CHARLES E. RUMBAUGH
Arbitrator/Mediator
(310) 373-1981 / FAX (310) 373-4182
(888) ADROffice (toll free)
e-mail: cerumbaugh@aol.com
P.O. Box 2636
Rolling Hills, California 90274
P.O. Box 2095
Burlingame, California 94011
December 20, 2001 Regulatory
Update
Happy Holidays!
Please
note above e-mail address that should be bookmarked/used in the
future.
Recent Regulatory
Matters that may be of interest since the last Update include---
1.
orders
under IndefiniTe-Delivery contracts may be deemed separate
contracts. On
November 14, 2001, the Federal Register noticed a proposal
“to amend the FAR to require, under indefinite-delivery contracts,
the contractor to account for and submit progress payment requests
under individual orders as if each order constitutes a separate
contract, unless otherwise specified in the contract.”
The Progress Payments clause at FAR 52.232-16, will now be
amended to conform to, and be reconciled with, FAR Part 32 which
currently provides for same.
Comments are due on/before January 14, 2002.
2.
PERFORMANCE-BASED
CONTRACTING FOR SERVICES MAY PERMIT THE USE OF FAR PART 12
PROCEDURES. On December 6, 2001, the Federal Register
noticed an interim DoD rule “amending the DFARS to implement
Section 821(b) of the National Defense Authorization Act for Fiscal
Year 2001. Section 821(b) permits DoD to treat certain
performance-based service contracts and task orders as contracts for
the procurement of commercial items.” Specifically, “Section 821(b) permits a contracting
officer to use the same procedures used for the acquisition of
commercial items under Part 12 of the FAR for a performance-based
service contract or task order, if certain conditions are met.
These conditions include—
1--The contract or task order must-- (a) Be
firm-fixed-price; (b) Have a value of $5 million or less; (c) Set
forth specifically each task to be performed; (d) Define each task
in measurable, mission-related terms; and (e) Identify the specific
end products or output to be achieved for each task;
2--The contractor must provide similar services
at the same time to the
general public under terms and conditions similar
to those in the contract or task order; and
3--The
procedures in FAR Subpart 13.5, Test Program for Certain Commercial
Items, must not be used.”
COMMENT:
What are “similar” terms and conditions?
Comments are due on/before February 4, 2002.
Also, a very good presentation on Performance-Based Service
Acquisitions was recently made available by/through AFMC.
3.
LESS VISIBILITY
ANTICIPATED ON PROPOSED R&D BUSINESS OPPORTUNITIES.
On December 6, 2001, the Federal Register noticed
a proposal “to amend DFARS to eliminate the requirement for
posting of solicitations at the research and development streamlined
solicitation website. Instead, each contracting activity will use its own
procedures for electronic posting of research and development
streamlined solicitations. Contracting activities will continue
to make synopses and solicitations available through the
Governmentwide point of entry (FedBizOpps).”
Comments are due on/before February 4, 2002.
4.
Federal
Acquisition Circular 2001-02 ISSUED. On December 18, 2001,
the Federal Register noticed FAC 2001-02 which issued final
rules that included the following topics:
Ø
Restore unique definitions of “Component” and
“End Product” in FAR Part 25.
Ø
Energy Efficiency of Supplies and Services to
implement an Executive Order.
Ø
Prompt Payment and the Recovery of Overpayment—also
requires certain additional language on an invoice in order to
“trigger” application of the Act.
Ø
FAR Part 15 “Discussions” clarified whereby “the
contracting officer is not required to discuss every
area where the proposal could be improved.”
Ø
Contractor Personnel in the Procurement of Information
Technology Services.
Miscellaneous:
·
The November 2001, Update referenced the proposed
commercial item regulations which will be effective on December 21,
2001. Industry has submitted an analysis and request for revisions
in certain key areas. Specifically,
this rule uses the word “government” rather than “Government”
within the definition of “commercial items.” Industry is
concerned as to the contextual meaning of “government,” i.e.
does a commercial item determination depend on sales to the US
Government, FMS, state/local governments, and/or sales to
contractors for end-use by the federal government?
COMMENT:
Contractors should re-review this rule with
counsel. Without
revisions it may be necessary to consider whether or not to advise
your customer on how you reasonably interpret any regulatory
drafting concerns.
Industry was also concerned about the continued use of
“catalog or market price” terminology.
Also, a concern was expressed (again) over the absence of any
rationale in the Federal Register on why prior public
comments were not adopted on proposals.
It is noted that some other agencies
“go-through-the-effort” of publishing significant public
comments (by categories) received and agency action thereon with
rationale. If the
public is to “truly participate” in this “due process”
endeavor, i.e. requirement of “notice and comment” in the
Federal Register, it is not unreasonable to have a substantive
published response to the public comments.
Rumor has it that the public does provide constructive
input and, consequently, should be constructively advised in the
Federal Register on “why” significant input was not adopted in
the final regulations. Contractors
are part of the acquisition team!
·
DoD has published its “final” November 2001,
“Commercial Item Handbook” that provides “further guidance on
sound business strategies for acquiring commercial items.” Of
particular concern (also see prior Updates) is the noted
“limited” coverage on the use of “rated orders” by DoD and
by contractors/subcontractors as well as the use of negotiation
techniques in arriving at fair/reasonable commercial pricing.
Given the recent issuance of audit reports on “proper
pricing” (usually deemed critical in some commercial/sole pricing
determination actions) it is interesting that the Handbook provides
the following…
“When the contracting officer cannot conclude that the price of
a commercial item is fair and reasonable, after exploring the
various market alternatives that would effectively meet the
agency’s needs with the requiring activity and other members of
the acquisition team, the contracting officer should consider any
suitable noncommercial items. If there are none, the contracting officer should escalate
negotiations in accordance with agency procedures.
If the price still cannot be determined to be fair and
reasonable, the item ordinarily should not be acquired.
If, however, it is not in the Government’s best interest to
forgo or delay the procurement, then it is essential that the
contracting officer document the difficulty he or she had in
determining the price to be fair and reasonable.
The contracting officer then may make the award….”
COMMENT: Appropriate
deviations should be obtained when any FAR requirement on pricing on
fairness/reasonableness cannot be obtained, i.e. doing something
inconsistent with the FAR is prohibited in the absence of same!
Contracting officers and contractors should be aware of
deviation “requirements.” Otherwise,
be prepared for more (adverse) audit reports!
Further, negotiation tools should be re-visited!
The Handbook is at www.acq.osd.mil/ar/doc/cihandbook.pdf.
On December 14, 2001, DoD also issued its “Commercial
Operations and Support Savings Initiative Handbook” as a result of
its initiative “designed to improve readiness and reduce
operations and support costs by inserting existing commercial items
or technology into military legacy systems.”
This handbook is located at http://www.acq.osd.mil/ar/doc/cossiguide.pdf.
·
The next industry/AFMC “Acquisition Reform Steering
Group (Contracting)” meeting is scheduled for February 13, 2002
with action items/agenda that will include the following:
1--Should
ADR be a factor in CPARS? (Air Force will recommend closure of this
issue—AF sent a letter to NDIA and other industry associations
advising them that it is proceeding as previously indicated)
2--Develop
Financial Management training for program managers and contracting
officers from an industry perspective.
3--Analyze
use and impact of the new Weighted Guidelines technology incentive
(up to 4%) on certain acquisitions.
·
The November 2001, Update referenced the noticed DoD
proposal to amend the DFARS weighted profit guidelines.
Extensive industry comments are being finalized for
“late” submittal. Also,
that Update referred to the noticed DoD proposal to amend the DFARS
in the area of “exclusive teaming arrangements” and purported
relationships, etc. that may be alleged violations of the antitrust
laws.
COMMENT: Interesting in “war-time” that a
proposal is being considered that may dampen complementary
relationship contracting. Several
public responses are in preparation.
Comments are due on this “teaming” proposal on/before
December 31, 2001.
·
The Army has published a new (June 2001) “Source
Selection Guide.” Topics
include performing market research, developing the source selection
plan, creating the solicitation and evaluation factors,
“exchanges” with offerors, selection and award, notification to
unsuccessful offerors, and debriefing of offerors.
Appendices cover Oral Presentations, Using Current/Past
Performance as a Source Selection Factor, Past Performance
Interviews, Cost Realism Analysis, and On-Line Auctions.
Related material can be accessed at the Army Materiel
Command, “Source Selection Resource Center” at http://www.amc.army.mil/amc/rda/rda-ap/ssrc/fr_ssll.htm.
·
And, DoD has issued its guide, “Intellectual
Property: Navigating Through Commercial Waters” (subtitle—
“Issues And Solutions When Negotiating Intellectual Property With
Commercial Companies”), under a date of October 15, 2001.
“This guide is
intended to provide a straightforward discussion of the information
contracting officers need to negotiate IP arrangements.
Such negotiations should strive to balance the needs of the
Government and industry, resulting in a win-win solution.”
This
guide is located at www.acq.osd.mil/ar/doc/intelprop.pdf
·
The Department of Justice announced on November 14,
2001, that a voluntary disclosure by the parent of a contractor
resulted in a settlement whereby that subsidiary will pay the
Department of Veterans Affairs (VA) $15 million.
The parent company advised VA that “the company’s
personnel failed to notify the federal agency about an agreement
with a national account which gave that customer significantly lower
pricing for certain medical supplies.
The contract between the VA and…(the subsidiary) required
that the company notify the agency of any such cost reductions and
to pass the lower prices on to government customer purchasing
through the VA contract.”
·
The Defense Finance and Accounting Service (DFAS)
announced that it “used a reverse auction to buy over $6 million
of information technology equipment
(PCs, laptops, and monitors)” in September 2001 and
“saved more than $1.9 million over what it would have paid using a
GSA Schedule price.”
COMMENT:
Is the GSA Schedule a dinosaur if non-regulatory
reverse auctions are used?
·
A final rule published on November 30, 2001, permits
certain federal employees to be reimbursed for travel expenses
related to unofficial speaking events.
COMMENT: Interesting.
Want a federal employee to speak?
“Pay (travel expenses) to Play” may become the
“rule.”
·
The Export Managers Association of California is
sponsoring an Export Licensing Seminar (for example, commercial
dual-use items) presented by the US Department of Commerce, Bureau
of Export Administration on January 28-29, 2002, in Manhattan Beach,
CA. Info is available
at 310 606-0150.
·
The DoD briefing of December 18th on
reorganization of AF and Army can be located at http://www.defenselink.mil/news/Dec2001/g011218-D-6570C.html.
Finally, a special holiday message to men/women in military
may be sent again this year. See http://anyservicemember.navy.mil/
Recent/Future Publications include—
The National Contract Management
Association (NCMA) Contract Management magazine will
commence in January 2002 a three-part monthly series on an important
part of most arbitrations, i.e. the Preliminary Hearing
process.
The American Arbitration
Association quarterly Dispute Resolution Times has
published a two-part series on “Baseball Arbitration I and
II—Or, How to Facilitate Negotiations/Settlements.”
Future Speaking Engagements
Include—
·
January 9, 2002, San Fernando Valley NAPM Affiliate,
“Mock Arbitration.”
·
January-February 2002, Southern California,
“International Trade/Law” Seminar.
·
January 17, 2002, San Fernando Valley NCMA Chapter,
“What's New and Exciting in Government Regs That Impact Your
Life"?
·
February 21, 2002, China Lake/Ridgecrest NCMA Chapter,
"How to Negotiate Fair/Reasonable Prices in Sole Source
Procurements."
·
March 13, 2002, Cape Canaveral NCMA Chapter, “Recent
Regulatory Update Issues.”
·
March 14, 2002, Orlando, Florida NCMA Chapter,
“Recent Regulatory Update Issues.”
·
March 29-31 and April 13-15, 2002, China,
“International Trade/Law” seminars.
·
May 7, 2002, Institute for Supply Management (NAPM)
International Conference, San Francisco, “Designing and Enhancing
Effective B2B Relationships in the 21st Century.”
·
May 16, 2002, Inland Empire NCMA Chapter, "How to
Negotiate Fair/Reasonable Prices in Sole Source Procurements."
Charles E. Rumbaugh
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