The Defense Department, last month, issued a Class Deviation that should effectively reduce some of the paperwork associated with Government Contracting for small businesses and non-traditional contractors. It exempts from certified cost or pricing data requirements (see FAR 15.403-1(b)) contracts and subcontracts awarded pursuant to (i) the Small Business Innovation Research Program (SBIR), (ii) the Small Business Technology Transfer Program (STTR) and (iii) a technical, merit-based selection procedure, such as a broad agency announcement.
Further, for SBIR awards and technical merit-based selections (but not STTR awards), this Class Deviation also eliminates the audit and records examination clause (see FAR 52.215-2, Audit and Records - Negotiations).
In this context, nontraditional defense contractors are those that are not currently performing and have not performed any contracts or subcontracts for DoD that are subject to full coverage under the cost accounting standards (CAS) and the implementing regulations for at least one-year preceding the solicitation.
This is a pilot program required by the fiscal years 2016 and 2017 NDAAs (National Defense Authorization Act) and is currently set to expire on October 1, 2020 (call it a three-year trial).
While this pilot program may appear to benefit small businesses, the practical impact doesn't seem so great. In our experience, most SBIRs are already, for the most part, awarded without certified cost or pricing data being required and we haven't seen too many of these technical merit-based procurements. The exemption to the audit clause may seem like a tangible benefit but the auditors have all but written off those contracts anyway due to immateriality. One of the clauses that require a lot of effort on the part of contractors and subcontractors is the allowable cost and payment clause at FAR 52.216-7 which requires the submission of an annual incurred cost proposal. This contract clause is not eliminated by the Class Deviation.
The Pilot Program includes a provision that the contracting officer may still require certified cost or pricing data and may still require the audit clause based on some knowledge or suspicion that the clauses are necessary to protect the Government's interests.
You can read the full DoD Memorandum here.
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