FEDERAL CONTRACTS PERSPECTIVE Federal Acquisition Developments, Guidance, and Opinions

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1 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE Federal Acquisition Developments, Guidance, and Opinions Vol. XV, No. 12 December 2014 FAC STANDARDIZES INCORPORATION OF REPRESENTATIONS AND CERTIFICATIONS IN CONTRACTS Federal Acquisition Circular (FAC) addresses a nagging problem that has bedeviled federal acquisitions for years: the inconsistent incorporation in contract awards of Section K, Representations, Certifications, and Other Statements of Bidders/Offerors or Respondents. In addition, FAC amends the Federal Acquisition Regulation (FAR) to reflect the transfer of authority to process claims for the payment of workers who were not paid appropriate wages; to clarify when to use higher-level quality standards in solicitations and contracts; and to remove the last vestiges of year 2000 compliance ( Y2K ). CONTENTS FAR Incorporates Section K in Contracts... 1 Five-Year Acquisition Threshold Adjustments Proposed.. 4 Number of Protests Increased by 5% in FY DOD Updates Four Types of Contract Clauses... 7 Incorporating Section K in Contracts: This finalizes, with an editorial change, the proposed rule that would revise FAR subpart 4.12, Representations and Certifications, and add FAR , Incorporation by Reference of Representations and Certifications, to standardize the incorporation by reference of representations and certifications in contracts. The standard contract award forms are inconsistent regarding the reference to Section K of the Uniform Contract Format [Representations, Certifications, and Other Statements of Bidders/Offerors or Respondents]. Standard Form (SF) 26, Award/Contract, SF 33, Solicitation, Offer and Award, and Optional Form 307, Contract Award, each have a block for the page numbers where Section K is located in the contract, but SF 252, Architect-Engineer Contract, SF 1442, Solicitation, Offer and Award (Construction, Alteration or Repair), SF 1447, Solicitation/Contract, and SF 1449, Solicitation/Contract/Order for Commercial Items, do not address Section K. In addition, FAR , Uniform Contract Format, requires that Section K be incorporated by reference into the contract, but FAR , Uniform Contract Format [Sealed Bidding], merely stated that acceptance of a bid incorporates Section K in the resultant contract even though not physically attached. To clarify this, the rule proposed the following: Amend FAR , Policy, and FAR , Solicitation Provision and Contract Clause, to add: The contracting officer shall incorporate the representations and certifications by reference in the contract (see [FAR] X, or for commercial items see [FAR] (v)).

2 Amend FAR and FAR to add: The representations and certifications shall be incorporated by reference in the contract by using [FAR] X (see [FAR] (b)) or for commercial items [FAR] (v)). Add FAR X and amend paragraph (v) of FAR , Contract Terms and Conditions Commercial Items, to read as follows: The contractor s representations and certifications, including those completed electronically via the System for Award Management (SAM) [ are incorporated by reference into the contract. One respondent submitted comments on the proposed rule, and in response the parenthetical phrase in FAR and FAR is amended to read: (see [FAR] (b)) or for commercial items see [FAR] (v)) (emphasis added). In addition, the numbering of the added clause is finalized as FAR (FAR X was merely a placeholder). For more on the proposed rule, see the May 2014 Federal Contracts Perspective article Proposed FAR Rule Would Add Section K to Contracts. Streamlining Claims Processing: This final rule amends FAR subpart 22.4, Labor Standards for Contracts Involving Construction, and removes Standard Form (SF) 1093, Schedule of Withholdings Under the Construction Wage Rate Requirements Statute (40 U.S.C. Chapter 31, Subchapter IV, Section 3144) and/or the Contract Work Hours and Safety Standards Statute (40 U.S.C. Chapter 37, Section 3703), to comply with the Streamlining Claims Processing for Federal Contractor Employees Act (Public Law ), which transfers from the Government Accountability Office (GAO) to the Department of Labor (DOL) certain administrative authorities relating to the processing of claims for the payment of workers who were not paid appropriate wages. One of the specific functions transferred to the DOL is the authority to pay certain wages. FAR subpart 22.4, which addresses the withholding or suspending of contract payments and the disposition of such payments, requires revision to be consistent with the act. Specifically, paragraph (c) of FAR , Withholding from or Suspension of Contract Payments, includes instructions regarding the disposition of contract payments that have been withheld or suspended. Also, FAR , Contract Terminations, includes instructions for submitting reports when terminations result from violation of labor standards clauses. This final rule revises these FAR sections to reflect the authorities transferred to the DOL, and to provide a link to the DOL website that provides guidance on the disbursement of withheld funds ( gov/whd/govcontracts/dbra.htm). Also, because the SF 1093 was used to disburse funds to the GAO, SF 1093 is deleted from FAR part 53, Illustration of Forms, and references to it in FAR are removed. Year Format: This finalizes, without changes, the rule that proposed to delete FAR , Year 2000 Compliance, and related portions of the FAR because all of the issues addressing the transition to year 2000 have been resolved. Vivina McVay, Editor-in Chief 2014 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 December 2014 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 2

3 FAR required that information technology being acquired must be year 2000 compliant, meaning the year had to be representing in a four-digit format ( 1/1/2000 ). In addition, FAR required that all information technology not year 2000 compliant be upgraded into compliance. Because all information technology now in use by the government is year 2000 compliant, FAR is no longer necessary. In addition, the rule proposed to remove the Year 2000 Compliant definition in FAR , Definitions, and paragraph (a) of FAR , Policy, which addresses the statutory requirement for year 2000 compliance. No comments were submitted on the proposed rule, so it is finalized without changes. For more on the proposed rule, see the April 2014 Federal Contracts Perspective article Removal of Year 2000 Compliance Regulations Proposed. Higher-Level Contract Quality Requirements: This finalizes, with changes, the rule that proposed to amend FAR part 46, Quality Assurance, to clarify when to use higher-level quality standards in solicitations and contracts, and to update the examples of higher-level quality standards by revising obsolete standards and adding two new industry standards that pertain to quality assurance for avoidance of counterfeit items. These standards will be used to help minimize and mitigate counterfeit items or suspect counterfeit items in government contracting. Section 818 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law ), Detection and Avoidance of Counterfeit Electronic Parts, requires the Department of Defense (DOD) to issue regulations addressing contractor responsibilities for detecting and avoiding the use or inclusion of counterfeit electronic parts or suspect counterfeit electronic parts. However, because of the globalization of the marketplace, the problem of counterfeits extends far beyond DOD and electronic parts, posing a supply chain challenge to both government and industry. Globalization raises the risk because of the variations in laws related to commerce and fragments the quality assurance process. Therefore, it was decided to apply the rule to all federal contracting activities and to expand it beyond electronics. The rule proposed making the following changes to FAR part 46: Paragraph (a) of FAR , Higher-Level Contract Quality Requirements, to add the following sentence: Agencies shall establish procedures for determining when higherlevel contract quality requirements are necessary, for determining the risk (both the likelihood and the impact) of receiving nonconforming items, and for advising the contracting officer about which higher-level standards should be applied and included in the solicitation and contract. FAR (a)(1) to add design and testing to the list of examples of technical requirements requiring control. Revised paragraph (a)(1) would read that higher-level quality standards would be appropriate in technical contracts that require Control of such things as design, work operations, in-process controls, testing, and inspection (emphasis added). FAR (b) to remove outdated or obsolete standards and add new examples of higher-level quality standards, including those related to counterfeit electronic parts and materials (the replacement standards would be ISO 9001, ASQ E, ASME NQA-1, SAE AS9100, SAE AS9003, SAE AS5553, and SAE AS6174). 3 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE December 2014

4 FAR , Higher-level Contract Quality Requirement, to clarify that, if the clause FAR , Higher-Level Contract Quality Requirement, is used, the contracting officer will list one or more higher-level quality standards that will apply to the contract. FAR to remove the opportunity for the offeror to select a standard: If more than one standard is listed, the offeror shall indicate its selection by checking the appropriate block would be replaced with Contracting Officer insert the title, number, date, and tailoring (if any) of the higher-level quality standards. In addition, it was proposed that FAR , Contractors Purchasing Systems Review, be revised to add implementation of higher-level quality standards to the areas for evaluation when conducting a contractor s purchasing system review (new paragraph (k)). Six respondents submitted comments, and the following changes are incorporated in the final rule in response: FAR (b) is revised to: (1) clarify that higher-level quality standards include both overarching quality management system standards and product or process specific quality standards; (2) delete reference to SAE AS6174, Counterfeit Materiel; Assuring Acquisition of Authentic and Conforming Materiel, because it does not provide guidance in implementing meaningful counterfeit avoidance processes for material; and (3) add ISO/TS 16949, Quality Management Systems Particular Requirements for the Application of ISO 9001:2008 for Automotive Production and Relevant Service Part Organizations. Add the following as paragraph (b) of FAR : For each higher-level quality standard, the contracting officer shall fill in the title, number, date, and tailoring (if any). Add paragraph (b) to FAR to clarify that the prime contractor is responsible for flowing down applicable requirements of the higher-level quality standard in subcontracts for critical and complex items at any tier. For more on the proposed rule, see the January 2014 Federal Contracts Perspective article Higher-Level Contract Quality Requirements Proposed. FIVE-YEAR ACQUISITION THRESHOLD ADJUSTMENTS PROPOSED Every five years, statutory-based acquisition-related thresholds are required to be adjusted for inflation except for the Construction Wage Rate Requirements statute (the Davis-Bacon Act), the Service Contract Labor Standards statute (the Service Contract Act), and trade agreements thresholds. This requirement is in Section 807 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year (FY) 2005 (Public Law ), and it requires an adjustment every five years ( on October 1 of each year that is evenly divisible by five ) using the Consumer Price Index for all urban consumers. This proposed rule would make the required adjustments to the statutory-based acquisition thresholds on October 1, In addition, this proposed rule would use the same methodology to adjust nonstatutory acquisition-related December 2014 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 4

5 thresholds that is, those thresholds in the FAR that have their origin in executive orders or regulations. However, this proposed rule does not address those thresholds that are not considered acquisition-related, such as those related to claims, penalties, withholding, payments, required levels of insurance, small business size standards, liquidated damages, etc. Finally, changes to cost accounting standards (CAS) thresholds will be dealt with separately. The following are the adjustments that would be made to the most used thresholds by this rule: The micropurchase threshold in FAR 2.101, Definitions, would be increased from $3,000 to $3,500. The threshold in FAR subpart 4.14, Reporting Executive Compensation and First-Tier Subcontract Awards, for reporting first-tier subcontract information and executive compensation would increase from $25,000 to $30,000. The commercial items test program ceiling in FAR , General, would be increased from $6,500,000 to $7,000,000 (however, note that the program is scheduled to expire on January 1, 2015, unless Congress extends it). The cost and pricing data threshold in FAR , Requiring Cost or Pricing Data (10 USC 2306a and 41 USC Chapter 35), would be increased from $700,000 to $750,000. The prime contractor subcontracting plan threshold in FAR , Statutory Requirements, would be increased from $650,000 to $700,000, but the construction threshold would remain at $1,500,000. Comparable changes would be made to corresponding provisions and clauses in FAR part 52, Solicitation Provisions and Contract Clauses. The $150,000 simplified acquisition threshold in FAR would be unchanged because it was escalated in 2010 and the inflation since then is insufficient to trigger another adjustment. Also, the threshold for FedBizOpps ( preaward and post-award notices in FAR part 5, Publicizing Contract Actions, will remain at $25,000 because of the trade agreements. Comments on the proposed rule must be submitted no later than January 26, 2015, 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), ATTN: Ms. Flowers, 1800 F Street NW, 2nd Floor, Washington, DC For more on the previous adjustments to FAR thresholds, see the September 2010 Federal Contracts Perspective article Federal Acquisition-Related Thresholds Adjusted for Inflation. In addition, the Department of Defense (DOD) has proposed five-year inflation adjustments to acquisition-related thresholds in the Defense FAR Supplement (DFARS). Besides making changes to conform to the FAR threshold adjustments (see above), DOD is proposing changes to thresholds that apply only to DOD. Among the most significant DOD-unique threshold changes would be the following: 5 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE December 2014

6 The threshold in DFARS , Announcement of Contract Awards, would be increased from $6,500,000 to $7,000,000 (the threshold in FAR remains $4,000,000). The limit in DFARS , Contracts Under the Program, for acquisition of militarypurpose nondevelopmental items, would be increased from $50,000,000 to $55,000,000. The multiyear contract cancellation ceiling threshold in DFARS , General, would be increased from $100,000,000 to $139,000,000. The limit on the use of a multiyear contract for services in DFARS , Multiyear Contracts for Services, would be increased from $625,500,000 to $698,500,000. The limit on the use of a multiyear contract for supplies in DFARS , Multiyear Contracts for Supplies, would be increased from $500,000,000 to $698,500,000. The approval threshold for the acquisition of services through a contract or task order that is not performance-based in DFARS , Approval Requirements, would be increased from $85,500,000 to $95,500,000. Comparable changes would be made to corresponding provisions and clauses in DFARS part 252, Solicitation Provisions and Contract Clauses. Comments on the proposed rule must be submitted no later than January 5, 2015, identified as DFARS 2014-D025, by any of the following methods: (1) the Federal erulemaking Portal: (2) osd.dfars@mail.mil; (3) fax: ; or (4) mail: Defense Acquisition Regulations System, Attn: Amy Williams, OUSD(AT&L)DPAP/ DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC For more on the previous adjustments to DFARS thresholds, see the September 2010 Federal Contracts Perspective article Defense Acquisition-Related Thresholds Adjusted, Too. NUMBER OF PROTESTS INCREASED BY 5% IN FY 2014 The Government Accountability Office (GAO) issued its annual letter on bid protests to various Congressional committees, in which it reported that 2,561 protests, cost claims, and requests for reconsideration were filed in Fiscal Year (FY) 2014, a 5% increase from the 2,429 filed in FY This is the largest number of protests filed since FY The FY 2014 protest sustain rate (number of GAO decisions in favor of the protestor versus the number of all protests) was 13%, compared to the 17% sustain rate for FY 2013 and 18.6% sustain rate for FY The 43% effectiveness rate (the protestor obtained some form of relief from the agency either as a result of voluntary corrective action by the agency or a GAO decision sustaining the protest) was the same as the effectiveness rate for FY 2013 and slightly higher than the 42% effectiveness rates for FY 2012 and FY GAO s review of its decisions shows the most prevalent reasons for sustaining protests during FY 2014 were: (1) failure to follow the solicitation evaluation criteria; (2) flawed selection decision; (3) unreasonable technical evaluation; and (4) unequal treatment of offerors. December 2014 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 6

7 DOD UPDATES FOUR TYPES OF CONTRACT CLAUSES Besides the proposed revision of acquisition thresholds in the DFARS (see above), DOD continued its revision of DFARS provisions and clauses that have alternates by finalizing the proposed rules on clauses and their alternates in contracts involving special contracting methods, major systems, services, and foreign acquisitions. In addition, DOD is proposing to require the use of a new clause that would clarify that entering into a contract may cause a small business to exceed the applicable small business size standard. Special Contracting Methods, Major System Acquisition, and Service Contracting Clauses with Alternates: This finalizes, without changes, the rule that proposed to create overarching prescriptions for clauses with one or more alternates pertaining to special contracting methods (DFARS part 217), major system acquisitions (DFARS part 234), and service contracting (DFARS part 237). In addition, separate prescriptions for the basic clause and its alternate(s) are added, and the text of the alternate is included in the DFARS in full. The affected clauses are: DFARS , Exercise of Option to Fulfill Foreign Military Sales Commitments, with one alternate; DFARS , Notice of Cost and Software Data Reporting System, with one alternate; DFARS , Cost and Software Data Reporting System, with one alternate; DFARS , Award to Single Offeror, with one alternate; and DFARS , Delivery Tickets, with two alternates. The naming convention results in new clause titles, for example, Exercise of Option to Fulfill Foreign Military Sales Commitments Basic, and Exercise of Option to Fulfill Foreign Military Sales Commitments Alternate I. No comments were submitted on the proposed rule, so it is finalized without changes. For more on the proposed rule, see the June 2014 Federal Contracts Perspective article DOD Continues Revising Clauses with Alternates. Foreign Acquisition Clauses with Alternates: This finalizes, with changes, the rule that proposed to create overarching prescriptions for clauses with one or more alternates pertaining to foreign acquisition (DFARS part 225). In addition, separate prescriptions for the basic clause and its alternate(s) are added, and the text of the alternate is included in the DFARS in full. The six clauses that were proposed for this treatment were: DFARS , Buy American Balance of Payments Program Certificate, and its one alternate; DFARS , Buy American and Balance of Payments Program, and its one alternate; DFARS , Trade Agreements Certificate, and its one alternate; DFARS , Trade Agreements, and its two alternates; 7 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE December 2014

8 DFARS , Buy American Free Trade Agreements Balance of Payments Program Certificate, and its five alternates; and DFARS , Buy American Free Trade Agreements Balance of Payments Program, and its five alternates. No comments were submitted in response to the proposed rule. However, DFARS part 225 contains eight solicitation provisions and clauses that have alternates. The proposed rule addressed the six above but not DFARS , Balance of Payments Program Construction Material, and its alternate, or DFARS , Balance of Payments Program Construction Material Under Trade Agreements, and its three alternates. These were to be addressed in a separate rule but the effort was abandoned. Therefore, this final rule includes DFARS and DFARS and reformats them to conform to the new structure for provisions and clauses with alternates. Finally, the final rule contains some minor wording changes for clarity and consistency in presentation of the clauses and provisions. For more on the proposed rule, see the March 2014 Federal Contracts Perspective article DOD Cranks Up DFARS Changes. Advancing Small Business Growth: This proposed rule would require the inclusion of DFARS XXXX, Advancing Small Business Growth, to clarify that entering into a contract may cause a small business to eventually exceed the applicable small business size standard. This is required by Section 1611 of the National Defense Authorization Act for Fiscal Year 2014 (Public Law ). The rule would add DFARS , Solicitation Provisions and Contract Clauses [for determining small business status], which would require the inclusion of DFARS XXXX in solicitations for contracts that are expected to exceed (1) the small business size standard, if expressed in dollars, for the North American Industry Classification System (NAICS) code assigned by the contracting officer; or (2) $70,000,000, if the small business size standard is expressed as number of employees for the NAICS code assigned by the contracting officer. DFARS XXXX would require the offeror to acknowledge that by acceptance of this contract, it may exceed the applicable small business size standard of the NAICS code assigned to the contract and would no longer qualify as a small business concern for that NAICS code. (Small business size standards matched to industry NAICS codes are published by the Small Business Administration and are available at The offeror is therefore encouraged to develop the capabilities and characteristics typically desired in contractors that are competitive as other-than-small contractors in this industry For technical assistance in this regard, the offeror may contact the nearest Procurement Technical Assistance Center (PTAC). PTAC locations are available at There are over 300 PTACs in the U.S., Puerto Rico, and Guam, and they offer a wide range of government contracting assistance. Comments on the proposed rule must be submitted no later than January 5, 2015, identified as DFARS case 2014-D022, by any of the following methods: (1) the Federal erulemaking Portal: (2) osd.dfars@mail.mil; (3) fax: ; or (4) mail: Defense Acquisition Regulations System, Attn: Lee Renna, OUSD(AT&L)DPAP/ DARS, Room 3B941, 3060 Defense Pentagon, Washington, DC December 2014 Panoptic Enterprises FEDERAL CONTRACTS PERSPECTIVE 8