September 19, 2018

The VA Proposes and Issues Wide-Ranging Revisions to Its Regulations

Holland & Knight Government Contracts Blog
Amy L. Fuentes

The U.S. Department of Veterans Affairs (VA) recently issued several proposed rules and a final rule amending the VA Acquisition Regulation (VAAR) as part of a phased approach intended to streamline the VAAR to eliminate duplication and incorporate new policies. Collectively, these wide-ranging rules serve three primary purposes: (1) to revise any policy superseded by changes in the Federal Acquisition Regulation (FAR); (2) to move what the VA deems to be internal procedural guidance from the VAAR to the VA Acquisition Manual (VAAM); and (3) to incorporate any new agency specific regulations or policies. As a result, contractors should pay special attention to the VAAM, which will now contain policies that were formerly included in the VAAR. Several of the VA’s changes are discussed below.

On Sept. 7, 2018, the VA published proposed rules for Construction and Architect-Engineer Contracts. These proposed rules include many important changes, including the removal of Buy American Act regulations as they currently “duplicate[] FAR clauses and [are] unnecessary” as well as removal of liquidated damages regulations from the VAAR as “the subject matter is adequately covered in the FAR.” The VA’s rulemaking also proposes moving the notice to proceed and notice of award regulations to the VAAM, as the VA believes they have no significant effect beyond internal operating procedures. 

Also on Sept. 7, 2018, the VA published proposed rules relating to Contracting by Negotiation and Service Contracting. These proposed rules are extensive and include changes such as moving regulations related to source selection responsibilities, evaluation factors and subfactors, contract pricing and unsolicited proposals to the VAAM. The VA’s proposed rules also intend to eliminate references to the VA Mentor-Protégé program, as it is no longer current. The proposed rules also add a new section—Section 815.370 (Only One Offer) — that will give contracting officers the ability to resolicit for additional offers if only one offer is received and the solicitation’s terms gave less than 30 days to submit a proposal. In addition, if only one offer is received on a competitive solicitation, the new regulations establish procedures to foster competition and ensure that the price is fair and reasonable. 

As another example, on Sept. 13, 2018, the VA issued a final rule relating to Contract Cost Principles and Procedures; and Protests, Disputes and Appeals, following the receipt of no comments to an earlier proposed rule published in April 2018. This final rule revises VAAR Part 831, and clarifies the application of the cost principles to both fixed-price and cost reimbursement contracts with educational institutions, as well as those with commercial and non-profit organizations. Other revisions include clarification of the types of protests that may be dismissed by the VA without consideration of the merits, or that may be forwarded to another agency for appropriate action. The final rule states that certain challenges of the legal status of a firm as a regular dealer or manufacturer are determined solely by the procuring agency, the U.S. Small Business Administration (SBA) if a small business is involved and the Secretary of Labor. It also updates two clauses in Part 852 related to protests and clarifies a contractor’s obligation to continue performance under a dispute. The final rule also revises VAAR Part 833 to update information for where an interested party may protest to the contracting officer, provides for independent review a level above the contracting officer and clarifies how interested parties may appeal a contracting officer’s decision on a protest.

As a final example, on Sept. 18, 2018, the VA issued a final rule relating to Subcontracting Policies and Procedures and Government Property, following the receipt of no comments to an earlier proposed rule published in April 2018. This final rule implements FAR Part 44 by making public the VA’s additional requirements for providing its consent to subcontract. It further describes items that should be evaluated as a part of a contractor’s purchasing system review. The final rule also establishes that contractors should determine whether subcontract items meet the FAR definition of a commercial item. Finally, the rule implements and supplements FAR Part 45 by addressing procedures for contractors to document their acquisition of property for use in the service of VA contracts.

Given the wide-ranging changes proposed and issued by the VA to the VAAR, contractors should be certain to review any clauses in solicitations and modifications to existing contracts to ensure they understand the terms to which they are agreeing. The VA’s incremental revisions touch on a broad range of topics, which impact all stages of a procurement, including the solicitation and proposal phases, contract award and termination—as well as construction and services specific clauses to protests. Consequently, knowledge of these changes is critical for contractors navigating the VA’s changed procurement landscape.

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