May 6, 2002


Ms. Susan L. Schneider
Defense Acquistion Regulation Council
OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon
Washington, DC 20301-3062

RE:  DFARS Case 2001-D017; Multiple Award Contracts

Dear Ms Schneider:

The Chief Counsel for Advocacy of the U.S. Small Business
Administration was created in 1976 to represent the views
and interests of small business in Federal policy making
activities.(1) The Chief Counsel participates in rulemakings
and other Federal agency activities when he deems it
necessary to ensure proper representation of small business
interests.  In addition, the Chief Counsel has a particular
interest in ensuring that laws and regulations do not have
an adverse impact on competition among businesses of
differing sizes.  Finally, the Chief Counsel monitors
agencies' compliance with the Regulatory Flexibility Act
(RFA)(2) and works with Federal agencies to ensure that
their rulemakings are supported by analyses.

This letter is in response to a proposed regulation
published on April 1, 2002, in the Federal Register
entitled, "Defense Acquisition Regulation Supplement;
Competition Requirements for Purchase of Service Under
Multiple Award Contracts, DFARS Case 2001-D017."  The
proposed rule is designed to implement section 803 of the
National Defense Authorization Act for Fiscal Year 2002,
which requires the Department of Defense (DOD) to issue
Defense Acquisition Regulations policy requiring competition
in the purchase of services under multiple award contracts.


DOD should be commended for seeking additional comments on
certain aspects of this regulation through a public meeting.
However, Advocacy would like to bring to the attention of
DOD the fact that the regulation, as proposed, does not meet
the requirements of the RFA. The RFA requires an agency
either to certify that the proposed regulation will not have
a significant economic impact on a substantial number of
small entities, or if there is an impact, the agency must
prepare an Initial Regulatory Flexibility Analysis (IRFA).
If an agency opts to certify the regulation, then there must
be a factual basis for such a conclusion.  The proposed DOD
regulation provides a certification, but does not provide an
adequate factual basis.


The Office of Advocacy concurs with DOD's position that the
proposed regulation does not change the preferences afforded
to small business concerns under FAR 8.404(b)(6).  However,
there are a large number of small businesses that
participate in multiple award contracts at dollar values
above the micro threshold level of $2,500.  The proposed
regulation will impact these small businesses.


Currently, if an agency solicits a multiple award
requirement and the solicitation provides for clear and
defined work for small businesses and large businesses, only
small businesses can bid for task orders under the small
business requirements while large businesses are limited to
task orders restricted for large businesses.  The proposed
regulatory change would seem to suggest that "all
contractors offering such services under the multiple award
schedule" must be allowed to compete for the work.  Will
small and large businesses be required to compete for the
same work?  If this interpretation is correct, then what
will the impact on small businesses be?


Thus, it is the recommendation of the Office of Advocacy
that an interim IRFA be prepared and published in the
Federal Register for public comment prior to publication of
a final rule.  This IRFA should provide additional clarity
to section 208.404-70(c)(1)(i) of the proposed regulation
and analyze more carefully the impact to small business
concerns.  If Advocacy's interpretation of the relevant
section is not correct, then, at a minimum, additional
clarity should be provided in the final rule along with a
certification.


In conclusion, while the proposed regulation implements
section 803 of the Fiscal Year 2002 National Defense
Authorization Act, the regulation must still meet the
requirements of the RFA.  The Office of Advocacy urges DOD
to consider the options discussed above before proceeding to
a final rule.  Please contact Mr. Major Clark, III, of my
staff if you have any questions relating to this issue, 202-
205-7150.

Sincerely,


Thomas M. Sullivan
Chief Counsel Office for Advocacy

ENDNOTES

1.  Pub. L. No. 94-305 (codified as amended at 15 U.S.C.
634a-g, 637.)
2.  Pub. L. No. 96-354, 94 Stat. 1164 (1980) (codified as
amended at 5 U.S.C. 601-612.)