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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

May 2007
Vol. VIII, No. 5

CONTENTS

Certification Required for Program Managers of
Major Acquisitions

Office of Federal Procurement Policy Administrator Paul Denett has directed that civilian agencies' program and project managers of major acquisitions be certified as having achieved general training and experience requirements. The Federal Acquisition Certification for Program and Project Managers (FAC-P/PM) is very similar to the Federal Acquisition Certification in Contracting (FAC-C) program, which standardized the education, training, and experience requirements for contracting professionals (see the February 2006 Federal Contracts Perspective article "OMB Establishes Civilian Contracting Certification").

The reason for the similarity between the two programs is that "a strong partnership between program and project managers and contracting professionals requires a common understanding of how to meet the government's needs through acquisitions that deliver quality goods and services in an effective and efficient manner," said Denett in his memorandum to chief acquisition officers.

The program will apply to all agencies that are not covered by the Defense Acquisition Workforce Improvement Act (DAWIA).

Unlike the FAC-C, which prescribes a specific curriculum, the FAC-P/PM describes core, minimum competencies that are considered essential for successful program and project management. For example, a entry-level program or project manager would be competent in oral communications, problem solving, and interpersonal skills; a mid-level manager would be competent in team building, political savvy, and conflict management; and a senior manager would be competent in strategic thinking, vision, and entrepreneurship.

Entry-level managers must have at least one year of project management experience within the last five years; mid-level managers must have at least two years of project management experience within the last five years that includes experience at the entry level; and senior managers must have at least four years of program and project management experience on federal projects and/or programs.

The agency's Chief Acquisition Officer (CAO) is responsible for developing policies that apply the FAC-P/PM requirements to ensure the program and project managers have essential competencies.

Managers have one year from the date of assignment to the program or project to attain the certification. A waiver must be executed by the CAO for additional time beyond the first year, and it cannot exceed one additional year. If time is needed beyond that, the CAO must concur with any extensions.

To maintain a FAC-P/PM certification, managers are required to earn 80 continual learning points (CLPs) of skills currency training every two years.

Size Standards for Airport Concessions Adjusted

The Department of Transportation (DOT) is adjusting the small business size standards used in its Airport Concessions Disadvantaged Business Enterprise (ACDBE) program to compensate for inflation. Also, DOT is adjusting the dollar limits used to define small businesses for DOT's Disadvantaged Business Enterprise (DBE) program, which applies to state and local highway, transit, and airport recipients of DOT financial assistance.

The two programs are based on different statutes. The ACDBE program is designed to give business opportunities to small business concerns that operate at airports and are owned and controlled by socially and economically disadvantaged individuals. The DBE program is intended to ensure nondiscriminatory contracting opportunities for small business concerns owned and controlled by socially and economically disadvantaged individuals in DOT's highway, mass transit and airport financial assistance programs. The ACDBE is covered in Title 49 of the Code of Federal Regulations (49 CFR) Part 23, Participation of Disadvantaged Business Enterprise in Airport Concessions. The DBE program is covered in 49 CFR Part 26, Participation by Disadvantaged Business Enterprises in Department of Transportation Financial Assistance Programs.

• ACDBE Program: The size standard for the ACDBE program is revised to $47,780,000 in gross receipts averaged over the firm's previous three years (from $30,000,000). The size standard had not been adjusted since 1992.
  
  There are four exceptions to this size standard, and the two revenue-based exceptions are revised: banks and financial institutions may not have more than $750 million in assets to participate in the program (increased from $275 million); and car rental companies may not have more than $63,710,000 in average annual gross receipts over the three previous fiscal years (increased from $40,000,000). The bank and financial institutions size standard is not a strict inflation adjustment, but more closely approaches the "small" bank and financial institution standards while accommodating the size of actual minority financial institutions. The new standard also reflects the size differences between most minority banks and the banking industry generally. The other two exceptions that were not adjusted are employee-based size standards and not subject to inflation: companies providing pay telephones (1,500 employees), and automobile dealers (200 employees).
  
  
• DBE Program: The size standard for the DBE program was last adjusted in August 2005, so it is increased from $19,570,000 to $20,410,000 in annual gross receipts averaged over the firm's previous three years.

DOD Restricts Excessive "Pass-Through" Charges

Through with performing spring cleaning, the Department of Defense (DOD) is gearing up to start making more changes to the Defense Federal Acquisition Regulation Supplement (DFARS). Among those changes recently implemented are prohibitions against the payment of "excessive pass-through charges," the separation of various acquisition functions, and several miscellaneous revisions.

• Excessive Pass-Through Charges: This interim rule adds a new provision and clause to ensure that pass-through charges on contracts or subcontracts that are entered into for or on behalf of DOD are not excessive in relation to the cost of work performed by the relevant contractor or subcontractor. This implements Section 852 of the National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364) (for more on other acquisition-related provisions of Public Law 109-364, see the November 2006 Federal Contracts Perspective article "2007 Defense Authorization Addresses Training, Award Fees, Specialty Metals, Small Claims").
  
  New DFARS clause 252.215-7004, Excessive Pass-Through Charges, defines an "excessive pass-through charge" as one that "adds no or negligible value to a contract or subcontract...by the contractor or subcontractor that is for indirect costs or profit on work performed by a subcontractor (other than charges for the costs of managing subcontracts and applicable indirect costs and profit based on such costs)." It goes on to define "no or negligible value" as occurring when "the contractor or subcontractor cannot demonstrate to the contracting officer that its effort added substantive value to the contract or subcontract in accomplishing the work performed under the contract." The contracting officer will determine if excessive pass-through charges exist, and such charges are unallowable.
  
  New DFARS provision 252.215-7003, Excessive Pass-Through Charges -- Identification of Subcontract Effort, requires the offeror to "identify in its proposal the percent of effort it intends to perform, and the percent expected to be performed by each subcontractor, under the contract, task order, or delivery order." If the offeror intends to subcontract more than 70% of the total cost of work to be performed under the contract, task order, or delivery order, the offeror is required to identify in its proposal "the amount of the offeror's indirect costs and profit applicable to the work to be performed by the subcontractor(s); and a description of the value added by the offeror as related to the work to be performed by the subcontractor(s)."
  
  The new provision and clause must be included in all solicitations and contracts, including task and delivery orders, except for:
  
  
  • Firm-fixed-price contracts awarded on the basis of adequate price competition;
    
    
  • Fixed-price contracts with economic price adjustment, awarded on the basis of adequate price competition;
    
    
  • Firm-fixed-price contracts for the acquisition of a commercial item; or
    
    
  • Fixed-price contracts with economic price adjustment, for the acquisition of a commercial item.
  
  The provision and clause must be included in all subcontracts (including task and delivery orders) unless the subcontract is exempt.
  
  Comments on this interim rule must be submitted by June 25, 2007, identified as "DFARS Case 2006-D057," 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: John McPherson, 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.
  
  
• Acquisition Integrity: This final rule adds DFARS 203.170, Business Practices, to address requirements for the separation of government functions for oversight, source selection, contract negotiation, and contract award to ensure acquisition integrity.
  
  DFARS 203.170 states that "departments and agencies shall adhere to the following best practice policies":
  
  
  • "Senior leaders shall not perform multiple roles in source selection for a major weapon system or major service acquisition."
    
    
  • "Acquisition process reviews of the military departments shall be conducted to assess and improve acquisition and management process, roles, and structures."
    
    
  • "Source selection processes shall be (1) reviewed and approved by cognizant organizations responsible for oversight; (2) documented by the head of the contracting activity or at the agency level; and (3) periodically reviewed by outside officials independent of that office or agency."
    
    
  • "Legal review of documentation of major acquisition system source selection shall be conducted prior to contract award, including the supporting documentation of the source selection evaluation board, source selection advisory council, and source selection authority."
    
    
  • "Procurement management reviews shall determine whether clearance threshold authorities are clear and that independent review is provided for acquisitions exceeding the simplified acquisition threshold."
  
  
• Deletion of Obsolete Acquisition Procedures: This final rule removes text relating to obsolete requirements for maintenance of paper-based solicitation mailing lists and for furnishing of documents to certain entities as follows:
  
  
  • DFARS 206.303-1, Requirements, is deleted. It designated the Director of Defense Procurement and Acquisition Policy as the agency point of contact for submission of certain justification and approval documents to the U.S. Trade Representative (USTR). The underlying FAR requirement for submission of these documents to the USTR was removed by the interim rule in Federal Acquisition Circular (FAC) 2001-27 (see the February 2005 Federal Contracts Perspective article "FAC 2001-27 Implements Australian and Moroccan Free Trade Acts, Creates Table of Excluded Services") and finalized by FAC 2005-07 (see the February 2006 Federal Contracts Perspective article "Performance-Based Acquisition Procedures Revised").
    
    
  • DFARS 225.870-2, Solicitation of Canadian Contractors, is revised to remove text addressing requirements for inclusion of Canadian firms on solicitation mailing lists, and for sending solicitations to the Canadian Commercial Corporation and Canadian firms appearing on such lists. Solicitation mailing lists have been replaced by electronic tools such as the Central Contractor Registration (http://www.ccr.gov) and the Federal Business Opportunities website (http://www.fbo.gov). FAC 2001-15 removed references to Standard Form 129 solicitation mailing lists from the FAR, so this language is obsolete (for more on FAC 2001-15, see the August 2003 Federal Contracts Perspective article "FAC 2001-15 Addresses SF 129 Elimination, Environmental Issues, Cost Principles, GWAC/MAC Directory").
    
    
  • DFARS 225.872-3, Solicitation Procedures, is amended to remove language directing that qualifying country sources be included on solicitation mailing lists upon their request.
  
  
• Small Business Programs: This final rule amends DFARS Part 219, Small Business Programs, to clarify and update policy for contracting with small business and small disadvantaged business concerns by making the following changes:
  
  
  • Deleting DFARS 219.202-1, Encouraging Small Business Participation in Acquisitions, DFARS 219.705-2, Determining the Need for a Subcontracting Plan, and DFARS 219.812, Contract Administration [8(a) contracts].
    
    
  • Relocating to the Procedures, Guidance, and Information (PGI) text containing:
    
    
    • Procedures for referring matters to the Small Business Administration (DFARS 219.602, Procedures [for Certificate of Competency referrals]);
      
      
    • Information on the DOD test program for negotiation of comprehensive small business subcontracting plans (paragraphs (i) and (ii) of DFARS 219.702, Statutory Requirements); and
      
      
    • Procedures for processing contract awards under the 8(a) program (DFARS 219.803, Selecting Acquisitions for the 8(a) Program; DFARS 219.804-2, Agency Offering; DFARS 219.804-3, SBA [Small Business Administration] Acceptance; DFARS 219.805-2, Procedures [for competitive 8(a) acquisitions]; DFARS 219.808-1, Sole Source [8(a) negotiations]; and DFARS 219.811-1, Sole Source [contract preparation]).
      
      For more on the PGI, see the December 2004 Federal Contracts Perspective article "DFARS Transformation in Full Gear, 'Procedures, Guidance, and Information' Added").
    
    Three respondents submitted comments on the proposed rule, and an editorial change was made in response (for more on the proposed rule, see the March 2006 Federal Contracts Perspective article "DOD Suspends SDB Evaluation Adjustment Another Year").
  
  
• Wage Determinations: This final rule revises DFARS Part 222, Application of Labor Laws to Government Acquisition, to update procedures for obtaining Department of Labor (DOL) wage determinations for service and construction contracts, and bring it into conformance with the FAR.
  
  FAC 2005-10 amended FAR Part 22 to implement the Wage Determinations OnLine website (http://www.wdol.gov/) as the source for Service Contract Act and Davis-Bacon Act wage determinations (for more on FAC 2005-10, see the July 2006 Federal Contracts Perspective article "FAC 2005-10 Mandates Electronic Wage Determination"). This rule:
  
  
  • Updates DFARS 222.1008-1, Obtaining Wage Determinations, to reflect the replacement of Standard Form 98a with the electronic e98 process.
    
    
  • Deletes DFARS 222.1008-7, Required Time of Submission of Notice, and DFARS 222.1014, Delay of Acquisition Dates Over 60 Days, because they are obsolete.
  
  In addition, DFARS 222.404-2, General Requirements, is added to reference internal DOD procedures in the PGI for obtaining clarification of proper application of construction wage rate schedules.
  
  
• Military Construction on Guam: This final rule amends DFARS Subpart 222.73, Limitations Applicable to Contracts Performed on Guam, to remove text addressing a statutory prohibition on the use of nonimmigrant aliens to perform work under contracts for military construction on Guam. The statutory prohibition was repealed by Section 2810 of the National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364). The deleted text is DFARS 222.7300, Scope of Subpart; paragraph (a)(1) of DFARS 222.7301, Prohibition on Use of Nonimmigrant Aliens; and DFARS 222.7302, Exception.
  
  The statutory prohibition on the use of nonimmigrant aliens under contracts for base operations support on Guam is still in effect and continues to be implemented in DFARS Subpart 222.73.

Administrative Changes Slated for AIDAR

The U.S. Agency for International Development (USAID) is amending its Agency for International Development Acquisition Regulation (AIDAR) to make the following changes:

• AIDAR 752.228-70, Medical Evacuation (MEDEVAC) Services; Appendix D, General Provision 25, "Medical Evacuation (MEDEVAC) Services"; and Appendix J, General Provision 21, "Medical Evacuation (MEDEVAC) Services" required contractors to use USAID's central contract to purchase MEDEVAC insurance for employees involved in accidents or suffering a sudden illness at a time when adequate medical facilities are not available at post. The central contract incorporated a volume discount for these services, thus saving insurance costs to USAID. However, after more than ten years' experience with the centrally-awarded MEDEVAC contract, USAID has concluded that the difference in rates it obtained through the competitive contracting process and the rates the insurance providers were offering to the general public was negligible, and that continuing the central MEDEVAC contract was no longer in its best interest. USAID did not recompete a new contract when the last MEDEVAC contract expired in 2003, so the requirement is obsolete. Therefore, this rule will delete the clause and general provisions.
  
  
• AIDAR 752.7016, Family Planning and Population Assistance Activities, is removed because it was made obsolete by guidance issued under the Fiscal Year 1999 Foreign Operations Appropriations Act (Public Law 105-277). The act established new statutory requirements for voluntary family planning projects, known as the Tiahrt Amendment. The Tiahrt Amendment has been included in all subsequent Foreign Operations Appropriations Acts, and its requirements will be incorporated by a proposed rule at a later date.
  
  
• All references to Office of Procurement (M/OP) and replacing with Office of Acquisition and Assistance (M/OAA).

The rule will go into effect July 17, 2007, without further action unless adverse comments are received by May 21, 2007. If adverse comment is received, USAID will publish a timely withdrawal of the rule.

Comments on the rule must be submitted by any of the following means: (1) eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-216-3395; or (3) mail: U.S. Agency for International Development, Office of Acquisition & Assistance, Policy Division, 1300 Pennsylvania Avenue, NW, Room 7.9-18, Washington, DC 20523-0001.

Proposed Change to "Cost or Pricing Data" Definition

The terms "cost or pricing data" and "information other than cost or pricing data" are confusing to contracting officers and the general public, so it is proposed that the terms be clarified so they are more understandable, and to clarify the need to obtain data other then certified cost or pricing data when there is no other means to determine fair and reasonable pricing during price analysis.

This proposed rule is the product of a number of troubling reports during the past several years, including an DOD Inspector General report citing confusion among contracting officers; a Defense Acquisition University study that questioned the consistency of the definition and usage of the term "cost or pricing data" in the FAR, the DFARS, and the Truth in Negotiations Act (TINA, the statute that requires cost or pricing data -- 10 U.S.C. 2306a and 41 U.S.C. 254b); Congressional expressions of concern that the FAR definition is ambiguous; and the DFARS Pricing Committee conclusion that there is a misunderstanding over the kinds of information that can be obtained under "information other than cost or pricing data," and the difference between "cost or pricing data" and "certified cost or pricing data."

To try to clarify the issue, the proposed rule would revise FAR 2.101, Definitions, as follows:

• The definition of "cost or pricing data" currently states that such data "are more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred. They also include such factors as: (1) vendor quotations; (2) nonrecurring costs..." and six other factors. However, this language seems to imply that these eight factors are all that constitute cost or pricing data when the contracting officer should be free to ask for any information needed to determine the fairness and reasonableness of a price. So the proposed rule would change "They also include such factors as" to "They also include, but are not limited to, such factors as..."
  
  In addition, the current definition includes the sentence "Cost or pricing data are data requiring certification in accordance with [FAR] 15.406-2 [Certificate of Current Cost or Pricing Data]." However, this contradicts the TINA, which addresses "cost or pricing data" and "certified cost or pricing data" separately. Therefore, the sentence would be deleted and a definition of "certified cost or pricing data" would be added (see next).
  
  
• The following definition of "certified cost or pricing data" would be added: "'cost or pricing data' that has been required to be submitted and has been certified, or is required to be certified, in accordance with [FAR] 15.406-2. This certification states that, to the best of the person's knowledge and belief, the cost or pricing data is accurate, complete, and current as of a date certain before contract award. Cost or pricing data is required to be certified in certain procurements (10 U.S.C. 2306a and 41 U.S.C. 254b). See FAR 15.403-4 [Requiring Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b)]."
  
  
• The current definition of "information other than cost or pricing data" is "any type of information that is not required to be certified in accordance with [FAR] 15.406-2 and is necessary to determine price reasonableness or cost realism. For example, such information may include pricing, sales, or cost information, and includes cost or pricing data for which certification is determined inapplicable after submission." However, this definition seems to restrict the contracting officer from obtaining cost or pricing data, contrary to the TINA, which requires that cost or pricing data be certified under certain circumstances. When those circumstances do not apply, the contracting officer may obtain the same information (detailed cost estimates and cost or pricing data) when there are no other means to determine the fairness and reasonableness of prices. Therefore, the term would be changed to "data other than certified cost or pricing data," and the definition would be revised to "any data, including cost or pricing data and judgmental information necessary for the contracting officer to determine a fair and reasonable price or cost realism, where certification is not required in accordance with [FAR] 15.406-2. For example, such data may include pricing, sales, or cost data, and includes cost or pricing data for which certification is determined inapplicable after submission."

In addition, FAR Subpart 15.4, Contract Pricing, would be revised to clarify the need and authority to obtain a detailed cost estimate, including cost or pricing data, when there is no other means to determine fair and reasonable pricing during price analysis even though the cost or pricing data will not be certified.

Comments on the proposed rule must be submitted no later than June 22, 2007, by any of the following means: (1) eRulemaking Portal: http://www.regulations.gov; (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 2006-007."

Nonmanufacturer Rule Waiver Denied for Used Oil

The Small Business Administration (SBA) is denying the request to waive the nonmanufacturer rule for re-refining used petroleum lubricating oils (MIL-PRF-2104, Type 10W; Type 15W40; Type 30W; and Type 40W) under North American Industry Classification System (NAICS) code 324191 because SBA has determined that this request is for a product in a specific solicitation, rather than for a class of products within a subdivision within a NAICS Industry Number, as is required for class waivers under paragraph (d) of 13 CFR 121.1202, When Will a Waiver of the Nonmanufacturer Rule Be Granted for a Class of Products? This request was prompted by a Defense Supply Center Richmond (DSCR) solicitation. While the SBA may examine a waiver request for a "class of products," an individual waiver request for a "product in a specific solicitation" must be initiated by the contracting officer. Since this waiver request is for a "product in a specific solicitation" but was not initiated by the contracting officer, it must be denied.

For more on the request for waiver, see the February 2007 Federal Contracts Perspective article "Nonmanufacturer Rule Waiver Proposed for Used Oil."

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