Infotech and the Law: Homeland Security bills provide special procurement authority

Richard Rector

When the Bush administration in June resolved to create a Department of Homeland Security, it proposed giving the department special authority to use "flexible" procurement practices. The administration proposed that the agency generally would follow existing, governmentwide procurement laws, but would have broad authority to deviate from them if they would impair the agency's mission or operations.

Unfortunately, while this approach was reasonable in concept, the limits and day-to-day implementation of this so-called non-impairment authority were legally problematic. In fact, it was not clear that such authority would be interpreted in the manner expected by the administration, nor that there would be adequate accountability and transparency regarding the authority.

The House of Representatives addressed both of these concerns in July when it passed H.R. 5005, the Homeland Security Act of 2002. It provides clear authority through 2007 for the department to depart from existing rules when they would hinder the agency's mission. The legislation also includes justification, approval and reporting provisions that would ensure substantial accountability and transparency of the agency's actions.

But H.R. 5005 also limits the flexibility provided in the administration's original proposal. Specifically, while the legislation was clarified to expressly allow the department to use streamlined acquisition authority when its mission would otherwise be seriously impaired, it also was modified to specifically define -- and restrict -- the scope of that authority.

Under the legislation, the department's special authority would be limited to four options:

* Treating any item or service to be acquired as a commercial item for purpose of federal procurement laws;

* Increasing the threshold for simplified acquisition procedures from $5 million to $7.5 million;

* Increasing the simplified acquisition threshold from $125,000 to $175,000;

* Increasing the micropurchase threshold from $2,500 to $5,000.

In addition, relatively strict approval and reporting obligations would have to be followed if these options were used. Thus, the act provides the department with a modest amount of additional procurement flexibility while imposing significant approval and reporting burdens.

At this time, it is not clear how the Senate will address the department's procurement authority. Sen. Joseph Lieberman, D-Conn., proposed a substitute amendment, S.A. 4471, in September, and Sen. Phil Gramm, R-Texas, subsequently proposed a substitute to that: S.A. 4738.

While the procurement provisions of the Senate bills are similar, they differ significantly from those of H.R 5005. The Senate bills provide "emergency procurement flexibility" that would be available only for solicitations issued within one year of the law's enactment vs. a seven-year period in House legislation. The special authority could be used only for defense against or recovery from terrorism or nuclear, biological, chemical or radiological attack vs. whenever acquisition rules would impair the agency's mission under H.R. 5005.

The specific procurement alternatives that would be available through the Senate bills are similar, but not identical, to those in the House bill: application of commercial-item authorities, use of streamlined procedures and increasing the micropurchase and simplified acquisition thresholds for procurements in support of humanitarian, peacekeeping or contingency operations.

For contractors, the most significant of these alternatives would be the department's ability to use commercial-item procurement practices for covered acquisitions, without regard to whether the supply or service was actually a commercial item. As defined in FAR Part 12, commercial-item contracts do not contain some of the complex and -- from a contractor's perspective -- onerous clauses that are typically required in federal contracts.

Let's hope that this flexibility, at a minimum, remains in the final version of the Homeland Security Act. *

Richard Rector is a partner in the Government Contracts Group of Piper Marbury Rudnick & Wolfe LLP in Washington. His e-mail address is richard.

rector@piperrudnick.com.

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