[Federal Register Volume 64, Number 127 (Friday, July 2, 1999)]
[Rules and Regulations]
[Pages 36222-36225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16855]



[[Page 36221]]

_______________________________________________________________________

Part VII

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________



48 CFR Part 1 et al.



Federal Acquisition Regulation; Reform of Affirmative Action in Federal 
Procurement and Small Entity Compliance Guide; Final Rules

  Federal Register / Vol. 64, No. 127 / Friday, July 2, 1999 / Rules 
and Regulations  

[[Page 36222]]



DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 12, 14, 15, 19, 26, 33, 52, and 53

[FAC 97-13; FAR Case 97-004]
RIN 9000-AH59


Federal Acquisition Regulation; Reform of Affirmative Action in 
Federal Procurement

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

ACTION: Final rule.

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

SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (the Councils) have agreed to adopt the 
interim rules published in the Federal Register at 63 FR 35719, June 
30, 1998; 63 FR 36120, July 1, 1998; 63 FR 52426, September 30, 1998; 
and 63 FR 71721, December 29, 1998, as final rules with changes. These 
amendments conform to a Department of Justice (DoJ) model for reform of 
affirmative action in Federal procurement. DoJ's proposal is designed 
to ensure compliance with the constitutional standards established by 
the Supreme Court in Adarand Constructors, Inc. v. Pena, 115 S. Ct. 
2097 (1995).

DATES: Effective Date: October 1, 1999.
    Applicability Date: The policies, provisions, and clauses of this 
final rule are effective for all solicitations issued on or after 
October 1, 1999.

FOR FURTHER INFORMATION CONTACT: Ms. Victoria Moss, Procurement 
Analyst, Federal Acquisition Policy Division, General Services 
Administration, at (202) 501-4764, or Mr. Charles Zuckerman, Office of 
the Director of Defense Procurement, Department of Defense, at (703) 
697-0895. For general information, contact the FAR Secretariat, Room 
4035, GS Building, Washington, DC, 20405, (202) 501-4755. Please cite 
FAC 97-13, FAR case 97-004.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD, GSA, and NASA issued the following Federal Acquisition 
Circulars (FACs) to make amendments to the FAR concerning programs for 
small disadvantaged business concerns:

FAC 97-06, 63 FR 35719, June 30, 1998
FAC 97-07, 63 FR 36120, July 1, 1998
FAC 97-08, 63 FR 52426, September 30, 1998
FAC 97-07 Addendum, 63 FR 71721, December 29, 1998

These amendments conformed to the DoJ model for reform of affirmative 
action in Federal procurement. This rule revises and finalizes the 
above interim rules. The Councils received twenty-four letters 
containing 63 comments in response to the interim rules and considered 
them in the formulation of this final rule. The Councils made only one 
significant change to the rule, as follows:
    FAC 97-07 Addendum amended the FAR to allow contractors acting in 
good faith to rely upon the self-representations of their 
subcontractors as to their status as small disadvantaged business 
concerns. The change provided an additional period of time for 
subcontractors to become certified under rules issued by the Small 
Business Administration. That time period is being extended to 
September 30, 1999. Accordingly, this final rule, which becomes 
effective on October 1, 1999, rescinds the change made by FAC 97-07 
Addendum.
    Also, the Councils made several clarifying amendments in this final 
rule, including removing all references to a list of SDBs to be 
maintained by the Small Business Administration and referring instead 
to SBA's PRO-Net database.
    This rule was subject to Office of Management and Budget review 
under Section 6(b) of Executive Order 12866, Regulatory Planning and 
Review, dated September 30, 1993. This is 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 the rule provides 
preferences through which the Government may provide small business 
concerns benefits in Federal contracting. The Final Regulatory 
Flexibility Analysis (FRFA) is summarized as follows:

    In Adarand Constructors, Inc. v. Pena, 115 S. Ct. 2097 (1995), 
the Supreme Court extended strict judicial scrutiny to Federal 
affirmative action programs that use racial or ethnic criteria as a 
basis for decision-making. Following the decision, the Department of 
Justice (DoJ) published, at 61 FR 26042 (May 23, 1996), Proposed 
Reforms to Affirmative Action in Federal Procurement. This DoJ model 
was implemented in several parts: Small Business Administration 
(SBA) regulations; publication of the Department of Commerce price 
evaluation adjustments for use in Federal procurements; and interim 
FAR rules.
    Four interim FAR rules established in the FAR three procurement 
mechanisms benefiting small disadvantaged businesses (SDBs). The 
first mechanism is a price evaluation adjustment of up to 10 percent 
in certain two-digit Standard Industrial Classification (SIC) Major 
Groups. The second mechanism is a source selection evaluation factor 
or subfactor for planned SDB participation in the performance of a 
contract. The third mechanism provides for a monetary incentive for 
subcontracting with SDBs.
    We received one public comment that specifically addressed the 
Initial Regulatory Flexibility Analysis. That comment provided that 
the rule imposes a complicated tracking system and will not increase 
opportunities for small disadvantaged businesses. We made no changes 
to the rule based on this comment. While we recognize that the rule 
calls for more detailed reporting of SDB subcontractors in order to 
comply with the DoJ proposal, no alternatives to that reporting 
exist. The commenter provided no evidence to support the commenter's 
opinion that this rule will not increase opportunities for small 
disadvantaged businesses. It is our opinion that, to the contrary, 
this rule will increase opportunities for such firms, particularly 
in the award of prime contracts by civilian agencies that, unlike 
DoD, have not previously granted procurement preferences to SDBs.

The FAR Secretariat has submitted a copy of the FRFA to the Chief 
Counsel for Advocacy of the Small Business Administration. Interested 
parties may obtain a copy from the FAR Secretariat. The Council will 
consider comments from small entities concerning the affected FAR 
subpart in accordance with 5 U.S.C. 610. Interested parties must submit 
such comments separately and should cite 5 U.S.C 601, et seq. (FAC 97-
13, FAR Case 97-004), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 104-13) applies because the 
rules being converted to a final rule contain reporting and 
recordkeeping requirements. OMB approved the information collections 
under OMB clearance numbers 9000-0007 through June 30, 2000, and 9000-
0150 through June 30, 2000. This final rule does not affect those 
previously approved information collection requirements.

List of Subjects in 48 CFR Parts 1, 12, 14, 15, 19, 26, 33, 52, and 
53

    Government procurement.


[[Page 36223]]


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

Federal Acquisition Circular

    Federal Acquisition Circular (FAC) 97-13 is issued under the 
authority of the Secretary of Defense, the Administrator of General 
Services, and the Administrator for the National Aeronautics and Space 
Administration.
    The policies, provisions and clauses of this final rule are 
effective for all solicitations issued on or after October 1, 1999.
Eleanor R. Spector,
Director, Defense Procurement.
    Dated: June 15, 1999
Ida M. Ustad,
Deputy Associate Administrator, Office of Acquisition Policy, General 
Services Administration.
June 16, 1999.

Tom Luedtke,
Associate Administrator for Procurement, National Aeronautics and Space 
Administration.
June 11, 1999.

Interim Rules Adopted as Final With Changes

    Accordingly, DoD, GSA, and NASA adopt the interim rules amending 48 
CFR parts 1, 12, 14, 15, 19, 26, 33, 52, and 53, which were published 
at 63 FR 35719, June 30, 1998; 63 FR 36120, July 1, 1998; 63 FR 52426, 
September 30, 1998; and 63 FR 71721, December 29, 1998, as final with 
the following changes:
    1. The authority citation for 48 CFR parts 1, 12, 14, 15, 19, 26, 
33, 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 19--SMALL BUSINESS PROGRAMS

    2. Amend section 19.001 to revise the definition ``Small 
disadvantaged business concern'' to read as follows:


19.001  Definitions.

* * * * *
    Small disadvantaged business concern, as used in this part (except 
for 52.212-3(c)(2) and 52.219-1(b)(2) for general statistical purposes 
and 52.212-3(c)(7)(ii), 52.219-22(b)(2), and 52.219-23(a) for joint 
ventures under the price evaluation adjustment for small disadvantaged 
business concerns), means an offeror that represents, as part of its 
offer, that it is a small business under the size standard applicable 
to the acquisition; and either--
    (1) It has received certification as a small disadvantaged business 
concern consistent with 13 CFR part 124, subpart B; and
    (i) No material change in disadvantaged ownership and control has 
occurred since its certification;
    (ii) Where the concern is owned by one or more disadvantaged 
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
    (iii) It is identified, on the date of its representation, as a 
certified small disadvantaged business (SDB) concern in the database 
maintained by the Small Business Administration (PRO-Net); or
    (2) For a prime contractor, it has submitted a completed 
application to the Small Business Administration or a private certifier 
to be certified as a small disadvantaged business concern in accordance 
with 13 CFR part 124, subpart B, and a decision on that application is 
pending, and that no material change in disadvantaged ownership and 
control has occurred since it submitted its application. In this case, 
a contractor must receive certification as an SDB by the SBA prior to 
contract award.
* * * * *
    3. Amend section 19.304 to revise paragraph (c)(1) to read as 
follows:


19.304  Disadvantaged business status.

* * * * *
    (c) * * *
    (1) If the apparently successful offeror has represented that it is 
currently certified as an SDB, the contracting officer may confirm that 
the concern is identified as a small disadvantaged business concern by 
accessing SBA's database (PRO-Net) or by contacting the SBA's Office of 
Small Disadvantaged Business Certification and Eligibility.
* * * * *
    4. Amend section 19.703 to add two new sentences after the first 
sentence of paragraph (b) to read as follows:


19.703  Eligibility requirements for participating in the program.

* * * * *
    (b) * * * The clause at 52.219-25, Small Disadvantaged Business 
Participation Program--Disadvantaged Status and Reporting, requires the 
contractor to obtain representations of small disadvantaged status from 
subcontractors through use of a provision substantially the same as 
paragraph (b)(1)(i) of the provision at 52.219-22, Small Disadvantaged 
Business Status. The clause requires the contractor to confirm that a 
subcontractor representing itself as a small disadvantaged business 
concern is identified by SBA as a small disadvantaged business concern 
by accessing SBA's database (PRO-Net) or by contacting the SBA's Office 
of Small Disadvantaged Business Certification and Eligibility. * * *
    5. Revise section 19.1102 to read as follows:


19.1102  Applicability.

    (a) Use the price evaluation adjustment in competitive acquisitions 
in the authorized SIC Major Groups.
    (b) Do not use the price evaluation adjustment in acquisitions--
    (1) That are less than or equal to the simplified acquisition 
threshold;
    (2) That are awarded pursuant to the 8(a) Program;
    (3) That are set aside for small business concerns;
    (4) That are set aside for HUBZone small business concerns;
    (5) Where price is not a selection factor so that a price 
evaluation adjustment would not be considered (e.g., architect/engineer 
acquisitions); or
    (6) Where all fair and reasonable offers are accepted (e.g., the 
award of multiple award schedule contracts).
    6. Amend section 19.1103 to revise paragraphs (a)(2), (a)(3), 
(a)(4), (a)(5), and (b) to read as follows:


19.1103  Procedures.

    (a) * * *
    (2) An otherwise successful offer of eligible products under the 
Trade Agreements Act when the acquisition equals or exceeds the dollar 
threshold in 25.402;
    (3) An otherwise successful offer where application of the factor 
would be inconsistent with a Memorandum of Understanding or other 
international agreement with a foreign government;
    (4) For DoD, NASA, and Coast Guard acquisitions, an otherwise 
successful offer from a historically black college or university or 
minority institution; or
    (5) For DoD acquisitions, an otherwise successful offer of 
qualifying country end products (see DFARS 225.000-70 and 252.225-
7001).
    (b) Apply the factor to a line item or a group of line items on 
which award may be made. Add other evaluation factors such as 
transportation costs or rent-free use of Government facilities to the 
offers before applying the price evaluation adjustment.
* * * * *
    7. Amend section 19.1104 to revise the heading and the first 
sentence to read as follows:


19.1104  Contract clause.

    Insert the clause at 52.219-23, Notice of Price Evaluation 
Adjustment for

[[Page 36224]]

Small Disadvantaged Business Concerns, in solicitations and contracts 
when the circumstances in 19.1101 and 19.1102 apply. * * *
    8. Amend section 19.1202-3 to revise the introductory text to read 
as follows:


19.1202-3  Considerations in developing an evaluation factor or 
subfactor.

    In developing an SDB participation evaluation factor or subfactor 
for the solicitation, agencies may consider
* * * * *


19.1202-4  [Amended]

    9. In section 19.1202-4, remove paragraph (c).

PART 26--OTHER SOCIOECONOMIC PROGRAMS

    10. Revise section 26.304 to read as follows:


26.304  Solicitation provision.

    Insert the provision at 52.226-2, Historically Black College or 
University and Minority Institution Representation, in solicitations 
exceeding the micro-purchase threshold, for research, studies, 
supplies, or services of the type normally acquired from higher 
educational institutions. For DoD, NASA, and Coast Guard acquisitions, 
also insert the provision in solicitations that contain the clause at 
52.219-23, Notice of Price Evaluation Adjustment for Small 
Disadvantaged Business Concerns.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    11. Amend section 52.212-3 to revise the date of the provision and 
paragraph (c)(7)(i)(A) to read as follows:


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

* * * * *

Offeror Representations and Certifications--Commercial Items (Oct 1999)

* * * * *
    (c) * * *
    (7) * * *
    (i) * * *
    (A) It /__/ is, /__/ is not certified by the Small Business 
Administration as a small disadvantaged business concern and 
identified, on the date of this representation, as a certified small 
disadvantaged business concern in the database maintained by the 
Small Business Administration (PRO-Net), and that no material change 
in disadvantaged ownership and control has occurred since its 
certification, and, where the concern is owned by one or more 
individuals claiming disadvantaged status, 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); or
* * * * *
    12. Amend section 52.219-8 to revise the date of the clause and 
paragraph (c)(3) to read as follows:


52.219-8  Utilization of Small Business Concerns.

* * * * *

Utilization of Small Business Concerns (Oct 1999)

* * * * *
    (c) * * *
    (3) Small business concern owned and controlled by socially and 
economically disadvantaged individuals and small disadvantaged 
business concern mean a small business concern that represents, as 
part of its offer that--
    (i) It has received certification as a small disadvantaged 
business concern consistent with 13 CFR 124, Subpart B;
    (ii) No material change in disadvantaged ownership and control 
has occurred since its certification;
    (iii) 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
    (iv) It is identified, on the date of its representation, as a 
certified small disadvantaged business in the database maintained by 
the Small Business Administration (PRO-Net).
* * * * *
    13. Amend section 52.219-9 to revise the date of the clause and 
paragraph (d)(5) to read as follows:


52.219-9  Small Business Subcontracting Plan.

* * * * *

SMALL BUSINESS SUBCONTRACTING PLAN (OCT 1999)

* * * * *
    (d) * * *
    (5) A description of the method used to identify potential 
sources for solicitation purposes (e.g., existing company source 
lists, the Procurement Marketing and Access Network (PRO-Net) of the 
Small Business Administration (SBA), the National Minority 
Purchasing Council Vendor Information Service, the Research and 
Information Division of the Minority Business Development Agency in 
the Department of Commerce, or small, HUBZone, small disadvantaged, 
and women-owned small business trade associations). A firm may rely 
on the information contained in PRO-Net as an accurate 
representation of a concern's size and ownership characteristics for 
the purposes of maintaining a small, HUBZone, small disadvantaged 
and women-owned small business source list. Use of PRO-Net as its 
source list does not relieve a firm of its responsibilities (e.g., 
outreach, assistance, counseling, or publicizing subcontracting 
opportunities) in this clause.
* * * * *
    14. Amend section 52.219-22 to revise the date of the provision and 
paragraph (b)(1)(i)(C) to read as follows:


52.219-22  Small Disadvantaged Business Status.

* * * * *

SMALL DISADVANTAGED BUSINESS STATUS (OCT 1999)

* * * * *
    (b) * * *
    (1) * * *
    (i) * * *
    (C) It is identified, on the date of its representation, as a 
certified small disadvantaged business concern in the database 
maintained by the Small Business Administration (PRO-Net); or
* * * * *
    15. Amend section 52.219-23 to revise the date of the clause and 
paragraphs (a)(1)(iii) and (b) to read as follows:


52.219-23  Notice of Price Evaluation Adjustment for Small 
Disadvantaged Business Concerns.

* * * * *

NOTICE OF PRICE EVALUATION ADJUSTMENT FOR SMALL DISADVANTAGED BUSINESS 
CONCERNS (OCT 1999)

    (a) * * *
    (1) * * *
    (iii) It is identified, on the date of its representation, as a 
certified small disadvantaged business concern in the database 
maintained by the Small Business Administration (PRO-Net).
* * * * *
    (b) Evaluation adjustment. (1) The Contracting Officer will 
evaluate offers by adding a factor of ______ [Contracting Officer 
insert the percentage] percent to the price of all offers, except--
    (i) Offers from small disadvantaged business concerns that have 
not waived the adjustment;
    (ii) An otherwise successful offer of eligible products under 
the Trade Agreements Act when the dollar threshold for application 
of the Act is equaled or exceeded (see section 25.402 of the Federal 
Acquisition Regulation (FAR));
    (iii) An otherwise successful offer where application of the 
factor would be inconsistent with a Memorandum of Understanding or 
other international agreement with a foreign government;
    (iv) For DoD, NASA, and Coast Guard acquisitions, an otherwise 
successful offer from a historically black college or university or 
minority institution; and
    (v) For DoD acquisitions, an otherwise successful offer of 
qualifying country end products (see sections 225.000-70 and 
252.225-7001 of the Defense FAR Supplement).
    (2) The Contracting Officer will apply the factor to a line item 
or a group of line items on which award may be made. The Contracting 
Officer will apply other evaluation factors described in the 
solicitation before application of the factor.

[[Page 36225]]

The factor may not be applied if using the adjustment would cause 
the contract award to be made at a price that exceeds the fair 
market price by more than the factor in paragraph (b)(1) of this 
clause.
* * * * *
    16. Amend section 52.219-25 to revise the date of the clause and 
paragraph (a) to read as follows:


52.219-25  Small Disadvantaged Business Participation Program--
Disadvantaged Status and Reporting.

* * * * *

SMALL DISADVANTAGED BUSINESS PARTICIPATION PROGRAM--DISADVANTAGED 
STATUS AND REPORTING (OCT 1999)

    (a) Disadvantaged status for joint venture partners, team 
members, and subcontractors. This clause addresses disadvantaged 
status for joint venture partners, teaming arrangement members, and 
subcontractors and is applicable if this contract contains small 
disadvantaged business (SDB) participation targets. The Contractor 
shall obtain representations of small disadvantaged status from 
joint venture partners, teaming arrangement members, and 
subcontractors through use of a provision substantially the same as 
paragraph (b)(1)(i) of the provision at FAR 52.219-22, Small 
Disadvantaged Business Status. The Contractor shall confirm that a 
joint venture partner, team member, or subcontractor representing 
itself as a small disadvantaged business concern, is identified as a 
certified small disadvantaged business in the database maintained by 
the Small Business Administration (PRO-Net) or by contacting the 
SBA's Office of Small Disadvantaged Business Certification and 
Eligibility.
* * * * *
[FR Doc. 99-16855 Filed 7-1-99; 8:45 am]
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