The FAR Overhaul of Part 31: Grab your dictionaries
Plus GSA shows its distaste for set-asides; DoD wants your small-business advice; GAO's affiliate-past-performance case is for entity-owned firms; and GAO wants to make it harder to get agency reports
The FAR Council yesterday afternoon published its FAR-Overhaul deviation text for two new FAR parts: Part 31 on Contract Cost Principles and Procedures and Part 29 on Taxes. For Part 31, the Overhaul managed to cut an impressive 1,300 words. How?
There weren’t substantive changes: I went through line by line (even finding a typo1) and didn’t see anything that would change the real-world experience of applying Part 31. Instead, most of the cuts were to definitions at the beginning of Part 31 and then scattered throughout the rest of the section. I counted 15 deleted definitions in all.
What that means is that, for example, if you need a definition of “labor market,” it’s no longer in the FAR Part 31. The FAR Council might bring back these definitions in a future rewrite of FAR Part 2, the section that contains the long alphabetical list of definitions. More likely, the FAR Council will keep the definition out entirely, as what they refer to as “well-known business definitions.”
In procurement law, if something isn’t defined in the FAR, the next source of guidance is the good ol’ dictionary. I have some experience with this. In 2016, a case I was involved in reached the U.S. Supreme Court involving the definition of the word “contract.” Though the FAR has a definition of “contract in Part 2, the Supreme Court ruled in Kingdomware Techs. v. United States in favor of the small-business litigant based on the dictionary definition of “contract.” Specifically, Black’s Law Dictionary defines “contract” as “An agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law.”
So, now, if you need to find the meaning of the 15 terms that were cut out of Part 31, you’ll need to pull out your dictionary and look it up.
GSA shows its distaste for set-asides
The legislative proposals GSA published this week include a whopper at the very beginning, and it’s not good for small businesses. GSA recommends that Congress raise the simplified acquisition threshold to $10 million over the next five years. Ordinarily, raising the SAT would be good for small contractors because small business set-asides are mandatory below the SAT. But GSA wants to change that too. GSA’s proposal would limit mandatory set-asides to contracts between $10,000 and $250,000. That upper limit is even less than what the SAT will be next year, based on the automatic inflation adjustment.
This intersects with the big question of whether the FAR Overhaul drafters will keep the Rule of Two in Part 19 of the FAR. The FAR’s Rule of Two is not statutory, but it appears in SBA’s regulations. So the question becomes whether the FAR Overhaul will treat SBA’s regulation as equivalent to statute, since it is the definitive interpretation of SBA’s statute, the Small Business Act.
If the FAR Overhaul eliminates the Rule of Two, GSA’s legislative proposal would decimate small business set-asides. Essentially, agencies would be able to fast-track contracts up to $10 million without giving small businesses the opportunity to compete. Why not just increase the mandatory set-aside alongside the SAT? GSA doesn’t explain.
DoD wants advice on small-business contracting
As it did four years ago, the Department of Defense is seeking comments from small businesses on its contracting policies. Comments are due August 8. DoD wants small businesses to address four specific areas: acquisition process reform, regulations, acquisition workforce, and the requirements of the Joint Capabilities Integration and Development System. Readers should comment, as DoD took the comments seriously four years ago.
My recommendation would be for DoD to reflect the Rule of Two in its own regulations, the DFARS. Statutorily, DoD is required by section 816 of the 2006 NDAA to conduct market research and set aside the contract if there are “a sufficient number of qualified small businesses.” What’s a “sufficient number?” Since 1964, at least some parts of the Defense Department have used two small businesses as the appropriate number. So two is a reasonable answer.
This recommendation might be short-lived, though. The Senate’s draft of NDAA 2026 would repeal the small-business market research requirement. No reasoning provided. That would allow DoD to revoke DFARS 210.001(a)(i)(B), which currently requires contracting officers to look for those sufficient number of small businesses. Since the FAR Overhaul took small businesses entirely out of FAR Part 10 on Market Research, you could conceivably end up with a world where no one—civilian or Defense—is required to do market research to find small businesses.
GAO’s affiliate-past-performance case is a good read for entity-owned firms
Pick up GAO’s decision in Jude & L Construction, LLC to read one of the worst bad beats among recent bid protests. Then stay for a preview of what firms owned by Alaska Native Corporations, Indian tribes, and Native Hawaiian Organizations (i.e., entity-owned firms) need to be careful about in using affiliate past performance.
In Jude & L, the Air Force failed to consider the past performance of the protester’s affiliate, claiming that the solicitation did not require that consideration. The protestor argued the opposite, that the solicitation allowed for affiliate past performance so long as the affiliate was going to be involved in performance. GAO agreed with the protester.
But the protester still lost. And it lost even though it had an email from the contracting officer that refuted the agency’s other argument—that the protester failed to provide past-performance questionnaires for the affiliate. GAO held that the protester needed to protest earlier, when proposals were due rather than after awards were made.
What does this have to do with entity-owned firms? The NDAA from 2024 included a provision requiring DoD contracting officers to consider the “relevant” past performance of a small business’s affiliates. DoD implemented the law late last year. Most small businesses don’t have affiliates, but entity-owned firms can have business and ownership relationships with other firms under the entity (SBA does not call that affiliation). The law clearly was passed for the benefit of entity-owned firms.
Jude & L shows that DoD components are reluctant to consider affiliate past performance. If entity-owned small businesses allow that to continue, they won’t get the benefit of the 2024 law. So it may take a protest to convince the contracting office to change.
GAO wants to make it harder to get agency reports
GAO spent much of its 40-page response to a Congressional mandate pushing back on drastic changes to the bid-protest process. Congress had asked GAO to propose a loser-pay fee-shifting regime, and to calculate the costs to DoD and the protested awardee. GAO did not deliver meaningfully on either of those, casting doubt on the practicality of loser-pays and finding insufficient data for the costs question.
But GAO heartily endorsed another Congressionally-suggested change to the bid-protest procedures: an enhanced pleading standard. The pleading standard is what a protester needs to meet to survive a dismissal request. Importantly, if the protester can meet the pleading standard, it can get the agency to produce documents through an agency report. But, if the protester fails to meet the pleading standard, it won’t get those documents.
GAO told Congress that GAO proposes to change its pleading standard from (A) to (B):
(A) “provide, at a minimum, either allegations or evidence sufficient, if uncontradicted, to establish the likelihood of the protester’s claim of improper agency action”
(B) “provide, at a minimum, credible allegations that are supported by evidence and are sufficient, if uncontradicted, to establish the likelihood of the protester’s claim of improper agency action.
The proposal would change the “or” in (A) to “are supported by” in (B). That, along with the requirement that allegations be “credible,” would make it harder for protesters to get past the dismissal stage. GAO suggested that it could make this change through caselaw, rather than needing a regulatory or statutory change. It probably won’t make a big difference generally but could be the deciding factor in cases on the margin.
I’m fairly certain the FAR Overhaul drafters did not intend to repeat themselves in this section, especially since they clearly wanted to cut as many words as possible:
A great post Sam! Thanks for untangling all this. The affiliate past performance discussion was particularly enlightening!
Oh interesting--it's definitely true that agencies spend a lot of time thinking about protests and how they'll affect the timeline. The GAO report had a graph showing how bid protests have become less frequent over the past four years. It's probably because of the higher threshold for order protests at GAO. What was most interesting to me was that, starting in 2020, DoD started accounting for fewer than 50% of protests. That's probably because of the higher DoD order-protest threshold or enhanced debriefings. But DoD contracting officers also could be doing a better job at structuring their procurements.