[Federal Register Volume 68, Number 220 (Friday, November 14, 2003)]
[Rules and Regulations]
[Pages 64559-64561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28440]


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DEPARTMENT OF DEFENSE

48 CFR Parts 208, 210, 219, and 252

[DFARS Case 2002-D003]


Defense Federal Acquisition Regulation Supplement; Competition 
Requirements for Purchases From a Required Source

AGENCY: Department of Defense (DoD).

ACTION: Final rule.

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SUMMARY: DoD has issued a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement section 811 of 
the National Defense Authorization Act for Fiscal Year 2002 and section 
819 of the National Defense Authorization Act for Fiscal Year 2003. 
Sections 811 and 819 address requirements for conducting market 
research before purchasing a product listed in the Federal Prison 
Industries (FPI) catalog, and for use of competitive procedures if an 
FPI product is found to be noncomparable to products available from the 
private sector. Section 819 also addresses limitations on an inmate 
worker's access to information and on use of FPI as a subcontractor.

EFFECTIVE DATE: December 15, 2003.

FOR FURTHER INFORMATION CONTACT: Ms. Michele Peterson, Defense 
Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 
Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0311; 
facsimile (703) 602-0350. Please cite DFARS Case 2002-D003.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 811 of the National Defense Authorization Act for Fiscal 
Year 2002 (Pub. L. 107-107) added 10 U.S.C. 2410n, providing that (1) 
before purchasing a product listed in the FPI catalog, DoD must conduct 
market research to determine whether the FPI product is comparable in 
price, quality, and time of delivery to products available from the 
private sector; (2) if the FPI product is not comparable in price, 
quality, and time of delivery, DoD must use competitive procedures to 
acquire the product; and (3) in conducting such a competition, DoD must 
consider a timely offer from FPI for award in accordance with the 
specifications and evaluation factors in the solicitation.
    DoD published an interim rule at 67 FR 20687 on April 26, 2002, to 
implement section 811 of Public Law 107-107. On December 2, 2002, 
section 819 of the National Defense Authorization Act for Fiscal Year 
2003 (Pub. L. 107-314) amended 10 U.S.C. 2410n to (1) clarify 
requirements for conducting market research before purchasing a product 
listed in the FPI catalog; (2) specify requirements for use of 
competitive procedures or for making a purchase under a multiple award 
contract if an FPI product is found to be noncomparable to products 
available from the private sector; (3) specify that a contracting 
officer's determination, regarding the comparability of an FPI product 
to products available from the private sector, is not subject to the 
arbitration provisions of 18 U.S.C. 4124(b); (4) specify that a DoD 
contractor may not be required to use FPI as a subcontractor; and (5) 
prohibit the award of a contract to FPI that would allow an inmate 
worker access to classified or sensitive information.
    DoD published a proposed rule at 68 FR 26265 on May 15, 2003, to 
further implement the requirements of section 811 of Public Law 107-
107, to implement section 819 of Public Law 107-314, and to address 
public comments received in response to the interim rule published on 
April 26, 2002. A discussion of the comments received in response to 
the proposed rule published on May 15, 2003, is provided below. DoD has 
adopted the proposed rule as a final rule without change.
    1. Comment: FPI is not a small business concern and should not be 
permitted to participate in small business set-asides.
    DoD Response: Concur that FPI is not a small business concern. The 
small business set-aside procedures in the rule apply only when an FPI 
product is found to be noncomparable to private sector products. In 
these situations, competitive procedures must be used and FPI must be 
given an opportunity to compete. Because the definition of competitive 
procedures in 10 U.S.C. 2410n includes procurements conducted in 
furtherance of the Small Business Act, the DFARS rule permits 
restriction of the competition to FPI and small business concerns.
    2. Comment: The rule should prohibit a Federal contractor from 
being required to specify FPI products in the designs, specifications, 
or standards it develops for DoD.
    DoD Response: Concur. Section 208.670 of the rule prohibits such an 
action.
    3. Comment: The rule should clarify that DoD contracts, 
particularly architect-engineer contracts, should specify that FPI 
goods must be used to supply DoD unless excepted by 208.602. For 
example, DoD would not be permitted by law to procure office furniture 
as part of a consolidated or prime contract for the construction or 
renovation of a building if such a contracting method is used to 
preclude the necessity for a comparability determination or competitive 
procedures under sections 811 and 819.
    DoD Response: Concur that consolidation of requirements merely to 
avoid a comparability determination or competitive procedures would be 
improper, as would any other action taken to circumvent statutory or 
regulatory requirements. However, consolidation where appropriate 
appears to be consistent with 10 U.S.C. 2410(e), which addresses the 
issue of subcontracting and specifically prohibits DoD from requiring a 
contractor to use FPI as a subcontractor or supplier. The provisions of 
10 U.S.C. 2410(e) are reflected in the rule at 208.670.
    4. Comment: A paragraph should be added to 208.670 to state that 
nothing in that section prohibits FPI from voluntarily entering into a 
subcontract with, or from being accepted as a subcontractor by, any 
prime contractor doing business with a DoD component.
    DoD Response: Nothing in the rule precludes FPI from acting as a 
subcontractor. Specific mention of this subject in the rule is 
unnecessary.
    5. Comment: The rule should clarify that use of multiple award 
schedule contracts is a legitimate competitive procedure.
    DoD Response: This point is clear from the definition of 
``competitive procedures'' at 208.601-70, which permits use of the 
procedures in FAR 6.102, to include the use of multiple award schedule 
contracts.
    6. Comment: The first sentence of 208.602(a)(i) should make it 
clear that it is mandatory for contracting officers to conduct market 
research before purchasing a product listed in the FPI Schedule.
    DoD Response: The first sentence of 208.602(a)(i) is an imperative 
statement and is clearly mandatory.
    7. Comment: The way the rule is written, if FPI's product is found 
to be noncomparable in price, quality, and delivery time, FPI is given 
a second chance to meet these criteria through the competition phase. 
The rule should

[[Page 64560]]

be revised to eliminate the second redundant step.
    DoD Response: Do not concur. The two-step process is consistent 
with 10 U.S.C. 2410n(b), which clearly establishes an ``if-then'' 
situation, i.e., if DoD makes a noncomparability determination, then 
competitive procedures must be used.
    8. Comment: The rule should emphasize the two-step nature of the 
procedures, add a definition of ``comparable'' to 208.601-70, and 
clarify that DoD purchasers may request waiver if an FPI product has 
been determined to be comparable.
    DoD Response: The rule is clear with regard to the two-step nature 
of the procedures. A definition of ``comparable'' is unnecessary, as 
this term is already used throughout the FAR and DFARS with its common 
dictionary meaning. If an FPI product is determined to be comparable to 
a private sector product, the rule requires use of the procedures in 
FAR subpart 8.6, which addresses clearance/waiver provisions. It is 
unnecessary to repeat these provisions in the DFARS.
    9. Comment: The requirement for a written comparability 
determination takes discretion away from the contracting officer and 
should be eliminated.
    DoD Response: Do not concur. It is common business practice to 
document the decision-making process.
    10. Comment: The ``unilateral decision'' language at 208.602(a) 
should be removed. It does not provide any guidance to contracting 
officers in exercising their discretion.
    DoD Response: Do not concur. This language clarifies the 
contracting officer's role in the determination process and is 
consistent with the provisions of 10 U.S.C. 2410n(d).
    11. Comment: The rule should include language requiring FPI to 
adhere to its contractual obligations to the same extent as any other 
DoD contractor.
    DoD Response: Concur that FPI should be held accountable for its 
performance. In accordance with FAR 8.607, the Government may collect 
past performance information for use in supporting a clearance request 
for future purchases. However, it is unnecessary to address this issue 
in this DFARS rule.
    12. Comment: The rule overlooks the statutory requirement to give 
NIB second priority, behind FPI, for sales of products to the 
Government. The language at 208.602(a)(iv) should be revised to state 
that in the event that FPI is found to be non-comparable, JWOD products 
would be given first priority; if the product is not on the JWOD 
Procurement List, then competitive procedures may be used.
    DoD Response: Do not concur. In accordance with 41 U.S.C. 48, NIB 
is given priority only if the required supplies or services are not 
available from FPI. If FPI can fulfill the requirement, even though it 
is determined to be noncomparable, 10 U.S.C. 2410n requires use of 
competitive procedures that include FPI.
    13. Comment: The requirement in 208.602(a)(iv)(C)(1), to 
``Establish and communicate to FPI the requirements and evaluation 
factors that will be used as the basis for selecting a source, so that 
an offer from FPI can be evaluated on the same basis as the schedule 
holder'' is too solicitous of FPI, exceeds the requirements of the law, 
and should be removed.
    DoD Response: Do not concur. Since a formal solicitation will not 
be issued for purchases made using multiple award schedules, there must 
be a means of communicating this information to enable FPI to compete 
in accordance with 10 U.S.C. 2410n.
    14. Comment: The language at 208.602(a)(iv) should specify how FPI 
will be notified of a solicitation.
    DoD Response: Do not concur. This level of detail is more 
appropriately left to the discretion of the contracting officer.
    15. Comment: The FPI Board of Directors adopted a resolution that 
directs FPI to grant waivers in all cases where the private sector 
provides a lower price for a comparable product that FPI does not meet. 
The rule should clarify that, because of sections 811 and 819, DoD 
contracting officers are exempt from this resolution and are therefore 
not required to obtain a waiver from FPI.
    DoD Response: Section 208.606 of the rule provides a blanket 
exception from FPI clearance requirements, to apply when a contracting 
officer determines that an FPI product is not comparable to private 
sector products and the procedures at 208.602(a)(iv) are used. A 
specific exemption from the Board of Directors resolution is 
unnecessary.
    16. Comment: The initial regulatory flexibility analysis concluded 
that the rule could benefit small business concerns that offer products 
comparable to FPI. The analysis should also consider and include the 
impact on FPI and the small business concerns that support FPI.
    DoD Response: Concur. The final regulatory flexibility analysis 
addresses FPI and the small business concerns that provide supplies and 
services to FPI.
    This rule was subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

    This rule may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because the rule will permit 
small entities to compete with FPI for DoD contract awards under 
certain conditions. A final regulatory flexibility analysis has been 
prepared and is summarized as follows:
    This rule amends DoD policy pertaining to the acquisition of 
products from FPI. The rule implements 10 U.S.C. 2410n. The net effect 
of the rule is unknown at this time. The rule is expected to benefit 
small business concerns that offer products comparable to those listed 
in the FPI catalog, by permitting those concerns to compete for DoD 
contract awards. The rule could also have a negative impact on small 
business concerns that provide supplies or services to FPI in support 
of its products. There are no known significant alternatives to the 
rule that would meet the requirements of 10 U.S.C. 2410n.
    A copy of the analysis may be obtained from the point of contact 
specified herein.

C. Paperwork Reduction Act

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

List of Subjects in 48 CFR Parts 208, 210, 219, and 252

    Government procurement.

Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.

0
Accordingly, the interim rule amending 48 CFR parts 208 and 210 which 
was published at 67 FR 20687 on April 26, 2002, is adopted as a final 
rule with the following changes:
0
1. The authority citation for 48 CFR parts 208, 210, 219, and 252 
continues to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

PART 208--REQUIRED SOURCES OF SUPPLIES AND SERVICES

0
2. Section 208.601-70 is added to read as follows:

[[Page 64561]]

208.601-70  Definitions.

    As used in this subpart--
    Competitive procedures includes the procedures in FAR 6.102, the 
set-aside procedures in FAR subpart 19.5, and competition conducted in 
accordance with FAR part 13.
    Market research means obtaining specific information about the 
price, quality, and time of delivery of products available in the 
private sector and may include techniques described in FAR 
10.002(b)(2).

0
3. Sections 208.602 and 208.606 are revised to read as follows:


208.602  Policy.

    (a)(i) Before purchasing a product listed in the FPI Schedule, 
conduct market research to determine whether the FPI product is 
comparable to products available from the private sector that best meet 
the Government's needs in terms of price, quality, and time of delivery 
(10 U.S.C. 2410n). This is a unilateral determination made at the 
discretion of the contracting officer. The procedures of FAR 8.605 do 
not apply.
    (ii) Prepare a written determination that includes supporting 
rationale explaining the assessment of price, quality, and time of 
delivery, based on the results of market research comparing FPI 
products to those available from the private sector.
    (iii) If the FPI product is comparable, follow the policy at FAR 
8.602(a).
    (iv) If the FPI product is not comparable in one or more of the 
areas of price, quality, and time of delivery--
    (A) Acquire the product using--
    (1) Competitive procedures; or
    (2) The fair opportunity procedures in FAR 16.505, if placing an 
order under a multiple award task or delivery order contract;
    (B) Include FPI in the solicitation process and consider a timely 
offer from FPI for award in accordance with the requirements and 
evaluation factors in the solicitation, including solicitations issued 
using small business set-aside procedures; and
    (C) When using a multiple award schedule issued under the 
procedures of FAR subpart 8.4--
    (1) Establish and communicate to FPI the requirements and 
evaluation factors that will be used as the basis for selecting a 
source, so that an offer from FPI can be evaluated on the same basis as 
the schedule holder; and
    (2) Consider a timely offer from FPI.


208.606  Exceptions.

    For DoD, FPI clearances also are not required when--
    (1) The contracting officer makes a determination that the FPI 
product is not comparable to products available from the private sector 
that best meet the Government's needs in terms of price, quality, and 
time of delivery; and
    (2) The procedures at 208.602(a)(iv) are used.

0
4. Sections 208.670 and 208.671 are added to read as follows:


208.670  Performance as a subcontractor.

    Do not require a contractor, or subcontractor at any tier, to use 
FPI as a subcontractor for performance of a contract by any means, 
including means such as--
    (a) A solicitation provision requiring a potential contractor to 
offer to make use of FPI products or services;
    (b) A contract specification requiring the contractor to use 
specific products or services (or classes of products or services) 
offered by FPI; or
    (c) Any contract modification directing the use of FPI products or 
services.


208.671  Protection of classified and sensitive information.

    Do not enter into any contract with FPI that allows an inmate 
worker access to any--
    (a) Classified data;
    (b) Geographic data regarding the location of--
    (1) Surface and subsurface infrastructure providing communications 
or water or electrical power distribution;
    (2) Pipelines for the distribution of natural gas, bulk petroleum 
products, or other commodities; or
    (3) Other utilities; or
    (c) Personal or financial information about any individual private 
citizen, including information relating to such person's real property 
however described, without the prior consent of the individual.

PART 219--SMALL BUSINESS PROGRAMS

0
5. Section 219.502-70 is added to read as follows:


219.502-70  Inclusion of Federal Prison Industries, Inc.

    When using competitive procedures in accordance with 
208.602(a)(iv), include Federal Prison Industries, Inc. (FPI), in the 
solicitation process and consider a timely offer from FPI.

0
6. Section 219.508 is added to read as follows:


219.508  Solicitation provisions and contract clauses.

    (c) Use the clause at FAR 52.219-6, Notice of Total Small Business 
Set-Aside, with 252.219-7005, Alternate A, when the procedures of 
208.602(a)(iv) apply to the acquisition.
    (d) Use the clause at FAR 52.219-7, Notice of Partial Small 
Business Set-Aside, with 252.219-7006, Alternate A, when the procedures 
of 208.602(a)(iv) apply to the acquisition.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
7. Sections 252.219-7005 and 252.219-7006 are added to read as follows:


252.219-7005  Alternate A.

Alternate A (Dec 2003)

    As prescribed in 219.508(c), substitute the following paragraph 
(b) for paragraph (b) of the clause at FAR 52.219-6:
    (b) General. (1) Offers are solicited only from small business 
concerns and Federal Prison Industries, Inc. (FPI). Offers received 
from concerns that are not small business concerns or FPI shall be 
considered nonresponsive and will be rejected.
    (2) Any award resulting from this solicitation will be made to 
either a small business concern or FPI.


252.219-7006  Alternate A.

Alternate A (Dec 2003)

    As prescribed in 219.508(d), add the following paragraph (d) to 
the clause at FAR 52.219-7:
    (d) Notwithstanding paragraph (b) of this clause, offers will be 
solicited and considered from Federal Prison Industries, Inc., for 
both the set-aside and non-set-aside portion of this requirement.

[FR Doc. 03-28440 Filed 11-13-03; 8:45 am]
BILLING CODE 5001-08-P