[Federal Register Volume 69, Number 59 (Friday, March 26, 2004)]
[Rules and Regulations]
[Pages 16147-16151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6800]



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Part IV





Department of Defense

General Services Adminstration

National Aeronautics and Space Administration





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48 CFR Chapter 1



Federal Acquisition Regulations; Purchases from Federal Prison 
Industries--Requirement for Market Research and Small Entity Compliance 
Guide; Interim Rules

Federal Register / Vol. 69, No. 59 / Friday, March 26, 2004 / Rules 
and Regulations

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 8, 19, 42, and 52

[FAC 2001-21; FAR Case 2003-023]
RIN 9000-AJ91


Federal Acquisition Regulation; Purchases From Federal Prison 
Industries--Requirement for Market Research

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

ACTION: Interim rule with request for comments.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on an interim 
rule amending the Federal Acquisition Regulation (FAR) to implement 
Section 637 of Division F of the Consolidated Appropriations Act, 2004. 
Section 637 provides that no fiscal year 2004 funds shall be expended 
for purchase of a product or service offered by Federal Prison 
Industries, Inc., unless the agency making the purchase determines that 
the offered product or service provides the best value to the buying 
agency.

DATES: Effective Date: March 26, 2004.
    Comment Date: Interested parties should submit comments to the FAR 
Secretariat at the address shown below on or before May 25, 2004, to be 
considered in the formulation of a final rule.

ADDRESSES:

Submit written comments to-- General Services Administration, FAR 
Secretariat (MVA), 1800 F Street, NW, Room 4035, Attn: Ms. Laurie 
Duarte, Washington, DC 20405.
Submit electronic comments via the Internet to-- [email protected].

    Please submit comments only and cite FAC 2001-21, FAR case 2003-
023, in all correspondence related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755, 
for information pertaining to status or publication schedules. The TTY 
Federal Relay Number for further information is 1-800-877-8973. For 
clarification of content, contact Ms. Linda Nelson, Procurement 
Analyst, at (202) 501-1900. Please cite FAC 2001-21, FAR case 2003-023.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 637 of Division F of the Consolidated Appropriations Act, 
2004 (Pub. L. 108-199) provides that none of the funds made available 
under that or any other Act for fiscal year 2004 shall be expended for 
the purchase of a product or service offered by Federal Prison 
Industries, Inc. (FPI), unless the agency making such purchase 
determines that the offered product or service provides the best value 
to the buying agency pursuant to Governmentwide procurement regulations 
issued pursuant to 41 U.S.C. 421(c)(1) that impose procedures, 
standards, and limitations of 10 U.S.C. 2410n.
    This interim rule implements Section 637 by amending the FAR to 
incorporate the requirements of 10 U.S.C. 2410n with regard to purchase 
of products from FPI. The rule addresses--
     Requirements for conducting market research 
before purchasing supplies listed in the FPI Schedule;
     Use of competitive procedures if FPI supplies 
are found to be noncomparable to supplies available from the private 
sector;
     Limitations on an inmate worker's access to 
information; and
     Prohibitions on requiring use of FPI as a 
subcontractor.
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The changes may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., because the rule will permit 
small entities to compete with FPI for contract awards under certain 
conditions. An Initial Regulatory Flexibility Analysis has been 
prepared and is summarized as follows:

    The rule implements the Consolidated Appropriations Act, 2004, 
Division F, Section 637 (Public Law 108-199). The Act imposes the 
procedures, standards, and limitations of 10 U.S.C. 2410n, which 
requires market research before purchasing a product listed in the 
FPI catalog, to determine whether the FPI product is comparable to 
products available from the private sector that best meet the 
agency's needs in terms of price, quality, and time of delivery. If 
the FPI product is not comparable, the agency must use competitive 
procedures to acquire the product or must make an individual 
purchase under a multiple award contract. In conducting such a 
competition or making such a purchase, the agency must consider a 
timely offer from FPI. The impact of the rule is unknown at this 
time. The elimination of FPI as a mandatory source may have an 
impact on those small businesses that supply FPI with raw materials, 
equipment and services. However, the rule could benefit small 
business concerns that offer products comparable to those listed in 
the FPI catalog, by permitting those concerns to compete for Federal 
contract awards.

The FAR Secretariat has submitted a copy of the IRFA to the Chief 
Counsel for Advocacy of the Small Business Administration. Interested 
parties may obtain a copy from the FAR Secretariat. The Councils will 
consider comments from small entities concerning the affected FAR Parts 
8, 19, 42, and 52 in accordance with 5 U.S.C. 610. Interested parties 
must submit such comments separately and should cite 5 U.S.C. 601, et 
seq. (FAC 2001-21, FAR case 2003-023), in correspondence.

C. Paperwork Reduction Act

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

D. Determination to Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DoD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary to implement Section 637 of Division F of Public Law 108-
199, the Consolidated Appropriations Act, 2004. Section 637 provides 
that no fiscal year 2004 funds shall be expended for purchase of a 
product or service offered by Federal Prison Industries, Inc., unless 
the agency making such purchase determines that the offered product or 
service provides the best value to the buying agency pursuant to 
Governmentwide procurement regulations, issued pursuant to 41 U.S.C. 
421(c)(1), that impose procedures, standards, and limitations of 10 
U.S.C. 2410n. Section 637 became effective on January 23, 2004. 
However, pursuant to Public Law 98-577 and FAR 1.501, the Councils will 
consider public

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comments received in response to this interim rule in the formation of 
the final rule.

List of Subjects in 48 CFR Parts 8, 19, 42, and 52

    Government procurement.

    Dated: March 22, 2004.
Laura Auletta,
Director, Acquisition Policy Division.

Federal Acquisition Circular

    Federal Acquisition Circular (FAC) 2001-21 is issued under the 
authority of the Secretary of Defense, the Administrator of General 
Services, and the Administrator for the National Aeronautics and Space 
Administration.
    Unless otherwise specified, all Federal Acquisition Regulation 
(FAR) and other directive material contained in FAC 2001-21 are 
effective March 26, 2004.

    Dated: March 22, 2004.

Deidre A. Lee,

Director, Defense Procurement and Acquisition Policy.

    Dated: March 18, 2004.

David A. Drabkin,

Deputy Associate Administrator, Office of Acquisition Policy, 
General Services Administration.

    Dated: March 18, 2004.

James A. Balinskas,

Acting Assistant Administrator for Procurement, National Aeronautics 
and Space Administration.


0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 8, 19, 42, and 52 as 
set forth below:
0
1. The authority citation for 48 CFR parts 8, 19, 42, and 52 is revised 
to read as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

0
2. Revise subpart 8.6 to read as follows:

Subpart 8.6--Acquisition from Federal Prison Industries, Inc.

Sec.
8.601 General.
8.602 Policy.
8.603 Purchase priorities.
8.604 Waivers.
8.605 Exceptions.
8.606 Evaluating FPI performance.
8.607 Performance as a subcontractor.
8.608 Protection of classified and sensitive information.


8.601  General.

    (a) Federal Prison Industries, Inc. (FPI), also referred to as 
UNICOR, is a self-supporting, wholly owned Government corporation of 
the District of Columbia.
    (b) FPI provides training and employment for prisoners confined in 
Federal penal and correctional institutions through the sale of its 
supplies and services to Government agencies (18 U.S.C. 4121-4128).
    (c) FPI diversifies its supplies and services to minimize adverse 
impact on private industry.
    (d) Supplies manufactured and services performed by FPI are listed 
in the FPI Schedule, which can be accessed at http://www.unicor.gov or 
by submitting a written request to Federal Prison Industries, Inc., 
Department of Justice, Washington, DC 20534.


8.602  Policy.

    (a) Agencies shall purchase required supplies of the classes listed 
in the Schedule of Products made in Federal Penal and Correctional 
Institutions (referred to in this subpart as ``the FPI Schedule'') at 
prices not to exceed current market prices, using the procedures in 
this subpart.
    (b) For purchases made by civilian agencies using fiscal year 2004 
appropriated funds, and for all purchases made by DoD (Section 637 of 
Division F of Public Law 108-199, the Consolidated Appropriations Act, 
2004; 10 U.S.C. 2410n), agencies shall--
    (1) Before purchasing an item of supply listed in the FPI Schedule, 
conduct market research to determine whether the FPI item is comparable 
to supplies available from the private sector that best meet the 
Government's needs in terms of price, quality, and time of delivery. 
This is a unilateral determination made at the discretion of the 
contracting officer. The arbitration provisions of 18 U.S.C. 4124(b) do 
not apply;
    (2) 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 the FPI 
item to supplies available from the private sector;
    (3) If the FPI item is comparable, purchase the item from FPI 
following the ordering procedures at http://www.unicor.gov, unless a 
waiver is obtained in accordance with 8.604; and
    (4) If the FPI item is not comparable in one or more of the areas 
of price, quality, and time of delivery--
    (i) Acquire the item using--
    (A) Competitive procedures (e.g., the procedures in 6.102, the set-
aside procedures in subpart 19.5, or competition conducted in 
accordance with part 13); or
    (B) The fair opportunity procedures in 16.505, if placing an order 
under a multiple award delivery-order contract;
    (ii) 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; and
    (iii) When using a multiple award schedule issued under the 
procedures in subpart 8.4 or when making an award using the fair 
opportunity procedures in 16.505--
    (A) 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 contract or schedule holder; and
    (B) Consider a timely offer from FPI.
    (c) The procedures in paragraph (b) of this section do not apply if 
an exception in 8.605 applies and the purchase is made from a source 
other than FPI.
    (d) In some cases where FPI and a JWOD participating nonprofit 
agency produce identical items (see 8.603), FPI grants a waiver to 
permit the Government to purchase a portion of its requirement from the 
JWOD participating nonprofit agency. When this occurs, the portion of 
the requirement for which FPI has granted a waiver--
    (1) Shall be purchased from the JWOD participating nonprofit agency 
using the procedures in subpart 8.7; and
    (2) Shall not be subject to the procedures in paragraph (b) of this 
section.
    (e) For civilian agency purchases made using other than fiscal year 
2004 appropriated funds, the following policy applies:
    (1) Agencies shall purchase required supplies of the classes listed 
in the FPI Schedule at prices not to exceed current market prices 
following the ordering procedures at http://www.unicor.gov, unless a 
waiver is obtained in accordance with 8.604.
    (2) If the contracting officer believes that the FPI price exceeds 
the market price, the matter may be referred to the cognizant product 
division identified in the FPI Schedule or to the FPI Washington office 
for resolution.
    (f) Disputes regarding price, quality, character, or suitability of 
supplies produced by FPI, except for determinations under paragraph 
(b)(1) of this section, are subject to arbitration as specified in 18 
U.S.C. 4124. The statute provides that the arbitration shall be 
conducted by a board consisting of the Comptroller General of the 
United States, the Administrator of General Services, and the 
President, or their representatives. The decisions of the

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board are final and binding on all parties.


8.603  Purchase priorities.

    FPI and nonprofit agencies participating in the Javits-Wagner-O'Day 
(JWOD) Program (see subpart 8.7) may produce identical supplies or 
services. When this occurs, ordering offices shall purchase supplies 
and services in the following priorities:
    (a) Supplies. (1) Federal Prison Industries, Inc. (41 U.S.C. 48).
    (2) JWOD participating nonprofit agencies.
    (3) Commercial sources.
    (b) Services. (1) JWOD participating nonprofit agencies.
    (2) Federal Prison Industries, Inc., or commercial sources.


8.604  Waivers.

    FPI may grant a waiver for purchase of supplies in the FPI Schedule 
from another source. FPI waivers ordinarily are of the following types:
    (a) General or blanket waivers issued when classes of supplies are 
not available from FPI.
    (b) Formal waivers issued in response to requests from offices 
desiring to acquire, from other sources, supplies listed in the FPI 
Schedule and not covered by a general waiver. Agencies shall process 
waiver requests in accordance with the procedures at http://www.unicor.gov.


8.605  Exceptions.

    Purchase from FPI is not mandatory and a waiver is not required 
if--
    (a) The policy at 8.602(b) applies to the acquisition and--
    (1) The contracting officer makes a determination that the FPI item 
of supply is not comparable to supplies available from the private 
sector that best meet the Government's needs in terms of price, 
quality, and time of delivery; and
    (2) The item is acquired in accordance with 8.602(b)(4);
    (b) Public exigency requires immediate delivery or performance;
    (c) Suitable used or excess supplies are available;
    (d) The supplies are acquired and used outside the United States;
    (e) Acquiring listed items totaling $2,500 or less; or
    (f) Acquiring services.


8.606  Evaluating FPI performance.

    Agencies shall evaluate FPI contract performance in accordance with 
subpart 42.15. Performance evaluations do not negate the requirements 
of 8.602 and 8.604, but they may be used to support a waiver request in 
accordance with 8.604.


8.607  Performance as a subcontractor.

    Agencies shall 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 supplies or services;
    (b) A contract specification requiring the contractor to use 
specific supplies or services (or classes of supplies or services) 
offered by FPI; or
    (c) Any contract modification directing the use of FPI supplies or 
services.


8.608  Protection of classified and sensitive information.

    Agencies shall 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.


8.704  [Amended]

0
3. Amend section 8.704 in paragraph (c) by removing ``clearance 
(8.605)'' and adding ``waiver (8.604)'' in its place.

PART 19--SMALL BUSINESS PROGRAMS


19.502-1  [Amended]

0
4. Amend section 19.502-1 in paragraph (b) by removing ``Federal Prison 
Industries,''.

0
5. Add section 19.504 to read as follows:


19.504  Inclusion of Federal Prison Industries, Inc.

    When using competitive procedures in accordance with 8.602(b)(4), 
agencies shall include Federal Prison Industries, Inc. (FPI), in the 
solicitation process and consider a timely offer from FPI.

0
6. Amend section 19.508 by adding a sentence to the end of paragraphs 
(c) and (d) to read as follows:


19.508  Solicitation provisions and contract clauses.

* * * * *
    (c) * * * Use the clause at 52.219-6 with its Alternate II when 
including FPI in the competition in accordance with 19.504.
    (d) * * * Use the clause at 52.219-7 with its Alternate II when 
including FPI in the competition in accordance with 19.504.
* * * * *

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES


42.1503  [Amended]

0
7. Amend section 42.1503 in the seventh sentence of paragraph (b) by 
removing ``clearance request (see 8.605)'' and adding ``waiver request 
(see 8.604)'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
8. Amend section 52.212-5 by revising the date of the clause; and 
adding paragraphs (b)(5)(iii) and (b)(6)(iii) to read as follows:


52.212-5  Contract Terms and Conditions Required to Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or 
Executive Orders--Commercial Items (MAR 2004)

* * * * *
    (b) * * *
    (5) * * *
---- (iii) Alternate II (MAR 2004) of 52.219-6.

    (6) * * *

---- (iii) Alternate II (MAR 2004) of 52.219-7.
* * * * *

0
9. Amend section 52.219-6 by adding Alternate II to read as follows:


52.219-6  Notice of Total Small Business Set-Aside.

* * * * *
    Alternate II (MAR 2004). As prescribed in 19.508(c), substitute the 
following paragraph (b) for paragraph (b) of the basic clause:
    (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.

0
10. Amend section 52.219-7 by adding Alternate II to read as follows:

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52.219-7  Notice of Partial Small Business Set-Aside.

* * * * *
    Alternate II (MAR 2004). As prescribed in 19.508(d), add the 
following paragraph (d) to the basic clause:
    (d) Notwithstanding paragraph (b) of this clause, offers from 
Federal Prison Industries, Inc., will be solicited and considered for 
both the set-aside and non-set-aside portion of this requirement.

[FR Doc. 04-6800 Filed 3-25-04; 8:45 am]
BILLING CODE 6820-EP-P