Source: https://fedgovcontracts.com/pe04-106.htm
Timestamp: 2020-06-06 11:45:49
Document Index: 729950240

Matched Legal Cases: ['art 12', 'art 37', 'art 12', 'art 12', 'art 31', 'art 31', 'art 31', 'art 8', 'art 8', 'art 8', 'art 8', 'art 5', 'art 6', 'art 12', 'arts 13', 'art 19', 'art 37', 'art 19', 'art 31']

6/18/04 Dispatch: Federal Acquisition Circular (FAC) 2001-24 - Miscellaneous Amendments
SUBJECT: Federal Acquisition Circular (FAC) 2001-24, Miscellaneous Amendments
SOURCE: Federal Register, June 18, 2004, Vol. 69, No. 117, page 34223
SYNOPSIS: The Federal Acquisition Secretariat is issuing FAC 2001-24 to amend the Federal Acquisition Regulation (FAR) in the following areas: (1) incentives for use of performance-based contracting for services; (2) definitions clause; (3) procurement lists; (4) determining official for employment provision compliance -- Immigration and Nationality Act (INA); (5) Federal Supply Schedules services and blanket purchase agreements (BPAs); (6) designated countries -- new European Communities member states; (7) Buy American Act -- nonavailable articles; (8) application of cost principles and procedures; (9) maintenance and repair costs, and material costs; and (10) technical amendments.
DATES: The effective date of these rules is July 19, 2004, except for items (1), (4), (6), and (10) which are effective June 18, 2004. Comments on item (1) must be submitted on or before August 17, 2004.
ADDRESSES: Comments on item (1) must be submitted to General Services Administration, FAR Secretariat (MVA), 1800 F Street, NW, Room 4035, Attn: Laurie Duarte, Washington, DC 20405; or by e-mail to farcase.2004-002@gsa.gov. Cite "FAC 2001-24, FAR Case 2004-004" in correspondence related to the interim rule.
Item (1), Julia Wise, 202-208-1168.
Item (2), Jeritta Parnell, 202-501-4082.
Items (3) and (5), Linda Nelson, 202-501-1900.
Item (4), Craig Goral, 202-501-3856.
Items (6) and (7), Cecelia Davis, 202- 219-0202.
Items (8) and (9), Edward Loeb, 202-501-0650.
SUPPLEMENTAL INFORMATION: (1) Incentives for Use of Performance-Based Contracting for Services: This interim rule amends FAR Part 12, Acquisition of Commercial Items, and FAR Subpart 37.6, Performance-Based Contracting, to implement Sections 1431 and 1433 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108-136). Section 1431 permit non-commercial performance-based contracts or task orders for services to be treated as contracts for commercial items if the value of the contract or order does not exceed $25,000,000, the contract or task order specifies each task to be performed, and each task has a firm-fixed-price. Section 1433 amends the definition of "commercial item" to add specific performance-based terminology and to conform to the language added by Section 1431. (EDITOR'S NOTE: For more on the acquisition-related provisions of Public Law 108-136, see the November 25, 2003, FEDERAL CONTRACT DISPATCH "Enactment of the National Defense Authorization Act for Fiscal Year 2004.")
To implement Sections 1431 and 1433, the following changes are made to the FAR:
The introduction to paragraph (6) of the "commercial item" definition in FAR 2.101, Definitions, and paragraph (c)(6) of FAR 52.202-1, Definitions, is revised to add the words "or a specific outcome to be achieved" to the end of the second sentence. The introduction now reads: "Services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices for specific tasks performed or specific outcomes to be achieved and under standard commercial terms and conditions. This does not include services that are sold based on hourly rates without an established catalog or market price for a specific service performed or a specific outcome to be achieved." (EDITOR'S NOTE: Item (2) (see below) replaces the entire text of FAR 52.202-1 effective July 19, 2004. Since Item (1) is effective June 18, the change to FAR 52.202-1 will be in force for only one month.)
Paragraph (d)(6) of FAR 4.601, Record Requirements, is added to require agencies to be able to access information from their computer systems on "contracts or task orders treated as commercial items" that are over $25,000.
A paragraph (g) is added to FAR 12.102 which provides that FAR Part 12 procedures for commercial items may be used "for any acquisition performance-based contracting for services that does not meet the definition of commercial item in FAR 2.101, if the contract or task order (i) is entered into on or before November 24, 2013 (the date the authority expires); (ii) has a value of $25 million or less; (iii) meets the definition of performance-based contracting at FAR 2.101; (iv) includes a quality assurance surveillance plan; (v) includes performance incentives where appropriate; (vi) specifies a firm-fixed price for specific tasks to be performed or outcomes to be achieved; and (vii) is awarded to an entity that provides similar services to the general public under terms and conditions similar to those in the contract or task order."
FAR 37.601, General, is revised to add a cross-reference to FAR 12.102(b) for the use of FAR Part 12 procedures for performance-based contracting.
(2) Definitions Clause: This final rule amends FAR 52.202-1, Definitions, to clarify which FAR definitions apply to FAR solicitation provisions and contract clauses.
FAR 52.202-1 was an incomplete list of definitions applicable to the provisions and clauses -- it contained definitions only for "agency head," "commercial component," "commercial item," "component," "contracting officer," "nondevelopmental item," and "subcontracts." In contrast, FAR 2.101, Definitions, contains almost 200 definitions. Therefore, on January 21, 2004, a proposed rule was published to amend FAR 52.202-1 to state, "(a) When a solicitation provision or contract clause uses a word or term that is defined in the Federal Acquisition Regulation (FAR), the word or term has the same meaning as the definition in FAR 2.101 in effect at the time the solicitation was issued, unless (1) the solicitation, or amended solicitation, provides a different definition; (2) the contracting parties agree to a different definition; (3) the part, subpart, or section of the FAR where the provision or clause is prescribed provides a different meaning; or (4) the word or term is defined in Subpart 31 for use in the cost principles and procedures" (see the January 21, 2004, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Definitions Clause").
One respondent submitted comments, and the proposed rule is being finalized with several minor editorial changes (such as changing "Subpart 31" to FAR Part 31" in (a)(4)). Also, the web address where the FAR Index can be located, which is cited in proposed paragraph (b), is corrected to "http://www.acqnet.gov". Finally, FAR 2.201, Contract Clause, is amended to retain the first sentence ("Insert the clause at 52.202-1, Definitions, in solicitations and contracts that exceed the simplified acquisition threshold"), and delete the last two sentences ("If the contract is for personal services, construction, architect-engineer services, or dismantling, demolition, or removal of improvements, use the clause with its Alternate I. The contracting officer may include additional definitions, provided they are consistent with the clause and the FAR.")
(3) Procurement Lists: This final rule amends FAR Part 8, Required Sources of Supplies and Services, to clarify the point that the Javits-Wagner O'Day (JWOD) program for blind or severely disabled people becomes a mandatory source of supplies and services.
The JWOD program is administered by the Committee for Purchase from People Who Are Blind or Severely Disabled. The Committee has established workshops ("participating agencies") that employ blind or severely disabled people in the production of supplies or rendering of services. The Committee maintains a Procurement List of all supplies and services that are required to be purchased from these JWOD participating agencies.
Not all JWOD supplies and services are on the Committee's Procurement List. However, FAR 8.002, Priorities for Use of Government Supply Sources, stated that "products available from the Committee..." and "services available from the Committee..." were to be acquired before products or services from Federal Supply Schedules or commercial sources. This caused confusion in that some were under the misconception that all products and services available from the Committee have a higher priority. Therefore, on December 11, 2003, a proposed rule was published to revise FAR 8.002 to state "supplies which are on the Procurement List maintained by the Committee..." and "services which are on the Procurement List maintained by the Committee..." In addition, FAR 8.004, Contract Clause, which required that FAR 52.208-9, Contractor Use of Mandatory Sources of Supply and Services, be included in contracts that require a contractor to provide supplies or services "that are available from the Committee..." was proposed to be revised to "that are on the Procurement List maintained by the Committee..." Finally, FAR 8.703, Procurement List, would have been revised to add "The Procurement List may be accessed at: http://www.jwod.gov/procurementlist" (see the December 11, 2003, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Javits-Wagner O'Day (JWOD) Program Procurement List").
One respondent submitted comments, and the proposed rule is finalized with an editorial change at FAR 8.714, Communications with the Central Nonprofit Agencies and the Committee, to update the Committee's address information and to revise FAR 52.208-9 to clarify that the Procurement List contains supplies and services.
(4) Determining Official for Employment Provision Compliance -- Immigration and Nationality Act (INA): This final rule revises paragraph (b)(2) of FAR 9.406-2, Causes for Debarment, and paragraph (b) of FAR 9.406-4, Period of Debarment, to include the Secretary of Homeland Security as an authority for determining when a contractor is not in compliance with the INA. Previously, the Attorney General had been the sole authority for making this determination, but Executive Order 13286, published March 5, 2003, gave the Secretary of Homeland Security this authority. This final rule implements Executive Order 13286.
(5) Federal Supply Schedules Services and Blanket Purchase Agreements (BPAs): This final rule amends FAR Subpart 8.4, Federal Supply Schedules, to incorporate policies for services and to strengthen the procedures for establishing blanket purchase agreements (BPAs) under the Federal Supply Schedules (FSS).
On April 18, 2003, a proposed rule was published that would reorganize and incorporate the "special ordering procedures" developed by GSA for the FSS (see the April 18, 2003, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Federal Supply Schedules Services and Blanket Purchase Agreements"). Thirty-four respondents submitted comments, and the proposed rule is adopted as final with substantial changes. The following are the changes being made to FAR Subpart 8.4 (differences between the proposed and final rules are indicated):
FAR Subpart 8.4 is reorganized as follows:
8.401, Definitions
8.402, General
8.403, Applicability
8.404, Use of Federal Supply Schedules
8.405, Ordering Procedures for Federal Supply Schedules
8.405-1, Ordering Procedures for Supplies, and Services Not Requiring a Statement of Work
8.405-2, Ordering Procedures for Services Requiring a Statement of Work
8.405-3, Blanket Purchase Agreements (BPAs)
8.405-4, Price Reductions
8.405-5, Small Business
8.405-6, Sole Source Justification and Approval
8.405-7, Documentation
8.405-8, Payment
8.406, Ordering Activity Responsibilities
8.406-1, Order Placement
8.406-2, Inspection and Acceptance
8.406-3, Remedies for Nonconformance
8.406-4, Termination for Cause
8.406-5, Termination for the Government's Convenience
8.406-6, Disputes
FAR 8.401 is added (there was no "Definitions" section in the proposed rule). Definitions are included for "ordering activity," "multiple award schedule," "requiring agency," "Schedule e-Library" (http://www.gsa.gov/elibrary), and "special item number."
FAR 8.402 (FAR 8.401 in the proposed rule) provides an overview of the FSS program ("also known as the GSA Schedules Program or the Multiple Award Schedule Program"). It provides instructions for ordering agencies to obtain schedule contractors' "Authorized Federal Supply Schedule Pricelists" and other FSS publications.
It alerts ordering offices that "GSA offers an on-line shopping service called 'GSA Advantage!' through which ordering activities may place orders against Schedules...GSA Advantage! enables ordering activities to search specific information (i.e., national stock number, part number, common name), review delivery options, place orders directly with Schedule contractors and pay for orders using the governmentwide commercial purchase card."
It also states, "e-Buy, GSA's electronic Request for Quotation (RFQ) system, is a part of a suite of on-line tools which complement GSA Advantage!. E-Buy allows ordering activities to post requirements, obtain quotes, and issue orders electronically. Ordering activities may access e-Buy at http://www.ebuy.gsa.gov."
Finally, it permits an ordering activity contracting officer to "add items not on the Federal Supply Schedule (also referred to as open market items) to a Federal Supply Schedule blanket purchase agreement (BPA) or an individual task or delivery order [but] only if: (1) all applicable acquisition regulations pertaining to the purchase of the items not on the Federal Supply Schedule have been followed (e.g., publicizing Part 5), competition requirements (Part 6), acquisition of commercial items (Part 12), contracting methods (Parts 13, 14, and 15), and small business programs (Part 19)); (2) the ordering activity contracting officer has determined the price for the items not on the Federal Supply Schedule is fair and reasonable; (3) the items are clearly labeled on the order as items not on the Federal Supply Schedule; and (4) all clauses applicable to items not on the Federal Supply Schedule are included in the order."
FAR 8.404(a) states, "when establishing a BPA...or placing orders under Federal Supply Schedule contracts using the procedures of 8.405, ordering activities shall not seek competition outside of the Federal Supply Schedules or synopsize the requirement" (proposed FAR 8.403(a) stated, "... ordering offices need not seek further competition, synopsize the requirement, or consider small business programs").
FAR 8.405-1 states that its procedures apply to "ordering supplies and services that are listed in the schedule contracts as a fixed price for the performance of a specific task (e.g., installation, maintenance and repair)."
FAR 8.405-2 addresses ordering procedures for services "priced at hourly rates." For such services, ordering offices are required to:
Develop a statement of work that includes the work to be performed, the location of the work, the period of performance, the deliverable schedule, applicable standards, and any special requirements, such as security clearances, travel, or special knowledge. "To the maximum extent practicable, agency requirements shall be performance-based statements (see Subpart 37.6 [Performance-Based Contracting])."
Provide the Request for Quotation (RFQ) to schedule contractors that offer services that will meet the agency's needs. The RFQ must include the statement of work and evaluation criteria (for example, experience and past performance). The RFQ may be posted on GSA's electronic RFQ system, e-Buy.
For orders exceeding the maximum order threshold or when establishing a BPA, the ordering office is required to provide the RFQ "to additional schedule contractors that offer services that will meet the needs of the ordering activity" (the proposed rule said, "to an appropriate number of additional schedule contractors...") Also, ordering offices are to "seek price reductions." (EDITOR'S NOTE: The proposed rule only had two categories of order: under the micro-purchase threshold and over the micro-purchase threshold.)
FAR 8.405-3 states, "Ordering activities may establish BPAs under any schedule contract to fill repetitive needs for supplies or services. BPAs may be established with one or more schedule contractors. The number of BPAs to be established is within the discretion of the ordering activity establishing the BPAs and should be based on a strategy that is expected to maximize the effectiveness of the BPA(s). In determining how many BPAs to award, consider (i) the scope and complexity of the requirement(s); (ii) the technical qualifications of the schedule contractor(s); (iii) the administrative costs of BPAs; and (iv) the need to periodically compare multiple technical approaches or prices."
If the ordering activity establishes one BPA, authorized users may place the order directly under the BPA when the need for the supply or service arises. If the ordering activity establishes multiple BPAs, before placing an order exceeding the micro-purchase threshold, the ordering activity shall "(i) forward the requirement, or statement of work and the evaluation criteria, to an appropriate additional number of BPA holders, as established in the BPA ordering procedures; and (ii) evaluate the responses received, make a best value determination...and place the order with the BPA holder that represents the best value."
The following on BPA duration is added to the final rule: "BPAs generally should not exceed five years in length, but may do so to meet program requirements. Contractors may be awarded BPAs that extend beyond the current term of their GSA Schedule contract, so long as there are option periods in their GSA Schedule contract that, if exercised, will cover the BPA's period of performance."
Finally, ordering offices must review BPAs at least once a year.
FAR 8.405-5 states, "Although the mandatory preference programs of Part 19 [Small Business Programs] do not apply, orders placed against schedule contracts may be credited toward the ordering activity's small business goals...Ordering activities may consider socio-economic status when identifying contractor(s) for consideration or competition for award of an order or BPA." (EDITOR'S NOTE: This language was added to the final rule.)
FAR 8.405-6 is added to the final rule. It permits ordering activities to procure sole source requirements but "only if the need to do so is justified in writing and approved at the levels specified in paragraph (b) of this section..." The levels for approval of the sole source justifications (prepared in accordance with FAR 6.303-2, Content), are:
FAR 8.405-7 requires ordering offices to document the circumstances and rationale for restricting consideration of schedule contractors to fewer than required by FAR 8.405-1 and FAR 8.405-2 (at least three FSS contractors if order exceeds the micro-purchase threshold).
The price reasonableness determination required by FAR 8.405-2; and
FAR 8.405-8 allows agencies to make payments for oral or written orders by any authorized means, including the governmentwide commercial purchase card.
(6) Designated Countries -- New European Communities Member States: On May 1, 2004, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia joined the European Communities (EC). The U.S. Trade Representative (USTR) has determined, under the Trade Agreements Act, that suppliers from these countries are eligible to participate in U.S. government procurement under the terms and conditions of the World Trade Organization Government Procurement Agreement (WTO GPA). Therefore, these countries are added to the list of designated countries in FAR 25.003, Definitions, FAR 52.225-5, Trade Agreements, and FAR 52.225-11, Buy American Act -- Construction Materials Under Trade Agreements. Also, these countries are added to the list of countries subject to the WTO GPA in FAR 22.1503, Procedures for Acquiring End Products on the List of Products Requiring Contractor Certification as to Forced or Indentured Child Labor, and FAR 52.222-19, Child Labor -- Cooperation with Authorities and Remedies.
(7) Buy American Act -- Nonavailable Articles: This final rule adds bamboo shoots; goat hair canvas; grapefruit sections, canned; modacrylic fur ruff; and water chestnuts to the list of articles not available from domestic sources in sufficient and reasonably available commercial quantities of a satisfactory quality in paragraph (a) of FAR 25.104, Nonavailable Articles. Paragraph (b) of FAR 25.103, Exceptions, permits the acquisition of foreign end products listed in FAR 25.104 without regard to the restrictions of the Buy American Act.
On September 16, 2003, a proposed rule was published to amend FAR 25.103(a) to add these articles (see the September 16, 2003, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Buy American Act -- Nonavailable Articles"). Two respondents submitted comments, but it was decided to finalize the proposed rule without changes. (EDITOR'S NOTE: On May 18, 2004, a request for comments was published seeking information to that will assist in determining whether some articles listed in FAR 25.104 are now mined, produced, or manufactured in the United States in sufficient and reasonably-available commercial quantities and are of a satisfactory quality -- see the May 18, 2004, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); List of Nonavailable Articles Under the Buy American Act." Also, on May 24, 2004, a proposed rule was published that would amend FAR 25.103, Exceptions, to clarify the intent of the list of items determined to be nonavailable for purposes of the Buy American Act -- see the May 24, 2004, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Policy on Nonavailable Articles Under the Buy American Act.")
(8) Application of Cost Principles and Procedures: This final rule amends FAR 31.204, Application of Principles and Procedures, to improve its clarity and structure.
On May 22, 2003, a proposed rule was published that would amend FAR 31.204 and FAR 31.201-6, Accounting for Unallowable Costs (see the May 22, 2003, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Application of Cost Principles and Procedures, and Accounting for Unallowable Costs." Nine respondents submitted comments on FAR 31.201-6, and because of the significance of the comments, a second proposed rule on FAR 31.201-6 will be published.
No comments were received on the proposed changes to FAR 31.204, so it is adopted as final without changes. The following are the revisions being made to FAR 31.204:
Paragraph (b) is split into two subparagraphs. Subparagraph (b)(1) states that "costs incurred as reimbursements or payments to a subcontractor are allowable to the extent the reimbursements or payments are for costs incurred by the subcontractor that are consistent with [FAR Part 31, Contract Cost Principles and Procedures]" for the following subcontract types: cost-reimbursement, fixed-price incentive, and price redeterminable (that is, fixed-price contracts with prospective price redetermination and fixed-ceiling-price contracts with retroactive price redetermination).
New paragraph (b)(2) states that subcontract allowability requirements in paragraph (b)(1) "apply to any tier above the first firm-fixed-price subcontract or fixed-price subcontract with economic price adjustment provisions."
The last sentence of paragraph (b) is redesignated as new paragraph (c), and paragraph (c) is redesignated as paragraph (d).
(9) Maintenance and Repair Costs, and Material Costs: This final rule removes the cost principle at FAR 31.205-24, Maintenance and Repair Costs, and revises the cost principle at FAR 31.205-26, Material Costs, to improve its clarity and structure, and to remove unnecessary and duplicative language.
On July 7, 2003, a proposed rule was published to revise FAR 31.205-16, Gains and Losses on Disposition or Impairment of Depreciable Property or Other Capital Assets, FAR 31.205-24, and FAR 31.205-24 (see the July 7, 2003, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Gains and Losses, Maintenance and Repair Costs, and Material Costs"). Three respondents submitted comments on FAR 31.205-16, and because of the significance of the comments, a second proposed rule on FAR 31.205-16 was published on May 21, 2004 (see the May 21, 2004, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Regulation (FAR); Gains and Losses").
The same three respondents submitted comments on FAR 31.205-24 and FAR 31.205-26, but the proposed changes are being finalized with minor changes. Therefore, FAR 31.205-24 is deleted, and the following changes are made to FAR 31.205-26:
The last sentence of paragraph (a), which states, "These [material] costs are allowable, subject to the requirements of paragraphs (b) through (e) of this section", is removed.
The last sentence of paragraph (d), which states, "When estimates of future material costs are required, current market price or anticipated acquisition cost may be used, but the basis of pricing must be disclosed", is removed.
The proposed rule would have deleted paragraph (c), which states, "Reasonable adjustments arising from differences between periodic physical inventories and book inventories may be included in arriving at costs; provided, such adjustments relate to the period of contract performance", and relied on generally-accepted accounting practices (GAAP) instead. However, "based on the public input, it appears there are significant concerns that reliance solely upon GAAP could result in potential disputes...this provision provides protection to both the contractor and the Government by specifically permitting reasonable adjustments for inventory differences while also requiring that such adjustments relate to the period of contract performance." Therefore, paragraph (c) is retained.
(10) Technical Amendments: The following technical amendments are made:
In paragraph (d) of FAR 8.003, Use of Other Government Supply Sources, the address for the Defense National Stockpile Center is revised by replacing "Suite 4528" with "Suite 3229."
In FAR 11.102, Standardization Program, the document number of the "Defense Standardization Program Policies and Procedures" is revised by replacing "DOD 4120.3-M" with "DOD 4120.24-M" each time it appears.
Illustrations of SF 254, Architect-Engineer and Related Services Questionnaire, and SF 255, Architect-Engineer and Related Services Questionnaire for Specific Projects, are removed because they were replaced by the SF 330, Architect-Engineer Qualifications, effective June 8, 2004 (see the December 11, 2003, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 2001-18, Miscellaneous Amendments" (Item (1)), and the January 7, 2004, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 2001-19, SF 330 Effectivity Delay and Free Trade Acts").