Federal Acquisition Regulation: Protests of Orders Set Aside for Small Business

AGENCY:

Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION:

Final rule.

SUMMARY:

DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to implement regulatory changes made by the Small Business Administration to update and clarify requirements associated with size and socioeconomic status protests in connection with multiple-award contract set-asides and reserves, and orders placed under multiple-award contracts.

DATES:

Effective August 29, 2024.

FOR FURTHER INFORMATION CONTACT:

For clarification of content, contact Ms. Dana Bowman, Procurement Analyst, at 202-803-3188 or by email at dana.bowman@gsa.gov. For information pertaining to status or publication schedules contact the Regulatory Secretariat Division at 202-501-4755 or GSARegSec@gsa.gov. Please cite FAC 2024-06, FAR Case 2021-009.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA published a proposed rule in the Federal Register at 88 FR 68067 on October 3, 2023, to implement regulatory changes made by the Small Business Administration (SBA) in its final rules published in the Federal Register on October 2, 2013 (78 FR 61113), October 16, 2020 (85 FR 66146), and on November 29, 2022 (87 FR 73400). For further details, please see the proposed rule. One respondent 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

The following significant changes from the proposed rule are made in the final rule: The final rule amends FAR 19.302(d)(1) to add a new paragraph (ii)(C), which reflects language in SBA's October 16, 2020, final rule at 13 CFR 121.1004(a)(2)(ii) and specifies when a protest is due for orders placed under multiple-award contracts where the contracting officer requested rerepresentation for the order. In addition, the final rule FAR text at FAR 19.306(e)(1)(iii), 19.307(e)(1)(v), and 19.308(e)(1)(iii) is amended to clarify when a protest is due when written notification is not required and other communication means are used.

B. Analysis of Public Comments

Comment: The respondent recommended revising the proposed rule text at FAR 19.302(a)(2) to add a reference to SBA's regulations at 13 CFR 121.1001(a)(1) to provide significant clarity to the acquisition community, including small businesses.

Response: The final rule text at FAR 19.302(a)(2) includes a reference to SBA's regulations at 13 CFR 121.1001(a), which specify the parties that may protest the small business representation of an offeror in a specific offer for a contract and the parties that can protest competitive contracts. Therefore, to change the reference at FAR 19.302(a)(2) to 13 CFR 121.1001(a)(1) would omit the inclusion of the remaining paragraphs under paragraph (a), which are relevant to this FAR section.

Comment: The respondent recommended revising the proposed rule FAR text at 19.302(d)(1) to state each of the types of contracts and orders that are subject to the SBA's five-day protest deadline. (See 13 CFR 121.1004(a)(2)).

Response: The final rule FAR text at 19.302(d)(1)(i) and (ii) specifies the types of contracts and orders subject to the SBA five-day protest deadline. In addition, the final rule FAR text at 19.302(d) directs contracting officers to 13 CFR 121.1004 for SBA's regulations on timeliness.

Comment: The respondent stated that the FAR text should capture the language regarding certifications and recertifications that is stated in the SBA rules at 13 CFR 121.1004(a)(2)(ii).

Response: The final rule text has been revised to adopt this recommendation at FAR 19.302(d)(1)(ii)(C).

Comment: The respondent recommended revising the proposed rule FAR text at 19.302(d)(1) to remove the word “special” and the reference to FAR 15.503(a)(2) because 13 CFR 121.1004(a)(2) does not mention either. The respondent stated that this may confuse rather than clarify the timeliness rules for small businesses. The respondent provided an example of an instance when a contracting officer could provide notice of the identity of the apparently successful offeror, but the notice may not meet the requirements of FAR 15.503(a)(2), which could lead to confusion as to whether the five-day clock began.

Response: The special notification at FAR 19.302(d)(1) aligns with FAR 15.503(a)(2), which requires the contracting officer to provide preaward notices to offerors for small business set-asides made pursuant to FAR subpart 19.5, or the procedures in sections 19.1305, 19.1307, 19.1405, or 19.1505. This notification is referred to as a “special notification”; therefore, it is not necessary to modify the text to align with SBA's regulations. The rule did not amend this text or the reference, rather the rule merely moved the reference to immediately follow “special notification from the contracting officer” for clarity. While 13 CFR 121.1004(a)(2) does not use the term “special” or reference FAR 15.503(a)(2), the FAR provides guidance to contracting officers using terminology specific to Federal procurement.

Comment: The respondent stated it is unclear if the text at 19.302(d)(5) refers to protests challenging a firm's size at the time the firm submitted its application for a Schedule contract, or if the text is meant to challenge a firm's size at the time the firm submitted its application for set-aside orders under Multiple Award Schedule contracts. The respondent suggests revising the FAR text at 19.302(d)(5) to add the following language: “A protest under a Multiple Award Schedule will be timely if received by SBA at any time prior to the expiration of the contract period, including renewals.” (emphasis added).

Response: The suggested revision to add “at any time” is in the existing FAR text at 19.302(d)(5).

Comment: The respondent recommended revising the FAR text at 19.306, 19.307, and 19.308 to implement SBA regulations at 13 CFR 126.801(d), 13 CFR 134.1004(a), and 13 CFR 127.603(c), respectively, to specify when protests are due for orders placed under multiple-award contracts where the contracting officer requested rerepresentation. The respondent believes the proposed changes will provide significant clarity to the acquisition community, including small businesses.

Response: The final rule implements SBA's regulations 13 CFR 126.801(d), 13 CFR 134.1004(a), and 127.603(c) at FAR 19.306(e)(1)(ii)(A), 19.307(e)(1)(ii)(A), and 19.308(e)(1)(ii)(A), respectively.

Comment: The respondent recommended revising the proposed rule FAR text at 19.306, 19.307, and 19.308 to make clear that for negotiated procurements, the fifth business day deadline applies to contracts that are set aside for HUBZone, small business firms, Service-Disabled Veteran-Owned Small Business (SDVOSB) firms, Women-Owned Small Business (WOSB) firms, and Economically-Disadvantaged Women-Owned Small Business (EDWOSB) firms, not only for set-aside orders placed under multiple-award contracts, in accordance with 13 CFR 121.1004(a)(2). The respondent states that the FAR text should use similar language and make clear that the five-business day deadline applies to HUBZone, SDVOSB, WOSB, and EDWOSB set-aside contracts.

Response: FAR 19.306, 19.307, and 19.308 address the procedures for protesting a firm's status as a HUBZone small business concern, an SDVOSB concern, an EDWOSB concern or a WOSB concern, respectively. The final rule FAR text at 19.306(e)(1)(ii), 19.307(e)(1)(ii), and 19.308(e)(1)(ii) specifies, for negotiated acquisitions, that an interested party shall submit its written protest to the contracting officer by the close of business on the fifth business day after notification by the contracting officer of the apparently successful offeror.

Comment: The respondent recommended changing the term “rerepresentation” in the FAR text at 19.306(e)(1)(ii)(A), 19.307(e)(1)(ii)(A), and 19.308(e)(1)(ii)(A) to “recertification” to ensure consistency and to avoid confusion. The respondent indicated that the SBA regulations refer to recertification, as opposed to rerepresentation, and that the SBA has developed case law regarding what constitutes a request for recertification.

Response: The FAR does not automatically replicate terminology used in SBA's regulations. In this case, the FAR has long used the terms “representation” and “rerepresentation” in lieu of the terms “certification” and “recertification” to describe how an entity addresses its size status. This difference is consistent with a longstanding policy, set forth at 41 U.S.C. 1304(b) and FAR 1.107, to limit the use of certification requirements in the FAR.

Comment: The respondent recommended deleting the FAR text at 19.306(e)(1)(iii), FAR 19.307(e)(1)(iii), and FAR 19.308(e)(1)(iii) and adding a new subsection (e)(3) to each for clarity and accuracy.

Response: The final rule FAR text at 19.306(e)(1)(iii), FAR 19.307(e)(1)(v), and FAR 19.308(e)(1)(iii) align with the opening paragraph at 19.306(e)(1) and that of the text at FAR 19.302(d)(1)(iii). Therefore, it is not necessary to add a new subsection (e)(3).

Comment: The respondent recommended revising the proposed rule FAR text at 19.306, 19.307, and 19.308 to implement SBA's regulations at 13 CFR 126.801(d), 13 CFR 134.1004(a), and 13 CFR 127.603(c), respectively, to specify when protests are due for orders that are set aside for HUBZone, SDVOSB, WOSB, and EDWOSB firms under a multiple-award contract that is not itself partially or totally set-aside or reserved for the particular concern. This does not apply to orders and blanket purchase agreements placed under Federal Supply Schedule contracts.

Response: The final rule FAR text at 19.306 (e)(1)(ii), 19.307(e)(1)(v), and 19.308(e)(1)(ii) implements SBA's regulations 13 CFR 126.801(d), 13 CFR 134.1004(a), and 13 CFR 127.603(c), respectively.

C. Other Changes

The final rule FAR text at 19.306(e)(1)(ii), 19.307(e)(1)(ii), and 19.308(e)(1)(ii) has been revised to conform with the FAR text at 19.302(d)(1)(ii) regarding the receipt of the special notification from the contracting officer for negotiated acquisitions. In addition, the final rule FAR text at 19.302(d)(1)(ii)(A), (B), and (C), 19.306(e)(1)(ii)(A) and (B), 19.307(e)(1)(ii)(A) and (B), and 19.308(e)(1)(ii)(A) and (B) is revised to remove “indefinite-delivery indefinite-quantity (IDIQ)” and “IDIQ” as it is unnecessary to specify either since the definition of multiple-award contract at FAR 2.101 includes IDIQ contracts.

III. Applicability to Contracts at or Below the Simplified Acquisition Threshold (SAT), for Commercial Products (Including Commercially Available Off-the-Shelf (COTS) Items), or for Commercial Services

This rule does not create new solicitation provisions or contract clauses or impact any existing provisions or clauses.

IV. Expected Impact of the Rule

This rule is expected to impact the Government, offerors, and contractors.

This final rule provides processes and procedures for filing size and socioeconomic status protests associated with multiple-award contracts that are partially set-aside for small businesses or that include reserves for small businesses and orders placed under multiple-award contracts, with the exception of orders and blanket purchase agreements placed under Federal Supply Schedule contracts in accordance with FAR 8.405. Prior to this rule, the FAR did not specify unique procedures for protests associated with these types of contract actions.

By clarifying the protest processes and procedures, this rule is expected to help contracting officers and interested parties understand the requirements for filing size and socioeconomic status protests for certain multiple-award contracts and orders placed under multiple-award contracts. Therefore, any impact is expected to be beneficial to the Government, contractors, and offerors.

V. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 (as amended by E.O. 14094) and 13563 direct agencies to assess the 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, dated September 30, 1993.

VI. Congressional Review Act

Pursuant to the Congressional Review Act, DoD, GSA, and NASA will send this rule to each House of the Congress and to the Comptroller General of the United States. The Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget has determined that this rule does not meet the definition in 5 U.S.C. 804(2).

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. 601-612. The FRFA is summarized as follows:

DoD, GSA, and NASA are issuing a final rule to amend the Federal Acquisition Regulation (FAR) to implement regulatory changes made by the Small Business Administration (SBA) in its final rules published on October 2, 2013 (78 FR 61113), October 16, 2020, (85 FR 66146), and on November 29, 2022 (87 FR 73400). This rule provides processes and procedures associated with size and socioeconomic protests related to partial set-asides and reserves of multiple-award contracts, and protests related to orders placed against multiple-award contracts, with the exception of blanket purchase agreements and orders placed under Federal Supply Schedule contracts.

There were no significant issues raised by the public comments in response to the initial regulatory flexibility analysis.

This final rule will impact small businesses who are or may become multiple-award contract holders and who may be awarded orders under multiple-award contracts. According to data from the Federal Procurement Data System, in the last three fiscal years (FYs), agencies set aside orders for small businesses under unrestricted multiple-award contracts as follows: 8,336 in FY 2021; 7,463 in FY 2022; and 7,271 in FY 2023; for an average of 7,690 per fiscal year. In the last three fiscal years, agencies also further set aside orders under set-aside multiple-award contracts as follows: 10,641 in FY 2021; 11,635 in FY 2022; and 15,260 in FY 2023; for an average of 12,512 per fiscal year. In addition, in the last three fiscal years, agencies further set-aside orders for small businesses under a socioeconomic category under the set-aside portion of a multiple-award contract, where the socioeconomic category differs from the underlying multiple-award contract, as follows: 2,060 in FY 2021; 1,977 in FY 2022; and 2,213 in FY 2023; for an approximate average of 2,083 per fiscal year. In the last three fiscal years contracting officers required rerepresentation for orders as follows: 453 in FY 2021; 975 in FY 2022; and 938 in FY 2023, which averages out to approximately 789 per fiscal year.

Although we can estimate the number of set-aside orders that may be affected by this rule, it is not possible to estimate the number of protests; therefore, it is not possible to estimate the number of small entities that may be affected by this rule.

This rule clarifies the requirements for filing size and socioeconomic status protests for orders placed under multiple-award contracts resulting in reduced ambiguities of the process and increased efficiencies for small entities.

This rule does not include any new reporting, recordkeeping, or other compliance requirements for small entities.

There are no known significant alternative approaches that would accomplish the stated objectives.

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 the Small Business Administration.

VIII. Paperwork Reduction Act

This rule does not contain any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

List of Subjects in 48 CFR Part 19

• Government procurement

Therefore, DoD, GSA, and NASA amend 48 CFR part 19 as set forth below:

PART 19—SMALL BUSINESS PROGRAMS

1. The authority citation for part 19 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 4 and 10 U.S.C. chapter 137 legacy provisions (see 10 U.S.C. 3016); and 51 U.S.C. 20113.

2. Amend section 19.302 by—

a. Removing from the end of paragraph (a)(2) the text “or the SBA.” and adding the text “or SBA. See 13 CFR 121.1001(a).” in its place; and

b. Revising paragraph (d).

The revision reads as follows:

3. Amend section 19.306 by—

a. Removing from the end of paragraph (e)(1)(i)(B) the word “or”; and

b. Revising paragraph (e)(1)(ii) and adding paragraph (e)(1)(iii).

The revision and addition read as follows:

4. Amend section 19.307 by revising paragraph (e)(1) to read as follows:

5. Amend section 19.308 by revising paragraph (e)(1) to read as follows: