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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Rules and Regulations
Business Act which involve domestic sources of supply, such as the Buy American Act or the Trade Agreements Act. Class deviations issued by individual agencies do not impact the text of this rule. In many instances the definition of subcontractor used in the FAR varies depending on which statutes or FAR regulations apply. It is not possible to use the same definition across all the parts of the FAR. Agency regulations and guidance must be consistent with the FAR unless an authorized deviation see FAR 1.404 is in place.
III. Applicability to Contracts at or Below the Simplified Acquisition Threshold and for Commercial Items, Including Commercially Available Offthe-Shelf Items The Federal Acquisition Regulatory FAR Council has made the following determinations with respect to the rules application of section 1651 of the NDAA
for FY 2013 to contracts at or below the simplified acquisition threshold SAT
and for the acquisition of commercial items, including commercially available off-the-shelf COTS items. Discussion of these determinations is set forth below.

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A. Applicability to Contracts at or Below the SAT
Pursuant to 41 U.S.C. 1905, a provision of law is not applicable to acquisitions at or below the SAT unless the law i contains criminal or civil penalties; ii specifically refers to 41
U.S.C. 1905 and states that the law applies to acquisitions at or below the SAT; or iii the FAR Council makes a written determination that it is not in the best interest of the Federal Government to exempt contracts or subcontracts at or below the SAT. If none of these conditions are met, the FAR is required to include the statutory requirements on a list of provisions of law that are inapplicable to acquisitions at or below the SAT.
The purpose of this rule is to implement section 1651 of the NDAA
for FY 2013. Section 1651 provides revised limitations on subcontracting that apply across all small business programs. It also requires that the limitations on subcontracting be determined based on the percentage of the overall award amount that a prime contractor spends on its subcontractors.
In addition, section 1651 provides that the percentage of the award amount that the prime contractor spends on subcontractors who are similarly situated entities is not considered subcontracted for purposes of the
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limitations on subcontracting in section 1651.
These statutory requirements are reflected in SBAs final rule published in the Federal Register at 81 FR 34243, on May 31, 2016, which did not exempt acquisitions at or below the SAT that are set aside for, or awarded on a solesource basis to, 8a program participants, HUBZone, service-disabled veteran-owned, women-owned, or economically disadvantaged womenowned small business concerns; or that use the HUBZone price evaluation preference to award to a HUBZone small business concern. SBAs final rule did exempt acquisitions at or below the SAT
that are set aside for small businesses.
The law is silent on the applicability of these requirements to acquisitions at or below the SAT and does not independently provide for criminal or civil penalties; nor does it include terms making express reference to 41 U.S.C.
1905 and its application to acquisitions at or below the SAT. Therefore, it does not apply to acquisitions at or below the SAT unless the FAR Council makes a written determination as provided at 41
U.S.C. 1905.
Application of the law to acquisitions at or below the SAT will maximize the positive impact set-aside and solesource contracts provide for small businesses in the socioeconomic programs e.g., HUBZone, 8a, servicedisabled veteran-owned, and womenowned small business programs by ensuring these benefits extend to the many contracts valued below the SAT.
According to the Federal Procurement Data System, an average of 283,374
contracts per year resulted from FAR
part 19 set-asides and sole-source awards at or below the simplified acquisition threshold during fiscal years 20162018. Failure to apply section 1651 below the SAT would exclude a significant number of acquisitions, contrary to the goal of promoting opportunities for small businesses in the Federal marketplace to the maximum extent possible. Further, the FAR
clauses imposing limitations on subcontracting and the nonmanufacturer rule are currently prescribed for use in solicitations and contracts at or below the SAT that are set aside for, or awarded on a solesource basis to, 8a program participants, HUBZone, service-disabled veteran-owned, women-owned, or economically disadvantaged womenowned small business concerns; or that use the HUBZone price evaluation preference to award to a HUBZone small business concern. Making section 1651
applicable to acquisitions at or below the SAT would allow the amended
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versions of those clauses, reflecting the requirements of section 1651, to be incorporated into such solicitations and contracts. Exclusion of the amended clauses from those documents would create confusion among contractors and the Federal contracting workforce.
Finally, under the FAR clauses currently incorporated into those documents, contractors are already required to comply with the limitations on subcontracting and the nonmanufacturer rule. The new requirements will result in substantial savings for contractors.
For these reasons, it is in the best interest of the Federal Government to apply the requirements of the rule to acquisitions at or below the SAT.
B. Applicability to Contracts for the Acquisition of Commercial Items Pursuant to 41 U.S.C. 1906, acquisitions of commercial items other than acquisitions of COTS items, which are addressed in 41 U.S.C. 1907 are exempt from a provision of law unless the law i contains criminal or civil penalties; ii specifically refers to 41
U.S.C. 1906 and states that the law applies to acquisitions of commercial items; or iii the FAR Council makes a written determination and finding that it would not be in the best interest of the Federal Government to exempt contracts for the procurement of commercial items from the provision of law. If none of these conditions are met, the FAR is required to include the statutory requirements on a list of provisions of law that are inapplicable to acquisitions of commercial items.
The purpose of this rule is to implement section 1651 of the NDAA
for FY 2013. Section 1651 provides revised limitations on subcontracting that apply across all small business programs. It also requires that the limitations on subcontracting be determined based on the percentage of the overall award amount that a prime contractor spends on its subcontractors.
In addition, section 1651 provides that the percentage of the award amount that the prime contractor spends on subcontractors who are similarly situated entities is not considered subcontracted for purposes of the limitations on subcontracting in section 1651.
These statutory requirements are reflected in SBAs final rule published in the Federal Register at 81 FR 34243, on May 31, 2016, which did not exempt acquisitions of commercial items.
The law is silent on the applicability of these requirements to acquisitions of commercial items and does not independently provide for criminal or
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