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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


October 2002
Vol. III, No. 10

CONTENTS

FAC 2001-09 Clamps Down on Task & Delivery Orders, Provides Temporary Emergency Procurement Authority
SBA Revising SBIR Program Policies
SBA Waives One Nonmanufacturer Rule, Rethinks Another
Comments Requested on Improving Contract Closeouts
Bonneville Purchasing Instructions Available



FAC 2001-09 Clamps Down on Task & Delivery Orders,
Provides Temporary Emergency Authority

The Federal Acquisition Regulatory Council rounded out a rather peaceful summer by issuing Federal Acquisition Circular (FAC) 2001-09 to amend the Federal Acquisition Regulation (FAR) so it provides additional guidance on task-order and delivery-order contracts, implements temporary emergency procurement authority, has revised trade agreements thresholds, clarifies payments under fixed-price construction contracts, finalizes two interim rules affecting veteran-owned small businesses, and makes technical amendments. All changes are effective September 30, 2002, except the emergency procurement authority and veteran-owned small business rules, which are effective August 30, 2002.

  1. Task-Order and Delivery-Order Contracts: Section 804 of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106-65) requires that the FAR be revised "to provide guidance to agencies on the appropriate use of task order and delivery order contracts". This was enacted because of Congressional concern that (1) contracting officers are using task- and delivery-order contracts to avoid the requirements of the Competition in Contracting Act, and (2) the government may not be obtaining the full benefit of these types of contracts.

    FAC 97-17 revised the FAR to clarify what contracting officers should consider when planning for multiple awards of indefinite-delivery contracts and to clarify how orders should be placed against the resultant contracts (see the May 2000 Federal Contracts Perspective article "FAC 97-17 Tightens Task Order Rules, Encourages Indian Subcontracting, Addresses U.S.-Flag Vessels"). On August 23, 2001, a proposed rule was published to further implement Section 804 by providing guidance on the appropriate use of task- and delivery-order contracts; requiring more deliberation by agency acquisition planners before orders are placed under a Federal Supply Schedule contract, or task- or delivery-order contracts are awarded; and specific steps agencies should take when placing orders under task- and delivery-order contracts established by another agency (see the September 2001 Federal Contracts Perspective article "Flurry of FAR Changes Proposed: Trademarks, Claims, Terminations, Commercial Items, Task Orders"). The proposed rule is finalized with minor editorial changes.

    The following are the most significant changes being made by this final rule:



  2. Temporary Emergency Procurement Authority: This interim rule implements Section 836 of the Fiscal Year 2002 National Defense Authorization Act (Public Law 107-107), which provides temporary procurement authority for any procurement that facilitates the defense of the United States against terrorism or biological or chemical attack until September 30, 2003. The interim rule increases the micro-purchase threshold for such procurements from $2,500 to $15,000 when made by or for the Department of Defense (DOD); increases the simplified acquisition threshold from $100,000 to $250,000 when the purchase is made by or for DOD inside the U.S. in support of a contingency operation; and from $200,000 to $500,000 when the purchase is made by or for DOD outside the U.S. in support of a contingency operation. Also, any acquisition by or for DOD of biotechnology supplies or biotechnology services to facilitate the U.S. defense against terrorism or biological or chemical attack is to be treated as an acquisition of commercial items. (EDITOR'S NOTE: For more on the acquisition-related provisions of Public Law 107-107, see the February 2002 Federal Contracts Perspective article "2002 Defense Authorization Act Signed Into Law, Extends FAR Subpart 13.5 Until January 1, 2003.")

    To implement Section 836, this interim rule:


    Comments on the interim rule must be submitted by October 29, 2002, to General Services Administration, FAR Secretariat (MVP), 1800 Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405, or by e-mail to farcase.2002-003@gsa.gov. Cite FAC 2001-09, FAR case 2003-003 in all correspondence related to this interim rule.

  3. Veterans Entrepreneurship and Small Business Development Act of 1999: This final rule adopts, without changes, (a) the interim rule that added a 3% subcontracting plan goal for veteran-owned small businesses to FAR 19.704, Subcontracting Plan Requirements, and a 3% governmentwide agency goal for service-disabled veteran-owned small businesses throughout FAR Part 19, Small Business Programs (see the November 2000 Federal Contracts Perspective article "FAC 97-20 Implements Veterans Entrepreneurship Act, Raises Cost or Pricing Threshold to $550,000"); and (b) the interim rule that added a subcontracting plan goal for service-disabled veteran-owned small business concerns to FAR 52.219-9, Small Business Subcontracting Plan (see the November 2001 Federal Contracts Perspective article "2001 FAR Published; FAC 2001-01 Addresses Veterans, Davis-Bacon, Commercial Items, Very Small Businesses"). Four comments were received in response to the interim rules, but none were adopted.

  4. Trade Agreements Thresholds: On February 21, 2002, the United States Trade Representative (USTR) decided to adjust the U.S. dollar thresholds for the application of the Trade Agreements Act of 1979 (TAA) and the North American Free Trade Agreement (NAFTA) as follows: TAA: procurement of goods and services -- $169,000 (down from $177,000); procurement of construction services -- $6,481,000 (down from $6,808,000); NAFTA: procurement of goods and services -- $56,190 (up from $54,372); procurement of construction services -- $7,304,733 (up from $7,068,419) (see the March 2002 Federal Contracts Perspective article "Trade Agreements Act and NAFTA Thresholds Revised").

    This final rule revises the thresholds for the application of the TAA and NAFTA throughout FAR Part 25, Foreign Acquisition, and other parts of the FAR that reference the thresholds.

  5. Payments Under Fixed-Price Construction Contracts: This final rule revises FAR 52.232-5, Payments Under Fixed-Price Construction Contracts, to clarify the certification language. The ambiguity surfaced as a result of a decision issued on April 2, 1999, by the United States Court of Appeals for the Sixth Circuit in United States v. Gatewood (173 F.3d 983), in which the court concluded that requiring the prime contractor to certify that it has made payments to subcontractors and suppliers is not the same as having a prime contractor certify it has made all payments due to subcontractors and suppliers.

    A proposal was published to add the words "all" and "due" to FAR 52.232-5(c)(2) so it would read, "(c)(2) All payments due to subcontractors and suppliers from previous payments received under the contract have been made, and timely payments will be made from the proceeds of the payment covered by this certification, in accordance with subcontract agreements and the requirements of Chapter 39 of Title 31, United States Code..." Six respondents submitted comments, but none were adopted, so the proposed rule is finalized without change (for more on the proposed rule, see the November 2001 Federal Contracts Perspective article "Proposed Changes on Construction Payments, A-E Forms").

  6. Technical Amendments: This makes several changes to the FAR to update references and make editorial changes, the most significant being revising the web address in paragraph (a) of FAR 22.1503, Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor for the List of Products, from http://www.dol.gov/dol/ilab to http://www.dol.gov/ilab.


SBA Revising SBIR Program Policies

The Small Business Administration (SBA) has published its revised policy directive on the Small Business Innovation Research (SBIR) program. This is the first revision to the directive since 1993, and its primary purpose it to implement provisions of the Small Business Innovation Research Program Reauthorization Act of 2000 (Public Law 106-554), and provide guidance to federal agencies for the general conduct of the program.

In 1982, Congress established the SBIR program and directed SBA to "issue policy directives for the general conduct of the SBIR programs within the federal government." Because of the legislative requirement to "issue policy directives," there is no coverage of the SBIR program in SBA's regulations or in the Federal Acquisition Regulation (FAR) (although the memorandum forwarding the policy directive to the various agencies' SBIR program directors states that "the Federal Acquisition Regulations may need to be modified to conform to the requirements of the Reauthorization Act and a final policy directive").

The SBIR program consists of three phases:

Phase I: An agency identifies research and development (R&D) topics that directly affect its functions and are suitable for small business participation. The agency solicits proposals (no longer than 25 pages) that describe experimental or theoretical research efforts up to six months long and costing no more than $100,000. The small business offerors must agree to perform at least two-thirds of the effort. The agency can award more than one contract if several different solutions and approaches have merit.

Phase II: If the results of Phase I are promising, the agency may fund a Phase II of the research, which allows the small business to expand and develop the research further. The agency selects the Phase I small businesses it wants to submit proposals for Phase II, and the agency selects the small businesses it wants to continue funding -- up to $750,000 for up to a two year effort. However, the agency is under no obligation to fund any Phase II proposal. Phase II small businesses must perform at least one-half of the effort.

Phase III: Once Phase II is completed, the agency may enter into a non-SBIR funded agreement or contract for additional work. Phase III small businesses are also encouraged to obtain non-federal funds for commercial applications of the R&D.

The SBIR Program Reauthorization Act extended the SBIR program expiration date from September 30, 2000, to September 30, 2008. In addition, it made several other changes to the SBIR program and directed SBA to revise its SBIR program policy directive within 120 days to reflect those changes. On May 18, 2001, SBA published a proposed SBIR program policy directive to comply with that Congressional direction and to streamline the policy directive (see the June 2001 Federal Contracts Perspective article "SBA Proposes Revised SBIR Policy Directive"). SBA received more than 200 comments from 30 respondents, and the final directive reflects some of those comments.

The following are some of the more significant changes that have been made to the policy directive, as well as significant changes between the proposed and final policy directives:



SBA Waives One Nonmanufacturer Rule, Rethinks Another

In addition to the SBIR Policy Directive, SBA has been busy with its nonmanufacturer rule, waiving the rule for small arms ammunition manufacturing within North American Industry Classification System (NAICS) 332992, and reconsidering its waiver of the nonmanufacturer rule for unmounted and mounted bearings under NAICS 333613 (see the June 2002 Federal Contracts Perspective article "Nonmanufacturer Rule Waived for Bearings").

Public Law 100-656, enacted November 15, 1988, requires recipients of federal contracts that are set-aside for small businesses or are awarded through the SBA's 8(a) program for disadvantaged small businesses to provide the product of a small business manufacturer or processor if the recipient is not the actual manufacturer or processor. This is called the "nonmanufacturer rule" (see paragraph (f) of Federal Acquisition Regulation (FAR) 19.102, Size Standards). However, the law permits SBA to waive this requirement for any "class of products" if there are no small business manufacturers or processors in the federal market. Waiving the nonmanufacturer rule allows otherwise qualified nonmanufacturers to supply the products of any domestic manufacturer on a federal contract set aside for small business or awarded through the SBA's 8(a) program.

The SBA regulation on the nonmanufacturer rule is in Title 13 of the Code of Federal Regulations (CFR), Business and Credit Administration, Part 121, Small Business Size Standards, under paragraph (b) of 121.406, How Does a Small Business Concern Qualify to Provide Manufactured Products Under Small Business Set-Aside or MED [Minority Enterprise Development] Procurements? The SBA regulation on the waiver of the nonmanufacturer rule is 13 CFR 121.1202, When Will a Waiver of the Nonmanufacturer Rule Be Granted for a Class of Products? A complete list of products for which the nonmanufacturer rule has been waived is available at http://www.sba.gov/GC/approved.html.



Comments Requested on Improving Contract Closeouts

Comments are being sought from both government and industry on how the FAR, Defense FAR Supplement (DFARS), and General Services Administration Acquisition Regulation (GSAR) can be revised to facilitate timely contract closeouts. There is a substantial backlog of contracts that have not been closed out within the timeframes required by FAR 4.804, Closeout of Contract Files. DOD has analyzed the contract closeout process and the causes of backlogs, and has identified the lack of contract funding and agency resources as significant causes, along with process related delays like late submittal of final vouchers, final price redetermination proposals, royalty/patents submittals and approvals, final audits, overhead rate negotiations, and disposition of government property and classified materials.

The FAR Council is seeking comments on which, if any, FAR, DFARS, or GSAR requirements should be changed to help facilitate the contract closeout process. An interagency team has been established that will review the FAR, DFARS, and GSAR to determine what changes, if any, can be made to facilitate timely contract closeout. FAR, DFARS, and GSAR requirements relating to contract closeout that are not required by statute, not needed to ensure adequately standardized government business practices, or not needed to protect the public interest will be considered for revision or elimination.

Comments must be submitted on or before November 25, 2002, to General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405, or by e-mail to ANPR.contractcloseout@gsa.gov.



Bonneville Purchasing Instructions Available

Copies of the Bonneville Power Administration (BPA) Purchasing Instructions (BPI), which contain the procedures BPA uses in the solicitation, award, and administration of its purchases of goods and services, including construction, are available in print for $30, or without charge at the following Internet address: http://www.bpa.gov/Corporate/kgp/bpi/bpi.htm. Copies of the Bonneville Financial Assistance Instructions (BFAI), which contain the procedures that BPA uses in the solicitation, award, and administration of financial assistance instruments (principally grants and cooperative agreements), are available in print for $15 each, or without charge at the following Internet address: http://www.bpa.gov/corporate/kgp/bfai/bfai.htm.

Unbound copies of the BPI or BFAI may be obtained by sending a check for the proper amount to the Head of the Contracting Activity, Routing CK-1, Bonneville Power Administration, P.O. Box 3621, Portland, Oregon 97208-3621.



Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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