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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

January 2003
Vol. IV, No. 1

CONTENTS

2003 Defense Authorization Act Limits Task Orders, Extends FAR Subpart 13.5 Until 2004
Department of Homeland Security Approved to Open
DFARS Changes on Mentor-Protege Program, U.S.-Made Products
DTAR to be Rewritten
EO Guides Faith-Based Initiatives Implementation
OMB Releases Second Set of FAIR Act Inventories
PRO-Net, CCR Databases Merged
Prompt Payment Interest Rate Set at 4 1/4%

2003 Defense Authorization Act Limits Task Orders,
Extends FAR Subpart 13.5 Until January 1, 2004

On December 2, 2002, President Bush signed the $393 billion National Defense Authorization Act for Fiscal Year 2003 (Public Law 107-314). As was the case with the FY 2002 National Defense Authorization Act, this year's act is relatively calm and quiet. However, it does contain acquisition-related provisions in Title VIII, Acquisition Policy, Acquisition Management, and Related Matters (one of which applies governmentwide), and a few other miscellaneous provisions scattered about.

Governmentwide:

• Section 812, One-Year Extension of Program Applying Simplified Procedures to Certain Commercial Items: Extends from January 1, 2003, to January 1, 2004, the authority in FAR Subpart 13.5, Test Program for Certain Commercial Items, for contracting officers governmentwide to use FAR Part 13 simplified acquisition procedures when acquiring commercial items up to $5,000,000.

Applicable to Department of Defense (DOD) Only:

• Section 801, Buy-to-Budget Acquisition of End Items: Allows DOD to acquire a higher quantity of an end item than specified in an authorization or appropriations law if: (1) the agency has an established requirement for the end item that is expected to remain substantially unchanged throughout the period of the acquisition; (2) it is possible to acquire the higher quantity without additional funding because of production efficiencies or other cost reductions; (3) the funds used for the acquisition of the higher quantity of end items will not exceed the amount provided for the acquisition of the end item; and (4) the amount is sufficient to ensure that each of the additional end items are fully funded and complete.
  
  
• Section 805, Performance Goals for Procuring Services Pursuant to Multiple Award Contracts: Establishes the following goals for purchases of services under multiple award contracts that are made on a competitive basis and involve receipt of more than one offer from qualified contractors: for FY 2003, not less than 40%; for FY 2004, not less than 50%; and for FY 2011, not less than 75%.
  
  Also, this section establishes the following goals for all purchases of services under multiple award contracts that use performance-based purchasing specifying firm-fixed prices for the specific tasks to be performed: for FY 2003, not less than 25%; for FY 2004, not less than 35%; for FY 2005, not less than 50%; and for FY 2011, not less than 70%.
  
  
• Section 811, Limitation Period for Task and Delivery Orders: Limits to five years the length of task and delivery order contracts, and applies the same restrictions and requirements to such multiyear task and delivery order contracts as other multiyear contracts. This also applies to the National Aeronautics and Space Administration (NASA).
  
  
• Section 812, One-Year Extension of Program Applying Simplified Procedures to Certain Commercial Items: Extends from January 1, 2003, to January 1, 2004, the authority in FAR Subpart 13.5, Test Program for Certain Commercial Items, for contracting officers governmentwide to use FAR Part 13 simplified acquisition procedures when acquiring commercial items up to $5,000,000.
  
  
• Section 816, Extension of Contract Goal for Small Disadvantaged Businesses and Certain Institutions of Higher Education: Extends for three years, through FY 2006, the 5% goal for awards to small disadvantaged businesses, Historically Underutilized Business Zone (HUBZone) concerns, historically black colleges and universities, and minority institutions. This also applies to NASA.
  
  
• Section 817, Grants of Exceptions to Cost or Pricing Data Certification Requirements and Waivers of Cost Accounting Standards: Requires that guidance be issued on when it is appropriate to grant a waiver to cost or pricing data certification requirements and waivers of cost accounting standards. The guidance is to state that such waivers may be granted only when: (1) the property or services cannot reasonably be obtained under the contract, subcontract, or modification without the grant of the exception or waiver; (2) the price can be determined to be fair and reasonable without the submission of certified cost and pricing data or the application of cost accounting standards; and (3) there are demonstrated benefits to granting the exception or waiver.
  
  
• Section 819, Contracting with Federal Prison Industries (FPI): To clarify the requirements of Section 811 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107), requires that competitive procedures be used to acquire a product if the contracting officer determines the FPI product is not comparable in price, quality, or time of delivery to products available from the private sector that best meet DOD's needs in terms of price, quality, and time of delivery (italicized words added). In addition, such a determination by a contracting officer is not subject to review. Also, a contractor or potential contractor may not be required to use FPI as a subcontractor or supplier of products or provider of services for the performance of a DOD contract by any means. Finally, DOD is prohibited from entering into a contract with FPI if an inmate worker would have access to: (1) any classified data; (2) any geographic data regarding the location of surface and subsurface infrastructure providing communications or water or electrical power distribution, pipelines for the distribution of natural gas, bulk petroleum products, or other commodities, or other utilities; or (3) any personal or financial information about any private citizen, including information relating to such person's real property, without the prior consent of the individual. (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." For more on acquisitions from FPI, see FAR Subpart 8.6, Acquisitions from Federal Prison Industries, Inc.)
  
  
• Section 820, Revisions to Multiyear Contracting Authority: Clarifies that funds for multiyear contracts may only be used for the procurement of complete and usable end items, for the procurement of long-lead items necessary to meet a planned delivery schedule for complete major end items, or for economic order quantities of long-lead items when authorized by law. This also applies to NASA.

In addition to Title VIII, Public Law 107-314 has several other acquisition-related provisions squirreled away:

• Section 243, Defense Acquisition Challenge Program: Requires DOD to establish a "Defense Acquisition Challenge Program" to provide any person or activity within or outside DOD the opportunity to propose alternatives at the component, subsystem, or system level of an existing DOD program that would result in improvements in performance, affordability, manufacturability, or operational capability.
  
  
• Section 244, Encouragement of Small Businesses and Nontraditional Defense Contractors to Submit Proposals Potentially Beneficial for Combating Terrorism: During FYs 2003, 2004, and 2005, DOD is required to establish an outreach program that provides a process for reviewing and evaluating research activities of, and new technologies being developed by, small businesses and nontraditional defense contractors that have the potential for meeting a defense requirement or technology development goal that relates to the combat of terrorism.
  
  
• Section 365, Logistics Support and Services for Weapon Systems Contractors: Authorizes DOD to make available logistics support and logistics services to a contractor in support of the performance of a contract for the construction, modification, or maintenance of a weapon system.
  
  
• Section 1007, Improvements in Purchase Card Management: Requires DOD to conduct periodic reviews to determine whether each purchase card holder has a need for that card. Also, DOD is to conduct periodic audits to identify potentially fraudulent, improper, and abusive uses of purchase cards; any patterns of improper card holder transactions, such as purchases of prohibited items; and categories of purchases that should be made by means other than purchase cards to better aggregate purchases and obtain lower prices. Appropriate penalties are to be prescribed, to include adverse personnel actions or other punishments.
  
  
• Section 1008, Improvements in Travel Card Management: Permits DOD to require disbursement directly to the issuer of a defense travel card. Also, DOD may deduct and withhold from an employee's or armed forces member's pay any amount that is owed by the employee or member to a creditor if payment is delinquent and the amount is not in dispute.

Department of Homeland Security Approved to Open

On November 25, 2002, President Bush signed into law Public Law 107-296, the Homeland Security Act of 2002. It establishes the Department of Homeland Security (DHS) and authorizes it to open in 60 days -- on January 24, 2003.

There are several provisions of the act that are of interest to those interested in acquisitions with the department:

• Section 832, Personal Services: Permits the secretary of homeland security to procure temporary or intermittent services of experts or consultants, and temporary or intermittent personal services without regard to certain pay limitations when necessary due to an urgent homeland security need.
  
  
• Section 833, Special Streamlined Acquisition Authority: Authorizes the secretary to use specified micro-purchase, simplified acquisition, and commercial item acquisition procedures with respect to any procurement made through September 30, 2007, if the secretary determines that the mission of DHS would be seriously impaired without the use of such authorities. When the secretary makes such a determination, the micro-purchase threshold is increased from $2,500 to $7,500, the simplified acquisition threshold is increased from $100,000 to $200,000 for purchases made within the United States (and to $300,000 for purchases made outside the U.S.), and the FAR Subpart 13.5 limitation from $5,000,000 to $7,500,000.
  
  
• Section 853, Increased Simplified Acquisition Threshold for Procurements in Support of Humanitarian or Peacekeeping Operations or Contingency Operations: The simplified acquisition threshold for procurements for "defense against or recovery from terrorism or nuclear, biological, chemical, or radiological attack" that is carried out in support of a humanitarian or peacekeeping operation or a contingency operation is increased from $100,000 to $200,000 for purchases made within the U.S., and to $300,000 for purchases made outside the U.S.
  
  
• Section 854, Increased Micro-Purchase Threshold for Certain Procurements: The micro-purchase threshold for procurements for "defense against or recovery from terrorism or nuclear, biological, chemical, or radiological attack" is $7,500.
  
  
• Section 855, Application of Certain Commercial Items Authorities to Certain Procurements: Permits heads of agencies to use simplified acquisition procedures for commercial items to procurements for "defense against or recovery from terrorism or nuclear, biological, chemical, or radiological attack." In addition, for such procurements, the $5,000,000 limitation on the use of simplified acquisition procedures for commercial items is inapplicable.
  
  
• Section 856, Use of Streamlined Procedures: Requires heads of agencies to use streamlined procedures when making procurements for "defense against or recovery from terrorism or nuclear, biological, chemical, or radiological attack" that are sole source, urgent, classified, or in the public interest. Also, the competition thresholds for 8(a) and HUBZone contract awards ($5,000,000 for manufacturing, $3,000,000 for all others) are waived for such procurements.
  
  
• Section 857, Identification of New Entrants Into the Federal Marketplace: Requires each executive agency to conduct market research to identify the capabilities of small businesses and new entrants into federal contracting that are available to meet agency requirements for defense against or recovery from terrorism or nuclear, biological, chemical, or radiological attack.

DFARS Changes on Mentor-Protege Program, U.S.-Made Products

Several changes to the Defense FAR Supplement (DFARS) were made during December:

• Extension of DOD Pilot Mentor-Protege Program: DFARS Subpart 219.71, Pilot Mentor-Protege Program, and DFARS Appendix I, Policy and Procedures for the DOD Pilot Mentor-Protege Program, are amended to extend the expiration of the Mentor-Protege program for three years, as required by Section 812 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107). The period during which companies may enter into agreements under the DOD Pilot Mentor-Protege Program is extended from September 30, 2002, to September 30, 2005, and the period during which mentor firms may incur costs that are eligible for reimbursement or credit under the program is extended from September 30, 2005, to September 30, 2008. (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.")
  
  
• Trade Agreements Act -- Exception for U.S.-Made End Products: This finalizes, without changes, the July 30, 2002, proposed rule to revise DFARS Part 225, Foreign Acquisition, and the corresponding provisions and clauses in DFARS Part 252, to implement the determination of Under Secretary of Defense for Acquisition, Technology, and Logistics E.C. "Pete" Aldridge (USD(AT&L)) that, for procurements subject to the Trade Agreements Act (TAA), it would be inconsistent with the public interest to apply the Buy American Act (BAA) to U.S.-made end products that are "substantially transformed in the United States." The intent of the determination was to eliminate a conflict between the definition of "domestic end product" under the BAA and the definition of "U.S.-made end product" under the TAA. Two comments were submitted on the proposed change, and both supported the change, so the proposed rule is finalized without change. (EDITOR'S NOTE: For more on the proposed rule and the issues involved, see the August 2002 Federal Contracts Perspective article DOD Proposes Exempting 'Substantially Transformed' U.S.-Made End Products from the Buy American Act." For more on the BAA, see FAR Subpart 25.1, Buy American Act -- Supplies, FAR Subpart 25.2, Buy American Act -- Construction Materials, and the corresponding DFARS Subparts 225.1 and 225.2. The TAA applies to acquisitions for supplies or services if the estimated value of the acquisition is $169,000, and to construction if the estimated value of the acquisition is $6,481,000. For more on the TAA, see FAR Subpart 25.4, Trade Agreements, and the corresponding DFARS Subpart 225.4.)
  
  
• Purchase Card Internal Controls: DOD also published a proposed rule to amend DFARS 213.301, Governmentwide Commercial Purchase Card, to add policy on internal controls for the proper use of the governmentwide commercial purchase card. Several recent General Accounting Office (GAO) reports and congressional committee meetings have identified several instances where DOD employees have misused their purchase cards and there was insufficient oversight. Part of the problem is that the current DFARS 213.301 concentrates on the conditions placed on use of the commercial purchase card outside the United States, but provides no guidance on how what can and cannot be purchased with the card, or how to administer the purchase card program. Therefore, DOD proposes to redesignate the current DFARS 213.301 as DFARS 213.301-71, Overseas Use of the Governmentwide Commercial Purchase Card, and would substitute a new DFARS 213.301, which would contain the following restrictions on purchase card use:
  
  
  • Only formally appointed and trained cardholders are authorized to use the purchase card.
    
    
  • Requirements exceeding the micro-purchase threshold ($2,500 in most instances) or the cardholder's single purchase limit must not be split into several purchases to use the purchase card.
    
    
  • The purchase card may not be used to issue a task or delivery order that exceeds the cardholder's single purchase limit.
    
    
  • Cardholders, when ordering against a Federal Supply Schedule, must comply with FAR 8.404, Using Schedules, and DFARS 208.404, and must retain best value documentation with the purchase card file.
    
    
  • Cardholders, when ordering against a blanket purchase agreement, must comply with FAR 13.303-5, Purchases Under BPAs.
    
    
  • Each order exceeding $2,500 must comply with the reporting requirements of DFARS Subpart 204.6, Contract Reporting.
    
    
  • Purchase cards are not to be issued to contractors.
  
  Comments must be submitted by February 18, 2003. Respondents may submit comments directly on the web site at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm; by e-mail to dfars@acq.osd.mil; by mail to Defense Acquisition Regulations Council, Attn: Angelena Moy, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; or by fax to 703-602-0350. (EDITOR'S NOTE: For more on additional controls Congress is placing on DOD's purchase card program, see the lead article in this issue on the FY 2003 Defense Authorization Act, specifically the portion on Section 1007.)

DTAR to be Rewritten

The Department of the Treasury is proposing to completely rewrite the Department of the Treasury Acquisition Regulation (DTAR) so it is in plain English; eliminates internal operating procedures that do not have a significant effect beyond Treasury; reflects current policy, practice, and recent FAR changes; and eliminates coverage that duplicates the FAR. In addition, the rewritten DTAR would establish a Treasury mentor-protege program. Treasury intends the reissued DTAR to be simple for contractors, offerors, and Treasury contracting personnel to use. (EDITOR'S NOTE: The DTAR is Chapter 10 of Title 48 of the Code of Federal Regulations.)

Some of the more prominent provisions of the proposed rewritten DTAR are:

• Proposed DTAR 1005.202, Exceptions; DTAR 1019.811, Preparing the Contracts; DTAR 1052.219-18, Notification of Competition Limited to Eligible 8(a) Concerns -- Alternate III (Deviation); and DTAR 1052.219-72, Notification of Competition Limited to Eligible 8(a) Concerns, provide guidance and contract clauses based on the Memorandum of Understanding with the Small Business Administration allowing Treasury to contract directly with 8(a) contractors.
  
  
• Proposed DTAR 1019.202-70, The Treasury Mentor-Protege Program; DTAR 1052.219-73, Department of the Treasury Mentor-Protege Program; and DTAR 1052.219-75, Mentor Requirements and Evaluation, provide procedures and guidance for the Treasury Mentor-Protege Program that assists qualified small businesses to receive developmental assistance from Treasury prime contractors to increase the base of small businesses eligible to perform Treasury contracts and subcontracts.

Comments must be submitted by January 10, 2003, to the Department of the Treasury, Office of the Procurement Executive, ATTN: Angelie Jackson, 1500 Pennsylvania Ave., NW, c/o 1310 G Street, NW, Suite 400W, Washington, DC 20220.

EO Guides Faith-Based Initiatives Implementation

On December 12, President Bush issued Executive Order (EO) 13279, Equal Protection of the Laws for Faith-Based and Community Organizations, to "guide federal agencies in formulating and developing policies with implications for faith-based organizations and other community organizations." This guidance applies to certain contracts issued by various departments and agencies.

On January 29, 2001, President Bush issued EO 13198 directing the Departments of Education, Health and Human Services, Housing and Urban Development, Justice, and Labor to "establish within their respective departments a Center for Faith-Based and Community Initiatives" to "coordinate department efforts to eliminate regulatory, contracting, and other programmatic obstacles to the participation of faith-based and other community organizations in the provision of social services."

EO 13279 supplements EO 13198 by defining which "social services" are subject to the president's faith-based initiative:

1. Child care services, protective services for children and adults, services for children and adults in foster care, adoption services, services related to the management and maintenance of the home, day care services for adults, and services to meet the special needs of children, older individuals, and individuals with disabilities (including physical, mental, or emotional disabilities);
   
   
2. Transportation services;
   
   
3. Job training and related services, and employment services;
   
   
4. Information, referral, and counseling services;
   
   
5. The preparation and delivery of meals and services related to soup kitchens or food banks;
   
   
6. Health support services;
   
   
7. Literacy and mentoring programs;
   
   
8. Services for the prevention and treatment of juvenile delinquency and substance abuse, services for the prevention of crime and the provision of assistance to the victims and the families of criminal offenders, and services related to intervention in, and prevention of, domestic violence; and
   
   
9. Services related to the provision of assistance for housing under federal law.

To implement this guidance, EO 13279 amends EO 11246 of September 24, 1965 (Section 202 of which mandates equal opportunity for all persons regardless of race, color, religion, sex, or national origin), to exempt from the equal opportunity requirements "a government contractor or subcontractor that is a religious corporation, association, educational institution, or society, with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities." In addition, EO 13279 amends EO 11246 to permit the Secretary of Labor to "provide, by rule, regulation, or order, for the exemption of facilities of a contractor that are in all respects separate and distinct from activities of the contractor related to the performance of the contract."

Finally, President Bush also issued EO 13280, Responsibilities of the Department of Agriculture and the Agency for International Development With Respect to Faith-Based and Community Initiatives, to direct the Department of Agriculture and the Agency for International Development to establish Centers for Faith-Based and Community Initiatives, and to comply with EO 13198 and EO 13279.

OMB Releases Second Set of FAIR Act Inventories

On December 9, the Office of Management and Budget (OMB) released the second set of Fiscal Year 2002 Commercial Activities Inventories of non-governmental functions being performed by government agencies. These inventories are required to be compiled and made available to the public by the Federal Activities Inventory Reform (FAIR) Act of 1998. This second set of inventories covers almost 54,000 positions; the first set covered approximately 250,000. Inventories are from the Departments of Education and Interior, the Environmental Protection Agency, the Small Business Administration, and others. The agencies' lists are available at http://www.whitehouse.gov/OMB/procurement/index.html.

Interested parties have 30 working days (that is, until January 23, 2003) to challenge the omission or inclusion of an activity on an agency's Commercial Activities Inventories list. The Office of Federal Procurement Policy (OFPP) has prepared a summary "FAIR Act User's Guide" and it is available at http://www.whitehouse.gov/OMB/procurement/index.html. This User's Guide will help interested parties review 2002 FAIR Act inventories, and include the website addresses for individual agency inventories.

PRO-Net, CCR Databases Merged

On December 19, DOD and the Small Business Administration (SBA) announced that they had completed the integration of two key federal contractor databases: the Procurement Marketing and Access Network (PRO-Net) and the Central Contractor Registration (CCR). The merged databases will allow small businesses to input information into both databases once.

PRO-Net is SBA's electronic gateway to information by and for small businesses. It is at http://pro-net.sba.gov. CCR is DOD's repository for information about federal contractors that the government needs to transact with them. It eventually will become the repository for all agencies so vendors will not have to register separately with each agency. It is at http://www.ccr.gov.

Prompt Payment Interest Rate Set at 4 1/4%

The Department of Treasury has established 4 1/4% (4.25%) as the interest rate for the computation of payments made between January 1 and June 30, 2003, under the Prompt Payment Act 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, 2002 -- December 31, 2002) was 5 1/4% (5.25%). The interest rate for January 1, 2002, through June 30, 2002, was 5 1/2% (5.5%).

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