Panoptic Enterprises’


Federal Acquisition Developments, Guidance, and Opinions

December 2019
Vol. XX, No. 12
[pdf version]


FAC 2020-02 Requires Contractors to Report Counterfeit Parts to GIDEP.org
DOD Takes It Easy
SBA Takes on Small Business Contracting Programs
EO Ordering Nondisplacement of Employees Rescinded

FAC 2020-02 Requires Contractors to Report
Counterfeit Parts to GIDEP.org

Federal Acquisition Circular (FAC) 2020-02 consists of one final rule: it amends Federal Acquisition Regulation (FAR) part 46, Quality Assurance, and adds FAR 52.246-26, Reporting Nonconforming Items, to require contractors and subcontractors to report to the Government-Industry Data Exchange Program (http://www.gidep.org/) certain counterfeit or suspect counterfeit parts and certain major or critical nonconformances.

This final rule implements National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012 (Public Law 112-81), Section 818, Detection and Avoidance of Counterfeit Electronic Parts, which applies only to the Department of Defense (DOD) and only to counterfeit electronic parts. Section 818 requires the Secretary of Defense to amend the Defense FAR Supplement (DFARS) to address the detection and avoidance of counterfeit electronic parts. Paragraph (c)(4) of Section 818 goes on to require that the amended DFARS obligate any DOD “contractor or subcontractor who becomes aware, or has reason to suspect, that any end item, component, part, or material contained in supplies purchased by the Department [of Defense], or purchased by a contractor or subcontractor for delivery to, or on behalf of, the Department [of Defense], contains counterfeit electronic parts or suspect counterfeit electronic parts report in writing within 60 days to appropriate government authorities and the Government-Industry Data Exchange Program...”

While Section 818 applies only to the DOD, the FAR Council concluded that the principles expressed in Section 818 should be applied beyond DOD and beyond electronic products. Therefore, instead of DOD issuing a proposed rule to amend the DFARS, the FAR Council issue a proposed rule that would amend the FAR to apply Section 818 governmentwide to the acquisition of all supplies delivered to the government, acquired by the contractor for use in performing services, or furnished by the contractor for use by, or for the government (see the July 2014 Federal Contracts Perspective article “Expanded Reporting of Nonconforming Items Proposed”). The introduction to the final rule explains that “the FAR Council proposed this because the problem of counterfeit and nonconforming parts extends far beyond electronic parts and can impact the mission of all government agencies, such as NASA [National Aeronautics and Space Administration] and the Department of Energy, and mission critical systems such as avionics, satellites, space flight systems, and nuclear facilities.”

Fourteen respondents submitted comments on the proposed rule. In response to the comments, the final rule is “significantly descoped”:

In addition, FAR 52.246-26(d) now states that GIDEP reports “shall not include: (1) trade secrets or confidential commercial or financial information protected under the Trade Secrets Act (18 USC 1905); or (2) any other information prohibited from disclosure by statute or regulation.”

Finally, to implement Section 818(c)(5), FAR 52.246-26(f) states: “If this is a contract with the Department of Defense, as provided in paragraph (c)(5) of Section 818 of the National Defense Authorization Act for Fiscal Year 2012 (Pub. L. 112-81), the contractor or subcontractor that provides a written report or notification under this clause that the end item, component, part, or material contained electronic parts (i.e., an integrated circuit, a discrete electronic component [including, but not limited to, a transistor, capacitor, resistor, or diode], or a circuit assembly) that are counterfeit electronic parts or suspect counterfeit electronic parts shall not be subject to civil liability on the basis of such reporting, provided that the contractor or any subcontractor made a reasonable effort to determine that the report was factual.”

DOD Takes It Easy

The Department of Defense (DOD) took some time off in November and put its feet up, issuing only four final rules, one proposed rule, and one advance notice of proposed rulemaking.

SBA Takes on Small Business Contracting Programs

The Small Business Administration (SBA) has been busy revising its small business regulations in Title 13 of the Code of Federal Regulations (CFR), Business Credit and Assistance, Chapter I, Small Business Administration, to make a multitude of changes that had been stacking up for years, and to update the Historically Underutilized Business Zone (HUBZone) program regulations in 13 CFR part 126, HUBZone Program.

EO Ordering Nondisplacement of Employees Rescinded

President Trump has issued Executive Order (EO) 13897, Improving Federal Contractor Operations by Revoking Executive Order 13495. EO 13495, Nondisplacement of Qualified Workers Under Service Contracts, which was issued by President Obama, mandated that “service contracts and solicitations for such contracts shall include a clause that requires the contractor, and its subcontractors, under a contract that succeeds a contract for performance of the same or similar services at the same location, to offer those employees (other than managerial and supervisory employees) employed under the predecessor contract whose employment will be terminated as a result of the award of the successor contract, a right of first refusal of employment under the contract in positions for which they are qualified. There shall be no employment openings under the contract until such right of first refusal has been provided.”

EO 13495 was implemented with the addition of FAR subpart 22.12, Nondisplacement of Qualified Workers Under Service Contracts, and contract clause FAR 52.222-17, Nondisplacement of Qualified Workers, by Federal Acquisition Circular (FAC) 2005-64 (for more on EO 13495, see the March 2009 Federal Contracts Perspective article “Obama Issues Four Labor-Related Executive Orders”; for more on FAC 2005-64, see the January 2013 Federal Contracts Perspective article “FAR Amended to Require Nondisplacement of Predecessor Service Contractor’s Employees”).

With the issuance of EO 13897, President Trump joins a long list of presidents who have rescinded the previous presidents’ EOs on the subject. President Obama’s EO 13495 rescinded President George W. Bush’s EO 13204, Revocation of Executive Order on Nondisplacement of Qualified Workers Under Certain Contracts, which in turn rescinded President Clinton’s EO 12933, which directed federal agencies to include in public building maintenance contracts a clause that required successor contractors to give their predecessors’ employees the right of first refusal to employment openings under the new contract (for more on EO 13204, see the March 2001 Federal Contracts Perspective article “Bush Issues Three Acquisition-Related Orders Involving Labor Issues in FAR Part 22”). Undoubtedly, the next time a Democrat takes office as president, he or she will issue an EO reimposing the nondisplacement rules.

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