DATE: April 30, 2002

SUBJECT: Federal Acquisition Circular (FAC) 2001-07, Miscellaneous Amendments

SOURCE: Federal Register, April 30, 2002, Vol. 67, No. 83, page 21531

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

ACTION: Final Rules

SYNOPSIS: The Federal Acquisition Regulatory Council is issuing FAC 2001-07 to amend the Federal Acquisition Regulation (FAR) in the following areas: (1) preference for performance-based contracting; (2) revisions to Balance of Payments program; (3) European Union trade sanctions; and (4) technical amendments.

EFFECTIVE DATES: All items are effective May 15, 2002.


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

      Items (2) and (3), Cecelia L. Davis at 202-219-0202.

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) Preference for Performance-Based Contracting: This finalizes an interim rule that was published in FAC 97-25 which established a preference for performance-based contracts or task orders when acquiring services (see the May 2, 2001, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 97-25, Performance-Based Contracting and Information Technology Contractor Personnel"). The interim rule amended FAR 2.101, Definitions, and FAR 37.102, Policy, to implement Section 821 of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398), which established the following order of precedence when acquiring services: (1) a firm-fixed-price performance-based contract or task order; (2) a performance-based contract or task order that is not firm-fixed-price; and (3) a contract or task order that is not performance-based (for more on the acquisition-related provisions of Public Law 106-398, see the November 2, 2000, FEDERAL CONTRACTS DISPATCH "Enactment of the National Defense Authorization Act of Fiscal Year 2001").

Two respondents submitted comments on the interim rule, and the interim rule is finalized without change except that paragraph (b)(4) of FAR 7.105, Contents of Written Acquisition Plans, is amended to clarify that contracting officers must "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) and [FAR] 16.505(a)(3) [Ordering])."

EDITOR'S NOTE: One respondent suggested that the regulations do not need to be changed, but acquisition personnel need to be trained in developing performance-based requirements. The final rule states, "the regulatory changes in this rule are not meant as a substitute for training that will enhance the knowledge and skills of acquisition personnel in performance-based contracting." However, it lists the following websites as possible sources of guidance:

     Best Practices for Performance-Based Service Contracting
     Seven Steps to Performance-Based Services Acquisition
     GSA's Performance-Based Contracting Website
          (http://www.gsa.gov, then click on "Policies, Guidelines, Regulations, and Best Practices"; then "Acquisition"; then "Best Practices"; then "Performance-Based Contracting")

Also, the Office of Federal Procurement Policy (OFPP) is establishing an interagency group to develop a common understanding among the agencies regarding performance-based contracting requirements.

(2) Balance of Payments Program (BOPP): This rule amends the FAR to remove language pertaining to the BOPP, particularly FAR Subpart 25.3, Balance of Payments Program, and the related clauses in FAR Section 52.225.

The BOPP is like a foreign version of the Buy American Act, and it applies to purchases of supplies for use outside the U.S. and to construction materials for construction contracts performed outside the U.S. On September 11, 2000, a proposed rule was published to eliminate FAR Subpart 25.3 because few civilian agencies make purchases for use outside the U.S. and the BOPP does not apply to purchases below the $100,000 simplified acquisition threshold, nor to contracts subject to the Trade Agreements Act applies (generally, contracts over $169,000 for supplies and $6,481,000 for construction -- see the February 21, 2002, FEDERAL CONTRACTS DISPATCH "Procurement Thresholds for Implementation of Trade Agreements Act"; for more on the proposal to remove FAR Subpart 25.3, see the September 11, 2000, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Balance of Payments Program").

One respondent submitted comments, claiming that "industry would be adversely impacted by the elimination of the Balance of Payments Program by the deletion of FAR 25.3." In response, the FAR Council states that "it appears the commenter is unaware that the Balance of Payments Program will be continued within the Department of Defense..." In fact, on April 26, 2002, DOD published a final rule incorporating the BOPP policy in FAR Subpart 25.3 related to construction contracts performed outside the U.S., along with the BOPP coverage already in Defense FAR Supplement (DFARS) Subpart 225.3, into a new DFARS Subpart 225.75, Balance of Payments Program. For more on this, see the April 26, 2002, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); balance of Payments Program (BOPP)." Therefore, the proposed rule is being finalized without changes.

This final rule removes FAR Subpart 25.3, revises all the clauses in FAR 52.225 to remove references to the BOPP (for example, changing the title of FAR 52.225-1 from "Buy American Act -- Balance of Payments Program -- Supplies" to "Buy American Act -- Supplies" and removing the reference to "Balance of Payments Program" in paragraph (d)), making related changes to other clauses (such as revising the titles of FAR 52.225 clauses referenced in FAR 52.212-3, Offeror Representations and Certifications -- Commercial Items), and make conforming changes in FAR Part 13, Simplified Acquisition Procedures, and elsewhere in FAR Part 25, Foreign Acquisition.

(3) European Union Trade Sanctions: This rule revises paragraph (c)(2)(i) of FAR 25.1103, Other Provisions and Clauses, to specifically exclude solicitations issued and contracts awarded by DOD from the use of FAR 52.225-15, Sanctioned European Union Country End Products, and FAR 52.225-16, Sanctioned European Union Country Services. While FAR 25.600, Scope of Subpart, which addresses the coverage of FAR Subpart 25.6, Trade Sanctions, clearly states that "this subpart does not apply to...the Department of Defense", the prescription for FAR 52.225-15 and FAR 52.225-16 in FAR 25.1103(c)(2)(i) does not include the DOD exception. Therefore, to FAR 25.1103(c)(2)(i) is added an exception for solicitations issued and contracts awarded by "the Department of Defense."

(4) Technical Amendments: This amends to the FAR to make several editorial changes and corrections. For example, the semi-colons at the end of paragraphs (b)(1) and (b)(2) of FAR 12.301, Solicitation Provisions and Contract Clauses for the Acquisition of Commercial Items, are replaced by periods; and the introductory text of Alternates I and II of FAR 52.214-20, Bid Samples, are revised to change the dates of the alternatives to "May 2002" to reflect the effectivity of the changes made to the alternates by Item (3) of FAC 2001-06 (see the March 20, 2002, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 2001-06, Miscellaneous Amendments").

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

Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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