[Federal Register Volume 64, Number 42 (Thursday, March 4, 1999)]
[Rules and Regulations]
[Pages 10535-10538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5204]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

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

[FAC 97-11; FAR Case 98-013; Item II]
RIN 9000-AI29


Federal Acquisition Regulation; Very Small Business Concerns

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

ACTION: Interim rule with request for comments.

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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 the Small 
Business Administration's Very Small Business Pilot Program (13 CFR 
parts 121 and 125).

DATES: Effective Date: March 4, 1999.
    Applicability Date: This rule applies to solicitations issued on or 
after March 4, 1999.
    Comment Date: Comments should be submitted to the FAR Secretariat 
at the address shown below on or before May 3, 1999, to be considered 
in the formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVR), 1800 F Street, 
NW, Room 4035, Attn: Ms. Laurie Duarte, Washington, DC 20405.

    E-Mail comments submitted over the Internet should be addressed to: 
[email protected]
    Please cite FAC 97-11, FAR case 98-013 in all correspondence 
related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC 20405, (202) 501-4755, for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ms. Victoria Moss, Procurement Analyst, at (202) 501-
4764. Please cite FAC 97-11, FAR case 98-013.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 304 of the Small Business Administration Reauthorization 
and Amendments Act of 1994 (Pub. L. 103-403) authorized the SBA 
Administrator to establish and carry out a pilot program for very small 
business (VSB) concerns. The Small Business Administration (SBA) 
published a final rule in the Federal Register on September 2, 1998 (63 
FR 46640), amending 13 CFR parts 121 and 125 to establish a pilot 
program for VSB business concerns. The purpose of the program is to 
improve access to Government contract opportunities for concerns that 
are substantially below SBA's size standards by reserving certain 
acquisitions for competition among such VSB concerns. Implementation of 
the program is limited to geographic areas served by 10 SBA district 
offices. A VSB concern is defined as a small business that has 15 or 
fewer employees together with average annual receipts that do not 
exceed $1 million. Any procurement that has an anticipated dollar value 
exceeding $2,500 but not greater than $50,000 may be set aside for VSB 
concerns. A contracting officer must set aside for VSB concerns any 
such service or construction requirement that will be performed within 
the geographical boundaries served by a designated SBA district office 
if there is a reasonable expectation of obtaining fair and reasonable 
offers from two or more responsible VSB concerns headquartered within 
the geographical area served by that designated SBA district. In the 
case of a procurement for supplies, a contracting officer must set 
aside any such requirement for VSBs if the contracting office is 
located within the geographical area served by a designated SBA 
district, and there is a reasonable expectation of obtaining fair and 
reasonable offers from two or more responsible VSB concerns 
headquartered within the geographical area served by that designated 
SBA district office. A decision chart to assist contracting personnel 
in making the decision to set aside an acquisition for VSB concerns is 
located at http://www.arnet.gov/References/VerySmall.html. The program 
will expire on September 30, 2000, unless further extended through 
legislation.
    This regulatory action was not subject to Office of Management and 
Budget review under Executive Order 12866, dated September 30, 1993, 
and is not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The changes may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., because Section 304 of the Small 
Business Administration Reauthorization and Amendments Act of 1994 
(Pub. L. 103-403) called for the Small Business Administration (SBA) to 
conduct a pilot program to improve access to Federal Government 
contract opportunities for concerns that are substantially below SBA's 
size standards by reserving certain procurements for competition among 
such very small business (VSB) concerns. SBA's final rule implementing 
the pilot program was published in the Federal Register on September 2, 
1998 (63 FR 46640).
    The SBA provides, in its final rule, that the rule should have no 
effect on the amount of dollar value of any contract requirement or the 
number of requirements reserved for the small business set-aside 
program, since it is administered within and is a component of the 
small business set-aside program. Estimates of the number of entities 
to which the rule will apply were submitted by SBA in its regulatory 
flexibility analysis prepared for the final SBA rule. An Initial 
Regulatory Flexibility Analysis (IRFA) has been prepared and will be 
provided to the Chief Counsel for Advocacy for the Small Business 
Administration. A copy of the IRFA may be obtained from the FAR 
Secretariat. Comments are invited. Comments from small entities 
concerning the affected FAR subpart will be considered in accordance 
with 5 U.S.C. 610. Such comments must be submitted separately and 
should cite 5 U.S.C 601, et seq. (FAC 97-11, FAR Case 98-013), in 
correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose information collection requirements that require 
the approval of the Office of Management and Budget under 44 U.S.C. 
3501, et seq.

[[Page 10536]]

D. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DoD), the Administrator of General Services (GSA), and the 
Administrator of the National Aeronautics and Space Administration 
(NASA) that urgent and compelling reasons exist to promulgate this 
interim rule without prior opportunity for public comment. This action 
is necessary to conform the Federal Acquisition Regulation to revisions 
made to the Small Business Administration's small business size and 
Government contracting assistance regulations to incorporate the Very 
Small Business Set-Aside Pilot Program. The Small Business 
Administration's rule is effective on January 4, 1999. However, 
pursuant to Public Law 98-577 and FAR 1.501, public comments received 
in response to this interim rule will be considered in the formation of 
the final rule.

List of Subjects in 48 CFR Parts 5, 8, 12, 19, and 52

    Government procurement.

    Dated: February 25, 1999.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, 48 CFR Parts 5, 8, 12, 19, and 52 are amended as set 
forth below:
    1. The authority citation for 48 CFR Parts 5, 8, 12, 19, and 52 
continues to read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 5--PUBLICIZING CONTRACT ACTIONS

    2. Section 5.207 is amended by adding paragraph (c)(2)(xviii); and 
by revising paragraph (d) to read as follows:


 5.207  Preparation and transmittal of synopses.

* * * * *
    (c)(2) * * *
    (xviii) In the case of a very small business set-aside, identify 
the Designated Region (see subpart 19.9).
    (d) Set-asides. When the proposed acquisition provides for a total, 
partial, or very small business set-aside, or a HUBZone small business 
set-aside, the appropriate CBD Numbered Note will be cited.
* * * * *

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

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


8.404  Using schedules.

    (a) General. When agency requirements are to be satisfied through 
the use of Federal Supply Schedules as set forth in this subpart, the 
simplified acquisition procedures of Part 13 and the small business 
provisions of Part 19 do not apply, except for the provision at 13.303-
2(c)(3). Orders placed pursuant to a Multiple Award Schedule (MAS), 
using the procedures in this subpart, are considered to be issued 
pursuant to full and open competition (see 6.102(d)(3)). Therefore, 
when placing orders under Federal Supply Schedules, ordering offices 
need not seek further competition, synopsize the requirement, make a 
separate determination of fair and reasonable pricing, or consider 
small business programs. GSA has already determined the prices of items 
under schedule contracts to be fair and reasonable. By placing an order 
against a schedule using the procedures in this section, the ordering 
office has concluded that the order represents the best value and 
results in the lowest overall cost alternative (considering price, 
special features, administrative costs, etc.) to meet the Government's 
needs.
* * * * *

PART 12--ACQUISITION OF COMMERCIAL ITEMS


 12.303  [Amended]

    4. Section 12.303 is amended at the end of paragraph (b)(1) by 
removing the semicolon and adding ``, or set-aside for very small 
business concerns;''.

PART 19--SMALL BUSINESS PROGRAMS

    5. Section 19.000 is amended at the end of paragraph (a)(8) by 
removing ``and''; in paragraph (a)(9) by removing the period and adding 
``; and''; and by adding paragraph (a)(10) to read as follows:


 19.000  Scope of part.

    (a) * * *
    (10) The Very Small Business Pilot Program.
* * * * *
    6. Section 19.001 is amended by adding, in alphabetical order, the 
definition ``Very small business concern'' to read as follows:


 19.001  Definitions.

* * * * *
    Very small business concern means a small business concern--
    (1) Whose headquarters is located within the geographic area served 
by a designated SBA district; and
    (2) Which, together with its affiliates, has no more than 15 
employees and has average annual receipts that do not exceed $1 
million.
* * * * *
    7. Section 19.102 is amended by redesignating paragraph ``(g)'' as 
``(h)''; and by adding a new paragraph (g) to read as follows:


 19.102  Size standards.

* * * * *
    (g) In the case of acquisitions set aside for very small business 
in accordance with 19.904, offerors may not have more than 15 employees 
and may not have average annual receipts that exceed $1 million.
* * * * *


 19.502-2   [Amended]

    8. Section 19.502-2 is amended in the first sentence of paragraph 
(a) by removing ``Each'' and adding ``Except for those acquisitions set 
aside for very small business concerns (see subpart 19.9), each''.
    9. Subpart 19.9, consisting of sections 19.901 through 19.905, is 
added to read as follows:

Subpart 19.9--Very Small Business Pilot Program

Sec.
    19.901  General.
    19.902  Definition.
    19.903  Applicability.
    19.904  Procedures.
    19.905  Solicitation provision and contract clause.

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

Subpart 19.9--Very Small Business Pilot Program


 19.901  General.

    (a) The Very Small Business Pilot Program was established under 
Section 304 of the Small Business Administration Reauthorization and 
Amendments Act of 1994 (Public Law 103-403).
    (b) The purpose of the program is to improve access to Government 
contract opportunities for concerns that are substantially below SBA's 
size standards by reserving certain acquisitions for competition among 
such concerns.
    (c) This pilot program terminates on September 30, 2000. Therefore, 
any award under this program must be made on or before this date.


19.902  Definition.

    Designated SBA district means the geographic area served by any of 
the following SBA district offices:

[[Page 10537]]

    (1) Albuquerque, NM, serving New Mexico.
    (2) Los Angeles, CA, serving the following counties in California: 
Los Angeles, Santa Barbara, and Ventura.
    (3) Boston, MA, serving Massachusetts.
    (4) Louisville, KY, serving Kentucky.
    (5) Columbus, OH, serving the following counties in Ohio: Adams, 
Allen, Ashland, Athens, Auglaize, Belmont, Brown, Butler, Champaign, 
Clark, Clermont, Clinton, Coshocton, Crawford, Darke, Delaware, 
Fairfield, Fayette, Franklin, Gallia, Greene, Guernsey, Hamilton, 
Hancock, Hardin, Highland, Hocking, Holmes, Jackson, Knox, Lawrence, 
Licking, Logan, Madison, Marion, Meigs, Mercer, Miami, Monroe, 
Montgomery, Morgan, Morrow, Muskingum, Noble, Paulding, Perry, 
Pickaway, Pike, Preble, Putnam, Richland, Ross, Scioto, Shelby, Union, 
Van Wert, Vinton, Warren, Washington, and Wyandot.
    (6) New Orleans, LA, serving Louisiana.
    (7) Detroit, MI, serving Michigan.
    (8) Philadelphia, PA, serving the State of Delaware and the 
following counties in Pennsylvania: Adams, Berks, Bradford, Bucks, 
Carbon, Chester, Clinton, Columbia, Cumberland, Dauphin, Delaware, 
Franklin, Fulton, Huntington, Juniata, Lackawanna, Lancaster, Lebanon, 
Lehigh, Luzerne, Lycoming, Mifflin, Monroe, Montgomery, Montour, 
Northampton, Northumberland, Philadelphia, Perry, Pike, Potter, 
Schuylkill, Snyder, Sullivan, Susquehanna, Tioga, Union, Wayne, 
Wyoming, and York.
    (9) El Paso, TX, serving the following counties in Texas: Brewster, 
Culberson, El Paso, Hudspeth, Jeff Davis, Pecos, Presidio, Reeves, and 
Terrell.
    (10) Santa Ana, CA, serving the following counties in California: 
Orange, Riverside, and San Bernadino.


19.903  Applicability.

    (a) The Very Small Business Pilot Program applies to acquisitions, 
including construction acquisitions, with an estimated value exceeding 
$2,500 but not greater than $50,000, when--
    (1) In the case of an acquisition for supplies, the contracting 
office is located within the geographical area served by a designated 
SBA district; or
    (2) In the case of an acquisition for other than supplies, the 
contract will be performed within the geographical area served by a 
designated SBA district.
    (b) The Very Small Business Pilot Program does not apply to--
    (1) Acquisitions that will be awarded pursuant to the 8(a) Program; 
or
    (2) Any requirement that is subject to the Small Business 
Competitiveness Demonstration Program (see Subpart 19.10).


19.904  Procedures.

    (a) A contracting officer shall set-aside for very small business 
concerns each acquisition that has an anticipated dollar value 
exceeding $2,500 but not greater than $50,000 if--
    (1) In the case of an acquisition for supplies--
    (i) The contracting office is located within the geographical area 
served by a designated SBA district; and
    (ii) There is a reasonable expectation of obtaining offers from two 
or more responsible very small business concerns headquartered within 
the geographical area served by the designated SBA district that are 
competitive in terms of market prices, quality, and delivery; or
    (2) In the case of an acquisition for services--
    (i) The contract will be performed within the geographical area 
served by a designated SBA district; and
    (ii) There is a reasonable expectation of obtaining offers from two 
or more responsible very small business concerns headquartered within 
the geographical area served by the designated SBA district that are 
competitive in terms of market prices, quality, and delivery.
    (b) Contracting officers shall determine the applicable designated 
SBA district office as defined at 19.902. The geographic areas served 
by the SBA Los Angeles and Santa Ana District offices will be treated 
as one designated SBA district for the purposes of this subpart.
    (c) If no reasonable expectation exists under paragraphs (a)(1)(ii) 
and (a)(2)(ii) of this section, the contracting officer shall document 
the file and proceed with the acquisition in accordance with Subpart 
19.5.
    (d) If the contracting officer receives only one acceptable offer 
from a responsible very small business concern in response to a very 
small business set-aside, the contracting officer should make an award 
to that firm. If there is no offer received from a very small business 
concern, the contracting officer shall cancel the very small business 
set-aside and proceed with the acquisition in accordance with Subpart 
19.5.


19.905  Solicitation provision and contract clause.

    The contracting officer shall use the clause at 52.219-5, Very 
Small Business Set-Aside, in solicitations and contracts if the 
acquisition is set aside for very small business concerns.
    (a) The contracting officer shall use the clause at 52.219-5 with 
its Alternate I--
    (1) In construction or service contracts; or
    (2) When the acquisition is for a product in a class for which the 
Small Business Administration has waived the nonmanufacturer rule (see 
19.102(f)(4) and (5)).
    (b) The contracting officer shall use the clause at 52.219-5 with 
its Alternate II when Alternate I does not apply, the acquisition is 
processed under simplified acquisition procedures, and the total amount 
of the contract does not exceed $25,000.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    10. Section 52.212-5 is amended by revising the clause date; and by 
redesignating paragraphs (b)(2) through (b)(8) as (b)(4) through 
(b)(10), and (b)(9) and (b)(10) as (b)(2) and (b)(3), respectively; and 
by revising newly designated paragraph (b)(4) of the clause to read as 
follows:


52.212-5  Contract Terms and Conditions Required To Implement Statutes 
or Executive Orders--Commercial Items.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or 
Executive Orders--Commercial Items (Mar 1999)

* * * * *
    (b) * * *
    ____(4)(i) 52.219-5, Very Small Business Set-Aside (Pub. L. 103-
403, section 304, Small Business Reauthorization and Amendments Act 
of 1994).
    ____(ii) Alternate I to 52.219-5.
    ____(iii) Alternate II to 52.219-5.
* * * * *
    11. Section 52.219-5 is added to read as follows:


52.219-5  Very Small Business Set-Aside.

    As prescribed in 19.905, insert the following clause:

Very Small Business Set-Aside (Mar 1999)

    (a) Definition. Very Small Business Concern, as used in this 
clause, means a concern whose headquarters is located within the 
geographical area served by a designated SBA district (see 13 CFR 
125.7(b)); which, together with its affiliates, has no more than 15 
employees and has average annual receipts that do not exceed $1 
million.
    (b) Eligibility. (1) Only those firms headquartered in the ----
------------------------------ Small Business Administration (SBA) 
district [Contracting Officer shall insert the applicable SBA 
designated district. If the geographic area is served by the SBA Los 
Angeles or Santa Ana District offices, list both] are eligible for 
this acquisition.

[[Page 10538]]

    (2) Offers or quotations under this acquisition are solicited 
from very small business concerns only. Offers that are from other 
than an eligible very small business concern shall not be considered 
and shall be rejected. The offeror represents that it is an eligible 
very small business concern by submission of an offer or quotation.
    (c) Agreement. A very small business concern submitting an offer 
in its own name agrees to furnish, in performing the contract, only 
end items manufactured or produced by small business concerns in the 
United States. As used in this clause, the term United States 
includes its territories and possessions, the Commonwealth of Puerto 
Rico, the trust territory of the Pacific Islands, and the District 
of Columbia.

(End of clause)

    Alternate I (Mar 1999). As prescribed in 19.905(a), delete 
paragraph (c) of the basic clause.
    Alternate II (Mar 1999). As prescribed in 19.905(b), substitute 
the following paragraph (c) for paragraph (c) of the basic clause:
    (c) Agreement. A very small business concern submitting an offer 
in its own name agrees to furnish, in performing the contract, only 
end items manufactured or produced by domestic firms in the United 
States. As used in this clause, the term United States includes its 
territories and possessions, the Commonwealth of Puerto Rico, the 
trust territory of the Pacific Islands, and the District of 
Columbia.

[FR Doc. 99-5204 Filed 3-3-99; 8:45 am]
BILLING CODE 6820-EP-P