On June 16, 2010, two more regulations were published in the Federal Register: one was a final rule and the other an interim rule. Both implement different portions of the 2008 Defense Authorization Act and both are currently in effect.

Mandatory Publication of Justification & Approvals

The final rule, effective July 16, 2010, requires all government agencies to post (i.e., publish on the agency’s website and FedBizOpps) all Justification and Approval (J&A) documents within 14 days after award of non-competitive contracts or within 30 days of when the award has been made on the basis of unusual and compelling urgency. A J&A is the government document required when a Federal agency awards a contract without using Full and Open competition. It contains the rationale why an award cannot be obtained through Full and Open competition, the name of the contractor receiving the contract, the goods or services being obtained, and the amount of the purchase/contract. It also contains the names and signatures of those government employees who approved the non-competitive award. J&As have been considered public documents, but the new rule requires that they actually be posted for a minimum of 30 days. This is intended to make the J&A process more transparent.

Given the sensitive nature of the information contained in J&As, prior to posting the J&As, contracting officers are required to review and remove any information of a proprietary nature, including sometimes the J&A itself, in accordance with the Freedom of Information Act. Also, to the extent possible, the contracting officers are to afford the contractor receiving an award the chance to identify any information it wants removed from the J&A before its posting. However, soliciting input from the contractor will not delay the posting within the prescribed timeframes.

At present, this rule does not apply to the placement of orders under the Federal Supply Schedules. Also, it is unclear how the posting of the J&As will impact the rights of companies to protest sole source awards. Currently, disappointed companies who wish to file a protest before the Government Accountability Office (GAO) must protest any contract award within 10 days of when it knew or should have known of the basis for a protest. Once a J&A is posted, it may trigger the10-day period of when a company should have known of the basis of its protest from the contents of the J&A. The councils adopting this rule had no comment on this problem because this rule was intended to be consistent only with President Obama’s focus on creating a “New Era of Open Government.”

Mandatory Market Research before Award of Noncommercial Task Orders or Subcontracts in excess of $100,000

The second new rule, effective June 16, 2010 and issued on an interim basis, focuses on requiring both government agencies and contractors to conduct more “market research” before awarding task orders/delivery orders or subcontracts without consideration of alternate sources within the marketplace. Specifically, the interim rule requires agencies to conduct market research before awarding a task or delivery order in excess of the simplified acquisition threshold (currently $100,000) under indefinite delivery/indefinite quantity type contracts (FAR 10.001(a) (2) (v)). In addition, a prime contractor with a contract in excess of $5 million for the procurement of non-commercial items is now required to conduct market research before making subcontract or vendor purchases that exceed the simplified acquisition threshold if the purchase is made for or on behalf of the Government. The only guidance on what was intended by the wording “made for or on behalf of the Government” comes from the newly proposed language in FAR 44.402(b) and 52.244-6 referring to the contractor as “acting as a purchasing agent for the Government.” So, for the present, this new rule does not appear to require prime contractors to conduct market research for all subcontract purchases in excess of $100,000; it only requires market research when the prime contractor is acting as a purchasing agent for the Government, e.g., GOCOs, or other instances where the prime is just a pass-through conduit for Government purchases. However, both the Government and prime contractors may rely upon market research conducted within the prior 18 months before any award covered by this requirement if the information remains current, accurate and relevant. The purpose this new requirement is to “reduce dollars spent unnecessarily due to the lack of market research information obtained.”

For More Information

For more information on these rules, please contact any member of the Taft Government Contracts team or your primary Taft attorney.