[Federal Register Volume 60, Number 227 (Monday, November 27, 1995)]
[Proposed Rules]
[Pages 58276-58282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28515]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 125
Government Contracting Assistance
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: In response to President Clinton's Government-wide regulatory
reform initiative, the Small Business Administration (SBA) has
completed a page-by-page, line-by-line review of all of its existing
regulations to determine which should be revised or eliminated. This
proposed rule would eliminate seven sections which are currently
contained in 13 CFR Part 125 pertaining to SBA's procurement assistance
programs. The Part would be retitled Government Contracting Assistance.
DATES: Comments must be submitted on or before December 27, 1995.
ADDRESS: Written comments should be addressed to David R. Kohler,
Regulatory Reform Team Leader, (125), Small Business Administration,
409 3rd Street, S.W., Suite 13, Washington, D.C. 20416.
FOR FURTHER INFORMATION CONTACT: John W. Klein, Chief Counsel for
Special Programs, at (202) 205-6645.
SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a
Memorandum to Federal agencies, directing them to simplify their
regulations. In response to this directive, SBA has completed a page-
by-page, line-by-line review of all of its existing regulations to
determine which should be revised or eliminated. 13 CFR Part 125 is
presently titled ``Procurement Assistance'' and consists
[[Page 58277]]
of 12 sections. This proposed rule would change the title to
``Government Contracting Assistance'' and would reduce the number of
sections to six. SBA's regulatory review indicated that seven sections
could be eliminated as unnecessary (repeating statutory provisions),
obsolete, or inappropriate.
Section-by-Section Analysis
The following is a section-by-section analysis of each provision of
SBA's regulations that would be affected by this proposed rule:
Current Sec. 125.1 is a statement of policy paraphrased from the
Small Business Act (the Act). SBA proposes to eliminate this language
as being unnecessary and duplicative and replace it with a brief
description of the programs included in Part 125.
Current Sec. 125.2 contains definitions such as ``Administrator,''
``SBA,'' and ``procurement.'' The proposed rule would eliminate these
definitions as unnecessary. Revised regulations on the Prime
Contracting Assistance program, now found at Sec. 125.6, would become
Sec. 125.2. These regulations have been simplified to eliminate a
lengthy list of duties performed by SBA procurement center
representatives and breakout procurement center representatives, which
are already contained in the Act and the Federal Acquisition Regulation
(FAR). In addition, the set-aside and breakout appeals procedures have
been shortened to incorporate the procedures already set forth in the
FAR.
Section 125.3 is presently an introduction. The proposed rule would
eliminate this as unnecessary and replace it with revised regulations
on the Subcontracting Assistance program now found at Sec. 125.9. The
revised subcontracting assistance regulations have been clarified and
rewritten in plain language for ease of use, but no substantive changes
are proposed.
Current Sec. 125.4 is a summary of statutory provisions contained
in the Act. SBA proposes to eliminate this summary as being unnecessary
and duplicative. Revised regulations on the Government Property Sales
Assistance program, now found at Sec. 125.8, would become Sec. 125.4.
These regulations have been clarified and rewritten in plain language
for ease of use, but no substantive changes are proposed.
The proposed rule would eliminate that portion of the current
regulation which deals with size standards and rules for timber sales,
since those rules are already set forth in Part 121 of this title.
On August 21, 1992, SBA published in the Federal Register (57 FR
37909) a proposed revision of 13 CFR Sec. 125.5, SBA's regulations on
the Certificate of Competency (COC) program. Due to the passage of
time, and after review of all previous comments, SBA is again proposing
revised regulations for comment.
The proposed rule would also make further technical changes to COC
rules. It would eliminate referrals to SBA for eligibility
determinations under the Walsh-Healey Public Contracts Act (WHPCA)
(previously proposed Sec. 125.5(d)). Section 7201 of the Federal
Acquisition Streamlining Act of 1994 (FASA) repealed the ``regular
dealer'' or ``manufacturer'' eligibility requirements imposed by WHPCA
for offerors on contracts subject to the Act.
This proposed rule would change the $25,000 threshold (under which
a contracting officer has no right to appeal an initial affirmative COC
decision to SBA Headquarters) referenced in Sec. 125.5(b)(11) of the
previously proposed COC regulation to dollar values that coincide with
either contracting actions valued under $100,000, or the use of
Simplified Acquisition Threshold (SAT) procedures implemented under
FASA.
The proposed rule would also make some minor technical edits to
SBA's earlier proposed rule dealing with the COC program. The following
substitutions have been made from the rule as originally proposed: (1)
references to the Office of Procurement Assistance have been changed to
the Office of Government Contracting; (2) references to the Associate
Administrator for Procurement Assistance have been changed to the
Associate Administrator for Government Contracting; (3) references to
Regional Administrators have been deleted; (4) references to the
Assistant Regional Administrator for Procurement Assistance have been
changed to Area Director for Government Contracting.
The proposed rule would also make several changes to the Prime
Contractor Performance Requirements (Limitations on Subcontracting),
which were earlier proposed as part of the COC regulatory package
published for public comment on August 21, 1992 (57 FR 37909). This
proposed rule would separate those provisions into a separate section
125.6, since the provisions have applicability outside the COC process.
The comments, however, relate back to the COC proposal as published on
August 21, 1992.
A commenter to that rule suggested that SBA make it clear that this
section applies to both the DoD Small Disadvantaged Business (SDB) set
aside program, including the SDB 10% evaluation preference, and SBA's
MED (8(a)) program. SBA agrees and has revised the earlier proposed
regulation accordingly.
Another comment suggested clarification of the applicability of
this requirement to sealed bidding situations. Since the ``limitations
on subcontracting'' requirement applies to negotiated and formally
advertised procurements as well as to procurements under the Simplified
Acquisition Threshold, SBA considers it unnecessary to state this again
in the regulation. In the case of a formally advertised procurement,
compliance with the requirement will be determined after bid opening
and before contract award through the procuring agency's preaward
evaluation procedures. This requirement applies only to small business
set-asides or that portion of a procurement set aside for small
business.
A comment suggested that the regulation address the need for SBA to
evaluate compliance with this requirement for the base period and all
option periods of a contract. SBA has not revised the regulation since
a failure to comply with the requirement in the course of contract
performance is considered to be a material breach of contract.
Contracting officers already have remedies to assure compliance with
the requirement.
Another comment suggested that SBA clarify that the term
``materials'' includes purchases made by a small business which are
``normal commercial practices within the industry.'' SBA has revised
the regulation to include normal commercial practices within the
industry.
Another comment suggested that SBA clarify whether Government-
specified sources referenced within a solicitation are included in the
definition of ``cost of materials.'' SBA has not changed the regulation
in response to this comment because the definition of
``subcontracting'' in Sec. 125.5(c)(4)(vii) states that where the prime
contractor has been directed by the Government to utilize a specific
source, the costs associated with such a purchase will be considered as
the cost of materials.
One commenter suggested that a separate definition for ``off-the-
shelf'' items should be added to this section. SBA has adopted this
suggestion.
Finally, a commenter suggested that SBA clarify the use of ``part-
time'' employees in the definition of ``personnel'' in this section
rather than reference Sec. 121.404 of this Title. SBA has not adopted
this suggestion because the definition of ``employee'' in SBA's size
regulations at part 121 includes part-time employees.
[[Page 58278]]
SBA proposes to eliminate in its entirety current Sec. 125.7 which
deals with Defense Production Pools. Although such Pools continue to be
authorized by statute, their formation is such a rare event that it is
unnecessary to have a separate regulation on the subject when it can be
adequately dealt with on a case-by-case basis.
SBA also proposes to delete in its entirety current Sec. 125.10
dealing with the Procurement Automated Source System (PASS). Since this
computerized information data base on small business contractors is
governed by contractual provisions, it is unnecessary to have a
separate regulation on the topic.
The proposed rule would eliminate Sec. 125.11 which describes the
Technology Assistance Program. This program has been administratively
discontinued and is no longer in operation.
Current Sec. 125.12 describes the Natural Resources Development
Program or ``tree-planting program.'' SBA would eliminate this section
as obsolete since Congress no longer provides funds for this program.
Compliance With Executive Orders 12612, 12778, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA certifies that this proposed rule would not have a significant
economic impact on a substantial number of small entities within the
meaning of Executive Order 12866 or the Regulatory Flexibility Act, 5
U. S. C. 601, et seq. This rule would eliminate seven sections of SBA's
regulations that SBA has determined to be obsolete, unnecessary, or
duplicative. The remaining regulations have been rewritten for clarity
and ease of use. No contracting opportunities for small business would
be affected by this proposed rule. Therefore, it is not likely to have
an annual economic impact of $100 million or more, result in a major
increase in costs or prices, or have a significant adverse effect on
competition or the U.S. economy.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this proposed rule, if adopted in final form, would
contain no new reporting or recordkeeping requirements.
For purposes of Executive Order 12612, SBA certifies that this rule
would not have any federalism implications warranting the preparation
of a Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in Section 2 of that Order.
List of Subjects in 13 CFR Part 125
Government contracts; Government procurement; Reporting and
recordkeeping requirements; Small businesses; Technical assistance.
For the reasons set forth above, SBA proposes to revise Part 125 of
Title 13 of the Code of Federal Regulations as follows:
PART 125--GOVERNMENT CONTRACTING PROGRAMS
Sec.
125.1 Programs included.
125.2 Prime contracting assistance.
125.3 Subcontracting assistance.
125.4 Government property sales assistance.
125.5 Certificate of Competency program.
125.6 Prime contractor performance requirements (limitations on
subcontracting).
Authority: 15 U.S.C. 634(b)(6), 637, and 644; 31 U.S.C. 9701,
9702.
Sec. 125.1 Programs included.
The regulations in this part relate to the Government contracting
assistance programs of SBA. There are four main programs: Prime
contracting assistance; Subcontracting assistance; Government property
sales assistance; and the Certificate of Competency program. The
objective of the programs is to assist small businesses in obtaining a
fair share of Federal Government contracts, subcontracts, and property
sales.
Sec. 125.2 Prime contracting assistance.
(a) Traditional PCR responsibilities. (1) SBA Procurement Center
Representatives (PCRs) are located at Federal agencies and buying
activities which have major contracting programs. PCRs review all
acquisitions not set aside for small businesses to determine whether a
set-aside would be appropriate. In cases where there is disagreement
between a PCR and the contracting officer over the suitability of a
particular acquisition for a small business set-aside, the PCR may
initiate an appeal to the head of the contracting activity. If the head
of the contracting activity agrees with the contracting officer, SBA
may appeal to the secretary of the department or head of the agency.
The procedures and time limits for such appeals are set forth in
Sec. 19.505 of the Federal Acquisition Regulation (FAR). (48 CFR
19.505).
(2) PCRs review and evaluate the small business programs of Federal
agencies and buying activities and make recommendations for
improvement. They also recommend small business, small women-owned
business, and small disadvantaged business sources for use by
contracting activities and assist these businesses in obtaining Federal
contracts and subcontracts. Other authorized duties of a PCR are set
forth in the FAR in 48 CFR 19.402(c) and in the Small Business Act in
Section 15(a) (15 U.S.C. 644(a)).
(b) BPCR responsibilities. (1) SBA is required by section 403 of
Public Law 98-577 to assign a breakout PCR (BPCR) to major contracting
centers. A major contracting center is a center that, as determined by
SBA, purchases substantial dollar amounts of other than commercial
items, and which has the potential to achieve significant savings as a
result of the assignment of a BPCR.
(2) BPCRs advocate full and open competition in the Federal
contracting process and recommend the breakout for competition of items
and requirements which previously have not been competed. They may
appeal the failure by the buying activity to act favorably on a
recommendation in accord with the appeal procedures set forth in
Sec. 19.505 of the FAR (48 CFR 19.505). BPCRs also review restrictions
and obstacles to competition and make recommendations for improvement.
Other authorized functions of a BPCR are set forth in 48 CFR 19.403(c)
of the FAR and Section15(l) of the Small Business Act (15 U.S.C.
644(l)).
Sec. 125.3 Subcontracting assistance.
(a) The purpose of the subcontracting assistance program is to
achieve maximum utilization of small business by major prime
contractors. The Small Business Act requires other than small firms
awarded contracts by the Federal Government in excess of $500,000, or
$1 million for construction of a public facility, to submit a
subcontracting plan to the contracting agency. The FAR sets forth the
requirements for subcontracting plans in 48 CFR subpart 19.7 and 48 CFR
52.219-9.
(b) Upon determination of the successful subcontract offeror, but
prior to award, the prime contractor must inform each unsuccessful
subcontract offeror in writing of the name and location of the apparent
successful offeror. This is applicable to all subcontracts over
$10,000.
(c) SBA Commercial Market Representatives (CMRs) facilitate the
process of matching large prime contractors with small, small
disadvantaged, and small women-owned subcontractors. CMRs identify,
develop, and market small businesses to the prime contractors and
assist the small firms in obtaining subcontracts.
(d) Each CMR has a portfolio of prime contractors and conducts
periodic
[[Page 58279]]
compliance reviews and needs assessments of the companies in this
portfolio. CMRs are also required to perform opportunity development
and source identification. Opportunity development means assessing the
current and future needs of the prime contractors. Source
identification means identifying those small, small disadvantaged, and
small women-owned firms which can fulfill the needs assessed from the
opportunity development process.
(e) CMRs offer additional assistance to small businesses: (1)
Advice to representatives of small firms interested in obtaining
subcontracts from Federal prime contractors;
(2) Information and assistance on how to identify subcontract
opportunities and what opportunities are currently available; and
(3) Information and assistance on the qualifications required to
become eligible for inclusion on potential source listings of large
firms for future subcontract requirements.
(f) CMRs also perform the following duties:
(1) Assisting both Government agencies and prime contractors in the
formulation of subcontracting plans and providing contractors with
potential sources to help them comply with their plans;
(2) Assisting PCRs, upon request, in reviewing subcontracting plans
submitted by prime contractors prior to contract award;
(3) Evaluating compliance by contractors with the contract clause
entitled ``Utilization of Small, Small Disadvantaged and Women-Owned
Small Business Concerns'';
(4) Recommending small, small disadvantaged, and small women-owned
firms to prime contractors and Government agencies for performance of
subcontract requirements; and
(5) Maintaining liaison and contact with prime contractors to
assist in advance procurement planning and to foster increased
utilization of small businesses.
Sec. 125.4 Government property sales assistance.
(a) The purpose of SBA's Government property sales assistance
program is to:
(1) Insure that small businesses obtain their fair share of all
Federal real and personal property qualifying for sale or other
competitive disposal action; and
(2) Assist small businesses in obtaining Federal property being
processed for disposal, sale, or lease.
(b) SBA property sales assistance primarily consists of two
activities:
(1) Obtaining small business set-asides when necessary to insure
that a fair share of Government property sales are made to small
businesses; and
(2) Providing advice and assistance to small businesses on all
matters pertaining to sale or lease of Government property.
(c) The program is intended to cover the following categories of
Government property:
(1) Sales of timber and related forest products;
(2) Sales of strategic material from national stockpiles;
(3) Sales of royalty oil by the Department of Interior's Minerals
Management Service;
(4) Leases involving rights to minerals, petroleum, coal, and
vegetation; and
(5) Sales of surplus real and personal property.
(d) SBA has established specific small business size standards and
rules for the sale or lease of the different kinds of Government
property. These provisions are contained in Secs. 121.501 through
121.514 of this title.
Sec. 125.5 Certificate of Competency Program.
(a) General. (1) The Certificate of Competency (COC) Program is
authorized under section 8(b)(7) of the Small Business Act. A COC is a
written instrument issued by SBA to a Government contracting officer,
certifying that one or more named small business concerns possess the
responsibility to perform a specific Government procurement (or sale)
contract. The COC Program is applicable to all Government procurement
actions.
(2) A contracting officer must, upon determining a low responsive
small business offeror to be nonresponsible, refer that small business
to SBA for a possible COC, even if the next low responsive offeror is
also a small business.
(3) A small business offeror referred to SBA as nonresponsible may
apply to SBA for a COC.
(b) COC Eligibility. (1) The offeror seeking a COC has the burden
of proof to demonstrate its eligibility for COC review. To be eligible
for the COC program, a firm must meet the following criteria:
(i) It must qualify as a ``small business concern'' under the size
standard applicable to the procurement. Where the solicitation fails to
specify a size standard or Standard Industrial Classification (SIC)
code, SBA will assign the appropriate size standard to determine COC
eligibility. SBA determines size eligibility as of the date described
in Sec. 121.404 of this title.
(ii) A manufacturing, service, or construction concern must
demonstrate that it will perform a significant portion of the proposed
contract with its own facilities, equipment, and personnel. The
contract must be performed or the end item manufactured within the
United States, its territories, possessions, or the Commonwealth of
Puerto Rico.
(iii) A non-manufacturer making an offer on a small business set-
aside contract for supplies must furnish end items that have been
manufactured in the United States, its territories, possessions, or the
Commonwealth of Puerto Rico by a small business. Non-manufacturing
concerns may apply for a waiver of this requirement under
Secs. 121.1301 through 121.1305 of this title for either the type of
product being procured or the specific contract at issue.
(iv) A non-manufacturer submitting an offer on a procurement
utilizing simplified acquisition threshold procedures with a cost that
does not exceed $25,000, or on any unrestricted procurement, must
furnish end items manufactured in the United States, or its trust
territories, possessions, or the Commonwealth of Puerto Rico. Any COC
shall apply to the responsibility of the non-manufacturer, not to that
of the manufacturer.
(v) An offeror intending to provide a kit consisting of finished
components or other components provided for a special purpose, is
eligible if:
(A) It meets the Size Standard for the SIC code assigned to the
procurement; and
(B) More than 50% of the total dollar value of the components of
the kit were manufactured by small businesses under the size standard
applicable to the component provided. The offeror need not itself be
the manufacturer of any of the components of the kit. Each component
comprising the kit must be produced or manufactured in the United
States or its trust territories, possessions, or the Commonwealth of
Puerto Rico. Where the Government has specified any item for the kit
which is not manufactured by a small business, then such item shall be
excluded from the determination of total value for the purposes of this
section.
(2) SBA will determine a concern ineligible for a COC if the
concern, or any of its principals, appears in the ``Parties Excluded
From Federal Procurement Programs'' section found in the U.S. General
Services Administration Office of Acquisition Policy Publication: List
of Parties Excluded From Federal Procurement or Nonprocurement
Programs. If a principal is unable to presently control the applicant
concern, and appears in
[[Page 58280]]
the Procurement section of the list due to matters not directly related
to the concern itself, responsibility will be determined in accordance
with paragraph (c)(9) of this section.
(3) An eligibility determination will be made on a case by case
basis, where a concern or any of its principals appears in the
Nonprocurement Section of the publication referred to in paragraph
(b)(2) of this section.
(c) Referral of nonresponsibility determination to SBA. (1) A
contracting officer who determines that an apparently successful
offeror that has certified itself to be a small business with respect
to a specific Government contract lacks any element of responsibility
(including competency, capability, capacity, credit, integrity or
tenacity or perseverance) must refer the matter in writing to the SBA
Government Contracting Area Office (Area Office) serving the area in
which the headquarters of the offeror is located. The referral must
include a copy of the following:
(i) Solicitation;
(ii) Offer submitted by the concern whose responsibility is at
issue for the procurement (as of Best and Final Offers for a negotiated
procurement, and as of bid opening for a sealed bid procurement);
(iii) Abstract of Bids, where applicable, or the Contracting
Officer's Price Negotiation Memorandum;
(iv) Preaward survey, where applicable;
(v) Contracting officer's written determination of non-
responsibility;
(vi) Technical data package (including drawings, specifications,
and Statement of Work); and
(vii) Any other justification and documentation used to arrive at
the nonresponsibility determination.
(2) Contract award must be withheld by the contracting officer for
a period of 15 working days (or longer if agreed to by SBA and the
contracting officer) following receipt by the appropriate Area Office
of a referral which includes all required documentation.
(3) The COC referral must indicate that the offeror has been found
responsive to the solicitation, but at the same time must identify the
reasons for the nonresponsibility determination.
(d) Application for COC. (1) Upon receipt of the contracting
officer's referral, the SBA Area Office will inform the concern of the
contracting officer's negative responsibility determination, and offer
it the opportunity to apply to SBA for a COC by a specified date.
(2) The COC application must include all information and
documentation requested by SBA and any additional information which the
firm believes will demonstrate its ability to perform on the proposed
contract. The application should be returned as soon as possible, but
no later than the date specified by SBA.
(3) Upon receipt of a complete and acceptable application, SBA may
elect to visit the applicant's facility to review its responsibility.
Where a service or construction contract will be performed outside the
United States or its trust territories, possessions, or the
Commonwealth of Puerto Rico, SBA will rely solely on documentation and
other relevant information obtained within the United States. SBA
personnel may obtain clarification or confirmation of information
provided by the applicant by directly contacting suppliers, financial
institutions, and other third parties upon whom the applicant's
responsibility depends.
(e) Incomplete applications. If an application for a COC is
materially incomplete or is not submitted by the date specified by SBA,
SBA will close the case and so notify the contracting officer. The
basis for its decision will be specified in a declination letter sent
to both the concern and the contracting officer.
(f) Reviewing an application. (1) The COC review process is not
limited to the areas of nonresponsibility cited by the contracting
officer. SBA may, at its discretion, independently evaluate the COC
applicant for all elements of responsibility, but it may presume
responsibility exists as to elements other than those cited as
deficient. SBA may deny a COC for reasons of nonresponsibility not
originally cited by the contracting officer.
(2) A small business will be rebuttably presumed nonresponsible if
any of the following circumstances are shown to exist:
(i) Within three years before the application for a COC, the
concern, or any of its principals, has been convicted of an offense or
offenses that would constitute grounds for debarment or suspension
under FAR subpart 9.4 (48 CFR Subpart 9.4), and the matter is still
under the jurisdiction of a court (e.g., the principals of a concern
are incarcerated, on probation or parole, or under a suspended
sentence); or
(ii) Within three years before the application for a COC, the
concern or any of its principals has had a civil judgment entered
against it or them for any reason that would constitute grounds for
debarment or suspension under FAR subpart 9.4 (48 CFR Subpart 9.4).
(g) Decision by Area Director. After reviewing the information
submitted by the applicant and the information gathered by SBA, the
Director will make a determination, either final or recommended as set
forth in the following chart:
------------------------------------------------------------------------
SBA official or Finality of
office with decision; options
Contracting actions authority to make for contracting
decision agencies
------------------------------------------------------------------------
$100,000 or less, or in Director may approve Final. The Director
accordance with Simplified or deny. will notify both
Acquisition Threshold the applicant and
procedures. contracting agency
in writing of the
decision.
Between $100,000 and $25 (1) Director may (1) Final.
million.. deny.. (2) Contracting
(2) Director may agency may proceed
approve, subject to under paragraph (h)
right of appeal and or paragraph (1) of
other options. this section.
Exceeding $25 million....... (1) Director may (1) Final.
deny. (2) Contracting
(2) Director must agency may proceed
refer to SBA under paragraph (j)
Headquarters of this section.
recommendation for
approval.
------------------------------------------------------------------------
(h) Notification of intent to issue on a contract with a value
between $100,000 and $25 million. Where the Director determines that a
COC is warranted, he or she will notify the contracting officer of the
intent to issue a COC, and of the reasons for that decision, prior to
issuing the COC. At the time of notification, SBA will give the
contracting officer the following options:
(1) Accept the Director's decision to issue the COC and award the
contract to the concern (the issuance letter will
[[Page 58281]]
include as an attachment a detailed rationale of the decision); or
(2) Ask the Director to suspend the case:
(i) for a specified period of time, and to forward a detailed
rationale for the decision to the contracting officer; or
(ii) to afford the contracting officer the opportunity to meet with
the Area Office to review all documentation contained in the case file;
or
(iii) to submit any information which the contracting officer
believes SBA has not considered (at which time, SBA will establish a
new suspense date mutually agreeable to the contracting officer and
SBA); or
(iv) to permit resolution of an appeal by the contracting agency to
SBA Headquarters under pargraph (i) of this section.
(3) After any discussions under paragraph (h)(2) of this section,
the Director will issue the determination.
(i) Appeals of Area Director determinations. For COC actions with a
value exceeding $100,000, contracting agencies may appeal a Director's
decision to issue a COC to SBA Headquarters by filing an appeal with
the Area Office processing the COC application. The Area Office must
honor the request to appeal if the contracting officer agrees to
withhold award until the appeal process is concluded. Without such an
agreement from the contracting officer, the Director will issue the
COC. When such an agreement has been obtained, the Area Office will
immediately forward the case file to SBA Headquarters.
(1) The intent of the appeal procedure is to allow the contracting
agency the opportunity to submit to SBA Headquarters any documentation
which the contracting officer believes the Area Office has not
considered.
(2) SBA Headquarters will furnish written notice to the Director,
Office of Small and Disadvantaged Business Utilization (OSDBU) at the
secretariat level of the procuring agency (with a copy to the
contracting officer), that the case file has been received and that an
appeal decision may be requested by an authorized official at that
level. If the contracting agency decides to file an appeal, it must
notify SBA Headquarters through its Director, OSDBU, within 10 working
days (or a time period agreed upon by both agencies) of its receipt of
the notice under paragraph (h) of this section. The appeal and any
supporting documentation must be filed within 10 working days (or a
different time period agreed to by both agencies) after SBA receives
the request for a formal appeal. The SBA Associate Administrator for
Government Contracting (AA/GC) will make a final determination, in
writing, to issue or to deny the COC.
(j) Decision by SBA Headquarters where contract value exceeds $25
million. (1) Prior to taking final action, SBA Headquarters will
contact the contracting agency at the secretariat level or agency
equivalent and afford it the following options:
(i) Ask SBA Headquarters to suspend the case so that the agency can
meet with Headquarters personnel and review all documentation contained
in the case file; or
(ii) Submit to SBA Headquarters for evaluation any information
which the contracting agency believes has not been considered.
(2) After reviewing all available information, the AA/GC will make
a final decision to either issue or deny the COC. If the AA/GC's
decision is to deny the COC, the applicant and contracting agency will
be informed in writing by the Area Office. If the decision is to issue
the COC, a letter certifying the responsibility of the firm will be
sent to the contracting agency by Headquarters and the applicant will
be informed of such issuance by the Area Office. Except as set forth in
paragraph (l) of this section, there can be no further appeal or
reconsideration of the decision of the AA/GC.
(k) Notification of denial of COC. The notification to an
unsuccessful applicant following either an Area Director or a
Headquarters denial of a COC will briefly state all reasons for denial
and inform the applicant that a meeting may be requested with
appropriate SBA personnel to discuss the denial. Upon receipt of a
request for such a meeting, the appropriate SBA personnel will confer
with the applicant and explain the reasons for SBA's action. The
meeting does not constitute an opportunity to rebut the merits of the
SBA's decision to deny the COC, and is for the sole purpose of giving
the applicant the opportunity to correct deficiencies so as to improve
its ability to obtain future contracts either directly or, if
necessary, through the issuance of a COC.
(l) Reconsideration of COC after issuance. (1) An approved COC may
be reconsidered and possibly rescinded, at the sole discretion of SBA,
in the following circumstances:
(i) If, after issuance of a COC, but before award of any contract
in reliance upon such COC, SBA discovers that:
(A) the COC applicant submitted false or omitted material
information; or
(B) new materially adverse information has appeared relating to the
current responsibility of the applicant concern; or
(ii) Where the contract for which a COC has been issued has not
been awarded within 60 days (in which case SBA may investigate the
firm's current circumstances).
(2) Where SBA reaffirms the COC, the procedures under paragraph (h)
of this section do not apply.
(m) Effect of COC Certification. By the terms of the Small Business
Act, a COC is conclusive as to responsibility. Where SBA issues a COC
on behalf of a small business with respect to a particular contract,
contracting officers are required to award the contract without
requiring the firm to meet any other requirement with respect to
responsibility.
(n) Non-Certification. Denial of a COC by SBA does not preclude a
contracting officer from awarding a contract to the referred firm.
(o) Monitoring performance. Once a COC has been issued and a
contract awarded on that basis, SBA will monitor contractor
performance.
Sec. 125.6 Prime contractor performance requirements (limitations on
subcontracting).
(a) In order to be awarded a small business set-aside, a partial
set-aside, an 8(a) contract, or an unrestricted procurement where a
concern has claimed a 10 percent SDB price evaluation preference, a
small business concern must agree that:
(1) In the case of a contract for services (except construction),
the concern will perform at least 50 percent of the cost of the
contract incurred for personnel with its own employees.
(2) In the case of a contract for supplies or products (other than
procurement from a regular dealer in such supplies or products), the
concern will perform at least 50 percent of the cost of manufacturing
the supplies or products (not including the costs of materials).
(3) In the case of a contract for general construction, the concern
will perform at least 15 percent of the cost of the contract with its
own employees (not including the costs of materials).
(4) In the case of a contract for construction by special trade
contractors, the concern will perform at least 25 percent of the cost
of the contract with its own employees (not including the cost of
materials).
(b) Definitions. The following definitions apply to this section:
(1) Cost of the Contract. All allowable direct and indirect costs
allocable to the contract, excluding profit or fees.
(2) Cost of contract performance incurred for personnel. Direct
labor costs and any overhead which has only
[[Page 58282]]
direct labor as its base, plus the concern's General and Administrative
rate multiplied by the labor cost.
(3) Cost of manufacturing. Those costs incurred by the firm in the
production of the end item being acquired. These are costs associated
with the manufacturing process, including the direct costs of
fabrication, assembly, or other production activities, and indirect
costs which are allocable and allowable. The cost of materials, as well
as the profit or fee from the contract, are excluded.
(4) Cost of materials. Includes costs of the items purchased,
handling and associated shipping costs for the purchased items (which
includes raw materials), off-the-shelf items (and similar
proportionately high-cost common supply items requiring additional
manufacturing or incorporation to become end items), special tooling,
special testing equipment, and construction equipment purchased for and
required to perform on the contract. In the case of a supply contract,
the acquisition of services or products from outside sources following
normal commercial practices within the industry are also included. In
addition, where the services of a public or private utility company are
obtained for the lease and use of distribution facilities such as
telecommunications circuits, petroleum or natural gas pipelines, or
electric transmission lines in connection with the performance of a
contract, the acquisition of those services will also be considered as
cost of materials.
(5) Off-the-shelf item. An item produced and placed in stock by a
manufacturer, or stocked by a distributor, before orders or contracts
are received for its sale. The item may be commercial or may be
produced to military or Federal specifications or description. Off-the-
shelf items are also known as Nondevelopmental Items (NDI).
(6) Personnel. Individuals who are ``employees'' under Sec. 121.106
of this title.
(7) Subcontracting. That portion of the contract performed by a
firm, other than the concern awarded the contract, under a second
contract, purchase order, or agreement for any parts, supplies,
components, or subassemblies which are not available off-the-shelf, and
which are manufactured in accordance with drawings, specifications, or
designs furnished by the contractor, or by the government as a portion
of the solicitation. Raw castings, forgings, and moldings are
considered as materials, not as subcontracting costs. Where the prime
contractor has been directed by the Government to use any specific
source for parts, supplies, components subassemblies or services, the
costs associated with those purchases will be considered as part of the
cost of materials, not subcontracting costs.
(c) SBA will determine compliance with the Prime Contractor
Performance Requirements (Requirements) as of the following dates:
(1) In a sealed bid procurement, as of the date the bid was
submitted;
(2) In a negotiated procurement, as of the date the concern submits
its best and final offer. If a concern is determined not to be in
compliance at the time it submits its best and final offer, it may not
come into compliance later for that procurement by revising its
subcontracting plan.
(d) The Requirements will be considered an element of
responsibility and not a component of size eligibility.
(e) The base contract period (excluding any options) will be used
to determine compliance with the Requirements.
(f) Work to be performed by subsidiaries or other affiliates of a
concern is not counted as being performed by the concern for purposes
of determining whether the concern will perform the required percentage
of work.
(g) The procedures of Sec. 125.5 apply where the contracting
officer determines non-compliance with the requirements applicable to
small business set-aside or SDB-related procurements, and refers the
matter to SBA for a COC determination.
Dated: November 11, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-28515 Filed 11-24-95; 8:45 am]
BILLING CODE 8025-01-P
