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
July 12, 2002 Regulatory Update
Recent Regulatory matters that may be of interest
since the last Update include---
1.
DEPARTMENT OF JUSTICE (DoJ) CALLS FOR NEW LOOK AT FREEDOM OF INFORMATION
ACT (FOIA) COVERAGE/RELEASE OF “UNIT PRICE” INFORMATION. On May 29, 2002, the DoJ Office of Information and Privacy
issued significantly new guidance on the FOIA release of “unit
prices” paid by the government for goods/services in response to
FOIA requests. This
guidance reviewed two recent court decisions that require greater
protection/scrutiny under FOIA Exemption 4 that may preclude release
of unit prices pursuant to that Exemption.
Next, the guidance sets forth a methodology for future agency
“treatment of unit prices” as follows:
“First,
agencies handling FOIA requests for unit price information should in
all cases notify the submitter (of unit price information) that such
a request has been made in order to obtain and consider any
objections to disclosure…. Second, agencies should conduct a
thorough competitive harm analysis of any objection that is made to
the disclosure of unit prices through this submitter-notification
process…. [I]t it is
imperative that all agencies, having afforded submitter notice,
carefully evaluate any claims of competitive harm that may be made
by submitters on a case-by-case basis.”
Finally, the DoJ direction states “only by paying
careful attention to the potential application of Exemption 4 to
unit prices can agencies be sure that they will always have a
sufficient administrative record on which to base and support their
decisions.”
COMMENT: The cost of doing
business with the government no longer (necessarily) includes
government release of competitively harmful information.
Before this policy change—and given the government trend
toward greater commercial practices and doing business with
commercial firms and companies— the disclosure of unit prices was
detrimental to those commercial firms doing business with the
government since they could be adversely affected in the commercial
marketplace. This could
be adverse to the government’s interest by ultimately resulting in
fewer commercial organizations bidding on government contracts.
2.
TRANSPARENCY OF REGULATORY PROCESS
WILL BE ENHANCED. The
“quality” of data which agencies use as a basis in issuing new
regulations will be improved October 1, 2002.
Further, that data will for the first time be subject to
challenge by the public. OMB is tasked with creating overall government
“guidelines” that the agencies must use as a template for
agency-unique guidelines which are due by October 1st—and
are subject to preapproval by OMB.
If challenged data is not corrected, a private right of
action is permitted.
COMMENT: Flawed data used as the underlying premise for costly
regulations can be questioned!
Regulatory transparency will be truly enhanced.
However, the “challenge” to OMB (and industry) is the
“off-the-book” rules that are issued under the name of
Guidebooks, Handbooks, guidance, etc.
Also, the June
14, 2002, OFPP hearings on “competition” elicited testimony by
the Professional Services Council on the need for greater
“transparency” in the regulatory process.
Miscellaneous:
·
The
June 28, 2002, Court of Federal Claims decision in Union Pacific
Railroad Corp. v. U.S. (No. 01-490C) serves as a reminder of the
need to review the Anti-Deficiency Act—and necessary “contract
drafting rules”—with your counsel on indemnity agreements with
the government—they could be deemed as being “open-ended” and
perhaps unenforceable pursuant to the Anti-Deficiency Act.
COMMENT:
An
“indemnification agreement/clause” will normally be contested by
the government attorney notwithstanding the express language in an
agreement signed by the Contracting Officer.
However, this court ultimately ruled that the plaintiff
therein could
“reform
the contract language by specifying (1) that in no event will the
government payments under the (contested contract) clause exceed
actual appropriations and (2) that nothing in the contract shall be
construed as a promise that Congress, at a later date, will
appropriate sufficient funds to meet deficiencies.”
Interestingly,
the court expressly stated that it was not making any definitive
ruling as to whether any such “amendment” would succeed to
overcome any flaws under the Act.
The court also discussed the general rules on availability of
the Judgment Fund as a source of payment for breach of contract.
Counsel should be
consulted on the scope/applicability of the Act, the Contingency
Cost Principle (FAR 31.205-7(c)(2)) as well as other specific
drafting concerns/techniques for addressing
“unknown/unspecified” contract reimbursable costs, obligations,
etc.
·
On
July 12, 2002, DoD published a final rule that “contains Fiscal
Year 2003 requirements for completion of DD Form 350, Individual
Contracting Action Report. DoD uses this form to collect statistical
data on its contracting actions.”
·
The
Director of Defense Procurement is sponsoring a public meeting on
the treatment of proprietary data during all phases of DoD
procurements. The
meeting will be held on July 26, 2002, in Room C-43, Crystal Mall,
Building 4, 1941 Jefferson Davis Highway, Arlington, VA 22202. The
meeting notice also stated a background paper will be discussed at
the public meeting and would be available on the Defense Procurement
Internet home page at http://www.acq.osd.mil/dp/.
However, as of July 12th the paper was not posted.
·
On
July 3, 2002, “a federal
grand jury in Southern California indicted a United States Army
colonel based in South Korea on charges of orchestrating a scheme in
which he solicited hundreds of thousands of dollars in bribes in
exchange for influencing the award of millions of dollars in
contracts to two Korean businesses….
The indictment also alleges a conspiracy among (named
individuals) to improperly disclose information on contract bids …
for the purpose of providing … a competitive advantage.”
One of the charges against the defendants is a violation of
the Procurement Integrity Act.
·
On
June 14, 2002, the Department of Commerce, Bureau of Industry and
Security (BIS) announced as a “reminder” that it “conducts
pre-license checks (PLC) and post-shipment verifications (PSV) on
certain export transactions.” Certain foreign persons have been
identified by BIS “who were parties in past transactions where
PLCs or PSVs could not be conducted for reasons outside the
control of the U.S. Government … (and BIS) advises exporters that the involvement of a listed
person as a party to a proposed transaction constitutes a ‘red
flag’ as described in the guidance set forth in Supplement No. 3
to 15 CFR part 732. Under that guidance, the ‘red flag’ requires
heightened scrutiny by the exporter before proceeding with a
transaction in which a listed person is a party.”
·
Last
month’s Update reported that a commercial company would not accept
Government purchase orders or credit cards.
The July 1st Wall Street Journal reported
that that company “has decided it likes Uncle Sam after all” and
reversed a policy that dated from 1979!
A subsequent company review of the “burdensome” labor
data-reporting requirements that were originally cited as the
purported basis for that policy resulted in a reversal of the
federal purchase ban. In
addition, it was reported that there were recent meetings between
representatives of GSA and the company.
·
Federal
Acquisition Circular (FAC) 2001-08 was published on June 27, 2002.
Finalized rules cover the following topics/areas:
Ø
Intended
non-substantive definitional revisions/clarifications in
“changes,” “terminations,” “cancellations,”
“claims,” etc.
Ø
Federal
Supply Schedule Order Disputes and Incidental Items including
removal of the requirement that contractors notify GSA “when a
schedule contractor refuses to honor an order placed by a Government
contractor.”
Ø
Relocation
Cost Principle (FAR 31.205-35) including an increase in the ceiling
for “allowance of miscellaneous costs of relocation to $5,000.”
Future Speaking Engagements
Include—
·
July
22-24, 2002, Long Beach, California NCMA World Congress panel
presentations include
Ø “21st
Century B2B Advanced Negotiation.”
Ø “Mock
Commercial Arbitration Between Buyer/Seller.”
Ø “Critical
Issues in Building Buyer-Seller Relationships through the Use of ADR.”
·
July/August,
2002, California State University course, “Contract Management.”
·
August
9-12, 2002, “International Law/Trade Seminar,” Shenyang, China.
·
October
11, 2002, Monterey, California Annual State Bar Conference,
“Drafting Dispute Resolution Clauses for Commercial Contracts.”
Recent Speaking Topics have
included the following—
ü
"Significant
Regulatory Developments Affecting Government Contracting."
ü
“Designing
and Enhancing Effective B2B Relationships in the 21st Century.”
ü
“Forum
Selection Provisions in Commercial Dispute Resolution Agreements.”
ü
“Recent
Developments in Alternative Dispute Resolution”
ü
“Update
on Current Federal Regulatory Contracting Issues”
ü
“How
to Negotiate Fair Prices in Sole Source Procurements, Or How to
Close the Deal!”
ü
“Negotiation”
Seminars/Workshops.
ü
“Rules-of-the
Road for Conducting International Trade”
ü
“What's
New and Exciting in Government Regulations That Impact Your Life?”
ü
“Mock
Commercial Arbitration of the Century”
Information on any of the above as well as arranging other
speaking/teaching engagements including various aspects of
alternative dispute resolution (ADR), seminars/workshops on
basic/advanced negotiation techniques, or on substantive topics may
be arranged by sending a message to ADROffice@ieee.org.
Charles E. Rumbaugh
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