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Federal Register / Vol. 86, No. 152 / Wednesday, August 11, 2021 / Rules and Regulations
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civil penalties; nor does it include terms making express reference to 41 U.S.C.
1906 and its application to acquisitions of commercial items. Therefore, it does not apply to acquisitions of commercial items unless the FAR Council makes a written determination as provided at 41
U.S.C. 1906.
The law furthers the Administrations goal of simplifying the acquisition process and facilitating easier access to the Federal marketplace, in this case for small business contractors who make up an important component of the Governments industrial base. It advances the interests of small business prime contractors by making it easier to comply with the limitations on subcontracting, potentially allowing those contractors to compete for larger contracts than they could in the past.
The law also advances the interests of small business subcontractors by encouraging small business prime contractors to award more subcontracts to similarly situated small businesses.
Exclusion of a large segment of Federal contracting, such as acquisitions for commercial items, would limit the full implementation of these objectives.
Further, the primary FAR clauses implementing the limitations on subcontracting and the nonmanufacturer rule are currently prescribed for use in solicitations and contracts for commercial items. Making section 1651 applicable to acquisitions for commercial items would allow the amended versions of those clauses, reflecting the requirements of section 1651, to be included in such solicitations and contracts. Exclusion of those amended clauses from contracts for commercial items would create confusion among contractors and the Federal contracting workforce. Finally, the burden on contractors would not increase significantly if the requirements of section 1651 were applied to acquisitions for commercial items. Under the FAR clauses currently incorporated into contracts for commercial items, 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 the acquisition of commercial items.
C. Applicability to Contracts for the Acquisition of COTS Items Pursuant to 41 U.S.C. 1907, acquisitions of COTS items will be exempt from a provision of law unless the law i contains criminal or civil
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penalties; ii specifically refers to 41
U.S.C. 1907 and states that the law applies to acquisitions of COTS items;
iii concerns authorities or responsibilities under the Small Business Act 15 U.S.C. 644 or bid protest procedures developed under the authority of 31 U.S.C. 3551 et seq., 10
U.S.C. 2305e and f, or 41 U.S.C. 3706
and 3707; or iv the Administrator for Federal Procurement Policy makes a written determination and finding that would not be in the best interest of the Federal Government to exempt contracts for the procurement of COTS 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 COTS
items.
The purpose of this rule is to implement section 1651 of the NDAA
for FY 2013 codified at 15 U.S.C. 657s.
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 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 COTS items.
The law is silent on the applicability of these requirements to acquisitions of COTS items and does not independently provide for criminal or civil penalties;
nor does it concern bid protest procedures developed under the authority of the relevant statutes.
Therefore, it does not apply to acquisitions of COTS items unless the Administrator for Federal Procurement Policy makes a written determination as provided at 41 U.S.C. 1907.
The law furthers the Administrations goal of simplifying the acquisition process and facilitating easier access to the Federal marketplace, in this case for small business contractors who make up an important component of the Governments industrial base. It advances the interests of small business prime contractors by making it easier to comply with the limitations on subcontracting, potentially allowing those contractors to compete for larger contracts than they could in the past.

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The law also advances the interests of small business subcontractors by encouraging small business prime contractors to award more subcontracts to similarly situated small businesses.
Exclusion of a large segment of Federal contracting, such as acquisitions for COTS items, would limit the full implementation of these objectives.
Further, FAR clauses imposing limitations on subcontracting and the nonmanufacturer rule are currently prescribed for use in solicitations and contracts for COTS items. Making section 1651 applicable to acquisitions of COTS items would allow the amended 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, the burden on contractors would not increase significantly if the requirements of section 1651 were applied to acquisitions for COTS items.
Under the FAR clauses currently incorporated into contracts for those items, 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 the acquisition of COTS items.
IV. Expected Cost Savings The purpose of this rule is to implement statutory authorities and SBA regulations that are designed to make it easier and less burdensome for small business prime contractors to comply with requirements related to how much work they may subcontract under Federal contracts, including task and delivery orders under those contracts i.e., the limitations on subcontracting. The changes to these requirements would both ease compliance costs and provide more authorized ways to subcontract. Section 1651 of the NDAA for FY 2013 revised and standardized the limitations on subcontracting, including the nonmanufacturer rule. The nonmanufacturer rule is the requirement that the prime contractor, who is a reseller of a product i.e., a nonmanufacturer, provide an end product manufactured by a small business in the United States or its outlying areas. The limitations on subcontracting and the nonmanufacturer rule are meant to
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