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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

May 2006
Vol. VII, No. 5

CONTENTS

FAC 2005-09 Revises A-76 Rules, Provides
FedTeDS Guidance, Addresses Trafficking in Persons

Federal Acquisition Circular (FAC) 2005-09 amends the Federal Acquisition Regulation (FAR) to remove the obsolete rules that pertained to the pre-2003 version of Office of Management and Budget (OMB) Circular A-76, Performance of Commercial Activities; require the use of the Federal Technical Data Solution (FedTeDS) for electronic posting of solicitation-related materials that require control over availability or distribution; to authorize contract termination if the contractor or any subcontractor engages in trafficking in persons; and make several other changes.

• OMB Circular A-76: This final rule amends FAR Subpart 7.3, Contractor Versus Government Performance, to replace the language that pertained to the old version of A-76 with language that essentially refers to the May 29, 2003, A-76 version for guidance. In addition, it adds two solicitation provisions to reflect the two different types of A-76 competitions: FAR 52.207-1, Notice of Standard Competition; and FAR 52.207-2, Notice of Streamlined Competition. (EDITOR'S NOTE: For more on the May 29, 2003, version of OMB Circular A-76, see the July 2003 Federal Contracts Perspective article "Revised OMB Circular A-76 Released, Establishes 12 Month Period for Competitions.")
  
  
• Federal Technical Data Solution (FedTeDS): This final rule requires contracting officers to use FedTeDS for electronic posting of solicitation-related materials that require control over availability or distribution (for example, technical data, specifications, maps, building designs, and schedules) unless certain exceptions apply. FedTeDS provides secure, user identification and password protected access to solicitation-related data that should not be made available to the public on FedBizOpps.
  
  To FAR 2.101, Definitions, is added the following: "FedTeDS is a web application integrated with the Governmentwide Point of Entry (GPE) [http://www.FedBizOpps.gov] and the Central Contractor Registration (CCR) system [http://www.ccr.gov] for distribution of information related to contract opportunities. It is designed to enhance controls on the access and distribution of solicitation requirements or other documents when controls are necessary according to agency procedures. FedTeDS may be found on the Internet at https://www.fedteds.gov."
  
  FAR 5.102, Availability of Solicitations, requires that restricted information be made available unless one of the exceptions in paragraph (a)(5) applies: (i) disclosure would compromise the national security (for example, would result in disclosure of classified information, or information subject to export controls) or create other security risks; (ii) the nature of the file (for example, its size or format) does not make it cost-effective or practicable for contracting officers to provide access to the solicitation through the GPE; (iii) agency procedures specify that the use of FedTeDS does not provide sufficient controls for the information to be made available and an alternative means of distributing the information is more appropriate; or (iv) the agency's senior procurement executive determines that access through the GPE is not in the government's interest.
  
  Seven respondents submitted comments on the proposed rule. As a result, the use of FedTeDS was made mandatory for information requiring controls (the proposed rule said, "the information should be made available through FedTeDS..."), and the exception regarding information subject to export controls (that is, the International Traffic in Arms Regulations (ITAR)) was added. (EDITOR'S NOTE: For more on FedTeDS, see the April 2003 Federal Contracts Perspective article "OMB Unveils Website to Safeguard Sensitive Information". For more on the proposed rule, see the December 2004 Federal Contracts Perpective article "Proposed FAR Rule Addresses 'FedTeDS.'")
  
  
• Combating Trafficking in Persons: This interim rule adds FAR Subpart 22.17, Combating Trafficking in Persons, and the corresponding clause FAR 52.222-50, Combating Trafficking in Persons, which allows the contracting agency to terminate the contract if the contractor or subcontractor engages in severe forms of trafficking in persons or has procured a commercial sex act, or used forced labor in the performance of the contract.
  
  The rule applies to contractors awarded service contracts regardless of amount (other than commercial service contracts under FAR Part 12, Acquisition of Commercial Items). Such contractors must develop policies to combat trafficking in persons. The clause lists remedies, including contract termination and debarment, that may be imposed on contractors that support or promote or fail to monitor the conduct of their employees and subcontractors with regard to severe forms of trafficking in persons, the procurement of commercial sex acts, or use of forced labor. In addition, contractors are to "take appropriate action, up to termination, against employees or subcontractors that violate [this] policy..."Finally, contractors are to include FAR 52.222-50 in all subcontracts for the acquisition of services, and require the subcontractors to include the clause in their subcontracts.
  
  Comments on the interim rule must be submitted by June 19, 2006, identified by "FAR case 2005-012" 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.2005-012@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.
  
  
• Removal of Sanctions Against Certain European Union Member States: This interim rule removes FAR Subpart 25.6, Trade Sanctions, FAR 52.225-15, Sanctioned European Union Country End Products, and FAR 52.225-16, Sanctioned European Country Services, because the U.S. Trade Representative terminated the sanctions, which had been in place since 1993 against certain members of the European Union (for more on the termination of the sanctions, see the March 2006 Federal Contracts Perspective article "U.S. Trade Representative Lifts Sanctions Against Certain Members of the European Communities").
  
  The sanctions applied to Austria, Belgium, Denmark, Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Sweden, and the United Kingdom, and prohibited the acquisition of all products and services from the sanctioned countries between the simplified acquisition threshold and $193,000 ($7,407,000 for construction), and the acquisition of a variety of services regardless of dollar amount. The sanctions did not apply to the Department of Defense or small business set-asides.
  
  Comments on the interim rule must be submitted by June 19, 2006, identified by "FAR case 2005-045" by any of the methods mentioned above, except that e-mails are to be sent to farcase.2005-045@gsa.gov.
  
  
• Morocco Free Trade Agreement: This interim rule implements the Morocco Free Trade Agreement by amending FAR Subpart 25.4, Trade Agreements, FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders -- Commercial Items, FAR 52.225-3, Buy American Act -- Free Trade Agreements -- Israeli Trade Act, FAR 52.225-5, Trade Agreements, FAR 52.225-11, Buy American Act -- Construction Materials under Trade Agreements, and FAR 52.225-12, Notice of Buy American Act Requirement -- Construction Materials under Trade Agreements, to add Morocco as a "designated country" and a "Free Trade Agreement country."
  
  The Morocco Free Trade Agreement waives the applicability of the Buy American Act for Moroccan supplies and services equal to or exceeding $193,000, and Moroccan construction materials equal to or exceeding $7,407,000.
  
  EDITOR'S NOTE: An interim rule in FAC 2001-27 initially implemented the Morocco Free Trade Agreement, but FAC 2005-07 removed the FAR language implementing the Morocco Free Trade Agreement because the president had not determined that Morocco had taken measures necessary to bring it into compliance with certain provisions of the agreement. Apparently, the president has now made that determination, and the Morocco Free Trade Agreement can now be implemented. For more on the original implementation and subsequent removal of the implementation language, see the February 2006 Federal Contracts Perspective article "Performance-Based Acquisition Procedures Revised."
  
  
• Definition of Information Technology: This finalizes, without changes, the interim rule that amended the definition of "information technology" in FAR 2.101, Definitions, to include "analysis" and "evaluation" as functions performed by such equipment or systems, and added to the definition "ancillary equipment (including imaging peripherals, input, output, and storage devices necessary for security and surveillance)," and "peripheral equipment designed to be controlled by the central processing unit of a computer."
  
  For more on the interim rule, see the August 2005 Federal Contracts Perspective article "FAC 2005-05 Clarifies Justifications for Limiting Schedule Orders, 5% Withholding on T&M Contracts."
  
  
• Confirmation of Historically Underutilized Business Zone (HUBZone) Certification: This finalizes, without changes, the interim rule that amended FAR 19.703, Eligibility Requirements for Participating in the Program, and FAR 52.219-9, Small Business Subcontracting Plan, to clarify that contractors are required to confirm that a subcontractor representing itself as a HUBZone small business concern is certified by the Small Business Administration (SBA) as a HUBZone small business concern.
  
  For more on the interim rule, see the August 2005 Federal Contracts Perspective article "FAC 2005-05 Clarifies Justifications for Limiting Schedule Orders, 5% Withholding on T&M Contracts."
  
  
• Expiration of the Small Disadvantaged Business (SDB) Price Evaluation Adjustment: This finalizes, without changes, the interim rule that cancelled the SDB price evaluation adjustment which was originally authorized under the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355) and implemented in FAR Subpart 19.11. This authority permitted civilian agencies to apply a price evaluation adjustment to competitive offers of SDBs that exceed the simplified acquisition threshold and are not set aside for small businesses in industries determined by the Department of Commerce (DOC) to have "persistent and significant underutilization of minority firms." This authority expired December 9, 2004, and was not renewed by Congress.
  
  For more on the interim rule, see the November 2005 Federal Contracts Perspective article "FAC 2005-06 IT Security, Cancels SDB Price Evaluation Adjustment for Civilian Agencies."
  
  
• Fast Payment Procedures: This finalizes, without changes, the proposed rule that would amend FAR 52.213-1, Fast Payment Procedure, to permit, but not require, fast payment when invoices and/or outer shipping containers are not marked "Fast Pay." Current practice is to reject such invoices. Instead, they will be paid using either fast payment or normal payment procedures.
  
  For more on the proposed rule, see the August 2005 Federal Contracts Perspective article "FAR Rule Would Address Fast Payment Procedures."

Coverage on Labor Laws Cleaned Up in DFARS

In a continuing effort to modify the Defense FAR Supplement (DFARS) so it only contains requirements of law, Department of Defense (DOD)-wide policies, delegations of FAR authorities, deviations from FAR requirements, and policies/procedures that either have a significant effect beyond the internal operating procedures of DOD or a significant cost or administrative effect on contractors or offerors, most of the text in DFARS Part 222, Application of Labor Laws to Government Acquisitions, is removed and relocated to Procedures, Guidance, and Information (PGI), which is available at http://www.acq.osd.mil/dpap/dars/pgi. All that remains of DFARS Part 222 are cross-references to applicable sections of the PGI and miscellaneous directions, such as assessing the impact of labor disputes on programs and contractor compliance with Occupational Safety and Health Administration (OSHA) regulations.

No comments were submitted on the proposed rule, so this finalizes the proposed rule without changes except that the internal reporting requirements in DFARS 222.101-3, Reporting Labor Disputes, have been relocated to the PGI.

For more on the proposed rule, see the August 2005 Federal Contracts Perspective article "DFARS Addresses Berry Amendment, Hawaiian Organizations." For more on the PGI, see the December 2004 Federal Contracts Perspective article "DFARS Transformation in Full Gear, 'Procedures, Guidance, and Information' Added".

In addition to the clean-up of DFARS Part 222, the following final and proposed rules were published in April:

• Transition of Weapons-Related Prototype Projects to Follow-On Contracts: This finalizes, with changes, the interim rule that added DFARS Subpart 212.70, Pilot Program for Transition to Follow-On Contracting After Use of Other Transaction Authority, to implement Section 847 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136), which authorizes DOD to carry out a pilot program that permits the use of streamlined contracting procedures for the production of items or processes begun as prototype projects under "other transaction" agreements.
  
  One respondent submitted comments on the interim rule, and DFARS 212.7003, Technical Data and Computer Software, is reorganized to clarify the distinction between delivery requirements and license rights.
  
  For more on the interim rule, see the December 2004 Federal Contracts Perspective article "DFARS Transformation in Full Gear, 'Procedures, Guidance, and Information' Added".
  
  
• Incremental Funding of Fixed-Price Contracts: This final rule amends DFARS Subpart 232.7, Contract Funding, to address the use of incrementally funded fixed-price contracts for severable services of less than one year in length (new paragraph (1)(i) of DFARS 232.703-1, General). In addition, the rule removes the requirement for the head of the contracting activity (HCA) to approve incremental funding for base services and hazardous/toxic waste remediation contracts (DFARS 232.703-1(1)(iii)). Finally, DFARS 252.232-7007, Limitation of Government's Obligation, is amended to clarify that contractors are not to work without funding by adding a new paragraph (i) which states, "Nothing in this clause shall be construed as authorization of voluntary services whose acceptance is otherwise prohibited under 31 U.S.C. 1342."
  
  
• Prohibition of Foreign Taxation on U.S. Assistance Programs: This finalizes, without changes, the interim rule that amended DFARS Part 229, Taxes, to require that a bilateral agreement that provides U.S. assistance to a foreign country must specify that the U.S. assistance is exempt from taxation by the foreign government, and the foreign government is prohibited from imposing taxes on commodities acquired under contracts funded by such U.S. assistance.
  
  No comments were received on the interim rule, so DOD has adopted it as final. For more on the interim rule, see the November 2005 Federal Contracts Perspective article "Procedures for Billing and Payment Improved in the DFARS."
  
  
• Buy American Act Exemption for Commercial Information Technology: This proposed rule would amend DFARS Part 225, Foreign Acquisition, to implement Section 535 of Consolidated Appropriations Act of 2004 (Public Law 108-199), Section 517 of the Consolidated Appropriations Act of 2005 (Public Law 108-447), and Section 717 of the Consolidated Appropriations Act of 2006 (Public Law 109-115), which exempt commercial information technology from the Buy American Act.
  
  DFARS 225.1101, Acquisition of Supplies, would be amended to prohibit the use of DFARS 252.225-7036, Buy American Act -- Free Trade Agreements -- Balance of Payments Program, when "acquiring information technology that is a commercial item, using fiscal year 2004 or subsequent funds..." (new paragraph (10)(ii)(B)). In addition, because the Balance of Payments program is an extension of the Buy American Act that applies to acquisitions of supplies for overseas use, DFARS 225.7501, Policy, would be amended to apply the same exemption to the Balance of Payments program (new paragraph (a)(2)(vi)). These changes will eliminate the need for annual deviations addressing the exemption (for example, see the January 2006 Federal Contracts Perspective article "DFARS Amendments Address Task Order Contracts" for the latest deviation.
  
  Comments on the proposed rule must be submitted no later than June 12, 2006, identified as "DFARS Case 2005-D011," 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.
  
  
• Definitions of Component and Domestic Manufacture: This proposed rule would amend DFARS Part 225 and associated provisions and clauses to clarify the definitions of "component" and "domestic manufacture" with regard to foreign acquisitions.
  
  The general definition of "component'" in FAR 2.101, Definitions, is "any item supplied to the government as part of an end item or of another component." This means the term applies to components that are incorporated directly into the end product ("top-level components") and components that are incorporated into a component of the end product ("lower-tier components"). However, for determining whether a product is a domestic end product under the Buy American Act or the Balance of Payments program, FAR 25.003, Definitions, defines "component" as "an article, material, or supply incorporated directly into an end product or construction material" (emphasis added).
  
  DFARS Part 225 defines "component" as applying only to top-level components, except in DFARS Subpart 225.70, Authorization Acts, Appropriation Acts, and Other Statutory Restrictions on Foreign Acquisitions, where the term "component" includes both top-level and lower-tier components. However, there are some requirements in DFARS Subpart 225.70 in which "component" applies only to top-level components, and some requirements elsewhere in DFARS Part 225 that apply to all components. Therefore, to clarify which definition of "component" applies to these exceptions to the general rule, the following changes would be made to DFARS Part 225 and the associated provisions and clauses:
  
  
  • DFARS 225.900-70, Definition, would be added, and DFARS 252.225-7013, Duty-Free Entry, would be amended to state that "component" means both top-level and lower-tier components.
    
    
  • DFARS 225.7001, Definitions, and DFARS 252.225-7019, Restriction on Anchor and Mooring Chain, would be amended to state that "component" means only to top-level components for anchor and mooring chain.
    
    
  • DFARS 225.7101, Definitions, and DFARS 252.225-7025, Restriction on Acquisition of Forgings, would be amended to state that "component" means both top-level and lower-tier forging items.
  
  In addition, the proposed rule would eliminate references to the DOD Industrial Preparedness Production Planning Program in paragraph (a) of DFARS 225.7005-1, Restriction, and in the definition of "domestic manufacture" in paragraph (a)(1)(ii) of DFARS 252.225-7025 since DOD no longer has an Industrial Preparedness Production Planning Program.
  
  Comments on the proposed rule must be submitted no later than June 12, 2006, identified as "DFARS Case 2005-D010," by any of the methods mentioned above.

Eliminate DPAS Set-Aside For Metalworking Machines?

The Department of Commerce's Bureau of Industry and Security (BIS) is seeking comments on the effect the Defense Priorities and Allocations System (DPAS) set-aside for metalworking machines has on industry (15 CFR 700.31, Metalworking Machines).

Under DPAS regulations, the president is authorized to require preferential acceptance and performance of contracts or orders supporting certain approved national defense and energy programs, and to allocate materials, services, and facilities in such a manner as to promote these approved programs.

Currently, the DPAS regulations include a set-aside that applies to metalworking machines. DPAS 700.31 states:

"(c) A metalworking machine producer is not required to accept DO rated orders calling for delivery in any month of a total quantity of any size of machine in excess of 60 percent of scheduled production of that size of machine for that month, or any DO rated orders received less than three months prior to the beginning of the month for which delivery is requested. However, DX rated orders must be accepted without regard to a set-aside or the lead time, if delivery can be made by the required date."

In an effort to streamline the DPAS regulations, BIS is seeking comments on the effect of the DPAS's set-aside for metalworking machines on industry and the effect on industry of the possible elimination of this set-aside.

Comments must be submitted by May 17, 2006, by any of the following methods: e-mail: DPAS@bis.doc.gov (include "Metalworking Machines Notice of Inquiry" in the subject line); fax: 202 482-5650 (Attn: Michael Vaccaro); or by mail or hand delivery/courier to: Michael Vaccaro, U.S. Department of Commerce, Bureau of Industry and Security, Office of Strategic Industries and Economic Security, 1401 Constitution Avenue, NW, Room 3876, Washington, DC 20230.

Make-or-Buy Plans for M&O Contractors Eliminated

The Department of Energy Acquisition Regulation (DEAR) Part 970, DOE Management and Operating Contracts, is revised to eliminate the requirement that management and operating (M&O) contractors submit make-or-buy plans and analyses because "the make-or-buy program is not delivering value to the department commensurate with the costs of its implementation...there is little evidence that these plans are producing the efficiencies and cost savings anticipated by the department. The department has determined that the lack of measurable progress and costs of complying and monitoring compliance with the make-or-buy policy outweigh any potential benefits to the department." Therefore, the following are removed: DEAR 970.1504-4-1, Make-or-Buy Plans, DEAR 970.1504-4-2, Policy, DEAR 970.1504-4-3, Requirements, and DEAR 970.5215-2, Make-or-Buy Plan.

Taking "Early Bird" Registration Discounts Clarified

The Federal Travel Regulation (FTR) is amended to clarify that advance payment of discounted "early bird" conference fees may be treated as an allowable travel advance, and to address when the traveler fails to attend the conference.

Many travelers have expressed reluctance to take advantage of discounted fees for early registration because they believe they cannot be reimbursed until the conference is over and they file their travel claims. To take advantage of such these discounts, FTR 301-74.25, May we reimburse travelers for an advanced payment of a conference or training registration fee?, is added to clarify that "Yes, you [the agency] may reimburse travelers for an advanced discounted payment for a conference or training registration fee as soon as you have approved their travel to that event, and they submit a proper claim for the expenses incurred."

In addition, FTR 301-74.26, What is the traveler required to do if he/she is unable to attend an event for which they were reimbursed for an advanced discounted payment of a conference or training registration fee?, is added to state, "The traveler must seek a refund of the registration fee and repay the agency with any refund received. If no refund is made, the agency must absorb the advanced payment if the traveler's failure to attend the event was caused either by an agency decision or for reasons beyond the employee's control that are acceptable to the agency, e.g., unforeseen illness or emergency. If no refund is made, and the traveler's failure to attend the scheduled event is due to reasons deemed unexcusable by the agency, the traveler must repay the agency for the amount advanced."

Nonmanufacturer Rule Waived for Industrial Gases

The Small Business Administration is waiving the nonmanufacturer rule for industrial gases manufacturing; refinery gases made in petroleum refineries; cyrogenic tanks, heavy gauge metal manufacturing; liquid oxygen tanks manufacturing; liquefied petroleum gases (LPG) cylinders manufacturing; bulk storage tanks, heavy gauge metal, manufacturing; gas storage tanks, heavy gauge metal, manufacturing; and cylinders, pressure, heavy gauge metal, manufacturing under North American Industry Classification System (NAICS) codes 325120, 324110 and 332420.

The nonmanufacturer rule is being waived because SBA has determined there are no small business manufacturers of these classes of products.

For more on the proposal to waive the nonmanufacturer rule for these products, see the March 2006 Federal Contracts Perspective article "SBA to Waive Two Nonmanufacturer Rules, Denies Two."

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