[Federal Register Volume 77, Number 75 (Wednesday, April 18, 2012)]
[Rules and Regulations]
[Pages 23369-23370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-9204]

[[Page 23369]]





48 CFR Parts 6, 15, and 19

[FAC 2005-58; FAR Case 2009-038; Item III; Docket 2010-0095, Sequence 
RIN 9000-AL55

Federal Acquisition Regulation; Justification and Approval of 
Sole-Source 8(a) Contracts

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

ACTION: Final rule.


SUMMARY: DoD, GSA, and NASA are adopting as final, without change, an 
interim rule amending the Federal Acquisition Regulation (FAR) to 
implement a section of the National Defense Authorization Act for 
Fiscal Year 2010. This section requires the head of an agency to 
execute and make public prior to award, the justification for an 8(a) 
sole-source contract in an amount exceeding $20 million.

DATES: Effective Date: April 18, 2012.

FOR FURTHER INFORMATION CONTACT:  Mr. Karlos Morgan, Procurement 
Analyst, at 202-501-2364, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat at 202-501-4755. Please cite FAC 2005-58, FAR Case 2009-


I. Background

    DoD, GSA, and NASA published an interim rule in the Federal 
Register at 76 FR 14559 on March 16, 2011, to implement section 811 of 
the National Defense Authorization Act for Fiscal Year 2010 (NDAA for 
FY 2010) (Pub. L. 111-84). Section 811 prohibits the award of a sole-
source contract in an amount over $20 million under the 8(a) Business 
Development Program authority (15 U.S.C. 637(a)) without first 
obtaining a written Justification and Approval (J&A) approved by an 
appropriate official and making public the J&A and related information. 
Section 811 does not institute any requirement for J&As for sole-source 
8(a) contracts less than or equal to $20 million. Nine 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 public comments in the 
development of the final rule. A discussion of the comments is provided 
as follows:

A. Summary of Significant Changes

    There were no changes made to the FAR as a result of the public 
comments received.

B. Analysis of Public Comments

1. General Support for the Rule as Written
    Comment: A majority of the respondents were supportive of the rule 
as written and recommended there be no substantial changes to the 
interim rule.
    Response: The Councils acknowledge receipt of these comments in 
support of the rule.
2. Statutory Basis for the Rule
    Comment: A number of respondents commented that there is no 
statutory basis for the new language at FAR 19.808-1(a), which states 
that the Small Business Administration (SBA) may not accept a sole-
source 8(a) contract in excess of $20 million for negotiation, unless 
the requesting agency has completed a J&A in accordance with FAR 6.303. 
The respondents recommended amending this language in the final rule to 
clarify that the J&A is only required to be developed and executed 
prior to award and after coordinating and negotiating with the SBA (or 
the 8(a) participant where SBA has delegated its authority to the 
procuring agency).
    Response: The law stipulates that the head of the agency may not 
award a sole-source contract that exceeds $20 million under the 8(a) 
program unless the contracting officer justifies the use of a sole-
source contract in writing and the justification is approved by the 
appropriate official. However, the law does not specify the precise 
stage in the contract award process when the J&A must be executed. The 
language that was added to FAR 19.808-1 ensures that the J&A is 
executed prior to contract negotiation, a critical juncture in the 
contract award continuum. Contract negotiation, with rare exception, 
occurs before the contract is awarded; therefore there is no conflict 
with the law.
    Execution of the J&A prior to the SBA's initiation of contract 
negotiations adheres to the established procedures in the FAR that 
require (1) at FAR 6.303-1, the contracting officer to justify the use 
of a sole-source contract in writing prior to negotiations; and (2) at 
FAR 19.804-2, the agency, if appropriate, to request in its offering 
letter to the SBA, that a requirement with a contract value over the 
applicable competitive threshold be awarded as a sole-source contract 
under the 8(a) program. The language that was added at FAR 19.808-1 
does not pre-empt the obligation of agencies to cooperate with the SBA 
in determining the extent to which a requirement should be offered in 
support of the 8(a) program, nor does it impact SBA's acceptance of the 
requirement into the 8(a) program. It does not affect the timing of 
SBA's eligibility determination.
3. Including the Value of Options in Contract Value
    Comment: Several respondents recommended that the $20 million 
threshold be applicable to the base year only, rather than including 
options in the total contract value.
    Response: The standard contract action valuation practice is 
outlined in FAR 1.108(c), which provides that the final anticipated 
dollar value of an action include the dollar value of all options. 
Section 811 does not provide a basis to diverge from this standard.
4. Cross Reference at FAR 6.204(b)
    Comment: One respondent recommended striking the parenthetical text 
at FAR 6.204(b), which references the requirements for a separate 
justification to support the use of 8(a) sole-source awards in FAR 
subpart 6.3, because it was unnecessary and potentially confusing.
    Response: The Councils considered the comment, but find that the 
cross reference adds clarity to the FAR text.
5. Content of Justification
    Comment: A number of respondents recommended that the language at 
FAR 6.303-2(d)(5) be amended in the final rule to clarify the other 
matters the head of the agency should consider when justifying and 
approving the award of a sole-source 8(a) contract in excess of $20 
million. These considerations should include Native American economic 
development and meeting agency small business goals.
    Response: FAR 6.303-2(d)(5), as currently written, requires agency 
heads to address ``Such other matters as the head of the agency 
concerned shall specify for purposes of this section.'' This gives 
agency heads the discretion to consider Native American economic 
development and meeting agency small business goals, as well as other 

[[Page 23370]]

matters when justifying and approving the award of a sole-source 8(a) 
6. Potential Impact on Native American-Owned Firms
    Comment: Several respondents expressed concern regarding the 
possible impact facing Native American-owned enterprises. The 
respondents pointed out that the 8(a) program has undergone 
considerable reform over the last two years and has experienced 
overwhelming success in achieving its goals. The respondents also 
emphasized that the vast majority of Native American-owned enterprises 
have consistently provided high value support to their Government 
customers. In view of these considerations, the respondents requested 
that each executive agency send a policy directive to their contracting 
officers to outline the benefits of the SBA 8(a) program and the 
positive impact this program has had for Native participants.
    Response: The benefits of SBA's 8(a) program and the positive 
impact this program has had for Native participants are promoted by SBA 
and the Office of Small and Disadvantaged Business Utilization (OSDBU) 
on a consistent basis throughout the Government. Each Federal agency 
with contracting authority has established an OSDBU. The OSDBU 
advocates for small, small disadvantaged (including the 8(a) program), 
veteran, service-disabled veteran-owned, HUBZone, and women-owned 
businesses. The OSDBU is charged with promoting increased access for 
small businesses to procurement opportunities, conducting outreach 
efforts, and providing liaison support for small and disadvantaged 
businesses. In addition, the OSDBU works closely with program officers 
and contracting officers to assist in the accomplishment of the annual 
Governmentwide 5 percent procurement goals for small disadvantaged 

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, the General Services Administration, and 
the National Aeronautics and Space Administration 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 the rule does not 
impose any additional requirements on the majority of small businesses. 
The rule implements the statutory requirements mandated by section 811, 
Justification and Approval of Sole-Source Contracts, of the National 
Defense Authorization Act for Fiscal Year 2010. It is recognized that a 
very small number of businesses that have been awarded 8(a) contracts 
over the $20 million threshold may be impacted. However, the rule does 
not limit the number of contracts or dollars awarded to these 
businesses. The rule may also indirectly benefit the 8,833 currently 
certified section 8(a) firms by improving their likelihood of a 
contract award through increased competition, but this impact is 
similarly considered not significant.

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 6, 15, and 19

    Government procurement.

    Dated: April 11, 2012.
Laura Auletta,
Director, Office of Governmentwide Acquisition Policy, Office of 
Acquisition Policy, Office of Governmentwide Policy.

Interim Rule Adopted as Final Without Change

Accordingly, the interim rule amending 48 CFR parts 6, 15, and 19, 
which was published in the Federal Register at 76 FR 14559 on March 16, 
2011, is adopted as a final rule without change.

[FR Doc. 2012-9204 Filed 4-17-12; 8:45 am]