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

Highlights this month include:

  • DoD Issues Final Rule Updating DFARS Clause on Section 8(a) Direct Award
  • DoD Issues Final Rule Repealing DFARS Clause "Option for Supervision and Inspection Services"
  • DoD Issues Final Rule Repealing DFARS Clause "Acquisition Streamlining"
  • DoD Issues Final Rule Repealing DFARS Provision "Bonds or Other Security"
  • DoD Withdraws Proposed Rule on Performance-Based Payments and Progress Payments
  • DoD Issues Proposed Rule Regarding Amendments Related to General Solicitations
  • DoD Issues Proposed Rule Regarding the Use of Brand Name or Equal Proprietary Specifications or Standards

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

Legislation

As the legislative calendar was limited in October due to midterm elections, no relevant legislative government contract updates occurred this month. Legislative activity is expected to resume after midterms.

Regulations

  • DoD Issues Final Rule Updating DFARS Clause on Section 8(a) Direct Award
  • DoD Issues Final Rule Repealing DFARS Clause "Option for Supervision and Inspection Services"
  • DoD Issues Final Rule Repealing DFARS Clause "Acquisition Streamlining"
  • DoD Issues Final Rule Repealing DFARS Provision "Bonds or Other Security"
  • DoD Withdraws Proposed Rule on Performance-Based Payments and Progress Payments
  • DoD Issues Proposed Rule Regarding Amendments Related to General Solicitations
  • DoD Issues Proposed Rule Regarding the Use of Brand Name or Equal Proprietary Specifications or Standards

Regulations

DoD Issues Final Rule Updating DFARS Clause on Section 8(a) Direct Award (DFARS Case 2018-D052)

On October 31, 2018, DoD issued a final rule, effective immediately, to remove an obsolete requirement from DFARS 252.219-7009, Section 8(a) Direct Award. Currently, the clause requires 8(a) contractors to obtain written approval from the Small Business Administration (SBA) and the contracting officer prior to subcontracting the performance of any contract requirements. This requirement, however, no longer exists in SBA's regulations. The final rule deletes paragraph (c)(2); the remaining paragraphs (c) and (c)(1) are combined in to a single paragraph (c). The clause currently applies to solicitations and contracts below the simplified acquisition threshold (SAT) and to the acquisition of commercial items, including commercially available off-the-shelf items (COTS). DoD plans to apply the rule to contracts below the SAT and to the acquisition of commercial items, including COTS items to ensure that contracts with 8(a) Program participants are covered by the rule. (83 Fed. Reg. 54681, Oct. 31, 2018).

DoD Issues Final Rule Repealing DFARS Clause "Option for Supervision and Inspection Services" (DFARS Case 2018-D041)

On October 31, 2018, DoD issued a final rule, effective immediately, to remove DFARS 252.236-7009, Option for Supervision and Inspection Services, remove the associated clause prescription at DFARS 236.609-70(a)(1), and revise a cross reference in the introductory text to DFARS 252.236-7011. DFARS 252.236-7009 was used in fixed-price solicitations and contracts for architect-engineering services when the architect may also be required to provide supervision and inspection services during construction. DoD determined that the need for architect-engineers to perform supervision and inspection services during construction is uncommon. When necessary, an option that accurately describes the scope of services can be included in the contract pursuant to FAR subpart 17.2, Options. (83 Fed. Reg. 54680, Oct. 31, 2018).

DoD Issues Final Rule Repealing DFARS Clause "Acquisition Streamlining" (DFARS Case 2018-D033)

On October 31, 2018, issued a final rule, effective immediately, amending the DFARS to remove DFARS 252.211-7000, Acquisition Streamlining, and the associated prescription at DFARS 211.002-70. DFARS 252.211-7000 was included in all solicitations and contracts for systems acquisition programs and required contractors to: prepare acquisition streamlining recommendations in accordance with the performance work statement; format and submit the recommendations in accordance with the contract data requirements list of the contract; and include the clause in all subcontracts valued over $1.5 million that are awarded in the performance of the contract. The clause was originally added to the DFARS to implement DoD Directive 5000.43, Acquisition Streamlining. The Directive has since been cancelled by DoD instruction 5000.02, Operation of the Defense Acquisition System, requiring contractors to submit acquisition streamlining recommendations. DoD found that FAR subpart 7.1, Acquisition Plans, already includes acquisition streamlining and industry engagement as considerations to be made when preparing a written acquisition plan. As the implementing Directive has been cancelled and FAR subpart 7.1 addresses acquisition streamlining, DFARS 252.211-7000 was considered unnecessary and removed. (83 Fed. Reg. 54676, Oct. 31, 2018).

DoD Issues Final Rule Repealing DFARS Provision "Bonds or Other Security" (DFARS Case 2018-D036)

On October 31, 2018, DoD issued a final rule, effective immediately, amending the DFARS to remove DFARS 252.228-7004, Bonds or Other Security, and the associated clause prescription at DFARS 228.170. The Miller Act (40 U.S.C. § 3131-3134) requires contractors on certain construction contracts to post bonds that guarantee performance of the contract and payment to subcontractors and supplies. DoD notes that several FAR clauses are available to implement these requirements on construction contracts. Specifically, DoD notes that FAR clause 52.228-16, Performance and Payment Bonds—Other than Construction, and FAR provision 52.228-1, Bid Guarantee, provide the information contained in the DFARS provision and can be included in solicitations and contracts that involve dismantling, demolition, or removal of improvements. Since the FAR provision and clause can be used to provide the same information included in the DFARS provision, DoD determined that the DFARS provision is no longer necessary and should be removed. This rule only removes the obsolete DFARS provision and does not impose any new requirements on contracts at or below the simplified acquisition threshold and for commercial items, including commercial available off-the-shelf items. (83 Fed. Reg. 54679, Oct. 31, 2018).

DoD Withdraws Proposed Rule on Performance-Based Payments and Progress Payments

On October 4, 2018, the DoD withdrew a proposed rule, published on August 24, 2018, regarding performance-based payments and progress payments. The proposed rule intended to implement Section 831 of the FY 2017 National Defense Authorization Act (NDAA) which addresses the preference for performance-based payments, and to streamline the performance-based payment process. The proposed rule would have amended the DFARS to revise progress payments and performance-based payments policies for DoD contracts. Under the proposed rule, a customary progress payment rate of 50 percent (50%) would apply for other than small businesses and the 90 percent (90%) rate would apply for small businesses. The proposed rule would have provided criteria by which contractors can achieve customary progress payment rate of up to 95 percent (95%). DoD is withdrawing the rule in order to conduct additional outreach with the industry regarding contract financing methods. Implementation of Section 831 of the FY 2017 NDAA will be addressed in a proposed rule to be published in 2019. (83 Fed. Reg, 50052, Oct. 4, 2018).

DoD Issues Proposed Rule Regarding Amendments Related to General Solicitations (DFARS Case 2018-D021)

On October 31, 2018, DoD issued a proposed rule to implement Sections 221 and 861 of the FY 2018 NDAA by expanding the definition of other competitive procedures, and extending the terms and increasing the dollar value under the contract authority for advanced development of initial or additional prototype units. Section 221 amends 10 U.S.C. § 2302(2)(B) to allow for an expanded application of other competitive procedures by replacing the words "basic research" with "science and technology." Competitive procedures are defined in 10 U.S.C. 2302(2) as "procedures under which the head of an agency enters into a contract pursuant to full and open competition." Changing the words "basic research" to science and technology expands the authority to use other competitive procedures for "advanced technology development" and "advanced component development and prototypes" research proposals, in addition to the previously authorized "basic research" and "applied research" proposals. Section 221 permits the use of broad agency announcements (BAAs) for competitive selection of science and technology proposals by authorizing the use of the competitive procedures at 10 U.S.C. 2302(2)(B) that result from a general solicitation and peer or scientific review of such proposals—a key element of the BAA process. Section 861 amends 10 U.S.C. § 2302e to allow for an extended term limit and increased dollar threshold under the contract authority for advanced development of initial or additional prototype units awarded from a competitive selection, as specified in 10 U.S.C. § 2302(2)(B). The statutory term limit extends from 12 months to 2 years and the dollar threshold increases from $20 million to $100 million in fiscal year 2017 constant dollars. In summary, the proposed rule expands the application of other competitive procedures to include the competitive selection of science and technology proposals beyond "basic research" proposals. This proposed rule also expands the contract authority for advanced development of initial or additional prototype units. The objective of this rule is to implement Sections 221 and 861 to establish BAAs as a competitive procedure that may be used to select science and technology proposals and to expand the term limit and dollar threshold for the contract authority for advanced development of initial or additional prototype units. Comments on the proposed rule are due by December 31, 2018. (83 Fed. Reg. 54698, Oct. 31, 2018).

DoD Issues Proposed Rule Regarding the Use of Brand Name or Equal Proprietary Specifications or Standards (DFARS Case 2017-D040)

On October 31, 2018, DoD issued a proposed rule to implement Section 888(a) of the FY 2017 NDAA, which requires the use of brand name or equivalent descriptions or proprietary specifications or standards in solicitations to be justified and approved. Section 888(a) requires that competition on DoD contracts not be limited through the use of brand name or equivalent descriptions, or proprietary specifications or standards, in solicitations, unless a justification for such specification is provided and approved in accordance with 10 U.S.C. § 2304(f). The requirements of 10 U.S.C. § 2304(f) are implemented in FAR subparts 6.303 and 6.304, which addresses the content, format, and approval authorities for justifications for other than full and open competition. The proposed rule amends DFARS 206.302-1 to add a new paragraph (c)(2) advising contracting officers that, notwithstanding FAR 6.302-1(c)(2), a justification and approval described at FAR 6.303 is required when using brand name or equal descriptions. The rule further amends DFARS 213.501 advising contracting officers that a justification and approval for brand name or equal descriptions or proprietary specifications or standards is required when using FAR subpart 13.5 simplified procedures for the acquisition of certain commercial items. The objective of the proposed rule is to ensure that contracting officers execute a justification and approval in accordance with FAR 6.302-1 when including brand name or equal descriptions, or proprietary specifications or standards in a solicitation. Comments on the proposed rule are due by December 31, 2018. (83 Fed. Reg. 54696, Oct. 31, 2018).

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