Panoptic Enterprises'


Federal Acquisition Developments, Guidance, and Opinions

October 2010
Vol. XI, No. 10


Parity Among Small Business Programs Mandated by Statute
FAC 2005-46 Exempts Commercial IT from BAA
FAR Rule Would Address T&M/Labor-Hour Contracts
USD(AT&L) Directs DOD to “Do More Without More”
Defense Piles on More Changes to DFARS
DEAR Implements Sustainable Acquisition
Homeland Security Undertakes “Revision Initiative”

Parity Among Small Business Programs
Mandated by Statute

The Small Business Jobs Act of 2010 (Public Law 111-240) resolved a dispute among the three branches of government regarding whether the Historically Underutilized Business Zone (HUBZone) program takes precedence over the Small Business Administration’s 8(a) program and the service-disabled veteran-owned small business (SDVOSB) program by changing “shall” to “may” in the HUBZone program’s authorization language, thus providing “parity” among all three small business programs.

The disagreement was the result of a series of protest decisions by the Government Accountability Office (GAO), Congress’ investigative arm, in which GAO ruled that the statutory language authorizing the HUBZone program contained language that gave it precedence over the 8(a) and SDVOSB programs. That language, in Title 15 of the U.S. Code, Section 657a (15 U.S.C. 657a), paragraph (b)(2)(B), stated, “Notwithstanding any other provision of law…a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.” Comparable statutory language authorizing the 8(a) programs states, “such officer shall be authorized in his discretion to let such procurement contract to the [Small Business Administration (SBA)]...” (15 U.S.C. 637, paragraph (a)(1)(A)), and comparable statutory language authorizing the SDVOSB program states, “A contracting officer may award contracts on the basis of competition restricted to small business concerns owned and controlled by service-disabled veterans...” (15 U.S.C. 657f, paragraph (b)).

The Court of Federal Claims upheld the GAO in two appeals, while the Office of Management and Budget (OMB) issued a memorandum to federal agencies directing them to ignore the GAO decisions, and the Department of Justice (DOJ) issued a memorandum to SBA, one that was widely distributed within the government, stating that SBA’s regulations are correct to make all three programs equal (“parity”).

This kind of regulatory squabbling could not be allowed to continue without producing dire consequences for federal acquisition – confusion, court cases, etc. So Congress, on its second attempt at correcting this mess (it failed last year), passed Public Law 111-240, and in the statute is Section 1347, Small Business Contracting Parity. Paragraph (c) of Section 1347 amends 15 U.S.C. 657a(b)(2) to remove “Notwithstanding any other provision of law” and change “shall” to “may,” so that it now reads, “...a contract opportunity may be awarded pursuant to this section on the basis of competition restricted to HUBZone small business concerns...” This now makes “parity” a matter of law, and no longer a matter of SBA regulations.

For more on the dispute, see the see the August 2009 Federal Contracts Perspective article “OMB Issues Five Memos Providing Contracting Guidance”; the September 2009 Federal Contracts Perspective article “Department of Justice Reaffirms SBA’s Small Business Program Parity Regulations”; the April 2010 Federal Contracts Perspective article “HUBZone Preference Upheld by Court of Federal Claims”; and the September 2010 Federal Contracts Perspective article “Court of Federal Claims Upholds HUBZone Precedence.”

There are other acquisition-related provisions of Public Law 111-240 besides the “parity” provision:

FAC 2005-46 Exempts Commercial IT from BAA

Federal Acquisition Circular (FAC) 2005-46 has amended the FAR to authorize exemption from the Buy American Act (BAA) acquisition of construction material that is commercial information technology (IT). Other rules in FAC 2005-46 involve equal opportunity for veterans, Iranian sanctions, termination for default reporting, award-fee language revision, offering construction requirements for the 8(a) program, and banning text messaging while driving.

FAR Rule Would Address T&M/Labor-Hour Contracts

To relieve contracting officers of “the mistaken impression that the fixed labor rates in the time-and-material/labor-hour contracts make them fixed price type contracts,” it is proposed that the FAR be amended to state, once and for all, that “time-and-materials contracts and labor-hour contracts are not fixed-price contracts.”

Government Accountability Office (GAO) Report 09-579, “Minimal Compliance with New Safeguards for Time-and-Materials Contracts for Commercial Services and Safeguards Have Not Been Applied to GSA Schedules Program,” dated June 2009 (http://www.gao.gov/new.items/d09579.pdf), found that “T&M [time-and-material] contracts for commercial services may be underreported based on a misunderstanding about contract type among contracting officials in most of the government agencies in our review. Some contracting officers had the incorrect belief that the fixed labor rate component of T&M contracts renders them fixed-price. In fact, some contracts in our sample were referred to in the contract file as ‘firm fixed price labor hour,’ a contract type that does not exist.” Also, GAO found a general lack of awareness among contracting officers of the requirement to prepare a determinations and findings (D&F) before using a T&M or labor-hour contract to acquire commercial services (FAR 12.207, Contract Type). Based on this, GAO recommended to the Office of Federal Procurement Policy (OFPP) that the following actions be taken:

OFPP officials agreed with GAO and, in response, the following changes are proposed:

Comments on the proposed rule must be submitted no later than November 26, 2010, identified as “FAR Case 2009-043,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (MVCB), 1800 F Street, NW, Room 4041, ATTN: Hada Flowers, Washington, DC 20405.

Besides the T&M and labor-hour proposed rule, two other proposed FAR rules were published in September:

USD(AT&L) Directs DOD to “Do More Without More”

On September 14, 2010, Under Secretary for Defense for Acquisition, Technology & Logistics (USD(AT&L)) Ashton Carter issued a memorandum to all Department of Defense (DOD) acquisition professionals directing them to “DO MORE WITHOUT MORE” (sic). The memorandum, titled “Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending,” provides specific guidance for achieving the mandate outlined in his June 28, 2010, memorandum “Better Buying Power: Mandate for Restoring Affordability and Productivity in Defense Spending” – “delivering better value to the taxpayer and improving the way the Department does business” (see the July 2010 Federal Contracts Perspective article “A Plethora of Changes to DFARS in June”). “We estimate that the efficiencies targeted by this guidance can make a significant contribution to achieving the $100 billion redirection of defense budget dollars from unproductive to more productive purposes that is sought by Secretary Gates and Deputy Secretary Lynn over the next five years.”

The guidance contains the following 23 principal actions to improve efficiency organized in five major areas:

“There is every reason to believe the efficiencies we are seeking can be realized. It has taken years for excessive costs and unproductive overhead to creep into our business practices, but over the coming years we can surely work them out again. Those who hesitate to go down the road of greater efficiency must consider the alternative: broken or cancelled programs, budget turbulence, uncertainty and unpredictability for industry, erosion of taxpayer confidence that they are getting value for their defense dollar and, above all, lost capability for the warfighter in a dangerous world. Not only can we succeed: we must.”

Defense Piles on More Changes to DFARS

The Department of Defense (DOD) can’t seem to help itself, issuing 11 rule changes to the Defense FAR Supplement (DFARS), one class deviation, and four memoranda on acquisition issues.

DEAR Implements Sustainable Acquisition

The Department of Energy (DOE) is amending the DOE Acquisition Regulation (DEAR) to implement Executive Order 13514, Federal Leadership in Environmental, Energy and Economic Performance, to leverage agency acquisitions to foster markets for sustainable technologies and energy efficient and environmentally sustainable materials, products, and services (for more on Executive Order 13514, see the November 2009 Federal Contracts Perspective article “President Sets Sustainability Goals for Government”). This DEAR amendment will supplement the sustainable acquisition regulations that will soon be added to FAR Part 23, Environment, Energy and Water Efficiency, Renewable Energy Technologies, Occupational Safety, and Drug-Free Workplace.

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

Comments on this interim rule must be submitted no later than October 22, 2010, identified as “RIN 1991-AB95,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) e-mail: DEARrulemaking@hq.doe.gov; or (3) mail: Richard Langston, MA-61, U.S. Department of Energy, 1000 Independence Avenue, SW, Washington, DC 20585.

Homeland Security Undertakes “Revision Initiative”

The Department of Homeland Security (DHS) is undertaking a DHS Acquisition Regulation (HSAR) “revision initiative” to align the existing content with the FAR; to implement Section 695 of the Post-Katrina Emergency Management Reform Act of 2006 (PKEMRA) (Public Law 109-295); to clarify agency acquisition regulations; and to provide editorial corrections.

Among the more significant changes being proposed to the HSAR are:

Comments on this proposed rule must be submitted no later than November 12, 2010, identified as “DHS-2009-0085,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) or mail to the Department of Homeland Security, Office of the Chief Procurement Officer, Acquisition Policy and Legislation, ATTN: Teresa McConahie, 245 Murray Drive, Bldg. 410 (RDS), Washington, DC 20528.

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