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
July 9, 2003
Regulatory Update
Recent Regulatory matters that may be of interest
since the last Update include---
1.
DoD “DFARS TRANSFORMATION” INITIATIVE.
DoD continues its transformation of the FAR and DFARS.
On June 17, 2003, Deputy Director, Defense Acquisition
Regulations, Ron Poussard, presented his “Phase 2 Final Report”
to a committee of the ABA Public Contract Law Section.
Most of the presentation had been previously
available/reported—see earlier Regulatory Updates on topics that
are subject to this Phase 2 effort whereby it was “tentatively”
decided by that office which regulations would be eliminated,
“targeted” for movement to “Instructions/Guidebooks,”
changed, or scheduled for legislative change.
It is noteworthy
that this June 17th presentation did not appear to refer
to any of previously released/reported areas subject to this Phase 2
effort. But, under the
caption of “Relocate,” DoD is stating (now) that it proposes to
“create non-regulatory ‘Procedures and Guidance’” which have
“no significant impact on (the) public” and used for “Internal
guidance, instructions and procedures (optional and mandatory).”
If one then considers under this “Relocate” caption that
which was previously targeted for inclusion therein, a clearer
picture may emerge. For
example, it was reported earlier that the following subjects were
tentatively decided to be included in the “Relocated” category:
·
Source
Selection Procedures
·
Contract
Reporting Procedures
·
Weighted
Guidelines internal profit procedures
·
Debarment
processing procedures
Do
these subjects “significantly impact the public?”
Are they entirely “internal” to the operation of the
Government?
The task force is
currently in its 3rd Phase—drafting of proposed rules
and legislation. The 4th
Phase is scheduled to start in the September/October timeframe with
the issuance of proposed rules for public comment.
COMMENT: First, see comments in prior Updates. The task force is “still” seeking public input through
its website but not via the normal Federal Register
“request for comments.” Learning
more about this initiative and how it may impact primes,
subcontractors, small businesses, and acquisition professionals
(Contracts and Supply Management) is a “must.”
One excellent method is through the National Contract
Management Association (NCMA) which has scheduled a free
program on this initiative on July 16th (in conjunction
with its annual West Coast Educational Conference on July 17th
and 18th)—noticed speakers include Messrs. Poussard and
Ed Will from Boeing. Information
on the Conference and reserving a place at this “DFARS
Transformation Industry Forum” can be obtained by visiting the
NCMA website: <http://www.ncmahq.org>.
Finally see the second comment below on page 3 as to the
significance of “Guidance”
issued by DoD.
2.
COST PRINCIPLE CHANGES PROPOSED. The
July 7, 2003, Federal Register noticed a proposed amendment
to the FAR that would delete “the cost principle regarding
maintenance and repair costs (FAR 31.205-24), revising the cost
principles regarding gains and losses on disposition or impairment
of depreciable property or other capital assets (FAR 31.205-16), and
by revising the language concerning material costs (FAR
31.205-26).” The
deletion of FAR 31.205-24 reflects the Government’s view that CAS
covers the topic. A new
subparagraph is proposed for FAR 31.205-16 that “addresses the
method and timing for determining the gain and loss associated with
a sale and leaseback arrangement.”
And, two proposed deletions in FAR 31.205-26 reflect “a
reliance upon GAAP” in the first case and to reflect the
regulatory intent of only have “allowability” covered in the
Cost Principles. Comments are due on/before September 5, 2003.
3.
METHODOLOGY OF DETERMINING COST IMPACTS DUE TO ACCOUNTING CHANGES
PROPOSED.
The July 3, 2003, Federal Register noticed a proposed
amendment to the FAR “to delineate the process for determining and
resolving the cost impact on contracts and subcontracts when
a contractor makes a compliant change to a cost accounting practice
or follows a noncompliant practice.” A public meeting will be held
on this proposal starting at 9:00 am on August 5th at
Crystal Mall 3, 1931 Jefferson Davis Highway, Room C-43, Arlington,
VA, 22202. Otherwise,
comments are due on/before September 2, 2003.
Miscellaneous:
·
On
May 22, 2003, Federal Acquisition Circular 2001-14 was issued.
Final rules included the following subjects:
Ø
Geographic
Use of the. Term ``United States''.
Ø
Miscellaneous
Cost Principles.
Ø
Prompt
Payment Under Cost-Reimbursement Contracts for Services.
Ø
Electronic
Signatures
Ø
Increased
Federal Nelson. Prison Industries, Inc. (FPI) Waiver Threshold
Ø
Past
Performance Evaluation of FPI Contracts.
Ø
Contract
Terms and Conditions Required to Implement Statute or Executive
Orders-- Commercial Items.
·
The
June 11, 2003, Federal Register noticed a proposed amendment
to amend the DFARS “to prescribe the use of DoD activity address
codes in the first six positions of solicitation and contract
numbers, instead of the current practice of using DoD activity
address numbers in the first six positions.” Comments are due
on/before August 11, 2003.
COMMENT: Will this impact your accounting system, old/new
contracts, etc.?
·
The
Veterans Affairs Department “has halted all public-private job
competitions over concerns that the (competitive sourcing) program
could violate federal law.” Seems
that the contemplated outsourcing of over 20,000 jobs created a
legal concern as to the “level” of current employee involvement,
or cost comparisons, without specific Congressional funding of the
effort associated therewith.
·
The
Department of Treasury released on July 3, 2003, its “reissued”
Treasury Acquisition Regulations which “uses plain English to
improve clarity and understanding; eliminates internal operating
procedures that do not have a significant effect beyond
Treasury….”
·
On
June 25, 2003, Deidre Lee, Director Defense Procurement and
Acquisition Policy issued a memorandum on “Class
Deviation—Prohibited Sources” which outlined the revised
policy/deviation removing source restrictions for Yugoslavia (Serbia
and Montenegro), Taliban “controlled areas” of Afghanistan, and
Iraq. Entities/individuals
subject to economic sanctions are available at
<http://www.treas.gov/ofac>
·
A
recent Wall Street Journal article noted that “mergers make
it tougher to punish federal contractors” and cited alleged
violations, etc.
·
The
Director of Defense Procurement recently issued the updated, “A
Guide to Collection and Use of Past Performance Information”
(Version 3), dated May 2003. The
DoD Guide is available at <http://www.acq.osd.mil/dpap/Docs/PPI_Guide_2003_final.pdf>.
Also available is the “Manager’s Guide to Technology
Transition in an Evolutionary Acquisition Environment” (Version
1.0), dated January 31, 2003. This
Guide is available at <http://www.acq.osd.mil/dpap/Docs/AQ201S1v10Complete.pdf>
COMMENT: As a reminder, on September 10, 2002 the Director of
Defense Procurement issued a memorandum on “Guidance” issued by
her office and its applicability to contractors, i.e. “The
guidance (issued by the Director) is not legally binding on
contractors.” See
October 23, 2002, Update.
·
Industry
recently sent a letter to the Secretary of Homeland Security
regarding the need for expeditious regulatory implementation of the
“SAFETY ACT.” See
March 26, 2003, Update for background.
·
Recent
cases provided by readers that touch on Regulatory/Contractual
issues—consult with Counsel as to the applicability/ramifications:
Ø
Johnson
v. All-State Construction, Inc. wherein it was determined that the government under that Navy
construction contract had a common-law right of setoff off any
amounts due as liquidated damages notwithstanding the absence of any
express provision to do so. Case is available at <http://laws.lp.findlaw.com/fed/021442.html>
Ø
See
Rumsfeld v.Freedom NY, Inc. as an example where an old
contract created a multitude of issues including alleged cardinal
changes, negotiated releases, lost profits, etc. and where a
contract modification was determined by the Court to be invalid due
to duress. Available at
<http://laws.lp.findlaw.com/fed/021105.html>
Future Speaking Topics
Include—
·
October
2/3, 2003, “Use of Party-Appointed Arbitrators,” Los Angeles and
Orange County—American Arbitration Association.
·
October-November,
2003, “Conducting Global Business Transactions,” Peking
University and Renmin University, Beijing, China and Shenzhen
University, Hong Kong, China.
Information
on arranging speaking/teaching engagements on the above and/or
various aspects of Alternative Dispute Resolution (ADR),
basic/advanced negotiation techniques seminars/workshops, or on
substantive topics
may be arranged by sending a message to
CERumbaugh@earthlink.net
Charles E. Rumbaugh
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