General Services Administration
FAR Secretariat (MVRS)
18th & F Streets, N.W.
Room 4037
Washington, DC 20405
Dear FAR Secretariat:
This concerns the proposed rule, FAR Part 15 Rewrite: Contracting by Negotiating; Competitive Range Determinations, published in the Federal Register on May 14, 1997.
The Office of Advocacy has expressed its views on earlier versions of the subject proposal in letters to the FAR Secretariat, the Honorable Steve Kelman, the Honorable Sally Katzen, at public meetings in Washington, DC and Kansas City, and, most recently at a House Small Business Committee hearing. This discussion will serve as a follow-up to our previous comments.
This is a significant rule that will change how the government negotiates contracts and alter the process of "full and open competition." Many small business groups feel the proposal will limit competition and adversely affect the ability of small firms to win federal contracts. The subject rule, however, is an improvement over earlier proposals. Advocacy is pleased that several of its recommendations were incorporated in the May 14 proposal.
While Advocacy would like to support the streamlining the rule fosters, we are concerned that certain aspects of the proposal will limit competition by giving the contracting officer significant authority to eliminate offerors prematurely -- for reasons of "administrative convenience." In theory, limiting the competitive range to promote government and offeror efficiency sounds great. But, in the real world -- where contracting officers have concurrent buying actions on-going and are under significant pressure to do more with less -- we believe the rule will give government contracting officials license and incentive to focus on the fewest number of offerors that are the best known or who represent the most recognized brand name.
We are particularly concerned that new government vendors, emerging firms and other small businesses, less polished in marketing or proposal writing skills, will be quickly eliminated from a competition.
For the same reasons the Federal Trade Commission (FTC) recently ruled against the proposed merger between Office Depot and Staples, Inc., Advocacy is concerned that certain provisions in the FAR Part 15 proposal will limit competition, causing harm to numerous small businesses. Small firms are the engine within our economy promoting competition, creating jobs, stimulating innovations and providing long-term economic growth. The government has an undeniable obligation to protect and cultivate the entrepreneurial spirit within the country.
Public policy should not promote the concentration of federal contract dollars in the hands of a few industry giants. If you consider FY '96 data and account for recent mergers, four mega-firms together received more than $44 billion in government contracts or greater than 25 percent of all federal purchases over $25,000. Small firms, representing 95 percent of all businesses, received about 20 percent of all federal contract dollars for the same period.
This is not a discussion about slowing reforms and increasing government unique preferences for small businesses. It is about balancing reforms, such that small businesses are not disproportionately impacted and that vigorous, open competition is encouraged. What meaningful benefits will be achieved, if several years from now we have a procurement process that provides numerous administrative efficiencies, but only a small number of large firms doing business with the government?
Advocacy offers the following specific comments on the proposed rule.
Competitive Range Determinations
The recently enacted Federal Acquisition Reform Act (FARA), authorizes contracting officers to restrict the competitive range, "if the contracting officer determines that the number of offerors that would otherwise be included in the competitive range...exceeds the number at which an efficient competition can be conducted..." An appropriate question is, what is efficient competition? Without specific guidance, this could be a major loophole.
On the other hand, FARA specifically subordinates efficiency to the requirement for full and open competition stating, "...the Federal Acquisition Regulation (FAR ) shall ensure that the requirement to obtain full and open competition is implemented..." In addition, FARA does not permit contracting officers to limit the competitive range on the basis of efficiency in every procurement.
The regulatory proposal, we believe, goes beyond this limited statutory authority because it eliminates the requirement to include the "greatest number" of proposals in its primary definition of competitive range, stating that "the contracting officer shall establish a competitive range comprised of those proposals most highly rated..." As proposed, a contracting officer can limit the competitive range to as few as two proposals because the top two proposals would always be the most highly rated.
Improvements to the proposal can be made by:
* defining what is meant by "efficient competition" and tracking the legislative language to include the "greatest number" in the primary definition of competitive range.
* incorporating a process where small firms that have a "reasonable chance" of winning, are advised regarding their standing in the procurement, and given the option to continue or drop out.
* where applicable, requiring that at least one small business (highest ranked), with at least a "reasonable chance" of winning a particular contract, be included in the competitive range.
Regulatory Flexibility Analysis
The rule is expected to have a significant impact on a substantial number of small businesses and an Initial Regulatory Flexibility Analysis (IRFA) was prepared. However, Advocacy finds the analysis to be inaccurate and misleading. The IRFA, using FY '95 data, estimates that about 7,000 small businesses will be impacted by the rule.
The purpose of the IRFA is to measure the impact of the proposal on small businesses and evaluate opportunities for alternative regulatory actions that minimize a rule's impact on small firms. Advocacy suggests that the estimate of 7,000 impacted small businesses is significantly off the mark. Advocacy agrees with the estimate that 602,000 entities will be impacted by the rule. Where are the data to support the assumptions in the balance of the analysis? Without this data, the conclusions drawn in the analysis regarding small business impact are purely speculative.
In addition, the IRFA failed to mention that the 188, 863 competed procurement actions that were analyzed represented some $60 billion or about 30 percent of all government contract dollars for the year. Further, in FY '95 as well as in prior years, small firms won more contract actions when they were competed versus actions that were non-competed. This is important information that should be disclosed in any discussion about the impact of the proposed rule.
The IRFA states that the proposed rule "does not duplicate, overlap, or conflict with any other federal rules." Advocacy suggests that aspects in the proposal will conflict with Part 52-219 in the FAR. The FAR states, " It is the policy of the United States that small business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals and small business concerns owned and controlled by women shall have the maximum practicable opportunity to participate in contracts let by any federal agency..." Advocacy and the small business community believe that competitive range limitations built-in to the proposal will not provide "maximum practicable opportunity" for small businesses. Since the proposal would severely restrict opportunities, it conflicts with the existing FAR policy statement.
Finally, Advocacy believes the FAR Part 15 proposal should be considered a major rule, subject to Office of Management and Budget (OMB) review and analysis under Executive Order 12866.
If the Office of Advocacy can be of further assistance, please contact the undersigned.
Sincerely,
Jere W. Glover
Chief Counsel
Office of Advocacy
James M. O'Connor
Procurement Policy Advocate
Office of Advocacy
cc: The Honorable Sally Katzen, OMB, OIRA