2018 Recap – Federal Acquisition Circulars
Starting in 2019 I will be editing a reference book on the FAR, tracking changes made in 2018. Consider this article to be a foretaste of that update.
There were four Federal Acquisition Circulars (FACs) issued in 2018. Interestingly, with the issuance of FAC 2005-99 (June 15, 2018) the numbering reset and the following FAC (December 20, 2018) was numbered 2019-01.
FAC 2005-97 was issued January 24, 2018. It contained one final rule (FAR Case 2018-001: Trade Agreements Thresholds) that adjusted “the thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements as determined by the United States Trade Representative, according to predetermined formulae under the agreements.” The final rule made changes to FAR 25.4 (“Trade Agreements”) and other FAR sections that include trade agreement thresholds. It also revised certain solicitation provisions and contract clauses.
FAC 2005-98 was issued May 1, 2018. It contained four final rules, as follows:
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FAR Case 2015-039: Audit of Settlement Proposals. Increased the “dollar threshold for the audit of prime contract settlement proposals and subcontract settlements submitted in the event of contract termination, from $100,000 to align with the threshold in FAR 15.403–4(a)(1) for obtaining certified cost or pricing data, which is currently $750,000.”
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FAR Case 2017-004: Liquidated Damages Rate Adjustment. Made an inflation adjustment to “the rate of liquidated damages assessed for violations of the overtime provisions of the Contract Work Hours and Safety Standards Act.” The rate to be used is specified at 28 C.F.R. 5.5(b)(2).
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FAR Case 2017-007: Task- and Delivery-Order Protests. Raised the protest threshold “from $10 million to $25 million (applicable to DoD, NASA, and the Coast Guard) and [repeals] the sunset date for the authority to protest the placement of an order (for the other civilian agencies), which was also previously repealed by the GAO Civilian Task and Delivery Order Protest Authority Act of 2016.”
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FAR Case 2017-008: Duties of Office of Small and Disadvantaged Business Utilization. Amended FAR 19.201 “to update the list of duties for OSDBUs and OSBPs in line with section 15(k) of the Small Business Act. No clauses or provisions are being created or revised by this rule.”
FAC 2005-99 was issued June 15, 2018. It contained two interim rules and zero final rules. The two interim rules were:
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FAR Case 2017-018: Violations of Arms Control Treaties or Agreements with the United States. Added a new FAR section, 9.109, to “address the prohibition on contracting with an entity involved in activities that violate arms control treaties or agreements with the United States.” Also added a new provision 52.209-13 that requires a contractor certification. Does not apply to acquisitions of commercial items or to acquisitions below the Simplified Acquisition Threshold.
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FAR Case 2018-010: Use of Products and Services of Kaspersky Lab. Added a new FAR section, 4.20, and a related contract clause to “prohibit[] the use of hardware, software, and services of Kaspersky Lab and its related entities by the Federal Government on or after October 1, 2018.”
FAC 2019-01 was issued December 20, 2018. It contained one final rule (FAR Case 2015-017: Combatting Trafficking in Persons-Definition of “Recruitment Fees”). The final rule added a definition of “recruitment fees” to FAR 22.1702 and revised the language at 22.1703. It also revised the language of contract clauses 52.212-5, 52.213-4, 52.222-50, and 52.244-6.
In addition to the foregoing, a late proposed rule was issued December 26, 2018. The proposed rule would implement FAR Case 2017-005, entitled “Whistleblower Protection for Contractor Employees.” The proposed rule would “make permanent the pilot program for enhancement of contractor protection from reprisal for sharing certain information.” It would also “clarify” that “that the cost principles at 10 U.S.C. 2324(k) and 41 U.S.C. 4304 and 4310 that prohibit reimbursement for certain legal costs apply to costs incurred by a contractor, subcontractor, or personal services contractor.” The rule-making comments note that “personal services contractors are contractors” and “cost principles generally already apply in the same way to costs incurred by subcontractors as to costs incurred by contractors.”
UPDATE: Contract Financing and Performance Incentives
Hey! Remember that proposed DFARS rule on contract financing payments? You know, the one we wrote about here and then again right here? (Actually we wrote a quick update in between those other two articles, but let’s skip that one.) You know, the one that—according to watercooler gossip and rumor—cost a DoD Director a senior leadership position.
Yeah, that’s the one. Not a great rule and, if gossip and rumor is to be believed, not a great public relations result at the public meetings held to solicit “public input” on the proposed language. (Hey, that’s a lot of “public” used in a sentence to describe a rule that, based on language and discussion points, really didn’t benefit the public to any great extent.)
Anyway, it’s back.
What? No, really. It’s back. And we’ve all got to deal with it.
The Federal Register noticed a new series of three public meetings to be held “to obtain views of experts and interested parties in Government and the private sector regarding revising policies and procedures for contract financing, performance incentives, and associated regulations for DoD contracts.” Yeah, for real.
The public meetings will be held in the Mark Center Auditorium, 4800 Mark Center Drive, Alexandria, Virginia, on the dates of January 10, January 22, and February 19. Note that participants (or onlookers) must register ahead of time.
Hey, let’s all hope these new public meetings go better than the last couple on the same topic, right?
What might participants wish to discuss at said meetings?
Well, if you recall, the earlier (now defunct) proposed rule sought to link the value of contract financing payments to certain performance criteria, including:
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Conviction or civil judgment related to fraud
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Criminal offense in connection with obtaining, attempting to obtain, or performing a public (Federal, State, or local) contract or subcontract
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Violation of Federal or State antitrust statutes relating to the submission of offers
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Commission of embezzlement, theft, forgery, or bribery
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Falsification or destruction of records
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Making false statements
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Tax evasion or violations of Federal criminal tax laws
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Receiving stolen property
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Any open level III or level IV corrective action requests (CARs) related to contractor business systems
Were we to present to the members of the DAR Council, we would note that the performance criteria specified in the (now defunct) rule had very little to do with enhancing performance in the “five domains” identified by the rule—i.e., On Time or Accelerated Contract Deliveries, Contractor Quality, Contractor Business Systems, Increasing Contract Opportunities for Small Business and for the Blind and Severely Disabled, and Receipt of Timely Quality Proposals. Really, at best only one of the detailed contractor performance criteria had any relation to any of the five domains; the rest were completely unrelated.
Moreover, every single one of the detailed performance criteria already had both legal and administrative remedies available to the government. Or did somebody on the DAR Council think that all those laws such as the False Claims Act, the False Statements Act, or the Federal Bribery Statute (to name but a few) were just there for window-dressing? And did the DAR Council think that the suspension or debarment rules were for show? And what about the Mandatory Disclosure rule? And what about the Contractor Business System Administration rule? And what about … we could go on, but let’s not.
The point is, there was no point to the (now defunct) proposed rule. It was redundant at best and double jeopardy at worst. It appeared to set up one single bureaucrat as the sole arbiter of how much a contractor might receive in contracting financing payments (to include performance-based payments) and, while authoritarianism seems to be in vogue these days, there is no reason to encourage it, especially when it puts thousands of jobs on the line and might end up hurting the warfighter.
DoD needs to declare what it cares about. If what the Pentagon cares about is accelerated contract deliveries and contractor quality, then it needs to award incentive contracts where the incentive is tied to on-spec, on-time deliveries. It’s that simple. If the Pentagon cares about contract opportunities for small business and for the blind and severely disabled, then it needs to incentivize prime contractor awards to such entities—though it may have to pay for those entities to become approved subcontractors.
And contractor business systems? Yeah, well that’s working out, isn’t it? Neither DCMA nor DCAA are resourced to effectively administer the oversight regime envisioned by the DAR Council in 2011, and we’re all awaiting a forthcoming GAO report that may shed some light on what’s working and what’s not working there. Our position is that the DAR Council broke it, and we need some new folks to come and fix it. Until then, keep the DAR Council the hell away from the topic.
So that’s what we might tell the DAR Council, were we to present at one of the three upcoming public meetings. But as we are not going to be in attendance, this blog article will have to suffice as a public record of our sentiments.
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Shay Assad Moves On
I’ve always been confused by Mr. Assad’s role(s) within the Department of Defense. At different points, he’s been a mediator (between DCAA and DCMA), a policy-maker, a builder of empires, and an industry antagonist. And those are just off the top of my head.
Let’s be clear here: I’ve never met Mr. Assad (unlike some of my industry peers) and I do not know him personally. What I know of the man, I know through public information: the ineligible healthcare dependent position, the CAS 412/413 position, the redefinition of “adequate price competition” decision, the Performance-Based Payments cash flow tool, various DFARS Class Deviations, and other similar issues that have come from his office over the past nine years. A keyword search identifies that we have written about Mr. Assad and his directives 49 times since 2010; this article marks the 50th instance. A quick scan of those articles reinforces our opinion. Based on the public information available to us: not a fan.
And now Mr. Assad is moving on.
We already knew that Mr. Assad was departing his role as Director, Defense Pricing and Contracting and we alluded to it in mid-December. We didn’t know where he was going or what he was going to be doing, but we knew he was moving on. Now comes word, via a report by Marcus Weisgerber at DefenseOne, that Mr. Assad is being reassigned to a DCMA office in Boston. His exact role is unclear, but it is being described as a lateral move. The exact report is as follows—“in the coming weeks, Assad will be moved from his position as director of defense pricing and contracting initiatives to a lateral position within the Defense Contract Management Agency in the Boston area. …” It’s tough to imagine what “lateral position” DCMA might offer him in terms of policy-making impact, but it’s likely that “lateral” refers to pay band and not roles and responsibilities.
An interesting aspect of Mr. Assad’s compensation was a negotiated agreement to permit him to maintain a primary residence in the Boston area while commuting to Washington, D.C., for his job at the Pentagon. Unlike almost every civilian and military employee of DoD, he was not required to relocate to accept a new position. Indeed, the taxpayers paid for his commuting expenses (though we suspect it was reported as taxable income to him). The DefenseOne article stated—
Assad had a special arrangement that allowed him to live in the Boston area and commute regularly to Washington, current and former defense officials said. Neither Ash Carter, then the Pentagon’s acquisition chief, nor his successor Frank Kendall objected to this arrangement, because they viewed Assad as unusually good at saving taxpayers’ money.
According to the article, taxpayers spent $503,000 on Assad’s travel during the past seven years. Is that a lot? Not really. But it is unusual, isn’t it?
Although the travel reimbursement may be an interesting aspect of Mr. Assad’s compensation, it is not why he is being reassigned, according to the report. Two other reasons were given: the first was the recent proposed rule on contract financing payments, about which we have written fairly extensively. (Note: not fans.) The second reason had to do with Mr. Assad’s character. Although he was seen as a shrewd and tough negotiator, “some current and former officials also describe him as a bully who needed to be monitored by his superiors out of fear he would overstep his authorities.”
When one combines the travel reimbursement with the political backlash from the contract financing rule, and then combines those with the perception that he was a maverick that needed watching, it seems that Mr. Assad’s liabilities outweighed his benefits, at least in the minds of his bosses.
Thus: Mr. Assad’s return to a permanent work location in the Boston area, one near his home and family, at what we assume to be a commensurate salary.
A soft landing indeed.
UPDATE: CO Dispositions of DCAA Proposal Findings
Recently we wrote about a DoD OIG report that criticized DCMA contracting officers for failing to properly document dispositions of DCAA audit findings related to allegedly noncompliant contractor cost proposals. To be clear, the DOD OIG audit report found that each of the contracting officers associated with the 23 files reviewed by the OIG auditors “took appropriate actions to address the proposal inadequacies identified by DCAA.” The problem was that nine of the 23 files didn’t contain adequate documentation of those actions.
If you follow the link in the first sentence you’ll see that we criticized the OIG auditors. We noted that the audit report curiously failed to include any discussion of DFARS 215.408(4) and the solicitation provision 252.215-7009, which provide a mandatory proposal adequacy checklist that contractors are supposed to submit along with their proposals. We also noted that the audit report curiously omitted any discussion of the actual DCAA audit findings, so it would be impossible for a third party to determine the materiality of the lack of file documentation. We further noted that, in our view, the audit report provided a misleading statement of the actual FAR requirement (found at 15.406-3(7)), which requires that a CO document dispositions of DCAA auditor recommendations, but which is silent regarding what a CO is to do if DCAA simply reports that a contractor proposal is inadequate and does not provide any recommendations. Perhaps the DCAA audit reports did provide recommendations to the COs; but we cannot tell because the OIG audit report didn’t discuss the DCAA audit findings at all.
Another curious aspect of the DoD OIG audit report was to be found in the responses. Management comments were included from many sources, including the U.S. Army Contracting Command, the Naval Air Systems Command, the Naval Sea Systems Command, the Space and Naval Warfare Command, and the Department of the Air Force (Office of the Assistant Secretary for Acquisition). There was even a response from the Principal Director, Defense Contracting and Pricing. All responses were thoughtful; there were some (minor) disagreements with the OIG’s recommendation to conduct refresher training. That said, the response from the Principal Director, Defense Contracting and Pricing, was interesting in that it was a full concurrence with the recommendation to issue better guidance to contracting officers—and it promised to issue that guidance within 60 days.
In all of the foregoing, where was the Director, DCMA? Nowhere, as we noted in our original blog post. You would think that before anybody issued guidance to DCMA contracting officers, that guidance would be coordinated with DCMA leadership, would you not? Yet, apparently, that was not the case in this instance.
Weird, right?
Anyway, the guidance from the office of Defense Contracting and Pricing was issued, as promised. It requires contracting officers “to document all DCAA identified inadequacies in the negotiation memorandum or another part of the contract file.” In addition, “contracting officers also must document why the actions take appropriately address the contractor price proposal inadequacies.” So there you have it.
One more item of interest: Appendix B of the audit report (“Other Items of Interest”) noted some concerns with the Contract Pricing Reference Guides. For those who don’t know, these are very important sources of information used to provide direction and guidance to DoD contracting officers in evaluating and negotiating contractor proposals. (They are also really useful reference sources for contractors as well!) The OIG audit report noted that the auditors “found instances where the Guides are outdated.” In addition, the auditors “noted that the guides are difficult to locate on the Acquisition Community Connection website. While the guides are referenced on the Defense Pricing and Contracting homepage, the user is required to navigate through at least five pages to access the Contract Pricing Reference Guides.”
What’s interesting is that the Directorate of Defense Contracting and Pricing maintains those Guides—or at least, it is supposed to do so. Curiously, although the Directorate was quick to concur with the audit report’s Recommendation related to contracting officer file documentation, it ignored entirely the issue of maintenance of the Contract Pricing Reference Guides. Perhaps it ignored the issue because a response was not required. Or perhaps it ignored the issue because addressing it would have taken resources from the Directorate; whereas adding to the file documentation burden of contracting officers cost it nothing except for the paper used to issue the guidance.
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