[Federal Register Volume 60, Number 240 (Thursday, December 14, 1995)]
[Proposed Rules]
[Pages 64135-64138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-50469]



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DEPARTMENT OF DEFENSE

48 CFR Parts 215, 219, 236, 242, 252, and 253

[DFARS Case 95-D039]


Defense Federal Acquisition Regulation Supplement; Small 
Disadvantaged Business Concerns

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

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SUMMARY: The Department of Defense has suspended the sections of the 
Defense Acquisition Regulation Supplement (DFARS) that prescribe the 
set-aside of acquisitions for small disadvantaged businesses (SDBs). 
The Department of Defense is proposing to amend the DFARS to implement 
initiatives designed to limit the adverse impact of the suspension. 
This proposal is an initial response to the suspension. The efforts of 
a government-wide group to reform affirmative action programs continue. 
It is expected that further proposals will be published for comment in 
the near future. This action was reviewed by the Office of Management 
and Budget under Executive Order 12866.

DATES: Comment Date: Comments on the proposed rule should be submitted 
in writing to the address below on or before February 12, 1996, to be 
considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, Attn: Ms. Susan Schneider, 
PDUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 602-0350. Please cite DFARS Case 95-
D039 in all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT:
Ms. Susan Schneider, (703) 602-0131.

SUPPLEMENTARY INFORMATION: 

A. Background

    This proposed rule amends the Defense Federal Acquisition 
Regulation Supplement (DFARS) to implement initiatives designed to 
facilitate awards to SDBs while taking account of the Supreme Court's 
decision in Adarand Constructors, Inc. vs. Pena, 63 U.S.L.W. 4523 (U.S. 
June 12, 1995).

B. Regulatory Flexibility Act

    This proposed rule 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. An Initial Regulatory 
Flexibility Analysis (IRFA) has been prepared and may be obtained from 
the address specified herein. A copy of the IRFA has been submitted to 
the Chief Counsel for Advocacy of the Small Business Administration. 
Comments are invited from small businesses and other interested 
parties. Comments from small entities concerning the affected DFARS 
subparts will be considered in accordance with Section 610 of the 
Regulatory Flexibility Act. Such comments must be submitted separately 
and cite DFARS Case 95-D039 in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (Pub. L. 104-13) applies 
because the proposed rule contains a reporting and recordkeeping 
requirement. The necessary request for approval of the information 
collection requirement has been submitted to the Office of 

[[Page 64136]]
Management and Budget under Section 3507(d) of the Act.
    1. Title for the collection of information, applicable forms, 
applicable OMB controls number, and type of request.
    Approval of the information collection requirement in DFARS 
252.219-7003(g) has been requested as a new clearance, ``Small, Small 
Disadvantaged and Women-Owned Small Business Subcontracting Plan (DoD 
Contracts).''
    2. Summary of information collection.
    DFARS 219.704(a)(4) with its corresponding clause coverage at 
252.219-7003(g) adds a notification requirement for contractors that 
have identified small, small disadvantaged or women-owned small 
businesses in subcontracting plans. Firms are to notify the 
administrative contracting officer of any substitutions of firms that 
are not small, small disadvantaged, or women-owned small businesses for 
the firms listed in the subcontracting plan. Notifications shall be in 
writing and shall occur within a reasonable period of time after award 
of the subcontract. Contractor specified formats shall be acceptable.
    3. Needs and Uses.
    Information is collected on an occasional basis as the need arises 
to keep the administrative contracting officer apprised of a 
contractor's compliance with approved subcontracting plans. Under the 
current procedure, the prime contractor proposes, and the contracting 
officer negotiates, an approved subcontracting plan. Consistent with 10 
U.S.C. 2323, these subcontracting plans are evaluated as part of source 
selection. Under DFARS 215.605, criteria for proposal evaluation may 
include the extent to which small or small disadvantaged businesses are 
specifically identified in proposals (expected to be expanded to 
include women-owned small businesses in a separate DFARS case). Under 
the proposed rule, when an evaluation includes this criteria, the 
small, small disadvantaged, or women-owned small businesses considered 
in the evaluation shall be listed in any subcontracting plan submitted 
pursuant to FAR 52.219-9. The current procedures do not explicitly 
provide a vehicle to determine if those small, small disadvantaged or 
women-owned small business firms which have been identified as 
subcontractors are actually awarded subcontracts. Small firms have 
repeatedly raised the issue that prime contractors do not follow 
through on subcontracting plans as proposed and evaluated. Notification 
is required for DoD to assess compliance with approved subcontracting 
plans. Under the proposed rule at DFARS 242.1503, past performance 
evaluations for previously awarded contracts should consider any 
notifications under the proposed DFARS 252.219-7003(g).
    4. Frequency. On Occasion.
    5. Estimate of total annual reporting and recordkeeping burden.
    Number or respondents: 41.
    Annual responses: 41.
    Annual burden hours: 41.
    We estimate that 30 percent (1,650) of the total estimated number 
of subcontracting plans (5,500) include specific names of small 
businesses, small disadvantaged businesses, and women-owned small 
businesses. We estimate that substitution occurs in 10 percent (165) of 
those plans. Since subcontracting plans typically address several years 
of contract effort, we estimate that 25 percent (41) of the 
substitutions will occur on an annual basis.
    6. Comments. Written comments to OMB, citing DFARS Case 95-D039, 
are invited. Particular comments are solicited on:
    a. Whether the proposed collection of information is necessary for 
the proper performance of the functions of the agency, including 
whether the information shall have practical utility;
    b. The accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    d. Ways to minimize the burden of the collection of information on 
respondents.

List of Subjects in 48 CFR Parts 215, 219, 236, 242, 252, and 253

    Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.

    Therefore, 48 CFR Parts 215, 219, 236, 242, 252, and 253 are 
proposed to be amended as follows:
    1. The authority citation for 48 CFR Parts 215, 219, 236, 242, 252 
and 253 continues to read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 215--CONTRACTING BY NEGOTIATION

    2. Section 215.605 is amended by revising paragraph (b)(ii)(E) and 
by adding paragraph (b)(iv) to read as follows:


215.605  Evaluation factors.

    (b) * * *
    (ii) * * *
    (E) When not otherwise required by 215.608(a)(2), prior performance 
of the offerors in complying with requirements of the clause at FAR 
52.219-8, Utilization of Small, Small Disadvantaged and Women-Owned 
Small Business Concerns, and 52.219-9, Small, Small Disadvantaged and 
Women-Owned Small Business Subcontracting Plan; and
* * * * *
    (iv) When an evaluation includes the criterion at (b)(ii)(A), the 
small, small disadvantaged, or women-owned small businesses considered 
in the evaluation shall be listed in any subcontracting plan submitted 
pursuant to FAR 52.219-9 to facilitate compliance with 252.219-7003(g).
* * * * *
    3. Section 215.608 is amended by redesignating existing paragraph 
(a) as paragraph (a)(1) and by adding paragraph (a)(2) to read as 
follows:


215.608  Proposal evaluation.

    (a) * * *
    (2) When a past performance evaluation is required by FAR 15.605 
and the solicitation includes the clause at FAR 52.219-8, Utilization 
of Small, Small Disadvantaged and Women-Owned Small Business Concerns, 
the evaluation shall include the past performance of offerors in 
complying with requirements of that clause. When a past performance 
evaluation is required by FAR 15.605, and the solicitation includes the 
clause at 52.219-9, Small, Small Disadvantaged and Women-Owned Small 
Business Subcontracting Plan, the evaluation shall include the past 
performance of offerors in complying with requirements of that clause.
* * * * *

PART 219--SMALL BUSINESS PROGRAMS

    4. The heading of Part 219 is revised to read as set forth above.
    5. Section 219.704 is amended by adding paragraph (a)(4) to read as 
follows:


219.704  Subcontracting plan requirements.

    (a) * * *
    (4) In those subcontracting plans which specifically identify 
small, small disadvantaged, and women-owned small businesses, prime 
contractors shall notify the administrative contracting officer of any 
substitutions of firms that are not small, small 

[[Page 64137]]
disadvantaged, or women-owned small businesses for the firms listed in 
the subcontracting plan. Notifications shall be in writing and shall 
occur within a reasonable period of time after award of the 
subcontract. Contractor specified formats shall be acceptable.
    6. Section 219.1006 is amended by revising paragraph (b)(1)(B) to 
read as follows:


219.1006  Procedures.

    (b) * * *
    (1) * * *
    (B) The evaluation preference at 219.70 shall not be used. However, 
note the test program at 219.72 for construction acquisitions.
* * * * *
    7. Section 219.7001 is amended by revising paragraph (a) to read as 
follows:


219.7001  Applicability.

    (a) The evaluation preference shall be used in competitive 
acquisitions except as provided in paragraph (b) of this section and in 
219.1006(b)(1)(B).
* * * * *
    8. Subpart 219.72 is added to read as follows:
219.72--Evaluation Preference for Small Disadvantaged Business (SDB) 
Concerns in Construction Acquisitions--Test Program
Sec.
219.7200  Policy.
219.7201  Administration of the Test Program.
219.7202  Applicability.
219.7203  Procedures.
219.7204  Contract Clause.

219.72--Evaluation Preference for Small Disadvantaged Business 
(SDB) Concerns in Construction Acquisitions--Test Program


219.7200  Policy.

    DoD policy is to ensure that, during this test program, offers from 
small disadvantaged business (SDB) concerns shall be given an 
evaluation preference in construction acquisitions.


219.7201  Administration of the test program.

    The test program will be conducted over an eighteen-month period. 
The test program will be conducted by all DoD contracting activities 
that award construction contracts. The focal point for the test program 
is the Director, Small and Disadvantaged Business Utilization, Office 
of the Under Secretary of Defense for Acquisition and Technology 
(Director, SADBU). Fourteen months after the initiation of this test 
program, the military departments and defense agencies shall submit a 
status report to the Director, SADBU. This report shall specify the 
impact of the evaluation preference over the first twelve months of the 
test program, and shall provide recommendations with respect to 
continuation and/or modification of the evaluation preference.


219.7202  Applicability.

    (a) The evaluation preference shall be used in competitive 
acquisitions for construction (see definition in FAR subpart 36.1) when 
work is to be performed inside the United States, its territories or 
possessions, Puerto Rico, the Trust Territory of the Pacific Islands, 
or the District of Columbia.
    (b) Do not use the evaluation preference in acquisitions which--
    (1) Are less than or equal to the simplified acquisition threshold;
    (2) Are set aside for small businesses; or
    (3) Are awarded under section 8(a) procedures.
    (c) The evaluation preference need not be applied when the head of 
the contracting activity expects that--
    (1) The contracting activity will meet its goal for SDB concerns, 
established pursuant to 10 U.S.C. 2323, during the current fiscal year, 
without this preference;
    (2) The evaluation preference is having a disproportionate impact 
on non-SDB concerns; or
    (3) The preference is otherwise not in the best interest of the 
Government.


219.7203  Procedures.

    (a) Solicitations that require bonding shall require offerors to 
separately state bond costs in the offer. Bond costs include the costs 
of bid, performance, and payment bonds.
    (b) Evaluate total offers. If the apparently successful offeror is 
an SDB concern, no further preference-based evaluation is required 
under this subpart.
    (c) If the apparently successful offeror is not an SDB concern, 
evaluate offers excluding bond costs. If, after excluding bond costs, 
the apparently successful offeror is an SDB concern, add bond costs 
back to all offers, and give offers from SDB concerns a preference in 
evaluation by adding a factor of 10 percent to the total price of all 
offers, except--
    (1) Offers from SDBs which have not waived the evaluation 
preference; and
    (2) Offers from historically black colleges and universities or 
minority institutions, which have not waived the evaluation preference.
    (d) When using the procedures in 36.303-70, Additive or deductive 
items, the evaluation preference in this subpart shall be applied.


219.7204  Contract clause.

    Use the clause at 252.219-7010, Notice of Evaluation Preference for 
Small Disadvantaged Business Concerns--Construction Acquisitions--Test 
Program, in all solicitations--
    (1) That involve the evaluation preference; and
    (2) Where work is to be performed inside the U.S., its territories 
or possession, Puerto Rico, the Trust Territory of the Pacific Islands, 
or the District of Columbia.

PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

    9. Section 236.303-70 is amended by revising the introductory text 
of paragraph (c)(2) to read as follows:


236.303-70  Additive or deductive items.

* * * * *
    (c) * * *
    (2) Evaluate all bids, including those using the procedures in 
219.703, on the basis of the same additive or deductive bid items.
* * * * *

PART 242--CONTRACT ADMINISTRATION

    10. Subpart 242.15 is added to read as follows:

Subpart 242.15--Contractor Performance Information

Sec.
242.1503  Procedures.


242.1503  Procedures.

    Evaluations should consider any notifications submitted under 
paragraph (g) of the clause at 252.219-7003, Small, Small Disadvantaged 
and Women-Owned Small Business Subcontracting Plan (DoD Contracts).

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    11. Section 252.219-7003 is amended by adding paragraph (g) to read 
as follows:


252.219-7003  Small, small disadvantaged and women-owned small business 
subcontracting plan (DoD contracts).

* * * * *
    (g) In those subcontracting plans which specifically identify 
small, small disadvantaged, and women-owned small businesses, the 
Contractor shall notify the Administrative Contracting Officer of any 
substitutions of firms that are not small, small disadvantaged, or 
women-owned small businesses for the firms listed in the subcontracting 
plan. Notifications shall be in writing and 

[[Page 64138]]
shall occur within a reasonable period of time after award of the 
subcontract. Contractor specified formats shall be acceptable.
    12. Section 252.219-7010 is added to read as follows:


252.219-7010  Notice of evaluation preference for small disadvantaged 
business concerns--construction acquisitions--Test program.

    As prescribed in 219.7204, use the following clause:

Notice of Evaluation Preference for Small Disadvantaged Business 
Concerns--Construction Acquisitions--Test Program (Date)

    (a) Definitions.
    As used in this clause--
    ``Historically black colleges and universities (HBCUs),'' means 
institutions determined by the Secretary of Education to meet the 
requirements of 34 CFR 608.2. The term also means any nonprofit 
research institution that was an integral part of such a college or 
university before November 14, 1986. ``Minority institutions,'' 
means institutions meeting the requirements of paragraphs (3), (4), 
and (5) of Section 1046(3) of the Higher Education Act of 1965 (20 
U.S.C. 1135d-5(3)). The term also includes Hispanic-serving 
institutions as defined in Section 316(b)(1) of such Act (20 U.S.C. 
1059c(b)(1)).
    ``Small disadvantaged business (SDB) concern,'' means a small 
business concern, owned and controlled by individuals who are both 
socially and economically disadvantaged, as defined by the Small 
Business Administration at 13 CFR part 124, the majority of earnings 
of which directly accrue to such individuals. This term also means a 
small business concern owned and controlled by an economically 
disadvantaged Indian tribe or Native Hawaiian organization which 
meets the requirements of 13 CFR 124.112 or 13 CFR 124.113, 
respectively.
    (b) Evaluation preference. (1) Offerors shall separately state 
bond costs in the offer. Bond costs include the costs of bid, 
performance, and payment bonds.
    (2) Offers will be evaluated initially based on their total 
prices. If the apparently successful offeror is an SDB concern, no 
further preference based evaluation will be conducted.
    (3) If the apparently successful offeror is not an SDB concern, 
offers will be evaluated based on their prices excluding bond costs. 
If, after excluding bond costs, the apparently successful offeror is 
an SDB concern, bond costs will be added back to all offers, and 
offers from SDB concerns will be given a preference in evaluation by 
adding a factor of ten percent to the total price of all offers, 
except--
    (i) Offers from SDBs which have not waived the evaluation 
preference; or
    (ii) Offers from HBCUs or minority institutions, which have not 
waived the evaluation preference.
    (c) Waiver of evaluation preference. A small disadvantaged 
business, historically black college or university, or minority 
institution offeror may elect to waive the preference. The 
agreements in paragraph (d) of this clause do not apply to offers 
which waive the preference.
    ______________Offeror elects to waive the preference.
    (d) Agreements. A small disadvantaged business concern, 
historically black college or university, or minority institution 
offeror, which did not waive the preference, agrees that in 
performance of the contract, in the case of a contract for--
    (i) General construction, at least 15 percent of the cost of the 
contract, excluding the cost of materials, will be performed by 
employees of the concern.
    (ii) Construction by special trade contractors, at least 25 
percent of the cost of the contract, excluding the cost of 
materials, will be performed by employees of the concern.

(End of clause)

PART 253--FORMS

    13. Section 253.204-70 is amended by revising paragraph (e)(3) to 
read as follows:


253.204-70  DD Form 350, Individual Contracting Action Report.

* * * * *
    (e) * * *
    (3) Block E3, Next Low Offer.
    (i) Complete Block E3 only if Block E2 is completed, or the 
evaluation preference for small disadvantaged business concerns in 
construction acquisitions set forth at 219.72 is applied. Otherwise, 
leave Block E3 blank.
    (ii) If Block E2 is completed, enter the offered price from the 
small business firm that would have been the low offeror if qualified 
nonprofit agencies employing people who are blind or severely disabled 
had not participated in the acquisition. If the evaluation preference 
for small disadvantaged business concerns in construction acquisitions 
set forth at 219.72 is applied, enter the offered price from the non-
SDB concern that would have been the successful offeror if the 
evaluation preference had not been applied. Enter the amount in whole 
dollars.
* * * * *
[FR Doc. 95-50469 Filed 12-13-95; 8:45 am]
BILLING CODE 5000-04-M