Panoptic Enterprises’


Federal Acquisition Developments, Guidance, and Opinions

July 2012
Vol. XIII, No. 7


OFPP, SBA Provide Guidance on Maximizing Small Business Utilization
OFPP Proposes Value Engineering Revisions
OMB Issues Guidance on Modular Development
DOD Drafts Version 2 of Contingency COR Handbook
DFARS Addresses Receipt of Only One Offer
Twelve Categories Proposed for Biobased Designation
Prompt Payment Interest Rate Set at 1 3/4%

OFPP, SBA Provide Guidance on Maximizing
Small Business Utilization

In one of his first acts as Office of Federal Procurement Policy (OFPP) administrator, Joseph Jordan joined with Karen Mills, administrator of the Small Business Administration (SBA), to issue a memorandum providing direction, guidance, and encouragement on “(1) maximiz[ing] opportunities for small businesses when making small dollar awards, (2) increas[ing] opportunities for small businesses under multiple award contracts, and (3) strengthen[ing] accountability for small business goal achievement...each agency should ensure program, contracting, and small business policy staff understand their agency’s small business contracting goals and the tools available for meeting their goals.” The memorandum was forwarded to agency deputy secretaries, chief acquisition officers, senior procurement executives, and small business directors.

The following is a summary of the direction, guidance, and encouragement provided by OFPP and SBA:

OFPP Proposes Value Engineering Revisions

The Office of Federal Procurement Policy (OFPP), a part of the Office of Management and Budget (OMB), is proposing to revise OMB Circular A-131, Value Engineering, to reflect current buying strategies and practices, such as performance-based service contracting, to ensure that the government is effectively considering and taking full advantage of value engineering (VE), whenever appropriate, to cut waste and inefficiency, and promote greater fiscal responsibility.

According to FAR Part 48, Value Engineering, VE is “the formal technique by which contractors may (1) voluntarily suggest methods for performing more economically and share in any resulting savings or (2) be required to establish a program to identify and submit to the government methods for performing more economically. Value engineering attempts to eliminate, without impairing essential functions or characteristics, anything that increases acquisition, operation, or support costs.” With VE, the government shares with the contractor the savings generated by the contractor’s VE change proposal.

The VE methodology originated during World War II in the industrial community as a means of continuing production despite shortages of critical materials. It was adopted by federal agencies that recognized its potential for yielding a large return on investment. VE has frequently been cited as an effective technique for fostering utilization of innovative practices, technologies, and products to lower cost while maintaining necessary quality and performance levels. VE has been applied to hardware and software; development, production, and manufacturing; specifications, standards, contract requirements, and other acquisition program documentation; and facilities design and construction.

As examples of savings that can be realized by the application of VE, the Department of Defense (DOD) reported savings of nearly $2 billion in fiscal year (FY) 2009 and $3.4 billion in FY 2010. The Department of Transportation’s Federal Highway Administration reports that annual savings for federally-funded state construction projects have ranged from $1.8 to $3.2 billion between 2005 and 2009. The State Department reports that it has used VE to identify hundreds of millions of dollars in total life cycle savings since FY 2008, saving an average of $46 for every dollar invested in VE studies.

OMB Circular A-131 requires agencies to establish VE programs so the agencies will realize the benefits of using VE techniques to reduce nonessential contract and program costs. OMB Circular A-131 specifically requires agencies to: (1) identify a focal point within each agency to monitor, manage and maintain data on agency VE programs; (2) establish criteria and guidelines for screening programs and projects that might benefit from the application of VE techniques; (3) develop guidelines to evaluate VE proposals; (4) actively solicit VE ideas from contractors; and (5) emphasize, through training and other means, the potential of VE to reduce unnecessary costs.

OMB Circular A-131 was first issued in January 1988 and last revised in May 1993. OFPP’s proposed revisions to OMB Circular A-131 would reflect changes in industry practices that have taken place in the past two decades.

The proposed revisions to OMB Circular A-131 are available at http://www.whitehouse.gov/sites/default/files/omb/procurement/a131-circular-changes-draft.pdf. The following is a summary of those proposed revisions:

Comments on these proposed revisions must be submitted no later than August 7, 2012, identified as “Proposed Revision to OMB Circular A-131’, by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-395-5105; or (3) mail: Office of Federal Procurement Policy, ATTN: Curtina Smith, New Executive Office Building, Room 9013, 725 17th Street NW, Washington, DC 20503.

OMB Issues Guidance on Modular Development

OFPP Administrator Joseph Jordan and Federal Chief Information Officer Steven VanRoekel, both members of the Office of Management and Budget (OMB), issued “Contracting Guidance to Support Modular Development” to encourage modular development of information technology (IT), which “improve[s] investment manageability and budgetary feasibility; reduce[s] overall risk; and support[s] rapid delivery of incremental new functionality...This document provides guidance to agencies for adopting modular approaches, and presents a variety of factors that acquisition officials, in support of IT managers, will need to consider as they plan for modular development efforts.” “Contracting Guidance to Support Modular Development” was forwarded by memorandum to agency chief acquisition officers, senior procurement executives, chief information officers, and chief financial officers.

According to the definition of “modular contracting” in FAR 39.002, Definitions, it is the “use of one or more contracts to acquire information technology systems in successive, interoperable increments.” FAR 39.103, Modular Contracting, goes on to explain that, when using modular contracting, “an acquisition of a system of information technology may be divided into several smaller acquisition increments that: (1) are easier to manage individually than would be possible in one comprehensive acquisition; (2) address complex information technology objectives incrementally in order to enhance the likelihood of achieving workable systems or solutions for attainment of those objectives; (3) provide for delivery, implementation, and testing of workable systems or solutions in discrete increments, each of which comprises a system or solution that is not dependent on any subsequent increment in order to perform its principal functions; (4) provide an opportunity for subsequent increments to take advantage of any evolution in technology or needs that occur during implementation and use of the earlier increments; and (5) reduce risk of potential adverse consequences on the overall project by isolating and avoiding custom-designed components of the system.”

The following are the general principles identified in the guidance that agencies should apply to realize the intended benefits of modular development:

The guidance goes on to observe that indefinite-delivery indefinite-quantity (IDIQ) task and delivery order contracts “are likely to be the most popular contracting form as agencies migrate to modular development approaches. Under an IDIQ contract, the agency awards an ‘umbrella’ contract to one or more contractors with a statement of work that describes the general scope, nature, complexity and purposes of the goods or services to be procured. The agency then places orders for specific goods or services within this general scope of work as needs arise. IDIQ contracts may be particularly advantageous when the scope of all subsequent projects cannot be clearly defined when the contract is first awarded. Using IDIQ contracts in modular development can:

However, single contracts with options, successive contracts, and performance-based work statements are suitable for modular development under certain circumstances.

The transmittal memorandum is available at http://www.whitehouse.gov/sites/default/files/omb/procurement/memo/contracting-guidance-to-support-modular-development.pdf, and the “Contracting Guidance to Support Modular Development” is available at http://www.whitehouse.gov/sites/default/files/omb/procurement/guidance/modular-approaches-for-information-technology.pdf.

DOD Drafts Version 2 of Contingency COR Handbook

The Department of Defense (DOD) has developed Version 2 of the “Defense Contingency COR [Contracting Officer’s Representative] Handbook” and an accompanying DVD that provide “essential information, tools, and training for DOD CORs to meet the challenges they may face, regardless of the mission environment.” This 222-page pocket-sized handbook has been revised “in significant and subtle ways based on recommendations from the user community and joint working group.” Version 1 of the handbook was issued on August 17, 2010 (see the September 2010 Federal Contracts Perspective article “Defense Acquisition-Related Thresholds Adjusted, Too”). (NOTE: According to FAR 2.101, Definitions, a “contingency operation” is one “in which members of the armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing military force...”).

The handbook provides basic knowledge and tools for CORs to perform effective contract quality surveillance. It is organized as follows:

Chapter 1 The Importance of Contract Surveillance
Chapter 2Roles and Responsibilities for Contract Surveillance
Chapter 3COR Responsibilities
Chapter 4Ethics and Integrity
Chapter 5The Acquisition Team and Process
Chapter 6Contract Structure
Chapter 7Contract Administration
Chapter 8Monitoring the Contractor
Chapter 9Developing a Quality Assurance Surveillance Plan
Chapter 10Monitoring Service Contracts
Chapter 11Monitoring Construction Contracts
Chapter 12Foreign Acquisition and International Relationships
Appendix ACOR Checklists
Appendix BForms
Appendix CTurnover and Continuity
Appendix DContract Planning and Source Selection
Appendix ECultural Awareness
Appendix FCOR Qualifications and Training
Appendix GPreaward Duties
Appendix HUsing the Supplemental DVD/Website
Appendix ICOR Resources and References
Appendix JMetric Conversion Table
Appendix KAcronyms and Terms

“Chapters have been restructured to emphasize COR responsibilities and improve the flow, and text has been updated to reflect the current contingency environment,” writes Richard Ginman, Defense Procurement and Acquisition Policy director, in his memorandum to the services’ deputy assistant secretaries of acquisition and procurement. “In some cases content was added based on current needs or policy changes; in others, information was removed or reduced from the printed text and placed on the DVD, which is shipped with the handbook...”

The memorandum provides the following hyperlink for access to the draft handbook and supplemental materials for the handbook and DVD: http://www.acq.osd.mil/dpap/ccap/cc/corhb/v2draft.html. Comments are being sought on the draft handbook and DVD, and are to be placed on the comment matrix (a link to which is included with the supplemental materials) and submitted no later than June 25, 2012, to Lt. Col. Judy Anderson at 571-256-2949 or judy.anderson@osd.mil.

DFARS Addresses Receipt of Only One Offer

The Department of Defense (DOD) has amended the Defense FAR Supplement (DFARS) to address procedures when only one offer is received on a competitive solicitation. In addition are other DFARS changes addressing Wide Area Workflow, the acquisition of tents and other temporary structures, defining the Czech Republic as a “qualifying country,” shipping instructions, and the application of current hexavalent chromium policy to commercial items.

Twelve Categories Proposed for Biobased Designation

The United States Department of Agriculture (USDA) is proposing to add twelve (12) more sections to Title 7 of the Code of Federal Regulations (CFR), Part 3201, Guidelines for Designating Biobased Products for Federal Procurement (7 CFR Part 3201), to designate product categories that would be given preference in federal procurements as provided under Section 9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA) (Public Law 107-171), and to specify the minimum level of biobased content to be contained in the procured products.

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

3201.88,Agricultural spray adjuvants
3201.89,Animal cleaning products
3201.91,Dethatcher products
3201.92,Fuel conditioners
3201.93,Leather, vinyl, and rubber care products
3201.94,Lotions and moisturizers
3201.95,Shaving products
3201.96,Specialty precision cleaners and solvents
3201.97,Sun care products
3201.98,Wastewater systems coatings
3201.99,Water clarifying agents

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 this proposal must be submitted no later than August 6, 2012, identified with the Regulatory Information Number (RIN) 0599-AA15, by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) email: biopreferred@usda.gov – include “RIN 0599-AA15” and “Proposed Designation of Product Categories” on the subject line; or (3) mail or commercial/hand delivery to: Ron Buckhalt, USDA, Office of Procurement and Property Management, Room 361, Reporters Building, 300 7th St. SW, Washington, DC 20024.

For more information on the biobased program, all the products in the program, and those proposed for inclusion, go to http://www.biopreferred.gov/. Also see the February 2005 Federal Contracts Perspective article “USDA Publishes Biobased Products Guidelines”; the August 2005 Federal Contracts Perspective article "Agriculture Proposes Six Biobased Items"; the April 2006 Federal Contracts Perspective article “USDA Designates Six Biobased Products for Procurement”; the September 2006 Federal Contracts Perspective article “USDA Proposes 20 More Biobased Products”; the November 2006 Federal Contracts Perspective article “10 More Biobased Items Proposed”; the June 2008 Federal Contracts Perspective article “USDA Adds 27 Items to Biobased Products List, Exempts DOD and NASA from Requirements”; the November 2008 Federal Contracts Perspective article “Nine More Biobased Items Proposed”; the November 2009 Federal Contracts Perspective article “USDA Adds Nine More Biobased Items”; the March 2010 Federal Contracts Perspective article “USDA Proposes Another Nine Biobased Items”; the November 2010 Federal Contracts Perspective article “Eight More Biobased Products Designated”; and ; the December 2010 Federal Contracts Perspective article “Fourteen More Items Proposed for Biobased Designation”; the October 2011 Federal Contracts Perspective article “Thirteen More Items Proposed for Biobased Designation”; and the May 2012 Federal Contracts Perspective article “FAC 2005-58 Addresses Biobased Procurements, Exports to Iran, Sole Source 8(a) Contracts."

Prompt Payment Interest Rate Set at 1 3/4%

The Treasury Department has established 1 3/4% (1.75%) as the interest rate for the computation of payments made between July 1, 2012, through December 31, 2012, under the Prompt Payment Act and the Contracts Disputes Act. This rate is also used in facilities capital cost of money calculations. The interest rate for the prior six-month period (January 1, 2012, and June 30, 2012) was 2% (2.0%). The interest rate for July 1, 2011, through December 31, 2011), was 2 1/2% (2.5%).

All prompt payment interest rates since 1980 (in six-month increments) are available at http://www.treasurydirect.gov/govt/rates/tcir/tcir_opdprmt2.htm.

FAR Subpart 32.9, Prompt Payment; FAR Subpart 33.2, Disputes and Appeals; FAR 31.205-10, Cost of Money; and Cost Accounting Standard (CAS) 9904.414, Cost of Money as an Element of the Cost of Facilities Capital, are affected by this interest rate.

Copyright 2012 by Panoptic Enterprises. All Rights Reserved.

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