The Federal Acquisition Regulation Councils recently released a highly anticipated interim rule that requires federal agencies wanting to issue lucrative sole-source contracts to 8(a) small businesses to issue a written justification and seek senior agency leader approval for the award.

With implementation of the interim rule, a contracting officer must submit a written justification for an 8(a) sole-source contract award over $20 million. The written justification must include a description of the agency’s needs, a determination that the contract is in the government’s best interest, and a verification that the 8(a)’s costs will be fair and reasonable.

This regulatory change has been in the making since the 2010 Defense Authorization Bill, enacted October 28, 2009. Prior to the proposed rule, the contracting authority was not required to provide a justification for an 8(a) sole-source award, regardless of the dollar value.

Even though the change was anticipated to affect all 8(a) small business owners, Alaska Native Corporations, which are eligible to receive 8(a) contracts in any dollar amount versus the applicable dollar caps for all other 8(a)s, were concerned that the rule would change their special status. The regulatory summary indicates that the purpose of the rule is to “maximize competition” and not to act as a ceiling or a “cap.” According to the interim rule announcement, it is not expected to have a negative effect on a substantial number of small businesses, but it may indirectly benefit the 9,165 8(a) firms by “improving their likelihood of a contract award through increased competition.”

This proposed rule is available at 76 Fed.Reg. 14559. It is open to public comment until May 16, 2011.