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FAR Part 19 applicability in Foreign Countries

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Question: Does an overseas office buying a service that will be performed in a U.S. outlying area have to comply with the rest of Part 19? It seems that there is an emerging consensus among the participants here that it is the location of performance that matters. If the answer is yes, does anyone know if overseas contracting offices read it that way?

I corresponded with representatives of an Army and a Navy contracting offce located in Europe. Neither office has a SB rep; neither awards contracts for work in the US. I am attempting to obtain copies of relevant documents setting out the reasons for these policies.

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In February 2009, the SBA Office of Advocacy asked the FAR councils to eliminate the "foreign exemption" in FAR 19.000(B). http://www.sba.gov/advo/r3/r3_foreign09.html. The councils have not opened a FAR case on the matter. It appears that the SBA to apply to acquisitions performed outside the U.S.

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FAR 19.000(B) states that FAR Subpart 19.6 applies worldwide. However, the prescription for the provision at FAR 52.219-1, Small Business Program Representations, says to insert when the contract will be performed inside the United States and its outlying areas.

Question: If an acquisition is to be performed outside the US and its outlying areas and a CO determines that a prospective contractor is nonresponsible, how would the CO know whether or not the prospective contractor was a small business concern? The prospective contractor would never have represented itself as such.

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Question: If an acquisition is to be performed outside the US and its outlying areas and a CO determines that a prospective contractor is nonresponsible, how would the CO know whether or not the prospective contractor was a small business concern? The prospective contractor would never have represented itself as such.

CCR and/or ORCA.

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FAR 19.6 applies outside the United States and its outlying areas, but only with respect to small businesses. A small business concern is a business entity "with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor." 13 CFR ? 121.105(a)(1). As Jacques says, the CO could check CCR and ORCA. Or the firm could assert its status, subject to verification.

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Question: Does an overseas office buying a service that will be performed in a U.S. outlying area have to comply with the rest of Part 19? It seems that there is an emerging consensus among the participants here that it is the location of performance that matters. If the answer is yes, does anyone know if overseas contracting offices read it that way?

What about performance that doesn't need to be performed in the United States, but could be?

Many foreign offices read Part 19 as not impacting them because they are located outside the United States and its outlying areas. Many don't have small business personnel assigned. Many employ foreign nationals and permavilians who wouldn't know 19 if it hit them square upside the head.

Some activities have offices both outside the United States and its outlying areas and inside and they permit each office to interpret the rule based on what is convenient to them. Not surprisingly, what is convenient to them is to trigger the foreign exemption whenever possible, even when contract performance is entirely in the US.

To answer the OP's question:

If your contracting office is located in the United States, and your activity is a Defense activity, I would anticipate that you have a SBS appointed and that this person is following the "all acquisitions" language at DFARS 219.201(d)(10)(A).

The SBS probably wants to get a 2579 because:

1) She feels she is required to;

2) He wants to make sure you are not citing the foreign exemption when you shouldn't;

3) She wants to ensure you are not claiming a FAR 5.202(a)(12) exception improperly (block 13);

4) He wants to find any U.S. based performance or potential U.S. based performance in your needs statement for subcontracting reasons (block 12);

5) If you are inside the United States, nothing has happened yet to invoke the foreign exemption. The DFARS requires the SBS to coordinate with the buyer and document the coordination on the 2579 before the KO issues the solicitation. If you need supplies delivered OCONUS, how do you know a US concern can't meet those needs? If you need acquisition performance OCONUS, how do you know a US based concern can't meet those needs? The regulation permits overseas 8(a) construction: Do you think the SBS might have an interest in this instance? See 13 CFR 124.502.

There are also some low-level things the coordination process catches that ensures proper codes are reported through the federal procurement data system, even if the acquisition isn't set-aside, like NAICS codes (block 8a) and FSCs (block 6a).

Wouldn't you want the SBS to have awareness of what you are doing so that when you synopsize, the SBS is not caught unaware? In these circumstances, it would seem as though you would want the Small Business Specialist's involvement in the planning of these acquisitions.

OP, what is your hesitance about just submitting the 2579?

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CCR and/or ORCA.

A representation as a small business in CCR/ORCA wouldn't apply to a solicitation when the contract will be performed in the United States or its outlying areas. See FAR 52.204-8( c)(1)(viii).

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A representation as a small business in CCR/ORCA wouldn't apply to a solicitation when the contract will be performed in the United States or its outlying areas. See FAR 52.204-8( c)(1)(viii).

1) Each CCR record reads at the top, "Not to be used as certifications and representations. See ORCA for official certification."

2) What about situations where the place of performance is not specified by the Government in the solicitation, but could include performance either entirely outside the US or its outlying areas or performance entirely inside the US or its outlying areas?

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What about situations where the place of performance is not specified by the Government in the solicitation, but could include performance either entirely outside the US or its outlying areas or performance entirely inside the US or its outlying areas?

The issue is whether the CO has to process the acquisition through the SADBUS. Assuming that there is no disagreement about the applicability of Part 19, the CO has to decide whether to coordinate with the SADBUS. In order to do that he or she has to decide where performance will take place. If the CO coordinates with the SADBUS, the SADBUS should ask the CO where performance will take place, because if it will be in the U.S. or its outlying areas, the CO must consider the issue of small business set-aside.

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I took Don's question in Post #28 to be a logistical one. The absence of a 52.219-1 certification in the solicitation would not prevent a CO from determining whether, upon finding the apparent successful offeror nonresponsible, that offeror was a small business for purposes of FAR Subpart 19.6 and SBA's COC process.

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The issue is whether the CO has to process the acquisition through the SADBUS. Assuming that there is no disagreement about the applicability of Part 19, the CO has to decide whether to coordinate with the SADBUS. In order to do that he or she has to decide where performance will take place. If the CO coordinates with the SADBUS, the SADBUS should ask the CO where performance will take place, because if it will be in the U.S. or its outlying areas, the CO must consider the issue of small business set-aside.

"DFARS 219.201(d)(10) Contracting activity small business specialists perform this function by? (A) Reviewing and making recommendations for all acquisitions (including orders placed against Federal Supply Schedule contracts) over $10,000, except those under the simplified acquisition threshold that are totally set aside for small business concerns in accordance with FAR 19.502-2. Follow the procedures at PGI 219.201(d)(10) regarding such reviews. ( B ) Making the review before issuance of the solicitation or contract modification and documenting it on DD Form 2579, Small Business Coordination Record; and ( C ) Referring recommendations that have been rejected by the contracting officer to the Small Business Administration (SBA) procurement center representative. If an SBA procurement center representative is not assigned, see FAR 19.402(a)."

This passage does not identify the responsibility of a contracting officer, but rather details the responsibilities of the contracting activity small business specialist. The contracting activity small business specialist has a responsibility to review and make recommendations for all acquisitions specified. This would, by necessity, include certain contracts performed outside the United States or its outlying areas. See DFARS PGI 219.804-2(4), which reads, "(4) For competitive requirements for construction to be performed overseas, submit the notification to SBA Headquarters." How is DoD doing competitive 8(a) construction "to be performed overseas" if Part 19 doesn't apply there? How is the small business specialist going to make a recommendation on these contracts if he or she doesn't even know one is going on?

Also, compare the language from FAR 19.000( b ) with the language from FAR 22.1003-2, which details the geographical coverage of the Service Contract Act of 1965. It reads, "The Act applies to service contracts performed in the United States (see 22.1001). The Act does not apply to contracts performed outside the United States."

It is clear if "performed outside the United States" had been desired, 19.000( b ) could have been written that way. (Perhaps it still could, but FAR 19.000( b ) doesn't read that way right now.)

See the following for a useful, if imprecise, article covering the "foreign exemption" issue: http://ncmahq.org/files/Articles/CM0609%20-%2030-37.pdf

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How is DoD doing competitive 8(a) construction "to be performed overseas" if Part 19 doesn't apply there?

Part 19 does not have to apply in order for acquisitions to be set aside under 8(a) overseas. FAR 19.000(B) limits the scope of Part 19, not the Small Business Act. We still have 13 CFR Part 124, FAR 6.204 (competitive 8(a) under the authority of the Act), and 6.302-5(B)(4) (sole source 8(a) under the authority of the Act). I don't take the cross-reference back to Subpart 19.8 as limiting the scope of the statutory exceptions to full and open competition. You would have to read language limiting scope as implicitly prohibiting conduct. FAR Part 1 generally discourages this type of interpretation. Relief from a requirement is generally not a requirement to do the opposite. To put it more plainly, just because you don't have to do something, doesn't mean you can't.

There is a decision that potentially doesn't support this rationale. Consider Miller, Groezinger, Pettit & Evers, 50 Comp. Gen. 759 (1971), where the protester to a set-aside award by a domestic contracting activity for overseas performance argued that the predecessor to FAR 19.000(B) (ASPR 1-700) limited the use of small business set-asides to contracts performed in the U.S. The GAO rejected the argument, looking to the language of the Small Business Act. The decision stated, "[W]e can perceive of no legal basis to interpose an objection to a small business set-aside that is awarded within, but is to be performed outside, the geographical areas enumerated in ASPR 1-700." While it does not invariably follow, the language can be read to suggest that if the contract was both awarded and performed outside the US, there could be a legal objection under ASPR 1-700. Like Sterile Foods, those weren't the facts before the GAO.

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I came across the following in the RFA analysis section of an interim DoD rule (see DFARS Case 2009-D029):

Contract support for recent military operations has been provided primarily by the Department of Army's LOGCAP contracts, which were awarded to large businesses. There are high costs associated with a company being able to perform in the geographic regions where most military operations are currently taking place. This makes it unlikely that a small business could afford to sustain the infrastructure required to perform these types of services in locations such as Iraq and Afghanistan. Small business preferential programs under FAR part 19 may not apply to these contracts as they only apply to contracts placed in the United States or its outlying areas. At this time, DoD is unable to estimate the number of small entities to which this rule will apply.

Ok, so where is a contract "placed"? Where it's awarded, or where it's performed?

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According to a recent SBA IG report, the SBA's position is that FAR Part 19 applies to contracts awarded in the United States, regardless of where they are performed. From the report:

In addition, Management's response advises that SBA has actually rendered an interpretation that under the FAR, the Small Business Act applies to contracts awarded by contracting offices located within the United States, but where contract performance takes place overseas." However, Management believes that most agencies are likely taking the position that the Act does not apply to contracts performed and/or awarded overseas. We believe this response does not give adequate consideration to the fact that Congress has charged SBA, not procuring agencies, with authority to interpret the Small Business Act and to establish the goaling guidance. The SBA Administrator appears to have sufficient authority to define which government contracts should be included in the goaling calculations.

See the full report here.

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The recent SBA IG Report has confirmed what the SBA Office of Advocacy had acknowledged in 2009, that FAR 19.000( :o - or as it is known, the 'Foreign Exemption' - is not consistent with applicable laws and must be eliminated. The 'Foreign Exemption' is on the SBA Office of Advocacy r3 Initiative's list which identifies it as one of the "Ten Worst Regulations Affecting Small Businesses," FPA announcement

You might find my OP-ED about the Exemptions on this link of interest, OMG. It focuses on the SBA Legal Opinion of February 2007 which stated that "according to statute and regulations, small business set asides are mandatory for acquisitions valued from $3,000 to $100,000 (upgraded to $150,000 in 2011). This interpretation is consistent with the declared and unambiguous intent of Congress as it relates to Federal procurement and small businesses."

The procurement community must no longer exclude small businesses from those eligible contracts and must consider letting the SBA PCRs do their small business coordination of all applicable foreign contracts.

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