FEDERAL CONTRACT LAW

Looked closely at FAR lately? There are changes

Joseph J. Petrillo

The weighty Federal Acquisition Regulation, governing most procurements by the government, is a living thing that continues to evolve. Consider these recent changes:

Multiple-award contracts. The procurement streamlining legislation of a few years ago was successful in fostering the use of indefinite-quantity contracts. It also encouraged multiple awards so contractors could compete for orders.

The practice has been controversial. Some vendors complain they do not have a fair opportunity to compete. Recent revisions to FAR Subpart 16.5 emphasize that the contracting officer must give each contractor an opportunity to compete for orders of more than $2,500.

There are four exceptions to this rule, however. The first occurs in cases of urgency, which also justify sole-source contracts. The second occurs when only one vendor is capable of supplying unique or highly specialized goods.

The third, and most controversial, exception occurs when the order is a logical follow-on to a previous order that was competitively awarded. The fourth exception happens when the order is necessary to meet the guaranteed minimum quantity in the contract.

When an agency does conduct a competition for an order, the regulation sketches out an abridged selection process. According to the revised FAR, selection procedures should be written into the solicitation and resulting contracts. FAR authorizes oral proposals and other streamlined techniques. It obligates buyers to consider price or cost. And it encourages using past performance as a criterion, but that is not a mandatory evaluation factor.

Fundamentals. The new FAR section 1.108 details some general rules of which contracting veterans are already aware.

For instance, contract value is to be measured by including all options and at the maximum quantity the contract specifies.

FAR changes effective before the solicitation due date must apply. If a FAR change is effective after the due date but before the contract award, the contracting officer decides whether to include it. And FAR changes effective after award can be included, but 'with appropriate consideration.'

All these rules apply 'unless otherwise specified ,' meaning that a specific instance can depart from the rule if it does so explicitly.

Further, when FAR prescribes a contract clause, as it does regularly, modifications to the clause are permitted only when specifically authorized by FAR. When FAR requires a clause 'substantially the same' as the written version, the modified version must contain the 'salient features' of the FAR text and be consistent with the 'intent, principle and substance' of FAR.

Small business. Small businesses have had increasing difficulty keeping their share of contracting dollars under the new rules. Two of the recent changes will have an impact on this situation.

One change aims to encourage government agencies to consider small businesses for awards of orders under the General Services Administration's Federal Supply Service contracts. Although small businesses get a healthy 31 percent chunk of total dollar sales under this program, their percentage has been slipping. This may be the result of the growing a typical size of order, or simply of the greater marketing muscle of large businesses.

Another factor is that individual contract awards are larger than they were years ago. As contracts get bigger, fewer are suitable for small businesses to take on as prime contractors. Some observers say by increasing the emphasis on subcontracting to small businesses this gap could be filled.

Another FAR change alters rules for payment. A large business is now authorized to bill the government for subcontractor costs it has incurred but not yet paid.

Previously, only small businesses could do so; large businesses would have to actually pay the cost before billing the government.

Although this change will improve cash flow of large contractors, it may also mean that subcontractors'which are more likely to be small businesses'will have to wait longer for payment. This is not likely to appease small business advocates who already claim that subcontracts from large businesses are no substitute for prime contract awards.

Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo & Powell. E-mail him at jp@petrillopowell.com.

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