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I’m back with another Q&A for GovCon Intelligence this time. We’re going to talk more about the FAR Overhaul and look closely at Part 19 to see what’s changed.
I’m going to debunk some myths that I’ve heard about the FAR Overhaul. There’s a lot of misinformation out there, fake news, and I’m going to try to get to the heart of what’s really happening with the FAR Overhaul.
But first, I want to let everybody know that we’re starting a giving campaign at GovCon Intelligence. I’m going to run the Marine Corps Marathon on Sunday. It’s the 50th running of the Marine Corps Marathon, and I’m going to do it in support of the Capital Area Food Bank. There are really long lines at the Food Bank as federal workers lose their paychecks for last week and as the shutdown goes on.
So we’re starting a campaign. You can go to samlelaw.com/give. Please donate in support of the Capital Area Food Bank. One possible donation is 26.2. That’s the number of miles that I’m hoping to run on Sunday for the 50th running of the Marine Corps Marathon.
So wish me luck there.
Okay, we’ll get into the questions. Thanks to everybody who’s been reading me and sending questions by replying to the emails or comments, or by finding me on LinkedIn. I’ll continue these Q&A sessions and go through all your questions.
Subcontract plan administration appears in Part 42
The first question I got was about a statement I made in the last Q&A. It said that the FAR eliminated a section on administrative contracting officers, 19.706. And I said maybe it would have come back in Part 42, but administrative contracting officers didn’t come back in Part 42.
Well, what I said was incomplete. Somebody pointed out to me that there may not be the term “administrative contracting officers” in Part 42, but there is something called the administrative contracting or contracting administrative office. And it’s in Part 42.302, the CAO, Contract Administration Office. And it covers some of the subcontracting responsibilities that were in 19.706 about the administrative contracting officers. Specifically, it’s a very long section, by the way. Specifically, parts 52, 53, 54, and 55 of that CAO, Contract Administration Office, section 42.302.
All four of those sections deal with subcontracting. They include reviewing and evaluating and approving subcontracting plans; obtaining contractors’ approved subcontracting for its commercial products; if there’s not an approved plan, assisting the contracting officer in evaluating proposed subcontracting plans; and, importantly to this point, by periodic surveillance, ensuring that the contractors’ compliance with small, disadvantaged, women-owned, veteran-owned, etc., subcontracting plans maintain documentation of the contractor’s performance and compliance with these plans requirements and provide advice and assistance to the firms involved.
So that’s a lot of the material that was in the former 19.706 that was eliminated in the FAR Overhaul. It was already there in this 42.302. I think the FAR misled a bit in saying that they eliminated 706 because it was not necessary to sound procurement. Really, it’s duplicative. I think they should have said it was duplicative. 19.706 just went over some of the material that was in 42.302, just in different words, saying administrative contracting officer instead of contracting administration office. But it really covers the same ground.
So I think in the end, not much has changed. You still have many, if not all, of the responsibilities that were in 19.706. Now it’s just in 42.302. It was already there, but it remains in 42.302. And it’s just in a different title. It’s in the CAO instead of the ACO.
So my apologies if I was confused on that point. The word search does not work in all instances when you’re switching terms like that.
Sole-source contracts to entity-owned firms
Someone sent in a question about what the FAR Overhaul means for entity-owned firms. That’s ANCs, the Alaska Native Corporation, Indian tribes, and NHOs, which are Native Hawaiian Organizations. And the question is about the removal of a provision in the 8(a) part of the FAR that said that agencies could award sole-source contracts to 8(a) participants owned by Alaska Native firms and Indian tribes above the competitive threshold.
That was in 19.805-1(b)(2) and that’s been removed. So the question is, if the FAR has removed that authority, does that mean that the agency can’t—they no longer are able to use 8(a) sole-source awards above the competitive threshold to those entity-owned firms?
Just one note. I said Alaska Native and Indian tribes,. That’s because Native Hawaiian Organizations have that authority, but it’s through a separate provision in the DFARs, which is the DOD-specific area of the FAR.
That authority still exists. I’ll start with that. The authority to award sole-source 8(a) contracts to entity-owned firms above the competitive threshold still exists. It’s in statute. It’s in public law through various NDAAs over the years. I’ll link to that in the show notes. [Link: The Legal basis for Native 8(a) participation]
It is not as clear in the FAR Overhaul now, though, because the FAR does not specifically state the authority for Indian tribes and Alaska Native firms and Native Hawaiian Organizations. Instead, it refers by reference to another FAR provision that does say it.
I’ll go to the text here and give you an idea of what I’m talking about. By the way, I made a note at the last time that they messed up the numbering. It was really easy to figure out which of the FAR sections was 8(a), because it’s just 19.8. You just remember the number 8, and you get to it. They did try to keep that to some extent here because they put the 8(a) program under 19.208. They changed the numbering, but still kept the number 8 in the title, which I like because then it makes things easier to find.
It says now that, under competitive 8(a) contracting. So this is 19.208-2(a)(1). It says SBA may not accept for negotiation a sole-source 8(a) contract that exceeds $30 million unless the requesting agency has completed a justification in accordance with the requirements of 6.104.
That $30 million threshold is the $30 million threshold for entity-owned firms for civilian agencies. That $30 million threshold is still in the FAR. It still exists there in Part 6. The FAR is just referring to it by reference rather than putting the whole authority in 19.8.
And furthermore, the 19.208—it is going to be a while before I remember all the numbering here. It also says that—competitive threshold, let me see it here. There’s a mention of Alaska Native Indian Tribe and Native Hawaiian organizations in 19.208-2.
Let me just find the threshold here. So, I think this might be a be about service-disabled vet.
The other section is 19.108-7. So, you still get the 8 in there. And it says, where an acquisition exceeds the competitive threshold, the SBA may accept the requirement for a sole source 8(a) award, only after the contracting officer has complied with the requirements for other than full and open competition andin accordance with 6.103.
So there again, it’s referring back to another section. It’s referring to 6.103. Part 6 is the part of the FAR that deals with competition. And if you go to 6.103, so it’s basically saying, oh, you can’t do a sole source below the competitive threshold, which is now $5.5 million. Unless there’s something in 6.103.
If you go to 6.103, that section speaks to statutory exceptions to competition. And one of those statutory exceptions to competition is the ability to issue a sole-source contract to an Alaska Native firm, Indian Tribe, and then if you’re within DOD, a Native Hawaiian organization.
It’s 6.103-5(e), which refers to sole source 8(a) contracts and above 30 million, they require justification and approval. That’s 100 million within DOD. But below that, any agency can use a sole source contract to an Alaska Native, Indian Tribe, or Native Hawaiian firm.
And that’s clear from the public law. I’ll put the citations to the public law in the show notes so that you can refer to them.
Public Law 100-656, sect. 602
Public Law 109-148, sect. 8020
There’s a really roundabout way of telling agencies that they can award sole-source contracts to Alaska Native owned 8(a) participants and Indian Tribe 8(a) participants.
You’ve got to go to -108, -208; maybe you have to know the Public Law. That’s really the outcome of the FAR Overhaul. In trying to streamline things and use fewer words, so you don’t state that, it sometimes puts the readers on a wild-goose chase to try to find the different sections that, once you piece it together, end up in the same place. You could just said that, but now you’ve got to switch between different sections of the FAR to get there.
Changes to the Rule of Two for R&D
The next question asks, what is the status of the language from the former rule of two?
So this was 19.502-2 that said the following. It said, “total small business status should not be made unless a reasonable expectation exists. Although past acquisition history and market research of an item or similar items are always important, these are not the only factors to be considered in determining whether a reasonable expectation exists. In making research and development small business set-asides, there must also be a reasonable expectation of obtaining from small businesses the best scientific and technological sources consistent with the demands of the proposed acquisition for the best mix of cost performances and schedules.”
This language, particularly the language about research and development, discouraged agencies from using small business set-asides when performing R&D market research and putting together the acquisition for R&D.
SBA had been advocating to take this language out. It doesn’t really have any sort of statutory basis. It was obviously a policy call. By saying that, not only need to satisfy the rule of two, you also need to have the so-called best scientific and technological sources, agencies would be less likely to use set-asides in R&D contracts.
The FAR took that out. That’s not in the FAR Overhaul anymore.
So you no longer have a requirement in the FAR Overhaul to determine for R&D whether the small businesses are providing the best scientific and technological sources. SBA was essentially successful in getting that language out of the statute—I’m sorry—out of the regulation.
The new FAR Rule of Two says very simply the agency must set aside if there are two or more small businesses that are expected to submit reasonable offers at fair market prices. There’s nothing in there about R&D. There’s nothing about past acquisition history and market research being the only factors. It’s just whittled down to the actual Rule of Two, not these additional caveats for R&D.
So that’s good for small business R&D firms. They don’t have that additional hurdle of showing that they have the best scientific and technological sources, in addition to satisfying the Rule of Two.
Public comments still open
I got another question about, is there still time for the public to make comments and is there a good way to put the word out for small business government contractors?
So let me say I’m putting the word out right now: Small business government contractors, you still have time to comment on the FAR Overhaul.
The last day for submitting informal comments is November 3rd. There’s a text box up on acquisition.gov/FAR-overhaul for contractors of all types—small, large, what not—to submit their comments on the FAR Overhaul. And that’s any section of the FAR Overhaul: Part 19, Part 8, Part 15, 16. All of those are very important. You could all put them into one big comment and put them into that box.
There’ll be another opportunity to submit comments when the FAR overhaul goes through official notice and comment. They will publish something in the Federal Register. It may be the entire FAR, however long it is now—a thousand pages of the FAR. And you’ll get 30, 45, 60 days to comment in a more formal basis by submitting a comment through regulations.gov.
So there is still time now on the informal process. That ends November 3rd. And then there’ll be an additional opportunity to submit comments when the FAR goes to regulations.gov for comment there.
MYTH: The Rule of Two is a “may” and discretionary
I’ve heard several times in the last few days that the FAR Part 19 changed the Rule of Two from “shall” to “may”—that it’s become discretionary instead of mandatory.
So, as my first act of debunking fake news, I wanted to say that that is not true. The FAR has not changed the Rule of Two from “shall” to “may.”
It has changed the language. It’s now must instead of shall. But that’s a change across the whole FAR. It’s not something that’s unique to the Rule of Two. And there’s no legal significance to changing shall to must.
But if you look at the Rule of Two, it says “must.” It’s not a “may.”
Let me bring it up right now. Here we go. “A set aside for small business is limiting of an acquisition exclusively for participation by small business concerns. For contracts above the micro purchase threshold, the contracting officer must set the contract aside for small businesses if there’s a reasonable expectation of obtaining offers from two or more responsible small businesses and that are competitive in terms of a fair market prices as quality and delivery.”
It says must. There’s no shall. Well, there’s no may in there. It changed shall to must. But there’s no may. It’s not discretionary. It’s a must.
You can take that to court. You can take that to GAO. You can win a case based on that must.
Now, the word contracts is new in that sentence. It used to be acquisitions, now changed to contracts. Contracts are arguably narrower than acquisitions. The Supreme Court doesn’t necessarily think so, but it appears that the drafters of the FAR think the contracts is narrower than acquisitions. So that’s changed.
But the mandatory nature of the Rule of Two has not changed. It’s still a rule. It’s not a suggestion. You must set it aside if the Rule of Two is satisfied.
I’m not certain where this notion that the FAR has changed to may is coming from. I know there was speculation before the Overhaul came out that it could change from shall to may. That did not happen. The rule stayed. It’s still a rule.
And the word’s must now. That’s the bigger change. In the grand scheme of things, that’s not that big a change.
Probably the bigger issue is changing from acquisition to contracts. How does that address orders? May see a court challenge? We may get more development from the FAR in additional materials as to what that means.
I noted in the practitioner’s album that the FAR talks about setting aside orders and how to treat set-asides of orders with rerepresentation in the practitioner’s guide. So that material is still in there. It’s just in a different place.
And we may be looking in four years at revisiting whether the Rule of Two still applies where it applies. Because the FAR has said that for non-statutory items, and the Rule of Two above the simplified acquisition threshold is non-statutory, the FAR will review the efficacy of those regulations every four years. So, 2029, 2030, we may be looking at that again.
Debunking the slide deck of falsehoods
Somebody sent me a long slide deck that has a lot of false information that I’m going to try to debunk here. I’m not going to name any names, but I just want to get the idea out there that yes, there are a lot of changes in the FAR overall. I’ve written about them on GovCon Intelligence. The Rule of Two stayed, but it’s arguably been narrowed because of the change from acquisition to contract. The 8(a) program has changed in some respects from more of a sole-source program to more of a competitive program. There are changes in support for small-business specialists in Part 19 and Part 7.
But not everything has changed. There’s still a lot of stuff that’s the same. And what I’m seeing from what people are sending me is, there are folks out there that are arguing that really the whole small business landscape has changed. And that’s just not true.
And I don’t want these falsehoods to perpetuate and say, oh, SBA doesn’t have authority to do this, or this doesn’t exist anymore. Because if those ideas start to steamroll and people start to adopt them, they may not have the chance to look at the regulation and see what actually is the case.
And they may just say, well, I’ve heard it in this presentation or I saw it online that this doesn’t exist anymore, so I’m going to ignore it. And that’s really hard to unravel once it’s out there. So I want to take a moment to go through some of the ideas that I’ve heard and push back on them.
MYTH: OSDBUs have been eliminated
One thing I heard is that the OSDBU functions have been eliminated entirely. That is not true.
The OSDBUs are still in Part 19, just search OSDBU. It’s in there several times.
The OSDBUs are still required by statute. That’s 15 USC 644(k), section 15(k) of the Small Business Act. The SBA scorecard considers whether the agency has an OSDBU. None of that has changed. There are still OSDBUs. You can find them on LinkedIn. There are still OSDBUs out there.
Now, some of the agencies have reduced their OSDBU office. They haven’t given as much support to the OSDBUs. But it’s not true at all that the OSDBU functions have been eliminated.
The functions are still there. They’re still in statute. They are being shifted out of the FAR text, maybe to a companion guide or maybe just in relying on the statute. But that shift doesn’t have a legal significance. That statute is still in play. You still have the Small Business Act that gives 21 responsibilities to OSDBUs.
I wrote something on GovCon Intelligence to say that OSDBUs also have an important responsibility in reducing regulatory burden for small businesses.
That’s still there, too. That’s in a separate statute.
So this notion that the OSDBU functions have been eliminated is false misinformation. Don’t go too far with that.
MYTH: The WOSB program is being eliminated
Someone also said that the women-owned small business program will be eliminated soon based on the DOT DBE changes. That’s not true.
Just some background: Department of Transportation, on the last day of September, the last day of the fiscal year, announced that they were requiring narratives of social and economic disadvantage for all DBE firms, all DBE-approved firms. That’s hard to do because there are 54 certifiers of DBE firms out there. It’s not just one certifier like they have for the SBA 8(a) program. So there’s a lot of coordination that’s going on right now. Firms are being asked for social and economic disadvantage narrative to be sent within the week in some states, so that states can start reviewing those narratives in accordance with the DOT requirement.
The through line to the women-owned small business program is that the DBE program used to have a gender-based presumption. So if you applied as a woman-owned small business to DBE (Disadvantaged Business Enterprise) program, which is mostly transportation funding, you would be presumed to be socially disadvantaged. Now under the new Department of Transportation rule, you have to submit a narrative of your disadvantage.
The women-owned small business program on the SBA side does not include a narrative. You get in if you can show that you’re owned and controlled by one or more women. It doesn’t mean, the DOT action doesn’t mean that the women-owned small business program is eliminated or is on track for being eliminated.
The women-owned small business program is statutory. It’s in section 8(m) of the Small Business Act. That would require an act of Congress to eliminate the program. Maybe there’d be a court case about the women-owned small business program in the future. There isn’t one that I’m aware of now involving the SBA program.
The program is structured differently than, say, the veteran-owned or 8(a) programs because every five years SBA has to conduct a study called a disparity study to look industry by industry at whether the women-owned small business program is authorized for a particular industry.
So SBA looks at all the NAICS codes, all 2000 NAICS codes [CORRECTION: there are about 1,000 NAICS codes] to see whether women-owned small businesses suffer a disparity in those NAICS codes, whether they’re underrepresented or substantially underrepresented. SBA releases the results of that study to qualify industries for the women-owned small business program.
So if there were to be a court case about the women-owned small business program, that would be one of the government’s defenses. It’s not just that we found that women-owned small businesses need preference across government contracting. It’s that someone’s actually done a statistical study to say industry-by-industry the women-owned small business program should be authorized for this particular industry. And SBA does that every five years.
MYTH: SBA has been stripped of its power
I also saw in a presentation that, allegedly, SBA has been so-called stripped of its power, that PCRs have been eliminated from doing periodic reviews, that SBA doesn’t do certificates of competency, that it’s not requiring that agencies follow subcontracting plans and holding contactors to subcontracting plans. All of that is unsure. All that is false.
SBA is still an agency. It has not been stripped of its power, whatever that means.
MYTH: PCRs can’t do periodic reviews
PCRs still have duties under the FAR, and those duties could include periodic reviews. It’s not specific to periodic reviews, but the FAR in trying to cut out words, has said that the PCR duties are set forth in SBA’s regulation.
It says the duties assigned by SBA to its PCR are set forth at 13 CFR 125.2(b) and this is important wording: “include but are not limited to reviewing proposed acquisitions to recommend the set-aside or sole-source awards to a small business of selected acquisitions.”
So it says the duties “include but are not limited to” proposing set-asides. So first of all, that means PCRs are still alive. They still have this important duty of recommending set-asides. And also, by incorporating by reference SBA’s regulation, 125.2, the FAR is adopting the long list of responsibilities that PCRs have in SBA regulations.
The FAR didn’t duplicate that. Remember, it’s trying to cut out words, but those responsibilities still exist. It’s just that you have to go to another regulatory section to find them.
The PCRs have not been eliminated. The responsibilities are set forth in SBA’s regulations.
MYTH: Certificates of Competency don’t exist
The other ones are easy to point to. Certificates of competency: They’re still around. They’re in 19.204. That’s a certificate that SBA can issue to a business to say that it’s competent for a specific procurement. That comes up where an agency has eliminated a small business for reasons of responsibility. And the business has an opportunity to appeal for this certificate of competency. Those are still in 19.204.
MYTH: Subcontracting plans eliminated
And then subcontracting plans are still in the FAR in a couple of places. One of them is 19.206. The subcontracting plans are still evaluated during proposal. And then they have to be issued at or before award with subcontracting goals in them. So subcontracting plans have not changed.
Those are also still in section 8 of the Small Business Act. They’re still in a statute.
The other citation is 19.302-2. There was a notion in this presentation that subcontracting plans are no longer required. Please do not believe that. Please do not go forward with thinking subcontracting plans are no longer required. They are required. Subcontracting plans are required above $900,000, for contracts above $900,000, except from small businesses or where there are not subcontracting opportunities. That has not changed. It’s in the statute. It’s in multiple places in the FAR.
MYTH: Plans to make 8(a) and WOSB unconstitutional
I also saw in this presentation that I’m debunking that the administration is looking to make 8(a) and women-owned small business unconstitutional. I have not heard this. I do not know where this is coming from.
There certainly are pressures on the 8(a) programs pecifically. Yesterday, the SBA reannounced that it’s conducting audits of the 8A program. And there are pressures on the women-owned small business program primarily because of the changes in the DOT DBE program, disadvantaged business enterprise program.
But those have not led to constitutional attacks on the women-owned program. There is a constitutional case about the 8(a) program that’s ongoing. That’s the Ultima Services case. That’s the case where SBA introduced the social-disadvantage narrative requirement in response to an interim order from the judge.
As I mentioned, a constitutional case against the women-owned program would have to consider that the government already conducts an industry-by-industry analysis to determine whether women-owned small businesses are underrepresented in a particular industry in order to qualify that industry for women-owned small business side.
MYTH: 8(a) preferences eliminated
Oh, it just keeps going. There’s more.
There’s a notion that the 8(a) preference is eliminated. That’s not true. There are still 8(a) set-asides. There is still the opportunity for 8(a) sole source contracts. I speculated in my last article that the 8(a) program could be essentially unchanged dollars-wise. There’s going to be a shift from newer 8(a) firms, more mature 8A firms, maybe a shift to entity-owned firms that have more time in the program.
There’s still an 8(a) program. The FAR has even said that they prefer 8(a) competition rather than using 8(a) sole sources. Agenciesare to look at competing a requirement off of a multiple-award contract among 8(a) firms, preapproved multiple-award contracts, rather than using 8(a) sole sources.
That just means there’s still an 8(a) program. There’s still 8(a) set-aside competitions. That means there’s still important value to having an 8(a) certification.
MYTH: “Once 8(a), Always 8(a)” eliminated
It’s also the notion out there that the Once 8(a), Always 8(a) rule has been eliminated. That’s not true. Once 8(a), Always 8(a) is still in place. There’s just an extra exception to it.
Previously, agencies had to get a waiver or release from SBA when an agency wanted to move a contract out of the 8(a) program into another SBA program, like HUBZone, a service-disabled vet, or women owned. The FAR Overhaul says that release is no longer required.
Now, SBA’s rules have not changed. SBA could still require releases. We don’t know what’s going to happen until the shutdown ends. But it’s possible that SBA can say, we don’t care what the FAR Overhaul says. That’s not a notice-and-comment rulemaking. We’re going to wait until final rulemaking is out. It’s a bit uncertain whether that release is still required or not.
But that’s the only change in the Once 8(a), Always 8(a) rule. The rest of the rule is still in play.
Let’s say an agency wants to take something out of the 8(a) program and issue it as a small business aside. Would the release be required? Yes. You would need to follow the Once 8(a), Always 8(a) rule in that scenario because that’s not one of the criteria for the automatic release under the FAR Overhaul. Or agency wants to take something out of the 8(a) program and compete it full and open. That requires a release. So in that case, the Once 8(a), Always 8(a) rule is still in play.
MYTH: HUBZone on life support
There was something that somebody sent that said the HUBZone program is on life support. And it represents less than 2% of contracting. I’m not sure where this comes from.
HUBZone dollars are actually up in 2025 as compared to 2024. So the program is up and running and thriving.
It’s always, at least in recent years, at least in the last 10-15 years, been above 2%. It just hasn’t been 3%. It hasn’t gotten to the 3% government-wide goal.
But certainly, HUBZone has been in the 2.5, 2.7 range for government contracting overall.
MYTH: Requirement for OSDBUs/OSBPs eliminated
Two more debunking notes. One, that the requirement for federal agencies to have OSDBUs and OSBP offices has been eliminated. That’s not true. That’s dangerous to say that agencies don’t have OSDBUs or OSBP offices anymore. Please don’t repeat that.
The offices are still required by the law, section 15(k). There are still offices out there. Some offices are just one person now. And the idea there is, okay, well, the statute doesn’t tell you how many people to put that in office. Even if it was required, we just put one person in that office. The FAR Overhaul refers to OSDBUs. You look at 19.102(g). That refers to the role of the OSDBUs in supporting small business set-asides and the set-aside programs.
So there’s really nothing out there that says that the offices have been eliminated. People are different. There have certainly been small-business specialists at multiple agencies that have been RIF’d, gotten layoff notices. We saw some stuff online about the Department of the Treasury recently, possibly closing down its office. But there’s nothing in the law that allows for that, for closing down an entire office. The OSDBUs are still required by law.
MYTH: SBA Scorecard eliminated
And then near and dear to my heart, there is a notion that SBA has eliminated the SBA scorecard. That’s not true. The SBA scorecard is still going to be published. It’s required by law. It was codified in the Small Business Act a few years ago. And the FAR Overhaul specifically refers to the scorecard goal setting and achievement process, 19.101. One of the very first things in the FAR Overhaul is about the scorecard. It’s in there.
So the scorecard will continue. Agencies will still be required to set goals with SBA, try to meet those goals, and SBA will grade agencies on how well they achieve those goals.
Please keep your questions coming. Send them by reply to this article, at GovCon Intelligence, or leave them in the comments, or send me an email.
And once again, I encourage all of you to consider giving to the Capital Area Food Bank. Particularly as the shutdown continues, the lines are extremely long at the food bank right now. They need all the help they can get.
You can give by going to samlelaw.com/give. I’m running the marathon on Sunday. So one possible way you could support my running and the Capital Area Food Bank is by giving 26.2. That’s a number of miles that’s in the Marine Corps Marathon on Sunday.
All right. Wish me luck, everybody. See you next time.
With 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. His website is www.samlelaw.com.
