[Federal Register: November 19, 2009 (Volume 74, Number 222)]
[Rules and Regulations]
[Page 59914-59916]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19no09-9]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Part 208
RIN 0750-AG03
Defense Federal Acquisition Regulation Supplement; Competition
Requirements for Purchases From Federal Prison Industries (DFARS Case
2008-D015)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD has adopted as final, without change, an interim rule
[[Page 59915]]
amending the Defense Federal Acquisition Regulation Supplement (DFARS)
to implement section 827 of the National Defense Authorization Act for
Fiscal Year 2008. Section 827 requires the use of competitive
procedures in the acquisition of items for which Federal Prison
Industries has a significant market share.
DATES: Effective Date: November 19, 2009.
FOR FURTHER INFORMATION CONTACT: Ms. Cassandra Freeman, Defense
Acquisition Regulations System, OUSD (AT&L) DPAP (DARS), IMD 3D139,
3062 Defense Pentagon, Washington, DC 20301-3062. Telephone 703-602-
8383; facsimile 703-602-7887. Please cite DFARS Case 2008-D015.
SUPPLEMENTARY INFORMATION:
A. Background
Section 827 of the National Defense Authorization Act for Fiscal
Year 2008 (Pub. L. 110-181) amended 10 U.S.C. 2410n to require the use
of competitive procedures in the acquisition of items for which Federal
Prison Industries (FPI) has a significant market share. Section 827
provides that FPI shall be treated as having a significant share of the
market for a product if DoD, in consultation with the Office of Federal
Procurement Policy, determines that the FPI share of the DoD market for
the category of products including that product is greater than five
percent.
DoD published an interim rule at 73 FR 46816 on August 12, 2008, to
implement section 827 of Public Law 110-181. Five sources submitted
comments on the interim rule. The respondents expressed general support
for section 827 as a means of increasing competition and ensuring the
best value for the Government. A discussion of other comments received
from the respondents is provided below.
1. Comment: Although section 827 of Public Law 110-181 is limited
to products, DoD acquisition personnel should take the spirit of the
statute into account when procuring services.
DoD Response: In accordance with FAR 8.605(g), FPI is not a
mandatory source for services. Therefore, application of this DFARS
rule to the acquisition of services is unnecessary.
2. Comment: The 5 percent threshold should be applied to individual
items, rather than to entire Federal supply classes. FPI will be
supplying more than 50 percent of DoD's requirements for ballistic
helmets, even though it only supplies 3.8 percent of the overall
Federal supply class (FSC 4870--Armor, Personal) to which this item
belongs. A mechanism should be available to group products of a similar
type and characteristics into smaller sub-classes in order to comply
with the statutory intent.
DoD Response: Section 827 specifically provides for application of
its requirements to categories of products, rather than individual
items. As a practical matter, it would be difficult, if not impossible,
to determine up-to-date market share percentages at the individual item
level. Given the number of items acquired by the Federal Government,
Federal supply classes are the most practical groupings of items; sub-
classes would be too numerous for practical applicability. In
accordance with FAR 8.604 and 8.605, waiver and exception mechanisms
exist to permit acquisition of FPI Schedule items from other sources if
necessary.
3. Comment: DoD has not required FPI to compete on a level playing
field for those procurements where private industry is now allowed to
participate. Ordinarily, when U.S. Government agencies compete with
private sector entities for the provision of goods or services to other
Government agencies, such competitions are governed by OMB Circular A-
76. Among other things, OMB Circular A-76 requires that, when
considering the cost to the Government of an agency's submittal, the
purchasing agency must consider both the price charged and the amount
of any subsidy provided by the Government to the agency bidding for
such work. Now that FPI is being required to compete for the supply of
certain products, the provisions of OMB Circular A-76 should apply to
such competitions and, although private industry now has the right to
compete against FPI in certain areas, it will be at a significant
disadvantage unless and until the Government's subsidies to FPI are
considered when evaluating its pricing.
DoD Response: This comment pertains to acquisitions that employ
comparability determinations, rather than to those where competitive
procedures are used because of FPI's significant market share.
Therefore, the comment is outside the scope of this DFARS case.
However, a recent Government Accountability Office (GAO) decision (B-
400328) addressed this issue as follows:
``We find no statute or regulation * * * that specifically
requires an agency to conduct an A-76 study and competition, or
otherwise adjust its evaluation to account for any FPI competitive
advantages simply because FPI is a potential or actual competitor.
For example, neither 18 U.S.C. 4124 nor 10 U.S.C. 4210n refers to A-
76, and FAR Sec. 7.302(b)(2) does not establish a separate
requirement that agencies must meet when FPI is a potential or
actual competitor. Likewise, we are aware of no requirement that an
agency otherwise notify offerors of FPI's participation in a
procurement or to equalize FPI's alleged competitive advantages.
Further, while FPI transactions constitute intragovernmental
transfers (18 U.S.C. 4124(c)), and not contracts, there was no
solicitation, statutory, or regulatory provision that required the
agency to specifically evaluate the impact of this difference.''
4. Comment: DoD should conduct yearly or semi-yearly market studies
to determine FPI's current market share for a product.
DoD Response: As permitted by section 827(b)(2) of Public Law 110-
181, DoD will modify the list of products for which FPI has a
significant market share when new data indicate the need for
modification. The latest update was made on June 3, 2009, and is
available at http://www.acq.osd.mil/dpap/cpic/cp/specific_policy_
areas.html#federal_prison. DoD does not consider it necessary to
establish a specific schedule for updating the list.
5. Comment: Textiles and clothing should be added to the list of
items for which FPI has a significant market share, based on sales
information in FPI's 2007 Annual Report.
DoD Response: Textiles and clothing fall within the 8000 series of
Federal supply classes. The initial list, published on March 28, 2008,
was based on DoD contract data for fiscal year 2006, which indicated
that FPI's market share during that fiscal year did not exceed 5
percent for any of the Federal supply classes in the 8000 series. The
current list, published on June 3, 2009, is based on fiscal year 2008
contract data and contains three federal supply classes within the 8000
series: 8405, Men's Outerwear; 8415, Special Purpose Clothing; and
8420, Men's Underwear and Nightwear.
6. Comment: The web site referenced in the rule at 208.602-70(b)
does not take you directly to the list of Federal supply classes for
which FPI has a significant market share. Recommend referencing a site
that provides a better link to the list.
DoD Response: The web site referenced at 208.602-70(b) now provides
direct access to the list.
This rule was subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
B. Regulatory Flexibility Act
DoD has prepared a final regulatory flexibility analysis consistent
with 5 U.S.C. 604. A copy of the analysis may be obtained from the
point of contact
[[Page 59916]]
specified herein. The analysis is summarized as follows:
The objective of the rule is to provide for competition in the
acquisition of items for which FPI has a significant market share. The
legal basis for the rule is 10 U.S.C. 2410n, as amended by section 827
of the National Defense Authorization Act for Fiscal Year 2008 (Pub. L.
110-181). The rule is expected to benefit small business concerns that
offer items for which FPI has a significant market share, by permitting
those concerns to compete for additional DoD contract awards. The rule
also could adversely impact small business concerns that provide
supplies and services to FPI relative to the affected items. There are
no practical alternatives that would accomplish the objectives of
section 827 of Public Law 110-181.
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 Part 208
Government procurement.
Amy G. Williams,
Editor, Defense Acquisition Regulations System.
0
Accordingly, the interim rule amending 48 CFR part 208, which was
published at 73 FR 46816 on August 12, 2008, is adopted as a final rule
without change.
[FR Doc. E9-27848 Filed 11-18-09; 8:45 am]
BILLING CODE 5001-08-P