[Federal Register Volume 71, Number 54 (Tuesday, March 21, 2006)]
[Rules and Regulations]
[Pages 14104-14106]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-2646]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 207, 210, and 219
[DFARS Case 2003-D109]
Defense Federal Acquisition Regulation Supplement; Consolidation
of Contract Requirements
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD has adopted as final, with changes, an interim rule
amending the Defense Federal Acquisition Regulation Supplement (DFARS)
to implement Section 801 of the National Defense Authorization Act for
Fiscal Year 2004. Section 801 places restrictions on the consolidation
of two or more requirements of a DoD department, agency, or activity
into a single solicitation and contract with a total value exceeding
$5,000,000.
DATES: Effective March 21, 2006.
FOR FURTHER INFORMATION CONTACT: Ms. Deborah Tronic, Defense
Acquisition Regulations System, OUSD (AT&L) DPAP (DARS), IMD 3C132,
3062 Defense Pentagon, Washington, DC 20301-3062; telephone (703) 602-
0289; facsimile (703) 602-0350. Please cite DFARS Case 2003-D109.
SUPPLEMENTARY INFORMATION:
A. Background
DoD published an interim rule at 69 FR 55986 on September 17, 2004,
to implement 10 U.S.C. 2382, as added by Section 801 of the National
Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108-136). 10
U.S.C. 2382 places restrictions on the consolidation of two or more
requirements of a DoD department, agency, or activity into a single
solicitation and contract with a total value exceeding $5,000,000.
Twenty-two respondents submitted comments on the interim rule. A
discussion of the comments is provided below.
1. Comment: Four respondents indicated that the difference between
consolidation of contract requirements and contract bundling is
unclear.
DoD Response: The definitions of the two terms are similar, because
all bundles are consolidations. However, not all consolidations are
bundles. The definition of ``bundle'' requires that previous contracts
for the item were either performed by small business concerns or were
suitable for small business concerns, whereas the definition of
``consolidation'' does not contain this requirement.
2. Comment: One respondent requested clarification regarding the
definition of ``consolidation.'' The respondent interpreted the phrase
``two or more separate contracts lower in cost than the total cost of
the contract for which the offers are solicited'' to mean that, if the
cost of one contract for two or more requirements is less than the cost
of two or more separate contracts, the acquisition would be outside the
definition of consolidation.
DoD Response: Agree that the phrase could lead to multiple
interpretations. To ensure that the rule is applied where appropriate,
the phrase has been excluded from the final rule.
3. Comment: One respondent stated that the rule does not consider
varying quantities between the previous buy and the current
acquisition; and does not consider when the previous buys were made,
i.e., a year ago or five years ago. This could make a big difference in
comparing costs.
DoD Response: The definition included in the final rule eliminates
the need for cost comparisons.
4. Comment: Four respondents stated that the term ``consolidation
of contract requirements'' is not clear with regard to what is meant by
``requirements'' and whether or not a different acquisition strategy
would be considered a new requirement, such as combining sustaining
engineering with system maintenance of the same system.
DoD Response: The DFARS rule follows the legislative definition for
consolidation of contract requirements, which addresses a single award
covering requirements previously provided under more than one award.
DoD believes that the definition is clear, but exercise of judgment may
be necessary in some cases to determine whether the requirement has
previously been provided.
5. Comment: One respondent asked for clarification regarding
whether the rule applies to orders.
DoD Response: Under GSA Schedules, DoD activities place orders, but
the actual contract (Schedule) is put in place by GSA. A literal
reading of the interim rule would be that the DoD senior procurement
executive's determination must be made when the Schedule itself is
awarded. The final rule clarifies that the rule applies to orders
placed under GSA Schedules.
6. Comment: One respondent asked who the senior procurement
official is.
DoD Response: The rule uses the term ``senior procurement
executive.'' This term is defined at DFARS 202.101, which specifies the
department/agency officials that hold this title.
7. Comment: Seven respondents recommended delegation of the senior
procurement executive's authority to determine that contract
consolidation is necessary and justified.
DoD Response: The rule does not prohibit delegation of this
authority. Therefore, in accordance with FAR 1.108(b), departments and
agencies may delegate this authority as deemed appropriate.
8. Comment: One respondent stated that the requirement to file the
determination in the contract file is unnecessary and should be
deleted, because the contracting officer would do this without having
it be required.
DoD Response: Due to the specific requirement of 10 U.S.C. 2382 to
ensure that decisions regarding consolidation are necessary and
justified, DoD believes it is appropriate for this DFARS rule to
address the need for supporting documentation.
9. Comment: One respondent requested that the requirement for
inclusion of the senior procurement executive's determination in the
contract file be satisfied by including the determination in the
acquisition plan.
DoD Response: The senior procurement executive may, if desired,
[[Page 14105]]
document and sign the acquisition plan to satisfy the requirement for
the determination, provided it addresses all the elements in DFARS
207.170-3.
10. Comment: One respondent requested additional guidance with
respect to permissible contents of the determination. Absent such
guidance, the regulation should at least make clear that the scenario
identified in 207.170-3(a)(i), i.e., ``the benefits of the acquisition
strategy substantially exceed the benefits of each of the possible
alternative contracting approaches'' is simply an example of an
adequate determination.
DoD Response: The DFARS language is sufficiently clear. However, a
possible source for additional guidance is the DoD Office of the Small
and Disadvantaged Business Utilization Benefit Analysis Guidebook--
Reference to Assist Department of Defense Acquisition Strategy Teams in
Performing a Benefit Analysis before Bundling Contract Requirements.
Although this guidebook's focus is on bundling, there are some
similarities to the measurably substantial benefits descriptions that
may be helpful. A copy of this guidebook is available at http://www.acq.osd.mil/sadbu/news/guidebook.htm. DoD will be revising this
guidebook to address consolidation.
11. Comment: One respondent recommended that market research
requirements for consolidation be added to DFARS 210.001.
DoD Response: The final rule adds a new section at DFARS 210.001 to
address market research requirements.
12. Comment: Nine respondents recommended a higher dollar threshold
for application of the rule.
DoD Response: DoD is unable to increase this threshold, as the $5
million threshold is specified in 10 U.S.C. 2382(b).
13. Comment: Five respondents indicated that the DFARS rule is in
conflict with acquisition reform initiatives that include such tools as
strategic sourcing, corporate contracts, and commodity councils.
DoD Response: The DFARS rule may make it more administratively
burdensome to pursue such strategies; however, the rule does not
preclude pursuing acquisition strategies that involve consolidation
when it is determined that such consolidation is necessary and
justified.
14. Comment: One respondent indicated that consolidation limits
competitive opportunities and that DoD should not impede competition.
DoD Response: DoD agrees that competition should not be impeded.
The rule is intended to ensure that consolidation decisions are made
with a view toward providing small business concerns with appropriate
opportunities to participate in DoD procurements at both the prime and
subcontract level. It is noted, however, that consolidation will not in
all cases result in a less competitive situation than what previously
existed. There may be instances where firms that competed for previous
separate contracts can still compete for the consolidated contract. In
addition, when two contracts that were previously awarded on a sole
source basis result in a new contract that is also sole source,
competition has not been affected.
15. Comment: One respondent stated that the requirements of this
rule could result in additional workload to the Government, since it
could result in two or three procurements instead of one procurement.
DoD Response: Agree that the rule could increase the number of DoD
procurement actions. However, the intent of the rule is to ensure that
small business concerns are provided with appropriate opportunities to
participate in DoD procurements.
16. Comment: One respondent stated that the rule could burden small
businesses by requiring them to respond to multiple solicitations
instead of just one.
DoD Response: As required by the statute, the application of the
rule will preclude the issuance of consolidated acquisitions that
cannot be justified, thus protecting the interests of small businesses.
The appropriate issuance of multiple solicitations will provide
multiple opportunities for small business concerns to compete.
17. Comment: Four respondents indicated that there are no
exceptions to the rule for small business set-asides, sole source
awards, foreign military sales, etc., and suggests there should be
exceptions.
DoD Response: 10 U.S.C. 2382 does not provide for any exceptions to
the policy stated in the rule.
18. Comment: One respondent recommended the removal of the DFARS
rule based on the fact that contracting officers are trained in and
evaluated on properly applying small business rules to ensure small
businesses get appropriate opportunities. In addition, the contracting
officer is already required, in some cases, to provide all information
relevant to the justification of contract bundling, including the
acquisition plan, and to address bundling if applicable.
DoD Response: This DFARS rule is necessary to implement the
requirements of 10 U.S.C. 2382, which are separate from the
requirements applicable to bundling at 15 U.S.C. 644(e)(2).
19. Comment: One respondent stated that an annual review and
assessment of contract consolidations is an undue administrative
burden.
DoD Response: In accordance with FAR 19.201(d)(11), the Office of
Small and Disadvantaged Business Utilization is already required to
conduct annual reviews regarding contract bundling actions. The
consolidation review will be a part of this annual review process, and
is needed to comply with Section 801(b) of Public Law 108-136, which
requires DoD to conduct periodic reviews to determine the extent of
consolidation and the impact on small business concerns.
20. Comment: One respondent recommended adding a threshold to the
review requirement at DFARS 219.201(d)(11), since no documentation
requirements exist for contract consolidations valued at less than $5
million.
DoD Response: DoD does not believe it is necessary to restate the
documentation threshold at 219.201(d)(11).
21. Comment: One respondent suggested modification of the DD Form
350 to collect information on consolidations.
DoD Response: The DD Form 350 data collection system has been
revised to identify procurements involving consolidation of contract
requirements.
22. Comment: One respondent asked if the rule applies to
acquisitions already in process as of the effective date of the rule,
September 17, 2004.
DoD Response: In accordance with FAR 1.108(d), the rule applies to
solicitations issued on or after September 17, 2004.
23. Comment: Two respondents requested clarification as to whether
the rule would apply to a procurement that was under the $5 million
threshold initially, but exceeded the threshold after offers were
received.
DoD Response: The determination occurs before the solicitation is
released, based on the estimated total value of the contract. If the
value exceeded $5 million after offers were received, no further
documentation and approval would be necessary at that time. The DFARS
rule has been amended at 207.170-3(a) to clarify that application of
the rule is based on estimated dollar value.
24. Comment: One respondent stated that, if the previous contract
contained two or more requirements, the follow-on
[[Page 14106]]
contract action for the same requirement would not be considered
consolidation.
DoD Response: If two or more items were previously acquired under a
single contract, and the follow-on acquisition is for the same
requirement, the follow-on acquisition would not meet the definition of
consolidation, unless it is further combined with other requirements.
25. Comment: One respondent asked whether a contract for support
services at a dining facility that includes mess attendant services and
full food (cooking) is covered by the DFARS rule.
DoD Response: Whether this situation is covered depends upon how
the requirements were previously performed. The DFARS rule applies when
the required supplies or services previously were acquired under two or
more separate contracts, but now will be acquired under one.
26. Comment: Two respondents recommended that coverage be included
in the DoD 5000 series publications as to what an acquisition strategy
must include before contracts with a total value exceeding $5,000,000
can be consolidated.
DoD Response: DoD considers the comment to be outside the scope of
this DFARS rule. However, this recommendation has been forwarded to the
Defense Acquisition Policy Working Group for consideration.
This rule was not subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
B. Regulatory Flexibility Act
DoD has prepared a final regulatory flexibility analysis consistent
with 5 U.S.C. 604. A copy of the analysis may be obtained from the
point of contact specified herein. The analysis is summarized as
follows:
This final rule amends the DFARS to implement Section 801 of the
National Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108-
136). Section 801 added 10 U.S.C. 2382, which places restrictions on
the consolidation of two or more requirements of a DoD department,
agency, or activity into a single solicitation and contract, when the
total value of the requirements exceeds $5,000,000. The objective of
the rule is to ensure that decisions regarding consolidation of
contract requirements are made with a view toward providing small
business concerns with appropriate opportunities to participate in DoD
procurements as prime contractors and subcontractors. DoD received no
public comments in response to the initial regulatory flexibility
analysis. As a result of public comments received on the interim rule,
the final rule contains changes that clarify the applicability of the
rule and the requirements for market research. The rule will apply to
small entities that are interested in providing supplies or services
under DoD contracts or subcontracts. There are no known alternatives
that would accomplish the objectives of 10 U.S.C. 2382. The impact on
small entities is expected to be positive.
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 207, 210, and 219
Government procurement.
Michele P. Peterson,
Editor, Defense Acquisition Regulations System.
0
Accordingly, the interim rule amending 48 CFR parts 207 and 219, which
was published at 69 FR 55986 on September 17, 2004, is adopted as a
final rule with the following changes:
0
1. The authority citation for 48 CFR parts 207 and 219 continues to
read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 207--ACQUISITION PLANNING
0
2. Section 207.170-2 is revised to read as follows:
207.170-2 Definitions.
As used in this section--
Consolidation of contract requirements means the use of a
solicitation to obtain offers for a single contract or a multiple award
contract to satisfy two or more requirements of a department, agency,
or activity for supplies or services that previously have been provided
to, or performed for, that department, agency, or activity under two or
more separate contracts.
Multiple award contract means-
(1) Orders placed using a multiple award schedule issued by the
General Services Administration as described in FAR Subpart 8.4;
(2) A multiple award task order or delivery order contract issued
in accordance with FAR Subpart 16.5; or
(3) Any other indefinite-delivery, indefinite-quantity contract
that an agency enters into with two or more sources for the same line
item under the same solicitation.
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3. Section 207.170-3 is amended by revising paragraph (a) introductory
text and paragraph (a)(3)(i) introductory text to read as follows:
207.170-3 Policy and procedures.
(a) Agencies shall not consolidate contract requirements with an
estimated total value exceeding $5,000,000 unless the acquisition
strategy includes--
* * * * *
(3) * * *
(i) Market research may indicate that consolidation of contract
requirements is necessary and justified if the benefits of the
acquisition strategy substantially exceed the benefits of each of the
possible alternative contracting approaches. Benefits may include costs
and, regardless of whether quantifiable in dollar amounts--
* * * * *
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4. Part 210 is added to read as follows:
PART 210--MARKET RESEARCH
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
210.001 Policy.
(a) In addition to the requirements of FAR 10.001(a), agencies
shall--
(i) Conduct market research appropriate to the circumstances before
soliciting offers for acquisitions that could lead to a consolidation
of contract requirements as defined in 207.170-2; and
(ii) Use the results of market research to determine whether
consolidation of contract requirements is necessary and justified in
accordance with 207.170-3.
[FR Doc. 06-2646 Filed 3-20-06; 8:45 am]
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