[Federal Register: December 27, 1999 (Volume 64, Number 247)]
[Rules and Regulations]
[Page 72441-72444]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de99-25]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 2, 4, 5, 7, 10, 15, and 19
[FAC 97-15; FAR Case 1997-306 (97-306); Item III]
RIN 9000-AI55
Federal Acquisition Regulation; Contract Bundling
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comments.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on an interim
rule amending the Federal Acquisition Regulation (FAR) to implement
sections of the Small Business Reauthorization Act of 1997. The
sections of the Act define ``contract bundling,'' and require agencies
to avoid unnecessary bundling that precludes small business
participation in the performance of Federal contracts.
DATES: Effective Date: December 27, 1999.
Applicability Date: The FAR, as amended by this rule, is applicable
to solicitations issued on or after December 27, 1999.
Comment Date: Interested parties should submit comments to the FAR
Secretariat at the address shown below on or before February 25, 2000
to be considered in the formulation of a final rule.
ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (MVRS), 1800 F Street,
NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.
Address e-mail comments submitted via the Internet to:
farcase.1997-306@gsa.gov.
Please submit comments only and cite FAC 97-15, FAR case 1997-306
(97-306) in all correspondence related to this case.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS
Building, Washington, DC 20405, (202) 501-4755, for information
pertaining to status or publication schedules. For clarification of
content, contact Mr. Ralph De Stefano, Procurement Analyst, at (202)
501-1758. Please cite FAC 97-15, FAR case 1997-306 (97-306).
SUPPLEMENTARY INFORMATION:
A. Background
This interim rule amends FAR Parts 2, 4, 5, 7, 10, 15, and 19 to
implement Sections 411-417 of the Small Business Reauthorization Act of
1997, Pub. L. 105-135, and the Small Business Administration (SBA)
interim rule published in the Federal Register at 64 FR 57366, October
25, 1999. Sections 411-417 amend Title 15 of the United States Code to
define ``contract bundling,'' and require agencies to avoid unnecessary
bundling that precludes small business participation in the performance
of Federal contracts.
This rule was not subject to Office of Management and Budget 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.
B. Regulatory Flexibility Act
The changes may have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601 et seq., because opportunities for
participation by small entities in acquisitions involving bundling may
increase. An Initial Regulatory Flexibility Analysis (IRFA) has been
performed and is summarized as follows:
The objective of the interim rule is to establish agency
procedures for processing bundled requirements and to ensure maximum
small business participation in bundled acquisitions. Agencies
must--
<bullet> Perform market research when bundled requirements are
anticipated;
<bullet> Justify bundling in acquisition strategies;
<bullet> Meet specific estimated benefit thresholds before
bundling requirements;
<bullet> Assess the impact of bundling on small businesses;
<bullet> Submit solicitations containing bundled requirements to
the SBA procurement center representatives for review; and
<bullet> Include, in negotiated competitions for bundled
requirements, a source selection factor for the offerors' proposed
use of small businesses as subcontractors and their past performance
in meeting subcontracting goals.
These objectives are stated in Sections 411-417 of Pub. L. 105-
135 and in SBA's implementing regulations.
The FAR Secretariat has submitted a copy of the IRFA to the Chief
Counsel for Advocacy of the Small Business Administration. Interested
parties may obtain a copy from the FAR Secretariat. The Councils will
consider comments from small entities concerning the affected FAR
subparts in accordance with 5 U.S.C. 610. Interested parties
[[Page 72442]]
must submit such comments separately and should cite 5 U.S.C 601, et
seq. (FAC 97-15, FAR Case 1997-306 (97-306)), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
3501, et seq.
D. Determination to Issue an Interim Rule
The Councils have made a determination under the authority of the
Secretary of Defense (DoD), the Administrator of General Services
(GSA), and the Administrator of the National Aeronautics and Space
Administration (NASA) that urgent and compelling reasons exist to
promulgate this interim rule without prior opportunity for public
comment. This action is necessary because this interim rule implements
Sections 411-417 of the Small Business Reauthorization Act of 1997,
Pub. L. 105-135. Sections 411-417 amend Title 15 of the United States
Code to define ``contract bundling,'' and require agencies to avoid
unnecessary bundling that precludes small business participation in the
performance of Federal contracts. The SBA published an interim rule in
the Federal Register at 64 FR 57372, October 25, 1999, with an
effective date of December 27, 1999, to implement Sections 411-417 of
Pub. L. 105-135. It is necessary to have a December 27, 1999, effective
date for this rule to provide contracting regulations that conform with
SBA's regulations.
However, pursuant to Pub. L. 98-577 and FAR 1.501, the Councils
will consider public comments received in response to this interim rule
in the formation of the final rule.
List of Subjects in 48 CFR Parts 2, 4, 5, 7, 10, 15, and 19
Government procurement.
Dated: December 20, 1999.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 4, 5, 7, 10,
15, and 19 as set forth below:
1. The authority citation for 48 CFR parts 2, 4, 5, 7, 10, 15, and
19 continues to read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 2--DEFINITIONS OF WORDS AND TERMS
2. In section 2.101, add, in alphabetical order, the definitions
``bundled contract'' and ``bundling'' to read as follows:
2.101 Definitions.
* * * * *
Bundled contract means a contract that is entered into to meet
requirements that are consolidated by bundling, excluding a contract
awarded and performed entirely outside the United States.
Bundling means--
(1) Consolidating two or more requirements for supplies or
services, previously provided or performed under separate smaller
contracts, into a solicitation for a single contract that is likely to
be unsuitable for award to a small business concern due to--
(i) The diversity, size, or specialized nature of the elements of
the performance specified;
(ii) The aggregate dollar value of the anticipated award;
(iii) The geographical dispersion of the contract performance
sites; or
(iv) Any combination of the factors described in paragraphs (1)(i),
(ii), and (iii) of this definition.
(2) Separate smaller contract, as used in this definition, means a
contract that has been performed by one or more small business concerns
or that was suitable for award to one or more small business concerns.
(3) This definition does not apply to a contract that will be
awarded and performed entirely outside of the United States.
* * * * *
PART 4--ADMINISTRATIVE MATTERS
3. In section 4.601, redesignate paragraph (e) as paragraph (f);
add new paragraph (e); and revise the redesignated paragraph (f) to
read as follows:
4.601 Record requirements.
* * * * *
(e) In addition to the information described in paragraphs (b),
(c), and (d) of this section, agencies must be able to access
information from the computer file to identify bundled contracts with a
total contract value, including all options, exceeding $5,000,000.
(f) Agencies must transmit this information to the Federal
Procurement Data System in accordance with its procedures.
PART 5--PUBLICIZING CONTRACT ACTIONS
4. Revise the section heading and text of 5.206 to read as follows:
5.206 Notices of subcontracting opportunities.
(a) The following entities may use a CBD notice to seek competition
for subcontracts, to increase participation by small, small
disadvantaged, and women-owned small business firms, and to meet
established subcontracting plan goals:
(1) A contractor awarded a contract exceeding $100,000 that is
likely to result in the award of any subcontracts.
(2) A subcontractor or supplier, at any tier, under a contract
exceeding $100,000, that has a subcontracting opportunity exceeding
$10,000.
(b) The notices must describe--
(1) The business opportunity, following the standard CDB format for
items 7, 10, 11, and 17 in 5.207(b)(4);
(2) Any prequalification requirements; and
(3) Where to obtain technical data needed to respond to the
requirement.
PART 7--ACQUISITION PLANNING
5. In section 7.103, add paragraph (r) to read as follows:
7.103 Agency-head responsibilities.
* * * * *
(r) Ensuring that acquisition planners, to the maximum extent
practicable
(1) Structure contract requirements to facilitate competition by
and among small business concerns; and
(2) Avoid unnecessary and unjustified bundling that precludes small
business participation as contractors (see 7.107) (15 U.S.C. 631(j)).
6. Revise paragraph (b)(1) of section 7.105 to read as follows:
7.105 Contents of written acquisition plans.
* * * * *
(b) Plan of action--(1) Sources. Indicate the prospective sources
of supplies or services that can meet the need. Consider required
sources of supplies or services (see part 8). Include consideration of
small business, HUBZone small business, small disadvantaged business,
and women-owned small business concerns (see part 19), and the impact
of any bundling that might affect their participation in the
acquisition (see 7.107) (15 U.S.C. 644(e)). Address the extent and
results of the market research and indicate their impact on the various
elements of the plan (see part 10).
* * * * *
[[Page 72443]]
7. Add section 7.107 to read as follows:
7.107 Additional requirements for acquisitions involving bundling of
contract requirements.
(a) Bundling may provide substantial benefits to the Government.
However, because of the potential impact on small business
participation, the head of the agency must conduct market research to
determine whether bundling is necessary and justified (15 U.S.C.
644(e)(2)). Market research may indicate that bundling is necessary and
justified if an agency would derive measurably substantial benefits
(see 10.001(a)(2)(iv) and (a)(3)(vi)).
(b) Measurably substantial benefits may include, individually or in
any combination or aggregate, cost savings or price reduction, quality
improvements that will save time or improve or enhance performance or
efficiency, reduction in acquisition cycle times, better terms and
conditions, and any other benefits. The agency must quantify the
identified benefits and explain how their impact would be measurably
substantial. Except as provided in paragraph (d) of this section, the
agency may determine bundling to be necessary and justified if, as
compared to the benefits that it would derive from contracting to meet
those requirements if not bundled, it would derive measurably
substantial benefits equivalent to--
(1) Ten percent of the estimated contract value (including options)
if the value is $75 million or less; or
(2) Five percent of the estimated contract value (including
options) if the value exceeds $75 million.
(c) Without power of delegation, the service acquisition executive
for the military departments, the Under Secretary of Defense for
Acquisition, Technology and Logistics for the defense agencies, or the
Deputy Secretary or equivalent for the civilian agencies may determine
that bundling is necessary and justified when
(1) The expected benefits do not meet the thresholds in paragraphs
(b)(1) and (b)(2) of this section but are critical to the agency's
mission success; and
(2) The acquisition strategy provides for maximum practicable
participation by small business concerns.
(d) Reduction of administrative or personnel costs alone is not
sufficient justification for bundling unless the cost savings are
expected to be at least 10 percent of the estimated contract value
(including options) of the bundled requirements.
(e) Substantial bundling is any bundling that results in a contract
with an average annual value of $10 million or more. When the proposed
acquisition strategy involves substantial bundling, the acquisition
strategy must--
(1) Identify the specific benefits anticipated to be derived from
bundling;
(2) Include an assessment of the specific impediments to
participation by small business concerns as contractors that result
from bundling;
(3) Specify actions designed to maximize small business
participation as contractors, including provisions that encourage small
business teaming;
(4) Specify actions designed to maximize small business
participation as subcontractors (including suppliers) at any tier under
the contract or contracts that may be awarded to meet the requirements;
and
(5) Include a specific determination that the anticipated benefits
of the proposed bundled contract justify its use.
(f) The contracting officer must justify bundling in acquisition
strategy documentation.
(g) In assessing whether cost savings would be achieved through
bundling, the contracting officer must consider the cost that has been
charged or, where data is available, could be charged by small business
concerns for the same or similar work.
(h) The requirements of this section do not apply to bundled
contracts that are awarded in accordance with OMB Circular A-76 if a
cost comparison has been performed under OMB Circular A-76 procedures.
However, agencies must comply with the requirements of this section if
they have not been met under A-76 procedures.
PART 10--MARKET RESEARCH
8. Amend section 10.001 as follows:
a. In paragraph (a) introductory text, remove ``shall'' and add
``must'' in its place;
b. In paragraph (a)(1) remove ``which'' and add ``that'' in its
place;
c. At the end of paragraph (a)(2)(ii) remove ``and'';
d. Add paragraph (a)(2)(iv);
e. At the end of paragraph (a)(3)(iv) remove ``and'';
f. In paragraph (a)(3)(v) remove the period and add ``; and'';
g. Add paragraph (a)(3)(vi); and
h. Add paragraph (c).
The revised and added text reads as follows:
10.001 Policy.
* * * * *
(a) * * *
(2) * * *
(iv) Before soliciting offers for acquisitions that could lead to a
bundled contract (15 U.S.C. 644(e)(2)(A)); and
(3) * * *
(vi) Determine whether bundling is necessary and justified (see
7.107) (15 U.S.C. 644(e)(2)(A)).
* * * * *
(c) If an agency contemplates awarding a bundled contract, the
agency should--
(1) When performing market research, consult with the local Small
Business Administration procurement center representative (PCR) or if a
PCR is not assigned to the procuring activity, the SBA Office of
Government Contracting
Area Office serving the area in which the procuring activity is
located; and
(2) At least 30 days before release of the solicitation, notify any
affected incumbent small business concerns of--
(i) The Government's intention to bundle the requirement; and
(ii) How the concerns may contact the appropriate Small Business
Administration representative.
PART 15--CONTRACTING BY NEGOTIATION
15.101-2 [Amended]
8a. In section 15.101-2, amend paragraph (b)(1) by removing
``15.304(c)(3)(iii)'' and adding ``15.304(c)(3)(iv)'' in its place.
9. In section 15.304, amend paragraphs (c)(3)(i) and (c)(3)(ii) by
removing ``(iii)'' and adding ``(iv)'' in their places; redesignate
paragraph (c)(3)(iii) as (c)(3)(iv); and add new paragraphs (c)(3)(iii)
and (c)(3)(5) to read as follows:
15.304 Evaluation factors and significant subfactors.
* * * * *
(c) * * *
(3) * * *
(iii) For solicitations involving bundling that offer a significant
opportunity for subcontracting, the contracting officer must include a
factor to evaluate past performance indicating the extent to which the
offeror attained applicable goals for small business participation
under contracts that required subcontracting plans (15 U.S.C.
637(d)(4)(G)(ii)).
* * * * *
(5) For solicitations involving bundling that offer a significant
opportunity for subcontracting, the contracting officer must include
proposed small business subcontracting participation in the
subcontracting plan as an evaluation factor (15 U.S.C.
637(d)(4)(G)(i)).
* * * * *
10. In section 15.305, add paragraph (a)(5) to read as follows:
[[Page 72444]]
15.305 Proposal evaluation.
(a) * * *
(5) Small business subcontracting evaluation. Structure
solicitations to give offers from small business concerns the highest
rating for the evaluation factors in 15.304(c)(3)(iii) and (c)(5).
* * * * *
PART 19--SMALL BUSINESS PROGRAMS
11. In section 19.101, revise paragraph (g)(1) to read as follows:
19.101 Explanation of terms.
* * * * *
(g) Control through contractual relationships--(1) Definition of a
joint venture for size determination purposes. A joint venture for size
determination purposes is an association of persons or concerns with
interests in any degree or proportion by way of contract, express or
implied, consorting to engage in and carry out a single specific
business venture for joint profit, for which purpose they combine their
efforts, property, money, skill, or knowledge, but not on a continuing
or permanent basis for conducting business generally. A joint venture
is viewed as a business entity in determining power to control its
management.
(i) For bundled requirements, apply size standards for the
requirement to individual persons or concerns, not to the combined
assets, of the joint venture.
(ii) For other than bundled requirements, apply size standards for
the requirement to individual persons or concerns, not to the combined
assets, of the joint venture, if--
(A) A revenue-based size standard applies to the requirement and
the estimated contract value, including options, exceeds one-half the
applicable size standard; or
(B) An employee-based size standard applies to the requirement and
the estimated contract value, including options, exceeds $10 million.
* * * * *
12. In section 19.201, redesignate paragraphs (d)(5) through (d)(9)
as (d)(6) through (d)(10) respectively; add a new paragraph (d)(5); and
amend paragraph (e) by removing ``shall'' and adding ``must'' in its
place. The added text reads as follows:
19.201 General policy.
* * * * *
(d) * * *
(5) Work with the SBA procurement center representative to--
(i) Identify proposed solicitations that involve bundling;
(ii) Facilitate small business participation as contractors
including small business contract teams, where appropriate; and
(iii) Facilitate small business participation as subcontractors and
suppliers where participation by small business concerns as contractors
is unlikely;
* * * * *
13. Amend section 19.202-1 as follows:
a. At the end of paragraph (e)(1)(i) remove ``, or'' and add ``;''
in its place;
b. In paragraph (e)(1)(ii) remove the period and add ``; or'' in
its place;
c. Add paragraph (e)(1)(iii);
d. In the introductory text of paragraph (e)(2) remove ``shall
also'' and add ``also must'' in its place;
e. At the end of paragraph (e)(2)(iii) remove ``or;''
f. In paragraph (e)(2)(iv) remove the period and add ``; or'' in
its place; and
g. Add paragraph (e)(2)(v).
The added text reads as follows:
19.202-1 Encouraging small business participation in acquisitions.
* * * * *
(e) * * *
(1) * * *
(iii) The proposed acquisition is for a bundled requirement.
* * * * *
(2) * * *
(v) Bundling is necessary and justified.
* * * * *
[FR Doc. 99-33432 Filed 12-23-99; 8:45 am]
BILLING CODE 6820-EP-P