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FAC 2005-45 Issued with Three Extensive Rules

The Civilian Agency Acquisition and Defense Acquisition Regulations Councils have published Federal Acquisition Circular 2005-45, which contains three final rules amending the Federal Acquisition Regulation. In order of appearance, the rules address the following subjects: Item I, Inflation Adjustment of Acquisition-Related Thresholds (FAR Case 2008-024); Item II, Definition of Cost or Pricing Data (FAR Case 2005-036); and Item III, American Recovery and Reinvestment Act of 2009 --Buy American Requirements for Construction Materials (FAR Case 2009-008). This FAC also contains a Small Entity Compliance Guide. A full listing of the FAR sections impacted by these rules appears in the table below. All three rules go into effect October 1, 2010. For the text of FAC 2005-45, see ¶70,002.125.

Inflation Adjustments

A final rule, FAR Case 2008-024, amends the FAR to implement Section 807 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005. Section 807 requires an adjustment of acquisition-related thresholds for inflation every 5 years using the Consumer Price Index for all urban consumers. The FAR Councils have used the same methodology to adjust nonstatutory FAR acquisition-related thresholds in 2010. This is the second review of FAR acquisition-related thresholds following the adjustments made during FY 2005, which were published in FAC 2005-13 (FAR Case 2004-033). The effect of this final rule on heavily-used thresholds is the same as stated in the preamble to the proposed rule (¶70,006.238):

l The micro-purchase base threshold of $3,000 (FAR 2.101) will not be changed;

l The simplified acquisition threshold (FAR 2.101) will be raised from $100,000 to $150,000;

l The FedBizOpps preaward and post-award notices (FAR Part 5) will remain at $25,000 because of trade agreements;

l The commercial items test program ceiling (FAR 13.500) will be raised from $5,500,000 to $6,500,000;

l The cost and pricing data threshold (FAR 15.403-4) will be raised from $650,000 to $700,000; and

l The prime contractor subcontracting plan (FAR 19.702) floor will be raised from $550,000 to $650,000, while the construction threshold of $1,000,000 will increase to $1,500,000.

The adjustments do not apply to Davis-Bacon Act, Service Contract Act, and trade agreement thresholds. Any changes to Cost Accounting Standards thresholds will be dealt with under a separate case.

Cost/Pricing Data

The FAR Case 2005-036 final rule amends the FAR to clarify the distinction between "certified cost or pricing data" and "data other than certified cost or pricing data," and to clarify requirements for submission of cost or pricing data (see ¶70,006.211 for the proposed rule). FAR Subpart 15.4 describes the contracting officer's responsibility to purchase supplies and services at fair and reasonable prices and prescribes the use of data and information in meeting this requirement. This subpart incorporates the requirements of the Truth in Negotiations Act (10 USC 2306a and 41 USC 254b), which address the submission of cost or pricing data and the circumstances under which a contractor must certify their accuracy, completeness, and currency. This final rule is intended to eliminate confusion and misunderstanding, especially regarding the authority of COs to request data other than certified cost or pricing data when there are no other means to determine that proposed prices are fair and reasonable. In particular, the rule clarifies that data other than certified cost or pricing data may include the identical types of data as certified cost or pricing data but without the certification. Thus, this rule neither expands nor diminishes the existing rights of COs to request cost or pricing data (whether certified or other than certified) or other information, or the existing responsibilities of the offeror to submit the data or other information. Similarly, the rule does not require or authorize COs to obtain cost or pricing data or other information unless it is needed to determine that prices offered are fair and reasonable, which may include the request for data in connection with a cost realism analysis.

Construction Materials

The rule associated with FAR Case 2009-008 finalizes, with changes, an interim rule issued with FAC 2005-32 that amended the FAR to implement Section 1605 of the American Recovery and Reinvestment Act of 2009 with regard to Buy American Act requirements for construction materials. Section 1605 prohibits the use of funds appropriated or otherwise made available by the Recovery Act for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States. The law requires this prohibition to be applied in a manner consistent with U.S. obligations under international agreements, and it provides for waiver under three circumstances: iron, steel, or manufactured goods are not produced in the U.S. in sufficient and reasonably available quantities and of a satisfactory quality; inclusion of iron, steel, or manufactured goods produced in the U.S. will increase the cost of the contract by more than 25 percent; or applying the domestic preference would be inconsistent with the public interest. The interim rule added a new FAR Subpart 25.6 (FAR 25.600 through FAR 25.607), entitled "American Recovery and Reinvestment Act --Buy American Act --Construction Materials," and also added new contract clauses at FAR 52.225-21 through FAR 52.225-24, with conforming changes made to FAR 1.106, FAR 5.207, FAR 25.001, FAR 25.002, and FAR 25.1102.

Final Rule Changes

In response to public comments, the FAR Councils made changes to the interim rule to clarify particular requirements. Changes made by the final rule include: amending the definition of "component" at FAR 2.101 to include references to cited contract clauses; amending FAR 25.001 by adding a new sentence stating if construction material consists wholly or predominantly of iron or steel, the iron or steel must be produced in the U.S.; revising the definition of "Domestic construction material" at FAR 25.003; revising FAR Subpart 25.6 in the scope provision (FAR 25.600), definitions (FAR 25.601), policy statements (FAR 25.602), and exceptions to the requirements (FAR 25.603); amending FAR 25.605 to clarify procedures for evaluation offers of foreign construction material; and amending FAR 25.607 regarding noncompliance. The contract clauses at FAR 52.225-21 through FAR 52.225-24 were amended to make corresponding changes. Other provisions impacted by the final rule are: FAR 5.207, FAR 25.604, and FAR 25.1102. The final rule applies to solicitations issued, and contracts awarded, on or after October 1, 2010. Contracting officers must modify, on a bilateral basis in accordance with FAR 1.108(d)(3), existing contracts to include the FAR clauses for future orders if Recovery Act funds will be used. If a contractor refuses to accept the modification, the contractor will not be eligible to receive Recovery Act funds.

(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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