The FY2024 NDAA and its Nexus to the FAR and DFARS

Source of Federal Acquisition Regulation

President Biden signed the Fiscal Year 2024 National Defense Authorization Act (NDAA) into law on December 22, 2023. Beyond authorization for fiscal year appropriations, the passage adds acquisition policy to the Federal Acquisition Regulation (FAR) and its Supplements. Well, not exactly…

Creation of the National Defense Authorization Act

The process of adding Regulation from the NDAA commences with the publication of the Presidential Budget Request (PBR) by the Executive Branch, serving as a preliminary proposal; thereafter, Congress utilizes the PBR as a foundational framework for the broader National Budget. Following this, the House and Senate Armed Services Committees embark on the development of their respective versions of the NDAA, each tailored to reflect distinct legislative priorities and considerations.

Upon the completion and endorsement of both versions, a joint committee convenes to harmonize the disparate elements into a unified bill, ensuring coherence and consistency in the final legislative text. The consolidated bill then undergoes scrutiny by the President and the Executive Branch, culminating in the President's signature, formalizing the NDAA into law and thereby authorizing fiscal year appropriations principally for the Department of Defense, Department of Energy national security programs, Department of State, and the intelligence community.

Title VIII of the NDAA, pertaining to Acquisition Policy, Acquisition Management, and Related Matters, has particular significance for government contractors. It encompasses Congress’ intent concerning contractor procurement. Notably, recent amendments have introduced heightened scrutiny and stipulations regarding procurement of products and services from prohibited sources, commerciality and Agency oversight.

Acquisition Councils

From the NDAA, the FAR and the DoD Supplement (DFARS) are crafted by the Civilian Agency Acquisition Council (CAAC) with representatives from various federal agencies and the Defense Acquisition Regulations Council (DARC). These bodies consider proposals for amendments from Congress, agencies, industry stakeholders, and the public through working groups and conduct research, gather data and analyze the impact of the proposed regulatory change.

Ultimately, the information is crafted into a draft of a proposed rule or amendment and includes supporting documentation such as a preamble, which explains the rationale for the proposed changes. The status of “Open FAR” and “Open DFARS” Regulation in process can be tracked at https://www.acq.osd.mil.

Office of Information and Regulatory Affairs

The Office of Information and Regulatory Affairs (OIRA) is a regulatory oversight agency within the Office of Management and Budget (OMB). OIRA plays a key role in the federal regulatory process by reviewing and coordinating significant regulatory actions proposed by executive branch agencies.

Its main objectives include ensuring that regulations are consistent with the administration's policies, minimizing unnecessary regulatory burdens, and promoting cost-effective and evidence-based regulatory decision-making. OIRA's review process involves assessing the economic and policy implications of proposed regulations to ensure they align with the government's priorities and do not impose undue burdens on businesses and the public.

OIRA's role in relation to the FAR/DFARS involves the review of proposed regulations that may impact federal procurement processes. OIRA examines the proposed regulations to ensure they align with the administration's policies, are cost-effective, and adhere to established regulatory principles. 

During President Trump’s Administration, with OIRA as the gatekeeper, Executive Order (EO) 13771 required federal agencies to identify two regulations to be repealed for every new regulation proposed, and to offset the cost of any new regulations with cost savings from repealing old regulations. This effectively shut down the addition of any new regulation since this would have likely required a change to public law from which such regulation is derived. President Biden, on his first day in office, revoked EO 13771 with EO 13990.

Federal Register Proposed, Interim and Final Regulation

Once a proposed rule is drafted, it may be published in the Federal Register for public comment. Interested parties can submit written comments, supporting or opposing the proposed changes, and providing recommendations for improvement. The public comment period typically lasts 30 to 60 days.

After considering public comments, the regulation may be issued interim or final with inclusion in the FAR/DFARS. The regulation will contain a specified date on which it is effective. Contractors are required to comply with recently passed regulation once incorporated into a contract through award or modification.

Deviations

Deviations to the FAR or its supplements are crucial in government procurement, allowing agencies to address unique circumstances efficiently. These deviations afford agencies the flexibility necessary to navigate complex situations effectively, ensuring they can respond promptly to emergencies or unforeseen challenges.

Once the need for a deviation is identified, agencies evaluate whether the deviation is necessary, aligns with the agency's objectives, and complies with applicable laws and regulations. Recent notable deviations include an increase in the threshold for obtaining certified cost or pricing data for subcontracts and price adjustments (2022-O0001 – Rev 1, dated 7 Oct 2021) increasing the threshold from $750,000 to $2,000,000.

Takeaway

In conclusion, the regulatory rulemaking process is complex, time-consuming and nonlinear, with many interested parties including the legislative branch, executive branch and American public. Moreover, the Regulation is continuously evolving to conform with public policy, Congressional, Administration and Agency goals. This NDAA 2024 summary highlights the key updates contractors and agencies need to navigate the new fiscal year effectively. For example, stay tuned for the significant update to create a new FAR Part 40, which will be the new location for Cybersecurity Supply Chain requirements in the FAR.

Capital Edge Consulting is a professional services company comprised of adept problem solvers who deliver tangible results to address today’s most complex U.S. government contracting challenges. Capital Edge helps clients address the challenging regulatory, contractual, and compliance requirements of U.S. federal contracts and we have experience working with a wide variety of industries that provide goods or services to the federal government including industries such as biotech and healthcare, nuclear energy, education, information technology, non-profit, professional services, defense, and software.