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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

July 2006
Vol. VII, No. 7

CONTENTS

Former OFPP Chief Safavian Convicted,
Faces Up to 20 Years in Prison

On June 20, a federal jury convicted David Safavian, former administrator of the Office of Federal Procurement Policy (OFPP) and former chief of staff of the General Services Administration (GSA), of obstructing a GSA proceeding and making false statements. The jury convicted Safavian of four charges, finding that he made false statements and obstructed investigations into his relationship with Jack Abramoff. The investigations focused on whether Safavian, during his tenure as GSA chief of staff, aided Abramoff in his attempts to acquire GSA-controlled property in and around Washington, DC. In August 2002, Abramoff took Safavian and others on a golf trip to Scotland that cost $140,000.

Safavian was convicted on three counts of making false statements to a GSA Office of Inspector General special agent, a GSA ethics official, and the Senate Committee on Indian Affairs, by telling them Abramoff had no business before GSA prior to the Scotland golf trip. Prosecutors convinced the jury by releasing e-mails in which Safavian provided Abramoff information and advice on obtaining two GSA-controlled properties soon after he became GSA chief of staff in 2002. One property was the Naval Surface Warfare Center in Silver Spring, MD, which Abramoff wanted to use for a Jewish high school he supported, the other was the Old Post Office Building on Pennsylvania Avenue several blocks from the White House, which Abramoff wanted to convert into a hotel and was near two restaurants owned by Abramoff.

Also, Safavian was convicted of obstructing the GSA Office of Inspector General investigation. Safavian was acquited of obstructing the Senate Indian Affairs Committee's investigation.

Safavian faces a maximum sentence of five years in prison on each of the four counts, a $250,000 fine, and three years of supervised release. Sentencing is scheduled for October 12, 2006. His attorney said an appeal is planned.

On January 3, Abramoff pleaded guilty to charges of conspiracy, mail fraud, and tax evasion. He has agreed to cooperate with law enforcement officials in other criminal investigations (see the February 2006 Federal Contracts Perspective article "Abramoff Pleads Guilty to Fraud, Tax Evasion").

Safavian became OFPP administrator on November 20, 2004, and resigned from that post on September 16, 2005, three days before he was arrested. None of the activities for which he was convicted took place while he was OFPP administrator.

Safavian had worked with Abramoff in the law firm Preston, Gates & Ellis, in the late 1990s, and Abramoff became Safavian's mentor. After leaving the firm, he became a lobbyist.

His wife, Jennifer, is the chief investigative counsel for House Committee on Government Reform, which oversees procurement activities within the government.

For other articles on Safavian and Abramoff, see the December 2004 Federal Contracts Perspective article "Safavian Confirmed to Head OFPP"; the October 2005 Federal Contracts Perspective article "OFPP Chief Arrested for Making False Statements" and the November 2005 Federal Contracts Perspective article "Former OFPP Chief Indicted for Obstruction."

Denett Testifies for OFPP Position

On the same day Safavian was convicted, the Senate Committee on Homeland Security and Governmental Affairs (actually, two senators -- chairwoman Susan Collins (R-ME) and Tom Coburn (R-OK)) heard testimony from Paul Denett, nominated to be Safavian's successor as OFPP administrator. Though Safavian was not mentioned at the confirmation hearing, his "legacy" was invoked when Denett promised to "build a world-class acquisition system that garners the confidence of our taxpayers by consistently delivering efficient, effective, and ethical contracting service."

Denett said that he would strive to obtain training for the acquisition workforce to keep it current; would improve the Federal Procurement Data System--Next Generation so that it accurately depicted the status of all federal contracts, and would continue the emphasis on competitive sourcing through the Office of Management and Budget (OMB) Circular A-76, Performance of Commercial Activities.

Denett's testimony pointed up a significant difference between himself and Safavian: Denett knows federal contracting, and is not a mere political hack who got his government positions through his connections. During his more than 30-year career in federal contracts, Denett was involved in acquisition with the Departments of the Navy, Army, and Agriculture, and was the senior procurement executive of the Department of the Interior and the Treasury. He left government service to become program director for the Logistics Management Institute, where he focused on the strategic improvement of government acquisition and grant management issues. Currently, he is Vice President of Contracting Programs at ESI International.

Denett holds a master's degree with emphasis in acquisition from The George Washington University, and he is a National Contract Management Association (NCMA) fellow.

For more on the Denett nomination, see the June 2006 Federal Contracts Perspective article "Denett Nominated to be OFPP Administrator."

If confirmed, Denett would become OFPP Administrator at a difficult time for the acquisition community. Besides the Safavian conviction, the jailing of the former Air Force acquisition head Darlene Druyun for giving the Boeing Company preferential treatment in multibillion dollar contract competitions in return for a high-level position in Boeing, and the poor (possibly illegal) practices in Iraq and Hurricane Katrina relief efforts bring into question the integrity and capabilities of the federal contracting workforce and will put Denett under the microscope.

FAC 2005-10 Mandates Electronic Wage Determinations

Federal Acquisition Circular (FAC) 2005-10 amends Federal Acquisition Regulation (FAR) Part 22, Application of Labor Laws to Government Acquisitions, to implement the Department of Labor (DOL) Wage Determinations OnLine (WDOL) website as the source for Service Contract Act and Davis-Bacon Act wage determinations (for service contracts over $2,500 and construction contracts over $2,000, respectively). The website is at http://www.wdol.gov.

Both the Service Contract Act and Davis-Bacon Act require contractors and subcontractors to pay locally-prevailing wages and fringe benefits to service employees, laborers, and mechanics. The DOL determines what are the locally-prevailing wages and fringe benefits and publishes "wage determinations," and the appropriate wage determinations are incorporated into service and construction contracts and are binding on the contractors -- the contractor must pay the covered employees the wages and benefits as a minimum.

Until the establishment of the WDOL website, contracting officers had to submit to DOL an SF-98, Notice of Intention to Make a Service Contract and Response to Notice, for contracts subject to the Service Contract Act, or an SF-308, Request for Wage Determination and Response to Request, for contracts subject to the Davis-Bacon Act. Now, contracting officers will be able to get most wage determinations from WDOL.

If WDOL does not contain an applicable wage determination for a service contract, the contracting officer must use the e98 process instead -- this is available at http://www.wdol.gov as well. However, if the WDOL does not contain an applicable wage determination for a construction contract, the contracting must still submit an SF-308 request to DOL -- DOL decided not to develop an electronic version because it processes fewer than 100 SF-308s a year.

The key changes are made to FAR 22.404, Davis-Bacon Act Wage Determinations, and FAR 22.1008, Procedures for Obtaining [Service Contract Act] Wage Determinations.

Comments on this interim rule must be submitted no later than August 28, 2006, by any of the following methods: (1) eRulemaking Portal: http://www.regulations.gov; (2) http://www.acquisition.gov/far/ProposedRules/proposed.htm; (3) e-mail: farcase.2005-033@gsa.gov; (4) fax: 202-501-4067; or (5) mail: General Services Administration, Regulatory Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405.

Besides this rule, FAC 2005-10 contains five other rules:

• Validating a Central Contracting Registration (CCR) Registrant's Taxpayer Identification Number (TIN): This final rule amends FAR Subpart 4.11, Central Contractor Registration, to state that a registrant's TIN will be validated as part of the CCR registration process. TIN validation is now possible because of advances in technology, and the Internal Revenue Service has agreed to permit this computer matching.

  In addition, this rule deletes outdated language in FAR Subpart 4.11 that required modifications to contracts by December 31, 2003, to include CCR registration requirements.

  Two comments were received in response to the proposed rule. Neither required any changes to the proposed rule, so it is adopted as final with minor editorial changes. For more on the proposed rule, see the November 2005 Federal Contracts Perspective article "CCR Registrant's Taxpayer ID to be Validated."
  
  

• Procedures Related to Procurement Center Representatives: This final rule amends FAR 19.402, Small Business Administration [SBA] Procurement Center Representatives, to provide internal procedures to cover when the FAR requires interaction with a procurement center representative and one has not been assigned to the procuring activity or contract administration office. The rule adds a paragraph (a)(2), which states, "If a SBA procurement center representative is not assigned to the procuring activity or contract administration office, contact the SBA Office of Government Contracting Area Office serving the area in which the procuring activity is located for assistance in carrying out SBA policies and programs. See http://www.sba.gov/GC/pcr.html for the location of the SBA office servicing the activity."
  
  
• Submission of Cost or Pricing Data on Noncommercial Modifications to Commercial Items: This finalizes, with minor changes, the interim rule that amended FAR 15.403-1, Prohibition on Obtaining Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b), to provide an exception to the prohibition for "noncommercial modifications" of a commercial item that are expected to cost, in the aggregate, more than $500,000 or 5% of the total price of the contract, whichever is greater. According to FAR 2.101, Definitions, noncommercial modifications are "minor modifications of a type not customarily available in the commercial marketplace made to meet federal government requirements." This exception only applies to "such modifications" funded by the Department of Defense, the National Aeronautics and Space Administration, and the Coast Guard.
  
  Seven respondents submitted comments on the interim rule. As a result of those comments, the phrase "the total cost of the modifications do not exceed the greater of $500,000 or 5% of the total price of the contract..." is clarified to read "the total price of all such modifications under a particular contract action does not exceed..." Also, the exemption is clarified in the introduction to the rule: while exceeding the $500,000 threshold means that the prohibition on obtaining cost or pricing data does not apply, the contracting officer is not required to obtain cost or pricing unless the noncommercial modifications exceed the $550,000 threshold in FAR 15.403-4, Requiring Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b).
  
  For more on the interim rule, see the July 2005 Federal Contracts Perspective article "FAC 2005-04 Requires Cost or Pricing Data for Noncommercial Modifications of Commercial Items."
  
  
• Free Trade Agreements -- El Salvador, Honduras, and Nicaragua: This interim rule amends FAR Part 25, Foreign Acquisition, to implement the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) with respect to El Salvador, Honduras, and Nicaragua (the CAFTA-DR has not gone into effect for the other signatories: Costa Rica, Dominican Republic, and Guatamala). The CAFTA-DR waives the Buy American Act for acquisitions of supplies and services that exceed $64,786 and for construction contracts that exceed $7,407,000 (with the same exceptions that apply to the North American Free Trade Agreement (NAFTA) and the Chile Free Trade Agreement -- see FAR 25.401, Exceptions).
  
  Comments on the interim rule must be submitted no later than August 28, 2006, by any of the methods mentioned above, except send e-mail comments to farcase.2006-006@gsa.gov.
  
  
• Buy-Back of Assets: This final rule amends FAR 31.205-11, Depreciation, to add language that addresses the allowability of depreciation costs of reacquired assets involved in a sales and leaseback arrangement. Based on the principle that a contractor should not benefit or be penalized for entering into a sale and leaseback arrangement, and that the government should reimburse the contractor the same amount for the subject asset as if the contractor had retained title throughout the service life of the asset, FAR 31.205-11(g) is revised to provide that the determination of allowable depreciation expense of the reacquired asset consider: (1) any gain or loss recognized in accordance with paragraph (b) of FAR 31.205-16, Gains and Losses on Disposition or Impairment of Depreciable Property or Other Capital Assets; (2) any depreciation expense included in the calculation of the normal cost of ownership for the limitations at FAR 31.205-11(h)(1) (redesignated from (i)(1)) and paragraph (b)(2) of FAR 31.205-36, Rental Costs; and (3) the depreciation expense taken prior to the sale and leaseback arrangement.

New DFARS Rule on Contractors Accompanying Troops

The Department of Defense has amended Defense FAR Supplement (DFARS) Subpart 225.74, Defense Contractors Outside the United States, and DFARS 252.225-7040, Contractor Personnel Authorized to Accompany U.S. Armed Forces Deployed Outside the United States to implement the policy in DoD Instruction 3020.41, Contractor Personnel Authorized to Accompany the U.S. Armed Forces (available at http://www.dtic.mil/whs/directives/corres/html/302041.htm. The rule addresses the status of contractor personnel as civilians accompanying the U.S. Armed Forces and the responsibilities of the combatant commander regarding the protection of contractor personnel.

The rule makes the following significant changes to DFARS 252.225-7040:

• Paragraph (b), which had prohibited contractor personnel from using force or otherwise directly participating in acts likely to cause actual harm to enemy armed forces, is revised to provide for contractor personnel other than private security contractor personnel to use deadly force against enemy armed forces only in self-defense. Also, private security contractor personnel are authorized to use deadly force when necessary to execute their security mission to protect assets/persons, consistent with the mission statement contained in their contract.
  
  
• Paragraph (c), which required the combatant commander to develop a security plan for protection of contractor personnel through military means unless the terms of the contract placed the responsibility with another party, is revised to limit the requirement for the combatant commander to develop such a security plan to those locations where there is not sufficient or legitimate civil authority and the combatant commander decides that it is in the interests of the government to provide security.
  
  Also, a paragraph (b) is added to DFARS 225.7402-3, Government Support, which states that the government will provide logistical or security support only when the appropriate agency official, in accordance with agency guidance, determines that government provision of such support is needed to ensure continuation of essential contractor services and that the contractor cannot obtain adequate support from other sources.
  
  
• Paragraph (c)(4) is added to address requirements for contractor personnel to have a letter of authorization. Also, paragraph (e)(1)(iii) is revised to address requirements for Common Access Cards issued to deploying personnel to contain the access permissions allowed by the letter of authorization.
  
  
• Paragraph (e)(2) is added to require the contractor to notify its personnel that (1) the Military Extraterritorial Jurisdiction Act and some other statutes may apply to contractor personnel who commit offenses outside the United States; and (2) when there is a formal declaration of war by Congress, contractor personnel authorized to accompany U.S. armed forces may be subject to prosecution under the Uniform Code of Military Justice.
  
  
• Paragraph (j) is revised to clarify requirements relating to situations where contractor personnel are authorized to carry weapons. Also, a statement has been added to clarify that the liability for use of any weapon by contractor personnel rests solely with the contractor and the contractor employee using such weapon.

Comments on this interim rule must be submitted no later than August 15, 2006, by any of the following methods: (1) eRulemaking Portal: http://www.regulations.gov; (2) e-mail: dfars@gsa.gov (include "DFARS Case 2005-D013" in the subject line); (3) fax: 703-602-0350; (4) mail: Defense Acquisition Regulations System, OUSD(AT&L) DPAP (DARS), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; or (5) hand delivery/courier: Defense Acquisition Regulations System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402.

In addition, DOD published the following DFARS changes and proposed changes:

• Free Trade Agreement -- El Salvador, Honduras, and Nicaragua: Because DOD has many unique foreign acquisition requirements that do not apply to the rest of the government, it has to issue a separate interim rule implementing the CAFTA-DR with respect to El Salvador, Honduras, and Nicaragua (see the article "FAC 2005-10 Mandates Electronic Wage Determinations" above for the FAR implementation of CAFTA-DR). This rule adds El Salvador, Honduras, and Nicaragua to the definition of "Free Trade Agreement country" in DFARS 252.225-7013, Duty-Free Entry; DFARS 252.225-7021, Trade Agreements; DFARS 252.225-7035, Buy American Act -- Free Trade Agreements -- Balance of Payments Program Certificate; DFARS 252.225-7036, Buy American Act -- Free Trade Agreements -- Balance of Payments Program; and DFARS 252.225-7045, Balance of Payments Program -- Construction Material Under Trade Agreements.
  
  Comments on the interim rule must be submitted no later than August 15, 2006, by any of the methods mentioned above (except e-mails must include "DFARS Case 2006-D019" in the subject line).
  
  
• Security-Guard Services Contracts: This interim rule amends DFARS 237.102-70, Prohibition on Contracting for Firefighting or Security-Guard Functions, to extend, from September 30, 2006, to September 30, 2007, the period during which contractor performance of security-guard functions at military installations or facilities is authorized to fulfill additional requirements resulting from the terrorist attacks on the United States on September 11, 2001. This implements Section 344 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163) (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").
  
  Comments on the interim rule must be submitted no later than August 15, 2006, by any of the methods mentioned above (except e-mails must include "DFARS Case 2006-D011" in the subject line).
  
  
• Berry Amendment Exceptions -- Acquisition of Perishable Food and Fish, Shellfish, or Seafood: This interim rule amends DFARS 225.7002, Restrictions on Food, Clothing, Fabrics, Specialty Metals, and Hand or Measuring Tools, to implement Section 831 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163) and Section 8118 of the Defense Appropriations Act for Fiscal Year 2005 (Public Law 108-287).
  
  The Berry Amendment (10 U.S.C. 2533a ) requires DOD to acquire certain items from domestic sources, unless an exception applies. The requirements of 10 U.S.C. 2533a are implemented at DFARS 225.7002, and the exceptions are listed at DFARS 225.7002-2, Exceptions.
  
  Section 831 of Public Law 109-163 amended 10 U.S.C. 2533a(d)(3) to expand the exception that permits the acquisition of non-domestic perishable foods by activities located outside the United States, to also permit the acquisition of such foods by activities that are making purchases on behalf of activities located outside the United States. To reflect this change, the exception in DFARS 225.7002-2(e) is changed from "acquisitions of perishable foods by activities located outside the United States for personnel of those activities" to "acquisitions of perishable foods by or for activities located outside the United States for personnel of those activities."
  
  FY 2003 and FY 2004 Defense Appropriations Acts established an exception to the exception, requiring the acquisition of domestic fish, shellfish, and seafood, including fish, shellfish, and seafood contained in foods manufactured or processed in the United States. Section 8118 of the FY 2005 Defense Appropriation Act (Public Law 108-287) made this exception to the exception permanent. Therefore, the reference in DFARS 225.7002-2(e)(1) to the FY 2003 act "and similar sections in subsequent DOD appropriations acts" is replaced by a reference to Section 8118.
  
  Comments on the interim rule must be submitted no later than August 15, 2006, by any of the methods mentioned above (except e-mails must include "DFARS Case 2006-D005" in the subject line).
  
  
• Sole Source 8(a) Awards to Small Business Concerns Owned by Native Hawaiian Organizations: This finalizes, with changes, the interim rule that authorized DOD to award sole source 8(a) contracts to small business concerns owned by Native Hawaiian Organizations of any amount -- they are not restricted to the $5,000,000 limit for manufacturing contracts and the $3,000,000 limit for most other 8(a) contracts. The interim rule was published on July 26, 2005, to implement provisions in the FY 2004 and FY 2005 Defense Appropriations Acts. Since then, the FY 2006 Defense Appropriations Act has made this permanent, so the final rule deletes references to the FY 2004 and FY 2005 acts and substitutes a reference to the FY 2006 act (Public Law 109-148). For more information on the interim rule, see the August 2005 Federal Contracts Perspective article "DOD Addresses Berry Amendment, Hawaiian Organizations."
  
  
• Claims: This proposed rule would delete DFARS 233.204, Policy, which states, "When it would be helpful in reviewing the current claim, the contracting officer should get information on claims previously filed by the contractor with other contracting officers." This language is considered unnecesary.
  
  Also, DFARS 233.210, Contracting Officer's Authority, would be deleted because it consists solely of a reference to DFARS 243.105, Availability of Funds, which was removed November 9, 2005 (for more on the removal of DFARS 243.105, see the December 2005 Federal Contracts Perspective article "DFARS Amended to Address Telecommunications Services").
  
  Comments on the proposed rule must be submitted no later than August 15, 2006, by any of the methods mentioned above (except e-mails must include "DFARS Case 2003-D010 " in the subject line).
  
  
• Aviation Into-Plane Reimbursement Card: This proposed rule would amend DFARS 213.306, SF 44, Purchase Order-Invoice-Voucher, to address use of the Aviation Into-Plane Reimbursement (AIR) card for purchases of aviation fuel and oil. DOD uses the AIR card for purchases not exceeding the simplified acquisition threshold of aviation fuel and oil at commercial airport facilities. The AIR card is a centrally-billed, government commercial purchase card that is an alternative to use of the Standard Form (SF) 44.
  
  Comments on the proposed rule must be submitted no later than August 15, 2006, by any of the methods mentioned above (except e-mails must include "DFARS Case 2006-D017" in the subject line).

DOE Postpones Pension Decision for One Year

On June 20, Department of Energy (DOE) Secretary Samuel Bodman announced that DOE is postponing for one year its decision not to compensate management and operating (M&O) contractors and site management contracts for the costs of defined benefit pension plans. The policy was attacked by members of Congress and the unions. For more on the original DOE decision, see the June 2006 Federal Contracts Perspective article "DOE Will Not Reimburse Defined Benefit Pension Plans."

SBA Proposes Women-Owned Small Business Program

The Small Business Administration (SBA) proposes to implement the Women-Owned Small Business Federal Contract Assistance Program that was authorized under the Small Business Reauthorization Act of 2000 (Public Law 106-554). Section 811 of the act authorizes contracting officers to restrict competition to women-owned small businesses (WOSBs) in industries that SBA has determined that WOSBs are underrepresented. Section 811 limits the contracting officer's authority to restrict competition to contracts not exceeding $3 million ($5 million for manufacturing). The program's regulations would be in Title 13 of the Code of Federal Regulations, Part 127, Women-Owned Small Business Federal Contract Assistance Program.

The federal government has had a 5% goal for awards to WOSBs since the enactment of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355). However, WOSBs have never received anywhere near that share of federal contracting dollars. WOSBs received 2.3% of federal contract dollars in Fiscal Year (FY) 2000; 2.5% in FY 2001; 2.9% in FY 2002; and 3.0% in FY 2003 and FY 2004. This shortfall precipitated enactment of Section 811 to assist contracting officers achieve the 5% goal by providing a targeted government program for contracting with WOSBs.

According to the proposed SBA rule, it will conduct a study at least once every three years to identify the industries in which WOSBs are "underrepresented" or "substantially underrepresented" in federal contracting (neither of these terms is defined).

For industries in which WOSBs are underrepresented, the contracting officer will be permitted to set-aside contracts for certified "economically disadvantaged WOSBs" (EDWOSBs) if (1) two or more EDWOSBs will compete for the contract; (2) the anticipated award price of the contract (including options) does not exceed $3,000,000 ($5,000,000 for manufacturing contracts); and (3) contract award will be made at a fair market price.

For industries in which WOSBs are substantially underrepresented, the contracting officer will be permitted to set-aside contracts for certified WOSBs under the same conditions as set-asides for EDWOSBs.

To be eligible as a WOSB, the firm must be a small business that is at least 51% owned by one or more women and controlled by one or more women who are United States citizens. To be eligible as a EDWOSB, the firm must be a small business that is at least 51% owned by one or more economically disadvantaged women and controlled by one or more economically disadvantaged women who are United States citizens. The economic disadvantage requirement has the same $750,000 threshold for personal net worth as does the 8(a) business development program and the small disadvantaged business program. One notable feature of the 51% ownership requirement is that community property laws do not apply.

SBA points out that its proposed certification requirement is at odds with the statute in that the statute authorizes concerns to self-certify their status directly to the contracting officer. "However, based on prevailing Supreme Court precedent, the likely disruption that such an approach would have on the acquisition process as well as the agency's goal of reducing the risk of fraud associated with the program, SBA has decided not to propose a self-certification process for procurements set aside under the program..."

Comments on SBA's proposed implementation of the WOSB program must be received not later than July 17, 2006, identified by "RIN 3245-AE65," by any of the following methods: (1) http://www.regulations.gov; (2) e-mail: Linda.Waters@sba.gov (include "RIN 3245-AE65" in the subject line); (3) fax: 202-205-6390; or (4) mail or hand delivery/courier to Linda Waters, Procurement Analyst, Office of Federal Contract Assistance for Women Business Owners, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416.

DOSAR Amended to Address Overseas Contracting

The Department of State (DOS) has revised the DOS Acquisition Regulation (DOSAR) to (1) formalize policy regarding the application of the Small Business Act to contracts awarded by domestic contracting activities where contract performance takes place overseas; and, (2) clarify the application of the Defense Base Act (DBA) insurance to local and third country nationals.

• DOSAR 619.000, Scope of Part, implements DOS policy by stating, "DOS contracts that are awarded domestically for performance overseas shall be subject to the Small Business Act as a matter of policy. Contracts that are both awarded and performed outside the United States should comply on a voluntary basis." This clarifies the language in paragraph (b) of FAR 19.000, which states that FAR Part 19, Small Business Programs "applies only in the United States or its outlying areas." While FAR 19.000(b) is clear with respect to contracts both awarded and performed in the United States (FAR Part 19 applies), and to contracts both awarded and performed outside the United States (FAR Part 19 does not apply), the application of FAR Part 19 to contracts awarded in the U.S. but performed overseas was unclear. DOS had followed an informal policy of applying FAR Part 19 to such contracts. This change formalizes the policy.
  
  
• DOSAR Subpart 628.3, Insurance, and the related clauses in DOSAR 652.228 are revised to clarify the application of DBA insurance to local and third country nationals.
  
  
  • Paragraph (e)(2) of DOSAR 628.305, Overseas Workers' Compensation and War-Hazard Insurance, is revised to state, "In cases where a contract is performed in a country where there are no local workers' compensation laws, local and third country national contractor employees are considered to be 'covered contractor employees', and the contractor shall acquire Defense Base Act insurance for those employees pursuant to the contract between the Department of State and the Defense Base Act insurance broker." Also, DOSAR 652.228-70, Defense Base Act -- Covered Contractor Employees, is added to request information from prospective contractors on whether or not any covered contractor employees will be employed on the resultant contract.
    
    
  • DOSAR 628.305(f) and paragraph (g) of DOSAR 652.228-71, Workers' Compensation Insurance (Defense Base Act) -- Services, are amended to exempt from DBA coverage of contractor employees who perform work on an intermittent basis for not more than 90 days in a calendar year. This exemption is in Section 16 of the State Department Basic Authorities Act (22 U.S.C. 2680a).
    
    
  • Instead of having two separate provisions (DOSAR 652.228-74, Defense Base Act Insurance Rates -- Limitation -- Fixed Price, and DOSAR 652.228-76, Defense Base Act Insurance Rates -- Limitation -- Cost Reimbursement, Labor-Hours, and Time-and-Materials), DOSAR 652.228-76 is removed and DOSAR 652.228-74 is renamed "Defense Base Act Insurance Rates -- Limitation" and revised to cover all contract types.

EPA Permits Financing of Simplified Acquisitions

The Environmental Protection Agency (EPA) is amending the EPA Acquisition Regulation (EPAAR) to add a prescription and clause for contracting officers to use when approving advance or interim payments on purchases at or below the simplified acquisition threshold that are appropriate or customary in the commercial marketplace.

The final rule adds EPAAR 1532.003, Simplified Acquisition Procedures Financing, which permits the contracting officer to authorize advance and interim payments on orders for commercial items that do not exceed the micro-purchase threshold, and requires 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 micro-purchase threshold but not exceeding the simplified acquisition threshold.

In addition, a new clause EPAAR 1552.232-74, Payments -- Simplified Acquisition Procedures Financing, is added for inclusion in all solicitations and orders that will provide such financing. EPAAR 1552.232-74 requires the contracting officer to identify the type of financing being authorized (advance and/or interim), and to specify the payment schedule.

No comments were submitted in response to the proposed rule, so the proposed rule is finalized with an editorial change. For more on the proposed rule, see the April 2006 Federal Contracts Perspective article "EPA Proposes Financing for Simplified Acquisitions."

SBA Waives Nonmanufacturer Rule for Furniture

SBA is waiving the nonmanufacturer rule for the following products: furniture frames and parts, metal, manufacturing, North American Industry Classification System (NAICS) code 337215; furniture frames, wood, manufacturing, NAICS 337215; furniture parts, finished metal, manufacturing, NAICS 337215; furniture parts, finished plastics, manufacturing, NAICS 337215; furniture, factory-type (e.g., cabinets, stools, tool stands, work benches), manufacturing, NAICS 337127; furniture, hospital (e.g., hospital beds, operating room furniture), manufacturing, NAICS 339111; and furniture, laboratory-type (e.g., benches, cabinets, stools, tables), manufacturing, NAICS 339111.

The SBA is denying a nonmanufacturer rule waiver for the following products, because there are small businesses manufacturers for them: furniture (except wood), office-type, padded, upholstered, or plain, manufacturing, NAICS 337214; and furniture parts, finished wood, manufacturing, NAICS 337215.

For more on the proposed waiver, see the March 2006 Federal Contracts Perspective article "SBA to Waive Two Nonmanufacturer Rules, Denies Two."

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