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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


July 2007
Vol. VIII, No. 7

CONTENTS


Cost Accounting Standards Threshold Increased to $650,000
Application of CAS to Foreign Concerns Addressed
OFPP Issues Emergency Acquisitions Guide
Acquisition Workforce Remains Steady, Workload Grows
DOE Proposes Regs for Energy Efficient Products
DOSAR to Implement IT Security Requirements
USAID Implements Mentor-Protege Program
SBA Establishes Program for Military Entrepreneurs



Cost Accounting Standards Threshold Increased to $650,000

The Cost Accounting Standards Board (CASB) is increasing the threshold for the application of the Cost Accounting Standards (CAS) from $500,000 to $650,000. This change is in accordance with Section 822 of the 2006 National Defense Authorization Act (Public Law 109-163), which requires that the threshold for CAS applicability be the same as the threshold for compliance with the Truth in Negotiations Act (TINA). TINA requires that cost or pricing data be submitted with proposals exceeding $650,000 except under certain circumstances. (NOTE: The CAS are in Chapter 99 of Title 48 of the Code of Federal Regulations (CFR) -- see http://www.access.gpo.gov/nara/cfr/waisidx_05/48cfr9903_05.html. For more on the acquisition-related provisions of Public Law 109-163 (including Section 822), see the February 2006 Federal Contracts Perspective article "2006 Defense Authorization Addresses A-76, Consolidates Civilian Boards of Contract Appeals." For more on the provisions of TINA, see the Federal Acquisition Regulation (FAR) Subpart 15.4, Contract Pricing.")

On December 15, 2005, the CASB issued a proposed rule to implement Section 807 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375), which requires the adjustment of acquisition-related thresholds contained in statutes that were in effect on October 1, 2000, every five years (with certain exceptions). The proposed rule called for increasing the threshold for CAS applicability from $500,000 to $550,000, and increasing several other CAS thresholds. (NOTE: For more on the CASB proposed rule, see the January 2006 Federal Contracts Perspective article "Inflation Adjustment Proposed for FAR, CAS Thresholds." For more on 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.")

The CASB decided that its thresholds are not subject to the provisions of Section 807 because CAS thresholds are not "acquisition-related" as defined by Section 807. However, subsequent to the publication of CASB's proposed rule, Section 822 of Public Law 109-163 was enacted, and it requires the threshold for CAS applicability to be the same as the threshold for compliance with the TINA. The TINA threshold was increased to $650,000 in September 2006 (see the October 2006 Federal Contracts Perspective article "Micro-Purchase, Cost or Pricing Data, 8(a) Competition Thresholds Adjusted for Inflation"), so the CASB is increasing the CAS applicability threshold to $650,000 to comply with Section 822 of Public Law 109-163. However, the final rule adjusts only the CAS applicability threshold as statutorily required, and none of the other CAS thresholds because they were not addressed in Section 822.



Application of CAS to Foreign Concerns Addressed

In addition to increasing the CAS applicability threshold, the CASB took two actions concerning the application of CAS to foreign concerns.



OFPP Issues Emergency Acquisitions Guide

The Office of Federal Procurement Policy (OFPP) has issued an Emergency Acquisitions Guide "to help agencies prepare the acquisition workforce for emergencies. The guide describes strategies for effective response planning and provides a list of acquisition reminders when contracting during emergencies. The guide also discusses flexibilities that acquisition personnel deployed to an emergency situation may use to facilitate timely procurements...This guide is intended to supplement, not supplant, agency-specific guidance, and should be read in conjunction with Part 18 [Emergency Acquisitions] of the Federal Acquisition Regulation on emergency acquisitions."

The Guide is presented in three parts:

As an example of the kinds of information that is included in the Guide, under "Anticipating Acquisition Workforce Needs" are the recommended contents of "To Go Kits" for contracting personnel:

In addition, the Guide includes emergency-specific acquisition training (either developed or in development), issues that should be addressed in a "stewardship plan" ("were local businesses given preference in accordance with the requirements of the Stafford Act?"), and a more-detailed explanation of the FAR Part 18 emergency flexibilities ("agencies are fully authorized to innovate and use sound business judgment that is otherwise consistent with law and within the limits of their authority").

The Guide will be maintained electronically and updated, as needed, on the OFPP website http://www.whitehouse.gov/omb/procurement, under "Contingency Contracting."



Acquisition Workforce Remains Steady, Workload Grows

The Federal Acquisition Institute (FAI), which was established to foster and promote governmentwide career management programs for a professional acquisition workforce, has released its "Annual Report on the Federal Acquisition Workforce." The report notes that "there has been an increase in the volume and complexity of the acquisition workload," but that the number of those in the GS-1102 job series (that is, contracting officers and contract specialists) has remained fairly steady during the last eight years. The following chart compares the dollar amount awarded governmentwide for each fiscal year (from the Federal Procurement Data System) and the corresponding size of the GS-1102 workforce (the percentages following the award amounts and workforce numbers is the difference between that number and the corresponding number for Fiscal Year 1999):

Fiscal Year     Amount Awarded
($ Billions)
     GS-1102
Workforce

1999     $198.8          26,775     
2000     $218.8  (+10.1%)     26,751  (-0.1%)
2001     $234.9  (+18.2%)     26,608  (-0.6%)
2002     $250.2  (+25.9%)     27,294  (+1.9%)
2003     $305.5  (+53.7%)     26,849  (+0.2%)
2004     $341.4  (+71.7%)     26,936  (+0.6%)
2005     $378.4  (+90.3%)     27,589  (+3.0%)
2006     $400.0+  (100%+)*     27,944  (+4.6%)

* FY 2006 figure is unavailable from the Federal Procurement Data System, but the total amount is expected to exceed $400 billion.

While the contracting workforce grew a mere 4.6% between FY 1999 and 2006, the amount awarded through contracts increased by over 100%. However, FAI includes the FY 1992 workforce total for comparison, and the contrast over that 15 year period is "dramatic":

1992     $199.8          31,794     
2006     $400.0+  (100%+)     27,944  (-12.1%)

This disparity between workload and workers, combined with an 8% turnover rate among GS-1102 personnel (more than 15% in 12 of 24 agencies), and the fact that 12% of GS-1102 personnel are currently eligible to retire (more than 15% in 9 of the 24 agencies surveyed for this report) indicates a workforce in distress. The report projects the situation to get worse -- 50% of the workforce will be eligible to retire in 10 years.



DOE Proposes Regs for Energy Efficient Products

The Department of Energy (DOE) is proposing to require federal agencies to report on their implementation of Section 553 of the National Energy Conservation Policy Act (NECPA), which requires agencies to procure ENERGY STAR qualified and Federal Energy Management Program (FEMP) designated products in procurements involving energy consuming products and systems.

NECPA Section 553 authorizes the head of agency to invoke either of two exceptions to this requirement: (1) an ENERGY STAR qualified product or FEMP designated product is not cost-effective over the life of the product taking energy cost savings into account; or (2) no ENERGY STAR qualified product or FEMP designated product is reasonably available that meets the functional requirements of the agency. In addition, Section 553 excludes any energy consuming product or system designed or procured for combat or combat-related missions from these requirements.

This proposed rule would amend Title 10 of the Code of Federal Regulations (CFR), Energy, Chapter 436, Federal Energy Management and Planning Programs, to add Subpart C, Agency Procurement of Energy Efficient Products. Subpart C would consist of Sections 436.40, Purpose and Scope, 436.41, Definitions, and 436.42, Reporting Requirement. The most significant of these is 10 CFR 436.42, which would require each agency to report on its progress toward implementing the procurement requirements of Section 553 in its annual report on energy management to the president. The report would be required to include: (1) the number of covered products excepted by the head of the agency; (2) the value of the excepted procurements; (3) a description of the products for which exceptions were granted; and (4) the reasons the exceptions were granted.

Comments on the proposed rule must be identified as "RIN 1904-AB6B" and submitted no later than August 20, 2007, by any of the following methods: (1) e-mail to: cyrus.nasseri@ee.doe.gov; (2) mail to: Mr. Cyrus Nasseri, U.S. Department of Energy, Office of Federal Energy Management Program, Mailstop EE-2L, 1000 Independence Avenue, SW, Washington, DC 20585-0121; or (3) hand delivery or courier to: Mr. Cyrus Nasseri, U.S. Department of Energy, Federal Energy Management Program, Room 1M-048, 1000 Independence Avenue, SW, Washington, DC 20585-0121.

Currently, ENERGY STAR qualified and FEMP designated products cover 62 types of products in the following categories: (1) lighting; (2) commercial and industrial equipment; (3) food service equipment; (4) office equipment; (5) home electronics; (6) appliances; (7) residential equipment; (8) plumbing; and (9) construction products. A list of such products is available at http://www1.eere.energy.gov/femp/pdfs/eep_productfactsheet.pdf.

In addition to the requirement that federal agencies procure an ENERGY STAR qualified or FEMP designated product whenever procuring a covered product, contractors performing at a federally controlled facility should provide qualified products./P>

ENERGY STAR qualified and FEMP designated products have been determined to be life-cycle cost-effective in normal usage. However, purchasers are encouraged to evaluate products according to their specific applications and circumstances. Life-cycle cost calculators for many of the ENERGY STAR qualified and FEMP designated products can be accessed at http://www1.eere.energy.gov/femp/procurement/eep_eccalculators.html.

To identify actual products that are ENERGY STAR rated, potential purchasers can go to http://www.energystar.gov/products. While there is no comparable list of FEMP designated products, FEMP specifications for energy efficiency products are located at http://www1.eere.energy.gov/femp/procurement/eep_requirements.html.



DOSAR to Implement IT Security Requirements

The Department of State (DOS) is proposing to amend the DOS Acquisition Regulation (DOSAR) to implement information technology (IT) systems security as required by the Federal Information Security Management Act of 2002 (FISMA) (Title III of the E-Government Act of 2002).

Federal Acquisition Circular (FAC) 2005-06 revised the Federal Acquisition Regulation (FAR) to implement the IT security provisions of the FISMA (see the November 2005 Federal Contracts Perspective article "FAC 2005-06 Addresses IT Security, Cancels SDB Price Evaluation Adjustment for Civilian Agencies"). While FAC 2005-06 provided some guidance to contracting officers, it recognized that federal agencies would need to customize IT security policies and procedures to meet mission needs. Because of this, FAC 2005-06 did not provide specific contract language for inclusion in affected contracts, but required that agencies "include the appropriate information technology security policies and requirements" when acquiring information technology.

This proposed rule would add a new solicitation provision, DOSAR 652.239-70, Information Technology Security Plan and Accreditation, and contract clause, DOSAR 652.239-71, Security Requirements for Unclassified Information Technology Resources, which would be required to be included in solicitations and contracts "that include information technology resources or services in which the contractor will have physical or electronic access to Department information that directly supports the mission of the Department." This requirement will be included in contracts to acquire personal services from organizations, but not in contracts for personal services with specific individuals. Such individuals are considered to be employees of the DOS and are under its direct supervision and control for purposes of ensuring compliance with applicable information security laws and regulations.

Proposed DOSAR 652.239-70 would notify offerors that all responses to the solicitation must address the approach for completing the security plan and certification and accreditation requirements as required by DOSAR 652.239-71.

Proposed DOSAR 652.239-71 would require that the contractor be responsible for IT security, based on agency risk assessments, for all systems connected to a DOS network or operated by a contractor for DOS. The clause requires the development of an IT security plan and IT security certification and accreditation in accordance with National Institute of Standards and Technology (NIST) Special Publication 800-37, Guide for the Security Certification and Accreditation of Federal Information Technology Systems (http://csrc.nist.gov/publications/nistpubs/800-37/SP800-37-final.pdf), as well as all related policies and guidance promulgated by the Office of Management and Budget (OMB) under FISMA and the Privacy Act. This would include related testing and continuous monitoring, incident reporting, and DOS oversight activities.

DOSAR 652.239-71 provides the following examples of tasks that require security provisions: "(1) hosting of DOS e-government sites or other IT operations; (2) acquisition, transmission or analysis of data owned by DOS with significant replacement cost should the contractor's copy be corrupted; and (3) access to DOS general support systems/major applications at a level beyond that granted the general public; e.g., bypassing a firewall."

Comments on the proposed rule, identified as "RIN 1400-AC31," must be submitted no later than August 24, 2007, by any of the following methods: (1) e-mail: ginesgg@state.gov; (2) mail (paper, disk, or CD-ROM submissions): Gladys Gines, Procurement Analyst, Department of State, Office of the Procurement Executive, 2201 C Street, NW, Suite 603, State Annex Number 6, Washington, DC 20522-0602; (3) fax: 703-875-6155; or (4) Internet: http://www.regulations.gov/index.cfm.



USAID Implements Mentor-Protege Program

The United States Agency for International Development (USAID) is establishing a mentor-protege program "to assist small business, including veteran-owned small business, service-disabled veteran-owned small business, HUBZone [Historically Underutilized Business Zone], small socially and economically disadvantaged business, and women-owned small business in enhancing their capabilities to perform contracts and subcontracts for USAID and other federal agencies."

The mentor-protege program is included in new USAID Acquisition Regulation (AIDAR) 719.273, The U.S. Agency for International Development (USAID) Mentor-Protege Program, which includes 11 subsections. AIDAR 719.273 implements a mentor-protege program similar to the "no-cost" programs established by the Departments of Energy, State, and Treasury, and the Environmental Protection Agency (the Departments of Defense and Homeland Security, and the National Aeronautics and Space Administration are authorized by statute to reimburse contractors for the costs they incur in mentoring their proteges). Paragraph (b) of AIDAR 719.273-3, Incentives for Prime Contractor Participation, states that "costs incurred by a mentor to provide developmental assistance...to fulfill the terms of their agreement(s) with a protege firm(s), are not reimbursable as a direct cost under a USAID contract." Because of the "no-cost" nature of the program, AIDAR 719.273-3(c) provides that contracting officers "may give mentors evaluation credit under FAR 15.101-1 [Tradeoff Process] considerations for subcontracts awarded pursuant to their Mentor-Protege Agreements and their subcontracting plans. Therefore: (1) contracting officers may evaluate subcontracting plans containing Mentor-Protege arrangements more favorably than subcontracting plans without Mentor-Protege Agreements; [and] (2) contracting officers may assess the prime contractor's compliance with the subcontracting plans submitted in previous contracts as a factor in evaluating past performance under FAR 15.305(a)(2)(v) [Proposal Evaluation] and determining contractor responsibility [under FAR] 19.705-5(a)(1) [Awards Involving Subcontracting Plans]."

Fourteen comments were submitted in response to the proposed rule. The two most significant changes resulting from these comments are:



SBA Establishes Program for Military Entrepreneurs

The Small Business Administration (SBA) is establishing the Patriot Express Pilot Loan Initiative "to support the entrepreneurial sector of the nation's military community that are being significantly affected by what is expected to be a protracted war on terror." The Patriot Express Pilot Loan Initiative will operate as a pilot program through December 31, 2010, in which SBA will provide streamlined documentation and expedited loan processing for loans up to $500,000 to eligible members of the military community.

"With military activations and extensions having a profound impact on entrepreneurs in the military community, SBA is committed to helping America's service men and women during the continuing War on Terror," said SBA Administrator Steven Preston at the initative's announcement. "We believe that Patriot Express, supported by SBA's other services, goes directly to the needs of these American Patriots who wish to start businesses, and in the process encourages job creation and growth, an essential part of the President's economic agenda.

"More than 14% of businesses in America are owned by veterans, and SBA is proud that we guarantee more than $1 billion annually in loans for veteran-owned businesses."

A Patriot Express loan can be used for most business purposes, including start-up, expansion, equipment purchases, working capital, inventory, or business-occupied real estate purchases.

SBA will guarantee up to 85% of Patriot Express loans that are $150,000 or less, and will guarantee up to 75% of loans between $150,000 and $500,000. Interest rates may be fixed or variable, and lenders and borrowers can negotiate the interest rate, but lenders may not charge more than 2.25% over Prime for loans of less than seven years, and 2.75% over Prime for loans longer than seven years. In addition, lenders may charge 1% more for loans under $50,000 and 2% more for loans under $25,000.

Eligibility for Patriot Express loans will be limited to certain members of the military community, and lenders will be required to document each borrower's eligibility using approved Department of Defense or Veterans' Administration documentation, and that documentation must be furnished to SBA. SBA is making the following persons eligible for Patriot Express loans: (1) veterans (other than dishonorably discharged); (2) service-disabled veterans; (3) active-duty military participating in the military's Transition Assistance Program for potential retirees within 24 months of separation, and discharging active duty members within 12 months of discharge; (4) reservists and National Guard members; and (5) the current spouse of the above and the widowed spouse of a service member or veteran who died during service or of a service-connected disability.

Details on the initiative can be found at http://www.sba.gov/patriotexpress.



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