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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

SEPTEMBER 2001
Vol. II, No. 9

CONTENTS

Flurry of FAR Changes Proposed: Trademarks, Claims, Terminations
Bush Puts Bite on "Vampire Appliances"
DOD Seeks Comments on Buy American Act Exemption
NFS Addresses Child Labor, Property Reporting
SBA Taking Applications for Reservist Loans

Flurry of FAR Changes Proposed: Trademarks,
Claims, Terminations, Commercial Items, Task Orders

When the Bush Administration started on January 20, 2001, one of its first acts was to freeze rules published late in the Clinton Administration so they could be reviewed and possibly rescinded. Several acquisition-related rules were caught in the review process, most notably the "blacklisting rule" (see the May 2001 Federal Contracts Dispatch article "'Blacklisting Rule' Suspended, FAC 97-21 Proposed for Permanent Repeal"). Now that most of the suspended rules have been reviewed and handled appropriately (most were allowed to take effect), the Federal Acquisition Regulation (FAR) Council is ready to move on to new work -- it published several proposed changes to the FAR during August (and withdrew one proposed rule, too):

• Trademarks for Government Products: This proposal would add FAR Subpart 27.X, Government-Unique Trademarks and Service Marks, and a new FAR clause 52.227-XX, Rights in Government-Unique Marks, to establish the process for either the government or a contractor to assert rights in a government- unique mark and to seek trademark or service mark protection.
  
  FAR 27.X03, Policy, would state, "agencies may elect to register or assert rights in a government-unique mark. The government may then use the mark on an exclusive basis or may make the mark available on a nonexclusive basis. When the government decides not to register or assert rights in a government-unique mark, the contractor may register or assert rights in the mark."
  
  FAR 27.X04, Protection of Government-Unique Marks, would state, "when the clause at 52.227-XX, Rights in Government-Unique Marks, is inserted in the contract, the contractor must notify the government in writing of its intent to assert rights in, or file an application to register, a government-unique mark." It would allow the contractor to assert the rights if the government does not object within 120 days of receipt of the notification, but "failure of the government to respond does not waive the government's right under the Trademark Act to contest the contractor's assertion of rights or application." In addition, the contractor would not be permitted to assert the rights or file the application if the government either chooses to assert its rights in the mark or objects to the contractor's intended action. However, if the government objects, the government and the contractor may negotiate conditions for contractor use of the government-unique mark.
  
  FAR 52.227-XX, which would repeat the definitions, rights, and procedures in FAR Subpart 27.X, would be inserted in all solicitations and contracts that include FAR 52.227-11, Patent Rights -- Retention by the Contractor (Short Form), FAR 52.227-12, Patent Rights -- Retention by the Contractor (Long Form), FAR 52.227-13, Patent Rights -- Acquisition by the Government, or FAR 52.227-14, Rights in Data -- General.
  
  Comments on the proposed rule must be submitted no later than October 9, 2001, to General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405; e-mail: farcase.1998-018@gsa.gov.
  
  
• Definition of "Claim" and Terms Relating to Termination: This proposed rule would move to FAR 2.101, Definitions, various definitions of terms that are used in more than one part of the FAR. This is being proposed to clarify the applicability of definitions, eliminate redundant or conflicting definitions, and make them easier to find. (EDITOR'S NOTE: This is an ongoing effort to consolidate definitions in FAR 2.101. For more on this effort, see the February 2001 Federal Contracts Perspective article "FAC 97-22 Addresses Definitions and Cleans House, FAC 97-23 Prohibits Products by Forced Child Labor.")
  
  The proposed rule would:
  
  
  • Move the definition of "claim" from FAR 33.201, Definitions, to FAR 2.101 and revise it by deleting the sentence, "A claim arising under a contract, unlike a claim relating to that contract, is a claim that can be resolved under a contract clause that provides for the relief sought by the claimant." Then, the following parenthetical phrase would be added to paragraph (a) of FAR 33.213, Obligation to Continue Performance: "(A claim arising under a contract is a claim that can be resolved under a contract clause, other than the clause at 52.233-1, Disputes, that provides for the relief sought by the claimant; however, relief for such claim can also be sought under the clause at 52.233-1. A claim relating to a contract is a claim that cannot be resolved under a contract clause other than the clause at 52.233-1.)" Also, the definition of "claim" in FAR 52.233-1 would be revised to correspond to the FAR 2.101 definition.
    
    
  • The definition of "termination for convenience" would be moved from FAR 17.103, Definitions, to FAR 2.101. To clarify the difference between "termination for convenience" and "cancellation" in FAR Subpart 17.1, Multi-Year Contracts, the following would be added as new paragraph (d) of FAR 17.104, General: "The termination for convenience procedure may apply to any government contract, including multiyear contracts. As contrasted with cancellation, termination can be effected at any time during the life of the contract (cancellation is effected between fiscal years) and can be for the total quantity or partial quantity (whereas a cancellation must be for all subsequent fiscal years' quantities)."
    
    
  • The definitions of "continued portion of the contract," "partial termination," and "terminated portion of the contract" would be moved from FAR 49.001, Definitions, to FAR 2.101.
    
    
  • A definition of "termination of default" would be added to FAR 2.101. It would take the "general" statement in paragraph (a) of FAR 49.401 ("termination for default is generally the exercise...") and turn it into a definition ("termination for default means the exercise...").
  
  Comments on the proposed rule must be submitted no later than October 15, 2001, to the above address or by e-mail to: farcase.2000-406@gsa.gov.
  
  
• Commercial Item Acquisitions: This proposed rule would amend FAR 52.212-1, Instructions to Offerors -- Commercial Items, to accommodate sealed bidding and simplified acquisition procedures. The following changes would be made to FAR 52.212-1:
  
  
  • A new paragraph (a) would be added which would state that the terms "offer" and "offeror" include "quote" and "quoter" respectively (current paragraphs (a) through (j) would be redesignated as paragraphs (b) through (k)). (Also, FAR 52.212-3, Offeror Representations and Certifications -- Commercial Items, would be revised to state "the term 'offeror' includes 'quoter'.")
    
    
  • Current paragraph (b) would be redesignated as paragraph (c)(1), and redesignated paragraph (c)(1)(xi) (current paragraph (b)(11)) would have the following sentence added to it: "Bids that do not conform to the essential requirements of the invitation for bids will be rejected." A paragraph (c)(2) would be added, which would state, "Address offers and modifications to offers, regardless of the media under which submitted, to the office specified in the solicitation. Offerors shall ensure that the outermost wrapper (or the transmittal documentation for electronic submissions) of the offer or modification is marked to show the time and date specified for receipt, the solicitation number, and the name and address of the offeror."
    
    
  • Current paragraph (g) is titled "Contract award (not applicable to Invitation for Bids)." Redesignated paragraph (h) would provide three sets of procedures: one for Requests for Quotations, one for Invitations for Bids, and one for Requests for Proposal.
  
  Comments on the proposed rule must be submitted no later than October 22, 2001, to the above address or by e-mail to: farcase.2000-011@gsa.gov.
  
  
• Task-Order and Delivery-Order Contracts: Because of concern that contracting officers are using task-order and delivery-order contracts to avoid the requirements of the Competition in Contracting Act, and that the government may not be obtaining the full benefit of these types of contracts, Congress passed the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106-65), and its Section 804, Guidance on Use of Task Order and Delivery Order Contracts, requires that the FAR be revised "to provide guidance to agencies on the appropriate use of task order and delivery order contracts." Federal Acquisition Circular (FAC) 97-17 provided initial guidance (see the May 2000 Federal Contracts Perspective article "FAC 97-17 Tightens Task Order Rules").
  
  This proposed rule would further strengthen that guidance by amending FAR Part 7, Acquisition Planning, to draw greater attention to the capital planning requirements of the Clinger-Cohen Act (Public Law 104-106), and to ensure more deliberation by agency acquisition planners before placing orders under a governmentwide acquisition contract (GWAC), a task-order or delivery-order contract issued by another agency, or the General Services Administration's multiple award schedules program (that is, Federal Supply Schedules).
  
  The most noticeable change is the addition of "orders" in several places throughout FAR Part 7 which currently address only "contracts" (for example, "all contracts and orders", "contract award or order placement"). However, paragraph (b)(4) of FAR 7.105, Contents of Written Acquisition Plans, would be divided into a "contract" subparagraph and an "order" subparagraph. The "order" subparagraph would require the acquisition to discuss "how the capital planning and investment control requirements of 40 U.S.C. 1422 and OMB [Office of Management and Budget] Circular A-130 [Management of Federal Information Resources] will be met..." It would also require the acquisition plan to discuss how "ordering through one of these vehicles facilitates access to small business concerns, including small disadvantaged business concerns, 8(a) contractors, women-owned small business concerns, HUBZone small business concerns, veteran-owned small business concerns, or service-disabled veteran-owned small business concerns."
  
  Similar changes are proposed for various sections of FAR Part 8, Required Sources of Supplies and Services, and FAR Part 16, Types of Contracts.
  
  Comments on the proposed rule must be submitted no later than October 22, 2001, to the above address or by e-mail to: farcase.1999-303@gsa.gov.
  
  
• Signing and Retention of High-Technology Workers: On December 28, 2000, a proposal was published to amend FAR 31.205-34, Recruitment Costs, to explicitly allow signing bonuses to recruit, as well as retention bonuses to retain, employees with critical skills, such as scientists and engineers in the software and systems integration fields (see the January 2001 Federal Contracts Perspective article "Proposed FAR Changes on High Tech Employees"). This proposed rule was considered to be merely a clarification since the FAR does not explicitly disallow these types of expenses.
  
  Some of those responding to the proposed rule expressed concern that the rule (1) is more restrictive than current FAR provisions, (2) may result in decreased use of bonuses, and (3) makes it more difficult for government contractors to compete with other employers for workers with critical technical skills. After review of the comments, it was decided that the proposed rule was unnecessary, since recruitment and retention bonuses are already allowable costs on government contracts if they are reasonable and allocable. Therefore, on August 3, the proposed rule was withdrawn from further consideration.

Bush Puts Bite on "Vampire Appliances"

On July 31, 2001, President Bush issued Executive Order 13221, Energy Efficient Standby Power Devices, directing agencies to purchase electrical products that use no more than one watt in their standby power consuming mode. This is an attempt by the president to curtail the federal government's acquisition and use of so-called "vampire appliances," that is, those appliances that suck up electricity even when "off". Such appliances as televisions and computers still draw electrical power when not in use to keep internal clocks running and to "power up" more rapidly when turned on.

Executive Order 13221 applies to purchases of "commercially available, off-the-shelf products that use external standby power devices, or that contain an internal standby power function..." The executive order directs agencies to purchase products "that use no more than one watt in their standby power consuming mode. If such products are not available, agencies shall purchase products with the lowest standby power wattage while in their standby power consuming mode. Agencies shall adhere to these requirements, when life-cycle cost-effective and practicable and where the relevant product's utility and performance are not compromised as a result."

The Department of Energy, with help from the Department of Defense and the General Services Administration, is to compile "a preliminary list of products to be subject to these requirements" by December 31, 2001, and update it annually afterwards. "The Department of Energy shall finalize the list and may remove products deemed inappropriate for listing."

DOD Seeks Comments on Buy American Act Exemption

Not only has the Department of Defense (DOD) been busy working on revisions to the FAR, but it has been working on revisions to its own Defense FAR Supplement (DFARS):

• Buy American Act Exemption for Commercial U.S.-Made End Products: DOD is seeking information that will assist it in evaluating a proposed exception to the Buy American Act (BAA) in procurements subject to the Trade Agreements Act (TAA) for commercial U.S.-made end products, substantially transformed in the United States, that do not qualify as domestic end products under the BAA.
  
  The BAA restricts the purchase by the government of supplies that are not "domestic end products." To qualify as a domestic end product, the article (1) must be manufactured in the United States, and (2) the cost of its components mined, produced, or manufactured in the United States must exceed 50% the cost of all its components. Under the TAA, the BAA is waived for "eligible products" (that is, products subject to the TAA, products of North American Free Trade Agreement (NAFTA) countries, and products of Caribbean Basin countries). The country of origin for eligible products is the country in which the articles/components (wherever the origin) have been substantially transformed into another article of commerce. Since the TAA applies only to products of foreign countries, the BAA is not waived for products substantially transformed in the United States from mostly foreign components. This results in treating such U.S.-made end products less favorably than designated country end products, which might encourage companies to manufacture products or locate manufacturing facilities in a designated foreign country rather than in the United States.
  
  Comments, information, and opinions must be submitted no later than September 24, 2001, to Domenico C. Cipicchio, Deputy Director, Defense Procurement, Contract Policy & Administration, OUSD (AT&L), 3060 Defense Pentagon, Washington, DC 20301-3060.
  
  
• Waiver of Limitations on Certain Defense Items Produced in the United Kingdom: The Undersecretary of Defense (Acquisition, Technology, and Logistics) has extended for another year (until August 18, 2002) the waiver of the limitation on procurement of the following products from the UK: welded shipboard anchor and mooring chain with a diameter of four inches or less; air circuit breakers; ball and roller bearings; totally enclosed lifeboats; gyrocompasses; electronic navigation chart systems; steering controls; pumps; propulsion and machinery control systems.
  
  
• Delay in the Implementing Electronic Submission and Processing of Claims for Contract Payments Requirements: Section 1008 of the National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398) provides that the Secretary of Defense must require a contractor to submit electronically, and DOD to process electronically, any claim for payment under a DOD contract. Solicitations after June 30, 2001, were to include this requirement, but the Secretary of Defense could delay the implementation date to no later than October 1, 2002, if the Secretary found it impracticable to implement requirement until the later date.
  
  The Secretary has delayed the implementation date until October 30, 2002, because DOD does not have the capability to receive all contractor claims for payment electronically, nor does DOD have the capability to process all claims and supporting documentation electronically. In addition, DOD must publish changes to the DFARS to implement the requirement.
  
  
• Customary Progress Payment Rate for Large Business Concerns: The Fiscal Year 1994 Defense Appropriations Act (Public Law 103-139) reduced the customary progress payment rate for large business concerns under Defense contracts from 85% to 75%. The rates for small businesses (90%) and small disadvantaged businesses (95%) were not changed. (EDITOR'S NOTE: The customary progress rate for other agencies, listed in FAR 32.501-1, Customary Progress Payment Rates, is 80% for large businesses and 85% for small businesses.) DOD has been trying to get the large business progress payment rate increased the last several years because changes to short term borrowing rates have supported an increase. The FY 2002 budget submitted by the President accommodates the progress payment increase. Therefore, this proposed rule would amend DFARS 232.501-1, Customary Progress Payment Rates, to reflect the 80% large business progress payment rate. However, the rate change would only be applicable to contract awards made on or after October 1, 2001, with final implementation contingent upon the approval of a DOD budget with the rate in it.

  Comments on the proposed rule must be submitted no later than September 24, 2001, on http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm, or by e-mail to dfars@acq.osd.mil, or to Defense Acquisition Regulations Council, Attn: Ms. Sandra Haberlin, OUSD (AT&L) DP (DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; fax: 703-602-0350. Cite DFARS Case 2001-D012 when submitting comments.
  
  

• The Small Business Competitiveness Demonstration Program: To demonstrate that small businesses can compete for competitive federal contracts on an unrestricted basis, the Small Business Competitiveness Demonstration Program prohibits 10 federal agencies from using small business set-asides to acquire services over $25,000 in four "designated industry groups" (DIGs): construction, refuse systems and related services, architectural and engineering (A&E) services, and nonnuclear ship repair. However, if an agency fails to award 40% of its contracts in a particular DIG to small businesses, or whenever small business awards under certain North American Industry Classification System (NAICS) codes within the Construction and Architectural & Engineering Services DIGs fall below 35%, the organizational element that failed to meet the small business participation goal must reinstate small business set-asides until its awards to small businesses reach the 40% (or 35%) mark. (EDITOR'S NOTE: For more on the program, see FAR Subpart 19.10, DOD-specific regulations in DFARS Subpart 219.10, and the April 2000 Federal Contracts Perspective article "FAC 97-16 Revises Contract Financing Rules, Small Business Competitiveness Demo Program." For more on small business set-asides, see FAR Subpart 19.5, Set-Asides for Small Business, and DFARS Subpart 219.5.)
  
  For the 12 months ending September 2000, DOD fell below the 40% goal in acquisitions under NAICS Code 336611, Federal Service Code (FSC) J999, for non-nuclear ship repairs on the West Coast. Therefore, in accordance with paragraph (b)(1) of DFARS 219.1007, Procedures, Director of Defense Procurement Deidre Lee has directed the reinstatement of small business set-aside procedures for all solicitations issued on or after August 13, 2001, or as soon thereafter as practicable, for non-nuclear ship repairs on the West Coast.
  
  Also, small business set-asides had been reinstated for NAICS Subsector 234, Heavy Construction Other than Building Construction -- Contractors, for all Army and Navy activities, and NAICS Subsector 235, Construction -- Special Trade Contractors, for all Navy activities, because DOD fell below the goals in those industries. However, for the 12 months ending September 2000, DOD met the 40% goal in acquisitions under NAICS Subsector 234, and met the 35% goal in all subcategories of Subsector 235. Therefore, Director of Defense Procurement Deidre Lee has directed that unrestricted competition be reinstatement for all solicitations issued on or after August 13, 2001, or as soon thereafter as practicable.

NFS Addresses Child Labor, Property Reporting

The National Aeronautics and Space Administration (NASA) has been busy, too, issuing two final rules amending the NASA FAR Supplement (NFS) and one proposed rule:

• Investigations of Suspected Forced or Indentured Child Labor: On June 12, 1999, President Clinton signed Executive Order 13126, Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor, to "continue the executive branch's commitment to fighting abusive child labor practices." On January 18, 2001, Federal Acquisition Circular (FAC) 97-23 implemented Executive Order 13126 by adding FAR Subpart 22.15, Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor (see the February 2001 Federal Contracts Perspective article "FAC 97-22 Addresses Definitions and Cleans House, FAC 97-23 Prohibits Products by Forced Child Labor").
  
  Paragraph (e) of FAR 22.1503, Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor, requires the contracting officer to refer any suspicions to the agency's Inspector General, the Attorney General, or the Secretary of the Treasury for investigation, "whichever is determined appropriate in accordance with agency procedures..." This final rule adds NFS Subpart 1822.15, which consists of NFS 1822.1503, Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor. NFS 1822.1503 consists of the following: "(e) All investigations under FAR Subpart 22.15 shall be referred to NASA's Office of Inspector General."
  
  
• Property Reporting Requirements: OMB Bulletin 97-01, Form and Content of Agency Financial Statements, prescribes financial accounting and reporting requirements for federal agencies, including accounting standards which apply to property, plant, and equipment. NASA's initial implementation of the standards was through NASA Form 1018, NASA Property in the Custody of Contractors, but the revised NASA Form 1018 generated many comments from contractors. Therefore, on September 11, 2000, NASA decided to make additional changes to the NASA Form 1018 reporting requirements in NFS Subpart 1845.71, Forms Preparations, to ensure compliance with the accounting standards and the submittal of accurate and timely financial statements. Comments were received from four groups, and NASA is finalizing the interim rule with editorial changes for consistency.
  
  
• Broad Agency Announcements: This proposed rule would make changes to the proposal preparation and evaluation processes to require consideration of safety and risk-based acquisition management (RBAM) in NASA's Broad Agency Announcements (BAAs). NASA uses two types of BAAs: the Announcement of Opportunity (AO) (see NFS Subpart 1872.3, The Announcement of Opportunity), and the NASA Research Announcement (NRA) (see NFS 1835.016-71, NASA Research Announcements). This change would ensure consistency in the way safety and RBAM are treated in all NASA acquisitions.
  
  NFS 1852.235-72, Instructions for Responding to NASA Research Announcements, and NFS 1872.307, Guidelines for Proposal Preparation, would be revised to add that proposals are to "identify and discuss risk factors and issues throughout the proposal where they are relevant." Also, NFS 1872.402, Criteria for Evaluation, would add "the proposed approach to managing risk" as an evaluation factor.
  
  Comments should be submitted on or before October 30, 2001, to Rex T. Elliott, NASA Headquarters, Office of Procurement, Analysis Division (Code HC), Washington, DC 20546, or by e-mail to relliott@hq.nasa.gov.

SBA Taking Applications for Reservist Loans

The Small Business Administration (SBA) has announced that it is accepting applications for Military Reservist Economic Injury Disaster loans. The loans are available to a small business employing a military reservist if the reservist is called up to active military duty during a period of military conflict, and he or she is an essential employee critical to the success of the business' daily operation whose call-up has caused or will cause the business substantial economic injury (a sole proprietor who is called up to active duty also qualifies for the loan). The loans have interest rates of no more than 4%, have a term of up to 30 years, and are capped at $1,500,000.

The offices where one can obtain an application are:

• Disaster Area 1 Office, 360 Rainbow Blvd., South 3rd Fl., Niagara Falls, NY 14303, 1-800-659-2955: Connecticut, District of Columbia, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico, Rhode Island, Vermont, Virgin Islands, Virginia, West Virginia
  
  
• Disaster Area 2 Office, One Baltimore Place, Suite 300, Atlanta, GA 30308, 1-800-359-2227: Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Minnesota, Mississippi, North Carolina, Ohio, South Carolina, Tennessee, Wisconsin
  
  
• Disaster Area 3 Office, 4400 Amon Carter Blvd., Suite 102, Ft. Worth, TX 75155, 1-800-366-6303: Arkansas, Colorado, Iowa, Kansas, Louisiana, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Utah, Wyoming
  
  
• Disaster Area 4 Office, P.O. Box 13795, Sacramento, CA 95853-4795, 1-800-488- 5323: Alaska, American Samoa, Arizona, California, Guam, Hawaii, Idaho, Nevada, Oregon, Washington

The program was authorized by the Veterans Entrepreneurship and Small Business Development Act of 1999 (Public Law 106-50), Section 402, Assistance to Active Duty Military Reservists. The regulations for the program were added August 24, 2001, as Title 13 of the Code of Federal Regulations (CFR), Business and Credit Administration; Chapter 1, Small Business Administration; Part 123, Business Loans; Subpart F, Military Reservist Economic Injury Disaster Loans.

For more on the program, see the August 2001 Federal Contracts Perspective article "SBA to Provide Loans When Reservists are Called Up."

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