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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


August 2020
Vol. XXI, No. 8
[pdf version]

CONTENTS


FAC 2020-07 Increases Simplified Acquisition, Micro-Purchase Thresholds
Contractors with Chinese Telecommunications Prohibited
United States-Mexico-Canada Agreement in Effect
GSA Plans to Revamp Small Business GWAC Program
COVID-19 Persists, Precipitates More Actions
GSA Launches IT Acquisition University
Prompt Payment Interest Rate Set at 1 1/8%
Nonmanufacturing Rule For Diabetic Test Strips Waived



FAC 2020-07 Increases Simplified Acquisition,
Micro-Purchase Thresholds

Federal Acquisition Circular (FAC) 2020-07 finally got around to amending the Federal Acquisition Regulation (FAR) to reflect the increases to the micro-purchase threshold to $10,000 and the simplified acquisition threshold to $250,000, as provided by the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018. In addition, FAC 2020-07 contains final rules that address multiple-award contracts, increases the threshold for requesting certified cost or pricing data, orders issued via fax or electronic commerce, and the DD Form 254, Contract Security Classification Specification.



Contractors with Chinese Telecommunications Prohibited

FAC 2020-08 consists of one interim rule, and it implements the NDAA for FY 2019 (Public Law 115-232), Section 889, Prohibition on Certain Telecommunications and Video Surveillance Services or Equipment, paragraph (a)(1)(B), which was passed to combat national security and intellectual property threats that face the United States. FAC 2020-08 addresses the portion of Section 889 that prohibits executive agencies from entering into, or extending or renewing, a contract with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology of any system. The provision goes into effect August 13, 2020.

Section 889(a)(1) consists of two parts:

Paragraph (a)(1)(A) prohibits agencies from procuring, obtaining, extending, or renewing a contract to procure or obtain any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system. This portion of Section 889 became effective one year after enactment of Public Law 115-232 – August 13, 2019.

Paragraph (a)(1)(B) prohibits agencies from entering into a contract (or extending or renewing a contract) with an entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system. This portion of Section 889 becomes effective two years after enactment of Public Law 115-232 – August 13, 2020.

In other words, (a)(1)(A) prohibits government agencies from acquiring covered equipment, and (a)(1)(B) prohibits contracting with entities that use covered equipment.

Paragraph (a)(2) of Section 889 goes on to provide that “nothing in paragraph [a](1) shall be construed to: (A) prohibit the head of an executive agency from procuring with an entity to provide a service that connects to the facilities of a third-party, such as backhaul, roaming, or interconnection arrangements; or (B) cover telecommunications equipment that cannot route or redirect user data traffic or permit visibility into any user data or packets that such equipment transmits or otherwise handles.”

Section 889(f)(3) defines “covered telecommunications equipment or services” as “(A) telecommunications equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities); [or] (B) for the purpose of public safety, security of government facilities, physical security surveillance of critical infrastructure, and other national security purposes, video surveillance and telecommunications equipment produced by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of such entities).”

Because Section 889(a)(1)(A) went into effect on August 13, 2019, FAC 2019-05 was issued with an effective date of August 13, 2019. It added FAR subpart 4.21, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, which included: the Section 889 definition for “covered telecommunications equipment or services”; the prohibition in Section 889(a)(1)(A); procedures contracting officers are to follow; waivers authorized to the prohibition; new FAR 52.204-24, Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment, which is to be included in all solicitations for contracts or orders under indefinite-delivery indefinite-quantity (IDIQ) contracts; and new FAR 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, which is to be included in all solicitations and contracts (see the September 2019 Federal Contracts Perspective article “FAC 2019-05 Prohibits Acquisition of Chinese Telecommunications and Surveillance Equipment”).

To implement Section 889(a)(1)(B), this interim rule supplements the FAC 2019-05 interim rule as follows:

Comments on this interim rule must be submitted no later than September 14, 2020, identified as “FAR Case 2019-009” via the Federal eRulemaking Portal at http://www.regulations.gov.

The FAR Council is soliciting comments on the following questions regarding the anticipated affect on affected parties:

EDITOR’S NOTE: Kim Herrington, Acting Principal Director, Department of Defense (DOD) Pricing and Contracting, has issued a memorandum with the subject “Implementation of the Section 889(a)(1)(B) Prohibition on Contracting with Entities Using Certain Telecommunications and Video Surveillance Services or Equipment.”

“The purpose of this memorandum is to facilitate implementation of interim FAR rule 2019-009 [FAC 2020-08], published on July 14, 2020, and effective on August 13, 2020,” writes Mr. Herrington. Since Section 889 applies to the Department of Defense and the rest of the federal government, this memorandum contains much information that is helpful. It explains what contracting officers are required to do to comply with Section 889(a)(1)(B); FAR 52.204-24 and FAR 52.204-25 requirements and procedures; exceptions; waivers; emergency procurements; provides hyperlinks to additional information; and provides a “top level matrix” detailing who is to take what action under various circumstances.

The memorandum is available at https://www.acq.osd.mil/dpap/policy/policyvault/USA001557-20-DPC.pdf.

In addition, the General Services Administration (GSA) will be hosting a live and recorded virtual webinar on August 12, 2020, at 1:00 pm regarding its implementation of Section 889. The webinar will be held virtually and the call-in information will be made available to registrants. Industry partners wishing to virtually attend must register at https://gsa.zoomgov.com/webinar/register/WN_hQ6tHTRDR-mMNnRRxJy22Q. Members of the press, in addition to registering for this event, must also RSVP to press@gsa.gov by August 10, 2020.

GSA’s webinar features panel leaders from GSA’s business lines who will explain how they are implementing the Section 889 FAR rule in their specific business lines. Panelists will also answer questions that have been pre-collected from industry. Send in your questions no later than close of business on August 5, 2020, Eastern to gsaombudsman@gsa.gov.

The webinar panelists will be:

Michael Thompson, Senior Policy Advisor, General Services Acquisition Policy Division, Office of Governmentwide Policy, Moderator

Stephanie Shutt, Director, Multiple Awards Schedule Program Management Office, Federal Acquisition Service (FAS)

Mary Gartland, Director City Pair Program, Office of Travel, Employee Relocation, and Transportation, FAS

Lawrence Hale, Director, IT Security Subcategory Office of Information Technology Category, FAS

Julie Milner, Director, Special Programs Division, Office of Project Delivery, Office of Design and Construction, Public Buildings Service (PBS)

Chip Pierpont, Director, Innovation Technology and Performance Division, Office of Facilities Management, PBS

Justin Hawes, Division Director, Lease Policy and Innovation Division, Office of Leasing, PBS

Len Fedoruk, Director, Vehicle Purchasing Division, Office of Motor Vehicle Management, FAS

For additional information, contact Patricia Richardson at patricia.m.richardson@gsa.gov or Maria Swaby at 202-208-0291.



United States-Mexico-Canada Agreement in Effect

On July 1, 2020, the United States-Mexico-Canada Agreement Implementation Act (Public Law 116-113). went into effect, superseding the North American Free Trade Agreement (NAFTA) (Public Law 103-182).

To ensure agencies’ acquisition regulations reflect this change, the Civilian Agency Acquisition Council (CAAC) issued a memorandum authorizing civilian agencies to issue class deviations from the FAR to implement the United States-Mexico-Canada Agreement (USMCA), and the Department of Defense (DOD) issued a FAR deviation to implement the USMCA. (EDITOR’S NOTE: The CAAC memorandum serves as consultation in accordance with FAR 1.404, Class Deviations, thus allowing agencies to authorize deviations to their acquisition regulations to reflect the USMCA. FAR 1.404(a)(1) states “an agency official who may authorize a class deviation, before doing so, shall consult with the chairperson of the Civilian Agency Acquisition Council...” So far, the Department of the Treasury is the only civilian agency to issue a deviation, to the Department of the Treasury Acquisition Regulation [DTAR].)

The two documents remove references in the FAR and the DFARS to the “NAFTA” and “19 USC 3301 note” [definitions pertinent to NAFTA] and replaces them with references to the “USMCA” and “19 USC chapter 29 (sections 4501-4732),” respectively.

In addition, “Canada” is removed from all listings of Free Trade Agreement countries in the FAR and the Defense FAR Supplement (DFARS). This includes paragraph (b)(1) of FAR 22.1503, Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor (and FAR 52.222-19, Child Labor – Cooperation with Authorities and Remedies), and Table 1 in paragraph (b) of FAR USMCA (which pertains to government procurement) applies only to the United States and Mexico. However, Canada is still a designated country under the World Trade Organization Government Procurement Agreement (WTO GPA).

The following are other FAR sections and clauses that are revised by the CAAC deviation:

The DOD deviation provides replacements for the following DFARS provisions and clauses:



GSA Plans to Revamp Small Business GWAC Program

The General Services Administration (GSA) has announced that it “is planning a new approach to its small business governmentwide acquisition contracts (GWACs) to help federal agencies partner with small businesses in various socioeconomic categories to meet the government’s information technology (IT) requirements.” It’s first step was the cancellation of the Alliant 2 Small Business (A2SB) solicitation. “Upon development and approval of the updates and new requirements - [it] will be re-procured under a new solicitation.”

EDITOR’S NOTE: A GWAC is an indefinite-delivery contract for various types of IT supplies and services that are negotiated, awarded, and administered by one agency which then makes it available for use by other agencies. Typically, GWACs have several contractors providing the same or similar IT supplies or services.

The A2SB had a troubled life. It was intended to provide vehicles for small businesses to offer up to $15 billion of artificial intelligence (AI), distributed ledger technology (DLT), robotic process automation (RPA), and other types of emerging technologies. Over 500 firms submitted offers, and 61 firms received awards in December 2017. However, protests caused GSA to cancel the awards and resolicit. In February 2018 GSA made awards to 81 contractors, but more protests caused GSA to cancel all 81 awards. In August 2019 GSA resolicited once more and announced that it would increase the number of awards to 120, but GSA restricted competition to those firms that had submitted offers on the previous solicitations. This produced more protests, and GSA suspended all action until announcing the cancellation of A2SB on July 2.

In light of the A2SB cancellation, GSA is encouraging federal customers that are looking for a contract vehicle to fill IT services needs from small business prime contractors to use GSA’s portfolio of IT contracts, including the 8(a) STARS II [Streamlined Technology Application Resource for Services] GWAC (which had its ceiling raised from $15 billion to $22 billion in June), the VETS 2 GWAC (which is set-aside for Service-Disabled, Veteran-Owned Small Businesses [SDVOSB]), and the Multiple Award Schedule - Information Technology (formerly IT Schedule 70). “Businesses may continue to offer solutions through the Multiple Award Schedule, team with existing GSA GWAC contract holders, and consider the 8(a) STARS III GWAC solicitation.”

Four days later, on July 6, GSA announced it was issuing Request for Proposals (RFP) 47QTCB20R0005 for the 8(a) STARS III GWAC. The GWAC, reserved for firms that are participating in the Small Business Administration’s (SBA) 8(a) program, will provide IT services and IT services-based solutions that may include the integration of ancillary support necessary and integral to the IT services being acquired. It will have a contract ceiling of $50 billion, and will include a greater focus on supply chain security, emerging technologies, and performance outside of the continental United States (OCONUS).

Offers are due August 19, 2020, and must be submitted via the Telecommunication Services Category Portal at https://tscportal.fas.gsa.gov/.



COVID-19 Persists, Precipitates More Actions

Since the COVID-19 pandemic has proven to be more persistent than anticipated, various federal agencies have decided to provide more acquisition guidance and direction, to extend the expiration dates of authorities that were granted to combat COVID-19, and to take additional actions, even overseas.



GSA Launches IT Acquisition University

The General Services Administration (GSA) has announced the launch of its new online training solution for acquisition professionals, the IT [Information Technology] Acquisition University (ITAU) (https://hallways.cap.gsa.gov/app/#/gateway/it-acquisition-university). ITAU offers training on such topics as cybersecurity, cloud migration, and federal IT modernization. While much of the portal is publicly accessible, some content is restricted to government personnel only. ITAU will eventually offer live webinars from GSA’s experts in IT and acquisition.



Prompt Payment Interest Rate Set at 1 1/8%

The Treasury Department has established 1 1/8% (1.125%) as the interest rate for the computation of payments made between July 1, 2020, through December 31, 2020, 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, 2020, through June 30, 2020) was 2 1/8% (2.125%). The interest rate for July 1, 2019, through December 31, 2019, was 2 5/8% (2.625%).

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.



Nonmanufacturing Rule For Diabetic Test Strips Waived

The Small Business Administration (SBA) is waiving the nonmanufacturer rule for diabetic test strips under North American Industry Classification System (NAICS) code 325413, In-Vitro Diagnostic Substance Manufacturing, and Product Service Code (PSC) 6515, Medical and Surgical Instruments, Equipment, and Supplies.

SBA invited the public to comment on the proposed waiver or to provide information on potential small business sources for these products. No comments were received in response to the proposed waiver, so SBA has determined that there are no small business manufacturers of this class of products, and it is granting the nonmanufacturing rule waiver. This waiver will allow qualified regular dealers to supply the product of any manufacturer on a federal contract set aside for small businesses, service-disabled veteran-owned small businesses (SDVOSB), women-owned small businesses (WOSB), economically disadvantaged women-owned small businesses (EDWOSB), businesses in historically underutilized business zones (HUBZones), or participants in the SBA’s 8(a) Business Development program.

For more on the proposed nonmanufacturing rule waiver, see the May 2020 Federal Contracts Perspective article “Nonmanufacturer Rule Waiver for Diabetic Test Strips.”

EDITOR’S NOTE: The SBA regulation on the nonmanufacturer rule is in Title 13 of the Code of Federal Regulations (CFR), Business and Credit Administration; part 121, Small Business Size Standards; under paragraph (b) of 121.406, How Does a Small Business Concern Qualify to Provide Manufactured Products or Other Supply Items Under a Small Business Set-Aside, Service-Disabled Veteran-Owned Small Business Set-Aside, WOSB [women-owned small business] or EDWOSB [economically disadvantaged women-owned small business] Set-Aside, or 8(a) Contract? (13 CFR 121.406(b)) The SBA regulation on the waiver of the nonmanufacturer rule is 13 CFR 121.1202, When Will a Waiver of the Nonmanufacturer Rule Be Granted for a Class of Products?

More information on the nonmanufacturer rule and class waivers can be found at https://www.sba.gov/partners/contracting-officials/small-business-procurement/non-manufacturer-rule. A complete list of products for which the nonmanufacturer rule has been waived is available at https://www.sba.gov/document/support--non-manufacturer-rule-class-waiver-list.





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