We recently wrote about the Department of Defense (DoD) amendment to the Defense Federal Acquisition Regulation Supplement (DFARS) to increase the threshold for requiring defense contracting agencies to issue sole-source justifications to companies participating in the Small Business Administration’s (SBA) 8(a) program. The amendment – DFARS 206.303-1 – increased the DoD threshold from $22 million to $100 million.

We have received questions about what this means for different small business concerns, so we wanted to follow-up on the previous blog post to discuss the practical implications for small businesses interested in receiving larger sole-source contracts.

Which Agencies Does This Impact?

As an initial matter, this amendment only impacts defense agencies subject to the DFARS. The applicable threshold for civilian agencies and contracting officers, however, has not changed and remains $22 million (13 C.F.R. § 124.506(b)(5), and (d)).  The Federal Acquisition Regulation (FAR) Council often follows the lead of DFARS developments, so the civilian threshold may increase to match the new DFARS threshold, but for now it remains unchanged at $22 million.

How Can My Company Receive a $100 Million Sole-Source Contract?

Notably, this threshold increase does not impact SBA’s competition requirements or the tribal and Alaska Native Corporation (ANC) exceptions of 13 C.F.R. § 124.506. That is, for requirements under $4 million ($7 million for manufacturing requirements), contracting officers may still issue sole-source awards. For requirements over these $4 million and $7 million thresholds, contracting officers must still complete 8(a) contracts if “[t]here is a reasonable expectation that at least two eligible Participants will submit offers at a fair market price.” An exception to this general rule of competition is that contracting officers may award a sole-source contract to a tribally owned or ANC-owned concern.

Accordingly, the threshold increase allows DoD contracting officers to award sole-source contracts without going through the J&A process – up to $100 million – (1) if the requirement has not already been awarded to a tribally owned or ANC-owned concern and (2) if there is not a reasonable expectation for 8(a) competition. The threshold increase makes it even easier to award larger sole-source contracts to tribally and ANC-owned concerns, but also allows for other 8(a) concerns to receive these larger sole-source opportunities when there is not a reasonable expectation for another 8(a) competitor. It is important for all 8(a) concerns to know their DoD customers’ needs, and just as important for DoD customers to know the expertise and capacity of 8(a) companies, so that both parties can be ready when a sole-source opportunity manifests.