Government Contracts Update September 2008

September 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

Defense Department Cancels Air Tanker Competition
The Defense Department has cancelled the competition between Boeing and Northrop Grumman to build a new fleet of aerial refueling tankers, leaving the issue for the next presidential administration, Defense Secretary Robert Gates announced on September 10.

"It has now become clear that the solicitation and award process cannot be accomplished by January," Gates stated. "Thus, I believe that rather than hand the next administration an incomplete and possibly contested process, we should clearly defer this procurement to the next team."

After several years of consideration, the Air Force early this year awarded the $35 billion contract to Northrop Grumman and its partner the European Aeronautic Defense and Space Company. Boeing challenged the decision, claiming it was flawed.

The Government Accountability Office reviewed the award and agreed with Boeing (23 CGEN 112,629). Among the significant errors cited by the GAO, the Air Force did not follow its own evaluation criteria when assessing the competing proposals and it conducted "misleading and unequal discussions "with Boeing.

Following the GAO's decision, the Defense Department in July reopened the competition between Boeing and Northrop Grumman, limited to only the areas of concern identified by the GAO. The goal was to award the contract by the end of the year.

Gates acknowledged that the Air Force made mistakes during the long and controversial acquisition process. He said the cancellation of the competition will provide a "cooling-off period [that] will allow the next administration to view objectively the military requirements and craft a new acquisition strategy." Gates said he has been assured that the current aerial tanker fleet can adequately satisfy the needs of Air Force missions for the near future. Government Contracts Reports 1976, September 17, 2008.

FAR Councils Issue FAC 2005-27 with 14 Rules
The Civilian Agency Acquisition and Defense Acquisition Regulations Councils have published Federal Acquisition Circular 2005-27. The Circular contains two interim and twelve final rules amending the Federal Acquisition Regulation. In order of appearance, the rules address: Item I —Correcting Statutory References Related to the Higher Education Act of 1965 (FAR Case 2007-020); Item II —Changing the Name of the Office of Small and Disadvantaged Business Utilization for DoD (FAR Case 2008-001); Item III —Administrative Changes to the FPI Blanket Waiver and the JWOD Program Name (FAR Case 2007-015); Item IV —Local Community Recovery Act of 2006 (FAR Case 2006-014); Item V —Additional Requirements for Competition Advocate Annual Reports (FAR Case 2007-007); Item VI —Contract Debts (FAR Case 2005-018); Item VII —Subcontractor Requests for Bonds (FAR Case 2007-022); Item VIII —Extension of Authority for Use of Simplified Acquisition Procedures for Certain Commercial Items (FAR Case 2008-002); Item IX —Enhanced Competition for Task and Delivery Order Contracts (FAR Case 2008-006, Interim); Item X —Online Representations and Certifications Application Review (FAR Case 2006-025); Item XI —Cost Accounting Standards Administration and Associated Federal Acquisition Regulation Clauses (FAR Case 2007-002, Interim); Item XII —CAS Administration (FAR Case 2006-004); Item XIII —Accepting and Dispensing of $1 Coin (FAR Case 2006-027); and Item XIV, Technical Amendments. For a complete listing of all FAR sections impacted by this FAC, as well as the applicable effective dates, see the table below in this report. The full text of FAC 2005-27 appears at 70,002.101.

A final rule, FAR Case 2005-018, amends the FAR to revise the policies and procedures pertaining to contract debts. This rule, which adopted a prior proposal (70,006.200), reorganizes FAR Subpart 32.6 (FAR 32.600 through FAR 32.611) to add clarity and provide a logical sequence. FAR Subpart 32.6 prescribes policies and procedures for identifying, collecting, and deferring collection of contract debts (including interest, if applicable). The rule revises FAR 32.601 to specify what constitutes a contract debt, rather than how a contract debt may arise. In addition, this provision is amended to include payments determined to be in excess of contract limitations for commercial financing, because these payments constitute a contract debt. Newly revised FAR 32.602 defines the responsibilities of the contracting officer and the payment officials to ensure an efficient and non-duplicative process. All discussions of contract debt determinations are consolidated in FAR 32.603. The rule also consolidates all discussion on payment issues in a single provision at FAR 32.604. Revised FAR 32.605 consolidates the materials on CO final decisions. Similarly, FAR 32.606 consolidates discussions on debt collection and FAR 32.608 simplifies the discussions relating to interest. The rule also revises FAR 12.215 and FAR 32.008 to refer to the responsibilities of the CO at FAR 32.604 when notified by the contractor of an overpayment. In addition, the rule revises the clauses at FAR 52.212-4, and FAR 52.232-25 through FAR 52.232-27, to conform with other revisions. Other provisions impacted by this rule include: FAR 13.401, FAR 33.208, FAR 33.211, FAR 36.608, FAR 42.302, FAR 52.213-4, and FAR 52.232-17.

The rule associated with FAR Case 2006-014 adopts as final, with a change to the second interim rule, two interim rules amending the FAR that implemented amendments to the Robert T. Stafford Disaster Relief and Emergency Assistance Act. The Local Community Recovery Act of 2006 amended the Stafford Act to authorize set-asides for major disaster or emergency assistance acquisitions to businesses that reside or primarily do business in the geographic area affected by the disaster or emergency. The first interim rule (FAC 2005-12) implemented this statutory amendment by adding a new FAR Subpart 6.6, titled Stafford Act Preference for Local Area Contractor, consisting of FAR 6.601 through FAR 6.603. In addition, the rule added new provisions at FAR 26.202 and FAR 26.203 to describe CO procedures and solicitation clauses. New contract clauses were added at FAR 52.226-3 through FAR 52.226-5. Conforming amendments were made to FAR 6.302-5, FAR 12.301, FAR 26.200, and FAR 52.212-5. Subsequently, Section 694 of the Department of Homeland Security Appropriations Act of 2007 (PL 109-295) amended the Stafford Act to enact requirements for transitioning work under existing contracts. A second interim rule (FAC 2005-21) addressed this statutory amendment and added a new provision at FAR 6.207, amended FAR 5.207, FAR 12.301, FAR 18.203, and revised FAR Subpart 26.2, as well as the clauses at FAR 52.212-5, and FAR 52.226-3 through FAR 52.226-5. The rule also removed FAR Subpart 6.6. The current final rule makes a minor change to FAR 26.202-2, which allows COs to use an evaluation preference, when authorized by agency regulations or procedures.

An interim rule, FAR Case 2008-006, amends the FAR to implement Section 843 of the Fiscal Year 2008 National Defense Authorization Act, entitled “Enhanced Competition for Task and Delivery Order Contracts.” The purpose of this statute is to improve opportunities for competition through fair opportunity, transparency and accountability in contracting. Section 843 stipulated several requirements regarding enhancing competition within federal contracting. The provisions of Section 843 implemented by the interim rule include those pertaining to: a limitation on single award task and delivery order contracts greater than $100 million; enhanced competition for task and delivery orders in excess of $5 million; and protests on orders on the grounds the order increases the scope, period, or maximum value of the contract under which the order is issued, or the order is valued in excess of $10 million. FAR 16.503 and FAR 16.504, as amended by the interim rule, apply to single award task or delivery order contracts awarded on or after May 27, 2008, which was the date FY08 NDAA went into effect. FAR 16.505, as amended, applies to orders awarded on or after May 27, 2008, on existing contracts as well as new contracts. Comments on the rule, identified by FAR Case 2008-006, are due by November 17, 2008.

The interim rule associated with FAR Case 2007-002 amends the FAR to revise the contract clauses related to the administration of the Cost Accounting Standards to maintain consistency between the FAR and CAS. The CAS Board had previously published a final rule (70,055.18) revising the contract clauses related to CAS administration. This CAS rule amended the CAS applicability threshold to be the same as the threshold for compliance with the Truth in Negotiations Act as required by Section 822 of the 2006 National Defense Authorization Act (PL 109-163). The TINA threshold is currently $650,000. The CAS rule also changed the effective dates of CASB 9903.201-3 and CASB 9903.201-4(a), (c), and (e) from April 2000 and June 2000, respectively, to June 2007. In addition, the CAS Board had published an earlier final rule (70,055.14), which specified that the interest rate for overpayments by the government under CASB 9903.201-4(a), (c), and (e) shall be computed at the annual rate established under section 6621(a)(2) of the Internal Revenue Code of 1986 (26 USC 6621(a)(2)). To maintain consistency between the FAR and CAS as they relate to CAS administration, this current FAR interim rule amends the following provisions: FAR 30.201-4, and the contract clauses at FAR 52.230-1 through FAR 52.230-5. Comments on the rule, identified by FAR Case 2007-002, are due by November 17, 2008. A final rule, FAR Case 2006-004, makes additional changes to CAS administration provisions. The rule, which adopts a proposed rule (70,006.199) with minor changes, amends the FAR to implement revisions to the regulations related to the administration of the CAS as they pertain to contracts with foreign concerns, including United Kingdom concerns. The minor changes to FAR 30.201-4(c) clarify that the clause at FAR 52.230-4 need not be included in contracts with foreign concerns otherwise exempt from CAS coverage, and that foreign concerns do not include foreign governments, or their agents or instrumentalities.

The FAR Case 2007-007 final rule amends the FAR to require that annual reviews by executive agency competition advocates be provided in writing to both the agency senior procurement executive and the agency chief acquisition officer. Agency competition advocates must describe initiatives that ensure task and delivery orders over $1,000,000 issued under multiple award contracts are properly planned, issued, and comply with FAR 8.405 and FAR 16.505 in a report to the senior procurement executives. The rule amends FAR 6.502.

A rule, FAR Case 2006-027, finalizes with changes an interim rule issued with FAC 2005-19 , which amended the FAR to implement Section 104 of the Presidential $1 Coin Act of 2005. Section 104 required entities that operate any business on any premises owned or controlled by the United States to be capable of accepting and dispensing $1 coins on January 1, 2008. Subsequent to this statute's enactment, Pubic Law 110-147 amended 31 USC 5112(p)(1)(A) to allow an exception from the $1 coin dispensing capability requirement for vending machines that do not receive currency denominations greater than $1. The final rule implements this second statutory directive and applies to all service contracts that involve business operations conducted using U.S. coins and currency, including vending machines, on any premises owned by the U.S. or under the control of any agency or instrumentality of the U.S. The clause at FAR 52.237-11 is required for all solicitations and contracts on and after September 17, 2008, which is the effective date of the final rule. Affected contracts in existence before January 1, 2008, that do not already have the clause must be modified to include the clause, and contracts that have the August 2007 edition of the clause must be modified, if the contractor requests, to include the newer version contained in this final rule, without requiring consideration from the contractor. In addition to the contract clause at FAR 52.237-11, this rule amends FAR 37.116-1 and FAR 52.212-5.

The final rule associated with FAR Case 2008-002 amends the FAR to extend the authority to use simplified acquisition procedures for certain commercial items. This final rule, which amends FAR 13.500, implements Section 822 of the National Defense Authorization Act for Fiscal Year 2008 (PL 110- 181). Section 822 amends Section 4202(e) of the Clinger-Cohen Act of 1996 by extending until January 1, 2010, the timeframe in which an agency may use simplified procedures to purchase commercial items in amounts greater than the simplified acquisition threshold, but not exceeding $5,500,000 or $11 million for acquisitions described in FAR 13.500(e).

The FAR Case 2007-022 final rule amends the FAR to clarify that the clause “Prospective Subcontractor Requests for Bonds” does not apply to commercial items. This clause, FAR 52.228-12, implemented Section 806(a)(3) of Public Law 102-190, as amended, which required a contractor to provide a copy of the payment bond to a prospective subcontractor or supplier offering to furnish labor or material for the performance of a construction contract for which a payment bond has been furnished to the government pursuant to the Miller Act. This final rule exempts the acquisition of commercial items from the clause's requirement and incorporates the associated statutory citation into FAR 12.503 and FAR 12.504.

A final rule, FAR Case 2007-015, amends the FAR to increase the blanket waiver threshold for small dollar-value purchases from Federal Prison Industries by federal agencies, and to change the name of the JWOD Program to the “AbilityOne Program.” JWOD refers to the Javis-Wagner-O'Day Act, which requires government entities to purchase certain supplies and services from workshops employing disabled people. This rule amends FAR 8.602, FAR 8.603, and FAR 8.605, to effect the name change and reflect the threshold increase from $2,500 to $3,000. No waiver is required for purchases from an alternative source below $3,000. Customers may, however, still purchase from FPI at, or below, this threshold. The name change to “AbilityOne Program” is also reflected in FAR 4.602, FAR 4.606, FAR Subpart 8.7, FAR 9.107, FAR 18.107, FAR 44.202-2, and FAR 52.208-9.

The FAR Case 2008-001 final rule changes the name of the “Office of Small and Disadvantaged Business Utilization” to the “Office of Small Business Programs” for the Department of Defense, as required by Section 904 of the National Defense Authorization Act for Fiscal Year 2006 (PL 109-163). The office name change, as well as the change in the title of the director of the office, must be noted in the FAR. Accordingly, this rule amends the definitions at FAR 2.101, as well as FAR 19.201 and FAR 19.702, to make the necessary changes.

The final rule associated with FAR Case 2007-020 amends the FAR to correct references to sections of the Higher Education Act of 1965 at FAR 2.101, FAR 52.212-5, FAR 52.219-23, and FAR 52.226-2. These sections of the Act contain and refer to the definitions of “minority institution” and “Hispanic-serving institution.” The citations for these sections changed when the Higher Education Act of 1965 was amended by the Higher Education Amendments of 1998. This final rule updates the FAR accordingly.

A rule, FAR Case 2006-025, finalizes without change an interim rule issued with FAC 2005-19, which amended the FAR to revise the prescription for use of clauses for the use of Environmental Protection Agency-designated products and toxic chemical release reporting. The interim rule revised FAR 4.1104, which mandates the use of the clause at FAR 52.204-7, “Central Contractor Registration,” which in turn 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. Consequently, 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 amended 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.

Item XIV of FAC 2005-27 implements a technical amendments final rule to the Federal Acquisition Regulation. The rule makes editorial changes at FAR 15.404-1 and FAR 52.212-5. Also, a Small Entity Compliance Guide, which was prepared in accordance with Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, accompanies FAC 2005-27.

Legal News

Jurisdiction Existed Over Protest of GWAC Task Order
According to the Court of Appeals for the Federal Circuit, jurisdiction existed over a protest challenging the government's decision to forego competitive procedures in favor of meeting its requirements under a Government Wide Acquisition Contract, because the alleged harm was “in connection with a procurement or a proposed procurement” as defined by the Tucker Act. The protest concerned an information technology project where the government first issued requests for information from potential software vendors, but chose to procure the requirements under an existing GWAC task order. The GWAC contractor then awarded subcontracts to software vendors. The protesters argued the GWAC contractor was essentially acting as a purchasing agent for the government, and the requirements should have been procured through competitive procedures. The Comptroller General dismissed the protests for lack of jurisdiction, on grounds “the procurement at issue was not conducted by a federal agency ”( 21 CGEN 112,095). The Court of Federal Claims agreed, finding the protesters were essentially challenging “the award of subcontracts by a contractor with a [f]ederal agency, not a contract award by a [f]ederal agency” ( 51 CCF 78,753).

However, the Comptroller General and the CFC misinterpreted the protesters' complaint. Rather than contesting the GWAC contractor's award of subcontracts, the protesters were challenging the government's decision to allow the GWAC contractor to award subcontracts for the purchase of software, instead of procuring the software through a competitive process. As stated by the protesters, they were challenging “the government's decision to utilize a task order ... to allow [the contractor] to procure software for the government without competition ....” Jurisdiction existed over the protest under the Tucker Act, because the protest was “in connection with a procurement or a proposed procurement” (28 USC 1491(b)(1)). The government's actions in using vendors' responses to the RFIs to determine the scope of its requirements, and then choosing to meet its requirements through the GWAC task order, were pre-procurement decisions that involved the “process for determining a need for property or services,” and thus qualified as a “proposed procurement” for purposes of Tucker Act jurisdiction. Accordingly, the CFC's decision was reversed and remanded. (Distributed Solutions, Inc., et al. v. U.S., CA-FC, 52 CCF 78,993)

Government's Breach of Oil and Gas Leases, Remedy, Affirmed
The Court of Appeals for the Federal Circuit affirmed the Court of Federal Claims' determination 1990 amendments to the Coastal Zone Management Act amounted to a repudiation of offshore oil and gas leases, because the government breached the leases when it implemented the federal courts' interpretation of the amendments. The contractors filed suit in the CFC in 2001 when the government altered the procedures for granting requested lease suspensions in response to a federal district court's interpretation of the CZMA amendments. According to the district court, the amendments required the government to provide a consistency determination to the relevant state agency before granting requested suspensions ( California v. Norton, 150 F Supp 2d 1046 (ND Cal 2001), aff'd 311 F3d 1162 (CA-9 2002)). The CFC found the 1990 amendments effected an anticipatory repudiation of the leases and ordered the government to pay more than $1.1 billion as restitution for the lessees' upfront bonus payments (68 FedCl 535).

On appeal, the Federal Circuit disagreed with the CFC's conclusion the 1990 legislation itself constituted a breach or anticipatory repudiation, noting the parties initially treated the leases as unaffected by the amendments and continued performance. Rather, the breach occurred when the government implemented the courts' interpretation of the amendments. However, because the CFC's holding was based in part on the government's conduct following the courts' rulings, the CFC's determination anticipatory repudiation occurred in 1990 was not essential to its resolution of the case. The Federal Circuit also rejected the government's attempts to distinguish Mobil Oil Exploration v. U.S. (45 CCF 77,730), which held enactment of a statute repudiated similar oil and gas leases by imposing new requirements inconsistent with the lease terms. The court acknowledged the breach in Mobil Oil was somewhat more clear-cut and the parties in Mobil Oil did not perform for many years before the statutory interpretation that led to the breach. Nevertheless, the court was persuaded the Supreme Court's analysis applied to the circumstances of the case.

The Federal Circuit affirmed the CFC's judgment regarding restitution “in all respects.” The court confirmed the lessees stood “in the shoes” of the original lessees, and the assignment of the leases included the right to enforce the contracts and pursue all available contract remedies. The Federal Circuit also upheld the CFC's denial of the lessees' development costs as part of the restitutionary award because the benefit the lessees' due diligence activities conferred on the government was uncertain. ( Amber Resources Co., et al. v. U.S., CA-FC, 52 CCF 78,992)

Ninth Circuit Denies Reimbursement of Clean Air Act Defense Costs
The Court of Appeals for the Ninth Circuit denied a contractor reimbursement for costs incurred in the unsuccessful defense of a private Clean Air Act lawsuit, because the costs were similar to those disallowed in FAR 31.205-47(b). After a federal district court found the shipyard contractor violated the Act, it awarded the plaintiff attorneys' fees and assessed a civil penalty against the contractor, but allowed the penalty to be completely offset by costs the contractor incurred to improve a stormwater diversion system. The contractor included over $2.7 million in fees and expenses associated with the defense of the lawsuit in its general and administrative indirect cost pool and assigned the costs to its vessel repair and alteration contracts, which provided for reimbursement of costs deemed allowable under Federal Acquisition Regulation Subpart 31.2. The Armed Services Board of Contract Appeals ruled the costs were unallowable because they were similar to the costs disallowed in FAR 31.205-47(b) (05-1 BCA 32,892), and a federal district court, exercising admiralty jurisdiction, affirmed.

Reviewing the claim de novo, the Court of Appeals agreed the costs were unallowable. No FAR provision explicitly addressed the claimed costs, so FAR 31.204 (c) (currently renumbered as FAR 31.204(d)) required an examination of the FAR's treatment of similar costs. Under FAR 31.205-47(b), the costs of defending against a government proceeding alleging violation of a law or statute are unallowable if a monetary penalty is imposed against the contractor. Although the lawsuit here was not brought by the government, the Clean Water Act authorizes both citizen and governmental suits and permits the government to intervene in any suit brought by a private citizen. A citizen that brings an action acts as a “private attorney general,” and citizen suits supplement the Act's governmental remedies. Also, if a private citizen successfully proves a violation, the monetary penalties inure to the United States Treasury, not the individual. Thus, the costs disallowed in FAR 31.205-47(b) were similar to the costs sought by the contractor.

There also was no merit to the contractor's argument the costs were allowable under FAR 31.205-33(a), which permits reimbursement of certain professional and consultant service costs. Although legal costs arguably fall within the provision, the majority of the costs here represented the Clean Air Act plaintiff's legal expenses. The contractor did not incur those expenses “to enhance [its] legal, economic, financial, or technical position,” a condition of FAR 31.205-33 (a). As a result, the costs, as whole, could not be classified as allowable professional and consultant service costs within the meaning of the regulation. Further, even if both FAR 31.205-47 and FAR 31.205-33 were relevant, FAR 31.204(c) would require the costs to be apportioned between the two provisions. The costs here could not be apportioned, so the allowability determination was to be made on the basis of the guidance in FAR 31.205-47, which better captured the essential nature of the claimed costs. ( Southwest Marine, Inc. v. U.S., et al., CA-9, 52 CCF 78,991)

Appeals Stayed Pending Criminal Investigation
The government's motion to stay proceedings was granted by the Armed Services Board of Contract Appeals because the consolidated appeals involved issues directly related to a criminal investigation and continuing with the case would interfere with the investigation. The contractor, engaged to provide technical and engineering support under two contracts, sought payment for services it allegedly performed. The contracting officer denied the claims, stating the contractor may have billed for work it did not perform. The CO based her decision on an ongoing fraud investigation examining the contractor's billing practices. The government moved to stay the appeals for six months to allow law enforcement agencies to investigate allegations the contractor engaged in criminal conduct. In response, the contractor argued it would suffer financial harm if the board were to stay the appeals. When the government moves to suspend civil actions on the basis of interference with criminal proceedings, the civil tribunal must consider and balance several factors, including whether: the facts, issues, and witnesses in both the civil and criminal proceedings are substantially similar; the government's ongoing investigation would be compromised by going forward with the civil case; the proposed stay could harm the contractor; and the duration of the requested stay is reasonable.

Here, the criminal investigation and the appeals both concerned the extent to which the contractor performed the services for which it sought payment under the contracts. Also, the witnesses with knowledge of this issue would presumably be the same in both proceedings. In addition, continuing with the appeals and discovery against the government would be "akin to giving [the contractor] a roadmap of the [g]overnment's investigation. "Although the government seized the contractor's records, the investigation allegedly extended beyond the contractor to its employees and various government project personnel who were part of an alleged conspiracy. Under these circumstances, the government would suffer hardship if it were required to respond to civil discovery relating to the performance of services under the contracts before it could complete its criminal investigation. Although the proposed stay could harm the contractor if the invoices are found to be valid, a six-month stay was reasonable to complete the government's investigation. (Unconventional Concepts, Inc., ASBCA, 92,368)

Government Did Not Attempt to Resolve OCI Issues
The disqualification of an offeror was unreasonable because the government did not allow the offeror to respond to its organizational conflict of interest concerns or propose a plan to mitigate the perceived OCIs. The request for proposals for information operations support services advised offerors the contracting officer would evaluate all proposals to determine whether a prime contractor or subcontractor had an actual or apparent OCI. Offerors with even an appearance of an OCI were to be “disqualified and eliminated.” The CO conducted an OCI assessment and determined the protester would be “in a position to favor its own products and capabilities ... (and disfavor its competitor’s products)” since one of its business operations and affiliates provided IO products and services similar to those already in use by the government and to be evaluated under the RFP. The CO concluded the protester had an impaired objectivity OCI and disqualified it from the competition. The protester argued the government improperly failed to consider the proposal, give notice of its OCI concerns, or provide an opportunity to respond to those concerns.

The Comptroller General sustained the protest, finding no support for the government's OCI assessments. The RFP provided the CO would evaluate all proposals to determine whether an apparent OCI existed, but the protester's proposal, which included a mitigation plan, was not evaluated prior to the disqualification. Thus, the OCI assessment “clearly was not conducted in accordance with the terms of the RFP.” Further, the RFP referenced FAR 9.505's general rules for limitations on contracting as a means of avoiding, neutralizing, or mitigating perceived OCIs, but there was nothing of record showing the government considered the rules before disqualifying the protester. Finally, there was no support for the government's conclusion the protester would be evaluating its own IO security products in performing the tasks identified in the RFP. According to the protester, its IO security products were not part of the systems to be supported under the RFP, and its IO products were only available to its network subscribers and the government was not a subscriber to that network. Therefore, the OCI determination appeared “to be based more on unsupported inference than fact.” The Comptroller General recommended the government advise the protester of the reasons for its OCI concerns and provide it an opportunity to respond. (AT&T Government Solutions, Inc., 23 CGEN 112,682)

Regulatory News

Rule Supports DoD Acquisitions in Iraq and Afghanistan
The Department of Defense has issued an interim rule (DFARS Case 2008-D002) amending the Defense Federal Acquisition Regulation Supplement to implement Sections 886 and 892 of the National Defense Authorization Act for Fiscal Year 2008. Section 886 provides authority for DoD to limit competition when acquiring products or services in support of operations in Iraq or Afghanistan. Section 892 addresses competition requirements for the procurement of small arms for assistance to Iraq or Afghanistan. The rule adds a new DFARS Subpart 225.77 (comprised of DFARS 225.7700 through DFARS 225.7703-5) to implement these statutory provisions. The rule creates a new a new trade agreements clause at DFARS 252.225-7022, and alternate paragraphs for use with the existing trade agreements clause at DFARS 252.225-7021, to remove the prohibition against acceptance of Iraqi end products that would otherwise apply to acquisitions subject to the Trade Agreements Act. In addition, the new solicitation provision and contract clauses at DFARS 252.225-7023 and DFARS 252.225-7024 permit tailoring of the provision or clauses to provide a preference for products of only Iraq or only Afghanistan, as appropriate. A third new clause at DFARS 252.225-7026 is intended for use in acquisitions conducted under the authority of Section 886 to restrict an acquisition to Iraqi or Afghani items or sources.

This interim rule also amends DFARS 225.1101 to direct contracting officers to not use Buy American Act/Balance of Payments Program/Trade Agreements provisions or clauses that might otherwise apply if the acquisition were not conducted using the authority of Section 886. Also, newly added DFARS 206.303 and DFARS 206.303-70 specify that for acquisitions conducted under the authority of Section 886, the justification and approval addressed in FAR 6.303 is not required. Also, construction contracts are included within the scope of acquisitions that may be conducted using the authority of Section 886 as provided in DFARS 225.7703-1. However, at newly added DFARS 225.401-71, the rule excludes small arms from the items that may be acquired using the authority of Section 886, in view of the specific requirement for competition in the acquisition of small arms addressed in Section 892. The rule makes corresponding technical changes to the following provisions: DFARS 225.502, DFARS 225.7501, DFARS 252.225-7032, DFARS 252.225-7033, DFARS 252.225-7035, and DFARS 252.225-7036. The rule also adds new material to the DFARS companion resource, Procedures, Guidance, and Information at PGI Subpart 225.77 . Comments on the rule, identified by DFARS Case 2008-D002, are due by November 14, 2008. The rule is effective September 15, 2008, and appears at 70,016.489.

DFARS Interim Rule Extends Security Guard Waiver
A Department of Defense interim rule (DFARS Case 2006-D050) amends the Defense Federal Acquisition Regulation Supplement to implement Section 343 of the National Defense Authorization Act for Fiscal Year 2008, which extends, through September 30, 2012, the period during which contractor performance of security guard functions at military installations or facilities is authorized to fulfill additional requirements resulting from the September 11, 2001 terrorist attacks on the United States. The rule, which amends DFARS 237.102-70, also establishes corresponding personnel limitations. Comments on the rule, identified by DFARS Case 2006-D050, are due by November 14, 2008. The rule, which carries a September 15, 2008, effective date, appears at 70,016.491.

Final Rule Changes Flight Simulator Waiver Conditions

A Department of Defense final rule (DFARS 2008-D013) amends the Defense Federal Acquisition Regulation Supplement to implement Section 883(b) of the National Defense Authorization Act for Fiscal Year 2008. Section 883(b) changed the conditions under which DoD may waive the prohibition on entering into a service contract to acquire a military flight simulator. Section 832 of the National Defense Authorization Act for Fiscal Year 2007 established a prohibition on an award, unless the Secretary of Defense determines a waiver is necessary for national security purposes and provides an economic analysis to the congressional defense committees (see 70,016.451). This prohibition and the waiver authority are implemented at DFARS 237.102-71, which has been amended to reflect the conditions by replacing the phrase “necessary for national security purposes” with “in the national interest.” The rule is effective September 15, 2008, and appears at 70,016.490.

Major Contract Awards

Lockheed Martin Corp. - $5.6 Billion. Lockheed Martin Corp., Moorestown, N.J., is being awarded a maximum $5,600,000,000 fixed price with economic price adjustment, indefinite quantity contract for tactical and non-tactical wheeled vehicle fleet support. There are no other locations of performance. Using services are Army, Navy, Air Force and Marine Corps. There were originally 4 proposals solicited with 10 responses. Contract funds will not expire at the end of the current fiscal year. This FASI-G contract is for a 4-year base period and includes three, two-year option periods. The date of performance completion is Sept. 8, 2012. The contracting activity is Defense Supply Center Columbus, Columbus, Ohio, (SPM7LX-08-D-9021). Government Contracts Reports 1976, September 17, 2008.

Northrop Grumman Shipbuilding - $5 Billion. Northrop Grumman Shipbuilding - Newport News, Newport News, Va., a sector of the Northrop Grumman Corp., is being awarded a $5,114,500,788 cost-plus-incentive-fee, cost-plus-fixed-fee, cost-plus-award-fee contract for the detail design and construction of USS Gerald R. Ford (CVN 78). The contract will include engineering; integration; related development efforts including drawing and work package development; advanced planning; design weight estimate; lifecycle support products and related logistics data; production planning; test and evaluation; further definition of initiatives to reduce CVN 78 class total ownership costs; and other data necessary to support construction of CVN 78. This contract includes one option which, if exercised, would bring the total contract value to $5,144,500,788. Work will be performed in Newport News, Va., and is expected to be completed by Sept. 2015. Contract funds will not expire at the end of the current fiscal year. This contract was not competitively procured. The Naval Sea Systems Command, Washington Navy Yard, Washington, D.C., is the contracting activity (N00024-08-C-2110). Government Contracts Reports 1976, September 17, 2008.

Federal Express Charter Programs Team Arrangement - $1.37 Billion. Federal Express Charter Programs Team Arrangement of Memphis, Tenn., 38118-1516, is being awarded an estimated $1,374,735,872 firm fixed-price contract for international airlift services with a minimum guarantee of $150,730,792. Team members include: Air Transport International LLC of, Little Rock Ark., Atlas Air, Inc., of Purchase, N.Y., Federal Express Corp., of Memphis, Tenn., Northwest Airlines, Inc., of St Paul, Mo., Omni Air International, Inc., of Tulsa, Okla., Polar Air Cargo Worldwide, Inc., of Purchase, N.Y., and Tradewinds Airlines, Inc., of Greensboro, N.C. Work will be performed at worldwide locations, and is expected to be completed Sept. 2009. Contract funds will expire at the end of the current fiscal year. Electronic proposals were solicited and 30 proposals received. The contracting activity is U.S. Transportation Command, Directorate of Acquisition, Scott AFB, Ill., 62225, (HTC711-08-D-5001). Government Contracts Reports 1976, September 17, 2008.

Alliance Contractor Team - $1.35 Billion. Alliance Contractor Team of Leesburg, Va., 20175-2718 is being awarded an estimated $1,351,414,857 firm fixed-price contract for international airlift services with a minimum guarantee of $206,407,957. Team members include: American Airlines, Inc., of Ft. Worth, Texas, Arrow Air, Inc., of Miami, Fla., ASTAR Air Cargo, Inc., of Miami, Fla., Delta Air Lines, Inc., of Atlanta, Ga., Evergreen International Airlines, Inc., of McMinnville, Ore., North American Airlines, Inc., of Jamaica, N.Y., United Airlines, Inc., of Elk Grove Village, Ill., U.S. Airways, Inc., of Phoenix, Ariz., and World Airways, Inc., of Peachtree City, Ga. Work will be performed at worldwide locations, and is expected to be completed Sept. 2009. Contract funds will expire at the end of the current fiscal year. Electronic proposals were solicited and 30 proposals received. The contracting activity is U.S. Transportation Command, Directorate of Acquisition, Scott AFB Ill., 62225, (HTC711-08-D-5000) Government Contracts Reports 1976, September 17, 2008.

BP West Coast Products LLC - $1 Billion. BP West Coast Products LLC, La Palma, Calif. Is being awarded a maximum $1,130,287,795 fixed price with economic price adjustment, indefinite delivery and indefinite quantity contract for aviation fuel. Other location of performance is Ferndale, Washington. Using service is Defense Energy Support Center. There were originally 29 proposals solicited with 16 responses. Contract funds will not expire at the end of the current fiscal year. The date of performance completion is Oct. 30, 2009. The contracting activity is Defense Energy Support Center, Fort Belvoir, Va., (SP0600-08-D-0508). Government Contracts Reports 1977, September 24, 2008.

Navistar Defense LLC - $752 Million. Navistar Defense LLC, Warrenville, Ill., is being awarded a $752,042,549 firm-fixed-priced delivery order #0009 under previously awarded contract (M67854-07-D-5032) for the procurement of Category I (CAT I) Mine Resistant Ambush Protected (MRAP) low rate initial production vehicles with engineering change proposal upgrades for enhanced maneuverability and associated non-recurring engineering costs. This order will also be used to support the procurement of additional CAT I MRAP vehicles to provide protection of U.S. military personnel supporting Operation Enduring Freedom. Work will be performed in WestPoint, Miss., and work is expected to be completed Feb. 2009. Contract funds will not expire by 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 Reports 1975, September 10, 2008.

AM General LLC - $734 Million. AM General LLC, South Ben, Ind., was awarded on Sept. 24, 2008, a $734,983,443 firm fixed price contract for 4,853 High Mobility Multi-purpose Wheeled Vehicles to contract. Work will be performed in Mishawaka, Mich., with an estimated completion date of Dec. 31, 2009. One bid was solicited and one bid was received. TACOM, Warren, Mich., is the contracting activity (DAAE07-01-C-S001). Government Contracts Reports 1978, October 1, 2008. Government Contracts Reports 1978, October 1, 2008.

AM General, LLC - $533.5 Million. AM General, LLC, South Bend, Ind., was awarded on Aug. 29, 2008, a $533,553,384 firm/fixed price contract for EA High Multi-Purpose Wheeled Vechile (HMMWV). Work will be performed in Mishawaka, Ind., with an estimated completion date of Dec. 31, 2009. One bid was solicited and one bid was received. TACOM-Warren, AMSTA-AQ-AHLC, Warren, Mich., is the contracting activity (DAAE07-01-C-S001). Government Contracts Reports 1975, September 10, 2008.

SupplyCore, Inc. - $525 Million. SupplyCore, Inc., Rockford, Ill. is being awarded a maximum $525,000,000 fixed price with economic price adjustment, indefinite delivery and indefinite quantity contract for Maintenance, Repair and Operation for Supplies. There are no other locations of performance. Using services are Army, Navy, Air Force, Marine Corps, federal civilian agencies and Defense Logistics Agency. This proposal was originally Web solicited with 11 responses. Contract funds will expire at the end of the current fiscal year. The date of performance completion is Sept. 18, 2009. The contracting activity is Defense Supply Center Philadelphia, Philadelphia, Pa., (SPM500-02-D-0122). Government Contracts Reports 1977, September 24, 2008.