## Change Request Number: 03-02 Date Received: 10/10/02

**Title: T3.6.1. Small Business Utilization**

# Name: Fred Dendy/Yvonne Joseph

Routing Symbol: ASU-110

Phone: 78638

Policy OR Guidance: Guidance

Summary of Change: Guidance was added to supplement policy establishing
noncompetitive SEDB (8(a)) actions.

Reason for Change: To supplement policy.

Development, Review, and/or Concurrence: AGC/ARA-5

Target Audience: Procurement community

Potential Links within FAST for the Change: Any clauses in 3.6.1 and
also link to address in A.3.c.

Attachments: Language of change.

### Briefing Planned: No

**ASAG Responsibilities: None**

  ----------------------- --------------------------------------------------------- --------------------
                          Issue Date (revision): - January 2003 (rev. 12)           

  [Section]{.underline}   [Topics in the Section]{.underline}                       [Page]{.underline}

  **A**                   **Small Business Utilization**                            

  1                       Procurement Team Responsibilities in Support of the Small 1
                          Business Utilization Program                              

  2                       The FAA's Office of Small Business Utilization (OSBU) &   2
                          Liaison Representative Involvement                        

  3                       Prime Contracting with Small Businesses                   3

  4                       Subcontracting with Small Businesses                      4

  5                       DOT Lending And Bonding Program                           6

  6                       Business Declaration                                      6

  7                       Contract Bundling                                         8

  8                       Mentor-Protégé                                            10

  **B**                   **Clauses**                                               11

  **C**                   **Forms**                                                 11
  ----------------------- --------------------------------------------------------- --------------------

# a. Small business utilization

**1. Procurement Team Responsibilities in Support of the Small Business
Utilization Program**

a\. Effective implementation of the FAA's small business utilization
programs in their contracting actions, including achieving program
goals;

b\. Develop small businesses by taking all reasonable action to increase
small business participation in the FAA's procurements (including
subcontracts);

c\. Consider the feasibility of breaking out requirements to increase
opportunities for small businesses to successfully compete for prime
contracts;

d\. Consider the extent of small business participation in contract
performance during procurement planning;

e\. Obtain guidance from the Office of Small Business Utilization
(OSBU)/liaison as it relates to small business utilization issues. In
doing-so, the IPT/PT must coordinate with representatives of the
cognizant local FAA Small and Disadvantaged Business Utilization staff
as soon as requirements estimated to exceed \$100,000 are defined to
receive assistance in identifying opportunities for small businesses and
small businesses owned and controlled by socially and economically
disadvantaged individuals. In addition, any requirements that had
previously been procured through the SEDB (8(a)) Program, but not
currently proposed for reprocurement through the SEDB (8(a)) program
must be approved by the cognizant local FAA Small and Disadvantaged
Business Utilization staff. If agreement cannot be reached, the FAA
Acquisition Executive \'s approval is required prior to any public
notice or solicitation of the requirement; and

f\. Participate and assist in the development of small business
conferences and outreach efforts sponsored by the OSBU.

**2. The FAA'S Office of Small Business Utilization (OSBU) & Liaison
Representative Involvement**

The OSBU maintains a direct working relationship with the procurement
teams. When appropriate, the OSBU interacts with all procurement teams
in the following areas to provide support and ensure effective and
consistent program implementation:

a\. Participates in procurement workshops to increase access to and
award of FAA contracts by small businesses;

b\. Participates in acquisition and procurement planning meetings and
other scheduled meetings with the procurement team as advisors;

c\. Identifies potential small businesses that qualify for a particular
procurement;

d\. Provides the procurement team with source lists of small businesses;

e\. Ensures that the source selection criteria used to select firms for
award is fair, consistent and does not limit opportunities for small
businesses;

f\. Provides advertising recommendations to the integrated products
teams to ensure all requirements are being advertised in media
accessible to small businesses;

g\. Responds to written and telephone inquires from small businesses and
small businesses owned and controlled by a socially and economically
disadvantaged individuals regarding procurement opportunities with FAA;

h\. Reviews final source lists to ensure an adequate representation of
small businesses;

i\. Reviews questions presented at conferences, preparing answers to
questions submitted by small businesses, interacting with the integrated
product teams for distribution of responses to all potential
contractors;

j\. Reviews business declarations and accompanying documentation;

k\. Reviews subcontracting plans;

l\. Ensures that small businesses and small businesses owned and
controlled by socially and economically disadvantaged individuals are
entered into the OSBU database;

m\. Assists in the proposal evaluation process as a non-voting member of
the evaluation team;

n\. Conducts on-site pre-award verifications to verify that a sufficient
percentage of the ownership, as well as the business control and
management of the firm is vested in a disadvantaged group member(s) or
woman (woman) and verify compliance with small business program
requirements;

o\. Participates in debriefings of unsuccessful small businesses to
ensure fair and equitable treatment to all firms;

p\. Participates in postaward meetings with successful offerors to
ensure a clear understanding of small business program guidelines and
engagement of small businesses as subcontractors; and

q\. Conducts on-site compliance reviews of contractors with
subcontracting plans to ensure compliance with program requirements.

**3. Prime Contracting with Small Businesses**

a\. While the use of small business set-asides as a method of
procurement is not mandatory, small businesses must be afforded
reasonable opportunities to compete for all procurements. Thus,
procurement teams should take the following actions when appropriate:

\(1\) Set-aside procurements competitively in accordance with the
policies and guidance contained in Acquisition Management System (AMS)
Section 3.2.2 Source Selection;

\(2\) Consider the capabilities of small businesses and small businesses
owned and controlled by a socially and economically disadvantaged
individual during the screening phase of each procurement;

\(3\) Breakout large requirements (if severable) into smaller sized
requirements to provide for greater small business participation;

\(4\) Plan procurements of supplies and services so that more than one
small business firm may perform the work (if the work exceeds the amount
that a single small business can handle);

\(5\) Ensure that delivery schedules are established on a realistic
basis to encourage small business participation to the extent consistent
with actual requirements of FAA;

\(6\) Encourage teaming relationships among small and large businesses
to enhance competition; and

\(7\) Utilize small businesses on qualified vendor lists on a rotational
basis to increase opportunities to the greatest number of small
businesses.

b\. Conducting set-asides with small businesses, very small businesses,
and small businesses owned and controlled by socially and economically
disadvantaged individuals:

\(1\) All set-asides are to be conducted directly with small businesses
independent of the Small Business Administration (SBA);

\(2\) Procurements may be set-aside exclusively for small businesses and
very small businesses;

\(3\) Procurements may also be set-aside exclusively for competitive
award among socially and economically disadvantaged businesses (SEDB's)
that are expressly certified by the Small Business Administration (SBA)
for participation in the SBA's 8(a) program. Each firm claiming 8(a)
status is required to provide a copy of its SBA 8(a) certification
letter to the Contracting Officer (CO) as evidence of eligibility. There
is no requirement to obtain the SBA\'s approval to make award to the
selected socially and economically disadvantaged business (SEDB).

\(4\) Procurements may not be exclusively set-aside for women-owned
businesses;

\(5\) Industry should be notified of the applicable North American
Industry Classification (NAIC) System code representing the predominant
portion of the overall requirement in the public announcement to ensure
small business size eligibility requirements are timely known; and

\(6\) The IPT/PT will state the date when the firm must be 8(a)
certified.

c\. *Noncompetitive Awards to SEDB* *(8(a))* *Firms.* A rational basis
for the decision to award a noncompetitive SEDB(8(a)) procurement should
be documented. As a minimum, the rational basis should be based on a
comparison of technical capabilities, past performance and market prices
of two or more SEDB(8(a)) vendors. Procurement decision makers should
consider potential SEDB(8(a)) sources of supply contained in
"Source-Net" located at http://www.sbo.faa.gov and/or "Pro-Net" located
at [http://www.sba.gov](http://www.sba.gov/)."

**4. Subcontracting with Small Businesses.**

In procurements estimated to exceed \$5,000,000 (\$1,000,000 for
construction), the CO must incorporate subcontracting provisions
(including attainable and reasonable subcontracting goals for the
participation of small businesses and small businesses owned and
controlled by socially and economically disadvantaged individuals).
Subcontracting provisions are not required for commercial items or when
there are no subcontracting possibilities or when the prime contractor
is a small business or a small business owned and controlled by a
socially and economically disadvantaged individual. The contract should
include requirements for contractors to periodically report data on
subcontracting accomplishments in sufficient detail to determine the
extent of the contractor's attainment of subcontracting goals. The
following is a listing of the subcontracting considerations as a guide
that should be used in procurements that have subcontracting provisions
as appropriate:

a\. Establishment of goals requires much care to ensure that they are
realistic and motivate the contractor. Percentage goals that are
unrealistically low will only create a false sense of success and should
be avoided. Likewise, goals that are too high can be counterproductive.

b\. Subcontracting requirements should be a subject for review and
discussion at postaward conferences. It is important to monitor
contractor performance in meeting goals. This is particularly important
early in the life of the contract when the majority of subcontracts will
be awarded. Prompt corrective action should be taken if it appears that
a contractor will not meet its goal. The CO is responsible for ensuring
that the contractor attains all subcontracting goals. Subcontracting
data (accomplishments) must be timely forwarded to the individual
responsible for the preparation of the Major Procurement Program Goal
Report.

c\. The procurement team should notify the OSBU/liaison of the
opportunity to review the subcontracting proposal in sufficient time to
provide the representative a reasonable time to review the material and
submit advisory recommendations prior to award.

d\. The CO should provide a listing of potential small business
subcontractors for information purposes. The FAA should not make any
warranty as to their capabilities or abilities to perform any portion of
the contract. The listing may be obtained from the OSBU.

e\. Evaluate the percentage and dollar volume of planned subcontracting,
total dollar volume of expected awards to small business subcontractors
(including small businesses owned and controlled by a socially and
economically disadvantaged individuals and women-owned concerns).

f\. There should be separate subcontracting goals for small businesses
and small businesses owned and controlled by a socially and economically
disadvantaged individuals and women-owned concerns expressed as a
percentage of total planned subcontracting dollars.

g\. Principal product and service areas to be subcontracted and an
identification of those areas where it is planned to use small business,
small businesses owned and controlled by a socially and economically
disadvantaged individuals, and women-owned subcontractors.

h\. Review business declarations of principal proposed small business
and small disadvantaged business subcontractors, including the type of
product or service and the dollar value thereof to be awarded to each
principal subcontractor. This information is to be used to assist the CO
in making a determination as to the acceptability of the proposed
subcontracting goals. The contractor is not contractually bound to make
awards to the designated subcontractors nor is the Government approving
the subcontracts.

i\. Evaluate extent of complexity and variety of work to be performed by
small businesses with greater weight on performance of substantive or
high technology components or services. In this way, the FAA can ensure
that small businesses will receive technologically challenging or a
meaningful portion of the overall contract;

j\. Include subcontracting monetary incentives such as including an
award fee provision to provide incentives for providing meaningful,
technically substantive subcontracting work to small businesses. Under
this approach subcontracting proposals that provide appropriate
percentage commitments would be accepted, but an award fee contract line
item would be incorporated as part of the contract. Receipt of the award
fee would be after preliminary design review, critical design review, or
other appropriate milestones. The percentage amount of the award fee
pool would be based on the extent the contractor has provided
meaningful, technically substantive work to eligible small businesses
within the previously accepted percentage goals;

k\. Evaluate past performance related to the offeror\'s compliance with
prior subcontracting proposals and subcontracting plans with greater
weight on subcontracting proposals received from concerns that have
successfully attained, or exceeded subcontracting goals in the past.

l\. Evaluate level of participation of small businesses evaluated based
on the percentage of the total contract value (if appropriate). This is
particularly recommended for requirements traditionally performed by
small businesses that perhaps will be displaced due to the bundling of
smaller set-aside requirements into one larger contract.

m\. Contractors should be required to flow down similar subcontracting
requirements under the prime contract to all subcontractors (except
small businesses).

n\. If an offeror submits an offer that does not address each of the
subcontracting provisions, the CO should advise the offeror of the
deficiency and request submission of a revised offer by a specific date;
and

o\. If the offeror does not submit an offer which incorporates the
subcontracting requirements within the time allotted, the offeror should
be ineligible for award.

**5. DOT Lending and Bonding Program**

a\. To promote the financial assistance programs available from the
OSDBU (S‑40), procurement teams should add the following information in
each public announcement of a procurement containing a bonding
requirement:

"This Notice is for informational purposes for Minority, Women-Owned and
Disadvantaged Business Enterprises: The Department of Transportation
(DOT), Office of Small and Disadvantaged Business Utilization, has
programs to assist small businesses, small businesses owned and
controlled by a socially and economically disadvantaged individuals, and
women-owned concerns to acquire capital and bonding assistance for
transportation-related contracts. This is applicable to any eligible
prime or subcontract at any tier. The DOT Bonding Assistance Program
enables firms to apply for bid, payment, and performance bonds up to
\$1.0 million per contract. The DOT provides an 80 percent guaranty on
the bond amount to a surety against losses. Loans are also available
under the DOT short Term receivable financing. The maximum line of
credit is \$500,000. For further information regarding the bonding and
lending programs. , please call the DOT Office of Small and
Disadvantaged Business Utilization at (800) 532‑1169."

b\. The following should be included in all public announcements of all
other procurements that do not require bonding:

"This Notice is for informational purposes for Minority, Women-Owned and
Disadvantaged Business Enterprises: The Department of Transportation
(DOT), Office of Small and Disadvantaged Business Utilization, has a
program to assist small businesses, small businesses owned and
controlled by a socially and economically disadvantaged individuals, and
women-owned concerns to acquire short-term working capital assistance
for transportation-related contracts. Loans are available under the DOT
Short Term Lending Program (STLP) at prime interest rates to provide
accounts receivable financing. The maximum line of credit is \$500,000.
For further information and applicable forms concerning the STLP, call
the OSDBU at (800) 532‑1169."

**6. Business Declaration**

To preserve the integrity and foster the objectives of the small
business program, the FAA must satisfy itself that the ownership,
control, and day-to-day management requirements of the program are
fulfilled. Each business claiming eligibility as a small business or
small business owned and controlled by a socially and economically
disadvantaged individual must be required to provide evidence of
eligibility prior to award. The FAA reserves the right to review and
verify each firm's program eligibility. If the firm is not a small
business as defined by the North American Industry Classification (NAIC)
code size standards, it will not qualify as a small business.

For set-asides restricted to small businesses, very small businesses,
and/or small businesses owned and controlled by socially and
economically disadvantaged individuals, the Business Declaration Form
shall be included in the SIR, and completed by each offeror.

For unrestricted procurements, the successful offeror shall complete and
submit the Business Declaration Form to the contracting officer.

When subcontracting goals are established for small businesses, small
businesses owned and controlled by socially and economically
disadvantaged individuals, and small businesses owned and controlled by
women, the prime contractor shall obtain completed Business Declaration
Form for such small businesses counted toward the successful offeror's
subcontracting goals.

a\. A successful small business program rests with the FAA's ability to
limit participation to bona fide small businesses and small businesses
owned and controlled by socially and economically disadvantaged
individual for they are the intended recipients of the agency's
procurement dollars earmarked for small business set-asides.

b\. To that end, the business declaration is:

\(1\) A tool used to ensure that the small business program benefits
only those businesses that are bona fide small businesses and small
businesses owned and controlled by socially and economically
disadvantaged individuals by establishing a basis for determining a
firm's eligibility to participate in a small business set-aside; and

\(2\) A tool used internally by the OSBU/Liaison to accurately report
awards made to small businesses and small businesses owned and
controlled by socially and economically disadvantaged individuals on the
Major Procurement Program Goal (Accomplishments) Report.

c\. In order for the owner of the firm to be found to have controlling
interest in the company the following must exist:

\(1\) The eligible owner holds the position of chairperson of the board,
president or Chief Executive Officer;

\(2\) The eligible owner has the right to vote his or her shares or
other equity interest to elect the majority of voting members of the
Board of Directors or other governing body;

\(3\) The eligible owner holds at least 51% unconditionally ownership
and control of the operation;

\(4\) The eligible owner has direct full-time responsibility for the
day-to-day management of the business, as evidenced by all of the
following:

\(a\) Directly related managerial or technical experience and
competency;

\(b\) Establishment of company policies;

\(c\) Determination and selection of business opportunities;

\(d\) Supervision and coordination of projects;

\(e\) Control of major expenditures;

\(f\) Hiring and dismissing key personnel;

\(g\) Marketing and sales decisions; and

> \(h\) Signature on major business documents.

**7. Contract Bundling**

a\. Definitions:

\(1\) A bundled contract is a contract that is entered into to meet
requirements that are consolidated.

\(2\) Bundling is consolidation of two or more requirements for supplies
or services, previously provided or performed under separate smaller
contracts, into a SIR for a single contract that renders a contract
likely to be unsuitable for award to a small business concern (including
socially and economically disadvantaged (8(a)), small disadvantaged, and
women-owned businesses) due to:

\(a\) The diversity, size, or specialized nature of the elements of the
performance specified;

\(b\) The aggregate dollar value of the anticipated award;

\(c\) The geographical dispersion of the contract performance sites; or

\(d\) Any combination of the factors described in paragraphs (2)(i),
(ii), and (iii) of this definition.

\(3\) Measurably Substantial Benefits are the dollar amount of benefits
accruing from the bundling of requirements. These benefits can be in
many forms to include cost savings, price reduction, quality efficiency,
enhance performance, result in better terms and conditions, reduce
acquisition cycle times and any other benefits

b\. This section is not applicable to contracts whose total estimated
bundled value (including all options) is less than \$10 Million.

c\. Bundling of contractual requirements is discouraged unless it is
necessary and justified. Bundling is necessary and justified if there
are substantial benefits which are measurable and quantifiable. The IPT
shall document the measurably substantial benefits to the government.
Benefits shall be equivalent to 10% if the total anticipated contract
value is \$75 million or less; or 5% if the contract value exceeds \$75
million.

d\. To ensure that prime contract opportunities are provided to small
businesses, the following

alternatives shall be considered prior to bundling:

\(1\) Breaking up the procurement into smaller discrete procurements to
render them suitable for small business set asides;

\(2\) Breaking out discrete components, where practicable, to be set
aside for small business; or

\(3\) When issuing multiple awards against a single solicitation,
reserving one or more awards for small businesses.

e\. If an IPT determines that contract bundling is to be used, the IPT
shall so inform the administrator and include written justification in
the file (a part of the acquisition strategy plan, separate memo, etc.)
outlining the need for bundling and documenting the impact on attaining
the FAA socioeconomic goals. Additionally, if bundling would result in
any adverse impact to achievement of the agency\'s socio-economic goals,
the SIR for the bundled procurement must be approved by the FAA
Acquisition Executive (FAE). In addition, the IPT shall notify the local
FAA Small Business Office prior to issuance of the SIR.

f\. In a bundled procurement, the acquisition strategy should provide
for maximum practicable participation by small business concerns. Some
of the ways this can be accomplished include the following:

\(1\) Authorizing two or more small businesses to form a contract team
and for that team to be considered a small business for purposes of a
bundled requirement provided that each small business partner to the
teaming arrangement individually qualifies as a small business under the
assigned NAIC codes for the requirement. ~(Revised\ 11/2000)~

\(2\) For SIRs that offer a significant opportunity for subcontracting,
the CO should include proposed small business, small disadvantaged
business and women-owned business subcontracting participation in the
subcontracting plan as an evaluation factor.

\(3\) Including small business, small disadvantaged business and
women-owned subcontracting goals in SIRs and contracts based on contract
dollars versus planned subcontracting dollars.

\(4\) Consulting the local FAA Small Business Office and Source Net

g\. The requirements of this section do not apply to bundled contracts
that are awarded in accordance with OMB Circular A-76 if a cost
comparison has been performed under A-76 procedures.

h\. The requirements of this section do not apply to contracts to be
awarded and performed entirely outside of the United States.

**8. Mentor Protégé**

a\. Definitions:

\(1\) Socially and Economically Disadvantaged Businesses (SEDB), as used
in the Mentor-Protégé Program, means small business concerns owned and
controlled by socially and economically disadvantaged individuals as
defined by the Acquisition Management System (AMS).

\(2\) Historically Black Colleges and Universities (HBCU) means
institutions determined by the U.S. Secretary of Education to meet the
requirements of 34 CFR 608.2 and listed therein.

\(3\) Minority Educational Institutions (MI) means institutions verified
by the U.S. Secretary of Education to meet the criteria set forth in 34
CFR 637.4. MIs include Hispanic-serving institutions as defined by 20
USC 1059c(b)(1).

\(4\) Women-Owned Small Businesses (WO), as used in the Mentor-Protégé
Program, means a small business where ownership and controlling interest
(at least 51%) in the company is held by a woman.

\(5\) High Tech as used herein, means research and/or development
efforts that are within or advances the state-of-the-art in technology
discipline and are performed primarily by professional engineering,
scientists, and highly skilled and trained technicians or specialists.

b\. Purpose. The FAA Mentor-Protégé Program is designed to motivate and
encourage firms to assist Small Socially and Economically Disadvantaged
Businesses (SEDB), Historically Black Colleges and Universities (HBCU),
Minority Institutions (MI) and Women-Owned (WO) Small Businesses in
enhancing their capabilities to perform FAA prime contracts and
subcontracts, foster the establishment of long-term business
relationships between these entities and Mentor Firms, and increase the
overall number of these entities that receive FAA prime contract and
subcontract awards. The "Mentor-Protégé Program Guide" may be obtained
from the FAA's Small Business Utilization staff.

c\. Incentives for Mentor Participation

\(1\) Mentors may receive additional evaluation points (for
Mentor-Protégé Program participation) toward the award of contracts
during the evaluation of competitive offers.

\(2\) Mentors may receive credit toward attaining subcontracting goals
contained in their FAA subcontracting plan(s) for Mentor-Protégé
participation.

\(3\) Costs incurred by a mentor to provide developmental assistance
(i.e., technical or managerial) described in Section 1.12 are allowable
as indirect costs (appropriate documentation shall be provided) unless
the contract contains a line item specifically for the Mentor-Protégé
Program. A ceiling on allowable developmental costs shall be established
at time of contract award.

\(4\) Procurements may be set-aside exclusively for competition among
firms that are participants in the FAA Mentor-Protege Program.

d\. Review and Approval of Mentor-Protégé Applications and Agreement.

\(1\) The Mentor-Protégé application and agreement is reviewed by FAA
Team (OSDBU, the responsible Integrated Product Team (IPT)/Product Team
(PT)). The review should be completed no later than 30 days after
receipt by the FAA Team. FAA OSDBU should provide a copy of the
submitted information to the cognizant FAA IPT/PT for a parallel review
and concurrence.

\(2\) Upon agreement approval, the mentor may implement the
developmental assistance program.

\(3\) An approved agreement should be incorporated into the mentor or
protégé firm\'s contract or memorandum of understanding with the FAA. It
should be added to the subcontracting plan in contracts which contain
such a plan.

\(4\) If the application is disapproved the mentor may provide
additional information for reconsideration. The review of any
supplemental material should be completed within 30 days after receipt
by the OSDBU. Upon finding deficiencies that the FAA considers
correctable, the OSDBU should notify the mentor and request information
to be provided within 30 days that may correct the deficiencies.

e\. Additional Mentor-Protégé Program guidance is located at web site
http:www.faa.gov/sbo.

**B. CLAUSES** *Click here to access applicable clauses.*

**C. FORMS** *Click here to access applicable forms.*~(Revised\ 2/2001)~