federal Relations.

She must be confirmed as OFPP administrator by the Senate.



FAC 97-22 Effective Date Delayed

Federal Acquisition Circular (FAC) 97-22 became the latest victim of President Bush's January 20 directive ordering the delay for 60 days the effective date of regulations that had been published in the Federal Register but had not yet taken effect. Four of the six items in FAC 97-22 were to have taken effect March 12, but will now take effect May 11. (EDITOR'S NOTE: For more on FAC 97-22 and the president's directive, see the February 2001 Federal Contracts Dispatch articles "FAC 97-22 Addresses Definitions and Cleans House" and "President Bush Freezes New Regulations".)

FAC 97-22 was published January 10, 2001. Two of its final rules (Item 2, Applicability, Thresholds, and Waiver of Cost Accounting Standards Coverage; and Item 6, Technical Amendments) went into effect on January 10, 2001, so they were not affected by the directive. However, the other four final rules (Item 1, Definitions; Item 3, Advance Payments for Non-Commercial Items; Item 4, FAR Part 12, Acquisition of Commercial Items, and Assignment of Claims; and Item 5, Clause Flowdown -- Commercial Items) were to go into effect on March 12, 60 days after publication. Since these rules had not gone into effect, their effective date is delayed 60 days, until May 11, 2001.



GAO to Convene Panel on Contracting Out

Section 832 of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398) requires the General Accounting Office (GAO) to convene a panel of experts to study the policies and procedures governing the transfer of commercial activities performed by government personnel to a federal contractor, and to submit a report to Congress by May 1, 2002. The topics to be addressed are to include: (1) procedures for determining whether functions should continue to be performed by government personnel; (2) procedures for comparing the costs of performing functions by government personnel with the costs of performing those functions by federal contractors; (3) implementation by the Department of Defense (DOD) of the FAIR Act; and (4) procedures of DOD for public-private competitions under OMB Circular A-76 (see the related article on above).

Section 832 requires that the panel be headed by the GAO Comptroller General or a GAO official designated by the Comptroller General. The Comptroller General must appoint highly qualified and knowledgeable persons to serve on the panel, and must ensure that the following entities receive fair representation on the panel: (1) DOD; (2) private industry; (3) federal labor organizations; and (4) OMB. On December 1, 2000, GAO invited suggestions on the composition of the panel, and GAO is now reviewing the comments and nominations.

In preparing for the panel's discussions, GAO is asking for input from interested parties, including federal government agencies, federal employees or their representatives, industry groups, labor unions, and individuals. GAO is seeking comments identifying significant issues, as well as copies of materials related to these issues, including: (1) determining which functions should be performed by the government and which functions are potential candidates for outsourcing; (2) options, mechanisms, and best practices for determining how commercial activities should be performed; and (3) issues involving A-76. GAO invites comments, articles, and publications on these issues or other key topics the panel should address. Comments are requested by May 7, 2001, and may be sent by e-mail A76panel@gao.gov or in hard-copy to the General Accounting Office, Office of General Counsel, Room 7476, 441 G Street, NW, Washington, DC 20548, Attention: William T. Woods.

As the panel proceeds with its work, it will solicit public comments on relevant issues through a variety of means, including public hearings.



DOE Seeks More Changes to M&O Contracts

On March 7, Headquarters Policy Flash 2001-08 was sent to all Department of Energy (DOE) procurement directors regarding the further rewrite of the DOE Acquisition Regulation (DEAR) Part 970, DOE Management & Operating (M&O) Contracts. In it, DOE again asks its procurement directors "for your help in continuing to improve the DEAR management and operating contract coverage." DOE just published a completely rewritten DEAR Part 970 on December 22, 2000, streamlining its policies, procedures, provisions, and clauses (see the February 2001 Federal Contracts Perspective article "DOE Rewrites DEAR Part 970, Mandates Legal Management"). The new DEAR Part 970 went into effect on January 22, 2001.

DOE plans to issue a "follow-on rule to cover both substantive and administrative issues not addressed in the recent final rule." The following are some of the subject areas DOE will be reviewing:

DOE is soliciting "ideas and concerns in any subject areas." DOE is asking that comments and suggestions be accompanied by line-in/line-out changes to the affected DEAR language and the rationale for the proposed change. Comments are to be sent to Michael Righi, e-mail: Michael.L.Righi@hq.doe.gov.



Labor Removes Qualified Workers Nondisplacement Reg

In response to President Bush's Executive Order 13204 of February 17, 2001, which revoked Executive Order 12933 of October 20, 1994, on the nondisplacement of qualified workers under certain federal contracts, and directed the Secretary of Labor to promptly rescind the regulations and policies implementing Executive Order 12933, the Department of Labor (DOL) rescinded Part 9 of Title 29 of the Code of Federal Regulations (CFR), the regulations implementing Executive Order 12933, on March 23.

Executive Order 12933 required that workers on a building service contract for a public building be given the right of first refusal for employment with a successor contractor if they would otherwise lose their jobs as a result of termination of the contract.

For more on Executive Order 13204, see the March 2001 Federal Contracts Perspective article "Bush Issues Three Acquisition-Related Orders Involving Labor Issues in FAR Part 22."



GAO Rules on E-Mail Timeliness

In a protest that is believed to be the first in which the General Accounting Office (GAO) has ruled on the timeliness of e-mail transmissions, has ruled that e-mail that "enters the offeror's computer system after close of business or on a weekend or holiday and is not opened before the following business day, receipt of the notice is considered to have occurred on that business day" (International Resources Group, B-286663, January 31, 2001).

The solicitation was issued by the U.S. Agency for International Development (USAID) for technical assistance and training to improve the management of natural resources in the Central Asian Republics of Kazakhstan, Kyrgyzstan, Turkmenistan, and Uzbekistan. On Friday, September 1, 2000, the contracting officer notified International Resources Group (IRG) that it had been excluded from the competitive range. The contracting officer sent IRG the notification by e-mail shortly before midnight Eastern time, and the e-mail entered IRG's computer system at approximately 12:16 am on Saturday, September 2. The e-mail was not opened by IRG until the following business day -- Tuesday, September 5 (September 4 was Labor Day, a federal holiday). By e-mail dated September 7, IRG requested a debriefing. On September 20, having received no response from USAID, IRG reiterated its request. On September 26, USAID awarded the contract to another firm. On October 6, USAID notified the protester that it would furnish a post-award debriefing on October 12. The debriefing was held on October 12, and IRG protested to GAO on October 23.

The winning offeror, Hagler Bailly Services, Inc. (HBS), pointed out that GAO's protest regulation in paragraph (a)(2) of Section 21.2, Time of Filing, states that "protests...shall be filed not later than 10 days after the basis of protest is known or should have been known (whichever is earlier), with the exception of protests challenging a procurement conducted on the basis of competitive proposals under which a debriefing is requested and, when requested, is required." HBS further argued that a debriefing to IRG was not required because paragraph (a)(1) of FAR 15.505, Preaward Debriefing of Offerors, states that "the offeror may request a preaward debriefing by submitting a written request for debriefing to the contracting officer within 3 days after receipt of the notice of exclusion from the competition." HBS contended that IRG's request for a preaward debriefing was untimely because it was not filed until September 7, six days after IRG received notice of its exclusion from the competitive range on September 1.

GAO disagreed with that argument. "Where an e-mail notification of exclusion from the competitive range enters an offeror's computer system after close of business on a weekday or on a weekend or holiday and is not opened before the following business day, we think that for purposes of FAR 15.505(a)(1), receipt of the notice should be considered to have occurred on that business day," it states in its decision. "To construe receipt of an e-mail notification as occurring when the notification enters the offeror's computer system, even when the entry occurs outside of normal business hours, would lead to a reduction of the 3-day period for requesting a debriefing granted by the FAR to a single day when the notification is transmitted after close of business on Friday or on Saturday of a weekend followed by a Monday holiday." GAO concluded that "IRG's request for a preaward debriefing here, which was filed within 3 days after IRG received notice of its exclusion from the competitive range on September 5, was timely." GAO sustained IRG's protest and recommended that USAID reopen discussions with all offerors in the competitive range in August.



Adarand Back to Supreme Court for Third Time

On March 26, the U.S. Supreme Court agreed to consider, for the third time, allegations by Adarand Constructors, Inc. that federal affirmative action programs violate its rights under the 14th amendment to the Constitution to "equal protection under the law."

In 1995, the Supreme Court decision in Adarand Constructors, Inc. v. Pena drastically changed the way the government applied affirmative action programs to its procurements. In finding that Adarand, which is owned by a white man, had been deprived of "equal protection under the law" by the operation of the Department of Transportation's Disadvantaged Business Enterprise (DBE) program, the Supreme Court ruled that "all governmental action based on race...should be subjected to detailed judicial inquiry to ensure that the personal right to equal protection of the laws has not been infringed." As a result, the automatic granting of preferences to disadvantaged businesses was replaced by the procedures in FAR Subpart 19.11, Price Evaluation Adjustment for Small Disadvantaged Business Concerns, and Subpart 19.12, Small Disadvantaged Business Participation Program.

However, the Supreme Court did not render a definitive ruling in the case, but sent it back to the Court of Appeals for the Tenth Circuit to decide whether the DOT DBE program met the "strict scrutiny" standard. While the lower courts were deciding the returned Adarand, the Colorado DOT (CDOT) changed its DBE certification program by doing away with the presumption of social disadvantage for certain minorities and women. In its place, CDOT substituted a requirement that all applicants certify that each of a firm's majority owners "has experienced social disadvantage based upon the effects of racial, ethnic, or gender discrimination." CDOT required no further showing of social disadvantage by any applicant.

Adarand requested and received DBE status from CDOT. When the Court of Appeals for the Tenth Circuit found out about Adarand's DBE status, it held that the appeal was moot because Adarand had obtained the preferential status it had been seeking. However, Adarand appealed this ruling to the Supreme Court, and on January 12, 2000, the Supreme Court ruled once again in Adarand's favor, saying that the Court of Appeals "confused mootness with standing" and "placed the burden of proof on the wrong party. If this case is moot, it is because the federal government has accepted CDOT's certification of petitioner as a disadvantaged business enterprise, and has thereby ceased its offending conduct." The Supreme Court noted that "it is not at all clear that CDOT's certification is a 'valid certification'" that DOT will accept. "It is no small matter to deprive a litigant of the rewards of its efforts, particularly in a case that has been litigated up to this Court and back down again. Such action on grounds of mootness would be justified only if it were absolutely clear that the litigant no longer had any need of the judicial protection that it sought." Therefore, the Supreme Court sent the case back to the Court of Appeals for further hearings.

On September 25, 2000, the Court of Appeals decided that the DOT DBE program is constitutional because it is "narrowly tailored" and meets the "strict scrutiny" standard. This is the decision that Adarand is appealing to the Supreme Court.

EDITOR'S ANALYSIS: The Adarand case is similar in many ways to the Florida vote count in the 2000 presidential election. Al Gore would appeal adverse lower court decisions to the Florida Supreme Court, the Florida Supreme Court would rule in Gore's favor, George Bush would appeal to the U.S. Supreme Court, and the U.S. Supreme Court would rule in Bush's favor and send it back to the Florida Supreme Court for reconsideration. The Florida Supreme Court would reconsider, rule once again in Gore's favor, Bush would appeal, and the U.S. Supreme Court would rule in Bush's favor again. Finally, the U.S. Supreme Court got tired of the game and declared Bush the winner. Perhaps this time the U.S. Supreme Court will get tired of the Court of Appeals and declare Adarand the winner.



DOD to Hold Meeting on Cost Measurement and Allocation

On April 19, the Department of Defense (DOD) will hold a meeting to discuss potential opportunities for streamlining cost measurement, assignment, and allocation provisions in FAR Part 31, Contract Cost Principles and Procedures. Director of Defense Procurement Deidre Lee believes that acquisition reform and the evolution of generally accepted accounting principles (GAAP) have made it possible, or even necessary, to simplify the complicated provisions.

The meeting will be held between 10:00 am and 1:00 pm in the auditorium of the General Services Administration, 18th and F Streets, NW, Washington, DC. Directions are available at the home page of the Office of Cost, Pricing, and Finance at http://www.acq.osd.mil/dp/cpf. Upon identification of the key areas, subsequent public meetings will be held to hear views of interested parties regarding specific recommendations. The dates and times of those meetings will be published at http://www.acq.osd.mil/dp/cpf.

A list of some possible streamlining areas is published at http://www.acq.osd.mil/dp/cpf. Some of the areas are:



EPA Adopts "Notice-to-Proceed" Letter Contract

The Environmental Protection Agency (EPA) is amending EPA Acquisition Regulation (EPAAR) Subpart 1516.6, Time-and-Materials, Labor-Hour, and Letter Contracts, to authorize the use, in certain circumstances and under certain conditions, of a letter contract known as a Notice-to-Proceed (NTP) to carry out emergency response actions. It is authorized for use when any hazardous substance, pollutant, or contaminant has been released, or threatened to be released, into the environment, or there is an imminent and substantial danger to the public health or welfare. An NTP may be issued by the federal on-scene coordinator if an EPA contracting officer is not available to provide the required contracting support by the time the federal on-scene coordinator requires the response action to be undertaken. The total definitized dollar value of an individual NTP is not to exceed $200,000.

EDITOR'S NOTE: The EPAAR is available on the Internet at http://www.epa.gov/oamrfp12/ptod/epaar.pdf.



New Database Has Davis-Bacon Wage Determinations

On March 2, the Department of Labor (DOL) started publishing its databases of Davis-Bacon wage determinations at http://www.gpo.gov/davisbacon. Previously, the databases were only available on a subscription basis from the National Technical Information Service. Each contract for the construction, alteration, or repair of public buildings or public works that exceeds $2,000 must require that every laborer or mechanic employed on the construction site by the contractor or any subcontractor must be paid no less than the prevailing wage rates for the area. These wage rates, including fringe benefits, are reflected in "wage determinations" issued by DOL. Determinations are issued for different types of construction, such as building, heavy, highway, and residential. FAR Subpart 22.4, Labor Standards for Contracts Involving Construction, implements the Davis-Bacon and Related Acts.

The Davis-Bacon web site contains reference materials which include a short discussion of the Davis-Bacon and Related Acts and their requirements; a brief explanation of wage determinations and their use; a discussion of how to interpret the information contained in Davis-Bacon general wage determinations; answers to several of the most frequently asked questions about administration of the Davis-Bacon and Related Acts; and suggestions on ways to search the databases and limit the search results to obtain the most relevant and specific results to a query. For example, one can search the databases by selecting a state and the type of construction (that is, building, heavy, highway, or residential). The databases can be searched if one knows the wage determination number or portion of it, or they can be browsed. Several sample searches are included as guides to the general types of searches that can be conducted in the Davis-Bacon databases.



Grants Info on the Internet

The General Services Administration (GSA) announced on March 2 that it has developed a one-stop on-line access to grant information called "Federal Commons" at http://www.cfda.gov/federalcommons/.

Federal Commons is where the 30,000 federal grant applicants (state and local governments, institutions, and individuals) can access all of the information they need to act on the $300 billion in federal government grant opportunities. The information is organized by the topic of the grant from agriculture to transportation.

In addition to providing information on grants, Federal Commons also links grant recipients to two electronic payment systems, the Department of Health and Human Services' Payment Management System and the Financial Management Service's Automated Standard Application for Payment.

Federal Commons is expected to be able to process grant applications later this year.



Copyright 2001 by Panoptic Enterprises. All Rights Reserved.

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