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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

May 2005
Vol. VI, No. 5

CONTENTS

FAC 2005-03 Permits Purchases From
Federal Prisons Only If They Are Best Value

Federal Acquisition Circular (FAC) 2005-03 amends Federal Acquisition Regulation (FAR) Subpart 8.6, Acquisition from Federal Prison Industries, Inc. (FPI), to require that best value procedures be used when purchasing FPI products. Previously, agencies had to purchase FPI products listed on the "Schedule of Products Made in Federal Penal and Correctional Institutions." In addition, FAC 2005-03 finalizes, without changes, the interim rule that extended the micro-purchase exemption for purchasing electronic and information technology (EIT) that conforms to the requirements of Section 508 of the Rehabilitation Act of 1973 from October 1, 2004, to April 1, 2005.

• Purchases From Federal Prison Industries -- Requirement for Market Research: This interim rule implements Section 637 of the Consolidated Appropriations Act for Fiscal Year 2005 (Public Law 108-447), which provides that no funds made under that or any other act in subsequent fiscal years are to be expended for a product or service offered by FPI unless the agency making the purchase determines that the offered product or service provides the best value to the buying agency.
  
  Section 637 of the Consolidated Appropriations Act for Fiscal Year 2004 (Public Law 108-199) contained a similar requirement that applied only to fiscal year 2004 funds. FAC 2001-21 consisted of an interim rule implementing the FY 2004 Section 637 requirement (see the April 2004 Federal Contracts Perspective article "FAC 2001-21 Addresses Purchases from Federal Prisons"). Twelve respondents submitted comments on the first interim rule. This second interim rule incorporates changes made as a result of public comments, and to reflect the FY 2005 appropriations act provision that makes the best value requirement permanent. Also, this second interim rule clarifies that, while offers from FPI in response to a competitive solicitation must be evaluated in accordance with the item description or specifications and evaluation factors in the solicitation, purchases from FPI must be made using the ordering procedures at http://www.unicor.gov, because FPI is not required to complete the representations and certifications included with the solicitation.
  
  Comments on the second interim rule must be submitted by June 10, 2005, to (a) http://www.regulations.gov; (b) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (c) e-mail: farcase.2003-023@gsa.gov; (d) fax: 202-501-4067; or (e) mail: General Services Administration, Regulatory Secretariat (MVA), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405.
  
  
• Section 508 Micropurchase Exemption: This finalizes, without changes, the interim rule that amended paragraph (a) of FAR 39.204, Exceptions, to extend the micro-purchase exemption for purchasing electronic and information technology (EIT) that conforms to the requirements of Section 508 of the Rehabilitation Act of 1973 from October 1, 2004, to April 1, 2005 (for more on the interim rule, see the November 2004, Federal Contracts Perspective article "FAC 2001-25 Authorizes Telecommuting for Contractors"). Section 508 requires that the EIT developed, procured, maintained, or used by the federal government provide individuals with disabilities access to and use of information and data that is comparable to the access and use of information and data by individuals without disabilities.
  
  The extension of the micropurchase exception until April 1, 2005, provides agencies time to update their purchase card training on the Section 508 requirements and provide necessary training to personnel. Free online training is available at http://www.section508.gov.

FAR Implementation of Earned Value Proposed

The FAR Council is proposing to amend FAR Part 34, Major System Acquisition, and FAR Part 52, Solicitation Provisions and Contract Clauses, to implement earned value management system (EVMS) policy.

The Federal Acquisition Streamlining Act of 1994 (FASA) requires agency heads to approve or define the cost, performance, and schedule goals for major acquisitions and achieve, on average, 90% of the cost, performance and schedule goals established by the agency. The Clinger-Cohen Act of 1996 requires the Office of Management and Budget (OMB) to develop, as part of the budget process, a process for analyzing, tracking, and evaluating the risks and results of all major capital investments for information systems for the life of the system. OMB Circular A-11, Preparation, Submission and Execution of the Budget, Part 7, Planning, Budgeting, Acquisition, and Management of Capital Assets, and the Capital Programming Guide (a supplement to A-11, Part 7), were written to meet the requirements of FASA and the Clinger-Cohen Act. OMB Circular A-11, Part 7, sets forth the policy, budget justification, and reporting requirements for major capital acquisitions that apply to all executive agencies.

EVMS has been adopted by OMB as the method for complying with the provisions of FASA and the Clinger-Cohen Act, and is mandated by A-11, Part 7. EVMS is described in American National Standards Institute (ANSI)/Electronics Industries Alliance (EIA) Standard-748, Earned Value Management Systems. (EDITOR’S NOTE: ANSI/EIA Standard-748 is available from Global Engineering Documents (1–800–854–7179). Information on earned value management systems is available at http://www.acq.osd.mil/pm.)

This proposed rule would standardize the use of EVMS across the government with a new FAR Subpart 34.X, Earned Value Management Systems, two provisions, and one clause.

Comments on the proposed rule must be submitted by June 7, 2005, to the above address, except that the e-mail address is "farcase.2004-019@gsa.gov", and the comments should be identified by "FAR Case 2004-019."

DFARS Transformation Momentum Builds

The Department of Defense (DOD) continues transforming the Defense FAR Supplement (DFARS) by publishing eight proposed rules. In addition, a non-transformation proposed rule was published, as were three final rules.

• Uniform Contract Line Item Numbering: This proposed rule would amend DFARS Subpart 204.71, Uniform Contract Line Item Numbering, specifically DFARS 204.7102, Policy, to promote standardization in contract writing by amending paragraph (a)(2), which currently requires that the DFARS Subpart 204.71 numbering procedures be applied to all "solicitation line and subline item numbers, if practicable," by eliminating the words "if practicable."
  
  Comments on this proposed rule, and all others unless otherwise indicated, must be submitted by June 13, 2005. Comments on this, and all the other proposed rules, must be sent 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.
  
  
• Administrative Matters: This proposed rule would amend DFARS Part 204, Administrative Matters, as follows:
  
  
  • Paragraph (1) of DFARS 204.402, General, which cross-references DFARS Subpart 239.74, Telecommunications Services, and paragraph (b) of DFARS 204.902, General, which cross-references DFARS 204.670, Defense Contract Action Data System (DCADS), would be removed because they are considered unnecessary.
    
    
  • Most of paragraph (2) of DFARS 204.402, which addresses security requirements, would be removed because the subject is adequately covered in the FAR. All that would remain of paragraph (2) would be "DOD employees or members of the Armed Forces who are assigned to or visiting a contractor facility and are engaged in oversight of an acquisition program will retain control of their work products, both classified and unclassified."
    
    
  • DFARS 204.904, Reporting Payment Information to the IRS [Internal Revenue Service], would be deleted because the subject is adequately addressed in the FAR.
  
  
• Other Socioeconomic Programs: This proposed rule would amend DFARS Part 226, Other Socioeconomic Programs, as follows:
  
  
  • DFARS Subpart 226.70, Historically Black Colleges and Universities and Minority Institutions, would be redesignated as DFARS Subpart 226.3 to be consistent with the location of the corresponding FAR policy. While the redesignated text would be substantially unchanged, information on contract and subcontract goals for historically black colleges and universities and minority institutions (HBCU/MI) at DFARS 226.7000, Scope of Subpart, and information on HBCU/MI infrastructure assistance at DFARS 226.7002, General Policy, would be deleted because it is considered unnecessary.
    
    
  • DFARS Subpart 226.72, Base Closures and Realignments, would be deleted because it duplicates text found elsewhere in the DFARS, specifically DFARS Subpart 222.71, Right of First Refusal of Employment (rights of government employees who are adversely affected by closure of an installation), DFARS Subpart 226.71, Preference for Local and Small Businesses (qualified businesses located in the vicinity of the installation and small businesses may be given preference), and DFARS 237.74, Services at Installations Being Closed (DOD may contract with local governments for police, fire protection, airfield operations, and other community services at installations being closed).
  
  
• Use of the Governmentwide Commercial Purchase Card for Micro-Purchases: This proposed rule would amend paragraphs (b)(1) and (b)(2) of DFARS 213.270, Use of the Governmentwide Commercial Purchase Card, to lower the approval level for exceptions to the purchase card policy, from a general or flag officer or a member of the Senior Executive Service to the chief of the contracting office; and add as paragraph (c) an exception to the purchase card policy that applies if an authorized official renders the agency's or activity's purchase card program inactive.
  
  
• Simplified Acquisition Procedures: This proposed rule would delete DFARS 213.305-1, General, which addresses imprest funds and third party drafts, except that paragraph (2) would be moved to DFARS 213.305-3, Conditions for Use, as the introduction to paragraph (d) ("On a very limited basis, installation commanders and commanders of other activities with contracting authority may be granted authority to establish imprest funds and third party draft (accommodation check) accounts."). Also, DFARS 213.7001, Policy [for simplified acquisition procedures under the 8(a) program], and DFARS 213.7003-2, Contract Clauses, would be deleted because they consist of unnecessary cross-references to DFARS Subpart 219.8, Contracting with the Small Business Administration (the 8(a) Program).
  
  
• Environment, Occupational Safety, and Drug-Free Workplace: This proposed rule would amend DFARS Part 211, Describing Agency Needs, and DFARS Part 223, Environment, Conservation, Occupational Safety, and Drug-Free Workplace, as follows:
  
  
  • DFARS 211.271, Elimination of Use of Class I Ozone-Depleting Substances, would be relocated to DFARS Subpart 223.8, Ozone-Depleting Substances, replacing DFARS 223.803, Policy. A cross-reference to DFARS Subpart 223.8 would be retained in DFARS 211.271.
    
    
  • DFARS Part 223 would be retitled "Environment, Energy and Water Efficiency, Renewable Energy Technologies, Occupational Safety, and Drug-Free Workplace," to conform to the title of the corresponding FAR Part 23.
    
    
  • The following would be deleted because they are either redundant or unnecessary: DFARS 223.300, Scope of Subpart [Hazardous Material Identification and Material Safety Data]; paragraphs (b), (e)(i), and (e)(ii) of DFARS 223.302, General (which would be retitled "Policy" to conform to the title of the corresponding FAR section); paragraphs (a)(1) through (a)(5) of DFARS 223.370-3, Policy [pertains to the handling of ammunition and explosives]; DFARS 223.570-1, Definitions [used in DFARS Subpart 223.5, Drug-Free Workplace]; and DFARS 223.570-3, General.
  
  
• Contract Administration and Audit Services: This proposed rule would amend DFARS Part 242, Contract Administration and Audit Services, as follows:
  
  
  • The following would be deleted because they are considered unnecessary or duplicative of FAR policy: DFARS 242.402, Visits to Contractors' Facilities; DFARS 242.503-3, Postaward Conference Report; DFARS 242.704, Billing Rates; DFARS 242.705-3, Educational Institutions [final indirect cost rates]; DFARS 242.801, Notice of Intent to Disallow Costs; DFARS 242.1202, Responsibility for Executing Agreements [novation and change-of-name agreements]; DFARS 242.1503, Procedures [contractor performance information]; paragraphs (a) and (c) of DFARS 242.7400, General [technical representation at contractor facilities]; and DFARS 252.242-7000, Postaward Conference.
    
    
  • DFARS 252.242-7004, Material Management and Accounting Systems, would be revised to bring it into conformity with the policy articulated in paragraph (d)(5) of DFARS 242.7203, Review Procedures, regarding corrective action the administrative contracting officers may take to address a contractor's failure to make adequate progress in correcting system deficiencies.
  
  
• Subcontracting Policies and Procedures: This proposed rule would amend DFARS 244.301, Objective [of contractors' purchasing systems reviews] would be revised to clarify responsibilities for conducting reviews of contractor purchasing systems by stating "the administrative contracting officer (ACO) is solely responsible for initiating reviews of the contractor's purchasing systems, but other organizations may request that the ACO initiate such reviews."
  
  
• Radio Frequency Identification: This proposed rule would amend DFARS Subpart 211.2, Using and Maintaining Requirements Contracts, to 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 DOD's RFID implementation plan, which is located at http://www.acq.osd.mil/log/rfid/implementation_plan.htm, indicates that on January 1, 2006, additional items and destinations will be added, and that "commencing January 1st, 2007, RFID tagging will be required for all classes of supply on all individual cases, all cases packaged within palletized unit loads, all pallets, and all unit packs for unique identification (UID) items, shipped to any DOD location."
  
  Comments on this proposed rule must be submitted by June 20, 2005, by any of the methods mentioned above.
  
  
• Unique Item Identification and Valuation: This rule finalizes, with changes, the December 30, 2003, interim rule that amended DFARS 211.274, Item Identification and Valuation, and DFARS 252.211-7003, Item Identification and Valuation, to require unique item identification and valuation of items with an acquisition cost of $5,000 or more (for more on the interim rule being finalized, see the February 2004 Federal Contracts Perspective article "DFARS Changes Address Payments, Unique Item IDs").
  
  On October 10, 2003, DOD published an interim rule that required contractors to uniquely mark items and to provide for identification of the government's acquisition cost of items with an acquisition cost of $5,000 or more that are to be delivered to DOD (see the November 2003 Federal Contracts Perspective article "DFARS Changes on Task Orders Unique Item IDs"). Because of the significance of the comments on the October 10, 2003, interim rule, DOD issued a second interim rule on December 30, 2003, and invited further comments. Thirteen respondents submitted comments on the second interim rule and, as a result of the comments, DOD has finalized the second interim rule with the following significant changes:
  
  
  • DFARS 211.274-1, Item Identification, is redesignated as DFARS 211.274-2, Policy for Unique Item Identification, and it clarifies that unique item identification is required for all delivered items with a unit acquisition cost of $5,000 or more; items less than $5,000 when identified by the requiring activity as serially managed, mission essential, or controlled inventory; items for which the government's unit acquisition cost is less than $5,000 when the requiring activity determines that permanent identification is required (this is added by the final rule); and any DOD serially managed subassembly, components, or parts embedded within a delivered item, and the parent item that contains the embedded subassembly, component, or part, regardless of value (the "parent item" requirement is added by the final rule). DFARS 211.274-2 also includes exceptions for items determined by the head of the agency to be for use to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack; or a determination and findings is executed concluding that it is more cost effective for the government to assign, mark, and register the unique item identification after delivery of an item acquired from a small business or a commercial item.
    
    
  • DFARS 211.274-2, Government's Unit Acquisition Cost, is redesignated as DFARS 211.274-3, Policy for Valuation, and it is revised to clarify that "it is DOD policy that contractors shall be required to identify the government's unit acquisition cost...for all items delivered, even if none of the criteria for placing a unique item identification mark applies."
  
  
• Reporting Contract Performance Outside the United States: This final rule amends DFARS Subpart 225.72, Reporting Contract Performance Outside the United States, to clarify requirements for the reporting of contract performance outside the United States. DFARS Subpart 225.72 implements two distinct reporting requirements: (1) the requirements of 10 U.S.C. 2410g for offerors and contractors to notify DOD of any intention to perform a DOD contract outside the United States and Canada when the contract exceeds $10,000,000 and could be performed inside the United States or Canada; and (2) DOD policy for contractor reporting of performance outside the United States of contracts exceeding $500,000. DFARS Subpart 225.72 is rewritten to address the two reporting requirements separately, and former DFARS 252.225-7004, Reporting of Contract Performance Outside the United States, which addressed both reporting requirements, has been split in two: DFARS 252.225-7004, Report of Intended Performance Outside the United States and Canada -- Submission After Award, in solicitations and contracts exceeding $10,000,000; and DFARS 252.225-7006, Quarterly Reporting of Actual Contract Performance Outside the United States, in solicitations and contracts exceeding $500,000.
  
  
• Personal Services Contracts: This rule finalizes, without changes, the interim rule that amended DFARS 237.104, Personal Services Contracts, to implement Sections 721 and 841 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136). Section 721 provides authority for DOD to enter into personal services contracts for health care at locations outside of DOD medical treatment facilities, and Section 841 adds authority for DOD to enter into personal services contracts to be performed outside the United States or that directly support the mission of a DOD intelligence or counter-intelligence organization or the special operations command (for more on the interim rule, see the October 2004 Federal Contracts Perspective article "DOD Removes Iraq From List of Terrorist Countries").

Workforce Told to Avoid Brand Name Specifications

David Safavian, Office of Federal Procurement Policy (OFPP) Administrator, and Karen Evans, Office of Electronic Government and Information Technology Administrator, issued a joint memorandum to chief acquisition officers (CAOs), senior procurement executives (SPEs), and chief information officers (CIOs) to "reinforce the need to maintain vendor neutral contract specifications and to ensure that agencies strictly comply with the requirements in the Federal Acquisition Regulation (FAR) regarding the use of brand name specifications."

FAR 11.105, Items Peculiar to One Manufacturer, states, "Agency requirements shall not be written so as to require a particular brand-name, product, or a feature of a product, peculiar to one manufacturer, thereby precluding consideration of a product manufactured by another company, unless the particular brand name, product, or feature is essential to the government's requirements, and market research indicates other companies' similar products, or products lacking the particular feature, do not meet, or can not be modified to meet, the agency's needs."

Mr. Safavian and Ms. Evans express concern "that the use of brand name specifications in agency solicitations may have increased significantly in recent years, particularly for information technology. For example, some federal agencies have issued solicitations with specifications for brand name microprocessors that are associated with a single manufacturer. Rather than issue brand name specifications for microprocessors, agencies should either: 1) articulate a benchmark for performance; or 2) specify the requirements for applications and interoperability."

Safavian and Evans admit that "the increased use of brand name specifications is not limited to information technology procurements. For example, last year a federal agency issued a request for quotations (RFQ) for approximately $81 million in office supplies. Throughout the RFQ, office supplies were identified by a vendor number unique to one large office supply company. In these examples, the use of brand name specifications limited competition and diminished the likelihood the agency purchased the best value product. There is also a significant risk of severely limiting small business participation in these cases."

Therefore, to ensure agencies are providing for maximum competition and are purchasing the best products to meet agency needs, "we are requesting that agencies take steps to mitigate brand name usage. As a general rule, contract specifications should emphasize the necessary physical, functional, and performance characteristics of a product, not brand names. In cases where the use of a brand name associated with a single manufacturer is warranted, the FAR currently requires a written justification. Effective immediately, we are asking agencies to publicize the justification with the contract solicitation when the solicitation is posted on the Federal Business Opportunities website (http://www.fedbizopps.gov). If publication of the justification is inappropriate because of national security, trade secrets, or similar concerns, agencies should provide a copy of the justification to the Office of Federal Procurement Policy...this guidance applies to all acquisitions, including simplified acquisitions, GSA (General Services Administration) purchases, and sole source procurements."

This justification has been a requirement since enactment of the Competition in Contracting Act in 1984. Paragraph (c) of FAR 6.302-1, Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements, states, "An acquisition that uses a brand name description or other purchase description to specify a particular brand name, product, or feature of a product, peculiar to one manufacturer does not provide for full and open competition regardless of the number of sources solicited. It shall be justified and approved in accordance with FAR 6.303 [Justifications] and 6.304 [Approval of the Justification]. The justification should indicate that the use of such descriptions in the acquisition is essential to the government's requirements, thereby precluding consideration of a product manufactured by another company." In addition, these justifications have been available to the public upon request (see FAR 6.305, Availability of the Justification), and those who believed they were being wrongfully excluded from competition could challenge the justification under the protest procedures in FAR Subpart 33.1, Protests. What this memorandum does that is new is require that the justification be published on FedBizOpps along with the solicitation. Bringing such justifications out into the public should make contracting officers a little more careful about invoking this exception to competition.

OFPP Makes Civilian Acquisition Training Similar to DOD's

OFPP has issued Policy Letter 05-01 "to promote uniform implementation of a program to develop the federal acquisition workforce." OFPP Policy Letter 05-01 aligns core civilian agency acquisition workforce training requirements with those for the defense workforce. This will ensure that the federal acquisition workforce has common, core training, and this alignment will promote workforce mobility.

Also, Policy Letter 05-01 broadens the definition of the acquisition workforce beyond the GS-1102 contract specialist job series to include such acquisition-related functions as program management, legal counsel, finance, and others who perform acquisition-related functions. These individuals are included in the definition of the acquisition workforce to they can be trained and developed using common standards.

Finally, Policy Letter 05-01 emphasizes the importance of continuous learning. For example, employees in the GS-1102 series will be required to earn 80 continuous learning points every two years, which is twice the current requirement. Many of these continuous learning opportunities are available free of charge on the Federal Acquisition Institute (FAI) website on http://www.fai.gov and through the Defense Acquisition University (DAU) on http://www.dau.mil.

OFPP's announcement of the publication of Policy Letter 05-01 states "FAI and DAU are forming a partnership to advance the capabilities of our federal acquisition workforce. To address the changing nature of the acquisition environment, DAU is currently restructuring the contracting curriculum. As new courses are completed, course content will be made available to training providers to obtain equivalencies for the new offerings...Therefore, civilian agencies should use October 1, 2005, as a general guideline in adopting the DOD curriculum, but may reasonably extend the transition time to accommodate agency and employee needs. FAI will provide guidance and information on transition as the coursework is developed and classes become available."

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