United States: Lots Of Little Things - FAR Updates From The Federal Acquisition Circular

Every now and then, the FAR Councils issue a Federal Acquisition Circular (FAC) – an update to the Federal Acquisition Regulation implementing a number of changes. Often these changes are rather pro forma. But occasionally, you get a Circular with many different (and interesting) issues. FAC 2005-67, issued in late-June 2013, with rules becoming effective in June and July 2013, is one such circular. We thought it would be helpful to highlight five of these rules that raise interesting and timely issues, especially where they may signal additional changes yet to come.

1. Open-Ended Government Indemnification in EULAs – Comments Welcome

A new interim rule addresses the government's ability to agree to a company's standard commercial end-user license agreement (EULA), which is an extremely common part of using software or social media. See 78 Fed. Reg. 37686. Since some of the terms and conditions contained in an EULA may conflict with federal law, the specific provisions may not be enforceable against the government. Obviously, this can be a shock for the new or unknowing government contractor who thought that it understood the terms governing its agreement with the end user. This issue is not completely new, but the new FAC and the new FAR updates move the ball forward. The effective date of the interim rule is June 21, 2013. Comments on the interim rule should be submitted on or before August 20, 2013.

Previously in 2012, a written opinion from the Department of Justice Office of Legal Counsel (see Memorandum for Barbara S. Fredericks, Asst. General Counsel for Administration, United States Department of Commerce, March 27, 2012) opined that open-ended promises by an authorized government official to indemnify a company based on the use and/or misuse of a software product, which would occur were the government to agree to most standard EULAs, violate the Anti-Deficiency Act, 31 U.S.C. §§ 1341, 1342, 1517, which limits government employees from making promises to pay on open-ended obligations without having the necessary appropriations already in place. More recently, the Office of Management and Budget (OMB) issued guidance regarding standard promises by the government to indemnify when using social media applications. See Memorandum for the Heads of Executive Departments and Agencies, M-13-10 (April 4, 2013). Specifically, the OMB recommended that the FAR be amended:

to require contracting officers to put contractors on notice that any TOS [Terms of Service], EULA, or other agreement requiring the government or government-authorized end user to indemnify the contractor for damages, costs, or fees incurred is unenforceable against the government or end-user and will be read out of the agreement to prevent violations of the Antideficiency Act.

Responding in large part to these comments from DOJ and OMB, the FAR Councils recently issued the new interim rule to promote consistency throughout government agencies with regard to treatment of open-ended indemnification clauses, which should reduce time and cost spent negotiating terms governing social media applications provided to various agencies. The FAR Councils estimate that the interim rule will affect 75% of GSA IT Schedule 70 vendors. New FAR sections added by the interim rule include:

  • FAR 12.216, Unenforceability of unauthorized obligations – This provision outlines the issue presented above where supplies or services acquired by the government are subject to an open-ended indemnification clause, pointing to new subparagraph (u) at 52.212-4, Contract Terms and Conditions – Commercial Items, which specifies that: (i) such a clause is unenforceable against the government, (ii) the government will not be deemed to have agreed to such a clause even where it clicks "I agree," and (iii) such a clause will be read out of the agreement. The foregoing does not apply to government indemnification that is expressly authorized by statute and agency regulations. Commercial vendors should be aware of this change because FAR 52.212-4 contains the standard terms and conditions related to commercial items and is to be included the majority of commercial item contracts.
  • FAR 13.202, Unenforceability of unauthorized obligations in micro-purchases – This provision is similar to that at FAR 12.216. It provides that a new clause, FAR 52.232-39 (discussed below) automatically applies to any micro-purchase (beneath $3,000). This is a big deal – because right now micro-purchases are subject to almost zero FAR clauses. But the new clause dealing with restrictions on open-ended indemnification likely will apply, whether incorporated in a purchase agreement or not.
  • FAR 32.705, Unenforceability of unauthorized obligations – This provision relating to contract funding contains language similar to that in FAR 12.216 and FAR 13.202 and reminds contracting officers of limitations on their ability to agree to specific terms.
  • FAR 52.232-39, Unenforceability of Unauthorized Obligations – This provision is to be inserted in all solicitations and contracts. As in FAR 52.212-4(u), this provision provides that an indemnification clause in an EULA or TOS that would create an Anti-Deficiency Act violation: (i) is unenforceable against the government, (ii) is deemed not agreed to even where the government clicks "I agree," and (iii) will be read out of the agreement. The foregoing does not apply where government indemnification is expressly authorized by statute and applicable agency regulations.

The interim rule acknowledges that its purpose is to address the concerns raised in the DOJ opinion and recognizes that "there are also other clauses in commercial [EULAs] and TOS that could result in a violation of the Anti-Deficiency Act." GSA has previously circulated a list of these types of clauses on a "fail list," which objects to items such as choice of law provisions, automatic renewals, requirements to pay fees and penalties, provisions allowing users who are not contracting officers to bind the government, etc. So, look for future amendments that expand on the issue addressed in the interim rule and potentially address more of the issues previously raised in the GSA "fail list."

2. Updates Regarding the System for Award Management (SAM)

The FAR Councils also issued a final rule, effective July 22, 2013, that updates the FAR to reference the System for Award Management (SAM) database. See 78 Fed. Reg. 37676; see also 78 Fed. Reg. 28756 (updating references in the DFARS). If you do not know what the SAM is, you should. Basically, SAM is a new, one-stop database for all contractor information. SAM is designed to be the primary government repository for contractor information and the centralized government system for contracts, grants, and other assistance-related processes required for doing business with the government. Information in SAM includes data from prospective awardees required to do business with the government (such as contractor DUNS number and CAGE code), annual representations and certifications submitted by contractors, identification of contractors excluded from receiving contracts and subcontracts, and listings of information regarding financial and non-financial assistance and benefits.

SAM replaces the now-retired Central Contractor Registration (CCR), Online Representations and Certification Application (ORCA), and Excluded Parties List System (EPLS) databases. Consolidating these databases was part of "Phase 1" of GSA's efforts related to SAM (which began in July 2012). (Plans for later "phases" involve joining additional government procurement systems, including FedBizOps and the Past Performance Information Retrieval System; but GSA needs to get the funding first.) Use of SAM is intended to enhance the efficiency of government contracting by eliminating the need for data entry at multiple sites and allowing easier access to vendor, contract award, and reporting information by maintaining it in one place. The FAR and the DFARS have now been updated to include references to "SAM," rather than to the now-obsolete CCR, ORCA, and EPLS.

3. Acquisitions By Civilian Agencies on Behalf of DOD Customers

A new final rule (FAR Case 2012-010), effective July 22, 2013, reminds us of special restrictions that may apply when a civilian agency makes purchases on behalf of DOD customers. See 78 Fed. Reg. 37684. Per the rule (which was previously implemented via an interim rule), a civilian agency conducting a procurement on behalf of DOD must certify compliance with defense procurement requirements for the fiscal year in which it will conduct the acquisition. "Defense procurement requirements" include the FAR and other laws and regulations applicable to federal procurements of property and services, and laws and regulations applicable to procurements by DOD, including DOD financial management regulations, the DFARS, and the DFARS Procedures, Guidance, and Information. Agency certifications are to be sent to DOD within 30 days of the beginning of each fiscal year.

This new rule serves as a good reminder that a company's compliance protocols that are in place for civilian contracts may not necessarily satisfy additional requirements where DOD is the ultimate customer – particularly where the DFARS imposes a host of additional terms and conditions that may apply (including, perhaps, additional reporting requirements, additional country of origin requirements, etc.). Contractors should ensure that they understand the requirements applicable to any interagency acquisition in which they may be involved and that they are in full compliance with the final terms and conditions of any purchase order (as supplemented by the DOD-unique terms and conditions).

4. Clarifying the Role of the Contracting Officer's Representative (COR)

Another new final rule (FAR Case 2013-004) clarifies the role and responsibilities of a Contracting Officer's Representative (COR). See 78 Fed. Reg. 37675. The final rule reiterates that a COR "[h]as no authority to make any commitments or changes that affect price, quality, quantity, delivery, or other terms and conditions of the contract nor in any way direct the contractor or its subcontractors to operate in conflict with the contract terms and conditions." FAR 1.602-2(d)(5). It further reiterates that a contractor is to be given a written description regarding the COR and the COR's authority, including limitations on that authority and a statement that the COR may be personally liable for unauthorized acts.

This amendment is not really anything new, but it serves as a clear reminder to contractors that, while the COR plays an important role in managing and administering the program, the COR does not have authority to change the contract. Companies follow COR directions to work beyond the scope of the contract at their own peril (and the COR himself/herself may face individual consequences for engaging in conduct that exceeds the bounds of his/her authority).

5. Removing Limitations for Women-Owned Small Business Set-Asides – Comments Welcome

Another interim rule, effective June 21, 2013, removes the statutory limitation on the dollar amount for set-asides to economically disadvantaged women-owned small business (EDWOSB) concerns and/or women-owned small business (WOSB) concerns eligible under the WOSB Program. See 78 Fed. Reg. 37692. The prior dollar limits were $6.5 million for manufacturing and $4 million for all other contracts. Now, acquisitions at any dollar level above the micro-purchase threshold may be set-aside to EDWOSB concerns or WOSB concerns eligible under the WOSB Program, provided the other requirements for set-asides under the WOSB Program are met. This change was made to implement section 1697 of the FY 2013 National Defense Authorization Act, which removed the monetary cap. Comments on the interim rule are due by August 20, 2013.

The interim rule recognizes that the amendment "may have significant positive economic impact" on the above-mentioned small business concerns and also that it "may have a negative effect" on small businesses not owned by women and WOSBs that are not included in the WOSB Program where these concerns may be excluded from competitions that previously could not be set-aside due to dollar limitations. The rule seems like a good idea to us, so long as agencies ensure that award is made to the WOSB that will do the best job.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
29 Nov 2017, Webinar, Los Angeles, United States

This webinar will cover issues that California employers must face when managing a remote workforce of employees who “telecommute” for work. Due to the growing number of employees that work from home, California employers must know how to manage this new remote workforce in order to offer competitive career opportunities for a new generation of employees, while also being careful not to violate the complex California employment laws that govern these work arrangements.

30 Nov 2017, Conference, Brussels, Belgium

The European Competition and Regulatory Law Review (CoRe), the Computer and Communications Industry Association (CCIA) and the Vrije Universiteit Brussel (VUB) are delighted to invite you to our joint conference discussing some of today’s most frequently asked questions: Does competition law enforcement require an update for online markets?

4 Dec 2017, Conference, Virginia, United States

The Government Contract Management Symposium (GCMS) is held annually by the National Contract Management Association (NCMA) in the Washington, DC metro area. Formerly intended for those in federal sector, it has grown to provide training for professionals in both government and industry contracting.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.