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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

December 2003
Vol. IV, No. 12

CONTENTS

Services Acquisition Reform Act Signed Into Law
Wage Determination On-Line Program Inaugurated
FAR Would Address Commercial Items in Construction
Small Arms Ammo Nonmanufacturer Waiver Terminated
DFARS Agency Activity Numbers, CCR Coverage Removed
NASA FAR Supplement Reissuance Proposed
OMB Releases First Set of 2003 FAIR Act Inventories
Navy Establishes Approval Levels for Services Buys

Services Acquisition Reform Act Signed Into Law,
Establishes Training Fund, Chief Acquisition Officer

On November 24, 2003, President Bush signed Public Law 108-136, the National Defense Authorization Act for Fiscal Year 2004, which contains several acquisition-related provisions, including the Services Acquisition Reform Act of 2003 (SARA). SARA applies to all agencies, and is a further attempt by Congress to bring commercial acquisition practices to the government.

The following are some of the significant provisions of SARA, which apply to all departments and agencies, not just the Department of Defense (DOD):

• Section 1412, Acquisition Workforce Training Fund: This directs the General Services Administration (GSA) to establish an acquisition workforce training fund to be managed by the Federal Acquisition Institution (FAI). The fund will be financed by depositing 5% of the fees collected by executive agencies (other than DOD) under governmentwide task and delivery-order contracts, governmentwide contracts for the acquisition of information technology ("governmentwide acquisition contracts" (GWACs)), and GSA's multiple-award schedule contracts (Federal Supply Schedule contracts). This training fund shall cease five years after enactment -- November 24, 2008.
  
  
• Section 1421, Chief Acquisition Officers: Each agency, other than DOD (which already has the Undersecretary of Defense for Acquisition, Technology, and Logistics), that has an appointed or designated Chief Financial Officer (CFO) shall appoint or designate a non-career employee as its Chief Acquisition Officer (CAO), who shall provide overall guidance and direction to the acquisition workforce, and report directly to the head of the agency. The CAO will not replace the senior procurement executive -- the senior procurement executive will manage the agency's day-to-day procurement operations.
  
  
• Section 1428, Authorization of Telecommuting for Federal Contractors: The Federal Acquisition Regulation (FAR) is to be amended to permit telecommuting by employees of government contractors in the performance of contracts. The FAR must prohibit the inclusion of any requirement or evaluation factor that would make an offeror ineligible or reduce the scoring of the offeror's proposal based on the offeror's inclusion of a plan to permit its employees to telecommute, unless the contracting officer determines the requirements of the agency cannot be met or would be adversely affected if telecommuting is permitted.
  
  
• Section 1431, Additional Incentive for Use of Performance-Based Contracting for Services: FAR Part 12, Acquisition of Commercial Items, must be amended to permit performance-based contracts or task orders for services to be treated as a contract for commercial items if the value of the contract or order does not exceed $25,000,000, the contract or task order specifies each task to be performed, and each task has a firm-fixed-price. This authority expires in 10 years, on November 24, 2013.
  
  
• Section 1432, Authorization of Additional Commercial Contract Types: FAR 12.207, Contract Type, is to be amended to authorize the use of time-and-materials or labor-hour contracts for the acquisition of commercial services that are commonly sold to the general public through such contracts and are procured on a competitive basis (currently, FAR 12.207 authorizes only firm-fixed-price and fixed-price with economic price adjustment contracts for commercial services). Time-and-materials or labor-hour contracts would be authorized for use only if the contracting officer determines that no other contract type is suitable, includes a ceiling price that the contractor exceeds at its own risk, and authorizes any subsequent change in the ceiling price only upon determining that such a change is in the best interest of the agency.
  
  
• Section 1443, Special Emergency Procurement Authority: For all acquisitions that support a contingency operation or facilitate the defense against or recovery from nuclear, biological, chemical, or radiological attack against the United States: (1) the micro-purchase threshold is increased from $2,500 to $15,000; (2) the simplified acquisition threshold is increased from $100,000 to $250,000 when the contract is to be awarded and performed inside the United States, and to $500,000 for contracts to be awarded and performed outside the United States; (3) such acquisitions are considered to be for commercial items, regardless of dollar amount; and (4) the limitation on 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 is increased from $5,000,000 to $10,000,000. However, acquisitions for supplies or services covered by this section that are in excess of $15,000,000 and are awarded on a sole source basis are not exempt from cost or pricing data requirements (see FAR Subpart 15.4, Contract Pricing), or the Cost Accounting Standards (see Chapter 99 of Title 48 of the Code of Federal Regulations and FAR Part 30, Cost Accounting Standards Administration). (EDITOR'S NOTE: The threshold increases are essentially the same as those authorized by Section 836 of the Fiscal Year 2002 National Defense Authorization Act (Public Law 107-107), which expired September 30, 2003. For more information on this authority, see the November 2003 Federal Contracts Perspective article "CCR Registration, Unique Contract Numbers Required.")

The following are other acquisition-related provisions in the Defense Authorization Act that apply to DOD only (unless otherwise indicated):

• Section 804, Special Temporary Contract Closeout Authority: Until September 30, 2006, the Secretary of Defense is authorized to settle the financial accounts for contracts executed prior to September 30, 1996, that have unreconciled balances of less than $100,000.
  
  
• Section 833, Single Acquisition Corps: DOD is required to consolidate all the military departments' acquisition corps into a single acquisition corps.
  
  
• Section 835, General Management Provisions: Authorizes the Secretary of Defense to establish different experience, educational, and tenure requirements for contracting officers, program executive officers, senior contracting officials, program managers, and positions in the contract contingency force filled by members of the armed forces.
  
  
• Section 841, Additional Authority to Enter Into Personal Services Contracts: DOD may enter into personal services contracts for urgent or unique services that would not be practicable for it to obtain by other means if the services: (1) are to be provided by individuals outside the United States, regardless of their nationality, and are necessary and appropriate for supporting DOD activities and programs outside the U.S.; (2) directly support the mission of a DOD intelligence component or counterintelligence organization; or (3) directly support the mission of the U.S. Special Operations Command.
  
  
• Section 843, Multiyear Task and Delivery Order Contracts: The total period for a task or delivery order contract may not be more than five years. (This applies to DOD, the National Aeronautics and Space Administration (NASA), and the Coast Guard.)
  
  
• Section 853, Demonstration Project for Contractors Employing Persons with Disabilities: Authorizes DOD to carry out a demonstration project by entering into one or more contracts with an eligible contractor (that is, at least 33% of its employees are severely disabled individuals) for the purpose of providing DOD contracting opportunities for severely disabled individuals. Offers under the demonstration program shall have as an evaluation factor the percentage of the offeror's total workforce that consists of severely disabled individuals.

Wage Determination On-Line Program Inaugurated

On November 12, 2003, the Department of Labor's (DOL) Wage and Hour Division announced the official launch of the new Wage Determination On-Line (WDOL) program at http://www.wdol.gov, where current and archived Davis-Bacon Act (DBA) and Service Contract Act (SCA) wage determinations are available.

The DBA requires that construction contractors with contracts over $2,000 pay their construction workers no less than the locally prevailing wage rate. The SCA requires service contractors with contracts over $2,500 to pay service employees no less than the wage rates and fringe benefits found prevailing in the locality. DOL establishes these minimum wages through what are called "wage determinations." Previously, agencies had to request that DOL provide wage determinations for the various types of labor used on the contract. Now, with the launching of WDOL.gov, these wage determinations are readily available to the federal contracting community and the general public.

WDOL.gov offers users several unique features, including (1) guidance to contracting officers on selecting the appropriate wage determinations for each contract action; (2) access to the most current DBA and SCA wage determinations, as well as an alert service for notification of future revisions to particular wage determinations; (3) access to databases containing archived DBA and SCA wage determinations; and (4) access to other websites that many in the contracting community may not have known existed.

FAR Would Address Commercial Items in Construction

The FAR Council has published a proposed FAR rule that would require that FAR 52.244-6, Subcontracts for Commercial Items and Commercial Components, be required in solicitations and contracts other than those for commercial items.

FAR Subpart 44.4, Subcontracts for Commercial Items and Commercial Components, prescribes the policies limiting the contract clauses a prime contractor my be required to apply to any subcontractors that are furnishing commercial items or commercial components. FAR 44.403, Contract Clause, requires that FAR 52.244-6 be included "in solicitations and contracts for supplies or services other than commercial items." It is not clear whether this includes solicitations and contracts for construction. Therefore, this proposed rule would amend FAR 44.403 to revise the prescription to read "in solicitations and contracts other than those for commercial items." This change would clearly include construction contracts.

Also, the definition of "commercial item" in paragraph (a) of FAR 52.244-6, which currently reads "'Commercial item' has the meaning contained in the clause at [FAR] 52.202-1, Definitions," would be revised to read "'Commercial item' has the meaning contained in the clause at [FAR] 52.202-1, Definitions, and includes commercial construction materials but does not include construction itself." This would clarify that a commercial item would include commercial construction materials but would not include construction itself.

Comments on the proposed rule should be submitted on or before December 26, 2003, to General Services Administration, FAR Secretariat (MVA), 1800 F Street, NW, Room 4035, Attn: Laurie Duarte, Washington, DC 20405; or by e-mail to: farcase.2002-021@gsa.gov.

Small Arms Ammo Nonmanufacturer Waiver Terminated

The Small Business Administration (SBA) announced that it is terminating its waiver of the nonmanufacturer rule for small arms ammunition manufacturing under North American Industry Classification System (NAICS) code 332992. This decision is based on SBA's discovery of small business manufacturers for these products. (EDITOR'S NOTE: Paragraph (f) of FAR 19.102, Size Standards, requires recipients of federal contracts set-aside for small businesses or awarded through the SBA's 8(a) program 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" 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.)

SBA published a notice on September 6, 2002, that it was granting a nonmanufacturer rule waiver for small arms ammunition manufacturing within NAICS 332992. SBA granted the waiver because it was unaware of any small business sources for these items and it received no comments when it published its intent to grant such a waiver (see the October 2002 Federal Contracts Perspective article "SBA Waives One Nonmanufacturer Rule, Rethinks Another").

It was brought to SBA's attention by SBA's Procurement Center Representatives that a small business manufacturer exists for items within this class of products. SBA published a notice of its intent to terminate the waiver granted for small arms ammunition manufacturing, and invited the public to comment on its intent to terminate the waiver (see the August 2003 Federal Contracts Perspective article "SBA Busy with Size Standards, Nonmanufacturer Rule"). Comments were received from small business manufacturers, so SBA is required to terminate the waiver of the nonmanufacturer for small arms ammunition manufacturing under NAICS 332992. Therefore, recipients of contracts set aside for small or 8(a) businesses will be required to provide the products of small business manufacturers or processors on such contracts.

DFARS Agency Activity Numbers, CCR Coverage Removed

DOD did some subtracting from the Defense FAR Supplement (DFARS) during November, and did some adding as well:

• DOD Activity Address Codes in Contract Numbers: DFARS Subpart 204.70, Uniform Procurement Instrument Identification Numbers, is amended to prescribe the use of DOD activity address codes in the first six positions of solicitation and contract numbers. This provides consistency in the method of identifying DOD activities and eliminates the need to maintain the list of DOD activity address numbers in DFARS Appendix G, Activity Address Numbers, which is removed.
  
  
• Central Contractor Registration (CCR): This interim rule deletes DFARS Subpart 204.73, Central Contractor Registration, because it duplicates policy added to the FAR by Federal Acquisition Circular (FAC) 2001-16 (see the November 2003 Federal Contracts Perspective article "CCR Registration, Unique Contract Numbers Required").
  
  FAC 2001-16 added FAR Subpart 4.11, Central Contractor Registration, and it requires all federal contractors to register in the CCR database prior to award of any contract or agreement. Since the DFARS policy has been superseded by the FAR policy, this interim rule removes DFARS Subpart 204.73 and most other DFARS policy pertaining to CCR. However, there is still a need to address requirements for CAGE code information to accommodate DOD payment systems, so this interim rule adds DFARS Subpart 204.11, Central Contractor Registration, which retains DOD requirements for inclusion of CAGE codes on contracts and in the CCR database.
  
  Comments on this interim rule must be submitted by January 13, 2004, either on the website at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm, by e-mail to dfars@acq.osd.mil, by fax to 703-602-0350, or by mail to the Defense Acquisition Regulations Council, Attn: Angelena Moy, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062.
  
  
• Competition Requirements for Purchases from the Federal Prison Industries (FPI): DFARS Subpart 208.6, Acquisition from Federal Prison Industries, Inc., is amended to implement Section 811 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 101-107) and Section 819 of the National Defense Authorization Act for Fiscal Year 2003 (Public Law 107-314).
  
  Section 811 of Public Law 107-107 requires that contracting officers conduct market research before purchasing a product listed in the Federal Prison Industries (FPI) catalog to determine whether the FPI product is comparable in price, quality, and time of delivery to products available from the private sector, and if the FPI product is not comparable, to use competitive procedures to procure the product. On April 26, 2002, DOD published an interim rule implementing Section 811 by adding DFARS 208.602, Policy, and invited comments (see the May 2002 Federal Contracts Perspective article "New DFARS Rules Address Profit, Berry Amendment, Federal Prisons, NAFTA, Balance of Payments").
  
  Section 819 of Public Law 107-314 clarifies Section 811 by adding to "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" the words "that best meet DOD's needs in terms of price, quality, and time of delivery." On May 15, 2003, DOD published a proposed rule to further implement the requirements of Section 811 of Public Law 107-107 and Section 819 of Public Law 107-314 by making the corresponding changes to DFARS 208.602 and other changes to DFARS Subpart 208.6 (see the June 2003 Federal Contracts Perspective article "DFARS Changes Proposed on FPI Competition"). The 43 comments received in response to earlier interim rule were considered in the development of the proposed rule. DOD received 16 comments in response to the proposed rule, but has decided to adopt the proposed rule as final without changes.
  
  Besides making these changes, this final rule revises DFARS 208.602 to:
  
  
  • Permit the contracting officer to acquire the product through "the fair opportunity procedures in FAR 16.505 [Ordering], if placing an order under a multiple award task or delivery order contract." Previously, the contracting officer had been limited to using "competitive procedures" only (paragraph (a)(iv)(A)(2) ).
    
    
  • Require that FPI be included in the solicitation process and evaluated as any other offeror if the contracting officer determines the FPI product is not comparable (paragraph (a)(iv)(B)). This requirement applies to small business set-asides as well.
    
    
  • Require the contracting officer, when using a multiple award schedule issued under the procedures of FAR Subpart 8.4, Federal Supply Schedules, to "establish and communicate to FPI the requirements and evaluation factors that will be used as the basis for selecting a source, so that an offer from FPI can be evaluated on the same basis as the schedule holder; and considera timely offer from FPI."
  
  In addition, the following new DFARS sections are added:
  
  
  • DFARS 208.670, Performance as a Subcontractor, prohibits any requirement that a contractor, or subcontractor at any tier, use FPI as a subcontractor for performance of a contract.
    
    
  • DFARS 208.671, Protection of Classified and Sensitive Information, prohibits entering into any contract with FPI that allows an inmate worker access to any "(a) classified data; (b) geographic data regarding the location of (1) surface and subsurface infrastructure providing communications or water or electrical power distribution; (2) pipelines for the distribution of natural gas, bulk petroleum products, or other commodities; or (3) other utilities; or (c) personal or financial information about any individual private citizen, including information relating to such person's real property however described, without the prior consent of the individual."
    
    
  • DFARS 219.502-70, Inclusion of Federal Prison Industries, Inc., requires the inclusion of FPI when using competitive procedures in accordance with DFARS 208.602(a)(iv).
  
  
• Provisional Award Fee Payments: This final rule amends DFARS 216.405-2, Cost-Plus-Award-Fee Contracts, to permit provisional award fee payments under cost-plus-award-fee (CPAF) contracts to successfully performing contractors prior to a final evaluation for the period if the payments:
  
  
  • Are not made more frequently than once a month;
    
    
  • For the initial award fee evaluation period, are limited to no more than 50% of the award fee available for that period; and for subsequent award fee evaluation periods, 80% of the evaluation score for the prior evaluation period times the award fee available for the current period (for example, if the contractor received 90% of the award fee available for the prior evaluation period, provisional payments for the current period could not exceed 72% (90% x 80%) of the award fee available for the current period);
    
    
  • Are superceded by an interim or final award fee evaluation for the applicable evaluation period (but if provisional payments exceed the payment determined by the evaluation score for the applicable period, the contracting officer must collect the debt in accordance with FAR 32.606, Debt Determination and Collection); and
    
    
  • May be discontinued, or reduced as deemed appropriate by the contracting officer, when he or she determines that the contractor will not achieve a level of performance commensurate with the provisional payment.
  
  A proposed rule was published November 22, 2002. Seven comments were submitted, but the proposed rule is adopted as final with clarifying changes (see the December 2002 Federal Contracts Perspective article "DFARS Changes on FMS, Award Fee Payments").
  
  The rule is effective January 13, 2004, and will apply to solicitations issued on or after that date. Contracting officers may, at their discretion, apply these changes to solicitations issued before January 13, 2004, provided award of the resulting contract(s) occurs on or after January 13, 2004. Contracting officers may, at their discretion, apply the changes to any existing contract with appropriate consideration.

NASA FAR Supplement Reissuance Proposed

The National Aeronautics and Space Administration (NASA) is proposing to remove from the Code of Federal Regulations (CFR) version of the NASA FAR Supplement (NFS) those portions containing information that consists of internal administrative procedures and guidance that does not control the relationship between NASA and contractors or prospective contractors. All that would remain in the CFR version of the NFS is information requiring codification and subject to public comment. The Internet version of the NFS (http://www.hq.nasa.gov/office/procurement/regs/nfstoc.htm) will continue to contain both information requiring codification and internal agency guidance. Changes to the Internet version of the NFS would be incorporated through Procurement Notices (PNs).

The following NFS subparts would be removed: 1801.2, 1801.3, 1801.4, 1801.6, 1801.7, 1803.2, 1803.3, 1803.5, 1803.6, 1803.7, 1803.8, 1804.2, 1804.2, 1804.5, 1804.6, 1804.8, 1804.9, 1804.70, 1804.71, 1804.72, 1804.73, 1805.1, 1805.2, 1805.4, 1805.5, 1806.3, 1806.5, 1807.2, 1807.3, 1807.5, 1807.70, 1807.71, 1808.1, 1808.4, 1808.6, 1808.7, 1811.5, 1811.6, and 1812.1.

In addition, many NFS sections in NFS Part 1801 through 1812 would be removed.

Comments on the proposed rule should be submitted on or before January 16, 2004, to Celeste Dalton, NASA, Office of Procurement, Contract Management Division (Code HK), Washington DC 20546 or by e-mail to: Celeste.M.Dalton@nasa.gov.

OMB Releases First Set of 2003 FAIR Act Inventories

On November 21, the Office of Management and Budget (OMB) released the first set of Fiscal Year 2003 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. Inventories in this first set are from the Departments of Housing and Urban Development, Interior, and Transportation; National Aeronautics and Space Administration; OMB; and several smaller agencies. The inventories are available at http://www.whitehouse.gov/omb/procurement/index.html.

Interested parties have 30 working days (that is, until January 7, 2004) to challenge the omission or inclusion of an activity on an agency's 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 2003 FAIR Act inventories, and it includes the website addresses for individual agency inventories.

Navy Establishes Approval Levels for Services Buys

The Navy is revising the Navy Acquisition Procedures Supplement (NAPS) to define its approval levels for use of a contract or task order that is not performance-based. This is necessary to implement the requirements in the new DFARS 237.170, Approval of Contracts and Task Orders for Services (see the November 2003 Federal Contracts Perspective article "DFARS Changes on Task Orders, Unique Item IDs").

To implement this, NAPS 5237.170, Approval of Contracts and Task Orders for Services, is added. It consists of NAPS 5237.170-3, Approval Requirements. NAPS 5237.170-3(a) states that the following are the approving officials for the acquisition of services through a DOD contract or task order that is not performance-based:

• The head of the contracting activity (HCA) for services at or below $50,000,000. The HCA's authority may be delegated to (i) the Deputy/Assistant Commander for Contracts, a Flag or General Officer or member of the Senior Executive Service (SES) who is a member of the Acquisition Professional Community, or (ii) to the Commanding Officer for commands and locations without a local SES/Flag/General Officer.
  
  
• The Deputy Assistant Secretary of the Navy for Acquisition Management (DASN(ACQ)) for acquisitions exceeding $50,000,000, but not exceeding $500,000,000.

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