Panoptic Enterprises'


Federal Acquisition Developments, Guidance, and Opinions

July 2008
Vol. IX, No. 7


President Orders Contractors to Verify Immigration Status of Federal Contract Employees
GSAR Undergoing Rewrite
DOD Reinstates Set-Asides Under FAR Subpart 19.10
OFPP Issues Guidance on Interagency Acquisitions
GAO’S Protest Regulations Amended
GAO Contract Appeals Board Established
SBA Grants One Nonmanufacturer Waiver, Proposes One
Contractors Banned from Conducting Business in Sudan
Acquisition-Related Legislation Enacted
OMB Releases First Set of FY 2007 FAIR Act Inventories
Safavian Conviction Overturned

President Orders Contractors to Verify Immigration
Status of Federal Contract Employees

On June 6, President Bush issued Executive Order 13465 directing departments and agencies “that enter into contracts shall require, as a condition of each contract, that the contractor agree to use an electronic employment eligibility verification system designated by the Secretary of Homeland Security to verify the employment eligibility of: (i) all persons hired during the contract term by the contractor to perform employment duties within the United States; and (ii) all persons assigned by the contractor to perform work within the United States on the Federal contract.” Subsequently, the Department of Homeland Security secretary designated “E-Verify” as the electronic verification system, and a proposed FAR rule implementing the executive order and E-Verify.

The executive order states that it is intended “to promote economy and efficiency in federal government procurement...It is the policy of the executive branch to enforce fully the immigration laws of the United States, including the detection and removal of illegal aliens and the imposition of legal sanctions against employers that hire illegal aliens...Contractors that employ illegal aliens cannot rely on the continuing availability and service of those illegal workers, and such contractors inevitably will have a less stable and less dependable workforce than contractors that do not employ such persons. Where a contractor assigns illegal aliens to work on federal contracts, the enforcement of federal immigration laws imposes a direct risk of disruption, delay, and increased expense in federal contracting. Such contractors are less dependable procurement sources, even if they do not knowingly hire or knowingly continue to employ unauthorized workers.”

E-Verify is an Internet-based system (http://www.dhs.gov/E-Verify) operated by the U.S. Citizenship and Immigration Services (USCIS – part of the Department of Homeland Security (DHS)) that allows employers to electronically verify the employment eligibility of all newly hired employees. Based on the information provided by the employee on his or her Form I-9, Employment Eligibility Verification, E-Verify electronically checks this information against records contained in DHS and Social Security Administration (SSA) databases.

SSA verifies that the name, Social Security Number, and date of birth are correct and, if the employee has stated that he or she is a U.S. citizen, confirms whether this is in fact the case through its databases. If the employee is a U.S. citizen, SSA establishes that the employee is employment-eligible. USCIS also verifies through database checks that any non-U.S. citizen employee is in an employment-authorized immigration status.

If the information provided by the worker matches the information in the SSA and USCIS records, no further action will be required, and the worker may continue employment. If SSA is unable to verify information presented by the worker, the employer will receive an “SSA Tentative Nonconfirmation” notice. Similarly, if USCIS is unable to verify information presented by the worker, the employer will receive a “DHS Tentative Nonconfirmation” notice. Tentative nonconfirmation notices can result from a variety of reasons, including inaccurate entry of information into the E-Verify website, name changes, or changes in immigration status that are not reflected in the database. If the individual’s information does not match the SSA or USCIS records, the employer must notify the employee, and the employee has eight federal workdays to visit an SSA office or call USCIS to try to resolve the discrepancy. If the worker fails to contest the tentative nonconfirmation, or if SSA or USCIS was unable to resolve the discrepancy, the contractor will receive a notice of final nonconfirmation and the employee may be terminated.

A contractor must enroll in E-Verify to use the program. The contractor has to provide basic contact information for the company and agree to follow the rules of the program, including execution of a Memorandum of Understanding (MOU) that provides the terms of agreement between the contractor, the SSA, and DHS. USCIS reviews the information provided and activates the contractor’s account if all is in order. After the account is activated, the contractor receives an e-mail with logon instructions, user identification, and password.

To implement this, it is proposed that FAR Subpart 22.18, Employment Eligibility Verification, be added. Essentially, it would require the inclusion of new FAR clause 52.222-XX, Employment Eligibility Verification, in all contracts and solicitations that exceed the micro-purchase threshold ($3,000), except for acquisitions of commercially-available off-the-shelf (COTS) items or items that would be COTS items except for minor modifications (that is, the definition of “commercial item” in FAR 2.101, Definitions), or do not include any work that will be performed in the United States. The clause requires the contractor to include the clause in all subcontracts that meet these criteria.

FAR 52.222-XX would require the contractor (and its subcontractors) to enroll in the E-Verify program within 30 days of contract award, begin verifying the employment eligibility of all new employees who are hired after enrollment in E-Verify, and continue to use the E-Verify program for the life of the contract. It would require the contractor and subcontractors to use E-Verify to confirm the employment eligibility of all existing employees who are directly engaged in the performance of work under the contract. In addition, it would require the contractor and subcontractors to verify the eligibility of new employees within three days of employment (the eligibility of current employees assigned to work on the contract would have to be verified within three days of assignment).

Comments on the proposed rule must be submitted no later than August 11, 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, Washington, DC 20405. Identify comments as “FAR case 2007-013.”

An estimated 168,324 contractors and subcontractors will be required to enroll in E-Verify, and approximately 3.8 million employees are expected to be verified through E-Verify, according to the introduction to the proposed rule.

GSAR Undergoing Rewrite

On February 15, 2006, the General Services Administration (GSA) announced that it was undertaking a review and update of the GSA Acquisition Regulation (GSAR), and was seeking comments from both government and industry on areas GSA could improve the GSAR’s clarity and simplify procedures (see the March 2006 Federal Contracts Perspective article “GSAR Rewrite Underway”). The comments are in, GSA has conducted its reviews and analyses, and has started the GSAR rewrite process by publishing eight proposed GSAR parts. In addition, GSA is proposing to amend the GSAR to implement a mentor-protégé program.

DOD Reinstates Set-Asides Under FAR Subpart 19.10

The Department of Defense (DOD) is reinstituting the use of small business set-asides for four of the five “designated industry groups” (DIGs) under the Small Business Competitiveness Demonstration Program, which is covered by FAR Subpart 19.10, because DOD has failed to attain the 40% goal for the DIGs.

The Small Business Competitiveness Demonstration Program prohibits set asides of contracts over $30,000 for certain services in the following five DIGs: construction, refuse systems and related services, nonnuclear ship repair, landscaping and pest control, and architectural and engineering services (its threshold is $50,000). However, if a participating agency fails to award small businesses 40% of its contract dollars spent for services in a DIG, the participating agency must solicit subsequent contracts through small business set asides until it meets the goal. DOD is a participating agency in the Small Business Competitiveness Demonstration Program, and its implementing regulations are in Defense FAR Supplement (DFARS) Subpart 219.10.

According to the Federal Procurement Data System, DOD failed to meet its 40% goal in the following DIGS for the 12-month period ending September 30, 2007: construction (except dredging), subsector 236, construction of buildings; non-nuclear ship repair, product or service dode J999 (West Coast only); architect and engineering services (including surveying and mapping); and refuse systems and related services.

In addition, when an “organizational unit” (such as the Army, Navy, and Air Force) fails to award small businesses 35% of its contract dollars in either the construction or architect and engineering services DIGs, then the organizational unit must reinstitute set-asides in the DIG (only for the specific North American Industry Classification System (NAICS) codes that fell below 35%) even if DOD’s overall achievement in the DIG was 40% or greater. Therefore, set-asides have been reinstituted under specific construction NAICS codes for the Army, the Navy, the Air Force, the Defense Logistics Agency, the Defense Information Systems Agency, the Defense Threat Reduction Agency, the Defense Education Activity, and the U.S. Special Operations Command.

OFPP Issues Guidance on Interagency Acquisitions

To combat “lack of clear line of responsibilities...inadequate planning, inconsistent use of competition, weak contract management, and concerns regarding financial controls,” the Office of Federal Procurement Policy (OFPP) has issued a 70-page guidance document intended “to help agencies (1) make sound business decisions to support the use of interagency acquisitions and (2) strengthen the management of assisted acquisitions.”

An “interagency acquisition” is an intragovernmental transaction in which one agency (the requesting agency) uses the contracts and/or contracting services of other agencies (the servicing agencies) to obtain supplies and services.

There are two types of interagency acquisitions: direct acquisitions and assisted acquisitions. In a direct acquisition, the requesting agency places an order directly against the servicing agency’s indefinite-delivery vehicles (IDVs) (such as task and delivery order contracts). The servicing agency manages the IDV but does not participate in the placement of an order. In an assisted acquisition, the requesting agency and servicing agency enter into an interagency agreement in which the servicing agency performs acquisition activities on the requesting agency’s behalf, such as awarding a contract, task order, or delivery order. The preponderance of the guidance addresses assisted acquisitions.

Interagency acquisitions have been a concern for some time, having been placed on the Government Accountability Office's (GAO) list of “High-Risk Areas” in 2005. “Interagency contracts provide agencies with convenient access to commonly needed goods and services, for which the agencies that establish these contracts and provide contracting services charge a fee to support their operations,” observed GAO in it 2007 edition of “High-Risk Series.” “When used correctly, interagency contracts provide opportunities to streamline the procurement process and achieve savings through leveraging the government’s buying power. However, monitoring and oversight of these contracts have not kept up with their growth, and there are no complete and reliable data on how much is spent governmentwide through interagency contracts or the amount of fees paid by agencies using this contracting method...Proper use of this contracting method requires strong internal controls, clear definition of roles and responsibilities, and training for both customers and servicing agencies.”

Starting October 1, 2008, agencies’ decisions to use interagency acquisitions must be supported by best interest determinations, taking into consideration whether the IDV can satisfy the agency’s schedule, performance, and delivery requirements; whether the IDV’s pricing, including fees, is fair and reasonable and comparable to what the agency is likely to secure by creating its own contract; and whether the agency’s contracting office personnel have the appropriate experience and training to properly place an order on a timely basis. Starting November 3, 2008, new interagency acquisitions must comply with the rest of the guidance.

The guidance consists of the following:

The guidance is available at http://www.whitehouse.gov/sites/default/files/omb/assets/procurement/iac_revised.pdf.

GAO’S Protest Regulations Amended

The Government Accountability Office (GAO) has amended its bid protest regulations to implement Section 326 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 110-181), which expanded the protest rights of federal employees in a competition conducted under Office of Management and Budget (OMB) Circular A-76, Performance of Commercial Activities, or a noncompetitive decision to convert a function performed by federal employees to private sector performance. GAO is implementing this by amending the definition of “interested party” in paragraph (b) of Section 21.0, Definitions, which addresses protests regarding A-76 actions, to add “any one person or individual who, for the purpose of representing the employees of a federal agency in a protest, has been designated their agent by a majority of the employees who are engaged in performing such activity.” Previously, only “the official who submitted the agency tender in a public-private competition” was eligible to file an A-76 protest on behalf of federal employees.

In addition, GAO made the following announcements:

GAO Contract Appeals Board Established

GAO is establishing the GAO Contract Appeals Board (GAOCAB) to consider appeals involving contracts with legislative branch agencies, which include the Architect of the Capitol, United States Botanic Gardens, GAO, Government Printing Office, Library of Congress, Congressional Budget Office, United States Capitol Police, and any other agency, board, or commissions established in the legislative branch. The GAOCAB is established by Section 1501 of the Consolidated Appropriations Act of 2008 (Public Law 110-161).

The Armed Services Board of Contract Appeals (ASBCA) and the Civilian Board of Contract Appeals (CBCA) have been established (according to the Contracts Disputes Act of 1978 (CDA)) to resolve appeals of contracting officers’ decisions involving contracts with executive branch agencies. However, no such permanent board has existed to resolve similar appeals involving contracts with legislative branch agencies until the authorization and establishment of the GAOCAB.

Like the ASBCA and the CBCA, the CDA applies to the GAOCAB, and its procedures reflect that, with a couple of notable exceptions: (1) contractors do not have a right to directly appeal a decision of a contracting officer to the Court of Federal Claims as is authorized under the CDA; and (2) contractors are required to certify claims exceeding $50,000 as a prerequisite to filing an appeal of a contracting officer’s decision, instead of the $100,000 required by the CDA.

Comments on this interim rule must be submitted no later than August 25, 2008, by e-mail at cab@gao.gov or by facsimile at 202-512-9749. Due to delivery delays, submission by regular mail is discouraged. Comments may be sent by Federal Express (FedEx) or United Parcel Service (UPS) addressed to: James A. Spangenberg, Chairman, Government Accountability Office Contract Appeals Board, 441 G Street, NW, Room 7182, Washington, DC 20548.

EDITOR’S NOTE: GAOCAB decisions and procedures are available at http://www.gao.gov/legal/appeals.html.

SBA Grants One Nonmanufacturer Waiver, Proposes One

The Small Business Administration (SBA) is waiving the nonmanufacturer rule for other aircraft parts and auxiliary equipment manufacturing (drones and aircraft launching equipment) under North American Industry Classification System (NAICS) code 326111, product service codes 1550 and 1720. SBA invited the public to comment on this proposed waiver, which covered product service codes 1550, 1680, and 1720, or to provide information on potential small business sources for these products. One comment was received, and SBA has determined that there is a small business manufacturer of product under service code 1680, so SBA is not issuing a waiver for product service code 1680. However, SBA is granting waivers for product service codes 1550 and 1720. For more on the proposed waivers, see the June 2008 Federal Contracts Perspective article “Three Nonmanufacturer Rules Waived, One Proposed.”

In addition, SBA is proposing to waive the nonmanufacturer rule for televisions under NAICS code 334220, product number 5820. SBA is inviting the public to comment on this proposed waiver or to provide information on potential small business sources for these products by June 19, 2008, to Edith Butler, Program Analyst, Small Business Administration, Office of Government Contracting, 409 3rd Street, SW, Suite 8800, Washington, DC 20416.

EDITOR'S NOTE: Public Law 100-656, enacted November 15, 1988, 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 or processor if the recipient is not the actual manufacturer or processor (see paragraph (f) of FAR 19.102, Size Standards). This is called the "nonmanufacturer rule." However, SBA may waive this requirement if there are no small business manufacturers or processors.

The SBA regulation on the nonmanufacturer rule is in Title 13 of the 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 Under Small Business Set-Aside or MED [Minority Enterprise Development] Procurements? 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? A complete list of products for which the nonmanufacturer rule has been waived is available at http://www.sba.gov/idc/groups/public/documents/sba_program_office/gcbd_non_mfg_approved.pdf.

Contractors Banned from Conducting Business in Sudan

Federal Acquisition Circular (FAC) 2005-26 amends FAR Subpart 25.7, Prohibited Sources, to implement Section 6 of the Sudan Accountability and Divestment Act of 2007 (Public Law 110-174), which requires certification in each contract entered into by an executive agency that the contractor does not conduct certain business operations in Sudan.

The new provisions are in FAR 25.702, Prohibition on Contracting with Entities that Conduct Restricted Business Operations in Sudan (the text from old FAR 25.702, Source of Further Information, has been added to FAR 25.701, Restrictions on Acquisitions of Supplies or Services from Prohibited Sources).

In addition, FAC 2005-26 adds Burma to the list of countries from which most imports are prohibited. This change is made in accordance with Executive Order (EO) 13310, Blocking Property of the Government of Burma and Prohibiting Certain Transactions, and EO 13448, Blocking Property and Prohibiting Certain Transactions Related to Burma. FAR 25.701(b) and paragraph (b) of FAR 52.225-13, Restrictions on Certain Foreign Purchases, are modified accordingly.

Comments on the interim rule must be submitted no later than August 11, 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 (VPR), 1800 F Street, NW, Room 4041, Washington, DC 20405. Identify comments as “FAC 2005-26, FAR case 2008-004.”

Acquisition-Related Legislation Enacted

Congress passed, and President Bush signed, two pieces of legislation that have provisions affecting federal acquisition:

OMB Releases First Set of FY 2007 FAIR Act Inventories

The Office of Management and Budget (OMB) has released the first set of Fiscal Year 2007 Commercial Activities Inventories of non-governmental functions being performed by government agencies. These inventories are required to be compiled and made available to the public by the Federal Activities Inventory Reform (FAIR) Act of 1998.

Inventories are from the Departments of Agriculture, Commerce, Education, Health and Human Services, Homeland Security, Housing and Urban Development, Interior, Justice, Labor, State, Transportation, and Treasury; the Environmental Protection Agency; General Services Administration; National Aeronautics and Space Administration; Small Business Administation; Social Security Administration; and several smaller agencies and commissions. Links to these inventories are available at http://edocket.access.gpo.gov/2008/E8-13500.htm.

Interested parties who disagree with an agency's initial judgment have 30 working days from June 17 (that is, until July 17) to challenge the omission or inclusion of an activity on an agency's Commercial Activities Inventories list.

The Office of Federal Procurement Policy has made available a FAIR Act User’s Guide at http://www.whitehouse.gov/OMB/procurement/fair-index.html to help interested parties review FY 2007 FAIR Act inventories.

Safavian Conviction Overturned

The United States Court of Appeals for the District of Columbia overturned the conviction of David Safavian, former Office of Federal Procurement Policy (OFPP) administrator and former GSA chief of staff, for making false statements and obstructed investigations into his relationship with Jack Abramoff. The charges against Safavian involved a 2002 golf trip to Scotland on which Abramoff provided Safavian with free transportation on a chartered jet. Safavian was GSA’s chief of staff at the time.

Before accepting Abramoff’s offer of a free ride, Safavian asked for an opinion of the GSA ethics official on the propriety of accepting the airfare. He stated that Abramoff had “no business before GSA.” The ethics officer responded that because “neither Mr. Abramoff nor his firm does business with or is seeking to do business with GSA...you may accept the gift of free transportation from your friend.”

In actuality, Abramoff had asked Safavian for information and advice on obtaining two GSA-controlled properties soon after he became GSA chief of staff in 2002. This became the basis for the charges against Safavian that he had false statements to the GSA ethics official. Even though Safavian testified that he had interpreted the term “business before GSA” as pertaining to contracts, he was convicted on four counts of making false statements and obstructing justice for concealing his assistance to Abramoff in official GSA-related activities.

The Court of Appeals found that the District Court that convicted Safavian “abused its discretion in excluding favorable expert testimony on how government contracting professionals view having business or working with GSA.” In addition, the Court of Appeals noted that the GSA ethics official’s function is to offer advice, and “it is not apparent how this voluntary system...imposes a duty on those seeking ethical advice to disclose ‘all relevant’ information upon pain of prosecution...” Therefore, the Court overturned convictions on all four counts.

For more 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"; the November 2006 Federal Contracts Perspective article “Safavian Sentenced to 18 Months in Prison”; and the December 2006 Federal Contracts Perspective article “Safavian Out on Bond Pending Appeal.”

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