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[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Proposed Rules]
[Pages 3761-3763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00616]

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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 16

[FAR Case 2024-007, Docket No. FAR-2024-0007, Sequence No. 1]
RIN 9000-AO76

Federal Acquisition Regulation: Protests of Orders Under Certain 
Multiple-Award Contracts

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

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to clarify protest rights for orders set 
aside under certain multiple-award contracts.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat Division at the address shown below on or before 
March 17, 2025, to be considered in the formation of the final rule.

ADDRESSES: Submit comments in response to FAR Case 2024-007 to the 
Federal eRulemaking portal at https://www.regulations.gov by searching 
for ``FAR Case 2024-007''. Select the link ``Comment Now'' that 
corresponds with ``FAR Case 2024-007''. Follow the instructions 
provided on the ``Comment Now'' screen. Please include your name, 
company name (if any), and ``FAR Case 2024-007'' on your attached 
document. If your comment cannot be submitted using https://www.regulations.gov, call or email the points of contact in the FOR 
FURTHER INFORMATION CONTACT section of this document for alternate 
instructions.
    Instructions: Please submit comments only and cite ``FAR Case 2024-
007'' in all correspondence related to this case. Comments received 
generally will be posted without change to https://www.regulations.gov, 
including any personal and/or business confidential information 
provided. Public comments may be submitted as an individual, as an 
organization, or anonymously (see frequently asked questions at https://www.regulations.gov/faq). To confirm receipt of your comment(s), 
please check https://www.regulations.gov, approximately two to three 
days after submission to verify posting.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
Ms. Carrie Moore, Procurement Analyst, at 571-300-5917 or by email at 
[email protected]. For information pertaining to status, publication 
schedules, or alternate instructions for submitting comments if https://www.regulations.gov cannot be used, contact the Regulatory Secretariat 
Division at 202-501-4755 or [email protected]. Please cite FAR Case 
2024-007.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA are proposing to revise the FAR to clarify 
protest rights, in accordance with existing statute and regulations, 
when an order is or is not set aside. This includes whether the action 
was taken in accordance with the policy proposed in FAR Case 2023-011, 
Small Business Participation on Certain Multiple-Award Contracts, 
published at XX FR XXX, on January XX, 2025.
    To increase small business opportunities and maximize their 
participation on multiple-award contracts, FAR Case 2023-011 proposes 
guidance for contracting officers regarding how to exercise the 
statutory grant of discretion to set aside an order for a small 
business under a multiple-award contract. Under that proposed rule, if 
the contracting officer determines that there is a reasonable 
expectation of obtaining offers from two or more responsible small 
business awardees that are competitive in terms of various criteria 
under the applicable multiple-award contract, then the order should be 
set aside for small business. This proposed rule for FAR Case 2024-007 
clarifies that the proposed rule for FAR Case 2023-011 does not alter 
the existing statutory grant of discretion to agencies as to whether or 
not to set aside an order. The proposed rule for FAR Case 2023-011, if 
finalized, cannot alter the existing protest rights in connection with 
the issuance or proposed issuance of an order under a multiple-award 
contract. (See FAR 16.505(a)(10), 41 U.S.C. 4106, and 10 U.S.C. 3406.)

II. Discussion and Analysis

    This proposed rule adds clarifying text to FAR part 16 to specify 
that a contracting officer's decision to set aside or not set aside an 
order under a multiple-award contract is not grounds for protest.
    Specifically, under 15 U.S.C. 644(r), Federal agencies, and 
contracting officers acting on behalf of those agencies, are granted 
discretion as to whether to set aside an order under a multiple-award 
contract for small

[[Page 3762]]

businesses. This statutory grant of discretion means that agencies are 
not required to set aside orders; it is a choice. To the extent a bid 
protest challenges an agency's decision to set aside or not set aside 
an order for small business, that protest challenges a discretionary 
act statutorily committed to agency decision-making, and therefore 
cannot form the basis for a protest seeking to compel an agency to make 
a different choice.
    This issue has not been clearly understood and has been subject to 
litigation, which is why FAR Case 2023-011 proposes to clarify guidance 
for agencies and this FAR Case 2024-007 proposes to clarify protest 
rights. On the one hand, in a series of decisions, the U.S. Government 
Accountability Office (GAO) has determined that 15 U.S.C. 644(r) 
``clearly provides for granting agency officials discretion in deciding 
whether to set aside orders under multiple-award contracts.'' Aldevra, 
B-411752 (Oct. 16, 2015), 2015 CPD ] 339. In a separate decision, GAO 
discussed 15 U.S.C. 644(r) and the regulations implementing that 
provision in the FAR and issued by the SBA, and concluded that, ``we 
think it is beyond debate that these regulations, by their plain 
language, grant discretion to a contracting officer about whether to 
set aside for small business participation task orders placed under 
multiple-award contracts.'' See FAR 19.502-4 and 16.505(b)(2)(i)(F). 
Edmond Scientific Co., B-410179 (Nov. 12, 2014), 2014 CPD ] 336. On the 
other hand, the U.S. Court of Federal Claims, in Tolliver Group, Inc. 
v. United States, 151 Fed. Cl. 70 (2020), held that an agency is 
required to apply the Rule of Two prior to deciding to utilize a given 
multiple-award contract, and that, if the Rule of Two is satisfied, the 
agency is required to set the contract aside for small business. The 
Court rejected the position that 15 U.S.C. 644(r) provides agencies 
with discretion to utilize a multiple-award contract and then decide 
whether to set the order aside for small business.
    Through the proposed rule for FAR case 2023-011, as well as this 
proposed rule, DoD, GSA, and NASA seek to address the confusion and 
disagreement regarding the discretion that is provided to agencies by 
clarifying the guidance previously issued under 15 U.S.C. 644(r). DoD, 
GSA, and NASA agree with, and adopts, GAO's conclusion that ``the 
statutory grant of discretion does not require application of the Rule 
of Two prior to issuing an order, unless the multiple-award contract or 
task order solicitation expressly anticipated the use of the Rule of 
Two.'' ITility, LLC, B-419167 (Dec. 23, 2020), 2020 CPD ] 412. 
Furthermore, as GAO explained in this decision, the discretion provided 
by the statute necessarily means that an agency decision as to whether 
to set aside an order, or not to set it aside, under a multiple-award 
contract, is not a decision that can be challenged via a bid protest: 
``Where Congress has enunciated a clear policy granting contracting 
officials discretion, and the Executive Branch's regulatory 
implementation similarly emphasizes the statutory grant of discretion, 
our Office cannot substitute the parties' or our own judgments on the 
matter.'' Id.

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

    This proposed rule does not create new solicitation provisions or 
contract clauses or impact any existing provisions or clauses.

IV. Expected Impact of the Rule

    This proposed rule is expected to impact contractors and the 
Government by clarifying that the proposed policies of FAR Case 2023-
011 and the existing statutory grant of discretion to agencies as to 
whether or not to set aside an order do not alter the existing protest 
rights in connection with the issuance or proposed issuance of an order 
under a multiple-award contract. As such, this clarification is 
expected to deter contractors from submitting protests of decisions to 
set aside or not set aside orders placed against multiple-award 
contracts, thereby saving contractors and the Government time and 
resources.
    This savings in time and resources is expected to expedite the 
award of such orders and preclude delays in meeting mission needs. This 
rule is also expected to provide clarity for all parties in the protest 
process.

V. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 (as amended by E.O. 14094) and 13563 
direct agencies to assess the 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 under section 3(f)(1) of E.O. 12866 and, therefore, 
was not subject to review under Section 6(b) of E.O. 12866, Regulatory 
Planning and Review, dated September 30, 1993.

VI. Regulatory Flexibility Act

    DoD, GSA, and NASA do not expect this proposed rule, if finalized, 
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. 
601-612, because this rule only clarifies protest statute and 
regulations for contractors and the Government. However, an Initial 
Regulatory Flexibility Analysis (IRFA) has been performed and is 
summarized as follows:

    DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to specify that the policy of FAR Case 
2023-011, which proposes guidance for contracting officers regarding 
how to exercise the existing statutory grant of discretion to 
agencies as to whether or not to set aside an order, does not alter 
the existing protest rights in connection with the issuance or 
proposed issuance of an order under a multiple-award contract.
    The objective of this rule is to clarify protest regulations in 
the FAR regarding the set-aside of certain orders under multiple-
award contracts. Promulgation of FAR regulations is authorized by 40 
U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy 
provisions (see 10 U.S.C. 3016); and 51 U.S.C. 20113.
    This proposed rule will impact small business contract holders 
under certain multiple-award contracts. Specifically, small entities 
will have clear guidance regarding when an order under a multiple-
award contract may be protested. The impacts of this rule cannot be 
quantified, as there is no reliable way to estimate the number of 
protests that would have occurred without this proposed rule; 
therefore, there is no data with which to accurately reflect the 
number of small entities to which this rule will apply. Instead, 
this rule has the potential to benefit any small entity looking to 
do business with the Government under certain multiple-award 
contracts. According to data from the System for Award Management 
(SAM), there are approximately 384,100 small entities currently 
registered in SAM to do business with the Government. This proposed 
rule has the potential to impact any number of these small entities, 
depending on several factors, including: the primary industry of the 
entity; the Government's future needs for products and services; and 
the entity's submission of proposals and offers for orders to be 
placed against multiple-award contracts.
    The proposed rule does not impose any new reporting, 
recordkeeping, or other compliance requirements for small entities. 
The proposed rule does not duplicate or conflict with any other 
Federal rules. This rule is related to and overlaps with the 
proposed rule for FAR Case 2023-011.

[[Page 3763]]

    There are no known significant alternative approaches to the 
proposed rule that would accomplish the stated objectives of the 
rule and further minimize any significant economic impact of this 
proposed rule on small entities, as the economic impact is not 
anticipated to be significant.

    The Regulatory Secretariat Division has submitted a copy of the 
IRFA to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the IRFA may be obtained from the Regulatory 
Secretariat Division. DoD, GSA, and NASA invite comments from small 
business concerns and other interested parties on the expected impact 
of this proposed rule on small entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by the rule in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 610 (FAR Case 2024-007), 
in correspondence.

VII. Paperwork Reduction Act

    This 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. 3501-3521).

List of Subjects in 48 CFR Part 16

    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 propose amending 48 CFR part 16 as 
set forth below:

PART 16--TYPES OF CONTRACTS

0
1. The authority citation for 48 CFR part 16 continues to read as 
follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. 
chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 
20113.

0
2. Amend section 16.505 by adding paragraph (a)(10)(iv) to read as 
follows:

16.505   Ordering.

    (a) * * *
    (10) * * *
    (iv) In accordance with 15 U.S.C. 644(r), a contracting officer's 
decision to set aside or not set aside an order for small business 
concerns is an exercise of discretion granted to agencies and not a 
basis for protest. However, this does not preclude the filing of a 
protest of such an order if such a protest would otherwise be 
authorized on a separate basis recognized in accordance with paragraph 
(a)(10)(i) of this section.
* * * * *
[FR Doc. 2025-00616 Filed 1-14-25; 8:45 am]
BILLING CODE 6820-EP-P
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