[Federal Register Volume 63, Number 224 (Friday, November 20, 1998)]
[Rules and Regulations]
[Pages 64427-64430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31039]
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DEPARTMENT OF DEFENSE
48 CFR Parts 215, 217, 219, 226, 236, 252, and Appendix I to
Chapter 2
[DFARS Case 98-D021]
Defense Federal Acquisition Regulation Supplement; Reform of
Affirmative Action in Federal Procurement, Part II
AGENCY: Department of Defense (DoD).
ACTION: Interim rule with request for comments.
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SUMMARY: The Director of Defense Procurement has issued an interim rule
amending the Defense Federal Acquisition Regulation Supplement (DFARS)
guidance concerning programs for small disadvantaged business (SDB)
concerns. These amendments conform to a Department of Justice (DoJ)
proposal to reform affirmative action in Federal procurement, and are
consistent with the changes made to the Federal Acquisition Regulation
(FAR) in Federal
[[Page 64428]]
Acquisition Circular (FAC) 97-07. 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: January 1, 1999.
Applicability Date: The policies, provisions, and clauses of this
interim rule are effective for all solicitations issued on or after
January 1, 1999, and all Mentor-Protege agreements entered into on or
after January 1, 1999.
Comment Date: Comments on the interim rule should be submitted in
writing to the address shown below on or before January 19, 1999, to be
considered in the formulation of the final rule.
ADDRESSES: Interested parties should submit written comments to:
Defense Acquisition Regulations Council, Attn: Ms. Susan Schneider,
PDUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC
20301-3062, telefax (703) 602-0350.
E-mail comments submitted over the Internet should be addressed to:
dfars@acq.osd.mil.
Please cite DFARS Case 98-D021 in all correspondence related to
this issue. E-mail comments should cite DFARS Case 98-D021 in the
subject line.
FOR FURTHER INFORMATION CONTACT:
Ms. Susan Schneider, PDUSD(A&T)DP(DAR), (703) 602-0131, or Mr. Mike
Sipple, PDUSD(A&T)DP(CPA), (703) 695-8567. Please cite DFARS Case 98-
D021.
SUPPLEMENTARY INFORMATION:
A. Background
In Adarand, the Supreme Court extended strict judicial scrutiny to
Federal affirmative action programs that use racial or ethnic criteria
as a basis for decisionmaking. In procurement, this means that any use
of race in the decision to award a contract is subject to strict
scrutiny. Under strict scrutiny, any Federal programs that make race a
basis for contract decisionmaking must be narrowly tailored to serve a
compelling Government interest.
DoJ developed a proposed structure to reform affirmative action in
Federal procurement designed to ensure compliance with the
constitutional standards established by the Supreme Court in Adarand.
the DoJ proposal was published for public notice and comment (61 FR
26042, May 23, 1996). DoJ issued a notice that provided a response to
the public comments (62 FR 25648, May 9, 1997). To implement the DoJ
concept, two interim FAR rules and an interim DFARS rule were issued:
FAC 97-06, effective October 1, 1998, implements a price evaluation
adjustment for SDB concerns (63 FR 35719, June 30, 1998); FAC 97-07,
effective January 1, 1999, implements an SDB participation program (63
FR 36120, July 1, 1998); and the rule published on August 6, 1998 (63
FR 41972), effective October 1, 1998, conforms the DFARS to FAC 97-06.
This interim rule contains the revisions necessary to conform the DFARS
to the interim FAR rule in FAC 97-07, and to the DoJ proposal
implemented by the FAR rule.
B. Regulatory Flexibility Act
This interim rule is not expected to 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 most of
the changes merely conform the DFARS to the FAR rule in FAC 97-07. Two
source selection considerations for SDB concerns currently in the
DFARS, but not in the FAR, are amended by this rule to conform to the
DoJ model: Leader company contracting (DFARS 217.401); and architect-
engineer (A-E) services (DFARS 236.602). These two changes are not
expected to have a significant economic impact on a substantial number
of small entities since: (1) Leader company contracting is infrequently
used by DoD; and (2) the primary factor in A-E selection is the
determination of the most highly qualified firm; the SDB consideration
is one of several secondary source selection factors. Therefore, an
initial regulatory flexibility analysis has not been performed.
Comments are invited from small businesses and other interested
parties. Comments from small entities concerning the affected DFARS
subparts also will be considered in accordance with 5 U.S.C. 610. Such
comments should be submitted separately and should cite DFARS Case 98-
D021 in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the interim rule
does not impose any information collection requirements that require
the approval of the Office of Management and Budget under 44 U.S.C.
3501, et seq.
D. Determination To Issue an Interim Rule
A determination has been made under the authority of the Secretary
of Defense that urgent and compelling reasons exist to publish an
interim rule prior to affording the public an opportunity to comment.
This interim rule amends the DFARS to conform it to the requirements of
FAC 97-07, dated July 1, 1998, effective January 1, 1999. FAC 97-07
contains an interim rule amending the FAR to implement a DoJ proposal
for reform of affirmative action in Federal procurement to ensure
compliance with the constitutional standards established by the Supreme
Court in Adarand Constructors, Inc. v. Pena, 115, S. Ct. 2097 (1995).
The FAR rule contains an SDB participation program. Publication of an
interim DFARS rule is necessary to conform the DFARS to the interim FAR
rule effective January 1, 1999, and to the DoJ proposal implemented by
the FAR rule. Comments received in response to the publication of this
interim rule will be considered in formulating the final rule.
List of Subjects in 48 CFR Parts 215, 217, 219, 226, 236, and 252
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, 48 CFR Parts 215, 217, 219, 226, 236, 252, and Appendix
I to Chapter 2 are amended as follows:
1. The authority citation for 48 CFR Parts 215, 217, 219, 226, 236,
252, and Appendix I to subchapter I continue to read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 215--CONTRACTING BY NEGOTIATION
2. Section 215.304 is revised to read as follows:
215.304 Evaluation factors and significant subfactors.
(c)(i) In acquisitions that require use of the clause at FAR
52.219-9, Small, Small Disadvantaged and Women-Owned Small Business
Subcontracting Plan, other than those based on the lowest price
technically acceptable source selection process (see FAR 15.101-2), the
extent of participation of small businesses and historically black
colleges or universities and minority institutions in performance of
the contract shall be addressed in source selection. The contracting
officer shall evaluate the extent to which offerors identify and commit
to small business and historically black college or university and
minority institution performance of the contract, whether as a joint
venture, teaming arrangement, or subcontractor.
(A) Evaluation factors may include--
(1) The extent to which such firms are specifically identified in
proposals;
(2) The extent of commitment to use such firms (for example,
enforceable
[[Page 64429]]
commitments are to be weighted more heavily than non-enforceable ones);
(3) The complexity and variety of the work small firms are to
perform;
(4) The realism of the proposal;
(5) Past performance of the offerors in complying with requirements
of the clauses at FAR 52.219-8, Utilization of Small, Small
Disadvantaged and Women-Owned Small Business Concerns, and 52.219-9,
Small, Small Disadvantaged and Women-Owned Small Business
Subcontracting Plan; and
(6) The extent of participation of such firms in terms of the value
of the total acquisition.
(B) Proposals addressing the extent of small business and
historically black college or university and minority institution
performance may be separate from subcontracting plans submitted
pursuant to the clause at FAR 52.219-9 and should be structured to
allow for consideration of offers from small businesses.
(C) When an evaluation includes the factor in paragraph
(c)(i)(B)(1) of this section, the small businesses, historically black
colleges or universities and minority institutions, and women-owned
small businesses considered in the evaluation shall be listed in any
subcontracting plan submitted pursuant to FAR 52.219-9 to facilitate
compliance with 252.219-7003(g).
(ii) The costs or savings related to contract administration and
audit may be considered when the offeror's past performance or
performance risk indicates the likelihood of significant costs or
savings.
PART 217--SPECIAL CONTRACTING METHODS
3. Section 217.401 is revised to read as follows:
217.401 General.
(1) When leader company contracting is to be considered, take
special effort to select a small disadvantaged business (SDB) concern
as the follower company if--
(i) The follower company will be a subcontractor and the Standard
Industrial Classification (SIC) Major Group of the acquisition is one
in which use of an evaluation factor or subfactor for participation of
SDB concerns is currently authorized (see FAR 19.201(b)); or
(ii) The follower company will be a prime contractor and the SIC
Major Group of the acquisition is one in which use of a price
evaluation adjustment is currently authorized (see FAR 19.201(b)).
(2) If special effort is required by paragraph (1) of this section
and an SDB is not selected as the follower company, the contracting
officer shall document the contract file to reflect--
(i) The extent of actions taken to identify SDB concerns for
participation in the acquisition; and
(ii) The rationale for selection of a non-SDB as the follower
company.
PART 219--SMALL BUSINESS PROGRAMS
4. Section 219.001 is revised to read as follows:
219.001 Definitions.
Small disadvantaged business concern is defined:
(1) At FAR 52.219-23(a) (i.e., a firm is considered a small
disadvantaged business (SDB) concern by receiving certification by the
Small Business Administration and meeting the other listed criteria),
except as specified in paragraph (2) of this definition.
(2) At FAR 52.219-23(a) or 52.219-1(b)(2) for the following
purposes (i.e., a firm is considered an SDB concern by either receiving
certification by the Small Business Administration and meeting the
other listed criteria or self-representing its status for general
statistical purposes):
(i) A higher customary progress payment rate for SDB concerns (see
232.501-1(a)(i) and 252.232-7004(c)).
(ii) A lower threshold for inclusion of customary progress payments
in contracts with SDB concerns (see 232.502-1).
(iii) The prompt payment policy for SDB concerns in 232. 903 and
232.905(2).
(iv) Reporting contract actions with SDB concerns (``Type of
Business'' on the DD Form 350, Individual Contracting Action Report
(see 253.204-70(d)(5)(i)(A)) or ``Small Disadvantaged Business (SDB)
Actions'' on the DD Form 1057, Monthly Contracting Summary of Actions
$25,000 or Less (see 253.204-71(g)(2)).
5. Section 219.708 is amended by revising paragraph (c)(1) and
removing paragraph (c)(2). The revised text reads as follows:
219.708 Solicitation provisions and contract clauses.
* * * * * * *
(c)(1) Do not use the clause at FAR 52.219-10, Incentive
Subcontracting Program, in contracts with contractors that have
comprehensive subcontracting plans approved under the test program
described in 219.702(a).
6. Subpart 219.12 is added to read as follows:
Subpart 219.12--Small Disadvantaged Business Participation Program
Sec.
219.1203 Incentive subcontracting with small disadvantaged business
concerns.
219.1204 Solicitation provisions and contract clauses.
219.1203 Incentive subcontracting with small disadvantaged business
concerns.
The contracting officer shall encourage increased subcontracting
opportunities for SDB concerns in negotiated acquisitions by providing
monetary incentives in the SIC Major Groups for which use of an
evaluation factor or subfactor for participation of SDB concerns is
currently authorized (see FAR 19.201(b)). Incentives for exceeding SDB
subcontracting targets shall be paid only if an SDB subcontracting
target was exceeded as a result of actual subcontract awards to SDBs,
and not a result of developmental assistance credit under the Pilot
Mentor-Protege Program (see Subpart 219.71).
219.1204 Solicitation provisions and contract clauses.
(c) The contracting officer shall, when contracting by negotiation,
insert in solicitations and contracts containing the clause at FAR
52.219-25, Small Disadvantaged Business Participation Program-
Disadvantaged Status and Reporting, a clause substantially the same as
the clause at FAR 52.219-26, Small Disadvantaged Business Participation
Program-Incentive Subcontracting, when authorized (see FAR 19.1203).
The contracting officer may include an award fee provision in lieu of
the incentive; in such cases, however, the contracting officer shall
not use the clause at FAR 52.219-26. Do not use award fee provisions in
contracts with contractors that have comprehensive subcontracting plans
approved under the test program described in 219.702(a).
PART 226--OTHER SOCIOECONOMIC PROGRAMS
7. Section 226.7007 is amended by revising paragraph (b) to read as
follows:
226.7007 Goals and incentives for subcontracting with HBCU/MIs.
* * * * *
(b) The contracting officer may, when contracting by negotiation,
insert in solicitations and contracts a clause similar to the clause at
FAR 52.219-10, Incentive Subcontracting Program, when a subcontracting
plan is required, and inclusion of a monetary incentive is, in the
judgment of the contracting officer, necessary to increase
subcontracting opportunities for
[[Page 64430]]
historically black colleges or universities and minority institutions.
The clause should include a separate goal for historically black
colleges or universities and minority institutions.
PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS
8. Section 236.602-1 is amended by revising paragraph (a)(i)(6)(C)
to read as follows:
236.602-1 Selection criteria.
(a) * * *
(i) * * *
(6) * * *
(C) Consider the extent to which potential contractors identify and
commit to small business, to small disadvantaged business (SDB) if the
Standard Industrial Classification Major Group of the subcontracted
effort is one in which use of an evaluation factor or subfactor for
participation of SDB concerns is currently authorized (see FAR
19.210(b)), and to historically black college or university and
minority institution performance as subcontractors.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
252.212-7001 [Amended]
9. Section 252.212-7001 is amended by revising the clause date to
read ``(JAN 1999)'', and by removing the entry at 252.219-7005.
252.219-7005 [Removed and Reserved]
10. Section 252.219-7005 is removed and reserved.
Appendix I to Chapter 2--[Amended]
11. Appendix I to Chapter 2 is amended by revising Section I-104 to
read as follows:
Appendix I--Policy and Procedures for the DOD Pilot Mentor-Protege
Program
* * * * *
I-104 Eligibility requirements for a protege firm.
(a) An entity may qualify as a protege firm if it is--
(1) An SDB concern as defined at 219.001, paragraph (1) of the
definition of ``small disadvantaged business concern,'' which is--
(i) Eligible for the award of Federal contracts; and
(ii) A small business according to the SBA size standard for the
Standard Industrial Classification (SIC) code that represents the
contemplated supplies or services to be provided by the protege firm
to the mentor firm; or
(2) A qualified organization employing the severely disabled as
defined in Pub. L. 102-172, section 8064A.
(b) A protege firm may self-certify to a mentor firm that it
meets the eligibility requirements in paragraph (a) (1) or (2) of
this section. Mentor firms may rely in good faith on a written
representation that the entity meets the requirements of paragraph
(a) (1) or (2) of this section, except for a protege's status as a
small disadvantaged business concern (see FAR 19.703(b)).
(c) A protege firm may have only one active mentor-protege
agreement.
[FR Doc. 98-31039 Filed 11-19-98; 8:45 am]
BILLING CODE 5000-04-M
