On April 26, 2022, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council amended the FAR to include overseas contracts as part of agency small business contracting goals. This would allow small business contracting procedures to apply to overseas procurements. Prior to this rule, FAR 19.000(b) explicitly stated that small business programs did not apply outside the United States and its outlying areas. This new rule from the Councils follows an SBA regulation amendment that sought to apply the Small Business Act to overseas acquisitions—an area that the SBA’s regulations were silent about previously. The primary aim of the Councils’ and SBA’s rule changes are to expand overseas opportunities for small businesses.
The method for achieving this goal is expanding the scope of FAR Part 19 to overseas procurements on a discretionary basis. In particular, the rule amends FAR 19.000(b) so that it no longer limits application of Part 19 to “the United States or its outlying areas.” The idea behind this is to give contracting officers the ability to decide the most appropriate acquisition strategy for foreign markets to encourage U.S. small businesses to compete. The rulemakers acknowledge that overseas opportunities present a host of issues to all types of contractors, including competition with native businesses, economic conditions, and foreign law. Giving the contracting officers the flexibility to determine whether a particular overseas contract should be a set-aside will hopefully help small business avoid these issues while encouraging small businesses to gain experience in these types of contracts.
The implications of this rule change are significant. The government estimates that between 2019 and 2021, there were 359,567 awards for performance overseas, including contracts, task orders and delivery orders, and calls under blanket purchase agreements. The vast majority of these awards (344,720) went to large businesses (12,002 unique ones in total), however. In other words, just a little over 4% of the total number of overseas contracts was awarded to small businesses even though the SBA estimates that about 26% federal contract dollars (or $145.7 billion) was awarded to small businesses in 2021. While the discretionary nature of Part 19 to overseas contracts may mean these type of opportunities never quite reach the 26% small business participation level reported by the SBA, it still stands to reason that there will be a measurable growth in the coming years to the number of prime contractor and subcontractor opportunities for small businesses under this rule change.
Be sure to keep an eye out for these new opportunities as these rule changes went into effect in May 2022.