Panoptic Enterprises'


Federal Acquisition Developments, Guidance, and Opinions

December 2008
Vol. IX, No. 12


FAC 2005-29 Requires Contractors to Verify Workers' Eligibility for Employment
Contractor Ethics Requirements Toughened
Contractors Might Represent IT Products’ Authenticity
DOD Revises Government Property Identification Rules
GAO Reasserts Authority on Task Order Protests

FAC 2005-29 Requires Contractors to
Verify Workers' Eligibility for Employment

In response to the vast number of illegal immigrants in the country, Federal Acquisition Circular (FAC) 2005-29 requires most contractors with contracts exceeding the simplified acquisition threshold ($100,000) to verify that all of their employees working on the contract in the United States, and all of their newly-hired employees (regardless of whether they are working on the contract or not), are authorized to work in the United States.

Since 1986, it has been against the law to hire workers who are not authorized to work in the U.S. The first formal expression of concern regarding the presence of illegal immigrants in the federal contracting workforce was in Executive Order 12989, which was signed by President Clinton in 1996:

           “Contractors that employ unauthorized alien workers are necessarily less stable and dependable procurement sources than contractors that do not hire such persons. I find, therefore, that adherence to the general policy of not contracting with providers that knowingly employ unauthorized alien workers will promote economy and efficiency in federal procurement.”

On June 6, 2008, President Bush issued Executive Order 13465, which amended Executive Order 12989 by adding an electronic employment eligibility verification requirement -- “I find, therefore, that adherence to the general policy of contracting only with providers that do not knowingly employ unauthorized alien workers and that have agreed to utilize an electronic employment verification system designated by the Secretary of Homeland Security to confirm the employment eligibility of their workforce will promote economy and efficiency.” Executive Order 13465 went on to state, “departments and agencies that enter into contracts shall require, as a condition of each contract, that the contractor agree to use an electronic employment eligibility verification system designated by the Secretary of Homeland Security to verify the employment eligibility of: (i) all persons hired during the contract term by the contractor to perform employment duties within the United States; and (ii) all persons assigned by the contractor to perform work within the United States on the Federal contract.”

On June 13, 2008, the secretary of Homeland Security designated E-Verify as that electronic verification system (http://www.dhs.gov/e-verify), and a proposed Federal Acquisition Regulation (FAR) change implementing the executive order was also published (see the July 2008 Federal Contracts Perspective article “President Orders Contractors to Verify Immigration Status of Federal Contract Employees”).

E-Verify is a free Internet-based system operated by the Department of Homeland Security (DHS) in conjunction with the Social Security Administration (SSA). The DHS’ U.S. Citizenship and Immigration Service (USCIS) oversees the program.

More than 1,600 comments on the proposed rule were submitted by individuals, organizations, corporations, trade associations, chambers of commerce, and government entities. After considering all the comments, FAC 2005-29 finalized the proposed rule with several significant changes. FAC 2005-29 implements E-Verify by adding FAR Subpart 22.18 and the accompanying contract clause FAR 52.222-54, both titled “Employment Eligibility Verification.” The following are the major provisions of the final rule:

The following are the significant changes between the proposed and final versions of the rule:

EDITOR’S NOTE: During the verification process, the SSA checks its 425 million record database to verify that the name, social security number (SSN), and date of birth given by the employee are correct and, if the employee has stated that he or she is a U.S. citizen, confirms the employee’s U.S. citizen status. The USCIS checks its 60 million record immigration database to verify that any non-U.S. citizen employee is in an employment-authorized immigration status. If the information provided by the worker matches the information in the SSA and USCIS databases, no further action will be required. If E-Verify cannot verify the information provided by the employee, a “tentative nonconfirmation notice” is provided to the contractor and the employee. The employee may contest the findings by providing additional records or information within eight business days. Most frequently, the discrepancy in the records is because the contractor incorrectly entered the employee’s information, or the employee has had a name change or change in immigration status. If the employee fails to contest the tentative nonconfirmation, or if SSA or USCIS is unable to resolve the discrepancy, the employer will receive a “notice of final nonconfirmation” and the contractor may terminate the employee’s employment.

Also, E-Verify does not eliminate the requirement for employers to complete a Form I-9, Employment Eligibility Verification, for each newly-hired employee. The introduction to FAC 2005-29 states, “This rule merely provides a more convenient, faster, and more consistent means of determining whether an individual is, or is not, authorized to work in the U.S. to establish greater stability and dependability among the federal contractor workforce.”

Contractor Ethics Requirements Toughened

To implement the Close the Contractor Fraud Loophole Act and requests by the Department of Justice (DOJ), FAR Subpart 3.10, Contractor Code of Business Ethics and Conduct, is revised to require contractors performing contracts exceeding $5,000,000 that are more than 120 days in duration to disclose to the agency Office of the Inspector General (OIG), with a copy to the contracting officer, credible evidence of a violation of federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations, or a violation of the civil False Claims Act, in the award, performance, or closeout of a government contract performed by the contractor (or a subcontract to the contract). In other words, contractors will be required to turn themselves in.

This rule toughens FAR Subpart 3.10, which was added by FAC 2005-22 and required contractors performing contracts exceeding $5,000,000 that have a performance period of 120 days or more to have a written code of business ethics and conduct and display hotline posters. About the same time, a proposed rule was published at DOJ’s request to amend FAR Subpart 3.10 to (1) require contractors to establish and maintain specific internal controls to detect and prevent improper conduct in connection with the award or performance of government contracts or subcontracts, and (2) to notify contracting officers without delay whenever they become aware of violations of federal criminal law with regard to government contracts or subcontracts. However, the proposed rule would not apply when the contract would be for a commercial item awarded under FAR Part 12, Acquisition of Commercial Items, or would be performed entirely outside the United States. (For more on FAC 2005-22 and the proposed rule, see the December 2007 Federal Contracts Perspective article “Contractors Required to Develop Codes of Business Ethics and Conduct.”)

Several in Congress charged that the Bush Administration was trying to exempt favored contractors performing in Iraq and Afghanistan (such as Halliburton and Blackwater) from the proposed ethics rules. In response, the proposed rule was modified to repeal the exemption for commercial items and contracts performed outside the U.S. In addition, again at DOJ’s request, the revised proposed rule would make the failure to report criminal violations as grounds for suspension or debarment (see the June 2008 Federal Contracts Perspective article “Proposed Contractor Ethics Rule Being Revised"). Nevertheless, Congress passed the Close the Contractor Fraud Loophole Act as Chapter 1 of Title VI of the Supplemental Appropriation Act (Public Law 110-252) (see the July 2008 Federal Contracts Perspective article “Acquisition-Related Legislation Enacted”). The act accomplished what the revised proposed rule intended to do, and this final rule implements the act and all the DOJ requested revisions.

The final rule adds the following requirements to FAR Subpart 3.10 and the associated clause at FAR 52.203-13, Contractor Code of Business Ethics and Conduct, and FAR Subpart 9.4, Debarment, Suspension, and Ineligibility:

Contractors Might Represent IT Products’ Authenticity

The government is deciding whether to amend FAR Part 39, Acquisition of Information Technology, to require contractors selling information technology (IT) products, including computer hardware and software, to represent that such products are authentic. To help it decide, comments are being sought from both government and industry on this issue. In addition, comments are being sought: (1) regarding contractor liability if IT products sold to the government by contractors are not authentic; (2) on whether contractors who are resellers or distributors of computer hardware and software should represent to the government that they are authorized by the original equipment manufacturer (OEM) to sell the IT products to the government; (3) on whether the above measures should be extended to other items purchased by the government; and (4) on whether the rule should apply when IT is a component of a system or assembled product.

“The widespread availability of counterfeit IT products presents a multidimensional threat to our nation,” states the advance notice of proposed rulemaking (ANPR). “While it is estimated that our nation’s industries and governments lose millions of dollars each year to counterfeiters, the trade in counterfeit IT products also presents serious threats to our national security and consumer safety...[The government] believes requiring contractors to represent that the IT products they sell to the government are authentic, will aid in efforts to combat counterfeit IT products.”

A public meeting will be held on December 11, 2008, from 9:00 am to 3:00 pm EST, in the National Aeronautics and Space Administration James E. Webb Memorial Auditorium, 300 E St., SW, Washington, DC 20546. The visitors’ entrance is on the west end of the building at the corner of 4th and E Streets SW. Attendees are encouraged to arrive at least 30 minutes early.

Those wishing to make a presentation on this topic should contact and submit a copy of their presentations by December 1, 2008, to General Services Administration, Contract Policy Division (VPC), 1800 F Street, NW, Room 4040, Attn: Edward N. Chambers, Washington, DC 20405; telephone: 202-501-3221; e-mail: Chambers.Edward@gsa.gov.

Comments should be submitted no later than December 1, 2008, by any of the following means: (1) eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail to: General Services Administration, Regulatory Secretariat (VPR), 1800 F Street, NW, Room 4041, ATTN: Laurieann Duarte, Washington, DC 20405. Identify comments as “FAR Case 2008-019.”

DOD Revises Government Property Identification Rules

The Department of Defense (DOD) issued four final rules and one set of technical amendments during November, the most significant being a revision to the procedures for identifying government property in contractors’ possession.

GAO Reasserts Authority on Task Order Protests

The Government Accountability Office (GAO) has handed down a second decision in a month invoking its newly-granted authority to decide protests involving task orders in excess of $10,000,000 (B-310566.4, Triple Canopy, Inc., October 30, 2008). The authority is provided by Section 843 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 110-181) (NDAA), which modified the previous limitations placed on GAO’s authority to hear protests regarding task orders that were imposed by the Federal Acquisition Streamlining Act (FASA) to permit protests of task orders exceeding $10,000,000. This authority expires May 27, 2011. (EDITOR’S NOTE: For more on Public Law 110-181, see the February 2008 Federal Contracts Perspective article “Defense Authorization Act Restricts A-76 Competitions, Extends FAR Subpart 13.5.” 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.”)

The protest was filed by Triple Canopy, Inc., against the award of a task order by the Department of the Army under an indefinite-delivery/indefinite-quantity contract to another firm for security services in Iraq. Though Triple Canopy lost the protest, the GAO had to address first the Army’s argument that GAO was not authorized to consider the issues raised by Triple Canopy because “IDIQ holders essentially have a right to file a ‘pre-award’ protest to challenge the sufficiency of the task order solicitation, but they do not have a right to a ‘post-award’ protest to challenge the rationale of the award decision itself.”

“We reject the agency’s argument,” GAO rules. “In the context of CICA [the Competition in Contracting Act] and FASA, along with this Office’s well-established practices and procedures employed to implement the protest jurisdiction conferred by those statutes, we view the NDAA’s authorization to consider ‘a protest of an order valued in excess of $10,000,000’ as providing the same substantive protest jurisdiction conferred by those statutes. In this regard, we find no basis to conclude that, in enacting the NDAA and authorizing certain task order protests, Congress intended to establish a system that requires agencies to advise offerors of the bases for task order competitions, and enforces that requirement through authorization of bid protests -- but provides no similar enforcement authority to ensure that agencies actually act in accordance with the guidance they are required to provide to offerors. Rather, consistent with this Office’s past practice, and CICA’s provisions that define a protest as an ‘objection...to...an award or proposed award,’ we view the NDAA’s authorization to consider protests of task orders in excess of $10 million as extending to protests asserting that an agency’s award decision failed to reasonably reflect the ground rules established for the task order competition. Accordingly, our review of Triple Canopy’s protest includes consideration of whether the agency’s source selection decision was reasonably consistent with the terms of the underlying solicitation and applicable procurement laws and regulations.”

The first protest in which GAO addressed its new authority to hear protests involving task orders in excess of $10,000,000 was earlier in B-400403, Delex Systems, Inc. (October 8, 2008). In that decision, GAO ruled that task and delivery orders issued under multiple-award contracts are subject to the small business set-aside procedures in FAR Subpart 19.5, Set-Asides for Small Business). For more on that decision, see the November 2008 Federal Contracts Perspective article “GAO Rules Task Orders Subject to Set-Aside Procedures.”

Copyright 2008 by Panoptic Enterprises. All Rights Reserved.

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