Pay Attention to these 7 Changes from the 2019 National Defense Authorization Act (NDAA)

Last month, the President signed Congress’ FY 2019 National Defense Authorization Act, calling for a host of adjustments to the rules of Federal procurement. Each year the NDAA updates programs and policy initiatives, often in response to complaints from either the Executive Branch or industry. Most updates will make their way into the FAR or the DoD FAR supplement. What follows is an overview of the most important changes you’ll want to know about.

#1: A Reduction in Lowest Price Technically Acceptable (LPTA) Procurements

The change with perhaps the farthest-reaching implications relates to the use of LPTA procurements. Industry has complained about the inappropriate use of LPTA evaluation criteria and the results they’ve obtained. And now, Congress has responded accordingly.

In LPTA procurements, an agency identifies the technically acceptable bids, and then offers the vendor with the lowest evaluated price the contract. In order to curb LPTA procurements, the source of so many complaints, Congress has just placed serious limitations on the use of this evaluation criterion. Specifically, the agency must make and document specific findings before using LPTA. Also, this criterion should be avoided “to the maximum extent practicable” for the procurement of professional services, personal protective equipment, and knowledge-based training and/or logistics services in contingency for overseas ops. With a 120-day phase-in, you can expect see a reduction in LPTA procurements in the near future.


#2: Goodbye to the Term “Commercial Item”

You may recall that back in January 2018, the Section 809 Panel, which was created in FY 2016 to provide guidance for simplifying DoD procurements, raised issues surrounding the definition of “commercial item” in the FAR. Now, Government will no longer talk about “commercial items” at all.

Things got sticky because “commercial item” embraced both products and services. For the purpose of clarity, we will now use either “commercial product” or “commercial service.” Since the actual definitions haven’t changed, this is more a matter of form rather than substance. Mostly, the distinction will make it easier for Government to write clearer regulations and, in certain contexts, differentiate between products and services when rules would apply to one, but not the other.


#3: The FAR Council Will Revisit Decisions Not to Exempt Commercial Products and Services

This one is a bit of a shot across the bow by Congress, which doesn’t want to write up a long list of laws and regulations that won’t apply to commercial products and services. As such, Congress is requesting that the FAR Council take another look at commercial products and services not exempt from certain laws and regulations. The list grows year by year, so it seems that these buys are subject to far too many rules and regulations. With a one-year deadline to complete this task, it seems we will know relatively soon what happens to this request.


#4: Doubling the Micro-purchase Threshold

This is one simple change that will have an impact on very small purchases. Generally speaking, micro-purchases can omit flow-down clauses (with minor exceptions for certain terms and conditions that are inconsistent with legal requirements – especially appropriation laws – and for some DoD supply chain requirements). But now, DoD’s micro-purchase threshold will be lifted from $5K to $10K, to match that of civilian agencies. This change will make it easier for commercial companies to sell products in small quantities.

First, the new threshold needs to be implemented. To avoid waiting for the regulation process to unfold, the FAR council has authorized the civilian agencies to issue deviations to adopt the higher threshold passed earlier for them. So it will be interesting to see whether DoD issues an agency-wide deviation to allow use of this higher threshold immediately.


#5: Barring Purchases of “Sensitive Materials” from Some Foreign Countries

This change places a limitation on the products that the DoD can purchase from North Korea, China, Russia, and Iran. Specifically banned are samarian-cobalt magnets or neodymium-iron-boron magnets, as well as certain tungsten materials such as metal powder or heavy alloy. There is an exception process. These strategic minerals are not widely available in the US, and restricting purchases from those countries will encourage the development of domestic sources or sources in other countries.


#6: Certain Telecom and Video Equipment Are Banned (Except With a Waiver)

For months, the Administration and Congress have gone back-and-forth over whether to ban purchases from major Chinese telecoms Huawei and ZTE. The latest NDAA bans telecom and video equipment from these vendors. Nonetheless, there’s a waiver process that DoD can invoke, but likely only for very good reason.

While it’s unusual for Government to target specific companies, there are significant security concerns with these two. And, more generally speaking, there’s a growing concern within Government about purchasing IT equipment from countries in which there’s a risk of insecurity, such as data compromise. This is just one aspect of the vulnerabilities that the Government faces as we become increasingly reliant (and properly so) on the Internet and devices connected to it.


#7: New Requirements for Bid Protests

Although there were many proposed improvements to the bid protest process, only two made it into the statute. One is that DoD must set up an expedited bid protest process for contracts worth less than $100K. Although there aren’t a ton of contracts in that range, Congress wants those that are to be handled quickly by DoD, when they are protested. Beyond this, Congress has ordered DoD to conduct a study of bid protests that make their way to both GAO and the COFC. Like protests of contracts under $100K, there aren’t many of these either. But it must be frustrating for an agency to win a protest at GAO only to face a protest of the same acquisition at the COFC. DoD will report back to Congress on that assignment, and it will be interesting to see what they learn.


In Summary

The FY 2019 NDAA implements a lot of small changes to DoD procurement. Although the reforms aren’t fundamental, they’re significant enough that contractors, marketers, and sellers should take note. In the past years, it’s taken a long time to implement changes made by an NDAA, but the process has speeded up recently. As such, we might see some of these changes implemented more quickly that we have in the past.

For more on the FY 2019 NDAA, check out my interview on Federal News Radio’s “Federal Drive with Tom Temin.”


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