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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


August 2005
Vol. VI, No. 8

CONTENTS


FAC 2005-05 Clarifies Justifications for Limiting Schedule Orders
FAR Rule Would Address Fast Payment Procedures
DOD Addresses Berry Amendment, Hawaiian Organizations
Agriculture Proposes Six Biobased Items
Comments Sought on Contractors' ESOPs
Prompt Payment Interest Rate Set at 4 1/2%



FAC 2005-05 Clarifies Justifications for Limiting
Schedule Orders, 5% Withholding on T&M Contracts

Federal Acquisition Circular (FAC) 2005-05 amends the Federal Acquisition Regulation (FAR) to clarify and correct some unintended and inapplicable requirements that were adopted by FAC 2001-24 for restricting consideration of Federal Supply Schedule contractors to less than the required number. In addition, FAC 2005-05 removes the requirement that a contracting officer withhold 5% of the payments due under a time-and-materials contract, revises the definition of "information technology," requires prime contractors to confirm that a subcontractor representing itself as a Historically Underutilized Business Zone (HUBZone) small business concern is certified, and clarifies the basis for determining rental charges for the use of government property.



FAR Rule Would Address Fast Payment Procedures

It is proposed that FAR 52.213-1, Fast Payment Procedure, be amended to permit, but not require, fast payment when invoices and/or outer shipping containers are not marked "Fast Pay." Current practice is to reject such invoices. Instead, they will be paid using either fast payment or normal payment procedures. In addition, the proposed revision would delete the requirement for marking invoices "No Receiving Report Prepared."

Comments on the proposed rule must be submitted by September 12, 2005, to (a) http://www.regulations.gov; (b) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (c) e-mail: farcase.2004-031@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.

EDITOR'S NOTE: Fast payment procedures are authorized for fixed-price contracts, purchase orders, or delivery orders for supplies that are less than $25,000. Title to the supplies passes to the government upon delivery to a post office or common carrier, but the supplier has to agree to replace, repair, or correct supplies that are not received, are damaged, or do not conform to purchase requirements. See FAR Subpart 13.4, Fast Pay Procedure, for more details.



DOD Addresses Berry Amendment, Hawaiian Organizations

The Department of Defense (DOD) stayed busy in July, publishing one final rule amending the Defense FAR Supplement (DFARS), two interim rules, five proposed rule, and executing a DFARS class deviation regarding foreign information technology.



Agriculture Proposes Six Biobased Items

The Department of Agriculture (USDA) is proposing to designate the following six items as biobased products that would be afforded federal procurement preference: mobile equipment hydraulic fluids; urethane roof coatings; water tank coatings; diesel fuel additives; penetrating lubricants; and bedding, bed linens, and towels.

Once USDA designates an item, federal agencies are generally required to purchase biobased products within these designated items when the purchase price exceeds $10,000 or where the quantity of such items (or functionally equivalent items) purchased over the preceding fiscal year equaled $10,000 or more. The regulations for the program are at Title 7 of the Code of Federal Regulations (CFR) Part 2902, Guidelines for Designating Biobased Products for Federal Procurement, and information on the program is at http://www.biobased.oce.usda.gov. Also, see the February 2005 Federal Contracts Perspective article "USDA Publishes Biobased Products Guidelines."

In addition, USDA is proposing a minimum biobased content for each of these items; would revise Section 2902.2, Definitions, to add definitions for "biodegradability" and "functional unit"; and would amend Section 2902.8 to adopt applicable ASTM International performance tests to verify biodegradability.

Comments on the proposal should be submitted by September 6, 2005, at either http://www.regulations.gov or http://www.biobased.oce.usda.gov; by e-mail to fb4p@oce.usda.gov; or by mail Marvin Duncan, USDA, Office of the Chief Economist, Office of Energy Policy and New Uses, Room 4059, South Building, 1400 Independence Avenue SW, MS-3815, Washington, DC 20250-3815. All submissions must include the agency name and "Regulatory Information Number (RIN) 0503-AA26." Identify submittals as pertaining to the "Proposed Designation of Items."



Comments Sought on Contractors' ESOPs

The Cost Accounting Standards Board (CASB) (part of the Office of Federal Procurement Policy (OFPP)), is inviting public comments on proposed amendments to Cost Accounting Standard (CAS) 412, Cost Accounting Standard for Composition and Measurement of Pension Cost, and CAS 415, Accounting for the Cost of Deferred Compensation, regarding employee stock ownership plans (ESOPs). These proposed amendments would address criteria for measuring the costs of ESOPs and their assignment to cost accounting periods under government cost-based contracts and subcontracts. Also, the amendments would specify that accounting for the costs of ESOPs will be covered by the provisions of CAS 415.

This notice of proposed rulemaking (NPRM) is in response to ten sets of comments submitted on the August 20, 2003, advance notice of proposed rulemaking (see the September 2003 Federal Contracts Perspective article "CAS Coverage Proposed for ESOPs"). Differences between the NPRM and the advance NPRM involve assignment of costs based on award of shares (paragraph (f)(2) of CAS 9904.415-50, Techniques for Application); transition method (proposed CAS 9904.415-64, Transition Method, is deleted, and a new paragraph (d) is added to CAS 9904.415-63, Effective Date); and the definition of an ESOP (paragraph (a)(3) of CAS 9904.415-30, Definitions).

Comments should be sent no later than September 20, 2005, by e-mail to casb2@omb.eop.gov.



Prompt Payment Interest Rate Set at 4 1/2%

The Treasury Department has established 4 1/2% (4.5%) as the interest rate for the computation of payments made between July 1 and December 31, 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 (January 1, 2005, through June 30, 2005), was 4 1/4% (4.25%). The interest rate for July 1 through December 31, 2004, was 4 1/2% (4.5%).

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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