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 25, 2002 Regulatory Update
Recent Regulatory matters that may be of interest
since the last Update include---
1.
OFFICE OF MANAGEMENT AND BUDGET (OMB) PROPOSES MAJOR REVISIONS TO
CIRCULAR A-76 AND
“COMPETITION PROCESSES.” On
November 19, 2002, OMB noticed in the Federal Register major
changes in the way the government intends to conduct commercial
acquisitions. Specifically,
major revisions to Circular No. A-76 are proposed “to improve the
management of commercial activities that are needed to conduct the
business of government. The revisions would expand the use of
public-private competitions to all activities performed in-house
and through commercial inter-service support agreements (ISSAs).
The revisions would also incorporate principles of the Federal
Acquisition Regulation (FAR) into the competitive sourcing process,
including the ability to conduct an expanded best value
cost-technical trade-off source selection process. In addition,
the revisions would provide guidance for the development of
inventories identifying the commercial and inherently governmental
activities agencies perform, and prescribe limitations regarding the
reimbursable services federal agencies may provide to state and
local governments. To accomplish these changes, OMB is proposing to
revise and incorporate the following documents into the revised
Circular A-76:
Ø
the
“Revised Supplemental Handbook to OMB Circular A-76” (March
1999);
Ø
OMB
Circular A-76 Transmittal Memoranda Nos. 1-24;
Ø
Office
of Federal Procurement Policy (OFPP) Policy Letter 92-1,
“Inherently Governmental Functions;” and
Ø
OMB
Circular A-97, “Provision of Specialized or Technical Services to
State and Local Units of Government by Federal Agencies Under Title
III of the Intergovernmental Cooperation Act of 1968.”
These
stand-alone documents would be rescinded. Copies of the proposed
revision to OMB Circular A-76 may be obtained at the OMB home page
at www.whitehouse.gov/OMB/
circulars/index.html. Comments
are due on/before December 19, 2002.
COMMENT:
The stated goal of OMB is to “improve and expand the use of
competition in public-private sourcing decisions,
better ensure fairness, integrity, and transparency in the
decision-making process, and strengthen accountability for achieving
results.” The
OMB memorandum of November 14th (also at the website)
provides that the changes are effective for solicitations for “all
Direct Conversions and Standard Competitions” issued
on/after January 1, 2003.
Notwithstanding this request for comments, it is clear the
changes must be anticipated now!
Opportunity time?
2.
DoD FINALIZES RULE ON SCOPE OF CUSTOMER PARTICIPATION IN NEGOTIATION OF
FOREIGN MILITARY SALES (FMS) CONTRACTS.
On
November 22, 2002, the Federal Register noticed the final
rule on involvement of customers in FMS negotiations.
The rule differs from the proposed rule—published April 26,
2002—“in that it contains additional language requiring the
contracting officer to
Consult with
the contractor before making a decision regarding the degree of FMS
customer participation in contract negotiations; and
Provide an
explanation to the FMS customer if its participation in negotiations
will be limited.”
COMMENT: This will ensure that contractors have an
opportunity to express their concerns over release of proprietary
information, etc. Also,
the “equally” important news with this notice is DoD publishing
a discussion/feedback on public comments received in the public
notice/comment process. A listing of public comments is published
and is followed by DoD response thereto.
A very refreshing approach by DoD and should encourage
greater participation as well as enhance transparency in the
regulatory process.
3.
DoD PROPOSES THE PAYMENT OF “PROVISIONAL AWARD FEES.” On
November 22, 2002, the Federal Register noticed the long
awaited proposed rule, which if adopted, would permit the “use of
provisional award fee payments under cost-plus-award-fee contracts.
The rule provides for successfully performing contractors to receive
a portion of award fees within an evaluation period, prior to an
interim or final evaluation for that period.”
The rule would permit no more frequently than monthly
payments with a percentage payment cap from available award fee
amounts. Comments are
due on/before January 21, 2003.
Miscellaneous:
·
On
November 22, 2002, Federal Acquisition Circular 2001-10 was issued.
Final rule changes include…
Ø
Financing
Policies. “The rule removes
the restriction on use of performance-based payments on fixed-price
contracts prior to definitization; and permits large
businesses, in their billings to the Government, to include certain
vendor and subcontractor costs that have been incurred, but not
actually paid, provided that, ordinarily, they pay the subcontractor
within 30 days.”
Ø
Preservation
of Open Competition and Government Neutrality Towards Government
Contractors' Labor Relations on Federal and Federally Funded
Construction Projects. Finalizes the prior interim rule whereby
“Contracting officers, or any construction manager acting on
behalf of the Government, may not require or prohibit offerors,
contractors, or subcontractors from entering into or adhering to
project labor agreements with one or more labor organizations. It
also permits agency heads to exempt a project from the requirements
of the (applicable) Executive order under special circumstances, but
the exemption may not be related to the possibility of, or an
actual, labor dispute.”
Ø
Minor
revision to government record-keeping requirements.
COMMENT: Should some of these changes, e.g. inclusion in
payment requests of incurred costs that are not yet paid, be
operative under existing contracts?
Talk to counsel.
·
The
recent GAO decision in Sea Box, Inc., B-291056 (October 31,
2002) reinforces the need to realize that electronic proposals
“may” have to be “at the initial point of entry to the
Government” on the working day before the due date if such
proposals are subsequently mishandled by the government and they do
not arrive on the due date at the office designated for receipt of
same. See FAR 15.208
and FAR 52.215-1(c) (3)(ii)(A)(1) and talk to counsel.
·
It’s
been reported that the TRW/Northrop Grumman merger may necessitate
an agreement to facilitate some form of “equal access to
technology” by other contractors in order to “preserve”
competition.
COMMENT:
The further vertical integration of the defense industry continues
with agreements “attempting” to preserve vestiges of competition
in a “best value” world. Auditing
and pricing issues are more complex when competitors are
involved—have proposed teaming agreements, subcontracts, and
purchase orders reviewed by counsel.
·
And,
the Federal Prison Industries (FPI) charter as “the” exclusive
provider of over 150 products to federal agencies is back in the
news. This time FPI is alleged to be selling products to agencies
that were, in fact, produced, in whole or in part, by commercial
suppliers.
COMMENT: Is FPI vertically integrated?
Is your company selling to FPI in order to have an
(exclusive) entry portal to government agencies?
Talk to counsel.
·
Finally,
with passage of the Homeland Security legislation will it revive
terrorism insurance coverage but at what cost/surcharge?
Check with your insurance broker.
Is your insurer “required” to offer coverage?
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.
·
“Advanced
Negotiation Seminar,” California State University.
·
“Conducting
Global Business Transactions,” Peking University.
·
“DoD
Regulatory/Contractual Developments Impacting
Subcontracting”—Institute for Supply Management (ISM)
International Conference, Nashville.
·
“Negotiating
Sole Source Procurements,” NCMA Finger Lakes Chapter, Rochester,
New York.
Information
on arranging other speaking/teaching engagement on the above and/or
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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