NenaLenz

Company has submitted a bid for a contract to provide services at USPS sites. The RFP SOW lists specific services that must be provided at about 250 USPS sites on a periodic basis over a 12-month period. Bidder's offer included an annual fixed price per site for the services. The RFP includes the caveat that "USPS reserves the right to add or remove USPS facilities to the contract in accordance with the changes clause of the contract if such action is determined to be within the best interest of the USPS." USPS Changes Clause 4-1(c). USPS held discussions with bidder and informed bidder that it hopes to add substantially more locations to the contract, including up to all 25,000 USPS properties! Would that really be within the scope of the changes clause? When does adding sites to a contract like this exceed scope? Company wants this contract, but does not want to service all 25K locations. Providing discrete services to far-flung USPS locations is much more expensive than working in large facilities in metropolitan areas. How would you recommend the bidder communicate with USPS about this issue? Finally, if USPS does add sites to a contract like this, the contractor would negotiate for a fair price for its work, and a fair price would be expensive. Company wants to make sure that they could charge USPS prices that actually include profit. USPS equitable adjustment clauses and guidance don't offer the comfort I need on this one, and so I am hoping the experience of this group can provide some practical insight. Thanks in advance for your insight and please let me know if you need additional details or citations to answer my questions.

Thank you for your help on this. I have what I need. This thread ended up heading in the same direction of a prior thread on the topic.

@Retreadfed, you're right -- that is a complicated analysis that requires broad expertise and inappropriate for this forum. For the purpose of this discussion, my question is limited to how accepting/performing federal work orders would impact an affiliate. If we forgo formal subcontracts, wouldn't the affiliates then be viewed as part of the "prime contractor" and be subject to the prime contractor's obligations?

Fortunately, my choice of the word "subcontract" in the original post was inaccurate - the company is currently using work orders to facilitate this work. There are no formal subcontracts at this time. I am trying to help them figure out the compliance obligations on the contract holder and affiliates performing the work. Originally, I was thinking subcontracts were a good idea, but it sounds like executing formal subcontracts may be ill advised. My concern with not using subcontracts is that the compliance obligations that apply to the contract holder would then also apply to all performing affiliates without the "flow down" filter/buffer that insulates subcontractors from many prime contractor obligations. Does that make sense? For example, not all affiliates need affirmative action plans at this point. Would the use of a "make program" somehow trigger AAP obligations for all affiliates under the parent? Or just the ones accepting/performing work orders that trigger the requirements? (Again, the concept of a "make program" is new to me, so these may be rather simple questions. I appreciate any wisdom this group can offer.)

I like this conclusion. But I am new to the "make" versus "buy" concepts. Does the concept of a "make program" impact the entire enterprise? Does this pull the whole network of affiliated entities under contractual compliance requirements? For example - How do we decide which affiliates must have affirmative action plans? I would greatly appreciate any general guidance on make/buy you can offer.

Good suggestion. Did not find clarity there.

Would you report the subcontracts themselves, though?

Is there any reason that subcontracts to affiliates would not be reportable under FAR 52.204-10? (Assuming all other reporting thresholds are met). I ask because subcontracts to affiliates are not reportable on eSRS per FAR 52.219-9(l) "(l) The Contractor shall submit ISRs and SSRs using the web-based eSRS at http://www.esrs.gov. Purchases from a corporation, company, or subdivision that is an affiliate of the Contractor or subcontractor are not included in these reports. Subcontract awards by affiliates shall be treated as subcontract awards by the Contractor. Subcontract award data reported by the Contractor and subcontractors shall be limited to awards made to their immediate next-tier subcontractors." I do not see any similar caveat to the FSRS requirement. Do you? FYI - Under 52.304-10, “First-tier subcontract” "means a subcontract awarded directly by the Contractor for the purpose of acquiring supplies or services (including construction) for performance of a prime contract." Thanks for your insight.

@Vern Edwards I think you're selling everyone short in this comment. The frequent Wifcon posters, particularly those engaged in this thread (@Don Mansfield, @C Culham, @joel hoffman, and @ji20874) are a wonderful resource for practitioners of all stripes, including lawyers. The collective breadth and depth of regulatory knowledge within this community is exceptional. After all, you find "discussion, debate and bickering" over federal contracting regulations to be fun. As to whether it is appropriate for lawyers to consult this community when providing counsel to clients -- Even seasoned lawyers conduct legal research to answer client questions -- especially practitioners in complex and dynamic areas of law, such as government contracts. Two important steps in legal research are to figure out: (1) which rules apply in a given situation and (2) what do regulators think those rules require. This community is a good source for that. Although I don't always agree with the conclusions here, I find this community to be an incredibly useful place to help with legal research. And you're right that advice given here is really just a starting point. But it is a good starting point.

It has a paragraph listing what clauses are not applicable to order level materials. TAA is not listed. Further clarification that Yes -TAA does apply to replacement parts supplied under maintenance contract. To put an even finer point on this conclusion, see the GSAM 538.7203(b) . . . . 538.7203 Administering Order-Level Materials in FSS contracts. (b) Except as stated in 552.238-82 (d)(10)(11), all terms and conditions that otherwise apply to the FSS contract also apply to order-level materials. For example, order-level materials must comply with the Trade Agreements Act clauses, the Environmental Attributes clause, and the Industrial Funding Fee and Sales Reporting clauses.

@Vern Edwards - I rely on the Customs and Border Protection decisions and cases in the Court of International Trade for TAA country of origin guidance. Customs and CIT have the authority to make country of origin determinations for TAA purposes. To find lines of cases that speak to what is an end product, search for "substantial transformation" analyses. When examining whether a product complies with TAA, CBP first decides which product is subject to the requirement -- and that requires determining which product is the end product. The country of origin is where that end product was last "substantially transformed". The specific facts matter in each case, so the decisions are hard to analogize to other situations, but here is a quick rundown of factors that inform whether something will be considered an "end product" and thus subject to the TAA country of origin requirements. There's a lot of discussion about systems as end products when products are purchased together: Whether the parts are directly incorporated into the system. The more the part is directly integrated into the “system,” the more likely it is found to be a component, rather than an end product. The purpose of the government solicitation. If the purpose of the solicitation is to obtain a single system, the government will consider whether the purpose of the solicitation is met only by a combination of parts, or if the parts, in isolation, meet that same purpose in some meaningful way. If the parts do not achieve the government’s purpose in a meaningful way, they are more likely to be viewed as components. The language of the solicitation. Even if the language does not expressly explain which contract items are end products, the solicitation language may be useful in determining the purpose of the procurement. The usefulness of the system parts in isolation. If a contract item has no use except as an integrated feature of the system, the item is more likely to be viewed as a component. Whether the parts are available for individual purchase as replacement parts. If a contractor offers contract items for sale as replacement or ancillary items, the items are more likely to be considered end products than components.

This is incredibly helpful! That you all for weighing in. ... Now to help my client design a new compliance protocol and amend some subcontracts ....

That is how I have always interpreted it, and I believe (but do not have on hand) some good case law and other guidance documents on point re: CLINs as end products. (Happy to find them if someone really wants to see them). The key here is whether the materials listed in the repair task orders amount to CLINs for end product purposes.

Thanks for all the thoughtful responses. I frequently provide legal counsel re TAA & BAA compliance, but clarity on this one is elusive, so I appreciate your insights. The OP is on my team. Allow me to add some details - Client is on GSA Schedule 03FAC (facilities maintenance services). The contract CLINS are all for services. DOD BPA says: "Contractor is to provide all work, materials, and labor required to provide inspection, testing and maintenance . . in accordance with the statement of work, amendments and proposal". The statement of work contemplates "minor repair work", but does not include any mention of materials. Work Order. After inspections indicate a need for minor repair work, contractor submits quote to DOD for the repair work. This is usually done via email (both quote submission and approval by DOD). Quote includes labor and materials priced separately. Materials are sometimes referred to generally as "materials" and sometimes by specific description. These work orders are issued under the GSA Schedule and DoD BPA T&Cs, but they do not reference those agreements in any way. In the definition of end product, I am wrestling with the meaning of "for public use". Here, the materials are installed in government buildings. They become part of the fixtures. Is that sufficient to be "for public use"? I guess the answer to this depends on what we are calling the "contract schedule". The replacement parts are not identified in DOD BPA schedule specifically, although the schedule says the contractor must provide the materials needed for repair. The replacement parts are clearly and separately priced as materials v. labor on the repair work orders. What do you think?

Thanks, @Don Mansfield. We looked hard to find this answer before putting it out to the group. As compliance counsel to the contractor, I get nervous when I cannot find authority to justify my conclusion that a reg doesn't apply. In this case, we don't want to ask the CO because the contractor has been operating as if TAA doesn't apply here. But they just asked the question: "are we right?"

Great. Thanks, @ji20874. To confirm - for the purpose of this analysis, it does not matter whether the contractor charges the government separately for the repair parts.

@ji20874 thanks for the input. I like your conclusion, and want to make sure I'm following the logic. [Let's set aside any discussion of BAA/TAA distinction for the time being] Because this is a contract for inspection/maintenance/minor repair, it is 100% for services. If inspection indicates minor repair/maintenance is required, then the contractor will purchase the necessary materials, install them on government fixtures and charge the government for the parts. Because the materials are used in repair work, they are not supplies that are furnished to the government. On the other hand, the following is an example of a contract for supplies and services: government purchases replacement parts as individual CLINS and repair services under separate CLINS on the same contract. In that case, the replacement parts would be subject to BAA/TAA requirements.

@ji20874 I think the question is: what qualifies as an "end product" in this situation. If the Contractor must repair a pipe, and repair requires a pipe fitter to install replacement parts on the existing equipment, are those replacement parts end products? Does it make a difference whether the replacement part is specifically listed and priced on the work order? This seems like it could be an end product within the scope of TAA -- but that casts a really broad definition of end product.

@REA'n Maker Good questions. I don't think this would qualify for an upgrade, and it's not part of a larger effort to overhaul existing systems. The inventory is in the sustainment stage, as you put it. And it is accurate to say "replacing" items with a similar (currently available) capability. Sounds like DLA where we need to go . . . .

That makes a lot of sense. Can you think of any similar kinds of government-wide upgrades? It would be helpful to show folks a model

Good tip. I think the hardware in this instance will evolve and remain in use for the foreseeable future.

@Vern Edwards Thanks for the typo correction. Yes, it's 7012. Agreed on your statements of general contract breach risks to late reporting. I am not seeing any consequences specific or unique to late reporting. It sounds like there aren't any.

Yes to all, but for desktop computers

Company has been approached by several DoD purchasers across agencies that are interested in purchasing its product. The product is a ubiquitous, low-tech component found in most government hardware systems. Government systems that require this manufactured component cannot function without it, and existing government hardware is obsolete technology and failing, raising national security concerns. Because this hardware is located in major & minor systems across the defense industrial base, the potential scope of work is daunting. The government lacks records containing specs for the currently installed product, requiring reverse engineering in many instances. The government also lacks an inventory database. It appears that the government officials who want to purchase the products are not sure how to design and scope this type of procurement and fund it. I am helping the Company think through procurement options for discussion with government officials. We would like to find an analogous situation that was successfully solved, thinking that this can't be the first time the government faced this problem. The Company is a small business. So, here's my question: Can you identify an example of a ubiquitous component in government property that was replaced with a new and improved product. Ideal examples would involve replacement of manufactured hardware components in the defense industrial base.

Company needs to report a cyber security incident under DFARS 252.204-7011. Reporting is required within 72 hours. I have two questions: Are there penalties or other adverse consequences for late reporting? Before the Company can report, an employee must obtain a DoD-approved medium assurance certificate and this appears to take a couple days. That is a significant delay when you're sprinting toward a 72-hours deadline. Do most companies sign up for this certificate in advance? I did not see reference to it in the NIST SP 800-171. Thanks in advance for any insight! Best, Nena