Acquisition reforms ring in the new year

Infotech and the law | Legal insights for today's market

The Acquisition Improvement and Accountability Act of 2008 is important for two reasons. First, it makes big changes in procurement laws ? probably the most significant changes since the reforms of the mid-1990s. Second, it makes clear that the pendulum is swinging away from commercial-item acquisition policies.

With no time to create a stand-alone acquisition law, the House and Senate incorporated key provisions of their respective contractor accountability bills into their fiscal 2008 Defense Authorization bills. Differences between the bills were subsequently resolved, and Congress approved the final version of the act in mid-December. Although the president vetoed the bill because of an unrelated concern, the administration had said as of press time that it would work with Congress to enact the balance of the Defense Authorization Act. Thus it is likely to become law early this year.

Title VIII of the act contains the acquisition changes. It reflects many of the accountability provisions in the original House and Senate bills, although with changes to key provisions. Some provisions apply on a governmentwide basis, and others apply only to defense acquisition.

Key governmentwide provisions would:

  • Prohibit task or delivery orders worth more than $100 million to a single contractor except under limited conditions.

  • Require enhanced source-selection procedures ? more like Federal Acquisition Regulation Part 15 processes ? for all task and delivery order awards valued at more than $5 million.

  • Authorize bid protests ? to the Government Accountability Office only ? in connection with the award or proposed award of task orders and delivery orders valued in excess of $10 million.

  • Require federal agencies to publish justification and approval documents for non-competitive contracts on the agency's Web site, in most cases within 14 days of the award.

  • Require reporting to Congress significant audit findings included in final, completed audit reports through an annex to the semiannual reports submitted by agency inspectors general.

The act also institutes Defense Department-specific acquisition reforms, including:

  • Enabling DOD to treat services of a type offered and sold competitively in substantial quantities in the commercial marketplace as commercial items for purposes of the Truth in Negotiations Act application only if the contracting officer has sufficient information to determine price reasonableness. If not, the officer may request information on labor, material and overhead costs.

  • Limiting situations in which DOD can buy commercial services through time-and-materials and labor-hour contracts to support services for a commercial item, emergency repair services and services for which an agency leader has approved a written determination by the officer that, among other things, sufficient pricing information was obtained to determine reasonableness and the services are commonly sold to the public through time-and-materials and labor-hour contracts.

  • Limiting situations in which DOD can use commercial item procedures to acquire subsystems, components and spare parts that are incorporated into a major weapons system. The officer must determine that sufficient information has been submitted to determine price reasonableness.

These are significant changes. Contractors should anticipate them and be prepared to offer detailed justifications for their commercial-item pricing.

Richard Rector is chairman of the government contracts practice at DLA Piper US LLP.

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