[Federal Register Volume 64, Number 195 (Friday, October 8, 1999)]
[Notices]
[Pages 54918-54920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26217]



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OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy


OFPP Policy Letter 99-1 on Small Business Procurement Goals

AGENCY: Executive Office of the President, Office of Management and 
Budget (OMB), Office of Federal Procurement Policy (OFPP).

ACTION: Notice of final policy directive; rescission of OFPP Policy 
Letter 91-1.

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SUMMARY: OFPP is issuing OFPP Policy Letter 99-1 which contains 
guidance on implementing government-wide goals for procurement 
contracts awarded to small businesses, HUBZone small businesses, small 
disadvantaged businesses, and women-owned small businesses. The goals 
for each of these small business categories are stated as a percentage 
of overall Federal procurement dollars. The policy letter also provides 
guidance on reporting requirements that will help the Small Business 
Administration (SBA) determine whether executive agencies are reaching 
these goals. This policy letter supersedes OFPP Policy Letter 91-1. As 
a result of comments received following publication of the proposed 
policy letter in the Federal Register on April 2, 1999 (64 FR 16003), 
we are making minor changes to the policy letter as follows: (1) The 
title of the policy letter is shortened to read: ``Small Business 
Procurement Goals'' (2) A new subparagraph is added in Section 6 to 
make clear that--in addition to working with each agency to establish 
goals for awarding prime contracts--SBA also negotiates with the 
agencies goals for subcontract awards made by prime contractors; and 
(3) The last sentence in Section 7a.2 is revised to make clear that an 
agency's narrative report should include plans for improvement if the 
agency fails to achieve their small business goals.

EFFECTIVE DATE: November 8, 1999.

FOR FURTHER INFORMATION CONTACT: Michael Gerich or Keith Coleman, OFPP, 
at 202-395-3501. To obtain a copy of this policy letter, please log on 
to the Acquisition Reform Network at: www.arnet.gov/References/
Fwd__Index.html.

SUPPLEMENTARY INFORMATION:

A. Background

    We issued an earlier Policy Letter, 91-1, entitled ``Government-
Wide Small Business and Small Disadvantaged Business Goals for 
Procurement Contracts'' on March 11, 1991. That policy letter addressed 
sections 502 and 503 of the Business Opportunity Development Act of 
1988. Section 502 establishes goals for contract awards to small 
business concerns and small disadvantaged businesses. Section 503 
requires the President to include the agencies' actual goal 
achievements in the ``State of Small Business'' report. The report also 
includes an analysis of an agency's failure to achieve the goals, and 
the number and dollar value of prime contracts awarded to small firms 
through noncompetitive negotiated procurements, restricted and 
unrestricted competitions, and information on subcontract awards.
    We need to issue this new policy letter because of statutory 
changes made in 1994 and 1997. Section 7106 of the Federal Acquisition 
Streamlining Act of 1994 (FASA) establishes a 5 percent women-owned 
small business goal. Section 603 of the Small Business Reauthorization 
Act of 1997 increases the annual government-wide goal for prime 
contract awards to small business concerns from not less than 20 
percent to not less than 23 percent. The Act also adds a 3 percent 
HUBZone small business goal phased-in over the next 5 years.
    This policy letter supports SBA's policies of establishing its own 
guidance on the goals by: (1) Establishing with each agency separate 
goals for prime contracts and subcontracts in each of the small 
business categories; (2) Establishing for each agency goals for awards 
made under section 8(a) of the Small Business Act; (3) Requiring use of 
Federal procurement data in the Federal Procurement Data System (FPDS) 
to measure goal achievements rather than requiring agencies to provide 
this information in separate reports; and (4) Requiring that, prior to 
the beginning of each fiscal year, SBA mutually establish with each 
agency goals for each of the small business categories.

B. Comments

    We received fourteen letters in response to the request for 
comments on proposed OFPP Policy Letter 99-1 (64 FR 16003; April 2, 
1999). A summary of the main issues and concerns raised in the comments 
follows:
    1. Comment: OFPP should cancel this policy letter because it is 
unnecessary since SBA issues its own guidance.
    Response: This policy letter supports SBA's comprehensive policy 
guidance on establishing with each agency mutually acceptable prime and 
subcontract goals to implement statutory goaling requirements. The 
policy letter provides, among other things, guidance to implement the 
statutory five percent goals for small disadvantaged businesses (SDBs) 
and women-owned small businesses. The Small Business Act requires a 
goal of at least five percent for the combination of prime and 
subcontract awards. To implement this requirement, the policy letter 
establishes a separate five percent goal for prime contracts and a 
separate five percent goal for subcontracts for these two small 
business categories. This policy helps to promote small disadvantaged 
business and women-owned small business participation in federal 
contracting, and ensures easy and reasonable tracking of data to 
measure goal achievements. Therefore, we believe it is essential to 
issue this policy letter.
    2. Comment: The policy letter should not impose mandatory goals for 
HUBZones until SBA certifies a significant number of HUBZone small 
businesses. Some commenters suggested that we consider an alternative 
phase-in process or rely on self-certification to implement the HUBZone 
goals.
    Response: Section 603 of the Small Business Reauthorization Act of 
1997 (Pub. L. 105-135) requires the three percent HUBZone small 
business goal to be phased in over five years beginning with one 
percent of prime contract awards to be awarded to such firms in fiscal 
year 1999. In addition, section 603 requires prime contractors to 
establish goals for subcontracts with HUBZone small businesses. While 
we realize that only a small number of HUBZone small businesses have 
been certified by SBA, the statute does not provide the authority to 
implement alternative dates. Further, the statute requires SBA to 
certify HUBZone small business concerns and maintain a list of all 
qualified firms. Therefore, agencies and prime contractors may not rely 
on self-certification to determine the status of HUBZone small business 
concerns.
    3. Comment: For sake of brevity, the title of the policy letter 
should be shortened.
    Response: We will change the title to read ``Small Business 
Procurement Goals.''
    4. Comment: The chart in section 6b. of the policy letter that 
lists the statutorily-required goals and percentages should include all 
reportable goaling categories--even those without a statutorily 
established percentage, such as prime 8(a) awards and small business 
subcontract awards.
    Response: The primary purpose of the policy letter is to provide 
guidance to implement the statutory government-wide small business 
goals, including goals for SDBs, women-owned small businesses, and 
HUBZone small business concerns. While agencies must

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negotiate with SBA goals for 8(a) prime awards and subcontract goals 
for each small business category, we believe the charts in sections 6b. 
and 6c. should be limited to implementation of the statutory 
government-wide goals. However, we will add a new subparagraph in 
section 6 to make clear that agencies must establish goals for 
subcontract awards to small businesses, SDBs, women-owned small 
businesses, and HUBZone small businesses.
    5. Comment: Section 6e. of the policy letter indicates that 
agencies may count prime contract awards to small businesses toward 
more than one goal. This practice has historically been recognized as 
``double counting'' and may provide opportunities for inaccuracies. 
This section should be clarified to indicate how ``double counting'' 
may be utilized.
    Response: The policy letter recognizes that the government-wide 
small business goal of 23 percent includes all the goals for the 
specific categories of small businesses. Therefore, agencies may count 
awards to small businesses toward more than one goal. We do not view 
this as ``double counting'' since the goals for each small business 
category are a subset of the overall small business goal. SBA's 
``Guidelines on Goals Under Procurement Preference Programs'' provides 
more detailed guidance on the goal-setting process.
    6. Comment: Section 7a.(2) of the policy letter should be clarified 
to require ``plans for improving performance'' only from agencies that 
fail to meet their goals.
    Response: Section (h)(2)(C) of the Small Business Act requires the 
SBA Administrator to include in the report to the President an analysis 
of why the government-wide goals or any individual agency goals were 
not met. The commenter suggests that section 7a.(2) should make clear 
that an agency's narrative report should include plans for improvement 
if the agency fails to achieve their goals. If the agency achieves its 
goals, the narrative report would not include a plan for improvement. 
We will revise the last sentence in section 7a.(2) to clarify this 
point.
    7. Comment: The policy letter correctly emphasizes the importance 
of accurate and complete prime and subcontract data in the Federal 
Procurement Data System (FPDS) since SBA uses FPDS data to measure an 
agency's small business goal achievements. However, agencies should 
have timely and easy access to their FPDS data. There should be a 
government-wide standard for which agencies can take small business 
credit when ordering from another agency's contract. Also, there should 
be an initiative to improve the quality and reporting of subcontracting 
data.
    Response: We realize that providing agencies with easy access to 
their FPDS data would help to improve the quality of the data. We are 
working with GSA's Federal Procurement Data Center, which operates the 
FPDS, to provide agencies easier on-line access to their data. 
Currently, the FPDC does provide agencies with reports of their data 
upon request. We have drafted government-wide policy that would allow 
agencies to take small business credit when ordering from another 
agency's contract, e.g., Federal Supply Schedules, government-wide 
agency contracts, and multi-agency contracts. When finalized, this 
guidance should help to improve the FPDS data and permit an agency to 
properly reflect its level of small business participation. We also 
agree that there should be an initiative to improve the subcontracting 
data collection process. In that regard, we plan to work with SBA and 
the Procurement Executives Council to identify problem areas where 
improvements can be made.
    8. Comment: The second bullet in section 7b.(4)(ii) of the policy 
letter should read ``competition restricted to small business concerns 
owned and controlled by socially and economically disadvantaged 
individuals' to coincide with the requirements of section 503 of Public 
Law 100-656, Presidential Reports on Contracting Goals. As currently 
written, it seems to imply that agencies have the authority to set-
aside acquisitions for SDBs, a statutory authority that has been 
superseded by the provisions in FAR Part 19 which allow for price 
evaluation adjustments.
    Response: Throughout the policy letter, we refer to ``small 
business concerns owned and controlled by socially and economically 
disadvantaged individuals' as ``small disadvantaged businesses.'' We 
are using procurement mechanisms like price evaluation adjustments set 
forth in FAR Part 19 instead of set-asides for small disadvantaged 
businesses. However, competition restricted to small disadvantaged 
businesses also includes competitive 8(a) awards. We do not believe the 
policy letter should be changed.

    Dated: October 1, 1999.
Deidre A. Lee,
Administrator.
POLICY LETTER 99-1
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Small Business Procurement Goals

    1. Purpose. This policy letter provides guidance to Executive 
Branch departments and agencies on government-wide goals for 
procurement contracts awarded to small businesses, HUBZone small 
businesses, small disadvantaged businesses and women-owned small 
businesses (``small businesses''). It also provides guidance on 
reporting requirements that will help the Small Business Administration 
(SBA) determine whether agencies are reaching these goals.
    2. Supersession Information. This policy letter replaces OFPP 
Policy Letter 91-1, ``Government-Wide Small Business and Small 
Disadvantaged Business Goals for Procurement Contracts,'' dated March 
11, 1991, which is rescinded.
    3. Authority. This policy letter is based on the Small Business 
Act, the Office of Federal Procurement Policy Act, the Business 
Opportunity Development Reform Act of 1988, the Federal Acquisition 
Streamlining Act of 1994, and the Small Business Reauthorization Act of 
1997.
    4. Background. The Small Business Act requires executive agencies, 
in consultation with SBA, to develop annual goals for contract awards 
to small businesses. SBA monitors agency performance and reports their 
achievements to the President. The Office of Federal Procurement Policy 
Act, 41 U.S.C. 405, empowers the Administrator for Federal Procurement 
Policy to prescribe government-wide procurement policies.
    The Business Opportunity Development Reform Act establishes 
government-wide goals for small businesses and small disadvantaged 
businesses and requires the President to include the agencies' actual 
goal achievements in the ``State of Small Business'' report. The report 
must also include an analysis of any failure to achieve the goals, and 
the number and dollar value of prime contracts awarded to small 
businesses through noncompetitive negotiated procurements, restricted 
and unrestricted competitions, and information on subcontract awards. 
The Federal Acquisition Streamlining Act of 1994 (FASA) establishes a 5 
percent women-owned small business goal. The Small Business 
Reauthorization Act of 1997 (SBRA) adds a 3 percent HUBZone small 
business goal phased-in over the next 5 years. It also increases the 
annual government-wide goal for prime contract awards to small business 
concerns to not less than 23 percent.

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    In March 1991, the OFPP issued Policy Letter 91-1 to implement 
government-wide goals for small businesses and small disadvantaged 
businesses. This policy letter includes the guidance from Policy Letter 
91-1, and also implements the more recent statutory provisions of FASA 
and SBRA.
    This policy letter also supports the Small Business 
Administration's (SBA) policies of establishing its own guidance on the 
goals, establishing with each agency mutually acceptable prime contract 
goals for awards made under section 8(a) of the Small Business Act, and 
using procurement data in the Federal Procurement Data System to 
measure accomplishments rather than requiring agencies to provide this 
information in separate reports.
    5. Policy. Prior to the beginning of each fiscal year, SBA will 
mutually establish with each agency goals for participation by small 
businesses, small disadvantaged businesses, HUBZone small businesses, 
and women-owned small businesses. The agencies' cumulative goals shall 
count toward accomplishment of the government-wide goals.
    6. Goals.
    a. The government-wide small business goal is not less than 23 
percent of the total value of all prime contracts awarded for the 
fiscal year. This includes all the goals for the specific categories of 
small businesses.
    b. The following table lists the specific goals for small 
disadvantaged and women-owned small businesses.

------------------------------------------------------------------------
            The goal for . . .                        is . . .
------------------------------------------------------------------------
Small disadvantaged business prime          Not less than 5 percent of
 contracts.                                  the value of all prime
                                             contract awards.
Small disadvantaged business subcontracts.  Not less than 5 percent of
                                             the value of all
                                             subcontract awards.
Women-owned small business prime contracts  Not less than 5 percent of
                                             the value of all prime
                                             contract awards.
Women-owned small business subcontracts...  Not less than 5 percent of
                                             the value of all
                                             subcontract awards.
------------------------------------------------------------------------

    c. The following table lists the specific goals for HUBZone small 
businesses.

------------------------------------------------------------------------
                                              the percentage goal is at
               For FY . . .                          least . . .
------------------------------------------------------------------------
1999......................................  1 percent of the value of
                                             all prime contract awards
2000......................................  1.5 percent of the value of
                                             all prime contract awards.
2001......................................  2 percent of the value of
                                             all prime contract awards.
2002......................................  2.5 percent of the value of
                                             all prime contract awards.
2003 and after............................  3 percent of the value of
                                             all prime contract awards.
------------------------------------------------------------------------

    d. There is no specific statutory requirement to establish goals 
for awards made pursuant to section 8(a) of the Small Business Act. 
However, agencies must mutually establish with SBA acceptable goals for 
awards to 8(a) firms.
    e. Agencies must mutually establish with SBA acceptable goals for 
prime contract awards as well as subcontract awards by prime 
contractors to small businesses, small disadvantaged businesses, women-
owned small businesses, and HUBZone small businesses.
    f. Agencies may count prime contract awards to small businesses 
toward more than one goal. Prime contract awards to small businesses, 
women-owned small businesses, small disadvantaged businesses, 8(a) 
firms, and HUBZone small businesses count toward the government-wide 
small business goal.
    7. Responsibilities.
a. Agency Responsibilities
    (1) Each department or agency must negotiate annually in good faith 
with SBA to establish its specific prime and subcontract goals for 
small businesses, woman-owned small businesses, small disadvantaged 
businesses, HUBZone small businesses, and 8(a) firms. These goals 
should provide the maximum practicable opportunity for all these 
categories of small businesses to participate in contracts let by the 
agency. SBA's annual guidance on establishing small business goals, 
entitled ``Guidelines on Goals Under Procurement Preference Programs,'' 
covers the goal-setting process.
    (2) At the end of the fiscal year, each agency must submit a 
narrative report to SBA analyzing its achievements and any failures to 
achieve its small business goals for the year. If an agency fails to 
achieve its goals, the report also must include plans for improving 
performance in the next year.
    (3) Agencies must ensure that their prime and subcontract data in 
the Federal Procurement Data System is accurate and complete in order 
to measure their small business goal accomplishments.
b. SBA Responsibilities
    (1) Prior to the beginning of each fiscal year, SBA will work with 
each agency to establish mutually acceptable prime and subcontract 
goals for the different categories of small businesses.
    (2) SBA must ensure that the mutually established cumulative goals 
for all agencies meet or exceed the government-wide small business goal 
of 23%.
    (3) SBA must compile and analyze agencies' achievements against 
their individual small business procurement goals and report the 
results to the President.
    (4) SBA will use data in the Federal Procurement Data System to 
determine:
    (i) Agencies' success in reaching their procurement goals for prime 
contracts and subcontracts;
    (ii) The number and dollar value of prime contracts awarded to 
small business concerns, HUBZone small business concerns, small 
disadvantaged business concerns, and women-owned small business 
concerns through:
     Noncompetitive negotiation,
     Competition restricted to small disadvantaged business 
concerns,
     Competition restricted to small business concerns and 
HUBZone small business concerns, and
     Unrestricted competitions; and
    (iii) The dollar value of subcontracts awarded to small business 
concerns, HUBZone small business concerns, small disadvantaged business 
concerns, and women-owned small business concerns.
    8. Information Contact. Direct any questions regarding this policy 
letter to Michael Gerich or Keith Coleman, OFPP, 202-395-3501.
    9. Effective Date. The policy letter is effective 30 days after 
issuance.
Deidre A. Lee,
Administrator.
[FR Doc. 99-26217 Filed 10-7-99; 8:45 am]
BILLING CODE 3110-01-P