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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

March 2005
Vol. VI, No. 3

CONTENTS

DFARS Transformation Continues by Addressing
Taxes, Services, Utilities, Extraordinary Relief

The Department of Defense (DOD) continued transforming the Defense Federal Acquisition Regulation Supplement (DFARS) by updating and streamlining some procedures and provisions, and removing unnecessary and obsolete ones.

• Tax Procedures for Overseas Contracts: The text in DFARS Subpart 229.70, Special Procedures for Overseas Contracts, which addressed the procedures that DOD contracting officers use in obtaining tax relief and duty-free import privileges for acquisitions conducted in Spain and the United Kingdom, is removed and relocated to the DFARS companion document " Procedures, Guidance, and Information" (PGI), which will contain all mandatory and non-mandatory internal DOD procedures, non-mandatory guidance, and supplemental information (for more on the PGI, see the December 2004 Federal Contracts Perspective article "DFARS Transformation in Full Gear, 'Procedures, Guidance, and Information' Added"). All that remains of DFARS Subpart 229.70 is the following sentence: "To obtain tax relief for overseas contracts, follow the procedures at PGI 229.70." (EDITOR'S NOTE: For more on the proposed rule, see the September 2004 Federal Contracts Perspective article "DFARS Rules on Taxes, Bonds.")
  
  
• Resolving Tax Problems: Paragraphs (c) and (d) of DFARS 229.101, Resolving Tax Problems, which addressed the resolution of tax problems under DOD contracts, is removed and relocated to the PGI 229.101. All that remains of paragraphs (c) and (d) are cross-references to PGI 229.101. (EDITOR'S NOTE: For more on the proposed rule, see the September 2004 Federal Contracts Perspective article "DFARS Rules on Taxes, Bonds.")
  
  
• Fidelity and Forgery Bonds: DFARS 228.105, Other Types of Bonds, is amended to clarify that fidelity and forgery bonds are authorized under certain circumstances. DFARS 228.105 is changed from "Fidelity and forgery bonds generally are not required but may be used when (1) necessary for the protection of the government or the contractor; or (2) the investigative and claims services of a surety company are desired" to "Fidelity and forgery bonds generally are not required but are authorized for use when..." (EDITOR'S NOTE: For more on the proposed rule, see the September 2004 Federal Contracts Perspective article "DFARS Rules on Taxes, Bonds.")
  
  
• Restriction to Domestic Sources for Polyacrylonitrile Carbon (PAN) Fiber: DFARS 225.7103, Polyacrylonitrile (PAN) Carbon Fiber, is amended to extend the phase-out date for domestic source restrictions on the acquisition of PAN carbon fiber from May 31, 2005, to May 31, 2006, to accommodate the aerospace industry, which requested an extension of the phase-out to provide U.S. companies sufficient time to maintain the industrial and technological capability to support a critical material used in advanced aerospace weapons programs.
  
  
• Small Business Competitiveness Demonstration Program: DFARS 219.1007, Procedures, is amended to address the use of automated systems when making an award under the Small Business Competitiveness Demonstration Program. Paragraph (a)(2) of Federal Acquisition Regulation (FAR) 19.1007, Procedures, requires that "the face of each award made pursuant to the [Small Business Competitiveness Demonstration] program must contain a statement that the award is being issued pursuant to the Small Business Competitiveness Demonstration Program." To accommodate the use of automated systems, DOD is adding a paragraph (a)(2) to DFARS 219.1007, which states, "When it is not practical to mark the face page of an award document, alternative means may be used to identify the contract as an award under the Small Business Competitiveness Demonstration Program."
  
  
• Government Source Inspection Requirements: DFARS 246.402, Government Contract Quality Assurance At Source, is amended to eliminate government source inspection requirements for contracts or delivery orders valued below $250,000 unless certain conditions exist to permit DOD contract administration offices to devote more resources to high-risk contracts. The exceptions are that the source inspection is: "(1) mandated by DOD regulation; (2) required by a memorandum of agreement between the acquiring department or agency and the contract administration agency; or (3) the contracting officer determines that (i) contract technical requirements are significant (e.g., the technical requirements include drawings, test procedures, or performance requirements); (ii) the product being acquired (A) has critical characteristics; (B) has specific features identified that make government contract quality assurance at source necessary; or (C) has specific acquisition concerns identified that make government contract quality assurance at source necessary; and (iii) the contract is being awarded to (A) a manufacturer or producer; or (B) a non-manufacturer or non-producer and specific government verifications have been identified as necessary and feasible to perform."
  
  DOD published a proposed rule on September 15, 2003, that was essentially the same as the final rule, except that proposed paragraph (3)(ii) would have stated "(ii) critical product features/characteristics or specific acquisition concerns have been identified..." Thirty-seven respondents submitted comments on the proposed rule, and paragraph (3)(ii) was revised to clarify what is meant by "critical product features/characteristics or specific acquisition concerns."
  
  EDITOR'S NOTE: For more on the proposed rule, see the October 2003 Federal Contracts Perspective article "DFARS Rules Proposed on Shellfish, Inspection Elimination."
  
  
• Providing Information to Cooperative Agreement Holders: This interim rule amends DFARS 205.470, Contract Clause, to implement Section 816 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375), which increases 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. (EDITOR'S NOTE: For more on other acquisition-related provisions of Public Law 108-375, see the November 2004 Federal Contracts Perspective article "FY 2005 Defense Authorization Act Directs Review of GSA Procedures, Permits A-76 Protests by Feds.")
  
  Comments on the interim rule should be submitted on of before April 25, 2005, directly on the Federal eRulemaking Portal at http://www.regulations.gov; on 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: Michele Peterson, 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.
  
  
• Extraordinary Contractual Actions: This proposed rule would amend DFARS Part 250, Extraordinary Contractual Actions, to update requirements for processing requests for extraordinary contract adjustments under Public Law 85-804, and to move the procedures for preparation of records and submittal of requests to the PGI. The following are the changes being proposed:
  
  
  • The text in DFARS 250.105, Records, would be relocated to PGI 250.105, Records, and replaced with a cross-reference to PGI 250.105.
    
    
  • DFARS 250.303, Contractor Requests, would be redesignated as DFARS 250.303-1, Contractor Requests, to correspond to the FAR numbering. All the text would be deleted except for the first sentence: "Requests should be filed with the procuring contracting officer (PCO)." Also, the following sentence would be added: "However, if filing with the PCO is impractical, requests may be filed with an authorized representative, an administrative contracting officer, or the Office of General Counsel of the applicable department or agency, for forwarding to the cognizant PCO."
    
    
  • DFARS 250.306, Disposition, currently has no text, but is a section heading for DFARS 250.306-70, Record of Disposition. DFARS 250.306-70 would be relocated to PGI 250.306, Disposition, and DFARS 250.306 would consist of a cross-reference to PGI 250.306.
  
  Comments on the proposed rule should be submitted by April 8, 2005, by any of the methods mentioned in the interim rule above except they should be addressed to Euclides Barrera.
  
  
• Acquisition of Ball and Roller Bearings: This proposed rule would establish a consistent exception for commercial bearings to restrictions on the acquisition of foreign ball and roller bearings by amending DFARS 225.7009, Restrictions on Ball and Roller Bearings, and the associated clause at DFARS 252.225-7016, Restriction on Acquisition of Ball and Roller Bearings. DFARS 225.7009 and DFARS 252.225-7016 implement various restrictions on the acquisition of foreign ball and roller bearings contained in annual DOD appropriations acts and 10 U.S.C. 2534. This proposed rule would clarify DFARS 225.7009 and DFARS 252.225-7016 by (1) addressing only the exceptions, waivers, and waiver authority available to the contracting officer under current law; and (2) applying the current exception to 10 U.S.C. 2534 for commercial items incorporating ball or roller bearings to bearings that are commercial components of non-commercial end items or components.
  
  DFARS 225.7009 would be completely rewritten and streamlined as follows:
  
  
  • DFARS 225.7009-1, Restrictions, would be redesignated as DFARS 225.7009-2 and reduced to: "Do not acquire ball and roller bearings or bearing components unless the bearings and bearing components are manufactured in the United States or Canada."
    
    
  • DFARS 225.7009-2, Exceptions, would be redesignated as DFARS 225.7009-3, and the exceptions in paragraph (a) would be deleted. All that would remain is the statement in current paragraph (b): "The restriction in [DFARS] 225.7009-2 does not apply to contracts or subcontracts for the acquisition of commercial items, except for commercial ball and roller bearings acquired as end items."
    
    
  • DFARS 225.7009-3, Waiver, would be redesignated as DFARS 225.7009-4, and all the waivers in paragraphs (a) and (b), most of which are authorized by 10 U.S.C. 2534, would be deleted because they are rendered ineffective by the overriding restrictions of the annual DOD appropriations acts. Also, the waiver requirements in subparagraphs (b)(3) and (4), which relate to multiyear acquisitions and miniature and instrument ball bearings, respectively, would be deleted because they derive from the 1992 version of the DFARS, and 10 U.S.C. 2534(d) provides new waiver authority that supersedes the prior more restrictive waiver authority of the 1992 DFARS. All that would remain is the authority in current paragraph (c) for the Secretary of Defense to waive the restrictions on a case-by-case basis.
    
    
  • DFARS 225.7009-4, Contract Clause, would be redesignated as DFARS 225.7009-5, and it would require that DFARS 252.225-7016 be included in solicitations and contracts unless "(a) the items being acquired are commercial items other than ball or roller bearings acquired as end items; (b) the items being acquired do not contain ball or roller bearings; or (c) a waiver has been granted in accordance with [DFARS] 225.7009-4" (paragraphs (a) and (c) would be added, and the statement "or an exception applies or a waiver has been granted, other than the waiver for the United Kingdom, which has been incorporated into the clause" would be deleted). Also, the prescription that Alternate I be included in solicitations and contracts that use simplified acquisition procedures would be deleted.
  
  DFARS 252.225-7016 would be revised as follows:
  
  
  • All references to miniature and instrument ball bearings (in paragraphs (a)(2), (b), and (d)) would be deleted.
    
    
  • Paragraph (c)(ii), which states that the restriction in the clause do not apply to ball or roller bearings that are acquired as components if "the ball or roller bearings are commercial components manufactured in the United Kingdom" would be revised by deleting "manufactured in the United Kingdom".
    
    
  • Paragraph (e), which requires the contractor to "retain records showing compliance with the restriction...of this clause until 3 years after final payment..." would be deleted.
  
  Comments on the proposed rule should be submitted by April 25, 2005, by any of the methods mentioned in the interim rule above except they should be addressed to Amy Williams.
  
  
• Advisory and Assistance Services: This proposed rule would revise DFARS Subpart 237.2, Advisory and Assistance Services, to delete obsolete text and material that is adequately addressed in other documents. The following are the changes being proposed:
  
  
  • DFARS 237.201, Definition, which consists of the definition of "advisory and assistance services," would be deleted because the definition is used primarily for budget reporting under 10 U.S.C. 2212, and is adequately addressed in financial management regulations.
    
    
  • DFARS 237.203, Policy, would be deleted. It addresses engineering and technical services, and the text was based on DOD Directive 1130.2, Engineering and Technical Sevices -- Management Control, which was cancelled in 1990.
    
    
  • In paragraph (a) of DFARS 237.270, Acquisition of Audit Services, is a reference listing of DOD publications that govern audits. This listing would be removed from DFARS 237.270 and relocated to the PGI as PGI 237.270, Acquisition of Audit Services.
    
    
  • DFARS 237.271, Management Controls, and DFARS 237.272, Requesting Activity Responsibilities, would be deleted. The text in these two sections was based on Office of Management and Budget (OMB) Circular A-120, Guidelines for the Use of Advisory and Assistance Services, which was rescinded in 1993. OMB Circular A-120 was replaced by Office of Federal Procurement Policy (OFPP) Policy Letter 93-1, Management Oversight of Service Contracting, which is implemented in Federal Acquisition Regulation (FAR) Subpart 37.5, Management Oversight of Service Contracts.
  
  Comments on the proposed rule should be submitted by April 25, 2005, by any of the methods mentioned in the interim rule above except they should be addressed to Robin Schulze.
  
  
• Mortuary Services and Laundry and Dry Cleaning Services: This proposed rule would update the text in DFARS Subpart 237.70, Mortuary Services, and DFARS Subpart 237.71, Laundry and Dry Cleaning Services, to delete text and material that is adequately addressed elsewhere, and to relocate internal instructions and procedures to the PGI.
  
  The following are the changes being proposed to DFARS Subpart 237.70:
  
  
  • DFARS 237.7002, Area of Performance, which provides guidelines for defining the geographical area to be covered by mortuary services contracts, and DFARS 237.7003, Distribution of Contracts, which provides procedures for distribution of those contracts, would be removed and relocated to the PGI as PGI 237.7002, Area of Performance and Distribution of Contracts. DFARS 237.7002 would be retitled "Area of Performance and Distribution of Contracts," and would consist of a cross-reference to PGI 237.7002.
    
    
  • The related clause at DFARS 252.237-7010, Facility Requirements, which contains requirements for mortuary facilities, would be deleted because these requirements are adequately addressed in state law.
  
  The following are the changes being proposed to DFARS Subpart 237.71:
  
  
  • DFARS 237.7100, Scope, currently states, "This subpart contains acquisition procedures for laundry and dry cleaning services within the United States. It may be used as guidance in all other locations." It would be revised to state, "This subpart (a) applies to contracts for laundry and dry cleaning services within the United States; and (b) may be used as guidance in areas outside the United States."
    
    
  • DFARS 237.7101, General, which describes the method for acquiring laundry and dry cleaning services for hospitals ("count-of-articles or bulk weight") and other facilities ("count-of-articles") would be deleted because it is unnecessary.
  
  Comments on the proposed rule should be submitted by April 25, 2005, by any of the methods mentioned in the interim rule above except they should be addressed to Robin Schulze.
  
  
• Acquisition of Telecommunication Services: This proposed rule would delete the text in DFARS 239.7405, Multiyear Contracting Authority for Telecommunications Resources, which discusses the General Services Administration's (GSA) authority to enter into multiyear contracts for telecommunication resources. DFARS 239.7405 would be retitled "Delegated Authority for Telecommunication Resources," and would consist of the following text: "The contracting officer may enter into a telecommunications service contract on a month-to-month basis or for any longer period or series of periods, not to exceed a total of 10 years. See PGI 239.7405 for documents relating to this contracting authority, which the General Services Administration has delegated to DOD." PGI 239.7405, Delegated Authority for Telecommunications Resources, would contain two documents: "Procurement of Communications Services; Statement of Areas of Understanding Between Department of Defense and General Services Administration," published in the December 1, 1950, Federal Register; and Federal Property Management Regulations Temporary Regulation F-227, Subject: Delegation of Authority, dated September 6, 1974, which "delegates authority to the Secretary of Defense to enter into contracts for procurement of public utility services for a period not exceeding 10 years."
  
  Comments on the proposed rule should be submitted by April 25, 2005, by any of the methods mentioned in the interim rule above except they should be addressed to Bill Sain.
  
  
• Utility Rates Established by Regulatory Bodies: This proposed rule would amend DFARS Part 241, Acquisition of Utility Services, to clarify that utility rates established by independent regulatory bodies may be relied upon as fair and reasonable, and to clarify requirements for use of contract clauses addressing changes in rates for regulated and unregulated utility services. The following are the changes being proposed to DFARS Part 241:
  
  
  • Paragraph (3) of DFARS 241.201, Policy, now states, "Rates established by an independent regulatory body are considered 'prices set by law or regulation' and do not require submission of cost or pricing data (see FAR Subpart 15.4 [Contract Pricing])." The proposed rule would amend paragraph (3) to state, "Rates established by an independent regulatory body (i) are considered 'prices set by law or regulation'; (ii) are sufficient to set prices without obtaining cost or pricing data (see FAR Subpart 15.4); and (iii) are a valid basis on which prices can be determined fair and reasonable." In addition, the following would be added as paragraph (4): "Compliance with the regulations, practices, and decisions or independent regulatory bodies as a matter of comity is not a substitute for the procedures at FAR 41.202(a) [Procedures]."
    
    
  • DFARS 241.501, Solicitation Provision and Contract Clauses would be added. It would state: "(d)(1) Use a clause substantially the same as the clause at FAR 52.241-7, Change in Rates or Terms and Conditions of Service for Regulated Services, when the utility services to be provided are subject to an independent regulatory body.
    
          "(2) Use a clause substantially the same as the clause at FAR 52.241-8, Change in Rates or Terms and Conditions of Service for Unregulated Services, when the utility services to be provided are not subject to a regulatory body or are subject to a nonindependent regulatory body."
  
  Comments on the proposed rule should be submitted by April 25, 2005, by any of the methods mentioned in the interim rule above (send comments to Michele Peterson).
  
  
• Acquisition of Utility Services: This proposed rule would amend DFARS Part 241, Acquisition of Utility Services, to delete text on use of competitive procedures and delegated authority to acquire utility services because these issues are adequately addressed in the FAR; delete obsolete text on preaward contract reviews; and relocate procedures and corresponding definitions related to connection charges and award of separate contracts for utility services from DFARS to the PGI. The following are the changes being proposed to DFARS Part 241:
  
  
  • In DFARS 241.101, Definitions, the definitions for "definite term contract" (a contract between one and ten years duration), "dual service area" (a geographical area in which two or more utility suppliers provide services), and "indefinite term contract" (a month-to-month contract) would be deleted. The definitions for "definite term contract" and "indefinite term contract" would be relocated to PGI 241.205, Separate Contracts.
    
    
  • DFARS 241.103, Statutory and Delegated Authority, would be amended to add a cross-reference to PGI 241.103, Statutory and Delegated Authority, which would contain a list of statutory authorities and maximum contract periods for utility and energy contracts.
    
    
  • In DFARS 241.202, Procedures, paragraph (a)(i), which addresses competitive proposals, and paragraph (a)(ii), which addresses periodic reviews for competition, would be deleted. In addition, paragraph (a)(iv), which addresses construction and labor requirements, would be removed and relocated to PGI 241.202, Procedures. All that would remain would be a cross-reference to PGI 241.202.
    
    
  • DFARS 241.203, GSA [General Services Administration] Assistance, would be deleted.
    
    
  • DFARS 241.205, Separate Contracts, would be removed and relocated to PGI 241.205, Separate Contracts. All that would remain would be a cross-reference to PGI 241.205.
    
    
  • DFARS 241.270, Preaward Contract Review, would be deleted.
  
  Comments on the proposed rule should be submitted by April 25, 2005, by any of the methods mentioned in the interim rule above (send comments to Michele Peterson).

Nonmanufacturer Rule Waived for Adhesives, Sealants

The Small Business Administration (SBA) has decided to waive the nonmanufacturer rule for adhesives and sealants manufacturing under North American Industry Classification System (NAICS) code 325520 because no small business manufacturers are currently supplying these classes of products to the federal government. This waiver allows otherwise qualified nonmanufacturers to supply general aviation turboprop aircraft of any domestic manufacturer on a federal contract set aside for small businesses, set aside for service-disabled veteran-owned small businesses, or awarded through the SBA's 8(a) program. (EDITOR'S NOTE: For more on the proposed waiver, see the January 2005 Federal Contracts Perspective article "One Nonmanufacturer Rule Waived, One Proposed, One Terminated.")

Agencies Must Justify eTravel Missed Deadline

The General Services Administration (GSA) is requiring all agencies that did not award a task order to an eTravel Service (eTS) vendor by December 31, 2004, to submit a justification for missing the deadline, and to request that GSA grant an exception from the eTS implementation requirement. GSA had established December 31, 2004, as the deadline for all agencies subject to the Federal Travel Regulations (FTR) (with the exception of DOD and the government of the District of Columbia) to award a task order to an eTS vendor, and fully migrate to eTS agency-wide no later than September 30, 2006. (EDITOR'S NOTE: The authorized eTS vendors are CW Government Travel, EDS Corporation, and Northrup Grummann Mission Systems.) All agencies met the December 31, 2004, date except for the Department of Education, the National Aeronautics and Space Administration (NASA), and the Social Security Administration.

GSA published a notice on February 28 stating, "Each agency that encountered a delay with its eTS acquisition and has not yet implemented eTS as required under the FTR must submit a request for an exception to the Administrator of General Services, 1800 F Street, NW, Washington, DC 20405, for consideration of approval. The request must include a complete justification outlining why you need an extension and the date when your agency will award a task order or will agree to be cross-serviced by a franchise organization. Please submit your request and supporting information no later than March 30, 2005."

Transportation Acquisition Regulation Reissued

The Department of Transportation (DOT) is reissuing the Transportation Acquisition Regulation (TAR), replacing the 1994 edition with a 2004 edition that is consistent with the 2001 edition of the FAR. The 2004 TAR has been substantially revised to eliminate coverage that is unnecessary or duplicates the FAR or other directives; update references to obsolete policies, procedures, and organizations; incorporate electronic links to references such as provisions to the FAR, U.S. Code, and the Code of Federal Regulations; and adopt by reference executive orders and Office of Federal Procurement Policy (OFPP) policy letters. Only coverage that is suitable and necessary will be retained in the regulation.

The goal of rewriting the TAR was to ensure it would contain only current and appropriate coverage for a department-level acquisition regulation, and to remove and re-designate any internal agency guidance from the TAR to the Transportation Acquisition Manual (TAM).

The most noticeable changes to the TAR involve the removal of all U.S. Coast Guard specific language and clauses because the Coast Guard was transferred to the Department of Homeland Security on March 1, 2003.

Comments on the revised TAR should be filed with the Docket Management System, U.S. Department of Transportation, Room PL-401, 400 Seventh Street, SW, Washington, DC 20590-0001; or through the internet to http://dms.dot.gov.

Automobile Reimbursement Increased to 40.5 Cents/Mile

The General Services Administration (GSA) is amending Federal Travel Regulation (FTR) 301-10.303, What am I reimbursed when use of a POV is determined by my agency to be advantageous to the Government?, to increase the 2005 mileage reimbursement rate for use of a privately owned automobile on official travel from 37.5 cents per mile to 40.5 cents per mile; for use of a privately owned airplane from 99.5 cents per mile to $1.07 per mile; and the cost of operating a privately owned motorcycle from 28.5 cents per mile to 30.5 cents per mile. This increase reflects the current costs of operation as determined in GSA's cost studies.

The same statute that directs GSA to establish the POV mileage reimbursement rates also provides that the automobile reimbursement rate cannot exceed the single standard mileage rate established by the Internal Revenue Service (IRS). The IRS announced a new single standard mileage rate for automobiles of 40.5 cents per mile effective January 1, 2005, so the new FTR rate of 40.5 cents per mile conforms with the IRS rate.

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