[Federal Register Volume 63, Number 243 (Friday, December 18, 1998)]
[Rules and Regulations]
[Pages 70265-70281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33513]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 5, 6, 7, 8, 12, 13, 14, 15, 19, 26, 52, and 53

[FAC 97-10; FAR Case 97-307; Item I]
RIN 9000-AI20


Federal Acquisition Regulation; Historically Underutilized 
Business Zone (HUBZone) Empowerment Contracting Program

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Interim rule with request for comments.

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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 revisions made to 
Small Business Administration (SBA) regulations covering the 
Historically Underutilized Business Zone (HUBZone) Empowerment 
Contracting Program (hereinafter referred to as the HUBZone Program).

EFFECTIVE DATE: January 4, 1999.
    Comment Date: Comments should be submitted to the FAR Secretariat 
at the address shown below on or before February 16, 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 97-10, FAR case 97-307 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 97-10, FAR case 97-307.

SUPPLEMENTARY INFORMATION:

A. Background

    This interim rule amends FAR parts 5, 6, 7, 8, 12, 13, 14, 15, 19, 
26, 52, and 53 to comply with the SBA's HUBZone Program regulations 
contained in 13 CFR parts 121, 125, and 126 (63 FR 31896, June 11, 
1998). The purpose of the HUBZone Program is to provide Federal 
contracting assistance for qualified small business concerns located in 
distressed communities in an effort to increase employment 
opportunities, investment, and economic development in these 
communities. The Program provides for set-asides for firms that meet 
the definition of a HUBZone small business concern (SBC), sole source 
awards to HUBZone SBCs, and price evaluation preferences for HUBZone 
SBCs in acquisitions conducted using full and open competition; and 
establishes a Governmentwide goal for HUBZone awards. Until September 
30, 2000, ten Government agencies are required to comply with the prime 
contract HUBZone Program. After that date, the Program will apply to 
all Federal

[[Page 70266]]

agencies employing one or more contracting officers.
    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

    This interim 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., because the purpose 
of the HUBZone Program is to provide Federal contracting assistance for 
qualified small business concerns located in historically underutilized 
business zones in an effort to increase employment opportunities, 
investment, and economic development in these zones. An Initial 
Regulatory Flexibility Analysis has been prepared and is summarized as 
follows:

    It is anticipated that the HUBZone Program will benefit small 
business concerns by increasing the number of Government contracts 
awarded to them. There is a statutory goal for Government HUBZone 
small business concerns to receive 3 percent of contract dollars by 
fiscal year 2003. The HUBZone Act of 1997, Title VI of Public Law 
105-135, 111 Stat. 2592 (December 2, 1997), created the HUBZone 
Program and directed the Administrator of the Small Business 
Administration (SBA) to promulgate regulations to implement it. This 
rule further implements the SBA rule. The small entities affected by 
this rule are those that fit within the definition of a small 
business concern, as defined by SBA in 13 CFR part 121 and new part 
126, and that participate in Government contracting. Because the 
program is new, we cannot estimate precisely the number or classes 
of small entities that this rule will affect. However, the SBA 
estimated that more than 30,000 small businesses will apply for 
certification as qualified HUBZone small business concerns. This 
rule requires that a firm be listed on SBA's list of eligible 
HUBZone small business concerns in order to receive a contracting 
preference. That requirement is addressed in SBAs rule. This FAR 
rule requires that Government prime contractors with contracts that 
require subcontracting plans seek out HUBZone small business 
concerns as subcontractors as well as maintain records and report on 
those subcontracts awarded to HUBZone small business concerns. These 
requirements do not apply to small businesses. This rule does not 
duplicate, overlap, or conflict with any other Federal rules. In 
general, the drafters of this rule modeled its procurement 
mechanisms, to the extent permitted by the SBA rule, on those 
already in use within the Federal Government. This approach should 
make the requirements of the rule immediately familiar to many small 
businesses that already have extensive experience in dealing with 
Government contracting offices. Moreover, each individual mechanism 
was structured to strike an appropriate balance between the 
interests of HUBZone and non-HUBZone small businesses, and to 
minimize the overall burden of compliance on small business.

    A copy of the analysis has been submitted to the Chief Counsel for 
Advocacy of the Small Business Administration and may be obtained from 
the FAR Secretariat. Comments are invited. Comments from small entities 
concerning the affected FAR subparts also will be considered in 
accordance with 5 U.S.C. 610. Such comments must be submitted 
separately and should cite FAR case 97-307 in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. 3501, et seq.) is deemed to 
apply because the interim rule contains information collection 
requirements. The interim rule increases the collection requirements 
currently approved under OMB Control Numbers 9000-0006 and 9000-0007.
    OMB Control No. 9000-0006 burden hours have increased from 428,035 
to 640,837 to reflect the additional burden of planning, maintaining 
and reporting subcontract award data on HUBZone small businesses. In 
addition, burden inappropriately attached to OMB Control No. 9000-0007 
that related to planning and maintaining data was transferred to this 
clearance. OMB Control No. 9000-0007 burden hours have been adjusted to 
remove hours inappropriately included in this clearance and to add 
hours to reflect the additional burden associated with reporting 
HUBZone data. The net difference is an increase, from 90,924 to 91,570 
hours. The appropriate paperwork has been forwarded to OMB.

D. Request for Comments Regarding Paperwork Burden

    Members of the public are invited to comment on the recordkeeping 
and information collection requirements and estimates set forth above. 
Please send comments to: Office of Information and Regulatory Affairs, 
Office of Management and Budget, Attn: Mr. Peter N. Weiss, FAR Desk 
Officer, New Executive Office Building, Room 10102, 725 17th Street, 
NW, Washington, DC 20503.
    Also send a copy of any comments to the FAR Secretariat at the 
address shown under ADDRESSES. Please cite the corresponding OMB 
Clearance Number in all correspondence related to the estimate.

E. 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 in 13 CFR parts 121, 125, and 126 on June 11, 1998, pertaining to 
the Small Business Administration (SBA) HUBZone Program. The SBA final 
rule became effective on September 9, 1998. Section 605 of the Small 
Business Reauthorization Act of 1997 (Title VI of Public Law 105-135) 
requires that, 180 days after the SBA issues its final regulations to 
carry out the HUBZone Program, conforming amendments must be made to 
the Federal Acquisition Regulation (December 8, 1998). However, 
pursuant to Public Law 98-577 and FAR 1.501, public comments received 
in response to this interim rule will be considered in formulating the 
final rule.

List of Subjects in 48 CFR Parts 5, 6, 7, 8, 12, 13, 14, 15, 19, 
26, 52, and 53

    Government procurement.

    Dated: December 14, 1998.
Ralph DeStefano,
Acting Director, Federal Acquisition Policy Division.
    Therefore, 48 CFR Parts 5, 6, 7, 8, 12, 13, 14, 15, 19, 26, 52, and 
53 are amended as set forth below:
    1. The authority citation for 48 CFR Parts 5, 6, 7, 8, 12, 13, 14, 
15, 19, 26, 52, and 53 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 revising paragraph (d) to read as 
follows:


5.207  Preparation and transmittal of synopses.

* * * * *
    (d) Set-asides. When the proposed acquisition provides for a total 
or partial small business set-aside or a HUBZone small business set-
aside, the appropriate CBD Numbered Note will be cited.
* * * * *

[[Page 70267]]

PART 6--COMPETITION REQUIREMENTS

    3. Section 6.205 is added to read as follows:


6.205  Set-asides for HUBZone small business concerns.

    (a) To fulfill the statutory requirements relating to the HUBZone 
Act of 1997 (15 U.S.C. 631 note), contracting officers in participating 
agencies (see 19.1302) may set aside solicitations to allow only 
qualified HUBZone small business concerns to compete (see 19.1305).
    (b) No separate justification or determination and findings is 
required under this part to set aside a contract action for qualified 
HUBZone small business concerns.
    4. Section 6.302-5 is amended by adding paragraph (b)(6) to read as 
follows:


6.302-5  Authorized or required by statute.

* * * * *
    (b) * * *
    (6) Sole source awards under the HUBZone Act of 1997--15 U.S.C. 
657a (see 19.1306).
* * * * *

PART 7--ACQUISITION PLANNING

    5. Section 7.105 is amended by revising the third sentence of 
paragraph (b)(1) to read as follows:


7.105  Contents of written acquisition plans.

* * * * *
    (b) Plan of action--(1) Sources. * * * Include consideration of 
small business, HUBZone small business, small disadvantaged business, 
and women-owned small business concerns (see part 19). * * *
* * * * *

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

    6. Section 8.404 is amended by revising the first sentence of 
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, the small business set-
aside provisions of subpart 19.5, and the HUBZone program of subpart 
19.13 do not apply, except for the provision at 13.303-2(c)(3). * * *
* * * * *

PART 9--CONTRACTOR QUALIFICATIONS

    7. Section 9.104-3 is amended by revising the last sentence of 
paragraph (b) to read as follows:


9.104-3  Application of standards.

* * * * *
    (b) * * * If the pending contract requires a subcontracting plan 
pursuant to Subpart 19.7, The Small Business Subcontracting Program, 
the contracting officer shall also consider the prospective 
contractor's compliance with subcontracting plans under recent 
contracts.
* * * * *

PART 12--ACQUISITION OF COMMERCIAL ITEMS

    8. Section 12.301 is amended at the end of paragraph (b)(2) by 
removing the semicolon and adding a period; and adding a sentence to 
read as follows:


12.301  Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (b) * * *
    (2) * * * Use the provision with its Alternate III in solicitations 
issued by Federal agencies subject to the requirements of the HUBZone 
Act of 1997 (see 19.1302);
* * * * *

PART 13--SIMPLIFIED ACQUISITION PROCEDURES

    9. Section 13.003 is amended by redesignating paragraph (b)(2) as 
(b)(3) and adding a new paragraph (b)(2) to read as follows:


13.003  Policy.

* * * * *
    (b) * * *
    (2) The contracting officer may set aside for HUBZone small 
business concerns (see 19.1305) an acquisition of supplies or services 
that has an anticipated dollar value exceeding $2,500 and not exceeding 
the simplified acquisition threshold. The contracting officer's 
decision not to set aside an acquisition for HUBZone participation 
below the simplified acquisition threshold is not subject to review 
under subpart 19.4.
* * * * *
    10. Section 13.005 is amended by adding paragraph (a)(9) to read as 
follows:


13.005  Federal Acquisition Streamlining Act of 1994 list of 
inapplicable laws.

    (a) * * *
    (9) 15 U.S.C. 631 note (HUBZone Act of 1997), except for 15 U.S.C. 
657a(b)(2)(B), which is optional for the agencies subject to the 
requirements of the Act.
* * * * *

PART 14--SEALED BIDDING


14.206  [Reserved]

    11. Section 14.206 is removed and reserved.
    12. Section 14.502 is amended by redesignating paragraph (b)(5) as 
(b)(6) and adding a new paragraph (b)(5) to read as follows:


14.502  Conditions for use.

* * * * *
    (b) * * *
    (5) The use of a set-aside or price evaluation preference for 
HUBZone small business concerns (see subpart 19.13).
* * * * *

PART 15--CONTRACTING BY NEGOTIATION

    13. Section 15.503 is amended by revising paragraph (a)(2) to read 
as follows:


15.503  Notifications to unsuccessful offerors.

    (a) * * *
    (2) Preaward notices for small business programs. (i) In addition 
to the notice in paragraph (a)(1) of this section, the contracting 
officer shall notify each offeror in writing prior to award, upon 
completion of negotiations, determinations of responsibility, and, if 
necessary, the process in 19.304(d)--
    (A) When using a small business set-aside (see subpart 19.5);
    (B) When a small disadvantaged business concern receives a benefit 
based on its disadvantaged status (see subpart 19.11 and 19.1202) and 
is the apparently successful offeror; or
    (C) When using the HUBZone procedures in 19.1305 or 19.1307.
    (ii) The notice shall state--
    (A) The name and address of the apparently successful offeror;
    (B) That the Government will not consider subsequent revisions of 
the offeror's proposal; and
    (C) That no response is required unless a basis exists to challenge 
the small business size status, disadvantaged status, or HUBZone status 
of the apparently successful offeror.
    (iii) The notice is not required when the contracting officer 
determines in writing that the urgency of the requirement necessitates 
award without delay or when the contract is entered

[[Page 70268]]

into under the 8(a) program (see 19.805-2).
* * * * *

PART 19--SMALL BUSINESS PROGRAMS

    14. Section 19.000 is amended by revising paragraphs (a)(3) and 
(a)(8) to read as follows:


19.000  Scope of part.

    (a) * * *
    (3) Setting acquisitions aside for exclusive competitive 
participation by small business concerns and HUBZone small business 
concerns, and sole source awards to HUBZone small business concerns;
* * * * *
    (8) The use of a price evaluation adjustment for small 
disadvantaged business concerns, and the use of a price evaluation 
preference for HUBZone small business concerns; and
* * * * *
    15. Section 19.001 is amended by adding, in alphabetical order, the 
definitions ``HUBZone'' and ``HUBZone small business concern'' to read 
as follows:


19.001  Definitions.

* * * * *
    HUBZone means a historically underutilized business zone, which is 
an area located within one or more qualified census tracts, qualified 
nonmetropolitan counties, or lands within the external boundaries of an 
Indian reservation.
    HUBZone small business concern means a small business concern that 
appears on the List of Qualified HUBZone Small Business Concerns 
maintained by the SBA.
* * * * *
    16. Section 19.201 is amended by revising the first sentence of 
paragraph (a); in paragraph (c) by removing the words ``small, small 
disadvantaged and women-owned''; and revising paragraphs (d)(4), 
(d)(6), (d)(7)(ii), (d)(8), and (d)(9) to read as follows:


19.201  General policy.

    (a) It is the policy of the Government to provide maximum 
practicable opportunities in its acquisitions to small business, 
HUBZone small business, small disadvantaged business, and women-owned 
small business concerns. * * *
* * * * *
    (d) * * *
    (4) Be responsible for the agency carrying out the functions and 
duties in sections 8, 15, and 31 of the Small Business Act.
* * * * *
    (6) Have supervisory authority over agency personnel to the extent 
that their functions and duties relate to sections 8, 15, and 31 of the 
Small Business Act.
    (7) * * *
    (ii) Whose principal duty is to assist the SBA's assigned 
representative in performing functions and duties relating to sections 
8, 15, and 31 of the Small Business Act;
    (8) Cooperate and consult on a regular basis with the SBA in 
carrying out the agency's functions and duties in sections 8, 15, and 
31 of the Small Business Act;
    (9) Make recommendations in accordance with agency procedures as to 
whether a particular acquisition should be awarded under subpart 19.5 
as a small business set-aside, under subpart 19.8 as a Section 8(a) 
award, or under subpart 19.13 as a HUBZone set-aside.
* * * * *


19.202  [Amended]

    17. Section 19.202 is amended in the first sentence by removing 
``Subpart 19.5 or 19.8'' and adding ``subpart 19.5, 19.8, or 19.13.''
    18. Section 19.202-2 is amended by revising the introductory 
paragraph; and in paragraph (a) by adding ``and HUBZones'' after the 
word ``areas''. The revised text reads as follows:


19.202-2  Locating small business sources.

    The contracting officer shall, to the extent practicable, encourage 
maximum participation by small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns in 
acquisitions by taking the following actions:
* * * * *
    19. Section 19.202-4 is amended by revising the introductory 
paragraph to read as follows:


19.202-4  Solicitation.

    The contracting officer shall encourage maximum response to 
solicitations by small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns by 
taking the following actions:
* * * * *
    20. Section 19.202-5 is amended by revising paragraphs (a) and (b) 
to read as follows:


19.202-5  Data collection and reporting requirements.

* * * * *
    (a) Require each prospective contractor to represent whether it is 
a small business, HUBZone small business, small disadvantaged business, 
or women-owned small business concern (see the provision at 52.219-1, 
Small Business Program Representations).
    (b) Accurately measure the extent of participation by small 
business, HUBZone small business, small disadvantaged business, and 
women-owned small business concerns in Government acquisitions in terms 
of the total value of contracts placed during each fiscal year, and 
report data to the SBA at the end of each fiscal year (see subpart 
4.6).
    21. Section 19.202-6 is amended by removing the introductory text 
and revising paragraph (a) to read as follows:


19.202-6  Determination of fair market price.

    (a) The fair market price shall be the price achieved in accordance 
with the reasonable price guidelines in 15.404-1(b) for--
    (1) Total and partial small business set-asides (see subpart 19.5);
    (2) HUBZone set-asides (see subpart 19.13);
    (3) Contracts utilizing the price evaluation adjustment for small 
disadvantaged business concerns (see subpart 19.11); and
    (4) Contracts utilizing the price evaluation preference for HUBZone 
small business concerns (see subpart 19.13).
* * * * *

Subpart 19.3--Determination of Status as a Small Business, HUBZone 
Small Business, or Small Disadvantaged Business Concern

    22. The heading of Subpart 19.3 is revised to read as set forth 
above.
    23. Section 19.301 is amended by revising the first sentence of 
paragraph (d) to read as follows:


19.301  Representation by the offeror.

* * * * *
    (d) If the SBA determines that the status of a concern as a small 
business, HUBZone small business, small disadvantaged business, or 
women-owned small business has been misrepresented in order to obtain a 
set-aside contract, an 8(a) subcontract, a subcontract that is to be 
included as part or all of a goal contained in a subcontracting plan, 
or a prime or subcontract to be awarded as a result, or in furtherance 
of any other provision of

[[Page 70269]]

Federal law that specifically references Section 8(d) of the Small 
Business Act for a definition of program eligibility, the SBA may take 
action as specified in Section 16(d) of the Act. * * *
    24. Section 19.306 is redesignated as 19.307; and a new 19.306 is 
added to read as follows:


19.306  Protesting a firm's status as a HUBZone small business concern.

    (a) For sole source acquisitions, the SBA or the contracting 
officer may protest the apparently successful offeror's HUBZone small 
business status. For all other acquisitions, an offeror, the 
contracting officer, or the SBA may protest the apparently successful 
offeror's HUBZone small business concern status.
    (b) Protests relating to whether a HUBZone small business concern 
is a small business for purposes of any Federal program are subject to 
the procedures of subpart 19.3. Protests relating to small business 
size status for the acquisition and the HUBZone qualifying requirements 
will be processed concurrently by SBA.
    (c) All protests shall be in writing and shall state all specific 
grounds for the protest. Assertions that a protested concern is not a 
HUBZone small business concern, without setting forth specific facts or 
allegations, is insufficient. An offeror shall submit its protest to 
the contracting officer. The contracting officer and the SBA shall 
submit their protests to SBA's Associate Administrator for the HUBZone 
Program (AA/HUB).
    (d) An offeror's protest must be received by close of business on 
the fifth business day after bid opening (in sealed bid acquisitions) 
or by close of business on the fifth business day after notification by 
the contracting officer of the apparently successful offeror (in 
negotiated acquisitions). Any protest received after these time limits 
is untimely. Any protest received prior to bid opening or notification 
of intended award, whichever applies, is premature and shall be 
returned to the protester.
    (e) Except for premature protests, the contracting officer shall 
forward any protest received, notwithstanding whether the contracting 
officer believes that the protest is insufficiently specific or 
untimely, to: AA/HUB, U.S. Small Business Administration, 409 3rd 
Street, SW, Washington, DC 20416.
    (f) SBA will determine the HUBZone status of the protested HUBZone 
small business concern within 15 business days after receipt of a 
protest. If SBA does not contact the contracting officer within 15 
business days, the contracting officer may award the contract to the 
apparently successful offeror, unless the contracting officer has 
granted SBA an extension. The contracting officer may award the 
contract after receipt of a protest if the contracting officer 
determines in writing that an award must be made to protect the public 
interest.
    (g) SBA will notify the contracting officer, the protester, and the 
protested concern of its determination. The determination is effective 
immediately and is final unless overturned on appeal by SBA's Associate 
Deputy Administrator for Government Contracting and 8(a) Business 
Development (ADA/GC&8(a)BD).
    (h) The protested HUBZone small business concern, the protester, or 
the contracting officer may file appeals of protest determinations with 
SBA's ADA/GC&8(a)BD. The ADA/GC&8(a)BD must receive the appeal no later 
than 5 business days after the date of receipt of the protest 
determination. SBA will dismiss any appeal received after the 5-day 
period.
    (i) The appeal must be in writing. The appeal must identify the 
protest determination being appealed and must set forth a full and 
specific statement as to why the decision is erroneous or what 
significant fact the AA/HUB failed to consider.
    (j) The party appealing the decision must provide notice of the 
appeal to the contracting officer and either the protested HUBZone 
small business concern or the original protester, as appropriate. SBA 
will not consider additional information or changed circumstances that 
were not disclosed at the time of the AA/HUB's decision or that are 
based on disagreement with the findings and conclusions contained in 
the determination.
    (k) The ADA/GC&8(a)BD will make its decision within 5 business days 
of the receipt of the appeal, if practicable, and will base its 
decision only on the information and documentation in the protest 
record as supplemented by the appeal. SBA will provide a copy of the 
decision to the contracting officer, the protester, and the protested 
HUBZone small business concern. The ADA/GC&8(a)BD's decision is the 
final decision.
    24a. In newly redesignated 19.307, the section heading and 
paragraph (a) are revised to read as follows:


19.307  Solicitation provision.

    (a)(1) The contracting officer shall insert the provision at 
52.219-1, Small Business Program Representations, in solicitations 
exceeding the micro-purchase threshold when the contract 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.
    (2) The provision shall be used with its Alternate I in 
solicitations issued by DoD, NASA, or the Coast Guard that are expected 
to exceed the threshold at 4.601(a).
    (3)(i) The provision shall be used with its Alternate II in 
solicitations issued by the following agencies on or before September 
30, 2000:

(A) Department of Agriculture.
(B) Department of Defense.
(C) Department of Energy.
(D) Department of Health and Human Services.
(E) Department of Housing and Urban Development.
(F) Department of Transportation.
(G) Department of Veterans Affairs.
(H) Environmental Protection Agency.
(I) General Services Administration.
(J) National Aeronautics and Space Administration.

    (ii) The provision shall be used with its Alternate II in 
solicitations issued by all Federal agencies after September 30, 2000.
* * * * *
    25. Section 19.402 is amended by revising paragraph (c)(1) to read 
as follows:


19.402  Small Business Administration procurement center 
representatives.

* * * * *
    (c) * * *
    (1) Reviewing proposed acquisitions to recommend--
    (i) The setting aside of selected acquisitions not unilaterally set 
aside by the contracting officer.
    (ii) New qualified small, HUBZone small, small disadvantaged, and 
women-owned small business sources, and
    (iii) Breakout of components for competitive acquisitions.
* * * * *
    26. Section 19.501 is amended--
    (a) In the third and fourth sentences of paragraph (a) by adding 
``small business'' after the word ``A'' in each instance;
    (b) In the first sentence of paragraph (b) by adding ``small 
business'' after the word ``a''; and in the second and third sentences 
by removing the word ``which'' and adding ``that'' in each instance; 
and
    (c) By redesignating paragraphs (c) through (g) as (d) through (h), 
respectively; adding a new paragraph (c); and by revising newly 
designated paragraphs (d) and (h) to read as follows:

[[Page 70270]]

19.501   General.

* * * * *
    (c) For acquisitions exceeding the simplified acquisition 
threshold, the requirement to set aside an acquisition for HUBZone 
small business concerns (see 19.1305) takes priority over the 
requirement to set aside the acquisition for small business concerns.
    (d) The contracting officer shall review acquisitions to determine 
if they can be set aside for small business, giving consideration to 
the recommendations of agency personnel having cognizance of the 
agency's small business programs. The contracting officer shall 
document why a small business set-aside is inappropriate when an 
acquisition is not set aside for small business, unless a HUBZone small 
business set-aside or HUBZone small business sole source award is 
anticipated. If the acquisition is set aside for small business based 
on this review, it is a unilateral set-aside by the contracting 
officer. Agencies may establish threshold levels for this review 
depending upon their needs.
* * * * *
    (h) Except as authorized by law, a contract may not be awarded as a 
result of a small business set-aside if the cost to the awarding agency 
exceeds the fair market price.
    27. Section 19.502-1 is revised to read as follows:


19.502-1  Requirements for setting aside acquisitions.

    (a) The contracting officer shall set aside an individual 
acquisition or class of acquisitions for competition among small 
businesses when--
    (1) It is determined to be in the interest of maintaining or 
mobilizing the Nations full productive capacity, war or national 
defense programs; or
    (2) Assuring that a fair proportion of Government contracts in each 
industry category is placed with small business concerns; and the 
circumstances described in 19.502-2 or 19.502-3(a) exist.
    (b) This requirement does not apply to purchases of $2,500 or less, 
or purchases from required sources of supply under part 8 (e.g., 
Federal Prison Industries, Committee for Purchase from People Who are 
Blind or Severely disabled, and Federal Supply Schedule contracts).
    28. Section 19.502-2 is amended by revising the section heading; in 
the first sentence of paragraph (a) by adding ``for small business'' 
after the word ``aside''; and revising the last sentence; in the first 
sentence of paragraph (c) by adding ``small business'' after the word 
``For'', and removing the word ``which'' and adding ``that''; and in 
paragraph (d) by adding ``small business'' after the word ``when''. The 
revised text reads as follows:


19.502-2  Total small business set-asides.

    (a) * * * The small business reservation does not preclude the 
award of a contract with a value not greater than $100,000 under 
Subpart 19.8, Contracting with the Small Business Administration, under 
19.1006(c), Emerging small business set-aside, or under 19.1305, 
HUBZone set-aside procedures.
* * * * *


19.502-4  [Amended]

    29. Section 19.502-4 is amended in the first sentence of paragraph 
(a) by adding ``small business'' after the word ``Total''.


19.502-5  [Amended]

    30. Section 19.502-5 is amended in the second sentences of 
paragraphs (b) and (c) by adding ``small business'' after the word 
``total'' in each instance; and in paragraph (g) by adding ``small 
business'' after the word ``class''.
    31. Section 19.503 is amended by revising the section heading to 
read as set forth below; in the second sentence of paragraph (a) by 
adding ``small business'' after the word ``class''; in paragraph (b) by 
adding ``for small business'' after the word ``acquisitions''; in 
paragraph (c) introductory text by adding ``small business'' after the 
word ``class''; and in the first sentence of paragraph (d) by adding 
``small business'' after the word ``class'' both times it appears.


19.503  Setting aside a class of acquisitions for small business.

    32. Section 19.506 is amended by revising the section heading, 
paragraph (a), the last sentence of paragraph (b), and paragraph (c) to 
read as follows:


19.506  Withdrawing or modifying small business set-asides.

    (a) If, before award of a contract involving a small business set-
aside, the contracting officer considers that award would be 
detrimental to the public interest (e.g., payment of more than a fair 
market price), the contracting officer may withdraw the small business 
set-aside determination whether it was unilateral or joint. The 
contracting officer shall initiate a withdrawal of an individual small 
business set-aside by giving written notice to the agency small 
business specialist and the SBA procurement center representative, if 
one is assigned, stating the reasons. In a similar manner, the 
contracting officer may modify a unilateral or joint class small 
business set-aside to withdraw one or more individual acquisitions.
    (b) * * * However, the procedures are not applicable to automatic 
dissolutions of small business set-asides (see 19.507) or dissolution 
of small business set-asides under $100,000.
    (c) The contracting officer shall prepare a written statement 
supporting any withdrawal or modification of a small business set-aside 
and include it in the contract file.
    33. Section 19.507 is amended by revising the section heading to 
read as set forth below; and in the first sentence of paragraph (a) by 
adding ``small business'' after the word ``a''.


19.507  Automatic dissolution of a small business set-aside.

Subpart 19.7--The Small Business Subcontracting Program

    34. The heading of Subpart 19.7 is revised to read as set forth 
above.
    35. Section 19.702 is amended by revising the introductory 
paragraph and (b)(4) to read as follows:


19.702  Statutory requirements.

    Any contractor receiving a contract for more than the simplified 
acquisition threshold shall agree in the contract that small business, 
HUBZone small business, small disadvantaged business, and women-owned 
small business concerns shall have the maximum practicable opportunity 
to participate in contract performance consistent with its efficient 
performance. It is further the policy of the United States that its 
prime contractors establish procedures to ensure the timely payment of 
amounts due pursuant to the terms of their subcontracts with small 
business, HUBZone small business, small disadvantaged business, and 
women-owned small business concerns.
* * * * *
    (b) * * *
    (4) For modifications to contracts within the general scope of the 
contract that do not contain the clause at 52.219-8, Utilization of 
Small Business Concerns (or equivalent prior clauses; e.g., contracts 
awarded before the enactment of Public Law 95-507).
* * * * *
    36. Section 19.703 is amended by revising the introductory text of 
paragraph (a) and (a)(1); in paragraph (b) by revising the first 
sentence and adding a sentence to the end of the paragraph to read as 
follows:


19.703  Eligibility requirements for participating in the program.

    (a) To be eligible as a subcontractor under the program, a concern 
must

[[Page 70271]]

represent itself as a small business, HUBZone small business, small 
disadvantaged business, or woman-owned small business concern.
    (1) To represent itself as a small business, HUBZone small 
business, or women-owned small business concern, a concern must meet 
the appropriate definition in 19.001.
* * * * *
    (b) A contractor acting in good faith may rely on the written 
representation of its subcontractor regarding the subcontractor's 
status as a small business, HUBZone small business, or women-owned 
small business concern. * * * Protests challenging HUBZone small 
business concern status shall be filed in accordance with 13 CFR 
126.800.
    37. Section 19.704 is amended by revising paragraphs (a)(1), 
(a)(2), (a)(3), (a)(6), (a)(8), (a)(9), (a)(11), and the first sentence 
of paragraph (b) to read as follows:


19.704  Subcontracting plan requirements.

    (a) * * *
    (1) Separate percentage goals for using small business, HUBZone 
small business, small disadvantaged business, and women-owned small 
business concerns as subcontractors;
    (2) A statement of the total dollars planned to be subcontracted 
and a statement of the total dollars planned to be subcontracted to 
small business, HUBZone small business, small disadvantaged business, 
and women-owned small business concerns;
    (3) A description of the principal types of supplies and services 
to be subcontracted and an identification of types planned for 
subcontracting to small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns;
* * * * *
    (6) A statement as to whether or not the offeror included indirect 
costs in establishing subcontracting goals, and a description of the 
method used to determine the proportionate share of indirect costs to 
be incurred with small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns;
* * * * *
    (8) A description of the efforts the offeror will make to ensure 
that small business, HUBZone small business, small disadvantaged 
business, and women-owned small business concerns have an equitable 
opportunity to compete for subcontracts;
    (9) Assurances that the offeror will include the clause at 52.219-
8, Utilization of Small Business Concerns (see 19.708(a)), in all 
subcontracts that offer further subcontracting opportunities, and that 
the offeror will require all subcontractors (except small business 
concerns) that receive subcontracts in excess of $500,000 ($1,000,000 
for construction) to adopt a plan that complies with the requirements 
of the clause at 52.219-9, Small Business Subcontracting Plan (see 
19.708(b));
* * * * *
    (11) A description of the types of records that will be maintained 
concerning procedures adopted to comply with the requirements and goals 
in the plan, including establishing source lists; and a description of 
the offeror's efforts to locate small business, HUBZone small business, 
small disadvantaged business, and women-owned small business concerns 
and to award subcontracts to them.
    (b) Contractors may establish, on a plant or division-wide basis, a 
master plan (see 19.701) that contains all the elements required by the 
clause at 52.219-9, Small Business Subcontracting Plan, except goals. * 
* *
* * * * *
    38. Section 19.705-2 is amended by revising the last sentence of 
paragraph (d) to read as follows:


19.705-2  Determining the need for a subcontracting plan.

* * * * *
    (d) * * * In determining when subcontracting plans should be 
required, as well as when and with whom plans should be negotiated, the 
contracting officer shall consider the integrity of the competitive 
process, the goal of affording maximum practicable opportunity for 
small business, HUBZone small business, small disadvantaged business, 
and women-owned small business concerns to participate, and the burden 
placed on offerors.
    39. Section 19.705-4 is amended by revising the last sentence of 
paragraph (b), the second and last sentences of paragraph (c), the 
first sentence of paragraph (d)(1), (d)(5), and the first sentence of 
paragraph (d)(6) to read as follows:


19.705-4  Reviewing the subcontracting plan.

* * * * *
    (b) * * * If the plan, although responsive, evidences the bidder's 
intention not to comply with its obligations under the clause at 
52.219-8, Utilization of Small Business Concerns, the contracting 
officer may find the bidder nonresponsible.
    (c) * * * Subcontracting goals should be set at a level that the 
parties reasonably expect can result from the offeror expending good 
faith efforts to use small business, HUBZone small business, small 
disadvantaged business, and women-owned small business subcontractors 
to the maximum practicable extent. * * * An incentive subcontracting 
clause (see 52.219-10, Incentive Subcontracting Program), may be used 
when additional and unique contract effort, such as providing technical 
assistance, could significantly increase subcontract awards to small 
business, HUBZone small business, or women-owned small business 
concerns.
    (d) * * *
    (1) Obtain information available from the cognizant contract 
administration office, as provided for in 19.706(a), and evaluate the 
offeror's past performance in awarding subcontracts for the same or 
similar products or services to small business, HUBZone small business, 
small disadvantaged business, and women-owned small business concerns. 
* * *
* * * * *
    (5) Evaluate subcontracting potential, considering the offeror's 
make-or-buy policies or programs, the nature of the supplies or 
services to be subcontracted, the known availability of small business, 
HUBZone small business, small disadvantaged business, and women-owned 
small business concerns in the geographical area where the work will be 
performed, and the potential contractor's long-standing contractual 
relationship with its suppliers.
    (6) Advise the offeror of available sources of information on 
potential small business, HUBZone small business, small disadvantaged 
business, and women-owned small business subcontractors, as well as any 
specific concerns known to be potential subcontractors. * * *
* * * * *
    40. Section 19.705-6 is amended by revising paragraphs (a) and (b) 
to read as follows:


19.705-6  Postaward responsibilities of the contracting officer.

* * * * *
    (a) Notifying the SBA of the award by sending a copy of the award 
document to the Area Director, Office of Government Contracting, in the 
SBA area office where the contract will be performed.
    (b) Forwarding a copy of each commercial plan and any associated 
approvals to the Area Director, Office of Government Contracting, in 
the SBA

[[Page 70272]]

area office where the contractor's headquarters is located.
* * * * *
    41. Section 19.705-7 is amended in the first sentence of paragraph 
(a), and in the third and fourth sentences of paragraph (d) by removing 
the words ``small, small disadvantaged'' and adding ``small business, 
HUBZone small business, small disadvantaged business,'' in each 
instance; and revising the introductory text of paragraph (f) to read 
as follows:


19.705-7  Liquidated damages.

* * * * *
    (f) With respect to commercial plans approved under the clause at 
52.219-9, Small Business Subcontracting Plan, the contracting officer 
that approved the plan shall--
* * * * *
    42. Section 19.706 is amended by revising paragraphs (b) and (c) to 
read as follows:


19.706  Responsibilities of the cognizant administrative contracting 
officer.

* * * * *
    (b) Information on the extent to which the contractor is meeting 
the plan's goals for subcontracting with eligible small business, 
HUBZone small business, small disadvantaged business, and women-owned 
small business concerns;
    (c) Information on whether the contractor's efforts to ensure the 
participation of small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns are in 
accordance with its subcontracting plan;
* * * * *
    43. Section 19.708 is amended by revising the section heading; in 
the introductory text of paragraph (a) by removing the words ``Small, 
Small Disadvantaged and Women-Owned''; by revising paragraph (b); and 
in paragraphs (c)(1), (c)(2), and (c)(3) by adding ``business, HUBZone 
small business,'' after the word ``small'' the first time it is used. 
The revised text reads as follows:


19.708  Contract clauses.

* * * * *
    (b)(1) The contracting officer shall, when contracting by 
negotiation, insert the clause at 52.219-9, Small Business 
Subcontracting Plan, in solicitations and contracts that offer 
subcontracting possibilities, are expected to exceed $500,000 
($1,000,000 for construction of any public facility), and are required 
to include the clause at 52.219-8, Utilization of Small Business 
Concerns, unless the acquisition is set aside or is to be accomplished 
under the 8(a) program. When contracting by sealed bidding rather than 
by negotiation, the contracting officer shall use the clause with its 
Alternate I. When contracting by negotiation, and subcontracting plans 
are required with initial proposals as provided for in 19.705-2(d), the 
contracting officer shall use the clause with its Alternate II.
    (2) The contracting officer shall insert the clause at 52.219-16, 
Liquidated Damages--Subcontracting Plan, in all solicitations and 
contracts containing the clause at 52.219-9, Small Business 
Subcontracting Plan, or the clause with its Alternate I or II.
* * * * *
    44. Section 19.800 is amended by adding paragraph (d) to read as 
follows:


19.800  General.

* * * * *
    (d) Before deciding to set aside an acquisition in accordance with 
subpart 19.5 or 19.13, the contracting officer should review the 
acquisition for offering under the 8(a) Program. In making this 
decision, contracting officers in participating agencies (see 19.1302) 
are advised that SBA will give first priority to HUBZone 8(a) concerns.


19.803  [Amended]

    45. Section 19.803 is amended at the end of paragraph (c) by 
removing the period and adding ``(but see 19.800(d)).''.
    46. Section 19.804-2 is amended by revising paragraph (a)(12) to 
read as follows:


19.804-2  Agency offering.

    (a) * * *
    (12) Identification of all known 8(a) concerns, including HUBZone 
8(a) concerns, that have expressed an interest in this specific 
requirement as a result of self-marketing, response to sources sought, 
or publication of advanced acquisition requirements.
* * * * *
    47. Section 19.1006 is amended by revising the last sentence of 
paragraph (b)(1) to read as follows:


19.1006  Procedures.

* * * * *
    (b) Designated industry groups. (1) * * * Acquisitions in the 
designated industry groups shall continue to be considered for 
placement under the 8(a) Program (see subpart 19.8) and the HUBZone 
Program (see subpart 19.13).
* * * * *
    48. Section 19.1102 is amended by revising paragraph (b) to read as 
follows:


19.1102  Applicability.

* * * * *
    (b) The price evaluation adjustment shall not be used in 
acquisitions that--
    (1) Are less than or equal to the simplified acquisition threshold;
    (2) Are awarded pursuant to the 8(a) Program;
    (3) Are set aside for small business concerns; or
    (4) Are set aside for HUBZone small business concerns.
    49. Section 19.1202-2 is amended by revising paragraph (b)(1) to 
read as follows:


19.1202-2  Applicability.

* * * * *
    (b) * * *
    (1) Small business set-asides (see subpart 19.5) and HUBZone set-
asides (see subpart 19.13);
* * * * *
    50. Subpart 19.13, consisting of sections 19.1301 through 19.1308, 
is added to read as follows:

Subpart 19.13--Historically Underutilized Business Zone (HUBZone) 
Program

Sec.
19.1301  General.
19.1302  Applicability.
19.1303  Status as a qualified HUBZone small business concern.
19.1304  Exclusions.
19.1305  HUBZone set-aside procedures.
19.1306  HUBZone sole source awards.
19.1307  Price evaluation preference for HUBZone small business 
concerns.
19.1308  Contract clauses.

    Authority: 41 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

Subpart 19.13--Historically Underutilized Business Zone (HUBZone) 
Program


19.1301  General.

    (a) The Historically Underutilized Business Zone (HUBZone) Act of 
1997 (15 U.S.C. 631 note) created the HUBZone Program (sometimes 
referred to as the ``HUBZone Empowerment Contracting Program'').
    (b) The purpose of the HUBZone Program is to provide Federal 
contracting assistance for qualified small business concerns located in 
historically underutilized business zones, in an effort to increase 
employment opportunities, investment, and economic development in those 
areas.


19.1302  Applicability.

    (a) Until September 30, 2000, the procedures in this subpart apply 
only to acquisitions made by the following Federal agencies:

(1) Department of Agriculture.
(2) Department of Defense.

[[Page 70273]]

(3) Department of Energy.
(4) Department of Health and Human Services.
(5) Department of Housing and Urban Development.
(6) Department of Transportation.
(7) Department of Veterans Affairs.
(8) Environmental Protection Agency.
(9) General Services Administration.
(10) National Aeronautics and Space Administration.

    (b) On or after September 30, 2000, the procedures in this subpart 
will apply to all Federal agencies that employ one or more contracting 
officers.


19.1303  Status as a qualified HUBZone small business concern.

    (a) Status as a qualified HUBZone small business concern is 
determined by the Small Business Administration (SBA) in accordance 
with 13 CFR part 126.
    (b) If the SBA determines that a concern is a qualified HUBZone 
small business concern, it will issue a certification to that effect 
and will add the concern to the List of Qualified HUBZone Small 
Business Concerns on its Internet website at http://www.sba.gov/
hubzone. The concern must appear on the list to be a HUBZone small 
business concern.
    (c) A joint venture (see 19.101) may be considered a HUBZone small 
business if the business entity meets all the criteria in 13 CFR 
126.616.
    (d) Except for construction or services, any HUBZone small business 
concern (nonmanufacturer) proposing to furnish a product that it did 
not itself manufacture must furnish the product of a HUBZone small 
business concern manufacturer to receive a benefit under this subpart.


19.1304  Exclusions.

    This subpart does not apply to--
    (a) Requirements that can be satisfied through award to--
    (1) Federal Prison Industries, Inc. (see subpart 8.6); or
    (2) Javits-Wagner-O'Day Act participating non-profit agencies for 
the blind or severely disabled (see subpart 8.7);
    (b) Orders under indefinite delivery contracts (see subpart 16.5);
    (c) Orders against Federal Supply Schedules (see subpart 8.4);
    (d) Requirements currently being performed by an 8(a) participant 
or requirements SBA has accepted for performance under the authority of 
the 8(a) Program, unless SBA has consented to release the requirements 
from the 8(a) Program;
    (e) Requirements that do not exceed the micro-purchase threshold; 
or
    (f) Requirements for commissary or exchange resale items.


19.1305  HUBZone set-aside procedures.

    (a) A participating agency contracting officer shall set aside 
acquisitions exceeding the simplified acquisition threshold for 
competition restricted to HUBZone small business concerns when the 
requirements of paragraph (b) of this section can be satisfied. The 
contracting officer shall consider HUBZone set-asides before 
considering HUBZone sole source awards (see 19.1306) or small business 
set-asides (see subpart 19.5).
    (b) To set aside an acquisition for competition restricted to 
HUBZone small business concerns, the contracting officer must have a 
reasonable expectation that--
    (1) Offers will be received from two or more HUBZone small business 
concerns; and
    (2) Award will be made at a fair market price.
    (c) A participating agency may set aside acquisitions exceeding the 
micro-purchase threshold, but not exceeding the simplified acquisition 
threshold, for competition restricted to HUBZone small business 
concerns at the sole discretion of the contracting officer, provided 
the requirements of paragraph (b) of this section can be satisfied.
    (d) If the contracting officer receives only one acceptable offer 
from a qualified HUBZone small business concern in response to a set 
aside, the contracting officer should make an award to that concern. If 
the contracting officer receives no acceptable offers from HUBZone 
small business concerns, the HUBZone set-aside shall be withdrawn and 
the requirement, if still valid, set aside for small business concerns, 
as appropriate (see subpart 19.5).
    (e) The procedures at 19.202-1 and, except for acquisitions not 
exceeding the simplified acquisition threshold, at 19.402 apply to this 
section. When the SBA intends to appeal a contracting officer's 
decision to reject a recommendation of the SBA procurement center 
representative to set aside an acquisition for competition restricted 
to HUBZone small business concerns, the SBA procurement center 
representative shall notify the contracting officer, in writing, of its 
intent within 5 working days of receiving the contracting officer's 
notice of rejection. Upon receipt of notice of SBA's intent to appeal, 
the contracting officer shall suspend action on the acquisition unless 
the head of the contracting activity makes a written determination that 
urgent and compelling circumstances, which significantly affect the 
interests of the Government, exist. Within 15 working days of SBA's 
notification to the contracting officer, SBA shall file its formal 
appeal with the head of the contracting activity, or that agency may 
consider the appeal withdrawn. The head of the contracting activity 
shall reply to SBA within 15 working days of receiving the appeal. The 
decision of the head of the contracting activity shall be final.


19.1306  HUBZone sole source awards.

    (a) A participating agency contracting officer may award contracts 
to HUBZone small business concerns on a sole source basis without 
considering small business set-asides (see subpart 19.5), provided--
    (1) Only one HUBZone small business concern can satisfy the 
requirement;
    (2) The anticipated price of the contract, including options, will 
not exceed--
    (i) $5,000,000 for a requirement within the Standard Industrial 
Classification (SIC) codes for manufacturing; or
    (ii) $3,000,000 for a requirement within any other SIC code;
    (3) The requirement is not currently being performed by a non-
HUBZone small business concern;
    (4) The acquisition is greater than the simplified acquisition 
threshold (see part 13);
    (5) The HUBZone small business concern has been determined to be a 
responsible contractor with respect to performance; and
    (6) Award can be made at a fair and reasonable price.
    (b) The SBA has the right to appeal the contracting officer's 
decision not to make a HUBZone sole source award.


19.1307  Price evaluation preference for HUBZone small business 
concerns.

    (a) The price evaluation preference for HUBZone small business 
concerns shall be used in acquisitions conducted using full and open 
competition. The preference shall not be used--
    (1) In acquisitions expected to be less than or equal to the 
simplified acquisition threshold;
    (2) Where price is not a selection factor so that a price 
evaluation preference would not be considered (e.g., Architect/Engineer 
acquisitions);
    (3) Where all fair and reasonable offers are accepted (e.g., the 
award of multiple award schedule contracts).
    (b) The contracting officer shall give offers from HUBZone small 
business concerns a price evaluation preference by adding a factor of 
10 percent to all offers, except--

[[Page 70274]]

    (1) Offers from HUBZone small business concerns that have not 
waived the evaluation preference;
    (2) Otherwise successful offers from small business concerns;
    (3) Otherwise successful offers of eligible products under the 
Trade Agreements Act when the acquisition equals or exceeds the dollar 
threshold in 25.402; and
    (4) Otherwise successful offers where application of the factor 
would be inconsistent with a Memorandum of Understanding or other 
international agreement with a foreign government (see agency 
supplement).
    (c) The factor of 10 percent shall be applied on a line item basis 
or to any group of items on which award may be made. Other evaluation 
factors, such as transportation costs or rent-free use of Government 
facilities, shall be added to the offer to establish the base offer 
before adding the factor of 10 percent.
    (d) A concern that is both a HUBZone small business concern and a 
small disadvantaged business concern shall receive the benefit of both 
the HUBZone small business price evaluation preference and the small 
disadvantaged business price evaluation adjustment (see subpart 19.11). 
Each applicable price evaluation preference or adjustment shall be 
calculated independently against an offeror's base offer. These 
individual preference and adjustment amounts shall both be added to the 
base offer to arrive at the total evaluated price for that offer.


19.1308  Contract clauses.

    (a) The contracting officer shall insert the clause 52.219-3, 
Notice of Total HUBZone Set-Aside, in solicitations and contracts for 
acquisitions that are set aside for HUBZone small business concerns 
under 19.1305 or 19.1306.
    (b) The contracting officer shall insert the clause at 52.219-4, 
Notice of Price Evaluation Preference for HUBZone Small Business 
Concerns, in solicitations and contracts for acquisitions conducted 
using full and open competition. The clause shall not be used in 
acquisitions that do not exceed the simplified acquisition threshold.

PART 26--OTHER SOCIOECONOMIC PROGRAMS


26.104  [Amended]

    51. Section 26.104 is amended in paragraph (a) by removing the 
words ``Small, Small Disadvantaged and Women-Owned''.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    52. Section 52.212-3 is amended by adding Alternate III following 
Alternate II to read as follows:


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

* * * * *
    Alternate III (Jan 1999). As prescribed in 12.301(b)(2), add the 
following paragraph (c)(9) to the basic provision:
    (9) HUBZone small business concern. [Complete only if the 
offeror represented itself as a small business concern in paragraph 
(c)(1) of this provision.] The offeror represents as part of its 
offer that--
    (i) It {time}  is, {time}  is not a HUBZone small business 
concern listed, on the date of this representation, on the List of 
Qualified HUBZone Small Business Concerns maintained by the Small 
Business Administration, and no material change in ownership and 
control, principal place of ownership, or HUBZone employee 
percentage has occurred since it was certified by the Small Business 
Administration in accordance with 13 CFR part 126; and
    (ii) It {time}  is, {time}  is not a joint venture that complies 
with the requirements of 13 CFR part 126, and the representation in 
paragraph (c)(9)(i) of this provision is accurate for the HUBZone 
small business concern or concerns that are participating in the 
joint venture. [The offeror shall enter the name or names of the 
HUBZone small business concern or concerns that are participating in 
the joint venture: ________________________________.] Each HUBZone 
small business concern participating in the joint venture shall 
submit a separate signed copy of the HUBZone representation.

    53. Section 52.212-5 is amended in the clause by revising (b)(3) 
and (b)(4); redesignating (b)(9) through (b)(20) as (b)(12) through 
(b)(23), respectively; and adding new paragraphs (b)(9), (b)(10), and 
(b)(11) 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 (Jan. 1999)
* * * * *
    (b) * * *
    __ (3) 52.219-8, Utilization of Small Business Concerns (15 
U.S.C. 637 (d)(2) and (3)).
    __ (4) 52.219-9, Small Business Subcontracting Plan (15 U.S.C. 
637(d)(4)).
* * * * *
    __ (9) 52.219-3, Notice of HUBZone Small Business Set-Aside (Jan 
1999).
    __ (10) 52.219-4, Notice of Price Evaluation Preference for 
HUBZone Small Business Concerns (Jan 1999) (if the offeror elects to 
waive the preference, it shall so indicate in its offer).
    __ (11) 52.222-21, Prohibition of Segregated Facilities (Feb 
1999).
* * * * *
    54. Section 52.219-1 is amended by revising the introductory 
paragraph; in the introductory text of Alternate I by revising 
``19.306(a)(1)'' to read ``19.307(a)(1)''; and adding Alternate II 
following Alternate I to read as follows:


52.219-1  Small Business Program Representations.

    As prescribed in 19.307(a)(1), insert the following provision:
* * * * *
    Alternate II (Jan 1999). As prescribed in 19.307(a)(3), add the 
following paragraph (b)(5) to the basic provision:
    (5) [Complete only if offeror represented itself as a small 
business concern in paragraph (b)(1) of this provision.] The offeror 
represents, as part of its offer, that--
    (i) It {time}  is, {time}  is not a HUBZone small business 
concern listed, on the date of this representation, on the List of 
Qualified HUBZone Small Business Concerns maintained by the Small 
Business Administration, and no material change in ownership and 
control, principal place of ownership, or HUBZone employee 
percentage has occurred since it was certified by the Small Business 
Administration in accordance with 13 CFR part 126; and
    (ii) It {time}  is, {time}  is not a joint venture that complies 
with the requirements of 13 CFR part 126, and the representation in 
paragraph (b)(5)(i) of this provision is accurate for the HUBZone 
small business concern or concerns that are participating in the 
joint venture. [The offeror shall enter the name or names of the 
HUBZone small business concern or concerns that are participating in 
the joint venture: ____________.] Each HUBZone small business 
concern participating in the joint venture shall submit a separate 
signed copy of the HUBZone representation.


52.219-2  [Amended]

    55. Section 52.219-2 is amended in the introductory text by 
revising ``19.306(c)'' to read ``19.307(c)''.
    56. Sections 52.219-3 and 52.219-4 are added to read as follows:


52.219-3  Notice of total HUBZone set-aside.

    As prescribed in 19.1308(a), insert the following clause:

Notice of Total HUBZone Set-Aside (Jan 1999)

    (a) Definition. HUBZone small business concern, as used in this 
clause, means a small business concern that appears on the List of 
Qualified HUBZone Small Business Concerns maintained by the Small 
Business Administration.
    (b) General. (1) Offers are solicited only from HUBZone small 
business concerns. Offers received from concerns that are not 
HUBZone small business concerns shall not be considered.
    (2) Any award resulting from this solicitation will be made to a 
HUBZone small business concern.

[[Page 70275]]

    (c) Agreement. A HUBZone small business concern agrees that in 
the performance of the contract, in the case of a contract for--
    (1) Services (except construction), at least 50 percent of the 
cost of personnel for contract performance will be spent for 
employees of the concern or employees of other HUBZone small 
business concerns;
    (2) Supplies (other than acquisition from a nonmanufacturer of 
the supplies), at least 50 percent of the cost of manufacturing, 
excluding the cost of materials, will be performed by the concern or 
other HUBZone small business concerns;
    (3) General construction, at least 15 percent of the cost of the 
contract performance incurred for personnel will be spent on the 
concern's employees or the employees of other HUBZone small business 
concerns; or
    (4) Construction by special trade contractors, at least 25 
percent of the cost of the contract performance incurred for 
personnel will be spent on the concern's employees or the employees 
of other HUBZone small business concerns.
    (d) A HUBZone joint venture agrees that, in the performance of 
the contract, the applicable percentage specified in paragraph (c) 
of this clause will be performed by the HUBZone small business 
participant or participants.
    (e) A HUBZone small business concern nonmanufacturer agrees to 
furnish in performing this contract only end items manufactured or 
produced by HUBZone small business manufacturer concerns. This 
paragraph does not apply in connection with construction or service 
contracts.

(End of clause)


52.219-4  Notice of price evaluation preference for HUBZone small 
business concerns.

    As prescribed in 19.1308(b), insert the following clause:

Notice of Price Evaluation Preference for HUBZone Small Business 
Concerns (Jan 1999)

    (a) Definition. HUBZone small business concern, as used in this 
clause, means a small business concern that appears on the List of 
Qualified HUBZone Small Business Concerns maintained by the Small 
Business Administration.
    (b) Evaluation preference. (1) Offers will be evaluated by 
adding a factor of 10 percent to the price of all offers, except--
    (i) Offers from HUBZone small business concerns that have not 
waived the evaluation preference;
    (ii) Otherwise successful offers from small business concerns;
    (iii) Otherwise successful offers of eligible products under the 
Trade Agreements Act when the dollar threshold for application of 
the Act is exceeded (see 25.402 of the Federal Acquisition 
Regulation (FAR)); and
    (iv) Otherwise successful offers where application of the factor 
would be inconsistent with a Memorandum of Understanding or other 
international agreement with a foreign government.
    (2) The factor of 10 percent shall be applied on a line item 
basis or to any group of items on which award may be made. Other 
evaluation factors described in the solicitation shall be applied 
before application of the factor.
    (3) A concern that is both a HUBZone small business concern and 
a small disadvantaged business concern will receive the benefit of 
both the HUBZone small business price evaluation preference and the 
small disadvantaged business price evaluation adjustment (see FAR 
clause 52.219-23). Each applicable price evaluation preference or 
adjustment shall be calculated independently against an offeror's 
base offer.
    These individual preference amounts shall be added together to 
arrive at the total evaluated price for that offer.
    (c) Waiver of evaluation preference. A HUBZone small business 
concern may elect to waive the evaluation preference, in which case 
the factor will be added to its offer for evaluation purposes. The 
agreements in paragraph (d) of this clause do not apply if the 
offeror has waived the evaluation preference.
    {time}  Offeror elects to waive the evaluation preference.
    (d) Agreement. A HUBZone small business concern agrees that in 
the performance of the contract, in the case of a contract for
    (1) Services (except construction), at least 50 percent of the 
cost of personnel for contract performance will be spent for 
employees of the concern or employees of other HUBZone small 
business concerns;
    (2) Supplies (other than procurement from a nonmanufacturer of 
such supplies), at least 50 percent of the cost of manufacturing, 
excluding the cost of materials, will be performed by the concern or 
other HUBZone small business concerns;
    (3) General construction, at least 15 percent of the cost of the 
contract performance incurred for personnel will be will be spent on 
the concern's employees or the employees of other HUBZone small 
business concerns; or
    (4) Construction by special trade contractors, at least 25 
percent of the cost of the contract performance incurred for 
personnel will be spent on the concern's employees or the employees 
of other HUBZone small business concerns.
    (e) A HUBZone joint venture agrees that in the performance of 
the contract, the applicable percentage specified in paragraph (d) 
of this clause will be performed by the HUBZone small business 
participant or participants.
    (f) A HUBZone small business concern nonmanufacturer agrees to 
furnish in performing this contract only end items manufactured or 
produced by HUBZone small business manufacturer concerns. This 
paragraph does not apply in connection with construction or service 
contracts.
(End of clause)

    57. Section 52.219-8 is revised to read as follows:


52.219-8  Utilization of small business concerns.

    As prescribed in 19.708(a), insert the following clause:

Utilization of Small Business Concerns (Jan 1999)

    (a) It is the policy of the United States that small business 
concerns, HUBZone small business concerns, small business concerns 
owned and controlled by socially and economically disadvantaged 
individuals, and small business concerns owned and controlled by 
women shall have the maximum practicable opportunity to participate 
in performing contracts let by any Federal agency, including 
contracts and subcontracts for subsystems, assemblies, components, 
and related services for major systems. It is further the policy of 
the United States that its prime contractors establish procedures to 
ensure the timely payment of amounts due pursuant to the terms of 
their subcontracts with small business concerns, HUBZone small 
business concerns, small business concerns owned and controlled by 
socially and economically disadvantaged individuals, and small 
business concerns owned and controlled by women.
    (b) The Contractor hereby agrees to carry out this policy in the 
awarding of subcontracts to the fullest extent consistent with 
efficient contract performance. The Contractor further agrees to 
cooperate in any studies or surveys as may be conducted by the 
United States Small Business Administration or the awarding agency 
of the United States as may be necessary to determine the extent of 
the Contractor's compliance with this clause.
    (c) Definitions. As used in this contract
    (1) Small business concern means a small business as defined 
pursuant to section 3 of the Small Business Act and relevant 
regulations promulgated pursuant thereto.
    (2) HUBZone small business concern means a small business 
concern that appears on the List of Qualified HUBZone Small Business 
Concerns maintained by the Small Business Administration.
    (3) Small business concern owned and controlled by socially and 
economically disadvantaged individuals means an offeror that 
represents, as part of its offer, that--
    (i) It is a small business under the size standard applicable to 
the acquisition;
    (ii) It has received certification as a small disadvantaged 
business concern consistent with 13 CFR part 124, Subpart B;
    (iii) No material change in disadvantaged ownership and control 
has occurred since its certification;
    (iv) Where the concern is owned by one or more individuals, the 
net worth of each individual upon whom the certification is based 
does not exceed $750,000 after taking into account the applicable 
exclusions set forth at 13 CFR 124.104(c)(2); and
    (v) It is listed, on the date of its representation, on the 
register of small disadvantaged business concerns maintained by the 
Small Business Administration.
    (4) Small business concern owned and controlled by women means a 
small business concern--
    (i) Which is at least 51 percent owned by one or more women, or, 
in the case of any publicly owned business, at least 51 percent of 
the stock of which is owned by one or more women; and

[[Page 70276]]

    (ii) Whose management and daily business operations are 
controlled by one or more women; and
    (d) Contractors acting in good faith may rely on written 
representations by their subcontractors regarding their status as a 
small business concern, a HUBZone small business concern, a small 
business concern owned and controlled by socially and economically 
disadvantaged individuals, or a small business concern owned and 
controlled by women.
(End of clause)

    58. Section 52.219-9 is amended--
    a. By revising the section and clause headings;
    b. By revising the first and second sentences of paragraph (c);
    c. By revising the first sentence of paragraph (d)(1);
    d. By redesignating (d)(2)(iii) and (d)(2)(iv) as (d)(2)(iv) and 
(d)(2)(v) and adding a new (d)(2)(iii);
    e. By revising paragraph (d)(3);
    f. In the first sentence of paragraph (d)(5) by adding ``HUBZone 
small,'' after the words ``or small,'';
    g. By revising paragraph (d)(6);
    h. In paragraph (d)(8) by adding ``business, HUBZone small 
business,'' after the words ``that small''; and adding ``business,'' 
after ``small disadvantaged'';
    i. In paragraph (d)(9) by removing the word ``in'' the first time 
it is used and adding ``of'' in its place; and removing the words 
``Small, Small Disadvantaged and Women-Owned'';
    j. By revising paragraph (d)(11);
    k. By revising paragraphs (e)(1), (e)(2), (e)(3), and (e)(4);
    l. In paragraph (i)(1) by removing the words ``Small, Small 
Disadvantaged and Women-Owned''; and
    m. By revising Alternates I and II to read as follows:


52.219-9  Small business subcontracting plan.

* * * * *

Small Business Subcontracting Plan (Jan 1999)

* * * * *
    (c) The offeror, upon request by the Contracting Officer, shall 
submit and negotiate a subcontracting plan, where applicable, that 
separately addresses subcontracting with small business, HUBZone 
small business concerns, small disadvantaged business, and women-
owned small business concerns. If the offeror is submitting an 
individual contract plan, the plan must separately address 
subcontracting with small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns, 
with a separate part for the basic contract and separate parts for 
each option (if any). * * *
    (d) * * *
    (1) Goals, expressed in terms of percentages of total planned 
subcontracting dollars, for the use of small business, HUBZone small 
business, small disadvantaged business, and women-owned small 
business concerns as subcontractors. * * *
    (2) * * *
    (iii) Total dollars planned to be subcontracted to HUBZone small 
business concerns;
* * * * *
    (3) A description of the principal types of supplies and 
services to be subcontracted, and an identification of the types 
planned for subcontracting to--
    (i) Small business concerns;
    (ii) HUBZone small business concerns;
    (iii) Small disadvantaged business concerns; and
    (iv) Women-owned small business concerns.
* * * * *
    (6) A statement as to whether or not the offeror in included 
indirect costs in establishing subcontracting goals, and a 
description of the method used to determine the proportionate share 
of indirect costs to be incurred with--
    (i) Small business concerns;
    (ii) HUBZone small business concerns;
    (iii) Small disadvantaged business concerns; and
    (iv) Women-owned small business concerns.
* * * * *
    (11) A description of the types of records that will be 
maintained concerning procedures that have been adopted to comply 
with the requirements and goals in the plan, including establishing 
source lists; and a description of the offeror's efforts to locate 
small business, HUBZone small business, small disadvantaged 
business, and women-owned small business concerns and award 
subcontracts to them. The records shall include at least the 
following (on a plant-wide or company-wide basis, unless otherwise 
indicated):
    (i) Source lists (e.g., PRO-Net), guides, and other data that 
identify small business, HUBZone small business, small disadvantaged 
business, and women-owned small business concerns.
    (ii) Organizations contacted in an attempt to locate sources 
that are small business, HUBZone small business, small disadvantaged 
business, or women-owned small business concerns.
    (iii) Records on each subcontract solicitation resulting in an 
award of more than $100,000, indicating--
    (A) Whether small business concerns were solicited and, if not, 
why not;
    (B) Whether HUBZone small business concerns were solicited and, 
if not, why not;
    (C) Whether small disadvantaged business concerns were solicited 
and, if not, why not;
    (D) Whether women-owned small business concerns were solicited 
and, if not, why not; and
    (E) If applicable, the reason award was not made to a small 
business concern.
    (iv) Records of any outreach efforts to contact--
    (A) Trade associations;
    (B) Business development organizations; and
    (C) Conferences and trade fairs to locate small, HUBZone small, 
small disadvantaged, and women-owned small business sources.
    (v) Records of internal guidance and encouragement provided to 
buyers through--
    (A) Workshops, seminars, training, etc.; and
    (B) Monitoring performance to evaluate compliance with the 
program's requirements.
    (vi) On a contract-by-contract basis, records to support award 
data submitted by the offeror to the Government, including the name, 
address, and business size of each subcontractor. Contractors having 
commercial plans need not comply with this requirement.
    (e) * * *
    (1) Assist small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns by 
arranging solicitations, time for the preparation of bids, 
quantities, specifications, and delivery schedules so as to 
facilitate the participation by such concerns. Where the 
Contractor's lists of potential small business, HUBZone small 
business, small disadvantaged business, and women-owned small 
business subcontractors are excessively long, reasonable effort 
shall be made to give all such small business concerns an 
opportunity to compete over a period of time.
    (2) Provide adequate and timely consideration of the 
potentialities of small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns in 
all ``make-or-buy'' decisions.
    (3) Counsel and discuss subcontracting opportunities with 
representatives of small business, HUBZone small business, small 
disadvantaged business, and women-owned small business firms.
    (4) Provide notice to subcontractors concerning penalties and 
remedies for misrepresentations of business status as small, HUBZone 
small, small disadvantaged, or women-owned small business for the 
purpose of obtaining a subcontract that is to be included as part or 
all of a goal contained in the Contractor's subcontracting plan.
* * * * *
    Alternate I (Jan 1999). When contracting by sealed bidding rather 
than by negotiation, substitute the following paragraph (c) for 
paragraph (c) of the basic clause:

    (c) The apparent low bidder, upon request by the Contracting 
Officer, shall submit a subcontracting plan, where applicable, that 
separately addresses subcontracting with small business, HUBZone 
small business, small disadvantaged business, and women-owned small 
business concerns. If the bidder is submitting an individual 
contract plan, the plan must separately address subcontracting with 
small business, HUBZone small business, small disadvantaged 
business, and women-owned small business concerns, with a separate 
part for the basic contract and separate parts for each option (if 
any). The plan shall be included in and made a part of the resultant 
contract. The subcontracting plan shall be submitted within the time 
specified by the Contracting Officer. Failure to submit the 
subcontracting plan shall make

[[Page 70277]]

the bidder ineligible for the award of a contract.

    Alternate II (Jan 1999). As prescribed in 19.708(b)(1), substitute 
the following paragraph (c) for paragraph (c) of the basic clause:

    (c) Proposals submitted in response to this solicitation shall 
include a subcontracting plan that separately addresses 
subcontracting with small business, HUBZone small business, small 
disadvantaged business, and women-owned small business concerns. If 
the offeror is submitting an individual contract plan, the plan must 
separately address subcontracting with small business, HUBZone small 
business, small disadvantaged business, and women-owned small 
business concerns, with a separate part for the basic contract and 
separate parts for each option (if any). The plan shall be included 
in and made a part of the resultant contract. The subcontracting 
plan shall be negotiated within the time specified by the 
Contracting Officer. Failure to submit and negotiate a 
subcontracting plan shall make the offeror ineligible for award of a 
contract.

    59. Section 52.219-10 is amended by revising paragraph (a) of the 
clause; and in the first sentence of paragraph (b) by removing 
``concerns'' the first time it is used and adding ``HUBZone small 
business,'' in its place. The revised text reads as follows:


52.219-10  Incentive Subcontracting Program.

* * * * *

Incentive Subcontracting Program (Jan 1999)

    (a) Of the total dollars it plans to spend under subcontracts, 
the Contractor has committed itself in its subcontracting plan to 
try to award certain percentages to small business, HUBZone small 
business, small disadvantaged business, and women-owned small 
business concerns, respectively.
* * * * *


52.219-16  [Amended]

    60. Section 52.219-16 is amended by revising the date of the clause 
to read ``(JAN 1999)''; and in paragraph (a) and the second sentence of 
paragraph (b) of the clause by removing the words ``Small, Small 
Disadvantaged and Women-Owned''.


52.219-22  [Amended]

    61. Section 52.219-22 is amended in the introductory paragraph by 
revising ``19.306(b)'' to read ``19.307(b)''.


52.226-1  [Amended]

    62. Section 52.226-1 is amended by revising the date of the clause 
to read ``(JAN 1999)''; and in paragraph (a) of the clause by removing 
the words ``Small, Small Disadvantaged and Women-Owned''.

PART 53--FORMS

    63. Section 53.219 is amended by revising paragraph (a); and in 
paragraph (b) by revising the revision date of the form to read ``(Rev. 
12/98)''.


53.219  Small business programs.

* * * * *
    (a) SF 294 (Rev. 12/98), Subcontracting Report for Individual 
Contracts. (See 19.704(a)(10).) SF 294 is authorized for local 
reproduction and a copy is furnished for this purpose in part 53 of the 
loose-leaf edition of the FAR.
* * * * *
    64. Sections 53.301-294 and 53.301-295 are revised to read as 
follows:


53.301-294  Subcontracting Report for Individual Contracts.

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[[Page 70279]]

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53.301-295  Summary Subcontract Report.
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[FR Doc. 98-33513 Filed 12-16-98; 8:45 am]
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