Piliero Mazza & Pargament, PLLC Vol. 4, Issue 2 March/April 2002
An Update for Federal Contractors and Commercial Businesses
A R T I C L E S
Representative Davis Introduces Services Acquisition Reform Act
Representative Wynn Introduces Small Business Legislation
Interim and Proposed Rules Affecting Small Business
Supreme Court Refines Definition of Disability Under ADA
In a victory for employers, the United States Supreme Court issued a decision which limits the scope of the Americans with Disabilities Act (ADA). In Toyota Motor Manufacturing, Kentucky, Inc. v. Williams, the Court unanimously held that an employee with carpal tunnel syndrome was not disabled under the ADA because her condition did not substantially limit any major life activities. In its decision, the Court set forth standards which will make it more difficult for employees to establish that they are disabled and entitled to reasonable accommodations under the ADA.
The plaintiff in the Williams case developed symptoms of carpal tunnel syndrome after several months on the job. Her condition rendered her unable to perform her job and she was ultimately terminated.
Williams claimed that she was disabled and therefore entitled to reasonable accommodations under the ADA because her condition substantially limited her in various manual tasks including job-related duties, housework, gardening, playing with her children and lifting, all of which, she claimed, were major life activities under the ADA. The case was dismissed on the grounds that Williams' condition was not so severe as to substantially limit any major life activity. However, on appeal, the United States Court of Appeals for the Sixth Circuit held that Williams was disabled because she was unable to perform a "class" of manual activities, which in turn affected her ability to do her job.
The Supreme Court held that the Sixth Circuit relied on the wrong standard in analyzing whether Williams was disabled. The Court held that a limitation is not "substantial," as required under the ADA, if it "interfere[s] in only a minor way with the performance of manual tasks." The Court further held that the term "major life activities" refers to "activities that are of central importance to daily life." In Williams' case, her disability limited her ability to perform her job, but did not affect activities such as brushing her teeth, washing her face, bathing, gardening, fixing breakfast, doing laundry and picking up around the house. Her conditions caused her to avoid sweeping, quit dancing, seek help dressing occasionally and reduce how long she played with her children, gardened and drove. However, those limitations were not severe enough restrictions in activities of central importance to most people's daily lives to establish a manual-task disability as a matter of law.
The decision in Williams will make it more difficult for employees to establish that their medical conditions substantially limit major life activities. Employees whose conditions do not substantially limit major life activities are not entitled to reasonable accommodations under the ADA. Employers should be aware that certain state laws provide broader protections than those of the ADA. Furthermore, employees may have a cause of action under the ADA even if they are not disabled, if their employer mistakenly regarded them as disabled. Finally, the issue of whether an individual is disabled under the ADA must be reviewed on a case by case basis. Thus, an employee with carpal tunnel syndrome may indeed be able to establish that she is disabled, depending on the severity of her condition.
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Rep. Davis Introduces Services Acquisition Reform Act
On March 4, 2002, Rep. Tom Davis (R-VA) introduced the long-awaited Services Acquisition Reform Act (SARA), H.R. 3832, which would provide comprehensive service contracting reform. According to Rep. Davis, SARAs overall goal is to ensure that the government can purchase goods and services from the commercial market in a speedy and efficient manner. Hearings were held on a draft of the bill and revisions were made prior to introduction to accommodate some White House opposition. After introduction, the bill was referred to the House Committee on Government Reform and Armed Services and hearings were held on March 7, 2002. Rep. Davis's bill contains six titles. This article summarizes some of the key provisions.
Title I would create an acquisition workforce training fund by taking five percent of all fees collected by agencies under their government-wide contracts and applying it to a centralized training fund. The fund would be used to establish a center for excellence for training that would utilize private sector best practices to ensure that the entire acquisition workforce receives consistent training. Additionally, under this title, a new acquisition professional exchange program would be created which would allow the government and private contractors to temporarily exchange professional employees in appropriate circumstances. Provisions designed to recruit civilian federal acquisition employees and, except for security issues, to provide that solicitations should not contain restrictions on telecommuting employees are also contained in this title. The overall objective of Title I is to enhance the capabilities of the federal acquisition workforce.
Title II of SARA would create a Chief Acquisition Officer within every federal agency to assist in developing the agency's comprehensive acquisition policy. This title also creates a streamlined payment process. Biweekly (electronically submitted) or monthly invoices would be accepted or rejected within five working days and paid no later than 30 days after the invoice date. Title II would also amend protest procedures to provide statutory authority for protests at the agency level. This authority would allow for a stay of an award or of contract performance during the ten-day working period that an agency is given to decide a protest. Protesters would still maintain the right to file protests with the General Accounting Office (GAO) and the Court of Federal Claims and would be entitled to a suspension of performance so long as a GAO protest was filed within five days of receipt of an adverse agency decision.
Title IV of the bill pertains to commercial items. The title would clarify the definition of "commercial item" and would expand the types of contracts that could be used for the acquisition of commercial items. The title would also include as a commercial item any product or service sold by a commercial entity which primarily sells to non-government sources. Under this provision, the commercial entity would have to prove that over 85 percent of its sales were made to nongovernmental entities or as commercial items under Part 12 of the FAR. Title IV would also require that all government contracts include a provision barring the payment of consequential damages and capping direct damages for contractor liability.
Title V pertains mostly to accessing technology in the government contract marketplace. The title would mandate that prohibitions on foreign products under the Buy American Act and Trade Agreements of 1979 be inapplicable to the acquisition of "commercial information technology." Additionally, Title V would allow state and local governments to use certain Federal Supply Schedules for the acquisition of this technology.
Title VI states only that the OFPP may adjust the simplified acquisition threshold every three years to account for inflation.
At the March 7 hearing before the Technology and Procurement Policy subcommittee, the Administration offered its opinions on the revised legislation. Angela Styles, the OFPP's Policy Administrator, stated that the Administration is supportive of much of SARA. However, the Administration voiced opposition to the creation of a workforce training fund contained in Title I. It is the Administration's view that this fund, if created, should be funded separately by Congress rather than funded with procurement fees. Additionally, Ms. Styles stated that while the Administration could support the authorization of chief executive officers at federal agencies, they could not support Title II's requirement that establishes these officers. Finally, Ms. Styles expressed concern with many of the commercial items provisions in Title IV because, in her opinion, they would eliminate marketplace protections that assure that the government pay fair and reasonable prices.
At the same March 7 hearing, William Woods of the GAO stated that the agency generally supports SARA. Unlike the Administration, Mr. Woods expressed support for the workforce training provisions contained in Title I. However, the GAO did express concern with respect to some provisions in the bill. Specifically, Mr. Woods cited several provisions in Title II, including the protest procedure amendments, an increase in the micropurchase threshold from $2,500 to $25,000, and the prompt payment provisions.
The Legal Advisor will continue to monitor and report on service contract reform bills in future issues.
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SBA Issues Proposed HUBZone Program Rules
On January 28, 2002, the Small Business Administration (SBA) issued proposed rules that would implement changes authorized by the Small Business Reauthorization Act of 2000. The proposed rules primarily concern the Historically Underutilized Business Zone Program (HUBZone Program) and attempt to clarify the interaction between the HUBZone and 8(a) Programs. The proposed rules would also broaden the base of the HUBZone program and ease the eligibility requirements. The SBA hopes that these changes will move the HUBZone Program closer to meeting its statutory objective of creating new jobs and providing economic growth to disadvantaged areas.
Among other things, the proposed rules attempt to clarify the interaction between the HUBZone and 8(a) Programs and to establish parity between the two. To assist contracting officers (CO) in preparing procurements, the proposed rules provide the following guidelines. The determining factor for a CO in deciding if a procurement should be issued as HUBZone or 8(a) would be whether the agency has met is contracting goals. IF the goals of one program have been met, but not the other, then the procurement would be written for the latter program. If the levels were at the same percentage, the CO would use his/her discretion in determining the award. At this point, the CO's first-hand knowledge of specific HUBZone or 8(a) concerns capable of performing the work would be a relevant factor in making a determination.
In keeping with the clarification aspect of the proposed rules, Senators John Kerry (D-MA) and Christopher "Kit" Bond (R-MO) are cosponsoring the "Combined 8(a) Business Development (BD) and HUBZone Priority-Preference Act" which was introduced on March 6, 2002. The Act would give statutory preference to businesses with both HUBZone and 8(a) certifications over businesses with only one of the two certifications.
Other changes proposed by SBA would broaden the base of the program. Small businesses owned by Native American Tribal Governments and community development corporations would become eligible for the program. Procurement opportunities would expand by making HUBZone contracts available to any government agency or department that has one or more contracting officers and by setting a government-wide contracting goal at three percent. At this time, participation in the HUBZone Program is limited to ten agencies or departments and has a 2.5 percent contracting goal. Because shifts in unemployment or income can affect HUBZone designation, the proposed rules would establish "redesignated areas," which would be in effect for three years, making the HUBZone area more stable during the life of the contracts.
The proposed rules would also ease the eligibility requirement by redefining the term "employee" to mean "a person...employed by a concern on a full-time, part-time, temporary, leased or other basis." Temporary or leased employees are not presently considered "employees" for the purpose of meeting the 35 percent workforce requirement of residency.
According to SBA estimates, over 30,000 small businesses may be eligible to participate in the program but at the end of 2001 only 4,000 firms were participating. Also, federal agencies are meeting only 22% of the statutory goal for HUBZone contracts. By clarifying points of confusion, redefining terms, and easing requirements, it is hoped that the Program will reach its potential and come to be instrumental in bringing economic prosperity to HUBZone areas.
The comment period for these proposed rules has been extended to March 29, 2002. Comments should be sent to Michael McHale, Associate Administrator for the HUBZone Empowerment Contracting Program (AA/HUB), 409 3rd Street, SW, Washington, D. C. 20416.
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Representative Wynn Introduces Small Business Legislation
Represenive Albert Wynn (D-MD) has introduced three pieces of legislation that could provide additional protections for subcontractors. The first of these bills, the "Prompt Payment Improvement Act of 2002," would require the Office of Management and Budget to distribute a "prompt payment policy" to both contractors and subcontractors under federal contracts. Additionally, prime contractors would be required to flow down their prompt payment clauses from their contracts to their subcontracts and to list the name and phone number of a prime contractor employee who would be responsible for addressing payment questions. The bill has been referred to the House Committee on Government Reform.
Representative Wynn's second bill, the "Subcontractor Protection Act," H.R. 3637, would amend the Small Business Act to require federal agencies to include a "subcontracting penalty" clause in all federal contracts that contain subcontracting plans. The clause would require the agency to withhold amounts ranging from three to five percent of the total contract value if the contractor fails to meet the subcontracting goals with small and disadvantaged businesses.
The third bill, H.R. 3638, would increase the current government-wide goal for procurement contracts awarded to small businesses from 23 to 25 percent. This bill and H.R. 3637 have been referred to the House Committee on Small business.
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Interim And Proposed Rules Affecting Small Business
Two federal agencies have recently issued rules of interest to small businesses. On January 23, 2002, the Small Business Administration (SBA) issued an interim rule to address the effects of inflation on monetary-based size standards. These size standards had been unchanged since 1994. According to the SBA, the inflation rate from 1994 to the third quarter of 2000 was at 15.8 percent and was high enough to justify an increase. The interim rule factors in the effects of inflation and adjusts the size standards accordingly. Also included in the interim rule is a provision that required an assessment to be conducted every five years to gauge the effect of inflation. The adjusted monetary size standards went into effect February 22, 2002.
A proposed rule by the Internal Revenue Service (IRS) would relax the cash accounting rule. At present, small businesses with gross receipts in excess of $1 million are required to use the accrual method of accounting. The proposed rule raises the cash accounting ceiling to $10 million in gross receipts. The proposed rule would clarify the accounting position for service providers who also sell merchandise and would establish four "safe harbors" which would offer small businesses additional opportunities for using the cash method.
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