[Federal Register Volume 84, Number 155 (Monday, August 12, 2019)]
[Proposed Rules]
[Pages 39793-39795]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16957]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2 and 19

[FAR Case 2016-002; Docket No. 2016-0002; Sequence No. 1]
RIN 9000-AN34


Federal Acquisition Regulation: Applicability of Small Business 
Regulations Outside the United States

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

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to support the Small Business 
Administration's (SBA) policy of including overseas contracts in agency 
small business contracting goals. This amendment is consistent with 
SBA's regulatory changes, which clarify that small business contracting 
provisions, e.g., set-asides, may apply to contracts performed 
overseas.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat Division at one of the addresses shown below on 
or before October 11, 2019 to be considered in the formation of the 
final rule.

ADDRESSES: Submit comments in response to FAR Case 2016-002 by any of 
the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by entering ``FAR Case 
2016-002'' under the heading ``Enter Keyword or ID''. Select the link 
``Submit a Comment'' that corresponds with FAR Case 2016-002. Follow 
the instructions provided at the ``Submit a Comment'' screen. Please 
include your name, company name (if any), and ``FAR Case 2016-002'' on 
your attached document.
     Mail: General Services Administration, Regulatory 
Secretariat Division (MVCB), 1800 F Street NW, 2nd Floor, ATTN: Lois 
Mandell, Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR Case 2016-
002 in all correspondence related to this case. All comments received 
will be posted without change to http://www.regulations.gov, including 
any personal and/or business confidential information provided.

FOR FURTHER INFORMATION CONTACT: Ms. Marilyn E. Chambers, Procurement 
Analyst, at 202-285-7380 for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat Division at (202) 501-4755. Please cite FAR Case 2016-002.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA are proposing to amend the FAR to support SBA's 
changes to the basis for the Governmentwide small business contracting 
goals. The proposed FAR changes are consistent with SBA's regulatory 
changes, which clarify that small business contracting rules, e.g., 
set-asides, may be applied to contracts performed outside the United 
States. On October 3, 2013, SBA issued a final rule amending its 
regulations at 13 CFR 125.2 to make this clarification.
    The Small Business Act requires the President to establish 
Governmentwide contracting goals for small business contracts awarded 
by Federal agencies each fiscal year (15 U.S.C. 644(g)). Historically, 
SBA has not included certain categories of contracts in the 
establishment of these goals, for example, contracts with a place of 
performance outside of the United States. Section 1631(c) of the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013 
(Pub. L. 112-239), amended the Governmentwide small business 
contracting goal provisions established under section 15(g) of the 
Small Business Act. Section 1631(c) requires SBA to review and revise 
the guidelines for the establishment of small business goals for 
Federal procurement to ensure that agency goals are established in a 
manner that does not exclude contracts based on (a) type of goods or 
services for which the agency contracts, (b) how funding for the 
contracts is made available to the agency by an Appropriations Act or 
is made available by reimbursement from another agency or account, or 
(c) whether or not the contract is subject to the FAR. As a result of 
this review, SBA began including overseas contracts in the 
establishment of small business goals for FY 2016 to broaden the base 
of contracts that could be awarded to small businesses under FAR part 
19.

II. Discussion and Analysis

    The proposed changes to the FAR are summarized in the following 
paragraphs.
    A. Subpart 2.1, Definitions. This subpart is amended to revise the 
definition of ``bundling'' by deleting paragraph (3) in its entirety, 
making the definition applicable outside the United States. The Small 
Business Act does not exempt an agency from justifying its bundling of 
contract requirements based on location of award, location of service 
performance, or location of supply delivery.
    B. Section 19.000, Scope of part. This section is amended to 
clarify that, unless otherwise noted in FAR part 19 (such as for 
subparts 19.6 and 19.7), contracting officers shall apply this part in 
the United States and its outlying areas and may apply this part 
outside the United States and its outlying areas. Additionally, the 
section is amended to specify that offerors participating in any FAR 
part 19 procurement are required to meet the definition of ``small 
business concern'' at FAR 2.101 and the definition of ``concern'' at 
FAR 19.001.
    C. Section 19.309, Solicitation provisions and contract clauses. 
This section is amended to remove language that restricts application 
of the following provisions and clause to contracts to be performed in 
the United States or its outlying areas: The provisions at FAR 52.219-
1, Small

[[Page 39794]]

Business Program Representations, and FAR 52.219-2, Equal Low Bids; and 
the clause at FAR 52.219-28, Post-Award Small Business Program 
Rerepresentation.

III. Expected Impact of the Rule

    Currently, FAR 19.000(b) states that FAR part 19, except for FAR 
subpart 19.6, applies only in the United States or its outlying areas. 
Some contracting officers have interpreted the phrase ``applies only in 
the United States'' to mean that they are not allowed to use the set-
aside and sole-source procedures of FAR part 19 for overseas 
procurements. Other contracting officers have interpreted ``applies 
only in the United States'' to mean that they are not required to use 
FAR part 19 procedures for overseas procurements, but may do so if they 
choose. These conflicting interpretations have resulted in inconsistent 
use of FAR part 19 procedures for overseas procurements across Federal 
agencies. Conflicting interpretations may also contribute to low 
numbers of overseas contract actions that are set aside for small 
businesses.
    This proposed rule will clarify that contracting officers are 
allowed, but not required, to use the set-aside and sole-source 
procedures of FAR part 19 for overseas procurements. While SBA's 
regulations do not explicitly state that use of small business programs 
is discretionary overseas, SBA clarified and confirmed their position 
in the preamble of their notice on Small Business Mentor-
Prot[eacute]g[eacute] Programs published July 25, 2016, at 81 FR 48557. 
The preamble stated that SBA had issued a final rule previously on 
October 2, 2013, to amend 13 CFR 125.2 ``recognizing that small 
business contracting could be used `regardless of the place of 
performance.' '' The preamble went on to explain that SBA merely sought 
to clarify that the authority to use small business programs overseas 
already existed and to highlight contracting officers' discretionary 
authority to use these programs where appropriate regardless of the 
place of performance. This proposed rule is consistent with these 
rules.
    As a result of the clarification provided in the rule, contracting 
officers may set aside more overseas actions for small businesses in 
the future. However, this rule does not propose to impose additional 
costs or reduce existing costs for small businesses who may compete. 
The rule merely allows additional opportunities to be provided to small 
businesses through set-asides and other tools in FAR part 19 for 
overseas requirements.
    Data are not available on the number of overseas procurements 
contracting officers have not set aside for small business as a result 
of the conflicting interpretations described in the first paragraph of 
this section. According to data obtained from the Federal Procurement 
Data System (FPDS) for FY 2017 and 2018, there were an average of 
1,601,915 awards for performance overseas, including contracts, task 
and delivery orders, and calls under FAR part 13 blanket purchase 
agreements. Of those awards, 1,588,334 were made to approximately 8,512 
unique large businesses, while 13,581 awards were made to approximately 
1,954 unique small businesses. These numbers indicate that less than 1 
percent of actions awarded for performance outside the United States 
are awarded to small businesses.
    Contract awards to small businesses could increase if contracting 
officers expand their use of set-asides and other tools in FAR part 19 
for overseas contracts. FAR 19.502-(2)(b) states that the set-aside 
authority can only be used where a contracting officer has a reasonable 
expectation that offers will be received from two small businesses and 
that award will be made at a fair market price. Similarly, sole-source 
authority under any of the small business programs also requires 
certain conditions to be met before being utilized. The conditions for 
using the FAR part 19 sole-source authorities include, but are not 
limited to, making award at a fair and reasonable price. It is not 
possible to identify how many small businesses will have the 
capability, capacity, or inclination to compete for contracts performed 
outside the United States. In addition, it is not possible to predict 
how many overseas procurements contracting officers will set aside for 
small business as a result of the proposed FAR changes.
    DoD, GSA, and NASA invite public comment regarding the driving and 
restraining forces impacting application of FAR part 19 to overseas 
procurements, both on the Government's acquisition workforce and small 
business concerns.

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

    This proposed rule does not change the applicability of the 
existing provisions at FAR 52.219-1, Small Business Program 
Representations, and 52.219-2, Equal Low Bids, and the clause at 
52.219-28, Post-Award Small Business Program Rerepresentation, which 
already apply to acquisitions at or below the simplified acquisition 
threshold and to acquisitions for commercial items, including 
commercially available off-the-shelf items.

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 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.

VI. Executive Order 13771

    This proposed rule is not expected to be an E.O. 13771 regulatory 
action, because this rule imposes de minimis costs on the public as 
explained in section III of this preamble, Expected Impact of the Rule. 
The FAR Council invites comments from the regulated community on the 
analysis provided in this rule.

VII. Regulatory Flexibility Act

    The change may 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. The Initial Regulatory 
Flexibility Analysis (IRFA) has been performed and is summarized as 
follows:

    DoD, GSA, and NASA are proposing to amend the FAR to give 
contracting officers the tools they need, including the ability to 
use set-asides, to maximize opportunities for small businesses to 
obtain contracts for performance outside the United States. This 
change may increase contract awards to small businesses, which will 
improve agencies' achievement of their small business contracting 
goals.
    The objective of this proposed rule is to provide the Government 
with additional tools with which to maximize small business 
participation in contracts performed outside the United States. 
Currently, the FAR states that the small business programs do not 
apply outside of the United States (FAR 19.000(b)). However, on 
October 3, 2013, the Small Business Administration (SBA) issued

[[Page 39795]]

a final rule amending its regulations at 13 CFR 125.2 to clarify 
that its small business contracting regulations apply regardless of 
the place of performance. With the changes to SBA's guidelines for 
establishment of small business goals in response to section 1631(c) 
of the National Defense Authorization Act (NDAA) for Fiscal Year 
(FY) 2013 (Pub. L. 112-239), contracts performed outside of the 
United States are now included in the Government's small business 
contracting goals.
    This rule may have a positive economic impact on small 
businesses. The proposed rule expands existing procurement 
mechanisms (e.g., set-asides) to contracts performed outside the 
United States. Therefore, small businesses available to compete for 
Federal contracts performed outside the United States are most 
directly affected by this rule. Analysis of the System for Award 
Management (SAM) indicates there are over 327,000 small business 
registrants that can potentially benefit from the implementation of 
this rule. An analysis of the Federal Procurement Data System (FPDS) 
for FY 2017 and 2018 revealed that there was an average of 1,601,915 
awards for performance overseas, including contracts, task and 
delivery orders, and calls under part 13 blanket purchase agreements 
(BPAs). Of those awards, 1,588,334 were made to approximately 8,512 
unique large businesses, while 13,581 awards were made to 
approximately 1,954 unique small businesses. This number could 
increase if contracting officers expand their use of set-asides and 
other tools in FAR part 19 for overseas contracts.
    Therefore, this rule could affect a smaller number of small 
businesses than the 327,000 registered in SAM, but potentially more 
than those revealed by FPDS as having overseas contracts. It is not 
possible to identify how many of the registered small businesses 
will have the capability, capacity, or inclination to compete for 
contracts performed outside the United States. In addition, it is 
not possible to predict how many overseas procurements contracting 
officers will set aside for small business as a result of the 
proposed FAR changes. Contracting officers must continue to comply 
with FAR 19.502-(2)(b), which states that the set-aside authority 
can only be used where a contracting officer has a reasonable 
expectation that offers will be received from two small businesses 
and that award will be made at a fair market price. Similarly, sole 
source authority under any of the small business programs also 
requires certain conditions to be met before being utilized. The 
conditions for using the FAR part 19 sole-source authorities 
include, but are not limited to, making award at a fair and 
reasonable price.
    Nonetheless, we believe that this rule may have a significant 
positive economic impact on small business concerns competing for 
Federal contracting opportunities since it will provide greater 
access to Federal contracting opportunities.
    This proposed rule does not include any new reporting, 
recordkeeping, or other compliance requirements for small 
businesses.
    The proposed rule does not duplicate, overlap, or conflict with 
any other Federal rules.
    There are no known significant alternative approaches to the 
proposed rule.

    The Regulatory Secretariat has submitted a copy of the IRFA to the 
Chief Counsel for Advocacy of the SBA. A copy of the IRFA may be 
obtained from the Regulatory Secretariat. DoD, GSA, and NASA invite 
comments from small business concerns and other interested parties on 
the expected impact of this rule on small entities.
    DoD, GSA, and NASA 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 
comments separately and should cite 5 U.S.C. 610 (FAR case 2016-002) 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 2 and 19

    Government procurement.

Janet Fry,
Acting Director, Office of Government-wide Acquisition Policy, Office 
of Acquisition Policy, Office of Government-wide Policy.
    Therefore, DoD, GSA, and NASA are proposing to amend 48 CFR parts 2 
and 19 as set forth below:

0
1. The authority citation for 48 CFR parts 2 and 19 continues to read 
as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

Part 2--Definitions of Words and Terms


2.101   [Amended]

0
2. Amend section 2.101, in the definition of ``bundling'', by removing 
paragraph (3).

Part 19--Small Business Programs

0
3. Amend section 19.000 by revising paragraph (b) to read as follows:


19.000   Scope of part.

* * * * *
    (b)(1) Unless otherwise specified in this part (see subparts 19.6 
and 19.7)--
    (i) Contracting officers shall apply this part in the United States 
and its outlying areas; and
    (ii) Contracting officers may apply this part outside the United 
States and its outlying areas.
    (2) Offerors that participate in any part 19 procurement are 
required to meet the definition of ``small business concern'' at 2.101 
and the definition of ``concern'' at 19.001.
0
4. Amend section 19.309 by revising paragraphs (a)(1), (b), and (c) to 
read as follows:


19.309   Solicitation provisions and contract clauses.

    (a)(1) Insert the provision at 52.219-1, Small Business Program 
Representations, in solicitations exceeding the micro-purchase 
threshold when the contract is for supplies to be delivered or services 
to be performed in the United States or its outlying areas, or when the 
contracting officer has applied part 19 in accordance with 
19.000(b)(1)(ii).
* * * * *
    (b) When contracting by sealed bidding, insert the provision at 
52.219-2, Equal Low Bids, in solicitations when the contract is for 
supplies to be delivered or services to be performed in the United 
States or its outlying areas, or when the contracting officer has 
applied part 19 in accordance with 19.000(b)(1)(ii).
    (c) Insert the clause at 52.219-28, Post-Award Small Business 
Program Rerepresentation, in solicitations and contracts exceeding the 
micro-purchase threshold when the contract is for supplies to be 
delivered or services to be performed in the United States or its 
outlying areas, or when the contracting officer has applied part 19 in 
accordance with 19.000(b)(1)(ii).

[FR Doc. 2019-16957 Filed 8-9-19; 8:45 am]
 BILLING CODE 6820-EP-P