DoD Seal DoD 50 Year Seal

OFFICE OF THE SECRETARY OF DEFENSE

1000 DEFENSE PENTAGON
WASHINGTON, DC 20301-1000
April 29,1996

 
ACQUISITION AND
 TECHNOLOGY

DP(DAR)

                                                                  In reply refer to
                                                                  DFARS Case: 95-D039
                                                                  D. L. 96-009



MEMORANDUM FOR	DIRECTORS OF DEFENSE AGENCIES
                    DEPUTY FOR ACQUISITION AND BUSINESS MANAGEMENT,
                      ASN(RD&A)/ABM
                    DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE
                      (CONTRACTING), SAF/AQC
                    DIRECTOR, PROCUREMENT POLICY, ASA(RD&A)/SARD-PP
                    DEPUTY DIRECTOR (ACQUISITION), DEFENSE LOGISTICS
                      AGENCY



SUBJECT:	Small Disadvantaged Business Concerns


     We have amended the Defense Federal Acquisition Regulation Supplement (DFARS) to
implement initiatives designed to facilitate awards to small disadvantaged businesses
(SDBs) while taking account of the Supreme Court's decision in Adarand Constructors,
Inc. v. Pena, 63 U.S.L.W. 4523 (U.S. June 12, 1995).

     The attached final 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, and 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.

     This DFARS rule is effective immediately and will be included in a future Defense
Acquisition Circular.






                                                    /s/

                                             Eleanor R. Spector
                                             Director, Defense Procurement

Attachment

cc: DSMC, Ft. Belvoir

* * * * *

PART 215--CONTRACTING BY NEGOTIATION

* * * * *

SUBPART 215.6--SOURCE SELECTION

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 offerors in complying with requirements of the clauses at FAR 52.219-8, Utilization of Small[,] Small Disadvantaged [and Women-Owned Small] Business Concerns, and 52.219-9, Small[, Small Disadvanataged 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).]

* * * * *

215.608 Proposal evaluation.

(a)[(1)] * * *

[(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]

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.]

* * * * *

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.]

* * * * *

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)].

[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 non-disadvantaged 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

* * * * *

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

[SUBPART 242.15--Contractor Performance Information

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

* * * * *

252.219-7003 Small, Small Disadvantaged and Women-Owned Small Business Subcontracting Plan (DoD Contracts).

* * * * *

SMALL, SMALL DISADVANTAGED AND WOMEN-OWNED SMALL BUSINESS SUBCONTRACTING PLAN (DOD CONTRACTS) (APR 1996)

* * * * *

[(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.]

* * * * *

[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), (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

* * * * *

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, e]nter 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 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.

* * * * *