Government Contracts Monitor

Draft 2017 NDAA: Some Highlights

December 14, 2016

Following months of uncertainty and debate, the House and Senate have both approved the draft 2017 National Defense Authorization Act (NDAA), funding the Defense Department through the end of fiscal year 2017 (FY17). The FY17 NDAA contains a number of significant provisions that promise to impact government contractors in significant ways. This article discusses several of them.

Section 217 of the Act raises the micro-purchase threshold for research programs and activities procured through DoD science and technology reinvention laboratories from $3,500.00 to $10,000.00, and Section 821 raises the general micro-purchase threshold from $3,500.00 to $5,000.00, meaning that DoD contracting officials (but not those employed by civilian agencies) may make more small purchases without going through the often onerous restrictions of full and open competition. Micro-purchases can be made non-competitively using government purchase cards, do not require the agency to follow applicable small business set-aside rules, and do not require market research.

In a move that reflects the shifting priorities of the Department, lowest price technically acceptable (LPTA) procurements, which were all but mandatory for many defense agencies just a few years ago, will be avoided in all but a few circumstances; in their stead, best value tradeoffs will be the primary evaluation method for most procurements. In accordance with Section 813 of the Act, LPTA procurements will be permitted only when all of the following criteria are met:

The DoD is able to comprehensively and clearly describe the minimum requirements expressed in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
DoD would realize no (or only minimal) value from a proposal that exceeded the minimum technical or performance requirements articulated in the solicitation;
The technical approaches proposed by offerors will little or no subjective judgment by the source selection authority as to their desirability as compared to competitors;
The source selection authority is confident that reviewing the bids from other than the lowest price offeror(s) would not result in the identification of factors that could provide value or benefit to the Government;
The Contracting Officer includes written justification for use of the LPTA scheme in the contract file; and
DoD determines that the lowest price reflects full life-cycle costs, including costs for maintenance and support.

The NDAA states that, within 120 days of its passage, the Defense Federal Acquisition Regulation (DFARS) must be updated to reflect the preference for best value tradeoff procurements. Further, the NDAA requires Contracting Officers to avoid LPTA procurements to the maximum extent possible when procuring information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, audit or audit readiness services, or other knowledge based professional services; personal protective equipment; and knowledge-based training or logistics services in contingency operations or other operations outside the United States, to include Afghanistan and Iraq.

In addition, the NDAA provides for the enforcement of this requirement by mandating that the Comptroller General must provide an annual report of LPTA procurements for contracts over $10,000,000. The first report is due no later than December 31, 2017, and subsequent reports are due at the end of each of the next 3 calendar years.

Section 1821, entitled “Good Faith in Subcontracting,” is aimed at increasing large contractors’ compliance with Small Business Subcontracting Goals, as codified in the Small Business Act. Within 270 days of the passage of the NDAA, this Section requires the Small Business Administration (SBA) Administrator to “provide examples of activities that would be considered a failure to make a good faith effort to comply with the requirements imposed on an entity other than a small business...that is awarded a prime contract containing the clauses required under

…the Small Business Act.” In other words, non-small business prime contractors are to be held accountable for any failure to reach their subcontracting goals. Further, NDAA Section 1822 creates a pilot program for small businesses without past performance ratings as prime contractors, but who have performed as a first tier subcontractor, to request past performance ratings in order to establish a record of performance, which is an evaluation factor in many procurements for prime contracts.

Jackson Kelly will continue to monitor and report on developments as the NDAA continues through the process of passage and as it is implemented.