FAR Council Issues Proposed Rule to Adjust Acquisition-Related Thresholds for Inflation

Last Friday, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration (together, the "FAR Council") issued a proposed rule to adjust for inflation several acquisition-related thresholds. Comments on the proposed rule are due on or before January 28, 2025.

By way of background, the proposed rule would amend the Federal Acquisition Regulation ("FAR") to implement 41 U.S.C. § 1908, which requires the FAR Council, every five years (on October 1 of each year evenly divisible by five), to adjust for inflation certain acquisition-related thresholds. The last such review took place under FAR Case 2019-013 during FY 2020, with prior reviews in FY 2005, FY 2010, and FY 2015.

Broadly, the FAR Council proposes the following acquisition-related adjustments:

• The micro-purchase threshold will increase from $10,000 to $15,000.
• The simplified acquisition threshold ("SAT") will increase from $250,000 to $350,000.
• The threshold for reporting first-tier subcontract information including executive compensation will increase from $30,000 to $40,000.
• The preaward and postaward notices remain at $25,000 because of trade agreements.
• The threshold requirement for limiting competition to eligible 8(a) awards over $25 million is increased to $30 million.
• Approval thresholds of justifications for other than full and open competition will increase from $750,000 to $950,000. Paragraphs (a)(3) and (4) will increase from $15 million to $20 million and from $75 million to $95 million, respectively. The $100 million threshold applicable to DoD, NASA, and the Coast Guard will increase to $150 million.
• The ceiling for using simplified procedures for certain commercial products and commercial services will increase from $7.5 million to $9.5 million. For acquisitions described at FAR 13.500(c), the ceiling will increase from $15 million to $20 million.
• The cost or pricing data threshold will increase from $2 million to $2.5 million.
• The threshold for justifications of single-award indefinite-delivery contracts will increase from $100 million to $150 million.
• The prime contractor subcontracting plan floor will increase from $750,000 to $950,000. The construction threshold will increase from $1.5 million to $2 million.

The proposed rule also would adjust thresholds under FAR Part 19 relating to sole-source awards for 8(a), WOSB, HUBZone, and SDVOSB concerns. As written, the proposed rule would increase the competitive thresholds for manufacturing NAICS codes from $7 million to $8.5 million and for all other acquisitions from $4.5 million to $5.5 million.

Notably, the FAR Council's prefatory comments provide that the rule does not address thresholds that are not "acquisition-related," as that term is defined in the proposed rule. Excepted thresholds include, for example, thresholds relating to claims, penalties, withholding, payments, insurance, SBA size standards, liquidated damages, and protests.

Takeaway

The proposed rule is great news for industry, as several acquisition-related thresholds will be increasing to keep pace with inflation. The proposed increase to the SAT is indeed a welcome sight –?a higher threshold should boost small business contracting and open the door for new entrants to public sector work. Notably, a change to the SAT was included in a recent bill – the Federal Improvement in Technology (FIT) Procurement Act (H.R.9595) –?which was introduced in September and which appears to have bipartisan support. Beyond that potential change, the FAR Council also provides a boost for small businesses in SBA's socio-economic programs, as it proposes to increase to the sole-source thresholds ($8.5 million for manufacturing NAICS and $5.5 million for others). Interested parties should be sure to submit comments by the deadline.

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