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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 in Emergency Relief
OFPP Chief Arrested for Making False Statements
RFID Requirements Included in DFARS
SBA Amends HUBZone Eligibility Requirements
Time-and-Materials Proposed for Commercial Services
Government Property Regs Proposed for Rewrite, Again
Automobile Reimbursement Increased to 48.5 Cents/Mile
Should CAS Apply to Non-U.S. Contracts?
SBA Proposes Nonmanufacturing Rule Waiver for Film



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:

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

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.



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:

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.

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:

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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