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Fara Fasat

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Maybe I'm missing something simple, so feel free to point out my error. I'm trying to figure out whether the Gratuities clause, 52.203-3, goes in commercial item contracts. 

  • the prescription says all contracts over the SAT, but
  • it is not listed in 52.212-5 as a mandatory clause for commercial item contracts, and 
  • it is not listed as a CI clause in the FAR Matrix

I thought I remembered something from a few years ago that said a clause was not applicable to CI contracts unless the prescription specifically said it did. So I checked a couple others, and they are in 212-5 as mandatory for CI contracts, but CI contracts are not called out in the prescription. For example, 52.204-23 (the Kaspersky ban) is listed in 212-5, but the prescription simply says all solicitations and contracts.

So is 203-3 just another disconnect in the FAR? Should it be added to 212-5 to be consistent with the "all" prescription? Should the prescription say "except solicitations and contacts for commercial items?

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How is 12.101 (c) applicable to this question?

9 hours ago, ji20874 said:

No.  See FAR 12 301(a) and (d).  See also 12.101(c).

The questions appear to concern whether there is a FAR disconnect and should the FAR be corrected either to include the clause in contracts for commercial items or services or to correct the prescription to exclude the clause from contracts for commercial items or commercial services

I’m missing the points in your response, which appear to agree with Fara Fasat that 52.203-3 is not prescribed in Part 12 (nor included in the FAR clause matrix for Commercial Item contracts), which conflicts with the prescription for 52.203-3 to be included in all contracts over the Simplified Aquisition Threshold [except as noted below].

“So is 203-3 just another disconnect in the FAR? Should it be added to 212-5 to be consistent with the "all" prescription? Should the prescription say "except solicitations and contacts for commercial items?”

Here is the prescription at 3.202:

“3.202 Contract clause.

The contracting officer shall insert the clause at 52.203-3, Gratuities, in solicitations and contracts with a value exceeding the simplified acquisition threshold, except those for personal services and those between military departments or defense agencies and foreign governments that do not obligate any funds appropriated to the Department of Defense.”

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FAR 12.301 (a), (b), and (c) prescribe the provisions and clauses that apply to contracts for commercial items. FAR 12.301(d) says: "Other required provisions and clauses. Notwithstanding prescriptions contained elsewhere in the FAR, when acquiring commercial items, contracting officers shall be required to use only those provisions and clauses prescribed in this part." Emphasis added.

What about that is hard to understand?

We've now been buying commercial items pursuant to FAR Part 12 since the mid-1990s, more than 20 years. There is no issue about the gratuities clause. It does not apply. It does not apply because it is not prescribed in FAR Part 12. There is no "disconnect" in this case, only cognitive dissonance.

I might understand the opening post if this were the For Beginners Only forum, but it's not.

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Note that the current Gratuities clause at 52.203-3 has been in the FAR from the beginning in 1984.

 I couldn’t find discussion concerning why it would be excluded from commercial item contracts. 

The current prescription for the clause at 3.202 appears to read the same as in the 1998 FAR edition, which includes the exclusion for contracts below the SAT. My 1996 edition appears to use the original 1984 prescription language (can’t find my 1984 edition).

EDIT: Vern posted his above response while I was looking this up.

So, the FAR cleverly solves the disconnect problem with the general disclaimer at FAR 12.301(d): "(d) Other required provisions and clauses. Notwithstanding prescriptions contained elsewhere in the FAR,...”

Edited by joel hoffman
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The prescription in FAR 3.202  is irrelevant pursuant to FAR 12.301(d). If you're buying commercial items you shouldn't be reading FAR 3.202, because of FAR 12.301(d). The history of FAR 3.202 is also irrelevant pursuant to FAR 12.301(d).

There is nothing new about this. The statute that introduced commercial items policy was enacted in 1994. FAR Part 12 dates from slightly later. It's now 2021. Time to get with the program.

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See DFARS 212.301(f)(1)(A), which requires inclusion of the gratuities clause in DOD solicitations and contracts for commercial items "to comply with 10 USC 2207," a law that applies only to the Department of Defense and that has to do with limitations on expenditure of appropriations. That is consistent with FAR 12.301(f), which states:

Quote

(f) Agencies may supplement the provisions and clauses prescribed in this part (to require use of additional provisions and clauses) only as necessary to reflect agency unique statutes applicable to the acquisition of commercial items or as may be approved by the agency senior procurement executive, or the individual responsible for representing the agency on the FAR Council, without power of delegation.

A check of the FAR system shows that no other agency has applied the gratuities clause to contracts for commercial items. 

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26 minutes ago, Vern Edwards said:

The prescription in FAR 3.202  is irrelevant pursuant to FAR 12.301(d). If you're buying commercial items you shouldn't be reading FAR 3.202, because of FAR 12.301(d). The history of FAR 3.202 is also irrelevant pursuant to FAR 12.301(d).

There is nothing new about this. The statute that introduced commercial items policy was enacted in 1994. FAR Part 12 dates from slightly later. It's now 2021. Time to get with the program.

I don’t disagree with the fact that the clause has been excluded since the FAR Part 12 was added in the 1990’s. However, due to the subject of the clause, I’m somewhat curious why something as fundamental as prohibiting offering or giving gratuities to a official, officer or employee of the Government with the intent to obtain a contract or favorable treatment under a contract would be excluded for contracts for commercial items or commercial services.

Was this a conscious exclusion?  

Inasmuch as the Federal Government policy is to acquire supplies and services as commercial  items whenever feasible, a large share of acquisitions exclude this prohibition. 

EDIT:  Vern’s reply above, while I was writing this post partly answers my question. Yay for DoD. 

Edited by joel hoffman
I was finger pecking my post when Vern posted above.
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50 minutes ago, joel hoffman said:

...52.203-3 is not prescribed in Part 12 (nor included in the FAR clause matrix for Commercial Item contracts), which conflicts with the prescription for 52.203-3 to be included in all contracts over the Simplified Aquisition Threshold...

No.  Let me correct it for you...

  • ...52.203-3 is not prescribed in Part 12 (nor included in the FAR clause matrix for Commercial Item contracts), which conflicts with [trumps, supersedes, overrides, and utterly squashes] the prescription for 52.203-3 to be included in all contracts over the Simplified Acquisition Threshold...

The clause at FAR 52.203-3 does not belong in contracts for commercial items.  Period.  

 

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9 minutes ago, joel hoffman said:

I don’t disagree with the fact that the clause has been excluded since the FAR Part 12 was added in the 1990’s. However, due to the subject of the clause, I’m somewhat curious why something as fundamental as prohibiting offering or giving gratuities to a official, officer or employee of the Government with the intent to obtain a contract or favorable treatment under a contract would be excluded for contracts for commercial items or commercial services.

Was this a conscious exclusion?  

Who knows? I doubt that there is any readily accessible record of any deliberations that may have occurred in Congress, OFPP, the FAR Councils, or elsewhere.

A lot of FAR clauses are excluded from contracts for commercial items, but not enough. 

9 minutes ago, joel hoffman said:

Yay for DoD. 

Why "Yay"? They only did what the law required. They didn't act out of special DOD moral or ethical righteousness.

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10 minutes ago, ji20874 said:

The clause at FAR 52.203-3 does not belong in contracts for commercial items.  Period.

Well, apparently it does for DoD, due to DoD appropriations laws. Wonder why it is also prescribed for non-commercial, non-DoD contracts?
EDIT:  Why would government statutes and policy distinguish between commercial and non-commercial if prohibiting gratuities in federal contracting is fundamental policy and promoting maximum practical use of commercial contracting is   now fundamental acquisition policy? 

 

 

Edited by joel hoffman
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When FAR Part 12 for Commercial Items was implemented in the FAR in the mid-1990s, the FAR councils made a conscious decision to make FAR Part 12 override everything else in the FAR -- that way, they could deal with commercial item prescriptions one time and in one place (FAR Part 12) and in one rule-making effort rather than having to make changes in every part of the FAR that has clause prescriptions.  I recall this because I was on a temporary assignment to support OFPP at this exact time, and I remember OFPP Administrator Steven Kelman verbalizing his thought.

So, it is what it is.  The plain text of FAR 12.102(c) and 12.301(d) is there for anyone to read.

The FAR councils were given the responsibility to consider commercial item application of new clauses and to keep FAR 52.212-5 up-to-date as needed.

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If other federal statutes prohibit gratuities, the clause may be superfluous, I suppose.

 

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DOD operates in a special acquisition environment because of the amount of money it spends. That's why Congress is obsessed with DOD acquisition and enacts so many Title VIII laws every year. That's why the goal of a single governmentwide procurement regulation has not been achieved. The FAR is 1,996 pages long in its pdf edition. The DFARS is 1,336 pages long, and that doesn't include all the class deviations and policies like the 60-page DOD source selection procedures. Absurd.

The regulators need to let DOD have its own regulation and apply the FAR to just the civilian agencies. 

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23 minutes ago, Vern Edwards said:

DOD operates in a special acquisition environment because of the amount of money it spends. That's why Congress is obsessed with DOD acquisition and enacts so many Title VIII laws every year. That's why the goal of a single governmentwide procurement regulations has not been achieved. The FAR is 1,996 pages long in its pdf edition. The DFARS is 1,336 pages long, and that doesn't include all the class deviations and policies like the 60-page DOD source selection procedures. Absurd.

The regulators need to let DOD have its own regulation and apply the FAR to just the civilian agencies. 

Back to segregated acquisition regulations then.  They had lofty goal for uniformity across government which isn’t entirely possible but would seem to be an improvement over numerous previous practices.

I realize that there is a need to simplify contracting practices for commercial items and services. There may well be enough US laws against bribery, baksheesh, palm greasing, influence peddling, kickbacks, etc. that there is no practical need to even include a Gratuities clause in any federal contract, except where Congress specifically directed.

When Congress Barks, the regulators have to jump.

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2 minutes ago, Vern Edwards said:

Don't worry, Joel. They policy people will never agree to going back to separate regulations. We're stuck with the FAR and the DFARS, which will just continue to grow.

Yep. Thanks for your research and insights by the way! 

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Just now, joel hoffman said:

I realize that there is a need to simplify contracting practices for commercial items and services. There may well be enough US laws against bribery, backsheesh, palm greasing, influence peddling, kickbacks, etc. that there is no need to even include a Gratuities clause in any federal contract. 

Exactly and why my recollection of the creation of commercial item contracting practices attempted to do exactly what you realize and Vern suggests.  In truth anyone  could offer gratuities all it wants to government employees, isn't it the government employee that violates ethics rules if they accept the gratuity.   Further should the gratuity issue involve a commercial contract is there not the termination clause of 52.212-4 if the contractor continues to attempt offering a gratuity and the government employee continues to refuse.  Something like unacceptable business practice.   And then there is paragraph "q" that basically provides the  ability for action should there be an issue of gratuity offered and accepted.

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19 minutes ago, C Culham said:

In truth anyone  could offer gratuities all it wants to government employees, isn't it the government employee that violates ethics rules if they accept the gratuity. 

That's not entirely correct. See the Gratuities clause, FAR 52.203-3:

Quote

 

Gratuities (Apr 1984)

      (a) The right of the Contractor to proceed may be terminated by written notice if, after notice and hearing, the agency head or a designee determines that the Contractor, its agent, or another representative-

           (1) Offered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and

           (2) Intended, by the gratuity, to obtain a contract or favorable treatment under a contract.

      (b) The facts supporting this determination may be reviewed by any court having lawful jurisdiction.

      (c) If this contract is terminated under paragraph (a) of this clause, the Government is entitled-

           (1) To pursue the same remedies as in a breach of the contract; and

           (2) In addition to any other damages provided by law, to exemplary damages of not less than 3 nor more than 10 times the cost incurred by the Contractor in giving gratuities to the person concerned, as determined by the agency head or a designee. (This paragraph (c)(2) is applicable only if this contract uses money appropriated to the Department of Defense.)

      (d) The rights and remedies of the Government provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this contract.

(End of clause)

 

The clause does not prohibit offering or giving gratuities (gifts) unless the contractor is seeking something in return. But if such an intent is just suspected or inferred, the offering could result in a costly hearing, contract termination, and demand for damages, depending on the circumstances.

 

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Thank you for the response, 'beginners' comment notwithstanding. 12.301 trumps everything else. Fine, that's the answer. "All" doesn't mean "all." I'm not the only one who thought it might.

Makes me wonder whether there are any other general policy statements that override specific prescriptions.

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Fara,

It happens all the time, even in the hallowed halls of Congress.  How many times has Congress passed a bill that says "Notwithstanding any other provision of law. . ." or similar?  This allows them to declare the new law without the tedious chore and argument of modifying all the pre-existing laws that might be stepped on by the new law.

Some other examples in the FAR...

  • 52.242-1 Notice of Intent to Disallow Costs - (a) Notwithstanding any other clause of this...
  • 52.227-22 Major System-Minimum Rights - Notwithstanding any other provision of this contract, the Government shall have...
  • 52.236-11 Use and Possession Prior to Completion - ...notwithstanding the terms of the clause in this contract entitled Permits...
  • 52.216-21 Requirements - Notwithstanding anything to the contrary stated in the contract...

The word "notwithstanding" is a very powerful word.  That is the word used in FAR 12.301(d).

Some participants in the acquisition system have been ignoring or resisting this for over twenty years -- hopefully, through exchanges such as this, one at a time, we can help others learn correct principles.

 

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6 hours ago, joel hoffman said:

However, due to the subject of the clause, I’m somewhat curious why something as fundamental as prohibiting offering or giving gratuities to a official, officer or employee of the Government with the intent to obtain a contract or favorable treatment under a contract would be excluded for contracts for commercial items or commercial services.

See, 18 U.S.C. 209.  In light of this statute maybe we don't need a gratuities clause at all.

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12 minutes ago, Retreadfed said:

See, 18 U.S.C. 209.  In light of this statute maybe we don't need a gratuities clause at all.

Lots of loopholes in that citation...

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