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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: March 9, 2005

SUBJECT: Federal Acquisition Circular (FAC) 2005-01, Miscellaneous Amendments

SOURCE: Federal Register, March 9, 2005, Vol. 70, No. 45, page 11735

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 Secretariat is issuing FAC 2005-01 to amend the Federal Acquisition Regulation (FAR) in the following areas: (1) architect-engineer services; (2) increased justification and approval threshold for DOD, NASA, and the Coast Guard; (3) extension of authority for use of simplified acquisition procedures for certain commercial items; (4) addition of landscaping and pest control services to the Small Business Competitiveness Demonstration Program; (5) nonavailable articles; (6) Cost Accounting Standards administration; (7) elimination of certain subcontract notification requirements; (8) use of FAR 52.244-6, Subcontracts for Commercial Items; and (9) technical amendments.

DATES: The effective date of these rules is April 8, 2005, except for items (1), (2), (4), (7), (8), and (9), which are effective March 9, 2005. Comments on items (1), (2), (4), and (7) must be submitted on or before May 9, 2005.

ADDRESSES: Submit comments on items (1), (2), (4), and (7) to: (a) http://www.regulations.gov; (b) http://www.acqnet.gov/far/ProposedRules/proposed.htm; (c) e-mail: Item (1) - farcase.2004-001@gsa.gov; Item (2)farcase.2004-037@gsa.gov; Item (4) - farcase.2004-036@gsa.gov; Item (7) - farcase.2003-024@gsa.gov; (d) fax: 202-501-4067; or (e) mail: General Services Administration, Regulatory Secretariat (MVA), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405. Identify comments on Item (1) by "FAC 2005-01, FAR case 2004-001”; on Item (2) by "FAC 2005-01, FAR case 2004-037”; on Item (4) by "FAC 2005-01, FAR case 2004-036”; and on Item (7) by "FAC 2005-01, FAR case 2003-024”.

FOR FURTHER INFORMATION CONTACT: The following analysts:

      Items (1), (2), (3), and (8), Michael Jackson, 202-208-4949.

      Item (4), Kimberly Marshall, 202-219-0986.

      Item (5), Cecelia Davis, 202-219-0202.

      Item (6), Richard Loeb, 202-208-3810.

      Item (7), Rhonda Cundiff, 202-501-0044.

For general information, contact the FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, 202-501-4755.

SUPPLEMENTAL INFORMATION: (1) Improvements in Contracting for Architect-Engineer Services: This interim rule implements Section 1427 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136), which prohibits the acquisition of architectural and engineering services under Federal Supply Schedule contracts or governmentwide task and delivery-order contracts unless such services are performed under the direct supervision of a licensed architect or engineer and awarded using the quality-based procedures of the Brooks Architect-Engineer Act specified in FAR Subpart 36.6, Architect-Engineer Services. (EDITOR’S NOTE: For more on the acquisition-related provisions of Public Law 108-136, see the November 25, 2003, FEDERAL CONTRACTS DISPATCHEnactment of the National Defense Authorization Act for Fiscal Year 2004.”)

The following are the changes being made by this interim rule:




(2) Increased Justification and Approval Threshold for DOD, NASA, and Coast Guard: This interim rule amends FAR 6.304, Approval of the Justification, to implement Section 815 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375), which increased the threshold for obtaining approval of a justification for other than full and open competition by the senior procurement executive from $50,000,000 to $75,000,000.

The phrase “or, for DOD, NASA, and the Coast Guard, over $75,000,000” is added to paragraph (a)(4) of FAR 6.304 so that it reads “For a proposed contract over $50,000,000 or, for DOD, NASA, and the Coast Guard, over $75,000,000, by the senior procurement executive of the agency designated pursuant to the OFPP Act (41 U.S.C. 414(3)) in accordance with agency procedures.” In addition, a similar phrase is added to paragraph (a)(3) so that it reads “For a proposed contract over $10,000,000, but not exceeding $50,000,000, or, for DOD, NASA, and the Coast Guard, not exceeding $75,000,000, by the head of the procuring activity, or a designee who (i) if a member of the armed forces, is a general or flag officer; or (ii) if a civilian, is serving in a position in a grade above GS-15 under the General Schedule (or in a comparable or higher position under another schedule).” (EDITOR’S NOTE: The outdated reference to “grade GS-16” is replaced with “a grade above GS-15” in (a)(3)(ii).)

EDITOR’S NOTE: For other acquisition-related provisions of Public Law 108-375, see the October 29, 2004, FEDERAL CONTRACTS DISPATCHEnactment of the National Defense Authorization Act for Fiscal Year 2005.”


(3) Extension of Authority to Use Simplified Acquisition Procedures for Certain Commercial Items: FAR 13.500, General, is amended to extend the deadline for use of the simplified procedures in FAR Subpart 13.5, Test Program for Certain Commercial Items, for the acquisition of commercial items of $5,000,000 or less, from January 1, 2006, to January 1, 2008. This change implements Section 817 of Public Law 108-375 (for other acquisition-related provisions of Public Law 108-375, see the October 29, 2004, FEDERAL CONTRACTS DISPATCHEnactment of the National Defense Authorization Act for Fiscal Year 2005”).


(4) Addition of Landscaping and Pest Control Services to the Small Business Competitiveness Demonstration Program: This interim rule amends FAR Subpart 19.10, Small Business Competitiveness Demonstration Program, to add landscaping (under North American Industrial Classification System (NAICS) code 561730, Landscaping Services) and pest control services (under NAICS code 561710, Exterminating and Pest Control Services) to the program as required by Section 821 of Public Law 108-375 (for other acquisition-related provisions of Public Law 108-375, see the October 29, 2004, FEDERAL CONTRACTS DISPATCHEnactment of the National Defense Authorization Act for Fiscal Year 2005”).

Paragraph (a) of FAR 19.1005, Applicability, is amended to add these two NAICS codes to the list of “designated industry groups.” Also, the definition of “emerging small business reserve amount” is amended to establish $25,000 as the emerging small business reserve amount for landscaping and pest control services. The $25,000 amount is the same as that for construction, refuse systems and related services, and nonnuclear ship repair. The amount for architect and engineering services is $50,000.


(5) Nonavailable Articles: This final rule amends paragraph (b) of FAR 25.103, Exceptions, to clarify that being on the list of items determined to be nonavailable for purposes of the Buy American Act (in paragraph (a) of FAR 25.104, Nonavailable Articles) does not mean that an item is completely nonavailable from U.S. sources, but that the item is not mined, produced, or manufactured in the United States insufficient and reasonably available commercial quantities and of a satisfactory quality. In addition, FAR 25.103(b)(1)(ii) is amended to emphasize the need to conduct market research, appropriate to the circumstances, for potential domestic sources, when acquiring an article on the list. Finally, FAR 25.104(b) is amended to state that “this list will be published in the Federal Register for public comment no less frequently than once every five years”, and that “recommendations for deletions from this list may be submitted at any time and should provide sufficient data and rationale to permit evaluation...”

A proposed rule was published May 24, 2004 (see the May 24, 2004, FEDERAL CONTRACTS DISPATCHFederal Acquisition Regulation (FAR); Policy on Nonavailable Articles Under the Buy American Act”). No comments were received on the proposed rule, so it is adopted as final without changes.


(6) Cost Accounting Standards (CAS) Administration: This final rule amends FAR Part 30, Cost Accounting Standards Administration, to delineate the process for determining and resolving the cost impact on contracts and subcontracts when a contractor makes a compliant change to a cost accounting practice or follows a noncompliant practice. The primary changes involve a complete revision of FAR Subpart 30.6, CAS Administration, and revision of the related FAR 52.230-6, Administration of Cost Accounting Standards. Also, FAR 52.230-7, Proposal Disclosure -- Cost Accounting Practice Changes, is added, which addresses how a contractor is to prepare its proposal when a contract award will result in a change in accounting practice.

The CAS Board has felt (since at least since 1995 when it began working on the subject) that the government does not uniformly implement the administrative process for making contract price and cost adjustments resulting from contractor changes in a cost accounting practice, and that the procedures and processes are not widely understood or adequately documented.

On April 18, 2000, a proposed FAR revision was published which attempted to clearly delineate the entire cost-impact process the government and the contractor must follow when a contractor makes a compliant change to a cost accounting practice or fails to comply with a CAS (see the April 18, 2000, FEDERAL CONTRACTS DISPATCHFederal Acquisition Regulation (FAR); Cost Accounting Standards Administration”). Based on comments submitted in response to that proposed rule, another proposed rule was drafted and published on July 3, 2003 (see the July 3, 2003, FEDERAL CONTRACTS DISPATCHFederal Acquisition Regulation (FAR); Cost Accounting Standards Administration”). Nine respondents submitted comments in response to the second proposed rule, and the second proposed rule is converted to a final rule, with changes.

The following is a summary of the significant changes being made to FAR Part 30 and the related clauses:


(7) Elimination of Certain Subcontract Notification Requirements: This interim rule revises FAR 44.201-2, Advance Notification Requirements, and Alternate I of FAR 52.244-2, Subcontracts, to implement Section 842 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136), which removed the requirement for contractors with approved purchasing systems under cost-reimbursement contracts with DOD, NASA, and the Coast Guard to notify the agency before the award of any cost-plus-fixed-fee subcontract or any fixed-price subcontract that exceeds the simplified acquisition threshold or 5% of the total estimated cost of the contract, whichever is greater.

FAR 44.201-2 is revised to state that contractors with cost-reimbursement contracts are required to notify the contracting officer as follows:

      “(a) For the Department of Defense, the Coast Guard, and the National Aeronautics and Space Administration, unless the contractor maintains an approved purchasing system, 10 U.S.C. 2306 requires notification before the award of any cost-plus-fixed-fee subcontract, or any fixed-price subcontract that exceeds the greater of the simplified acquisition threshold or 5 percent of the total estimated cost of the contract.
      “(b) For civilian agencies other than the Coast Guard and the National Aeronautics and Space Administration, even if the contractor has an approved purchasing system, 41 U.S.C. 254(b) requires notification before the award of any cost-plus-fixed-fee subcontract, or any fixed-price subcontract that exceeds either the simplified acquisition threshold or 5 percent of the total estimated cost of the contract.”

In Alternate I of FAR 52.244-2, paragraph (f)(2) is revised to state, “Unless the Contractor maintains an approved purchasing system, the Contractor shall notify the Contracting Officer reasonably in advance of entering into any (i) cost-plus-fixed-fee subcontract, or (ii) fixed-price subcontract that exceeds the greater of the simplified acquisition threshold or 5 percent of the total estimated cost of this contract.”

EDITOR’S NOTE: For more on the acquisition-related provisions of Public Law 108-136, see the November 25, 2003, FEDERAL CONTRACTS DISPATCHEnactment of the National Defense Authorization Act for Fiscal Year 2004.”


(8) Use of FAR Clause 52.244-6, Subcontracts for Commercial Items: This final rule amends FAR 44.403, Contract Clause, to require the use of FAR 52.244-6 in solicitations and contracts other than those for commercial items. The FAR 44.403 prescription had required use of FAR 52.244-6 “in solicitations and contracts for supplies or services other than commercial items.” It was not clear whether this prescription included solicitationsand contracts for construction, so a proposed rule was published on October 27, 2003 (see the October 27, 2003, FEDERAL CONTRACTS DISPATCHFederal Acquisition Regulation (FAR); Subcontracts for Commercial Items and Commercial Components”), to revise the FAR 44.403 prescription to read that FAR 52.244-6 is to be required “in solicitations and contracts other than those for commercial items." Also, the proposed rule would have amended the definition of “commercial item” in paragraph (a) of FAR 52.244-6, which read “'Commercial item' has the meaning contained in the clause at 52.202-1, Definitions," to read “'Commercial item' has the meaning contained in the clause at 52.202-1, Definitions, and includes commercial construction materials but does not include construction itself." This proposed revision was intended to clarify that, within the context of FAR 52.244-6, a commercial item would include commercial construction materials but would not include construction itself.

One comment was received that was supportive of the proposed changes. While the change to the FAR 52.244-6 prescription at FAR 44.403 was adopted as proposed, the proposed change to the definition of “commercial item” in FAR 52.244-6 was not adopted because the change in FAR 44.403 was thought to provide sufficient clarity.


(9) Technical Amendments: The following editorial changes are made to the FAR:


FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953.

Copyright 2005 by Panoptic Enterprises. All Rights Reserved.

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