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Cape Canaveral Chapter
National Contract Management Association
Recent Federal Acquisition
Regulation Changes
Karen L. Manos
2006 Federal Acquisition Circulars
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FAC 2005-7, 71 Fed. Reg. 198 (3 Jan 06)
FAC 2005-8, 71 Fed. Reg. 864 (5 Jan 06)
FAC 2005-9, 71 Fed. Reg. 20294 (19 Apr 06)
FAC 2005-10, 71 Fed. Reg. 36922 (28 Jun 06)
FAC 2005-11, 71 Fed. Reg. 38238 (5 Jul 06)
FAC 2005-12, 71 Fed. Reg. 44546 (4 Aug 06)
FAC 2005-13, 71 Fed. Reg. 57356 (28 Sep 06)
FAC 2005-14, 71 Fed. Reg. 67770 (22 Nov 06)
FAC 2005-15, 71 Fed. Reg. 74656 (12 Dec 06)
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Time-and-Materials & LaborHour Contracts
Payments Under T&M and LH
Contracts
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Revised FAR 52.232-7, Payments Under Time-and-Materials and Labor-Hour
Contracts (FEB 2007)
“Hourly rate” means all labor that meets the contract labor qualifications
o Includes labor performed by contractor, subcontractor, and interorganizational
transfer
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“Materials” means
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Direct materials
Subcontracts for supplies and incidental services
Other direct costs
Applicable indirect costs
Material costs may include indirect costs and ODCs
o Costs must be excluded from hourly rates, and
o Allocated in accordance with contractor’s accounting practices
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Established three new solicitation provisions to direct how proposals address
subcontract labor
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FAR 52.216-29
 Noncommercial item acquisitions with adequate price
competition
 Offeror must specify whether proposed hourly rates for
each labor category apply to labor by
o the offeror,
o subcontractors, or
o divisions, subsidiaries, or affiliates under common control
 Offeror must establish fixed hourly rates using either
o separate rates for each category of labor
o blended rates for each category of labor, or
o any combination of separate and blended rates
 Agencies can make alternative #1 mandatory
o DoD interim rule (12 Dec 06) did so
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FAR 52.216-30
 Noncommercial item acquisitions without adequate price competition
 Offeror must specify fixed hourly rates for each category of labor to be
performed by
o the offeror,
o each subcontractor, and
o each division, subsidiary, or affiliate of the offeror under a common
control
 For interdivisional transfers
o Fixed hourly rates may not include profit for transferor
o May include profit for prime contractor
 Fixed hourly rates for interdivisional transfers of commercial services
may be the established catalog or market rate when it is the established
practice of the transferring organization to price interorganizational
transfers at other than cost for commercial work
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FAR 52.216-31
 Commercial item acquisitions
 Offeror must specify whether proposed
hourly rates for each labor category apply to
labor by
o the offeror,
o subcontractors, or
o divisions, subsidiaries, or affiliates under
common control
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Additional Commercial Contract Types
 T&M and LH contracts are permitted for commercial
services under FAR Part 12 if:
o the contract or task order is competitively awarded,
o the CO executes a determination and findings (D&F) that no other
contract type authorized for commercial item contracts is
appropriate,
o there is a ceiling price that the contractor exceeds at its own risk,
and
o any subsequent change in the ceiling price is made only upon a
documented determination that it is in the best interest of the
procuring agency
 For both commercial and noncommercial T&M/LH
contracts, the D&F must be approved by HCA if the
contract will exceed 3 years
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FAR 52.212-4, Alt 1
 ¶ (a) Inspection/Acceptance
o reimbursement for rework at fixed hourly rates less profit (assumed to
be 10% unless specified)
 ¶ (e) Definitions
o includes new definitions of “hourly rates” and “materials”
 ¶ (i) Payments
o limits ODCs to those specified in contract or order
o provides for reimbursement of indirect costs on pro rata basis over term
of contract
o contains broad access to records provision
 ¶ (l) Termination for the Government’s Convenience
o paid for labor prior to termination at fixed hourly rates,
o plus reasonable charges resulting from termination
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New Requirements for
Contractors
Combating Trafficking in Persons
 New FAR 52.222-50, Combating Trafficking in Persons
(APR 2006)
o Applies to non-commercial service contracts
 Requires contractor to establish policies and procedures for
ensuring its employees do not:
o engage in or support severe forms of trafficking,
o procure commercial sex acts, or
o use forced labor in performance of the contract
 Receipt of allegations about an employee requires
immediate reporting to contracting officer
 Sanctions include default termination, suspension and
debarment, among others
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Common Identification Standard for
Contractors
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FAC 2005-7, interim rule (3 Jan 06); FAC 2005-14, final rule with changes (22
Nov 06).
New FAR 52.204-9, Personal Identity Verification of Contractor Personnel
(NOV 2006)
Requires compliance with:
o Homeland Security Presidential Directive (HSPD) 12, “Policy for a Common
Identification Standard for Federal Employees and Contractors”
o Federal Information Processing Standards Publication (FIPS PUB) 201, “Personal
Identity Verification (PIV) of Federal Employees and Contractors”
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Requires National Agency Check with Inquiries (NACI) for
contractor/subcontractor personnel who require routine access to federal
facilities or information systems
o Interim access may be granted based on fingerprint check
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Applied to new contracts as of 27 Oct 05
Existing contracts must be modified by 27 Oct 07
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Earned Value Management System
 Major acquisitions for development require use of an
EVMS that complies with the guidelines of ANSI/EIA
Standard 748
o Applies regardless of contract type
o Intended to standardize the use of EVMS across the government
o Agencies may require use of an EVMS for other acquisitions
 When an EVMS is required, the agency must conduct an
Integrated Baseline Review (IBR)
o Agency determines whether IBR is conducted pre- or post-award
 Offerors without an operational EVMS are still eligible for
award if they submit an EVMS implementation plan
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Contract Award and
Administration
Inflation Adjustment of AcquisitionRelated Thresholds
 Effective 28 Sep 06, FAC 2005-13 made the
following adjustments (among others):
o Micro-purchase threshold – $3,000
o Commercial item test program -- $5,500,000
o Subcontracting plan floor -- $550,000 ($1
million for construction remained unchanged)
o DoD Major System -- $814,500,000
o Truth in Negotiations Act -- $650,000
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Performance Based Acquisition
 Performance-Based Contracting (PBC) and PerformanceBased Service Contracting (PBSC) are out; PerformanceBased Acquisition (PBA) is in
 PBA = “an acquisition structured around the results to be
achieved as opposed to the manner by which the work is to
be performed”
 PBA remains preferred method, and must be used for
services contracts to maximum extent practicable
 Final rule clarifies PBA terms and elements
o Clarifies that selection of contract type is same for PBA as for any
acquisition
o T&M/LH contracts may be used
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Emergency Acquisitions
 New FAR Part 18 provides single reference for existing
acquisition flexibilities that may be used to facilitate and
expedite acquisitions in an emergency situation
o Response to Hurricane Katrina
 Divided into
o “Available Acquisition Flexibilities” that may be used at any time
o “Emergency Acquisition Flexibilities” that can only be used in
declared emergencies
 Emergency Acquisition Flexibilities are divided into
o Contingency operations
o Defense or recovery from attack
o Incidents of national significance, emergency declaration, or major
disaster declaration
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OMB Circular A-76
 Revises FAR to be consistent with OMB
Cir. A-76 (Revised), Performance of
Commercial Activities (29 May 03)
 Adds two new FAR clauses to inform
potential offerors of procedures the
government will follow for streamlined and
standard competitions
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Use of Brand Name Specifications
 Implements Office of Management and Budget
policy memoranda
 Requires agencies to publish on the
Governmentwide point of entry (GPE) or e-Buy
documentation required by the FAR to support the
use of a brand name specification
 Intended to limit the use of brand name
specifications
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Federal Prison Industries
 Converts interim rule (11 Apr 05) to final rule with
changes
 Implements Consolidated Appropriations Act for 2005
o Use market research before purchasing an FPI product to
determine if FPI product is comparable to best value private sector
products
o If FPI product is not comparable, use
competitive procedures or purchase
under multiple award contract
o Must consider timely offer from FPI
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Federal Technical Data Solution
 Contracting officers are required to make
solicitation-related limited-distribution information
available to offerors electronically through the
Federal Technical Data Solution
(FedTeDS)
 FedTeDS provides secure, user identification and
password protected access
 Note: Those who download FedTeDS information
have an obligation to assure continued control of it
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Wage Determinations OnLine
 On August 26, 2005, the Department of Labor launched the Wage
Determinations OnLine (WDOL) website
 FAR interim rule directs contracting agencies to obtain wage
determinations from WDOL for contracts subject to the Service
Contract Act or Davis-Bacon Act
 If WDOL does not contain the applicable W/D, the CO must request
one:
o by submitting electronic e98 for SCA contracts
o by submitting a paper SF-308 for DBA contracts
 Eliminates requirement for CO to submit collective bargaining
agreements to DOL; they are incorporated by reference and included in
successor contract
 Deletes FAR 52.222-47, SCA Minimum Wages and Fringe Benefits
Applicable to Successor Contract Pursuant to Predecessor Contractor
Collective Bargaining Agreement (CBA) because it is no longer
necessary with the WDOL
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TIN Validation
 Makes Internal Revenue Service (IRS)
validation of the Taxpayer Identification
Number (TIN) a mandatory part of the
Central Contractor Registration (CCR)
 Offerors with invalid TIN will not be
eligible for award
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Annual Reps & Certs
 FAR 52.204-8, Annual Representations and
Certifications (JAN 2006)
 Now includes a section where the contracting
officer can include the appropriate North
American Industry Classification System (NAICS)
code
 Provides standard way for communicating the
NAICS code and small business size standard
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Archiving Online Reps & Certs
 Prospective contractors must submit annual
representations and certifications via the
Online Representations and Certifications
(ORCA)
 FAR 4.803(a)(11) requires CO to include
reps & certs in contract file
 CO may refer to OCRA archive in lieu of
including paper copy
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Fast Payment Procedures
 Applies when contract contains FAR 52.213-1,
Fast Payment Procedures
o Gives payment office flexibility to make (but does not
require) fast payments when invoices and/or outer
shipping containers are not marked “Fast Pay”
 If payment office decides against fast payment,
payment date will be the date that would have
applied in absence of the clause
 Unmarked invoices will no longer be rejected
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Transportation Standard Industry
Practices
 FAR updated to reflect changes to Federal
Management Regulation
 Definitions added
o “bill of lading”
o “commercial bill of lading”
 Requires use of commercial bills of lading
for domestic shipments
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Cost & Pricing
TINA Exception for Noncommercial
Modifications of Commercial Items
 Implements § 818 of National Defense
Authorization Act for FY 2005
 The commercial item exception does not apply to
noncommercial modifications of a commercial
item that are expected to cost more than
o $500,000, or
o 5% of the contract price, whichever is greater
 Note: just because commercial item exception is
inapplicable does not mean TINA applies
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Buy-Back of Assets
 FAR 31.205-11 was revised to cover contractors
that re-acquire an asset after a sale-and-leaseback
 Allowable depreciation costs are limited to the
amount that would have been allowed had the
contractor retained title, as adjusted for the rental
cost limitation required in connection with a sale
and leaseback
 The limitation applies only to assets that generated
costs in the most recent accounting period prior to
the reacquisition
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Socioeconomic Programs
Confirmation of HUBZone
Certification
 Adopts interim rule (27 Jul 05)
without change
 Prime contractors must confirm
that a subcontractor
representing itself as a
Historically Underutilized
Business Zone (HUBZone)
small business is certified
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Very Small Business
 Very Small Business Pilot Program deleted
o Pilot program had set-aside acquisitions
between $2,500 and $50,000 for very small
businesses
o Very small business means < 15 employees &
annual receipts < $1 million
o Any small business is now eligible for set-aside
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Expiration of SDB Price Evaluation
Adjustment
 Adopts interim rule (30 Sep 05) without change
 Cancels for civilian agencies (except NASA and
the Coast Guard) the Small Disadvantaged
Business (SDB) price evaluation adjustment
o Adjustment originally authorized under Federal
Acquisition Streamlining Act of 1994
 The price adjustment evaluation is still authorized
for DoD, NASA and the Coast Guard
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SBA Procurement Center
Representative
 Adds guidance for what to do when the
Small Business Administration has not
assigned a Procurement Center
Representative for a procuring activity
 Contact the SBA Office of Government
Contracting Area Office
 Provides website for list of locations
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Subcontract Notification
Requirements
 Implements National Defense Authorization Act
for Fiscal Year 2004
 Eliminates requirement for contractors under costreimbursement contracts with DoD, the Coast
Guard, and NASA to notify the agency before the
award of any
o CPFF subcontract, or
o FP subcontract that exceeds the simplified acquisition
threshold or 5% of the total estimated cost of the
contract, but only
 If the contractor has an approved purchasing
system
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Local Community Recovery Act
 Implements the Local Community Recovery Act of 2006
 Authorizes set-asides for major disaster or emergency assistance
acquisitions to businesses that reside or primarily do business in the
affected geographic area
o Covers contracts for debris clearance, distribution of supplies,
reconstruction, etc.
o CO determines the geographic area for the set-aside
o Cannot extend beyond declared disaster/emergency area
 Imposes subcontracting restrictions
o Contractor employees or other businesses in set-aside area must incur at
least 50% of the cost of labor and at least 50% of the cost of
manufacturing of supplies
o For general construction, contractor must perform at least 15% of the cost,
not including materials, with its own employees or other businesses in setaside area
o For construction by specific trades, percentage increases to 25%
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Foreign Acquisition
Trade Agreements Thresholds
 Interim rule, effective 5 Jan 06; final rule 28 Sep 06
 Every two years, the trade agreements thresholds are
escalated by formula
 World Trade Organization (WTO) Government
Procurement Agreement (GPA) threshold increased from
$175,000 to $193,000 for supply and service contracts
o Construction contract threshold increased from $6,725,000 to
$7,407,000
 Most Free Trade Agreement thresholds increased from
$58,550 to $64,786 for supply and service contracts
o Construction contract thresholds also increased
o Threshold for Canada FTA supply contracts remained unchanged
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Free Trade Agreements
 FAC 2005-7 (3 Jan
06), adopted interim
rule (28 Dec 04) with
changes
 Removed Morocco
and left in place
Australia Free Trade
Agreement
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Free Trade Agreements
 FAC 2005-9, interim rule; FAC 2005-14,
final rule
 Implements Morocco Free Trade Agreement
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Free Trade Agreements
 Dominican Republic-Central America-United
States Free Trade Agreement
o FAC 2005-10, interim rule, implements FTA with
respect to El Salvador, Honduras and Nicaragua
o FAC 2005-14, interim rule, implements FTA for
Guatemala
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Free Trade Agreements
 FAC 2005-14, interim rule, implements
United States – Bahrain Free Trade
Agreement
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Removal of Sanctions Against
European Union Member States
 Eliminates sanctions against EU member states
o Austria, Belgium, Denmark, Finland, France, Ireland,
Italy, Luxembourg, the Netherlands, Sweden, and the
United Kingdom
 Sanctions had limited applicability in any event
o Applied only to acquisitions not covered by the WTO
GPA
o Did not apply to small business set-asides
o Did not apply to DoD procurements
FAC 2005-9, interim rule; FAC 2005-14, final rule.
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Removal of Sanctions Against Libya
 Implements Executive Order terminating sanctions
against Libya
 Removes Libya from list of prohibited sources
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Reporting of Purchases from
Overseas Sources
 FY 2006 Consolidated Appropriations Act requires agencies to
report the $ value of acquisitions of goods manufactured outside
U.S.
 New FAR 52.225-18, Place of Manufacture
o Used when contract is predominately for the acquisition of manufactured
end products
o Requires offeror to indicate whether place of manufacture will be in or
outside U.S.
o All that matters is place of manufacture of end product, without regard to
origin of components
 Comparable provision added to FAR 52.212-3, Offeror
Representations and Certifications – Commercial Items
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Information Technology
Defining Information Technology
 Adopts interim rule (27 Jul 05) without change
 Revises definition of “information technology” to
add “analysis” and “evaluation”
 Clarifies “ancillary equipment” with “(including
imaging peripherals, input, output, and storage
devices necessary for security and surveillance)”
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Commercial Information Technology
 FAC 2005-7, interim rule; FAC 2005-13 final rule.
 Exempts acquisitions for commercial information
technology from Buy American Act
 Acquisitions over $193,000 are still subject to the Trade
Agreements clauses
 Exemption applies when using FY 2004 or later funds
o Interim rule assumes statutory exemption will continue in future
appropriations acts
o If not, FAR will be amended to limit applicability of the exemption
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Information Technology Security
 FAC 2005-13 adopts interim rule (30 Sep 05), as corrected
(14 Nov 05), without change
 Implements IT security provisions of the Federal
Information Security Management Act of 2002 (FISMA)
 FISMA requires agencies to Follow National Institute of
Standards and Technology (NIST) guidance, and evaluate
private sector information security policies and practices
 Most policy requirements for IT security are expected to be
issued as agency FAR supplements or internal IT policies
promulgated by the agency Chief Information Officer
(CIO)
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Questions?
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