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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions


January 2022
Vol. XXIII, No. 1
[pdf version]

CONTENTS


National Defense Authorization Act for Fiscal Year 2022 Enacted
Two Clean-Up FACs Issued
FY 2021 Contract Spending Down 5.1% to $631 Billion
SBA Releases FY 2020 "Disaggregated" Contracting Data
FAR Changes Proposed to Implement USMCA
Government's Purchasing Power to Reduce Emissions
Biden's Contractor Vaccine Mandate Put on Hold
Mileage Reimbursement Set at 58.5 Cents Per Mile for Autos
Termination of Furniture Nonmanufacturer Rule Waiver Proposed
OMB Accepts 2022 Revisions to NAICS



National Defense Authorization Act
For Fiscal Year 2022 Enacted

On December 27, President Biden signed into law the $768 billion National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2022 (Public Law 117-81). Most of the provisions of NDAA for FY 2022 that address issues involving acquisition are in Title VIII, Acquisition Policy, Acquisition Management, and Related Matters (Sections 801-878). While Title VIII of previous NDAA's usually included provisions that changed how the Department of Defense (DOD) conducts its acquisitions, this year's NDAA concentrates on establishing pilot programs, providing reports, preparing plans, and collecting data for future decisions. Nevertheless, there are some provisions of the 2165-page NDAA for FY 2022 that will have a more immediate effect on DOD's acquisitions. The following are some of those:



Two Clean-Up FACs Issued

Most Federal Acquisition Circulars (FACs) consist of several final and interim rules that amend the Federal Acquisition Regulation (FAR) in a variety of ways. Not so with the FACs issued in December. Both consist of single rules that catch up the FAR to what has already taken place.



FY 2021 Contract Spending Down 5.1% to $631 Billion

Federal contracting spending in Fiscal Year (FY) 2021 decreased to $631.2 billion, down 5.1% from the $665.5 billion spending level in FY 2020 because of all the funds expended combatting COVID-19 in 2020.

The big dollar increase winner was the Department of Energy, which saw its contract spending increase 7.2%, from $36 billion in FY 2020 to $38.6 billion in FY 2021. The biggest percentage increase winner was the Department of the Treasury, which saw its spending increase 45.6%, from $6.6 billion in FY 2020 to $9.6 billion in FY 2021. The biggest dollar decrease loser was the Department of Defense, which saw its spending decrease by $34 billion, from $421 billion in FY 2020 to $387 billion in FY 2021, an 8.2% decrease. The biggest percentage decrease loser was the Small Business Administration, which experienced a 24.8% decline, from $1.5 billion to $1.1 billion.

The following are the largest agencies' FY 2021 spending versus their FY 2020 spending:

Department/AgencyFY 2021 SpendingFY 2020 Spending
Defense$387,046,038,734$421,461,423,956
Health and Human Services38,834,885,43740,688,230,412
Energy38,558,766,49135,978,470,585
Veterans Affairs34,393,200,19136,895,860,529
Homeland Security19,775,488,70919,547,473,312
National Aeronautics and Space Administration19,319,538,39818,898,391,552
General Services Administration17,845,691,03417,469,104,664
State9,764,168,73010,601,217,389
Treasury9,565,448,9756,567,609,859
Justice9,514,658,3178,483,948,386
Agriculture9,351,855,29010,102,435,357
Transportation7,835,504,3637,780,326,282
Agency for International Development5,565,324,3626,145,877,505
Interior5,091,000,0544,513,149,869
Commerce4,530,964,3855,791,666,832
Education2,684,476,5282,878,674,148
Labor2,365,893,9592,186,700,477
Social Security Administration1,833,827,5742,127,481,592
Environmental Protection Agency1,198,264,8981,161,816,957
Small Business Administration1,148,082,3821,525,991,135
Housing and Urban Development683,110,907737,950,358
Securities and Exchange Commission549,950,121521,488,832
National Science Foundation497,714,659503,338,621
Office of Personnel Management465,922,392335,263,275
Smithsonian Institution398,330,462393,575,015
Pension Benefit Guaranty Corporation376,563,221359,226,653
Others 2,048,740,392 1,827,995,271
      TOTAL$631,243,410,965$665,484,688,823

For more on FY 2020 spending, see the February 2021 Federal Contracts Perspective article "FY 2020 Contract Spending Up 13% to $665 Billion



SBA Releases FY 2020 "Disaggregated" Contracting Data

On December 2, 2021, the Biden administration released, through the Small Business Administration (SBA), Fiscal Year (FY) 2020 federal contracting data "disaggregated" by race, ethnicity, and geography.

In a statement released simultaneously with the data, the Biden administration observed that "for years, the federal government has relied on topline data to benchmark contracting spend to small businesses and socioeconomic small businesses. This data, while insightful, offers only a partial illustration of performance in reaching certain groups. For example, while we typically award roughly 10% of federal contracting dollars to SDBs [small disadvantaged businesses], in FY 2020 just 1.7% went to black-owned small businesses, 1.8% went to Hispanic-owned small businesses, and 2.8% went to Asian American and Pacific Islander-owned small businesses. Similarly, high-level data obscures inequitable geographic distribution of federal contracts. Beginning with FY 2020 data, the federal government will publicly release this disaggregated data on an annual basis so that procurement officials, business owners, and the American people can use it as a tool to track equity and progress over time. This data will also allow agencies to assess their performance across industries and sectors, helping them better target interventions to areas with the greatest opportunity for growth."

In addition, the Biden administration is "asking agencies to increase their goals so that governmentwide spending results in 11% of contracting dollars being awarded to small disadvantaged businesses, up from the current statutory goal of 5%. This is the first step towards meeting the president's goal of ensuring that 15% of federal contracts go to SDBs by 2025."

The Office of Management and Budget (OMB) issued a memorandum explaining the management actions agencies should take to achieve this goal and others that employ "federal contract spending to support small businesses and advance equity."

The following are the disaggregated federal contract data released by SBA:

Business Type*PercentEligible Dollars**
Asian-Pacific American Owned Small1.23%$6,885,893,213
Subcontinent Asian American Owned Small1.55%$8,688,436,628
Black Owned Small1.67%$9,366,550,757
Hispanic Owned Small1.78%$9,953,668,578
Native American Owned Small2.69%$15,081,622,197
Other Minority Owned Small0.48%$2,680,329,763
Other Small Business 15.64%$87,556,529,300
Not a Small Business74.96%$419,768,134,824
      TOTAL ELIGIBLE DOLLARS100.00%$559,981,165,260

*Racial and ethnic categories are reflected here as they appear in the System for Award Management (SAM.gov) when an entity registers to do business with the government. Classifications are self-reported. The "other small business" category reflects those firms who did not report as being minority-owned.

**This includes all federal contracts except those excluded by SBA's Goaling Guidelines. This data does not apply to the double-credit and subcontracting adjustments required by statute for SBA's annual scorecard.



FAR Changes Proposed to Implement USMCA

The FAR Council is proposing to amend various sections of the FAR to implement the United States-Mexico-Canada Agreement (USMCA) Implementation Act (Public Law 116-113), which was signed into law on January 9, 2020, and replaced the North American Free Trade Agreement (NAFTA) (Public Law 103-182).

USMCA Chapter 13, Government Procurement, establishes certain obligations between the United States and Mexico with respect to government procurement of goods and services, as specified in Annex 13-A of the USMCA. Chapter 13 of the USMCA applies only between Mexico and the United States and does not cover Canada. (EDITOR'S NOTE: Although Canada is still a "designated country" under the World Trade Organization Goverment Procurement Agreement (WTO GPA) [see FAR 25.003, Definitions], Canada is no longer a "Free Trade Agreement country" [see FAR 25.003] because USMCA Chapter 13 applies only to the United States and Mexico. Therefore, references to Canada as a Free Trade Agreement country are proposed for deletion, including the $25,000 threshold above which the Buy American statute and other discriminatory provisions have been waived for eligible products from Canada. Mexico's thresholds remain unchanged.)

To implement the USMCA, the following changes to the FAR are proposed:

Comments on this proposed rule must be submitted no later than February 11, 2022, identified as "FAR Case 2020-014," through the Federal eRulemaking Portal at http://www.regulations.gov.



Government's Purchasing Power to Reduce Emissions

On December 8, 2021, President Biden issued Executive Order (EO) 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, to establish policy "for the federal government to lead by example in order to achieve a carbon pollution-free electricity sector by 2035 and net-zero emissions economy-wide by no later than 2050."

The EO directs the federal government to use its scale and procurement power "as the single largest land owner, energy consumer, and employer in the nation" to achieve seven goals:

  1. 100% carbon pollution-free electricity (CPE) by 2030, at least half of which will be locally supplied clean energy to meet 24/7 demand;

  2. 100% zero-emission vehicle (ZEV) acquisitions by 2035, including 100% zero-emission light-duty vehicle acquisitions by 2027;

  3. Net-zero emissions from federal procurement no later than 2050, including a Buy Clean policy to promote use of construction materials with lower embodied emissions;

  4. A net-zero emissions building portfolio by 2045, including a 50% emissions reduction by 2032;

  5. Net-zero emissions from overall federal operations by 2050, including a 65% emissions reduction by 2030;

  6. Climate resilient infrastructure and operations; and

  7. A climate- and sustainability-focused federal workforce.

Federal acquisition is expected to contribute directly to this effort as follows:

Simultaneously with the execution of EO 14057, OMB issued a memorandum to federal agencies providing direction for agency compliance with the EO. The following are some of the directions provided in the memorandum:



Biden's Contractor Vaccine Mandate Put on Hold

President Biden's Executive Order (EO) 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors, which requires vaccination of contractor employees and masking and physical distancing while in covered contractor workplaces, has been placed on hold until the U.S. Supreme Court rules on whether to allow the EO to go into effect. The Supreme Court is scheduled to hear arguments on January 7, 2022. The EO was originally to go into effect on November 14, 2021, but its implementation date was delayed until December 9, 2021 (for more on EO 14042, see the October 2021 Federal Contracts Perspective article "Biden Orders Federal Contractors to Protect Employees from COVID").

In response to EO 14042, agencies throughout the government had issued directions, guidance, and contract clauses addressing compliance with the vaccine mandate (see the November 2021 Federal Contracts Perspective article "Agencies Expedite Actions to Protect Contractor Employees from COVID").

On November 30, 2021, the U.S. District Court for the Eastern District of Kentucky enjoined the implementation of EO 14042 in Kentucky, Ohio, and Tennessee. Then, on December 7, 2021, U.S. District Court for the Southern District of Georgia enjoined implementation of EO 14042 in the U.S. and its territories.

Given the uncertainty surrounding the court orders, the Office of Management and Budget (OMB) provided the following notice: "The government will take no action to enforce the clause implementing requirements of Executive Order 14042...The court orders only apply to the application of requirements pursuant to Executive Order 14042. There is no change to the Safer Federal Workforce Task Force's guidance for COVID-19 workplace safety protocols for federal agencies [https://www.saferfederalworkforce.gov/contractors/]. Federal agency workplace safety protocols for federal buildings and federally controlled facilities still apply in all locations. Contractor employees working onsite in those facilities must still follow those federal agency workplace safety protocols."



Mileage Reimbursement Set at 58.5 Cents Per Mile for Autos

The General Services Administration (GSA) is increasing the mileage reimbursement rates for use of a privately owned automobile on official travel from 56 cents per mile to 58.5 cents per mile, for use of a motorcycle on official travel from 54 cents per mile to 56.5 cents per mile, and for use of a privately owned aircraft from $1.26 per mile to $1.515 per mile.

These rates are effective for travel performed on or after January 1, 2022, through December 31, 2022.



Termination of Furniture Nonmanufacturer Rule Waiver Proposed

The Small Business Administration (SBA) is proposing to terminate the class waiver to the nonmanufacturer rule for furniture frames and parts, metal, manufacturing under North American Industry Classification System (NAICS) code 337215, Showcase, Partition, Shelving, and Locker Manufacturing, and Product Service Code (PSC) 7195, Miscellaneous Furniture and Fixtures; furniture frames, wood, manufacturing under NAICS code 337215 and PSC 7195; furniture parts, finished plastics, manufacturing under NAICS code 337215 and PSC 7195; furniture, factory-type (for example, cabinets, stools, tool stands, work benches), Manufacturing under NAICS code 337127, Institutional Furniture Manufacturing, and PSC 7110, Office Furniture; furniture, hospital (for example, hospital beds, operating room furniture) Manufacturing under NAICS code 339113, Surgical Appliance and Supplies Manufacturing, and PSC 7195; and furniture, laboratory-type (for example, benches, cabinets, stools, tables) manufacturing under NAICS code 339113 and PSC 7195.

Public Law 100-656, the Business Opportunity Development Reform Act of 1988, Section 303, Contractual Assistance, paragraph (h), Non-Manufacturer Rule, requires those with federal contracts that are set-aside for small businesses or awarded through the 8(a) program to provide the product of a small business manufacturer if the recipient is not the actual manufacturer (see paragraph (c) of FAR 19.505, Limitations on Subcontracting and Nonmanufacturer Rule). However, SBA may waive this requirement if there are no small business manufacturers of the product (see FAR 19.505(c)(4)).

The SBA regulations on the nonmanufacturer rule are in paragraph (b) of Title 13 of the Code of Federal Regulations (CFR), Section 121.406 (13 CFR 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? 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?

On October 6, 2019, SBA received a request to terminate this waiver. The requester provided information that established the existence of several small business manufacturers of the identified products that have provided these products to federal agencies within the past 24 months. Therefore, SBA is proposing to terminate the class waiver for equipment under these NAICS and PSC codes. SBA is inviting the public to comment or provide source information on the proposed termination of the nonmanufacturer rule waiver for these products by January 14, 2022, through the Federal Rulemaking Portal at https://www.regulations.gov.

If this nonmanufacturer rule waiver is terminated, small businesses receiving contracts for covered equipment through a set-aside (or the 8(a) program) will no longer be able to provide the product of any manufacturer regardless of the size of the business - the small business contractor will have to provide radiology equipment manufactured by a small business. 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.



OMB Accepts 2022 Revisions to NAICS

The Office of Management and Budget (OMB) has announced its acceptance of the recommendations of its Economic Classification Policy Committee (ECPC) on updating the North American Industry Classification System (NAICS) for 2022. The ECPC, which is comprised of representatives of the Bureau of Economic Analysis, Bureau of Labor Statistics, Census Bureau, and other federal agencies recommended an update of the industry classification system to clarify existing industry definitions and content, recognize new and emerging industries, combine industries, and correct errors and omissions in the 2017 version of the NAICS.

The NAICS is a system for classifying individual business locations (establishments) by type of economic activity. Its purposes are to: (1) provide a consistent framework for the collection, tabulation, presentation, and analysis of data relating to establishments, and (2) promote uniformity and comparability in the presentation and analysis of statistical data describing the North American economy. Mexico and Canada have collaborated on the NAICS with the ECPC to make the industry statistics produced by the three countries comparable.

The ECPC's recommendations were concentrated in Wholesale Trade (Sector 42), Retail Trade (Sector 45), and Information (Sector 51). In addition, the names of 31 industry sectors and subsectors were proposed to be changed for clarity and consistency. Finally, ECPC recommended content revisions to 141 subsectors.

Twenty-nine comments were submitted on the ECPC's recommendations, but ECPC recommended that OMB accept ECPC's recommendations without change. OMB has decided to accept all ECPC recommendations, making no changes to the scope and substance of those recommendations. For more on the ECPC’s recommendations, see the August 2021 Federal Contracts Perspective article "OMB Seeks Comments on Proposed 2022 NAICS."

The 2022 NAICS is available at https://www.census.gov/naics/.





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