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
January 14, 2002 Regulatory
Update
Recent Regulatory
Matters that may be of interest since the last Update include---
1.
REGULATIONS
ON mATERIAL SAFETY DATA SHEETS PROPOSED TO BE CHANGED IN RESPONSE TO
INDUSTRY REQUEST. On January 4, 2002, the Federal
Register noticed a proposal “to amend FAR (Part 23.3, and
applicable FAR clause) to revise the language that provides policies
and procedures for contractor submission of Material Safety Data
Sheets.” This
FAR case was initiated at the request of industry to address several
issues including definition of “hazardous material,” requiring
contractor compliance after contract award of any revisions
to Federal Standard 313, “excess” information from contractors
on “hazardous material,” proprietary data and liability issues.
This proposal will, among other things, “remove the
automatic inclusion of future Federal Standard 313 revisions into
the contract,” address proprietary data concerns, and change some
liability language in the applicable FAR clause. Comments are due
on/before March
5, 2002.
COMMENT:
A highly respected industry spokesperson was
quoted as stating, “most
prime contractors procure at least 60% of the components and
materials entering into production and in most instances have no
information as to the materials now deemed hazardous; they should
therefore not be held responsible for providing updated information.
While it may be possible in some instances for the prime contractor
to flow down to its vendors these HazMat identification
requirements, it is probably not possible for the prime contractor
to monitor or enforce these requirements in the case of materials,
items or components provided by a commercial supplier.”
Are these rules a problem given the increased use of
commercial items and/or will this be a barrier to increased use of
commercial items? What
are your suppliers telling you?
This is “your” second bite at the ….
2.
WHEN IS A “SUBCONTRACT,” NOT
A “SUBCONTRACT?” On
January 4, 2002, the Federal Register noticed “a final FAR
rule amending…15.407-2 to exclude from application the
expanded definition of ``subcontract'' at FAR 15.401.”
This final rule was not previously published as
a proposed rule and is effective February 19, 2002.
Comments from small businesses are solicited.
COMMENT:
The impact of this change will be in the make-verses-buy
analysis for any item/work by a prime contractor or its affiliates,
subsidiaries, etc., i.e. transactions with them will “not
(be) considered to be a ‘subcontract’” while they will be a
“subcontract” for purposes of contract pricing actions under FAR
15.407. The “world”
of “make” transactions became larger.
How will this impact the equation?
Miscellaneous:
·
The authority in FAR Subpart 13.5 for the “use of
simplified procedures for the acquisition of supplies and services
in amounts greater than the simplified acquisition threshold, but
not exceeding $5,000,000,” will be extended (beyond the
“normal” expiration date of December 31, 2001, as specified in
FAR 13.5(d)) as a result of legislative action to extend same.
Commercial item acquisitions are similarly impacted (FAR
12.203). Revised FAR language is expected.
·
FAR 12.207 continues to “mandate” that “Agencies
shall use
firm-fixed-price contracts or fixed-price contracts with economic
price adjustment for the acquisition of commercial items….”
Given that FASA specified FFP or FP/EPA contracts must “be
used (only) to the maximum extent practicable for acquisition
of commercial items” it is interesting that this very restrictive
language is in the FAR.
The Army Chief Counsel in an attachment to the December
2001, “Office of Command Counsel Newsletter,” noted this
limitation by stating, “The FAR provision eliminates the
flexibility the “maximum extent practicable” statutory language
provided, and imposes a complete prohibition on the use of any
contract type other than FFP or FP/EPA for the acquisition of
commercial services.” The Army Chief Counsel further specified
that “legislative relief and/or changes through the FAR Council or
Re-Invention Laboratories will be needed to enable continued use of
cost and T&M type contracts for commercial services.”
COMMENT:
With clear statute wording why is this limitation
imposed? The DoD
Commercial Item Handbook, mentioned in prior Updates, has the
expanded statutory wording! If the legislative/regulatory policy thrust is to expand
commercial contracting, this FAR provision needs to be revised.
Otherwise, the “incentive” is to find (more)
“non-commercial items.”
In the interim, why not a “simple” FAR deviation to
comply with the statute?
Thus, when deemed “not practicable” to use FFP or FP/EPA
contracts, contracting parties can use other contract types—with
an appropriate deviation—for commercial items.
·
The current issue of Treasury Department’s
“Procurement News—Near and FAR” has a very good article by
Ronne A. Rogin entitled, “Devising Incentives for
Performance-Based Contracts.”
The article enumerates
various non-monetary
and monetary incentives. This Fall 2001 issue can be located
at http://www.ustreas.gov/procurement/news/newsltr.html#near_far
·
The Army “Source Selection Guide” mentioned in
last month’s Update can be located at http://acqnet.saalt.army.mil/library/
·
The ABA Section of Public Contracting and the Council
Of Defense and Space Industry Associations (CODSIA) in separate
responses to the November 1, 2001, Federal Register notice
regarding proposed DFARS changes on “teaming arrangements”
recommended that the proposal not be adopted.
This proposal was generally perceived as creating unnecessary
burdens, deter collaborative efforts that would be beneficial to the
Government, etc. (See prior Updates)
·
CODSIA also submitted to the DAR Council an extensive
reply to the earlier Federal Register proposed DFARS changes
to the Weighted Guideline Methods (WGM).
Most importantly, and notwithstanding the published goal of a
“revenue neutral result,” an industry analysis indicated “that
the WGM calculation would not produce a revenue neutral
result, rather a result that would reduce profit.”
Industry recommended changes included a request not to
“reduce the normal range and designated range for the equipment
portion of the facilities capital employed factor by 50%” since
this would, in part, “undermine the incentive for contractor
investment in equipment modernization.”
Further, an amended and expanded cost efficiency factor was
supported by industry. Upon
final rule implementation training for government and
industry personnel will be needed.
·
The January 3, 2002, Federal Register published
the third 2001 Federal Activities Inventory Reform (FAIR) Act
release of additional agencies “inventories of activities
that are not inherently Governmental (and) now available to
the public.” On
January 11th DLA announced that operations and management
of its Defense Distribution Depot,
Richmond, Va., would remain in-house.
·
On December 27, 2001, a notice was published whereby
the rule published on April 3, 2001, is finalized such that the
“Contractor Responsibility, Labor Relations Costs, and Costs
Relating to Legal and Other Proceedings” published December 20,
2000, is revoked.
·
A new automated DD 250 system is being implemented
by/through DFAS Columbus. There will be a test site with training
starting in March 2002 and deployment shortly thereafter.
The payment office will make payments when the DD 250 is
electronically signed and electronically sent to the payment office. The contractor would not have to “send-in” an invoice.
This is seen as a great benefit for small as well as large
businesses and contracts would close much faster. The software
system is called WAWF - Wide Area Work Flow.
·
For an interesting overview of current/significant
accounting related developments in government contracting you may
want to take advantage of a free subscription to the Newsletter
published by Darrell Oyer at DOYERCO@aol.com.
·
As of January 1, 2002, Federal Business Opportunities
(www.fedbizopps.gov) is the single point of entry to federal
procurements in lieu of the Commerce Business Daily.
·
For those in the proposal preparation/reading
“business” the following may be of interest:
http://www.dilbert.com/comics/dilbert/archive/dilbert-20020103.html
Recent/Future Publications include—
The National Contract Management
Association (NCMA) Contract Management magazine commenced
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-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.
·
April-May, Southern California, “Negotiation”
Seminar.
·
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."
·
May 17, 2002, San Diego, California State Bar Business
Law Section Annual Spring meeting, “Problems in drafting/enforcing
arbitration forum selection clauses in Franchise agreements.”
Charles E. Rumbaugh
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