[Federal Register: October 20, 2003 (Volume 68, Number 202)]
[Rules and Regulations]
[Page 59999-60006]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20oc03-8]
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Part II
Department of Defense
General Services Administration
National Aeronautics and Space Administration
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48 CFR Chapter 1
Federal Acquisition Regulations--Contract Bundling and Small Entity
Compliance Guide; Final Rules
Small Business Adminstration
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13 CFR Part 125
Small Business Government Contracting Programs; Final Rule and Proposed
Rule
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 2, 7, 8, 10, 16, 19, and 42
[FAC 2001-17; FAR Case 2002-029]
RIN 9000-AJ58
Federal Acquisition Regulation; Contract Bundling
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) governing contract
bundling. Specifically, this final rule: Revises the definition of
contract bundling to expressly include multiple award contract vehicles
and task and delivery orders under such contract vehicles; mandates
that procuring activities coordinate with the Small Business Specialist
(SBS) proposed acquisition strategies or plans contemplating awards
above specified dollar thresholds, and that the SBS notify the agency
Office of Small and Disadvantaged Business Utilization (OSDBU) when
those strategies include contract bundling that is unnecessary or
unjustified; revises the threshold and documentation required for
substantial bundling; and requires agency OSDBUs to perform certain
oversight functions. These amendments are intended to implement a
number of the recommendations included in an October 2002, Office of
Management and Budget (OMB) report on contract bundling.
DATES: Effective Date: October 20, 2003.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, (202) 501-4755,
for information pertaining to status or publication schedules. For
clarification of content, contact Ms. Rhonda Cundiff, Procurement
Analyst, at (202) 501-0044. Please cite FAC 2001-17, FAR case 2002-029.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 68 FR 5138, January 31, 2003, to solicit comments on its
proposal to implement several recommendations included in OMB's October
2002 report, entitled ``Contract Bundling: A Strategy for Increasing
Federal Contracting Opportunities for Small Business.'' (See http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.fac.gov
).
Contract bundling is defined in the Small Business Act as the
consolidation of two or more procurement requirements for goods and
services previously provided or performed under separate smaller
contracts into a solicitation of offers for a single contract that is
``unlikely to be suitable for award to a small business concern'', 15
U.S.C. 632(o). The President's Small Business Agenda directed OMB to
develop a strategy for unbundling contracts, as a means of expanding
small business access to Federal procurements.
In response, the Office of Federal Procurement Policy (OFPP),
within OMB, issued the October 2002 bundling report, providing a nine-
point action plan to hold agencies accountable for eliminating
unnecessary contract bundling and for mitigating the effects of
necessary contract bundling.
The proposed rule detailed the changes to the FAR that would
implement the five action items requiring regulatory amendments. In
particular, the rule proposed to: (1) Revise the definition of bundling
to expressly include multiple award contract vehicles and task and
delivery orders under such contracts; (2) require procuring activities
to coordinate with their SBS proposed acquisition strategies or plans
contemplating awards above specified dollar thresholds and require the
SBS to notify the agency OSDBU when those strategies include
unnecessary and unjustified contract bundling; (3) reduce the threshold
and revise the documentation required for substantial bundling; and (4)
require agency OSDBUs to perform periodic oversight reviews of agency
bundling activities.
The proposed rule invited the public to submit comments on the
proposed amendments by April 1, 2003. In response to the proposed rule,
43 comment letters were received. Some respondents complained that a
few of the proposed changes did not go far enough to curb contract
bundling. Others, on the other hand, criticized some of the proposed
changes for going too far with the bundling regulations.
The Councils considered all of the comments and recommendations in
developing this final rule. The specific comments to each proposed
amendment and the Councils' corresponding response are summarized as
set forth below.
1. Comments on Clarification of Bundling Definition. Eleven
comments were received on the proposal to implement the OMB bundling
report recommendation to require bundling reviews for task and delivery
order awards under multiple award contract vehicles. The proposed
regulation adds new language (paragraph (3)) to the FAR part 2
definition of ``bundling'' that defines a ``single contract'' to
include: (1) multiple awards of indefinite-quantity contracts under a
single solicitation for the same or similar supplies or services to two
or more sources; and (2) an order placed against an indefinite quantity
contract under a Federal Supply Schedule contract; or task-order
contract or delivery-order contract awarded by another agency (i.e.,
Governmentwide acquisition contract or multiagency contract).
Some respondents suggested that any change in the definition of
bundling (e.g., to specifically include multiple award contracts and
orders under multiple award contracts) is questionable. Another
respondent wants expansion of the FAR case to include ``consolidated
contract procurements on IDIQ multiple award vehicles'' so that small
businesses will have more opportunities to compete.
One respondent believes that the scope of bundling is unclear and
that a consistent definition must be agreed upon and supported by a
cost-benefit analysis before proceeding. The Councils believe that a
cost-benefit analysis is unnecessary and that the definition is clear
and consistent by defining the type of contract actions that fall under
the revised bundling definition. Two respondents oppose the definition
of ``single contract'' particularly as it applies to Indefinite
Delivery/Indefinite Quantity (ID/IQ) contracts for A-E services and
recommends limiting the definition to those instances in which bundling
under ID/IQ contracts for A-E services would replace two or more
previous contracts with small business primes with one bundled contract
on which it is unlikely that small businesses could be competitive as a
prime contractor. The strategy of the proposed definition is intended
to close loopholes that otherwise would allow certain types of
acquisitions to escape effective review.
A number of respondents commented on the proposed definition of
``single contract'' and ``order.'' One respondent commented that the
definition did not fully implement OMB's bundling recommendation to
close the loophole of bundling task and delivery order awards because
it does not cover the orders an agency issues against its own
[[Page 60001]]
multiple award contracts. This commenter pointed out that the new
definition only covers the orders placed against GSA's Federal Supply
Schedules, or against an indefinite quantity contract awarded by
another agency and urged that the definition of contract bundling
include orders placed against indefinite quantity, multiple award
contracts awarded by any agency. The Councils do not agree that an
agency's orders against its own contract should be subject to
additional bundling reviews. The underlying multiple award contract of
an agency is subject to the requirements for Small Business Specialist
(SBS) and procurement center representative (PCR) review for contract
bundling and small business participation. Unlike FSS orders,
theoretically, the SBS and PCR reviews of an agency's proposed
acquisition strategy or plan for its multiple award contract should
encompass that agency's anticipated orders under that contract.
Consequently, the agency's own orders presumably were part of the
underlying PCR and SBS review. It would therefore be duplicative to
require yet another bundling review of each individual order the agency
places against its already reviewed multiple award contract. As a
result, the Councils are not adopting this recommendation, particularly
in light of the limited resources available to conduct the reviews.
Another respondent noted that the proposed definition of bundling
is deficient because it does not cover ``new work.'' New work is work
that was never performed by contract before. Therefore, it was never
part of a separate smaller contract, and so it is not bundled, by
definition. Bundling is a concept which describes consolidation of
prior contracts.
Two respondents believe that the definition should be broader to
include ``accretive bundling,'' which occurs when dissimilar tasks are
added onto GWACs, ID/IQs, Schedules, and multiple award type contracts.
The Councils disagree. FAR Subpart 19.2 requires that the Offices of
Small and Disadvantaged Business Utilization (OSDBUs) work with the
Small Business Administration's PCR to identify proposed solicitations
that involve bundling. Further, FAR 19.202-1(e) requires the
contracting officer to provide a copy of the proposed acquisition
package to the PCR at least 30 days prior to the issuance of the
solicitation if the proposed acquisition is for a bundled requirement.
In particular, since FAR 19.202-1 requires procuring activities to
submit acquisitions strategies above the established threshold to PCRs,
strategies that contemplate orders that are above the threshold and
that are not against an agency's own multiple award contract, would be
subject to PCR review for bundling. Second, FAR 19.202-1 requires a
procuring activity to submit a copy of a proposed acquisition strategy
to the PCR, whenever that strategy involves a bundled requirement.
Because the proposed definition in FAR Part 2 defines a bundled
requirement to include certain task and delivery orders under another
agency's contract, agencies would be required to submit such orders to
PCRs for review, when the orders include bundling.
For the purposes of bundling, the proposed rule now defines a
single contract to include orders placed against an indefinite quantity
contract under a Federal Supply Schedule or a task-order contract or
delivery-order contract awarded by another agency and requires strategy
review when the estimated contract or order value reaches or exceeds
the thresholds. After considering all of the comments on the proposed
single contract definition within the meaning of bundling, the Councils
believe that the amendment effectively implements OMB's recommendation
to compel bundling reviews of task and delivery orders. The Councils
are therefore adopting it as proposed.
2. Comments on Requirement for Bundling Reviews. The Councils
received several comments concerning its proposal to add FAR
7.104(d)(1), requiring bundling reviews of proposed acquisition
strategies or plans. As proposed, that section requires an agency to
coordinate its acquisition strategy or plan with its SBS whenever the
agency's contemplated strategy or plan contemplates award of a contract
or order that exceeds the applicable agency threshold established and
is not set-aside for small businesses. As previously stated, FAR
19.202-1(e) provides a minimum period of no later than 30 days before
the issuance of the solicitation for the agency to coordinate its plan
with the SBS. In addition, under FAR 7.104(d)(1), the SBS is required
to notify the agency OSDBU if the proposed acquisition strategy or plan
includes bundled requirements that the agency has not identified as
bundled or includes unnecessary or unjustified bundling of
requirements. Several commenters proposed exemptions for certain types
of contracts (A-E services, Federal Supply Schedules). One commenter
disagreed with applying contract bundling reviews to contracts (not
orders) under GSA's Multiple Award Schedules (MAS) Program. The
Councils disagree. Contract bundling has been applicable to GSA's
Multiple Award Schedules Program since the FAR and SBA bundling
regulations first became effective. This final rule specifically covers
agency orders under the MAS program and provides more detailed review
of various contract actions at agency-specific thresholds. The strategy
is intended to close loopholes that otherwise would allow certain types
of acquisitions to escape effective review.
Some respondents commented that the proposed rule adds additional
burdens and would require additional resources or a reallocation of
existing resources. Although agency reallocation of resources may be
necessary, the Councils believe that this rule is in response to the
President's Small Business Agenda and OMB's strategy for unbundling
Federal contracts to increase Federal contracting opportunities for
small businesses. The proposed rule provides for eliminating
unnecessary contract bundling and mitigating the effects of necessary
contract bundling and ensuring maximum compliance with current contract
bundling laws by fully using the resources of the Small Business
Administration and agency OSDBUs.
Some commenters suggested that OSDBUs should have authority to
block an acquisition. That comment ignores existing regulations that
would operate in tandem with proposed FAR 7.104(d)(2). The Councils
believe this recommended change is unnecessary. Specifically, FAR
19.202-1(e)(4) and FAR 19.505 already provide the mechanism for
resolving disagreements with agencies concerning contract bundling and
small business participation in procurements. FAR 19.202-1(e)(4)
requires the contracting officer to document the basis for the
rejection and notify the PCR in accordance with 19.505 if the
contracting officer rejects the PCR's recommendation, made in
accordance with 19.402(c)(2). FAR 19.505 allows the PCR to appeal the
contracting officer's rejection to the head of the contracting activity
(or designee).
The proposed rule, specifically FAR 19.201 and FAR Subpart 19.4,
encourages SBSs and OSDBUs to cooperate with PCRs in reviewing
procurements and in identifying possible small business contracting
opportunities. SBSs and OSDBUs therefore can work with PCRs in using
the PCR appeal mechanism to challenge unnecessary and unjustified
contract bundling.
[[Page 60002]]
Accordingly, the Councils believe that the proposed FAR 7.104(d)(2)
properly balances the need for SBS reviews of acquisition strategies
with the need for operational efficiency in the procurement process. In
adopting FAR 7.104(d)(2), the Councils have made minor revisions. The
first is a technical change to clarify that the proposed strategies
include ``acquisitions'' meeting the dollar threshold. The second is
the inclusion of additional language reinforcing the SBS's
responsibility to assist in identifying alternative strategies when an
acquisition plan involves substantial bundling.
3. Comments on Acquisition Dollar Thresholds. FAR 7.104(d)(2)
establishes three agency-specific dollar thresholds that would trigger
the bundling reviews required under FAR 7.104(d)(1). The three-tiered
dollar threshold proposed is: $7 million or more for the Department of
Defense (DoD); $5 million or more for the National Aeronautics and
Space Administration (NASA), the Department of Energy (DoE) and the
General Services Administration (GSA); and $2 million or more for all
other agencies.
The Councils received numerous comments on FAR 7.104(d)(2). Several
respondents suggested increasing the agency review thresholds by
doubling or tripling them or raising the threshold as applied to a
particular agency. A few respondents recommended lowering the
thresholds, either for review of Federal Supply Schedule orders or as
applied to a particular agency. Of these respondents, some believed
that adopting different thresholds for different agencies would
unnecessarily complicate the acquisition process. They recommended
adoption of a single Governmentwide threshold that would apply to all
agencies equally. One of these respondents suggested that the Councils
consider keeping the threshold already provided in FAR 7.107(e) for
documenting substantial bundling ($10 million). Another respondent
indicated that close monitoring of DOD's procurement is essential to
limiting the adverse impact of contract bundling on small businesses.
Another commenter also believed that the three-tiered approach is too
complicated. This commenter suggested one threshold of $1 million. The
proposed dollar amounts of the thresholds are based on a comparative
analysis of the number and size of the contracting actions of the major
procuring activities. The objective of the tiered approach is two-fold:
(1) to target those contracting actions for individual agencies that
would most likely involve significant contract bundling as well as
opportunities for small business contracting; and (2) to minimize the
extent to which the bundling reviews would disrupt the procurement
process of individual agencies. The Councils continue to believe that
the proposed three-tiered threshold will best achieve those objectives.
The Councils therefore decline to adopt the recommendations for a
single Governmentwide threshold to trigger bundling reviews. The
respondents' expressed diverse opinions as to the appropriate structure
and amount of the thresholds were not persuasive enough to divert from
the proposed range in the strategy (i.e., $2 million, $5 million, and
$7 million) or the proposed regulatory approach (three thresholds). The
Councils are instead adopting the proposed threshold of $7 million for
DoD, $5 million for NASA, DoE and GSA, and $2 million for all other
agencies. These agency-specific levels will capture those procurements
that would most likely involve contract bundling for individual
agencies, will minimize the disruption to the procurement process, and
will properly account for the limited resources and contracting
personnel to conduct the bundling reviews.
One respondent recommended that the rule clearly state the basis
for determining review levels on orders placed against GSA, NASA, and
DoE contracts by other agencies with lower thresholds and recommends
that the specific agency threshold apply to that agency regardless of
whether another agency's contract is used. An agency's threshold
applies to that agency regardless of whether another agency's contract
is being used.
4. Comments on Additional Requirements for Acquisitions Involving
Bundling. Two respondents disagreed with the proposed requirement to
identify alternative strategies and recommended deleting that
requirement. The Councils disagree. The proposed language is intended
to require agencies to fully investigate all alternatives to bundling
during the acquisition planning stage.
Several respondents did not agree with thresholds proposed for
substantial bundling. However, these comments were not persuasive
enough to divert from the proposed thresholds. The Councils recognize
that lowering the threshold for ``substantial bundling'' would mean
enlarging the number of procurements that would require the additional
written justification under FAR 7.107. However, the Councils continue
to believe that this change will simplify the application by using the
same three-tiered dollar threshold to trigger the bundling reviews and
the required supporting analysis for substantial bundling. Also, the
changes in the requirement for written justifications are consistent
with OMB's report recommendations relating to the identification of
alternative acquisition strategies.
Finally, one respondent recommended that FAR 7.105 be changed to
require any requirement previously procured be identified and an
explanation given if it was satisfied by a separate smaller contract or
order and is now planned for consolidation into contract or order. The
Councils agree and have added the following language: ``When the
proposed acquisition strategy involves bundling, identify the incumbent
contractors and contracts affected by the bundling''.
5. Comments on Part 8--Required Sources of Supplies and Services.
Three comments were received for this part. The first respondent
believes that clarifying that FSS contracts must comply with bundled
contracts is helpful but the proposed requirement at 19.202-
1(e)(1)(iii) cited in 8.404(a)(1) is unnecessary. The Councils believe
that this reference is appropriately placed and is necessary in Part 8
in order to advise those contracting officers utilizing Part 8 to know
what is applicable and not applicable to orders placed against Federal
Supply Schedules. The second respondent recommends caution in opening
the Schedules program to mandatory compliance without considering the
impact on meeting agency needs. The strategy of the definition is
intended to include orders placed against the Schedules program in
order to close loopholes that otherwise would allow acquisitions to
escape effective review. Finally, the third respondent believes that
federal statutes specifically provide that task and delivery orders
issued under a Schedules contract satisfy statutory competition
requirements. While FSS contracts meet the statutory competition
requirements, the bundling statute is silent on orders placed against
these contracts. Including Schedule orders in the definition of
bundling will close loopholes that currently allow those orders to
escape effective review.
6. Comments on Part 16--Types of Contracts. Two comments were
received. The first respondent opposes the requirement in FAR 2.101
whereby the definition affects the contract and task order requirements
in 16.505(a)(7) and believes it would be devastating to the
Government's procurement of surveying and mapping services, disruptive
to emergency response activities (e.g., war efforts), and urges
[[Page 60003]]
that A-E services as defined in FAR Part 36 be exempt from these
provisions. The Councils disagree. As previously stated, the strategy
of the definition is intended to include orders to close loopholes that
otherwise would escape effective review. The second respondent believes
that the addition of FAR 16.505(a)(7)(iii) may conflict with statutory
provisions. The Councils do not believe that this rule conflicts with
statutory provisions but merely is intended as strategy to close
loopholes that otherwise would allow certain types of acquisitions to
escape effective review.
7. Comments on Part 19--Small Business Programs, Subpart 19.2,
Policies. Two comments were received for FAR 19.201 General policy.
Both respondents recommended including a timeframe for periodic
reviews. The Councils adopted the recommendation and amended the
language to require annual reviews rather than periodic reviews.
Three comments were received for FAR 19.202, Specific policies. The
first respondent wants to ensure that OSDBU offices in all agencies
have the necessary authority, resources, and independence to perform
their function and wants to require written notification to agency
OSDBUs early in the requisition stage of all GWAC and bundled
proposals.
The second respondent recommends revisions to require the
negotiation of two-part goals for contracts awarded to the various
types of small business concerns, with agency specific goals set for
prime contracts and subcontracts awarded to small business concerns and
for the OSDBU, in performing assessments of contracts awarded to small
business concerns, to identify and track the number of Federal
contracting dollars going to the various small business categories. The
Councils believe that this comment is outside the scope of this rule.
The third respondent questions the language ``Agencies shall
establish procedures including dollar thresholds for review of
acquisitions'' and questions who will decide the agency thresholds for
review. These agency procedures would be issued as other agency
regulations, orders, and procedures are, by the agency head or his
designee. That person would decide what the agency review thresholds
are. The FAR Council is adopting the proposed rule as final.
Three comments were received for FAR 19.202-1, Encouraging small
business participation in acquisitions. The first respondent believes
that additional language requiring the contracting officer to provide
all information relative to the justification of contract bundling is
inappropriate because release of information must be decided on a case-
by-case basis in accordance with existing laws and regulations (i.e.,
Procurement Integrity, FOIA, and the FAR) and may be in conflict with
existing laws. The Councils believe that this requirement complies with
the Procurement Integrity Act.
The second respondent comments that when the OSDBU directors
undertake new responsibilities that the regulations further require an
assessment of the impact and that they should also review the impact of
any such decision on effective competition and on proven technical
capabilities available in the marketplace. The final respondent
suggests that the OSDBUs review and consider alternative strategies
that maximize the use of small and mid-size firms in procurements. The
Councils believe that with the additional responsibilities placed on
OSDBUs with this rule, no additional responsibilities are necessary at
this time.
8. Comments on Subpart 42.15, Contractor Performance Information.
Eighteen respondents commented on the proposed revision to FAR 42.1502
that requires an assessment of agency contractor compliance with the
goals identified in the small business subcontracting plan when the
contract includes the clause at FAR 52.219-9, Small Business
Subcontracting Plan. Although the comments applauded the intent of the
proposed language added to FAR 42.1502, the majority of the comments
indicated that it is insufficient to monitor and ensure compliance with
subcontracting plans. The primary issues of the respondents were
general comments pertaining to subcontracting plans and performance
evaluations both of which are addressed as follows:
(a) Comments on the Subcontracting Plans. Four general comments
were received regarding subcontracting plans. Two of the three
respondents recommended that subcontracting plans include other
information, such as a description of the nature of the work to be
subcontracted and the efforts the offeror will make to ensure that
small businesses have an equitable opportunity to compete for
subcontracts. These requirements are already in FAR 19.704(a) and no
further change is necessary. The third respondent recommended that the
regulations mandate that PCRs share their compliance assessments with
SBA's breakout PCRs, who are assigned to major contracting centers.
This commenter also recommended that SBA develop a system to enable
PCRs and breakout PCRs to submit their assessments to the cognizant
contracting office. The fourth respondent recommended inserting a
clause in each contract requiring a prime contractor to prove it has
met its original subcontracting plan and requiring a prime's
subcontracting partners to sign off on a joint statement of compliance
before the prime gets paid.
(b) Comments on Performance Evaluations. Two respondents expressed
the need for further guidance on evaluating compliance with
subcontracting plans and a contractor's ``good faith'' efforts to
achieve its small business goals. One of these two respondents further
indicated that Government agencies should be required to ``evaluate
large businesses on the same basis and understanding of the small
business subcontracting plan regulations.'' This respondent also
complained that large businesses need additional guidance in completing
commercial plans, which cover a commercial contractor's entire fiscal
year and commercial production.
One respondent commented that performance evaluations are
inadequate, penalties have never been assessed, and the proposed change
does not link performance evaluations to the penalty. The FAR already
provides for liquidated damages for noncompliance with subcontracting
plans. Under FAR 19.705-7, a prime contractor is liable for such
damages for failing to make a ``good faith effort'' to comply with its
subcontracting plans. Since governing regulations already provide
monetary consequences for noncompliance with subcontracting plans, the
Councils are not adopting this recommendation. Another commenter
recommended that large businesses that are awarded task and delivery
orders under the Federal Supply Schedules should be subject to the
requirement for subcontracting plans under 8(d) of the Small Business
Act, 15 U.S.C. 637(d). The Councils agree that effective procedures to
mitigate the effects of contract bundling on small businesses
necessitates more stringent requirements for monitoring compliance with
subcontracting plans to ensure that small businesses receive the
maximum practical opportunity to participate as subcontractors in large
Federal contracts. Many of the commenters recommended amendments that
require further consideration to evaluate their likely effectiveness
and impact on the procurement process. As a result, concurrent with
publication of this FAR final rule, the Small Business Administration
(SBA) is issuing a final
[[Page 60004]]
rule to incorporate parallel changes in 13 CFR part 125. At the same
time, SBA is issuing a proposed rule to provide more guidance on
subcontracting, including guidelines for evaluating a company's good
faith efforts to comply with subcontracting plan requirements. When the
SBA proposed rule becomes final, the Councils will consider
incorporating appropriate provisions in the FAR.
This is a significant regulatory action and, therefore, was subject
to review under Section 6(b) of Executive Order 12866, Regulatory
Planning and Review, dated September 30, 1993. This rule is not a major
rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., applies to
this final rule. A Final Regulatory Flexibility Analysis (FRFA) has
been prepared and is as follows:
Final Regulatory Flexibility Analysis
FAR Case 2002-029, Contract Bundling
This Final Regulatory Flexibility Analysis has been prepared
consistent with the criteria of 5 U.S.C. 604.
1. Reasons for the final rule:
This rule amends the Federal Acquisition Regulation (FAR) to
implement the recommendations of the Office of Management and Budget
(OMB) in its report entitled ``A Strategy for Increasing
Opportunities for Small Business.'' The FAR changes will: (1)
Clarify the definition of ``bundling'' to indicate it applies to
orders placed against Federal Supply Schedules and another agency's
Governmentwide Acquisition Contracts or Multi-agency Contracts when
those orders otherwise meet the parameters of the definition; (2)
require the small business specialist to coordinate on agency
acquisition strategies at specified dollar thresholds and notify the
agency Office of Small and Disadvantaged Business Utilization when
those strategies include contract bundling that is unnecessary,
unjustified, or not identified as such by the agency; (3) reduce the
threshold for ``substantial bundling''; (4) revise the documentation
requirements for substantial bundling to include identification of
alternative acquisition strategies that would result in the bundling
of fewer requirements, along with justification for not choosing
those alternatives; (5) require contracting officers to provide
bundling justification documentation to the agency Office of Small
and Disadvantaged Business Utilization when substantial bundling is
involved; (6) require contractor performance evaluations to include
an assessment of contractor compliance with small business
subcontracting goals; and (7) require the Office of Small and
Disadvantaged Utilization to be responsible for conducting annual
reviews to assess agency contract bundling requirements and the
extent to which small businesses are receiving a fair share of
Federal procurements.
2. Objectives of and legal basis for this rule:
The objective of this final rule is to further the
Administration's commitment of creating a Government strategy to
increase Federal contracting opportunities for small business. In
order to accomplish this commitment this final rule provides FAR
coverage that implements the recommendations of the Office of
Management and Budget (OMB) in its report entitled ``A Strategy for
Increasing Opportunities for Small Business.''
3. Description of and estimate of the number of small entities
to which the rule will apply, or an explanation if such estimate is
not available:
The final rule will indirectly apply to all large and small
entities that seek award of Federal contracts. The rule should have
a positive economic impact on small prime contractors and
subcontractors by providing more Federal contracting opportunities
for small businesses. In the SBA's 2001 State of Small Business
Report filed with the House and Senate Small Business Committees,
SBA identified only four material bundling cases with a total value
of $60 million for the first three quarters of Fiscal Year (FY)
2001. This represents 0.0004% of Federal contract dollar activity
($60 million divided by $150 billion for the first three quarters of
the fiscal year). Based on FY 2001 data, the final rule will impact
approximately $3 billion in orders placed against FSS contracts,
Governmentwide acquisition contracts, and multiagency contracts.
Applying the contract bundling estimate of 0.0004% to these
unreviewed orders, SBA expects approximately $1 million will be
identified as bundled. This rule establishes a three-tiered dollar
threshold of $7 million for DOD, $5 million for NASA, DOE and GSA,
and $2 million for all other civilian agencies. The dollar amount is
based on a comparative analysis of the number and size of the
contracting actions of the major procuring activities and is
intended to target reviews of the contracting actions that would
most likely involve contract bundling, without undue disruption to
the acquisition process.
4. Description of the projected reporting, recordkeeping, and
other compliance requirements of the rule, including an estimate of
the classes of small entities which will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record.
The final rule imposes no reporting, recordkeeping, or other
compliance requirements.
5. Relevant Federal rules that may duplicate, overlap, or
conflict with the rule:
Simultaneously with the publication of this final rule, SBA is
publishing its final rule on contract bundling to implement the
required action items in OMB's October 2002 report, entitled
``Contract Bundling: A Strategy for Increasing Federal Contracting
Opportunities for Small Business.'' In some instances, SBA's final
rule duplicates language in the FAR final rule.
6. Description of any significant alternatives to the final rule
which accomplish the stated objectives of applicable statutes and
which minimize the rule's economic impact on small entities.
Currently, there are no practical alternatives that will
accomplish the objectives of this final rule.
Interested parties may obtain a copy of the FRFA from the FAR
Secretariat. The FAR Secretariat has submitted a copy of the FRFA to
the Chief Counsel for Advocacy of the Small Business Administration.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
3501, et seq.
List of Subjects in 48 CFR Parts 2, 7, 8, 10, 16, 19, and 42
Government procurement.
Dated: October 16, 2003.
Laura Auletta,
Director, Acquisition Policy Division.
Federal Acquisition Circular
Federal Acquisition Circular (FAC) 2001-17 is issued under the
authority of the Secretary of Defense, the Administrator of General
Services, and the Administrator for the National Aeronautics and Space
Administration.
Unless otherwise specified, all Federal Acquisition Regulation
(FAR) and other directive material contained in FAC 2001-17 is
effective October 20, 2003.
Dated: October 9, 2003.
Deidre A. Lee,
Director, Defense Procurement and Acquisition Policy.
Dated: October 2, 2003.
David A. Drabkin,
Deputy Associate Administrator, Office of Acquisition Policy,
General Services Administration.
Dated: October 2, 2003.
Tom Luedtke,
Assistant Administrator for Procurement, National Aeronautics and
Space Administration.
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Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 7, 8, 10, 16, 19,
and 42 as set forth below:
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1. The authority citation for 48 CFR parts 2, 7, 8, 10, 16, 19, and 42
is revised to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 2--DEFINITIONS OF WORDS AND TERMS
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2. Amend section 2.101(b)(2) in the definition ``Bundling'' by
redesignating paragraph (3) as paragraph (4) and
[[Page 60005]]
adding a new paragraph (3) to read as follows:
2.101 Definitions.
* * * * *
Bundling means--
* * * * *
(3) Single contract, as used in this definition, includes--
(i) Multiple awards of indefinite-quantity contracts under a single
solicitation for the same or similar supplies or services to two or
more sources (see FAR 16.504(c)); and
(ii) An order placed against an indefinite quantity contract under
a--
(A) Federal Supply Schedule contract; or
(B) Task-order contract or delivery-order contract awarded by
another agency (i.e., Governmentwide acquisition contract or multi-
agency contract).
* * * * *
PART 7--ACQUISITION PLANNING
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3. Amend section 7.104 by adding paragraph (d) to read as follows:
7.104 General procedures.
* * * * *
(d)(1) The planner shall coordinate the acquisition plan or
strategy with the cognizant small business specialist when the strategy
contemplates an acquisition meeting the dollar amounts in paragraph
(d)(2) of this section unless the contract or order is entirely
reserved or set-aside for small business under part 19. The small
business specialist shall notify the agency Office of Small and
Disadvantaged Business Utilization if the strategy involves contract
bundling that is unnecessary, unjustified, or not identified as bundled
by the agency. If the strategy involves substantial bundling, the small
business specialist shall assist in identifying alternative strategies
that would reduce or minimize the scope of the bundling.
(2)(i) The strategy shall be coordinated with the cognizant small
business specialist in accordance with paragraph (d)(1) of this section
if the estimated contract or order value is--
(A) $7 million or more for the Department of Defense;
(B) $5 million or more for the National Aeronautics and Space
Administration, the General Services Administration, and the Department
of Energy; and
(C) $2 million or more for all other agencies.
(ii) If the strategy contemplates the award of multiple contracts
or orders, the thresholds in paragraph (d)(2)(i) of this section apply
to the cumulative maximum potential value, including options, of the
contracts and orders.
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4. Amend section 7.105 in paragraph (b)(1) by adding a sentence after
the third sentence to read as follows:
7.105 Contents of written acquisition plans.
* * * * *
(b)(1) * * * When the proposed acquisition strategy involves
bundling, identify the incumbent contractors and contracts affected by
the bundling. * * *
* * * * *
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5. Amend section 7.107 in the third sentence of paragraph (a) by
removing ``an agency'' and adding ``an agency or the Government'' in
its place; in paragraphs (b)(1), (b)(2), and (d) by removing the word
``contract'' and adding ``contract or order'' in its place; by revising
the introductory text of paragraph (e), paragraphs (e)(4) and (e)(5);
and by adding paragraph (e)(6) to read as follows:
7.107 Additional requirements for acquisitions involving bundling.
* * * * *
(e) Substantial bundling is any bundling that results in a contract
or order that meets the dollar amounts specified in 7.104(d)(2). When
the proposed acquisition strategy involves substantial bundling, the
acquisition strategy must additionally--
* * * * *
(4) Specify actions designed to maximize small business
participation as subcontractors (including suppliers) at any tier under
the contract, or order, that may be awarded to meet the requirements;
(5) Include a specific determination that the anticipated benefits
of the proposed bundled contract or order justify its use; and
(6) Identify alternative strategies that would reduce or minimize
the scope of the bundling, and the rationale for not choosing those
alternatives.
* * * * *
PART 8--REQUIRED SOURCES OF SUPPLIES AND CONTRACTS
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6. Amend section 8.404 in the introductory text of paragraph (a)(1) by
removing the period at the end of the first sentence and adding ``and
the requirement at 19.202-1(e)(1)(iii).'' in its place; and revising
paragraph (a)(2) to read as follows:
8.404 Using schedules.
(a) * * *
(2) Orders placed under a Federal Supply Schedule contract--
(i) Are not exempt from the development of acquisition plans (see
subpart 7.1), and an information technology acquisition strategy (see
part 39); and
(ii) Must comply with all FAR requirements for a bundled contract
when the order meets the definition of ``bundled contract'' (see
2.101(b)).
PART 10--MARKET RESEARCH
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7. Amend section 10.001 by revising the introductory text of paragraph
(c)(2) to read as follows:
10.001 Policy.
* * * * *
(c) * * *
(2) At least 30 days before release of the solicitation or 30 days
prior to placing an order without a solicitation--
* * * * *
PART 16--TYPES OF CONTRACTS
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8. Amend section 16.505 by removing the word ``and'' from the end of
paragraph (a)(7)(i); removing the period at the end of paragraph
(a)(7)(ii) and adding ``; and'' in its place; and adding paragraph
(a)(7)(iii) to read as follows:
16.505 Ordering.
(a) * * *
(7) * * *
(iii) Must comply with all FAR requirements for a bundled contract
when the order meets the definition of ``bundled contract'' (see
2.101(b)).
* * * * *
PART 19--SMALL BUSINESS PROGRAMS
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9. Amend section 19.201 by removing the period at the end of paragraph
(d)(10) and adding a semicolon in its place; and adding paragraphs
(d)(11) and (d)(12) to read as follows:
19.201 General policy.
* * * * *
(d) * * *
(11) Conduct annual reviews to assess the--
(i) Extent to which small businesses are receiving a fair share of
Federal procurements, including contract opportunities under the
programs administered under the Small Business Act;
(ii) Adequacy of contract bundling documentation and
justifications; and
(iii) Actions taken to mitigate the effects of necessary and
justified contract bundling on small businesses.
(12) Provide a copy of the assessment made under paragraph (d)(11)
of this
[[Page 60006]]
section to the Agency Head and SBA Administrator.
* * * * *
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10. Amend section 19.202 by adding a new sentence after the first
sentence to read as follows:
19.202 Specific policies.
* * * Agencies shall establish procedures including dollar
thresholds for review of acquisitions by the Director or the Director's
designee for the purpose of making these recommendations. * * *
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11. Amend section 19.202-1 by revising paragraph (e)(1)(iii) to read as
follows:
19.202-1 Encouraging small business participation in acquisitions.
* * * * *
(e)(1) * * *
(iii) The proposed acquisition is for a bundled requirement. (See
10.001(c)(2)(i) for mandatory 30-day notice requirement to incumbent
small business concerns.) The contracting officer shall provide all
information relative to the justification of contract bundling,
including the acquisition plan or strategy, and if the acquisition
involves substantial bundling, the information identified in 7.107(e).
When the acquisition involves substantial bundling, the contracting
officer shall also provide the same information to the agency Office of
Small and Disadvantaged Business Utilization.
* * * * *
PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES
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12. Amend section 42.1502 by adding a new sentence to the end of
paragraph (a) to read as follows:
42.1502 Policy.
(a) * * * These procedures shall require an assessment of
contractor performance against, and efforts to achieve, the goals
identified in the small business subcontracting plan when the contract
includes the clause at 52.219-9, Small Business Subcontracting Plan.
* * * * *
[FR Doc. 03-26463 Filed 10-17-03; 8:45 am]