Panoptic Enterprises'


Federal Acquisition Developments, Guidance, and Opinions

April 2006
Vol. VII, No. 4


DFARS Rules Finalized on Contract Consolidations, Component Breakout, Task Order Competitions
USDA Designates Six Biobased Products for Procurement
FAR to Address Termination of Purchase Orders
OMB Releases First Set of FY 2005 FAIR Act Inventories
More Nonmanufacturer Waivers Considered, One Denied
EPA Proposes Financing for Simplified Acquisitions

DFARS Rules Finalized on Contract Consolidations,
Component Breakout, Task Order Competitions

The Department of Defense (DOD) conducted a little spring cleaning in March of the Defense Federal Acquisition Regulation Supplement (DFARS) by finalizing four interim rules and three proposed rules. Also, DOD published two new proposed rules on electronic submission of payment requests and government property reporting.

USDA Designates Six Biobased Products for Procurement

The U.S. Department of Agriculture (USDA) is designating the first six "biobased items" (actually, generic groupings of biobased products) that must be given preference in government purchases: mobile equipment hydraulic fluids; roof coatings; water tank coatings; diesel fuel additives; penetrating lubricants; and bedding, bed linens, and towels. Also, the USDA is establishing minimum biobased content for each of these items.

Once USDA designates an item for preferred procurement under the Federal Biobased Products Preferred Procurement Program (FB4P), contracting activities are required to purchase those biobased products if the purchase price of the item exceeds $10,000 or the quantity of such items or of functionally equivalent items purchased during the preceding fiscal year equaled $10,000 or more. However, agencies may decide not to procure such items if they are not reasonably priced or readily available, or do not meet specified or reasonable performance standards.

Manufacturers of all products within a "biobased item" that meet the qualification requirements for preferred procurement can claim that status for their products, and they will be invited to post information on the product, contacts, and performance testing on its FB4P Web site, http://www.biobased.oce.usda.gov. However, two of these items (water tank coatings and bedding, bed linens, and towels) have only a single supplier of biobased products, so USDA is deferring the effective date for those items until at least two suppliers are making these items. The effective date for the other four items is March 16, 2007.

These are the first in a series of designated biobased items. USDA has identified about 150 items that could become biobased items, and it is collecting test data needed to make that determination.

Among the six biobased items are three that may overlap with Environmental Protection Agency (EPA)-designated recovered content products: mobile equipment hydraulic fluids, roof coatings, and penetrating lubricants. Products under these three items may overlap with lubricating oils containing re-refined oil and recovered content roofing materials, depending on how these products are to be used.

Where a biobased item is used for the same purposes and to meet the same requirements as an EPA-designated recovered content product, the agency must purchase the recovered content product. For example, if a biobased hydraulic fluid is to be used as a fluid in hydraulic systems and because "lubricating oils containing re-refined oil" has already been designated by EPA for that purpose, then the agency must purchase the EPA-designated recovered content product. However, if that biobased hydraulic fluid is to be used to address certain environmental or health requirements that the EPA-designated recovered content product would not meet, then the biobased product should be given preference, subject to cost, availability, and performance. (EDITOR'S NOTE: For more on the EPA-designated recovered content products, see the "Comprehensive Procurement Guidelines" website at http://www.epa.gov/cpg/index.htm.)

The process USDA uses to designate biobased items is in Title 7 of the Code of Federal Regulations (CFR), Part 2902, Guidelines for Designating Biobased Products for Federal Procurement. For more on the regulations, see the February 2005 Federal Contracts Perspective article "USDA Publishes Biobased Products Guidelines."

Each of these six items is addressed in a new section in 7 CFR Part 2902: sections 2902.10 through 2902.15. Each section contains a definition of the item, the minimum biobased content that the product must contain to qualify as biobased, the preference effective date, and exceptions.

For more on the proposal to designate these six biobased items, see the August 2005 Federal Contracts Perspective article "Agriculture Proposes Six Biobased Items."

FAR to Address Termination of Purchase Orders

A proposal has been published to amend Federal Acquisition Regulation (FAR) 13.302-4, Termination or Cancellation of Purchase Orders, to correct the inadvertent omission of language addressing the termination for cause of commercial purchase orders.

Currently, FAR 13.302-4(a) states, "If a purchase order that has been accepted in writing by the contractor is to be terminated, the contracting officer shall process the termination in accordance with -- (1) [FAR] 12.403(d) [Termination] and [FAR] 52.212-4(l) [Contract Terms and Conditions -- Commercial Items] for commercial items..." Both FAR 12.403(d) and FAR 52.212-4(l) address termination for convenience. Before the 1998 rewrite of FAR Part 13, Simplified Acquisition Procedures, FAR Part 13 identified both termination for cause ("in the event of any default by the contractor, or if the contractor fails to comply with any contract terms and conditions, or fails to provide the government, upon request, with adequate assurances of future performance") as well as termination for convenience as the methods available to contracting officers. Furthermore, FAR 12.403 permits the government to terminate a contract for commercial items either for convenience or for cause regardless of dollar value or the method used to procure the commercial item. Therefore, this proposed rule would amend FAR 13.302-4(a) by deleting the reference to paragraph (d) of FAR 12.403 and adding a reference to FAR 52.212-4(m), which addresses terminations for cause. The revised FAR 13.302-4(a)(1) would state, "[FAR] 12.403 and [FAR] 52.212-4(l) or (m) for commercial items..."

In addition, FAR 13.302-4(b)(2), which currently states, "If the contractor does not accept the cancellation or claims that costs were incurred as a result of beginning performance under the purchase order, the contracting officer shall process the termination action as prescribed in paragraph (a) of this subsection" would be revised to read "...the contracting officer shall process the action as a termination prescribed in paragraph (a) of this subsection." It is believed that this language is clearer than the current language.

Comments on the proposed change must be submitted by May 22, 2006, identified by "FAR case 2005-029" 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.2005-029@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.

OMB Releases First Set of FY 2005 FAIR Act Inventories

On March 14, the Office of Management and Budget (OMB) released the first set of Fiscal Year 2005 Commercial Activities Inventories of non-governmental functions being performed by government agencies. These inventories are required to be compiled and made available to the public by the Federal Activities Inventory Reform (FAIR) Act of 1998. Inventories in this first set are from the Departments of Defense, Education, Energy, Health and Human Services, Housing and Urban Development, Interior, Justice, Labor, State, Transportation, and Treasury; the Environmental Protection Agency, the National Aeronautics and Space Administration; the Small Business Administration; the Social Security Administration; the U.S. Agency for International Development; and several small agencies and commissions.

Interested parties have 30 working days from March 14 (that is, until April 25) to challenge the omission or inclusion of an activity on an agency's Commercial Activities Inventories list.

The Office of Federal Procurement Policy has made available a FAIR Act User's Guide at http://www.whitehouse.gov/OMB/procurement/fair-index.html to help interested parties review FY 2005 FAIR Act inventories.

More Nonmanufacturer Waivers Considered, One Denied

The Small Business Administration (SBA) is considering waiving the nonmanufacturer rule for the following industries because no small business manufacturers are supplying these classes of products to the federal government:

Comments on the proposed waivers, or the identification of small businesses that provide these classes of products, must be submitted no later than March 24, 2006, for chemical and allied products, and March 29, 2006, for ophthalmic lenses manufacturing, to Edith Butler, Program Analyst, by telephone at 202-619-0422; by fax at 202-481-1788; or by e-mail to edith.butler@sba.gov.

Also, SBA is terminating the proposed nonmanufacturer rule waiver for water treatment chemicals under NAICS codes 325188 and 325199. SBA was unaware of any small businesses supplying that class of products to the federal government, so it proposed issuing a nonmanufacturer rule waiver (see the February 2006 Federal Contracts Perspective article "Nonmanufacturer Waiver Proposed for Water Chemicals"). However, SBA recently discovered the existence of several small business manufacturers that have provided those products to the government, so SBA is terminating the proposed waiver.

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 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.

EPA Proposes Financing for Simplified Acquisitions

The Environmental Protection Agency (EPA) is proposing to amend the EPA Acquisition Regulation (EPAAR) to implement a procedure for financing purchases or commercial items made under simplified acquisition procedures. This proposed EPAAR revision will add a prescription and clause for contracting officers to use when approving advance or interim payments that are appropriate or customary in the commercial marketplace.

EPAAR 1532.003, Simplified Acquisition Procedures Financing, would be added. It would (1) permit contracting officers to authorize use of advance and interim payments at or below the micro-purchase threshold; (2) require approval at one level above the contracting officer, on a case-by-case basis, for advance and interim payments on orders for commercial items exceeding the micropurchase threshold and not exceeding the simplified acquisition threshold; (3) require the contracting officer to document the file with supporting rationale demonstrating that the purchase meets the conditions of paragraphs (b)(1), (b)(3), and (b)(4) of FAR 32.202-1, Policy [on Commercial Item Purchase Financing]: (b)(1) the item being financed is a commercial supply or service; (b)(3) the contracting officer determines it is appropriate or customary in the commercial marketplace to make financing payments for the item; and (b)(4) the financing is in the best interest of the government; and (4) require that EPAAR 1552.232-74, Payments -- Simplified Acquisition Procedures Financing, be included in solicitations and orders that will provide such financing. EPAAR 1552.232-74 would require the contracting officer to identify the type of financing being authorized (advance (prior to performance) and/or interim (according to payment schedule)), and to specify the payment schedule.

Comments on the proposed rule must be submitted no later than May 12, 2006, identified as "Docket ID No. OARM-2006-0126," by any of the following methods: (1) eRulemaking Portal: http://www.regulations.gov; (2) http://www.epa.gov/edocket (the preferred method); (3) e-mail: oei.docket@epa.gov; or (4) mail to: EPA Docket Center, Environmental Protection Agency, Mailcode: 28221T, 1200 Pennsylvania Ave., NW., Washington, DC 20460.

For further information, contact Tiffany Schermerhorn, 202-564-9902; e-mail: schermerhorn.tiffany@epa.gov.

EDITOR'S NOTE: Though EPA insists "the EPAAR changes are consistent with the Federal Acquisition Regulation," it is interesting to note that one condition for use of financing, specified in FAR 32.202-1(b)(2) is: "The contract price exceeds the simplified acquisition threshold." EPA purposely left this out of the contracting officer's required supporting rationale. Why does EPA feel it needs to finance such small buys of commercial items when the rest of the government is prohibited from doing so?

Copyright 2006 by Panoptic Enterprises. All Rights Reserved.

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