FAC 2005-47 Issued with Seven Rules

The Civilian Agency Acquisition and Defense Acquisition Regulations Councils have published Federal Acquisition Circular 2005-47, which contains four interim and three final rules amending the Federal Acquisition Regulation. In order of appearance, the rules address the following subjects: Item I, Notification of Employee Rights Under the National Labor Relations Act (FAR Case 2010-006, Interim); Item II, HUBZone Program Revisions (FAR Case 2006-005); Item III, Preventing Abuse of Interagency Contracts (FAR Case 2008-032, Interim); Item IV, Small Disadvantaged Business Self-Certification (FAR Case 2009-019, Interim); Item V, Uniform Suspension and Debarment Requirement (FAR Case 2009-036, Interim); and Item VI, Limitation on Pass-Through Charges (FAR Case 2008-031). Item VII contains a final rule that makes editorial changes to FAR 3.104-1, FAR 5.601, FAR 7.105, and FAR 10.002. This FAC also contains a Small Entity Compliance Guide. A full listing of FAR sections impacted by these rules, as well as the effective date for each rule, appears in the table below. Comments on the interim rules, identified by their respective FAR case numbers, are due by February 11, 2011. For the text of FAC 2005-47, see 70,002.127.

Employee Rights

An interim rule, FAR Case 2010-006, amends the FAR to implement Executive Order 13496, Notification of Employee Rights under Federal Labor Laws, as implemented by the Department of Labor. The order requires contractors and subcontractors to display a notice to employees of their rights under federal labor laws. DoL has determined the notice must also include employee rights under the National Labor Relations Act (29 USC 151 and following). The NLRA encourages collective bargaining and protects employees' freedom to associate, self organize, and designate representatives of their own choosing for negotiating the terms and conditions of their employment. The DoL issued a final rule implementing E.O. 13496 at 29 CFR Part 471 (75 FR 28368). This FAR interim rule implements the requirements of the DoL final rule by creating FAR Subpart 22.16 and a clause at FAR 52.222-40, Notification of Employee Rights under the National Labor Relations Act. In addition, this rule revises the clauses at FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders --Commercial Items, and FAR 52.244-6, Subcontracts for Commercial Items, to include the requirements of FAR 52.222-40. The interim rule makes corresponding technical changes to the definition of "United States" in FAR 2.101, the Office of Management and Budget approval provision under the Paperwork Reduction Act at FAR 1.106, and the terms and conditions clause for simplified acquisitions at FAR 52.213-4.

HUBZone Revisions

The final rule associated with FAR Case 2006-005 amends the FAR to implement revisions to the Small Business Administration's HUBZone Program. Specifically, this final rule implements an SBA final rule (70,425.183) and interim rule (70,425.228) that incorporated the changes to SBA's regulations at SBA Part 126 required by the Small Business Reauthorization Act of 2000. The FAR is amended to require a historically underutilized business zone small business concern to be a HUBZone small business concern both at the time of its initial offer and at the time of contract award (FAR 19.1303(d)). Also, HUBZone concerns must provide the contracting officer with a copy of the notice required by SBA 126.501 if material changes occur before award that could affect their HUBZone eligibility (FAR 52.219-3(f)). This final rule also requires construction contractors to spend at least 50 percent of the cost of contract performance incurred for personnel on their own employees or subcontract employees of other HUBZone small business concerns (FAR 19.1308(a)). However, amended FAR 52.219-3, Notice of Total HUBZone Set-Aside, and FAR 52.219-4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns, include an Alternate I, which is to be used to waive the 50 percent requirement only after there is a determination that at least two HUBZone small business concerns cannot meet the requirement. HUBZone small business prime contractors must still meet the performance of work requirements set forth in SBA 125.6(c).

Interagency Contracts

The FAR Case 2008-032 interim rule amends the FAR to implement provisions of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (PL 110-417) to add requirements for preventing abuse of interagency contracts. Recognizing that an increasing number of interagency acquisitions are conducted under other authorities, the rule substantially broadens the scope of FAR Subpart 17.5 to address all interagency acquisitions, with limited exceptions, rather than just those conducted under the Economy Act (31 USC 1535). Also, the rule requires agencies to support the decision to use an interagency acquisition with a determination that the action is the "best procurement approach" (FAR 17.502-1). Assisted acquisitions must be accompanied by written agreements between the requesting agency and the servicing agency documenting the roles and responsibilities of the respective parties, including the planning, execution, and administration of the contract (FAR 17.502-1(a)(1)). Under FAR 17.504, senior procurement executives for each executive agency must submit an annual report on interagency acquisitions to the Director of the Office of Management and Budget, in accordance with Section 865(c) of PL 110-417. The rule also clarifies the meaning of "interagency acquisition," "direct acquisition," and "assisted acquisitions," and moves the terms from FAR 4.601 and FAR Subpart 17.5 to FAR 2.101. This interim rule also amends FAR 8.404 to add a cross-reference to the requirements in FAR Subpart 17.5 for Federal Supply Schedule orders over $500,000.

SDB Self-Certification

An interim rule, FAR Case 2009-019, amends the FAR to incorporate changes made by the Small Business Administration to its Small Disadvantaged Business Program. The SBA rule (70,425.338) permitted SDB subcontractors to provide written statements to prime contractors representing in good faith their status as an SDB concern for the purposes of subcontract awards under federal prime contracts. This interim rule is intended to maintain consistency between the SBA regulations and the FAR. Specifically, this rule amends the definition provision at FAR 2.101 to revise the term "small disadvantaged business concern" to be consistent with SBA Part 124 , which continues to recognize small business concerns that have been certified by SBA, and to add language that allows small business concerns to self-represent their status as SDBs for subcontracts. FAR 19.301-1 is amended to update citations, and FAR 19.703 is amended to add language that allows the contractor to rely on small business concerns to self-represent their status as SDBs for subcontracts. Also, the rule amends FAR 52.219-8, Utilization of Small Business Concerns, to allow a small business concern to self-represent its SDB status in writing, and FAR 52.219-25, Small Disadvantaged Business Participation Program --Disadvantaged Status and Reporting, to allow contractors to accept written self-representations of small disadvantaged status from subcontractors. This rule only addresses the subcontracting status portion of the SBA final rule for SDB certification. The SDB certification for prime contracts will be addressed in a future rule.

Suspension and Debarment

The interim rule associated with FAR Case 2009-036 amends the FAR to implement Section 815 of the National Defense Authorization Act for Fiscal Year 2010 (PL 111-84), which extends the flowdown of the restriction on subcontracting to lower-tier subcontractors that have been suspended or debarred, with exceptions for contracts for the acquisition of commercial items and commercially available off-the-shelf items. Specifically, this interim rule amends FAR 9.405-2 to exclude COTS items from the restrictions on subcontracting with contractors that have been debarred, suspended, or proposed for debarment. The rule amends the clause at FAR 52.209-6, Protecting the Government's Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment, by flowing down the requirement to check whether a subcontractor is suspended or debarred beyond the first tier, with the stated exceptions for COTS items. The clause at FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders --Commercial Items, is amended because the requirement that commercial contracts must flow the requirement down to the first tier is now statutory. A corresponding technical change is made to FAR 52.213-4, regarding terms and conditions of simplified acquisitions (other than commercial items), to add the requirements of revised FAR 52.209-6.

Pass-Through Charges

The FAR Case 2008-031 rule finalizes a prior interim rule issued with FAC 2005-37, which amended the FAR to minimize excessive pass-through charges by contractors from subcontractors, or of tiers of subcontractors, that add no or negligible value and to ensure that neither a contractor nor a subcontractor receives indirect costs or profit/fee on work performed by a lower-tier subcontractor to which the higher-tier contractor or subcontractor adds no, or negligible, value. The rule implemented Section 866 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (PL 110-417), which applies to executive agencies other than the Department of Defense, which is subject to Section 852 of the John Warner NDAA for FY 2007. The interim rule was intended to protect the government's interests when there appears to be an agreement with a contractor to perform the contract scope of work, including managing subcontractors, then after award, the contractor subcontracts substantially all the effort without providing the required value-added subcontract management functions that were expected. To enable agencies to ensure pass-through charges are not excessive, the interim rule added a solicitation provision, FAR 52.215-22, and a contract clause, FAR 52.215-23, requiring offerors and contractors to identify the percentage of work that will be subcontracted, and when subcontract costs will exceed 70 percent of the total cost of work to be performed, to provide information on indirect costs and profit/fee and value added with regard to the subcontract work. The rule made corresponding technical changes to FAR 15.408 and FAR 31.203. The final rule adopts the interim rule with a minor change adding fixed-price incentive contracts awarded on the basis of adequate price competition and fixed-price incentive contracts for the acquisition of a commercial item to the list of contracts at FAR 15.408(n)(2)(i)(B)(2) for DoD that are not subject to the limitation on pass-through charges clauses. The rule is to be applied consistent with existing Cost Accounting Standards and FAR rules related to subcontract management, indirect cost allocation, and profit analysis.




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