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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


July 2019
Vol. XX, No. 7
[pdf version]

CONTENTS


FAC 2019-03 Revises “Adequate Price Competition” Standard for DOD, NASA, Coast Guard
DOD Eases Off the Gas – For a Month
Two FAR Amendments Proposed
GSA Seeks Comments on FSS Consolidation
WDOL.gov Retired, Wage Determinations on beta.SAM.gov
Small Business Goal Achieved for 6th Consecutive Year
Prompt Payment Interest Rate Set at 2 5/8%



FAC 2019-03 Revises “Adequate Price Competition”
Standard for DOD, NASA, Coast Guard

Federal Acquisition Circular (FAC) 2019-03 amends Federal Acquisition Regulation (FAR) 15.403-1, Prohibition on Obtaining Certified Cost or Pricing Data (10 USC 2306a and 41 USC Chapter 35), to revise the standard for “adequate price competition” applicable to the Department of Defense (DOD), the National Aeronautics and Space Administration (NASA), and the Coast Guard, as required by the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017 (Public Law 114-328), Section 822, Enhanced Competition Requirements. Section 822 excludes from the standard for adequate price competition the situation in which there was an expectation of competition but only one offer is received, and substitutes “competition that results in at least two or more responsive and viable competing bids.”

FAR 2.101, Definitions, defines “cost or pricing data” as “all facts that, as of the date of price agreement..., prudent buyers and sellers would reasonably expect to affect price negotiations significantly…Cost or pricing data are more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred.” Some of the factors that are considered cost or pricing data are: “(1) vendor quotations; (2) nonrecurring costs; (3) information on changes in production methods and in production or purchasing volume; (4) data supporting projections of business prospects and objectives and related operations costs; (5) unit-cost trends such as those associated with labor efficiency; (6) make-or-buy decisions; (7) estimated resources to attain business goals; and (8) information on management decisions that could have a significant bearing on costs.” “Certified cost or pricing data” is cost or pricing data that are required to be submitted and certified as “accurate, complete, and current...to the best of the [certifier’s] knowledge and belief.”

The accumulation and presentation of such data to justify a proposed price is quite administratively burdensome and costly. Therefore, there are many exceptions to the certified cost or pricing data requirement: acquisitions under $2,000,000 (see NDAA for FY 2018 [Public Law 115-91], Section 811, Modifications to Cost or Pricing Data and Reporting Requirements); when the prices are based on adequate price competition; when commercial items are being acquired; when prices are set by law or regulation; etc. (see FAR 15.403-1(b)).

FAR 15.403-1(c)(1) further explains each of the exceptions, and FAR 15.403-1(c)(1)(ii) states that a price is based on adequate price competition when “there was a reasonable expectation, based on market research or other assessment, that two or more responsible offerors, competing independently, would submit priced offers in response to the solicitation’s expressed requirement, even though only one offer is received from a responsible offeror and if (A) based on the offer received, the contracting officer can reasonably conclude that the offer was submitted with the expectation of competition, e.g., circumstances indicate that (1) the offeror believed that at least one other offeror was capable of submitting a meaningful offer; and (2) the offeror had no reason to believe that other potential offerors did not intend to submit an offer...”

Paragraph (b)(1) of Title 10 of the U.S. Code, Section 2306a (10 USC 2306a), Cost or Pricing Data: Truth in Negotiations, had provided that “submission of certified cost or pricing data shall not be required...in the case of a contract, a subcontract, or modification of a contract or subcontract (A) for which the price agreed upon is based on (i) price competition; or (ii) prices set by law or regulation...” However, paragraph (2)(a) of Section 822 of the NDAA for FY 2017 amended paragraph (b)(1)(A)(i) to remove “price competition” and replace it with “competition that results in at least two or more responsive and viable competing bids.” Now 10 USC 2306a(b)(1) provides that “submission of certified cost or pricing data shall not be required under subsection (a) in the case of a contract, a subcontract, or modification of a contract or subcontract (A) for which the price agreed upon is based on (i) adequate competition that results in at least two or more responsive and viable competing bids; or (ii) prices set by law or regulation…” (emphasis added). (EDITOR’S NOTE: Title 10 of the U.S. Code applies only to the DOD, NASA, and the Coast Guard. All “civilian” agencies are subject to the provisions of Title 41 of the U.S. Code, so the change made by Section 822 applies to DOD, NASA, and the Coast Guard only.)

To implement Section 822, a rule was proposed that would amend FAR 15.403-1(c)(1) to state that it applies to “agencies other than DOD, NASA, and the Coast Guard,” and add the following as a separate standard for the DOD, NASA, and the Coast Guard: “a price is based on adequate price competition only if two or more responsible offerors, competing independently, submit responsive and viable offers. (10 USC 2306a(b)(1)(A)(i)).”

Ten respondents submitted comments on the proposed rule. Because of the comments, the rule is finalized with the following changes:

In addition, Section 822 is implemented in a DOD final rule that amends the Defense FAR Supplement (DFARS); see the next article for details. For more on the proposed rule that led to the FAC 2019-03 final rule and the proposed rule that led to the DOD final rule, see the July 2018 Federal Contracts Perspective article “DOD Continues Deluge of Rules, Deviations.”



DOD Eases Off the Gas – For a Month

The Department of Defense (DOD) slowed down a bit on the issuance of DFARS revisions, publishing only three final rules and three proposed rules during June.



Two FAR Amendments Proposed

Besides the final rule in FAC 2019-03 (see article above), two proposed amendments to the FAR were published, and comments are being sought on them.



GSA Seeks Comments on FSS Consolidation

The General Services Administration (GSA) is soliciting comments from industry on the upcoming consolidation of the Federal Supply Schedules (FSS – also referred to as Multiple Award Schedules [MAS]). There are 24 FSS/MAS covering different supplies and services; for example, Schedule 66 covers “Scientific Equipment and Services, and Schedule 71 covers “Furniture.” However, each of these 24 schedules has different terms and conditions, which makes it administratively difficult for contractors with products on several different schedules. Conversely, some government needs can only be met by products on different schedules, which makes it difficult for contracting officers to issue a single order that cites various schedules with dissimilar terms and conditions.

GSA issued a Request for Information (RFI) seeking comments on the content and structure of its proposed consolidated FSS solicitation scheduled for release later this year. The RFI is requesting comments and suggestions on the proposed solicitation format, including the streamlined terms and conditions, and the solicitation cover page outlining the instructions applicable to all offerors. Comments are due July 5, 2019, to the General Services Administration, Federal Acquisition Service, The Dow Building, 100 S. Independence Mall, West, Philadelphia, PA 19106.

In addition, GSA issued another RFI seeking comments on the new large categories, subcategories, and Special Items Numbers (SINs) for the FSS/MAS solicitation. The announcement of the RFI states, “Under the new proposed category structure, companies that offer goods and services under multiple categories will no longer need to have multiple Schedules, so there will no longer be a need to ‘team’ with yourself to provide a total solution to customers. In addition, the reorganization, removal of duplication, and streamlining of categories and SINs will ensure that contractors with identical or similar offerings all fall under the same large category, subcategory, and SIN. This will increase order level competition for buyers and make sure our industry partners have the opportunity to respond to these opportunities.”

Comments on the proposed large categories, subcategories, and SINs are due July 12, 2019, at the address mentioned above.

For more on the FSS/MAS consolidation, see the December 2018 Federal Contracts Perspective article “GSA Announces Transformation of Multiple Award Schedules.”



WDOL.gov Retired, Wage Determinations on beta.SAM.gov

The General Services Administration has announced that the Wage Determinations OnLine (WDOL.gov) is retired and no longer available for wage determination information. The official source for wage determination is now part of the System for Award Management (SAM) at https://beta.SAM.gov. (EDITOR’S NOTE: SAM [https://www.sam.gov] is a consolidation of several acquisition-related databases. SAM provides users one login for access to all the capabilities previously found in the old systems, eliminates data overlap by sharing the data throughout the award lifecycle, and has a standardized format across all webpages to make it easier to navigate and find information. This is an ongoing effort; WDOL.gov is the latest acquisition-related database to be merged with the rest of SAM.)

Wage determinations are “the wage rates and fringe benefits found by the Department of Labor to be prevailing in the locality,” and these are required to be posted in most service and construction contracts and are the minimum that covered contractors and their subcontractors must pay their laborers and mechanics. For more information on wage determinations, see FAR 22.404, Construction Wage Rate Requirements Statute Wage Determinations, and FAR 22.1008, Procedures for Obtaining Wage Determinations.

When GSA moved the WDOL functions to beta.SAM.gov, GSA made the following improvements:

WDOL.gov was retired by GSA on June 14, 2019.



Small Business Goal Achieved for 6th Consecutive Year

The Small Business Administration (SBA) has announced that the government has exceeded its 23% small business federal contracting goal for the sixth consecutive year, awarding 25.05% of Fiscal Year (FY) 2018 prime contract expenditures to small businesses for a total of $120.8 billion, an increase from FY 2017 of nearly $15 billion, and the first time more than $120 billion in prime contracts has been awarded to small businesses. In addition, $79 billion in subcontracts was awarded to small businesses.

The government almost doubled its 5% goal for awards to small disadvantaged businesses by awarding 9.65% for a total of $46.5 billion. The government exceeded its 3% goal for awards to service-disabled veteran-owned small businesses by awarding 4.27% for a total of $20.6 billion. While the government fell short of its 5% goal for awards to women-owned small businesses (4.75% for $22.9 billion) and 3% for awards to small businesses in Historically Underutilized Business Zones (HUBZones) (2.05% for $9.9 billion), the dollar amounts were the most that either small business category has ever been awarded.

The individual agency scorecards a detailed explanation of the methodology is available at https://www.sba.gov/document/support--small-business-procurement-scorecard-overview.



Prompt Payment Interest Rate Set at 2 5/8%

The Treasury Department has established 2 5/8% (2.625%) as the interest rate for the computation of payments made between July 1, 2019, and December 31, 2019, 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, 2019, through June 30, 2019) was 3 5/8% (3.625%). The interest rate for July 1, 2018, through December 31, 2018, was 3 1/2% (3.5%).

All prompt payment interest rates since 1980 (in six-month increments) are available at https://www.fiscal.treasury.gov/prompt-payment/rates.html.

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.





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