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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


January 2007
Vol. VIII, No. 1

CONTENTS


Time-and-Materials and Labor-Hour Contracts Authorized for Commercial Services
Proposed FAR Rules Stress Conservation
Increased Use of Performance-Based Payments Proposed
HHSAR Updated, Brought Into Conformance with FAR
Year-End Closeout on DFARS Changes!
Nonmanufacturer Rule Waiver Proposed for Cargo Containers
Prompt Payment Interest Rate Set at 5 1/4%



Time-and-Materials and Labor-Hour Contracts
Authorized for Commercial Services

Federal Acquisition Circular (FAC) 2005-15 amends the Federal Acquisition Regulation (FAR) to implement two long-awaited rules pertaining to time-and-materials (T&M) and labor-hour (LH) contracts: one primarily addresses T&M and LH contracts for non-commercial items, and the other authorizes the use of T&M and LH contracts for commercial services under specific conditions.

EDITOR'S NOTE: While these rules authorize the expanded use of T&M and LH contracts, they do not provide carte blanche. These rules establish new requirements and responsibilities for both the government and the contractor.



Proposed FAR Rules Stress Conservation

During December, two conservation-related rules were proposed for the FAR:



Increased Use of Performance-Based Payments Proposed

To increase the use of performance-based payments (PBPs) as the method of contract financing on government contracts, and to improve the efficiency of performance-based payments when used on these contracts, a proposed rule would make the following changes to FAR Subpart 32.10, Performance-Based Payments:

Comments on the proposed rule must be submitted no later than February 12, 2007, by any of the methods mentioned above. Identify such comments as "FAR case 2005-016."



HHSAR Updated, Brought Into Conformance with FAR

The Department of Health and Human Services (HHS) is amending the HHS Acquisition Regulation (HHSAR) to make the following administrative and editorial changes concerning internal procedural matters which are administrative in nature:



Year-End Closeout on DFARS Changes!

The Department of Defense (DOD) decided to issue several Defense FAR Supplement (DFARS) changes before the end of the year -- some to finalize rules that had been proposed earlier in the year, others to implement statutory provisions, and one to bring the DFARS into compliance with the FAR.



Nonmanufacturer Rule Waiver Proposed for Cargo Containers

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for demountable cargo containers manufacturing (dry freight containers/connex boxes) under North American Industry Classification System (NAICS) code 336212 because SBA is unaware of any small business manufacturers supplying these products to the federal government.

SBA is inviting the public to comment on this proposed waiver, or provide information on potential small business sources for these products, by January 5, 2007, to Sarah Ayers, Program Analyst, U.S. Small Business Administration, Office of Government Contracting, 409 3rd Street, SW, Suite 8800, Washington, DC 20416.

EDITOR'S NOTE: Public Law 100-656, enacted November 15, 1988, requires those with federal contracts that are set-aside for small businesses or awarded through the 8(a) program to provide the product of a small business manufacturer or processor if the recipient is not the actual manufacturer or processor (see paragraph (f) of FAR 19.102, Size Standards). This is called the "nonmanufacturer rule." However, SBA may waive this requirement if there are no small business manufacturers or processors.

The SBA regulation on the nonmanufacturer rule is in Title 13 of the CFR, Business and Credit Administration, Part 121, Small Business Size Standards, under paragraph (b) of 121.406, How Does a Small Business Concern Qualify to Provide Manufactured Products Under Small Business Set-Aside or MED [Minority Enterprise Development] Procurements? The SBA regulation on the waiver of the nonmanufacturer rule is 13 CFR 121.1202, When Will a Waiver of the Nonmanufacturer Rule Be Granted for a Class of Products? A complete list of products for which the nonmanufacturer rule has been waived is available at http://www.sba.gov/GC/approved.html.



Prompt Payment Interest Rate Set at 5 1/4%

The Treasury Department has established 5 1/4% (5.25%) as the interest rate for the computation of payments made between January 1 and June 30, 2007, 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 (July 1, 2006, through December 31, 2006) was 5 3/4% (5.75%). The interest rate for January 1, 2006, through June 30, 2006, was 5 1/8% (5.125%).

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.



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