[Federal Register Volume 76, Number 51 (Wednesday, March 16, 2011)]
[Rules and Regulations]
[Pages 14566-14568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5556]



[[Page 14566]]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 13 and 19

[FAC 2005-50; FAR Case 2011-004; Item V; Docket 2011-0004, Sequence 1]
RIN 9000-AL88


Federal Acquisition Regulation; Socioeconomic Program Parity

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

ACTION: Interim rule.

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SUMMARY: DoD, GSA, and NASA are issuing an interim rule amending the 
Federal Acquisition Regulation (FAR) to implement section 1347 of the 
``Small Business Jobs Act of 2010.'' Section 1347 clarifies the 
contracting officer's ability to use discretion when determining 
whether an acquisition will be restricted to small businesses 
participating in the 8(a), HUBZone, or service-disabled veteran-owned 
small business (SDVOSB) programs. There is no order of priority among 
small businesses in the 8(a) Business Development Program, the HUBZone 
Program, or the SDVOSB Program.

DATES: Effective Date: March 16, 2011.
    Comment Date: Interested parties should submit written comments to 
the Regulatory Secretariat on or before May 16, 2011 to be considered 
in the formulation of a final rule.

ADDRESSES: Submit comments identified by FAC 2005-50, FAR Case 2011-
004, by any of the following methods:
    <bullet> Regulations.gov: http://www.regulations.gov.
    Submit comments via the Federal eRulemaking portal by inputting 
``FAR Case 2011-004'' under the heading ``Enter Keyword or ID'' and 
selecting ``Search.'' Select the link ``Submit a Comment'' that 
corresponds with ``FAR Case 2011-004.'' Follow the instructions 
provided at the ``Submit a Comment'' screen. Please include your name, 
company name (if any), and ``FAR Case 2011-004'' on your attached 
document.
    <bullet> Fax: (202) 501-4067.
    <bullet> Mail: General Services Administration, Regulatory 
Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE., 7th 
Floor, Washington, DC 20417.
    Instructions: Please submit comments only and cite FAC 2005-50, FAR 
Case 2011-004, 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: Mr. Karlos Morgan, Procurement 
Analyst, at (202) 501-2364, for clarification of content. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-50, FAR 
Case 2011-004.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA are issuing an interim rule amending the FAR, to 
implement section 1347 of the Small Business Jobs Act of 2010 (Pub. L. 
111-240). Section 1347 changed the word ``shall'' to ``may'' at section 
31(b)(2)(B) of the Small Business Act (15 U.S.C. 657a(b)(2)(B)). This 
interim rule makes similar changes to the FAR, ensuring that the FAR 
clearly reflects the statutory relationship among the small business 
programs and eliminates any confusion on the part of contracting 
officers or others.
    DoD, GSA, and NASA published a proposed rule under FAR Case 2006-
034 in the Federal Register at 73 FR 12699, March 10, 2008, which would 
have amended the FAR to clearly reflect the Small Business 
Administration's (SBA) interpretation of the Small Business Act and its 
agency regulations that no order of precedence applies when the 
contracting officer considers satisfying a requirement through an award 
to a HUBZone small business concern, a SDVOSB concern, or a small 
business participating in the 8(a) Program. The proposed rule was 
closed due to the Government Accountability Office's and the Court of 
Federal Claims' interpretation of the Small Business Act to require 
acquisitions to be set aside for HUBZone small businesses before 
setting aside acquisitions for other small business programs. See 
Mission Critical Solutions v. U.S., 91 Fed. Cl. 386 (2010), and B-
401057.
    This rule does not address the women-owned small businesses and 
their relationship to the other small business programs. FAR Case 2010-
015, Women-Owned Small Business Program, will be published as an 
interim rule with request for comments to implement the SBA's Women-
owned Small Business (WOSB) Federal Contract Program final rule, (75 FR 
62258, October 7, 2010), which became effective on February 4, 2011. 
SBA's rule provides parity for WOSBs with SBA's other small business 
contracting programs.

II. Discussion and Analysis

    Section 1347 amended the language concerning HUBZone set asides by 
deleting the ``shall'' set aside in the statute and replacing that term 
with ``may'' set aside. This clarifies that contracting officers can 
exercise discretion when determining whether a requirement will be 
restricted to small business concerns under the 8(a), HUBZone or SDVOSB 
programs.
    This interim rule is intended to address the recent statutory 
clarification and make clear that--
    1. There is no order of precedence among the 8(a), HUBZone, or 
SDVOSB programs. However, if a requirement has been accepted by SBA 
under the 8(a) Program, it must remain in the 8(a) program unless SBA 
agrees to its release in accordance with 13 CFR 124, 125 and 126;
    2. For acquisitions exceeding the simplified acquisition threshold, 
the contracting officer must consider a set-aside or sole source 
acquisition to a small business under the 8(a), HUBZone, or SDVOSB 
programs before the contracting officer proceeds with a small business 
set-aside. See FAR 19.203(c) and 19.502-2(b); and
    3. The small business set-aside requirement of FAR 19.502-2(a) does 
not preclude award of a contract to a qualified 8(a) Program 
participant, HUBZone small business concern, or SDVOSB concern, because 
the SBA's regulations give the contracting officer discretionary 
authority to use the 8(a), HUBZone, or SDVOSB, at dollar levels above 
the micro-purchase threshold and at or below the simplified acquisition 
threshold.

III. Executive Order 12866

    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.

IV. 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., because this rule revises the 
FAR to implement Section 1347 of the Small Business Jobs Act of 2010 
governing specific contracting and business assistance programs which 
include the 8(a), HUBZone, and the SDVOSB programs.
    The Regulatory Secretariat will be submitting a copy of the Interim

[[Page 14567]]

Regulatory Flexibility Analysis (IRFA) to the Chief Counsel for 
Advocacy of the Small Business Administration. 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 such 
comments separately and should cite 5 U.S.C. 610 (FAC 2005-50, FAR Case 
2011-004) in correspondence.
    The analysis is summarized as follows:

    The purpose of this rule is to ensure that the FAR clearly 
reflects section 1347 of the Small Business Jobs Act of 2010 (Pub. 
L. 111-240) and to incorporate the SBA's interpretation of the Small 
Business Act and regulations promulgated thereunder. Following 
recent interpretations of the Small Business Act by the Government 
Accountability Office and the Court of Federal Claims, some in the 
acquisition community have been confused about whether there is an 
order of precedence that applies when deciding whether to satisfy a 
requirement through an award to a small business, a small business 
participating in the 8(a) Business Development Program, a HUBZone 
small business, or a SDVOSB. Section 1347 clarified that there is 
parity, rather than an order of precedence, and the purpose of this 
interim rule is to ensure that the FAR removes any uncertainty on 
the part of the contracting officer, small businesses, and others.
    Small businesses that participate in Federal Government 
contracting are the entities that may be impacted by the rule. There 
should be no negative impact on small businesses as a whole. The 
number of contracts awarded overall to small businesses should not 
decrease as a result of this rule. However, it is possible that the 
clarity the rule provides could result in a difference in the number 
of contracts awarded to any particular category of small businesses.
    Generally, all current and potential Government contractors must 
register in the Central Contractor Registration (CCR) database to be 
eligible for contract award and payment. There are approximately 
349,992 small business firms; 9,303 HUBZone firms; 9,234 8(a) firms 
and 18,213 SDVOSB firms currently registered in CCR that may be 
affected by this final rule.
    There are no significant alternatives that would reduce the 
impact on small businesses. This FAR rule is implementing section 
1347 of the Small Business Jobs Act of 2010 (Pub. L. 111-240).

V. Paperwork Reduction Act

    The interim 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).

V. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DoD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary because the enactment of the Small Business Jobs Act of 
2010 requires the implementation of section 1347. The statute was 
enacted on September 27, 2010. However, pursuant to 41 U.S.C. 1707 and 
FAR 1.501-3(b), DoD, GSA, and NASA will consider public comments 
received in response to this interim rule in the formation of the final 
rule.

List of Subjects in 48 CFR Parts 13 and 19

    Government procurement.

    Dated: March 4, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide Acquisition Policy.
    Therefore, DoD, GSA, and NASA amend 48 CFR parts 13 and 19 as set 
forth below:

0
1. The authority citation for 48 CFR parts 13 and 19 continues 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 13--SIMPLIFIED ACQUISITIONS PROCEDURES

0
2. Amend section 13.003 by removing from paragraph (b)(1) ``see 
19.000'' and adding ``see 19.000, 19.203,'' in its place; and by 
revising paragraph (b)(2) to read as follows:


13.003  Policy.

* * * * *
    (b) * * *
    (2) The contracting officer may make an award to a small business 
under the 8(a) Program (see subpart 19.8), or set aside for HUBZone 
small business concerns (see 19.1305) or service-disabled veteran-owned 
small business concerns (see 19.1405) an acquisition of supplies or 
services that has an anticipated dollar value exceeding the micro-
purchase threshold and at or below the simplified acquisition 
threshold. The following contracting officer's decisions for 
acquisitions at or below the simplified acquisition threshold are not 
subject to review under subpart 19.4:
    (i) A decision not to make an award under the 8(a) Program (see 
subpart 19.8).
    (ii) A decision not to set aside an acquisition for HUBZone small 
business or service-disabled veteran-owned small business concerns 
participation.
* * * * *

PART 19--SMALL BUSINESS PROGRAMS


19.202  [Amended]

0
3. Amend section 19.202 by removing ``Subpart 19.5, 19.8, or 19.13'' 
and adding ``subpart 19.5, 19.8, 19.13, or 19.14'' in its place.

0
4. Add section 19.203 to read as follows:


19.203  Relationship among small business programs.

    (a) There is no order of precedence among the 8(a) Program (subpart 
19.8), HUBZone Program (subpart 19.13), or Service-Disabled Veteran-
Owned Small Business (SDVOSB) Procurement Program (subpart 19.14).
    (b) At or below the simplified acquisition threshold. The 
requirement to exclusively reserve acquisitions for small business 
concerns at 19.502-2(a) does not preclude the contracting officer from 
awarding a contract to a small business under the 8(a) Program, HUBZone 
Program, or SDVOSB Program. If the contracting officer does not proceed 
with a small business set-aside and purchases on an unrestricted basis, 
the contracting officer shall include in the contract file the reason 
for this unrestricted purchase.
    (c) Above the simplified acquisition threshold. The contracting 
officer shall first consider an acquisition for the 8(a), HUBZone, or 
SDVOSB programs before using a small business set-aside (see 19.502-
2(b)). However, if a requirement has been accepted by the SBA under the 
8(a) Program, it must remain in the 8(a) Program unless SBA agrees to 
its release in accordance with 13 CFR parts 124, 125 and 126.
    (d) Small business set-asides have priority over acquisitions using 
full and open competition. See requirements for establishing a small 
business set-aside at subpart 19.5.

0
5. Amend section 19.501 by removing paragraphs (c) and (d); 
redesignating paragraphs (e) through (i) as paragraphs (c) through (g), 
respectively; and revising the newly redesignated paragraph (c) to read 
as follows:


19.501  General.

* * * * *

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    (c) The contracting officer shall review acquisitions to determine 
if they can be set aside for small business, giving consideration to 
the recommendations of agency personnel having cognizance of the 
agency's small business programs. The contracting officer shall perform 
market research and document why a small business set-aside is 
inappropriate when an acquisition is not set aside for small business, 
unless an award is anticipated to a small business under the 8(a), 
HUBZone, or service-disabled veteran-owned programs. If the acquisition 
is set aside for small business based on this review, it is a 
unilateral set-aside by the contracting officer. Agencies may establish 
threshold levels for this review depending upon their needs.
* * * * *

0
6. Amend section 19.502-2 by adding a new first sentence and revising 
the last sentence of paragraph (a); and by revising the first sentence 
in paragraph (b) to read as follows:


19.502-2  Total small business set-asides.

    (a) Before setting aside an acquisition under this paragraph, refer 
to 19.203(b). * * * The small business reservation does not preclude 
the award of a contract as described in 19.203.
    (b) Before setting aside an acquisition under this paragraph, refer 
to 19.203(c). * * *
* * * * *

0
7. Amend section 19.800 by revising paragraph (e) to read as follows:


19.800  General.

* * * * *
    (e) Before deciding to set aside an acquisition in accordance with 
subpart 19.5, the contracting officer may consider offering the 
acquisition to a small business under the 8(a) Program in accordance 
with 19.203.
* * * * *


19.804-2  [Amended]

0
8. Amend section 19.804-2 by removing paragraph (a)(12); and 
redesignating paragraphs (a)(13) through (a)(16) as paragraphs (a)(12) 
through (a)(15), respectively.

0
9. Amend section 19.1305 by--
0
a. Revising paragraph (a);
0
b. Removing paragraph (c);
0
c. Redesignating paragraphs (d) and (e) as paragraphs (c) and (d), 
respectively; and
0
d. Removing from the newly redesignated paragraph (c) ``(see subpart 
19.5)'' and adding ``(see 19.203)'' in its place.
    The revised text reads as follows:


19.1305  HUBZone set-aside procedures.

    (a) The contracting officer--
    (1) May set aside acquisitions exceeding the micro-purchase 
threshold for competition restricted to HUBZone small business concerns 
when the requirements of paragraph (b) of this section can be satisfied 
(see 19.203); and
    (2) Shall consider HUBZone set-asides before considering HUBZone 
sole source awards (see 19.1306) or small business set-asides (see 
subpart 19.5).
* * * * *

0
10. Amend section 19.1306 by revising the introductory text of 
paragraph (a) to read as follows:


19.1306  HUBZone sole source awards.

    (a) A contracting officer may award contracts to HUBZone small 
business concerns on a sole source basis (see 6.302-5(b)(5)) before 
considering small business set-asides (see 19.203 and subpart 19.5), 
provided none of the exclusions at 19.1304 apply; and--
* * * * *

0
11. Amend section 19.1405 by revising paragraph (a); and removing from 
paragraph (c) ``(see Subpart 19.5)'' and adding ``(see 19.203)'' in its 
place.
    The revised text reads as follows:


19.1405  Service-disabled veteran-owned small business set-aside 
procedures.

    (a) The contracting officer--
    (1) May set-aside acquisitions exceeding the micro-purchase 
threshold for competition restricted to service-disabled veteran-owned 
small business concerns when the requirements of paragraph (b) of this 
section can be satisfied (see 19.203); and
    (2) Shall consider service-disabled veteran-owned small business 
set-asides before considering service-disabled veteran-owned small 
business sole source awards (see 19.1406) or small business set-asides 
(see subpart 19.5).
* * * * *

0
12. Amend section 19.1406 by revising the introductory text of 
paragraph (a) to read as follows:


19.1406  Sole source awards to service-disabled veteran-owned small 
business concerns.

    (a) A contracting officer may award contracts to service-disabled 
veteran-owned small business concerns on a sole source basis (see 
6.302-5(b)(6)), before considering small business set-asides (see 
19.203 and subpart 19.5) provided none of the exclusions of 19.1404 
apply and--
* * * * *
[FR Doc. 2011-5556 Filed 3-15-11; 8:45 am]
BILLING CODE 6820-EP-P