FedGovContracts.com

Panoptic Enterprises'

FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

January 2006
Vol. VII, No. 1

CONTENTS

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:

• The micro-purchase threshold (FAR 2.101, Definitions) would be increased from $2,500 to $3,000.
  
  
• The Federal Procurement Data System reporting threshold (paragraph (c) of FAR 4.602, Federal Procurement Data System) would be increased from $2,500 to $3,000.
  
  
• The commercial items test program ceiling (paragraph (a) of FAR 13.500, General) would be increased from $5,000,000 to $5,500,000.
  
  
• The cost and pricing data threshold (paragraph (a)(1) of FAR 15.403-4, Requiring Cost or Pricing Data) would be increased from $550,000 to $600,000.
  
  
• The prime contractor subcontracting plan floor (paragraphs (a)(1) and (a)(2) of FAR 19.702, Statutory Requirements) would be increased from $500,000 to $550,000, but the $1,000,000 floor for construction would remain unchanged.

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:

• For contract applicability, from $500,000 to $550,000.
  
  
• For applicability to a business unit, from $7,500,000 to $8,500,000.
  
  
• For waiver authority, from $15,000,000 to $17,000,000.
  
  
• For full coverage, from $50,000,000 to $56,500,000.
  
  
• For disclosure statement submissions by a company (other than educational institutions), from $50,000,000 to $56,500,000.
  
  
• For disclosure statement submissions by a segment of a company, from $10,000,000 to $11,500,000.
  
  
• For disclosure statement submissions by an educational institutions, from $25,000,000 to $28,300,000.

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.

• Contract Period for Task and Delivery Order Contracts: This finalizes, with changes, the interim rule that implemented Section 843 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136) and Section 813 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law 109-375). Section 843 placed a 5-year limit on the period of defense task or delivery order contracts, but Section 813 permitted the exercise of one or more options to extend the task or delivery order contract period up to a total of 10 years, and further if the head of the agency determines that exceptional circumstances require a longer period.
  
  A first interim rule implemented Section 843 by amending DFARS Subpart 216.5, Indefinite-Delivery Contracts, and DFARS Subpart 217.2, Options (see the April 2004 Federal Contracts Perspective article "DFARS Limits Task/Delivery Order Contracts to Five Years"), and a second interim rule implemented Section 813 by amending DFARS 217.204, Contracts (see the January 2005 Federal Contracts Perspective article "DFARS Changes Address Task Order Contract Limit"). This final rule amends paragraph (e) of DFARS 217.204 to clarify that (1) the restrictions on the task and delivery order contract period apply to contracts for information technology (Federal Acquisition Regulation (FAR) 17.204(e) specifically exempts information technology contracts from the 5-year limitation); and (2) to specify that DOD must submit a report to Congress, annually through fiscal year 2009, when an ordering period is extended beyond 10 years.
  
  
• Foreign Acquisition: This final rule adopts, with changes, the proposed rule that would delete redundant and unnecessary language throughout DFARS Part 225, Foreign Acquisition, and make several additional clarifying changes (see the April 2005 Federal Contracts Perspective article "Acquisition Functions Addressed in DFARS Changes").
  
  The final rule adopts the text that was added to DFARS 225.7301, General [for Foreign Military Sales (FMS)], by the September 30, 2005, interim rule on foreign taxation of U.S. assistance programs ("See [DFARS] 229.170 [Reporting of Foreign Taxation on U.S. Assistance Programs] for policy on contracts financed under U.S. assistance programs that involve payment of foreign country value added taxes or customs duties") (see the November 2005 Federal Contracts Perspective article "Procedures for Billing and Payment Improved in DFARS").
  
  In addition, the text proposed for addition to paragraph (c) of DFARS 225.802-70, Contracts for Performance Outside the United States and Canada, that would have addressed work performed in Germany, has been excluded from this final rule because the text was added to DFARS 225.7401, General [for defense contractors outside the U.S.], as paragraph (b) by the final rule published on May 5, 2005 (see the June 2005 Federal Contracts Perspective article "DFARS Addresses Task Orders Against Non-DOD Contracts").
  
  
• Free Trade Agreements -- Australia and Morocco: This final rule adopts, with changes, the interim rule that amended DFARS Part 225 and the corresponding clauses in DFARS Part 252 to implement the Australian and Moroccan Free Trade Agreements (FTAs). This interim rule was issued soon after the FAR was amended to implement the Australian and Moroccan FTAs (see the February 2005 Federal Contracts Perspective article "FAC 2001-27 Implements Australian and Moroccan Free Trade Acts, Creates Table of Excluded Services"). The Australian and Moroccan FTAs were scheduled to go into effect January 1, 2005, but the U.S. Trade Representative has informed DOD that the Moroccan FTA has not yet entered into force, so Morocco removed from the definition of "designated country" in paragraph (a)(3)(ii) of DFARS 252.225-7021, Trade Agreements, and paragraph (a) of DFARS 252.225-7045, Balance of Payments Program -- Construction Material Under Trade Agreements.
  
  In addition, for consistency with the FAR, the definition of "eligible product" in paragraph (5) of DFARS 225.003, Definitions, is amended to include foreign construction material.
  
  
• Socioeconomic Programs: This adopts as final, without changes, the proposed rule that would redesignate DFARS Subpart 226.70, Historically Black Colleges and Universities and Minority Institutions, as DFARS Subpart 226.3 to be consistent with the location of the corresponding FAR policy; and delete DFARS Subpart 226.72, Base Closures and Realignments, because it duplicates text found elsewhere in the DFARS.
  
  For more on the proposed rule, see the May 2005 Federal Contracts Perspective article "DFARS Transformation Momentum Builds."
  
  
• Environment, Occupational Safety, and Drug-Free Workplace: This adopts as final, without changes, the proposed rule that would (1) relocate DFARS 211.271, Elimination of Use of Class I Ozone-Depleting Substances, to DFARS Subpart 223.8, Ozone-Depleting Substances; (2) retitle DFARS Part 223 "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; and (3) delete the following 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; DFARS 223.570-1, Definitions [used in DFARS Subpart 223.5, Drug-Free Workplace]; and DFARS 223.570-3, General.
  
  For more on the proposed rule, see the May 2005 Federal Contracts Perspective article "DFARS Transformation Momentum Builds."
  
  
• Contract Financing: This adopts as final, with minor editorial changes, the proposed rule that would amend DFARS Part 232, Contract Financing, to update its text and to delete unnecessary or redundant language, and transfer several portions of DFARS Part 232 to the DFARS companion document, the "Procedures, Guidance, and Information" (PGI), which consists of 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").
  
  For more on the proposed rule, see the June 2005 Federal Contracts Perspective article "DFARS Addresses Task Orders Against Non-DOD Contracts."
  
  
• Technical Amendment: This amends DFARS 213.301, Governmentwide Commercial Purchase Card, to add a reference to guidance on DOD's purchase, travel, and fuel card programs (http://www.acq.osd.mil/dpap/pcard/pcardguidebook.htm).
  
  
• Contract Pricing and Cost Accounting Standards: This proposed rule would update text addressing contract pricing matters and cost accounting standards administration as follows:
  
  
  • Add text to DFARS 215.403-1, Prohibition on Obtaining Cost or Pricing Data, and DFARS 230.201-5, Waiver [of cost accounting standards] to implement Section 817 of the National Defense Authorization Act for Fiscal Year 2003 (Public Law 107-314), which requires that guidance be issued on when it is appropriate to grant a waiver to cost or pricing data certification requirements and waivers of cost accounting standards. The guidance is to state that such waivers may be granted only when: (1) the property or services cannot reasonably be obtained under the contract, subcontract, or modification without the grant of the exception or waiver; (2) the price can be determined to be fair and reasonable without the submission of certified cost and pricing data or the application of cost accounting standards; and (3) there are demonstrated benefits to granting the exception or waiver. For more on Section 817, see the January 2003 Federal Contracts Perspective article "2003 Defense Authorization Act Limits Task Orders, Extends FAR Subpart 13.5 Until January 1, 2004."
    
    
  • Eliminate some material from DFARS Subpart 230.70, Facilities Capital Employed for Facilities in Use, and DFARS Subpart 230.71, Facilities Capital Employed for Facilities Under Construction, and transfer other material from those two subparts to DFARS 215.404-4, Profit, or DFARS 215.404-73, Alternate Structured Approaches, respectively, because the material pertains to the calculation of weighted guidelines for profit, and not cost accounting standards.
    
    
  • Relocate much of DFARS Subpart 215.4, Contract Pricing, to the PGI (http://www.acq.osd.mil/dpap/dars/pgi) because it is not regulatory, but rather instructions, information, and guidance.
  
  Comments on the proposed rule must be submitted by February 21, 2006, to: (a) http://www.regulations.gov; (b) http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm; (c) e-mail: dfars@acq.osd.mil (include "DFARS Case 2003-D014" in the subject line of the message); (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.
  
  
• Required Sources of Supply: This proposed rule would update the text in DFARS Part 208, Required Sources of Supplies and Services, and corresponding clauses, to address acquisitions made through government supply sources as follows:
  
  
  • Delete the information text on GSA Federal Supply Schedules from DFARS 208.002, Priorities for Use of Government Supply Sources. All that would remain are cross-references to DFARS Subpart 208.70, Coordinated Acquisition, and DFARS Subpart 208.74, Enterprise Software Agreements.
    
    
  • Delete DFARS 208.003, Use of Other Government Supply Sources, which addresses the Defense National Stockpile and the acquisition of helium. These are adequately addressed in FAR 8.003 and FAR Subpart 8.5, Acquisition of Helium.
    
    
  • Delete DFARS Subpart 208.72, Industrial Preparedness Production Planning, because this program no longer exists.
    
    
  • Relocate to the PGI text pertaining to: (1) ordering from central nonprofit agencies (DFARS Subpart 208.7, Acquisition from the Blind and Other Severely Handicapped); (2) acquisitions under the DOD Coordinated Acquisition Program (DFARS Subpart 208.70, Coordinated Acquisition, and DFARS Appendix B, Coordinated Acquisition Assignments); (3) contracting or performing field service functions for NASA (DFARS Subpart 208.71, Acquisition for National Aeronautics and Space Administration (NASA); (4) use of the DOD Precious Metals Recovery Program (DFARS Subpart 208.73, Use of Government-Owned Precious Metals); (5) use of enterprise software agreements for acquiring commercial software and related services (DFARS Subpart 208.74, Enterprise Software Agreements); and (6) instructions on preparation and use of the DD Form 448, Military Interdepartmental Purchase Request (DFARS 253.208-1).
  
  Comments on the proposed rule must be submitted by February 7, 2006, by any of the methods mentioned above (except include "DFARS Case 2003-D072" in the subject line of e-mail responses).
  
  
• Restriction on Carbon, Alloy, and Armor Steel Plate: This proposed rule would clarify the restriction on the acquisition of foreign carbon, alloy, or armor steel plate in DFARS 225.7011, Restriction on Carbon, Alloy, and Armor Steel Plate, and the corresponding clause at DFARS 252.225-7030.
  
  DFARS 225.7011-1, Restriction, currently states "do not acquire any of the following types of carbon, alloy, or armor steel plate unless it is melted and rolled in the United States or Canada..." This proposed rule would amend this statement to read "do not acquire any of the following types of carbon, alloy, or armor steel plate as a raw material for use in a government-owned facility or a facility under the control of (e.g., leased by) DOD, unless it is melted and rolled in the United States or Canada..." A similar change would be made to DFARS 252.225-7030.
  
  Comments on the proposed rule must be submitted by February 7, 2006, by any of the methods mentioned above (except include "DFARS Case 2005-D002" in the subject line of e-mail responses).
  
  
• Class Deviation -- Exemption from Limitations on Procurement of Foreign Information Technology that is a Commercial Item for Fiscal Year 2006: To implement Section 717 of the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act for Fiscal Year 2006 (Public Law 109-115), Acting Director of Defense Procurement and Acquisition Policy Domenic C. Cipicchio issued a class deviation exempting acquisitions of foreign information technology using FY 2006 funds from the provisions of the Buy American Act (see FAR Subpart 25.1). The deviation is effective from December 9, 2005, until its provisions are incorporated into the DFARS, or the deviation is rescinded.

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:

* 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:

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:

• Extended the STTR Program through September 30, 2009.
  
  
• Required the establishment of an STTR program database, which is the Tech-Net Database System (http://tech-net.sba.gov).
  
  
• Required participating agencies (those with research/research & development (R&D) budgets of more than $1 billion: the Departments of Defense, Energy, and Health and Human Services; NASA; and the National Science Foundation) to increase the amount of their extramural budget to be reserved for the STTR Program from 0.15% to 0.3%.
  
  
• Permits agencies to increase the value of STTR Phase II awards from $500,000 to $750,000.
  
  
• Permits agencies to approve a performance period shorter or longer than the standard one year for Phase I awards and two years for Phase II awards, where appropriate.

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.

Return to the Newsletters Library.

Return to the Main Page.