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
November 12, 2002 Regulatory Update
Recent Regulatory matters that may be of interest
since the last Update include---
1.
DoD CHANGES ACQUISITION CULTURE BY CANCELING DoD
DIRECTIVE 5000.1, INSTRUCTION 5000.2 AND
DoD 5000.2-R. The Deputy Secretary of Defense on October 30, 2002,
issued a memorandum on Defense Acquisition whereby he canceled DoDD
5000.1 (“The Defense Acquisition System”),
DoDI 5000.2 (“Operation of the Defense Acquisition
System”), and DoD 5000.2-R (“Mandatory
Procedures for Major Defense Acquisition
Programs….”). The
Deputy also issued interim guidance on the acquisition system and
directed that revised Directives/Instructions be prepared within 120
days. “The intent of the (interim) guidance is to rapidly deliver
affordable, sustainable capability to the warfighter that meets the
warfighter’s needs.” The revised
guidance/policies “apply to all on-going acquisition programs
regardless of their stage of development.”
COMMENT: Given these changes are applicable to current
programs the policy/interim guidance (including attachments) is must
reading for program managers, etc.
The FAR and DFARS control in the event of any conflict with
the interim guidance.
2.
National Contract Management Association (NCMA) Issues
“Guide to the Contract Management Body of Knowledge”. In September, NCMA released its updated and expanded
Book of Knowledge for the Contract Management professional and as a
foundation for NCMA’s professional education and certification
programs. The Guide is
replete with competencies, subject matter, and tasks in a work
breakdown structure format for the Federal Government contracting
environment. A
Commercial contracting knowledge module is planned for 2003.
3.
OFFICE OF FEDERAL PROCUREMENT POLICY (OFPP) ISSUES MAJOR “BUNDLING”
REPORT. OFPP
issued a report on “Contract Bundling, A Strategy for Increasing
Federal Contracting Opportunities for Small Business (October
2002).” The OFPP
Administrator in an October 29, 2002, letter to the President
stated, in part, that the accompanying “report provides an
aggressive strategy for holding agencies accountable for eliminating
unnecessary contract bundling and mitigating the effects of
necessary contract bundling. The
recommendations propose a series of regulatory changes to ensure
maximum compliance with current contract bundling laws and full use
of the resources of the Small Business Administration and agency
Offices of Small and Disadvantaged Business Utilization.”
Miscellaneous:
·
On
October 25, 2002, the Federal Register noticed one proposed
DoD rule and five final DoD rules—effective for solicitations
issued on/after October 25th.
The proposed
rule covers “Transportation of Supplies by Sea - Commercial
Items” which would “change the list of clauses at DFARS
252.212-7001, Contract Terms and Conditions Required to Implement
Statutes or Executive Orders Applicable to Defense Acquisitions of
Commercial Items, to add Alternate III of 252.247-7023,
Transportation of Supplies by Sea.
This change will minimize transportation information required
from contractors under contracts at or below the simplified
acquisition threshold when acquiring commercial items.”
The final rules include the following:
Ø
Competition
Requirements for Purchase of Services Under Multiple Award
Contracts. “Changes the DFARS to strengthen procedures for
competition when DoD or other Federal agencies place orders
exceeding $100,000 for services under Federal Supply Schedules and
multiple award contracts to meet DoD requirements.”
COMMENT: The “increased” notice/competition requirements
including “enhanced” regulatory process changes should be
carefully reviewed with counsel.
Note also that this change is applicable to all orders placed
under prior multiple award contracts, i.e. regardless of when those
multiple award contracts were issued.
Ø
Contracting
Officer Qualifications. “Changes
the DFARS to add requirements for new entrants into the contracting
field in order to serve as a contracting officer with authority to
award or administer contracts exceeding the simplified acquisition
threshold. Included is a requirement for a baccalaureate
degree and 24 semester credit hours of study in a
business-related discipline.”
COMMENT: Also
see http://www.acq.osd.mil/ar/education.htm
Ø
Performance-Based
Contracting Using FAR Part 12 Procedures.
“Revises and finalizes the interim rule published on
December 6, 2001 (DFARS Change Notice 20011206) to clarify
applicability of provisions for utilizing Indian Organizations and
Indian-Owned Economic Enterprises. The previous changes permitted
the use of FAR Part 12 (Acquisition of Commercial Items) procedures
for firm-fixed-price, performance-based service contracts of $5
million or less that are awarded on or before October 30, 2003, if
certain conditions are met.”
·
On November 12, 2002, NASA noticed in the Federal
Register that it “is proposing to amend the NASA FAR
Supplement to implement the determination of the (NASA) Assistant
Administrator for Procurement that, for procurements subject to the
Trade Agreements Act, it would be inconsistent with the public
interest to apply the Buy American Act for U.S.-made end products
that are substantially transformed in the United States.”
Consequently, if adopted as proposed, the Buy American Act is
“not applicable to U.S.-made end products,” i.e. “the cost
of domestic components exceeds the cost of all components by more
than 50 percent.” Comments
are due on/before January 13, 2003.
·
A
couple of trade associations in a letter to the FAR Secretariat
recommended that the cost principle on Selling Costs be eliminated.
·
On
October 24, 2002, the Federal Register noticed a proposed FAR
rule change which requested public input on the FAR Council
“revising FAR 31.205-35, Relocation costs, to permit contractors
the option of claiming employee relocation costs based on actual
costs, an appropriate lump-sum basis, or a combination of the two
approaches.” Comments
are due on/before December 23, 2002.
·
The
previous reported Air Force clause tying contract performance to the
compensation of senior executives is reportedly not currently being
used.
·
An
incident was recently reported whereby the foreign production of
some DoD articles gave rise to a claim in that country against the
manufacturer for patent infringement under the local/foreign laws. The level of support from the DoD buying activity was also
cited.
COMMENT: Review your contracts with counsel on scope of patent
protection/indemnification in/for foreign locations.
·
The
Director of Defense Procurement recently reported that in FY 2001
“almost two-thirds of all contact financing payments made by DoD
were performance-based, while the remainder were progress payments
based on cost.”
·
The
Summer 2002 issue of the Journal of the Defense Acquisition
University has a timely article entitled, “Auctions in Defense
Acquisition: Theory and
Experimental Evidence”— “theory and experimental evidence of
auctions in the defense acquisition process.”
Also, where is
the trust in “partnering” with/between the Government and its
prime contractor? An
article/opinion in the same Journal on “Just Contracting
Parties, or Partners as well?” may also be of interest.
·
“Air
Force officials announced November 7, 2002, a potential cost overrun
of up to $690 million in the engineering, manufacturing and
development phase of the F/A-22 program.”
An industry/AF team has been tasked to investigate the
matter.
COMMENT: Catch a great (close-up) picture of the “Raptor”
over the California desert at http://www.af.mil/photos/images/021108_51.jpg
Recent
Publications include—
“Having Trouble Getting to the Negotiation Table?
Try Baseball Arbitration,” two-part series on incentivizing
parties to negotiate, appeared in NCMA Contract Management
magazine, October and November 2002 issues.
NCMA Contract
Management magazine had a three-part monthly series
(January-March 2002) on an important part of most arbitrations, i.e.
the Preliminary Hearing process.
Future Speaking Topics
Include—
·
"Are
Attorneys Required To Advise Their Clients On The Use/Availability
Of ADR?” –—California State Bar Business Law Section Winter
Conference, San Francisco.
·
“DoD
Regulatory/Contractual Developments Impacting
Subcontracting”—Institute for Supply Management International
Conference, Nashville.
·
“Negotiating
Sole Source Procurements,” NCMA Finger Lakes Chapter, Rochester,
New York.
Charles E. Rumbaugh
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