[Federal Register Volume 84, Number 62 (Monday, April 1, 2019)]
[Proposed Rules]
[Pages 12187-12189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06252]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 219 and 252
[Docket DARS-2019-0015]
RIN 0750-AK39
Defense Federal Acquisition Regulation Supplement:
Nonmanufacturer Rule for 8(a) Participants (DFARS Case 2019-D004)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Proposed rule.
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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition
Regulation Supplement (DFARS) to implement the final rule published by
the Small Business Administration implementing a section of the
National Defense Authorization Act for Fiscal Year 2013 that provided
revised and standardized limitations on subcontracting, including the
nonmanufacturer rule, that apply to small business concerns, including
participants in the 8(a) Program.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before May 31, 2019, to be considered in
the formation of a final rule.
ADDRESSES: Submit comments identified by DFARS Case 2019-D004, using
any of the following methods:
[cir] Federal eRulemaking Portal: http://www.regulations.gov.
Search for ``DFARS Case 2019-D004.'' Select ``Comment Now'' and follow
the instructions provided to submit a comment. Please include ``DFARS
Case 2019-D004'' on any attached documents.
[cir] Email: [email protected]. Include DFARS Case 2019-D004 in
the subject line of the message.
[cir] Fax: 571-372-6094.
[cir] Mail: Defense Acquisition Regulations System, Attn: Jennifer
D. Johnson, OUSD(A-S)DPC/DARS, Room 3B941, 3060 Defense Pentagon,
Washington, DC 20301-3060.
Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To
confirm receipt of your comment(s), please check www.regulations.gov,
approximately two to three days after submission to verify posting
(except allow 30 days for posting of comments submitted by mail).
FOR FURTHER INFORMATION CONTACT: Ms. Jennifer D. Johnson, telephone
571-372-6100.
SUPPLEMENTARY INFORMATION:
I. Background
DoD is proposing to revise the DFARS to implement regulatory
changes made by the Small Business Administration (SBA) in its final
rule published in the Federal Register at 81 FR 34243 on May 31, 2016.
SBA's final rule implemented the requirements of section 1651 of the
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013
(Pub. L. 112-239, 15 U.S.C. 657s). Section 1651 revised and
standardized the limitations on subcontracting, including the
nonmanufacturer rule, that apply to small business concerns, including
8(a) Program participants, under procurements conducted pursuant to
Federal Acquisition Regulation (FAR) part 19, Small Business Programs.
Small business concerns must meet certain requirements when they
offer to the Government an end item they did not manufacture, process,
or produce. These requirements are known as the nonmanufacturer rule.
For example, a small business nonmanufacturer must offer an end item
that a small business manufactured, processed, or produced in the
United States or its outlying areas (as defined in FAR 2.101). The
clause at DFARS 252.219-7010, Notification of Competition Limited to
Eligible 8(a) Concerns--Partnership Agreement, includes an outdated
version of these requirements. This rule proposes to update DFARS
252.219-7010 to include the revised nonmanufacturer rule provided by
section 1651 and implemented in SBA's final rule.
II. Discussion and Analysis
This rule proposes to amend DFARS 252.219-7010, paragraph (d), to
replace the outdated text regarding the nonmanufacturer rule with
updated text that implements section 1651 and SBA's final rule. The
proposed, updated text is consistent with the proposed FAR rule
published in the Federal Register on December 4, 2018, at 83 FR 62540
(FAR Case 2016-011, Revision of Limitations on Subcontracting). In
addition, this rule proposes to revise the title of the clause at
252.219-7010 to align with the title of FAR 52.219-18, Notification of
Competition Limited to Eligible 8(a) Participants.
III. Expected Impact of the Proposed Rule
The clause at DFARS 252.219-7010, Notification of Competition
Limited to Eligible 8(a) Concerns--Partnership Agreement, currently
requires 8(a) participants that offer end items they did not
manufacture or produce (i.e., nonmanufacturers) to offer end items
manufactured or produced by small business concerns in the United
States or its outlying areas. This requirement is known as the
``nonmanufacturer rule.'' DFARS 252.219-7010 provides an exemption from
the nonmanufacturer rule for contracts valued at or below $25,000 and
awarded under simplified acquisition procedures. For these contracts,
an 8(a) participant currently may offer end items manufactured or
produced by any domestic firm.
SBA's final rule applied the nonmanufacturer rule to 8(a) contracts
at any dollar value. There was no exemption for contracts valued at or
below $25,000 and awarded under simplified acquisition procedures.
Therefore, this rule proposes to remove that exemption from DFARS
252.219-7010. This change means the nonmanufacturer rule will apply to
8(a) contracts at any dollar value, and 8(a) participants that are
nonmanufacturers will be required to offer end items manufactured,
processed, or produced by small business concerns in the United States
or its outlying areas.
To estimate the number of 8(a) participants that may be impacted by
this change, DoD obtained data from the Federal Procurement Data System
on DoD contracts, for products, awarded to 8(a) participants under the
8(a) Program. Contracts for services, including construction, were
excluded because the nonmanufacturer rule only applies to products, not
services. In FY 2016 through FY 2018, DoD awarded contracts for
products to an average of 285 8(a) participants each year. An
[[Page 12188]]
average of 90 of those 8(a) participants per year were awarded
approximately 2 contracts each that were valued at or below $25,000,
using simplified acquisition procedures. Therefore, DoD estimates that
approximately 90 participants may be impacted by this rule. Due to the
small number of 8(a) participants that may be impacted, it is expected
that the cost associated with this rule will be de minimis.
IV. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf Items
DoD intends to apply the requirements of section 1651 of the NDAA
for FY 2013 to contracts at or below the simplified acquisition
threshold and to contracts for the acquisition of commercial items,
including commercially available off-the-shelf items.
A. Applicability to Contracts at or Below the Simplified Acquisition
Threshold
41 U.S.C. 1905 governs the applicability of laws to contracts or
subcontracts in amounts not greater than the simplified acquisition
threshold. It is intended to limit the applicability of laws to such
contracts or subcontracts. 41 U.S.C. 1905 provides that if a provision
of law contains criminal or civil penalties, or if the FAR Council
makes a written determination that it is not in the best interest of
the Federal Government to exempt contracts or subcontracts at or below
the SAT, the law will apply to them. The Principal Director, Defense
Pricing and Contracting (DPC), is the appropriate authority to make
comparable determinations for regulations to be published in the DFARS,
which is part of the FAR system of regulations.
Therefore, given that SBA applied section 1651 to contracts and
subcontracts at or below the SAT and that nearly 76 percent of the DoD
contracts awarded to 8(a) participants in recent years are at or below
the SAT, DoD has determined that it is in the best interest of the
Federal Government to apply section 1651 to contracts or subcontracts
at or below the SAT. An exemption for contracts or subcontracts at or
below the SAT would exclude contracts intended to be covered by the
law, thereby undermining the overarching public policy purpose of the
law.
B. Applicability to Contracts for the Acquisition of Commercial Items,
Including COTS Items
10 U.S.C. 2375 governs the applicability of laws to contracts for
the acquisition of commercial items, including COTS items, and is
intended to limit the applicability of laws to contracts for the
acquisition of commercial items. 10 U.S.C. 2375 provides that if a
provision of law contains criminal or civil penalties, or if the Under
Secretary of Defense (Acquisition and Sustainment) makes a written
determination that it is not in the best interest of the Federal
Government to exempt commercial item contracts, including COTS items,
then the provision of law will apply to contracts for the acquisition
of commercial items. This authority has been delegated to the Principal
Director, DPC.
Therefore, given that SBA applied section 1651 to contracts for the
acquisition of commercial items, including COTS items, and that
approximately 72 percent of the DoD contracts awarded to 8(a)
participants in recent years are for commercial items, including COTS
items, DoD intends to determine that it is in the best interest of the
Federal Government to apply the rule to contracts for the acquisition
of commercial items, including COTS items, as defined at FAR 2.101. An
exception for contracts for the acquisition of commercial items,
including COTS items, would exclude the contracts intended to be
covered by the law, thereby undermining the overarching public policy
purpose of the law.
V. 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 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 rule is not a major rule
under 5 U.S.C. 804.
VI. Executive Order 13771
This rule is not expected to be subject to E.O. 13771, because this
rule is not a significant regulatory action under E.O. 12866.
VII. Regulatory Flexibility Act
DoD does not expect this proposed rule to 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 it will impact a very small number of small entities. However,
an initial regulatory flexibility analysis has been performed and is
summarized as follows:
This rule proposes to revise the DFARS to implement regulatory
changes made by SBA in its final rule published in the Federal Register
on May 31, 2016 (81 FR 34243), which implemented section 1651 of the
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013
(Pub. L. 112-239; 15 U.S.C. 657s). Section 1651 revised and
standardized the limitations on subcontracting and the nonmanufacturer
rule that apply to small business concerns, including 8(a) Program
participants, under procurements conducted pursuant to FAR part 19,
Small Business Programs.
The objective of the rule is to implement the revised
nonmanufacturer rule for 8(a) Program participants by updating the
clause at DFARS 252.219-7010, Notification of Competition Limited
Eligible 8(a) Concerns--Partnership Agreement. The legal basis is
section 1651 of the NDAA for FY 2013.
This rule will apply to 8(a) participants that contract with DoD.
According to data obtained from the Federal Procurement Data System,
DoD awarded contracts for products (i.e., contracts to which the
nonmanufacturer rule would apply) to an average of 285 8(a)
participants each year during FY 2016 through FY 2018. These entities
will need to familiarize themselves with this rule. The clause at DFARS
252.219-7010 currently provides an exemption from the nonmanufacturer
rule for contracts valued at or below $25,000 and awarded under
simplified acquisition procedures. SBA's final rule applied the
nonmanufacturer rule to 8(a) contracts at any dollar value, with no
exemption for contracts at or below $25,000. DoD awarded contracts at
or below $25,000 to an average of 90 8(a) participants each year during
FY 2016 through FY 2018.
This rule does not impose any new reporting, recordkeeping or other
compliance requirements for small entities.
[[Page 12189]]
This rule does not duplicate, overlap, or conflict with any other
Federal rules.
There are no known alternatives which would accomplish the stated
objectives of the applicable statute.
DoD invites comments from small business concerns and other
interested parties on the expected impact of this rule on small
entities.
DoD will also consider comments from small entities concerning the
existing regulations in subparts affected by this rule in accordance
with 5 U.S.C. 610. Interested parties must submit such comments
separately and should cite 5 U.S.C. 610 (DFARS Case 2019-D004), in
correspondence.
VIII. 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 219 and 252
Government procurement.
Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 2019 and 252 are proposed to be amended as
follows:
0
1. The authority citation for parts 219 and 252 continues to read as
follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 219--SMALL BUSINESS PROGRAMS
* * * * *
219.811-3 [Amended]
0
2. Amend section 219.811-3 by removing ``Eligible 8(a) Concerns'' and
adding ``Eligible 8(a) Participants'' in two places.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
3. Amend section 252.219-7010--
0
a. In the section heading, by removing ``Eligible 8(a) Concerns'' and
adding ``Eligible 8(a) Participants'' in its place;
0
b. In the clause heading, by removing ``Eligible 8(a) Concerns'' and
adding ``Eligible 8(a) Participants'' in its place, and removing ``(MAR
2016)'' and adding ``(DATE)'' in its place;
0
c. In the paragraph (a) introductory text, by removing ``in the SBA's''
and adding ``in SBA's'' in its place;
0
d. In paragraph (a)(2), by removing ``by the SBA'' and adding ``by
SBA'' in its place;
0
e. By redesignating paragraph (d)(2) as paragraph (e); and
0
f. By revising paragraph (d).
The revision reads as follows:
252.219-7010 Notification of Competition Limited to Eligible 8(a)
Concerns--Partnership Agreement
* * * * *
(d)(1) Unless SBA has waived the requirements of paragraphs
(d)(1)(i) through (iii) and (d)(2) of this clause in accordance with 13
CFR 121.1204, a small business concern that provides an end item it did
not manufacture, process, or produce, shall--
(i) Provide an end item that a small business has manufactured,
processed, or produced in the United States or its outlying areas; for
kit assemblers, see paragraph (d)(2) of this clause instead;
(ii) Be primarily engaged in the retail or wholesale trade and
normally sell the type of item being supplied; and (iii) Take ownership
or possession of the item(s) with its personnel, equipment, or
facilities in a manner consistent with industry practice; for example,
providing storage, transportation, or delivery.
(2) When the end item being acquired is a kit of supplies, at least
50 percent of the total cost of the components of the kit shall be
manufactured, processed, or produced by small businesses in the United
States or its outlying areas.
(3) The requirements of paragraphs (d)(1)(i) through (iii) and
(d)(2) of this clause do not apply to construction or service
contracts.
* * * * *
[FR Doc. 2019-06252 Filed 3-29-19; 8:45 am]
BILLING CODE 5001-06-P