White House drops controversial Section 803 language

The Office of Federal Procurement Policy does not plan to include time and materials language in the final Section 803 rule after all, according to industry and congressional sources.

Under the draft version of the Federal Acquisition Regulation rule, the Defense Department would have had to use firm-fixed price contracts when buying commercial items through schedule contracts instead of preferred time and materials contracts. The administration plans to issue the final version shortly without the controversial requirement to use firm-fixed price contracts only.

OFPP will address the time and materials issue through a separate rule, said David Marin, spokesman for Rep. Tom Davis (R-Va.). Davis, chairman of the Government Reform Subcommittee on Procurement Policy and Technology, fought the language.

"Congressman Davis will strongly oppose the separate rule as well?but agrees that this is the way this should be pursued?through separate rule-making," Marin said. "In a nutshell, Davis is pleased OFPP ceded to his request."

OFPP had added the language late in the process, prompting complaints from industry, congressional and Defense officials.

Larry Allen, executive vice president for the Coalition for Government Procurement in Washington, said he too was pleased by OFPP's decision. Allen learned of the change Monday in a two-hour meeting with Office of Management and Budget officials, including director Mitchell E. Daniels.

"The amendment had no business being in there in the first place, and we are gratified it has been removed," he said. "This is a significant win for DOD."

The final Section 803 rule still will require DOD to obtain at least three bids when making schedule purchases of more than $100,000. Congress included the requirement in the National Defense Authorization Act of 2002.