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

Published date12 August 2019
Citation84 FR 39793
Record Number2019-16957
SectionProposed rules
CourtDefense Department,General Services Administration,National Aeronautics And Space Administration
Federal Register, Volume 84 Issue 155 (Monday, August 12, 2019)
[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
                

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