Defense Federal Acquisition Regulation Supplement; Small Disadvantaged Business Concerns

DEPARTMENT OF DEFENSE

48 CFR Parts 215, 219, 236, 242, 252, and 253

[DFARS Case 95-D039]

Defense Federal Acquisition Regulation Supplement; Small

Disadvantaged Business Concerns

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

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SUMMARY: The Department of Defense has suspended the sections of the

Defense Acquisition Regulation Supplement (DFARS) that prescribe the

set-aside of acquisitions for small disadvantaged businesses (SDBs).

The Department of Defense is proposing to amend the DFARS to implement

initiatives designed to limit the adverse impact of the suspension.

This proposal is an initial response to the suspension. The efforts of

a government-wide group to reform affirmative action programs continue.

It is expected that further proposals will be published for comment in

the near future. This action was reviewed by the Office of Management

and Budget under Executive Order 12866.

DATES: Comment Date: Comments on the proposed rule should be submitted

in writing to the address below on or before February 12, 1996, to be

considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to:

Defense Acquisition Regulations Council, Attn: Ms. Susan Schneider,

PDUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC

20301-3062. Telefax number (703) 602-0350. Please cite DFARS Case 95-

D039 in all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT:

Ms. Susan Schneider, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

This proposed rule amends the Defense Federal Acquisition

Regulation Supplement (DFARS) to implement initiatives designed to

facilitate awards to SDBs while taking account of the Supreme Court's

decision in Adarand Constructors, Inc. vs. Pena, 63 U.S.L.W. 4523 (U.S.

June 12, 1995).

B. Regulatory Flexibility Act

Ms. Susan Schneider, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

This proposed rule amends the Defense Federal Acquisition

Regulation Supplement (DFARS) to implement initiatives designed to

facilitate awards to SDBs while taking account of the Supreme Court's

decision in Adarand Constructors, Inc. vs. Pena, 63 U.S.L.W. 4523 (U.S.

June 12, 1995).

B. Regulatory Flexibility Act

This proposed rule 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. An Initial Regulatory

Flexibility Analysis (IRFA) has been prepared and may be obtained from

the address specified herein. A copy of the IRFA has been submitted to

the Chief Counsel for Advocacy of the Small Business Administration.

Comments are invited from small businesses and other interested

parties. Comments from small entities concerning the affected DFARS

subparts will be considered in accordance with Section 610 of the

Regulatory Flexibility Act. Such comments must be submitted separately

and cite DFARS Case 95-D039 in correspondence.

C. Paperwork Reduction Act

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

because the proposed rule contains a reporting and recordkeeping

requirement. The necessary request for approval of the information

collection requirement has been submitted to the Office of

Management and Budget under Section 3507(d) of the Act.

1. Title for the collection of information, applicable forms,

applicable OMB controls number, and type of request.

Approval of the information collection requirement in DFARS

252.219-7003(g) has been requested as a new clearance, ``Small, Small

Disadvantaged and Women-Owned Small Business Subcontracting Plan (DoD

Contracts).''

2. Summary of information collection

Section 3507(d) of the Act.

1. Title for the collection of information, applicable forms,

applicable OMB controls number, and type of request.

Approval of the information collection requirement in DFARS

252.219-7003(g) has been requested as a new clearance, ``Small, Small

Disadvantaged and Women-Owned Small Business Subcontracting Plan (DoD

Contracts).''

2. Summary of information collection.

DFARS 219.704(a)(4) with its corresponding clause coverage at

252.219-7003(g) adds a notification requirement for contractors that

have identified small, small disadvantaged or women-owned small

businesses in subcontracting plans. Firms are to notify the

administrative contracting officer of any substitutions of firms that

are not small, small disadvantaged, or women-owned small businesses for

the firms listed in the subcontracting plan. Notifications shall be in

writing and shall occur within a reasonable period of time after award

of the subcontract. Contractor specified formats shall be acceptable.

3. Needs and Uses.

Information is collected on an occasional basis as the need arises

to keep the administrative contracting officer apprised of a

contractor's compliance with approved subcontracting plans. Under the

current procedure, the prime contractor proposes, and the contracting

officer negotiates, an approved subcontracting plan. Consistent with 10

U.S.C. 2323, these subcontracting plans are evaluated as part of source

selection. Under DFARS 215.605, criteria for proposal evaluation may

include the extent to which small or small disadvantaged businesses are

specifically identified in proposals (expected to be expanded to

include women-owned small businesses in a separate DFARS case). Under

the proposed rule, when an evaluation includes this criteria, the

small, small disadvantaged, or women-owned small businesses considered

in the evaluation shall be listed in any subcontracting plan submitted

pursuant to FAR 52.219-9

ort, we estimate that 25 percent (41) of the

substitutions will occur on an annual basis.

6. Comments. Written comments to OMB, citing DFARS Case 95-D039,

are invited. Particular comments are solicited on:

a. Whether the proposed collection of information is necessary for

the proper performance of the functions of the agency, including

whether the information shall have practical utility;

b. The accuracy of the agency's estimate of the burden of the

proposed collection of information, including the validity of the

methodology and assumptions used;

c. Ways to enhance the quality, utility, and clarity of the

information to be collected; and

d. Ways to minimize the burden of the collection of information on

respondents.

List of Subjects in 48 CFR Parts 215, 219, 236, 242, 252, and 253

Government procurement.

Michele P. Peterson,

Executive Editor, Defense Acquisition Regulations Council.

Therefore, 48 CFR Parts 215, 219, 236, 242, 252, and 253 are

proposed to be amended as follows:

1. The authority citation for 48 CFR Parts 215, 219, 236, 242, 252

and 253 continues to read as follows:

Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 215--CONTRACTING BY NEGOTIATION

2. Section 215.605 is amended by revising paragraph (b)(ii)(E) and

by adding paragraph (b)(iv) to read as follows:

215.605 Evaluation factors.

(b) * * *

(ii) * * *

(E) When not otherwise required by 215.608(a)(2), prior performance

of the offerors in complying with requirements of the clause at FAR

52.219-8, Utilization of Small, Small Disadvantaged and Women-Owned

Small Business Concerns, and 52.219-9, Small, Small Disadvantaged and

Women-Owned Small Business Subcontracting Plan; and

* * * * *

llows:

215.605 Evaluation factors.

(b) * * *

(ii) * * *

(E) When not otherwise required by 215.608(a)(2), prior performance

of the offerors in complying with requirements of the clause at FAR

52.219-8, Utilization of Small, Small Disadvantaged and Women-Owned

Small Business Concerns, and 52.219-9, Small, Small Disadvantaged and

Women-Owned Small Business Subcontracting Plan; and

* * * * *

(iv) When an evaluation includes the criterion at (b)(ii)(A), the

small, small disadvantaged, or women-owned small businesses considered

in the evaluation shall be listed in any subcontracting plan submitted

pursuant to FAR 52.219-9 to facilitate compliance with 252.219-7003(g).

* * * * *

3. Section 215.608 is amended by redesignating existing paragraph

(a) as paragraph (a)(1) and by adding paragraph (a)(2) to read as

follows:

215.608 Proposal evaluation.

(a) * * *

(2) When a past performance evaluation is required by FAR 15.605

and the solicitation includes the clause at FAR 52.219-8, Utilization

of Small, Small Disadvantaged and Women-Owned Small Business Concerns,

the evaluation shall include the past performance of offerors in

complying with requirements of that clause. When a past performance

evaluation is required by FAR 15.605, and the solicitation includes the

clause at 52.219-9, Small, Small Disadvantaged and Women-Owned Small

Business Subcontracting Plan, the evaluation shall include the past

performance of offerors in complying with requirements of that clause.

* * * * *

PART 219--SMALL BUSINESS PROGRAMS

4. The heading of Part 219 is revised to read as set forth above.

5. Section 219.704 is amended by adding paragraph (a)(4) to read as

follows:

219.704 Subcontracting plan requirements.

ed and Women-Owned Small

Business Subcontracting Plan, the evaluation shall include the past

performance of offerors in complying with requirements of that clause.

* * * * *

PART 219--SMALL BUSINESS PROGRAMS

4. The heading of Part 219 is revised to read as set forth above.

5. Section 219.704 is amended by adding paragraph (a)(4) to read as

follows:

219.704 Subcontracting plan requirements.

(a) * * *

(4) In those subcontracting plans which specifically identify

small, small disadvantaged, and women-owned small businesses, prime

contractors shall notify the administrative contracting officer of any

substitutions of firms that are not small, small

disadvantaged, or women-owned small businesses for the firms listed in

the subcontracting plan. Notifications shall be in writing and shall

occur within a reasonable period of time after award of the

subcontract. Contractor specified formats shall be acceptable.

6. Section 219.1006 is amended by revising paragraph (b)(1)(B) to

read as follows:

219.1006 Procedures.

(b) * * *

(1) * * *

(B) The evaluation preference at 219.70 shall not be used. However,

note the test program at 219.72 for construction acquisitions.

* * * * *

7. Section 219.7001 is amended by revising paragraph (a) to read as

follows:

219.7001 Applicability.

(a) The evaluation preference shall be used in competitive

acquisitions except as provided in paragraph (b) of this section and in

219.1006(b)(1)(B).

* * * * *

8. Subpart 219.72 is added to read as follows:

219.72--Evaluation Preference for Small Disadvantaged Business (SDB)

Concerns in Construction Acquisitions--Test Program

Sec.

219.7200 Policy.

219.7201 Administration of the Test Program.

219.7202 Applicability.

219.7203 Procedures.

219.7204 Contract Clause.

219.72--Evaluation Preference for Small Disadvantaged Business

(SDB) Concerns in Construction Acquisitions--Test Program

219.7200 Policy.

219.72--Evaluation Preference for Small Disadvantaged Business (SDB)

Concerns in Construction Acquisitions--Test Program

Sec.

219.7200 Policy.

219.7201 Administration of the Test Program.

219.7202 Applicability.

219.7203 Procedures.

219.7204 Contract Clause.

219.72--Evaluation Preference for Small Disadvantaged Business

(SDB) Concerns in Construction Acquisitions--Test Program

219.7200 Policy.

DoD policy is to ensure that, during this test program, offers from

small disadvantaged business (SDB) concerns shall be given an

evaluation preference in construction acquisitions.

219.7201 Administration of the test program.

The test program will be conducted over an eighteen-month period.

The test program will be conducted by all DoD contracting activities

that award construction contracts. The focal point for the test program

is the Director, Small and Disadvantaged Business Utilization, Office

of the Under Secretary of Defense for Acquisition and Technology

(Director, SADBU). Fourteen months after the initiation of this test

program, the military departments and defense agencies shall submit a

status report to the Director, SADBU. This report shall specify the

impact of the evaluation preference over the first twelve months of the

test program, and shall provide recommendations with respect to

continuation and/or modification of the evaluation preference.

219.7202 Applicability.

(a) The evaluation preference shall be used in competitive

acquisitions for construction (see definition in FAR subpart 36.1) when

work is to be performed inside the United States, its territories or

possessions, Puerto Rico, the Trust Territory of the Pacific Islands,

or the District of Columbia.

(b) Do not use the evaluation preference in acquisitions which--

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

(2) Are set aside for small businesses; or

(3) Are awarded under section 8(a) procedures.

en

work is to be performed inside the United States, its territories or

possessions, Puerto Rico, the Trust Territory of the Pacific Islands,

or the District of Columbia.

(b) Do not use the evaluation preference in acquisitions which--

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

(2) Are set aside for small businesses; or

(3) Are awarded under section 8(a) procedures.

(c) The evaluation preference need not be applied when the head of

the contracting activity expects that--

(1) The contracting activity will meet its goal for SDB concerns,

established pursuant to 10 U.S.C. 2323, during the current fiscal year,

without this preference;

(2) The evaluation preference is having a disproportionate impact

on non-SDB concerns; or

(3) The preference is otherwise not in the best interest of the

Government.

219.7203 Procedures.

(a) Solicitations that require bonding shall require offerors to

separately state bond costs in the offer. Bond costs include the costs

of bid, performance, and payment bonds.

(b) Evaluate total offers. If the apparently successful offeror is

an SDB concern, no further preference-based evaluation is required

under this subpart.

(c) If the apparently successful offeror is not an SDB concern,

evaluate offers excluding bond costs. If, after excluding bond costs,

the apparently successful offeror is an SDB concern, add bond costs

back to all offers, and give offers from SDB concerns a preference in

evaluation by adding a factor of 10 percent to the total price of all

offers, except--

(1) Offers from SDBs which have not waived the evaluation

preference; and

(2) Offers from historically black colleges and universities or

minority institutions, which have not waived the evaluation preference.

DB concern, add bond costs

back to all offers, and give offers from SDB concerns a preference in

evaluation by adding a factor of 10 percent to the total price of all

offers, except--

(1) Offers from SDBs which have not waived the evaluation

preference; and

(2) Offers from historically black colleges and universities or

minority institutions, which have not waived the evaluation preference.

(d) When using the procedures in 36.303-70, Additive or deductive

items, the evaluation preference in this subpart shall be applied.

219.7204 Contract clause.

Use the clause at 252.219-7010, Notice of Evaluation Preference for

Small Disadvantaged Business Concerns--Construction Acquisitions--Test

Program, in all solicitations--

(1) That involve the evaluation preference; and

(2) Where work is to be performed inside the U.S., its territories

or possession, Puerto Rico, the Trust Territory of the Pacific Islands,

or the District of Columbia.

PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS

9. Section 236.303-70 is amended by revising the introductory text

of paragraph (c)(2) to read as follows:

236.303-70 Additive or deductive items.

* * * * *

(c) * * *

(2) Evaluate all bids, including those using the procedures in

219.703, on the basis of the same additive or deductive bid items.

* * * * *

PART 242--CONTRACT ADMINISTRATION

10. Subpart 242.15 is added to read as follows:

Subpart 242.15--Contractor Performance Information

Sec.

242.1503 Procedures.

242.1503 Procedures.

Evaluations should consider any notifications submitted under

paragraph (g) of the clause at 252.219-7003, Small, Small Disadvantaged

and Women-Owned Small Business Subcontracting Plan (DoD Contracts).

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

11. Section 252.219-7003 is amended by adding paragraph (g) to read

as follows:

252.219-7003 Small, small disadvantaged and women-owned small business

subcontracting plan (DoD contracts).

* * * * *

paragraph (g) of the clause at 252.219-7003, Small, Small Disadvantaged

and Women-Owned Small Business Subcontracting Plan (DoD Contracts).

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

11. Section 252.219-7003 is amended by adding paragraph (g) to read

as follows:

252.219-7003 Small, small disadvantaged and women-owned small business

subcontracting plan (DoD contracts).

* * * * *

(g) In those subcontracting plans which specifically identify

small, small disadvantaged, and women-owned small businesses, the

Contractor shall notify the Administrative Contracting Officer of any

substitutions of firms that are not small, small disadvantaged, or

women-owned small businesses for the firms listed in the subcontracting

plan. Notifications shall be in writing and

shall occur within a reasonable period of time after award of the

subcontract. Contractor specified formats shall be acceptable.

12. Section 252.219-7010 is added to read as follows:

252.219-7010 Notice of evaluation preference for small disadvantaged

business concerns--construction acquisitions--Test program.

As prescribed in 219.7204, use the following clause:

Notice of Evaluation Preference for Small Disadvantaged Business

Concerns--Construction Acquisitions--Test Program (Date)

(a) Definitions.

As used in this clause--

``Historically black colleges and universities (HBCUs),'' means

institutions determined by the Secretary of Education to meet the

requirements of 34 CFR 608.2. The term also means any nonprofit

research institution that was an integral part of such a college or

university before November 14, 1986. ``Minority institutions,''

means institutions meeting the requirements of paragraphs (3), (4),

and (5) of Section 1046(3) of the Higher Education Act of 1965 (20

U.S.C. 1135d-5(3)). The term also includes Hispanic-serving

institutions as defined in Section 316(b)(1) of such Act (20 U.S.C.

1059c(b)(1))

itution that was an integral part of such a college or

university before November 14, 1986. ``Minority institutions,''

means institutions meeting the requirements of paragraphs (3), (4),

and (5) of Section 1046(3) of the Higher Education Act of 1965 (20

U.S.C. 1135d-5(3)). The term also includes Hispanic-serving

institutions as defined in Section 316(b)(1) of such Act (20 U.S.C.

1059c(b)(1)).

``Small disadvantaged business (SDB) concern,'' means a small

business concern, owned and controlled by individuals who are both

socially and economically disadvantaged, as defined by the Small

Business Administration at 13 CFR part 124, the majority of earnings

of which directly accrue to such individuals. This term also means a

small business concern owned and controlled by an economically

disadvantaged Indian tribe or Native Hawaiian organization which

meets the requirements of 13 CFR 124.112 or 13 CFR 124.113,

respectively.

(b) Evaluation preference. (1) Offerors shall separately state

bond costs in the offer. Bond costs include the costs of bid,

performance, and payment bonds.

(2) Offers will be evaluated initially based on their total

prices. If the apparently successful offeror is an SDB concern, no

further preference based evaluation will be conducted.

(3) If the apparently successful offeror is not an SDB concern,

offers will be evaluated based on their prices excluding bond costs.

If, after excluding bond costs, the apparently successful offeror is

an SDB concern, bond costs will be added back to all offers, and

offers from SDB concerns will be given a preference in evaluation by

adding a factor of ten percent to the total price of all offers,

except--

(i) Offers from SDBs which have not waived the evaluation

preference; or

(ii) Offers from HBCUs or minority institutions, which have not

waived the evaluation preference.

ul offeror is

an SDB concern, bond costs will be added back to all offers, and

offers from SDB concerns will be given a preference in evaluation by

adding a factor of ten percent to the total price of all offers,

except--

(i) Offers from SDBs which have not waived the evaluation

preference; or

(ii) Offers from HBCUs or minority institutions, which have not

waived the evaluation preference.

(c) Waiver of evaluation preference. A small disadvantaged

business, historically black college or university, or minority

institution offeror may elect to waive the preference. The

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

which waive the preference.

______________Offeror elects to waive the preference.

(d) Agreements. A small disadvantaged business concern,

historically black college or university, or minority institution

offeror, which did not waive the preference, agrees that in

performance of the contract, in the case of a contract for--

(i) 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.

(ii) 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.

(End of clause)

PART 253--FORMS

13. Section 253.204-70 is amended by revising paragraph (e)(3) to

read as follows:

253.204-70 DD Form 350, Individual Contracting Action Report.

* * * * *

(e) * * *

(3) Block E3, Next Low Offer.

ion 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.

(End of clause)

PART 253--FORMS

13. Section 253.204-70 is amended by revising paragraph (e)(3) to

read as follows:

253.204-70 DD Form 350, Individual Contracting Action Report.

* * * * *

(e) * * *

(3) Block E3, Next Low Offer.

(i) Complete Block E3 only if Block E2 is completed, or the

evaluation preference for small disadvantaged business concerns in

construction acquisitions set forth at 219.72 is applied. Otherwise,

leave Block E3 blank.

(ii) If Block E2 is completed, enter the offered price from the

small business firm that would have been the low offeror if qualified

nonprofit agencies employing people who are blind or severely disabled

had not participated in the acquisition. If the evaluation preference

for small disadvantaged business concerns in construction acquisitions

set forth at 219.72 is applied, enter the offered price from the non-

SDB concern that would have been the successful offeror if the

evaluation preference had not been applied. Enter the amount in whole

dollars.

* * * * *

[FR Doc. 95-50469 Filed 12-13-95; 8:45 am]

BILLING CODE 5000-04-M