Panoptic Enterprises'


Federal Acquisition Developments, Guidance, and Opinions

December 2007
Vol. VIII, No. 12


Contractors Required to Develop Codes of Business Ethics and Conduct
Waiver of Another Nonmanufacturer Rule Proposed
FAC 2005-21 Rewrites FAR Part 27 in Plain English
DOD Waives Specialty Metals Restriction for COTS
Clause Addressing HSPD-12 Proposed for DOSAR
OFPP Requires COTR Certification
Proposed FAR Change Addresses Post-Retirement Benefits

Contractors Required to Develop
Codes of Business Ethics and Conduct

Federal Acquisition Circular (FAC) 2005-22 consists of two new rules that amend the Federal Acquisition Regulation (FAR): (1) the addition of FAR Subpart 3.10, Contractor Code of Business Ethics and Conduct, and corresponding contract clauses to address requirements for a contractor code of business ethics and conduct and the display of federal agency Office of the Inspector General (OIG) Fraud Hotline Posters; and (2) the addition of FAR 52.223-15, Energy Efficiency in Energy-Consuming Products, to require that all acquisitions of energy consuming-products and all contracts that involve the furnishing of energy-consuming products require acquisition of ENERGY STAR® or Federal Energy Management Program (FEMP) designated products.

Waiver of Another Nonmanufacturer Rule Proposed

The Small Business Administration (SBA) is proposing to waive the nonmanufacturer rule for electromedical and electrotherapeutic apparatus manufacturing, diagnostic equipment, MRI (magnetic resonance imaging) manufacturing; MRI medical diagnostic equipment manufacturing; medical ultrasound equipment manufacturing; MRI medical diagnostic equipment manu-facturing; patient monitoring equipment (e.g., intensive care coronary care unit) manufacturing; and PET (positron emission equipment tomography) scanners manufacturing under North American Industry Classification System (NAICS) code 334510 because SBA is unaware of any small business manufacturers supplying these products to the federal government.

SBA is inviting the public to comment on this proposed waiver, or provide information on potential small business sources for these products, by November 30, 2007, to Edith G. Butler, Program Analyst, U.S. Small Business Administration, Office of Government Contracting, 409 3rd Street, SW, Suite 8800, Washington, DC 20416.

FAC 2005-21 Rewrites FAR Part 27 in Plain English

FAC 2005-21 contains a number of significant FAR changes, the largest and possibly most significant being the rewrite of FAR Part 27, Patents, Data, and Copyrights. Other rules in FAC 2005-21 address implementation of the SAFETY Act; the biobased products preference program; removal of references to the Federal Computer Network (FACNET); the exemption of certain service contracts from the Service Contract Act (SCA); and further implementation of the Local Community Recovery Act of 2006.

DOD Waives Specialty Metals Restriction for COTS

The Department of Defense (DOD) is amending the Defense FAR Supplement (DFARS) to waive the application of 10 U.S.C. 2533b for acquisitions of commercially available off-the-shelf (COTS) items. 10 U.S.C. 2533b was established by Section 842 of the National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364), and it places restrictions on the acquisition of specialty metals not melted or produced in the United States.

Section 842, Protection of Strategic Materials Critical to National Security, prohibits the procurement of aircraft, missile and space systems, ships, tank and automotive items, weapon systems, or ammunition, or components, that contain a specialty metal not melted or produced in the United States. Also, this prohibition applies to the direct purchase of specialty metals or purchases by a prime contractor.

Paragraph (a) of 41 U.S.C. 431, Commercially Available Off-the-Shelf Item Acquisitions: Lists of Inapplicable Laws in Federal Acquisition Regulation, requires that the FAR list the provisions of law that are inapplicable to contracts and subcontracts for COTS items. This list is in FAR 12.503, Applicability of Certain Laws to Executive Agency Contracts for the Acquisition of Commercial Services. Inapplicable provisions of law must be included on that list unless the Administrator of the Office of Federal Procurement Policy (OFPP) makes a written determination that it would not be in the best interest of the United States to exempt contracts for COTS items from the applicability of that provision of law. DOD consulted with the OFPP Administrator, and he did not make a written determination that it is not to be in the best interest of the United States to exempt COTS contracts from the applicability of 10 U.S.C. 2533b. Therefore, DOD is adding DFARS 212.570, Applicability of Certain Laws to Contracts and Subcontracts for the Acquisition of Commercially Available Off-the-Shelf Items, which lists 10 U.S.C. 2533b as inapplicable to contracts and subcontracts for the acquisition of COTS items; and (2) adds paragraph (q) to DFARS 225.7002-2, Exceptions, which identifies acquisitions of COTS items containing specialty metals as an exception to the Berry Amendment (which is 10 U.S.C. 2533a).

There were 41 respondents who submitted comments on the proposed rule. The final rule differs from the proposed rule in that both DFARS 212.570 and DFARS 225.7002-2(q) have been modified to clarify that the inapplicability of 10 U.S.C. 2533b to COTS items does not include specialty metals acquired directly by the government or prime contractor for delivery to the government as an end item. For more on the proposed rule, see the August 2007 Federal Contracts Perspective article "Specialty Metals Waiver Proposed for COTS."

Clause Addressing HSPD-12 Proposed for DOSAR

The Department of State (DOS) is proposing to amend the DOS Acquisition Regulation (DOSAR) to add the clause DOSAR 652.204-70, Department of State Personal Identification Card Issuance Procedures, to implement the requirements of Homeland Security Presidential Directive 12 (HSPD-12), Policy for a Common Identification Standard for Federal Employees and Contractors; Federal Information Processing Standards Publication (FIPS PUB) Number 201, Personal Identity Verification (PIV) of Federal Employees and Contractors; and associated OMB guidance M-05-24. HSPD-12, FIPS PUB 201, and OMB Memo M-05-24 apply to solicitations and contracts that require the contractor to have routine physical access to a federally-controlled facility and/or routine access to a federally-controlled information system. (EDITOR'S NOTE: OMB guidance M-05-24 is available at http://www.whitehouse.gov/omb/memoranda/fy2005/m05-24.pdf (HSPD-12 is Attachment B to the guidance); and FIPS PUB 201 is available at http://csrc.nist.gov/publications/fips/fips201-1/FIPS-201-1-chng1.pdf.)

FAC 2005-07 included an interim rule that implemented HSPD-12, FIPS PUB 201, and OMB guidance M-05-24 by adding FAR Subpart 4.13, Personal Identity Verification of Contractor Personnel, and the corresponding clause at FAR 52.204-9. However, federal agencies need to customize these policies and procedures to meet their mission needs, so the FAR interim rule did not provide specific procedural language for inclusion in affected contracts, but merely required that contractors "comply with agency personal identity verification procedures identified in the contract." (EDITOR'S NOTE: For more on the FAR implementation of HSPD-12 and FIPS PUB 201, see the February 2006 Federal Contracts Perspective article "Performance-Based Acquisition Procedures Revised.")

This proposed rule would add a new contract clause DOSAR 652.204-70 to implement DOS' requirements regarding personal identity verification of contractor personnel. DOSAR 652.204-70 will apply to contracts that require contractor employees to perform on-site at a DOS location and/or that require contractor employees to have access to DOS information systems.

DOS 652.204-70 directs contractors to the Internet website http://www.state.gov/m/ds/rls/rpt/c21664.htm, which outlines the personal identity verification procedures for various types of contractors (cleared and uncleared), location of performance (domestic facilities; domestic -- Washington, DC metro area facilities; and overseas facilities), and the access requirements (physical; logical; or both).

Also, DOSAR 652.237-71, Identification/Building Pass, would be removed because the process it prescribes for issuing building passes to contractors working on-site at DOS facilities is not sufficiently stringent to meet the requirements of HSPD-12 and FIPS PUB 201.

Comments on the proposed rule must be submitted no later than January 18, 2008, by any of the following means: (1) e-mail: ginesgg@state.gov; (2) mail (paper, disk, or CD-ROM submissions): Gladys Gines, Procurement Analyst, Department of State, Office of the Procurement Executive, 2201 C Street, NW, Suite 603, State Annex Number 6, Washington, DC 20522-0602; or (3) fax: 703-875-6155.

OFPP Requires COTR Certification

Office of Federal Procurement Policy (OFPP) Administrator Paul Denett has continued his efforts to professionalize all aspects of the federal acquisition workforce, this time by issuing a memorandum to all chief acquisition officers announcing the establishment of "a structured training program for Contracting Officer Technical Representatives (COTRs) and other individuals performing these functions...that standardizes competencies and training across civilian agencies..."

This Federal Acquisition Certification for COTRs (FAC-COTR) is similar to the Federal Acquisition Certification in Contracting (FAC-C) program and the Federal Acquisition Certification for Program and Project Managers (FAC-P/PM) in that it requires all COTRs to have a minimum of 40 hours of training in a variety of competencies, and earn 40 continuous learning points (CLPs) of skills currency training every two years. All COTRs appointed to a contract after the date of the memorandum (November 26, 2007) have six months from the date of their appointment to become certified. COTRs who currently hold delegation letters on active contracts have 12 months from the date of the memorandum to become certified.

For more on the FAC-C program, see the February 2006 Federal Contracts Perspective article "OMB Establishes Civilian Contracting Certification." For more on the FAC-P/PM program, see the May 2007 Federal Contracts Perspective article "Certification Required for Program Managers of Major Acquisitions."

Proposed FAR Change Addresses Post-Retirement Benefits

The FAR Council has published a proposed rule to amend paragraph (o) of FAR 31.205-6, Compensation for Personal Services, to permit the contractor to measure accrued post-retirement benefits (PRB) costs using either the criteria in Internal Revenue Code (IRC) 419 or the criteria in Financial Accounting Standard (FAS) 106.

Currently, FAR 31.205-6(o) allows contractors to choose among three different accounting methods for PRB costs: cash basis ("pay-as-you-go"), terminal funding, and accrual basis. When the accrual basis is used, FAR 31.205-6(o)(iii)(A) requires that costs must be measured based on the requirements of FAS 106. However, the tax-deductible amount that is contributed to the retiree benefit trust is determined using IRC 419, which has different measurement criteria than FAS 106. As a result, the FAS 106 amount can often exceed the IRC 419 measured costs, and contractors that choose to accrue PRB costs for government reimbursement face a dilemma: whether to fund the entire FAS 106 amount to obtain government reimbursement of the costs, regardless of tax implications, or fund only the tax deductible amount and not be reimbursed for the entire FAS 106 amount under their government contracts.

This proposed rule would alleviate this dilemma by amending FAR 31.205-6(o) to give the contractor an option of measuring accrued PRB costs using criteria based on IRC 419 rather than FAS 106, which would permit the contractor to fund the entire tax deductible amount without having a portion disallowed because it did not meet the FAR's current measurement criteria. Under this change, the total measured PRB costs over the life of the PRB plan would be the same whether the contractor chose to apply the criteria in FAS 106 or IRC 419.

The proposed rule may result in the government paying higher PRB costs because, under the current FAR language, some contractors may have chosen to fund the IRC amount rather than the full FAS amount in current and future accounting periods. If the FAR language is unchanged, the resulting difference will be an unallowable cost. However, there may be a cost impact if the rule remains unchanged. For example, instead of funding the lower IRC amount, contractors might decide to fund the full FAS amount (and forego the tax benefit), change from accrual to pay-as-you go accounting, or terminate their PRB plans rather than fund amounts that are not tax deductible.

Comments on the proposed rule must be submitted no later than January 14, 2008, by any of the following means: (1) eRulemaking Portal: http://www.regulations.gov/far; (2) fax: 202-501-4067; or (3) mail: General Services Administration, Regulatory Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann Duarte, Washington, DC 20405. Identify such comments as "FAR Case 2006-021."

Copyright 2007 by Panoptic Enterprises. All Rights Reserved.

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