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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


December 2005
Vol. VI, No. 12

CONTENTS


President Reinstates Davis-Bacon Act for Areas Affected by Katrina
DFARS Amended to Address Telecommunications Services
Size Standards Amended for Hurricane-Relief Programs
SBA Taking More Actions on Nonmanufacturer Rules
eSRS Becomes Operational, Mandatory for Civilians
Proposed Increase in Size Standard for Security Guards
Real Property Policies Updated in FMR



President Reinstates Davis-Bacon Act for
Areas Affected by Hurricane Katrina

On November 3, President George W. Bush issued a proclamation reinstating the Davis-Bacon Act for construction in the areas of Alabama, Florida, Louisiana, and Mississippi affected by Hurricane Katrina. The reinstatement was effective November 8. The president had suspended the provisions of the Davis-Bacon Act on September 8 (see the October 2005 Federal Contracts Perspective article "Hurricane Katrina Devastates Gulf Coast, Unleashes Billions of Dollars in Emergency Relief"), citing Section 6 of the act, which authorizes the president to suspend the provisions of the act in a national emergency.

The Davis-Bacon Act, which applies to contracts over $2,000 for construction, alteration, or repair of public buildings, requires that "no laborer or mechanic employed directly upon the site of the work shall receive less than the prevailing wage rates..." However, the "prevailing wage rates" usually correspond to union wages and fringe benefits, and the administrative effort required to comply with the Davis-Bacon Act can be quite extensive -- the provisions of the Davis-Bacon Act negates any competitive advantage companies employing non-union workers might enjoy.

The provisions of the Davis-Bacon act had been suspended on three previous occasions: by President Franklin Roosevelt in 1934 in response to the administration of the New Deal; by President Nixon in 1971 to reduce inflationary pressures; and by President George H. W. Bush in 1992 after Hurricane Andrew struck Florida.

President Bush suspended Davis-Bacon because "the wage rates...increase the cost to the federal government of providing federal assistance to these areas. Suspension...will result in greater assistance to these devastated communities and will permit the employment of thousands of additional individuals." However, labor leaders and Democratic senators and representatives decried the suspension as "anti-worker, anti-union," but some confused "prevailing wages" with the $5.15 minimum wage. In fact, under the Davis-Bacon Act, construction contractors in New Orleans are required to pay roofers $12.28 an hour; painters $14.88 an hour plus $4.32 in fringe benefits; and electricians $22.09 an hour plus $6.00 in fringe benefits. Even common laborers must be paid $9.55 an hour plus $1.05 in fringe benefits.

EDITOR'S NOTE: What is ironic about the Depression-era Davis-Bacon Act of 1931 is that it was originally intended to exclude unskilled and non-union black labor from federal construction projects in favor of unionized white labor. If a contractor had to pay union wages, why not hire union workers (overwhelmingly white at the time) instead of black labor migrating from the South? Now, the president has bowed to the demands of the unions and has reimposed requirements that, once again, limit unskilled, predominately-black laborers from helping the government -- in this case, cleaning up and rebuilding the Gulf Coast.



DFARS Amended to Address Telecommunications Services

The folks in the Department of Defense (DOD) were busy in November amending the Defense Federal Acquisition Regulation Supplement (DFARS) to address telecommunication services, information technology, contract administration, and several other subjects.



Size Standards Amended for Hurricane-Relief Programs

The Small Business Administration (SBA) is amending the size eligibility criteria for its Surety Bond Guarantee (SBG) program and the "Gulf Opportunity Pilot Loan Program" (GO Loan Pilot) to help small businesses in disaster areas produced by Hurricanes Katrina, Rita, and Wilma.



SBA Taking More Actions on Nonmanufacturer Rules

The SBA is waiving the nonmanufacturer rule for the following industries:

In addition, SBA is proposing to waive the nonmanufacturer rule for the following industries because no small business manufacturers are supplying these classes of products to the federal government:

Comments on the proposed waivers, or the identification of small businesses that provide these classes of products, must be submitted no later than November 14, 2005, to Edith Butler, Program Analyst, by telephone at 202-619-0422; by fax at 202- 481-1788; or by e-mail at edith.butler@sba.gov.

Finally, SBA is considering terminating the proposed nonmanufacturer rule waiver for commercial cooking equipment under NAICS code 333319. SBA was unaware of any small businesses supplying that class of products to the federal government, so it proposed issuing a nonmanufacturer rule waiver. However, SBA recently discovered the existence of a small business that provides commercial cooking equipment, so SBA is considering terminating the proposed waiver.

Comments on the proposed termination of the proposed waiver must be submitted by December 12, 2005, to Edith Butler by any of the methods mentioned above. For more on the proposed waiver, see the September 2005 Federal Contracts Perspective article "SBA Proposes Waiving Five Nonmanufacturing Rules."

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.



eSRS Becomes Operational, Mandatory for Civilians

On November 3, the Office of Management and Budget (OMB) announced that the Electronic Subcontracting Reporting System (eSRS) is now operational, and large contractors with contracts from civilian agencies that require small business subcontract reporting are required to enter their reports into the eSRS (http://www.esrs.gov) -- Subcontracting Reports for Individual Contracts (formerly the Standard Form 294), and the Summary Subcontract Reports (formerly the Standard Form 295).

Implementation of the eSRS for DOD is targeted for the second quarter of fiscal year 2006 (that is, January 1 -- March 31, 2006). Until then, all DOD contractors will continue to submit paper SF 294s and SF 295s. A formal notice will be provided when eSRS becomes available for use by DOD contractors.

Previously, OMB had authorized agencies to grant a 60-day extension for contractors to file their reports fo the periods ending September 30, 2004, and April 30, 2005. OMB is now extending that authorization to cover the reports for the period ending September 30, 2005, which were due October 30, 2005. The new due date is December 31, 2005.

Because there is confusion regarding the due dates and submission of reports for fiscal years 2004 and 2005, OMB has coordinated with the SBA on the following guidance:

Contracting officers, prime contractors, and large subcontractors should register in the system and begin processing through, and reviewing, subcontracting reports through eSRS.



Proposed Increase in Size Standard for Security Guards

The SBA is proposing to increase the size standard for the Security Guards and Patrol Services Industry under NAICS code 561612 from $10,500,000 in average annual receipts to $15,500,000. The $10,500,000 size standard was last revised in 2002, and many in the security guards industry believe an increase in the size standard is warranted because (1) the increased costs of complying with federal requirements for security guards; (2) the increased number of large security firms competing for federal contracts; and (3) the relative success by large firms in winning federal contracts. Small security guard firms also argue that these industry trends would shrink the pool of eligible small businesses, causing federal agencies to scale back their use of small business preferences in procurement.

Comments on this proposed increase (identified by "RIN 3245-AF28") must be received no later than December 12, 2005, either through the Federal eRulemaking Portal at http://www.regulations.gov; by fax 202-205-6390; or by mail or hand delivery/courier to Gary M. Jackson, Assistant Administrator for Size Standards, 409 Third Street, SW, Mail Code 6530, Washington, DC 20416.



Real Property Policies Updated in FMR

GSA is reissuing Subchapter C of the Federal Management Regulation (FMR), Real Property, because of extensive revisions which (1) update the legal citations to conform to Public Law 107-217 (enacted August 21, 2002), which revised, restated, and recodified, without substantive change, certain laws related to public buildings, property, and works in Title 40 of the United States Code (USC); (2) incorporate additional policy guidance, including new accessibility standards for federal facilities (FMR 102-76.65, What standards must facilities subject to the Architectural Barriers Act meet?); and (3) provides additional real property policy coverage on the integrated workplace, sustainable development, outleasing, telework, siting antennas on federal property, seismic safety, screening of excess real property, and the National Environmental Policy Act of 1969 (NEPA).

The FMR is Chapter 102 of Title 41 of the Code of Federal Regulations (CFR). Subchapter C consists of Parts 102-71 through 102-84 of 41 CFR Chapter 102. The FMR and corresponding documents (such as FMR amendments, bulletins, deviations, notices, proposed rules, public comments, and archives) may be accessed at http://www.gsa.gov/fmr.



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