[Federal Register Volume 84, Number 250 (Tuesday, December 31, 2019)]
[Rules and Regulations]
[Pages 72554-72561]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27826]
[[Page 72553]]
Vol. 84
Tuesday,
No. 250
December 31, 2019
Part IV
Department of Defense
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Defense Acquisition Regulations System
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48 CFR Parts 204, 212, 215, 219 et al.
Defense Federal Acquisition Regulation Supplement: Demonstration
Project for Contractors Employing Persons With Disabilities (DFARS Case
2018-D058); Defense Federal Acquisition Regulation Supplement: Review
of Defense Solicitations by Procurement Center Representatives (DFARS
Case 2019-D008); Defense Federal Acquisition Regulation Supplement:
Technical Amendments; Final Rules
Federal Register / Vol. 84, No. 250 / Tuesday, December 31, 2019 /
Rules and Regulations
[[Page 72554]]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 204, 212, 215, 219, 226, and 252
[Docket DARS-2019-0009]
RIN 0750-AK19
Defense Federal Acquisition Regulation Supplement: Demonstration
Project for Contractors Employing Persons With Disabilities (DFARS Case
2018-D058)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement a section of the
National Defense Authorization Act for Fiscal Year 2019 that requires
the DFARS to be updated to include an instruction on the Demonstration
Project for Contractors.
DATES: Effective December 31, 2019.
FOR FURTHER INFORMATION CONTACT: Ms. Jennifer D. Johnson, telephone
571-372-6100.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 84 FR
12182 on April 1, 2019, to implement section 888 of the National
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L.
115-232). Section 888 requires that the DFARS be updated to include an
instruction on the demonstration project authorized by section 853 of
the NDAA for FY 2004 (Pub. L. 108-136, 10 U.S.C. 2302 note), as amended
by division H, section 110 of the Consolidated Appropriations Act, 2004
(Pub. L. 108-199, 10 U.S.C. 2302 note). Section 853 authorizes a
demonstration project for contractors employing persons with
disabilities in order to provide defense contracting opportunities for
both nonprofit and for-profit entities employing individuals who have
severe disabilities. Twenty 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, and of the changes made to the rule
as a result of those comments, is provided as follows:
A. Summary of Significant Changes From the Proposed Rule
This final rule makes the following significant changes from the
proposed rule:
1. Clarification of Procedures for Use of the Demonstration Project
In DFARS subpart 226.72, Demonstration Project for Contractors
Employing Persons with Disabilities, section 226.7200, Scope of
subpart, is revised to clarify that subpart 226.72 does not supersede
the requirements for contracting officers to use the mandatory sources
in FAR part 8, Required Sources of Supplies and Services, or the small
business programs in FAR part 19, Small Business Programs. This means
that, depending on the specifics of a particular procurement, FAR part
8 or 19 may require a contracting officer to use a program other than
the Demonstration Project for Contractors Employing Persons with
Disabilities.
The text in DFARS 226.7202, Policy and procedures, is revised to
clarify that, in order to limit competition to entities that meet the
definition of ``eligible contractor,'' a written justification and
approval is required pursuant to FAR 6.302-5, Authorized or required by
statute. This means that prior to issuing the solicitation, contracting
officers must explain, in writing, their rationale for using the
Demonstration Project, and must obtain approval at the appropriate
level based on the dollar value of the procurement.
DFARS 226.7202 is also revised to require that, in order for DoD to
continue to receive small disadvantaged business credit for a contract
awarded under the Demonstration Project, the contractor must be an
eligible contractor when options are exercised. Contracting officers
are required to verify whether the contractor is still an eligible
contractor (e.g., by checking the representation in the System for
Award Management (SAM)) prior to exercising an option on a contract
awarded under the Demonstration Project. The contracting officer may
exercise an option on a contract regardless of whether the contractor
is still an eligible contractor, but DoD would only continue to receive
small disadvantaged business credit for that contract if the contractor
remains an eligible contractor under the Demonstration Project.
2. Clarification Regarding Subcontracts Under the Demonstration Project
The final rule adds Alternate II for the clause at DFARS 252.219-
7003, Small Business Subcontracting Plan (DoD Contracts), for use in
solicitations and contracts issued under the Demonstration Project.
Alternate II includes the definition of ``eligible contractor'' and
allows the prime contractor to receive credit toward its small
disadvantaged business subcontracting goal for subcontracts issued to
eligible contractors. This final rule does not include, in the basic or
Alternate I clause at DFARS 252.219-7003, the definition of ``eligible
contractor'' and the statement regarding credit toward the small
disadvantaged business subcontracting goal. The effect of this changes
is that only eligible contractors that have contracts awarded under the
Demonstration Project will receive credit toward their small
disadvantaged business subcontracting goal for subcontracts they award
to other eligible contractors under Demonstration Project contracts.
The prescription for use of Alternate II of DFARS 252.219-7003 is added
at DFARS 219.708.
3. Clarification of Applicability to Commercial Items
To clarify that contracting officers may use the Demonstration
Project to purchase commercial items, including commercially available
off-the-shelf (COTS) items, this final rule adds the following
provision and clause to section 212.301, Solicitation provisions and
contract clauses for the acquisition of commercial items:
Alternate II of the clause at DFARS 252.219-7003, Small
Business Subcontracting Plan (DoD Contracts).
The provision at DFARS 252.226-7002, Representation for
Demonstration Project for Contractors Employing Persons with
Disabilities.
B. Analysis of Public Comments
1. Support for the Rule
Comment: Most respondents expressed support for the rule and for
the opportunities it may provide to entities employing individuals with
disabilities.
Response: DoD acknowledges the respondents' support.
2. Scope of the Demonstration Project
a. Product Service Codes
Comment: A few respondents commented on the need for clarity about
the types of procurements that would be eligible for the Demonstration
Project, particularly with regard to the product service codes (PSCs)
listed in the proposed rule. One respondent requested confirmation that
the Demonstration Project would be used
[[Page 72555]]
only for procurements under those PSCs.
Response: Section 853 does not impose limitations on the products
or services that may be procured under the Demonstration Project. The
PSCs listed in the Federal Register notice for the proposed rule were
used merely to estimate the potential opportunities Congress identified
in the Conference Report for the NDAA for FY 2004. The list of PSCs was
not intended to limit the procurements that could be conducted under
the Demonstration Project.
b. Applicability of the Demonstration Project at or Below the
Simplified Acquisition Threshold and to Commercial Items
Comment: One respondent commented on the applicability of the
Demonstration Project to acquisitions at or below the simplified
acquisition threshold (SAT) and to acquisitions of commercial items.
The respondent stated that the Demonstration Project should be limited
to commercial items under the SAT, and that to apply the Demonstration
Project to all commercial item acquisitions would have a wider impact
than Congress intended.
Response: Section 853 did not limit the procurements that could be
conducted under the Demonstration Project with regard to dollar value
or the commercial (or noncommercial) nature of the product or service
to be procured. By applying section 853 to acquisitions at or below the
SAT, DoD allows these low dollar value procurements to be conducted
under the Demonstration Project. In other words, the Demonstration
Project could be used to buy products or services valued at or below
the SAT. Similarly, applying section 853 to acquisitions of commercial
items, including COTS items, allows these items to be procured under
the Demonstration Project. For the reasons stated in section IV of this
preamble, DoD has determined that it is in the Government's best
interest to allow acquisitions at or below the SAT and acquisitions of
commercial items, including COTS items, to be conducted under the
Demonstration Project.
c. Selecting Procurements for the Demonstration Project
Comment: One respondent asked how DoD would ``determine the
suitability'' of a procurement for the Demonstration Project. In
particular, the respondent asked if DoD would ``apply the Rule of Two
like other Small Business programs.''
Response: Contracting officers may elect to use the Demonstration
Project for a particular procurement, but they are not required to do
so. FAR part 10 requires agencies to conduct market research, and
contracting officers will use the results of market research to
determine whether a particular procurement may be appropriate for the
Demonstration Project. The Demonstration Project is not a small
business program. Therefore, the rule of two in FAR part 19 does not
apply. However, section 853 does not provide authority to award
contracts on a sole-source basis (i.e., without competition), so there
is an expectation that procurements under the Demonstration Project
will be competed unless a sole-source award is justified and approved
based on another authority.
3. Demonstration Project and the AbilityOne Program
a. Credit Toward Small Disadvantaged Business Goal for AbilityOne
Contracts
Comment: Two respondents recommended allowing credit toward the
small disadvantaged business goal for current and future contracts
awarded to AbilityOne nonprofits that also qualify as eligible
contractors under the Demonstration Project. Several respondents
recommended continuing the small disadvantaged business credit for
Demonstration Project contracts that are later added to the AbilityOne
Procurement List.
Response: There is no statutory authority for DoD to implement the
respondents' recommendations. Section 853 provides credit for DoD
toward its small disadvantaged business goal only for contracts awarded
to eligible contractors under the Demonstration Project. This credit
does not extend to contracts awarded outside the Demonstration Project.
There is no statutory authority to provide small disadvantaged business
credit for contracts for products or services on the Procurement List.
b. Impact of the Demonstration Project on the AbilityOne Procurement
List
Comment: Several respondents expressed concern that allowing DoD to
receive credit toward its small disadvantaged business goal for
contracts awarded under the Demonstration Project would have an adverse
impact on AbilityOne nonprofits' ability to add projects to the
AbilityOne Procurement List.
Response: The authority to add products or services to the
Procurement List resides with the U.S. AbilityOne Commission, which has
its own process to make such additions. Addressing this process in the
DFARS is outside the scope of this rule.
c. AbilityOne Purchase Exception Process
Comment: Several respondents commented on the description of
procurements made under the Demonstration Project in section III of the
preamble of the proposed rule and recommended clarifying that a ``valid
purchase exception'' must be granted by an appropriate authority in the
AbilityOne Program. Some respondents stated that products and services
on the Procurement List should not be eligible for award under the
Demonstration Project. One respondent recommended modifying DFARS
226.7202 to require contracting officers to ensure compliance with FAR
8.002 and subpart 8.7 prior to conducting market research and
developing a solicitation under the Demonstration Project.
Response: The final rule includes a clarification at DFARS 226.7200
that nothing in DFARS subpart 226.72 supersedes the requirement to use
the mandatory sources in FAR part 8, Required Sources of Supplies and
Services, or the small business programs in FAR part 19, Small Business
Programs.
d. Eligibility of AbilityOne Nonprofits for the Demonstration Project
Comment: Two respondents commented that they believe it was the
intent of Congress to allow AbilityOne nonprofits to be eligible to
participate in the Demonstration Project. One respondent noted that
there appear to be limits on the participation of AbilityOne nonprofits
in procurements conducted under the Demonstration Project. Two
respondents argued that there should be a presumption of eligibility
for AbilityOne nonprofits to participate in procurements under the
Demonstration Project.
Response: Any entity that meets the definition of ``eligible
contractor'' may participate in a procurement conducted under the
Demonstration Project. While AbilityOne nonprofit agencies are likely
to meet the Demonstration Project requirement that at least 33 percent
of their workforce must be severely disabled individuals, the statutory
definition of ``eligible contractor'' in section 853 goes beyond the
percentage. The definition includes other requirements (e.g., health
insurance, minimum wage) that a specific nonprofit agency may or may
not meet. Therefore, the eligibility of any entity for the
Demonstration Project cannot be presumed.
[[Page 72556]]
e. Oversight of the Demonstration Project
Comment: A few respondents suggested that the AbilityOne Commission
should provide oversight for eligible contractors under the
Demonstration Project, i.e., all eligible contractors ``would fall
under the umbrella of the AbilityOne program.''
Response: The Demonstration Project includes both for-profit and
nonprofit entities. The AbilityOne Commission oversees only nonprofit
entities. Therefore, the respondents' suggestion is not included in the
final rule.
4. Demonstration Project and Small Business
a. Relationship to Small Business Programs
Comment: One respondent asked whether the Demonstration Project
would ``affect the mandatory small business reserve'' at 15 U.S.C.
644(j).
Response: The Demonstration Project will not affect the mandatory
small business set-asides required by 15 U.S.C. 644(j). Text has been
added in the final rule to clarify that nothing in DFARS subpart 226.72
supersedes the requirement to use the small business programs in FAR
part 19, Small Business Programs, or the mandatory sources in FAR part
8, Required Sources of Supplies and Services.
b. Credit Toward the Small Disadvantaged Business Goal
Comment: Two respondents objected to allowing DoD to receive credit
toward its small disadvantaged business goal for contracts awarded
under the Demonstration Project, since such credit should only be
allowed for awards to small businesses that qualify as disadvantaged
under the Small Business Administration's rules. One respondent
commented that it appears prime contractors who are not eligible
contractors under the Demonstration Project could obtain credit toward
their small disadvantaged business subcontracting goal for subcontracts
awarded to eligible contractors. Another respondent recommended
changing ``may'' to ``shall'' in paragraph (c) of the proposed text at
DFARS 226.7202 to more closely align with section 853.
Response: Section 853 of the NDAA for FY 2004 was amended by
division H, section 110 of the Consolidated Appropriations Act, 2004
(Pub. L. 108-199), which required that contracts awarded under the
Demonstration Project to eligible contractors be counted toward DoD's
small disadvantaged business goal, and that subcontracts awarded to
eligible contractors under these contracts be counted toward the prime
contractor's small disadvantaged business goal. Therefore, this final
rule requires these contracts and subcontracts to be counted toward the
small disadvantaged business goal.
DoD contractors can only receive credit toward the small
disadvantaged business goal for subcontracts to eligible contractors if
the prime contract was awarded under the Demonstration Project. The
final rule provides clarification by adding Alternate II for the clause
at DFARS 252.219-7003, Small Business Subcontracting Plan (DoD
Contracts), specifically for use in procurements conducted under the
Demonstration Project. Alternate II will appear in contracts awarded
under the Demonstration Project, not in any other contracts, so it
should be clear that this credit is available only if the prime
contract was awarded under the Demonstration Project.
DoD agrees that ``may'' should be changed to ``shall'' at DFARS
226.7202, paragraph (c), as well as in Alternate II of the clause at
DFARS 252.219-7003, to be consistent with the statute. This change is
included in the final rule.
c. Update of Systems
Comment: One respondent stated that the Federal Procurement Data
System (FPDS) and the Electronic Subcontracting Reporting System (eSRS)
must be updated to ensure contract awards under the Demonstration
Project can be accurately reported and counted toward the small
disadvantaged business goal.
Response: DoD agrees that FPDS will need to be updated to ensure
accurate reporting and counting of awards to eligible contractors under
the Demonstration Project. No change is needed to eSRS. Contractors
with subcontracting plans will continue to report their achievements
toward their subcontracting goals in eSRS.
d. Subcontracting Plan Requirement
Comment: One respondent commented that the subcontracting plan
requirement may dissuade nontraditional companies from participating in
the Demonstration Project. Another respondent requested clarification
that small business subcontracting plans are not required from small
businesses or AbilityOne nonprofit agencies.
Response: If a contract awarded under the Demonstration Project
meets the requirements for a subcontracting plan at FAR 19.702, then a
subcontracting plan is required. Section 853 does not provide relief
from this requirement. FAR 19.702 states that subcontracting plans are
not required from small businesses. It is not necessary to repeat this
in the DFARS, since DoD contracting officers use the DFARS in
conjunction with the FAR. Clarification regarding applicability of the
subcontracting plan requirement to AbilityOne nonprofit agencies is
outside the scope of this DFARS rule.
e. Limitation on Subcontracting
Comment: Two respondents requested that DoD limit outsourcing by an
eligible contractor to 50 percent of the contract amount, similar to
the limitation on subcontracting that applies to small business.
Response: The statutory authority for the Demonstration Project
does not provide limits on subcontracting for eligible contractors. To
the extent an eligible contractor decides to subcontract part of the
work under a Demonstration Project contract, there is an incentive for
them to subcontract to other eligible contractors because they receive
credit toward their small disadvantaged business subcontracting goal
for those subcontracts.
5. Eligibility Criteria
a. Verification of Compliance
Comment: Many respondents expressed concern regarding DoD's ability
to verify compliance with the eligibility criteria for the
Demonstration Project. Three respondents recommended independent
verification of an entity's employment of severely disabled
individuals. Other respondents commented that self-certification may
lead to waste, fraud, and abuse, resulting in ``crowding the intended
beneficiaries out of employment opportunities generated.'' These
respondents suggested that AbilityOne nonprofits ``could be deemed to
be compliant'' under the Demonstration Project, but other entities
should be required to demonstrate compliance with the definition of
eligible contractor. Another respondent urged DoD to consider
strengthening the self-certification process for eligible contractors.
Response: All offerors for procurements conducted under the
Demonstration Project are required to represent whether they are or are
not eligible contractors. This representation has value because there
are criminal and civil penalties for misrepresentations associated with
Government contracts (see 18 U.S.C. 287 and 31 U.S.C. 3729-3733).
DoD considered more extensive verification requirements for this
final
[[Page 72557]]
rule. However, such requirements would be burdensome for contractors
and for the Government. At this time, DoD does not have sufficient data
on the use of the Demonstration Project to determine whether this
burden would be necessary. Therefore, DoD will rely on the
representation requirement described above until enough data can be
collected on the Demonstration Project to determine if more extensive
requirements are needed.
b. Challenges to Representations
Comment: One respondent recommended that DoD identify an appellate
body to which awards under the Demonstration Project could be appealed.
Another respondent commented that there is no way to determine how DoD
will evaluate offerors for compliance and enforcement and asked if
offerors would submit a protest for evaluation of another offeror's
representation. If so, the respondent asked how DoD would examine and
enforce the protests.
Response: DoD contracting officers will rely on an offeror's
representation under the provision at DFARS 252.226-7002. Interested
parties may file a protest under existing FAR part 33 procedures. Any
challenge to an entity's representation will be addressed on a case-by-
case basis.
c. Definition of Eligible Contractor
Comment: Several respondents commented that eligible contractors
should be required to meet the requirement to employ severely disabled
individuals at a rate of 33 percent of the contractor's workforce
throughout the life of the contract. One respondent questioned whether
the 33 percent requirement applied to the entity's total workforce or
only to employees for a specific contract, as well as whether it
applied to full-time and part-time employees. Another respondent
supported applying the 33 percent requirement to the entity's total
workforce. One respondent recommended requiring performance of the
contract by disabled individuals. Another respondent recommended, to
the extent feasible, clarifying how a contractor can ascertain in good
faith its compliance with the requirement to offer health insurance and
retirement plan that are comparable to those offered by entities of
similar size in its industrial sector or geographic region.
Response: The 33 percent requirement applies to the entity's total
workforce. To qualify for a contract under the Demonstration Project,
eligible contractors are required to employ severely disabled
individuals at a rate of 33 percent of their total workforce over the
12-month period prior to issuance of the solicitation. The final rule
has been revised to require contracting officers to verify whether the
contractor is still an eligible contractor (e.g., by checking the
representation in SAM) prior to exercising an option under a contract
awarded under the Demonstration Project. The contracting officer may
decide to exercise an option on the contract if the contractor has
represented that it is not an eligible contractor, but DoD will not
continue to receive small disadvantaged business credit for that
contract.
Regarding health insurance and retirement plans, the final rule
implements the definition of ``eligible contractor'' consistent with
the authorizing statute, which allows for variability among industries
and regions. Entities should be generally aware of benefits packages
offered by competitors in their own industry and geographic region.
d. Flexible Implementation of Eligibility Criteria
Comment: Two respondents requested greater clarity and additional
guidance on possible teaming or subcontracting opportunities to meet
the eligibility criteria. One of the two respondents noted that initial
flexibility would be helpful regarding the requirement to employ
severely disabled individuals at a rate of 33 percent of the entity's
workforce, e.g., a transition phase of 2 or 3 years building up to 33
percent or allow a prime contractor and subcontractor working together
to meet the requirement. The other respondent commented that more
contractors may participate if there is flexibility in achieving
eligibility criteria.
Response: The statutory authority for the Demonstration Project
specifies that an eligible contractor must employ severely disabled
individuals at a rate of 33 percent of the entity's total workforce. A
prime contractor and subcontractor would not qualify as a single entity
in order to meet the requirement. The use of joint ventures to meet the
33 percent requirement would be consistent with this final rule.
e. Definition Related to Disabilities
Comment: Several respondents stated that it was unclear whether
``severe'' in the definition of ``severely disabled individual'' is
meant to create a subset of people with disabilities who can be counted
by eligible contractors, or if anyone with a disability can be counted,
and recommended adopting the legal definition of blindness in 41 U.S.C.
8501(1). Another respondent commented that the definition of ``severely
disabled individual'' does not clarify what would constitute a
``serious limitation of one or more functional capacities'' or a
``severe physical or mental impairment.'' Another respondent
recommended that DoD consider expanding the definition of ``severely
disabled individual'' to include severely disabled veterans ``to remove
any uncertainty.''
Response: The definition of ``severely disabled individual'' comes
from section 853. Any employee who meets the definition of ``severely
disabled individual'' in this rule, including veterans, can be counted
toward the requirement to employ severely disabled individuals at a
rate of 33 percent of the entity's total workforce.
6. Protected Health Information
Comment: One respondent recommended the creation of criteria for
eligible contractors to obtain and maintain protected health
information in their possession.
Response: The creation of such criteria is outside the scope of
this DFARS rule.
7. Use of Evaluation Factor
Comment: One respondent stated that it is unclear how the
evaluation factor for the percentage of the entity's workforce that
consists of severely disabled individuals will be applied if the
contracting officer is also considering price and technical factors.
The respondent recommended use of a ``best-value scenario'' and
expressed support for the use of a rating method in which a higher
percentage of the workforce results in a higher overall rating. Another
respondent commented that the evaluation factor should not give an
advantage to offerors who employ severely disabled individuals at a
rate of more than 33 percent of their workforce.
Response: The contracting officer has the discretion to structure
this evaluation factor in a way that best suits the specific
procurement. The evaluation factor will be applied as described in the
solicitation for the specific procurement.
8. Guidance and Training for Contracting Officers
Comment: One respondent noted that there is no incentive for
contracting officers to use the Demonstration Project, so it is
important to educate them about the Demonstration Project and to
encourage them to use it.
Response: DoD acknowledges the comment and notes that training is
considered for DFARS rules as needed.
[[Page 72558]]
9. Vocational Support Services
Comment: One respondent recommended considering the establishment
of a requirement for all eligible contractors to provide vocational
support services for severely disabled individuals to help them
overcome challenges that impede their ability to obtain and retain
employment, e.g., vocational rehabilitation, employment retention
support.
Response: Establishment of such a requirement is outside the scope
of this rule.
10. Preemployment Training
Comment: One respondent recommended including, as part of the
Demonstration Project, preemployment training for severely disabled
individuals employed by eligible contractors.
Response: Inclusion of such training is outside the scope of this
rule.
C. Other Changes
The final rule includes minor editorial changes in paragraph (3) of
the definition of ``eligible contractor'' at 226.7201.
III. Expected Impact of the Rule
The Demonstration Project allows DoD to provide additional
contracting opportunities to entities that employ individuals who are
severely disabled. Procurements under the Demonstration Project must be
for products and services that are not on the AbilityOne Procurement
List, or for which the designated central nonprofit agency has granted
a purchase exception.
The Demonstration Project is modeled after the Small Business
Administration's set-aside program, but uniquely includes an incentive
for Federal contractors to hire people with disabilities who currently
receive Social Security benefits. Such a demonstration project provides
opportunities for severely disabled individuals to become gainfully
employed taxpayers. Employing people with disabilities can be a way to
offset the effects of an aging and shrinking workforce. In addition,
people with disabilities bring different perspectives on solving
problems and adapting to different circumstances. The Demonstration
Project provides another incentive for both for-profit and nonprofit
entities to recruit, employ, and retain people with disabilities.
DoD estimates that there may be approximately 549 procurements
conducted under the Demonstration Project per year, based on data
obtained from the Federal Procurement Data System. Specifically, DoD
examined the number of contracts awarded to nonprofits in product
service codes (PSCs) that may be suitable for award under the
Demonstration Project. The selection of PSCs was informed by the
Conference Report for the NDAA for FY 2004, which authorized the
Demonstration Project. The Conference Report indicated that Congress
expected opportunities to exist for the Demonstration Project in
aerospace end items and components, as well as information technology
products and services. It is important to note that use of these PSCs
to estimate the number of procurements that may be conducted under the
Demonstration Project does not limit such procurements to these PSCs.
Opportunities may exist for the Demonstration Project in other PSCs.
DoD obtained data for contracts awarded in the following PSCs:
------------------------------------------------------------------------
PSC Description
------------------------------------------------------------------------
1560................................... Airframe Structural Components.
All PSCs in Group 16................... Aerospace Craft Components and
Accessories.
All PSCs in Group 70................... Information Technology
Equipment (including
firmware), Software, Supplies,
and Support Equipment.
All PSCs in Category D3................ Information Technology and
Telecommunications.
------------------------------------------------------------------------
In certain PSCs, there is some overlap with the Procurement List
maintained by the Committee for Purchase From People Who Are Blind or
Severely Disabled. The areas of overlap generally included a few items
within a specific PSC, not the entire PSC. Therefore, relevant PSCs
were included regardless of possible overlap with the Procurement List.
DoD also used awards to nonprofits as an indicator of suitability
for the Demonstration Project because of its similarities to the
AbilityOne Program, in terms of employment of individuals with severe
disabilities. From FY 2016 through 2018, an average of 0.16 percent of
those contracts (approximately 90 each year) were awarded to
nonprofits. Since the Demonstration Project applies to both for-profit
and nonprofit entities, DoD conservatively estimated that up to 1
percent of contracts (approximately 549 each year) awarded in those
PSCs may be suitable for the Demonstration Project.
This rule requires offerors for procurements conducted under the
Demonstration Project to represent whether they are or are not eligible
contractors as defined in the rule. Offerors will complete the
representation in SAM. The cost associated with the representation is
expected to be de minimis and is within the estimate of public burden
for OMB Control Number 9000-0159, System for Award Management
Registration.
IV. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf Items
This rule applies the requirements of section 853 of the NDAA for
FY 2004 (Pub. L. 108-136), as amended by division H, section 110 of the
Consolidated Appropriations Act, 2004 (Pub. L. 108-199) (10 U.S.C. 2302
note), to contracts at or below the SAT and to contracts for the
acquisition of commercial items, including COTS 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.
B. Applicability to Contracts for the Acquisition of Commercial Items,
Including COTS Items
10 U.S.C. 2375 governs the applicability of laws to DoD contracts
and subcontracts for the acquisition of commercial items (including
commercially available off-the-shelf items) and is intended to limit
the applicability of laws to contracts for the acquisition of
commercial items, including COTS 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 for Acquisition and Sustainment (USD(A&S))
makes a written determination that it is not in the best interest of
the Federal Government to exempt commercial item contracts, the
provision of law will apply to contracts for the acquisition of
commercial items. Due to delegations of authority from
[[Page 72559]]
USD(A&S), the Principal Director, DPC, is the appropriate authority to
make this determination.
C. Determinations
The requirements of section 853 of the NDAA for FY 2004, as amended
by division H, section 110 of the Consolidated Appropriations Act,
2004, were enacted to provide defense contracting opportunities for
contractors employing persons with disabilities. The majority of
contracts that could be awarded under the Demonstration Project are
likely to be valued at or below the SAT. Similarly, the majority of the
products and services offered by these contractors are commercial
items, including COTS items. Therefore, DoD has determined that it is
in the best interest of the Federal Government to apply the rule to
contracts valued at or below the SAT and contracts for the acquisition
of commercial items, including COTS items. It is expected that
contracting officers would likely be unable to utilize the
Demonstration Project established by Congress, if this rule is not
applied to these categories of contracts.
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 rule is not subject to the requirements of E.O. 13771, because
this rule will result in no more than de minimis costs.
VII. Regulatory Flexibility Act
A final regulatory flexibility analysis (FRFA) has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
The FRFA is summarized as follows:
DoD is amending the DFARS to include an instruction on the
Demonstration Project for Contractors Employing Persons with
Disabilities, as required by section 888 of the National Defense
Authorization Act for Fiscal Year 2019 (Pub. L. 115-232). The
Demonstration Project allows DoD to provide defense contracting
opportunities to entities that employ individuals who are severely
disabled. Nothing in this final DFARS rule supersedes the requirement
to use the mandatory sources in FAR part 8 or the small business
programs in FAR part 19.
There were no significant issues raised by the public in response
to the initial regulatory flexibility analysis.
The rule will apply to entities, including small entities, that
meet the definition of ``eligible contractor'' in the rule and that are
interested in competing for contracts under the Demonstration Project.
Specifically, an eligible contractor is one that employs severely
disabled individuals at a rate of no less than 33 percent of the
contractor's workforce over a 12-month period prior to issuance of the
solicitation; pays not less than the minimum wage to those individuals;
and provides health insurance and a retirement plan comparable to those
provided by similar entities. The entity may operate on a for-profit or
nonprofit basis.
According to data in FPDS, DoD awarded contracts to approximately
4,065 small entities each year from FY 2016 to FY 2018 in product and
service codes (PSCs) that may be suitable for award under the
Demonstration Project, such as aerospace components and accessories and
information technology equipment and services. DoD conservatively
estimates that approximately 21 percent, or 870 small entities, may
meet the definition of ``eligible contractor'' and be interested in
competing for contracts under the Demonstration Project.
This rule requires offerors to represent whether they are or are
not eligible contractors under the Demonstration Project. This
representation will be available for completion in SAM and will be
completed on an annual basis. This rule does not impose any additional
recordkeeping or other compliance requirements for small entities.
DoD considered more extensive recordkeeping requirements related to
the definition of ``eligible contractor,'' particularly with regard to
the percentage of the entity's workforce that consists of severely
disabled individuals. Such recordkeeping requirements would be
burdensome for small entities. At this time, DoD does not have
sufficient data on the use of the Demonstration Project to determine
whether this burden would be necessary. Therefore, DoD will rely on the
representation requirement described above until sufficient data can be
collected on the Demonstration Project to determine if more extensive
requirements are needed.
VIII. Paperwork Reduction Act
This rule affects the information collection requirements in the
provision at FAR 52.204-7, System for Award Management, and in the
clause at FAR 52.204-13, System for Award Management Maintenance,
currently approved under OMB Control Number 9000-0159, entitled System
for Award Management Registration, in accordance with the Paperwork
Reduction Act (44 U.S.C. chapter 35). The impact, however, is
negligible, because the cost of providing the additional representation
in SAM is de minimis and is within the estimate of public burden
approved for OMB Control Number 9000-0159.
List of Subjects in 48 CFR Parts 204, 212, 215, 219, 226, and 252
Government procurement.
Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 204, 212, 215, 219, 226, and 252 are
amended as follows:
0
1. The authority citation for 48 CFR parts 204, 212, 215, 219, 226, and
252 continues to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 204--ADMINISTRATIVE MATTERS
0
2. Amend section 204.1202 by--
0
a. Redesignating paragraphs (2)(xii), (xiii), and (xiv) as paragraphs
(2)(xiii), (xiv), and (xv), respectively; and
0
b. Adding new paragraph (xii).
The addition reads as follows:
204.1202 Solicitation provision.
* * * * *
(2) * * *
(xi) 252.226-7002, Representation for Demonstration Project for
Contractors Employing Persons with Disabilities.
* * * * *
PART 212--ACQUISITION OF COMMERCIAL ITEMS
0
3. Amend section 212.301(f) by-
0
a. Adding paragraph (vii)(A)(3); and
0
b. In paragraph (x), designating the text as paragraph (A) and adding a
new paragraph (B).
The additions read as follows:
[[Page 72560]]
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(f) * * *
(vii) * * *
(A) * * *
(3) Use the alternate II clause as prescribed in
219.708(b)(1)(A)(3).
* * * * *
(x) * * *
(B) Use the provision at 252.226-7002, Representation for
Demonstration Project for Contractors Employing Persons with
Disabilities, as prescribed in 226.7203.
PART 215--CONTRACTING BY NEGOTIATION
0
4. Amend section 215.304 by adding paragraph (c)(vii) to read as
follows:
215.304 Evaluation factors and significant subfactors.
(c) * * *
(vii) See 226.7202 for an additional evaluation factor required in
solicitations when using the Demonstration Project for Contractors
Employing Persons with Disabilities.
PART 219--SMALL BUSINESS PROGRAMS
0
5. Amend section 219.708 by-
0
a. In paragraph (b)(1)(A) introductory text, removing ``basic or
alternate clause'' and adding ``basic, alternate I, or alternate II
clause'' in its place; and
0
b. Adding paragraph (b)(1)(A)(3).
219.708 Contract clauses.
(b) * * *
(1) * * *
(A) * * *
(3) Use the alternate II clause at 252.219-7003 when using the
Demonstration Project described at 226.72.
* * * * *
PART 226--OTHER SOCIOECONOMIC PROGRAMS
0
6. Add subpart 226.72, consisting of 226.7200 through 226.7203, to read
as follows:
Subpart 226.72--Demonstration Project for Contractors Employing Persons
With Disabilities
Sec.
226.7200 Scope of subpart.
226.7201 Definitions.
226.7202 Policy and procedures.
226.7203 Solicitation provision.
Subpart 226.72--Demonstration Project for Contractors Employing
Persons With Disabilities
226.7200 Scope of subpart.
This subpart implements section 853 of the National Defense
Authorization Act for Fiscal Year 2004 (Pub. L. 108-136, 10 U.S.C. 2302
note). Nothing in this subpart supersedes the requirement to use the
mandatory sources in FAR part 8 or the small business programs in FAR
part 19.
226.7201 Definitions.
As used in this subpart--
Eligible contractor means a business entity operated on a for-
profit or nonprofit basis that--
(1) Employs severely disabled individuals at a rate that averages
not less than 33 percent of its total workforce over the 12-month
period prior to issuance of the solicitation;
(2) Pays not less than the minimum wage prescribed pursuant to 29
U.S.C. 206 to the employees who are severely disabled individuals; and
(3) Provides, for its employees, health insurance and a retirement
plan comparable to those provided for employees by business entities of
similar size in its industrial sector or geographic region.
Severely disabled individual means an individual with a disability
(as defined in 42 U.S.C. 12102) who has a severe physical or mental
impairment that seriously limits one or more functional capacities.
226.7202 Policy and procedures.
(a)(1) Contracting officers may use this Demonstration Project to
award one or more contracts to an eligible contractor for the purpose
of providing defense contracting opportunities for entities that employ
severely disabled individuals. To determine if there are eligible
contractors capable of fulfilling the agency's requirement, conduct
market research as described in 210.002 and FAR 10.002. For services,
see also PGI 210.070.
(2) If the contracting officer elects to use this Demonstration
Project, FAR 6.302-5 requires a written justification and approval to
limit competition to eligible contractors. In the justification,
identify the statutory authority for the Demonstration Project (10
U.S.C. 2302 note).
(b) When using this Demonstration Project, one of the evaluation
factors shall be the percentage of the offeror's total workforce that
consists of severely disabled individuals employed by the offeror.
Contracting officers may use a rating method in which a higher
percentage of the offeror's total workforce consisting of severely
disabled individuals would result in a higher rating for this
evaluation factor.
(c)(1) Contracts awarded to eligible contractors under this
Demonstration Project shall be counted toward DoD's small disadvantaged
business goal. The contractor must be an eligible contractor when
options under the contract are exercised, in order for DoD to continue
to receive credit for the contract toward its small disadvantaged
business goal.
(2) Contracting officers shall verify the contractor's
representation (e.g., by checking the System for Award Management)
prior to exercising an option on a contract awarded under the
Demonstration Project. Contracting officers may exercise the option if
the contractor has represented that it is not an eligible contractor;
however, the contract shall no longer be counted toward DoD's small
disadvantaged business goal.
226.7203 Solicitation provision.
Use the provision at 252.226-7002, Representation for Demonstration
Project for Contractors Employing Persons with Disabilities, in
solicitations when using this Demonstration Project, including
solicitations using FAR part 12 procedures for the acquisition of
commercial items.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
7. Amend section 252.204-7007 by--
0
a. Removing clause date ``(JUN 2019)'' and adding ``(DEC 2019)'' in its
place; and
0
b. Adding paragraph (d)(2)(vi).
The addition reads as follows:
252.204-7007 Alternate A, Annual Representations and Certifications.
* * * * *
(d) * * *
(2) * * *
____(vi) 252.226-7002, Representation for Demonstration Project for
Contractors Employing Persons with Disabilities.
* * * * *
0
8. Amend section 252.219-7003 by-
0
a. Removing clause date ``(MAY 2019)'' and adding ``(DEC 2019)'' in its
place;
0
b. In paragraph (b), removing ``goal'' and adding ``goal (section 8025
of Pub. L. 108-87)'' in its place;
0
c. In paragraph (d), removing ``Contractor's cognizant contract
administration activity'' and adding ``cognizant contract
administration activity for the Contractor''.
[[Page 72561]]
0
d. In the Alternate I clause--
0
i. Removing clause date ``(MAY 2019)'' and adding ``(DEC 2019)'' in its
place;
0
ii. In paragraph (b), removing ``goal'' and adding ``goal (section 8025
of Pub. L. 108-87)'' in its place;
0
iii. In paragraph (d), removing ``Contractor's cognizant contract
administration activity'' and adding ``cognizant contract
administration activity for the Contractor''; and
0
e. Adding Alternate II clause to read as follows:
252.219-7003 Small Business Subcontracting Plan (DoD Contracts).
* * * * *
Alternate II. As prescribed in 219.708(b)(1)(A) and (b)(1)(A)(3),
use the following clause, which uses different paragraphs (a) and (b)
than the basic clause.
Small Business Subcontracting Plan (DoD Contracts)--Alternate II (Dec
2019)
(a) Definitions. As used in this clause--
Eligible contractor means a business entity operated on a for-
profit or nonprofit basis that--
(1) Employs severely disabled individuals at a rate that
averages not less than 33 percent of its total workforce over the
12-month period prior to issuance of the solicitation;
(2) Pays not less than the minimum wage prescribed pursuant to
29 U.S.C. 206 to the employees who are severely disabled
individuals; and
(3) Provides, for its employees, health insurance and a
retirement plan comparable to those provided for employees by
business entities of similar size in its industrial sector or
geographic region.
Summary Subcontract Report (SSR) Coordinator means the
individual who is registered in the Electronic Subcontracting
Reporting System (eSRS) at the Department of Defense level and is
responsible for acknowledging receipt or rejecting SSRs submitted
under an individual subcontracting plan in eSRS for the Department
of Defense.
(b)(1) Subcontracts awarded to qualified nonprofit agencies
designated by the Committee for Purchase From People Who are Blind
or Severely Disabled (41 U.S.C. 8502-8504), may be counted toward
the Contractor's small business subcontracting goal (section 8025 of
Pub. L. 108-87).
(2) Subcontracts awarded to eligible contractors under the
Demonstration Project for Contractors Employing Persons with
Disabilities (see Defense Federal Acquisition Regulation Supplement
(DFARS) 226.72) may be counted toward the Contractor's small
disadvantaged business subcontracting goal (section 853 of Pub. L.
108-136, as amended by division H, section 110 of Pub. L. 108-199).
(c) A mentor firm, under the Pilot Mentor-Protege Program
established under section 831 of Public Law 101-510, may count
toward its small disadvantaged business goal, subcontracts awarded
to--
(1) Protege firms which are qualified organizations employing
the severely disabled; and
(2) Former protege firms that meet the criteria in section
831(g)(4) of Public Law 101-510.
(d) The master plan is approved by the cognizant contract
administration activity for the Contractor.
(e) In those subcontracting plans which specifically identify
small businesses, the Contractor shall notify the Administrative
Contracting Officer of any substitutions of firms that are not small
business firms, for the small business firms specifically identified
in the subcontracting plan. Notifications shall be in writing and
shall occur within a reasonable period of time after award of the
subcontract. Contractor-specified formats shall be acceptable.
(f)(1) For DoD, the Contractor shall submit reports in eSRS as
follows:
(i) The Individual Subcontract Report (ISR) shall be submitted
to the contracting officer at the procuring contracting office, even
when contract administration has been delegated to the Defense
Contract Management Agency.
(ii) Submit the consolidated SSR for an individual
subcontracting plan to the ``Department of Defense.''
(2) For DoD, the authority to acknowledge receipt or reject
reports in eSRS is as follows:
(i) The authority to acknowledge receipt or reject the ISR
resides with the contracting officer who receives it, as described
in paragraph (f)(1)(i) of this clause.
(ii) The authority to acknowledge receipt of or reject SSRs
submitted under an individual subcontracting plan resides with the
SSR Coordinator.
(g) Include the clause at DFARS 252.219-7004, Small Business
Subcontracting Plan (Test Program), in subcontracts with
subcontractors that participate in the Test Program described in
DFARS 219.702-70, if the subcontract is expected to exceed the
applicable threshold specified in Federal Acquisition Regulation
19.702(a) and to have further subcontracting opportunities.
(End of clause)
0
9. Add section 252.226-7002 to read as follows:
252.226-7002 Representation for Demonstration Project for Contractors
Employing Persons with Disabilities.
As prescribed in 226.7203, use the following provision:
Representation for Demonstration Project for Contractors Employing
Persons With Disabilities (Dec 2019)
(a) Definitions. As used in this provision--
Eligible contractor means a business entity operated on a for-
profit or nonprofit basis that--
(1) Employs severely disabled individuals at a rate that
averages not less than 33 percent of its total workforce over the
12-month period prior to issuance of the solicitation;
(2) Pays not less than the minimum wage prescribed pursuant to
29 U.S.C. 206 to the employees who are severely disabled
individuals; and
(3) Provides, for its employees, health insurance and a
retirement plan comparable to those provided for employees by
business entities of similar size in its industrial sector or
geographic region.
Severely disabled individual means an individual with a
disability (as defined in 42 U.S.C. 12102) who has a severe physical
or mental impairment that seriously limits one or more functional
capacities.
(b) Demonstration Project. This solicitation is issued pursuant
to the Demonstration Project for Contractors Employing Persons with
Disabilities. The purpose of the Demonstration Project is to provide
defense contracting opportunities for entities that employ severely
disabled individuals. To be eligible for award, an offeror must be
an eligible contractor as defined in paragraph (a) of this
provision.
(c) Representation. The offeror represents that it [] is [] is
not an eligible contractor as defined in paragraph (a) of this
provision.
(End of provision)
[FR Doc. 2019-27826 Filed 12-30-19; 8:45 am]
BILLING CODE 5001-06-P