[Federal Register: June 6, 2000 (Volume 65, Number 109)]
[Rules and Regulations]               
[Page 36023-36025]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]





48 CFR Parts 8 and 38

[FAC 97-18; FAR Case 1998-609 (98-609); Item V]
RIN 9000-AI48

Federal Acquisition Regulation; Federal Supply Schedules Small 
Business Opportunities

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.


SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to enhance the 
participation of small business concerns under the Federal Supply 
Schedules (FSS) program.

DATES: Effective Date: August 7, 2000.
    Applicability Date: The FAR, as amended by this rule, is applicable 
to solicitations issued on or after August 7, 2000.

Building, Washington, DC, 20405, (202) 501-4755, for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ms. Linda Nelson, Procurement Analyst, at (202) 501-
1900. Please cite FAC 97-18, FAR case 1998-609.


A. Background

    The rule--
    <bullet> Amends FAR subpart 8.4 to encourage ordering offices to 
consider the availability of small business concerns under the schedule 
and encourages ordering offices to consider small businesses when 
conducting evaluations before placing an order;
    <bullet> Amends FAR Part 38 to reaffirm that the General Services 
Administration and agencies delegated the authority to establish a 
Federal Supply Schedule must comply with all statutory and regulatory 
requirements before a solicitation is issued; and
    <bullet> Revises the FSS guidance in accordance with the plain 
language guidelines in a White House memorandum, Plain Language in 
Government Writing, dated June 1, 1998.
    DoD, GSA, and NASA published a proposed rule in the Federal 
Register on September 14, 1999 (64 FR 49948). Thirty-two respondents 
submitted public comments. We considered all comments and converted the 
proposed rule to a final rule with minor changes.
    This rule was not subject to Office of Management and Budget review 
under Section 6(b) of Executive Order 12866, Regulatory Planning and 
Review, dated September 30, 1993. This rule is not a major rule under 5 
U.S.C. 804.

B. Regulatory Flexibility Act

    The Councils prepared a Final Regulatory Flexibility Analysis 
(FRFA) consistent with 5 U.S.C. 604. Because this rule may impact small 
businesses, we are providing the FRFA in its entirety as follows:

    This Final Regulatory Flexibility Analysis has been prepared 
consistent with the criteria stated in 5 U.S.C. 604.
    1. Statement of need for, and objectives of, the rule.
    The purpose of this rule is to promote the growth of Federal 
procurement sales opportunities for small business concerns under 
the Federal Supply Schedules. The rule amends FAR Subparts 8.4 and 
38.1 to encourage ordering offices to consider small business 
concerns, if available, when conducting evaluations before placing 
an order. The rule also recognizes the recent change made by the 
Small Business Administration requiring inclusion of Federal Supply 
Schedule orders in agencies' small business goals. Effective fiscal 
year 1999, agencies must include the dollar value of orders expected 
to be placed against the General Services Administration's (GSA) 
Federal Supply Service (FSS) Schedules and report accomplishments 
against those goals.
    2. Summary of significant issues raised by the public comments 
in response to the Initial Regulatory Flexibility Analysis (IRFA), a 
summary of the assessment of the agency of such issues, and a 
statement of any changes made in the proposed rule as a result of 
such comments.
    We received one public comment that specifically addressed the 
Initial Regulatory Flexibility Analysis. The public comment 
expressed concerns that the data presented

[[Page 36024]]

did not adequately detail the impact the rule will have on small 
business concerns. Specifically, the respondent stated that although 
well represented in the Federal Supply Schedule program, small 
Federal Supply Schedule contractors cannot adequately compete with 
large Federal Supply Schedule contractors. In response, it is 
important to note that while sales under the program have increased 
to large businesses, sales to small businesses have increased as 
well. The Federal Supply Schedule program recognizes that in certain 
instances small business may not have the capability to meet some 
requirements of Federal agencies. However, the program permits 
schedule contractors to team with other schedule contractors to 
provide a solution to meet agency needs. A team can be any 
combination of large and small businesses. Therefore, small 
businesses can compete against large businesses by forming teams 
that can provide supplies and services tailored to address agency 
needs. The Federal Supply Schedules program is one of the most 
successful Government procurement programs; a program where small 
businesses can experience continuous growth.
    We did not change the rule as a result of the comment. The rule 
encourages ordering offices to consider the availability of small 
business concerns under the schedule when conducting evaluations 
before placing an order. The preference for awarding an order to a 
small business ``when two or more items at the same delivered 
price'' will continue to apply. This final rule is intended to be 
beneficial by expanding small business consideration under Federal 
Supply Schedule orders.
    3. Description of, and an estimate of the number of, small 
entities to which the rule will apply or an explanation of why no 
such estimate is available.
    This rule will apply to all small business concerns under the 
Federal Supply Schedules program. Although the rule pertains to 
internal Government procedures, it is intended to increase the 
number of orders for supplies and services placed by the Government 
with small business concerns. Based on ``Small Business 'Vital 
Statistics''' found on SBA's homepage (www.sba.gov/aboutsba/), SBA 
estimated that there are approximately 23 million small businesses 
in the United States that provide 47 percent of all sales in the 
country. Clearly, not all of the businesses that are considered 
small seek to participate in the Federal Supply Schedules program. 
However, according to fiscal year 1999 statistical data maintained 
by GSA's Federal Supply Service, small business concerns hold 5,705 
national scope schedule contracts out of a total population of 7,431 
national scope schedule contracts. Thus, approximately 77 percent of 
the schedule contractors are small business concerns. In fiscal year 
1999, small business schedule contractors received approximately 
$3.2 billion or 31 percent of total schedule sales. This exceeds the 
current Governmentwide small business goal. During fiscal year 1998, 
4,900 small businesses held contracts out of a total of 7,000 
national scope schedule contracts. Small business sales in 1998 were 
$2.5 billion or 33 percent of total schedule sales. Between fiscal 
year 1998 and fiscal year 1999, the number of small businesses 
holding FSS contracts increased 6 percent and small business sales 
increased 28 percent. The increased sales to small businesses total 
almost \3/4\ of a billion dollars. SBA reports that in 1998 the 
small business share of all Federal prime contract dollars dropped 
to 20.6 percent. Clearly, small businesses are receiving a greater 
market share under the schedules.
    The General Services Administration (GSA) has radically 
restructured the schedules program over the past 4 years. GSA has 
streamlined both contracting and ordering processes for industry and 
for Government users of the program. The changes made to the program 
over the last 4 years provide small business vendors easy access to 
the Federal community and provide users with streamlined procedures. 
The pro-cedures give small business contractors the opportunity to 
fairly compete within the broader universe of schedule contractors. 
These changes ensure that ordering activities have the broad 
discretion, and effective and flexible business solutions, to meet 
agency requirements. The rule also supports continued increases in 
small business sales.
    4. Description of the projected reporting, recordkeeping, and 
other compliance requirements of the rule, including an estimate of 
the classes of small entities which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report or record.
    There are no projected reporting, recordkeeping, or other 
compliance requirements.
    5. Description of the steps the agency has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of applicable statutes, including a statement of 
the factual, policy, and legal reasons for selecting the alternative 
adopted in the final rule and why each one of the other significant 
alternatives to the rule considered by the agency which affect the 
impact on small entities was rejected.
    We considered various alternative approaches, as well as the 
adverse and beneficial impacts upon large businesses, small 
business, and the Government. One alternative that we considered was 
to apply small business set-asides to the FSS ordering process, 
including mandatory application of the rule of two for orders at 
certain dollar thresholds. Another alternative we considered was to 
allow agencies, at their discretion, to limit consideration of 
schedule orders to small business concerns. A third alternative we 
considered was to set-aside a significant number of Federal Supply 
Schedules for small businesses by applying the rule of two. However, 
contracting officers under the FSS program already issue 
solicitations that comply with the re-quirements of FAR Parts 5, 6, 
and 19. Determinations regarding small business set-asides are made 
during acquisition planning and solicitation preparation. All 
schedule solicitations must be reviewed by the Small Business 
Administration Procurement Center Representative (PCR) before 
issuance. For the reasons provided, we considered these alternatives 
inappropriate for adoption.
    We determined that the alternatives offered by respondents to 
the proposed rule would be detrimental to the effectiveness and 
flexibility of the schedules program. We are converting the proposed 
rule to a final rule because it enhances the participation of small 
business in the Federal Supply Schedules program and provides a 
mechanism to increase the sales to small business under the FSS 
    The rule encourages ordering offices to consider the 
availability of small business concerns under the schedule and when 
conducting evaluations before placing an order. We expect sales to 
small businesses under the Federal Supply Schedules to increase 
because agencies are encouraged to include small business when 
conducting evaluations for an order and because agencies may credit 
small business schedule orders towards agency small business goals. 
The rule also ensures that all sectors of the economy may 
participate in the Federal Supply Schedules program. After we 
publish the final rule, we will track sales to verify if this rule 
has a positive impact on small business.

    The FAR Secretariat has submitted a copy of the FRFA to the 
Chief Counsel for Advocacy of the Small Business Administration.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes 
to the FAR do not impose 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 8 and 38

    Government procurement.

    Dated: May 26, 2000.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.
    Therefore, DoD, GSA, and NASA amend 48 CFR parts 8 and 38 as set 
forth below:

    1. The authority citation for 48 CFR parts 8 and 38 continues to 
read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).


    2. Revise section 8.402 to read as follows:

8.402  Applicability.

    Procedures in this subpart apply to orders placed against Federal 
Supply Schedules. Occasionally, GSA may establish special ordering 
procedures. The affected Federal Supply Schedules will outline these 
    3. In section 8.404--
    a. Revise paragraph (a);

[[Page 36025]]

    b. Remove from paragraph (b)(1) ``Ordering Offices can place'' and 
add ``Place'' in its place;
    c. Revise the introductory text of paragraph (b)(2);
    d. Revise paragraph (b)(2)(i);
    e. Remove from the last sentence of the introductory text of 
paragraph (b)(3) ``, ordering offices shall'';
    f. Revise paragraph (b)(3)(i);
    g. Revise the first sentence in paragraph (b)(3)(iii); and
    h. Revise paragraphs (b)(4), (b)(5), and (b)(6) to read as follows:

8.404  Using schedules.

    (a) General. Parts 13 and 19 do not apply to orders placed against 
Federal Supply Schedules, except for the provision at 13.303-2(c)(3). 
Orders placed against a Multiple Award Schedule (MAS), using the 
procedures in this subpart, are considered to be issued using full and 
open competition (see 6.102(d)(3)). Therefore, ordering offices need 
not seek further competition, synopsize the requirement, make a 
separate determination of fair and reasonable pricing, or consider 
small business programs. GSA has already determined the prices of items 
under schedule contracts to be fair and reasonable. By placing an order 
against a schedule using the procedures in this section, the ordering 
office has concluded that the order represents the best value and 
results in the lowest overall cost alternative (considering price, 
special features, administrative costs, etc.) to meet the Government's 
    (b) * * *
    (2) Orders exceeding the micro-purchase threshold but not exceeding 
the maximum order threshold. Place orders with the schedule contractor 
that can provide the supply or service that represents the best value. 
Before placing an order, consider reasonably available information 
about the supply or service offered under MAS contracts by using the 
``GSA Advantage!'' on-line shopping service, or by reviewing the 
catalogs or pricelists of at least three schedule contractors (see 
8.404(b)(6)). Select the delivery and other options available under the 
schedule that meet the agency's needs. When selecting the supply or 
service representing the best value, the ordering office may consider--
    (i) Special features of the supply or service required for 
effective program performance;
* * * * *
    (3) * * *
    (i) Review additional schedule contractors' catalogs or pricelists, 
or use the ``GSA Advantage!'' on-line shopping service;
* * * * *
    (iii) After seeking price reductions, place the order with the 
schedule contractor that provides the best value and results in the 
lowest overall cost alternative (see 8.404(a)). * * *
    (4) Blanket purchase agreements (BPAs). Agencies may establish BPAs 
(see 13.303-2(c)(3)) when following the ordering procedures in this 
subpart. All schedule contracts contain BPA provisions. Ordering 
offices may use BPAs to establish accounts with contractors to fill 
recurring requirements. BPAs should address ordering frequency, 
invoicing, discounts, and delivery locations and times.
    (5) Price reductions. In addition to the circumstances in paragraph 
(b)(3) of this section, there may be other reasons to request a price 
reduction. For example, seek a price reduction when the supply or 
service is available elsewhere at a lower price or when establishing a 
BPA to fill recurring requirements. The potential volume of orders 
under BPAs, regardless of the size of the individual order, offer the 
opportunity to secure greater discounts. Schedule contractors are not 
required to pass on to all schedule users a price reduction extended 
only to an individual agency for a specific order.
    (6) Small business. When conducting evaluations and before placing 
an order, consider including, if available, one or more small, women-
owned small, and/or small disadvantaged business schedule 
contractor(s). Orders placed against the schedules may be credited 
toward the ordering agency's small business goals. For orders exceeding 
the micro-purchase threshold, ordering offices should give preference 
to the items of small business concerns when two or more items at the 
same delivered price will satisfy the requirement.
* * * * *


    4. Revise section 38.101 to read as follows:

38.101  General.

    (a) The Federal Supply Schedule program, pursuant to 41 U.S.C. 
259(b)(3)(A), provides Federal agencies with a simplified process of 
acquiring commonly used supplies and services in varying quantities 
while obtaining volume discounts. Indefinite-delivery contracts 
(including requirements contracts) are awarded using competitive 
procedures to commercial firms. The firms provide supplies and services 
at stated prices for given periods of time, for delivery within a 
stated geographic area such as the 48 contiguous states, the District 
of Columbia, Alaska, Hawaii, and overseas. The schedule contracting 
office issues Federal Supply Schedules that contain information needed 
for placing orders.
    (b) Each schedule identifies agencies that are required to use the 
contracts as primary sources of supply.
    (c) Federal agencies not identified in the schedules as mandatory 
users may issue orders under the schedules. Contractors are encouraged 
to accept the orders.
    (d) Although GSA awards most Federal Supply Schedule contracts, it 
may authorize other agencies to award schedule contracts and publish 
schedules. For example, the Department of Veterans Affairs awards 
schedule contracts for certain medical and nonperishable subsistence 
    (e) When establishing Federal Supply Schedules, GSA, or an agency 
delegated that authority, is responsible for complying with all 
applicable statutory and regulatory requirements (e.g., Parts 5, 6, and 
19). The requirements of Parts 5, 6, and 19 apply at the acquisition 
planning stage prior to issuing the schedule solicitation and do not 
apply to orders and BPAs placed under resulting schedule contracts (see 

[FR Doc. 00-13821 Filed 6-1-00; 4:00 pm]