U.S. Army Corps of Engineers Nashville small business contract Susan Nicholson, U.S. Army Corps of Engineers Nashville District Small Business chief, provides contracting forecast information to participants of the 9th Annual Small Business Industry Day on March 6, 2019, at Tennessee State University’s Avon Williams Campus in Nashville. (USACE photo by Leon Roberts)

What You Need to Know About the New Small Business Reserves FAR Rule

DoD, GSA, and NASA issued a final rule last month amending the Federal Acquisition Regulation (FAR) to implement regulatory changes made by the Small Business Administration, which provide governmentwide policy for partial set-asides and reserves, and for set-asides of orders for small business concerns under multiple-award contracts. This rule goes into effect March 30.

As part of the implementation of reserves of multiple-award contracts, the proposed rule removed the term “reserve” in the FAR where it is not related to reserves of multiple-award contracts.

These were the significant changes made in the final rule:

  • Removal of the term “HUBZone order.” This term has been removed throughout the final rule.
  • Requirement to assign a North American Industry Classification System (NAICS) code. The final rule clarifies that NAICS code(s) must be assigned to all solicitations, contracts, and task and delivery orders, and that the NAICS code assigned to a task or delivery order must be a NAICS code assigned to the multiple-award contract. This clarification appears at FAR 19.102, with cross references in 8.404, 8.405-5, and 16.505.
  • Requirement to assign more than one NAICS code and associated size standard for multiple-award contracts where a single NAICS code does not describe the principal purpose of both the contract and all orders to be issued under the contract. In the proposed rule, the date for implementation of this particular requirement was listed as January 31, 2017. For the final rule, this date has been extended to October 1, 2022. This is when Governmentwide systems are expected to accommodate the requirement. This date also allows time for Federal agencies to budget and plan for internal system updates across their multiple contracting systems to accommodate the requirement. Use of this date in the final rule means that the assignment of more than one NAICS code for multiple-award contracts is authorized only for solicitations issued after October 1, 2022. Before this date, agencies may continue awarding multiple-award contracts using any existing authorities, including any addressed in this rule, but shall continue to report one NAICS code and size standard which best describes the principal purpose of the supplies or services being acquired.
  • Rerepresentation of size status for multiple-award contracts with more than one NAICS code. FAR 19.301-2 is revised to clarify that, for multiple-award contracts with more than one NAICS code assigned, a contractor must rerepresent its size status for each of those NAICS codes. A new Alternate I is added for the clause at 52.219-28 to allow rerepresentations for multiple NAICS codes, and a prescription is added at 19.309(c). Alternate I will be included in solicitations that will result in multiple-award contracts with more than one NAICS code.
  • Rerepresentation for orders under multiple-award contracts. The clause at 52.219-28 is revised to relocate the paragraph addressing rerepresentation for orders closer to the beginning of the clause and to renumber subsequent paragraphs.
  • Representation of size and socioeconomic status. FAR 19.301-1 is revised to clarify that, for orders under basic ordering agreements and FAR part 13 blanket purchase agreements (BPAs), offerors must be a small business concern identified at 19.000(a)(3) at the time of award of the order, and that a HUBZone small business concern is not required to represent twice for an award under the HUBZone Program. A HUBZone small business concern is required to represent at the time of its initial offer and be a HUBZone small business concern at time of contract award.
  • Applicability of the limitations on subcontracting to orders issued directly to one small business under a reserve. The final rule clarifies that the limitations on subcontracting and the nonmanufacturer rule apply to orders issued directly to one small business concern under a multiple-award contract with reserves. This clarification appears in multiple locations in parts 19 and 52. The final rule also clarifies the limitations on subcontracting compliance period for orders issued directly, under multiple-award contracts with reserves, to small businesses who qualify for any of the socioeconomic programs. These clarifications appear in subparts 19.8, 19.13, 19.14, and 19.15, and in the clauses at 52.219-3, 52.219-14, 52.219-27, 52.219-29, and 52.219-30.
  • Compliance period for the limitations on subcontracting. The final rule revises the proposed text at sections 19.505, 19.809, 19.1308, 19.1407, and 19.1507 to be consistent with the implementing clauses for those sections. The clauses reflect that the contracting officer has discretion on whether the compliance period for a set-aside contract is at the contract level or at the individual order level.
  • Fair opportunity and orders issued directly to one small business under a reserve. The final rule addresses orders issued directly to one small business under a reserve at FAR 16.505.
  • Conditions under which an order may be issued directly to an 8(a) contractor under a reserve. The final rule clarifies in 19.804-6 the conditions under which an order can be issued directly to an 8(a) contractor on a multiple-award contract with a reserve.
  • Set-asides of orders under multiple-award contracts. At FAR 19.507, the prescription for Alternate I of the clause at 52.219-13 is revised to apply to any multiple-award contract under which orders will be set aside, regardless of whether the multiple-award contract contains a reserve.
  • Consistent language for “rule of two” text. FAR 19.502-3, 19.502-4, and 19.503 are revised for consistency with FAR 19.502-2(a), which most closely matches the “rule of two” in the Small Business Act (15 U.S.C. 644(j)(1)).
  • Documentation of compliance with limitations on subcontracting. The requirement for contracting officers to document contractor compliance with the limitations on subcontracting is removed from subparts 19.5, 19.8, 19.13, 19.14, and 19.15. FAR part 4 and subpart 42.15 already prescribe documentation of contractor complianceStart Printed Page 11748with various contract terms and conditions, including the limitations on subcontracting. FAR subpart 42.15 is revised to clarify that performance assessments shall include, as applicable, a contractor’s failure to comply with the limitations on subcontracting.
  • Clarification of “domestically produced or manufactured product.” FAR 19.6 is revised to use the phrase “end item produced or manufactured in the United States or its outlying areas” instead of “domestically produced or manufactured product.”
  • Subcontracting plans for multiple-award contracts with more than one NAICS code. FAR subpart 19.7 is revised to provide guidance to contracting officers on how to apply the requirement for small business subcontracting plans to multiple-award contracts assigned multiple NAICS codes. With the requirement to assign multiple NAICS codes, it will be possible for a contractor to be both a small business concern and an other than small business concern for a single contract.
  • HUBZone price evaluation preference and reserves. FAR subpart 19.13 is revised to clarify that the HUBZone price evaluation preference shall not be used for the reserved portion of a solicitation for a multiple-award contract. The price evaluation preference shall be used in the portion of a solicitation for a multiple-award contract that is not reserved. In addition, the clause at 52.219-4 is revised to remove the proposed text that stated the HUBZone price evaluation preference did not apply to solicitations that have a reserve for HUBZone small business concerns, since that is not accurate.
  • Performance by a HUBZone small business concern. FAR 19.1308 is revised to specify performance by a HUBZone small business concern instead of performance in a HUBZone. The related changes that were proposed in the clause at 52.219-4, paragraph (d)(2), are not being adopted as they are no longer accurate.
  • Separate provision for reserves and clause for orders issued directly under a reserve. The final rule provides a new solicitation provision at 52.219-31, Notice of Small Business Reserve, and prescription at 19.507 to address information and requirements that are related to reserves of multiple-award contracts and are appropriate for inclusion only in the solicitation. These requirements and information were proposed as part of the clause at 52.219-XX (now 52.219-32); however, since they only apply prior to contract award, the final rule relocates them to a separate provision. The final rule also revises the clause at 52.219-32 to address only orders issued directly to one small business under a reserve. The title of the clause reflects the revised content.

Reserves are applicable to Multiple-Award Contracts only, and should only be used when market research indicates that a total or partial set-aside is not feasible.

Reserves in Multiple-Award Contracts guarantee small business participation as prime contractors when they otherwise may not have been able to participate

The offerors responsibilities: identify whether a multiple-award contract is being totally set-aside, contains a partial set-aside, or contains reserves.

  • Solicitation for a multiple-award contract that is a total set-aside will include FAR clause 52.219-6
  • Solicitation for a multiple-award contract that contains partial set-asides will include FAR clause 52.219-7
  • Solicitation for a multiple-award contract that contains a reserve will include FAR clause 52.219-31
  • Award of the contract will be based on criteria identified elsewhere in the solicitation for that multiple-award contract

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