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FAR vs. SBA Regulation  

7 members have voted

  1. 1. FAR 19.505(c)(5) and 13 CFR §121.406(c) seemingly provide conflicting thresholds (see below). Which would you follow?

    • Follow FAR
      6
    • Follow SBA Regulation
      1


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—Poll Question Is Above—
 

FAR 19.505(c)(5) Exception to the nonmanufacturer rule. The SBA provides for an exception to the nonmanufacturer rule when— (ii) The cost is not anticipated to exceed $25,000;

vs.

13 CFR §121.406(c) The performance requirements (limitations on subcontracting) and the nonmanufacturer rule do not apply to small business set-aside acquisitions with an estimated value between the micro-purchase threshold and the simplified acquisition threshold (as both terms are defined in the FAR at 48 CFR 2.101).

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As a contracting officer, I would have to follow the FAR.  

An agency head (or designee, such as a senior procurement executive) can grant a one-time or class deviation to the FAR if he or she wants to.  But a contracting officer cannot do that.

When the FAR and another regulation appear to conflict, the contracting officer should inform his or her superior and follow instruction.  FAR 1.602-1(a).

When para. (d) of the clause at FAR 52.219-6 was deleted earlier this year, I though the problem had been resolved -- but maybe not, as the FAR 19.505(c)(5) text is still there and is reflected in the new 52.219-33.

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@ji20874 in the past the FAR council has stated that contracting officers should follow FAR. I recall that the case law doesn’t necessarily support their statement, but I’m with you, the solution is just a deviation away. Unfortunately, many (most) contracting officers don’t have easy access to deviations authorities. One would think that class deviations would be appropriate considering it’s taking several years to process the open FAR Case (2016-011).

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The need for a CAAC Letter and a DoD Class Deviation is evidence that the FAR Councils are not doing the job envisioned by FAR 1.201. They are not fulfilling their responsibilities to contracting officers, to contractors, and to the taxpayers.

Obviously, just my opinion.

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Your opinion is shared by others.

Asking every agency to do its own class deviation does not seem like a good way to run this railroad, when a single FAR-level interim rule could holistically solve the problem for everyone. 

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Since there are authorized deviations to the FAR, does the wording of the Poll need to be revised? 

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5 hours ago, ji20874 said:

As a contracting officer, I would have to follow the FAR.  

An agency head (or designee, such as a senior procurement executive) can grant a one-time or class deviation to the FAR if he or she wants to.  But a contracting officer cannot do that.

When the FAR and another regulation appear to conflict, the contracting officer should inform his or her superior and follow instruction.  FAR 1.602-1(a).

When para. (d) of the clause at FAR 52.219-6 was deleted earlier this year, I though the problem had been resolved -- but maybe not, as the FAR 19.505(c)(5) text is still there and is reflected in the new 52.219-33.

Devil's advocate kind of question here for my own edification: Where does it say that you follow the FAR above all else? FAR 1.602-1(b) states, "No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met." So what about a scenario where the Small Business Act has been updated and 13 CFR has been updated to reflect that change in law but the FAR has lagged behind that change? Seems like FAR 1.304(b)(2) allows for local policy to be inconsistent with the FAR when required by law (though I could just be interpreting it in the way I want to). 

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3 minutes ago, Freyr said:

So what about a scenario where the Small Business Act has been updated and 13 CFR has been updated to reflect that change in law but the FAR has lagged behind that change?

See, MCS Portable Restroom Service, B-299291, March 28, 2007.  This may provide some food for thought.

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16 minutes ago, Retreadfed said:

See, MCS Portable Restroom Service, B-299291, March 28, 2007.  This may provide some food for thought.

Thanks Retreadfed, definitely provides food for thought. Specifically, "While the Air Force’s position here would seem to be consistent with a literal reading of FAR § 19.1406(a), “a regulation must be interpreted so as to harmonize with and further and not conflict with the objective of the statute it implements.""  The case seems to support the idea that if the FAR conflicts with a statute, then it should not be followed if there's other implementing regulation that could be reasonably used (provided we don't skip over the rule-making process). 

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It's complicated. Following FAR appears to be the most practical route to me. There are over 50 open FAR Council cases pending, lagging behind statutory changes, some 4-5 years old. Can't imagine what contracting hell would be like if each contracting officer was required to understand each such case and apply the statutory change wording to FAR. Also, there would likely be various resulting interpretations, which might cause more trouble than each contracting officer having the same FAR regulation to apply. In my experience suing governments regarding lagging regulatory application of statutory changes, I found that courts are willing to extend time to the agency to expedite its regulatory compliant change. But, 4-5 years? No. In an extreme case where irreparable harm to the suing entity/person was likely, the court was willing to compel the agency to comply immediately. I have thought about what would happen if the FAR Council was sued and required to issue interim regulations in all cases. That might help. Maybe they won't get it 100% right with an interim regulation but the hope would be that 85-90% right would be better than a long delay to get near 100% correct. I do recall some interim regulations. I have not done research into the standards for interim action.                  

Edited by Neil Roberts
add word "are"
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2 hours ago, Freyr said:

Devil's advocate kind of question here for my own edification: Where does it say that you follow the FAR above all else? FAR 1.602-1(b) states, "No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met." So what about a scenario where the Small Business Act has been updated and 13 CFR has been updated to reflect that change in law but the FAR has lagged behind that change? Seems like FAR 1.304(b)(2) allows for local policy to be inconsistent with the FAR when required by law (though I could just be interpreting it in the way I want to). 

It would be unlawful for a contracting officer to deviate from the FAR without authorization. If a local policy were inconsistent with the FAR, it would be a deviation.

I wrote an article for the September 2015 issue of the Nash & Cibinic Report on the conflict between the FAR and SBA regulations regarding the "overseas exception" at FAR 19.000(b). Here's a section on conflicts between the FAR and SBA regulations:

Quote

 

Inconsistencies Between the FAR and the SBA Regulations: What’s a CO to do?

In responding to a public comment alleging a conflict between the FAR and the SBA regulations under FAR Case 2006-032, Small Business Size Rerepresentation, the FAR councils stated their position with respect to such conflicts—

The stated purpose of the interim rule is to improve the accuracy of small business size status reporting, at the prime contract level, over the life of certain contracts. Contracting officers under the Executive Branch are required to follow the FAR. In cases where there are inconsistencies between Title 13 (SBA regulations) and Title 48 (FAR) of the Code of Federal Regulations, contracting officers follow the FAR.  [Emphasis added.]

74 Fed. Reg. 11821 (March 19, 2009).

This is a questionable position given that both the Court of Federal Claims and the GAO have viewed the SBA regulations as controlling when they conflict with the FAR.  In C & G Excavating, Inc. v. U.S., 32 Fed. Cl. 231, the Court dealt with a FAR rule that limited the scope of SBA review to those areas of responsibility identified as lacking by the CO when considering an application for a COC.  The SBA regulations contained no such limitation.  In resolving the conflict, the Court stated:

With regard to the direct conflict between 13 C.F.R § 125.5(e) and FAR § 19.602–2(a)(2), the court finds that the restrictive language in the FAR concerning the scope of SBA's site investigation cannot be interpreted to limit the scope of SBA's general review authority. The clear intendment of 13 C.F.R. § 125.5(e) is that the SBA may perform a site investigation examining all elements of responsibility. This interpretation is consistent with the [Small Business Act] and shall be given deference.

      In Adams Industrial Services, Inc. 98-2 CPD ¶ 56, the GAO sustained a protest where the agency, relying on FAR 19.302(j) (48 C.F.R. § 19.302(j) (1998)), argued that size protests received after award had no effect on the award—they only have prospective applicability.  The GAO stated:

While FAR Sec. 19.302(j) treats size status protests received after award of a contract as having no applicability to that contract, SBA's regulations, which we view as controlling in this area, provide that "[a] timely filed protest applies to the procurement in question even though a contracting officer awarded the contract prior to receipt of the protest.”

See also Diagnostic Imaging Technical Education Center, Inc., 94-2 CPD ¶ 148 (Timely filed postaward size protest applied to instant award despite FAR stating that decisions on such protests have only prospective applicability).

Thus, if a conflict exists between the FAR and the SBA regulations, it seems that a CO would be in the difficult position of having to choose between complying with the law as interpreted by the COFC and GAO or deviating from the FAR. See FAR Subpart 1.4, “Deviations from the FAR.”

 

I should have written that last sentence to say that the CO would have to deviate from the FAR to follow the law.

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At WIFCON, we're trying to help contracting officers and other front-line acquisition professionals deal with real-world problems.  I hope we stay practical, with forays into the abstract or realm of devil's advocacy only rarely and when necessary to help to see the big picture.  

Any hint or suggestion that contracting officers should blatantly disregard the FAR are non-starters for me.  They can and should interpret the FAR, and stretch the FAR, and so forth, and we can encourage that -- but we should not be making life hard for contracting officers such as by hinting or suggesting that they should blatantly ignore the FAR (48 CFR) in favor of the SBA regulations (13 CFR).  The differences between the two are known by the right people, and maybe they'll get to accord one day.  But until then, I think we have to encourage contracting officers to follow the FAR when there appears to be a head-to-head conflict.  Nothing helpful comes from hinting or suggesting that contracting officers are violating the FAR (such as FAR 1.602-1(b)) by following the FAR (such as FAR 19.505(c)(5) and 52.219-33(c)(1)(i)(B)).

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29 minutes ago, ji20874 said:

we should not be making life hard for contracting officers such as by hinting or suggesting that they should blatantly ignore the FAR (48 CFR) in favor of the SBA regulations (13 CFR). 

Who is given authority to issue regulations implementing the Small Business Act?  Are you saying that everyone other than contracting officers is bound by regulations issued by the SBA Administrator?  Are the FAR Councils authorized to issue regulations implementing the Small Business Act that are inconsistent with regulations issued by the SBA?

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To the extent that the members of the FAR Councils condone known differences ("the differences are known by the right people") they should be held personally accountable, just as a contracting officer may be held personally liable in certain situations. Again, I'm obviously expressing a personal opinion. But don't these people have supervisors who do performance reviews?

To be clear, contracting officers and contractors should not be put into a position of having to choose between regulation and statute. The individuals who put them into that position should be held accountable, in my view.

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35 minutes ago, Retreadfed said:

Are you saying that everyone other than contracting officers is bound by regulations issued by the SBA Administrator?  

No.  I am saying that if there appears to be a direct conflict between the FAR and the SBA regulations, a contracting officer should follow the FAR.

36 minutes ago, Retreadfed said:

Are the FAR Councils authorized to issue regulations implementing the Small Business Act that are inconsistent with regulations issued by the SBA?

I'm talking about contracting officers, not the FAR Councils.  

I answered your questions.  Will you answer mine?  Regarding the matter of the nonmanufacturer rule, are you saying contracting officers should ignore the FAR (FAR 19.505(c)(5) and 52.219-33(c)(1)(i)(B)) and follow the SBA regulation (13 CFR §121.406(c)) instead?

 

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6 hours ago, ji20874 said:

Regarding the matter of the nonmanufacturer rule, are you saying contracting officers should ignore the FAR (FAR 19.505(c)(5) and 52.219-33(c)(1)(i)(B)) and follow the SBA regulation (13 CFR §121.406(c)) instead?

I don't see a conflict between the FAR and SBA regs in this regard.  Thus, contracting officers can comply with both.

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On 8/27/2020 at 10:02 AM, Don Mansfield said:

I agree with @ji20874.

DoD did issue a class deviation to implement the SBA rule.

The CAAC also issued this.

There is apparently no conflict to the specific scenario of the Poll. 

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6 hours ago, Retreadfed said:

I don't see a conflict between the FAR and SBA regs in this regard.  Thus, contracting officers can comply with both.

Oh -- then I wonder what this entire thread has been about?

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On 8/28/2020 at 6:43 AM, Retreadfed said:

Are the FAR Councils authorized to issue regulations implementing the Small Business Act that are inconsistent with regulations issued by the SBA?

The short answer is "yes" it is possible that the FAR Council may issue regulations inconsistent with a regulation issued by SBA but consistent with a law that caused SBA to issue that regulation. FAR Council regulations should give deference to an unambiguous SBA regulatory interpretation of an unambiguous law passed by Congress. But, the FAR Council is not required to "blindly" mimic every single SBA regulation that is supposed to be an implementation of a law passed by Congress. It may come to a different rational view after notice of proposed regulation and comment period has concluded. In this case however, the last I looked, the FAR Council indicated it just hasn't got to finalizing any required change to FAR 19.505(c)(5) as a result of the law that caused SBA to issue 13 CFR 121.406(c). As I said in an earlier post, some FAR Council cases are 4-5 years old.    

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Neil, which "agency" has primary jurisdiction in regard to issuing regulations implementing the Small Business Act?  If the SBA issued a regulation implementing the Act and the FAR councils issued a conflicting regulation implementing the same provision, which, if either regulation would be entitled to Chevron deference?

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4 hours ago, Retreadfed said:

If the SBA issued a regulation implementing the Act and the FAR councils issued a conflicting regulation implementing the same provision, which, if either regulation would be entitled to Chevron deference?

Retread,

I think your question is inapt.  In this thread, it seems we are talking about contracting officers and what they should do in case of a conflict: follow the FAR or follow the SBA regs?

Regarding the matter of the nonmanufacturer rule, you already said there is no conflict.  But if there were, should contracting officers follow the dollar threshold cited in FAR (FAR 19.505(c)(5) and 52.219-33(c)(1)(i)(B)) or follow the threshold cited in SBA regulation (13 CFR §121.406(c))?

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On 8/29/2020 at 9:28 AM, Neil Roberts said:

The short answer is "yes" it is possible that the FAR Council may issue regulations inconsistent with a regulation issued by SBA but consistent with a law that caused SBA to issue that regulation. FAR Council regulations should give deference to an unambiguous SBA regulatory interpretation of an unambiguous law passed by Congress. But, the FAR Council is not required to "blindly" mimic every single SBA regulation that is supposed to be an implementation of a law passed by Congress. It may come to a different rational view after notice of proposed regulation and comment period has concluded.

This is likely to happen when we get a final rule under FAR Case 2016-002, Applicability of Small Business Regulations Outside the United States. The SBA regulations require set-asides when the rule of two is met regardless of place of performance. The proposed rule under FAR Case 2016-002 would make application of FAR part 19 outside the United States optional. FAR 19.000(b) currently contains a blanket exception for acquisitions outside the United States.

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