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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

October 2006
Vol. VII, No. 10

CONTENTS

Micro-Purchase, Cost or Pricing Data,
8(a) Competition Thresholds Adjusted for Inflation

Federal Acquisition Circular (FAC) 2005-13 amends various acquisition-related thresholds for inflation as required by law every five years. In addition, FAC 2005-13 implements the Office of Management and Budget (OMB) policy on the use of brand name specifications; requires each agency to report to Congress on acquisitions of articles, materials, and supplies that are manufactured outside the United State; and finalizes several interim rules.

• Inflation Adjustment of Acquisition-Related Thresholds: This final rule adjusts acquisition-related thresholds for inflation as required every five years by the Section 807 of the Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375). (NOTE: Public Law 108-375 does not permit escalation of acquisition-related thresholds established by the Davis-Bacon Act, the Service Contract Act, or trade agreements. Furthermore, the statute does not authorize the escalation of thresholds established by an executive order or that implement agency regulations (such as those established by the Department of Labor or the Small Business Administration). For more on Section 807 of Public Law 108-375, 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 significant thresholds being adjusted:
  
  
  • The micro-purchase threshold (in FAR 2.101, Definitions) is increased from $2,500 to $3,000. However, the micro-purchase threshold for acquisitions subject to the Service Contract Act remains at $2,500, and the micro-purchase threshold for acquisitions subject to the Davis-Bacon Act remains at $2,000.
    
    
  • The Federal Procurement Data System (FPDS) reporting threshold (in FAR 4.602) is increased from $2,500 to $3,000.
    
    
  • The ceiling for the use of the commercial items test program (in FAR Subpart 13.5) is increased from $5,000,000 to $5,500,000.
    
    
  • The cost or pricing data threshold (in FAR 15.403-4) is increased from $550,000 to $650,000.
    
    
  • The threshold for requiring a prime contractor subcontracting plan (at FAR 19.702) is increased from $500,000 to $550,000. However, the threshold for construction contracts remains $1,000,000.
    
    
  • The 8(a) competition threshold (in FAR 19.805-1) is increased from $3,000,000 to $3,500,000 (from $5,000,000 to $5,500,000 for manufacturing).
    
    
  • The limitation on HUBZone sole source awards (in FAR 19.1306) is increased from $3,000,000 to $3,500,000 (from $5,000,000 to $5,500,000 for manufacturing).
    
    
  • The limitation on service-disabled veteran-owned small business sole source awards (in FAR 19.1406), is increased from $5,000,000 to $5,500,000 for manufacturing. The limitation for non-manufacturing remains $3,000,000.
  
  The simplified acquisition threshold remains unchanged at $100,000. The threshold is expected to be increased in 2010 when the next required adjustments will be made.
  
  Eight respondents submitted comments on the proposed rule. While no changes were made in response to the comments, some thresholds were revised because the inflation adjustment factors in the proposed rule were calculated using December 2004 data, and data through October 2005 was used for the final rule. Also, it was decided to address inflation adjustments of cost accounting standards (CAS) thresholds in a separate rule -- the proposed rule contained CAS threshold inflation adjustments. For more on the proposed rule, see the January 2006 Federal Contracts Perspective article "Inflation Adjustment Proposed for FAR, CAS Thresholds."
  
  
• Use of Brand Name Specifications: This interim rule implements Office of Management and Budget (OMB) policy on the use of brand name specifications -- those that "require a particular brand name, product, or a feature of a product, peculiar to one manufacturer" (FAR 11.105, Items Peculiar to One Manufacturer). Because of the increasing use of brand name specifications, which preclude consideration of a product manufactured by another company (particularly for information technology), OMB issued memoranda directing that brand name justifications be published with the solicitation. This rule implements OMB's policy as follows:
  
  
  • New paragraph (a)(6) of FAR 5.102, Availability of Solicitations, requires the contracting officer, when conducting an acquisition exceeding $25,000 that uses a brand name specification (including simplified and sole source acquisitions), to publish the justification with the solicitation on FedBizOpps (http://www.fedbizopps.gov) (see FAR 5.102 (a)(6)).
    
    
  • New paragraph (d) of FAR 8.405-6, Limited Sources Justification and Approval, requires the contracting activity, when placing a brand name order exceeding $25,000 against an Federal Supply Schedule (FSS) contract, to post the brand name justification and the request for quotations (RFQ) on e-Buy (http://www.ebuy.gsa.gov). Also, revised FAR 8.406-1, Order Placement, prohibits ordering activities from placing oral FSS orders over $25,000.
  
  Comments on this interim rule must be submitted by November 27, 2006, by any of the following methods: (1) eRulemaking Portal: http://www.regulations.gov/far; (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405. Identify such comments as "FAC 2005-13, FAR case 2005-037."
  
  
• Reporting of Purchases from Overseas Sources: This interim rule implements Section 837 of the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006 (Public Law 109-115), which requires each agency to submit a report to Congress on the dollar value of acquisitions made by the agency of articles, materials, or supplies that are manufactured outside the United States.
  
  The rule requires the inclusion of new FAR 52.225-18, Place of Manufacture, in solicitations that are predominantly for the acquisition of manufactured end products (that is, the estimated value of the manufactured end products exceeds the estimated value of other items to be acquired as a result of the solicitation). Offers are required to indicate whether the place of manufacture of the end products it expects to provide is predominantly in the United States (that is, the total anticipated price of offered end products manufactured in the United States exceeds the total anticipated price of offered end products manufactured outside the United States), or outside the United States. A corresponding requirement has been added to FAR 52.212-3, Offeror Representations and Certifications -- Commercial Items.
  
  Comments on this interim rule must be submitted by November 27, 2006, by any of the methods specified above. Identify such comments as "FAC 2005-13, FAR Case 2005-034."
  
  
• Online Representations and Certifications Application (ORCA) Archiving Capability: This interim rule requires prospective contractors to submit annual representations and certification through ORCA (https://orca.bpn.gov/) (see FAR Subpart 4.12, Annual Representations and Certifications). The rule adds paragraph (c) to FAR 4.1102, Policy [for Central Contractor Registration (CCR)], to permit contracting officers to "reference the date of ORCA verification in the associated government contract file, rather than including a paper copy of the electronically-submitted representations and certifications in the file. Such a reference satisfies contract file documentation requirements of [FAR] 4.803(a)(11) [Contents of Contract Files]." However, if an offeror identifies changes to its ORCA reps and certs that apply only to a particular solicitation (indicated in paragraph (c) of FAR 52.204-8, Annual Representations and Certifications, or paragraph (k) of FAR 52.212-3, Offeror Representations and Certifications -- Commercial Items), the contracting officer must include a copy of the changes in the contract file.
  
  This change is made because ORCA archives a contractor's representations and certifications by date, so contracting officers no longer need to file a paper copy of a contractor's representations and certifications in the contract file.
  
  Comments on this interim rule must be submitted by November 27, 2006, by any of the methods specified above. Identify such comments as "FAC 2005-13, FAR Case 2005-025."
  
  
• Information Technology Security: This finalizes, without changes, the interim rule that implemented information technology security provisions of the Federal Information Security Management Act of 2002 (FISMA), which requires that contractors be held accountable to the same security standards as government employees when collecting or maintaining information or using or operating information systems on behalf of an agency.
  
  Five respondents submitted comments on the interim rule, but none of the comments were adopted. For more on the interim rule, see the November 2005 Federal Contracts Perspective article "FAC 2005-06 Addresses IT Security, Cancels SDB Price Evaluation Adjustment for Civilian Agencies."
  
  
• Exception to the Buy American Act for Commercial Information Technology: This finalizes, without changes, the interim rule that amended FAR Part 25, Foreign Acquisition, to implement several annual appropriations act provisions that exempt acquisitions of information technology that are commercial items from the Buy American Act.
  
  Two respondents submitted comments on the interim rule, but none of the comments were adopted. For more on the interim rule, see the February 2006 Federal Contracts Perspective article "Performance-Based Acquisition Procedures Revised."
  
  
• Trade Agreements Thresholds: This finalizes, without changes, the interim rule that increased the thresholds for the World Trade Organization Government Procurement Agreement and the various free trade agreements. The thresholds are required to be adjusted every two years according to a pre-determined formula set forth in the agreements.
  
  No comments were received on the interim rule, so it is finalized without changes. For more on the interim rule, see the February 2006 Federal Contracts Perspective article "FAC 2005-08 Increases Trade Agreements Thresholds."

More Changes to Lobbying Restrictions Proposed

The FAR Council is proposing to amend FAR Subpart 3.8, Limitation on the Payment of Funds to Influence Federal Transactions, and FAR 52.203-11, Certification and Disclosure Regarding Payments to Influence Certain Federal Transactions, to implement statutory changes since the enactment of the Byrd Amendment and to increase the use of plain language.

The Byrd Amendment was enacted in 1989 as Section 319 of the Department of Interior and Related Agencies Appropriations Act (Public Law 101-121). It prohibits the recipients of federal contracts, grants, loans and cooperative agreements from using appropriated funds for lobbying the executive or legislative branches of the federal government in connection with a specific contract, grant, loan or cooperative agreement. Also, it requires those who receive a federal contract, grant, or cooperative agreement in excess of $100,000, or a loan or federal commitment to insure or guarantee a loan, in excess of $150,000, to disclose lobbying with other than appropriated funds. Approximately 300 disclosures are received annually from states, local governments, non-profit organizations, individuals, and businesses.

In 1990, an interim rule was published that implemented the Byrd Amendment by adding FAR Subpart 3.8 and FAR 52.203-11. This interim rule was not finalized until 2005 (see the November 2005 Federal Contracts Perspective article "FAC 2005-06 Addresses IT Security, Cancels SDB Price Evaluation Adjustment for Civilian Agencies"). The final rule made minor corrections to the interim rule, but it was recognized that additional analysis needed to be conducted to determine if further changes were required based on developments since 1990, particularly the enactment of the Lobbying Disclosure Act of 1995, which simplified the disclosure and reporting requirements of the Byrd Amendment.

The Lobbying Disclosure Act requires the recipient ("the contractor and all subcontractors") to identify the name of any lobbyist who has made lobbying contacts on behalf of the person, but the recipient is not required to provide information on amounts paid or descriptions of services performed, including identification of who was contacted.

This proposed rule would amend FAR Subpart 3.8 and FAR 52.203-11 to implement the Lobbying Disclosure Act and OMB guidance on compliance with the Byrd Amendment and the act, but the rule consists primarily of clarifications, plain language changes, FAR drafting conventions, and editorial corrections.

Comments on the proposed rule must be submitted by November 13, 2006, by any of the following methods: (1) eRulemaking Portal: http://www.regulations.gov/far; (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405. Identify such comments as "FAC 2005-13, FAR case 2005-035."

DOD Restricts Use of "Tiered Evaluations"

The Department of Defense (DOD) has amended the DOD FAR Supplement (DFARS) to limit the use of a procedure called "tiered evaluation of offers" for contracts and for task or delivery orders under contracts. In addition, the DFARS is amended to update the text on acquisition planning, to prohibit the acquisition of items on the United States Munitions List from Communist Chinese military companies, and to require that contractor personnel who interact with detainees receive training regarding the applicable international obligations and laws of the United States.

• Limitations on Tiered Evaluation of Offers: This interim rule implements Section 816 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163) to prescribe guidance on the use of tiered evaluation of offers for contracts and for task or delivery orders under contracts. This procedure is sometimes called "cascading evaluation of offers," in which the contracting officer solicits and receives offers from all types of businesses at the same time, but considers each category of offers in a designated order of precedence, or "tiers." Whenever there is adequate competition at a tier, the contracting officer stops at that tier and mades award. If there is insufficient competition at a tier, any otherwise acceptable offer "cascades" to the next lower tier. For example, the solicitation might specify that 8(a) offers will be considered first; if there is insufficient competition among 8(a) firms, all other small business offers will be considered next; if there is insufficient competition among small businesses, then all large business offers will be considered. Congress was very concerned that this procedure induces small businesses to incur costs preparing proposals that might not be considered for award.
  
  DFARS 213.106-1-70, Soliciting Competition -- Tiered Evaluation of Offers, and DFARS 215.203-70, Requests for Proposals -- Tiered Evaluation of Offers, are added, and they both prohibit the used of tiered evaluation of offers unless the contracting officer: (1) has conducted market research in accordance with FAR Part 10, Market Research; (2) is unable to determine whether or not a sufficient number of qualified small businesses are available to justify limiting competition for the contract or order; and (3) includes in the contract file a written explanation of why the contracting officer was unable to make the determination.
  
  Comments on the interim rule must be submitted no later than November 8, 2006, identified as "DFARS Case 2006-D009," by any of the following methods: (1) eRulemaking Portal: http://www.regulations.gov; (2) e-mail: dfars@osd.mil; (3) fax: 703-602-0350; (4) mail to: Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; or (5) hand delivery or courier to: Defense Acquisition Regulations System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402.
  
  For more on the acquisition-related provisions of Public Law 109-163, see the February 2006 Federal Contracts Perspective article "2006 Defense Authorization Addresses A-76, Consolidates Civilian Boards of Contract Appeals."
  
  
• Acquisition Planning: This final rule updates DFARS Subpart 207.1, Acquisition Plans, by:
  
  
  • Amending DFARS 207.103, Agency-Head Responsibilities, to increase the dollar thresholds for preparation of written acquisition plans from $5,000,000 to $10,000,000 for development; from $30,000,000 to $50,000,000 for total program costs; and from $15,000,000 to $25,000,000 for any one fiscal year's program costs; and make the acquisition planning requirements consistent with the DOD 5000 series of publications on the DOD acquisition system.
    
    
  • Deleting DFARS 207.102, Policy, and DFARS 207.104, General Procedures, because they are unnecessary.
    
    
  • Deleting DFARS 207.105, Contents of Written Acquisition Plans, and relocating the text to Procedures, Guidance, and Information (PGI) 207.105, Contents of Written Acquisition Plans (for more on the PGI, see the December 2004 Federal Contracts Perspective article "DFARS Transformation in Full Gear, 'Procedures, Guidance, and Information' Added").
  
  No responses were received on the proposed rule, so it is finalized with minor editorial changes. For more on the proposed rule, see the October 2005 Federal Contracts Perspective article "RFID Requirements Included in DFARS."
  
  
• Prohibition on Acquisition from Communist Chinese Military Companies: This interim rule implements Section 1211 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163), which prohibits DOD from acquiring goods or services from a Communist Chinese military company if the goods or services being acquired are on the United States Munitions List (USML) maintained by the Department of State. (EDITOR'S NOTE: The USML is part of the International Traffic in Arms Regulations (ITAR). The ITAR is available at http://www.pmdtc.org/itar_index.htm, and the USML is Part 121 of the ITAR.)
  
  This rule implements Section 1211 by adding DFARS 225.770, Prohibition on Acquisition of United States Munitions List Items from Communist Chinese Military Companies, and the corresponding clause at DFARS 252.225-7007. These define a Communist Chinese military company as "(1) a part of the commercial or defense industrial base of the People's Republic of China; or (2) owned or controlled by, or affiliated with, an element of the government or armed forces of the People's Republic of China," and prohibits the acquisition of "supplies or services covered by the United States Munitions List (USML) (22 CFR Part 121), through a contract or subcontract at any tier, from any Communist Chinese military company. This prohibition does not apply to components and parts of covered items unless the components and parts are themselves covered by the USML" (DFARS 225.770-2, Prohibition). However, supplies or services acquired "(a) in connection with a visit to the People's Republic of China by a vessel or an aircraft of the U.S. armed forces; (b) for testing purposes; or (c) for the purpose of gathering intelligence" are exempt (DFARS 225.770-3, Exceptions), and the prohibition may be waived by the military department secretaries, the Under Secretary of Defense (Acquisition, Technology, and Logistics), and the Component Acquisition Executive of the Defense Logistics Agency (DFARS 225.770-5, Waiver of Prohibition).
  
  Comments on the interim rule must be submitted on or before November 7, 2006, identified as "DFARS Case 2006-D007," by any of the methods specified above.
  
  
• Training for Contractor Personnel Interacting with Detainees: This finalizes, with changes, the interim rule that added DFARS 237.171, Training for Contractor Personnel Interacting with Detainees, and the corresponding contract clause at DFARS 252.237-7019 to require that DOD contractor personnel who interact with detainees receive training regarding the applicable international obligations and laws of the United States.
  
  One industry association submitted comments on the interim rule. Because of those comments, several clarifying changes have been made, such as changing "individuals detained by DOD on behalf of the U.S. government" to "detainees," and changing "acknowledge receipt of the training" to "provide a copy of the training receipt document to the contractor." For more on the interim rule, see the October 2005 Federal Contracts Perspective article "RFID Requirements included in DFARS."

Direct-Hire Authority for Acquisition Positions Approved

The Office of Personnel Management (OPM) has finalized regulations authorizing non-DOD agencies to recruit and appoint highly qualified individuals for certain federal acquisition positions deemed a shortage category under Section 1413 of the Services Acquisition Reform Act (Public Law 108-136). This "direct-hire" authority expires September 30, 2007. It is addressed in Title 5 of the Code of Federal Regulations (CFR); Part 337, Examining System; Sections 337.204, Severe Shortage of Candidates (5 CFR 337.204), and 337.206, Terminations, Modifications, Extensions, and Reporting (5 CFR 337.206).

To use this authority, the head of the agency must determine that a shortage of highly qualified acquisition candidates exists. In doing so, the head of the agency must use the following supporting evidence and maintain a file of that supporting evidence:

• The results of workforce planning and analysis.
  
  
• Employment trends including the local or national labor market.
  
  
• The existence of nationwide or geographic skills shortages.
  
  
• Agency efforts, including recruitment initiatives, use of other appointing authorities (for example, schedule A, schedule B) and flexibilities, training and development programs tailored to the position, and an explanation of why these recruitment and training efforts have not been sufficient.
  
  
• The availability and quality of candidates.
  
  
• The desirability of the geographic location of the position.
  
  
• The desirability of the duties and/or work environment associated with the position.
  
  
• Other pertinent information, such as selective placement factors or other special requirements of the position, as well as agency use of hiring flexibilities such as recruitment or retention allowances or special salary rates.
  
  

Also, agencies must comply with public notice requirements by posting job announcements on OPM's USAJOBS website (http://www.usajobs.gov).

Equal Opportunity Survey Rescinded

The Office of Federal Contract Compliance Programs (OFCCP) has concluded that the Equal Opportunity (EO) Survey, which was originally promulgated in 2000, does not provide value to either OFCCP enforcement or contractor compliance, so it is discontinuing the EO Survey and removing 41 CFR 60-2.18, Equal Opportunity Survey, which required "a substantial portion of all nonconstruction contractor establishments" to submit a new survey each year (OFCCP interpreted "a substantial portion" to mean "half"). The EO Survey contained information about personnel activities, compensation and tenure data, and certain information about the contractor's affirmative action program.

OFCCP had two studies conducted, and they concluded the EO Survey was not a good predictor of noncompliance that would assist OFCCP in targeting those contractors engaging in systemic discrimination -- they found its predictive power to be only slightly better than chance.

OFCCP published a notice of proposed rulemaking on January 20, 2006, and 2,736 comments were submitted in response: 1,707 comments (62%) supported the proposal to discontinue the EO Survey, and 1,029 comments (38%) opposed the proposal. OFCCP concluded that the rescission of the EO Survey would allow it to "better direct its resources for the benefit of victims of discrimination, the government, contractors, and taxpayers."

Federal Awards Website Approved

On September 26, President Bush signed Public Law 109-282, the Federal Funding Accountability and Transparency Act of 2006, which requires, by January 1, 2008, the establishment of a single searchable website, accessible by the public at no cost, that includes information on all contracts, subcontracts, purchase orders, task orders, delivery orders, grants, subgrants, loans, cooperative agreements, and other forms of financial assistance that exceed $25,000. The website is to contain data for fiscal year 2007 and all awards in subsequent years. Individual recipients of federal assistance and federal employees are exempt from inclusion.

Data on contracts will be obtained from the Federal Procurement Data System -- Next Generation (FPDS-NG) (https://www.fpds.gov/). However, data on grants will be more problematic because there is no standard reporting system currently in existence. The legislation says that the new website may use the data in Grants.gov (http://www.Grants.gov) and the Federal Assistance Award Data System (FAADS) (http://www.census.gov/govs/www/faads.html), but the data in those databases is considered incomplete, and the data is not in a standardized format, making it difficult to use.

The website is to provide the following information on each "federal award":

• The name of the entity receiving the award.
  
  
• The amount of the award.
  
  
• Information on the award, including transaction type, funding agency, the North American Industry Classification System (NAICS) code or Catalog of Federal Domestic Assistance number; program source; and award title descriptive of the purpose of the funding action.
  
  
• Location of the entity receiving the award and the primary location of performance.

Nonmanufacturer Rule for Plastic Pallets Waived

The Small Business Administration (SBA) is waiving the nonmanufacturer rule for plastics pallets (twin sheet thermoformed) under North American Industry Classification System (NAICS) code 326199, product number 4141.

In August 2006, SBA published a notice of intent to waive the nonmanufacturer rule because SBA was unaware of any small businesses supplying that class of products. No comments were received in response to the notice, so SBA is waiving the nonmanufacturer rule for plastics pallets.

See 13 CFR 121.1202, When Will a Waiver of the Nonmanufacturer Rule 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.

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