B-223585, SEP 3, 1986, OFFICE OF GENERAL COUNSEL

B-223585: Sep 3, 1986

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WILLIS: FAR SECRETARIAT GENERAL SERVICES ADMINISTRATION THIS IS IN RESPONSE TO YOUR LETTER OF JUNE 30. FAR CASE NO. 86-23 IS A PROPOSAL TO AMEND FAR PARTS 13. THE PROPOSAL IS CONSISTENT WITH A REQUIREMENT IN THE COMPETITION IN CONTRACTING ACT OF 1984 THAT THE FAR BE MODIFIED TO PROVIDE FOR SPECIAL. WE THEREFORE HAVE NO OBJECTION TO THE PROPOSED CHANGES. FAR SEC. 19.102(F)(3) (WHICH IS NOT CHANGED UNDER THE PROPOSAL). WHEN SMALL PURCHASE PROCEDURES ARE USED. WE UNDERSTAND THAT THE CURRENT REGULATION WAS INTENDED TO PERMIT SMALL PURCHASE SET ASIDES FOR PRODUCTS WHICH ARE NOT MANUFACTURED BY A SMALL BUSINESS. WE HAVE FOUND THAT THIS PROGRAM HAS BEEN SUBJECT TO ABUSE AND SOMETIMES RESULTS IN THE GOVERNMENT'S PAYING A PRICE FOR AN ITEM SIGNIFICANTLY HIGHER THAN IT WOULD IN AN UNRESTRICTED PROCUREMENT.

B-223585, SEP 3, 1986, OFFICE OF GENERAL COUNSEL

FEDERAL ACQUISITION REGULATION - PROPOSED REVISION DIGEST: 1. GAO HAS NO OBJECTION TO A PROPOSAL TO AMEND FEDERAL ACQUISITION REGULATION (FAR) PARTS 13, 19, 20, AND 52 TO PROVIDE FOR THE USE OF SMALL PURCHASE PROCEDURES IN AWARDING SMALL BUSINESS SET-ASIDE CONTRACTS VALUED BETWEEN $10,000 AND $25,000. FEDERAL ACQUISITION REGULATION - PROPOSED REVISION 2. GAO HAS NO OBJECTION TO A PROPOSAL TO AMEND PARAGRAPH 5 OF TABLE 15 2 AT FEDERAL ACQUISITION REGULATION (FAR) SEC. 15.804-6(B)(2) AND STANDARD FORM 1411, WHICH APPEARS AT FAR 53.301-1411, TO ENSURE THAT THE GOVERNMENT HAS ACCESS TO THOSE RECORDS OF A CONTRACTOR NECESSARY TO PERMIT AN ADEQUATE EVALUATION OF THE PROPOSED PRICE.

MS. MARGARET A. WILLIS:

FAR SECRETARIAT

GENERAL SERVICES ADMINISTRATION

THIS IS IN RESPONSE TO YOUR LETTER OF JUNE 30, 1986, REQUESTING OUR COMMENTS ON FEDERAL ACQUISITION REGULATION (FAR) CASE NOS. 86-23 AND 86 32.

FAR CASE NO. 86-23 IS A PROPOSAL TO AMEND FAR PARTS 13, 19, 20, AND 52 TO EXTEND THE USE OF SMALL PURCHASE PROCEDURES IN AWARDING SMALL BUSINESS SET -ASIDES TO CONTRACT VALUED AT BETWEEN $10,000 AND $25,000. THE PROPOSAL IS CONSISTENT WITH A REQUIREMENT IN THE COMPETITION IN CONTRACTING ACT OF 1984 THAT THE FAR BE MODIFIED TO PROVIDE FOR SPECIAL, SIMPLIFIED PROCEDURES FOR PROCUREMENTS OF $25,000 OR LESS. 10 U.S.C. SEC. 2304(G) (SUPP. III 1985); 41 U.S.C. SEC. 253(G) (SUPP. III 1985). WE THEREFORE HAVE NO OBJECTION TO THE PROPOSED CHANGES.

WE WISH TO POINT OUT, HOWEVER, THAT ALTHOUGH UNDER MOST SMALL BUSINESS SET-ASIDES A SMALL BUSINESS NONMANUFACTURER MUST FURNISH A PRODUCT MANUFACTURED BY A SMALL BUSINESS, THE CURRENT REGULATION, FAR SEC. 19.102(F)(3) (WHICH IS NOT CHANGED UNDER THE PROPOSAL), PERMITS A NONMANUFACTURER UNDER A SMALL BUSINESS SET-ASIDE TO FURNISH ANY DOMESTIC PRODUCT-- EVEN ONE MANUFACTURED BY A LARGE BUSINESS-- WHEN SMALL PURCHASE PROCEDURES ARE USED. WE UNDERSTAND THAT THE CURRENT REGULATION WAS INTENDED TO PERMIT SMALL PURCHASE SET ASIDES FOR PRODUCTS WHICH ARE NOT MANUFACTURED BY A SMALL BUSINESS. WE HAVE FOUND THAT THIS PROGRAM HAS BEEN SUBJECT TO ABUSE AND SOMETIMES RESULTS IN THE GOVERNMENT'S PAYING A PRICE FOR AN ITEM SIGNIFICANTLY HIGHER THAN IT WOULD IN AN UNRESTRICTED PROCUREMENT. SEE CONTRACTING OFFICERS' EXPLANATION FOR PRICE INCREASES ON 125 SPARE PARTS, GAO/NSIAD-85-119, JULY 29, 1985 PP 11-12. SINCE THE PROPOSED CHANGES LIKELY WOULD RESULT IN AN INCREASE IN THE NUMBER AND COST OF SMALL BUSINESS SET-ASIDES USING SMALL PURCHASE PROCEDURES, WE SUGGEST THAT POLICY REPRESENTED BY FAR SEC. 19.102(F)(3) BE LIMITED TO SET-ASIDES OF $10,000 AND BELOW.

FAR CASE NO. 86-32 IS A PROPOSAL TO AMEND PARAGRAPH 5 OF TABLE 15-2 IN FAR SEC. 15.804-6(B)(2) TO ENSURE THAT THE GOVERNMENT HAS ACCESS TO THOSE RECORDS OF A CONTRACTOR NECESSARY TO PERMIT AN ADEQUATE EVALUATION OF THE PROPOSED PRICE. A SIMILAR CHANGE IN STANDARD FORM 1411, "CONTRACT PRICING PROPOSAL COVER SHEET," WHICH APPEARS AT FAR SEC. 53.301-1411, ALSO IS PROPOSED. WE HAVE NO OBJECTION TO THESE PROPOSED CHANGES.