Defense Federal Acquisition Regulation Supplement: 8(a) Program

Defense Federal Acquisition Regulation Supplement: 8(a) Program (DFARS Case 2024-D025)

Supplementary Information

I. Background

DoD is proposing to revise the DFARS to align with changes made to the FAR via the final rules published in the Federal Register on August 11, 2021 (86 FR 44233) and on September 23, 2022 (87 FR 58219). The final rule for FAR Case 2016-011, Revision of Limitations on Subcontracting, published on August 11, 2021, standardized the application of the nonmanufacturer rule requirements for the socioeconomic programs identified at FAR 19.000(a)(3). The final rule for FAR Case 2017-019, Policy on Joint Ventures, published on September 23, 2022, clarified the eligibility of joint ventures under the 8(a) Program.

This rule is also proposing to revise the DFARS to align with the proposed rule for FAR Case 2021-020, Limitations on Subcontracting Revisions, published on January 17, 2024 (89 FR 2910). This FAR rule proposed to remove the nonmanufacturer rule requirements for 8(a) participants from FAR 19.809-2 as was intended to be accomplished via the final rule published on August 11, 2021, and to remove the kit assembler rule set from the nonmanufacturer rule. This DFARS rule proposes to make similar changes.

II. Discussion and Analysis

This rule proposes to modify the contract clause at DFARS 225.219-7010, Notification of Competition Limited to Eligible 8(a) Participants-Partnership Agreement, to add joint ventures to the list of concerns from whom offers are solicited for 8(a) Program acquisitions that are processed in accordance with the 8(a) Partnership Agreement between DoD and the Small Business Administration (SBA) (the Agreement). This proposed rule also includes the removal of the kit assembler rule set and the nonmanufacturer rule requirements addressed in paragraphs (d)(1), (d)(2), and (d)(3) of the clause at DFARS 252.219-7010 to align with the clause at FAR 52.219-33, Nonmanufacturer Rule, which specifies the nonmanufacturer rule requirements for all socioeconomic categories.

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

This proposed rule amends the clause at DFARS 225.219-7010, Notification of Competition Limited to Eligible 8(a) Participants-Partnership Agreement; however, this proposed rule does not impose any new requirements on contracts at or below the SAT, for commercial products including COTS items, or for commercial services. The clause will continue to not apply to acquisitions at or below the SAT and will continue to apply to acquisitions of commercial products including COTS items, and to acquisitions of commercial services.

IV. Expected Impact of the Rule

This proposed rule, when finalized, is expected to impact 8(a) participants, including 8(a) joint ventures, who enter into contracts with DoD that are processed in accordance with the Agreement. These participants will be required to comply with the nonmanufacturer rule requirements in the clause at FAR 52.219-33. As a result, DoD may see an increase in the number of 8(a) participants that submit proposals for contracts processed in accordance with the Agreement, which may expand 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. Regulatory Flexibility Act

DoD does not expect this proposed rule, when finalized, to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because this rule merely updates the DFARS to align with the FAR. However, an initial regulatory flexibility analysis has been performed and is summarized as follows:

This proposed rule is necessary to revise the contract clause at DFARS 252.219-7010, Notification of Competition Limited to Eligible 8(a) Participants-Partnership Agreement, to align with changes made to the FAR regarding joint venture eligibility for 8(a) Program acquisitions processed in accordance with the 8(a) Partnership Agreement between DoD and the Small Business Administration (SBA). This proposed rule also removes the nonmanufacturer rule requirements from the clause to align with changes made to the FAR.

The objective of the rule is to revise the DFARS to align with amendments made to the FAR. The legal basis for the rule is 41 U.S.C. 1303.

According to data from the Procurement Business Intelligence Service, in the last three fiscal years DoD awarded contracts that included the clause at DFARS 252.219-7010 to unique small entities as follows: 848 in fiscal year 2021; 553 in fiscal year 2022; 600 in fiscal year 2023. This averages out to 667 per fiscal year. Therefore, DoD estimates that the number of small entities to which this rule will apply is approximately 667.

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

This proposed rule does not duplicate, overlap, or conflict with any other Federal rules.

DoD did not identify any significant alternatives to the proposed rule. Any impact is expected to be beneficial.

DoD invites comments from small business concerns and other interested parties on the expected impact of this proposed rule on small entities.

DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this proposed rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (DFARS Case 2024-D025), in correspondence.

VII. Paperwork Reduction Act

This proposed 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. chapter 35).

Therefore, the Defense Acquisition Regulations System proposes to amend 48 CFR part 252 as follows:

Part 252 Solicitation Provisions and Contract Clauses

As prescribed in 219.811-3(2), use the following clause:

Notification of Competition Limited to Eligible 8(a) Participants-Partnership Agreement (DATE)

(a) Offers are solicited only from-

(1) Small business concerns expressly certified by the Small Business Administration (SBA) for participation in SBA's 8(a) Program and which meet the following criteria at the time of submission of offer:

(i) The Offeror is in conformance with the 8(a) support limitation set forth in its approved business plan.

(ii) The Offeror is in conformance with the Business Activity Targets set forth in its approved business plan or any remedial action directed by SBA.

(iii) If the competition is to be limited to 8(a) concerns within one or more specific SBA regions or districts, then the Offeror's approved business plan is on file and serviced by ___. [Contracting Officer completes by inserting the appropriate SBA District and/or Regional Office(s) as identified by SBA.]

(2) A joint venture, in which at least one of the 8(a) program participants that is a party to the joint venture complies with the criteria set forth in paragraph (a)(1) of this clause, and that has a joint venture agreement that complies with 13 CFR 124.513(c); or

(3) A joint venture-

(i) That is comprised of a mentor and an 8(a) protégé with an approved mentor-protégé agreement under an SBA mentor-protégé program;

(ii) In which at least one of the 8(a) program participants that is a party to the joint venture complies with the criteria set forth in paragraph (a)(1) of this clause; and

(iii) With a joint venture agreement that complies with 13 CFR 124.513(c).

(b) By submission of its offer, the Offeror represents that it meets the applicable criteria set forth in paragraph (a) of this clause.

(c) Any award resulting from this solicitation will be made directly by the Contracting Officer to the successful 8(a) offeror selected through the evaluation criteria set forth in this solicitation.

(d) The ___ [insert name of SBA's contractor] will notify the ___ [insert name of contracting agency] Contracting Officer in writing immediately upon entering an agreement (either oral or written) to transfer all or part of its stock or other ownership interest to any other party.

(End of clause)