83 FR 62550 - Defense Federal Acquisition Regulation Supplement: Restrictions on Use of Lowest Priced Technically Acceptable Source Selection Process (DFARS Case 2018-D010)

DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System

Federal Register Volume 83, Issue 233 (December 4, 2018)

DoD proposes to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement sections of the National Defense Authorization Acts for Fiscal Years 2017 and 2018 that establish limitations and prohibitions on the use of the lowest price technically source selection process.

[Federal Register Volume 83, Number 233 (Tuesday, December 4, 2018)]
[Proposed Rules]
[Pages 62550-62554]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-26306]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 208, 212, 213, 215, 216, 217, 234, and 237

[Docket DARS-2018-0055]
RIN 0750-AJ74


Defense Federal Acquisition Regulation Supplement: Restrictions 
on Use of Lowest Priced Technically Acceptable Source Selection Process 
(DFARS Case 2018-D010)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Proposed rule.

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SUMMARY: DoD proposes to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to implement sections of the National 
Defense Authorization Acts for Fiscal Years 2017 and 2018 that 
establish limitations and prohibitions on the use of the lowest price 
technically source selection process.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before February 4, 2019, to be considered 
in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2018-D010, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: http://www.regulations.gov. 
Search for ``DFARS Case 2018-D010.'' under the heading ``Enter keyword 
or ID'' and selecting ``Search.'' Select ``Comment Now and'' follow the 
instructions provided to submit a comment. Please

[[Page 62551]]

include ``DFARS Case 2018-D010'' on your attached documents.
    [cir] Email: [email protected]. Include DFARS Case 2018-D010 in 
the subject line of the message.
    [cir] Fax: 571-372-6093.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. 
Carrie Moore, OUSD (A&S)DPC/DARS, Room 3B941, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check www.regulations.gov, 
approximately two to three days after submission to verify posting 
(except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Carrie Moore, telephone 703-372-
6093.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD is proposing to amend the DFARS to implement the limitations 
and prohibitions on use of the lowest prices technical acceptable 
(LPTA) source selection process provided in sections 813, 814, and 892 
of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 
2017 (Pub. L. 114-328) and sections 822, 832, 882, and 1002 of the NDAA 
for FY 2018 (Pub. L. 115-91). The following is a summary of the 
statutory restrictions:
     Section 813 of the NDAA for FY 2017, as amended by section 
822 of the NDAA for FY 2018, establishes that the LPTA source selection 
process shall only be used when--
    [cir] Minimum requirements can be described clearly and 
comprehensively and expressed in terms of performance objectives, 
measures, and standards that will be used to determine the 
acceptability of offers;
    [cir] No, or minimal, value will be realized from a proposal that 
exceeds the minimum technical or performance requirements;
    [cir] The proposed technical approaches will require no, or 
minimal, subjective judgment by the source selection authority as to 
the desirability of one offeror's proposal versus a competing proposal;
    [cir] The source selection authority has a high degree of 
confidence that reviewing the technical proposals of all offerors would 
not result in the identification of characteristics that could provide 
value or benefit;
    [cir] No, or minimal, additional innovation or future technological 
advantage will be realized by using a different source selection 
process;
    [cir] Goods to be procured are predominantly expendable in nature, 
are nontechnical, or have a short life expectancy or short shelf life;
    [cir] The contract file contains a determination that the lowest 
price reflects full life-cycle costs of the product(s) or service(s) 
being acquired; and
    [cir] The contracting officer documents the contract file 
describing the circumstances justifying the use of the lowest price 
technically acceptable source selection process.
    Section 813, as amended, further provides that use of the LPTA 
process should be avoided, to the maximum extent practicable, when 
acquiring information technology, cybersecurity services, systems 
engineering and technical assistance services, advanced electronic 
testing, other knowledge-based professional services, personal 
protective equipment, or certain services in support of contingency or 
other operations outside the United States.
     Section 814 of the NDAA for FY 2017 prohibits the use of 
reverse auctions or the LPTA source selection process when purchasing 
personal protective equipment, if the level of quality or failure of 
the item could result in combat casualties. Section 882 of the NDAA for 
FY 2018 amends section 814 to further prohibit the use of reverse 
auctions or the LPTA source selection process for aviation critical 
safety items as defined in 10 U.S.C. 2319(g).
     Section 832 of the NDAA for FY 2018 prohibits the use of 
the LPTA source selection process for engineering and manufacturing 
development (EMD) of a major defense acquisition program (MDAP) for 
which budgetary authority is requested beginning in FY 2019.
     Section 892 of the NDAA for FY 2017, as amended by section 
1002 of the NDAA for FY 2018, amended 10 U.S.C. 254b to prohibit the 
use of the LPTA source selection process when acquiring auditing 
services and requires selection of service providers based on the best 
value to the Department, as determined by the resource sponsor for an 
auditing contract.

II. Discussion and Analysis

    Use of the LPTA source selection process is implemented in Federal 
Acquisition Regulation (FAR) section 15.101-2. To supplement the FAR, 
DoD is proposing to add a new DFARS section 215.101-2-70 that addresses 
the various limitations and prohibitions on the use of the LPTA source 
selection process. This new section is broken into two paragraphs: 
Paragraph (a) addresses the limitations provided in section 813 of the 
NDAA for FY 2017, as amended by section 822 of the NDAA for FY 2018; 
paragraph (b) addresses the prohibitions provided in sections 814, 832, 
and 892 of the NDAA for FY 2017, as amended by sections 882 and 1002 of 
the NDAA for FY 2018.
    Currently, reverse auctions are not addressed in the FAR or DFARS. 
To implement the specific restriction on the use of reverse auctions to 
procure personal protective equipment and aviation critical safety 
items, DoD is proposing to add a new subpart 217.7X under DFARS part 
217, Special Contracting Methods, to address the prohibition associated 
with reverse auctions under a section titled ``Prohibitions.''
    The new statutory limitations and prohibitions on the use of the 
LPTA source selection process and reverse auctions apply to not only 
acquisitions conducted using FAR part 15 procedures for negotiation, 
but also--
     Orders placed against Federal Supply Schedules using FAR 
subpart 8.4 procedures;
     Acquisitions for commercial items using FAR part 12 
procedures;
     Acquisitions conducted using FAR part 13 simplified 
acquisition procedures; and
     Orders placed under multiple award indefinite delivery 
contracts using FAR 16.505 procedures for fair opportunity.
    In order to notify contracting officers of the new limitations and 
prohibitions when using these other procedures, DoD is proposing to add 
cross-references to the new limitations and prohibitions outlined at 
DFARS 215.101-2-70 in DFARS sections 208.405, 212.203, 213.106-1, and 
216.505. The new cross-references make clear that the limitations and 
prohibitions on the use of LPTA at DFARS 215.101-2-70 apply to the type 
of procurement being conducted. In addition, separate cross-references 
are added in these sections to highlight the restriction on the use of 
reverse auctions for the procurement of personal protective equipment 
and aviation critical safety items at 217.7XXX.
    The new list of prohibitions at DFARS 215.101-2-70(b) includes the 
prohibitions on use of the LPTA source selection process for EMD of 
certain MDAPs and for audit services. Special requirements associated 
with the major system acquisitions are addressed in FAR part 234 and 
special requirements for the acquisition of audit services are 
addressed at DFARS 237.270. As such, DoD is proposing to add cross-
references at DFARS 234.005-2 and

[[Page 62552]]

237.270 to the prohibitions associated with these types of procurement 
at DFARS 215.101-2-70(b).

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule does not propose to create any new provisions or clauses 
or impact any existing provisions or clauses.

IV. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

V. Executive Order 13771

    This proposed rule is not expected to be subject to E.O. 13771, 
because this rule is not a significant regulatory action under E.O. 
12866.

VI. Regulatory Flexibility Act

    DoD does not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The 
rule primarily affects internal Government requirements determination 
and acquisition strategy decisions, and contract file documentation 
requirements. However, an initial regulatory flexibility analysis has 
been performed and is summarized as follows:
    The rule proposes to revise the Defense Federal Acquisition 
Regulation Supplement (DFARS) to establish a preference for the use of 
the tradeoff source selection process for certain safety items and 
auditing services; prohibit the use of reverse auctions or the lowest 
priced technically acceptable (LPTA) source selection process for 
specific supplies and services; and specify criteria for use of the 
LPTA source selection process. The legal basis for the rule is the 
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2017 
(Pub. L. 114-328) and the NDAA for FY 2018 (Pub. L. 115-91).
    DoD does not have access to information on the total number of 
solicitations issued on an annual basis that did or did not specify the 
use of the lowest price technically acceptable source selection 
process. However, the Federal Procurement Data System (FPDS) provides 
the following information for fiscal year 2016:
     DoD competitive contracts using FAR part 15 procedures. 
DoD awarded 18,361 new contracts and orders using negotiated 
competitive procedures, of which 47% were awarded to 5,221 unique small 
businesses. It is important to note that FPDS does not collect data for 
solicitations using the LPTA source selection process; therefore, this 
data applies to solicitations using both tradeoff and LPTA source 
selection procedures, which will be subject to future considerations 
and restrictions provided by section 813 of the NDAA for FY 2017 and 
section 822 of the NDAA for FY 2018.
     Personal protective equipment. Based on information from 
FPDS for FY 2016, DoD issued 9,130 new competitive contract actions 
(including task, delivery, and call orders) potentially for combat-
related personal protective equipment (PPE) items that could be 
impacted by restrictions in section 814 of the NDAA for FY 2017. Of 
those new contract actions, 89% were awarded to 668 unique small 
businesses.
     Aviation critical safety items. As discussed during the 
rulemaking process for DFARS 252.209-7010 published in the Federal 
Register at 76 FR 14641 on March 17, 2011, the identification of 
aviation critical safety items occurs entirely outside the procurement 
process and is not captured in FPDS. Therefore, it is not possible to 
assess the impact on small businesses.
     Audit-related services. DoD issued 46 new competitive 
contract actions (including task, delivery, and call orders) for audit 
services which may be impacted by section 1002 of the NDAA for FY 2018. 
Of those new contract actions, 61% were awarded to 17 unique small 
businesses. The average award (including all options) to small business 
was valued over the simplified acquisition threshold.
     Major defense acquisition programs (MDAPs). The impact to 
small businesses resulting from implementation of sections 832 and 882 
of the NDAA for FY 2018 cannot be assessed, since FPDS does not collect 
data for major defense acquisition programs (MDAPs) or for specific 
acquisition phases (i.e., engineering and manufacturing development 
(EMD)). Subject matter experts within DoD know of no instances where 
the LPTA source selection process has been used for procurement of EMD 
of an MDAP.
    The proposed rule does not impose any Paperwork Reduction Act 
reporting or recordkeeping requirements on any small entities. The rule 
may impact some small businesses as offerors may need to change the way 
their quotations or offers are structured to conform to proposal 
instructions and corresponding evaluation criteria when responding to 
solicitations that use the tradeoff source selection process for 
supplies or services where the LPTA source selection process is now 
prohibited or must now be avoided. This incremental impact, which 
represents the incremental difference between a noncomplex LPTA 
proposal and additional information required for a tradeoff proposal, 
is expected to be minimal.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    There are no known, significant, alternative approaches to the 
proposed rule that would meet the requirements of the applicable 
statute.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2018-D010), in 
correspondence.

VII. Paperwork Reduction Act

    The rule does not contain any information collection requirements 
that require the approval of the Office of Management and Budget under 
the Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Parts 208, 212, 213, 215, 216, 217, 234, 
and 237

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 208, 212, 213, 215, 216, 217, 234, and 237 
are proposed to be amended as follows:

0
1. The authority citation for 48 CFR parts 208, 212, 213, 215, 216, 
217, 234, and 237 continues to read as follows:

    Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

[[Page 62553]]

PART 208--REQUIRED SOURCES OF SUPPLIES OR SERVICES

0
2. Amend section 208.405 by redesignating the text as paragraph (1) and 
adding paragraphs (2) and (3) to read as follows:


208.405   Ordering procedures for Federal Supply Schedules.

* * * * *
    (2) See 215.101-2-70 for the limitations and prohibitions on the 
use of the lowest price technically acceptable source selection 
process, which are applicable to orders placed under Federal Supply 
Schedules.
    (3) See 217.7XXX for the prohibition on the use of reverse auctions 
for personal protective equipment and aviation critical safety items.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
3. Add section 212.203 to read as follows:


212.203   Procedures for solicitation, evaluation, and award.

    (1) See 215.101-2-70 for the limitations and prohibitions on the 
use of the lowest price technically acceptable source selection 
process, which are applicable to the acquisition of commercial items.
    (2) See 217.7XXX for the prohibition on the use of reverse auctions 
for personal protective equipment and aviation critical safety items.

PART 213--SIMPLIFIED ACQUISITION PROCEDURES

0
4. Revise section 213.106-1 to read as follows:


213.106-1   Soliciting competition.

    (a) Considerations. (2)(i) Include an evaluation factor regarding 
supply chain risk (see subpart 239.73) when acquiring information 
technology, whether as a service or as a supply, that is a covered 
system, is a part of a covered system, or is in support of a covered 
system, as defined in 239.7301.
    (ii) See 215.101-2-70 for limitations and prohibitions on the use 
of the lowest price technically acceptable source selection process, 
which are applicable to simplified acquisitions.
    (iii) See 217.7XXX for the prohibition on the use of reverse 
auctions for personal protective equipment and aviation critical safety 
items.

PART 215--CONTRACTING BY NEGOTIATION

0
5. Add section 215.101-2 heading to read as follows:


215.101-2   Lowest price technically acceptable source selection 
process.

0
6. Add section 215.101-2-70 to read as follows:


215.101-2-70   Limitations and prohibitions.

    The following limitations and prohibitions apply when considering 
the use of the lowest price technically acceptable source selection 
procedures.
    (a) Limitations. (1) In accordance with section 813 of the National 
Defense Authorization Act for Fiscal Year 2017 (Pub. L. 114-328) as 
amended by section 822 of the National Defense Authorization Act for 
Fiscal Year 2018 (Pub. L. 115-91) (see 10 U.S.C. 2305 note), the lowest 
price technically acceptable source selection process shall only be 
used when--
    (i) Minimum requirements can be described clearly and 
comprehensively and expressed in terms of performance objectives, 
measures, and standards that will be used to determine the 
acceptability of offers;
    (ii) No, or minimal, value will be realized from a proposal that 
exceeds the minimum technical or performance requirements;
    (iii) The proposed technical approaches will require no, or 
minimal, subjective judgment by the source selection authority as to 
the desirability of one offeror's proposal versus a competing proposal;
    (iv) The source selection authority has a high degree of confidence 
that reviewing the technical proposals of all offerors would not result 
in the identification of characteristics that could provide value or 
benefit;
    (v) No, or minimal, additional innovation or future technological 
advantage will be realized by using a different source selection 
process;
    (vi) Goods to be procured are predominantly expendable in nature, 
are nontechnical, or have a short life expectancy or short shelf life;
    (vii) The contract file contains a determination that the lowest 
price reflects full life-cycle costs (as defined at FAR 7.101) of the 
product(s) or service(s) being acquired; and
    (viii) The contracting officer documents the contract file 
describing the circumstances justifying the use of the lowest price 
technically acceptable source selection process.
    (2) In accordance with section 813 of the National Defense 
Authorization Act for Fiscal Year 2017, as amended by section 822 of 
the National Defense Authorization Act for Fiscal Year 2018 (see 10 
U.S.C. 2305 note), contracting officers shall avoid, to the maximum 
extent practicable, using the lowest price technically acceptable 
source selection process in the case of a procurement that is 
predominately for the acquisition of--
    (i) Information technology services, cybersecurity services, 
systems engineering and technical assistance services, advanced 
electronic testing, or other knowledge-based professional services;
    (ii) Items designated by the requiring activity as personal 
protective equipment (except see paragraph (b)(1) of this section); or
    (iii) Services designated by the requiring activity as knowledge-
based training or logistics services in contingency operations or other 
operations outside the United States, including in Afghanistan or Iraq.
    (b) Prohibitions. (1) In accordance with section 814 of the 
National Defense Authorization Act for Fiscal Year 2017 as amended by 
section 882 of the National Defense Authorization Act for Fiscal Year 
2018 (see 10 U.S.C. 2302 note), contracting officers shall not use the 
lowest price technically acceptable source selection process to procure 
items designated by the requiring activity as personal protective 
equipment or an aviation critical safety item, when the requiring 
activity advises the contracting officer that the level of quality or 
failure of the equipment or item could result in combat casualties. See 
252.209-7010 for the definition and identification of critical safety 
items.
    (2) In accordance with section 832 of the National Defense 
Authorization Act for Fiscal Year 2018 (see 10 U.S.C. 2442 note), 
contracting officers shall not use the lowest price technically 
acceptable source selection process to acquire engineering and 
manufacturing development for a major defense acquisition program for 
which budgetary authority is requested beginning in fiscal year 2019.
    (3) Contracting officers shall make award decisions based on best 
value factors and criteria, as determined by the resource sponsor (in 
accordance with agency procedures), for an auditing contract. The use 
of the lowest price technically acceptable source selection process is 
prohibited (10 U.S.C. 254b).

PART 216--TYPES OF CONTRACTS

0
7. Amend section 216.505 by--
0
a. Adding new paragraph (a) heading;
0
b. Redesignating paragraph (1) as paragraph (a)(S-70);
0
c. Redesignating paragraph (2) as paragraph (a)(6);
0
d. Adding new paragraph (b) heading; and

[[Page 62554]]

0
e. Adding new paragraph (b)(1).
    The additions read as follows:


216.505   Ordering.

    (a) General.
* * * * *
    (b) Orders under multiple-award contracts--(1) Fair opportunity.
    (A) See 215.101-2-70 for the limitations and prohibitions on the 
use of the lowest price technically acceptable source selection 
process, which are applicable to orders placed against multiple award 
indefinite delivery contracts.
    (B) See 217.7XXX for the prohibition on the use of reverse auctions 
for personal protective equipment and aviation critical safety items.
* * * * *

PART 217--SPECIAL CONTRACTING METHODS

0
8. Add new subpart 217.7X, to read as follows:
217.7X--REVERSE AUCTIONS
Sec.
7XXX Prohibition.

217.7X--REVERSE AUCTIONS


217.7XXX   Prohibition.

    In accordance with section 814 of the National Defense 
Authorization Act for Fiscal Year 2017 (Pub. L. 114-328) as amended by 
section 882 of the National Defense Authorization Act for Fiscal Year 
2018 (Pub. L. 115-91) (see 10 U.S.C. 2302 note), contracting officers 
shall not use reverse auctions when procuring items designated by the 
requiring activity as personal protective equipment or an aviation 
critical safety item, when the requiring activity advises the 
contracting officer that the level of quality or failure of the 
equipment or item could result in combat casualties. See 252.209-7010 
for the definition and identification of critical safety items.

PART 234--MAJOR SYSTEM ACQUISITION

0
9. Add section 234.005-2 to read as follows:


234.005-2   Mission-oriented solicitation.

    See 215.101-2-70(b)(2) for the prohibition on the use of the lowest 
price technically acceptable source selection process for engineering 
and manufacturing development of a major defense acquisition program 
for which budgetary authority is requested beginning in fiscal year 
2019.

PART 237--SERVICE CONTRACTING

0
10. Amend section 237.270 by--
0
a. Redesignating paragraph (a)(2) as paragraph (a)(3); and
0
b. Adding new paragraph (a)(2) to read as follows:


237.270   Acquisition of audit services.

    (a) * * *
    (2) See 215.101-2-70(b)(3) for the prohibition on the use of the 
lowest price technically acceptable source selection process when 
acquiring audit services.
* * * * *
[FR Doc. 2018-26306 Filed 12-3-18; 8:45 am]
BILLING CODE 5001-06-P