This perennial problem puzzles our profession every time it presents itself:

  • Congress passes a new law affecting government contracting;
  • The law does not specify when the changes take effect;
  • The Federal Acquisition Regulation (FAR) has not been updated with the changes prescribed by this new law—therefore, there are no FAR clauses that reflect the new law.

How do we proceed? When does this law take effect?

If you have questions about changes in the law and how they affect your government contracts, contact Christoph@ChristophLLC.com

ALL CONTRACTING PROFESSIONALS MUST KNOW HOW LAWS AND REGULATIONS AFFECT GOVERNMENT CONTRACTS

As a contracting professional,[1] you have a duty to constantly learn, expand your skills, and educate your colleagues. This article clarifies one of the more mystifying concepts in government contracts—the interplay between laws passed by Congress and regulations promulgated by executive agencies.

Contracting officers have incomplete guidance about their authority to enter into contracts. The FAR states:

No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met.[2]

The language seems clear, but it is incomplete and silent on an important issue: How should the contracting officer proceed if a new law conflicts with current regulations? The FAR does not dare to broach this scenario, even though it is a recurring quandary for contracting professionals.

Even worse, contracting officers have conflicting guidance about their authority at FAR Subpart 1.4, which covers deviations from the FAR. Notably, the definition of deviation is tied to what the FAR states, not what the law states.[3] This places contracting officers in a very awkward dilemma when Congress passes a new law affecting government contracting, but the FAR has not been updated to implement this new law. Should the contracting officer ignore the law and follow the FAR? Should the contracting officer follow the law and deviate from the FAR

WHEN DOES THIS LAW TAKE EFFECT?

As an informed professional, you track relevant legislation and notice that a bill related to government contracts was signed into law. It’s important to note how the law will affect government contracting, but when there is no specific date stated for the law to take effect, when does it take effect?[4]

To answer this question, let’s compare and contrast laws and regulations—two of the most important sources of authority in government contracting.[5]

Laws and Their Citations

As a product of the legislative branch of the U.S. government, laws or legislation are passed by Congress (and ultimately signed by the president). How do you know you’re dealing with a law? A law will usually have a catchy—if not misleading—name that ends in “Act.” You’ve probably encountered two sets of formative legislation in the field of government contracts, namely:

  • The Competition in Contracting Act,[6] and
  • The Contract Disputes statute.[7]

When permanently codified in the U.S. Code (USC), each Act will be assigned two numbers that sandwich the abbreviation, “USC.” If you read a citation that includes “USC,” that’s your clue that it’s probably referring to a law.

The first number refers to the “Title” in the USC and the second number refers to either the “Chapter” or the “Section” in the USC. For example, the Contract Disputes statute is codified at Title 41, Chapter 71, and the definitions section is codified at Title 41, Section 7101. Therefore, a citation to the general statute would be “41 USC 71” or “41 USC Chapter 71.” A citation to the definitions section would be “41 USC §7101.”

Regulations and Their Citations

Regulations are different from laws passed by Congress; they are not a product of the legislative branch. Instead, regulations are “promulgated” by executive agencies.

The curious reader or budding constitutional scholar will wonder, “Why would executive agencies ‘create’ regulations? Shouldn’t the executive branch merely execute the laws created by the legislative branch? How can executive agencies effectively make their own rules in the form of regulations? Does this violate the separation of powers envisioned by the Constitution?” These are astute questions, worthy of thoughtful investigation in their own article!

Skipping over the constitutional controversies, the short answer is that Congress formally delegated some of its legislative authority to executive agencies through a law called the Administrative Procedures Act,[8] which establishes a formal process of public notice and comment, also called “rulemaking.” You can follow and participate in the rulemaking process, including changes to the FAR, by visiting the Federal Register online.[9]

Other laws, like the Office of Federal Procurement Policy Act[10] and the Small Business Act,[11] provide further guidance for how executive agencies create regulations affecting government contracting. The Office of Federal Procurement Policy Act lays the groundwork for how the FAR is changed and updated by FAR Council.[12] The Small Business Act, among other things, defers to the Small Business Administration (SBA) the authority to specify detailed small business size standards through a rulemaking process.[13] This rulemaking, or regulatory implementation, is of paramount importance to answering the question: When does this law take effect?

DISTINGUISHING LAWS VERSUS REGULATIONS

Citations to regulations will not include “USC.” Instead, regulations are codified in the Code of Federal Regulations (CFR). Therefore, a citation to a regulation will include two numbers which sandwich the abbreviation, “CFR.”

Much like laws, the first number refers to the “Title” and the second number refers to the “Chapter” or “Section.” The FAR is the most important regulation for contracting professionals and is found at Title 48, Chapter 1 of the CFR. A general citation to the FAR is 48 CFR Chapter 1. A precise citation to FAR 13.500, for example, would be 48 CFR §13.500.

Although the FAR is of primary importance, don’t ignore the SBA’s contracting regulations, which are found in Title 13 of the CFR. These regulations implement the Small Business Act and are directly relevant to government contracting. For instance, small business size standards are defined in 13 CFR §121.101.

Regulations are more specific than laws, because they implement the broader legislation passed by Congress. For instance:

  • The Competition in Contracting Act—Implemented in several sections of the FAR,[14] such as FAR Part 6, “Competition Requirements,” and FAR Part 15, “Contracting by Negotiation.”
  • The Small Business Act—Implemented in FAR Part 19, “Small Business Programs,” and Title 13 of the CFR.
  • The Contract Disputes statute—Implemented in FAR Part 33, “Protests, Disputes, and Appeals.”

PUTTING IT ALL TOGETHER: SYNTHESIZING LAWS AND REGULATIONS IN GOVERNMENT CONTRACTS

Now that we have a fundamental understanding of laws and regulations, let’s get back to our original question: When does this law take effect? Let’s say there’s a signed law that affects government contracts, but the law does not specify an effective date, the FAR has not yet been updated, and there is currently no FAR clause containing the substance of this new law.

The FAR Does Not Apply to Contractors

First, consider the difference between the laws affecting federal employees who conduct acquisition (i.e., contracting officers and government members of the acquisition team) as distinguished from federal contractors. You may be shocked by the fact that the FAR does not apply to federal contractors.[15]

If you don’t have the time to read the author’s previous article discussing this fact,[16] just review FAR 1.000, FAR 1.104, and the definition of acquisition at FAR 2.101—in that order. You will find that the FAR applies only to federal employees conducting acquisition. Federal contractors are only bound by the language of their contracts; therefore, the only way the FAR can affect the rights and obligations of federal contractors is through the inclusion of specific FAR clauses in their federal contracts.[17]

Many laws will call for specific changes to the way contracting officers negotiate, award, or administer federal contracts. The analysis would stop there if we didn’t have to consider the previously mentioned delegation of Congress’ authority, which includes contracting regulations and FAR clauses. When Congress passes contracting legislation, the story is not over. In fact, it’s just the beginning…

THE TWO-STEP PROCESS—LAW IS PASSED,FAR  IS REVISED

Once Congress passes a contracting law, the contracting-related requirements must then be implemented into the FAR to provide new direction to contracting officers. To affect contractors, contracting officers must have the new FAR provisions or clauses to insert into the solicitation or contracts, respectively.[18] Any of these actions requires a formal change to the FAR through the rulemaking process.

In other words, for the requirements of the law to “kick in,” we need the regulations, not just the law! This establishes a two-step process, as shown in FIGURE 1.

Advantages

One advantage of this two-step process is that the FAR Council, and executive agencies, are better poised to implement the details of broad policy goals from Congress’ legislation. In other words, let the experts deal with the details.

Another advantage is that contracting officers need not be attorneys, law clerks, or legislative researchers. Having a strong background in the law is an undeniable strength for a contracting professional; however, being an attorney is different from being a contracting officer. Not every contracting officer is educated in the law or trained to interpret new legislation, which is often poorly drafted.

Also, consider the cosmic understatement that attorneys do not always agree with each other—or, as the saying goes, “too many cooks spoil the broth.” A multitude of attorneys and contracting officers, each interpreting the law in a different way, is a recipe for chaos. For transparency and consistency, it is helpful to have a central body—a single point of authority—to implement legislation. Luckily for the federal contracting profession, that central body is the FAR Council.

Disadvantages

A disadvantage to having to wait for FAR revisions to implement new legislation is that the process is incredibly slow. This author has been involved with several FAR and Defense FAR Supplement (DFARS) revisions, and such revisions can take literally years to finish and finalize into regulation.

That being said, executive agencies can always “skip” this lengthy process by issuing a deviation, whereby the agency head immediately complies with the new law by issuing a policy, procedure, practice, solicitation provision, or contract clause that is inconsistent with the FAR.[19] The deviation provides immediate implementation until the proper FAR revisions (or agency FAR supplement revisions) are finalized and the deviation is no longer necessary.

Sometimes, however, government contracts policy requires more than the FAR Council’s involvement. You see, there’s a potential complication to this process: If the law concerns both government contracts and small business policy, there’s an additional step—i.e., the two-step process becomes a three-step process.

THE THREE-STEP PROCESS—LAW IS PASSED, THEN SBA REGULATIONS, THEN FAR REVISIONS

Congress delegated most small business contracting regulatory powers to the SBA. This includes the power of rulemaking—or implementing regulations—that affect small business.[20]Therefore, before small business contracting laws are implemented in the FAR, the SBA usually gets the “first bite.”[21] The chain of events for this type of legislation is shown in FIGURE 2.

You might ask why we need step three. Why do we need two sets of regulation to implement small business contracting laws? Again, remember that the FAR does not apply to federal contractors,[22] and federal contracting officers follow the FAR. If there’s an updated SBA regulation that reflects the new law, but the FAR remains the same, what do you think contracting officers will do? Taken a step further, if there is no updated FAR clause to include in a contract, how can federal contractors be directly affected by the new law?

These questions illuminate the fundamental relationship between laws and regulations, like the FAR at Title 48 of the CFR and the SBA regulations at Title 13. Although any first-year law student will tell you that legislation trumps regulations, it really isn’t that simple in government contracting. It’s usually not enough to simply follow the new legislation.

Congress has specifically delegated authority over government contracting matters to executive agency rulemaking. Specifically, Congress delegated government contracting policy to the FAR Council and small business policy to the SBA.[23]

For these reasons, every contracting professional must understand the rulemaking process, whereby executive agencies implement legislation into regulation. The FAR is the most famous regulation for contracting professionals, but the SBA regulations at Title 13 of the CFR are also extremely important. The informed contracting professional will understand how to answer the question: When does this law take effect?

ANSWERING THE QUESTION, “WHEN DOES THIS LAW TAKE EFFECT?”

First, research whether the new law affects small business contracting policy or if it only affects government contracting in general. Does the SBA have a horse in this race? Does this new law fall squarely within the jurisdiction of the SBA? This will determine whether you track the two-step or three-step process previously outlined. CM

ABOUT CHRISTOPH MLINARCHIK, JD, CFCM, PMP

  • Attorney, professor, expert witness, consultant, and frequent speaker on government contracts
  • Founder, Christoph LLC, providing expert advice on government contracts
  • Teaches courses on acquisitions, contracting, proposals, bid protests, and government contract law nationwide
  • Recipient of NCMA’s “Top Professionals Under 40” Award (2013) and “Best Article of the Year” Award (2017)
  • www.ChristophLLC.com
  • Christoph@ChristophLLC.com
  • www.linkedin.com/in/christoph-mlinarchik-31b55477

ENDNOTES

[1] For more guidance and suggestions on improving the contracting profession and developing as a contracting professional, see Christoph Mlinarchik, “Secrets of Superstar Contracting Professionals,” Contract Management Magazine (May 2014).

[2] FAR 1.602-1(b).

[3] FAR 1.401 states that deviation means any one or combination of the following:

  • (a.)The issuance or use of a policy, procedure, solicitation provision…, contract clause…, method, or practice of conducting acquisition actions of any kind at any stage of the acquisition process that is inconsistent with the FAR.
  • (b.)The omission of any solicitation provision or contract clause when its prescription requires its use.
  • (c.)The use of any solicitation provision or contract clause with modified or alternate language that is not authorized by the FAR….
  • (d.)The use of a solicitation provision or contract clause prescribed by the FAR on a “substantially as follows” or “substantially the same as” basis…, if such use is inconsistent with the intent, principle, or substance of the prescription or related coverage on the subject matter in the FAR.
  • (e.)The authorization of lesser or greater limitations on the use of any solicitation provision, contract clause, policy, or procedure prescribed by the FAR.
  • (f.)The issuance of policies or procedures that govern the contracting process or otherwise control contracting relationships that are not incorporated into agency acquisition regulations….

Note that this definition does not mention “law,” “legislation,” or “statute,” but focuses exclusively on the FAR.

[4] For the purposes of this article, “take effect” has a very specific and narrow definition. In this article, “take effect” means that the law is actionable in government contracting, which this author defines as having the ability to be included as a clause in federal contracts and therefore applicable to federal contractors. There are several complicated legal issues involved with determining the force and effect of laws and regulations. This article focuses only on the most practical and immediate concerns for the federal contracting officer and the federal contractor—i.e., how to incorporate the new law into federal contracts.

[5] For more information on the proper sources of authority in federal contracting, seeChristoph Mlinarchik, “Sticks and Stones: How Words and Terms of Art Can Hurt the Contracting Profession,” Contract Management Magazine (January 2016).

[6] 41 USC 253.

[7] 41 USC 71 (formerly known as the Contract Disputes Act of 1978).

[8] Pub. L. 79-404, codified at 5 USC 5, subchapter I §500, et seq.

[9] The Federal Register is available online at https://www.federalregister.gov and contains proposed and final changes to the FAR, agency supplements, and other federal regulations.

[10] 41 USC §1101.

[11] 15 USC 14A, et seq.

[12] The FAR Council consists of the Administrator for Federal Procurement Policy, the Administrator of General Services, the Administrator of National Aeronautics and Space, and the Secretary of Defense. (See 41 USC §1302(a).)

[13] See 15 USC §632(a)(2) and 15 USC §632(a)(6).

[14] The FAR is divided into subchapters, parts, subparts, sections, and subsections. (See FAR 1.105-2(a).)

[15] This fact was analyzed in one of the author’s previous articles. (See Christoph Mlinarchik, “Does the FAR Apply to Federal Contractors? (No!),” Contract Management Magazine (October 2017).)

[16] See ibid.

[17] There is, however, an important exception to this principle called the Christian Doctrine. Discussion of the Christian Doctrine is beyond the scope of this article, but it is briefly explained in Mlinarchik, “Does the FAR Apply to Federal Contractors? (No!)” (see ibid.).

[18] “‘Solicitation provision or provision’ means a term or condition used only in solicitations and applying only before contract award. ‘Contract clause’ or ‘clause’ means a term or condition used in contracts or in both solicitations and contracts, and applying after contract award or both before and after award.” (FAR 2.101.)

[19] See FAR Subpart 1.4, “Deviations from the FAR.”

[20] To settle a specific conflict between the FAR and SBA regulations considering certificates of competency, the Court of Federal Claims deferred to the SBA’s regulations, notwithstanding the FAR. The reasoning was that, as explained in this article, Congress has delegated the power of administering small business programs (like the certificate of competency program) to the SBA. (See C&G Excavating, Inc. v. U.S., 32 Fed. Cl. 231 (1994); and Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984): “considerable weight should be accorded to an executive department’s construction of a statutory scheme it is entrusted to administer….”)

[21] The question of how to resolve a conflict between the FAR and SBA regulations is beyond the scope of this article, but there are several court cases to research this topic further. (See ibid.)

[22] See Mlinarchik, note 15.

[23] See note 20.