Federal Acquisition Regulation; Reform of Affirmative Action in Federal Procurement

SUMMARY: The Department of Defense, the General Services

Administration, and the National Aeronautics and Space Administration

have agreed to issue Federal Acquisition Circular 97-06, as an interim

rule to make amendments to the Federal Acquisition Regulation (FAR)

concerning programs for small disadvantaged business (SDB) concerns.

These amendments conform to a Department of Justice (DoJ) proposal to

reform 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). This regulatory action was subject to Office of

Management and Budget review under Executive Order 12866, dated

September 30, 1993. This is a major rule under 5 U.S.C. 804.

DATES: Effective Date: October 1, 1998.

Applicability Date: The policies, provisions, and clauses of this

interim rule are effective for all solicitations issued on or after

October 1, 1998.

Comment Date: Comments should be submitted to the FAR Secretariat

at the address shown below on or before August 31, 1998 to be

considered in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to:

General Services Administration, FAR Secretariat (MVR), 1800 F Street,

NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.

E-Mail comments submitted over the Internet should be addressed to:

[email protected]

Please cite FAC 97-06, FAR case 97-004A in all correspondence

related to this case.

FOR FURTHER INFORMATION CONTACT:

Ms. Victoria Moss, Procurement Analyst, Federal Acquisition Policy

Division, General Services Administration, 1800 F Street NW, Washington

DC 20405, Telephone: (202) 501-4764

or

Mr. Mike Sipple, Procurement Analyst, Contract Policy and

Administration, Director, Defense Procurement, Department of Defense,

3060 Defense Pentagon, Washington DC 20301-3060, Telephone: (703) 695-

8567.

For general information call the FAR Secretariat at (202) 501-4755.

SUPPLEMENTARY INFORMATION:

A. Background

In Adarand, the Supreme Court extended strict judicial scrutiny to

Federal affirmative action programs that use racial or ethnic criteria

as a basis for decisionmaking. In procurement, this means that any use

of race in the decision to award a contract is subject to strict

scrutiny. Under strict scrutiny, any Federal programs that make race a

basis for contract decisionmaking must be narrowly tailored to serve a

compelling Government interest.

DoJ developed a proposed structure to reform affirmative action in

Federal procurement designed to ensure compliance with the

constitutional standards established by the Supreme Court in Adarand.

The DoJ proposal was published in the Federal Register for public

notice and invitation for comments at 61 FR 26042, May 23, 1996. The

DoJ model is expected to be implemented in several parts: revisions to

the FAR and the FAR supplements; Small Business Administration (SBA)

regulations; and procurement mechanisms and applicable factors

(percentages) determined by the Department of Commerce (DoC). The SBA

regulations were published for public comment on August 14, 1997 (62 FR

23584). This interim rule contains certain FAR revisions. On May 9,

1997, proposed amendments to the FAR, based on the DoJ Model, were

published as a proposed rule in the Federal Register (62 FR 25786). All

public comments received in response to the proposed rule were

considered in the formulation of this interim rule. 143 letters

containing approximately 222 comments were received in response to the

proposed rule. The following significant changes were made to the rule

based on the comments received:

1. Changes were made to conform it to the regulations issued by the

Small Business Administration. These changes include conforming protest

and appeal and certification procedures in the FAR to those prescribed

by SBA.

2. Clarifying that the annual DoC determination of procurement

mechanisms shall only affect solicitations that are issued on or after

the effective date of the DoC determination.

3. Clarifying that any decisions to limit use of the mechanisms

because of a finding of undue burden will not affect on-going

acquisitions.

4. Clarifying that an individual or business concern need only

provide supporting rationale in a request for an undue burden

determination.

5. Clarifying that fair market price under the price evaluation

adjustment shall be determined in accordance with the procedures in

15.404-1(b) (referenced in 19.202-6).

6. Removing the prohibition against use of the price evaluation

adjustment for acquisitions under the Competitiveness Demonstration

Program.

7. Revising the provisions at 52.212-3 and 52.219-1, and the clause

at 52.219-23 to facilitate their use by all agencies.

Other changes have been made to make the rule effective at the

earliest practicable date, taking account of the time required for SBA

to determine eligibility of SDB firms. This rule implements the price

evaluation adjustment for SDB concerns. It is anticipated that coverage

pertaining to the SDB participation program will be issued 1 day

following publication of this rule under FAR Case 97-004B.

B. Regulatory Flexibility Act

These 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 through the

rule small business concerns may be provided benefits in Federal

contracting. An Initial Regulatory Flexibility Analysis (IRFA) was

prepared and submitted to the Chief Counsel for Advocacy of the Small

Business Administration (SBA). A summary of the IRFA was published

along with the FAR proposed rule in the Federal Register at 62 FR

25786, May 9, 997. The economic impact associated with certification

and associated costs, as well as other program requirements addressed

in the SBA's changes to 13 CFR Parts 121, 124, and 134 have been

addressed in analyses prepared by the SBA. The following information is

provided to update the IRFA related to this FAR interim rule:

This interim rule would establish in the FAR a procurement

mechanism benefiting

[[Page 35720]]

small disadvantaged businesses (SDBs). The mechanism is a price

evaluation adjustment of up to ten percent in certain Standard

Industrial Classification (SIC) Major Groups as determined by the

Department of Commerce. This price evaluation adjustment would be

mandatory for those competitive procurements to which it applied. It

would not, however, apply to several major categories of

acquisition, including, for example, acquisitions within the

simplified acquisition threshold, acquisitions set aside for small

business, and acquisitions conducted pursuant to the 8(a) program.

The main impact of the rule is expected to be on SDBs seeking to

obtain contracts from Federal government agencies. The best

available estimate of the number of such firms is 30,000. The basis

for this estimate is the IRFA prepared by SBA addressing the changes

to 13 CFR Parts 121, 124, and 134. The anticipated costs for

certification and protest and appeal procedures are addressed in

SBA's IRFA. The primary impact of this interim rule is expected to

be the increase in contract awards to qualified firms and a

corresponding decrease in contract awards to firms that are not

qualified as SDBs.

Within the constraints imposed by the need to implement the DoJ-

proposed reforms, the rule was crafted throughout to select

alternatives that would minimize any adverse economic impact on

small business.

A copy of the IRFA may be obtained from the FAR Secretariat.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (Pub. L. 104-13) applies

because the interim rule contains reporting and recordkeeping

requirements. Requests for approval of new information collection

requirements were submitted to the Office of Management and Budget

under 44 U.S.C. 3501, et seq. The information collections required by

this rule were approved under clearance 9000-0150 through June 30,

2000. Public comments concerning this request were invited through a

Federal Register notice published on May 9, 1997. No comments were

received.

D. Determination To Issue an Interim Rule

A determination has been made under the authority of the Secretary

of Defense (DOD), the Administrator of General Services (GSA), and the

Administrator of the National Aeronautics and Space Administration

(NASA) that urgent and compelling reasons exist to promulgate this

interim rule without prior opportunity for public comment. This action

is necessary to conform the FAR to the model program designed by the

Department of Justice to ensure compliance with Constitutional

standards established by the Supreme Court and, thereby, avoid

unnecessary litigation. A proposed FAR rule on this subject was

published for public comment at 62 FR 25786 on May 9, 1997. As a result

of public comments received in response to the proposed rule, changes

have been made to the rule. This interim rule would qualify for

publication as a final rule; however, further public comments are

requested. Pursuant to Public Law 98-577 and FAR 1.501, public comments

received in response to this interim rule will be considered in the

formation of the final rule.

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

Government procurement.

Dated: June 23, 1998.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Federal Acquisition Circular--FAC 97-06

Federal Acquisition Circular (FAC) 97-06 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 interim rule are

effective for all solicitations issued on or after October 1, 1998.

Dated: June 17, 1998.

R.D. Kerrins,

Col., USA, Dep Director, Defense Procurement.

Dated: June 16, 1998.

Ida M. Ustad,

Deputy Associate Administrator, Office of Acquisition Policy, General

Services Administrator, Office of Acquisition Policy, General Services

Administration.

Dated: June 17, 1998.

Deidre A. Lee,

Associate Administrator for Procurement, NASA.

Therefore, 48 CFR Parts 1, 12, 14, 15, 19, 33, and 52 are amended

as set forth below:

1. The authority citation for 48 CFR Parts 1, 12, 14, 15, 19, 33,

and 52 continues to read as follows:

Authority: 41 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM

2. Section 1.106 is amended in the table following the introductory

paragraph by adding, in numerical order, the following entries:

1.106 OMB approval under the Paperwork Reduction Act.

* * * * *

------------------------------------------------------------------------

OMB control

FAR segment No.

------------------------------------------------------------------------

* * * * *

52.219-22............................................... 9000-0150

52.219-23............................................... 9000-0150

* * * * *

------------------------------------------------------------------------

PART 12--ACQUISITION OF COMMERCIAL ITEMS

3. Section 12.301 is amended by revising paragraph (b)(2) to read

as follows:

12.301 Solicitation provisions and contract clauses for the

acquisition of commercial items.

* * * * *

(b) * * *

(2) The provision at 52.212-3, Offeror Representations and

Certifications-Commercial Items. This provision provides a single,

consolidated list of certifications and representations for the

acquisition of commercial items and is attached to the solicitation for

offerors to complete and return with their offer. This provision may

not be tailored except in accordance with Subpart 1.4. Use the

provision with its Alternate I in solicitations issued by DoD, NASA, or

the Coast Guard that are expected to exceed the threshold at 4.601(a);

* * * * *

4. Section 12.303(b)(1) is revised to read as follows:

12.303 Contract format.

* * * * *

(b) * * *

(1) Block 10 if a price evaluation adjustment for small

disadvantaged business concerns is applicable (the contracting officer

shall indicate the percentage(s) and applicable line item(s)), or if

set aside for emerging small businesses;

* * * * *

PART 14--SEALED BIDDING

5. The section heading for 14.206 is revised to read as set forth

below.

14.206 Small business set-asides and price evaluation adjustments for

small disadvantaged business concerns.

6. Section 14.502 is amended by redesignating paragraph (b)(4) as

(b)(5) and adding a new (b)(4) to read as follows:

14.502 Conditions for use.

* * * * *

(b) * * *

[[Page 35721]]

(4) The use of the price evaluation adjustment for small

disadvantaged business concerns (see Subpart 19.11).

* * * * *

PART 15--CONTRACTING BY NEGOTIATION

7. Section 15.503 is amended by revising paragraph (a)(2) to read

as follows:

15.503 Notifications to unsuccessful offerors.

(a) * * *

(2) Preaward notices for small business programs. In addition to

the notice in paragraph (a)(1) of this section, when using a small

business set-aside (see Subpart 19.5), or when a small disadvantaged

business concern receives a benefit based on its disadvantaged status

(see Subpart 19.11) and is the apparently successful offeror, upon

completion of negotiations and determinations of responsibility, and

completion of the process in 19.304(d), if necessary, but prior to

award, the contracting officer shall notify each offeror in writing of

the name and address of the apparently successful offeror. The notice

shall also state that the Government will not consider subsequent

revisions of the offeror's proposal; and no response is required unless

a basis exists to challenge the disadvantaged status and/or small

business size status of the apparently successful offeror. The notice

is not required when the contracting officer determines in writing that

the urgency of the requirement necessitates award without delay or when

the contract is entered into under the 8(a) program (see 19.805-2).

* * * * *

PART 19--SMALL BUSINESS PROGRAMS

8. Section 19.000 is amended by revising the introductory text of

paragraph (a); at the end of (a)(6) by removing ``and''; at the end of

(a)(7) by removing the period and inserting''; and''; and by adding

paragraph (a)(8) to read as follows:

19.000 Scope of part.

(a) This part implements the acquisition-related sections of the

Small Business Act (15 U.S.C. 631, et seq.), applicable sections of the

Armed Services Procurement Act (10 U.S.C. 2302, et seq.), the Federal

Property and Administrative Services Act (41 U.S.C. 252), section 7102

of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-

355), 10 U.S.C. 2323, and Executive Order 12138, May 18, 1979. It

covers--

* * * * *

(8) The use of a price evaluation adjustment for small

disadvantaged business concerns.

* * * * *

9. Section 19.001 is amended in the definition of ``Small

disadvantaged business concern'' by revising its introductory

paragraph; by redesignating paragraphs (a) and (b) introductory text as

(a)(1) and (a)(2) introductory text; (b)(1), (b)(2), and (b)(3) as

(a)(2)(i), (a)(2)(ii), and (a)(2)(iii); and (c) and (d) as (a)(3) and

(a)(4); and by adding paragraphs (a) introductory text and (b) to read

as follows:

19.001 Definitions.

* * * * *

Small disadvantaged business concern, as used in this part, means--

(a) For subcontractors, a small business concern that is at least

51 percent unconditionally owned by one or more individuals who are

both socially and economically disadvantaged, or a publicly owned

business that has at least 51 percent of its stock unconditionally

owned by one or more socially and economically disadvantaged

individuals and that has its management and daily business controlled

by one or more such individuals. This term also means a small business

concern that is at least 51 percent unconditionally owned by an

economically disadvantaged Indian tribe or Native Hawaiian

Organization, or a publicly owned business that has at least 51 percent

of its stock unconditionally owned by one of these entities, that has

its management and daily business controlled by members of an

economically disadvantaged Indian tribe or Native Hawaiian

Organization, and that meets the requirements of 13 CFR 124.

* * * * *

(b) For prime contractors, (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) 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 from the Small Business

Administration as a small disadvantaged business concern consistent

with 13 CFR 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 listed, on the date of its representation, on the

register of small disadvantaged business concerns maintained by the

Small Business Administration; or

(2) 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 124, Subpart

B, and a decision on that application is pending, and that no material

change in disadvantaged ownership and control has occurred since its

application was submitted. In this case, a contractor must receive

certification as an SDB by the SBA prior to contract award.

10. Section 19.201 is amended by redesignating paragraphs (b), (c),

and (d) as (c), (d), and (e), respectively; and by adding new

paragraphs (b) and (f) to read as follows:

19.201 General policy.

* * * * *

(b) The Department of Commerce will determine on an annual basis,

by Major Groups as contained in the Standard Industrial Classification

(SIC) manual, and region, if any, the authorized small disadvantaged

business (SDB) procurement mechanisms and applicable factors

(percentages). The Department of Commerce determination shall only

affect solicitations that are issued on or after the effective date of

the determination. The effective date of the Department of Commerce

determination shall be no less than 60 days after its publication date.

The Department of Commerce determination shall not affect ongoing

acquisitions. The Department of Commerce determination shall include

the applicable factors, by SIC Major Group, to be used in the price

evaluation adjustment for SDB concerns (see 19.1104). The authorized

procurement mechanisms shall be applied consistently with the policies

and procedures in this subpart. The agencies shall apply the SDB

procurement mechanisms determined by the Department of Commerce. The

Department of Commerce, in making its determination, is not limited to

the price evaluation adjustment for SDB concerns where the Department

of Commerce has found substantial and persuasive evidence of--

[[Page 35722]]

(1) A persistent and significant underutilization of minority firms

in a particular industry, attributable to past or present

discrimination; and

(2) A demonstrated incapacity to alleviate the problem by using

those mechanisms.

* * * * *

(f)(1) Each agency shall designate, at levels it determines

appropriate, personnel responsible for determining whether, in order to

achieve the contracting agency's goal for SDB concerns, the use of the

SDB mechanism in Subpart 19.11 has resulted in an undue burden on non-

SDB firms in one of the major industry groups and regions identified by

Department of Commerce following paragraph (b) of this section, or is

otherwise inappropriate. Determinations under this subpart are for the

purpose of determining future acquisitions and shall not affect ongoing

acquisitions. Requests for a determination, including supporting

rationale, may be submitted to the agency designee. If the agency

designee makes an affirmative determination that the SDB mechanism has

an undue burden or is otherwise inappropriate, the determination shall

be forwarded through agency channels to the OFPP, which shall review

the determination in consultation with the Department of Commerce and

the Small Business Administration. At a minimum, the following

information should be included in any submittal:

(i) A determination of undue burden or other inappropriate effect,

including proposed corrective action.

(ii) The SIC Major Group affected.

(iii) Supporting information to justify the determination,

including, but not limited to, dollars and percentages of contracts

awarded by the contracting activity under the affected SIC Major Group

for the previous two fiscal years and current fiscal year to date for--

(A) Total awards;

(B) Total awards to SDB concerns;

(C) Awards to SDB concerns awarded contracts under the SDB price

evaluation adjustment where the SDB concerns would not otherwise have

been the successful offeror;

(D) Number of successful and unsuccessful SDB offerors; and

(E) Number of successful and unsuccessful non-SDB offerors.

(iv) A discussion of the pertinent findings, including any

peculiarities related to the industry, regions or demographics.

(v) A discussion of other efforts the agency has undertaken to

ensure equal opportunity for SDBs in contracting with the agency.

(2) After consultation with OFPP, or if the agency does not receive

a response from OFPP within 90 days after notice is provided to OFPP,

the contracting agency may limit the use of the SDB mechanism in

Subpart 19.11 until the Department of Commerce determines the updated

price evaluation adjustment, as required by this section. This

limitation shall not apply to solicitations that already have been

synopsized.

11. Section 19.202-6 is amended by revising the introductory

paragraph and paragraph (a) to read as follows:

19.202-6 Determination of fair market price.

Agencies shall determine the fair market price as follows:

(a) For total and partial small business set-aside contracts and

contracts utilizing the price evaluation adjustment for small

disadvantaged business concerns, the fair market price shall be the

price achieved in accordance with the reasonable price guidelines in

15.404-1(b).

* * * * *

Subpart 19.3--Determination of Status as a Small Disadvantaged

Business Concern or a Small Business Concern

12. The heading for Subpart 19.3 is revised to read as set forth

above.

13. Section 19.302 is amended at the end of the introductory text

of paragraph (d) by adding the following sentence:

19.302 Protesting a small business representation.

* * * * *

(d) * * * SBA's regulations on timeliness related to protests of

disadvantaged status are contained in 13 CFR 124, Subpart B.

19.304 [Redesignated as 19.306]

14a. Section 19.304 is redesignated as 19.306.

14b. New sections 19.304 and 19.305 are added to read as follows:

19.304 Disadvantaged business status.

(a) To be eligible to receive a benefit as a prime contractor based

on its disadvantaged status, a concern, at the time of its offer, must

either be certified as a small disadvantaged business (SDB) concern or

have a completed SDB application pending at the SBA or a Private

Certifier (see 19.001).

(b) The contracting officer may accept an offeror's representation

that it is an SDB concern for general statistical purposes. The

provision at 52.219-1, Small Business Program Representations, or

52.212-3(c)(2), Offeror Representations and Certifications-Commercial

Items, is used to collect SDB data for general statistical purposes.

(c) The provision at 52.219-22, Small Disadvantaged Business

Status, or 52.212-3(c)(7), Offeror Representations and Certifications--

Commercial Items, is used to obtain SDB status when the prime

contractor may receive a benefit based on its disadvantaged status. The

mechanism that may provide benefits on the basis of disadvantaged

status as a prime contractor is a price evaluation adjustment for SDB

concerns (see Subpart 19.11).

(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 listed on the SBA's register by accessing the list at

http://www.sba.gov or by contacting the SBA's Office of Small

Disadvantaged Business Certification and Eligibility.

(2) If the apparently successful offeror has represented that its

SDB application is pending at the SBA or a Private Certifier, and its

position as the apparently successful offeror is due to the application

of the price evaluation adjustment, the contracting officer shall

follow the procedure in paragraph (d) of this section.

(d) Notifications to SBA of potential awards to offerors with

pending SDB applications. (1) The contracting officer shall notify the

Small Business Administration Assistant Administrator for SDBCE 409

Third Street, SW Washington, DC 20416. The notification shall contain

the name of the apparently successful offeror, and the names of any

other offerors that have represented that their applications for SDB

status are pending at the SBA or a Private Certifier and that could

receive the award due to the application of a price evaluation

adjustment if the apparently successful offeror is determined not to be

an SDB by the SBA.

(2) The SBA will, within 15 calendar days after receipt of the

notification, determine the disadvantaged status of the apparently

successful offeror and, as appropriate, any other offerors referred by

the contracting officer and will notify the contracting officer.

(3) If the contracting officer does not receive an SBA

determination within 15 calendar days after the SBA's receipt of the

notification, the contracting officer shall presume that the apparently

successful offeror, and any other offerors referred by the contracting

officer, are not disadvantaged, and shall make award accordingly,

unless the contracting officer grants an extension to the 15-day

response period. No

[[Page 35723]]

written determination is required for the contracting officer to make

award at any point following the expiration of the 15-day response

period.

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

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

officer may proceed to contract award without notifying SBA or before

receiving a determination of SDB status from SBA during the 15-day

response period. In both cases, the contracting officer shall presume

that the apparently successful offeror, or any other offeror referred

to the SBA whose SDB application is pending, is not an SDB and shall

make award accordingly.

19.305 Protesting a representation of disadvantaged business status.

(a) This section applies to protests of a small business concern's

disadvantaged status as a prime contractor. Protests of a small

business concern's disadvantaged status as a subcontractor are

processed under 19.703(a)(2). Protests of a concern's size as a prime

contractor are processed under 19.302. Protests of a concern's size as

a subcontractor are processed under 19.703(b). An offeror, the

contracting officer, or the SBA may protest the apparently successful

offeror's representation of disadvantaged status if the concern is

eligible to receive a benefit based on its disadvantaged status (see

Subpart 19.11).

(b) An offeror, excluding an offeror determined by the contracting

officer to be non-responsive or outside the competitive range, or an

offeror that SBA has previously found to be ineligible for the

requirement at issue, may protest the apparently successful offeror's

representation of disadvantaged status by filing a protest in writing

with the contracting officer. SBA regulations concerning protests are

contained in 13 CFR 124, Subpart B. The protest--

(1) Must be filed within the times specified in 19.302(d)(1); and

(2) Must contain specific facts or allegations supporting the basis

of protest.

(c) The contracting officer or the SBA may protest in writing a

concern's representation of disadvantaged status at any time following

bid opening or notification of intended award.

(1) If a contracting officer's protest is based on information

provided by a party ineligible to protest directly or ineligible to

protest under the timeliness standard, the contracting officer must be

persuaded by the evidence presented before adopting the grounds for

protest as his or her own.

(2) The SBA may protest a concern's representation of disadvantaged

status by filing directly with its Assistant Administrator for Small

Disadvantaged Business Certification and Eligibility and notifying the

contracting officer.

(d) The contracting officer shall return premature protests to the

protestor. A protest is considered to be premature if it is submitted

before bid opening or notification of intended award. SBA normally will

not consider a postaward protest. SBA may consider a postaward protest

in its discretion where it determines that an SDB determination after

award is meaningful (e.g., where the contracting officer agrees to

terminate the contract if the protest is sustained).

(e) Upon receipt of a protest that is not premature, the

contracting officer shall withhold award and forward the protest to

Small Business Administration, Assistant Administrator for SDBCE, 409

Third Street, SW, Washington, DC 20416. The contracting officer shall

send to SBA--

(1) The written protest and any accompanying materials;

(2) The date the protest was received;

(3) A copy of the protested concern's representation as a small

disadvantaged business, and the date of such representation; and

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

apparently successful offeror was sent to unsuccessful offerors.

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

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

notwithstanding the protest.

(g) The SBA Assistant Administrator for Small Disadvantaged

Business Certification and Eligibility will notify the protestor and

the contracting officer of the date the protest was received and

whether it will be processed or dismissed for lack of timeliness or

specificity. For protests that are not dismissed, the SBA will, within

15 working days after receipt of the protest, determine the

disadvantaged status of the challenged offeror and will 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 it is appealed

and--

(1) The contracting officer receives the SBA's decision on the

appeal before award; or

(2) The contracting officer has agreed to terminate the contract,

as appropriate, based on the outcome of the appeal (see 13 CFR 124,

Subpart B).

(h) If the contracting officer does not receive an SBA

determination within 15 working days after the SBA's receipt of the

protest, the contracting officer shall presume that the challenged

offeror is disadvantaged and may award the contract, unless the SBA

requests and the contracting officer grants an extension to the 15-day

response period.

(i) An SBA determination may be appealed by--

(1) The party whose protest has been denied;

(2) The concern whose status was protested; or

(3) The contracting officer.

(j) The appeal must be filed with the SBA's Administrator or

designee within five working days after receipt of the determination.

If the contracting officer receives the SBA's decision on the appeal

before award, the decision shall apply to the instant acquisition. If

the decision is received after award, it will not apply to the instant

acquisition (but see paragraph (g)(2) of this section).

15. Newly redesignated 19.306 is amended in paragraph (a) by adding

a sentence at the end of the paragraph; and by redesignating paragraph

(b) as (c) and adding a new paragraph (b) to read as follows:

19.306 Solicitation provision and contract clause.

(a) * * * The provision shall be used with its Alternate I in

solicitations issued by DoD, NASA, or the Coast Guard that are expected

to exceed the threshold at 4.601(a).

(b) The contracting officer shall insert the provision at 52.219-

22, Small Disadvantaged Business Status, in solicitations that include

the clause at 52.219-23, Notice of Price Evaluation Adjustment for

Small Disadvantaged Business Concerns.

* * * * *

16. Subpart 19.11, consisting of sections 19.1101 through 19.1104,

is added to read as follows:

Subpart 19.11--Price Evaluation Adjustment for Small Disadvantaged

Business Concerns

Sec.

19.1101 General.

19.1102 Applicability.

19.1103 Procedures.

19.1104 Solicitation provisions and contract clauses.

Authority: 41 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

[[Page 35724]]

Subpart 19.11--Price Evaluation Adjustment for Small Disadvantaged

Business Concerns

19.1101 General.

A price evaluation adjustment for small disadvantaged business

concerns shall be applied as determined by the Department of Commerce

(see 19.201(b)). Joint ventures may qualify provided the requirements

set forth in 13 CFR 124.1002(f) are met.

19.1102 Applicability.

(a) The price evaluation adjustment shall be used in competitive

acquisitions.

(b) The price evaluation adjustment shall not be used in

acquisitions that--

(1) Are not greater than the simplified acquisition threshold;

(2) Are awarded pursuant to the 8(a) program; or

(3) Are set aside for small business concerns.

19.1103 Procedures.

(a) Give offers from small disadvantaged business concerns a price

evaluation adjustment by adding the factor determined by the Department

of Commerce to all offers, except--

(1) Offers from small disadvantaged business concerns that have not

waived the evaluation adjustment;

(2) Otherwise successful offers of eligible products under the

Trade Agreements Act when the acquisition equals or exceeds the dollar

threshold in 25.402;

(3) Otherwise successful offers 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, otherwise

successful offers from historically black colleges and universities or

minority institutions; or

(5) For DOD acquisitions, otherwise successful offers of qualifying

country end products (see DFARS 225.000-70 and 252.225-7001).

(b) Apply the factor on a line item basis or apply it to any group

of 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.

(c) Do not evaluate offers using the price evaluation adjustment

when it would cause award, as a result of this adjustment, to be made

at a price that exceeds fair market price by more than the factor as

determined by the Department of Commerce (see 19.202-6(a)).

19.1104 Solicitation provisions and contract clauses.

The contracting officer shall 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

19.1102 apply. The contracting officer shall insert the authorized

price evaluation adjustment factor. The clause shall be used with its

Alternate I when the contracting officer determines that there are no

small disadvantaged business manufacturers that can meet the

requirements of the solicitation.

PART 33--PROTESTS, DISPUTES, AND APPEALS

17. Section 33.102 is amended in paragraph (a) by revising the last

sentence to read as follows:

33.102 General.

(a) * * * (See 19.302 for protests of small business status, and

19.305 for protests of disadvantaged business status.)

* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

18. Section 52.212-3 is amended by revising the date of the

provision; removing the definition of ``Small disadvantaged business

concern''; revising paragraph (c)(2); adding (c)(7); and adding

Alternate I following ``(End of provision)'' to read as follows:

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

* * * * *

Offeror Representations and Certifications--Commercial Items (Oct 1998)

* * * * *

(c) * * *

(2) Small disadvantaged business concern. The offeror

represents, for general statistical purposes, that it {time} is,

{time} is not, a small disadvantaged business concern as defined in

13 CFR 124.1002.

* * * * *

(7) (Complete only if the solicitation contains the clause at

FAR 52.219-23, Notice of Price Evaluation Adjustment for Small

Disadvantaged Business Concerns, and the offeror desires a benefit

based on its disadvantaged status.)

(i) General. The offeror represents that either--

(A) It {time} is, {time} is not certified by the Small

Business Administration as a small disadvantaged business concern

and is listed, on the date of this representation, on the register

of small disadvantaged business concerns maintained by the Small

Business Administration, 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

(B) It {time} has, {time} has not 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 124, Subpart B, and a decision on that

application is pending, and that no material change in disadvantaged

ownership and control has occurred since its application was

submitted.

(ii) Joint Ventures under the Price Evaluation Adjustment for

Small Disadvantaged Business Concerns. The offeror represents, as

part of its offer, that it is a joint venture that complies with the

requirements in 13 CFR 124.1002(f) and that the representation in

paragraph (c)(7)(i) of this provision is accurate for the small

disadvantaged business concern that is participating in the joint

venture. [The offeror shall enter the name of the small

disadvantaged business concern that is participating in the joint

venture: ____________.]

* * * * *

(End of provision)

Alternate I (Oct 1998). As prescribed in 12.301(b)(2), add the

following paragraph (c)(8) to the basic provision:

(8) (Complete if the offeror has represented itself as

disadvantaged in paragraph (c)(2) or (c)(7) of this provision.) [The

offeror shall check the category in which its ownership falls]:

____Black American.

____Hispanic American.

____Native American (American Indians, Eskimos, Aleuts, or

Native Hawaiians).

____Asian-Pacific American (persons with origins from Burma,

Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China,

Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines,

U.S. Trust Territory of the Pacific Islands (Republic of Palau),

Republic of the Marshall Islands, Federated States of Micronesia,

the Commonwealth of the Northern Mariana Islands, Guam, Samoa,

Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru).

____Subcontinent Asian (Asian-Indian) American (persons with

origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the

Maldives Islands, or Nepal).

____Individual/concern, other than one of the preceding.

19. Section 52.212-5 is amended by revising the clause date;

redesignating paragraphs (b)(6) through (b)(17) as (b)(7) through

(b)(18), respectively; and adding a new paragraph (b)(6) to read as

follows:

52.212-5 Contract Terms and Conditions Required to Implement Statutes

or Executive Orders--Commercial Items.

* * * * *

[[Page 35725]]

Contract Terms and Conditions Required to Implement Statutes or

Executive Orders-Commercial Items (Oct 1998)

* * * * *

(b) * * *

____(6)(i) 52.219-23, Notice of Price Evaluation

Adjustment for Small Disadvantaged Business Concerns (Pub. L.

103-355, section 7102, and 10 U.S.C. 2323) (if the offeror elects to

waive the adjustment, it shall so indicate in its offer).

(ii) ____Alternate I of 52.219-23.

* * * * *

20. Section 52.219-1 is amended by revising the introductory text

of the provision; the provision date and paragraph (b)(2); by deleting

the definitions of ``Joint venture'' and ``Small disadvantaged business

concern''; and adding an Alternate I to read as follows:

52.219-1 Small Business Program Representations.

As prescribed in 19.306(a), insert the following provision:

Small Business Program Representations (Oct 1998)

* * * * *

(b) * * *

(2) (Complete only if offeror represented itself as a small

business concern in paragraph (b)(1) of this provision.) The offeror

represents, for general statistical purposes, that it {time} is,

{time} is not, a small disadvantaged business concern as defined in

13 CFR 124.1002.

* * * * *

Alternate I (Oct 1998). As prescribed in 19.306(a), add the

following paragraph (b)(4) to the basic provision:

(4) (Complete if offeror represented itself as disadvantaged in

paragraph (b)(2) of this provision). [The offeror shall check the

category in which its ownership falls]:

____Black American.

____Hispanic American.

____Native American (American Indians, Eskimos, Aleuts, or

Native Hawaiians).

____Asian-Pacific American (persons with origins from Burma,

Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China,

Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines,

U.S. Trust Territory of the Pacific Islands (Republic of Palau),

Republic of the Marshall Islands, Federated States of Micronesia,

the Commonwealth of the Northern Mariana Islands, Guam, Samoa,

Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru).

____Subcontinent Asian (Asian-Indian) American (persons with

origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the

Maldives Islands, or Nepal).

____Individual/concern, other than one of the preceding.

52.219-2 [Amended]

21. Section 52.219-2 is amended in the introductory paragraph by

revising ``19.304(b)'' to read ``19.306(c)''.

22. Sections 52.219-22 and 52.219-23 are added to read as follows:

52.219-22 Small Disadvantaged Business Status.

As prescribed in 19.306(b), insert the following provision:

Small Disadvantaged Business Status (Oct 1998)

(a) General. This provision is used to assess an offeror's small

disadvantaged business status for the purpose of obtaining a benefit

on this solicitation. Status as a small business and status as a

small disadvantaged business for general statistical purposes is

covered by the provision at FAR 52.219-1, Small Business Program

Representation.

(b) Representations.

(1) General. The offeror represents, as part of its offer, that

it is a small business under the size standard applicable to this

acquisition; and either--

{time} (i) It has received certification by the Small Business

Administration as a small disadvantaged business concern consistent

with 13 CFR 124, Subpart B; and

(A) No material change in disadvantaged ownership and control

has occurred since its certification;

(B) 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

(C) It is listed, on the date of this representation, on the

register of small disadvantaged business concerns maintained by the

Small Business Administration; or

{time} (ii) 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

124, Subpart B, and a decision on that application is pending, and

that no material change in disadvantaged ownership and control has

occurred since its application was submitted.

(2){time} For Joint Ventures. The offeror represents, as part of

its offer, that it is a joint venture that complies with the

requirements at 13 CFR 124.1002(f) and that the representation in

paragraph (b)(1) of this provision is accurate for the small

disadvantaged business concern that is participating in the joint

venture. [The offeror shall enter the name of the small

disadvantaged business concern that is participating in the joint

venture: ____________.]

(c) Penalties and Remedies. Anyone who misrepresents any aspects

of the disadvantaged status of a concern for the purposes of

securing a contract or subcontract shall:

(1) Be punished by imposition of a fine, imprisonment, or both;

(2) Be subject to administrative remedies, including suspension

and debarment; and

(3) Be ineligible for participation in programs conducted under

the authority of the Small Business Act.

(End of provision)

52.219-23 Notice of Price Evaluation Adjustment for Small

Disadvantaged Business Concerns.

As prescribed in 19.1104, insert the following clause:

Notice of Price Evaluation Adjustment for Small Disadvantaged Business

Concerns (Oct 1998)

(a) Definitions. As used in this clause--

Small disadvantaged business concern means an offeror that

represents, as part of its offer, that it is a small business under

the size standard applicable to this acquisition; and either--

(1) It has received certification by the Small Business

Administration as a small disadvantaged business concern consistent

with 13 CFR 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 listed, on the date of its representation, on the

register of small disadvantaged business concerns maintained by the

Small Business Administration;

(2) 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 124,

Subpart B, and a decision on that application is pending, and that

no material change in disadvantaged ownership and control has

occurred since its application was submitted. In this case, in order

to receive the benefit of a price evaluation adjustment, an offeror

must receive certification as a small disadvantaged business concern

by the Small Business Administration prior to contract award; or

(3) Is a joint venture as defined in 13 CFR 124.1002(f).

Historically black college or university means an institution

determined by the Secretary of Education to meet the requirements of

34 CFR 608.2. For the Department of Defense (DoD), the National

Aeronautics and Space Administration (NASA), and the Coast Guard,

the term also includes any nonprofit research institution that was

an integral part of such a college or university before November 14,

1986.

Minority institution means an institution of higher education

meeting the requirements of Section 1046(3) of the Higher Education

Act of 1965 (20 U.S.C. 1135d-5(3)) which, for purposes of this

clause, includes a Hispanic-serving institution of higher education

as defined in Section 316(b)(1) of the Act (20 U.S.C. 1059c(b)(1)).

United States means the United States, its territories and

possessions, the Commonwealth of Puerto Rico, the U.S. Trust

Territory of the Pacific Islands, and the District of Columbia.

(b) Evaluation adjustment. (1) Offers will be evaluated by

adding a factor of ____________ [percentage to be inserted by

[[Page 35726]]

the contracting officer] percent to the price of all offers,

except--

(i) Offers from small disadvantaged business concerns that have

not waived the adjustment;

(ii) For DOD, NASA, and Coast Guard acquisitions, otherwise

successful offers from historically black colleges or universities

or minority institutions;

(iii) Otherwise successful offers 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));

(iv) Otherwise successful offers where application of the factor

would be inconsistent with a Memorandum of Understanding or other

international agreement with a foreign government; and

(v) For DOD acquisitions, otherwise successful offers of

qualifying country end products (see sections 225.000-70 and

252.225-7001 of the Defense FAR Supplement).

(2) The factor shall be applied on a line item basis or to any

group of items on which award may be made. Other evaluation factors

described in the solicitation shall be applied 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.

(c) Waiver of evaluation adjustment. A small disadvantaged

business concern may elect to waive the adjustment, in which case

the factor will be added to its offer for evaluation purposes. The

agreements in paragraph (d) of this clause do not apply to offers

that waive the adjustment.

____Offeror elects to waive the adjustment.

(d) Agreements. (1) A small disadvantaged business concern, that

did not waive the adjustment, agrees that in performance of the

contract, in the case of a contract for--

(i) Services, except construction, at least 50 percent of the

cost of personnel for contract performance will be spent for

employees of the concern;

(ii) Supplies (other than procurement from a nonmanufacturer of

such supplies), at least 50 percent of the cost of manufacturing,

excluding the cost of materials, will be performed by the concern;

(iii) 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; or

(iv) 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.

(2) A small disadvantaged business concern submitting an offer

in its own name agrees to furnish in performing this contract only

end items manufactured or produced by small disadvantaged business

concerns in the United States. This paragraph does not apply in

connection with construction or service contracts.

(End of clause)

Alternate I (Oct 1998). As prescribed in 19.1104, substitute the

following paragraph (d)(2) for paragraph (d)(2) of the basic clause:

(2) A small disadvantaged business concern submitting an offer

in its own name agrees to furnish in performing this contract only

end items manufactured or produced by small business concerns in the

United States. This paragraph does not apply in connection with

construction or service contracts.

[FR Doc. 98-17197 Filed 6-26-98; 8:45 am]

BILLING CODE 6820-EP-P