Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Rules and Regulations 82183 

List of Subjects in 48 CFR Parts 205, 

212, 214, 215, and 237 

Government procurement. 

Jennifer D. Johnson, 

Editor/Publisher, Defense Acquisition 

Regulations System. 

Therefore, the Defense Acquisition 

Regulations System amends 48 CFR 

parts 205, 212, 214, 215, and 237 as 

follows: 

■ 1. The authority citation for 48 CFR 

parts 205, 212, 214, 215, and 237 

continues to read as follows: 

Authority: 41 U.S.C. 1303 and 48 CFR 

chapter 1. 

PART 205—PUBLICIZING CONTRACT 

ACTIONS 

■ 2. Add subpart 205.1 to read as 

follows: 

Subpart 205.1—Dissemination of 

Information 

Sec. 

205.102 Availability of solicitations. 

205.102–70 Availability of DoD 

solicitations. 

Subpart 205.1—Dissemination of 

Information 

205.102 Availability of solicitations. 

205.102–70 Availability of DoD 

solicitations. 

See PGI 205.102–70 for policy and 

procedures related to the Solicitation 

Module within the Procurement 

Integrated Enterprise Environment. 

PART 212— ACQUISITION OF 

COMMERCIAL PRODUCTS AND 

COMMERCIAL SERVICES 

■ 3. Amend section 212.203 by adding 

paragraph (6) to read as follows: 

212.203 Procedures for solicitation, 

evaluation, and award. 

* * * * * 

(6) See the procedures at PGI 

205.102–70 for use of the Solicitation 

Module within the Procurement 

Integrated Enterprise Environment. 

PART 214—SEALED BIDDING 

■ 4. Add section 214.203 to read as 

follows: 

214.203 Methods of soliciting bids. 

See the procedures at PGI 205.102–70 

for use of the Solicitation Module 

within the Procurement Integrated 

Enterprise Environment. 

PART 215—CONTRACTING BY 

NEGOTIATION 

■ 5. Add section 215.205 to read as 

follows: 

215.205 Issuing solicitations. 

See the procedures at PGI 205.102–70 

for use of the Solicitation Module 

within the Procurement Integrated 

Enterprise Environment. 

PART 237—SERVICE CONTRACTING 

237.102–77 [Removed and Reserved] 

■ 6. Remove and reserve section 

237.102–77. 

[FR Doc. 2024–23228 Filed 10–9–24; 8:45 am] 

BILLING CODE 6001–FR–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 206, 212, 252, and 270 

[Docket DARS–2024–0017] 

RIN 0750–AM01 

Defense Federal Acquisition 

Regulation Supplement: Pilot Program 

To Incentivize Contracting With 

Employee-Owned Businesses (DFARS 

Case 2024–D004) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is issuing a final rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to implement sections of the 

National Defense Authorization Acts for 

Fiscal Year 2022 and Fiscal Year 2024 

that authorize DoD to establish a pilot 

program that allows for the 

noncompetitive award of certain followon contracts to certain employee-owned 

businesses. 

DATES: Effective November 25, 2024. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Jeanette Snyder, telephone 703–508– 

7524. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD published a proposed rule in the 

Federal Register at 89 FR 46831 on May 

30, 2024, to implement section 874 of 

the National Defense Authorization Act 

(NDAA) for Fiscal Year (FY) 2022 (Pub. 

L. 117–81; 10 U.S.C. 3204 note) as 

amended by section 872 of the NDAA 

for FY 2024 (Pub. L. 118–31; 10 U.S.C. 

3204 note). Sections 874 and 872 

authorize DoD to establish a pilot 

program that allows for the 

noncompetitive award of certain followon contracts to employee-owned 

businesses that meet the definition of a 

qualified business. Five respondents 

submitted public comments in response 

to the proposed rule. 

II. Discussion and Analysis 

DoD reviewed the public comments in 

the development of the final rule. A 

discussion of the comments and the 

changes made to the rule as a result of 

those comments is provided, as follows: 

A. Summary of Significant Changes 

From the Proposed Rule 

There are no significant changes from 

the proposed rule. 

B. Analysis of Public Comments 

1. Support for the Rule 

Comment: The respondents expressed 

support for the rule. 

Response: DoD acknowledges the 

respondents’ support for the rule. 

2. Clarifications 

Comment: One respondent 

recommended revising the proposed 

rule text at DFARS 270.X02 to clarify 

that a reference to Federal Acquisition 

Regulation (FAR) 6.302–5 is sufficient to 

justify a sole-source award under the 

pilot program. The respondent also 

recommended adding the following 

sentence to the text: ‘‘A justification that 

cites FAR 6.302–5, makes reference to 

48 CFR 206.302–5(b)(iii), and meets the 

requirements of subparts 207.X03 and 

207.X04 shall be considered complete 

and sufficient for an exception to full an 

open competition.’’ One respondent 

indicated that a justification and 

approval (J&A) that only references FAR 

6.302–5 is likely to be found insufficient 

by audit agencies. 

Response: The proposed rule text at 

DFARS 270.102(b) requires the 

contracting officer to justify the use of 

a sole-source contract in accordance 

with FAR 6.303 and 6.304 prior to 

conducting negotiations and to cite FAR 

6.302–5, Authorized or required by 

statute, as the exception to full and open 

competitive procedures. FAR 6.303 

specifies the requirements for and the 

content of a justification. The statute did 

not modify the requirements for or 

content of a justification; therefore, DoD 

cannot make the recommended change. 

However, the final rule text at DFARS 

270–X02(b) has been amended to 

remove duplicative text addressed at 

FAR 6.303–1(a). 


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3. Exceptions to Implementation 

Comment: Two respondents took 

exception to the fact that the proposed 

rule does not provide a process for a 

contractor to apply to participate in the 

pilot program to ensure a transparent 

and accessible process. One respondent 

indicated the inability for a contractor to 

apply to participate in the pilot program 

is overly restrictive and inconsistent 

with the statute. 

Response: Section 874 required the 

Secretary of Defense to submit to the 

congressional defense committees an 

implementation plan for the pilot 

program. This implementation plan 

indicated that applications for 

participation in the pilot program will 

be submitted by contracting officers. 

The proposed rule text at DFARS 

270.103 is consistent with the 

implementation plan. As such, a 

contractor is not able to submit an 

application for participation in the pilot 

program. 

Comment: One respondent took 

exception to the requirement for a J&A, 

indicating that it is inconsistent with 

the statute. The respondent further 

indicated that such a requirement may 

limit the number of businesses that may 

participate in the pilot program, citing 

the fact that there are only eight 

businesses currently participating in the 

pilot program. 

Response: While sections 872 and 874 

authorize the use of other than 

competitive procedures for the award of 

certain contracts under this pilot 

program, neither waived the 

requirement for a J&A; therefore, a J&A 

is required. The Office of the Under 

Secretary of Defense (Acquisition and 

Sustainment), Defense Pricing, 

Contracting, and Acquisition Policy 

implemented section 874 via a contract 

policy memorandum dated November 8, 

2022, and limited participation in the 

pilot program to nine contractors. 

Therefore, the requirement for a J&A has 

not limited participation in the pilot 

program. 

Comment: Three respondents took 

exception to the proposed rule reporting 

requirements, while one respondent 

expressed support for the reporting 

requirements. One respondent indicated 

that some of the proposed reporting 

requirements are open-ended and 

subjective, which will lead to confusion 

as to whether the data provided by the 

contractor is sufficient. One respondent 

indicated that the proposed reporting 

requirements focus on challenges of 

employee ownership rather than 

performance and value and indicated 

that the contractor’s past performance 

rating in the Contractor Performance 

Assessment Reporting System (CPARS) 

would be more useful in assessing the 

success of the pilot program. One 

respondent recommended DoD develop 

a comprehensive plan to monitor the 

implementation and impact of the 

Employee Stock Ownership Plan (ESOP) 

pilot program, allowing for adjustments 

and improvements over time to 

optimize its effectiveness. One 

respondent stated that its member 

companies who participated in the 

original, limited pilot program found 

the data collection to be straightforward 

and to require minimal time. Another 

respondent indicated that DoD’s 

estimate of 16 hours to collect and 

submit the data required by the clause 

at DFARS 252.270–70YY should be 80 

to 120 hours. 

Response: Section 874 required the 

Secretary of Defense to establish 

mechanisms to collect and analyze data 

on the pilot program for the purposes of 

developing and sharing best practices 

with leadership and the congressional 

defense committees. Section 874 also 

required the Secretary of Defense to 

submit to the congressional defense 

committees a data collection and 

reporting strategy for the pilot program. 

The information to be reported in 

accordance with the contract clause at 

DFARS 252.270–7002, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses, is consistent with 

this strategy. This information will be 

submitted to DoD leadership and the 

congressional defense committees and 

may be used to determine if additional 

measures should be taken to assist ESOP 

businesses in overcoming challenges 

associated with their corporate 

structure. 

Additionally, the proposed rule text at 

DFARS Procedures, Guidance, and 

Information (PGI) 270.104, paragraph(d), 

specifies the reporting requirements for 

contracting officers, which include, but 

are not limited to, a summary of the 

contractor’s performance and the 

benefits experienced from using the 

pilot program. This information will be 

used to assess the success of the pilot 

program and the need for adjustments 

and improvements over time. In 

reporting the contractor’s performance 

pursuant to DFARS PGI 270.104, the 

contracting officer may use information 

from CPARS. To minimize the time 

required to collect and submit the data, 

the reporting requirements in the clause 

at DFARS 252.270–7002 are amended to 

clarify that data regarding challenges 

faced due to the contractor’s corporate 

ownership structure is only required 

when applicable. In addition, 

contractors are only required to report 

data collected during the period of 

performance of the contract; therefore, 

the data should be readily available. 

4. Outside the Scope of the Rule 

Comment: One respondent 

recommended DoD establish evaluation 

criteria to give preference to qualified 

businesses during the source-selection 

process in lieu of limiting the pilot 

program to sole-source, follow-on 

contracts. The respondent also 

recommended that DoD prioritize efforts 

to on-ramp qualified businesses onto 

multiple-award contracts to create a 

larger pool of qualified businesses 

eligible for follow-on contracts under 

this pilot program. 

Response: These comments are 

outside the scope of this rule. Sections 

872 and 874 do not authorize DoD to 

establish source selection evaluation 

criteria to give preference to qualified 

businesses or to use on-ramps under the 

pilot program. 

C. Other Changes 

DFARS 270.102(b) is revised in the 

final rule to simplify the direction to 

contracting officers. The final rule 

revises the prescriptions for the 

solicitation provisions at DFARS 

252.270–7000 and 252.270–7001 and 

the clause at DFARS 252.270–7002 to 

specify that they are not to be included 

in solicitations and contracts solely for 

the acquisition of commercially 

available off-the-shelf items. These 

provisions and this clause are added to 

the list of provisions and clauses that 

are not applicable to COTS items, 

located at DFARS 212.371. The 

reporting requirements are clarified in 

the clause at DFARS 252.270–7002. 

III. Applicability to Contracts at or 

Below the Simplified Acquisition 

Threshold (SAT), for Commercial 

Products (Including Commercially 

Available Off-the-Shelf (COTS) Items), 

and for Commercial Services 

The two provisions and the clause at 

DFARS 252.270–7000, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses-Representation; 

DFARS 252.270–7001, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses—Certification; and 

DFARS 252.270–7002, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses, are prescribed at 

DFARS 270.105 for use in solicitations 

and contracts for approved acquisitions 

under the Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses. Consistent with the analysis 

that DoD provided in the proposed rule 

with regard to the application of the 

requirements of section 874 of the 

NDAA for FY 2022, as amended by 


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section 872 of the NDAA for FY 2024, 

DoD has decided to not apply the 

statutes to contracts at or below the 

SAT, and DoD has made the 

determination to apply the statutes, as 

implemented in the provisions and 

clause at 252.270–7000, 252.270–7001, 

and 252.270–7002, to contracts for the 

acquisition of commercial products 

excluding COTS items and for the 

acquisition of commercial services, as 

defined at Federal Acquisition 

Regulation 2.101. 

IV. Expected Impact of the Rule 

This final rule is expected to impact 

the Government and contractors that 

participate in the Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses. This final rule is 

expected to incentivize and expedite the 

award of follow-on contracts to 

qualified businesses for the continued 

development, production, or provision 

of products or services previously 

procured by or for DoD. As a result, 

employee-owned businesses may 

benefit from additional opportunities to 

contract with DoD, which may benefit 

DoD by expanding the defense 

industrial base. 

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 not a significant 

regulatory action and, therefore, was not 

subject to review under section 6(b) of 

E.O. 12866, Regulatory Planning and 

Review, as amended. 

VI. Congressional Review Act 

As required by the Congressional 

Review Act (5 U.S.C. 801–808) before an 

interim or final rule takes effect, DoD 

will submit a copy of the interim or 

final rule with the form, Submission of 

Federal Rules Under the Congressional 

Review Act, to the U.S. Senate, the U.S. 

House of Representatives, and the 

Comptroller General of the United 

States. A major rule under the 

Congressional Review Act cannot take 

effect until 60 days after it is published 

in the Federal Register. The Office of 

Information and Regulatory Affairs has 

determined that this rule is not a major 

rule as defined by 5 U.S.C. 804. 

VII. Regulatory Flexibility Act 

A final regulatory flexibility analysis 

has been prepared consistent with the 

Regulatory Flexibility Act, 5 U.S.C. 601, 

et seq. and is summarized as follows: 

This final rule is necessary to 

implement section 874 of the National 

Defense Authorization Act (NDAA) for 

Fiscal Year (FY) 2022 (Pub. L. 117–81; 

10 U.S.C. 3204 note) and section 872 of 

the NDAA for FY 2024 (Pub. L. 118–31; 

10 U.S.C. 3204 note). The objective of 

the rule is to implement sections 874 

and 872, which authorize DoD to 

establish a pilot program to incentivize 

contracting with employee-owned 

businesses. The pilot program provides 

for the use of noncompetitive 

procedures for certain follow-on 

contracts to qualified businesses. A 

‘‘qualified business’’ is defined as an S 

corporation (as defined in 26 U.S.C. 

1361(a)(1)) for which 100 percent of the 

outstanding stock is held through an 

employee stock ownership plan as 

defined in 26 U.S.C. 4975(e)(7). 

There were no significant issues 

raised by the public comments in 

response to the initial regulatory 

flexibility analysis. One respondent took 

exception to the number of hours DoD 

estimated it would take a contractor to 

comply with the reporting requirement. 

DoD reviewed the data to be collected 

and modified the reporting requirement 

to clarify that the contractor is required 

to only report challenges it faced, if any. 

Although not specified in the DFARS 

text, because this is a contract clause, 

contractors are only required to report 

data collected during the period of 

performance of the contract. 

Data from the System for Award 

Management (SAM) revealed there were 

384,145 small entities registered in SAM 

as of August 2024. Data on the number 

of small entities that are a qualified 

business, as defined in the final rule, is 

not available. 

The pilot program was implemented 

on November 8, 2022. To date, eight 

businesses are participating in the pilot, 

six of which are small entities. DoD 

cannot estimate the number of 

contracting officers that will submit 

applications for participation in the 

pilot program, how many applications 

will be approved for participation, or 

how many of the subsequent awards 

will be made to small entities. However, 

based on current participation, DoD 

expects that the pilot program will grow 

to approximately 16 contractors per 

year, of which approximately 12 may be 

small entities. 

This final rule imposes a new 

reporting requirement. Not later than 30 

days after the end of the period of 

performance of the contract, contractors 

participating in the pilot program will 

be required to submit to the contracting 

officer the following information: (1) the 

number of years the contractor has been 

wholly-owned by its employee stock 

ownership plan; (2) the contractor’s 

challenges, if any, in attracting and 

retaining a talented workforce due to its 

corporate ownership structure; (3) 

challenges, if any, the contractor 

experienced that hinder its ability to 

contract with DoD in order to scale its 

technologies and capabilities due to its 

corporate ownership structure; and (4) 

challenges, if any, the contractor 

experienced, due to its corporate 

ownership structure, in obtaining 

capital necessary to bridge funding gaps, 

for example, between prototype 

demonstration and full-scale 

development. The annual reporting 

burden is estimated as follows: 16 

respondents, with 16 total annual 

responses (1 response per respondent), 

and a total annual burden of 16 hours. 

There are no known significant 

alternative approaches that would 

accomplish the stated objectives. 

VIII. Paperwork Reduction Act 

This final rule contains information 

collection requirements that have been 

approved by the Office of Management 

and Budget under the Paperwork 

Reduction Act (44 U.S.C. chapter 35). 

This information collection requirement 

has been assigned OMB Control Number 

0750–0012, Defense Federal Acquisition 

Regulation Supplement Part 270, 

Defense Contracting Programs—Pilot 

Program to Incentivize Contracting with 

Employee-Owned Businesses, and 

Related Clause. 

List of Subjects in 48 CFR Parts 206, 

212, 252, and 270 

Government procurement. 

Jennifer D. Johnson, 

Editor/Publisher, Defense Acquisition 

Regulations System. 

Therefore, the Defense Acquisition 

Regulations System amends 48 CFR 

chapter 2 as follows as follows: 

PART 206—COMPETITION 

REQUIREMENTS 

■ 1. The authority citation for part 206 

continues to read as follows: 

Authority: 41 U.S.C. 1303 and 48 CFR 

chapter 1. 

■ 2. Revise and republish section 

206.302–5 to read as follows: 


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82186 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Rules and Regulations 

206.302–5 Authorized or required by 

statute. 

(b) Application. Agencies may use 

this authority to— 

(i) Acquire supplies and services from 

military exchange stores outside the 

United States for use by the armed 

forces outside the United States in 

accordance with 10 U.S.C. 2424(a) and 

subject to the limitations of 10 U.S.C. 

2424(b). The limitations of 10 U.S.C. 

2424(b)(1) and (2) do not apply to the 

purchase of soft drinks that are 

manufactured in the United States. For 

the purposes of 10 U.S.C. 2424, soft 

drinks manufactured in the United 

States are brand name carbonated sodas, 

manufactured in the United States, as 

evidenced by product markings. 

(ii) Acquire police, fire protection, 

airfield operation, or other community 

services from local governments at 

military installations to be closed under 

the circumstances in 237.7401 (section 

2907 of Fiscal Year 1994 Defense 

Authorization Act (Pub. L. 103–160)). 

(iii) Acquire products and services 

under the Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses (see subpart 270.1). 

(c) Limitations. (i) 10 U.S.C. 4141 

precludes use of this exception for 

awards to colleges or universities for the 

performance of research and 

development, or for the construction of 

any research or other facility, unless— 

(A) The statute authorizing or 

requiring award specifically— 

(1) States that the statute modifies or 

supersedes the provisions of 10 U.S.C. 

4141; 

(2) Identifies the particular college or 

university involved; and 

(3) States that award is being made in 

contravention of 10 U.S.C. 4141(a); and 

(B) The Secretary of Defense provides 

Congress written notice of intent to 

award. The contract cannot be awarded 

until 180 days have elapsed since the 

date Congress received the notice of 

intent to award. Contracting activities 

must submit a draft notice of intent with 

supporting documentation through 

channels to the Principal Director, 

Defense Pricing, Contracting, and 

Acquisition Policy, Office of the Under 

Secretary of Defense (Acquisition and 

Sustainment). 

(ii) The limitation in paragraph (c)(i) 

of this section applies only if the statute 

authorizing or requiring award was 

enacted after September 30, 1989. 

(iii) Subsequent statutes may provide 

different or additional constraints on the 

award of contracts to specified colleges 

and universities. Contracting officers 

should consult legal counsel on a caseby-case basis. 

PART 212—ACQUISITION OF 

COMMERCIAL PRODUCTS AND 

COMMERCIAL SERVICES 

■ 3. The authority citation for part 212 

continues to read as follows: 

Authority: 41 U.S.C. 1303 and 48 CFR 

chapter 1. 

■ 4. Amend section 212.301 by adding 

paragraph (f)(xxii) to read as follows: 

212.301 Solicitation provisions and 

contract clauses for the acquisition of 

commercial products and commercial 

services. 

* * * * * 

(f) * * * 

(xxii) Part 270—Defense Contracting 

Programs. (A) Use the provision at 

252.270–7000, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses—Representation, as 

prescribed at 270.105(a) to comply with 

section 874 of the National Defense 

Authorization Act (NDAA) for Fiscal 

Year (FY) 2022 (Pub. L. 117–81; 10 

U.S.C. 3204 note) and section 872 of the 

NDAA for FY 2024 (Pub. L. 118–31; 10 

U.S.C. 3204 note). 

(B) Use the provision at 252.270– 

7001, Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses—Subcontracting 

Certification, as prescribed at 

270.105(b), to comply with section 874 

of the NDAA for FY 2022 (Pub. L. 117– 

81; 10 U.S.C. 3204 note) and section 872 

of the NDAA for FY 2024 (Pub. L. 118– 

31; 10 U.S.C. 3204 note). 

(C) Use the clause at 252.270–7002, 

Pilot Program to Incentivize Contracting 

with Employee-Owned Businesses, as 

prescribed at 270.105(c), to comply with 

section 874 of the NDAA for FY 2022 

(Pub. L. 117–81; 10 U.S.C. 3204 note) 

and section 872 of the NDAA for FY 

2024 (Pub. L. 118–31; 10 U.S.C. 3204 

note). 

■ 5. Amend section 212.371 by adding 

paragraphs (b), (c), and (d) to read as 

follows: 

212.371 Inapplicability of certain 

provisions and clauses to contracts for the 

acquisition of commercially available offthe-shelf items. 

* * * * * 

(b) 252.270–7000, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses—Representation. 

(c) 252.270–7001, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses—Subcontracting 

Certification. 

(d) 252.270–7002, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses. 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 6. The authority citation for part 252 

continues to read as follows: 

Authority: 41 U.S.C. 1303 and 48 CFR 

chapter 1. 

■ 7. Add sections 252.270–7000, 

252.270–7001, and 252.270–7002 to 

read as follows: 

* * * * * 

Sec. 

252.270–7000 Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses—Representation. 

252.270–7001 Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses—Subcontracting 

Certification. 

252.270–7002 Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses. 

* * * * * 

252.270–7000 Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses—Representation. 

As prescribed in 270.105(a), use the 

following provision: 

Pilot Program To Incentivize 

Contracting With Employee-Owned 

Businesses—Representation (NOV 

2024) 

(a) Definition. As used in this 

provision, qualified business has the 

meaning given in the Defense Federal 

Acquisition Regulation Supplement 

252.270–7002, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses, clause of this 

solicitation. 

(b) Representation. The Offeror 

represents that it is a qualified business. 

(End of provision) 

252.270–7001 Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses—Subcontracting Certification. 

As prescribed in 270.105(b), use the 

following provision: 

Pilot Program To Incentivize 

Contracting With Employee-Owned 

Businesses—Subcontracting 

Certification (NOV 2024) 

(a) Definition. As used in this 

provision, qualified business has the 

meaning given in the Defense Federal 

Acquisition Regulation Supplement 

252.270–7002, Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses, clause of this 

solicitation. 

(b) Limitations on subcontracting. The 

Offeror certifies that in performance of 

the contract it will not expend more 

than 50 percent of the amount paid 

under the contract on subcontracts 

unless— 


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Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Rules and Regulations 82187 

(1) The subcontract is awarded to a 

qualified business; 

(2) The contract is for products and 

the subcontract is for materials not 

available from another qualified 

business; or 

(3) A waiver is granted. 

(End of provision) 

252.270–7002 Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses. 

As prescribed in 270.105(c), use the 

following clause: 

Pilot Program To Incentivize 

Contracting With Employee-Owned 

Businesses (NOV 2024) 

(a) Definition. As used in this clause— 

Qualified business means an S 

corporation as defined in 26 U.S.C. 

1361(a)(1) for which 100 percent of the 

outstanding stock is held through an 

employee stock ownership plan as 

defined in 26 U.S.C. 4975(e)(7). 

(b) Limitations on subcontracting. In 

performance of the contract, the 

Contractor shall not expend more than 

50 percent of the amount paid under the 

contract on subcontracts, unless— 

(1) The subcontract is awarded to a 

qualified business; 

(2) The contract is for products and 

the subcontract is for materials not 

available from another qualified 

business; or 

(3) A waiver is granted. 

(c) Reporting requirement. Not later 

than 30 days after the end of the 

contract period of performance, the 

Contractor shall submit to the 

Contracting Officer the following 

information in writing: 

(1) The number of years the 

Contractor has been wholly-owned by 

its employee stock ownership plan. 

(2) Challenges, if any, the Contractor 

experienced in attracting and retaining 

a talented workforce in a competitive 

market due to the Contractor’s corporate 

ownership structure. 

(3) Challenges, if any, the Contractor 

experienced that hinder its ability to 

contract with DoD to scale its 

technologies and capabilities due to the 

Contractor’s corporate ownership 

structure. 

(4) Challenges, if any, the Contractor 

experienced, due to its corporate 

ownership structure, in obtaining 

capital necessary to bridge funding gaps, 

for example, between prototype 

demonstration and full-scale 

development. 

(End of clause) 

■ 8. Add part 270 to read as follows: 

PART 270—DEFENSE CONTRACTING 

PROGRAMS 

Sec. 

270.000 Scope of part. 

Subpart 270.1—Pilot Program to Incentivize 

Contracting with Employee-Owned 

Businesses 

270.100 Scope of subpart. 

270.101 Definition. 

270.102 Policy. 

270.103 Limitations. 

270.104 Procedures. 

270.105 Solicitation provisions and 

contract clause. 

Authority: 41 U.S.C. 1303 and 48 CFR 

chapter 1. 

270.000 Scope of part. 

This part has been created to facilitate 

promulgation of additional DFARS 

coverage of defense-specific contracting 

programs that do not properly fall under 

DFARS subchapter D, Socioeconomic 

Programs, and neither implement nor 

supplement existing FAR part 19 or 

parts 22 through 25. 

Subpart 270.1—Pilot Program to 

Incentivize Contracting with EmployeeOwned Businesses 

270.100 Scope of subpart. 

(a) This subpart implements section 

874 of the National Defense 

Authorization Act (NDAA) for Fiscal 

Year (FY) 2022 (Pub. L. 117–81; 10 

U.S.C. 3204 note) and section 872 of the 

NDAA for FY 2024 (Pub. L. 118–31; 10 

U.S.C. 3204 note). Sections 874 and 872 

authorize the establishment of a pilot 

program that allows for the 

noncompetitive award of certain followon contracts to contractors that meet the 

definition of a qualified business (see 

270.101). 

(b) The authority to award contracts 

under this subpart expires on December 

27, 2029. 

270.101 Definition. 

As used in this subpart, qualified 

business means an S corporation as 

defined in 26 U.S.C. 1361(a)(1) for 

which 100 percent of the outstanding 

stock is held through an employee stock 

ownership plan as defined in 26 U.S.C. 

4975(e)(7). 

270.102 Policy. 

(a) The contracting officer may only 

award one sole-source, follow-on 

contract to the incumbent contractor 

if— 

(1) The contractor has represented 

that it is a qualified business; and 

(2) The contract is for the continued 

development, production, or provision 

of products or services that are the same 

as or substantially similar to those 

procured under the prior contract 

awarded to the contractor by or for DoD. 

(b) The contracting officer shall justify 

the use of a sole-source contract in 

accordance with FAR 6.303 and 6.304 

and cite FAR 6.302–5 as the exception 

to full and open competition. 

270.103 Limitations. 

(a) Participation in the pilot program 

is subject to approval by the Under 

Secretary of Defense (Acquisition and 

Sustainment), Office of the Principal 

Director, Defense Pricing, Contracting, 

and Acquisition Policy (Contract 

Policy). Only a contracting officer may 

submit an application to participate in 

the pilot program. See PGI 270.104(a). 

(b) Contracting officers shall only 

award— 

(1) One sole-source, follow-on 

contract per predecessor contract to the 

incumbent contractor unless waived by 

the head of the contracting activity, 

delegable to a level no lower than one 

level above the contracting officer; 

(2) Contracts to qualified businesses 

that have a minimum performance 

rating of satisfactory for the predecessor 

contract in the Contractor Performance 

Assessment Reporting System (see FAR 

subpart 42.15); and 

(3) Contracts to qualified businesses 

that have certified they will not pay 

more than 50 percent of the amount 

paid by the Government for contract 

performance to subcontractors that are 

not qualified businesses, except for 

subcontracts for materials not available 

from another qualified business when 

the contract is for products, unless 

waived by the head of the contracting 

activity, delegable to a level no lower 

than one level above the contracting 

officer. 

270.104 Procedures. 

See PGI 270.104 for procedures and 

information concerning the pilot 

program. 

270.105 Solicitation provisions and 

contract clause. 

(a) Use the provision at 252.270–7000, 

Pilot Program to Incentivize Contracting 

with Employee-Owned Businesses— 

Representation, in solicitations, 

including solicitations using FAR part 

12 procedures for the acquisition of 

commercial products and commercial 

services, except for solicitations solely 

for the acquisition of commercially 

available off-the-shelf (COTS) items, 

that include the clause at 252.270–7002, 

Pilot Program to Incentivize Contracting 

with Employee-Owned Businesses. 

(b) Unless waived in accordance with 

270.103(b)(3), use the provision at 

252.270–7001, Pilot Program to 


lotter on DSK11XQN23PROD with RULES1
82188 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Rules and Regulations 

Incentivize Contracting with EmployeeOwned Businesses—Subcontracting 

Certification, in solicitations, including 

solicitations using FAR part 12 

procedures for the acquisition of 

commercial products and commercial 

services, except for solicitations solely 

for the acquisition of COTS items, that 

include the clause at 252.270–7002, 

Pilot Program to Incentivize Contracting 

with Employee-Owned Businesses. 

(c) Use the clause at 252.270–7002, 

Pilot Program to Incentivize Contracting 

with Employee-Owned Businesses, in 

solicitations and contracts, including 

solicitations and contracts using FAR 

part 12 procedures for the acquisition of 

commercial products and commercial 

services, except for solicitations and 

contracts solely for the acquisition of 

COTS items, for approved pilot program 

acquisitions. 

[FR Doc. 2024–23226 Filed 10–9–24; 8:45 am] 

BILLING CODE 6001–FR–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Part 252 

[Docket DARS–2024–0018] 

RIN 0750–AM03 

Defense Federal Acquisition 

Regulation Supplement: Procurement 

Technical Assistance Program (DFARS 

Case 2024–D006) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is issuing a final rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to implement a section of the 

National Defense Authorization Act for 

Fiscal Year 2024 that modifies certain 

definitions associated with the 

Procurement Technical Assistance 

Program. 

DATES: Effective October 10, 2024. 

FOR FURTHER INFORMATION CONTACT: 

Jeanette Snyder, telephone 703–508– 

7524. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD published a proposed rule in the 

Federal Register at 89 FR 46836 on May 

30, 2024, to implement section 853 of 

the National Defense Authorization Act 

(NDAA) for Fiscal Year (FY) 2024 (Pub. 

L. 118–31; 10 U.S.C. 4951). Section 853 

amends the definitions of ‘‘nonprofit 

organization’’ and ‘‘business entities’’ at 

10 U.S.C. 4951 for the Procurement 

Technical Assistance Program (PTAP). 

One respondent submitted public 

comments in response to the proposed 

rule. 

II. Discussion and Analysis 

DoD reviewed the public comments in 

the development of the final rule. A 

discussion of the comments is provided, 

as follows: 

A. Summary of Significant Changes 

From the Proposed Rule 

There are no significant changes from 

the proposed rule. 

B. Analysis of Public Comments 

Comment: The respondent indicated 

that the statement: ‘‘In addition, 

business entities, including 

corporations, associations, partnerships, 

limited liability companies, limited 

liability partnerships, consortia, not-forprofit, or other legal entities will also be 

able to be a cooperative agreement 

holder’’ in section IV of the proposed 

rule preamble is inaccurate. The 

respondent indicated that the term 

‘‘eligible entity’’ refers to the entities 

that may be served by cooperative 

agreement holders. The respondent also 

indicated that ‘‘(as defined in 10 U.S.C. 

4951)’’ added to DFARS clause 252.205– 

7000(a) is misleading, as ‘‘business 

entities’’ are the recipients of 

procurement technical assistance, not 

the providers. 

Response: Subsection (1) of 10 U.S.C. 

4951 defines the term ‘‘eligible entity’’ 

to mean a state, local government, 

nonprofit organization, and tribal 

organization. Subsection (5) of 10 U.S.C. 

4951 defines the term ‘‘business entity’’ 

to mean a corporation, association, 

partnership, limited liability company, 

limited liability partnership, consortia, 

not-for-profit, or other legal entity. The 

statute at 10 U.S.C. 4952 specifies that 

the purpose of the PTAP is, in part, to 

increase assistance provided by DoD to 

‘‘eligible entities’’ furnishing 

procurement technical assistance to 

‘‘business entities’’. Therefore, the 

referenced statement in section IV of the 

proposed rule preamble is inaccurate 

and is corrected in this final rule. 

However, the parenthetical ‘‘as defined 

in 10 U.S.C. 4951’’ in the contract clause 

at DFARS 252.205–7000, Provision of 

Information to Cooperative Agreement 

Holders, is accurate as ‘‘business 

entities’’ in this context refers to those 

entities that may receive assistance. 

III. Applicability to Contracts at or 

Below the Simplified Acquisition 

Threshold (SAT), for Commercial 

Products (Including Commercially 

Available Off-the-Shelf (COTS) Items), 

and for Commercial Services 

This final rule amends the clause at 

DFARS 252.205–7000, Provision of 

Information to Cooperative Agreement 

Holders. However, this final rule does 

not impose any new requirements on 

contracts at or below the SAT, for 

commercial products including COTS 

items, or for commercial services. The 

clause will continue to not apply to 

acquisitions at or below the SAT, and 

will continue to apply to acquisitions of 

commercial products excluding COTS 

items, and to acquisitions of commercial 

services. 

IV. Expected Impact of the Rule 

This final rule is expected to impact 

DoD contractors whose contracts 

include the clause at DFARS 252.205– 

7000. The clause requires contractors to 

provide cooperative agreement holders 

under the PTAP, upon request, with a 

list of the contractor’s employees or 

offices responsible for entering into 

subcontracts under defense contracts. 

As a result of this final rule, such 

contractors may be required to provide 

the list to different entities that are 

cooperative agreement holders under 

the PTAP. 

The changes in section 853 allow any 

type of nonprofit organization to be a 

cooperative agreement holder under the 

PTAP. In addition, section 853 provides 

a definition of ‘‘business entities’’ to 

specify the entities that may receive 

assistance under the PTAP, including 

corporations, associations, partnerships, 

limited liability companies, limited 

liability partnerships, consortia, not-forprofit, or other legal entities. These 

changes are reflected in the revisions to 

the clause at DFARS 252.205–7000. As 

a result, there may be increases in the 

number of entities that become 

cooperative agreement holders and in 

the number of business entities that 

receive assistance under the PTAP. 

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 


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