[Federal Register Volume 63, Number 126 (Wednesday, July 1, 1998)]
[Rules and Regulations]
[Pages 36120-36127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17298]



[[Page 36119]]

_______________________________________________________________________

Part IV

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________



48 CFR Chapter 1



Federal Acquisition Regulations (FAR); Final Rules

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

[[Page 36120]]



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: 
<a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="44222536272537216a7d736974747006042337256a232b326a">[email protected]</a>
    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.

[[Page 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

[[Page 36122]]

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

[[Page 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

[[Page 36124]]

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) * * *
    ________ (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).
    ________ (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 Women-Owned 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 women-owned 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.

[[Page 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 ________ [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

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[FR Doc. 98-17298 Filed 6-30-98; 8:45 am]
BILLING CODE 6820-EP-C


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