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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


February 2005
Vol. VI, No. 2

CONTENTS


FAC 2001-27 Implements Australian and Moroccan Free Trade Acts
OMB Releases Second Set of 2004 FAIR Act Inventories
SBA Clarifies Small Business Subcontracting Rules
SDB Evaluation Adjustments Expire for Civilian Agencies
Public Utility Disputes Addressed by GSA
GSA Announces FPDS-NG Availability
SBA Report Finds Small Business Coding a "Problem"
USDA Publishes Biobased Products Guidelines
AGAR Brought Into Conformance with FAR
Prompt Payment Interest Rate Set at 4 1/4%



FAC 2001-27 Implements Australian and Moroccan
Free Trade Acts, Creates Table of Excluded Services

Federal Acquisition Circular (FAC) 2001-27 is amending Federal Acquisition Regulation (FAR) Subpart 25.4, Trade Agreement, and the corresponding clauses in FAR Part 52, Solicitation Provisions and Contract Clauses, to allow the purchase of products from Australia and Morocco without application of the Buy American Act if the acquisition is subject to a Free Trade Agreement (FTA). Also, FAC 2001-27 establishes a table of services excluded from the coverage of the various trade agreements; corrects the threshold for Canadian services; revises the list of "Least Developed Countries" (LDCs), revises how the FAR uses the terms "designated country" and "Trade Agreements Act"; and revises the FAR clauses that apply the Buy American Act and trade agreements to construction material to correct the definition of "cost of components."

The Australian and Moroccan FTAs waive the applicability of the Buy American Act for supplies and services over $58,550 from Australia and over $175,000 from Morocco (with certain exceptions specified in paragraph (b) of FAR 25.401, Exceptions, which is revised to add a table of services that are excluded from these and the other FTAs), and construction materials over $6,725,000 from both Australia and Morocco. The Australian and Moroccan FTAs are implemented by amending FAR Subpart 25.4 and the corresponding clauses at FAR 52.212-3, Offeror Representations and Certifications -- Commercial Items; FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders -- Commercial Items; FAR 52.225-3, Buy American Act -- Free Trade Agreements -- Israeli Trade Act; FAR 52.225-4, Buy American Act -- Free Trade Agreements -- Israeli Trade Act Certificate; FAR 52.225-5, Trade Agreements; FAR 52.225-6, Trade Agreements Certificate; FAR 52.225-11, Buy American Act -- Construction Materials under Trade Agreements; and FAR 52.225-12, Notice of Buy American Act Requirement -- Construction Materials under Trade Agreements.

Also, this interim rule makes the following FAR changes related to foreign acquisitions:

The effective date of this rule is January 1, 2005. Comments on the interim rule must be submitted on or before February 28, 2005, to: (1) http://www.regulations.gov; (2) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (3) e-mail: farcase.2004-027@gsa.gov; (4) fax: 202-501-4067; or (5) mail: General Services Administration, Regulatory Secretariat (MVA), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405.

In addition, the Defense FAR Supplement (DFARS) Part 225 and the corresponding clauses (DFARS 252.225-7021, Trade Agreements, and DFARS 252.225-7045, Balance of Payments Program -- Construction Material Under Trade Agreements) have been amended at the request of the USTR to implement the Australia and Morocco FTAs to conform to the changes made by FAC 2001-27. This action is necessary because Congress has developed an entire body of legislation (primarily provisions in authorization and appropriations acts) that applies only to the Department of Defense (DOD) and not to the rest of the government, primarly because of the amount of money DOD spends each year in overseas operations and in acquiring supplies and services from foreign firms. This is why DOD has its own extensive DFARS Part 225 and separate contract provisions and clauses.

The DFARS interim rule is effective January 13, 2005, and comments should be submitted on of before March 14, 2005, directly on the Federal eRulemaking Portal at http://www.regulations.gov, or the Defense Acquisition Regulations website 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)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; by hand- or courier-delivery to Defense Acquisition Regulations Council, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402; or by fax to 703-602-0350.



OMB Releases Second Set of 2004 FAIR Act Inventories

On January 18, the Office of Management and Budget (OMB) released the second set of Fiscal Year 2004 Commercial Activities Inventories of non-governmental functions being performed by government agencies. These inventories are required to be compiled and made available to the public by the Federal Activities Inventory Reform (FAIR) Act of 1998. Inventories in this second set are from the Departments of Defense, Education, Housing and Urban Development, State, and Treasury; Environmental Protection Agency; General Services Administration; Small Business Administration; and many smaller agencies.

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



SBA Clarifies Small Business Subcontracting Rules

The Small Business Administration (SBA) is amending its regulations governing small business subcontracting (13 CFR 125.3, Subcontracting Assistance) to provide a list of factors for contracting officers to consider when evaluating a prime contractor's performance and good-faith efforts to achieve the requirements in its subcontracting plan, and to authorize the use of goals in subcontracting plans as a factor in source selection when placing orders against Federal Supply Schedule (FSS) contracts, government-wide acquisition contracts (GWACs), and multi-agency contracts (MACs).

The following are actions a contractor may take to demonstrate its good-faith efforts to increase small business subcontracting opportunities (paragraph (c)(1)):

      “(i) Breaking out contract work items into economically feasible units, as appropriate, to facilitate small business participation;
      “(ii) Conducting market research to identify small business subcontractors and suppliers through all reasonable means, such as performing on-line searches on the Central Contractor Registration (CCR), posting Notices of Sources Sought and/or Requests for proposal on SBA's SUB-Net, participating in Business Matchmaking events, and attending pre-bid conferences;
      “(iii) Soliciting small business concerns as early in the acquisition process as practicable to allow them sufficient time to submit a timely offer for the subcontract;
      “(iv) Providing interested small businesses with adequate and timely information about the plans, specifications, and equirements for performance of the prime contract to assist them in submitting a timely offer for the subcontract;
      “(v) Negotiating in good faith with interested small businesses;
      “(vi) Directing small businesses that need additional assistance to SBA;
      “(vii) Assisting interested small businesses in obtaining bonding, lines of credit, required insurance, necessary equipment, supplies, materials, or services;
      “(viii) Utilizing the available services of small business associations; local, state, and Federal small business assistance offices; and other organizations; and
      “(ix) Participating in a formal mentor-protégé program with one or more small-business protégés that results in developmental assistance to the protégés.”

New paragraph (g) authorizes contracting officials to use subcontracting plans as an "important" evaluation factor in the award of task and delivery orders against an FSS, GWAC, or MAC. In addition, the ordering agency may evaluate subcontracting as a significant factor in source selection when entering into a blanket purchase agreement. A small-business offeror automatically receives the maximum possible score or credit on this evaluation factor without having to submit a subcontracting plan and without having to demonstrate subcontracting past performance. The factors that may be evaluated, individually or in combination, are: (1) the subcontracting to be performed on the specific requirement; (2) the goals negotiated in previous subcontracting plans; and (3) the contractor's past performance in meeting the subcontracting goals contained in previous subcontracting plans."

Finally, paragraph (b)(2) was added to clarify that "a small business cannot be required to submit a formal subcontracting plan or be asked to submit a formal subcontracting plan, [though] a small-business prime contractor is encouraged to provide maximum practicable opportunity to other small businesses to participate in the performance of the contract, consistent with the efficient performance of the contract."

For more on SBA's proposed rule, see the November 2003 Federal Contracts Perspective article "Contract Bundling Restriction Increased in FAR and SBA Regulations."



SDB Evaluation Adjustments Expire for Civilian Agencies

The statutory authority for FAR Subpart 19.11, Price Evaluation Adjustment for Small Disadvantaged Business Concerns, expired for civilian agencies on December 9, 2004, according to a memorandum sent by the Small Business Administration to Chief Acquisition Officers and Senior Procurement Executives.

Congress has established a 5% governmentwide goal for contract awards to small disadvantaged business (SDBs). To help agencies achieve the 5% SDB goal, Section 7102 of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355) authorized civilian agencies to apply a price evaluation adjustment to competitive offers of SDBs that exceed the simplified acquisition threshold and are not set aside for small businesses in industries determined by the Department of Commerce (DOC) to have "persistent and significant underutilization of minority firms." DOC has determined that a 10% price evaluation adjustment is appropriate for 54 industries (the list is at http://www.acqnet.gov/References/sdbadjustments.htm). This provision is implemented by FAR Subpart 19.11.

Although the program was continued under the SBA's temporary authorizations, the authority for the program was omitted from the Small Business Reauthorization and Manufacturing Assistance Act of 2004 (Public Law 108-447). Therefore, civilian agencies have no statutory authority to apply the SDB price evaluation adjustment as of December 9, 2004.

The SDB price evaluation adjustment for the Department of Defense (DOD), National Aeronautics and Space Administration (NASA), and the Coast Guard is governed by a different statutory authority, and that authority is not affected by the lapse of authority for civilian agencies. However, the National Defense Authorization Act for Fiscal Year 1999 (Public Law 105-261) contains a provision that prohibits DOD from paying a price that exceeds the fair market cost if the secretary of defense determines that DOD achieved the 5% goal in the most recent fiscal year. On January 24, 2005, the director of defense procurement and acquisition policy determined that DOD exceeded the 5% goal for contract awards to SDBs in fiscal year 2004, so the FAR Subpart 19.11 price evaluation adjustment is suspended for DOD from February 24, 2005, through February 23, 2006.

The 5% governmentwide SDB contracting goal remains in effect for both civilian and defense agencies.



Public Utility Disputes Addressed by GSA

The General Services Administration (GSA) is amending the GSA Acquisition Regulation (GSAR) to add GSAR 552.233-71, Disputes (Utility Contracts), which addresses disputes involving tariffed retail rates, tariff rate schedules, and tariffed terms. (EDITOR’S NOTE: The GSAR is the shaded part of the GSA Acquisition Manual, which is available on the Internet at http://www.acqnet.gov/GSAM/gsam.html.)

GSA's Public Building Service awards contracts for public utility services, and occasionally disputes involving tariffs and tariff related matters arise from those contracts. To address who has jurisdiction to hear such disputes, GSA is adding GSAR 552.233-71 as a supplement to FAR 52.233-1, Disputes, “in solicitations and contracts for utility services subject to the jurisdiction and regulation of a utility rate commission.” The text of the new GSAR 552.233-1 is asfollows:

“The requirements of the Disputes clause at Federal Acquisition Regulation (FAR) 52.233-1 are supplemented to provide that matters involving the interpretation of tariffed retail rates, tariff rate schedules, and tariffed terms provided under this contract are subject to the jurisdiction and regulation of the utility rate commission having jurisdiction.”


GSA Announces FPDS-NG Availability

GSA, which administers the Federal Procurement Data System -- Next Generation (FPDS-NG), has announced that it will provide the public with three years of free access to FPDS-NG data, but that it will charge $2,500 to members of the public who want to establish a direct computer connection with the system.

FPDS was created in 1978 to provide Congress with information on how the various government agencies were spending their money. FPDS has become the primary database of information relating to federal procurement, and is used to generate reports to the president, Congress, federal executive agencies, and the general public.

FPDS was a paper-based reporting system. In 2003, GSA awarded a contract for the development and operation of an electronic, web-based FPDS-NG. FPDS-NG is now operational, and agencies are required to provide their contract award information through the FPDS-NG system.

GSA has announced that it will provide the public with three years of free access to FPDS-NG data. The public will be able to access the FPDS-NG data in any of the following three methods: (1) a copy of data can be made available using FTP (file transfer protocol) from the FPDS-NG website; (2) prewritten queries (that can be customized to produce data for specified period and organizations) can be used that will produce reports; and (3) ad hoc queries can be written by members of the public to produce reports on nearly any desired set of FPDS-NG data.

In addition, GSA will subsidize the cost of providing a special direct web services connection with the FPDS-NG database for individuals, companies, or organizations wishing direct access. GSA will charge a one-time fee of $2,500 for this service. The $2,500 fee will partially cover the cost of technical support, testing, and certification of direct integration to the FPDS-NG web services. However, those paying this fee will not be required to pay a fee for the data itself.

Information on FPDS-NG is available at http://www.fpdsng.com/public_welcome_text.html. One may access FPDS-NG information after registering at https://www.fpds.gov.



SBA Report Finds Small Business Coding a "Problem"

In a development related to FPDS, SBA issued a report on the coding of the top 1,000 "small business contractors" in FPDS during fiscal year 2002. Thirty-nine of the companies were actually large businesses, and another five were either non-profit organizations or government entities. Some of the entities coded as "small" in FPDS were Raytheon, Titan, Northrop Grumman, General Dynamics, Booz Allen Hamilton, Deloitte & Touche, Hewlett-Packard, Department of the Treasury, State of Texas, University of Guam, and the YWCA. Together, these 44 entities received $2 billion in contract awards, thus lowering the small business share of FY 2002 contracts from 20.5% to 19.7%.

DOD and GSA accounted for 79% of the contract awards to these 44 entities: DOD awarded $967.6 million, and GSA awarded $620.0 million. Finally, 80% of the awards to these 44 entities were issued on some form of multiple award or indefinite-delivery/indefinite-quantity (IDIQ) contract.

"The inconsistent type-of-business coding found in this study suggests that federal policymakers need to review and streamline agency policies on designating vendors as small businesses," concludes the report. "Procurement coding paterns among small businesses falling below the 1,000th position suggest significant problems exist in this group of companies as well."

The report, "Analysis of Type of Business Coding for the Top 1,000 Contractors Receiving Small Business Awards in FY 2002," was prepared by Eagle Eye Publishers, Inc., a company that analyzes and publishes FPDS data (and will be charged $2,500 for direct access to the FPDS-NG database). The report is available at http://www.sba.gov/advo/research/rs246tot.pdf.



USDA Publishes Biobased Products Guidelines

The U.S. Department of Agriculture (USDA) is establishing guidelines for designating items made from biobased products that will be given federal procurement preference. Biobased products that cost over $10,000 will receive the preference unless the items are not reasonably available, fail to meet applicable performance standards, or are at an unreasonable price. These guidelines implement the requirements in Section 9002 of the Farm Security and Rural Investment Act of 2002 (Public Law 107-171) (FSRIA). Section 9002 had three primary purposes: (1) to improve demand for biobased products; (2) to spur the development of value-added agricultural processing and manufacturing in rural communities; and (3) to enhance the nation's energy security by substituting domestically produced biobased products for fossil energy-based products derived from imported oil and natural gas.

The USDA guidelines are in Title 7 of the Code of Federal Regulations as new Part 2902, Guidelines for Designating Biobased Products for Federal Procurement (7 CFR Part 2902). They address how USDA will designate the designation process, how it will determine the biobased content and other attributes of specific products, and cost sharing for product testing. In addition, these guidelines include the Section 9002 requirement that federal agencies have in place, within one year of the publication of final guidelines (that is, January 11, 2006), a procurement program that assures biobased products within designated items will be purchased to the maximum extent practicable, an agency promotion program, and provisions for the annual review and monitoring of the agency's procurement program. USDA and the Office of Federal Procurement Policy (OFPP) will work in cooperation to ensure implementation of the requirements of Section 9002 in the FAR.

7 CFR Part 2902 consists of Subpart A, General, which explains the Section 9002 requirements and procedures, and Subpart B, Designated Items, which is “reserved” for the present. The following are the sections that constitute Subpart A:

      2902.1, Purpose and Scope
      2902.2, Definitions
      2902.3, Applicability to Federal Procurements
      2902.4, Procurement Programs
      2902.6, Providing Product Information to Federal Agencies
      2902.7, Determining Biobased Content
      2902.8, Determining Life Cycle Costs, Environmental and Health Benefits, and Performance
      2902.9, Funding for Testing

In designating items (generic groupings of specific products such as crankcase oils or synthetic fibers) for preferred procurement, USDA will consider the availability of such items and the economic and technological feasibility of using such items, including life cycle costs. Federal agencies will be required to purchase products that fall within an item only after that item has been designated for preferred procurement. In addition, USDA will provide information to federal agencies on the availability, relative price, performance, and environmental and public health benefits of such items and, where appropriate, will recommend the level of biobased content to be contained in the procured product. Manufacturers and vendors will be able to offer their products to federal agencies for preferred procurement under the program when their products fall within the definition of an item that has been designated for preferred procurement and the biobased content of the products meets the standards set forth in the guidelines.

Information on the Federal Biobased Products Preferred Procurement Program is available at http://www.biobased.oce.usda.gov.



AGAR Brought Into Conformance with FAR

The U.S. Department of Agriculture (USDA) is amending the Agriculture Acquisition Regulation (AGAR) to reflect changes in the FAR made by FACs 97-02 through 2001-24, and to implement changes in USDA delegated authorities and internal procedures since October 2001, the last time the AGAR was amended. (EDITOR’S NOTE: The AGAR is Chapter 4 of Title 48 of the Code of Federal Regulations (CFR). It is available on the Internet at http://www.usda.gov/procurement/policy/agar_x/index.html.)

The following are the significant changes being made to the AGAR by this rule:



Prompt Payment Interest Rate Set at 4 1/4%

The Treasury Department has established 4 1/4% (4.25%) as the interest rate for the computation of payments made between January 1 and June 30, 2005, under the Prompt Payment Act and the Contracts Disputes Act. This rate is also used in facilities capital cost of money calculations. The interest rate for the prior six-month period (July 1 through December 31, 2004), was 4 1/2% (4.5%). The interest rate for January 1, 2004, through June 30, 2004, was 4% (4.0%).

FAR Subpart 32.9, Prompt Payment; FAR Subpart 33.2, Disputes and Appeals; FAR 31.205-10, Cost of Money; and Cost Accounting Standard (CAS) 9904.414, Cost of Money as an Element of the Cost of Facilities Capital, are affected by this interest rate.



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