36120 Federal Register / Vol. 63, No. 126 /Wednesday, July 1, 1998 /Rules and Regulations

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 1, 12, 15, 19, 52, and 53

[FAC 97–07; FAR Case 97–004B]

RIN 9000–AH59

Federal Acquisition Regulation;

Reform of Affirmative Action in Federal

Procurement

AGENCY: Department of Defense (DoD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Interim rule with request for

comment.

SUMMARY: The Department of Defense,

the General Services Administration,

and the National Aeronautics and Space

Administration have agreed to issue

Federal Acquisition Circular 97–07, as

an interim rule to make amendments to

the Federal Acquisition Regulation

(FAR) concerning programs for small

disadvantaged business (SDB) concerns.

These amendments conform to a

Department of Justice (DoJ) proposal to

reform affirmative action in Federal

procurement. DoJ’s proposal is designed

to ensure compliance with the

constitutional standards established by

the Supreme Court in Adarand

Constructors, Inc. v. Pena, 115 S. Ct.

2097 (1995). This regulatory action was

subject to Office of Management and

Budget review under Executive Order

12866, dated September 30, 1993. This

is a major rule under 5 U.S.C. 804.

DATES: Effective Date: January 1, 1999.

Applicability Date: The policies,

provisions, and clauses of this interim

rule are effective for all solicitations

issued on or after January 1, 1999.

Comment Date: Comments should be

submitted to the FAR Secretariat at the

address shown below on or before

August 31, 1998 to be considered in the

formulation of a final rule.

ADDRESSES: Interested parties should

submit written comments to: General

Services Administration, FAR

Secretariat (MVR), 1800 F Street, NW,

Room 4035, Attn: Ms. Laurie Duarte,

Washington, DC 20405.

E-Mail comments submitted over the

Internet should be addressed to:

farcase.97–004B@gsa.gov.

Please cite FAC 97–07, FAR case 97–

004B in all correspondence related to

this case.

FOR FURTHER INFORMATION CONTACT:

Ms. Victoria Moss, Procurement

Analyst, Federal Acquisition Policy

Division, General Services

Administration, 1800 F Street NW,

Washington DC 20405, Telephone: (202)

501–4764, or Mr. Mike Sipple,

Procurement Analyst, Contract Policy

and Administration, Director, Defense

Procurement, Department of Defense,

3060 Defense Pentagon, Washington DC

20301–3060, Telephone: (703) 695–

8567.

For general information call the FAR

Secretariat at (202) 501-4755.

SUPPLEMENTARY INFORMATION:

A. Background

In Adarand, the Supreme Court

extended strict judicial scrutiny to

Federal affirmative action programs that

use racial or ethnic criteria as a basis for

decisionmaking. In procurement, this

means that any use of race in the

decision to award a contract is subject

to strict scrutiny. Under strict scrutiny,

any Federal programs that make race a

basis for contract decisionmaking must

be narrowly tailored to serve a

compelling Government interest. DoJ developed a proposed structure to

reform affirmative action in Federal

procurement designed to ensure

compliance with the constitutional

standards established by the Supreme

Court in Adarand. The DoJ proposal

was published for public notice and

invitation for comments (61 FR 26042,

May 23, 1996). The DoJ model is being

implemented in several parts: revisions

to the FAR and the FAR supplements;

Small Business Administration (SBA)

regulations; and procurement

mechanisms and applicable factors

(percentages) determined by the

Department of Commerce. The SBA

regulations were published for public

comment on August 14, 1997 (62 FR

23584). Requirements related to

certification, protests, and appeals and

other issues are also addressed in SBA’s

rules. On May 9, 1997, proposed

amendments to the FAR, based on the

DoJ Model, were published as a

proposed rule in the Federal Register

(62 FR 25786). An interim FAR rule that

implemented the price evaluation

adjustment for SDB concerns was

previously issued in the Federal

Register on June 30, 1998. This interim

rule implements the evaluation factor or

subfactor for SDB participation,

incentive subcontracting with SDB

concerns, and other coverage that is not

directly related to the price evaluation

adjustment for SDB concerns.

B. Regulatory Flexibility Act

These changes may have a significant

economic impact on a substantial

number of small entities within the

meaning of the Regulatory Flexibility

Act, 5 U.S.C. 601 et seq., because

through the rule small business

concerns may be provided benefits in

Federal contracting. An Initial

Regulatory Flexibility Analysis (IRFA)

was submitted to the Chief Counsel for

Advocacy of the Small Business

Administration. A summary of the IRFA

was published along with the FAR

proposed rule in the Federal Register at

62 FR 25786, May 9, 1997. The

economic impact associated with

certification and associated costs, as

well as other program requirements

addressed in the SBA’s changes to 13

CFR Parts 121, 124, and 134 have been

addressed in analyses prepared by the

SBA. The following information is

provided to update the IRFA related to

this FAR interim rule:

This interim rule would establish in the

FAR two procurement mechanisms

benefiting small disadvantaged businesses

(SDBs). The first of these mechanisms is a

source selection evaluation factor or

subfactor for planned SDB participation,

primarily at the subcontract level, in the

performance of a contract in the SIC Major

Groups as determined by the Department of

Commerce. This evaluation factor or

subfactor would be used in competitive,

negotiated acquisitions expected to exceed

$500,000 ($1,000,000 for construction). This

mechanism would not be applied to certain

major categories of acquisition, including, for

example, small business set-asides, 8(a)

acquisitions, and acquisitions in which

source selection is based on a cost or price

competition between proposals meeting the

Government’s minimum requirements.

The second mechanism provides for a

monetary incentive for subcontracting with

SDBs. Contracts resulting from solicitations

in which SDB participation is evaluated may

provide for a monetary payment to those

prime contractors that meet specified targets

for SDB participation as subcontractors in the

SIC Major Groups as determined by the

Department of Commerce.

The rule would also add to the FAR a

requirement to evaluate the past performance

of offerors in complying with targets for SDB

participation and subcontracting plan goals

for SDBs whenever past performance is to be

evaluated.

The main impact of the rule is expected to

be on firms seeking to obtain contracts from

Federal government agencies and SDBs

seeking subcontracts under those prime

contracts. The best available estimate of the

number of such firms is 30,000. The basis for

this estimate is the IRFA prepared by SBA

addressing the changes to 13 CFR Parts 121,

124, and 134. The anticipated costs for

certification and protest and appeal

procedures are addressed in SBA’s IRFA. The

primary impact of this interim rule is

expected to be the increase in contract

awards to qualified firms and a

corresponding decrease in contract awards to

firms that are not qualified as SDBs.
Federal Register / Vol. 63, No. 126 /Wednesday, July 1, 1998 /Rules and Regulations 36121

Within the constraints imposed by the

need to implement the DOJ-proposed

reforms, the rule was crafted throughout to

select alternatives that would minimize any

adverse economic impact on small business.

A copy of the IRFA may be obtained

from the FAR Secretariat.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995

(Pub. L. 104–13) applies because the

interim rule contains reporting and

recordkeeping requirements. Requests

for approval of new and revised

information collection requirements

were submitted to the Office of

Management and Budget under 44

U.S.C. 3501 et seq. The information

collections required by this rule were

approved under clearance 9000–0007

through June 30, 2000, and 9000–0150

through June 30, 2000. Public comments

concerning this request were invited

through a Federal Register notice

published on May 9, 1997. No

comments were received.

D. Determination to Issue an Interim

Rule

A determination has been made under

the authority of the Secretary of Defense

(DOD), the Administrator of General

Services (GSA), and the Administrator

of the National Aeronautics and Space

Administration (NASA) that urgent and

compelling reasons exist to promulgate

this interim rule without prior

opportunity for public comment. This

action is necessary to allow adequate

time for the significant number of

potential SDB subcontractors to

understand the requirements of the rule

and to be certified as SDB’s by SBA. The

rule will conform the FAR to the model

program designed by the Department of

Justice to ensure compliance with

Constitutional standards established by

the Supreme Court and, thereby, avoid

unnecessary litigation. A proposed FAR

rule on this subject was published for

public comment at 62 FR 25786 on May

9, 1997. As a result of public comments

received in response to the proposed

rule, changes have been made to the

rule. This interim rule would qualify for

publication as a final rule; however,

further public comments are requested.

Pursuant to Public Law 98–577 and FAR

1.501, public comments received in

response to this interim rule will be

considered in the formation of the final

rule.

List of Subjects in 48 CFR Parts 1, 12,

15, 19, 52, and 53

Government procurement.

Dated: June 23, 1998.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Federal Acquisition Circular

FAC 97–07

Federal Acquisition Circular (FAC) 97–07

is issued under the authority of the Secretary

of Defense, the Administrator of General

Services, and the Administrator for the

National Aeronautics and Space

Administration.

The policies, provisions, and clauses of

this interim rule are effective for all

solicitations issued on or after January 1,

1999.

Dated: June 17, 1998.

R.D. Kerrins,

Col, USA, Deputy Director, Defense

Procurement.

Dated: June 16, 1998.

Ida M. Ustad,

Deputy Associate Administrator, Office of

Acquisition Policy, General Services

Administration.

Dated: June 17, 1998.

Deidre A. Lee,

Associate Administrator for Procurement,

NASA.

Therefore, 48 CFR Parts 1, 12, 15, 19,

52, and 53 are amended as set forth

below:

1. The authority citation for 48 CFR

Parts 1, 12, 15, 19, 52, and 53 continues

to read as follows:

Authority: 41 U.S.C. 486(c); 10 U.S.C.

chapter 137; and 42 U.S.C. 2473(c).

PART 1—FEDERAL ACQUISITION

REGULATIONS SYSTEM

2. Section 1.106 is amended in the

table following the introductory

paragraph by adding, in numerical

order, the following entries:

1.106 OMB approval under the Paperwork

Reduction Act.

* * * * *

FAR segment OMB control No.

* * * * *

19.12 .......................... 9000–0150

* * * * *

52.219–25 .................. 9000–0150

* * * * *

OF 312 ...................... 9000–0150

* * * * *

PART 12—ACQUISITION OF

COMMERCIAL ITEMS

3. Section 12.303(b)(1) is revised to

read as follows:

12.303 Contract format.

* * * * *

(b) * * *

(1) Block 10 if a price evaluation

adjustment for small disadvantaged

business concerns is applicable (the

contracting officer shall indicate the

percentage(s) and applicable line

item(s)), if an incentive subcontracting

clause is used (the contracting officer

shall indicate the applicable

percentage), or if set aside for emerging

small businesses;

* * * * *

PART 15—CONTRACTING BY

NEGOTIATION

4. Section 15.304 is amended by

adding paragraph (c)(4) to read as

follows:

15.304 Evaluation factors and significant

subfactors.

* * * * *

(c) * * *

(4) The extent of participation of

small disadvantaged business concerns

in performance of the contract shall be

evaluated in unrestricted acquisitions

expected to exceed $500,000

($1,000,000 for construction) subject to

certain limitations (see 19.201 and

19.1202).

* * * * *

5. Section 15.305 is amended by

adding paragraph (a)(2)(v) to read as

follows:

15.305 Proposal evaluation.

(a) * * *

(2) * * *

(v) The evaluation should include the

past performance of offerors in

complying with subcontracting plan

goals for small disadvantaged business

(SDB) concerns (see Subpart 19.7),

monetary targets for SDB participation

(see 19.1202), and notifications

submitted under 19.1202–4(b).

* * * * *

6. Section 15.503 is amended in

paragraph (a)(2) by revising the first

sentence to read as follows:

15.503 Notifications to unsuccessful

offerors.

(a) * * *

(2) Preaward notices for small

business programs. In addition to the

notice in paragraph (a)(1) of this section,

when using a small business set-aside

(see Subpart 19.5), or when a small

disadvantaged business concern

receives a benefit based on its

disadvantaged status (see Subpart 19.11

and 19.1202) and is the apparently

successful offeror, upon completion of

negotiations and determinations of
36122 Federal Register / Vol. 63, No. 126 /Wednesday, July 1, 1998 /Rules and Regulations

responsibility, and completion of the

process in 19.304(d), if necessary, but

prior to award, the contracting officer

shall notify each offeror in writing of the

name and address of the apparently

successful offeror. * * *

* * * * *

PART 19—SMALL BUSINESS

PROGRAMS

7. Section 19.000 is amended at the

end of paragraph (a)(7) by removing

‘‘and’’; in paragraph (a)(8) by removing

the period and inserting ‘‘; and’’ in its

place; and by adding paragraph (a)(9) to

read as follows:

19.000 Scope of part.

(a) * * *

(9) The Small Disadvantaged Business

Participation Program.

* * * * *

19.001 Definitions.

8. Section 19.001 is amended by

revising the definition of ‘‘Small

disadvantaged business concern’’ to

read as follows:

19.001 Definitions.

* * * * *

Small disadvantaged business

concern, as used in this part, means

(except for 52.212–3(c)(2) and 52.219–

1(b)(2) for general statistical purposes

and 52.212–3(c)(7)(ii), 52.219–22(b)(2),

and 52.219–23(a) for joint ventures

under the price evaluation adjustment

for small disadvantaged business

concerns) an offeror that represents, as

part of its offer, that it is a small

business under the size standard

applicable to the acquisition; and

either—

(1) It has received certification as a

small disadvantaged business concern

consistent with 13 CFR 124, Subpart B;

and

(i) No material change in

disadvantaged ownership and control

has occurred since its certification;

(ii) Where the concern is owned by

one or more disadvantaged individuals,

the net worth of each individual upon

whom the certification is based does not

exceed $750,000 after taking into

account the applicable exclusions set

forth at 13 CFR 124.104(c)(2); and

(iii) It is listed, on the date of its

representation, on the register of small

disadvantaged business concerns

maintained by the Small Business

Administration; or

(2) For prime contractors, it has

submitted a completed application to

the Small Business Administration or a

Private Certifier to be certified as a small

disadvantaged business concern in

accordance with 13 CFR 124, Subpart B,

and a decision on that application is

pending, and that no material change in

disadvantaged ownership and control

has occurred since its application was

submitted. In this case, a contractor

must receive certification as an SDB by

the SBA prior to contract award.

* * * * *

9. Section 19.201 is amended by

revising paragraph (b) to read as follows:

19.201 General policy.

* * * * *

(b) The Department of Commerce will

determine on an annual basis, by Major

Groups as contained in the Standard

Industrial Classification (SIC) manual,

and region, if any, the authorized small

disadvantaged business (SDB)

procurement mechanisms and

applicable factors (percentages). The

Department of Commerce determination

shall only affect solicitations that are

issued on or after the effective date of

the determination. The effective date of

the Department of Commerce

determination shall be no less than 60

days after its publication date. The

Department of Commerce determination

shall not affect ongoing acquisitions.

The SDB procurement mechanisms are

a price evaluation adjustment for SDB

concerns (see Subpart 19.11), an

evaluation factor or subfactor for

participation of SDB concerns (see

19.1202), and monetary subcontracting

incentive clauses for SDB concerns (see

19.1203). The Department of Commerce

determination shall also include the

applicable factors, by SIC Major Group,

to be used in the price evaluation

adjustment for SDB concerns (see

19.1104). The authorized procurement

mechanisms shall be applied

consistently with the policies and

procedures in this subpart. The agencies

shall apply the procurement

mechanisms determined by the

Department of Commerce. The

Department of Commerce, in making its

determination, is not limited to the SDB

procurement mechanisms identified in

this section where the Department of

Commerce has found substantial and

persuasive evidence of—

(1) A persistent and significant

underutilization of minority firms in a

particular industry, attributable to past

or present discrimination; and

(2) A demonstrated incapacity to

alleviate the problem by using those

mechanisms.

* * * * *

10. Section 19.304 is amended in the

introductory text of paragraph (c) by

revising the second sentence to read as

follows:

19.304 Disadvantaged business status.

* * * * *

(c) * * * The mechanisms that may

provide benefits on the basis of

disadvantaged status as a prime

contractor are a price evaluation

adjustment for SDB concerns (see

Subpart 19.11), and an evaluation factor

or subfactor for SDB participation (see

19.1202).

* * * * *

11. Section 19.305 is amended in

paragraph (a) by revising the last

sentence to read as follows:

19.305 Protesting a representation of

disadvantaged business status.

(a) * * * An offeror, the contracting

officer, or the SBA may protest the

apparently successful offeror’s

representation of disadvantaged status if

the concern is eligible to receive a

benefit based on its disadvantaged

status (see Subpart 19.11 and 19.1202).

* * * * *

12. Section 19.306 is amended by

revising paragraph (b) to read as follows:

19.306 Solicitation provisions.

* * * * *

(b) The contracting officer shall insert

the provision at 52.219–22, Small

Disadvantaged Business Status, in

solicitations that include the clause at

52.219–23, Notice of Price Evaluation

Adjustment for Small Disadvantaged

Business Concerns, or 52.219–25, Small

Disadvantaged Business Participation

Program-Disadvantaged Status and

Reporting.

* * * * *

13. Section 19.703 is amended by

revising paragraphs (a)(2) and (b) to read

as follows:

19.703 Eligibility requirements for

participating in the program.

(a) * * *

(2) In connection with a subcontract,

or a requirement for which the

apparently successful offeror received

an evaluation credit for proposing one

or more SDB subcontractors, the

contracting officer or the SBA may

protest the disadvantaged status of a

proposed subcontractor. Such protests

will be processed in accordance with 13

CFR 124.1015 through 124.1022. Other

interested parties may submit

information to the contracting officer or

the SBA in an effort to persuade the

contracting officer or the SBA to initiate

a protest. Such protests, in order to be

considered timely, must be submitted to

the SBA prior to completion of

performance by the intended

subcontractor.

(b) A contractor acting in good faith

may rely on the written representation
Federal Register / Vol. 63, No. 126 /Wednesday, July 1, 1998 /Rules and Regulations 36123

of its subcontractor regarding the

subcontractor’s status as a small

business concern or a woman-owned

small business concern. The contractor

shall obtain representations of small

disadvantaged status from

subcontractors through use of a

provision substantially the same as

paragraph (b)(1)(i) of the provision at

52.219–22, Small Disadvantaged

Business Status. A contractor shall

confirm that a subcontractor

representing itself as a small

disadvantaged business concern is listed

on the SBA’s list of SDBs by accessing

the list at http://www.sba.gov or by

contacting the SBA’s Office of Small

Disadvantaged Business Certification

and Eligibility. The contractor, the

contracting officer, or any other

interested party can challenge a

subcontractor’s size status

representation by filing a protest, in

accordance with 13 CFR 121.1601

through 121.1608. Protests challenging a

subcontractor’s small disadvantaged

business representation shall be filed in

accordance with 13 CFR 124.1015

through 124.1022.

14. Section 19.705–1 is amended by

inserting the following sentence after

the first sentence to read as follows:

19.705–1 General support of the program.

* * * This subsection does not apply

to SDB subcontracting (see

19.1203). * * *

19.705–4 [Amended]

15. Section 19.705–4 is amended in

the last sentence of paragraph (c) by

removing ‘‘, small disadvantaged’’.

19.708 [Amended]

16. Section 19.708 is amended in the

first sentence of paragraphs (c)(1), (c)(2),

and (c)(3) by removing ‘‘, small

disadvantaged’’.

17. Subpart 19.12, consisting of

sections 19.1201 through 19.1204, is

added to read as follows:

Subpart 19.12—Small Disadvantaged

Business Participation Program

19.1201 General.

19.1202 Evaluation factor or subfactor.

19.1202–1 General.

19.1202–2 Applicability.

19.1202–3 Considerations in developing an

evaluation factor or subfactor.

19.1202–4 Procedures.

19.1203 Incentive subcontracting with

small disadvantaged business concerns.

19.1204 Solicitation provisions and

contract clauses.

Authority: 41 U.S.C. 486(c); 10 U.S.C.

chapter 137; and 42 U.S.C. 2473(c).

Subpart 19.12—Small Disadvantaged

Business Participation Program

19.1201 General.

This subpart addresses the evaluation

of the extent of participation of small

disadvantaged business (SDB) concerns

in performance of contracts in the

Standard Industrial Classification (SIC)

Major Groups as determined by the

Department of Commerce (see

19.201(b)), and to the extent authorized

by law. Two mechanisms are addressed

in this subpart—

(a) An evaluation factor or subfactor

for the participation of SDB concerns in

performance of the contract; and

(b) An incentive subcontracting

program for SDB concerns.

19.1202 Evaluation factor or subfactor.

19.1202–1 General.

The extent of participation of SDB

concerns in performance of the contract,

in the SIC Major Groups as determined

by the Department of Commerce, and to

the extent authorized by law, shall be

evaluated consistent with this section.

Participation in performance of the

contract includes joint ventures,

teaming arrangements, and

subcontracts. Credit under the

evaluation factor or subfactor is not

available to SDB concerns that receive a

price evaluation adjustment under

Subpart 19.11. If an SDB concern waives

the price evaluation adjustment at

Subpart 19.11, participation in

performance of that contract includes

the work expected to be performed by

the SDB concern at the prime contract

level.

19.1202–2 Applicability.

(a) Except as provided in paragraph

(b) of this subsection, the extent of

participation of SDB concerns in

performance of the contract in the

authorized SIC Major Groups shall be

evaluated in competitive, negotiated

acquisitions expected to exceed

$500,000 ($1,000,000 for construction).

(b) The extent of participation of SDB

concerns in performance of the contract

in the authorized SIC Major Groups (see

paragraph (a) of this subsection) shall

not be evaluated in—

(1) Small business set-asides (see

Subpart 19.5);

(2) 8(a) acquisitions (see Subpart

19.8);

(3) Negotiated acquisitions where the

lowest price technically acceptable

source selection process is used (see

15.101–2); or

(4) Contract actions that will be

performed entirely outside of any State,

territory, or possession of the United

States, the District of Columbia, and the

Commonwealth of Puerto Rico.

19.1202–3 Considerations in developing

an evaluation factor or subfactor.

In developing an SDB participation

evaluation factor or subfactor, agencies

may consider—

(a) The extent to which SDB concerns

are specifically identified;

(b) The extent of commitment to use

SDB concerns (for example, enforceable

commitments are to be weighted more

heavily than non-enforceable ones);

(c) The complexity and variety of the

work SDB concerns are to perform;

(d) The realism of the proposal;

(e) Past performance of offerors in

complying with subcontracting plan

goals for SDB concerns and monetary

targets for SDB participation; and

(f) The extent of participation of SDB

concerns in terms of the value of the

total acquisition.

19.1202–4 Procedures.

(a) The solicitation shall describe the

SDB participation evaluation factor or

subfactor. The solicitation shall require

offerors to provide, with their offers,

targets, expressed as dollars and

percentages of total contract value, in

each of the applicable, authorized SIC

Major Groups, and a total target for SDB

participation by the contractor,

including joint venture partners, and

team members, and a total target for

SDB participation by subcontractors.

The solicitation shall require an SDB

offeror that waives the SDB price

evaluation adjustment in the clause at

52.219–23, Notice of Price Evaluation

Adjustment for Small Disadvantaged

Business Concerns, to provide with its

offer a target for the work that it intends

to perform as the prime contractor. The

solicitation shall state that any targets

will be incorporated into and become

part of any resulting contract.

Contractors with SDB participation

targets shall be required to report SDB

participation.

(b) When an evaluation includes an

SDB participation evaluation factor or

subfactor that considers the extent to

which SDB concerns are specifically

identified, the SDB concerns considered

in the evaluation shall be listed in the

contract, and the contractor shall be

required to notify the contracting officer

of any substitutions of firms that are not

SDB concerns.

19.1203 Incentive subcontracting with

small disadvantaged business concerns.

The contracting officer may encourage

increased subcontracting opportunities

in the SIC Major Groups as determined

by the Department of Commerce for SDB
36124 Federal Register / Vol. 63, No. 126 /Wednesday, July 1, 1998 /Rules and Regulations

concerns in negotiated acquisitions by

providing monetary incentives (see the

clause at 52.219–26, Small

Disadvantaged Business Participation

Program Incentive Subcontracting, and

19.1204(c)). Monetary incentives shall

be based on actual achievement as

compared to proposed monetary targets

for SDB subcontracting. The incentive

subcontracting program is separate and

distinct from the establishment,

monitoring, and enforcement of SDB

subcontracting goals in a subcontracting

plan.

19.1204 Solicitation provisions and

contract clauses.

(a) The contracting officer may insert

a provision substantially the same as the

provision at 52.219–24, Small

Disadvantaged Business Participation

Program Targets, in solicitations that

consider the extent of participation of

SDB concerns in performance of the

contract. The contracting officer may

vary the terms of this provision

consistent with the policies in 19.1202–

4.

(b) The contracting officer shall insert

the clause at 52.219–25, Small

Disadvantaged Business Participation

Program—Disadvantaged Status and

Reporting, in solicitations and contracts

that consider the extent of participation

of SDB concerns in performance of the

contract.

(c) The contracting officer may, when

contracting by negotiation, insert in

solicitations and contracts containing

the clause at 52.219–25, Small

Disadvantaged Business Participation

Program—Disadvantaged Status and

Reporting, a clause substantially the

same as the clause at 52.219–26, Small

Disadvantaged Business Participation

Program—Incentive Subcontracting,

when authorized (see 19.1203). The

contracting officer may include an

award fee provision in lieu of the

incentive; in such cases, however, the

contracting officer shall not use the

clause at 52.219–26.

PART 52—SOLICITATION PROVISIONS

AND CONTRACT CLAUSES

52.212–2 [Amended]

18. Section 52.212–2 is amended by

revising the provision date to read ‘‘(Jan

1999)’’; and in the parenthetical

following paragraph (a) of the provision

by inserting ‘‘; (iv) small disadvantaged

business participation;’’ after ‘‘(see FAR

15.304)’’.

19. Section 52.212–3 is amended by

revising the provision date; and the

introductory text of paragraph (c)(7) to

read as follows:

52.212–3 Offeror Representations and

Certifications—Commercial Items.

* * * * *

Offeror Representations and Certifications—

Commercial Items (Jan. 1999)

* * * * *

(c) * * *

(7) (Complete only if the solicitation

contains the clause at FAR 52.219–23, Notice

of Price Evaluation Adjustment for Small

Disadvantaged Business Concerns, or FAR

52.219–25, Small Disadvantaged Business

Participation Program—Disadvantaged Status

and Reporting, and the offeror desires a

benefit based on its disadvantaged status.)

* * * * *

20. Section 52.212–5 is amended by

revising the clause date; redesignating

paragraphs (b)(7) through (b)(18) as

(b)(9) through (b)(20), respectively; and

adding new paragraphs (b)(7) and (b)(8)

to read as follows:

52.212–5 Contract Terms and Conditions

Required to Implement Statutes or

Executive Orders—Commercial Items.

* * * * *

Contract Terms and Conditions Required to

Implement Statutes or Executive Orders—

Commercial Items (Jan. 1999)

* * * * *

(b) * * *

llll (7) 52.219–25, Small

Disadvantaged Business Participation

Program—Disadvantaged Status and

Reporting (Pub. L. 103–355, section 7102,

and 10 U.S.C. 2323).

llll (8) 52.219–26, Small

Disadvantaged Business Participation

Program—Incentive Subcontracting (Pub. L.

103–355, section 7102, and 10 U.S.C. 2323).

* * * * *

21. Section 52.219–8 is amended by

revising the clause date and paragraph

(c) to read as follows:

52.219–8 Utilization of Small, Small

Disadvantaged, and Women-Owned Small

Business Concerns.

* * * * *

Utilization of Small, Small Disadvantaged,

and Women-Owned Small Business

Concerns (Jan. 1999)

* * * * *

(c) As used in this contract, the term

‘‘small business concern’’ shall mean a small

business as defined pursuant to section 3 of

the Small Business Act and relevant

regulations promulgated pursuant thereto.

The term ‘‘small business concern owned

and controlled by socially and economically

disadvantaged individuals’’ means an offeror

that represents, as part of its offer, that—

(1) It is a small business under the size

standard applicable to the acquisition;

(2) It has received certification as a small

disadvantaged business concern consistent

with 13 CFR 124, Subpart B;

(3) No material change in disadvantaged

ownership and control has occurred since its

certification;

(4) Where the concern is owned by one or

more individuals, the net worth of each

individual upon whom the certification is

based does not exceed $750,000 after taking

into account the applicable exclusions set

forth at 13 CFR 124.104(c)(2); and

(5) It is listed, on the date of its

representation, on the register of small

disadvantaged business concerns maintained

by the Small Business Administration.

* * * * *

22. Section 52.219–9 is amended by

revising the clause date and paragraphs

(d)(5), and (d)(10)(iii); and by adding

paragraph (j) to read as follows:

52.219–9 Small, Small Disadvantaged and

Women-Owned Small Business

Subcontracting Plan.

* * * * *

Small, Small Disadvantaged and WomenOwned Small Business Subcontracting Plan

(Jan. 1999)

* * * * *

(d) * * *

(5) A description of the method used to

identify potential sources for solicitation

purposes (e.g., existing company source lists,

the Procurement Marketing and Assistance

Network (PRONET) of the Small Business

Administration (SBA), the list of certified

small disadvantaged business concerns of the

SBA, the National Minority Purchasing

Council Vendor Information Service, the

Research and Information Division of the

Minority Business Development Agency in

the Department of Commerce, or small, small

disadvantaged, and women-owned small

business trade associations). A firm may rely

on the information contained in PRONET as

an accurate representation of a concern’s size

and ownership characteristics for the

purposes of maintaining a small and womenowned small business source list. A firm

shall rely on the information contained in

SBA’s list of small disadvantaged business

concerns as an accurate representation of a

concern’s size and ownership characteristics

for the purposes of maintaining a small

disadvantaged business source list. Use of

PRONET and/or the SBA list of small

disadvantaged business concerns as its

source lists does not relieve a firm of its

responsibilities (e.g., outreach, assistance,

counseling, publicizing subcontracting

opportunities) in this clause.

(10) * * *

(iii) Submit Standard Form (SF) 294,

Subcontracting Report for Individual

Contracts, and/or SF 295, Summary

Subcontract Report, in accordance with the

instructions on the forms or as provided in

agency regulations and in paragraph (j) of

this clause; and

* * * * *

(j) The Contractor shall submit the

following reports:

(1) Standard Form 294, Subcontracting

Report for Individual Contracts. This report

shall be submitted to the Contracting Officer

semiannually and at contract completion.

The report covers subcontract award data

related to this contract. This report is not

required for commercial plans.
Federal Register / Vol. 63, No. 126 /Wednesday, July 1, 1998 /Rules and Regulations 36125

(2) Standard Form 295, Summary

Subcontract Report. This report encompasses

all the contracts with the awarding agency.

It must be submitted semi-annually for

contracts with the Department of Defense and

annually for contracts with civilian agencies.

If the reporting activity is covered by a

commercial plan, the reporting activity must

report annually all subcontract awards under

that plan. All reports submitted at the close

of each fiscal year (both individual and

commercial plans) shall include a breakout,

in the Contractor’s format, of subcontract

awards, in whole dollars, to small

disadvantaged business concerns by

Standard Industrial Classification (SIC) Major

Group. For a commercial plan, the Contractor

may obtain from each of its subcontractors a

predominant SIC Major Group and report all

awards to that subcontractor under its

predominant SIC Major Group.

(End of clause)

* * * * *

52.219–10 [Amended]

23. Section 52.219–10 is amended by

revising the clause date to read ‘‘(Jan.

1999)’’; and in the first sentence of

paragraph (b) of the clause by inserting

‘‘for small business concerns and

women-owned small business

concerns’’ after the word ‘‘goals’’.

24. Sections 52.219–24 through

52.219–26 are added to read as follows:

52.219–24 Small Disadvantaged Business

Participation Program—Targets.

As prescribed in 19.1204(a), insert a

provision substantially the same as the

following:

Small Disadvantaged Business Participation

Program—Targets (Jan. 1999)

(a) This solicitation contains a source

selection factor or subfactor related to the

participation of small disadvantaged business

(SDB) concerns in the contract. Credit under

that evaluation factor or subfactor is not

available to an SDB concern that qualifies for

a price evaluation adjustment under the

clause at FAR 52.219–23, Notice of Price

Evaluation Adjustment for Small

Disadvantaged Business Concerns, unless the

SDB concern specifically waives the price

evaluation adjustment.

(b) In order to receive credit under the

source selection factor or subfactor, the

offeror must provide, with its offer, targets,

expressed as dollars and percentages of total

contract value, for SDB participation in any

of the Standard Industrial Classification (SIC)

Major Groups as determined by the

Department of Commerce. The targets may

provide for participation by a prime

contractor, joint venture partner, teaming

arrangement member, or subcontractor;

however, the targets for subcontractors must

be listed separately.

(End of provision)

52.219–25 Small Disadvantaged Business

Participation Program—Disadvantaged

Status and Reporting.

As prescribed in 19.1204(b), insert the

following clause:

Small Disadvantaged Business Participation

Program—Disadvantaged Status and

Reporting (Jan. 1999)

(a) Disadvantaged status for joint venture

partners, team members, and subcontractors.

This clause addresses disadvantaged status

for joint venture partners, teaming

arrangement members, and subcontractors

and is applicable if this contract contains

small disadvantaged business (SDB)

participation targets. The Contractor shall

obtain representations of small

disadvantaged status from joint venture

partners, teaming arrangement members, and

subcontractors through use of a provision

substantially the same as paragraph (b)(1)(i)

of the provision at FAR 52.219–22, Small

Disadvantaged Business Status. The

Contractor shall confirm that a joint venture

partner, team member, or subcontractor

representing itself as a small disadvantaged

business concern is included in the SBA’s

on-line list of SDBs at http://www.sba.gov or

by contacting the SBA’s Office of Small

Disadvantaged Business Certification and

Eligibility.

(b) Reporting requirement. If this contract

contains SDB participation targets, the

Contractor shall report on the participation of

SDB concerns at contract completion, or as

otherwise provided in this contract.

Reporting may be on Optional Form 312,

Small Disadvantaged Business Participation

Report, or in the Contractor’s own format

providing the same information. This report

is required for each contract containing SDB

participation targets. If this contract contains

an individual Small, Small Disadvantaged

and Women-Owned Small Business

Subcontracting Plan, reports may be

submitted with the final Subcontracting

Report for Individual Contracts (Standard

Form 294) at the completion of the contract.

(End of clause)

52.219–26 Small Disadvantaged Business

Participation Program—Incentive

Subcontracting.

As prescribed in 19.1204(c), insert a

clause substantially the same as the

following:

Small Disadvantaged Business Participation

Program—Incentive Subcontracting (Jan.

1999)

(a) Of the total dollars it plans to spend

under subcontracts, the Contractor has

committed itself in its offer to try to award

a certain amount to small disadvantaged

business concerns in the Standard Industrial

Classification (SIC) Major Groups as

determined by the Department of Commerce.

(b) If the Contractor exceeds its total

monetary target for subcontracting to small

disadvantaged business concerns in the

authorized SIC Major Groups, it will receive

llll [Contracting Officer to insert the

appropriate number between 0 and 10]

percent of the dollars in excess of the

monetary target, unless the Contracting

Officer determines that the excess was not

due to the Contractor’s efforts (e.g., a

subcontractor cost overrun caused the actual

subcontract amount to exceed that estimated

in the offer, or the excess was caused by the

award of subcontracts that had been planned

but had not been disclosed in the offer during

contract negotiations). Determinations made

under this paragraph are not subject to the

Disputes clause of this contract.

(c) If this is a cost-plus-fixed-fee contract,

the sum of the fixed fee and the incentive fee

earned under this contract may not exceed

the limitations in subsection 15.404–4 of the

Federal Acquisition Regulation.

(End of clause)

PART 53—FORMS

25. Section 53.219 is amended by

adding paragraph (c) to read as follows:

53.219 Small business programs.

* * * * *

(c) OF 312 (1/99), Small

Disadvantaged Business Participation

Report. (See Subpart 19.12.)

26. Section 53.302–312 is added to

read as follows:

53.302–312 OF 312, Small Disadvantaged

Business Participation Report.

BILLING CODE 6820–EP–U
36126 Federal Register / Vol. 63, No. 126 /Wednesday, July 1, 1998 /Rules and Regulations
Federal Register / Vol. 63, No. 126 /Wednesday, July 1, 1998 /Rules and Regulations 36127

[FR Doc. 98–17298 Filed 6–30–98; 8:45 am]

BILLING CODE 6820–EP–C