The President signed the FY 2009 defense appropriations act providing for $487.7 Billion in discretionary spending authority that contains several contracting related provisions, many of which apply government wide:

1. Create a database that will contain information about contractors awarded contracts in excess of $500,000. Information will include civil, criminal or administrative proceedings in connection with an award or contract performance for the last five years, contracts that were terminated due to default, contractors that have been suspended or debarred and administrative agreements intended to resolve suspension or debarment proceedings. Access to the database will be for “appropriate acquisition officials” in federal agencies, or “other government officials” the General Services Administration deems appropriate. The Bush administration opposed the database as “unwieldy” saying much of the information is already collected and available by other means.

2. Require greater competition for task and delivery orders placed under multiple award contracts.  There are now new restrictions on use of the “unusual and compelling urgency” exception to following the Competition in Contracting Act (e.g. use of the exception for less than one year). Also competitive procedures will be put in place that describes the work of each order, gives MAC contractors a “fair opportunity” to be considered and includes “as many contractors as practicable” considered to be at least three or where the CO states in writing no other qualified contractors could be identified in spite of reasonable efforts.  The American Bar Association recently issued a memo recommending the new rule should be amended to clarify that a timely protest of a solicitation for a TO/DO should trigger an automatic stay of performance.

3. Limit use of cost reimbursement contracting. Requires amendments to the FAR within 270 days that will address when cost type contracts are appropriate and establish an acquisition plan process to support use of such contracts and identify the workforce resources necessary to award and manage them.

4.  Price reasonableness for services that are “of a type.” Will require COs to make a written determination that an offeror proposing a service that is not offered and sold competitively in the commercial marketplace but is “of a type” that is offered and sold in substantial quantities has provided sufficient price and/or cost information to allow a price reasonableness determination to be made.  The FAR changes will also authorize a CO to request actual labor costs, material costs and overhead rates if the information on prices paid for similar items is deemed insufficient to determine the proposed prices are reasonable.

5. Access to contractor employees.  Expands the GAO’s authority to inspect contractors’ records to include interviewing any current prime or subcontract employee about a contract unless it was awarded by sealed bidding. Industry objections to earlier proposals have been significant.

6.  Excessive pass through costs and award fees.  Will require a FAR amendment to address use of subcontractors that add no or negligible value on cost reimbursement contracts and profit on work performed by lower-tier subcontractors if the higher tier contractor adds no or negligible value.  Also FAR will be amended to provide guidelines on the amount of award or incentive fees a contractor may receive on cost type contracts where incentive fees will be linked to periodic performance evaluation scores.

7. Where non-FAR agreements are entered into (e.g. other transaction agreements, cooperative R&D agreements to develop and build prototypes) FAR guidance will put forth guidelines to protect the government’s interest in intellectual property.

8. In response to wasteful and fraudulent accounting practices in Iraq and Kuwait, the changes ask for a reevaluation of the current exemption from cost accounting standards on contracts performed outside of the US.

9. Provides for a definition of “inherently governmental functions” when deciding to promote a public-private competition when such inherently government functions are not performed by an agency.

10. Provides guidelines and FAR clauses to ensure that when contractor employees  perform work traditionally performed by government employees they are not tainted by potential conflict of interest. The guidelines will identify PCOI, prohibit contractor employees from improperly using non-public government information and discipline employees who do not comply with new rules.

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