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
February
25, 2003 Regulatory Update
Recent
Regulatory matters that may be of interest since the last Update
include---
1.
DoD ISSUES
GUIDANCE ON GRANTING/REPORTING OF WAIVERS OF TRUTH IN NEGOTIATIONS
ACT (TINA). On
February 11, 2003, DoD Director of Defense Procurement &
Acquisition Deidre Lee issued a memorandum implementing Section 817
of the National Defense Authorization Act for FY2003, which
“directs that specific guidance be issued regarding the
circumstances under which it is appropriate to grant…a waiver”
for certified cost/pricing data under TINA.
The memorandum directs that
“the
grant of an exceptional case waiver shall be made only upon a
determination that (1) the property or services cannot reasonably
be obtained under the contract, subcontract, or modification,
without the grant of the waiver; (2) the price can be
determined to be fair and reasonable without the submission of
certified cost or pricing data; and (3) there are demonstrated
benefits to granting the waiver.”
And,
to implement the corresponding annual Congressional reporting
requirement “all exceptional case TINA waivers granted during a
given fiscal year…having a value of $15 million or greater,”
must be consolidated into a report which shall be delivered to the
Director no later than November 30th of each year.
Further, commercial item purchases in excess of $15 million
where the exception is based upon a commercial item determination
must also be reported.
Additionally,
the memorandum covers recent GAO related concerns, i.e. “whether a
TINA waiver can be granted for part of a proposed price and whether
(an) unpriced option can be the subject of TINA waivers.”
The Director also stated that in stated circumstances a
waiver may be supported for part of a proposed price but the
government “cannot agree in advance to waive TINA certification
for unpriced options.”
COMMENT: While this “guidance” will be superseded by
“formal incorporation” into the DFARS, no Federal Register
notice and opportunity for comment is provided by this action which
obviously impacts negotiations between all parties including those
with subcontractors!
2.
CIVILIAN
AND DEFENSE COUNCILS NOTICE “MORE” STREAMLINING IN COST
PRINCIPLES…
·
On January
30, 2003, the Federal Register noticed that the
Civilian/Defense Councils are “proposing to amend the Federal
Acquisition Regulation (FAR) to amend the insurance and
indemnification cost principle and the portion of the compensation
cost principle relating to pension costs.”
Comments are due on/before March 31st.
Comment: This is part of the government’s initiative (and supported
by industry in major respects) to streamline the FAR cost
principles—see other examples below.
Further, DoD announced that it has initiated a “Defense
Task Force for Regulation Transformation” with a focus on the
transformation of FAR and DFARS. The reported “aim (is) to shorten DoD rule-making processes
by 50% and to eliminate all unnecessary rules” with three phases
in the released DFARS plan.
·
On February
4, 2003, the Federal Register also noticed a proposed FAR
rule resulting from this Civilian/Defense Council
“analysis of the general provisions at (several additional
cost principles including) FAR 31.106-2, Exceptions to general rule
on allowability and allocability; FAR 31.201-1, Composition of total
cost; FAR 31.201-2, Determining allowability; FAR 31.202, Direct
costs; and FAR 31.203, Indirect costs.”
This proposal provides several so-called clarifying and
editorial changes. However,
it is noted under FAR 31.106-2, it is planned to “explicitly
recognize the concept of special allocations for application to
facilities contracts that are not subject to full Cost Accounting
Standards (CAS) coverage.” In
addition “proposed language has been added to provide the specific
methodology to be used when employing the concept of a special
allocation.” Comments are due on/before April 7th.
·
On January
30, 2003, the Federal Register noticed a noticed a proposed
notice of advance rulemaking whereby the FAR Council “is
soliciting comments regarding the implementation of section 4203 of
the Federal Acquisition Reform Act (the Act) with respect to
Commercially Available Off-the-Shelf Item Acquisitions. The Act
requires the Federal Acquisition Regulation (FAR) to list certain
provisions of law that are inapplicable to contracts for acquisition
of commercially available off-the-shelf items.”
While FASA also provided some laws inapplicable to such
commercial purchases, an extensive list of laws that “that could
be determined inapplicable to commercially available off-the-shelf
items” is included in the notice.
Comments are due on/before March 31st.
Comment: Consequently, this is an excellent opportunity to
review the current listing of appropriate laws including any
so-called “renegade” contract clauses that may be in
use—purportedly due to some “new legal requirement”— and
have them considered as possible additions to the
“inapplicability” listing in FAR.
·
On January
30, 2003, the Federal Register noticed a proposed FAR rule as
a result of a “comprehensive
review of the cost principle at FAR 31.205-11, Depreciation, (and)
to evaluate the need for each specific requirement.”
In addition to “streamlining” this principle, proposed
changes include those in the following topics/definitions/areas:
Definition
of depreciation
Residual
values
Depreciation
claimed for tax purposes
Write-down
due to business combinations/impaired assets.
Emergency
facilities
Comments are due on/before March 31st.
3.
ELECTRONIC
INVOICING IS REQUIRED AT DoD! On
February 21, 2003, the Federal Register noticed that DoD
“issued an interim rule (effective March 1, 2003) amending the
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.”
The notice also includes the publication of the 36 previously
submitted comments (and DoD responses thereto) to the prior Federal
Register notice on the subject.
The rule provides “authority for the contracting officer
to permit the contractor to submit a payment request using an
alternative method, if the contracting officer, the payment office, and
the contractor mutually agree.” Comments are due on/before
April 22nd.
Comment: See prior Updates on the topic of “e-submissions” and
initiatives under the leadership of DCMA
You may want to contact your customer/counsel about
implementation for ALL contracts rather than just those contracts
that have the new clause on/after March 1st as well as
any alternative method that is permitted/desired.
Miscellaneous:
·
On February
4, 2003, the Federal Register noticed proposed FAR changes
revising the current regulatory guidance on debriefings.
Specifically, the proposed “rule amends FAR 52.212-1 and
52.215-1 to implement the statutory requirement and the additional
FAR past performance requirement by listing all the prescribed
minimal information that shall be disclosed in postaward
debriefings.” Also,
the proposal notes, “unit price information, if applicable,
on the debriefed and successful offerors was intentionally not
included. As a result
of recent court cases, especially MCI WorldCom v. GSA, 163 F. Supp.
2d 28, the treatment of unit prices under exemption no. 4 of the
Freedom of Information Act (5 U.S.C. 552(b)(3)) is in a state of
flux which may cause a revision to FAR 15.503(b)(1)(iv) to
clarify the release of unit prices. The requirements are
addressed in FAR 15.506(d) and FAR 12.203.” Comments are due
on/before April 7th.
Comment: What is the policy on release of unit price?
Should the policy-makers wait for a court decision to drive
policy without public explanation of the void in the regulations?
Or, is this a good “safe harbor?”
·
On January
31, 2003, the Federal Register noticed proposed FAR changes
on “contract bundling” which would implement the recommendations
of the Office of Management and Budget (OMB) in its report entitled,
“A Strategy for Increasing Federal Contracting Opportunities for
Small Business.” (See
November 12, 2002 Update for background info).
Specific action items in this proposal include…
Ø
“Action
Item 3 recommends regulatory changes to expressly require bundling
reviews of multiple award contract vehicles and task and delivery
orders under such procurements.
Ø
Action Item 4
proposes the establishment of agency-specific acquisition dollar
thresholds, within the range of $2 million and $7 million, that
would trigger bundling reviews by the agency Office of Small and
Disadvantaged Business Utilization (OSDBU).
Ø
Action Item 5
recommends that when an agency contemplates a bundled procurement
above the established threshold, the agency must identify
alternative acquisition strategies and justify the rationale for
selecting a particular strategy over another that would involve less
bundling.
Ø
Action Item 6
calls for measures to strengthen compliance with the plans of large
business prime contractors for subcontracting with small businesses.
Ø
Action Item 7
further requires measures to facilitate small business teams
including joint ventures to effectively compete for bundled
contracts. In connection with Action Item 7, the report requires
that SBA determine whether regulatory changes are appropriate to
encourage the development of such small business teaming
arrangements.” Comments
are due on/before April 1st.
Comment: Ironically DoD had announced on January 24, 2003, that it
will be suspending “the regulation implementing the authority to
enter into a contract for a price exceeding fair market cost if the
Secretary (of Defense) determines at the beginning of the fiscal
year that DoD achieved the 5 percent goal established” for small
disadvantaged businesses. DoD
exceeded that goal and, thus, there will be no price adjustments
through February 23, 2004.
·
On February
18, 2003, the Federal Register noticed Office of Government
Ethics (OGE) proposed rule on post-employment conflict of interest
restriction/guidance for government personnel.
The proposal “would expand the guidance previously
published in part 2641 (of 5 Code Federal Regulations) as interim or
interim final rules and make minor modifications to … earlier
rulemakings. It would
also remove part 2637 from 5 CFR…. The purpose of part 2641 is to provide regulatory
guidance explaining the scope and content of the statutory
restrictions as they apply to employees terminating service on or
after January 1, 1991.” Also,
it is noted that “this proposed rule does not address very limited
amendments enacted on December 17, 2002, in section 209(d) of the
E-Government Act of 2002, Pub. L. 107-347. These amendments, which
pertain only to assignees from private sector organizations under
the newly authorized Information Technology Exchange Program, had
not been enacted when the proposed rule was developed and will not
be effective until April 16, 2003, subsequent to the issuance of the
proposed rule. See section 402(a)(1), Pub. L. 107-347. OGE
invites comments concerning interpretation of these amendments.”
Comments are due on/before May 19th.
Future Speaking Topics
Include—
·
“Tools to
Use In Negotiating Sole Source Procurements,” Institute for Supply
Management (ISM), Los Angeles Affiliate.
·
“Advanced
Negotiation Workshop,” California State University. Information
can be obtained for this May 2003 “Negotiation Workshop”
by visiting: http://www.csun.edu/exl/schedule/spring/springdept.htm
·
“Designing
the Human Resources Department for the 21st Century
International Company,” Beijing
and Dalian, China.
·
“Conducting
Global Business Transactions,” Peking University.
·
“DoD
Regulatory/Contractual Developments Impacting
Subcontracting”—ISM International Conference, Nashville.
·
“Tools to
Use In Negotiating Sole Source Procurements,” NCMA Finger Lakes
Chapter, Rochester, New York.
·
“How to
Negotiate With Sole Source Suppliers,” NCMA Buffalo Chapter.
·
“Recent
Regulatory Changes Impacting Government Contracting,” NCMA
Leatherstocking Chapter, Rome, New York.
Information
on arranging other speaking/teaching engagements on the above and/or
various aspects of alternative dispute resolution (ADR),
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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