P03 - Brand Name Justification - Redacted.pdf

Per VHA specific requirements set forth in VHAPM Part 813.106-1/2, the VHA aims to prevent the sale of “gray market goods,” defined as goods sold through unauthorized channels in direct competition with authorized distributors. This procurement is for new OEM medical supplies, medical equipment and/or services contracts for maintenance of medical equipment (i.e. replacement parts) for VA Medical Centers.

The CO has reviewed the considerations of the above-referenced guidance in terms of the context of the subject procurement and has determined that it is in the best interest of the Government to purchase the item from either the Original Equipment Manufacturer (OEM) or an authorized distributor to preserve and guarantee the manufacturer’s warranty and servicing components.

The solicitation will include the requirement that responders provide an authorized distributor letter that states the responder is an authorized dealer/distributor of the OEM for the items being procured such that all product warranties and service and/or preventative maintenance agreements transfer to the VA and will be honored by the OEM or guarantees that the OEM gives authorization to the responder to fulfill all warranty, service, and/or preventative maintenance obligations for the equipment. Vendors who are unable to supply proof of authorized dealer or distributorship will not be considered for award.

NON-MANUFACTURING RULE (NMR)

The requirement that a Non-Manufacturer supply the product of a small business concern is referred to as the Non-Manufacturer Rule (NMR) [13 C.F.R. § 121.406]. In order to qualify as a small business concern for a small business set-aside, an offeror must either manufacture the item in accordance with the Limitations on Subcontracting (see FAR section 52.219-14, 52.219-27 and 13 C.F.R. § 125.6) or supply the product of a small business made in the United States.

FAR 19.102(f)(4) provides that, “in the case of acquisitions set aside for small business or awarded under section 8(a) of the Small Business Act, when the acquisition is for a specific product (or a product in a class of products) for which the SBA has determined that there are no small business manufacturers or processors in the Federal market, then the SBA may grant a class waiver so that a nonmanufacturer does not have to furnish the product of a small business.” The SBA Administrator has delegated the authority to make decisions on waivers of the NMR to the Associate Administrator for Government Contracting in the case of class waivers.

On May 31, 2016, the Small Business Administration (SBA) published a final rule in the Federal Register that proposed to clarify that the limitations on subcontracting and the NMR does not apply to small business set-aside contracts valued between the micro-purchase threshold and the Simplified Acquisition Threshold (SAT), effective June 30, 2016. Therefore, the CO has determined a waiver to the NMR for Small Business Set-Aside is not required for this requirement.

However, per guidance received from the SBA on November 28, 2017, the NMR applies to socioeconomic SB set-asides (SDVOSB, VOSB, WOSB, etc.) under SAT. To set-aside a requirement for an SDVOSB/VOSB (or other socioeconomic category), the vendor must provide the product of a small business manufacturer, made in the United States, OR the CO may request an individual waiver to the NMR. The decision to request an individual waiver to the NMR is at the discretion of the CO as decided in Court of Federal Claims case numbers 16-182C and 16-183C, Geo-Med, LLC v. The United States and Manus Medical, Inc. v. The United States filed April 13, 2016. The CO may choose to obtain an individual waiver or may choose to set-aside the requirement for SB concerns. A 2268 would then need to be submitted in accordance with PCAC SOP Part 819 – VA Form 2268 Submission [REVISION 1] dated January 19, 2017.

The Contracting Officer (CO) determined the NMR is applicable and there is not an existing class waiver for NAICS 334516 and PSC 6640. The current list of NMR Class Waivers is maintained by the SBA and can be found at https://www.sba.gov/contracting/contracting-officials/non-manufacturer-rule/classwaivers.

Based on the market research conducted and because this effort is below the SAT, the CO determined there is not a reasonable expectation that quotes received from two (2) or more SDVOSBs or VOSBs will be received. However, if the requirement is set-aside for the broader category of Small Business, any SDVOSB response can comply with the NMR.

VA RULE OF TWO

The VA Rule of Two is the process prescribed in 38 U.S.C. 8127(d) whereby a contracting officer of the VA, “shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.”

In accordance with VAAR 819.7003 Eligibility (e), A contract awarded under this subpart is subject to the SBA limitations on subcontracting requirements in 13 CFR 125.6, provided that only VIP-listed SDVOSBs Are considered eligible and/or “similarly situated” under an SDVOSB sole source or set-aside. In addition, a VOSB is subject to the same limitations on subcontracting that apply to an SDVOSB, and only VIP-listed Veteran-owned small businesses are considered eligible and/or “similarly situated” under a VOSB sole source or set-aside. The nonmanufacturer rule (see 13 CFR 121.406) and the limitations on subcontracting requirements apply to all SDVOSB and VOSB set-aside and sole source contracts.

For medical equipment and medical supplies, SDVOSB and VOSB firms must also meet VA’s gray market requirements and be authorized by the OEM as a distributor, reseller, or similar.

As shown above there is not a reasonable expectation that two or more SDVOSB or VOSB concerns owned and controlled by veterans will submit offers and comply with the NMR.

BUY AMERICAN ACT AND WAIVER

In accordance with FAR 25.101, the Buy American Statute restricts the purchase of supplies that are not domestic end products. The exception at FAR 25.103(b) – Nonavailability states the “Buy American statute does not apply with respect to articles, materials, or supplies if articles, materials, or supplies of the class or kind to be acquired, either as end items or components, are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality.” The anticipated value of this requirement is under the Simplified Acquisition Threshold. The brand name manufacturer does not comply with the Buy American Act. As a result, a Buy American Act Waiver exercising an exception to the Buy American Act (FAR 25.103(b) Nonavailability) by utilizing foreign manufacturers will be submitted for HCA approval in accordance with VA Acquisition Manual (VAAM) M825.103(f)(2).

5. Contracting Officer's Certification: Purchase is approved in accordance with FAR13.106-1(b). I certify that the foregoing justification is accurate and complete to the best of my knowledge and belief.