Government Contracts Update August 2007

September 2007

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 aaron.broaddus@wolterskluwer.com.

Hot Topic

OMB Nominee Stresses Need For Contractor Oversight
Federal contractor oversight is "inherently a government role" and should be done by federal employees for activities that are "core to the agency's mission," stated Jim Nussle at a July 25 Senate committee hearing on his nomination to be the director of the Office of Management and Budget. Nussle spelled out his view of the contractor oversight issue in response to a question by Sen. George V. Voinovich (R-Ohio), a member of the Homeland Security and Governmental Affairs Committee.

Voinovich raised concerns about current rules allowing federal contractors to oversee other federal contractors. This arrangement usually involves a teaming agreement, or when contractors are assigned different tasks, with one the "lead" contractor. The regulatory basis addressing lead company contracting is found at FAR 17.401 - FAR 17.403, and small business contracting requirements are contained in FAR Part 19.

As a general rule, "federal employees trained and qualified to perform contract administration should be overseeing contractors," Nussle noted in a pre-hearing questionnaire. The OMB nominee, if confirmed by the Senate, promised to work with Congress to make sure these rules are clear.

Committee Chairman Joseph Liebermann (ID-Conn), in an opening statement, noted that federal acquisition of goods and services is "another troubling area." Government spending "exploded" to more than $415 billion in contracts in 2006 yet the trained workforce overseeing contracts has shrunk, Liebermann observed. "At the highest level of OMB, we need greater leadership to replenish the acquisition workforce, increase competition in contracting and ensure that contractors do not perform inherently governmental work," Liebermann stated.

Nussle, in the questionnaire released in conjunction with the nomination hearing, was asked about an Office of Federal Procurement Policy memorandum issued to Chief Acquisition Officers in June. The memo stated that the government's acquisition workforce is not taking full advantage of tools to make effective and efficient use of competition. According to the memo, the OFPP found only 64 percent of dollars spent on contracts exceeding $1 billion was competed.

Nussle responded the OFPP memorandum identifies a number of regulatory changes to strengthen the use of competition and increase transparency in sole-source contracting. He said he would support improvements to encourage a "more competitive contracting environment."

Nussle also was queried about interagency contracting in the wake of numerous audits and investigations finding significant waste and mismanagement in this process. Nussle said he would ask the OFPP administrator to "review and strengthen, as necessary," interagency contracting polices and practices, "including competition requirements when conducting acquisitions through another agency's contracts."

Senate members widely praised Nussle's extensive background in budget matters. During his eight terms in office, Nussle had served as Chairman of the House Budget Committee and a member of the Ways and Means Committee. He also earned a reputation as a consensus builder who could work successfully with all political parties. By Paula Cruickshank, CCH News Staff

Legal News

Warranty, Upgrade Obligations Survived Convenience Termination
Reversing the Court of Federal Claims, the Court of Appeals for the Federal Circuit held the convenience termination of a contract to provide computers did not extinguish the contractor's obligation to provide warranty and software upgrade services, because the contract incorporated the cost of warranty and update services into the cost of the equipment, and FAR 49.603-1 provides warranty rights survive contract termination. The CFC held the section 8(a) contractor was no longer required to provide warranty and upgrade services when, upon the contractor's acquisition by a non-section 8(a) entity, the government was required by the Small Business Act to terminate the contract for convenience (50 CCF ¶78,544). The government appealed, arguing the mandatory termination requirement of 15 USC 637(a)(21)(A) applied only to work under the contract, not warranties associated with goods.

The contract explicitly warranted parts and labor for three to five years and software upgrades for two years at no extra cost to the government. Therefore, the Federal Circuit concluded, the terms of the contract indicated the government had already paid for the contested services. Other documents confirmed the purchased equipment included express extended warranties and other bundled support services. In addition, the termination notice specified the termination would not affect the parties' warranty and software upgrade rights and liabilities. This was consistent with FAR 49.603-1(b)(7)(v), which reserves the parties' contract rights and liabilities "concerning defects, guarantees, or warranties relating to any articles or component parts furnished to the [g]overnment by the [c]ontractor" following the complete termination of fixed-price contracts. International Data Products Corp. v. U.S., CA-FC, 51 CCF ¶78,776.

CBCA Reaffirms Inability to Impose Monetary Sanctions
The Civilian Board of Contract Appeals denied a contractor's motion for costs and attorney's fees incurred in a discovery dispute because there was no clear and specific authority authorizing boards to impose monetary sanctions against the government for discovery abuses. After a protracted discovery dispute in which the government resisted turning over documents or a privilege log, the contractor moved to recover costs and attorney's fees. According to the contractor, the board was authorized to impose the sanction because Congress waived the government's sovereign immunity in Section 8(d) of the Contract Disputes Act (41 USC 607(d)), which provides a board may "grant any relief that would be available to a litigant asserting a contract claim in the United States Court of Federal Claims," and the government waived its sovereign immunity for costs and attorney's fees in cases before the Court of Federal Claims.

However, in Fidelity Construction Co. v. U.S. (30 CCF ¶70,827), the Court of Appeals for the Federal Circuit explicitly held Section 8(d)'s "any relief" language did not grant a board the power to award attorney's fees against the government under the Equal Access to Justice Act because there was no specific statutory language authorizing fee awards. Although Fidelity dealt with the scope of the EAJA, and its discussion of Section 8(d) was not the primary focus of the decision, it "spread a wide net as to the need for specific and clear statutory language in order to waive sovereign immunity." Further, although Congress legislatively overruled Fidelity in 1985 by amending the EAJA to include board proceedings, this legislative action did not mean that Fidelity was wrongly decided. Rather, "[t]he general legal standard of requiring an express delegation, rather than relying on implication and inference, remains good law and the benchmark [the board] must follow." Numerous other board decisions issued after Fidelity have also ruled boards do not have jurisdiction to issue monetary sanctions for discovery abuses. If the contractor were ultimately to prevail and meet the criteria for an EAJA award, the hours associated with discovery might be reimbursable as part of a final fee award. Mountain Valley Lumber, Inc. v. Dept. of Agriculture, CBCA, 07-2 BCA ¶33,611.

Repriced Contract Excluded from CAS Cost Impact
A contract that was repriced and rephased after the contractor implemented changed accounting practices was not required to be included in the cost impact analysis of the changed practices and was not subject to a price adjustment, according to the Armed Services Board of Contract Appeals, because it was not an "affected contract." The dispute involved a cost-plus-award-fee contract for engineering and manufacturing development of the F-22 fighter aircraft. The parties negotiated a repricing and rephasing of the contract to accommodate an expected funding shortfall. At the same time, the government analyzed the contractor's cost accounting practices and recommended extensive changes. The contractor reclassified certain personnel costs and, as required, reflected the changed accounting practices in an amended Cost Accounting Standards disclosure statement. Although the government considered the changed accounting practices to be adequately described, CAS-compliant, and fully integrated and factored into the rephased F-22 contract price, a Defense Contract Audit Agency audit report concluded the net result of the changes was to increase the government's total costs. The government contended the impact of the contractor's voluntary changes in accounting practices should have been included in the contractor's cost impact study because the F-22 contract was an "affected contract," and the government was entitled to a commensurate price adjustment. The contractor countered the government paid no increased costs as a result of the changed practices because the contract was completely repriced during the rephase negotiations.

The board of contract appeals looked to the definition of "affected contract" in FAR 30.001 and FAR 52.230-6 and concluded these regulations serve to protect the government from payment of increased costs not contemplated by the parties when they negotiated the contract price. In situations where a changed accounting practice is disclosed and used in cost estimation and negotiation of a contract price, the accumulation and reporting of costs in accordance with the changed practice does not violate the CAS consistency requirements. Here, the parties used the changed practices to reprice the contract during negotiations. The repricing effort fully incorporated the impact of the changed practices in the contract price as rephased. The record showed the parties attempted to determine accurately the cost of the entire program and "rebaseline" the contract to insure compliance with budgetary restrictions. Despite the government's assertion the negotiations were merely an "exercise in estimating," the parties conducted extensive cost-specific negotiations regarding the increased number of hours, personnel and associated costs that would be charged directly as a consequence of the changed practices. Thus, the F-22 contract was not an affected CAS-covered contract and was not required to be included in the CIS analysis of the cost shifts resulting from the new accounting practices. Lockheed Martin Corp., ASBCA, 07-2 ¶33,614.

Change Order Was Cardinal Change Excusing Performance
A mail delivery contractor's nonperformance was excused because the government's issuance of a unilateral change order adding boxes to the contractor's route constituted a cardinal change. After the contractor refused to service the additional boxes and discontinued all contract performance, the government terminated the contract for default. The government was in breach of contract because its change order violated the contract's Changes clause, which allowed additional work exceeding $2500 to be added only by mutual agreement of the parties. Nevertheless, the government maintained the contractor was still under a duty to continue performance and present any complaints related to performance in accordance with the contract's grievance procedures. The government also argued a cardinal change did not occur because both the additional work and compensation were less than 10% of the original contract amount.
The court found none of the other contract provisions cited by the government supported its interpretation and the change order was beyond the scope of the Changes clause. A cardinal change is a substantial deviation from the original scope of work that changes the nature of the bargain between the parties. Here, the most appropriate way to determine the existence of a cardinal change was to inquire whether the change order complied with the express terms of the Changes clause. When the government attempted to make a change valued at more than $2500 without the contractor's agreement, it violated the Changes clause. Although a 10% change is not necessarily a substantial contract alteration, the government created the $2500 threshold and it was obligated to act in accordance with that standard. The modification was a cardinal change to the contract that was serious enough to justify the contractor's refusal to perform the disputed work and discontinue contract performance altogether. Keeter Trading Co., Inc. v. U.S., FedCl, 51 CCF ¶78,787.

Legislative and Regulatory Activity

FAR Councils Issue FAC 2005-19 with Thirteen Rules
The Civilian Agency Acquisition and Defense Acquisition Regulations Councils have published Federal Acquisition Circular 2005-19. The Circular contains four interim and nine final rules amending the Federal Acquisition Regulation. In order of appearance, the rules address: Item I, Reporting of Purchases from Overseas Sources (FAR Case 2005-034); Item II, Changes to Lobbying Restrictions (FAR Case 2005-035); Item III, Online Representations and Certifications Application Archiving Capability (FAR Case 2005-025); Item IV, Requirement to Purchase Approved Authentication Products and Services (FAR Case 2005-017); Item V, Combating Trafficking in Persons (FAR Case 2005-012, Interim); Item VI, Emergency Acquisitions (FAR Case 2005-038); Item VII, Small Business Credit for Alaska Native Corporations and Indian Tribes (FAR Case 2004-017); Item VIII, New Designated Countries --Bulgaria, Dominican Republic, and Romania (FAR Case 2006-028 Interim); Item IX, Online Representations and Certifications Application Review (FAR Case 2006-025 Interim); Item X, Free Trade Agreements --El Salvador, Honduras, and Nicaragua (FAR Case 2006-006); Item XI, Free Trade Agreements --Bahrain and Guatemala (FAR Case 2006-017); Item XII, Accepting and Dispensing of $1 Coin (FAR Case 2006-027 Interim); and Item XIII, Technical Amendments. Unless indicated below, all rules carry an August 17, 2007, effective date. Comments on the interim rules, identified by their respective FAR case numbers, are due by October 16, 2007. A complete list of all FAR sections impacted by this FAC appears in the table below. For the text of FAC 2005-19, see ¶70,002.91.

A final rule (FAR Case 2005-035) makes the FAR consistent with the Lobbying Disclosure Act of 1995 and Office of Management and Budget Interim Final Guidance (see proposed rule at ¶70,006.197). The final rule introduces the concept of "lobbying contact" and incorporates the designation of registrants under the Lobbying Act of 1995. A further change specifies the term "appropriated funds" does not include profit or fee from a covered federal action and to the extent the contractor can demonstrate the contractor has sufficient monies, other than federal appropriated funds, the government will assume these other monies were spent for influencing activities that would be unallowable if paid for with federal appropriated funds. In addition, the rule formalizes in the FAR the changes that were previously incorporated in the OMB Standard Form LLL, Disclosure of Lobbying Activities, and removes 31 USC 1352, Limitations on Payment to Influence Certain Federal Transactions, from the list of laws that are inapplicable to subcontracts for the acquisition of commercial items. Also, the rule improves the clarity of the regulation through improved use of plain language and compliance with FAR drafting conventions. The final rule revises FAR Subpart 3.8, Limitation of the Payment of Funds to Influence Federal Transactions (FAR 3.800-FAR 3.808), and the contract clauses at FAR 52.203-11, FAR 52.203-12, and FAR 52.212-3. A technical change is made to FAR 12.504. The rule goes into effect September 17, 2007.

FAC 2005-19 contains a rule (FAR Case 2005-034) finalizing with changes an interim rule (see FAC 2005-13) that amended FAR Part 25 and related contract clauses in FAR Part 52. The interim rule implemented Section 837 of Division A of the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006 (PL 109-115). Section 837 requires the head of each federal agency to submit a report to Congress relating to acquisitions of articles, materials, or supplies manufactured outside the United States. The rule added a new provision at FAR 25.004 and a corresponding contract clause at FAR 52.225-18 to request from offerors the necessary data regarding place of manufacture. The amendments required an offeror to indicate whether the place of manufacture of the end products it expects to provide in response to the solicitation was predominantly inside or outside the U.S. Whenever the place of manufacture for a contract is coded outside the U.S., the contracting officer must provide the predominant reason for buying items manufactured outside of the country. The interim rule also revised FAR 25.001, FAR 25.1101, and FAR 52.212-3. The final rule amends FAR 25.004 to implement the reporting requirements of 41 USC 10a and makes a technical change at FAR 1.106 relating to the Paperwork Reduction Act of 1980.

A final rule (FAR Case 2005-017) amends the FAR to address the acquisition of products and services for personal identity verification that comply with requirements in Homeland Security Presidential Directive-12, "Policy for a Common Identification Standard for Federal Employees and Contractors," and Federal Information Processing Standards Publication 201, "Personal Identity Verification of Federal Employees and Contractors" (see proposed rule ¶70,006.195). The primary objectives of HSPD-12 are to establish a process to enhance security, increase government efficiency, reduce identity fraud, and protect personal privacy by establishing a mandatory, government-wide standard for secure and reliable forms of identification issued by the government to its employees and contractors. In accordance with HSPD-12, the Secretary of Commerce issued FIPS PUB 201 to establish a government-wide standard for secure and reliable forms of identification for federal and contractor employees. This final rule revises FAR Subpart 4.13 (FAR 4.1300-FAR 4.1303) to add two new sections on the scope of the subpart and the acquisition of approved products and services. Existing sections in the subpart are revised and renumbered. The rule also makes a technical change to the clause at FAR 52.204-9. This rule has a September 17, 2007, effective date.

A final rule (FAR Case 2005-038) adopts with changes an interim rule (see FAC 2005-11) that revised the FAR to add a new Part 18, Emergency Acquisitions. FAR Part 18 provides a single reference to the acquisition flexibilities already available in the FAR to facilitate and expedite acquisitions of supplies and services during all types of emergencies. For clarity and ease of use, the flexibilities are divided into two main groups. The first group, titled "Available Acquisition Flexibilities" (FAR 18.101 through FAR 18.124), identifies the flexibilities that may be used anytime and do not require an emergency declaration. The second group, titled "Emergency Acquisition Flexibilities" (FAR 18.201 through FAR 18.204), identifies the flexibilities that may be used only after an appropriate official has made an emergency declaration or designation. The second group is further divided into three subgroups: contingency operation; defense or recovery from certain attacks; and incidents of national significance, emergency declaration, or major disaster declarations. The final rule amends FAR 18.000 to authorize additional flexibilities in an agency supplement to the FAR. Also, the final rule redesignates FAR 18.106 through FAR 18.116 as FAR 18.107 through FAR 18.117, and FAR 18.117 through FAR 18.124 as FAR 18.119 through FAR 18.126. As part of this action, the final rule adds two new sections, at FAR 18.106, regarding acquisitions from Federal Prison Industries, Inc., and at FAR 18.118, regarding trade agreements. Additional changes are made to FAR 18.203 and FAR 18.204. The rule goes into effect September 17, 2007.

A final rule (FAR Case 2005-025) adopts without change an interim rule (see FAC 2005-13) amending Parts 4, 12, 14, and 15 of the Federal Acquisition Regulation. The interim rule addressed record retention policy where the online application is used to submit an offeror's representations and certifications. Under FAR Subpart 4.12, prospective contractors must submit annual representations and certifications via the Online Representations and Certifications Application. Data in ORCA is archived and electronically retrievable. Therefore, when a prospective contractor has completed representations and certifications electronically via ORCA, the contracting officer may reference the date of ORCA verification in the associated government contract file rather than including a paper copy of the electronically-submitted representations and certifications in the file. Such a reference satisfies the contract file documentation requirements of FAR 4.803(a)(11). However, if an offeror identifies changes to ORCA data pursuant to the FAR provisions at FAR 52.204-8(c) or FAR 52.212-3(k), the CO must include a copy of the changes in the contract file. The regulations impacted by the rule are: FAR 4.803, FAR 4.1201, FAR 12.301, FAR 14.201-1, FAR 15.102, and FAR 15.204-1.

An interim rule (FAR Case 2006-025) amends the FAR to revise the prescription for employing clauses for the use of Environmental Protection Agency-designated products and toxic chemical release reporting. FAR 4.1104 mandates the use of the clause at FAR 52.204-7, "Central Contractor Registration," which requires the contractor to register in CCR. FAR 4.1202 lists 26 representations and certifications that are included in the Online Representations and Certifications Application database and are therefore not to be included in solicitations that include FAR 52.204-7. Of the 26 representations and certifications, the prescriptions for use of two associated clauses, FAR 52.223-9, "Estimate of Percentage of Recovered Material Content for EPA-Designated Products," and FAR 52.223-14, "Toxic Chemical Release Reporting," were dependent on the associated provisions at FAR 52.223-4 and FAR 52.223-13 being included in the solicitation. In instances where CCR is required, the annual certification in ORCA applies, and therefore neither provision would be included in the solicitation. Therefore, when applicable to the resultant contract, the government may fail to include the associated clause because the provision was not included in the solicitation. Failure to include the clause would preclude receipt of information or certification required by statute. The interim rule amends FAR 23.406 and FAR 23.906, both titled "Solicitation provision and contract clause," to revise the prescriptions for inserting FAR 52.223-9 and FAR 52.223-14 in contracts to provide for use under the same circumstances as the prescription for use of their associated provisions. These revisions allow the proper receipt of certification information and ensure compliance with the statutory requirements of 40 CFR Part 247 and 42 USC 11023.

A FAC 2005-19 interim rule (FAR Case 2005-012) amends the FAR to implement 22 USC 7104(g), which mandates that contracts include a provision authorizing the government to terminate the contract if the contractor or any subcontractor engages in trafficking in persons. A prior interim rule, published with FAC 2005-09, implemented this statute by adding FAR Subpart 22.17 with an associated clause at FAR 52.222-50 to address combating trafficking in persons. That prior rule applied to all contracts for services, other than commercial service contracts under FAR Part 12. The rule prohibited the contractor and contractor employees from engaging in or supporting severe forms of trafficking in persons, procurement of commercial sex acts, or use of forced labor during the performance of the contract. In revising the prior interim rule, the FAR Councils noted the statutory language at 22 USC 7104(g) contained no exceptions or limitations with regard to its application to federal contracts. Therefore, while the first rule applied only to contracts for services (other than commercial), this revised interim rule applies to all contracts, including contracts for supplies, and all contracts for commercial items as defined at FAR 2.101. Although the Federal Acquisition Streamlining Act governs and limits the applicability of laws to commercial items, it also provides if a provision of law contains criminal or civil penalties, or if the FAR Councils determine it is not in the best interest of the government to exempt commercial item contracts, then the provision of law will apply to contracts for commercial items. Section 112 of the Trafficking Victims Protection Act of 2000 amended 18 USC Part 1 to provide for civil and criminal penalties for severe forms of trafficking in persons and use of forced labor. Therefore, consistent with FASA, the FAR Councils have determined the statutory requirements prohibiting these activities apply to contracts for commercial items. To accurately reflect the statutory language, the revised interim rule provides for contract termination for engaging in severe forms of trafficking in persons, procurement of a commercial sex act, or use of forced labor in the performance of the contract. The requirements for the contractor to establish policies and procedures and develop an awareness program have been replaced with the requirement to notify employees of the government policy and actions that will be taken against them for violations. Additionally, the requirement to obtain written agreement from employees has been deleted. This interim rule revises the following provisions: FAR 12.503, FAR 22.1700-FAR 22.1705, FAR 52.212-5, FAR 52.213-4, and FAR 52.222-50.

An interim rule (FAR Case 2006-028) amends the FAR to implement the Dominican Republic-Central America-United States Free Trade Agreement with respect to the Dominican Republic. This trade agreement waives the applicability of the Buy American Act for some foreign supplies and construction materials from the Dominican Republic and specifies procurement procedures designed to ensure fairness in the acquisition of supplies and services. Accordingly, this interim rule adds the Dominican Republic to the definition of "Free Trade Agreement country" and deletes the Dominican Republic from the definition of "Caribbean Basin country" because, in accordance with Section 201(a)(3) of PL 109-53, when the CAFTA-DR agreement enters into force with respect to a country, that country is no longer designated as a beneficiary country for purposes of the Caribbean Basin Economic Recovery Act. The Dominican Republic has the same thresholds as the other CAFTA-DR countries ($64,786 for supply and service contracts, $7,407,000 for construction contracts). The rule also adds Bulgaria and Romania to the list of World Trade Organization Government Procurement Agreement countries. This interim rule amends the following provisions: FAR 22.1503, FAR 25.003, FAR 25.402, FAR 52.212-3, FAR 52.212-5, FAR 52.222-19, FAR 52.225-3-FAR 52.225-5, FAR 52.225-11, and FAR 52.225-12.

A final rule (FAR Case 2006-006) adopts without change an interim rule (see FAC 2005-10) that amended the FAR to allow contracting officers to purchase the goods and services of El Salvador, Honduras, and Nicaragua without application of the Buy American Act if the acquisition is subject to the FTAs. The U.S. Trade Representative negotiated the Dominican Republic-Central America-United States Free Trade Agreement with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. However, the agreements did not all take effect at the same time. The agreements with El Salvador, Honduras, and Nicaragua joined the North American Free Trade Agreement and the Australia, Chile, Morocco, and Singapore Free Trade Agreements, which were already in the FAR. The threshold for applicability of the Central America-United States Free Trade Agreement is $64,786 for supplies and services (the same as other FTAs to date except Morocco and Canada) and $7,407,000 for construction (the same as all other FTAs to date except NAFTA). This rule amends FAR 25.003, FAR 25.400 through FAR 25.402, and the clauses at FAR 52.212-3, FAR 52.212-5, FAR 52.225-3 through FAR 52.225-5, FAR 52.225-11, and FAR 52.225-12.

Another final rule (FAR Case 2006-017) also adopts without change an interim rule (see FAC 2005-14) amending the FAR to allow contracting officers to purchase the goods and services of Guatemala and Bahrain without application of the Buy American Act if the acquisition is subject to the FTAs. These trade agreements with Guatemala and Bahrain join the North American Free Trade Agreement, the Australia, Chile, Morocco, and Singapore Free Trade Agreements, and similar agreements with El Salvador, Honduras, and Nicaragua, which are already in the FAR. The threshold for applicability is $64,786 for supplies and services (the same as other FTAs to date except Morocco and Canada) and $7,407,000 for construction (the same as all other FTAs except NAFTA). The threshold for applicability of the Bahrain FTA is $193,000 (the same as the Morocco) and $8,422,165 for construction (the same as NAFTA). The rule amends the following regulations and contract clauses: FAR 25.003, FAR 25.400, FAR 25.401, FAR 25.402, FAR 25.405, FAR 52.212-3, FAR 52.212-5, FAR 52.225-3-FAR 52.225-5, FAR 52.225-11, and FAR 52.225-12.

A final rule (FAR Case 2004-017) amends the FAR to implement Section 702 of the Emergency Supplemental Act, 2002, as amended by Section 3003 of the 2002 Supplemental Appropriations Act for Further Recovery from and Response to Terrorist Attacks on the United States (see proposed rule at ¶70,006.179). The law permits subcontracts awarded to Alaska Native Corporations and Indian tribes to be counted towards a contractor's goals for subcontracting with small business and small disadvantaged business concerns. The final rule amends small business program provisions at FAR 19.701, FAR 19.703 and FAR 19.704, the clauses at FAR 52.212-5 and FAR 52.219-9, and the forms at FAR 53.219, FAR 53.301-294, and FAR 53.301-295. The rule goes into effect September 17, 2007.

An interim rule (FAR Case 2007-027) amends the FAR to implement the Presidential $1 Coin Act of 2005 (PL 109-145). The Act requires the Secretary of the Treasury to mint and issue annually four new $1 coins bearing the likenesses of the U.S. Presidents in the order of their service and to continue to mint and issue "Sacagawea-design" coins for circulation. To promote circulation of the coins, the statute also requires agencies to take action so that, by January 1, 2008, entities that operate any business, including vending machines, on any premises owned by or under the control of the government, are capable of accepting and dispensing $1 coins and display notices of this capability on the business premises. The rule adds new provisions at FAR 37.116, FAR 37.116-1, and FAR 37.116-2, and a new contract clause at FAR 52.237-11. The rule makes a corresponding technical change to FAR 52.212-5.

Item XII of FAC 2005-19 implements a technical amendments final rule. The rule makes editorial changes at FAR 31.201-5, FAR 32.006-1, FAR 32.006-2, FAR 52.212-5, FAR 52.232-16, and FAR 52.245-1. Also, a Small Entity Compliance Guide identifying two rules with a Regulatory Flexibility Analysis accompanies FAC 2005-19.

Final Rule Implements Contractor Affirmative Action Requirements
The Office of Federal Contract Compliance Programs has published a final rule promulgating a new set of regulations to implement amendments to the affirmative action provisions of the Vietnam-Era Veterans' Readjustment Assistance Act of 1974 that were made by the Jobs for Veterans Act. The JVA raised the threshold dollar amount of government contracts subject to VEVRAA affirmative action requirements from $25,000 to $100,000. The Act also eliminated Vietnam-era veterans from the categories of veterans covered under VEVRAA, and added a new category for veterans who participated on active duty in a military operation for which an armed forces service medal was awarded pursuant to Executive Order 12985. Additionally, the JVA expanded the coverage of veterans with disabilities to include all veterans with service-connected disabilities, and expanded the coverage of "recently separated veterans" from one year after discharge or release from active duty to three years. The JVA also modified the mandatory job listing requirement for covered contractors to obligate contractors to list all employment openings with the "appropriate employment service delivery system," a term defined by the Act. New regulations implementing the JVA amendments are codified in a new 41 CFR Part 60 --300. The new regulations only apply to government contracts entered into or modified on or after December 1, 2003. The existing VEVRAA regulations found in 41 CFR Parts 60 through 250 will continue to apply to contracts entered into before December 1, 2003. For the text of this final rule, effective September 7, 2007, see 72 FR 44393.

BIS Makes Extensive Corrections to EAR
The Bureau of Industry and Security has issued a final rule amending the Export Administration Regulations to make technical corrections to several EAR provisions. The rule corrects citations, removes an endnote to the Entity List, reinserts the grace period provision for support documents, clarifies when an Automated Export System or Shipper's Export Declaration record must be filed, adds omitted information to certain Export Control Classification Numbers, removes references to the International Munitions List, and removes or edits references to ECCNs that have either changed or do not exist. For the text of the final rule, effective August 6, 2007, see ¶72,750.125.

The rule corrects various citations throughout the EAR. Inaccurate citations to the EAR Part 736 General Prohibitions are corrected in the note to EAR 740.12(a), paragraphs (f) and (i) in Supplement No. 2 to EAR Part 748, and EAR 752.6(c). In EAR 762.6(b), an erroneous reference to EAR 765.5(c)(4)(ii) for recordkeeping related to voluntary disclosures is replaced with the correct citation, EAR 764.5(c)(4)(ii). Lastly, a correction is made to the definition for "Hold Without Action" in EAR 772.1 to replace an erroneous citation to EAR 750.4(c) with the correct citation, EAR 750.4(b).

Corrections are also made to several ECCNs in the Commerce Control List (Supplement No. 1 to EAR Part 774). The rule adds a License Exceptions section and List of Items Controlled section to ECCN 0A987. The rule also adds "reasons for control" acronyms to ECCNs 1C239 and 1C240, and expands the "Related Controls" paragraph of ECCN 1C239 to refer readers to ECCNs 1C018 and 1C992. The rule amends EAR 740.2(a)(7) by removing references to ECCNs 6D104 and 6E102, which do not currently exist in the CCL. Similarly, the rule removes a reference to the nonexistent ECCN 6E102 from ECCN 6D001. Furthermore, the rule amends EAR 740.16(i) by removing a reference to ECCN 5A991.f and replacing it with ECCN 5A991.g. The purpose of this amendment is to make the requirements concerning reexports to Sudan under License Exception APR consistent with the list of items allowed for reexport to Sudan under EAR 742.10.

The rule also removes an irrelevant endnote from the end of Supplement No. 4 to EAR Part 744, reinserts paragraph (a) in EAR 748.12, which was inadvertently removed by a prior rule, and clarifies language in EAR 758.1(b)(2). Finally, in accordance with the replacement of the Coordinating Committee on Multilateral Export Controls with the Wassenaar Arrangement on Export Controls, this rule removes the phrase "International Munitions List" and replaces it with "Wassenaar Arrangement Munitions List" in EAR 738.2(d)(1), EAR 744.17(d), EAR 744.21(f), EAR 750.4(b)(6)(ii)(E), and in the headings of ECCNs 1B018, 2B018, and 8A018.

SBA Proposal Changes Method for Calculating Size Status
A proposed rule would change the manner in which the Small Business Administration calculates a concern's number of employees for determining small business size status. The proposed revision to SBA 121.106 would alter the period used for calculating average number of employees to an average over the last three completed calendar years. Calculation of size would coincide with both the calendar year submission of Internal Revenue Service Form W-3, "Transmittal of Wage and Tax Statement," and the required annual size updates for the Central Contractor Registration and On-line Certifications and Representations databases. The current method uses a rolling average over the preceding 12 months. According to the SBA, this proposal simplifies the calculation of the average number of employees, reduces the burden on small businesses, and better defines the size of a small business where number of employees is the measure for the size standard. Comments identified by RIN 3245-AF60 are due September 25, 2007. For the text of the proposed rule, see ¶70,425.294.

Major Contract Aawards

Lockheed Martin - $5 Billion. Lockheed Martin Corp., Fort Worth, TX, is being awarded a firm-fixed-price, firm-fixed-price w/economic price adjustment and cost-plus-fixed fee contract modification for $5,049,743,121. This modification definitizes the F-22 multi-year aircraft advanced buy, Economic Ordering Quantity and Full Rate Production contract (sixty aircraft, Lots 7, 8 and 9). At this time, $332,519.681 has been obligated. This work will be complete June 2012. For questions please call (937) 904-5340. Headquarters Aeronautical Systems Center, Wright-Patterson Air Force Base, OH, is the contracting activity (FA8611-06-C-2899/no modification number at this time). Government Contracts Report Letter No. 1920, August 8, 2007.

Lockheed Martin - $2.4 Billion. Lockheed Martin Corp., Lockheed Martin Aeronautics Co., Fort Worth, TX, is being awarded an estimated $2,440,000,000 advance acquisition contract for long lead components, parts, and materials associated with the Lot 2 Low Rate Initial Production (LRIP II) of six F-35 Joint Strike Fighter Conventional Take-Off and Landing (CTOL) for the U.S. Air Force and six Short Take-off and Vertical Landing Air Systems for the U.S. Marine Corp. In addition, the contract provides for associated ancillary mission equipment, sustainment support, special tooling/special test equipment and technical/financial data. Work will be performed in Fort Worth, TX (75.5 percent); El Segundo, CA (15.6 percent); and Samlesbury, United Kingdom (8.9 percent), and is expected to be completed in February 2011. Contract funds will not expire at the end of the current fiscal year. This contract was not competitively procured. The Naval Air Systems Command, Patuxent River, MD is the contracting activity (N00019-07-C-0097). Government Contracts Report Letter No. 1919, August 1, 2007.

Northrop Grumman - $2.3 Billion. Northrop Grumman Space Technology, Redondo Beach, CA, is being awarded a cost-plus-award-fee with multiple incentives contract modification for $2,346,892,272. This modification will incorporate Engineering Change Proposal (ECP-13) Restructure to the National Polar-orbiting Operational Environmental Satellite System Acquisition and Operations Contract as directed by the National Polar-orbiting Operational Environmental Satellite System's Acquisition Decision Memorandum (ADM) dated 5 June 2006. The key features of the modification are: Two Engineering Manufacturing Development (EMD) satellites with a production option for two additional satellites. Revised fee structure with emphasis on incentives for cost, schedule and technical performance. The sensor suite has been reworked to conform to the ADM direction. Five sensors were removed from the manifest to reduce risk. At this time, no funds have been obligated. This work will be complete September 2016. For question please contact Jeffrey Dedrick at (301) 713-4754. National Polar-Orbiting Operational Environmental Satellite System Integrated Program Office, Silver Spring, MD, is the contracting activity (F04701-02-C-0502/P00072). Government Contracts Report Letter No. 1919, August 1, 2007.

General Dynamics - $2.25 Billion. General Dynamics Network Systems Inc., Needham, MA, is being awarded a firm-fixed-price and cost reimbursement contract modification for $2,250,000,000 (Maximum). This represents a $300,000,000.00 increase in the total ceiling amount for this Indefinite Delivery/Indefinite Quantity (ID/IQ) contract. The Intelligence Information, Command and Control, Equipment and Enhancements (ICE2) contract provides worldwide Information Technology (IT) sustainment and technical support. The contractor provides computer equipment support consisting of preventive and remedial maintenance of hardware and inventory management. This increase will allow task orders to continue to June 2008. At this time, no funds have been obligated. For more information please call (478) 926-8374. Headquarters 330th Aircraft Sustainment Wing, Robins Air Force Base, GA, is the contracting activity (F09603-03-D-0095/P00006). Government Contracts Report Letter No. 1923, August 29, 2007.

United Technologies - $1.2 Billion. United Technologies Corp., Pratt & Whitney, East Hartford, CT, is being awarded a fixed-price with economic price adjustment and firm-fixed-price contract modification for $1,282,809,793. This modification definitizes the F-119 engine multi-year contract. At this time, $367,649,855 has been obligated. Solicitations began April 2006 and negotiations were completed in July 2007. This work will be complete February 2011. For questions please call (937) 904-5318. Headquarters Aeronautical Systems Center, Wright-Patterson Air Force Base, OH, is the contracting activity (FA8811-06-C-2900/No modification number at this time). Government Contracts Report Letter No. 1920, August 8, 2007.

United Technologies - $1 Billion. United Technologies Corp., Pratt and Whitney, East Hartford, CT, is being awarded an indefinite delivery/indefinite quantity, fixed-price with economic price adjustment contract for $1,059,758,466. This contract provides for F117-PW-100 install engines, spare engines and associated data for the C-17 aircraft. At this time, no funds have been obligated. Solicitations began August 2006 and negotiations were complete in June 2007. This work will be complete December 2012. For question please contact PA POC at (937) 255-2350. Headquarters Aeronautical Systems Center, Wright-Patterson Air Force Base, OH, is the contracting activity (FA8626-07-D-2073). Government Contracts Report Letter No. 1919, August 1, 2007.

Lockheed Martin - $951.7 Million. Lockheed Martin Systems Integration-Owego, Owego, NY, is being awarded a $951,735,822 definitization modification to a previously awarded advance acquisition contract (N00019-06-C-0098). This definitization effort will result in a firm-fixed-price multiyear contract for the procurement of 139 MH-60R Mission Avionics Systems. This multiyear is for MH-60R FY07 Lot V through FY11 Lot IX. Work will be performed in Owego, NY, and is expected to be completed in December 2013. Contract funds will not expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, MD, is the contracting activity. Government Contracts Report Letter No. 1922, August 22, 2007.

Raytheon - $816 Million. Computer Sciences Raytheon is being awarded a contract for $816,171,570. This action provides for Eastern Range Technical Services to provide operations, maintenance, sustainment of critical range and launch processing systems that support the launch processing mission of the 45 Space Wing and its launch customers at Cape Canaveral Air Station. The scope of this acquisition will include all critical range systems and associated support systems. Service include downrange facilities support, base and range local area network/metropolitan area network (LAN/MAN) service, and other minor technical systems support required for successful range mission accomplishment. At this time, all funds have been obligated. For more information please call (321) 494-1490. 45 CONS/LGCZR, 1201 Edward H. White II Street, MS 7200, Patrick Air Force Base FL, 32925-3237 is the contracting activity (FA2521-07-C-0011). Government Contracts Report Letter No. 1923, August 29, 2007.

Graybar Electric - $660 Million. Graybar Electric Co., St. Louis, MO, is being awarded a maximum $660,000,000.00 fixed price with economic price adjustment, indefinite delivery/indefinite quantity contract for maintenance, repair and operations (MRO) supplies. This contract is exercising second one-year option. Using services are Army, Navy, Air Force, Marine Corps, and Federal Civilian Agencies. The original proposal was Web solicited with six responses. Contract funds will not expire at the end of the current fiscal year. Date of performance completion is July 28, 2008. Contracting activity is Defense Supply Center Philadelphia (DSCP), Philadelphia, PA. (SPM500-04-D-BP11). Government Contracts Report Letter No. 1919, August 1, 2007.

Northrop Grumman - $635 Million. Northrop Grumman Systems Corp., Integrated Systems - Western Region, San Diego, CA, is being awarded a $635,860,599 cost-plus-incentive-fee contract for the Unmanned Combat Air System CV Demonstration Program (UCAS-D). The purpose of the UCAS-D is to demonstrate critical CV suitability technologies for a low observable platform air vehicle in a relevant environment. Expected deliverables include trade studies, analyses, software, reports and flight test data. Work will be performed in Rancho Bernardo, CA (38 percent); El Segundo, CA (29 percent); Palmdale, CA (13 percent); East Hartford, CT (7 percent); Jupiter, FL (2 percent); Nashville, TN (2 percent); Hazelwood, MO (1 percent), and various locations within the United States (8 percent), and is expected to be completed in September 2013 Contract funds will not expire at the end of the current fiscal year. This contract was competitively procured through a request for proposals; two firms were solicited and two offers were received. The Naval Air Systems Command Patuxent River, MD is the contracting activity (N00019-07-C-0055). Government Contracts Report Letter No. 1920, August 8, 2007.

Menlo Worldwide - $525 Million. Menlo Worldwide Government Services, LLC, San Mateo, CA, is being awarded a fixed-price/cost-reimbursement contract for a base period face value of $525,076,256. The contract has a total estimated contract value of $1,635,842,885, which includes all option periods and award term option periods. This action is to perform transportation coordination services in a manner that will improve the reliability, predictability, and efficiency of Department of Defense materiel moving within the Continental United States under the Defense Transportation Coordination Initiative (DTCI). Work will be performed throughout the Continental United States and will continue through August 2014, if all option periods and award term option periods are exercised. Contract funds will not expire at the end of the current fiscal year. The United States Transportation Command Directorate of Acquisition, Scott Air Force Base, IL, is the contracting activity (HTC711-07-D-0032). Government Contracts Report Letter No. 1922, August 22, 2007.

Multiple Firms - $400 Million. Spectrum Comm Inc., Hampton, VA, DP Technology Services Inc., Hampton, VA, Micro Technology LLC, Vienna, VA, MacAulay-Brown Inc., Dayton, OH, Science Application International Corp., Hampton, VA, TASC Inc., a wholly owned subsidiary of Northrop Grumman Corp., Andover, MA, is being awarded an indefinite delivery/indefinite quantity with fixed-price & cost reimbursable contract for $400,000,000. The Contract Advisory and Assistance Services (CAAS) contract shall serve as a vehicle to provide broad technical and analytical services, to support and improve policy development, management and administration and to improve the operation of systems. CAAS shall be used to complement the Government's technical expertise in accomplishing its mission. Outputs may take the form information, advice, opinions, alternatives, analyses, evaluations, recommendations, training and services to complement the Government's technical expertise. The nature of this work will, at times, demand the contractor be capable of quick response to deadlines. The required contractor support shall fall into one of the following categories: 1) Management and Professional Services, 2) Studies, Analyses, and Evaluations, 3) Engineering and Technical Services. This modification definitizes the F-22 multi-year aircraft advanced buy, Economic Ordering Quantity and Full Rate Production contract (sixty aircraft, Lots 7, 8 and 9). At this time, $40,000 has been obligated. Solicitations began December 2006 and negotiations were complete July 2007. This work will be complete August 2013. For questions please call (757) 225-1852. Headquarters Air Combat Command Acquisition Management and Integration Center, Langley Air Force Base, VA, is the contracting activity (FA4890-07-D-0001, FA4890-07-D-0002, FA4890-07-D-0003, FA4890-07-D-0004, FA4890-07-D-0005, FA4890-07-D-0006, FA4890-07-D-0007, and FA4890-07-D-0008). Government Contracts Report Letter No. 1920, August 8, 2007.

Canadian Commercial Corp. - $338 Million. Canadian Commercial Corp., General Dynamics Land Systems Canada, Ottawa, Ontario, Canada, is being awarded $338,734,800 for firm-fixed-priced delivery order # 0003 under previously awarded contract (M67854-07-D-5028) to purchase 600 Category (CAT) II Mine Resistant Ambush Protected (MRAP) variation vehicles. MRAP vehicles are armored vehicles with a blast resistant underbody designed to protect the crew from mine blasts, fragmentary and direct fire weapons. Work will be performed in Lansing, Michigan, and work is expected to completed March 2008. Contract funds will not expire at the end of the current fiscal year. This contract was competitively procured. The Marine Corps Systems Command, Quantico, VA, is the contracting activity. Government Contracts Report Letter No. 1921, August 15, 2007.

Lockheed Martin - $322 Million. Lockheed Martin Corp., Lockheed Martin Aeronautical Systems, Marietta, GA, is being awarded a firm-fixed-price contract modification for $322,000,000. This contract modification is an undefinitized contract action for the procurement of five, FY07 Global War on Terrorism, (GWOT) Supplemental C-130J aircraft. At this time, $161,000,000 has been obligated. This work will be complete in December 2010. For more information please call (937) 255-4599. Headquarters Aeronautical Systems Center, Wright-Patterson Air Force Base, OH, is the contracting activity (FA8625-06-C-6456/P00021). Government Contracts Report Letter No. 1920, August 8, 2007.

Rolls Royce - $296 Million. Rolls-Royce Corp., Indianapolis, Ind., is being awarded a cost-sharing contract for $296,254,318. The objective of the Adaptive Versatile Engine Technology (ADVENT) program is to develop and demonstrate inlet, engine, exhaust nozzle, and integrated thermal management technologies that enable optimized propulsion system performance over a broad range of altitude and flight velocity. The ADVENT program will demonstrate integration technologies to Technology Readiness Level (TRL) 4-5 and engine technologies to TRL-6 in a large thrust class, with emphasis on multi-design point demonstration of significant advancements in thrust, fuel efficiency, development cost, production cost and maintenance cost characteristics over baseline engines. At this time, $98,770 has been obligated. Solicitations began in March 2007 and negotiations were completed in August 2007. This work will be complete in September 2012. Air Force Research Laboratory, Wright-Patterson Air Force Base, OH, is the contracting activity (FA8650-07-C-2803). Government Contracts Report Letter No. 1922, August 22, 2007.

Kongsberg Defense - $292 Million. Kongsberg Defense, Kongsberg, Norway, was awarded on Aug. 21, 2007, a delivery order amount of $292,895,119 as part of a $1,000,000,000 firm-fixed-price and time and materials contract for the Common Remotely Operated Weapon Station Systems, spare parts, depot operations, and field service representatives. Work will be performed in Johnstown, PA, and is expected to be completed by Aug. 1, 2012. Contract funds will not expire at the end of the current fiscal year. There were an unknown number of bids solicited via the World Wide Web on Aug. 23, 2006, and three bids were received. The U.S. Army Joint Munitions and Lethality Life Cycle Command, Picatinny Arsenal, NJ, is the contracting activity (W15QKN-07-D-0018). Government Contracts Report Letter No. 1923, August 29, 2007.

General Dynamics - $270 Million. General Dynamics Land Systems, Sterling Heights, Mich., was awarded on July 31, 2007, a delivery order amount of $270,550,950 as part of a $270,550,950 firm-fixed-price contract for system enhancement package for the Abrams M1A2 Tanks. Work will be performed in Lima, OH (75 percent), Tallahassee, FL (10 percent), Anniston, AL (9 percent), Scranton, PA (3 percent), and Sterling Heights, MI (3 percent), and is expected to be completed by July 31, 2010. Contract funds will not expire at the end of the current fiscal year. This was a sole source contract initiated on March 16, 2007. The U.S. Army Tank-Automotive and Armaments Command, Warren, MI, is the contracting activity (W56HZV-06-G-0006). Government Contracts Report Letter No. 1921, August 15, 2007.

General Electric - $231 Million. General Electric Co., Aircraft Engines, Cincinnati, Ohio, is being awarded a cost-sharing contract for $231,215,100. The objective of the Adaptive Versatile Engine Technology (ADVENT) program is to develop and demonstrate inlet, engine, exhaust nozzle, and integrated thermal management technologies that enable optimized propulsion system performance over a broad range of altitude and flight velocity. The ADVENT program will demonstrate integration technologies to Technology Readiness Level (TRL) 4-5 and engine technologies to TRL-6 in a large thrust class, with emphasis on multi-design point demonstration of significant advancements in thrust, fuel efficiency, development cost, production cost and maintenance cost characteristics over baseline engines. At this time, $129,140 has been obligated. Solicitations began in March 2007 and negotiations were completed in August 2007. This work will be complete in September 2012. Air Force Research Laboratory, Wright-Patterson Air Force Base, OH, is the contracting activity (FA8650-07-C-2802). Government Contracts Report Letter No. 1922, August 22, 2007.

Multiple Firms - $200 Million. American Piping & Boiler Co., Kapolei, Hawaii; RMA Land Construction, Brea, CA; Niking Corp., Wahiawa, HI; Standard Sheetmetal & Mechanical, Inc., Honolulu, HI; and Su-Mo Builders, Inc./NAN, Inc. (Joint Venture), Honolulu, HI, are each being awarded a firm-fixed price multiple award indefinite-delivery/indefinite-quantity contract for various construction projects within the state of Hawaii. The total contract amount is not to exceed $200,000,000. The work to be performed provides for new construction, repair, alteration, and related demolition of existing infrastructure based on design build, modified design build or full plans and specifications for Department of Defense infrastructure. Work will be performed in Hawaii. The term of the contract is not to exceed five years, with an expected completion date of August 2012 (August 2008 for the base period). Contract funds will expire at the end of the current fiscal year. This contract was issued as a Section 8(a) small business set-aside with 44 solicitations distributed and 12 proposals received. These five contractors may compete for task orders under the terms and conditions of the awarded contract. The Naval Facilities Engineering Command, Hawaii, Pearl Harbor, HI, is the contracting activity (contract numbers N62478-07-D-4003/4004/ 4005/4006/4007). Government Contracts Report Letter No. 1920, August 8, 2007.

SAIC - $200 Million. Scientific Applications International Corp., San Diego, CA, is being awarded a maximum $200,000,000.00 fixed price with economic price adjustment, integrated prime vendor contract for the material and material management of benchstock items. Other locations of performance are North Carolina and Florida. Using services are Navy. There were 12 proposals originally solicited with 4 responses. Contract funds will not expire at the end of the current fiscal year. This is the 1st option year being exercised. Date of performance completion is July 22, 2009. Contracting activity is Defense Supply Center Philadelphia (DSCP), Philadelphia, PA. (SPM500-04-D-BP13). Government Contracts Report Letter No. 1919, August 1, 2007.