[Federal Register Volume 77, Number 42 (Friday, March 2, 2012)]
[Rules and Regulations]
[Pages 12927-12929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4485]


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

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 5, 8, 16, 18, and 38

[FAC 2005-56; FAR Case 2007-012; Item III; Docket 2011-0081, Sequence 
1]
RIN 9000-AL93


Federal Acquisition Regulation: Requirements for Acquisitions 
Pursuant to Multiple-Award Contracts

AGENCIES: 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, an 
interim rule amending the Federal Acquisition Regulation (FAR) to 
implement a section of the Duncan Hunter National Defense Authorization 
Act for Fiscal Year 2009 to enhance competition in the purchase of 
supplies and services by all executive agencies under multiple-award 
contracts.

DATES: Effective Date: April 2, 2012.

FOR FURTHER INFORMATION CONTACT: Mr. William Clark, Procurement 
Analyst, at 202-219-1813 for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAC 2005-56, FAR Case 2007-
012.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA published an interim rule in the Federal 
Register at 76 FR 14548 on March 16, 2011, to implement section 863 of 
the Duncan Hunter National Defense Authorization Act for Fiscal Year 
2009 (Pub. L. 110-417), enacted on October 14, 2008. Section 863 
mandated the development and publication of regulations in the FAR to 
enhance competition for the award of orders placed under multiple-award 
contracts. Section 863 specified enhancements that include--
     Strengthening competition rules for placing orders under 
the Federal Supply Schedules (FSS) program and other multiple-award 
contracts to ensure both the provision of fair notice to contract 
holders and the opportunity for contract holders to respond (similar to 
the procedures implemented for section 803 of the National Defense 
Authorization Act for Fiscal Year 2002 (Pub. L. 107-107)); and
     Providing notice in FedBizOpps of certain orders placed 
under multiple-award contracts, including FSS.
    For each individual purchase of supplies or services in excess of 
the simplified acquisition threshold (SAT) that is made under a 
multiple-award contract, section 863 requires the provision of fair 
notice of intent to make a purchase (including a description of the 
work to be performed and the basis on which the selection will be made) 
to all contractors offering such supplies or services under the 
multiple-award contract. In addition, the statute requires that all 
contractors responding to the notice be afforded a fair opportunity to 
make an offer and have that offer fairly considered by the purchasing 
official. A notice may be provided to fewer than all contractors 
offering such supplies or services under a multiple-award contract if 
the notice is provided to as many contractors as practicable. When 
notice is provided to fewer than all the contractors, a purchase cannot 
be made unless--
     Offers were received from at least three qualified 
contractors; or
     A contracting officer determines in writing that no 
additional qualified contractors were able to be identified despite 
reasonable efforts to do so.
    These requirements may be waived on the basis of a justification, 
including a written determination identifying the statutory basis for 
an exception to fair opportunity, that is prepared and approved at the 
levels specified in the FAR.
    In considering the regulatory changes to strengthen the use of 
competition in task and delivery-order contracts, DoD, GSA, and NASA 
made changes consistent with the general competition principles 
addressed in the President's March 4, 2009, Memorandum on Government 
Contracting (available at http://www.whitehouse.gov/the_press_office/Memorandum-for-the-Heads-of-Executive-Departments-and-Agencies-Subject-Government), while still preserving the efficiencies of these contract 
vehicles. For this reason, the rule addressed several issues that were 
not expressly addressed in section 863, such as competition for the 
establishment and placement of orders under FSS blanket purchase 
agreements (BPAs).
    The FAR changes are applicable to task and delivery orders placed 
against multiple-award contracts including FSS and BPAs awarded under 
FSS pursuant to FAR subpart 8.4, and indefinite-delivery/indefinite-
quantity contracts awarded pursuant to subpart 16.5. They do not apply 
to BPAs awarded pursuant to part 13.
    Seven respondents submitted comments on the interim rule.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the comments in the 
development of the final rule. Respondents submitted comments covering 
the following nine categories: (1) Conformance with the Small Business 
Jobs Act; (2) The $103 million threshold reference; (3) Posting 
requirements; (4) Eliminate distinctions between single-award and 
multiple-award BPAs; (5) Competition requirements for establishing BPAs 
and allowing flexibility in establishing BPA ordering procedures; (6) 
BPA requirements and health-care programs; (7) Competition above the 
SAT is a

[[Page 12928]]

burden; (8) Seeking price reduction is inconsistent with competition; 
and (9) Modify FSS contracts to change the Maximum Order Threshold 
(MOT) to the SAT. A discussion of the comments and the changes made to 
the rule as a result of those comments are provided as follows:

A. Summary of Significant Changes

     FAR 8.405-3(a)(7)(v) was modified to correct an 
inadvertent error regarding the threshold amount. The amount should 
have read $103 million in the interim rule. The amount has been 
corrected to read $103 million in the final rule to reflect inflation.
     FAR 8.405-3(c)(3) has been revised to add at the end of 
paragraph (3) ``The ordering activity is responsible for considering 
the level of effort and the mix of labor proposed to perform a specific 
task being ordered, and for determining that the total price is 
reasonable through appropriate analysis techniques, and documenting the 
file accordingly.'' This was added to ensure the price of an order 
requiring a statement of work is being evaluated when placed under a 
BPA with hourly rate services. This language is also consistent with 
the evaluation of orders requiring a statement of work in FAR 8.405-
2(d).
     FAR 8.405-3(e) has been revised to remove paragraph (3), 
``If a single-award BPA is established, the ordering activity 
contracting officer's annual determination must be approved by the 
ordering activity's competition advocate prior to the exercise of an 
option to extend the term of the BPA.'' This was determined to be too 
stringent a requirement for the exercise of an option, which is 
generally within a contracting officer's authority.

B. Analysis of Public Comments

1. Conformance With the Small Business Jobs Act
    Comment: One respondent asked how the interim rule reconciles with 
the requirements of the Small Business Jobs Act of 2010, part III, 
section 1331 (Reservation of Prime Contracts for Small Businesses).
    Response: This rule is not impacted by the requirements of section 
1331 of the Small Business Jobs Act of 2010.
2. The $103 Million Threshold
    Comment: Two respondents made reference to the $100 million 
threshold at FAR 8.405-3(a)(7)(v). They stated that it should be $103 
million to be consistent with FAR 8.405-3(a)(3)(ii).
    Response: The threshold should be $103 million in all places. The 
correction has been made to the FAR text.
3. Posting Requirements
    Comment: Two respondents submitted comments on the posting 
requirements. One of the respondents asked what purpose is served by 
posting fair opportunity exemptions to the FedBizOpps Web site. The 
respondent noted that fair opportunity exemptions are posted after 
orders are placed and will be viewed by many parties that do not hold 
contracts under the relevant multiple-award acquisitions. The 
respondent suggested that this practice may result in needless 
challenges and litigation by parties that do not have standing to 
challenge the exemptions. The other respondent stated that it seemed 
that the posting requirements provided at FAR 5.301(d) are exactly the 
same as those provided at FAR 5.406. The respondent suggested that it 
seemed unnecessary to list the requirement in two different places in 
the FAR. As such, the respondent recommended removing FAR 5.406.
    Response: The requirement to post exceptions to fair opportunity to 
FedBizOpps is required by section 863 of the Duncan Hunter National 
Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110-417). 
Further, regarding the duplicative posting requirements at FAR 5.301(d) 
and FAR 5.406, the Councils concluded that the multiple references 
would provide for clarity in implementation. The Councils also 
concluded that posting the justifications for exceptions to the 
competition requirements provides transparency into agency purchases.
4. Eliminate Distinctions Between Single-Award and Multiple-Award BPAs
    Comment: One respondent stated that FAR 8.405-3(a) of the interim 
rule should be revised to place single-award BPAs on par with multiple-
award BPAs. The respondent indicated that FAR 8.405-3 does not limit 
multiple-award BPAs to a one-year base and up to four one-year options, 
as required for single-award BPAs, nor does it require approval of the 
competition advocate to extend a multiple-award BPA. The respondent 
further stated the regulation should be revised to provide that the 
decision to use a single-award BPA versus a multiple-award BPA be 
documented and addressed in the acquisition plan for the BPA with the 
factors to be considered.
    Response: The rule includes a preference for multiple-award BPAs, 
but does not prohibit the establishment of a single-award BPA. A 
single-award BPA is appropriate in certain circumstances. The multiple-
award preference is intended to facilitate and enhance competition 
involving orders placed under FSS BPAs. The Councils concluded that the 
limit on the duration for single-award BPAs supports the preference for 
multiple-award BPAs and competition. However, the requirement for 
competition advocate approval at the annual review of a single-award 
BPA has been removed for the final rule. The contracting officer's 
determination whether to establish a single-award BPA or multiple-award 
BPAs must be documented in the file in accordance with FAR 8.405-
3(a)(7).
5. Competition Requirements for Establishing BPAs and Allowing 
Flexibility in Establishing BPA Ordering Procedures
    Comment: One respondent recommended that the interim rule be 
revised to provide greater flexibility in the establishment of 
multiple-award BPAs and the placement of orders under BPAs. The 
respondent noted that the rules previously allowed the agency 
establishing a BPA to establish its own BPA ordering procedures, and 
that this allowed agencies such as the Department of Veterans Affairs 
and the Department of Defense Enterprise Software Initiative to craft 
flexible ordering procedures that made good business sense under their 
unique circumstances.
    Response: This rule provides flexibility in the establishment of 
FSS BPAs and the placement of orders under FSS BPAs. The rule includes 
the flexibility to justify an exception to the competition requirements 
at either the FSS BPA or order level. The procedures provided in the 
rule for the establishment of FSS BPAs and placement of the orders 
thereunder are intended to enhance competition. This is consistent with 
section 863 of the Duncan Hunter National Defense Authorization Act for 
Fiscal Year 2009 (Pub. L. 110-417) and the general competition 
principles addressed in the President's March 4, 2009, Memorandum on 
Government Contracting, while still preserving the efficiencies 
provided by these contract vehicles.
6. BPA Requirements and Health-Care Programs
    Comment: One respondent recommended that Schedules covering drugs 
and medical supplies be excluded from the rule.
    Response: The statute does not allow for an exclusion of FSS 
covering drugs and medical supplies.

[[Page 12929]]

7. Competition Above the SAT Is a Burden
    Comment: Two respondents thought that competition above the SAT 
level is too burdensome. One respondent recommended that the threshold 
at which formal competition procedures are triggered should be the 
greater of the MOT or SAT. The respondent also suggested that this rule 
will increase administrative burden and cost to both the Government and 
FSS holders. Another respondent noted that multiple-award contracts are 
designed to offer agencies a streamlined mechanism for acquiring 
services and supplies. The respondent stated that the procedures set 
forth in the interim rule would significantly increase the time 
required for placing orders in situations where a valid reason exists 
to utilize an exception to the fair opportunity requirement. According 
to the respondent, it is not clear that adding these requirements will 
have the intended effect of meaningfully increasing competition under 
multiple-award contracts.
    Response: The use of the SAT as the threshold is required by 
statute (section 863 of the Duncan Hunter National Defense 
Authorization Act for Fiscal Year 2009 (Pub. L. 110-417)).
8. Seeking Price Reduction Is Inconsistent With Competition
    Comment: One respondent stated that the requirement that 
contracting officers seek a price reduction when placing an order over 
the SAT is inconsistent with the requirement that purchase orders over 
the SAT be competed. The FAR is built, in part, on the concept that 
competition drives a fair and reasonable price. As such, it is unclear, 
from the respondent's perspective, why contracting officers should be 
required to seek a further price reduction after a competitive 
procurement is awarded because the successful contractor has already 
provided its best price in order to win the procurement. The respondent 
argued that this requirement will likely result in contractors 
preparing their original price list in anticipation of multiple layers 
of price negotiation during the competitive procurement process and 
thereafter.
    Response: Pursuant to the Government Accountability Office (GAO) 
report number GAO-09-792 entitled ``Agencies are not Maximizing 
Opportunities for Competition or Savings Under BPAs Despite Significant 
Increase in Usage,'' requesting a price reduction is not inconsistent 
with competition. A contracting officer can meet this requirement at 
any time via a solicitation, or anytime thereafter. This rule does not 
require the contractor to reduce its prices when asked to do so by the 
Government.
9. Modify FSS Contracts To Change the MOT to the SAT
    Comment: One respondent stated that the old FAR subpart 8.4 
ordering procedures and the price reduction clause (PRC) reflected the 
balance between competition and price reductions above the MOT versus 
compliance with the PRC. The PRC recognized that the PRC remedies were 
not necessary above the MOT, where competition and requests for price 
reductions were required by the old FAR subpart 8.4. According to the 
respondent, the new FAR subpart 8.4 ordering procedures have replaced 
the MOT with the simplified acquisition threshold and, as such, there 
should be a corresponding change in the contracts.
    Response: The respondent's suggestion is out of the scope of this 
rule. The suggestion has been forwarded to the GSA Federal Acquisition 
Service for consideration.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is a significant regulatory action and, therefore, was subject to 
review under section 6(b) of E.O. 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

    The Department of Defense (DoD), the General Services 
Administration (GSA), and the National Aeronautics and Space 
Administration (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 this rule does not revise or change existing regulations 
pertaining specifically to small business concerns seeking Government 
contracts. DoD, GSA, and NASA believe the final rule should benefit 
small entities by encouraging and enhancing competition.

V. Paperwork Reduction Act

    The 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 5, 8, 16, 18, and 38

    Government procurement.

    Dated: February 21, 2012.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of 
Acquisition Policy, Office of Governmentwide Policy.

Interim Rule Adopted As Final With Changes

    Accordingly, the interim rule amending 48 CFR parts 5, 8, 16, 18, 
and 38 which was published in the Federal Register at 76 FR 14548 on 
March 16, 2011, is adopted as final with the following changes:

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

0
1. The authority citation for 48 CFR part 8 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).


0
2. Amend section 8.405-3 by removing from paragraph (a)(7)(v) ``$100 
million'' and adding ``$103 million'' in its place; adding a new 
sentence to the end of paragraph (c)(3); and removing paragraph (e)(3). 
The added text reads as follows:


8.405-3  Blanket purchase agreements (BPAs).

* * * * *
    (c) * * *
    (3) * * * The ordering activity is responsible for considering the 
level of effort and the mix of labor proposed to perform a specific 
task being ordered, and for determining that the total price is 
reasonable through appropriate analysis techniques, and documenting the 
file accordingly.
* * * * *

[FR Doc. 2012-4485 Filed 3-1-12; 8:45 am]
BILLING CODE 6820-EP-P