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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

October 2005
Vol. VI, No. 10

CONTENTS

Hurricane Katrina Devastates Gulf Coast,
Unleashes Billions of Dollars in Emergency Relief

August 29, 2005, will not soon be forgotten by residents of the Gulf Coast as Hurricane Katrina, a Category 4 storm, ripped through Louisiana, Mississippi, and Alabama, leaving nothing but devastation in its path and millions of victims to fend for themselves. Though the Federal Emergency Management Agency (FEMA) was slow to respond, and responded spastically when it did, Congress rushed in to approve more than $62 billion in relief, most of which will be expended through contracts for emergency relief and reconstruction. In addition, Congress authorized a 100-fold increase in the micro-purchase threshold to enable purchase cardholders to spend the money more quickly, and President Bush waived the provisions of the Davis-Bacon Act to provide "greater assistance to these devastated communities and permit the employment of thousands of additional individuals."

First out of the gate was the Department of Defense (DOD), which on September 2 invoked the "contingency operation" justification provided by Section 1443 of the Services Acquisition Reform Act of 2003 to increase the micro-purchase threshold from $2,500 to $15,000; the simplified acquisition threshold from $100,000 to $250,000; and the Federal Acquisition Regulation (FAR) Subpart 13.5 test program for commercial items threshold from $5,000,000 to $10,000,000 (see the December 2003 Federal Contracts Perspective article "Services Acquisition Reform Act Signed Into Law, Establishes Training Fund, Chief Acquisition Officer"). Also, Section 1443 provides that such emergency purchases are considered to be for commercial items, regardless of dollar amount. In addition, DOD issued a class deviation authorizing contracting officers to use the governmentwide purchase card up to the revised threshold to support Hurricane Katrina relief efforts. However, the effectiveness of this class deviation was diminished by the requirement for contracting officers to obtain oral certifications (and document the file at a later date) of compliance with such statutes and executive orders as the Buy American Act, the various Free Trade Agreements, the Service Contract Act, Equal Employment Opportunity (EEO) provisions, Small Business Act, and procurement integrity provisions.

Also on September 2, Congress enacted Public Law 109-61, the Emergency Supplemental Appropriations Act to Meet Immediate Needs Arising From the Consequences of Hurricane Katrina, 2005, authorizing $10 billion for evacuation, emergency repairs, deployment of personnel, and other costs resulting from immediate relief efforts.

On September 8, Congress enacted Public Law 109-62, the Second Emergency Supplemental Appropriations Act, to authorize an additional $52 billion for relief efforts. In addition, Public Law 109-62 increased the micro-purchase threshold to $250,000. Furthermore, the law appropriated $15,000,000 for audits and investigations of recovery activities by the Department of Homeland Security (DHS) Office of the Inspector General (FEMA is a part of DHS).

Also on September 8, President Bush issued a proclamation waiving the Davis-Bacon Act requirements for all contracts in the designated disaster area, not just those for Hurricane Katrina relief (see FAR Subpart 22.4, Labor Standards for Contracts Involving Construction, for more on the Davis-Bacon Act).

To minimize the administrative burdens imposed on contracting officers engaged in relief efforts, on September 9 the Department of Labor (DOL) decided to waive some of the mandated EEO requirements. Among the waived requirements were the development of affirmative action programs, the preparation of reports, and the notices required by FAR 52.222-26, Equal Opportunity; FAR 52.222-35, Equal Opportunity for Special Service Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans; and FAR 52.222-36, Affirmative Action for Workers with Disabilities.

On September 12, the General Services Administration (GSA) issued a Federal Travel Regulation (FTR) bulletin suggesting that agencies consider delaying all non-essential temporary-duty (TDY) and relocation travel to the areas affected by Hurricane Katrina for 90 days. For essential TDY and relocation travel to the areas affected by Hurricane Katrina, the bulletin alerts agencies that certain provisions of the FTR governing the authorization of actual subsistence expenses are temporarily waived because it is expected that finding lodging facilities and/or adequate meals may be difficult, and distances involved may be great resulting in increased costs for per diem expenses.

On September 13, DOD temporarily increased the convenience check limit from $2,500 to $15,000 when used to support recovery efforts.

Finally, on September 13, the Office of Management and Budget (OMB) issued guidance for relief contracts, particularly on the use of the increased $250,000 micro-purchase threshold authorized by Congress in Public Law 109-62. This guidance was partially in response to a severe case of "legislative remorse" on the part of many senators and representatives on the $250,000 micro-purchase threshold they had just approved. In the guidance, OMB directed that:

• There not be a blanket increase in cardholder authority. Rather, the head of the contracting activity is required to identify, in writing, the individuals authorized to use the higher threshold, and these individuals must be working directly on Hurricane-Katrina-related acquisitions.
  
  
• These individuals must have their warrants modified and must have sufficient training appropriate for the increased authority.
  
  
• All open market transactions (that is, those not placed under existing contracts) exceeding $50,000 must be pre-approved by a contracting officer (other than the buyer or cardholder) or a senior manager at the GS-14 grade level or above.
  
  
• The agency must designate officials to conduct follow-up reviews of transactions made under Public Law 109-62, and these reviews must take place no later than 60 days after any such transaction.
  
  
• Agencies should increase management controls to mitigate risk, such as those described in OMB Circular A-123, Management's Responsibility for Internal Control, Appendix B, Improving the Management of Government Charge Card Programs (see the September 2005 Federal Contracts Perspective article "New Charge Cardholders to Get Credit Checks").

In addition to these directives, OMB provides the following additional guidance:

• "Cardholders and ordering officials are reminded to ensure that prices are reasonable. These common sense determinations may take into consideration the extraordinary circumstances of the rescue and recovery operations."
  
  
• "Although there is no absolute requirement to award micro-purchases to small businesses, agencies using this authority are expected to provide small businesses maximum practicable opportunity under the circumstances to participate in federal acquisitions as prime contractors and subcontractors. Where possible and consistent with efficient acquisition of needed supplies and services, local small businesses should be given priority."
  
  
• "Section 307 of the Stafford Act (Public Law 93-288) establishes a preference, to the extent feasible and practicable, for contracting with local organizations, firms, or individuals for debris clearance, distribution of supplies, reconstruction, and other major disaster or emergency assistance activities." (EDITOR'S NOTE: For more on the Stafford Act, see FAR Subpart 26.2, Disaster or Emergency Assistance Activities.)

Already, there are concerns about how the $62 billion appropriated for hurricane-relief effort are being spent, especially when FEMA is expected to be doing a substantial amount of the spending. For example, Kellogg, Brown and Root (a subsidiary of Halliburton Co.) and Bechtel Corp. have received no-bid contracts for various kinds of relief activities (utilizing the FAR 6.302-2, Unusual and Compelling Urgency, exception to the "full and open competition" requirement); and Carnival Cruise Lines has been awarded $236 million for three cruise ships to serve as temporary shelter for victims for six months, but they have been mostly empty.

To compound problems, Hurricane Rita struck west Louisiana and east Texas on September 24. Hurricane Rita was similar in size and intensity to Hurricane Katrina, and caused similar devastation, including again flooding parts of New Orleans. It is expected that the emergency authorities enacted and promulgated for Hurricane Katrina relief will be extended to areas affected by Hurricane Rita.

OFPP Chief Arrested for Making False Statements

David Safavian, former Office of Federal Procurement Policy (OFPP) administrator, was arrested September 19 for making false statements to a GSA ethics officer and GSA's Office of the Inspector General (OIG), and for obstructing an investigation by the OIG. Safavian resigned as OFPP administrator on September 16.

The complaint alleges that, while Safavian was the GSA chief of staff, he aided Jack Abramoff, a lobbyist and former partner of Safavian, in Abramoff's attempts to acquire two GSA-controlled properties. In August 2002, Abramoff allegedly took Safavian and others on a golf trip to Scotland. The false statements charge relates to Safavian's concealing from the the GSA ethics officer and the OIG that Abramoff had business before GSA prior to the golf trip, and that Safavian was aiding Abramoff in his attempts to do business with GSA.

Abramoff was indicted last month on unrelated fraud and conspiracy charges involving his lobbying for Indian gambling interests.

On September 28, six Democratic representatives asked the Government Accountability Office (GAO) to investigate possible misconduct in the federal contracting process.

"We were shocked to learn of the arrest of David Safavian," wrote the Congressmen. "As the Chief of Staff to the Administrator of GSA, this Presidential Appointee occupied a very powerful position and operating in a position of trust for an agency that oversees all civilian procurement, federal land acquisition and disposal, and telecommunications technology and policy. Moreover, Mr. Safavian subsequently became the Administrator for the Office of the Federal Procurement Policy within the Executive Office of the President in the Office of Management and Budget. In this mor recent position, he oversaw governmentwide procurement policy including the [OMB Circular] A-76 [Performance of Commercial Activities] process, which entails the systematic outsourcing of federal employees functions to outside contractors.

"As a consequence, in both of these high-level jobs, Mr. Safavian was in a position to engage in other transactions that could greatly compromise government assets in exchange for personal or political favors, thereby violating federal statutes, regulations, and/or ethics requirements that govern conflicts of interests and the appearance of impropriety.

"Consequently, we request that you conduct a comprehensive investigation of all of the matters where Mr. Safavian became directly or indirectly involved to ensure that the public trust was not violated, and that other important and costly government programs were not compromised."

Even though Safavian's arrest was for activities conducted before November 29, 2004, when he became the OFPP administrator (see the December 2004 Federal Contracts Perspective article "Safavian Confirmed to Head OFPP"), his arrest has a substantial effect of the federal contracting community. First of all, OFPP is without a head once again. Prior to Safavian's nine-month stint as OFPP administrator, there was a 14-month gap between his swearing-in and the resignation of his predecessor, Angela Styles (see the October 2003 Federal Contracts Perspective article "Angela Styles Resigns as OFPP Administrator"). This means that no one in the Bush administration is specifically assigned to push such contracting initiatives as A-76, strategic sourcing, and performance-based contracting. Second, his arrest comes soon after the former head of Air Force contracting, Darlene Druyun, was convicted and jailed for giving Boeing Co. preferential treatment in multibillion dollar contract competitions in return for a high-level position in Boeing and jobs for her daughter and son-in-law. These two arrests call into question the integrity of the entire community. Finally, the questionable (possibly illegal) and poor contracting practices that have surfaced in Iraq and Hurricane Katrina relief efforts bring into question the integrity and capabilities of the federal contracting workforce.

RFID Requirements Included in DFARS

The Department of Defense (DOD) has taken the first tentative steps towards embracing package marking with passive radio frequency identification (RFID) tags, just like Wal-Mart and other firms tracking large inventories. In addition to the DFARS RFID implementation, DOD published four other final rules, two interim rules, and six proposed rules.

• Radio Frequency Identification (RFID): This final rule amends DFARS Subpart 211.2, Using and Maintaining Requirements Documents, to add DFARS 211.275 Radio Frequency Identification, and the corresponding clause DFARS 252.211-7006, Radio Frequency Identification. These changes require contractors to affix passive radio frequency identification (RFID) tags at the case and palletized unit load levels when shipping packaged operational rations, clothing, individual equipment, tools, personal demand items, or weapon system repair parts, to the Defense Distribution Depot in Susquehanna, PA, or the Defense Distribution Depot in San Joaquin, CA. The data encoding schemes that contractors must write to the tags are identified in the clause and are also located at http://www.dodrfid.org/tagdata.htm. In addition, the clause requires contractors to send an advance shipment notice in accordance with the procedures at http://www.dodrfid.org/asn.htm to provide the association between the unique identification encoded on the passive tag(s) and the product information at the applicable case and palletized unit load levels.
  
  The proposed rule (see the May 2005 Federal Contracts Perspective article "DFARS Transformation Momentum Builds") prompted 93 comments from 33 respondents. As a result of those comments, the final rule contains additional changes that clarify the shipment locations, the definitions of "exterior container" and "palletized unit load," and the requirements for ensuring that data encoded on each RFID tag are unique.
  
  
• Restrictions on Totally Enclosed Lifeboat Survival Systems: This final rule removes DFARS 225.7008, Restrictions on Totally Enclosed Lifeboat Survival Systems, and the corresponding contract clause at DFARS 252.225-7039, which had implemented provisions of the Fiscal Year 1994 DOD Appropriations Act, the Fiscal Year 1995 DOD Appropriations Act, and 10 U.S.C. 2534. The fiscal year 1994 and 1995 appropriations act restrictions are no longer considered applicable, and 10 U.S.C. 2534 applies to the acquisition of totally enclosed lifeboats that are components of naval vessels. Since this restriction affects only the Navy, DFARS coverage for implementation of this restriction was considered unnecessary.
  
  There were no comments in response to a proposed rule that would make these changes, so the proposed rule is adopted as final without changes.
  
  
• Provision of Information to Cooperative Agreement Holders: This final rule adopts, without change, an interim rule that amended DFARS 205.470, Contract Clause, to implement Section 816 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375). Section 816 increased the threshold at which a DOD contract must include DFARS 252.205-7000, Provision of Information to Cooperative Agreement Holders, from $500,000 to $1,000,000. DFARS 252.205-7000 requires contractors to provide to cooperative agreement holders, upon request, a list of the contractor's employees who are responsible for entering into subcontracts.
  
  No comments were received in response to the interim rule, so it is adopted as final without change. (For more on the interim rule, see the March 2005 Federal Contracts Perspective article "DFARS Transformation Continues by Addressing Taxes, Services, Utilities, Extraordinary Relief.")
  
  
• Multiyear Contracting: This final rule adopts, without change, the interim rule that amended DFARS Subpart 217.1, Multiyear Contracting, to implement Section 8008 of the Defense Appropriations Act for Fiscal Year 2005 (Public Law 108-287) and Section 814 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375).
  
  Section 814 required DOD to provide notice and supporting rationale to Congress before awarding a multiyear contract containing a cancellation ceiling exceeding $100 million that is not fully funded. Section 8008 placed additional restrictions on the award of multiyear contracts for supplies using FY 2005 appropriated funds. The interim rule implemented the requirements of Section 814 by adding paragraph (a)(5) to DFARS 217.171, Multiyear Contracts for Services, and paragraph (e)(2)(ii) to DFARS 217.172, Multiyear Contracts for Supplies, and Section 8008 by the addition of paragraphs (g) and (h) to DFARS 217.172.
  
  No comments were received in response to the interim rule, so it is adopted as final without change. (For more on the interim rule, see the June 2005 Federal Contracts Perspective article "DFARS Addresses Task Orders Against Non-DOD Contracts.")
  
  
• Assignment of Contract Administration -- Exception for Defense Energy Support Center: This final rule amends paragraph (a)(i) of DFARS 242.202, Assignment of Contract Administration, to reflect a memorandum of agreement between the Defense Contract Management Agency and the Defense Energy Support Center (DESC) that provides for DESC to perform contract administration functions for all the contracts it awards. This arrangement eliminates duplication of effort in the bulk fuel quality management program.
  
  
• Training for Contractor Personnel Interacting with Detainees: This interim rule adds DFARS 237.171, Training for Contractor Personnel Interacting with Detainees, and the corresponding contract clause at DFARS 252.237-7019 to implement Section 1092 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375). Section 1092 requires DOD to prescribe policies to ensure that members of the Armed Forces, and all persons acting on behalf of the Armed Forces or within facilities of the Armed Forces, treat persons detained by the U.S. government in a humane manner consistent with the international obligations and laws of the U.S. These policies require the Combatant Commander responsible for the area where a detention or interrogation facility to provide training for DOD contractor personnel interacting with detainees.
  
  Comments on this interim rule must be submitted by October 31, 2005, to: (a) http://www.regulations.gov; (b) http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm; (c) e-mail: dfars@acq.osd.mil; (d) fax: 703-602-0350; (e) mail: Defense Acquisition Regulations Council, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; or by courier/hand to Defense Acquisition Regulations Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402.
  
  
• Levy on Payments to Contractors: This interim rule adds DFARS Subpart 232.71, Levies on Contractor Payments, and the corresponding clause at DFARS 252.232-7010 to address the effect of Internal Revenue Service (IRS) levies on contract payments. The rule requires DOD contractors to promptly notify the contracting officer if a levy that will jeopardize contract performance is imposed on a contract.
  
  Comments on this interim rule must be submitted by October 31, 2005, by any of the methods specified above.
  
  
• Acquisition Planning: This proposed rule would update DFARS Subpart 207.1, Acquisition Plans, to:
  
  
  • Delete DFARS 207.102, Policy, which addresses class justifications for full and open competition, because it is unnecessary.
    
    
  • Amend DFARS 207.103, Agency-Head Responsibilities, to increase the dollar thresholds for preparation of written acquisition plans from $5,000,000 to $10,000,000 for development; from $30,000,000 to $50,000,000 for total program costs; and from $15,000,000 to $25,000,000 for any one fiscal year's program costs.
    
    
  • Delete DFARS 207.104, General Procedures, which addresses contract administration, because it is unnecessary.
    
    
  • Delete DFARS 207.105, Contents of Written Acquisition Plans, and relocate the text to Procedures, Guidance, and Information (PGI) 207.105, Contents of Written Acquisition Plans (for more on the PGI, see the December 2004 Federal Contracts Perspective article "DFARS Transformation in Full Gear, 'Procedures, Guidance, and Information' Added").
  
  Comments on this proposed rule must be submitted by November 15, 2005, by any of the methods specified above.
  
  
• Types of Contracts: This proposed rule would update DFARS Part 216, Types of Contracts, to:
  
  
  • Delete DFARS 216.104, Factor in Selecting Contract Types, which contains unnecessary text on design stability.
    
    
  • Delete DFARS 216.104-70, Research and Development, which describes the considerations in choosing the appropriate contract type for the various categories and research and development, and relocate the text to PGI 216.104-70.
    
    
  • Delete paragraph (a) of DFARS 216.203-4, Contract Clauses [for fixed-price contracts with economic price adjustment], which consists of procedures for selecting economic price adjustment clauses; and deleting paragraph (d), which provides instructions on making adjustments bases on labor or material cost indexes, and relocate the text to PGI 216.203-4.
    
    
  • Delete paragraph (c)(ii)(A) of DFARS 216.203, Cost-Plus-Fixed-Fee Contracts, which addresses environmental restoration at an installation that is being closed or realigned, because it is obsolete.
    
    
  • Delete DFARS Subpart 216.4, Incentive Contracts, and relocate the text to PGI Subpart 216.4. There are three exceptions: DFARS 216.403, Fixed-Price Incentive Contracts, and DFARS 216.404, Fixed-Price Contracts with Award Fees, would be deleted and not relocated to PGI Subpart 216.4; and paragraph (b)(3) of DFARS 216.405-2, Cost-Plus-Award-Fee Contracts (which addresses provisional award fee payments), would be retained in DFARS Subpart 216.4.
    
    
  • Paragraph (c) of DFARS 216.703, Basic Ordering Agreement, which limits the maximum ordering period to three years, but provides for an extension of up to two years when approved by the chief of the contracting office, would be amended to increase the maximum ordering period to five years. Also, paragraph (d), which addresses orders, would be deleted and relocated to PGI 216.703.
  
  Comments on this proposed rule must be submitted by November 15, 2005, by any of the methods specified above.
  
  
• Special Contracting Methods: This proposed rule would update DFARS Part 217, Special Contracting Methods, to:
  
  
  • Delete DFARS 217.202, Use of Options, and relocate the text to PGI 217.202.
    
    
  • Delete DFARS 217.503, Determinations and Findings Requirements [for interagency acquisitions under the Economy Act], because it is unnecessary.
    
    
  • Delete most of DFARS Subpart 217.71, Master Agreement for Repair and Alteration of Vessels, and relocate the text to PGI Subpart 217.71.
    
    
  • Delete DFARS Subpart 217.72, Bakery and Dairy Products, and DFARS 252.217-7017, Time of Delivery, DFARS 252.217-7018, Change in Plant Location -- Bakery and Dairy Products, DFARS 252.217-7019, Sanitary Conditions, DFARS 252.217-7020, Examination and Testing, DFARS 252.217-7021, Deficiency Adjustment, DFARS 252.217-7022, Code Dating, DFARS 252.217-7023, Marking, DFARS 252.217-7024, Responsibility for Containers and Equipment, and DFARS 252.217-7025, Containers and Equipment, because they are considered obsolete.
    
    
  • Delete DFARS 217.7502, Spares Acquisition Integrated with Production, and DFARS 217.7503, Acquisition of Parts When Data Is Not Available, and relocate the text to PGI 217.7503 and PGI 217.7504, respectively.
    
    
  • Delete DFARS Subpart 217.76, Contracts with Provisioning Requirements, and relocate most of the text to PGI Subpart 217.76. All that would remain of DFARS Subpart 217.76 would be cross-references in DFARS 217.7601, Provisioning, to PGI Subpart 217.76 and to DOD 4140.1-R, DOD Supply Chain Materiel Management Regulation, Chapter 2 Section C2.2.
    
    
  • Delete DFARS 217.7701, Procedures [for Acquisition of Work Over and Above Contract Requirements], and relocate the text to PGI 217.7701.
  
  In addition, DFARS Appendix E, DOD Spare Parts Breakout Program, would be deleted and relocated to PGI Appendix E.
  
  Comments on this proposed rule must be submitted by November 15, 2005, by any of the methods specified above.
  
  
• Exchange or Sale of Government-Owned Information Technology: This proposed rule would delete the text from DFARS Subpart 239.70, Exchange or Sale of [Government-Owned] Information Technology, which is obsolete. Because DOD now handles the exchange or sale of information technology equipment in the same manner as other personal property, it would include a cross-reference in DFARS 239.7001, Policy, to DOD 4140.1-R, DOD Supply Chain Materiel Management Regulation, Chapter 9, Section C9.5.
  
  Comments on this proposed rule must be submitted by November 15, 2005, by any of the methods specified above.
  
  
• Acquisitions of Information Technology: This proposed rule would update DFARS Part 239, Acquisition of Information Technology, to:
  
  
  • Delete DFARS 239.7404, [Acquisition of Telecommunications Services from] Foreign Carriers, and relocate the text to PGI 239.7404.
    
    
  • Clarify paragraph (a) of DFARS 239.7408-2, Applicability of Construction Labor Standards for Special Construction [Related to Telecommunications Services], by adding "alteration, or repair" to the sentence "However, if the special construction includes construction, alteration, or repair (as defined in FAR 22.401 [definitions used in FAR Subpart 22.4, Labor Standards for Contracts Involving Construction]) of a public buidling or public work, the construction labor standards may apply."
    
    
  • Remove the following because they are obsolete or unnecessary: DFARS 239.7202, Waivers [of Federal Information Processing Standards]; paragraphs (a)(2) and (a)(3) of DFARS 239.7402, Policy (which addresses DOD's participation in the rulemaking process of governmetnal regulatory bodies); DFARS 239.7403, Regulatory Bodies; paragraph (c) of DFARS 239.7406, Cost or Pricing Data and Information Other Than Cost or Pricing Data (which addresses when a contracting officer should obtain cost or pricing data for telecommunications services); and DFARS Subpart 239.75, Appropriations Act Restrictions (which addresses prohibitions and conditional approvals on the acquisition of major automated information systems contained in fiscal years 1992, 1993, 1994, and 1995 appropriations acts).
  
  Comments on this proposed rule must be submitted by November 15, 2005, by any of the methods specified above.

SBA Amends HUBZone Eligibility Requirements

The Small Business Administration (SBA) has issued an interim amendment to expand the coverage of the Historically Underutilized Business Zone (HUBZone) program to implement the provisions of the Consolidated Appropriations Act, 2005 (Public Law 108-447), which contained the Small Business Reauthorization and Manufacturing Assistance Act of 2004.

The changes to the SBA HUBZone regulations:

• Reduce the ownership citizenship requirements for HUBZone small businesses from 100% owned and controlled by U.S. citizens to 51%.
  
  
• Make small agricultural cooperatives or small businesses wholly or partially-owned by small agricultural cooperatives organized and incorporated in the U.S. to be eligible for participation in the HUBZone program.
  
  
• Give each tribally-owned HUBZone small business the option of either (1) complying with the existing requirement that 35% of its employees performing a HUBZone contract reside within an Indian reservation governed by one or more of the tribal government owners or within an adjoining HUBZone; or (2) maintaining its principal office in a HUBZone and hiring at least 35% of their employees from any HUBZone area (as is required of all other HUBZone small businesses).
  
  
• Authorize military base closure areas that have undergone final closure to be treated as qualified HUBZones for five years.
  
  
• Allowed those areas that no longer qualify as HUBZones to remain in the program for a period of three years from the date on which the area ceased to qualify as a HUBZone or until the Census Bureau releases the results of the 2010 census, whichever is later. Previously, areas could stay in the program for three years after the area ceased to qualify as a HUBZone, but Congress determined that this three-year period did not provide sufficient time for firms to recoup a return on their investment in locating their businesses in qualified HUBZone areas, adjusting their ownership structure, and recruiting HUBZone residents as employees.
  
  
• Apply a 5% price evaluation preference on the first 20% of Department of Agriculture procurements of commodities used for international food aid export operations.

Comments on the interim rule must be submitted on or before October 31,2005, by the Internet at http://www.regulations.gov; by e-mail: hubzone@sba.gov; by fax: 202-481-5593; or by mail or hand-delivery to: Michael McHale, Associate Administrator for the HUBZone Program, 409 Third Street, SW, Washington, DC 20416.

Time-and-Materials Proposed for Commercial Services

Two rules have been proposed to address time-and-materials (T&M) contracts: (1) to implement Section 1432 of the Services Acquisition Reform Act of 2003" (SARA) (part of the National Defense Authorization Act for Fiscal Year 2004), which expressly authorizes the use of (T&M) and labor-hour (LH) contracts for certain categories of commercial services under specified conditions; and (2) clarify the policies on payments made under T&M and LH contracts for non-commercial items.

• FAR 12.207, Contract Types, authorizes only firm-fixed-price and fixed-price with economic price adjustment contracts for commercial services. Section 1432 authorizes the use of T&M and LH contracts for the acquisition of commercial services that are commonly sold to the general public through such contracts and are procured on a competitive basis.
  
  This proposed rule would amend FAR 12.207 to permit the use of a T&M or LH contract for the acquisition of commercial services when competitive procedures are used, the contracting officer executes a Determination and Finding (D&F) that no other contract type is suitable, the contract includes a ceiling price that the contractor exceeds at its own risk, and authorizes any subsequent change in the ceiling price only upon a determination that such a change is in the best interest of the agency. The contracting officer's D&F must include a description of the market research conducted, establish that it is not possible at the time of the contract to accurately estimate the extent or duration of the work or to anticipate costs with any reasonable degree of certainty; and establish that the requirement has been structured to maximize the use of fixed price contracts (for example, by limiting the value or length of the T&M or LH contract) on future acquisitions for the same or similar requirements. These requirements would also apply to indefinite-delivery contracts for commercial services.
  
  In addition, an Alternate I would be added to FAR 52.212-4, Contract Terms and Conditions -- Commercial Items, for use with T&M and LH contracts. Part of Alternate I would be a new paragraph (u), which would require the contracting officer's written consent before the contractor places any subcontract that is: (1) a cost-reimbursement, T&M, or LH type; or (2) is fixed-price, and (A) exceeds the simplified acquisition threshold or 5% of the total estimated cost of the contract, whichever is greater (for DOD, the Coast Guard, or the National Aeronautics and Space Administration), or (B) exceeds either the simplified acquisition threshold or 5% of the total estimated cost of the contract (for all other agencies). If the contractor has an approved purchasing system, the contractor only has to obtain the contracting officer's consent before placing subcontracts identified in an addendum to the clause.
  
  EDITOR'S NOTE: For more on the provisions of SARA, see the December 2003 Federal Contracts Perspective article "Services Acquisition Reform Act Signed Into Law, Establishes Training Fund, Acquisition Officer."
  
  
• The second proposed rule would address T&M and LH contracts for non-commercial items. The primary change would address "materials" under T&M contracts. Paragraph (a)(2) of FAR 16.601, Time-and-Material Contracts, provides for the payment of materials at cost, but it does not address subcontract costs, which are frequently a significant part of the work performed under such contracts and are provided for under FAR 52.232-7, Payments Under Time-and-Materials and Labor-Hour Contracts. Also, FAR 16.601(a)(2) does not address other direct costs and applicable indirect costs (such as general and administrative expenses) other than material handling that may be appropriate for the acquisition. Therefore, this proposed rule would revise the definition of "materials" in FAR 16.601 to include direct materials, subcontracts for supplies and services, other direct costs, and applicable indirect costs.

A public meeting will be held on Tuesday, October 18, 2005, from 9:00 a.m. to 4:00 p.m. in the General Services Building Auditorium, 1800 F Street NW, Washington, DC 20405, to encourage a discussion of the issues involved. Interested parties are encouraged to provide written comments on issues they would like addressed at the public meeting no later than Tuesday, October 11, 2005. Interested parties may register and submit their input electronically at http://www.acq.osd.mil/dpap/dars/index.htm. Attendees are encouraged, but not required, to register for the public meeting, to ensure adequate accommodations.

Comments on these proposed rules must be submitted by November 25, 2005, to: (a) http://www.regulations.gov; (b) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (c) fax: 202-501-4067; or (d) mail: General Services Administration, Regulatory Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405.

Government Property Regs Proposed for Rewrite, Again

FAR Part 45, Government Property, is proposed to be rewritten to simplify procedures, clarify language, and eliminate obsolete requirements related to the management and disposition of government property in the possession of contractors -- again. In 2000, a FAR Part 45 rewrite was proposed, but only FAR Subpart 45.6, Reporting, Reutilization, and Disposal, was eventually revised because "the comments concerning the other subparts of FAR Part 45 were conflicting and a satisfactory resolution of those comments was not attained" (see the May 2004 Federal Contracts Perspective article "FAC 2001-22 Simplifies Property Disposal Procedures, Revises General Provisions of Cost Principles").

The proposed rewrite would promote efficiency, flexibility, innovation, and creativity by encouraging the use of current processes and technologies such as Enterprise Resource Planning, relational databases, unique item identification, radio frequency tags, bar-coding, and the general trend toward commercialization of components and equipment. This trend reflects a life-cycle, performance-based approach to property management.

Many of the changes are administrative in nature, such as deleting obsolete terms, eliminating duplicate language, clarifying and relocating definitions to clauses, etc.

In addition, all of the clauses in FAR 52.245 (except for FAR 52.245-9, Use and Charges) would be deleted and replaced by two clauses: FAR 52.245-1, Government Property; and FAR 52.245-2, Government Property (Installation Operations for Services). FAR 52.245-2 addresses contracts designed for military base-operating and installation-level contracts, particularly those awarded under the OMB Circular A-76 process.

Comments on the proposed rule must be submitted no later than November 18, 2005, by any of the methods mentioned in the previous article.

Automobile Reimbursement Increased to 48.5 Cents/Mile

The General Services Administration (GSA) is amending FTR 301-10.303, What am I reimbursed when use of a POV [privately-owned vehicle] is determined by my agency to be advantageous to the Government?, to increase the mileage reimbursement rate for use of a privately owned automobile on official travel between September 1 and December 31, 2005, from 40.5 cents per mile to 48.5 cents per mile. This increase reflects recent gas price increases.

The GSA's automobile reimbursement rate cannot exceed the single standard mileage rate established by the Internal Revenue Services (IRS). On September 9, 2005, the IRS announced an automobile reimbursement rate of 48.5 cents effective from September 1 to December 31, 2005.

Should CAS Apply to Non-U.S. Contracts?

The Cost Accounting Standards (CAS) Board is seeking comments on whether the CAS should apply to contracts that are executed and performed entirely outside the United States, its territories, and possessions (paragraph (b)(14) of CAS 9903.201-1, Applicability). In particular, the CAS Board is seeking comments on the following:

• Is there any statute that would require the CAS Board to retain this exemption? If any such statute exists, provide the specific statute and language that contain this requirement.
  
  
• How this exemption does or does not promote the CAS Board's primary objective of achieving "(1) an increased degree of uniformity in cost accounting practices among government contractors in like circumstances, and (2) consistency in cost accounting practices in like circumstances by individual government contractor over periods of time."
  
  
• The significance of the location of contract execution to CAS applicability.
  
  
• The significance of the location of contract performance to CAS applicability.
  
  
• The advantages and disadvantages of exempting contracts and subcontracts from CAS that are executed and performed entirely outside the U.S.
  
  
• Contracting situations in which the exemption has historically been utilized.

Comments must be submitted by November 14, 2005, either by e-mail to casb2@omb.eop.gov, or by fax at 202-395-5105.

SBA Proposes Nonmanufacturing Rule Waiver for Film

SBA is proposing to waive the nonmanufacturer rule for photographic film, paper, plate, and chemical manufacturing under North American Industry Classification System (NAICS) code 325992 because it is unaware of any small business manufacturers that are supplying these classes of products to the government.

SBA is inviting the public to comment on this proposed waiver, or provide information on potential small business sources for these products, by October 7, 2005, to Edith Butler, Program Analyst, at 202-619-0422; or by fax at 202-481-1788; or by e-mail at edith.butler@sba.gov.

A complete list of products for which the nonmanufacturer rule has been waived is available at http://www.sba.gov/GC/approved.html.

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