FedGovContracts.com

Panoptic Enterprises’

FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


January 2019
Vol. XX, No. 1
[pdf version]

CONTENTS


FAC 2019-01 Provides Definition of “Recruitment Fees” On Combating Trafficking in Persons
Amendments Proposed to Limitations on Subcontracting
Mileage Reimbursement Set at 58¢ Pe Mile for Autos
DOD Holds Year-End Regulations Clearance
Amendment Proposed for Contractor Whistleblowers



FAC 2019-01 Provides Definition of “Recruitment Fees”
On Combating Trafficking in Persons

Federal Acquisition Circular (FAC) 2019-01 is amending Federal Acquisition Regulation (FAR) subpart 22.17, Combating Trafficking in Persons, and the clause FAR 52.222-50, Combating Trafficking in Persons, to provide a definition of “recruitment fees” to further implement the FAR policy on combating trafficking in persons, one element of which is to prohibit contractors from charging employees recruitment fees.

Paragragh (a)(6) of FAR 22.1703, Policy, states that “government solicitations and contracts shall...(a) prohibit contractors, contractor employees, subcontractors, subcontractor employees, and their agents from...(6) charging employees recruitment fees...” However, the Government Accountability Office (GAO) issued report GAO-15-102, Oversight of Contractors’ Use of Foreign Workers in High-Risk Environments Needs to Be Strengthened, which recommended that agencies “develop a more precise definition of recruitment fees.” The GAO explained that without a clear definition, agencies would face challenges enforcing the prohibition.

To address the GAO recommendation, FAC 2019-01 is adding the following definition to FAR 22.1702, Definitions, and FAR 52.222-50(a): “Recruitment fees means fees of any type, including charges, costs, assessments, or other financial obligations, that are associated with the recruiting process, regardless of the time, manner, or location of imposition or collection of the fee.”

In addition, the following examples of prohibited recruitment fees associated with the recruiting process are included:

  1. Soliciting, identifying, considering, interviewing, referring, retaining, transferring, selecting, training, providing orientation to, skills testing, recommending, or placing employees or potential employees;

  2. Advertising;

  3. Obtaining permanent or temporary labor certification, including any associated fees;

  4. Processing applications and petitions;

  5. Acquiring visas, including any associated fees;

  6. Acquiring photographs and identity or immigration documents, such as passports, including any associated fees;

  7. Accessing the job opportunity, including required medical examinations and immunizations; background, reference, and security clearance checks and examinations; and additional certifications;

  8. An employer's recruiters, agents or attorneys, or other notary or legal fees;

  9. Language interpretation or translation, arranging for or accompanying on travel, or providing other advice to employees or potential employees;

  10. Government-mandated fees, such as border crossing fees, levies, or worker welfare funds;

  11. Transportation and subsistence costs: (A) while in transit, including, but not limited to, airfare or costs of other modes of transportation, terminal fees, and travel taxes associated with travel from the country of origin to the country of performance and the return journey upon the end of employment; and (B) from the airport or disembarkation point to the worksite;

  12. Security deposits, bonds, and insurance; and

  13. Equipment charges.

The definition clarifies that a payment “is a recruitment fee, regardless of whether the payment is:

  1. Paid in property or money;

  2. Deducted from wages;

  3. Paid back in wage or benefit concessions;

  4. Paid back as a kickback, bribe, in-kind payment, free labor, tip, or tribute; or

  5. Collected by an employer or a third party, whether licensed or unlicensed, including, but not limited to: (A) agents; (B) labor brokers; (C) recruiters; (D) staffing firms (including private employment and placement firms); (E) subsidiaries/affiliates of the employer; (F) any agent or employee of such entities; and (G) subcontractors at all tiers.”

Twenty-eight respondents submitted comments on the proposed rule. In response to the comments, the following changes were made in the final rule:

The final rule goes into effect January 22, 2019.

For more on the proposed rule, see the June 2016 Federal Contracts Perspective article “Four More FAR Rules Proposed.”



Amendments Proposed to Limitations on Subcontracting

To bring the FAR into conformance with revisions made by the Small Business Administration (SBA) to its regulations to implement the NDAA for FY 2013 (Public Law 112-239), Section 1651, Limitations on Subcontracting, which changed and standardized the limitations on subcontracting and the nonmanufacturer rule, a rule is being proposed that would amend FAR part 19, Small Business Programs, and corresponding clauses.

FAR 52.219-14, Limitations on Subcontracting, applies to each contract exceeding $150,000 that is awarded as a set-aside or awarded under the SBA’s 8(a) program. The clause establishes that, as a condition for award of the contract, the small business agrees that for:

Section 1651 turned this around to limit the percentage of the award amount received by the small business contractor that may be spent on subcontractors. For example, instead of requiring the small business contractor to perform at least 15% of the general construction contract, Section 1651 limits the small business contractor from expending more than 85% of the general construction contract cost on subcontractors. However, Section 1651 created a new category of exempt subcontractors: “similarly situated entities.”

If a contractor receives an award under a service-disabled veteran-owned small business set-aside, any subcontracts awarded to “similarly situated entities” – in this case, other service-disabled veteran-owned small businesses – do not count as subcontracted work when determining compliance with the limitation on subcontracting requirements. This means the service-disabled veteran-owned small business contractor can subcontract as much of the contract to service-disabled veteran-owned small businesses without violating the limitation on subcontracting. This gives small businesses greater flexibility in complying with the limitations on subcontracting.

In addition, SBA decided to clarify that the nonmanufacturer rule, which is an exception to the limitations on subcontracting, does not apply to small business set-aside contracts between $3,500 and $150,000. Under the nonmanufacturer rule in paragraph (f) of FAR 19.102, Size Standards, a small business may submit a bid or offer under a set-aside for supplies as a nonmanufacturer if it has no more than 500 employees and furnishes the product of a small business manufacturer or producer. However, the SBA regulations at Title 13 of the Code of Federal Regulations (CFR), Section 121.406 (13 CFR 121.406), How does a small business concern qualify to provide manufactured products or other supply items under a small business set-aside, service-disabled veteran-owned small business, HUBZone, WOSB or EDWOSB, or 8(a) contract?, also require that the small business nonmanufacturer must be “primarily engaged in the retail or wholesale trade and normally sells the type of item being supplied...[and] takes ownership or possession of the item(s) with its personnel, equipment or facilities in a manner consistent with industry practice...”

To conform to SBA’s final rule dated May 31, 2016, the following are the significant changes that would be made to FAR part 19 and corresponding clauses:

Comments on this proposed rule must be submitted no later than February 4, 2019, identified as FAR Case 2016-011, by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: General Services Administration, Regulatory-Secretariat Division (MVCB), ATTN: Lois Mandell, 1800 F Street NW, 2nd floor, Washington, DC 20405.


In a parallel effort, the DOD decided it couldn’t wait for a final rule to be issued amending the FAR to reflect SBA’s revised regulations on limitations on subcontracting and the nonmanufacturer rule, so Kim Herrington, the acting director of defense pricing and contracting, issued a class deviation directing DOD contracting officers to use the following alternate clauses (which are very similar to those in the proposed FAR rule):

This class deviation will remain in effect until it is incorporated into the FAR and DFARS or is rescinded.



Mileage Reimbursement Set at 58¢ Pe 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 54¢ per mile to 58¢ per mile, and the rate for use of a motorcycle on official travel from 51.5¢ per mile to 55¢ per mile. The rate for use of a privately owned aircraft is increased from $1.21 per mile to $1.26 per mile. These revised rates are effective for travel performed on or after January 1, 2019, through December 31, 2019. The increased reimbursement rates reflect higher fuel prices.



DOD Holds Year-End Regulations Clearance

As the Department of Defense (DOD) has done the past several Decembers, it has prepared for the upcoming new year by cleaning house with the issuance of a multitude of final rules (7) and interim rules (1) amending the Defense FAR Supplement (DFARS), proposed rules (3) that would amend the DFARS, deviations (4, including the one on limitations on subcontracting – see preceding article) to the FAR and DFARS, and a memorandum addressing DOD acquisition policy. Most of these actions address acquisition-related provisions in various National Defense Authorization Acts (NDAA).



Amendment Proposed for Contractor Whistleblowers

To implement the provisions of Public Law 114-261, An Act to Enhance Whistleblower Protection for Contractor and Grantee Employees, a rule is proposed that would make permanent the provisions in FAR 3.908, Pilot Program for Enhancement of Contractor Employee Whistleblower Protections, and to clarify that the prohibition on the reimbursement of certain legal costs applies to subcontractors as well as to contractors.

The NDAA for FY 2013 (Public Law 112-239), Section 828, Pilot Program for Enhancement of Contractor Employee Whistleblower Protections, added Section 4712, Pilot Program for Enhancement of Contractor Protection from Reprisal for Disclosure of Certain Information, to Title 41 of the U.S. Code (41 USC 4712), to enact a four-year pilot program (through January 1, 2017) that enhanced the existing whistleblower protections for contractor employees. A rule in FAC 2005-70 implemented Section 828 by adding FAR 3.908. (EDITOR’S NOTE: The pilot program in FAR 3.908 does not apply to the DOD, the National Aeronautics and Space Administration (NASA), and the Coast Guard, or to the intelligence community. DOD, NASA, and the Coast Guard are covered by 10 USC 2409, Contractor Employees: Protection from Reprisal for Disclosure of Certain Information. NDAA for FY 2013, Section 827, Enhancement of Whistleblower Protections For Contractor Employees, and those whistleblower protections provisions are permanent, not limited to a four-year period like the protections in the Section 828 civilian agency contractor pilot program. DOD issued a rule amending DFARS subpart 203.9, Whistleblower Protections for Contractor Employees, on the same day as FAC 2005-70.)

On December 16, 2016, Public Law 114-261 was enacted into law. It amended 41 USC 4712 to make the whistleblower protections permanent, just before the scheduled January 1, 2017, expiration of the pilot program.

To implement Public Law 114-261 and make the Section 828 pilot program permanent, this rule proposes the make the following changes to FAR subpart 3.9, Whistleblower Protections for Contractor Employees, and its clause, FAR 52.203-17, Contractor Employee Whistleblower Rights and Requirement to Inform Employees of Whistleblower Rights:

In addition, Public Law 114-261 also clarifies that the cost principles at paragraph (k) of 10 USC 2324, Allowable Costs Under Defense Contracts, 41 USC 4304, Specific Costs Not Allowable, and 41 USC 4310, Proceeding Costs Not Allowable, that prohibit reimbursement of certain legal costs (including costs incurred responding to complaints under 10 USC 2409 and 41 USC 4712) apply to costs incurred by a contractor, subcontractor, or personal services contractor. To implement this provision of Public Law 114-261, this proposed rule would amend FAR 31.205-47, Costs Related to Legal and Other Proceedings, and FAR 31.603, Requirements [for contracts with state, local, and federally recognized Indian tribal governments], to add “or subcontract” after “contract” wherever it occurs, and to add “or subcontractor” after “contractor” wherever it occurs. There is one exception: “or subcontract” is not added to FAR 31.205-47(b)(3)(ii) and (iii), which address a final decision by an appropriate official to rescind, void, or terminate a contract for default, because the government does not have the authority to rescind, void, or terminate a subcontract. Also, the terms “personal services contract” and “personal services contractor” are not added to the FAR because they are covered by the terms “contract” and “contractor.”

Comments on this proposed rule must be submitted no later than February 25 2019, identified as FAR Case 2017-005, by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: General Services Administration, Regulatory-Secretariat Division (MVCB), ATTN: Lois Mandell, 1800 F Street NW, 2nd floor, Washington, DC 20405.





Copyright 2019 by Panoptic Enterprises. All Rights Reserved.

Return to the Newsletters Library.

Return to the Main Page.