IV. Regulatory Flexibility Act

DoD certifies 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 most contracts awarded to small entities use simplified acquisition procedures or are awarded on a competitive fixed-price basis and do not utilize award-fee type incentives. Of the 1.16 million contracts awarded to small businesses in Fiscal Year 2010, less than 0.1 percent were award-fee contracts.

The rule prohibits roll-over of unearned award fee, and requires that at least 40 percent of the award-fee pool be available for the final performance evaluation with the intent of incentivizing the contractor throughout performance of the contract. Any impact of these requirements on small businesses that do have award-fee contracts is mitigated by the fact that contractors will continue to be paid costs on cost-type contracts, and progress or performance-based payments on fixed-price contracts. Therefore, contractors' cash flow will not be impacted significantly unless there is a failure to meet the performance criteria in the contract.

Furthermore, the final rule provides more flexibility regarding the requirement that 40 percent of the award-fee pool must be available for the final evaluation period. With the approval of the head of the contracting activity, the contracting officer can determine that, in some cases, a percentage of less than 40 percent of the award-fee pool is appropriate to be made available for the final evaluation period.

Additionally, no comments were received in response to publication of the proposed rule with respect to the impact of the proposed rule on small entities.