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FAC 2005-52 Contains Six Rules Amending the FAR

The Civilian Agency Acquisition and Defense Acquisition Regulations Councils have issued Federal Acquisition Circular 2005-52, which contains one interim and five final rules amending the Federal Acquisition Regulation. In order of appearance, the rules address: Item I, Sustainable Acquisition (FAR Case 2010-001, Interim); Item II, Contract Closeout (FAR Case 2008-020); Item III, Prohibition on Contracting With Inverted Domestic Corporations (FAR Case 2008-009); Item IV, Buy American Exemption for Commercial Information Technology --Construction Material (FAR Case 2009-039); and Item V, Oversight of Contractor Ethics Programs (FAR Case 2010-017). Item VI makes editorial technical amendments to FAR 52.212-3 and the standard forms at FAR 53.301-1447, Solicitation/Contract, FAR 53.301-1449, Solicitation/Contract/Order for Commercial Items, and FAR 53.302-347, Order for Supplies and Services. The FAC also contains a Small Entity Compliance Guide. A full listing of the sections impacted by the rules appears in the FAC regulation table below. For the text of FAC 2005-52, see 70,002.133.

Sustainable Acquisition

The interim rule, FAR Case 2010-001, amends the FAR to implement Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic Performance, and E.O. 13423, Strengthening Federal Environmental, Energy, and Transportation Management. The rule requires agencies to leverage acquisitions to foster markets for sustainable technologies, materials, products, and services. Federal agencies must also implement high-performance sustainable building design, construction, renovation, repair, commissioning, operation and maintenance, management, and deconstruction practices in applicable acquisitions. Contractors will be required to support the goals of an agency's environmental management system.


The rule updates the authorities throughout the applicable FAR parts to include E.O. 13423 and E.O. 13514, and to delete references to E.O. 13101, E.O. 13123, and E.O. 13148, which were revoked by E.O. 13423. The rule also revises the definitions for "renewable energy" and "United States" to reflect the latest definitions of the terms in E.O. 13514, and adds a new definition for "sustainable acquisition," derived from the definition of "sustainable" in E.O. 13514, and a definition for "water consumption intensity" also from E.O. 13514. FAR Part 4 changes include revisions to the policy for contractor submission of paper documents to the government and updating the general description of the Federal Procurement Data System. FAR Parts 5, 7, and 11 are revised to ensure agencies include or consider sustainable acquisition requirements in their synopses, acquisition planning documents, and functions, and descriptions of agency needs. Conforming changes are made to FAR Parts 12 and FAR 13. FAR Part 23 is revised to ensure that agencies follow the policy of "leading by example." This includes fostering markets for sustainable technologies, materials, products, and services, as a goal of agency acquisitions.

New Provisions

The rule also adds a new FAR Subpart 23.1, Sustainable Acquisition, which implements Sections 2(h) and 18 of E.O. 13514. With certain exceptions or exemptions, agencies must advance sustainable acquisition by ensuring that 95 percent of new contract actions contain requirements for products that are designated as energy-efficient, water-efficient, biobased, environmentally preferable, non-ozone depleting, or those that contain recovered materials. In addition, the rule adds a new contract clause at FAR 52.223-19, Compliance with Environmental Management Systems, and modifies other clauses in FAR Part 52 to incorporate the policies reflected in E.O. 13514 and E.O. 13423. The rule carries a May 31, 2011, effective date. Comments on the interim rule, identified by FAR Case 2010-001, are due August 1, 2011.

Contract Closeout

The final rule associated with FAR Case 2008-020 amends the requirements for closing out contract files, including revising the procedures for clearing final patent reports and quick-closeout, and describes the contents of an adequate final indirect cost rate proposal and supporting data. Specifically, the rule revises FAR 42.705-1 (b)(1) to make the language consistent with FAR 52.216-7 (d)(2). FAR 42.705-1 (b) and FAR 42.705-2 (b)(2) are revised to clarify the auditor's role and provide guidance on reviewing the indirect cost rate proposal for adequacy and preparing an advisory audit report, after the proposal has been determined to be adequate for audit. Revised FAR 42.708 (a)(2) lowers the percentage limitation in the existing quick-closeout criteria. The rule also renumbers FAR 42.708 (a)(3) as FAR 42.708 (a)(4) and adds a new paragraph FAR 42.708 (a)(3). Examples of other pertinent information appear in the new paragraph at FAR 42.708 (a)(3)(iii). Also, revised FAR 52.216-7 clarifies that the supplemental information listed, although it may not be required for a determination on the adequacy of the contractor's proposal, may be required during the audit process. See 70,006.232 for the proposed rule. The final rule goes into effect June 30, 2011.

Inverted Domestic Corps

The FAR Case 2008-009 rule finalizes, with changes, the interim rule issued with FAC 2005-34, which amended the FAR to implement Section 743 of Division D of the Omnibus Appropriations Act, 2009 (PL 111-8). Section 743 prohibited 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 one. For Fiscal Year 2010, the same restrictions were continued under Section 740 of Division C of the Consolidated Appropriations Act, 2010 (PL 111-117). An inverted domestic corporation is one that was formerly 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 (see FAR 9.108-1). The amendments included requirements for Responsible Prospective Contractors, at FAR Subpart 9.1. New FAR 9.108 added a definition of "inverted domestic corporation" (FAR 9.108-1) and a prohibition on contracting with one (FAR 9.108-3). It also included the limited Secretarial waiver authority granted by the Appropriations Act (FAR 9.108-4) and a prescription for the new solicitation provision (FAR 9.108-5) at FAR 52.209-2, which requires a contractor to represent it is not an inverted domestic corporation or a subsidiary of one.

Final Changes

In response to public comments, the final rule amends FAR 9.108-3 to apply the prohibition on contracting with inverted domestic corporations to the use of FY 2008 and FY 2009 appropriated funds. The rule amends FAR 9.108-2 to specify the exclusion of contracts entered into before December 26, 2007 (for FY 2008 funds), March 11, 2009 (for FY 2009 funds), and December 16, 2009 (for FY 2010 funds) and task orders issued under those contracts. Also, the rule modifies applicable definitions at FAR 9.108-1, including "inverted domestic corporation" and "subsidiary" to simplify and avoid complicating the application of the prohibition. The rule provides further clarification of the representation requirement in FAR 52.209-2. This final rule carries a May 31, 2011 effective date.

Commercial IT Exemption

The FAR Case 2009-039 rule finalizes, without change, the interim rule issued with FAC 2005-46, which amended the FAR to implement Section 615 of Division C, Title VI, of the Consolidated Appropriations Act, 2010 (PL 111-117). Section 615 authorizes exemption from the Buy American Act for acquisition of information technology that is a commercial item. The interim rule amended FAR 25.202, and the clauses at FAR 52.225-9 and FAR 52.225-11, to implement the exemption with regard to construction material. The final rule is effective May 31, 2011.

Ethics Oversight

The rule associated with FAR Case 2010-017 amends the FAR to add to the list of contract administration functions at FAR 42.302, the function to ensure that contractors have implemented the mandatory contractor business ethics program requirements of FAR 52.203-13, Contractor Code of Business Ethics and Conduct. This final rule goes into effect June 30, 2011.




(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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