Proposed Changes to FAR to Clarify Requirements for 8(a) Sole Source Contract Justification Over $22 Million

November 16, 2016

By Megan C. Connor

On November 15, 2016, the DOD, GSA, and NASA issued a proposed rule to amend the FAR to clarify guidance for justifications of sole source 8(a) contract awards exceeding $22 million. This proposed rule responds to recommendations made by the Government Accountability Office (“GAO”) in its report, “Slow Start to Implementation of Justifications for 8(a) Sole-Source Contracts” (GAO-13-118).

The GAO report focuses on the revisions made to the FAR to implement section 811 of the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111–84). Section 811 established justification requirements for 8(a) sole source contracts over $20 million—subsequently updated to $22 million—and required that the FAR be amended within 180 days after enactment.

However, as the GAO observed, the FAR Council missed this deadline by almost 325 days. The final rule promulgated by the FAR Council lacks clarity on certain issues, according to the GAO, and the GAO recommended that the FAR be amended to assist agencies in applying the justification requirement consistently.  Therefore, the proposed rule proposes amendments to the FAR to incorporate these clarifications.

First, the FAR will be amended to make clear that the justification requirement only applies to 8(a) sole source awards exceeding $22 million. Second, the FAR Council proposes amending the FAR to state that if the estimated contract value at the time of submission of the offering letter to the SBA exceeds $22 million, the procuring agency must include the approved justification with the offering letter. If the estimated contract value at the time of submission of the offering letter is less than or equal to $22 million, but the contract value at time of award exceeds $22 million, the procuring agency must send the approved justification to the SBA prior to contract award.

Lastly, if an 8(a) sole source contract is modified and such modification is out of scope, as determined by the contracting officer, then the procuring agency will need to go through the appropriate procurement process for a new contract, including complying with the justification requirement if the value exceeds $22 million.

Comments to the proposed rule are due on, or before, January 17, 2017.

About the Author: Megan Connor, an associate with PilieroMazza, focuses her practice in the areas of government contracts, small business administration programs, business and corporate law, and litigation. She may be reached at mconnor@pilieromazza.com

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