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Three FAC 2005-59 Rules Amend the FAR

The Civilian Agency Acquisition and Defense Acquisition Regulations Councils have issued Federal Acquisition Circular 2005-59, which contains two interim rules and one final rule amending the Federal Acquisition Regulation. The rules are: Item I --Prohibition on Contracting with Inverted Domestic Corporations (FAR Case 2012-013); Item II --Free Trade Agreement-Colombia (FAR Case 2012-012); and Item III --Revision of Cost Accounting Standards Threshold (FAR Case 2012-003). This FAC also contains a Small Entity Compliance Guide. A full listing of the regulations impacted by the rules, along with the effective date for each rule, appears in the FAC regulation table below. For the text of FAC 2005-59, see 70,002.148.

Inverted Corporations

The FAR Case 2012-013 interim rule amends the FAR to implement Section 738 of Division C of the Consolidated Appropriations Act, 2012 (PL 112-74), which prohibits the award of contracts using appropriated funds to any foreign incorporated entity that is treated as an inverted domestic corporation or to any subsidiary of this type of entity. The same governmentwide restrictions were already incorporated in the FAR for funds appropriated in fiscal years 2008 through 2010 (FAR Case 2008-009, FAC 2005-34 and FAC 2005-52). Section 738 extends the prohibition to use federal appropriated funds to FY 2012. An inverted domestic corporation is one that used to be incorporated in the United States, or used to be a U.S. partnership, but now is incorporated in a foreign country, or is a subsidiary whose parent corporation is incorporated in a foreign country ( FAR 9.108-1). The rule adds a paragraph to FAR 52.209-10, Prohibition on Contracting with Inverted Domestic Corporations, to refer to the FAR 9.108-2 exceptions to the prohibition. Comments on the rule, identified by the FAR case number, are due July 9, 2012.


The interim rule associated with FAR Case 2012-012 amends the FAR to implement the United States-Colombia Trade Promotion Agreement (PL 112-42). This agreement is a free trade agreement that provides for mutually non-discriminatory treatment of eligible products and services from Colombia. The Colombia agreement covers acquisitions of supplies and services equal to or exceeding $77,494. The excluded services for the Colombia agreement are the same as for the Bahrain, Dominican Republic-Central American, Chile, North American, Oman, and Peru FTAs. Because the Colombia agreement construction threshold of $7,777,000 is the same as the World Trade Organization Government Procurement Agreement threshold, no new clause alternates are required for the Buy American Act --Construction Materials under Trade Agreements provision and clause ( FAR 52.225-11 and FAR 52.225-12) or FAR 52.225-23 and FAR 52.225-24, the Recovery Act clauses. Comments on this interim rule are due by July 9, 2012.

CAS Thresholds

The FAR Case 2012-003 final rule amends the FAR to revise the threshold for applicability of cost accounting standards to implement a recent Cost Accounting Standards Board rule ( 70,055.24) and statutory requirements. This final rule amends FAR 30.201-4 and the CAS clauses at FAR 52.230-1 through FAR 52.230-5 to replace "$650,000" with "$700,000" rather than the phrase "the Truth in Negotiations Act (TINA) threshold, as adjusted for inflation (41 USC 1908 and 41 USC 1502(b)(1)(B))" (the phrase used by the CAS Board in its rule), as applicable. The FAR Councils made this change from the CAS Board's rule to clarify FAR 30.201-4 and the CAS clauses. No further action will be required by the CAS Board to implement further adjustments for inflation in the future as permitted by the CAS Board's rule. The CAS applicability thresholds in the FAR will be revised every five years in the future, whenever the TINA threshold is revised as part of the statutory revision of the acquisition thresholds.




(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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