DOD IG spots conflict in regulations

The Federal Acquisition Regulation that governs all procurement purchases includes rules on small-business contracting that apparently contradict each other. But experts say the contradiction might be more of a legal distinction than a threat to the current system of awarding contracts.

The Defense Department’s inspector general uncovered the problem and described it in a report released May 6.

In FAR Part 19, a provision known as the Rule of Two requires agencies to give small businesses an advantage over other companies if there are at least two small companies that can offer reasonable bids. Last year, the Government Accountability Office said the rule applies to task and delivery orders in addition to full contracts.

However, FAR Part 16 requires contracting officers to give all companies a fair opportunity to be considered for each task or delivery order under multiple-award contracts.

DOD’s IG found the apparently conflicting language when it audited the Navy’s SeaPort Enhanced indefinite-delivery, indefinite-quantity contracts. The auditors said SeaPort-e’s manager failed to adequately compete task orders when he allowed work to be set aside for small businesses.

Navy Department officials intend to broach the subject with regulators. The Navy will ask for clarification from the Defense Acquisition Regulations and the Federal Acquisition Regulations councils on whether the FAR should be updated to allow small-business set-asides for task orders on IDIQ contracts.

Congress clearly supports small-business set-asides, and lawmakers have put task and delivery orders, which agencies use to expedite many purchases, on par with contracts in the fiscal 2009 National Defense Authorization Act, said Robert Burton, former deputy administrator of the Office of Federal Procurement Policy and now a partner at Venable law firm.

With agencies funneling more than half their spending through such arrangements, lawmakers decided the larger task orders need more regulation, but they still support the small-business set-aside policy, Burton said.