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DoD is amending the Defense Federal Acquisition Regulation Supplement to implement the Small Business Administration's (SBA) final rule (see 81 FR 34243) for section 1651 of the National Defense Authorization Act for Fiscal Year (FY) 2013. Section 1651 revised the nonmanufacturer rule that applies to small business resellers, including participants in the Small Business Administration's 8(a) Business Development Program.

Statement of Need:

This rule will amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement the Small Business Administration’s final rule (see 81 FR 34243) for section 1651 of the National Defense Authorization Act for Fiscal Year 2013. Section 1651 revised the nonmanufacturer rule that applies to small business resellers, including participants in the Small Business Administration’s 8(a) Business Development Program.

Summary of the Legal Basis:

This regulation is issued under the authorities of section 1651 of the National Defense Authorization Act for Fiscal Year 2013 and 41 U.S.C. 1303.

Alternatives:

DoD considered the following alternatives: (1) taking no action; (2) amending the DFARS to implement the Small Business Administration’s final rule implementing section 1651. If DoD took no action, the DFARS would continue to implement an outdated version of the nonmanufacturer rule. Therefore, DoD is amending the DFARS.

Anticipated Costs and Benefits:

The DFARS requires 8(a) participants that offer end items they did not manufacture or produce (i.e., nonmanufacturers) to offer end items manufactured or produced by small business concerns in the United States or its outlying areas. The DFARS provides an exemption from the nonmanufacturer rule for contracts valued at or below $25,000 and awarded under simplified acquisition procedures. For these contracts, an 8(a) participant could offer end items manufactured or produced by any domestic firm. However, SBA’s final rule applied the nonmanufacturer rule to 8(a) contracts at any dollar value. Therefore this rule will remove that exemption from the DFARS, which means the nonmanufacturer rule will apply to 8(a) contracts at any dollar value, and 8(a) participants that are nonmanufacturers will be required to offer end items manufactured, processed, or produced by small business concerns in the United States or its outlying areas. To estimate the number of 8(a) participants that may be impacted by this change, DoD obtained data from the Federal Procurement Data System on DoD contracts, for products, awarded to 8(a) participants under the 8(a) Program. Contracts for services, including construction, were excluded because the nonmanufacturer rule only applies to products, not services. In FY 2016 through FY 2018, DoD awarded contracts for products to an average of 285 8(a) participants each year. An average of 90 of those 8(a) participants per year were awarded approximately two contracts each that were valued at or below $25,000, using simplified acquisition procedures. Therefore, DoD estimates that approximately 90 participants may be impacted by this rule. Due to the small number of 8(a) participants that may be impacted, it is estimated that the cost associated with this rule will be de minimis.

Risks: