II. Discussion and Analysis

Section 811 became effective on the date of enactment, October 28, 2009. Section 811 addresses requirements for the J&A of sole-source contracts over $20 million under the 8(a) small-business development program.

The Federal Acquisition Regulatory Council (FAR Council) held three Tribal consultation and outreach meetings to discuss rulemaking associated with section 811.

The meetings took place during October 2010 in Washington, DC; Albuquerque, New Mexico; and Fairbanks, Alaska (see the meeting notice that was published in the Federal Register on August 31, 2010 at 75 FR 53269). Transcripts of the meetings are available at http://www.acq.osd.mil/dpap/dars/section811_docs.html.

After the meetings, DoD, GSA, and NASA weighed the costs and benefits of publishing this rule as proposed or interim. The rule is being published as interim, rather than proposed, because the rule is implementing a statutory mandate, and the statutory date for issuance of regulations has already passed. Because this is an interim rule, the public will have another opportunity to comment. These additional comments could result in further changes in the final rule.A frequently heard comment at the October meetings was a request that the FAR not use the 12 elements currently required at FAR 6.303-2 for J&As for less than full-and-open competition, but instead limit the elements to be addressed to the five elements listed in section 811(b), which are set forth as follows:

(1) A description of the needs of the agency concerned for the matters covered by the contract;

(2) A specification of the statutory provision providing the exception from the requirement to use competitive procedures in entering into the contract;

(3) A determination that the use of a sole-source contract is in the best interest of the agency concerned;

(4) A determination that the anticipated cost of the contract will be fair and reasonable; and

(5) Such other matters as the head of the agency concerned shall specify.

DoD, GSA, and NASA have drafted the interim FAR rule to adopt only these five elements. DoD, GSA, and NASA did not adopt the suggestions raised in the October meetings (1) not to include the fair and reasonable price determination and (2) not to allow agency heads to address any matter, without specific limits (the fifth element set out in section 811). A determination that the anticipated cost of a contract will be fair and reasonable is a universal requirement in Federal contracting; including the requirement in the J&A would be sensible, even if it were not specifically required by section 811.

A common issue raised in the meetings was that the fifth element, "Such other matters as the head of the agency concerned shall specify," was too broad. DoD, GSA, and NASA determined that it made sense to allow agency heads to identify other factors supporting the decision to make a sole-source 8(a) award. By retaining the wording from the statute, agency heads retain the discretion to consider such factors as Indian economic development or meeting agency small business contracting goals--both factors that participants in the October meetings offered as legitimate reasons to make a sole-source award.

Commenters at the meetings and in the written comments also requested that the "over $20 million" threshold for requiring a J&A be applied only to the base year of a contract. For example, if a requirement was for $75 million, with a base year estimate of $15 million and four one-year $15 million options, commenters stated their belief that the requirement should not need a J&A because the base-year amount was not over $20 million. DoD, GSA, and NASA have declined to use the base year amount as the basis for determining the applicability of the J&A requirement. The FAR (1.108(c)) establishes the following rule:

Dollar thresholds. Unless otherwise specified, a specific dollar threshold for the purpose of applicability is the final anticipated dollar value of the action, including the dollar value of all options. If the action establishes a maximum quantity of supplies or services to be acquired or establishes a ceiling price or establishes the final price to be based on future events, the final anticipated dollar value must be the highest final priced alternative to the Government, including the dollar value of all options.

Unless there is a specific reason, such as a statutory requirement to establish the dollar value of a procurement using a different method, agencies will not deviate from this FAR convention.

Commenters also requested that the requirement for the agency head to approve the J&A be delegated down to a much lower level, such as the contracting officer. FAR 1.108(b) states the following:

Delegation of authority. Each authority is delegable unless specifically stated otherwise. * * *

J&As are delegable, but there are limits on the redelegation authority based on the dollar value of the procurement; these are stated at FAR 6.304. The competition advocate for the procuring activity and the head of the procuring activity are included in the approval authorities to ensure the J&A is prepared and coordinated properly within the agency. Unless there is a specific reason, agencies will not deviate from the FAR convention at FAR 6.304.

A commenter was concerned about whether "fair and reasonable price" equates to "fair market price." The FAR provides various provisions to address the commenter's concern. The various techniques that contracting officers may use to determine that a price is fair and reasonable are described at FAR 15.404-1, Proposal analysis techniques. With regard to 8(a) contracts, FAR 19.202-6(b) states that contracting officers shall follow the procedures at FAR 19.807, which reads in pertinent part as follows:

Estimating fair market price.

The contracting officer shall estimate the fair market price of the work to be performed by the 8(a) contractor.

In estimating the fair market price for an acquisition other than those covered in paragraph (c) of this section, the contracting officer shall use cost or price analysis and consider commercial prices for similar products and services, available in-house cost estimates, data (including certified cost or pricing data) submitted by the SBA or the 8(a) contractor, and data obtained from any other Government agency.

As required by the FAR, agencies will continue to use the existing regulations to evaluate prices offered for 8(a) contracts over $20 million.

The changes made by the interim rule are summarized as follows:

(1) Cross references to the requirement for a J&A when the procurement is a sole-source 8(a) over $20 million are added at FAR 6.204, entitled "Section 8(a) competition," FAR 6.302-5, entitled "Authorized or required by statute," and in 19.808-1, entitled "Sole source".

(2) FAR 6.302-5, which sets forth the situations in which other than full-and-open competition is authorized or required by statute, has been modified to clarify that, while 8(a) sole-source awards are still authorized, they now must be supported by a J&A prior to award when the total estimated contract amount is over $20 million.

(3) Circumstances requiring a J&A for other than full-and-open competition have been expanded to include a new FAR 6.303-1(b) that includes the section 811(a) prohibition against awarding a sole-source 8(a) contract over $20 million unless a written J&A is approved by the appropriate official and made public after award.

(4) FAR 6.303-2, Content, (of the J&A) has a new paragraph that lists the five required elements for the sole-source 8(a) J&A from section 811.

 (5) FAR 19.808-1(a), Sole source, was revised to inform the contracting officer that the SBA may not accept for negotiation a sole-source 8(a) contract over $20 million unless the requesting agency has completed a J&A in accordance with the requirements at FAR 6.303.

Other requirements of section 811 were reviewed by DoD, GSA, and NASA and determined to be fully covered by the existing FAR. The specific areas reviewed included--

(1) The definition of a "covered procurement" at section 811(c)(1). Review determined that covered procurements, for the purposes of section 811, are those made under the SBA's Section 8(a) program. Therefore, it was not necessary to define and use the term "covered procurement" in this rule.

(2) The definition of "head of an agency" at section 811(c)(2). Review of the statutory references in this section determined that the FAR-wide definition of this term at FAR 2.101 could be used.

(3) The definition of "appropriate official" at section 811(c)(3). The statutory references provided in this section equate to those currently in FAR 6.304, Approval of the Justification.

(4) Requirement for synopses of proposed procurement actions. The existing FAR synopsis requirements at subpart 5.2, Synopses of Proposed Contract Actions, were reviewed. No change is proposed to FAR 5.202, Exceptions, or FAR 5.205, Special situations, because the statute did not modify the existing 8(a) synopsis requirements.

(5) Requirement at section 811(a)(3)to make the J&A and related information available to the public. This statutory requirement matches the J&A publication requirements added by the National Defense Authorization Act for Fiscal Year 2008, section 844, entitled "Public Disclosure of Justification and Approval Documents for Noncompetitive Contracts" (FAR Case 2008-003). The latter FAR case added the requirement to FAR 6.305, Availability of the Justification. Any J&A issued for an 8(a) sole-source contract award over $20 million will require posting in accordance with FAR 6.305, but no further change to that section is necessary.

Various commenters at the public meetings questioned whether contracting officers will be trained on the content of this rule implementing section 811. DoD, GSA, and NASA have prepared and submitted documentation to the Defense Acquisition University and the Federal Acquisition Institute to coordinate the appropriate changes in training curricula.