E7-14906. Defense Federal Acquisition Regulation Supplement; Limitations on Tiered Evaluation of Offers (DFARS Case 2006-D009)

AGENCY:

Defense Acquisition Regulations System, Department of Defense (DoD).

ACTION:

Final rule.

SUMMARY:

DoD has adopted as final, with changes, an interim rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement Section 816 of the National Defense Authorization Act for Fiscal Year 2006. Section 816 requires DoD to prescribe guidance on the use of tiered evaluation of offers for contracts and for task or delivery orders under contracts.

DATES:

Effective Date: August 2, 2007.

FOR FURTHER INFORMATION CONTACT:

Ms. Deborah Tronic, Defense Acquisition Regulations System, OUSD(AT&L)DPAP(DARS), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062. Telephone [phone]; facsimile [phone]. Please cite DFARS Case 2006-D009.

SUPPLEMENTARY INFORMATION:

A. Background

DoD published an interim rule at 71 FR 53042 on September 8, 2006, to implement Section 816 of the National Defense Authorization Act for Fiscal Year 2006 (Pub. L. 109-163). Section 816 requires DoD to prescribe guidance on the use of tiered evaluation of offers for contracts and for task or delivery orders under contracts. The guidance must include a prohibition on the use of tiered evaluation of offers unless the contracting officer (1) has conducted market research in accordance with Part 10 of the Federal Acquisition Regulation (FAR); (2) is unable, after conducting market research, to determine whether or not a sufficient number of qualified small businesses are available to justify limiting competition for the contract or order; and (3) includes in the contract file a written explanation of why the contracting officer was unable to make the determination.

Four sources submitted comments on the interim rule. A discussion of the comments is provided below. In addition to the changes addressed in the DoD response to Comment 1, the final rule revises section 213.106-1-70 to provide a cross-reference to section 215.203-70, instead of duplicating the text found in that section.

1. Comment: The rule failed to include an explicit prohibition.

DoD Response: While DoD believes that stating the actions that the contracting officer must take before using tiered evaluation is an implied prohibition, the final rule contains amendments at 215.203-70 to explicitly prohibit the contracting officer from using tiered evaluation unless those actions have been taken.

2. Comment: Defining the technique of tiered evaluation in the DFARS legitimizes the use of tiered evaluation.

DoD Response: The statute does not completely prohibit the use of tiered evaluation; it requires that certain actions be taken before this technique may be used. To permit an understanding of the statutory requirements, the technique must first be defined.

3. Comment: FAR Part 10 already requires the market research required by the statute, and no additional research is necessary.

DoD Response: DoD agrees that the FAR already requires agencies to conduct market research appropriate to the circumstances before soliciting offers for acquisitions in excess of the simplified acquisition threshold and, when necessary and cost-effective, below the simplified acquisition threshold. However, DoD believes the additional language in DFARS Part 210 is appropriate to reinforce the statutory requirement for market research before conducting a tiered evaluation of offers.

4. Comment: The phrase “appropriate to the circumstances” at DFARS 210.001(a)(i), with regard to requirements for conducting market research, should be deleted. Although the phrase is consistent with the FAR, it is not in the statute being implemented and creates ambiguity.

DoD Response: The text at DFARS 210.001 is consistent with both the statute and FAR Part 10. The statute prohibits the use of tiered evaluation of offers unless, among other things, the contracting officer has conducted market research in accordance with Part 10 of the FAR. The implementing DFARS language reflects the policy in FAR Part 10, requiring the conduct of market research “appropriate to the circumstances.” The DFARS language recognizes that there are many ways to conduct market research, and that the methods employed should be those that will be effective for the particular acquisition.

5. Comment: The rule states that the tiered evaluation of offers order of precedence shall be consistent with FAR Part 19. However, FAR Part 19 does not provide an “order of precedence” among the various small business goals.

DoD Response: FAR Part 19 does not specifically state an order of precedence. However, it does provide direction on the circumstances under which acquisitions may or must be set aside for various categories of small businesses. For example, FAR 19.1305 states that the contracting officer must consider HUBZone set-asides for acquisitions at a certain dollar level before considering small business set-asides. DoD believes that, in establishing an order of precedence in a tiered evaluation of offers, that order of precedence must be consistent with the direction in FAR Part 19.

6. Comment: Guidance to the contracting officer can be addressed in the Procedures, Guidance, and Information (PGI), consistent with the law.

DoD Response: PGI guidance to supplement this rule is considered unnecessary at this time.

7. Comment: The rule should include coverage stating that a large business involved in an 8(a) mentor-protege agreement shall not offer itself as a large business in competition against the 8(a) mentor-protege agreement. In a recent cascading set-aside, a large business offered itself as a large entity, as a subcontractor to a small business, and as a mentor in an 8(a) mentor-protege joint venture.

DoD Response: The issue of a mentor firm competing against a protege firm is not specific to tiered evaluation of offers. Therefore, the final rule contains no change relating to this comment.

This rule was not subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993.

B. Regulatory Flexibility Act

DoD certifies that this final rule will not 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 the rule relates to market research and documentation requirements performed by the Government.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply, because the rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR Parts 202, 210, 213, 215, and 219

• Government procurement

Michele P. Peterson,

Editor, Defense Acquisition Regulations System.

Accordingly, the interim rule amending 48 CFR parts 202, 210, 213, 215, and 219, which was published at 71 FR 53042 on September 8, 2006, is adopted as a final rule with the following changes:

1. The authority citation for 48 CFR parts 202, 210, 213, 215, and 219 continues to read as follows:

Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 213—SIMPLIFIED ACQUISITION PROCEDURES

2. Section 213.106-1-70 is revised to read as follows:

213.106-1-70

Soliciting competition—tiered evaluation of offers.

See limitations on the use of tiered evaluation of offers at 215.203-70.

PART 215—CONTRACTING BY NEGOTIATION

3. Section 215.203-70 is amended by revising paragraph (c) introductory text, paragraph (c)(1) introductory text, and paragraph (c)(2) to read as follows:

215.203-70

Requests for proposals—tiered evaluation of offers.

* * * * *

(c) The contracting officer is prohibited from issuing a solicitation with a tiered evaluation of offers unless—

(1) The contracting officer conducts market research, in accordance with FAR Part 10 and Part 210, to determine—

* * * * *

(2) If the contracting officer cannot determine whether the criteria in paragraph (c)(1) of this section are met, the contracting officer includes a written explanation in the contract file as to why such a determination could not be made (Section 816 of Public Law 109-163).