[Federal Register Volume 86, Number 9 (Thursday, January 14, 2021)]
[Rules and Regulations]
[Pages 3679-3682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29087]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 12, 13, 15, 16, and 37

[FAC 2021-03; FAR Case 2018-016; Item II; Docket No. FAR-2018-0016, 
Sequence No. 1]
RIN 9000-AN75


Federal Acquisition Regulation: Lowest Price Technically 
Acceptable Source Selection Process

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

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the 
Federal Acquisition Regulation (FAR) to implement a section of the John 
S. McCain National Defense Authorization Act for Fiscal Year 2019 that 
applies criteria for and limitations on the use of the lowest price 
technically acceptable source selection criteria in solicitations.

DATES: Effective: February 16, 2021.

FOR FURTHER INFORMATION CONTACT: Mr. Michael O. Jackson, Procurement 
Analyst, at 202-208-4949 or <a href="/cdn-cgi/l/email-protection#115c78727970747d7e3f7b70727a627e7f517662703f767e67"><span class="__cf_email__" data-cfemail="05486c666d6460696a2b6f64666e766a6b456276642b626a73">[email protected]</span></a> for clarification 
of content. For information pertaining to status or publication 
schedules, contact the Regulatory Secretariat Division at (202) 501-
4755 or <a href="/cdn-cgi/l/email-protection#72352133201715211711321501135c151d04"><span class="__cf_email__" data-cfemail="074054465562605462644760746629606871">[email protected]</span></a>. Please cite FAC 2021-03, FAR Case 2018-016.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA published a proposed rule at 84 FR 52425 on 
October 2, 2019, to implement section 880 of the John S. McCain 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 
(Pub. L. 115-232, 41 U.S.C. 3701 Note). Section 880 specifies the 
criteria that must be met in order to include lowest price technically 
acceptable (LPTA) source selection criteria in a solicitation; and 
requires solicitations predominantly for the acquisition of certain 
services and supplies to avoid the use of LPTA source selection 
criteria, to the maximum extent practicable. Nine respondents submitted 
public comments in response to the proposed rule.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the public comments in the 
development of the final rule.

A. Summary of Significant Changes From the Proposed Rule

    No changes were made to the final rule as a result of public 
comments. Minor edits were made to the final rule to account for 
baseline updates and to add the full name of the applicable statute. A 
discussion of the comments is provided as follows:

B. Analysis of Public Comments

    Comment: Respondents expressed support for the rule and advised 
that the rule is beneficial to the small business community and 
provides them with a greater opportunity to compete in the Federal 
marketplace.
    Response: The Councils acknowledge support for the rule.
    Comment: Respondents expressed support for using the LPTA source 
selection process, when its use is appropriate and the selection 
criteria can be well-defined.
    Response: The Councils agree that use of the LPTA source selection 
process is a valuable part of the best value continuum and an 
acceptable and appropriate source selection approach for many 
acquisitions.
    Comment: Respondents expressed concern that the rule will be 
considered a complete ban on the use of the LPTA source selection 
process. A respondent is specifically concerned that the use of the 
LPTA source selection process is prohibited for a significant number of 
information technology (IT) supplies and services that can be 
appropriately purchased using the process. As a result, the respondent 
recommends that the rule not be implemented, or be revised to narrow 
the scope of IT products and services to which the rule applies, 
because the rule, as proposed, will result in increased acquisition 
lead times and higher prices without a corresponding increase in 
quality of services.
    Response: It is not the intent of the rule to prohibit the use of 
the LPTA source selection process. Instead, the intent of the rule is 
to implement the statutory language, which aims to identify 
circumstances that must exist for an acquisition to use the LPTA source 
selection process and certain types of requirements that will regularly 
benefit from the use of tradeoff source selection procedures. 
Specifically, section 880 requires use of the LPTA

[[Page 3680]]

source selection process to be avoided, to the maximum extent 
practicable, in acquisitions for various services and/or supplies, 
including acquisitions for ``information technology services'' or 
``telecommunications devices and services.'' The statute does not 
further define or narrow these categories; as such, the rule implements 
the law, as written. With the exception of telecommunications devices, 
the rule does not preclude buying IT supplies on an LPTA basis.
    Comment: Respondents recommended that sections 813, 822, and 880, 
to the maximum extent practicable, be harmonized in the FAR and the 
DoD-unique requirements be addressed in the Defense Federal Acquisition 
Regulation Supplement (DFARS). Another respondent recommended revising 
the proposed FAR rule text to add cross-references to the DFARS, when 
DoD-unique requirements exist, in order to avoid confusion for 
individuals that are unaware of the DFARS requirements.
    Response: The intent of this rule is to implement section 880 of 
the NDAA for FY 2019 in the FAR. Sections 813 of the NDAA for FY 2017 
and 822 of the NDAA for FY 2018, which prescribe limitations on the use 
of the LPTA source selection process for DoD, are implemented in the 
DFARS. These statutes, as codified, are similar, but not identical, in 
text. As such, the statutes are implemented separately, and in their 
entirety, in the FAR and DFARS, respectively, in order to provide 
contracting officers with a single, complete, clear, and uniform policy 
on the use of the LPTA source selection process, as it applies to their 
agency. Contracting officers are responsible for being aware of and 
complying with acquisition policies and procedures, including the FAR 
and other applicable agency regulations; therefore, it is not necessary 
to make cross-references to agency supplements in the FAR.
    Comment: Respondents asserted that section 880(c) applies to DoD 
because the term ``executive agencies'' does not appear in that 
paragraph of the statute; as such, the DoD should also be excluded from 
using the LPTA source selection process to acquire health care services 
and records and telecommunications devices and services, as directed in 
section 880(c). Respondents advised that because section 813, as 
amended by section 822, existed at the time section 880 was written, it 
is the intent of section 880 to clarify and/or add to the limitations 
of section 813, which apply only to DoD.
    Response: Section 813 (Pub. L. 114-328, enacted December 23, 2016) 
and section 822 (Pub. L. 115-91, enacted December 12, 2017) apply to 
DoD and are codified at 10 U.S.C. 2305 note. Section 880 (Pub. L. 115-
132, enacted August 13, 2018) applies to executive agencies, other than 
DoD, and is codified at 41 U.S.C. 3701 note. The text of sections 813 
and 822 are implemented in the DFARS as they currently appear in law. 
10 U.S.C. 2305 note has not been revised, via subsequent legislation, 
to amend the list of procurements for which the use of LPTA should be 
avoided to the maximum extent practicable.
    Comment: A respondent suggested that future Federal acquisition 
guidance emphasize the importance of effectively conveying clear 
technical and performance requirements.
    Response: The Councils agree that it is important to clearly 
identify and communicate the functional, performance, and physical 
requirements of a supply or service being acquired by an agency. To 
facilitate this goal, guidance, tools, and training are available to 
acquisition personnel on a variety of acquisition topics (e.g., market 
research techniques, describing agency needs, and encouraging 
competition) to support the requirements outlined in the FAR. 
Additionally, agencies have internal controls and procedures to monitor 
and evaluate contract performance and compliance.
    Comment: A respondent advised on the importance of robust oversight 
of contract performance when services are provided on a contract 
awarded using the LPTA source selection process.
    Response: The Councils agree that it is essential to exercise 
appropriate and adequate oversight of contractor performance on all 
contracts. Contracting officers are responsible for ensuring compliance 
with the terms of the contract, while safeguarding the interests of the 
United States in its contractual relationships. In addition, agencies 
are required to establish effective management practices to monitor and 
evaluate contract performance and compliance, and prevent fraud, waste, 
and abuse in service contracting.
    Comment: A respondent recommended establishing adequate monitoring 
systems to ensure LPTA is applied appropriately and only when the 
requirements of a contract meet the rule's criteria. The respondent 
also suggested that public accountability should be established, 
possibly through the System for Award Management (SAM) at SAM.gov 
contract opportunities notice, when a contracting officer uses the LPTA 
source selection process.
    Response: Contracting officers are responsible for ensuring that 
the requirements of this rule are met when issuing a solicitation that 
includes the LPTA source selection process. Agencies have internal 
controls and procedures to monitor and evaluate their compliance with 
acquisition rules, regulations, and policies. To maintain public 
accountability, the respondent suggests that agencies publish the LPTA 
determination in the SAM.gov contract opportunities notice. However, 
section 880 does not require public notice or publication of the 
documented determination to use LPTA source selection criteria, and the 
Councils do not believe additional oversight protocols are required at 
this time.
    Comment: A respondent expressed concern that the rule is not being 
applied to the GSA Federal Supply Schedules (FSS) Program and 
recommends aligning the Program with the rule to avoid inconsistent 
application and use of LTPA source selection criteria across the 
Federal and contractor communities when placing orders under FSS 
contracts.
    Response: GSA will separately address, outside of this rule, the 
applicability of section 880 to the GSA FSS Program.
    Comment: A respondent advised against using LPTA source selection 
criteria in solicitations for multiple award IT supply contracts that 
require contractors to bid on a notional supply list. The respondent 
advised that this approach leads to unrealistically low-priced offers 
for the items on the initial supply list, but substantially higher-
priced offers for supplies added to the contracts or refreshed after 
contract award. As a result, the Government does not realize the cost 
savings that is implied during the initial contract award.
    Response: Contracting officers are responsible for ensuring that 
the requirements of this rule are met when issuing a solicitation that 
includes the LPTA source selection process. Section 880 does not 
prohibit the use of the LPTA source selection process when issuing 
multiple-award indefinite-delivery, indefinite-quantity contracts. 
Section 880 does require contracting officers to avoid, to the maximum 
extent practicable, using the LPTA source selection process in the case 
of a procurement that is predominantly for the acquisition of 
telecommunications devices and services. The rule reflects this 
statutory requirement.
    In addition, contracting officers consider price or cost when 
issuing or modifying multiple-award indefinite-delivery indefinite-
quantity supply

[[Page 3681]]

contracts, or placing orders under these contracts in accordance with 
FAR subpart 16.5. When issuing or modifying these contracts, 
contracting officers must evaluate the reasonableness of the offered 
prices, in accordance with the procedures of FAR part 13 or 15, as 
applicable. When placing orders under these contracts, FAR subpart 16.5 
requires contracting officers to consider price or cost as part of 
their selection decision for each order. These procedures help to 
ensure that the contracted price and the price paid under each order is 
fair and reasonable to the Government.
    Comment: One respondent recommended that the DoD budget be reduced 
by 30%.
    Response: This comment is outside the scope of this rule.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Items, Including Commercially 
Available Off-the-Shelf (COTS) Items

    This final rule does not create any new provisions or clauses, nor 
does it change the applicability or burden of any existing provisions 
or clauses included in solicitations and contracts valued at or below 
the SAT, or for commercial items, including COTS items.

IV. 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 not a significant regulatory action and, therefore, was not 
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.

V. Executive Order 13771

    This rule is not subject to E.O. 13771, because this rule is not a 
significant regulatory action under E.O. 12866.

VI. Regulatory Flexibility Act

    DoD, GSA, and NASA have prepared a Final Regulatory Flexibility 
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 
U.S.C. 601, et seq. The FRFA is summarized as follows:

    This rule is necessary to implement section 880 of the John S. 
McCain National Defense Authorization Act (NDAA) for Fiscal Year 
(FY) 2019 (Pub. L. 115-232). The objective of this rule is to avoid 
the use of lowest price technically acceptable (LPTA) source 
selection criteria in circumstances that would deny the Government 
the benefits of cost and technical tradeoffs in the source selection 
process. No public comments were received in response to the initial 
regulatory flexibility analysis.
    DoD, GSA, and NASA do not expect this rule to 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 
rule primarily affects internal Government requirements 
determination decisions, acquisition strategy decisions, and 
contract file documentation requirements. The Government does not 
collect data on the total number of solicitations issued on an 
annual basis that do or do not specify the use of the LPTA source 
selection process. However, the Federal Procurement Data System 
(FPDS) provides the following information for FY 2018:
    <bullet> Federal competitive contracts and orders awarded using 
FAR parts 13, 15, or subpart 16.5 procedures. In FY 2018, the 
Federal Government, excluding DoD, awarded approximately 82,337 new 
contracts and orders using the competitive procedures of FAR parts 
13, 15, or subpart 16.5. This data excludes acquisitions for the 
supply/service categories identified in section 880(c) of the NDAA 
for FY 2019. Of the 82,337 contracts and orders, approximately 69 
percent (or 56,622 contracts and orders) were awarded to 
approximately 27,029 unique small businesses. It is important to 
note that FPDS does not collect data on solicitations. FPDS can 
identify contracts that are awarded using competitive procedures, 
but did not begin collecting data on the source selection process 
used to award those contracts until 2020. Therefore, the data 
described above represents all competitively awarded contracts, 
including those using other than the LPTA source selection process.
    <bullet> Federal competitive contracts and orders awarded for 
specific services and supplies. In FY 2018, the Federal Government, 
excluding DoD, awarded approximately 22,581 new contracts and orders 
potentially for the supplies and services identified in section 
880(c) of the NDAA for FY 2019 using the competitive procedures of 
FAR parts 13, 15, and subpart 16.5, of which approximately 63 
percent (or 14,285 contracts and orders) were awarded to 
approximately 10,129 unique small businesses.
    This rule does not include any new reporting, recordkeeping, or 
other compliance requirements on any small entities.
    There are no known significant alternative approaches to the 
rule that would meet the stated objectives of the applicable 
statute.

    Interested parties may obtain a copy of the FRFA from the 
Regulatory Secretariat Division. The Regulatory Secretariat Division 
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of 
the Small Business Administration.

VII. 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 12, 13, 15, 16, and 37

    Government procurement.

William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 12, 13, 15, 16 and 
37 as set forth below:

0
1. The authority citation for 48 CFR parts 12, 13, 15, 16 and 37 
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 12--ACQUISITION OF COMMERCIAL ITEMS

0
2. Revise section 12.203 by redesignating the text as paragraph (a) and 
adding paragraph (b) to read as follows:


12.203   Procedures for solicitation, evaluation, and award.

* * * * *
    (b) Contracting officers shall ensure the criteria at 15.101-2(c) 
are met when using the lowest price technically acceptable source 
selection process.

PART 13--SIMPLIFIED ACQUISITION PROCEDURES

0
3. Amend section 13.106-1 by adding paragraphs (a)(2)(v) and (a)(2)(vi) 
to read as follows:


13.106-1   Soliciting competition.

    (a) * * *
    (2) * * *
    (v) Except for DoD, contracting officers shall ensure the criteria 
at 15.101-2(c)(1)-(5) are met when using the lowest price technically 
acceptable source selection process.
    (vi) Except for DoD, avoid using the lowest price technically 
acceptable source selection process to acquire certain supplies and 
services in accordance with 15.101-2(d).
* * * * *

0
4. Amend section 13.106-3 by--
0
a. In paragraph (b)(3) introductory text, removing ``statements--'' and 
adding ``statements, when applicable--'' in its place;

[[Page 3682]]

0
b. In paragraph (b)(3)(i), removing ``; or'' and adding ``;'' in its 
place;
0
c. In paragraph (b)(3)(ii), removing ``supplier.'' and adding 
``supplier; and''
0
d. Adding paragraph (b)(3)(iii).
    The addition reads as follows:


13.106-3   Award and documentation.

* * * * *
    (b) * * *
    (3) * * *
    (iii) Except for DoD, when using lowest price technically 
acceptable source selection process, justifying the use of such 
process.
* * * * *

PART 15--CONTRACTING BY NEGOTIATION

0
5. Amend section 15.101-2 by adding paragraphs (c) and (d) to read as 
follows:


15.101-2   Lowest price technically acceptable source selection 
process.

* * * * *
    (c) Except for DoD, in accordance with section 880 of the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 
115-232, 41 U.S.C. 3701 Note), the lowest price technically acceptable 
source selection process shall only be used when--
    (1) The agency can comprehensively and clearly describe the minimum 
requirements in terms of performance objectives, measures, and 
standards that will be used to determine the acceptability of offers;
    (2) The agency would realize no, or minimal, value from a proposal 
that exceeds the minimum technical or performance requirements;
    (3) The agency believes the technical proposals will require no, or 
minimal, subjective judgment by the source selection authority as to 
the desirability of one offeror's proposal versus a competing proposal;
    (4) The agency has a high degree of confidence that reviewing the 
technical proposals of all offerors would not result in the 
identification of characteristics that could provide value or benefit 
to the agency;
    (5) The agency determined that the lowest price reflects the total 
cost, including operation and support, of the product(s) or service(s) 
being acquired; and
    (6) The contracting officer documents the contract file describing 
the circumstances that justify the use of the lowest price technically 
acceptable source selection process.
    (d) Except for DoD, in accordance with section 880 of the John S. 
McCain National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 
115-232, 41 U.S.C. 3701 Note), contracting officers shall avoid, to the 
maximum extent practicable, using the lowest price technically 
acceptable source selection process in the case of a procurement that 
is predominantly for the acquisition of--
    (1) Information technology services, cybersecurity services, 
systems engineering and technical assistance services, advanced 
electronic testing, audit or audit readiness services, health care 
services and records, telecommunications devices and services, or other 
knowledge-based professional services;
    (2) Personal protective equipment; or
    (3) Knowledge-based training or logistics services in contingency 
operations or other operations outside the United States, including in 
Afghanistan or Iraq.

PART 16--TYPES OF CONTRACTS

0
6. Amend section 16.505 by--
0
a. Removing from the end of paragraph (b)(1)(ii) ``must--'' adding 
``shall--'' in its place;
0
b. Removing from paragraph (b)(1)(ii)(D) ``contract; and'' and adding 
``contract;'' in its place;
0
c. Removing from paragraph (b)(1)(ii)(E) ``decision.'' and adding 
``decision;'' in its place;
0
d. Adding paragraphs (b)(1)(ii)(F) and (b)(1)(ii)(G); and
0
e. Adding paragraph (b)(7)(iii).
    The additions read as follows:


16.505   Ordering.

* * * * *
    (b) * * *
    (1) * * *
    (ii) * * *
    (F) Except for DoD, ensure the criteria at 15.101-2(c)(1)-(5) are 
met when using the lowest price technically acceptable source selection 
process; and
    (G) Except for DoD, avoid using the lowest price technically 
acceptable source selection process to acquire certain supplies and 
services in accordance with 15.101-2(d).
* * * * *
    (7) * * *
    (iii) Except for DoD, the contracting officer shall document in the 
contract file a justification for use of the lowest price technically 
acceptable source selection process, when applicable.
* * * * *

PART 37--SERVICE CONTRACTING

0
7. Amend section 37.102 by adding paragraph (j) to read as follows:


37.102   Policy.

* * * * *
    (j) Except for DoD, see 15.101-2(d) for limitations on the use of 
the lowest price technically acceptable source selection process to 
acquire certain services.

[FR Doc. 2020-29087 Filed 1-13-21; 8:45 am]
BILLING CODE 6820-EP-P


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