Regulatory Updates

November 2016

PROPOSED DFARS

Pilot Program for Streamlining Awards for Innovative Technology Projects
Key Details: The Department of Defense (DOD) has published a proposed rule that would amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement exceptions from the certified cost and pricing data requirements and from the records examination requirement for certain awards to small businesses or nontraditional defense contractors. The exceptions would apply to contracts, subcontracts or modifications of contracts or subcontracts valued at less than $7.5 million awarded to a small business or nontraditional defense contractor pursuant to a technical, merit-based selection procedure (e.g., broad agency announcement) or the Small Business Innovation Research (SBIR) Program. The exceptions would end October 1, 2020.

Procurement of Commercial Items
Key Details: DOD is proposing to amend the DFARS to implement sections of the National Defense Authorization Acts (NDAA) for Fiscal Years (FY) 2013 and 2016 relating to commercial item acquisitions. The rule provides changes as followed:
  • Definitions of “market prices,” “market research,” “nontraditional defense contractor,” “relevant sales data” and “uncertified cost data” are added.
  • DFARS 212.102, Applicability, is amended to instruct contracting officers on the treatment of prior commercial item determinations and nontraditional defense contractors.
  • DFARS 212.209, Determination of Price Reasonableness, is added to provide a hierarchy of data for contracting officers to consider when making determinations of price reasonableness.
  • DFARS subpart 212.72, Limitation on Conversion of Procurement from Commercial Acquisition Procedures, is added.
  • DFARS 215.402, Pricing Policy, is amended to provide information regarding the contracting officer’s responsibility for determining if the information provided by the offeror is sufficient to determine price reasonableness.
  • DFARS 215.403-1, Prohibition on Obtaining Certified Cost or Pricing Data (10 U.S.C. 2306a and 41 U.S.C. chapter 35), is amended to provide a reference to 212.102 regarding prior commercial item determinations.
  • DFARS 215.404-1, Proposal Analysis Techniques, is amended to supplement the proposal analysis procedures identified in the FAR.
  • DFARS 234.7002, Policy, is amended to incorporate the revisions in Section 852 of the NDAA for FY 2016.
  • DFARS 239.101, Policy, is amended to incorporate the revisions in Section 855 of the NDAA for FY 2016.
  • DFARS provisions 252.215-70XX, 252.215-70YY and 252.215-70ZZ are added.

FINAL DFARS
Detection and Avoidance of Counterfeit Electronic Parts; Further Implementation
Key Details: DOD has issued a final rule amending the DFARS to include a requirement of the NDAA for Fiscal Year 2012. This requires all defense contractors and subcontractors to have sources of electronic parts.
Effective: August 2, 2016

New Qualifying Countries-Japan and Slovenia
Key Details: DOD has issued a final rule amending the DFARS to add Japan and Slovenia as qualifying countries. The agreements remove discriminatory barriers to procurements of supplies and services produced by industrial enterprises of the countries to the extent mutually beneficial and consistent with national laws, regulations, policies and international obligations. These agreements do not cover construction or construction material.
Effective: August 2, 2016

Allowable Costs Related to Counterfeit Electronic Parts
Key Details: DOD has issued a final rule amending the DFARS to amend the allowability of costs of counterfeit electronic parts or suspect counterfeit electronic parts and the cost of rework or corrective action that may be required to remedy the use or inclusion of such parts. Effective August 30, 2016, such costs are not allowable unless:
  • The contractor has an approved operational system to detect and avoid counterfeit and suspect electronic parts;The counterfeit or suspect parts were provided to the contractor as government property in accordance with FAR Part 45, or were obtained by the contractor in accordance with the regulations described in Section 818 of the NDAA for FY 2012; or
The contractor discovers the counterfeit or suspect parts and notifies the government within 60 days of the discovery.
Effective: August 30, 2016

Audit Agreements with France, Germany, Netherlands, and United Kingdom
Key Details: DOD has issued a final rule that amends the DFARS to specify the countries with which DOD has audit agreements. Those countries are the United Kingdom, Netherlands, France and Germany.
Effective: August 30, 2016

Instructions for Wide Area WorkFlow Reparable Receiving Report
Key Details: DOD issued a final rule amending the DFARS to add instructions for utilizing the Wide Area WorkFlow (WAWF) Reparable Receiving Report (RRR). The objective of the rule is to provide instruction for the use, preparation and distribution of the WAWF RRR, which differentiates between the deliveries of new government assets (new procurements) and the return of government property that is repaired or overhauled.
Effective: September 29, 2016

FINAL FAR

Technical Amendments
Key Details: DOD, GSA and NASA are issuing a final rule that makes amendments to the Federal Acquisition Regulation (FAR) in order to make editorial changes. These changes include minor revisions to the definition of “Commercial and Government Entity (CAGE) code,” amongst other various technical edits.
Effective: July 14, 2016

FPI Blanket Waiver Threshold
Key Details: DOD, GSA and NASA are issuing a final rule amending the FAR to increase the blanket waiver threshold for small dollar-value purchases from Federal Prison Industries (FPI) by federal agencies. On March 3, 2016, FPI’s Board of Directors adopted a resolution increasing the blanket waiver threshold for small dollar-value purchases from FPI by federal agencies from $3,000 to $3,500. The increase coincides with the increase in the micro-purchase threshold. This final rule amends the FAR to reflect the threshold increase from $3,000 to $3,500. No waiver is required to buy from an alternative source below $3,500. Customers may, however, still purchase from FPI at, or below, this threshold if they choose.
Effective: August 15, 2016

OMB Circular Citation Update
Key Details: DOD, GSA and NASA are issuing a final rule amending the FAR to update outdated Office of Management and Budget (OMB) Circular citation references. On December 26, 2013, the Office of Management and Budget (OMB) published new guidance at 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (OMB Uniform Guidance). This became effective on December 26, 2014, after federal agencies adopted the guidance as a set of binding regulations. OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards supersedes and streamlines requirements from OMB Circulars A-21, A-87, A-89, A-102, A-110, A-122 and A-133, and the guidance in Circular A-50 on Audit Follow-up. This final rule replaces OMB citations in the FAR to the circulars cited above that have been replaced by this new OMB Uniform Guidance, and cross-references to new terminology in the OMB Uniform Guidance. This rule also creates a definition with an abbreviated title in FAR Section 2.101 for FAR citations to this OMB Uniform Guidance.
Effective: August 15, 2016

Revision to Standard Forms for Bonds
Key Details: DOD, GSA and NASA are issuing a final rule to amend five Standard Forms prescribed by the FAR for contracts involving bonds and other financial protections. The revisions are aimed at clarifying liability limitations and expanding the options for organization types. This finalizes the proposed rule, which addressed concerns that surety bond producers may be adversely affected by differing federal agency views on the proper type of organization to indicate on these Standard Forms when the subject business was a limited liability company (LLC), an increasingly prevalent form of business in the construction industry. The proposed rule added a box labelled “Other: (Specify)” to the “Type of Organization” block on each of the five forms (SFs 24, 25, 25A, 34, and 35) in order to expand the range of business types to include not just LLCs, but others, as they evolve.
Effective: August 15, 2016

Fair Pay and Safe Workplaces EO
Key Details: Federal Acquisition Circular 2005-90 contains one final rule implementing President Barack Obama’s executive order on Fair Pay and Safe Workplaces, which is intended to improve contractors’ compliance with labor laws. Effective October 25, 2016, this final rule amends the FAR to require federal contractors and subcontractors to report such violations and agency contracting officers to consider this information during a source selection decision. For more details, read our client alert on this rule here.
Effective: October 25, 2016

Small Business Subcontracting Improvements
Key Details: DOD, GSA and NASA are issuing a final rule amending the FAR to implement regulatory changes made by the Small Business Administration, which provide for a government-wide policy on small business subcontracting. Among its changes, this final rule requires prime contractors to:
  • Make good faith efforts to utilize their proposed small business subcontractors during performance of a contract to the same degree the prime contractor relied on the small business in preparing and submitting its bid or proposal
  • Assign North American Industry Classification System codes to subcontracts (NAICS)
  • Resubmit a corrected subcontracting report within 30 days of receiving the contracting officer’s notice of report rejection
  • Provide the socioeconomic status of the subcontractor in the notification to unsuccessful offerors for subcontracts
  • Not prohibit a subcontractor from discussing payment or utilization matters with the contracting officer
Effective: November 1, 2016

AGENCY SUPPLEMENTS TO THE FAR – FINAL RULES

Civil Monetary Penalty Inflation Adjustment, DOD Interim Final Rule
Key Details: On November 2, 2015, the President signed into law the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act), which further amended the Federal Civil Penalties Inflation Adjustment Act of 1990. The 2015 Act updates the process by which agencies adjust applicable civil monetary penalties (CMP) for inflation to retain the deterrent effect of those penalties. The 2015 Act requires that the head of each agency must adjust each CMP within its jurisdiction by the inflation adjustment described in the 2015 Act not later than July 1, 2016, and not later than January 15 of every year thereafter. Accordingly, DOD must adjust the level of all civil monetary penalties under its jurisdiction through an interim final rule and make subsequent annual adjustments for inflation.
Release: May 26, 2016

Small Business Government Contracting and National Defense Authorization Act of 2013 Amendments, SBA Final Rule
Key Details: The Small Business Administration (SBA) has published a wide-ranging final rule that implements several changes mandated by the NDAA of FY 2013, including changes to limitations on subcontracting in small business contracts, SBA’s regulations concerning the non-manufacturer rule and affiliation rules, and the treatment of joint ventures between small businesses. The rule also aims to clarify the tests for a finding of affiliation by identity of interest, the ostensible subcontractor rule and SBA’s method of calculating annual receipts for revenue-based size standards, among other questions.
Effective: May 31, 2016

Unenforceable Commercial Supplier Agreement Terms, GSA Proposed Rule
Key Details: GSA is proposing to amend the General Services Administration Acquisition Regulation (GSAR) to implement standard terms and conditions for the most common conflicting Commercial Supplier Agreement terms, to minimize the need for the negotiation of the terms of Commercial Supplier Agreements on an individual basis. The proposed rule will add provisions to contracts making certain conflicting or inconsistent terms in a Commercial Supplier Agreement unenforceable, so long as an express exception is not authorized elsewhere by federal statute. GSA is also proposing to amend the GSAR to modify the order of precedence contained in the Commercial Items clause (52.212-4) to make clear that all of the terms of the GSAR clause control in the event of a conflict with a Commercial Supplier Agreement unless both parties agree to specific terms during the course of negotiating the contract. Both of the above changes will be accomplished by revising guidance and clauses contained throughout the GSAR. Interested parties should submit written comments to the Regulatory Secretariat Division on or before August 1, 2016 to be considered in the formation of the final rule.
Effective: May 31, 2016

Cooperative Agreements with Commercial Firms, NASA Final Rules
Key Details: This final rule implements the requirements of Section 872 for recipients and NASA staff to report information that will appear in the Federal Awardee Performance and Integrity Information Systems (FAPIIS). Pursuant to Section 872, NASA will consider information contained within the system about a non-federal entity before awarding a grant or cooperative agreement to that non-federal entity. Some of the major elements of the rule are:
  • NASA is to report information in FAPIIS about:
    • Any termination of an award due to a material failure to comply with the award terms and conditions,

    • Any administrative agreement with a non-federal entity to resolve a suspension or debarment proceeding; and

    • Any finding that a non-federal entity is not qualified to receive a given award, if the finding is based on criteria related to the non-federal entity’s integrity or prior performance under federal awards and it is anticipated that the total federal funding will exceed the simplified threshold during the period of performance.
  • Recipients that have federal contract, grant and cooperative agreement awards with a cumulative total value greater than $10,000,000 must enter information in FAPIIS about certain civil, criminal and administrative proceedings that reached final disposition within the most recent five-year period and that were connected with the award or performance of a federal award.
Effective: June 3, 2016

Transactional Data Reporting, GSA Final Rule
Key Details: GSA will include clauses for reporting transactional data for the Federal Supply Schedule (FSS) contracts. Transactional data refers to the information generated when the government purchases goods or services from a vendor. The clauses will be introduced in phases by the GSA. After this change, any participating vendors will no longer be subject to the existing Commercial Sales Practices and the Price Reductions clauses. Theses clauses may also apply to new GWACs and government-wide IDIQ contracts without existing transactional data requirements.
Effective: June 22, 2016

Federal Civil Penalties Adjustment Act Amendments, Department of Veterans Affairs Interim Final Rule
Key Details: Due to the Federal Civil Penalties Inflation Adjustment Act Improvements Act, the Department of Veteran Affairs is required to declare the increase in penalties made. The maximum civil monetary penalty was increased from $10,000 to $21,563. The fraudulent claims penalty was increased from $5,500 to $10,781.
Effective: June 22, 2016

Technical Amendments, GSAM Final Rule
Key details: GSA is making technical amendments to the GSAR by making revisions to GSAR Case 2010-G511, Federal Supply Schedules: Purchasing by Non-Federal Entities, a previously published final rule that amended the GSAR with regard to purchasing by state and local governments and other qualified organizations through its FSS program. Since that rule was published, further revisions were made to the affected regulations. Therefore, GSA is making conforming changes to correct 48 CFR parts 538 and 552.
Effective: July 6, 2016

Small Business Mentor Protégé Programs, SBA Final Rule
Key Details: SBA is amending its regulations to implement provisions of the Small Business Jobs Act of 2010, and the NDAA for FY 2013. Based on authorities provided in these two statutes, the rule establishes a government-wide mentor-protégé program for all small business concerns, consistent with SBA’s mentor-protégé program for participants in SBA’s 8(a) Business Development (BD) program. The rule also makes minor changes to the mentor-protégé provisions for the 8(a) BD program in order to make the mentor-protégé rules for each of the programs as consistent as possible. The rule also amends the current joint venture provisions to clarify the conditions for creating and operating joint venture partnerships, including the effect of such partnerships on any mentor-protégé relationships. In addition, the rule makes several additional changes to the current 8(a) Office of Hearings and Appeals and HUBZone regulations concerning, among other things, ownership and control, changes in primary industry, standards of review and interested party status for some appeals.
Effective: August 24, 2016

Various Administrative Changes and Clauses to the USAID Acquisition Regulation, AIDAR Final Rule
Key Details: The U.S. Agency for International Development (USAID) is issuing a final rule amending the Agency for International Development Acquisition Regulation (AIDAR) to maintain consistency with federal and agency regulations and incorporate current and new USAID clauses into the regulation. The highlights of the changes are as follows:
  • Sections 722.810 and 752.222-71 are added to encourage all USAID contractors performing and recruiting entirely outside the United States to develop and enforce employment nondiscrimination policies with regard to race, color, religion, sex (including pregnancy and gender identity), sexual orientation, marital status, parental status, political affiliation, national origin, disability, age, genetic information, veteran status or any other conduct that does not adversely affect the performance of the employee.
  • New part 729, subpart 729.4, Sections 729.204-70 and 752.229-70 require contractors to report the amounts of foreign taxes assessed by a foreign government on commodities financed with U.S. foreign assistance funds. The reporting is used to require the countries to reimburse the taxes or duties imposed on U.S. foreign assistance funds and for certain reporting to Congress.
  • Sections 731.205-43 and 752.231-72 are added to mitigate the risk of inappropriate spending, as mandated by Executive Order 13589, “Promoting Efficient Spending,” dated November 9, 2011. Contractors are required to obtain USAID written approval prior to committing costs related to USAID-funded conferences that meet the criteria provided in Section 731.205-43. Further guidance provides that costs associated with a conference, meeting the criteria in the subpart, are unallowable when the required prior written approval for such costs is not obtained.
  • New Section 752.7036 directs contractors to register with the Implementing Partner Notices (IPN) Portal, where USAID uploads contract modifications that affect multiple awards and provides notices to contractors.
  • Section 752.7037 is added to promote child safeguarding when implementing USAID programs. The clause complements the USAID Counter Trafficking in Persons (C-TIP) Code of Conduct by expanding the range of actions prohibited by USAID to include abuse, exploitation or neglect of children.
Effective: August 25, 2016

Clarification of Award Fee Evaluations and Payments, NFS Final Rule
Key Details: NASA published a final rule amending the NASA Federal Acquisition Regulation Supplement to clarify NASA’s award fee process by incorporating terms used in award fee contracting, guidance relative to final award fee evaluations, release of source selection information and the calculation of the provisional award fee payment percentage in NASA end-item award fee contracts.
Effective: August 31, 2016

Participation by Disadvantaged Business Enterprises in Procurements under EPA Financial Assistance Agreements, EPA Final Rule
Key Details: A final rule is being issued by the EPA to revise the Disadvantaged Business Enterprise program. The revisions will improve the utility, minimize burden and clarify requirements that were subject to questions for financial assistance within the program. All of these regulations are in accordance with the federal laws that govern the DBE program.
Effective: October 26, 2016

AGENCY SUPPLEMENTS TO THE FAR – PROPOSED RULES

Contractor Business Systems: Definition and Administration, Withdrawal of DEAR Proposed Rule
Key Details: The Department of Energy (DOE) is withdrawing a proposed rule that would have amended the DOE Acquisition Regulation to define contractor business systems as an accounting system, estimating system, purchasing system, earned value management system or property management system.

Incremental Funding of Fixed-Price, Time-and-Material or Labor-Hour Contracts during a Continuing Resolution, DTAR Proposed Rule
Key Details: A proposed rule issued by the Department of the Treasury would amend the Department of Treasury Acquisition Regulation (DTAR) to provide acquisition policy for incremental funding of fixed-price, time-and-material or labor-hour contracts during a continuing resolution. Specifically, this proposed rule would establish procedures for using incremental funding for fixed-price, time-and-material and labor-hour contracts during a period in which funds are provided to Treasury under a continuing resolution. Heads of contracting activities may develop necessary supplemental internal procedures as well as guidance to advise potential offerors, offerors and contractors of these policies and procedures.

Contractor Financial Reporting of Property, NFS Proposed Rule
Key Details: NASA has updated the NASA Federal Acquisition Regulation Supplement policy regarding property financial reporting to specify that all contractors with custody of NASA PP&E with a value of $10 million or more report this information on a monthly basis to NASA.


Read Next Article, "Significant Accounting and Reporting Updates" 

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