CHARLES E. RUMBAUGH
Arbitrator/Mediator
(310) 373-1981 / FAX (310) 373-4182
(888) ADROffice (toll free)
e-mail: ADROffice@Rumbaugh.net
P.O. Box 2636
Rolling Hills, California 90274
P.O. Box 2095
Burlingame, California 94011
December 29, 2003, Regulatory
Update
Recent Regulatory
matters that may be of interest since the last Update include---
·
On November 28, 2003, the Federal Register
noticed a proposed FAR rule “to
remove the requirement to apply cost principles and procedures when
pricing a contract if cost or pricing data are not obtained, and to
increase the contract dollar threshold for assessing a penalty if
the contractor includes expressly unallowable costs in its claim for
reimbursement.” Specifically,
the proposal would…
Ø
“Amend the FAR to indicate that the cost principles
and procedures of FAR part 31 do not apply to the pricing of
fixed-price contracts if cost or pricing data are not obtained.
Currently, the cost principles and procedures of FAR part 31 apply
whenever cost analysis is performed, regardless of whether cost or
pricing data are obtained.
Ø
“Adds a definition to FAR 31.001 for fixed-price
contracts, subcontracts and modifications.
Ø
“Raises the dollar threshold (to $550,000) for
including the contract clause at FAR 52.242-3, Penalties for
Unallowable Costs, in solicitations and contracts” and similarly
raised the threshold for a “covered contract” amount to $550,000
for consistency with TINA.
Comments are due on/before January 27,
2004.
· On December 4, 2003, the Federal Register noticed the Department of Homeland Security issuance
of an interim rule to establish the Department of Homeland Security Acquisition Regulation (HSAR).”
This rule has over 37 pages (52 Parts—similarly organized as the FAR). The HSAR is available in the
Federal Register or at the DHS website: www.dhs.gov/dhspublic/interapp/editorial/editorial_0378.xml.
Comments are due on/before January 5, 2004.
Comment:
Noted items of concern include scope/sunset of warranty
coverage; appropriate protection for proprietary non-disclosure
agreements; organizational/personal conflicts of interest; interplay
with FAR in various areas including, for example, cost principles;
etc.
· On November 28, 2003, the Federal Register noticed an interim AFARS rule and clause
(5152.225-74-9000 “Contractors Accompanying the Force”) that addresses many of the
issues associated with the deployment of contractor personnel overseas under Army contracts.
Under this contract clause the contractor “acknowledges that such operations are inherently
dangerous and accepts the risks associated with contract performance in this environment.”
Further,
“the contractor shall ensure that Contractor Personnel working in an area of operations
…are familiar and comply with applicable: (i) Military Service and Department of Defense
regulations, directives, instructions, general orders, policies, and procedures, in particular Army
Regulation 715-9 and Field Manual 3-100.21; (ii) U.S., host country, local, and international laws
and regulations; and (iii) treaties and international agreements (e.g., Status of Forces Agreements,
Host Nation Support Agreements, and Defense Technical Agreements) relating to safety, health,
force protection, and operations under this contract (and ensure this clause is included in all subcontracts).”
Also, the Air Force General Counsel issued a “guidance
document” entitled, “Deploying with Contractors: Contracting
Considerations,” under a date of November 2003 which “addresses
the practical aspects of contracting (including acquisition
planning, contact formation, modification and contract close-out)
when performance requires the contactor’s employees to deploy or
perform contract services overseas.”
And, on December 8, 2003, the Acting Director of Defense
Procurement and Acquisition Policy issued a guidance memorandum
emphasizing the need to include the Defense Base Act Clause (FAR
52.228-3, “Workers Compensation Insurance”) in overseas
contracts.
Comments on the Army rule are due on/before January 27,
2004.
Comment: What
are the contract risks being “accepted” with the Army clause?
What is the price for “acceptance” of those risks and
what is the price for compliance with the cited
“regulations?”—see the contingency cost principle and discuss
with counsel. For an
excellent paper, “Contractors on the Battlefield:
Emerging Issues for Contractor Support in Combat and
Contingency Operations,” see the Briefing Paper at http://www.ffhsj.com/govtcon/pdf/briefjune2002.pdf.
·
On December 23, 2003, the Federal Register
noticed a proposed FAR rule “to implement the revised definitions
of ‘Construction’ and ‘site of the work’ in the Department
of Labor (DoL) regulations (that were effective on January 19,
2001). In addition, the Councils are proposing to clarify several
definitions relating to labor standards for contracts involving
construction and make requirements for flow down of labor clauses
more precise….
The Councils propose revisions to the clause at 52.222-11,
‘Subcontracts (Labor Standards),’ to clarify that it flows down
only to subcontracts for construction within the United States, and
that the clause entitled ‘Contract Work Hours and Safety Standards
Act--Overtime Compensation’ (FAR 52.222-4) does not flow down
unless included in the (prime) contract.”
Comments are due on/before February 23, 2004.
·
On December 11, 2003, the Federal Register
noticed a proposed FAR rule to “revise the relocation cost
principle (FAR 31.205-35) to expand the use of reimbursement on a
lump-sum basis to certain types of employee relocation costs.”
Specifically, it is proposed “to amend the relocation cost
principle to permit contractors the option of being reimbursed on a
lump-sum basis for three types of employee relocation costs, namely,
costs of finding a new home, (2) costs of travel to the new
location, and (3) costs of temporary lodging. These three types of
costs are in addition to the miscellaneous relocations costs for
which lump-sum reimbursements are already permitted.” Comments are
due on/before February 9, 2004.
Comment:
This proposal is purportedly the direct result of public
participation and input at public hearings as well as through prior
notices on proposed rule-making.
However, contracting officers and contractors can always
negotiate advance agreements or “lump sum” amount.
Or is this another word for a “cap” for that which is
reasonable, allocable and allowable?
· On December 15, 2003, the Federal Register noticed that “DoD has adopted as final, with changes,
an interim rule (that was effective February 21, 2003) amending the Defense Federal Acquisition Regulation
Supplement (DFARS) to implement Section 1008 of the National Defense Authorization Act for Fiscal
Year 2001. Section 1008 requires contractors to submit, and DoD to process, payment requests in
electronic form.” DFARS 252.232-7003, “Electronic Submission of Payment Requests,” is revised
to reflect these changes. Specific changes in this final rule that is effective on December 15, 2003,
include…
Ø “Electronic form means any automated system that transmits information electronically from the
initiating system to all affected systems. Facsimile, e-mail, and scanned documents are not acceptable
electronic forms for submission of payment requests. However, scanned documents are acceptable
when they are part of a submission of a payment request made using one of the electronic forms
provided (in DFARS 252.232-7003(b)).
Ø “If the Contractor is unable to submit a payment request in electronic form, or DoD is unable to receive a
payment request in electronic form, the Contractor shall submit the payment request using a method mutually
agreed to by the Contractor, the Contracting Officer, the contract administration office, and the payment office.”
Comment: When
was the last time anyone saw a contract clause specifying four
organizations to agree on an alternative “method”—in the
contract? Seemingly, there is the “possibility” of another
method. DoD is to be
commended for continuing the practice of providing a discussion of
the public comments (in 23 areas) it has received as well as the
differences between the interim and final rules.
·
On November 26, 2003, the Acting Undersecretary of
Defense issued a policy update/guidance on Unique Identification (UID)
of Tangible Items. See
prior Updates on the topic of UIDs and the UID unique website at http://www.acq.osd.mil/uid/.
· On December 15, 2003, DoD noticed a final DFARS rule “to provide additional flexibility
(to contracting officers) when determining the need to withhold payments under time-and-materials
and labor-hour contracts (utilizing the clause at DFARS 252.232-7006, Alternate A). The rule
clarifies that normally there should be no need to withhold payment for a contractor with a record
of timely submittal of a release discharging the Government from all liabilities, obligations, and claims
under a contract.” The clause provides that if the “ACO determines that it is necessary to withhold
payment to protect the Government's interests, the ACO shall unilaterally issue a modification requiring
the contractor to withhold 5 percent of amounts due, up to a maximum of $50,000.”
Comment: Note that while the phrase, “public interest,” is undefined it must presumably relate
solely to “timing” in submittal of required releases. However, could this be a hidden attempt to
penalize contractors for not closing out contracts on a “timely” basis? Also, DoD specifically
responded to the public comments.
·
Federal Acquisition Circular 2001-18 was published in
the Federal Register on December 11, 2003. Topics include…
Ø
Depreciation Cost principle
Ø
Debarment and Suspension—Order Placement and Option
Exercise
Ø
Insurance and Pension costs
Ø
Debriefing—Competitive Acquisition
·
Comment:
Procurement Integrity and ethics related issues including
adequate training—within industry and
government—have been in the news and could receive heightened and
renewed attention within all levels of the organizational structure.
Do prime contractors and subcontractors have required
“crisis management” programs in place and are the
requisite terms and conditions in subcontracts those that are
appropriate for these issues? Discuss
with counsel.
Future
Speaking Topics Include—
·
“Creative Thinking to
Conflict Resolution for the 21st Century,” California
State University (January/February 2004)
How
do we strategically manage or respond to conflicts that surface in
our professional and personal lives? How do we analyze a critical
situation at work or in the multitude of interpersonal environments
we find ourselves in? Should everything be decided on what is best
on an individual basis, or what's best for the organization or team?
Participants in this interactive course will learn the methods to
successfully prevent and resolve conflicts. Through role play and
case studies, students will apply creative thinking tools and models
as they explore the
·
appropriate use and
importance of power and leverage
·
role of verbal and
non-verbal communication
·
rights and
interest-based approaches to managing conflict
Info/registration:
http://www.csun.edu/exl/schedule/winter/xbmg_exl.htm#040041
·
ISM San Fernando Valley
Affiliate, "How 'Baseball Arbitration' will help in Negotiating
Sole Source Procurements--or how to get through Impasse."
·
NCMA China Lake
Chapter, “Current Government Contracting Issues Impacting
Contracting/Buying Profession.”
·
California State Bar
Business Law Conference, “Drafting Critical Dispute Resolution
Clauses” and “Utilization of ADR in Franchise and Securities
Industries.”
·
NCMA Dayton Chapter,
“Hot Topics in ADR.”
·
ISM 89th Annual
International Purchasing Conference, Philadelphia, Pennsylvania,
“An Effective Dispute Resolution Process for Subcontractors” and
“Update on DoD Transformation Initiative."
·
NCMA World Congress,
Orlando, Florida, “Designing the Ultimate Dispute Resolution
Clause for Enhanced Subcontractor Relationships.”
Charles E. Rumbaugh
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