Amendment of FIRMR Provisions Relating to FIRMR Applicability, FIRMR Bulletins, and Present Value Analysis

GENERAL SERVICES ADMINISTRATION

41 CFR Parts 201-1, 201-3, 201-20, and 201-39

[FIRMR Amendment 3]

RIN 3090-AF04

Amendment of FIRMR Provisions Relating to FIRMR Applicability,

FIRMR Bulletins, and Present Value Analysis

AGENCY: Information Resources Management Service, GSA.

ACTION: Final rule.

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SUMMARY: This document amends the Federal Information Resources

Management Regulation (FIRMR) regarding: FIRMR applicability provisions

relating to the replacement of embedded Federal information processing

FIP resources, the delivery of small or inconsequential quantities of

FIP resources under non-FIP procurements, and the availability of

guidance on interpreting FIRMR applicability provisions; the

nonmandatory nature of FIRMR bulletins; and the use of OMB Circular A-

94 in performing present value analysis when evaluating bids and

proposals.

EFFECTIVE DATE: January 23, 1995.

FOR FURTHER INFORMATION CONTACT:

Anne Horth, telephone FTS/Commercial (202) 501-0960 (v) or (202) 501-

0657 (tdd).

SUPPLEMENTARY INFORMATION: (1) This amendment was published in a notice

of proposed rulemaking in the January 3, 1994 issue of the Federal

Register. All comments were considered and, where possible, were

incorporated into the amendment. Some comments, which would involve

amendments beyond what was intended in these revisions, were not

adopted so that this amendment could be issued as quickly as possible

to allow agencies to take advantage of the new exceptions to the FIRMR.

The comments that were not fully accommodated are discussed below:

(a) A number of comments related to the new $500,000 exception to

FIRMR applicability for small quantities of FIP resources. Several

respondents felt that the exception should be expanded by increasing

the amount or basing the exception on a percentage as well as the

dollar amount. Others did not have a clear understanding of the meaning

of ``predominantly for non-FIP resources.'' The language in the final

rule has been modified to clarify the meaning of the exception and will

provide additional flexibility. However, the intent of this exception

was to capture situations where some FIP resources will be delivered in

a contract but are of little consequence to the major purpose of the

contract. Many such situations have been the subject of protest

decisions issued by the General Services Board of Contract Appeals and

an effort is being made to align the regulations with some of these

decisions. The amendment should eliminate some of the situations that

have created unnecessary protests. It provides broader flexibility to

agencies in acquisitions of mixed requirements where the FIP resources

required are only a minor portion of and do not constitute the

principle purpose of a solicitation or contract, or where the FIP

resources are of little consequence to the purpose of the contract. The

exception applies to all FIP resources to be delivered to or acquired

for use by the Government or users designated by the Government.

Additional guidance will be provided in revisions to FIRMR Bulletin A-

1.

(b) Suggestions were made to extend the exception for replacement

of embedded FIP to other acquisitions for spare parts or upgrades. The

intent of this exception extends only to replacement of embedded FIP

resources that initially meet the criteria for exception from the

FIRMR. Spare parts or upgrades (unless for the embedded resource) do

not meet this description.

(c) Suggestions were made for expansion of the language regarding

OMB Circular A-94 or for issuance of guidance. Questions have arisen

regarding the mandatory nature of the Circular; its application to

purchase (where payments will extend over time) of FIP resources; to

services, and to evaluation of sealed bids as well as proposals for FIP

resources; and the rates to be applied in specific type acquisitions.

The Circular applies to FIP resources, including services. Section

8.c(4) of the Circular specifically addresses information technology

requirements. The Circular is mandatory in some situations, but may not

be in other situations (e.g., for some acquisitions for less than three

years). The rate to be used depends on the type of analysis. An agency

must, after review of the Circular, make a determination in each

situation as to whether it applies and whether the use of present value

factors would make a difference in final prices/costs. The intent of

this amendment is to direct agencies to the Circular as a resource in

evaluations of bids and proposals, since it replaces rescinded OMB

Circular A-104, which was previously used. Details in the regulation

could cause confusion, since the Circular may be applied differently in

various situations. OMB will assist agencies with the bulletin.

Agencies should provide internal guidance. FAR 7.4 contains some

guidance on lease vs. purchase buys that may be helpful. GSA will

consider additional guidance for FIP resources as the Acquisition

Guides are updated.

(d) There were proposals that GSA provide exceptions for broad

categories of equipment, such as building support systems. Exceptions

for specific categories of equipment are not listed in the regulation

itself. GSA will take these suggestions under consideration in making

appropriate revisions in FIRMR Bulletin A-1.

(2) Explanations of the amendments follow:

(a) Part 201-1 and subpart 201-39.1 are amended to be responsive to

agency concerns that the replacement of FIP resources that initially

were excepted from FIRMR applicability as embedded FIP equipment should

also be excepted. Since the FIP resources would be used in the same

manner as used initially, the amendment grants an exception to FIRMR

applicability for the replacement of any FIP equipment, software, or

related supplies used in the embedded FIP equipment that has already

been granted an exception under Sec. 201-1.002-2(e), regardless of the

cost of the replacement resources. This change also clarifies that the

criteria for excepting embedded FIP equipment applies to an individual

product and not to all the products being acquired.

(b) Part 201-1 and subpart 201-39.1 are also amended to provide an

exception to FIRMR applicability for small amounts of FIP resources

that will be delivered to the Government when an acquisition is

primarily for other purposes and the FIP resources constitute a minimal

or insignificant part of the contract. Currently, the FIRMR applies to

all FIP resources delivered to a Federal agency or users designated by

the agency, no matter how minimal. Given the legislative exceptions for

FIP resources that are not ``significant'' or are ``incidental to the

performance of a Federal contract.'' GSA believes that a FIRMR

exception is appropriate for acquisitions of FIP resources with a

relatively low dollar value when the principal purpose of the

solicitation or contract is for non-FIP resources. Accordingly, the

FIRMR is being revised to except such acquisitions when the value of

the FIP resources does not exceed $500,000 or where the resources are

of little consequence to the major purpose of the contract.

(c) A new Sec. 201-1.002-3 is being added to show that guidance on

understanding FIRMR applicability provisions is available in FIRMR

Bulletin A-1. Some agencies asked for additional information or how to

interpret FIRMR applicability provisions because they have been unaware

of the existence of the guidance already available in Bulletin A-1. The

addition of this section will correct that deficiency.

(d) Subpart 201-3.001 is being amended to explain the nonmandatory

nature of FIRMR bulletins. There is a perception, among some users of

the FIRMR, that FIRMR bulletins are regulatory in nature. While there

may be a few procedures in FIRMR bulletins that may need to be complied

with to be in consonance with the regulation, FIRMR bulletins are not

regulatory. They are issued to provide information and guidance that

helps agencies acquire or manage FIP resources, explain procedures for

using GSA programs, and assist in interpreting the provisions of the

Brooks Act.

(e) Sections 201-20.203-2, 201-39.14-1, and 201-39.1501-1 are

amended to reflect the fact that OMB Circular No. A-94 should now be

used not only as the basis of analyzing the cost of alternatives when

doing analyses of alternatives, but also in calculating bid and

proposal prices/costs. OMB Circular A-94 replaces the guidance in OMB

Circular A-104, used previously in the evaluation of bids and

proposals.

(3) GSA has determined that this rule is a significant rule for the

purposes of Executive Order 12866. It is certified that this rule will

not have a significant economic impact upon a substantial number of

small entities under the Regulatory Flexibility Act of 1980 (5 U.S.C.

601, et seq.).

List of Subjects in 41 CFR Parts 201-1, 201-3, 201-20, and 201-39

Archives and records, Computer technology, Telecommunications,

Government procurement, Property management, Records management, and

Federal information processing resources activities.

Accordingly 41 CFR parts 201-1, 201-3, 201-20 and 201-39 are

amended as follows:

PART 201-1--APPLICABILITY AND AUTHORITY

1. The authority citation for part 201-1 continues to read as

follows:

Authority: 40 U.S.C. 486(c) and 751(f).

2. Section 201-1.002-2 is amended by redesignating paragraphs (d)

and (e) as (e) and (f), respectively; adding a new paragraph (d);

revising newly designated paragraph (f); and by adding new paragraph

(g) to read as follows:

Sec. 201-1.002-2 Exceptions.

* * * * *

(d) Where the value of the FIP resources to be delivered does not

exceed $500,000 and constitutes only a minimal dollar amount of the

contract, or is of little consequence to the major purpose of the

contract, the FIRMR does not apply.

* * * * *

(f) The FIRMR does not apply to the acquisition, management, and

use of products containing embedded FIP equipment when: (1) the

embedded FIP equipment would need to be substantially modified to be

used other than as an integral part of the product, or (2) the dollar

value of the embedded FIP equipment is less than $500,000 or less than

20 percent of the value of the product, whichever amount is lower.

Embedded FIP equipment is FIP equipment that is an integral part of the

product, where the principal function of the product is not the

automatic acquisition, storage, manipulation, management, movement,

control, display, switching, interchange, transmission, or reception of

data or information. In an acquisition where multiple products are

acquired, the exception applies to each discrete product.

(g) The FIRMR does not apply to the acquisition, management, and

use of FIP resources that will be used in or as embedded FIP resources

(equipment, software or supplies) in products excepted from FIRMR

coverage under Sec. 201-1.002-2(f). This exception includes replacement

or upgrades of the embedded FIP resources, regardless of the cost.

3. Section 201-1.002-3 is added as follows:

Sec. 201-1.002-3 Procedures.

FIRMR Bulletin A-1 provides an analytical framework, guidance, and

examples for use in determining whether the FIRMR applies to an

acquisition. Agencies should use this bulletin to assist them in

understanding FIRMR applicability provisions.

PART 201-3--THE FIRMR SYSTEM

4. The authority citation for part 201-3 continues to read as

follows:

Authority: 40 U.S.C. 486(c) and 751(f).

5. Section 201-3.001 is amended by revising paragraph (b)(1) to

read as follows:

Sec. 201-3.001 General.

* * * * *

(b) * * *

(1) FIRMR bulletins contain guidance and information on various

information resources management subjects. FIRMR bulletins do not

constitute binding authority, but should be used as an aid in

understanding and using GSA programs and the FIRMR. They may contain

procedures for use of GSA programs. FIRMR bulletins are published in

appendix B of the looseleaf edition of the FIRMR and are available

along with the FIRMR from GPO by subscription or on GSA's CD-ROM.

* * * * *

PART 201-20--ACQUISITION

6. The authority citation for part 201-20 continues to read as

follows:

Authority: 40 U.S.C. 486(c) and 751(f).

7. Section 201-20.203-2 is amended by revising paragraph (c) to

read as follows:

Sec. 201-20.203-2 Cost for each alternative.

* * * * *

(c) Agencies shall follow the guidance in OMB Circular A-94 when

calculating the cost of each alternative.

PART 201-39--ACQUISITION OF FEDERAL INFORMATION PROCESSING

RESOURCES (FIP) BY CONTRACTING

8. The authority citation for part 201-39 continues to read as

follows:

Authority: 40 U.S.C. 486(c) and 751(f).

9. Section 201-39.101-3 is amended by redesignating paragraphs

(b)(4) and (b)(5) as (b)(5) and (6), respectively; adding new paragraph

(b)(4); revising newly designated paragraph (b)(6); and by adding new

paragraph (b)(7) to read as follows:

Sec. 201-39.101-3 Applicability.

* * * * *

(b) * * *

(4) Where the value of the FIP resources to be delivered does not

exceed $500,000 and constitutes only a minimal dollar amount of the

contract, or is of little consequence to the major purpose of the

contract, the FIRMR does not apply.

* * * * *

(6) The FIRMR does not apply to the acquisition, management, and

use of products containing embedded FIP equipment when: (i) the

embedded FIP equipment would need to be substantially modified to be

used other than as an integral part of the product; or (ii) the dollar

value of the embedded FIP equipment is less than $500,000 or less than

20 percent of the value of the product, whichever amount is lower.

Embedded FIP equipment is FIP equipment that is an integral part of the

product, where the principal function of the product is not the

``automatic acquisition, storage, manipulation, management, movement,

control, display, switching, interchange, transmission, or reception of

data or information.'' In an acquisition where multiple products are

acquired, the exception applies to each discrete product.

(7) The FIRMR does not apply to the acquisition, management, and

use of FIP resources that will be used in or as embedded FIP resources

(equipment, software or supplies) in products excepted from FIRMR

coverage under Sec. 201-39.101-3(b)(6). This exception includes

replacement or upgrades of the embedded FIP resources, regardless of

the cost.

* * * * *

10. Section 201-39.1402-1 is amended by revising paragraph (b) to

read as follows:

Sec. 201-39.1402-1 Policies.

* * * * *

(b) When payments are expected to vary among the alternatives being

considered, or where payments will be made over an extended period,

agencies should adjust prices and costs to present value and apply the

results in source selection. Agencies should follow the guidance in OMB

Circular A-94 regarding present value calculations.

11. Section 201-39.1501-1 is amended by revising paragraph (b) to

read as follows:

Sec. 201-39.1501-1 Policies.

* * * * *

(b) When payments are expected to vary among the alternatives being

considered, or where payments will be made over an extended period,

agencies should adjust prices and costs to present value and apply the

results in source selection. Agencies should follow the guidance in OMB

Circular A-94 regarding present value calculations.

Dated: August 15, 1994.

Julia M. Stasch,

Acting Administrator of General Services.

[FR Doc. 94-31595 Filed 12-22-94; 8:45 am]

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