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
March
26, 2003 Regulatory
Update
Recent Regulatory matters that may be of interest
since the last Update include---
1.
DoD ISSUES ADDITIONAL DIRECTION ON ACQUISITION OF SERVICE CONTRACTORS.
On
January 28, 2003, DoD Director of Defense Procurement &
Acquisition Deidre Lee issued a memorandum expressing concern about
“many solicitations for services (that) include educational
requirements for contractor personnel which mirror education
requirement for DoD acquisition workforce under the Defense
Acquisition Workforce Improvement Act (DAWIA).”
The memorandum further states that FASA
“requires
use of commercial practices and performance based statements of work
wherever feasible. Rather
than imposing education requirements, our focus should be on the
desired outcome (e.g., great analytical support) and provide the
contractor maximum flexibility on how they will deliver the desired
outcome. Education
requirements should only be imposed in those rare
occasions where there is a safety consideration or if
educational requirements are required for professional
certifications for similar jobs in private industry.”
On March 7, 2003, the Navy issued a similar memorandum on the
subject and specifically stated that recent law also “limits the
use of education and experience requirements in IT contracts.”
Related thereto, on March 10, 2003, the Navy issued a memorandum on
“Acquisition of Services,” which implemented, effective
immediately, its Department of the Navy Management and Oversight
Process for the Acquisition of Services (MOPAS). MOPAS
provides
“the DoN process for oversight and management of
the acquisition of services….
(and) will ensure that service acquisitions are of the
highest quality and support DoN objectives; are, to the maximum
extent practicable, based on clear, performance-based requirements
and that required outcomes are identified and measurable; and are
properly planned and administered to achieve the intended result.”
COMMENT: Detailing, or micromanaging, the “how-to” in a SOW,
rather than using performance specifications, could put
“at-risk” the ultimate contractual objectives of the parties!
Talk to your counsel.
2.
DoD
transformation initiative moves ahead!
The
DoD pursuit of its DFARS Transformation has resulted at last count
in over 150 “improvement proposals” with most of the submissions
by government personnel. The stated deadline for submissions of proposals in this
deregulation effort is March 28, 2003—See March 3, 2003 Special
Regulatory Update and the Transformation website at
<http://www.acq.osd.mil/dp/dars/transf.htm>
COMMENT: For an industry primarily “regulated” by the four
corners of the contract, a “level-playing” field within the
parameters of “having” reasonable acquisition/policy regulations
should be an important subject to all.
3.
DoD PROPOSES TO ELIMINATE WITHHOLD REQUIREMENT. The February 28, 2003, Federal Register noticed a
proposed amendment to the DFARS that would “remove the requirement
that a contracting officer withhold 5 percent of the payments due
under a time-and-materials or labor-hour contract unless otherwise
prescribed in the contract Schedule. The proposed rule would permit,
but not require, the ACO to withhold payment amounts if the ACO
determines the withholding to be necessary to protect the
Government's interests.” Comments are due on/before April 29th.
Miscellaneous:
·
On
March 18, 2003, Federal Acquisition Circular 2001-13 was issued and
is generally effective April 17, 2003.
Final rules included the following:
Ø
Contract
Types for Commercial Item Acquisitions. This
“final rule amends FAR 12.207, 16.202-1, and 16.203-1 to indicate
that award fee and performance or delivery incentives based solely
on factors other than cost may be used in conjunction with firm-
fixed-price (FFP) contracts and fixed-price contracts with economic
price adjustment (FP/EPA) without changing the FFP or FP/EPA nature
of the contract.”
Ø
Preference
for U.S.-Flag Vessels--Subcontracts for Commercial Items “This
final rule amends FAR Parts 12, 32, 47, and associated clauses to
limit the types of subcontracts for which the waiver of cargo
preference statutes is applicable…. This final rule also amends
FAR Part 12 by adding 10 U.S.C. 2631, Transportation of Supplies by
Sea, to the list of laws inapplicable to subcontracts for the
acquisition of commercial items (except for certain subcontracts).
FAR Subpart 47.5 and the clause at FAR 52.247-64 do not generally
apply to acquisitions by the Department of Defense.”
Ø
Progress
Payment Requests Under Indefinite-Delivery Contracts. “This
final rule amends the FAR to require, under indefinite-delivery
contracts, the contractor to account for and submit progress payment
requests under individual orders as if each order constitutes a
separate contract, unless otherwise specified in the contract.”
Ø
Federal, State, and Local Taxes
·
The
March 17, 2003, issue of “Legal Times” had an excellent, i.e.
“must-read,” article on “Safety
Against Terror—Manufacturers obtain immunity from some lawsuits if
they get on the right list” by James McCullough and Abram Pafford. The introductory paragraph of the article sets its tone,
“One
of the most significant provisions of the November 2002 Homeland
Security Act may be a somewhat obscure section known as the Support
Anti-terrorism by Fostering Effective Technologies (SAFETY) Act.
The SAFETY Act is intended to create incentives for the
development of anti-terrorist technology by limiting the risk of
financial liability for suppliers of anti-terrorism technologies in
the event they are sued for damages after a terrorist attack.
That means…the manufacturers will be immune from suit if
their products are properly qualified.”
The “list” is the one that will be administered by the Department of
Homeland Security pursuant to the Act.
The Act provides non-exclusive criteria that the Department
should consider in its designation as “qualified anti-terrorism
technology” for inclusion on the list.
Comment: Implementing regulations
are expected “in a couple of weeks” and will need to be closely
monitored. This is also
an important industrial base issue—going to its viability—and
thus equally important to all government agencies AND contracting
officers that contract with any of these contractors, e.g. appropriated
funds are not at risk by “designation”! It was suggested at
a recent industry association meeting that it may be desirable to
have regulations that “could” also operate to provide a
“self-executing” designation in addition to individual
“applications” for inclusion on a list.
And, the February 28, 2003, Executive Order 13286, Section 73, suggests
a view to some that PL 85-804 contractual relief may have been
severely constrained given, for example, DoD may be required to
first consider/use of the authority cited above in the Act.
Accordingly, if this view is correct, designation on the
“list” may be very important in this “immunity (SAFETY
Act) verses federal government appropriation/cost (PL 85-804)
issue.
Finally, it is
noted that the March 25th issue of the Wall Street
Journal stated that terrorism insurance (required to be offered by
insurers) is not being obtained—purportedly because it is
“too pricey or because the companies don’t consider themselves
terrorist targets” according to a reported survey of insurance
brokers. The SAFETY Act
may provide another reasonable safe-harbor that is not “too
pricey.”
See the January
Regulatory Update for additional background information relating to
contracting pursuant to that Act.
Stay tuned and
talk to your counsel.
·
The
January Regulatory Update provided, in part, that DoD had “issued
a memorandum on December 19, 2002, whereby it will establish an
Integrated Product Team (IPT) in connection with a ‘Policy for
Unique Identification (UID) of Tangible Items.’”
It was recently reported that this UID effort could involve
having an ISO standard being adopted and could (potentially) result
in contractors “using one marking system for their commercial
customers and one for DoD.”
Comment: Talk to your cognizant property/financial personnel as to how
this effort may impact you.
·
On
March 21, 2003, the Air Force issued a memorandum whereby
“Operation
Iraqi Freedom is determined to be a contingency operation.
As a result, the exception in the Defense Acquisition
Regulation Supplement at 225.701-70 applies to Operation Iraqi
Freedom. Pursuant to
this exception, Air Force personnel may make emergency acquisitions
in direct support of U.S. or allied forces during Operation Iraqi
Freedom. In addition,
the threshold is increased for acquisitions in direct support of
this Operation as prescribed in the definition of ‘Simplified
Acquisition Threshold’ in FAR 2.101.”
Related thereto, the Air Force also issued on March 21, 2003, a
memorandum on Rapid, Agile Contracting Support During Operation
Iraqi Freedom with a listing of contract techniques that could be
employed by contracting officers.
·
Comment: The recent Federal Circuit
decision of Kearfott Guidance & Navigation Corp v. Rumsfeld, No.
02-1039 (Fed Cir. Feb. 25, 2003) “reinforces” the notion by some
of considering/having a policy on how to address revised/new cost
principles, etc. that may seem only to be applicable to new
contracts yet could result in being deemed retroactive in
application, notwithstanding a clear effectiveness date.
Further, the advantages of NOT having two “systems”
when a new regulation becomes effective should also be reviewed in
this context.
When are
advance agreements warranted to remove (any) uncertainty of
retroactivity and/or minimizes cost to the customer by having
only one system in place?
Can the absence of an advance agreement impact your
costs/operations?
A recent example of a “potential” dual system is the DoD
rule—effective March 1, 2003—on electronic (verses hardcopy)
submission of payment requests—see “Electronic Invoicing…at
DoD” and comment in the February Regulatory Update.
See your counsel.
·
An
excellent web portal to/for ALL government forms including GSA and
DoD is <www.fedforms.gov>.
·
The
A-12 litigation was remanded and overturned, in part, by the US
Court of Appeals for the Federal Circuit.
·
The
Air Force recently updated its ADR website <http://www.adr.af.mil/>
which includes several forms of sample ADR agreements that may be of
interest.
·
For
an interesting commercial case with alleged defective goods
including the parties attempted resolution of the controversy by
withholds, etc. and involved e-mail issues including statute of
frauds, “battle-of-the-forms,” etc. see Gen. Trading Int’l,
Inc. v. Wal-Mart Stores, Inc. Nos. 20-1947/2064 (8th Cir.
February 25, 2003). When
do e-mails sufficiently satisfy the Statute of Frauds? They did not in this case!
Future Speaking Topics
Include—
·
“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,
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.
·
“Industry
Perspective of Government ADR Programs,” 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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