PNWC’s Government Contracting Update

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Last week we reported that DoD experienced released an interim rule in its FAR Supplement made to improve the effectiveness of DoD oversight of contractor business systems (i.e. withhold agreement funds until contractors fix their systems). We’ve watched these guidelines develop through two iterations of suggested rules very carefully and so did a lot of individuals judging by the extraordinary quantity of responses posted to DoD. Comments certainly matter, because there were many changes between your first and second proposed guidelines and the second and this interim rule.

You can read our prior coverage on business systems utilizing the search box to your right. Just search on the word “business systems”. Within the results you will see the requirements of what constitutes a sufficient system for every of the six business systems included in this interim rule; accounting, estimating, purchasing, EVMS, MMAS, and property management.

Following is a listing of the guideline changes from the previous draft. 1. The term “significant deficiency” is defined as a shortcoming in the system that materially impacts the ability of officials of the Department of Defense to trust information made by the system that is necessary for management purposes.

5. The 16-month timeframe for completion of a contractor’s preliminary Earned Value Management System validation has been revised to allow for a timeframe that is approved by the contracting official to permit for versatility in the original validation process. 6. The term “covered agreement” has been thought as a contract that is at the mercy of the price Accounting Standards under 41 U.S.C.

Consequently, all language pertaining to payment withholdings for small business has been struck from the guideline. This interim rule allows the contracting officer the discretion to withhold obligations from one or more contracts including the clause. 8. This guideline revises procedures for the implementation of payment withholdings by changing the requirement for contracting officers to issue unilateral adjustments with the requirement to concern written notifications. Therefore, sources to unilateral modifications for payment withholding as well as the sample vocabulary for the unilateral adjustments have been deleted from this rule.

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11. The original written determination language under 242.7502(d) (2) (ii) (A) has been revised to give a description of each significant deficiency in sufficient details to permit the contractor to understand the deficiency. 13. The full total percentage of obligations which may be withheld on a contract shall not go beyond ten percent. The Contractor changes the quantity of subcontract effort after award such that it surpasses 70 percent of the full, total cost of work to be performed under the agreement, task order, or delivery order.

Any subcontractor changes the amount of lower-tier subcontractor work after award so that it surpasses 70 percent of the total cost of the task to be performed under its subcontract. The notification shall identify the revised cost of the subcontract effort and shall include verification that the subcontractor will provide added value as related to the task to be performed by the lower-tier subcontractor(s).

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