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

 
CONTENT
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