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Changes in Regulations by the Federal Government Are the Real Impact on Procurement

On Behalf of | Aug 12, 2017 | Firm News

Written by Jon M. DeVore

The Trump Administration just released its first Unified Regulatory Agenda.  This is one of the primary tools that the White House uses to control agency actions and has real impact on doing business with the government.  Most agency rules must be submitted to a White House office called Office of Information and Regulatory Affairs (OIRA) for review before they can be published.  OIRA’s primary role is to look at nonpartisan issues like a regulation’s costs and benefits.  But, because it is housed directly under the White House, it also allows the President to control the regulatory agenda.  Congress and the Administration are expected to push procurement reform for the Department of Defense (DoD) and other large agencies.  The SBA has been asked to be involved in many of these regulatory and policy reforms.

The Unified Agenda reports that federal agencies have withdrawn 469 proposed rules, reconsidered 391 active regulations, and reduced economically significant regulations by 50%.  As many commentators have noted, it is fairly easy and cost free for Pres. Trump to cancel rulemakings Pres. Obama was considering.  It is a useful reminder, however, to expect more deregulation than regulation from this White House.  That said, the Administration is not doing a complete about face on all rules that are near completion.  For example, the “Buy American, Hire American” is going to be a major policy push and will find itself in new regulations.

The Federal Acquisition Regulations (FARs) are on track to be amended to reflect several recent items that may impact the Federal Contracting.  The changes are expected to address the following issues:

  • Changes in SBA Regulations on Status Determinations (To be proposed Sept. 2017 and open for comment until Dec.) – These clarifications are expected to relieve the burden on both industry and government by reducing the number of protests related to inappropriate elimination from competition of offers from 8(a) joint ventures and inappropriate awards to ineligible 8(a) joint ventures. This will reduce the risk for fraud by clarifying the role of SBA as the authority for making eligibility determination. The rule is also expected to facilitate competition by clarifying the circumstances under which a joint venture is eligible for award under the 8(a) program.
  • Clarify that Overseas Contracting Is Not Excluded from Agency Responsibilities to Foster Small Business Participation (to be proposed Oct 2017 and open for comment until Dec.) In its final rule, SBA has clarified that, as a general matter, its small business contracting regulations apply regardless of the place of performance. There is a need to amend the FAR both to bring its coverage into alignment with SBA’s regulation and to give agencies the tools they need, especially the ability to use set-asides to maximize opportunities for small businesses overseas.  SBA intends to include contracts performed outside of the US in agencies’ prime contracting goals beginning in FY 2016. Although inclusion for goaling purposes is not dependent on FAR changes, amending FAR part 19 will allow agencies to take advantage of the tools authorized for providing small business opportunities for contracts awarded outside of the US.  This will make it easier for small businesses to receive additional opportunities for contracts performed outside of the US.  The new FAR regulation has significant implications for opening more markets for small businesses.
  • Revise Limits on Subcontracting (to be proposed Aug 2017 and open for comment until Oct) This FAR change incorporates SBA final rule which implemented the statutory requirements of sec. 1651 of the National Defense Authorization Act (NDAA) for FY 2013. This action is necessary to meet the Congressional intent of clarifying the limitations on subcontracting with which small businesses must comply, as well as the ways in which they can comply.  Failure to implement sec. 1651 promptly will prevent small businesses from taking advantage of subcontracts with similarly situated entities.  This new FAR update is critical to the changes mandated by the NDAA and significantly changes the manner in which contract performance is measured.
  • Changes to Section 811 There will be new FAR regulations adding Controls on Sole Source 8(a) Contracts Exceeding $22 Million (final rule expected in Oct.) – This rule implements guidance from a Government Accountability Office report entitled “Federal Contracting: Slow Start to Implementation of Justifications for 8{a) Sole-Source Contracts” (GA0-13-118, December 2012). Sole-source contracting regulations are statutory and are found in sec. 811 of the NDAA for FY 2010 (Pub. L. 11184) (see 77 FR 23369).  These clarifications improve the contracting officer’s ability to comply with the sole source contracts and statutory requirements.  This rule provides such guidance, including when justification is necessary, how contracting officers should comply, and when a separate sole-source justification is necessary for out-of-scope modifications to 8(a) sole-source contracts.
  • Partial Set Asides, Reserves, and Multiple-Award Contracts (final rule expected in Sept.) This rule incorporates statutory requirements discussed at sec.1331 of the Small Business Jobs Act of 2010 (15 U.S.C. 644(r)) and the SBA’s final rule at 78 FR 61114, dated October 2, 2013. The rule increases small business participation in Federal prime contracts by ensuring that small businesses have greater access to multiple award contracts and clarifying the procedures for submitting proposals for partial set-asides, reserves, and orders placed under such contracts.
  • HUBZone Regulations (proposed rule expected in Sept) SBA has been reviewing its processes and procedures for implementing the HUBZone program and has determined that several of the regulations governing the program should be amended in order to resolve certain issues that have arisen. As a result, the proposed rule would constitute a comprehensive revision of part 126 of SBA’s regulations to clarify current HUBZone Program regulations, and implement various new procedures. The SBA will focus on the principles of Executive Orders 12866, 13771 and 13563 to determine whether portions of regulations should be modified, streamlined, expanded or repealed to make the HUBZone program more effective and/or less burdensome on small business concerns.
  • Updates to Reflect Last Year’s NDAA (proposed rule expected in Sept.) – Sec.1822 of the NDAA for FY 2017, Public Law 114-328, Dec. 23, 2016, establishes a pilot program for qualified subcontractors to obtain past performance ratings that can be used to compete for prime contracts. 1811 of the NDAA of 2017 also limits the scope of review of Procurement Center Representatives for certain DoD procurements performed outside of the U.S.  Sec. 1821 of the NDAA of 2017, establishes that failure to act in good faith in providing timely subcontracting reports shall be considered a material breach of the contract.  Sec. 863 of the NDAA for FY 2016, Public Law 114-92, Nov. 25, 2015, establishes procedures for the publication of acquisition strategies if the acquisition involves consolidation or substantial bundling. SBA also intends to request comment on various proposed changes requested by industry or other agencies, including those pertaining to exclusions from calculating compliance with the limitations on subcontracting, an agency’s ability to set aside orders under set-aside contracts, and a contracting officer’s authority to request reports on a prime contractor’s compliance with the limitations on subcontracting.

As is obvious by the list of anticipated regulations, the new Administration will not be hesitant to propose new regulations and policies.  What is less clear is how this administration will consider small business and minority, Alaska Native, NHO and Native American owned businesses in the complexity of the Federal Procurement System.  Monitoring these regulations is extremely critical and commenting on the new proposal is crucial.  We recommend working with the Congressional Delegations in assisting in crafting the FAR clarifications.