New rules change procurement process

Cost-reimbursement contracts, 8(a) program among those affected

New rules published March 16 to implement parts of the National Defense Authorization Act for fiscal 2009 change the way contracts are competed and managed under the Federal Acquisition Regulation.

The most far-reaching of the new rules is aimed at contracts that are not firm fixed price, such as time-and-materials and labor-hour but especially cost-reimbursement contracts. The rule aligns the FAR with the Presidential Memorandum on Government Contracting issued in March 2009 that directed agencies to save a total of $40 billion in contracting by fiscal 2011 and reduce the use of high-risk contracts.

Government contracting almost doubled during the George W. Bush administration, to well over $500 billion a year. President Barack Obama campaigned on a promise to save billions in contracting dollars and improve the management of the remaining contracts. The interim rule issued March 16 — Proper Use and Management of Cost-Reimbursement Contracts — provides guidance on the handling of all contracts other than firm fixed price. It highlights three areas for the FAR Councils to consider in amending the FAR:

  1. Circumstances when cost-reimbursement contracts are appropriate.
  2. Acquisition plan findings to support the selection of a cost-reimbursement contract.
  3. Acquisition resources necessary to award and manage a cost-reimbursement contract.

The interim rule was issued without prior public comment because of various issues that the government said needed to be urgently addressed. However, public comments on the interim rule will be considered until May 16 for possible changes to the final rule.

Another interim rule raises the bar on the competitive requirements for issuing multiple-award contracts, including those in the General Services Administration’s Federal Supply Schedules. That rule would apply to solicitations issued and contracts awarded on or after May 16 and to orders issued after May 16 even if the underlying contracts were awarded prior to that date. Under the new rule, fair notice would have to be given to existing contract holders of the intention to place orders under a multiple-award contract, and contract holders would have to be given the opportunity to respond.

Notice of certain orders placed under multiple-award contracts would also have to be published on

A third interim rule would prohibit agencies from awarding 8(a) sole-source contracts worth more than $20 million without first obtaining a written Justification and Approval document and making it public. The rule is not intended to put a cap on such contracts but simply to make the process more transparent and accountable by publishing the reasons for the sole-source award, according to the Federal Register.

To see the full list of new procurement rules published March 16, click here.

About the Author

Brian Robinson is a freelance writer based in Portland, Ore.

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