DOD: Sole-Source Contracts up to $100 Million Don’t Need Justification

Effective March 17, DOD contracting officers won’t have to issue a justification or obtain approval for award of a sole-source contract under the Small Business Administration’s 8(a) program for awards up to $100 million, up from the prior $22 million limit. This Department of Defense class deviation implements the higher dollar amount that Congress set in the 2020 National Defense Authorization Act. This change will likely matter most for 8(a) concerns owned by an Indian Tribe, Alaska Native Corporation (ANC) or Native Hawaiian Organization (NHO), as other 8(a) firms are limited to a smaller dollar amount for sole source awards unless only one 8(a) firm can perform the work.

This deviation means that DOD contracting officers must use a threshold of $100 million in lieu of the $22 million threshold currently in a number of rules in the Federal Acquisition Regulation. In particular, FAR 6.302-5(b)(4), 6.303-1(b), and 19.808-1(a) will now allow sole-source contracts up to $100 million contract value with fewer agency requirements.

FAR 6.302-5(b)(4) applies to sole source awards under the 8(a) Program. For 8(a) sole source awards over $100 million, (1) a contractor must provide a written justification, (2) the justification must be approved by a higher-up agency official (for DoD this will be the head of the procuring activity), and (3) the justification must be made public after award. FAR 6.303-1(b). FAR 19.808-1(a), in turn, now allows the SBA to accept a sole source 8(a) contract up to $100 million without a DoD agency justification.

Generally speaking, contracting officers can award a contract to an 8(a) business on a sole source basis if the estimated cost is $4 million or less ($7 million for manufacturing). The DoD class deviation has no effect on these limits, which are found in SBA’s rules at 13 C.F.R. § 124.506. In particular, above those dollar thresholds an 8(a) contract must be competed if “[t]here is a reasonable expectation that at least two eligible Participants will submit offers at a fair market price” and the requirement has not already been awarded a sole-source contract to a tribally-owned or ANC-owned concern.

In particular, the requirement that two 8(a) companies will submit offers can be hard to meet. But, assuming all the requirements are met, the DoD class deviation would have an effect on sole-source awards to non-tribal 8(a) companies: DoD would not have to prepare a justification for this type of procurement up to $100 million in contract value.

Increasing the threshold from $22 million to $100 million will make it easier for contracting officers to award much larger contracts as 8(a) sole sources without competition to 8(a) concerns owned by a tribe, ANC, or NHO. While this could mean other small businesses may miss out on certain contracts, it is a great boon to 8(a) contractors who are eligible for these sole source awards.