[Federal Register Volume 68, Number 94 (Thursday, May 15, 2003)]
[Proposed Rules]
[Pages 26265-26269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-12190]
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DEPARTMENT OF DEFENSE
48 CFR Parts 208, 219, and 252
[DFARS Case 2002-D003]
Defense Federal Acquisition Regulation Supplement; Competition
Requirements for Purchases From a Required Source
AGENCY: Department of Defense (DoD).
ACTION: Proposed rule with request for comments.
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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition
Regulation Supplement (DFARS) to implement Section 811 of the National
Defense Authorization Act for Fiscal Year 2002 and Section 819 of the
National Defense Authorization Act for Fiscal Year 2003. Sections 811
and 819 address requirements for conducting market research before
purchasing a product listed in the Federal Prison Industries (FPI)
catalog, and for use of competitive procedures if an FPI product is
found to be noncomparable to products available from the private
sector. Section 819 also addresses
[[Page 26266]]
limitations on an inmate worker's access to information and on use of
FPI as a subcontractor.
DATES: Comments on the proposed rule should be submitted in writing to
the address shown below on or before July 14, 2003, to be considered in
the formation of the final rule.
ADDRESSES: Respondents may submit comments directly on the World Wide
Web at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an
alternative, respondents may e-mail comments to: [email protected].
Please cite DFARS Case 2002-D003 in the subject line of e-mailed
comments.
Respondents that cannot submit comments using either of the above
methods may submit comments to: Defense Acquisition Regulations
Council, Attn: Ms. Susan Schneider, OUSD (AT&L) DPAP (DAR), IMD 3C132,
3062 Defense Pentagon, Washington, DC 20301-3062; facsimile (703) 602-
0350. Please cite DFARS Case 2002-D003.
At the end of the comment period, interested parties may view
public comments on the World Wide Web at http://emissary.acq.osd.mil/dar/dfars.nsf.
FOR FURTHER INFORMATION CONTACT: Ms. Susan Schneider, (703) 602-0326.
SUPPLEMENTARY INFORMATION:
A. Background
Section 811 of the National Defense Authorization Act for Fiscal
Year 2002 (Pub. L. 107-107) added 10 U.S.C. 2410n, providing that (1)
before purchasing a product listed in the FPI catalog, DoD must conduct
market research to determine whether the FPI product is comparable in
price, quality, and time of delivery to products available from the
private sector; (2) if the FPI product is not comparable in price,
quality, and time of delivery, DoD must use competitive procedures to
acquire the product; and (3) in conducting such a competition, DoD must
consider a timely offer from FPI for award in accordance with the
specifications and evaluation factors in the solicitation.
On April 26, 2002, DoD published an interim rule at 67 FR 20687 to
implement Section 811 of Public Law 107-107. In addition, DoD conducted
a public meeting on June 2, 2002, to hear the views of interested
parties. Approximately 60 persons attended the public meeting, and 43
sources submitted written comments in response to the interim rule.
On December 2, 2002, Section 819 of the National Defense
Authorization Act for Fiscal Year 2003 (Public Law 107-314) amended 10
U.S.C. 2410n to (1) clarify requirements for conducting market research
before purchasing a product listed in the FPI catalog; (2) specify
requirements for use of competitive procedures or for making a purchase
under a multiple award contract if an FPI product is found to be
noncomparable to products available from the private sector; (3)
specify that a contracting officer's determination, regarding the
comparability of an FPI product to products available from the private
sector, is not subject to the arbitration provisions of 18 U.S.C.
4124(b); (4) specify that a DoD contractor may not be required to use
FPI as a subcontractor; and (5) prohibit the award of a contract to FPI
that would allow an inmate worker access to classified or sensitive
information.
This proposed rule further implements the requirements of Section
811 of Public Law 107-107 and implements Section 819 of Public Law 107-
314. DoD considered comments received in response to the interim rule
published on April 26, 2002, in developing this proposed rule. A
discussion of the comments, grouped by subject area, is provided below:
1. Small Business Issues
Comment: DoD should provide guidance on the role of FPI
participation in small business set-aside competitions. Some
respondents want DoD to restrict FPI participation to those
acquisitions that have not been set aside for competition among small
businesses. Those respondents indicate that, prior to the issuance of
the first interim rule, FPI had been defined as an ``other than small''
business and, therefore, is not eligible to compete for small business
set-aside awards. Other respondents commented that FPI participation in
small business set-asides will have a positive effect on FPI.
DoD Response: Section 811 of Public Law 107-107 was silent on FPI's
relationship to small business set-asides. However, Section 819 of
Public Law 107-314 added a definition of ``competitive procedures'' as
it applies to 10 U.S.C. 2410n. This definition is the one at 10 U.S.C.
2302(2), which includes, in subsection (2)(D), ``procurements conducted
in furtherance of section 15 of the Small Business Act (15 U.S.C. 644)
* * *'' Therefore, this proposed rule adds text at 208.601-70,
208.602(a)(iv)(B), subpart 219.5, and Part 252 to provide for the
inclusion of FPI in procurements conducted using small business set-
aside procedures.
Comment: The Initial Regulatory Flexibility Analysis is correct in
stating that the rule will have a positive effect on small business
concerns, because the rule permits small businesses to participate in
procurements for supplies that were previously allocated to FPI on a
priority basis.
DoD Response: DoD expects this rule to have a positive impact on
small businesses. If an FPI product is determined to be noncomparable,
small businesses will have the opportunity to compete. The rule further
provides small businesses an opportunity to compete with FPI as their
sole competitor.
2. Micro-Purchase Exclusion
Comment: DoD should exempt micro-purchases ($2,500 and under) from
the requirements of the rule. The procedures of the rule are far too
burdensome for micro-purchases.
Comment: The requirements of Section 811 and FPI's statute apply
regardless of whether the purchase is below the micro-purchase
threshold.
DoD Response: 10 U.S.C. 2410n does not authorize DoD to provide an
exemption for micro-purchases. However, FPI's Board of Directors
recently adopted a resolution exempting purchases at or below $2,500
from FPI clearance requirements. This change is being processed under a
separate FAR case. When the FAR is amended to reflect this exemption,
the text at DFARS 208.606(1) will become obsolete and will be removed.
Therefore, this proposed rule excludes the text at DFARS 208.606(1).
3. Competitive Procedures
Comment: DoD should provide examples of ``competitive procedures.''
DoD Response: Section 819 of Public Law 107-314 added a definition
of ``competitive procedures'' as it applies to 10 U.S.C. 2410n. The
definition in the proposed rule at 208.601-70 reflects the statutory
definition, and also includes competition conducted using simplified
acquisition procedures in accordance with FAR Part 13.
4. GSA Multiple Award Schedules
Comment: It is questionable whether the use of GSA multiple award
schedules constitutes ``competitive procedures'' as contemplated in
Section 811. Confusion arises because orders on GSA schedules do not
require issuance of a solicitation or establishment of evaluation
factors.
DoD Response: Section 811 of Public Law 107-107 was silent on FPI's
relationship to the GSA multiple award schedule program. However, the
definition of ``competitive procedures'' added by Section 819 of Public
Law 107-314 includes ``the procedures
[[Page 26267]]
established by the Administrator of General Services for the multiple
award schedule program * * *'' (10 U.S.C. 2302(2)(C)). The definition
of ``competitive procedures'' in the proposed rule at 208.601-70
includes the use of GSA multiple award schedules (as one of the
procedures in FAR 6.102). The proposed rule provides further
clarification, at 208.602(a)(iv)(C), regarding competitive procedures
involving multiple award schedules.
Comment: Contracting officers should be authorized to acquire the
product off the Federal Supply Schedule, eliminating further
competition if Federal Supply Schedule published prices are lower than
FPI catalog prices.
DoD Response: Do not concur. This would violate 10 U.S.C. 2410n,
which requires market research to determine if the FPI product is
comparable. If the FPI product is determined to be noncomparable,
competitive procedures must be used to acquire the product.
5. Comparability
Comment: The meaning of ``comparable price, quality, and time of
delivery'' is questionable with respect to FPI products compared to
private sector competition. Recognizing that it may not be feasible to
produce a single general methodology that applies to every product, the
rule should require disclosure of specific guidelines and the
methodology used. Several respondents believed it was clear from both
the statute and the interim rule that, to be found comparable to a
product from the private sector, the FPI product must meet all three
criteria of price, quality, and time of delivery. The inability to meet
any one of the criteria should result in an automatic failure to find
FPI comparable. Several other respondents stated exactly the opposite,
i.e., that for the FPI product to be considered comparable, it need
only be comparable in one of the three areas. Several respondents
requested that the final rule contain procedures for making the
noncomparability determination.
DoD Response: Section 819(b) of Public Law 107-314 clarifies that
DoD may determine an FPI product to be noncomparable based on price,
quality, or time of delivery. The proposed rule clarifies this point at
208.602(a)(iv). The comparability determination must be fair, but it is
not practicable to set the criteria that will apply to all
circumstances. The contracting officer must retain flexibility. The
word ``comparable'' is already used throughout the FAR with its common
dictionary meaning (``having sufficient features in common with
something else to afford comparison''). To support the comparability
determination, a requirement for a written document has been included
in the proposed rule at 208.602(a)(ii). This document will include an
assessment of the three factors, based on the results of market
research that compares FPI products to those available from the private
sector.
Comment: Eliminate the requirement to allow FPI to compete if,
based on market research, it is determined noncomparable to the private
sector. The private sector does not receive two chances, so FPI should
not either.
DoD Response: Do not concur. The recommended change does not comply
with 10 U.S.C. 2410n, which requires that an offer from FPI be
considered if made in a timely fashion.
Comment: Section 811 is not appropriate for build-to-print items
(spares) that support older weapons systems. It is more appropriate for
commercial-type items, where it is easier to conduct market surveys for
comparison purposes. In some cases, the organization uses the
Government's depot cost to fabricate, as a basis of comparison. The use
of the term ``private sector'' invalidates that comparison and requires
a further comparison before award to FPI.
DoD Response: It appears that 10 U.S.C. 2410n was tailored more for
commercial-type items than build-to-print items. However, DoD
organizations must comply with its requirements.
Comment: The rule does not address buys of military-unique items,
because those items do not have catalog prices. Each requirement is
built to customer specification and must be individually quoted. There
are no catalogs to consult for pricing and delivery, from either FPI or
commercial sources. Section 811 would require following manual
procedures, outside of automated procurement systems, and cause
additional unnecessary lead time. In these situations, is it
permissible to solicit commercial sources and FPI simultaneously and
have the competitive offers and subsequent award decision serve as the
basis for making the determination of whether the FPI product is
comparable?
DoD Response: Although 10 U.S.C. 2410n does not prohibit this
method of conducting comparability determinations, the statute clearly
establishes an ``if-then'' situation, i.e., if the Secretary makes a
noncomparability determination, then he uses competitive procedures.
Therefore, section 208.602 of the proposed rule addresses the market
research and resulting comparability determination as a step separate
from the solicitation process, to adhere to the ``if-then'' approach
established in 10 U.S.C. 2410n.
6. The Resolution Process
Comment: Does the arbitration panel affect the resolution of
protests? In enacting Section 811, Congress was silent regarding the
arbitration panel's authority or whether a clearance or waiver from FPI
is required if the market research indicates that FPI's products are
not comparable to those available from the private sector.
DoD Response: Although Section 811 was silent on this matter,
Section 819 of Public Law 107-314 provides that the contracting
officer's determination, regarding the comparability of FPI products or
services to those available from the private sector that best meet
DoD's needs in terms of price, quality, and time of delivery, is not
subject to 18 U.S.C. 4124(b). 18 U.S.C. 4124(b) addresses the
arbitration board process as it relates to disputes as to price,
quality, character, or suitability of FPI products. The proposed rule
amends the text at DFARS 208.602(a)(i) to clarify that the arbitration
board process does not apply to a contracting officer's comparability
determination.
7. Delegation of Authority
Comment: Will the determination to award to other than FPI be
delegated down to the contracting officer level, as opposed to being
kept at the department or agency level as stated in 208.602?
DoD Response: The proposed rule amends DFARS 208.602(a) to provide
contracting officers the authority to make comparability determinations
with regard to FPI products. This amendment is consistent with the
language in Section 819(c)(1) of Public Law 107-314.
8. Unilateral Decision at 208.602(a)
Comment: It is inappropriate for the rule to state that the
comparability determination is ``a unilateral decision made solely at
the discretion of the department or agency.'' This sentence should
either be stricken or clarified. The provisions of the rule may
conflict with other statutes or lead to possible misapplication of
applicable law. DoD should be afforded discretion in making its
decision, however, there must be guidance setting forth the criteria so
the decisions are not arbitrary or capricious.
DoD Response: Do not concur. The comparability determination is
clearly and solely a DoD determination.
9. Terminology
Comment: The words ``FPI Schedule'', in the first sentence of
208.602(a),
[[Page 26268]]
should be changed to ``FPI Catalog'' to conform to the language in
Section 811.
DoD Response: Do not concur. The word ``Schedule'' has been
retained to conform to the terminology used in FAR subpart 8.4.
10. Previous DoD Guidance
Comment: The validity of a policy memorandum from the Office of the
Assistant Secretary of Defense, dated October 1988, that directs use of
GSA schedules as a ``quick and efficient'' way to obtain furniture for
DoD activities is questionable.
DoD Response: DoD recommends that the respondent not use this
memorandum for guidance. The policy has been superceded by 10 U.S.C.
2410n and its implementing regulations.
11. Sole-source Purchases
Comment: Is there a requirement to perform a comparability
determination if the need is to be acquired on a sole-source basis?
DoD Response: 10 U.S.C. 2410n does not provide for sole-source
purchases. If a product is on the FPI Schedule, the purchaser must
follow the DFARS policy implementing 10 U.S.C. 2410n.
12. Architect-engineer Contracts
Comment: There is concern about mandating the use of FPI products
for architect-engineer contracts. The rule should state that ``FPI may
not be specified as a source, nor shall an FPI product be prescribed or
recommended in any design or specification prepared by an architect or
engineer under contract to the Government. * * *''
DoD Response: The requirements of 10 U.S.C. 2410n are imposed on
the Government, not on the contractor. Section 819 of Public Law 107-
314 added text prohibiting DoD from requiring a contractor or potential
contractor to use FPI as a subcontractor or supplier. This prohibition
is addressed in the proposed rule at 208.670.
13. Use of the Term ``Solicitation''.
Comment: Use of the term ``solicitation'' means one must proceed
with issuing a formal solicitation whenever an agency determines that
an FPI product is not comparable.
DoD Response: Do not concur. As defined in FAR 2.101,
``solicitation'' means any request to submit offers or quotations to
the Government. For further clarification, the proposed rule separately
addresses the use of multiple award schedules at 208.602(a)(iv)(C).
14. Use of the Phrase ``That Best Meet the Government's Needs''.
Comment: The rule should be revised to conform to the text of
Section 811 by deleting the phrase ``that best meet the Government's
needs'' at each of the three locations where it appears. This phrase
does not meet the intent of the statute.
DoD Response: DoD used the phrase ``that best meet the Government's
needs'' in the interim rule to provide needed guidance in this area.
This phrase was included in Section 819 of Public Law 107-314 and,
therefore, has been retained in the proposed rule.
15. Application of Priorities for Use of Government Supply Sources.
Comment: If the FPI item is not comparable, can the Government go
directly to JWOD?
DoD Response: No. FPI can still fulfill the requirement, even
though it has been determined to be noncomparable.10 U.S.C. 2410n
requires DoD to consider a timely offer from FPI under such
circumstances.
This rule was subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
B. Regulatory Flexibility Act
This rule may 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 the rule will permit
small entities to compete with FPI for DoD contract awards under
certain conditions. An initial regulatory flexibility analysis has been
prepared and is summarized as follows: This rule proposes amendments to
DoD policy pertaining to the acquisition of products from FPI. The rule
implements 10 U.S.C. 2410n. The impact of the rule is unknown at this
time. However, the rule could benefit small business concerns that
offer products comparable to those listed in the FPI Schedule, by
permitting those concerns to compete for DoD contract awards.
A copy of the analysis may be obtained from the point of contact
specified herein. DoD invites comments from small businesses and other
interested parties. DoD also will consider comments from small entities
concerning the affected DFARS subparts in accordance with 5 U.S.C. 610.
Such comments should be submitted separately and should cite DFARS Case
2002-D003.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the rule does
not impose any information collection requirements that require the
approval of the Office of Management and Budget under 44 U.S.C. 3501,
et seq.
List of Subjects in 48 CFR Parts 208, 219, and 252
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, DoD proposes to amend 48 CFR Parts 208, 219, and 252 as
follows:
1. The authority citation for 48 CFR Parts 208, 219, and 252
continues to read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 208--REQUIRED SOURCES OF SUPPLIES AND SERVICES
2. Section 208.601-70 is added to read as follows:
208.601-70 Definitions.
As used in this subpart--
Competitive procedures includes the procedures in FAR 6.102, the
set-aside procedures in FAR subpart 19.5, and competition conducted in
accordance with FAR part 13.
Market research means obtaining specific information about the
price, quality, and time of delivery of products available in the
private sector and may include techniques described in FAR
10.002(b)(2).
3. Sections 208.602 and 208.606 are revised to read as follows:
208.602 Policy.
(a)(i) Before purchasing a product listed in the FPI Schedule,
conduct market research to determine whether the FPI product is
comparable to products available from the private sector that best meet
the Government's needs in terms of price, quality, and time of delivery
(10 U.S.C. 2410n). This is a unilateral determination made at the
discretion of the contracting officer. The procedures of FAR 8.605 do
not apply.
(ii) Prepare a written determination that includes supporting
rationale explaining the assessment of price, quality, and time of
delivery, based on the results of market research comparing FPI
products to those available from the private sector.
(iii) If the FPI product is comparable, follow the policy at FAR
8.602(a).
(iv) If the FPI product is not comparable in one or more of the
areas of price, quality, and time of delivery--
[[Page 26269]]
(A) Acquire the product using--
(1) Competitive procedures; or
(2) The fair opportunity procedures in FAR 16.505, if placing an
order under a multiple award task or delivery order contract;
(B) Include FPI in the solicitation process and consider a timely
offer from FPI for award in accordance with the requirements and
evaluation factors in the solicitation, including solicitations issued
using small business set-aside procedures; and
(C) When using a multiple award schedule issued under the
procedures of FAR subpart 8.4--
(1) Establish and communicate to FPI the requirements and
evaluation factors that will be used as the basis for selecting a
source, so that an offer from FPI can be evaluated on the same basis as
the schedule holder; and
(2) Consider a timely offer from FPI.
208.606 Exceptions.
For DoD, FPI clearances also are not required when the contracting
officer makes a determination that the FPI product is not comparable to
products available from the private sector that best meet the
Government's needs in terms of price, quality, and time of delivery,
and the procedures at 208.602(a)(iv) are used.
4. Sections 208.670 and 208.671 are added to read as follows:
208.670 Performance as a subcontractor.
Do not require a contractor, or subcontractor at any tier, to use
FPI as a subcontractor for performance of a contract by any means,
including means such as--
(a) A solicitation provision requiring a potential contractor to
offer to make use of FPI products or services;
(b) A contract specification requiring the contractor to use
specific products or services (or classes of products or services)
offered by FPI; or
(c) Any contract modification directing the use of FPI products or
services.
208.671 Protection of classified and sensitive information.
Do not enter into any contract with FPI that allows an inmate
worker access to any--
(a) Classified data;
(b) Geographic data regarding the location of--
(1) Surface and subsurface infrastructure providing communications
or water or electrical power distribution;
(2) Pipelines for the distribution of natural gas, bulk petroleum
products, or other commodities; or
(3) Other utilities; or
(c) Personal or financial information about any individual private
citizen, including information relating to such person's real property
however described, without the prior consent of the individual.
PART 219--SMALL BUSINESS PROGRAMS
5. Section 219.502-70 is added to read as follows:
219.502-70 Inclusion of Federal Prison Industries, Inc.
When using competitive procedures in accordance with
208.602(a)(iv), include Federal Prison Industries, Inc. (FPI), in the
solicitation process and consider a timely offer from FPI.
6. Section 219.508 is added to read as follows:
219.508 Solicitation provisions and contract clauses.
(c) Use the clause at FAR 52.219-6, Notice of Total Small Business
Set-Aside, with 252.219-70XX, Alternate A, when the procedures of
208.602(a)(iv) apply to the acquisition.
(d) Use the clause at FAR 52.219-7, Notice of Partial Small
Business Set-Aside, with 252.219-70YY, Alternate A, when the procedures
of 208.602(a)(iv) apply to the acquisition.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
7. Sections 252.219-70XX and 252.219-70YY are added to read as
follows:
252.219-70XX Alternate A.
Alternate A (XXX 2003)
As prescribed in 219.508(c), substitute the following paragraph
(b) for paragraph (b) of the clause at FAR 52.219-6:
(b) General. (1) Offers are solicited only from small business
concerns and Federal Prison Industries, Inc. (FPI). Offers received
from concerns that are not small business concerns or FPI shall be
considered nonresponsive and will be rejected.
(2) Any award resulting from this solicitation will be made to
either a small business concern or FPI.
252.219-70YY Alternate A.
Alternate A (XXX 2003)
As prescribed in 219.508(d), add the following paragraph (d) to the
clause at FAR 52.219-7:
(d) Notwithstanding paragraph (b) of this clause, offers will be
solicited and considered from Federal Prison Industries, Inc., for
both the set-aside and non-set-aside portion of this requirement.
[FR Doc. 03-12190 Filed 5-14-03; 8:45 am]
BILLING CODE 5001-08-P