The FAR Council released Federal Acquisition Circular 2005-06 Sept. 30.  Significant changes to the FAR include:

1.  Statistical Sampling to Identify Unallowable Costs.  Two proposed rules allowing use of statistical sampling to identify and account for unallowable costs under federal contracts were finalized into a government-wide rule that provides criteria for use of statistical sampling and addresses application of penalty provisions.  Under the rule, which amends FAR 31.201-6, statistical sampling will now be an acceptable practice for contractors in accounting for and presenting unallowable costs provided (1) the sampling results in an unbiased sample that is a reasonable representation of the sampling universe (2) any large dollar value or high risk transaction is reviewed separately and excluded from the sample and (3) the statistical sampling result permits audit verification.  In addition, the rule provides that for any indirect cost in the sample that is subject to a penalty under FAR 42.709 provisions the amount projected to the sampling universe from that sampled cost is also subject to the same penalty provisions.

Further, the use of statistical sampling should be subject to an advance agreement between the contractor and ACO where the agreement will specify the basic characteristics of the sampling process.  If an advance agreement is not used, the burden of proof falls on the contractors to establish the sample methods are adequate.

2.  Relocation Costs.  The final rule revises FAR 31.205-35 giving contractors the option of being reimbursed on a lump-sum basis for three types of relocation expenses: (1) costs of finding a new home (2) costs of travel to the new location and (3) costs of temporary lodging.  The types of costs are in addition to the miscellaneous relocation costs for which lump-sum reimbursements are already permitted.

3.  Training and Education Costs.  FAR 31.205-44 is revised to eliminate confusing language and restructuring the rule to list “only specifically unallowable costs.”  The change eliminates several specific limitations on the allowablilty of costs associated with various categories of education e.g. different treatment of full-time and part-time undergraduate education costs and limiting allowable costs to training and education related to the field the employee is working in or is expected to work.  Except for six unallowable public policy exceptions (e.g. overtime compensation for education and training for other than bona fide employees) the reasonableness of specific training and education costs will be assessed by reference to FAR 31.201-3, Determining reasonableness.

4.  End of Price Evaluation Adjustment.  The rule cancels the authority of civilian agencies to apply a price evaluation adjustment to certain small disadvantaged business concerns in competitive acquisitions.

5.  Anti-Lobbying.  Implementing an interim 1990 rule, the new rule now requires the insertion of two FAR clauses, 52.203-11 and 52.203-12 in all solicitations and contracts exceeding $100,000 that will generally prohibit recipients of federal contracts, grants and loans from using appropriated funds for lobbying the federal government in connection with a specific contract, grant or loan (Fed. Reg. 57448).

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