Rule2024-23226
Defense Federal Acquisition Regulation Supplement: Pilot Program To Incentivize Contracting With Employee-Owned Businesses (DFARS Case 2024-D004)
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
October 10, 2024
Effective
November 25, 2024
Issuing agencies
Defense DepartmentDefense Acquisition Regulations System
Abstract
DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement sections of the National Defense Authorization Acts for Fiscal Year 2022 and Fiscal Year 2024 that authorize DoD to establish a pilot program that allows for the noncompetitive award of certain follow-on contracts to certain employee-owned businesses.
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 197 (Thursday, October 10, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 197 (Thursday, October 10, 2024)]
[Rules and Regulations]
[Pages 82183-82188]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-23226]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 206, 212, 252, and 270
[Docket DARS-2024-0017]
RIN 0750-AM01
Defense Federal Acquisition Regulation Supplement: Pilot Program
To Incentivize Contracting With Employee-Owned Businesses (DFARS Case
2024-D004)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement sections of the
National Defense Authorization Acts for Fiscal Year 2022 and Fiscal
Year 2024 that authorize DoD to establish a pilot program that allows
for the noncompetitive award of certain follow-on contracts to certain
employee-owned businesses.
DATES: Effective November 25, 2024.
FOR FURTHER INFORMATION CONTACT: Ms. Jeanette Snyder, telephone 703-
508-7524.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 89 FR
46831 on May 30, 2024, to implement section 874 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2022 (Pub. L. 117-81; 10
U.S.C. 3204 note) as amended by section 872 of the NDAA for FY 2024
(Pub. L. 118-31; 10 U.S.C. 3204 note). Sections 874 and 872 authorize
DoD to establish a pilot program that allows for the noncompetitive
award of certain follow-on contracts to employee-owned businesses that
meet the definition of a qualified business. Five respondents submitted
public comments in response to the proposed rule.
II. Discussion and Analysis
DoD 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 is provided, as follows:
A. Summary of Significant Changes From the Proposed Rule
There are no significant changes from the proposed rule.
B. Analysis of Public Comments
1. Support for the Rule
Comment: The respondents expressed support for the rule.
Response: DoD acknowledges the respondents' support for the rule.
2. Clarifications
Comment: One respondent recommended revising the proposed rule text
at DFARS 270.X02 to clarify that a reference to Federal Acquisition
Regulation (FAR) 6.302-5 is sufficient to justify a sole-source award
under the pilot program. The respondent also recommended adding the
following sentence to the text: ``A justification that cites FAR 6.302-
5, makes reference to 48 CFR 206.302-5(b)(iii), and meets the
requirements of subparts 207.X03 and 207.X04 shall be considered
complete and sufficient for an exception to full an open competition.''
One respondent indicated that a justification and approval (J&A) that
only references FAR 6.302-5 is likely to be found insufficient by audit
agencies.
Response: The proposed rule text at DFARS 270.102(b) requires the
contracting officer to justify the use of a sole-source contract in
accordance with FAR 6.303 and 6.304 prior to conducting negotiations
and to cite FAR 6.302-5, Authorized or required by statute, as the
exception to full and open competitive procedures. FAR 6.303 specifies
the requirements for and the content of a justification. The statute
did not modify the requirements for or content of a justification;
therefore, DoD cannot make the recommended change. However, the final
rule text at DFARS 270-X02(b) has been amended to remove duplicative
text addressed at FAR 6.303-1(a).
[[Page 82184]]
3. Exceptions to Implementation
Comment: Two respondents took exception to the fact that the
proposed rule does not provide a process for a contractor to apply to
participate in the pilot program to ensure a transparent and accessible
process. One respondent indicated the inability for a contractor to
apply to participate in the pilot program is overly restrictive and
inconsistent with the statute.
Response: Section 874 required the Secretary of Defense to submit
to the congressional defense committees an implementation plan for the
pilot program. This implementation plan indicated that applications for
participation in the pilot program will be submitted by contracting
officers. The proposed rule text at DFARS 270.103 is consistent with
the implementation plan. As such, a contractor is not able to submit an
application for participation in the pilot program.
Comment: One respondent took exception to the requirement for a
J&A, indicating that it is inconsistent with the statute. The
respondent further indicated that such a requirement may limit the
number of businesses that may participate in the pilot program, citing
the fact that there are only eight businesses currently participating
in the pilot program.
Response: While sections 872 and 874 authorize the use of other
than competitive procedures for the award of certain contracts under
this pilot program, neither waived the requirement for a J&A;
therefore, a J&A is required. The Office of the Under Secretary of
Defense (Acquisition and Sustainment), Defense Pricing, Contracting,
and Acquisition Policy implemented section 874 via a contract policy
memorandum dated November 8, 2022, and limited participation in the
pilot program to nine contractors. Therefore, the requirement for a J&A
has not limited participation in the pilot program.
Comment: Three respondents took exception to the proposed rule
reporting requirements, while one respondent expressed support for the
reporting requirements. One respondent indicated that some of the
proposed reporting requirements are open-ended and subjective, which
will lead to confusion as to whether the data provided by the
contractor is sufficient. One respondent indicated that the proposed
reporting requirements focus on challenges of employee ownership rather
than performance and value and indicated that the contractor's past
performance rating in the Contractor Performance Assessment Reporting
System (CPARS) would be more useful in assessing the success of the
pilot program. One respondent recommended DoD develop a comprehensive
plan to monitor the implementation and impact of the Employee Stock
Ownership Plan (ESOP) pilot program, allowing for adjustments and
improvements over time to optimize its effectiveness. One respondent
stated that its member companies who participated in the original,
limited pilot program found the data collection to be straightforward
and to require minimal time. Another respondent indicated that DoD's
estimate of 16 hours to collect and submit the data required by the
clause at DFARS 252.270-70YY should be 80 to 120 hours.
Response: Section 874 required the Secretary of Defense to
establish mechanisms to collect and analyze data on the pilot program
for the purposes of developing and sharing best practices with
leadership and the congressional defense committees. Section 874 also
required the Secretary of Defense to submit to the congressional
defense committees a data collection and reporting strategy for the
pilot program. The information to be reported in accordance with the
contract clause at DFARS 252.270-7002, Pilot Program to Incentivize
Contracting with Employee-Owned Businesses, is consistent with this
strategy. This information will be submitted to DoD leadership and the
congressional defense committees and may be used to determine if
additional measures should be taken to assist ESOP businesses in
overcoming challenges associated with their corporate structure.
Additionally, the proposed rule text at DFARS Procedures, Guidance,
and Information (PGI) 270.104, paragraph(d), specifies the reporting
requirements for contracting officers, which include, but are not
limited to, a summary of the contractor's performance and the benefits
experienced from using the pilot program. This information will be used
to assess the success of the pilot program and the need for adjustments
and improvements over time. In reporting the contractor's performance
pursuant to DFARS PGI 270.104, the contracting officer may use
information from CPARS. To minimize the time required to collect and
submit the data, the reporting requirements in the clause at DFARS
252.270-7002 are amended to clarify that data regarding challenges
faced due to the contractor's corporate ownership structure is only
required when applicable. In addition, contractors are only required to
report data collected during the period of performance of the contract;
therefore, the data should be readily available.
4. Outside the Scope of the Rule
Comment: One respondent recommended DoD establish evaluation
criteria to give preference to qualified businesses during the source-
selection process in lieu of limiting the pilot program to sole-source,
follow-on contracts. The respondent also recommended that DoD
prioritize efforts to on-ramp qualified businesses onto multiple-award
contracts to create a larger pool of qualified businesses eligible for
follow-on contracts under this pilot program.
Response: These comments are outside the scope of this rule.
Sections 872 and 874 do not authorize DoD to establish source selection
evaluation criteria to give preference to qualified businesses or to
use on-ramps under the pilot program.
C. Other Changes
DFARS 270.102(b) is revised in the final rule to simplify the
direction to contracting officers. The final rule revises the
prescriptions for the solicitation provisions at DFARS 252.270-7000 and
252.270-7001 and the clause at DFARS 252.270-7002 to specify that they
are not to be included in solicitations and contracts solely for the
acquisition of commercially available off-the-shelf items. These
provisions and this clause are added to the list of provisions and
clauses that are not applicable to COTS items, located at DFARS
212.371. The reporting requirements are clarified in the clause at
DFARS 252.270-7002.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT), for Commercial Products (Including Commercially
Available Off-the-Shelf (COTS) Items), and for Commercial Services
The two provisions and the clause at DFARS 252.270-7000, Pilot
Program to Incentivize Contracting with Employee-Owned Businesses-
Representation; DFARS 252.270-7001, Pilot Program to Incentivize
Contracting with Employee-Owned Businesses--Certification; and DFARS
252.270-7002, Pilot Program to Incentivize Contracting with Employee-
Owned Businesses, are prescribed at DFARS 270.105 for use in
solicitations and contracts for approved acquisitions under the Pilot
Program to Incentivize Contracting with Employee-Owned Businesses.
Consistent with the analysis that DoD provided in the proposed rule
with regard to the application of the requirements of section 874 of
the NDAA for FY 2022, as amended by
[[Page 82185]]
section 872 of the NDAA for FY 2024, DoD has decided to not apply the
statutes to contracts at or below the SAT, and DoD has made the
determination to apply the statutes, as implemented in the provisions
and clause at 252.270-7000, 252.270-7001, and 252.270-7002, to
contracts for the acquisition of commercial products excluding COTS
items and for the acquisition of commercial services, as defined at
Federal Acquisition Regulation 2.101.
IV. Expected Impact of the Rule
This final rule is expected to impact the Government and
contractors that participate in the Pilot Program to Incentivize
Contracting with Employee-Owned Businesses. This final rule is expected
to incentivize and expedite the award of follow-on contracts to
qualified businesses for the continued development, production, or
provision of products or services previously procured by or for DoD. As
a result, employee-owned businesses may benefit from additional
opportunities to contract with DoD, which may benefit DoD by expanding
the defense industrial base.
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.
This is not a significant regulatory action and, therefore, was not
subject to review under section 6(b) of E.O. 12866, Regulatory Planning
and Review, as amended.
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 will submit a copy of
the interim or final rule with the form, Submission of Federal Rules
Under the Congressional Review Act, to the U.S. Senate, the U.S. House
of Representatives, and the Comptroller General of the United States. A
major rule under the Congressional Review Act cannot take effect until
60 days after it is published in the Federal Register. The Office of
Information and Regulatory Affairs has determined that this rule is not
a major rule as defined by 5 U.S.C. 804.
VII. Regulatory Flexibility Act
A final regulatory flexibility analysis has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
and is summarized as follows:
This final rule is necessary to implement section 874 of the
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2022
(Pub. L. 117-81; 10 U.S.C. 3204 note) and section 872 of the NDAA for
FY 2024 (Pub. L. 118-31; 10 U.S.C. 3204 note). The objective of the
rule is to implement sections 874 and 872, which authorize DoD to
establish a pilot program to incentivize contracting with employee-
owned businesses. The pilot program provides for the use of
noncompetitive procedures for certain follow-on contracts to qualified
businesses. A ``qualified business'' is defined as an S corporation (as
defined in 26 U.S.C. 1361(a)(1)) for which 100 percent of the
outstanding stock is held through an employee stock ownership plan as
defined in 26 U.S.C. 4975(e)(7).
There were no significant issues raised by the public comments in
response to the initial regulatory flexibility analysis. One respondent
took exception to the number of hours DoD estimated it would take a
contractor to comply with the reporting requirement. DoD reviewed the
data to be collected and modified the reporting requirement to clarify
that the contractor is required to only report challenges it faced, if
any. Although not specified in the DFARS text, because this is a
contract clause, contractors are only required to report data collected
during the period of performance of the contract.
Data from the System for Award Management (SAM) revealed there were
384,145 small entities registered in SAM as of August 2024. Data on the
number of small entities that are a qualified business, as defined in
the final rule, is not available.
The pilot program was implemented on November 8, 2022. To date,
eight businesses are participating in the pilot, six of which are small
entities. DoD cannot estimate the number of contracting officers that
will submit applications for participation in the pilot program, how
many applications will be approved for participation, or how many of
the subsequent awards will be made to small entities. However, based on
current participation, DoD expects that the pilot program will grow to
approximately 16 contractors per year, of which approximately 12 may be
small entities.
This final rule imposes a new reporting requirement. Not later than
30 days after the end of the period of performance of the contract,
contractors participating in the pilot program will be required to
submit to the contracting officer the following information: (1) the
number of years the contractor has been wholly-owned by its employee
stock ownership plan; (2) the contractor's challenges, if any, in
attracting and retaining a talented workforce due to its corporate
ownership structure; (3) challenges, if any, the contractor experienced
that hinder its ability to contract with DoD in order to scale its
technologies and capabilities due to its corporate ownership structure;
and (4) challenges, if any, the contractor experienced, due to its
corporate ownership structure, in obtaining capital necessary to bridge
funding gaps, for example, between prototype demonstration and full-
scale development. The annual reporting burden is estimated as follows:
16 respondents, with 16 total annual responses (1 response per
respondent), and a total annual burden of 16 hours.
There are no known significant alternative approaches that would
accomplish the stated objectives.
VIII. Paperwork Reduction Act
This final rule contains information collection requirements that
have been approved by the Office of Management and Budget under the
Paperwork Reduction Act (44 U.S.C. chapter 35). This information
collection requirement has been assigned OMB Control Number 0750-0012,
Defense Federal Acquisition Regulation Supplement Part 270, Defense
Contracting Programs--Pilot Program to Incentivize Contracting with
Employee-Owned Businesses, and Related Clause.
List of Subjects in 48 CFR Parts 206, 212, 252, and 270
Government procurement.
Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.
Therefore, the Defense Acquisition Regulations System amends 48 CFR
chapter 2 as follows as follows:
PART 206--COMPETITION REQUIREMENTS
0
1. The authority citation for part 206 continues to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
0
2. Revise and republish section 206.302-5 to read as follows:
[[Page 82186]]
206.302-5 Authorized or required by statute.
(b) Application. Agencies may use this authority to--
(i) Acquire supplies and services from military exchange stores
outside the United States for use by the armed forces outside the
United States in accordance with 10 U.S.C. 2424(a) and subject to the
limitations of 10 U.S.C. 2424(b). The limitations of 10 U.S.C.
2424(b)(1) and (2) do not apply to the purchase of soft drinks that are
manufactured in the United States. For the purposes of 10 U.S.C. 2424,
soft drinks manufactured in the United States are brand name carbonated
sodas, manufactured in the United States, as evidenced by product
markings.
(ii) Acquire police, fire protection, airfield operation, or other
community services from local governments at military installations to
be closed under the circumstances in 237.7401 (section 2907 of Fiscal
Year 1994 Defense Authorization Act (Pub. L. 103-160)).
(iii) Acquire products and services under the Pilot Program to
Incentivize Contracting with Employee-Owned Businesses (see subpart
270.1).
(c) Limitations. (i) 10 U.S.C. 4141 precludes use of this exception
for awards to colleges or universities for the performance of research
and development, or for the construction of any research or other
facility, unless--
(A) The statute authorizing or requiring award specifically--
(1) States that the statute modifies or supersedes the provisions
of 10 U.S.C. 4141;
(2) Identifies the particular college or university involved; and
(3) States that award is being made in contravention of 10 U.S.C.
4141(a); and
(B) The Secretary of Defense provides Congress written notice of
intent to award. The contract cannot be awarded until 180 days have
elapsed since the date Congress received the notice of intent to award.
Contracting activities must submit a draft notice of intent with
supporting documentation through channels to the Principal Director,
Defense Pricing, Contracting, and Acquisition Policy, Office of the
Under Secretary of Defense (Acquisition and Sustainment).
(ii) The limitation in paragraph (c)(i) of this section applies
only if the statute authorizing or requiring award was enacted after
September 30, 1989.
(iii) Subsequent statutes may provide different or additional
constraints on the award of contracts to specified colleges and
universities. Contracting officers should consult legal counsel on a
case-by-case basis.
PART 212--ACQUISITION OF COMMERCIAL PRODUCTS AND COMMERCIAL
SERVICES
0
3. The authority citation for part 212 continues to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
0
4. Amend section 212.301 by adding paragraph (f)(xxii) to read as
follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial products and commercial services.
* * * * *
(f) * * *
(xxii) Part 270--Defense Contracting Programs. (A) Use the
provision at 252.270-7000, Pilot Program to Incentivize Contracting
with Employee-Owned Businesses--Representation, as prescribed at
270.105(a) to comply with section 874 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2022 (Pub. L. 117-81; 10
U.S.C. 3204 note) and section 872 of the NDAA for FY 2024 (Pub. L. 118-
31; 10 U.S.C. 3204 note).
(B) Use the provision at 252.270-7001, Pilot Program to Incentivize
Contracting with Employee-Owned Businesses--Subcontracting
Certification, as prescribed at 270.105(b), to comply with section 874
of the NDAA for FY 2022 (Pub. L. 117-81; 10 U.S.C. 3204 note) and
section 872 of the NDAA for FY 2024 (Pub. L. 118-31; 10 U.S.C. 3204
note).
(C) Use the clause at 252.270-7002, Pilot Program to Incentivize
Contracting with Employee-Owned Businesses, as prescribed at
270.105(c), to comply with section 874 of the NDAA for FY 2022 (Pub. L.
117-81; 10 U.S.C. 3204 note) and section 872 of the NDAA for FY 2024
(Pub. L. 118-31; 10 U.S.C. 3204 note).
0
5. Amend section 212.371 by adding paragraphs (b), (c), and (d) to read
as follows:
212.371 Inapplicability of certain provisions and clauses to
contracts for the acquisition of commercially available off-the-shelf
items.
* * * * *
(b) 252.270-7000, Pilot Program to Incentivize Contracting with
Employee-Owned Businesses--Representation.
(c) 252.270-7001, Pilot Program to Incentivize Contracting with
Employee-Owned Businesses--Subcontracting Certification.
(d) 252.270-7002, Pilot Program to Incentivize Contracting with
Employee-Owned Businesses.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
6. The authority citation for part 252 continues to read as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
0
7. Add sections 252.270-7000, 252.270-7001, and 252.270-7002 to read as
follows:
* * * * *
Sec.
252.270-7000 Pilot Program to Incentivize Contracting with Employee-
Owned Businesses--Representation.
252.270-7001 Pilot Program to Incentivize Contracting with Employee-
Owned Businesses--Subcontracting Certification.
252.270-7002 Pilot Program to Incentivize Contracting with Employee-
Owned Businesses.
* * * * *
252.270-7000 Pilot Program to Incentivize Contracting with Employee-
Owned Businesses--Representation.
As prescribed in 270.105(a), use the following provision:
Pilot Program To Incentivize Contracting With Employee-Owned
Businesses--Representation (NOV 2024)
(a) Definition. As used in this provision, qualified business has
the meaning given in the Defense Federal Acquisition Regulation
Supplement 252.270-7002, Pilot Program to Incentivize Contracting with
Employee-Owned Businesses, clause of this solicitation.
(b) Representation. The Offeror represents that it is a qualified
business.
(End of provision)
252.270-7001 Pilot Program to Incentivize Contracting with Employee-
Owned Businesses--Subcontracting Certification.
As prescribed in 270.105(b), use the following provision:
Pilot Program To Incentivize Contracting With Employee-Owned
Businesses--Subcontracting Certification (NOV 2024)
(a) Definition. As used in this provision, qualified business has
the meaning given in the Defense Federal Acquisition Regulation
Supplement 252.270-7002, Pilot Program to Incentivize Contracting with
Employee-Owned Businesses, clause of this solicitation.
(b) Limitations on subcontracting. The Offeror certifies that in
performance of the contract it will not expend more than 50 percent of
the amount paid under the contract on subcontracts unless--
[[Page 82187]]
(1) The subcontract is awarded to a qualified business;
(2) The contract is for products and the subcontract is for
materials not available from another qualified business; or
(3) A waiver is granted.
(End of provision)
252.270-7002 Pilot Program to Incentivize Contracting with Employee-
Owned Businesses.
As prescribed in 270.105(c), use the following clause:
Pilot Program To Incentivize Contracting With Employee-Owned Businesses
(NOV 2024)
(a) Definition. As used in this clause--
Qualified business means an S corporation as defined in 26 U.S.C.
1361(a)(1) for which 100 percent of the outstanding stock is held
through an employee stock ownership plan as defined in 26 U.S.C.
4975(e)(7).
(b) Limitations on subcontracting. In performance of the contract,
the Contractor shall not expend more than 50 percent of the amount paid
under the contract on subcontracts, unless--
(1) The subcontract is awarded to a qualified business;
(2) The contract is for products and the subcontract is for
materials not available from another qualified business; or
(3) A waiver is granted.
(c) Reporting requirement. Not later than 30 days after the end of
the contract period of performance, the Contractor shall submit to the
Contracting Officer the following information in writing:
(1) The number of years the Contractor has been wholly-owned by its
employee stock ownership plan.
(2) Challenges, if any, the Contractor experienced in attracting
and retaining a talented workforce in a competitive market due to the
Contractor's corporate ownership structure.
(3) Challenges, if any, the Contractor experienced that hinder its
ability to contract with DoD to scale its technologies and capabilities
due to the Contractor's corporate ownership structure.
(4) Challenges, if any, the Contractor experienced, due to its
corporate ownership structure, in obtaining capital necessary to bridge
funding gaps, for example, between prototype demonstration and full-
scale development.
(End of clause)
0
8. Add part 270 to read as follows:
PART 270--DEFENSE CONTRACTING PROGRAMS
Sec.
270.000 Scope of part.
Subpart 270.1--Pilot Program to Incentivize Contracting with Employee-
Owned Businesses
270.100 Scope of subpart.
270.101 Definition.
270.102 Policy.
270.103 Limitations.
270.104 Procedures.
270.105 Solicitation provisions and contract clause.
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
270.000 Scope of part.
This part has been created to facilitate promulgation of additional
DFARS coverage of defense-specific contracting programs that do not
properly fall under DFARS subchapter D, Socioeconomic Programs, and
neither implement nor supplement existing FAR part 19 or parts 22
through 25.
Subpart 270.1--Pilot Program to Incentivize Contracting with
Employee-Owned Businesses
270.100 Scope of subpart.
(a) This subpart implements section 874 of the National Defense
Authorization Act (NDAA) for Fiscal Year (FY) 2022 (Pub. L. 117-81; 10
U.S.C. 3204 note) and section 872 of the NDAA for FY 2024 (Pub. L. 118-
31; 10 U.S.C. 3204 note). Sections 874 and 872 authorize the
establishment of a pilot program that allows for the noncompetitive
award of certain follow-on contracts to contractors that meet the
definition of a qualified business (see 270.101).
(b) The authority to award contracts under this subpart expires on
December 27, 2029.
270.101 Definition.
As used in this subpart, qualified business means an S corporation
as defined in 26 U.S.C. 1361(a)(1) for which 100 percent of the
outstanding stock is held through an employee stock ownership plan as
defined in 26 U.S.C. 4975(e)(7).
270.102 Policy.
(a) The contracting officer may only award one sole-source, follow-
on contract to the incumbent contractor if--
(1) The contractor has represented that it is a qualified business;
and
(2) The contract is for the continued development, production, or
provision of products or services that are the same as or substantially
similar to those procured under the prior contract awarded to the
contractor by or for DoD.
(b) The contracting officer shall justify the use of a sole-source
contract in accordance with FAR 6.303 and 6.304 and cite FAR 6.302-5 as
the exception to full and open competition.
270.103 Limitations.
(a) Participation in the pilot program is subject to approval by
the Under Secretary of Defense (Acquisition and Sustainment), Office of
the Principal Director, Defense Pricing, Contracting, and Acquisition
Policy (Contract Policy). Only a contracting officer may submit an
application to participate in the pilot program. See PGI 270.104(a).
(b) Contracting officers shall only award--
(1) One sole-source, follow-on contract per predecessor contract to
the incumbent contractor unless waived by the head of the contracting
activity, delegable to a level no lower than one level above the
contracting officer;
(2) Contracts to qualified businesses that have a minimum
performance rating of satisfactory for the predecessor contract in the
Contractor Performance Assessment Reporting System (see FAR subpart
42.15); and
(3) Contracts to qualified businesses that have certified they will
not pay more than 50 percent of the amount paid by the Government for
contract performance to subcontractors that are not qualified
businesses, except for subcontracts for materials not available from
another qualified business when the contract is for products, unless
waived by the head of the contracting activity, delegable to a level no
lower than one level above the contracting officer.
270.104 Procedures.
See PGI 270.104 for procedures and information concerning the pilot
program.
270.105 Solicitation provisions and contract clause.
(a) Use the provision at 252.270-7000, Pilot Program to Incentivize
Contracting with Employee-Owned Businesses--Representation, in
solicitations, including solicitations using FAR part 12 procedures for
the acquisition of commercial products and commercial services, except
for solicitations solely for the acquisition of commercially available
off-the-shelf (COTS) items, that include the clause at 252.270-7002,
Pilot Program to Incentivize Contracting with Employee-Owned
Businesses.
(b) Unless waived in accordance with 270.103(b)(3), use the
provision at 252.270-7001, Pilot Program to
[[Page 82188]]
Incentivize Contracting with Employee-Owned Businesses--Subcontracting
Certification, in solicitations, including solicitations using FAR part
12 procedures for the acquisition of commercial products and commercial
services, except for solicitations solely for the acquisition of COTS
items, that include the clause at 252.270-7002, Pilot Program to
Incentivize Contracting with Employee-Owned Businesses.
(c) Use the clause at 252.270-7002, Pilot Program to Incentivize
Contracting with Employee-Owned Businesses, in solicitations and
contracts, including solicitations and contracts using FAR part 12
procedures for the acquisition of commercial products and commercial
services, except for solicitations and contracts solely for the
acquisition of COTS items, for approved pilot program acquisitions.
[FR Doc. 2024-23226 Filed 10-9-24; 8:45 am]
BILLING CODE 6001-FR-P
</pre></body>
</html>Indexed from Federal Register on October 10, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.