Rule2021-16364
Federal Acquisition Regulation: Revision of Limitations on Subcontracting
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 11, 2021
Effective
September 10, 2021
Issuing agencies
Defense DepartmentGeneral Services AdministrationNational Aeronautics and Space Administration
Abstract
DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to implement revised and standardized limitations on subcontracting, including the nonmanufacturer rule, that apply to small business concerns.
Full Text
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<title>Federal Register, Volume 86 Issue 152 (Wednesday, August 11, 2021)</title>
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[Federal Register Volume 86, Number 152 (Wednesday, August 11, 2021)]
[Rules and Regulations]
[Pages 44233-44246]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-16364]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 19 and 52
[FAC 2021-07; FAR Case 2016-011; Item II; Docket No. 2016-0011;
Sequence No. 1]
RIN 9000-AN35
Federal Acquisition Regulation: Revision of Limitations on
Subcontracting
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the
Federal Acquisition Regulation (FAR) to implement revised and
standardized limitations on subcontracting, including the
nonmanufacturer rule, that apply to small business concerns.
DATES: Effective September 10, 2021.
FOR FURTHER INFORMATION CONTACT: Ms. Mahruba Uddowla, Procurement
Analyst, at 703-605-2868 or by email at <a href="/cdn-cgi/l/email-protection#cca1ada4beb9aeade2b9a8a8a3bba0ad8cabbfade2aba3ba"><span class="__cf_email__" data-cfemail="2548444d575047440b5041414a524944654256440b424a53">[email protected]</span></a>, for
clarification of content. For information pertaining to status or
publication schedules, contact the Regulatory Secretariat Division at
202-501-4755 or <a href="/cdn-cgi/l/email-protection#5c1b0f1d0e393b0f393f1c3b2f3d723b332a"><span class="__cf_email__" data-cfemail="f7b0a4b6a59290a49294b7908496d9909881">[email protected]</span></a>. Please cite FAC 2021-07, FAR Case
2016-011.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published a proposed rule at 83 FR 62540 on
December 4, 2018, to implement regulatory changes made by the Small
Business Administration (SBA) in its final rule published in the
Federal Register at 81 FR 34243 on May 31, 2016, which became effective
on June 30, 2016. SBA's final rule implements the statutory
requirements of section 1651 of the National Defense Authorization Act
(NDAA) for Fiscal Year (FY) 2013 (15 U.S.C. 657s). Section 1651 revised
and standardized the limitations on subcontracting, including the
nonmanufacturer rule, that apply to small business concerns under FAR
part 19. Twenty-nine respondents submitted comments on the proposed
rule.
II. Discussion and Analysis
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council (the Councils) reviewed the public comments in the
development of the final rule. A discussion of the comments and the
changes made to the rule as a result of those comments are provided as
follows:
A. Summary of Significant Changes
This final rule makes the following significant changes from the
proposed rule:
<bullet> The definition of ``similarly situated entity''. The
definition of ``similarly situated entity'' is revised at FAR 19.001
and in FAR clause 52.219-14, Limitations on Subcontracting. It now
provides an example of entities having the same small business program
status and to specify that the entity must be small under the size
standard associated with the North American Industry Classification
System (NAICS) code the prime contractor assigned to the subcontract.
<bullet> Applicable dollar threshold. The final rule reflects the
clarification that the nonmanufacturer rule and the limitations on
subcontracting apply to set-asides and sole source awards made pursuant
to subparts 19.8, 19.13, 19.14, and 19.15, as well as awards using the
HUBZone price evaluation preference pursuant to subpart 19.13,
regardless of dollar value.
<bullet> HUBZone price evaluation preference.
[cir] Paragraph (e)(2) is added to FAR 19.507, Solicitation
provisions and contract clauses, to clarify that, in solicitations and
contracts using the HUBZone price evaluation preference, the
contracting officer shall insert the clause at FAR 52.219-14,
Limitations on Subcontracting. Paragraph (h)(1)(ii)(B) is added to
specify that the contracting officer shall insert the clause at FAR
52.219-33, Nonmanufacturer Rule, in solicitations and contracts when
the HUBZone price evaluation preference is used. For the FAR clauses at
52.219-14 and 52.219-33, the prescription also states that the
contracting officer shall not insert the clause in the resultant
contract if the prospective contractor waived the use of the price
evaluation preference or is an other than small business.
[cir] The clause at FAR 52.219-4, Notice of Price Evaluation
Preference for HUBZone Small Business Concerns, is revised to remove
the proposed rule definition of ``similarly situated entity'', and to
delete (instead of revising) the new redundant paragraphs (d) and (e),
which pertained to the limitation on subcontracting.
<bullet> Limitations on Subcontracting. FAR clause 52.219-14,
Limitations on Subcontracting, is revised to clarify that
[[Page 44234]]
this clause applies to contracts using the HUBZone price evaluation
preference to award to a HUBZone small business concern unless the
concern waived the evaluation preference. Additionally, to provide
clarification on calculating the 50 percent limitation for contracts
that include both services and supplies (i.e., ``mixed contracts''),
paragraph (e)(1) of the clause at FAR 52.219-14 is revised to specify
that when a contract is assigned a NAICS code for services, the 50
percent limitation shall only apply to the services portion of the
contract. Paragraph (e)(2) is revised to specify that when a contract
is assigned a NAICS code for supplies, the 50 percent limitation shall
only apply to the supply portion of the contract.
<bullet> Nonmanufacturer Rule. FAR clause 52.219-33,
Nonmanufacturer Rule, is revised to clarify the clause applies to
contracts using the HUBZone price evaluation preference to award to a
HUBZone small business concern unless the concern waived the evaluation
preference. Paragraph (c)(2) is revised to remove text concerning an
item for a kit that is not produced by small business concerns in the
United States or its outlying areas.
<bullet> Revisions to include recent FAR changes. Prior to
publication of this final rule, FAR part 19 and its associated
provisions and clauses were substantially revised as a result of FAC
2020-05 (published February 27, 2020, and effective March 30, 2020). As
a result, some revisions in the proposed rule are no longer included in
this final rule, because the revisions have already been made to the
FAR in FAC 2020-05. Other revisions appear in a different location due
to the changed landscape of FAR part 19. The final rule also contains
revisions that were not in the proposed rule due to changes made in FAC
2020-05. For example, prior to March 30, 2020, the FAR did not include
coverage of the limitations on subcontracting and nonmanufacturer rule
in subparts 19.8, 19.13, 19.14, and 19.15; FAC 2020-05 added coverage
tailored for each of those subparts. Due to the standardization of the
limitations on subcontracting and nonmanufacturer rule, this final rule
removes the coverage from those subparts and consolidates the coverage
in subpart 19.5. In addition, as of March 30, 2020, FAR part 19
includes coverage for orders issued directly to one small business
under a reserve. This final rule provides guidance on the applicability
of the limitations on subcontracting and nonmanufacturer rule for this
new topic.
B. Analysis of Public Comments
1. Support for the Rule
Comment: Several respondents expressed support for the rule.
Response: The Councils acknowledge the expressions of support.
2. Faster Implementation
Comment: Several respondents expressed disappointment at the time
it took to publish the proposed rule. More specifically, two
respondents noted that it had taken over 2 years to publish the
proposed rule. One respondent requested immediate implementation of the
rule by means of a class deviation for the civilian agencies or an
``interim final rule,'' noting that it is burdensome for small
businesses if one agency has a class deviation in place while others do
not. Another respondent also requested issuance of an ``interim final
rule'' and recommended that the FAR Council coordinate with SBA on
SBA's pending rulemaking and issue its own final rule that matches
SBA's final rule.
Response: The Councils acknowledge the length of time between the
opening of FAR case 2016-011 and publication of the proposed rule. More
time was required to publish the proposed rule due to changes in the
rulemaking process that occurred in 2017 to more fully consider the
regulatory or deregulatory impact of the rulemaking. The Councils have
taken steps to try to shorten the time required to implement SBA's
rules in the FAR. Beginning in 2019, the Councils started working on
proposed FAR rules after SBA publishes a proposed rule, instead of
waiting for a final rule from SBA. This approach should allow more
timely publication of FAR rules implementing SBA rules.
3. Simplified Acquisition Threshold vs. Dollar Value
Comment: Several respondents recommended changing all references to
``$150,000'' to ``the simplified acquisition threshold (SAT).''
Furthermore, two respondents highlighted the fact that SBA updated its
regulation at 13 CFR 121.406(d) to reference the term ``the simplified
acquisition threshold'' and that the FAR at 48 CFR 2.101 contains the
definition of the SAT.
Response: This final rule has been revised to include recent
amendments to the FAR, including the removal of many of the references
to the dollar value ``$150,000'' (reference FAC 2020-05).
4. Other Pending FAR Rules
Comment: Two respondents pointed out that the proposed text for FAR
52.219-4(e) does not account for the joint venture options afforded to
HUBZone small business concerns under SBA's regulations and requires
further revisions to bring the clause into alignment with SBA's
limitations on subcontracting rules for HUBZone joint ventures.
Specifically, the respondents are concerned the SBA's requirement that
a HUBZone joint venture partner perform 40 percent of the joint
venture's work, is not being addressed.
Response: A separate FAR case, 2017-019, Policy on Joint Ventures,
will address the respondents' concern. The final rule will address the
policy that a HUBZone joint venture partner must perform 40 percent of
the joint venture's work.
5. HUBZone Price Evaluation Preference
Comment: One respondent stated that the clause at FAR 52.219-4
places HUBZone distributors at a significant disadvantage by
effectively preventing them from taking advantage of the HUBZone price
evaluation preference, because it is not possible for a HUBZone
nonmanufacturer to obtain a waiver of the nonmanufacturer rule from SBA
for a full-and-open contract. The respondent also stated that the
HUBZone nonmanufacturer should be permitted to supply a product of any
business when utilizing the HUBZone price evaluation preference. The
respondent further stated that if the clause at FAR 52.219-4 continues
to require full compliance with the nonmanufacturer rule for HUBZone
distributors, then the waiver rules must be modified to permit SBA to
issue a waiver of the nonmanufacturer rule, upon request of a HUBZone
firm, for a full and open contract when the price evaluation preference
is utilized. The respondent further stated that if HUBZone distributors
are not permitted to supply products of any size business, the clause
at FAR 52.219-4 should be modified to permit HUBZone distributors to
provide products of any type of small business rather than the current
requirement to supply products made by other HUBZone small businesses.
Response: This final rule is implementing SBA's final rule
published in the Federal Register at 81 FR 34243 on May 31, 2016, and
the changes requested by the respondent would not be consistent with
that SBA rule. An award made using the HUBZone price evaluation
preference is considered a HUBZone contract (see 13 CFR 126.600(c) and
FAR 2.101). SBA's regulations regarding the limitations on
subcontracting and the nonmanufacturer rule apply to
[[Page 44235]]
HUBZone contracts (see 13 CFR 125.6). The Councils have updated the
final rule at FAR 19.507(e) and (h) to clarify that solicitations and
contracts using the HUBZone price evaluation preference to award to a
HUBZone small business concern must include the FAR clauses at 52.219-
14, Limitations on Subcontracting, and 52.219-33, Nonmanufacturer Rule.
The Councils have also updated the paragraphs entitled
``Applicability'' in these clauses to clarify their applicability to
contracts awarded to a HUBZone small business concern using the HUBZone
price evaluation preference and that the limitations on subcontracting
and nonmanufacturer rule do not apply if the price evaluation
preference is waived by the offeror.
6a. Similarly Situated Entities--Definition
Comment: One respondent requested clarification on which
subcontractors count as similarly situated entities. The respondent
specifically requested additional examples regarding ``standard small
business set-asides.''
Response: SBA's regulation at 13 CFR 125.1 states that ``for small
business set-aside, partial set-aside, or reserve'' a similarly
situated entity is ``a subcontractor that is a small business
concern.'' Therefore, the definition of ``similarly situated entity''
in this final FAR rule has been revised to clarify that, for a small
business set-aside, a similarly situated entity is a small business,
without regard to socioeconomic status.
6b. Similarly Situated Entities--Loophole for 8(a) Participants
Comment: One respondent stated the proposed rule circumvents FAR
19.808-1(e) by allowing a new ANC or Indian Tribe to win a sole-source
follow-on contract and then to subcontract it to the incumbent without
competing it, which would increase costs to the Government. The
respondent requested language be added to FAR 52.219-14(e)(1) through
(4) to prohibit treatment of such a subcontractor as a similarly
situated entity.
Response: The FAR does not direct subcontracting decisions of prime
contractors. Additionally, SBA's regulation does not provide that a
prime contractor must compete a subcontract before it can award a
subcontract, whether or not the award is to a similarly situated
entity. This final rule will not be revised to incorporate the
requested language as the rule is consistent with SBA's regulations.
6c. Treatment of Similarly Situated Entity Subcontractors
Comment: One respondent acknowledged the proposed rule properly
provides that first-tier subcontracts awarded to a ``similarly situated
entity'' are excluded from the calculation of the 50 percent
subcontract amount that cannot be exceeded. However, the respondent
points out, the clauses then provide that all work further
subcontracted by such similarly situated entity does count toward the
50 percent subcontract amount that cannot be exceeded. The respondent
believes this formulation creates an inconsistency among small business
programs and an administrative burden for prime contractors and urges
that this further limitation be deleted.
Response: SBA's regulation at 13 CFR 125.6(c) limits similarly
situated entities to the first-tier subcontractors. Therefore, this
final rule also contains this limitation. Determining compliance with
the limitations on subcontracting by including in the calculation
subcontracts beyond the prime contractor and first-tier subcontractor
creates the possibility that the first-tier subcontractor may
subcontract 100% of the work it received from the prime to an entity
that is not similarly situated. This would create a loophole for
entities that are not small business concerns and would not have
qualified to receive the prime contract, to benefit as subcontractors
from Government contracts that are set aside for performance by small
business concerns. To address these concerns, SBA's regulations apply
the limitations on subcontracting collectively to the prime and any
similarly situated first-tier subcontractor. Any work performed by a
similarly situated first-tier subcontractor will count toward
compliance with the applicable limitation on subcontracting. For
purposes of determining whether the prime and its subcontractor
complied with the applicable limitation on subcontracting, work that is
not performed by the employees of the prime contractor or employees of
first-tier similarly situated subcontractors will count as subcontracts
performed by non-similarly situated entities. Using similarly situated
subcontractors gives the prime contractor greater flexibility but does
require monitoring and oversight by the prime contractor to ensure the
benefits flow to the intended recipients. The final rule has been
revised at FAR 52.219-14 to provide additional clarity on this issue.
6d. Similarly Situated Entities--Interpretation of the Rule
Comment: One respondent requested clarification of its
understanding of the proposed rule regarding the prime contractor not
completing 50 percent of the work because it subcontracted to a
similarly situated entity.
Response: A prime contractor may subcontract more than 50 percent
of the work to a similarly situated entity and still comply with the
limitations on subcontracting. SBA's regulation at 13 CFR 125.6(c)
provides three examples to illustrate when the prime contractor meets,
or fails to meet, the limitations on subcontracting. One example
describes an award for supplies to a service-disabled veteran-owned
small business (SDVOSB) that subcontracts to a similarly situated
entity for 51 percent of the work, which does not violate the
limitations on subcontracting. However, any work that the similarly
situated entity further subcontracts will be counted toward the 50
percent subcontract limit.
7a. Application of the Limitations on Subcontracting and
Nonmanufacturer Rule at or Below the SAT
Comment: Two respondents submitted substantially similar comments
suggesting that set-asides below the SAT in all small business and
small business socioeconomic categories should be exempt from any
limitations on subcontracting, including the nonmanufacturer rule.
Another respondent stated the original intent of the nonmanufacturer
rule was to promote U.S. innovation in manufacturing and technology by
allowing small U.S. manufacturers to compete with large business for
Federal Government contracts. This respondent also stated the recent
SBA change to raise the value of application of the nonmanufacturer
rule to the SAT contradicts this intent and threatens the U.S. Defense
Industrial Base.
Response: This rule implements SBA's policy on the limitations on
subcontracting and the nonmanufacturer rule. The rule reflects distinct
statutory authorities for setting aside small business procurements and
small business socioeconomic category procurements below and above the
threshold at 15 U.S.C. 644(j).
For small business socioeconomic category procurements (i.e., a
set-aside or sole source contract for 8(a) participants, women-owned
small businesses, HUBZone small businesses, or SDVOSBs), the
limitations on subcontracting, and the nonmanufacturer rule, apply to
[[Page 44236]]
procurements regardless of contract value. The Small Business Act at 15
U.S.C. 657s established the applicability of the limitations on
subcontracting and the nonmanufacturer rule for contracts awarded to
``covered'' small business (or socioeconomic category) concerns ``under
section 637(a), 637(m), 644(a), 657a, or 657f'' of Title 15. Contracts
with ``covered'' concerns under 15 U.S.C. 637(a), 637(m), 657a, and
657f include set-aside or sole source contracts, and any evaluation-
preference contracts, regardless of dollar value, for specific small
business socioeconomic categories, i.e., small disadvantaged businesses
participating in the section 8(a) business development program, women-
owned small businesses, HUBZone small businesses, and SDVOSBs.
Set-aside contracts with small business concerns below the
threshold (i.e., the simplified acquisition threshold) at 15 U.S.C.
644(j) are not designated as ``covered'' in section 657s (see SBA's
implementing regulations 13 CFR 125.6(a)). For this reason, contracts
resulting from small business set-asides below this threshold would be
exempt from the limitations on subcontracting and the nonmanufacturer
rule.
7b. Application of the Limitations on Subcontracting and
Nonmanufacturer Rule to Commercial Items
Comment: Two respondents commented that the limitations on
subcontracting, including those related to the nonmanufacturer rule,
should not apply to acquisitions for commercial items and commercially
available off-the-shelf (COTS) items because the complex and confusing
limits conflict with the straightforward nature of commercial and COTS
acquisitions.
Response: The Councils do not concur with this comment. Section
1651 of the NDAA for FY 2013 is silent on its applicability to
commercial and COTS items. The corresponding final rule implemented by
the SBA in its regulation did not exempt acquisitions of commercial or
COTS items from the limitations on subcontracting. Further, the
revisions to the limitations on subcontracting reflected in this final
FAR rule actually facilitate access to the Federal marketplace for
small businesses, simplify the process of tracking costs spent by prime
contractors on subcontractors, and make the application of limitations
on subcontracting consistent across the small business programs.
Exclusion of acquisitions for commercial and COTS items will limit the
full realization of these improvements for small businesses and hinder
their participation in Federal procurements as both prime contractors
and subcontractors.
8. Limitations on Subcontracting Too Restrictive
Comment: One respondent suggests the proposed rule restricts
opportunities for small businesses and discourages subcontracting
arrangements. The same respondent recommends eliminating all
limitations between prime contractors and subcontractors, regardless of
business size.
Response: The rule does not restrict small business subcontracting
opportunities nor does it discourage subcontracting arrangements.
Rather, the proposed rule provides small businesses with greater
flexibility in how they choose to comply with the limitations on
subcontracting. Moreover, the new rules make it easier for small
business prime contractors to do business with Federal agencies by
giving them more choices that are less burdensome and less costly for
pursuing and winning larger contracts than before. The rule implements
an SBA final rule intended to ensure that the benefits of set-aside
contracts flow to the intended beneficiaries. The recommended
elimination of all limitations on subcontracting is counter to that
intent and is beyond the scope of this rule.
9. Mixed Contracts
Comment: One respondent noted that 13 CFR 125.6(b) discusses the
limitations on subcontracting with respect to mixed contracts (i.e.,
contracts for both supplies and services). The proposed revision to the
clause at FAR 52.219-14 failed to address mixed contracts. The
respondent proposed bringing the FAR into alignment with SBA's
regulation by adding another subparagraph to address mixed contracts.
Response: According to SBA's final rule published in the Federal
Register at 81 FR 34243, on May 31, 2016, SBA's regulation at 13 CFR
125.6(b) states that, ``where a contract combines services and
supplies, the contracting officer shall select the appropriate NAICS
code'' that best describes the principal purpose of the product or
service being acquired. The contracting officer's selection of the
applicable NAICS code determines which limitation on subcontracting
applies. Thus, for a prime contract that includes both services and
supplies, the NAICS code assigned by the contracting officer determines
the relevant amount for purposes of calculating compliance with the
limitation on subcontracting; e.g., when a NAICS code for services is
assigned, the limitation on subcontracting for services applies to the
services portion of the contract. Likewise, for subcontracts, the prime
contractor will assign the NAICS. To provide clarification on
calculating the 50 percent limitation for contracts that include both
services and supplies (i.e., ``mixed contracts''), this final rule
revises the clause at 52.219-14, Limitations on Subcontracting, to
specify that when a contract is assigned a NAICS code for services, the
50 percent limitation applies only to the services portion of the
contract, and that when a contract is assigned a NAICS code for
supplies, the 50 percent limitation applies only to the supply portion
of the contract.
10. Revisions to the Clause on the Nonmanufacturer Rule
Comment: One respondent indicated that the proposed solicitation
provision does not state that the nonmanufacturer rule requirements can
be waived by SBA, either on an individual or class basis; and
furthermore, the provision does not state that nonmanufacturers need to
have no more than 500 employees. The respondent further stated that the
SBA has proposed to eliminate its rule about ``kit assemblers,'' and
suggested that the Council similarly remove all rules about ``kit
assemblers.''
Response: The Councils reviewed the area of the rule identified by
the respondent and found that the SBA waiver information for the
nonmanufacturer rule is not appropriate for inclusion in the contract
clause at 52.219-33, Nonmanufacturer Rule. FAR 19.507(h)(2) instructs
contracting officers not to use 52.219-33 when SBA has waived the
nonmanufacturer rule. Individual and class waivers of the
nonmanufacturer rule are addressed in the final rule at FAR 19.505(c).
The size standard for nonmanufacturers is located in the
solicitation provisions that contain the requirement for offerors to
represent size status (e.g., 52.219-1, Small Business Program
Representations). There is no need to include it in the clause at
52.219-33, which does not address representation of size status.
The Councils found that removing the text on kit assemblers from
the FAR is premature in this final rule, and must be addressed in a
separate case. Therefore, the suggested revisions have not been
included in the final rule.
[[Page 44237]]
11. Orders Under Multiple Award Contracts
Comment: One respondent stated that clarification should be
provided for orders set aside for small business under multiple-award
contracts regarding whether, for the purpose of applying the
limitations on subcontracting and the nonmanufacturer rule, the value
is determined at the contract level or at the order level. The
respondent further expressed a preference for having the value
determined at the individual order level, so that the nonmanufacturer
rule would only apply to orders above the simplified acquisition
threshold.
Response: The prescriptions for the clauses at FAR 52.219-14,
Limitations on Subcontracting, and 52.219-33, Nonmanufacturer Rule,
specify use of the clauses when ``any portion of the requirement is set
aside for small business and is expected to exceed the simplified
acquisition threshold''. The prescriptions also specify use of the
clauses in multiple-award contracts when orders may be set aside for
small business because the clauses apply to orders that are set aside
for small business under multiple-award contracts. The applicability of
the limitations on subcontracting and the nonmanufacturer rule is
determined partly by whether the contract or the order is being set
aside for small business. If an order is set aside for small business,
the clause applies to the order if it exceeds the simplified
acquisition threshold (see 52.219-14(c)(4) and 52.219-33(b)(2)(iii)).
Alternatively, if a multiple-award contract is set aside for small
business, the clause applies to the contract if it exceeds the
simplified acquisition threshold.
12a. Additional SBA Rule--Hazardous Waste Industry
Comment: Six respondents stated the hazardous waste industry should
be excluded from the limitations on subcontracting as disposal
facilities and transportation costs are prohibitively expensive for
small businesses to own and operate. Therefore, small businesses
subcontract out these services, which would cause them to exceed the
limitations on subcontracting.
Two respondents stated environmental remediation requires the
purchase of significant materials, which is similar to construction.
The respondents requested these materials be excluded from the
limitations on subcontracting.
Response: These changes are included in SBA's final rule at 13 CFR
125.6(a), published in the Federal Register on November 29, 2019 (84 FR
65647). SBA's rule updates the limitations on subcontracting. A new FAR
case would have to be opened to implement the additional changes, which
require public comment under 41 U.S.C. 1707 prior to implementation in
the FAR. Therefore, the suggested changes are not incorporated in this
final rule.
12b. Additional SBA Rule--Independent Contractors
Comment: Two respondents suggested additional language be added to
the proposed rule to define an independent contractor. One respondent
requested that the term ``independent contractor'' be removed from the
rule. One respondent recommended that independent contractors should
not be subject to FAR 44.201-1, Consent requirements.
Response: SBA made clarifications regarding independent contractors
in its final rule, published in the Federal Register on November 29,
2019 (84 FR 65647), which updates the limitations on subcontracting.
Those changes are beyond the scope of this FAR case. A new FAR case
would have to be opened to implement additional changes in the FAR,
including publication for notice and comment if necessary. The
suggested changes are not consistent with the SBA's regulations which
are being implemented in this final FAR rule, and therefore will not be
included in this final FAR rule.
12c. Additional SBA Rule--Exclusion of Materials and Other Direct Costs
From the Limitation on Subcontracting for Services
Comment: Four respondents stated the cost of materials and other
direct costs for services should be excluded from the limitations on
subcontracting, which would treat these contracts the same as supply
contracts.
Response: This rule implements SBA's final rule published in the
Federal Register at 81 FR 34243 on May 31, 2016, which does not provide
an exclusion for the cost of materials or other direct costs. These
changes are in SBA's final rule, published in the Federal Register on
November 29, 2019 (84 FR 65647), which updates the limitations on
subcontracting. A new FAR case would have to be opened to implement the
additional changes.
12d. Additional SBA Rule--Inconsistencies Between FAR and SBA
Comment: Two respondents stated that because of SBA's proposed rule
published December 4, 2018, 83 FR 62516, the FAR will be inconsistent
with SBA's regulations once again, which will create new confusion.
They requested the FAR Council issue an interim final rule.
Response: SBA's final rule published November 29, 2019, 84 FR 6564,
made updates to the limitations on subcontracting. A new FAR case would
have to be opened to implement the SBA's November 29, 2019 changes. The
FAR Council may issue an interim rule without first publishing a
proposed rule only when urgent and compelling circumstances exist,
which justify changing the FAR prior to seeking public comment.
13. Information Technology Value Added Resellers
Comment: One respondent requested a clarification of whether the
nonmanufacturer rule applies to Information Technology Value Added
Resellers (ITVAR), NAICS code 541519.
Response: An ITVAR provides a total solution to information
technology acquisitions by providing multi-vendor hardware and software
along with significant value added services. SBA's regulation at
footnote 18 within 13 CFR 121.201 states that the nonmanufacturer rule
applies to an ITVAR procurement unless SBA has issued a class or
contract-specific waiver of the nonmanufacturer rule.
14. Out of Scope
Comment: One respondent stated DoD Class Deviation 2019-O0003,
Limitations on Subcontracting for Small Business, contains a
requirement stating, if the contract falls below the SAT, it is not a
complete waiver of the nonmanufacturer rule because the small business
must still provide the end item of any domestic firm. The respondent
noted this same requirement is not present in the current SBA
regulations, nor in the current proposed rule change and encourages the
Councils to proceed with issuing a final rule that does not include
this restriction. A second respondent recommended that clear
definitions of subcontract and subcontractor should be provided to
regulate the use of independent contractors (consultants) and ancillary
services, as well as to formulate policies and mechanisms with respect
to consent to subcontract, flow down of contract provisions, and other
FAR requirements. A third respondent asked if the proposed regulation
would take precedence over a specified agency's clause.
Response: These comments are beyond the scope of this rule. SBA's
waiver of the nonmanufacturer rule (13 CFR 121.406(b)(7)) has no effect
on requirements external to the Small
[[Page 44238]]
Business Act which involve domestic sources of supply, such as the Buy
American Act or the Trade Agreements Act. Class deviations issued by
individual agencies do not impact the text of this rule. In many
instances the definition of subcontractor used in the FAR varies
depending on which statutes or FAR regulations apply. It is not
possible to use the same definition across all the parts of the FAR.
Agency regulations and guidance must be consistent with the FAR unless
an authorized deviation (see FAR 1.404) is in place.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold and for Commercial Items, Including Commercially Available
Off-the-Shelf Items
The Federal Acquisition Regulatory (FAR) Council has made the
following determinations with respect to the rule's application of
section 1651 of the NDAA for FY 2013 to contracts at or below the
simplified acquisition threshold (SAT) and for the acquisition of
commercial items, including commercially available off-the-shelf (COTS)
items. Discussion of these determinations is set forth below.
A. Applicability to Contracts at or Below the SAT
Pursuant to 41 U.S.C. 1905, a provision of law is not applicable to
acquisitions at or below the SAT unless the law (i) contains criminal
or civil penalties; (ii) specifically refers to 41 U.S.C. 1905 and
states that the law applies to acquisitions at or below the SAT; or
(iii) the FAR Council makes a written determination that it is not in
the best interest of the Federal Government to exempt contracts or
subcontracts at or below the SAT. If none of these conditions are met,
the FAR is required to include the statutory requirement(s) on a list
of provisions of law that are inapplicable to acquisitions at or below
the SAT.
The purpose of this rule is to implement section 1651 of the NDAA
for FY 2013. Section 1651 provides revised limitations on
subcontracting that apply across all small business programs. It also
requires that the limitations on subcontracting be determined based on
the percentage of the overall award amount that a prime contractor
spends on its subcontractors. In addition, section 1651 provides that
the percentage of the award amount that the prime contractor spends on
subcontractors who are similarly situated entities is not considered
subcontracted for purposes of the limitations on subcontracting in
section 1651.
These statutory requirements are reflected in SBA's final rule
published in the Federal Register at 81 FR 34243, on May 31, 2016,
which did not exempt acquisitions at or below the SAT that are set
aside for, or awarded on a sole-source basis to, 8(a) program
participants, HUBZone, service-disabled veteran-owned, women-owned, or
economically disadvantaged women-owned small business concerns; or that
use the HUBZone price evaluation preference to award to a HUBZone small
business concern. SBA's final rule did exempt acquisitions at or below
the SAT that are set aside for small businesses.
The law is silent on the applicability of these requirements to
acquisitions at or below the SAT and does not independently provide for
criminal or civil penalties; nor does it include terms making express
reference to 41 U.S.C. 1905 and its application to acquisitions at or
below the SAT. Therefore, it does not apply to acquisitions at or below
the SAT unless the FAR Council makes a written determination as
provided at 41 U.S.C. 1905.
Application of the law to acquisitions at or below the SAT will
maximize the positive impact set-aside and sole-source contracts
provide for small businesses in the socioeconomic programs (e.g.,
HUBZone, 8(a), service-disabled veteran-owned, and women-owned small
business programs) by ensuring these benefits extend to the many
contracts valued below the SAT. According to the Federal Procurement
Data System, an average of 283,374 contracts per year resulted from FAR
part 19 set-asides and sole-source awards at or below the simplified
acquisition threshold during fiscal years 2016-2018. Failure to apply
section 1651 below the SAT would exclude a significant number of
acquisitions, contrary to the goal of promoting opportunities for small
businesses in the Federal marketplace to the maximum extent possible.
Further, the FAR clauses imposing limitations on subcontracting and the
nonmanufacturer rule are currently prescribed for use in solicitations
and contracts at or below the SAT that are set aside for, or awarded on
a sole-source basis to, 8(a) program participants, HUBZone, service-
disabled veteran-owned, women-owned, or economically disadvantaged
women-owned small business concerns; or that use the HUBZone price
evaluation preference to award to a HUBZone small business concern.
Making section 1651 applicable to acquisitions at or below the SAT
would allow the amended versions of those clauses, reflecting the
requirements of section 1651, to be incorporated into such
solicitations and contracts. Exclusion of the amended clauses from
those documents would create confusion among contractors and the
Federal contracting workforce. Finally, under the FAR clauses currently
incorporated into those documents, contractors are already required to
comply with the limitations on subcontracting and the nonmanufacturer
rule. The new requirements will result in substantial savings for
contractors.
For these reasons, it is in the best interest of the Federal
Government to apply the requirements of the rule to acquisitions at or
below the SAT.
B. Applicability to Contracts for the Acquisition of Commercial Items
Pursuant to 41 U.S.C. 1906, acquisitions of commercial items (other
than acquisitions of COTS items, which are addressed in 41 U.S.C. 1907)
are exempt from a provision of law unless the law (i) contains criminal
or civil penalties; (ii) specifically refers to 41 U.S.C. 1906 and
states that the law applies to acquisitions of commercial items; or
(iii) the FAR Council makes a written determination and finding that it
would not be in the best interest of the Federal Government to exempt
contracts for the procurement of commercial items from the provision of
law. If none of these conditions are met, the FAR is required to
include the statutory requirement(s) on a list of provisions of law
that are inapplicable to acquisitions of commercial items.
The purpose of this rule is to implement section 1651 of the NDAA
for FY 2013. Section 1651 provides revised limitations on
subcontracting that apply across all small business programs. It also
requires that the limitations on subcontracting be determined based on
the percentage of the overall award amount that a prime contractor
spends on its subcontractors. In addition, section 1651 provides that
the percentage of the award amount that the prime contractor spends on
subcontractors who are similarly situated entities is not considered
subcontracted for purposes of the limitations on subcontracting in
section 1651.
These statutory requirements are reflected in SBA's final rule
published in the Federal Register at 81 FR 34243, on May 31, 2016,
which did not exempt acquisitions of commercial items.
The law is silent on the applicability of these requirements to
acquisitions of commercial items and does not independently provide for
criminal or
[[Page 44239]]
civil penalties; nor does it include terms making express reference to
41 U.S.C. 1906 and its application to acquisitions of commercial items.
Therefore, it does not apply to acquisitions of commercial items unless
the FAR Council makes a written determination as provided at 41 U.S.C.
1906.
The law furthers the Administration's goal of simplifying the
acquisition process and facilitating easier access to the Federal
marketplace, in this case for small business contractors who make up an
important component of the Government's industrial base. It advances
the interests of small business prime contractors by making it easier
to comply with the limitations on subcontracting, potentially allowing
those contractors to compete for larger contracts than they could in
the past. The law also advances the interests of small business
subcontractors by encouraging small business prime contractors to award
more subcontracts to similarly situated small businesses. Exclusion of
a large segment of Federal contracting, such as acquisitions for
commercial items, would limit the full implementation of these
objectives. Further, the primary FAR clauses implementing the
limitations on subcontracting and the nonmanufacturer rule are
currently prescribed for use in solicitations and contracts for
commercial items. Making section 1651 applicable to acquisitions for
commercial items would allow the amended versions of those clauses,
reflecting the requirements of section 1651, to be included in such
solicitations and contracts. Exclusion of those amended clauses from
contracts for commercial items would create confusion among contractors
and the Federal contracting workforce. Finally, the burden on
contractors would not increase significantly if the requirements of
section 1651 were applied to acquisitions for commercial items. Under
the FAR clauses currently incorporated into contracts for commercial
items, contractors are already required to comply with the limitations
on subcontracting and the nonmanufacturer rule. The new requirements
will result in substantial savings for contractors.
For these reasons, it is in the best interest of the Federal
Government to apply the requirements of the rule to the acquisition of
commercial items.
C. Applicability to Contracts for the Acquisition of COTS Items
Pursuant to 41 U.S.C. 1907, acquisitions of COTS items will be
exempt from a provision of law unless the law (i) contains criminal or
civil penalties; (ii) specifically refers to 41 U.S.C. 1907 and states
that the law applies to acquisitions of COTS items; (iii) concerns
authorities or responsibilities under the Small Business Act (15 U.S.C.
644) or bid protest procedures developed under the authority of 31
U.S.C. 3551 et seq., 10 U.S.C. 2305(e) and (f), or 41 U.S.C. 3706 and
3707; or (iv) the Administrator for Federal Procurement Policy makes a
written determination and finding that would not be in the best
interest of the Federal Government to exempt contracts for the
procurement of COTS items from the provision of law. If none of these
conditions are met, the FAR is required to include the statutory
requirement(s) on a list of provisions of law that are inapplicable to
acquisitions of COTS items.
The purpose of this rule is to implement section 1651 of the NDAA
for FY 2013 (codified at 15 U.S.C. 657s). Section 1651 provides revised
limitations on subcontracting that apply across all small business
programs. It also requires that the limitations on subcontracting be
determined based on the percentage of the overall award amount that a
prime contractor spends on its subcontractors. In addition, section
1651 provides that the percentage of the award amount that the prime
contractor spends on subcontractors who are similarly situated entities
is not considered subcontracted for purposes of the limitations in
section 1651.
These statutory requirements are reflected in SBA's final rule
published in the Federal Register at 81 FR 34243, on May 31, 2016,
which did not exempt acquisitions of COTS items.
The law is silent on the applicability of these requirements to
acquisitions of COTS items and does not independently provide for
criminal or civil penalties; nor does it concern bid protest procedures
developed under the authority of the relevant statutes. Therefore, it
does not apply to acquisitions of COTS items unless the Administrator
for Federal Procurement Policy makes a written determination as
provided at 41 U.S.C. 1907.
The law furthers the Administration's goal of simplifying the
acquisition process and facilitating easier access to the Federal
marketplace, in this case for small business contractors who make up an
important component of the Government's industrial base. It advances
the interests of small business prime contractors by making it easier
to comply with the limitations on subcontracting, potentially allowing
those contractors to compete for larger contracts than they could in
the past. The law also advances the interests of small business
subcontractors by encouraging small business prime contractors to award
more subcontracts to similarly situated small businesses. Exclusion of
a large segment of Federal contracting, such as acquisitions for COTS
items, would limit the full implementation of these objectives.
Further, FAR clauses imposing limitations on subcontracting and the
nonmanufacturer rule are currently prescribed for use in solicitations
and contracts for COTS items. Making section 1651 applicable to
acquisitions of COTS items would allow the amended versions of those
clauses, reflecting the requirements of section 1651, to be
incorporated into such solicitations and contracts. Exclusion of the
amended clauses from those documents would create confusion among
contractors and the Federal contracting workforce. Finally, the burden
on contractors would not increase significantly if the requirements of
section 1651 were applied to acquisitions for COTS items. Under the FAR
clauses currently incorporated into contracts for those items,
contractors are already required to comply with the limitations on
subcontracting and the nonmanufacturer rule. The new requirements will
result in substantial savings for contractors.
For these reasons, it is in the best interest of the Federal
Government to apply the requirements of the rule to the acquisition of
COTS items.
IV. Expected Cost Savings
The purpose of this rule is to implement statutory authorities and
SBA regulations that are designed to make it easier and less burdensome
for small business prime contractors to comply with requirements
related to how much work they may subcontract under Federal contracts,
including task and delivery orders under those contracts (i.e., the
``limitations on subcontracting''). The changes to these requirements
would both ease compliance costs and provide more authorized ways to
subcontract. Section 1651 of the NDAA for FY 2013 revised and
standardized the limitations on subcontracting, including the
nonmanufacturer rule. The nonmanufacturer rule is the requirement that
the prime contractor, who is a reseller of a product (i.e., a
``nonmanufacturer''), provide an end product manufactured by a small
business in the United States or its outlying areas. The limitations on
subcontracting and the nonmanufacturer rule are meant to
[[Page 44240]]
ensure that the benefits of contracts and orders awarded to small
businesses flow to the intended beneficiaries.
Prior to section 1651, the limitations on subcontracting and the
nonmanufacturer rule were inconsistent across the small business
programs. For example, under the 8(a) and WOSB Programs, the prime
contractor was required to perform a certain percentage of work itself,
whereas under the HUBZone and SDVOSB Programs, the prime contractor
could include subcontracts to other HUBZone small business or SDVOSB
concerns in the percentage of work it performed. Similarly, with regard
to the nonmanufacturer rule, a prime contractor for a contract or order
set aside or awarded on a sole-source basis under the HUBZone Program
was required to provide products manufactured by another HUBZone small
business, but for awards under the other small business programs, the
prime contractor was required to provide products manufactured by any
small business.
In addition, the basis of the limitations on subcontracting has
changed. Prior to section 1651, the limitations on subcontracting were
calculated as a percentage of work to be performed by a prime
contractor; the calculation was based on the contractor's costs to
perform the contract (e.g., salaries and other allowable costs under
FAR part 31). As a result of section 1651, the limitations on
subcontracting will be calculated as a percentage of the overall
contract or order amount (i.e., the contract price, including costs and
profit or fee) to be spent by the prime contractor on subcontractors.
As a result, for the purpose of compliance with the limitations on
subcontracting the prime contractor no longer has to track the
percentage of costs incurred that it spends performing work itself. It
only has to track the percentage of the overall award amount (i.e.,
contract price) that it spends on subcontractors. For small businesses,
this change will reduce the burden associated with tracking and
documenting compliance with the limitations on subcontracting.
Section 1651 also applied the concept of ``similarly situated
entities'' to all small business programs. A similarly situated entity
is a small business subcontractor that has the same small business
program status as that which qualified the prime contractor for the
prime contract. The percentage of the contract or order amount that the
prime contractor spends on subcontractors who are similarly situated
entities is not considered subcontracted for purposes of compliance
with the limitations on subcontracting. Prior to section 1651, small
businesses that wanted to work together to comply with the limitations
on subcontracting were required to form a joint venture or a new legal
entity (except in small business programs where the concept of
similarly situated entities was already applied). The concept of
similarly situated entities eliminates the need for paperwork,
coordination, and other costs associated with forming such a joint
venture or new legal entity simply to comply with the limitations on
subcontracting.
These important changes allow small businesses greater flexibility
on how they choose to comply with the limitations on subcontracting.
The impact is illustrated in the following example of a non-
construction contract:
------------------------------------------------------------------------
Limitations on
subcontracting Previous New
------------------------------------------------------------------------
Contract Value.............. $1,000.............. $1,000.
Small Business' Cost of $800................ Not tracked.
Contract Performance
incurred for personnel.
LOS Requirement............. Contractor must Contractor may pay
spend $400--i.e., up to $500 (50
50 percent of the percent of the
$800 cost of contract price) to
contract a non-similarly
performance situated entity,
incurred for its e.g., large
own personnel. The business, AND/OR
contract value subcontract to a
(i.e., $1,000) is similarly situated
not used to entity without
determine limitation.
compliance under
previous rule..
------------------------------------------------------------------------
Under the current limitations on subcontracting, the small business
only has one way to comply. In the example above, it must spend at
least $400 on its own employees and, therefore, must be able to track
its contract costs to ensure compliance with the requirement. Under the
new limitations on subcontracting, there are multiple and less costly
ways to comply, and the small business can choose the most efficient
option, as demonstrated below:
<bullet> The small business can continue to spend $400 on its own
employees and subcontract $400 to any business, as it did to comply
with the previous limitations on subcontracting. Because the prime
contractor is not subcontracting more than $500 to businesses that are
not similarly situated entities, it will meet the new limitations on
subcontracting.
<bullet> The small business can subcontract to any combination of
similarly situated and non-similarly situated entities and remain in
compliance with the new limitations on subcontracting as long as the
amount spent on non-similarly situated entities does not exceed $500.
For example, the small business can subcontract $500 to any business
and spend $300 on its own employees, or subcontract $500 to any
business, $100 to a similarly situated entity, and spend only $200 on
its own employees.
SBA's final rule specified that similarly situated entities must
also comply with the limitations on subcontracting. As part of
implementing section 1651, the SBA made a few more revisions to their
regulations that are reflected in this FAR rule:
<bullet> The nonmanufacturer rule does not apply to small business
set-asides at or below the simplified acquisition threshold. Note that
currently, the FAR applies the nonmanufacturer rule to small business
set-asides above $25,000.
<bullet> Waivers of the nonmanufacturer rule will now be allowed
for procurements under the HUBZone Program. Such waivers allow a
HUBZone small business to provide the product of any size business.
<bullet> In the event SBA grants a nonmanufacturer rule waiver
after the issuance of a solicitation, but before award, contracting
officers are required to amend that solicitation to notify potential
offerors of the waiver and to give them more time to submit proposals.
The above changes drive both costs and savings; however, the rule
is expected to result in net savings to small entities, as well as to
the Government. Since the rule will only revise regulations under the
various small business programs, there will be no costs or savings to
large businesses. The expected net savings of the rule, calculated at
present value using a 7-percent discount rate over ten years, is
estimated to be $189,298,957.
To access the full regulatory cost analysis for this rule, go to
the Federal eRulemaking Portal at <a href="http://www.regulations.gov">http://www.regulations.gov</a>, search
for ``FAR
[[Page 44241]]
Case 2016-011,'' click ``Open Docket,'' and view ``Supporting
Documents.''
V. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
The Office of Information and Regulatory Affairs in the Office of
Management and Budget has determined that this is a significant
regulatory action and, therefore, was subject to review under Section
6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30,
1993.
VI. Congressional Review Act
As required by the Congressional Review Act (5 U.S.C. 801-808)
before an interim or final rule takes effect, DoD, GSA and NASA will
submit for an interim or final rule a report to each House of the
Congress and to the Comptroller General of the United States. A major
rule cannot take effect until 60 days after it is published in the
Federal Register. The Office of Information and Regulatory Affairs in
the Office of Management and Budget has determined that this is not a
major rule under 5 U.S.C. 804.
VII. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5
U.S.C. 601, et seq. The FRFA is summarized as follows:
DoD, GSA, and NASA are amending the Federal Acquisition
Regulation (FAR) to implement changes made by the Small Business
Administration (SBA) in its final rule published in the Federal
Register at 81 FR 34243 on May 31, 2016. SBA's final rule implements
the statutory requirements of section 1651 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2013, which revised
and standardized the limitations on subcontracting, including the
nonmanufacturer rule, that apply to small business concerns under
FAR part 19 procurements.
The objectives of this rule are to apply the limitations on
subcontracting consistently to the small business concerns
identified in FAR 19.000(a)(3) and to change the method of
calculation to the percentage of the award amount to be spent on
subcontractors.
There were no significant issues raised by the public in
response to the Initial Regulatory Flexibility Analysis.
This rule may have a positive economic impact on small
businesses, because it will make application of the limitations on
subcontracting and the nonmanufacturer rule uniform across all small
business programs and make it easier to calculate compliance with
the limitations on subcontracting. Through the ability to meet the
limitations by means of subcontracts with similarly situated
entities, this rule will make it possible for small businesses to
compete for larger contracts than they could in the past. The rule
will encourage small business prime contractors to award
subcontracts to other, similarly situated, small businesses.
According to the System for Award Management (SAM), there are
315,655 active registrants that are considered small for at least
one North American Industry Classification System code. Firms
looking to be prime contractors for Government contracts are
required to register in SAM. However, firms do not need to register
in SAM to participate in subcontracting. Thus, the number of small
business firms impacted by this rule may be greater than the number
of firms registered in SAM.
This rule does not include any new reporting or recordkeeping
requirements for small entities. This rule does not include any new
compliance requirements. The FAR already required compliance with
the limitations on subcontracting and the nonmanufacturer rule for
small business prime contractors receiving awards pursuant to part
19. This rule simply revises the limitations on subcontracting and
the nonmanufacturer rule to match that required by section 1651 of
the NDAA for FY 2013. According to the Federal Procurement Data
System, there were approximately 70,992 contracts per year in fiscal
years 2016-2018 under all the small business programs to which the
limitations on subcontracting or the nonmanufacturer rule would
apply.
This rule is not expected to have a negative impact on the
majority of small entities.
Interested parties may obtain a copy of the FRFA from the
Regulatory Secretariat Division. The Regulatory Secretariat Division
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of
SBA.
VIII. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. chapter 35) does apply;
however, these changes to the FAR do not impose additional information
collection requirements to the paperwork burden previously approved
under OMB Control Number 3245-0374, titled: Certification for the
Women-Owned Small Business Federal Contract Program.
List of Subjects in 48 CFR Parts 19 and 52
Government procurement.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-wide Policy.
Therefore, DoD, GSA, and NASA are amending 48 CFR parts 19 and 52
as set forth below:
0
1. The authority citation for 48 CFR parts 19 and 52 continues to read
as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
PART 19--SMALL BUSINESS PROGRAMS
0
2. Amend section 19.001 by removing the definition of
``Nonmanufacturer'' and adding, in alphabetical order, the definition
of ``Similarly situated entity'' to read as follows:
19.001 Definitions.
* * * * *
Similarly situated entity means a first-tier subcontractor,
including an independent contractor, that--
(1) Has the same small business program status as that which
qualified the prime contractor for the award (e.g., for a small
business set-aside contract, any small business concern, without regard
to socioeconomic status); and (2) Is considered small for the size
standard under the NAICS code the prime contractor assigned to the
subcontract.
0
3. Revise section 19.505 to read as follows:
19.505 Limitations on subcontracting and nonmanufacturer rule.
(a) Applicability. (1) This section applies to small business set-
asides above the simplified acquisition threshold and orders issued
directly to a small business in accordance with 19.504(c)(1)(ii) above
the simplified acquisition threshold.
(2) This section applies, regardless of dollar value, to the
following awards under subparts 19.8, 19.13, 19.14, and 19.15:
(i) Contracts that are set aside.
(ii) Contracts that are awarded on a sole-source basis.
(iii) Orders that are set-aside as described in 8.405-5 and
16.505(b)(2)(i)(F).
(iv) Orders that are issued directly in accordance with
19.504(c)(1)(ii).
(v) Contracts that use the HUBZone price evaluation preference to
award to a HUBZone small business concern unless the concern waived the
evaluation preference.
[[Page 44242]]
(b)(1) Limitations on subcontracting. A small business concern
subject to the limitations on subcontracting is required to comply with
the following:
(i) For a contract or order assigned a North American Industry
Classification System (NAICS) code for services (except construction),
the concern will not pay more than 50 percent of the amount paid by the
Government for contract performance to subcontractors that are not
similarly situated entities. Any work that a similarly situated entity
further subcontracts will count towards the concern's 50 percent
subcontract amount that cannot be exceeded. When a contract includes
both services and supplies, the 50 percent limitation shall apply only
to the service portion of the contract.
(ii) For a contract or order assigned a NAICS code for supplies or
products (other than a procurement from a nonmanufacturer of such
supplies or products), the concern will not pay more than 50 percent of
the amount paid by the Government for contract performance, excluding
the cost of materials, to subcontractors that are not similarly
situated entities. Any work that a similarly situated entity further
subcontracts will count towards the concern's 50 percent subcontract
amount that cannot be exceeded. When a contract includes both supplies
and services, the 50 percent limitation shall apply only to the supply
portion of the contract.
(iii) For a contract or order assigned a NAICS code for general
construction, the concern will not pay more than 85 percent of the
amount paid by the Government for contract performance, excluding the
cost of materials, to subcontractors that are not similarly situated
entities. Any work that a similarly situated entity further
subcontracts will count towards the concern's 85 percent subcontract
amount that cannot be exceeded.
(iv) For a contract or order assigned a NAICS code for construction
by special trade contractors, the concern will not pay more than 75
percent of the amount paid by the Government for contract performance,
excluding the cost of materials, to subcontractors that are not
similarly situated entities. Any work that a similarly situated entity
further subcontracts will count towards the concern's 75 percent
subcontract amount that cannot be exceeded.
(2) Compliance period. A small business contractor subject to the
limitations on subcontracting is required to comply with the
limitations on subcontracting--
(i) For a contract that has been set aside, either by the end of
the base term and then by the end of each subsequent option period, or
by the end of the performance period for each order issued under the
contract, at the contracting officer's discretion; and
(ii) For an order set aside under a contract as described in
19.504(a), (b), or (c)(1)(i) or an order issued in accordance with
19.504(c)(1)(ii), by the end of the performance period for the order.
(c) Nonmanufacturer rule. The nonmanufacturer rule applies to
nonmanufacturers in accordance with paragraph (c)(1) of this section
and to kit assemblers who are nonmanufacturers in accordance with
paragraph (c)(2) of this section.
(1) Nonmanufacturers. Any concern, including a supplier, that is
awarded a contract or order subject to the nonmanufacturer rule, other
than a construction or service acquisition, but proposes to furnish an
end item that it did not itself manufacture, process, or produce (i.e.,
a ``nonmanufacturer''), is required to--
(i) Provide an end item that a small business has manufactured,
processed, or produced in the United States or its outlying areas (see
paragraph (c)(3) of this section for determining the manufacturer of an
end item);
(ii) Not exceed 500 employees;
(iii) Be primarily engaged in the retail or wholesale trade and
normally sell the type of item being supplied; and
(iv) Take ownership or possession of the item(s) with its
personnel, equipment, or facilities in a manner consistent with
industry practice; for example, providing storage, transportation, or
delivery.
(2) Kit assemblers. When the end item being acquired is a kit of
supplies--
(i) The offeror may not exceed 500 employees; and
(ii) At least 50 percent of the total cost of the components of the
kit shall be manufactured, processed, or produced in the United States
or its outlying areas by business concerns that are small under the
size standards for the NAICS codes of the components of the kit.
(3) Identification of manufacturers. For the purposes of applying
the nonmanufacturer rule, the manufacturer, processor, or producer is
the concern that manufactures, processes, or produces an end item with
its own facilities (i.e., transforms raw materials, miscellaneous
parts, or components into the end item being acquired). See 13 CFR
121.406(b)(2).
(4) Waiver of nonmanufacturer rule. (i) The SBA may grant an
individual or a class waiver to the nonmanufacturer rule to allow a
nonmanufacturer to provide an end item of an other than small business
without regard to the place of manufacture, processing, or production.
(A) Class waiver. An agency may request that SBA waive the
requirement at paragraph (c)(1)(i) or (c)(2)(ii) of this section for a
specific product or class of products. See 13 CFR 121.1202 for an
explanation of when SBA will issue a class waiver.
(B) Individual waiver. The contracting officer may also request a
waiver of the requirements at paragraph (c)(1)(i) or (c)(2)(ii) of this
section for an individual acquisition once the contracting officer
determines through market research that no known small business
manufacturers, processors, or producers in the United States or its
outlying areas can reasonably be expected to offer an end item meeting
the requirements of the solicitation. This type of waiver is known as
an individual waiver and would apply only to a specific acquisition.
(ii) Waiver requests. Requests for waivers shall include the
content specified at 13 CFR 121.1204 and shall be sent via email to
<a href="/cdn-cgi/l/email-protection#345a594643555d42514647744756551a535b42"><span class="__cf_email__" data-cfemail="bdd3d0cfcadcd4cbd8cfcefdcedfdc93dad2cb">[email protected]</span></a> or by mail to the--Director, Office of Government
Contracting, Small Business Administration, 409 Third Street SW,
Washington, DC 20416.
(iii) List of class waivers. For the most current listing of class
waivers, contact the SBA Office of Government Contracting or go to
<a href="https://www.sba.gov/document/support-non-manufacturer-rule-class-waiver-list">https://www.sba.gov/document/support-non-manufacturer-rule-class-waiver-list</a>.
(iv) Notification of waiver. The contracting officer shall provide
potential offerors with written notification of any class or individual
waiver in the solicitation. If providing the notification after
solicitation issuance, the contracting officer shall provide potential
offerors a reasonable amount of additional time to respond to the
solicitation.
(5) Multiple-item acquisitions. (i) If at least 50 percent of the
estimated contract value is composed of items that are manufactured,
processed, or produced by small business concerns, then a waiver of the
nonmanufacturer rule is not required. There is no requirement that each
item acquired in a multiple-item acquisition be manufactured,
processed, or produced by a small business in the United States or its
outlying areas.
(ii) If more than 50 percent of the estimated acquisition cost is
composed of items manufactured, processed, or produced by other than
small business concerns, then a waiver is required. SBA may grant an
individual waiver for one or more items in an acquisition in order to
ensure that at least 50 percent
[[Page 44243]]
of the cost of the items to be supplied by the nonmanufacturer comes
from small business manufacturers, processors, and producers in the
United States or its outlying areas or are subject to a waiver.
(iii) If a small business offeror is both a manufacturer of item(s)
and a nonmanufacturer of other item(s) for an acquisition, the
contracting officer shall apply the manufacturer size standard.
0
4. Amend section 19.507 by revising paragraphs (e) and (h) to read as
follows:
19.507 Solicitation provisions and contract clauses.
* * * * *
(e) The contracting officer shall insert the clause at 52.219-14,
Limitations on Subcontracting, in solicitations and contracts--
(1) For supplies, services, and construction, if any portion of the
requirement is to be set aside for small business and the contract
amount is expected to exceed the simplified acquisition threshold, and
in any solicitations and contracts that are set aside or awarded on a
sole-source basis in accordance with subparts 19.8, 19.13, 19.14, or
19.15, regardless of dollar value. This includes multiple-award
contracts when orders may be set aside for small business concerns, as
described in 8.405-5 and 16.505(b)(2)(i)(F), and when orders may be
issued directly to a small business concern as described in
19.504(c)(1)(ii). For contracts that are set aside, the contracting
officer shall indicate in paragraph (f) of the clause whether
compliance with the limitations on subcontracting is required at the
contract or order level;
(2) Using the HUBZone price evaluation preference. However, if the
prospective contractor waived the use of the price evaluation
preference, or is an other than small business, do not insert the
clause in the resultant contract.
* * * * *
(h)(1) The contracting officer shall insert the clause at 52.219-
33, Nonmanufacturer Rule, in solicitations and contracts (including
multiple-award contracts when orders may be set aside for small
business concerns as described in 8.405-5 and 16.505(b)(2)(i)(F), and
when orders may be issued directly to a small business concern as
described in 19.504(c)(1)(ii)), when--
(i) the item being acquired has been assigned a manufacturing or
supply NAICS code, and--
(ii)(A) Any portion of the requirement is to be--
(1) Set aside for small business and is expected to exceed the
simplified acquisition threshold; or
(2) Set aside or awarded on a sole-source basis in accordance with
subparts 19.8, 19.13, 19.14, or 19.15, regardless of dollar value; or
(B) Using the HUBZone price evaluation preference. However, if the
prospective contractor waived the use of the price evaluation
preference, or is an other than small business, do not insert the
clause in the resultant contract.
(2) The contracting officer shall not insert the clause at 52.219-
33 when the Small Business Administration has waived the
nonmanufacturer rule (see 19.505(c)(4)).
19.811-3 [Amended]
0
5. Amend section 19.811-3 by removing from paragraph (d) ``The clause
at 52.219-18 with its Alternate I shall be used when'' and adding ``Use
the clause at 52.219-18 with its Alternate I when'' in its place.
19.1308 [Removed and Reserved]
0
6. Remove and reserve section 19.1308.
0
7. Revise section 19.1309 to read as follows:
19.1309 Contract clauses.
(a) The contracting officer shall insert the clause at 52.219-3,
Notice of HUBZone Set-Aside or Sole-Source Award, in solicitations and
contracts for acquisitions that are set aside or awarded on a sole-
source basis to, HUBZone small business concerns under 19.1305 or
19.1306. This includes multiple-award contracts when orders may be set
aside for HUBZone small business concerns as described in 8.405-5 and
16.505(b)(2)(i)(F) or when orders may be issued directly to one HUBZone
small business concern in accordance with 19.504(c)(1)(ii).
(b) The contracting officer shall insert the clause at 52.219-4,
Notice of Price Evaluation Preference for HUBZone Small Business
Concerns, in solicitations and contracts for acquisitions conducted
using full and open competition.
(c) For use of clause 52.219-14, Limitations on Subcontracting, see
the prescription at 19.507(e).
(d) For use of clause 52.219-33, Nonmanufacturer Rule, see the
prescription at 19.507(h).
19.1403 [Amended]
0
8. Amend section 19.1403 by removing from paragraph (d) ``19.1407(c)''
and adding ``19.505'' in its place.
19.1407 [Removed and Reserved]
0
9. Remove and reserve section 19.1407.
0
10. Revise section 19.1408 to read as follows:
19.1408 Contract clauses.
(a) The contracting officer shall insert the clause at 52.219-27,
Notice of Service-Disabled Veteran-Owned Small Business Set-Aside, in
solicitations and contracts for acquisitions that are set aside or
awarded on a sole- source basis to, service-disabled veteran-owned
small business concerns under 19.1405 and 19.1406. This includes
multiple-award contracts when orders may be set aside for service-
disabled veteran-owned small business concerns as described in 8.405-5
and 16.505(b)(2)(i)(F) or when orders may be issued directly to one
service-disabled veteran-owned small business contractor in accordance
with 19.504(c)(1)(ii).
(b) For use of clause 52.219-14, Limitations on Subcontracting, see
the prescription at 19.507(e).
(c) For use of clause 52.219-33, Nonmanufacturer Rule, see the
prescription at 19.507(h).
19.1507 [Removed and Reserved]
0
11. Remove and reserve section 19.1507.
0
12. Revise section 19.1508 to read as follows:
19.1508 Contract clauses.
(a) The contracting officer shall insert the clause at 52.219-29,
Notice of Set-Aside for, or Sole-Source Award to, Economically
Disadvantaged Women-owned Small Business Concerns, in solicitations and
contracts for acquisitions that are set aside or awarded on a sole-
source basis to, EDWOSB concerns under 19.1505(b) or 19.1506(a). This
includes multiple-award contracts when orders may be set aside for
EDWOSB concerns as described in 8.405-5 and 16.505(b)(2)(i)(F) or when
orders may be issued directly to one EDWOSB contractor in accordance
with 19.504(c)(1)(ii).
(b) The contracting officer shall insert the clause at 52.219-30,
Notice of Set-Aside for, or Sole-Source Award to, Women-Owned Small
Business Concerns Eligible Under the Women-Owned Small Business
Program, in solicitations and contracts for acquisitions that are set
aside or awarded on a sole-source basis to WOSB concerns under
19.1505(c) or 19.1506(b). This includes multiple-award contracts when
orders may be set aside for WOSB concerns eligible under the WOSB
Program as described in 8.405-5 and 16.505(b)(2)(i)(F) or when orders
may be issued directly to one
[[Page 44244]]
WOSB contractor in accordance with 19.504(c)(1)(ii).
(c) For use of clause 52.219-14, Limitations on Subcontracting, see
the prescription at 19.507(e).
(d) For use of clause 52.219-33, Nonmanufacturer Rule, see the
prescription at 19.507(h).
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
13. Amend section 52.204-8 by--
0
a. Revising the date of the provision;
0
b. Revising paragraph (a)(3);
0
c. Revising the date of Alternate I; and
0
d. Revising paragraph (a)(2) of Alternate I.
The revisions read as follows:
52.204-8 Annual Representations and Certifications.
* * * * *
Annual Representations and Certifications (SEP 2021)
(a) * * *
(3) The small business size standard for a concern that submits
an offer, other than on a construction or service acquisition, but
proposes to furnish an end item that it did not itself manufacture,
process, or produce is 500 employees if the acquisition--
(i) Is set aside for small business and has a value above the
simplified acquisition threshold;
(ii) Uses the HUBZone price evaluation preference regardless of
dollar value, unless the offeror waives the price evaluation
preference; or
(iii) Is an 8(a), HUBZone, service-disabled veteran-owned,
economically disadvantaged women-owned, or women-owned small
business set-aside or sole-source award regardless of dollar value.
* * * * *
Alternate I (SEP 2021).
* * *
(a) * * *
(2) The small business size standard for a concern that submits
an offer, other than on a construction or service acquisition, but
proposes to furnish an end item that it did not itself manufacture,
process, or produce, (i.e., nonmanufacturer), is 500 employees if
the acquisition--
(i) Is set aside for small business and has a value above the
simplified acquisition threshold;
(ii) Uses the HUBZone price evaluation preference regardless of
dollar value, unless the offeror waives the price evaluation
preference; or
(iii) Is an 8(a), HUBZone, service-disabled veteran-owned,
economically disadvantaged women-owned, or women-owned small
business set-aside or sole-source award regardless of dollar value.
* * * * *
0
14. Amend section 52.212-1 by revising the date of the provision and
paragraph (a) to read as follows:
52.212-1 Instructions to Offerors--Commercial Items.
* * * * *
Instructions to Offerors--Commercial Items (SEP 2021)
(a) North American Industry Classification System (NAICS) code
and small business size standard. The NAICS code(s) and small
business size standard(s) for this acquisition appear elsewhere in
the solicitation. However, the small business size standard for a
concern that submits an offer, other than on a construction or
service acquisition, but proposes to furnish an end item that it did
not itself manufacture, process, or produce is 500 employees if the
acquisition--
(1) Is set aside for small business and has a value above the
simplified acquisition threshold;
(2) Uses the HUBZone price evaluation preference regardless of
dollar value, unless the offeror waives the price evaluation
preference; or
(3) Is an 8(a), HUBZone, service-disabled veteran-owned,
economically disadvantaged women-owned, or women-owned small
business set-aside or sole-source award regardless of dollar value.
* * * * *
0
15. Amend section 52.212-5 by revising the date of the clause and
paragraphs (b)(11), (b)(12), (b)(19), (b)(21), (b)(22), (b)(23),
(b)(24), and (b)(26) to read as follows:
52.212-5 Contract Terms and Conditions Required to Implement Statutes
or Executive Orders--Commercial Items.
* * * * *
Contract Terms and Conditions Required To Implement Statutes or
Executive Orders--Commercial Items (SEP 2021)
* * * * *
(b) * * *
__(11) 52.219-3, Notice of HUBZone Set-Aside or Sole-Source
Award (SEP 2021) (15 U.S.C. 657a).
__(12) 52.219-4, Notice of Price Evaluation Preference for
HUBZone Small Business Concerns (SEP 2021) (if the offeror elects to
waive the preference, it shall so indicate in its offer) (15 U.S.C.
657a).
* * * * *
__(19) 52.219-14, Limitations on Subcontracting (SEP 2021) (15
U.S.C. 657s).
* * * * *
__(21) 52.219-27, Notice of Service-Disabled Veteran-Owned Small
Business Set-Aside (SEP 2021) (15 U.S.C. 657f).
__(22)(i) 52.219-28, Post-Award Small Business Program
Rerepresentation (SEP 2021) (15 U.S.C. 632(a)(2)).
__(ii) Alternate I (MAR 2020) of 52.219-28.
__(23) 52.219-29, Notice of Set-Aside for, or Sole-Source Award
to, Economically Disadvantaged Women-Owned Small Business Concerns
(SEP 2021) (15 U.S.C. 637(m)).
__(24) 52.219-30, Notice of Set-Aside for, or Sole-Source Award
to, Women-Owned Small Business Concerns Eligible Under the Women-
Owned Small Business Program (SEP 2021) (15 U.S.C. 637(m)).
* * * * *
__(26) 52.219-33, Nonmanufacturer Rule (SEP 2021) (15 U.S.C.
657s).
* * * * *
0
16. Amend section 52.219-1 by--
0
a. Revising the date of the provision;
0
b. Removing from paragraph (b)(1) ``--'' and adding a space in its
place;
0
c. Revising paragraph (b)(3);
0
d. Revising the date of Alternate II; and
0
e. Revising paragraph (b)(2) of Alternate II.
The revisions read as follows:
52.219-1 Small Business Program Representations.
* * * * *
Small Business Program Representations (SEP 2021)
* * * * *
(b) * * *
(3) The small business size standard for a concern that submits
an offer, other than on a construction or service acquisition, but
proposes to furnish an end item that it did not itself manufacture,
process, or produce (i.e., nonmanufacturer), is 500 employees if the
acquisition--
(i) Is set aside for small business and has a value above the
simplified acquisition threshold;
(ii) Uses the HUBZone price evaluation preference regardless of
dollar value, unless the offeror waives the price evaluation
preference; or
(iii) Is an 8(a), HUBZone, service-disabled veteran-owned,
economically disadvantaged women-owned, or women-owned small
business set-aside or sole-source award regardless of dollar value.
* * * * *
Alternate II (SEP 2021).
* * * * *
(b) * * *
(2) The small business size standard for a concern that submits
an offer, other than on a construction or service acquisition, but
proposes to furnish an end item that it did not itself manufacture,
process, or produce (i.e., nonmanufacturer), is 500 employees if the
acquisition--
(i) Is set aside for small business and has a value above the
simplified acquisition threshold;
(ii) Uses the HUBZone price evaluation preference regardless of
dollar value, unless the offeror waives the price evaluation
preference; or
(iii) Is an 8(a), HUBZone, service-disabled veteran-owned,
economically disadvantaged women-owned, or women-owned small
business set-aside or sole-source award regardless of dollar value.
* * * * *
0
17. Amend section 52.219-3 by--
0
a. Revising the introductory text;
0
b. Revising the title and date of the clause;
[[Page 44245]]
0
c. Revising paragraph (a);
0
d. In paragraph (b)(1) removing ``sole source'' and adding ``sole-
source'' in its place;
0
e. In paragraph (b)(3) removing ``set-aside'' and adding ``set aside''
in its place;
0
f. Removing paragraphs (d), (e), and (f);
0
g. Redesignating paragraph (g) as paragraph (d); and
0
h. Removing Alternate I.
The revisions read as follows:
52.219-3 Notice of HUBZone Set-Aside or Sole-Source Award.
As prescribed in 19.1309(a), insert the following clause:
Notice of HUBZone Set-Aside or Sole-Source Award (SEP 2021)
(a) Definition. ``HUBZone small business concern,'' as used in
this clause, means a small business concern, certified by the Small
Business Administration (SBA), that appears on the List of Qualified
HUBZone Small Business Concerns maintained by the SBA (13 CFR
126.103).
* * * * *
0
18. Amend section 52.219-4 by--
0
a. In the introductory text removing ``19.1309(b)(1)'' and adding
``19.1309(b)'' in its place;
0
b. Revising the date of the clause;
0
c. Removing paragraphs (a), (d), and (e);
0
d. Redesignating paragraphs (b), (c) and (f) as paragraphs (a), (b) and
(c), respectively;
0
e. Revising newly redesignated paragraph (b); and
0
f. Removing Alternate I.
The revision reads as follows:
52.219-4 Notice of Price Evaluation Preference for HUBZone Small
Business Concerns.
* * * * *
Notice of Price Evaluation Preference for HUBZone Small Business
Concerns (SEP 2021)
* * * * *
(b) Waiver of evaluation preference. A HUBZone small business
concern may elect to waive the evaluation preference, in which case
the factor will be added to its offer for evaluation purposes.
[square] Offeror elects to waive the evaluation preference.
* * * * *
0
19. Revise section 52.219-14 to read as follows:
52.219-14 Limitations on Subcontracting.
As prescribed in 19.507(e), insert the following clause:
Limitations on Subcontracting (SEP 2021)
(a) This clause does not apply to the unrestricted portion of a
partial set-aside.
(b) Definition. Similarly situated entity, as used in this
clause, means a first-tier subcontractor, including an independent
contractor, that--
(1) Has the same small business program status as that which
qualified the prime contractor for the award (e.g., for a small
business set-aside contract, any small business concern, without
regard to its socioeconomic status); and
(2) Is considered small for the size standard under the North
American Industry Classification System (NAICS) code the prime
contractor assigned to the subcontract.
(c) Applicability. This clause applies only to--
(1) Contracts that have been set aside for any of the small
business concerns identified in 19.000(a)(3);
(2) Part or parts of a multiple-award contract that have been
set aside for any of the small business concerns identified in
19.000(a)(3);
(3) Contracts that have been awarded on a sole-source basis in
accordance with subparts 19.8, 19.13, 19.14, and 19.15;
(4) Orders expected to exceed the simplified acquisition
threshold and that are--
(i) Set aside for small business concerns under multiple-award
contracts, as described in 8.405-5 and 16.505(b)(2)(i)(F); or
(ii) Issued directly to small business concerns under multiple-
award contracts as described in 19.504(c)(1)(ii);
(5) Orders, regardless of dollar value, that are--
(i) Set aside in accordance with subparts 19.8, 19.13, 19.14, or
19.15 under multiple-award contracts, as described in 8.405-5 and
16.505(b)(2)(i)(F); or
(ii) Issued directly to concerns that qualify for the programs
described in subparts 19.8, 19.13, 19.14, or 19.15 under multiple-
award contracts, as described in 19.504(c)(1)(ii); and
(6) Contracts using the HUBZone price evaluation preference to
award to a HUBZone small business concern unless the concern waived
the evaluation preference.
(d) Independent contractors. An independent contractor shall be
considered a subcontractor.
(e) Limitations on subcontracting. By submission of an offer and
execution of a contract, the Contractor agrees that in performance
of a contract assigned a North American Industry Classification
System (NAICS) code for--
(1) Services (except construction), it will not pay more than 50
percent of the amount paid by the Government for contract
performance to subcontractors that are not similarly situated
entities. Any work that a similarly situated entity further
subcontracts will count towards the prime contractor's 50 percent
subcontract amount that cannot be exceeded. When a contract includes
both services and supplies, the 50 percent limitation shall apply
only to the service portion of the contract;
(2) Supplies (other than procurement from a nonmanufacturer of
such supplies), it will not pay more than 50 percent of the amount
paid by the Government for contract performance, excluding the cost
of materials, to subcontractors that are not similarly situated
entities. Any work that a similarly situated entity further
subcontracts will count towards the prime contractor's 50 percent
subcontract amount that cannot be exceeded. When a contract includes
both supplies and services, the 50 percent limitation shall apply
only to the supply portion of the contract;
(3) General construction, it will not pay more than 85 percent
of the amount paid by the Government for contract performance,
excluding the cost of materials, to subcontractors that are not
similarly situated entities. Any work that a similarly situated
entity further subcontracts will count towards the prime
contractor's 85 percent subcontract amount that cannot be exceeded;
or
(4) Construction by special trade contractors, it will not pay
more than 75 percent of the amount paid by the Government for
contract performance, excluding the cost of materials, to
subcontractors that are not similarly situated entities. Any work
that a similarly situated entity further subcontracts will count
towards the prime contractor's 75 percent subcontract amount that
cannot be exceeded.
(f) The Contractor shall comply with the limitations on
subcontracting as follows:
(1) For contracts, in accordance with paragraphs (c)(1), (2),
(3) and (6) of this clause--
[Contracting Officer check as appropriate.]
__By the end of the base term of the contract and then by the
end of each subsequent option period; or
__By the end of the performance period for each order issued
under the contract.
(2) For orders, in accordance with paragraphs (c)(4) and (5) of
this clause, by the end of the performance period for the order.
(g) A joint venture agrees that, in the performance of the
contract, the applicable percentage specified in paragraph (e) of
this clause will be performed by the aggregate of the joint venture
participants.
(End of clause)
0
20. Amend section 52.219-27 by--
0
a. Revising the date of the clause;
0
b. Removing paragraphs (d) and (e);
0
c. Redesignating paragraph (f) as paragraph (d); and
0
d. Revising newly redesignated paragraph (d).
The revisions read as follows:
52.219-27 Notice of Service-Disabled Veteran-Owned Small Business
Set-Aside.
* * * * *
Notice of Service-Disabled Veteran-Owned Small Business Set-Aside (SEP
2021)
* * * * *
(d) A joint venture may be considered a service-disabled veteran
owned small business concern if--
(1) At least one member of the joint venture is a service-
disabled veteran-owned small business concern, and makes the
following representations:
(i) That it is a service-disabled veteran-owned small business
concern, and
[[Page 44246]]
(ii) That it is a small business concern under the North
American Industry Classification Systems (NAICS) code assigned to
the procurement;
(2) Each other concern is small under the size standard
corresponding to the NAICS code assigned to the procurement;
(3) The joint venture meets the requirements of 13 CFR
121.103(h); and
(4) The joint venture meets the requirements of 13 CFR
125.15(b).
0
21. Amend section 52.219-28 by revising the date of the clause and
paragraph (e) to read as follows:
52.219-28 Post-Award Small Business Program Rerepresentation.
* * * * *
Post-Award Small Business Program Rerepresentation (SEP 2021)
* * * * *
(e) The small business size standard for a Contractor providing
an end item that it does not manufacture, process, or produce
itself, for a contract other than a construction or service
contract, is 500 employees if the acquisition--
(1) Was set aside for small business and has a value above the
simplified acquisition threshold;
(2) Used the HUBZone price evaluation preference regardless of
dollar value, unless the Contractor waived the price evaluation
preference; or
(3) Was an 8(a), HUBZone, service-disabled veteran-owned,
economically disadvantaged women-owned, or women-owned small
business set-aside or sole-source award regardless of dollar value.
* * * * *
0
22. Amend section 52.219-29 by--
0
a. Revising the section heading, clause heading, and date of the
clause;
0
b. In paragraph (a) removing from the definition ``Economically
disadvantaged women-owned small business (EDWOSB) concern'' ``means- A
small'' and adding ``means a small'' in its place;
0
c. In paragraph (b)(1) removing ``sole source'' and adding ``sole-
source'' in its place;
0
d. Removing paragraphs (d) and (e);
0
e. Redesignating paragraph (f) as paragraph (d);
0
f. In newly redesignated paragraph (d)--
0
i. In paragraph (1) removing ``NAICS'' and adding ``North American
Industry Classification System'' in its place;
0
ii. In paragraph (3)(v) removing ``venture.'' and adding ``venture;
and'' in its place;
0
iii. Removing paragraph (4);
0
iv. Redesignating paragraph (5) as (4); and
0
v. In newly redesignated paragraph (4) removing ``procuring activity''
and adding ``Contracting Officer'' in its place.
The revision reads as follows:
52.219-29 Notice of Set-Aside for, or Sole-Source Award to,
Economically Disadvantaged Women-Owned Small Business Concerns.
* * * * *
Notice of Set-Aside for, or Sole-Source Award to, Economically
Disadvantaged Women-Owned Small Business Concerns (SEP 2021)
* * * * *
0
23. Amend section 52.219-30 by--
0
a. Revising the section heading, clause heading, date of the clause,
and the introductory text of paragraph (a);
0
b. In paragraph (b)(1) removing ``sole source'' and adding ``sole-
source'' in its place;
0
c. In the second sentence of paragraph (c)(1) removing ``WOSB program''
and adding ``WOSB Program'' in its place;
0
d. Removing paragraphs (d) and (e);
0
e. Redesignating paragraph (f) as paragraph (d);
0
f. In newly redesignated paragraph (d):
0
i. In paragraph (1) removing ``NAICS'' and adding ``North American
Industry Classification System'' in its place;
0
ii. In paragraph (d)(3)(v) removing ``venture.'' and adding ``venture;
and'' in its place;
0
iii. Removing paragraph (4);
0
iv. Redesignating paragraph (5) as (4); and
0
v. In newly redesignated paragraph (4) removing ``procuring activity''
and adding ``Contracting Officer'' in its place.
The revisions read as follows:
52.219-30 Notice of Set-Aside for, or Sole-Source Award to, Women-
Owned Small Business Concerns Eligible Under the Women-Owned Small
Business Program.
* * * * *
Notice of Set-Aside for, or Sole-Source Award to, Women-Owned Small
Business Concerns Eligible Under the Women-Owned Small Business Program
(SEP 2021)
(a) Definitions. As used in this clause--
* * * * *
0
24. Revise section 52.219-33 to read as follows:
52.219-33 Nonmanufacturer Rule.
As prescribed in 19.507(h), insert the following clause:
Nonmanufacturer Rule (SEP 2021)
(a) Definitions. As used in this clause--
Manufacturer means the concern that transforms raw materials,
miscellaneous parts, or components into the end item. Concerns that
only minimally alter the item being procured do not qualify as
manufacturers of the end item. Concerns that add substances, parts,
or components to an existing end item to modify its performance will
not be considered the end item manufacturer, where those identical
modifications can be performed by and are available from the
manufacturer of the existing end item.
Nonmanufacturer means a concern, including a supplier, that
provides an end item it did not manufacture, process, or produce.
(b) Applicability.
(1) This clause does not apply to contracts awarded pursuant to
the unrestricted portion of a partial set-aside or to a contractor
that is the manufacturer of the product or end item.
(2) This clause applies to--
(i) Contracts that have been awarded pursuant to a set-aside, in
total or in part, for any of the small business concerns identified
in 19.000(a)(3);
(ii) Contracts that have been awarded on a sole-source basis in
accordance with subparts 19.8, 19.13, 19.14, and 19.15;
(iii) Orders expected to exceed the simplified acquisition
threshold and that are--
(A) Set aside for small business under multiple-award contracts,
as described in 8.405-5 and 16.505(b)(2)(i)(F); or
(B) Issued directly to a small business concern under multiple-
award contracts as described in 19.504(c)(1)(ii);
(iv) Orders, regardless of dollar value, that are--
(A) Set aside in accordance with subparts 19.8, 19.13, 19.14,
and 19.15 under multiple-award contracts as described in 8.405-5 and
16.505(b)(2)(i)(F); or
(B) Issued directly to concerns that qualify for the programs
described in subparts 19.8, 19.13, 19.14, and 19.15 under multiple-
award contracts as described in 19.504(c)(1)(ii); and
(v) Contracts using the HUBZone price evaluation preference to
award to a HUBZone concern unless the Contractor waived the
evaluation preference.
(c) Requirements.
(1) The Contractor shall--
(i) Provide an end item that a small business has manufactured,
processed, or produced in the United States or its outlying areas;
for kit assemblers who are nonmanufacturers, see paragraph (c)(2) of
this clause instead;
(ii) Be primarily engaged in the retail or wholesale trade and
normally sell the type of item being supplied; and
(iii) Take ownership or possession of the item(s) with its
personnel, equipment, or facilities in a manner consistent with
industry practice; for example, providing storage, transportation,
or delivery.
(2) When the end item being acquired is a kit of supplies, at
least 50 percent of the total cost of the components of the kit
shall be manufactured, processed, or produced in the United States
or its outlying areas by small business concerns.
(End of clause)
* * * * *
[FR Doc. 2021-16364 Filed 8-10-21; 8:45 am]
BILLING CODE 6820-EP-P
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