[Federal Register Volume 70, Number 68 (Monday, April 11, 2005)]
[Rules and Regulations]
[Pages 18954-18958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-6865]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 8 and 25
[FAC 2005-03; FAR Case 2003-023; Item I]
RIN 9000-AJ91
Federal Acquisition Regulation; Purchases From Federal Prison
Industries--Requirement for Market Research
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comments.
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[[Page 18955]]
SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on an interim
rule amending the Federal Acquisition Regulation (FAR) to implement
Section 637 of Division H of the Consolidated Appropriations Act, 2005.
Section 637 provides that no funds made available under the
Consolidated Appropriations Act for fiscal year 2005, or under any
other Act for fiscal year 2005 and each fiscal year thereafter, shall
be expended for purchase of a product or service offered by Federal
Prison Industries, Inc., unless the agency making the purchase
determines that the offered product or service provides the best value
to the buying agency, pursuant to Governmentwide procurement
regulations issued pursuant to 41 U.S.C. 421(c)(1) that impose
procedures, standards, and limitations of 10 U.S.C. 2410n.
DATES: Effective Date: April 11, 2005.
Comment Date: Interested parties should submit comments to the FAR
Secretariat at the address shown below on or before June 10, 2005 to be
considered in the formulation of a final rule.
ADDRESSES: Submit comments identified by FAC 2005-03, FAR case 2003-
023, by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Agency Web Site: http://www.acqnet.gov/far/ProposedRules/proposed.htm. Click on the FAR case number to submit comments.
E-mail: [email protected]. Include FAC 2005-03, FAR
case 2003-023, in the subject line of the message.
Fax: 202-501-4067.
Mail: General Services Administration, Regulatory
Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann
Duarte, Washington, DC 20405.
Instructions: Please submit comments only and cite FAC 2005-03, FAR
case 2003-023, in all correspondence related to this case. All comments
received will be posted without change to http://www.acqnet.gov/far/ProposedRules/proposed.htm, including any personal information
provided.
FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755,
for information pertaining to status or publication schedules. The TTY
Federal Relay Number for further information is 1-800-877-8973. For
clarification of content, contact Ms. Linda Nelson, Procurement
Analyst, at (202) 501-1900. Please cite FAC 2005-03, FAR case 2003-023.
SUPPLEMENTARY INFORMATION:
A. Background
Section 637 of Division H of the Consolidated Appropriations Act,
2005 (Public Law 108-447), provides that none of the funds made
available under that or any other Act for fiscal year 2005 and each
fiscal year thereafter shall be expended for the purchase of a product
or service offered by Federal Prison Industries, Inc. (FPI), unless the
agency making the purchase determines that the offered product or
service provides the best value to the buying agency pursuant to
Governmentwide procurement regulations issued pursuant to 41 U.S.C.
421(c)(1) that impose procedures, standards, and limitations of 10
U.S.C. 2410n. Section 637 of Division F of the Consolidated
Appropriations Act, 2004 (Public Law 108-199), contained a similar
requirement that applied only to fiscal year 2004 funds.
DoD, GSA, and NASA published an interim rule at 69 FR 16147 on
March 26, 2004, to implement the fiscal year 2004 appropriations act
provision. Twelve sources submitted comments on the interim rule. A
discussion of the comments is provided below. This second interim rule
incorporates changes made as a result of public comments, and as a
result of the fiscal year 2005 appropriations act provision that
establishes a permanent requirement for use of best value procedures
when purchasing FPI products. Differences between the March 26, 2004,
interim rule and this second interim rule are addressed in the
discussion of Comments 1, 2, 5, 9, 13, and 18 below.
In addition, a change has been made at FAR 8.605 to clarify that
purchase from FPI is not mandatory when an agency is acquiring items
that the FPI Board of Directors has determined that FPI offers
exclusively on a competitive basis. It should be noted that the
requirements of FAR 8.602(b) apply only to items of supply offered by
FPI subject to its mandatory source status. FAR 8.602(b) does not apply
to purchase of a service or to purchase of any item of supply that FPI
has been authorized by its Board of Directors to offer exclusively on a
competitive (non-mandatory) basis. With regard to a purchase of such an
item or any service offered by FPI, FPI must be an otherwise eligible
offeror pursuant to the applicable solicitation. For example, FPI would
not be eligible to participate in a solicitation to acquire a service,
if the competition has been restricted to small business concerns in
accordance with FAR Subpart 19.5.
Discussion of Comments:
1. Comment: For a solicitation that is normally posted on
FedBizOpps, is the contracting officer required to send a copy of the
solicitation to FPI or is FPI responsible for checking FedBizOpps and
responding just like any other vendor?
Councils' response: If a solicitation is posted on FedBizOpps, the
contracting officer need not send a separate copy to FPI. Paragraph
(b)(4)(ii) of section 8.602 of the rule has been revised to clarify
this procedure.
2. Comment: Is FPI subject to the terms and conditions of the
clauses in any given solicitation, and is FPI required to complete the
representations and certifications included with the solicitation?
Councils' response: Offers from FPI must be evaluated in accordance
with the item description or specifications and evaluation factors in
the solicitation. However, purchases from FPI must be made using the
ordering procedures at http://www.unicor.gov. Therefore, FPI need not
complete the representations and certifications included with the
solicitation. If an agency determines that purchase from FPI will
provide the best value to the Government after issuance of a
competitive solicitation, the agency must make the purchase in
accordance with FPI's ordering procedures. Sections 8.602(b)(4)(ii) and
8.602(b)(4)(iii)(A) have been revised, and new paragraphs at
8.602(b)(4)(iv) and 8.602(b)(4)(v) have been added to clarify this
procedure.
3. Comment: The rule presently excludes purchases at or below
$2,500 from market research requirements, if the purchase is made from
a source other than FPI. Purchases from FPI at or below $2,500 should
also be excluded from market research requirements.
Councils' response: FAR 8.605 exempts purchases at or below $2,500
from FPI mandatory source requirements. However, if an agency chooses
to make a purchase at or below $2,500 from FPI, the agency must first
conduct market research, to comply with Section 637 of Division H of
the Consolidated Appropriations Act, 2005. Section 637 prohibits the
expenditure of any funds for purchase of a product or service from FPI,
unless the agency making the purchase determines that the FPI product
or service provides the best value to the Government in accordance with
10 U.S.C. 2410n, which contains market research requirements.
4. Comment: Contracting officers are hesitating to use these new
procedures
[[Page 18956]]
because they are not officially published in the FAR.
Councils' response: The interim rule containing these new
procedures became effective upon publication on March 26, 2004. The
procedures have been mandatory for use by contracting officers since
that date.
5. Comment: This new regulation can only be effective if it is made
permanent.
Councils' response: In accordance with Section 637 of Division H of
the Consolidated Appropriations Act, 2005, the requirements of the rule
have been made permanent. Therefore, the rule has been amended at FAR
8.602(a), 8.602(b), and 8.605(a), and former paragraph (e) of FAR 8.602
has been removed to reflect this change.
6. Comment: Why include FPI in the solicitation process after the
contracting officer has determined the FPI item to be noncomparable?
Councils' response: Section 637 requires that purchase of FPI
products be made in accordance with the procedures, standards, and
limitations of 10 U.S.C. 2410n. 10 U.S.C. 2410n requires that (1) if an
FPI product is not comparable to products available from the private
sector, the product must be purchased through competitive procedures or
a multiple award contract; and (2) in conducting such a competition or
making such a purchase, the purchasing agency must consider a timely
offer from FPI.
7. Comment: To ensure proper implementation of this rule, the FAR
Council and agency contracting officials should monitor information
disseminated to contracting officers by aggressive FPI marketing
agents.
Councils' response: The comment is outside the scope of this FAR
rule.
8. Comment: Inclusion of FPI in FAR clauses for small business set-
asides negatively impacts our nation's small entrepreneurs by
subjecting them to unfair competition. Set-asides are designed to
afford small businesses the maximum practicable opportunity to
participate in the performance of federal government contracts.
Councils' response: 10 U.S.C. 2410n(b) requires agencies to include
FPI in the competition if an FPI product is found to be non-comparable
to products available from the private sector. 10 U.S.C. 2410(g)
defines ``competitive procedures'' to include small business set-
asides. Therefore, FPI may participate in small business set-asides in
only those situations where an FPI product has been found to be non-
comparable to private sector products, and the subsequent competition
is limited to FPI and small business concerns. For those items of
supply where FPI is found to be comparable, FPI's mandatory source
status would apply.
9. Comment: The final rule should emphasize the two-step nature of
the procedures at FAR 8.602(b) or at least add the definition of
``comparable'' to FAR Subpart 8.6.
Councils' response: This second interim rule contains a new
paragraph 8.602(b)(4)(iv) to emphasize that, if an FPI product is
determined to be non-comparable to products available from the private
sector, a best value determination must be made after conducting a
competition that includes FPI. A definition of ``comparable'' in FAR
Subpart 8.6 is considered unnecessary, as ``comparable'' is used
throughout the FAR with its common dictionary meaning.
10. Comment: There needs to be clarification on how to structure a
contract for administrative convenience. Regardless of whether a
product is provided to the Government directly or indirectly, a
comparability determination and competitive procedures are required any
time products offered for sale by FPI are purchased for a Government
agency. For instance, agencies are not permitted by law to procure
office furniture as part of a consolidated or prime contract for the
construction or renovation of a building, if such a contracting method
is used to preclude the necessity for a comparability determination or
competitive procedures pursuant to Section 637. If FPI is found to be
comparable, or is the competitive choice, the agency is required to
purchase from FPI, regardless of the procurement method. In such cases,
the purchase would need to be made directly by the agency, following
the requirements of Section 637.
Councils' response: Special procedures regarding structuring of
contracts are considered unnecessary with regard to this rule.
Consolidation of requirements merely to avoid a comparability
determination or competitive procedures pursuant to Section 637 would
be improper, as would any other action taken to circumvent statutory or
regulatory requirements. However, consolidation, where appropriate,
appears to be consistent with 10 U.S.C. 2410n(e), which addresses the
issue of subcontracting and specifically prohibits the Government from
requiring a contractor to use FPI as a subcontractor or supplier. In
such cases, therefore, it is the responsibility of the agency to ensure
compliance with the requirements of this interim rule if the
procurement involves items of supply on FPI's Schedule.
11. Comment: The impact of this rule on small business concerns
that supply goods and services to FPI will be negative.
Councils' response: This issue is addressed in the Initial
Regulatory Flexibility Analysis for this second interim rule.
12. Comment: Section 637 is temporary legislation. However, the
following sections of the rule are drafted in such a way as to imply
permanence: Section 8.607, which prohibits agencies from requiring use
of FPI as a subcontractor; Section 8.605(f), which provides an
exception to FPI's mandatory source status for services; and Section
19.502-1, which removes FPI from the examples of required sources of
supply. This is erroneous and must be corrected. In fact, the propriety
of Section 8.607 of the rule is questioned in its entirety. Section 637
is directed toward determining that the FPI product provides the best
value to the buying agency. Prohibitions on the use of FPI as a
subcontractor are not germane to this determination. Hence, there is no
legislative authorization for imposing section 8.607 on civilian
agencies.
Councils' response: (1) In accordance with Section 637 of Division
H of the Consolidated Appropriations Act, 2005, this legislative
requirement is now permanent.
(2) Section 8.607 has been appropriately included in this FAR rule.
It implements 10 U.S.C. 2410n, which was made applicable to civilian
agencies by the Consolidated Appropriations Acts for fiscal years 2004
and 2005.
(3) FPI is not a mandatory source for services, as indicated in the
order of priorities at FAR 8.002(a)(2).
(4) Removal of FPI from the list of examples at FAR 19.502-1
prevents potential conflict within the regulation, but has no impact on
FPI's mandatory source status.
13. Comment: The interim rule has deleted the following sections:
Section 8.602(b), which encourages maximum practicable purchase of FPI-
manufactured supplies that are not listed in the Schedule and FPI
services that are listed in the Schedule; Section 8.602(c), which
encourages agencies to suggest the addition of items to the Schedule;
Section 8.603(b), which addresses the conformity of FPI supplies and
services to Federal specifications, and the content and availability of
FPI's Schedule; and Section 8.605(b), which specifies that purchases
from other sources because of a lower price are not
[[Page 18957]]
normally authorized. These sections should be fully applicable upon
expiration of Section 637 and, therefore, should be restored.
Councils' response: (1) In accordance with Section 637 of Division
H of the Consolidated Appropriations Act, 2005, this legislative
requirement is now permanent.
(2) This second interim rule includes a statement at 8.601(e) that
encourages agencies to purchase FPI supplies and services to the
maximum extent practicable. The text previously in Sections 8.602(c)
and 8.603(b) is considered unnecessary for inclusion in the FAR, except
for the text on availability of FPI's schedule, which has been
relocated to Section 8.601(d).
(3) The text previously in Section 8.605(b) is no longer applicable
as a result of the resolution of the FPI Board of Directors, in
accordance with the information at http://www.unicor.gov, that FPI will
grant waivers in all cases where the private sector provides a lower
price for a comparable product that FPI does not meet.
14. Comment: Clarify the applicability of price evaluation
preferences for HUBZone small business concerns and small disadvantaged
business concerns when evaluating an offer from FPI that had been found
noncomparable initially.
Councils' response: The clauses at FAR 52.219-4 and 52.219-23
provide notice and procedures for use of a price evaluation factor for
HUBZone small business concerns and small disadvantaged business
concerns, respectively. These are not set-aside procedures that exclude
other potential offerors. FPI would be treated the same as any other
eligible offeror not entitled to the benefit of the price evaluation
factor. Therefore, no clarification in this area is needed.
15. Comment: To reflect the requirements of 18 U.S.C. 4122, Section
8.601(c) of the rule should be changed as follows:
From: ``FPI diversifies its supplies and services to minimize
adverse impact on private industry.''
To: ``FPI's statute requires FPI to diversify its supplies and
services to minimize adverse impact on private industry.''
Councils' response: The recommended change is considered
unnecessary. FPI's statute (18 U.S.C. 4121-4128) is referenced in
section 8.601(b) of the rule.
16. Comment: Since Section 637 appears to be intended to open the
procurement process, there should be no set-asides for JWOD products if
FPI is unable to meet the threshold for price, quality, and delivery.
The JWOD agency should have the right to participate in the open
bidding process under this rule as with industry and FPI.
Councils' response: The procedures in section 8.602(d) of the rule,
regarding purchase from JWOD participating nonprofit agencies employing
people who are blind or severely disabled, apply only in limited
situations where FPI grants an advance waiver that permits JWOD
agencies to provide a portion of the Government's requirements for
certain items. In these situations, FPI does not ``offer'' the portion
reserved for JWOD agencies. This existing practice has been addressed
in the rule to avoid any negative impact to JWOD participating
nonprofit agencies.
17. Comment: It is unclear under sections 8.602 and 8.605 whether a
sole source award to other than FPI, without notifying and considering
a timely offer from FPI, is permitted when acquiring supplies totaling
over $2,500 within the United States after the FPI item has been
determined to be non-comparable.
Councils' response: Even if FPI's product has been determined, as a
result of market research, to be non-comparable to an item available
from the private sector, FPI would still be regarded as a responsible
source for purposes of conducting competition and, in accordance with
FAR 8.602(b)(4), must be given an opportunity to compete.
18. Comment: Sections 8.602(b) and 8.602(c) seem to conflict with
FAR 8.605. FAR 8.602(c) states that 8.602(b) does not apply if an
exception in 8.605 applies, but 8.605(a) requires compliance with
8.602(b) procedures.
Councils' response: For clarification, FAR 8.602(c) has been
revised to exclude the reference to FAR 8.605(a).
This is not a significant regulatory action and, therefore, was not
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.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., applies to
this interim rule. The Councils have prepared an Initial Regulatory
Flexibility Analysis (IRFA), which is summarized as follows:
This interim rule amends the FAR to implement the Consolidated
Appropriations Act, 2005, Division H, Section 637 (Public Law 108-
447). The Act imposes the procedures, standards, and limitations of
10 U.S.C. 2410n, which requires market research before purchasing a
product listed in the FPI catalog, to determine whether the FPI
product is comparable to products available from the private sector
that best meet the agency's needs in terms of price, quality, and
time of delivery. If the FPI product is not comparable, the agency
must use competitive procedures to acquire the product or must make
an individual purchase under a multiple award contract. In
conducting such a competition or making such a purchase, the agency
must consider a timely offer from FPI.
The rule could benefit small business concerns that offer
products comparable to those listed in the FPI catalog, by
permitting those concerns to compete for Federal contract awards.
However, the rule could have a negative impact on those small
business concerns that supply goods or services to FPI. In response
to an interim FAR rule published on March 24, 2004, that contained a
similar requirement, FPI stated that it purchased over $497,000,000
of goods or services from private sector companies during fiscal
year 2003, and over 53 percent of those purchases were from small
business concerns.
The FAR Secretariat has submitted a copy of the IRFA to the Chief
Counsel for Advocacy of the Small Business Administration. Interested
parties may obtain a copy from the FAR Secretariat. The Councils will
consider comments from small entities concerning the affected FAR Parts
8 and 25 in accordance with 5 U.S.C. 610. Interested parties must
submit such comments separately and should cite 5 U.S.C 601, et seq.
(FAC 2005-03, FAR case 2003-023), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the changes to
the FAR do not impose information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
3501, et seq.
D. Determination to Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense (DoD), the Administrator of General Services (GSA), and the
Administrator of the National Aeronautics and Space Administration
(NASA) that urgent and compelling reasons exist to promulgate this
interim rule without prior opportunity for public comment. This action
is necessary to implement Section 637 of Division H of Public Law 108-
447, the Consolidated Appropriations Act, 2005. Section 637 provides
that no funds made available under the Consolidated Appropriations Act
for fiscal year 2005, or under any other Act for fiscal year 2005 and
each fiscal year thereafter, shall be expended for purchase of a
product or service offered by Federal Prison Industries,
[[Page 18958]]
Inc., unless the agency making the purchase determines that the offered
product or service provides the best value to the buying agency
pursuant to Governmentwide procurement regulations issued pursuant to
41 U.S.C. 421(c)(1) that impose procedures, standards, and limitations
of 10 U.S.C. 2410n. Section 637 became effective December 8, 2004.
However, pursuant to Public Law 98-577 and FAR 1.501, the Councils will
consider public comments received in response to this interim rule in
the formation of the final rule.
List of Subjects in 48 CFR Parts 8 and 25
Government procurement.
Dated: April 1, 2005.
Rodney P. Lantier,
Director, Contract Policy Division, General Services Administration.
0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 8 and 25 as set forth
below:
0
1. The authority citation for 48 CFR parts 8 and 25 is revised 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 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES
0
2. Amend section 8.601 by adding paragraph (e) to read as follows:
8.601 General.
* * * * *
(e) Agencies are encouraged to purchase FPI supplies and services
to the maximum extent practicable.
0
3. Amend section 8.602 by--
0
a. Revising paragraph (a);
0
b. Revising the introductory text of paragraph (b), paragraphs
(b)(4)(ii) and (b)(4)(iii); and adding paragraphs (b)(4)(iv) and
(b)(4)(v);
0
c. Removing from paragraph (c) ``8.605'' and adding ``8.605(b) through
(g)'' in its place; and
0
d. Removing paragraph (e) and redesignating paragraph (f) as paragraph
(e).
The revised text reads as follows:
8.602 Policy.
(a) Agencies shall use the procedures in this subpart when
purchasing supplies of the classes listed in the FPI Schedule.
(b) In accordance with 10 U.S.C. 2410n and Section 637 of Division
H of the Consolidated Appropriations Act, 2005 (Pub. L. 108-447),
agencies shall--
* * * * *
(4) * * *
(ii) Include FPI in the solicitation process and consider a timely
offer from FPI for award in accordance with the item description or
specifications, and evaluation factors in the solicitation--
(A) If the solicitation is available through the Governmentwide
point of entry (FedBizOpps), it is not necessary to provide a separate
copy of the solicitation to FPI;
(B) If the solicitation is not available through FedBizOpps,
provide a copy of the solicitation to FPI;
(iii) When using a multiple award schedule issued under the
procedures in Subpart 8.4 or when using the fair opportunity procedures
in 16.505--
(A) Establish and communicate to FPI the item description or
specifications, 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 contract or schedule holder; and
(B) Consider a timely offer from FPI;
(iv) Award to the source offering the item determined by the agency
to provide the best value to the Government; and
(v) When the FPI item is determined to provide the best value to
the Government as a result of FPI's response to a competitive
solicitation, follow the ordering procedures at http://www.unicor.gov.
* * * * *
0
4. Amend section 8.605 by--
0
a. Removing the introductory text of paragraph (a);
0
b. Removing from the end of paragraph (e) the word ``or''; and
0
c. Redesignating paragraph (f) as paragraph (g) and adding a new
paragraph (f) to read as follows:
8.605 Exceptions.
* * * * *
(f) Acquiring items that FPI offers exclusively on a competitive
(non-mandatory) basis, as identified in the FPI Schedule; or
* * * * *
PART 25--FOREIGN ACQUISITION
0
5. Amend section 25.401 by revising paragraph (a)(4) to read as
follows:
25.401 Exceptions.
(a) * * *
(4) Acquisitions from Federal Prison Industries, Inc., under
Subpart 8.6, and acquisitions under Subpart 8.7, Acquisition from
Nonprofit Agencies Employing People Who Are Blind or Severely Disabled;
and
* * * * *
[FR Doc. 05-6865 Filed 4-8-05; 8:45 am]
BILLING CODE 6820-EP-S