ADVANCED FEDERAL ACQUISITION REGULATIONS

ADVANCED FEDERAL ACQUISITION REGULATIONSADVANCED FEDERAL ACQUISITION REGULATIONS

10 SEPTEMBER 201010 SEPTEMBER 2010Administrative Committee on Research (ACOR) RETREATAdministrative Committee on Research (ACOR) RETREAT

Presented by:Presented by:Sally Cord and Danelle KissellSally Cord and Danelle Kissell

OutlineOutline

• Introduction•Origin and Purpose of FAR•FAR Supplements (DFAR, AFFARS, etc)•FAR Basics Review

• Example FAR clauses & why they can be problematic•52.204-2 and ALT 1Security Requirement•52.216-7 Allowable Cost and Payment•52.212.4 Contract Terms and Conditions – Commercial Items•52.227-1 Authorization and Consent and ALT 1•52.246-20 Warranty of Services•52.227-3 Patent Indemnity•52.222-50 Combating Trafficking in Persons•252.204-7000 Disclosure of Information

• Summary/Resources

• Questions/Contact Information

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INTRODUCTIONINTRODUCTION

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•The origins of the Federal Acquisition Regulations System can be traced back to 1792 when Congress granted the Departments of War and Treasury the authority to contract.

•The purpose of the FAR is to establish uniform rules for federal contracting.

FAR Origin and PurposeFAR Origin and Purpose


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•Where do you find the FAR?http://farsite.hill.af.mil/

•What is a prescription?A prescription is a clause that provides the Contracting Officer (CO) instructions as to when a particular FAR clause is or is not applicable to a contract. (A reference to the relevant prescription can be found at the beginning of each FAR clause.)

•What is an alternate?An alternate is a variation of a FAR clause. Check the prescription for instructions as to when a particular alternate applies. (Not all clauses have alternates.)


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•The Federal Acquisition Regulations System consists of the Federal Acquisition Regulation (FAR) which is the primary document, and agency acquisition regulations that implement or supplement the FAR.

•These supplements include the Defense Federal Acquisition Regulation Supplement (DFARS), the Department of Energy Acquisition Regulation Supplement (DEARS), etc.

FAR SupplementsFAR Supplements


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FAR /DFAR CLAUSESFAR /DFAR CLAUSES

FAR CLAUSES FAR CLAUSES

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52.204.2 Security Requirements w/ Alternate I52.204-2 Security Requirements. As prescribed in 4.404(a), insert the following clause:

Security Requirements (Aug 1996)(a) This clause applies to the extent that this contract involves access to information classified “Confidential,” “Secret,” or “Top Secret.” (b) The Contractor shall comply with— (1) The Security Agreement (DD Form 441), including the National Industrial Security Program Operating Manual (DoD 5220.22-M); and (2) Any revisions to that manual, notice of which has been furnished to the Contractor. (c) If, subsequent to the date of this contract, the security classification or security requirements under this contract are changed by the Government and if the changes cause an increase or decrease in security costs or otherwise affect any other term or condition of this contract, the contract shall be subject to an equitable adjustment as if the changes were directed under the Changes clause of this contract. (d) The Contractor agrees to insert terms that conform substantially to the language of this clause, including this paragraph (d) but excluding any reference to the Changes clause of this contract, in all subcontracts under this contract that involve access to classified information. (End of clause) Alternate I (Apr 1984). If a cost contract for research and development with an educational institution is contemplated, add the following paragraphs (e), (f), and (g) to the basic clause: (e) If a change in security requirements, as provided in paragraphs (b) and (c), results (1) in a change in the security classification of this contract or any of its elements from an unclassified status or a lower classification to a higher classification, or (2) in more restrictive area controls than previously required, the Contractor shall exert every reasonable effort compatible with the Contractor’s established policies to continue the performance of work under the contract in compliance with the change in security classification or requirements. If, despite reasonable efforts, the Contractor determines that the continuation of work under this contract is not practicable because of the change in security classification or requirements, the Contractor shall notify the Contracting Officer in writing. Until resolution of the problem is made by the Contracting Officer, the Contractor shall continue safeguarding all classified material as required by this contract. (f) After receiving the written notification, the Contracting Officer shall explore the circumstances surrounding the proposed change in security classification or requirements, and shall endeavor to work out a mutually satisfactory method whereby the Contractor can continue performance of the work under this contract. (g) If, 15 days after receipt by the Contracting Officer of the notification of the Contractor’s stated inability to proceed, (1) the application to this contract of the change in security classification or requirements has not been withdrawn, or (2) a mutually satisfactory method for continuing performance of work under this contract has not been agreed upon, the Contractor may request the Contracting Officer to terminate the contract in whole or in part. The Contracting Officer shall terminate the contract in whole or in part, as may be appropriate, and the termination shall be deemed a termination under the terms of the Termination for the Convenience of the Government clause. Alternate II (Apr 1984). If employee identification is required for security or other reasons in a construction contract or architect-engineer contract, add the following paragraph (e) to the basic clause: (e) The Contractor shall be responsible for furnishing to each employee and for requiring each employee engaged on the work to display such identification as may be approved and directed by the Contracting Officer. All prescribed identification shall immediately be delivered to the Contracting Officer, for cancellation upon the release of any employee. When required by the Contracting Officer, the Contractor shall obtain and submit fingerprints of all persons employed or to be employed on the project.


What the clause says:“… The Contractor shall comply with –(1) The Security Agreement (DD Form 441) including the National Industrial Security Program Operating Manual (DoD 5220.22-M) . . .”

Prescription 4.404(a): (a)The contracting officer shall insert the clause…in solicitations and contracts when the contract may require access to classified information….(b)If a cost contract (see 16.302) for research and development with an educational institution is contemplated, the contracting officer shall use the clause with its Alternate I.

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52.204.2 Security Requirements w/ Alternate I


What the Alternate I says:“… If despite reasonable efforts, the Contractor determines that the continuation of work under this contract is not practicable because of the change in security classification or requirements, the Contractor shall notify the Contracting Officer in writing. . .”

Conclusion for PSU: Educational institutions should not accept this clause

unless the CO agrees to include Alternate I.

Exception for DRRU:EOC and ARL have classified facilities and can accept

under a cost type contract if the work is classified.

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52.204.2 Security Requirements w/ Alternate I


What the clause says:Specifies payment terms for cost-reimbursement contracts.

“The Government will make payments to contractor when requested . . . In the amounts determined to be allowable in accordance with FAR subpart 31.2 . . .”

Prescription 16.307(a): (a)(1) . . . “If the contact is with an educational institution modify the clause by deleting from paragraph (a) the works Subpart 31.2 and substituting for them 31.3 .”

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52.216-7 Allowable Cost and Payment


Why is this important?

Subpart 31.2 – Contacts with Commercial Organizations

Subpart 31.3 – Contracts with Educational Institutions

Subpart 31.3 incorporates OMB Circular A-21 cost principles vice FAR cost principles.

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52.216-7 Allowable Cost and Payment


What the clause says:

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52.212-4 Contract Terms and Conditions- Commercial Terms

•Clause includes warranty and inspection.•Government won’t pay if they aren’t satisfied with the work. •Government may require re-performance at no additional cost.•Clause includes patent indemnity, which PSU will not accept.•Clause includes termination for cause, which PSU will not accept.•Government receives title to all furnished items, which is NOT preferable to PSU.

THESE TERMS ARE NOT ACCEPTABLE FOR RESEARCH


Prescription 12.301(b)(3): Be cautious , 12.301(b)(3) is vague. Read the section prior to the prescription to understand that this clause is only to be used “for the acquisition of commercial items.”

PSU position:

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52.212-4 Contract Terms and Conditions- Commercial Terms

We do NOT supply commercial items. FAR Part 12 is for the Acquisition of Commercial Items. This clause should NOT be accepted.

PSU research work is typically negotiated under FAR 15, Contracting by Negotiation, not FAR 12.



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52.227-1 Authorization and Consent and ALT I

“The Government authorizes and consents to all use and manufacture, in performance of this contract or any subcontract at any tier, of any invention described in and covered by a United States patent – . . .

(1)Embodied in the structure of any article the delivery of which is accepted by the government

(2) Used in machinery, tools, or methods who’s use results from compliance of specifications . . .”


What the ALTERNATE says:

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52.227-1 Authorization and Consent and ALT I

“The Government authorizes and consents to all use and manufacture of any invention described in and covered by a United States patent in performance of this contract or any subcontract at any tier.”

•Always request ALTERNATE I per Prescription 27.201-2(a)(2)

•ALTERNATE I is required for all contracts “for which the primary purpose is R&D work.”

•Protects the institution from being sued for patent infringement.



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52.246-20 Warranty of Services

“Contractor warrants that all services performed . . . will be free from defects in workmanship and conform to the requirements of this contract.”

Government reserves the right under this clause to require re-performance at no additional cost to the Government.

The prescription for this clause is vague and states that the contracting officer may insert this clause if approved under agency procedures.


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52.246-20 Warranty of Services

Arguments for removing warranty clauses:

•University research is performed on a reasonable best effort basis. We cannot predict the outcome of research at the outset of a project, so it is unfair to expect us to warrant our work.

•Universities operate on a non-profit basis, which is why we can’t afford to enter into contracts that require unfunded re-performance.

•The Inspection R&D Short Form (52.246-9) was created for organizations like universities, and it does not require unfunded re-performance.

•Prescription 46.710(d) is intended when a “fixed-price contract for services is contemplated” by the Government.



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52.227-3 Patent Indemnity

This clause requires you to indemnify the Government in the event your institution infringes a US patent. This means PSU can be sued for patent infringement.

Obviously, it doesn’t make sense to accept 52.227-3 if you’ve received 52.227-1 Authorization and Consent with its Alternate I (use and manufacture of any invention described in and covered by a United States patent).

The prescription for this clause used to explicitly make this point; unfortunately, as of 12/2007, it no longer does.


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Arguments for removing Patent Indemnity:

•The prescription for this clause says that it is for contracts that may result in the delivery of commercial items. Universities do not deliver commercial items.

•You can point out to the Contracting Officer that 52.227-3 is inconsistent with 52.227-1, Alt I, which they are required to give you.


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Finally, you can reiterate the reason why universities are always opposed to patent indemnity:

•In the course of performing experimental work, we may inadvertently infringe on someone else’s patent.

•No university can afford to perform patent searches on every area of experimental research it is engaged in.

•Since the Government is asking us to perform this R&D work, they ought to protect us from this potential liability.


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52.222-50 Combating Trafficking in Persons

“Contractor shall notify employees of Government’s zero tolerance regarding trafficking in persons:

•Contractors (and their employees) may not engage in severe forms of trafficking in persons during the POP.•Contractors may not procure commercial sex acts or use forced labor in performance of contract.”

Prepare a sign-off for all project personnel to inform them of the above.



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52.222-50 Combating Trafficking in Persons

Historical interlude:Many people objected to the wording of this clause when it came out three years ago.

Instead of saying that contractors couldn’t engage in these activities, it said that they couldn’t support or promote these activities, which was seen by some as a restriction on academic freedom.

The original clause also included a requirement for contractors to “monitor the conduct of their employees” with regard to “procurement of commercial sex acts,” etc.

DFAR CLAUSE DFAR CLAUSE

This clause states:(a) The Contractor shall not release to anyone outside the Contractor's organization any unclassified information, regardless of medium (e.g., film, tape, document), pertaining to any part of this contract or any program related to this contract, unless—

(1) The Contracting Officer has given prior written approval”

Prescription 204.404-70(a) states: (a)The contracting officer shall insert the clause… “in solicitations and contracts when the contractor will have access to or generate unclassified information that may be sensitive and inappropriate for release to the public”

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252.204-7000 Disclosure of Information


Many Universities refuse to accept any publication restrictions and therefore cannot accept this clause

If your college or laboratory does “military sensitive” work, it may be necessary to accept this clause

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Prior to accepting this clause, it important to consider the following implications:

• Faculty, staff members and students may not be permitted to publish

• This could affect a junior faculty member’s ability to secure tenure, a postdoc’s ability to find a tenure-track job and a student’s ability to graduate.

• This clause constitutes an explicit publication restriction and invalidates the fundamental research exemption

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Strategies for removing this clause:

Argue that the project should not be considered sensitive or otherwise inappropriate for public release. This is especially true if all the materials and data are already in the public domain.When receiving this clause in a subcontract, you might be able to argue that the university’s portion of the project is NOT sensitive, even though the prime contractor’s component of the project might be.

The following memo can also help:http://www.research.psu.edu/osp/PSU/Toolbox/DODMemo.pdf


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Other implications to consider:•The project will have to be reviewed for export control.

•It may be necessary to prohibit foreign nationals from working on the project if the project has export implications.

•It may be necessary to draft a “Technology Control Plan” to prevent unauthorized foreign nationals from accessing any of the project materials or data


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OTHER CLAUSES OF CONCERN

52.227-14 Rights in Data - General52.227-17 Rights in Data – Special Works52.215-2 Audits and Records52.232-17 Interest52.245-1 Government Property (ALT I)252.223-7004 Drug Free Work Force

(vice 52.223-06 Drug Free Work Place)


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SUMMARY

•FAR clauses are applicable based many variances including : Dollar Threshold Scope and Type of Work Type of Organization (for-profit vice non-profit) Type of Contract Classification

• FAR clause acceptance may also vary by college or unit.

• FAR clauses continually change and are updated for a variety of reasons. Clauses are tied to the instant contract, unless modified.

RESOURCE: FAR MATRIX Negotiation Tool

http://www.research.psu.edu/osp/toolbox/contractregs.html


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QUESTIONS?

Contact Information:

Danelle KissellOffice of Sponsored [email protected]

Sally CordElectro-Optics [email protected]

ADVANCED FEDERAL ACQUISITION REGULATIONS

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