[Federal Register: July 2, 1999 (Volume 64, Number 127)]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

Part VII

Department of Defense

General Services Administration

National Aeronautics and Space Administration

48 CFR Part 1 et al.

Federal Acquisition Regulation; Reform of Affirmative Action in Federal

Procurement and Small Entity Compliance Guide; Final Rules

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 12, 14, 15, 19, 26, 33, 52, and 53

[FAC 97-13; FAR Case 97-004]

Federal Acquisition Regulation; Reform of Affirmative Action in Federal Procurement

AGENCIES: Department of Defense (DoD), General Services Administration

(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

SUMMARY: The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (the Councils) have agreed to adopt the interim rules published in the Federal Register at 63 FR 35719, June 30, 1998; 63 FR 36120, July 1, 1998; 63 FR 52426, September 30, 1998;

and 63 FR 71721, December 29, 1998, as final rules with changes. These amendments conform to a Department of Justice (DoJ) model for reform of 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).

FAC 97-06, 63 FR 35719, June 30, 1998

FAC 97-07, 63 FR 36120, July 1, 1998

FAC 97-08, 63 FR 52426, September 30, 1998

FAC 97-07 Addendum, 63 FR 71721, December 29, 1998

DATES: Effective Date: October 1, 1999.

Applicability Date: The policies, provisions, and clauses of this final rule are effective for all solicitations issued on or after October 1, 1999.

FOR FURTHER INFORMATION CONTACT: Ms. Victoria Moss, Procurement Analyst, Federal Acquisition Policy Division, General Services Administration, at (202) 501-4764, or Mr. Charles Zuckerman, Office of the Director of Defense Procurement, Department of Defense, at (703)

697-0895. For general information, contact the FAR Secretariat, Room 4035, GS Building, Washington, DC, 20405, (202) 501-4755. Please cite FAC 97-13, FAR case 97-004.

SUPPLEMENTARY INFORMATION:

A. Background

DoD, GSA, and NASA issued the following Federal Acquisition Circulars (FACs) to make amendments to the FAR concerning programs for small disadvantaged business concerns:

FAC 97-06, 63 FR 35719, June 30, 1998

FAC 97-07, 63 FR 36120, July 1, 1998

FAC 97-08, 63 FR 52426, September 30, 1998

FAC 97-07 Addendum, 63 FR 71721, December 29, 1998

These amendments conformed to the DoJ model for reform of affirmative action in Federal procurement. This rule revises and finalizes the above interim rules. The Councils received twenty-four letters containing 63 comments in response to the interim rules and considered them in the formulation of this final rule. The Councils made only one significant change to the rule, as follows:

FAC 97-07 Addendum amended the FAR to allow contractors acting in good faith to rely upon the self-representations of their subcontractors as to their status as small disadvantaged business

concerns. The change provided an additional period of time for subcontractors to become certified under rules issued by the Small Business Administration. That time period is being extended to

September 30, 1999. Accordingly, this final rule, which becomes effective on October 1, 1999, rescinds the change made by FAC 97-07 Addendum.

Also, the Councils made several clarifying amendments in this final rule, including removing all references to a list of SDBs to be maintained by the Small Business Administration and referring instead to SBA's PRO-Net database.

This rule was subject to Office of Management and Budget review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This is a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

The 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 the rule provides preferences through which the Government may provide small business concerns benefits in Federal contracting. The Final Regulatory Flexibility Analysis (FRFA) is summarized as follows:

In Adarand Constructors, Inc. v. Pena, 115 S. Ct. 2097 (1995), the Supreme Court extended strict judicial scrutiny to Federal affirmative action programs that use racial or ethnic criteria as a basis for decision-making. Following the decision, the Department of Justice (DoJ) published, at 61 FR 26042 (May 23, 1996), Proposed Reforms to Affirmative Action in Federal Procurement. This DoJ model was implemented in several parts: Small Business Administration (SBA) regulations; publication of the Department of Commerce price evaluation adjustments for use in Federal procurements; and interim FAR rules.

Four interim FAR rules established in the FAR three procurement mechanisms benefiting small disadvantaged businesses (SDBs). The first mechanism is a price evaluation adjustment of up to 10 percent in certain two-digit Standard Industrial Classification (SIC) Major Groups. The second mechanism is a source selection evaluation factor or subfactor for planned SDB participation in the performance of a contract. The third mechanism provides for a monetary incentive for subcontracting with SDBs.

We received one public comment that specifically addressed the Initial Regulatory Flexibility Analysis. That comment provided that the rule imposes a complicated tracking system and will not increase opportunities for small disadvantaged businesses. We made no changes to the rule based on this comment. While we recognize that the rule calls for more detailed reporting of SDB subcontractors in order to comply with the DoJ proposal, no alternatives to that reporting exist. The commenter provided no evidence to support the commenter's opinion that this rule will not increase opportunities for small disadvantaged businesses. It is our opinion that, to the contrary, this rule will increase opportunities for such firms, particularly in the award of prime contracts by civilian agencies that, unlike DoD, have not previously granted procurement preferences to SDBs.

The FAR Secretariat has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration. Interested parties may obtain a copy from the FAR Secretariat. The Council will consider comments from small entities concerning the affected FAR subpart in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C 601, et seq. (FAC 97-13, FAR Case 97-004), in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act (Pub. L. 104-13) applies because the rules being converted to a final rule contain reporting and recordkeeping requirements. OMB approved the information collections under OMB clearance numbers 9000-0007 through June 30, 2000, and 9000-0150 through June 30, 2000. This final rule does not affect those previously approved information collection requirements.

List of Subjects in 48 CFR Parts 1, 12, 14, 15, 19, 26, 33, 52, and 53

Government procurement. Dated: June 25, 1999. Edward C. Loeb, Director, Federal Acquisition Policy Division.

Federal Acquisition Circular

Federal Acquisition Circular (FAC) 97-13 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 final rule are effective for all solicitations issued on or after October 1, 1999.Eleanor R. Spector, Director, Defense Procurement. Dated: June 15, 1999 Ida M. Ustad, Deputy Associate Administrator, Office of Acquisition Policy, General

Services Administration. June 16, 1999. Tom Luedtke, Associate Administrator for Procurement, National Aeronautics and Space Administration. June 11, 1999.

Interim Rules Adopted as Final With Changes

Accordingly, DoD, GSA, and NASA adopt the interim rules amending 48 CFR parts 1, 12, 14, 15, 19, 26, 33, 52, and 53, which were published at 63 FR 35719, June 30, 1998; 63 FR 36120, July 1, 1998; 63 FR 52426, September 30, 1998; and 63 FR 71721, December 29, 1998, as final with

the following changes:

1. The authority citation for 48 CFR parts 1, 12, 14, 15, 19, 26, 33, 52, and 53 continues to read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 U.S.C. 2473(c).

PART 19--SMALL BUSINESS PROGRAMS

2. Amend section 19.001 to revise the definition ``Small disadvantaged business concern'' to read as follows:

19.001 Definitions.

* * * * *

Small disadvantaged business concern, as used in this part (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), means 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 part 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 identified, on the date of its representation, as a certified small disadvantaged business (SDB) concern in the database maintained by the Small Business Administration (PRO-Net); or

(2) For a prime contractor, 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 part 124, subpart B, and a decision on that application is pending, and that no material change in disadvantaged ownership and control has occurred since it submitted its application. In this case, a contractor must receive certification as an SDB by the SBA prior to

contract award.

* * * * *

3. Amend section 19.304 to revise paragraph (c)(1) to read as follows:

19.304 Disadvantaged business status.

* * * * *

(c) * * *

(1) If the apparently successful offeror has represented that it is currently certified as an SDB, the contracting officer may confirm that the concern is identified as a small disadvantaged business concern by accessing SBA's database (PRO-Net) or by contacting the SBA's Office of Small Disadvantaged Business Certification and Eligibility.

* * * * *

4. Amend section 19.703 to add two new sentences after the first sentence of paragraph (b) to read as follows:

19.703 Eligibility requirements for participating in the program.

* * * * *

(b) * * * The clause at 52.219-25, Small Disadvantaged Business Participation Program--Disadvantaged Status and Reporting, requires the contractor to 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. The clause requires the contractor to confirm that a subcontractor representing itself as a small disadvantaged business concern is identified by SBA as a small disadvantaged business concern by accessing SBA's database (PRO-Net) or by contacting the SBA's Office of Small Disadvantaged Business Certification and Eligibility. * * *

5. Revise section 19.1102 to read as follows:

19.1102 Applicability.

(a) Use the price evaluation adjustment in competitive acquisitions in the authorized SIC Major Groups.

(b) Do not use the price evaluation adjustment in acquisitions--

(1) That are less than or equal to the simplified acquisition threshold;

(2) That are awarded pursuant to the 8(a) Program;

(3) That are set aside for small business concerns;

(4) That are set aside for HUBZone small business concerns;

(5) Where price is not a selection factor so that a price evaluation adjustment would not be considered (e.g., architect/engineer acquisitions); or

(6) Where all fair and reasonable offers are accepted (e.g., the award of multiple award schedule contracts).

6. Amend section 19.1103 to revise paragraphs (a)(2), (a)(3), (a)(4), (a)(5), and (b) to read as follows:

19.1103 Procedures.

(a) * * *

(2) An otherwise successful offer of eligible products under the Trade Agreements Act when the acquisition equals or exceeds the dollar threshold in 25.402;

(3) An otherwise successful offer where application of the factor would be inconsistent with a Memorandum of Understanding or other international agreement with a foreign government;

(4) For DoD, NASA, and Coast Guard acquisitions, an otherwise successful offer from a historically black college or university or minority institution; or

(5) For DoD acquisitions, an otherwise successful offer of qualifying country end products (see DFARS 225.000-70 and 252.225-7001).

(b) Apply the factor to a line item or a group of line items on which award may be made. Add other evaluation factors such as transportation costs or rent-free use of Government facilities to the

offers before applying the price evaluation adjustment.

* * * * *

7. Amend section 19.1104 to revise the heading and the first sentence to read as follows:

19.1104 Contract clause.

Insert the clause at 52.219-23, Notice of Price Evaluation Adjustment for Small Disadvantaged Business Concerns, in solicitations and contracts when the circumstances in 19.1101 and 19.1102 apply. * * *

8. Amend section 19.1202-3 to revise the introductory text to read as follows:

19.1202-3 Considerations in developing an evaluation factor or subfactor.

In developing an SDB participation evaluation factor or subfactor for the solicitation, agencies may consider

* * * * *

19.1202-4 [Amended]

9. In section 19.1202-4, remove paragraph (c).

PART 26--OTHER SOCIOECONOMIC PROGRAMS

10. Revise section 26.304 to read as follows:

26.304 Solicitation provision.

Insert the provision at 52.226-2, Historically Black College or University and Minority Institution Representation, in solicitations exceeding the micro-purchase threshold, for research, studies, supplies, or services of the type normally acquired from higher educational institutions. For DoD, NASA, and Coast Guard acquisitions, also insert the provision in solicitations that contain the clause at 52.219-23, Notice of Price Evaluation Adjustment for Small Disadvantaged Business Concerns.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

11. Amend section 52.212-3 to revise the date of the provision and paragraph (c)(7)(i)(A) to read as follows:

52.212-3 Offeror Representations and Certifications--Commercial Items.

* * * * *

Offeror Representations and Certifications--Commercial Items (Oct 1999)

* * * * *

(c) * * *

(7) * * *

(i) * * *

(A) It /__/ is, /__/ is not certified by the Small Business Administration as a small disadvantaged business concern and identified, on the date of this representation, as a certified small disadvantaged business concern in the database maintained by the Small Business Administration (PRO-Net), and that no material change in disadvantaged ownership and control has occurred since its certification, and, where the concern is owned by one or more individuals claiming disadvantaged status, 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); or

* * * * *

12. Amend section 52.219-8 to revise the date of the clause and paragraph (c)(3) to read as follows:

52.219-8 Utilization of Small Business Concerns.

* * * * *

Utilization of Small Business Concerns (Oct 1999)

* * * * *

(c) * * *

(3) Small business concern owned and controlled by socially and economically disadvantaged individuals and small disadvantaged business concern mean a small business concern that represents, as part of its offer that--

(i) It has received certification as a small disadvantaged business concern consistent with 13 CFR 124, Subpart B;

(ii) No material change in disadvantaged ownership and control has occurred since its certification;

(iii) 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

(iv) It is identified, on the date of its representation, as a certified small disadvantaged business in the database maintained by the Small Business Administration (PRO-Net).

* * * * *

13. Amend section 52.219-9 to revise the date of the clause and paragraph (d)(5) to read as follows:

52.219-9 Small Business Subcontracting Plan.

* * * * *

SMALL BUSINESS SUBCONTRACTING PLAN (OCT 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 Access Network (PRO-Net) of the Small Business Administration (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, HUBZone, small disadvantaged, and women-owned small business trade associations). A firm may rely on the information contained in PRO-Net as an accurate representation of a concern's size and ownership characteristics for the purposes of maintaining a small, HUBZone, small disadvantaged and women-owned small business source list. Use of PRO-Net as its source list does not relieve a firm of its responsibilities (e.g., outreach, assistance, counseling, or publicizing subcontracting opportunities) in this clause.

* * * * *

14. Amend section 52.219-22 to revise the date of the provision and paragraph (b)(1)(i)(C) to read as follows:

52.219-22 Small Disadvantaged Business Status.

* * * * *

SMALL DISADVANTAGED BUSINESS STATUS (OCT 1999)

* * * * *

(b) * * *

(1) * * *

(i) * * *

(C) It is identified, on the date of its representation, as a certified small disadvantaged business concern in the database maintained by the Small Business Administration (PRO-Net); or

* * * *

15. Amend section 52.219-23 to revise the date of the clause and paragraphs (a)(1)(iii) and (b) to read as follows:

52.219-23 Notice of Price Evaluation Adjustment for Small Disadvantaged Business Concerns.

* * * * *

NOTICE OF PRICE EVALUATION ADJUSTMENT FOR SMALL DISADVANTAGED BUSINESS CONCERNS (OCT 1999)

(a) * * *

(1) * * *

(iii) It is identified, on the date of its representation, as a certified small disadvantaged business concern in the database maintained by the Small Business Administration (PRO-Net).

* * * * *

(b) Evaluation adjustment. (1) The Contracting Officer will evaluate offers by adding a factor of ______ [Contracting Officer insert the percentage] percent to the price of all offers, except--

(i) Offers from small disadvantaged business concerns that have not waived the adjustment;

(ii) An otherwise successful offer of eligible products under the Trade Agreements Act when the dollar threshold for application of the Act is equaled or exceeded (see section 25.402 of the Federal

Acquisition Regulation (FAR));

(iii) An otherwise successful offer where application of the factor would be inconsistent with a Memorandum of Understanding or other international agreement with a foreign government;

(iv) For DoD, NASA, and Coast Guard acquisitions, an otherwise successful offer from a historically black college or university or minority institution; and

(v) For DoD acquisitions, an otherwise successful offer of qualifying country end products (see sections 225.000-70 and 252.225-7001 of the Defense FAR Supplement).

(2) The Contracting Officer will apply the factor to a line item or a group of line items on which award may be made. The Contracting Officer will apply other evaluation factors described in the solicitation before application of the factor. The factor may not be applied if using the adjustment would cause the contract award to be made at a price that exceeds the fair market price by more than the factor in paragraph (b)(1) of this clause.

* * * *

16. Amend section 52.219-25 to revise the date of the clause and paragraph (a) to read as follows:

52.219-25 Small Disadvantaged Business Participation Program--Disadvantaged Status and Reporting.

* * * * *

SMALL DISADVANTAGED BUSINESS PARTICIPATION PROGRAM--DISADVANTAGED

STATUS AND REPORTING (OCT 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 rovision 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 identified as a certified small disadvantaged business in the database maintained by the Small Business Administration (PRO-Net) or by contacting the SBA's Office of Small Disadvantaged Business Certification and Eligibility.

* * * * *