DoD Increases the Justification and Approval Threshold for Its Sole Source Contract Awards to 8(a) Contractors to $100 Million

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Implementing Section 823 of the National Defense Authorization Act for Fiscal Year 2020 (NDAA FY ‘20), on July 5, 2020, the Department of Defense (DoD) amended the DoD Federal Acquisition Regulation Supplement (DFARS) to increase the threshold for requiring sole source justifications of awards to Small Business Administration (SBA) certified 8(a) small disadvantaged businesses.  Under the new DFARS final rule, DFARS 206.303-1, no formal justification and approval (J&A) will be required for a sole source award of $100 million or less to such an 8(a) small business.  This final rule is a significant increase over the current $22 million threshold which applies to procurements covered by the Federal Acquisition Regulation (FAR) Part 6.3 rule.

The SBA is responsible for administration of the 8(a) small business program.  To qualify as an 8(a) small business, the small business must be owned and controlled by an economically and socially disadvantaged individual whose income, net worth and assets do not exceed specific dollar amounts and who meets other requirements.  A small business accepted into the SBA 8(a) program that maintains its good standing may be certified as an 8(a) for a maximum of nine years.

The FAR provides for full and open competition for contracts unless a specific exception applies. Its sole source provisions allow an exception to this requirement where (1) there is only one responsible source and no other supplies or services will satisfy agency requirements, (2) there is unusual or compelling urgency, (3) it is necessary to award a contract to a particular source or sources for purposes of industrial mobilization; to maintain essential engineering, developmental, or research capability; or expert services, (4) it is required by international agreement or treaty between the U.S. and a foreign government, (5) it is authorized or required by statute, (6) where it is determined to be necessary for the national security, or (7) where it is determined by the agency head to be in the public interest.

Under the new rule, the SBA may not accept for negotiation a DoD sole source award to an 8(a) small business above the new $100 million threshold, unless DoD issues and approves a J&A in accordance with FAR 6.303-2 and the new DFARS rule 206.303-1(b).  The final rule provides that DoD J&A approval must be done by a member of the armed forces serving in a rank above brigadier general or rear admiral (lower half), or a civilian in a position of a comparable grade.  The final rule is effective immediately.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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