OFFICE OF THE SECRETARY OF DEFENSE
1000 DEFENSE PENTAGON
WASHINGTON, DC 20301-1000
In reply refer to
DFARS Case: 96-D304
D. L. 96-016
MEMORANDUM FOR DIRECTORS OF DEFENSE AGENCIES
DEPUTY FOR ACQUISITION AND BUSINESS MANAGEMENT,
DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE
DIRECTOR, PROCUREMENT POLICY, ASA(RD&A)/SARD-PP
DEPUTY DIRECTOR (ACQUISITION), DEFENSE LOGISTICS
SUBJECT: Test Program for Negotiation of Comprehensive Subcontracting Plans
We have amended the Defense Federal Acquisition Regulation Supplement (DFARS) to
reflect changes to the Test Program for Negotiations of Comprehensive Small Business
Subcontracting Plans, as required by Section 811 of the National Defense Authorization
Act for Fiscal Year 1996 (Pub. L. 104-106). We have also made editorial changes to
DFARS Part 219 to reflect revisions to FAR Part 19 published in Federal Acquisition
The attached interim DFARS rule (Atch 1) is effective immediately and will be
published in a future Defense Acquisition Circular.
For your information, I have provided a copy of the revised Test Program for
Negotiation of Small Business Subcontracting Plans prepared by the Office of Small and
Disadvantaged Business Utilization (Atch 2).
Eleanor R. Spector
Director, Defense Procurement
cc: DSMC, Ft. Belvoir
PART 219--[SMALL BUSINESS PROGRAMS]
* * * * *
SUBPART 219.7--SUBCONTRACTING WITH SMALL BUSINESS[,] SMALL DISADVANTAGED BUSINESS [AND WOMEN-OWNED SMALL BUSINESS] CONCERNS
219.702 Statutory requirements.
(a) Section 834 of Pub. L. 101-189, as amended[,] by
requires the DoD to establish a test program to determine whether comprehensive
subcontracting plans on a corporate, division, or plant-wide basis will
[reduce administrative burdens while enhancing] subcontracting opportunities for small
[and small disadvantaged] business concerns.
* * * * *
219.708 Solicitation provisions and contract clauses.
* * * * *
- (b)(1)(A) Use the clause at 252.219-7003, [Small, Small Disadvantaged and Women-Owned
Small Business Subcontracting Plan (DoD Contracts)], in solicitations and contracts that
contain the clause at FAR 52.219-9, [Small, Small Disadvantaged and Women-Owned Small Business
- (B) In contracts with contractors which have comprehensive subcontracting plans
approved under the test program described in 219.702(a), use the clause at 252.219-7004,
[Small, Small Disadvantaged and Women-Owned Small Business Subcontracting Plan (Test
Program),] instead of the clauses at 252.219-7003, [Small, Small Disadvantaged and Women-Owned
Small Business Subcontracting Plan (DoD Contracts)], and FAR 52.219-9, [Small, Small Disadvantaged and
Women-Owned Small Business Subcontracting Plan].
- (2) * * *
- (c)(1) * * *
- (A) When contracting by negotiation, use the clause at 252.219-7005, Incentive for
Subcontracting with Small Businesses, Small Disadvantaged Businesses, Historically Black
Colleges and Universities, and Minority Institutions, in all solicitations and contracts
that contain the clause at FAR 52.219-9, [Small, Small Disadvantaged and Women-Owned Small Business
Subcontracting Plan]. Incentives for exceeding SDB subcontracting goals shall be paid only
if an SDB subcontracting goal was exceeded as a result of actual subcontract awards to
SDBs, and not as a result of developmental assistance credit under the Pilot Mentor-Protege
Program (see Subpart 219.71).
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
* * * * *
SUBPART 252.2--TEXTS OF PROVISIONS AND CLAUSES
* * * * *
252.219-7004 [Small, Small Disadvantaged and Women-Owned Small Business Subcontracting
Plan (Test Program)].
* * * * *
SMALL, SMALL DISADVANTAGED AND WOMEN-OWNED SMALL BUSINESS SUBCONTRACTING PLAN
(TEST PROGRAM) (APR 1996)
(a) * * *
(b) The Offeror’s comprehensive small business subcontracting plan and its successors,
which are authorized by and approved under the test program of Section 834 of Pub. L.
101-189, as amended[,] shall be included in and made a
part of the resultant contract. Upon expulsion from the test program or expiration of the
test program, the Contractor shall negotiate an individual subcontracting plan for all
future contracts that meet the requirements of Section 211 of Pub. L. 95-507.
(c) The Contractor shall submit Standard Form 295, Summary Subcontract Report, in
accordance with the instructions on the form, except Item , Remarks,
shall be completed to include [semi-annual cumulative
(1)] small business[,] and small disadvantaged business [, and women-owned small business]
goals, and [(2)] small business and small
disadvantaged business goals, actual accomplishments, and percentages for each of the two
designated industry categories.
(d) The failure of the Contractor or subcontractor to comply in good faith with (1) the
clause of this contract entitled "Utilization of Small [,] Small
Disadvantaged [and Women-Owned Small] Business Concerns," or (2) an approved plan required
by this clause, shall be a material breach of the contract.
(End of clause)
TEST PROGRAM FOR NEGOTIATION OF COMPREHENSIVE SMALL
BUSINESS SUBCONTRACTING PLANS
(Revised July 31, 1996)
This document implements Section 834 of Public Law 101-189, the National Defense
Authorization Act for Fiscal Years 1990 and 1991, as amended. The primary purpose of the
Comprehensive Small Business Subcontracting Plan Test Program (the Program) is to determine
whether the negotiation and administration of comprehensive small business subcontracting
plans will reduce administrative burdens on contractors while enhancing subcontracting
opportunities for small business concerns and small business concerns owned and controlled
by socially and economically disadvantaged individuals under Department of Defense (DoD)
The Program is established pursuant to Section 834 of the National Defense Authorization
Act for Fiscal Years 1990 and 1991, as amended.
III. Program Requirements
- A. The Program shall be conducted from October 1, 1990, through September 30,
- B. The selection of contractors for participation in the Program shall be in
accordance with Section 811(b)(3) of the National Defense Authorization Act For Fiscal
Year 1996, Public Law 104-106. Eligible contractors are large business concerns at the
major (total) corporate level that, during the preceding fiscal year:
- 1. Were performing under at least three DoD contracts; furnished supplies or services (including professional services) to DoD, engaged in research and development for DoD, or performed construction for DoD; and were paid $5,000,000 or more for such contract activities; and
- 2. Achieved a small disadvantaged business (SDB) subcontracting participation rate of 5 percent or more during the preceding fiscal year. However, this requirement does not apply to the eight original contractors accepted into the Program. Additionally, a large business with an SDB subcontracting participation rate of less than 5 percent during the preceding fiscal year may request, through the designated contracting activity, to participate in the Program if the firm submits a detailed plan with milestones leading to attainment of at least a 5 percent SDB subcontracting participation rate by September 30, 1998.
- C. Contractors selected for participation shall:
- 1. Be eligible in accordance with paragraph III(B);
- 2. Establish their comprehensive subcontracting plans on the same corporate, division or plant-wide basis under which they submitted the Standard Form (SF) 295 during the preceding fiscal year, except that a division or plant that historically reported through a higher level division, but would meet the criteria of paragraph III(B)(2), shall be permitted to participate in the Program if the lower level division, plant or profit center can demonstrate a 5 percent or greater subcontract performance level with SDB concerns;
- 3. Have reported to DoD on the SF 295 for the last fiscal year, except as provided in paragraph III(C)(2);
- 4. Accept an SDB goal for each fiscal year of not less than 5 percent, or an SDB goal that is in accordance with the milestone established under paragraph III(B)(2);
- 5. Comply with the requirements of Defense Federal Acquisition Regulation Supplement (DFARS) Section 215.605 for source selection purposes;
- 6. Offer a broad range of subcontracting opportunities;
- 7. Voluntarily agree to participate; and
- 8. Have at least one active contract that requires a subcontracting plan at the designated DoD buying activity responsible for negotiating the Comprehensive Subcontracting Plan.
IV. Elements of the Comprehensive Small Business Subcontracting
- A. The comprehensive small business subcontracting plan shall address each of the 11 elements set forth in paragraph (d) of the clause at FAR 52.219-9, "Small, Small Disadvantaged and Women-Owned Small Business Subcontracting Plan."
- 1. The subcontracting plan, percentage and corresponding dollar goals for awards to small business, small disadvantaged business and women-owned small business concerns shall be developed by the contractor for its entire business operation in support of all DoD contracts regardless of dollar value.
- 2. Participating contractors shall include separate specific goals and timetables for the awarding of subcontracts in two industry categories which have not historically been made available to small business and small disadvantaged business concerns. These industry categories will be recommended by the contractor and approved by the contracting officer. Subcontract awards made in support of the specific industry categories shall also count towards attainment of the overall small business and small disadvantaged business goals.
- 3. The subcontracting plan shall set forth the prime contractor's actions to publicize prospective subcontract opportunities for small business, small disadvantaged business and women-owned small business concerns.
- B. Subcontracting plans to be established under the Program shall be submitted each year by participating contractors to the designated contracting officer 45 days prior to the end of the Government's fiscal year (September 30). However, new contractors requesting participation under the Program shall submit subcontracting plans to the contracting officer as close as possible to September 30.
VI. Monitoring and Reporting of Comprehensive Subcontracting Plans and Goals
- A. The Service Acquisition Executive within each military department and defense agency having contractors that meet the requirements of paragraphs III(B) and (C) shall designate at least three but not more than five contracting activities to participate in the Program. In selecting the contracting activities to participate in the Program, the Service Acquisition Executive shall ensure that the designated activities cover a broad range of supplies and services.
- B. The designated contracting activity will accomplish the following:
- 1. With the coordination of the Director, Office of Small and Disadvantaged Business Utilization, for their military department or defense agency, select as many eligible prime contractors (at least five) for participation under the Program as deemed appropriate.
- 2. Establish a "Comprehensive Small Business Subcontracting Plan" negotiating team(s) composed as follows:
- a. A contracting officer(s) who will be responsible for negotiation and approval of the comprehensive subcontracting plan(s) as well as the responsibilities at FAR 19.705.
- b. The contracting activity's Small and Disadvantaged Business Utilization Specialist.
- c. The Small and Disadvantaged Business Utilization Specialist of the cognizant contract administration activity that administers the preponderance of the selected prime contractor's contracts and/or the appropriate individual who will administer contractor performance under the test in accordance with FAR 19.706 and the provisions herein.
- d. Production specialist, price analyst and other functional specialists as appropriate.
- C. The designated contracting officer shall:
- 1. Solicit proposed comprehensive subcontracting plans from selected contractor(s) as soon as possible and by July 1, annually thereafter.
- 2. By October 1, and annually thereafter, review, negotiate and approve on behalf of DoD a comprehensive subcontracting plan for each selected contractor.
- 3. Distribute copies of the approved subcontracting plan in accordance with paragraph VI(A).
- 4. Upon negotiation and acceptance of the comprehensive subcontracting plan, obtain from the contractor:
- a. A listing of all active DoD contracts that contain individual subcontracting plans required by Section 211 of Public Law 95-507.
- b. The listing shall include the following:
- i. Contract number.
- ii. Name and address of the contracting activity.
- iii. Contracting officer's name and phone number.
- 5. Upon receipt of the information provided by the participating contractor under paragraph V(C)(4), direct the designated administrative contracting officer to issue a comprehensive change order, which modifies all of the contractor's active DoD contracts that include subcontracting plans. The modification will substitute the contractor's approved comprehensive subcontracting plan for the individual plans, will substitute the clause at DFARS 252.219-7004 for the clause at FAR 52.219-9, and will delete the clauses at FAR 52.219-10 and 52.219-16 and DFARS 252.219-7003 and 252.219-7005, as appropriate.
- 6. Review annually, with the contract administration activity, the contractor's performance under the plan. Document the review findings and distribute, in accordance with paragraph VI(A), within 45 days of the end of the fiscal year.
- 7. By November 15 of the year after acceptance, and annually thereafter, determine whether the contractor has met its comprehensive subcontracting goals. If the goals have not been met, determine whether there is any indication that the contractor failed to make a good faith effort and take appropriate action.
- 8. By December 15, 1998, prepare and submit a report on each participating contractor's performance which details the results of the Program. The report must compare the contractor's performance under the Program with its performance for the three fiscal years prior to acceptance into the program. The report distribution will be in accordance with paragraph VI(A).
- D. Participating contractors:
- 1. Shall establish their comprehensive subcontracting plans on the same corporate, division or plant-wide basis under which they submitted the SF 295 during the preceding fiscal year, except that those contractors that historically reported through a higher headquarters can elect to participate as a separate (lower level) reporting profit center, plant or division if the contractor achieved an SDB subcontracting performance rate of 5 percent or greater in the preceding fiscal year.
- 2. Upon negotiation of an acceptable comprehensive subcontracting plan, shall be exempt from individual contract-by-contract reporting requirements for DoD contracts unless otherwise required in accordance with paragraph III(C)(5).
- 3. Shall continue individual contract reporting on non-DoD contracts.
- 4. Shall comply with the flow-down provisions of Section 211 of Public Law 95-507. Large business concerns receiving a DoD subcontract in excess of $500,000 ($1,000,000 for construction) are required to adopt a plan similar to that mandated by the clause at FAR 52.219-9. Participating contractors are prohibited from flowing down the "Comprehensive" subcontracting deviation provisions of DFARS 252.219-7004. Accordingly, large business subcontractors to the participating contractors shall be required to establish individual subcontracting plans with specific goals for awards to small business, small disadvantaged business and women-owned small business concerns.
- 5. Upon expulsion from the Program or Program termination on September 30, 1998, shall negotiate and establish individual subcontracting plans on all future DoD contracts that otherwise meet the requirements of Section 211 of Public Law 95-507.
- A. Upon negotiation and acceptance of comprehensive subcontracting plans and goals, the designated activity shall immediately forward one copy of the plan to each of the following:
- 1. Director, Office of Small and Disadvantaged Business Utilization, Office of the Deputy Under Secretary of Defense (International and Commercial Programs), 3061 Defense Pentagon, Room 2A338, Washington, DC 20301-3061.
- 2. Director, Small and Disadvantaged Business Utilization, for the military department or defense agency of the activity that negotiated and accepted the comprehensive subcontracting plan.
- 3. The cognizant contract administration office.
- B. Each participating contractor shall complete the SF 295 "Summary Subcontract Report" in accordance with the instructions on the back of the form on a semi-annual basis, except as noted below:
- 1. One copy of the SF 295 and attachments shall be submitted to Director, Office of Small and Disadvantaged Business Utilization, Office of the Deputy Under Secretary of Defense (International and Commercial Programs), 3061 Defense Pentagon, Room 2A338, Washington, DC 20301-3061.
- 2. Participating contractors shall enter in Item 14 "Remarks" block the annual corporate, division or plant-wide small business, small disadvantaged business and women-owned small business percentage and corresponding dollar goals.
- 3. Participating contractors shall also enter separately in Item 14 the percentage and corresponding dollar goals for each of the two selected industry categories (see paragraph IV(A)(2)).
- 4. Participating contractors shall also enter separately in Item 14 on a semi-annual cumulative basis the percentage and corresponding dollar amount of subcontract awards made in each of the two selected industry categories.
- 5. Participating contractors shall be exempt from the completion of SF 294 "Subcontract Report For Individual Contracts" for DoD contracts during their participation in the Program.