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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

November 2008
Vol. IX, No. 11

CONTENTS

2009 Defense Authorization Act
Includes Clean Contracting Act

On October 18, President Bush signed into law the $612 billion Duncan Hunter Defense Authorization Act for Fiscal Year 2009 (Public Law 110-417), which includes Title VIII, Acquisition Policy, Acquisition Management, and Related Matters. Of particular note is the inclusion of the Clean Contracting Act of 2008 (Sections 861 through 874), which applies governmentwide.

• Section 833, Acquisition Workforce Expedited Hiring Authority: The Secretary of Defense is permitted to designate any category of acquisition positions within the DOD as shortage category positions, and utilize this authority to recruit and appoint highly qualified persons directly to positions so designated.
  
  
• Section 841, Ethics Safeguards Related to Contractor Conflicts of Interest: The Office of Federal Procurement Policy (OFPP) Administrator must develop and issue a standard policy to prevent personal conflicts of interest by contractor employees performing acquisition functions closely associated with inherently governmental functions (including the development, award, and administration of government contracts) for or on behalf of a federal agency or department. In addition, the Administrator must develop a personal conflicts-of-interest clause or a set of clauses for inclusion in solicitations and contracts (and task or delivery orders) for the performance of acquisition functions closely associated with inherently governmental functions that sets forth the personal conflicts-of-interest policy and sets forth the contractor’s responsibilities under such policy.
  
  
• Section 862, Limitation on Length of Certain Noncompetitive Contracts: Any contract entered into with other than full and open competition because of unusual and compelling urgency (1) may not exceed the time necessary to meet the unusual and compelling requirements of the work to be performed under the contract; (2) may not exceed one year unless the head of the agency determines that exceptional circumstances apply; and (3) follow-on contracts for the required goods or services must be made through competitive procedures.
  
  
• Section 863, Requirements for Purchase of Property and Services Pursuant to Multiple Award Contracts: The Federal Acquisition Regulation (FAR) shall be amended to require competition in the purchase of property and services under multiple award contracts that exceed the simplified acquisition threshold unless one of the exceptions in paragraph (b)(2) of FAR 16.505, Ordering, applies, or a law expressly authorizes or requires that the purchase be made from a specified source. All contractors offering such property or services under the multiple award contract must be given notice of intent to make that purchase, and all contractors responding to such notice must be given a fair opportunity to compete. However, notice may be provided to fewer than all contractors if notice is provided to as many contractors as practicable. Nevertheless, if notice is not provided to all contractors under the multiple award contract, award may not be made unless offers were received from at least three qualified contractors, or a contracting officer determines that no additional qualified contractors were able to be identified despite reasonable efforts to do so. Finally, a notice must be published on FedBizOpps (http://www.fbo.gov) of all sole source task or delivery orders in excess of the simplified acquisition threshold placed against multiple award contracts, and the determination required by FAR 16.505(b)(2) must be published. (EDITOR’S NOTE: This applies to civilian agencies the same rule that has applied to DOD purchases since the FY 2002 Defense Authorization Act (Section 803) -- see the February 2002 Federal Contracts Perspective article “2002 Defense Authorization Act Signed Into Law, Extends FAR Subpart 13.5 Until January 1, 2003”.)
  
  
• Section 864, Regulations on the Use of Cost-Reimbursement Contracts: The FAR shall be revised to address: (1) when, and under what circumstances, cost-reimbursement contracts are appropriate; (2) the acquisition plan findings necessary to support a decision to use cost-reimbursement contracts; and (3) the acquisition workforce resources necessary to award and manage cost-reimbursement contracts.
  
  
• Section 866, Limitations on Tiering of Subcontractors: The FAR shall be amended, for agencies other than DOD, to (1) minimize the excessive use by contractors of subcontractors, or of tiers of subcontractors, that add no or negligible value; and (2) ensure that neither a contractor nor a subcontractor receives indirect costs or profit on work performed by a lower-tier subcontractor to which the higher-tier contractor or subcontractor adds no, or negligible, value (but not to limit charges for indirect costs and profit based on the direct costs of managing lower-tier subcontracts). This will apply to cost-reimbursement type contracts and task or delivery orders in an amount greater than the simplified acquisition threshold. (EDITOR’S NOTE: DOD became subject to a similar rule in the FY 2007 Defense Authorization Act. See the November 2006 Federal Contracts Perspective article “2007 Defense Authorization Addresses Training, Award Fees, Specialty Metals, Small Claims.”)
  
  
• Section 867, Linking of Award and Incentive Fees to Acquisition: The FAR shall be amended to provide agencies, other than DOD, with instructions on the appropriate use of award and incentive fees in federal acquisition programs. The revised FAR shall: (1) ensure that all new contracts using award fees link such fees to acquisition outcomes (which shall be defined in terms of program cost, schedule, and performance); (2) provide guidance on the circumstances in which contractor performance may be judged to be “excellent” or “superior” and the percentage of the available award fee which contractors should be paid for such performance; (3) establish standards for determining the percentage of the available award fee, if any, which contractors should be paid for performance that is judged to be “acceptable”, “average”, “expected”, “good”, or “satisfactory”; (4) ensure that no award fee may be paid for contractor performance that is judged to be below satisfactory performance or performance that does not meet the basic requirements of the contract; (5) provide specific direction on the circumstances, if any, in which it may be appropriate to roll over award fees that are not earned in one award fee period to a subsequent award fee period or periods; and (6) include performance measures to evaluate the effectiveness of award and incentive fees as a tool for improving contractor performance and achieving desired program outcomes. (EDITOR’S NOTE: DOD became subject to a similar rule in the FY 2007 Defense Authorization Act.)
  
  
• Section 868, Minimizing Abuse of Commercial Services Item Authority: The FAR shall be amended to ensure that services that are not offered and sold competitively in substantial quantities in the commercial marketplace, but are of a type offered and sold competitively in substantial quantities in the commercial marketplace, may be treated as commercial items only if the contracting officer determines in writing that the offeror has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price for such services. The contracting officer may request the offeror to submit prices paid for the same or similar commercial items under comparable terms and conditions by both government and commercial customers, or, if the information is not sufficient to determine the reasonableness of price, the contracting officer may request other relevant information regarding the basis for price or cost, including information on labor costs, material costs, and overhead rates.
  
  
• Section 871, Access of Government Accountability Office (GAO) to Contractor Employees: GAO representatives will have the authority to interview any contractor employee regarding records of the contractor or any of its subcontractors.
  
  
• Section 872, Database for Federal Agency Contract and Grant Officers and Suspension and Debarment Officials: A database shall be established of all persons awarded a federal contract or grant in excess of $500,000, or other category or categories of federal contract as the FAR may provide. The database shall contain information, during the most recent five-year period, on: (1) each civil or criminal proceeding, or any administrative proceeding, in connection with the award or performance of a contract or grant with the government, to the extent that such proceeding results in certain specific dispositions; (2) each federal contract and grant awarded to the person that was terminated in such period due to default; (3) each federal suspension and debarment of the person in that period; (4) each federal administrative agreement entered into by the person and the federal government in that period to resolve a suspension or debarment proceeding; (5) each final finding by a federal official in that period that the person has been determined not to be a responsible source; (6) such other information required by the FAR; and (7) to the maximum extent practical, similar information in connection with the award or performance of a contract or grant with a state government.

GAO Rules Task Orders Subject to Set-Aside Procedures

The Government Accountability Office (GAO) has ruled in a protest decision that task and delivery orders issued under multiple-award contracts are subject to small business set-aside provisions in FAR Subpart 19.5, Set-Asides for Small Business (B-400403, Delex Systems, Inc., October 8, 2008). This is the GAO’s first use of the authority granted to it by Section 843 of the Fiscal Year 2008 National Defense Authorization Act (Public Law 110-181) to consider protests of task and delivery orders that exceed $10,000,000 (see the February 2008 Federal Contracts Perspective article “Defense Authorization Act Restricts A-76 Competitions, Extends FAR Subpart 13.5,” and for the FAR implementation of Section 843 see the October 2008 Federal Contracts Perspective article “FAC 2005-27 Requires ‘Enhanced Competition’ for Task and Delivery Orders”).

On August 13, 2003, the Naval Air Systems Command (NAVAIR) awarded multiple indefinite-delivery/indefinite-quantity (IDIQ) contracts for general aviation training products. Four IDIQ contracts were awarded to small businesses, one of which was Delex Systems, four were awarded to large businesses, and the contracts had an ordering period of eight years. In the solicitation for the contracts, NAVAIR stated that it would reserve the right to solicit individual delivery orders on a small business set-aside basis to meet NAVAIR’s small business goal.

On May 22, 2008, NAVAIR issued a delivery order proposal request for the Naval Center for Aviation Technical Training. The proposal request anticipated a five-year performance period with an estimated value of $75,000,000. On June 11, 2008, NAVAIR amended each of the IDIQ contracts to incorporate FAR 52.219-28, Post-Award Small Business Program Rerepresentation, and on June 16, 2008, the contracting officer asked each of the small businesses to rerepresent their small business size status in accordance with FAR 52.219-28 (see the August 2007 Federal Contracts Perspective article “FAC 2005-18 Requires Contractors to Rerepresent Small Business Size Status”). In response, only two firms recertified as small businesses -- Delex Systems was one. As a consequence, the contracting officer determined that there was not a reasonable expectation of obtaining competitive offers from at least two small business concerns,” so the delivery order proposal request was issued on an unrestricted basis to all the IDIQ contractors. Delex Systems protested that NAVAIR erred in concluding that it had no reasonable expectation of receiving offers from two small business IDIQ contractors.

Paragraph (b) of FAR 19.502-2, Total Small Business Set-Asides, states, “The contracting officer shall set aside any acquisition over $100,000 for small business participation when there is a reasonable expectation that (1) offers will be obtained from at least two responsible small business concerns offering the products of different small business concerns...and (2) award will be made at fair market prices.” This is commonly called the “Rule of Two.” The Navy, representing NAVAIR, argued that FAR 19.502-2(b) does not apply to the issuance of task and delivery orders. The Navy reasoned that an agency’s obligation to follow the requirements of FAR Subpart 19.5 is derived from the requirements for full and open competition in FAR Part 6, Competition Requirements. Paragraph (c) of FAR 6.203, Set-Asides for Small Business Concerns, requires agencies to follow FAR Subpart 19.5. However, when an agency is placing task and delivery orders under a multiple-award IDIQ contract, subparagraph (b)(1)(ii) of FAR 16.505, Ordering, states that the competition requirements in FAR Part 6 do not apply to the ordering process. Therefore, since FAR Part 6 contains the requirement that agencies comply with FAR Subpart 19.5 and its “Rule of Two,” and since agencies are exempt from the requirements of FAR Part 6 when placing task and delivery orders, there is no requirement to set-aside the proposal request even if there was a likelihood that Delex and the other small business IDIQ contractor would submit proposals (a contention the Navy disputed as well).

GAO decided that this protest was not merely a matter of regulation interpretation but a matter of statute. The full and open competition regulations in FAR Part 6 implement the requirements of the Competition in Contracting Act of 1984 (CICA), and the regulations for using multiple-award IDIQ contracts in FAR Subpart 16.5 implement the requirements of the Federal Acquisition Streamlining Act of 1994 (FASA). Of particular importance is that the “Rule of Two” regulations in FAR Subpart 19.5 are intended to implement the Small Business Act of 1953. The Small Business Act states that small businesses “shall receive any award or contract...as to which it is determined by the Administration and the contracting procurement or disposal agency...(3) to be in the interest of assuring that a fair proportion of the total purchases and contracts for property and services for the government in each industry category are placed with small business concerns...” While the Small Business Act does not specifically enunciate the “Rule of Two,” in 1984 the Office of Federal Procurement Policy (OFPP) inserted the “Rule of Two” into the draft FAR to implement the Small Business Act, and the final FAR included the “Rule of Two.”

Next, GAO notes that both CICA and FASA expressly recognized that their requirements were to be harmonized with existing statutes. Nothing in CICA or FASA exempts task or delivery orders from the “Rule of Two.” GAO believes that the Navy “overreads” the statement in FAR 16.505(b)(1)(ii) that the competition requirements in FAR Part 6 do not apply to the ordering process:

Since most agencies are relying more and more on task and delivery orders to acquire the products and services they need, some acquisition experts predict that this is the first of a deluge of protests against task and delivery orders over $10,000,000. Before the 2008 National Defense Authorization Act, FAR 16.505(a)(9) had stated “No protest under [FAR] Subpart 33.1 [Protests] is authorized in connection with the issuance or proposed issuance of an order under a task-order contract or delivery-order contract, except for a protest on the grounds that the order increases the scope, period, or maximum value of the contract...” That blanket exemption no longer exists.

GSAR Rewrite Keeps Rolling Along

The General Services Administration (GSA) is continuing its rewrite of the GSA Acquisition Regulation (GSAR) with the proposed revision of five GSAR parts.

• GSAR Part 504, Administrative Matters: This proposed rule would revise GSAR Part 504 as follows:
  
  
  • Within GSAR Subpart 504.4, Safeguarding Classified Information Within Industry, GSAR 504.402, General, would be revised to delete duplicative information already addressed in FAR 4.402; and revise GSAR 504.475, Return of Classified Information, to ensure grammatical and structural consistency.
    
    
  • GSA Subpart 504.5, Electronic Commerce in Contracting, would be removed in its entirety because it duplicates information already addressed in FAR Subpart 4.5.
    
    
  • GSAR Subpart 504.11, Central Contractor Registration (CCR), would be added. It would consist of GSAR 504.1103, Procedures, which would require the contracting officer to take actions in addition to those specified in FAR 4.1103 to ensure that prospective contractors are registered properly in CCR (http://www.ccr.gov).
    
    
  • GSAR Subpart 504.13, Personal Identity Verification of Contractor Personnel, would be added. It would consist of two sections: GSAR 504.1301, Policy, which would establish policy for ensuring compliance with Homeland Security Presidential Directive (HSPD)-12, Policy for a Common Identification Standard for Federal Employees and Contractors, and GSAR 504.1303, Contract Clause, which would require that new clause GSAR 552.204-9, Personal Identify Verification Requirements, be included in solicitations and contracts when contractor employees will require access to federal facilities or information. GSAR 552.204-9 would require the contractor to comply with GSA personal identification verification requirements.
  
  Comments on the proposed rule must be submitted no later than December 8, 2008, 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 (VPR), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405. Identify comments as “GSAR case 2006-G510.”
  
  
• GSAR Part 511, Describing Agency Needs: This proposed rule would revise GSAR Part 511 as follows:
  
  
  • Within GSAR Subpart 511.2, Using and Maintaining Requirements Documents, GSAR 511.204, Solicitation Provisions and Contract Clauses, would be revised to insert prescriptions for the use of ten (10) new GSAR clauses in solicitations and contracts that cite federal specifications.
    
    
  • GSAR Subpart 511.5, Liquidated Damages, would be added. It would consist of GSAR 511.503, Contract Clause, which would require the inclusion of new GSAR 552.211-X3, Liquidated Damages for Phased Completion -- Construction, in solicitations and contracts for construction when supplementing FAR 52.211-12, Liquidated Damages -- Construction.
    
    
  • GSAR Subpart 511.6, Priorities and Allocations, particularly GSAR 511.600, Scope of Part, would be revised to delete obsolete text and update it to note its non-applicability to non-rated orders. Also, GSAR 511.601, Definitions, would be deleted because the definitions are adequately addressed in FAR 11.601.
  
  Comments on the proposed rule must be submitted no later than December 8, 2008, by any of the methods mentioned above, except identify comments as “GSAR case 2007-G507.”
  
  
• GSAR Part 514, Sealed Bidding: This proposed rule would revise GSAR Part 514 as follows:
  
  
  • In GSAR 514.201-7, Contract Clauses, paragraph (b), Examination of Records, would be deleted because GSAR 552.215-70, Examination of Records by GSA, does not provide basic audit rights that are in addition to the FAR 52.215-2, Audit and Records -- Negotiation, and FAR 52.214-26, Audit and Records -- Sealed Bidding. Also, FAR 52.214-26 is specific to sealed bids, unlike GSAR 552.215-70. Further, GSAR 552.215-70 grants to the agency rights to audit subcontractors that are in excess of those granted by the FAR and the statute.
    
    
  • New GSAR 514.202-5, Descriptive Literature, would be added to address the requirements of FAR 14.202-5(c).
    
    
  • GSAR 514.203, Methods of Soliciting Bids, and GSAR 514.203-1, Transmittal to Prospective Bidders, would be deleted because GSA is not using paper copies and to be consistent with the FAR.
    
    
  • Paragraph (b) of GSAR 514.407-3, Other Mistakes Disclosed Before Award, which addresses legal review of mistakes in bid, would be deleted because it is redundant with FAR 14.407-3(f).
  
  Comments on the proposed rule must be submitted no later than December 9, 2008, by any of the methods mentioned above, except identify comments as “GSAR case 2008-G505.”
  
  
• GSAR Part 515, Contracting by Negotiation: This proposed rule would revise GSAR Part 515 as follows:
  
  
  • To paragraph (a) of GSAR 515.205, Issuing Solicitations, which states that the incumbent contractor is to be included as a potential source except when its written response to the notice of contract action under FAR Subpart 5.2 states a negative interest, is added “or unless the incumbent contractor is otherwise ineligible for the award.” This would advise contracting officers that they are not obligated to include an offeror in the competition if it is not eligible to compete.
    
    
  • In GSAR 515.209-70, Examination of Records by GSA, paragraphs (c) and (d), which prescribe GSAR 552.215-71, Examination of Records by GSA (Multiple Award Schedules), would be transferred to GSAR Part 538, Federal Supply Schedule Contracting, because GSAR 552.215-71 only pertains to Federal Supply Schedule (FSS) Multiple Award Schedules (MAS). In addition, GSAR 552.215-71 would be redesignated as GSAR 552.238-XX.
    
    
  • GSAR 515.408, Solicitation Provisions and Contract Clauses, which addresses MAS requests for information other than cost or pricing data, would be transferred to GSA Acquisition Manual (GSAM) Part 538 because it is only applicable to the Multiple Award Schedules Program.
    
    
  • GSAR 552.215-72, Price Adjustment -- Failure to Provide Accurate Information, would be redesignated as GSAR 552.238-YY because its use is restricted to MAS solicitations and contracts.
  
  Comments on the proposed rule must be submitted no later than December 2, 2008, by any of the methods mentioned above, except identify comments as “GSAR case 2008-G506.”
  
  
• GSAR Part 532, Contract Financing: This proposed rule would revise GSAR Part 532 as follows:
  
  
  • GSAR Subpart 532.1, Non-Commercial Item Purchase Financing, which consists of GSAR 532.111, Contract Clauses for Non-Commercial Purchases, would be revised as follows:
    
    
    • GSAR 552.232-70, Invoice Requirements, and GSAR 552.232-71, Adjusting Payments, would be deleted because they are redundant to the FAR and/or Standard Form 26, Award/Contract.
      
      
    • GSAR 552.232-72, Final Payment, would be retitled “Final Payment Under Building Services Contracts,” and the prescription would be relocated GSAR 532.904, Determining Payment Due Dates.
      
      
    • GSA Form 2419, Certification of Progress Payments Under Fixed-Price Construction Contracts, was made mandatory at the request of the Office of General Counsel and Office of Inspector General, and the form’s prescription would become GSAR 532.111.
    
    
  • The four clauses prescribed in GSAR Subpart 532.2, Commercial Items Purchase Financing, are for Federal Supply Schedules only, so GSAR Subpart 532.2 and GSAR 552.232-8, Discounts for Prompt Payment, GSAR 552.232-81, Payments by Non-Federal Ordering Activities, GSAR 552.232-82, Contractor’s Remittance (Payment) Address, and GSAR 552.232-83, Contractor’s Billing Responsibilities, would be deleted.
    
    
  • In GSAR Subpart 532.7, Contract Funding, GSAR 532.705-1, Clauses for Contracting in Advance of Funds, would be revised to provide for the use of new GSAR 552.232-7007, Limitation of Government’s Obligation, in incrementally funded fixed-price, time-and-materials, and labor-hour contracts. The FAR provides clauses for incremental funding of cost-type contracts, but not for these contract types, though the use of incremental funding for such contracts is not prohibited by the FAR. In addition, GSAR 552.232-73, Availability of Funds, would be cancelled because its use would be inappropriate in circumstances other than those authorized by the FAR (i.e., cost-type contracts).
    
    
  • GSAR Subpart 532.8, Assignment of Claims, would be removed because it consists of a prescription for GSAR 552.232-28, Assignment of Claims, which is to be included in solicitations and requirements or indefinite-quantity contracts under which more than one agency may place orders. GSAR 552.232-28 consists of a substitute for paragraph (a) of FAR 52.232-23, Assignment of Claims, and it limits the assignment of claims capability to an individual order, rather than to the contract as a whole. GSAR 552.232-28 provides an important protection for GSA, one that should be available to other government agencies that award contracts used by more than one agency and for the government agencies that issue orders under such contracts. Therefore, GSAR 552.232-28 would be removed and proposed for inclusion as Alternate 1 to FAR 52.232-23.
    
    
  • In GSAR Subpart 532.9, Prompt Payment, the following changes would be made:
    
    
    • GSAR 532.902, Definitions, which consists of a definition for “full cycle electronic commerce,” would be deleted because the term is not used elsewhere in the GSAR except in paragraph (a)(2) of GSAR 552.232-25, Prompt Payment.
      
      
    • GSA has an approved deviation to use GSAR 552.232-25, Prompt Payment, in lieu of FAR 52.232-25. GSAR 552.232-25 waives Prompt Payment Act requirements for certain situations and types of contracts to allow GSA to pay its contractors more quickly than would be the case under the Prompt Payment Act. A related clause, GSAR 552.232-74, Invoice Payments, is used only in accordance with the FAR deviation to reduce payment times for commercial items when EFT (electronic funds transfer) is used. Because this is the only difference from normal payment terms, GSAR 552.232-74 would be proposed for inclusion as Alternate II of FAR 52.212-4, Contract Terms and Conditions -- Commercial Items.
      
      
    • The FAR does not cover contracting for leasehold interests, while GSAR Part 570 is devoted to the subject. Therefore, GSAR 252.232-75, Prompt Payment, and GSAR 552.232-76, Electronic Funds Transfer Payment, and their associated clause prescriptions in GSAR 532.908, Contract Clauses, would be transferred to GSAR Part 570 because they apply only to contracts for leasehold interests.
      
      
    • GSAR 552.232-78, Payment Information, directs contractors to a GSA-unique site where they can use to monitor the status of their payments. It is not necessary to use a clause to inform contractors of this website -- the website can be included in the body of the contract itself. Section G, Contract Administration Data, is the appropriate location for information relating to contract financing payments. Therefore, GSAR 552.232-78 would be deleted.
    
    
  • In GSAR Subpart 532.70, Authorizing Payment of Governmentwide Commercial Purchase Card, the following changes would be made:
    
    
    • GSAR 532.7001, Definition, which consists of a definition of “Governmentwide commercial purchase card,” would be deleted because it merely refers to the definition in FAR 13.101, General [Simplified Acquisition Procedures].
      
      
    • GSAR 532.7002, Solicitation Requirements, would be deleted and much of the information incorporated into GSAR 552.232-77, Payment by Government Charge Card.
      
      
    • GSAR 532.7003, Contract Clause, which prescribes the use of GSAR 552.232-77, would retain the information for indefinite-delivery, indefinite-quantity (IDIQ) contracts, but would delete the information regarding Federal Supply Schedule contracts, instead referring to GSAR Part 538.
      
      
    • GSAR 552.232-77 would be revised to update the terminology and delete references to “the credit card clearing house” based on recommendations by the Office of the Chief Financial Officer (OCFO).
    
    
  • GSAR Subpart 532.71, Payments for Recurring Services, consists of a definition for “fixed-roll payments” and the circumstances in which they may be used. Since the implementation of Pegasys, GSA no longer uses the fixed-roll payment process, so GSAR Subpart 532.71 and the related GSAR 552.232-71, Adjusting Payments, would be deleted.
  
  Comments on the proposed rule must be submitted no later than November 6, 2008, by any of the methods mentioned above, except identify comments as “GSAR case 2006-G515.”

Nonmanufacturer Rule Waivers Proposed

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for the following industries: control cable and conductors, North American Industry Classification System (NAICS) code 335931, product service code 6145; trailers and heavy duty truck tractors, NAICS code 333924, product service code 2330; and line hardware (insulator strings), NAICS code 335932, product service code 5975. SBA is inviting the public to comment on these proposed waivers, or to provide information on potential small business sources for these products by October 27, 2008, to Edith G. Butler, Program Analyst, Small Business Administration, Office of Government Contracting, 409 3rd Street, SW, Suite 8800, Washington, DC 20416.

DFARS Addresses Selected Reserve, Human Subjects

The Department of Defense (DOD) issued one final rule and two proposed rules last month:

• Evaluation Factor for Use of Members of the Selected Reserve: This final rule implements Section 819 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163), which authorizes the Department of Defense (DOD) to use an evaluation factor that considers whether an offeror intends to perform a contract using employees or individual subcontractors who are members of the Selected Reserve, and requires offerors to submit documentation supporting any stated intent to use such employees or subcontractors.
  
  DFARS 215.370, Evaluation Factor for Employing or Subcontracting with Members of the Selected Reserve, is added to authorize contracting officers to use an evaluation factor that considers whether an offeror intends to perform the contract using employees or individual subcontractors who are members of the Selected Reserve (DFARS 215.370-2, Evaluation Factor). DFARS 215.370-3, Solicitation Provision and Contract Clause, requires the inclusion of DFARS 252.215-7005, Evaluation Factor for Employing or Subcontracting with Members of the Selected Reserve, in solicitations that include an evaluation factor considering whether an offeror intends to perform the contract using employees or individual subcontractors who are members of the Selected Reserve; and DFARS 252.215-7006, Use of Employees or Individual Subcontractors Who are Members of the Selected Reserve, in solicitations that include DFARS 252.215-7005. However, DFARS 252.215-7006 is to be included in the resultant contract only if the contractor stated in its proposal that it intends to perform the contract using employees or individual subcontractors who are members of the Selected Reserve, and that statement was used as an evaluation factor in the award decision.
  
  DFARS 252.215-7005 references 10 USC 10143 as containing the applicable definition of “Selected Reserve.” It goes on to state that “Selected Reserve members normally attend regular drills throughout the year and are the group of Reserves most readily available to the President.” The clause goes on to state that the solicitation includes “an evaluation factor that considers the offeror’s intended use of employees, or individual subcontractors, who are members of the Selected Reserve,” but leaves the creation of the clause to the contracting officer. Finally, it requires offerors that intend to use employees or individual subcontractors who are members of the Selected Reserve to provide documentation.
  
  DFARS 252.215-7006 requires the contractor, if it stated it intended to use members of the Selected Reserve in the performance of the contract, to use members of the Selected Reserve to the fullest extent consistent with efficient contract performance. It goes on to state that the government has the right to terminate the contract for default if the contractor willfully or intentionally fails to use members of the Selected Reserve, as employees or individual subcontractors, in the performance of the contract.
  
  No comments were received in response to the proposed rule, so the proposed rule is finalized without changes. For more on the proposed rule, see the October 2007 Federal Contracts Perspective article “Tidying Up the DFARS.” For more on other acquisition-related provisions of Public Law 109-163, see the February 2006 Federal Contracts Perspective article “2006 Defense Authorization Addresses A-76, Consolidates Civilian Boards of Contract Appeals.”
  
  
• Protection of Human Subjects in Research Projects: This proposed rule would add DFARS 252.235-70XX, Protection of Human Subjects, to address requirements for the protection of human subjects involved in research projects. The clause informs contractors of their responsibilities for compliance with Title 32 of the Code of Federal Regulations (CFR), Part 219, Protection of Human Subjects; DOD Directive 3216.02, Protection of Human Subjects and Adherence to Ethical Standards in DOD Supported Research; applicable DoD component policies; Title 10 of United States Code (USC), Chapter 49, Miscellaneous Prohibitions and Penalties, Section 980, Limitation on Use of Humans as Experimental Subjects; and, when applicable, Food and Drug Administration policies and regulations.
  
  In addition, DFARS 207.172, Human Research, would be added to require DOD components sponsoring research involving human subjects to have a Human Resource Protection Official, and revises DFARS 235.072, Additional Contract Clauses, to require the inclusion of DFARS 252.235-70XX in solicitations and contracts that include or may include research involving human subjects. DFARS 235.072 would clarify that the clause does not apply to the use of cadaver materials alone.
  
  Comments on the proposed rule must be submitted no later than December 26, 2008, by any of the following means: (1) eRulemaking Portal: http://www.regulations.gov; (2) e-mail: dfars@osd.mil; (3) fax: 703-602-7887; (4) mail: Defense Acquisition Regulations System, Attn: Mark Gomersall, OUSD (AT&L) DPAP (DARS), IMD 3D139, 3062 Defense Pentagon, Washington, DC 20301-3062; or (5) hand-delivery/courier: Defense Acquisition Regulations System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 22202-3402. Identify comments as “DFARS Case 2007-D008.”
  
  
• Clarification of Central Contractor Registration and Procurement Instrument Identification Data Requirements: This proposed rule would revise DFARS Part 204, Administrative Matters, to: (1) address requirements for ensuring the accuracy of contractor information in the Central Contractor Registration (CCR) (http://www.ccr.gov) database and in contract documents; and (2) clarify requirements for proper assignment of procurement instrument identification (PII) numbers.
  
  The rule would modify DFARS Subpart 204.11, Central Contractor Registration, by adding to DFARS 204.1103, Procedures, a requirement for contracting officers to verify the accuracy of the contractor’s CCR information before exercising options or at any other time. If the information is not accurate or current, the contracting officer must wait until the contractor updates its CCR information before exercising the option or issuing a contract modification. Also, DFARS 217.207, Exercise of Options, would be added to reiterate this requirement.
  
  DFARS Subpart 204.70, Uniform Procurement Instrument Identification Numbers, would be amended by revising DFARS 204.7003, Basic PII Number, to” (1) clarify that positions 7 and 8 of the PII number are to consist of the last two digits of the fiscal year in which the contract instrument is awarded (currently, DFARS 204.7003(a)(2) and the PII number illustration in DFARS 204.7003(b) state that positions 7 and 8 are to consist of the last two digits of the fiscal year in which the PII number is assigned); and (2) specify that position 9, Type of Instrument, shall not use either code C or code H for contracts or agreements with provisions for orders or calls (DFARS 204.7003(a)(3)(iii) states that code C is reserved for “contracts of all types except indefinite delivery contracts, facilities contracts, sales contracts, and contracts placed with or through other government departments or agencies”; and DFARS 204.7003(a)(3)(viii) states that code H is reserved for “agreements, including basic agreements and loan agreements, but excluding blanket purchase agreements, basic ordering agreements, and leases”).
  
  Comments on the proposed rule must be submitted no later than December 19, 2008, by any of the means mentioned above, except mailed comments should be to the attention of Julian Thrash, and the comments should be identified as “DFARS Case 2008-D010.”

Women-Owned Business Assistance Program Instituted

The Small Business Administration (SBA) is establishing a new women-owned small business (WOSB) federal contract assistance program as authorized by the Small Business Act. SBA has published a final rule putting in place the regulations that will govern the WOSB program, which will include set-asides for WOSBs and economically disadvantaged WOSBs (EDWOSBs), but SBA has not yet identified which industries will be eligible for such set-asides. The new regulations are in Title 13 of the Code of Federal Regulations, Part 127, Women-Owned Small Business Federal Contract Assistance Procedures.

On December 27, 2007, SBA published a proposed rule for the WOSB program and requested comments (see the January 2008 Federal Contracts Perspective article “SBA Proposes Set-Aside Program for Women-Owned Small Businesses”). The rule proposed to restrict WOSB and EDWOSB set-asides to contracts not exceeding $3,000,000 ($5,000,000 for manufacturing) in four industries where WOSBs were underrepresented according to a study SBA commissioned: coating, engraving, heat treating, and allied activities (North American Industry Classification System (NAICS) codes 3328); household and institutional furniture and kitchen cabinet manufacturing (NAICS 3371); other motor vehicle dealers (NAICS 4412); and National Security and International Affairs (NAICS 9281). In addition, the rule proposed standards for determining the eligibility of a concern as a WOSB or EDWOSB, and required any firm receiving a contract under those procedures to certify its status as a WOSB or EDWOSB.

SBA received approximately 1,720 comments: 1,610 comments from individuals, 31 comments from individuals using form letters from various associations or organizations, 45 comments from associations or organizations, 31 comments from members of Congress, and three comments from federal agencies. Of those 1,720 comments, 1,689 requested withdrawal of the proposed rule and/or stated opposition to some portion of the proposed rule: 1,591 comments requested that the proposed rule be withdrawn; 828 comments stated that some aspect of the proposed rule frustrated Congressional intent; 173 comments opposed the method by which the proposed rule would require a procuring agency to determine that the set-aside is consistent with constitutional standards; 104 comments were concerned with the methodology used by SBA to determine industries in which WOSBs were underrepresented or substantially underrepresented; 36 alleged that SBA and/or the organization that conducted the study, the Kauffman-RAND Institute for Entrepreneurship Public Policy (RAND), applied the incorrect level of scrutiny to determine underrepresentation or otherwise addressed Constitutional concerns; seven comments addressed SBA’s use of the value of contract dollars to determine underrepresentation; and four comments opposed the proposed self-certification process.

The most significant comments involved the study that identified only four industries as being underrepresented with WOSBs. These comments stated that SBA should have used a broader methodology in the RAND study to identify the industries in which WOSBs are underrepresented. The comments pointed out that SBA declined to adopt the approach in the RAND study that would have classified 87% of industries as underrepresented, but instead adopted the most restrictive approach proposed by the report.

The RAND study outlined twenty-eight different approaches for measuring the underrepresentation of WOSBs. Each approach uses a different data source or a different version of the same data source. Depending on the approach, the RAND study yielded different levels of WOSB representation in federal procurement. SBA eliminated various approaches as unjustifiable, and selected the approach that it believed most appropriately conformed to the applicable statutory requirements, most accurately reflected the measure employed, and was legally justifiable. The selected approach compared the percentage of federal contract dollars going to WOSBs to the percentage of total revenue from all sources going to WOSBs in 4-digit NAICS codes. Using this approach, SBA identified four industries in which WOSBs were underrepresented or substantially underrepresented, and this approach was used in the proposed rule.

Because of the large number of comments opposed to the selected approach, SBA engaged in a further review and examination of the RAND study, including the data sources and in particular the Central Contractor Registration (CCR) (http://www.ccr.gov) data that was relied upon to arrive at the four industries. As a result of this further examination, SBA has now identified a limitation inherent in the CCR data. Specifically, when RAND computed the disparity ratio to determine underrepresentation, each firm’s total revenue was counted in every NAICS code associated with the firm. This means a firm’s total revenue could be counted for multiple NAICS codes, thus overstating the aggregate revenue figures. For example, a WOSB with revenues of $1,000,000 split between three different NAICS codes was counted as having $1,000,000 in revenues in each of the three NAICS codes, thus making it appear that the firm had $3,000,000 in revenues. Therefore, the final rule does not identify the industries in which WOSBs are underrepresented or substantially underrepresented in federal procurement. Instead, SBA is issuing a proposed rule and requesting comments on what effect, if any, the CCR data has on the industries determined to be underrepresented. Once SBA makes its final determination and decides on the eligible industries, it will publish a notice in the Federal Register.

Using data from the Census Bureau, the following 32 industries (out of 140 NAICS codes analyzed in the RAND study) are identified as underrepresented or substantially underrepresented:

• Residential Building Construction (NAICS 2361)
• Other Textile Product Mills (NAICS 3149)
• Cut and Sew Apparel Manufacturing (NAICS 3152)
• Printing and Related Support Activities (NAICS 3231)
• Other Chemical Product and Preparation Manufacturing (NAICS 3259)
• Architectural and Structural Metals Manufacturing (NAICS 3323)
• Boiler, Tank and Shipping Container Manufacturing (NAICS 3324)
• Coating, Engraving, Heat Treating, and Allied Activities (NAICS 3328)
• Other Transportation Equipment Manufacturing (NAICS 3369)
• Household and Institutional Furniture and Kitchen Cabinet Manufacturing (NAICS 3371)
• Other Motor Vehicle Dealers (NAICS 4412)
• Health and Personal Care Stores (NAICS 4461)
• Direct Selling Establishments (NAICS 4543)
• General Freight Trucking (NAICS 4841)
• Warehousing and Storage (NAICS 4931)
• Other Telecommunications (NAICS 5179)
• Offices of Real Estate Agents and Brokers (NAICS 5312)
• Architectural, Engineering, and Related Services (NAICS 5413)
• Specialized Design Services (NAICS 5414)
• Scientific Research and Development Services (NAICS 5417)
• Other Professional, Scientific, and Technical Services (NAICS 5419)
• Business Support Services (NAICS 5614)
• Travel Arrangement and Reservation Services (NAICS 5615)
• Other Support Services (NAICS 5619)
• Waste Treatment and Disposal (NAICS 5622)
• Remediation and Other Waste Management Services (NAICS 5629)
• Business Schools and Computer and Management Training (NAICS 6114)
• Technical and Trade Schools (NAICS 6115)
• Other Schools and Instruction (NAICS ) 6116
• Outpatient Care Centers (NAICS 6214)
• Electronic and Precision Equipment Repair and Maintenance (NAICS 8112 )
• Other Personal Services (NAICS 8129).

Comments on the proposed rule must be submitted no later than October 31, 2008, either through the Federal eRulemaking portal at http://www.regulations.gov; or by mail, hand delivery, or courier to Linda Korbol, Assistant Administrator for Women's Procurement, Office of Government Contracting, Small Business Administration, 409 Third Street, SW, Washington, DC 20416.

Nine More Biobased Items Proposed

The United States Department of Agriculture (USDA) is proposing to add nine more sections to Title 7 of the Code of Federal Regulations (CFR), Part 2902, Guidelines for Designating Biobased Products for Federal Procurement, to identify nine more biobased products to be given preference in federal procurements as provided under Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA), and to specify the minimum level of biobased content to be contained in the procured products.

The following are the proposed new designated items and their Title 7 section numbers:

As a general rule, procuring agencies must purchase biobased products within these designated items where the purchase price of the procurement item exceeds $10,000 or where the quantity of such items or functionally equivalent items purchased over the preceding fiscal year equaled $10,000 or more, unless products within a designated item: (1) are not reasonably available within a reasonable period of time; (2) fail to meet the reasonable performance standards of the procuring agencies; or (3) are available only at an unreasonable price. The $10,000 threshold applies to federal agencies as a whole and not to agency subgroups such as regional offices or subagencies of the larger federal department or agency.

Comments on the proposed additions to the biobased products list must be submitted no later than December 22, 2008, by any of the following means: (1) Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: biopreferred@usda.gov; or (3) mail/commercial/hand delivery: Shana Love, USDA, Office of the Assistant Secretary for Administration, Room 209A, Whitten Building, 1400 Independence Avenue, SW, Washington, DC 20250-0103.

For more on the biobased products program, go to http://www.biopreferred.gov, and see the June 2008 Federal Contracts Perspective article “USDA Adds 27 Items to Biobased Products List, Exempts DOD and NASA from Requirements.”

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