Panoptic Enterprises’


Federal Acquisition Developments, Guidance, and Opinions

July 2014
Vol. XV, No. 7
[pdf version]


FAC 2005-75 Reduces Allowable Employee Compensation to $487,000, Expands EPEAT Products
$10.10/Hour Minimum Wage Deviations Issued
DOD Undertakes Housekeeping, NDAA Implementation
SBA Addresses Small Business Size Standards
Expanded Reporting of Nonconforming Items Proposed

FAC 2005-75 Reduces Allowable Employee Compensation to $487,000,
Expands EPEAT Products

Federal Acquisition Circular (FAC) 2005-75 consists of three rules that amend the Federal Acquisition Regulation (FAR) to: (1) revise to $487,000 the allowable cost limit relative to the compensation of contractor and subcontractor employees; (2) expand the Electronic Product Environmental Assessment Tool (EPEAT) items to include imaging equipment and televisions; and (3) finalize the interim rule that removed the dollar limitation for set-asides for economically disadvantaged women-owned small businesses (EDWOSBs) and women-owned small businesses (WOSBs).

$10.10/Hour Minimum Wage Deviations Issued

In response to Executive Order 13658, Establishing a Minimum Wage for Contractors, which establishing a minimum wage of $10.10 per hour for all contractors and subcontractors performing federal contracts effective January 1, 2015, the Office of Management and Budget (OMB) and the Department of Labor (DOL) issued a memorandum notifying federal agencies that they “are required to take steps, to the extent permitted by law, to exercise any applicable authority to ensure these contracts comply with the requirements of the order.”

Responding to the OMB/DOL memorandum, both the Department of Defense (DOD) and the Civilian Agency Acquisition Council (CAAC) issued FAR deviations directing contracting officers to use FAR 52.222-99, Establishing a Minimum Wage for Contractors (DEVIATION), in solicitations and contracts that include FAR 52.222-6, Construction Wage Rate Requirements, and/or FAR 52.222-41, Service Contract Labor Standards, and will be performed in whole or in part in the United States. The clause mandates that “the minimum wage to be paid to each service employee, laborer, or mechanic performing work on this contract between January 1, 2015, and December 31, 2015, shall be $10.10 per hour.” In addition, it requires the contractor to “adjust the minimum wage paid under this contract each time the Secretary of Labor’s annual determination of the applicable minimum wage...results in a higher minimum wage.” When the Secretary of Labor’s annual determination increases the minimum wage, “the contracting officer will adjust the contract price or contract unit price...for the increase in labor costs resulting from the annual inflation increases in the Executive Order 13658 minimum wage beginning on January 1, 2016. The contracting officer shall consider documentation as to the specific costs and workers impacted in determining the amount of the adjustment.”

The contractor will be required to include FAR 52.222-99 in all subcontracts.

In their memorandum, OMB/DOL point out that paragraph 8(c) of Executive Order 13658 states that “for all new contracts and contract-like instruments negotiated between the date of this order [February 12, 2014] and the effective dates set forth in this section [January 1, 2015], agencies are strongly encouraged to take all steps that are reasonable and legally permissible to ensure that individuals working pursuant to those contracts and contract-like instruments are paid an hourly wage of at least $10.10…”

In addition, DOL issued proposed regulations that would add to Title 29 of the Code of Federal Regulations, Labor, a Part 10, Establishing a Minimum Wage for Contractors, which would include key definitions, exclusions from coverage, frequency of pay, deductions, records to be kept by contractors, handling complaints, disputes regarding contractor compliance, debarment proceedings, and a clause for use in contracts not covered by the FAR. Comments on the proposed rule must be submitted no later than July 17, 2014, identified as “RIN 1235-AA10,” by either of the following methods: (1) the Federal eRulemaking Portal: http://www.regulations.gov; or (2) mail: Mary Ziegler, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-13510, 200 Constitution Avenue NW, Washington, DC 20210.

For more on Executive Order 13658, see the March 2014 Federal Contracts Perspective article “President Issues Executive Order Mandating $10.10/Hour Minimum Wage.”

DOD Undertakes Housekeeping, NDAA Implementation

The Department of Defense (DOD) issued two final rules and five proposed rules that clarify various aspects of the Defense FAR Supplement (DFARS) and implement several sections of various National Defense Authorization Acts (NDAAs).

SBA Addresses Small Business Size Standards

The Small Business Administration (SBA) has issued an interim rule and a proposed rule that address small business size standards: the interim rule increases all the monetary-based industry size standards to reflect inflation since 2008, and the proposed rule would establish a safe harbor from fraud penalties for those that misrepresent their business as being small for purposes of federal procurement opportunities if they acted in good faith reliance on small business status advisory opinions received from Small Business Development Centers (SBDCs) or Procurement Technical Assistance Centers (PTACs).

Expanded Reporting of Nonconforming Items Proposed

The FAR Council has issued a proposed rule that would amend the FAR to require expanded government and contractor reporting of nonconforming items. This rule would implement Section 818 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012 (Public Law 112-81) and requirements of the Office of Federal Procurement Policy (OFPP) Policy Letter 91-3, Reporting Nonconforming Products. While Section 818 applies only to DOD, only to counterfeit electronic products, and only to contractors covered by the Cost Accounting Standards (CAS), the FAR Council has concluded that the principles expressed in Section 818 should be applied beyond DOD, beyond electronic products, and beyond CAS-covered contractors. Similarly, although OFPP Policy Letter 91-3 requires agencies to report to the Government-Industry Data Exchange Program (GIDEP) (http://www.gidep.org/), the FAR Council has determined that this reporting would be much more timely and effective if contractors were to make the reports directly to GIDEP.

The following are the proposed FAR changes to implement Section 818 and OFPP Letter 91-3:

Comments on the proposed rule must be submitted no later than August 11, 2014, identified as “FAR Case 2013-002,” 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), ATTN: Ms. Flowers, 1800 F Street NW, 2nd Floor, Washington, DC 20405.

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