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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: October 29, 2004

SUBJECT: Enactment of the National Defense Authorization Act for Fiscal Year 2005

AGENCIES: Department of Defense (DOD)

ACTION: Editor's Analysis

SYNOPSIS: On October 28, 2004, President Bush signed Public Law 108-375, Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, which authorizes $446 billion for defense and national security programs. Public Law 108-375 contains several acquisition-related provisions that apply to the Department of Defense only, and several other provisions that apply to all government agencies.

ANALYSIS: The following are some of the key acquisition-related provisions of the Fiscal Year 2005 Defense Authorization Act:

• Section 326, Bid Protests by Federal Employees in Actions Under Office of Management and Budget Circular A-76, Performance of Commercial Activities: This authorizes an agency tender official to file a protest against the public-private competition when requested by a majority of the agency employees whose jobs are subject to the competition.
  
  EDITOR'S NOTE: This provision addresses several Government Accountability Office (GAO) decisions in which GAO decided that the Competition in Contracting Act (CICA) did not provide the "in-house entity" standing to protest (see the April 1, 2004, FEDERAL CONTRACTS DISPATCH "General Accounting Office (GAO) Decides Federal Employees Have No Right to Protest Under OMB Circular A-76 Streamlined Competition Procedures Conducted Without a Solicitation," and the April 20, 2004, FEDERAL CONTRACTS DISPATCH "General Accounting Office (GAO) Decides Federal Employees Have No Right to Protest Under OMB Circular A-76 Procedures"). In fact, in one of the decisions, GAO recommended that Congress consider amending CICA to allow protests to be brought on behalf of agency employees, and sent letters making such a recommendation to the Chairman and Ranking Minority Member of the House Committee on Government Reform, the Senate Committee on Governmental Affairs, and the Senate and House Committees on Armed Services. Section 326 is in response to GAO's recommendation.)
  
  
• Section 802, Internal Controls for Department of Defense Procurements Through General Services Administration (GSA) Client Support Centers: This requires the inspector generals of DOD and GSA to review the policies, procedures, and internal controls of each of GSA's Federal Technology Service's Client Support Centers (CSC) to determine whether each CSC is compliant with DOD procurement requirements. This review must be completed by March 15, 2005. DOD may continue to use the services of a CSC that is found to be compliant with defense procurement requirements, but it may not use the services of a CSC that is not compliant with DOD procurement requirements unless the Undersecretary of Acquisition, Technology, and Logistics determines that it is in the interest of DOD to continue to use the services of that CSC. However, if a CSC is not compliant with defense procurement requirements but made significant progress during 2004 toward becoming compliant, DOD may continue to use the services of that CSC until March 16, 2006. Beginning March 16, 2006, acquisitions over $100,000 must be made through a CSC that is compliant with defense procurement requirements unless the Undersecretary of Acquisition, Technology, and Logistics determines that it is in the interest of DOD to continue to use the services of that CSC.
  
  
• Section 804, Contractor Performance of Acquisition Functions Closely Associated with Inherently Governmental Functions: Before entering into a contract for functions closely associated with governmental functions as defined in paragraph (d) of Federal Acquisition Regulation (FAR) 7.503, Policy, the Secretary of Defense must determine that (1) military or DOD civilian personnel cannot reasonably available to perform the function; (2) appropriate military or DOD civilian personnel are available to supervise contractor performance of the contract and perform all inherently government functions associated with the contract; and (3) the agency addresses any potential contractor organizational conflict of interest consistent with FAR Subpart 9.5, Organizational and Consultant Conflicts of Interest, and the best interests of DOD.
  
  
• Section 807, Inflation Adjustment of Acquisition-Related Dollar Thresholds: The Federal Acquisition Regulatory Council must adjust for inflation each acquisition-related dollar threshold provided by law on October 1 of every year divisible by five (that is, 2005, 2010, etc.). Dollar thresholds for the Davis-Bacon Act, the Service Contract Act, and the Trade Agreements Act of 1979 are exempt from this adjustment.
  
  
• Section 811, Rapid Acquisition Authority to Respond to Combat Emergencies: The Secretary of Defense is authorized to establish a streamlined acquisition process for any equipment that is urgently needed to eliminate a combat capability deficiency that has resulted in combat fatalities. The goal for awarding such a contract is 15 days. This authority is limited to acquire no more than $100,000,000 worth of equipment during any fiscal year.
  
  
• Section 813, Period for Multiyear Task and Delivery Order Contracts: The five-year limitation on task and delivery order contracts (including options) that was imposed by Section 843 of the Fiscal Year 2004 National Defense Authorization Act (Public Law 108-136) is amended to "any period up to five years and may extend the contract period for one or more successive periods pursuant to an option provided in the contract or a modification of the contract. The total contract period as extended may not exceed 10 years unless such head of an agency determines in writing that exceptional circumstances necessitate a longer contract period." (EDITOR'S NOTE: For more on the acquisition-related provisions of the National Defense Authorization Act for Fiscal Year 2004, see the November 25, 2003, FEDERAL CONTRACTS DISPATCH "Enactment of the National Defense Authorization Act for Fiscal Year 2004." For more on the interim rule that implemented Section 843 of the National Defense Authorization Act for Fiscal Year 2004, see the March 23, 2004, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); Contract Period for Task and Delivery Order Contracts.")
  
  
• Section 815, Increased Threshold for Senior Procurement Executive Approval of Use of Procedures Other Than Competitive Procedures: The threshold for obtaining approval of a justification for other than full and open competition by the senior procurement executive is increased from $50,000,000 to $75,000,000 (see paragraph (a)(4) of FAR 6.304, Approval of the Justification).
  
  
• Section 817, Extension of Authority for Use of Simplified Acquisition Procedures: The deadline for use of the simplified procedures in FAR Subpart 13.5, Test Program for Certain Commercial Items, for the acquisition of commercial items of $5,000,000 or less, is extended from January 1, 2006, to January 1, 2008.
  
  
• Section 818, Submission of Cost or Pricing Data on Noncommercial Modifications of Commercial Items: Defense contractors are required to submit cost or pricing data on noncommercial modifications to commercial items if the modifications are expected to exceed $500,000 or 5% of the total price of the contract, whichever is greater.
  
  
• Section 821, Addition of Landscaping and Pest Control Services to List of Designated Industry Groups Participating in the Small Business Competitiveness Demonstration Program: Landscaping services assigned to North American Industrial Classification System (NAICS) code 561730, Landscaping Services, and NAICS 561710, Exterminating and Pest Control Services, are added as "designated industry groups" under the Small Business Competitiveness Demonstration Program (see FAR Subpart 19.10).
  
  
• Section 822, Increased Thresholds Under Special Emergency Procurement Authority: For acquisitions that support a contingency operation or facilitate the defense against or recovery from nuclear, biological, chemical, or radiological attack, the micro-purchase threshold is increased from $15,000 to $25,000, and the simplified acquisition threshold for such contracts awarded or performed outside the United States is increased from $500,000 to $1,000,000.
  
  
• Section 841, Extension of Mentor-Protege Program: The deadline for applying to participate in the DOD mentor-protege program (see Defense FAR Supplement (DFARS) Subpart 219.71 and Appendix I) is extended from September 30, 2005, to September 30, 2008. In addition, the deadline for DOD reimbursement of a mentor firm's developmental assistance costs is extended from September 30, 2008, to September 30, 2013.
  
  
• Section 842, Amendment to Mentor-Protege Program: Historically Underutilized Business Zone (HUBZone) small businesses (see FAR Subpart 19.13), and service-disabled veteran-owned small businesses (see FAR Subpart 19.14) are eligible to participate in the DOD mentor-protege program.
  
  
• Section 843, Extension of Test Program for Negotiation of Comprehensive Small Business Subcontracting Plans: The DOD test program for negotiation of comprehensive small business subcontracting plans (in which prime contractors submit a plan that covers all anticipated contracts on a plant, division, or corporate basis, rather than for each contract or subcontract exceeding $500,000) is extended from September 30, 2005, to September 30, 2010 (see DFARS 219.702, Statutory Requirements).

One noteworthy provision that was proposed but not adopted was the prohibition against DOD from paying more than a 1% service charge for using other agency contracts to purchase goods and services. This was seen as an attack on GSA's Federal Technology Service, which charges fees considerably more than 1% and has been involved, with DOD, in contractual improprieties. However, GSA convinced Congress that DOD is such a large customer of the Federal Technology Service that it would be crippled if DOD were not permitted to use its services. In its place, Congress substituted a requirement that the procurement be conducted in accordance with procedures for reviewing and approving the use of non-Department contracts, and to report all service charges imposed on purchases exceeding the simplified acquisition threshold in Fiscal Years 2005 and 2006 (see Section 854, Defense Procurements Made Through Contracts of Other Agencies).

"The conferees expect the Department's review and approval procedures to ensure that any fees are reasonable in relation to the work actually performed by the contracting agency," the conference report states. "The conferees do not believe that the Department should pay fees in excess of 1% to an outside agency that merely acts as a conduit for Department requirements. The conferees are particularly concerned that in some instances, the Department's orders appear to have been awarded to contractors who charge their own fees for directing the work to preferred subcontractors without providing any value added."

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

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