The FAR Councils Drop 10 FAR Amendments in End-of-Fiscal-Year Blitz

by Holland & Knight LLP
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On September 30, 2016, the Federal Acquisition Regulation (FAR) Councils issued 10 FAR amendments (nine final and one interim) on a broad range of topics. One rule imposes new risks for contractors with delinquent taxes or felony convictions. Other rules address small business concerns by providing new authority for women-owned small business sole source awards and amending the current policy against unnecessary or unjustified consolidation. Another confirms a previously imposed cap on allowable employee compensation and another may open up new sources of services and supplies in Ukraine and Moldova. Many of these final rules are implementations of previously issued "interim" rules that have been in effect for the past year or two. Holland & Knight will provide more expansive discussions of certain of these rules in the days and weeks ahead.

A summary of these 10 FAR amendments with links to the Federal Register notices follows:

1. Prohibition on Contracting with Corporations with Delinquent Taxes or a Felony Conviction (2015-011)

This final rule adopts, without change, an interim rule published on December 4, 2015.  This rule implements provisions of the Consolidated and Further Continuing Appropriations Act of 2015 and prohibits the Federal Government from entering into a contract with any "corporation" having a delinquent Federal tax liability or a felony conviction under any Federal law within the last 24 months, unless the agency has considered suspension or debarment of the corporation and has made a determination that this further action is not necessary to protect the interests of the Government. As noted in the interim rule, reportable tax liabilities are those which have been "assessed, [and] for which all judicial and administrative remedies have been exhausted or have lapsed." This final rule leaves in place FAR clauses 52.209-11 and 52.209-12, which were prescribed by the interim rule, and which require offerors to certify to the foregoing. Effective Date: September 30, 2016.

2. Updating Federal Contractor Reporting of Veterans' Employment (2015-036)

This rule implements changes required by the Veterans’ Employment and Training Service (VETS) of the Department of Labor. The final rule implements without any changes an interim rule issued late last year.  The purpose is to update obsolete regulations regarding how contractors report veterans’ employment data, including updated terminology and new procedures for filing the annual report. The revisions affect FAR 52.222-37 – EMPLOYMENT REPORTS ON VETERANS (FEB 2016), a clause that is required in contracts with an expected value of $150,000 performed by U.S. employees. 

Contractors who are subject to this clause should update their compliance procedures regarding filing the annual VETS-4212 "Federal Contractor Veterans’ Employment Report." In addition, FAR 52.222-37 is now a mandatory flowdown in subcontracts for commercial items per the revision to FAR 52.244-6. Effective Date: September 30, 2016.

3. Non-Retaliation for Disclosure of Compensation Information (Interim) (2016-0007)

Through this interim rule, the FAR has been amended to provide a policy prohibiting Federal contractors from discriminating against employees who "inquire about, discuss, or disclose their own compensation or the compensation of other employees or applicants." The interim rule amends the FAR Equal Opportunity clause (52.222-26) to include this prohibition.  It also requires contractors to incorporate this policy into existing employee manuals or handbooks and to post this policy in "conspicuous" places available to employees and applicants for employment. The interim rule implements Executive Order 13665, signed on April 8, 2014 and published in the Federal Register. Comments are due on the interim rule on or before November 29, 2016. Effective Date: applies to solicitations and contracts issued on or after September 30, 2016.

4. Sole Source Contracts for Women-Owned Small Businesses (2015-032)

This rule adopts as final an interim rule published late last year implementing regulatory changes made by the Small Business Administration (SBA) that provide for authority to award sole source contracts to economically disadvantaged women-owned small business concerns and to women-owned small business concerns eligible under the Women-Owned Small Business (WOSB) Program. This authority applies to Federal contracts in certain industries that SBA has determined to be under represented by small business concerns owned and controlled by women, a 12-page list of which is available here. The final is primarily procedural instructions regarding how and when contracting officers may consider sole source awards and set-aside competitions for women-owned small businesses. Effective Date: September 30, 2016.

5. Unique Identification of Entities Receiving Federal Awards (2015-0022)

The FAR has been amended to remove reference to the proprietary term "Data Universal Numbering System" a/k/a "DUNS®" numbers. References to the "DUNS" numbering system have been replaced with a new term: "unique entity identifier." The summary of this final rule notes that the Government is "establishing a process for considering alternatives to existing entity identifiers" and that the Government "does not intend to move away from the use of the DUNS® number in the short term."  As noted in the proposed rule, the DUNS numbering system is owned by Dun and Bradstreet. The FAR Councils announced that moving away from the use of a proprietary system will "provide opportunities for future competition that can reduce costs to taxpayers." The final rule amends a substantial number of FAR provisions, clauses and standard forms. Effective Date: October 31, 2016.

6. Consolidation and Bundling (2014-015)

This rule provides a government-wide policy on consolidation and bundling of requirements previously performed by small businesses. It makes significant changes to the proposed rule published in June 2015. In general, the rule amends FAR Subpart 7.1 regarding acquisition planning and implements a policy intended to avoid "unnecessary and unjustified" consolidation of small business contracts.  In general, before an agency conducts an acquisition that is a consolidation of requirements with a total value exceeding $2 million, the senior procurement executive or chief acquisition shall make a written determination that consolidation is necessary and justified that addresses numerous procedures and factors relevant to the decision. The changes provide new grounds for protest for small businesses seeking to protect their work from consolidation. Effective Date: October 31, 2016.

7. Amendment Relating to Multi-year Contract Authority for Acquisition of Property (2016-006)

FAR 17.105-1 has been amended to require that "significant" savings would be achieved by entering into a multi-year contract. Previously, the FAR required a "substantial" savings. This change implements a corresponding statutory change and is being published as final without a public comment period.  Effective Date: October 31, 2016.

8. New Designated Countries—Ukraine and Moldova (2016-009)

In what could be a significant development for the economies of Ukraine and Moldova, these countries have been added to the list of Designated Countries that are protected from the discriminatory provisions of the Buy American statute. For acquisitions of supplies or services exceeding $191,000 or construction contracts exceeding $7,358,000, services and end products of Ukraine and Moldova may not be acquired by the U.S. Government and its prime contractors, pursuant to FAR 52.225-5 or 52.225-11. This creates new opportunities for Federal contracting and subcontracting, especially for the emerging information technology industry in Ukraine. Effective Date: October 31, 2016.

9. Contractors Performing Private Security Functions (2014-0022)

This final rule removes the distinction between DOD and non-DOD procurements for private security functions outside the United States. It also adds a definition of "full cooperation" which affirms that the contractors obligation to cooperate and provide information to the Government related to certain incidents does not foreclose any contractor rights in defending itself. Among other things the FAR clause (52.225-26) now makes clear that the contractor is not required to waive attorney-client privilege or the protections of the attorney work product doctrine. It also notes that individuals are not required to waive attorney-client privilege or Fifth Amendment rights and that contractors are not restricted from conducting internal investigations or mounting a defense to alleged violations. Effective Date: October 31, 2016.

10. Limitation on Allowable Government Contractor Employee Compensation Costs (2014-012)

This rule implements without change an interim rule published in 2014 revising the allowable cost limit regarding the compensation of contractor and subcontractor employees. For contracts awarded on or after June 24, 2014, the compensation of employees in excess of the benchmark compensation determined by the OFPP Administrator (currently $487,000) are unallowable.  The rule does permit an agency to establish narrow exceptions for scientists, engineers, or other specialist. Because the interim rule has been in effect since 2014, this final rule, which makes only a few minor clarifications, is not a major change. Effective Date: September 30, 2016.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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