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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

January 2008
Vol. IX, No. 1

CONTENTS

SBA Proposes Set-Aside Program
For Women-Owned Small Businesses

After nearly three decades of lobbying by women’s groups and “encouragement” by Congress and the president, the Small Business Administration (SBA) has proposed a set-aside program for women-owned small businesses (WOSB) and economically disadvantaged WOSBs (EDWOSB). However, the set-asides would be restricted to industries in which WOSBs are determined to be substantially underrepresented in governmentwide federal contracting, and SBA has identified only four such industries.

In 1979, Executive Order 12138 directed federal agencies to provide procurement assistance to women-owned businesses. At that time, WOSBs received only 0.2% of all federal procurements. By 1988, WOSB federal procurements had grown to a mere 1%, so the Women’s Business Ownership Act (Public Law 100-588) was enacted to assist women in starting and managing small businesses. While the program resulting from Public Law 100-588 has provided financing and information to thousands of women seeking to start their own businesses, WOSBs have not been very successful in obtaining federal contracts. Despite the Federal Acquisition Streamlining Act (FASA) (Public Law 103-355) establishing a governmentwide WOSB contract goal of 5%, WOSBs received only 2.3% of fiscal year (FY) 2000 awards; 2.5% of FY 2001 awards; 2.9% of FY 2002 awards; 3% of FY 2003 and 2004 awards; 3.2% of FY 2005 awards; and 3.4% of FY 2006 awards.

The Small Business Reauthorization Act of 2000 (Public Law 106-554) included a provision authorizing contracting officers to restrict competition to WOSBs in industries where they are substantially underrepresented, but the set-aside contracts could not exceed $3,000,000 ($5,000,000 for manufacturing). However, this provision was not implemented quickly because of questions regarding interpretation of the statutory provision and questions about the methodology used to identify the industries. Consequently, SBA contracted with the Kauffman-RAND Institute for Entrepreneurship Public Policy (RAND) to conduct another study of the availability and utilization of WOSBs in prime contracts, and RAND determined that WOSBs are underrepresented in federal procurement in the following four industries: North American Industry Classification System (NAICS) codes 3328, Coating, Engraving, Heat Treating, and Allied Activities; 3371, Household and Institutional Furniture and Kitchen Cabinet Manufacturing; 4412, Other Motor Vehicle Dealers, and 9281, National Security and International Affairs. In addition, SBA published a proposed rule to implement the WOSB set-aside provision. (EDITOR’S NOTE: The RAND report is available at http://www.RAND.org/pubs/technical_reports/TR442. For more on SBA’s proposed rule, see the July 2006 Federal Contracts Perspective article “SBA Proposes Women-Owned Small Business Program.”)

Based on an evaluation of comments on the proposed rule, discussions with the Department of Justice (DOJ) and the Office of Federal Procurement Policy (OFPP), and a further examination of the statutory provision, SBA has decided that the rule requires significant changes and warrants further public comments and consideration.

The revised proposed rule would add a new Part 127, Women-Owned Small Business Federal Contract Assistance Procedures, to Title 13 of the Code of Federal Regulations, Business Credit and Assistance. The following are the key provisions of proposed Part 127:

• To qualify as a WOSB, a concern must be a small business and not less than 51% unconditionally and directly owned and controlled by one or more women who are U. S. citizens. To qualify as an EDWOSB, a concern must be a small business and not less than 51% unconditionally and directly owned and controlled by one or more women who are U. S. citizens and economically disadvantaged (13 CFR 127.200, What are the requirements a concern must meet to qualify as an EDWOSB or WOSB?).
  
  
• A woman is economically disadvantaged if she can demonstrate that her ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business, and her personal net worth is less than $750,000 (excluding her ownership interest in the concern and equity in her primary personal residence) (13 CFR 127.203, What are the rules governing the requirement that economically disadvantaged women must own EDWOSBs?).
  
  
• To be eligible for a WOSB or EDWOSB set-aside, a concern it must be registered in the Central Contractor Registration (CCR) (http://www.ccr.gov) and have a current self-certification posted on the Online Representations and Certifications Application (ORCA) (http://orca.bpn.gov) that it qualifies as an EDWOSB or WOSB (13 CFR 127.300, How is a concern certified as an EDWOSB or WOSB?).
  
  
• When an agency seeks to set-aside a procurement for among WOSBs or EDWOSBs within an industry designated by SBA, the agency must conduct an appropriate analysis of the agency's procurement history and make a determination of whether there is evidence of relevant discrimination in that industry by that agency (13 CFR 127.501, How will SBA determine the industries that are eligible for EDWOSB or WOSB requirements?).
  
  
• Requirements in the underrepresented industries may be set-aside for EDWOBs if the contracting officer has a reasonable expectation based on market research that two or more EDWOSBs will submit offers for the contract; the anticipated award price of the contract (including options) does not exceed $3,000,000 ($5,000,000 for manufacturing), and the contract award will be made at a fair and reasonable price. If market research indicates that any of the criteria for an EDWOSB set-aside do not exist, the contracting officer may set aside the requirement for WOSBs if there is a reasonable expectation that two or more WOSBs will submit offers for the contract; the anticipated award price of the contract including options) does not exceed $3,000,000 ($5,000,000 for manufacturing), and the contract award will be made at a fair and reasonable price (13 CFR 127.503, When is a contracting officer authorized to restrict competition under this part?).
  
  
• A contracting officer may not set-aside a requirement for EDWOSBs or WOSBs if the requirement is being performed under the SBA’s Section 8(a) program or SBA has accepted the requirement for performance under the 8(a) program (13 CFR 127.503).
  
  
• An interested party may protest the EDWOSB or WOSB status of an apparent successful offeror on an EDWOSB or WOSB contract. Any other party or individual may submit information to the contracting officer or SBA in an effort to persuade them to initiate a protest or to persuade SBA to conduct an examination (“an investigation by SBA to verify that a concern meets the EDWOSB or WOSB eligibility requirements at the time of the examination”) (13 CFR 127.600, Who may protest the status of a concern as an EDWOSB or WOSB?).

Comments on this revised proposed rule must be submitted by February 25, 2008, by either of the following methods: (1) Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail, hand-delivery/courier: Robert C. Taylor, Office of Contract Assistance, Office of Government Contracting, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416.

Trade Agreements Thresholds Adjusted

The United States Trade Representative (USTR) has adjusted the thresholds for applicability of the various trade agreements in which the U.S. agrees to waive the provisions of the Buy American Act (see Federal Acquisition Regulation (FAR) Subpart 25.1, Buy American Act – Supplies, and FAR Subpart 25.2, Buy American Act – Construction) in exchange for the reduction or elimination of other countries’ tariffs and preference programs that favor their domestic products and services.

The following are the new thresholds [with the old thresholds in brackets]:

• World Trade Organization Government Procurement Agreement: supplies and services: $194,000 [$193,000]; construction: $7,443,000 [$7,407,000]) (see the definition of “designated country” in FAR 25.003, Definitions, for participating countries)
  
  
• Australia Free Trade Agreement: supplies and services: $67,826 [$64,786]; construction: $7,443,000 [$7,407,000]
  
  
• Bahrain Free Trade Agreement: supplies and services: $194,000 [$193,000]; construction: $8,817,449 [$8,422,165]
  
  
• Central America Free Trade Agreement (CAFTA): supplies and services: $67,826 [$64,786]; construction: $7,443,000 [$7,407,000] (Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua)
  
  
• Chile Free Trade Agreement: supplies and services: $67,826 [$64,786]; construction: $7,443,000 [$7,407,000]
  
  
• Morocco Free Trade Agreement: supplies and services: $194,000 [$193,000]; construction: $7,443,000 [$7,407,000]
  
  
• North American Free Trade Agreement Implementation Act (NAFTA): Canadian supplies: $25,000 [$25,000]; Canadian services, and Mexican supplies and services: $67,826 [$64,786]; Canadian and Mexican construction: $8,817,449 [$8,422,165]
  
  
• Singapore Free Trade Agreement supplies and services: $67,826 [$64,786]; construction: $7,443,000 [$7,407,000]

See FAR Subpart 25.4, Trade Agreements, for more information on the trade agreements.

95% EPEAT-Registered Electronic Products Mandated

Federal Acquisition Circular (FAC) 2005-23 consists of the following three rules:

• Electronic Products Environmental Assessment Tool (EPEAT): This interim rule amends FAR Subpart 23.7, Contracting for Environmentally Preferable Products and Services, to require the use of the Electronic Products Environmental Assessment Tool (EPEAT) when acquiring personal computer products such as desktops, notebooks (also known as laptops), and monitors. This rule implements Executive Order 13423, Strengthening Federal Environmental, Energy, and Transportation Management. (EDITOR’S NOTE: For more on Executive Order 13423, see the February 2007 Federal Contracts Perspective article “President Orders Federal Energy Conservation.” Also, see the following article, “OFPP Proposes Policy Letter on Green Acquisitions,” for more on the implementation of Executive Order 13423.)
  
  EPEAT is a system that helps purchasers evaluate, compare, and select desktop computers, notebooks, and monitors based on their environmental attributes. EPEAT also provides a clear and consistent set of performance criteria for the design of products, and provides an opportunity for manufacturers to secure market recognition for efforts to reduce the environmental impact of their products. For more on EPEAT, go to the website at http://www.epeat.net.
  
  Section 2(h) of Executive Order 13423 states that the head of each agency shall “ensure that the agency...when acquiring an electronic product to meet its requirements, meets at least 95% of those requirements with an Electronic Product Environmental Assessment Tool (EPEAT)-registered electronic product, unless there is no EPEAT standard for such product.” EPEAT lists products that comply with the Institute of Electrical and Electronics Engineers (IEEE) 1680 Standard for the Environmental Assessment of Personal Computer Products, which contains a set of environmental performance criteria. Most of the IEEE 1680 criteria refer to environmental performance characteristics of the specific product.
  
  This interim rule amends FAR Subpart 23.7 and prescribes a new clause, FAR 52.223-16, IEEE 1680 Standard for the Environmental Assessment of Personal Computer Products, for use in all solicitations and contracts for the acquisition of personal computer products, services that require furnishing of personal computer products for use by the government, and services for contractor operation of government-owned facilities. The following are the key provisions of the interim rule:
  
  
  • New FAR 23.701, Definitions, defines “personal computer products” as “a notebook computer, a desktop computer, or a computer monitor, and any peripheral equipment that is integral to the operation of such items. For example, the desktop computer together with the keyboard, the mouse, and the power cord would be a personal computer product. Printers, copiers, and fax machines are not included in peripheral equipment, as used in this definition.”
    
    
  • New FAR 23.705, Electronic Products Environmental Assessment Tool, provides the policy as stated in Executive Order 13423. It goes on to explain that “the IEEE 1680 standard sets forth required and optional criteria. EPEAT “Bronze” registered products must meet all required criteria. EPEAT “Silver” registered products meet all required criteria and 50% of the optional criteria. EPEAT “Gold” registered products meet all required criteria and 75% of the optional criteria...The clause at [FAR] 52.223-16 makes EPEAT Bronze registration the standard that contractors must meet. In accordance with guidance from the Office of the Federal Environmental Executive encouraging agencies to procure EPEAT Silver registered products, Alternate I of the clause makes EPEAT Silver registration the standard that contractors must meet. Agencies also may use EPEAT Silver or Gold registration in the evaluation of proposals.” Agencies must establish procedures for granting exceptions to this requirement, such as when the agency determines that no EPEAT-registered product meets its requirements, or that the EPEAT-registered product will not be cost effective over the life of the product. However, the goal is that “the dollar value of exceptions granted will not exceed 5% of the total dollar value of electronic products acquired by the agency.”
    
    
  • New FAR 52.223-16 requires that the contractor “deliver, furnish for government use, or furnish for contractor use at a government-owned facility, only personal computer products that at the time of submission of proposals were EPEAT Bronze registered or higher.” Alternate I to FAR 52.223-16 requires that the contractor delivery personal computer products that were EPEAT Silver registered or higher at the time of submission of proposals.
  
  Comments on the interim rule must be submitted by February 25, 2008, 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 “FAC 2005-23, FAR case 2006-030.”
  
  EDITOR’S NOTE: The introduction to the interim rule contains the following: “The EPEAT Product Registry has been designed to encourage small business manufacturer participation. There is a sliding scale for the annual EPEAT registration fee vendors pay to have their products EPEAT-registered based on the annual revenue of the vendor. The vendors with the smallest annual revenue pay the smallest annual registration fee of $1,000, for which the company may register all products. A summary of the standard is available on the EPEAT website, but a copy of the standard costs $70.”
  
  
• Performance-Based Payments: This final rule amends FAR Subpart 32.10, Performance-Based Payments, to increase the use of performance-based payments (PBPs) as the method of contract financing on federal contracts and improve the efficiency of performance-based payments when used on these contracts. The rule does so by clarifying that: (1) PBPs may be authorized provided the contract or order does not provide for progress payments (revised FAR 32.1003, Criteria for Use); and (2) “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,” and 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” (revised FAR 32.1004, Procedures).
  
  Three respondents submitted comments on the proposed rule, but the rule is finalized with only minor editorial changes. For more on the proposed rule, see the January 2007 Federal Contracts Perspective article “Increased Use of Performance-Based Payments Proposed.”
  
  
• Contracts With Religious Entities: This finalizes, without changes, the interim rule that implemented Executive Order 13279, Equal Protection of the Laws for Faith-Based and Community Organizations, by amending FAR 52.222-26, Equal Opportunity, to exempt religious corporations, associations, educational institutions, and societies from the prohibition against discrimination on the basis of religion.
  
  No comments were received on the interim rule, so it is finalized without changes. For more on the interim rule, see the April 2007 Federal Contracts Perspective article “FAC 2005-16 Tidies Up Some Loose Ends.”

OFPP Proposes Policy Letter on Green Acquisitions

The Office of Federal Procurement Policy (OFPP) is proposing to issue a policy letter on green procurement policies and strategies. The policy letter would address: (1) general responsibilities of agencies for the procurement of green products and services; (2) the relationship of green products and services to other socio-economic programs; (3) automatic substitution policies; (4) listing of green products in federal catalogues and online ordering systems; (5) green requirements for paper and printing; (6) application of green requirements in service contracting; and (7) energy efficiency. The policy letter would implement specific provisions of Executive Order 13423, Strengthening Federal Environmental, Energy, and Transportation Management, and provisions of the Energy Policy Act of 2005 and several other statutes addressing environmental and energy issues. The policy letter would supersede OFPP Policy Letter 92-4, Procurement of Environmentally-Sound and Energy-Efficient Products and Services.

The letter provides guidance on green purchasing policies and strategies. It requires agencies to identify opportunities and give preference to the acquisition of green products and services, including but not limited to: (1) alternative fuels and alternative fuel vehicles and hybrids; (2) biobased products; (3) ENERGY STAR® and Federal Energy Management Program (FEMP)-designated products; (4) environmentally-preferable products and services; (5) electronics registered on the Electronic Product Environmental Assessment Tool (EPEAT); (6) low or no toxic or hazardous chemicals or materials or products; (7) non-ozone depleting substances; (8) recycled-content and/or remanufactured products; (9) renewable energy; and (10) water-efficient products.

Comments on the proposed letter must be received no later than February 26, 2008, by any of the following methods: (1) e-mail: OFPPGreen@omb.eop.gov; (2) fax: 202-395-5105; or (3) mail: Office of Federal Procurement Policy, Office of Management and Budget, Room 9013, 725 17th Street, NW, Washington, DC 20503.

EDITOR’S NOTE: For more on the FAR rule implementing Executive Order 13423 and addressing EPEAT, see the earlier article in this issue, “95% EPEAT-Registered Electronic Products Mandated.” For more on the FAR rule implementing the Energy Policy Act of 2005 and addressing ENERGY STAR® and Federal Energy Management Program (FEMP)-designated products, see the December 2007 Federal Contracts Perspective article “Contractors Required to Develop Codes of Business Ethics and Conduct.”

50% Goal Established for Performance-Based Buys

In a memorandum to chief acquisition officers and senior procurement executives, OFPP Administrator Paul Denett announced that the governmentwide goal for application of performance-based acquisition (PBA) methods to eligible service contracts exceeding $25,000 is increased from 45% in Fiscal Year 2007 to 50% for Fiscal Year 2008. According to the memorandum, this increase is intended “to continue to motivate agencies to use the PBA strategy on eligible service actions...”

According to the memorandum, PBAs are “the government’s preferred approach for acquiring services.” In a PBA, the government describes the work in terms of the required results rather than “how” the work is to be accomplished or the number of hours the contractor is to provide. The PBA must include measurable performance standards (in terms of quality, timeliness, quantity, etc.) and the method of assessing contractor performance against performance standards. The PBA may include performance incentives. PBA is addressed in FAR Subpart 37.6, Performance-Based Acquisition.

Patent Rights Clause Added to DFARS

The Department of Defense (DOD) took a break during December, issuing only one amendment to the Defense FAR Supplement (DFARS), and that merely added a clause that was deleted from the FAR. However, DOD did take time out to propose two changes to the DFARS.

• Ownership of Patent Rights by the Contractor: This final rule adds DFARS 252.227-7038, Patent Rights – Ownership by the Contractor (Large Business), which is similar to the former FAR 52.227-12, Patent Rights – Retention by the Contractor (Long Form). FAR 52.227-12 was removed from the FAR by FAC 2005-21 (the rewrite of FAR Part 27, Patents, Data, and Copyrights) because DOD was the only agency using the clause. The new DFARS 252.227-7038 contains changes for consistency with current statutory provisions (such as changing “domestic university” to “university” because the word “domestic” does not appear in the statutory definition of “nonprofit organization”) and with other changes made to FAR in the FAR Part 27 rewrite. DFARS 252.227-7038 is prescribed for use in contracts awarded to large business concerns for experimental, developmental, or research work.
  
  A proposed rule was published in anticipation of this FAR Part 27 rewrite and the removal of FAR 52.227-12. No comments were received on the proposed rule, so it is adopted as final with a minor modification: DFARS 252.227-7034, Patents – Subcontracts, is removed because the subject of the clause is now adequately addressed in paragraph (k) of FAR 52.227-11, Patent Rights – Retention by the Contractor (Short Form), which was revised in the FAR Part 27 rewrite. For more on the proposed rule, see the November 2004 Federal Contracts Perspective article “DOD Extends 8(a) Partnership Agreement.” For more on the FAR Part 27 rewrite, see the December 2007 Federal Contracts Perspective article “FAC 2005-21 Rewrites FAR Part 27 in Plain English.”
  
  
• Ground and Flight Risk Clause: This proposed rule would combine DFARS 252.228-7001, Ground and Flight Risk, which is used in negotiated fixed-price contracts involving the furnishing of aircraft to the government, and DFARS 252.228-7002, Aircraft Flight Risk, which is used in cost-reimbursement contracts involving the furnishing of aircraft to the government, into a single clause that would apply to all contract types. This combined clause, DFARS 252.228-7001, Ground and Flight Risk, would include the following additions:
  
  
  • A requirement that the contractor include the clause in all subcontracts (paragraph l).
    
    
  • A statement that the government property clause (generally, FAR 52.245-1, Government Property) is not applicable if the government withdraws its self-insurance coverage (paragraph (d)(4)(iii)).
    
    
  • A statement that commercial insurance costs or self-insurance charges that duplicate the government’s self-insurance are unallowable (paragraph (d)(4)(ii)).
    
    
  • The establishment of a share of loss for the contractor that is the lesser of $100,000 or 20% percent of the estimated contract cost or price (paragraph (f)(3)). (EDITOR’S NOTE: This change would be consistent with the contractor share of loss presently specified in DFARS 252.228-7002. Currently, DFARS 252.228-7001 prescribes a share of loss of $25,000 for the contractor.)
  
  In addition, DFARS 231.205-19, Insurance and Indemnification, would be added. It would state, “In addition to the cost limitations in FAR 31.205-19(e) [Insurance and Indemnification], self-insurance and purchased insurance costs are subject to the requirements of the clauses at [DFARS] 252.217-7012, Liability and Insurance, and [DFARS] 252.228-7001, Ground and Flight Risk.
  
  Comments on this proposed rule must be submitted no later than February 5, 2008, identified as “DFARS Case 2007-D009,” by: (1) eRulemaking Portal: http://www.regulations.gov; (2) e-mail: dfars@osd.mil; (3) fax: 703-602-7887; (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.
  
  
• Allowability of Costs To Lease Government Equipment for Display or Demonstration: This proposed rule would add DFARS 231.205-1, Public Relations and Advertising Costs, to specify that monies paid to the government for the leasing of government equipment for display or demonstration are unallowable, except in the case of foreign military sales (FMS) contracts. DFARS 231.205-1(f) would state, “Unallowable public relations and advertising costs also include monies paid to the government associated with the leasing of government equipment, including lease payments and reimbursement for support services, except for foreign military sales contracts as provided for at [DFARS] 225.7303-2 [Cost of Doing Business with a Foreign Government or an International Organization].” DFARS 225.7303-2 would be amended to add the following cross-reference as paragraph (e): “The limitations on allowability of costs associated with leasing government equipment, in [DFARS] 231.205-1, do not apply to FMS contracts.”
  
  Comments on this proposed rule must be submitted no later than February 5, 2008, identified as “DFARS Case 2007-D004,” by any of the methods identified above, except that mail should be addressed to the attention of John McPherson.

Travel Cost Principle Proposed for Change

Paragraph (b) of FAR 31.205-46, Travel Costs, currently states, “Airfare costs in excess of the lowest customary standard, coach, or equivalent airfare offered during normal business hours are unallowable...” This limitation is being interpreted inconsistently, either as lowest coach fare available to the contractor or lowest coach fare available to the general public, and these inconsistent interpretations can lead to confusion regarding what costs are allowable. Therefore, it is proposed that this language be revised to read “Airfare costs, in excess of the lowest priced coach class, or equivalent, airfare available to the contractor during normal business hours are unallowable...” This standard was selected because “it is not prudent to allow the costs of the lowest coach fares available to the general public when contractors have obtained lower fares as a result of direct negotiation.”

Comments on this proposed rule must submitted no later than February 19, 2008, 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: Diedra Wingate, Washington, DC 20405. Identify such comments as “FAR case 2006-024.”

Nonmanufacturer Rule Waivers Granted, Proposed

The Small Business Administration (SBA) is waiving the nonmanufacturer rules for two classes of products: (1) electromedical and electrotherapeutic apparatus manufacturing, diagnostic equipment, MRI (magnetic resonance imaging) manufacturing; MRI medical diagnostic equipment manufacturing; medical ultrasound equipment manufacturing; MRI medical diagnostic equipment manufacturing; patient monitoring equipment (e.g., intensive care coronary care unit) manufacturing; and PET (positron emission equipment tomography) scanners manufacturing under North American Industry Classification System (NAICS) code 334510; and (2) irradiation apparatus manufacturing (x-ray equipment and supplies) under NAICS code 334517. SBA published notices of intent to waive the nonmanufacturer rules for these two classes, but determined that there are no small business manufacturerers for these classes of products. For more o the notice of intent to waive the nonmanufacturer rule for electromedical and electrotherapeutic apparatus manufacturing, see the December 2007 Federal Contracts Perspective article “Waiver of Another Nonmanufacturer Rule Proposed.” For more on the notice of intent to waive the nonmanufacturer rule for irradiation apparatus manufacturing, see the November 2007 Federal Contracts Perspective article “Nonmanufacture Rule Waiver for Irradiation Apparatus."

Also, SBA is proposing to waive the nonmanufacturer rule for all other miscellaneous electrical equipment and component manufacturing under NAICS code 335999, product numbers 6240 and 6250. SBA is inviting the public to comment on this proposed waiver, or provide information on potential small business sources for these products, by January 14, 2008, to Edith G. Butler, 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 Section 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.

Prompt Payment Interest Rate Set at 4 3/4%

The Treasury Department has established 4 3/4% (4.75%) as the interest rate for the computation of payments made between January 1 and July 31, 2008, 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, 2007, through December 31, 2007) was 5 3/4% (5.75%). The interest rate for January 1, 2007, through June 30, 2007, was 5 1/4% (5.25%).

All prompt payment interest rates since 1980 (in six-month increments) are available at http://www.treasurydirect.gov/govt/rates/tcir/tcir_opdprmt2.htm.

Restrictions Proposed on Purchase Card Use

To prevent contractors with debts to the government from getting paid through a governmentwide commercial purchase card, it is proposed to amend the FAR to require contracting officers to determine whether the Central Contractor Registration (CCR) (http://www.ccr.gov) indicates that the contractor has delinquent debt that is subject to collection under the Treasury Offset Program (TOP) and, if a delinquent debt indicator is found, the contracting officer is not authorized to use the governmentwide commercial purchase card as a method of payment. (EDITOR’S NOTE: Information on the TOP program is available at http://fms.treas.gov/debt/index.html.)

The Financial Management Service (FMS) of the Department of the Treasury is charged with implementing the government's delinquent debt collection program. To collect delinquent debts owed to federal agencies and states, FMS uses the Treasury Offset Program (TOP). TOP uses both “offsets” and “continuous levies” to collect delinquent debts. “Offset” is a process in which federal payments are reduced to satisfy a person’s overdue federal debt, child support obligation, or state tax debt. A payee’s name and taxpayer identification number are matched against an FMS database of delinquent debtors for automatic offset of funds. Offset funds are then used to satisfy payment of the delinquent debt to the extent allowed by law.

Under the continuous levy program, delinquent federal tax debts are collected by levying non-tax payments until the debt is satisfied. The continuous levy program includes levy of some vendor payments, federal employee salary payments, the Office of Personnel Management retirement payments, and social security benefit payments. Continuous levy is accomplished through a process almost identical to that of offset: FMS matches delinquent debtor data with payment record data for automated collection of the debt at the time of payment.

FMS is unable to offset or apply a continuous levy to payments made to contractors with delinquent debts when the governmentwide commercial purchase card is used as the method of payment. When the governmentwide commercial purchase card is used as the method of pay-ment, the government does not make a direct payment to the contractor. Instead, the processing bank for the governmentwide commercial purchase card pays the contractor. Approximately $73.5 million of delinquent debts subject to collection under TOP have not been collected because the debtors have been paid using the governmentwide commercial purchase card.

To help increase the collection of delinquent debts owed to the government, this proposed rule would amend FAR 32.1108, Payment by Governmentwide Commercial Purchase Card, “to verify (by looking in CCR) whether the contractor has any delinquent debt subject to collection under the Treasury Offset Program (TOP) program at contract award, order placement, and prior to any option exercise.” If a delinquent debt flag indicator is found, the governmentwide commercial purchase card would not be authorized as a method of payment. “In such cases, the contracting officer shall provide alternative payment instructions to the contractor. Contracting officers shall not use the presence of the delinquent debt indicator to exclude a contractor from receipt of the contract, order, or exercised option.”

Also, the proposed rule would amend FAR 52.232-36, Payment by Third Party, to advise contractors that the governmentwide commercial purchase card is not authorized as a method of payment if a delinquent debt flag indicator is in the CCR for the contractor.

This proposed rule would not apply to individual travel charge cards or centrally billed accounts for travel/transportation services.

Comments on this proposed rule must be submitted no later than February 29, 2008, 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: Diedra Wingate, Washington, DC 20405. Identify such comments as “FAR case 2006-026.”

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