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DOD signals pivot away from proposed DFARS rule on evaluating price reasonableness for commercial items

The Department of Defense (DOD) published a report on the Open DFARS Cases as of December 7, 2015, which indicates that the controversial proposed rule on evaluating price reasonableness for commercial items (DFARS Case 2013-D034) was closed. As we previously reported, the proposed rule would have made significant substantive changes to what qualified as a commercial item under DOD-funded contracts and would have imposed significant data gathering burdens on prime contractors. In its place the DOD opened a new case, DFARS Case 2016-D006, Procurement of Commercial Items. The purpose of the new DFARS case is to implement the requirements of six sections of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2016, in addition to the requirements of section 831 of the NDAA for FY 2013. See National Defense Authorization Act for Fiscal Year 2016, Pub. L. No. 114-92; National Defense Authorization Act for Fiscal Year 2013, Pub. L. No. 112-239. A brief overview of some key requirements within the applicable sections of the NDAA for FY 2016 is provided below.

The DOD opened DFARS Case 2016-D006 on December 7, 2015, and has proposed a rule within the agency, which its staff is processing. We will continue to monitor the progress and will report back here with updates.

Section 851, “Procurement of Commercial Items.” This section requires the Secretary of Defense to establish a centralized capability to oversee the making of commercial item determinations for DOD procurements and to provide public access to these determinations. The section also permits contracting officers (CO) to rely on prior determinations made by a military department, Defense Agency or other component of the DOD. Notably, the section permits a CO to require a contractor to supply additional information to support the reasonableness of a price, irrespective of whether a contractor was required to provide such information in connection to a prior procurement.

Section 852, “Modification to Information Required to be Submitted by Offeror in Procurement of Major Weapon System as Commercial Item.” Under this section, an offeror must submit: (a) prices paid for the same or similar commercial items under comparable terms and conditions by both the government and commercial customers; and (b), if the information for (a) is not available, (i) prices for the same or similar items sold under different terms and conditions; (ii) prices for similar levels of work or effort on related products or services; (iii) prices for alternative solutions or approaches and (iv) other relevant information. The section also permits the CO to request additional information, such as labor costs, material costs and overhead rates.

Section 853, “Use of Recent Prices Paid by the Government in the Determination of Price Reasonableness.” This section provides that a CO, in determining whether a price is reasonable, must consider prior prices paid by the government for the same or similar commercial item if these prices are provided by an offeror and represent reasonable prices based upon the totality of the circumstances (i.e., the time elapsed, the quantities and the terms and conditions).

Section 855, “Market Research and Preference for Commercial Items.” This section requires the Under Secretary of Defense for Acquisition, Technology, and Logistics to issue guidance that: (a) prohibits an agency from contracting for noncommercial information technology products or services in excess of the simplified acquisition threshold, unless the agency determines in writing that commercial items cannot meet the agency’s needs; and (b) mandates that agencies conduct market research, where appropriate, prior to making a price reasonableness determination.

Section 856, “Limitation on Conversion of Procurements from Commercial Acquisition Procedures.” Under this section, for a CO to convert a procurement of commercial items or services valued over $1,000,000 from commercial acquisition procedures to noncommercial acquisition procedures, the CO must make a written determination that: (a) the commercial acquisition procedures were erroneously utilized or were utilized because of inadequate information; and (b) the conversion will result in cost savings. In making such a determination the CO must consider: (a) estimated research and development costs for improving future products or services; (b) transaction costs for both the DOD and contractor; (c) changes in purchase quantities and (d) potential delay costs resulting from the conversion. If the procurement is valued over $100,000,000, the head of the contracting authority must also approve the determination. The requirements in this section terminate in five years.

Section 857, “Treatment of Goods and Services Provided by Nontraditional Defense Contractors as Commercial Items.” This section permits the head of an agency to treat the items and services provided by nontraditional defense contractors as commercial items.

As previously stated, DFARS Case 2015-D006 will also implement section 831 of NDAA for FY 2013, which directed DOD to, among other things, issue guidance including “standards for determining whether information on the prices at which the same or similar items have previously been sold is adequate for evaluating the reasonableness of prices.” National Defense Authorization Act for Fiscal Year 2013, Pub. L. No. 112-239.

DOD signals pivot away from proposed DFARS rule on evaluating price reasonableness for commercial items

Construction Law and Federal Contracting Breakfast Series: Miller Act (Payment Bond) Actions on Federal Projects

Join us on March 12th at 8:30 am for the third briefing of the six-part “Construction Law and Federal Contracting” breakfast series hosted by Dentons and the San Diego Chapter of the Associated General Contractors of America (AGC). This session titled “Miller Act (Payment Bond) Actions on Federal Projects” will be led by Dentons lawyer Laurence Phillips. Under the Miller Act, prime contractors are required to furnish payment and performance bonds before any contract of more than $100,000 is awarded for any public work of the Federal Government. During this briefing, you will learn what you need to know about the Miller Act, including enforcement, subcontractor flow down issues and common defenses.Full 2015 Breakfast Series Schedule:

January 8, 2015 Federal False Claims Act on Construction Projects February 12, 2015 Federal Prevailing Wage Requirements and Issues on Construction Projects March 12, 2015Miller Act (Payment Bond) Actions on Federal Projects April 9, 2015 Compliance With Federal Small Business Size and Status Rules and Subcontracting Plans May 14, 2015 Claims and Termination on Federal Projects June 11, 2015 Government Contracts Compliance and Investigations

Click here for more details and to register.

Construction Law and Federal Contracting Breakfast Series: Miller Act (Payment Bond) Actions on Federal Projects

Construction Law and Federal Contracting Breakfast Series: Federal Prevailing Wage Requirements and Issues on Construction Projects

Come join us for the second briefing of the six-part breakfast series entitled, Construction Law and Federal Contracting, hosted by Dentonsand the San Diego Chapter of the Associated General Contractors of America (AGC). On February 12th, Dentons lawyers Laurence Phillips and Jim McNeill will lead a session titled “Federal Prevailing Wage Requirements and Issues on Construction Projects” covering key provisions of the Davis-Bacon Act and related issues involving construction projects. Don’t miss the chance to interact with key personnel from Dentons during this 90-minute discussion.

Full 2015 Breakfast Series Schedule:

January 8, 2015 Federal False Claims Act on Construction Projects
February 12, 2015 Federal Prevailing Wage Requirements and Issues on Construction Projects
March 12, 2015 Miller Act (Payment Bond) Actions on Federal Projects
April 9, 2015 Compliance With Federal Small Business Size and Status Rules and   Subcontracting Plans
May 14, 2015 Claims and Termination on Federal Projects
June 11, 2015 Government Contracts Compliance and Investigations.

Click here for more details and to register.

Construction Law and Federal Contracting Breakfast Series: Federal Prevailing Wage Requirements and Issues on Construction Projects

An In-Depth Look at Why Federal Circuit’s Metcalf Constr. Decision is a Win for Contractors

Last month we profiled the Federal Circuit’s Metcalf Constr. decision about the implied duty of good faith and fair dealing.  This month we published an in-depth article (i) analyzing the recent evolution of this implied duty and (ii) discussing the standard a contractor now must demonstrate to prove the Government’s breach of the duty.  Importantly, the Metalf Constr. decision solidifies the “reasonableness” standard for proving breach, and clarifies that the much tougher “specific targeting” standard (announced in the Federal Circuit’s 2010 Precision Pine decision) only will be used in limited circumstances.  Although some questions remain about the application of the “specific targeting” standard, Metcalf Constr. clearly is a win for contractors.

An In-Depth Look at Why Federal Circuit’s Metcalf Constr. Decision is a Win for Contractors