DOD rules curb contract consolidations, add subcontracting incentive

Defense Department procurement rules that went into effect today limit the consolidation of DOD requirements into single contracts and allow incentive payments to companies that use Native American, Native Alaskan and Native Hawaiian small businesses as subcontractors on DOD contracts.

The rules were published in today's Federal Register.

An interim rule limits how often two or more DOD requirements can be consolidated into a single contract when those requirements collectively are worth more than $5 million. Interim rules go into effect immediately, but can be changed after the DOD reviews comments on the rule.

The rule says requirements may not be consolidated unless a senior procurement executive conducts market research and determines the consolidation is necessary and justified.

According to the Federal Register notice, the rule is designed to ensure that small businesses can participate in DOD procurements as prime contractors and subcontractors.

The Defense Department is asking for comments on the rule, which implements a provision of the 2004 Defense Authorization Act. Comments are due by Nov. 16 at

Comments should be identified by DFARS Case 2003-D109. Comments may also be e-mailed to

A final procurement rule permits incentive payments to contractors and subcontractors that use Native American, Native Alaskan and Native Hawaiian small businesses as subcontractors on Defense Department contracts and subcontracts worth more than $500,000. The rule allows incentive payments of 5 percent of the amount of the subcontract.

The rule implements provisions of the Defense appropriations laws for fiscal 2003, 2004 and 2005, according to the Federal Register notice.

The rule requires that "maximum practicable opportunity" be given to Native American, Native Alaskan and Native Hawaiian small business concerns to receive subcontracts.

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