What is "performance outside the United States" (FAR 19) for services acquisition?

If the contract is for janitorial services, for example, the key is the location where the floor sweeping and toilet scrubbing will occur.  If the covered building is in Greece, then performance occurs entirely outside the United States.  It is irrelevant where the company's headquarters is -- it is irrelevant where the janitors are recruited -- it is irrelevant where the cleaning products are sourced -- it is irrelevant if the company has a U.S. branch office -- it is irrelevant if the payroll function is in the U.S.

At least, that's my take on it.

Yes and it would seem stupid to me to apply set asides and subcontracting goals and plans  for such a contract.

ji20874 said:

If the contract is for janitorial services, for example, the key is the location where the floor sweeping and toilet scrubbing will occur.  If the covered building is in Greece, then performance occurs entirely outside the United States.  It is irrelevant where the company's headquarters is -- it is irrelevant where the janitors are recruited -- it is irrelevant where the cleaning products are sourced -- it is irrelevant if the company has a U.S. branch office -- it is irrelevant if the payroll function is in the U.S.

At least, that's my take on it.

Okay, so if the contract is for provision of technical assistance to the Government of Greece and the contractor provides technical experts deployed to Greece to assist Greek Government but hires and pays them in the US, and the compliance aspect of the contract, accounting, subcontract management, executive oversight, program management etc., is handled in the home office by 30+ people, all charged to the Government through indirects.  Is the contract performed overseas? In its entirety?

If the service contract is for janitorial services for a building in Greece, and the contractor deploys U.S. citizen janitors to Greece to sweep the floors and scrub the toilets but hires and pays them in the US, and the accounting, subcontract management, executive oversight, program management etc., is handled in the U.S. home office by 30+ people, all charged as indirects, I would still say performance is entirely outside the U.S.  This remains true even if the contractor sources the brooms and brushes and cleaning liquids in the U.S.  All the floor sweeping occurs in Greece, and all the toilet scrubbing occurs in Greece, right?  

The purpose of the sample service contract is to sweep floors and scrub toilets in Greece.  At least, that's my take on it.  Are you seeing things differently?

I don't think the FAR or SBA regulations provide definitive criteria for determining place of performance, so I would interpret it the way ji does (i.e., to the advantage of the CO).

Don Mansfield said:

I don't think the FAR or SBA regulations provide definitive criteria for determining place of performance, so I would interpret it the way ji does (i.e., to the advantage of the CO).

What we lack is a definition of what constitutes "contract performance." If a contractor is building something in Afghanistan, but is purchasing materials, inspecting them, packing them for shipment to the worksite, and loading them on an aircraft or vessel in the United States, is that work part of "contract performance"? If so, where was the place of contract performance and what are the policy implications?

But - what If the solicitation and contract don’t require the contractor to purchase materials, inspect them, pack them for shipment to the worksite, and load them on an aircraft or vessel in the United States?

What if this can be done within the local  country or any other country and the award isn’t restricted to only US contractors?

In other words, if place of performance isn’t restricted during the soliciting stage, then does Part 19 apply?

I wouldn’t think so. There are a whole lot of host countries who would not appreciate restricting award of a contract to US based contractors. In fact DoD has Host Nation Agreements with many countries that host US Forces.

Tzarina, what is your specific issue?  Are you wondering if a contract should be set aside for small businesses?  Since you mentioned services are you concerned about application of the SCA?  What about EEO?

Service Contract Act only applies to services performed in the US and specified territories (see definition of United States at FAR 22.1001).

For reference, Clause and Form for performance outside the United States https://www.acquisition.gov/dfars/252.225-7003-report-intended-performance-outside-united-states-and-canada—submission-offer.

Neil Roberts said:

For reference, Clause and Form for performance outside the United States https://www.acquisition.gov/dfars/252.225-7003-report-intended-performance-outside-united-states-and-canada—submission-offer.

Neil, what is this DoD FAR Supplement in reference to concerning this thread? Tzarina is asking about application of Part 19 to, for example, a technical assistance contract to the Government of Greece, performed in Greece or for services performed in Egypt. 

For DoD, see 225.7201 Policy:

“10 U.S.C. 2410g requires offerors and contractors to notify DoD of any intention to perform any part of a DoD contract outside the United States and Canada that—

(a) Exceeds $750,000 in value; and

(b) Could be performed inside the United States or Canada.

Parent topic:  SUBPART 225.72 —REPORTING CONTRACT PERFORMANCE OUTSIDE THE UNITED STATES”

Hi Joel. I would say one government contract definition view of how "performance outside the United States" is seen.

As a side comment, not quite sure to me whether the post is about "performance outside the United States," acquisition of services which are to be performed overseas," or "contract performed overseas," which are used in this post.

On 2/7/2022 at 8:52 AM, Tzarina of Compliance said:

So, if I have a contract which is to be performed under Foreign Assistance Act in, lets say, Egypt, and I am hiring contractors in the US, who then go and hire personnel in the US and send them to Egypt and also maintain a home office in the US which is paid for by indirect costs.  Let's say all the costs that are actually "incurred" overseas for the performance are about 30% of the contract and the rest are "incurred" in the US.  Is the contract performed overseas?  If there is a definitive thread on this that exists, grateful for a link.  Thanks!

@Tzarina of Compliance, FAR 52.219-xx clauses in a prime contract are the requirements for the contractor related to FAR Part 19. Is your concern about those requirements? Which one? Or are you a contracting officer concerned about something else in FAR Part 19, and if so, can you refer to the specific paragraph section that includes the requirements (and words) you are concerned about there?

Neil Roberts said:

@Tzarina of Compliance, FAR 52.219-xx clauses in a prime contract are the requirements for the contractor related to FAR Part 19. Is your concern about those requirements? Which one? Or are you a contracting officer concerned about something else in FAR Part 19, and if so, can you refer to the specific paragraph section that includes the requirements (and words) you are concerned about there?

The questions are:  should this be a set-aside under FAR 19 and if its not a set aside does it require a Small Business Subcontracting Plan (over $750K)?    The contract is to provide technical assistance to the Government of let's say Egypt, in creating financial management system which can be used by various departments of the Egyptian Government.  The expected offerors will be US based contractors, who will perform the work in Egypt with the back office support, compliance etc., in the United States.   70% of the contract costs are incurred in the US to pay salaries of both personnel posted to Egypt, and personnel supporting the effort in the US, indirect costs, etc.    The Agency's position is that since all of its contracts are performed overseas, they do not have to (but can) offer set-asides or require small business subcontracting plans.    My question is not to the point of the FAR 19 and whether or not it should be used more often in contracts which are performed overseas.

On 2/7/2022 at 10:18 PM, Vern Edwards said:

What we lack is a definition of what constitutes "contract performance." If a contractor is building something in Afghanistan, but is purchasing materials, inspecting them, packing them for shipment to the worksite, and loading them on an aircraft or vessel in the United States, is that work part of "contract performance"? If so, where was the place of contract performance and what are the policy implications?

In services contracting, this is the issue. If the work is performed both in the US and overseas, what percentage makes it "performance overseas" for mandatory SB considerations?

Deleted

Tzarina of Compliance said:

In services contracting, this is the issue. If the work is performed both in the US and overseas, what percentage makes it "performance overseas" for mandatory SB considerations?

I’m assuming that indirect costs and support are performed by in-house company personnel who support multiple contracts (hence “indirect”) and who are not contractors. Is that correct?  Are the personnel accepting, packing and shipping materials directly charged to the contract?

Tzarina of Compliance said:

The Agency's position is that since all of its contracts are performed overseas, they do not have to (but can) offer set-asides or require small business subcontracting plans.

The dust has not settled on this issue. The FAR Councils' rationale for concluding that set-asides are discretionary overseas is not supported by the facts. See the ABA's comments submitted in response to the proposed rule for FAR Case 2016-002: https://www.regulations.gov/comment/FAR-2016-0002-0025

If I were you, I would go along with the agency's position unless the final rule comes out making set-asides mandatory regardless of place of performance.

Tzarina,

If you insist on applying FAR 19 to contracts performed overseas, contrary to your agency's guidelines and the comments here, go ahead.  No one here will stop you.

Tzarina of Compliance said:

In services contracting, this is the issue. If the work is performed both in the US and overseas, what percentage makes it "performance overseas" for mandatory SB considerations?

For a scholarly (and lengthy) discussion of this topic written by an Air Force JAG officer, see Malone, Only in America! (and its outlying areas): the conflict between the SBA regulations and the FAR, and the importance of not burdening overseas and contingency contracting agencies with a requirement to execute U.S. small business set-asides, 73 A.F. L. Rev. 151 (2015).

https://www.afjag.af.mil/Portals/77/documents/Law Review/AFD-150827-031.pdf?ver=twfkmKgqzZ8GV3eXzAKo1g%3d%3d

You'll have to scroll down to the article.

See also Mansfield, "SMALL BUSINESS PROGRAMS: Do They Apply Outside The United States?", The Nash & Cibinic Report, September 2015. (Yes, our Don Mansfield.)

Since I don't think anyone has mentioned it, see Latvian Connection, LLC, Comp. Gen. B-408633, Sept. 18, 2013.F

https://www.gao.gov/assets/b-408633.pdf

See also Maersk Line, Limited, Comp. Gen. B-410280, Dec. 1, 2014.

https://www.gao.gov/assets/b-410280.pdf

On August 12, 2019, 84 Fed. Reg. 39793, the FAR councils issued a proposed rule entitled, "Federal Acquisition Regulation: Applicability of Small Business Regulations Outside the United States." The proposed rule would change FAR 19.000(b), According to the background statement:

Quote

Section 19.000, Scope of part. This section is amended to clarify that, unless otherwise noted in FAR part 19 (such as for subparts 19.6 and 19.7), contracting officers shall apply this part in the United States and its outlying areas and may apply this part outside the United States and its outlying areas. Additionally, the section is amended to specify that offerors participating in any FAR part 19 procurement are required to meet the definition of "small business concern" at FAR 2.101 and the definition of "concern" at FAR 19.001.

The proposed text of 19.000(b) is as follows:

Quote

Amend section 19.000 by revising paragraph (b) to read as follows:

19.000 Scope of part.

(b)(1) Unless otherwise specified in this part (see subparts 19.6 and 19.7)-

(i) Contracting officers shall apply this part in the United States and its outlying areas; and

(ii) Contracting officers may apply this part outside the United States and its outlying areas.

(2) Offerors that participate in any part 19 procurement are required to meet the definition of "small business concern" at 2.101 and the definition of "concern" at 19.001.

The comment period ended on October 11, 2019.

According to the FAR councils' semiannual regulatory agenda dated January 31, 2022, they plan to issue a final rule in March 2022. They did not indicate what the rule will say.

For those of you who want more background, the Federal Register RIN is 9000-AN34.

This, from the article that Vern provide the link to, is an immediate “Bingo!” For me.

“…V. AN EXPANSION OF SMALL BUSINESS SET-
ASIDE REQUIREMENTS TO EXTRATERRITORIAL PROCUREMENTS NOT ONLY CONFLICTS WITH THE
FAR, BUT ALSO WITH OTHER U.S. STATUTES AND INTERNATIONAL AGREEMENTS ..................................................... 179 A. U.S. Statutes and Treaties Should Control Over the Regulatory
Interpretation of the Small Business Act ........................................... 179
B. A Worldwide Application of Small Business Set-Asides Will
Conflict with Statutes and Agreements Governing the Presence
of U.S. Armed Forces in Other Countries ......................................... 180
C. Applying Small Business Set-Asides to Overseas
Procurements Will Also Conflict with the Letter and Spirit of
Valid, Enforceable International Executive Agreements................... 184    

1. The FAR Exempts From Certain U.S. Laws and Policies [of]
Countries with which the United States Has Entered into
Executive Agreements ................... 185”

EDIT: For example, the 1965 USACE “Engineer Assistance Agreement” (EAA) and subsequent Memoranda Of Agreement (MOA’s) with the Kingdom of Saudi Arabia, various Status of Forces Agreements (SOFAs)  and Various Foreign Military Sales (FMS) Agreements and other agreements that covered work in Central Latin America and South America come to mind.

Everyone: Go back and look at the Czarina's question.

Quote

How does one determine "performance outside the US", not even mentioning "entirely outside the United States"  - what is "performance" for this purpose?

It's reasonably clear.

I wrote this for publication 9 years ago:

Quote

Some statements in the FAR seem clear until the time comes to apply them. Consider this from FAR Part 19, “Small Business Programs,” at FAR 19.000(b):

"This part, except for [FAR] subpart 19.6, applies only in the United States or its outlying areas."

What does “in the United States” mean? Who or what has to be “in the United States?” The Contracting Officer? The contractor? Performance of the work? All three? Does FAR Part 19 apply if the CO is in the United States but the work will be done in Bahrain? What if the CO is in Bahrain but the work will be done in the United States? The FAR contains many such mysterious passages.

 I wonder if the upcoming final rule will clear things up. I doubt it. Look at the proposed 19.000(b).

What part of what is necessary to deliver supplies or services constitutes the "performance" to which 19.000(b) refers? In the absence of clear regulatory or tribunal guidance, a CO must reason the matter through, then construct an argument to support their conclusion.

Vern Edwards said:

For a scholarly (and lengthy) discussion of this topic written by an Air Force JAG officer, see Malone, Only in America! (and its outlying areas): the conflict between the SBA regulations and the FAR, and the importance of not burdening overseas and contingency contracting agencies with a requirement to execute U.S. small business set-asides, 73 A.F. L. Rev. 151 (2015).

https://www.afjag.af.mil/Portals/77/documents/Law Review/AFD-150827-031.pdf?ver=twfkmKgqzZ8GV3eXzAKo1g%3d%3d

You'll have to scroll down to the article.

See also Mansfield, "SMALL BUSINESS PROGRAMS: Do They Apply Outside The United States?", The Nash & Cibinic Report, September 2015. (Yes, our Don Mansfield.)

Since I don't think anyone has mentioned it, see Latvian Connection, LLC, Comp. Gen. B-408633, Sept. 18, 2013.F

https://www.gao.gov/assets/b-408633.pdf

See also Maersk Line, Limited, Comp. Gen. B-410280, Dec. 1, 2014.

https://www.gao.gov/assets/b-410280.pdf

Thank you so much, Vern.   I am looking for some discussion on this, so this is exactly the reading I am looking for, also per your last - I was hopeful with the new FAR 19 "Clarification", but it does not look like they are clarifying this part.   This agency's industry has a lot of small and emerging businesses, so I am trying to learn more about how the process works for them.    I am not trying to go against any guidelines etc., but I am trying to find out how do I determine when to apply the small business subcontracting requirements and set asides.  "Using discretion" in this case seems to affect a lot of businesses.   I will gratefully read all the links you shared and thank you all again.   Happy Valentine's Day!  🙂❤️

On 2/13/2022 at 11:02 PM, Don Mansfield said:

The dust has not settled on this issue. The FAR Councils' rationale for concluding that set-asides are discretionary overseas is not supported by the facts. See the ABA's comments submitted in response to the proposed rule for FAR Case 2016-002: https://www.regulations.gov/comment/FAR-2016-0002-0025

If I were you, I would go along with the agency's position unless the final rule comes out making set-asides mandatory regardless of place of performance.

Don, thank you.  ABA comments are helpful.  I hope final rule clarifies, but probably not.   Thank you for providing this link.   I have requested my office to look up your 2015 article that Vern mentioned.  Look forward to reading that.  Thank you again.

Tzarina of Compliance said:

Don, thank you.  ABA comments are helpful.  I hope final rule clarifies, but probably not.   Thank you for providing this link.   I have requested my office to look up your 2015 article that Vern mentioned.  Look forward to reading that.  Thank you again.

Tzarina, you mentioned the Foreign Assistance Act earlier. Are you specifically asking about non-military agency programs (e.g., USAID, Dept of Commerce, etc.)? I don’t know what country to country agreements apply to such foreign programs. Are you aware of any that would be applicable to your contracts (e.g., USAID)? I’d think that there would be…

Thanks!

I would think US Agencies providing military OR non-military services to foreign countries would have some type of country to country or program agreements. If not or if the recipient country doesn’t care who you contract with, then your question is still open.

Edit- add: But if they do care, the Part 19 programs are restricted to or favor US Small Businesses, correct? I’m sure that would go over like a lead balloon…

joel hoffman said:

Tzarina, you mentioned the Foreign Assistance Act earlier. Are you specifically asking about non-military agency programs (e.g., USAID, Dept of Commerce, etc.)? I don’t know what country to country agreements apply to such foreign programs. Are you aware of any that would be applicable to your contracts (e.g., USAID)? I’d think that there would be…

Thanks!

Thats a good point.  Having read through all the info provided here, I am thinking that the way the agency obligates funding to specific country accounts before the funding is used to what is called "sub-obligation" to contracts may support the whole "overseas contracting" argument, even though the actual "performance" is  in the US if you count it by dollar value or by number of personnel and where they work from.  Very confusing.  If the whole thing is exempt, then say its exempt and all the set-asides and SB sub plans are completely discretionary.  If it is not exempt, then everyone follows the same rules....

As for your services assistance to the Greek government example,  the Greeks might not care how you contract for the assistance. However, if it were for construction, I’ll bet they would care.

Tzarina,

So, what have you decided for your situation?  Contract performance is or is not entirely outside the U.S.?

@Tzarina of Compliance,

Note that the authority at FAR 6.302-4(a)(2) would likely trump set-aside rules.

ji20874 said:

Tzarina,

So, what have you decided for your situation?  Contract performance is or is not entirely outside the U.S.?

I am leaning towards it is NOT, although my choice would just be considered "discretionary".  Until it is clear what is considered "performance in the US" and how that is determined, people will continue to wing it.  At least in this industry, which is non-DOD.  

Don Mansfield said:

@Tzarina of Compliance,

Note that the authority at FAR 6.302-4(a)(2) would likely trump set-aside rules.

I this case, the Foreign Assistance bilaterals do not restrict sources, so it just defaults to the rest of the FAR.

Tzarina of Compliance said:

Until it is clear what is considered "performance in the US" and how that is determined, people will continue to wing it.

FAR 19.000(b) indicates that small business programs apply only in the United States... There is no language therein about "performance."

Tzarina of Compliance said:

Until it is clear what is considered "performance in the US" and how that is determined, people will continue to wing it.

Is there a problem?  Is it bad for "people to continue to wing it"?

I don't see a problem.  I am okay with two different contracting officers having different but both reasonable opinions.

I think we are not served well by insisting on more and more rules and less and less professional discretion.

ji20874 said:

Is there a problem?  Is it bad for "people to continue to wing it"?

I don't see a problem.  I am okay with two different contracting officers having different but both reasonable opinions.

I think we are not served well by insisting on more and more rules and less and less professional discretion.

Highlighted much of the time in Forum is the reflected experience that professional discretion may not be that but just a "wing it" as implied by Tzarina which by my read  means someone does do something without much preparation and practice.  I do wonder how many CO's, by example, have taken the time to personally explore the matter discussed here in to arrive at a reasonable opinion, or should I say a well documented decision as to why or why not for an instant procurement?   

I agree with less rules and professional discretion while I also agree there should be a genuine concern with regard to people "winging it".  Winging it probably happens much more than it should!  For an industry that experiences it a lot, where I suspect such inconsistency might be the lynch pin to proposal pricing and even acceptance it would seem an added rule of definition might be a very good thing for everyone.

ji20874 said:

I think we are not served well by insisting on more and more rules and less and less professional discretion.

While I generally agree with that view, I have some questions, starting with: What does "professional discretion" mean?

What makes discretion "professional"?

• Is it the standing of  the person exercising it?
• Is it the subject matter, regardless of who is exercising it?
• Is it the way in which discretion is exercised, regardless of the subject?

If it is discretion exercised by a professional, then what is a professional? Uber calls its drivers "professionals":

Quote

Professional drivers on every trip

Expect elevated service from professional drivers. People driving with Uber Black must maintain a minimum rating requirement of 4.85 stars, be insured to drive commercially, and meet state-or local-level livery regulations.

https://www.uber.com/us/en/ride/uberblack/

Is a profession anything someone does for a living?

Is a professional someone who does something for a living, so that Uber drivers are professionals in the same way that physicians are professionals?

Is a professional someone who is polite and decorous in the office, even though they are ignorant of and unskilled at their work?

Is a truly and deeply knowledgeable and skilled person doing complex work extremely well unprofessional because they are impatient and do not suffer fools gladly or sympathetically?

I'm not opposed to professional discretion. But are contracting officers really professionals? If so, what makes them so? Is it the fact of having been appointed. Is it the kind of work they do? Is it how well they do that work?

FAR 19.000(b) is a declarative sentence that makes a statement about the implementation of policy. As a statement, it's true or false. In order for us to know whether it's true or false we have to know what it means. I don't know what it means. I think it is vague, because it is not clear about "applies only in" means.

Should the implementation of a national policy depend on the discretion of individuals interpreting a vague instruction? Or should the policy be clear?

When I read ji20874's post I found myself uncertain about its implications. On the one hand, I wanted to agree, but on the other hand, I found myself unable to do so without hesitation. I'm just stating the reasons for my uncertainty.

If I were facing a problem about that required interpretation of 19.000(b) I would not ask strangers for guidance. I would do some background research, talk to respected colleagues, decide what I want to do, and then construct an argument that supports my plan and try to sell it to the powers that be. Absent clear direction, I wouldn't agonize over the decision. If it's wrong, someone will sort me out. Or maybe not.

Added thought:

According to Andrew Abbott in The System of Professionals: An Essay on the Division of Expert Labor (Univ. of Chicago, 1988):

• On page 8: "[P]rofessions are exclusive occupational groups applying somewhat abstract knowledge to particular cases."
• On page 35: "The tasks of professions are human problems amenable to expert service."

The keys, in Abbott's view, are knowledge and expertise (skill in application).

Even though Google Maps might dictate the "best" route for an Uber driver, I am okay with allowing the driver some professional discretion in deciding the course for a particular trip.

Vern Edwards said:

If I were facing a problem about that required interpretation of 19.000(b) I would not ask strangers for guidance. I would do some background research, talk to respected colleagues, decide what I want to do, and then construct an argument that supports my plan and try to sell it to the powers that be. Absent clear direction, I wouldn't agonize over the decision. If it's wrong, someone will sort me out. Or maybe not.

I agree.  I would not want to insist on more rules to make the decision for me.  I am okay with two different contracting officers having different but both reasonable opinions.

Vern Edwards said:

But are contracting officers really professionals?

Good question -- are contracting officers professionals or clerks?  I want them to be professionals, and to act like professionals, and to make decisions like professionals.  I know others want to take away discretion from contracting officers.

ji20874 said:

I would not want to insist on more rules to make the decision for me.

How about clearer rules? Remember, we live in a legally adversarial society, and litigation (protest) is costly, time-consuming, and energy-sapping.

ji20874 said:

I know others want to take away discretion from contracting officers.

Who? Why? I've been a senior staffer in a four-star military command. In my experience senior people want to take discretion away from COs because they don't like the way the COs have used the discretion. Also, in my experience, most COs have not been truly expert in the matters they handle.

Neil Roberts said:

FAR 19.000(b) indicates that small business programs apply only in the United States... There is no language therein about "performance."

True, but see the prescription for the provision at FAR 52.219-1, Small Business Program Representation:

Quote

Insert the provision at 52.219-1, Small Business Program Representations, in solicitations exceeding the micro-purchase threshold when the contract will be performed in the United States or its outlying areas.

On 2/7/2022 at 8:52 AM, Tzarina of Compliance said:

but the services are purchased from personnel hired in the United States and posted overseas, plus the indirect cost pools are for personnel who are located in the United States.  So, if I have a contract which is to be performed under Foreign Assistance Act in, lets say, Egypt, and I am hiring contractors in the US, who then go and hire personnel in the US and send them to Egypt and also maintain a home office in the US which is paid for by indirect costs.  Let's say all the costs that are actually "incurred" overseas for the performance are about 30% of the contract and the rest are "incurred" in the US.  Is the contract performed overseas?

1. How would you know, prior to receiving proposals, where the personnel would be hired and that the indirect cost pools are for personnel who are located in the United States?

2. How would you know, prior to receiving proposals, that you were going to hire contractors in the US who would then go and hire personnel in the US and send them to Egypt and also maintain a home office in the US which is paid for by indirect costs?

I ask because the decision whether or not to set aside is made before soliciting proposals.

Vern Edwards said:

Who? Why? I've been a senior staffer in a four-star military command. In my experience senior people want to take discretion away from COs because they don't like the way the COs have used the discretion. Also, in my experience, most COs have not been truly expert in the matters they handle.

Most of the rhetoric after the acquisition reform efforts of the 90's focused on taking discretion away from contracting officers and ensuring "consistency."

See, e.g., Schooner's Fear of Oversight: The Fundamental Failure of Business-Like Government. Portions of the abstract are quoted below.

Quote

The article shows that the reformed system couples greatly increased buyer discretion with dramatically reduced oversight of government spending - both internal and external. This article asserts that this combination erodes the public's confidence in the procurement system, violates established norms, and is antithetical to a host of Congressional mandates and policies. ... The article suggests that, despite the success of procurement reform, the current paradigm elevates its facially attractive norms - efficiency and discretion - at the expense of other established, yet apparently undervalued, norms that guide the procurement system, e.g., transparency, integrity, and competition. It cautions that businesslike government has diluted existing internal and external oversight mechanisms and threatened sustained public confidence in the procurement system.

Just now, here_2_help said:

Most of the rhetoric after the acquisition reform efforts of the 90's focused on taking discretion away from contracting officers and ensuring "consistency."

See, e.g., Schooner's Fear of Oversight: The Fundamental Failure of Business-Like Government. Portions of the abstract are quoted below.

Now I could be wrong but if memory serves me right the intent of the FAR in its beginning was in part for consistency.  Where, I could as a contractor move from one agency to another and hopefully find a proposed solicitation formed in the same manner -  the Uniform Contract Format.   Not that it matters but in my personal view having the consistency would make it easier (less costly?) for folks to do business with government.  I particularly like my local doctor because she treats me consistently, it is when I stray away from her clinic, her associated primary and have to deal with someone new that frustrates the heck out of me, along with the fact that I spend extra time beyond the actual care matters, which in their own right takes more time to educate the new doctor, but the administrative side on how my personal finances and insurances should pay, will pay, for the care.  Time and time again they do not get it right on the latter and I do feel my time is worth something.

Poor example be it as it may.  Consistency does play an important role in my view.  I will enjoy reading "Fear..."

Neil Roberts said:

FAR 19.000(b) indicates that small business programs apply only in the United States... There is no language therein about "performance."

See also FAR 19.702(b)(3), saying that subcontracting plans are not required for contracts that will be performed entirely outside of the United States and its outlying areas.

Vern Edwards said:

I've been a senior staffer in a four-star military command. In my experience senior people want to take discretion away from COs because they don't like the way the COs have used the discretion. Also, in my experience, most COs have not been truly expert in the matters they handle.

Those Air Force four-star generals lost whatever procurement discretion they once had with the Air Force's decision, for the sake of consistency, to strip them of their "Head of the Contracting Activity" role.

I agree that many or most COs have not been expert in the matters they handle, and I wish it were otherwise -- I want COs to be able to exercise professional discretion in making decisions, rather than being clerks.  To me, many of the calls for consistency seem to be calls for contracting officers to be clerks.

Regarding the original poster's matter of whether performance occurs entirely outside the United States, I don't need more rules (or even clearer rules) -- I can make the call for my procurements with existing text while being flexible enough to be reasonable and to adapt to changing interpretations and rules.  In the context of the original posting, I care about where performance of the contracted services will occur, and not at all about where the contracting office is, where the eventual contractor's home office might be, where the contractor sources its staff or materials, where the CEO goes on his or her vacation, where the contractor's back office functions reside, whether a contractor employee might be paid in U.S. dollars, and so forth.

ji20874 said:

See also FAR 17.702(b)(3), saying that subcontracting plans are not required for contracts that will be performed entirely outside of the United States and its outlying areas.

Those Air Force four-star generals lost whatever procurement discretion they once had with the Air Force's decision, for the sake of consistency, to strip them of their "Head of the Contracting Activity" role.

I agree that many or most COs have not been expert in the matters they handle, and I wish it were otherwise -- I want COs to be able to exercise professional discretion in making decisions, rather than being clerks.  To me, many of the calls for consistency seem to be calls for contracting officers to be clerks.

Regarding the original poster's matter of whether performance occurs entirely outside the United States, I don't need more rules (or even clearer rules) -- I can make the call for my procurements with existing text while being flexible enough to be reasonable and to adapt to changing interpretations and rules.  In the context of the original posting, I care about where performance of the contracted services will occur, and not at all about where the contracting office is, where the eventual contractor's home office might be, where the contractor sources its staff or materials, where the CEO goes on his or her vacation, where the contractor's back office functions reside, whether a contractor employee might be paid in U.S. dollars, and so forth.

Since one won’t subcontract the home office and likely not other support functions and the actual work is performed outside of the US and it’s outlying areas, what would be subcontracted anyway…

ji20874 said:

Those Air Force four-star generals lost whatever procurement discretion they once had with the Air Force's decision, for the sake of consistency, to strip them of their "Head of the Contracting Activity" role.

@ji20874They no longer have the permanent title, but most USAF HCA authorities are delegable. See Air Force MP5301.601(a)(i). Many are delegable down to the Chief of the Contracting Office. Four-stars almost always have discretion, or can get it with a phone call.

ji20874 said:

I don't need more rules (or even clearer rules).

Who needs more rules? But I prefer clear ones to vague ones. Saves time.

What's the place of performance for a supply contract? The place where the product is manufactured or the place of delivery?

What's the place of performance of a cloud services contract?

What's the place of performance for a call-center contract?

Vern Edwards said:

What's the place of performance for a supply contract? The place where the product is manufactured or the place of delivery?

How can you know the place of manufacture before you receive offers?

Don Mansfield said:

How can you know the place of manufacture before you receive offers?

Is the place of manufacture the place of performance?

This thread leads to the question as to whether FAR 19.001(b) is consistent with 15 U.S.C. 631 which states "It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order . . . to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises."  Note that the statute talks about "total purchases and contracts."  Nothing in the statute limits this policy to contracts to be performed in the U.S.  Also, see, 13 CFR 125.2(f) ( The contracting officer shall set aside any acquisition with an anticipated dollar value exceeding the Simplified Acquisition Threshold (defined in the FAR at 48 CFR 2.101) for small business concerns when there is a reasonable expectation that offers will be obtained from at least two small business concerns that are competitive in terms of quality and delivery and award will be made at fair market prices.)

Vern Edwards said:

Is the place of manufacture the place of performance?

Unless the Government is specifying place of manufacture, I don't see how "place of performance" could be interpreted as "place of manufacture" for purposes of applying FAR part 19.

Have we changed the discussion from service contracts to supply contracts?

For purposes of set-aside and subcontracting plans for supply contracts, it might make sense to think of the place of delivery as the place of performance for FAR Part 19 purposes.  The contract is for delivery, and delivery (performance) occurs at the government agency's loading dock, right?  For supply contracts, as just mentioned, and especially for competitive supply contracts, we usually don't specify a place of manufacture in our solicitations.  I prefer to look at contract performance as where the contract specifies performance (or delivery), not where the contractor electively chooses to perform preparatory or back office tasks, or where it electively chooses to source its supplies and services.

ji20874 said:

Have we changed the discussion from service contracts to supply contracts?

For purposes of set-aside and subcontracting plans for supply contracts, it might make sense to think of the place of delivery as the place of performance for FAR Part 19 purposes.  The contract is for delivery, and delivery (performance) occurs at the government agency's loading dock, right?  For supply contracts, as just mentioned, and especially for competitive supply contracts, we usually don't specify a place of manufacture in our solicitations.  I prefer to look at contract performance as where the contract specifies performance (or delivery), not where the contractor electively chooses to perform preparatory or back office tasks, or where it electively chooses to source its supplies and services.

Careful....not sure the discussion is aligning with other elements of guidance.  https://fedspendingtransparency.github.io/whitepapers/place-of-performance/#:~:text=In contracting reporting instructions for,the service will be performed.

"In contracting reporting instructions for many years, the “place of performance” was the location of the principal plant or place of business where the supply items will be manufactured; where finished products will be taken from inventory; or, for services, the principal location where the service will be performed."

C Culham said:

Careful....not sure the discussion is aligning with other elements of guidance.  https://fedspendingtransparency.github.io/whitepapers/place-of-performance/#:~:text=In contracting reporting instructions for,the service will be performed.

"In contracting reporting instructions for many years, the “place of performance” was the location of the principal plant or place of business where the supply items will be manufactured; where finished products will be taken from inventory; or, for services, the principal location where the service will be performed."

Carl,

At the time of contract reporting, you would know that information. It would either be specified by the Government or you would have a response to FAR 52.214-14 or 52.215-6. Unless the Government is specifying place of manufacture, you wouldn't know before soliciting offers.

Carl,

Everyone understands there is some fiction here.  Here's another quotation from the link you cited:

Quote

For procurement, unless the place of performance is specified by the Federal Government, or awardees are required by specific terms and conditions of the award to specify their performance location(s), prime awardees are not required to identify the primary place of performance, and are free to actually “perform” on the award wherever they choose. In these cases, government users have historically used the prime awardee’s own location (as registered in their System for Award Management (SAM) record in the physical address data fields).

(my emphasis)

So, one location is coded in this post-award report while the contractor remains free to perform wherever it chooses.

ji20874 said:

For purposes of set-aside and subcontracting plans for supply contracts, it might make sense to think of the place of delivery as the place of performance for FAR Part 19 purposes.  The contract is for delivery, and delivery (performance) occurs at the government agency's loading dock, right?  For supply contracts, as just mentioned, and especially for competitive supply contracts, we usually don't specify a place of manufacture in our solicitations.  I prefer to look at contract performance as where the contract specifies performance (or delivery), not where the contractor electively chooses to perform preparatory or back office tasks, or where it electively chooses to source its supplies and services.

@ji20874What if the contract specifies inspection and acceptance at origin (see FAR 46.402 and 46.503), with delivery f.o.b. destination to a base in Africa (see FAR 47.302(c))?

I'm not challenging you, ji. I'm just asking for your view. Nor am I trying to answer Tzarina's question.

My point is that the concept and phrase "place of performance", which appears in 31 places in the FAR, is unclear in many circumstances, which can result in inconsistent policy application. I don't care that you are okay with that. That's your business. I'm interested only in showing that terms and phrases in the FAR that seem clear at first impression are often obscure or confusing upon inquiry.

That is my only point.

@Don Mansfield

Don Mansfield said:

How would you know, prior to receiving proposals, that you were going to hire contractors in the US who would then go and hire personnel in the US and send them to Egypt and also maintain a home office in the US which is paid for by indirect costs?

Do market research. Issue an RFI prior before solicitation of offers and ask prospective offerors what approach they are likely to take. Also, consider what contractors did on past contracts. You wouldn't "know," but you might get a sense of the possibilities and likelihoods.

Vern Edwards said:

I'm interested only in showing that terms and phrases in the FAR that seem clear at first impression are often obscure or confusing upon inquiry.

I agree.  But I think that professionals can handle it.  As a general matter, I would rather have professional contracting officers handle each situation according to its facts and the best advice they can get rather than having back office policy people making more rules.  I would rather have contracting officers who professionally handle these matters than contracting officers who wallow in uncertainty.

Vern Edwards said:

What if the contract specifies inspection and acceptance at origin (see FAR 46.402 and 46.503), with delivery f.o.b. destination to a base in Africa (see FAR 47.302(c))?

We're getting a long way from the original poster's question.  We've been talking about place of performance for FAR Part 19 purposes for services contracts.  If we're talking FAR Part 19 and supply contracts, it seems to me that the contractor performs when it delivers to the base in Africa.  If it is a DoD contract, DCMA's International Command has many overseas offices that can do inspection and acceptance at origin.

ji20874 said:

We're getting a long way from the original poster's question.

The OP's question was based on a false premise. She interpreted FAR 19.000(b) as setting "place of performance" as the criterion for applicability of FAR Part 19. But FAR 19.000(b) does not mention place of performance. It says that Part 19 "applies only in the United States." That phrase is entirely obscure.

As for "professional contracting officers," I presume that different contracting officers will have various standards, so there is no standard.

My standard would be the late Gordon Wade Rule. A very high standard, indeed. I doubt that even five percent of today's contracting officers meet that standard (or have even heard of Rule). But then the word "professional" has lost all meaning in our society, because our society does not believe in standards. Everyone is gets a trophy.

Thanks for your response.

Vern Edwards said:

My standard would be the late Gordon Wade Rule. A very high standard, indeed.

How much, if any, do you think Mr. Rule’s legal training played in his knowledge, skills, and abilities?

@Jamaal ValentineIt certainly helped, because legal training teaches you how to think. But you can learn to think without legal training. I think I can think, but I haven't been to law school.

You can learn to think by reading and by discussing things with people who know how to think and discuss.

BTW, I don't think I meet Mr. Rule's standard. But I aspire.

On 2/16/2022 at 4:20 PM, Retreadfed said:

This thread leads to the question as to whether FAR 19.001(b) is consistent with 15 U.S.C. 631 which states "It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order . . . to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small-business enterprises."  Note that the statute talks about "total purchases and contracts."  Nothing in the statute limits this policy to contracts to be performed in the U.S.  Also, see, 13 CFR 125.2(f) ( The contracting officer shall set aside any acquisition with an anticipated dollar value exceeding the Simplified Acquisition Threshold (defined in the FAR at 48 CFR 2.101) for small business concerns when there is a reasonable expectation that offers will be obtained from at least two small business concerns that are competitive in terms of quality and delivery and award will be made at fair market prices.)

On 2/16/2022 at 11:30 PM, Vern Edwards said:

The OP's question was based on a false premise. She interpreted FAR 19.000(b) as setting "place of performance" as the criterion for applicability of FAR Part 19. But FAR 19.000(b) does not mention place of performance. It says that Part 19 "applies only in the United States." That phrase is entirely obscure.

As for "professional contracting officers," I presume that different contracting officers will have various standards, so there is no standard.

My standard would be the late Gordon Wade Rule. A very high standard, indeed. I doubt that even five percent of today's contracting officers meet that standard (or have even heard of Rule). But then the word "professional" has lost all meaning in our society, because our society does not believe in standards. Everyone is gets a trophy.

Thanks for your response.

My question was really to do with the specific situation but also for almost all agency contracts, which are "delivering services" outside the US, but the services are performed by contractor personnel who are located in the US and outside the US.   The COs are also based in the US and/or in overseas locations - sometimes both.  Do COs know that some services or a lot of services will be performed in both US and overseas locations?  In most cases, yes, because these are cost reimbursable contracts which require large US based recruitment efforts with some personnel traveling overseas and some not.  To Vern's point, FAR 19.000(b) does not say "performance", it just says "applies in the United States" and does not explain what this means.   The new proposed rule to explain that it means "discretional" application for contracts outside the United States, again means nothing.   What does "in the United States" mean?   The question is really about the small businesses in this industry.  The agency mostly takes the position that because the contracts are performed "almost entirely overseas" ( a term which is not defined) COs may use discretion in setting aside contracts, but are not mandated to do so under FAR 19 even if there are multiple small businesses capable of performing the work.   The small businesses disagree and would like to argue that there is no presumed exception for the agency's contracts.  The issue is not more rules, but clearer rules as to when US small businesses do not have to be considered and why.    

I am assuming that the agency's above interpretation of FAR 19.000 (b) "applies in the US" to include consideration of location of performance and the "entire" or not "entire" concept is due to the definition which relates to small business subcontracting plans.  FAR 19.702 (b)(3) sets the requirements for small business subcontracting plans under the authority of 15 USC 637(d) and states that the requirement for small business subcontracting plans does not apply " For contracts or contract modifications that will be performed entirely outside of the United States and its outlying area"

So there we have it - prime contract set-aside requirements only apply "in the US" and small business subcontracts requirement applies only for contracts "performed entirely outside the US and its outlying areas".    What does a pro-US small business CO to do?  Thank you all for an interesting discussion.

Tzarina of Compliance said:

What does a pro-US small business CO to do?

Ideally, he or she makes a decision and life goes on.  Another contracting officer might have made a different decision with seemingly identical facts, and that is okay.

Tzarina of Compliance said:

The small businesses disagree and would like to argue that there is no presumed exception for the agency's contracts.

They may file protests if they disagree with the contracting officer's set-aside decisions.

ji20874 said:

Another contracting officer might have made a different decision with seemingly identical facts, and that is okay.

@ji20874That statement is absurd if it pertains to determinations of the applicability of FAR Part 19 according to FAR 19.000(b). It's not okay that two COs looking at the same facts reach different conclusions about the applicability of Part 19.

That statement would be okay if the applicability of FAR Part 19 to acquisitions were meant to be strictly one of CO judgment, such as the determination of price reasonableness or best value. But it's not. Given specific facts, FAR Part 19 either applies or it doesn't.

The matter at hand, the applicability small business policy and FAR Part 19 to acquisitions, is a matter in which Congress is particularly interested and that has a large and politically potent constituency. COs don't make small business policy; COs execute small business policy.

As of February 18 there were more open FAR cases about small business policy and programs than any other matter. One of them is FAR Case 2016-002, which concerns the applicability of FAR Part 19 outside the U.S., and about which OFPP has just objected (on February 17) to a draft final rule. According to the latest case status report the FAR councils and OFPP are "resolving issues."

Perhaps what you meant by your statement is that COs should take advantage of the ambiguity of FAR 19.000(b) to make the decision that they and their colleagues or superiors prefer. That, at least, would make some kind of sense.

Vern Edwards said:

Given specific facts, FAR Part 19 either applies or it doesn't.

Okay, then please tell the original poster if she must comply with set-aside and subcontracting plan rules for her procurement.

Vern Edwards said:

Perhaps what you meant by your statement is that COs should take advantage of the ambiguity of FAR 19.000(b) to make the decision that they and their colleagues or superiors prefer.

No. Contracting officers should apply the text and common sense, obtain advice as appropriate, make reasonable and timely decisions, and conduct the acquisition in an honorable, efficient, and effective manner.

I'm wondering, Vern, about your choice of words -- are you thinking my comments are suggesting unprofessionalism or opportunism?

Tzarina of Compliance said:

My question was really to do with the specific situation but also for almost all agency contracts, which are "delivering services" outside the US, but the services are performed by contractor personnel who are located in the US and outside the US.

One can come up with some scenarios that make application of FAR part 19 tricky (like Vern has with cloud services), but I don't think applying FAR part 19 is that difficult in your specific situation. The contract will require performance outside the United States and its outlying areas. At the time of the set-aside decision, you don't know who the contractor will be, so you can't conclude that any work will be done in the United States or its outlying areas. All you can have is an expectation. Therefore, FAR part 19 wouldn't apply.

The dilemma you face is that the SBA regulations requiring set-asides explicitly say they apply regardless of place of performance. So, if the small businesses that are pestering you to set aside the contract decide to protest, they have a good chance of winning. Historically, the GAO and COFC have deferred to the SBA regulations when there is a conflict with the FAR.

ji20874 said:

I'm wondering, Vern, about your choice of words -- are you thinking my comments are suggesting unprofessionalism or opportunism?

I do not think you are suggesting unprofessionalism or opportunism. But I think your position is professionally unsound.

I think it is unsound to believe that it's okay for two COs, based on FAR 19.000(b) and the same facts, to reach different conclusions about whether FAR Part 19 applies to a particular acquisition.

It would not be okay because the applicability of FAR Part 19 is not a matter of judgment, it is a matter of policy compliance.

Two COs with the same facts and applying FAR 19,000(b) should reach the same conclusion. What you think would be "okay" would indicate either (a) that one of the two COs is wrong on the facts or on the interpretation of 19.000(b), or (b) that FAR 19.000(b) is ambiguous. Neither would be okay.

I think FAR 19.000(b) is ambiguous because "applies only in the United States and its outlying areas" is ambiguous. WHAT must be "in the United States"? The requiring activity? The CO? The contracting office? The agency? The place or some part of the place of performance?  The majority of prospective offerors? WHAT?

I think the rule is ambiguous. And I think it is intentionally ambiguous, because DOD is responsible for Part 19 and it disagrees with SBA about the applicability of Part 19.

Ambiguous rules are not okay with me.

We have to play with the cards that are dealt.  Assuming, arguendo, that FAR 19.000(b) is ambiguous, then it is perfectly reasonable to imagine that two contracting officers might come to differing conclusions -- after all, that's the definition of ambiguous.  

I think maybe I am working in the world of reality and practicality with the text as it is written, and you're working in the ivory tower with the text as you think it should have been written   I have no objection to someone (maybe someone in the ivory tower) re-writing the text to remove any ambiguity.  But no purist or idealist has re-written the text yet, and contracting officers have work to do.  So YES, in the world of reality and practicality, I am okay with two contracting officers professionally and honorably coming to differing conclusions with the same text and seemingly the same facts.

So, Vern, can you help the original poster?  Must she apply the set-aside and subcontracting rules to her acquisition?  That's a YES or NO question.  I answered NO based on the facts she shared, and you see my answer as professional unsound, so I am assuming your answer is YES, although you are avoiding giving that answer.

ji20874 said:

Assuming, arguendo, that FAR 19.000(b) is ambiguous, then it is perfectly reasonable to imagine that two contracting officers might come to differing conclusions -- after all, that's the definition of ambiguous.

That's true, John. It is reasonable to expect that ambiguous policies lead to multiple interpretations, inconsistent applications, and litigation. Professionals should NOT be "okay" with that, and they should not be silent about it.

ji20874 said:

I think maybe I am working in the world of reality and practicality with the text as it is written, and you're working in the ivory tower with the text as you think it should have been written

Ivory tower? Really, Mr. Inman? That's an insult. A serious insult.

Well, kiss off. My writings have been widely read and cited and many of my practical ideas and teachings have been adopted. Shall we compare publications, mentions, and citations, "professor"?

ji20874 said:

So, Vern, can you help the original poster?

Yes.

On 2/21/2022 at 12:41 PM, Don Mansfield said:

One can come up with some scenarios that make application of FAR part 19 tricky (like Vern has with cloud services), but I don't think applying FAR part 19 is that difficult in your specific situation. The contract will require performance outside the United States and its outlying areas. At the time of the set-aside decision, you don't know who the contractor will be, so you can't conclude that any work will be done in the United States or its outlying areas. All you can have is an expectation. Therefore, FAR part 19 wouldn't apply.

The dilemma you face is that the SBA regulations requiring set-asides explicitly say they apply regardless of place of performance. So, if the small businesses that are pestering you to set aside the contract decide to protest, they have a good chance of winning. Historically, the GAO and COFC have deferred to the SBA regulations when there is a conflict with the FAR.

I thank you @Don Mansfield and @Vern Edwards very much for continued engagement and I am definitely one of those who is not okay with ambiguous rules, especially when they very clearly affect people's livelihoods or fair competition.   I wonder if the revised FAR 19 rule "clarification" will respond to the ABA comments that you all shared (thank you!) and reconcile the SBA's "regardless of place of performance" rule with "applies only in the United States" language.  

Would be most grateful if you all hear something on this and share here.  Many thanks again!

Tzarina of Compliance said:

Would be most grateful if you all hear something on this and share here.  Many thanks again!

In the latest report on open FAR cases, dated February 18, 2022, the status of FAR Case 2016-002, "Applicability of Small Business Regulations Outside the United States," was stated to be as follows:

Quote

02/17/2022, OFPP identified draft final rule issues. OFPP, FAR and DAR staff resolving issues.

Perhaps one of the issues is the ambiguity of FAR 19.000(b).

On 2/22/2022 at 2:53 PM, Vern Edwards said:

In the latest report on open FAR cases, dated February 18, 2022, the status of FAR Case 2016-002, "Applicability of Small Business Regulations Outside the United States," was stated to be as follows:

Perhaps one of the issues is the ambiguity of FAR 19.000(b).

Thank you!  Watching this...

On 2/22/2022 at 11:53 AM, Vern Edwards said:

Perhaps one of the issues is the ambiguity of FAR 19.000(b).

This has been all cleared up by the FAR Councils. From today's Federal Register

Quote

8. Clarification Needed

a. Change Not Clear

Comment: One respondent stated the proposed rule is not clear regarding what is meant by “applying” FAR part 19 to overseas acquisitions. The respondent requested the rule state whether application referred to where the contracting officer is located or where contract performance will take place.

Response: The final rule does not change the way FAR part 19 applies in the United States and its outlying areas. The rule is written to provide maximum flexibility to contracting officers to apply FAR part 19 outside the United States and its outlying areas.

So we all know what this means now, right?

Don Mansfield said:

This has been all cleared up by the FAR Councils. From today's Federal Register

So we all know what this means now, right?

It was interesting when a comment mentioned the inequity of not allowing local foreign owned small businesses in a foreign area from competing against small US based businesses in a FAR 19 set-aside in their own country. The Council essentially said that foreign owned businesses can apply to be classified as small businesses.

”b. Rule Excludes Small Foreign Entities

Comment: A respondent commented that, since non-U.S. businesses are not considered “small,” applying small business size standards outside the United States excludes foreign entities and limits competition to U.S. companies only, contrary to CICA.

Response: As explained in the response to the comment under category 10a, SBA's regulations allow “non-U.S. businesses” to be considered small business concerns for the purposes of FAR part 19 procurements if they meet the criteria at 13 CFR 121.105. The Councils note that CICA provides an exception that allows agencies to exclude from competition other than small businesses in furtherance of sections 9 and 15 of the Small Business Act (see 10 U.S.C. 2304(b)(2) and 41 U.S.C. 3303(b)).”

Thus, we are now permitted (discretionary) to use set-asides to hire foreign owned small businesses. Awards to such firms would also count toward Small Business award “goals”… And if the foreign entity could meet the requirements as a Small Disadvantaged or other small business category…

The Councils did recognize that overseas construction, A/E and many service contracts are subject to [many] considerations that are unique to the overseas environment.  Thus the acquisition team needs to determine [use discretion] whether or not to set-aside such contracts.

Is all that within the scope and Intent of Small Business Administration Part 19 Programs? Since when has the SBA and its programs decide to apply to foreign owned small businesses. And what is a minority or disadvantaged owned business entity in a foreign country anyway? Can qualifying foreign owned firms from any country compete in other countries under set-asides?

I am okay with the response in the Federal Register.  The rule is written to provide maximum flexibility to contracting officers.  As I have previously shared, I am okay with that flexibility, but I know that many here are not okay with it.

ji20874 said:

I am okay with the response in the Federal Register.  The rule is written to provide maximum flexibility to contracting officers.  As I have previously shared, I am okay with that flexibility, but I now that many here are not okay with it.

I don’t have a problem with the flexibility [it is discretionary], provided that the KO’s have sense enough to use it. I have a huge problem with the practicality of it and some of the responses and implications of those responses to the public comments.

There are a lot of areas where the FAR provides flexibility, but where contracting officers should be careful in using that flexibility.  I hope HCAs and contracting officer chiefs will help guide contracting officers in the careful use of the available flexibility, rather than removing the flexibility.

Don Mansfield said:

So we all know what this means now, right?

Inside the United States. Outside the United States. Another dumb rule from the FAR Councils.

More work for the lawyers.  $$$$$

ji20874 said:

There are a lot of areas where the FAR provides flexibility, but where contracting officers should be careful in using that flexibility.  I hope HCAs and contracting officer chiefs will help guide contracting officers in the careful use of the available flexibility, rather than removing the flexibility.

HCAs and contracting officer chiefs can’t remove the flexibility if it contradicts a treaty or other country to country agreements, e.g., foreign assistance agreements, NATO, etc.

Joel, No one here has suggested contradicting treaties or other country-to-country agreements, so your posting seems non-sequitur.  I'm all in favor of careful use of available flexibility -- aren't you?

ji20874 said:

Joel, No one here has suggested contradicting treaties or other country-to-country agreements, so your posting seems non-sequitur.  I'm all in favor of careful use of available flexibility -- aren't you?

Having worked overseas on two continents for 6 1/2 years and leading source selections for, negotiating contracts for and overseeing work In Central and South America for seven more years, I’m not in favor of using FAR 19 set-asides outside the US and it’s territories, etc.

ji20874 said:

I'm all in favor of careful use of available flexibility -- aren't you?

@ji20874Yes, when the personnel exercising a "flexibility" have been trained in how to do it properly, know and understand the "whys" of the underlying policies, know the principles of discretionary choice in a regulated activity, know right reasons for choice from wrong ones, can state their reasons in clear and persuasive terms, and know not to make such choices for the wrong reasons.

Right on, Vern, we agree.  Your text matches my intent with the word "careful."

So, to make clear for folks who have not run across this before, the FAR Council is pointing not only to criteria for "small" as most folks might expect, but also to criteria for "business concern" or "concern" when deciding whether to set-aside a services acquisition outside the United States; the Contracting Officer would need to consider not only whether the entity is small, but also whether it satisfies one of the two criteria of a "business concern", at 13 CFR 121.105. A small business entity that is not located within the US may none the less meet the criteria of a business concern in that it "makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor."

joel hoffman said:

discretionary

ji20874 said:

careful use

Vern Edwards said:

choices for the wrong reasons

In the reality of Federal Government contracting discretion is simply a gate propped open that is rarely swung for the purposes its swing is intended.

 I would suggest that the long standing echo found in Forum regarding the knowledge, skills and abilities of individual CO's has a lot less to do with "careful" and "wrong" and more to do with their very myopic view of the their view of their authority pursuant to the FAR.

Vern Edwards said:

@ji20874Yes, when the personnel exercising a "flexibility" have been trained in how to do it properly, know and understand the "whys" of the underlying policies, know the principles of discretionary choice in a regulated activity, know right reasons for choice from wrong ones, can state their reasons in clear and persuasive terms, and know not to make such choices for the wrong reasons.

One of my biggest gripes about our field is the lack of contracting officer ability to exercise “flexibility.”  Warrants should only be given to people with experience, demonstrated knowledge, and a track record of using sound judgement.  Let them be accountable for results.  Reward them for proper efforts and discipline them for dumb mistakes. 

The barriers are a risk adverse culture we created, the perceived need by management including Congress to provide close oversight and controls, and the extensive agency/office reviews of solicitations, contracts, and other decisional documents before any actions can be taken.

I talked with a Navy CO recently.  He told be out of curiosity he looked at the electronic size of all his “guidance.”  The FAR was small in comparison with the DFARS, PGI, Nav Sup and command procedures, office SOPs, and internal directives.

Vern Edwards said:

More work for the lawyers.  $$$$$

Protest assertion "the decision not to set aside the procurement for small business concerns was an abuse of discretion."

@Vern Edwards @Don Mansfield well, the final rule is out and the response to questions.  They still do not describe what they mean by "performance" or  "outside the US".  So if services are "performed" BOTH in the US and overseas under the same contract, I am still not clear if I must  set-aside or I may set-aside.    Any other reads on this?

Also they say you can protest the set-aside and not set-aside decisions.....

Tzarina,

If the contract is for janitorial services, for example, the key is the location where the floor sweeping and toilet scrubbing will occur.  If the covered building is in Greece, then performance occurs entirely outside the United States.  It is irrelevant where the company's headquarters is -- it is irrelevant where the janitors are recruited -- it is irrelevant where the cleaning products are sourced -- it is irrelevant if the company has a U.S. branch office -- it is irrelevant if the payroll function is in the U.S.

At least, that's my take on it.

ji20874 said:

Tzarina,

If the contract is for janitorial services, for example, the key is the location where the floor sweeping and toilet scrubbing will occur.  If the covered building is in Greece, then performance occurs entirely outside the United States.  It is irrelevant where the company's headquarters is -- it is irrelevant where the janitors are recruited -- it is irrelevant where the cleaning products are sourced -- it is irrelevant if the company has a U.S. branch office -- it is irrelevant if the payroll function is in the U.S.

At least, that's my take on it.

If you are providing technical assistance services and writing reports and part of the team is in Egypt and the other is in Arlington VA, is the contract performed overseas?

Tzarina of Compliance said:

If you are providing technical assistance services and writing reports and part of the team is in Egypt and the other is in Arlington VA, is the contract performed overseas?

Please note that the new rule does not tie the applicability of Part 19 to place of performance. It says that the CO "shall" apply Part 19 "in the United States and its outlying areas" and "may" apply it outside the United States and its outlying areas.

The councils have not resolved the issue of what the phrases "in the United States" and "outside the United States" mean. What must be "in the United States"? Why didn't they say "when performance will be in the United States" or outside the United States? And why didn't they say what constitutes "performance"?

Tzarina of Compliance said:

If you are providing technical assistance services and writing reports and part of the team is in Egypt and the other is in Arlington VA, is the contract performed overseas?

Does the specification or work statement used in the solicitation require any of those services to be performed in the U.S., and/or for reports to be written in the U.S.? 

But regardless, a simple question such as you asked may not be useful.  For example, a useful question to be considered pre-award is whether the acquisition will be a set-aside.  Questions need to be for a purpose, and within a context.

ji20874 said:

For example, a useful question to be considered pre-award is whether the acquisition will be a set-aside.  Questions need to be for a purpose, and within a context.

If the CO determines that the procurement is "outside" the U.S., then the relevant question becomes: Should we apply Part 19?

It's discretionary. Is the discretion "unfettered", or must the CO have reasons? If the CO must have reasons, what kinds must they be?

And how many pages of documentation will be needed to support the answer, and how many levels of review will have to concur?  Yes, there are a lot of questions -- someone could paralyze the entire process if he or she wanted to.

ji20874 said:

Yes, there are a lot of questions -- someone could paralyze the entire process if he or she wanted to.

If no one asks and answers those questions the lawyers will take the entire process to court and kill it, the way Amazon killed JEDI. Or the way Boeing killed the first KC-X acquisition. There is no sense complaining because there are lawyers and you have to THINK. People who don't want to think should go fishing.

It's the way our system works. But it might have been easier if the FAR Councils had earned their pay.

ji20874 said:

Right on, Vern, we agree.  Your text matches my intent with the word "careful."

What DAU or FAI contracting courses provide training on policy analysis and policy-based reasoning so that contracting officers can be ‘careful’?

Jamal, I am not aware of any.  But I think good contracting officers bring value to the table beyond what DAU or FAI gives them.

Retreadfed said:

Protest assertion "the decision not to set aside the procurement for small business concerns was an abuse of discretion."

I predict we see a protest by the end of the year.

For those wondering what kind of analysis and discernment are necessary to decide whether or not to apply FAR Part 19 to an foreign contract, I suggest a close reading of the Comments and FAR Council responses to the Final rule. The comments acknowledge some criteria and circumstances that would likely make it challenging, difficult, impractical or almost impossible to apply Part 19.

In particular, DoD installations and activities in foreign countries often involve country to country agreements (e.g.,assistance agreements, Status of Forces Agreements, Treaties, etc.). We are foreign guests operating in others’ Home countries and communities. Our operations affect the local populations, business communities and work forces.

Applying Set-asides that might affect or shutout  local contractors, workforces , skilled labor, manufacturers, supplier sources and relationships should be considered. Logistics should be considered. Financing and currency factors must be considered. 

There was very good discussion of various constraints and hurdles to consider and overcome for construction projects, such as  design standards, laws, ordinances, codes, materials, cultural issues, geography, environmental, means and methods, labor forces, suppliers and trade subcontractors, continuing responsibilities such as warranty support, etc.

These risks, challenges and considerations are particularly applicable to any small business, especially to US small businesses and emerging small businesses attempting to operate in many foreign countries.

If the acquisition team isn’t familiar with or able to assess such considerations, then they have no business imposing US Socioeconomic business policies and procedures in host nations.

joel hoffman said:

For those wondering what kind of analysis and discernment are necessary to decide whether or not to apply FAR Part 19 to an foreign contract, I suggest a close reading of the Comments and FAR Council responses to the Final rule. The comments acknowledge some criteria and circumstances that would likely make it challenging, difficult, impractical or almost impossible to apply Part 19.

I think that's good advice. However, given the issues, the stakeholders, and the potential for litigation, costs, and delays--and despite ji20874's apparently faith in contracting officer judgment--senior agency acquisition officials should provide chiefs of contracting offices with some guidance. They should at least provide a list of things to consider when deciding whether to apply Part 19 to acquisitions outside the U.S. In larger procurements, such decisions should be subject to higher level policy review.

No one really likes oversight, but there should be oversight when the stakes are high. I agree with ji20874 that there are many "good" contracting officers out there, and I think the best of the good ones will want some backup in this matter.

Like Don, I believe that we'll eventually see litigation, whether or not this year. Agency acquisition chiefs would be wise to ensure the appropriate use of discretion and consistent policy application.

Don Mansfield said:

I predict we see a protest by the end of the year.

Yep....  I like discretion, provided it is not abused to avoid a more complicated but better solution.  In my world, the work is almost proportionally overseas and not overseas under the same contract, and there are plenty of small businesses who want and can do it, so technically I should be doing market research and then setting-aside in every case that FAR 19 tells me to.... but the pressure form the "big" guys is for me to use "discretion" not to set aside, because they do not want smalls getting the work and then growing to compete with them.    And, no, the contract does not require it to be done one way or another (in or out of US), it just has to be done.  But more importantly, why should it matter where the performance is if there are two (or many more) US small businesses who can do it?  Isn't this the whole idea? Wouldn't the "discretion" be better exercised in analyzing the market and capability of smalls to do the work?

Vern Edwards said:

and despite ji20874's apparently faith in contracting officer judgment--senior agency acquisition officials should provide chiefs of contracting offices with some guidance

Vern, There is no "despite" -- as I said earlier in this thread, "_I h_ope HCAs and contracting officer chiefs will help guide contracting officers in the careful use of the available flexibility."

Tzarina of Compliance said:

but the pressure form the "big" guys is for me to use "discretion" not to set aside

Really?  Like the old hymn, Do What Is Right, Let the Consequence Follow.  If you believe a procurement should be set aside, then do it!  Don't wring your hands and expect the FAR to be re-written to mandate the set aside.  You have the discretion, so do it!

Tzarina of Compliance said:

Wouldn't the "discretion" be better exercised in analyzing the market and capability of smalls to do the work?

Do it, Tzarina!  You already have the discretion to do as much market analysis as you want to -- do it!

If there is a problem with your organization, the problem is with your organization -- your problem is not with the FAR text.

ji20874 said:

Vern, There is no "despite" -- as I said earlier in this thread, "_I h_ope HCAs and contracting officer chiefs will help guide contracting officers in the careful use of the available flexibility."

@ji20874You did say that. But I want more than guidance. I want oversight. I do not want the decision left to contracting officers, good or otherwise.

Don Mansfield said:

I predict we see a protest by the end of the year.

I predict several GS-12s, GS-13s, and GS-14s will gang tackle said protest at a premium cost to the taxpayer.

I wonder if the FAR council considered this.

Vern Edwards said:

They should at least provide a list of things to consider when deciding whether to apply Part 19 to acquisitions outside the U.S. In larger procurements, such decisions should be subject to higher level policy review.

From a very negative view point they have and will continue to do so.   That list will be short  - hey we have not met our small business goals so make some of these foreign procurements set-aside.  Absurd thought?   Not from my experience where I saw demands to do such with non-foreign procurements.

On 4/27/2022 at 11:32 AM, Tzarina of Compliance said:

Also they say you can protest the set-aside and not set-aside decisions....

Who is "they"?

In this thread, ji20874 and I have engaged in a little back and forth about contracting officer exercises of professional judgment and discretion. And I think that ji will agree with me that the proper exercise of CO judgment and discretion requires knowledge of not just the what and the how of the rules, but also the why.

I'm talking now about the conceptual ideal of the CO.

On May 11, Bob notified us about a recent bid protest decision by the U.S. Court of Federal Claims, Seventh Dimension, LLC v. U.S., No. 21-2275C, May 11, 2022. The protester challenged the CO's decision to cancel a solicitation after receipt of proposals, which was based on FAR 15.206(e).

The court held if favor of the protester, vacated the agency's decision to cancel, and enjoined the agency from proceeding with any procurement actions "until further notice." It ordered the agency to either award a contract to the protester or issue a new cancellation decision within 60 days. The agency must explain its decision to issue a new cancellation decision. The court retained jurisdiction over the case for the time being. 

The reason I bring the case up in this thread, which is about a different matter, is that Part V of the decision, pp. 14 - 37, is a beautifully-written textbook illustration by Judge Solomson of the kind of deep reading and interpretative analysis and thinking that I believe COs should be able to do (with advice from their lawyers, of course) when exercising judgment. It is one of the best examples I have seen in a bid protest decision. It should be mandatory reading by all procurement analysts, contract specialists, and contracting officers. Reading it is an exercise in learning the why, instead of just the what and the how. Whether Judge Solomson would be upheld by the Federal Circuit if the Army appeals is another matter. His explanation of his analysis is simply wonderful.

For anyone who enjoys thinking—serious acquisition practitioners who want to express well-reasoned and respected opinions and who don't just want to be told what to do by their lawyers—it is a joy to read.

Vern, that is a joy to read.   I quickly read the decision after Bob originally posted but scanned through the part you noted without catching the significance.  

I especially like the Judge’s lead in

Quote

We begin our tour of the legal landscape with the statutory provisions.

Legal analysis and writing, done well, is a gift.

I recently finished a class on legal research, analysis, and writing. Judge Solomson demonstrated many of the tips and best practices I recently discovered. One thing I noticed was that a secondary source was cited. Although the secondary source is not a mandatory authority, it is persuasive.

Judge Solomson provided a valuable example of deductive reasoning, analogical reasoning, and policy-based reasoning in action. I will use this case in our training program.

On 4/28/2022 at 10:16 AM, ji20874 said:

Really?  Like the old hymn, Do What Is Right, Let the Consequence Follow.  If you believe a procurement should be set aside, then do it!  Don't wring your hands and expect the FAR to be re-written to mandate the set aside.  You have the discretion, so do it!

Do it, Tzarina!  You already have the discretion to do as much market analysis as you want to -- do it!

If there is a problem with your organization, the problem is with your organization -- your problem is not with the FAR text.

Agree!  Much appreciate everyone's time and support !