FASMG member Charles Rumbaugh's Regulatory Update provides general insight into timely issues facing the purchasing professional and stimulates further discussion. These updates are not intended as legal advice and you should consult your own attorney before applying any item below to a specific situation or real transaction.

CHARLES E. RUMBAUGH
Arbitrator/Mediator
Tel: (310) 373-1981
Fax: (310) 373-4182
Toll Free: (888) ADROffice
E-mail: ADROffice@Rumbaugh.net
PO Box 2636
Rolling Hills, California 90274
PO Box 2095
Burlingame, California 94011


May 13, 2000

Recent Regulatory Matters that may be of interest include --

1. OFPP Administrator issues Executive compensation cap. On May 12th the OFPP Administrator published in the Federal Register a memorandum to heads of agencies concerning the determination of the maximum benchmark compensation that will be allowable under government contracts during contractors' FY 2000 -- $353,010. This determination applies equally to both defense and civilian procurement agencies and is to be used for contractor fiscal year 2000, and subsequent contractor fiscal years, unless and until revised by OFPP. This benchmark compensation amount applies to contract costs incurred after January 1, 2000, under covered contracts of both the defense and civilian procurement agencies as specified in Section 808 of Pub. L. 105-85.
   
   
2. FAR proposed to be amended to cover Energy Efficiency of Supplies and Services. On May 10th the Federal Register published a proposed rule to amend the FAR to implement Executive Order 13123 of June 3, 1999, Greening the Government through Efficient Energy Management. Proposed changes in the FAR include Part 2.1, Definitions Energy-efficient product, Energy-savings performance contract, Renewable energy, and renewable energy technology. (FAR Parts 11, 15, and 23 are also proposed to be amended, in part in order to alert agencies to the special procedures at 10 CFR 436.33(b) that agencies must use when evaluating unsolicited proposals for energy-savings performance contacts.) Comments are due on or before July 10, 2000.
   
   
3. Affirmative Action Programs proposed to be revised. On May 4th the Department of Labor, Office of Federal Contract Compliance Programs (OFCCP) published a proposal to revise certain regulations implementing Executive Order 11246, as amended. The Executive Order prohibits Government contractors and subcontractors, and federally assisted construction contractors and subcontractors, from discriminating in employment, and requires these contractors to take affirmative action to ensure that employees and applicants are treated without regard to race, color, religion, sex, or national origin. Today's proposal would refocus, revise, and restructure 41 CFR Part 60-2, the regulations that establish the requirements for affirmative action programs, and related sections in 41 CFR Part 60-1. The proposal would refocus the regulatory emphasis from the development of a written document that complies with highly prescriptive standards, to a performance based standard that effectively implements an affirmative action program into the overall management plan of the contractor. The proposal also would introduce a new tool that would aid contractors in assessing their pay and other personnel practices, while increasing the efficiency and effectiveness of program monitoring. This tool, the Equal Opportunity Survey, would be primarily submitted electronically. Comments are due on/before July 3, 2000.
   

Miscellaneous:

• The recently revised regulatory change for new contracts whereby large federal contractors may submit progress payment requests for amounts payable (i.e. not paid) to subcontractors has resulted in some contractors recently making proposals to change current contracts to include this change. Proposals are being made under the Single Process Initiative (SPI) Block Change process for MOUs with the new DCMA and cover those old contracts. Consideration is an issue but the cash flow enhancement should not be ignored. Does having only one accounting system for progress payments cover the consideration issue, i.e. cost avoidance of having two systems?
  
  
• There has been some reported confusion as to whether subcontractors who have government accepted SPIs have to be reapproved for/by each prime contractor. DCMA is expected to issue some guidance to ensure that once accepted by a suppliers management council, that SPI must be accepted by the primes and their management council. Sounds like a real single process initiative at the subcontractor level; how about at the prime level?
  
  
• Potential International Traffic in Arms Regulation (ITAR) changes on the horizon may include sending some satellite components back to Department of Commerce for licensing, expanding the Canadian exemption to cover Britain and Australia, and implementation of a program license in connection with NATO countries. Some think that licensing of satellites may return to DoC from the State Department.
  
  
• On May 4th EPA issued a proposed rule to amend the EPA Acquisition Regulation (EPAAR) to add a contract clause to Agency contracts whereby contractors, under contracts exceeding $1,000,000, are required to display EPA Office of the Inspector General Hotline posters within contractor work areas. Comments are due on/before July 3, 2000.
  
  
• Some recent industry correspondence over the Contingency Cost Principle reinforced the need to revisit the benefits of this principle in contract risk management and pricing, in particular FAR 31.205-7(c)(2). When was the last time you read it or applied it? How about every time a proposal with assumptions/qualifications is submitted and the pricing of unknowns. FAR 31.205-7(c)(2) also ensures the lowest price to the government. A deviation is required when the principle is not followed!
  
  
• On May 8th the United States Trade Representative (USTR) published the annual report on discrimination in foreign government procurement with only the USTR's 1992 identification of the European Union for discriminatory procurement practices of government-owned telecommunications entities in certain member states, as well as the resulting U.S. sanctions, remains outstanding.
  
  
• The Federal Trade Commission will hold a public workshop on June 29, 2000, to examine issues of competition policy that arise in connection with the B2B electronic marketplaces. The workshop will be held in Room 432 of the Federal Trade Commission Headquarters Building, 600 Pennsylvania Avenue, N.W., Washington, D.C. Any interested person may also submit a written presentation.
  
  
• The FTC and DoJ issued its April 2000 Antitrust Guidelines for Collaborations Among Competitors must reading before entering into those teaming and strategic alliances! See your counsel.
  
  
• On May 12th the DoD Office of Foreign Contracting, Defense Procurement published a request for information that will assist it in reviewing the defense procurement practices of countries with which the DoD has a reciprocal procurement Memorandum of Understanding (MOU). These countries are Australia, Austria, Belgium, Canada, Denmark, Egypt, Finland, France, Germany, Greece, Israel, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. Interested parties are invited to submit written comments concerning the defense procurement practices of MOU countries that will assist the Office of Foreign Contracting in evaluating the manner in which these reciprocal MOUs are being implemented. Comments are due on/before June 26, 2000.
  
  
• DoD is reported to be drafting a Supplier Partnerships in 2010A DoD/Industry Vision toward a more cooperative, win-win relationship with industry. Commercial buyers have long been aimed in this direction in order to be a world-class customer. With fewer and fewer suppliers this only makes good business sense. However, when the issue is, what is fair and reasonable in the pricing of sole source commercial items, other negotiation techniques will have to be first recognized by DoD including requisite regulatory changes.
  
  
• The Equal Employment Opportunity Commission under the guise of no funds is expected to only use government employees as mediators of EEOC complaints. One should review with counsel any compliant(s) including neutrality of the agency and, in particular, the purported neutrality of employee mediators in the negotiation/mediation of settlement agreements.
  
  
• Next month agencies are expected to once again publish commercial activities under the Federal Activities Inventory Reform (FAIR) Act. Several legislative proposals are pending which would enhance the fairness of the process under FAIR stay tuned!
  

© 1999 Charles E. Rumbaugh

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