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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: August 30, 2002

SUBJECT: Federal Acquisition Circular (FAC) 2001-09, Miscellaneous Amendments

SOURCE: Federal Register, August 30, 2002, Vol. 67, No. 169, page 56115

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

ACTION: Interim and Final Rules

SYNOPSIS: The Federal Acquisition Regulatory Council is issuing FAC 2001-09 to amend the Federal Acquisition Regulation (FAR) in the following areas: (1) task-order and delivery-order contracts; (2) temporary emergency procurement authority; (3) Veterans Entrepreneurship and Small Business Development Act of 1999; (4) trade agreements thresholds; (5) payments under fixed-price construction contracts; and (6) technical amendments.

EFFECTIVE DATES: All items are effective September 30, 2002, except Items (2) and (3), which are effective August 30, 2002.

FOR FURTHER INFORMATION CONTACT: The following analysts:

      Item (1), Julia Wise at 202-208-1168.

      Item (2), Victoria Moss at 202-501-4764.

      Item (3), Rhonda Cundiff at 202-501-0044.

      Item (4), Cecelia Davis at 202-219-0202.

      Item (5), Jeremy Olson at 202-501-3221.

For more information on the technical amendments or for general information, contact the FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, 202-501-4755.

SUPPLEMENTAL INFORMATION: (1) Task-Order and Delivery-Order Contracts: Section 804 of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 106-65) requires that the FAR be revised "to provide guidance to agencies on the appropriate use of task order and delivery order contracts". On April 25, 2000, the FAR was revised to clarify what contracting officers should consider when planning for multiple awards of indefinite-delivery contracts and to clarify how orders should be placed against the resultant contracts (see the April 25, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 97-17, Miscellaneous Amendments" (Item (1)). On August 23, 2001, a proposed rule was published to further implement Section 804 by providing guidance on the appropriate use of task- and delivery-order contracts; requiring more deliberation by agency acquisition planners before orders are placed under a Federal Supply Schedule contract, or task- or delivery-order contracts are awarded; and specific steps agencies should take when placing orders under task- and delivery-order contracts established by another agency (see the August 23, 2001, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Task-Order and Delivery-Order Contracts"). Four respondents submitted comments and, as a result, the definition of "multi-agency contract" was modified to add a cross-reference to paragraph (b) of FAR 17.500, Scope of Subpart, which expressly provides that the Economy Act is not applicable if an interagency acquisition is authorized under a more specific statutory authority.

This final rule makes the following changes to the FAR:

• To FAR 2.101, Definitions, is added definitions for "governmentwide acquisition contract (GWAC)" and "multi-agency contract (MAC)" to clarify the difference between the terms and the purpose of each contract vehicle.
  
  
• To FAR 7.101, Definitions, is added a definition for "order" ("an order placed under a Federal Supply Schedule contract, or task-order or delivery-order contract awarded by another agency (i.e., governmentwide acquisition contract or multi-agency contract)").
  
  
• Paragraph (e) of FAR 7.103, Agency-Head Responsibilities, is amended to add "or on an individual order basis" to the requirement that the agency head prescribe procedures for "writing plans either on a systems basis, on an individual contract basis, or on an individual order basis, depending upon the acquisition."
  
  Also, to FAR 7.103 is added a new paragraph (t), which requires the agency head to prescribe procedures "ensuring that agency planners on information technology acquisitions comply with the capital planning and investment control requirements in 40 U.S.C. 1422 [the Clinger-Cohen Act] and OMB Circular A-130 [Management of Federal Information Resources]."
  
  
• In the introduction to FAR 7.105, Contents of Written Acquisition Plans, the words "or orders" is added to the sentence "Acquisition plans for service contracts or orders must describe the strategies for implementing performance-based contracting methods or must provide rationale for not using those methods (see [FAR] Subpart 37.6 [Performance-Based Contracting])."
  
  Also in FAR 7.105, paragraph (b)(4) addresses "acquisition considerations." To paragraph (b)(4) is added the requirement that the capital planning and investment control requirements be addressed for information technology acquisitions, and that the reasons the action benefits the government be discussed, such as when "the agency can accomplish its mission more efficiently and effectively...or ordering through an indefinite delivery contract facilitates access to small business concerns..." Deleted from paragraph (b)(4) because it is redundant is the requirement that the plan "provide rationale if a performance-based contract will not be used or if a performance-based contract for services is contemplated on other than a firm-fixed price basis (see [FAR] 37.102(a) [Policy] and [FAR] 16.505(a) [Ordering]."
  
  
• To FAR Part 8, Required Sources of Supplies and Services, is added FAR 8.001, General, which states, "Regardless of the source of supplies or services to be acquired, information technology acquisitions shall comply with capital planning and investment control requirements in 40 U.S.C. 1422 and OMB Circular A-130."
  
  
• To paragraph (a) of FAR 8.404, Using Schedules, is added the following: "Orders placed under a Federal Supply Schedule contract are not exempt from the development of acquisition plans (see [FAR] Subpart 7.1 [Acquisition Plans]), and an information technology acquisition strategy (see [FAR] Part 39 [Acquisition of Information Technology]).
  
  
• Paragraph (a)(2) of FAR 16.505, Ordering [Under Indefinite-Delivery Contracts], contained the following sentence: "Individual orders shall clearly describe all services to be performed or supplies to be delivered." The sentence is revised to read, "Individual orders shall clearly describe all services to be performed or supplies to be delivered so the full cost or price for the performance of the work can be established when the order is placed."
  
  New paragraph (a)(4) states, "When acquiring information technology and related services, consider the use of modular contracting to reduce program risk (see [FAR] 39.103(a) [Modular Contracting])."
  
  New paragraph (a)(7) states, "Orders placed under a task-order contract or delivery-order contract awarded by another agency (i.e., a governmentwide acquisition contract, or multi-agency contract) -- (i) are not exempt from the development of acquisition plans (see [FAR] Subpart 7.1), and an information technology acquisition strategy (see [FAR] Part 39); and (ii) may not be used to circumvent conditions and limitations imposed on the use of funds (e.g., 31 U.S.C. 1501(a)(1))."
  
  Paragraph (b)(1)(iii)(A), which addresses what the contracting officer should consider when developing order placement procedures, adds the following two considerations: "(4) the amount of time contractors need to make informed business decisions on whether to respond to potential orders; [and] (5) whether contractors could be encouraged to respond to potential orders by outreach efforts to promote exchanges of information, such as -- (i) seeking comments from two or more contractors on draft statements of work; [or] (ii) using a multiphased approach when effort required to respond to a potential order may be resource intensive (e.g., requirements are complex or need continued development), where all contractors are initially considered on price considerations (e.g., rough estimates), and other considerations as appropriate (e.g., proposed conceptual approach, past performance). The contractors most likely to submit the highest value solutions are then selected for one-on-one sessions with the government to increase their understanding of the requirements, provide suggestions for refining requirements, and discuss risk reduction measures."
  
  Paragraph (b)(4), which addresses "decision documentation for orders," had stated, "The contracting officer shall document in the contract file the rationale for placement and price of each order." The paragraph is revised to state, "The contracting officer shall document in the contract file the rationale for placement and price of each order, including the basis for award and the rationale for any tradeoffs among cost or price and non-cost considerations in making the award decision. This documentation need not quantify the tradeoffs that led to the decision. The contract file shall also identify the basis for using an exception to the fair opportunity process. If the agency uses the logical follow-on exception, the rationale shall describe why the relationship between the initial order and the follow-on is logical (e.g., in terms of scope, period of performance, or value)."
  
  
• Paragraph (b) of FAR 17.500, Scope of Subpart, lists examples of interagency acquisitions where the Economy Act does not apply. To paragraph (b) is added "optional sources of supplies prescribed in [FAR] Part 8 [Required Sources of Supplies and Services]" (FAR 17.500(b) already cited "required sources of supplies" as an example) and "acquisitions using governmentwide acquisition contracts."

(2) Temporary Emergency Procurement Authority: This interim rule implements Section 836 of the Fiscal Year 2002 National Defense Authorization Act (Public Law 107-107), which provides temporary procurement authority for any procurement that facilitates the defense of the United States against terrorism or biological or chemical attack until September 30, 2003. The interim rule increases the micro-purchase threshold for such procurements from $2,500 to $15,000 when made by or for DOD; increases the simplified acquisition threshold from $100,000 to $250,000 when the purchase is made by or for DOD inside the U.S. in support of a contingency operation; and from $200,000 to $500,000 when the purchase is made by or for DOD outside the U.S. in support of a contingency operation. Also, any acquisition by or for DOD of biotechnology supplies or biotechnology services to facilitate the U.S. defense against terrorism or biological or chemical attack may treat the supplies or services as commercial items is to be treated as an acquisition of commercial items. (EDITOR'S NOTE: For more on the acquisition-related provisions of Public Law 107-107, see the January 2, 2002, FEDERAL CONTRACTS DISPATCH "Enactment of the National Defense Authorization Act for Fiscal Year 2002.")

This interim rule amends the following accordingly:

• The definitions of "micro-purchase" and "simplified acquisition threshold" in FAR 2.101, Definitions.
  
  
• A new paragraph (f) is added to FAR 12.102, Applicability, which states, in part, "The policies of this part [FAR Part 12, Acquisition of Commercial Items] shall apply to [covered] acquisitions, including the requirement to use firm-fixed price contracts or fixed-price contracts with economic price adjustments. Nothing in this paragraph shall preclude a contracting officer from treating an acquisition described in this paragraph as one for a non-commercial item if a determination is made by the contracting officer that the purchase cannot be made at a fair and reasonable price using the policies of this part."
  
  
• A new paragraph (g) is added to FAR 13.201, General, which provides notice that the micro-purchase threshold has been increased to $15,000 for covered acquisitions, and states, "Purchases using this authority must have a clear and direct relationship to the defense against terrorism or biological or chemical attack."
  
  
• A new paragraph (b)(3) is added to FAR 19.903, Applicability, which exempts from the Very Small Business Pilot Program "acquisitions of $15,000 or less facilitating the defense against terrorism or biological or chemical attack against the United States as described in [FAR] 13.201(g)."
  
  
• The phrase "($15,000 or less for acquisitions as described in 13.201(g))" is added after "$2,500" in the following: paragraph (a) of FAR 19.502-2, Total Small Business Set-Asides; paragraph (a)(1) of FAR 25.1101, Acquisition of Supplies; and paragraph (a) of FAR 25.1103, Other Provisions and Clauses.

Comments on the interim rule must be submitted by October 29, 2002, to General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405, or by e-mail to farcase.2002-003@gsa.gov. Cite FAC 2001-09, FAR case 2003-003 in all correspondence related to this interim rule.

(3) Veterans Entrepreneurship and Small Business Development Act of 1999: This final rule adopts, without changes, (a) the October 11, 2000, interim rule which added a 3% subcontracting plan goal for veteran-owned small businesses to FAR 19.704, Subcontracting Plan Requirements, and a 3% governmentwide agency goal for service-disabled veteran-owned small businesses throughout FAR Part 19, Small Business Programs (see the October 11, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 97-20, Veterans Entrepreneurship and Truth in Negotiations Act Threshold" (see Item (1)); and (b) the October 22, 2001, interim rule which added a subcontracting plan goal for service-disabled veteran-owned small business concerns to FAR 52.219-9, Small Business Subcontracting Plan (see the October 22, 2001, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 2001-01, Miscellaneous Amendments" (see Item (5)). Four comments were received in response to the interim rules, but none of the comments were adopted.

(4) Trade Agreements Thresholds: On February 21, 2002, the United States Trade Representative (USTR) decided to adjust the U.S. dollar thresholds for the application of the Trade Agreements Act of 1979 (TAA) and the North American Free Trade Agreement (NAFTA) (see the February 21, 2002, FEDERAL CONTRACTS DISPATCH "Procurement Thresholds for Implementation of Trade Agreements Act"). The following are the revised thresholds:

• TAA: procurement of goods and services -- $169,000 (down from $177,000); procurement of construction services -- $6,481,000 (down from $6,808,000)
  
  
• NAFTA: procurement of goods and services -- $56,190 (up from $54,372); procurement of construction services -- $7,304,733 (up from $7,068,419)

This final rule revises the thresholds for the application of the TAA and NAFTA in the following FAR sections:

• Paragraphs (b)(3) and (b)(4) of FAR 22.1503, Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor
  
  
• Paragraph (c) of FAR 25.202, Exceptions
  
  
• Paragraph (b)(1) of FAR 25.403, Trade Agreements Act
  
  
• Paragraphs (a), (b), and (c) of FAR 25.405, North American Free Trade Agreement (NAFTA)
  
  
• Paragraphs (a)(1), (a)(2), and (a)(3)(ii) of FAR 25.601, Policy
  
  
• Paragraphs (b)(1)(i)(A), (b)(1)(iii), (b)(2)(iii), (c)(1), and (d) of FAR 25.1101, Acquisition of Supplies
  
  
• Paragraphs (a), (c), (c)(3), and (d)(3) of FAR 25.1102, Acquisition of Construction
  
  
• Paragraphs (c)(1)(i) and (c)(1)(ii)(B) of FAR 25.1103, Other Provisions and Clauses
  
  
• Paragraphs (a)(3) and (a)(4) of FAR 52.222-19, Child Labor -- Cooperation with Authorities and Remedies

(5) Payments Under Fixed-Price Construction Contracts: This final rule revises FAR 52.232-5, Payments Under Fixed-Price Construction Contracts, to clarify the certification language. The ambiguity surfaced as a result of a decision issued on April 2, 1999, by the United States Court of Appeals for the Sixth Circuit in United States v. Gatewood (173 F.3d 983), in which the court concluded that requiring the prime contractor to certify that it has made payments to subcontractors and suppliers is not the same as having a prime contractor certify it has made all payments due to subcontractors and suppliers. A proposed revision to FAR 52.232-5(c)(2) was published October 18, 2001 (see the October 18, 2001, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Payments Under Fixed-Price Construction Contracts"). It proposed to revise paragraph (c)(2) to read as follows:

"(c)(2) All payments due to subcontractors and suppliers from previous payments received under the contract have been made, and timely payments will be made from the proceeds of the payment covered by this certification, in accordance with subcontract agreements and the requirements of Chapter 39 of Title 31, United States Code..."

Essentially, the proposed revision added the words "All" and "due" to the beginning of the paragraph.

Six respondents submitted comments, but none of the comments were adopted, so the proposed rule is finalized without change.

(6) Technical Amendments: This makes several changes to the FAR to update references and make editorial changes.

• The web address in paragraph (a) of FAR 22.1503, Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor for the List of Products, for the list is revised from http://www.dol.gov/dol/ilab to http://www.dol.gov/ilab.
  
  
• In paragraph (a) of FAR 36.606, Negotiations, the words "and the determination and findings requirement at 16.306(c)(2) for a cost-plus-fixed-fee contract" are removed from the parenthetical expression.
  
  
• The prescription for Alternate III of FAR 52.232-16, Progress Payments, is corrected.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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