Panoptic Enterprises'


Federal Acquisition Developments, Guidance, and Opinions

December 2006
Vol. VII, No. 12


Businesses Required to Recertify Size Status on Contracts Longer Than Five Years
Safavian Out on Bond Pending Appeal
FAC 2005-14 Addresses Trade Agreements, Contractor IDs
"JWOD Program" Renamed "AbilityOne Program"
DFARS Changes Proposed on MIRRs, Fixed-Price Exception
January Set for New Civilian Board of Contract Appeals
NASA Implements Earned Value Management
GSA Seeks Comments on Contractor Performance Guide
Nonmanufacturer Rule Waiver Denied for Computers
USAID Proposes Implementing Mentor-Protege Program

Businesses Required to Recertify Size Status on
Contracts Longer Than Five Years, After Mergers

On November 15, 2006, the Small Business Administration (SBA) amended its regulations to require small businesses to recertify their size status (1) on "long-term contracts" (that is, contracts, including options, that last more than five years, such as Federal Supply Service (FSS) contracts and governmentwide acquisition contracts (GWACs)); (2) when a small business is purchased by or merged with another business; and (3) when a novation agreement is executed. The new SBA regulations are in paragraph (g) of Title 13 of the Code of Federal Regulations (CFR), Section 121.404, When does SBA determine the size status of a business concern?

If the contractor certifies that it is no longer small, options exercised or orders issued under the contract will not count towards the agency's small business goals. This does not mean the contracting officer is prohibited from exercising options or issuing orders to contractors that are no longer small, only that such options or orders will not be counted as small business awards.

In addition, businesses that were "other than small" at the time of contract award may recertify themselves as small if they meet the applicable small business size standards.

The following time periods will apply to small business size recertifications:

This rule goes into effect June 30, 2007, and applies to solicitations and contracts issued after that date, and contracts and solicitations in existence on the effective date. This date was selected to give sufficient time for: (1) the modification of the Federal Procurement Data System (FPDS) to capture changes to small business size status "going forward" from the date of the recertification; (2) revision of agencies' contract reporting systems that feed into FPDS; and (3) implement the SBA regulation changes in the Federal Acquisition Regulation (FAR).

On April 25, 2003, SBA proposed to require recertification on long-term contracts on an annual basis, but requested comments on requiring recertification on an order-by-order basis or at least once every five years (see the May 2003 Federal Contracts Perspective article "Annual Recertification Proposed for FSS Contractors"). SBA received 636 comments supporting and criticizing all three proposals. After consideration of the comments and consulting with federal agencies that would be affected by the annual recertification requirement and the Office of Federal Procurement Policy (OFPP), SBA decided to require recertification prior to the beginning of the sixth contract year, and then prior to each option thereafter. In addition, SBA is giving procuring agencies the discretion to request size certifications in connection with competitions for particular orders.

EDITOR'S NOTE: This rule is largely the product of Congress' growing dissatisfaction with SBA's regulations which provide that a company's size is determined as of the date it originally submitted a certification that it is small, and a company that qualified as a small business at the time it receives a contract is considered a small business throughout the life of that contract -- all subsequent options or orders against the contract are considered small business awards regardless of the actual status of the contractor. In other words, SBA's regulations followed the contract, not the contractor.

Over the past decade, federal agencies have increasingly relied upon task or delivery order contracts to procure goods or services. Many of these contracts have durations that far exceed the typical five-year government contract -- with options, these contracts can be in effect for 10 to 20 years. A lot can change in 10 to 20 years, especially in business: small companies become successful and grow into large companies, companies merge, companies are acquired by other companies, etc.

Application of SBA's rule to these contracts led to unsatisfactory results, with contractors retaining their size status for decades, well after they had outgrown the size standard or merged with or been acquired by a large business concern (Lockheed Martin is considered a "small business" on many contracts because it has acquired the original small business contract holder for its expertise, patents, or other reasons). Thus, under existing rules an order awarded to a concern that has outgrown its small business status is counted as a prime contract award to a small business. Moreover, these large businesses can compete for and win orders that are reserved for small business concerns. This new rule is intended to ameliorate this inequity somewhat.

Safavian Out on Bond Pending Appeal

On November 16, David Safavian, former General Services Administration (GSA) chief of staff and OFPP administrator, was ordered released on bond pending appeal of his conviction and 18 month sentence for obstruction and making false statements. He was released because Judge Friedman decided that he is not likely to flee, and Safavian has raised substantial questions of law or fact.

Safavian will remain free until he is exonerated, a new trial is ordered, or his appeals are exhausted. This process could take several years.

For other articles on Safavian, see the December 2004 Federal Contracts Perspective article "Safavian Confirmed to Head OFPP"; the October 2005 Federal Contracts Perspective article "OFPP Chief Arrested for Making False Statements"; the November 2005 Federal Contracts Perspective article "Former OFPP Chief Indicted for Obstruction, False Statements"; the February 2006 Federal Contracts Perspective article "Abramoff Pleads Guilty to Fraud, Tax Evasion"; the July 2006 Federal Contracts Perspective article "Former OFPP Chief Safavian Convicted, Faces Up to 20 Years in Prison"; and the November 2006 Federal Contracts Perspective article "Safavian Sentenced to 18 Months in Prison."

FAC 2005-14 Addresses Trade Agreements, Contractor IDs

Federal Acquisition Circular (FAC) 2005-14 addresses trade issues for the most part, but it also finalizes, with changes, the interim rule that amended the FAR to address contractor personal identification requirements.

"JWOD Program" Renamed "AbilityOne Program"

The Committee for Purchase From People Who Are Blind or Severely Disabled has voted to change the name of the "JWOD Program," which implements the Javits-Wagner-O'Day Act, to the "AbilityOne Program."

The program provides employment opportunities for people who are blind or have other severe disabilities in the manufacture and delivery of products and services to the government. However, the Committee found that the JWOD acronym is not a descriptive or compelling name, and it does not clearly communicate information about the program, its workforce, or its benefits. So the Committee sought a new program name that would best reflect the workforce comprised of people who are blind or who have other severe disabilities; a name that would sound more official or professional than "JWOD" and would more accurately reflect the program's goals. The Committee decided "AbilityOne" has a much closer linkage to the program's workforce and capabilities, and alludes to one umbrella organization and one total solution.

DFARS Changes Proposed on MIRRs, Fixed-Price Exception

In November, the Defense of Defense (DOD) took it easy on the Defense Federal Acquisition Regulation Supplement (DFARS) -- DOD merely finalized an interim rule on trade agreements, and proposed amending the DFARS to address requirements for the distribution of material inspection and receiving reports (MIRRs), and to add an exception to the requirement for a written determination before using a fixed-price type contract for a development program effort.

January Set for New Civilian Board of Contract Appeals

The General Services Administration (GSA) has announced that the Civilian Board of Contract Appeals (CBCA) will become operational on January 6, 2007. The CBCA will hear and decide contract disputes involving executive agencies under the provisions of the Contract Disputes Act of 1978 and applicable rules and regulations. The CBCA will replace the boards of contract appeals for GSA and the departments of Agriculture, Energy, Housing and Urban Development, Interior, Labor, Transportation, and Veterans Affairs on that date, and their cases, judges, and other personnel will transfer to the CBCA, and cases will be reassigned CBCA docket numbers.

The CBCA will not hear contract disputes involving contracts with DOD and its services, the National Aeronautics and Space Administration, the United States Postal Service, the Postal Rate Commission, and the Tennessee Valley Authority.

The CBCA offices will be at 1800 M Street, NW, 6th Floor, Washington, DC 20036, and its mailing address will be 1800 F Street, NW, Washington, DC 20405. The phone number of the Office of the Clerk of the Board will be 202-606-8800, and the facsimile number will be 202-606-0019. The internet address of the CBCA's website will be http://www.cbca.gsa.gov.

EDITOR'S NOTE: Section 847 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163) established the CBCA within GSA to hear and decide contract disputes involving civilian executive agencies. For more on the acquisition-related provisions of Public Law 109-163, see the February 2006 Federal Contracts Perspective article "2006 Defense Authorization Addresses A-76, Consolidates Civilian Boards of Contract Appeals."

NASA Implements Earned Value Management

The National Aeronautics and Space Administration (NASA) has added NASA FAR Supplement (NFS) Subpart 1834.2, Earned Value Management System, to implement the earned value management (EVM) coverage contained in FAC 2005-11 (see the August 2006 Federal Contracts Perspective article "New FAR Part Consolidates Emergency Authorities, Earned Value Management Coverage Added").

The FAR permits agencies to develop provisions and clauses for their own use provided they are substantially the same as those in the FAR. So NASA has developed its own provision and clause (NFS 1852.234-1, Notice of Earned Value Management System, and NFS 1852.234-2, Earned Value Management System). NASA's coverage provides the following contract value dollar thresholds for EVM implementation: (1) for contracts and subcontracts valued at $20 million or more, and contracts and subcontracts for major acquisitions valued at less than $20 million, the EVM system shall comply with the guidelines in the American National Standards Institute (ANSI)/Electronics Industries Alliance (EIA) Standard-748, Earned Value Management Systems Standard; (2) for contracts and subcontracts valued at $50 million or more, the contractor shall have an EVM system that has been formally validated and accepted by the government (3) for contracts and subcontracts for other than major acquisitions valued at less than $20 million, EVM application is optional; and (4) EVM is not required on contracts for non-developmental engineering support services, steady state operations, basic and applied research, and routine services such as janitorial services or grounds maintenance services.

Comments on the interim rule must be submitted no later than January 12, 2006, identified as "RIN number 2700-AD29," by any of the following methods: (1) eRulemaking Portal: http://www.regulations.gov; (2) e-mail: ken.sateriale@nasa.gov; or (3) mail: Ken Sateriale, NASA Headquarters, Office of Procurement, Contract Management Division, Washington, DC 20546.

GSA Seeks Comments on Contractor Performance Guide

GSA is inviting comments on a new proposed best practices guide, "Contractor Performance in the Acquisition Process," for the collection and usage of contractor performance data. The 80 page guide is available at http://www.acquisition.gov.

The guide is intended to help agencies understand their role in addressing and using contractor performance information. It addresses the types of performance information that exist, resources for finding the data, and standards to employ. It discusses best use of performance data throughout the acquisition process, from the pre-award and planning phase through source selection and into contract evaluation. The guide does so in three chapters: Chapter 1, Using Pre-Solicitation Performance Information; Chapter 2, Awarding Contracts Using Performance Information; and Chapter 3, Documenting Contractor Performance.

The enactment of the Federal Acquisition Streamlining Act (FASA) in 1994 made contractor performance information a mandatory evaluation factor for all procurements because contractor performance is an important factor in making best value decisions in the acquisition of goods and services. To do this, agencies went in different directions in collecting and using such information, but there was no concerted effort to share data throughout the government -- the performance information was maintained at the local contracting office level. This meant that one government agency might unknowingly award a contract to a contractor that owed another government agency money, or might be in the process of being debarred.

An Office of Management and Budget (OMB) memorandum dated July 3, 2002, announced that all contractor past performance information would be centrally available on-line for use by all federal contracting officials effective July 1, 2002. This retrieval database is the Past Performance Information Retrieval System (PPIRS) (https://www.ppirs.gov). However, senior procurement executives determined that a lack of widespread use of PPIRS resulted in insufficient information in the database. So OMB's Office of Federal Procurement Policy (OFPP) established a working group to evaluate the regulations, policies, and business considerations associated with contractor performance information.

The working group has updated OFPP's 2002 version of "Best Practices for Collecting and Using Current and Past Performance Information" by incorporating DOD's "A Guide to Collection and Use of Past Performance Information" (Version 3, May 2003), and making changes to reflect statutory revisions and clarify concepts, instructions, and policies.

A proposed FAR rule reflecting the suggestions and findings of this working group is currently being processed by the FAR team and will be issued for comment at a later date.

Comments on the guide must be submitted by January 16, 2007, using one of the following means: (1) eRulemaking Portal: http://www.regulations.gov/; (2) fax: 703-872-8598; or (3) mail: GSA -- Integrated Acquisition Environnent Division, 2011 Crystal Drive, Suite 911, ATTN: OCAO-2006-N01, Arlington VA 22202. Identify such comments as "OCAO-2006-N01."

Nonmanufacturer Rule Waiver Denied for Computers

The Small Business Administration (SBA) has decided not to waive the nonmanufacturer rule for personal computers manufacturing under North American Industry Classification System (NAICS) code 334111 because SBA discovered small business personal computer manufacturers. Denial of this waiver will require recipients of contracts set aside for small businesses, service-disabled veteran-owned small businesses, or SBA's 8(a) program to provide the products of small business manufacturers or processors on such contracts.

For more on the proposal to waive the nonmanufacturer rule for personal computers, see the November 2006 Federal Contracts Perspective article "Nonmanufacturer Rule Waiver Proposed for Computers."

USAID Proposes Implementing Mentor-Protege Program

The U.S. Agency for International Development (USAID) is proposing to amend the USAID Acquisition Supplement (AIDAR) to implement a mentor-protege program similar to the "no-cost" programs established by the Departments of Energy, State, and Treasury, and the Environmental Protection Agency. While DOD, the Department of Homeland Security, and NASA are authorized to reimburse contractors for the costs they incur in mentoring their proteges, the other are not, so they resort to "no-cost" programs that rely on incentives.

A new AIDAR Subpart 719.273, would be added to implement the mentor-protege program. AIDAR 719.273-2, Definitions, would define those eligible to participate as proteges as "a small business, small disadvantaged business, women-owned small business, HUBZone small business, veteran-owned small business or service-disabled veteran-owned small business." AIDAR 219.273-3, Incentives for Prime Contractor Participation, would provide that costs incurred by the mentor in developing the protege are not chargeable to a contract but can be used to offset subcontract goals if they are incurred during the performance of a contract identified in the Mentor-Protege Agreement, and those costs have not been credited or reimbursed by the government. In addition, contracting officers may evaluate subcontracting plans containing Mentor-Protege arrangements more favorably than subcontracting plans without such agreements, and contracting officers may assess the prime contractor's compliance with the subcontracting plans submitted in previous contracts as a factor in evaluating past performance.

Comments must by submitted by February 22, 2007, to http://www.regulations.gov: fax: 202-216-3056; or e-mail: rherisse@usaid.gov.

Copyright 2006 by Panoptic Enterprises. All Rights Reserved.

Return to the Newsletters Library.

Return to the Main Page.