Panoptic Enterprises'


Federal Acquisition Developments, Guidance, and Opinions

September 2005
Vol. VI, No. 9


Small Businesses Win $69 Billion in FY 2004 Contracts
Safety Issues Notification to be Added to DFARS
Agencies Fail to Implement Race-Neutral Alternatives
SBA Proposes Waiving Five Nonmanufacturing Rules
New Charge Cardholders to Get Credit Checks
GSA Announces Federal Acquisition Service Plan
Labor Revises Regs to Permit "WDOL"
Section 508 "Buy Accessible Wizard" Announced
SBA to Increase Surety Fee

Small Businesses Win $69 Billion in FY 2004 Contracts,
Federal Government Surpasses 23% Goal

The Small Business Administration (SBA) has announced that small businesses received a record $69.23 billion in federal contracts in Fiscal Year (FY) 2004, surpassing by almost 6% the previous high of $65.5 billion in FY 2003. The contracts represented 23.09% of $299.9 billion in total federal contracting dollars, slightly exceeding the 23% goal mandated by Congress, but slightly less than the 23.6% awarded in FY 2003. FY 2004 awards to small businesses represented 43.7% of federal contracting actions in FY 2004 -- 4.36 million actions out of 9.97 million.

The data was obtained by the SBA from the Federal Procurement Data System -- Next Generation (FPDS-NG). The Internet-based FPDS-NG replaced the original FPDS on October 1, 2003, and FY 2004 is the first year that FPDS-NG is the authoritative source of contracting information.

"The report shows that the government not only matched its own statutory goal, but it broke records by awarding more contracting dollars to America's small businesses than ever before," said SBA Administrator Hector Barreto. "However, we can still do better. While the federal government reached its goal, I believe it still has room to improve in allowing small business to compete for additional contracting dollars."

The following are the statistics for various types of small businesses:

The report is available at http://www.sba.gov/GC/goals/Goaling-Report-08-21-2005.pdf.

EDITOR'S NOTE: There are some significant exclusions from the FPDS-NG data. These exclusions include:

In addition, FPDS-NG admits that there were various "challenges" in (1) migrating the data from FPDS to FPDS-NG, (2) with data collection policies, and (3) regarding the different ways various agencies handle and report indefinite-delivery contracts (information of the data is available at http://www.sba.gov/GC/goals/fy04-Supplemental-Info.pdf). So take the SBA's numbers with a grain of salt. However, it appears that small businesses are holding their own despite all the impediments placed in their way by "acquisition streamlining."

Safety Issues Notification to be Added to DFARS

The Department of Defense (DOD) is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to add policy regarding notification of potential safety issues under DOD contracts. This policy would be included in a new clause, DFARS 252.246-7XXX, Notification of Potential Safety Issues. This clause would be included in solicitations and contracts for: (1) replenishment parts identified as critical safety items ("a part, subassembly, assembly, subsystem, installation equipment, or support equipment for a system that contains a characteristic, any failure, malfunction, or absence of which could cause a catastrophic or critical failure resulting in the loss of or serious damage to the system or an unacceptable risk of personal injury or loss of life"); (2) systems and subsystems, assemblies, and subassemblies integral to a system; and (3) repair, maintenance, logistics support, or overhaul services for systems and subsystems, assemblies, and subassemblies integral to a system.

The clause would require the contractor to notify the administrative contracting officer and the procuring contracting officer within 72 hours after discovering or acquiring credible information concerning an item nonconformance or deficiency that may have an effect on safety. In addition, the contractor would be responsible for the notification of potential safety issues regarding an item furnished by a subcontractor, and the contractor would then be required to "facilitate direct communication between the government and the subcontractor as necessary."

Comments on this proposed rule must be submitted by September 30, 2005, 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.

Agencies Fail to Implement Race-Neutral Alternatives

In a report detailing its examination of federal procurement practices, the United States Commission on Civil Rights (CCR) found that the government fails to seriously consider race-neutral alternatives as required by the Constitution. The Supreme Court's 1995 decision in Adarand Constructors, Inc. vs. Pena held that any federal, state, or local program that bases decisions on racial and ethnic factors must serve a compelling government interest and be narrowly tailored to meet that interest. This standard is called "strict scrutiny," and it places the burden of proof on the government to demonstrate that the classification is the least restrictive way to serve a "compelling public interest."

To prepare the report, Federal Procurement After Adarand, the CCR examined procurement programs of the following agencies: the Departments of Defense, Education, Energy, Housing and Urban Development, State, and Transportation, and the Small Business Administration.

"Federal agencies are disregarding their constitutional obligation to seriously consider race-neutral alternatives," said CCR Chairman Gerald Reynolds. "After ten years, they are still not complying with the Supreme Court's mandate, and they are not even complying with the Clinton Administration's guidance on race-neutral alternatives. Federal Agencies do not independently evaluate, conduct research, collect data, or periodically review programs to determine whether race-neutral strategies will provide an adequate alternative to race-conscious programs. Instead, they continue to rely primarily on SBA-run programs, such as [the 8(a) program], to achieve diversity in the contract awards they make. This does not meet the Supreme Court's standard for strict scrutiny."

The CCR identified the following as race-neutral practices that should be adopted by agencies:

In addition, the CCR found that federal law does not specify protections for contractors who are the victims of discrimination, nor does any agency process enforcement authority against violations. The CCR (1) urges the Department of Justice to develop guidance for agencies on how to implement race-neutral alternatives, (2) asks the president to assemble a task force charged with determining what data agencies need to collect to measure and assure the appropriateness of race-neutral or race-conscious procurement programs, and (3) asks Congress to enact legislation expressly prohibiting racial discrimination in federal contracting, and establishing effective enforcement procedures.

The CCR's report is available a http://www.usccr.gov/pubs/080505_fedprocadarand.pdf.

SBA Proposes Waiving Five Nonmanufacturing Rules

SBA is proposing to waive the nonmanufacturer rule for the following industries:

SBA is inviting the public to comment on these five proposed waivers, or provide information on potential small business sources for these products by September 9, 2005, to Edith Butler, Program Analyst, 202-619-0422; or by fax at 202-481-1788; or by e-mail at edith.butler@sba.gov.

In addition, SBA is considering terminating it nonmanufacturer rule waiver for sporting and athletic goods manufacturing under NAICS code 339920. The nonmanufacturer rule was waived because SBA was unaware of any small businesses supplying that class of products to the federal government (see the December 2004 Federal Contracts Perspective article "Two Nonmanufacturer Rules Waived, One Terminated"). However, SBA discovered recently the existence of a small business sporting and athletic goods manufacturer, so SBA is accepting comments on its proposed termination of the waiver by August 15, 2005, by any of the methods mentioned above.

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.

New Charge Cardholders to Get Credit Checks

The Office of Management and Budget (OMB) has issued new federal charge card policies to consolidate and update government charge card program guidance previously issued by OMB, the General Services Administration (GSA), and other federal agencies. The new guidance is in OMB Circular A-123, Management's Responsibility for Internal Control, Appendix B, Improving the Management of Government Charge Card Programs (available at http://www.whitehouse.gov/omb/circulars/a123/a123_appendix_b.pdf). The new guidance goes into effect October 1, 2005, applies to all federal agencies, and applies to all types of charge cards: purchase cards (for goods and services supporting government business); travel cards (for travel- and transportation-related expenses); fleet cards (for purchase of fuel, repairs, and services for the government's vehicle fleet), AIR cards ("aviation into-plane reimbursement" -- used to procure aviation fuel and ground services); SEA cards ("ships' bunker easy acquisition" -- used to procure bunker fuel and fuel-related services); and integrated cards (cards that combine the features of purchase, travel, and/or fleet cards).

The most significant change in the policies is the requirement that all agencies conduct credit checks on all new purchase and travel cardholders. This requirement does not apply to current cardholders; it does apply to cardholders who leave government service and then return. Also, an agency may assess the credit of a cardholder who transfers from another agency.

Those with a FICO (Fair Isaac Corporation, which developed the rating system) score of 660 or more will receive a card with standard agency restrictions. Those with a FICO score of 500 to 660 (about a quarter of the population) may be issued a card with more stringent conditions, such as: (1) a reduced overall limit on the card; (2) a reduced limit on individual transactions; (3) a limit on the types of transactions allowed; (4) issue a pre-paid card (similar to a debit card); (5) limit the dollar amount of transactions that can be conducted within a particular period of time; (6) limit the length of time the card is active (such as the length of a trip); or (7) restrict use at automatic teller machines (ATMs). Those with FICO scores below 500 (about 2% of the population) will not be issued a card.

In addition, Appendix B addresses:

"This new guidance will help ensure that federal charge cards aren't misused, that the government pays its charge card debta on time, and that government managers implement strategies for making smarter procurement decisions," said OMB Controller Linda Combs. "The federal government has significantly improved the integrity and cost effectiveness of our charge card programs in the past few years, and this guidance will build on and reinforce this success."

GSA Announces Federal Acquisition Service Plan

General Services Administration (GSA) Administrator Stephen Perry has announced the detailed organizational design plan for reorganizing the Federal Supply Service (FSS) and the Federal Technology Service (FTS) into the new Federal Acquisition Service (FAS).

The merging of the FSS and the FTS into the FAS is a direct result of the "Get It Right" program GSA and the Department of Defense (DOD) jointly announced in July 2004 in response to findings by the GSA Inspector General that the FSS and FTS had allowed their contracting vehicles to be improperly used by DOD and other agencies (see the August 2004 Federal Contracts Perspective article "GSA, DOD Announce 'Get It Right' Program").

In January 2005, GSA launched the FSS/FTS reorganization effort, and in June GSA issued a high-level organizational design to indicate the general direction of the reorganization and to invite comments and suggestions from customer agencies, contractors, Congress, and others.

The detailed organizational design Perry announced consists of:

"This reorganization is a very important part of the overall effort to improve the federal acquisition process, and it will significantly improve GSA's effectiveness in meeting the increasing requirements of federal agencies for excellent acquisition services," said Perry. "I'm confident that it will enhance our ability to provide reliable, consistent, and compliant acquisition services that yield best value to federal agencies and taxpayers."

For more information on the plan, go to http://www.gsa.gov/fas.

Labor Revises Regs to Permit "WDOL"

The Department of Labor (DOL) has revised its regulations to allow implementation of the Wage Determinations OnLine (WDOL) (http://www.wdol.gov) as the source for contracting offices to obtain wage determinations issued for service contracts subject to the Service Contract Act (SCA) and for construction contracts subject to the Davis-Bacon Act (DBA).

The SCA requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality as determined by the Secretary of Labor, or the rates contained in a predecessor contractor's collective bargaining agreement. The DOL issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies. DOL's regulations in Title 29 of the Code of Federal Regulations (CFR), Part 4, Labor Standards for Federal Service Contracts, contain the rules related to SCA administration. 29 CFR 4.3, Wage Determinations, and 29 CFR 4.4, Obtaining a Wage Determination, require federal contracting agencies to file a Standard Form (SF) 98, Notice of Intention to Make a Service Contract, with DOL's Wage and Hour Division (WHD) if the agency believes the contract may be subject to the SCA. The WHD uses contracting agency filings to issue appropriate wage determinations.

The DBA requires that each contract over $2,000 to which the United States or the District of Columbia is a party for the construction, alteration, or repair of public buildings or public works shall contain a clause setting forth the minimum wages to be paid to various classes of laborers and mechanics employed under the contract. The DBA requires contractors and their subcontractors to pay workers employed directly upon the site of the work no less than the locally prevailing wages and fringe benefits paid on projects of a similar character as determined by the Secretary of Labor. DOL's regulations in 29 CFR Part 1, Procedures for Predetermination of Wage Rates, contains the procedures for making and applying determinations of prevailing wage rates and fringe benefits in accordance with the DBA. 29 CFR 1.5, Procedure for Requesting Wage Determinations, and 29 CFR 1.6, Use and Effectiveness of Wage Determinations, require federal contracting agencies to file an SF 308, Request for Wage Determination and Response to Request, with the WHD if the agency believes the contract may be subject to the DBA, and specifies how to use the wage determinations.

For WDOL to be effective, DOL's regulations had to be updated, and these updated regulations would provide a basis for updating related information in the FAR. In December 2004, DOL published a Notice of Proposed Rulemaking (NPRM) proposing to revise 29 CFR Parts 1 and 4 to require contracting agencies to use the WDOL website to obtain SCA and DBA wage determinations from the WHD (see the January 2005 Federal Contracts Perspective article "Labor Proposed Requiring WDOL Website"). Under the proposal, WHD would publish wage determinations solely through WDOL and would no longer publish notice of changes in the Federal Register, and the Government Printing Office (GPO) would no longer publish paper copies of general wage determinations. Also, for SCA wage determinations, the DOL proposed to eliminate the paper SF-98 and replace it with an electronic "e98" process.

DOL received comments in response to the NPRM from the Office of the Under Secretary of Defense; Army Corps of Engineers; Office of the Assistant Secretary for Research, Development and Acquisition (Navy); Contract Services Association; and International Association of Machinists and Aerospace Workers. All generally supported the proposed changes. Therefore, DOL has adopted the NPRM as final with a few minor changes, the most significant being the elimination of the SF-99, Notice of Award Contract, because the data is now reported electronically through the Federal Procurement Data System -- Next Generation (FPDS-NG).

Section 508 "Buy Accessible Wizard" Announced

The Office of Management and Budget (OMB) announced that GSA has developed the "Buy Accessible Wizard" at http://www.buyaccessible.gov to guide requiring officials and acquisition professionals in their efforts to comply with the requirements of Section 508 of the Rehabilitation Act of 1973, which requires federal agencies to make sure their electronic and information technology (EIT) permits employees and members of the public with disabilities to access and use government information and data.

An agency that procures, maintains, develops, or uses EIT must follow FAR Subpart 39.2, Electronic and Information Technology, by including appropriate provisions for Section 508-compliance in solicitations for EIT, and evaluating proposed solutions for conformance with those standards. GSA has developed the "Buy Accessible Wizard" to assist the information technology and acquisition communities in determining if Section 508 applies to an EIT acquisition, identifying which specific standards apply to the products or services being acquired, developing solicitation language, initiating market research, and documenting the acquisition. In addition, the Wizard provides assistance to government purchase cardholders to make sure that micro-purchases, which are not exempt from Section 508 requirements, include the appropriate accessibility considerations (see "New Charge Cardholders to Get Credit Checks" above). The Wizard is available for use by all federal agencies and is designed to be installed within an agency's own environment.

Additional information on Section 508 is available at http://www.section508.gov. This site includes best practices, free training on various subjects (such as micro-purchase training), frequently-asked questions, and other information that agencies find useful.

SBA to Increase Surety Fee

The SBA is proposing to increase the guarantee fee charged on each guaranteed bond (other than bid bonds), and payable by surety companies participating in SBA's Surety Bond Guarantee (SBG) Program, from 20% to 32% of the bond premium, effective October 1, 2005. SBA believes that the fee increase is necessary to increase the reserves in the SBG Program's revolving fund to better offset the unfunded program liabilities resulting from defaults under guaranteed bonds. SBA is requesting public comments on the proposed fee increase.

Comments on this proposed increase must be submitted on or before September 14, 2005, by: mail or hand-delivery to Barbara Brannan, Special Assistant, U.S. Small Business Administration, Office of Surety Guarantees, 409 Third Street, SW, Washington, DC 20416; by fax: 202- 205-7600; or by e-mail: Barbara.Brannan@sba.gov.

Copyright 2005 by Panoptic Enterprises. All Rights Reserved.

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