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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

August 2003
Vol. IV, No. 8

CONTENTS

FAC 2001-15 Addresses SF 129 Elimination, Environmental Issues
GSA Reduces Industrial Funding Fee to 0.75%
SBA Busy with Size Standards, Nonmanufacturer Rule
Proposed FAR Changes on CAS, Cost Principles
OMB Streamlines Grants Process
Treasury Rewrites DTAR
Prompt Payment Interest Rate Set at 3 1/8%

FAC 2001-15 Addresses SF 129 Elimination, Environmental Issues,
Cost Principles, GWAC/MAC Directory

Federal Acquisition Circular (FAC) 2001-15 amends the Federal Acquisition Regulation (FAR) to eliminate the Standard Form (SF) 129, Solicitation Mailing List Application; address environmental leadership and the acquisition of energy-efficient standby power devices; establish the "Contract Directory" for multi-agency use contracts; clarify the compensation and selling cost principles; and extend the Section 508 micro-purchase exception sunset provision.

• Elimination of the SF 129: This final rule removes from the FAR the requirement for contracting offices to establish and maintain manual solicitation mailing lists, thus eliminating the need for the SF 129.
  
  The SF 129 was created to enable contracting activities to obtain information from sources to develop a solicitation mailing list. However, agencies now have access to many tools that can provide the functionality of the SF 129 but in a more efficient and effective manner, such as the Central Contractor Registration (CCR) system (http://www.ccr.gov); PRO-Net (http://pro-net.sba.gov), a gateway to procurement information for and about small businesses operated by the Small Business Administration; and FedBizOpps (http://www.fedbizopps.gov), the designated single governmentwide point of entry for public access to notices of procurement actions over $25,000.
  
  On November 6, 2002, a proposed rule was published to eliminate the manual collection of contractor data using the SF 129; delete much of FAR 14.205, Solicitation Mailing Lists; and amend or delete various sections throughout the FAR that refer to the SF 129, bidders lists, or mailing lists (see the December 2002 Federal Contracts Perspective article "Proposed FAR Changes on SF 129, GPO Printing, Debarment"). Three respondents submitted comments on the proposed rule, and the proposed rule is finalized with minor editorial changes.
  
  
• Leadership in Environmental Management: This final rule amends FAR Part 23, Environment, Energy and Water Efficiency, Renewable Energy Technologies, Occupational Safety, and Drug-Free Workplace, and the related clauses in FAR 52.223, to implement Executive Order (EO) 13148 of April 21, 2000, Greening the Government through Leadership in Environmental Management (for more on EO 13148, see the May 2000 Federal Contracts Perspective article "Three 'Greening' Executive Orders Issued").
  
  EO 13148 directed each federal agency to make sure "that all necessary actions are taken to integrate environmental accountability into agency day-to-day decisionmaking and long-term planning processes, across all agency missions, activities, and functions." It provided requirements and goals for agencies related to environmental management and compliance; right-to-know and pollution prevention; release reduction of toxic chemicals; use reduction of toxic chemicals, hazardous substances, and other pollutants; and reduction in ozone-depleting substances. Also, it revoked EO 12843 of April 21, 1993, Procurement Requirements and Policies for Federal Agencies for Ozone-Depleting Substances; EO 12856 of August 3, 1993, Federal Compliance with Right-To-Know Laws and Pollution Prevention Requirements; and EO 12969 of August 8, 1995, Federal Acquisition and Community Right-To-Know.
  
  On August 29, 2002, a proposed rule was published to:
  
  
  • Replace references to EOs 12843, 12856, and 12969 with references to EO 13148.
    
    
  • Revise the title of FAR Subpart 23.9 to "Contractor Compliance with Toxic Chemical Release Reporting," cite the Environmental Protection Agency's (EPA's) website at http://www.epa.gov/tri for guidance on the Emergency Planning and Community Right-to-Know Act of 1986, and add metal and coal mining and several other industries to those that must file the Toxic Chemical Release Inventory Form (Form R).
    
    
  • Revise FAR Subpart 23.10, Federal Compliance with Right-to-Know Laws and Pollution Prevention Requirements, to add policies and procedures for implementation of an environmental management system (EMS) at a federal facility, and completion of facility compliance audits (FCAs) at a federal facility.
    
    
  • Revise FAR 52.223-5, Pollution Prevention and Right-to-Know Information, to add Alternate I for use when the contractor is to operate, or operate at, a facility that has implemented an EMS; and add Alternate II for use when the agency determines the contractor's activities on a federal facility should be included within the FCA.
  
  Two respondents submitted comments and, as a result, the proposed rule is adopted as final with minor editorial revisions (for more on the proposed rule, see the September 2002 Federal Contracts Perspective article "FAR Changes Proposed to Cost Principles, to Address Overpayments, Environmental Management").
  
  
• Energy-Efficient Standby Power Devices: This final rule implements the provisions of Executive Order 13221, Energy Efficient Standby Power Devices, which directed agencies to purchase electrical products that use no more than one watt in their standby power consuming mode (for more on EO 13221, see the September 2001 Federal Contracts Perspective article "Bush Puts Bite on 'Vampire Appliances'").
  
  On October 16, 2002, a proposed rule was published to amend FAR Part 23 to implement EO 13221 and to clarify the requirements for the purchase of EPA-designated products (see the November 2002 Federal Contracts Perspective article "FAR Changes on Efficient Devices, Relocation Costs").
  
  The most significant changes proposed were:
  
  
  • Revise paragraph (a) of FAR 23.203, Energy-Efficient Products, to add, "For products that consume power acquire products consume power in a standby mode and are listed on FEMP's [the Department of Energy Federal Energy Management Program's] Standby Power Devices product listing, agencies shall (A) purchase items which meet FEMP's standby power wattage recommendation or document the reason for not purchasing such items; or (B) if FEMP has listed a product without a corresponding wattage recommendation, purchase items which use no more than one watt in their standby power consuming mode. When it is impracticable to meet the one watt requirement, agencies shall purchase items with the lowest standby wattage practicable... (b) The requirements in paragraph (a) of this section only apply when the relevant product's utility and performance meet the agency's need."
    
    
  • Revise paragraph (c) of FAR 23.405, Procedures, to require contracting officers to place a written justification in the contract file "if an acquisition of EPA-designated products above the micro-purchase threshold does not meet applicable minimum recovered material content recommended by EPA guidelines."
  
  Four respondents submitted comments on the proposed rule. As a result of the comments, the proposed rule is adopted as final with the definition of "energy-efficient standby power devices" in FAR 2.101, Definitions, revised to read as follows: "Energy-efficient standby power devices means products that use (1) external standby power devices, or that contain an internal standby power function; and (2) no more than one watt of electricity in their standby power consuming mode or meet recommended low standby levels as designated by the Department of Energy Federal Energy Management Program."
  
  
• Electronic Listing of Acquisition Vehicles Available for Use by More Than One Agency: This final rule adds a new FAR Subpart 5.6, Publicizing Multi-Agency Use Contracts, which requires contracting activities to publish in a single on-line database information about their governmentwide acquisition contracts (GWACs), multi-agency contracts (MACs), Federal Supply Schedule (FSS) contracts, blanket purchase agreements (BPAs) under FSS contracts, and other procurement instruments intended for use by other agencies. The "Contract Directory" is located at http://www.contractdirectory.gov.
  
  On February 15, 2002, a proposed FAR change was published to facilitate the development of that on-line database by adding FAR Subpart 5.6, consisting of a single section: FAR 5.601, Governmentwide Database of Contracts (see the March 2002 Federal Contracts Perspective article "Listing of Multi-Agency Contract Instruments Proposed"). The proposed FAR 5.601 would provide the Internet address for the database, require contracting activities to enter 16 data items into the database within ten days of award of a procurement instrument intended for use by multiple agencies, and require contracting activities to enter the 16 data items into the database by a specific date (to be determined) for all existing contracts and other procurement instruments intended for multiple agency use.
  
  On May 9, 2003, Office of Federal Procurement Policy (OFPP) Administrator Angela Styles announced the roll-out of the Contract Directory, and asked agencies that manage interagency contracts to populate the database (see the June 2003 Federal Contracts Perspective article "OFPP Rolls-Out Interagency 'Contract Directory'"). Ms. Styles directed contracting activities "to provide the information identified at the Contract Directory website for each inter-agency procurement they manage by October 31, 2003, for existing instruments that expire after June 1, 2004, and within 10 days of award of a new instrument. Entering information on inter-agency instruments expiring before June 1, 2004, will be optional." Therefore, the final rule reflects OFPP's direction.
  
  Twelve respondents submitted comments on the proposed rule. Based on those comments, the proposed rule is adopted as final with two changes: (1) the second sentence of paragraph (b)(1) of FAR 7.105, Contents of Written Acquisition Plans, is revised to require contracting officers and program managers to consider the sources contained in the Contract Directory as prospective sources of supplies and services; and (2) paragraph (b)(2)(iv) of FAR 10.002, Procedures, is revised to encourage querying the Contract Directory during market research for information relevant to agency acquisitions. In addition, an additional data item has been added to the original 16 data items: the Data Universal Numbering System (DUNS) number of the contractor, because DUNS numbers are the common contractor-identifier among government acquisition databases -- for example, DUNS numbers are required for contractors that register in the CCR.
  
  
• Compensation Cost Principle: This final rule amends FAR 31.205-6, Compensation for Personal Services, to improve its clarity without changing its meaning. Besides reorganizing the cost principle to make it more coherent and understandable, almost all the changes constitute deletions of superfluous or confusing language and the addition of supplemental language to clarify concepts.
  
  
• Selling Cost Principle: This final rule amends FAR 31.205-38, Selling Costs, to increase its clarity and to remove excessive wording and details. As with the changes to FAR 31.205-6, the cost principle is reorganized, superfluous or confusing language is deleted, and additional clarifying language is added as necessary.
  
  
• Section 508 Micro-Purchase Exception Sunset Provision: This final rule adopts without change the interim rule in FAC 2001-11 (Item (2)) that amended the first sentence in paragraph (a) of FAR 39.204, Exceptions, to extend the electronic and information technology (EIT) micro-purchase exception from the requirements of Section 508 of the Rehabilitation Act Amendments of 1998 from January 1, 2003, to October 1, 2004 (for more on FAC 2001-11, see the February 2003 Federal Contracts Perspective article "FAC 2001-11 Extends FAR Subpart 13.5 to 2004, FAC 2001-12 Simplifies Buys Against Terrorism").

GSA Reduces Industrial Funding Fee to 0.75%

On July 11, the General Services Administration (GSA) amended the GSA Acquisition Regulation (GSAR) to combine GSAR 552.238-74, Contractor's Report of Sales, and GSAR 552.238-76, Industrial Funding Fee, into a single clause -- GSAR 552.238-74, Industrial Funding Fee and Sales Reporting. This new clause gives GSA the unilateral right to change the percentage rate of the industrial funding fee (IFF) in Federal Supply Schedule (FSS) contracts. Also, GSA provided notice it intends to reduce the IFF rate from 1.0% to 0.75%, effective January 1, 2004.

GSA proposed this change in March 2003 (see the April 2003 Federal Contracts Perspective article "GSA Proposes Reducing Industrial Funding Fee to 0.75%"). Minor editorial changes are the only differences between the proposed rule and this final rule.

In addition, the introduction to the final rule states, "The January 1, 2004, change will be implemented by means of a bilateral contract modification to be executed electronically. As consideration to Federal Supply Schedule contractors for any potential costs incurred as the direct result of this change, FSS will allow these vendors to continue to include the 1 percent IFF in their contract prices until December 31, 2003, but to forward to FSS an IFF of 0.75 percent for reported sales for the period of October 1, 2003, through December 31, 2003. Examples of the type of costs GSA anticipates contractors could incur include updating published prices and modifying accounting systems."

SBA Busy with Size Standards, Nonmanufacturer Rule

The Small Business Administration (SBA) has been revising and proposing to revise small business size standards; issuing and proposing to issue waivers of the nonmanufacturer rule; and announcing its intention to rescind a previously issued waiver of the nonmanufacturer rule. (EDITOR'S NOTE: The nonmanufacturer rule requires recipients of federal contracts that are set-aside for small businesses or are awarded through the 8(a) program to provide the product of a small business manufacturer or processor if the recipient is not the actual manufacturer or processor (see paragraph (f) of FAR 19.102, Size Standards). However, SBA may waive this requirement if there are no small business manufacturers or processors.)

• Size Standard for Forest Fire Suppression and Fuels Management Services: SBA is adopting a $15,000,000 small business size standard for "Forest Fire Suppression" and "Fuels Management Service" activities classified within the "Support Activities for Forestry" industry (North American Industry Classification System (NAICS) 115310). The size standard for the remainder of NAICS 115310 remains $6,000,000. The proposed size standard treated forest fire suppression and fuels management services as a single exception under NAICS 115310, but the final size standard lists them as two separate exceptions (for more on the proposed size standard, see the August 2002 Federal Contracts Perspective article "SBA Proposes Small Business Size Standard Changes").
  
  
• Size Standard for Small Business Innovation Research (SBIR) Program: SBA is proposing to revise its small business size regulations pertaining to the SBIR program to allow a small business that is owned and controlled by another business to be eligible for SBIR funding agreements. The proposed rule would not change the requirement that a small business, with its affiliates, have no more than 500 employees to be eligible to participate in the SBIR program.
  
  Comments on the proposed change must be received on or before July 7, 2003, by Gary M. Jackson, Assistant Administrator for Size Standards, Office of Size Standards, 409 Third Street, SW, Washington, DC 20416; or by e-mail to sizestandards@sba.gov; by facsimile at 202-205-6390; or at http://www.regulations.gov.
  
  For more on the SBIR program, see the October 2002 Federal Contracts Perspective article "SBA Revising SBIR Program Policies."
  
  
• Waiver of the Nonmanufacturer Rule for Overhead Fiber Optic Groundwire and Ancillary Hardware Components; and Other Ordnance and Accessories: The SBA is waiving the nonmanufacturer rule for overhead fiber optic groundwire manufacturing under NAICS code 335921, and ancillary hardware components under NAICS code 334417; and for other ordnance and accessories manufacturing under NAICS code 332995 (for more on the proposals to waive the nonmanufacturer rule for these industries, see the May 2003 Federal Contracts Perspective article "Three Nonmanufacturer Rule Waivers Proposed").
  
  
• Proposed Waiver of the Nonmanufacturer Rule for Ammunition (Except Small Arms) Manufacturing: The SBA is considering granting a waiver of the nonmanufacturer rule for ammunition (except small arms) manufacturing under NAICS code 332993 because no small business manufacturers are currently supplying these classes of products to the federal government. Comments and sources must be submitted on or before August 8, 2003, to Edith Butler, Program Analyst, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416; 202-619-0422.
  
  
• Notice of Intent to Terminate Nonmanufacturer Rule Waiver for Small Arms Ammunition Manufacturing: The SBA intends to terminate its waiver of the nonmanufacturer rule for small arms ammunition manufacturing under NAICS code 332992. This decision is based on SBA's recent discovery of small business manufacturers for these products. Comments on the proposed termination of the waiver must be received by Edith Butler at the above address on or before July 31, 2003. (EDITOR'S NOTE: For more on the original waiver of the nonmanufacturer rule, see the October 2002 Federal Contracts Perspective article "SBA Waives One Nonmanufacturer Rule, Rethinks Another.")

Proposed FAR Changes on CAS, Cost Principles

The FAR Council continues developing proposed cost-related FAR changes:

• Cost Accounting Standards (CAS) Administration: This proposed rule would revise FAR Part 30, Cost Accounting Standards Administration, to delineate the process for determining and resolving the cost impact on contracts when a contractor makes a compliant change to a cost accounting practice or follows a noncompliant practice. The most significant change would be the revision of FAR Subpart 30.6, CAS Administration, to provide a streamlined, three-step sequential process for the evaluation of changes. The process would include: (1) an initial evaluation by the "cognizant federal agency official" (CFAO) to determine materiality of the changes; (2) if the cost is determined to be "material" by the CFAO, the contractor would be requested to submit a "general dollar magnitude (GDM)" proposal; and (3) if the CFAO determines that the GDM proposal cannot be adequately supported or does not contain sufficient data to resolve the cost impact, the contractor would be requested to submit a "detailed cost-impact (DCI)" proposal.
  
  This proposed rule is in response to comments on a 2000 proposed rule, and it supersedes the 2000 proposed rule (for more on the 2000 proposed rule, see the May 2000 Federal Contracts Perspective article "FAR Changes on CAS Administration, Discussions Proposed").
  
  Comments must be submitted by September 2, 2003, to General Services Administration, FAR Secretariat (MVA), 1800 F Street, NW, Room 4035, Attn: Laurie Duarte, Washington, DC 20405; e-mail: farcase.1999-025@gsa.gov.
  
  
• Cost Principles: This proposed rule would revise the following cost principles in FAR Subpart 31.2, Contracts with Commercial Organizations:
  
  
  • FAR 31.205-16, Gains and Losses on Disposition or Impairment of Depreciable Property or Other Capital Assets, would be revised to add a new paragraph that addresses the method and timing for determining the gain and loss associated with a sale and leaseback arrangement.
    
    
  • FAR 31.205-24, Maintenance and Repair Costs, which addresses the assignment of maintenance and repair costs to cost accounting periods, would be deleted because the CAS adequately addresses these costs for contracts subject to full CAS coverage.
    
    
  • FAR 31.205-26, Material Costs, would have two changes: (1) paragraph (c), which addresses inventory adjustments, would be deleted, and the generally-accepted accounting principles (GAAP) would be relied upon instead; and (2) the last sentence of paragraph (d), which addresses estimates of future material costs, would be deleted because FAR 31 focuses on criteria for determining the allowability of costs rather than the methods used to estimate costs.
  
  Comments on this proposed rule must be submitted by September 5, 2003, to the above address, or to e-mail: farcase.2002-008@gsa.gov.

OMB Streamlines Grants Process

To implement the Federal Financial Assistance Management Improvement Act of 1999 (Public Law 106-107), the Office of Management and Budget (OMB) has issued five documents that streamline and standardize the federal grants process. Three of these actions finalize actions proposed in August 2002, one is a unilateral action, and the fifth is a proposed action. (EDITOR'S NOTE: For more on the three proposed actions that are being finalized, see the September 2002 Federal Contracts Perspective article "OMB Seeks to Streamline Grants Process.")

• Revisions to OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations: OMB Circular A-133 is revised to (1) increase the audit threshold from $300,000 to $500,000; (2) increase the threshold for "cognizant agency for audit" from $25,000,000 to $50,000,000; and (3) change the base year for cognizant agency for audit determination from one to two years before the start of the five year audit cognizance period. The final version differs from the proposal in that the definition of "oversight agency for audit" is clarified.
  
  
• Policy Directive on Financial Assistance Program Announcements: OMB has established a standard format for federal agency announcements of funding opportunities under programs that award discretionary grants or cooperative agreements. The format consists of an overview, followed by the full text of the announcement, consisting of the following sections: I. Funding Opportunity Description; II. Award Information; III. Eligibility Information; IV. Application and Submission Information; V. Application Review Information; VI. Award Administration Information; VII. Agency Contact(s); and VIII. Other Information. The most significant change OMB made when finalizing the proposed rule was to require agencies to post funding opportunity announcements that are open to domestic applicants on http://FedGrants.gov or provide an Internet address that FedGrants.gov may use to link from the synopsis to the full announcement.
  
  
• Posting Synopses of Federal Agencies' Financial Assistance Program Announcements at http://Grants.gov: OMB has established a government-wide standard set of data elements for federal agencies to use to post, at http://Grants.gov, synopses of announcements of funding opportunities under programs that award discretionary grants or cooperative agreements. Originally, the synopses were going to be posted at http://FedBizOpps.gov, which is the government's website for posting contract opportunities. Also, OMB has decided to require additional data elements.
  
  The standard data elements are included as an attachment to a proposed policy directive that requires federal agencies to use http://Grants.gov to post synopses of funding opportunities under federal financial assistance programs that award discretionary grants and cooperative agreements. OMB would like to know: (1) is the policy sufficient for getting agencies to post synopses of funding opportunities?; (2) are there any shortcomings in either the posting or retrieving of synopses from http://Grants.gov?; and (3) is there additional instruction that should appear in the policy directive?
  
  Comments on the proposed policy directive, and responses to the questions, must be received no later than July 23, 2003, by Sandra Swab, Office of Federal Financial Management, Office of Management and Budget, Room 6025, New Executive Office Building, 725 17th Street, NW, Washington, DC 20503, or be e-mail to sswab@omb.eop.gov.
  
  
• Use of a Universal Identifier by Grant Applicants: OMB has determined that there is a need for improved statistical reporting of federal grants and cooperative agreements, so it has unilaterally issued a policy directive that requirements grant applicants to provide a Dun and Bradstreet (D&B) Data Universal Numbering System (DUNS) number when applying for federal grants or cooperative agreements as of October 1, 2003.

Treasury Rewrites DTAR

The Department of the Treasury is completely rewriting the Treasury Acquisition Regulation (DTAR) so it is in plain English; reflects current policy, practice, and recent Federal Acquisition Regulation (FAR) changes; and eliminates internal operating procedures that do not have a significant effect beyond Treasury. In addition, the rewritten DTAR establishes a Treasury mentor-protege program.

On December 11, 2002, Treasury published a proposed rewritten DTAR that was intended to be simple for contractors, offerors, and Treasury contracting personnel to use (see the January 2003 Federal Contracts Perspective article "DTAR to Be Rewritten"). Besides the simplified language, the most noteworthy difference between the old DTAR and the proposed DTAR was the addition of procedures and guidance for a Treasury mentor-protege program that assists qualified small businesses receive developmental assistance from Treasury prime contractors -- the intent of the program is to increase the base of small businesses eligible to perform Treasury contracts and subcontracts. The program's procedures were in 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.

There were no comments received regarding the proposed rule, so the proposed rule is adopted as final with minor editorial changes.

Prompt Payment Interest Rate Set at 3 1/8%

The Department of Treasury has established 3 1/8% (3.125%) as the interest rate for the computation of payments made between July 1 and December 31, 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 (January 1 -- June 30, 2003) was 4 1/4% (4.25%). The interest rate for July 1, 2002, through December 31, 2002 was 5 1/4% (5.25%).

The following portions of the FAR are affected by this interest rate: FAR Subpart 32.9, Prompt Payment; FAR Subpart 33.2, Disputes and Appeals; and FAR 31.205-10, Cost of Money. Also see Cost Accounting Standard (CAS) 9904.414, Cost of Money as an Element of the Cost of Facilities Capital.

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