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What is the Federal Acquisition Regulation and Why Does it Matter?

This blog was originally posted on 11/16/2016 and updated 4/22/2020.

On March 30, 2020, a new amendment to the Federal Acquisition Regulation (FAR) that could significantly impact federal contractors and the small and diverse businesses within their supply chains went into effect. The new rule, FAC 2020-05, updates and clarifies regulations regarding set-aside orders under multiple-award contracts.

What does this mean for you? Let's start with a quick refresher on the FAR as a whole and then take a look at two other updates.

What Is the Federal Acquisition Regulation?

The Federal Acquisition Regulation is a set of clauses within the Code of Federal Regulations that describes the rules for contracting with the federal government. Federal government agencies—as well as government contractors that win a contract—are regulated by the FAR and must follow the procurement rules and policies set forth within it.

Amendments to the FAR

The FAR is amended when the three government agencies—the U.S. Department of Defense (DoD), NASA, and the General Services Administration (GSA)—that are governed by the FAR, along with the FAR Council, issue proposed and final rules under the “notice and comment” procedures established by the Administrative Procedure Act.

Depending on how the regulation is promulgated, the number of comments received upon a proposed change, and other factors, the process of amending the FAR can take anywhere from months to years (and in some cases, a change is proposed but not finalized).

New and Upcoming FAR Amendments

If your company has a federal contract, the government expects you to be FAR compliant. The federal government reviews contractor compliance with the FAR during purchasing reviews, so it’s important to stay up to date with new rules and amendments.

The FAR was recently amended in a few ways that may be meaningful to your company. Federal Acquisition Circular (FAC) 2020–04 amends the FAR to adjust the thresholds for application of the World Trade Organization Government Procurement Agreement and the Free Trade Agreements as determined by a United States Trade Representative (USTR), according to predetermined formulae under the agreements. This adjustment is made approximately every two years.

FAC 2020-02 addresses the reporting of certain counterfeit or suspect counterfeit parts and certain major or critical nonconformances. Contractors and subcontractors are now required to report these items and incidents to the Government-Industry Data Exchange Program (GIDEP). This rule was already in effect for DoD contractors and subcontractors but now extends to cover other government agencies, other types of parts, and other types of nonconformance. Review the new requirements here to ensure compliance.

A more significant rule regarding set-asides under multiple-award contracts went into effect on March 30, 2020. FAC 2020-05 brings the FAR into alignment with regulatory changes made by the Small Business Administration (SBA), which sets policy for partial set-asides and reserves as well as set-asides of orders for small businesses under multiple-award contracts government-wide.

According to the Civilian Agency Acquisition Council (CAAC) and the Defense Acquisition Regulations Council (DARC), this amendment to the FAR “is expected to benefit small business by providing contracting officers with additional guidance on tools with which to encourage small business participation in multiple-award contracts.”

By updating and clarifying these regulations, the FAR and SBA aim to increase opportunities for small businesses to win multiple-award contracts. For example, contracting officers have had the authority to use the tools described in the amendment for several years, but had minimal guidance about how to use them. In providing that guidance, the updated regulations are meant to:

  1. Set aside part or parts of multiple-award contracts for small business;
  2. Set aside orders under multiple-award contracts, notwithstanding the statutory requirement to provide contract holders fair opportunity to be considered; and
  3. Reserve one or more awards for small business on multiple-award contracts that are established through full and open competition (i.e., not totally or partially set aside).

The amendment also removes the current requirement for small business offerors to submit an offer for both the set-aside and non-set-aside portions of a partial set-aside, allowing them to submit an offer for only the set-aside portion. The government expects this change to increase the number of small businesses that can and will bid in multiple-contract situations. 

Other impacts of this final rule include the following:

  • The rule provides contracting officers with the authority to issue orders directly to a small business under a reserve.
  • This rule removes the ability of interested parties to protest sole source awards under the Service-Disabled Veteran-Owned Small Business (SDVOSB) program.
  • Currently, contracting officers assign only one North American Industry Classification System (NAICS) code to a multiple-award contract. This rule requires certain multiple-award contracts to be assigned more than one NAICS code.
    Some contractors may qualify as small under the size standards associated with one or more of the NAICS codes assigned to a particular contract and also may qualify as other than small for other NAICS codes assigned to the same contract.
    Therefore, some contractors may need to negotiate and manage a small business subcontracting plan either for the portion of a multiple-award contract for which they are other than small, or for the entirety of the contract, at the contractor's discretion, while other contractors may no longer require a subcontracting plan because the value of the portion of the contract for which they are other than small is too small to require a subcontracting plan.
  • Contracting officers currently verify compliance with the limitations on subcontracting at the contract level for multiple-award contracts that are set aside for a small business program. This rule requires contracting officers to specify the compliance period for the limitations on subcontracting at either the contract or order level.
  • This rule prohibits tiered evaluation of offers on multiple-award contracts unless the agency has statutory authority. Tiered evaluations allow the government to evaluate offers at each tier (e.g., service-disabled veteran-owned small business) and only evaluate offers at the next tier (e.g., small business) if an award cannot be made at the previous tier; it reduces the number of offers that must be evaluated.

If you are a federal contractor, it’s important to review your policies and procedures regularly to ensure compliance with all regulations, including new rules. Do you need help keeping up with changing FAR rules? CVM, a supplier.io company, can help. Click here to ensure you are FAR compliant.

Click here to ensure you are FAR Compliant  

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