[Federal Register Volume 64, Number 247 (Monday, December 27, 1999)]
[Rules and Regulations]
[Pages 72441-72444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33432]


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

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 4, 5, 7, 10, 15, and 19

[FAC 97-15; FAR Case 1997-306 (97-306); Item III]
RIN 9000-AI55


Federal Acquisition Regulation; Contract Bundling

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

ACTION: Interim rule with request for comments.

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

SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on an interim 
rule amending the Federal Acquisition Regulation (FAR) to implement 
sections of the Small Business Reauthorization Act of 1997. The 
sections of the Act define ``contract bundling,'' and require agencies 
to avoid unnecessary bundling that precludes small business 
participation in the performance of Federal contracts.

DATES: Effective Date: December 27, 1999.
    Applicability Date: The FAR, as amended by this rule, is applicable 
to solicitations issued on or after December 27, 1999.
    Comment Date: Interested parties should submit comments to the FAR 
Secretariat at the address shown below on or before February 25, 2000 
to be considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVRS), 1800 F Street, 
NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.
    Address e-mail comments submitted via the Internet to: 
farcase.1997-306@gsa.gov.
    Please submit comments only and cite FAC 97-15, FAR case 1997-306 
(97-306) in all correspondence related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC 20405, (202) 501-4755, for information 
pertaining to status or publication schedules. For clarification of 
content, contact Mr. Ralph De Stefano, Procurement Analyst, at (202) 
501-1758. Please cite FAC 97-15, FAR case 1997-306 (97-306).

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule amends FAR Parts 2, 4, 5, 7, 10, 15, and 19 to 
implement Sections 411-417 of the Small Business Reauthorization Act of 
1997, Pub. L. 105-135, and the Small Business Administration (SBA) 
interim rule published in the Federal Register at 64 FR 57366, October 
25, 1999. Sections 411-417 amend Title 15 of the United States Code to 
define ``contract bundling,'' and require agencies to avoid unnecessary 
bundling that precludes small business participation in the performance 
of Federal contracts.
    This rule was not subject to Office of Management and Budget 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.

B. Regulatory Flexibility Act

    The changes may 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 opportunities for 
participation by small entities in acquisitions involving bundling may 
increase. An Initial Regulatory Flexibility Analysis (IRFA) has been 
performed and is summarized as follows:

    The objective of the interim rule is to establish agency 
procedures for processing bundled requirements and to ensure maximum 
small business participation in bundled acquisitions. Agencies 
must--
     Perform market research when bundled requirements are 
anticipated;
     Justify bundling in acquisition strategies;
     Meet specific estimated benefit thresholds before 
bundling requirements;
     Assess the impact of bundling on small businesses;
     Submit solicitations containing bundled requirements to 
the SBA procurement center representatives for review; and
      Include, in negotiated competitions for bundled 
requirements, a source selection factor for the offerors' proposed 
use of small businesses as subcontractors and their past performance 
in meeting subcontracting goals.
    These objectives are stated in Sections 411-417 of Pub. L. 105-
135 and in SBA's implementing regulations.

    The FAR Secretariat has submitted a copy of the IRFA to the Chief 
Counsel for Advocacy of the Small Business Administration. Interested 
parties may obtain a copy from the FAR Secretariat. The Councils will 
consider comments from small entities concerning the affected FAR 
subparts in accordance with 5 U.S.C. 610. Interested parties

[[Page 72442]]

must submit such comments separately and should cite 5 U.S.C 601, et 
seq. (FAC 97-15, FAR Case 1997-306 (97-306)), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose information collection requirements that require 
the approval of the Office of Management and Budget under 44 U.S.C. 
3501, et seq.

D. Determination to Issue an Interim Rule

    The Councils have made a determination 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 this interim rule implements 
Sections 411-417 of the Small Business Reauthorization Act of 1997, 
Pub. L. 105-135. Sections 411-417 amend Title 15 of the United States 
Code to define ``contract bundling,'' and require agencies to avoid 
unnecessary bundling that precludes small business participation in the 
performance of Federal contracts. The SBA published an interim rule in 
the Federal Register at 64 FR 57372, October 25, 1999, with an 
effective date of December 27, 1999, to implement Sections 411-417 of 
Pub. L. 105-135. It is necessary to have a December 27, 1999, effective 
date for this rule to provide contracting regulations that conform with 
SBA's regulations.
    However, pursuant to Pub. L. 98-577 and FAR 1.501, the Councils 
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 2, 4, 5, 7, 10, 15, and 19

    Government procurement.

    Dated: December 20, 1999.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 4, 5, 7, 10, 
15, and 19 as set forth below:
    1. The authority citation for 48 CFR parts 2, 4, 5, 7, 10, 15, and 
19 continues to read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

    2. In section 2.101, add, in alphabetical order, the definitions 
``bundled contract'' and ``bundling'' to read as follows:


2.101  Definitions.

* * * * *
    Bundled contract means a contract that is entered into to meet 
requirements that are consolidated by bundling, excluding a contract 
awarded and performed entirely outside the United States.
    Bundling means--
    (1) Consolidating two or more requirements for supplies or 
services, previously provided or performed under separate smaller 
contracts, into a solicitation for a single contract that is likely to 
be unsuitable for award to a small business concern due to--
    (i) The diversity, size, or specialized nature of the elements of 
the performance specified;
    (ii) The aggregate dollar value of the anticipated award;
    (iii) The geographical dispersion of the contract performance 
sites; or
    (iv) Any combination of the factors described in paragraphs (1)(i), 
(ii), and (iii) of this definition.
    (2) Separate smaller contract, as used in this definition, means a 
contract that has been performed by one or more small business concerns 
or that was suitable for award to one or more small business concerns.
    (3) This definition does not apply to a contract that will be 
awarded and performed entirely outside of the United States.
* * * * *

PART 4--ADMINISTRATIVE MATTERS

    3. In section 4.601, redesignate paragraph (e) as paragraph (f); 
add new paragraph (e); and revise the redesignated paragraph (f) to 
read as follows:


4.601  Record requirements.

* * * * *
    (e) In addition to the information described in paragraphs (b), 
(c), and (d) of this section, agencies must be able to access 
information from the computer file to identify bundled contracts with a 
total contract value, including all options, exceeding $5,000,000.
    (f) Agencies must transmit this information to the Federal 
Procurement Data System in accordance with its procedures.

PART 5--PUBLICIZING CONTRACT ACTIONS

    4. Revise the section heading and text of 5.206 to read as follows:


5.206  Notices of subcontracting opportunities.

    (a) The following entities may use a CBD notice to seek competition 
for subcontracts, to increase participation by small, small 
disadvantaged, and women-owned small business firms, and to meet 
established subcontracting plan goals:
    (1) A contractor awarded a contract exceeding $100,000 that is 
likely to result in the award of any subcontracts.
    (2) A subcontractor or supplier, at any tier, under a contract 
exceeding $100,000, that has a subcontracting opportunity exceeding 
$10,000.
    (b) The notices must describe--
    (1) The business opportunity, following the standard CDB format for 
items 7, 10, 11, and 17 in 5.207(b)(4);
    (2) Any prequalification requirements; and
    (3) Where to obtain technical data needed to respond to the 
requirement.

PART 7--ACQUISITION PLANNING

    5. In section 7.103, add paragraph (r) to read as follows:


7.103  Agency-head responsibilities.

* * * * *
    (r) Ensuring that acquisition planners, to the maximum extent 
practicable
    (1) Structure contract requirements to facilitate competition by 
and among small business concerns; and
    (2) Avoid unnecessary and unjustified bundling that precludes small 
business participation as contractors (see 7.107) (15 U.S.C. 631(j)).
    6. Revise paragraph (b)(1) of section 7.105 to read as follows:


7.105  Contents of written acquisition plans.

* * * * *
    (b) Plan of action--(1) Sources. Indicate the prospective sources 
of supplies or services that can meet the need. Consider required 
sources of supplies or services (see part 8). Include consideration of 
small business, HUBZone small business, small disadvantaged business, 
and women-owned small business concerns (see part 19), and the impact 
of any bundling that might affect their participation in the 
acquisition (see 7.107) (15 U.S.C. 644(e)). Address the extent and 
results of the market research and indicate their impact on the various 
elements of the plan (see part 10).
* * * * *

[[Page 72443]]

    7. Add section 7.107 to read as follows:


7.107  Additional requirements for acquisitions involving bundling of 
contract requirements.

    (a) Bundling may provide substantial benefits to the Government. 
However, because of the potential impact on small business 
participation, the head of the agency must conduct market research to 
determine whether bundling is necessary and justified (15 U.S.C. 
644(e)(2)). Market research may indicate that bundling is necessary and 
justified if an agency would derive measurably substantial benefits 
(see 10.001(a)(2)(iv) and (a)(3)(vi)).
    (b) Measurably substantial benefits may include, individually or in 
any combination or aggregate, cost savings or price reduction, quality 
improvements that will save time or improve or enhance performance or 
efficiency, reduction in acquisition cycle times, better terms and 
conditions, and any other benefits. The agency must quantify the 
identified benefits and explain how their impact would be measurably 
substantial. Except as provided in paragraph (d) of this section, the 
agency may determine bundling to be necessary and justified if, as 
compared to the benefits that it would derive from contracting to meet 
those requirements if not bundled, it would derive measurably 
substantial benefits equivalent to--
    (1) Ten percent of the estimated contract value (including options) 
if the value is $75 million or less; or
    (2) Five percent of the estimated contract value (including 
options) if the value exceeds $75 million.
    (c) Without power of delegation, the service acquisition executive 
for the military departments, the Under Secretary of Defense for 
Acquisition, Technology and Logistics for the defense agencies, or the 
Deputy Secretary or equivalent for the civilian agencies may determine 
that bundling is necessary and justified when
    (1) The expected benefits do not meet the thresholds in paragraphs 
(b)(1) and (b)(2) of this section but are critical to the agency's 
mission success; and
    (2) The acquisition strategy provides for maximum practicable 
participation by small business concerns.
    (d) Reduction of administrative or personnel costs alone is not 
sufficient justification for bundling unless the cost savings are 
expected to be at least 10 percent of the estimated contract value 
(including options) of the bundled requirements.
    (e) Substantial bundling is any bundling that results in a contract 
with an average annual value of $10 million or more. When the proposed 
acquisition strategy involves substantial bundling, the acquisition 
strategy must--
    (1) Identify the specific benefits anticipated to be derived from 
bundling;
    (2) Include an assessment of the specific impediments to 
participation by small business concerns as contractors that result 
from bundling;
    (3) Specify actions designed to maximize small business 
participation as contractors, including provisions that encourage small 
business teaming;
    (4) Specify actions designed to maximize small business 
participation as subcontractors (including suppliers) at any tier under 
the contract or contracts that may be awarded to meet the requirements; 
and
    (5) Include a specific determination that the anticipated benefits 
of the proposed bundled contract justify its use.
    (f) The contracting officer must justify bundling in acquisition 
strategy documentation.
    (g) In assessing whether cost savings would be achieved through 
bundling, the contracting officer must consider the cost that has been 
charged or, where data is available, could be charged by small business 
concerns for the same or similar work.
    (h) The requirements of this section do not apply to bundled 
contracts that are awarded in accordance with OMB Circular A-76 if a 
cost comparison has been performed under OMB Circular A-76 procedures. 
However, agencies must comply with the requirements of this section if 
they have not been met under A-76 procedures.

PART 10--MARKET RESEARCH

    8. Amend section 10.001 as follows:
    a. In paragraph (a) introductory text, remove ``shall'' and add 
``must'' in its place;
    b. In paragraph (a)(1) remove ``which'' and add ``that'' in its 
place;
    c. At the end of paragraph (a)(2)(ii) remove ``and'';
    d. Add paragraph (a)(2)(iv);
    e. At the end of paragraph (a)(3)(iv) remove ``and'';
    f. In paragraph (a)(3)(v) remove the period and add ``; and'';
    g. Add paragraph (a)(3)(vi); and
    h. Add paragraph (c).
    The revised and added text reads as follows:


10.001  Policy.

* * * * *
    (a) * * *
    (2) * * *
    (iv) Before soliciting offers for acquisitions that could lead to a 
bundled contract (15 U.S.C. 644(e)(2)(A)); and
    (3) * * *
    (vi) Determine whether bundling is necessary and justified (see 
7.107) (15 U.S.C. 644(e)(2)(A)).
* * * * *
    (c) If an agency contemplates awarding a bundled contract, the 
agency should--
    (1) When performing market research, consult with the local Small 
Business Administration procurement center representative (PCR) or if a 
PCR is not assigned to the procuring activity, the SBA Office of 
Government Contracting
    Area Office serving the area in which the procuring activity is 
located; and
    (2) At least 30 days before release of the solicitation, notify any 
affected incumbent small business concerns of--
    (i) The Government's intention to bundle the requirement; and
    (ii) How the concerns may contact the appropriate Small Business 
Administration representative.

PART 15--CONTRACTING BY NEGOTIATION


15.101-2  [Amended]

    8a. In section 15.101-2, amend paragraph (b)(1) by removing 
``15.304(c)(3)(iii)'' and adding ``15.304(c)(3)(iv)'' in its place.
    9. In section 15.304, amend paragraphs (c)(3)(i) and (c)(3)(ii) by 
removing ``(iii)'' and adding ``(iv)'' in their places; redesignate 
paragraph (c)(3)(iii) as (c)(3)(iv); and add new paragraphs (c)(3)(iii) 
and (c)(3)(5) to read as follows:


15.304  Evaluation factors and significant subfactors.

* * * * *
    (c) * * *
    (3) * * *
    (iii) For solicitations involving bundling that offer a significant 
opportunity for subcontracting, the contracting officer must include a 
factor to evaluate past performance indicating the extent to which the 
offeror attained applicable goals for small business participation 
under contracts that required subcontracting plans (15 U.S.C. 
637(d)(4)(G)(ii)).
* * * * *
    (5) For solicitations involving bundling that offer a significant 
opportunity for subcontracting, the contracting officer must include 
proposed small business subcontracting participation in the 
subcontracting plan as an evaluation factor (15 U.S.C. 
637(d)(4)(G)(i)).
* * * * *
    10. In section 15.305, add paragraph (a)(5) to read as follows:

[[Page 72444]]

15.305  Proposal evaluation.

    (a) * * *
    (5) Small business subcontracting evaluation. Structure 
solicitations to give offers from small business concerns the highest 
rating for the evaluation factors in 15.304(c)(3)(iii) and (c)(5).
* * * * *

PART 19--SMALL BUSINESS PROGRAMS

    11. In section 19.101, revise paragraph (g)(1) to read as follows:


19.101  Explanation of terms.

* * * * *
    (g) Control through contractual relationships--(1) Definition of a 
joint venture for size determination purposes. A joint venture for size 
determination purposes is an association of persons or concerns with 
interests in any degree or proportion by way of contract, express or 
implied, consorting to engage in and carry out a single specific 
business venture for joint profit, for which purpose they combine their 
efforts, property, money, skill, or knowledge, but not on a continuing 
or permanent basis for conducting business generally. A joint venture 
is viewed as a business entity in determining power to control its 
management.
    (i) For bundled requirements, apply size standards for the 
requirement to individual persons or concerns, not to the combined 
assets, of the joint venture.
    (ii) For other than bundled requirements, apply size standards for 
the requirement to individual persons or concerns, not to the combined 
assets, of the joint venture, if--
    (A) A revenue-based size standard applies to the requirement and 
the estimated contract value, including options, exceeds one-half the 
applicable size standard; or
    (B) An employee-based size standard applies to the requirement and 
the estimated contract value, including options, exceeds $10 million.
* * * * *
    12. In section 19.201, redesignate paragraphs (d)(5) through (d)(9) 
as (d)(6) through (d)(10) respectively; add a new paragraph (d)(5); and 
amend paragraph (e) by removing ``shall'' and adding ``must'' in its 
place. The added text reads as follows:


19.201  General policy.

* * * * *
    (d) * * *
    (5) Work with the SBA procurement center representative to--
    (i) Identify proposed solicitations that involve bundling;
    (ii) Facilitate small business participation as contractors 
including small business contract teams, where appropriate; and
    (iii) Facilitate small business participation as subcontractors and 
suppliers where participation by small business concerns as contractors 
is unlikely;
* * * * *
    13. Amend section 19.202-1 as follows:
    a. At the end of paragraph (e)(1)(i) remove ``, or'' and add ``;'' 
in its place;
    b. In paragraph (e)(1)(ii) remove the period and add ``; or'' in 
its place;
    c. Add paragraph (e)(1)(iii);
    d. In the introductory text of paragraph (e)(2) remove ``shall 
also'' and add ``also must'' in its place;
    e. At the end of paragraph (e)(2)(iii) remove ``or;''
    f. In paragraph (e)(2)(iv) remove the period and add ``; or'' in 
its place; and
    g. Add paragraph (e)(2)(v).
    The added text reads as follows:


19.202-1  Encouraging small business participation in acquisitions.

* * * * *
    (e) * * *
    (1) * * *
    (iii) The proposed acquisition is for a bundled requirement.
* * * * *
    (2) * * *
    (v) Bundling is necessary and justified.
* * * * *
[FR Doc. 99-33432 Filed 12-23-99; 8:45 am]
BILLING CODE 6820-EP-P