Federal Acquisition Regulation; Electronic Commerce in Federal Procurement

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 4, 5, 13, 14, and 32

[FAC 97-09; FAR Case 97-304; Item II]

RIN 9000-AI10

Federal Acquisition Regulation; Electronic Commerce in Federal

Procurement

AGENCIES: Department of Defense (DoD), General Services Administration

(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Interim rule with request for comments.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council have agreed on an interim rule amending

the Federal Acquisition Regulation (FAR) to implement Section 850 of

the National Defense Authorization Act for Fiscal Year 1998 by removing

Federal Acquisition Computer Network (FACNET) specific terms and

requirements and replacing them with more flexible electronic commerce

policies. This regulatory action was not subject to Office of

Management and Budget review under Executive Order 12866, dated

September 30, 1993, and is not a major rule under 5 U.S.C. 804.

EFFECTIVE DATE: October 30, 1998.

Comment Date: Comments should be submitted to the FAR Secretariat

at the address shown below on or before December 29, 1998, to be

considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to:

General Services Administration, FAR Secretariat (MVR), 1800 F Street,

NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.

E-Mail comments submitted over the Internet should be addressed to:

[email protected]

Please cite FAC 97-09, FAR case 97-304, in all correspondence

related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS

Building, Washington, DC 20405, (202) 501-4755, for information

pertaining to status or publication schedules. For clarification of

content, contact Ms. Linda K. Nelson, Procurement Analyst, at (202)

501-1900. Please cite FAC 97-09, FAR case 97-304.

SUPPLEMENTARY INFORMATION:

[[Page 58591]]

A. Background

This interim rule revises FAR Subpart 4.5 and makes associated

changes to FAR Parts 2, 5, 13, 14, and 32 to implement Section 850 of

the National Defense Authorization Act for Fiscal Year 1998 (Pub. L.

105-85). Section 850 amends Titles 10, 15, 40, and 41 of the United

States Code to eliminate the preference for electronic commerce within

Federal agencies to be conducted on the Federal Acquisition Computer

Network (FACNET) Architecture. Additionally, Section 850 provides a

more flexible electronic commerce policy by promoting the use of cost-

effective procedures and processes that employ electronic commerce in

the conduct and administration of Federal procurement systems and the

use of nationally and internationally recognized standards that broaden

interoperability and ease the electronic interchange of information. In

order to facilitate access to Federal procurement opportunities,

Section 850 mandates that a single, Governmentwide point of entry be

used that will provide universal public access to procurement

opportunities Governmentwide. In the report submitted to Congress by

the President's Management Council Electronic Processes Initiatives

Committee entitled ``Electronic Commerce For Buyers and Sellers,'' the

Committee endorsed a World Wide Web-based electronic system that would

provide the private sector direct access to Federal procurement

opportunities at a single location.

In an effort to distribute acquisition-related information to

industry more quickly and economically, an electronic posting system is

now being tested by several Federal agencies. This system will permit

buyers to post solicitations and other pertinent information, in

addition to notices, directly to the Internet, thus giving sellers

access to this information through a single, Governmentwide point of

entry. If testing demonstrates that this electronic posting system is

capable of providing effective access to notices and solicitations

through a single point of entry, consideration will be given by the

Administrator of OFPP to designating it as the ``single, Governmentwide

point of entry,'' and the FAR will be changed accordingly.

In the meantime, FACNET is the Governmentwide system that provides

universal user access, employs nationally and internationally

recognized data formats, and allows the electronic data interchange of

acquisition information between the private sector and the Federal

Government. FACNET qualifies as the single, Governmentwide point of

entry until the Administrator of the Office of Federal Procurement

Policy designates the single, Governmentwide point of entry.

B. Regulatory Flexibility Act

This interim rule is not expected to have a significant negative

impact on a substantial number of small entities within the meaning of

the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule

is more flexible than the current FAR policy regarding the Federal

electronic commerce architecture. It may be easier for some small

entities to conduct business with the Federal Government over the World

Wide Web, for instance, than using a value-added network to conduct

business over FACNET. Since this may result in a positive impact on

small entities, an Initial Regulatory Flexibility Analysis (IRFA) has

been performed and is summarized as follows:

The objectives of the rule are (1) to promote the use of cost-

effective procedures and processes that employ electronic commerce

in the conduct and administration of Federal procurement systems,

and (2) to apply nationally and internationally recognized standards

that broaden interoperability and ease the electronic interchange of

information. These objectives are stated in Section 850 of Public

Law 105-85. The legal authority to use electronic commerce for

Government contracting actions was confirmed in General Accounting

Office (GAO) Advisory Opinion B-238449. The opinion concluded that

electronic transactions can create legally binding contractual

obligations in accordance with 31 U.S.C. 1501. The interim rule

applies to all large and small entities that do business or are

planning to do business with the Government. The ability to use

electronic architectures other than FACNET, such as the World Wide

Web, to conduct electronic commerce will increase competition by

improving access to Federal contracting opportunities for the more

than 72,995 vendors currently doing business with the Government,

particularly small businesses, as well as many other vendors that

find access to bidding opportunities difficult under the current

system.

A copy of the IRFA has been submitted to the Chief Counsel for

Advocacy of the Small Business Administration and may be obtained from

the FAR Secretariat. Comments are invited. Comments from small entities

concerning the affected FAR subparts also will be considered in

accordance with 5 U.S.C. 610. Such comments must be submitted

separately and should cite 5 U.S.C. 601, et seq. (FAC 97-09, FAR Case

97-304), in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the changes to

the FAR do not impose recordkeeping requirements or collections of

information from offerors, contractors, or members of the public that

require the approval of the Office of Management and Budget under 44

U.S.C. 3501, et seq.

D. Determination to Issue an Interim Rule

A determination has been made under the authority of the Secretary

of Defense (DoD), the Administrator of General Services (GSA), and the

Administrator of the National Aeronautics and Space Administration

(NASA) that urgent and compelling reasons exist to promulgate this

interim rule without prior opportunity for public comment. This action

is necessary to implement Section 850 of Public Law 105-85, which

eliminates the preference for electronic commerce within Federal

agencies to be conducted on the Federal Acquisition Computer Network

(FACNET) Architecture. Section 850 became effective on May 17, 1998.

However, pursuant to Public Law 98-577 and FAR 1.501, public comments

received in response to this interim rule will be considered in the

formation of the final rule.

List of Subjects in 48 CFR Parts 2, 4, 5, 13, 14, and 32

Government procurement.

Dated: October 22, 1998.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, 48 CFR Parts 2, 4, 5, 13, 14, and 32 are amended as set

forth below:

1. The authority citation for 48 CFR Parts 2, 4, 5, 13, 14, and 32

continues to read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

2. Section 2.101 is amended by adding, in alphabetical order, the

definition ``Electronic commerce''; revising the definition ``Federal

Acquisition Computer Network (FACNET) Architecture''; and removing the

definitions ``Full FACNET'', ``Governmentwide FACNET'', and ``Interim

FACNET'' to read as follows:

2.101 Definitions.

* * * * *

Electronic commerce means electronic techniques for accomplishing

business transactions including electronic mail or

[[Page 58592]]

messaging, World Wide Web technology, electronic bulletin boards,

purchase cards, electronic funds transfer, and electronic data

interchange.

* * * * *

Federal Acquisition Computer Network (FACNET) Architecture is a

Governmentwide system that provides universal user access, employs

nationally and internationally recognized data formats, and allows the

electronic data interchange of acquisition information between the

private sector and the Federal Government. FACNET qualifies as the

single, Governmentwide point of entry pending designation by the

Administrator of the Office of Federal Procurement Policy (OFPP).

* * * * *

PART 4--ADMINISTRATIVE MATTERS

3. Subpart 4.5, consisting of sections 4.500 through 4.502, is

revised to read as follows:

Subpart 4.5--Electronic Commerce in Contracting

Sec.

4.500 Scope of subpart.

4.501 Definitions.

4.502 Policy.

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

4.500 Scope of subpart.

This subpart provides policy and procedures for the establishment

and use of electronic commerce in Federal acquisition as required by

Section 30 of the Office of Federal Procurement Policy (OFPP) Act (41

U.S.C. 426).

4.501 Definitions.

Electronic data interchange (EDI), as used in this subpart, means a

technique for electronically transferring and storing formatted

information between computers utilizing established and published

formats and codes, as authorized by the applicable Federal Information

Processing Standards.

Single, Governmentwide point of entry, as used in this subpart,

means the one point of entry to be designated by the Administrator of

OFPP that will allow the private sector to electronically access

procurement opportunities Governmentwide.

4.502 Policy.

(a) The Federal Government shall use electronic commerce whenever

practicable or cost-effective. The use of terms commonly associated

with paper transactions (e.g., ``copy,'' ``document,'' ``page,''

``printed,'' ``sealed envelope,'' and ``stamped'') shall not be

interpreted to restrict the use of electronic commerce. Contracting

officers may supplement electronic transactions by using other media to

meet the requirements of any contract action governed by the FAR (e.g.,

transmit hard copy of drawings).

(b) Agencies may exercise broad discretion in selecting the

hardware and software that will be used in conducting electronic

commerce. However, as required by Section 30 of the OFPP Act (41 U.S.C.

426), the head of each agency, after consulting with the Administrator

of OFPP, shall ensure that systems, technologies, procedures, and

processes used by the agency to conduct electronic commerce--

(1) Are implemented uniformly throughout the agency, to the maximum

extent practicable;

(2) Are implemented only after considering the full or partial use

of existing infrastructures, (e.g., the Federal Acquisition Computer

Network (FACNET));

(3) Facilitate access to Government acquisition opportunities by

small business concerns, small disadvantaged business concerns, and

women-owned small business concerns;

(4) Include a means of providing widespread public notice of

acquisition opportunities through the single, Governmentwide point of

entry and a means of responding to notices or solicitations

electronically; and

(5) Comply with nationally and internationally recognized standards

that broaden interoperability and ease the electronic interchange of

information, such as standards established by the National Institute of

Standards and Technology.

(c) Before using electronic commerce, the agency head shall ensure

that the agency systems are capable of ensuring authentication and

confidentiality commensurate with the risk and magnitude of the harm

from loss, misuse, or unauthorized access to or modification of the

information.

PART 5--PUBLICIZING CONTRACT ACTIONS

4. Section 5.101 is amended by revising paragraph (a)(2)(ii) and

the last sentence of (a)(2)(iv) to read as follows:

5.101 Methods of disseminating information.

* * * * *

(a) * * *

(2) * * *

(ii) The contracting officer need not comply with the display

requirements of this section when the exemptions at 5.202(a)(1), (a)(4)

through (a)(9), or (a)(11) apply, when oral or FACNET solicitations are

used, or when providing access to a notice of proposed contract action

through the single, Governmentwide point of entry and the notice

permits the public to respond to the solicitation electronically.

* * * * *

(iv) * * * Contracting offices using electronic systems for public

posting that are not accessible outside the installation shall

periodically publicize the methods for accessing such information.

* * * * *

5. Section 5.102 is amended by revising paragraphs (a)(2) and

(a)(7) to read as follows:

5.102 Availability of solicitations.

(a) * * *

(2) Provide copies of a solicitation issued under other than full

and open competition to firms requesting copies that were not initially

solicited, but only after advising the requester of the determination

to limit the solicitation to a specified firm or firms as authorized

under Part 6 of the FAR;

* * * * *

(7) If electronic commerce is employed in the solicitation process,

availability of the solicitation may be limited to the electronic

medium.

* * * * *

6. Section 5.202 is amended by revising paragraph (a)(13), by

removing (a)(14), and by redesignating (a)(15) as (a)(14). The revised

text reads as follows:

5.202 Exceptions.

* * * * *

(a) * * *

(13) The proposed contract action--

(i) Is for an amount not expected to exceed the simplified

acquisition threshold;

(ii) Will be made through FACNET or another means that provides

access to the notice of proposed contract action through the single,

Governmentwide point of entry; and

(iii) Permits the public to respond to the solicitation

electronically; or

* * * * *

7. Section 5.203 is amended by revising paragraph (b) to read as

follows:

5.203 Publicizing and response time.

* * * * *

(b) The contracting officer shall establish a solicitation response

time that will afford potential offerors a reasonable opportunity to

respond to--each proposed contract action (including actions via FACNET

or for which the notice of proposed contract action is accessible

through the single,

[[Page 58593]]

Governmentwide point of entry), in an amount estimated to be greater

than $25,000, but not greater than the simplified acquisition

threshold; or each contract action for the acquisition of commercial

items in an amount estimated to be greater than $25,000. The

contracting officer should consider the circumstances of the individual

acquisition, such as the complexity, commerciality, availability, and

urgency, when establishing the solicitation response time.

* * * * *

5.202, 5.203, 5.205, 5.207 [Amended]

8. In addition to the amendments set forth above, in Subpart 5.2,

remove the term ``contract action'' or ``contract actions'' and add

``proposed contract action'' or ``proposed contract actions'',

respectively, in the following places:

a. Section 5.202(a)(2), (a)(3), (a)(4), (a)(5), (a)(6), (a)(7),

(a)(8) (twice), (a)(9), (a)(10), (a)(11) (twice), (a)(12) (4 times),

and (a)(14);

b. Section 5.203 introductory paragraph, (a) introductory text,

(c), (d), (e) (twice), and (g);

c. Section 5.205(d)(2);

d. Section 5.207(c)(2)(xi), (e)(3) (twice), and (h).

9. Section 5.301 is amended by revising paragraph (b)(7) to read as

follows:

5.301 General.

* * * * *

(b) * * *

(7) The contract action--

(i) Is for an amount not greater than the simplified acquisition

threshold;

(ii) Was conducted by using FACNET, or access to the notice of

proposed contract action was provided through the single,

Governmentwide point of entry; and

(iii) Permitted the public to respond to the solicitation

electronically; or

* * * * *

10. Section 5.503 is amended by revising paragraph (a)(2) to read

as follows:

5.503 Procedures.

(a) * * *

(2) The contracting officer shall use the SF 1449 for paper

solicitations. The SF 1449 shall be used to make awards or place orders

unless the award/order is made by using electronic commerce or by using

the Governmentwide commercial purchase card for micropurchases.

* * * * *

PART 13--SIMPLIFIED ACQUISITION PROCEDURES

11. Section 13.003 is amended by removing paragraph (c);

redesignating paragraphs (d) through (i) as (c) through (h),

respectively; and revising newly redesignated paragraphs (f) and (h)(3)

to read as follows:

13.003 Policy.

* * * * *

(f) Agencies shall maximize the use of electronic commerce when

practicable and cost-effective (see Subpart 4.5). Drawings and lengthy

specifications can be provided off-line in hard copy or through other

appropriate means.

* * * * *

(h) * * *

(3) Consider all quotations or offers that are timely received. For

evaluation of quotations or offers received electronically, see 13.106-

2(b)(3); and

* * * * *

12. Section 13.102 is amended by revising the introductory text of

paragraph (a) to read as follows:

13.102 Source list.

(a) Each contracting office should maintain a source list (or

lists, if more convenient). A list of new supply sources may be

obtained from the Procurement Marketing and Access Network (PRO-Net) of

the Small Business Administration. The list should identify the status

of each source (when the status is made known to the contracting

office) in the following categories:

* * * * *

13. Section 13.104 is amended by revising the first sentence of

paragraph (b) to read as follows:

13.104 Promoting competition.

* * * * *

(b) If using simplified acquisition procedures and not using either

FACNET or providing access to the notice of proposed contract action

through the single, Governmentwide point of entry, maximum practicable

competition ordinarily can be obtained by soliciting quotations or

offers from sources within the local trade area. * * *

14. Section 13.105 is amended by revising paragraph (a)(1) to read

as follows:

13.105 Synopsis and posting requirements.

(a) * * *

(1)(i) FACNET is used for an acquisition at or below the simplified

acquisition threshold; or

(ii) The single, Governmentwide point of entry is used at or below

the simplified acquisition threshold for providing widespread public

notice of acquisition opportunities and offerors are provided a means

of responding to the solicitation electronically; or

* * * * *

15. Section 13.106-1 is amended by revising paragraphs (c)(1)(ii)

and (f) to read as follows:

13.106-1 Soliciting competition.

* * * * *

(c) * * *

(1) * * *

(ii) Oral solicitation is more efficient than soliciting through

available electronic commerce alternatives; and

* * * * *

(f) Inquiries. An agency should respond to inquiries received

through any medium (including FACNET) if doing so would not interfere

with the efficient conduct of the acquisition. For an acquisition

conducted through FACNET, an agency must respond to telephonic or

facsimile inquiries only if it is unable to receive inquiries through

FACNET.

16. Section 13.106-2 is amended by revising the introductory text

of paragraph (b)(3) to read as follows:

13.106-2 Evaluation of quotations or offers.

* * * * *

(b) * * *

(3) For acquisitions conducted using FACNET or a method that

permits electronic response to the solicitation, the contracting

officer may--

* * * * *

17. Section 13.106-3 is amended by revising paragraph (c) to read

as follows:

13.106-3 Award and documentation.

* * * * *

(c) Notification. For acquisitions that do not exceed the

simplified acquisition threshold and for which automatic notification

is not provided through FACNET or an electronic commerce method that

employs widespread electronic public notice, notification to

unsuccessful suppliers shall be given only if requested or required by

5.301.

* * * * *

13.307 [Amended]

18. Section 13.307 is amended in paragraph (b)(1) by removing

``other electronic means,'' and inserting ``electronically,''.

PART 14--SEALED BIDDING

19. Section 14.205-1 is amended by revising the second sentence of

paragraph (a) to read as follows:

[[Page 58594]]

14.205-1 Establishment of lists.

(a) * * * This rule need not be followed, however, when the

requirements of the contracting office can be obtained through use of

simplified acquisition procedures (see part 13); the requirements are

nonrecurring; or electronic commerce methods are used that transmit

solicitations or notices of procurement opportunities automatically to

all interested sources. * * *

* * * * *

14.400 [Amended]

20. Section 14.400 is amended by removing ``contract'' and

inserting ``contracts''.

PART 32--CONTRACT FINANCING

32.1103 [Amended]

21. Section 32.1103 is amended in paragraph (a) by removing

``13.003(f)'' and inserting ``13.003(e)''.

[FR Doc. 98-28956 Filed 10-29-98; 8:45 am]

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