October 2008

From the editors of CCH's government contracts products, here are summaries of the important recent developments in this practice area for the past month.  Complete coverage of these issues, and many more, appear in the Government Contracts Reporter and related products.

If you have comments or suggestions concerning the information provided or the format used, please feel free to contact me directly at robert.musiala@wolterskluwer.com.

Hot Topic

Bush Signs Defense Authorization Act
President Bush on October 14, 2008, signed into law the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (S. 3001), authorizing $531.4 billion action in budget authority for the Department of Defense and the national security programs of the Department of Energy. Additionally, the legislation authorizes $68.6 billion action in supplemental funding to support operations in Iraq, Afghanistan, and elsewhere in the Global War on Terrorism for the first few months of Fiscal Year 2009.

There are several contractor-related provisions in the legislation. The Act includes provisions to promote competition in federal contracting, according to a summary from the House Armed Services Committee. The committee said the Act ensures that reimbursement contracts are used appropriately, links award fees with contractor performance, prevents abuse of interagency contracts, ensures that items bought using commercial procedures are actually commercial products and establishes a database of information on contractors who violate the law or use bad business practices.

The Act also requires the Cost Accounting Standards Board to reexamine whether existing cost accounting standards should apply to federal contracts that are entered into and performed overseas.

According to a GOP summary, the Act also:

• Directs the Secretary of Defense to review the security risks associated with U.S. defense contractors with access to classified information who also engage in space activities with China. The review includes a review of whether improper disclosure of classified information has occurred and any conclusions regarding the award of future Pentagon contracts to such contractors.
• Establishes a Contingency Contracting Corps on a government-wide basis.
• Requires standardization and streamlining of government-wide policies and definitions relating to inherently governmental functions, personal conflicts of interests at contractor organizations, and other matters.
• Requires the Secretary of the Navy to examine F-18 aircraft requirements and recommend whether Congress should authorize a multi-year contract to purchase F-18 aircraft. Should such a recommendation be made, the act directs the Secretary to provide necessary certifications to enable award of a multi-year procurement contract beginning in 2010.
• Directs the Secretary of Defense to take steps to strengthen Civil Reserve Airlift Fleet participation to assure adequate capacity is available to meet steady-state, surge, and mobilization requirements. The provision authorizes the Secretary to enter into a one-year contract with a minimum purchase amount for charter airlift services under certain conditions. Government Contracts Reports 1981, October 22, 2008.

Congress Extends Statute of Limitations for Wartime Fraud
Congress approved legislation to extend the statute of limitations under which contractors could be prosecuted for fraud during times of war, including fraud committed in Iraq and Afghanistan. The extension of the statute of limitations was contained in a bill to provide funds for the federal government in fiscal year 2009.

Under a 1940s-era law, the Wartime Suspension of Limitations Act, the statute of limitations for criminal fraud offenses against the United States during wartime is suspended until after the war is over. The 1940s law applies only when Congress has declared war, so the ongoing conflicts in Iraq and Afghanistan are exempt from its requirements.

The legislation approved by Congress --introduced as the Wartime Enforcement of Fraud Act (S. 2829) --would apply the World War II law to the current conflicts, as well as to future conflicts in which Congress authorizes the use of military force but does not declare war. The bill would extend the current statute of limitations from three to five years after the end of a military conflict. It would require a presidential proclamation that hostilities have ended, which would end the suspension of the statute of limitations for fraud.

"With passage of this bill today, Congress has taken action, as it has in the past, to protect the American taxpayer and make sure the money spent to support the troops is not wasted by fraud and corruption,"remarked Sen. Patrick Leahy, D-Vt., the sponsor of the bill.

The House approved the appropriations legislation (H.R. 2638) on September 24 by a 370-58 vote. The Senate cleared the bill for the White House on September 27 by a 78-12 vote. Leahy also added portions of the Wartime Enforcement of Fraud Act to a defense bill (S. 3001) that the House approved on September 24 and the Senate cleared for the White House on September 27. Government Contracts Reports 1979, October 8, 2008.

Legal News

Sovereign Acts Doctrine Precluded Change Claim
The Armed Services Board of Contract Appeals denied a deductive change claim because recovery for decreased work arising from a deployment of troops was precluded by the sovereign acts doctrine. The dispute involved a requirements contract for all phases of laundry services at an Army fort and airfield. After the government deployed an infantry division from the fort to Iraq, the contractor experienced a workload reduction in excess of eight percent. The contractor sought an adjustment under the Changes clause, arguing the deliberate government act of troop deployment unilaterally altered the contract by reducing actual workloads.

However, under the sovereign acts doctrine, the government cannot be held contractually liable for public acts undertaken in its capacity as a sovereign, and it is well established the Changes clause does not cover sovereign acts. It was undisputed the troop deployment was a sovereign government act, so the contractor was entitled to a remedy only if the contract provided one. The solicitation's performance work statement advised bidders of the possibility of "drastic variation in quantity" due to circumstances such as mobilization, deployment, or national emergency, and no contract provision referenced a right to compensation or other remedy for this type of occurrence.

Further, a promise to compensate for sovereign acts could not be implied from other contract terms. The contract's workload estimates were historically based on and applied to periods of non-deployment, and applying them here would be inconsistent with the "drastic variation" language of the PWS. The PWS did not expressly or impliedly promise compensation for damages incurred as a result of mobilization, deployment, or national emergency, and no other provision covered the sovereign act of deployment. The reduction in laundry requirements was the result of sovereign acts, not contracting actions, and the government took no action in its capacity as a contracting party. The board granted summary judgment in favor of the government and against the contractor. (Robertson & Penn, Inc. d/b/a Cusseta Laundry, Inc., ASBCA, 92,385)

Government Authorized Alleged Patent Infringement
The government could be held liable for its dredging contractors' patent infringement as a matter of law, according to the Court of Federal Claims, because the government authorized and consented to the allegedly infringing activity. The alleged infringement arose from government contracts to dredge and process contaminated material from navigable waterways. A majority of the contracts contained a provision requiring the contractor to submit a detailed description of its proposed process for treating dredged material, and government approval of the proposed process was required prior to contract award. The remaining contracts required the contractor to use a specified site for processing or to seek government approval of an alternate site. All of the contracts contained the Authorization and Consent clause (FAR 52.227-1), in which the government authorized the use of patented inventions that "necessarily resulted" from compliance with contract specifications or written instructions. A third party alleged the contractors infringed its patents and sought to hold the government liable for their conduct. Seeking partial summary judgment, the government argued it did not authorize the allegedly infringing activity and the court lacked patent infringement jurisdiction (28 USC 1498(a)) over the claim. In its cross-motion for summary judgment, the third party argued the government was fully aware of the processes for treatment of the dredged material, and it therefore could be held liable for its contractors' actions.

Sevenson Environmental Services v. U.S. (477 F3d 1361), an infringement case involving an identical clause, was controlling. There, the Court of Appeals for the Federal Circuit held a requirement for the contractor to develop a plan detailing the work to be performed constituted a "specification" forming part of the contract, and the alleged infringement "necessarily resulted" from compliance with the specification. Here, the required contractor submittals for the majority of the contracts also contained specifications or written provisions that formed part of the contracts. The contracts in both cases expressly required the contractor to provide, prior to award, a "detailed description of the proposed technological processing," including "method of treatment, additives used during the processing, mechanical processing used, decontamination methods incorporated, stabilization methods incorporated, and chemical treatment (if any)." Also, the government approved the proposed processing site and the detailed descriptions in both cases. Since the submittals here formed part of the contracts, it was clear the allegedly infringing dredging method "necessarily resulted" from contract compliance. As to the remaining contracts, the government's authorization and consent was "even more clear." The government's requirement to use a specific site necessarily resulted in the contractors' adoption of the processing method offered at that particular site. A contractor's use of a different processing facility would have been a breach of contract. (TDM America, LLC v. U.S., et al., FedCl, 52 CCF 79,005)

Title to Manufacturing Equipment Vested in the Contractor
The Court of Federal Claims granted a request for a judgment declaring a contractor to be the owner of manufacturing equipment because correspondence between the parties, changes to the definitive contract, and the conduct of the parties indicated title resided with the contractor. The dispute arose from a contract to manufacture projectiles. The parties first entered into a letter agreement that stated the government would acquire title to the equipment provided under the contract. However, the government changed its position on ownership during negotiations for the definitive contract, and the parties agreed the government would not take title to the manufacturing equipment and the contractor would be responsible for maintenance and repair. More than ten years after entering into the definitive contract, the government initiated another procurement for which it sought to provide the manufacturing equipment at issue as "government-furnished property." The contractor objected and sought a declaratory judgment that it was the owner of the equipment. The court found the definitive contract ambiguous with regard to which party owned the equipment. Unlike the letter agreement, the definitive contract lacked any clear term specifying ownership. The court then looked to extrinsic evidence to determine the parties' intent and concluded that provisions removed from the letter contract when it was definitized, the parties' correspondence in negotiating the definitive contract, and the actions of the parties before and after definitization demonstrated the contractor was the owner of the equipment.

As stated in the letter contract, the government began with the intention of owning the equipment. These ownership provisions, however, were removed from the agreement when the parties definitized the contract. During the negotiations, it was clear from the parties' correspondence that title would vest in the contractor. Moreover, from the time the parties negotiated the definitive agreement until the date the government first asserted ownership --more than ten years later --the parties acted consistently with an intent to vest title in the contractor. The contractor placed its property ownership tags on the equipment and recorded the equipment in its records. The government did not indicate the equipment was improperly tagged or dispute the correctness of the records showing the contractor's ownership. Also, the government's litigation position lacked merit. The government's interpretation of the contract's Government Property clause (FAR 52.245-2) conflicted with the parties' intent. The clause provided that title to equipment "acquired by the [c]ontractor for the [g]overnment "passes to and vests in the government. However, where a contractor simply acquires and uses equipment in its production of some product delivered to the government, the contractor is not "acquiring" the equipment "for the [g]overnment." The government could not consciously avoid the risks and responsibilities of equipment ownership and subsequently claim title. Moreover, the fact the government reimbursed the contractor for its costs to design, purchase, and install the equipment did not vest title to the property in the government because contract payments are unrelated to a determination of title and ownership to property. Also, the record lacked any credible evidence to show the contractor was required to amortize the equipment costs as a condition of ownership. (American Ordnance LLC v. U.S., FedCl, 52 CCF 79,002)

Contractor Entitled to Extension, Termination Unsupported
The Postal Service Board of Contract Appeals converted the default termination of a construction contract to a termination for the government's convenience, because the contractor was entitled to an extension of time to complete the work due to a late plan approval and winter weather, and the government failed to establish its termination decision was reasonable as of the adjusted completion date. The government rejected the contractor's requests for extensions of time to complete the post office construction project and terminated the contract for default two months after the contract completion date. Seeking its costs, the contractor claimed the government delayed the work by failing to provide an approved erosion and soil plan in a timely manner, which pushed the project into severe winter weather, when critical earthwork and installation of footings could not be performed. The government maintained that, under the contract's Permits and Responsibilities clause, it was the contractor's responsibility to obtain an approved E&S plan.

The board ruled the contractor's failure to complete the project by the contract completion date justified the default termination, but the delay was excused because the failure was the result of excusable causes beyond the contractor's control and the contractor was not at fault. Notwithstanding the P&R clause, the government took responsibility for obtaining an approved E&S plan by using its architect to submit the plan to the local approving body, revising the plan, obtaining final approval, and providing the final plan to the contractor. The solicitation did not advise that the plan had not been approved, so the government had no expectation the contractor would participate in the approval process. There was no support for the government's assertion the contractor could have commenced work before plan approval, and a solicitation requirement for the contractor to meet with the approving body after plan approval contributed to the delay.

The lack of an approved plan slowed the contractor's tree removal efforts and delayed the project by 26 days, and winter weather delayed the project by another 98 days. The contractor was therefore entitled to an adjusted completion date reflecting this amount of excused delay. However, the contracting officer gave no consideration to a finish date later than the original contract completion date, and the record contained "sparse and conflicting evidence" on the time needed for the contractor to complete the project. Thus, the government failed to meet its burden of showing there was no likelihood the contractor could have completed the project by the extended completion date. (Jody Builders Corp., PSBCA, 92,393)

"Go/No-go" Evaluation Was Inconsistent with RFP Scheme
An evaluation was improper because it did not qualitatively assess proposals under the primary technical factor, as required by the evaluation scheme. The request for proposals for fire support helicopter services listed four technical factors in descending order of importance: aircraft technical capability, safety/risk management, past performance, and organizational experience. These non-price factors, when combined, were significantly more important than price, and awards were to be made to offerors whose proposals were technically acceptable and "whose technical/price relationships [were] the most advantageous to the [g]overnment." When the government evaluated the proposals under the aircraft technical capability factor, it assigned one of two possible scores: two points (acceptable) or five points (unacceptable). The protester argued the government's use of a "go/no-go" evaluation for this factor was inconsistent with the evaluation scheme. According to the protester, the RFP identified aircraft technical capability as the most important technical evaluation factor, but the government did not qualitatively evaluate the proposals under this factor.

The Comptroller General sustained the protest, finding the government did not follow the stated evaluation scheme. The RFP listed the four technical factors in descending order of importance, stated they were significantly more important than price, and called for a price/technical trade-off that considered all four factors. As a result, the RFP "clearly contemplated a qualitative evaluation of the technical factors, balanced against price, to determine the offers that [were] most advantageous to the government. "However, the government evaluated proposals under the aircraft technical capability factor on a "go/no-go" basis, which essentially gave the factor no weight in the trade-off decision, and made the three less important factors the determining factors for award. By assigning all technically acceptable offers the same score for the primary technical factor, the evaluation "effectively neutralized the influence of the most important factor" and "made the evaluation discriminators the three less important technical factors." The Comptroller General also found the evaluation of the protester's past performance was inadequately documented. The Comptroller General recommended the government either qualitatively evaluate the proposals under the aircraft technical capability factor or revise the RFP to state it will evaluate the factor on a "go/no-go" basis, solicit revised proposals, reevaluate the protester's past performance, and make a new source selection decision. (Helicopter Transport Services LLC, 23 CGEN 112,695)

Government Disregarded HUBZone Set-Aside Requirements
Service-disabled veteran-owned small business set-asides were improper because the government did not adequately consider whether the contracts should be set aside for Historically Underutilized Business Zone small business concerns. The protester, a HUBZone small business, challenged two support and training services acquisitions: a sole source order issued to a SDVOSBC, and a solicitation that was set aside for SDVOSBCs. With respect to the order, the contracting specialist "considered a HUBZone sole-source based on his experience that only one HUBZone small business, [the protester], had submitted quotes in response to previous solicitations for similar requirements" but he "had concerns related to certain restrictions on HUBZone sole-source awards that caused him to turn his consideration to the possibility of an SDVOSBC sole-source award." He then researched whether SDVOSBCs could compete for the work. With respect to the solicitation, the CO was aware of multiple HUBZone and SDVOSBC sources and considered both HUBZone and SDVOSBC set-asides, but ultimately chose a SDVOSBC set-aside because the contracting activity was further behind on its SDVOSBC goals. According to the protester, the government should have set aside both procurements for HUBZone small businesses.

The Comptroller General explained that under FAR 19.305, a contracting officer "shall" set aside acquisitions exceeding the simplified acquisition threshold for HUBZone small businesses when there is a reasonable expectation two or more HUBZone small businesses will submit offers and award will be made at a fair market price. Contracts may also be awarded to HUBZone small businesses on a sole-source basis under certain circumstances, but the CO "shall" first consider HUBZone set-asides. While the language of FAR 19.305 is mandatory in nature, the regulatory language for the SDVOSBC program is discretionary. Under FAR 19.1405, a CO "may" set aside acquisitions exceeding the micro-purchase threshold for SDVOSBCs when there is a reasonable expectation two or more SDVOSBCs will submit offers and award will be made at a fair market price, and under FAR 19.1406, a CO "may" award contracts to SDVOSBCs on a sole-source basis and at a fair market price only if one SDVOSBC can satisfy the requirement. Thus, the threshold issue here was whether a CO retains the discretion to proceed with an SDVOSBC set-aside even if the conditions for a HUBZone small business set-aside are present.

The Comptroller General sustained the protests, finding under the "unambiguous" language of the statutory and regulatory scheme, the CO's discretion under the SDVOSBC set-aside program does not supersede the mandatory nature of the HUBZone set-aside program. Therefore, the government was first required to consider whether a HUBZone set-aside was warranted before proceeding with the SDVOSBC sole-source order. Here, the contracting staff's sole reliance on recent procurement experience was an inadequate means of identifying potential HUBZone competitors. The CO acknowledged other small businesses were available to perform this type of work, and the protester demonstrated a search of state industry codes would have revealed another potential HUBZone competitor. The government was also required to consider adequately whether a HUBZone set-aside was required before issuing the solicitation, but it did not do so. The failure to consider whether the conditions requiring HUBZone set-asides were present in each procurement was unreasonable. With respect to the solicitation, the Comptroller General recommended the government undertake reasonable efforts to ascertain whether it will receive offers from at least two HUBZone concerns, and if necessary, reissue the solicitation. However, the sole-source awardee had completed all of the work under the order, so reimbursement of costs was the only recommendation in that protest. (International Program Group, Inc., 23 CGEN 112,686)

Regulatory News

Rule Implements Selected Reserve Evaluation Factors
The Department of Defense has amended the Defense Federal Acquisition Regulation Supplement by finalizing (70,020.245), without change, a proposed rule implementing Section 819 of the National Defense Authorization Act for Fiscal Year 2006, which authorizes DoD to use an evaluation factor that considers whether an offeror intends to perform a contract using employees or individual subcontractors who are members of the Selected Reserve. The rule requires offerors to submit documentation supporting any stated intent to use these types of employees or subcontractors. The rule adds new provisions to DFARS Part 215, Contracting by Negotiation, at DFARS 215.370 through DFARS 215.370-3 to implement these new requirements. The rule also creates corresponding solicitation and contract clauses at DFARS 252.215-7005 and DFARS 252.215-7006 to address the evaluation factor and the obligations of a contractor awarded a contract based on the evaluation factor. In addition, the rule adds a new provision to the DFARS companion resource, Procedures, Guidance, and Information, at PGI 215.370-2. The final rule carries an October 20, 2008, effective date, and its text appears at 70,016.492.

SBA Rules Address Women-Owned Small Business Assistance
A Small Business Administration final rule amends regulations governing small business contracting programs to set forth procedures that will govern the new Women-Owned Small Business Federal Contract Assistance Procedures, which were authorized by the Small Business Act. SBA had issued a proposed rule (70,425.308) to implement the WOSB assistance procedures authorized under Section 811 of the Small Business Reauthorization Act of 2000 (PL 106-554) and codified at Section 8(m) of the Small Business Act (15 USC 637(m)). The proposed rule generated a significant number of public comments, with many commentators requesting SBA to withdraw the rule. However, Congress enacted Section 8(m) to authorize creation of a targeted procurement mechanism for WOSBs and it charged SBA with the responsibility for establishing and implementing the governing standards and regulations for these procedures. The procedures in the final rule should help federal agencies achieve their WOSB participation goals under Section 15(g) of the Small Business Act (15 USC 644(g)).

For these reasons, SBA has not withdrawn the proposed rule, but instead has decided to move forward with this final rule based on the authority in Section 8(m). Accordingly, the rule authorizes contracting officers to restrict competition to eligible WOSBs for contracts not exceeding $3 million ($5 million for manufacturing) in those industries in which WOSBs are underrepresented or substantially underrepresented and in which the procuring agency has determined that the set-aside would satisfy constitutional requirements. The rule also sets forth the standards for determining the eligibility of a concern as a WOSB or economically disadvantaged WOSB and requires any firm receiving a contract under these procedures to certify its status as a "small business concern owned and controlled by women" as defined in Section 3(n) of the Small Business Act (15 USC 632(n)). In addition, the rule establishes standards for eligibility examinations and protest procedures, as well as the penalties that can be imposed for a concern's misrepresentation of its status as an EDWOSB or WOSB. Lastly, the rule contains conforming amendments to SBA's current procurement and appeal procedure regulations. Specifically, the final rule amends existing regulations at SBA 121.401, SBA 121.1001, SBA 121.1008, SBA 125.6, SBA 134.102, and SBA 134.515. The rule also adds a new Part 127, consisting of SBA 127.100 through SBA 127.700, and a new Subpart G to Part 134, consisting of SBA 134.701 through SBA 134.715. The final rule carries an October 31, 2008, effective date. For the text of the rule, see 70,425.335.

The final rule does not identify the industries in which WOSBs are underrepresented or substantially underrepresented in federal procurement because SBA is awaiting comments on a new proposed rule before concluding its eligibility determinations. This new proposed rule seeks comments on two data sets that are used to determine the representation of WOSBs in federal procurement in various industries: the Central Contractor Registration data set, and a non-public Survey of Business Owners data set from the Economic Census. Comments to the rule will be evaluated to determine which data set would provide the soundest basis for identifying industries in which WOSBs are underrepresented in federal procurement. Comments on the proposed rule are due by October 31, 2008. The text of the proposed rule appears at 70,425.336.

Interim Rule Changes SBA Certification Requirements for SDBs

A Small Business Administration interim rule changes the certification requirements for small disadvantaged businesses. Currently, only those firms that have applied to and have been certified as SDBs by SBA may certify themselves to be SDBs for federal prime contracts and subcontracts. This rule allows firms to self-represent their status for subcontracting purposes without first receiving any SDB certification. The rule shifts the responsibility of identifying firms as SDBs for federal prime contracts to those agencies that have authority and choose to use price evaluation adjustments for SDBs. The rule amends SBA 124.1001 to eliminate references to SBA performing SDB certifications, and revises SBA 124.1003 through SBA 124.1006 to set forth the procedures for how a firm becomes SDB-certified, to address misrepresentations of SDB status, to specify how long an SDB certification lasts, and to allow SBA to initiate a review of the SDB status of a firm claiming to be an SDB. The rule also makes technical changes by removing SBA 124.1007 through SBA 124.1016, and redesignating SBA 124.1017 through SBA 124.1024 as SBA 124.1007 through SBA 124.1014. Comments on this interim rule are due by November 3, 2008. For the text of the rule, which carries an October 3, 2008, effective date, see 70,425.338.

SBA Creates Small Business Energy Efficiency Program

A Small Business Administration direct final rule addresses the Small Business Energy Efficiency Program. New SBA 101.500 provides that SBA has created a government-wide program that builds on the Energy Star for Small Business Program to assist small business concerns in becoming more energy efficient, understanding the cost savings from improved energy efficiency, and identifying financing options for energy efficiency upgrades. The rule also provides that SBA will develop a strategy to educate, encourage, and assist small business concerns in adopting energy efficient building fixtures and equipment. SBA issued the rule to comply with a provision of the Energy Independence and Security Act of 2007 (15 USC 657h). The rule is effective December 1, 2008, without further action, unless SBA receives a significant adverse comment by November 17, 2008. If SBA receives significant adverse comments, it will withdraw the rule. For the text of this direct final rule, see 70,425.342.

Interim Final Rule Amends EAR Provisions on Encryption Items

The Bureau of Industry and Security has issued an interim final rule that amends the Export Administration Regulations to make the treatment of encryption items more consistent with the treatment of other items subject to the EAR, and to simplify and clarify regulations pertaining to encryption items. The rule revises EAR 732.2 (b) by adding the phrase "mass market encryption software with symmetric key length exceeding 64-bits classified under ECCN 5D992," to the scope of publicly available technology and software. The addition of this phrase achieves consistency with the scope of publicly available encryption software considered to be subject to the EAR under EAR 734.3(b)(3). The rule also adds a note to EAR 734.3(a)(4) to clarify that certain foreign-manufactured items are subject to the EAR when developed or produced from United States-origin encryption items exported pursuant to EAR 740.17(a) of License Exception ENC, and clarifies a reference to software in Supplement No. 1 to EAR Part 734. Also, the rule revises EAR 738.4(a)(1) to clarify that in some cases the "License Requirements" section of an Export Control Classification Number will refer to a specific section of the EAR to determine particular license requirements. The rule removes notification requirements for items classified under ECCNs 5A992, 5D992, and 5E992, and the corresponding references in EAR 738.4(a)(2)(ii)(B).

The rule revises several EAR license exceptions. The LVS exception in EAR 740.3 is revised to clarify that not only exports, but also reexports of encryption components or spare parts, are subject to the special restriction of EAR 740.3(d)(5). License Exception KMI (EAR 740.8 ) is removed, and conforming changes are made by revising EAR 746.3(c) and removing Supplement No. 4 to EAR Part 742. License Exception TSU (EAR 740.13) is revised to clarify that the term "mass market" as used in the provision is not a defined term in EAR Part 772. The rule makes extensive revisions to License Exception ENC (EAR 740.17), including increasing certain parameters to reflect advances in technology, and adding two new review and reporting requirement exclusion paragraphs for wireless "personal area network" items and "ancillary cryptography "items. Finally, the rule adds Bulgaria, Canada, Iceland, Romania, and Turkey to the list of countries that receive favorable treatment in Supplement No. 3 to EAR Part 740. A complete list of the EAR provisions affected by the rule appears in the regulation table below. For the text of the rule, effective October 3, 2008, see 72,750.152.

BIS Rule Revises EAR De Minimis Provisions

The Bureau of Industry and Security has issued an interim final rule that revises the Export Administration Regulations' de minimis provisions. The EAR de minimis provisions pertain to foreign-made items that incorporate controlled United States-origin items. The goal of the provisions is to promote U.S. export control objectives while limiting U.S. jurisdiction over non-U.S. products containing a de minimis percentage, by value, of sensitive U.S. components. To prevent the diversion of controlled U.S. items and foreign made items incorporating a significant amount of U.S.-origin controlled content, a foreign-made item that contains more than the de minimis amount of controlled U.S. origin content value is subject to the EAR licensing requirements. The de minimis rules were established to alleviate trade disputes concerning non-U.S. items that contain U.S.-origin components in proportionate amounts within certain thresholds. In response to consistent public expressions of concern over the complicated and cumbersome process necessary to determine the applicability of the de minimis rules, BIS has issued this interim final rule to facilitate compliance efforts by clarifying the de minimis provisions. The rule revises the de minimis calculation for foreign produced hardware that is bundled with U.S.-origin software, clarifies the definition of "incorporate" as it applies to the de minimis rules and to the medical statement of understanding, removes the requirement to submit a one-time report to BIS for foreign software that incorporates U.S.-origin software, and makes further revisions to reduce redundancies and harmonize EAR provisions. The purpose of the revision is to benefit U.S. businesses by reducing disincentives to purchase U.S. content, while enabling BIS to continue exercising appropriate jurisdiction over foreign-made items incorporating controlled U.S. content. A complete list of the EAR provisions affected by the rule appears in the regulation table below. Comments on the rule are due by December 1, 2008. For the text of the rule, which is effective October 1, 2008, see 72,750.151.

BIS Final Rule Implements CCL Review

The Bureau of Industry and Security has issued a final rule amending the Export Administration Regulations to reflect the second phase of the implementation of the results of a systematic review of the Commerce Control List (Supplement No. 1 to EAR Part 774). The amendments clarify existing controls, eliminate redundant or outdated controls, establish more focused and rationalized controls, and add additional controls for clarity and consistency with international regimes. The rule adds a new note to Category 1 of the CCL and amends the following Export Control Classification Numbers: 1C350, 1C351, 1C352, 1C353, 1C354, 1C360, 1E001, 1E002, 2B018, 2B119, 2B350, 2B351, 4A101, 4A980, 4A994, 4D993, 4E992, 5A991, 6A995, 7D001, 7E001, 7E002, 7E101, and 9E101. The rule also makes clarifying amendments to Supplement No. 7 to EAR Part 742 and EAR 744.21. For the text of the rule, effective October 6, 2008, see 72,750.153.

Rule Amends CCL to Conform with Wassenaar Arrangement

The Bureau of Industry and Security has published a final rule that amends the Export Administration Regulations to implement changes made to the Wassenaar Arrangement's List of Dual Use Goods and Technologies. The WA is an arrangement maintained by the United States and 33 other countries that establishes multilateral export controls for conventional arms and dual-use goods and technologies. The WA contributes to regional and international security and stability by promoting transparency and greater responsibility in transfers of these items, thus preventing destabilizing accumulations of them. To implement revisions to the WL that were agreed upon in the December 2007, WA plenary meeting, as well as revisions to WL provisions regarding solar cells that were agreed to in the December 2006, plenary meeting, this rule amends several provisions of the Commerce Control List (Supplement No. 1 to EAR Part 774), adds and amends definitions of terms in EAR 772.1, and amends Supplement No. 1 to EAR Part 740.11. The rule amends the following Export Control Classification Numbers in the CCL: 1A004, 1E001, 1E201, 2B001, 2B009, 2B002, 2B006, 2B007, 2B008, 3A001, 3A002, 3A229, 3A232, 3A991, 3B001, 3C002, 3C005, 3D001, 3E001, 5A002, 6A001, 6A005, 6A995, 7A002, 7A003, 7A008, 9A012, 9E003. The rule also adds the following new ECCNs: 1A006, 1A007, 3C006. For the text of the rule, effective October 14, 2008, see 72,750.154.

Major Contract Awards

MTU Detroit Diesel, Inc. - $720 Million. MTU Detroit Diesel, Inc., Detroit, Mich., is being awarded a maximum $720,000,000 indefinite quantity type, sole source contract for diesel engine parts. Other location of performance is Pennsylvania. Using services are Army, Navy, Air Force and Marine Corps. Contract funds will not expire at the end of the current fiscal year. This is a five year contract with a one-year base and four option years. There were originally four proposals solicited with three responses. The date of performance completion is Sept. 30, 2009. The contracting activity is Defense Supply Center Columbus, Columbus, Ohio (SPM7LX-08-D-9028). Government Contracts Reports 1979, October 8, 2008.

Raytheon Co. - $679 Million. Raytheon Co., of Marlborough, Mass., is being awarded an indefinite delivery indefinite quantity contract for a maximum of $679 million for the Digital Airport Surveillance Radar System, which is a joint Department of Defense and Federal Aviation Administration activity to replace existing radar facilities at military and civilian airfields located worldwide. First fielded nearly 30 years ago, the current analog radar systems are nearly at the end of their life cycle, leading to occasional and sporadic loss of airport surveillance radar coverage. The contract is being awarded for approximately 116 fully operational 'turn-key" ASR-11 systems, consisting of site activation activities including: engineering and technical support services; site surveys; site preparation; dismantling of existing radars; and all activities related to the production, transportation, installation and check-out of the new radar systems. Spare parts and technical assistance is also included in the contract. At this time no funds have been obligated. 853d ELSG/PK, Hanscom AFB, Mass., is the contracting activity (FA8730-08-D-0001). Government Contracts Reports 1979, October 8, 2008.

General Electric - $641 Million. General Electric, Lynn, Mass., is being awarded a $641,000,000 five year Performance Based Logistics (PBL) requirements contract for repair, replacement, and program support for the F404 engine used on the F/A-18 A-D aircraft. Work will be performed at Lynn, Mass., and work is expected to be completed by Dec. 2012. Contract funds will not expire before the end of the current fiscal year. This effort combines efforts with the U.S. Navy (97 percent) and the Government of Switzerland, (1 percent); Finland, (1 percent) and Kuwait, (w percent) under the Foreign Military Sales Program. This contract was not competitively procured. The Naval Inventory Control Point is the contracting activity. Government Contracts Reports 1979, October 8, 2008.

Boeing - $523 Million. The Air Force is modifying a firm fixed price contract with the Boeing Co., of Long Beach, Calif., not to exceed $523,419,558. This contract action will provide for the total system support for the C-17 weapon system to include program management, sustaining logistics, material and equipment management, sustaining engineering, depot level aircraft maintenance, engine management, long term sustainment planning, Air Logistics Center partnering support, depot activation, and support of USAF and FMS operators of the C-17. At this time $256,475,584 has been obligated. 330th Aircraft Sustainment Wing, Contracting Flight, 730th ACSG/GFKAA, Robins AFB, Ga., is the contracting activity (FA8614-04-C-2004-P00500). Government Contracts Reports 1979, October 8, 2008.

BAE Systems - $442 Million. BAE Systems, Tactical Vehicle Systems Limited Partnership, Seal, Texas was awarded on Sept. 25, 2008, a $442,533,748 firm fixed price contract to definitize the Undefinitized Contract Action (UCA) for the procurement of 10,000 family of Medium Tactical Vehicle, program support and Federal Retail Excise Tax (FRET). Work will be performed in Sealy, Texas, with an estimated completion date of Dec. 31, 2011. One bid was solicited and one bid was received. U.S. Army TACOM, Warren, Mich., is the contracting activity (W56HZV-08-C-0460). Government Contracts Reports 1979, October 8, 2008.

American Ordinances LLC - $427 Million. American Ordnances LLC, St. Pittsburg, Kan., has three contract were awarded Oct. 2, 2008, a $427,782,611 firm/fixed-price contract for the operations Iowa and Milan Army Ammunition Plants. Work will be performed in Iowa Army Ammunition, Middleton, Iowa, Milan Army Ammunition Plant, Milan, Tenn., with estimated and completion date of Dec. 31, 2018. Bids solicited were via the Web and two bids were received. Army Sustainment Command, Rock Island, Ill., is the contracting activities (W52P1J08-E-003, W52P1J08-D-0074, and W52P108-G-004). Government Contracts Reports 1980, October 15, 2008.