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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


September 2004
Vol. V, No. 9

CONTENTS


Federal Contract Spending Tops $321 Billion
NFS Changes on Reps & Certs, COTR Training
DFARS Rules on Taxes, Bonds
SBA Proposes Six Nonmanufacturer Rule Waivers
FAR Change on Bid Bonds Powers of Attorney Proposed
Interior Adds Rules on Woody Biomass Utilization



Federal Contract Spending Tops $321 Billion,
21.3% Increase Due to Iraq and Homeland Security

The federal government set another record for contract spending in Fiscal Year (FY) 2003 (October 1, 2002 to September 30, 2003), awarding $321.8 billion, $56.5 billion more than the previous record set in FY 2002 -- a 21.2% increase. Most of the increase is attributed to increased spending by the Department of Defense (DOD) directly related to the war in Iraq, and to the newly established Department of Homeland Security (DHS), which came into existence on January 24, 2003 (see the January 2003 Federal Contracts Perspective article "Department of Homeland Security Approved to Open").

While the big winner in dollars was DOD with a $45.6 billion increase, the largest percentage increase was enjoyed by the Agency for International Development -- a whopping 80.7% increase over FY 2002, largely because of Iraq rebuilding contracts. It is hard to pick the departments with the largest decreases because nine of them lost organizations to DHS. A total of 22 organizations were transferred to DHS, including the Transportation Security Administration and Coast Guard from the Department of Transportation; the U.S. Customs Service and Secret Service from the Department of the Treasury; and all of the Federal Emergency Management Administration (which awarded contracts worth $332 million in FY 2002). All these departments show a net loss for FY 2003 (except FEMA, which disappeared into DHS).

The following are the departments and agencies that contributed organizations to DHS, and the organizations they contributed:

The following are the largest agencies' FY 2003 spending totals (in billions) and the percentage change from FY 2002:

Defense*$221.3+29.1%
Energy*$21.3+10.6%
Veterans Affairs$13.5+31.4%
National Aeronautics and Space Administration$11.9+1.0%
General Services Administration*$8.6-36.0%
Health and Human Services*$7.1+12.4%
Agriculture*$4.8+14.3%
Justice*$4.6-11.1%
Interior$4.3+40.6%
Transportation*$3.8-6.4%
Homeland Security**$3.5--
State$3.3+21.8%
Treasury*$2.9-19.6%
Agency for International Development$1.6+80.7%
Commerce$1.6-6.6%
Labor$1.6-4.0%
Environmental Protection Agency$1.3+6.9%
Education$1.0+8.6%
Housing and Urban Development$1.0+9.2%
Social Security Administration$0.7-3.5%
Office of Personnel Management$0.3-3.3%
National Science Foundation$0.2-18.1%
Miscellaneous Agencies$1.6+52.1%

* Portion(s) of the department or agency was transferred to the Department of Homeland Security during FY 2003.

** Came into existence January 24, 2003.

Among the states, Texas had the largest dollar increase -- $9.6 billion -- a 49.9% increase over its FY 2002 total of $19.2 billion. However, Missouri enjoyed the largest percentage increase -- 103.0% -- from $3.8 billion to $7.6 billion. The state with the largest percentage and dollar decrease was Georgia -- it went from $6.9 billion to $4.8 billion, a 29.9% decrease. The following states received the most federal contract money in FY 2003 (in billions). Their FY 2002 rank and dollar amount change are in parentheses, and the percentage increase from FY 2002 is in the last column:

1. California (1)$35.3 (+$3.3)10.3%
2. Virginia (2)$29.6 (+$4.8)19.4%
3. Texas (3)$28.8 (+$9.6)49.9%
4. Maryland (4)$15.1 (+$2.3)17.8%
5. District of Columbia (5)$11.1 (+$0.5)4.8%
6. Florida (6)$10.0 (+$1.4)16.6%
7. Arizona (13)$8.3 (+$1.3)19.5%
8. Connecticut (11)$8.3 (+$2.3)39.2%
9. Massachusetts (12)$7.7 (+$1.9)32.8%
10. Missouri (20)$7.6 (+$3.8)103.0%

The FY 2003 award information was published later than usual this year because of delays in the implementation of the Federal Procurement Data System -- Next Generation (FPDS-NG). A contract for the development of FPDS-NG was awarded in 2003 to Global Computer Enterprises, Inc., but the transition from FPDS to FPDS-NG has not been as smooth as expected.



NFS Changes on Reps & Certs, COTR Training

The National Aeronautics and Space Administration (NASA) made two changes to the NASA FAR Supplement (NFS) in August:



DFARS Rules on Taxes, Bonds

DOD took a break in August, publishing only three proposed changes to the Defense Federal Acquisition Regulation Supplement (DFARS):



SBA Proposes Six Nonmanufacturer Rule Waivers

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for the following classes of product because no small business manufacturers are currently supplying them to the federal government:

These waivers 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 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.

SBA is inviting the public to comment 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.



FAR Change on Bid Bonds Powers of Attorney Proposed

The Federal Acquisition Regulation (FAR) Council has published a proposed rule that would add FAR 28.101-3, Authority of an Attorney-in-Fact for a Bid Bond, to establish that a copy of an original power of attorney, when submitted in support of a bid bond, is sufficient evidence of the authority to bind the surety.

Since 1999, a series of Government Accountability Office (GAO) decisions has rejected faxed and photocopied powers of attorney. Then, in All Seasons Construction, Inc., B-291166.2, December 6, 2002, GAO sustained the government's decision to reject a low bidder's power of attorney because the signatures were generated by computer as part of the document. This decision has been interpreted by industry and procuring agencies to require a contracting officer to inspect the power of attorney at bid opening to ascertain that the signatures are original. The requirement for an original power of attorney, combined with the requirement for an original "wet" signature after the generation of the document, has become costly and unworkable for the surety industry.

However, on January 9, 2004, the U.S. Court of Federal Claims (COFC), in Hawaiian Dredging Construction Co. v. U.S., No. 03-2763C, ruled against the government's decision to reject a low bidder's power of attorney because the signatures were not original. In this decision, the COFC indicated that the FAR does not require an original signature on the document that serves as evidence of authority to bind the surety. In addition, the COFC held that the contracting officer was unreasonable in relying on GAO's All Seasons to require original signatures and was critical of certain aspects of GAO's reasoning in the decision. The Hawaiian Dredging case has created a division of opinion in the bid protest forums in regards to the standards for acceptability of powers of attorney.

This proposed rule would establish clear and uniform standards for powers of attorney accompanying bid bonds that safeguard the integrity of the procurement process but are not unduly onerous to either industry or government. It would allow a copy of an original power of attorney, including a photocopy or facsimile copy, as sufficient evidence of authority for a person signing a bid bond to bind the surety as an attorney-in-fact. While providing the bid bond with evidence of power of attorney would remain a matter of responsiveness, any doubt regarding the authenticity and enforceability of a power of attorney would be handled by the contracting officer after the bid opening as a matter of responsibility.

The proposed FAR 28.101-3 would be:

      "(a) Any person signing a bid bond as an attorney-in-fact shall include with the bid bond evidence of authority to bind the surety.

      "(b) An original or photocopy, or facsimile of an original power of attorney is sufficient evidence of such authority.

      "(c) The contracting officer shall --
      "(1) Treat the failure to provide a signed and dated power of attorney at the time of bid opening as a matter of responsiveness; and

      "(2) Treat questions regarding the authenticity and enforceability of the power of attorney at the time of bid opening as a matter of responsibility. These questions are handled after bid opening."

Comments must be submitted on or before October 22, 2004, to: (1) http://www.regulations.gov; (2) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (3) e-mail: farcase.2003-029@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.



Interior Adds Rules on Woody Biomass Utilization

The Department of the Interior (DOI) amended the DOI Acquisition Regulation (DIAR) to add DIAR Part 1437, Utilization of Woody Biomass, to provide contractors the option of removing woody biomass by-products from DOI land management activities wherever ecologically appropriate and in accordance with the law. (EDITOR'S NOTE: The DIAR is Chapter 14 of Title 48 of the Code of Federal Regulations. It is available on the Internet at http://www.doi.gov/pam/aindex.html.)

Woody biomass consists of "trees and woody plants, including limbs, tops, needles, leaves, and other woody parts, grown in a forest, woodland, or rangeland environment, that are the by-products of management, restoration and/or hazardous fuel reduction treatment." This rule establishes procedures allowing contractors to remove woody biomass by-products from DOI land management activities when ecologically appropriate ("for example, it may be necessary to retain snags or small woody debris to meet wildlife habitat objectives, or to create specific prescribed burning conditions to stimulate native plant development"). Removal or use of woody biomass will reduce smoke and emissions from prescribed and natural fires; preserve landfill capacities; reduce the threat of catastrophic wildfires to communities and public/private utilities; improve watershed and wildlife habitat protection; and improve forest, woodland, and rangeland health by reducing insects, disease, and invasive plant and animal species. The Forest Service of the Department of Agriculture has provisions in timber sale, service, and stewardship contracts that provide opportunities to utilize the type of materials included in this rule.

The following are the key provisions of DIAR Part 1437:

This rule is effective August 27, 2004. Comments on the rule must be received by October 26, 2004, to: (1) http://www.regulations.gov; (2) e-mail: John_Stewart@ios.doi.gov; (3) fax: 202-606-3150; (4) mail: Office of Wildland Fire Coordination, Department of the Interior, MS-3060 1849 C Street NW, Washington, DC 20240; or (5) hand-delivery: Office of Wildland Fire Coordination, MS-3060, Department of the Interior, 1849 C Street NW, Washington, DC 20240.



Copyright 2004 by Panoptic Enterprises. All Rights Reserved.

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