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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: March 27, 2000

FROM: Barry McVay, CPCM

SUBJECT: Federal Acquisition Circular (FAC) 97-16, Small Business Competitiveness Demonstration Program and Progress Payments

SOURCE: Federal Register, March 27, 2000, Vol. 65, No. 59, page 16273

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

ACTION: Final and Interim Rules

SYNOPSIS: The Federal Acquisition Regulatory Council is issuing FAC 97-16 to amend the Federal Acquisition Regulation (FAR) in the following three subject areas: (1) the Small Business Competitiveness Demonstration Program; (2) progress payments and related financing policies; and (3) technical amendments. These FAR changes are in plain language as required by the June 1, 1998, Presidential memorandum "Plain Language in Government Writing."

DATES: Items (1), (2), and the technical amendments are effective March 27, 2000. Item (1) is applicable to all solicitations issued on or after March 27, 2000. Item (2) is applicable to all solicitations issued on or after May 26, 2000, but contracting officers may, at their discretion, include the revised or new clauses and provisions in solicitations issued before that date. Comments on the interim rule at item (1) should be submitted to the FAR Secretariat by May 26, 2000, to be considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments on the interim rule at item (1) to the General Services Administration, FAR Secretariat (MVR), 1800 F Street, NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405. Cite FAC 97-16, FAR case 1999-012 in all correspondence related to the interim rule. Address e-mail comments to farcase.1999-012@gsa.gov.

FOR FURTHER INFORMATION CONTACT: The following analysts:

     Item (1): Victoria Moss at 202-501-4764.

     Item (2): Jeremy Olson at 202-501-0692.

For more information on the technical amendments or for general information, contact the FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, 202-501-4755.

SUPPLEMENTAL INFORMATION: (1) Small Business Competitiveness Demonstration Program: The Small Business Competitiveness Demonstration Program was established in 1988 as a test program by the Small Business Competitiveness Demonstration Program Act (Public Law 100-656), and it was implemented by FAR Subpart 19.10, Small Business Competitive Demonstration Program. The purpose of the program is to (1) assess the ability of small businesses to compete successfully in certain industry groups without the use of small business set-asides (the "designated industry groups" are construction, refuse systems and related services, nonnuclear ship repair, and architectural and engineering services); (2) expand small business participation in 10 targeted industry categories, selected by each agency participating in the program, through use of set-aside procedures, increased management attention, and tailored acquisition procedures; and (3) measure the extent to which awards are made to "emerging small businesses" (ESB) (defined as "no greater than 50% of the numerical size standard applicable to the standard industrial classification code assigned to a contracting opportunity"), and to provide for emerging small business set-asides for acquisitions equal to or less than $25,000 for construction, refuse systems and related services, and nonnuclear ship repair, and $50,000 for architectural and engineering services. The 10 agencies participating in the program are: the departments of Agriculture, Defense (except the National Imagery and Mapping Agency), Energy, Health and Human Services, Interior, Transportation, and Veterans Affairs; Environmental Protection Agency; General Services Administration; and National Aeronautics and Space Administration.

The Small Business Reauthorization Act of 1997 (Public Law 105-135) made the program permanent and made other changes. On May 25, 1999, the Office of Federal Procurement Policy (OFPP) and Small Business Administration (SBA) issued a joint final policy directive on the program which reflected the provisions of the Small Business Reauthorization Act. This interim rule amends FAR Subpart 19.10 to make it consistent with the joint final policy directive.

The most significant changes made to FAR Subpart 19.10 by the interim rule are:

(2) Progress Payments and Related Financing Policies: This final rule revises certain financing policies at FAR Part 32, Contract Financing, to reduce the burdens imposed on contractors and contracting officers by the progress payment type of financing; to permit the use of performance-based payments in contracts for research and development, and contracts awarded through competitive negotiation procedures; to expand the use of subcontractor performance-based and commercial financing payments; and to simplify and clarify related provisions and clauses in FAR Part 52, Solicitation Provisions and Contract Clauses. (EDITOR'S NOTE: Performance-based payments are contract financing payments made after achievement of predetermined goals, such as performance objectives or defined events. See FAR Subpart 32.10, Performance-Based Payments.)

This final rule is the product of a process that began in 1997, when the Director of Defense Procurement established a special interagency "progress payment rewrite" team to review existing policies and procedures related to progress payments. The team solicited comments from industry and government on how to revise FAR Part 32. It reviewed the comments and, in 1998, identified potential changes to FAR Part 32, solicited comments, held a public meeting, and submitted a report that included a draft proposed rule.

A proposed rule was published on February 10, 1999, and 15 respondents submitted public comments. Based on those comments, several clarifying changes have been made to this final rule.

The most significant changes to FAR Part 32 and the related provisions and clauses in FAR Part 52 are:

(3) Technical Amendments: The technical amendments update references and make editorial changes in several FAR sections. The most significant changes are to FAR 9.404, List of Parties Excluded from Federal Procurement and Nonprocurement Programs, in which its Internet address is included (http://epls.arnet.gov); FAR 15.404-1, Proposal Analysis Techniques, in which the Internet address for the five-volume set of Contract Pricing Reference Guides is changed to "http://www.acq.osd.mil/dp/cpf"; and FAR 52.212-1, Instructions to Offerors -- Commercial Items, in which the address for the DOD Index of Specifications and Standards (DODISS) Internet site is changed to "http://assist.daps.mil".

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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