Government Contracts Blog : Government Contracts Lawyer & Attorney : Sheppard Mullin Law Firm : Bids, Licenses, Awards, Conflict of Interest.

Not so long ago, we called your attention to a troubling trend in the natural order of Government contracting. First, we recounted how DCAA has initiated itself into the dark art of intimidation. Then we described how a contracting officer’s mere disagreement with the DCAA could result in an IG referral for a poor CO who comes out on the other side of a DCAA recommendation. And when last we resumed our chronicle, we recalled that a call for an end to these frontal assaults on CO independence was issued – not only by us in the last several months – but by an ABA Ad Hoc Committee some 22 years ago.
 

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In an attempt to promote "protection" and "provide transparency," the FAR Councils recently issued a final rule formally mandating Government Accountability Office ("GAO") auditor access to interview contractor personnel during an audit of the contractor's records.  This final rule published on October 14, 2009 adopted, without change, an interim rule issued March 31, 2009, implementing section 871 of the Duncan Hunter National Defense Authorization Act for 2009 ("Section 871"), as codified at 41 U.S.C. 254d(c)(1) and 10 U.S.C. 2313(c)(1)."   The American Recovery and Reinvestment Act of 2009 (the "Recovery Act") provides a similar interview right, but the Recovery Act provision extends that right to agency inspector generals.  Congress limited Section 871 interview rights to the GAO.
 

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The Competition in Contracting Act (CICA) requires that agencies maximize the competition for goods and services and thus requires the use of full and open competition when soliciting offers and awarding government contracts. 10 U.S.C. § 2304; FAR 6.101. An agency satisfies this requirement through the use of "competitive procedures," which include procedures such as sealed bids, competitive proposals, and multiple award schedules. An agency may employ a competitive procedure (or combination thereof) that is best suited for the procurement and allows the agency to fulfill efficiently its requirements.   
 

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In Caddell Constr. Co., Inc., B-401596, et al, Sept. 21, 2009, the GAO sustained a protest against the pre-qualification of a vendor on the grounds that the Department of State’s (DOS) determination that the vendor satisfied the qualification requirements of the Omnibus Diplomatic Security and Antiterrorism Act of 1986 (Security Act) was unreasonable. The GAO recommended that the DOS withdraw the pre-qualification, concluding that the vendor did not have the necessary experience required by the Security Act. This recommendation rejected the DOS’s method of aggregating dollar values to determine an offeror’s qualification under the statute.
 

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Based on their view that contractors who subcontract the majority of the work to subcontractors add little or no value, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (FAR Councils) issued an interim rule on October 14, 2009 that limits excessive pass-through charges by contractors and subcontractors.  See 74 Fed. Reg. 52,853 (October 14, 2009). The rule not only makes excessive pass-through costs unallowable, but also provides for recoupment of pass-through charges later determined to be excessive. 
 

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The FAR Councils issued an interim rule, effective October 14, 2009, revising the circumstances under which services not offered and sold commercially can still qualify as commercial services. This is important for a couple of reasons, but probably most importantly, because commerciality can eliminate the requirement for the submission of cost or pricing data and can limit the amount of Government contracting requirements to which a company is subjected. The new interim rule now permits a Contracting Officer determination of commerciality even where services are not offered and sold competitively in substantial quantities in the commercial marketplace. 
 

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On October 14, 2009, the Civilian Acquisition Council and the Defense Acquisition Regulation Council issued an interim rule that limits the use of award-fee contracts, modifies how a contractor earns an award fee, and prohibits the rollover of unearned award fees. The interim rule implements § 814 of the John Warner National Defense Authorization Act (NDAA) for Fiscal Year 2007, § 867 of the Duncan Hunter NDAA for Fiscal Year 2009, and the Office of Federal Procurement Policy Guidance Memorandum dated December 4, 2007 entitled "Appropriate Use of Incentive Contracts." The interim rule significantly revises Federal Acquisition Regulation (FAR) Part 16, adds FAR Part 16.401(e), and makes other general housekeeping changes.  
 

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Contractors handling Government property should be aware of upcoming changes to Federal Acquisition Regulation ("FAR") Part 45. Revisions to FAR 45 and other provisions relating to Government property were made throughout 2007 (see Federal Acquisition Circular 2005-17, FAR Case 2004-025) and continue with the August 6, 2009 proposed rule (see FAR Case 2008-011).  The proposed rule is intended merely "to add clarity and correction" to the previously published final rule for Part 45, published May 15, 2007. However, contractors who must comply with Government property regulations must be alert to the implications of the rule change on the allocation of the risk of loss for Government property, requirements for contractor property management systems, and contractors' right to obtain profit on contractor-acquired property used in performance but not a deliverable under the contract.
 

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