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FEDERAL CONTRACTS PERSPECTIVE

Federal Acquisition Developments, Guidance, and Opinions

JUNE 2001
Vol. II, No. 6

CONTENTS

FebBizOpps.gov to Replace CBD, Performance-Based Contracts Preferred
GAO Contracting Out Panel to Hold Meeting June 11
DOT Issues Proposed Regs to Implement MOU with SBA
SBA Proposes Revised SBIR Policy Directive
USTR to Monitor Foreign Procurement Practices
FY 2000 Spending Jumps 10% to $218.8 Billion
Executive Compensation Benchmark Raised to $374,228
Comments on "Blacklisting" Regulations Extended



FedBizOpps.gov to Replace CBD,
Performance-Based Contracts Preferred for Services

Two Federal Acquisition Circulars (FACs) were published during May, both of which contained interim rules that make some significant changes to the Federal Acquisition Regulation (FAR) to implement various provisions of the National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398). FAC 97-25, published May 2, establishes a preference for performance-based contracts or task orders, and prohibits the use of minimum experience or education requirements for contractor personnel in the acquisition of information technology services except under limited circumstances. FAC 97-26, published May 16, establishes "Federal Business Opportunities" (http://www.fedbizopps.gov) as the single point of universal electronic public access to governmentwide procurement opportunities (the "governmentwide point of entry" (GPE)), and it will eventually replace the Commerce Business Daily (CBD). (EDITOR'S NOTE: For more on the acquisition-related provisions of Public Law 106-398, see the December 2000 Federal Contracts Perspective article "Experience Requirements for IT Workers Restricted.")

FAC 97-25:

  1. Preference for Performance-Based Contracting: To implement Section 821 of the FY01 Defense Authorization Act, the definition of performance-based contracting is moved from FAR 37.101, Definitions, to FAR 2.101, Definitions, and revised to read as follows: "Performance-based contracting means structuring all aspects of an acquisition around the purpose of the work to be performed with the contract requirements set forth, in clear, specific, and objective terms with measurable outcomes as opposed to either the manner by which the work is to be performed or broad and imprecise statements of work."

    In addition, two changes are made to FAR 37.102, Policy:


  2. Contractor Personnel in the Procurement of Information Technology Services: To implement Section 813 of the FY01 Defense Authorization Act, FAR 39.104, Information Technology Services, is added. It states, "When acquiring information technology services, solicitations must not describe any minimum experience or educational requirement for proposed contractor personnel unless the contracting officer determines that the needs of the agency (a) cannot be met without that requirement; or (b) require the use of other than a performance-based contract (see Subpart 37.6)."

    Both these interim rules went into effect May 2. Comments must be submitted no later than July 2, 2001, to General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405. Electronic comments on Item 1 may be submitted to farcase.2000-307@gsa.gov, and on Item 2 to farcase.2000-609@gsa.gov.


    FAC 97-26:

    1. Electronic Commerce in Federal Procurement: This interim rule implements two statutory provisions: Section 850 of the FY98 Defense Authorization Act, which calls for the use of cost-effective procedures and processes that employ electronic commerce in the conduct and administration of federal procurement systems, including the designation in the FAR of a single point of universal electronic public access to governmentwide procurement opportunities through a GPE; and Section 810 of the FY01 Defense Authorization Act, which allows agencies to provide access to notices through the GPE, as designated in the FAR, instead of publishing them in the CBD.

      This interim rule designates "FedBizOpps" as the GPE (see FAR 2.101, Definitions). Agencies have until October 1, 2001, to transmit all their CBD notices to the GPE (see new FAR 5.003, Governmentwide Point of Entry). FAR 5.101, Methods of Disseminating Information, requires that all agencies use the GPE to provide access to public notices of procurement actions over $25,000 that are currently required to be published in the CBD along with associated solicitations and amendments (FAR 5.102, Availability of Solicitations). Agencies will be required to direct the GPE to forward each notice to the CBD until January 1, 2002, after which notice in the CBD will be optional (FAR 5.201, General).

    2. Executive Order 13202, Government Neutrality Towards Government Contractors' Labor Relations on Federal and Federally Funded Construction Projects: On February 17, 2001, President Bush signed Executive Order 13202 ordering that neither the government nor federally-federally funded construction projects "require or prohibit bidders, offerors, contractors, or subcontractors to enter into or adhere to agreements with one or more labor organizations, on the same or other related construction project(s)..." On April 6, President Bush issued Executive Order 13208 to amend Executive Order 13202 to permit the continuation any "project labor agreements" that were already in place on February 17, 2001. To implement these two executive orders, FAR 36.202, Specifications, is amended to add paragraph (d) which explains the requirements and prohibitions and waiver provisions related to project labor agreements. (EDITOR'S NOTE: For more on Executive Order 13202, see the March 2001 Federal Contracts Perspective article "Bush Issues Three Acquisition-Related Orders Involving Labor Issues in FAR Part 22." For more on Executive Order 13208, see the May 2001 Federal Contracts Perspective article "Existing Project Labor Agreements 'Grandfathered.'")

    3. Executive Order 13204, Revocation of Executive Order on Nondisplacement of Qualified Workers Under Certain Contracts: Also on February 17, President Bush signed Executive Order 13204 revoking Executive Order 12933, which directed federal agencies to include in public building maintenance contracts a clause that required successor contractors to give their predecessors' employees the right of first refusal to employment openings under the new contract. This was implemented by FAR Subpart 22.12, Nondisplacement of Qualified Workers Under Certain Contracts, and FAR 52.222-50, Nondisplacement of Qualified Workers. This interim rule removes FAR Subpart 22.12 and FAR 52.222-50.

      All three of these interim rules went into effect May 16. Comments must be submitted no later than July 16, 2001, to the General Services Administration address above. Electronic comments on Item 1 may be submitted to farcase.1997-304@gsa.gov; on Item 2 to farcase.2000-016@gsa.gov; and on Item three to farcase.2001-017@gsa.gov.



      GAO Contracting Out Panel to Hold Meeting June 11

      The General Accounting Office (GAO) Commercial Activities Panel has announced its first public meeting on the transfer of commercial activities currently performed by government employees to federal contractors, commonly known as "contracting out" or "out-sourcing." The meeting will be held on June 11 starting at 9:00 a.m., in the Walsh-Reckord Hall of States at One Massachusetts Avenue, Washington, DC. The Panel is interested in hearing views on the principles and policies that should govern decisions concerning whether particular functions should be performed by the public sector or the private sector.

      Individuals who wish to attend or participate in the hearing (each presenter will have 3 to 5 minutes to make an oral statement) should contact William T. Woods at 202-512-8214, and submit written summaries of their statements by 5:30 p.m. on June 4, 2001, to the General Accounting Office, Office of the General Counsel, Room 7476, 441 G Street, NW, Washington, DC 20548, or by e-mail to A76panel@gao.gov.

      Two additional hearings currently are planned. One will be held in Indianapolis, IN, on August 8, 2001, and will focus on alternatives to the public/private competitions conducted pursuant to Office of Management and Budget (OMB) Circular A-76, Performance of Commercial Activities. Another will be held in San Antonio, Texas, on August 15, 2001, and will address current processes under OMB Circular A-76 and the Federal Activities Inventory Reform (FAIR) Act.

      For more on the panel, see the April 2001 Federal Contracts Perspective article "GAO to Convene Panel on Contracting Out," and the May 2001 article "GAO Names Members of Contracting Out Panel."



      DOT Issues Proposed Regs to Implement MOU with SBA

      The Department of Transportation (DOT) has published a proposed regulation to make several changes to its Disadvantaged Business Enterprise (DBE) program (Title 49 of the Code of Federal Regulations, Part 26). The primary changes involve instituting a uniform reporting form and a uniform certification application, and establishing procedures for implementing the provisions of a Memorandum of Understanding (MOU) between DOT and the Small Business Administration (SBA) in which DOT recognizes SBA-certified small disadvantaged businesses (SDBs) as eligible for its DBE program, and vice versa.

      • On February 2, 1999, DOT revised its DBE rules to conform to the Supreme Court's decision in Adarand Constructors, Inc. v. Pena, Secretary of Transportation, et al. In the preamble of that rule, DOT stated that it would adopt one standard reporting form to reduce the administrative burdens for recipients who receive funds from more than one DOT operating administration (such as the Federal Aviation Administration and the Federal Highway Administration). The proposed reporting form requires that information concerning both awards or commitments and attainments of DBE participation be reported semi-annually. However, DOT recognizes that some states have additional statutory or regulatory requirements, so recipients will be permitted to supplement the uniform application form with a one to two page attachment containing the additional certification requirements.

        In addition, DOT has coordinated with SBA so the form will be suitable for use by both applicants to the DOT DBE program and SBA's 8(a) Business Development program and SDB program. The proposed application form has a main section with common requirements and three additional parts for 8(a), SDB and DBE certification. The applicant would need to complete the main section of the application only once, then fill out the program specific part applicable to each program for which the applicant is applying. The form is proposed to be Appendix F of 49 CFR Part 26.


      • On November 23, 1999, DOT and SBA entered into an MOU to develop common application procedures for DOT's DBE program and SBA's 8(a) and SDB programs because the two programs share many of the same certification requirements and apply to the same basic constituents. However, the proposed changes do not alter program requirements. Whereas a women-owned business is eligible for the DBE program, women are not presumed disadvantaged in SBA's programs, so a woman-owned DBE will still have to show disadvantage to qualify for SBA's 8(a) Business Development and SDB programs. Similarly, an SBA-certified firm must still undergo an on-site review before receiving DBE certification.

      • Regarding the value of vested pension plans, Individual Retirement Accounts, 401(k) accounts, and other retirement savings or investment programs in which the assets cannot be distributed to the individual without significant adverse tax or interest consequences, DOT is proposing that the personal net worth calculation use the present value of such assets, less the tax and interest penalties that would accrue if the asset were distributed at the present time.

      • DOT is proposing that those claiming to be a member of a group presumed to be socially and economically disadvantaged provide a signed and notarized statement of group membership from all persons who claim to own and control a firm applying for DBE certification and whose ownership and control are relied upon for DBE certification.

      Three copies of comments must be submitted no later than June 7, 2001, to the Docket Clerk, Docket No. OST-2000-7639, Department of Transportation, 400 7th Street, SW, Room PL-401, Washington, DC 20590.



      SBA Proposes Revised SBIR Policy Directive

      To implement provisions of the Small Business Innovation Research Program Reauthorization Act of 2000 (Public Law 106-554), the Small Business Administration (SBA) has published proposed revisions to guidance on federal conduct of the Small Business Innovative Research (SBIR) program. While the most notable provision of the Reauthorization Act is the extension of the SBIR program through September 30, 2008, there are several other significant provisions in the law that are addressed in the proposed guidance.

      But first, a little explanation of the SBIR program:

      • The SBIR program is not addressed in the FAR, but only in SBA's policy guidance since it is a "pilot" program -- one that is 19 years old (it is the product of the Small Business Innovation Development Act of 1982 (Public Law 97-219)).

      • The SBIR program requires all agencies with research and development (R&D) budgets of more than $100 million to set aside at least 2.5% of their (R&D) budgets for small businesses (defined as having no more than 500 employees regardless of the applicable Small Business Administration (SBA) size standard at http://www.sba.gov/size/Table-of-Small-Business-Size-Standards-from-final-rule.htm). The following 10 agencies take part in the SBIR program: the Departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, and Transportation; the Environmental Protection Agency; the National Aeronautics and Space Administration; and the National Science Foundation.

      • The SBIR program consists of three phases:

        Phase I: An agency identifies R&D topics that directly affect its functions and are suitable for small business participation. The agency solicits proposals (no longer than 25 pages) that describe experimental or theoretical research efforts up to six months long and costing no more than $100,000. The small business offerors must agree to perform at least two-thirds of the effort. The agency can award more than one contract if several different solutions and approaches have merit.

        Phase II: If the results of Phase I are promising, the agency may fund a Phase II of the research, which allows the small business to expand and develop the research further. The agency selects the Phase I small businesses it wants to submit proposals for Phase II, and the agency selects the small businesses it wants to continue funding -- up to $750,000 for up to a two year effort. However, the agency is under no obligation to fund any Phase II proposal. Phase II small businesses must perform at least one-half of the effort.

        Phase III: Once Phase II is completed, the agency may enter into a non-SBIR funded agreement or contract for additional work. Phase III small businesses are also encouraged to obtain non-federal funds for commercial applications of the R&D.

      Some of the proposed changes to the SBIR policy are:

      • Each application for a Phase II award would be required to contain a succinct commercialization plan (see Section 6(b)).

      • Agencies that fail to issue a Phase III or follow-on funding agreement would be required to report to SBA (see Section 4(c)(7) and (8)).

      • The timing of the four-year period of protection of SBIR data rights under Phase I and II awards, and the four-year period under Phase III awards is clarified (see Section 8(b) of the proposed policy guidance, and Appendix I, Instructions, Section 5(d)(1)(iii)).

      • An SBIR Program government-accessible and a public-accessible database is established -- the Technology Resources Network, or "Tech-Net" (http://tech-net.sba.gov) (see Section 11(e)).

      • Information provided to the SBIR databases (such as "Tech-Net") would be privileged, confidential, and not subject to the Freedom of Information Act (see Section 11(e)(3)(iii)).

      • The Federal and State Technology (FAST) Partnership Program would be established to strengthen the technological competitiveness of small businesses in the United States (see Section 12(a)).

      • The Rural Outreach Program (for 25 states with less than $5 million in FY95 awards under the SBIR and the Small Business Technology Transfer programs) is extended through September 30, 2005 (see Section 12(b)).

      Comments on this proposed policy directive should be received on or before June 18, 2001, by Maurice Swinton, Assistant Administrator for Technology, Office of Technology, Office of Policy, Planning, and Liaison, Office of Government Contracting/Business Development, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416, or by e-mail to technology@sba.gov.



      USTR to Monitor Foreign Procurement Practices

      On April 30, the U.S. Trade Representative (USTR) reported to Congress on the countries that engage in significant and persistent practices of discrimination against U.S. products and services in government procurement.

      The report identifies only one discriminatory procurement practice: the "special and exclusive rights" provided to telecommunications entities of Austria, Belgium, Denmark, Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Sweden, and the United Kingdom. These "rights" were first identified in 1992 and were the reason for FAR Subpart 25.6, Trade Sanctions. The FAR Subpart 25.6 sanctions remain in effect (the sanctions do not apply to the Department of Defense.)

      However, the report describes a number of foreign procurement practices that are of significant concern to U.S. exporters and that are being closely monitored:

      • Japan: Various discriminatory practices relating to the procurement for public works -- the U.S. share of Japan's $300 billion public works market was only $50 million in 1999.

      • Taiwan: Certain discriminatory practices and procedural barriers, specifically (1) restrictions on the ability of suppliers to joint tender, based on market considerations, and (2) the need for appropriate and predictable contract provisions relating to contingent liabilities, consistent with international norms.

      • Canada: Ontario, Quebec, and British Colombia procurement practices which discriminate against U.S. suppliers interested in bidding on provincial government procurement contracts.

      • Germany: Exclusion from government contracts of suppliers that have employees who attend or participate in Scientology seminars. While the German government has revised its contract clause so that it no longer prohibits firms with Scientologist employees from competing for government contracts, the U.S. government will continue to monitor the implementation of the revised policy.


      FY 2000 Spending Jumps 10% to $218.8 Billion

      Fiscal Year (FY) 2000 spending by the federal government increased a whopping 10% over the FY 1999 spending -- from $198.8 billion to $218.8 billion. This is the most money spent by the government through contracts since the government began keeping statistics in FY 1979 -- the previous high was $210.7 in FY 1991.

      The following are the largest agencies' FY 2000 spending totals (in billions) and the percentage change from FY 1999:

      Defense$142.0+6.5%
      Energy$16.9+8.3%
      General Services Administration$11.1+46.1%
      National Aeronautics and Space Administration$11.1-0.8%
      Veterans Affairs$5.3+39.3%
      Health and Human Services$4.5-7.5%
      Tennessee Valley Authority$4.4*
      Justice$3.7-0.2%
      Agriculture$3.5-0.1%
      Treasury$2.9-17.2%
      Transportation$1.9-32.2%
      Commerce$1.9+56.6%
      State$1.5+18.4%
      Interior$1.4+14.5%
      Labor$1.3+17.8%
      Housing and Urban Development$1.1+40.3%
      Environmental Protection Agency$1.0-23.2%
      Education$0.9+26.1%
      Social Security Administration$0.6+13.7%
      Agency for International Development$0.6-12.8%
      Federal Emergency Management Agency$0.2-17.5%
      Office of Personnel Management$0.2+19.9%
      Miscellaneous Agencies$0.9+26.1%

      *Tennessee Valley Authority (TVA) deobligated $1.3 billion more than it spent in FY 1999.

      The following states received the most federal contract money in FY 2000 (in billions), with their FY 1999 rank and dollar amount change in parentheses:

      1. California (1)$25.5 (+$1.2)
      2. Virginia (2)$21.0 (+$2.4)
      3. Texas (3)$18.1 (+$4.5)
      4. Maryland (4)$10.3 ($0.0)
      5. Florida (5)$7.9 ($0.0)
      6. District of Columbia (6)$7.4 (+$1.2)
      7. New York (7)$5.9 (+$0.2)
      8. Missouri (8)$5.7 (+$0.3)
      9. Pennsylvania (10)$5.6 (+$0.3)
      10. Massachusetts (9)$5.6 (+$0.2)


      Executive Compensation Benchmark Raised to $374,228

      Office of Management and Budged (OMB) Deputy Director Sean O'Keefe has decided to increase the "benchmark compensation amount" for senior executives by more than $20,000, from $353,010 to $374,228. This figure is "the median amount of the compensation provided for all senior executives of all benchmark corporations [those with annual sales in excess of $50 million] for the most recent year..." Mr. O'Keefe settled on that figure based on commercially available surveys and after consultation with the director of the Defense Contract Audit Agency (DCAA).

      The $374,228 is the maximum amount of compensation [that is, wages, salary, bonuses, deferred compensation, and employer contributions to defined contribution pension plans] that is allowable under federal contracts for "the five most highly compensated employees in management positions at each home office and each segment of the contractor." However, the benchmark compensation amount is not a limit on the compensation an executive may receive -- $374,228 is the maximum amount the government will reimburse contractors for their senior executives' compensation. See paragraph (p) of FAR 31.205-6, Personal Compensation.

      The benchmark compensation amount applies to contract costs incurred after January 1, 2001, for contractor fiscal year 2001 and subsequent contractor fiscal years unless and until revised by OMB, which is required to set the benchmark compensation amount annually.



      Comments on "Blacklisting" Regulations Extended

      The deadline for comments on the proposed rule to permanently repeal FAC 97-21 (the "blacklisting" regulations) has been extended from June 4 until July 6. In addition, a public meeting will be held on June 18 to permit an open dialogue on the proposed rule. (EDITOR'S NOTE: For more on the suspension and proposed repeal of FAC 97-21, see the May 2001 Federal Contracts Perspective article "'Blacklisting Rule' Suspended, FAC 97-21 Proposed for Permanent Repeal.")

      Comments on the proposed repeal should be sent to General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405; e-mail: farcase.2001-014@gsa.gov.

      The public meeting will be held between 12:00 p.m. and 4:00 p.m. at National Aeronautics and Space Administration, Headquarters Auditorium 300 E Street, SW, First Floor, West Lobby, Washington, DC 20546. Those wishing to attend the meeting or make a presentation on the proposed rule should contact and submit a copy of the presentation by June 4, 2001, to Ralph DeStephano at GSA, 202-501-1758.

      Copyright 2001 by Panoptic Enterprises. All Rights Reserved.

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