Empowerment Contracting

DEPARTMENT OF COMMERCE

15 CFR Part 3

[Docket No. 960828234-7093-04]

RIN 0690-AA25

Empowerment Contracting

AGENCY: Department of Commerce.

ACTION: Proposed regulations; request for comment.

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SUMMARY: The Department of Commerce is reissuing these proposed

guidelines requesting public comment on policies and procedures

intended to promote economy and efficiency in Federal procurement by

grating qualified large businesses and qualified small businesses

appropriate incentives to encourage business activity in areas of

general and severe economic distress. This actions taken in accordance

with the President's Executive Order entitled, ``Empowerment

Contracting.'' The standards and procedures set forth in these proposed

guidelines serve as the basis for a proposed revision to the Federal

Acquisition Regulation (``FAR''): Information obtained from public

comment on these guidelines will be used to help draft the final

Commerce and FAR regulations.

DATES: Comments must be submitted on or before July 21, 1997.

ADDRESSES: Comments may be mailed to the Department of Commerce, Office

of the Assistant General Counsel for Finance and Litigation, Room 5896,

14th and Constitution Street, NW., Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: Joe Levine, 202-482-1071.

SUPPLEMENTARY INFORMATION:

A. Background

On May 21, 1996, President Clinton issued Executive Order 13005,

``Empowerment Contracting'' (the ``Order''). The purpose of the Order

is to strengthen the economy and secure broad-based competition for

Federal contracts by fostering growth of Federal contractors in

economically distressed communities. In the Order, the President

charged the Secretary of Commerce (the ``Secretary''), in consultation

with the Secretaries of Housing and Urban Development, Labor and

Defense; and the Administrators of the General Services Administration,

the National Aeronautics and Space Administration, the Small Business

Administration, and the Office of Federal Procurement Policy, to

develop policies and procedures to ensure that Federal agencies, when

awarding contracts in unrestricted competitions, grant qualified large

and small businesses appropriate price or evaluation incentives to

encourage business activity in areas of general economic distress.

Specifically, the Order requires the Secretary to ``develop

policies and procedures to ensure that agencies, to the extent

permitted by law, grant qualified large businesses and qualified small

businesses appropriate incentives to encourage business activity in

areas of general economic distress, including a price or a non-price

evaluation credit, when assessing offers for government contracts in

unrestricted competitions, where the incentives would promote the

policy set forth in this Order.'' The Order also calls upon the

Secretary to (1) monitor the implementation and operation of the

procedures developed; (2) ensure proper administration of the program

and reduce the potential for fraud by intended beneficiaries; (3)

develop a process to evaluate the effectiveness of the procedures

developed; and (4) issue an annual report to the President on the

status and effectiveness of the program. In addition, the Secretary

must ensure that all policies, procedures and regulations developed

pursuant to the Order minimize the administrative burden on affected

agencies and the procurement process.

On September 13, 1996, the Department published, in the Federal

Register, its proposed Guidelines for implementing Executive Order

13005 (61 FR 48463). After several extensions, the period for public

comment closed on January 6, 1997. These revised Guidelines, and the

proposed amendments to the FAR, which were published on April 18, 1997

(62 FR 19200), for a 60 day public comment period, are based on

comments received under that process and further internal analysis.

B. Public Comments

Comments were received from 40 commentors. They included businesses

of all sizes, not-for-profit entities, industry and trade associations,

Federal agencies, State and local governments and one member of

Congress.

Federal agency comments included the following recommended

revisions to the proposed guidelines:

(1) Firms should be required to have met the eligibility criteria

prior to award of contracts. Eligibility based on prospective criteria

will raise monitoring and compliance problems.

(2) If firms are required to meet the eligibility criteria prior to

award of contracts, challenges to their status can be resolved prior to

award.

(3) The initial test phase of six months is too short. It should be

eighteen months.

(4) The third test of significant economic activity, ``ownership'',

should be deleted as not relevant.

(5) Criteria should apply to areas, not an area.

(6) The areas of general economic distress should include labor

surplus areas.

(7) The criteria for ``eligibility'' should not have ranges, but

rather a fixed percentage and higher targets.

(8) The threshold for applicability is too low. It should be $1

million.

(9) Qualification should be based on pre-certifications, not a

``showing''.

(10) The incentives should be revised to reflect the increasing

number of ``best value'' awards.

(11) The Department of Commerce needs to establish regulations to

cover challenges of eligibility.

(12) The preferences/incentives should not be cumulative with

incentives of other programs implemented through the procurement

system. To allow cumulative preferences will encourage ``front''

companies.

(13) The incentives are too high. The application of cumulative

incentives

[[Page 27557]]

will have an adverse impact on agency budgets.

A number of commentors suggested that special treatment be afforded

to firms located in areas with particularly high levels of economic

distress.

Other commentors, including several not-for-profits, expressed

support for the program and suggested various technical adjustments.

These comments included such recommendations as:

(1) The subcontracting criterion of 15% for the previous six months

is too high as a criterion for significant economic activity.

(2) Employment percentages of 40% to 50% are achievable within the

eligible areas.

(3) Certification and challenges should be delegated to local

government economic agencies.

(4) The $100,000 threshold is too high. A lower threshold would

offer more opportunities to small businesses.

(5) The incentives should be higher.

(6) Monitoring is essential to the success of the program.

(7) Firms track their data on a yearly basis, therefore, a six

month first phase is inadequate.

(8) The definition for ``not-for-profit'' should be expanded to

include government units, universities, and hospitals.

(9) Credit should be given for banking with minority firms.

(10) Preferences should be given to business enterprises owned by

American Indian tribes, Alaskan natives, tribal or native-American

corporations, and tribal organizations.

C. Guideline Revisions

Revisions have been made to the guidelines that respond to many of

these comments. These changes will enhance the program while remaining

consistent with the goals, policies and provisions of Executive Order

13005.

I. General

The guidelines have been reformatted to become a new part 3 to 15

CFR.

II. Definitions

The definitions pertaining to eligibility have been revised to

refer to areas, rather than an area, to allow businesses to receive

credit for economic activity in any eligible area.

Two additional definitions have been added. An ``area of severe

economic distress'', is defined as any census tract that has a poverty

rate of at least 50% A new category of firm, identified as an

``eligible business'', has also been established. An eligible business

is a business, regardless of size, that meets any one of the three

``significant'' tests in an area of severe economic distress. These

provisions recognize the goal of encouraging business activity in areas

of very high poverty. The 50% poverty rate was chosen to set a higher

standard for relaxed eligibility requirements for such businesses,

because the benefit of relaxed qualification standards is appropriate

only in areas of substantial deprivation. Initiating and sustaining

private activity in areas of severe distress is essential to the

economic recovery of those areas and it is felt that only through

special consideration could such areas receive the benefits intended by

this program.

Two separate processes have been established for firms to qualify

for preferences. One process will enable business to qualify by self-

certifying that they will meet prospective eligibility criteria. Such

firms will be subjected to detailed reporting and audit requirements,

and will be required to pay preference recoupment should they not meet

the required levels of performance. In addition, the definitions were

modified to measure the overall contribution of the business to

economic activity in eligible areas, rather than tying such measures to

a particular contract. Public comment is particularly requested on this

change in measurement standard.

A second process was added to allow businesses to seek pre-

qualification of eligibility to receive incentives under this program.

For this new process the definitions are written to measure the

businesses impact in eligible areas during the previous six months.

This process was established to accommodate situations, such as

provision of supplies and other manufactured items, where the product

being sold was already in inventory, and sealed bid awards, where

detailed reporting and post performance audits are not the norm.

Finally, the definitions pertaining to ``significant physical

presence'' were revised to measure the number of employees working in

eligible areas. It was decided that the original definition, which

merely measured the percentage of physical plant in eligible areas,

created too large a loophole in situations where firms might have large

amounts of land devoted to such things as warehouses, storage and

garages, where very little time was spent by employees.

III. Eligibility Processes

The processes under which businesses will establish their

eligibility have been added. Firms seeking to self-certify will have to

prepare plans setting forth how they plan to attain the necessary

economic activity in eligible areas. The Department of Commerce, on its

own initiative, or in response to challenges, will rule on the

achievability of these plans. Firms seeking pre-qualification will

submit the information required for the Department to decide on their

request for pre-qualification.

IV. Challenges

An outline of the procedures the Department proposes to utilize to

handle challenges is now set forth. Comments on its appropriateness,

and any alternative mechanism are solicited.

V. Applicability

The simplified acquisition threshold (currently $100,000) has been

retained. Any adjustment below this amount would create an

administrative burden on agencies that would greatly outweigh the

potential benefits of the program. No sound reason was perceived for

raising the threshold for applicability.

VI. Incentive Structure

The comments regarding elimination of cumulative incentives have

not been accepted. The Order requires that the incentives of this

program be applied in addition to any incentives available under

already existing programs. This provision was included to comply with

the Administration's policy thrust that the Empowerment Contracting

Program is to be used by all types of qualifying businesses in

distressed areas, and not to negatively impact existing preference

programs. Adding this Program and not allowing accumulation with other

preferences would have a negative impact on businesses eligible for

other preferences. A price preference of up to 10% or an evaluation

preference of up to 15% will be available. The incentive provisions

have been modified to accommodate the use of non-numeric selection

procedures.

VII. Phased Implementation

In response to several comments, the length of the first phase has

been revised from 6 months to 18 months. This longer period for phase

one will allow for accumulation of a larger base of data regarding the

effectiveness of the Program. Review of phase one will begin after 12

months. Eleven two digit Standard Industrial Code (SIC) major group

identifiers have been selected for inclusion in phase one. These SIC

codes were selected because they represent areas of business which are

likely to have viability in eligible areas. Several were suggested by

commentors. They represent a sufficiently broad base of activity that

will facilitate matching the needs of a wide range of Federal

[[Page 27558]]

agencies with potential sources in eligible areas.

The goal of the first phase is to see if the Program is most

effective luring current government contractors to distressed areas,

luring businesses in growth industries to distressed areas, or

encouraging sales for businesses located in distressed areas. Using a

broad array of contracts in various industries over an 18 month period,

will provide information to refine and expand the program.

D. Classification

It has been determined that these proposed guidelines are

significant for purposes of Executive Order 12866 dated September 30,

1993. This is a major rule under 5 U.S.C. 804. Because these proposed

guidelines relate to a matter of public property, loans, grants,

benefits, or contracts, they are exempted from all the procedural

requirements of the Administrative Procedure Act (5 U.S.C. 553).

Because notice and comment are not required by 5 U.S.C. 553 or any

other law, a Regulatory Flexibility Analysis is not required and was

not done for purpose of the Regulatory Flexibility Act. However, an

Initial Regulatory Flexibility Analysis (IRFA) was prepared in

connection with the proposed FAR amendments and may be obtained from

the FAR Secretariat.

Notwithstanding any other provision of law, no person is required

to respond to, nor shall a person be subject to, a penalty for failure

to comply with a collection of information subject to the requirements

of the Paperwork Reduction Act unless that collection of information

displays a currently valid control number. This rule contains

collection-of-information requirements subject to the Paperwork

Reduction Act. A request for approval of the paperwork burdens has been

submitted to the Office of Management and Budget. These relate to the

pre-qualification process, the self-certification process and the

challenge procedures. These requirements are estimated to take,

respectively, eight, two, and one hours, including the time to gather

records, make copies, and mail documents to the Department of Commerce.

Public comment is sought regarding: Whether this proposed

collection of information is necessary for the proper performance of

the functions of the agency, including whether the information has

practical utility; the accuracy of the burden estimate; ways to enhance

the quality, utility, and clarity of the information to be collected;

and ways to minimize the burden of the collection of information,

including through the use of automated collection techniques or other

forms of information technology. Comments on the collection of

information burden may be sent to Joseph Levine, Room 5896, U.S.

Department of Commerce, Washington DC 20230, and to the Office of

Information and Regulatory Affairs, Office of Management and Budget,

Washington DC 20503.

List of Subjects in 15 CFR Part 3

Business and industry, Government procurement.

Therefore, it is proposed that a new 15 CFR part 3 be added to read

as follows:

PART 3--EMPOWERMENT CONTRACTING

Sec.

3.01 Purpose.

3.02 Definitions.

3.03 Eligible areas.

3.04 Self-certification of eligibility.

3.05 Pre-qualification for eligibility.

3.06 Challenges--self-certification.

3.07 Challenges--pre-qualification.

3.08 Applicability.

3.09 Incentive structure.

3.10 Monitoring and evaluation.

3.11 Phased implementation of the Program.

Authority: Executive Order 13005 (61 FR 26069, May 24, 1996).

Sec. 3.01 Purpose.

The purpose of this part is to set forth the policies and

procedures applicable to the Empowerment Contracting Program

established by Executive Order 13005.

Sec. 3.02 Definitions.

(a) General.

(1) Agency means any authority of the United States that is an

``agency'' under 44 U.S.C. 3502(1), other than those considered

independent regulatory agencies as defined in 44 U.S.C. 3502(10).

(2) Area of general economic distress means, for all urban and

rural communities, any census tract that has a poverty rate of at least

20 percent or any designated Federal Empowerment Zone, Supplemental

Empowerment Zone, Enhanced Enterprise Community, or Enterprise

Community. Area of general economic distress also means any rural area

or Indian reservation that currently meet the criteria for designation

as a redevelopment area under section 401(a) of the Public Works and

Economic Development Act of 1965, as amended (42 U.S.C. 3161(a)), as

set forth at 13 CFR 301.2 (loss of population); 13 CFR 301.4 (Indian

Lands) and 13 CFR 301.7 (special impact areas).

(3) Area of severe economic distress means any census tract that

has a poverty rate of at least 50 percent.

(4) Business means the legal entity responsible for performance of

the contract for which a preference is sought.

(5) Qualified small business means a small for-profit or not-for-

profit trade or business that:

(i) Employs a significant number of residents from areas of general

economic distress;

(ii) Has a significant physical presence in areas of general

economic distress; or

(iii) Has a direct impact on generating significant economic

activity in areas of general economic distress.

(6) Qualified large business means a large for-profit or not-for-

profit trade or business that:

(i) Employs a significant number of residents from areas of general

economic distress; and

(ii)(A) Either has a significant physical presence in areas of

general economic distress or

(B) Has a direct impact on generating significant economic activity

in areas of general economic distress.

(7) Qualified eligible business means any business that meets one

of the following criteria:

(i) Employs a significant number of residents from areas of severe

economic distress;

(ii) Has a significant physical presence in areas of severe

economic distress; or

(iii) Has a direct impact on generating significant economic

activity in areas of severe economic distress. (See Secs. 3.04(b)(4)

and 3.05(b)(4) for qualification procedures.)

(8) Small Business is defined by the definitions and procedures set

forth by the Small Business Administration for determining size

eligibility for government procurements. (13 CFR 121.901-911).

(9) Small not-for-profit businesses--Notwithstanding 13 CFR 121.403

(the SBA regulation that defines ``business or concern'' to mean for-

profit entities) size determinations for not-for-profits entities will

follow the same procedures as those of for-profit entities, i.e., the

Standard Industrial Code (SIC) of the procurement will govern.

(10) Large business means any business that is not a small

business.

(b) Definitions applicable to Pre-Qualification. The following

definitions apply to businesses seeking pre-qualification based on

their current operations:

(1) Employs a significant number of residents from the area. This

means a

[[Page 27559]]

business which, during the six months preceding the date of its request

for pre-qualification, has expended at least 25 percent of its total

labor costs in wages and benefits to residents from areas of general

economic distress.

(2) Has a significant physical presence in the area. This means a

business with physical plant(s) in areas of general economic distress

where, for the six months preceding the date of its request, at least

25 percent of the employees of the business perform their job.

Employees will be considered to perform their job at the location where

they spend the most time working, so long as it is at least 6 hours per

work week.

(3) Has a direct impact on generating significant economic activity

in the area. This means a business which.

(i) During the six months preceding the date of its request for

pre-qualification, has expended at least 50 percent of its total labor

costs in wages and benefits to residents from areas of general economic

distress; or

(ii) During the six months prior to submitting its request for pre-

qualification, has incurred at least 25 percent of its expenses on

goods, materials, and services from firms located in areas of general

economic distress.

(c) Definitions for Self-Certification. The following definitions

apply to businesses which seek to self-certify their eligibility based

on future operations:

(1) Employs a significant number of residents from the area. This

means a business which, during the period of performance of the

contract, will expend at least 25 percent of its total labor costs in

wages and benefits to residents from areas of general economic

distress.

(2) Has a significant physical presence in the area. This means a

business with physical plant(s) in areas of general economic distress

where, during the period of performance of the contract, at least 25

percent of the employees of the business will perform their job.

Employees will be considered to perform their job at the location where

they spend the most time working, so long as it is at least 6 hours per

work week.

(3) Has a direct impact on generating significant economic activity

in the area. This means a business which:

(i) During the period of performance of the contract, will expend

at least 50 percent of its total labor costs in wages and benefits to

residents from areas of general economic distress; or

(ii) During the period of performance of the contract, will incur

at least 25 percent of its expenses on goods, materials, and services

from firms located in areas of general economic distress.

Sec. 3.03 Eligible areas.

The Department of Commerce will maintain the official listing of

eligible areas, based on the 1990 decennial Census of Population data.

The listing shall contain the Census tract and block numbering for all

eligible areas. This listing will be available on the internet at

[email protected].

Sec. 3.04 Self-Certification of Eligibility.

(a) When responding to solicitations, businesses may ``self-

certify'' their qualifications at the time of submission of their

proposal/bid, pursuant to the definitions set forth in Sec. 3.02(c) of

this part.

(b) At the time they self-certify their eligibility, businesses

will be expected to have prepared a short description of their plan for

achieving the requirements of this program. The description, which will

be kept in their files, should contain sufficient detail to enable the

Department to reach an informed judgment of the likelihood of the

plan's success.

(1) For Secs. 3.02(c)(1) and (c)(3)(i) the description should also

identify the areas of general economic distress where employees will be

recruited, the types of positions they will occupy, and evidence that

those types of employees are available in sufficient quantity from

those areas;

(2) For Sec. 3.02(c)(2) the description should identify the areas

of general economic distress where the physical plant(s) likely will we

located, the types of plant that are required, evidence that such

plants(s) are available, and the types and numbers of individuals who

will be employed there;

(3) For Sec. 3.02(c)(3)(ii) the description should identify the

types of goods and services that likely would be purchased, and likely

sources of those goods and services located in areas of general

economic distress.

(4) For qualification under the definition of Sec. 3.02(a)(7) as a

``qualified eligible business'', the information called for in

paragraphs (b)(1)-(3) of this section should be supplied, substituting

data for areas of severe economic distress for areas of general

economic distress.

(c) The Department will conduct random reviews of the self-

certifications submitted by businesses to verify their eligibility.

(d) If there is reason to believe that a business has submitted

false information, withheld relevant information, or otherwise violated

federal law, the matter will be promptly referred to the Department's

Inspector General for investigation.

Sec. 3.05 Pre-Qualification for Eligibility.

(a) Upon request, the Department will issue certificates that

businesses have met the pre-qualification requirement(s) set forth in

Sec. 3.026(b) of this part. Such requests shall be submitted to the

Office of Empowerment Contracting, Rm xxxx, U.S. Department of

Commerce, Washington, DC 20230.

(b) In addition to having available the full details of the

documentation needed to establish their eligibility, businesses shall

submit the following with their request:

(1) For qualification under Sec. 3.02(b)(1), a summary of the

number of employees of the firm, the number of employees living in

areas of general economic distress, the wages and benefits paid to each

group in the last six months, and a list of eligible areas in which

employees live;

(2) For qualification under Sec. 3.02(b)(2), the addresses of each

of the businesses plants, indicating which are in areas of general

economic distress, a brief description of the activities conducted at

each site, and the number of employees who perform their job at each

site;

(3)(i) For qualification under Sec. 3.02(b)(3)(i), business should

submit the same information as called for under Sec. 3.05(b)(1) of this

part;

(ii) For qualification under Sec. 3.02(b)(3)(ii), the names and

addresses of all firms located in areas of general economic distress

from which the business has purchased goods, materials or services in

the past six months, the dollar total of such purchases, and the dollar

total of all goods, materials and services purchased by the business in

the past six months.

(4) For qualification under the definition of Sec. 3.02(a)(7) as a

``qualified eligible business'', the information called for in

paragraphs (b)(1)-(3) of this section should be supplied, substituting

data for areas of severe economic distress for areas of general

economic distress.

(c) Businesses may submit requests for pre-qualification under,

one, several or all of the above. If it is determined that they meet

the requirements for Sec. 3.02(b)(1) and either Sec. 3.02(b)(2),

(b)(3)(ii); or they meet one of the alternative tests to be a qualified

eligible business, the Department will issue a certificate of

eligibility. If a business meets one or more of the requirements of

Sec. 3.02(b) but does not meet all the requirements to be a qualified

large

[[Page 27560]]

business or qualified eligible business, the Department will certify as

to its pre-qualification under the requirements(s) it has met. This

last certification will qualify them for participation in the program

if they are a small business in the context of a particular

procurement.

(d) Businesses receiving such certificates of pre-qualification may

submit copies thereof in lieu of the self-certification of eligibility,

when responding to solicitations.

(e) Any business may seek pre-qualification, however, it is likely

that solicitations will have limitations on subcontracting or similar

requirements that could affect their eligibility to receive an award.

(f) Determinations as to whether a firm is a small business will be

made in the context of each particular solicitation, based on SBA

procedures and the four digit SIC code applicable to that solicitation

(g) Pre-qualification certificates will be effective for one year

from their date of issue.

(h) businesses shall notify the Department of Commerce of material

changes that would affect their eligibility status (e.g. plant closing

or major scale backs that would significantly alter their employment

data or location).

(i) Upon receipt of a request, the Department will publish notice

in the Federal Register seeking public comment. The notice will include

the name of the requesting business, the definition(s) for which it

seeks to pre-qualify, and the principal eligible areas from which

employees are employed, in which plant are located, and/or goods and

services have been obtained.

(j) After preliminary review of a request the Department will

request such additional information as it believes necessary and/or

conduct a site visit. The Department will issue or deny a request

within 30 business days of receipt, or provide the business with the

reason for delay and an expected decision date.

(k) Appeals of denials of requests for pre-qualification must be

submitted, in writing within 30 working days of the date of the denial.

The appeal should be addressed to Office of xxxx and explain why the

decision was in error. The appellant will be notified, in writing, of

the Department's final decision, which will also be entered into the

Empowerment Contracting Database.

(l) If there is reason to believe that a business has submitted

false information, withheld relevant information, or otherwise violated

federal law, the matter will be promptly referred to the Department's

Inspector General for investigation.

Sec. 3.06 Challenges--Self-Certification.

(a) An offeror may protest a concern's self-certification by filing

a protest with the contracting officer in accordance with the procuring

agency's protest procedures.

(b) The contracting officer or the Department of Commerce may

protest a concern's self-certification at any time. The Department of

Commerce protests a concern's self-certification by filing directly

with its Office of EC and notifying the contracting officer.

(c) Upon receipt of a timely protest, the contracting officer shall

withhold award and forward the protest to the Department of Commerce

Office of EC, 14th and Constitution Ave. NW, Washington, DC. 20230. The

contracting officer shall send to the Department of Commerce--

(1) The protest;

(2) The date the protest was received and a determination of

timeliness;

(3) A copy of the protested concern's submittals regarding self-

certification; and

(4) The date of bid opening or date on which notification of the

apparently successful offeror was sent to unsuccessful offerors.

(d) When the contracting officer makes a written determination that

award must be made to protect the public interest, award shall be made

notwithstanding the protest.

(e) Upon receipt of notification that a challenge has been filed,

the apparently successful offeror shall, by 5 p.m. of the business day

following the date of receipt of the notice, submit to the Office of

EC, rm xxxx U.S. Department of Commerce, Washington DC 20230, fax no.

(202) 482-xxxx., a copy of its description called for in Sec. 3.04(b).

If the description is not received in a timely manner the challenge

will be upheld.

(f) The Department will review the description, request any

additional information it may require, and conduct on site verification

if it is considered advisable, and allow the apparently successful

offeror to submit such information as it may desire to refute the

challenge. Based on this data the Department will determine whether the

business is likely to achieve the performance required to qualify.

(g) The Department of Commerce, Office of EC, will determine the

qualification status of the challenged offeror and notify the

contracting officer, the challenged offeror, and the protestor. Award

may be made on the basis of that determination. The determination is

final for purposes of the instant acquisition, unless--

(1) It is appealed; and

(2) The contracting officer receives the Department of Commerce's

decision on the appeal before award.

(h) If the contracting officer does not receive a Department of

Commerce determination within 15 business days after the Department of

Commerce's receipt of the protest, the contracting officer shall

presume that the challenged offeror's self-certification is valid.

(i) A Department of Commerce determination may be appealed by the

interested party whose protest has been denied; the concern whose

status was protested; or the contracting officer. The appeal must be

filed with the Department of Commerce's Office of EC within five

business days after receipt of the determination. The appeal should

contain significant evidence beyond that submitted previously.

(j) Following receipt of the appeal the Department will notify the

other side (challenger or apparently successful offeror). Every effort

will be made to issue a final decision prior to award of the contract

in question.

(k) Both parties and the contracting officer will be notified, in

writing, of the Department's final determination, which will be entered

into the Empowerment Contracting Database.

Sec. 3.07 Challenges--Pre-Qualification.

(a) The Department reserves the right to revoke certificates of

pre-qualification if it determines that there are material changes in a

businesses eligibility status. Accordingly, anyone who has information

that might indicate such a change in status is encouraged to submit it,

in writing, to the Office of EC, rm. xxxx. U.S. Department of Commerce,

at any time. In addition, an offeror may protest a concern's pre-

qualification by filing a protest with the contracting officer in

accordance with the procuring agency's protest procedures. The

contracting officer or the Department of Commerce may protest a

concern's pre-qualified status at any time. The Department of Commerce

protests a concern's pre-qualification by filing directly with its

Office of EC and notifying the contracting officer.

(b) Upon receipt of a timely protest, or other adverse information,

the Department will decide whether it merits further investigation. If

further action is justified the Department will request the pre-

qualified firm to submit a response to the adverse information and

conduct such other inquiry as it deems appropriate to ascertain whether

there has been a material change in

[[Page 27561]]

circumstances that would justify revoking the pre-qualification.

(c) For protests concerning particular awards, the provisions of

paragraphs (c), (d), (g), (h), (i), (j) and (k) of Sec. 3.06 of this

part shall apply.

(d) For challenges not covered by paragraph (c) of this section,

the Department of Commerce, Office of EC, will notify the challenged

business and the challenger, of its decision.

(e) Decisions to revoke pre-qualifications will become effective

upon issuance and entered into the Empowerment Contracting Database.

(f) Appeals of decisions covered by paragraph (d) of this section,

must be submitted, in writing within 30 working days of the date of the

decision. The appeal should be addressed to Office of EC and explain

why the decision was in error. The appellant will be notified, in

writing, of the Department's final decision, which will be also be

entered into the Empowerment Contracting Database.

(g) If there is reason in believe that a business has submitted

false information, withheld relevant information, or otherwise violated

federal law, the matter will be promptly referred to the Department's

Inspector General for investigation.

Sec. 3.08 Applicability.

Subject to the provisions contained in Sec. 3.11, these guidelines

shall apply to unrestricted competitions for contracts exceeding the

simplified acquisition threshold, other than those where performance

will not take place in the United States.

Sec. 3.09 Incentive Structure.

(a) Incentives, in the form of price or non-price, shall be

available in contracts subject to these guidelines. While applying

these incentives, the Contracting Officer/Source Selection Official

shall have the discretion to determine the size and type of incentive

to apply to any particular procurement.

(b) Preferences in the form of incentives shall represent a price

preference of up to 10 percent or an evaluation credit of up to 15

percent. For procurements in which source selection will be made on a

non-numerical basis, the Contracting Officer/Source Selection Official

shall ensure that the incentive selected will be given sufficient

weight to be meaningful.

(c) Any preference a business receives under these guidelines shall

be added to the preferences it may receive pursuant to other statutory

or regulatory programs.

Sec. 3.10 Montitoring and Evaluation.

Subject to the provisions of the ``Phased Implementation of the

Program'' section of these guidelines, the Commerce Department, in

conjunction with procuring agencies, shall monitor the process as

follows:

(a) Monitoring the Federal Procurement process. We would expect

that the benefit to the federal procurement system would begin to be

realized during the latter years of phase two of the program. To assist

in monitoring and evaluating the efficiency of this new program,

agencies awarding contracts to qualified businesses shall provide the

following information to the Department of Commerce:

(1) The number and dollar amount of solicitations in which an

empowerment contracting preference was offered. This information will

be broken down by SIC Major Group and by the use of the price

evaluation preference and non-price evaluation factor;

(2) The contract numbers, dollar amounts, names of awardees, and

price premiums paid (if identifiable) for awards made as a result of an

empowerment preference. This information will be broken down by SIC

Major Group;

(3) Comments on the advantages and disadvantages of the Empowerment

Contracting Program, including comments on whether the program had any

impact on the quality of supplies and services procured through its

use.

(b) Monitoring the impact on business development. Evaluation

criteria shall be established on national goals and objectives. A

sample of businesses receiving contracts under the program would be

examined with the following issues being addressed:

(1) Did the business locate or remain in a particular place so that

it would be eligible for preferences under these guidelines?

(2) Did the business hire new workers or provide additional

benefits to existing workers from eligible areas so that it would be

eligible for preferences under these guidelines?

(3) Did the business purchase additional goods and services from

firms located in eligible areas so that it would be eligible for

preferences under these guidelines?

(4) Did the business propose to hire more workers in eligible areas

as a result of bidding or proposing under the subject contract?

(5) Is this contract new work that the business would not have

received but for this program?

(c)(1) Monitoring the impact on distressed communities. In order to

examine impacts of the program on distressed communities, outcomes

should be measured in the context of local conditions and community

priorities, as well as broad national goals. The local vision for a

community's transformation should provide the principal criteria for

measuring local outcomes. The monitoring and evaluation process should

have both an initial and a longer term phase. The principal objectives

of the initial phase would be to:

(i) Establish baseline measurements of demographics, economic

indicators, physical infrastructure conditions and needs, and social

conditions;

(ii) Identify local outcome measures and common national measures

toward which long-term evaluation will be directed, including

employment, crime, education, and poverty; and

(iii) Develop a strategy and mechanism for evaluating progress

toward local and national goals over time.

(2) The longer-term evaluation should have the capacity to answer

fundamental questions about the efficacy of targeted Federal

contracting, specifically its ability to revitalize distressed

communities and to improve the social and economic well-being of

residents. This phase will examine such questions as:

(i) To what extent does the program create or improve the quality

of jobs and economic opportunities in the distressed area?

(ii) To what extent does the program result in new businesses

locating in the community or increased rates of business retention in

the community?

(iii) To what extent does the program affect areas outside the

distressed community by either connecting residents with opportunities

in the larger community or by increasing growth in the larger areas?

(iv) How have the changes in these communities affected the

jurisdictions in which they are located?

(v) How have areas (and residents) adjacent to the distressed

communities been affected?

(vi) At what cost have these outcomes been achieved? The evaluation

must ultimately provide an empirical basis for assessing program costs

relative to benefits.

(vii) How effectively does the program interact with other

government programs designed to promote the development of economically

distressed communities?

(d) In monitoring the program, the Department of Commerce may

request additional information to the extent that it deems appropriate.

[[Page 27562]]

Sec. 3.11 Phased Implementation of the Program.

(a) First phase--eighteen month period. The guidelines will apply

initially, during a first phase of eighteen months' duration, only to

contracts involving industries whose two digit Standard Industrial

Classification (``SIC'') Code major group identifiers are listed below.

Each agency will establish procedures to ensure that the Empowerment

Contracting program is applied to approximately 25 percent of the

dollar value of its eligible procurements in these SIC codes, and will

inform the Department of Commerce as to how it will ensure that this is

done.

(b) At the end of the first year of the program, the Department of

Commerce, in coordination with the agencies listed in Executive Order

13005, will evaluate the program and develop any necessary changes to

improve performance. The revised procedures will become effective in

the second phase.

(c) The two digit SIC code major group identifiers to which the

first phase will apply are:

15--Construction

20--Food and Kindred Products

23--Apparel and Other Textile Products

25--Furniture and Fixtures

27--Printing and Publishing

30--Rubber and Miscellaneous

34--Fabricated Metal Products

42--Trucking and Warehousing

51--Wholesale Trade and Durable Goods

73--Business Services

87--Management Consulting Services

(d) Second phase--further implementation. Further implementation of

the order will be instituted in the second phase of the program, which

will begin after the first phase of the program has ended, and will

extend for a period of 5 years. If the evaluation of phase one so

justifies, the second phase of the program will applied to a larger

number of contracts within selected two digit SIC Code industries

involved in competitive Federal procurements, consistent with efficient

administration of the program and the development of new sources of

supplies and services. Industries included in the second phase will be

identified in advance of being included. The efficacy of the program

will be monitored and evaluated during the second phase, subject to the

criteria set forth in the ``Monitoring and Evaluation'' section of

these guidelines. At the end of this five-year period, the Department

of Commerce in consultation with the agencies designated in the

Executive Order will ascertain whether the program is meeting its

goals. Specifically, it will be determined whether the program

stimulated economic activity (through, among other things, job creation

or new business investment) in areas of general economic distress and

benefited the federal procurement system. If the program meets these

objectives, it will be expanded to other selected industries for

similar implementation and evaluation.

William M. Daley,

Secretary of Commerce.

[FR Doc. 97-13182 Filed 5-19-97; 8:45 am]

BILLING CODE 3510-17-M