Federal Acquisition Regulation: Analysis for Equipment Acquisitions, 52081-52084 [2020-15769]

Agencies

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

[Federal Register Volume 85, Number 164 (Monday, August 24, 2020)]
[Proposed Rules]
[Pages 52081-52084]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15769]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 7

[FAR Case 2019-001, Docket No. FAR-2019-0020, Sequence No. 1]
RIN 9000-AN84


Federal Acquisition Regulation: Analysis for Equipment 
Acquisitions

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

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to implement a section of the FAA 
Reauthorization Act of 2018, which requires, when acquiring equipment, 
a case-by-case analysis of cost and other factors associated with 
certain methods of acquisition, including purchase, short-term rental 
or lease, long-term rental or lease, interagency acquisition, and, if 
applicable, acquisition agreements with a State or local government.

DATES: Interested parties should submit written comments at the address 
shown below on or before October 23, 2020 to be considered in the 
formation of the final rule.

ADDRESSES: Submit comments in response to FAR Case 2019-001 to 
Regulations.gov: https://www.regulations.gov. Submit comments via the 
Federal eRulemaking portal by searching for ``FAR Case 2019-001''. 
Select the link ``Comment Now'' that corresponds with FAR Case 2019-
001. Follow the instructions provided at the ``Comment Now'' screen. 
Please include your name, company name (if any), and ``FAR Case 2019-
001'' on your attached document. If your comment cannot be submitted 
using https://www.regulations.gov, call or email the points of contact 
in the FOR FURTHER INFORMATION CONTACT section of this document for 
alternate instructions.
    Instructions: Please submit comments only and cite ``FAR case 2019-
001'' 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. Michael O. Jackson, Procurement 
Analyst, at 202-208-4949, or by email at [email protected], for 
clarification of content. For information pertaining to status or 
publication schedules, contact the Regulatory Secretariat Division at 
202-501-4755 or [email protected]. Please cite FAR case 2019-001.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 16, 2013, DoD, GSA, and NASA published a Request for 
Information (RFI) in the Federal Register (78 FR 42524) to determine 
whether there is a distinction between renting and leasing that is 
useful for the purposes of FAR subpart 7.4. The public comment period 
closed in September 2013 and 13 respondents provided comments in 
response to the RFI. A review of the public comments identified that 
there are differences between renting and leasing in many industries, 
but there are no standard differences between renting and leasing that 
span across all industries. As a result of the review, FAR case 2017-
017 was opened to clarify the term ``lease'', as used in the FAR and a 
proposed rule

[[Page 52082]]

was published in the Federal Register on September 5, 2018, at 83 FR 
45072; six respondents provided comments in response to the proposed 
rule.
    On October 5, 2018, the FAA Reauthorization Act of 2018 (Pub. L. 
115-254) became law and included section 555, ``Cost-Effectiveness 
Analysis of Equipment Rental.'' (FAA stands for Federal Aviation 
Administration.) FAR case 2017-017 was subsequently closed and this FAR 
case 2019-001 was opened to implement the requirements of section 555. 
The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the public comments 
received in response to FAR case 2017-017 in developing this proposed 
rule and are dispositioned in this notice.
    This rule implements section 555 of the FAA Reauthorization Act of 
2018, which:
     Requires an agency to acquire equipment using the method 
of acquisition that is most advantageous to the Government based on a 
case-by-case analysis of comparative costs and other factors (to 
include the factors in FAR section 7.401);
     Identifies methods of acquisition that must be considered, 
at a minimum, in the analysis; and
     Requires the FAR to implement the requirements of the 
section and identify the factors agencies should or shall consider to 
perform the case-by-case analysis.

II. Discussion and Analysis

    To implement the requirements of the law, described above, this 
rule proposes to amend FAR subpart 7.4 to: Require the comparison of 
purchase, short-term rental or lease, long-term rental or lease, 
interagency acquisition, and agency acquisition agreements with State 
or local governments as a method of acquisition for equipment; include 
the term ``rent,'' where applicable; and add factors to be considered 
when evaluating various methods of acquisition.
    A discussion of the comments received under proposed rule 2017-017 
is provided as follows:

1. Support for the Rule

    Comment: Several of the respondents expressed support for the rule.
    Response: The Councils acknowledge the public support for the rule.

2. Incorporate Section 555 Into the Proposed Rule

    Comment: A respondent advised that the proposed rule should be 
modified to incorporate section 555 of the FAA Reauthorization Act of 
2018.
    Response: FAR case 2017-017 was closed and rolled into FAR case 
2019-001, specifically to implement section 555 of the FAA 
Reauthorization Act of 2018.

3. Factors To Consider

    Comment: A number of respondents suggested the following additional 
factors that could be considered in the analysis and decision to rent, 
lease, or purchase equipment--
     How long the equipment is needed and how long it will be 
in use (or its useful life);
     Cancellation, extension, and early return conditions in 
the agreement;
     Maintenance requirements for the equipment and the cost to 
the Government under various acquisition methods, to include any 
maintenance requirements specific to an industry (e.g., test and 
measurement equipment);
     Whether the agreement includes an option to purchase the 
equipment, and, if so, the cost benefit to the Government in such an 
option;
     Repair, transport, storage, insurance, environmental and 
licensing requirements for the equipment and the cost to the Government 
under various acquisition methods;
     Whether the equipment can be swapped out or exchanged;
     Availability or delivery of equipment to meet Government 
needs and timeline.
    Response: While section 555 serves as the main impetus for this 
proposed rule, the suggestions and comments on FAR case 2017-017 have 
been taken into account and additional factors have been added to FAR 
7.401(b)(1) and (b)(2).

4. Renting/Leasing

    Comment: Several respondents expressed concern that the proposed 
rule did not clarify the differences between renting and leasing, 
including those specific to the heavy equipment industry, and that 
without this recognition, the Government will waste money by grouping 
these two categories together.
    Response: Additional considerations unique to renting have been 
added to FAR 7.401(b)(1) and (b)(2). However, the proposed rule does 
not differentiate between rent and leasing because there are no 
standard differences between these practices that span across all 
industries. As a result, the recommended clarification could have the 
unintended consequence of creating new confusion.
    Comment: Several respondents recommended implementing a separate 
``rental method'' of acquisition, in order to identify the unique 
properties and benefits of renting. A respondent asserts that 
codification of a definitive definition of ``rental method'', 
``equipment rental'', and ``lease method'' is necessary for contracting 
officers to understand the differences between both methods, and 
impossible for the Government to execute a rental agreement.
    Response: The purpose of FAR subpart 7.4 is to facilitate an 
analysis and a decision on whether it is in the best interest of the 
Government to purchase a piece of equipment versus obtaining the 
equipment via any other non-purchase method. As a result, this case 
includes the word ``rent'' throughout FAR subpart 7.4 text, to ensure 
that contracting officers are aware that rental agreements are an 
acceptable non-purchase acquisition method for equipment, and 
implements additional factors to be considered in the analysis that 
account for the unique benefits that rental agreements may provide for 
the Government.
    Comment: A respondent advised that defining the difference between 
renting and leasing will help agencies meet their small business goals, 
as a majority of heavy equipment leases would fall under the simplified 
acquisition threshold and; therefore, be awarded to small businesses.
    Response: This rule proposes to add the word ``rent'' throughout 
the text of FAR subpart 7.4, as appropriate, to ensure contracting 
officers are aware that rental agreements are an acceptable non-
purchase method of equipment acquisition.

5. Guidance/Resources

    Comment: A respondent advised that providing acquisition officials 
with the guidance in OMB Circular A-94 will cause confusion, as the 
guidance does not apply to short-term rentals and eliminates the 
possibility that an acquisition official would consider rental as an 
acquisition option since the proposed rule makes rentals and leases 
synonymous.
    Response: The purpose of referring to the OMB Circular is to make 
the contracting officer aware of additional information that may be 
relevant in determining the method of acquisition that is most 
advantageous to the Government. The reference is not intended to 
preclude consideration of rent as a method of acquisition, but 
respondents to the proposed rule are encouraged to offer suggested 
clarifications.
    Comment: A respondent suggested that the GSA website provided to

[[Page 52083]]

contracting officers for additional information may be too narrow of a 
resource, as it pertains to a program that is akin to a hardware store, 
home improvement center, or are maintenance, repair, and operations 
supplies. The respondent recommends providing another resource that can 
assist agencies with rental, lease, or purchase decisions for a broader 
scope of products.
    Response: The GSA customer service information and website at FAR 
7.403(b)(1) and (b)(2) are provided as current sources Federal agencies 
may use when they need assistance with a buy, rent, or lease decision. 
Agencies may provide supplemental guidance, as needed, to meet their 
unique needs and requirements.

6. Amend GSA Security Schedule

    Comment: A respondent recommended amending the GSA Security 
Schedule 84 to permit leasing of equipment, by Federal, State, and 
Local law enforcement and emergency response agencies, through the 
schedule contracts and make conforming changes within the contract that 
clarify the applicable terms and conditions that apply when purchasing 
versus leasing equipment under the Schedule.
    Response: This comment is outside the scope of FAR case 2017-017 
and the scope of the current proposed rule.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Items, Including Commercially 
Available Off-the-Shelf (COTS) Items

    This proposed rule does not create any new provisions or clauses, 
nor does it change the applicability of any existing provisions or 
clauses included in solicitations and contracts valued at or below the 
SAT, or for commercial items, including COTS items.

IV. 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 proposed rule is not a major 
rule under 5 U.S.C. 804.

V. Executive Order 13771

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

VI. Regulatory Flexibility Act

    DoD, GSA, and NASA do not expect this rulemaking to 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. However, an initial regulatory flexibility analysis has been 
performed and is summarized as follows:

    The Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA) are 
proposing to revise the Federal Acquisition Regulation (FAR) to 
require, when acquiring equipment, a case-by-case analysis of cost 
and other factors associated with certain methods of acquisition.
    The objective of the rule is to ensure agencies acquire 
equipment using the method of acquisition that is most advantageous 
to the Government based on a case-by-case analysis of comparative 
costs and other factors. The legal basis for the rule is section 555 
of the FAA Reauthorization Act of 2018 (Pub. L. 115-254).
    DoD, GSA, and NASA do not expect this rule to 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. The 
rule primarily affects internal Government requirements 
determination decisions, acquisition strategy decisions, and 
contract file documentation requirements. The Government does not 
collect data on the total number of solicitations issued on an 
annual basis that are subject to the analysis of FAR subpart 7.4. 
However, the Federal Procurement Data System (FPDS) collects 
information on the product service code (PSC) assigned to a contract 
based on the predominant supply or service being acquired. FPDS data 
for FY 2016-2018, on PSCs for approximately 100 types of equipment 
and 80 types of equipment rental or lease services, indicates that 
the Federal Government awards an average of 125,940 new contracts 
and orders annually; of which approximately 54,845 (44 percent) were 
awarded to approximately 6,940 unique small businesses.
    The proposed rule does not impose any Paperwork Reduction Act 
reporting or recordkeeping requirements on any small entities. The 
proposed rule does not duplicate, overlap, or conflict with any 
other Federal rules. There are no known significant alternative 
approaches to the proposed rule that would meet the proposed 
objectives.

    The Regulatory Secretariat has submitted a copy of the IRFA to the 
Chief Counsel for Advocacy of the Small Business Administration. A copy 
of the IRFA may be obtained from the Regulatory Secretariat. DoD, GSA 
and NASA invite comments from small business concerns and other 
interested parties on the expected impact of this rulemaking on small 
entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by this 
proposed rule consistent with 5 U.S.C. 610. Interested parties must 
submit such comments separately and should cite 5 U.S.C. 610 (FAR Case 
2019-001) in correspondence.

VII. Paperwork Reduction Act

    The proposed 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 Part 7

    Government Procurement.

William F. Clark,
Director, Office of Government-Wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-Wide Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR part 7 as set 
forth below:

PART 7--ACQUISITION PLANNING

0
1. The authority citation for 48 CFR part 7 continues to read as 
follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

0
2. Revise the heading of subpart 7.4 to read as follows:

Subpart 7.4--Equipment Acquisition

0
3. Revise section 7.400 to read as follows:


7.400  Scope of subpart.

    This subpart--
    (a) Implements section 555 of the FAA (Federal Aviation 
Administration) Reauthorization Act of 2018 (Pub. L. 115-254);
    (b) Provides guidance when acquiring equipment and more than one 
method of acquisition is available for use; and
    (c) Applies to both the initial acquisition of equipment and the 
renewal or extension of existing equipment leases or rental agreements.

0
4. Revise section 7.401 to read as follows:


7.401   Acquisition considerations.

    (a)(1) Agencies shall acquire equipment using the method of 
acquisition most advantageous to the Government based on a case-by-case

[[Page 52084]]

analysis of comparative costs and other factors in accordance with this 
subpart and agency procedures.
    (2) The methods of acquisition to be compared in the analysis shall 
include, at a minimum--
    (i) Purchase;
    (ii) Short-term rental or lease;
    (iii) Long-term rental or lease;
    (iv) Interagency acquisition (see 2.101); and
    (v) Agency acquisition agreements, if applicable, with a State or 
local government.
    (b)(1) The factors to be compared in the analysis shall include, at 
a minimum:
    (i) Estimated length of the period the equipment is to be used and 
the extent of use within that period;
    (ii) Financial and operating advantages of alternative types and 
makes of equipment;
    (iii) Cumulative rent, lease, or other periodic payments, however 
described, for the estimated period of use;
    (iv) Net purchase price;
    (v) Transportation, installation, and storage costs;
    (vi) Maintenance, repair, and other service costs; and
    (vii) Potential obsolescence of the equipment because of imminent 
technological improvements.
    (2) The following additional factors should be considered, as 
appropriate, depending on the type, cost, complexity, and estimated 
period of use of the equipment:
    (i) Availability of purchase options.
    (ii) Cancellation, extension, and early return conditions and fees.
    (iii) Ability to swap out or exchange equipment.
    (iv) Available warranties.
    (v) Insurance, environmental, or licensing requirements.
    (vi) Potential for use of the equipment by other agencies after its 
use by the acquiring agency is ended.
    (vii) Trade-in or salvage value.
    (viii) Imputed interest.
    (ix) Availability of a servicing capability, especially for highly 
complex equipment; e.g., can the equipment be serviced by the 
Government or other sources if it is purchased?
    (c) The analysis in paragraph (a) is not required--
    (1) When the President has issued an emergency declaration or a 
major disaster declaration pursuant to the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.);
    (2) In other emergency situations if the agency head makes a 
determination that obtaining such equipment is necessary in order to 
protect human life or property; or
    (3) When otherwise authorized by law.
0
5. Amend section 7.402 by--
0
a. Removing from paragraph (a)(1) ``cumulative leasing'' and adding 
``cumulative rental or leasing'' in its place;
0
b. Removing from paragraph (a)(2) ``favor of leasing'' and adding 
``favor of renting or leasing'' in its place;
0
c. Revising the heading and introductory text of paragraph (b)(1);
0
d. Revising paragraph (b)(2);
0
e. Removing from paragraph (b)(3) ``long term lease'' and adding ``long 
term rental or lease agreement'' in its place; and
0
f. Removing from paragraph (b)(4) ``If a lease with option'' and adding 
``If a rental or lease agreement with option'' in its place.
    The revised text reads as follows:


7.402   Acquisition methods.

* * * * *
    (b) Rent or lease method. (1) The rent or lease method is 
appropriate if it is to the Government's advantage under the 
circumstances. The rent or lease method may also serve as a short-term 
measure when the circumstances--
* * * * *
    (2) If a rent or lease method is justified, a rental or lease 
agreement with option to purchase is preferable.
* * * * *
0
6. Amend section 7.403 by--
0
a. Revising the section heading;
0
b. Removing from paragraph (a) ``in lease or'' and adding ``in lease, 
rent, or'' in its place;
0
c. Revising paragraph (b); and
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d. Adding paragraph (c).
    The revised and added text reads as follows:


7.403   General Services Administration assistance and OMB Guidance.

* * * * *
    (b) For additional GSA assistance and guidance, agencies may--
    (1) Request information from the GSA FAS National Customer Service 
Center by phone at 1-800-488-3111 or by email at 
[email protected]; and
    (2) See GSA website, Schedule 51 V Hardware Superstore-Equipment 
Rental, (https://www.gsa.gov/acquisition/purchasing-programs/gsa-schedules/list-of-gsa-schedules/schedule-51-vhardware-superstore/equipment-rental-and-leasing).
    (c) For additional OMB guidance, see--
    (1) Section 13, Special Guidance for Lease-Purchase Analysis, and 
paragraph 8.c.(2), Lease-Purchase Analysis, of OMB Circular A-94, 
Guidelines and Discount Rates for Benefit-Cost Analysis of Federal 
Programs, (https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A94/a094.pdf); and
    (2) Appendix B, Budgetary Treatment of Lease-Purchases and Leases 
of Capital Assets, of OMB Circular A-11, Preparation, Submission, and 
Execution of the Budget, (https://www.whitehouse.gov/wp-content/uploads/2018/06/app_b.pdf).


7.404   [Amended]

0
7. Removing from the text ``a lease with'' and adding ``a rental or 
lease agreement with'' in its place.

[FR Doc. 2020-15769 Filed 8-21-20; 8:45 am]
BILLING CODE 6820-EP-P