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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


November 20209
Vol. XXI, No. 11
[pdf version]

CONTENTS


FAC 2021-01 Makes 5-Year Inflation Adjustment to Acquisition-Related Thresholds
FAC 2021-02 Addresses ROTC, Recreational Services
Revision of “Commerical Item” Definition Proposed
OFCCP Seeks Materials on Race, Sex Stereotyping
OMB Extends Transition Date to Unique Entity Identifier
SBA Merges Mentor-Protégé Programs
Eight Industrial Sector Size Standards to be Revised



FAC 2021-01 Makes 5-Year Inflation Adjustment
To Acquisition-Related Thresholds

Federal Acquisition Circular (FAC) 2021-01 undertook the 5-year adjustment of acquisition-related thresholds required by Title 41 of the U. S. Code, Section 1908, Inflation Adjustment of Acquisition-Related Dollar Thresholds (41 USC 1908), which requires that statutory acquisition-related thresholds in the Federal Acquisition Regulation (FAR) be adjusted for inflation on October 1 of each year that is divisible by five. The year 2020 is divisible by 5, so the thresholds were adjusted to reflect the change in the Consumer Price Index (CPI) for all urban consumers from 2015, the last time the adjustments were made, to 2020. As a matter of policy, the FAR Council decided to use the same methodology to adjust nonstatutory FAR acquisition-related thresholds. (EDITOR’S NOTE: 41 USC 1908 prohibits the application of the threshold adjustments to the thresholds under the Construction Wage Rate Requirements statute [40 USC Chapter 31, Subchapter IV, formerly known as the Davis-Bacon Act – see FAR subpart 22.4, Labor Standards for Contracts Involving Construction], the Service Contract Labor Standards statute [41 USC Chapter 67, formerly known as the Service Contract Act – see FAR subpart 22.10, Service Contract Labor Standards], and trade agreements thresholds [see FAR subpart 25.4, Trade Agreements].

Once the inflation factor is applied to the acquisition-related threshold, the threshold is rounded as follows:

Less than $10,000      Round to the nearest $500
$10,000 to less than $100,000      Round to the nearest $5,000
$100,000 to less than $1 million      Round to the nearest $50,000
$1 million to less than $10 million      Round to the nearest $500,000
$10 million to less than $100 million      Round to the nearest $5 million
$100 million to less than $1 billion      Round to the nearest $50 million
$1 billion or more      Round to the nearest $500 million

While the FAC 2021-01 threshold adjustments occur throughout the FAR, the following are the adjustments made to some of the most-used acquisition-related thresholds (adjusted thresholds are in bold):

Some frequently-used acquisition-related thresholds are not changed by FAC 2021-01:

In addition, the acquisition-related thresholds adjustments are based on that year’s March CPI for all urban consumers. The proposed rule estimated that the March 2020 CPI for all urban consumers would be 258.6. Dividing the estimated March 2020 CPI for all urban consumers by the March 2015 CPI of 236.119 produces an estimated 9.52% inflation since the last adjustment, and this rate was used to calculate the proposed 5-year adjustments. Some of the proposed thresholds were very close to the 41 USC 1908 calculation formula amount. However, the actual March 2020 CPI for all urban consumers was 258.115, which means the actual 5-year inflation was slightly lower – 9.32%. This means that several of the proposed thresholds did not meet the 41 USC 1908 calculation formula amount, so this final rule removes those proposed threshold changes.

In FAR 50.102-3, Limitations on Exercise of Authority [for extraordinary contractual actions], the proposed rule would have increased the threshold requiring notification of the Senate and House Committees on Armed Services from $34 million to $40 million. Because the March 2020 CPI for all urban consumers was slightly lower than expected, the threshold is increased only to $35 million.

Finally, some thresholds were inadvertently omitted but are included in the final rule:

For more on the proposed rule, see “Inflation Adjustment of Acquisition-Related Thresholds” in the July 2020 Federal Contracts Perspective article “Inflation Adjustment of Acquisition-Related Thresholds Proposed.”



FAC 2021-02 Addresses ROTC, Recreational Services

Besides making the inflation adjustments in FAC 2021-01 (see above article), the FAR Council issued FAC 2021-02, which cleaned up several miscellaneous proposed rule changes, such as prohibiting the award of contracts to colleges that prohibit military recruiting on campus, exempting contracts for seasonal recreational services on federal lands from the federally-mandated minimum wage, and exempting contracts performed in Afghanistan from Afghan taxes.



Revision of “Commerical Item” Definition Proposed

As if the issuances of FAC 2021-01 and FAC 2021-02 were not enough, the FAR Council issued a rule proposing to revise the definition of “commercial item” by splitting it in two: “commercial product” and “commercial services.” Then, a week later, the FAR Council issued another proposed rule to increase the threshold for requiring fair opportunity on orders under multiple-award contracts to the “micro-purchase threshold.”



OFCCP Seeks Materials on Race, Sex Stereotyping

In response to Executive Order (EO) 13950, Combating Race and Sex Stereotyping, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) is soliciting “comments, information, and materials from the public relating to workplace trainings that involve race or sex stereotyping or scapegoating” (for more on EO 13950, see the October 2020 Federal Contracts Perspective article “President Orders ‘Divisive, Anti-American’ Training Cease”).

EO 13950 notes that materials teaching that men and members of certain races are inherently sexist and racist have recently appeared in workplace diversity trainings across the country, and asserts that “it shall be the policy of the United States not to promote race or sex stereotyping or scapegoating in the federal workforce or in the Uniformed Services...In addition, federal contractors will not be permitted to inculcate such views in their employees.”

OFCCP is inviting the public “to provide information or materials concerning any workplace trainings of federal contractors that involve such stereotyping or scapegoating...To gain a better understanding regarding potentially unlawful training materials that are being used by federal contractors and subcontractors, President Trump instructed the Director of OFCCP to request information from these contractors and subcontractors and their employees regarding the trainings that have been provided.” Therefore, OFCCP is requesting comments, information, and materials from federal contractors, federal subcontractors, and employees of federal contractors and subcontractors concerning workplace trainings involving prohibited race or sex stereotyping or scapegoating. “You may provide various other types of materials, such as PowerPoints, photographs, videos, handwritten notes, or printed handouts. OFCCP welcomes all forms of media and data that have in recent years been used, or that may soon be used, in both voluntary and mandatory trainings, workshops, or similar programming.”

OFCCP has created an email and telephone hotline to report potentially non-compliant workplace training materials. Employees and other concerned members of the public are encouraged to report potentially unlawful training materials by calling (202) 343-2008 or emailing OFCCPComplaintHotline@dol.gov.

In addition, federal contractors and subcontractors questioning whether their workplace trainings, workshops, or similar programs are compliant with EO 13950 are encouraged to voluntarily submit the information and materials. OFCCP will provide compliance assistance to federal contractors and subcontractors that voluntarily submit such information or materials.

OFCCP will not take enforcement action against a federal contractor or subcontractor that voluntarily submits information or materials determined by OFCCP to be non-compliant with EO 13950 provided the contractor or subcontractor promptly comes into compliance with EO 13950 as directed by OFCCP. Such information or materials must be submitted to OFCCP by one of the contractor’s or subcontractor’s executives, owners, or legal representatives with actual authority to legally bind the contractor or subcontractor in agreements with the U. S. government.

If the federal contractor or subcontractor voluntarily submits information or materials that is determined by OFCCP to be non-compliant, and the contractor or subcontractor refuses to correct the issue after compliance assistance is provided, OFCCP may take enforcement action against the contractor or subcontractor if OFCCP later receives the contractor’s or subcontractor’s materials through a separate source, such as from an employee.

There is one key final point: “There are no adverse legal consequences for choosing not to participate in this request for information. This request for information is strictly voluntary; it simply offers federal contractors and subcontractors an opportunity in the exercise of OFCCP’s enforcement discretion to come into compliance with their legal obligations to the extent they have concerns.”



OMB Extends Transition Date to Unique Entity Identifier

The General Services Administration (GSA) has announced that the deadline for the transition from using Data Universal Numbering System (DUNS®) numbers to identify non-governmental organizations to using new System for Award Management (SAM)-generated Unique Entity Identifiers has been extended from December 2020 to April 2022.

DUNS® numbers, developed by and proprietary to Dun and Bradstreet (D&B), have been used since 1962 to identify entities doing business with the government. DUNS® numbers permits the government to: (1) uniquely identify a contractor entity; and (2) roll-up government procurements to the ultimate parent organization to show the corporate family receiving U.S. obligations. The government required its contractors to obtain and report a unique DUNS® number as a condition for receiving a contract award. However, the Digital Accountability and Transparency Act of 2014 (DATA Act) (Public Law 113-101) specifically states that the data shall, to the extent reasonable and practicable, “incorporate a widely accepted, nonproprietary, searchable, platform-independent computer-readable format” and “include unique identifiers for federal awards and entities receiving federal awards that can be consistently applied governmentwide” (emphasis added).

In March 2019, GSA awarded a one-year with four option years contract to Ernst and Young LLP (E&Y) to develop a unique entity identifier system to take the place of DUNS® numbers (see the April 2019 Federal Contracts Perspective article “GSA Announces Award for Entity Validation Services”). E&Y was to develop the unique entity identifier system, and the government was originally to transition to its use by December 2020, which was originally thought to give agencies time to recode all their systems that used DUNS® numbers. However, the Office of Management and Budget (OMB) has decided that more time is needed, so it has extended the transition deadline to April 2022.

In the meantime, GSA will contract with D&B to ensure full continuity of services, including DUNS® number assignment and validation of entity uniqueness, during the extended transition period.

For more on the Unique Entity Identification and its uses, see the August 2019 Federal Contracts Perspective article “GSA Issues Unique ID Standard for SAM.gov”.



SBA Merges Mentor-Protégé Programs

The Small Business Administration (SBA) has decided to merge the 8(a) Business Development (BD) mentor-protégé program and the all small mentor-protégé program to eliminate confusion regarding perceived differences between the two programs and remove unnecessary duplication of functions within SBA. In addition, SBA is revising its small business regulations to further reduce unnecessary or excessive burdens on small businesses and to more clearly delineate SBA’s intent.

The mentor-protégé program is designed to enhance the capabilities of protégé firms by requiring approved mentors to provide BD assistance to protégé firms and to improve the protégé firms’ ability to successfully compete for federal contracts. This assistance may include technical and/or management assistance, financial assistance in the form of equity investments and/or loans, subcontracts (either from the mentor to the protégé or from the protégé to the mentor), trade education, and/or assistance in performing prime contracts with the government through joint venture arrangements. Mentors are encouraged to provide assistance relating to the performance of contracts set aside or reserved for small business so that protégé firms may more fully develop their capabilities. By mentoring a protégé, the mentor: (1) establishes a long-term business relationship with the protégé, thus improving the performance of subcontracts; (2) is permitted to acquire a minority interest in the protégé, and (3) can enter into joint-venture arrangements with its protégé to compete for, and perform on, federal government contracts.

Several agencies had developed mentor-protégé programs, some with congressional approval (Department of Defense, National Aeronautics and Space Administration, Department of Homeland Security, and Federal Aviation Administration), and some without (Department of Energy, Department of State, Department of Veterans Affairs, Environmental Protection Agency, General Services Administration, and U.S. Agency for International Development). All of these had different requirements, different rules, different procedures, etc.

Congress recognized that the various mentor-protégé programs helped small businesses develop into viable and important government contractors, but that the agencies’ disparate programs were needlessly confusing and burdensome. Therefore, Congress passed the Small Business Jobs Act of 2010 (Public Law 111-240), which contained Section 1347, Small Business Contracting Parity. Section 1347 provided that “the [SBA] Administrator may establish mentor-protégé programs for small business concerns owned and controlled by service-disabled veterans, small business concerns owned and controlled by women, and HUBZone small business concerns modeled on the mentor-protégé program of the [SBA] for small business concerns participating in programs under Section 8(a) of the Small Business Act...”

Subsequently, Congress enacted the NDAA for FY 2013 (Public Law 112-239), and it included Section 1641, Mentor-Protégé Progams, which provided that “the [SBA] Administrator is authorized to establish a mentor-protégé program for all small business concerns. The mentor-protégé program...shall be identical to the mentor-protégé program of the [SBA] for small business concerns that participate in the program under Section 8(a)...except that the [SBA] may modify the program to the extent necessary given the types of small business concerns included as protégés” (see the February 2013 Federal Contracts Perspective article “FY 2013 National Defense Authorization Act Extends FAR Subpart 13.5 Procedures Through 2014”). (EDITOR’S NOTE: The Department of Defense was allowed to keep and operate its own mentor-protégé program because it was the first to do so [authorized by the NDAA for FY 1991 (Public Law 101-510), Section 831, Mentor-Protégé Pilot Program] and the program was such a success it inspired the establishment of the other mentor-protégé programs. See paragraph (c)(1) of Title 13 of the Code of Federal Regulations [CFR], Section 125.10, Mentor-Protégé Programs of Other Agencies [13 CFR 125.10]. The SBA originally established its mentor-protégé program for 8(a) participants in 1998.)

To implement these two statutory sections, the SBA decided to create one new small business mentor-protégé program instead of four new mentor-protégé programs (one for small businesses, one for service-disabled veteran-owned small businesses, one for women-owned small businesses, and one for HUBZone small businesses), and to keep the 8(a) BD mentor-protégé program. The small business mentor-protégé program was drafted to be as similar to the 8(a) mentor-protégé program as possible” (see the August 2016 Federal Contracts Perspective article “Governmentwide Mentor-Protégé Program Established”).

In response to Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs (see the February 2017 Federal Contracts Perspective article “President Trump Orders Regulatory Freeze”), which is intended to reduce unnecessary and burdensome regulations and to control costs associated with regulations, SBA decided to merge the 8(a) BD mentor-protégé and the all small mentor-protégé programs. While SBA has made many conforming changes to its small business regulations to effect this merger, the most important change is in paragraph (a) of 13 CFR 124.520, Can 8(a) BD Program Participants participate in SBA’s Mentor-Protégé program? (formerly titled “What are the rules governing SBA’s Mentor/Protégé program?): “An 8(a) BD program participant, as any other small business, may participate in SBA’s All Small Mentor-Protégé program authorized under §125.9 of this chapter [13 CFR 125.9, What are the rules governing SBA’s small business mentor-protege program?].”

In addition to the merger of the mentor-protégé programs, this 36-page rule makes many other changes to the SBA’s small business regulations, most of which are technical in nature; for example, the requirement that 8(a) participants seeking to be awarded a competitive 8(a) contract as a joint venture submit the joint venture agreement to SBA for review and approval prior to contract award is eliminated (paragraph (e) of 13 CFR 124.513, Under what circumstances can a joint venture be awarded an 8(a) contract?).



Eight Industrial Sector Size Standards to be Revised

The SBA is seeking comments on two proposed rules that would revise the small business size standards in 13 CFR 121.201, What Size Standards has SBA Identified by North American Industry Classification System Codes?, for businesses in eight North American Industrial Classification System (NAICS) sectors to increase small business eligibility for SBA’s loan and contracting programs. The SBA estimates that more than 50,000 additional firms in these eight sectors will become eligible for SBA’s programs under the revised size standards, if adopted.

The first rule proposes to increase the receipts-based small business size definitions (commonly referred to as “size standards”) for 58 industries and two subindustries (“exceptions”) in NAICS Sector 11, Agriculture, Forestry, Fishing and Hunting; three industries in Sector 21, Mining, Quarrying, and Oil and Gas Extraction; three industries in Sector 22, Utilities; and one industry and one subindustry in Sector 23, Construction. Comments on this proposed rule must be submitted by December 1, 2020, identified as “RIN 3245-AG89” and submitted by one of the following methods: (1) Federal eRulemaking Portal: https://www.regulations.gov; or (2) mail/hand delivery/courier to: Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third Street SW, Mail Code 6530, Washington, DC 20416.

The second rule proposes to increase the receipts-based small business size standards for 18 industries in NAICS Sector 48-49, Transportation and Warehousing; eight industries in NAICS Sector 51, Information; 10 industries in NAICS Sector 52, Finance and Insurance; and nine industries in NAICS Sector 53, Real Estate and Rental and Leasing. Comments on this proposed rule must be submitted by December 1, 2020, identified as “RIN 3245-AG90” and submitted by one of the following methods: (1) Federal eRulemaking Portal: https://www.regulations.gov; or (2) mail/hand delivery/courier to: Khem R. Sharma, Ph.D., Chief, Office of Size Standards, 409 Third Street SW, Mail Code 6530, Washington, DC 20416.

SBA’s proposed revisions relied on its recently revised “Size Standards Methodology,” which is available at https://www.sba.gov/document/support--size-standards-methodology-white-paper. SBA seeks comments on its proposed changes to size standards in the above sectors, and the data sources it evaluated to develop the proposed size standards. The SBA considers the structural characteristics of individual industries, including average firm size, the degree of competition, and federal government contracting trends. This ensures that small business size standards reflect current economic conditions in those industries.





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