Interim Policy Directive, Small Business Competitiveness Demonstration Program

OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

Small Business Administration

Interim Policy Directive, Small Business Competitiveness

Demonstration Program

AGENCY: Office of Federal Procurement Policy (OFPP); Small Business

Administration (SBA).

ACTION: Interim policy directive with request for comments.

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SUMMARY: The OFPP and SBA are revising the interim policy directive and

test plan dated April 16, 1993, (which revised the final policy

directive and test plan dated August 31, 1989) to implement amendments

to the Small Business Competitiveness Demonstration Program made by the

Small Business Reauthorization Act of 1997, Pub. L. 105-135. Section

401 of Pub. L. 105-135 extends the Program indefinitely; section 402

requires monitoring of goal attainment on an annual basis; and sections

403-405 contain other technical changes to the

[[Page 51982]]

Program. This interim policy directive implements conforming revisions

to reflect these amendments and also responds to comments that we

received on the April 16, 1993, interim policy directive and test plan.

DATES: Effective: September 29, 1998.

Comment Date: Comments on the interim policy directive should be

submitted to the addresses shown below on or before November 30, 1998.

ADDRESSES: Comments on the policy directive should be submitted to:

Deidre A. Lee, Administrator, Office of Federal Procurement Policy,

Room 352, Old Executive Office Building, Washington, DC 20503.

Comments on the information collection requirements contained in

Sections III.D.4. and III.E.7. of the policy directive should be

submitted both to the OFPP Administrator at the above address and to

the Office of Information and Regulatory Affairs, Office of Management

and Budget, 725 17th Street, NW, Washington, DC 20503--Attention: Desk

Officer for the Federal Acquisition Regulation.

FOR FURTHER INFORMATION CONTACT: Linda G. Williams, Deputy Associate

Administrator (202) 395-3302.

SUPPLEMENTARY INFORMATION:

A. Background

Congress established the Small Business Competitiveness

Demonstration Program in 1988 to test the effectiveness of eliminating

small business set-asides in certain industries. (See Pub. L. 100-656

the Small Business Competitiveness Demonstration Program Act of 1988

(``Act''), as amended, at 15 U.S.C. 644 note.) The program has two

primary objectives: (1) To demonstrate whether or not small businesses

in certain industry groups can compete successfully on an unrestricted

basis for Federal contracts, and (2) to demonstrate whether or not

targeted goaling and management techniques can expand Federal contract

opportunities for small businesses in industry categories where such

opportunities historically have been low despite adequate numbers of

small business contractors in the economy. A separate program to expand

small business participation in the dredging industry, to be overseen

by the Department of the Army, was also included in the Act. As

originally established, the Demonstration Program extended through

December 31, 1992.

To implement the Program, Congress in section 715(a) of the Act,

authorized the OFPP Administrator to issue a test plan pursuant to

section 15 of the Office of Federal Procurement Policy Act (41 U.S.C.

413). In addition, in section 715(b), Congress directed the OFPP

Administrator, in cooperation with the SBA Administrator, to issue a

policy directive (binding on all participating agencies) to ensure

consistent government-wide implementation of the Act in the Federal

Acquisition Regulation (FAR).

After requesting public comment on an interim policy directive and

test plan 53 FR 52889 (December 29, 1988), OFPP implemented the Program

by issuing a final policy directive and test plan dated August 31,

1989. 54 FR 37741 (September 12, 1989). In accordance with section

715(b) of the Act, the policy directive and test plan were implemented

in the Federal Acquisition Regulation (48 CFR Subpart 19.10).

In 1992, Congress in Sections 201-203 of the Small Business Credit

and Business Opportunity Enhancement Act of 1992 (Pub. L. 102-366;

``1992 Act''), extended the Demonstration Program through September 30,

1996, and made amendments to the Program. To carry out these

amendments, Congress in Section 202(I) of the 1992 Act directed the

OFFP Administrator to issue conforming modifications to the test plan

and policy directive. The conforming modifications were issued in an

interim policy directive with request for comments (58 FR 19849, April

16, 1993), and were incorporated into the Federal Acquisition

Regulation (48 CFR Subpart 19.10). In 1996, Congress extended the

Demonstration Program for one year, through September 30, 1997. Pub. L.

104-208, Div. D, Title I, Sec. 108. In 1997, Congress also extended the

aspect of the Program covering expansion of small business

participation in the dredging industry. Pub. L. 105-18, Title II, Sec.

2002.

In December 1997, the Small Business Reauthorization Act of 1997

(Pub. L. 105-135) was enacted into law (``1997 Act''). Sections 401-405

of the 1997 Act made the Demonstration Program permanent, and made

further amendments to the Program.

In order to respond to the comments that we received on the April

1993 interim policy directive and test plan, and to make conforming

changes to reflect the amendments made by the 1997 Act, we are now

issuing a newly revised interim OFPP policy directive and

implementation plan. In addition to making conforming revisions to

reflect the amendments made by Congress in the 1997 Act, we also have

made non-substantive revisions in various parts of the document, which

are intended to improve its clarity. For ease of reading, we are re-

issuing the interim policy directive and implementation plan in its

entirety for comment.

B. Comments on April 16, 1993, Policy Directive and Test Plan

OFPP received three comment letters in response to the request for

comments on the April 16, 1993, interim policy directive and test plan.

The main issues and concerns raised in the comments are summarized

below:

1. Comment: The policy directive should establish goals for small

and small disadvantaged business participation as a requirement of all

solicitations with no restricted competition at all.

Response: This comment suggests that several economic and practical

benefits would result from such an approach. However, elimination of

all restricted competition is not within the scope of the Small

Business Competitiveness Demonstration Program. The legislation that

governs the Program requires that set-asides be reinstituted if

agencies do not meet established small business goals; consequently, it

does not authorize the elimination of set-asides altogether. See

section 713(b) of the Act, at 15 U.S.C. 644 note.

2. Comment: Awarding agencies, rather than the General Services

Administration, should be given credit for awards under multiple award

schedule contracts.

Response: This comment appears to be based on a misinterpretation

of the Program. Contract awards made under multiple award schedule

contracts are not covered by the Program. We did not include these

contracts because SBA historically did not count such awards toward

agencies' attainment of the government-wide small business goals.

3. Comment: The Defense Acquisition Regulation requirement that

small disadvantaged business set-asides be utilized conflicts with the

Program's requirements for the use of unrestricted competition.

Response: The requirement in question is based on 10 U.S.C. 2323

(formerly section 1207 of the Fiscal Year 1987 National Defense

Authorization Act). Procurements under section 2323 are exempt from the

Program's requirement for unrestricted competition. (See section 713(a)

of the Act, at 15 U.S.C. 644 note.)

4. Comment: The $25,000 reserve amount for emerging small

businesses should be raised for the construction industry because a

vast majority of construction projects are above that amount.

Response: The emerging small business reserve amount is set at

$25,000 by law (see section 712(b) of the

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Act, at 15 U.S.C. 644 note). OFPP is authorized to adjust the reserve

amount if agencies do not attain the statutory goal of awarding

emerging small business concerns 15 percent of the total dollar value

of contracts in a designated industry group. The 15 percent goal has

consistently been exceeded for the construction industry. Accordingly,

raising the reserve amount is not appropriate.

5. Comment: FAR architectural and engineering (A&E) service

selection methods do not include small or small disadvantaged business

preferences; as a result, there is still no protection for emerging

small business A&E firms under the Program.

Response: The Program, which is implemented in the FAR at 48 CFR

subpart 19.10, provides that all contracts under $50,000 for A&E

services shall be set-aside for emerging small businesses. Accordingly,

we do not agree that there is no protection for emerging small business

A&E firms under the Program.

6. Comment: The Defense Mapping Agency should be included under the

Program.

Response: The test plan exempts the Defense Mapping Agency (now the

National Imagery and Mapping Agency (NIMA)) from the Program. We

received a comment suggesting that the rule be revised to require that

all surveying and mapping activities of NIMA comply with the Program.

The commenter relied on subsection 202(c) of Pub. L. 102-366 which

requires that ``solicitations for the award of contracts for

architectural and engineering services (including surveying and

mapping) issued by a Military Department or a Defense agency'' comply

with 10 U.S.C. sections 2855(a) and (b). Section 2855(a) requires that

``contracts for architectural and engineering services and construction

design in connection with a military family housing project'' be

awarded in accordance with 40 U.S.C. section 541 (the Brooks A-E Act).

Section 2855(b) generally establishes thresholds for setting aside the

contracts described in section 2855(a) for award to small business

concerns. In our opinion, neither Pub. L. 102-366 nor 10 U.S.C. section

2855 support the commenter's position. We read these provisions to

apply only to those contracts specifically described in 10 U.S.C.

2855(a), i.e., contracts for A&E services and construction design in

connection with military construction or family housing projects. The

NIMA does not conduct such procurements.

C. Revisions to the April 16, 1993 Interim Policy Directive and

Test Plan

In the Small Business Reauthorization Act of 1997, Congress made

several changes to the Act, which are summarized below and incorporated

into the interim policy directive.

Section 401 of the 1997 Act amends section 711(c) of the Small

Business Competitiveness Demonstration Program Act (the Act) to make

the Program permanent. We have revised Section III.A.1 of the

Implementation Plan (formerly the ``Test Plan'') to delete the

Program's expiration date.

Section 402 of the 1997 Act amends section 712(d)(1) of the Act to

require participating agencies to monitor the attainment of their small

business participation goals on an annual basis. An annual review and

reports to the Small Business Administration (SBA) must be completed by

each participating agency not later than January 31 of each year, based

on the data for the preceding fiscal year, from October 1 through

September 30. We have revised section IV.A.1. of the Implementation

Plan to reflect annual monitoring of goal attainment.

Section 403 of the 1997 Act amends section 716(a) of the Act to

transfer to the Small Business Administration the responsibility for

reporting to Congress the results of the Program. Reports to Congress

are due within 180 days after data for each of fiscal years 1991

through 2000 are available from the Federal Procurement Data Center.

The section also updates the name of the Committee on Government Reform

and Oversight of the House of Representatives.

Section 404 of the 1997 Act amends section 722(a) of the Act to

make the dredging program permanent. As indicated above, under the Act,

the Department of the Army (Corps of Engineers) is responsible for

conducting the dredging program.

Section 405 of the 1997 Act amends section 717 of the Act to

recognize that either the standard industrial classification (SIC)

codes or the successor North American Industrial Classification System

(NAICS) codes may be used to identify the designated industry groups

covered by the Program. OMB issued the NAICS codes in 1997 (62 FR 17288

(April 9, 1997). The Implementation Plan will continue to reference SIC

codes until SBA and the FAR Council implement the NAICS codes.

One provision of the Act that has expired is section 714(b), which

required the OFPP Administrator to develop a simplified data collection

system to collect data on the participation of small business concerns

as subcontractors under prime contracts for A&E services. It also set a

temporary 35 percent small business participation goal for A&E services

until the simplified data collection system was implemented. The

purpose of the system was to collect subcontracting data below the

first tier of subcontracting to demonstrate if the actual rate of small

business participation under A&E prime contracts was substantially

higher than was reflected in the government's existing subcontracting

data collection system. OFPP implemented the simplified data collection

data on October 27, 1993 (58 FR 57869). The requirement for this system

expired on September 30, 1997. Accordingly, the Implementation Plan

excludes the subcontracting reporting system previously described in

Section V.C.1. of the April 16, 1993, Interim Policy Directive. It also

deletes the reference in section III.C.1. to the temporary 35 percent

goal for A&E services.

This interim Policy Directive also recognizes that section 4201 of

the Federal Acquisition Streamlining Act of 1994 authorizes agencies to

use competition to ``the maximum extent practicable'' for procurements

below the simplified acquisition threshold. Accordingly, we revised the

implementation plan to substitute ``unrestricted competition'' for

``full and open competition'' throughout the document. This allows

agencies to use the ``maximum practicable competition'' standard for

procurements below the simplified acquisition threshold but above the

emerging small business reserve. Agencies will continue to use full and

open competition for unrestricted procurements above the simplified

acquisition threshold.

This interim Policy Directive also authorizes prime contract awards

to small businesses pursuant to the HUBZone Act of 1997, Title VI of

the Small Business Reauthorization Act of 1997 (Pub. L. 105-135), to

count toward goal attainment. In addition, the interim Policy Directive

recognizes that participating agencies may set aside procurements in

the DIGs, under the HUBZone Empowerment Contracting Program, that

exceed the emerging small business reserve amount even though the

agency's 40 percent small business goal is being attained. (This is

consistent with the Small Business Regulations implementing the HUBZone

Act, 63 FR 31896, 31902.) We revised Sections III.C.3., III.D.1,

III.D.2, and IV.A.6 of the Implementation Plan to reflect these

changes.

[[Page 51984]]

We also made two minor changes as follows: (1) Section III.D.3.a.

was revised to reflect that the emerging small business reserve amount

for A&E services has been raised to $50,000, and (2) the citations to

the Code of Federal Regulations (C.F.R.) at section III.E.4 have been

updated.

Finally, to improve the clarity of the document, we have made non-

substantive changes in various parts of the text.

We intend to issue a final policy directive by April 30, 1999.

D. Cumulative Report on the Demonstration Program for Fiscal Years

1991-1995

Section 716(a) of the Act, as amended by the Omnibus Consolidated

Appropriations Act of 1997 (Pub. L. 104-208, Division D, Section 108),

required a cumulative report of the results of the Demonstration Test

Program for FYs 1991-1995. The report indicated that, at the macro

level, small and emerging small businesses could maintain a significant

market share without the benefits of preferences. In three of the four

industries, awards to small and emerging small businesses exceeded the

40 and 15 percent goals set by the Program, respectively. Upon

examination at the micro level, however, it appeared that the market

share of these firms declined to some extent without preferences,

compared to their share prior to the commencement of the Program.

Therefore, although the Test Program demonstrated that small and

emerging small businesses could maintain a significant market share

without preferences, the Program also appeared to have reduced total

small business awards in the construction, refuse, A&E services and

non-nuclear ship repair industries. When viewed collectively, both the

small business and emerging small business shares declined for every

DIG from FYs 1991-1995.

SBA will continue to evaluate the economic impact of the Program in

its subsequent reports to Congress.

E. Regulatory Flexibility Act and E.O. 12866

This interim policy directive incorporates changes to the Small

Business Reauthorization Act of 1997 (Sections 401-405 of Pub. L. 105-

135). This Act merely extended the Program indefinitely and modified

the reporting procedures of the participating Federal agencies. The Act

made no substantive changes to the Program as originally designed.

The changes required by the Act do not impose any new requirements

or additional burdens on small businesses and are unlikely to have an

annual economic effect of $100 million or more, result in a major

increase in cost or prices, or have a significant effect on competition

in the U.S. economy. Accordingly, this directive is not considered a

significant rule within the meaning of Executive Order 12866 and will

not 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. In addition, because this interim policy directive makes

ministerial changes to conform the directive to amendments mandated by

the 1997 Act (which amendments were effective upon the date of

enactment), we have determined that advance comment on these conforming

changes is unnecessary and thus we are issuing this document on an

interim basis. We will respond to any comments received in the coming

months.

F. Paperwork Reduction Act

The information collection requirements related to this policy

directive and implementation plan were previously approved by OMB and

assigned OMB control number 9000-0100. A revised information collection

request has been submitted to OMB for approval under the Paperwork

Reduction Act (44 U.S.C. Chapter 35).

Deidre A. Lee,

Administrator, Office of Federal Procurement Policy.

Richard L. Hayes,

Associate Deputy Administrator for Government Contracting and Minority

Enterprise Development, Small Business Administration.

September 21, 1998.

MEMORANDUM FOR:

THE SECRETARY OF AGRICULTURE

THE SECRETARY OF DEFENSE

THE SECRETARY OF ENERGY

THE SECRETARY OF HEALTH AND HUMAN SERVICES

THE SECRETARY OF THE INTERIOR

THE SECRETARY OF TRANSPORTATION

THE ADMINISTRATOR OF THE ENVIRONMENTAL PROTECTION AGENCY

THE ADMINISTRATOR OF GENERAL SERVICES

THE ADMINISTRATOR OF THE NATIONAL AERONAUTICS AND SPACE

ADMINISTRATION

THE SECRETARY OF VETERANS AFFAIRS

SUBJECT: The Small Business Competitiveness Demonstration Program

1. Purpose. This memorandum provides policy direction to the

participating agencies for implementation of the Small Business

Competitiveness Demonstration Program Act of 1988 (Title VII, Public

Law 100-656), as amended by Sections 23-27 of the Business

Opportunity Development Reform Act Technical Corrections Act (Public

Law 101-37), Sections 201 and 202 of the Small Business Credit and

Business Opportunity Enhancement Act of 1992 (Public Law 102-366),

Section 108 of the Omnibus Consolidation Appropriation Act of 1997

(Public Law 104-208), and Sections 401-405 of the Small Business

Reauthorization Act of 1997 (Public Law 105-135).

2. Authority. This memorandum is issued pursuant to Section 715

of Public Law 100-656, which requires that the Office of Federal

Procurement Policy (OFPP) and the Small Business Administration

(SBA) issue a policy directive to ensure consistent government-wide

implementation of Title VII in the Federal Acquisition Regulation

(FAR); Section 202(i) of the Small Business Credit and Business

Opportunity Enhancement Act of 1992 (Public Law 102-366), which

requires appropriate modifications to the policy directive to

conform to amendments made by that Act; Sections 401-405 of the

Small Business Reauthorization Act of 1997 (Public Law 105-135),

which further amends Title VII; and Section 15 of the Office of

Federal Procurement Policy Act, 41 U.S.C. 413, which provides for

the testing of innovative procurement methods and procedures.

3. Background. Section 15(a) of the Small Business Act mandates

that small businesses receive a fair proportion of Federal

procurements. To achieve this goal, Subpart 19.5 of the FAR requires

that Federal agencies reserve, or set aside, procurements for

exclusive small business participation when a contracting officer

determines that two or more small businesses are capable of

providing the goods or services at reasonable prices. While

restricting procurements for exclusive small business participation

has been very effective in assuring a small business share of

Federal contracts, one unintended result is a concentration of

awards in certain industries often dominated by small businesses. A

further result is that agencies expend resources in those industries

that are conducive to high levels of small business participation

rather than expand the base of small business contracting into areas

where small businesses do not traditionally obtain a significant

share of procurement awards.

4. Policy. The goals of the Program are to assess the ability of

small businesses in certain designated industry groups to retain a

fair proportion of procurement awards in unrestricted competition in

those industry groups and to expand small business participation in

a broader range of industry categories. The Act designates the Small

Business Administration as OFPP's executive agent to monitor the

Program. The procedures for implementing the Program are set forth

in the attached implementation plan.

5. Implementation. This policy directive shall be implemented in

FAR Part 19. Pursuant to Section 715(a) of the Small Business

Competitiveness Demonstration Program Act, provisions of the FAR

that are inconsistent with this policy directive and the attached

implementation plan are hereby waived.

[[Page 51985]]

6. Expiration Date. The Small Business Competitiveness

Demonstration Program has no expiration date.

Deidre A. Lee,

Administrator, Office of Federal Procurement Policy.

Richard L. Hayes,

Associate Deputy Administrator for Government Contracting and Minority

Enterprise Development, Small Business Administration.

Small Business Competitiveness Demonstration Program Implementation

Plan

I. Purpose

This document implements the Small Business Competitiveness

Demonstration Program Act of 1988 (Title VII, Public Law 100-656), as

amended by Sections 23-27 of the Business Opportunity Development

Reform Act Technical Corrections Act (Public Law 101-37), Sections 201

and 202 of the Small Business Credit and Business Opportunity

Enhancement Act of 1992 (Public Law 102-366), Section 108 of the

Omnibus Consolidation Appropriations Act of 1997 (Public Law 104-208),

and Sections 401-405 of the Small Business Reauthorization Act of 1997

(Public Law 105-135). The Program seeks to assess whether or not the

competitive capabilities of small business firms in certain industry

groups will enable them to successfully compete on an unrestricted

basis for Federal contracts. In addition, the Program attempts to

assess whether or not the use of targeted goaling and management

techniques by procuring agencies, in conjunction with the Small

Business Administration (SBA), will expand small business participation

in Federal contracting opportunities that have been historically low

despite adequate numbers of qualified small business contractors in the

economy. The Program further seeks to assess whether or not expanded

use of unrestricted competition adversely affects small business

participation in certain industry groups, taking into consideration the

numerical dominance of small firms, the size and scope of most

contracting opportunities, and the competitive capabilities of small

firms.

II. Authority

The Program is established pursuant to the Small Business

Competitiveness Demonstration Program Act of 1988 (Title VII, Public

Law 100-656), Sections 201 and 202 of the Small Business Credit and

Business Opportunity Enhancement Act of 1992 (Public Law 102-366),

Sections 401-405 of the Small Business Reauthorization Act of 1997

(Public Law 105-135), and Section 15 of the Office of Federal

Procurement Policy Act, 41 U.S.C. 413.

III. Program Requirements

A. Applicability

1. The Program began on January 1, 1989 and consists of two major

components: (1) unrestricted competition in four Designated Industry

Groups, and (2) enhanced small business participation in agencies' ten

Targeted Industry Categories. Contracts resulting from solicitations

issued on or after January 1, 1989 and any subsequent modifications to

such contracts, are covered by this Program.

2. Contract awards in the following designated industry groups are

covered by this Program:

a. Construction under standard industrial classification (SIC)

codes that comprise major groups 15, 16, and 17 (excluding dredging--

Federal Procurement Data System (FPDS) service codes Y216 and Z216);

b. Refuse systems and related services, including portable

sanitation services, under SIC code 4212 or 4953, limited to FPDS

service code S205;

c. Architectural and engineering (A&E) services (including

surveying and mapping) under SIC codes 7389, 8711, 8712, or 8713

(limited to FPDS service codes C111 through C216, C219, T002, T004,

T008, T009, T014, and R404), awarded under the qualification-based

selection procedures required by 40 U.S.C. 541 et seq. (the ``Brooks A-

E Act''); and

d. Non-nuclear ship repair--ship repair (including overhauls and

conversions) performed on non-nuclear propelled and nonpropelled ships

under SIC code 3731, limited to FPDS service codes J998 (repair

performed east of the 108th meridian) and J999 (repair performed west

of the 108th meridian).

3. Upon regulatory implementation by SBA and the FAR Council, the

North American Industrial Classification (NAIC) Coding System will be

substituted for SIC codes.

4. Targeted industry categories for enhanced participation are

determined by each participating agency, in conjunction with SBA.

5. Contract awards under the Federal Schedule Program are not

covered by the Program.

6. Contract awards to educational and non-profit institutions or

governmental entities are not covered by the Program.

B. Participating Agencies

The following agencies are participants in the Program:

1. The Department of Agriculture,

2. The Department of Defense, except the National Imagery and

Mapping Agency,

3. The Department of Energy,

4. The Department of Health and Human Services,

5. The Department of Transportation,

6. The Environmental Protection Agency,

7. The General Services Administration,

8. The National Aeronautics and Space Administration,

9. The Department of Veterans Affairs, and

10. The Department of the Interior.

C. Agency Goals for the Four Designated Industry Groups

1. Each participating agency shall have a small business

participation goal that is 40 percent of the agency's total contract

dollars awarded for construction major group 15, major group 16, and

major group 17; A&E services; refuse systems and related services; and

non-nuclear ship repair. The 40 percent goal applies to each

construction major group. In addition, each participating agency must

make a good faith effort to assure that emerging small businesses

receive not less than 15 percent of the agency's total contract dollars

awarded for each of the four designated industry groups.

2. The Small Business Competitiveness Demonstration Program Act of

1988 defines an emerging small business as one whose size is no greater

than 50 percent of the numerical size standard applicable to the SIC

Code assigned to the procurement. Subject to the requirements of

paragraph III.D.3 below, contract opportunities in the four designated

industry groups, which have an estimated award value equal to or less

than the reserve amount established for emerging small businesses, are

reserved for such businesses.

3. Contract awards made to fulfill the 15 percent goal for emerging

small businesses also count toward attainment of the 40 percent goal.

All prime contract awards to small businesses, including awards under

section 8(a) of the Small Business Act; 10 U.S.C. 2323; section 7102 of

the Federal Acquisition Streamlining Act of 1994; the HUBZone Act of

1997 (Title VI of the Small Business Reauthorization Act, Public Law

105-135); and sole source awards, count toward attainment of goals.

D. Procurement Procedures for the Four Designated Industry Groups

Participating agencies shall use the following procedures for

procurements in the four designated industry groups.

[[Page 51986]]

1. Unrestricted Competition for Contracts in Excess of the Emerging

Small Business Reserve Amount

a. Subject to the requirements of the Competition in Contracting

Act of 1984 and section 4201 of the Federal Acquisition Streamlining

Act of 1994, participating agencies are required to use unrestricted

competition for all solicitations in the four designated industry

groups, if the anticipated award value exceeds the dollar amount

reserved for emerging small businesses (unless the procurement is

placed under section 8(a) of the Small Business Act; or is set aside

under 10 U.S.C. 2323, section 7102 of the Federal Acquisition

Streamlining Act of 1994, or the HUBZone Act of 1997 (Title VI of the

Small Business Reauthorization Act, Public Law 105-135). Each

participating agency shall continue to use unrestricted competition as

long as annual reviews show that the agency's 40 percent goal is being

attained. The continued use of unrestricted competition is not affected

by an agency's failure to meet its 15 percent award goals for emerging

small businesses.

b. Notwithstanding the provisions of paragraph III.D.1.a., above,

the Department of Defense shall solicit contracting opportunities for

A&E services (including surveying and mapping), in accordance with the

provisions of subsections (a) and (b) of section 2855 of title 10,

United States Code.

2. Restricted Competition for Contracts in Excess of the Emerging Small

Business Reserve Amount

a. If any participating agency's annual review of its awards to

small businesses in the four designated industry groups shows that the

agency has failed to attain its 40 percent goal for any of the groups,

subsequent contracting opportunities, in excess of the amount reserved

for emerging small businesses, shall be solicited through competition

restricted to eligible small businesses only at the organizational

unit(s) within the agency that failed to attain the small business

participation goals. (Organizational unit(s) shall be no larger than

the major agency components or services, e.g., Army, Air Force, Navy,

etc. for Department of Defense, regional offices for the General

Services Administration, or space flight and research centers for the

National Aeronautics and Space Administration.) Such solicitations

(unless placed under section 8(a) of the Small Business Act or set

aside under 10 U.S.C. 2323, section 7102 of the Federal Acquisition

Streamlining Act of 1994, or the HUBZone Act of 1997 (Title VI of the

Small Business Reauthorization Act, Public Law 105-135) shall be

conducted in accordance with section 15(a) of the Small Business Act

and Subpart 19.5 of the Federal Acquisition Regulation (FAR).

b. Agencies shall return to the use of unrestricted competition

upon determining, after their annual review, that their contract awards

to small business concerns again meet the required goals.

c. Modifications to agency solicitation practices (instituting

restricted competition and reinstituting unrestricted competition)

shall be made as soon as practicable, but no later than 30 days

following completion of the review indicating the need for such change.

The reinstitution of restricted competition or unrestricted competition

shall be announced to the public through a notice published in the

Federal Register if restricted or unrestricted competition is to be

reimposed broadly by a participating agency. ``Special notices'' in the

Commerce Business Daily shall be used periodically to supplement such

Federal Register notices, and may be used as an alternative means of

providing such notices, if the reinstitution of restricted competition

or unrestricted competition will affect only a limited number of buying

activities.

3. Reserve Program for Emerging Small Businesses

a. The emerging small business reserve amount is $25,000, or such

higher amount as OFPP sets in the event that emerging small concerns

are not receiving 15 percent of the total dollar value of contract

awards in one or more of the four designated industry groups. The

emerging small business reserve amount for architectural and

engineering services is $50,000 (56 FR 46656, September 13, 1991). Any

required adjustments to the emerging small business reserve amount will

be made annually by industry group.

b. Competition for all contract opportunities in the four

designated industry groups with an estimated award value that is equal

to or less than the emerging small business reserve amount shall be

restricted to emerging small businesses, provided that the contracting

officer determines that there is a reasonable expectation of obtaining

offers from two or more responsible emerging small businesses that will

be competitive in terms of market price, quality, and delivery. If no

such reasonable expectation exists, requirements will be processed in

accordance with FAR 19.5 or FAR 19.8. However, if no such reasonable

expectation exists where OFPP has raised the small business reserve

amount to a level over $25,000, requirements over $25,000 will be

processed in accordance with paragraphs III.D.1 and III.D.2 above.

c. The use of simplified acquisition procedures is not required

under the reserve program; any competitive source selection method may

be used. The reserve program applies only to new awards within the

emerging small business reserve threshold. Modifications within the

scope of work of contracts having an initial award value in excess of

the emerging small business reserve amount are not subject to the

reserve program.

d. Each solicitation under the Program that utilizes simplified

acquisition procedures shall include the applicable SIC code and size

standard for the procurement.

4. Solicitation Provisions for Procurements in the Four Designated

Industry Groups

a. The provision set forth in FAR 52.219-19 entitled ``Small

Business Concern Representation for the Small Business Competitiveness

Demonstration Program'' shall be inserted in full text in all

solicitations issued by the participating agencies under the Small

Business Competitiveness Demonstration Program for the four designated

industry groups.

b. The provision set forth in FAR 52.219-20 entitled ``Notice of

Emerging Small Business Set-Aside'' shall be inserted in full text in

all solicitations and resulting contracts restricted to emerging small

businesses pursuant to paragraph III.D.3.

c. The face of each award issued by a participating agency under

the Small Business Competitiveness Demonstration Program for the four

designated industry groups shall contain a statement that the award is

being issued pursuant to such Program.

E. Agency Programs for Targeted Industry Categories With Limited Small

Business Participation

1. Each participating agency is required to select ten industry

categories (four-digit SIC Code or some segmented portion(s) of such

code(s), as identified by FPDS product or service code) as targeted

categories for expansion of small business participation.

2. In order to achieve such expanded participation, agencies shall

select categories that represent products and services purchased in

substantial

[[Page 51987]]

quantities by the agency; that historically have had a small business

participation rate of less than 10 percent by category, and in which

there is a significant amount of small business productive capacity

that has not been utilized by the Government.

3. Each participating agency shall consult with the Administrator

of SBA in selecting the ten targeted categories, developing the plan

for expanded small business participation, and establishing the goals

for the Program. Upon completion of their consultation with SBA,

participating agencies shall publish in the Federal Register, an

announcement soliciting public comment on that agency's program for

expansion of small business participation in the targeted categories.

Each participating agency shall notify SBA of any additions or

deletions to the ten targeted industry categories. Subsequent to the

SBA notification, the participating agency shall publish the changes in

the Federal Register.

4. Each plan shall be submitted to the Administrator of SBA and

shall contain a detailed time-phased strategy with incremental goals,

including reporting on goal attainment. To the extent practicable,

provisions that encourage and promote teaming and joint ventures shall

be included. These provisions should permit small business firms to

effectively compete for contracts that individual small businesses

would be ineligible to compete for because of lack of production

capacity or capability. Such joint ventures or teams shall comply with

the applicable small business guidelines. (See 13 CFR Secs. 121.103(f)

and 121.105(b)).

5. Participating agencies shall report to SBA on the results of the

expansion program regarding the ten targeted categories on the same

annual schedule as required for the four designated industry groups.

6. Goal attainment for the ten targeted industry categories shall

be determined on the basis of awards to U.S. business firms.

Participating agencies may use the format in Attachment A to report

accomplishments.

7. The provision set forth in FAR 52.219-21 entitled ``Small

Business Size Representation For Targeted Industry Categories Under the

Small Business Competitiveness Demonstration Program'' shall be

inserted in full text in any solicitation issued in each of the ten

targeted industry categories under the Small Business Competitiveness

Demonstration Program that is expected to result in a contract award in

excess of $25,000.

8. The face of each award issued in any of the ten targeted

industry categories under the Small Business Competitiveness

Demonstration Program shall contain a statement that the award is being

issued pursuant to such Program.

IV. Monitoring and Reporting for Four Designated Industry Groups

A. Monitoring of Goals for the Four Designated Industry Groups

1. Each participating agency shall monitor attainment of its small

business and emerging small business participation goals on an annual

basis and provide the information in a written report to SBA. The

report shall specify the industry groups for which restricted or

unrestricted competition have been imposed. Agencies shall complete

their annual reviews and submit their reports not later than January 31

of each year, based on the data for the preceding fiscal year, from

October 1 through September 30. The Department of Defense shall submit

a report that separately identifies performance by the Army, Air Force,

Navy and the Defense Agencies. The report submitted by the General

Services Administration shall separately identify performance by the

Public Building Service.

2. Monitoring and reporting of goal attainment will be based on

awards (and any subsequent modifications to those awards) in the

individual codes comprising the industry, as specified in paragraph

IV.B., below.

3. Any necessary modifications to agency solicitation practices for

the purpose of achieving the agency's small business participation

goals (instituting restricted competition or reinstituting unrestricted

competition) will be accomplished for each of the industry groups as

follows:

a. Construction (excluding dredging)

i. Major group 15

ii. Major group 16

iii. Major group 17

b. Refuse systems and related services.

c. A&E services (including surveying and mapping), limited to

contracts awarded under the qualification-based selection procedures

required by 40 U.S.C. 541 et seq. (the ``Brooks A-E Act'').

d. Non-nuclear ship repair.

However, if goal attainment for any individual FPDS service code

within the A&E services or non-nuclear ship repair industry groups

falls below 35 percent, the agency shall reinstitute set-asides for

that individual service code at the organizational unit(s) within the

agency that failed to achieve the 35 percent goal, even if overall goal

attainment in the industry group is 40 percent or more. In addition, if

goal attainment for any individual SIC code within one of the major

groups comprising the construction industry group falls below 35

percent, the agency shall reinstitute set-asides for that individual

SIC code at the organizational unit(s) within the agency that failed to

achieve the 35 percent goal, even if overall goal attainment in the

major group is 40 percent or more.

4. Agencies shall monitor goal attainment in the four designated

industry groups by reviewing total prime contract award dollars to (a)

all U.S. business firms, (b) small U.S. business concerns and (c)

emerging small U.S. business concerns. Awards to educational and non-

profit institutions or governmental entities are not part of the

Program and do not count towards goal attainment.

5. SBA will closely monitor the Program to ensure that each

participating agency makes a consistent effort to achieve goals evenly

across all individual codes that comprise a designated industry group.

Data shall be monitored using the format set forth at Attachment A.

6. All prime contract awards to small businesses, including awards

under section 8(a) of the Small Business Act; 10 U.S.C. 2323; section

7102 of the Federal Acquisition Streamlining Act of 1994; the HUBZone

Act of 1997 (Title VI of the Small Business Reauthorization Act, Public

Law 105-135); and sole source awards, count toward attainment of goals.

B. Codes for Monitoring and Reporting Goal Attainment for the Four

Designated Industry Groups

1. Refuse Systems and Related Services

The Small Business Competitiveness Demonstration Program Act of

1988 outlines the SICs that are included in the designated industry

groups. However, in the area of refuse systems and related services,

SIC codes 4212 and 4953 include services that should not be included in

the Program. The Program is designed to assess small firms'

competitiveness generally in procurements for the collection,

transportation, and disposal of residential and nonhazardous commercial

garbage, refuse, and waste materials. For example, contracts for the

regular collection and disposal at publicly or privately operated

landfills of residential and nonhazardous commercial solid waste,

garbage, debris, or other refuse from military installations, federal

office buildings, and other federal facilities, and garbage processing

and recycling activities,

[[Page 51988]]

should be included. Contracts for the operation of those facilities,

collection and disposal of acid, radioactive, or other hazardous waste

should not be included. Therefore, participating agencies shall use

FPDS service code S205 (trash/garbage collection services--including

portable sanitation services) to monitor goal attainment for refuse

systems and related services.

2. Architectural and Engineering Services

a. The Small Business Competitiveness Demonstration Act of 1988

provides that A&E services (including surveying and mapping) shall

include contracts assigned SIC codes 8711, 8712, 8713, and 7389 (if

identified as mapping), and awarded under the qualification-based

selection procedures required by 40 U.S.C. 541 et seq. (the ``Brooks A-

E Act''). Since SIC code 7389 includes many more services than mapping,

participating agencies shall use the following FPDS service codes to

monitor goal attainment for mapping services:

T002 Cartography services

T004 Charting services

T008 Photogrammetry services

T009 Aerial photographic services

T014 Topography services

b. Participating agencies shall use the following FPDS service

codes to monitor A&E services under SICcodes 8711, 8712, and 8713:

C111 Administrative and Service Buildings

C112 Airfield, Communication and Missile Facilities

C113 Educational Buildings

C114 Hospital Buildings

C115 Industrial Buildings

C116 Residential Buildings

C117 Warehouse Buildings

C118 Research and Development Facilities

C119 Other Buildings

C121 Conservation and Development

C122 Highways, Roads, Streets and Bridges

C123 Electric Power Generation (EPG)

C124 Utilities

C129 Other Non-Building Structures

C130 Restoration

C211 Architect--Engineer Services (non-construction)

C212 Engineering Drafting Services

C213 A&E Inspection Services (non-construction)

C214 A&E Management Engineering Services

C215 A&E Production Engineering Services

C216 Marine A&E Services

C219 Other Architect and Engineering Services

R404 Land Surveys, Cadastral Services--non-construction

3. Non-nuclear Ship Repair

Non-nuclear ship repair is included within SIC code 3731. Since

this SIC includes all ship repair as well as shipbuilding,

participating agencies shall use the following FPDS service codes to

monitor goal attainment for non-nuclear ship repair: J998 (Ship Repair,

Including Overhauls and Conversions, Performed on Non-nuclear Propelled

and Nonpropelled Ships East of the 108th Meridian) or J999 (Ship

Repair, Including Overhauls and Conversions, Performed on Non-nuclear

Propelled and Nonpropelled Ships West of the 108th Meridian).

4. Construction

Goal attainment for construction shall be monitored through the use

of the SIC codes identified in Attachment A.

V. FPDS Data Collection Requirements

Participating agencies shall maintain and report procurement data

to the Federal Procurement Data System (FPDS) in order to determine the

level of small business participation in the four designated industry

groups and the ten targeted industry categories for the small business

expansion program.

A. Awards in Excess of $25,000

For contract awards in excess of $25,000, the FPDS (1) has

information on the SIC code of the procurement and (2) can distinguish

awards to small business concerns and small disadvantaged business

concerns, as required by section 714(c) of the Small Business

Competitiveness Demonstration Program Act of 1988. However, for

purposes of the Program, the FPDS reporting requirements have been

revised to also:

1. Distinguish awards resulting from solicitations issued under the

Program from awards resulting from solicitations issued prior to

January 1, 1989, in the four designated industry groups. A distinction

must be made between contract actions awarded from solicitations issued

under the Program and contract actions awarded from solicitations

issued prior to January 1, 1989.

2. Distinguish emerging small business firms from other small

businesses. Participating agencies must make a good faith effort to

award not less than 15 percent of the dollar value of awards in the

four designated industry groups to emerging small businesses.

3. Distinguish awards to emerging small business firms in the small

business reserve program. Participating agencies must reserve for

exclusive competition among emerging small business concerns all

contracts of $25,000 or less in the four designated industry groups or

a greater amount set by OFPP if the 15 percent goal is not attained.

Emerging small businesses can also receive awards above the small

business reserve threshold.

4. Provide the size of the small business concern in terms of

number of employees or dollar volume of sales for awards in the four

designated industry categories and ten targeted industry categories.

Section 714(c) of the Small Business Competitiveness Demonstration

Program Act requires each participating agency to collect data

pertaining to the size of the small business concern receiving any

award for services in the four designated industry groups and products

or services in the ten targeted industry categories. The number of

employees shall be based on the average of the pay periods for the last

twelve months. The volume of sales shall be based on the average annual

gross revenue for the last three fiscal years (See FAR 19.101).

5. Limit A&E services to contracts awarded under the qualification-

based selection procedures of 40 U.S.C. 541 et seq. (the ``Brooks A-E

Act'').

6. Specific details outlining the FPDS changes have been included

in the FPDS Reporting Manual (September 1997).

B. Awards of $25,000 or Less

Each award of $25,000 or less made by a participating agency for

the procurement of a service in the four designated industry groups

shall be reported to the Federal Procurement Data Center in the same

manner as if the award was in excess of $25,000. This means that all

applicable data collected in the FPDS via the Individual Contract

Action Report (SF 279), or agencies' equivalent computer-generated

format, shall be reported for these purchases. It should be noted that

awards of $500 or less are not reportable to the FPDS.

Specific details outlining the FPDS changes have been included in

the FPDS Reporting Manual (September 1997).

[[Page 51989]]

Attachment A

Report on Small Business Participation Under the Small Business

Competitiveness Demonstration Program for Designated Industry

Groups

Fiscal Year ____________ Quarter ____________

Agency:----------------------------------------------------------------

Subagency (if applicable)----------------------------------------------

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

Small Emerging

Total U.S. Small disadvantaged small

Designated Groups Business business Percentage business Percentage business Percentage

actions/ actions/ of dollars actions/ of dollars actions/ of dollars

dollars dollars* dollars dollars

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

I. Construction, excluding dredging (Dollars in Thousands; Percentage in Whole Numbers)

SIC Group 15:

1521............................................. ............ ............ ............ ............. ............ ............ ............

1522............................................. ............ ............ ............ ............. ............ ............ ............

1531............................................. ............ ............ ............ ............. ............ ............ ............

1541............................................. ............ ............ ............ ............. ............ ............ ............

1542............................................. ............ ............ ............ ............. ............ ............ ............

Subtotal.....................................

SIC Group 16:

1611............................................. ............ ............ ............ ............. ............ ............ ............

1622............................................. ............ ............ ............ ............. ............ ............ ............

1623............................................. ............ ............ ............ ............. ............ ............ ............

1629............................................. ............ ............ ............ ............. ............ ............ ............

Subtotal..................................... ............ ............ ............ ............. ............ ............ ............

SIC Group 17:

1711............................................. ............ ............ ............ ............. ............ ............ ............

1721............................................. ............ ............ ............ ............. ............ ............ ............

1731............................................. ............ ............ ............ ............. ............ ............ ............

1741............................................. ............ ............ ............ ............. ............ ............ ............

1742............................................. ............ ............ ............ ............. ............ ............ ............

1743............................................. ............ ............ ............ ............. ............ ............ ............

1751............................................. ............ ............ ............ ............. ............ ............ ............

1752............................................. ............ ............ ............ ............. ............ ............ ............

1761............................................. ............ ............ ............ ............. ............ ............ ............

1771............................................. ............ ............ ............ ............. ............ ............ ............

1781............................................. ............ ............ ............ ............. ............ ............ ............

1791............................................. ............ ............ ............ ............. ............ ............ ............

1793............................................. ............ ............ ............ ............. ............ ............ ............

1794............................................. ............ ............ ............ ............. ............ ............ ............

1795............................................. ............ ............ ............ ............. ............ ............ ............

1796............................................. ............ ............ ............ ............. ............ ............ ............

1799............................................. ............ ............ ............ ............. ............ ............ ............

Subtotal..................................... ............ ............ ............ ............. ............ ............ ............

Grand Total.................................. ............ ............ ............ ............. ............ ............ ............

II. Refuse Systems and Related Services (Dollars in Thousands; Percentages in Whole Numbers)

PSC S205............................................. ............ ............ ............ ............. ............ ............ ............

Total.......................................... ............ ............ ............ ............. ............ ............ ............

III. Architectural and Engineering Services, including mapping and surveying (Dollars in Thousands; Percentages in Whole Numbers)

SIC 7389: ............ ............ ............ ............. ............ ............ ............

PSC T002......................................... ............ ............ ............ ............. ............ ............ ............

PSC T004......................................... ............ ............ ............ ............. ............ ............ ............

PSC T008......................................... ............ ............ ............ ............. ............ ............ ............

PSC T009......................................... ............ ............ ............ ............. ............ ............ ............

PSC T014......................................... ............ ............ ............ ............. ............ ............ ............

Subtotal..................................... ............ ............ ............ ............. ............ ............ ............

SIC 8711 or SIC 8712 or 8713:

PSC C111......................................... ............ ............ ............ ............. ............ ............ ............

PSC C112......................................... ............ ............ ............ ............. ............ ............ ............

PSC C113......................................... ............ ............ ............ ............. ............ ............ ............

PSC C114......................................... ............ ............ ............ ............. ............ ............ ............

PSC C115......................................... ............ ............ ............ ............. ............ ............ ............

PSC C116......................................... ............ ............ ............ ............. ............ ............ ............

PSC C117......................................... ............ ............ ............ ............. ............ ............ ............

PSC C118......................................... ............ ............ ............ ............. ............ ............ ............

PSC C119......................................... ............ ............ ............ ............. ............ ............ ............

PSC C121......................................... ............ ............ ............ ............. ............ ............ ............

PSC C122......................................... ............ ............ ............ ............. ............ ............ ............

PSC C123......................................... ............ ............ ............ ............. ............ ............ ............

PSC C124......................................... ............ ............ ............ ............. ............ ............ ............

PSC C129......................................... ............ ............ ............ ............. ............ ............ ............

PSC C130......................................... ............ ............ ............ ............. ............ ............ ............

PSC C211......................................... ............ ............ ............ ............. ............ ............ ............

PSC C212......................................... ............ ............ ............ ............. ............ ............ ............

[[Page 51990]]

PSC C213......................................... ............ ............ ............ ............. ............ ............ ............

PSC C214......................................... ............ ............ ............ ............. ............ ............ ............

PSC C215......................................... ............ ............ ............ ............. ............ ............ ............

PSC C216......................................... ............ ............ ............ ............. ............ ............ ............

PSC C219......................................... ............ ............ ............ ............. ............ ............ ............

PSC R404......................................... ............ ............ ............ ............. ............ ............ ............

Subtotal..................................... ............ ............ ............ ............. ............ ............ ............

Grand Total.................................. ............ ............ ............ ............. ............ ............ ............

IV. Non-nuclear Ship Repair (Dollars in Thousands; Percentages in Whole Numbers)

SIC 3731: ............ ............ ............ ............. ............ ............ ............

PSC J998......................................... ............ ............ ............ ............. ............ ............ ............

PSC J999......................................... ............ ............ ............ ............. ............ ............ ............

Total........................................ ............ ............ ............ ............. ............ ............ ............

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

*Small Business Dollars include dollars to Emerging Small Businesses.

[FR Doc. 98-26060 Filed 9-28-98; 8:45 am]

BILLING CODE 3110-01-P