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What parts of the FAR apply to me?

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Don, If a CO priced an action would it not be a contract - as opposed to a subcontract?

garth,

COs price contracts and subcontracts. FAR 15.404-3 contains the COs responsibilities pertaining to subcontract pricing:

15.404-3 Subcontract pricing considerations.

(a) The contracting officer is responsible for the determination of price reasonableness for the prime contract, including subcontracting costs. The contracting officer should consider whether a contractor or subcontractor has an approved purchasing system, has performed cost or price analysis of proposed subcontractor prices, or has negotiated the subcontract prices before negotiation of the prime contract, in determining the reasonableness of the prime contract price. This does not relieve the contracting officer from the responsibility to analyze the contractor?s submission, including subcontractor?s cost or pricing data.

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Jacques, are you reading that exemption under 5 USC 553(a)(2) as exempting the FAR from APA or just the portion addressing Rule Making?

All I had in mind was rulemaking, since 553(a)(2) only exempts matters relating to contract from the section, and the section is about rulemaking. Garth, please don't miss the forest for the trees. The fact section 553 does not require the same formality in issuing substantive rules regarding contracts doesn't change the fact the rule would have to implement some authority delegated to the agency by statute.

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Notwithstanding the FAR was promulgated under the OFPP Act (thanks Vern), it implements a number of statutes, TINA, CICA, etc.

If I am reading Cibinic and Nash's Formation of Government Contracts (thanks Jacques) correctly it seems to say that there is great uncertainty regarding the legal status of specific provisions in the FAR.

That various courts have ruled that regulations have the full force and effect of law if:

(1) a court can reasonably conclude that the grant of authority contemplated the regulations issued (Chrysler Corp v. Brown),

(2) if not specifically authorized by statute, to the extent the rule was adopted to further the congressional purpose of achieving an ?economical and efficient? procurement system (Liberty Mut. Ins. V. Friedman), or

(3) regulations not implementing a specific statue may have the force and effect of law if supported by the general authority of the Agency and the importance of the Government policy (G. L. Christian & Asscos. v United States)

Given this uncertainty, where the FAR states that the ?contractor shall? or ?subcontractor shall? do something, then as a practical matter it still seems to me that a contractor should regard these provisions as prescriptive.

Jacques, if you were a contractor how would you set your internal policies regarding these types of provision.

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Dear Forum Readers, please allow me to apologize for all of my posts to date. Clear writing is a reflection of clear thinking, and I apparently don't think clearly. The shoe is now on the other foot, and I'm being asked to decipher a post that looks remarkably like the stuff I've posted in haste to attempt to make my point. Hopefully I'll remember in the future that haste makes waste, and that stream of consciousness makes the job of figuring out my point difficult for my fellow readers. Thanks, Garth.

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I agree that it's indecipherable. Don't try to decipher it. Say that you don't understand it. Let the poster clarify. Better yet, ignore it. You're not going to get anywhere with the poster.

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Jacques, my apologies for the lack of clarity.

How about just to the question, if you were a contractor how would you set your internal policies regarding provisions in the FAR that state a contractor or subcontractor shall do something absent any supporting contractual provision?

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I would use the Christian Doctrine as my guide.

Thanks Jacques. Can you spoon feed me just a little more here. I am reading that as to take them as prescriptive. Is that correct?

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Two scenarios:

(1) The absence of the contractual provision is because the CO omitted a required clause that implements a significant or deeply engrained public policy.

(2) The absence of the contractual provision is either because the CO omitted a clause that doesn't meet this test; or because there is no provision.

For Scenario #1, I'm not going to be surprised when the court reads the clause into my contract, because the government CO acted beyond his authority in omitting it. For Scenarios #2, I'm not contractually bound.

Everything else is "gee wizz."

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Yes, but I won't.

Vern - After re-reading the discussion from the start I appreciate your lack of interest in restating something you have already said three times.

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Jacques,

I think the lack of comfort I have with yours and Vern?s position ? I read them as substantial the same at this point ? and the inability to defend mine, stems from a lack of understanding of the underlying statutes. I need to better familiarize myself with the various authorities under which the regulations were promulgated and how they interrelate. How the grant of procurement authority to the armed services (ASPA) plays against the authority to promulgate the regulations (OFPP Act), how that authority plays against the rule making process (APA), and how those relate to the underling authority granted each agency and the various statutes they are charged with implementing (e.g., TINA, CICA, FARA, FASA, WSARA?)

After I attempt to remedy my ignorance on administrative law - if my position still holds water - I will try to make a more pointed defense.

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It would help if you would clarify the question for yourself.

You gave this thread the name, "What parts of the FAR apply to me?" Now, what do you mean by "apply"? Apply how?

Suppose that a prospective prime contractor is negotiating a sole source contract with the government and plans to subcontract some of the work. FAR 15.404-3(B) says that the prime contractor "shall" conduct appropriate cost or price analysis of proposed subcontract prices. The CO asks the prospective prime contractor to comply. The prospective prime contractor tells the CO to get lost and to accept its proposal or reject it--take it or leave it as is.

What can the CO do to the prospective prime contractor beside refusing to do business with it? If that's all the CO can do, then in what sense can it be said that FAR "applies" to the prospective prime contractor? The government cannot force the firm to do what it says. It cannot fine them or imprison their management for refusing to comply, like it could if the firm refused to file a tax return. There are no civil or criminal sanctions for refusal. Thus, from my perspective, it makes no sense to say that FAR 15.404-3(B) "applies" to contractors when it says "The prime contractor shall... . Despite the language, FAR is really telling the CO to get the contractor to do it, if possible.

Bottom line: What do you mean by "apply"? What is your question, really? What do you want to know, exactly? Answer those questions before you start doing any research.

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Any thoughts on the following except from the new DoD Business Systems Rule affect the comments in this thread?

DFARS 252.244-7001 Contractor Purchasing System Administration

The Contractor's purchasing system shall--

(1) Have an adequate system description including policies, procedures, and purchasing practices that comply with the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS);

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Interesting question. My old answer would have been the parts of the FAR that are within the funky four corners of the contract we signed. Now, those four corners have roped in not only the whole FAR but also the DFARS.

Contractor purchasing systems used to have to follow FAR principles with wide latitude to use commercial best practices. Now they must "comply" with the FAR and DFARS, a much higher standard.

May as well throw out all the old policies, procedures, and practices (except for a few such as Disputes, Prompt Payment, etc that cannot flow down as is, and must be adapted) and just use the FAR and DFARS for everything else.

No longer can a contractor limit a bidders list to enough proven performers to maximize the likelihood of adequate price competition. Now it appears that a contractor must comply with those portions of the FAR and DFARS that implement CICA. Our company's procedures require a justification for non-competitive procurement. Now it looks like we will need a justification for anything other than full and open. Does FAR/DFARS compliance include posting subcontract requirements on FedBizOpps? Or some similar contractor web page?

How far does this compliance requirement go? Every last detail? Literal compliance with every piece of FAR and DFARS will be a practical impossibility for contractors.

It's times like this when I'm glad I work the prime contract side of the contractor house, and not the subcontract and procurement side.

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After further analysis I think my original post is valid. If the FAR places a requirement on a contractor or subcontractor then, even absent any contractual language, it should be given deference as having the full force and affect as law. I think the argument that there is not sufficient statutory basis to allow the FAR to place requirements on contractors lacks support.

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Here is what you said in your first ("original") post.

May take is the primary direction for prime contractors and higher tier subcontracts are provided in the contract. If there is a contractual clause citing a regulatory requirement then that section(s) of the regulation applies to the prime contractor and higher tier subcontractors.

I think the mistake that is often made in reading the regulations is substituting the term ?contractor? when the regulations use the term ?Contracting Officer?. It seems to me that the regulations reserve the term ?Contracting Officer? for U.S.G. personnel with authority to award or execute Government prime contracts. When the regulations place requirements on contractors, as opposed to the Contracting Officer, the regulations state such by using the terms ?contractor? or ?subcontractor. Using the terms ?contractor? and ?Contracting Officer? interchangeably lead to a confused and incoherent reading, and selective substitution is arbitrary.

Having said that there do appear to be statutory requirements that penetrate down to the contractor subcontractor relationship absent any contractual language. I am not real clear on the rule for that application.

Now, just what part of that do you think is valid? The part that you weren't "real clear" about? Tell us about your "further analysis." Give us the details.

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I offer these two cases ...

CHEVRON U. S. A. INC. v. NATURAL RESOURCES DEFENSE COUNCIL

When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, 843*843 as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.

"The power of an administrative agency to administer a congressionally created . . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress." If Congress has explicitly left a gap for the agency to fill, there is an express delegation 844*844 of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. Sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.

Note the wording indicating the standard necessary for a nexus between the statute and regulation does not appear to be particularly high: ?Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute?

CHRYSLER CORP. v. BROWN, SECRETARY OF DEFENSE, ET AL

In order for a regulation to have the "force and effect of law," it must have certain substantive characteristics and be the product of certain procedural requisites. The central distinction among agency regulations found in the APA is that between "substantive rules" on the one hand and "interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice" on the other. A "substantive 302*302 rule" is not defined in the APA, and other authoritative sources essentially offer definitions by negative inference. But in Morton v. Ruiz, 415 U. S. 199 (1974), we noted a characteristic inherent in the concept of a "substantive rule." We described a substantive rule?or a "legislative-type rule," id., at 236?as one "affecting individual rights and obligations." Id., at 232. This characteristic is an important touchstone for distinguishing those rules that may be "binding" or have the "force of law." Id., at 235, 236.

That an agency regulation is "substantive," however, does not by itself give it the "force and effect of law." The legislative power of the United States is vested in the Congress, and the exercise of quasi-legislative authority by governmental departments and agencies must be rooted in a grant of such power by the Congress and subject to limitations which that body imposes. As this Court noted in Batterton v. Francis, 432 U. S. 416, 425 n. 9 (1977):

"Legislative, or substantive, regulations are `issued by an agency pursuant to statutory authority and . . . implement 303*303 the statute, as, for example, the proxy rules issued by the Securities and Exchange Commission . . . . Such rules have the force and effect of law.

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Neither of those cases supports your argument, which, as I understand it, is that when a passage of the FAR, such as FAR 15.404-3(B) , says that a contractor "shall" do something it must do so even when FAR does not prescribe a contract clause to that effect. I know of no clause that requires a prime to perform an analysis of proposed subcontract costs. Absent a required clause, the contractor is not contractually bound, and the government has no contractual remedy if the contractor refuses. At most the CO can say that the prime has not proved its subcontract costs and negotiate accordingly. FAR prescribes no sanction if a contractor refuses to analyze subcontract proposals, and there is no express contractual remedy. The only thing a CO could do is deny a claim, if there is one, and see what happens.

You really shouldn't just grab cases off a shelf and throw them at me. It's pointless.

By the way, as a matter of common sense the prime would do an analysis, but we're not talking about that.

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garth,

Your argument ignores FAR 1.104, which states "The FAR applies to all acquisitions as defined in Part 2 of the FAR, except where expressly excluded." The definition of "acquisition" in FAR Part 2 only includes contracts that are made "by and for the use of the Federal Government." Except in the rare circumstance where a contractor is acting as the Government's purchasing agent, contractors do not make "acquisitions" as defined in FAR Part 2. In order for your argument to be valid, you need to prove that FAR 1.104 doesn't mean what it says.

I agree with Vern regarding the effect of FAR 15.404-3( b ). It is not that paragraph that requires a contractor to perform an analysis of subcontract costs. If the CO uses a provision or clause requiring submission of price proposals in accordance with FAR Table 15-2, the table instructions require an analysis of subcontract costs.

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Garth, you need to understand what Chevron and Chrysler are about. The significance of Chevron is that if an agency is charged with implementing a statute and issues regulations that represent a reasonable interpretation of the statute, courts are bound by the agency's interpretation of the statute and regulation although the court may interpret the statute or regulation a different way. Chevron really does not apply to the FAR because no single agency is charged with promulgation of the FAR.

As for Chrysler, while it has been held that the FAR is a regulation having the force and effect of law, exactly what that phrase means has to be examined. In Chrylser, the significance of that phrase related to whether regulations issued to implement an executive order could authorize a government employee to release information that may fall within 18 U.S.C. 1905. Frequently, that term is used to describe the interpretation that courts must give to regulations and the analytical approach to be used by courts when interpreting regulaitons having the force and effect of law.

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"Force and effect of law" means that a court will credit a regulation lawfully promulgated by an executive agency with the same authority as a statute enacted by Congress pursuant to the Constitution. That does not mean that the regulation applies to any particular party. it means that if a regulation does apply to a particular party the courts will enforce it.

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The argument is not specific any particular requirment in the FAR. The argument is if the legal status of the regulations makes them binding on persons, including Government contractors and subcontractors, regardless of contractual agreement.

The argument is that the FAR impliments many statutes (e.g., TINA, CICA, FARA, FASA, WSARA) over and above the statute providing their origianl authority. If there is sufficient nexus in regulations to the statutes they have the full force and effect of law. To that point i still content the cases are relevent.

It seems Nash & Cibinic interpret Chrysler Corp. v. Brown, 441 U.S. 281 (1979) have a similar interpratation in their report Legal Status of Government Manuals and Instructions: Putting the Fox in Charge of the Chickens, 1 N&CR ? 77 (Oct. 1987).

"The Supreme Court held that for a regulation to have the force and effect of law it must be:

1. Promulgated pursuant to a statute which can be reasonably said to contemplate the regulations, and

2. Published in accordance with the prior notice and hearing requirements of Administrative Procured Act, 5 U.S.C. 553.

The Court held that such regulations are, in effect, the result of Congress' delegation of its legislative powers to the executive agencies. Their legal status makes them binding on persons, including Government contractors and subcontractors, regardless of contractual agreement."

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