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Reference Interim Rule for FAR Case 2019-009 published July 14, 2020 in the Federal Register - https://www.govinfo.gov/content/pkg/FR-2020-07-14/pdf/2020-15293.pdf

Ultimately, I would like to know your opinion whether a bilateral contract modification should be pursued to update FAR 52.204-25 to the newest AUG 2020 version.  The clause is currently included in my IDIQ commercial services contract.  The contract base and all options is anticipated to be 60 months in length, estimated total $12M.  The contractor completed their representations in SAM for provisions 52.212-3(v)(2) and 52.204-26(c) and stated "does not" provide covered telecommunications equipment or services for both provisions.  Provision FAR 52.204-24 is also being updated AUG 2020.  Do I need their representations for FAR 52.204-24(d)(2)?  Potentially prior to exercising an option???

The Interim Rule states contracting officers shall modify existing contracts prior to placing future orders.  On page 11 of the Federal Register publication it states, "the objective of the rule is to provide an information collection mechanism that relies on an offer-by-offer representation that is required to enable agencies to determine and ensure that they are complying with section 889(a)(1)(B)."

FAR 52.204-25 AUG 2019 does not address section 889(a)(1)(B).  FAR 52.204-25 AUG 2020 added a second paragraph under (b), the second paragraph pertains to section 889(a)(1)(B).  If I do not modify my contract to update FAR 52.204-25, will I potentially be in violation of section 889(a)(1)(B)?  I can't recall ever modifying a contract just to include the most current version of a clause.

Do you think a modification to update FAR 52.204-25 to AUG 2020 is appropriate?  If so, would you expect this to be a no-cost mod?

Thanks in advance for participating in this discussion!

 

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I have not read the FAC yet, so take what I say with a grain of salt.

I believe the clause update modification should be unilateral -- the contractor really doesn't have a choice, and a contracting officer should not give the contractor the opportunity to hold it hostage in a negotiation for more money.  Congress and the President declared the law in the Government's sovereign capacity, and nothing in the contract entitles the contractor to an equitable adjusment (increase) in contract price in order to implement the sovereign decision.  Unilateral and no-cost.  It's the law.

Others might have differing opinions.

EDIT:  Since this comment, I have read the FAC.  The clause update modification should be bilateral -- if the contractor refuses or the parties are unable to agree on consideration, then the Government simply will not exercise any further options or issue any further orders.

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I have not read the FR reference either, but I disagree with ji.  A sovereign act would be one that applies to the country as a whole.  When the government passes a law that affects only its relationship with its contractors, the issue becomes murky and we have to be guided by the Supreme Court's Winstar decision.  If the law requires inclusion of a provision in existing contracts, it seems that the government is amending the terms of its contracts unilaterally by statute.  This is essentially what the Court said the government could not do in Winstar, unless the government compensates the contractor for the consequences of the change to the contract. 

Further, when the contracting officer amends a contract to include a new or revised clause, the contracting officer is acting for the government in its contractual capacity.  In this case, FAR 1.108(d)(3) comes into play.  Consider the case of a contractor that had intended to provide equipment that is now banned and replacement equipment will cost more. 

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From https://www.acq.osd.mil/dpap/policy/policyvault/USA001557-20-DPC.pdf
“The purpose of this memorandum is to facilitate implementation of interim FAR rule 2019-009, published on July 14, 2020, and effective on August 13, 2020. The interim rule implements prohibitions contained in section 889(a)(1)(B) of the National Defense Authorization Act (NDAA) for Fiscal Year 2019, and requires contracting officers to take specific actions prior to awarding, or extending or renewing, contracts, task orders, or delivery orders on or after August 13, 2020.
Section 889 of the NDAA for FY 2019 contains two prohibitions related to Federal contracting:
 The first prohibition, set forth in section 889(a)(1)(A), took effect August 13, 2019, and prohibits the Government from buying and using covered telecommunications equipment or services from five named Chinese companies and their subsidiaries or affiliates.
 The second prohibition, set forth in section 889(a)(1)(B), is effective August 13, 2020, and prohibits the Government from contracting with any entity that uses any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system, on or after August 13, 2020, unless an exception applies or a waiver has been granted.”

See, also for example : “When Congressional Legislation Interferes with Existing Contracts: Legal Issues”at:

https://fas.org/sgp/crs/misc/R42635.pdf

This is a situation where a contracting officer needs to coordinate with their legal counsel and or other members of the acquisition team if they aren’t sure of the legal rights and ramifications when modifying a contract for application of this new rule applicable to future options and future orders. See FAR 1.102-3 and -4. Under 1.102-4, if you don’t have knowledge of the answers to your questions, you can’t rely on the liberal interpretation of paragraph (e).

if the contractor can’t or won’t certify to the new restrictions, you can’t award a  new contract,  any new orders against an existing contract or exercise an option after the implementation date, absent a waiver.

The Winstar Decision of the Supreme Court applied to a set of circumstances.

DAU is planning to issue training, per the Policy referenced above.

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2 hours ago, Retreadfed said:

Further, when the contracting officer amends a contract to include a new or revised clause, the contracting officer is acting for the government in its contractual capacity.  In this case, FAR 1.108(d)(3) comes into play.  Consider the case of a contractor that had intended to provide equipment that is now banned and replacement equipment will cost more. 

The Contracting Officer does not have discretion to include or not to include the revised clause in existing contracts for future orders or award of options to extend the contract. Contracting Officers are prohibited from making new awards or extensions unless the contractor certifies compliance with the prohibition.

There is a caveat to 1.108-(d)(3), that being 1.108 (d):

“(d) Application of FAR changes to solicitations and contracts. Unless otherwise specified-“

That being said, if a future order isn’t pre-priced, I’m guessing that the contractor could be entitled to include consideration for its cost to comply with the prohibition. I don’t know about increased costs for pre-priced orders or an option period - all of that is something to the Acquisition TEAM to investigate and determine.

EDIT:  I don’t think that the Contractor has to certify compliance, unless it wants new orders or wants an extension. It just can’t be awarded further orders or options to extend...

 

 

Edited by joel hoffman
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11 hours ago, Andrea Tichenor said:

Reference Interim Rule for FAR Case 2019-009 published July 14, 2020 in the Federal Register - https://www.govinfo.gov/content/pkg/FR-2020-07-14/pdf/2020-15293.pdf

Ultimately, I would like to know your opinion whether a bilateral contract modification should be pursued to update FAR 52.204-25 to the newest AUG 2020 version.  The clause is currently included in my IDIQ commercial services contract.  The contract base and all options is anticipated to be 60 months in length, estimated total $12M.  The contractor completed their representations in SAM for provisions 52.212-3(v)(2) and 52.204-26(c) and stated "does not" provide covered telecommunications equipment or services for both provisions.  Provision FAR 52.204-24 is also being updated AUG 2020.  Do I need their representations for FAR 52.204-24(d)(2)?  Potentially prior to exercising an option???

The Interim Rule states contracting officers shall modify existing contracts prior to placing future orders.  On page 11 of the Federal Register publication it states, "the objective of the rule is to provide an information collection mechanism that relies on an offer-by-offer representation that is required to enable agencies to determine and ensure that they are complying with section 889(a)(1)(B)."

FAR 52.204-25 AUG 2019 does not address section 889(a)(1)(B).  FAR 52.204-25 AUG 2020 added a second paragraph under (b), the second paragraph pertains to section 889(a)(1)(B).  If I do not modify my contract to update FAR 52.204-25, will I potentially be in violation of section 889(a)(1)(B)?  I can't recall ever modifying a contract just to include the most current version of a clause.

Do you think a modification to update FAR 52.204-25 to AUG 2020 is appropriate?  If so, would you expect this to be a no-cost mod?

Thanks in advance for participating in this discussion!

 

You need to 1) Modify the contract IAW FAR 1.108(d) to include the new clause before issuing any new orders or exercising an option and 2) include the provision in all solicitations for an order, or notices of intent to place an order, including those issued before the effective date of the rule. FAR 1.108(d)(3) permits the contracting officer to incorporate FAR changes in existing contracts "with appropriate consideration." In this case, the FAC requires it (note the "Unless otherwise specified--" at the beginning of FAR 1.108).

The law applies to executive agencies and does not give the Government any authority to incorporate the clause unilaterally. Contractors most certainly have a choice--they can decline to sign the modification, although they risk not receiving any more orders or not getting their options exercised. The fact that there's nothing in the contract to entitle the contractor to an adjustment is irrelevant. There's also nothing in the contract that requires that the contractor comply with the new clause until they agree to it. If the Government wants to include the clause, they should expect to cover the cost impact.

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Interestingly, the DOD policy referenced above says that the prohibition doesn’t apply to subcontractors. That is somewhat intriguing. Intentional or a Congressional oversight? I didn’t read the legislation. 

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Ok the July 20 Interim rule clearly states: “Contracting officers shall modify, in accordance with FAR 1.108(d), existing indefinite delivery contracts to include the FAR clause for future orders, prior to placing any future orders.” 

I agree with Don.

Thanks, Don. 
 

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3 hours ago, joel hoffman said:

Interestingly, the DOD policy referenced above says that the prohibition doesn’t apply to subcontractors. That is somewhat intriguing. Intentional or a Congressional oversight? I didn’t read the legislation. 

(b)(2) of the clause added by the Federal Register action, covers 889(a)(1)(B) and reads in part as follows: (2) Section 889(a)(1)(B) of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 115–232) prohibits the head of an executive agency ...Paragraph II of the Federal Register states in part as follows:...the prohibition for section 889(a)(1)(B) will not flow down because the prime contractor is the only ‘‘entity’’ that the agency ‘‘enters into a contract’’ with, and an agency does not directly ‘‘enter into a contract’’ with any subcontractors, at any tier. Paragraph (e) of the clause remains unchanged and requires flowdown. (b)(2) does not seem applicable to subcontractors, but my opinion is the clause language requires its substance to be flowed. If it was desired not to flow (b)(2), it could have easily be said in (e) not to flow it.   

Edited by Neil Roberts
paragraph (b)(2) not cited correctly
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Thanks, Neil. 

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And I guess that, if the contractor doesn’t or can’t agree and/ or it would be unnecessarily expensive for the government to agree to a contractor’s “consideration” or additional cost to comply, then the contracting officer has the discretion not to modify the contract. That would end any new orders or award of an extension or exercising an option for extension of time. And the government has the discretion not to order any more services or supplies, which would also justify not modifying the contract. 

Ok, I can understand that. 

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  • 1 month later...

Not sure if this belongs here or on a new thread, but regarding flowing down to subcontractors, are there exceptions to 52.204-24 and 52.204-25 based on either value or commercial item status?  Would it apply to a low-value COTS purchase from an online retail site?

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15 minutes ago, Patrick Mathern said:

Not sure if this belongs here or on a new thread, but regarding flowing down to subcontractors, are there exceptions to 52.204-24 and 52.204-25 based on either value or commercial item status?  Would it apply to a low-value COTS purchase from an online retail site?

FAR 52.204-25 is listed in FAR 52.244-6 as a flow down to commercial subcontracts. It doesn't state any applicable dollar threshold.

FAR 52.204-24 is a solicitation provision.

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On 9/2/2020 at 11:08 AM, Patrick Mathern said:

Not sure if this belongs here or on a new thread, but regarding flowing down to subcontractors, are there exceptions to 52.204-24 and 52.204-25 based on either value or commercial item status?  Would it apply to a low-value COTS purchase from an online retail site?

-24 (AUG2020) is a solicitation provision and does not include any mandatory flowdown language. As a practical matter, I believe that contractor (and potentially subcontractor) could have serious consequences for failing to obtain this representation before entering into any contract, subcontract or other contractual instrument.The consequences could result because the representation includes language under which the Offeror is vouching for equipment or services provided to it through its subcontracts, contracts or other contractual instruments.     

An Offeror is excused from (d)(1) representation if it already submitted the required representation in the -26 solicitation provision, which reads as follows: “(c) Representation. The Offeror represents that it does, does not provide covered telecommunications equipment or services as a part of its offered products or services to the Government in the performance of any contract, subcontract, or other contractual instrument.” The Offeror may also be excused from (d)(1) representation if it already represented in paragraph (v) of the provision at 52.212-3, Offeror Representations and Certifications-Commercial Items.

 


 

Edited by Neil Roberts
change would to could.
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It's important to keep in mind that there are two (2) different prohibitions at play.  Section 889(a)(1)(A) is the prohibition on the Government acquiring covered equipment and services (the representations at FAR 52.204-24(d)(1)).  Section 889(a)(1)(B) is the prohibition on the Government doing business with entities that use covered equipment and services (the representation at FAR 52.204-24(d)(2)). 

Additionally, there is no monetary threshold on applicability and the prohibitions in the FY2019 NDAA are being applied to micropurchases utlizing a Government Purchase Card.  https://www.acq.osd.mil/dpap/policy/policyvault/USA001666-20-DPC.pdf

 

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