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24836 Federal Register/Vol. 87, No. 80/Tuesday, April 26, 2022/Rules and Regulations
DEPARTMENT OF DEFENSE and National Aeronautics and Space ADDRESSES: The FAC, including the
Administration (NASA). SECG, is available at https://
GENERAL SERVICES ACTION: Summary presentation of final www.regulations.gov.
ADMINISTRATION rules.
FORFURTHERINFORMATIONCONTACT: The
NATIONAL AERONAUTICS AND SUMMARY: This document summarizes analyst whose name appears in the table
SPACE ADMINISTRATION the Federal Acquisition Regulation below in relation to the FAR case. For
(FAR) rules agreed to by the Civilian information pertaining to status or
48 CFR Chapter 1 Agency Acquisition Council and the publication schedules, contact the
[Docket No. FAR–2022–0051, Sequence No. Defense Acquisition Regulations Regulatory Secretariat Division at 202–
3] Council (Councils) in this Federal 501–4755 or GSARegSec@gsa.gov.
Acquisition Circular (FAC) 2022–06. A
Federal Acquisition Regulation; companion document, the Small Entity
Federal Acquisition Circular 2022–06; Compliance Guide (SECG), follows this
Introduction FAC.
AGENCY: Department of Defense (DoD), DATES: For effective dates see the
General Services Administration (GSA), separate documents, which follow.
RULES LISTED IN FAC 2022–06
Item Subject FAR case Analyst
I .................... Applicability of Small Business Regulations Outside the United States ...................... 2016–002 Uddowla.
II ................... Technical Amendments.
SUPPLEMENTARYINFORMATION: the Administrator of National DEPARTMENT OF DEFENSE
Summaries for each FAR rule follow. Aeronautics and Space Administration.
For the actual revisions and/or Unless otherwise specified, all GENERAL SERVICES
amendments made by these FAR rules, Federal Acquisition Regulation (FAR) ADMINISTRATION
refer to the specific item numbers and and other directive material contained
subjects set forth in the documents in FAC 2022–06 is effective April 26, NATIONAL AERONAUTICS AND
following these item summaries. FAC 2022 except for Item I, which is effective SPACE ADMINISTRATION
2022–06 amends the FAR as follows: May 26, 2022, and Item II, which is
Item I—Applicability of Small Business effective May 1, 2022. 48 CFR Parts 2, 19, and 52
Regulations Outside the United States Linda W. Neilson [FAC 2022–06; FAR Case 2016–002; Item
(FAR Case 2016–002) I; Docket No. 2016–0002, Sequence No. 1]
Director, Defense Pricing and Contracting
This final rule amends the Federal (DARS) Department of Defense.
Acquisition Regulation (FAR) to give Jeffrey A. Koses, RIN 9000–AN34
agencies the tools they need, especially Senior Procurement Executive/Deputy CAO, Federal Acquisition Regulation:
the ability to use set-asides, to maximize Office of Acquisition Policy, U.S. General Applicability of Small Business
opportunities for small businesses Services Administration. Regulations Outside the United States
outside the United States or its outlying Karla Smith Jackson,
areas, as defined in FAR part 2. Prior to AGENCY: Department of Defense (DoD),
this rule, the FAR stated that the small Assistant Administrator for Procurement, General Services Administration (GSA),
business programs do not apply outside Senior Procurement Executive, National and National Aeronautics and Space
of the United States (FAR 19.000(b)). Aeronautics and Space Administration. Administration (NASA).
This rule supports the Small Business [FR Doc. 2022–08720 Filed 4–25–22; 8:45 am] ACTION: Final rule.
Administration (SBA) policy of BILLING CODE 6820–EP–P
including overseas contracts in agency SUMMARY: DoD, GSA, and NASA are
small business contracting goals. issuing a final rule amending the
Item II—Technical Amendments Federal Acquisition Regulation (FAR) to
support the Small Business
Editorial changes are made at FAR Administration (SBA) policy of
4.402, 4.1103, 12.302, 12.402, 15.601, including overseas contracts in agency
18.205, 46.102, 52.212–5, and 52.222– small business contracting goals. This
54. final rule allows small business
William F. Clark, contracting procedures, e.g., set-asides,
Director, Office of Government-wide to apply to overseas procurements.
Acquisition Policy, Office of Acquisition DATES: Effective: May 26, 2022.
Policy, Office of Government-wide Policy. FORFURTHERINFORMATIONCONTACT: Ms.
Federal Acquisition Circular (FAC) Mahruba Uddowla, Procurement
2022–06 is issued under the authority of Analyst, at 703–605–2868, or by email
the Secretary of Defense, the at mahruba.uddowla@gsa.gov, for
Administrator of General Services, and clarification of content. For information
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Federal Register/Vol. 87, No. 80/Tuesday, April 26, 2022/Rules and Regulations 24837
pertaining to status or publication 3. Legal Concerns Regarding Overseas nation sources. According to this
schedules, contact the Regulatory Application of the Small Business Act respondent, if the proposed rule is
Secretariat Division at 202–501–4755 or Comment: One respondent stated that adopted, it should be revised to reflect
GSARegSec@gsa.gov. Please cite FAC the Small Business Act must show an this lack of discretion.
2022–06, FAR Case 2016–002. affirmative intent to apply overseas and Response: In its October 2, 2013, final
SUPPLEMENTARYINFORMATION: reconcile conflicts of law, otherwise the rule, SBA applied the Small Business
statute is meant to apply only within the Act to overseas acquisitions. The
I. Background territorial jurisdiction of the United Councils note that, at the time of the
DoD, GSA, and NASA published a States. The respondent further stated the GAO’s decision in the cited Latvian
proposed rule at 84 FR 39793 on August Small Business Act is silent regarding Connection case, SBA’s regulations
12, 2019, to support SBA’s policy of its application overseas and does not were silent regarding the application of
including overseas contracts in agency account for conflicts of law. A second the Small Business Act outside the
small business contracting goals by respondent stated that it has been the United States and its outlying areas.
allowing small business contracting position of DoD that the Small Business SBA’s final rule amended 13 CFR 125.2,
procedures, e.g., set-asides, to apply to Act does not apply outside of the United which SBA stated was issued in part to
overseas procurements (i.e., States and its outlying areas. According clarify its position that the Small
procurements outside the United States to the respondent, absent a statement of Business Act applies ‘‘regardless of the
and its outlying areas), which is Congressional intent, the Government place of performance’’.
expected to expand overseas Accountability Office (GAO) has The Councils proposed to amend the
opportunities for small business deferred to DoD’s interpretation of the FAR to support SBA’s changes to the
concerns. Twenty-six respondents Small Business Act embodied in FAR basis for the Governmentwide small
submitted comments on the proposed 19.000(b) (Latvian Connection Gen. business contracting goals. This rule
rule. Trading & Constr. LLC, B–408633, 2013 will allow for application of FAR part
CPD 224, September 8, 2013). The 19 overseas and thereby expand
II. Discussion and Analysis respondent described GAO’s deference opportunities for small business
to DoD’s interpretation embodied in the concerns overseas. The Councils are
The Civilian Agency Acquisition FAR as an example of ‘‘Chevron’’ aware that the SBA regulations at 13
Council and the Defense Acquisition deference, which does not give agencies CFR 125.2 do not make application of
Regulations Council (the Councils) license to follow statutes to the extent small business set-aside and sole-source
reviewed the public comments in the they deem desirable; instead, it is authorities discretionary for overseas
development of the final rule. A deference to an agency’s permissible acquisitions. However, the Councils
discussion of the comments received interpretation of an ambiguous statute. recognize that overseas acquisitions are
and any changes made to the rule as a A third respondent noted that the subject to international agreements,
result of the public comments are Federal Acquisition Regulatory Council treaties, local laws, diplomatic and
provided as follows: (FAR Council) stated that the change in other considerations that are unique to
A. Summary of Significant Changes the proposed rule is being done to be the overseas environment and may limit
From the Proposed Rule consistent with SBA’s own rules. The the Government’s ability to apply the
respondent stated that by revising FAR small business preferences in FAR part
This final rule makes conforming 19.000(b) to explicitly make application 19 on a mandatory basis. In addition,
changes to FAR solicitation provisions of FAR part 19 ‘‘discretionary’’ for the Councils believe that policies issued
52.204–8, Annual Representations and overseas contracts, the FAR Council is subsequent to the promulgation of
Certifications, and 52.212–3, Offeror amending the FAR to continue to SBA’s regulations, such as those in
Representations and Certifications— conflict with SBA’s regulations directly, Executive Order (E.O.) 14005, Ensuring
Commercial Products and Commercial or at the very least conflict with SBA’s the Future Is Made in All of America by
Services. These changes are required to stated interpretation of its regulations. All of America’s Workers, addressing
resolve conflicts between these This respondent mentioned that SBA’s steps to increase reliance on domestic
provisions and the changes in the interpretation of the Small Business Act manufacturing, will operate more
proposed rule to the prescriptions at is that the application of the Act effectively with a discretionary policy
FAR 19.309. overseas is mandatory, not for use of set-asides overseas.
B. Analysis of Public Comments discretionary. The respondent It is not practicable to list in the FAR
recommended that the FAR Council everything that may affect the decision
1. Support for the Rule consult with SBA to ensure the FAR to set aside an overseas acquisition.
rule, and FAR 19.000(b) in particular, Therefore, the Councils are amending
Comment: Multiple respondents conform to SBA’s regulations. Two the FAR to make the use of part 19
expressed their support for the rule. respondents expressed concern discretionary outside the United States
Response: The Councils acknowledge regarding conflicts between this FAR and its outlying areas, so agencies and
the respondents’ support for the rule. rule and treaties and international their contracting officers can consider
agreements. One of the respondents these factors in the exercise of their
2. Opposition to the Rule stated the proposed rule did not require discretion. The Councils confirm that
Comment: A few respondents the contracting officer to document how SBA representatives participated in the
expressed their opposition to the rule. they considered international development of both the proposed and
agreements when exercising their final FAR rules and concurred with both
Response: The Councils acknowledge discretion. The other respondent the proposed and final FAR rules.
the respondents’ opposition to the rule. indicated that overseas contracting 4. Rule Creates Conflicts Within the
The Councils have taken into officers will not have the discretion to FAR
consideration all of the public apply FAR part 19 when international
comments in the development of this treaties or international agreements Comment: Two respondents stated
final rule. require solicitation or award to host that the proposed rule created conflicts
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24838 Federal Register/Vol. 87, No. 80/Tuesday, April 26, 2022/Rules and Regulations
within the FAR. The respondents cited contracts overseas. Therefore, there is definition of ‘‘consolidation or
the following examples of conflicts: no conflict that needs to be resolved. consolidated requirement’’ at FAR
• The provisions at FAR 52.204–8, With regard to FAR 25.802, this final 2.101, Definitions, nor the applicability
Annual Representations and rule provides discretion to contracting of FAR 7.107–2, Consolidation. The
Certifications, and 52.212–3, Offeror officers in making a set-aside decision bundling requirements at FAR 7.107–3,
Representations and Certifications— for overseas acquisitions so they can Bundling, and 7.107–4, Substantial
Commercial Products and Commercial choose the appropriate acquisition bundling, require an agency to make a
Services, explicitly provide that small strategy for the location. The discretion written determination that such action
business representations only apply provided in the rule will allow is necessary and justified, allowing
when the resulting contract is to be contracting officers to avoid possible agencies to bundle in certain
performed in the United States or its conflicts between FAR 52.219–14 and circumstances. Applying the bundling
outlying areas. This conflict makes the other regulations. For further discussion requirements to overseas contracts
rule unclear for offerors and contracting related to international agreements, see requires agencies to provide for
officers. the responses to comments under maximum practicable participation by
• FAR 19.702(b)(3) and 19.708 do not category 9. For further discussion small business concerns as contractors.
explicitly require small business related to the limitations on Providing for maximum practicable
subcontracting plans for any contract subcontracting, see the response to participation by small business
performed entirely outside the United comments under category 11. concerns is not the same as mandating
States or its outlying areas. The 5. Application of Consolidation and the use of set-asides or creating a de
respondent believes that it is illogical Bundling to Overseas Contracts facto justification requirement for not
for an agency to set aside an overseas Comment: Two respondents applying FAR part 19 to overseas
contract for small business when it is recommend not revising the definition contracts. The respondent’s comments
prohibited from requiring small of ‘‘bundling’’ in FAR subpart 2.1, on the DoD FMS Program are outside
business subcontracting for those same Definitions, to make bundling the scope of this case.
contracts. The respondent points to applicable to a contract that will be 6. Negative Impacts of the Rule
Defense Federal Acquisition Regulation awarded and performed entirely outside a. Higher Prices
Supplement (DFARS) clause 252.225– of the United States. The respondents
7002(b), Qualifying Country Sources as believe that if the requirements of FAR Comment: Two respondents stated the
Subcontractors, as a further example 7.107–2, Consolidation; 7.107–3, changes in the proposed rule would
that complements the FAR’s prohibition Bundling; and 7.107–4, Substantial negatively impact the taxpayer by
on requiring a small business bundling, are mandatory for overseas driving up prices. One of the
subcontracting plan for overseas contracts, then: (a) Contracting officers respondents believed that foreign-
contract. would be required to justify not owned entities would almost always
• FAR part 25, Foreign Acquisition, is applying FAR part 19, and (b) this have better pricing for contracts
problematic to reconcile with the would cause overseas procurement performed overseas than U.S.-owned
proposed rule. Specifically, the actions involving bundling to be small businesses. The other respondent
respondent points to the requirements at extremely burdensome, time believed the changes would result in
FAR 25.802 and DFARS 225.7401 for consuming, and unlikely to occur. higher liabilities, ignorance of the
contracting officers to incorporate Therefore, contracting officers should market and environment, and less
relevant requirements of international not be required to follow consolidation control over the work.
agreements into solicitations and and bundling procedures for overseas Response: The Councils recognize
contracts, while the proposed rule is contracts. One of the respondents stated that overseas contracts are subject to
silent on how contracting officers are to that making bundling requirements considerations that are unique to the
account for international agreements in applicable to overseas acquisitions is overseas environment, as described in
making their discretionary set-aside problematic for two reasons. First, such the response to comments under
decisions. requirements can be inconsistent with category 3. In acknowledgment of these
• It is difficult for a small business to acquisition approaches and source considerations, this final rule retains the
comply with the requirements at FAR restrictions in international agreements, proposed rule text to make the use of
52.219–14, Limitations on foreign military sales (FMS) letters of FAR part 19 discretionary outside the
Subcontracting, and the ‘‘Balance of offer and acceptance, and other United States and its outlying areas to
Payments’’ regulations at DFARS 225.75 arrangements with foreign partners. allow contracting officers to use the
(e.g., World Trade Organization Second, agencies regularly use the most appropriate acquisition strategy.
Government Procurement Agreement) bundling strategy to make overseas When the contracting officer is
because each requirement specifies use requirements attractive to capable determining whether to set aside the
of certain sources. vendors to induce them to enter foreign procurement, fair market price, quality,
Response: With regard to the markets. and delivery are some of the factors
representation provisions, the Councils Response: The Small Business Act considered. Any new entrants into
concur that there is a conflict. does not exempt an agency from overseas markets, whether small or
Conforming edits have been made to justifying its consolidation and other than small business concerns, will
resolve the conflict at FAR 52.204– bundling of contract requirements based experience the same challenges:
8(c)(1)(xii) and (xiii) as well as FAR on location of award, location of service Competing with native businesses who
52.212–3(c). performance, or location of supply know the market, economic conditions,
With regard to FAR subpart 19.7, the delivery. The Councils note that the and applicable laws. However, each
Councils note that FAR 19.702(b) states FAR currently applies the consolidation time U.S. small businesses go through
that small business subcontracting plans requirements to overseas contracts, the solicitation process for overseas
are not required for contracts performed which is consistent with the Small contracts, they will gain experience and
entirely overseas, but it does not Business Act. As such, this rule is not knowledge. By allowing discretionary
prohibit use of set-asides for prime making any changes to the FAR use of small business procurement rules
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Federal Register/Vol. 87, No. 80/Tuesday, April 26, 2022/Rules and Regulations 24839
for overseas contracts, contracting encounter when performing in a foreign 7. Overseas Construction and Services
officers can develop appropriate country. By making set-aside decisions, Contracts
acquisition strategies to encourage U.S. the contracting officer would end up Comment: A few respondents noted
small businesses to participate and awarding contracts with higher rates of that overseas construction contracts are
become competitive. Small businesses default, delays, and claims than high risk and complex. The respondents
will win contracts when their proposal contracts awarded with unrestricted pointed to difficulties with supply chain
or bid demonstrates they can perform competition or including participation management, meeting specified staffing
the work at the lowest price or based on by host nation firms. Two respondents requirements, understanding local
tradeoffs among price and non-price commented that U.S. small businesses market conditions, and managing local
evaluation factors. are not suitable for overseas acquisitions subcontractors and material suppliers as
b. Additional Acquisition Lead Time and may end up suffering substantial examples of the complexities of
Comment: One respondent stated that losses by operating overseas. One of the overseas construction contracts. One of
contracting officers must already respondents believed that small the respondents stated that overseas
consider complex sourcing businesses, unlike large businesses, are construction and architect-engineer
requirements for overseas acquisitions, unlikely to have the capability to make (A/E) contracts are inherently local in
and adding small business goals and set- the necessary capital outlay, assign the nature and require detailed knowledge
asides to the process will add to necessary personnel, or offer local of host nation laws and requirements
acquisition lead time without adding partners sufficient expectation of future related to construction, e.g., building
corresponding value. The respondent work, to effectively prepare to perform standards, permitting and licensing
noted that nothing currently precludes in foreign countries, which may lead to requirements, environmental matters.
small businesses from competing for project delays and increased costs for As such, the respondents stated that
overseas acquisitions. which the contractor could be liable. overseas construction contracts are not
Response: The Councils recognize the The other respondent used the cost of suitable for small businesses. Two
complex sourcing requirements for Value Added Taxes (VAT) on materials respondents stated FAR part 19 should
overseas acquisitions. Discretionary use and services purchased in foreign exclude overseas construction and
of FAR part 19 for overseas countries, which the respondent service contracts. One of the
procurements will address an important calculates as averaging 20 percent, as an respondents proposed a revision at FAR
public policy objective of the example to highlight the unsuitability of 19.000(b) to exclude construction
Government to enhance the a small business for overseas contracts.
participation of small businesses in acquisitions. According to the Response: The Councils considered
overseas Federal acquisition as respondent, while some contractors are the recommended revision and decided
appropriate. exempt from paying VAT for work not to adopt it in the final rule since it
c. Improper Influence of Government performed on behalf of the U.S. does not reflect the best course of action
Personnel Government, the contractors must still for every overseas construction
pay the VAT at initial point of sale and acquisition. The Councils recognize
Comment: One respondent then wait 6 months to a year for a overseas construction and service
commented that allowing for refund of that VAT from the foreign contracts are subject to considerations
discretionary authority to set aside government. According to the that are unique to the overseas
overseas procurements may lead to respondent, this creates financial environment, as described in the
prospective offerors trying to influence hardship for small businesses. response to comments under category 3,
Government personnel in favor of set- Response: The Councils recognize for both small business concerns and
asides or full and open competition in overseas contracts are subject to other than small business concerns. In
corrupt ways, since there are likely to be considerations that are unique to the acknowledgment of these
very few U.S. small businesses capable overseas environment, as described in considerations, this final rule retains the
of fulfilling any complicated the response to comments under proposed rule text to make the use of
Government requirement in many category 3, for both small business FAR part 19 discretionary outside the
foreign countries. concerns and other than small business United States and its outlying areas.
Response: The FAR addresses concerns. In acknowledgment of these
improper business practices and considerations, this final rule retains the 8. Clarification Needed
personal conflicts of interest in proposed rule text to make the use of a. Change Not Clear
Government procurement at part 3, FAR part 19 discretionary outside the
which applies regardless of the location United States and its outlying areas to Comment: One respondent stated the
or situation. Part 3 states that allow contracting officers to utilize the proposed rule is not clear regarding
expenditure of public funds requires the most appropriate acquisition strategy. what is meant by ‘‘applying’’ FAR part
highest degree of public trust and an The Councils note that prospective 19 to overseas acquisitions. The
impeccable standard of conduct. contractors are required to meet certain respondent requested the rule state
Therefore, Government personnel are standards in order to be determined whether application referred to where
required to act in good faith when responsible and therefore, eligible for the contracting officer is located or
making acquisition decisions, which are award. If there are questions regarding where contract performance will take
subject to review as appropriate. a prospective small business place.
d. Contract Issues and Financial contractor’s responsibility, the matter Response: The final rule does not
Hardship would be referred to SBA in accordance change the way FAR part 19 applies in
Comment: One respondent believed with FAR subpart 19.6. Offerors are the United States and its outlying areas.
that it is impossible for a contracting expected to practice sound business The rule is written to provide maximum
officer to take into account all the judgment in deciding which overseas flexibility to contracting officers to
possible unforeseen impediments and opportunities to pursue and be aware of apply FAR part 19 outside the United
costs that a U.S. small business could potential financial risks. States and its outlying areas.
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