[Federal Register Volume 66, Number 110 (Thursday, June 7, 2001)]
[Proposed Rules]
[Pages 30659-30681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13988]


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DEPARTMENT OF VETERANS AFFAIRS

48 CFR Parts 801, 806, 812, 837, 852, and 873

RIN 2900-AI71


VA Acquisition Regulation: Simplified Acquisition Procedures for 
Health-Care Resources

AGENCY: Department of Veterans Affairs.

ACTION: Withdrawal of proposed rule and promulgation of a new proposed 
rule.

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SUMMARY: This document withdraws the proposed rule concerning 
simplified acquisition procedures for health-care resources published 
in the Federal Register on November 9, 1998, and promulgates a new 
proposed rule concerning simplified acquisition procedures for health-
care resources. This new proposed rule document would amend the 
Department of Veterans Affairs Acquisition Regulation (VAAR) to 
establish simplified procedures for the competitive acquisition of 
health-care resources, consisting of commercial services or the use of 
medical equipment or space, pursuant to 38 U.S.C. 8151-8153. Public Law 
104-262, the Veterans' Health Care Eligibility Reform Act of 1996, 
authorized VA to prescribe simplified procedures for the procurement of 
health-care resources. This proposed rule prescribes those procedures.

DATES: Comments on this proposed rule should be submitted on or before 
August 6, 2001 to be considered in the formulation of the final rule.

ADDRESSES: Mail or hand-deliver written comments to: Director, Office 
of Regulations Management (02D), Department of Veterans Affairs, 810 
Vermont Avenue, NW., Room 1154, Washington, DC 20420; or fax comments 
to (202) 273-9289; or e-mail comments to 
``[email protected]''. Comments should indicate that they are 
submitted in response to ``RIN 2900-AI71.'' All comments received will 
be available for public inspection in the Office of Regulations 
Management, Room 1158, between the hours of 8 a.m. and 4:30 p.m., 
Monday through Friday (except holidays).

FOR FURTHER INFORMATION CONTACT: Dennis Foley, (202) 273-9225, Office 
of the General Counsel, Professional Staff Group V; or Don Kaliher, 
(202) 273-8819, Acquisition Resources Service, Office of Acquisition 
and Materiel Management, Department of Veterans Affairs, 810 Vermont 
Avenue, NW., Washington, DC 20420.

SUPPLEMENTARY INFORMATION: On November 9, 1998, we published in the 
Federal Register (63 FR 60256) a proposed rule to amend the Department 
of Veterans Affairs Acquisition Regulation (VAAR), pursuant to 38 
U.S.C. 8151-8153, to establish simplified procedures for the 
competitive acquisition of health-care resources consisting of 
commercial services or the use of medical equipment or space. This 
document withdraws the proposed rule of November 9, 1998. In its place, 
we are promulgating a new proposed rule concerning the same subject 
matter. The new proposed rule is changed from the withdrawn proposed 
rule as explained below. Also, this document addresses the public 
comments that we received in response to the withdrawn proposed rule. 
Comments were solicited concerning the November 9, 1998, proposal for 
60 days, ending January 9, 1999.
    Based on the public comments received, we have determined that a 
revised proposed rule is necessary to more fully address the potential 
impact of the proposed rule on small business. In this regard, we have 
added an initial regulatory flexibility analysis.
    Currently, the acquisition of health-care resources that consist of 
commercial services or the use of medical equipment or space is 
governed by the VAAR and the Federal Acquisition Regulation (FAR). 
Statutory provisions at 38 U.S.C. 8153 (Pub. L. 104-262) specifically 
authorize the Secretary of Veterans Affairs, after consultation with 
the Administrator for Federal Procurement Policy, to establish 
simplified procedures for the competitive procurement of such health-
care resources. VA has consulted with the Administrator for Federal 
Procurement Policy and VA proposes to establish simplified procedures 
as set forth in this document. These proposed simplified procedures are 
applicable only to acquisitions conducted by the Veterans Health 
Administration (VHA), one of three administrations that comprise the 
Department of Veterans Affairs.
    Under the provisions of Pub. L. 104-262, procurements under the 
simplified procedures may be conducted ``without regard to any law or 
regulation that would otherwise require the use of competitive 
procedures.'' Accordingly, the competitive procedures of any laws and 
regulations (including the competitive procedures of FAR and VAAR and 
their underlying laws) would be superseded by the simplified 
procedures. However, under the provisions of Pub. L. 104-262, with 
certain exceptions, the simplified procedures are required to ``permit 
all responsible sources, as appropriate, to submit a bid, proposal, or 
quotation (as appropriate) for the resources to be procured and provide 
for the consideration by the Department of bids, proposals, or 
quotations so submitted.'' This allows VA to limit competition to the 
extent it determines reasonable for the circumstances of each 
particular acquisition. Consistent with the principles set forth above, 
this document proposes to establish a new VAAR Part 873 setting forth 
such simplified procedures.
    Under the provisions of 38 U.S.C. 8153, health-care resources 
consisting of commercial services, the use of medical equipment or 
space, or research, acquired from an institution affiliated with VA in 
accordance with 38 U.S.C.

[[Page 30660]]

7302, including medical practice groups and other approved entities 
associated with affiliated institutions (entities will be approved if 
determined legally to be associated with affiliated institutions), 
blood banks, organ banks, or research centers, may be procured without 
regard to any law or regulation that would otherwise require the use of 
competitive procedures. The provisions at new VAAR 873.104 contain a 
statement explaining this sole source acquisition authority. This 
authority, which is in accordance with statute, is not dependent upon 
this rulemaking.
    This rule applies only to the acquisition of health-care resources 
that are commercial services or the use of medical equipment or space. 
Thus, the proposed rule would apply only to acquisitions conducted by 
VHA in support of the medical care programs of VA. It would not apply 
to acquisitions of commercial services conducted by the Veterans 
Benefits Administration or the National Cemetery Administration. The 
following discussions only apply to VHA acquisitions of health-care 
resources.
    Proposed section 873.101, Policy, would provide that the procedures 
set forth in Part 873 would apply to the acquisition of health-care 
resources consisting of commercial services or the use of medical 
equipment or space. These procedures would be used in conjunction with 
FAR, but VAAR Part 873 would take precedence over FAR and other parts 
of VAAR. Currently, VAAR implements and supplements FAR. However, Pub. 
L. 104-262 grants VA authority to procure health-care resources 
consisting of commercial services or the use of medical equipment or 
space ``without regard to any other law or regulation that would 
require the use of competitive procedures * * *.'' Therefore, it is 
necessary to have Part 873 of VAAR take precedence over FAR and any 
other part of VAAR.
    Proposed section 873.102 would add definitions for ``commercial 
service,'' ``health-care providers,'' and ``health-care resource.'' 
These definitions restate provisions of 38 U.S.C. 8152 and 8153. 
Previously, because of limitations under 38 U.S.C. 8153 which were in 
effect prior to Pub. L. 104-262, procurements under the authority of 38 
U.S.C. 8153 were limited to ``specialized medical resources.'' 
Consistent with the new definitions, the simplified procedures are more 
expansive and would govern procurements of all commercial services or 
the use of medical equipment or space, not just those that are 
considered to be ``specialized medical resources.''
    FAR 8.001(a)(2) sets forth four levels of priority for the 
acquisition of services. These are, in descending order of priority, 
(i) services available from the Committee for Purchase from People who 
are Blind or Severely Disabled; (ii) mandatory Federal Supply Schedules 
(FSS); (iii) optional use FSS; and (iv) Federal Prison Industries, 
Inc., or commercial sources (including educational and non-profit 
institutions). Proposed section 873.103 would exempt acquisitions under 
this proposed rule from the provisions of FAR 8.001(a)(2) regarding the 
lowest three levels of priority. For VA, there are no longer any 
mandatory use FSS (the highest level of priority of the three levels 
proposed for elimination), so elimination of this priority level has no 
impact. As to the second level, optional use FSS, even without the 
priority levels, VA contracting officers would still be able to place 
delivery orders against optional use FSS contracts in accordance with 
FAR 8.404 without seeking competition. However, they would not be 
required to do so by the list of priority sources. Under the proposed 
rule, it would be at the contracting officer's discretion whether or 
not to issue a delivery order against an optional use FSS contract or 
to seek competition. This is necessary to ensure that VA has maximum 
flexibility to seek the highest quality services available, either from 
optional use FSS contractors or through a competitive acquisition. If 
the contracting officer does seek competition, contractors formerly at 
the lowest level of priority (i.e., commercial sources) would then be 
able to compete for those services. It is not proposed to affect the 
priority status for the acquisition of services available from the 
Committee for Purchase from People who are Blind or Severely Disabled, 
as required by the Javits-Wagner-O'Day (JWOD) Act. JWOD Act programs 
offer a valuable source of services for VA and have proven to be highly 
beneficial for both VA and program participants. The JWOD Act programs 
support VA's and other Federal Government agencies' procurement needs 
and generate employment and training opportunities for people who are 
blind or have other severe disabilities. It is in the best interest of 
the Government to continue to support these valuable programs.
    Proposed section 873.104, paragraphs (a) and (b), would restate the 
authority provided in the Act to acquire health-care resources that are 
commercial services or the use of medical equipment or space from 
entities affiliated with VA, in accordance with 38 U.S.C. 7302, or 
approved entities associated with an affiliate (entities will be 
approved if determined legally to be associated with affiliated 
institutions), on a sole source basis without public notice and without 
further justification. Proposed section 873.104, paragraph (c), would 
provide that, on VA acquisitions of commercial services or the use of 
medical equipment or space from other sources, contracting officers 
would be required to seek competition to the maximum extent 
practicable. This is consistent with provisions of the Act, which 
provide that procurements may be conducted without regard to any law or 
regulation that would otherwise require use of competitive procedures. 
Competition to the maximum extent practicable is required to ensure 
that VA's acquisitions of commercial services or the use of medical 
equipment or space are conducted in an efficient and expeditious 
manner. Proposed section 873.104, paragraph (d), restates the 
requirements of the Act that sole source acquisitions from sources 
other than affiliates or approved associates of affiliates (entities 
will be approved if determined legally to be associated with affiliated 
institutions) be justified and approved.
    Proposed section 873.105 would reiterate the importance of 
acquisition planning. The section would impose a requirement to form an 
acquisition team for high dollar value acquisitions (acquisitions 
exceeding $100,000). The team would be required to assure that the 
acquisition is properly coordinated and managed and to conduct market 
research. To promote streamlining, the section would authorize the use 
of a simplified process for documenting the acquisition plan. Under 
this process, contracting officers would obtain approval of and 
document the acquisition approach through the conduct of an acquisition 
strategy meeting in lieu of a written acquisition plan. These changes 
are necessary to ensure that high dollar value acquisitions are 
properly planned and coordinated, while still providing a streamlined 
process for documenting the contract file.
    Proposed section 873.106 would exempt VA acquisitions of health-
care resources that are commercial services or the use of medical 
equipment or space from most of the market research requirements of FAR 
Part 10 but would provide optional market research techniques tailored 
specifically for use in acquiring commercial services or the use of 
medical equipment or space. This change is necessary to simplify market 
research while ensuring that contracting officers have a full range of 
techniques available specifically tailored for use in

[[Page 30661]]

conducting market research when acquiring commercial services or the 
use of medical equipment or space.
    Proposed paragraph (a) of section 873.107 would require the 
contracting officer to set aside acquisitions of health-care resources 
for small business concerns if, through market research, the 
contracting officer determines that there is a reasonable expectation 
that reasonably priced offers would be received from two or more 
responsible small business concerns. This proposed section would also 
provide additional authority, over and above that found at FAR 19.502, 
for waiving the requirement for small business set-asides. FAR 19.502 
currently provides that contracting officers can elect to not set aside 
a procurement if, generally, the contracting officer determines that 
there is not a reasonable expectation of obtaining offers from two or 
more responsible small business concerns at fair market prices. In 
addition to that authority in FAR, under this proposed rule, the head 
of the contracting activity would have the authority to approve a 
waiver from the requirement to set aside a procurement of health-care 
resources, based on a determination that it is in the best interest of 
the Government. This provision is necessary to ensure that VA can 
procure health-care resources consisting of commercial services or the 
use of medical equipment or space from the highest quality sources 
while still supporting small business concerns to the maximum 
practicable extent.
    The rule would make certain changes to the administration of VA's 
small business program as it applies to the acquisition of health-care 
resources to reflect the fast-moving health-care market. For example, 
proposed paragraph (b) of section 873.107 would establish a streamlined 
process for handling disagreements between VA and the Small Business 
Administration regarding whether a procurement should be set aside for 
small business. These streamlined procedures would not alter VA's 
ongoing commitment to small business participation in its acquisitions 
of health-care resources. Nor would they affect efforts to mitigate any 
potential negative impacts of contract consolidations on small 
businesses' ability to secure work. VA's Office of Small and 
Disadvantaged Business Utilization and Office of Acquisition and 
Materiel Management would jointly monitor the impact of the new 
procedures on small business participation to ensure opportunities are 
available for competitive small businesses.
    Paragraph (c) of section 873.107 restates VA's intent to follow the 
FAR regarding the SBA 8(a) program. Paragraph (d) provides that VA's 
Office of Small and Disadvantaged Business Utilization and SBA's Office 
of Industrial Assistance shall serve as ombudsmen to assist VA 
contracting officers on any issues relating to Certificates of 
Competency.
    FAR Part 5 currently requires, with certain exceptions, that an 
acquisition with a value exceeding $25,000 be synopsized in the 
Governmentwide point of entry (GPE) (and, until January 1, 2002, in the 
Commerce Business Daily (CBD)) for specified periods of time and states 
what must be included in the announcement. Proposed section 873.108 
would: exempt VA acquisitions of health-care resources consisting of 
commercial services or the use of medical equipment or space below 
$100,000 from this requirement; modify the requirement for publication 
of acquisitions above $100,000 to only require public announcement, 
utilizing a medium designed to obtain competition to the maximum extent 
practicable; set the time requirements for announcement to be a 
``reasonable time''; and modify what must be included in the 
announcement. The medium to be used for announcements could be the GPE 
(FedBizOpps, http://www.fedbizopps.gov) or any other means, as 
appropriate, depending on the complexity of the acquisition. 38 U.S.C. 
8153 authorizes VA to conduct procurements for health-care resources 
that are commercial services or the use of medical equipment or space 
without regard to any law or regulation that would otherwise require 
the use of competitive procedures. In accordance with that authority, 
this section also proposes to exempt acquisitions from affiliates and 
entities associated with affiliates and sole source acquisitions of 
medical services from other sources from the requirement for 
publication of notice in the GPE. These provisions would streamline and 
simplify VA's acquisitions of commercial services or the use of medical 
equipment or space.
    Proposed paragraphs (a) and (b) of section 873.109 would emphasize 
that the contracting officer (rather than the team) is the selecting 
official and would provide guidance to contracting officers on 
statements of work and specifications. FAR requires certain 
documentation in contract files. Proposed paragraph (c) would provide 
simplified documentation requirements to be used in lieu of the FAR 
requirements. FAR requires specific time frames for announcing 
solicitations and procurement opportunities to the public and provides, 
for commercial solicitations, that bids or proposals received late 
shall not be considered. The FAR does not specifically address late 
quotations. Proposed paragraph (d)(1) would replace FAR announcement 
time requirements with a ``reasonable'' time requirement and paragraph 
(d)(2) would allow the contracting officer to accept late quotations or 
proposals if late receipt is determined by the contracting officer to 
be in the best interest of the Government. Late bids received in 
response to an invitation for bid (IFB) would not be considered and the 
FAR provisions regarding late bids would still apply. FAR provides 
certain minimum requirements that a contracting officer must meet 
before a solicitation may be canceled. Proposed paragraph (e) would 
exempt VA acquisitions of health-care resources that are commercial 
services or the use of medical equipment or space from those minimum 
requirements and would provide that a contracting officer could cancel 
a solicitation if cancellation is determined to be in the best interest 
of the Government. All of these changes are proposed for the purpose of 
streamlining and simplifying VA's acquisitions of commercial services 
or the use of medical equipment or space.
    Proposed section 873.110, paragraphs (a) through (e), would provide 
guidance to contracting officers on when to use the provisions and 
clauses in Part 852 of VAAR in VA acquisitions of health-care resources 
that are commercial services or the use of medical equipment or space. 
Paragraph (f) would propose to require use of FAR clause 52.207-3, 
Right of First Refusal, and the VAAR clause at 852.207-70, Report of 
employment under commercial activities, in a solicitation in which 
current VA employees might be displaced as a result of contract award. 
The FAR clause ensures that those employees have a right of first 
refusal to any employment openings created with the contractor as a 
result of the contract award. The VAAR clause requires the contractor 
to report employment openings and progress in hiring former VA 
employees. These requirements are necessary to protect VA employees and 
to reduce the cost of contract award by reducing or avoiding 
unemployment compensation costs.
    FAR places certain restrictions on when each type of acquisition 
procedure can be used. For instance, a request for quotation (RFQ) can 
be used to solicit quotations for non-commercial service acquisitions 
costing up to $100,000 and, until January 1, 2002, for commercial 
service acquisitions costing up to $5 million. Proposed section

[[Page 30662]]

873.111 would allow use of the RFQ process for any acquisition of 
commercial services or the use of medical equipment or space conducted 
under this VAAR part, regardless of dollar value. This change is 
necessary to simplify VA's acquisition of commercial services or the 
use of medical equipment or space and to provide maximum flexibility to 
contracting officers.
    Until January 1, 2002, FAR requires the use of full and open 
competition for commercial service acquisitions exceeding $5 million 
unless other statutory authority exists to limit competition. If this 
authority is not extended, after January 1, 2002, the FAR requirement 
to use full and open competition will apply to such acquisitions 
exceeding $100,000. Paragraph (a)(1) of section 873.111 would provide, 
for VA acquisitions of health-care resources that are commercial 
services or the use of medical equipment or space, that competition to 
the maximum extent practicable may be used in lieu of full and open 
competition, regardless of the dollar value of the acquisition. 
Proposed paragraph (a)(2) would exempt VA acquisitions of commercial 
services or the use of medical equipment or space from any dollar value 
restrictions in FAR on the use of RFQs, allowing VA to use the RFQ 
process for all acquisitions of health-care resources that are 
commercial services or the use of medical equipment or space, 
regardless of the dollar value of the procurement. These changes are 
necessary to simplify and streamline VA's acquisition of commercial 
services or the use of medical equipment or space by allowing use of 
the RFQ process in any circumstance.
    Proposed paragraph (b) of section 873.111 is advisory only and 
would provide that the procedures of FAR Part 14 would continue to be 
used for VA sealed bid acquisitions of commercial services or the use 
of medical equipment or space. Proposed paragraph (c) of section 
873.111 would provide that the negotiation procedures of FAR Parts 12, 
13, and 15 would be used for negotiated acquisitions of commercial 
services or the use of medical equipment or space, except as modified 
in VAAR Part 873. This paragraph is also advisory.
    Proposed paragraph (d) of section 873.111 would provide an 
alternative negotiation procedure using a multiphase negotiation 
technique. This would supersede current FAR provisions for an advisory 
multi-step process that does not allow the Government to exclude 
offerors that are unlikely to be viable competitors. Multiphase 
acquisitions may be appropriate when the submission of full proposals 
at the beginning of an acquisition would be burdensome for offerors to 
prepare and for Government personnel to evaluate. Under a multiphase 
acquisition, VA would seek limited information with vendors' first 
submissions, make one or more down-selects based on the initial 
information, and request full proposals only from the offerors 
remaining. This technique would ensure that only those firms most 
likely to receive awards would be required to expend the time and 
effort to prepare a full proposal. It would simplify and streamline the 
acquisition process and would save both vendors and the Government time 
and money.
    Proposed paragraph (e) of section 873.111 would provide two 
additional alternative negotiation techniques for use by VA in 
acquiring commercial services or the use of medical equipment or space 
under this proposed rule. The first technique would allow the 
contracting officer to indicate to all offerors, or to one or more 
offerors, a price, contract term or condition, commercially available 
feature, or other requirement that the offeror or offerors will have to 
improve upon or meet, as appropriate, in order to remain competitive. 
The second technique would allow contracting officers to post prices 
received on offers electronically or otherwise, without disclosing the 
identity of the offerors, and allow offerors to revise their prices 
based on the posted information. These procedures are necessary to 
assist contracting officers in procuring the highest quality health-
care services at best value prices.
    Proposed section 873.112 addresses the selection of evaluation 
requirements that VA contracting officers must place in solicitations 
to be issued under this proposed rule. This proposed section would 
allow contracting officers the flexibility to fashion their own 
acquisition-specific evaluation scheme with whatever information they 
deem to be in the best interest of the Government. However, this 
proposed section retains the requirement from FAR that price or cost to 
the Government must be included in any evaluation and that past 
performance must be evaluated in acquisitions exceeding the simplified 
acquisition threshold (SAT) (currently $100,000). As is currently set 
forth in the FAR, the contracting officer would be required, when not 
using past performance as an evaluation factor, to document the reasons 
why past performance is not being considered.
    Proposed section 873.113 sets forth a new standard for exchanges 
with offerors in negotiated acquisitions. Currently, under FAR, any 
contact with a vendor about the vendor's proposal that goes to the 
substance of the offer constitutes ``discussions.'' This causes a set 
of rules to go into effect, including a requirement that the Government 
hold ``discussions'' with every offeror, even if there is no need for 
discussions with those other offerors. Less important contact is 
referred to as ``clarification'' under existing FAR rules. Moreover, 
there is another category in the FAR called ``communications'' which 
goes to establishment of a competitive range. Under proposed section 
873.113, the Government could have contact, called ``exchanges,'' at 
any time with any vendor, as required. However, as with the current 
regulations, the Government could not improperly disclose information 
contained in another offeror's proposal (except as proposed at section 
873.111(e), Alternative negotiation techniques).
    Proposed section 873.114 sets forth a new concept of the ``best 
value pool.'' This is the ``pool'' of offeror(s) that, after initial 
evaluation, have the most highly rated proposals with the greatest 
likelihood of award. Although this is similar in concept to the 
``competitive range'' of the current rules, the difference is that the 
contracting officer may, in the solicitation, limit the best value pool 
to a specific number of offerors among which an efficient competition 
can be conducted. Under the existing rules of the FAR, the contracting 
officer may limit the number of proposals in the competitive range for 
purposes of efficiency, but that number is not defined and could be a 
matter of significant dispute. This proposed rule would expand on this 
FAR authority by defining, in advance in the solicitation, what 
constitutes an efficient solicitation. This is necessary to reduce the 
likelihood of disputes and to clarify how the authority to limit the 
number of proposals in the best value pool will be applied in a 
solicitation.
    Proposed section 873.115 sets forth new procedures governing 
proposal revisions. Currently, under the FAR, once a ``competitive 
range'' has been developed, all offerors therein must be given a chance 
to revise their proposals. At the close of ``discussions,'' all 
offerors remaining in the competition must be requested to submit a 
``best and final offer.'' Under this proposed section, contracting 
officers would be able to request proposal revisions as often as needed 
during the acquisition process. There would be no need for a 
requirement to request a ``best and final

[[Page 30663]]

offer'' from each and every offeror in every acquisition. The proposed 
section would require that proposal submissions be safeguarded against 
improper disclosures.
    Proposed section 873.116 would provide guidance to contracting 
officers on source selection. FAR 15.308 contains specific requirements 
for documenting the source selection decision that would continue to 
apply to acquisitions under the proposed rule.
    Proposed section 873.117 would provide additional guidance to 
contracting officers on contract award, over and above that contained 
in FAR at 15.504, specifically on the differences between awarding RFQs 
and requests for proposals.
    FAR 15.505 currently requires the contracting officer to make every 
effort to provide a preaward debriefing if a written request for a 
debriefing is received from the offeror no later than 3 days after 
receipt by the offeror of notice of exclusion from the competitive 
range. If a preaward debriefing is delayed, the contracting officer 
must provide written documentation for the contract file on the 
rationale for delaying the debriefing. Proposed section 873.118 would 
make preaward debriefings optional on the part of the contracting 
officer. Preaward debriefings may be provided when doing so is 
determined by the contracting officer to be in the best interest of the 
Government. Postaward debriefings would still be provided as required 
by the FAR. This is necessary to simplify and streamline the 
acquisition process.

Miscellaneous Changes

    Currently, VAAR 801.602-70(a)(4) provides that proposed contracts 
for the mutual use or exchange of use of ``specialized medical 
resources'' above specified dollar thresholds be submitted to VA 
Central Office for review. This proposed rule would revise the term 
``specialized medical resources'' to ``health-care resources'' pursuant 
to 38 U.S.C. 8152. The review threshold levels specified in VAAR have 
been changed by class deviation in accordance with section 801.404. 
This document proposes to incorporate that class deviation into VAAR 
and to raise the review thresholds for health-care resources. This is 
necessary to allow streamlined and expedited processing of proposed 
contracts and to reduce the administrative burden on contracting 
officers.
    This proposed rule would make minor editorial changes to sections 
801.602-71 and 801.601-72 to correspond with the new language used in 
this proposed rule.
    VAAR 806.302-5(b) currently provides that contracts for the mutual 
use or exchange of use of specialized medical resources to be acquired 
from health-care facilities are approved for other than full and open 
competition, but requires justification and approval in accordance with 
FAR 6.303 and VAAR 806.303. Section 301 of Public Law 104-262 revised 
38 U.S.C. 8153(a)(3)(A), restricting and modifying this authority. 
Under this new authority, only those acquisitions of health-care 
resources consisting of commercial services, the use of medical 
equipment or space, or research, to be acquired from institutions 
affiliated with the Department in accordance with 38 U.S.C. 7302, from 
medical practice groups and other approved entities associated with 
affiliated institutions (entities will be approved if determined 
legally to be associated with affiliated institutions), or from blood 
banks, organ banks, or research centers, are approved for other than 
full and open competition. In addition, 38 U.S.C. 8153 provides that 
justification and approval is not required for contracts with these 
entities. This rule proposes to revise paragraph (b) of section 
806.302-5 to incorporate this new authority into VAAR.
    Section 301 of Public Law 104-262 revised 38 U.S.C. 
8153(a)(3)(B)(i) to provide that contracts for the acquisition of 
commercial services or the use of medical equipment or space, not 
procured from affiliated institutions or approved entities associated 
with affiliated institutions (entities will be approved if determined 
legally to be associated with affiliated institutions), may be procured 
without regard to any law or regulation that would otherwise require 
the use of competitive procedures, provided the procurement is 
conducted in accordance with the simplified procedures proposed in this 
rule. Public Law 104-262 revised 38 U.S.C. 8153(a)(3)(B)(ii) to require 
that such acquisitions permit all responsible sources, as appropriate, 
to submit a bid, proposal, or quotation (as appropriate) and revised 38 
U.S.C. 8153(a)(3)(D) to require that such acquisitions, if conducted on 
a sole source basis, must be justified and approved. This rule proposes 
to renumber current paragraph (c) of section 806.302-5 as paragraph (d) 
and to add new paragraph (c) to incorporate these new authorities into 
VAAR.
    Currently, VAAR Part 812 addresses the acquisition of commercial 
services. This rule proposes to list the Part 852.273 clauses contained 
herein in section 812.302(g) for use in commercial service 
acquisitions, as authorized by FAR 12.301(f). This action is necessary, 
and is proposed based on the reasons set forth below, to permit use of 
these Part 852.873 clauses in VA's commercial service acquisitions.
    This rule proposes to add the VAAR clauses at section 852.207-70, 
Report of Employment Under Commercial Activities, and section 852.237-
7, Indemnification and Medical Liability Insurance, as shown below in 
full text, to section 812.302(c) for use in VA commercial service 
solicitations, including contracts issued under the authority of 38 
U.S.C. 8151-8153. These VAAR clauses at sections 852.207-70 and 
852.237-7 are currently set forth in 48 CFR Part 852. VA acquisitions 
under the authority of 38 U.S.C. 8151-8153 are considered to be for 
commercial services and the clauses at sections 852.207-70 and 852.237-
7 may be required for use in such acquisitions, where applicable. The 
VAAR clause at section 852.207-70, as set forth below, is necessary to 
ensure that contractors provide VA employees, who might be displaced as 
a result of a competitive acquisition, with the employee's right of 
first refusal to jobs created by that acquisition. The VAAR clause at 
section 852.237-7, as set forth below, is necessary to ensure that VA 
contractors providing nonpersonal health-care services have adequate 
medical liability insurance. This insurance is required to protect both 
VA and veterans from medical malpractice.

Report of Employment Under Commercial Activities (Oct 1988)

    (a) Consistent with the Government post-employment conflict of 
interest regulations, the contractor shall give adversely affected 
Federal employees the right of first refusal for all employment 
openings under this contract for which they are qualified.
    (b) Definitions. (1) An ``adversely affected Federal employee'' 
is:
    (i) Any permanent Federal employee who is assigned to the 
Government commercial activity, or (ii) Any employee identified for 
release from his or her competitive level or separated as a result 
of the contract.
    (2) ``Employment openings'' are position vacancies created by 
this contract which the contractor is unable to fill with personnel 
in the contractor's employ at the time of the contract award, 
including positions within a 50-mile radius of the commercial 
activity which indirectly arise in the contractor's organization as 
a result of the contractor's reassignment of employees due to the 
award of this contract.
    (3) The ``contract start date'' is the first day of contractor 
performance.
    (c) Filling employment openings. (1) For a period beginning with 
contract award and ending 90 days after the contract start date, no 
person other than an adversely affected Federal employee on the 
current listing provided by the contracting officer shall be

[[Page 30664]]

offered an employment opening until all adversely affected and 
qualified Federal employees identified by the contracting officer 
have been offered the job and refused it.
    (2) The contractor may select any person for an employment 
opening when there are no qualified adversely affected Federal 
employees on the latest current listing provided by the contracting 
officer.
    (d) Contracting reporting requirements. (1) No later than 5 
working days after contract award the contractor shall furnish the 
contracting officer with the following:
    (i) A list of employment openings including salaries and 
benefits, (ii) Sufficient job application forms for adversely 
affected Federal employees.
    (2) By the contract start date, the contractor shall provide the 
contracting officer with the following:
    (i) The names of adversely affected Federal employees offered an 
employment opening, (ii) The date the offer was made, (iii) A brief 
description of the position, (iv) The date of acceptance of the 
offer and the effective date of employment, (v) The date of 
rejection of the offer, if applicable for salary and benefits 
contained in the rejected offer, and (vi) The names of any adversely 
affected Federal employees who applied but were not offered 
employment and the reason(s) for withholding an offer.
    (3) For the first 90 days after the contract start date, the 
contractor shall provide the contracting officer with the names of 
all persons hired or terminated under the contract within five 
working days of such hiring or termination.
    (e) Information provided to the contractor. (1) No later than 10 
calendar days after the contract award, the contracting officer 
shall furnish the contractor a current list of adversely affected 
Federal employees exercising the right of first refusal, along with 
their completed job application forms.
    (2) Between the contract award and start dates, the contracting 
officer shall inform the contractor of any reassignment or transfer 
of adversely affected employees to other Federal positions.
    (3) For a period of up to 90 days after contract start date, the 
contracting officer will periodically provide the contractor with an 
updated listing of adversely affected Federal employees reflecting 
employees recently released from their competitive levels or 
separated as a result of the contract award.
    (f) Qualifications determination. The contractor has a right 
under this clause to determine adequacy of the qualifications of 
adversely affected Federal employees for any employment openings. 
However, an adversely affected Federal employee who held a job in 
the Government commercial activity which directly corresponds to an 
employment opening shall be considered qualified for the job. 
Questions concerning the qualifications of adversely affected 
Federal employees for specific employment openings shall be referred 
to the contracting officer for determination. The contracting 
officer's determination shall be final and binding on all parties.
    (g) Relating to other statutes, regulations and employment 
policies. The requirements of this clause shall not modify or alter 
the contractor's responsibilities under statutes, regulations or 
other contract clauses pertaining to the hiring of veterans, 
minorities or handicapped persons.
    (h) Penalty for noncompliance. Failure of the contractor to 
comply with any provision of the clause may be grounds for 
termination for default.
(End of Clause)

Indemnification and Medical Liability Insurance (Oct 1996)

    (a) It is expressly agreed and understood that this is a 
nonpersonal services contract, as defined in Federal Acquisition 
Regulation (FAR) 37.101, under which the professional services 
rendered by the Contractor or its health-care providers are rendered 
in its capacity as an independent contractor. The Government may 
evaluate the quality of professional and administrative services 
provided but retains no control over professional aspects of the 
services rendered, including by example, the Contractor's or its 
health-care providers' professional medical judgment, diagnosis, or 
specific medical treatments. The Contractor and its health-care 
providers shall be liable for their liability-producing acts or 
omissions. The Contractor shall maintain or require all health-care 
providers performing under this contract to maintain, during the 
term of this contract, professional liability insurance issued by a 
responsible insurance carrier of not less than the following 
amount(s) per specialty per occurrence:

[Contracting Officer insert the dollar amount value(s) of standard 
coverage(s) prevailing within the local community as to the specific 
medical specialty, or specialties, concerned, or such higher amount 
as the Contracting Officer deems necessary to protect the 
Government's interests].

    However, if the Contractor is an entity or a subdivision of a 
State that either provides for self-insurance or limits the 
liability or the amount of insurance purchased by State entities, 
then the insurance requirement of this contract shall be fulfilled 
by incorporating the provisions of the applicable State law.
    (b) An apparently successful offeror, upon request of the 
Contracting Officer, shall, prior to contract award, furnish 
evidence of the insurability of the offeror and/or of all health-
care providers who will perform under this contract. The submission 
shall provide evidence of insurability concerning the medical 
liability insurance required by paragraph (a) of this clause or the 
provisions of State law as to self-insurance, or limitations on 
liability or insurance.
    (c) The Contractor shall, prior to commencement of services 
under the contract, provide to the Contracting Officer Certificates 
of Insurance or insurance policies evidencing the required insurance 
coverage and an endorsement stating that any cancellation or 
material change adversely affecting the Government's interest shall 
not be effective until 30 days after the insurer or the Contractor 
gives written notice to the Contracting Officer. Certificates or 
policies shall be provided for the Contractor and/or each health-
care provider who will perform under this contract.
    (d) The Contractor shall notify the Contracting Officer if it, 
or any of the health-care providers performing under this contract, 
change insurance providers during the performance period of this 
contract. The notification shall provide evidence that the 
Contractor and/or health-care providers will meet all the 
requirements of this clause, including those concerning liability 
insurance and endorsements. These requirements may be met either 
under the new policy, or a combination of old and new policies, if 
applicable.
    (e) The Contractor shall insert the substance of this clause, 
including this paragraph (e), in all subcontracts for health-care 
services under this contract. The Contractor shall be responsible 
for compliance by any subcontractor or lower-tier subcontractor with 
the provisions set forth in paragraph (a) of this clause.

(End of Clause)

    VAAR 807.304-77 currently requires the use of the above clause at 
section 852.207-70, Report on employment under commercial activities, 
in all contracts that include the FAR clause at section 52.207-3, Right 
of First Refusal. This proposed rule would add this currently existing 
clause to the list of clauses in VAAR Part 812 for use in commercial 
item acquisitions. This is necessary to clarify that this currently 
existing clause is authorized for use in applicable commercial item 
solicitations.
    VAAR 837.403 currently requires the use of the above clause at 
section 852.237-7, Indemnification and Medical Liability Insurance, in 
lieu of FAR clause 52.237-7, in solicitations and contracts for 
nonpersonal health-care services. This proposed rule would clarify at 
section 837.403 that this same VAAR clause must also be used in 
solicitations and contracts for nonpersonal health-care services 
awarded under the authority of 38 U.S.C. 8151-8153 and VAAR Part 873. 
This proposed rule would also add this currently existing clause to the 
list of clauses in VAAR Part 812 for use in commercial item 
acquisitions. This is necessary to clarify that this currently existing 
clause is authorized for use in applicable commercial item 
solicitations. The clause is necessary for use in VA solicitations and 
contracts to ensure that VA contractors providing nonpersonal health-
care services have adequate medical liability insurance. This insurance 
is required to protect both VA and veterans from medical malpractice.
    VAAR Part 852 does not currently contain any provisions 
specifically relating to the acquisition of commercial services under 
the simplified acquisition authority of 38 U.S.C. 8151-8153. This rule 
proposed to add four

[[Page 30665]]

provisions to the VAAR, as set forth herein in Part 852. The following 
is an explanation of these proposed provisions.
    The proposed provision at section 852.273-70, Late offers, would 
replace paragraph (f) of FAR provision 52.212-1 in acquisitions of 
commercial services or the use of medical equipment or space conducted 
in accordance with VAAR Part 873. Paragraph (f) of FAR provision 
52.212-1 currently provides that offers or modifications of offers 
received after the exact time specified in the solicitation for receipt 
of offers will not be considered. VAAR provision 852.273-70 proposes to 
allow consideration of quotations, proposals, or modifications of 
proposals received after the time set forth in the request for 
quotations or request for proposals at the discretion of the 
contracting officer, if determined to be in the best interest of the 
Government. This will ensure that VA will be able to accept the best 
offer submitted on a solicitation, even if that offer is received after 
the time set forth in the solicitation.
    The provision at section 852.273-71, Alternative negotiation 
techniques, proposes to allow the use of the alternative negotiation 
techniques set forth at section 873.111(e). The techniques listed 
therein include (1) allowing the contracting officer to indicate to an 
offeror how the offeror must improve its offer in order to be 
considered for award and (2) allowing the contracting officer to post 
prices and permit revisions of offers based on that information. We 
believe these alternative negotiation techniques will allow VA to 
conduct acquisitions on a basis more in line with commercial practices 
and will result in the acquisition of improved services at reduced 
prices. Neither FAR nor VAAR currently contains provisions expressly 
allowing alternative negotiation techniques.
    The proposed provision at section 852.273-72, Alternative 
evaluation, would implement the provision at section 852.273-71, 
Alternative negotiation techniques, by advising offerors how prices 
would be posted and by providing guidance to offerors on how to submit 
offers. In addition, this proposed provision would advise offerors on 
how options would be evaluated, i.e., by adding the total price of all 
options to the total price for the basic requirement. It would also 
advise offerors that the Government would not be obligated to exercise 
the options. The ``options'' paragraph is included in this proposed 
provision because this provision might be used alone, without a 
separate ``options'' provision.
    The proposed provision at section 852.273-73, Evaluation--health-
care resources, would replace FAR provision 52.212-2 in acquisitions 
for commercial services conducted in accordance with VAAR Part 873. FAR 
provision 52.212-2 provides guidance to offerors on what factors the 
Government will use to evaluate offers and on how those factors are 
weighted. Under proposed VAAR 873, VA would not be required to use 
factors, as described in the FAR, to evaluate offers. Rather, VA would 
include ``evaluation information'' in the solicitation stating how 
offers will be evaluated. In addition, VA would not be required to 
state how the evaluation information is weighted, but would be required 
to state the relative importance of the evaluation information. This 
proposed provision is written to replace FAR 52.212-2 with these 
authorities in mind. Also, paragraph (c) has been drafted to clarify 
that notice of acceptance of an offer will create a binding contract if 
the solicitation is a request for proposals. If the solicitation is a 
request for quotations, that would not be the case, as notice of 
acceptance would not create a binding contract.
    The provision at section 852.273-74, Award without exchanges, is 
proposed to be added to VAAR to advise offerors that VA intends to 
evaluate proposals and award a contract without exchanges with 
offerors. This provision is necessary in order to avoid any 
misunderstanding regarding award and to help ensure that offerors 
provide their best prices and terms with their initial offer.

Consideration of Public Comments

    The withdrawn proposed rule included a certification under the 
Regulatory Flexibility Act that it would not have a significant 
economic impact on a substantial number of small entities. This 
certification was based on the finding that costs to comply with the 
provisions of the proposed rule would be minimal. The Office of 
Advocacy (Advocacy) of the Small Business Administration (SBA) 
commented that, instead of the certification, we should have prepared 
an initial regulatory flexibility analysis. Advocacy opposed the degree 
of discretion that this rule would afford to contracting officers in 
seeking competition and evaluating and selecting awardees. Advocacy 
asserted that the proposed rule would alter the process of ``full and 
open competition'' and also asserted that it would sacrifice 
competition at the expense of creating false efficiencies and short-
term savings. Advocacy further asserted that ``[o]nly market-based 
competition can prevent monopoly practices and the concentration of 
federal dollars in the hands of a few large industry giants.'' More 
specifically, Advocacy asserted that the proposed rule limits 
competition, provides the contracting officer with virtually unilateral 
authority to accept proposals, even when they are submitted after the 
closing date of the solicitation, and provides many other non-
competitive changes.
    The Executive Branch has worked closely with Congress to improve 
the Government's acquisition practices and productivity. These reforms 
allow agencies to structure their contracting operations in a way that 
makes sense and provides increased flexibility for contracting 
officials to make and implement good business decisions. For all 
purchases under $100,000 and, on a test basis until January 1, 2002, 
for purchases of commercial items up to $5 million, contracting 
officers are authorized to use simplified procedures. These authorities 
give contracting officials flexibility to emulate commercial practices 
and use the procedures they think will work best in the context of the 
specific products and services, market conditions, and other 
circumstances involved for using competition to obtain value. For large 
purchases, the revisions to FAR Part 15 help contracting officers, 
within current statutory constraints, to better focus the Government's 
resources on obtaining the best value.
    The provisions of this proposed rule are designed to build on these 
acquisition reforms in a manner that, as envisioned by Pub. L. 104-262, 
strengthen the efficiency and effectiveness by which VA acquires health 
care resources on behalf of America's veterans. The rule would require 
contracting officers to seek competition to the maximum extent 
practicable. In accomplishing this end, the rule would not sacrifice 
competition; nor would it give contracting officers unfettered 
discretion in evaluating sources and making awards.
    With respect to soliciting sources, for acquisitions over $100,000, 
the proposed rule would require acquisitions to be publicly announced. 
Contracting officers would be afforded greater flexibility in shaping 
how notice is published. This flexibility is not expected to be used to 
limit competition. Rather, it is intended to enable contracting 
officers to select the means of notice that will maximize effective 
dissemination of information to interested sources. While contracting 
officers would have the option of not publicizing contracting 
opportunities

[[Page 30666]]

below $100,000, they would still be expected to solicit a sufficient 
number of sources to promote competition to the maximum extent 
practicable and to ensure the purchase is advantageous to the 
Government.
    With respect to the evaluation of sources and awarding of 
contracts, the proposed rule would simplify the procedures associated 
with the conduct of negotiations, especially with respect to that which 
would otherwise be required under FAR Part 15. However, key source 
selection decision principles would remain unchanged. Among other 
things, contracting officers would be required to: (1) Make source 
selection decisions in a manner consistent with the solicitation (which 
would provide evaluation information to interested offerors); (2) treat 
prospective contractors fairly and impartially; (3) determine that 
prices are fair and reasonable; and (4) document their decisions.
    Of the approximately 6,000 commercial service acquisitions valued 
in excess of $25,000 awarded annually in Fiscal Years (FY) 1998 and 
1999 that might have been covered by this proposed rule, only a total 
of three (two in FY 1998 and one in FY 1999) of those acquisitions were 
in excess of $5 million. Less than 2,000 fell between $100,000 and $5 
million. Thus, where the differences between the proposed rule and the 
FAR are greatest (i.e., for acquisitions over $5 million), the number 
of potentially affected entities is minimal. While there are more 
entities seeking to make offers in the lower dollar range, the 
differences between the FAR and the proposed rule are considerably less 
extensive in that range.
    In toto, the proposed rule should ensure that competition is used 
effectively, as authorized and envisioned by Public Law 104-262, and in 
a manner that promotes strong participation by contractors small and 
large. As discussed in greater detail below, VA does not believe that 
the ways in which the proposed rule differs from the FAR would 
negatively impact competition. In addition, VA believes that the 
proposed rule would not negatively impact small business participation 
and intends to monitor, through the Federal Procurement Data System, 
the use of the procedures provided in this rule and the impact on VA's 
socioeconomic programs.
    For acquisitions exceeding $100,000, the proposed rule differs from 
the FAR in the following major areas:

------------------------------------------------------------------------
            FAR requirement                 Proposed rule requirement
------------------------------------------------------------------------
a. 8.001: Four levels of priority for    873.103: Only one priority
 acquiring services.                      source.
b. 6.101: Prior to 1/1/2002, for         873.104(c): Promote competition
 negotiated commercial acquisitions       to the maximum extent
 exceeding $5 million, promote full and   practicable (i. e., use
 open competition (i.e., use FAR Part     simplified procedures similar
 15).                                     to FAR Part 13).
c. 6.101: After 1/1/2002, for            873.104(c): Promote competition
 negotiated commercial acquisitions       to the maximum extent
 exceeding $100,000, promote full and     practicable (i. e., use
 open competition (i.e., use FAR Part     simplified procedures similar
 15).                                     to FAR Part 13).
d. 19.502-2(b): Set aside for small      873.107(a): Set aside for small
 business if two or more. No waiver       business if two or more. May
 provisions.                              be waived by the head of the
                                          contracting activity.
e. 5.201: Transmit notice of             873.108(a): Publicly announce
 acquisitions exceeding $25,000 to the    acquisitions exceeding
 Governmentwide point of entry (GPE).     $100,000 using a medium
                                          designed to obtain competition
                                          to the maximum extent
                                          practicable.
f. 6.302-1 & 5.101: Synopsize proposed   873.108(b): Acquisitions from
 acquisitions where only one source can   an affiliate or acquisitions
 satisfy agency needs in the GPE.         of hospital care, medical
                                          services, and other health-
                                          care services from a sole
                                          source are exempt from
                                          synopsis in the GPE.
g. 15.208 and 52.212-1(f): Late offers   873.109(d): Late offers and
 will not be considered. Late quotes      late quotes may be considered
 not addressed.                           if in the best interest of the
                                          Government.
h. 13.5: Prior to 1/1/2002, use of the   873.111(a)(2): Use of
 simplified procedures of FAR Part 13     simplified procedures similar
 is limited to acquisitions of $5         to FAR Part 13 may be used
 million or less.                         regardless of the dollar value
                                          of the acquisition. No
                                          expiration date for this
                                          authority.
i. 13.5: After 1/1/2002, use of the      873.111(a)(2): Use of
 simplified procedures of FAR Part 13     simplified procedures similar
 is limited to acquisitions of $100,000   to FAR Part 13 may be used
 or less.                                 regardless of the dollar value
                                          of the acquisition.
j. 15.202: Allows issuance of an         873.111(d): Allows multiphase
 advisory multi-step solicitation. All    solicitations and rejection of
 initial offerors may still submit full   offerors whose initial offers
 offers, even if advised that their       indicate that they are
 offers are unlikely to be viable.        unlikely to be viable
                                          contenders for award.
k. 15.306(d): May bargain with           873.111(e)(1): Expands on what
 offerors. Extensive limits on what can   can be discussed and on when
 be discussed when.                       discussions can be held.
                                          Allows the contracting officer
                                          to indicate a price or feature
                                          that offeror must meet or
                                          improve upon to remain
                                          competitive.
l. No comparable FAR provision.........  873.111(e)(2): Allows public
                                          posting of offer prices and
                                          subsequent submission of
                                          revised offers.
m. 15.304: Provides detailed             873.112(a): Provides agency
 requirements for evaluation factors.     acq. officials with broad
                                          discretion in establishing
                                          criteria, factors, and other
                                          evaluation information (except
                                          that price or cost must be
                                          evaluated in all acquisitions
                                          and past performance evaluated
                                          in acquisitions over the SAT).
n. 15.304(d): All factors and            873.112(d): The relative
 subfactors affecting award and their     importance of any evaluation
 relative importance shall be stated.     information must be stated.
o. 15.201/15.306: Detailed guidance on   873.113: Broad authority for
 exchanges of information with            the contracting officer to
 industry, categorized as pre-receipt     conduct exchanges with
 of proposals, post-receipt but prior     industry throughout the
 to establishing a competitive range,     acquisition process. Need not
 and post-establishment of a              conduct exchanges with all
 competitive range. Must conduct          offerors.
 discussions with all offerors in the
 competitive range.
p. 15.306(c): Contracting officer must   873.114: Contracting officer
 establish a competitive range if         may establish a best value
 discussions are to be held.              pool.
q. 15.306(c)(2): Contracting officer     873.114(b): Contracting officer
 may limit number of proposals to         may state in the solicitation
 greatest number that will permit         a maximum number of offerors
 efficient competition.                   that will be considered in the
                                          best value pool.

[[Page 30667]]

 
r. 15.307: Each offeror in the           873.115: Contracting officer
 competitive range shall be asked to      may request revisions as often
 submit a final proposal revision.        as needed. Contracting officer
 Contracting officer shall establish a    is not required to establish a
 common cutoff date for all final         common cutoff date for all
 proposal revisions.                      offerors.
s. 15.505: Offerors excluded from the    873.118: Offerors excluded from
 competitive range may request a          the competition under an RFP
 debriefing before award. Contracting     may request a debriefing.
 officer may delay the debriefing if in   Contracting officer may
 the best interest of the Government.     provide a pre-award debriefing
 Contracting officer must document the    if determined to be in the
 reasons for the delay.                   best interest of the
                                          Government. No documentation
                                          is required if a pre-award
                                          debriefing is not provided.
------------------------------------------------------------------------

    The following is a discussion of the above differences and their 
impact on competition:
    a. As noted in the SUPPLEMENTARY INFORMATION above, FAR 8.001(a)(2) 
sets forth four levels of priority for the acquisition of services. 
These are, in descending order of priority: (i) Services available from 
the Committee for Purchase from People who are Blind or Severely 
Disabled; (ii) mandatory Federal Supply Schedules (FSS); (iii) optional 
use FSS; and (iv) Federal Prison Industries, Inc., or commercial 
sources (including educational and non-profit institutions). Proposed 
section 873.103 would exempt VA from the provisions of FAR 8.001(a)(2) 
regarding the lowest three levels of priority. For VA, there are no 
longer any mandatory use FSS (the highest level of priority of the 
three levels proposed for elimination), so elimination of this priority 
level has no impact. As to the second level, optional use FSS, even 
without the priority levels, VA contracting officers would still be 
able to place delivery orders against optional use FSS contracts in 
accordance with FAR 8.404. However, they would not be required to do so 
by the list of priority sources. Under the proposed rule, it would be 
at the contracting officer's option whether or not to issue a delivery 
order against an optional use FSS contract or to pursue another 
contracting tool. If a contracting officer issued a solicitation for 
services instead of placing a delivery order with an optional use FSS 
contractor, optional use FSS contractors, Federal Prison Industries, 
Inc., and commercial sources would have an opportunity to compete. This 
provision of the proposed rule may provide firms, including small 
businesses, which chose not to participate in the FSS program with 
additional opportunities to compete. The decision on whether or not to 
use the FSS program would not affect whether award was made to a small 
business under the optional use FSS program or to a small business 
under a solicitation. We believe that this provision would result in 
minimal, if any, impact on small business and little change in the 
number of awards to small business. However, it does have the potential 
to increase, rather than decrease, competition.
    b. Until January 1, 2002, the FAR allows use of the simplified 
provisions of FAR Part 13 for the acquisition of commercial services 
not to exceed $5 million in value. For negotiated acquisitions 
exceeding $5 million, the FAR requires use of the more formal 
negotiation procedures of FAR Part 15. The proposed rule differs from 
the FAR by allowing use of simplified procedures similar to those in 
FAR Part 13 for all acquisitions. However, competition would still be 
required under the proposed rule and all offers received would have to 
be considered (see 873.104(c)). The negotiation method used for the 
acquisition, whether the procedures of the FAR or the more simplified 
procedures of this proposed rule, would not, in our opinion, have an 
impact on competition or on whether or not award would be made to a 
small business.
    c. The test provisions of FAR 13.5 are scheduled to expire on 
January 1, 2002. If those test provisions are not renewed or extended, 
after that date, all negotiated commercial acquisitions conducted under 
the FAR exceeding $100,000 will have to be conducted using the formal 
procedures of FAR Part 15. However, this proposed rule would allow VA 
to continue to use simplified procedures to conduct such acquisitions. 
Again, as noted in ``b.'' immediately above, competition would still be 
required under the proposed rule. As discussed in paragraph ``e.'' 
below, the proposed rule would require public announcement of proposed 
contract actions using methods that maximize effective dissemination 
and would require that all offers received be considered. The proposed 
rule would allow contracting officers to use simplified negotiation 
procedures rather than the more formal procedures of FAR Part 15. The 
method of negotiation used should not negatively impact competition or 
affect whether or not award would be made to a small business.
    d. The provisions of section 873.107 regarding the waiver of small 
business set-asides are addressed in the Initial Regulatory Flexibility 
Analysis.
    e. Although the proposed rule differs from the FAR in not requiring 
publication of contracting opportunities in the Governmentwide point of 
entry (GPE), the proposed rule (at 873.108) would require contracting 
officers to publicly announce proposed procurements over $100,000 using 
those means necessary to ensure maximum effective dissemination of 
information on the proposed acquisition. Thus, for example, if the 
contracting officer determined that the GPE was the most effective tool 
for advising interested offerors of an opportunity over $100,000, 
contracting officers would be expected to use the GPE. For acquisitions 
under $100,000, contracting officers would be expected to solicit a 
sufficient number of sources to promote competition to the maximum 
extent practicable. These changes should not reduce competition but 
rather improve the efficiency by which VA solicits interested sources. 
Additional discussion of 873.108 can be found in the Initial Regulatory 
Flexibility Analysis.
    f. The provisions of section 873.108 regarding announcing 
acquisitions in the GPE are addressed in the Initial Regulatory 
Flexibility Analysis.
    g. The issue regarding acceptance of late offers is addressed 
below.
    h. and i. The use of simplified procedures similar to those of FAR 
Part 13 for commercial service acquisitions, versus use of the more 
formal procedures of FAR Part 15, is addressed in paragraph b. above.
    j. The FAR allows the contracting officer to issue an advisory 
multi-step solicitation. Initial offers are submitted containing 
limited information. All initial offerors can proceed to submit full 
offers, even if one or more of those offerors are advised that, based 
on their initial offers, their offers are unlikely to be viable. This 
proposed rule contains similar provisions, with the exception that, 
under this proposed rule, offerors whose initial offers indicate that 
they are unlikely to be viable competitors could be excluded from 
further participation in the acquisition. This

[[Page 30668]]

proposed rule would be beneficial to offerors by relieving them of any 
burden to prepare final offers when those offers are unlikely to 
receive award and would be beneficial to the Government by eliminating 
a requirement to evaluate full proposals from firms that are unlikely 
to receive award. The proposed rule would save time and effort on both 
the offeror's and the Government's part. Although the procedure would 
authorize mandatory ``downselects,'' the impact on competition should 
be minimal. While downselects under the multi-step process authorized 
by FAR Part 15 are advisory only, we believe that, in most instances, 
sources advised that they are unlikely to receive award will not 
compete. The proposed rule offers the efficiency of being able to 
exclude the less than highly competitive offeror that occasionally may 
wish to pursue its offer under the Part 15 process (but would not add 
significantly to the overall competitive pressures of the source 
selection, given its comparatively weaker competitive position).
    k. The FAR allows contracting officers to bargain with offerors, 
but places limits on what can be discussed when. This proposed rule 
would expand on when discussions (called ``exchanges'' in the proposed 
rule) could take place and would expand on what could be discussed. The 
intent of the proposed rule is to ensure that there is a complete 
understanding between the Government and the offerors prior to making 
an award decision. In addition, the proposed rule would allow the 
contracting officer to indicate a price, contract term or condition, 
feature or requirement the offeror would have to meet or improve upon 
in order to stay competitive. These provisions would help ensure VA 
acquires the best value services available but should have no impact on 
the number of offers received and thus no impact on the amount of 
competition.
    l. The proposed rule would allow the contracting officer to 
publicly post all prices received on an offer and permit offerors to 
subsequently revise their offers. There are no similar provisions in 
the FAR. Since this provision would apply equally to all offerors and 
since it would apply only after offers had been submitted, we do not 
expect it to have a negative impact on the number of offers received or 
to thereby limit competition.
    m. The FAR specifies requirements for evaluation factors. This 
proposed rule would provide broad discretion to agency acquisition 
officials to establish evaluation information. How the factors/
information would be structured and what factors/information the 
Government would use to evaluate offers should have little, if any, 
impact on competition. If a firm is capable of, and interested in, 
providing the service, the firm would submit an offer based on the 
factors/information provided. We do not expect any reduction in the 
number of offers received based on this provision.
    n. The FAR requires that all evaluation factors and subfactors and 
their relative importance be stated in the solicitation. This proposed 
rule would require that the evaluation information be stated in the 
solicitation and that the relative importance of those evaluation 
information items be stated. Under the proposed rule, the contracting 
officer would have broad discretion to determine what to include as 
evaluation information, but this provision should have no effect on the 
amount of competition expected under such solicitations. There is no 
reason to suspect that fewer firms would submit offers because of this 
provision.
    o. The FAR contains guidance on, and requirements for, conducting 
discussions with vendors. If discussions are held, the FAR requires 
that the contracting officer hold discussions with all offerors, even 
if there is nothing to discuss. The proposed rule at section 873.113 
would simplify the negotiation process by providing the contracting 
officer with broad discretion on what to discuss and on when and how 
those discussions are to be conducted. In addition, the proposed rule 
provides that the contracting officer need hold discussions only if 
there is something to discuss. The intent of the proposed rule is to 
simplify the negotiation process while ensuring that there is a firm 
understanding between the Government and the offerors prior to making 
an award decision. We believe that these provisions would have no 
effect on the number of firms that submit offers on any particular 
solicitation and that these provisions are neutral as to whether or not 
award is made to a small business.
    p. The FAR requires the contracting officer to establish a 
competitive range if discussions are to be held, while the proposed 
rule at section 873.114 would provide that the establishment of a best 
value pool (similar to a competitive range) would be optional. This 
provision would have no effect on the number of firms submitting offers 
on any particular solicitation. If a best value pool is not 
established, then all offers received would be considered to be in 
contention for award.
    q. The FAR currently allows the contracting officer to limit the 
number of firms in the competitive range to the greatest number that 
will permit an efficient competition. The proposed rule at section 
873.114 would provide a similar method for limiting the number of firms 
in the competitive range, allowing the contracting officer to set, in 
advance in the solicitation, a maximum for the number of firms that 
would be considered in the best value pool. No dollar threshold is 
proposed for use of this authority. All firms submitting offers would 
be evaluated, but only the top 3 (or whatever number set by the 
contracting officer) would be included in the best value pool. Further 
negotiations would then be conducted with those top 3 firms. Again, we 
believe this provision would not have an impact on whether or not a 
firm decides to submit an offer or on whether or not a small firm 
versus a large firm was selected for inclusion in the best value pool.
    r. The FAR requires that each offeror in the competitive range be 
requested to submit a final proposal revision and that a common cut-of 
date be established for receipt of those final proposal revisions. This 
proposed rule at section 873.115 would allow the contracting officer to 
hold discussions (exchanges) with offerors as often as needed, but if 
there was no need to hold discussions with a firm that had submitted an 
outstanding offer, there would be no requirement to do so. Offerors 
could submit revised offers at any time. Each firm with whom exchanges 
were to be held would be provided a time period during which it may 
submit a revised offer. Award would be made after the last time period 
had expired. Again, these procedures would all be applicable only after 
initial offers had been received. We believe the presence or lack of 
these procedures would have no impact on whether a firm decides to 
submit an offer or on whether a small business, versus a large 
business, received award.
    s. The FAR requires the contracting officer to make every effort to 
provide a pre-award debriefing to offerors excluded from the 
competition, if so requested. The debriefing may be delayed if the 
delay is in the best interest of the Government. The reasons for the 
delay must be documented in writing. This proposed rule at section 
873.118 would allow the contracting officer more discretion in deciding 
whether or not to provide a pre-award debriefing and would remove the 
requirement for written justification if the debriefing is delayed. 
Post award debriefings would still be required, as provided in the FAR. 
This provision would simplify and expedite the award process. We 
believe the presence or lack of this provision would have little to no

[[Page 30669]]

effect on whether a firm decided to submit a bid on any particular 
solicitation or on whether a small business received award. 
Accordingly, we believe this provision should have little effect on 
competition.
    Based on the above, it is our belief that the proposed rule would 
not limit competition.
    Advocacy contended that the original proposed rule's provisions 
allowing the consideration of offers received after the closing date of 
a solicitation would negatively impact competition. No changes to this 
new proposed rule have been made based on this comment. Current General 
Accounting Office (GAO) protest decisions permit an agency under 
certain circumstances to accept a late proposal by extending the due 
date for receipt of proposals. Ivey Mechanical Co., Comp. Gen. Dec. B-
272764, 96-2 CPD para. 83. With regard to quotes, current GAO protest 
decisions state that if a request for quotation (RFQ) does not contain 
a late quotations clause, but merely requests quotations by a certain 
date, that date is not considered a firm date for the receipt of 
quotations. In such a case, the agency is not precluded from 
considering a quotation received after that date, provided that no 
substantial activity has transpired in evaluating quotes and the other 
quoters would not be prejudiced. Instruments & Controls Serv. Co., 65 
Comp. Gen. 685 (1986). Since offers and quotes are not publicly 
disclosed, vendors are not prejudiced by consideration of offers or 
quotes received late. Accordingly, this proposed rule concerning 
acceptance of late quotations or proposals essentially restates 
existing Government contract law and procedure. In our view, this 
provision would be neutral regarding impacts on small business versus 
large business. There is no reason to believe that late quotations or 
proposals would more likely be submitted by large businesses than by 
small businesses.
    Several comments were received from the Small Business 
Administration (SBA).
    SBA questioned whether the term ``sole source,'' as used in section 
873.104, accurately reflects a common understanding of the term ``sole 
source'' as there being only one available source. No changes are made 
to this revised proposed rule based on this comment. In our view, the 
term ``sole source,'' as used in this revised proposed rule, is 
consistent with the definition of a ``sole source acquisition'' as 
provided in FAR 6.003, meaning that negotiations are conducted with 
only one source. Under the FAR definition, an acquisition would be a 
``sole source acquisition'' if negotiations were conducted with only 
one source, as would be the case for a VA acquisition from an 
affiliated institution, even if there were other sources that could 
also provide the service.
    Sections 873.104(c) and 873.108(a) include the term ``as 
appropriate.'' SBA opposed the inclusion of this term in the rule based 
on an assertion that it does not appear in 38 U.S.C. 8153(a)(3)(B)(ii). 
No changes are made to this revised proposed rule based on this 
comment. The cited statutory provisions were amended by section 402(e) 
of Public Law 105-114 to include this term.
    SBA recommended that VA develop guidelines to define market 
research in section 873.107. We agree with the comment and made a 
change to section 807.107. The FAR already includes guidelines to 
define market research at section 10.002(b). The applicable provisions 
of section 10.002(b) would be useful in conducting market research for 
commercial services. Therefore, we have incorporated the provisions of 
FAR 10.002(b) into the guidance on market research contained in this 
revised proposed rule.
    SBA suggested that we revise section 873.107 to require the head of 
the contracting activity to submit copies of approved waivers of small 
business set asides to the Director, VA Office of Small and 
Disadvantaged Business Utilization, and to the Assistant Administrator, 
SBA Office of Prime Contracting. No change was made to this revised 
proposed rule based on this comment. We believe that if an inter-
governmental agreement of this nature were to be established, it would 
not need to be included in regulations.
    SBA raised concerns with the provision at section 873.108(c) making 
public announcement optional for procurement opportunities below the 
SAT. No changes were made to this revised proposed rule based on this 
comment. Even though public announcements are not required by the rule, 
contracting officers are expected to solicit a sufficient number of 
sources to promote competition to the maximum extent practicable and 
ensure that the purchase is advantageous to the Government, based, as 
appropriate, on either price alone or price and other factors. Public 
Law 104-262 grants VA authority to ``permit all responsible sources, as 
appropriate, to submit a bid, proposal, or quotation * * *.'' (emphasis 
added) and to ``prescribe simplified procedures for the procurement of 
health-care resources.'' As provided in the proposed rule, VA 
contracting officers are required to obtain competition to the maximum 
extent practicable. The ``as appropriate'' provision of Public Law 104-
262 permits VA to determine what is appropriate regarding announcing 
the solicitations valued below the SAT. Further, Public Law 104-262 
states that acquisitions conducted in accordance with these simplified 
procedures ``may be conducted without regard to any law or regulation 
that would otherwise require the use of competitive procedures * * *.'' 
Accordingly, the provisions of section 873.108(c) are consistent with 
statute.
    SBA suggested that VA select one method to publicize its 
procurement opportunities. No change was made to this revised proposed 
rule based on this comment. Changing technology makes selection of one 
alternative too limiting. The intent of this proposed rule is to 
maximize the options available for public announcements and to maximize 
the effective distribution of information on VA solicitations. 
Contracting officers should be free to select the methods for 
announcing acquisitions that are most appropriate for the type of 
acquisition being conducted.
    SBA objected to the provisions at section 873.111(a)(2) of the 
original proposed rule which provide that, for acquisitions below the 
simplified acquisition threshold ($100,000), two quotations will be 
considered as meeting the requirement for competition to the maximum 
extent practicable. Based on subsequent discussions held with a 
representative from the SBA Office of Advocacy, changes have been made 
to this section. The provision providing for two quotations has been 
removed. The requirements of FAR 13.104 would thus apply regarding 
obtaining competition to the maximum extent practicable.
    SBA pointed out that section 873.118, Debriefings, only addressed 
debriefings for multiphase or best value pool acquisitions, and did not 
address debriefings for requests for quotations (RFQs), sealed bids, or 
negotiated acquisitions that are not multiphase or best value pools. In 
this regard, SBA suggested that debriefings be required either after an 
offeror is eliminated from the competition or after contract award. 
Based on this comment, changes are made to this proposed rule. The FAR 
does not require debriefings for RFQs or sealed bids. In addition, 
while the FAR at section 15.505(b) requires that the contracting 
officer ``make every effort to debrief an unsuccessful offeror as soon 
as practicable,'' it allows the contracting officer to refuse the 
request for a pre-award debriefing if providing the debriefing is not 
in the Government's

[[Page 30670]]

best interest. The reasons for the denial must be documented in the 
contract file. The intent of this proposed rule is to simply and 
expedite the award process. Towards this end, the proposed rule would 
remove some of the administrative burden imposed by the FAR, eliminate 
the documentation requirements of the FAR, and make pre-award 
debriefings clearly optional. Making pre-award debriefings optional 
would help expedite the award process. Post-award debriefings would 
still be required for any firm requesting a debriefing as currently 
provided in the FAR. Where this proposed rule is silent, existing FAR 
requirements would apply. Thus, for RFQs, the ``request for 
information'' requirements of FAR 13.106-3(d) would still apply. For 
sealed bids, the ``information to bidders'' requirements of FAR 14.409 
would still apply. Based on the comment, the references to multiphase 
acquisitions and best value pools have been replaced with a reference 
to a ``request for proposals (RFP)'' to clarify that this section would 
apply to all RFPs conducted under this authority.
    A VA contracting officer objected to the proposed regulatory 
requirement of section 873.105 that the contracting officer form a team 
for each acquisition of commercial services or the use of medical 
equipment or space conducted under the authority of 38 U.S.C. 8153. We 
have made changes to this revised proposed rule based on this comment. 
Prior to the enactment of Public Law 104-262, 38 U.S.C. 8153 only 
authorized VA to acquire specialized medical services. Public Law 104-
262 expanded the types of services that can be acquired under the 
authority of 38 U.S.C. 8153 to include any health-care resource that is 
a commercial service or the use of medical equipment or space. These 
proposed simplified procedures have been drafted to cover this expanded 
authority. However, we expect these simplified acquisition procedures 
to continue to be used primarily for the acquisition of medical 
services. Such acquisitions are usually highly complex and of 
significant dollar value. It is critical to the success of such 
acquisitions that appropriate staff at the medical center fully 
cooperate with the contracting officer in the development of 
specifications, the conduct of the acquisition, as appropriate, and in 
the administration of the contract. We believe this can best be 
accomplished by the formation of a team. The composition of the team is 
to be determined by the contracting officer and the team would not need 
to be the same for every acquisition. The team could consist of as few 
as two people, the requestor and the contracting officer. While we feel 
a team is necessary for complex, high dollar value acquisitions, we 
agree with the commenter that a team may not be necessary for simple 
acquisitions of low dollar value. Therefore, based on the comment, we 
have proposed to set a dollar threshold of $100,000 (the SAT) for the 
requirement to form a team.
    One commenter expressed concern that, if adopted, the rule would 
effectively limit competition and prevent textile rental companies from 
obtaining VA laundry service contracts. No changes are made to this 
revised proposed rule based on this comment. We do not believe this 
revised proposed rule would have an effect on whether textile rental 
companies obtain VA laundry service contracts. We believe the pertinent 
issue raised by the commenter concerns VA decisions on whether or not 
to compete laundry services. Those determinations are beyond the scope 
of and not addressed in the proposed rule.
    One commenter objected to the provisions of the proposed rule 
exempting VA from provisions of FAR and VAAR. No changes are made to 
this revised proposed rule based on this comment. Public Law 104-262 
specifically grants VA authority to make such exemptions.
    One commenter alleged that the rule attempts to waive the Economy 
Act and allow VA to buy commercial services from other Government 
agencies with few restrictions. No changes are made to this revised 
proposed rule based on this comment. Acquisitions under the Economy Act 
and FAR Subpart 17.5 are not addressed in this proposed rule. In 
addition, this proposed rule does not cover acquisitions of health-care 
resources from the Department of Defense (DoD). Under 38 U.S.C. 8111, 
VA has specific authority to acquire health-care resources from DoD. 
This proposed rule, however, does cover acquisitions from other Federal 
agencies. The statute upon which this proposed rule is based, 38 U.S.C. 
8153, provides that VA may make arrangements by contract or other form 
of agreement for the mutual use or exchange of use of health-care 
resources with ``any health-care provider, or other entity or 
individual.'' These terms include other Federal agencies. Thus, the 
statute specifically authorizes VA to acquire commercial services or 
the use of medical equipment or space from other Federal agencies. 
However, at this time, we have no reason to believe that other Federal 
agencies will submit bids, proposals, or quotations in response to VA 
solicitations for commercial services or the use of medical equipment 
or space.
    One commenter expressed concern regarding the vague language used 
in the proposed rule and the potential negative affects thereof on 
competition and suggested that the final rule define and give examples 
for the terms ``best interest of the Government'' and ``contracting 
officer's discretion.'' No changes are made to this revised proposed 
rule based on this comment. Circumstances vary widely and it would be 
difficult, if not impossible, to describe all circumstances where a 
decision is in the ``best interest of the Government'' or to define 
whether decisions subject to the ``contracting officer's discretion'' 
are either acceptable or not acceptable.
    One commenter requested that VA provide examples of how it intends 
to define the term ``reasonable,'' as used in the November 9, 1998, 
SUPPLEMENTARY INFORMATION portion of the Federal Register proposed rule 
notice. No changes are made to this revised proposed rule based on this 
comment. This term, as used in the SUPPLEMENTARY INFORMATION, was not a 
part of the regulation. Whether or not an action is ``reasonable'' 
depends on the circumstances. Defining what is reasonable in one set of 
circumstances might restrict action in another set of circumstances, 
even when the proposed action under that new set of circumstances could 
also be considered ``reasonable.'' This notwithstanding, contracting 
officers must conduct business with integrity, fairness, and openness. 
Under the proposed rule, contracting officers would remain subject to 
FAR 1.102-2(c)(3), which states that all contractors and prospective 
contractors shall be treated fairly and impartially but need not be 
treated the same.
    Two commenters addressed the provisions of the proposed rule at 
sections 801.602-70 and 801.602-71 regarding technical and legal review 
requirements for VA sales agreements. Changes are made to this revised 
proposed rule based on these comments. This proposed rule is not 
intended to apply to the sale of VA services. Therefore, provisions 
regarding technical and legal review of proposed VA sales agreements 
have been removed.
    One commenter requested clarification of section 806.302-5 
regarding the legal definition of the term ``affiliated institution.'' 
No changes are made to this revised proposed rule based on this 
comment. Pursuant to 38 U.S.C. 7302, VA may have affiliations

[[Page 30671]]

with schools of medicine, osteopathy, dentistry, nursing, pharmacy, 
optometry, podiatry, public health, or allied health professions, other 
institutions of higher learning, medical centers, academic health 
centers, hospitals, and such other public or nonprofit agencies, 
institutions, or organizations as the Secretary of Veterans Affairs 
considers appropriate.
    One commenter expressed concern with the provisions of the proposed 
rule exempting VA from the automatic small business set-aside 
provisions of the FAR for acquisitions between $2,500 and $100,000, 
from the FAR notification requirements for announcing commercial 
solicitations in the Commerce Business Daily (CBD), and from other FAR 
acquisition processes and techniques. The commenter expressed concern 
that the proposed rule gives contracting officers too much discretion. 
Changes were made to the exemption from the automatic set-aside 
provisions of FAR 13.003(b)(1) and 19.502-2(a) contained in the 
November 9, 1998, proposed rule based on these comments.
    We examined the exemption to the automatic set-aside of 
acquisitions between $2,500 and $100,000 for small business and 
determined that elimination of this exemption would not impact the 
ability of VA to conduct simplified acquisitions. Accordingly, we have 
removed that exemption from this revised proposed rule.
    Regarding a comment on the broad discretion given to contracting 
officers, that discretion is consistent with the reforms of the Federal 
Acquisition Streamlining Act and the Clinger-Cohen Act and other 
acquisition reform efforts. It provides contracting officers with 
authority to conduct acquisitions in a manner that is in the best 
interest of the Government. No changes were made to this revised 
proposed rule based on this comment.
    One commenter expressed concern regarding the statement contained 
in the proposed rule that VA is exempt from laws that require the use 
of competitive procedures. No changes were made to this revised 
proposed rule based on this comment. VA has statutory authority for 
this exemption. 38 U.S.C. 8153 specifically states that ``[I]f the 
health-care resource required is a commercial service, the use of 
medical equipment or space, and is not to be acquired from an entity 
described in subparagraph (A), any procurement of the resource may be 
conducted without regard to any law or regulation that would otherwise 
require the use of competitive procedures for procuring the resource, 
but only if the procurement is conducted in accordance with the 
simplified procedures prescribed pursuant to clause (ii).'' 38 U.S.C. 
8153 goes on to require, for acquisitions not conducted with 
affiliates, that the simplified procedures permit all responsible 
sources, as appropriate, to submit a bid, proposal, or quotation and 
that acquisitions conducted on a sole source basis be justified in 
writing. This proposed rule sets forth those simplified procedures. The 
commenter went on to state a belief that Congress intended that VA be 
covered under the newly enacted Federal Activities Inventory Reform 
(FAIR) Act and stated an expectation that VA will comply with all of 
the FAIR Act provisions. No changes are made to this revised proposed 
rule based on this comment. Issues concerning the FAIR Act are outside 
of the scope of and not addressed by this proposed rule.
    One comment from a VA contracting officer requested clarification 
of the distinction between the terms ``weighted,'' as used in the 
SUPPLEMENTARY INFORMATION portion of the proposed rule notice of 
November 9, 1998, and ``relative importance,'' as used in section 
873.112(d). The proposed rule at section 873.112(d) states that the 
relative importance of any evaluation information included in a 
solicitation shall be set forth therein. The SUPPLEMENTARY INFORMATION 
portion of the proposed rule of November 9, 1998, merely reflected 
that, consistent with FAR 15.304(d), the elements that are 
distinguished by ``relative importance'' are not required to be 
weighted.
    In addition to the changes noted above, several other changes were 
made to the proposed rule document published in the Federal Register on 
November 9, 1998, as follows:
     A statement exempting architect-engineer (A/E) services 
from the rule has been added to section 873.102. A/E services are 
currently acquired in accordance with 40 U.S.C. 541-544. It is not the 
intent of this proposed rule to change the way VHA acquires A/E 
services or to deviate from the requirements of 40 U.S.C. 541-544.
     Additional provisions have been added to sections 873.105 
and 873.112 regarding acquisition planning and the evaluation of past 
performance. These are important aspects of the acquisition process and 
warrant additional emphasis in the rule.
     A provision has been added to section 873.107 to clarify 
that the section only applies to acquisitions in excess of the micro-
purchase threshold. The FAR does not require set-aside of acquisitions 
below the micro-purchase threshold and this section was not intended to 
be more restrictive than the FAR.
     Based on comments received from SBA, the number of days 
provided in 873.107(b) for SBA to notify the contracting officer of 
their intent to appeal has been changed from 1 day to 2 days to 
correspond with the number of days provided in the FAR.
     A provision has been added to section 873.108(b) to 
clarify that the exemption to announcing sole source acquisitions in 
the GPE would also apply to sole source mutual use or exchange of use 
contracts. To the extent that VA would be acquiring services under such 
contracts, those contracts are ``acquisitions,'' as originally covered 
by this paragraph.
     A provision has been added to section 873.117 to clarify 
that it is at the contracting officer's option, rather than a 
requirement, to establish a binding contract when a request for 
quotation process was used to obtain quotes. As originally proposed in 
the November 9, 1998, document, this section could have been 
interpreted as requiring such action rather than making it optional.
     A Paperwork Reduction Act notice has been added to the 
proposed rule on a currently existing VAAR clause at section 852.207-
70, Report of employment under commercial activities, and the clause 
has been added to VAAR Part 812 for use in commercial item 
acquisitions.
     Based on updated Federal Procurement Data System data, the 
estimated number of respondents and total annual reporting and 
recordkeeping burden for clause 852.237-7, Indemnification and Medical 
Liability Insurance, has been reduced.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), 
collections of information are contained in the VAAR clauses at section 
852.207-70, Report of employment under commercial activities, and 
section 852.237-7, Indemnification and Medical Liability Insurance, as 
set forth in the SUPPLEMENTARY INFORMATION portion of this revised 
proposed rule. Although this document proposes to add the clauses at 
sections 852.207-70 and 852.237-7 for use in commercial item 
solicitations and contracts, this Paperwork Reduction Act notice of 
this document seeks approval for collections of information for both 
commercial and non-commercial item and service contracts for these 
clauses. These clauses can be used in both commercial and non-
commercial item and service solicitations and contracts. As required

[[Page 30672]]

under Sec. 3507(d) of the Act, VA has submitted a copy of this proposed 
rulemaking action to the Office of Management and Budget (OMB) for its 
review of the collection of information.
    OMB assigns control numbers to collections of information it 
approves. VA may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a 
currently valid OMB control number.
    Comments on the collection of information should be submitted to 
the Office of Management and Budget, Attention: Desk Officer for the 
Department of Veterans Affairs, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Director, Office of 
Regulations Management (02D), Department of Veterans Affairs, 810 
Vermont Avenue, NW., Washington, DC 20420. Comments should indicate 
that they are submitted in response to ``RIN 2900-AI71.''
    Title and Provision/Clause Number: Clause 852.207-70, Report of 
employment under commercial activities.
    Summary of collection of information: This clause would be used in 
solicitations for commercial services where the work is currently being 
performed by VA employees and where those employees might be displaced 
as a result of award to a commercial firm. The clause requires 
contractors awarded such contracts to provide, within 5 days of 
contract award, a list of employment openings, including salaries and 
benefits, and blank job application forms. The clause also requires the 
contractor, prior to the contract start date, to report: the names of 
adversely affected Federal employees offered employment openings; the 
date the offer was made; a description of the position; the date of 
acceptance and the effective date of employment; the date of rejection 
if an employee rejected an offer; the salary and benefits contained in 
any rejected offer; and the names of employees who applied but were not 
offered employment and the reasons for withholding offers to those 
employees. In addition, the clause requires the contractor, during the 
first 90 days of contract performance, to report the names of all 
persons hired or terminated under the contract.
    Description of need for information and proposed use of 
information: The information is required to assist the contracting 
officer in monitoring the contractor's compliance with the employment 
requirements of this clause and FAR clause 52.207-3, Right of First 
Refusal.
    Description of likely respondents: Contractors awarded contracts 
for commercial services which might result in the conversion, from in-
house to contract performance, of work currently being performed by VA 
employees.
    Estimated number of respondents: 200.
    Estimated frequency of responses: 5 reports per contract.
    Estimated average burden per collection: 30 minutes per report.
    Estimated total annual reporting and recordkeeping burden: 500 
hours.
    Title and Provision/Clause Number: Clause 852.237-7, 
Indemnification and Medical Liability Insurance.
    Summary of collection of information: This clause is used in 
solicitations for nonpersonal health-care services in lieu of FAR 
clause 52.237-7. It requires the apparent successful bidder/offeror, 
prior to contract award, to furnish evidence that the firm possesses 
the types and amounts of insurance required by the solicitation. 
Following contract award, the contractor must notify the contracting 
officer if there are any changes in the firm's insurance coverage 
during the contract period. Prior to award, this evidence is in the 
form of a certificate from the firm's insurance company. After award, 
it is in the form of a letter or other correspondence, plus additional 
certificates.
    Description of need for information and proposed use of 
information: The information is required to protect VA by ensuring that 
the firm to which award will be made possesses the types and amounts of 
insurance required by the solicitation. It helps ensure that VA will 
not be held liable for any negligent acts of the contractor and ensures 
that VA beneficiaries and the public are protected by adequate 
insurance coverage.
    Description of likely respondents: Apparent successful bidders/
offerors on solicitations for nonpersonal health-care services.
    Estimated number of respondents: 1,500.
    Estimated frequency of responses: Usually just once for each 
contract awarded.
    Estimated average burden per collection: 30 minutes.
    Estimated total annual reporting and recordkeeping burden: 750 
hours.
    The Department considers comments by the public on proposed 
collections of information in--
    Evaluating whether the proposed collections of information are 
necessary for the proper performance of the functions of the 
Department, including whether the information will have practical 
utility;
    Evaluating the accuracy of the Department's estimate of the burden 
of the proposed collections of information, including the validity of 
the methodology and assumptions used;
    Enhancing the quality, usefulness, and clarity of the information 
to be collected; and
    Minimizing the burden of the collections of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.
    OMB is required to make a decision concerning the proposed 
collection of information contained in this proposed rule between 30 
and 60 days after publication of this document in the Federal Register. 
Therefore, a comment to OMB is best assured of having its full effect 
if OMB receives it within 30 days of publication. This does not affect 
the deadline for the public to comment on the proposed regulation.

Regulatory Flexibility Act

Initial Regulatory Flexibility Analysis

    This initial regulatory flexibility analysis is provided to meet 
the requirements of the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.).
    a. A description of the reasons why action by the Department is 
being considered.
    Response: As more fully explained above, the proposed rule would 
amend the VAAR to implement the provisions of 38 U.S.C. 8151-8153, 
which authorize the Secretary of Veterans Affairs, in consultation with 
the Administrator of Federal Procurement Policy, to prescribe 
simplified procedures for the procurement of health-care resources. We 
believe the simplified procedures will allow VA to become more 
efficient in procuring health-care resources.
    b. A succinct statement of the objectives of, and legal basis for, 
the proposed rule.
    Response: The objective of the proposed rule is to allow VA to 
become more efficient in procuring health-care resources and thereby 
strengthen the medical programs of the Department and improve the 
quality of health care provided to veterans.
    The legal basis for the proposed rule is contained in 38 U.S.C. 
8151-8153, which provide that the Secretary, in consultation with the 
Administrator for Federal Procurement Policy, may prescribe simplified 
procedures for the procurement of health-care resources.

[[Page 30673]]

    c. A description of and, where feasible, an estimate of the number 
of small entities to which the proposed rule will apply.
    Response: The description of the small entities that could be 
affected by the proposed rule would be small entities that provide 
commercial services or the use of medical equipment or space to the 
health-care industry.
    We do not have precise figures on the number of small entities that 
could potentially be affected by the proposed rule. Any small entity 
that provides, or wishes to provide, commercial services or the use of 
medical equipment or space to VA health-care facilities could 
potentially be affected.
    However, the proposed rule would not apply to the majority of VA 
acquisitions. The proposed rule would apply only to competitive 
acquisitions of commercial services or the use of medical equipment or 
space conducted by the Veterans Health Administration (VHA) and which 
specifically reference the authority of 38 U.S.C. 8153. The proposed 
rule would not apply to acquisitions of supplies or equipment or to 
acquisitions on behalf of the Veterans Benefits Administration (VBA) or 
the National Cemetery Administration (NCA). Except for section 
873.108(b), the proposed rule would not apply to VHA sole source 
acquisitions from affiliated institutions or entities associated with 
affiliated institutions. The authority for VA to contract on a sole 
source basis with an institution affiliated with VA or with a medical 
practice group or other approved entity associated with an affiliate, 
addressed in the proposed rule at 873.108(b), is authorized by law and 
is not dependent upon this rulemaking. The proposed rule would not 
apply to acquisitions of services for which other specific authorities 
apply, such as acquisitions of nursing home care services, which are 
acquired under the authority of 38 U.S.C. 1720, or to acquisitions of 
non-commercial services, such as construction.
    We have no relevant data regarding commercial service acquisitions 
below $25,000. However, we expect little application of the proposed 
rule to acquisitions below $25,000. Existing FAR provisions for such 
acquisitions are already very simple and the provisions of the revised 
proposed rule likely would not provide significant benefit to the 
Government to warrant use of this authority.
    In Fiscal Year (FY) 1998, VHA reported approximately 6,000 
individual service transactions (excluding classification codes C, E, 
Q402, Y, and Z (architect/engineer, purchase of structures, nursing 
home, construction, and maintenance of real property, respectively), 
all of which we believe are not covered by the proposed rule) valued in 
excess of $25,000 to the Federal Procurement Data System. Of those 
transactions, approximately 3,000 were awarded to small businesses and 
approximately 900 were awarded to non-profit businesses. Similar 
figures were reported for FY 1999. Of the total acquisition dollars 
associated with these 6,000 annual awards, we estimate that in FY 1998, 
approximately 42 percent, and in FY 1999, approximately 44 percent, 
were awarded to small businesses.
    d. A description of the projected reporting, recordkeeping, and 
other compliance requirements of the proposed rule, including an 
estimate of the classes of small entities which would be subject to the 
requirement, and the type of professional skills necessary for 
preparation of the report or record.
    Response: The reporting or recordkeeping requirements of the 
clauses at section 852.207-70, Report of employment under commercial 
activities, and section 852.237-7, Indemnification and Medical 
Liability Insurance, are discussed in the Paperwork Reduction Act (PRA) 
portion of the proposed rule. The clause at section 852.207-70 requires 
the contractor, on contracts where current VA employees are displaced, 
to report on employment openings and on efforts to hire displaced VA 
employees. The clause at section 852.237-7 requires contractors, on 
contracts for nonpersonal health-care services, to provide evidence of 
liability insurance. The revised proposed rule imposes no new reporting 
or recordkeeping requirements not already required by the VAAR. 
Currently, the VAAR requires that these clauses be included in all 
applicable solicitations and contracts, i.e., contracts where VA 
employees might be displaced or contracts for nonpersonal health-care 
services. The rule proposes to provide clarification that these clauses 
would continue to be required in all applicable service contracts, 
including commercial service contracts issued under the authority of 38 
U.S.C. 8153. Small entities currently holding contracts where VA 
employees might be displaced or for nonpersonal health-care services 
are required to provide employment reports or evidence of liability 
insurance, as applicable. Under the revised proposed rule, there would 
be no change to those requirements and no new added requirements. There 
would be no additional small entities affected by the revised proposed 
rule that would not already be affected by the current regulations. No 
professional skills are necessary to comply with these reporting and 
recordkeeping requirements.
    e. An identification, to the extent practicable, of all relevant 
Federal rules which may duplicate, overlap or conflict with the rule.
    Response: The provisions of the proposed rule, if adopted, would 
take precedence over currently existing regulations in the FAR and 
VAAR. To the extent that the new rule would apply, there would be no 
conflict, duplication, or overlap with VA or other Federal rules.
    f. A description of any significant alternatives to the proposed 
rule which accomplish the stated objectives of applicable statutes and 
which minimize any significant economic impact of the proposed rule on 
small entities.
    Response: We believe that, with two exceptions, the provisions of 
the proposed rule, where those provisions differ from the FAR, are 
small business/large business neutral, i.e., they would have neither a 
positive nor a negative impact on small business or large business. The 
two exceptions concern the authority to waive FAR small business set-
aside provisions and changes concerning the transmission of 
solicitation notices to the Governmentwide point of entry (GPE).
    1. The proposed rule at section 873.107 contains a provision 
allowing the head of the contracting activity (HCA) to waive the set-
aside of an acquisition for small business. The HCA must determine that 
the waiver is in the best interest of the Government. The availability 
of this authority may result in acquisitions where small businesses 
have to compete against large businesses rather than compete only 
against other small businesses.
    The alternatives to this waiver authority that were considered in 
order to limit the impact of waivers on small businesses included 
having no waiver authority or limiting the application of that 
authority to specific types of acquisitions, such as acquisitions for 
medical services, or limiting the authority to acquisitions in excess 
of a certain dollar threshold. For the reasons stated below, we 
determined to place no limits, other than those contained in the 
revised proposed rule, on the application of this waiver authority.
    As noted above, the revised proposed rule would only apply to a 
limited number of acquisitions. We believe the waiver authority would 
be used in very few of those limited number of

[[Page 30674]]

acquisitions, primarily in acquisitions where it is critical to broaden 
the pool of sources considered in order to obtain the highest quality 
patient care services at reasonable prices. In such cases, it would not 
be in VA's best interest to exclude non-profit teaching hospitals and 
universities and other similar high quality large businesses from the 
competition. Small businesses could still compete and would have an 
equal opportunity to be considered for award. The availability of this 
authority, while most critical to direct patient care service 
acquisitions, could be a necessary element of other commercial service 
acquisitions that are critical to the optimum functioning of the 
medical centers.
    In some limited circumstances, the waiver authority of section 
873.107 may have a beneficial impact on small entities. As noted above, 
VA has authority to contract on a sole source basis with medical 
schools, hospitals, and clinics affiliated with VA. Medical schools, 
hospitals, and clinics are almost exclusively large or nonprofit 
businesses. Under the FAR, if a VA medical center wishes to seek 
competition for services currently being acquired from its affiliate, 
the affiliate would be excluded from bidding on that competition if 
there were two or more small businesses capable of providing the 
services. It is in VA's best interest to obtain state-of-the-art 
medical services from the highest qualified sources at reasonable 
prices. Without the waiver authority, VA medical centers would most 
likely continue to award sole source contracts to its affiliates rather 
than seek competition, since, under a competitive solicitation, those 
affiliates might be excluded as potential sources for those services. 
While VA medical centers might be willing to consider other sources, 
they generally are unwilling to exclude their affiliate as a potential 
source. However, under the waiver procedures of the proposed rule, VA 
would no longer be required to exclude its affiliates from 
consideration. Accordingly, VA medical centers may be more likely to 
issue competitive solicitations for highly technical medical services 
rather than acquire such services on a sole source basis from their 
affiliates. Rather than reducing small business access to VA 
acquisitions of medical services, the waiver process could result in 
increased access to such acquisitions by small businesses. In this 
regard, once this rule is in place, VA intends to monitor, through the 
Federal Procurement Data System, the use of the procedures provided in 
this proposed rule and the impact on VA's socioeconomic programs.
    2. The FAR requires that all proposed acquisitions, including sole 
source acquisitions, exceeding $25,000, with certain exceptions, be 
transmitted to the GPE. The revised proposed rule differs from the FAR 
in several ways. First, it provides, at section 873.108(a), that 
acquisitions exceeding the simplified acquisition threshold (SAT) 
(currently $100,000) would not have to be announced in the GPE. Rather, 
the revised proposed rule would require that contracting officers 
publicly announce such proposed acquisitions utilizing a medium 
designed to obtain competition to the maximum extent practicable. The 
revised proposed rule lists a number of examples for where the 
announcements may be accessed, including the GPE. The intent of the 
revised proposed rule is to maximize the dissemination of information 
regarding such proposed acquisitions, not to limit dissemination. Most 
acquisitions for services are of interest only to the local community. 
In many cases, it is impossible for a firm located some distance from a 
VA medical center to provide coronary bypass operations, X-ray or 
oncology services, or other services necessary to operate the medical 
center, on a timely basis. We believe that both small and large local 
service providers of health-care resources (e.g., hospitals and 
clinics) are more likely to be made aware of acquisition opportunities 
if the acquisitions are announced in mediums that are seen and read by 
the local service community or if they are contacted directly. 
Accordingly, we believe this provision of the proposed rule would tend 
to increase competition rather than decrease competition and provide 
small businesses with increased opportunities.
    Second, the proposed rule at section 873.108(b) would provide that 
sole source acquisitions from institutions affiliated with VA and from 
medical practice groups and other entities associated with an 
affiliated institution are exempt from the requirement for synopsis in 
the GPE. 38 U.S.C. 8153 specifically authorizes VA to acquire health-
care resources on a sole source basis from institutions affiliated with 
VA and from medical practice groups and other entities associated with 
an affiliated institution. Exempting such acquisitions from synopsis in 
the GPE is consistent with statute, which imposes no requirement for VA 
to solicit and consider any other offers. Thus, this provision of the 
proposed rule would have no impact on competition, since competition is 
not required under any circumstances.
    Section 873.108(b) would also exempt from publication sole source 
acquisitions of hospital care, medical services, and other health-care 
services from any source, whether or not the source is affiliated with 
VA. However, as required by 38 U.S.C. 8153(a)(3)(D), acquisitions from 
non-affiliates, if conducted on a sole source basis, must still be 
justified and approved. Acquisitions for hospital care, medical 
services, or other health-care services would usually be conducted on a 
sole source basis only if there was an emergency need for such 
services. Otherwise, the acquisitions would likely be conducted 
competitively, if not acquired from an affiliate. The FAR provides an 
exemption from synopsis in the GPE under conditions of unusual or 
compelling urgency and where the Government would be seriously injured 
by any delay due to the publication requirement. We expect that most of 
the sole source acquisitions of hospital care, medical services, and 
other health-care services covered by this provision will be conducted 
under conditions of unusual or compelling urgency. Such acquisitions 
would include emergency hospital care for a veteran in an area not 
served by a nearby VA medical center. Even under the FAR, this type of 
acquisition is exempt from synopsis in the GPE by virtue of its being 
an urgent and compelling acquisition. This provision of the proposed 
rule would simplify the acquisition process by freeing the contracting 
officer from having to make individual determinations regarding 
publication for each sole source acquisition of hospital care, medical 
services, and other health-care services. Since we expect most such 
acquisitions to already be exempt under the FAR, we believe this 
provision would have little, if any, impact on competition or on awards 
to small businesses.
    Third, the proposed rule at section 873.108(c) would exempt 
acquisitions below the SAT from the requirement for public 
announcement, including synopsis in the GPE. However, the rule at 
section 873.104 would require the contracting officer to seek 
competition to the maximum extent practicable and to permit all 
responsible sources, as appropriate, to submit a bid, proposal, or 
quotation. In addition, for acquisitions below the SAT, section 873.111 
states that contracting officers should solicit a sufficient number of 
sources to promote competition to the maximum extent practicable. 
Section 873.107 would require that acquisitions be set aside for small 
business. These

[[Page 30675]]

provisions would tend to mitigate any negative impact that section 
873.108(c) would have on small businesses.
    The alternatives to the above provisions regarding public 
announcements in the GPE that were considered were to eliminate these 
provisions and follow the provisions of the FAR or to limit the 
exemptions to specific categories of acquisitions, such as acquisitions 
for medical services. The objectives of the proposed rule are to allow 
VA to become more efficient in procuring health-care resources. The 
intent of this revised proposed rule is to provide procurement 
processes that are simpler and less time consuming than those of the 
FAR. As discussed above, we believe that the flexibility to select the 
public medium that best captures the awareness of interested sources 
will enable the Department to maximize the effective distribution of 
information on VA solicitations and more efficiently take advantage of 
competition without decreasing competition. For this reason, the 
provisions regarding publicizing contract actions have been retained 
without change.

List of Subjects

48 CFR Parts 801 and 852

    Government Procurement, Reporting and recordkeeping requirements.

48 CFR Parts 806, 812, 837, and 873

    Government procurement.

    Approved: February 15, 2001
Anthony J. Principi,
Secretary of Veterans Affairs.

    For the reasons set forth in the preamble, 48 CFR chapter 8 is 
proposed to be amended as follows:

PART 801--VETERANS AFFAIRS ACQUISITION REGULATIONS SYSTEM

    1. The authority citations for Part 801 continue to read as 
follows:

    Authority: 38 U.S.C. 501 and 40 U.S.C. 486(c).


801.301-70  [Amended]

    2. The chart in paragraph (c) of section 801.301-70 is amended by 
adding two new entries in numerical order to read as follows:


801.301-70  Paperwork Reduction Act requirements.

* * * * *
    (c) * * *

------------------------------------------------------------------------
                                                           Current OMB
 48 CFR part or section where identified and described     control No.
------------------------------------------------------------------------
 
                 *        *        *        *          *
852.207-70............................................     2900-[number]
                 *        *        *        *          *
852.237-7.............................................     2900-[number]
 
                 *        *        *        *          *
------------------------------------------------------------------------

801.602-70  [Amended]

    3. In 801.602-70, paragraphs (a)(4)(vi) and (a)(4)(vii) are revised 
to read as follows:


801.602-70  Legal/technical review requirements to be met prior to 
contract execution.

    (a)* * *
    (4)* * *
    (vi) Competitive contracts exceeding $1.5 million and 
noncompetitive contracts exceeding $500,000 for the acquisition of 
scarce medical specialist services acquired under the authority of 38 
U.S.C. 7409.
    (vii) Competitive contracts exceeding $1.5 million and 
noncompetitive contracts exceeding $500,000 for the acquisition of 
health-care resources acquired under the authority of 38 U.S.C. 8151-
8153.
* * * * *


801.602-71  [Amended]

    4. In 801.602-71, paragraph (b)(2) is revised to read as follows:


801.602-71  Processing contracts for legal/technical review.

* * * * *
    (b) * * *
    (2) Proposed contracts and agreements for scarce medical specialist 
services or for the mutual use or exchange of use of health-care 
resources, as specified in 801.602-70(a)(4)(vi) and (a)(4)(vii), will 
be forwarded to Central Office in accordance with Veterans Health 
Administration directives and VA Manual M-1, Part 1, Chapter 34, for 
review and submission to the Office of the General Counsel (025).
* * * * *


801.602-72  [Amended]

    5. In 801.602-72, paragraph (b) is revised to read as follows:


801.602-72  Documents to be submitted for legal review.

* * * * *
    (b) For proposed contracts and agreements for scarce medical 
specialist services or for the mutual use or exchange of use of health-
care resources, as specified in 801.602-70(a)(4)(vi) and (a)(4)(vii), 
the documents referred to in VA Manual M-1, Part 1, Chapter 34.
* * * * *

PART 806--COMPETITION REQUIREMENTS

    6. The authority citations for Part 806 continue to read as 
follows:

    Authority: 38 U.S.C. 501 and 40 U.S.C. 486(c).


806.302-5  [Amended]

    7.-8. In 806.302-5, paragraph (b) is revised, paragraph (c) is 
redesignated as paragraph (d), and a new paragraph (c) is added to read 
as follows:


806.302-5  Authorized or required by statute.

* * * * *
    (b) Contracts or agreements for the mutual use or exchange of use 
of health-care resources, consisting of commercial services, the use of 
medical equipment or space, or research, negotiated under the authority 
of 38 U.S.C. 8151-8153, are approved for other than full and open 
competition only when such contracts or agreements are with 
institutions affiliated with the Department of Veterans Affairs, 
pursuant to 38 U.S.C. 7302, with medical practice groups or other 
approved entities associated with affiliated institutions (entities 
will be approved if determined legally to be associated with affiliated 
institutions), or with blood banks, organ banks, or research centers. 
The justification and approval requirements of FAR 6.303 and VAAR 
806.304 do not apply to such contracts or agreements.


806.302-5  Authorized or required by statute.

    (c) Contracts or agreements for the mutual use or exchange of use 
of health-care resources, consisting of commercial services or the use 
of medical equipment or space, negotiated under the authority of 38 
U.S.C. 8151-8153, and not acquired under the authority of paragraph (b) 
of this section, may be conducted without regard to any law or 
regulation that would otherwise require the use of competitive 
procedures for procuring resources, provided the procurement is 
conducted in accordance with the simplified procedures contained in 
(VAAR) 48 CFR part 873. The justification and approval requirements of 
FAR 6.303 and VAAR 806.304 shall apply to such contracts or agreements 
conducted on a sole source basis.
* * * * *

PART 812--ACQUISITION OF COMMERCIAL ITEMS

    9. The authority citations for Part 812 continue to read as 
follows:


[[Page 30676]]


    Authority: 38 U.S.C. 501 and 40 U.S.C. 486(c).


812.301  [Amended]

    10. In 812.301, paragraph (c) is revised and paragraph (g) is added 
to read as follows:


812.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (c) The provisions and clauses in the following VAAR sections must 
be used, when appropriate, in accordance with the prescriptions 
contained therein or elsewhere in the VAAR, in requests for quotations, 
solicitations, or contracts for the acquisition of commercial items:
    (1) 852.207-70, Report of employment under commercial activities.
    (2) 852.211-71, Guarantee clause.
    (3) 852.211-72, Inspection.
    (4) 852.211-73, Frozen processed foods.
    (5) 852.211-74, Telecommunications equipment.
    (6) 852.211-75, Technical industry standards.
    (7) 852.214-70, Caution to bidders-bid envelopes.
    (8) 852.216-70, Estimated quantities for requirements contracts.
    (9) 852.229-70, Purchases from patient's funds.
    (10) 852.229-71, Purchases for patients using Government funds and/
or personal funds of patients.
    (11) 852.233-70, Protest content.
    (12) 852.237-7, Indemnification and Medical Liability Insurance.
    (13) 852.237-70, Contractor responsibilities.
    (14) 852.237-71, Indemnification and insurance (vehicle and 
aircraft service contracts).
    (15) 852.252-1, Provisions or clauses requiring completion by the 
offeror or prospective contractor.
    (16) 852.270-1, Representatives of contracting officers.
    (17) 852.270-2, Bread and bakery products.
    (18) 852.270-3, Purchase of shellfish.
* * * * *
    (g) When soliciting for commercial services or the use of medical 
equipment or space under the authority of (VAAR) 48 CFR part 873 and 38 
U.S.C. 8151-8153, the provisions and clauses in the following VAAR 
sections may be used in accordance with the prescriptions contained 
therein or elsewhere in the VAAR:
    (1) 852.273-70, Late offers.
    (2) 852.273-71, Alternative negotiation techniques.
    (3) 852.273-72, Alternative evaluation.
    (4) 852.273-73, Evaluation--health-care resources.
    (5) 852.273-74, Award without exchanges.

PART 837--SERVICE CONTRACTING

    11. The authority citations for Part 837 continue to read as 
follows:

    Authority: 38 U.S.C. 501 and 40 U.S.C. 486(c).


837.403  [Amended]

    12. Section 837.403 is amended by adding, at the end of the first 
sentence, ``, including solicitations and contracts for nonpersonal 
health-care services awarded under the authority of 38 U.S.C. 8151-8153 
and (VAAR) 48 CFR part 873''.

PART 852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    13. The authority citations for Part 852 continue to read as 
follows:

    Authority: 38 U.S.C. 501 and 40 U.S.C. 486(c).

    14. In section 852.207-70, the introductory text is revised to read 
as follows:


852.207-70  Report of employment under commercial activities.

    As prescribed in 807.304-77 and 873.110, the following clause must 
be included in A-76 cost comparison solicitations and solicitations 
issued under the authority of 38 U.S.C. 8151-8153 which may result in 
the conversion, from in-house to contract performance, of work 
currently being performed by VA employees:
* * * * *
    15. Section 852.273-70 is added to read as follows:


852.273-70  Late offers.

    As prescribed in 873.110(a), insert the following provision:

LATE OFFERS (Date)

    This provision replaces paragraph (f) of FAR provision 52.212-1. 
Offers or modifications of offers received after the time set forth 
in a request for quotations or request for proposals may be 
considered, at the discretion of the contracting officer, if 
determined to be in the best interest of the Government. Late bids 
submitted in response to an invitation for bid (IFB) will not be 
considered.

(End of provision)

    16. Section 852.273-71 is added to read as follows:


852.273-71  Alternative negotiation techniques.

    As prescribed in 873.110(b), insert the following provision:

ALTERNATIVE NEGOTIATION TECHNIQUES (Date)

    The contracting officer may elect to use the alternative 
negotiation techniques described in section 873.111(e) of 48 Code of 
Federal Regulations Chapter 8 in conducting this procurement. If 
used, offerors may respond by maintaining offers as originally 
submitted, revising offers, or submitting an alternative offer. The 
Government may consider initial offers unless revised or withdrawn, 
revised offers, and alternative offers in making the award. Revising 
an offer does not guarantee an offeror an award.

(End of provision)

    17. Section 852.273-72 is added to read as follows:


852.273-72  Alternative evaluation.

    As prescribed in 873.110(c), insert the following provision:

ALTERNATIVE EVALUATION (Date)

    (a) The Government will award a contract resulting from this 
solicitation to the responsible offeror submitting the lowest priced 
offer that conforms to the solicitation. During the specified period 
for receipt of offers, the amount of the lowest offer will be posted 
and may be viewed by--[Contracting officer insert description of how 
the information may be viewed electronically or otherwise]--. 
Offerors may revise offers anytime during the specified period. At 
the end of the specified time period for receipt of offers, the 
responsible offeror submitting the lowest priced offer will be in 
line for award.
    (b) Except when it is determined not to be in the Government's 
best interest, the Government will evaluate offers for award 
purposes by adding the total price for all options to the total 
price for the basic requirement. The Government may determine that 
an offer is unacceptable if the option prices are materially 
unbalanced. Evaluation of options shall not obligate the Government 
to exercise the option(s).

(End of provision)

    18. Section 852.273-73 is added to read as follows:


852.273-73  Evaluation--health-care resources.

    As prescribed in 873.110(d), in lieu of FAR provision 52.212-2, the 
contracting officer may insert a provision substantially as follows:

EVALUATION--HEALTH-CARE RESOURCES (Date)

    (a) The Government will award a contract resulting from this 
solicitation to the responsible offeror whose offer, conforming to 
the solicitation, will be most advantageous to the Government, price 
and other factors considered. The following information or factors 
shall be used to evaluate offers:--[Contracting officer insert 
evaluation information or factors, such as technical capability to 
meet the Government's requirements, past performance, or such other 
evaluation information or factors as the contracting officer deems 
necessary to

[[Page 30677]]

evaluate offers. Price must be evaluated in every acquisition. The 
contracting officer may include the evaluation information or 
factors in their relative order of importance, such as in descending 
order of importance. The relative importance of any evaluation 
information must be stated in the solicitation.]--
    (b) Except when it is determined not to be in the Government's 
best interest, the Government will evaluate offers for award 
purposes by adding the total price for all options to the total 
price for the basic requirement. The Government may determine that 
an offer is unacceptable if the option prices are materially 
unbalanced. Evaluation of options shall not obligate the Government 
to exercise the option(s).
    (c) If this solicitation is a request for proposals (RFP), a 
written notice of award or acceptance of an offer, mailed or 
otherwise furnished to the successful offeror within the time for 
acceptance specified in the offer, shall result in a binding 
contract without further action by either party. Before the offer's 
specified expiration time, the Government may accept an offer (or 
part of an offer), whether or not there are negotiations after its 
receipt, unless a written notice of withdrawal is received before 
award.

(End of provision)

    19. Section 852.273-74 is added to read as follows:


852.273-74  Award without exchanges.

    As prescribed in 873.110(e), insert the following provision:

AWARD WITHOUT EXCHANGES (Date)

    The Government intends to evaluate proposals and award a 
contract without exchanges with offerors. Therefore, each initial 
offer should contain the offeror's best terms from a cost or price 
and technical standpoint. However, the Government reserves the right 
to conduct exchanges if later determined by the contracting officer 
to be necessary.

(End of provision)

    20. Part 873 is added to read as follows:

PART 873--SIMPLIFIED ACQUISITION PROCEDURES FOR HEALTH-CARE 
RESOURCES

Sec.
873.101   Policy.
873.102   Definitions.
873.103   Priority sources.
873.104   Competition requirements.
873.105   Acquisition planning.
873.106   Presolicitation exchanges with industry.
873.107   Socioeconomic programs.
873.108   Publicizing contract actions.
873.109   General requirements for acquisition of health-care 
resources.
873.110   Solicitation provisions.
873.111   Acquisition strategies for health-care resources.
873.112   Evaluation information.
873.113   Exchanges with offerors.
873.114   Best value pool.
873.115   Proposal revisions.
873.116   Source selection decision.
873.117   Award to successful offeror.
873.118   Debriefings.

    Authority: 38 U.S.C. 8151-8153.


873.101  Policy.

    The simplified acquisition procedures set forth in this Department 
of Veterans Affairs Acquisition Regulation (VAAR) part apply to the 
acquisition of health-care resources consisting of commercial services 
or the use of medical equipment or space. These procedures shall be 
used in conjunction with the Federal Acquisition Regulation (FAR) and 
other parts of VAAR. However, when a policy or procedure in FAR or 
another part of VAAR is inconsistent with the procedures contained in 
this part, this part shall take precedence. These procedures contain 
more flexibility than provided in FAR or elsewhere in VAAR.


873.102  Definitions.

    Commercial service means a service, except construction exceeding 
$2,000 and architect-engineer services, that is offered and sold 
competitively in the commercial marketplace, is performed under 
standard commercial terms and conditions, and is procured using firm-
fixed price contracts.
    Health-care providers includes health-care plans and insurers and 
any organizations, institutions, or other entities or individuals who 
furnish health-care resources.
    Health-care resource includes hospital care and medical services 
(as those terms are defined in section 1701 of title 38 United States 
Code (U.S.C.), any other health-care service, and any health-care 
support or administrative resource, including the use of medical 
equipment or space.


873.103  Priority sources.

    Without regard to FAR 8.001(a)(2), except for the acquisition of 
services available from the Committee for Purchase From People Who Are 
Blind or Severely Disabled, pursuant to the Javits-Wagner-O'Day Act (41 
U.S.C. 46-48c) and FAR subpart 8.7, there are no priority sources for 
the acquisition of health-care resources consisting of commercial 
services or the use of medical equipment or space.


873.104  Competition requirements.

    (a) Without regard to FAR part 6, if the health-care resource 
required is a commercial service, the use of medical equipment or 
space, or research, and is to be acquired from an institution 
affiliated with the Department in accordance with section 7302 of title 
38 U.S.C., including medical practice groups and other approved 
entities associated with affiliated institutions (entities will be 
approved if determined legally to be associated with affiliated 
institutions), or from blood banks, organ banks, or research centers, 
the resource may be acquired on a sole source basis.
    (b) Acquisition of health-care resources identified in paragraph 
(a) of this section are not required to be publicized as otherwise 
required by 873.108 or FAR 5.101. In addition, written justification, 
as otherwise set forth in section 303(f) of the Federal Property and 
Administration Services Act of 1949 (41 U.S.C. 253(f)) and FAR part 6, 
is not required.
    (c) Without regard to FAR 6.101, if the health-care resource 
required is a commercial service or the use of medical equipment or 
space, and is to be acquired from an entity not described in paragraph 
(a) of this section, contracting officers must seek competition to the 
maximum extent practicable and must permit all responsible sources, as 
appropriate under the provisions of this part, to submit a bid, 
proposal or quotation (as appropriate) for the resources to be procured 
and provide for the consideration by the Department of bids, proposals, 
or quotations so submitted.
    (d) Without regard to FAR 5.101, acquisition of health-care 
resources identified in paragraph (c) of this section shall be 
publicized as otherwise required by 873.108. Moreover, for any such 
acquisition described in paragraph (c) of this section to be conducted 
on a sole source basis, the contracting officer must prepare a 
justification that includes the information and is approved at the 
levels prescribed in section 303(f) of the Federal Property and 
Administration Services Act of 1949 (41 U.S.C. 253(f)) and FAR part 6.


873.105  Acquisition planning.

    (a) Acquisition planning is an indispensable component of the total 
acquisition process.
    (b) For the acquisition of health-care resources consisting of 
commercial services or the use of medical equipment or space, where the 
acquisition is expected to exceed the simplified acquisition threshold 
(SAT), an acquisition team must be assembled. The team shall be 
tailored by the contracting officer for each particular acquisition 
expected to exceed the SAT. The team should consist of a mix of staff, 
appropriate to the complexity of the acquisition, and may include 
contracting, fiscal, legal, administrative, and technical personnel, 
and such other

[[Page 30678]]

expertise as necessary to assure a comprehensive acquisition plan. The 
team should include the small business advocate representing the 
contracting activity or a higher level designee and the SBA Procurement 
Center Representative (PRC), if available. As a minimum, the team must 
include the contracting officer and a representative of the requesting 
service.
    (c) Prior to determining whether a requirement is suitable for 
acquisition using these simplified acquisition procedures, the 
contracting officer or the acquisition team, as appropriate, must 
conduct market research to identify interested businesses. It is the 
responsibility of the contracting officer to ensure the requirement is 
appropriately publicized and information about the procurement 
opportunity is adequately disseminated as set forth in 873.108.
    (d) In lieu of the requirements of FAR part 7 addressing 
documentation of the acquisition plan, the contracting officer may 
conduct an acquisition strategy meeting with cognizant offices to seek 
approval for the proposed acquisition approach. If a meeting is 
conducted, briefing materials shall be presented to address the 
acquisition plan topics and structure in FAR 7.105. Formal written 
minutes shall be prepared to summarize decisions, actions, and 
conclusions and included in the contract file, along with a copy of the 
briefing materials.


873.106  Presolicitation exchanges with industry.

    (a) This section shall be used in lieu of FAR part 10, except as 
provided in paragraph (b)(3) of this section. In conducting market 
research, exchange of information by all interested parties involved in 
an acquisition, from the earliest identification of a requirement 
through release of the solicitation, is encouraged. Interested parties 
include potential offerors, end users, Government acquisition and 
support personnel, and others involved in the conduct or outcome of the 
acquisition. The nature and extent of presolicitation exchanges between 
the Government and industry shall be a matter of the contracting 
officer's discretion (for acquisitions not exceeding the simplified 
acquisition threshold) or the acquisition team's discretion, as 
coordinated by the contracting officer.
    (b) Techniques to promote early exchange of information include--
    (1) Industry or small business conferences;
    (2) Public hearings;
    (3) Market research in accordance with FAR 10.002(b), which shall 
be followed to the extent that the provisions therein would provide 
relevant information;
    (4) One-on-one meetings with potential offerors;
    (5) Presolicitation notices;
    (6) Draft Requests for proposals (RFPs);
    (7) Requests for information (RFIs);
    (8) Presolicitation or preproposal conferences;
    (9) Site visits;
    (10) Electronic notices (e.g., Internet); and
    (11) Use of the Procurement Marketing and Access Network (PRO-NET).


873.107  Socioeconomic programs.

    (a) Implementation. This section provides additional authority, 
over and above that found at FAR 19.502, to waive small business set-
asides. For acquisitions above the micro-purchase threshold, if, 
through market research, the contracting officer determines that there 
is reasonable expectation that reasonably priced bids, proposals, or 
quotations will be received from two or more responsible small 
businesses, a requirement for health-care resources must be reserved 
for small business participation. Without regard to FAR 13.003(b)(1), 
19.502-2, and 19.502-3, the head of the contracting activity (HCA) may 
approve a waiver from the requirement for any set-aside for small 
business participation when a waiver is determined to be in the best 
interest of the Government.
    (b) Rejecting Small Business Administration (SBA) recommendations. 
(1) The contracting officer (or, if a waiver has been approved in 
accordance with paragraph (a) of this section, the HCA) must consider 
and respond to a recommendation from an SBA representative to set a 
procurement aside for small business within 5 working days. If the 
recommendation is rejected by the contracting officer (or, if a waiver 
has been approved, by the HCA) and if SBA intends to appeal that 
determination, SBA must, within 2 working days after receipt of the 
determination, notify the contracting officer involved of SBA's 
intention to appeal.
    (2) Upon receipt of the notification of SBA's intention to appeal 
and pending issuance of a final Department appeal decision to SBA, the 
contracting officer involved must suspend action on the acquisition 
unless a determination is made in writing by the contracting officer 
that proceeding to contract award and performance is in the public 
interest. The contracting officer must promptly notify SBA of the 
determination to proceed with the solicitation and/or contract award 
and must provide a copy of the written determination to SBA.
    (3) SBA shall be allowed 10 working days after receiving the 
rejection notice from the contracting officer (or the HCA, if a waiver 
has been approved) for acquisitions not exceeding $5 million, or 15 
working days after receiving the rejection notice for acquisitions 
exceeding $5 million, to file an appeal. SBA must notify the 
contracting officer within this 10 or 15 day period whether an appeal 
has, in fact, been taken. If notification is not received by the 
contracting officer within the applicable period, it shall be deemed 
that an appeal was not taken.
    (4) SBA shall submit appeals to the Secretary. Decisions shall be 
made by the Procurement Executive, whose decisions shall be final.
    (c) Contracting with the Small Business Administration (the 8(a) 
Program). The procedures of FAR 19.8 shall be followed where a 
responsible 8(a) contractor has been identified.
    (d) Certificates of Competency and determinations of 
responsibility. The Director, Office of Small and Disadvantaged 
Business Utilization (OSDBU), Department of Veterans Affairs (VA), and 
the Assistant Administrator, Office of Industrial Assistance, Small 
Business Administration (SBA), shall serve as ombudsmen to assist VA 
contracting officers on any issues relating to Certificates of 
Competency (COC). Copies of all COC referrals to SBA shall be submitted 
to the Director, OSDBU (00SB).


873.108  Publicizing contract actions.

    (a) Without regard to FAR 5.101, all acquisitions under this part 
873, except as provided in paragraph (b) of this section, for dollar 
amounts in excess of the simplified acquisition threshold (SAT), as set 
forth in FAR part 13, shall be publicly announced utilizing a medium 
designed to obtain competition to the maximum extent practicable and to 
permit all responsible sources, as appropriate under the provisions of 
this part, to submit a bid, proposal, or quotation (as appropriate).
    (1) The publication medium may include the Internet, including the 
Governmentwide point of entry (GPE), and local, regional or national 
publications or journals, as appropriate, at the discretion of the 
contracting officer, depending on the complexity of the acquisition.
    (2) Without regard to FAR 5.203, notice shall be published for a 
reasonable time prior to issuance of a

[[Page 30679]]

request for quotations (RFQ) or a solicitation, depending on the 
complexity or urgency of the acquisition, in order to afford potential 
offerors a reasonable opportunity to respond. If the notice includes a 
complete copy of the RFQ or solicitation, a prior notice is not 
required, and the RFQ or solicitation shall be considered to be 
announced and issued at the same time.
    (3) The notice may include contractor qualification parameters, 
such as time for delivery of service, credentialing or medical 
certification requirements, small business or other socio-economic 
preferences, the appropriate small business size standard, and such 
other qualifications as the contracting officer deems necessary to meet 
the needs of the Government.
    (b) The requirement for public announcement does not apply to sole 
source acquisitions, described in 873.104(a), from institutions 
affiliated with the Department in accordance with section 7302 of title 
38 U.S.C., including medical practice groups and other approved 
entities associated with affiliated institutions (entities will be 
approved if determined legally to be associated with affiliated 
institutions), or from blood banks, organ banks, or research centers. 
In addition, the requirement for public announcement does not apply to 
sole source acquisitions of hospital care and medical services (as 
those terms are defined in section 1701 of title 38 U.S.C.) or any 
other health-care services, including acquisitions for the mutual use 
or exchange of use of such services. However, as required by 38 U.S.C. 
8153(a)(3)(D), acquisitions from non-affiliates, if conducted on a sole 
source basis, must still be justified and approved (see 873.104(d)).
    (c) For acquisitions below the SAT, a public announcement is 
optional.
    (d) Each solicitation issued under these procedures must 
prominently identify that the requirement is being solicited under the 
authority of 38 U.S.C. 8153 and this part 873.


873.109  General requirements for acquisition of health-care resources.

    (a) Source selection authority. Contracting officers shall be the 
source selection authority for acquisitions of health-care resources, 
consisting of commercial services or the use of medical equipment or 
space, utilizing the guidance contained in this this part 873.
    (b) Statement of work/Specifications. Statements of work or 
specifications must define the requirement and should, in most 
instances, include qualifications or limitations such as time limits 
for delivery of service, medical certification or credentialing 
restrictions, and small business or other socio-economic preferences. 
The contracting officer may include any other such terms as the 
contracting officer deems appropriate for each specific acquisition.
    (c) Documentation. Without regard to FAR 13.106-3(b), 13.501(b), or 
15.406-3, the contract file must include:
    (1) A brief written description of the procedures used in awarding 
the contract;
    (2) The market research, including the determination that the 
acquisition involves health-care resources;
    (3) The number of offers received; and
    (4) An explanation, tailored to the size and complexity of the 
acquisition, of the basis for the contract award decision.
    (d) Time for receipt of quotations or offers. (1) Without regard to 
FAR 5.203, contracting officers shall set a reasonable time for receipt 
of quotations or proposals in requests for quotations (RFQs) and 
solicitations.
    (2) Without regard to FAR 15.208 or 52.212-1(f), quotations or 
proposals received after the time set forth in an RFQ or request for 
proposals (RFP) may be considered at the discretion of the contracting 
officer if determined to be in the best interest of the Government. 
Contracting officers must document the rationale for accepting 
quotations or proposals received after the time specified in the RFQ or 
RFP. This paragraph (d)(2) shall not apply to RFQs or RFPs if 
alternative evaluation techniques described in 873.111(e)(1)(ii) are 
used. This paragraph (d)(2) does not apply to invitations for bid 
(IFBs).
    (e) Cancellation of procurements. Without regard to FAR 14.404-1, 
any acquisition may be canceled by the contracting officer at any time 
during the acquisition process if cancellation is determined to be in 
the best interest of the Government.


873.110  Solicitation provisions.

    (a) As provided in 873.109(d), contracting officers shall insert 
the provision at 852.273-70, Late offers, in all requests for 
quotations (RFQs) and requests for proposals (RFPs) exceeding the 
micro-purchase threshold.
    (b) The contracting officer shall insert a provision in RFQs and 
solicitations, substantially the same as the provision at 852.273-71, 
Alternative negotiation techniques, when either of the alternative 
negotiation techniques described in 873.111(e)(1) will be used.
    (c) The contracting officer shall insert the provision at 852.273-
72, Alternative evaluation, in lieu of the provision at 52.212-2, 
Evaluation--Commercial Items, when the alternative negotiation 
technique described in 873.111(e)(1)(ii) will be used.
    (d) When evaluation information, as described in 873.112, is to be 
used to select a contractor under an RFQ or RFP for health-care 
resources consisting of commercial services or the use of medical 
equipment or space, the contracting officer may insert the provision at 
852.273-73, Evaluation--health-care resources, in the RFQ or RFP in 
lieu of FAR provision 52.212-2.
    (e) As provided at 873.113(f), if award may be made without 
exchange with vendors, the contracting officer shall include the 
provision at 852.273-74, Award without exchanges, in the RFQ or RFP.
    (f) The contracting officer shall insert the clauses at FAR 52.207-
3, Right of First Refusal of Employment, and at 852.207-70, Report of 
employment under commercial activities, in all RFQs, solicitations, and 
contracts issued under the authority of 38 U.S.C. 8151-8153 which may 
result in a conversion, from in-house performance to contract 
performance, of work currently being performed by Department of 
Veterans Affairs employees.


873.111  Acquisition strategies for health-care resources.

    Without regard to FAR 13.003 or 13.500(a), the following 
acquisition processes and techniques may be used, singly or in 
combination with others, as appropriate, to design acquisition 
strategies suitable for the complexity of the requirement and the 
amount of resources available to conduct the acquisition. These 
strategies should be considered during acquisition planning. The 
contracting officer shall select the process most appropriate to the 
particular acquisition. There is no preference for sealed bid 
acquisitions.
    (a) Request for quotations. (1) Without regard to FAR 6.1 or 6.2, 
contracting officers must solicit a sufficient number of sources to 
promote competition to the maximum extent practicable and to ensure 
that the purchase is advantageous to the Government, based, as 
appropriate, on either price alone or price and other factors (e.g., 
past performance and quality). RFQs must notify vendors of the basis 
upon which the award is to be made.
    (2) For acquisitions in excess of the SAT, the procedures set forth 
in FAR part 13 concerning RFQs may be utilized without regard to the 
dollar thresholds contained therein.
    (b) Sealed bidding. FAR part 14 provides procedures for sealed 
bidding.

[[Page 30680]]

    (c) Negotiated acquisitions. The procedures of FAR parts 12, 13, 
and 15 shall be used for negotiated acquisitions, except as modified in 
this part.
    (d) Multiphase acquisition technique. (1) General. Without regard 
to FAR 15.202, multiphase acquisitions may be appropriate when the 
submission of full proposals at the beginning of an acquisition would 
be burdensome for offerors to prepare and for Government personnel to 
evaluate. Using multiphase techniques, the Government may seek limited 
information initially, make one or more down-selects, and request a 
full proposal from an individual offeror or limited number of offerors. 
Provided that the notice notifies offerors, the contracting officer may 
limit the number of proposals during any phase to the number that will 
permit an efficient competition among proposals offering the greatest 
likelihood of award. The contracting officer may indicate in the notice 
an estimate of the greatest number of proposals that will be included 
in the down-select phase. The contracting officer may down-select to a 
single offeror.
    (2) First phase notice. In the first phase, the Government shall 
publish a notice (see 873.108) that solicits responses and that may 
provide, as appropriate, a general description of the scope or purpose 
of the acquisition and the criteria that will be used to make the 
initial down-select decision. The notice may also inform offerors of 
the evaluation criteria or process that will be used in subsequent 
down-select decisions. The notice must contain sufficient information 
to allow potential offerors to make an informed decision about whether 
to participate in the acquisition. The notice must advise offerors that 
failure to participate in the first phase will make them ineligible to 
participate in subsequent phases. The notice may be in the form of a 
synopsis in the Governmentwide point of entry (GPE) or a narrative 
letter or other appropriate method that contains the information 
required by this paragraph.
    (3) First phase responses. Offerors shall submit the information 
requested in the notice described in paragraph (d)(2) of this section. 
Information sought in the first phase may be limited to a statement of 
qualifications and other appropriate information (e.g., proposed 
technical concept, past performance information, limited pricing 
information).
    (4) First phase evaluation and down-select. The Government shall 
evaluate all offerors' submissions in accordance with the notice and 
make a down-select decision.
    (5) Subsequent phases. Additional information shall be sought in 
the second phase so that a down-select can be performed or an award 
made without exchanges, if necessary. The contracting officer may 
conduct exchanges with remaining offeror(s), request proposal 
revisions, or request best and final offers, as determined necessary by 
the contracting officer, in order to make an award decision.
    (6) Debriefing. Without regard to FAR 15.505, contracting officers 
must debrief offerors as required by 873.118 when they have been 
excluded from the competition.
    (e) Alternative negotiation techniques. (1) Contracting officers 
may utilize alternative negotiation techniques for the acquisition of 
health-care resources. Alternative negotiation techniques may be used 
when award will be based on either price or price and other factors. 
Alternative negotiation techniques include but are not limited to:
    (i) Indicating to offerors a price, contract term or condition, 
commercially available feature, and/or requirement (beyond any 
requirement or target specified in the solicitation) that offerors will 
have to improve upon or meet, as appropriate, in order to remain 
competitive.
    (ii) Posting offered prices electronically or otherwise (without 
disclosing the identity of the offerors) and permitting revisions of 
offers based on this information.
    (2) Except as otherwise permitted by law, contracting officers 
shall not conduct acquisitions under this section in a manner that 
reveals the identities of offerors, releases proprietary information, 
or otherwise gives any offeror a competitive advantage (see FAR 3.104).


873.112  Evaluation information.

    (a) Without regard to FAR 15.304 (except for 15.304(c)(1) and 
(c)(3), which do apply to acquisitions under this authority), the 
criteria, factors, or other evaluation information that apply to an 
acquisition, and their relative importance, are within the broad 
discretion of agency acquisition officials as long as the evaluation 
information is determined to be in the best interest of the Government.
    (b) Price or cost to the Government must be evaluated in every 
source selection. Past performance shall be evaluated in source 
selections for negotiated competitive acquisitions exceeding the SAT 
unless the contracting officer documents that past performance is not 
an appropriate evaluation factor for the acquisition.
    (c) The quality of the product or service may be addressed in 
source selection through consideration of information such as past 
compliance with solicitation requirements, technical excellence, 
management capability, personnel qualifications, and prior experience. 
The information required from quoters, bidders, or offerors shall be 
included in notices or solicitations, as appropriate.
    (d) The relative importance of any evaluation information included 
in a solicitation must be set forth therein.


873.113  Exchanges with offerors.

    (a) Without regard to FAR 15.201 or 15.306, negotiated acquisitions 
generally involve exchanges between the Government and competing 
offerors. Open exchanges support the goal of efficiency in Government 
by providing the Government with relevant information (in addition to 
that submitted in the offeror's initial proposal) needed to understand 
and evaluate the offeror's proposal. The nature and extent of exchanges 
between the Government and offerors is a matter of contracting officer 
judgment. Clarifications, communications, and discussions, as provided 
for in the FAR, are concepts not applicable to acquisitions under this 
part 873.
    (b) Exchanges with all potential offerors may take place throughout 
the source selection process. Exchanges may start in the planning 
stages and continue through contract award. Exchanges should occur most 
often with offerors determined to be in the best value pool (see 
873.114). The purpose of exchanges is to ensure there is mutual 
understanding between the Government and the offerors on all aspects of 
the acquisition, including offerors' submittals/proposals. Information 
disclosed as a result of oral or written exchanges with an offeror may 
be considered in the evaluation of an offeror's proposal.
    (c) Exchanges may be conducted, in part, to obtain information that 
explains or resolves ambiguities or other concerns (e.g., perceived 
errors, perceived omissions, or perceived deficiencies) in an offeror's 
proposal.
    (d) Exchanges shall only be initiated if authorized by the 
contracting officer and need not be conducted with all offerors.
    (e) Improper exchanges. Except for acquisitions based on 
alternative negotiation techniques contained in 873.111(e)(1), the 
contracting officer and other Government personnel involved in the 
acquisition shall not disclose information regarding one offeror's 
proposal to other offerors without

[[Page 30681]]

consent of the offeror in accordance with FAR parts 3 and 24.
    (f) Award may be made on initial proposals without exchanges if the 
solicitation states that the Government intends to evaluate proposals 
and make award without exchanges, unless the contracting officer 
determines that exchanges are considered necessary.


873.114  Best value pool.

    (a) Without regard to FAR 15.306(c), the contracting officer may 
determine the most highly rated proposals having the greatest 
likelihood of award based on the information or factors and subfactors 
in the solicitation. These vendors constitute the best value pool. This 
determination is within the sole discretion of the contracting officer. 
Competitive range determinations, as provided for in the FAR, are not 
applicable to acquisitions under this part 873.
    (b) In planning an acquisition, the contracting officer may 
determine that the number of proposals that would otherwise be included 
in the best value pool is expected to exceed the number at which an 
efficient, timely, and economical competition can be conducted. In 
reaching such a conclusion, the contracting officer may consider such 
factors as the results of market research, historical data from 
previous acquisitions for similar services, and the resources available 
to conduct the source selection. Provided the solicitation notifies 
offerors that the best value pool can be limited for purposes of making 
an efficient, timely, and economical award, the contracting officer may 
limit the number of proposals in the best value pool to the greatest 
number that will permit an efficient competition among the proposals 
offering the greatest likelihood of award. The contracting officer may 
indicate in the solicitation the estimate of the greatest number of 
proposals that will be included in the best value pool. The contracting 
officer may limit the best value pool to a single offeror.
    (c) If the contracting officer determines that an offeror's 
proposal is no longer in the best value pool, the proposal shall no 
longer be considered for award. Written notice of this decision must be 
provided to unsuccessful offerors at the earliest practicable time.


873.115  Proposal revisions.

    (a) Without regard to FAR 15.307, the contracting officer may 
request proposal revisions as often as needed during the proposal 
evaluation process at any time prior to award from vendors remaining in 
the best value pool. Proposal revisions shall be submitted in writing. 
The contracting officer may establish a common cutoff date for receipt 
of proposal revisions. Contracting officers may request best and final 
offers. In any case, contracting officers and acquisition team members 
must safeguard proposals, and revisions thereto, to avoid unfair 
dissemination of an offeror's proposal.
    (b) If an offeror initially included in the best value pool is no 
longer considered to be among those most likely to receive award after 
submission of proposal revisions and subsequent evaluation thereof, the 
offeror may be eliminated from the best value pool without being 
afforded an opportunity to submit further proposal revisions.
    (c) Requesting and/or receiving proposal revisions do not 
necessarily conclude exchanges. However, requests for proposal 
revisions should advise offerors that the Government may make award 
without obtaining further revisions.


873.116  Source selection decision.

    (a) An integrated comparative assessment of proposals should be 
performed before source selection is made. The contracting officer 
shall independently determine which proposal(s) represents the best 
value, consistent with the evaluation information or factors and 
subfactors in the solicitation, and that the prices are fair and 
reasonable. The contracting officer may determine that all proposals 
should be rejected if it is in the best interest of the Government.
    (b) The source selection team, or advisory boards or panels, may 
conduct comparative analysis(es) of proposals and make award 
recommendations, if the contracting officer requests such assistance.
    (c) The source selection decision must be documented in accordance 
with FAR 15.308.


873.117  Award to successful offeror.

    (a) The contracting officer shall award a contract to the 
successful offeror by furnishing the contract or other notice of the 
award to that offeror.
    (b) If a request for proposal (RFP) process was used for the 
solicitation and if award is to be made without exchanges, the 
contracting officer may award a contract without obtaining the 
offeror's signature a second time. The offeror's signature on the offer 
constitutes the offeror's agreement to be bound by the offer. If a 
request for quotation (RFQ) process was used for the solicitation, and 
if the contracting officer determines there is a need to establish a 
binding contract prior to commencement of work, the contracting officer 
should obtain the offeror's acceptance signature on the contract to 
ensure formation of a binding contract.
    (c) If the award document includes information that is different 
than the latest signed offer, both the offeror and the contracting 
officer must sign the contract award.
    (d) When an award is made to an offeror for less than all of the 
items that may be awarded and additional items are being withheld for 
subsequent award, each notice shall state that the Government may make 
subsequent awards on those additional items within the offer acceptance 
period.


873.118  Debriefings.

    Offerors excluded from a request for proposals (RFP) may submit a 
written request for a debriefing to the contracting officer. Without 
regard to FAR 15.505, preaward debriefings may be conducted by the 
contracting officer when determined to be in the best interest of the 
Government. Post-award debriefings shall be conducted in accordance 
with FAR 15.506.

[FR Doc. 01-13988 Filed 6-6-01; 8:45 am]
BILLING CODE 8320-01-P