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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


November 2007
Vol. VIII, No. 11

CONTENTS


Disaster Declared for California Wildfires, Local Set-Asides Authorized by Homeland Security
Proposed FAR Rule Would Implement SmartBUY
Results of Workforce Competencies Survey Announced
SBA Proposes Changing Size Standard for Fuel Oil Dealers
DOD Addresses United Kingdom, Italian Procurements
EPA Proposes Award Term Policies and Procedures
Nonmanufacturer Rule Waiver for Irradiation Apparatus
HUDAR Adopts Debarment and Suspension Rules



Disaster Declared for California Wildfires,
Local Set-Asides Authorized by Homeland Security

On October 24, President Bush signed a major disaster declaration for California in response to the widespread wildfires in the southern part of the state during the later part of October. To implement appropriate actions, the Department of Homeland Security (DHS) has authorized set-asides for local firms doing business in the areas affected by the wildfires.

The counties affected by the presidential declaration and DHS' actions are Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and Ventura.

The Local Community Recovery Act of 2006 (Public Law 109-218) 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." The Federal Acquisition Regulation (FAR) was amended by Federal Acquisition Circular (FAC) 2005-12 to implement the Local Community Recovery Act (see the September 2006 Federal Contracts Perspective article "New Set-Aside Authorized for Major Disaster or Emergency Assistance Acquisitions"). FAC 2005-12 added FAR Subpart 6.6, Stafford Act Preference for Local Area Contractor, and amended 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 affected area. However, Section 694 of the DHS Appropriations Act or 2007 (Public Law 109-295) required justifications for expenditures to other than local firms and established criteria for transitioning work under existing contracts to local area organizations, firms, or individuals. Section 694 has not yet been implemented in the FAR. Therefore, DHS Chief Procurement Officer Elaine Duke has decided to take necessary actions to address the needs of those affected by the disaster while complying with Section 694.

The DHS directive states the following:

In other developments related to the California wildfires, the General Services Administration (GSA) has issued two notices:

Both these bulletins became effective on October 24, 2007, and will remain effective until January 24, 2008, unless extended or rescinded by GSA.

These bulletins, and all FMR and FTR bulletins, are located at http://www.gsa.gov/bulletin.



Proposed FAR Rule Would Implement SmartBUY

To implement the Governmentwide Enterprise Software Licensing Program, also known as SmartBUY, a proposed rule would amend the FAR to add Subpart 8.9, Acquisition of Commercial Software. This rule would ensure compliance with the Office of Management and Budget's (OMB) Memorandum M-04-08, Maximizing Use of SmartBuy and Avoiding Duplication of Agency Activities with the President's 24 E-Gov Initiatives, by ensuring that "SmartBUY is considered during acquisition planning, and [by] prescribing the policies and procedures for using SmartBUY enterprise agreements."

The introduction to the proposed rule goes on to state, "OMB is responsible for improving the acquisition and use of information technology (IT) by the federal government...To ensure that the federal government is maximizing its buying power to achieve the cost savings and favorable terms and conditions for commercial software, OMB created the SmartBUY initiative...By leveraging [SmartBUY], the government will achieve the maximum cost savings and favorable terms and conditions for acquiring software and software maintenance."

The key portions of proposed FAR Subpart 8.9 are:

Comments on the proposed rule must be submitted no later than December 31, 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 2005-014."



Results of Workforce Competencies Survey Announced

On October 18, the Office of Management and Budget (OMB) released the results of the 2007 contracting workforce competency survey, the first ever baseline analysis of the proficiency levels of the civilian agency contracting workforce.

The survey by OMB's Office of Federal Procurement Policy (OFPP) and the Federal Acquisition Institute (FAI) was conducted between April 30 and May 18, 2007, among civilian agency contracting professionals. The survey asked respondents to provide a self assessment of their current proficiency in a set of general business and technical competencies. The competencies included 15 general business (those needed by most members of the workforce regardless of the function they perform) and 17 technical competencies (job-specific contracting functions), and were developed using job analysis, focus group input, critical incident review, and subject matter expert feedback. Technical competencies were aligned with specific phases of the contracting life cycle.

The survey indicates that the civilian agency contracting professionals are generally operating at appropriate levels, but require training in such areas a project management, strategic planning, requirements definition, negotiation, performance-based acquisition, financial management, contract administration, contract closeout, resolution of contract disputes, and oral communication.

There were 5,409 total survey respondents from 26 job series including administrative, legal, engineering and architecture, investigation, supply, human resources, and accounting.

The number of GS-1102 series survey respondents was 4,323, which represented 48% of the target 1102 population of 9,016. Those in the GS-1102 series constitute 80% of survey respondents. The majority of 1102s (87%) identified themselves as contracting officers or contract specialists.

According to the survey, a typical member of the federal contracting workforce is:

"This survey is a comprehensive review of our workforce and will guide strategic development and succession planning efforts. Agencies have a unique opportunity to identiy specific organizational competency gaps and are using this information to develop plans to close those gaps," said Paul Denett, OFPP Administrator.

OFPP will continue to work with agencies, the Federal Chief Acquisition Officers Council, and others to ensure coverage of essential competency gaps, as well as improve upon strengths identified by the survey.

The survey questions and a summary of the survey responses are available on the FAI website at http://www.fai.gov.



SBA Proposes Changing Size Standard for Fuel Oil Dealers

The Small Business Administration (SBA) is proposing to change the small business size standard for the heating oil dealers industry (North American Industry Classification System (NAICS) code 454311)) from $11.5 million in average annual receipts to 50 employees, and the size standard for the liquefied petroleum gas (LPG) (bottled gas) dealers industry (NAICS code 454312) from $6.5 million in average annual receipts to 50 employees. This change is being proposed because large and fluctuating increases in the prices of heating oil and propane over the past several years indicate that a more stable measure of firm size based on number of employees rather than receipts is needed for these two industries.

Several small businesses, trade associations, and members of Congress have requested that SBA review the size standards for these two industries. They point out that under the existing receipts size standard, a heating oil or LPG dealer currently defined as small may abruptly exceed the size standard due to large and unpredictable increases in crude oil costs, even though it continues to deliver the same quantity of fuel products. This occurs because the cost of such fuel products is included when calculating the firm's receipts for size purposes.

In addition to eligibility for SBA programs, small business status for heating oil and LPG dealers also determines the amount of registration fees business concerns and other organizational entities must pay to the U.S. Department of Transportation (DOT) for transporting hazardous materials (HAZMAT). Small businesses pay a lower HAZMAT fee than other organizations. For the 2006-2007 and 2007-2008 registration periods, small businesses pay $275 per year while all other registrants pay $1,000.

SBA reviewed data provided by the U.S. Energy Information Agency for the years from 2002 to 2007, and the data showed that heating oil and propane average weekly prices have increased by 95.9% and 74.5% respectively. Furthermore, prices have fluctuated by more than 35% in some years. As an alternative, SBA considered excluding the cost of fuel products in the calculation of receipts size. However, SBA decided this approach adds more complexity and uncertainty to the calculation of business size, and would put an undue administrative burden on the small businesses in these industries by requiring them to separate out three years of receipts for the costs of fuel products in order to calculate their size status. This is not a common business practice for business concerns in this and similar service industries.

Because of the volatility of heating oil and propane prices, SBA believes that a size standard based upon number of employees better reflects the real level of operations of heating oil and LPG dealers than a receipts-based size standard.

SBA is proposing 50 employees as the size standard for these two industries because: (1) the receipts-to-employee ratio for the heating oil industry is $292,750 per employee, which means 39.3 employees would be employed by a company meeting the $11.5 million size standard ($11,500,000 / $292,750 = 39.3); and (2) the receipts-to-employee ratio for the LPG dealers industry is $188,319 per employee, which means 34.5 employees would be employed by a company meeting the $6.5 million size standard ($6,500,000 / $188,319 = 34.5) (receipts-to-employee ratio obtained from the U.S. Bureau of the Census in a special tabulation of the 2002 Economic Census).

Comments on this proposed size standard change may be submitted by one of the following methods: (1) Federal eRulemaking Portal: http://www.regulations.gov; or by mail/hand delivery/courier to: Gary M. Jackson, Assistant Director for Size Standards, 409 Third Street, SW, Mail Code 6530, Washington, DC 20416. Identify such comments as "RIN 3245-AF67."



DOD Addresses United Kingdom, Italian Procurements

Title 10 of the U.S. Code, Section 2534, Miscellaneous Limitations on the Procurement of Goods Other than United States Goods, limits the Department of Defense (DOD) to procuring items listed in that section only if the manufacturer of the item is part of the national technology and industrial base. However, the Secretary of Defense may waive this restriction for a particular item listed in Section 2534 and for a particular foreign country if the Secretary determines that application of the limitation "would impede the reciprocal procurement of defense items under a memorandum of understanding providing for reciprocal procurement of defense items" and if "that country 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 that country." The Secretary of Defense has delegated this waiver authority to the Under Secretary of Defense (Acquisition, Technology, and Logistics).

The Undersecretary of Defense (Acquisition, Technology, and Logistics) has extended for one year, until November 13, 2008, the waiver of the limitation on procurement of the following products from the United Kingdom (UK):

The Undersecretary 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. DOD has had a Reciprocal Defense Procurement (RDP) Memorandum of Understanding (MOU) with the UK since 1975.



In addition, DOD is commencing negotiation of an updated RDP MOU with Italy and is soliciting input from U.S. industry that has had experience participating in public defense procurements conducted by or on behalf of the Italian Ministry of Defense or Armed Forces. The current RDP MOU involves reciprocal waivers of buy-national laws by each country, and the replacement RDP MOU is expected to continue these waivers. This means that offers of products of Italy would continue to be exempt from the U.S. Buy American Act and Balance of Payments Program policy that would otherwise require DOD to add 50% to the price of the foreign products when evaluating offers. This also means that U.S. products should be exempt from any analogous "Buy Italian" law or policy applicable to procurements by the Italian Ministry of Defense or Armed Forces.

While DOD is evaluating Italy's laws and regulations in this area, DOD would benefit from U.S. industry's experience in participating in Italy's public defense procurements. Therefore, DOD is asking U.S. firms that have participated or attempted to participate in procurements by or on behalf of Italy's Ministry of Defense or Armed Forces to provide input as to whether the procurements were conducted in accordance with published procedures with transparency, integrity, fairness, and due process, and if not, the nature of the problems encountered.

Comments must be submitted by November 16, 2007, to the Office of the Director, Defense Procurement and Acquisition Policy, ATTN: OUSD (AT&L) DPAP (CPIC), 3060 Defense Pentagon, Washington, DC 20301-3060; or by e-mail to nancy.dowling@osd.mil.



EPA Proposes Award Term Policies and Procedures

The Environmental Protection Agency (EPA) is proposing to amend the EPA Acquisition Regulation (EPAAR) to add policy, procedures, and contract clauses for the use of award term incentives. Award terms are a form of incentive, offering additional periods of performance rather than additional profit or fee as a reward for achieving prescribed performance measures. Award term incentives were introduced by the Department of the Air Force in 1997. While they have become increasingly popular, the FAR has yet to provide any coverage on their use. Accordingly, EPA believes it is necessary to amend the EPAAR to provide guidance on award term incentives to EPA contracting officers.

This proposed rule would add EPAAR 1516.401-70, Award Term Incentives, to add an explanation on use of award term incentives, and three clauses, one of which includes an alternate. In preparing the guidance and clauses, EPA was concerned that some contractors might believe that their achievement of prescribed performance measures conferred an absolute entitlement to an additional award term (or multiple award terms), notwithstanding the absence of need or funds for such award term. Accordingly, the guidance provides that any award terms are contingent upon a need for the services and the availability of funds.

Comments on the proposed rule must be submitted no later than December 3, 2007, by any of the following means: (1) eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-566-0224; (3) e-mail: docket.oei@epa.gov; (4) OEI Docket, Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania Ave., NW, Washington, DC 20460; or (5) hand delivery: EPA Docket Center-Attention OEI Docket, EPA West, Room B102, 1301 Constitution Ave, NW, Washington, DC 20004. Identify such comments as "Docket ID No. EPA-HQ-OARM-2003-0001."



Nonmanufacturer Rule Waiver for Irradiation Apparatus

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for irradiation apparatus manufacturing under North American Industry Classification System (NAICS) code 334517 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 November 15, 2007, to Pamela M. Fenderson, 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/idc/groups/public/documents/sba_program_office/gcbd_non_mfg_approved.pdf.



HUDAR Adopts Debarment and Suspension Rules

The Department of Housing and Urban Development (HUD) is amending the HUD Acquisition Regulation (HUDAR) to state that the nonprocurement suspension and debarment procedures are applicable to HUD's procurement contracts. The amendment to HUDAR 2409.7001, HUD Regulations on Debarment, Suspension, and Ineligibility, affirms that the suspension and debarment procedures in Title 24 of the Code of Federal Regulations (CFR), Part 24, Governmentwide Debarment and Suspension (Nonprocurement), apply to both procurement and nonprocurement contracts. The contracting community is already familiar with the suspension and debarment procedures and requirements.



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