[Federal Register: March 16, 2011 (Volume 76, Number 51)]
[Rules and Regulations]
[Page 14562-14565]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr11-17]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 10, 16, 44, and 52
[FAC 2005-50; FAR Case 2008-007; Item IV; Docket 2010-0086, Sequence 1]
RIN 9000-AL50
Federal Acquisition Regulation; Additional Requirements for
Market Research
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: DoD, GSA, and NASA have adopted as final, with changes, the
interim rule amending the Federal Acquisition Regulation (FAR) to
implement section 826, Market Research, of the National Defense
Authorization Act for Fiscal Year 2008. Section 826 requires the head
of an agency to take appropriate steps to ensure that any prime
contractor of a contract (or task order or delivery order) in an amount
in excess of $5 million for the procurement of items other than
commercial items engages in market research as necessary before making
purchases.
DATES: Effective Date: April 15, 2011.
FOR FURTHER INFORMATION CONTACT: Ms. Lori Sakalos, Procurement Analyst,
at (202) 208-0498, for clarification of content. For information
pertaining to status or publication schedules, contact the Regulatory
Secretariat at (202) 501-4755. Please cite FAC 2005-50, FAR Case 2008-
007.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published an interim rule in the Federal
Register at 75 FR 34277 on June 16, 2010, to implement section 826,
Market Research, of the National Defense Authorization Act for Fiscal
Year 2008 (Pub. L. 110-181). Section 826 establishes additional
requirements in subsection (c) of 10 U.S.C. 2377. As a matter of
policy, these requirements are extended to all executive agencies.
Specifically, the head of the agency must conduct market research
before issuing an indefinite-delivery indefinite-quantity task or
delivery order for a noncommercial item in excess of the simplified
acquisition threshold. In addition, a prime contractor with a contract
in excess of $5 million for the procurement of items other than
commercial items is required to conduct market research before making
purchases that exceed the simplified acquisition threshold for or on
behalf of the Government. Three respondents submitted 16 comments on
the interim rule.
II. Discussion/Analysis
Public Comments: A discussion of the comments and the changes made
to the rule as a result of those comments are provided as follows:
A. Purpose
1. Comment: One respondent stated that the guidance does not appear
to explain the end purpose of the market research. Another respondent,
however, concluded that the FAR states the purpose of the market
research twice, in FAR 44.402(b) and 10.001(a)(3). The second
respondent stated that the purpose for conducting market research is
``clearly described in Part 10 and there is no reason to repeat that
same language elsewhere in the FAR.''
Response: The Defense Acquisition Regulations Council and the
Civilian Agency Acquisition Council (the Councils) agree with the
second respondent. FAR part 10 ``prescribes policies and procedures for
conducting market research to arrive at the most suitable approach to
acquiring, distributing, and supporting supplies and services'' (FAR
10.000). FAR 10.001(a)(3) lists the ways in which the
[[Page 14563]]
results of the market research may be used. We believe that the end
purpose of market research is exhaustively covered in FAR part 10. We
also agree that there is no need to repeat this material in FAR subpart
44.4, and the final rule removes the redundant material.
2. Comment: A respondent noted that competitively awarded
indefinite-delivery indefinite-quantity contracts are priced as a
result of market forces. Conducting market research prior to the award
of individual task orders ``will only be looking at the scope of Task
Order* * * (and) is redundant to the market research already required
by FAR for the (indefinite-delivery indefinite-quantity) contract.'' It
is unlikely to result in more competition or better pricing, according
to the respondent.
Response: The Councils note that the purpose of market research is
to effectively identify, on an on-going basis, the capabilities of
small businesses and new entrants into Federal contracting that are
available in the marketplace for meeting the requirements of the
agency. The Councils disagree with the respondent's contention that
more competition or better pricing are unlikely to result. (Also see
responses at II.F., Burden.)
B. Location in FAR
1. Comment: A respondent noted that, while FAR part 10 contains
scant detail on market research, there are existing market research
techniques and information embedded in chapter 2 of the DoD Commercial
Item (CI) Handbook at http://www.acq.osd.mil/dpap/Docs/cihandbook.pdf.
The respondent stated that the Handbook might be instructive for
executive agencies to use as part of any training requirements.
Response: This comment is outside the scope of the FAR case.
However, it has been forwarded to both the Defense Acquisition
University and the Federal Acquisition Institute for their
consideration. The current Commercial Item Handbook (version 1.0) was
published November 2001 and is currently in revision.
2. Comment: A respondent stated its conclusion that the section 826
requirement for contractors with contracts exceeding $5 million to
perform market research for ``other than commercial items'' is
misplaced because the title of FAR subpart 44.4 is ``Subcontracts for
Commercial Items and Commercial Components.'' The respondent suggested
that a better location for the statutory requirement would be at FAR
44.303.
Response: The Councils agree that the requirement was misplaced in
FAR subpart 44.4 and have relocated the clause prescription to FAR part
10, Market Research (rather than FAR subpart 44.3, as suggested by the
respondent). The statute and policy require contractors to conduct
market research in certain circumstances (when the contract is over $5
million for the procurement of items other than commercial items);
whether the subcontract is for commercial or other than commercial
items is immaterial to the contractor's requirement to conduct market
research. The statute encourages contractors and subcontractors to use
commercial items. The FAR is amended to delete the subject of market
research from subpart 44.4, and the ``Scope of subpart'' section, FAR
44.400, is being revised accordingly. The Councils believe that the
coverage is better located in FAR part 10 rather than FAR subpart 44.3,
as the respondent suggested, because the latter subpart is exclusive to
Contractors' Purchasing Systems Reviews.
3. Comment: A respondent stated that FAR 52.244-6 is intended to
limit the clauses that a FAR part 15 prime contractor is required to
flow down to a subcontractor selling commercial items. The respondent
stated its belief that the new Alternate I to the clause is
unnecessary. The respondent also concluded that the existing FAR part
10 market research language should not be restated there. Last, the
respondent questioned the need for the added language about ``procuring
commercial items,'' when the focus of section 826 is on procurement of
``other than commercial items.''
Response: The Councils agree that Alternate I to FAR 52.244-6 is
unnecessary and not relevant to subcontracts for commercial items. By
removing discussion of market research from FAR subpart 44.4, there
will no longer be a redundant discussion of FAR part 10 material in FAR
subpart 44.4. The Councils agree with the respondent that the focus of
section 826 is on the procurement of other than commercial items.
Relocating the requirement for contractors to conduct market research
to FAR part 10 better aligns the FAR coverage with the statute. The
Councils have retained the requirement, at section 826(a) (10 U.S.C.
2377(c)(4)), for a contractor with a contract over $5 million for the
procurement of other than commercial items to conduct market research.
However, the Councils have added the requirement as a new FAR clause,
52.210-1, Market Research, prescribed at FAR 10.003, Contract clause.
Because the statute requires the conduct of market research by a
contractor awarded task orders or delivery orders over $5 million for
items other than commercial items, we have added a cross-reference to
the requirement to FAR subpart 16.5.
C. Clarification of FAR Language
1. Comment: A respondent concluded that the interim rule confuses
the prime contractor's role in procuring supplies and services to
support its deliverable to the Government, i.e., subcontracting, with
the unique and completely distinct role of a prime contractor holding a
contract to operate a Government facility and act in the place of the
Government in procuring supplies and services solely to support the
activities at the Government facility, i.e., acting as an agent of the
Government.
Response: The Councils eliminated the ``purchasing agent'' language
by deleting the Alternate I to FAR 52.244-6. The Councils also created
a new FAR clause 52.210-1, Market Research.
2. Comment: A respondent noted that there is a significant
difference between the section 826 requirement to conduct market
research ``as may be necessary'' and the FAR 44.402(b) requirement to
conduct market research ``to the maximum extent practicable.'' The
respondent requested that the language from section 826 be used so that
contractors will have the ability to tailor their market research as
necessary to reflect their knowledge and experience of the supplies and
services being procured.
Response: The Councils do not agree with the respondent. The
Government has interpreted ``as may be necessary'' to mean ``to the
maximum extent practicable.'' In any case, the term ``to the maximum
extent practicable'' has been removed from the case, as the coverage
for FAR 44.402(b) has been deleted from the rule.
D. Application
1. Comment: According to the respondent, mixing the discussion of a
contractor's possible roles of subcontracting and acting as the
Government's agent has created a lower standard for ``agents.'' As
written, the respondent stated, the language requires contractors to
perform the necessary market research whenever procuring other than
commercial items, but purchasing agents are only required to perform
market research when procuring other-than-commercial items with a value
over the simplified acquisition threshold. The respondent questioned
the need for this distinction.
Response: The Councils agree that there need not be any distinction
[[Page 14564]]
between the contractor acting as a subcontractor and the contractor
``acting as a purchasing agent.'' The language has been removed from
FAR subpart 44.4.
2. Comment: A respondent recommended requiring the conduct of
market research prior to the award of each task order issued under an
indefinite-delivery indefinite-quantity contract that was awarded on a
sole-source basis.
Response: The Councils disagree with the respondent because the
clear language of the statute, section 826(c), establishes a
requirement for the conduct of market research appropriate to the
circumstances prior to awarding a task order or delivery order in
excess of the simplified acquisition threshold for the procurement of
items other than commercial items. The statute does not limit the
market research requirements to task orders or delivery orders awarded
against sole-source indefinite-delivery contracts. Although this is
mandatory for DoD and not for civilian agencies, the language was
applied to civilian agencies for uniformity across the Government. See
also the response to the second comment at II.A., Purpose, and the
responses at II.E., Exceptions.
E. Exceptions
1. Comment: One respondent stated that the addition of a new
paragraph (d) at FAR 10.001, Policy, only applies to ``(A) contingency
operation or defense against or recovery from nuclear, biological,
chemical, or radiological attack; and (B) disaster relief * * *''. For
that reason, the respondent believes that the same applicability should
be added to FAR 44.402, as paragraph (d) outlines. The respondent noted
that, without this change, there would be a negative impact on
indefinite-delivery indefinite-quantity contracts.
Response: The respondent's assumptions about the applicability are
not correct. The requirement for agencies to conduct market research
for disaster relief and contingency operations already existed at FAR
10.001(a)(2).
2. Comment: A respondent claimed that indefinite-quantity contracts
set aside for Small Business Administration (SBA) categories, such as
the 8(a) program and small disadvantaged business, should be exempt
from market research requirements because the intent is to facilitate
the SBA in supporting these ``specialty market segments.'' The
respondent notes that this market segment historically is very
committed and can be relied upon to self-police.
Response: The SBA's current socioeconomic programs offering
eligible program participants contractual opportunities are the section
8(a) program, HUBZone program, and the service-disabled veteran-owned
small business concern program. The SBA has finalized the regulations
that will provide guidance for the women-owned small business Federal
contract program. The rule was published in the Federal Register on
October 7, 2010 (75 FR 66258). The SBA does not have a small and
disadvantaged business (SDB) program offering SDB set-asides. However,
the SBA's 8(a) firms may represent themselves as SDBs for Federal
contracts and subcontracts to include task- and delivery-orders under
indefinite-delivery contracts.
Performing market research for task- and delivery-orders will not
diminish opportunities for agencies to establish set-asides for small-
business concerns or, when appropriate, award sole-source contracts for
indefinite-delivery contracts. Market research performed by prime
contractors will also enhance subcontracting opportunities for small-
business concerns. Careful attention to market-research strategies is
an effective method for creating contract opportunities for small-
business concerns. It provides them with an awareness of forthcoming
procurements. In turn, the market research provides a vehicle for the
small-business concern to market its capabilities to the Government and
its contractors. FAR part 10 currently supports market research for
small business concerns and requires agencies to take advantage of
commercially available market research methods in order to effectively
identify the capabilities of small businesses. The final rule will not
limit an entity's ability to utilize the SBA's small business programs.
F. Burden
1. Comment: A respondent noted that at least one agency uses
multiple-award contracts for construction. Each task order is competed,
which the respondent stated ensures that ``the full force of the
marketplace is apparent in the pricing of competitiveness of each
award.'' In addition, each prime contractor is continually reviewing
the performance and prices of all its subcontractors. The respondent
stated that having the Government perform additional market research in
this market segment is a waste of time and money.
Response: The Councils do not agree with the respondent. Given the
continuously changing circumstances and entry of new businesses, on-
going market research is not a waste of manpower and taxpayers' money.
Further, the respondent addresses the Government's performance of
additional market research, but the statute also places the on-going
market research requirement on the prime contractor in these
circumstances. There is no reason why a multiple-award construction
contract should be treated any differently than any multiple-award
contract.
2. Comment: A respondent expressed concern about the negative
impact caused by the time and effort required for each market survey.
Fiscal year-end solicitations and awards may be slowed to the point of
making awards impossible.
Response: The Councils cannot waive statutory requirements simply
because compliance will take time. In an effort to enhance uniformity
and consistency, the DoD statutory mandate was intentionally extended
to all executive agencies, consistent with Governmentwide applications
being sought in other competition matters by the Office of Federal
Procurement Policy. The Councils also point the respondent to FAR
10.002(b)(1), which notes that the ``extent of market research will
vary, depending on such factors as urgency, estimated dollar value,
complexity, and past experience.'' Further, the Councils note that FAR
10.002(b)(1) clearly states that the market research effort for a new
task order or delivery order need not be de novo in every case; the
``contracting officer may use market research conducted within 18
months before the award of any task or delivery order if the
information is still current, accurate, and relevant'' (emphasis
added).
3. Comment: The respondent stated that the requirement for market
research will greatly impede the award of task orders, slowing fiscal
year-end awards to the point of impossibility and negatively impacting
Base Operating Support/Service (BOS) contracts. The respondent noted
that BOS contracts have performance-based elements that ensure the
contractor has incentives for efficiencies that will result in
substantive savings in cost and schedule. Time has proven that having a
single contractor responsible for the full scope of a contract effort
enables tradeoffs by the contractor that result in better overall
performance and savings, according to the respondent, than would
intermittent market research.
Response: Whatever the respondent's experience with BOS contracts
containing performance-based elements, the Councils note that the
statute requires the conduct of market research
[[Page 14565]]
for both single-award and multiple-award indefinite-delivery contracts.
The point of having contractors conduct market research, as stated in
the law, is to identify commercial or nondevelopmental items that may
be available to meet the agency's needs, not to identify efficiency
trade-offs within the contractor's operations. Both efforts can proceed
in tandem.
Finally, this final rule makes several conforming changes and
technical corrections as a result of public comments received:
1. The language added to FAR 52.244-6 (Alternate I) is relocated to
a new FAR clause 52.210-1, Market Research;
2. A prescription for the new clause is added at FAR 10.003,
Contract clause; and
3. A cross-reference for the clause is added at FAR 16.506(h) when
the contract is over $5 million for the procurement of items other than
commercial items.
III. Executive Order 12866
This 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.
IV. Regulatory Flexibility Act
DoD, GSA, and NASA 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 of the high dollar threshold, non-applicability to
contracts for commercial items (including commercial items that are
services), and non-applicability to subcontracts for commercial items
(including commercial items that are services). DoD, GSA, and NASA
anticipate that the required market research is likely to increase the
number of small businesses identified as able to provide commercial or
nondevelopmental items as subcontractors. Any impact to small
businesses is positive because their commercial and nondevelopmental
items are more likely to be discovered as a result of these market
research requirements. No comments were received from small entities in
response to the invitation to do so included in the interim rule.
V. Paperwork Reduction Act
The final 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. chapter 35).
List of Subjects in 48 CFR Parts 10, 16, 44, and 52
Government procurement.
Dated: March 4, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide Acquisition Policy.
Interim Rule Adopted as Final With Changes
Accordingly, the interim rule amending 48 CFR parts 10, 16, 44, and
52, which was published in the Federal Register at 75 FR 34277, June
16, 2010, is adopted as final with the following changes:
0
1. The authority citation for 48 CFR parts 10, 16, 44, 52 continues to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 10--MARKET RESEARCH
0
1. Amend section 10.001 by revising paragraph (d) to read as follows:
10.001 Policy.
* * * * *
(d) See 10.003 for the requirement for a prime contractor to
perform market research in contracts in excess of $5 million for the
procurement of items other than commercial items in accordance with
section 826 of Public Law 110-181.
0
2. Add section 10.003 to read as follows:
10.003 Contract clause.
The contracting officer shall insert the clause at 52.210-1, Market
Research, in solicitations and contracts over $5 million for the
procurement of items other than commercial items.
PART 16--TYPES OF CONTRACTS
0
3. Amend section 16.506 by adding paragraph (h) to read as follows:
16.506 Solicitation provisions and contract clauses.
* * * * *
(h) See 10.001(d) for insertion of the clause at 52.210-1, Market
Research, when the contract is over $5 million for the procurement of
items other than commercial items.
PART 44--SUBCONTRACTING POLICIES AND PROCEDURES
0
4. Revise section 44.400 to read as follows:
44.400 Scope of subpart.
This subpart prescribes the policies limiting the contract clauses
a contractor may be required to apply to any subcontractors that are
furnishing commercial items or commercial components in accordance with
section 8002(b)(2) of Public Law 103-355.
44.402 [Amended]
0
5. Amend section 44.402 by removing paragraph (b) and redesignating
paragraphs (c) and (d) as paragraphs (b) and (c), respectively.
0
6. Revise section 44.403 to read as follows:
44.403 Contract clause.
The contracting officer shall insert the clause at 52.244-6,
Subcontracts for Commercial Items, in solicitations and contracts other
than those for commercial items.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
7. Add section 52.210-1 to read as follows:
52.210-1 Market Research.
As prescribed in 10.003, insert the following clause:
Market Research (APR 2011)
(a) Definition. As used in this clause--
Commercial item and nondevelopmental item have the meaning
contained in Federal Acquisition Regulation 2.101.
(b) Before awarding subcontracts over the simplified acquisition
threshold for items other than commercial items, the Contractor
shall conduct market research to--
(1) Determine if commercial items or, to the extent commercial
items suitable to meet the agency's needs are not available,
nondevelopmental items are available that--
(i) Meet the agency's requirements;
(ii) Could be modified to meet the agency's requirements; or
(iii) Could meet the agency's requirements if those requirements
were modified to a reasonable extent; and
(2) Determine the extent to which commercial items or
nondevelopmental items could be incorporated at the component level.
(End of clause)
52.244-6 [Amended]
0
8. Amend section 52.244-6 by removing from the introductory text
``44.403(a),'' and adding ``44.403,'' in its place; and removing
Alternate I.
[FR Doc. 2011-5555 Filed 3-15-11; 8:45 am]
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