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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


January 2006
Vol. VII, No. 1

CONTENTS


SBA Increase Small Business Size Standards for Services by 8.7%
Inflation Adjustment Proposed for FAR, CAS Thresholds
DFARS Amendments Address Task Order Contracts
FY 2004 Federal Spending Hits $341.4 Billion
SBA Issues Revised STTR Guidance
Prompt Payment Interest Rate Set at 5 1/8%



SBA Increase Small Business Size Standards for
Service Industries by 8.7% to Adjust for Inflation

The Small Business Administration (SBA) is adjusting its monetary-based small business size standards for services to reflect 8.7% inflation since the last such adjustment was made in 2002 (see the February 2002 Federal Contracts Perspective article "SBA Increases Small Business Size Standards for Services"). This adjustment increases the "anchor" small business size standard (the one most common in service industries) by $500,000, from $6,000,000 to $6,500,000. The size standards that are other than $6,000,000 are increased by 8.7% and rounded off to the nearest $500,000. For example, the small business size standard for computer systems designed services under North American Industry Classification System (NAICS) code 541512 is increased from $21,000,000 to $23,000,000; the small business size standard for drycleaning and laundry services under NAICS code 812320 is increased from to $4,000,000 to $4,500,000.

SBA estimates that approximately 11,600 firms lost their small business status since 2002 because of inflation, and that most of these firms will regain their small business status as a result of this adjustment.

These size standard changes affect SBA's financial assistance programs, economic injury disaster loans, and procurement preference programs for small businesses (including 8(a) firms, small disadvantaged businesses, small businesses located in Historically Underutilized Business Zones (HUBZone), women-owned small businesses, veteran-owned small busineses, service disabled veteran-owned small businesses, and contracts awarded through full and open competition after application of the HUBZone or small disadvantaged business price evaluation preference or adjustment).

One of the primary reasons this size adjustment is being conducted three and one-half years after the 2002 adjustment instead of the statutorily-mandated five-year period is to provide immediate access to SBA's economic injury disaster loans to those businesses that would have been ineligible prior to Hurricanes Katrina, Rita, and Wilma based solely as a result of inflation that has occurred since 2002.

This rule applies to solicitations issued on or after January 5, 2006, with one exception: for noncompetitive 8(a) contracting actions, the new size standards apply to acquisitions offered by agencies for the 8(a) program that are accepted by SBA on or after January 5, 2006.

Comments on this interim rule must be submitted by January 5, 2006, identified by "RIN 3245-AF41," by any of the following methods: (1) through the Federal eRulemaking Portal at http://www.regulations.gov; (2) fax at 202-205-6390; or (3) mail/hand delivery/courier to Gary M. Jackson, Assistant Administrator for Size Standards, 409 3rd Street, SW, Mail Code, 6530, Washington, DC 20416.



Inflation Adjustment Proposed for FAR, CAS Thresholds

In another action that would make adjustments to compensate for inflation over the years, several acquisition-related thresholds would be increased as required by Section 807 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375), which requires that all statutory acquisition-related dollar thresholds in the FAR be adjusted for inflation every five years starting with 2005, except for the thresholds established by the Davis-Bacon Act, the Service Contract Act, or the various trade agreements (for more on Section 807, see the November 2004 Federal Contracts Perspective article "FY 2005 Defense Authorization Act Directs Review of GSA Procedures, Permits A-76 Protests by Feds").

The following are the most used thresholds that would be adjusted by this proposed rule:

However, the simplified acquisition threshold (FAR 2.101) of $100,000 would not be increased.

Comments on the proposed FAR threshold increases must be submitted by February 10, 2006, identified by "FAR case 2004-033 " by any of the following methods: (1) Federal eRulemaking Portal: http://www.regulations.gov; (2) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (3) e-mail: farcase.2004-033@gsa.gov; (4) fax: 202-501-4067; or (5) mail to: General Services Administration, Regulatory Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405.

In addition, the following Cost Accounting Standards (CAS) thresholds would be increased:

Comments on the proposed CAS threshold increases must be submitted by February 10, 2006, either by e-mail to casb2@omb.eop.gov or by fax to 202-395-5105.



DFARS Amendments Address Task Order Contracts

The Department of Defense (DOD) continues to revamp the Defense Federal Acquisition Regulation Supplement (DFARS) to simplify and update the text, and to make changes on a variety of subjects, including the length of task and delivery order contracts, and the removal of Morocco as a "designated country." In addition, DOD has issued a FAR class deviation exempting commercial foreign information technology from the provisions of the Buy American Act.



FY 2004 Federal Spending Hit $341.4 Billion

It took a while, but the Federal Procurement Data System (FPDS) finally got around to posting the final results for Fiscal Year (FY) 2004 spending, and the results show that the federal government spent $341.4 billion, an increase of 11.8% over the $305.5 billion spent in FY 2003.

The following are the largest agencies' FY 2004 spending totals (in billions) and the percentage change from FY 2003:

Defense$238.1+14.1%
Energy$22.1+4.7%
General Services Administration$13.8+60.5%
National Aeronautics and Space Administration$12.5+8.0%
Veterans Affairs$8.9-34.1%
Health and Human Services$8.2+15.5%
Homeland Security*$6.3--
Interior$4.4+2.3%
Justice$4.0-13.0%
Agriculture$4.0-20.0%
State$3.7+12.1%
Treasury$3.4+17.2%
Agency for International Development$1.7+3.2%
Labor$1.7+6.2%
Transportation$1.5-48.9%
Commerce$1.5+13.7%
Education$1.5+51.6%
Environmental Protection Agency$1.1+17.2%
Housing and Urban Development$0.9-4.9%
Social Security Administration$0.8+24.8%
Office of Personnel Management$0.5+47.3%
Miscellaneous Agencies$0.8-19.0%

* Came into existence January 24, 2003 -- FY 2003 partial year total was $3.5 billion.

The following states received the most federal contract money in FY 2004 (in billions). Their FY 2004 rank and dollar amount change are in parentheses, and the percentage change from FY 2003 is in the last column:

  1. California (1)$38.3 (+$3.0)+8.5%
  2. Virginia (2)$34.0 (+$0.4)+14.9%
  3. Texas (3)$27.2 (-$1.5)-5.2%
  4. Maryland (4)$19.3 (+$4.2)+27.8%
  5. District of Columbia (5)$13.1 (+$2.0)+18.0%
  6. Florida (6)$10.5 (+$0.4)+4.4%
  7. Arizona (8)$9.5 (+$1.2)+14.4%
  8. Connecticut (7)$9.3 (+$1.0)+12.2%
  9. Pennsylvania (12)$8.5 (+$1.2)+15.6%
10. Massachusetts (9)$8.5 (+$0.7)+9.6%


SBA Issues Revised STTR Guidance

The SBA has issued a new policy directive on the Small Business Technology Transfer (STTR) program to implement the Small Business Technology Transfer Program Reauthorization Act of 2001 (Public Law 107-50). The Reauthorization Act:

The STTR program is a three-phase program intended to stimulate a partnership of ideas and technologies between innovative small businesses and research institutions through federally-funded research or R&D. Phase I awards (no more than $100,000) are for the conduct of feasibility-related experimental or theoretical research/R&D related to described agency requirements. Phase II awards (no more than $750,000) continue Phase I work that show promise. Phase III awards continue work performed under Phases I and II, but they are funded by sources other than the STTR.

More information on the STTR program is available at http://www.sba.gov/sbir/indexsbir-sttr.html.



Prompt Payment Interest Rate Set at 5 1/8%

The Treasury Department has established 5 1/8% (5.125%) as the interest rate for the computation of payments made between January 1 and June 30, 2006, 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, 2005, through December 31, 2005), was 4 1/2% (4.5%). The interest rate for January 1, 2005, through June 30, 2005, was 4 1/4% (4.25%).

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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