[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27556-27562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13182]


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DEPARTMENT OF COMMERCE

15 CFR Part 3

[Docket No. 960828234-7093-04]
RIN 0690-AA25


Empowerment Contracting

AGENCY: Department of Commerce.

ACTION: Proposed regulations; request for comment.

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SUMMARY: The Department of Commerce is reissuing these proposed 
guidelines requesting public comment on policies and procedures 
intended to promote economy and efficiency in Federal procurement by 
grating qualified large businesses and qualified small businesses 
appropriate incentives to encourage business activity in areas of 
general and severe economic distress. This actions taken in accordance 
with the President's Executive Order entitled, ``Empowerment 
Contracting.'' The standards and procedures set forth in these proposed 
guidelines serve as the basis for a proposed revision to the Federal 
Acquisition Regulation (``FAR''): Information obtained from public 
comment on these guidelines will be used to help draft the final 
Commerce and FAR regulations.

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

ADDRESSES: Comments may be mailed to the Department of Commerce, Office 
of the Assistant General Counsel for Finance and Litigation, Room 5896, 
14th and Constitution Street, NW., Washington, DC 20230.

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

SUPPLEMENTARY INFORMATION: 

A. Background

    On May 21, 1996, President Clinton issued Executive Order 13005, 
``Empowerment Contracting'' (the ``Order''). The purpose of the Order 
is to strengthen the economy and secure broad-based competition for 
Federal contracts by fostering growth of Federal contractors in 
economically distressed communities. In the Order, the President 
charged the Secretary of Commerce (the ``Secretary''), in consultation 
with the Secretaries of Housing and Urban Development, Labor and 
Defense; and the Administrators of the General Services Administration, 
the National Aeronautics and Space Administration, the Small Business 
Administration, and the Office of Federal Procurement Policy, to 
develop policies and procedures to ensure that Federal agencies, when 
awarding contracts in unrestricted competitions, grant qualified large 
and small businesses appropriate price or evaluation incentives to 
encourage business activity in areas of general economic distress.
    Specifically, the Order requires the Secretary to ``develop 
policies and procedures to ensure that agencies, to the extent 
permitted by law, grant qualified large businesses and qualified small 
businesses appropriate incentives to encourage business activity in 
areas of general economic distress, including a price or a non-price 
evaluation credit, when assessing offers for government contracts in 
unrestricted competitions, where the incentives would promote the 
policy set forth in this Order.'' The Order also calls upon the 
Secretary to (1) monitor the implementation and operation of the 
procedures developed; (2) ensure proper administration of the program 
and reduce the potential for fraud by intended beneficiaries; (3) 
develop a process to evaluate the effectiveness of the procedures 
developed; and (4) issue an annual report to the President on the 
status and effectiveness of the program. In addition, the Secretary 
must ensure that all policies, procedures and regulations developed 
pursuant to the Order minimize the administrative burden on affected 
agencies and the procurement process.
    On September 13, 1996, the Department published, in the Federal 
Register, its proposed Guidelines for implementing Executive Order 
13005 (61 FR 48463). After several extensions, the period for public 
comment closed on January 6, 1997. These revised Guidelines, and the 
proposed amendments to the FAR, which were published on April 18, 1997 
(62 FR 19200), for a 60 day public comment period, are based on 
comments received under that process and further internal analysis.

B. Public Comments

    Comments were received from 40 commentors. They included businesses 
of all sizes, not-for-profit entities, industry and trade associations, 
Federal agencies, State and local governments and one member of 
Congress.
    Federal agency comments included the following recommended 
revisions to the proposed guidelines:
    (1) Firms should be required to have met the eligibility criteria 
prior to award of contracts. Eligibility based on prospective criteria 
will raise monitoring and compliance problems.
    (2) If firms are required to meet the eligibility criteria prior to 
award of contracts, challenges to their status can be resolved prior to 
award.
    (3) The initial test phase of six months is too short. It should be 
eighteen months.
    (4) The third test of significant economic activity, ``ownership'', 
should be deleted as not relevant.
    (5) Criteria should apply to areas, not an area.
    (6) The areas of general economic distress should include labor 
surplus areas.
    (7) The criteria for ``eligibility'' should not have ranges, but 
rather a fixed percentage and higher targets.
    (8) The threshold for applicability is too low. It should be $1 
million.
    (9) Qualification should be based on pre-certifications, not a 
``showing''.
    (10) The incentives should be revised to reflect the increasing 
number of ``best value'' awards.
    (11) The Department of Commerce needs to establish regulations to 
cover challenges of eligibility.
    (12) The preferences/incentives should not be cumulative with 
incentives of other programs implemented through the procurement 
system. To allow cumulative preferences will encourage ``front'' 
companies.
    (13) The incentives are too high. The application of cumulative 
incentives

[[Page 27557]]

will have an adverse impact on agency budgets.
    A number of commentors suggested that special treatment be afforded 
to firms located in areas with particularly high levels of economic 
distress.
    Other commentors, including several not-for-profits, expressed 
support for the program and suggested various technical adjustments. 
These comments included such recommendations as:
    (1) The subcontracting criterion of 15% for the previous six months 
is too high as a criterion for significant economic activity.
    (2) Employment percentages of 40% to 50% are achievable within the 
eligible areas.
    (3) Certification and challenges should be delegated to local 
government economic agencies.
    (4) The $100,000 threshold is too high. A lower threshold would 
offer more opportunities to small businesses.
    (5) The incentives should be higher.
    (6) Monitoring is essential to the success of the program.
    (7) Firms track their data on a yearly basis, therefore, a six 
month first phase is inadequate.
    (8) The definition for ``not-for-profit'' should be expanded to 
include government units, universities, and hospitals.
    (9) Credit should be given for banking with minority firms.
    (10) Preferences should be given to business enterprises owned by 
American Indian tribes, Alaskan natives, tribal or native-American 
corporations, and tribal organizations.

C. Guideline Revisions

    Revisions have been made to the guidelines that respond to many of 
these comments. These changes will enhance the program while remaining 
consistent with the goals, policies and provisions of Executive Order 
13005.

I. General

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

II. Definitions

    The definitions pertaining to eligibility have been revised to 
refer to areas, rather than an area, to allow businesses to receive 
credit for economic activity in any eligible area.
    Two additional definitions have been added. An ``area of severe 
economic distress'', is defined as any census tract that has a poverty 
rate of at least 50% A new category of firm, identified as an 
``eligible business'', has also been established. An eligible business 
is a business, regardless of size, that meets any one of the three 
``significant'' tests in an area of severe economic distress. These 
provisions recognize the goal of encouraging business activity in areas 
of very high poverty. The 50% poverty rate was chosen to set a higher 
standard for relaxed eligibility requirements for such businesses, 
because the benefit of relaxed qualification standards is appropriate 
only in areas of substantial deprivation. Initiating and sustaining 
private activity in areas of severe distress is essential to the 
economic recovery of those areas and it is felt that only through 
special consideration could such areas receive the benefits intended by 
this program.
    Two separate processes have been established for firms to qualify 
for preferences. One process will enable business to qualify by self-
certifying that they will meet prospective eligibility criteria. Such 
firms will be subjected to detailed reporting and audit requirements, 
and will be required to pay preference recoupment should they not meet 
the required levels of performance. In addition, the definitions were 
modified to measure the overall contribution of the business to 
economic activity in eligible areas, rather than tying such measures to 
a particular contract. Public comment is particularly requested on this 
change in measurement standard.
    A second process was added to allow businesses to seek pre-
qualification of eligibility to receive incentives under this program. 
For this new process the definitions are written to measure the 
businesses impact in eligible areas during the previous six months. 
This process was established to accommodate situations, such as 
provision of supplies and other manufactured items, where the product 
being sold was already in inventory, and sealed bid awards, where 
detailed reporting and post performance audits are not the norm.
    Finally, the definitions pertaining to ``significant physical 
presence'' were revised to measure the number of employees working in 
eligible areas. It was decided that the original definition, which 
merely measured the percentage of physical plant in eligible areas, 
created too large a loophole in situations where firms might have large 
amounts of land devoted to such things as warehouses, storage and 
garages, where very little time was spent by employees.

III. Eligibility Processes

    The processes under which businesses will establish their 
eligibility have been added. Firms seeking to self-certify will have to 
prepare plans setting forth how they plan to attain the necessary 
economic activity in eligible areas. The Department of Commerce, on its 
own initiative, or in response to challenges, will rule on the 
achievability of these plans. Firms seeking pre-qualification will 
submit the information required for the Department to decide on their 
request for pre-qualification.

IV. Challenges

    An outline of the procedures the Department proposes to utilize to 
handle challenges is now set forth. Comments on its appropriateness, 
and any alternative mechanism are solicited.

V. Applicability

    The simplified acquisition threshold (currently $100,000) has been 
retained. Any adjustment below this amount would create an 
administrative burden on agencies that would greatly outweigh the 
potential benefits of the program. No sound reason was perceived for 
raising the threshold for applicability.

VI. Incentive Structure

    The comments regarding elimination of cumulative incentives have 
not been accepted. The Order requires that the incentives of this 
program be applied in addition to any incentives available under 
already existing programs. This provision was included to comply with 
the Administration's policy thrust that the Empowerment Contracting 
Program is to be used by all types of qualifying businesses in 
distressed areas, and not to negatively impact existing preference 
programs. Adding this Program and not allowing accumulation with other 
preferences would have a negative impact on businesses eligible for 
other preferences. A price preference of up to 10% or an evaluation 
preference of up to 15% will be available. The incentive provisions 
have been modified to accommodate the use of non-numeric selection 
procedures.

VII. Phased Implementation

    In response to several comments, the length of the first phase has 
been revised from 6 months to 18 months. This longer period for phase 
one will allow for accumulation of a larger base of data regarding the 
effectiveness of the Program. Review of phase one will begin after 12 
months. Eleven two digit Standard Industrial Code (SIC) major group 
identifiers have been selected for inclusion in phase one. These SIC 
codes were selected because they represent areas of business which are 
likely to have viability in eligible areas. Several were suggested by 
commentors. They represent a sufficiently broad base of activity that 
will facilitate matching the needs of a wide range of Federal

[[Page 27558]]

agencies with potential sources in eligible areas.
    The goal of the first phase is to see if the Program is most 
effective luring current government contractors to distressed areas, 
luring businesses in growth industries to distressed areas, or 
encouraging sales for businesses located in distressed areas. Using a 
broad array of contracts in various industries over an 18 month period, 
will provide information to refine and expand the program.

D. Classification

    It has been determined that these proposed guidelines are 
significant for purposes of Executive Order 12866 dated September 30, 
1993. This is a major rule under 5 U.S.C. 804. Because these proposed 
guidelines relate to a matter of public property, loans, grants, 
benefits, or contracts, they are exempted from all the procedural 
requirements of the Administrative Procedure Act (5 U.S.C. 553). 
Because notice and comment are not required by 5 U.S.C. 553 or any 
other law, a Regulatory Flexibility Analysis is not required and was 
not done for purpose of the Regulatory Flexibility Act. However, an 
Initial Regulatory Flexibility Analysis (IRFA) was prepared in 
connection with the proposed FAR amendments and may be obtained from 
the FAR Secretariat.
    Notwithstanding any other provision of law, no person is required 
to respond to, nor shall a person be subject to, a penalty for failure 
to comply with a collection of information subject to the requirements 
of the Paperwork Reduction Act unless that collection of information 
displays a currently valid control number. This rule contains 
collection-of-information requirements subject to the Paperwork 
Reduction Act. A request for approval of the paperwork burdens has been 
submitted to the Office of Management and Budget. These relate to the 
pre-qualification process, the self-certification process and the 
challenge procedures. These requirements are estimated to take, 
respectively, eight, two, and one hours, including the time to gather 
records, make copies, and mail documents to the Department of Commerce.
    Public comment is sought regarding: Whether this proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information has 
practical utility; the accuracy of the burden estimate; ways to enhance 
the quality, utility, and clarity of the information to be collected; 
and ways to minimize the burden of the collection of information, 
including through the use of automated collection techniques or other 
forms of information technology. Comments on the collection of 
information burden may be sent to Joseph Levine, Room 5896, U.S. 
Department of Commerce, Washington DC 20230, and to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Washington DC 20503.

List of Subjects in 15 CFR Part 3

    Business and industry, Government procurement.

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

PART 3--EMPOWERMENT CONTRACTING

Sec.
3.01  Purpose.
3.02  Definitions.
3.03  Eligible areas.
3.04  Self-certification of eligibility.
3.05  Pre-qualification for eligibility.
3.06  Challenges--self-certification.
3.07  Challenges--pre-qualification.
3.08  Applicability.
3.09  Incentive structure.
3.10  Monitoring and evaluation.
3.11  Phased implementation of the Program.

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


Sec.  3.01  Purpose.

    The purpose of this part is to set forth the policies and 
procedures applicable to the Empowerment Contracting Program 
established by Executive Order 13005.


Sec.  3.02  Definitions.

    (a) General.
    (1) Agency means any authority of the United States that is an 
``agency'' under 44 U.S.C. 3502(1), other than those considered 
independent regulatory agencies as defined in 44 U.S.C. 3502(10).
    (2) Area of general economic distress means, for all urban and 
rural communities, any census tract that has a poverty rate of at least 
20 percent or any designated Federal Empowerment Zone, Supplemental 
Empowerment Zone, Enhanced Enterprise Community, or Enterprise 
Community. Area of general economic distress also means any rural area 
or Indian reservation that currently meet the criteria for designation 
as a redevelopment area under section 401(a) of the Public Works and 
Economic Development Act of 1965, as amended (42 U.S.C. 3161(a)), as 
set forth at 13 CFR 301.2 (loss of population); 13 CFR 301.4 (Indian 
Lands) and 13 CFR 301.7 (special impact areas).
    (3) Area of severe economic distress means any census tract that 
has a poverty rate of at least 50 percent.
    (4) Business means the legal entity responsible for performance of 
the contract for which a preference is sought.
    (5) Qualified small business means a small for-profit or not-for-
profit trade or business that:
    (i) Employs a significant number of residents from areas of general 
economic distress;
    (ii) Has a significant physical presence in areas of general 
economic distress; or
    (iii) Has a direct impact on generating significant economic 
activity in areas of general economic distress.
    (6) Qualified large business means a large for-profit or not-for-
profit trade or business that:
    (i) Employs a significant number of residents from areas of general 
economic distress; and
    (ii)(A) Either has a significant physical presence in areas of 
general economic distress or
    (B) Has a direct impact on generating significant economic activity 
in areas of general economic distress.
    (7) Qualified eligible business means any business that meets one 
of the following criteria:
    (i) Employs a significant number of residents from areas of severe 
economic distress;
    (ii) Has a significant physical presence in areas of severe 
economic distress; or
    (iii) Has a direct impact on generating significant economic 
activity in areas of severe economic distress. (See Secs. 3.04(b)(4) 
and 3.05(b)(4) for qualification procedures.)
    (8) Small Business is defined by the definitions and procedures set 
forth by the Small Business Administration for determining size 
eligibility for government procurements. (13 CFR 121.901-911).
    (9) Small not-for-profit businesses--Notwithstanding 13 CFR 121.403 
(the SBA regulation that defines ``business or concern'' to mean for-
profit entities) size determinations for not-for-profits entities will 
follow the same procedures as those of for-profit entities, i.e., the 
Standard Industrial Code (SIC) of the procurement will govern.
    (10) Large business means any business that is not a small 
business.
    (b) Definitions applicable to Pre-Qualification. The following 
definitions apply to businesses seeking pre-qualification based on 
their current operations:
    (1) Employs a significant number of residents from the area. This 
means a

[[Page 27559]]

business which, during the six months preceding the date of its request 
for pre-qualification, has expended at least 25 percent of its total 
labor costs in wages and benefits to residents from areas of general 
economic distress.
    (2) Has a significant physical presence in the area. This means a 
business with physical plant(s) in areas of general economic distress 
where, for the six months preceding the date of its request, at least 
25 percent of the employees of the business perform their job. 
Employees will be considered to perform their job at the location where 
they spend the most time working, so long as it is at least 6 hours per 
work week.
    (3) Has a direct impact on generating significant economic activity 
in the area. This means a business which.
    (i) During the six months preceding the date of its request for 
pre-qualification, has expended at least 50 percent of its total labor 
costs in wages and benefits to residents from areas of general economic 
distress; or
    (ii) During the six months prior to submitting its request for pre-
qualification, has incurred at least 25 percent of its expenses on 
goods, materials, and services from firms located in areas of general 
economic distress.
    (c) Definitions for Self-Certification. The following definitions 
apply to businesses which seek to self-certify their eligibility based 
on future operations:
    (1) Employs a significant number of residents from the area. This 
means a business which, during the period of performance of the 
contract, will expend at least 25 percent of its total labor costs in 
wages and benefits to residents from areas of general economic 
distress.
    (2) Has a significant physical presence in the area. This means a 
business with physical plant(s) in areas of general economic distress 
where, during the period of performance of the contract, at least 25 
percent of the employees of the business will perform their job. 
Employees will be considered to perform their job at the location where 
they spend the most time working, so long as it is at least 6 hours per 
work week.
    (3) Has a direct impact on generating significant economic activity 
in the area. This means a business which:
    (i) During the period of performance of the contract, will expend 
at least 50 percent of its total labor costs in wages and benefits to 
residents from areas of general economic distress; or
    (ii) During the period of performance of the contract, will incur 
at least 25 percent of its expenses on goods, materials, and services 
from firms located in areas of general economic distress.


Sec. 3.03  Eligible areas.

    The Department of Commerce will maintain the official listing of 
eligible areas, based on the 1990 decennial Census of Population data. 
The listing shall contain the Census tract and block numbering for all 
eligible areas. This listing will be available on the internet at 
[email protected].


Sec. 3.04  Self-Certification of Eligibility.

    (a) When responding to solicitations, businesses may ``self-
certify'' their qualifications at the time of submission of their 
proposal/bid, pursuant to the definitions set forth in Sec. 3.02(c) of 
this part.
    (b) At the time they self-certify their eligibility, businesses 
will be expected to have prepared a short description of their plan for 
achieving the requirements of this program. The description, which will 
be kept in their files, should contain sufficient detail to enable the 
Department to reach an informed judgment of the likelihood of the 
plan's success.
    (1) For Secs. 3.02(c)(1) and (c)(3)(i) the description should also 
identify the areas of general economic distress where employees will be 
recruited, the types of positions they will occupy, and evidence that 
those types of employees are available in sufficient quantity from 
those areas;
    (2) For Sec. 3.02(c)(2) the description should identify the areas 
of general economic distress where the physical plant(s) likely will we 
located, the types of plant that are required, evidence that such 
plants(s) are available, and the types and numbers of individuals who 
will be employed there;
    (3) For Sec. 3.02(c)(3)(ii) the description should identify the 
types of goods and services that likely would be purchased, and likely 
sources of those goods and services located in areas of general 
economic distress.
    (4) For qualification under the definition of Sec. 3.02(a)(7) as a 
``qualified eligible business'', the information called for in 
paragraphs (b)(1)-(3) of this section should be supplied, substituting 
data for areas of severe economic distress for areas of general 
economic distress.
    (c) The Department will conduct random reviews of the self-
certifications submitted by businesses to verify their eligibility.
    (d) If there is reason to believe that a business has submitted 
false information, withheld relevant information, or otherwise violated 
federal law, the matter will be promptly referred to the Department's 
Inspector General for investigation.


Sec. 3.05  Pre-Qualification for Eligibility.

    (a) Upon request, the Department will issue certificates that 
businesses have met the pre-qualification requirement(s) set forth in 
Sec. 3.026(b) of this part. Such requests shall be submitted to the 
Office of Empowerment Contracting, Rm xxxx, U.S. Department of 
Commerce, Washington, DC 20230.
    (b) In addition to having available the full details of the 
documentation needed to establish their eligibility, businesses shall 
submit the following with their request:
    (1) For qualification under Sec. 3.02(b)(1), a summary of the 
number of employees of the firm, the number of employees living in 
areas of general economic distress, the wages and benefits paid to each 
group in the last six months, and a list of eligible areas in which 
employees live;
    (2) For qualification under Sec. 3.02(b)(2), the addresses of each 
of the businesses plants, indicating which are in areas of general 
economic distress, a brief description of the activities conducted at 
each site, and the number of employees who perform their job at each 
site;
    (3)(i) For qualification under Sec. 3.02(b)(3)(i), business should 
submit the same information as called for under Sec. 3.05(b)(1) of this 
part;
    (ii) For qualification under Sec. 3.02(b)(3)(ii), the names and 
addresses of all firms located in areas of general economic distress 
from which the business has purchased goods, materials or services in 
the past six months, the dollar total of such purchases, and the dollar 
total of all goods, materials and services purchased by the business in 
the past six months.
    (4) For qualification under the definition of Sec. 3.02(a)(7) as a 
``qualified eligible business'', the information called for in 
paragraphs (b)(1)-(3) of this section should be supplied, substituting 
data for areas of severe economic distress for areas of general 
economic distress.
    (c) Businesses may submit requests for pre-qualification under, 
one, several or all of the above. If it is determined that they meet 
the requirements for Sec. 3.02(b)(1) and either Sec. 3.02(b)(2), 
(b)(3)(ii); or they meet one of the alternative tests to be a qualified 
eligible business, the Department will issue a certificate of 
eligibility. If a business meets one or more of the requirements of 
Sec. 3.02(b) but does not meet all the requirements to be a qualified 
large

[[Page 27560]]

business or qualified eligible business, the Department will certify as 
to its pre-qualification under the requirements(s) it has met. This 
last certification will qualify them for participation in the program 
if they are a small business in the context of a particular 
procurement.
    (d) Businesses receiving such certificates of pre-qualification may 
submit copies thereof in lieu of the self-certification of eligibility, 
when responding to solicitations.
    (e) Any business may seek pre-qualification, however, it is likely 
that solicitations will have limitations on subcontracting or similar 
requirements that could affect their eligibility to receive an award.
    (f) Determinations as to whether a firm is a small business will be 
made in the context of each particular solicitation, based on SBA 
procedures and the four digit SIC code applicable to that solicitation
    (g) Pre-qualification certificates will be effective for one year 
from their date of issue.
    (h) businesses shall notify the Department of Commerce of material 
changes that would affect their eligibility status (e.g. plant closing 
or major scale backs that would significantly alter their employment 
data or location).
    (i) Upon receipt of a request, the Department will publish notice 
in the Federal Register seeking public comment. The notice will include 
the name of the requesting business, the definition(s) for which it 
seeks to pre-qualify, and the principal eligible areas from which 
employees are employed, in which plant are located, and/or goods and 
services have been obtained.
    (j) After preliminary review of a request the Department will 
request such additional information as it believes necessary and/or 
conduct a site visit. The Department will issue or deny a request 
within 30 business days of receipt, or provide the business with the 
reason for delay and an expected decision date.
    (k) Appeals of denials of requests for pre-qualification must be 
submitted, in writing within 30 working days of the date of the denial. 
The appeal should be addressed to Office of xxxx and explain why the 
decision was in error. The appellant will be notified, in writing, of 
the Department's final decision, which will also be entered into the 
Empowerment Contracting Database.
    (l) If there is reason to believe that a business has submitted 
false information, withheld relevant information, or otherwise violated 
federal law, the matter will be promptly referred to the Department's 
Inspector General for investigation.


Sec. 3.06  Challenges--Self-Certification.

    (a) An offeror may protest a concern's self-certification by filing 
a protest with the contracting officer in accordance with the procuring 
agency's protest procedures.
    (b) The contracting officer or the Department of Commerce may 
protest a concern's self-certification at any time. The Department of 
Commerce protests a concern's self-certification by filing directly 
with its Office of EC and notifying the contracting officer.
    (c) Upon receipt of a timely protest, the contracting officer shall 
withhold award and forward the protest to the Department of Commerce 
Office of EC, 14th and Constitution Ave. NW, Washington, DC. 20230. The 
contracting officer shall send to the Department of Commerce--
    (1) The protest;
    (2) The date the protest was received and a determination of 
timeliness;
    (3) A copy of the protested concern's submittals regarding self-
certification; and
    (4) The date of bid opening or date on which notification of the 
apparently successful offeror was sent to unsuccessful offerors.
    (d) When the contracting officer makes a written determination that 
award must be made to protect the public interest, award shall be made 
notwithstanding the protest.
    (e) Upon receipt of notification that a challenge has been filed, 
the apparently successful offeror shall, by 5 p.m. of the business day 
following the date of receipt of the notice, submit to the Office of 
EC, rm xxxx U.S. Department of Commerce, Washington DC 20230, fax no. 
(202) 482-xxxx., a copy of its description called for in Sec. 3.04(b). 
If the description is not received in a timely manner the challenge 
will be upheld.
    (f) The Department will review the description, request any 
additional information it may require, and conduct on site verification 
if it is considered advisable, and allow the apparently successful 
offeror to submit such information as it may desire to refute the 
challenge. Based on this data the Department will determine whether the 
business is likely to achieve the performance required to qualify.
    (g) The Department of Commerce, Office of EC, will determine the 
qualification status of the challenged offeror and notify the 
contracting officer, the challenged offeror, and the protestor. Award 
may be made on the basis of that determination. The determination is 
final for purposes of the instant acquisition, unless--
    (1) It is appealed; and
    (2) The contracting officer receives the Department of Commerce's 
decision on the appeal before award.
    (h) If the contracting officer does not receive a Department of 
Commerce determination within 15 business days after the Department of 
Commerce's receipt of the protest, the contracting officer shall 
presume that the challenged offeror's self-certification is valid.
    (i) A Department of Commerce determination may be appealed by the 
interested party whose protest has been denied; the concern whose 
status was protested; or the contracting officer. The appeal must be 
filed with the Department of Commerce's Office of EC within five 
business days after receipt of the determination. The appeal should 
contain significant evidence beyond that submitted previously.
    (j) Following receipt of the appeal the Department will notify the 
other side (challenger or apparently successful offeror). Every effort 
will be made to issue a final decision prior to award of the contract 
in question.
    (k) Both parties and the contracting officer will be notified, in 
writing, of the Department's final determination, which will be entered 
into the Empowerment Contracting Database.


Sec. 3.07  Challenges--Pre-Qualification.

    (a) The Department reserves the right to revoke certificates of 
pre-qualification if it determines that there are material changes in a 
businesses eligibility status. Accordingly, anyone who has information 
that might indicate such a change in status is encouraged to submit it, 
in writing, to the Office of EC, rm. xxxx. U.S. Department of Commerce, 
at any time. In addition, an offeror may protest a concern's pre-
qualification by filing a protest with the contracting officer in 
accordance with the procuring agency's protest procedures. The 
contracting officer or the Department of Commerce may protest a 
concern's pre-qualified status at any time. The Department of Commerce 
protests a concern's pre-qualification by filing directly with its 
Office of EC and notifying the contracting officer.
    (b) Upon receipt of a timely protest, or other adverse information, 
the Department will decide whether it merits further investigation. If 
further action is justified the Department will request the pre-
qualified firm to submit a response to the adverse information and 
conduct such other inquiry as it deems appropriate to ascertain whether 
there has been a material change in

[[Page 27561]]

circumstances that would justify revoking the pre-qualification.
    (c) For protests concerning particular awards, the provisions of 
paragraphs (c), (d), (g), (h), (i), (j) and (k) of Sec. 3.06 of this 
part shall apply.
    (d) For challenges not covered by paragraph (c) of this section, 
the Department of Commerce, Office of EC, will notify the challenged 
business and the challenger, of its decision.
    (e) Decisions to revoke pre-qualifications will become effective 
upon issuance and entered into the Empowerment Contracting Database.
    (f) Appeals of decisions covered by paragraph (d) of this section, 
must be submitted, in writing within 30 working days of the date of the 
decision. The appeal should be addressed to Office of EC and explain 
why the decision was in error. The appellant will be notified, in 
writing, of the Department's final decision, which will be also be 
entered into the Empowerment Contracting Database.
    (g) If there is reason in believe that a business has submitted 
false information, withheld relevant information, or otherwise violated 
federal law, the matter will be promptly referred to the Department's 
Inspector General for investigation.


Sec. 3.08  Applicability.

    Subject to the provisions contained in Sec. 3.11, these guidelines 
shall apply to unrestricted competitions for contracts exceeding the 
simplified acquisition threshold, other than those where performance 
will not take place in the United States.


Sec. 3.09  Incentive Structure.

    (a) Incentives, in the form of price or non-price, shall be 
available in contracts subject to these guidelines. While applying 
these incentives, the Contracting Officer/Source Selection Official 
shall have the discretion to determine the size and type of incentive 
to apply to any particular procurement.
    (b) Preferences in the form of incentives shall represent a price 
preference of up to 10 percent or an evaluation credit of up to 15 
percent. For procurements in which source selection will be made on a 
non-numerical basis, the Contracting Officer/Source Selection Official 
shall ensure that the incentive selected will be given sufficient 
weight to be meaningful.
    (c) Any preference a business receives under these guidelines shall 
be added to the preferences it may receive pursuant to other statutory 
or regulatory programs.


Sec. 3.10  Montitoring and Evaluation.

    Subject to the provisions of the ``Phased Implementation of the 
Program'' section of these guidelines, the Commerce Department, in 
conjunction with procuring agencies, shall monitor the process as 
follows:
    (a) Monitoring the Federal Procurement process. We would expect 
that the benefit to the federal procurement system would begin to be 
realized during the latter years of phase two of the program. To assist 
in monitoring and evaluating the efficiency of this new program, 
agencies awarding contracts to qualified businesses shall provide the 
following information to the Department of Commerce:
    (1) The number and dollar amount of solicitations in which an 
empowerment contracting preference was offered. This information will 
be broken down by SIC Major Group and by the use of the price 
evaluation preference and non-price evaluation factor;
    (2) The contract numbers, dollar amounts, names of awardees, and 
price premiums paid (if identifiable) for awards made as a result of an 
empowerment preference. This information will be broken down by SIC 
Major Group;
    (3) Comments on the advantages and disadvantages of the Empowerment 
Contracting Program, including comments on whether the program had any 
impact on the quality of supplies and services procured through its 
use.
    (b) Monitoring the impact on business development. Evaluation 
criteria shall be established on national goals and objectives. A 
sample of businesses receiving contracts under the program would be 
examined with the following issues being addressed:
    (1) Did the business locate or remain in a particular place so that 
it would be eligible for preferences under these guidelines?
    (2) Did the business hire new workers or provide additional 
benefits to existing workers from eligible areas so that it would be 
eligible for preferences under these guidelines?
    (3) Did the business purchase additional goods and services from 
firms located in eligible areas so that it would be eligible for 
preferences under these guidelines?
    (4) Did the business propose to hire more workers in eligible areas 
as a result of bidding or proposing under the subject contract?
    (5) Is this contract new work that the business would not have 
received but for this program?
    (c)(1) Monitoring the impact on distressed communities. In order to 
examine impacts of the program on distressed communities, outcomes 
should be measured in the context of local conditions and community 
priorities, as well as broad national goals. The local vision for a 
community's transformation should provide the principal criteria for 
measuring local outcomes. The monitoring and evaluation process should 
have both an initial and a longer term phase. The principal objectives 
of the initial phase would be to:
    (i) Establish baseline measurements of demographics, economic 
indicators, physical infrastructure conditions and needs, and social 
conditions;
    (ii) Identify local outcome measures and common national measures 
toward which long-term evaluation will be directed, including 
employment, crime, education, and poverty; and
    (iii) Develop a strategy and mechanism for evaluating progress 
toward local and national goals over time.
    (2) The longer-term evaluation should have the capacity to answer 
fundamental questions about the efficacy of targeted Federal 
contracting, specifically its ability to revitalize distressed 
communities and to improve the social and economic well-being of 
residents. This phase will examine such questions as:
    (i) To what extent does the program create or improve the quality 
of jobs and economic opportunities in the distressed area?
    (ii) To what extent does the program result in new businesses 
locating in the community or increased rates of business retention in 
the community?
    (iii) To what extent does the program affect areas outside the 
distressed community by either connecting residents with opportunities 
in the larger community or by increasing growth in the larger areas?
    (iv) How have the changes in these communities affected the 
jurisdictions in which they are located?
    (v) How have areas (and residents) adjacent to the distressed 
communities been affected?
    (vi) At what cost have these outcomes been achieved? The evaluation 
must ultimately provide an empirical basis for assessing program costs 
relative to benefits.
    (vii) How effectively does the program interact with other 
government programs designed to promote the development of economically 
distressed communities?
    (d) In monitoring the program, the Department of Commerce may 
request additional information to the extent that it deems appropriate.

[[Page 27562]]

Sec. 3.11  Phased Implementation of the Program.

    (a) First phase--eighteen month period. The guidelines will apply 
initially, during a first phase of eighteen months' duration, only to 
contracts involving industries whose two digit Standard Industrial 
Classification (``SIC'') Code major group identifiers are listed below. 
Each agency will establish procedures to ensure that the Empowerment 
Contracting program is applied to approximately 25 percent of the 
dollar value of its eligible procurements in these SIC codes, and will 
inform the Department of Commerce as to how it will ensure that this is 
done.
    (b) At the end of the first year of the program, the Department of 
Commerce, in coordination with the agencies listed in Executive Order 
13005, will evaluate the program and develop any necessary changes to 
improve performance. The revised procedures will become effective in 
the second phase.
    (c) The two digit SIC code major group identifiers to which the 
first phase will apply are:

15--Construction
20--Food and Kindred Products
23--Apparel and Other Textile Products
25--Furniture and Fixtures
27--Printing and Publishing
30--Rubber and Miscellaneous
34--Fabricated Metal Products
42--Trucking and Warehousing
51--Wholesale Trade and Durable Goods
73--Business Services
87--Management Consulting Services

    (d) Second phase--further implementation. Further implementation of 
the order will be instituted in the second phase of the program, which 
will begin after the first phase of the program has ended, and will 
extend for a period of 5 years. If the evaluation of phase one so 
justifies, the second phase of the program will applied to a larger 
number of contracts within selected two digit SIC Code industries 
involved in competitive Federal procurements, consistent with efficient 
administration of the program and the development of new sources of 
supplies and services. Industries included in the second phase will be 
identified in advance of being included. The efficacy of the program 
will be monitored and evaluated during the second phase, subject to the 
criteria set forth in the ``Monitoring and Evaluation'' section of 
these guidelines. At the end of this five-year period, the Department 
of Commerce in consultation with the agencies designated in the 
Executive Order will ascertain whether the program is meeting its 
goals. Specifically, it will be determined whether the program 
stimulated economic activity (through, among other things, job creation 
or new business investment) in areas of general economic distress and 
benefited the federal procurement system. If the program meets these 
objectives, it will be expanded to other selected industries for 
similar implementation and evaluation.
William M. Daley,
Secretary of Commerce.
[FR Doc. 97-13182 Filed 5-19-97; 8:45 am]
BILLING CODE 3510-17-M