Government Contracts Monitor

Proposed Change to FAR Will Clarify Requirements for Setting Aside R&D Contracts for Small Businesses

August 31, 2012

DoD, GSA, and NASA issued a proposed rule to amend the Federal Acquisition Regulation (FAR) to clarify that contracting officers should set aside research and development (R&D) contracts for small businesses when the market research indicates there are small businesses capable of providing the best scientific and technological approaches.  Small Business Set Asides for Research and Development Contracts, 77 Fed. Reg. 47797 (Aug. 10, 2012) (to be codified at 48 C.F.R. pts. 19 and 35). 

The proposed rule will amend Subpart 19.5 of the FAR, which governs set-asides for small businesses. As it is currently written, the last sentence FAR 19.502-2(b)(2) provides, “In making R&D small business set-asides, there must also be a reasonable expectation of obtaining from small businesses the best scientific and technological sources consistent with the demands of the proposed acquisition for the best mix of cost, performances, and schedules.”  The Small Business Administration (SBA) requested this clarification because it believes that the quoted portion of FAR 19.502-2(b)(2) has been interpreted as an additional and unique condition that must be met before a contracting officer can set aside an R&D contract for small businesses.

Under the proposed change, the additional statement “consistent with the demands of the proposed acquisition for the best mix of cost, performances, and schedules” will be removed and FAR 19.502-2(b) will read:

(b) Before setting aside an acquisition under this paragraph, refer to 19.203(c).  The contracting officer shall set aside any acquisition over the simplified acquisition threshold for small business participation where there is a reasonable expectation—

(1) That offers will be obtained from at least two responsible small business concerns offering the products of different small business concerns (see paragraph (c) of this section);

(2) That award will be made at fair market prices.  Total small business set-asides shall not be made unless such a reasonable expectation exists (see 19.502-3 as to partial set-asides).  Although past acquisition history of an item or similar items is always important, it is not the only factor to be considered in determining whether a reasonable expectation exists; and

(3) When considering research and development small business set-asides, as a result of the market research performed in accordance with part 10, that there are small businesses capable of providing the best scientific and technological approaches. 

This clarification is intended to remove the potential barrier for small businesses previously noted by the SBA and establish that the market research requirement applies to all forms of small business set-aside contracts.  Interested parties can submit written comments on this proposed rule on or before October 9, 2012.  See the above link to the Federal Register notice for more information about submitting comments. 

 

Katie Calogero is the attorney responsible for the content of this article.