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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

August 2006
Vol. VII, No. 8

CONTENTS


FAC 2005-11 Addresses Emergency Authorities, Earned Value Management
Dun & Bradstreet to Validate CCR Name and Address Info
OMB Provides On-Line Assistance to Small Businesses
Boeing to Pay $615 Million for Hiring Darleen Druyun
DFARS Coverage on Required Sources of Supply Updated
Size Standard for Security Guards Increased
FAR Coverage Proposed for Contractors Outside U.S.
Prompt Payment Interest Rate Set at 5 3/4%



New FAR Part Consolidates Emergency Authorities;
Earned Value Management Coverage Added


Federal Acquisition Circular (FAC) 2005-11 consists of two rules -- one adds Federal Acquisition Regulation (FAR) Part 18, Emergency Acquisitions, to provide a single reference to acquisition flexibilities that may be used to acquire supplies and services quickly during emergency situations; and the other adds FAR Subpart 34.2, Earned Value Management System, to implement policy and help standardize the use of earned value management systems across the government.



Dun & Bradstreet to Validate CCR Name and Address Info

Beginning the end of July, the Central Contractor Register (CCR) will obtain the following data fields from Dun & Bradstreet (D&B): legal business name, doing business as name (DBA), physical address, and zip code. Registrants will not be able to enter or modify these fields in CCR -- they will be pre-populated using D&B DUNS record data. (EDITOR'S NOTE: The CCR (http://www.ccr.gov) is the primary vendor database for the federal government. CCR collects, validates, stores, and disseminates data in support of agency acquisition missions -- see FAR Subpart 4.11.)

During new registration or when updating a record, the registrant will have a choice to accept or reject the data provided by D&B. If the registrant agrees with the D&B data, it will be accepted into the CCR registrant record. If the registrant disagrees with the D&B data, the registrant will need to go to the D&B website http://fedgov.dnb.com/webform to modify the data contained in the D&B database before proceeding. When D&B confirms the modification has been made, the registrant must revisit CCR and "accept" D&B's changes. Only at that point will the D&B data be accepted into the CCR. It may take up to two business days for D&B to send the modified data to CCR.

Vendors having difficulty using the D&B website should contact the D&B Government Help Desk by e-mail at govt@dnb.com. Frequently Asked Questions can be found at http://www.ccr.gov/newsdetail.asp?id=55&type=N.



OMB Provides On-Line Assistance to Small Businesses

The Office of Management and Budget (OMB) has announced the availability of an on-line one-stop resource to help small businesses better understand federal requirements relating to regulations, taxes, and other paperwork, and to provide a point of contact at each agency for specific questions. The website is called "Compliance Assistance," and it is available at http://www.business.gov/sbpra.

OMB compiles an annual list of compliance assistance resources available to small businesses, and federal agencies are required to designate an appropriate point of contact for small business paperwork issues. OMB has integrated both lists and made them available on the Internet.



Boeing to Pay $615 Million for Hiring Darleen Druyun

The Boeing Company has agreed with the Department of Justice (DOJ) to pay a record $615 million settlement to resolve criminal and civil allegations that the company improperly used competitors' information to procure contracts for launch services worth billions of dollars from the Air Force and the National Aeronautics and Space Administration.

Boeing agreed to pay $565 million civil settlement and $50 million monetary penalty to resolve the government's investigations and claims relating to its hiring of Darleen Druyun, the former Principal Deputy Assistant Secretary of the Air Force for Acquisition and Management, and the handling of competitors' information in connection with the Air Force's Evolved Expendable Launch Vehicle (EELV) program and certain NASA launch services contracts.

The government's investigation focused on Boeing's relationship with Druyun who, as the Air Force's top career procurement officer before retiring in 2002, wielded influence over contract awards worth billions of dollars. In 2000, at Druyun's request, Boeing hired Druyun's daughter and future son-in-law. Then following her retirement in 2002, Boeing recruited Druyun for an executive position. During the 2000-2002 period, Druyun was responsible for dozens of Boeing contracts, as well as for the controversial $23 billion procurement to lease a fleet of KC-767 aerial refueling tankers that has since been canceled.

Druyun and the Boeing employee who recruited her, former chief financial officer Michael Sears, have pleaded guilty to violations of the conflict of interest statutes. Druyun admitted that Boeing's favors in hiring her children and in offering her a position influenced her contracting decisions. Druyun was sentenced to nine months in prison, and has served her sentence.

Also, the government's investigation focused on the EELV program, which the Air Force sought to usher in a new generation of space launch vehicles to serve the government's critical satellite needs through 2020. The Air Force's strategy called for two sources to reduce the risk of failure and cost through competition. Those sources ended up being Boeing and Lockheed, with Boeing's low pricing leading the Air Force to award Boeing 19 of the original 28 launch services contracts awarded in October 1998. However, prior to this award, Boeing obtained more than 22,000 pages of documents from Lockheed Martin, some of which contained confidential competition-sensitive or other proprietary information that related to Lockheed's EELV program. Some of this information was used to unfairly assist Boeing in the EELV competition. When the Air Force discovered this, it sought to "right the wrong" by re-balancing the contracts, at great expense. Boeing's conduct resulted in a 20-month suspension of three of its business units from government contracting.

NASA also had launch services contracts with Boeing and Lockheed that required the contractors to compete for missions. Boeing's possession and use of Lockheed's proprietary information, including additional documents obtained through different channels than the EELV documents, plus the unfair advantage the company had gained in the EELV, enabled Boeing to persuade NASA to award 19 missions, known as the "19 Pack," on a sole source basis. The lack of competition, plus Boeing's false claims for certain costs, resulted in Boeing charging NASA much more for the 19 Pack than NASA should have paid.

Boeing has accepted responsibility for the conduct of its employees in these matters. It has agreed to continue its cooperation with federal investigators and to maintain an effective ethics and compliance program, with particular attention to the hiring of former government officials and the handling of competitor information. The DOJ may seek to prosecute Boeing for charges relating to Druyun's conduct, or to assess a further penalty of up to $10 million, if during the two year term of the criminal agreement, an executive management employee of Boeing commits federal crimes and the company fails to report the misconduct to the DOJ.



DFARS Coverage on Required Sources of Supply Updated

The Department of Defense (DOD) has amended the Defense FAR Supplement (DFARS) to remove unnecessary, duplicative, and obsolete language from DFARS Part 208, Required Sources of Supplies and Services. In addition, DOD has revised the DFARS to address contract types, information technology, contract goals for small disadvantaged businesses, and the secondary Arab Boycott of Israel.

Finally, the Undersecretary of Defense (Acquisition, Technology, and Logistics) has extended for another year, until July 26, 2007, the waiver of the limitation on procurement of the following products from the United Kingdom (UK): air circuit breakers; welded shipboard anchor and mooring chain with a diameter of four inches or less; gyrocompasses; electronic navigation chart systems; steering controls; pumps; propulsion and machinery control systems; totally enclosed lifeboats; and ball and roller bearings.

The Under Secretary of Defense granted this waiver because the UK does not discriminate against defense items produced in the United States to a greater degree than the United States discriminates against defense items produced in the UK.



Size Standard for Security Guards Increased

SBA is increasing the size standard for the Security Guards and Patrol Services (North American Industry Classification System (NAICS) 561612) from $11.5 million in average annual receipts to $17 million. In November 2005, SBA proposed a 47.6% increase to the small business size standard for Security Guards and Patrol Services, from $10.5 million to $15.5 million (see the December 2005 Federal Contracts Perspective article "Proposed Increase in Size Standard for Security Guards"). SBA later issued an interim final rule in December 2005, that increased all receipts-based small business size standards to account for inflation that had occurred since its last increase for inflation. That interim final rule increased the Security Guards and Patrol Services size standard from $10.5 million to $11.5 million (see the January 2006 Federal Contracts Perspective article "SBA Increases Small Business Size Standards for Service Industries by 8.7% to Adjust for Inflation"). This final rule applies the same 47.6% increase to the revised $11.5 million size standard, producing a new size standard of $17 million.



FAR Coverage Proposed for Contractors Outside U.S.

The FAR Council has proposed to add FAR Subpart 25.3, Contractors Outside the United States, and FAR clause 52.225-XX, Contractor Personnel in a Theater of Operations or at a Diplomatic or Consular Mission Outside the United States, to address the issues of contractor personnel that are providing support in the theater of operations or at a diplomatic or consular mission outside the United States, but are not covered by DFARS 252.225-7040, Contractor Personnel Authorized to Accompany the U.S. Armed Forces (see the July 2006 Federal Contracts Perspective article "New DFARS Rule on Contractors Accompanying Troops").

FAR Subpart 25.3 would apply to contracts requiring contractor personnel to perform outside the United States (1) in a theater of operations during contingency operations, humanitarian or peacekeeping operations, other military operations, or military exercises designated by the combatant commander; or (2) at a diplomatic or consular mission.

FAR 52.225-XX would addresse such issues as responsibility for logistical and security support, compliance with laws and regulations, preliminary personnel requirements, processing and departure points, personnel data lists, removal of contractor personnel, authorization of weapons and ammunition, vehicle or equipment licenses, wearing of military clothing and protective equipment, evacuation, personnel recovery, notification and return of personal effects, mortuary affairs, changes in place of performance or government-furnished facilities, equipment, material, services, or site, and flowdown of the clause to subcontracts.

Comments on this proposed rule must be submitted by September 18, 2006, by any of the following methods: (1) eRulemaking Portal: http://www.acquisition.gov/far; (2) http://acquisition.gov/far/ProposedRules/proposed.htm; (3) e-mail: farcase.2005-011@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.



Prompt Payment Interest Rate Set at 5 3/4%

The Treasury Department has established 5 3/4% (5.75%) as the interest rate for the computation of payments made between July 1 and December 31, 2006, under the Prompt Payment Act and the Contracts Disputes Act. This rate is also used in facilities capital cost of money calculations. The interest rate for the prior six-month period (January 1, 2006, through June 30, 2006), was 5 1/8% (5.125%). The interest rate for July 1, 2005, through December 31, 2005, was 4 1/2% (4.5%).

FAR Subpart 32.9, Prompt Payment; FAR Subpart 33.2, Disputes and Appeals; FAR 31.205-10, Cost of Money; and Cost Accounting Standard (CAS) 9904.414, Cost of Money as an Element of the Cost of Facilities Capital, are affected by this interest rate.



Copyright 2006 by Panoptic Enterprises. All Rights Reserved.

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