Federal Acquisition Regulation; Very Small Business Concerns

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 5, 8, 12, 19, and 52

[FAC 97-11; FAR Case 98-013; Item II]

RIN 9000-AI29

Federal Acquisition Regulation; Very Small Business Concerns

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

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

ACTION: Interim rule with request for comments.

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

SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council have agreed on an interim rule amending

the Federal Acquisition Regulation (FAR) to implement the Small

Business Administration's Very Small Business Pilot Program (13 CFR

parts 121 and 125).

DATES: Effective Date: March 4, 1999.

Applicability Date: This rule applies to solicitations issued on or

after March 4, 1999.

Comment Date: Comments should be submitted to the FAR Secretariat

at the address shown below on or before May 3, 1999, 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 97-11, FAR case 98-013 in all correspondence

related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS

Building, Washington, DC 20405, (202) 501-4755, for information

pertaining to status or publication schedules. For clarification of

content, contact Ms. Victoria Moss, Procurement Analyst, at (202) 501-

4764. Please cite FAC 97-11, FAR case 98-013.

SUPPLEMENTARY INFORMATION:

A. Background

Section 304 of the Small Business Administration Reauthorization

and Amendments Act of 1994 (Pub. L. 103-403) authorized the SBA

Administrator to establish and carry out a pilot program for very small

business (VSB) concerns. The Small Business Administration (SBA)

published a final rule in the Federal Register on September 2, 1998 (63

FR 46640), amending 13 CFR parts 121 and 125 to establish a pilot

program for VSB business concerns. The purpose of the program is to

improve access to Government contract opportunities for concerns that

are substantially below SBA's size standards by reserving certain

acquisitions for competition among such VSB concerns. Implementation of

the program is limited to geographic areas served by 10 SBA district

offices. A VSB concern is defined as a small business that has 15 or

fewer employees together with average annual receipts that do not

exceed $1 million. Any procurement that has an anticipated dollar value

exceeding $2,500 but not greater than $50,000 may be set aside for VSB

concerns. A contracting officer must set aside for VSB concerns any

such service or construction requirement that will be performed within

the geographical boundaries served by a designated SBA district office

if there is a reasonable expectation of obtaining fair and reasonable

offers from two or more responsible VSB concerns headquartered within

the geographical area served by that designated SBA district. In the

case of a procurement for supplies, a contracting officer must set

aside any such requirement for VSBs if the contracting office is

located within the geographical area served by a designated SBA

district, and there is a reasonable expectation of obtaining fair and

reasonable offers from two or more responsible VSB concerns

headquartered within the geographical area served by that designated

SBA district office. A decision chart to assist contracting personnel

in making the decision to set aside an acquisition for VSB concerns is

located at http://www.arnet.gov/References/VerySmall.html. The program

will expire on September 30, 2000, unless further extended through

legislation.

This regulatory action was not subject to Office of Management and

Budget review under Executive Order 12866, dated September 30, 1993,

and is not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

The changes may have a significant economic impact on a substantial

number of small entities within the meaning of the Regulatory

Flexibility Act, 5 U.S.C. 601 et seq., because Section 304 of the Small

Business Administration Reauthorization and Amendments Act of 1994

(Pub. L. 103-403) called for the Small Business Administration (SBA) to

conduct a pilot program to improve access to Federal Government

contract opportunities for concerns that are substantially below SBA's

size standards by reserving certain procurements for competition among

such very small business (VSB) concerns. SBA's final rule implementing

the pilot program was published in the Federal Register on September 2,

1998 (63 FR 46640).

The SBA provides, in its final rule, that the rule should have no

effect on the amount of dollar value of any contract requirement or the

number of requirements reserved for the small business set-aside

program, since it is administered within and is a component of the

small business set-aside program. Estimates of the number of entities

to which the rule will apply were submitted by SBA in its regulatory

flexibility analysis prepared for the final SBA rule. An Initial

Regulatory Flexibility Analysis (IRFA) has been prepared and will be

provided to the Chief Counsel for Advocacy for the Small Business

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

Secretariat. Comments are invited. Comments from small entities

concerning the affected FAR subpart will be considered in accordance

with 5 U.S.C. 610. Such comments must be submitted separately and

should cite 5 U.S.C 601, et seq. (FAC 97-11, FAR Case 98-013), in

correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the changes to

the FAR do not impose information collection requirements that require

the approval of the Office of Management and Budget under 44 U.S.C.

3501, et seq.

[[Page 10536]]

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 Federal Acquisition Regulation to revisions

made to the Small Business Administration's small business size and

Government contracting assistance regulations to incorporate the Very

Small Business Set-Aside Pilot Program. The Small Business

Administration's rule is effective on January 4, 1999. However,

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 5, 8, 12, 19, and 52

Government procurement.

Dated: February 25, 1999.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, 48 CFR Parts 5, 8, 12, 19, and 52 are amended as set

forth below:

1. The authority citation for 48 CFR Parts 5, 8, 12, 19, and 52

continues to read as follows:

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

U.S.C. 2473(c).

PART 5--PUBLICIZING CONTRACT ACTIONS

2. Section 5.207 is amended by adding paragraph (c)(2)(xviii); and

by revising paragraph (d) to read as follows:

5.207 Preparation and transmittal of synopses.

* * * * *

(c)(2) * * *

(xviii) In the case of a very small business set-aside, identify

the Designated Region (see subpart 19.9).

(d) Set-asides. When the proposed acquisition provides for a total,

partial, or very small business set-aside, or a HUBZone small business

set-aside, the appropriate CBD Numbered Note will be cited.

* * * * *

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

3. Section 8.404 is amended by revising paragraph (a) to read as

follows:

8.404 Using schedules.

(a) General. When agency requirements are to be satisfied through

the use of Federal Supply Schedules as set forth in this subpart, the

simplified acquisition procedures of Part 13 and the small business

provisions of Part 19 do not apply, except for the provision at 13.303-

2(c)(3). Orders placed pursuant to a Multiple Award Schedule (MAS),

using the procedures in this subpart, are considered to be issued

pursuant to full and open competition (see 6.102(d)(3)). Therefore,

when placing orders under Federal Supply Schedules, ordering offices

need not seek further competition, synopsize the requirement, make a

separate determination of fair and reasonable pricing, or consider

small business programs. GSA has already determined the prices of items

under schedule contracts to be fair and reasonable. By placing an order

against a schedule using the procedures in this section, the ordering

office has concluded that the order represents the best value and

results in the lowest overall cost alternative (considering price,

special features, administrative costs, etc.) to meet the Government's

needs.

* * * * *

PART 12--ACQUISITION OF COMMERCIAL ITEMS

12.303 [Amended]

4. Section 12.303 is amended at the end of paragraph (b)(1) by

removing the semicolon and adding ``, or set-aside for very small

business concerns;''.

PART 19--SMALL BUSINESS PROGRAMS

5. Section 19.000 is amended at the end of paragraph (a)(8) by

removing ``and''; in paragraph (a)(9) by removing the period and adding

``; and''; and by adding paragraph (a)(10) to read as follows:

19.000 Scope of part.

(a) * * *

(10) The Very Small Business Pilot Program.

* * * * *

6. Section 19.001 is amended by adding, in alphabetical order, the

definition ``Very small business concern'' to read as follows:

19.001 Definitions.

* * * * *

Very small business concern means a small business concern--

(1) Whose headquarters is located within the geographic area served

by a designated SBA district; and

(2) Which, together with its affiliates, has no more than 15

employees and has average annual receipts that do not exceed $1

million.

* * * * *

7. Section 19.102 is amended by redesignating paragraph ``(g)'' as

``(h)''; and by adding a new paragraph (g) to read as follows:

19.102 Size standards.

* * * * *

(g) In the case of acquisitions set aside for very small business

in accordance with 19.904, offerors may not have more than 15 employees

and may not have average annual receipts that exceed $1 million.

* * * * *

19.502-2 [Amended]

8. Section 19.502-2 is amended in the first sentence of paragraph

(a) by removing ``Each'' and adding ``Except for those acquisitions set

aside for very small business concerns (see subpart 19.9), each''.

9. Subpart 19.9, consisting of sections 19.901 through 19.905, is

added to read as follows:

Subpart 19.9--Very Small Business Pilot Program

Sec.

19.901 General.

19.902 Definition.

19.903 Applicability.

19.904 Procedures.

19.905 Solicitation provision and contract clause.

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

U.S.C. 2473(c).

Subpart 19.9--Very Small Business Pilot Program

19.901 General.

(a) The Very Small Business Pilot Program was established under

Section 304 of the Small Business Administration Reauthorization and

Amendments Act of 1994 (Public Law 103-403).

(b) The purpose of the program is to improve access to Government

contract opportunities for concerns that are substantially below SBA's

size standards by reserving certain acquisitions for competition among

such concerns.

(c) This pilot program terminates on September 30, 2000. Therefore,

any award under this program must be made on or before this date.

19.902 Definition.

Designated SBA district means the geographic area served by any of

the following SBA district offices:

[[Page 10537]]

(1) Albuquerque, NM, serving New Mexico.

(2) Los Angeles, CA, serving the following counties in California:

Los Angeles, Santa Barbara, and Ventura.

(3) Boston, MA, serving Massachusetts.

(4) Louisville, KY, serving Kentucky.

(5) Columbus, OH, serving the following counties in Ohio: Adams,

Allen, Ashland, Athens, Auglaize, Belmont, Brown, Butler, Champaign,

Clark, Clermont, Clinton, Coshocton, Crawford, Darke, Delaware,

Fairfield, Fayette, Franklin, Gallia, Greene, Guernsey, Hamilton,

Hancock, Hardin, Highland, Hocking, Holmes, Jackson, Knox, Lawrence,

Licking, Logan, Madison, Marion, Meigs, Mercer, Miami, Monroe,

Montgomery, Morgan, Morrow, Muskingum, Noble, Paulding, Perry,

Pickaway, Pike, Preble, Putnam, Richland, Ross, Scioto, Shelby, Union,

Van Wert, Vinton, Warren, Washington, and Wyandot.

(6) New Orleans, LA, serving Louisiana.

(7) Detroit, MI, serving Michigan.

(8) Philadelphia, PA, serving the State of Delaware and the

following counties in Pennsylvania: Adams, Berks, Bradford, Bucks,

Carbon, Chester, Clinton, Columbia, Cumberland, Dauphin, Delaware,

Franklin, Fulton, Huntington, Juniata, Lackawanna, Lancaster, Lebanon,

Lehigh, Luzerne, Lycoming, Mifflin, Monroe, Montgomery, Montour,

Northampton, Northumberland, Philadelphia, Perry, Pike, Potter,

Schuylkill, Snyder, Sullivan, Susquehanna, Tioga, Union, Wayne,

Wyoming, and York.

(9) El Paso, TX, serving the following counties in Texas: Brewster,

Culberson, El Paso, Hudspeth, Jeff Davis, Pecos, Presidio, Reeves, and

Terrell.

(10) Santa Ana, CA, serving the following counties in California:

Orange, Riverside, and San Bernadino.

19.903 Applicability.

(a) The Very Small Business Pilot Program applies to acquisitions,

including construction acquisitions, with an estimated value exceeding

$2,500 but not greater than $50,000, when--

(1) In the case of an acquisition for supplies, the contracting

office is located within the geographical area served by a designated

SBA district; or

(2) In the case of an acquisition for other than supplies, the

contract will be performed within the geographical area served by a

designated SBA district.

(b) The Very Small Business Pilot Program does not apply to--

(1) Acquisitions that will be awarded pursuant to the 8(a) Program;

or

(2) Any requirement that is subject to the Small Business

Competitiveness Demonstration Program (see Subpart 19.10).

19.904 Procedures.

(a) A contracting officer shall set-aside for very small business

concerns each acquisition that has an anticipated dollar value

exceeding $2,500 but not greater than $50,000 if--

(1) In the case of an acquisition for supplies--

(i) The contracting office is located within the geographical area

served by a designated SBA district; and

(ii) There is a reasonable expectation of obtaining offers from two

or more responsible very small business concerns headquartered within

the geographical area served by the designated SBA district that are

competitive in terms of market prices, quality, and delivery; or

(2) In the case of an acquisition for services--

(i) The contract will be performed within the geographical area

served by a designated SBA district; and

(ii) There is a reasonable expectation of obtaining offers from two

or more responsible very small business concerns headquartered within

the geographical area served by the designated SBA district that are

competitive in terms of market prices, quality, and delivery.

(b) Contracting officers shall determine the applicable designated

SBA district office as defined at 19.902. The geographic areas served

by the SBA Los Angeles and Santa Ana District offices will be treated

as one designated SBA district for the purposes of this subpart.

(c) If no reasonable expectation exists under paragraphs (a)(1)(ii)

and (a)(2)(ii) of this section, the contracting officer shall document

the file and proceed with the acquisition in accordance with Subpart

19.5.

(d) If the contracting officer receives only one acceptable offer

from a responsible very small business concern in response to a very

small business set-aside, the contracting officer should make an award

to that firm. If there is no offer received from a very small business

concern, the contracting officer shall cancel the very small business

set-aside and proceed with the acquisition in accordance with Subpart

19.5.

19.905 Solicitation provision and contract clause.

The contracting officer shall use the clause at 52.219-5, Very

Small Business Set-Aside, in solicitations and contracts if the

acquisition is set aside for very small business concerns.

(a) The contracting officer shall use the clause at 52.219-5 with

its Alternate I--

(1) In construction or service contracts; or

(2) When the acquisition is for a product in a class for which the

Small Business Administration has waived the nonmanufacturer rule (see

19.102(f)(4) and (5)).

(b) The contracting officer shall use the clause at 52.219-5 with

its Alternate II when Alternate I does not apply, the acquisition is

processed under simplified acquisition procedures, and the total amount

of the contract does not exceed $25,000.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

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

redesignating paragraphs (b)(2) through (b)(8) as (b)(4) through

(b)(10), and (b)(9) and (b)(10) as (b)(2) and (b)(3), respectively; and

by revising newly designated paragraph (b)(4) of the clause to read as

follows:

52.212-5 Contract Terms and Conditions Required To Implement Statutes

or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or

Executive Orders--Commercial Items (Mar 1999)

* * * * *

(b) * * *

____(4)(i) 52.219-5, Very Small Business Set-Aside (Pub. L. 103-

403, section 304, Small Business Reauthorization and Amendments Act

of 1994).

____(ii) Alternate I to 52.219-5.

____(iii) Alternate II to 52.219-5.

* * * * *

11. Section 52.219-5 is added to read as follows:

52.219-5 Very Small Business Set-Aside.

As prescribed in 19.905, insert the following clause:

Very Small Business Set-Aside (Mar 1999)

(a) Definition. Very Small Business Concern, as used in this

clause, means a concern whose headquarters is located within the

geographical area served by a designated SBA district (see 13 CFR

125.7(b)); which, together with its affiliates, has no more than 15

employees and has average annual receipts that do not exceed $1

million.

(b) Eligibility. (1) Only those firms headquartered in the ----

------------------------------ Small Business Administration (SBA)

district [Contracting Officer shall insert the applicable SBA

designated district. If the geographic area is served by the SBA Los

Angeles or Santa Ana District offices, list both] are eligible for

this acquisition.

[[Page 10538]]

(2) Offers or quotations under this acquisition are solicited

from very small business concerns only. Offers that are from other

than an eligible very small business concern shall not be considered

and shall be rejected. The offeror represents that it is an eligible

very small business concern by submission of an offer or quotation.

(c) Agreement. A very small business concern submitting an offer

in its own name agrees to furnish, in performing the contract, only

end items manufactured or produced by small business concerns in the

United States. As used in this clause, the term United States

includes its territories and possessions, the Commonwealth of Puerto

Rico, the trust territory of the Pacific Islands, and the District

of Columbia.

(End of clause)

Alternate I (Mar 1999). As prescribed in 19.905(a), delete

paragraph (c) of the basic clause.

Alternate II (Mar 1999). As prescribed in 19.905(b), substitute

the following paragraph (c) for paragraph (c) of the basic clause:

(c) Agreement. A very small business concern submitting an offer

in its own name agrees to furnish, in performing the contract, only

end items manufactured or produced by domestic firms in the United

States. As used in this clause, the term United States includes its

territories and possessions, the Commonwealth of Puerto Rico, the

trust territory of the Pacific Islands, and the District of

Columbia.

[FR Doc. 99-5204 Filed 3-3-99; 8:45 am]

BILLING CODE 6820-EP-P