[Federal Register Volume 84, Number 32 (Friday, February 15, 2019)]
[Rules and Regulations]
[Pages 4371-4373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02526]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 236

[Docket DARS-2018-0039]
RIN 0750-AJ75


Defense Federal Acquisition Regulation Supplement: Exemption From 
Design-Build Selection Procedures (DFARS Case 2018-D011)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule to amend the Defense Federal 
Acquisition Regulation Supplement (DFARS) to implement a section of the 
National Defense Authorization Act for Fiscal Year 2018 that provides 
an exemption from design-build selection procedures for contracts that 
exceed $4 million.

DATES: Effective February 15, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Heather Kitchens, telephone 571-
372-6104.

SUPPLEMENTARY INFORMATION:

[[Page 4372]]

I. Background

    DoD published a proposed rule in the Federal Register at 83 FR 
42850 on August 24, 2018, to implement section 823 of the National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018. Section 823 
modifies 10 U.S.C. 2305a to provide an exemption from the phase two 
design-build maximum number of offerors that may be selected to submit 
competitive proposals for contracts exceeding $4 million. The exemption 
provides that if the contract value exceeds $4 million and the 
solicitation is issued pursuant to an indefinite-delivery indefinite-
quantity (IDIQ) contract for design-build construction, the maximum 
number of offerors to be selected may exceed five.
    In addition, for other than IDIQ contracts, the rule provides 
authority to exceed the five offeror maximum when the contracting 
officer's decision is approved by the head of the contracting activity, 
delegable to a level no lower than the senior contracting official 
within the contracting activity, when the solicitation is for a 
contract that exceeds $4 million. When a solicitation is for a contract 
that does not exceed $4 million, the rule provides that the number of 
offerors is at the contracting officer's discretion.
    Three respondents submitted public comments in response to the 
proposed rule.

II. Discussion and Analysis

    DoD reviewed the public comments in the development of the final 
rule. A discussion of the comments received and any changes made to the 
rule are provided as follows:

A. Summary of Significant Changes

    There were no changes from the proposed rule made in the final rule 
as a result of the comments received. The comments did not recommend 
changes to the proposed rule; rather, the respondents expressed 
concerns over the underlying intent of the statute.

B. Analysis of Public Comments

1. Administrative and Cost Burden
    Comment: Several respondents stated that the statutory requirement 
will create a significant administrative and cost burden on the 
Government and/or industry. One respondent suggested that the exemption 
will require DoD officials to review an unnecessarily high number of 
full proposals undermining the purpose of both IDIQ contracts and 
design-build.
    Response: The rule does not require contracting officers to 
consider more than five offerors; instead, the rule provides 
contracting officers the option to allow for more than five offerors to 
submit competitive proposals in solicitations for contracts for design-
build construction that exceed $4 million.
2. Impact on Competition
    Comment: Several respondents stated that the statutory requirement 
will drive away highly qualified design-build firms and/or possibly 
favor lower qualified firms. One respondent stated that increasing the 
number of offerors will reduce participation from highly qualified 
firms who incur much of the cost in these competitions. The same 
respondent noted that increasing the number of offerors may favor lower 
qualified offerors based on artificially low bids.
    Response: DoD does not agree that the statutory requirement, and 
the resulting implementing rule, will drive away highly qualified 
design-build firms and/or possibly favor lower qualified firms. The 
competitive selection criteria will not change based on this rule. 
Conversely, the rule could be viewed as providing expanded opportunity 
for qualified firms to compete.
3. Learning Curve
    Comment: One respondent stated that the statutory requirement will 
create a learning curve for new firms, which will result in longer 
project times.
    Response: DoD does not agree that expanding the competitive pool 
will necessarily result in longer project times. While a learning curve 
might be expected for any new firm or new requirement, this does not 
drive the decision of whether or not to restrict competition.
4. Industry Best Practices/Innovation
    Comment: Two respondents stated that the statutory requirement 
moves away from industry best practices. One respondent stated that the 
statutory requirement diminishes the opportunities for innovation that 
design-build offers.
    Response: While the rule may be viewed by the respondents as moving 
away from industry best practices, this rule is necessary to meet the 
requirements of the statute. Opening up the competitive pool may result 
in opportunities for increased innovation.
5. Accountability
    Comment: One respondent stated that the statutory requirement will 
create a larger competitive pool which will diminish accountability.
    Response: Opening up the competitive pool should not have any 
effect upon or diminish accountability.

C. Other Changes

    One minor editorial change is made to the rule numbering to 
correctly designate the added DFARS rule text as ``236.303-1(a)(4)'' in 
lieu of ``236.303-1(4)''.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule does not create any new provisions or clauses or impact 
any existing provisions or clauses.

IV. Executive Orders 12866 and 13563

    Executive Order (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 not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This is not a major rule under 5 
U.S.C. 804.

V. Executive Order 13771

    This final rule is not an E.O. 13771 regulatory action, because 
this rule is not significant under E.O. 12866.

VI. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared and is 
summarized as follows:
    This rule amends the Defense Federal Acquisition Regulation 
Supplement (DFARS) to implement section 823 of the National Defense 
Authorization Act (NDAA) for Fiscal Year (FY) 2018, which modifies 10 
U.S.C. 2305a(d) regarding the maximum number of offerors that may be 
selected to submit competitive proposals under solicitations for two-
phase design-build. Specifically, the selection procedures are modified 
by providing an exemption from the maximum number of five offerors when 
the contract value in a solicitation exceeds $4 million and the 
solicitation is issued pursuant to an indefinite-delivery indefinite-
quantity (IDIQ) contract for design-build construction. The rule 
provides the

[[Page 4373]]

authority to exceed the five offeror maximum when the contracting 
officer's decision is approved by the head of the contracting activity, 
delegable to a level no lower than the senior contracting official 
within the contracting activity, when the solicitation is for a 
contract that exceeds $4 million. The rule also provides that the 
number of offerors is at the contracting officer's discretion when the 
solicitation is for a contract that does not exceed $4 million.
    There were no significant issues raised by the public comments in 
response to the initial regulatory flexibility analysis.
    Based on FY 2017 data from the Federal Procurement Data System, DoD 
issued approximately 499 new awards for construction exceeding $4 
million to 396 unique businesses, to include IDIQ contracts, purchase 
orders, and orders under basic ordering agreements. Of the 499 new 
awards for construction, approximately 305 awards (approximately 61 
percent) were made to 252 unique small entities (approximately 64 
percent). This estimate is based on the assumption that contracts for 
design-build are coded as ``construction'' in FPDS, in which case a 
smaller number of small entities are actually impacted by the 
opportunity to exceed to the five offeror maximum for contracts valued 
in excess of $4 million. For contracts valued at or below $4 million, 
the FAR already provides an opportunity for contracting officers to 
determine that a greater number of offerors is in the Government's 
interest and is consistent with the purposes and objectives of the two-
phase design-build selection procedures. No significant impact is 
expected to result from authorizing contracting officers to exceed the 
maximum number at their own discretion.
    This final rule does not include any new reporting or recordkeeping 
requirements for small entities.
    There are no known significant alternative approaches to the final 
rule that would meet the requirements of the applicable statute.

VI. 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 Part 236

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR part 236 is amended as follows:

PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

0
1. The authority citation for part 236 continues to read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.


0
2. Add subpart 236.3, consisting of 236.303-1, to read as follows:

SUBPART 236.3--TWO-PHASE DESIGN-BUILD SELECTION PROCEDURES


236.303-1  Phase One.

    (a)(4) In lieu of the limitations on the maximum number of offerors 
that may be selected to submit phase-two proposals at FAR 36.303-
1(a)(4), for DoD--
    (i) If the contract value exceeds $4 million, the maximum number of 
offerors specified in the solicitation that are to be selected to 
submit phase-two proposals shall not exceed five, unless--
    (A) The solicitation is issued for an indefinite-delivery 
indefinite-quantity contract for design-build construction; or
    (B) The head of the contracting activity, delegable to a level no 
lower than the senior contracting official within the contracting 
activity, approves the contracting officer's decision with respect to 
an individual solicitation, that a maximum number greater than five is 
in the best interest of the Government and is consistent with the 
purposes and objectives of the two-phase selection procedures. The 
decision shall be documented in the contract file (10 U.S.C 2305a(d)).
    (ii) If the contract value is at or below $4 million, the maximum 
number of offerors specified in the solicitation that are to be 
selected to submit phase-two proposals is at the discretion of the 
contracting officer.

[FR Doc. 2019-02526 Filed 2-14-19; 8:45 am]
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