Federal Acquisition Regulation: Subcontracting to Puerto Rican and Covered Territory Small Businesses

<RULE> DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION <CFR>48 CFR Parts 2, 19, 42, and 52</CFR> <DEPDOC>[FAC 2025-03; FAR Case 2023-001, Item III; Docket No. FAR 2023-0001; Sequence No. 1]</DEPDOC> <RIN>RIN 9000-AO50</RIN> <SUBJECT>Federal Acquisition Regulation: Subcontracting to Puerto Rican and Covered Territory Small Businesses</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> 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 add incentives for certain United States territories under the Small Business Administration mentor-protégé program. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Effective January 17, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> For clarification of content, contact Ms. Carrie Moore, Procurement Analyst, at 571-300-5917, or by email at <E T="03">carrie.moore@gsa.gov.</E> For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755 or <E T="03">GSARegSec@gsa.gov.</E> Please cite FAC 2025-03, FAR Case 2023-001. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> DoD, GSA, and NASA published a proposed rule at 89 FR 48540 on June 7, 2024, to implement regulatory changes made by the Small Business Administration (SBA) in its final rules published on October 16, 2020 (85 FR 66146) and on August 19, 2022 (87 FR 50925) to implement section 861 of Public Law 115-232 and section 866 of Public Law 116-283. For further details please see the proposed rule. Two respondents submitted comments on the proposed rule. <HD SOURCE="HD1">II. Discussion and Analysis</HD> 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 is provided as follows; however, no changes were made to the rule as a result of those comments. <E T="03">A. Summary of significant changes:</E> There are no significant changes from the proposed rule. <E T="03">B. Analysis of public comments:</E> <E T="03">Comment:</E> The respondents expressed support for the rule. <E T="03">Response:</E> The Councils acknowledge the respondents' support for the rule. <E T="03">Comment:</E> The respondents expressed support for the change at 19.702, which specifies that subcontracting plans are not required from Alaska Native Corporations (ANCs). <E T="03">Response:</E> The Councils acknowledge the respondents' support for this change. SBA clarified that an ANC prime contractor is required to submit a subcontracting plan if they are large for the North American Industry Classification System (NAICS) code assigned to the contract. However, an ANC subcontractor is treated as a small business concern by statute and, therefore, cannot be required to submit a subcontracting plan ( <E T="03">see</E> 13 CFR 125.3(b)(2)). <E T="03">Comment:</E> The respondents recommended changes to the proposed rule text at FAR 19.703(2)(i) and (ii) and in the clauses at FAR 52.219-8, Utilization of Small Business Concerns, and 52.219-9, Small Business Subcontracting Plan, which specify that a contractor may rely on a subcontractor's representation unless it has reason to question it. A respondent recommended the word “question” be replaced with “doubt” to align with SBA's regulations at 13 CFR 121.404(e), indicating the word “doubt” means, in accordance with the Merriam-Webster Dictionary, to call into question the truth of, to lack confidence in, and to consider unlikely, whereas “question” simply means to ask a question. Another respondent recommended the text be amended to specify: “unless the contractor has an objective, evidence-based reason to question a representation for clarity”. <E T="03">Response:</E> In this context, SBA's term “doubt” has the same meaning as the FAR term “question”. The FAR consistently uses the term “question” when specifying that a contracting officer may rely on a representation or certification unless the contracting officer has a reason to question the representation or certification. Aligning the proposed rule text with text currently used in the FAR for other representations or certifications helps promote certainty and avoids confusion for the contracting community. Moreover, the FAR does not replicate terminology used in SBA's regulations; instead SBA's regulations are translated into FAR terminology. This rule implements SBA's regulations at 13 CFR 121.404(e), which do not specify that the contractor is required to have an objective, evidence-based reason to question a representation. There are a variety of reasons why a contractor might question a subcontractor's representation and this text is written so as to not limit the basis on which a contractor may question such a representation. <E T="03">C. Other changes.</E> The proposed rule FAR text at 19.702(b)(1) is moved in the final rule to FAR 19.704(a)(9) and to paragraph (d)(9) of the clause at FAR 52.219-9 and its Alternate IV to specify for contractors that subcontracting plans are not required from their subcontractors that are treated as small business concerns by statute. Conforming changes are made to the clause at FAR 52.219-9 and its Alternates III and IV. <HD SOURCE="HD1">III. Applicability to Contracts at or Below the Simplified Acquisition Threshold (SAT) and for Commercial Products (Including Commercially Available Off-the-Shelf (COTS) Items) or for Commercial Services</HD> This rule amends the clauses at FAR 52.212-5, Contract Terms and Conditions Required To Implement Statutes or Executive Orders—Commercial Products and Commercial Services; 52.213-4, Terms and Conditions—Simplified Acquisitions (Other Than Commercial Products and Commercial Services); 52.219-8, Utilization of Small Business Concerns; and 52.219-9, Small Business Subcontracting Plan. However, this rule does not change the applicability of these clauses, which continue to apply to contracts valued at or below the SAT, or on contracts for commercial products, including COTS items, or commercial services. This rule applies paragraphs (a) and (d) of section 861 of the John S. McCain National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 115-232), and paragraphs (a) and (c) of section 866 of the NDAA for FY 2021 (Pub. L. 116-283), to acquisitions at or below the SAT and to acquisitions for commercial products, including COTS items, and commercial services, as the two new incentives for SBA's mentor-protégé program are available to all contractors in the program, regardless of the dollar value of the contract awarded or the commercial nature of the products and services procured. <HD SOURCE="HD2">A. Applicability to Contracts at or Below the Simplified Acquisition Threshold</HD> The statute at 41 U.S.C. 1905 governs the applicability of laws to acquisitions at or below the SAT. Section 1905 generally limits the applicability of new laws when agencies are making acquisitions at or below the SAT, but provides that such acquisitions will not be exempt from a provision of law under certain circumstances, including when the Federal Acquisition Regulatory Council (FAR Council) makes a written determination and finding that it would not be in the best interest of the Federal Government to exempt contracts and subcontracts in amounts not greater than the SAT from the provision of law. The FAR Council has made a determination to apply this statute to acquisitions at or below the SAT. <HD SOURCE="HD2">B. Applicability to Contracts for the Acquisition of Commercial Products and Commercial Services, Including Commercially Available Off-The-Shelf (COTS) Items</HD> The statute at 41 U.S.C. 1906 governs the applicability of laws to contracts for the acquisition of commercial products and commercial services, and is intended to limit the applicability of laws to contracts for the acquisition of commercial products and commercial services. Section 1906 provides that if the FAR Council makes a written determination that it is not in the best interest of the Federal Government to exempt commercial contracts, the provision of law will apply to contracts for the acquisition of commercial products and commercial services. The statute at 41 U.S.C. 1907 states that acquisitions of COTS items will be exempt from certain provisions of law unless the Administrator for Federal Procurement Policy makes a written determination and finds that it would not be in the best interest of the Federal Government to exempt contracts for the procurement of COTS items. The FAR Council has made a determination to apply this statute to acquisitions for commercial products and commercial services. The Administrator for Federal Procurement Policy has made a determination to apply this statute to acquisitions for COTS items. <HD SOURCE="HD1">IV. Expected Impact of the Rule</HD> This rule is expected to benefit mentors with an SBA-approved mentor-protégé agreement that subcontract to covered territory small businesses and small businesses that have their principal office located in the Commonwealth of Puerto Rico. These benefits are expected to extend to covered territory small businesses and small businesses located in the Commonwealth of Puerto Rico, as mentors may be incentivized to enter into SBA-approved mentor-protégé agreements with such small businesses and issue subcontracts to them. This rule is expected to decrease the burden f ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 31k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━