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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

September 2006
Vol. VII, No. 9

CONTENTS

New Set-Aside Authorized for Major Disaster
or Emergency Assistance Acquisitions

Federal Acquisition Circular (FAC) 2005-12 consists of an interim rule that amends the FAR to implement the Local Community Recovery Act of 2006 (Public Law 109-218). The Act amended the Robert T. Stafford Disaster Relief and Emergency Assistance Act to authorize set-asides for major disaster or emergency assistance acquisitions for businesses "that reside or primarily do business in the area affected by the disaster or emergency." Before this rule, contracting officers were directed to give preference, "to the extent feasible and practicable, to those organizations, firms, or individuals residing or doing business primarily in the area affected by such major disaster or emergency." This guidance proved to be inadequate, as the response to Hurricane Katrina showed. So Congress reacted with the passage of the Local Community Recovery Act.

This rule adds FAR Subpart 6.6, Stafford Act Preference for Local Area Contractor, and amends FAR Subpart 26.2, Disaster or Emergency Assistance Activities, to permit contracting officers to set-aside solicitations for debris clearance, distribution of supplies, reconstruction, and other major disaster or emergency assistance for offerors residing or doing business primarily in the geographic area affected by the disaster or emergency (the use of the set-aside is optional).

The following are the key provisions of the FAR revisions:

• "The set-aside shall be based on a specific geographic area, within a Presidential declaration(s) of disaster or emergency" (paragraph (b) of FAR 6.602, Set-Asides for Local Firms During a Major Disaster or Emergency). The contracting officer "shall define the specific geographic area for the local set-aside" (subparagraph (a)(1) of FAR 26.202, Procedures to Accomplish the Local Area Preference), but "the designated area need not include all the counties in the declared disaster/emergency area(s)" (FAR 26.202(a)(2)). The introduction to the rule states, "the local area set-aside may be the whole of, or some subpart of, the affected area (e.g., one or more counties, including across state lines)."
  
  
• The set-aside may be used together with other set-asides, such as those for small businesses (see FAR 26.202(a)(3)).
  
  
• For acquisitions using the local area set-aside, the contracting officer must insert FAR 52.226-3, Disaster or Emergency Area Representation (this provision is not in the Online Representations and Certifications Application (ORCA) database); FAR 52.226-4, Notice of Disaster or Emergency Area Set-Aside; and FAR 52.226-5, Restrictions on Subcontracting Outside Disaster or Emergency Area (for services, at least 50% of the cost of personnel must be expended for contractor employees or employees of other businesses residing or primarily doing business in the area; for supplies, work for at least 50% of the cost of manufacturing the supplies (not including the cost of materials) must be performed by the contractor or employees of other businesses residing or primarily doing business in the area).

NOTE: This set-aside is not included in the new FAR Part 18, Emergency Acquisitions (see the August 2006 Federal Contracts Perspective article "New FAR Part Consolidates Emergency Authorities; Earned Value Management Coverage Added"). Undoubtedly this is because the two rules were on separate tracks and happened to be published one month apart. Until a cross-reference is added to FAR Part 18, contracting officers involved in major disaster or emergency assistance acquisitions will have to remember this set-aside exists.

Denett Confirmed as OFPP Administrator

On August 4, the U.S. Senate unanimously confirmed the nomination of Paul A. Denett to be Administrator of the Office of Federal Procurement Policy (OFPP). OFPP plays a central role in shaping the policies and practices federal agencies use to acquire the goods and services they need to carry out their responsibilities. Mr. Denett has served as counselor to the Office of Management and Budget's (OMB) Deputy Director for Management Clay Johnson, providing key guidance to federal agencies to improve agency and program performance (OFPP is part of OMB).

Denett joined OMB after serving from 2003 to 2006 as ESI International's Vice President for Contracting Programs, where he supported contract and acquisition training in both the government and commercial world. From 2001 to 2002, he was program director for Logistics Management Institute (LMI) and focused on the strategic improvement of government acquisition and grant management issues.

Denett is a retired senior executive from the federal service, having served as Director of Administration and Senior Procurement Executive for the Department of the Interior, and as Vice Chairman of the government-wide Procurement Executives Council (PEC), now called the Federal Acquisition Council (FAC).

He received many prestigious awards during his federal career, including a Presidential Rank Award. He has a MSA degree with emphasis in acquisition from George Washington University.

For more on Paul Denett, see the June 2006 Federal Contracts Perspective article "Denett Nominated to be OFPP Administrator," and the July 2006 Federal Contracts Perspective article "Denett Testifies for OFPP Position."

USDA Proposes 20 More Biobased Products

The U.S. Department of Agriculture (USDA) is proposing to add the following 20 sections to Title 7 of the Code of Federal Regulations (CFR) Part 2902, Guidelines for Designating Biobased Products for Federal Procurement, to identify biobased products that would be given preference in federal procurements as provided under Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA), and proposing minimum biobased content for each of these items.

Once USDA designates an item under the "Federal Biobased Products Preferred Procurement Program" (FB4P), procuring agencies must purchase biobased products within these designated items where the purchase price of the procurement item exceeds $10,000 or where the quantity of such items or functionally equivalent items purchased over the preceding fiscal year equaled $10,000 or more, unless products within a designated item: (1) are not reasonably available within a reasonable period of time; (2) fail to meet the reasonable performance standards of the procuring agencies; or (3) are available only at an unreasonable price. The $10,000 threshold applies to federal agencies as a whole and not to agency subgroups such as regional offices or subagencies of the larger federal department or agency.

Also, USDA is amending 7 CFR 2902 to be consistent with the statutory changes to FSRIA Section 9002 made by the Energy Policy Act of 2005. Those changes make federal contractors expressly subject to the procurement preference provisions of Section 9002 (see the definition of "procuring agency" in Section 2902.2, Definitions). In addition, USDA is amending Part 2902 to: (1) clarify that biobased products from certain designated countries (as defined in FAR 25.003, Definitions) must be treated by procuring agencies as eligible for the procurement preference under FSRIA (see new paragraph (b)(3) of Section 2902.4, Procurement Programs); and (2) clarify that the procurement preference provisions do not apply to purchases of biobased items that are not the direct result of contracts with procuring agencies (see paragraph (d) of Section 2902.3, Applicability to Federal Procurements).

Comments on these proposed and interim rules may be submitted by any of the following methods: (1) http://www.regulations.gov; (2) http://www.biobased.oce.usda.gov; (3) e-mail: fb4p@oce.usda.gov (include "RIN number 0503-AA30" and "Proposed Designation of Items"on the subject line for comments on Sections 2902.16 through 2902.25; "RIN number 0503-AA31" and "Proposed Designation of Items" on the subject line for comments on Sections 2902.26 through 2902.35; and "RIN number 0503-AA26" and "Amendments to Guidelines" on the subject line for comments on the interim rule changes); or (4) mail/commercial/hand delivery to: Marvin Duncan, USDA, Office of the Chief Economist, Office of Energy Policy and New Uses, Room 4059, South Building, 1400 Independence Avenue, SW, MS-3815, Washington, DC 20250-3815. Comments on the 20 proposed biobased products are due October 16, 2006. Comments on the interim rule changes are due August 28, 2006.

For more on the FB4P and the first six biobased items designated by USDA, see the February 2005 Federal Contracts Perspective article "USDA Publishes Biobased Products Guidelines," the August 2005 Federal Contracts Perspective article "Agriculture Proposes Six Biobased Items," and the April 2006 Federal Contracts Perspective article "USDA Designates Six Biobased Products for Procurement."

NASA Proposes Information Technology Security Changes

The National Aeronautics and Space Administration (NASA) is proposing to amend NASA FAR Supplement (NFS) 1852.204-76, Security Requirements for Unclassified Information Technology Resources, to reflect the updated requirements of NASA Procedural Requirements (NPR) 2810, "Security of Information Technology." The NPR was recently revised to address increasing cyber threats and to ensure consistency with the Federal Information Security Management Act (FISMA), which requires agencies to protect information and information systems commensurate with the sensitivity of the information processed, transmitted, or stored.

NFS 1852.204-76 is applicable to all NASA contracts that require contractors to: (1) have physical or electronic access to NASA's computer systems, networks, or information technology infrastructure; or (2) use information systems to generate, store, or exchange data with NASA or on behalf of NASA, regardless of whether the data resides on a NASA or a contractor's information system. NFS 1852.204-76 would be revised to:

• Expand requirements for information technology security plans to include a risk assessment in accordance with National Institute of Standards and Technology (NIST) Special Publication (SP) 800-30, Risk Management Guide for Information Technology Systems, and an assessment in accordance with Federal Information Processing Standards (FIPS) 199, Standards for Security Categorization of Federal Information and Information Systems (paragraph b);
  
  
• Add a requirement for a contingency plan in accordance with NIST SP 800-34, Contingency Planning Guide for Information Technology Systems (paragraph (b)(2)); and
  
  
• Change of the physical security requirement from "National Agency Check" to "National Agency Check with Inquiries" (paragraph (c)(1)).

In addition, NFS 1804.470, Security Requirements for Unclassified Information Technology (IT) Resources, would be revised to reflect the changes in NFS 1852.204-76.

Comments should be submitted on or before October 2, 2006, identified by "RIN Number 2700-AD26," by any of the following methods: (1) http://www.regulations.gov; (2) by e-mail to Ken.stepka@nasa.gov; or (3) to Ken Stepka, NASA Headquarters, Office of Procurement, Analysis Division, Washington, DC 20546.

Administrative Changes to the DFARS

The Department of Defense (DOD) issued three administrative final rules and one proposed rule that substantially revises an earlier proposed rule on export-controlled information and technology.

• Contract Reporting: This final rule removes the text from DFARS Subpart 204.6, Contract Reporting, and relocates the text pertaining to DD Form 350, Individual Contracting Action Report, to the "Procedures, Guidance, and Information" (PGI), which consists of all mandatory and non-mandatory internal DOD procedures, non-mandatory guidance, and supplemental information. All that remains in DFARS Subpart 204.6 is a cross-reference to the PGI text.
  
  In addition, the instructions for completion of the DD Form 350 in DFARS 253.204-70 is relocated to the PGI, and DFARS 253.204-71, DD Form 1057, Monthly Summary of Contracting Actions, is deleted. (EDITOR'S NOTE: For more on the PGI, see the December 2004 Federal Contracts Perspective article "DFARS Transformation in Full Gear, 'Procedures, Guidance, and Information' Added." The PGI is available at http://www.acq.osd.mil/dpap/dars/pgi.)
  
  
• Contract Administration Functions: This final rule amends DFARS 242.302, Contract Administration Functions, to update text addressing functions performed by DoD contract administration offices, as follows:
  
  
  • It amends paragraph (a)(12) to clarify that the contract administration office is responsible for payment administration.
    
    
  • It deletes paragraph (a)(33), which consists of obsolete text on mobilization production planning surveys.
    
    
  • It redesignates paragraph (a)(41), which states that the Defense Contract Management Agency (DCMA) is responsible for reviewing earned value management system (EVMS) plans and verifying contractor compliance, as paragraph (a)(S-71), and adds the sentence "The contracting officer shall not retain this function."
    
    
  • It deletes procedures for designation of contract payment offices in paragraph (a)(13)(B) and relocates the text to the PGI.
  
  One respondent submitted comments on the proposed rule. DOD did not accept the comments, so it adopted the proposed rule as final without changes. For more on the proposed rule, see the December 2005 Federal Contracts Perspective article "DFARS Amended to Address Telecommunications Services."
  
  
• Threshold for Small Business Specialist Review: This final rule amends DFARS 219.201, Policy, to revise text pertaining to DOD implementation of small business programs. The rule makes the following changes:
  
  
  • Paragraph (a), which contains an unnecessary general policy statement regarding attainment of small disadvantaged business goals, is deleted.
    
    
  • Paragraph (d)(10)(A) is revised to eliminate mandatory requirements for small business specialists to review proposed acquisitions that are under $100,000 and totally set aside for small business concerns.
    
    
  • Paragraph (d)(10)(C) is revised to reference paragraph (a) of FAR 19.402, Small Business Administration Procurement Center Representatives. FAR 19.402(a) was amended by FAC 2005-10 to provide internal procedures for when the FAR requires interaction with a procurement center representative and one has not been assigned to the procuring activity or contract administration office (for more on FAC 2005-10, see the July 2006 Federal Contract Perspectives article "FAC 2005-10 Mandates Electronic Wage Determinations").
    
    
  • Paragraph (e), which pertains to the appointment and functions of DOD small business specialists, is deleted and relocated to the PGI.
  
  Five respondents submitted comments in response to the proposed rule. As a result of the comments, the final version of paragraph (d)(10) is revised. Paragraph (d)(10), which required small business specialists to review and make recommendations for all acquisitions over $10,000, was proposed to be revised to exempt from this review those acquisitions that are "within the scope and under the terms of the existing contract," or "under $100,000 that are totally set aside for small business concerns..." One respondent commented that this change would not provide for a review of proposed task orders under multiple award contracts. DOD agreed, and decided to eliminate "within the scope and under the terms of the existing contract" to make it clear that acquisitions being accomplished through the placement of task orders are not excluded from small business specialist review. In addition, the phrase "including orders placed against Federal Supply Schedule contracts" has been added to reinforce this requirement.
  
  For more on the proposed rule, see the May 2004 Federal Contracts Perspective article "Proposed DFARS Transformation Continues."
  
  
• Export-Controlled Information and Technology: This proposed rule would add DFARS Subpart 204.73, Export-Controlled Information and Technology, and three clauses to address requirements for preventing unauthorized disclosure of export-controlled information and technology under defense contracts.
  
  A proposed rule was published July 12, 2005, to address requirements for preventing unauthorized disclosure of export-controlled information and technology (see the August 2005 Federal Contracts Perspective article "DOD Addresses Berry Amendment, Hawaiian Organizations"). The reason for this proposed rule was to address a DOD Inspector General (IG) report which found that some contractors granted foreign nationals access to unclassified export-controlled technology without proper authorization. The DODIG concluded that DOD does not have adequate processes to identify unclassified export-controlled information or technology, nor to prevent unauthorized disclosure to foreign nationals by its contractors.
  
  DOD received comments from 145 individuals and organizations on the proposed rule, primarily that the proposed rule was incomplete and conflicted with existing regulations. In response, DOD is publishing this second proposal, which is a substantially rewritten version of the initial proposed rule.
  
  The second proposed rule recognizes contractor and DOD responsibilities for complying with the Department of State's International Traffic in Arms Regulations (ITAR) (http://www.pmdtc.org/itar_index.htm) and the Department of Commerce's Export Administration Regulations (EAR) (http://www.access.gpo.gov/bis/ear/ear_data.html) (proposed DFARS 204.7303, Policy). The regulatory requirements that were in the initial proposed rule (such as the requirements of badging, training, and segregated work areas) are not included in the second proposed rule.
  
  Under this proposed rule, the requiring activity must review acquisitions to determine if, during performance of the contemplated contract, the contractor will generate or require access to export-controlled information or technology. The contracting officer will rely on input from the requiring activity when including the appropriate clause in each solicitation and contract: DFARS 252.204-70XX, Requirements for Contracts Involving Export-Controlled Information or Technology, in contracts for research and development, supplies, or services that will involve export-controlled information or technology; DFARS 252.204-70YY, Requirements Regarding Access to Export-Controlled Information or Technology -- Fundamental Research, in solicitations and contracts for fundamental research that will not involve export-controlled information or technology; and DFARS 252.204-70ZZ, Requirements Regarding Access to Export-Controlled Information or Technology, in solicitations and contracts for research and development when neither DFARS 252.204-70XX nor or 252.204-70YY will be included, or for supplies and services, when the requiring activity is unable to determine that export-controlled information or technology will not be involved.
  
  For contracts that do not involve generation of or access to export-controlled information or technology, DFARS 252.204-70YY and DFARS 252.204-70ZZ require that the contract be modified if, during performance, either contractual party becomes aware that the contractor will need to generate or have access to export-controlled information or technology.
  
  Comments on this proposed rule must be submitted no later than October 13, 2006, by any of the following methods: (1) eRulemaking Portal: http://www.regulations.gov; (2) e-mail: dfars@gsa.gov (include "DFARS Case 2004-D010" 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.

Proposed FAR Rules Would Address ID Verification, IPv6

Two rather technical proposed rules that would amend the FAR were recently published for comments:

• Requirement to Purchase Approved Authentication Products and Services: This proposed rule would amend FAR Subpart 4.13, Personal Identity Verification of Contractor Personnel, to address the acquisition of products and services for personal identity verification that comply with requirements in Homeland Security Presidential Directive (HSPD) 12, "Policy for a Common Identification Standard for Federal Employees and Contractors," and Federal Information Processing Standards Publication (FIPS PUB) 201, "Personal Identity Verification (PIV) of Federal Employees and Contractors." (EDITOR'S NOTE: OMB guidance on the implementation of HSPD-12 is available at http://www.whitehouse.gov/omb/memoranda/fy2005/m05-24.pdf (HSPD-12 is Attachment B to the guidance). FIPS PUB 201 is available at http://www.smartcardalliance.org/pdf/industry_info/FIPS_201_022505.pdf.)
  
  FAC 2005-07 added FAR Subpart 4.13, but if merely required compliance with HSPD-12 and FIPS PUB 201 (see the February 2006 Federal Contracts Perspective article "Performance-Based Acquisition Procedures Revised"). This proposed rule would add FAR 4.1302, Acquisition of Approved Products and Services for Personal Identity Verification, which would require agencies to purchase only approved personal identity verification products and services. One way to comply with this requirement would be to acquire approved products and services from the General Services Administration (GSA), Federal Supply Schedule 70, Special Item Number (SIN) 132-62, HSPD-12 Product and Service Components. The other way to comply would be for the agency to ensure the products and services comply with FIPS PUB 201 by (1) certifying the products and services procured meet all applicable federal standards and requirements; (2) ensuring interoperability and conformance to applicable federal standards for the lifecycle of the components; and (3) maintaining a written plan for ensuring ongoing conformance to applicable Federal standards for the lifecycle of the components. (EDITOR'S NOTE: GSA has developed a website (http://www.idmanagement.gov) that provides a one-stop shop for citizens, businesses, and government entities interested in identity management activities. The site provides information on HSPD-12 and eAuthentication acquisition vehicles and processes.)
  
  Comments on the proposed rule, identified as "FAR case 2005-017," must be submitted by October 23, 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.
  
  
• Internet Protocol Version 6 (IPv6): This proposed rule would amend three FAR sections to to require the IPv6-capable products be included in information technology procurements to the maximum extent practicable.
  
  The internet protocol is one of the primary mechanisms that define how and where information moves across networks. Currently, IPv4 is the industry standard, but IPv6 will significantly increase internet address space, promote flexibility and functionality, and enhance security. Agencies can reduce costly upgrades and the complexity of transitioning to IPv6 by integrating IPv6 requirements into federal contracts now.
  
  On August 2, 2005, OMB issued Memorandum M-05-22, Transition Planning for Internet Protocol Version 6 (IPv6)) (http://www.whitehouse.gov/omb/memoranda/fy2005/m05-22.pdf), giving guidance to agencies to transition from IPv4 to IPv6, and it required agencies to implement full use of IPv6 in network backbones by June 2008. OMB further required, to the maximum extent practicable, that all new information technology procurements include IPv6 capable products and systems. Any exceptions to the use of IPv6 will require advance written approval from the agency chief information officer (CIO).
  
  To implement OMB Memorandum M-05-22, this proposed rule would:
  
  
  • Add a new paragraph (b)(4)(ii)(A)(2) to FAR 7.105, Contents of Written Acquisition Plans, to require agencies to address in the acquisition plan how the acquisition will comply with IPv6.
    
    
  • Add paragraph (e) to FAR 12.202, Market Research and Description of Agency Need, to state that requirements documents for information technology shall include IPv6-capable products and services.
    
    
  • Add paragraph (e) to FAR 39.101, Policy [for acquisition of information technology], to state that agencies shall include the appropriate requirements for IPv6 capable products and services when acquiring information technology, and that agencies must establish procedures for granting exceptions.
  
  Comments on the proposed rule, identified as "FAR case 2005-041," must be submitted by October 23, 2006, by any of the methods mentioned above.

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