On March 31, 2009, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council issued an interim rule in the Federal Register that will amend the Federal Acquisition Regulation (“FAR”) to implement section 1512 of Division A of the American Recovery and Investment Act of 2009 (“the Recovery Act”). This amendment, if accepted, will require government contractors receiving funds under the Recovery Act to report to the federal government on a quarterly basis regarding how the contractors are utilizing the accepted funds. 74 Fed. Reg. 14639 (March 31, 2009). The proposed rule would add a new subpart to the FAR at Part 4.15 and a new clause at Part 52.204-11. The interim rule took effect March 31, 2009, and the final regulations will go into effect after the end of the comment period, June 1, 2009.
The Reporting Requirements
Prime contractors, regardless of their size, will be required to submit reports to the federal government regarding the use of received Recovery Act funds. These reports will be submitted through a new online reporting tool available at http://www.federalreporting.gov (currently under construction). Reports from contractors for all work funded by the Recovery Act, and for which an invoice is submitted prior to June 30, 2009, are due no later than July 10, 2009. Thereafter, reports must be submitted to the federal government no later than the tenth day after the end of each calendar quarter.
It is important to note that the proposed rule applies to: (1) contracts at or below the simplified acquisition threshold; (2) commercial item contracts; and (3) commercial off-the-shelf (“COTS”) item contracts, as defined by section 2.101 of the Federal Acquisition Regulation, 48 C.F.R. § 2.101. Contracting officers who utilize Recovery Act funds on existing contracts or orders must modify those contracts to include the new clause.
The Content of the Required Reports
Under the proposed rule, all reports to the federal government must include: (1) the dollar amount of the contractor’s invoices; (2) the supplies delivered or services performed under the contract; (3) an assessment of the completion status of the work to be performed; (4) an estimate of the number of jobs created and the number of jobs retained as a result of the Recovery Act funds; (5) the names and total compensation of each of the five most highly compensated officers for the calendar year in which the contract is awarded if, in its preceding fiscal year, the contractor received 80 percent or more of its annual gross revenues and $25 million or more in annual gross revenue from federal funds, and such information is not publicly available through SEC filings; and (6) information on first-tier subcontractors, including the same executive compensation information required from prime contractors.
Reporting requirements for subcontractors themselves are less burdensome; subcontractors are only required to submit basic information, including their DUNS numbers, address, and the location of the performance under the awarded contract.
Government Requests for Comments in the Federal Register Notice
The notice in the Federal Register requested public comments regarding the proposed rule, and posed the following questions:
Should the government provide a list of broad c nn ategories of work under the Recovery Act from which the contractor would select and, if so, what should these be?
- With respect to the methodology described in the proposed rule for estimating jobs created or retained (using the “Full-time Equivalent” method), is this consistent with business practices and systems? Should the government allow contractors to develop any method consistent with their own business practices, or should the government standardize calculation methods?
- If the government were to require companies to separately invoice for all supplies or services funded by the Recovery Act, what challenges would this pose? Are there any benefits?
- nn Is there information not customarily provided that would make it easier for companies to segregate their invoices to separately identify items funded by the Recovery Act?
- Are there challenges to obtaining the information required from first-tier subcontractors? If so, how could the rule be changed to ease the submission of information from both a prime contractor and subcontractor perspective?
- Does the term “total compensation” (referring to the contractors’ five most highly compensated officers) require further clarification?
- Would it be useful to provide an alternate clause that would allow agencies to identify meaningful distinct “projects” within a contract, as opposed to providing information about the contract as a whole?
- Would a contractor be able to identify when Recovery Act funds were received and be able to identify the payment to particular deliverables? How difficult would this be to track and report on a quarterly basis?
Pre-Award Reporting Requirements
Another proposed rule issued March 31, 2009 would require acquisition officials to publish public notices prior to the award of government contracts worth more than $25,000 in a format that is easy for the public to understand. 74 Fed. Reg. 14637 (March 31, 2009). This interim rule implements section 6.2 of a recent Office of Management and Budget (“OMB”) Memorandum, M-09-10, titled “Initial Implementing Guidance for the American Recovery and Reinvestment Act of 2009.” In order to implement Section 6.2 of OMB’s M-09-10, the interim rule would amend the FAR as follows:
- FAR Part 4 would require the contracting officer to enter data in the Federal Procurement Data System on any action funded in whole or in part by the Recovery Act, in accordance with the instructions listed at https://www.fpds.gov.
- Subpart 5.7 of the FAR would be added to direct the contracting officer to use the government-wide Point of Entry (https://www.fedbizopps.gov) to: (1) identify the action as funded by the Recovery Act; (2) post pre-award notices for orders exceeding $25,000 for “informational purposes only”; (3) describe supplies and services (including construction) in a narrative that is clear and unambiguous to the general public; and (4) provide a rationale for awarding any action, including any modification or order that is not both fixed-priced and competitive, and include the rationale for using other than a fixed-price or competitive approach.
Parts 8, 13, and 16 of the FAR would be amended to reflect the new posting requirements for orders at Subpart 5.7.
Like the first proposed rule summarized above, this proposed rule became effective March 31, 2009, and the comment period ends June 1, 2009.
These proposed amendments to the FAR, if accepted, will impose significant new reporting requirements for all prime contractors receiving federal funds under the Recovery Act. It is important that all contractors become familiar with the new reporting requirements, review the final rule when it is published this summer, and visit http://www.federalreporting.gov when the website is activated.