United States: December Government Contracts Legislative And Regulatory Update

Our December edition of "Government Contracts Legislative and Regulatory Update" offers a summary of the relevant changes that took place during the month of November.

Highlights this month include:

  • DoD Issues Final Rule Regarding Mentor-Protégé Program Modifications
  • DoD Issues Class Deviation 2019-O001: Use of Fixed-Priced Contracts
  • FAR Council Issues Proposed Rule Regarding Ombudsman for Indefinite Delivery Contracts
  • DoD Quietly Kills Controversial IR&D Rule

This update will also be available in Contract Management Magazine, which is published monthly by the National Contract Management Association (NCMA).


As the legislative calendar was limited in November due to the midterm elections and Thanksgiving recess, no relevant legislative government contract updates occurred this month.



DoD Issues Final Rule Regarding Mentor-Protégé Program Modifications (DFARS Case 2017-D016)

On October 31, 2018, the Department of Defense (DoD) issued a final rule without change, effective immediately, amending the Defense Federal Acquisition Supplement (DFARS) to implement Section 1823 and paragraph (b) of Section 1813 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017, modifying the DoD Pilot Mentor-Protégé Program. Section 1823 revises the definition and requirements associated with affiliation between mentor firms and their protégé firms. Both sections add new types of assistance for mentor firms to provide to their protégé firms. The original proposed rule, issued on May 4, 2018, amended DFARS subpart 219.71, Pilot Mentor-Protégé Program, and Appendix I. Specifically, within Appendix I, Section I-101 was amended to add the definition, of "affiliation" provided in Section 1823; Section I-102, Participant eligibility was amended to add paragraph (e), which specifies that a mentor firm may not enter into an agreement with a protégé firm if the Small Business Administration has made a determination of affiliation; Section I-106, Development of mentor-protégé agreements, was amended to add women's business centers under 15 U.S.C. 656 as a form of assistance that a mentor firm can obtain for a protégé firm; and Section I-107, Elements of a mentor-protégé agreement, is amended to add a new paragraph (h), which implements the requirement provided in Section 1813 for mentor-protégé agreements to include assistance the mentor firm will provide to the protégé firm in understanding Federal contract regulations, including the FAR and DFARS. The final rule will apply to small entities that participate in the program. (83 Fed. Reg. 54677>, Oct. 31, 2018).

DoD Issues Class Deviation 2019-O0001: Use of Fixed-Price Contracts

On November 27, 2018, the DoD issued Class Deviation 2019-O0001 (Deviation), which implements Section 829 of the FY 2017 NDAA, which directs establishment of a preference for fixed-price contracts, including fixed-price incentive contracts, in the determination of contract type and establishes the requirement for higher-level approval of certain cost-type contracts. The Deviation directs COs to consider the use of fixed-price contracts, including fixed-price incentive contracts, in the determination contract type and to not award the following cost-type contracts unless the contract is approved by the head of the contracting activity: (1) Cost-reimbursement contracts in excess of $50 million to be awarded after October 1, 2018 and before October 1, 2019; and (2) Cost-reimbursement contracts in excess of $25 million to be awarded on or after October 1, 2019. The Deviation is effective immediately and will remain in effect until it is incorporated into the DFARS. (DoD Class Deviation 2019-O0001, Nov. 27, 2018).

FAR Council Issues Proposed Rule Regarding Ombudsman for Indefinite Delivery Contracts (FAR Case 2017-020)

On November, 1, 2018, the FAR Council issued a proposed rule to implement a new clause for use in multiple-award indefinite-delivery, indefinite-quantity (IDIQ) contracts that provides information on the task-and-delivery-order ombudsman. The objective of the proposed rule is to implement a single clause available for use by all agencies when awarding multiple award IDIQ contracts that provides contractors with the requisite information for the agency task-and-delivery order ombudsman. Currently 10 U.S.C. 2304c and 41 U.S.C. 4106 require agencies to appoint or designate a task-and-delivery order ombudsman who is responsible for reviewing complaints from contractors and ensuring that all of the contractors are afforded a fair opportunity to be considered for the award of an order, consistent with the procedures in the contract. This requirement is currently implemented through FAR 15.504(a)(4)(v), which requires that the name, address, telephone number, facsimile number, and email address of the agency's task-and-delivery order ombudsman be included in IDIQ solicitations, if multiple awards may result from the solicitation, and multiple-award IDIQ contracts. Due to this requirement, several agencies created an agency-level contract clause that provides this information to contractors. The proposed rule standardizes the way to provide the necessary information to contractors with a single contract clause for use by all agencies. The new clause, FAR 52.216-XX, Task-Order and Delivery-Order Ombudsman, would provide contractors will contact information (as a fill-in) for the agency ombudsman, explains the responsibilities of the ombudsman, and explains that contacting the ombudsman does not alter the timelines for other processes in the FAR. Additionally, an Alternate I clause is proposed to the main clause for contracts used by multiple agencies. The Alternate I clause explains that for contracts used by multiple-agencies, complaints from contractors concerning orders placed under multi-agency contracts are primarily reviewed by the task-and-delivery-order ombudsman for the ordering agency and provides the offeror with the contact information for the ordering agency's ombudsman. The rule does not impose any burden on contractors, rather, the proposed rule provides contractors with information on the responsibilities of and how to contact the ombudsman. The FAR Council plans to apply this clause to solicitations and contracts for the acquisition of commercial items, including commercial off-the-shelf (COTS) items. (83 Fed. Reg. 54901, Nov. 1, 2018).

DoD Quietly Kills Controversial IR&D Rule

On November 4, 2016, the DoD published a proposed change to the DFARS that would have significantly altered DoD's regulatory landscape regarding independent research and development (IR&D) costs. On the same day, DOD also issued a final rule that required certain contractors to participate in a technical interchange before incurring IR&D costs. Both the proposed rule and the final rule met the same fate--each rule was withdrawn and abandoned. This is an appropriate outcome. Both the proposed rule and the final rule were counter-productive, vague and ambiguous, and carried significant risk of disincentivizing contractor investment in innovation. While both rules are now withdrawn, the DOD concerns expressed with respect to IR&D as part of Better Buying Power 3.0 likely remain unresolved. For more information, read Dentons' client alert here.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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