Source: http://www.fedgovcontracts.com/newsltr/fcp1-12.htm
Timestamp: 2017-12-17 21:35:53
Document Index: 98752678

Matched Legal Cases: ['art 12', 'art 212', 'art 247', 'art 32', 'art 32', 'art 13', 'art 60', 'art 22']

December 2000 Federal Contracts Perspective
Contracting Officers Fail to Obtain Quotes for FSS Orders for Services
Comments Sought on FAR Reverse Auctions
Proposed FAR Changes on Electronic Signatures, Cargo
Experience Requirements for IT Workers Restricted
DOD to Increase Use of Performance-Based Payments
Proposal to Allow Agencies to Accept 8(a) Requirements
SBA Increases Some Health Care Size Standards
OFCCP Revises EEO Regulations
GAO Finds Many DOD Contracting Officers Fail to
Obtain Quotes Before Placing FSS Orders for Services
On November 28, 2000, the General Accounting Office (GAO) released a report on its assessment of "whether [Department of Defense (DOD)] contracting officers were following [the General Services Administration's (GSA)] established procedures to ensure fair and reasonable prices and whether guidance and regulations regarding purchases [of services] under the Federal Supply Schedule (FSS) were adequate." In 17 of 22 orders GAO reviewed, it found the contracting officer did not follow GSA's established procedures by failing to seek competitive quotes from multiple contractors. These 17 orders were valued at $60.5 million (the other five orders were valued at $52.2 million).
The report, titled "Contract Management: Not Following Procedures Undermines Best Pricing Under GSA's Schedule" (GAO-01-125), was commissioned by the Senate's Armed Services Committee's Readiness and Management Support Subcommittee because of concerns "that there is inadequate oversight and accountability over using new contract vehicles and techniques to acquire services faster..."
The FSS is one of the fastest growing contract vehicles -- orders under the FSS for information technology services increased from $1.2 billion in FY98 to about $4.4 billion in FY 2000. A significant reason for this increase is the speed with which orders can be placed -- it takes only an average of 15 days to place an order under a FSS contract compared to 268 days to award a contract using a traditional method. Therefore, GAO chose to review compliance with GSA's procedures for information technology services ordered through the FSS.
GSA's "Ordering Procedures for Services (Requiring a Statement of Work)" (http://www.fss.gsa.gov/schedules/ordInsSv.cfm), which GSA maintains take precedence over the procedures in paragraphs (b)(2) and (b)(3) of Federal Acquisition Regulation (FAR) 8.404, Using Schedules, requires ordering agencies to (1) prepare a request for quotes, (2) send the request for quotes to at least three FSS contractors based on an initial evaluation of catalogs and price lists, and (3) evaluate the quotes and select the contractor to receive the order based on factors identified in the request. The ordering procedures also state that the ordering office is responsible for considering the level of effort and mix of labor proposed to perform specific tasks and for making a determination that the total price is fair and reasonable.
To prepare the report, GAO identified four large DOD buying commands (one for each military department, and the Defense Supply Service), then selected the largest orders for information technology services purchased in Fiscal Year 1999 using the FSS. In total, the 22 orders selected were worth $112.7 million. GAO found that:
Contracting officers often relied merely on a comparison of the labor rates of various contractors listed on the FSS and generally ended up placing the orders with the incumbent contractors. "Relying on labor rates alone does not offer an agency a good basis for deciding which contractor is the most competitive since it does not reflect the full cost of the order or even critical aspects of the service being provided, such as the number of hours and mix of labor skill categories needed to complete the work," wrote GAO.
The primary reason contracting officers did not follow established procedures was that they were not even aware of GSA's requirement to seek competitive quotes. "Guidance for the program is not clear. In particular, the Federal Acquisition Regulation does not make distinctions between services and products, and the regulations do not inform contracting officers that GSA's special ordering procedures for services even exist. Most contracting officers were not aware of the ordering procedures for services at the time the orders included in our survey were placed."
GAO concluded that DOD "has significantly undermined its ability to ensure that it is getting the best information technology services at the best prices. Moreover, the lack of clear guidance on when to seek competitive quotes for services has increased the risk that agencies will not identify and acquire the lowest cost alternatives to meet their needs."
GAO recommended that the Office of Federal Procurement Policy (OFPP) take steps to revise the FAR to incorporate the requirements contained in the ordering procedures for services to obtain competitive quotes, specifically to describe the procedures and when they should be used. GAO also recommended that the FAR address whether sole source orders for services may be placed using the FSS. "If sole source orders are allowed, the guidance should provide instructions on what steps contracting officers should take to ensure that prices are fair and reasonable and that orders result in the lowest overall cost alternative meeting the government's needs."
In response to the report, GSA stated that it would continue its outreach programs, such as "making presentations at GSA seminars and enhancing the agency's website." GSA also said it would "pursue additional efforts to educate agencies about ordering procedures and the best practices for managing their buys." OFPP said it agreed that the FAR guidance was insufficient, and that it would be working to prepare a FAR revision that would address GAO's recommendations as well as some additional issues.
EDITOR'S NOTE: In March 2000, GAO issued a report titled "Few Competing Proposals for Large DOD Information Technology Orders" which found that 16 of 22 task- and delivery-orders over $5 million were awarded without competing proposals. See the April 2000 Federal Contracts Perspective article "DODIG, GAO Point Out Acquisition Deficiencies."
Comments Sought on FAR Reverse Auctions Coverage
On October 31, the Civilian Agency Acquisition Council and Defense Acquisition Regulations Council published a request for comments on whether there is a need for FAR guidance on the conduct of electronic "reverse auctions," and, if so, what should the guidance be.
In a normal auction, several buyers bid on an item, and the highest bidder wins. In a reverse auction, multiple sellers bid down on the requirements of a single buyer, and the lowest bidder wins. Recently, several agencies have conducted reverse auctions on an experimental basis with promising results. Since there is no coverage in the FAR on reverse auctions, some have called for such coverage. Others point to paragraph (d) of FAR 1.102, Statement of Guiding Principles for the Federal Acquisition System, which permits any technique that is not expressly prohibited, and claim no FAR coverage is needed. Still others say reverse auctions are so new there is not enough information available to develop meaningful guidance.
Therefore, comments are being sought on a variety of topics related to reverse auctions:
Is there a need for guidance?
If so, should it be in a FAR change, best practice guides, training, other?
If guidance is needed, what topics should be addressed? Topics might include:
The ground rules of the auction.
How to determine whether a reverse auction is suitable.
Ways to tailor the technique to reflect various contracting strategies and source selection approaches (including best value cost-technical tradeoffs).
Handling of preferences (for example, since small disadvantaged businesses get a 10% evaluation preference for some products and services, what prevents a small disadvantaged business waiting until seconds before the bidding closes to submit a bid 9.9% higher than the low bid, thus winning the auction?)
Potential advantages and disadvantages of reverse auctions for industry participants.
Potential advantages and disadvantages of reverse auction for federal agencies.
Submit comments on or before January 2, 2001, to General Services Administration, FAR Secretariat (MVR), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405; e-mail: Auction@gsa.gov. Cite "reverse auction notice" in all correspondence related to this request for comments.
There were two proposed FAR changes published in November:
Electronic Signatures: The Government Paperwork Elimination Act of 1998 (GPEA) requires federal agencies, by October 21, 2003, to give persons who must maintain, submit, or disclose information the option of doing so electronically when practicable as a substitute for paper, and to use electronic signatures to verify the identity of the sender and the integrity of electronic content. The Electronic Signatures in Global and National Commerce Act, which went into effect October 1, 2000, makes electronic signatures as valid as "normal" signatures for most documents, including contracts.
To comply with these acts, it is proposed that the definitions of "in writing" or "written" in FAR 2.101, Definitions, be revised to "any expression of information in words, numbers, or other symbols, including electronic expressions, that can be read, reproduced, and stored," and that the definitions for "signature" or "signed" be revised to "the discrete, verifiable symbol of an individual that, when attached to or logically associated with a written contract or other record with the knowledge and consent of the individual, indicates a present intention to authenticate the contract or other record. This includes an electronic signature made by electronic sound, symbols, or process."
Also, a paragraph (d) would be added to FAR 4.502, Policy, which would state, "by October 21, 2003, agencies must allow individuals or entities the option to submit information or transact with the agency electronically when practicable. The GPEA requirement includes execution of contracts and associated records using electronic signatures of the offeror or contractor and the agency."
Comments must be submitted no later than January 2, 2001, to General Services Administration, FAR Secretariat (MVR), 1800 F Street,NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405; e-mail: farcase.2000-304@gsa.gov.
Preference for U.S.-Flag Vessels: 10 U.S.C. 2631 and 46 U.S.C. 1241(b) provide a preference for use of U.S.-flag vessels for ocean transportation of supplies purchased under government contracts. FAR Part 12, Acquisition of Commercial Items, presently waives the requirements of 46 U.S.C. 1241(b) for subcontracts for the acquisition of commercial items. Defense FAR Supplement (DFARS) Part 212, Acquisition of Commercial Items, and DFARS Part 247, Transportation, waive the requirements of 10 U.S.C. 2631 for subcontracts for the acquisition of commercial items with certain exceptions for ocean cargoes clearly destined for DOD use (see the April 2000 Federal Contracts Perspective article "DOD Cargo Preference for Commercial Items Clarified").
This proposed rule would amend paragraph (a) of FAR 12.504, Applicability of Certain Laws to Subcontracts for the Acquisition of Commercial Items, by adding 10 U.S.C. 2631 to the list of laws not applicable to subcontracts for the acquisition of commercial items or commercial components (paragraph (a) already includes 46 U.S.C. 1241(b)). However, to reflect those "exceptions for ocean cargoes clearly destined for DOD use" recently added to the DFARS, paragraph (d) of FAR 47.504, Exceptions, and paragraph (e) of FAR 52.247-64, Preference for Privately Owned U.S.-Flag Commercial Vessels, would be amended by adding the following exceptions to the U.S.-flag vessel waiver for subcontracts of commercial items or commercial components: (1) subcontracts under construction contracts; and (2) shipments of commercial items that are -- "(i) Items the contractor is reselling or distributing to the government without adding value (see FAR 12.501(b)). Generally, the contractor does not add value to the items when it subcontracts items for f.o.b. destination shipment; or (ii) Shipped in direct support of U.S. military (A) contingency operations; (B) exercises; or (C) forces deployed in connection with United Nations or North Atlantic Treaty Organization humanitarian or peacekeeping operations." Because of this change, the entries in FAR 12.504(a) for 10 U.S.C. 2631 and 46 U.S.C. 1241(b) would include "(except for the types of subcontracts listed at [FAR] 47.504(d)".
Also, the existing Alternate II of FAR 52.247-64, which currently is used in construction contracts in which supplies, materials, or equipment require ocean transportation, would be deleted as unnecessary, and replaced with a new Alternate II which would be used if any of the supplies to be transported are commercial items that are shipped in direct support of U.S. military contingency operations, exercises, or forces deployed in connection with United Nations or North Atlantic Treaty Organization humanitarian or peacekeeping operations.
Comments must be submitted no later than January 2, 2001, to General Services Administration, FAR Secretariat (MVR), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405; e-mail: farcase.1999-024@gsa.gov.
On October 30, 2000, Public Law 106-398, the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 was signed into law by President Clinton. While most of its provisions are specific to the Department of Defense, there are several that apply governmentwide. Possibly the most noteworthy is in Section 813, Appropriate Use of Requirements Regarding Experience and Education of Contractor Personnel in the Procurement of Information Technology [IT] Services. It requires that the FAR be amended within 180 days (that is, by April 28, 2001) to "provide that solicitations for the procurement of information technology services shall not set forth any minimum experience or educational requirement for proposed contractor personnel in order for a bidder to be eligible for award of a contract unless (1) the contracting officer first determines that the needs of the executive agency cannot be met without any such requirement; or (2) the needs of the executive agency require the use of a type of contract other than a performance-based contract."
The following are some other acquisition-related provisions of the law:
Section 807, Eligibility of Small Business Concerns Owned and Controlled by Women for Assistance Under the Mentor-Protege Program, authorizes women-owned and controlled businesses to participate in the DOD mentor-protege program.
Section 810, Procurement Notice of Contracting Opportunities Through Electronic Means, permits electronic posting of solicitation notices "through the single government-wide point of entry designated in the Federal Acquisition Regulation." (EDITOR'S NOTE: The web site http://www.FedBizOpps.gov has been proposed as the government-wide point of entry. For more on this, see the September 2000 Federal Contracts Perspective article "FedBizOpps.Gov Proposed as 'Single Face to Industry' for Procurement Opportunities.'")
Section 821, Improvements in Procurements of Services, requires that the FAR be amended within 180 days "to establish a preference for use of contracts and task orders for the purchase of services in the following order of precedence: (1) a performance-based contract or performance-based task order that contains firm fixed prices for the specific tasks to be performed; (2) any other performance-based contract or performance-based task order; (3) any contract or task order that is not a performance-based contract or a performance-based task order." To provide an incentive to use performance-based service contracts, a DOD performance-based service contract or task order may be treated as a contract for commercial items if the contract or task order is valued at $5,000,000 or less.
Section 1008, Electronic Submission and Processing of Claims for Contract Payments, directs DOD to require, by June 30, 2001, that any invoice or claim for payment under a DOD contract be submitted in electronic form. However, the secretary of defense can postpone implementation until no later than October 1, 2002, if it is impracticable to implement this requirement until the later date.
Section 1010, Interest Penalties for Late Payment of Interim Payments Due Under Government Service Contracts, requires agencies to pay an interest penalty whenever they make an interim payment under a cost-reimbursement contract for services more than 30 days after the agency receives a proper invoice from a contractor. This becomes effective December 15, 2000. (EDITOR'S NOTE: The current Prompt Payment Act interest rate is 7.25% for July 1, 2000, through December 31, 2000. See the September 2000 Federal Contracts Perspective article "Renegotiation Act Interest Rate Set at 7 1/4%." For more on prompt payment, see FAR Subpart 32.9, Prompt Payment.)
On November 13, 2000, Under Secretary of Defense Jacques Gansler issued a memorandum to the secretaries of the military departments stating that DOD "must take maximum advantage of the benefits of performance-based payments as the preferred means of providing contract financing under fixed-price contracts by making this form of payment the primary and most commonly used form of contract financing."
Performance-based payments are contract financing payments made after achievement of predetermined goals, such as performance objectives or defined events. Federal Acquisition Circular (FAC) 97-16 amended FAR Subpart 32.10, Performance-Based Payments, to make performance-based payments "the preferred government financing method when the contracting officer finds them practical, and the contractor agrees to their use" (FAR 32.1001, Policy). (EDITOR'S NOTE: For more on FAC 97-16, see the April 2000 Federal Contracts Dispatch article "FAC 97-16 Revises Contract Financing Rules, Small Business Competitiveness Demo Program.")
In addition to making performance-based payments the preferred government financing method, FAC 97-16 also removed the prohibitions on using performance-based payments on research and development and competitively negotiated acquisitions (from FAR 32.1000, Scope of Subpart), and now permits prime contractors with cost-type contracts to use performance-based payments on fixed-price subcontracts (see FAR 32.110, Payment of Subcontractors Under Cost-Reimbursement Prime Contracts).
Based on the changes made by FAC 97-16, Gansler directs that performance-based payments be "the primary form of contract in at least 25% of contracts valued at $2 million or more. By fiscal year 2005, this method of financing should be the most prevalent form used in fixed-price contracts, such as those for complex services or for production efforts...Exceptions to the use of this contract financing technique should only be agreed to by the contracting officer when supported by a sound business case justification."
The under secretary attached to the memorandum "The Case for Performance-Based Payments (PBP)". It lists the following as "advantages of using PBP":
The Small Business Administration (SBA) is proposing to amend its 8(a) regulations to permit procuring agencies to accept requirements for the 8(a) program without obtaining prior SBA approval. This move is intended to make the 8(a) program more attractive to agencies by reducing its procurement lead-time by up to twelve days. Agencies have decreased their use of the 8(a) program in favor of quicker and easier methods: indefinite-delivery/indefinite-quantity (IDIQ) contracts, multiple award contracts, governmentwide acquisition contracts (GWACs), federal supply schedules, credit card purchases, and the use of simplified procedures to acquire commercial items up to $5,000,000 (see FAR Subpart 13.5, Test Program for Certain Commercial Items).
Comments must be submitted by January 8, 2001, to Linda Williams, Associate Administrator for Policy, Planning, and Liaison, 409 Third Street, SW, Washington, DC 20416.
The SBA is increasing the small business size standards for 18 health care industries and retaining the existing $5 million size standard for the remaining 12 health care industries in the North American Industry Classification System (NAICS) Sector 62, Health Care and Social Assistance. This was done to better define the size of business that should be eligible for federal small business assistance programs. The changes are effective December 18, 2000.
The following are the Sector 62 industries and their small business size standards (in millions):
The Office of Federal Contract Compliance Programs (OFCCP) has revised its equal employment opportunity (EEO) regulations to change the emphasis from the development of a written affirmative action program (AAP) to a performance-based standard that incorporates an AAP into the contractor's overall management plan.
OFCCP's regulations, which are in 41 CFR Part 60-2, Affirmative Action Programs, requires government nonconstruction contractors and subcontractors with 50 or more employees and a contract of $50,000 or more to prepare and implement a written AAP for each of their establishments. Compliance with OFCCP's regulations by federal contractors is addressed in FAR Subpart 22.8, Equal Employment Opportunity.
The following are some of the more significant changes being made to the regulations:
To Section 60.1-12, Record Retention, is added a paragraph (c) which requires contractors to be able to identify the gender, race, and ethnicity of each employee and, where possible, each applicant (recognizing the increased use of e-mail applications).
To Section 60-2.1, Scope and Application, is added a subparagraph (d)(4) which permits contractors to develop AAPs based on how their businesses actually are organized without regard to the geographic locations of their establishments and employees. Such "functional" AAPs must be approved by the Deputy Assistant Secretary or designee.
Paragraph (b) of Section 60-2.10, General Purpose and Contents of Affirmative Action Programs, outlines the required elements of an AAP so contractors can get a general sense of what is required.
Section 60-2.11, Organizational Profile, permits contractors to use the old "workforce analysis" ("listing of each job title...ranked from lowest paid to highest paid") or the new "organizational display" ("a detailed graphical or tabular chart, text, spreadsheet or similar presentation of the contractor's organizational structure").
Paragraph (d) of Section 60-2.14, Determining Availability, reduces the number of availability factors which contractors are required to consider when determining the availability of minorities and women for employment from eight to two: "(1) The percentage of minorities or women with requisite skills in the reasonable recruitment area...(2) The percentage of minorities or women among those promotable, transferable, and trainable within the contractor's organization..."
Section 60-2.18, Equal Opportunity Survey, requires half of all covered establishments to submit a new survey every year.