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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


June 2004
Vol. V, No. 6

CONTENTS


FAC 2001-23 Institutes Service-Disabled Veteran-Owned Set-Asides
OMB Releases Third Set of 2003 FAIR Act Inventories
Comments Sought on BAA Nonavailable Items
Exceptions to the Berry Amendment Added to DFARS
SBA Launches Business.gov, Gateway for Small Business
OMB Establishes CFR Title 2 for Grants
GSA Finalizes IT Cooperative Purchasing Regulations
OMB Says A-76 Competitions Save Agencies $1.1 Billion
Nonmanufacturer Rule Waiver Proposed for Aluminum
Executive Compensation Benchmark Raised to $432,851
Proposed NFS Reissuance Continues with Parts 1852-1872



FAC 2001-23, SBA Institute Service-Disabled
Veteran-Owned Small Business Program

On May 5, the Service-Disabled Veteran-Owned Small Business (SDVOSB) program was instituted with the publication of Federal Acquisition Circular (FAC) 2001-23 and revisions to the Small Business Administration's (SBA) regulations. These regulations implement Section 308, Procurement Program for Small Business Concerns Owned and Controlled by Service-Disabled Veterans, of the Veterans Benefits Act of 2003 (Public Law 108-183), which permits set-aside and sole source procurements for SDVOSB concerns (for more on Public Law 108-183, see the January 2004 Federal Contracts Perspective article "Disabled Veteran Set-Asides Established").

Comments on both FAC 201-23 and 13 CFR Part 125 are due July 6, 2004. Comments on FAC 2001-23 must be submitted 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.2004-002@gsa.gov. Comments on 13 CFR Part 125 must be submitted through http://www.regulations.gov; by e-mail to SDVOSBCProgram@sba.gov; or by mail to Dean Koppel, Assistant Administrator, Office of Policy and Research, 409 3rd Street, SW, Washington, DC 20416.



OMB Releases Third Set of 2003 FAIR Act Inventories

On May 27, the Office of Management and Budget (OMB) released the third set of Fiscal Year 2003 Commercial Activities Inventories of non-governmental functions being performed by government agencies. Inventories in this third set are from the Departments of Agriculture, Commerce, Education, Justice, Treasury, and Veterans Affairs; National Science Foundation; Social Security Administration; the Agency for International Development; and many smaller agencies.

Interested parties have 30 working days from today (that is, until July 12, 2004) to challenge the omission or inclusion of an activity on an agency's Commercial Activities Inventories list.

For more on the first set of FY 2003 inventories, see the December 2003 Federal Contracts Perspective article "OMB Releases First Set of 2003 FAIR Act Inventories." For more on the second set of FY 2003 inventories, see the February 2004 Federal Contracts Perspective article "OMB Releases Second Set of 2003 FAIR Act Inventories."



Comments Sought on BAA Nonavailable Items

The FAR Council is seeking comments on proposed clarifications of the intent of the list of items determined to be nonavailable for purposes of the Buy American Act (BAA), and whether some articles currently listed as nonavailable articles are now mined, produced, or manufactured in the United States in sufficient and reasonably-available commercial quantities and should be removed from the list. (EDITOR'S NOTE: The BAA is implemented in FAR Subpart 25.1, Buy American Act -- Supplies.)

The BAA requires that only domestically mined, produced, or manufactured articles may be procured for public use in the United States. The BAA provides several exceptions to this requirement, one of them being for articles not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality (paragraph (b)(1) of FAR 25.103, Exceptions). Paragraph (a) of FAR 25.104, Nonavailable Articles, lists the articles that meet the conditions of this exception.

A proposed rule would clarify the purpose and procedures of the nonavailable list by making the following changes:

Also, because the list has not been subjected to a thorough review since 1957, the FAR Council is seeking information to determine whether some articles should be removed from the list because they are now mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality. Specific information regarding domestic production capacity in relation to U.S. government and nongovernment demand and the quality of domestically produced items would help in the determination whether articles should remain on or be removed from the list.

Comments on the proposed rule should be sent on or before July 23, 2004, to the General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405; through the Internet at http://www.regulations.gov; or by e-mail to farcase.2003-021@gsa.gov. Comments on the availability of articles on the list should be sent on or before July 19, 2004, to the above address or by e-mail to farcase.2004-N1@gsa.gov.



Exceptions to the Berry Amendment Added to DFARS

DOD is issuing an interim rule amending Defense FAR Supplement (DFARS) 225.7002, Restrictions on Food, Clothing, Fabrics, Specialty Metals, and Hand or Measuring Tools, to implement Sections 826 and 827 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136), which provide exceptions to the domestic source requirements of the "Berry Amendment."

The Berry Amendment requires that procurements of covered items in excess of the $100,000 simplified acquisition threshold for "food, clothing, tents, tarpaulins, covers, cotton and other natural fiber products, woven silk or woven silk blends, spun silk yarn for cartridge cloth, synthetic fabric or coated synthetic fabric, canvas products, or wool...or specialty metals including stainless steel flatware, or hand measuring tools..." must be grown, reprocessed, reuse, or produced in the United States or its possessions, unless the "Secretary of Department concerned" determines that satisfactory quality and sufficient quantity "cannot be procured as and when needed at United States market prices..." (EDITOR'S NOTE: The Berry Amendment is 10 U.S.C. Chapter 148, Section 2533a, Requirement to Buy Certain Articles from American Sources; Exceptions.)

This interim rule adds new exceptions to DFARS 225.7002-2, Exceptions, to implement Sections 826 and 827 of Public Law 108-136. Section 826 exempts from the Berry Amendment the acquisition of food, specialty metals, and hand or measuring tools when they are needed to support contingency operations or when the use of other than competitive procedures has been approved on the basis of unusual and compelling urgency -- this exemption is added as paragraph (f) of DFARS 225.7002-2. Section 827 exempts from the Berry Amendment the acquisition of waste and byproducts of cotton or wool fiber for use in the production of propellants and explosives -- this exemption is added as paragraph (k) of DFARS 225.7002-2. Corresponding changes are made to DFARS 252.225-7012, Preference for Certain Domestic Products.

The effective date of this interim rule is May 13, 2004. Comments on the interim rule must be submitted on or before July 12, 2004, directly on the web site at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm; by e-mail to dfars@acq.osd.mil; by mail to Defense Acquisition Regulations Council, Attn: Amy Williams, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; or by fax to 703-602-0350.



SBA Launches Business.gov, Gateway for Small Business

On May 21, the Small Business Administration (SBA) announced the launch of Business.gov (http://www.Business.gov), which will provide information from various agencies and links to:

Business.gov is scheduled to add more resources this autumn, including special "wizards" to help businesses find answers to their questions, fill out forms, and be more productive.



OMB Establishes CFR Title 2 for Grants

On May 11, OMB established in the Code of Federal Regulations (CFR) a Title 2, Grants and Agreements, for grants and other financial assistance and nonprocurement agreements. OMB believes that consolidating its guidance and co-locating the agency regulations provides a good foundation for streamlining and simplifying the policy for grants and agreements.

Title 2 of the CFR consists of two subtitles: Subtitle A, Office of Management and Budget Guidance for Grants and Agreements, for OMB's governmentwide guidance to federal agencies on the award and administration of grants and agreements; and Subtitle B, Federal Agency Regulations for Grants and Agreements, for federal agency regulations implementing that OMB guidance. Each agency that awards and administers grants and agreements will be assigned a chapter in Subtitle B for its implementing regulations.

In addition, Subtitle A has Chapter I and Chapter II. These two chapters will enable OMB to publish its governmentwide guidance in Title 2 in two phases. In the first phase, OMB will move circulars and other guidance, in their current form, into Chapter II and reserve Chapter I. During this first phase, agencies may publish their implementing regulations in Subtitle B if they wish, but are not required to do so. In the second phase, as OMB finalizes any changes to its guidance, the new guidance will be published in Chapter I and the original guidance will be removed from Chapter II. If OMB is to make a substantive change in the guidance when publishing it in either Chapter I or II of Subtitle A, the change will be proposed in the Federal Register with an opportunity for comment.

An explanation of Title 2 is included in Subtitle A as Part 1, About Title 2 of the Code of Federal Regulations and Subtitle A. The following are the contents of Part 1:

Subpart A, Introduction to Title 2 of the CFR
      1.100, Content of this title.
      1.105, Organization and subtitle content.
      1.110, Issuing authorities.
Subpart B, Introduction to Subtitle A
      1.200, Purpose of chapters I and II.
      1.205, Applicability to grants and other funding instruments.
      1.210, Applicability to Federal agencies and others.
      1.215, Relationship to previous issuances.
      1.220, Federal agency implementation of this subtitle.
      1.230, Maintenance of this subtitle.
Subpart C, Responsibilities of OMB and Federal Agencies
      1.300, OMB responsibilities.
      1.305, Federal agency responsibilities.

To begin the process of moving OMB circulars to the new Title 2, OMB Circular A-110 is being relocated to Title 2, Chapter II, as Part 215. OMB has made minor adjustments to conform to the formatting requirements of the CFR, but there are no substantive changes to the circular. The circular's section numbers remain the same, only now they are preceded by the Title 2 part number "215." For example, under OMB Circular A-110, Section 24 discusses program income -- the corresponding discussion of program income in Title 2 is in Section 215.24.

Agency implementing regulations may continue to reference OMB Circular A-110 and its title, and the OMB circulars continue to be available on the OMB Web site at http://www.whitehouse.gov/omb/circulars.



GSA Finalizes IT Cooperative Purchasing Regulations

The General Services Administration (GSA) has finalized, with changes, the interim rule that added GSAR Subpart 538.70, Cooperative Purchasing, and made other related changes to the GSA Acquisition Regulation (GSAR) to implement Section 211 of the E-Government Act of 2002 (Public Law 107-347), which authorizes GSA to permit state and local governments to use its Federal Supply Schedules (FSS) for "automated data processing equipment (including firmware), software, supplies, support equipment, and services (as contained in Federal Supply Classification Code Group 70 [General Purpose Commercial Information Technology Equipment, Software, and Services])" -- more commonly referred to as "information technology" (IT).

On January 23, 2003, GSA published a proposed rule to establish a new GSAR Subpart 538.70 and associated clauses to address cooperative purchasing from supply schedules by eligible non-federal organizations (see the February 2003 Federal Contracts Perspective article "State, Local Governments Use of IT Schedules Proposed"). Based on comments received regarding the proposed rule, GSA decided to issue an interim rule with substantive changes and request additional comments (see the June 2003 Federal Contracts Perspective article "State, Local Governments Permitted to Use FSS to Buy IT").

GSA received comments from four respondents, and based on those comments, GSA has decided to adopt the interim rule as final with several minor changes.

The following are the primary differences between the interim and final rules:



OMB Says A-76 Competitions Save Agencies $1.1 Billion

On May 25, OMB released "Report on Competitive Sourcing Results, Fiscal Year 2003," in which OMB claims that competitions conducted under OMB Circular A-76, Performance of Commercial Activities, procedures and completed in Fiscal Year 2003 and the first quarter of FY 2004 "are expected to yield $1.1 billion in savings for taxpayers over the next 3-5 years -- an approximate 15% cost reduction (or avoidance)."

The report states that:

These data are based on 662 competitive assessments completed in FY 2003, in which 17,595 "full-time equivalents" (FTEs) (equal to one work-year) were studied.



Nonmanufacturer Rule Waiver Proposed for Aluminum

The SBA is proposing to waive the nonmanufacturer rule for aluminum sheet, plate, and foil manufacturing under North American Industry Classification System (NAICS) code 331315 because no small business manufacturers are currently supplying this class of products to the federal government. This waiver would allow 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: Public Law 100-656, enacted November 15, 1988, requires recipients of 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 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.

SBA is inviting the public to comment or provide information on potential small business sources for aluminum sheet, plate, and foil manufacturing covered by NAICS code 331315 to Edith Butler, Program Analyst, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416; 202-619-0422.



Executive Compensation Benchmark Raised to $432,851

OMB Director Joshua B. Bolten has decided to increase the "benchmark compensation amount" for senior executives by $27,578, from $405,273 to $432,851. This figure is "the median amount of the compensation provided for all senior executives of all benchmark corporations [those with annual sales in excess of $50 million] for the most recent year..." Mr. Bolten settled on that figure based on commercially available surveys and after consultation with the director of the Defense Contract Audit Agency.

The $432,851 is the maximum amount of compensation (that is, wages, salary, bonuses, deferred compensation, and employer contributions to defined contribution pension plans) that is allowable under federal contracts for "the five most highly compensated employees in management positions at each home office and each segment of the contractor." However, the benchmark compensation amount is not a limit on the compensation an executive may receive -- $432,851 is the maximum allowable amount the government will reimburse contractors for their senior executives' compensation. See paragraph (p) of FAR 31.205-6, Personal Compensation.

The benchmark compensation amount applies to contract costs incurred after January 1, 2004, for contractor fiscal year 2004 and subsequent contractor fiscal years unless and until revised by OMB, which is required to set the benchmark compensation amount annually.



Proposed NFS Reissuance Continues with Parts 1852-1872

The National Aeronautics and Space Administration (NASA) published its sixth set of proposed revisions to reduce the NASA FAR Supplement (NFS) by eliminating NFS Subpart 1852.1, Instructions for Using Provisions and Clauses; all of NFS Part 1853, Forms; and all of NFS Part 1872, Acquisitions of Investigations.

Comments on the proposed rule should be submitted on or before July 20, 2004, to Celeste Dalton, NASA, Office of Procurement, Contract Management Division (Code HK), Washington DC 20546 or by e-mail to: Celeste.M.Dalton@nasa.gov.

For more on the proposed revision of NFS Parts 1827 through 1833, see the April 2004 Federal Contracts Perspective article "Proposed NFS Reissuance Continues with Parts 1827-1833." For more on the reissuance of NFS Parts 1801 through 1825, and the proposed revision of NFS 1834 through 1851, see the May 2004 Federal Contracts Perspective article "NASA Reissues NFS Parts 1801 Through 1825."

The Internet version of the NFS at http://www.hq.nasa.gov/office/procurement/regs/nfstoc.htm provides both the regulations and internal procedures.



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