Effective Oct 17, 2008, the Federal Acquisition Regulation (FAR) went through a significant rewrite to reflect and implement all of the changes made by all the recent laws. The FAR is the basic rulebook for government contracts. It contains all the rules governing the contracting process as well as all the forms and clauses used in government contracts. In order to do business with the federal government, you need to have a basic knowledge of what is in the FAR and how to use it.
The FAR is divided into 53 parts, each dealing with a separate aspect of the federal acquisition process. Part 52 contains the standard terms and conditions contained in a government contract including the Trade Agreement Act, Buy American Act, and the Contractor Code of Business Ethics and Conduct. Copies of most of the Government prescribed forms are in Part 53. Merger or acquisition in your future? See subpart 42.12 for asset transfer and name change. Small businesses may be interested in Part 19 on Small Business Programs.
Although the FAR is the primary acquisition regulation for the federal government, each government agency may issue an agency acquisition supplement to the FAR. These supplements are not stand-alone documents, but must be read in conjunction with the FAR. Some of the more commonly used supplements are: the Defense Federal Acquisition Regulation Supplement (DFARS) and the General Services Acquisition Regulation Supplement (GSARS). You can find many agency acquisition supplements at http://farsite.hill.af.mil/
The General Accountability Office (GAO) recently ruled that the Historically Underutilized Business Zone (HUB Zone) set-aside program takes precedence over the similar set-aside program for Service Disabled Veteran Owned Small Businesses, (SDVOSB). Per FAR Part 1305(a) Contracting Officers “shall” set-aside procurements for HUB Zone firms if there is a reasonable expectation that at least two HUB Zone firms will submit bids and that the contract will be awarded at a fair and reasonable price. FAR Part 1405(a) states that Contracting Officer “may” set-aside procurements for SDVOSBs under the same circumstances. GAO ruled that the plain meaning of the words “shall” and “may” require the Contracting Officer to set-aside qualifying HUB Zone procurements and grant the Contracting Officer the discretion to set-aside qualifying SDVOSB procurements. Thus, in situations where two or more HUB Zone firms and two or more SDVOSBs are expected to bid, the procurement must be set-aside for HUB Zone firms. Here is a link to the GAO decision. http://www.gao.gov/decisions/bidpro/400278.pdf
Program Launching on January 15th Will Require Government Contractors to Verify Employee Work Eligibility Status
It’s official – the (55 page) Final Rule is out and the use of the eVerify system to screen employees will become mandatory for federal contractors on January 15, 2009! Existing contracts with more than six months left in their periods of performance will likely be modified to include the new rule around that time, too. Although the worst case scenario requiring the use of eVerify on all federal contracts worth more than $3,000 did not come to pass, eVerify will apply to federal ID/IQ contracts and contracts worth more than $100,000. The requirement will also flow down to subcontracts over $3,000 performed against eligible federal prime contracts with prime contractors held responsible for the compliance of their subs. Only contracts for COTS products and services directly related to those products are exempt from eVerify. Whether this exemption will apply to any of the GSA Schedules still remains to be seen.
So, how does this new FAR clause affect your company? First of all, if you are doing any work for the government as a prime or subcontractor, you will have 30 days from the award of an eligible contract to enroll in eVerify at www.dhs.gov/E-Verify and 90 days to begin using the system to verify all new and current employees directly working on the federal contract. Employees with security clearances or HSPD-12 credentials are exempt from this requirement.
We strongly recommend contractors get a head start on enrolling in eVerify before the official start date. If you don’t, be prepared to face major headaches the system is expected to experience a 240% increase in volume which generally equals crashing servers. Another potential problem was highlighted in a recent IG report that showed the eVerify database produced an error rate of more than 4%. DHS claims that they have since reduced the error rate to 0.5%, but be aware that the onus is on the contractor to disprove any findings of ineligibility. Fines of up to $1,000 can be assessed for continuing to employee nonconfirmed employees.
We want to hear from you – what do you think about the new rule? How will you recoup your additional administrative costs? What unintended consequences are federal contractors likely to face? Talk back in our Comments Section.
The long awaited revision to the FAR ethics provisions was released on November 12th and will be effective on December 12, 2008. The existing provisions, which were added to the FAR in December of 2007, required all contractors who receive contracts valued at $5 million or more and exceeding 120 days of performance to adopt of code of ethics and business conduct and to promote compliance with the code. Large businesses were further required to implement a compliance “awareness program” as well as a set of fairly sophisticated internal controls. However, contracts performed entirely overseas and commercial contracts awarded via FAR part 12 were exempt from these requirements. Also, self disclosure of criminal violations was encouraged but voluntary.
The two most significant changes in the final rule are that (1) contracts performed overseas and commercial contracts are no longer exempt from the requirements and (2) timely disclosure of criminal conduct in connection with Government contracts is now mandatory. Failure to timely disclose such violations is cause for suspension or debarment.
The requirement for mandatory disclosure is by far the most controversial aspect of the new regulations. The FAR Council addressed some of industry’s concerns by limiting the disclosure requirement to instances where a “principal” of the company has “credible evidence” that a violation of Federal criminal law involving fraud, conflict of interest, bribery, gratuities, or the Civil False Claims Act has occurred.
Here is a link to the final rule.
Federal Acquisition Regulation; FAR Case 2007-006, Contractor Business Ethics Compliance Program and Disclosure Requirements. ACTION: Final rule.
Small Business Set-Aside Requirements Apply to Task Orders Issued Under Multiple Award IDIQ Contracts
In response to a pre-award protest filed by Delex Systems, Inc., a small business, the General Accounting Office (GAO) decided that the FAR small business set-aside requirements apply to task orders issued under multiple award contracts. FAR 19.502-2(b) requires Contracting Officers to set-aside for small businesses any acquisition in excess of $100,000 if there is a reasonable expectation that at least two offers will be received and the award will be made at fair market value. This provision is known as the “rule of two”.
The Navy awarded multiple IDIQ contracts to several firms for aviation training support. Two of the awardees were small businesses including Delex Systems. The Navy issued a delivery order proposal request for general aviation training products that was not set-aside for small businesses. Delex protested the solicitation arguing that the “rule of two” required the Navy to set-aside the delivery order for small businesses. The Navy argued that the “rule of two” did not apply to orders issued against multiple award IDIQ contracts. GAO determined that the “rule of two” does apply to such procurements. Here is a link to the redacted GAO opinion. Delex Systems, Inc
This decision could have major ramifications. Any agency that has issued multiple award IDIQ contracts to both small and large businesses may find that they will be routinely required to set aside task order procurements for the small business awardees. In turn, this may discourage large businesses from incurring the expenses necessary to win multiple award IDIQ vehicles when task orders may be set-aside for small businesses also holding the vehicle . On the other hand, it should be noted that this decision will not apply to GSA schedule contracts which, per FAR 8.404(a), are exempt from the requirements of FAR Part 19.
NASA has announced its intention to expand its mentor-protege program to include a wider variety of small businesses and to provide greater financial incentives to participating companies. The program will now be open to veteran-owned, service-disabled veteran-owned, and HUB zone small businesses. Firms participating in Phase II of the Small Business Innovative Research (SBIR) program will also be allowed to participate. Previously, only small disadvantaged and woman-owned small businesses along with Historically Black Colleges and Universities and minority institutions of higher education were eligible.
Mentors who provide assistance to SBIR firms will now be able to earn an award fee payment at the end of the mentor-protege agreement. NASA describes this as a pilot program and it is currently not available for other types of small business proteges. However, all mentors can seek reimbursement from NASA for the costs of being a mentor.
Here is a link to the proposed rule. Comments are due by November 18, 2008.
Effective October 3, 2008 the SBA will no longer verify the status of small disadvantaged businesses (SDB). This decision was made quickly after the SBA learned that most agencies will not longer reimburse the SBA for the costs of such certifications. The SDB certification process is time-consuming and costly and, at this point offers little or no benefits. This is because SDB designation is no longer as beneficial as it use to be. Prior to 2004, SDBs received a 10% price preference on Government procurements. Since then, only DOD, NASA, and the Coast Guard are currently authorized to offer the preference and most of the time, they do not.
In lieu of a SBA certification, SDBs may now self certify. The purpose of the self certification is primarily so that agencies and their prime contractors can report whether they are meeting the goals for awarding contracts and subcontracts to SDBs.
In 1991 there were approximately 33,000 contract specialists. (Grade 1102) that handled approximately $150 billion of federal contracts. These contract specialists were supported by a large number of contract clerks (Grade 1105). Today, there are about 28,000 contract specialists that handle about $450 billion of federal contracts and the contract clerk job function has all but disappeared. According to David Drabkin, GSA’s Deputy Chief Acquisition Officer “the numbers tell the story”.
Unusually high turnover, at least for the Federal work force, is exacerbating the problem. According to OMB, 6% of entry level employees, 8% of mid-career employees, and 10% of senior employees left the Government last year. Neal Couture, Executive Director of the NCMA stated that he has never seen such a “rapid movement of personnel within and out of federal service before”
Though contract specialists are now frequently obtained from contractors, this is not an ideal solution. Mr. Drabkin believes that the next administration must “right size” the acquisition work force to ensure that enough properly trained personnel are available to not only award contracts but to administer them through to conclusion. In the interim, if you feel your contract specialist is not being as responsive as you might like, it could be that they are doing the best they can, under the circumstances.
The Department of Veterans Affairs (VA) published a proposed rule in the Federal Register that would establish a set-aside program for Veteran and Service Disabled Veteran Owned small businesses. (VOSB/SDVOSB) The rule implements portions of the Veterans Benefits, Health Care, and Information Technology Act of 2006. The proposed rule would require that VA procurements valued in excess of $100,000 be set-aside if there is a expectation that two or more VOSBs / SDVOSBs will submit proposals. SDVOSBs would be given priority. The VA would also be allowed to award contracts valued at less than $100,000 to such firms on a sole-source basis. To participate, firms must register at VetBiz.gov. The proposed rule is also likely to increase subcontracting opportunities as prime contractors will receive extra evaluation points if they propose to use VOSBs / SDVOSBs as subcontractors. The downside to the proposed rule is that it will likely lead to less work for other types of small businesses. Comments are due on October 20, 2008.
On July 18th the SBA increased the monetary based small business size standards to account for inflation. The new size standards apply to procurements issued after August 18, 2008. As a result of the adjustment, many service related size standards increased form $6.5 million to $7 million. Similarly, information technology size standards increased form $23 million to $25 million. Size standards covering the architectural, engineering, surveying, and mapping industries were not adjusted as inflation has not materially affected these industries.
The last inflation adjustment was made in December, 2005. This inflation adjustment is unrelated to the comprehensive size standard review that SBA is conducting over the next 2 years.
What We Are Writing
- A Marriage of Inconvenience: GSA Schedule Contracts & The Contractor Code of Business Ethics & Conduct Clause
- Emerging Small Businesses: To Grow Your Business, You Must Plan For Growth
- Government Contracting: Look Before You Leap!
- GSA Schedules – Strategies for Success
- New Employee vs. Independent Contractor Considerations
- Pay on Display – Understanding the Executive Compensation and Subcontractor Data Reporting Requirements & Ramifications
- The GSA Schedule: Your Ticket to the Federal Market (May 2010)
- The New FAR Codes of Conduct and Compliance Program Provisions
- The Seven Deadly Sins (of contract compliance)