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ISM-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 and 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
March 17, 2001
Recent Regulatory Matters that may be of interest since the last Update include --
TEAMING/COOPERATIVE ARRANGEMENTS/AGREEMENTS MAY BE HAZARDOUS TO YOUR (FINANCIAL) HEALTH. Recently the government’s motion for summary judgment was granted, in part, in a US District Court for the Central District of California case (US ex rel. Richard Bagley v. TRW, Inc.) wherein a contractor’s treatment/recording of certain proposal costs as bid and proposal (B&P) costs was found to violate FAR 31.205-18. In an action for damages by the United States and its qui tam relator it was determined that a MOU, which the contractor entered into with another entity and outlined an envisioned telecommunications business arrangement, was found to be a “contract” and thus certain B&P costs associated therewith were found to be unallowable under the noted cost principle.
COMMENT: While this decision will be appealed, it should be reviewed with counsel for potential impact upon treatment of B&P costs. How does it impact any advance agreements that are in place that cover B&P costs? Are only written “contracts” at risk under the rationale of this decision? How does this decision adversely influence contractors/subcontractors and their relationships with the small business community? How does this decision “frustrate” the regulatory policy on encouraging teaming arrangements to satisfy customer requirements? Stay tuned. The Freid, Frank, Harris, Shriver & Jocobson law firm has issued a monograph on the topic, “The Price of Teaming—It Isn’t B&P Anymore”.
Miscellaneous:
(1) An earlier Update noted the industry/DoD desire to streamline some of the cost principles as well as the expressed concern—by some—in the proposed elimination of the Contingency cost principle (FAR 31.205-7). Industry and DoD have concluded that this principle should be retained since it serves their mutual interests.
COMMENT: If you haven’t reviewed FAR 31.205-7 “recently” it is suggested you do so and, in particular, ¶(c)(2) thereof which provides, in effect, a method to “price” unknowns through a “reopener” contract clause that is fair and equitable to the contracting parties.
(2) The current “dispute” between the US and the European Union over the US Foreign sales corporation (“relaxed” income tax treatment for foreign sales) rules allegedly “not” being consistent with the principles of WTO should be of much concern. This dispute arises due to an alleged illegal export subsidy that is provided to US industry through these rules. Industry and DoD will suffer the cost impact if approved foreign sales of defense related items are reduced resulting in the increase of the unit cost to DoD for same/similar production line items.
On a related trade topic, the Office of the US Trade Representative on February 28th published in the Federal Register a request for information on “foreign countries engaging in discriminatory government procurement practices.” Comments are due on/before March 26, 2001.
(3) Earlier Updates mentioned the forthcoming DoD Commercial Item Handbook and some concerns associated therewith including the absence of any discussion of “rated orders” under the Defense Priority Allocation System (DPAS). At least one region of the Defense Contract Management has as its “number one” contractor concern -- compliance by contractors/subcontractors with DPAS!
(4) The recent addition of electricity rate surcharges to hotel bills (e.g. “utilities surcharge”) should be deemed allowable over the permitted per diem rates.
(5) The Air Force has issued its ADR Handbook and is planning a joint AF-NDIA ADR Conference in San Antonio, April 17 through 19, 2001. The Handbook may be viewed at <http://www.adr.af.mil/acquisition/index.html> and information on the ADR Conference is available at <http://register.ndia.org/interview/ register.ndia?~Brochure~1050>.
The industry report flowing from its participation in this “IPT” effort concluded, in part, the following:
“The contribution from industry comments added balance to the tone and content of the Reference Book, as well as its organizational structure. In addition industry provided input to the training recommendations and the ADR conference agenda and approach. The discussions and comments raised industry issues and concerns with respect to policy and consistency of ADR practices across the services. It is noted that these issues, which are consistent with the CODSIA position (letter of January 8, 1998) on ADR, were not addressed based on the limited scope of the Air Force IPT. As a result they remain as concerns from industry’s perspective that continue to require attention.”
COMMENT: Collaboration could be improved to address mutual concerns/interests.
(6) Comments on proposed changes to the DFARS, i.e. presumably those published in the Federal Register, may be soon posted on the Web at http://dfars.nsf/pubcomm. Those comments may also be viewed on the Web (after the comment period closes) at http://emissary.acq.osd.mil/dar/dfars.nsf.
COMMENT: Now, the real “news” is whether DoD will expand the policy items that are published in the Federal Register and include those that touch and impact the public/contractors so that comments (by agencies and public) can be provided! And, having DoD publish a point-by-point response to/on significant public comments when the interim/final rule is published (as some agencies do) in the Federal Register would be refreshing.
(7) A Web site, “The GATEWAY for women-owned businesses selling to the government” is at <http://www.womenbiz.gov/index.htm>. Also, Unisys has an outstanding CD ROM available that “introduces” its Supplier Diversity program (located at <http://www.unisys.com/unisys/sup-diversity/>) as part of its supply chain management.
(8) Industry and government are moving toward “industry ownership” of the Earned Value Management System (EVMS)—as reported at an industry/government EVMS Conference earlier this month in Dallas.
(9) It is reported that a new web based system that will permit DoD contractors to access their past performance “report cards” will be up and running very soon. This Past Performance Automated Information System (PPAIS) will allow (user ID password required) “access to this past performance evaluation tool.” Web site is <http:// dodppais.navsea.navy.mil/>.
(10) On May 1st AF Col Barry Wilson will become Director of the DAR Council.
© 2001 Charles E. Rumbaugh
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