Source: https://www.federalregister.gov/documents/2010/08/30/2010-21025/federal-acquisition-regulation-inflation-adjustment-of-acquisition-related-thresholds
Timestamp: 2017-08-16 22:35:45
Document Index: 181764602

Matched Legal Cases: ['arts 1', 'art 19', 'art 19', 'art 19', 'arts 15', 'arts 48', 'arts 28', 'art 22', 'art 32', 'arts 46', 'art 547', 'art 549']

53129-53135 (7 pages)
2010-21025
1. Statutory Thresholds
a. All Statutory Thresholds
b. Prime Contractor Subcontracting Plan Thresholds (FAR 19.702)
c. Miller Act (FAR 28.102 and 52.228-15)
2. Nonstatutory Thresholds
3. Increase Penalties
a. Provide a Matrix
C. Changes Between the Proposed Rule and the Final Rule
List of Subjects in 48 CFR Parts 1, 2, 3, 5, 6, 7, 8, 12, 13, 15, 16, 17, 19, 22, 23, 28, 32, 36, 42, 50, and 52
https://www.federalregister.gov/d/2010-21025 https://www.federalregister.gov/d/2010-21025
For clarification of content, contact Mr. Michael Jackson, Procurement Analyst, at (202) 208-4949. For information pertaining to status or publication schedules, contact the Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-45, FAR case 2008-024.
The first review of acquisition-related thresholds to implement section 807 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (Pub. L. 108-375) was conducted under FAR Case 2004-033 during FY 2005. The final rule for the first review was published in the Federal Register at 71 FR 57363, September 28, 2006. This is the second review of FAR acquisition-related thresholds. DoD, GSA, and NASA published a proposed rule in the Federal Register at 75 FR 5716, February 4, 2010. The preamble to the proposed rule contained a detailed explanation of—
What an acquisition-related threshold is;
What acquisition-related thresholds are not subject to escalation adjustment under this case;
How the Councils analyze statutory and nonstatutory acquisition-related thresholds; and
The effect of this rule on the most heavily-used thresholds.
Eight respondents submitted comments on the proposed rule, which are addressed in the following section. The final rule has been coordinated with the Department of Labor and the Small Business Administration in areas of the regulation for which they are the lead agency. Any changes to Cost Accounting Standards thresholds will be dealt with under a separate case.
Comment: One respondent, while recognizing that this is a statutory requirement, believed that no inflation adjustments should be made at this time. The respondent views the threshold increases as a way to reduce Government oversight of Federal contracts and considers such reduction unwise, because of various congressional oversight hearings and reports of Inspectors General and the Government Accountability Office that have revealed “widespread systemic gaps in Government contracting oversight.”
Response: As noted, this is a statutory requirement. Further, the intent is not to reduce Government oversight but to maintain the status quo, by adjusting thresholds to keep pace with inflation. If thresholds are not adjusted for inflation, the number of contracts subject to the acquisition-related threshold will continue to grow, because more and more contracts will be below the stated thresholds.
Comment: One respondent stated that they were particularly pleased with the proposal to increase the threshold values in FAR part 19 relative to the need to submit an acceptable subcontracting plan. They consider the current threshold to be administratively burdensome. The respondent further recommended that the Councils should pursue legislative action to raise the threshold to a minimum of one million dollars.
Another respondent recommended increasing the prime contractor subcontracting plan threshold to $700,000, to be the same as the increased cost or pricing data threshold.
Response: The final rule raises the subcontracting threshold to $650,000, as required by the law that this case is implementing. Pursuing legislative changes is outside the scope of this case.
Comment: Three respondents addressed the proposed increase in the Miller Act threshold. These respondents emphasized the importance of performance and payment bonds as a protection for subcontractors and taxpayers.
One respondent stated that the law is “an unfortunate and contradictory statutory requirement.” The respondent considered that the threshold increase will undermine the original protective purposes of the bonding requirements set forth in the Miller Act, because more Federal construction projects will be undertaken without the benefit of payment bond protection. In particular, this respondent noted that subcontractors are frequently small businesses, for whom lack of a payment bond may be disastrous. The respondent requested the Councils explain accurately to Congress the significant negative impact that such increases will have.
Another respondent stated that the threshold increase is bad public policy, and the Councils should reconsider whether such thresholds are “acquisition-related thresholds” as contemplated by the Act.
The third respondent urged the Councils not to increase the Miller Act surety bond threshold, but did not suggest rationale for noncompliance with the statutory requirement.Start Printed Page 53130
Response: The Councils do not agree that adjustment of thresholds for inflation will have the negative impact perceived by these respondents. As already stated, inflation adjustment of thresholds is a means of maintaining the status quo. It will not decrease the number of contracts that are subject to the Miller Act, but will prevent the relative number of contracts subject to the Miller Act from increasing. The rationale that there should be some level below which the Miller Act is not applicable is maintained by adjustment of the threshold for inflation. The law (40 U.S.C. 3132) provides alternate payment protection for contracts that exceed $30,000, so that contracts below the Miller Act threshold are not entirely without payment protection.
As to whether the Miller Act threshold is an acquisition-related threshold, this threshold clearly meets the definition that was set forth in the law, as consistently interpreted by the Councils since the enactment of the law in 2004. The law defines an acquisition-related threshold as a threshold that is set forth in law (the Miller Act), as a factor in defining the scope of the applicability of a policy, procedure, requirement, or restriction provided in that law to the procurement of property or services by an executive agency. As this definition is applied to the Miller Act threshold, the Miller Act requires payment and performance bonds when agencies acquire construction that is valued at more than the Miller Act threshold (raised by this rule from $100,000 to $150,000).
Comment: One respondent was particularly concerned about the proposed increase in nonstatutory thresholds. In particular, this respondent cited three examples of threshold increases which the respondent considered questionable:
Approval levels for limited source justifications at FAR 8.405-6. The respondent stated that increasing such approval levels appears inconsistent with the President's March 4, 2009, Memorandum.
The threshold at FAR 22.1103 for use of the solicitation provision FAR 52.222-46, Evaluation of Compensation for Professional Employees. The respondent stated that when contractors pay very low wages and benefits, work quality can suffer and the Government may bear hidden costs because of the need to provide income assistance to low income families.
The threshold for subcontracting plans governed by FAR 19.702. The respondent stated that the increase of this threshold would have a detrimental impact, especially on small businesses.
Response: Although there is no statutory requirement to increase the nonstatutory thresholds, the same rationale applies as to why escalation to adjust for inflation is a good idea. If there was any rationale for the level at which the thresholds were originally put in place by policy, the thresholds will become further and further out of line with the original policy decision if they are left unchanged. In addition to this general rationale, the Councils add the following two particular responses:
In particular, the approval levels for limited source justifications at FAR 8.405-6 were selected to be consistent with the statutory thresholds at FAR 6.304(a). Therefore, it is reasonable to escalate these thresholds the same as the thresholds at FAR 6.304(a) to maintain the consistency.
Although the respondent cited the threshold for subcontracting plans governed by FAR 19.702 as an example of a nonstatutory threshold, this threshold is actually a statutory threshold (15 U.S.C. 637(d)(4)), which must therefore be escalated.
Comment: One respondent recommended that the Councils should also increase the maximum dollar amount of penalties when increasing the acquisition-related threshold contained in the same statute. According to the respondent, by not increasing the penalty for failure to disclose unallowable activities, the Councils are providing contractors a greater incentive to violate the law.
Response: The penalties are set by statute. The law that the FAR Council is implementing did not authorize the FAR Council to increase penalties, only the acquisition-related thresholds.
Two Government employees provided comments relating to the implementation of the rule.
Comment: One respondent requested a matrix of the changes in order to save everyone from having to do the analysis and matrix development. (Although the comment was submitted in response to the FAR rule, the respondent requested that the Councils provide a Defense Federal Acquisition Regulation Supplement (DFARS) matrix, so this may have been intended as a comment on the DFARS inflation adjustment rule.)
Response: In 2006, the URL of a matrix was provided at FAR 1.109(d). Likewise, the current matrix is again available and the Councils have provided a revised Web address to access it.
One respondent expressed concern over the large number of systems changes that this rule will require and the difficulty of implementation in a short period of time. The respondent recommended providing ample time between the release of firm requirements and the required implementation.
Response: Although the Councils hoped to publish this final rule in time to allow 60 days for implementation, they were unable to meet that goal. The effective date of October 1, 2010, allows only a little more than the standard 30 days for implementations, but this effective date is consistent with the statutory requirements and the desired procedures for implementation of changes that impact the Federal Procurement Data System at the beginning of the fiscal year.
Although there were no changes between the proposed rule and the final rule as the result of public comments, some of the thresholds changed due to lower inflation than was projected at the time of publication of the proposed rule. The proposed rule was based on a projected consumer price index (CPI) of 222 in April 2010. The final rule is based on an actual CPI of 217.631 through the end of March 2010. The end of March, 6 months before the effective date of the rule, is used as the cutoff in order to allow time for approval and publication of the final rule.
Because the actual CPI is more than 4 points lower than the projected CPI, proposed thresholds of at least $13 million are generally proportionally lower. Thresholds of less than $13 million were generally unchanged, due to rounding.
The effect of the final rule on heavily-used thresholds is the same as stated in the preamble to the proposed rule:
The micro-purchase base threshold of $3,000 (FAR 2.101) is not changed.
The simplified acquisition threshold (FAR 2.101) is raised from $100,000 to $150,000.
Commercial items test program ceiling (FAR 13.500) is raised from $5,500,000 to $6,500,000.Start Printed Page 53131
The cost or pricing data threshold (FAR 15.403-4) is raised from $650,000 to $700,000.
The prime contractor subcontracting plan (FAR 19.702) floor is raised from $550,000 to $650,000, and the construction threshold of $1,000,000 increases to $1,500,000.
This final rule 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.
The Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration certify that this final rule will not 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 the adjustment of acquisition-related thresholds for inflation maintains the status quo. The Councils note that the set-aside threshold of $100,000 increases to $150,000, which is not a detriment to small business. Although several respondents were concerned about the impact of some of the threshold changes on small businesses (see comment and response at B.1.c. and B.2.), the Councils reiterate that adjusting a threshold in an amount sufficient to keep pace with current inflation is neutral in impact on small businesses because it just maintains the status quo.
The Paperwork Reduction Act does apply; however, these changes to the FAR do not impose additional information collection requirements to the paperwork burden previously approved under OMB Control Numbers:
9000-0006, Subcontracting Plans/Subcontracting Report for Individual Contract (SF 294)—FAR Sections Affected: Subpart 19.7 and 52.219-9;
9000-0007, Summary Subcontract Report—FAR Sections Affected: Subpart 19.7, 53.219, and SF 295;
9000-0013, Cost or Pricing Data Exemption—FAR Sections Affected: Subparts 15.4, 42.7, 52.214-28, 52.215-12, 52.215-13, 52.215-20, and 52.215-21;
9000-0018, Certification of Independent Price Determination and Parent Company and Identifying Data—FAR Sections Affected: 3.103 and 3.302;
9000-0022, Duty-Free Entry—FAR 48 CFR 52.225-8—FAR Section Affected: 52.225-8;
9000-0026, Change Order Accounting—FAR Sections Affected: 43.205(f) and 52.243-6;
9000-0027, Value Engineering Requirements—FAR Sections Affected: Subparts 48.1 and 48.2, 52.248-1, 52.248-2, and 52.248-3;
9000-0034, Examination of Records 5 CFR 1320.5(b) by Comptroller General and Contract Audit—FAR Sections Affected: 52.215-2, 52.212-5, and 52.214-26;
9000-0045, Bid, Performance, and Payment Bonds—FAR Sections Affected: Subparts 28.1 and 28.2, 52.228-1, 52.228-2, 52.228-13, 52.228-15, and 52.228-16;
9000-0058, Schedules for Construction Contracts—FAR Section Affected: 52.236-15;
9000-0060, Accident Prevention 48 CFR 52.236-13, Plans and Recordkeeping—FAR Section Affected: 52.236-13;
9000-0066, Professional Employee Compensation Plan—FAR Sections Affected: Subpart 22.11 and 52.222-46;
9000-0073, Advance Payments—FAR Sections Affected: Subpart 32.4 and 52.232-12;
9000-0077, Quality Assurance Requirements—FAR Sections Affected: Subparts 46.1 through 46.3, 52.246-2 through 52.246-8, 52.246-10, 52.246-12, and 52.246-15;
9000-0080, Integrity of Unit Prices—FAR Sections Affected: 15.408(f) and 52.215-14;
9000-0091, Anti-Kickback Procedures—FAR Sections Affected: 3.502, and 52.203-7;
9000-0094, Debarment and Suspension, FAR Sections Affected: 9.1, 9.4, 52.209-5, and 52.212-3(h);
9000-0101, Drug-Free Workplace—FAR Section Affected: 52.223-6(b)(5);
9000-0115, Notification of Ownership Changes—FAR Sections Affected: 15.408(k) and 52.215-19;
9000-0133, Defense Production Act Amendments—FAR Sections Affected: 34.1 and 52.234-1;
9000-0134, Environmentally Sound Products—FAR Sections Affected: 23.406 and 52.223-4;
9000-0135, Prospective Subcontractor Requests for Bonds, FAR 28.106-4(b), 52.228-12;
1215-0072, OFCCP Recordkeeping and Reporting Requirements—Supply and Service; and
1215-0119, Requirements of a Bona Fide Thrift or Savings Plan (29 CFR part 547) and Requirements of a Bona Fide Profit-Sharing Plan or Trust (29 CFR part 549).
2. Amend section 1.109 by removing from paragraph (d) “
3. Amend section 2.101 in paragraph (b)(2) by—
a. Amending the definition “Major system” by removing from paragraph (1) “$173.5 million” and adding “$189.5 million”, and removing “$814.5 million” and adding “$890 million”; and removing from paragraph (2) “$1.8 million” and adding “$2 million” in its place;
4. Amend section 3.502-2 by removing from the introductory text of paragraph (i) “$100,000” and adding “$150,000” in its place.
Start Printed Page 53132
b. Removing from paragraph (a)(2) “$550,000” and adding “$650,000” in its place, and removing “$11.5 million” and adding “$12.5 million” in its place;
c. Removing from the introductory text of paragraph (a)(3) “$11.5 million” and adding “$12.5 million” in its place, removing “$57 million” and adding “$62.5 million” in its place, and removing “$78.5 million” and adding “$85.5 million” in its place; and
d. Removing from paragraph (a)(4) “$57 million” and adding “$62.5 million” in its place, and removing “$78.5 million” and adding “$85.5 million” in its place.
a. Removing from paragraph (b)(1) “$86 million” and adding “$94 million” in its place; and
b. Removing from paragraph (b)(2) “$8.6 million” and adding “$9.4 million” in its place, and removing “$86 million” and adding “$94 million” in its place.
b. Removing from paragraph (h)(2) “$550,000” and adding “$650,000” in its place, and removing “$11.5 million” and adding “$12.5 million” in its place;
c. Removing from the introductory text of paragraph (h)(3) “$11.5 million” and adding “$12.5 million” in its place, removing “$57 million” and adding “$62.5 million” in its place, and removing “$78.5 million” and adding “$85.5 million” in its place; and
d. Removing from paragraph (h)(4) “$57 million” and adding “$62.5 million” in its place, and removing “$78.5 million” and adding “$85.5 million” in its place.
15. Amend section 12.102 by removing from the introductory text of paragraph (f)(2) “$16 million” and adding “$17.5 million” in its place; and removing from paragraph (g)(1)(ii) “$27 million” and adding “$29.5 million” in its place.
b. Removing from paragraph (a)(2)(ii) “$550,000” and adding “$650,000” in its place, and removing “$11.5 million” and adding “$12.5 million” in its place;
c. Removing from paragraph (a)(2)(iii) ”$11.5 million” and adding “$12.5 million” in its place, removing “$57 million” and adding “$62.5 million” in its place, and removing “$78.5 million” and adding “$85.5 million” in its place; and
d. Removing from paragraph (a)(2)(iv) “$57 million” and adding “$62.5 million” in its place, and removing “$78.5 million” and adding “$85.5 million” in its place.
End Amendment Part Start Part Start Printed Page 53133
25. Amend section 15.403-1 by removing from paragraph (c)(3)(iv) “$16 million” and adding “$17.5 million” in its place.
27. Amend section 15.404-3 by removing from paragraph (c)(1)(i) “$11.5 million” and adding “$12.5 million” in its place.
28. Amend section 15.407-2 by removing from paragraph (c)(1) and the introductory text of paragraph (c)(2) “$11.5 million” and adding “$12.5 million” in its place.
29. Amend section 15.408 in Table 15-2, “II. Cost Elements” which follows paragraph (n), by removing from paragraph “A(2)” “$11.5 million” and adding “$12.5 million” in its place.
33. Amend section 16.503 by removing from paragraph (b)(2) “$100 million” and adding “$103 million” in its place; and removing from paragraph (d)(1) “$11.5 million” and adding “$12.5 million” in its place.
34. Amend section 16.504 by removing from the introductory texts of paragraphs (c)(1)(ii)(D)(
35. Amend section 16.506 by removing from paragraphs (f) and (g) “$11.5 million” and adding “$12.5 million” in its place.
36. Amend section 17.108 by removing from paragraph (a) “$11.5 million” and adding “$12.5 million” in its place; and removing from paragraph (b) “$114.5 million” and adding “$125 million” in its place.
37. Amend section 19.502-2 by—
38. Amend section 19.508 by removing from paragraph (e) “$100,000” and adding “$150,000” in its place.
39. Amend section 19.702 by—
40. Amend section 19.704 by removing from paragraph (a)(9) “$550,000” and adding “$650,000” in its place, and removing “$1,000,000” and adding “$1.5 million” in its place.
41. Amend section 19.708 by removing from paragraph (b)(1) “$550,000” and adding “$650,000” in its place, and removing “$1,000,000” and adding “$1.5 million” in its place.
42. Amend section 19.805-1 by removing from paragraph (a)(2) “$5.5 million” and adding “$6.5 million” in its place, and removing “$3.5 million” and adding “$4 million” in its place.
43. Amend section 19.1202-2 by removing from paragraph (a) “$550,000” and adding “$650,000” in its place, and removing “$1,000,000” and adding “$1.5 million” in its place.
44. Amend section 19.1306 by removing from paragraph (a)(2)(i) “$5.5 million” and adding “$6.5 million” in its place; and removing from paragraph (a)(2)(ii) “$3.5 million” and adding “$4 million” in its place.
45. Amend section 19.1406 by removing from paragraph (a)(2)(i) “$5.5 million” and adding “$6 million” in its place; and removing from paragraph (a)(2)(ii) “$3 million” and adding “$3.5 million” in its place.
46. Amend section 22.305 by removing from paragraph (a) “$100,000” and adding “$150,000” in its place.
47. Amend section 22.602 by removing “$10,000” and adding “$15,000” in its place.
48. Amend section 22.603 by removing from paragraph (b) “$10,000” and adding “$15,000” in its place.
49. Amend section 22.605 by removing from paragraphs (a)(1), (a)(2), (a)(3), and (a)(5) “$10,000” and adding “$15,000” in its place each time it appears (six times).
50. Amend section 22.1103 by removing “$550,000” and adding “$650,000” in its place.
51. Amend section 22.1402 by removing from paragraph (a) “$10,000” and adding “$15,000” in its place.
52. Amend section 22.1408 by removing from the introductory text of paragraph (a) “$10,000” and adding “$15,000” in its place.
End Amendment Part Start Part Start Printed Page 53134
53. Amend section 23.406 by removing from paragraph (d) “$100,000” and adding “$150,000” in its place.
54. Amend section 28.102-1 by removing from paragraphs (a) and (b)(1) “$100,000” and adding “$150,000” in its place.
55. Amend section 28.102-2 by removing from the headings of paragraphs (b) and (c) “
56. Amend section 28.102-3 by removing from paragraphs (a) and (b) “$100,000” and adding “$150,000” in its place.
57. Amend section 32.404 by removing from paragraph (a)(7)(i) “$10,000” and adding “$15,000” in its place.
58. Amend section 36.501 by removing from paragraph (b) “$1,000,000” and adding “$1.5 million” in its place each time it appears (twice).
59. Amend section 42.709 by removing from paragraph (b) “$650,000” and adding “$700,000” in its place.
60. Amend section 42.709-6 by removing “$650,000” and adding “$700,000” in its place.
61. Amend section 42.1502 by removing from paragraph (e) “$550,000” and adding “$650,000” in its place each time it appears (twice).
62. Amend section 50.102-1 by removing from paragraph (b) “$55,000” and adding “$65,000” in its place.
63. Amend section 50.102-3 by removing from paragraph (b)(4) “$28.5 million” and adding “$31.5 million” in its place; and removing from paragraphs (e)(1)(i) and (e)(1)(ii) “$55,000” and adding “$65,000” in its place.
64. Amend section 52.203-7 by removing from the clause heading “(July 1995)” and adding “(Oct 2010)” in its place; and removing from paragraph (c)(5) “$100,000” and adding “$150,000” in its place.
65. Amend section 52.203-12 by removing from the clause heading “(Sep 2007)” and adding “(Oct 2010)” in its place; and removing from paragraphs (g)(1) and (g)(3) “$100,000” and adding “$150,000” in its place.
66. Amend section 52.204-8 by removing from the provision heading “(Feb 2009)” and adding “(Oct 2010)” in its place; and removing from paragraph (c)(1)(ii) “$100,000” and adding “$150,000” in its place.
67. Amend section 52.212-3 by removing from the provision heading “(Aug 2009)” and adding “(Oct 2010)” in its place; and removing from paragraph (e) “$100,000” and adding “$150,000” in its place.
68. Amend section 52.212-5 by—
a. Removing from the clause heading “(Jul 2010)” and adding “(Oct 2010)” in its place;
b. Removing from paragraph (b)(12)(i) “(Apr 2008)” and adding “(Oct 2010)” in its place;
c. Removing from paragraph (b)(25) “(Jun 1998)” and adding “(Oct 2010)” in its place;
e. Removing from paragraph (e)(1)(vi) “(Jun 1998)” and adding “(Oct 2010)” in its place; and
1. Removing from the Alternate heading “(
3. Removing from paragraph (e)(1)(ii)(F) “(June 1998)” and adding “(Oct 2010)” in its place.
69. Amend section 52.213-4 by—
b. Removing from paragraph (a)(2)(vii) “(Jun 2010)” and adding “(Oct 2010)” in its place;
c. Removing from paragraph (b)(1)(ii) “(Dec 1996)” and adding “(Oct 2010)” in its place, and removing “$10,000” and adding “$15,000” in its place; and
d. Removing from paragraph (b)(1)(iv) “(June 1998)” and adding “(Oct 2010)” in its place, and removing “$10,000” and adding “$15,000” in its place.
70. Amend section 52.219-9 by—
71. Amend section 52.222-20 by removing from the clause heading “(Dec 1996)” and adding “(Oct 2010)” in its place; and removing from the introductory paragraph “$10,000” and adding “$15,000” in its place.
72. Amend section 52.222-36 by removing from the clause heading “(Jun 1998)” and adding “(Oct 2010)” in its place; and removing from paragraph (d) “$10,000” and adding “$15,000” in its place.
73. Amend section 52.225-8 by removing from the clause heading “(Feb 2000)” and adding “(Oct 2010)” in its place; and removing from the introductory texts of paragraphs (c)(1)
74. Amend section 52.228-15 by removing from the clause heading “(Nov 2006)” and adding “(Oct 2010)” in its place; and removing from the introductory text of paragraph (b) “$100,000” and adding “$150,000” in its place.
75. Amend section 52.244-6 by—
a. Removing from the clause heading “(Jun 2010)” and adding “(Oct 2010)” in its place;
c. Removing from paragraph (c)(1)(vi) “(Jun 1998)” and adding “(Oct 2010)” in its place.
76. Amend section 52.248-1 by removing from the clause heading “(Feb 2000)” and adding “(Oct 2010)” in its place; and removing from paragraph (l) “$100,000” and adding “$150,000” in its place.
77. Amend section 52.248-3 by removing from the clause heading “(Sep 2006)” and adding “(Oct 2010)” in its place; and removing from paragraph (h) “$55,000” and adding “$65,000” in its place.
[FR Doc. 2010-21025 Filed 8-27-10; 8:45 am]