[Federal Register Volume 61, Number 83 (Monday, April 29, 1996)]
[Rules and Regulations]
[Pages 18686-18689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10541]



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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: Final rule.

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SUMMARY: The Department of Defense suspended the sections of the 
Defense Federal Acquisition Regulation Supplement (DFARS) that 
prescribe the set-aside of acquisitions for small disadvantaged 
businesses (SDBs). The Department is issuing this final rule to 
implement initiatives designed to limit the adverse impact of this 
suspension. The efforts of a government-wide group

[[Page 18687]]

to reform affirmative action programs in procurement continue. This 
action was reviewed by the Office of Management and Budget under 
Executive Order 12866.

EFFECTIVE DATE: April 29, 1996.

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

SUPPLEMENTARY INFORMATION: 

A. Background

    This final 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. v. Pena, 115 S.Ct. 2097 (1995). This DFARS 
rule includes contracting procedures that: (1) expand the use of the 
evaluation factor for SDBs to include competitive awards based on other 
than price or price-related factors; (2) consider small, small 
disadvantaged, and women-owned small business subcontracting as a 
factor in the evaluation of past performance; (3) clarify that the 
contracting officer will weigh enforceable commitments to use small 
businesses, SDBs, women-owned small businesses, historically black 
colleges and universities, and minority institutions more heavily than 
non-enforceable ones, if the commitment to use such firms is included 
in the solicitation as a source selection criterion; (4) require prime 
contractors to notify the 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; and (5) 
establish a test program of an SDB evaluation preference that would 
remove bond cost differentials between SDBs and other businesses as a 
factor in most source selections for construction acquisitions.
    A proposed rule was published in the Federal Register on December 
14, 1995 (60 FR 64135), with a correction published on December 21, 
1995 (60 FR 66246). DoD considered all comments received in response to 
the proposed rule.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act applies. A final regulatory 
flexibility analysis has been performed and is available by writing the 
Defense Acquisition Regulations Council, PDUSD(A&T)DP(DAR), 3062 
Defense Pentagon, Washington, DC 20301-3062.

C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (Pub. L. 104-13) applies. OMB 
has approved the information collection requirement under OMB Control 
Number 0704-0386.

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 
amended as follows:

PART 215--CONTRACTING BY NEGOTIATION

    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.

    2. Section 215.605 is amended by revising the section title and 
paragraphs (b)(ii)(B) and (b)(ii)(E), and by adding paragraph (b)(iv) 
to read as follows:


215.605  Evaluation factors and subfactors.

    (b) * * *
    (ii) * * *
    (B) The extent of commitment to use such firms (for example, 
enforceable commitments are to be weighted more heavily than non-
enforceable ones);
* * * * *
    (E) When not otherwise required by 215.608(a)(2), past 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 in paragraph 
(b)(ii)(A) of this section, 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 FAR 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 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:

[[Page 18688]]

Subpart 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 a 36-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). The military departments and defense agencies shall submit 
status reports to the Director, SADBU. The first status report shall be 
submitted 18 months after initiation of the test program; the second 
status report shall be submitted 36 months after initiation of the test 
program. These reports shall specify the impact of the evaluation 
preference over each of the reporting periods 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 determines that the evaluation preference is 
having a disproportionate impact on non-SDB concerns or 
nondisadvantaged small business concerns.


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 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 236.303-70, Additive or deductive 
items, the evaluation preference in this subpart shall be applied.


219-7204  Contract clause.

    Use the clause at 252.219-7008, Notice of Evaluation Preference for 
Small Disadvantaged Business Concerns--Construction Acquisitions--Test 
Program, in all solicitations--
    (1) That involve the evaluation preference of this subpart; and
    (2) Where 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.

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 
219.7203, 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 revising the clause date to 
read ``(APR 1996)'' and 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 shall 
occur within a reasonable period of time after award of the 
subcontract. Contractor-specified formats shall be acceptable.

    12. Section 252.219-7008 is added to read as follows:


252.219-7008  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 (APR 1996)
    (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 Section 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),

[[Page 18689]]

(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 
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 10 percent to the total price of all offers, 
except--
    (i) Offers from SDBs which have not waived the evaluation 
preference; and
    (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 in subpart 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. In the evaluation preference 
for small disadvantaged business concerns in construction acquisitions 
set forth in subpart 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. 96-10541 Filed 4-26-96; 8:45 am]
BILLING CODE 5000-04-M