Defense Federal Acquisition Regulation Supplement: Nonmanufacturer Rule for 8(a) Participants (DFARS Case 2019-D004), 58334-58336 [2019-23811]

Download as PDF 58334 Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations (ii) The imposition of penalties to be paid by the contractor to the Government for failure to achieve such design specification requirements (10 U.S.C. 2443). PART 234—MAJOR SYSTEM ACQUISITION 5. Amend section 234.004 by adding paragraph (3) to read as follows: ■ 234.004 Acquisition strategy. * * * * * (3) The contracting officer shall include in solicitations for contracts for the technical maturation and risk reduction phase, engineering and manufacturing development phase or production phase of a weapon system, including embedded software— (i) Clearly defined measurable criteria for engineering activities and design specifications for reliability and maintainability provided by the program manager, or the comparable requiring activity official performing program management responsibilities; or (ii) Ensure a copy of the justification, executed by the program manager or the comparable requiring activity official performing program management responsibilities for the decision that engineering activities and design specifications for reliability and maintainability should not be a requirement, is included in the contract file (10 U.S.C. 2443). I. Background DoD published a proposed rule in the Federal Register at 84 FR 12187 on April 1, 2019, to implement regulatory changes made by the Small Business Administration (SBA) in its final rule published in the Federal Register at 81 FR 34243 on May 31, 2016. SBA’s final rule implemented section 1651 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013 (Pub. L. 112–239, 15 U.S.C. 657s). Section 1651 revised and standardized the limitations on subcontracting and the nonmanufacturer rule that apply to small business concerns, including 8(a) Program participants, under procurements conducted pursuant to Federal Acquisition Regulation (FAR) part 19, Small Business Programs. Two respondents submitted public comments in response to the proposed rule. II. Discussion and Analysis DoD reviewed the public comments in the development of the final rule. [FR Doc. 2019–23812 Filed 10–30–19; 8:45 am] A. Summary of Significant Changes BILLING CODE 5001–06–P There are no significant changes made to the final rule from the proposed rule. One minor edit is made to the clause in paragraph (a)(3) to change ‘‘by the SBA’’ to ‘‘by SBA’’. DEPARTMENT OF DEFENSE Defense Acquisition Regulations System B. Analysis of Public Comments 48 CFR Parts 219 and 252 1. Support for the Rule [Docket DARS–2019–0015] Comment: Both respondents expressed support for the proposed rule. Response: DoD acknowledges the respondents’ support. RIN 0750–AK39 Defense Federal Acquisition Regulation Supplement: Nonmanufacturer Rule for 8(a) Participants (DFARS Case 2019–D004) Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. AGENCY: khammond on DSKJM1Z7X2PROD with RULES to revise and standardize the limitations on subcontracting and the nonmanufacturer rule, which apply to small business concerns, including participants in the 8(a) Program. DATES: Effective October 31, 2019. FOR FURTHER INFORMATION CONTACT: Ms. Jennifer D. Johnson, telephone 571– 372–6100. SUPPLEMENTARY INFORMATION: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a Small Business Administration rule that implemented a section of the National Defense Authorization Act for Fiscal Year 2013 SUMMARY: VerDate Sep<11>2014 16:08 Oct 30, 2019 Jkt 250001 2. Scope of the Rule Comment: The respondents recommended expanding the rule to include all small businesses instead of limiting the rule to 8(a) participants. One respondent noted that application of the nonmanufacturer rule to all small business set-asides would require contracting officers to make a good faith effort to locate small business manufacturers before requesting a waiver from SBA. The respondent further noted that, without the nonmanufacturer rule and the waiver process, small business PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 nonmanufacturers would serve as a pass-through for large global and foreign manufacturers. Response: The scope of this final DFARS rule is limited to the 8(a) Program and cannot be expanded to all small business set-asides. Application of the nonmanufacturer rule to all small business set-asides is addressed in the FAR and will be updated in the final rule for FAR case 2016–011, Revision of Limitations on Subcontracting. DoD contracting officers must follow the FAR with regard to application of the nonmanufacturer rule to small business programs other than the 8(a) Program. In competitive procurements under the 8(a) Program, DoD contracting officers must use the clause at DFARS 252.219– 7010, Notification of Competition Limited to Eligible 8(a) Participants— Partnership Agreement, which takes into account the Partnership Agreement between DoD and SBA. III. Expected Impact of the Rule Prior to publication of this final rule, the clause at DFARS 252.219–7010 required 8(a) participants that offer end items they did not manufacture or produce (i.e., nonmanufacturers) to offer end items manufactured or produced by small business concerns in the United States or its outlying areas. This requirement is known as the ‘‘nonmanufacturer rule.’’ DFARS 252.219–7010 provided an exemption from the nonmanufacturer rule for contracts valued at or below $25,000 and awarded under simplified acquisition procedures. For these contracts, an 8(a) participant could offer end items manufactured or produced by any domestic firm. SBA’s final rule applied the nonmanufacturer rule to 8(a) contracts at any dollar value. There was no exemption for contracts valued at or below $25,000 and awarded under simplified acquisition procedures. Therefore, this rule removes that exemption from DFARS 252.219–7010. This change means the nonmanufacturer rule will apply to 8(a) contracts at any dollar value, and 8(a) participants that are nonmanufacturers will be required to offer end items manufactured, processed, or produced by small business concerns in the United States or its outlying areas. To estimate the number of 8(a) participants that may be impacted by this change, DoD obtained data from the Federal Procurement Data System on DoD contracts, for products, awarded to 8(a) participants under the 8(a) Program. Contracts for services, including construction, were excluded because the nonmanufacturer rule only applies to E:\FR\FM\31OCR1.SGM 31OCR1 Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations products, not services. In FY 2016 through FY 2018, DoD awarded contracts for products to an average of 285 8(a) participants each year. An average of 90 of those 8(a) participants per year were awarded approximately 2 contracts each that were valued at or below $25,000, using simplified acquisition procedures. Therefore, DoD estimates that approximately 90 participants may be impacted by this rule. Due to the small number of 8(a) participants that may be impacted, it is expected that the cost associated with this rule will be de minimis. khammond on DSKJM1Z7X2PROD with RULES IV. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Offthe-Shelf Items This rule applies the requirements of section 1651 of the NDAA for FY 2013 to contracts at or below the simplified acquisition threshold (SAT) and to contracts for the acquisition of commercial items, including commercially available off-the-shelf (COTS) items. A. Applicability to Contracts at or Below the Simplified Acquisition Threshold 41 U.S.C. 1905 governs the applicability of laws to contracts or subcontracts in amounts not greater than the simplified acquisition threshold. It is intended to limit the applicability of laws to such contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision of law contains criminal or civil penalties, or if the FAR Council makes a written determination that it is not in the best interest of the Federal Government to exempt contracts or subcontracts at or below the SAT, the law will apply to them. The Principal Director, Defense Pricing and Contracting (DPC), is the appropriate authority to make comparable determinations for regulations to be published in the DFARS, which is part of the FAR system of regulations. Therefore, given that SBA applied section 1651 to contracts and subcontracts at or below the SAT and that nearly 76 percent of the DoD contracts awarded to 8(a) participants in recent years are valued at or below the SAT, DoD has determined that it is in the best interest of the Federal Government to apply section 1651 to contracts or subcontracts at or below the SAT. B. Applicability to Contracts for the Acquisition of Commercial Items, Including COTS Items 10 U.S.C. 2375 governs the applicability of laws to DoD contracts VerDate Sep<11>2014 16:08 Oct 30, 2019 Jkt 250001 and subcontracts for the acquisition of commercial items, including COTS items, and is intended to limit the applicability of laws to contracts and subcontracts for the acquisition of Start Printed Page 25227commercial items, including COTS items. 10 U.S.C. 2375 provides that if a provision of law contains criminal or civil penalties, or if the Under Secretary of Defense for Acquisition and Sustainment (USD(A&S)) makes a written determination that it is not in the best interest of the Federal Government to exempt commercial item contracts, the provision of law will apply to contracts for the acquisition of commercial items. Due to delegations of authority from USD(A&S), the Principal Director, DPC, is the appropriate authority to make this determination. C. Determinations DoD has determined that it would not be in the best interest of the United States to exempt contracts not greater than the SAT or for the acquisitions of commercial items, including COTS items, from the applicability of section 1651 of the NDAA for FY 2013. These requirements are reflected in the SBA final rule published in the Federal Register on May 31, 2016 (81 FR 34243), which did not exempt contracts and subcontracts at or below the SAT or the acquisition of commercial items that are competed among, or awarded on a solesource basis to, 8(a) Program participants. Application of section 1651 to these procurements will ensure that the benefits of contracts awarded under the 8(a) Program will flow to the intended parties. Nearly 76 percent of the DoD contracts awarded under the 8(a) Program are in amounts at or below the SAT, and approximately 72 percent of such contracts are for commercial items, including COTS items. Therefore, it is in the best interest of the Federal Government to apply the rule to contracts in amounts at or below the SAT and to the acquisition of commercial items, including COTS items, as defined at FAR 2.101. V. 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 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 58335 flexibility. This is not a significant regulatory action and, therefore, was not 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. VI. Executive Order 13771 This rule is not subject to E.O. 13771, because this rule is not a significant regulatory action under E.O. 12866. VII. Regulatory Flexibility Act A final regulatory flexibility analysis (FRFA) has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The FRFA is summarized as follows: DoD is amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement regulatory changes made by the Small Business Administration (SBA) in its final rule published in the Federal Register on May 31, 2016, at 81 FR 34243. SBA’s final rule implemented section 1651 of the National Defense Authorization Act for Fiscal Year (FY) 2013 (Pub. L. 112– 239; 15 U.S.C. 657s), which revised and standardized the limitations on subcontracting and the nonmanufacturer rule that apply to small business concerns, including 8(a) Program participants, under procurements conducted pursuant to Federal Acquisition Regulation part 19, Small Business Programs. The objective of the rule is to implement the revised nonmanufacturer rule for 8(a) Program participants by updating the clause at DFARS 252.219– 7010, Notification of Competition Limited to Eligible 8(a) Participants— Partnership Agreement. There were no significant issues raised by the public in response to the Initial Regulatory Flexibility Analysis. This rule will apply to 8(a) participants that contract with DoD. According to data obtained from the Federal Procurement Data System (FPDS), DoD awarded contracts for products (i.e., contracts to which the nonmanufacturer rule would apply) to an average of 285 8(a) participants each year during FY 2016 through FY 2018. The clause at DFARS 252.219–7010 provided an exemption from the nonmanufacturer rule for contracts valued at or below $25,000 and awarded under simplified acquisition procedures. SBA’s final rule applied the nonmanufacturer rule to 8(a) contracts at any dollar value, with no exemption for contracts at or below $25,000. DoD awarded contracts at or below $25,000 to an average of 90 8(a) participants E:\FR\FM\31OCR1.SGM 31OCR1 58336 Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations each year during FY 2016 through FY 2018. This rule does not impose any new reporting, recordkeeping or other compliance requirements for small entities. There are no known, significant alternatives that would meet the requirements of the applicable statute. VIII. 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 219 and 252 Government procurement. Jennifer Lee Hawes, Regulatory Control Officer, Defense Acquisition Regulations System. Therefore, 48 CFR parts 219 and 252 are amended as follows: ■ 1. The authority citation for parts 219 and 252 continues to read as follows: Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. PART 219—SMALL BUSINESS PROGRAMS 219.811–3 [Amended] 2. Amend section 219.811–3 by removing ‘‘Eligible 8(a) Concerns’’ and adding ‘‘Eligible 8(a) Participants’’ wherever they appear. ■ khammond on DSKJM1Z7X2PROD with RULES 16:08 Oct 30, 2019 Jkt 250001 * * * * (d)(1) Unless SBA has waived the requirements of paragraphs (d)(1)(i) through (iii) and (d)(2) of this clause in accordance with 13 CFR 121.1204, a small business concern that provides an end item it did not manufacture, process, or produce, shall— (i) Provide an end item that a small business has manufactured, processed, or produced in the United States or its outlying areas; for kit assemblers, see paragraph (d)(2) of this clause instead; (ii) Be primarily engaged in the retail or wholesale trade and normally sell the type of item being supplied; and (iii) Take ownership or possession of the item(s) with its personnel, equipment, or facilities in a manner consistent with industry practice; for example, providing storage, transportation, or delivery. (2) When the end item being acquired is a kit of supplies, at least 50 percent of the total cost of the components of the kit shall be manufactured, processed, or produced by small businesses in the United States or its outlying areas. (3) The requirements of paragraphs (d)(1)(i) through (iii) and (d)(2) of this clause do not apply to construction or service contracts. * * * * * SUPPLEMENTARY INFORMATION: I. Background This final rule amends the clause at DFARS 252.239–7000, Protection Against Compromising Emanations, to update a reference within the clause to the current TEMPEST standard. This clause is included in solicitations and contracts involving information technology that requires protection against compromising emanations. The clause requires contractors to provide or use only information technology, as specified by the Government, that has been accredited to meet the appropriate information assurance requirements of the National Security Agency National TEMPEST standards or other standards specified by the contract. The clause further identifies NACSEM No. 5100 and NACSEM No. 5100A as examples of TEMPEST Standards. NSTISSAM TEMPEST 1–92, Compromising Emanations Laboratory Test Requirements, Electromagnetics (U) is the most current TEMPEST standard and supersedes the NACSEM standards identified in the clause. This rule updates the example provided in the clause to the current standard. Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. II. Discussion and Analysis The modification of this DFARS text implements a recommendation from the DoD Regulatory Reform Task Force. On February 24, 2017, the President signed Executive Order (E.O.) 13777, ‘‘Enforcing the Regulatory Reform Agenda,’’ which established a Federal policy ‘‘to alleviate unnecessary regulatory burdens’’ on the American people. In accordance with E.O. 13777, DoD established a Regulatory Reform Task Force to review and validate DoD regulations, including the DFARS. A public notice of the establishment of the DFARS Subgroup to the DoD Regulatory Reform Task Force, for the purpose of reviewing DFARS provisions and clauses, was published in the Federal Register at 82 FR 35741 on August 1, 2017, and requested public input. No public comments were received on this clause. The DoD Task Force reviewed the requirements of DFARS clause 252.239–7000, determined that the clause should be updated, and recommended its modification in the DFARS. DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to update a reference in an existing clause. DATES: Effective October 31, 2019. FOR FURTHER INFORMATION CONTACT: Ms. Carrie Moore, telephone 571–372–6093. III. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Offthe-Shelf Items This rule only updates a reference in an existing clause. The rule does not impose any new requirements on [FR Doc. 2019–23811 Filed 10–30–19; 8:45 am] BILLING CODE 5001–06–P Defense Acquisition Regulations System 3. Amend section 252.219–7010 by— a. In the section heading, removing ‘‘Eligible 8(a) Concerns’’ and adding ‘‘Eligible 8(a) Participants’’ in its place; ■ b. In the clause heading— ■ i. Removing ‘‘Eligible 8(a) Concerns’’ and adding ‘‘Eligible 8(a) Participants’’ in its place; and ■ ii. Removing ‘‘(MAR 2016)’’ and adding ‘‘(OCT 2019)’’ in its place; ■ c. In the paragraph (a) introductory text, removing ‘‘in the SBA’s’’ and adding ‘‘in SBA’s’’ in its place; ■ d. In paragraph (a)(2), removing ‘‘by the SBA’’ and adding ‘‘by SBA’’ in its place; ■ e. In paragraph (a)(3), removing ‘‘by the SBA’’ and adding ‘‘by SBA’’ in its place; ■ e. Redesignating paragraph (d)(2) as paragraph (e); and ■ f. Revising paragraph (d). The revision reads as follows: VerDate Sep<11>2014 * DEPARTMENT OF DEFENSE PART 252—SOLICITATION PROVISIONS AND CONTRACT CLAUSES ■ ■ 252.219–7010 Notification of Competition Limited to Eligible 8(a) Participants— Partnership Agreement 48 CFR Parts 239 and 252 [Docket DARS–2019–0061] RIN 0750–AK52 Defense Federal Acquisition Regulation Supplement: Modification of DFARS Clause ‘‘Protection Against Compromising Emanations’’ (DFARS Case 2019–D015) AGENCY: SUMMARY: PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 E:\FR\FM\31OCR1.SGM 31OCR1

Agencies

[Federal Register Volume 84, Number 211 (Thursday, October 31, 2019)]
[Rules and Regulations]
[Pages 58334-58336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23811]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 219 and 252

[Docket DARS-2019-0015]
RIN 0750-AK39


Defense Federal Acquisition Regulation Supplement: 
Nonmanufacturer Rule for 8(a) Participants (DFARS Case 2019-D004)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a Small Business 
Administration rule that implemented a section of the National Defense 
Authorization Act for Fiscal Year 2013 to revise and standardize the 
limitations on subcontracting and the nonmanufacturer rule, which apply 
to small business concerns, including participants in the 8(a) Program.

DATES: Effective October 31, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Jennifer D. Johnson, telephone 
571-372-6100.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 84 FR 
12187 on April 1, 2019, to implement regulatory changes made by the 
Small Business Administration (SBA) in its final rule published in the 
Federal Register at 81 FR 34243 on May 31, 2016. SBA's final rule 
implemented section 1651 of the National Defense Authorization Act 
(NDAA) for Fiscal Year (FY) 2013 (Pub. L. 112-239, 15 U.S.C. 657s). 
Section 1651 revised and standardized the limitations on subcontracting 
and the nonmanufacturer rule that apply to small business concerns, 
including 8(a) Program participants, under procurements conducted 
pursuant to Federal Acquisition Regulation (FAR) part 19, Small 
Business Programs. Two respondents submitted public comments in 
response to the proposed rule.

II. Discussion and Analysis

    DoD reviewed the public comments in the development of the final 
rule.

A. Summary of Significant Changes

    There are no significant changes made to the final rule from the 
proposed rule. One minor edit is made to the clause in paragraph (a)(3) 
to change ``by the SBA'' to ``by SBA''.

B. Analysis of Public Comments

1. Support for the Rule
    Comment: Both respondents expressed support for the proposed rule.
    Response: DoD acknowledges the respondents' support.
2. Scope of the Rule
    Comment: The respondents recommended expanding the rule to include 
all small businesses instead of limiting the rule to 8(a) participants. 
One respondent noted that application of the nonmanufacturer rule to 
all small business set-asides would require contracting officers to 
make a good faith effort to locate small business manufacturers before 
requesting a waiver from SBA. The respondent further noted that, 
without the nonmanufacturer rule and the waiver process, small business 
nonmanufacturers would serve as a pass-through for large global and 
foreign manufacturers.
    Response: The scope of this final DFARS rule is limited to the 8(a) 
Program and cannot be expanded to all small business set-asides. 
Application of the nonmanufacturer rule to all small business set-
asides is addressed in the FAR and will be updated in the final rule 
for FAR case 2016-011, Revision of Limitations on Subcontracting. DoD 
contracting officers must follow the FAR with regard to application of 
the nonmanufacturer rule to small business programs other than the 8(a) 
Program. In competitive procurements under the 8(a) Program, DoD 
contracting officers must use the clause at DFARS 252.219-7010, 
Notification of Competition Limited to Eligible 8(a) Participants--
Partnership Agreement, which takes into account the Partnership 
Agreement between DoD and SBA.

III. Expected Impact of the Rule

    Prior to publication of this final rule, the clause at DFARS 
252.219-7010 required 8(a) participants that offer end items they did 
not manufacture or produce (i.e., nonmanufacturers) to offer end items 
manufactured or produced by small business concerns in the United 
States or its outlying areas. This requirement is known as the 
``nonmanufacturer rule.'' DFARS 252.219-7010 provided an exemption from 
the nonmanufacturer rule for contracts valued at or below $25,000 and 
awarded under simplified acquisition procedures. For these contracts, 
an 8(a) participant could offer end items manufactured or produced by 
any domestic firm.
    SBA's final rule applied the nonmanufacturer rule to 8(a) contracts 
at any dollar value. There was no exemption for contracts valued at or 
below $25,000 and awarded under simplified acquisition procedures. 
Therefore, this rule removes that exemption from DFARS 252.219-7010. 
This change means the nonmanufacturer rule will apply to 8(a) contracts 
at any dollar value, and 8(a) participants that are nonmanufacturers 
will be required to offer end items manufactured, processed, or 
produced by small business concerns in the United States or its 
outlying areas.
    To estimate the number of 8(a) participants that may be impacted by 
this change, DoD obtained data from the Federal Procurement Data System 
on DoD contracts, for products, awarded to 8(a) participants under the 
8(a) Program. Contracts for services, including construction, were 
excluded because the nonmanufacturer rule only applies to

[[Page 58335]]

products, not services. In FY 2016 through FY 2018, DoD awarded 
contracts for products to an average of 285 8(a) participants each 
year. An average of 90 of those 8(a) participants per year were awarded 
approximately 2 contracts each that were valued at or below $25,000, 
using simplified acquisition procedures. Therefore, DoD estimates that 
approximately 90 participants may be impacted by this rule. Due to the 
small number of 8(a) participants that may be impacted, it is expected 
that the cost associated with this rule will be de minimis.

IV. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule applies the requirements of section 1651 of the NDAA for 
FY 2013 to contracts at or below the simplified acquisition threshold 
(SAT) and to contracts for the acquisition of commercial items, 
including commercially available off-the-shelf (COTS) items.

A. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold

    41 U.S.C. 1905 governs the applicability of laws to contracts or 
subcontracts in amounts not greater than the simplified acquisition 
threshold. It is intended to limit the applicability of laws to such 
contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision 
of law contains criminal or civil penalties, or if the FAR Council 
makes a written determination that it is not in the best interest of 
the Federal Government to exempt contracts or subcontracts at or below 
the SAT, the law will apply to them. The Principal Director, Defense 
Pricing and Contracting (DPC), is the appropriate authority to make 
comparable determinations for regulations to be published in the DFARS, 
which is part of the FAR system of regulations.
    Therefore, given that SBA applied section 1651 to contracts and 
subcontracts at or below the SAT and that nearly 76 percent of the DoD 
contracts awarded to 8(a) participants in recent years are valued at or 
below the SAT, DoD has determined that it is in the best interest of 
the Federal Government to apply section 1651 to contracts or 
subcontracts at or below the SAT.

B. Applicability to Contracts for the Acquisition of Commercial Items, 
Including COTS Items

    10 U.S.C. 2375 governs the applicability of laws to DoD contracts 
and subcontracts for the acquisition of commercial items, including 
COTS items, and is intended to limit the applicability of laws to 
contracts and subcontracts for the acquisition of Start Printed Page 
25227commercial items, including COTS items. 10 U.S.C. 2375 provides 
that if a provision of law contains criminal or civil penalties, or if 
the Under Secretary of Defense for Acquisition and Sustainment 
(USD(A&S)) makes a written determination that it is not in the best 
interest of the Federal Government to exempt commercial item contracts, 
the provision of law will apply to contracts for the acquisition of 
commercial items. Due to delegations of authority from USD(A&S), the 
Principal Director, DPC, is the appropriate authority to make this 
determination.

C. Determinations

    DoD has determined that it would not be in the best interest of the 
United States to exempt contracts not greater than the SAT or for the 
acquisitions of commercial items, including COTS items, from the 
applicability of section 1651 of the NDAA for FY 2013. These 
requirements are reflected in the SBA final rule published in the 
Federal Register on May 31, 2016 (81 FR 34243), which did not exempt 
contracts and subcontracts at or below the SAT or the acquisition of 
commercial items that are competed among, or awarded on a sole-source 
basis to, 8(a) Program participants. Application of section 1651 to 
these procurements will ensure that the benefits of contracts awarded 
under the 8(a) Program will flow to the intended parties. Nearly 76 
percent of the DoD contracts awarded under the 8(a) Program are in 
amounts at or below the SAT, and approximately 72 percent of such 
contracts are for commercial items, including COTS items. Therefore, it 
is in the best interest of the Federal Government to apply the rule to 
contracts in amounts at or below the SAT and to the acquisition of 
commercial items, including COTS items, as defined at FAR 2.101.

V. 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 not a significant regulatory action and, therefore, was not 
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.

VI. Executive Order 13771

    This rule is not subject to E.O. 13771, because this rule is not a 
significant regulatory action under E.O. 12866.

VII. Regulatory Flexibility Act

    A final regulatory flexibility analysis (FRFA) has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
The FRFA is summarized as follows:
    DoD is amending the Defense Federal Acquisition Regulation 
Supplement (DFARS) to implement regulatory changes made by the Small 
Business Administration (SBA) in its final rule published in the 
Federal Register on May 31, 2016, at 81 FR 34243. SBA's final rule 
implemented section 1651 of the National Defense Authorization Act for 
Fiscal Year (FY) 2013 (Pub. L. 112-239; 15 U.S.C. 657s), which revised 
and standardized the limitations on subcontracting and the 
nonmanufacturer rule that apply to small business concerns, including 
8(a) Program participants, under procurements conducted pursuant to 
Federal Acquisition Regulation part 19, Small Business Programs.
    The objective of the rule is to implement the revised 
nonmanufacturer rule for 8(a) Program participants by updating the 
clause at DFARS 252.219-7010, Notification of Competition Limited to 
Eligible 8(a) Participants--Partnership Agreement.
    There were no significant issues raised by the public in response 
to the Initial Regulatory Flexibility Analysis.
    This rule will apply to 8(a) participants that contract with DoD. 
According to data obtained from the Federal Procurement Data System 
(FPDS), DoD awarded contracts for products (i.e., contracts to which 
the nonmanufacturer rule would apply) to an average of 285 8(a) 
participants each year during FY 2016 through FY 2018. The clause at 
DFARS 252.219-7010 provided an exemption from the nonmanufacturer rule 
for contracts valued at or below $25,000 and awarded under simplified 
acquisition procedures. SBA's final rule applied the nonmanufacturer 
rule to 8(a) contracts at any dollar value, with no exemption for 
contracts at or below $25,000. DoD awarded contracts at or below 
$25,000 to an average of 90 8(a) participants

[[Page 58336]]

each year during FY 2016 through FY 2018.
    This rule does not impose any new reporting, recordkeeping or other 
compliance requirements for small entities.
    There are no known, significant alternatives that would meet the 
requirements of the applicable statute.

VIII. 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 219 and 252

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 219 and 252 are amended as follows:

0
1. The authority citation for parts 219 and 252 continues to read as 
follows:

    Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

PART 219--SMALL BUSINESS PROGRAMS


219.811-3   [Amended]

0
2. Amend section 219.811-3 by removing ``Eligible 8(a) Concerns'' and 
adding ``Eligible 8(a) Participants'' wherever they appear.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Amend section 252.219-7010 by--
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a. In the section heading, removing ``Eligible 8(a) Concerns'' and 
adding ``Eligible 8(a) Participants'' in its place;
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b. In the clause heading--
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i. Removing ``Eligible 8(a) Concerns'' and adding ``Eligible 8(a) 
Participants'' in its place; and
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ii. Removing ``(MAR 2016)'' and adding ``(OCT 2019)'' in its place;
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c. In the paragraph (a) introductory text, removing ``in the SBA's'' 
and adding ``in SBA's'' in its place;
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d. In paragraph (a)(2), removing ``by the SBA'' and adding ``by SBA'' 
in its place;
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e. In paragraph (a)(3), removing ``by the SBA'' and adding ``by SBA'' 
in its place;
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e. Redesignating paragraph (d)(2) as paragraph (e); and
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f. Revising paragraph (d).
    The revision reads as follows:


252.219-7010   Notification of Competition Limited to Eligible 8(a) 
Participants--Partnership Agreement

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    (d)(1) Unless SBA has waived the requirements of paragraphs 
(d)(1)(i) through (iii) and (d)(2) of this clause in accordance with 13 
CFR 121.1204, a small business concern that provides an end item it did 
not manufacture, process, or produce, shall--
    (i) Provide an end item that a small business has manufactured, 
processed, or produced in the United States or its outlying areas; for 
kit assemblers, see paragraph (d)(2) of this clause instead;
    (ii) Be primarily engaged in the retail or wholesale trade and 
normally sell the type of item being supplied; and
    (iii) Take ownership or possession of the item(s) with its 
personnel, equipment, or facilities in a manner consistent with 
industry practice; for example, providing storage, transportation, or 
delivery.
    (2) When the end item being acquired is a kit of supplies, at least 
50 percent of the total cost of the components of the kit shall be 
manufactured, processed, or produced by small businesses in the United 
States or its outlying areas.
    (3) The requirements of paragraphs (d)(1)(i) through (iii) and 
(d)(2) of this clause do not apply to construction or service 
contracts.
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[FR Doc. 2019-23811 Filed 10-30-19; 8:45 am]
 BILLING CODE 5001-06-P