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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

December 2004
Vol. V, No. 12

CONTENTS

DFARS Transformation in Full Gear,
"Procedures, Guidance, and Information" Added

The Department of Defense (DOD) got its "Defense Federal Acquisition Regulation Supplement (DFARS) Transformation" off to a fast start in November with the publication of 16 final rules, most of which are the product of proposed rules published February 23, 2004 (see the March 2004 Federal Contracts Perspective article "DFARS Transformation Gets Underway, Public Requested to Comment on 14 Proposed Rules"), one interim rule, and four proposed rules.

The DFARS Transformation is intended to improve the efficiency and effectiveness of the acquisition process while allowing the acquisition workforce the flexibility to innovate. The transformed DFARS will include only requirements of law, DOD-wide policies, delegations of FAR authorities, deviations from FAR requirements, and policies and procedures that have a significant effect beyond the internal operating procedures of DOD or a significant cost or administrative impact on contractors or offerors. In addition, a DFARS companion called the "Procedures, Guidance, and Information" (PGI), is established. The PGI contains mandatory and non-mandatory internal DOD procedures, non-mandatory guidance, and supplemental information.

• Procedures, Guidance, and Information: This final rule defines the PGI as "a companion resource to the DFARS that (1) contains mandatory internal DOD procedures...; (2) contains non-mandatory internal DOD procedures and guidance and supplemental information to be used at the discretion of the contracting officer; (3) is numbered similarly to the DFARS, except that each PGI numerical designation is preceded by the letters 'PGI'; and (4) is available electronically at http://www.acq.osd.mil/dpap/dars/index.htm" (the direct link to the PGI is http://www.acq.osd.mil/dpap/dars/pgi/current_pgi.htm). The PGI is not published in the Code of Federal Regulations (CFR), so it can be used to rapidly convey internal administrative and procedural information to the acquisition workforce. (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Publicizing Contract Actions: This final rule adopts, without change, the February 23, 2004, proposed rule to update the text in DFARS Part 205, Publicizing Contract Actions. DFARS 205.470, Contractor Information to be Provided Cooperative Agreement Holders, and DFARS 205.470-1, Statutory Requirement, are deleted as unnecessary; and the text in paragraph (d)(ii) of DFARS 205.207, Preparation and Transmittal of Synopses, which consists of a notice to be included in acquisitions being considered for historically black college and university and minority institution (HBCU/MI) set-aside, is removed and relocated to the PGI. (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Deletion of Duplicative Text on Federal Prison Industries, Inc. (FPI): Section 637 of the Consolidated Appropriations Act for Fiscal Year 2004 (Public Law 108-199), required that the restrictions and requirements regarding purchases from the FPI that were imposed on DOD be made to apply throughout the government. Section 637 was implemented with the publication of Federal Acquisition Circular (FAC) 2001-21 (see the April 2004 Federal Contracts Perspective article "FAC 2001-21 Addresses Purchases from Federal Prisons"). Since the FAR policy makes the DFARS policy on FPI purchases unnecessary, this final rule removes the DFARS policy by deleting DFARS Subpart 208.6, Acquisition from Federal Prison Industries, Inc., and the following:
  
  
  • DFARS Part 210, Market Research
  • DFARS 219.502-70, Inclusion of Federal Prison Industries, Inc.
  • DFARS 219.518, Solicitation Provisions and Contract Clauses
  • DFARS 252.219-7005, Alternate A
  • DFARS 252.219-7006, Alternate A
  
  
• Laws Inapplicable to Commercial Subcontracts: This final rule amends DFARS 212.504, Applicability of Certain Laws to Subcontracts for the Acquisition of Commercial Items, to remove the Trade Agreements Act and the Buy American Act from the list of laws inapplicable to subcontracts for commercial items, "because the government does not apply the restrictions of the Buy American Act or the Trade Agreements Act at the subcontract level." (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Cost Principles and Procedures: This final rule adopts, without change, the proposed rule that would delete DFARS 231.205-10, Cost of Money, and update the text of DFARS 231.205-22, Legislative Lobbying Costs, and DFARS 231.205-70, External Restructuring Costs. (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Contractor Qualifications Relating to Contract Placement: This final rule adopts, with one change, the proposed rule that would delete: (1) DFARS 209.103, Policy; DFARS 209.103-70, Contract Clause; and DFARS 252.209-7000, Acquisition from Subcontractors Subject to On-Site Inspection Under the Intermediate Range Nuclear (INF) Treaty, because they pertain to obsolete INF inspection requirements; (2) DFARS 209.106-1, Conditions for Preaward Surveys; DFARS 209.106-2, Requests for Preaward Surveys; and DFARS 209.202, Policy, which contain internal DOD procedures relating to requests for pre-award surveys and approval for use of product qualification requirements (the text would be relocated to the PGI); and (3) DFARS Subpart 209.3, First Article Testing and Approval, because it contains unnecessary first article testing and approval requirements.
  
  DOD received no comments on the proposed rule, so the proposed rule is adopted as final. However, to reflect the qualification requirements for aviation critical safety items added as DFARS 209.270, Aviation Critical Safety Items, after publication of the proposed rule, the following is added to DFARS 209.202: "See [DFARS] 209.270 for approval of qualification requirements for aviation critical safety items." (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above. For more on the addition of DFARS 209.270, see the October 2004 Federal Contracts Perspective article "DOD Removes Iraq from List of Terrorist Countries.")
  
  
• Acquisition of Commercial Items: This final rule deletes DFARS 212.303, Contract Format, because it is unnecessarily addresses the structuring of contracts for commercial items. DFARS 212.303 stated: "Structure awards valued above the micro-purchase threshold (e.g., contract line items, delivery schedule, and invoice instructions) in a manner that will minimize the generation of invoices valued at or below the micro-purchase threshold."
  
  
• Sealed Bidding: This final rule adopts, without change, the proposed rule that would delete DFARS 214.201-1, Uniform Contract Format; paragraph (h) of DFARS 214.407-3, Other Mistakes Disclosed Before Award (which directed that "a signed copy of the document authorizing correction of the bid to the appropriate finance center"); and DFARS Subpart 214.5, Two-Step Sealed Bidding, because they are unnecessary. (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Insurance: This final rule adopts, without change, the proposed rule that would remove DFARS 228.304, Risk-Pooling Arrangements, and DFARS 228.305, Overseas Workers' Compensation and War-Hazard Insurance, and relocate the text to the PGI. (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Research and Development Contracting: This final rule adopts, without change, the proposed rule that would: (1) delete DFARS 235.007, Solicitations, which states that the contracting officer is permitted to include in the solicitation the government's estimate of the man-year effort required for the research contract, because it is unnecessary; (2) delete the text of DFARS 235.010, Scientific and Technical Reports, which addresses the maintenance of scientific and technical reports, and relocate it to the PGI (all that would remain in DFARS 235.010 would be a cross-reference to PGI 235.010); (3) amend paragraph (c)(4) of DFARS 235.017-1, Sponsoring Agreements, to identify that the Software Engineering Institute (a DOD-sponsored federally funded research and development center (FFRDC)) is operated by Carnegie Mellon; and (4) amend DFARS 252.235-7011, Final Scientific or Technical Report, to update the administrative information for submitting reports in other than paper copy by adding "or follow the instructions at http://www.dtic.mil" (the Defense Technical Information Center (DTIC) website). (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Small Disadvantaged Businesses and Leader Company Contracting: This final rule adopts, without change, the proposed rule that would remove DFARS Subpart 217.4, Leader Company Contracting, because DOD rarely uses leader company contracting, and revise DFARS 219.705-4, Reviewing the Subcontracting Plan, to lower the approval level for small business subcontracting plans that contain a small disadvantaged business goal of less than 5% to the contracting officer. (EDITOR'S NOTE: For more on the proposed rule, see the May 2004 Federal Contracts Perspective article "Proposed DFARS Transformation Continues.")
  
  
• Contracting for Architect-Engineer Services: This final rule adopts, without change, the interim rule that amended DFARS 219.502-1, Requirements for Setting Aside Acquisitions, DFARS 219.502-2, Total Set-Asides, and DFARS 219.1005, Applicability, to increase from $85,000 to $300,000 the threshold below which acquisitions for architect-engineer services for military construction or family housing projects are required to be set aside for small business concerns (and acquisitions at or above the threshold may not be set aside for small business concerns). (EDITOR'S NOTE: For more on the interim rule, see the July 2004 Federal Contracts Perspective article "A Plethora of Changes Made to the DFARS.")
  
  
• Protection of Privacy and Freedom of Information: This final rule deletes DFARS 224.102, General, which pertains to the applicability of the Freedom of Information Act, because it is unnecessary. This issue is adequately addressed in DOD 5400.11-R, Department of Defense Privacy Program, which is referenced in DFARS 224.103, Procedures.
  
  
• Written Assurance of Technical Data Conformity: This final rule adopts, without changes, the interim rule that removed DFARS 252.227-7036, Declaration of Technical Data Conformity, and pertinent portions of DFARS 227.7103-6, Contract Clauses, DFARS 227.7103-14, Conformity, Acceptance, and Warranty of Technical Data, and DFARS 227.7104, Contracts Under the Small Business Innovation Research (SBIR) Program, to eliminate the requirement for contractors to furnish written assurance that technical data delivered to the government is complete and accurate and satisfies the requirements of the contract. The rule implements Section 844 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136). (EDITOR'S NOTE: For more on the interim rule, see the July 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Removal of Obsolete Research and Development Contracting Procedures: This final rule adopts, without change, the proposed rule that would delete DFARS Subpart 235.70, Research and Development Streamlined Contracting Procedures. DFARS Subpart 235.70 contained procedures for acquiring research and development using a standard solicitation and contract format and "the capabilities of the World Wide Web." These procedures had become obsolete due to advances in technology since their creation. (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Contractor Use of Government Supply Sources: This final rule adopts, without change, the proposed rule that would: (1) delete most of DFARS 251.102, Authorization to Use Government Supply Sources, which contain procedures for authorizing a contractor to use government supply sources, and relocate it to the PGI; (2) delete DFARS 251.105, Payment for Shipments, which states that contractor payments for purchases from DOD supply sources are due within 30 days of the date of a proper invoice; and (3) amend DFARS 252.251-7000, Ordering from Government Supply Sources, to add "The contractor shall annotate each invoice with the date of receipt." (EDITOR'S NOTE: For more on the proposed rule, see the March 2004 Federal Contracts Perspective article mentioned above.)
  
  
• Transition of Weapons-Related Prototype Projects to Follow-On Contracts: This interim rule adds DFARS Subpart 212.70, Pilot Program for Transition to Follow-On Contracting After Use of Other Transaction Authority, to implement Section 847 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136), which authorizes DOD to carry out a pilot program that permits the use of streamlined contracting procedures for the production of items or processes begun as prototype projects under "other transaction" agreements. Contracts and subcontracts awarded under the program may be treated as acquisitions of commercial items, and items or processes acquired under the program may be treated as developed in part with federal funds and in part at private expense for purposes of negotiating rights in technical data.
  
  EDITOR'S NOTE: "Other transaction agreements" are generally exempt from all the statutes and regulations that govern federal contracts and grants. The purpose of other transaction agreements is to overcome the reluctance of "nontraditional defense contractors" with significant technological advances and innovations to share their innovations with the government because of the significant statutory and regulatory requirements involved in government contracts and grants. When using other transaction agreements, DOD contracting officials are not required to include standard contract provisions that typically address such issues as financial management or intellectual property rights, but may structure the agreements as they consider appropriate.
  
  Comments on the interim rule must be submitted on or before December 6, 2004, to: (1) http://www.regulations.gov; (2) http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm; (3) e-mail: dfars@acq.osd.mil; (4) fax: 703-602-0350; (5) mail: Defense Acquisition Regulations Council, Attn: Amy Williams, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; or (6) by hand delivery/courier: Defense Acquisition Regulations Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402. Cite "DFARS Case 2003-D106" when making comments on this interim rule.
  
  
• Geographic Use of the Term "United States": Item (1) of FAC 2001-14 amended the FAR to clarify the use of the term "United States" when used in a geographic sense. Definitions of "contiguous United States (CONUS)," "customs territory of the United States," and "outlying areas" were added to FAR 2.101, Definitions, and all other definitions of "United States" in the FAR were revised to conform to the FAR 2.101 definitions. This proposed rule would amend the DFARS to standardize the use of geographic terms for consistency with the definitions of "United States," "contiguous United States," "customs territory of the United States," and "outlying areas" in FAR 2.101. (EDITOR’S NOTE: For more on FAC 2001-14, see the June 2003 Federal Contracts Perspective article “FAC 2001-14 Addresses Electronic Signatures, Federal Prison Industries, Cost Principles.”)
  
  Comments on the proposed rule must be submitted on or before January 10, 2005, to Amy Williams by any of the methods mentioned above. Cite "DFARS Case 2001-D003" when making comments on this proposed rule.
  
  
• Basic Agreements for Telecommunications Services: This proposed rule would delete the procedures at DFARS 239.7407-1, General, and DFARS 239.7407-2, Communication Service Authorizations (CSAs), regarding the use of basic agreements and CSAs for the acquisition of telecommunications services, and relocate the text to the PGI. Also, the following text would be added as DFARS 239.7407, Type of Contract: "When acquiring telecommunications services, the contracting officer may use a basic agreement (see FAR 16.702 [Basic Agreements]) in conjunction with communication service authorizations. When using this method, follow the procedures at PGI 239.7407 [Communication Service Authorizations]."
  
  Comments on the proposed rule must be submitted on or before January 21, 2005, to Michele Peterson by any of the methods mentioned above. Cite "DFARS Case 2003-D056" when making comments on this proposed rule.
  
  
• Screening of Government Information Technology Inventory: This proposed rule would remove DFARS Subpart 239.73, Acquisition of Automated Data Processing Equipment by DOD Contractors, which consists of obsolete procedures for screening of government inventory before authorizing a contractor to purchase information technology equipment. DOD now manages information technology equipment in the same manner as other government property, in accordance with FAR Part 45, Government Property, and DFARS Part 245.
  
  Comments on the proposed rule must be submitted on or before January 21, 2005, to Michele Peterson by any of the methods mentioned above. Cite "DFARS Case 2003-D054" when making comments on this proposed rule.
  
  
• Update of Clauses for Telecommunications Services: This proposed rule would update the clauses that pertain to telecommunications as follows:
  
  
  • The obsolete clause DFARS 252.239-7003, Facilities and Services to be Furnished -- Common Carriers, would be deleted; and
    
    
  • The applicability of DFARS 252.239-7004, Orders for Facilities and Services; DFARS 252.239-7005, Rates, Charges, and Services; and DFARS 252.239-7007, Cancellation or Termination of Orders, would be expanded to cover all carriers of telecommunications services. These clauses presently apply only to common carriers (that is, those subject to Federal Communications Commission or other governmental regulation). Expansion of these clauses to all carriers would reflect the current business environment, where the differences between common and noncommon carriers have become less distinct.
  
  Comments on the proposed rule must be submitted on or before January 21, 2005, to Michele Peterson by any of the methods mentioned above. Cite "DFARS Case 2003-D053" when making comments on this proposed rule.

Safavian Confirmed to Head OFPP

On November 20, the Senate confirmed David Safavian as the new administrator for the Office of Federal Procurement Policy (OFPP). He replaces Angela Styles, who resigned as OFPP administrator September 15, 2003, after leading the major revision of the Office of Management and Budget (OMB) Circular A-76, Performance of Commercial Activities (see the October 2003 Federal Contracts Perspective article "Angela Styles Resigns as OFPP Administrator").

Safavian was the chief of staff for the General Services Administration (GSA) for about a year prior to his nomination. However, following Safavian's confirmation hearing in April 2004 and the Senate Government Affairs committee approval of the nomination in June, Senator Robert Byrd (D-WV) put a hold on the nomination, preventing the full Senate from voting on the nomination. Byrd did this because of his concerns about how Safavian would carry out the Bush administration's A-76 agenda, an agenda the senator opposed. After Safavian and Byrd met privately in the summer, Byrd lifted the hold, but by then the Senate would not take up any of President Bush's nominations until after the election results.

While Safavian was awaiting confirmation, he was a special assistant to OMB Deputy Director for Management Clay Johnson. Before coming to GSA, Safavian worked for Representative Chris Cannon (R-UT) and former Representatives William Schuette (R-MI) and Robert Davis (R-MI). He has a master's degree in tax law from Georgetown University, and a law degree from Michigan State University.

Proposed FAR Rule Addresses "FedTeDS"

On November 1, a proposed rule was published that would amend the FAR to provide for access and distribution of solicitation requirements or other documents (such as technical specifications, maps, building designs, and schedules) through the Federal Technical Data Solution (FedTeDS) website (https://www.fedteds.gov) instead of through FedBizOpps (http://www.fedbizopps.gov) when controls on the release and distribution of such information are necessary. (EDITOR'S NOTE: For more on FedTeDS, see the April 2003 Federal Contracts Perspective article "OMB Unveils Website to Safeguard Sensitive Information.")

Under FAR 5.101, Methods of Disseminating Information, contracting officers are required to use FedBizOpps, the "governmentwide point of entry" (GPE), to publish information about proposed contract actions estimated to be $25,000 or more. FAR 5.102, Availability of Solicitations, encourages contracting officers to "make accessible through the GPE additional information related to a solicitation" when practicable and cost-effective. However, because FedBizOpps is freely accessible, it is not appropriate for disseminating "sensitive but unclassified" (SBU) information related to operations, systems, structures, individuals, and services essential to the security and management of a facility, including telecommunications, electrical power, building facility structural layout, gas and oil storage and transportation, water supply, schedules, and security clearance requirements. Much of this information could pose a threat to national security if made public. A secure solution, FedTeDS, has been developed for this purpose.

Agencies will still be required to synopsize and post their solicitations on FedBizOpps. However, agencies will be able to monitor access and distribution of its SBU information by providing a link from FedBizOpps to FedTeDS. Once in FedTeDS, the vendor will be able to download a copy of the information or request it on a compact disc. However, to download the information or request a disc, the vendor must be registered in both the Central Contractor Registration (CCR) (http://www.ccr.gov) and FedTeDS. To register in FedTeDS, the vendor must have the Marketing Partner Identification Number (MPIN) it created when registering in CCR. The MPIN, together with the vendor's Commercial and Government Entity (CAGE) number or DUNS number, is used to register and obtain a password in FedTeDS. Because the vendor defines it, the MPIN with the CAGE or DUNS number provides a unique identifier for the individual obtaining the information.

Comments on the proposed rule must be submitted by January 3, 2005, to (1) http://www.regulations.gov; (2) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (3) e-mail: farcase.2004-007@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. Cite "FAR Case 2004-007" when commenting on this proposed rule.

OMB Releases First Set of FY 2004 FAIR Act Inventories

On November 17, the Office of Management and Budget (OMB) released the first set of Fiscal Year 2004 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 Energy, Health and Human Services, and Transportation; the National Aeronautics and Space Administration; the Social Security Administration; and several small agencies and commissions. Interested parties have until January 5, 2005, to challenge the omission or inclusion of an activity on an agency's Commercial Activities Inventories list.

Two Nonmanufacturer Rules Waived, One Terminated

The SBA has decided to waive the nonmanufacturer rule for sporting and athletic goods manufacturing under North American Industry Classification System (NAICS) code 339920, and other communications equipment manufacturing under NAICS code 334290, because no small business manufacturers are currently supplying these classes of products to the federal government. These waivers allow otherwise qualified nonmanufacturers to supply the products of any domestic manufacturer on a federal contract set aside for small businesses, set aside for service-disabled veteran-owned small businesses, or awarded through the SBA's 8(a) program. (EDITOR'S NOTE: For more on the proposed waivers, see the September 2004 Federal Contracts Perspective article "SBA Proposes Six Nonmanufacturer Rule Waivers.")

In addition, SBA is terminating consideration of a proposed waiver of the nonmanufacturer rule for power-driven handtools manufacturing under NAICS code 333991 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 mentioned above.)

Rejected DPAS Orders Could Be Transmitted Electronically

A proposed rule would amend the Defense Priorities and Allocations System (DPAS) regulations to allow a person who has rejected a rated order to give his or her reasons for the rejection through electronic means rather than requiring the person to submit the rationale in writing.

Paragraph (d)(1) of 15 CFR 700.13, Acceptance and Rejection of Rated Orders, requires persons to transmit rejections of DPAS rated orders in writing. Industry has asserted that the current procedure hampers efficiency. This proposed rule would amend paragraph (d)(1) to give a person the option of transmitting his rationale for rejecting a rated order to the appropriate contracting officer or agency in writing or electronically. This change would allow the information to be transmitted more quickly.

Comments on the proposed rule must be submitted by December 22, 2004, to http://www.regulations.gov; to William J. Denk, Director of the Defense Programs Division, Office of Strategic Industries and Economic Security, Room 3876, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; fax: 202-482-5650; or by e-mail to wdenk@bis.doc.gov.

EDITOR'S NOTE: The DPAS regulations are in Title 15 of the Code of Federal Regulations (CFR), Part 700 (15 CFR Part 700).

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