Federal Acquisition Regulation; Justification and Approval of Sole-Source 8(a) Contracts, 14559-14562 [2011-5554]
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Federal Register / Vol. 76, No. 51 / Wednesday, March 16, 2011 / Rules and Regulations
classified information) or create other
security risks.
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(5) Decision documentation for
orders. (i) The contracting officer shall
document in the contract file the
rationale for placement and price of
each order, including the basis for
award and the rationale for any tradeoffs
among cost or price and non-cost
considerations in making the award
decision. This documentation need not
quantify the tradeoffs that led to the
decision.
(ii) The contract file shall also identify
the basis for using an exception to the
fair opportunity process (see paragraph
(b)(2)).
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PART 18—EMERGENCY
ACQUISITIONS
18.105
[Amended]
15. Amend section 18.105 by
removing ‘‘(See 8.405–3(a)(4))’’ and
adding ‘‘(see 8.405–3(a)(6))’’ in its place.
■
PART 38—FEDERAL SUPPLY
SCHEDULE CONTRACTING
16. Amend section 38.101 by revising
the second sentence in paragraph (e) to
read as follows:
■
38.101
General.
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(e) * * * The requirements of parts 5,
6, and 19 apply at the acquisition
planning stage prior to issuing the
schedule solicitation and, generally, do
not apply to orders and BPAs placed
under resulting schedule contracts
(except see 8.404).
[FR Doc. 2011–5553 Filed 3–15–11; 8:45 am]
BILLING CODE 6820–EP–P
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Parts 6, 15, and 19
[FAC 2005–50; FAR Case 2009–038; Item
III; Docket 2010–0095, Sequence 1]
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RIN 9000–AL55
Federal Acquisition Regulation;
Justification and Approval of SoleSource 8(a) Contracts
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Interim rule.
DoD, GSA, and NASA are
issuing an interim rule amending the
Federal Acquisition Regulation (FAR) to
implement section 811 of the National
Defense Authorization Act for Fiscal
Year 2010. This FAR change encourages
agencies to maximize the effective use
of competition by making certain that
the proper Justification and Approval
(J&A) is obtained prior to award of 8(a)
sole-source contracts over $20 million,
as required by section 811.
DATES: Effective Date: March 16, 2011.
Comment Date: Interested parties
should submit written comments to the
Regulatory Secretariat on or before May
16, 2011 to be considered in the
formulation of a final rule.
ADDRESSES: Submit comments
identified by FAC 2005–50, FAR Case
2009–038, by any of the following
methods:
• Regulations.gov: https://
www.regulations.gov. Submit comments
via the Federal eRulemaking portal by
inputting ‘‘FAR Case 2009–038’’ under
the heading ‘‘Enter Keyword or ID’’ and
selecting ‘‘Search.’’ Select the link
‘‘Submit a Comment’’ that corresponds
with ‘‘FAR Case 2009–038.’’ Follow the
instructions provided at the ‘‘Submit a
Comment’’ screen. Please include your
name, company name (if any), and ‘‘FAR
Case 2009–038’’ on your attached
document.
• Fax: (202) 501–4067.
• Mail: General Services
Administration, Regulatory Secretariat
(MVCB), ATTN: Hada Flowers, 1275
First Street, NE., 7th Floor, Washington,
DC 20417.
Instructions: Please submit comments
only and cite FAC 2005–50, FAR Case
2009–038, in all correspondence related
to this case. All comments received will
be posted without change to https://
www.regulations.gov, including any
personal and/or business confidential
information provided.
FOR FURTHER INFORMATION CONTACT: Mr.
Anthony Robinson, Procurement
Analyst, at (202) 501–2658, for
clarification of content. For information
pertaining to status or publication
schedules, contact the Regulatory
Secretariat at (202) 501–4755. Please
cite FAC 2005–50, FAR Case 2009–038.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
AGENCIES:
ACTION:
DoD, GSA, and NASA are issuing an
interim rule amending the FAR, to
implement section 811 of the National
Defense Authorization Act for Fiscal
Year 2010 (Pub. L. 111–84), enacted
October 28, 2009. Section 811 requires
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14559
a J&A prior to awarding a sole-source
contract in an amount over $20 million
under the 8(a) program (15 U.S.C.
637(a)). This written J&A must be
approved by an appropriate official and,
after award, made public. Authorized by
15 U.S.C. 637(a), the 8(a) program
enables contract awards to be made to
small business concerns determined
eligible for the 8(a) program by the
Small Business Administration (SBA).
The requirement for a J&A is not a
ceiling or a ‘‘cap’’ on sole-source awards
over $20 million for 8(a) contractors.
The statute requires execution of a J&A
documenting the reasons for making the
award on a sole-source basis rather than
competing among the small businesses
in the 8(a) program. Prior to the
enactment of section 811, a sole-source
award of a new contract made using the
8(a) contracting authority did not
require a J&A, regardless of the dollar
value, and the new statute does not
institute any requirement for a J&A for
sole-source 8(a) awards that are less
than or equal to $20 million.
II. Discussion and Analysis
Section 811 became effective on the
date of enactment, October 28, 2009.
Section 811 addresses requirements for
the J&A of sole-source contracts over
$20 million under the 8(a) smallbusiness development program.
The Federal Acquisition Regulatory
Council (FAR Council) held three Tribal
consultation and outreach meetings to
discuss rulemaking associated with
section 811.
The meetings took place during
October 2010 in Washington, DC;
Albuquerque, New Mexico; and
Fairbanks, Alaska (see the meeting
notice that was published in the Federal
Register on August 31, 2010 at 75 FR
53269). Transcripts of the meetings are
available at https://www.acq.osd.mil/
dpap/dars/section811_docs.html.
After the meetings, DoD, GSA, and
NASA weighed the costs and benefits of
publishing this rule as proposed or
interim. The rule is being published as
interim, rather than proposed, because
the rule is implementing a statutory
mandate, and the statutory date for
issuance of regulations has already
passed. Because this is an interim rule,
the public will have another
opportunity to comment. These
additional comments could result in
further changes in the final rule.
A frequently heard comment at the
October meetings was a request that the
FAR not use the 12 elements currently
required at FAR 6.303–2 for J&As for
less than full-and-open competition, but
instead limit the elements to be
addressed to the five elements listed in
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section 811(b), which are set forth as
follows:
(1) A description of the needs of the
agency concerned for the matters
covered by the contract;
(2) A specification of the statutory
provision providing the exception from
the requirement to use competitive
procedures in entering into the contract;
(3) A determination that the use of a
sole-source contract is in the best
interest of the agency concerned;
(4) A determination that the
anticipated cost of the contract will be
fair and reasonable; and
(5) Such other matters as the head of
the agency concerned shall specify.
DoD, GSA, and NASA have drafted
the interim FAR rule to adopt only these
five elements. DoD, GSA, and NASA did
not adopt the suggestions raised in the
October meetings (1) not to include the
fair and reasonable price determination
and (2) not to allow agency heads to
address any matter, without specific
limits (the fifth element set out in
section 811). A determination that the
anticipated cost of a contract will be fair
and reasonable is a universal
requirement in Federal contracting;
including the requirement in the J&A
would be sensible, even if it were not
specifically required by section 811.
A common issue raised in the
meetings was that the fifth element,
‘‘Such other matters as the head of the
agency concerned shall specify,’’ was
too broad. DoD, GSA, and NASA
determined that it made sense to allow
agency heads to identify other factors
supporting the decision to make a solesource 8(a) award. By retaining the
wording from the statute, agency heads
retain the discretion to consider such
factors as Indian economic development
or meeting agency small business
contracting goals—both factors that
participants in the October meetings
offered as legitimate reasons to make a
sole-source award.
Commenters at the meetings and in
the written comments also requested
that the ‘‘over $20 million’’ threshold for
requiring a J&A be applied only to the
base year of a contract. For example, if
a requirement was for $75 million, with
a base year estimate of $15 million and
four one-year $15 million options,
commenters stated their belief that the
requirement should not need a J&A
because the base-year amount was not
over $20 million. DoD, GSA, and NASA
have declined to use the base year
amount as the basis for determining the
applicability of the J&A requirement.
The FAR (1.108(c)) establishes the
following rule:
• Dollar thresholds. Unless otherwise
specified, a specific dollar threshold for the
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purpose of applicability is the final
anticipated dollar value of the action,
including the dollar value of all options. If
the action establishes a maximum quantity of
supplies or services to be acquired or
establishes a ceiling price or establishes the
final price to be based on future events, the
final anticipated dollar value must be the
highest final priced alternative to the
Government, including the dollar value of all
options.
Unless there is a specific reason, such
as a statutory requirement to establish
the dollar value of a procurement using
a different method, agencies will not
deviate from this FAR convention.
Commenters also requested that the
requirement for the agency head to
approve the J&A be delegated down to
a much lower level, such as the
contracting officer. FAR 1.108(b) states
the following:
• Delegation of authority. Each authority is
delegable unless specifically stated
otherwise. * * *
J&As are delegable, but there are
limits on the redelegation authority
based on the dollar value of the
procurement; these are stated at FAR
6.304. The competition advocate for the
procuring activity and the head of the
procuring activity are included in the
approval authorities to ensure the J&A is
prepared and coordinated properly
within the agency. Unless there is a
specific reason, agencies will not
deviate from the FAR convention at
FAR 6.304.
A commenter was concerned about
whether ‘‘fair and reasonable price’’
equates to ‘‘fair market price.’’ The FAR
provides various provisions to address
the commenter’s concern. The various
techniques that contracting officers may
use to determine that a price is fair and
reasonable are described at FAR 15.404–
1, Proposal analysis techniques. With
regard to 8(a) contracts, FAR 19.202–
6(b) states that contracting officers shall
follow the procedures at FAR 19.807,
which reads in pertinent part as follows:
Estimating fair market price.
• The contracting officer shall estimate the
fair market price of the work to be performed
by the 8(a) contractor.
• In estimating the fair market price for an
acquisition other than those covered in
paragraph (c) of this section, the contracting
officer shall use cost or price analysis and
consider commercial prices for similar
products and services, available in-house
cost estimates, data (including certified cost
or pricing data) submitted by the SBA or the
8(a) contractor, and data obtained from any
other Government agency.
As required by the FAR, agencies will
continue to use the existing regulations
to evaluate prices offered for 8(a)
contracts over $20 million.
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The changes made by the interim rule
are summarized as follows:
(1) Cross references to the
requirement for a J&A when the
procurement is a sole-source 8(a) over
$20 million are added at FAR 6.204,
entitled ‘‘Section 8(a) competition,’’ FAR
6.302–5, entitled ‘‘Authorized or
required by statute,’’ and in 19.808–1,
entitled ‘‘Sole source’’.
(2) FAR 6.302–5, which sets forth the
situations in which other than full-andopen competition is authorized or
required by statute, has been modified
to clarify that, while 8(a) sole-source
awards are still authorized, they now
must be supported by a J&A prior to
award when the total estimated contract
amount is over $20 million.
(3) Circumstances requiring a J&A for
other than full-and-open competition
have been expanded to include a new
FAR 6.303–1(b) that includes the
section 811(a) prohibition against
awarding a sole-source 8(a) contract
over $20 million unless a written J&A is
approved by the appropriate official and
made public after award.
(4) FAR 6.303–2, Content, (of the J&A)
has a new paragraph that lists the five
required elements for the sole-source
8(a) J&A from section 811.
(5) FAR 19.808–1(a), Sole source, was
revised to inform the contracting officer
that the SBA may not accept for
negotiation a sole-source 8(a) contract
over $20 million unless the requesting
agency has completed a J&A in
accordance with the requirements at
FAR 6.303.
Other requirements of section 811
were reviewed by DoD, GSA, and NASA
and determined to be fully covered by
the existing FAR. The specific areas
reviewed included—
(1) The definition of a ‘‘covered
procurement’’ at section 811(c)(1).
Review determined that covered
procurements, for the purposes of
section 811, are those made under the
SBA’s Section 8(a) program. Therefore,
it was not necessary to define and use
the term ‘‘covered procurement’’ in this
rule.
(2) The definition of ‘‘head of an
agency’’ at section 811(c)(2). Review of
the statutory references in this section
determined that the FAR-wide
definition of this term at FAR 2.101
could be used.
(3) The definition of ‘‘appropriate
official’’ at section 811(c)(3). The
statutory references provided in this
section equate to those currently in FAR
6.304, Approval of the Justification.
(4) Requirement for synopses of
proposed procurement actions. The
existing FAR synopsis requirements at
subpart 5.2, Synopses of Proposed
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Contract Actions, were reviewed. No
change is proposed to FAR 5.202,
Exceptions, or FAR 5.205, Special
situations, because the statute did not
modify the existing 8(a) synopsis
requirements.
(5) Requirement at section 811(a)(3)to
make the J&A and related information
available to the public. This statutory
requirement matches the J&A
publication requirements added by the
National Defense Authorization Act for
Fiscal Year 2008, section 844, entitled
‘‘Public Disclosure of Justification and
Approval Documents for
Noncompetitive Contracts’’ (FAR Case
2008–003). The latter FAR case added
the requirement to FAR 6.305,
Availability of the Justification. Any
J&A issued for an 8(a) sole-source
contract award over $20 million will
require posting in accordance with FAR
6.305, but no further change to that
section is necessary.
Various commenters at the public
meetings questioned whether
contracting officers will be trained on
the content of this rule implementing
section 811. DoD, GSA, and NASA have
prepared and submitted documentation
to the Defense Acquisition University
and the Federal Acquisition Institute to
coordinate the appropriate changes in
training curricula.
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III. Executive Order 12866
This is a significant regulatory action
and, therefore, was subject to review
under Section 6(b) of Executive Order
12866, Regulatory Planning and Review,
dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD, GSA, and NASA do not expect
this interim rule to have a significant
negative economic impact on a
substantial number of small entities
within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq.,
because the rule does not impose any
requirements on the majority of small
businesses. Therefore, an Initial
Regulatory Flexibility Analysis has not
been performed. It is recognized that a
very small number of businesses that
have been awarded 8(a) contracts over
the $20 million threshold may be
impacted. However, the rule does not
limit the number of contracts or dollars
awarded to these businesses. The rule
may also indirectly benefit the 9,165,
currently certified section 8(a) firms by
improving their likelihood of a contract
award through increased competition,
but this impact is similarly considered
not significant.
Also, the FAR Council has limited
flexibility in this case as the rule
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implements in the FAR statutory
requirements mandated by section 811,
Justification and Approval of SoleSource Contracts, of the National
Defense Authorization Act for Fiscal
Year 2010.
DoD, GSA, and NASA invite
comments from small business concerns
and other interested parties on the
expected impact of this rule on small
entities.
DoD, GSA, and NASA will also
consider comments from small entities
concerning the existing regulations in
subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested
parties must submit such comments
separately and should cite 5 U.S.C. 610,
(FAC 2005–50, FAR Case 2009–038) in
correspondence.
V. Paperwork Reduction Act
The interim rule implements section
811, which prohibits the award of a
sole-source contract in an amount over
$20 million under the 8(a) program
authority (15 U.S.C. 637(a)) without the
contracting officer first obtaining a
written J&A approved by an appropriate
official and making public the J&A and
related information. This additional
paperwork requirement is internal to the
Government and does not contain any
information collection requirements that
require the approval of the Office of
Management and Budget under the
Paperwork Reduction Act (44 U.S.C.
chapter 35).
VI. Determination To Issue an Interim
Rule
A determination has been made under
the authority of the Secretary of Defense
(DoD), the Administrator of General
Services (GSA), and the Administrator
of the National Aeronautics and Space
Administration (NASA) that urgent and
compelling reasons exist to promulgate
this interim rule without prior
opportunity for public comment. This
action is necessary because the National
Defense Authorization Act for Fiscal
Year 2010 (Pub. L. 111–84) was enacted
on October 28, 2009. Section 811
required the FAR to be revised no later
than 180 days after enactment, or April
26, 2010. Absent implementation of this
interim rule, section 811 will not be
implemented in the FAR and agencies
will not be compliant with this
provision. However, pursuant to 41
U.S.C. 1707 and FAR 1.501–3(b), DoD,
GSA, and NASA will consider public
comments received in response to this
interim rule in the formation of the final
rule.
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14561
List of Subjects in 48 CFR Parts 6, 15,
and 19
Government procurement.
Dated: March 4, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide
Acquisition Policy.
Therefore, DoD, GSA, and NASA
amend 48 CFR parts 6, 15, and 19 as set
forth below:
■ 1. The authority citation for 48 CFR
parts 6, 15, and 19 continues to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 42 U.S.C. 2473(c).
PART 6—COMPETITION
REQUIREMENTS
2. Amend section 6.204 by adding a
sentence to the end of paragraph (b) to
read as follows:
■
6.204
Section 8(a) competition.
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(b) * * * (But see 6.302–5 and 6.303–
1 for sole source 8(a) awards over $20
million.)
■ 3. Amend section 6.302–5 by revising
paragraphs (b)(4) and (c)(2) to read as
follows:
6.302–5
Authorized or required by statute.
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(b) * * *
(4) Sole source awards under the 8(a)
Program (15 U.S.C. 637), but see 6.303
for requirements for justification and
approval of sole-source 8(a) awards over
$20 million. (See subpart 19.8.)
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(c) * * *
(2) Contracts awarded using this
authority shall be supported by the
written justifications and approvals
described in 6.303 and 6.304, except
for—
(i) Contracts awarded under (a)(2)(ii)
or (b)(2) of this subsection;
(ii) Contracts awarded under (a)(2)(i)
of this subsection when the statute
expressly requires that the procurement
be made from a specified source.
(Justification and approval requirements
apply when the statute authorizes, but
does not require, that the procurement
be made from a specified source); or
(iii) Contracts less than or equal to
$20 million awarded under (b)(4) of this
subsection.
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■ 4. Amend section 6.303–1 by
redesignating paragraphs (b), (c), and (d)
as paragraphs (c), (d), and (e),
respectively; and adding a new
paragraph (b) to read as follows:
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Requirements.
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(b) The contracting officer shall not
award a sole-source contract under the
8(a) authority (15 U.S.C. 637(a)) for an
amount exceeding $20 million unless—
(1) The contracting officer justifies the
use of a sole-source contract in writing
in accordance with 6.303–2;
(2) The justification is approved by
the appropriate official designated at
6.304; and
(3) The justification and related
information are made public after award
in accordance with 6.305.
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5. Amend section 6.303–2 by—
a. Redesignating paragraphs (a) and
(b) as paragraphs (b) and (c),
respectively;
■ b. Adding a new paragraph (a);
■ c. Revising newly redesignated
paragraph (b) introductory text; and
■ d. Adding a new paragraph (d).
The added and revised text reads as
follows:
■
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6. Amend section 6.304 by removing
from paragraph (a)(1) ‘‘6.303–2(a)(12)’’
and adding ‘‘6.303–2(b)(12)’’ in its place.
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8. Amend section 19.808–1 by
redesignating paragraphs (a) and (b) as
paragraphs (b) and (c), respectively; and
adding a new paragraph (a) to read as
follows:
■
19.808–1
Sole source.
DEPARTMENT OF DEFENSE
[Amended]
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PROGRAMS
BILLING CODE 6820–EP–P
Content.
■
[Amended]
7. Amend section 15.607 by removing
from paragraph (b)(2) ‘‘6.303–2(b)’’ and
adding ‘‘6.303–2(c)’’ in its place.
■
[FR Doc. 2011–5554 Filed 3–15–11; 8:45 am]
(a) Each justification shall contain
sufficient facts and rationale to justify
the use of the specific authority cited.
(b) As a minimum, each justification,
except those for sole-source 8(a)
contracts over $20 million (see
paragraph (d) of this section), shall
include the following information:
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*
(d) As a minimum, each justification
for a sole-source 8(a) contract over $20
million shall include the following
information:
(1) A description of the needs of the
agency concerned for the matters
covered by the contract.
(2) A specification of the statutory
provision providing the exception from
the requirement to use competitive
procedures in entering into the contract
(see 19.805–1).
(3) A determination that the use of a
sole-source contract is in the best
interest of the agency concerned.
(4) A determination that the
anticipated cost of the contract will be
fair and reasonable.
(5) Such other matters as the head of
the agency concerned shall specify for
purposes of this section.
6.304
15.607
(a) The SBA may not accept for
negotiation a sole-source 8(a) contract
that exceeds $20 million unless the
requesting agency has completed a
justification in accordance with the
requirements of 6.303.
*
*
*
*
*
■
6.303–2
PART 15—CONTRACTING BY
NEGOTIATION
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Parts 10, 16, 44, and 52
[FAC 2005–50; FAR Case 2008–007; Item
IV; Docket 2010–0086, Sequence 1]
RIN 9000–AL50
Federal Acquisition Regulation;
Additional Requirements for Market
Research
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
AGENCY:
DoD, GSA, and NASA have
adopted as final, with changes, the
interim rule amending the Federal
Acquisition Regulation (FAR) to
implement section 826, Market
Research, of the National Defense
Authorization Act for Fiscal Year 2008.
Section 826 requires the head of an
agency to take appropriate steps to
ensure that any prime contractor of a
contract (or task order or delivery order)
in an amount in excess of $5 million for
the procurement of items other than
commercial items engages in market
research as necessary before making
purchases.
DATES: Effective Date: April 15, 2011.
SUMMARY:
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Ms.
Lori Sakalos, Procurement Analyst, at
(202) 208–0498, for clarification of
content. For information pertaining to
status or publication schedules, contact
the Regulatory Secretariat at (202) 501–
4755. Please cite FAC 2005–50, FAR
Case 2008–007.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:
I. Background
DoD, GSA, and NASA published an
interim rule in the Federal Register at
75 FR 34277 on June 16, 2010, to
implement section 826, Market
Research, of the National Defense
Authorization Act for Fiscal Year 2008
(Pub. L. 110–181). Section 826
establishes additional requirements in
subsection (c) of 10 U.S.C. 2377. As a
matter of policy, these requirements are
extended to all executive agencies.
Specifically, the head of the agency
must conduct market research before
issuing an indefinite-delivery indefinitequantity task or delivery order for a
noncommercial item in excess of the
simplified acquisition threshold. In
addition, a prime contractor with a
contract in excess of $5 million for the
procurement of items other than
commercial items is required to conduct
market research before making
purchases that exceed the simplified
acquisition threshold for or on behalf of
the Government. Three respondents
submitted 16 comments on the interim
rule.
II. Discussion/Analysis
Public Comments: A discussion of the
comments and the changes made to the
rule as a result of those comments are
provided as follows:
A. Purpose
1. Comment: One respondent stated
that the guidance does not appear to
explain the end purpose of the market
research. Another respondent, however,
concluded that the FAR states the
purpose of the market research twice, in
FAR 44.402(b) and 10.001(a)(3). The
second respondent stated that the
purpose for conducting market research
is ‘‘clearly described in Part 10 and there
is no reason to repeat that same
language elsewhere in the FAR.’’
Response: The Defense Acquisition
Regulations Council and the Civilian
Agency Acquisition Council (the
Councils) agree with the second
respondent. FAR part 10 ‘‘prescribes
policies and procedures for conducting
market research to arrive at the most
suitable approach to acquiring,
distributing, and supporting supplies
and services’’ (FAR 10.000). FAR
10.001(a)(3) lists the ways in which the
E:\FR\FM\16MRR2.SGM
16MRR2
]]>Agencies
[Federal Register Volume 76, Number 51 (Wednesday, March 16, 2011)]
[Rules and Regulations]
[Pages 14559-14562]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5554]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 6, 15, and 19
[FAC 2005-50; FAR Case 2009-038; Item III; Docket 2010-0095, Sequence
1]
RIN 9000-AL55
Federal Acquisition Regulation; Justification and Approval of
Sole-Source 8(a) Contracts
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule.
-----------------------------------------------------------------------
SUMMARY: DoD, GSA, and NASA are issuing an interim rule amending the
Federal Acquisition Regulation (FAR) to implement section 811 of the
National Defense Authorization Act for Fiscal Year 2010. This FAR
change encourages agencies to maximize the effective use of competition
by making certain that the proper Justification and Approval (J&A) is
obtained prior to award of 8(a) sole-source contracts over $20 million,
as required by section 811.
DATES: Effective Date: March 16, 2011.
Comment Date: Interested parties should submit written comments to
the Regulatory Secretariat on or before May 16, 2011 to be considered
in the formulation of a final rule.
ADDRESSES: Submit comments identified by FAC 2005-50, FAR Case 2009-
038, by any of the following methods:
Regulations.gov: https://www.regulations.gov. Submit
comments via the Federal eRulemaking portal by inputting ``FAR Case
2009-038'' under the heading ``Enter Keyword or ID'' and selecting
``Search.'' Select the link ``Submit a Comment'' that corresponds with
``FAR Case 2009-038.'' Follow the instructions provided at the ``Submit
a Comment'' screen. Please include your name, company name (if any),
and ``FAR Case 2009-038'' on your attached document.
Fax: (202) 501-4067.
Mail: General Services Administration, Regulatory
Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE., 7th
Floor, Washington, DC 20417.
Instructions: Please submit comments only and cite FAC 2005-50, FAR
Case 2009-038, in all correspondence related to this case. All comments
received will be posted without change to https://www.regulations.gov,
including any personal and/or business confidential information
provided.
FOR FURTHER INFORMATION CONTACT: Mr. Anthony Robinson, Procurement
Analyst, at (202) 501-2658, for clarification of content. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-50, FAR
Case 2009-038.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA are issuing an interim rule amending the FAR, to
implement section 811 of the National Defense Authorization Act for
Fiscal Year 2010 (Pub. L. 111-84), enacted October 28, 2009. Section
811 requires a J&A prior to awarding a sole-source contract in an
amount over $20 million under the 8(a) program (15 U.S.C. 637(a)). This
written J&A must be approved by an appropriate official and, after
award, made public. Authorized by 15 U.S.C. 637(a), the 8(a) program
enables contract awards to be made to small business concerns
determined eligible for the 8(a) program by the Small Business
Administration (SBA).
The requirement for a J&A is not a ceiling or a ``cap'' on sole-
source awards over $20 million for 8(a) contractors. The statute
requires execution of a J&A documenting the reasons for making the
award on a sole-source basis rather than competing among the small
businesses in the 8(a) program. Prior to the enactment of section 811,
a sole-source award of a new contract made using the 8(a) contracting
authority did not require a J&A, regardless of the dollar value, and
the new statute does not institute any requirement for a J&A for sole-
source 8(a) awards that are less than or equal to $20 million.
II. Discussion and Analysis
Section 811 became effective on the date of enactment, October 28,
2009. Section 811 addresses requirements for the J&A of sole-source
contracts over $20 million under the 8(a) small-business development
program.
The Federal Acquisition Regulatory Council (FAR Council) held three
Tribal consultation and outreach meetings to discuss rulemaking
associated with section 811.
The meetings took place during October 2010 in Washington, DC;
Albuquerque, New Mexico; and Fairbanks, Alaska (see the meeting notice
that was published in the Federal Register on August 31, 2010 at 75 FR
53269). Transcripts of the meetings are available at https://www.acq.osd.mil/dpap/dars/section811_docs.html.
After the meetings, DoD, GSA, and NASA weighed the costs and
benefits of publishing this rule as proposed or interim. The rule is
being published as interim, rather than proposed, because the rule is
implementing a statutory mandate, and the statutory date for issuance
of regulations has already passed. Because this is an interim rule, the
public will have another opportunity to comment. These additional
comments could result in further changes in the final rule.
A frequently heard comment at the October meetings was a request
that the FAR not use the 12 elements currently required at FAR 6.303-2
for J&As for less than full-and-open competition, but instead limit the
elements to be addressed to the five elements listed in
[[Page 14560]]
section 811(b), which are set forth as follows:
(1) A description of the needs of the agency concerned for the
matters covered by the contract;
(2) A specification of the statutory provision providing the
exception from the requirement to use competitive procedures in
entering into the contract;
(3) A determination that the use of a sole-source contract is in
the best interest of the agency concerned;
(4) A determination that the anticipated cost of the contract will
be fair and reasonable; and
(5) Such other matters as the head of the agency concerned shall
specify.
DoD, GSA, and NASA have drafted the interim FAR rule to adopt only
these five elements. DoD, GSA, and NASA did not adopt the suggestions
raised in the October meetings (1) not to include the fair and
reasonable price determination and (2) not to allow agency heads to
address any matter, without specific limits (the fifth element set out
in section 811). A determination that the anticipated cost of a
contract will be fair and reasonable is a universal requirement in
Federal contracting; including the requirement in the J&A would be
sensible, even if it were not specifically required by section 811.
A common issue raised in the meetings was that the fifth element,
``Such other matters as the head of the agency concerned shall
specify,'' was too broad. DoD, GSA, and NASA determined that it made
sense to allow agency heads to identify other factors supporting the
decision to make a sole-source 8(a) award. By retaining the wording
from the statute, agency heads retain the discretion to consider such
factors as Indian economic development or meeting agency small business
contracting goals--both factors that participants in the October
meetings offered as legitimate reasons to make a sole-source award.
Commenters at the meetings and in the written comments also
requested that the ``over $20 million'' threshold for requiring a J&A
be applied only to the base year of a contract. For example, if a
requirement was for $75 million, with a base year estimate of $15
million and four one-year $15 million options, commenters stated their
belief that the requirement should not need a J&A because the base-year
amount was not over $20 million. DoD, GSA, and NASA have declined to
use the base year amount as the basis for determining the applicability
of the J&A requirement. The FAR (1.108(c)) establishes the following
rule:
Dollar thresholds. Unless otherwise specified, a
specific dollar threshold for the purpose of applicability is the
final anticipated dollar value of the action, including the dollar
value of all options. If the action establishes a maximum quantity
of supplies or services to be acquired or establishes a ceiling
price or establishes the final price to be based on future events,
the final anticipated dollar value must be the highest final priced
alternative to the Government, including the dollar value of all
options.
Unless there is a specific reason, such as a statutory requirement
to establish the dollar value of a procurement using a different
method, agencies will not deviate from this FAR convention.
Commenters also requested that the requirement for the agency head
to approve the J&A be delegated down to a much lower level, such as the
contracting officer. FAR 1.108(b) states the following:
Delegation of authority. Each authority is delegable
unless specifically stated otherwise. * * *
J&As are delegable, but there are limits on the redelegation
authority based on the dollar value of the procurement; these are
stated at FAR 6.304. The competition advocate for the procuring
activity and the head of the procuring activity are included in the
approval authorities to ensure the J&A is prepared and coordinated
properly within the agency. Unless there is a specific reason, agencies
will not deviate from the FAR convention at FAR 6.304.
A commenter was concerned about whether ``fair and reasonable
price'' equates to ``fair market price.'' The FAR provides various
provisions to address the commenter's concern. The various techniques
that contracting officers may use to determine that a price is fair and
reasonable are described at FAR 15.404-1, Proposal analysis techniques.
With regard to 8(a) contracts, FAR 19.202-6(b) states that contracting
officers shall follow the procedures at FAR 19.807, which reads in
pertinent part as follows:
Estimating fair market price.
The contracting officer shall estimate the fair market
price of the work to be performed by the 8(a) contractor.
In estimating the fair market price for an acquisition
other than those covered in paragraph (c) of this section, the
contracting officer shall use cost or price analysis and consider
commercial prices for similar products and services, available in-
house cost estimates, data (including certified cost or pricing
data) submitted by the SBA or the 8(a) contractor, and data obtained
from any other Government agency.
As required by the FAR, agencies will continue to use the existing
regulations to evaluate prices offered for 8(a) contracts over $20
million.
The changes made by the interim rule are summarized as follows:
(1) Cross references to the requirement for a J&A when the
procurement is a sole-source 8(a) over $20 million are added at FAR
6.204, entitled ``Section 8(a) competition,'' FAR 6.302-5, entitled
``Authorized or required by statute,'' and in 19.808-1, entitled ``Sole
source''.
(2) FAR 6.302-5, which sets forth the situations in which other
than full-and-open competition is authorized or required by statute,
has been modified to clarify that, while 8(a) sole-source awards are
still authorized, they now must be supported by a J&A prior to award
when the total estimated contract amount is over $20 million.
(3) Circumstances requiring a J&A for other than full-and-open
competition have been expanded to include a new FAR 6.303-1(b) that
includes the section 811(a) prohibition against awarding a sole-source
8(a) contract over $20 million unless a written J&A is approved by the
appropriate official and made public after award.
(4) FAR 6.303-2, Content, (of the J&A) has a new paragraph that
lists the five required elements for the sole-source 8(a) J&A from
section 811.
(5) FAR 19.808-1(a), Sole source, was revised to inform the
contracting officer that the SBA may not accept for negotiation a sole-
source 8(a) contract over $20 million unless the requesting agency has
completed a J&A in accordance with the requirements at FAR 6.303.
Other requirements of section 811 were reviewed by DoD, GSA, and
NASA and determined to be fully covered by the existing FAR. The
specific areas reviewed included--
(1) The definition of a ``covered procurement'' at section
811(c)(1). Review determined that covered procurements, for the
purposes of section 811, are those made under the SBA's Section 8(a)
program. Therefore, it was not necessary to define and use the term
``covered procurement'' in this rule.
(2) The definition of ``head of an agency'' at section 811(c)(2).
Review of the statutory references in this section determined that the
FAR-wide definition of this term at FAR 2.101 could be used.
(3) The definition of ``appropriate official'' at section
811(c)(3). The statutory references provided in this section equate to
those currently in FAR 6.304, Approval of the Justification.
(4) Requirement for synopses of proposed procurement actions. The
existing FAR synopsis requirements at subpart 5.2, Synopses of Proposed
[[Page 14561]]
Contract Actions, were reviewed. No change is proposed to FAR 5.202,
Exceptions, or FAR 5.205, Special situations, because the statute did
not modify the existing 8(a) synopsis requirements.
(5) Requirement at section 811(a)(3)to make the J&A and related
information available to the public. This statutory requirement matches
the J&A publication requirements added by the National Defense
Authorization Act for Fiscal Year 2008, section 844, entitled ``Public
Disclosure of Justification and Approval Documents for Noncompetitive
Contracts'' (FAR Case 2008-003). The latter FAR case added the
requirement to FAR 6.305, Availability of the Justification. Any J&A
issued for an 8(a) sole-source contract award over $20 million will
require posting in accordance with FAR 6.305, but no further change to
that section is necessary.
Various commenters at the public meetings questioned whether
contracting officers will be trained on the content of this rule
implementing section 811. DoD, GSA, and NASA have prepared and
submitted documentation to the Defense Acquisition University and the
Federal Acquisition Institute to coordinate the appropriate changes in
training curricula.
III. Executive Order 12866
This is a significant regulatory action and, therefore, was subject
to review under Section 6(b) of Executive Order 12866, Regulatory
Planning and Review, dated September 30, 1993. This rule is not a major
rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD, GSA, and NASA do not expect this interim rule to have a
significant negative economic impact on a substantial number of small
entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C.
601, et seq., because the rule does not impose any requirements on the
majority of small businesses. Therefore, an Initial Regulatory
Flexibility Analysis has not been performed. It is recognized that a
very small number of businesses that have been awarded 8(a) contracts
over the $20 million threshold may be impacted. However, the rule does
not limit the number of contracts or dollars awarded to these
businesses. The rule may also indirectly benefit the 9,165, currently
certified section 8(a) firms by improving their likelihood of a
contract award through increased competition, but this impact is
similarly considered not significant.
Also, the FAR Council has limited flexibility in this case as the
rule implements in the FAR statutory requirements mandated by section
811, Justification and Approval of Sole-Source Contracts, of the
National Defense Authorization Act for Fiscal Year 2010.
DoD, GSA, and NASA invite comments from small business concerns and
other interested parties on the expected impact of this rule on small
entities.
DoD, GSA, and NASA will also consider comments from small entities
concerning the existing regulations in subparts affected by the rule in
accordance with 5 U.S.C. 610. Interested parties must submit such
comments separately and should cite 5 U.S.C. 610, (FAC 2005-50, FAR
Case 2009-038) in correspondence.
V. Paperwork Reduction Act
The interim rule implements section 811, which prohibits the award
of a sole-source contract in an amount over $20 million under the 8(a)
program authority (15 U.S.C. 637(a)) without the contracting officer
first obtaining a written J&A approved by an appropriate official and
making public the J&A and related information. This additional
paperwork requirement is internal to the Government and does not
contain any information collection requirements that require the
approval of the Office of Management and Budget under the Paperwork
Reduction Act (44 U.S.C. chapter 35).
VI. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense (DoD), the Administrator of General Services (GSA), and the
Administrator of the National Aeronautics and Space Administration
(NASA) that urgent and compelling reasons exist to promulgate this
interim rule without prior opportunity for public comment. This action
is necessary because the National Defense Authorization Act for Fiscal
Year 2010 (Pub. L. 111-84) was enacted on October 28, 2009. Section 811
required the FAR to be revised no later than 180 days after enactment,
or April 26, 2010. Absent implementation of this interim rule, section
811 will not be implemented in the FAR and agencies will not be
compliant with this provision. However, pursuant to 41 U.S.C. 1707 and
FAR 1.501-3(b), DoD, GSA, and NASA will consider public comments
received in response to this interim rule in the formation of the final
rule.
List of Subjects in 48 CFR Parts 6, 15, and 19
Government procurement.
Dated: March 4, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide Acquisition Policy.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 6, 15, and 19 as
set forth below:
0
1. The authority citation for 48 CFR parts 6, 15, and 19 continues to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 6--COMPETITION REQUIREMENTS
0
2. Amend section 6.204 by adding a sentence to the end of paragraph (b)
to read as follows:
6.204 Section 8(a) competition.
* * * * *
(b) * * * (But see 6.302-5 and 6.303-1 for sole source 8(a) awards
over $20 million.)
0
3. Amend section 6.302-5 by revising paragraphs (b)(4) and (c)(2) to
read as follows:
6.302-5 Authorized or required by statute.
* * * * *
(b) * * *
(4) Sole source awards under the 8(a) Program (15 U.S.C. 637), but
see 6.303 for requirements for justification and approval of sole-
source 8(a) awards over $20 million. (See subpart 19.8.)
* * * * *
(c) * * *
(2) Contracts awarded using this authority shall be supported by
the written justifications and approvals described in 6.303 and 6.304,
except for--
(i) Contracts awarded under (a)(2)(ii) or (b)(2) of this
subsection;
(ii) Contracts awarded under (a)(2)(i) of this subsection when the
statute expressly requires that the procurement be made from a
specified source. (Justification and approval requirements apply when
the statute authorizes, but does not require, that the procurement be
made from a specified source); or
(iii) Contracts less than or equal to $20 million awarded under
(b)(4) of this subsection.
* * * * *
0
4. Amend section 6.303-1 by redesignating paragraphs (b), (c), and (d)
as paragraphs (c), (d), and (e), respectively; and adding a new
paragraph (b) to read as follows:
[[Page 14562]]
6.303-1 Requirements.
* * * * *
(b) The contracting officer shall not award a sole-source contract
under the 8(a) authority (15 U.S.C. 637(a)) for an amount exceeding $20
million unless--
(1) The contracting officer justifies the use of a sole-source
contract in writing in accordance with 6.303-2;
(2) The justification is approved by the appropriate official
designated at 6.304; and
(3) The justification and related information are made public after
award in accordance with 6.305.
* * * * *
0
5. Amend section 6.303-2 by--
0
a. Redesignating paragraphs (a) and (b) as paragraphs (b) and (c),
respectively;
0
b. Adding a new paragraph (a);
0
c. Revising newly redesignated paragraph (b) introductory text; and
0
d. Adding a new paragraph (d).
The added and revised text reads as follows:
6.303-2 Content.
(a) Each justification shall contain sufficient facts and rationale
to justify the use of the specific authority cited.
(b) As a minimum, each justification, except those for sole-source
8(a) contracts over $20 million (see paragraph (d) of this section),
shall include the following information:
* * * * *
(d) As a minimum, each justification for a sole-source 8(a)
contract over $20 million shall include the following information:
(1) A description of the needs of the agency concerned for the
matters covered by the contract.
(2) A specification of the statutory provision providing the
exception from the requirement to use competitive procedures in
entering into the contract (see 19.805-1).
(3) A determination that the use of a sole-source contract is in
the best interest of the agency concerned.
(4) A determination that the anticipated cost of the contract will
be fair and reasonable.
(5) Such other matters as the head of the agency concerned shall
specify for purposes of this section.
6.304 [Amended]
0
6. Amend section 6.304 by removing from paragraph (a)(1) ``6.303-
2(a)(12)'' and adding ``6.303-2(b)(12)'' in its place.
PART 15--CONTRACTING BY NEGOTIATION
15.607 [Amended]
0
7. Amend section 15.607 by removing from paragraph (b)(2) ``6.303-
2(b)'' and adding ``6.303-2(c)'' in its place.
PART 19--SMALL BUSINESS PROGRAMS
0
8. Amend section 19.808-1 by redesignating paragraphs (a) and (b) as
paragraphs (b) and (c), respectively; and adding a new paragraph (a) to
read as follows:
19.808-1 Sole source.
(a) The SBA may not accept for negotiation a sole-source 8(a)
contract that exceeds $20 million unless the requesting agency has
completed a justification in accordance with the requirements of 6.303.
* * * * *
[FR Doc. 2011-5554 Filed 3-15-11; 8:45 am]
BILLING CODE 6820-EP-P
