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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

March 2004
Vol. V, No. 3

CONTENTS

DFARS Transformation Gets Underway, Comments on 14 Proposed Rules Sought
DOD Enters MOU with Sweden, Suspends SDB Adjustment
Agencies to Designate Real Property Officers
FAC 2001-20 Implements Emergency Purchasing Authority
Revision Proposed for FAR Training Cost Principle
NASA to Hold Meeting on Policies and Initiatives
President Orders High Priority for Manufacturing R&D



DFARS Transformation Gets Underway,
Public Requested to Comment on 14 Proposed Rules

On February 23, the Department of Defense (DOD) commenced its "Defense Federal Acquisition Regulation Supplement (DFARS) Transformation" with the publication of 14 proposed rules intended to "improve the efficiency and effectiveness of the acquisition process and allow our acquisition workforce the flexibility to innovate."

On February 11, 2003, DOD announced the "DFARS Transformation" because the DFARS is nearly 20 years old, and the last major review was conducted in the late 1980s (see the March 2003 Federal Contracts Perspective article "DFARS 'Transformation,' Many Changes Proposed"). This on-going review is intended to determine what value-based improvements and reductions to procurement policies, procedures, and processes can be made to the DFARS. The effort could produce legislative proposals for consideration by Congress.

The following are summaries of the 14 proposed rules that would simplify the DFARS:

Comments on all these proposed rule must be submitted on or before April 23, 2004, to the website at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm; e-mail to dfars@acq.osd.mil, or by fax to 703-602-0350.



DOD Enters MOU with Sweden, Suspends SDB Adjustment

Besides the 14 "DFARS Transformation" proposed rules, DOD took two other acquisition-related actions the past month:



Agencies to Designate Real Property Officers

On February 4, 2004, President Bush issued Executive Order (EO) 13327, Federal Real Property Asset Management, directing each agency to designate senior real property officer who will be responsible for developing and implementing "an agency asset management planning process." The senior real property officer's plan is to "(i) identify and categorize all real property owned, leased, or otherwise managed by the agency...; (ii) prioritize actions to be taken to improve the operational and financial management of the agency's real property inventory; (iii) make life-cycle cost estimations associated with the prioritized actions; (iv) identify legislative authorities that are required to address these priorities; (v) identify and pursue goals, with appropriate deadlines, consistent with and supportive of the agency's asset management plan and measure progress against such goals; (vi) incorporate planning and management requirements for historic property...and for environmental management...; and (vii) identify any other information and pursue any other actions necessary to the appropriate development and implementation of the agency asset management plan."



FAC 2001-20 Implements Emergency Purchasing Authority

Federal Acquisition Circular (FAC) 2001-20 consists of a single interim rule that amends the FAR to implement the special emergency procurement authorities of Section 1443 of Public Law 108-136, the National Defense Authorization Act for Fiscal Year 2004 (for more on Section 1443 and other 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").

Section 1443 provides that, 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 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).

This interim rule implements Section 1443 by revising the definitions of "micro-purchase threshold" and "simplified acquisition threshold" in FAR 2.101, Definitions; and revising various sections in FAR Part 12, Acquisition of Commercial Items, FAR Part 13, Simplified Acquisition Procedures, FAR Part 15, Contracting By Negotiation, FAR Part 19, Small Business Programs, and FAR Part 25, Foreign Acquisition, to reflect these changes. In addition, paragraph (b)(3) of FAR 19.805-1, General, and paragraph (c) of FAR 19.1306, HUBZone Sole Source Awards, are deleted because they address the authority in the Homeland Security Act, which expired November 23, 2003. Section 1443 replaces that authority.

The effective date of this interim rule is February 23, 2004. Comments on the interim rule must be submitted on or before April 23, 2004, 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.2003-022@gsa.gov.



Revision Proposed for FAR Training Cost Principle

On January 29, the FAR Council published a proposed rule that would amend FAR 31.205-44, Training and Education Costs, to improve its clarity. Currently, FAR 31.205-44 is restrictive in that it differentiates between vocational training, part-time college level education, full-time education, and specialized programs with numerous specific limitations on the allowability of costs associated with each of these categories.

On May 15, 2002, a proposed rule was published to make the costs associated with training and education allowable, subject to five public policy exceptions that would be retained from the current cost principle (see the June 2002 Federal Contracts Perspective article "Training and Education Cost Principle Changes Proposed"). The 2002 proposed rule stated that, except for those five expressly unallowable cost exceptions, the reasonableness of specific contractor training and education costs would be determined by FAR 31.201-3, Determining Reasonableness.

Six respondents submitted comments on the May 15, 2002, proposed rule, and additional changes are being proposed in response to those comments. The primary differences between the two proposed rules involve undergraduate- and graduate-level education:

Comments on the proposed rule must be submitted on or before April 23, 2004, 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.2001-021@gsa.gov.



NASA to Hold Meeting on Policies and Initiative

The National Aeronautics and Space Administration (NASA) will conduct an open meeting on March 18 to solicit questions, views, and opinions concerning NASA's procurement policies, practices, and initiatives. The purpose of the meeting is to have an open discussion among NASA's Associate Administrator for Procurement, Tom Luedtke, industry, and the public. The meeting will be held March 18, 2004, from 9:00 am to 11:30 am at the Marshall Space Flight Center, Morris Auditorium, Building 4200, Huntsville, AL 35812. The auditorium capacity is approximately 90 persons. To ensure adequate seating, a maximum of two representatives per firm is requested. Admittance will be on a first-come, first-served basis.



President Orders High Priority for Manufacturing R&D

On February 24, 2004, President Bush issued EO 13329, Encouraging Innovation in Manufacturing, to give high priority to manufacturing-related research and development (R&D) within the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs.

Because "continued technological innovation is critical to a strong manufacturing sector in the United States economy," and to help "advance innovation, including innovation in manufacturing, through small businesses," the president is directing the agencies participating in the SBIR and STTR programs to "give high priority within such programs to manufacturing-related research and development," and to submit annual reports to the Small Business Administration (SBA) administrator and the Office of Science and Technology Policy director concerning their efforts to implement the order. The SBA administrator is authorized to issue guidelines and directives needed to implement the order after such guidelines and directives are approved by the Office of Science and Technology Policy director and the president.

EDITOR'S NOTE: The purpose of the SBIR program is to strengthen the role of innovative small businesses in federally-funded R&D. The program applies to all agencies with R&D budgets of more than $100 million to set aside at least 2.5% of their R&D budgets for businesses with no more than 500 employees. The ten agencies currently participating in the SBIR program are the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, and Transportation; the Environmental Protection Agency; the National Aeronautics and Space Administration; and the National Science Foundation.

The STTR program is similar to the SBIR program. Its purpose is to stimulate a partnership of ideas and technologies between innovative small businesses and research institutions through federally-funded research or R&D. The STTR program requires all agencies with research/R&D budgets of more than $1 billion to set aside at least 0.3% of their research/R&D budgets for businesses with no more than 500 employees. The five agencies currently participating in the STTR program are the Departments of Defense, Energy, and Health and Human Services; the National Aeronautics and Space Administration; and the National Science Foundation.

In Fiscal Year 2003, there was approximately $1.1 billion awarded through the SBIR program, and $100 million awarded through the STTR program.

For more on the SBIR program, see the October 2002 Federal Contracts Perspective article "SBA Revising SBIR Program Policies." For more information on both these programs, see the SBA website at http://www.sba.gov/sbir/indexsbir-sttr.html.



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