Government Contracts Regulatory and Legislative Update

Regulations

DoD Issues Proposed Rule Clarifying How Contractors May Submit Relevant Information to Support Market Research for Price Analysis

On September 26, 2019, DoD issued a proposed rule to amend the DFARS to implement sections 871 and 872 of the National Defense Authorization Act (“NDAA”) for Fiscal Year 2017. This proposed rule would amend DFARS 212.209(a), which addresses the determination of price reasonableness in the acquisition of commercial items. The focus of this requirement is that agencies must conduct market research to support the determination of price reasonableness for commercial items. The rule proposes to add the reference to 10 U.S.C. 2377 and directs contracting officers to use the information submitted under DFARS 234.7002(d) when acquiring major weapon systems as commercial items in accordance with 10 U.S.C. 2379, or, in the case of other items, other relevant information as described in DFARS 212.209.

This proposed rule also implements the requirements of section 872 in DFARS subpart 234.70, which addresses the acquisition of major weapon systems as commercial items. DFARS 234.7002(d) addresses the relevant information necessary to make a determination of price reasonableness. To implement section 872, this rule proposes a new paragraph (d)(5) at DFARS 234.7002, which would allow an offeror to submit information or analysis relating to the value of a commercial item to aid in the determination of the reasonableness of the price of such item. A contracting officer may consider such information or analysis in addition to the information submitted pursuant to other paragraphs in DFARS 234.7002(d). Comments on the rule are due by November 25, 2019.

DoD Issues Proposed Rule to Exempt from Competition Certain Follow-On Productions Contracts

On September 26, 2019, DoD issued a proposed rule amending the DFARS to implement section 815 of the NDAA for Fiscal Year 2016. Section 815 repeals and replaces section 845 of the NDAA for FY 1994 with 10 U.S.C. 2371b, which modifies the authority of DoD to carry out certain prototype project transactions and the criteria required to award an associated follow-on production contract to a participant in the transaction without the use of competitive procedures. Currently, DFARS 206.001(S-70) states that the award of a follow-on production contract for products developed under the authority of 10 U.S.C. 2371 is excepted from competitive procedures, if (1) The prototype project transaction agreement includes a provision for a follow-on production contract; (2) specific criteria in 10 U.S.C. 2371 note are met; and (3) the quantities and prices for the follow-on contract do not exceed the quantities and target prices established in the transaction agreement. Section 815 no longer limits a follow-on production contract to quantities and target prices that were established in the transaction agreement. As a result, this proposed rule removes the limitation from the requisite criteria to exempt a follow-on contract from competitive procedures in subpart 206. Comments are due by November 25, 2019.

DoD Issues Proposed Rule Establishing Limitations of and Prohibitions on the Use of the Lowest Price Technically Acceptable Source-Selection Process

On September 26, 2019, DoD issued a proposed rule amending the DFARS to implement the limitations of and prohibitions on use of the lowest prices technically acceptable (LPTA) source-selection process. The LPTA source-selection process is implemented in Federal Acquisition Regulation (FAR) section 15.101-2. To supplement the FAR, DoD is proposing to add a new DFARS section 215.101-2-70 that addresses the various limitations of and prohibitions on the use of the LPTA source-selection process. These statutory limitations establish that the LPTA source selection process can only be used when all of the following conditions are met:

• Minimum requirements can be described clearly and comprehensively and expressed in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
• No or minimal value will be realized from a proposal that exceeds the minimum technical or performance requirements;
• The proposed technical approaches will require no or minimal subjective judgment by the source-selection authority as to the desirability of one offeror's proposal versus a competing proposal;
• The source-selection authority has a high degree of confidence that reviewing the technical proposals of all offerors would not result in the identification of characteristics that could provide value or benefit;
• No or minimal additional innovation or future technological advantage will be realized by using a different source-selection process;
• Goods to be procured are predominantly expendable in nature, are nontechnical, or have a short life expectancy or short shelf life;
• The contract file contains a determination that the lowest price reflects full life-cycle costs of the product(s) or service(s) being acquired; and
• The contracting officer documents the contract file describing the circumstances justifying the use of the lowest price technically acceptable source-selection process.

Finally, the new statutory limitations of and prohibitions on the use of the LPTA source-selection process and reverse auctions apply to not only acquisitions conducted using FAR part 15 procedures for negotiation, but also to (1) orders placed against Federal Supply Schedules using FAR subpart 8.4 procedures; (2) acquisitions for commercial items using FAR part 12 procedures; (3) acquisitions conducted using FAR part 13 simplified acquisition procedures; and (4) orders placed under multiple-award indefinite-delivery contracts using FAR 16.505 procedures for fair opportunity. The rule became effective October 1, 2019.

The FAR Council Issues Proposed Rule Prohibiting Award of Contracts to Colleges and Universities that Exclude ROTC on Campus

On September 24, 2019, the FAR Council issued a proposed rule to amend the FAR to implement 10 U.S.C. 983, which prohibits the award of certain federal contracts with covered funds to institutions of higher education that prohibit Reserve Officer Training Corps (ROTC) units or military recruiting on campus. “Covered funds” is defined in 10 U.S.C. 983 to be any funds made available for DoD, Department of Transportation, DHS, or National Nuclear Security Administration of the Department of Energy, the Central Intelligence Agency, or any department or agency in which regular appropriations are made in the Departments of Labor, Health and Human Services, Education, and Related Agencies Appropriations Act. None of these covered funds may be provided by contract or grant to an institution of higher education that has a policy or practice (regardless of when implemented) that prohibits or in effect prevents the Secretary of Defense from establishing or operating a Senior ROTC at that institution or that prohibits or in effect prevents a student at that institution from enrolling in a ROTC unit at another institution of higher education. Comments on the rule are due by November 25, 2019.

The FAR Council Issues Proposed Rule Notifying Contractors of Applicable Afghanistan Taxes

On September 20, 2019, the FAR Council issued a proposed rule amending the FAR to add to two new clauses relating to Afghanistan taxes or similar charges when contracts are being performed in Afghanistan. Agreements established with the Islamic Republic of Afghanistan exempt the United States government, the North Atlantic Treaty Organization (NATO) forces, and their contractors from liability for Afghanistan taxes and similar charges. The new FAR clauses would notify contractors of these exemptions. Comments on the rule are due by November 19, 2019.

The FAR Council Issues Proposed Rule Taxing Certain Foreign Procurements

On September 20, 2019, the FAR Council issued a proposed rule amending the FAR to withhold a two (2) percent tax on contract payments made by the U.S. government to foreign persons pursuant to certain contracts. The proposed rule applies to federal government contracts for goods or services that are awarded to foreign persons. This rule implements the Department of the Treasury’s final regulations published under section 5000C of the Internal Revenue Code. Comments on the rule are due by November 19, 2019.

VA Makes Additional Amendments to the VAAR to Incorporate Policy Changes

On September 4, 2019, the VA issued a final rule amending and updating its VA Acquisition Regulation (VAAR) in phased increments to revise or remove any policy superseded by changes in the Federal Acquisition Regulation (FAR), to remove procedural guidance internal to VA into the VA Acquisition Manual (VAAM), and to incorporate any new agency-specific regulations or policies. These changes seek to streamline and align the VAAR with the FAR, to remove outdated and duplicative requirements, and to reduce the burden on contractors. The rule became effective on October 4, 2019.

The FAR Council Issues Final Rule to Add Australia as a World Trade Organization Government Procurement Agreement Agency

On September 10, 2019, the FAR Council issued a final rule amending the FAR to add Australia to the list of World Trade Organization Government Procurement Agreement (WTO GPA) countries wherever the list appears in the FAR, whether as a separate definition, as part of the definition of “designated country” or “Recovery Act designated country,” or as part of the list of countries that are exempt from the prohibition of acquisition of products produced by forced or indentured child labor (FAR 22.1503, 25.003, 52.222-19, 52.225-5, 52.225-11, and 52.225-23). Australia became a party to the WTO GPA on May 5, 2019. Australia is already a designated country because it is a Free Trade Agreement Country. This rule becomes effective October 10, 2019.

The FAR Council Issues Final Rule Amending FAR to Reflect Update to CPARS System

On September 10, 2019, the FAR Council issued a final rule amending the FAR to implement changes regarding the retirement of the Past Performance Information Retrieval System (PPIRS) and establishment of the Contractor Performance Assessment Reporting System (CPARS) as the official system for past performance information. Effective January 15, 2019, PPIRS was retired, concluding its merger with CPARS. All data from PPIRS has been merged into CPARS.gov. This final rule amends FAR 42.1501 and 42.1503 to establish CPARS as the official system for contractor past performance information. Conforming changes are also made in FAR Parts 9, 13, 15, and 25 to remove all references to PPIRS and add CPARS. This rule becomes effective October 10, 2019.

The FAR Council Issues Final Rule Updating the Definition of Affiliates

On September 10, 2019, the FAR Council issued a final rule amending the FAR to revise the definition of “affiliates” at FAR 19.101, as well as references to this definition at FAR 2.101, 19.001, 19.1303, 19.1403, and in the clause at FAR 52.219-27, Notice of Service-Disabled Veteran-Owned Small Business Set-Aside. The definition of “affiliates” is amended by deleting existing language and replacing it with a reference to SBA's regulations on determining affiliation at 13 CFR 121.103. Additionally, the clauses at FAR 52.219-12, Special 8(a) Subcontract Conditions, and 52.219-17, Section 8(a) Award, currently require contractors who are 8(a) Program participants to obtain written approval from the Small Business Administration (SBA) and the contracting officer before subcontracting the performance of any contract requirements. SBA has removed this requirement from their regulations on the 8(a) Program at 13 CFR part 124. Therefore, the FAR Council is removing this obsolete requirement from the FAR through this final rule. This rule becomes effective October 10, 2019.

The FAR Council Issues Final Rule Prohibiting Use of Products or Services of Kaspersky Lab and Its Related Entities

On September 10, 2019, the FAR Council adopted as final, without change, an interim rule amending the FAR to implement section 1634 of the NDAA for Fiscal Year 2018. The interim rule added a new FAR 4.20, Prohibition on Contracting for Hardware, Software, and Services Developed or Provided by Kaspersky Lab, with a corresponding new contract clause at 52.204-23.FAR 52.204-23 now prohibits contractors from providing any hardware, software, or services developed or provided by Kaspersky Lab or its related entities and from using any such hardware, software, or services in the development of data or deliverables that were first produced in the performance of the contract. The contractor must also report any such hardware, software, or services discovered during contract performance; this requirement flows down to subcontractors. The rule became effective September 10, 2019.