Panoptic Enterprises’


Federal Acquisition Developments, Guidance, and Opinions

February 2013
Vol. XIV, No. 2


FY 2013 National Defense Authorization Act Extends FAR Subpart 13.5 Procedures Through 2014
FAC 2005-65 Extends Task Order Protest Authority
HHSAR Patent and Data Rights Clauses Proposed
Those with Tax Liability Barred from DOD Contracts
FY12 Spending Down 4% to $514 Billion

FY 2013 National Defense Authorization Act
Extends FAR Subpart 13.5 Procedures Through 2014

On January 3, 2013, President Obama signed into law the $633 billion National Defense Authorization Act for Fiscal Year (FY) 2013 (Public Law 112-239). As usual, Title VIII, Acquisition Policy, Acquisition Management, and Related Matters, has several provisions of interest to the acquisition community, particularly those in the Department of Defense (DOD). The most noteworthy is the reinstatement of the authority to use simplified acquisition procedures for commercial items between $150,000 and $6,500,000 through 2014 (see Federal Acquisition Regulation [FAR] subpart 13.5). However, there are several provisions in Title XVI, Industrial Base Matters, and Title XVII, Ending Trafficking in Government Contracting, that have widespread application, such as the transfer to the Small Business Administration (SBA) of responsibility for civilian agencies’ mentor-protégé programs.

FAC 2005-65 Extends Task Order Protest Authority

Federal Acquisition Circular (FAC) 2005-65 consists of four final rules amending the Federal Acquisition Regulation (FAR): an extension of the expiration date for protests of task and delivery orders; prohibition on contracting with inverted domestic corporations; unallowability of costs associated with foreign contractor excise tax; and implementation of the United States – Colombia Trade Promotion Agreement.

HHSAR Patent and Data Rights Clauses Proposed

The Department of Health and Human Services (HHS) is proposing to amend the HHS Acquisition Regulation (HHSAR) to add two clauses: HHSAR 352.227-11, Patent Rights – Exceptional Circumstances, and HHSAR 352.227-14, Rights in Data – Exceptional Circumstances, which will be used in place of FAR 52.227-11, Patent Rights – Ownership by the Contractor, and FAR 52.227-14, Rights in Data – General. These new clauses are intended to ensure that providers will retain their preexisting rights to material and subject inventions in which the provider has a proprietary interest when a Determination of Exceptional Circumstances (DEC) has been executed.

A DEC is executed consistent with the policy and objectives of the Bayh-Dole Act (Title 35 of the U.S. Code, Chapter 18, Patent Rights in Inventions Made with Federal Assistance) to ensure that subject inventions made under contracts and subcontracts (at all tiers) are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery; to encourage maximum participation of small business firms in federally supported research and development efforts; to promote collaboration between commercial concerns and nonprofit organizations including universities; to ensure that the government obtains sufficient rights in federally supported inventions to meet its needs; to protect the public against nonuse or unreasonable use of inventions; and in the case of fulfilling the mission of HHS to ultimately to benefit the public health.

Under certain circumstances, to ensure that pharmaceutical companies, academia, and others will collaborate with HHS in identifying, testing, developing, and commercializing new drugs, therapeutics, diagnostics, prognostics and prophylactic measures affecting human health, a DEC must be executed, and the contractor’s and subcontractor’s rights in subject inventions should be limited accordingly, consistent with DEC requirements and through appropriate contract clauses. The affected contracts are usually awarded using North American Industry Classification System (NAICS) code 541711, Research and Development in Biotechnology, or NAICS code 541712, Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology).

In the past, a significant number of FAR deviations were processed each time a DEC was executed. According to HHS, “using the proposed HHSAR clauses better addresses the requirements of the Bayh-Dole Act and provides legal protection for the proprietary rights of providers to ensure providers will collaborate with the government and provide access to their promising proprietary material(s) to meet HHS program goals. Therefore, it is believed that the approach outlined in the proposed rule is the most practical and provides benefits to the government, the public health and industry to ensure HHS program goals can be achieved.”

Comments on this proposed rule must be submitted no later than March 11, 2013, identified as “Health and Human Services Acquisition Regulation, Clauses 352.227-11 and 352.227-14,” by any of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; (2) fax: 202-690-6902; or (3) mail: HHS/ASFR/OGAPA/Division of Acquisition, ATTN: Cheryl Howe, Room 537H, HHH Building, 200 Independence Avenue SW, Washington, DC 20201.

Those with Tax Liability Barred from DOD Contracts

DOD has issued a DFARS class deviation that prohibits contracting with corporations with an unpaid delinquent tax liability or a felony conviction under a federal law. This prohibition applies to contracts funded by the Continuing Appropriations Resolution of 2012 (Public Law 112-175).

The class deviation provides two provisions and requires the contracting officer to include the one that is appropriate in solicitations that will use funds provided by Public Law 112-175, including the acquisition of commercial items: DFARS 252.209-7997, Representation by Corporations Regarding an Unpaid Delinquent Tax Liability or a Felony Conviction Under Any Federal Law – DOD Appropriations (Deviation 2013-O0006); and DFARS 252.209-7996, Representation by Corporations Regarding a Felony Conviction Under Any Federal Law – DOD Military Construction Appropriations (Deviation 2013-O0006).

DFARS 252.209-7997 requires each contractor to represent whether it: (1) “has any unpaid federal tax liability that has been assessed, for which all judicial and administrative remedies have been exhausted or have lapsed, and that is not being paid in a timely manner pursuant to an agreement with the authority responsible for collecting the tax liability”; or (2) “was convicted of a felony criminal violation under a federal law within the preceding 24 months.”

DFARS 252.209-7996 merely requires each construction contractor to represent whether it was convicted of a felony criminal violation under a federal law within the preceding 24 months.”

If the contractor answers “yes,” the contracting officer shall not award a contract to the contractor. “However, contracting officers may make an award despite these restrictions if the agency debarring and suspending official has considered suspension or debarment of the corporation and has made a written determination that this further action is not necessary to protect the interests of the government.”

FY12 Spending Down 4% to $514 Billion

Federal contracting spending in Fiscal Year (FY) 2012 dropped to $514 billion, down 4% from the $535 billion spending level in FY 2011.

The big loser was the General Services Administration (GSA), which saw its contract spending drop 29%, from $12.1 billion to $8.6 billion ($3.5 billion decrease). The biggest dollar increase winner was the Department of Transportation, which saw its spending increase 26% from $4.8 billion to $6.0 billion ($1.2 billion increase). The biggest percentage increase winner was the Broadcasting Board of Governors, which saw its spending increase 115% from $60 million to $130 million ($70 million increase).

The following are the largest agencies’ FY 2012 spending compared to their FY 2011 spending:

Department/Agency FY 2012 Spending FY 2011 Spending
Defense $360,622,167,484 $375,384,960,592
Energy 25,118,588,253 25,054,429,790
Health and Human Services 19,097,913,346 19,389,009,265
Veterans Affairs 17,110,274,597 17,443,696,285
National Aeronautics and Space Administration 15,143,715,865 15,371,491,826
Homeland Security 12,414,277,898 14,204,231,548
General Services Administration 8,566,070,764 12,121,905,486
State 8,216,821,286 9,152,752,527
Justice 6,420,933,959 7,045,000,606
Transportation 5,998,603,570 4,757,801,503
Treasury 5,869,018,672 7,080,543,677
Agriculture 5,173,977,658 5,198,600,813
Agency for International Development 4,935,007,907 4,107,091,699
Interior 4,154,485,271 4,082,114,174
Commerce 2,344,225,583 2,377,004,135
Education 2,051,372,293 1,861,164,806
Labor 2,011,832,564 1,938,966,813
Environmental Protection Agency 1,500,182,454 1,831,188,561
Office of Personnel Management 1,485,066,857 1,344,866,898
Housing and Urban Development 1,409,425,760 1,686,106,307
Social Security Administration 1,192,874,903 1,275,038,121
National Science Foundation 420,550,773 446,493,020
Smithsonian Institution 343,297,316 280,634,529
Securities and Exchange Commission 295,234,674 222,734,734
Pension Benefit Guaranty Corporation 285,570,481 272,556,107
Nuclear Regulatory Commission 203,028,890 200,465,742
National Archives and Record Administration 166,643,992 230,859,309
Broadcasting Board of Governors 129,586,804 60,327,390
Small Business Administration 122,297,303 132,305,356
Peace Corps 104,111,693 70,618,585
Federal Communications Commission 98,382,677 69,868,366
Others         790,833,069         665,489,464
      TOTAL $513,796,374,616 $535,360,318,035

Copyright 2013 by Panoptic Enterprises. All Rights Reserved.

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