FEDERAL CONTRACTS PERSPECTIVE

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1 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE Federal Acquisition Developments, Guidance, and Opinions Vol. XI, No. 9 September 2010 FEDERAL ACQUISITION-RELATED THRESHOLDS ADJUSTED FOR INFLATION Federal Acquisition Circular (FAC) has one big rule and two small ones amending the Federal Acquisition Regulation (FAR). The big rule is the five-year adjustment of acquisition-related thresholds for inflation. The other two redefine cost or pricing data and prohibit the use of Recovery Act funds for construction materials unless all the iron, steel, and manufactured goods used in the project are produced in the United CONTENTS States. Inflation Adjustment of Acquisition- Related Thresholds: Section 807 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law ) requires that acquisition-related thresholds provided by law be adjusted every five years ( on October 1 of each year that is evenly divisible by five ) for inflation using the Consumer Price Index for all urban Acquisition Thresholds Adjusted for Inflation... 1 Defense Acquisition Thresholds Adjusted, Too... 6 Rule on PIIDs Proposed Nonmanufacturer Rule Waived for Lab Equip COFC Upholds HUBZone Precedence DIAR Rewrite Adopted as Final GSAR Part 541 Added for Utility Services Education Proposes Reissuing EDAR consumers (with the exception of Davis-Bacon Act, Service Contract Act, and trade agreements thresholds). This final rule adjusts those thresholds, and adjusts the non-statutory FAR acquisition-related thresholds using the same methodology. Among the most significant threshold adjustments are: The simplified acquisition threshold is raised from $100,000 to $150,000 (FAR 2.101, Definitions). The FAR Subpart 13.5 commercial items test program ceiling is raised from $5,500,000 to $6,500,000 (FAR , General). The cost or pricing data threshold is raised from $650,000 to $700,000 (FAR , Requiring Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b)). The prime contractor subcontracting plan floor is raised from $550,000 to $650,000 (the construction subcontracting plan floor is raised from $1,000,000 to $1,500,000) (FAR , Statutory Requirements). The threshold for competitive 8(a) solicitations is increased from $5,500,000 to $6,500,000 for manufacturing, and from $3,500,000 to $4,000,000 for all other acquisitions (FAR , General).

2 The limit on the award of sole source contracts to HUBZone concerns is increased from $5,500,000 to $6,500,000 for manufacturing, and from $3,500,000 to $4,000,000 for all other acquisitions (FAR , HUBZone Sole Source Awards). The limit on the award of sole source contracts to service-disabled veteran-owned small business concerns is increased from $5,000,000 to $6,000,000 for manufacturing, and from $3,000,000 to $3,500,000 for other than manufacturing (FAR , Sole Source Awards to Service-Disabled Veteran-Owned Small Business Concerns). The micro-purchase base threshold of $3,000 (FAR 2.101), and the $25,000 threshold for FedBizOpps ( preaward and post-award notices (FAR Part 5, Publicizing Contract Actions) remain unchanged (the FedBizOpps threshold remains unchanged because of trade agreements). Any changes to Cost Accounting Standards thresholds will be addressed in a separate case. A table of all the 216 thresholds considered for adjustment and the calculations made is available at then search for FAR case Eight respondents submitted comments on the proposed rule. Although there were no changes made to the final rule in response to the comments, some of the thresholds changed because the actual inflation rate (actual CPI = 217.6) was lower than projected in February, when the proposed rule was published (estimated CPI = 222). As a result, thresholds of at least $13,000,000 are generally proportionally lower, and thresholds of less than $13,000,000 were generally unchanged due to rounding. For more on the proposed rule, see the March 2010 Federal Contracts Perspective article Inflation Adjustments Proposed for Acquisition Thresholds. Definition of Cost or Pricing Data: This final rule amends FAR 2.101, Definitions, by redefining cost or pricing data, adding a definition of certified cost or pricing data, and changing the term information other than cost or pricing data to data other than certified cost or pricing data. Also, the rule revises FAR Subpart 15.4, Contract Pricing, to clarify the authority for contracting officers to require certified cost or pricing data or data other than certified cost or pricing data, and the existing requirements for submission of the various types of pricing data. The rule is intended to eliminate confusion and misunderstanding, especially regarding the authority of the contracting officer to request data other than certified cost or pricing data when there is no other means to determine that proposed prices are fair and reasonable. Most significantly, the rule clarifies that data other than certified cost or pricing data may include the identical types of data as certified cost or pricing data but without the certification. This lack of clarity was due, in large part, to definitions that overlapped and were not identical to the Truth in Negotiations Act (TINA) (10 U.S.C. 2306a and 41 U.S.C. 254b). For example, the term cost or pricing data was defined in the FAR, prior to this rule, to mean certified cost or pricing data, whereas TINA does not make certification part of the definition of Vivina McVay, Editor-in Chief 2010 by Panoptic Enterprises. All rights reserved. Reproduction, photocopying, storage, or transmission by any means is prohibited by law without the express written permission of Panoptic Enterprises. Under no circumstances should the information contained in Federal Contracts Perspective be construed as legal or accounting advice. If a reader feels expert assistance is required, the services of a professional counselor should be retained. The Federal Contracts Perspective is published monthly by Panoptic Enterprises, P.O. Box 11220, Burke, VA September 2010 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 2

3 this term. In particular, there was confusion regarding the right of the government to request information other than certified cost or pricing data, the obligation of the offeror to provide this data, and the definition of this term. To alleviate this confusion, the following changes are made: FAR 2.101(b)(2) is revised as follows: o A definition of certified cost or pricing data is added: [It] means cost or pricing data that were required to be submitted in accordance with FAR [Requiring Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. 254b)] and [FAR] [Instructions for Submission of Cost or Pricing Data or Information Other than Cost or Pricing Data] and have been certified, or are required to be certified, in accordance with [FAR] [Certificate of Current Cost or Pricing Data]. This certification states that, to the best of the person s knowledge and belief, the cost or pricing data are accurate, complete, and current as of a date certain before contract award. Cost or pricing data are required to be certified in certain procurements (10 U.S.C. 2306a and 41 U.S.C. 254b). o The introduction to the definition of cost or pricing data is revised to delete the sentence Cost or pricing data are data requiring certification in accordance with [FAR] o A definition of data other than certified cost or pricing data is added: [It] means pricing data, cost data, and judgmental information necessary for the contracting officer to determine a fair and reasonable price or to determine cost realism. Such data may include the identical types of data as certified cost or pricing data, consistent with Table 15-2 of [FAR] [Solicitation Provisions and Contract Clauses], but without the certification. The data may also include, for example, sales data and any information reasonably required to explain the offeror s estimating process, including, but not limited to (1) the judgmental factors applied and the mathematical or other methods used in the estimate, including those used in projecting from known data; and (2) the nature and amount of any contingencies included in the proposed price. o The definition of information other than cost or pricing data is removed. Paragraph (a)(2)(ii)(b) of FAR , Pricing Policy, states that, for other than certified cost or pricing data, that cost data can be requested to the extent necessary for the contracting officer to determine a fair and reasonable price. Paragraph (c) of FAR , Requiring Data Other Than Certified Cost or Pricing Data, is revised to state that, for commercial items, the contracting officer shall request data other than cost or pricing data to support further analysis if unable to determine whether an offered price is fair and reasonable. Previously, this paragraph stated that the contracting officer must require submission of information other than cost or pricing data from the offeror that is adequate to determine a fair and reasonable price if the contracting officer cannot obtain adequate information from sources other than the offeror. 3 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE September 2010

4 Paragraph (a)(4) of FAR , Proposal Analysis Techniques, is revised to state explicitly that cost analysis may be used to evaluate data other than certified cost or pricing data to determine reasonableness or cost realism when a fair and reasonable price cannot be determined through price analysis alone for commercial and non-commercial items. Previously, this paragraph did not explicitly cite commercial and non-commercial items as subject to cost analysis. Table 15-2 Instructions for Submitting Cost/Price Proposals When Certified Cost or Pricing Data Are Required (at the end of FAR Subpart 15.4), is clarified to be consistent with the clarified terminology and policies for determining the type and quantity of data necessary to establish a fair and reasonable price. Eleven respondents submitted comments on the proposed rule. In response to the comments, many editorial changes and corrections are made to the final rule. For more on the proposed rule, see the May 2007 Federal Contracts Perspective article Proposed Change to Cost or Pricing Data Definition. Buy American Requirements for Construction Material in the American Recovery and Reinvestment Act of 2009: This finalizes, with changes, the interim rule that added FAR Subpart 25.6, American Recovery and Reinvestment Act Buy American Act Construction Materials, and two provisions and two clauses to prohibit, with some exceptions, the use of funds appropriated or provided by the American Recovery and Reinvestment Act of 2009 (Public Law 111-5) for construction, alternation, maintenance, or repair of a public building or public work unless all the iron, steel, and manufactured goods used in the project are produced in the United States. FAR Subpart 25.6 implements Section 1605 of the Recovery Act. While Section 1605 prohibits the use of Recovery Act funds on any construction project unless all the iron, steel, and manufactured goods used in the project are produced in the United States, it mandates that the Recovery Act Buy American requirement be applied in a manner consistent with U.S. obligations under international agreements. As a result, least developed countries are treated as Recovery Act designated countries while Caribbean Basin countries, which are not covered by an international agreement, are not. Thirty-two respondents submitted comments on the interim rule. In response to those comments, the following changes were made in the final rule: To paragraph (c)(4) of FAR , General [for foreign acquisition], which addresses the country of origin for an end product under the Buy American Act when using Recovery Act funds, is added the following sentence: If the construction material consists wholly or predominantly of iron or steel, the iron or steel must be produced in the United States. To the definition of domestic construction material in FAR , Definitions, is added Except that for use in [FAR] Subpart 25.6, see the definition in [FAR] [Definitions]. In FAR , the domestic construction material definition stated it consisted of (1) an unmanufactured construction material mined or produced in the United States; or (2) a construction material manufactured in the United States. Paragraph (2) is revised to state, A manufactured construction material that is manufactured in the United States and, if the construction material consists wholly or predominantly of iron or steel, the iron or steel was September 2010 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 4

5 produced in the United States. (Section 1605 of the Recovery Act applies.) The same change is made to FAR , Required Use of American Iron, Steel, and Manufactured Goods Buy American Act Construction Materials, and FAR , Required Use of American Iron, Steel, and Manufactured Goods Buy American Act Construction Materials Under Trade Agreements. Also in FAR is added the following definition of public building or public work : A building or work, the construction, prosecution, completion, or repair of which is carried on directly or indirectly by authority of, or with funds of, a federal agency to serve the interest of the general public regardless of whether title thereof is in a federal agency (see [FAR] [Definitions (for construction)]). These buildings and works may include, without limitation, bridges, dams, plants, highways, parkways, streets, subways, tunnels, sewers, mains, power lines, pumping stations, heavy generators, railways, airports, terminals, docks, piers, wharves, ways, lighthouses, buoys, jetties, breakwaters, levees, and canals, and the construction, alteration, maintenance, or repair of such buildings and works. Paragraph (a) of FAR , Policy, is revised to clarify the treatment of iron and steel components and all other components, and compliance requirements when trade agreements apply. FAR (b) is added to require that manufactured materials purchased directly by the government and delivered to the site for incorporation into the project shall meet the same domestic source requirements as specified for manufactured construction material in paragraph (a) (The previous paragraph (b) of FAR is redesignated as FAR , Buy American Act, and revised to add the italicized text: Except as provided in [FAR] [Exceptions], use only unmanufactured construction material mined or produced in the United States, as required by the Buy American Act or, if trade agreements apply, unmanufactured construction material mined or produced in a designated country may also be used. ) FAR (c) is added to clarify that a project may include several contracts, a single contract, or one or more line items on a contract. Paragraph (c)(4) of FAR , Noncompliance, is amended to identify the agency s Inspector General (IG) as an official, in addition to the officer responsible for criminal investigation, to whom one is to refer suspected fraudulent noncompliance. Paragraph (e)(2) of FAR , Acquisition of Construction, is added to specify that if these Recovery Act provisions and clauses are only applicable to a project consisting of certain line items in the contract, identify in the schedule the line items to which the provisions and clauses apply. (The previous paragraph (e)(2) is redesignated as paragraph (e)(3).) For more on the interim rule, see the April 2009 Federal Contracts Perspective article FAC Implements Recovery Act. Visit for more information on the rapidly-changing world of federal contracting! 5 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE September 2010

6 DEFENSE ACQUISITION-RELATED THRESHOLDS ADJUSTED, TOO Just like the FAR, the Department of Defense (DOD) is required by Section 807 of the National Defense Authorization Act for Fiscal Year 2005 (Public Law ) to adjust the acquisition-related thresholds that pertain only to the DOD every five years (these thresholds are in the Defense FAR Supplement (DFARS)). In addition, DOD issued five other rules, one proposed rule, and three memoranda on acquisition-related topics. Inflation Adjustment of Acquisition-Related Thresholds: This finalizes, without changes, the proposal to adjust the following acquisition-related thresholds. Some of the more important thresholds being adjusted are (the previous thresholds are in parentheses): The threshold in DFARS , Announcement of Contract Awards, for public announcement of contract awards, is now $6,500,000 (from $5,500,000). The threshold in DFARS , Policies and Procedures, for prohibiting the consolidation of contract requirements, is now $6,000,000 (from $5,500,000). The threshold in DFARS , Additional Ordering Procedures, for competition of orders against Federal Supply Schedule contracts, is now $150,000 (from $100,000). The threshold in DFARS , Orders Under Multiple Award Contracts, for competitively awarding orders under multiple award contracts, is now $150,000 (from $100,000). The upper limits in DFARS , Total Set-Asides, for small business set-asides for dredging, is now $1,500,000 (from $1,000,000), and for architect-engineer services for military construction or family housing projects, is now $350,000 (from $300,000). The limit in DFARS , Applicability, for setting aside architect-engineering services in support of military construction projects or military family housing projects, is now $350,000 (from $300,000). The threshold in DFARS , General, requiring bonds for fixed-price construction contracts under cost-type contracts, is now $150,000 (from $100,000). The threshold in DFARS , Use of Customary Progress Payments, for progress payments to a small disadvantaged business, is now $65,000 (from $55,000). The threshold in DFARS , Government Contract Quality Assurance at Source, for contract quality assurance at source, is now $300,000 (from $250,000). The threshold in DFARS , Acquisition Streamlining, for contractors to include the clause in subcontracts, is now $1,500,000 (from $1,000,000). The threshold in DFARS , Notification of Anticipated Contract Termination or Reduction, for contractors to notify their subcontractors of an anticipated termination or reduction, is now $650,000 (from $550,000); and the threshold for firsttier subcontractors to notify their second-tier subcontractors and require those second-tier subcontractors to include the clause in their third-tier subcontracts, is now $150,000 (from $100,000). There were no comments on the proposed rule, so it is finalized without changes. For more on the proposed rule, see the February 2010 Federal Contracts Perspective article Proposed DFARS Changes Address Business Systems and Increased Acquisition Thresholds. September 2010 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 6

7 Excessive Pass-Through Charges: This final rule deletes DFARS , Determining Allowability, DFARS , Indirect Costs, DFARS , Excessive Pass-Through Charges Identification of Subcontract Effort, and DFARS , Excessive Pass- Through Charges, because similar language was adopted in the FAR. Section 852 of the National Defense Authorization Act for Fiscal Year 2007 (Public Law ) required DOD to implement regulations to ensure that pass-through charges on contracts or subcontracts (or task or delivery orders) that are entered into for or on behalf of the Department of Defense are not excessive in relation to the cost of work performed by the relevant contractor or subcontractor. In response, DOD added DFARS , DFARS , DFARS and DFARS (see the May 2007 Federal Contracts Perspective article DOD Restricts Excessive Pass-Through Charges ). In response to comments on the interim rule, another interim rule was issued (see the June 2008 Federal Contracts Perspective article DFARS Addresses Excessive Pass-Through Charges Again ). Subsequently, FAC was published, and one of its interim rules implemented Section 866 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Public Law ) for civilian agencies, and Section 852 of Public Law for DOD (see the November 2009 Federal Contracts Perspective article FAC Provides Guidance on Use of Award Fees ). Since the FAR takes precedence over the DFARS, and both now contained language implementing Section 852 of Public Law , the DFARS implementing language is removed. Management of Unpriced Change Orders: This finalizes, with changes, the proposed rule that would add DFARS , Definitization of Change Orders, to make requirements for management and oversight of unpriced change orders exceeding $5,000,000 consistent with the requirements in DFARS Subpart , Undefinitized Contract Actions, that apply to other undefinitized contract actions. Two respondents submitted comments on the proposed rule. In response to those comments, the following changes were made in the final rule: To DFARS , Plans and Reports, is added the following as paragraph (c): Consolidated UCA [undefinitized contract actions] Management Reports shall include information about all change orders that are not forward priced (i.e., unpriced) and have an estimated value exceeding $5 million. In DFARS , Contract Clauses, the prescriptions for use of FAR , Limitation of Government Liability, and DFARS , Contract Definitization, is revised to add that these two clauses are to be used in unpriced change orders with an estimated value exceeding $5 million. DFARS , Exceptions, is revised to add that the prohibition against obligating more than 50% of the not-to-exceed price before definititization does not apply to unpriced change orders for ship construction and ship repair. DFARS , Unpriced Change Orders, is added, which states, See the clause prescriptions at [DFARS] for all unpriced change orders with an estimated value exceeding $5 million. For more on the proposed rule, see the August 2009 Federal Contracts Perspective article Tidal Wave of DFARS Changes in July. 7 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE September 2010

8 Reporting of Commercially Available Off-the-Shelf Items That Contain Specialty Metals: This final rule deletes DFARS , Reporting of Commercially Available Off-the-Shelf Items that Contain Specialty Metals and are Incorporated into Noncommercial End Items, because the statute that required the use of this clause has expired. This clause was added to the DFARS as part of the implementation of Section 804 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law ), which required the government to report to Congress on the use of the exception to the specialty metals restrictions for commercially available off-the-shelf items that are incorporated in noncommercial end items during fiscal years 2008 and This requirement was not extended by subsequent legislation to cover later fiscal years, so the clause is now obsolete and is removed. For more on the proposed rule, see the August 2009 Federal Contracts Perspective article Tidal Wave of DFARS Changes in July. Acquisition of Commercial Items: This finalizes, without changes, the interim rule that implemented Sections 805 and 815 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law ), by: (1) adding DFARS , Contract Type, to specify when time-and-materials or labor-hour contracts may be used for the acquisition of commercial items; and (2) amending DFARS , Policy, to address the conditions under which major weapon systems or subsystems may be treated as commercial items. For more on the interim rule, see the see the August 2009 Federal Contracts Perspective article Tidal Wave of DFARS Changes in July. Transportation: This finalizes, with changes, the proposed rule that would update the text in DFARS Part 247, Transportation, including clarifying certain shipping procedures and offering additional guidance on their use. This final rule revises DFARS Part 247 to: Delete DFARS Subpart 247.1, General; DFARS , Scope of Section [for stevedoring contracts]; DFARS , Award of [stevedoring] Contract; and DFARS , Use of Standard Form 30 for Consignment Instructions, because their subject matter is sufficiently addressed in the FAR or in DOD transportation regulations; Clarify requirements for inclusion of shipping instructions in solicitations and contracts contained in DFARS , DD Form 1384, Transportation Control and Movement Document; DFARS , DD Form 1653, Transportation Data for Solicitations; and DFARS , Ocean Transportation Incidental to a Contract for Supplies, Services, or Construction; and Transfer the text of DFARS , General [for transportation in supply contracts], and DFARS , Packing, Marking, and Consignment Instructions, to the Procedures, Guidance, and Information (PGI) ( No comments were submitted on the proposed rule. However, DOD deliberations resulted in the following differences between the proposed and final versions of the rule: To DFARS , Definitions, is added the following: See additional information at PGI for the Voluntary Intermodal Sealift Agreement program. September 2010 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 8

9 To DFARS , Scope of Subpart, is added the following: See additional guidance at PGI for procurement of transportation or related services. DFARS , Technical provisions [for stevedoring contracts], which had been proposed for deletion, is retained (it is redesignated from DFARS ). DFARS , Policy [for contracts for the preparation of personal property for shipment or storage], which was proposed for deletion, is retained (it is redesignated from DFARS ). To paragraph (i) of DFARS (which is redesignated from DFARS ) is added the following: See additional information at PGI (c)(1) for demurrage and detention charges. The text of DFARS , which was not addressed in the proposed rule, is transferred to PGI and the following is substituted in its place: See PGI for transportation guidance relating to Government Purchase Card purchases that require shipments to destinations outside CONUS [continental United States]. To DFARS (redesignated from DFARS ) is added the following: A link to this document [that is, DOD R, Defense Transportation Regulation, Part II, Chapter 203] is available in PGI For more on the proposed rule, see the August 2005 Federal Contracts Perspective article DOD Addresses Berry Amendment, Hawaiian Organizations. Warranty Tracking of Serialized Items: This proposed rule would revise DFARS Subpart 246.7, Warranties, to define the requirements to track warranties for items subject to Item Unique Identification (IUID) in the IUID registry. This proposed rule would make the following changes: Paragraph (a)(4) of DFARS , Policy for Unique Item Identification, would add any warranted item as being required to have a unique item identification (UII) regardless of value. To DFARS , Definitions [for warranties], would be added the following definition for warranty tracking : warranty tracking is defined in the [DFARS] clause YY, Warranty Tracking of Serialized Items. Paragraph (5) would be added to DFARS , Solicitation Provision and Contract Clauses, to include prescriptions for DFARS XX, Notice of Warranty Tracking of Serialized Items, and DFARS YY, Warranty Tracking of Serialized Items. The definition of issuing agency in DFARS , Item Identification and Valuation, would be revised to add the following to the list of organizations responsible for assigning a non-repeatable identifier to an enterprise (the list currently consists of Dun & Bradstreet s Data Universal Numbering System (DUNS) Number, GS1 Company Prefix, or Defense Logistics Information System (DLIS) Commercial and Government Entity (CAGE) Code): the Coded Representation of the North American Telecommunications Industry Manufacturers, Suppliers, and Related Service Companies (ATIS ) Number), European Health Industry Business Communication Council (EHIBCC) and Health Industry Business Communication Council (HIBCC), as indicated in the Register of Issuing Agency Codes for ISO/IEC 15459, located at ISOIEC Issuing-Agency-Codes.htm. 9 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE September 2010

10 DFARS XX, Notice of Warranty Tracking of Serialized Items, would be added. It would provide directions to the offeror on how to respond to DFARS YY. DFARS YY, Warranty Tracking of Serialized Items, would be added. It would require the contractor to provide the information required by Table I, Warranty Tracking Information, on each contract line item number (CLIN), subline item number (SLIN), or exhibit line item number (ELIN) for warranted items. Also, the contractor would be required to provide the information required by Table II, Warranty Repair Source Information, no later than when the warranted items are presented for receipt and/or acceptance. Comments on this proposed rule must be submitted no later than October 29, 2010, identified as DFARS Case 2009-D018, by any of the following methods: (1) the Federal erulemaking Portal: (2) (3) fax: ; or (4) mail: Defense Acquisition Regulations Council, Attn: Julian E. Thrash, OUSD (AT&L) DPAP (DARS), 3060 Defense Pentagon, Room 3B855, Washington, DC DOD Inspector General (DODIG) Contracting Action Areas of Concern, Purchases Made With Earmarks : This memorandum emphasizes specific interest of concerns resulting from the DODIG audit that was conducted to determine whether DOD activities awarded contracts using funds earmarked in the FY 2005 DOD budget in accordance with the FAR and DFARS. The DODIG reviewed 26 contract actions and identified eight as having concerns relating to market research, competition, and fair and reasonable price determinations. Besides emphasizing that contract actions associated with earmarks must comply with the FAR and DFARS, the Director of Defense Procurement and Acquisition Policy (DPAP) reminded the DOD acquisition workforce that DOD components must comply with the memorandum entitled Full and Open Competition Requirement for Congressionally Directed Spending Items and Earmarks Intended for For-Profit Entities, which addresses contract actions subject to Section 8121 of the FY 2010 Appropriations Act (Public Law ), (see the July 2010 Federal Contracts Perspective article A Plethora of Changes to DFARS in June ). Class Deviation Authorizing Direct Submission of Interim Vouchers: This class deviation deletes from paragraph (b)(1)(c) of DFARS , Disallowing Costs After Incurrence, the words for contractors with approved billing systems from The contract auditor is the authorized representative of the contracting officer for authorizing direct submission of interim vouchers for provisional payment to the disbursing office for contractors with approved billing systems. This deviation eases the requirements, especially for small businesses, to qualify for direct billing, thereby reducing DOD administration and conserving resources in processing low risk payment vouchers. Defense Contingency Contracting Officer Representative (COR) Handbook, 1st Edition: This memorandum announces the release of the Defense Contingency Contracting Officer (COR) Representative Handbook, which is electronically available at pacc/cc/index.html. DPAP is producing approximately 10,000 copies of the handbook in a pocket size format to distribute to each of the components. The pocket sized handbook and its accompanying compact disc will provide essential information, tools, templates, and training for DOD contingency CORs to meet the challenges they may face in any contracting environment. September 2010 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 10

11 RULE ON PROCUREMENT INSTRUMENT IDENTIFIERS PROPOSED A FAR rule is being proposed that would standardize the use of unique procurement instrument identifiers (PIID) throughout the government, and would extend the requirement for using PIIDs to all solicitations, contracts, and related procurement instruments across the federal government. Paragraph (a) of FAR 4.605, Procedures [for contract reporting], requires that agencies must have in place a process that ensures that each PIID reported to FPDS [Federal Procurement Data System] is unique, governmentwide, and will remain so for at least 20 years from the date of contract award. However, FAR 4.605(a) does not clearly articulate the specific policies and procedures necessary to ensure standardization of contract data beyond FPDS. This failure means there is nothing preventing one agency from using the same identification number for a financial record that another agency uses to identify its contracts in FPDS. The duplication of identification numbers would produce duplications, errors, discrepancies, and conflicting information. This problem increases for contract vehicles that are used by more than one agency. To alleviate this potential problem, the proposed rule would add FAR Subpart 4.16, Unique Procurement Instrument Identifiers, and corresponding definitions in new FAR 4.001, Definitions: FAR 4.001, would consist of two definitions: Procurement Instrument Identifier (PIID) means the government-unique identifier for each solicitation, contract, agreement, amendment, modification, or order. For example, an agency may use as its PIID for procurement actions, such as delivery and task orders or basic ordering agreements, the order or agreement number in conjunction with the contract number (see [FAR] ). Supplementary procurement instrument identifier means the non-unique identifier for a procurement action that is used in conjunction with the government-unique identifier. For example, an agency may use as its PIID for an amended solicitation, the governmentunique identifier for a solicitation number (e.g., N R0009) in conjunction with a non-unique amendment number (e.g., 001). The non-unique amendment number represents the supplementary PIID. FAR , Policy, would require agencies to have in place a process that ensures that each PIID used to identify a solicitation or contract action is unique governmentwide, and will remain so for at least 20 years from the date of contract award. Agencies shall submit their proposed identifier format to the General Services Administration s Integrated Acquisition Environment Program Office, which maintains a registry of the agency-unique identifiers schemes. FAR , Identifying the PIID and Supplementary PIID, would require that the PIID be used for all solicitations, contracts, purchase orders, delivery and task orders, blanket purchase agreements and basic ordering agreements, orders against blanket purchase agreements (including blanket purchase agreements established under Federal Supply Schedule contracts) and basic ordering agreements, and modifications, a supplementary PIID 11 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE September 2010

12 is to be identified in conjunction with the PIID for the solicitation, contract, order, or agreement. Comments on the proposed rule must be submitted no later than October 18, 2010, identified as FAR Case , by any of the following methods: (1) the Federal erulemaking Portal: (2) fax: ; or (3) mail: General Services Administration, Regulatory Secretariat (MVCB), 1800 F Street, NW, Room 4041, ATTN: Hada Flowers, Washington, DC NONMANUFACTURER RULE WAIVER ISSUED FOR LAB EQUIPMENT The Small Business Administration (SBA) is waiving the nonmanufacturer rule for liquid chromatography mass spectrometry systems (CS-MS), high performance liquid chromatography (HPLC) systems, gas chromatography mass spectrometry (GC-MS) systems, and inductively coupled plasma mass spectrometry (ICP-MS) systems under NAICS code , Analytical Laboratory Instrument Manufacturing, PSC 6640, Laboratory 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 submitted in response to the proposed waiver, so the waiver is granted. For more on the proposed waiver, see the August 2010 Federal Contracts Perspective article Nonmanufacturer Rule Waived for Tape Library Storage. In addition, the SBA is proposing to waive the nonmanufacturer rule for: (1) woven and knit impregnated with flat dipped rubber/plastic gloves under North American Industry Classification System (NAICS) code , Glove and Mitten Manufacturing; and (2) GEN II and GEN III image intensifier tubes, under NAICS code , Optical Instrument and Lens Manufacturing, Product Service Code (PSC) 5855, Night Vision Equipment, Emitted and Reflected Radiation. SBA is inviting the public to comment on these proposed waivers or to provide information on potential small business sources for these products by September 13, 2010, to Amy Garcia, Program Analyst, Small Business Administration, Office of Government Contracting, 409 3rd Street, SW, Suite 8800, Washington, DC 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 Section , 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 , 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 sba_program_office/class_waiver.pdf. Visit September 2010 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 12

13 COURT OF FEDERAL CLAIMS UPHOLDS HUBZONE PRECEDENCE The United States Court of Federal Claims (COFC) has upheld a protest that the Historically Underutilized Business Zone (HUBZone) program is granted statutory precedence over the SBA s 8(a) program. The case, DGR Associates, Inc. v. United States and General Trade & Services, Inc. (No C, August 13, 2010), was an appeal by DGR of the Air Force s refusal to comply with the Government Accountability Office (GAO) decision that the Air Force had to consider whether it could expect two or more qualified HUBZone small business concerns to submit proposals at a fair market price and, if the Air Force could expect two or more qualified HUBZone small business concerns to submit proposals at a fair market price, then it must cancel the 8(a) solicitation issue a new solicitation as a HUBZone set-aside (B , DGR Associates, Inc., May 14, 2010). Because the GAO is part of the legislative branch or government and the Air Force is part of the executive branch, GAO decisions are not binding on the Air Force. The Air Force informed GAO that it would not comply with its decision sustaining DGR s protest, and this appeal to the COFC was filed. This is the latest in a series of GAO and COFC decisions that rest on the contrasting language in the statutes authorizing the two programs (emphasis added): The HUBZone program language in Title 15 of the U.S. Code, Section 657a (15 U.S.C. 657a), paragraph (b)(2)(b), states, Notwithstanding any other provision of law a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price. The 8(a) program language in 15 U.S.C. 637, paragraph (a)(1)(a), states, In any case in which the [Small Business] Administration certifies to any officer of the government having procurement powers that the [SBA] is competent and responsible to perform any specific government procurement contract to be let by any such officer, such officer shall be authorized in his discretion to let such procurement contract to the [SBA] upon such terms and conditions as may be agreed upon between the [SBA] and the procurement officer. Both the GAO and the COFC have ruled that this language gives the HUBZone program precedence over the 8(a) program (and the service-disabled veteran-owned small business (SDVOSB) program, which is authorized by a statute that contains language similar to that authorizing the 8(a) program). However, both SBA and the Office of Management and Budget (OMB) have issued memoranda to contracting officers stating that the HUBZone and 8(a) programs (and the SDVOSB program) are equal the programs have parity. While the Air Force is not required to comply with GAO decisions, it is required to comply with COFC decisions. In its DGR Associates, Inc. decision, the COFC rules that the Air Force violated the Small Business Act by complying with the SBA s regulations, which fail to prioritize the HUBZone program over other small business programs as provided in the plain language of the Act If the Air Force had followed the HUBZone provision as it was obligated to do by the plain statutory language, it would have found there was a reasonable expectation that at least two qualified HUBZone small business concerns could submit offers at fair market prices. DGR would have been given an opportunity to compete Because the Air Force acted in 13 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE September 2010

14 violation of the law when it issued the second solicitation under the 8(a) program, it is in the public interest for the Court to correct the illegality that occurred and stop the contract from proceeding. The illegal contract must be cancelled and a new solicitation issued. DGR does not automatically become the contract awardee, but DGR will be able to compete for the award. For more GAO s DGR decision, see the June 2010 Federal Contracts Perspective article DOD Publishes Five Proposed Rules, Two Deviations. For more on the earlier decisions by GAO and the COFC, see the August 2009 Federal Contracts Perspective article OMB Issues Five Memos Providing Contracting Guidance ; the September 2009 Federal Contracts Perspective article Department of Justice Reaffirms SBA s Small Business Program Parity Regulations ; and the April 2010 Federal Contracts Perspective article HUBZone Preference Upheld by Court of Federal Claims. DIAR REWRITE ADOPTED AS FINAL The Department of the Interior (DOI) is adopting as final, without changes, the interim rule that rewrote the DOI Acquisition Regulation (DIAR) to update references to other federal and departmental directives, remove obsolete material and references, and clarify and streamline internal policies and procedures. This rewrite does not impose any new requirements on DOI contractors, and no DIAR clauses are being changed, with the exception of the removal of obsolete clauses. No comments were submitted in response to the interim rule, so it is adopted as final without changes. For more on the interim rule, see the May 2010 Federal Contracts Perspective article DIAR Rewritten. GSAR PART 541 ADDED FOR UTILITY SERVICES The General Services Administration (GSA) is amending the GSA Acquisition Regulation (GSAR) to add Part 541, Acquisition of Utility Services, to consolidate in one GSAR part material relevant to utilities contracts. GSAR Part 541 consists of a single subpart GSAR Subpart 541.5, Solicitation Provision and Contract Clauses which consists of the prescriptions for two new clauses: GSAR , Availability of Funds for the Next Fiscal Year or Quarter, and GSAR , Disputes (Utility Contracts). GSAR is to be included all GSA utility solicitations and contracts instead of FAR , Availability of Funds for the Next Fiscal Year. GSAR is to be included in solicitations and contracts for utility services subject to the jurisdiction and regulation of a utility rate commission. GSAR is added because there are no FAR clauses that adequately address disputes involving utility contracts. Two respondents submitted comments on the proposed rule, but GSA decided not to adopt either of the comments, so the proposed rule is adopted as final without changes. For more on the proposed rule, see the June 2009 Federal Contracts Perspective article GSAR Rewrite Picking Up Momentum. September 2010 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 14

15 DEPARTMENT OF EDUCATION PROPOSES REISSUING EDAR The Department of Education is proposing to revise and reissue the Department of Education Acquisition Regulation (EDAR), which has not been updated since In the years since then, the FAR has changed substantially. These changes caused a need for the department to update the EDAR so that it correctly implements the FAR and reflects department policy. Among the significant changes that have taken place since 1987 are the enactment of the Federal Acquisition Streamlining Act, the Clinger-Cohen Act, and the Service Acquisition Reform Act; the establishment of the HUBZone and SDVOSB programs; and the advent of the Internet and electronic commerce. The most noteworthy changes in the proposed EDAR address the procurement flexibility authorized in 1998 by 20 U.S.C. 1018a for the department s performance-based organization, the Office of Federal Student Aid (FSA). Comments on the proposed rule must be submitted no later than September 22, 2010, by either of the following methods: (1) the Federal erulemaking Portal: gov; or (2) mail, or commercial or hand delivery: Nicole Evans, U.S. Department of Education, 400 Maryland Avenue, SW, Room 7164, Potomac Center Plaza, Washington, DC TAKE ADVANTAGE OF THE ECONOMIC STIMULUS! 426 pages, 2009, ISBN: , $49.95 from Panoptic Enterprises ( and from Amazon.com 15 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE September 2010