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On July 10, 2014, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) published a proposed rule to implement Section 802 of the National Defense Authorization Act (NDAA) for Fiscal Year 2013.  [79 Fed. Reg. 39361]  Section 802, entitled “Review and Justification of Pass-Through Contracts,” provides that in any case in which an offeror for a contract or task or delivery order informs the agency, pursuant to FAR § 52.215-22 that the offeror intends to subcontract more than 70 percent of the total cost of the work, the contracting officer is required to (1) consider the availability of alternative contract vehicles and the feasibility of contracting directly with a subcontractor or subcontractors that will perform the bulk of the work; (2) make a written determination that the contracting approach selected is in the best interest of the Government; and (3) documents the basis for such determination.  The proposed rule amends FAR § 15.404-1 by adding paragraph (h), which incorporates the requirements set forth in Section 802.

Although Section 802 applies only to contracts with the DoD, the Department of State (DoS), and the United States Agency for International Development (USAID), “for the purpose of consistency,” the DoD, the GSA, and NASA “decided to apply the section’s requirements to all of the agencies subject to the FAR.”  Accordingly, the proposed rule states that the requirements of paragraph (h) “apply by law” to the DoD, the DoS, and USAID, and “as a matter of policy to other Federal agencies.”  On the other hand, the rule exempts contracts under FAR Part 19, in accordance with Section 1615 of the NDAA for Fiscal Year 2014, which provides that the requirements of Section 802 of NDAA for Fiscal Year 2013 do not apply to contracts under Section 46 of the Small Business Act (15 U.S.C. § 657s).  Thus, contracts set aside under the Small Business Subcontracting, 8(a), HUBZone, Service-Disabled Veteran-Owned Small Business, and Women-Owned Small Business Programs will not subject to the rule.

Interested parties should submit written comments to the Regulatory Secretariat on or before September 9, 2014 to be considered in the formation of the final rule.