Federal Acquisition Regulation; Preventing Abuse of Interagency Contracts, 183-186 [2011-33409]

Agencies

• DEPARTMENT OF DEFENSE
• General Services Administration
• National Aeronautics and Space Administration

[Federal Register Volume 77, Number 1 (Tuesday, January 3, 2012)]
[Rules and Regulations]
[Pages 183-186]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33409]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 4, 7, 8, 9, 17, 18, 35, and 41

[FAC 2005-55; FAR Case 2008-032; Item I; Docket 2010-0107, Sequence 1]
RIN 9000-AL69


Federal Acquisition Regulation; Preventing Abuse of Interagency 
Contracts

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA have adopted as final, with changes, an 
interim rule amending the Federal Acquisition Regulation (FAR) to 
implement a section of the Duncan Hunter National Defense Authorization 
Act for Fiscal Year 2009, to prevent abuse of interagency contracts.

DATES: Effective Date: February 2, 2012.

FOR FURTHER INFORMATION CONTACT: 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 2005-55, FAR Case 2008-
032.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA published an interim rule in the Federal 
Register at 75 FR 77733 on December 13, 2010, to implement paragraphs 
(b) and (d) of section 865 of the Duncan Hunter National Defense 
Authorization Act (NDAA). The rule is designed to ensure that the 
benefits of interagency acquisitions are consistently achieved.
    The FAR changes are applicable to all interagency acquisitions 
issued under the Economy Act (31 U.S.C. 1535) as well as other 
authorities, in recognition that an increasing number of interagency 
acquisitions are conducted using authorities other than the Economy 
Act. This rule strengthens FAR subpart 17.5, Interagency Acquisitions 
by--
     Broadening the scope of coverage to address all 
interagency acquisitions that result in a contract action, but does not 
apply to Federal Supply Schedule (FSS) orders under $500,000;
     Requiring agencies to support the decision to use an 
interagency acquisition with a determination that such action is the 
``best procurement approach;'' and
     Directing that assisted acquisitions be accompanied by 
written agreements between the requesting agency and the servicing 
agency documenting the roles and responsibilities of the respective 
parties.
    Five respondents submitted comments on the interim rule. Two of the 
respondents from the same organization provided duplicate comments.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (Councils) reviewed the public comments in the 
development of the final rule. A discussion of the comments and the 
changes made to the rule as a result of those comments are provided as 
follows:

A. Summary of Significant Changes

    As a result of public comments, changes were made to the interim 
rule to--
    1. Make it clear that FAR subpart 17.5 applies to interagency 
acquisitions

[[Page 184]]

when an agency needing supplies or services obtains them using another 
agency's contract; or when an agency uses another agency to provide 
acquisition assistance, such as awarding and administering a contract, 
a task order, or delivery order. The subpart does not apply to 
interagency reimbursable work performed by Federal employees (other 
than acquisition assistance), or interagency activities where 
contracting is incidental to the purpose of the transaction;
    2. Revise FAR 35.017 to permit that when a nonsponsoring agency 
requests, under the authority of the Economy Act, the use of a 
Federally Funded Research and Development Center (FFRDC), the 
nonsponsoring agency may incorporate the determination required by FAR 
17.502-1(a) into the determination and finding justification required 
by FAR 17.502-2(c);
    3. Expand the requirement for business-case analysis when creating 
multi-agency contracts (MACs) to include governmentwide acquisition 
contracts (GWACs). Therefore, the procedures for establishing MACs and 
GWACs have been relocated from FAR 17.502-2(d) to 17.502-1(c) and 
hyperlinked to the Office of Federal Procurement Policy (OFPP) Business 
Case guidance.

B. Analysis of Public Comments

    Respondents submitted comments covering the following seven 
categories:
     Best procurement approach determination.
     ``Direct acquisition'' definition.
     Written agreement for direct acquisition.
     Citing correct statutory authority for an interagency 
agreement.
     Content of determination and findings.
     Federal Supply Schedule orders and open market 
procurements.
     Business-case analysis.
1. Best Procurement Approach Determination
    Comment: One respondent asked if a class/commodity determination 
could be used for those products/services that might be ordered 
repeatedly from the FSS. Otherwise, according to the respondent, a 
determination for each procurement will be necessary.
    Response: The best procurement approach determination, as described 
at FAR 17.502-1(a), is required by section 865 of the NDAA for Fiscal 
Year 2009 for any FSS order exceeding $500,000. The law does not 
provide for class or commodity determinations.
    Comment: Some respondents expressed concern that an additional 
determination is required when agencies are using Schedules. The 
amended FAR 8.404(2) has added a requirement for FSS orders over 
$500,000 to make a determination that use of FSS is the best 
procurement approach. However, FAR 8.002 establishes use of FSS as part 
of the ``Priorities for Use of Government Supply Sources.'' It is not 
clear why an additional determination is required when agencies are 
using the Schedules as intended and as established by the FAR.
    Response: The determination is required because it is mandated by 
section 865 of the NDAA for Fiscal Year 2009 and applies to FSS orders 
over $500,000. Federal Supply Schedules are already priority sources, 
although not mandatory.
    Comment: One respondent asked for additional guidance for lower 
prices when determining the best procurement approach at FAR 17.502-
1(a)(2)(ii)(B). The reference to lower prices does not provide adequate 
guidance to contracting officers. Also, according to the respondent, an 
additional factor that should be listed under FAR 17.502-1(a)(2) is the 
cycle time to award.
    Response: Lower price is one of the factors to be considered in 
determining the appropriate contract vehicle. Once this analysis is 
performed, other factors should be considered while following the 
ordering procedures as prescribed in FAR subparts 8.4 and 16.5. The 
determination criteria outlined at FAR 17.502-1(a)(2) is not an all 
inclusive list and does not preclude the use of other factors.
2. ``Direct Acquisition'' Definition
    Comment: One respondent suggested adding to the current definition 
of ``direct acquisition'' the following sentence: ``A direct 
acquisition is also a type of interagency agreement where the servicing 
agency performs work using their own resources.''
    One respondent suggested adding the phrase ``or through performance 
that uses the servicing agency's resources'' in the text of FAR 
17.501(a), after the phrase, ``such as task and delivery-order 
contracts.'' Further, the respondent recommended, at FAR 17.502-1, 
adding a subsection (a)(3) to require that, prior to placing an order 
with another agency, the requesting agency shall make a determination 
that the servicing agency is able to provide the required supplies or 
services.
    Response: A ``direct acquisition,'' as defined in FAR 2.101(b)(2), 
is a type of interagency acquisition, not a type of interagency 
agreement. An interagency agreement establishes general terms and 
conditions governing the relationship between servicing agencies and 
requesting agencies as set forth in FAR 17.502-1(b)(1)(i). Interagency 
acquisitions may be a product of interagency agreements; the two are 
not the same. An interagency agreement whereby a servicing agency 
performs work using its own resources is not considered an interagency 
acquisition under the FAR.
    The second respondent's comment relies on the addition of 
interagency agreements in the definition of direct acquisition, which 
the Councils did not adopt.
    To provide additional clarity that the FAR only covers interagency 
transactions that result in a contract action, the rule was revised at 
FAR 17.500 and 17.502-2.
3. Written Agreement for Direct Acquisition
    Comment: One respondent stated that the current text at FAR 17.502-
1(b)(2) should be deleted and replaced with the requirement for a 
written agreement because section 865 of the NDAA for Fiscal Year 2009 
applies to all interagency agreements.
    Response: The written agreement assigns responsibility for contract 
administration and management between the requesting agency and the 
servicing agency. The FAR does not require an additional written 
agreement for a direct acquisition because the basic contract outlines 
administration and management responsibilities; therefore, the 
requesting agency should follow ordering procedures/instructions per 
the contract vehicle.
4. Citing Correct Statutory Authority for an Interagency Agreement
    Comment: One respondent recommended that FAR 17.502-2(b) be revised 
by dividing into two parts and adding new text as follows: ``(2) 
Agencies are responsible for determining whether statutory authority 
other than Economy Act applies to a particular interagency agreement.'' 
The respondent believed that because interagency agreements result in 
the transfer of funds from one agency to another, agencies must choose 
the correct authorizing statute for a particular interagency 
transaction.
    Response: The statutory authority should be cited in the 
interagency agreement. Additional guidelines for preparing interagency 
agreements, including statutory authorities, are available at FAR 
17.502-1(b).

[[Page 185]]

5. Content of Determination and Findings for Economy Act Acquisitions
    Comment: One respondent suggested adding a new subsection at FAR 
17.502-2(c), to read as follows: ``(3) The D&F should provide factual 
information to support the determinations of (c)(2).'' According to the 
respondent, without a requirement for factual information, the 
requesting agency's determination can be added as a mere unsupported 
statement.
    Response: Findings are statements of fact or rationale essential to 
support the determination and are already required in any determination 
and findings (D&F), as defined at FAR 1.701.
    Note that the FAR does not require a formal D&F for determinations 
of best procurement approach. They are prepared in accordance with FAR 
17.501-1(a).
6. Federal Supply Schedule Orders and Open Market Procurements
    Comment: One respondent expressed concern that the new rule 
requiring a best procurement approach determination for FSS orders 
exceeding $500,000, combined with the lack of corresponding 
determination for open market commercial item procurements, creates a 
presumption of favoring duplicative, open market procurements. 
According to the respondent, the rule also creates an incentive to 
split FSS orders to avoid exceeding the $500,000 threshold for a 
determination.
    One respondent suggested that to provide clarity and ensure a level 
playing field in the acquisition planning process, the FAR should be 
amended to require a best procurement approach determination for open 
market procurements as well as FSS orders and other interagency 
transactions. Further, according to the respondent, FAR 7.105(b), 
Contents of written acquisition plans, should be amended to include the 
requirement for a best procurement approach determination for all 
transactions requiring an acquisition plan, including open market 
procurements.
    Response: The best procurement approach determination is required 
for FSS orders greater than $500,000 by section 865 of the NDAA for 
Fiscal Year 2009. This statute does not encourage the splitting of 
orders exceeding the $500,000 threshold. FSS contracts are already 
priority sources, although not mandatory. The statute seeks to prevent 
abuse and implement controls for the interagency acquisitions process 
and is not intended to create barriers to the use of the FSS.
    Per FAR 7.102, agencies are required to perform acquisition 
planning and conduct market research for all acquisitions to ensure 
that the acquisition represents the best interests of the Government. 
If the result of acquisition planning is to use either a direct 
acquisition or an assisted acquisition, then the contracting officer is 
required to prepare a best procurement approach determination.
    As for the comment of creating a presumption of favoring 
duplicative, open market procurements, FAR case 2009-024, Prioritizing 
Sources of Supplies and Services for Use by the Government, which was 
published as a proposed rule on June 14, 2011 (76 FR 34634), will 
address the priority and consideration of open market sources as part 
of acquisition planning. The recommendation for developing a best 
procurement approach determination for open market procurements is 
outside the scope of this case.
7. Business-Case Analysis
    Comment: One respondent suggested that FAR 17.502-2(d) should 
require that the business-case analysis address whether any other 
interagency contract vehicles, like the Multiple-Award Schedule 
program, meet the servicing agency's needs.
    Response: Business-case analysis is required by this statute for 
multi-agency contracts under the Economy Act. The requirement for the 
servicing agency to consider other existing contract vehicles is 
already covered under business-case analysis requirements for MACs and 
GWACs, which has been relocated to FAR 17.502-1(c).

C. Other Changes

    During deliberations, the Councils determined that revisions to FAR 
35.017-3 were necessary to clarify and streamline instructions for the 
placement of orders with FFRDCs. The FAR text at 35.017-3 has been 
revised to permit nonsponsoring agencies desiring to place orders 
against an FFRDC contract the option of incorporating the best 
procurement approach determination required by FAR 17.502-1(a) into the 
D&F required by FAR 17.502-2(c), subject to approval by the sponsoring 
agency.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is a significant regulatory action and, therefore, was subject to 
review under section 6(b) of E.O. 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

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not have a significant 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 small entities.

V. Paperwork Reduction Act

    The rule 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).

List of Subjects in 48 CFR Parts 2, 4, 7, 8, 9, 17, 18, 35, and 41

    Government procurement.

    Dated: December 21, 2011.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of 
Acquisition Policy, Office of Governmentwide Policy.

Interim Rule Adopted as Final With Changes

    Accordingly, the interim rule amending 48 CFR parts 2, 4, 7, 8, 9, 
17, 18, 35, and 41, which was published in the Federal Register at 75 
FR 77733, December 13, 2010, is adopted as final with the following 
changes:

0
1. The authority citation for 48 CFR parts 17 and 35 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 17--SPECIAL CONTRACTING METHODS

0
2. Amend section 17.500 by removing from paragraph (a) ``paragraph 
(b)'' and adding ``paragraph (c)'' in its place; revising paragraph 
(b); and adding paragraph (c) to read as follows:


17.500  Scope of subpart.

* * * * *
    (b) This subpart applies to interagency acquisitions, see 2.101 for 
definition, when--

[[Page 186]]

    (1) An agency needing supplies or services obtains them using 
another agency's contract; or
    (2) An agency uses another agency to provide acquisition 
assistance, such as awarding and administering a contract, a task 
order, or delivery order.
    (c) This subpart does not apply to--
    (1) Interagency reimbursable work performed by Federal employees 
(other than acquisition assistance), or interagency activities where 
contracting is incidental to the purpose of the transaction; or
    (2) Orders of $500,000 or less issued against Federal Supply 
Schedules.
0
3. Amend section 17.502-1 by revising the introductory text of 
paragraph (a)(2); removing from paragraph (a)(2)(ii)(A) ``already''; 
and adding paragraph (c) to read as follows:


17.502-1   General.

    (a) * * *
    (2) Direct acquisitions. Prior to placing an order against another 
agency's indefinite-delivery vehicle, the requesting agency shall make 
a determination that use of another agency's contract vehicle is the 
best procurement approach and shall obtain the concurrence of the 
requesting agency's responsible contracting office. At a minimum, the 
determination shall include an analysis, including factors such as:
* * * * *
    (c) Business-case analysis requirements for multi-agency contracts 
and governmentwide acquisition contracts. In order to establish a 
multi-agency or governmentwide acquisition contract, a business-case 
analysis must be prepared by the servicing agency and approved in 
accordance with the Office of Federal Procurement Policy (OFPP) 
business case guidance, available at https://www.whitehouse.gov/sites/default/files/omb/procurement/memo/development-review-and-approval-of-business-cases-for-certain-interagency-and-agency-specific-acquisitions-memo.pdf. The business-case analysis shall--
    (1) Consider strategies for the effective participation of small 
businesses during acquisition planning (see 7.103(u));
    (2) Detail the administration of such contract, including an 
analysis of all direct and indirect costs to the Government of awarding 
and administering such contract;
    (3) Describe the impact such contract will have on the ability of 
the Government to leverage its purchasing power, e.g., will it have a 
negative effect because it dilutes other existing contracts;
    (4) Include an analysis concluding that there is a need for 
establishing the multi-agency contract; and
    (5) Document roles and responsibilities in the administration of 
the contract.

0
4. Amend section 17.502-2 by--
0
a. Revising paragraphs (a) and (c);
0
b. Removing paragraph (d);
0
c. Redesignating paragraph (e) as paragraph (d); and
0
d. Revising the newly redesignated paragraph (d)(4) to read as follows:


17.502-2   The Economy Act.

    (a) The Economy Act (31 U.S.C. 1535) authorizes agencies to enter 
into agreements to obtain supplies or services from another agency. The 
FAR applies when one agency uses another agency's contract to obtain 
supplies or services. If the interagency business transaction does not 
result in a contract or an order, then the FAR does not apply. The 
Economy Act also provides authority for placement of orders between 
major organizational units within an agency; procedures for such intra-
agency transactions are addressed in agency regulations.
* * * * *
    (c) Requirements for determinations and findings. (1) Each Economy 
Act order to obtain supplies or services by interagency acquisition 
shall be supported by a determination and findings (D&F). The D&F 
shall--
    (i) State that use of an interagency acquisition is in the best 
interest of the Government;
    (ii) State that the supplies or services cannot be obtained as 
conveniently or economically by contracting directly with a private 
source; and
    (iii) Include a statement that at least one of the following 
circumstances applies:
    (A) The acquisition will appropriately be made under an existing 
contract of the servicing agency, entered into before placement of the 
order, to meet the requirements of the servicing agency for the same or 
similar supplies or services.
    (B) The servicing agency has the capability or expertise to enter 
into a contract for such supplies or services that is not available 
within the requesting agency.
    (C) The servicing agency is specifically authorized by law or 
regulation to purchase such supplies or services on behalf of other 
agencies.
    (2) The D&F shall be approved by a contracting officer of the 
requesting agency with authority to contract for the supplies or 
services to be ordered, or by another official designated by the agency 
head, except that, if the servicing agency is not covered by the FAR, 
approval of the D&F may not be delegated below the senior procurement 
executive of the requesting agency.
    (3) The requesting agency shall furnish a copy of the D&F to the 
servicing agency with the request for order.
    (d) * * *
    (4) In no event shall the servicing agency require, or the 
requesting agency pay, any fee or charge in excess of the actual cost 
(or estimated cost if the actual cost is not known) of entering into 
and administering the contract or other agreement under which the order 
is filled.


17.503  [Amended]

0
5. Amend section 17.503 by removing from paragraph (b)(4) ``(see 
17.502-2(e))'' and adding ``(see 17.502-2(d))'' in its place.

PART 35--RESEARCH AND DEVELOPMENT CONTRACTING

0
6. Amend section 35.017-3 by revising paragraph (b) to read as follows:


35.017-3   Using an FFRDC.

* * * * *
    (b) Where the use of the FFRDC by a nonsponsor is permitted by the 
sponsor, the sponsor shall be responsible for compliance with paragraph 
(a) of this subsection.
    (1) The nonsponsoring agency shall prepare a determination in 
accordance with 17.502-1(a) and provide the documentation required by 
17.503(e) to the sponsoring agency.
    (2) When a D&F is required pursuant to 17.502-2(c), the 
nonsponsoring agency may incorporate the determination required by 
17.502-1(a) into the D&F and provide the documentation required by 
17.503(e) to the sponsoring agency.
    (3) When permitted by the sponsor, a Federal agency may contract 
directly with the FFRDC, in which case that Federal agency is 
responsible for compliance with part 6.

[FR Doc. 2011-33409 Filed 12-30-11; 8:45 am]
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