Recent Federal Acquisition Regulation Changes

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Recent Federal Acquisition Regulation Changes
Cape Canaveral Chapter National Contract
Management Association

• Karen L. Manos

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2006 Federal Acquisition Circulars

• FAC 2005-7, 71 Fed. Reg. 198 (3 Jan 06)
• FAC 2005-8, 71 Fed. Reg. 864 (5 Jan 06)
• FAC 2005-9, 71 Fed. Reg. 20294 (19 Apr 06)
• FAC 2005-10, 71 Fed. Reg. 36922 (28 Jun 06)
• FAC 2005-11, 71 Fed. Reg. 38238 (5 Jul 06)
• FAC 2005-12, 71 Fed. Reg. 44546 (4 Aug 06)
• FAC 2005-13, 71 Fed. Reg. 57356 (28 Sep 06)
• FAC 2005-14, 71 Fed. Reg. 67770 (22 Nov 06)
• FAC 2005-15, 71 Fed. Reg. 74656 (12 Dec 06)

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Time-and-Materials Labor-Hour Contracts

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Payments Under TM and LH Contracts

• Revised FAR 52.232-7, Payments Under
  Time-and-Materials and Labor-Hour Contracts (FEB
  2007)
• Hourly rate means all labor that meets the
  contract labor qualifications
• Includes labor performed by contractor,
  subcontractor, and interorganizational transfer
• Materials means
• Direct materials
• Subcontracts for supplies and incidental services
• Other direct costs
• Applicable indirect costs
• Material costs may include indirect costs and
  ODCs
• Costs must be excluded from hourly rates, and
• Allocated in accordance with contractors
  accounting practices
• Established three new solicitation provisions to
  direct how proposals address subcontract labor

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FAR 52.216-29

• Noncommercial item acquisitions with adequate
  price competition
• Offeror must specify whether proposed hourly
  rates for each labor category apply to labor by
• the offeror,
• subcontractors, or
• divisions, subsidiaries, or affiliates under
  common control
• Offeror must establish fixed hourly rates using
  either
• separate rates for each category of labor
• blended rates for each category of labor, or
• any combination of separate and blended rates
• Agencies can make alternative 1 mandatory
• DoD interim rule (12 Dec 06) did so

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FAR 52.216-30

• Noncommercial item acquisitions without adequate
  price competition
• Offeror must specify fixed hourly rates for each
  category of labor to be performed by
• the offeror,
• each subcontractor, and
• each division, subsidiary, or affiliate of the
  offeror under a common control
• For interdivisional transfers
• Fixed hourly rates may not include profit for
  transferor
• May include profit for prime contractor
• Fixed hourly rates for interdivisional transfers
  of commercial services may be the established
  catalog or market rate when it is the established
  practice of the transferring organization to
  price interorganizational transfers at other than
  cost for commercial work

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FAR 52.216-31

• Commercial item acquisitions
• Offeror must specify whether proposed hourly
  rates for each labor category apply to labor by
• the offeror,
• subcontractors, or
• divisions, subsidiaries, or affiliates under
  common control

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Additional Commercial Contract Types

• TM and LH contracts are permitted for commercial
  services under FAR Part 12 if
• the contract or task order is competitively
  awarded,
• the CO executes a determination and findings
  (DF) that no other contract type authorized for
  commercial item contracts is appropriate,
• there is a ceiling price that the contractor
  exceeds at its own risk, and
• any subsequent change in the ceiling price is
  made only upon a documented determination that it
  is in the best interest of the procuring agency
• For both commercial and noncommercial TM/LH
  contracts, the DF must be approved by HCA if the
  contract will exceed 3 years

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FAR 52.212-4, Alt 1

• (a) Inspection/Acceptance
• reimbursement for rework at fixed hourly rates
  less profit (assumed to be 10 unless specified)
• (e) Definitions
• includes new definitions of hourly rates and
  materials
• (i) Payments
• limits ODCs to those specified in contract or
  order
• provides for reimbursement of indirect costs on
  pro rata basis over term of contract
• contains broad access to records provision
• (l) Termination for the Governments
  Convenience
• paid for labor prior to termination at fixed
  hourly rates,
• plus reasonable charges resulting from termination

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New Requirements for Contractors

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Combating Trafficking in Persons

• New FAR 52.222-50, Combating Trafficking in
  Persons (APR 2006)
• Applies to non-commercial service contracts
• Requires contractor to establish policies and
  procedures for ensuring its employees do not
• engage in or support severe forms of trafficking,
• procure commercial sex acts, or
• use forced labor in performance of the contract
• Receipt of allegations about an employee requires
  immediate reporting to contracting officer
• Sanctions include default termination, suspension
  and debarment, among others

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Common Identification Standard for Contractors

• FAC 2005-7, interim rule (3 Jan 06) FAC 2005-14,
  final rule with changes (22 Nov 06).
• New FAR 52.204-9, Personal Identity Verification
  of Contractor Personnel (NOV 2006)
• Requires compliance with
• Homeland Security Presidential Directive (HSPD)
  12, Policy for a Common Identification Standard
  for Federal Employees and Contractors
• Federal Information Processing Standards
  Publication (FIPS PUB) 201, Personal Identity
  Verification (PIV) of Federal Employees and
  Contractors
• Requires National Agency Check with Inquiries
  (NACI) for contractor/subcontractor personnel who
  require routine access to federal facilities or
  information systems
• Interim access may be granted based on
  fingerprint check
• Applied to new contracts as of 27 Oct 05
• Existing contracts must be modified by 27 Oct 07

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Earned Value Management System

• Major acquisitions for development require use of
  an EVMS that complies with the guidelines of
  ANSI/EIA Standard 748
• Applies regardless of contract type
• Intended to standardize the use of EVMS across
  the government
• Agencies may require use of an EVMS for other
  acquisitions
• When an EVMS is required, the agency must conduct
  an Integrated Baseline Review (IBR)
• Agency determines whether IBR is conducted pre-
  or post-award
• Offerors without an operational EVMS are still
  eligible for award if they submit an EVMS
  implementation plan

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Contract Award and Administration

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Inflation Adjustment of Acquisition-Related
Thresholds

• Effective 28 Sep 06, FAC 2005-13 made the
  following adjustments (among others)
• Micro-purchase threshold 3,000
• Commercial item test program -- 5,500,000
• Subcontracting plan floor -- 550,000 (1 million
  for construction remained unchanged)
• DoD Major System -- 814,500,000
• Truth in Negotiations Act -- 650,000

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Performance Based Acquisition

• Performance-Based Contracting (PBC) and
  Performance-Based Service Contracting (PBSC) are
  out Performance-Based Acquisition (PBA) is in
• PBA an acquisition structured around the
  results to be achieved as opposed to the manner
  by which the work is to be performed
• PBA remains preferred method, and must be used
  for services contracts to maximum extent
  practicable
• Final rule clarifies PBA terms and elements
• Clarifies that selection of contract type is same
  for PBA as for any acquisition
• TM/LH contracts may be used

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Emergency Acquisitions

• New FAR Part 18 provides single reference for
  existing acquisition flexibilities that may be
  used to facilitate and expedite acquisitions in
  an emergency situation
• Response to Hurricane Katrina
• Divided into
• Available Acquisition Flexibilities that may be
  used at any time
• Emergency Acquisition Flexibilities that can
  only be used in declared emergencies
• Emergency Acquisition Flexibilities are divided
  into
• Contingency operations
• Defense or recovery from attack
• Incidents of national significance, emergency
  declaration, or major disaster declaration

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OMB Circular A-76

• Revises FAR to be consistent with OMB Cir. A-76
  (Revised), Performance of Commercial Activities
  (29 May 03)
• Adds two new FAR clauses to inform potential
  offerors of procedures the government will follow
  for streamlined and standard competitions

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Use of Brand Name Specifications

• Implements Office of Management and Budget policy
  memoranda
• Requires agencies to publish on the
  Governmentwide point of entry (GPE) or e-Buy
  documentation required by the FAR to support the
  use of a brand name specification
• Intended to limit the use of brand name
  specifications

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Federal Prison Industries

• Converts interim rule (11 Apr 05) to final rule
  with changes
• Implements Consolidated Appropriations Act for
  2005
• Use market research before purchasing an FPI
  product to determine if FPI product is comparable
  to best value private sector products

• If FPI product is not comparable, use
  competitive procedures or purchase under multiple
  award contract
• Must consider timely offer from FPI

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Federal Technical Data Solution

• Contracting officers are required to make
  solicitation-related limited-distribution
  information available to offerors electronically
  through the Federal Technical Data Solution
  (FedTeDS)
• FedTeDS provides secure, user identification and
  password protected access
• Note Those who download FedTeDS information have
  an obligation to assure continued control of it

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Wage Determinations OnLine

• On August 26, 2005, the Department of Labor
  launched the Wage Determinations OnLine (WDOL)
  website
• FAR interim rule directs contracting agencies to
  obtain wage determinations from WDOL for
  contracts subject to the Service Contract Act or
  Davis-Bacon Act
• If WDOL does not contain the applicable W/D, the
  CO must request one
• by submitting electronic e98 for SCA contracts
• by submitting a paper SF-308 for DBA contracts
• Eliminates requirement for CO to submit
  collective bargaining agreements to DOL they are
  incorporated by reference and included in
  successor contract
• Deletes FAR 52.222-47, SCA Minimum Wages and
  Fringe Benefits Applicable to Successor Contract
  Pursuant to Predecessor Contractor Collective
  Bargaining Agreement (CBA) because it is no
  longer necessary with the WDOL

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TIN Validation

• Makes Internal Revenue Service (IRS) validation
  of the Taxpayer Identification Number (TIN) a
  mandatory part of the Central Contractor
  Registration (CCR)
• Offerors with invalid TIN will not be eligible
  for award

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Annual Reps Certs

• FAR 52.204-8, Annual Representations and
  Certifications (JAN 2006)
• Now includes a section where the contracting
  officer can include the appropriate North
  American Industry Classification System (NAICS)
  code
• Provides standard way for communicating the NAICS
  code and small business size standard

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Archiving Online Reps Certs

• Prospective contractors must submit annual
  representations and certifications via the Online
  Representations and Certifications (ORCA)
• FAR 4.803(a)(11) requires CO to include reps
  certs in contract file
• CO may refer to OCRA archive in lieu of including
  paper copy

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Fast Payment Procedures

• Applies when contract contains FAR 52.213-1, Fast
  Payment Procedures
• Gives payment office flexibility to make (but
  does not require) fast payments when invoices
  and/or outer shipping containers are not marked
  Fast Pay
• If payment office decides against fast payment,
  payment date will be the date that would have
  applied in absence of the clause
• Unmarked invoices will no longer be rejected

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Transportation Standard Industry Practices

• FAR updated to reflect changes to Federal
  Management Regulation
• Definitions added
• bill of lading
• commercial bill of lading
• Requires use of commercial bills of lading for
  domestic shipments

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Cost Pricing

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TINA Exception for Noncommercial Modifications of
Commercial Items

• Implements 818 of National Defense
  Authorization Act for FY 2005
• The commercial item exception does not apply to
  noncommercial modifications of a commercial item
  that are expected to cost more than
• 500,000, or
• 5 of the contract price, whichever is greater
• Note just because commercial item exception is
  inapplicable does not mean TINA applies

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Buy-Back of Assets

• FAR 31.205-11 was revised to cover contractors
  that re-acquire an asset after a
  sale-and-leaseback
• Allowable depreciation costs are limited to the
  amount that would have been allowed had the
  contractor retained title, as adjusted for the
  rental cost limitation required in connection
  with a sale and leaseback
• The limitation applies only to assets that
  generated costs in the most recent accounting
  period prior to the reacquisition

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Socioeconomic Programs

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Confirmation of HUBZone Certification

• Adopts interim rule (27 Jul 05) without change
• Prime contractors must confirm that a
  subcontractor representing itself as a
  Historically Underutilized Business Zone
  (HUBZone) small business is certified

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Very Small Business

• Very Small Business Pilot Program deleted
• Pilot program had set-aside acquisitions between
  2,500 and 50,000 for very small businesses
• Very small business means lt 15 employees annual
  receipts lt 1 million
• Any small business is now eligible for set-aside

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Expiration of SDB Price Evaluation Adjustment

• Adopts interim rule (30 Sep 05) without change
• Cancels for civilian agencies (except NASA and
  the Coast Guard) the Small Disadvantaged Business
  (SDB) price evaluation adjustment
• Adjustment originally authorized under Federal
  Acquisition Streamlining Act of 1994
• The price adjustment evaluation is still
  authorized for DoD, NASA and the Coast Guard

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SBA Procurement Center Representative

• Adds guidance for what to do when the Small
  Business Administration has not assigned a
  Procurement Center Representative for a procuring
  activity
• Contact the SBA Office of Government Contracting
  Area Office
• Provides website for list of locations

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Subcontract Notification Requirements

• Implements National Defense Authorization Act for
  Fiscal Year 2004
• Eliminates requirement for contractors under
  cost-reimbursement contracts with DoD, the Coast
  Guard, and NASA to notify the agency before the
  award of any
• CPFF subcontract, or
• FP subcontract that exceeds the simplified
  acquisition threshold or 5 of the total
  estimated cost of the contract, but only
• If the contractor has an approved purchasing
  system

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Local Community Recovery Act

• Implements the Local Community Recovery Act of
  2006
• Authorizes set-asides for major disaster or
  emergency assistance acquisitions to businesses
  that reside or primarily do business in the
  affected geographic area
• Covers contracts for debris clearance,
  distribution of supplies, reconstruction, etc.
• CO determines the geographic area for the
  set-aside
• Cannot extend beyond declared disaster/emergency
  area
• Imposes subcontracting restrictions
• Contractor employees or other businesses in
  set-aside area must incur at least 50 of the
  cost of labor and at least 50 of the cost of
  manufacturing of supplies
• For general construction, contractor must perform
  at least 15 of the cost, not including
  materials, with its own employees or other
  businesses in set-aside area
• For construction by specific trades, percentage
  increases to 25

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Foreign Acquisition

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Trade Agreements Thresholds

• Interim rule, effective 5 Jan 06 final rule 28
  Sep 06
• Every two years, the trade agreements thresholds
  are escalated by formula
• World Trade Organization (WTO) Government
  Procurement Agreement (GPA) threshold increased
  from 175,000 to 193,000 for supply and service
  contracts
• Construction contract threshold increased from
  6,725,000 to 7,407,000
• Most Free Trade Agreement thresholds increased
  from 58,550 to 64,786 for supply and service
  contracts
• Construction contract thresholds also increased
• Threshold for Canada FTA supply contracts
  remained unchanged

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Free Trade Agreements

• FAC 2005-7 (3 Jan 06), adopted interim rule (28
  Dec 04) with changes
• Removed Morocco and left in place Australia Free
  Trade Agreement

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Free Trade Agreements

• FAC 2005-9, interim rule FAC 2005-14, final rule
  
• Implements Morocco Free Trade Agreement

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Free Trade Agreements

• Dominican Republic-Central America-United States
  Free Trade Agreement
• FAC 2005-10, interim rule, implements FTA with
  respect to El Salvador, Honduras and Nicaragua
• FAC 2005-14, interim rule, implements FTA for
  Guatemala

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Free Trade Agreements

• FAC 2005-14, interim rule, implements United
  States Bahrain Free Trade Agreement

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Removal of Sanctions Against European Union
Member States

• Eliminates sanctions against EU member states
• Austria, Belgium, Denmark, Finland, France,
  Ireland, Italy, Luxembourg, the Netherlands,
  Sweden, and the United Kingdom
• Sanctions had limited applicability in any event
• Applied only to acquisitions not covered by the
  WTO GPA
• Did not apply to small business set-asides
• Did not apply to DoD procurements
• FAC 2005-9, interim rule FAC 2005-14, final rule.

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Removal of Sanctions Against Libya

• Implements Executive Order terminating sanctions
  against Libya
• Removes Libya from list of prohibited sources

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Reporting of Purchases from Overseas Sources

• FY 2006 Consolidated Appropriations Act requires
  agencies to report the value of acquisitions of
  goods manufactured outside U.S.
• New FAR 52.225-18, Place of Manufacture
• Used when contract is predominately for the
  acquisition of manufactured end products
• Requires offeror to indicate whether place of
  manufacture will be in or outside U.S.
• All that matters is place of manufacture of end
  product, without regard to origin of components
• Comparable provision added to FAR 52.212-3,
  Offeror Representations and Certifications
  Commercial Items

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Information Technology

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Defining Information Technology

• Adopts interim rule (27 Jul 05) without change
• Revises definition of information technology to
  add analysis and evaluation
• Clarifies ancillary equipment with (including
  imaging peripherals, input, output, and storage
  devices necessary for security and surveillance)

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Commercial Information Technology

• FAC 2005-7, interim rule FAC 2005-13 final rule.
  
• Exempts acquisitions for commercial information
  technology from Buy American Act
• Acquisitions over 193,000 are still subject to
  the Trade Agreements clauses
• Exemption applies when using FY 2004 or later
  funds
• Interim rule assumes statutory exemption will
  continue in future appropriations acts
• If not, FAR will be amended to limit
  applicability of the exemption

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Information Technology Security

• FAC 2005-13 adopts interim rule (30 Sep 05), as
  corrected (14 Nov 05), without change
• Implements IT security provisions of the Federal
  Information Security Management Act of 2002
  (FISMA)
• FISMA requires agencies to Follow National
  Institute of Standards and Technology (NIST)
  guidance, and evaluate private sector information
  security policies and practices
• Most policy requirements for IT security are
  expected to be issued as agency FAR supplements
  or internal IT policies promulgated by the agency
  Chief Information Officer (CIO)

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Questions?
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