Agencies must justify large contracts to 8(a) firms

The FAR Councils are adding a new set of controls to contracts worth more than $20 million going to vendors in the socioeconomic program. This interim rule is i...

By Jason Miller
Executive Editor
Federal News Radio

Starting today, agencies will have to justify the award of contracts worth more than $20 million to companies in the 8(a) business development program.

The Federal Acquisition Regulation Councils are adding new controls to the 8(a) program specifically designed to reduce the likelihood of small companies passing through most of the work to large vendors. Under the 8(a) program, companies owned by Alaskan Native Corporations, Native American firms or others that fall into a similar category, must do at least 51 percent of the work under the contract.

The FAR Councils published the new interim rule in Wednesday’s Federal Register.

“That justification and approval does not mean there is a cap on sole source contracts,” said Dan Gordon, administrator in the Office of Federal Procurement Policy, Tuesday at the IRMCO conference in Washington. “There can continue to be large sole source contracts to the 8(a)s, but if there is one, there needs to be a justification and approval.”

Congress required the change the FAR in the 2010 Defense Authorization bill. It comes after the Small Business Administration, which runs the 8(a) program, suspended GTSI last October from obtaining any new work after allegations that an Alaskan Native Corporation acted as a front and passed through a majority of the work to the company. SBA eventually reinstated GTSI after several senior officials resigned.

Previously, agencies didn’t have to justify any size awards to 8(a) firms owned by Alaskan Native or Native American tribes.

Gordon said this issue is challenging for the administration because they want competition, but also want to support these small business socioeconomic programs. He said too many times the benefits of the contracts are not getting back to the communities and the administration wants to ensure that they Native American or Alaskan native communities are reaping the benefits of being a government contractor.

“We need to take action so that people understand the benefits of these programs are going to go to the intended communities and not be siphoned off to others,” Gordon said.

Along with this new rule, the FAR Councils also published an interim rule establishing a new order of priority of set-aside programs, placing 8(a), Historically Underutilized Business Zone (HUBZone) and service disabled veteran owned small businesses on the same level.

In the past, the 8(a) program always had the top priority. But Congress in the Small Business Jobs Act of 2010 wanted to eliminate any confusion over which program contracting officers should look to first.

“This clarifies that contracting officers can exercise discretion when determining whether a requirement will be restricted to small business concerns under the 8(a), HUBZone or SDVOSB programs,” the interim rule states. “This interim rule is intended to address the recent statutory clarification and make clear that there is no order of precedence among the 8(a), HUBZone, or SDVOSB programs. However, if a requirement has been accepted by SBA under the 8(a) Program, it must remain in the 8(a) program unless SBA agrees to its release.”

The notice states another FAR rule that became effective Feb. 4 gives women-owned firms equal status at these three other programs as well.

The interim rule also states that contracting officers must consider these three programs before setting the contract aside for any small business.

Additionally, the FAR Councils issued an interim rule setting up new rules around the use of multiple-award contracts, including the General Services Administration’s Federal Supply Schedule contracts.

Agencies will have to send a notice to other qualified vendors of their intention to award a contract for a specific product or service, and in some cases publish that notice online at

Gordon said while the government has fixed many of the problems that rose around governmentwide acquisition contracts in the 2000s, agencies still are struggling with multiple award contracts or blanket purchase agreements.

“I think it’s a problem we have so little visibility into BPAs,” he said. “BPAs play out in a very odd way. The FSS is a governmentwide vehicle, but we’ve somehow managed to start with a governmentwide vehicle and turn it in to agency-specific vehicles by having all these BPAs under the schedule vehicles. It seems like we are losing the advantage of a governmentwide approach with agency-specific BPAs.”

Gordon said agencies should keep in mind an order of priority when using multiple award contracts:

  • Governmentwide contracts
  • Agencywide or enterprisewide contract
  • Bureau or component specific contracts.
  • Schedule vehicle
  • Full and open competition

“When I say preference, it’s going to be a soft preference because you should only use the vehicle if it meets your needs,” he said. “You don’t want to do a full-and-open competition if it’s not necessary.”

The fourth interim rule from the FAR Council provides guidance on the proper use and management of other than firm-fixed-price contracts, such as cost-reimbursement, time-and-materials and labor-hours.

“The Councils consider that greater accountability for the management and oversight of all contracts, especially other than firm-fixed-price contracts, can be gained and improved by requiring that properly trained contracting officer representative or contracting officer’s technical representatives,” the interim rule states. “Acquisition personnel shall document the acquisition plan with findings that detail the particular facts and circumstances and associated reasoning essential to support the contract type selection. The contracting officer shall ensure that requirements and technical personnel provide the necessary documentation to support the contract type selection.”

Gordon said the administration never said to only use firm-fixed price contracts. But for too long agencies never re-examined existing contracts to determine if a new type of contract was appropriate.

“What we’ve said is fixed price usually represents a lower risk for the federal government so fixed price is usually preferable to cost-reimbursement which is usually preferable to time-and-materials,” he said. “We don’t want our agencies to insist on fixed price without thinking.”

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