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FAC 2005-50 Contains Ten Rules Amending the FAR

The Civilian Agency Acquisition and Defense Acquisition Regulations Councils have issued Federal Acquisition Circular 2005-50, which contains four interim and six final rules amending the Federal Acquisition Regulation. In order of appearance, the rules address: Item I, Proper Use and Management of Cost-Reimbursement Contracts (FAR Case 2008-030, Interim); Item II, Requirements for Acquisitions Pursuant to Multiple-Award Contracts (FAR Case 2007-012, Interim); Item III, Justification and Approval of Sole-Source 8(a) Contracts (FAR Case 2009-038, Interim); Item IV, Additional Requirements for Market Research (FAR Case 2008-007); Item V, Socioeconomic Program Parity (FAR Case 2011-004, Interim); Item VI, Use of Commercial Services Item Authority (FAR Case 2008-034); Item VII, Trade Agreements Thresholds (FAR Case 2009-040); Item VIII, Disclosure and Consistency of Cost Accounting Practices for Contracts Awarded to Foreign Concerns (FAR Case 2009-025); and Item IX, Compensation for Personal Services (FAR Case 2009-026). Item X makes editorial technical amendments to FAR 18.204, FAR 19.201, FAR 52.212-3, and FAR 52.212-5. The FAC also contains a Small Entity Compliance Guide. For the text of FAC 2005-50, see 70,002.130.

Cost Reimbursement

An interim rule, FAR Case 2008-030, amends the FAR to implement Section 864 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (PL 110-417), which aligns with the Presidential Memorandum on Government Contracting, issued on March 4, 2009 (70,105.05). The memorandum directed agencies to save $40 billion in contracting annually by fiscal year 2011 and to reduce the use of high-risk contracts. This rule provides regulatory guidance at FAR Subpart 16.1, Selecting Contract Types, and FAR Subpart 16.3, Cost-Reimbursement Contracts, on the proper use and management of other than firm-fixed-price contracts, which include cost-reimbursement, time-and-material, and labor-hour contracts. Specifically, this interim rule amends FAR 16.103 to revise paragraph (d) to reflect additional documentation when other than a firm-fixed-price contract type is selected. FAR 16.104 is amended to add a new paragraph (e) to provide contracting officers with guidance on combining contract types if the entire contract cannot be firm fixed-price. Similarly, FAR 16.301-2 and FAR 16.301-3 are amended to provide guidance to COs as to which C-R contracts to use and under what circumstances they should be used. The rule also amends and renumbers FAR 7.103 to add new paragraphs (d), (f), and (j) to ensure that acquisition planners document the file to support the selection of the contract type in accordance with FAR Subpart 16.1. These amendments call for a statement of work that is closely aligned with the performance outcomes and cost estimates. The rule also amends FAR 1.602-2 to update CO responsibilities and adds a new section at FAR 1.604 on the duties of CO representatives. FAR 2.101 is amended to add the definition of a "Contracting officer representative." The rule also amends FAR 7.103 to address agency-head responsibilities. FAR 7.105(b)(5)(iv) was added to discuss the strategy to transition from C-R contracts to firm-fixed-price contracts. Additionally, the rule amends FAR 16.103 to revise the procedures for negotiating contract types, FAR 16.301-2 on the application of C-R contracts, and FAR 16.301-3 to describe the limits placed on C-R contracts. With regard to contract administration functions, the rule adds a new paragraph at FAR 42.302(a)(12) to require COs to determine the continuing adequacy of the contractor's accounting system during the entire period of contract performance. Also, paragraph (a)(12) was added to the list of functions at FAR 42.302(a) that cannot be retained and that must be delegated by the CO when delegating contract administration functions to a contract administration office in accordance with FAR 42.202(a). The rule makes corresponding technical changes to FAR 1.603, FAR 7.102, FAR 7.104, FAR 32.1007, and FAR 50.205-1. Comments on the interim rule are due by May 16, 2011. The rule is effective March 16, 2011.

Multiple Awards

The FAR Case 2007-012 interim rule implements Section 863 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (PL 110-417). Section 863, entitled "Requirements for Purchase of Property and Services Pursuant to Multiple-Award Contracts," mandates enhanced competition for orders placed under multiple-award contracts, including the General Service Administration's Federal Supply Schedules. If an individual order over the simplified acquisition threshold does not follow the Section 863 competitive procedures, a notice of, and the determination to waive competition for, the order must be published at http://www.fedbizopps.gov within 14 days after award. In particular, the interim rule revises the "fair opportunity" competition requirements in FAR 16.505(b) applicable to multiple-award task- and delivery-order contracts, other than FSS contracts; amends the procedures for ordering supplies and services under FSS contracts at FAR 8.405-1 and FAR 8.405-2; establishes new competition procedures at FAR 8.405-3 for creating blanket purchase agreements under FSS contracts and placing orders under the BPAs; amends the contract award synopsis provisions at FAR 5.301 (with conforming changes at FAR 5.406, FAR 8.405-6(a)(2), and FAR 16.505(b)(2)(ii)(D)) to require publication and posting of actions supported by exceptions to fair opportunity at FAR 16.505(b)(2) for non-FSS task- and delivery-order contracts and limited-sources justifications at FAR 8.405-6 for FSS contracts, except when disclosure would compromise national security or create other security risks; clarifies that ordering activities may seek a price reduction under FSS contracts at any time; and adds language explaining that the protest procedures found at FAR Subpart 33.1 apply to the issuance of an order or the establishment of a BPA against an FSS contract. The rule also impacts these regulations: FAR 5.705, FAR 8.402, FAR 8.404, FAR 8.405, FAR 8.405-4, FAR 8.406-1, FAR 18.105, and FAR 38.101. This rule is intended to support the government's commitment to strengthened competition and increased transparency and is consistent with the general competition principles addressed in the President's March 4, 2009, Memorandum on Government Contracting (70,105.05). The rule goes into effect May 16, 2011. Comments on this interim rule are due by May 16, 2011.


An interim rule, FAR Case 2009-038, amends the FAR to implement Section 811 of the National Defense Authorization Act for Fiscal Year 2010 (PL 111-84). Section 811 requires agencies to maximize the effective use of competition by making certain that the proper justification and approval is obtained prior to award of 8(a) sole-source contracts over $20 million. This interim rule adds cross references at FAR 6.204, FAR 6.302-5, and FAR 19.808-1 to the requirement for a J&A; amends FAR 6.302-5, which sets forth situations in which other than full-and-open competition is authorized or required by statute, to clarify that, while 8(a) sole-source awards are still authorized, they now must be supported by a J&A prior to award when the total estimated contract amount is over $20 million; amends FAR 6.303-1(b) to specify the required J&A must be approved by the appropriate official and made public after award; amends FAR 6.303-2 to list the five required elements for the sole-source 8(a) J&A; and revises FAR 19.808-1 to inform contracting officers that the Small Business Administration may not accept for negotiation a sole-source 8(a) contract over $20 million unless the requesting agency has completed a J&A in accordance with the requirements at FAR 6.303. The rule makes corresponding technical amendments at FAR 6.304 and FAR 15.607. Comments on the interim rule, which is effective March 16, 2011, are due by May 16, 2011.

Market Research

The FAR Case 2008-007 rule finalizes, with changes, the interim rule issued with FAC 2005-42, which amended the FAR to implement Section 826 of the National Defense Authorization Act for Fiscal Year 2008 (PL 110-181). Section 826 established additional market research requirements in subsection (c) of 10 USC 2377. As a matter of policy, these statutory requirements extend to all executive agencies. Accordingly, the interim rule required market research to be accomplished before an agency places an indefinite-delivery/indefinite-quantity task or delivery order for a noncommercial item in excess of the simplified acquisition threshold. In addition, a prime contractor with a contract in excess of $5 million for the procurement of items other than commercial items must conduct market research before making purchases that exceed the simplified acquisition threshold when the contractor is acting as a purchasing agent for the government. To implement these new requirements, the interim rule amended FAR 10.001, FAR 10.002, FAR 44.303, FAR 44.400, FAR 44.402, and FAR 44.403, as well as the contract clause at FAR 52.244-6 relating to subcontracts for commercial items. In response to public comments, the final rule made changes to clarify the purpose of the market research requirement. Specifically, the final rule revises FAR 10.001 to include a cross-reference to newly added FAR 10.003, which prescribes a new contract clause at FAR 52.210-1 regarding the prime contractor's responsibility to perform market research; adds a cross-reference at FAR 16.506 to the market research requirement at FAR 10.001(d); revises the scope provision at FAR 44.400 to state FAR Subpart 44.4 prescribes the policies limiting the contract clauses a prime contractor may be required to apply to subcontractors providing commercial items; and revises FAR 44.403 to prescribe the use of the clause at FAR 52.244-6 regarding subcontracts for commercial items. The final rule makes corresponding technical changes to FAR 44.402 and FAR 52.244-6. This final rule goes into effect April 15, 2011.

Program Parity

The FAR Case 2011-004 interim rule implements Section 1347 of the Small Business Jobs Act of 2010 (PL 111-240). Section 1347 clarifies the contracting officer's ability to use discretion when determining whether an acquisition will be restricted to small businesses participating in the 8(a), HUBZone, or service-disabled veteran-owned small business programs. This interim rule makes similar changes to the FAR and provides for program parity among the 8(a), HUBZone, or SDVOSB programs. The rule adds a new section at FAR 19.203 to explain the relationship among small business programs. Thus, the FAR more clearly reflects the statutory relationship among the small business programs and eliminates any confusion on the part of COs or others. The rule also amends FAR 13.003, FAR 19.202, FAR 19.501, FAR 19.502-2, FAR 19.800, FAR 19.804-2, FAR 19.1305, FAR 19.1306, FAR 19.1405, and FAR 19.1406. The rule is effective March 16, 2011. Comments on the interim rule are due by May 16, 2011.

Commercial Services

The FAR Case 2008-034 rule finalizes, without change, the interim rule issued with FAC 2005-37, which amended the FAR to implement Section 868 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (PL 110-417). Section 868 provides that purchases of commercial services not offered and sold competitively in substantial quantities in the commercial marketplace may only be considered commercial items for the purposes of the FAR if the contracting officer determines in writing that the offeror has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price for the services. The rule, which amended FAR 15.403-1 and FAR 15.403-3, detailed the information the CO may consider in order to make this determination. The final rule is effective March 16, 2011.

Trade Thresholds

The FAR Case 2009-040 rule finalizes, without change, the interim rule issued with FAC 2005-43, which amended the FAR to incorporate increased thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements, as determined by the United States Trade Representative. The Trade Representative published the new procurement thresholds on December 29, 2009 (74 FR 68907), with a January 1, 2010, effective date. A table showing the new dollar thresholds appears at revised FAR 25.402. To implement these changes, the interim rule also amended FAR 22.1503, FAR 25.202, FAR 25.504-2, FAR 25.603, FAR 25.1101, FAR 25.1102, FAR 52.212-5, FAR 52.213-4, and FAR 52.222-19. This final rule carries a March 16, 2011, effective date.

CAS Clause

An interim rule in FAC 2005-42 (FAR Case 2009-025) addressing cost accounting for foreign firms, was finalized without change. The interim rule aligned the FAR with the revised Cost Accounting Standards Board clause, Disclosure and Consistency of Cost Accounting Practices-Foreign Concerns (see CASB 9903.201-4). A 2008 CASB final rule (70,055.21) added a clause for inclusion in CAS-covered contracts and subcontracts awarded to foreign concerns. To maintain consistency between CAS and the FAR in matters relating to CAS administration, the interim rule amended FAR 30.201-4, which prescribes the clause at FAR 52.230-4. Also, the rule revised FAR 30.201-4(d) to include use of FAR 52.230-6, Administration of Cost Accounting Standards, in all contracts containing FAR 52.230-4. The rule replaced the FAR 52.230-4 clause in its entirety and re-titled it "Disclosure and Consistency of Cost Accounting Practices-Foreign Concerns." FAR 52.230-6 was revised to include a reference to FAR 52.230-4. This final rule is effective March 16, 2011.

Compensation of Personnel

A FAC 2005-42 interim rule, FAR Case 2009-026, was also finalized without change. The interim rule incorporated into the FAR revised Cost Accounting Standards 412, Composition and measurement of pension cost, and 415, Accounting for the cost of deferred compensation. A CASB final rule (70,055.20) amended the CAS provisions concerning the recognition of costs incurred for Employee Stock Ownership Plans under government cost-based contracts and subcontracts. The final rule provided criteria for measuring the costs of ESOPs and assigning the costs to accounting periods, and the amendments specified the provisions of CAS 415, and not any other standard, govern accounting for ESOP costs. The FAR interim rule amended FAR 31.205-6 to implement the CAS changes. This final rule carries a March 16, 2011, effective date.




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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