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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

November 2004
Vol. V, No. 11

CONTENTS

FY 2005 Defense Authorization Act Directs Review of GSA Procedures,
Permits A-76 Protests by Feds

On October 28, 2004, President Bush signed Public Law 108-375, Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, which authorizes $446 billion for defense and national security programs. Public Law 108-375 contains several acquisition-related provisions that apply to the Department of Defense (DOD), and several other provisions that apply government-wide.

• Section 326, Bid Protests by Federal Employees in Actions Under Office of Management and Budget Circular A-76, Performance of Commercial Activities: This authorizes an agency tender official to file a protest against the public-private competition when requested by a majority of the agency employees whose jobs are subject to the competition.
  
  EDITOR'S NOTE: This provision addresses several Government Accountability Office (GAO) decisions in which GAO decided that the Competition in Contracting Act (CICA) did not provide the "in-house entity" standing to protest (see the May 2004 Federal Contracts Perspective article "Government Workers Are Not A-76 'Interested Parties'"). In fact, in one of the decisions, GAO recommended that Congress consider amending CICA to allow protests to be brought on behalf of agency employees, and sent letters making such a recommendation to the Chairman and Ranking Minority Member of the House Committee on Government Reform, the Senate Committee on Governmental Affairs, and the Senate and House Committees on Armed Services. Section 326 is in response to GAO's recommendation.
  
  
• Section 802, Internal Controls for Department of Defense Procurements Through General Services Administration (GSA) Client Support Centers: This requires the inspector generals of DOD and GSA to review the policies, procedures, and internal controls of each of GSA's Federal Technology Service's Client Support Centers (CSC) to determine whether each CSC is compliant with DOD procurement requirements. This review must be completed by March 15, 2005. DOD may continue to use the services of a CSC that is found to be compliant with defense procurement requirements, but it may not use the services of a CSC that is not compliant with DOD procurement requirements unless the Under Secretary of Acquisition, Technology, and Logistics determines that it is in the interest of DOD to continue to use the services of that CSC. However, if a CSC is not compliant with defense procurement requirements but made significant progress during 2004 toward becoming compliant, DOD may continue to use the services of that CSC until March 16, 2006. Beginning March 16, 2006, acquisitions over $100,000 must be made through a CSC that is compliant with defense procurement requirements unless the Under Secretary of Acquisition, Technology, and Logistics determines that it is in the interest of DOD to continue to use the services of that CSC.
  
  
• Section 807, Inflation Adjustment of Acquisition-Related Dollar Thresholds: The Federal Acquisition Regulatory Council must adjust for inflation each acquisition-related dollar threshold provided by law on October 1 of every year divisible by five (that is, 2005, 2010, etc.). Dollar thresholds for the Davis-Bacon Act, the Service Contract Act, and the Trade Agreements Act of 1979 are exempt from this adjustment.
  
  
• Section 811, Rapid Acquisition Authority to Respond to Combat Emergencies: The Secretary of Defense is authorized to establish a streamlined acquisition process for any equipment that is urgently needed to eliminate a combat capability deficiency that has resulted in combat fatalities. The goal for awarding such a contract is 15 days. This authority is limited to acquire no more than $100,000,000 worth of equipment during any fiscal year.
  
  
• Section 813, Period for Multiyear Task and Delivery Order Contracts: The five-year limitation on task and delivery order contracts (including options) that was imposed by Section 843 of the Fiscal Year 2004 National Defense Authorization Act (Public Law 108-136) is amended to "any period up to five years and may extend the contract period for one or more successive periods pursuant to an option provided in the contract or a modification of the contract. The total contract period as extended may not exceed 10 years unless such head of an agency determines in writing that exceptional circumstances necessitate a longer contract period." (EDITOR'S NOTE: For more on the acquisition-related provisions of the National Defense Authorization Act for Fiscal Year 2004, see the December 2003 Federal Contracts Perspective article "Services Acquisition Reform Act Signed Into Law, Establishes Training Fund, Chief Acquisition Officer.")
  
  
• Section 817, Extension of Authority for Use of Simplified Acquisition Procedures: The deadline for use of the simplified procedures in Federal Acquisition Regulation (FAR) Subpart 13.5, Test Program for Certain Commercial Items, for the acquisition of commercial items of $5,000,000 or less, is extended from January 1, 2006, to January 1, 2008.
  
  
• Section 818, Submission of Cost or Pricing Data on Noncommercial Modifications of Commercial Items: Defense contractors are required to submit cost or pricing data on noncommercial modifications to commercial items if the modifications are expected to exceed $500,000 or 5% of the total price of the contract, whichever is greater.
  
  
• Section 821, Addition of Landscaping and Pest Control Services to List of Designated Industry Groups Participating in the Small Business Competitiveness Demonstration Program: Landscaping services assigned to North American Industrial Classification System (NAICS) code 561730, Landscaping Services, and NAICS 561710, Exterminating and Pest Control Services, are added as "designated industry groups" under the Small Business Competitiveness Demonstration Program (see FAR Subpart 19.10).
  
  
• Section 822, Increased Thresholds Under Special Emergency Procurement Authority: For acquisitions that support a contingency operation or facilitate the defense against or recovery from nuclear, biological, chemical, or radiological attack, the micro-purchase threshold is increased from $15,000 to $25,000, and the simplified acquisition threshold for such contracts awarded or performed outside the United States is increased from $500,000 to $1,000,000.
  
  
• Section 841, Extension of Mentor-Protege Program: The deadline for applying to participate in the DOD mentor-protege program (see Defense FAR Supplement (DFARS) Subpart 219.71 and Appendix I) is extended from September 30, 2005, to September 30, 2008. In addition, the deadline for DOD reimbursement of a mentor firm's developmental assistance costs is extended from September 30, 2008, to September 30, 2013.
  
  
• Section 842, Amendment to Mentor-Protege Program: Historically Underutilized Business Zone (HUBZone) small businesses (see FAR Subpart 19.13), and service-disabled veteran- owned small businesses (see FAR Subpart 19.14, Service-Disabled Veteran-Owned Small Business) are eligible to participate in the DOD mentor-protege program.

DOD Extends 8(a) Partnership Agreement

The Department of Defense (DOD) is amending Defense FAR Supplement (DFARS) 219.800, General, to extend the expiration date of the partnership agreement between DOD and the Small Business Administration (SBA) to September 30, 2005. The partnership agreement permits DOD to award contracts to 8(a) program participants on behalf of the SBA.

On February 1, 2002, DOD and SBA entered into a partnership agreement in which SBA delegated to DOD its authority to enter into contracts under Section 8(a) of the Small Business Act. The expiration date of the partnership agreement was September 30, 2004, but DOD and SBA have agreed to extend the agreement to September 30, 2005. This final rule amends the last sentence of DFARS 219.800(a) to reflect this extension.

In a proposed change to the DFARS, FAR 52.227-12, Patent Rights -- Retention by the Contractor (Long Form), would be added to the DFARS because there is a proposed rule that would remove the clause from the FAR (see the June 2003 Federal Contracts Perspective article "FAR Rewrite Proposed on Patents and Copyrights"). FAR 52.227-12 is proposed for removal because DOD is the only agency that uses the clause. DOD includes the clause in contracts awarded to large businesses for experimental, developmental, or research work.

This proposed rule would add DFARS 252.227-70XX, Patent Rights -- Ownership by the Contractor (Large Business), which is substantially the same as FAR 52.227-12 except for some changes to reflect current statutory provisions (such as changing "domestic university" to "university" because the word "domestic" does not appear in the statutory definition) and minor changes in the proposed FAR Part 27 rewrite (such as changing the term "convey" to "assign" with regard to transfer of title to a subject invention).

Comments on the proposed rule must be submitted on or before November1, 2004, to: (1) http://www.regulations.gov; (2) e-mail: dfars@acq.osd.mil; (3) fax: 703-602-7887; or (4) mail: Defense Acquisition Regulations Council, Attn: Amy Williams, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062.

Agencies Directed to Increase Service-Disabled Contracts

On October 20, 2004, President Bush issued Executive Order 13360, Providing Opportunities for Service-Disabled Veteran Businesses To Increase Their Federal Contracting and Subcontracting, to "strengthen opportunities in federal contracting for service-disabled veteran businesses."

Section 308 of Public Law 108-183, the Veterans Benefits Zct of 2003, amended the Small Business Act to establish a service-disabled veteran-owned small business (SDVOSB) set-aside program (see the January 2004 Federal Contracts Perspective article "Disabled Veteran Set-Asides Established"). On May 5, 2004, the SDVOSB program was implemented with the addition of FAR Subpart 19.14 and additions to SBA's regulations in Title 13 of the Code of Federal Regulations (CFR), Part 125, Government Contracting Programs (see the June 2004 Federal Contracts Perspective article "FAC 2001-23, SBA Institute Service-Disabled Veteran-Owned Small Business Program").

In EO 13360, President Bush directs agencies to "more effectively implement...the Small Business Act...which provides that the President must establish a goal of not less than 3 percent for participation by service-disabled veteran businesses in federal contracting, and...which gives agency contracting officers the authority to reserve certain procurements for service-disabled veteran businesses." According to the EO:

• Agency heads are to develop a strategy to implement the President's policy. The strategy must include: (1) reserving contracts for SDVOSBs; (2) encouraging and facilitating participation by SDVOSBs in agency contracts competitions; (3) encouraging agency contractors to subcontract with SDVOSBs, and actively monitoring and evaluating contractors' efforts to do so; (4) training agency personnel on applicable law and policies relating to participation of SDVOSBs in federal contracting; and (5) disseminating information to SDVOSBs that would assist them in participating in awards of agency contracts. In addition, agency heads are to make the agency's strategy publicly available and report annually to the SBA on implementation of the agency's strategy; designate a senior-level official esponsible for developing and implementing the agency's strategy; and include development and implementation of the agency's strategy as significant elements in any performance plans of the agency's designated agency senior-level official, chief acquisition officer, and small and disadvantaged business utilization director.
  
  
• The Small Business Administration (SBA) is to: (1) designate an entity within SBA that will, in coordination with the Department of Veterans Affairs' Center for Veterans Enterprise (CVE), provide information and assistance concerning participation in federal contracting to SDVOSBs; (2) advise and assist agency heads in the implementation of their assignments; and (3) make available to SDVOSBs training in federal contracting law, procedures, and practices that would help them participate in federal contracting.
  
  
• The General Services Administration (GSA) is to establish a government-wide acquisition contract (GWAC) that is reserved for participation by SDVOSBs, and assist SDVOSBs to be included in Federal Supply Schedules.
  
  
• The Defense Acquisition University (DAU) to develop training on contracting with SDVOSBs and make this training available on-line through its continuous learning program.
  
  
• The Department of Veterans Affairs is to assist agencies by making available CVE services and assist in verifying the accuracy of contractor registration databases with regard to SDVOSBs.

FAC 2001-25 Authorizes Telecommuting for Contractors

Federal Acquisition Circular (FAC) 2001-25 amends the FAR to prohibit agencies from including a requirement in a solicitation that precludes an offeror from permitting its employees to telecommute. In addition, agencies are prohibited from reducing the scoring of an offer because the offeror proposes to permit its employees to telecommute. However, a contracting officer is permitted to prohibit the telecommuting of contractor employees if it would adversely affect agency requirements, such as security. This rule implements Section 1428 of the Services Acquisition Reform Act of 2003 (Title XIV of Public Law 108-136) (for more on the acquisition-related provisions of Public Law 108-136, see the December 2003 Federal Contracts Perspective article "Services Acquisition Reform Act Signed Into Law, Establishes Training Fund, Chief Acquisition Officer").

This interim rule adds FAR 7.108, Additional Requirements for Telecommuting, which lists the provisions of Section 1428. Also, FAR 7.108 is referenced in FAR 11.002, Policy [on describing agency needs], FAR 13.106-2, Evaluation of Quotations or Offers, and FAR 15.304, Evaluation Factors and Significant Subfactors.

Comments on the interim rule must be submitted on or before December 6, 2004, to: (1) http://www.regulations.gov; (2) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (3) e-mail: farcase.2003-025@gsa.gov; (4) fax: 202-501-4067; or (5) mail: General Services Administration, Regulatory Secretariat (MVA), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405.

The following are other changes made to the FAR by FAC 2001-25:

• Elimination of Standard Form 1417 Pre-Solicitation Notice (Construction Contract): This final rule eliminates the use of the Standard Form (SF) 1417, which was used in contracts for construction, alteration or repair, dismantling, demolition, or removal of improvements. The use of the form has become unnecessary because contracting officers are required to provide access to presolicitation notices through FedBizOpps (http://www.fedbizopps.gov), where government contract opportunities greater than $25,000 are synopsized.
  
  On September 16, 2003, a proposed rule deleting the SF 1417 was published (see the October 2003 Federal Contracts Perspective article "SF 1417 Proposed for Deletion from FAR"). No comments were received, so the proposed rule is finalized with technical editorial changes.
  
  Besides deleting the SF 1417, the following are removed:
  
  
  • Paragraph (b)(6) of FAR 36.213-2, Presolicitation Notices ("Presolicitation notices must...notify recipients that if they do not submit a bid they should advise the issuing office as to whether they want to receive future presolicitation notices...").
    
    
  • Paragraph (a) of FAR 36.701, Standard and Optional Forms for Use in Contracting for Construction or Dismantling, Demolition, or Removal of Improvements, which addresses the SF 1417 and the requirements for its use.
    
    
  • Paragraph (a) of FAR 53.236-1, Construction, which addresses the SF 1417 and the requirements for its use.
  
  
• Free Trade Agreements -- Chile and Singapore, and Trade Agreements Thresholds: This finalizes, with changes, the interim rule that (1) amended FAR Part 25, Foreign Acquisitions, and the related clauses in FAR Part 52 to implement the United States-Chile Free Trade Agreement Implementation Act (USCFTA) (Public Law 108-77) and the United States-Singapore Free Trade Agreement Implementation Act (USSFTA) (Public Law 108-78); and (2) implemented new dollar thresholds for application of trade agreements as determined by the United States Trade Representative (USTR) (see the February 2004 Federal Contracts Perspective article "FAC 2001-19 Delays SF 330 Implementation, Revises Thresholds for Free Trade Agreements").
  
  To implement Section 106 of the USCFTA and the USSFTA, which requires that contracts must specify the law that will apply to resolve any breach of contract claim, the interim rule added the statement "United States law will apply to resolve any claim of breach of contract" to paragraph (d) of FAR 52.225-3, Buy American Act -- Free Trade Act -- Israeli Trade Act Certificate; paragraph (c) of FAR 52.225-5, Trade Agreements; and paragraph (e) of FAR 52.225-11, Buy American Act -- Construction Materials Under Trade Agreements. However, the Department of Justice noted that Section 106 of each authorizing act applies to all contracts entered into by any agency of the United States. The Department of Justice recommended that the statement be a separate clause included in every contract. Therefore, the final rule removes the statement from FAR 52.225-3, FAR 52.225-5, and FAR 52.225-11, and creates a new clause at FAR 52.233-4, Applicable Law for Breach of Contract Claim, to be included in all solicitations and contracts, which states, "United States law will apply to resolve any claim of breach of this contract."
  
  
• Section 508 Micropurchase Exemption: This interim rule amends paragraph (a) of FAR 39.204, Exceptions, to extend the micro-purchase exemption for purchasing electronic and information technology (EIT) that conforms to the requirements of Section 508 of the Rehabilitation Act of 1973 from October 1, 2004, to April 1, 2005.
  
  Section 508 of the Rehabilitation Act of 1973 requires that the EIT developed, procured, maintained, or used by the federal government provide individuals with disabilities access to and use of information and data that is comparable to the access and use of information and data by individuals without disabilities. The law was implemented first through standards developed by the Architectural and Transportation Barriers Compliance Board (see the January 2001 Federal Contracts Perspective article "IT Accessibility Standards Published"), and then incorporated into the FAR as Subpart 39.2, Electronic and Information Technology (see the May 2001 Federal Contracts Perspective article "FAC 97-27 Implements Section 508 Accessibility Standards").
  
  Initially, the FAR exempted micropurchases from the 508 requirements until January 1, 2003, because the government personnel who use the government purchase card to buy commercial-off-the-shelf items are not usually contracting officers familiar with Section 508 requirements. Therefore, to give industry time to label its products for Section 508 standards compliance, and to provide more time for training of government purchase card users on Section 508 requirements, this deadline was extended to October 1, 2004 (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," and the August 2003 Federal Contracts Perspective article "FAC 2001-15 Addresses SF 129 Elimination, Environmental Issues, Cost Principles, GWAC/ MAC Directory").
  
  The introduction to the interim rule states, "...no further extensions will be granted. The extension until April 1, 2005, will provide agencies time to update their purchase card training modules on the [Section] 508 requirements and train their personnel. Agencies have had three years of experience with Section 508, and industry continues to make investments in accessible technology to support the requirements." Free online training is available at http://www.section508.gov.
  
  Comments on the interim rule must be submitted on or before December 6, 2004, by any of the means mentioned above.

One Nonmanufacturer Rule Waived, Two Proposed

The SBA decided to waive the nonmaufacturer rule for miscellaneous electrical equipment and component manufacturing under North American Industry Classification System (NAICS) code 335999 because no small business manufacturers are currently supplying this class of products to the federal government. This waiver 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. (EDITOR'S NOTE: For more on the proposed waiver, see the September 2004 Federal Contracts Perspective article "SBA Proposes Six Nonmanufacturer Rule Waivers.")

In addition, SBA is proposing to waive the nonmanufacturer rule for general aviation turboprop aircraft with six or more passenger seats under NAICS code 336411, and for small arms ammunition manufacturing under NAICS code 332992. SBA is inviting the public to comment on these two proposed waivers, or provide information on potential small business sources for these products, to Edith Butler, Program Analyst, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416; 202-619-0422. (EDITOR'S NOTE: SBA originally waived the nonmanufacturer rule for small arms ammunition manufacturing in September 2002 (see the October 2002 Federal Contracts Perspective article "SBA Waives One Nonmanufacturer Rule, Rethinks Another"). However, SBA terminated its waiver of the nonmanufacturer rule in October 2003 because it discovered a small business manufacturer (see the December 2003 Federal Contracts Perspective article "Small Arms Ammo Nonmanufacturer Waiver Terminated"). Apparently, that small business manufacturer is no longer capable of providing small arms ammunition to the government).

Finally, SBA is terminating consideration of a proposed waiver of the nonmanufacturer rule for paint and paint manufacturing under NAICS code 325510 because of its recent discovery of a small business manufacturer for this class of products. (EDITOR'S NOTE: For more on the proposed waiver, see the September 2004 Federal Contracts Perspective article "SBA Proposes Six Nonmanufacturer Rule Waivers.")

EDITOR'S NOTE: Public Law 100-656, enacted November 15, 1988, requires those with federal contracts that are set-aside for small businesses or 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). This is called the "nonmanufacturer rule." However, SBA may waive this requirement if there are no small business manufacturers or processors.

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.

NASA Removes NFS Subpart 1852.1, Parts 1853 and 1872

The National Aeronautics and Space Administration (NASA) is adopting, without change, the proposed removal of NASA FAR Supplement (NFS) Subpart 1852.1, Instructions for Using Provisions and Clauses, NFS Part 1853, Forms, and NFS Part 1872, Acquisitions of Investigations (see the June 2004 Federal Contracts Perspective article "Proposed NFS Reissuance Continues with Parts 1852-1872" for more on the proposed revisions).

This final rule completes the revision of the Code of Federal Regulations (CFR) version of the NFS. All that remains 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) continues to provide the regulations and internal agency guidance and procedures.

EPA Withdraws Proposed Background Check Rule

The Environmental Protection Agency (EPA) is withdrawing its proposed rule that would have added EPA Acquisition Regulation (EPAAR) 1552.211-81, Background Checks for EPA Contractors Performing Services On-Site, to require contractors and subcontractors to perform background checks and make suitability determinations for their employees who are performing services on or within federally-owned or leased space and facilities, commercial space primarily occupied by federal employees, and Superfund, Oil Pollution Act, and Stafford Act sites.

This proposed rule was in response to the events of September 11, 2001. Proposed EPAAR 1552.211-81 would have required contractors and subcontractors to perform background checks and make suitability determinations for contractor and subcontractor employees performing services on or within federally- owned or leased space or facilities. However, the public comments objected not only to the proposed clause's broad application, but also to its key provisions. Therefore, EPA has decided to withdraw the proposed EPAAR 1552.211-81, and instead plans to incorporate a narrowly tailored background check requirement in its emergency response contracts' statements of work. Currently, this category of contracts consists of Superfund Technical Assistance and Removal Team (START), Emergency and Rapid Response Services (ERRS), and Response Engineering and Analytical Contract (REAC). In the future, EPA may include this requirement in other types of contracts.

For more on the proposed rule, see the February 2003 Federal Contracts Perspective article "EPA Proposes Background Checks for On-Site Employees."

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