[Federal Register Volume 76, Number 51 (Wednesday, March 16, 2011)]
[Rules and Regulations]
[Pages 14562-14565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5555]


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

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 10, 16, 44, and 52

[FAC 2005-50; FAR Case 2008-007; Item IV; Docket 2010-0086, Sequence 1]
RIN 9000-AL50


Federal Acquisition Regulation; Additional Requirements for 
Market Research

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

ACTION: Final rule.

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

SUMMARY: DoD, GSA, and NASA have adopted as final, with changes, the 
interim rule amending the Federal Acquisition Regulation (FAR) to 
implement section 826, Market Research, of the National Defense 
Authorization Act for Fiscal Year 2008. Section 826 requires the head 
of an agency to take appropriate steps to ensure that any prime 
contractor of a contract (or task order or delivery order) in an amount 
in excess of $5 million for the procurement of items other than 
commercial items engages in market research as necessary before making 
purchases.

DATES: Effective Date: April 15, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Lori Sakalos, Procurement Analyst, 
at (202) 208-0498, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at (202) 501-4755. Please cite FAC 2005-50, FAR Case 2008-
007.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA published an interim rule in the Federal 
Register at 75 FR 34277 on June 16, 2010, to implement section 826, 
Market Research, of the National Defense Authorization Act for Fiscal 
Year 2008 (Pub. L. 110-181). Section 826 establishes additional 
requirements in subsection (c) of 10 U.S.C. 2377. As a matter of 
policy, these requirements are extended to all executive agencies. 
Specifically, the head of the agency must conduct market research 
before issuing an indefinite-delivery indefinite-quantity task or 
delivery order for a noncommercial item in excess of the simplified 
acquisition threshold. In addition, a prime contractor with a contract 
in excess of $5 million for the procurement of items other than 
commercial items is required to conduct market research before making 
purchases that exceed the simplified acquisition threshold for or on 
behalf of the Government. Three respondents submitted 16 comments on 
the interim rule.

II. Discussion/Analysis

    Public Comments: A discussion of the comments and the changes made 
to the rule as a result of those comments are provided as follows:

A. Purpose

    1. Comment: One respondent stated that the guidance does not appear 
to explain the end purpose of the market research. Another respondent, 
however, concluded that the FAR states the purpose of the market 
research twice, in FAR 44.402(b) and 10.001(a)(3). The second 
respondent stated that the purpose for conducting market research is 
``clearly described in Part 10 and there is no reason to repeat that 
same language elsewhere in the FAR.''
    Response: The Defense Acquisition Regulations Council and the 
Civilian Agency Acquisition Council (the Councils) agree with the 
second respondent. FAR part 10 ``prescribes policies and procedures for 
conducting market research to arrive at the most suitable approach to 
acquiring, distributing, and supporting supplies and services'' (FAR 
10.000). FAR 10.001(a)(3) lists the ways in which the

[[Page 14563]]

results of the market research may be used. We believe that the end 
purpose of market research is exhaustively covered in FAR part 10. We 
also agree that there is no need to repeat this material in FAR subpart 
44.4, and the final rule removes the redundant material.
    2. Comment: A respondent noted that competitively awarded 
indefinite-delivery indefinite-quantity contracts are priced as a 
result of market forces. Conducting market research prior to the award 
of individual task orders ``will only be looking at the scope of Task 
Order* * * (and) is redundant to the market research already required 
by FAR for the (indefinite-delivery indefinite-quantity) contract.'' It 
is unlikely to result in more competition or better pricing, according 
to the respondent.
    Response: The Councils note that the purpose of market research is 
to effectively identify, on an on-going basis, the capabilities of 
small businesses and new entrants into Federal contracting that are 
available in the marketplace for meeting the requirements of the 
agency. The Councils disagree with the respondent's contention that 
more competition or better pricing are unlikely to result. (Also see 
responses at II.F., Burden.)

B. Location in FAR

    1. Comment: A respondent noted that, while FAR part 10 contains 
scant detail on market research, there are existing market research 
techniques and information embedded in chapter 2 of the DoD Commercial 
Item (CI) Handbook at http://www.acq.osd.mil/dpap/Docs/cihandbook.pdf. 
The respondent stated that the Handbook might be instructive for 
executive agencies to use as part of any training requirements.
    Response: This comment is outside the scope of the FAR case. 
However, it has been forwarded to both the Defense Acquisition 
University and the Federal Acquisition Institute for their 
consideration. The current Commercial Item Handbook (version 1.0) was 
published November 2001 and is currently in revision.
    2. Comment: A respondent stated its conclusion that the section 826 
requirement for contractors with contracts exceeding $5 million to 
perform market research for ``other than commercial items'' is 
misplaced because the title of FAR subpart 44.4 is ``Subcontracts for 
Commercial Items and Commercial Components.'' The respondent suggested 
that a better location for the statutory requirement would be at FAR 
44.303.
    Response: The Councils agree that the requirement was misplaced in 
FAR subpart 44.4 and have relocated the clause prescription to FAR part 
10, Market Research (rather than FAR subpart 44.3, as suggested by the 
respondent). The statute and policy require contractors to conduct 
market research in certain circumstances (when the contract is over $5 
million for the procurement of items other than commercial items); 
whether the subcontract is for commercial or other than commercial 
items is immaterial to the contractor's requirement to conduct market 
research. The statute encourages contractors and subcontractors to use 
commercial items. The FAR is amended to delete the subject of market 
research from subpart 44.4, and the ``Scope of subpart'' section, FAR 
44.400, is being revised accordingly. The Councils believe that the 
coverage is better located in FAR part 10 rather than FAR subpart 44.3, 
as the respondent suggested, because the latter subpart is exclusive to 
Contractors' Purchasing Systems Reviews.
    3. Comment: A respondent stated that FAR 52.244-6 is intended to 
limit the clauses that a FAR part 15 prime contractor is required to 
flow down to a subcontractor selling commercial items. The respondent 
stated its belief that the new Alternate I to the clause is 
unnecessary. The respondent also concluded that the existing FAR part 
10 market research language should not be restated there. Last, the 
respondent questioned the need for the added language about ``procuring 
commercial items,'' when the focus of section 826 is on procurement of 
``other than commercial items.''
    Response: The Councils agree that Alternate I to FAR 52.244-6 is 
unnecessary and not relevant to subcontracts for commercial items. By 
removing discussion of market research from FAR subpart 44.4, there 
will no longer be a redundant discussion of FAR part 10 material in FAR 
subpart 44.4. The Councils agree with the respondent that the focus of 
section 826 is on the procurement of other than commercial items. 
Relocating the requirement for contractors to conduct market research 
to FAR part 10 better aligns the FAR coverage with the statute. The 
Councils have retained the requirement, at section 826(a) (10 U.S.C. 
2377(c)(4)), for a contractor with a contract over $5 million for the 
procurement of other than commercial items to conduct market research. 
However, the Councils have added the requirement as a new FAR clause, 
52.210-1, Market Research, prescribed at FAR 10.003, Contract clause. 
Because the statute requires the conduct of market research by a 
contractor awarded task orders or delivery orders over $5 million for 
items other than commercial items, we have added a cross-reference to 
the requirement to FAR subpart 16.5.

C. Clarification of FAR Language

    1. Comment: A respondent concluded that the interim rule confuses 
the prime contractor's role in procuring supplies and services to 
support its deliverable to the Government, i.e., subcontracting, with 
the unique and completely distinct role of a prime contractor holding a 
contract to operate a Government facility and act in the place of the 
Government in procuring supplies and services solely to support the 
activities at the Government facility, i.e., acting as an agent of the 
Government.
    Response: The Councils eliminated the ``purchasing agent'' language 
by deleting the Alternate I to FAR 52.244-6. The Councils also created 
a new FAR clause 52.210-1, Market Research.
    2. Comment: A respondent noted that there is a significant 
difference between the section 826 requirement to conduct market 
research ``as may be necessary'' and the FAR 44.402(b) requirement to 
conduct market research ``to the maximum extent practicable.'' The 
respondent requested that the language from section 826 be used so that 
contractors will have the ability to tailor their market research as 
necessary to reflect their knowledge and experience of the supplies and 
services being procured.
    Response: The Councils do not agree with the respondent. The 
Government has interpreted ``as may be necessary'' to mean ``to the 
maximum extent practicable.'' In any case, the term ``to the maximum 
extent practicable'' has been removed from the case, as the coverage 
for FAR 44.402(b) has been deleted from the rule.

D. Application

    1. Comment: According to the respondent, mixing the discussion of a 
contractor's possible roles of subcontracting and acting as the 
Government's agent has created a lower standard for ``agents.'' As 
written, the respondent stated, the language requires contractors to 
perform the necessary market research whenever procuring other than 
commercial items, but purchasing agents are only required to perform 
market research when procuring other-than-commercial items with a value 
over the simplified acquisition threshold. The respondent questioned 
the need for this distinction.
    Response: The Councils agree that there need not be any distinction

[[Page 14564]]

between the contractor acting as a subcontractor and the contractor 
``acting as a purchasing agent.'' The language has been removed from 
FAR subpart 44.4.
    2. Comment: A respondent recommended requiring the conduct of 
market research prior to the award of each task order issued under an 
indefinite-delivery indefinite-quantity contract that was awarded on a 
sole-source basis.
    Response: The Councils disagree with the respondent because the 
clear language of the statute, section 826(c), establishes a 
requirement for the conduct of market research appropriate to the 
circumstances prior to awarding a task order or delivery order in 
excess of the simplified acquisition threshold for the procurement of 
items other than commercial items. The statute does not limit the 
market research requirements to task orders or delivery orders awarded 
against sole-source indefinite-delivery contracts. Although this is 
mandatory for DoD and not for civilian agencies, the language was 
applied to civilian agencies for uniformity across the Government. See 
also the response to the second comment at II.A., Purpose, and the 
responses at II.E., Exceptions.

E. Exceptions

    1. Comment: One respondent stated that the addition of a new 
paragraph (d) at FAR 10.001, Policy, only applies to ``(A) contingency 
operation or defense against or recovery from nuclear, biological, 
chemical, or radiological attack; and (B) disaster relief * * *''. For 
that reason, the respondent believes that the same applicability should 
be added to FAR 44.402, as paragraph (d) outlines. The respondent noted 
that, without this change, there would be a negative impact on 
indefinite-delivery indefinite-quantity contracts.
    Response: The respondent's assumptions about the applicability are 
not correct. The requirement for agencies to conduct market research 
for disaster relief and contingency operations already existed at FAR 
10.001(a)(2).
    2. Comment: A respondent claimed that indefinite-quantity contracts 
set aside for Small Business Administration (SBA) categories, such as 
the 8(a) program and small disadvantaged business, should be exempt 
from market research requirements because the intent is to facilitate 
the SBA in supporting these ``specialty market segments.'' The 
respondent notes that this market segment historically is very 
committed and can be relied upon to self-police.
    Response: The SBA's current socioeconomic programs offering 
eligible program participants contractual opportunities are the section 
8(a) program, HUBZone program, and the service-disabled veteran-owned 
small business concern program. The SBA has finalized the regulations 
that will provide guidance for the women-owned small business Federal 
contract program. The rule was published in the Federal Register on 
October 7, 2010 (75 FR 66258). The SBA does not have a small and 
disadvantaged business (SDB) program offering SDB set-asides. However, 
the SBA's 8(a) firms may represent themselves as SDBs for Federal 
contracts and subcontracts to include task- and delivery-orders under 
indefinite-delivery contracts.
    Performing market research for task- and delivery-orders will not 
diminish opportunities for agencies to establish set-asides for small-
business concerns or, when appropriate, award sole-source contracts for 
indefinite-delivery contracts. Market research performed by prime 
contractors will also enhance subcontracting opportunities for small-
business concerns. Careful attention to market-research strategies is 
an effective method for creating contract opportunities for small-
business concerns. It provides them with an awareness of forthcoming 
procurements. In turn, the market research provides a vehicle for the 
small-business concern to market its capabilities to the Government and 
its contractors. FAR part 10 currently supports market research for 
small business concerns and requires agencies to take advantage of 
commercially available market research methods in order to effectively 
identify the capabilities of small businesses. The final rule will not 
limit an entity's ability to utilize the SBA's small business programs.

F. Burden

    1. Comment: A respondent noted that at least one agency uses 
multiple-award contracts for construction. Each task order is competed, 
which the respondent stated ensures that ``the full force of the 
marketplace is apparent in the pricing of competitiveness of each 
award.'' In addition, each prime contractor is continually reviewing 
the performance and prices of all its subcontractors. The respondent 
stated that having the Government perform additional market research in 
this market segment is a waste of time and money.
    Response: The Councils do not agree with the respondent. Given the 
continuously changing circumstances and entry of new businesses, on-
going market research is not a waste of manpower and taxpayers' money. 
Further, the respondent addresses the Government's performance of 
additional market research, but the statute also places the on-going 
market research requirement on the prime contractor in these 
circumstances. There is no reason why a multiple-award construction 
contract should be treated any differently than any multiple-award 
contract.
    2. Comment: A respondent expressed concern about the negative 
impact caused by the time and effort required for each market survey. 
Fiscal year-end solicitations and awards may be slowed to the point of 
making awards impossible.
    Response: The Councils cannot waive statutory requirements simply 
because compliance will take time. In an effort to enhance uniformity 
and consistency, the DoD statutory mandate was intentionally extended 
to all executive agencies, consistent with Governmentwide applications 
being sought in other competition matters by the Office of Federal 
Procurement Policy. The Councils also point the respondent to FAR 
10.002(b)(1), which notes that the ``extent of market research will 
vary, depending on such factors as urgency, estimated dollar value, 
complexity, and past experience.'' Further, the Councils note that FAR 
10.002(b)(1) clearly states that the market research effort for a new 
task order or delivery order need not be de novo in every case; the 
``contracting officer may use market research conducted within 18 
months before the award of any task or delivery order if the 
information is still current, accurate, and relevant'' (emphasis 
added).
    3. Comment: The respondent stated that the requirement for market 
research will greatly impede the award of task orders, slowing fiscal 
year-end awards to the point of impossibility and negatively impacting 
Base Operating Support/Service (BOS) contracts. The respondent noted 
that BOS contracts have performance-based elements that ensure the 
contractor has incentives for efficiencies that will result in 
substantive savings in cost and schedule. Time has proven that having a 
single contractor responsible for the full scope of a contract effort 
enables tradeoffs by the contractor that result in better overall 
performance and savings, according to the respondent, than would 
intermittent market research.
    Response: Whatever the respondent's experience with BOS contracts 
containing performance-based elements, the Councils note that the 
statute requires the conduct of market research

[[Page 14565]]

for both single-award and multiple-award indefinite-delivery contracts. 
The point of having contractors conduct market research, as stated in 
the law, is to identify commercial or nondevelopmental items that may 
be available to meet the agency's needs, not to identify efficiency 
trade-offs within the contractor's operations. Both efforts can proceed 
in tandem.
    Finally, this final rule makes several conforming changes and 
technical corrections as a result of public comments received:
    1. The language added to FAR 52.244-6 (Alternate I) is relocated to 
a new FAR clause 52.210-1, Market Research;
    2. A prescription for the new clause is added at FAR 10.003, 
Contract clause; and
    3. A cross-reference for the clause is added at FAR 16.506(h) when 
the contract is over $5 million for the procurement of items other than 
commercial items.

III. Executive Order 12866

    This is a significant regulatory action and, therefore, was 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.

IV. Regulatory Flexibility Act

    DoD, GSA, and NASA certify that this final rule will not 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 of the high dollar threshold, non-applicability to 
contracts for commercial items (including commercial items that are 
services), and non-applicability to subcontracts for commercial items 
(including commercial items that are services). DoD, GSA, and NASA 
anticipate that the required market research is likely to increase the 
number of small businesses identified as able to provide commercial or 
nondevelopmental items as subcontractors. Any impact to small 
businesses is positive because their commercial and nondevelopmental 
items are more likely to be discovered as a result of these market 
research requirements. No comments were received from small entities in 
response to the invitation to do so included in the interim rule.

V. Paperwork Reduction Act

    The final rule does not contain any information collection 
requirements that require the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Parts 10, 16, 44, and 52

    Government procurement.

    Dated: March 4, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide Acquisition Policy.

Interim Rule Adopted as Final With Changes

    Accordingly, the interim rule amending 48 CFR parts 10, 16, 44, and 
52, which was published in the Federal Register at 75 FR 34277, June 
16, 2010, is adopted as final with the following changes:

0
1. The authority citation for 48 CFR parts 10, 16, 44, 52 continues 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 10--MARKET RESEARCH

0
1. Amend section 10.001 by revising paragraph (d) to read as follows:


10.001  Policy.

* * * * *
    (d) See 10.003 for the requirement for a prime contractor to 
perform market research in contracts in excess of $5 million for the 
procurement of items other than commercial items in accordance with 
section 826 of Public Law 110-181.


0
2. Add section 10.003 to read as follows:


10.003   Contract clause.

    The contracting officer shall insert the clause at 52.210-1, Market 
Research, in solicitations and contracts over $5 million for the 
procurement of items other than commercial items.

PART 16--TYPES OF CONTRACTS

0
3. Amend section 16.506 by adding paragraph (h) to read as follows:


16.506   Solicitation provisions and contract clauses.

* * * * *
    (h) See 10.001(d) for insertion of the clause at 52.210-1, Market 
Research, when the contract is over $5 million for the procurement of 
items other than commercial items.

PART 44--SUBCONTRACTING POLICIES AND PROCEDURES

0
4. Revise section 44.400 to read as follows:


44.400  Scope of subpart.

    This subpart prescribes the policies limiting the contract clauses 
a contractor may be required to apply to any subcontractors that are 
furnishing commercial items or commercial components in accordance with 
section 8002(b)(2) of Public Law 103-355.


44.402  [Amended]

0
5. Amend section 44.402 by removing paragraph (b) and redesignating 
paragraphs (c) and (d) as paragraphs (b) and (c), respectively.


0
6. Revise section 44.403 to read as follows:


44.403  Contract clause.

    The contracting officer shall insert the clause at 52.244-6, 
Subcontracts for Commercial Items, in solicitations and contracts other 
than those for commercial items.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
7. Add section 52.210-1 to read as follows:


52.210-1   Market Research.

    As prescribed in 10.003, insert the following clause:

Market Research (APR 2011)

    (a) Definition. As used in this clause--
    Commercial item and nondevelopmental item have the meaning 
contained in Federal Acquisition Regulation 2.101.
    (b) Before awarding subcontracts over the simplified acquisition 
threshold for items other than commercial items, the Contractor 
shall conduct market research to--
    (1) Determine if commercial items or, to the extent commercial 
items suitable to meet the agency's needs are not available, 
nondevelopmental items are available that--
    (i) Meet the agency's requirements;
    (ii) Could be modified to meet the agency's requirements; or
    (iii) Could meet the agency's requirements if those requirements 
were modified to a reasonable extent; and
    (2) Determine the extent to which commercial items or 
nondevelopmental items could be incorporated at the component level.

(End of clause)


52.244-6   [Amended]

0
8. Amend section 52.244-6 by removing from the introductory text 
``44.403(a),'' and adding ``44.403,'' in its place; and removing 
Alternate I.

[FR Doc. 2011-5555 Filed 3-15-11; 8:45 am]
BILLING CODE 6820-EP-P