FedGovContracts.com

Panoptic Enterprises'

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

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.

• Payments Under T&M and LH Contracts: This rule amends FAR 16.601, Time-and-Material Contracts, and FAR 52.232-7, Payments Under Time-and-Materials and Labor-Hour Contracts, to define "materials" as consisting of: direct materials; subcontracts for supplies and ancillary services; other direct costs; applicable indirect costs; and supplies and ancillary services transferred between divisions, subdivisions, subsidiaries, or affiliates of the contractor under a common control. (EDITOR'S NOTE: The FAR had not defined "materials" previously.) Also, FAR 52.232-7 is further amended to specifically state that the government does not pay profit or fee to the prime contractor on materials except when the contractor furnishes its own materials that meet the "commercial item" definition.
  
  In addition, the rule adds three provisions:
  
  
  • FAR 52.216-29, Time-and-Materials/Labor-Hour Proposal Requirements -- Non-Commercial Item Acquisition with Adequate Price Competition. This provision instructs offerors that they may identify the labor rates they are proposing in either one of three different ways: (1) offerors may propose blended rates under which labor hours will be paid at the same rate, regardless of whether the individual performing the labor works for the prime contractor or a subcontractor; (2) offerors may offer labor hour rates that include two sets of rates, one set for individuals employed by the offeror and a second set for individuals employed by subcontractors; or (3) offerors may offer multiple sets of labor hour rates, one set for individuals employed by the offeror and additional sets for each subcontractor for individuals employed by different subcontractors. "If authorized by agency procedures, the contracting officer may amend the provision to make mandatory one of the three approaches...and/or to require the identification of all subcontractors, divisions, subsidiaries, or affiliates included in a blended labor rate" (revised paragraph (e) of FAR 16.601, Time-and Materials Contracts).
    
    
  • FAR 52.216-30, Time-and-Material/Labor-Hour Proposal Requirements -- Noncommercial Item Acquisitions Without Adequate Price Competition. This provision instructs offerors that they must offer multiple sets of labor hour rates: one set for individuals employed by the offeror, and additional sets for individuals employed by each subcontractor.
    
    
  • FAR 52.216-31, Time-and-Material/Labor-Hour Proposal Requirements -- Commercial Item Acquisitions. This provision instructs offerors that they must identify, for each labor hour rate, if the rate applies to only the offeror, a subcontractor, an affiliate of the offeror, or any combination.
  
  Comments were received from 17 respondents in response to the proposed rule (see the October 2005 Federal Contracts Perspective article "Time-and-Materials Proposed for Commercial Services"). In response to the comments, the three provisions were added and several other clarifications were made.
  
  
• Additional Commercial Contract Types: FAR 12.207, Contract Type, is revised to authorize the use of T&M and LH contracts for commercial services when the service is acquired under a contract awarded using: (1) competitive procedures (for example, the procedures in FAR 6.102, Use of Competitive Procedures; the set-aside procedures in FAR Subpart 19.5, Set-Asides for Small Business; or competition conducted in accordance with FAR Part 13, Simplified Acquisition Procedures); (2) the procedures in FAR Subpart 6.3, Other Than Full and Open Competition, provided the agency receives offers that satisfy the government's expressed requirement from two or more responsible offerors; or (3) the fair opportunity procedures in FAR 16.505, Ordering, if placing an order under a multiple award delivery-order contract (revised paragraph (b)(1) of FAR 12.207, Contract Type). Previously, acquisitions of commercial items were restricted to firm-fixed-price and fixed-price with economic price adjustment contracts.
  
  Before entering into a T&M or LH contract for commercial services, the contracting officer must: (1) execute a determination and findings (D&F) for the contract that no other contract type authorized by FAR Subpart 12.2, Special Requirements for the Acquisition of Commercial Items, is suitable (but see FAR 12.207(c) for indefinite-delivery contracts); (2) include a ceiling price in the contract or order that the contractor exceeds at its own risk; and (3) authorize any subsequent change in the ceiling price only upon a determination, documented in the contract file, that it is in the best interest of the procuring agency to change the ceiling price (FAR 12.207(b)(1)(ii)).
  
  Each required D&F must contain sufficient facts and rationale to justify that no other contract type is suitable. At a minimum, the D&F must: (1) include a description of the market research conducted; (2) establish that it is not possible at the time of placing the contract or order to accurately estimate the extent or duration of the work or to anticipate costs with any reasonable degree of certainty; (3) establish that the requirement has been structured to maximize the use of firm-fixed-price or fixed-price with economic price adjustment contracts on future acquisitions for the same or similar requirements (for example, by limiting the value or length of the T&M/LH contract or order; or establishing fixed prices for portions of the requirement); and (4) describe actions planned to maximize the use of firm-fixed-price or fixed-price with economic price adjustment contracts on future acquisitions for the same requirements (FAR 12.207(b)(2)).
  
  If the T&M/LH contract, with options, exceeds three years, the D&F must be approved by the head of the contracting activity (FAR 12.207(b)(3) and FAR 16.601(d)(1)(ii)).
  
  Comments were received from 13 respondents in response to the proposed rule (see the October 2005 Federal Contracts Perspective article "Time-and-Materials Proposed for Commercial Services"), and many changes and clarifications were made to the final rule.

Proposed FAR Rules Stress Conservation

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

• Biobased Products Preference Program: To implement Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA) (Public Law 107-171), which requires that federal agencies consider maximum practicable use of biobased products when acquiring products and services, FAR Subpart 23.4 would be retitled "Use of Products Containing Recovered Materials and Biobased Products" (currently "Use of Recovered Materials") and revised to incorporate the biobased procurement preference. Section 9002 requires the U.S. Department of Agriculture (USDA) to: (1) designate items which are or can be produced with biobased products, (2) establish recommended practices with respect to the procurement of products within the designated items, and (3) provide information as to the availability, relative price, performance, and environmental and public health benefits of such items.
  
  In January 2005, the USDA published, in Title 7 of the Code of Federal Regulations (CFR), a new Part 2902, Guidelines for Designating Biobased Products for Federal Procurement (7 CFR Part 2902). These guidelines address how USDA will conduct the designation process, how it will determine the biobased content and other attributes of specific products, and cost sharing for product testing. In addition, these guidelines include the Section 9002 requirement that federal agencies have a procurement program that assures within designated biobased products will be purchased to the maximum extent practicable, an agency promotion program, and provisions for annual review and monitoring of the agency's procurement program.
  
  So far, USDA has designated six items in which biobased products will receive procurement preference, and has established minimum biobased content for each of these items (the six items currently designated are mobile equipment hydraulic fluids; roof coatings; water tank coatings; diesel fuel additives; penetrating lubricants; and bedding, bed linens, and towels -- the list is available at http://www.biobased.oce.usda.gov). In addition, USDA has proposed designating 30 additional items.
  
  To implement the biobased procurement preference program, it was decided to include USDA's regulations with those of the Environmental Protection Agency's (EPA) recovered materials program in FAR Subpart 23.4 because of the similarities between the two programs. By integrating the regulations implementing the two programs, efficiencies can be achieved by eliminating repetitive requirements.
  
  FAR 23.400, Scope of Subpart, would be revised to state that agencies are required to comply with the subpart for both the biobased and recovered materials programs if: (1) the price of the designated item exceeds $10,000, or (2) the aggregate amount paid for designated items, or for functionally equivalent designated items, in the preceding fiscal year was $10,000 or more. However, FAR 23.404, Agency Affirmative Procurement Programs, and FAR 23.405, Procedures, would exempt agencies from designated items if it is determined that they cannot be acquired: (1) competitively within a reasonable time frame; (2) meeting reasonable performance standards; or (3) at a reasonable price.
  
  Comments on the proposed rule must be submitted no later than February 26, 2007, by any of the following means: (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. Identify such comments as "FAR case 2004-032."
  
  For more on the FB4P, the first six biobased items designated by USDA, and the 20 proposed biobased products, 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," the April 2006 Federal Contracts Perspective article "USDA Designates Six Biobased Products for Procurement," the September 2006 Federal Contracts Perspective article "USDA Proposes 20 More Biobased Products," and the November 2006 Federal Contracts Perspective article "10 More Biobased Items Proposed."
  
  
• Implementation of Section 104 of the Energy Policy Act of 2005: The purpose of this proposed rule is to ensure compliance with the mandate in Section 104 of the Energy Policy Act of 2005 to promote energy efficiency when specifying or acquiring energy-consuming products. Section 104 requires that all acquisitions of energy consuming-products and all contracts for energy-consuming products require acquisition of ENERGY STAR or Federal Energy Management Program (FEMP) designated products.
  
  The ENERGY STAR program is intended to protect the environment through energy efficient products and practices. The original focus of the ENERGY STAR program was office equipment, but it has been expanded to include many other consumer products as well as business products. The ENERGY STAR program allows manufacturers of products with superior energy efficiency that meet or exceed specified criteria to use the ENERGY STAR logo on their products to assist consumers in selecting the energy efficient products. Its website is http://www.energystar.gov.
  
  FEMP was designed to reduce energy consumption in federal buildings. FEMP publishes Energy Efficient Purchasing specifications that identify the energy efficiency requirements. Energy efficiency in the FEMP program is targeted to those products in the top 25% of energy efficiency in their class as well as products with low standby power. Its website is http://www1.eere.energy.gov/femp/.
  
  FAR 23.203, Energy-Efficient Products, currently requires the purchase of ENERGY STAR or other energy-efficient items listed on the FEMP Product Energy Efficiency Recommendations list "if life-cycle cost-effective and available." But this is frequently overlooked in services and construction contracts because there is no clause to implement the requirements. Therefore, this proposed rule would require the inclusion of FAR 52.223-XX, Energy Efficiency in Energy-Consuming Products, in solicitations and contracts when energy-consuming products listed in the ENERGY STAR program or FEMP will be (1) delivered by the contractor; (2) furnished by the contractor in the performance of services at a federally-controlled facility; or (3) specified in the design, construction, renovation, or maintenance of a facility. However, the clause prescription in FAR 23.205, Procurement Exemptions, would exempt contracts from this requirement when the contracting officer determines that (1) no ENERGY STAR or FEMP-designated product is reasonably available that meets the functional requirements of the agency; or (2) no ENERGY STAR or FEMP-designated product is cost effective over the life of the product taking energy cost savings into account. However, "such determinations should be rare as such products are normally life-cycle cost effective."
  
  Comments on the proposed rule must be submitted no later than February 5, 2007, by any of the methods mentioned above. Identify such comments as "FAR case 2006-008."

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:

• FAR 32.1003, Criteria for Use, would be revised to clarify the use of PBPs on fixed-priced line items and orders and on indefinite delivery-indefinite quantity (IDIQ) and non-indefinite delivery contracts -- that is, PBPs may be authorized provided the contract or order does not provide for progress payments.
  
  
• FAR 32.1004, Procedures, would be revised to clarify that "the signing of contracts or modifications, the exercise of options, the passage of time, or other such occurrences do not represent meaningful efforts or actions and shall not be identified as events or criteria for performance-based payments," and "the contract must specifically identify cumulative events or criteria and identify which events or criteria are preconditions for the successful achievement of each cumulative event or criterion." In addition, it would clarify that "the contracting officer shall not limit the amount of a performance-based payment to a percentage of actual incurred cost for the scheduled event or performance criteria." Finally it would state "if the contracting officer anticipates that the cost of providing performance-based payments would have a significant impact on determining the best value offer, the solicitation should state that the evaluation of the offeror's proposed prices will include an adjustment to reflect the estimated cost to the government of providing each offeror's proposed performance-based payments."
  
  
• FAR 32.1007, Administration and Payment of Performance-Based Payments, would be revised to prohibit actual cost verification unless the purpose is to assist in establishing revised or new PBP milestones or values.

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:

• Update organizational title changes resulting from Office of the Secretary (OS) and Operating Division (OPDIV) reorganizations;
  
  
• Eliminate of procedural guidance no longer deemed necessary;
  
  
• Change contracting review and approval authorities to levels more appropriate to simplification, streamlining, and empowerment;
  
  
• Bring the HHSAR in line with the latest amendments to the FAR;
  
  
• Clarify authorities for selecting and terminating contracting officers;
  
  
• Establish minimum training requirements for certain positions;
  
  
• Specifically reference regulations of other federal agencies; and
  
  
• Update the text of clauses required to be inserted in solicitations and contracts.

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.

• Labor Reimbursement on DOD Non-Commercial T&M and LH Contracts: This interim rule supplements the FAC 2005-15 rule that clarifies payment procedures for non-commercial T&M and LH contracts (see the preceding article). That rule adds FAR 52.216-29, Time-and-Materials/Labor-Hour Proposal Requirements -- Non-Commercial Item Acquisition with Adequate Price Competition, which prescribes three options for establishing fixed hourly rates on competitively awarded non-commercial T&M and LH contracts. The prescription for FAR 52.216-29 (in FAR 16.601(e)) provides, "If authorized by agency procedures, the contracting officer may amend the provision to make mandatory one of the three approaches...and/or to require the identification of all subcontractors, divisions, subsidiaries, or affiliates included in a blended labor rate."
  
  DOD believes it is in its best interests to make mandatory the option requiring separate fixed hourly rates that include profit for each category of labor performed by the contractor and each subcontractor. Therefore, DFARS 252.216-7002, Alternate A, Time-and-Materials/Labor-Hour Proposal Requirements -- Non-Commercial Item Acquisition with Adequate Price Competition, is added. This Alternate A consists of a paragraph (c) which is to be used in place of FAR 52.216-29(c), and it requires the offeror to "establish fixed hourly using separate rates for each category of labor to be performed by each subcontractor and for each category of labor to be performed by the offeror, and for each category of labor to be transferred between divisions, subsidiaries, or affiliates of the offeror under a common control."
  
  Comments on the interim rule must be submitted by February 12, 2007, identified as "DFARS Case 2006-D030," 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, Attn: Robin Schulze, 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.
  
  
• Contracting Officers' Representatives: This final rule amends DFARS 201.602-2, Responsibilities [of Contracting Officers], to clarify the authority of a contracting officer's representative (COR) by revising "a COR may not be delegated authority to make any commitments or changes that affect price, quality, quantity, delivery, or other terms and conditions of the contract..." to "a COR has no authority to make any commitments..." In addition, DFARS 201.602-2(6), which requires the COR to maintain files on each assigned contract, is relocated to the "Procedures, Guidance, and Information" (PGI), which consists of all mandatory and non-mandatory internal DOD procedures, non-mandatory guidance, and supplemental information. (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.).
  
  One comment was submitted in response to the proposed rule, and it was that the contracting officer should be required to include a copy of the written designation of the COR in the official contract file. In response, this requirement is added to PGI 201.602-2, Responsibilities. For more on the proposed rule, see the June 2006 Federal Contracts Perspective article "Defense Requires RFID Tags for Additional Commodities and Locations."
  
  
• Levy on Payments to Contractors: This finalizes, with changes, the interim rule that added DFARS Subpart 232.71, Levies on Contractor Payments, and the corresponding clause at DFARS 252.232-7010, to require DOD contractors to promptly notify the contracting officer if an Internal Revenue Service (IRS) levy on contract payments may result in an inability to perform a contract.
  
  Six respondents submitted comments on the interim rule. In response to the comments, the following changes were made to the final rule:
  
  
  • DFARS 212.301, Solicitation Provisions and Contract Clauses for the Acquisition of Commercial Items, is amended to add a prescription for use of DFARS 252.232-7010 in contracts for commercial items.
    
    
  • DFARS 232.7101, Policy and Procedures, and DFARS 252.232-7010 are amended to revise the requirement that the contractor "promptly notify the contracting officer when a levy that will jeopardize contract performance is imposed on a DOD contract" to "promptly notify the contracting officer when a levy may result in an inability to perform the contract..."
    
    
  • DFARS 232.7102, Contract Clause, is revised to exclude micro-purchases from the requirement to use DFARS 252.232-7010.
  
  For more on the interim rule, see the October 2005 Federal Contracts Perspective article "RFID Requirements Included in DFARS."
  
  
• Contract Pricing and Cost Accounting Standards: This finalizes, with changes, the proposed rule to update text addressing contract pricing matters and cost accounting standards (CAS) administration. It implements statutory provisions regarding exceptions to cost or pricing data requirements and waiver of cost accounting standards, and relocates internal DOD procedures relating to pricing considerations and cost accounting standards to the PGI.
  
  The most significant changes are:
  
  
  • Section 817 of the National Defense Authorization Act for Fiscal Year 2003 (Public Law 107-314) is implemented with the addition of text to DFARS 215.403-1, Prohibition on Obtaining Cost or Pricing Data, and DFARS 230.201-5, Waiver [of CAS], which states that such waivers may be granted only when: (1) the property or services cannot reasonably be obtained under the contract, subcontract, or modification without the grant of the exception or waiver; (2) the price can be determined to be fair and reasonable without the submission of certified cost and pricing data or the application of cost accounting standards; and (3) there are demonstrated benefits to granting the exception or waiver. (EDITOR'S NOTE: For more on Section 817, see the January 2003 Federal Contracts Perspective article "2003 Defense Authorization Act Limits Task Orders, Extends FAR Subpart 13.5 Until January 1, 2004.")
    
    
  • DFARS Subpart 230.70, Facilities Capital Employed for Facilities in Use, and DFARS Subpart 230.71, Facilities Capital Employed for Facilities Under Construction, are eliminated, and some of the text from those two subparts is transferred to DFARS 215.404-4, Profit, or DFARS 215.404-73, Alternate Structured Approaches, respectively, because the material pertains to the calculation of weighted guidelines for profit, and not cost accounting standards.
    
    
  • Much of DFARS Subpart 215.4, Contract Pricing, is transferred to the PGI because it is not regulatory, but rather instructions, information, and guidance.
  
  One respondent submitted comments on the proposed rule, questioning the proposed relocation of the weighted guidelines profit analysis procedures from DFARS Subpart 215.4 to the PGI because the considerations that DOD contracting officers use to develop profit objectives have a significant impact on industry. DOD agreed and retained the weighted guidelines procedures in DFARS Subpart 215.4, except for DFARS 215.404-70, DD Form 1547, Record of Weighted Guidelines Method Application, which merely provides a general description of the DD Form 1547, and DFARS 215.404-76, Reporting Profit and Fee Statistics, which deals exclusively with internal reporting procedures.
  
  For more on the proposed rule, see the January 2006 Federal Contracts Perspective article "DFARS Amendments Address Task Order Contracts."
  
  
• Restriction on Carbon, Alloy, and Armor Steel Plate: This finalizes, with changes, the proposed rule to clarify the restriction in DFARS 225.7011, Restriction on Carbon, Alloy, and Armor Steel Plate, and the corresponding clause at DFARS 252.225-7030. This restriction was introduced in the 1992 DOD Appropriations Act (Public Law 102-172) and has been continued in subsequent appropriations acts.
  
  DFARS 225.7011-1, Restriction, stated "do not acquire any of the following types of carbon, alloy, or armor steel plate unless it is melted and rolled in the United States or Canada..." This final rule amends this statement to read "do not acquire any of the following types of carbon, alloy, or armor steel plate for use in a government-owned facility or a facility under the control of (e.g., leased by) DOD, unless it is melted and rolled in the United States or Canada..." A similar change is made to DFARS 252.225-7030.
  
  Two respondents submitted comments on the proposed rule. The proposed rule would have amended the DFARS 225.7011-1 and DFARS 252.225-7030 restriction to "do not acquire any of the following types of carbon, alloy, or armor steel plate as a raw material for use in a government-owned facility..." However, one respondent stated that carbon, alloy, and armor steel plate is not a "raw material," but rather a finished steel mill product. Therefore, "as a raw material" is deleted from the restrictive language in DFARS 225.7011-1 and DFARS 252.225-7030, and the following clarifying explanation is added: "(b) This restriction (1) applies to the acquisition of carbon, alloy, or armor steel plate as a finished steel mill product that may be used 'as is' or may be used as an intermediate material for the fabrication of an end product; and (2) does not apply to the acquisition of an end product (e.g., a machine tool), to be used in the facility, that contains carbon, alloy, or armor steel plate as a component."
  
  For more on the proposed rule, see the January 2006 Federal Contracts Perspective article "DFARS Amendments Address Task Order Contracts."
  
  
• Material Inspection and Receiving Report (MIRR): This rule finalizes, with changes, the proposed rule to revise DFARS Appendix F, Material Inspection and Receiving Report, to: (1) clarify the requirements in paragraphs (b)(21)(iii) and (b)(21)(iv)(D) of DFARS F-301, Preparation Instructions, for marking of shipments when a contractor's certificate of conformance is used as the basis for acceptance; and (2) remove the procedures for documenting government contract quality assurance performed at a subcontractor's facility (DFARS F-201, Instructions), and the procedures for distribution and correction of DD Form 250-1 documents (DFARS F-701, Distribution, and DFARS F-702, Corrected DD Form 250-1), and transfer them to the PGI as PGI F-201, PGI F-701, and PGI F-702, respectively.
  
  One respondent submitted comments on the proposed rule, objecting to the proposed revision of DFARS F-401, Distribution, to state that use of Wide Area WorkFlow-Receipt and Acceptance electronic form satisfies DD Form 250 distribution requirements. In response, DOD elected not to make the change, but instead publish a proposed rule addressing this issue (see the December 2006 Federal Contracts Perspective article "DFARS Changes Proposed on MIRRs, Fixed-Price Exception").
  
  For more on the proposed rule, see the August 2005 Federal Contracts Perspective article "DOD Addresses Berry Amendment, Hawaiian Organizations."
  
  
• Inflation Adjustment for Acquisition-Related Thresholds: This finalizes, with changes, the proposed rule to adjust acquisition-related thresholds for inflation as required by Section 807 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375), which requires adjustments in every year divisible by five (that is, 2005, 2010, etc.).
  
  The inflation adjustment factors in the proposed rule were calculated using of December 2004 data. For the final rule, data through October 2005 was used. This produced a slight increase in the calculated inflation adjustment factors. However, due to rounding, most thresholds in the proposed rule did not change and were adopted as final, with the following exceptions:
  
  
  • In DFARS 217.170, General, and DFARS 217.171, Multiyear Contracting for Services, the threshold for Congressional notification was increased from $565.5 million to $572.5 million.
    
    
  • In DFARS 237.170-2, Approval Requirements [for service contracts], the approval threshold is increased from $77.5 million to $78.5 million.
    
    
  • The threshold for consolidation of contract requirements in DFARS 207.170-3, Policy and Procedures, was not addressed in the proposed rule, but because the calculated threshold now rounds up to $5.5 million, from $5 million, the threshold is revised to $5.5 million.
    
    
  • The threshold at DFARS 216.203-4, Contract Clauses, for use of the economic price adjustment clauses at FAR 52.216-2, FAR 52.216-3, and FAR 52.216-4, was proposed to increase from $50,000 to $55,000. However, a subsequent revision to DFARS 216.203-4 specified the simplified acquisition threshold as applicable, so the proposed $55,000 threshold was superseded (for more on the superseding revision, see the August 2006 Federal Contracting Perspective article "DFARS Coverage on Required Sources of Supply Updated").
    
    
  • The threshold at DFARS 236.601, Policy, for Congressional notification of certain architect-engineer or construction design contracts, was proposed to increase from $500,000 to $550,000. However, a subsequent revision to DFARS 236.601 established $1 million as the threshold, so the proposed $550,000 threshold was superseded (for more on the superseding revision, see the November 2006 Federal Contracting Perspective article "DFARS Amended to Address Foreign Acquisitions").
  
  For more on the proposed rule, see the February 2006 Federal Contracts Perspective article "DOD Finalizes Many Proposed, Interim DFARS Rules." For more on similar adjustments made to the acquisition-related thresholds in the FAR, see the October 2006 Federal Contracts Perspective article "Micro-Purchase, Cost or Pricing Data, 8(a) Competition Thresholds Adjusted for Inflation." For more on the acquisition-related provisions of Public Law 108-375, see the November 2004 Federal Contracts Perspective article "FY 2005 Defense Authorization Act Directs Review of GSA Procedures, Permits A-76 Protests by Feds."

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.

Return to the Newsletters Library.

Return to the Main Page.