[Federal Register Volume 63, Number 151 (Thursday, August 6, 1998)]
[Rules and Regulations]
[Pages 41972-41975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21043]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
48 CFR Parts 205, 206, 217, 219, 225, 226, 236, 252, and 253
[DFARS Case 98-D007]
Defense Federal Acquisition Regulation Supplement; Reform of
Affirmative Action in Federal Procurement
AGENCY: Department of Defense (DoD).
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
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 Acquisition Circular (FAC) 97-06. 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, 1998.
Applicability Date: The policies, provisions, and clauses of this
interim rule are effective for all solicitations issued on or after
October 1, 1998.
Comment Date: Comments on the interim rule should be submitted in
writing to the address shown below on or before October 5, 1998, 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:
dfarsacq.osd.mil
Please cite DFARS Case 98-D007 in all correspondence related to
this issue. E-mail comments should cite DFARS Case 98-D007 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-D007.
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 were issued: FAC 97-06, effective
October 1, 1998, implements a price evaluation adjustment for SDB
concerns (63 FR 35719, June 30, 1998); and FAC 97-07, effective January
1, 1999, implements an SDB participation program (63 FR 36120, July 1,
1998). This interim rule contains the revisions necessary to conform
the DFARS to the interim FAR rule in FAC 97-06, and to the DoJ proposal
implemented by the FAR rule. Subsequent revisions will be issued to
conform the DFARS to the interim FAR rule in FAC 97-07.
B. Regulatory Flexibility Act
This interim rule is not excepted 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 97-06. 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
[[Page 41973]]
with 5 U.S.C. 610. Such comments should be submitted separately and
should cite DFARS Case 98-D007 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 97-06, dated June 30, 1998, effective October 1, 1998. FAC 97-06
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 requires use of a price evaluation adjustment for small
disadvantaged business concerns in competitive acquisitions.
Publication of an interim DFARS rule is necessary to conform the DFARS
to the interim FAR rule effective October 1, 1998, 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 205, 206, 217, 219, 225, 226, 236,
252, and 253
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, 48 CFR Parts 205, 206, 217, 219, 225, 226, 236, 252, and
253 are amended as follows:
1. The authority citation for 48 CFR Parts 205, 206, 217, 219, 225,
226, 236, 252, and 253 continue to read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
PART 205--PUBLICIZING CONTRACT ACTIONS
205.207 [Amended]
2. Section 205.207 is amended by removing paragraphs (d)(i) and
(d)(ii) and by redesignating paragraphs (d)(iii) through (d)(v) as
paragraphs (d)(i) through (d)(iii), respectively.
PART 206--COMPETITION REQUIREMENTS
3. Section 206.203 is revised to read as follows:
206.203 Set-asides for small business concerns.
(b) Also no separate justification or determination and findings is
required for contract actions processed as historically black college
and university and minority institution set-asides (see 226.7003).
PART 217--SPECIAL CONTRACTING METHODS
4. 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 a price evaluation adjustment is currently authorized
(see FAR 19.201(b)).
(2) If the follower company will be a subcontractor, or if a price
evaluation adjustment in the SIC Major Group is authorized, 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
5. Section 219.001 is revised to read as follows:
219.001 Definitions.
Small disadvantaged business concern, as used in Subpart 217.4 (if
the follower company will be a prime contractor), Subpart 219.11, and
Subpart 236.6 (if the small disadvantaged business concern is a prime
contractor or a participant in a joint venture at the prime contract
level), is defined at FAR 19.001, paragraph (b) of the definition of
``small disadvantaged business concern.'' As used elsewhere in the
DFARS, the term ``small disadvantaged business concern,'' for both
prime contractors and subcontractors, is as defined at FAR 19.001,
paragraph (b) of the definition of ``small disadvantaged business
concern,'' except that the firm need not have received certification as
a small disadvantaged business concern by the Small Business
Administration or be listed on the register of small disadvantaged
business concerns maintained by the Small Business Administration.
6. Section 219.201 is amended by revising paragraph (a); and by
adding, after paragraph (d)(viii), paragraph (f) to read as follows:
219.201 General policy.
(a) The DoD will use the Section 8(a) program, small disadvantaged
business evaluation preferences, advance payments, outreach, and
technical assistance to meet its five percent goal for contract and
subcontract awards to small disadvantaged businesses.
* * * * *
(f) The Directors, Office of Small and Disadvantaged Business
Utilization, of the military departments and defense agencies are
responsible for determining whether use of the price evaluation
adjustment to achieve a small disadvantaged business goal has caused
non-SDB firms in a particular Standard Industrial Classification Major
Group to bear an undue burden or other inappropriate effect. A copy of
each determination shall be forwarded to the Office of Small and
Disadvantaged Business Utilization, Office of the Under Secretary of
Defense (Acquisition and Technology), simultaneously with submittal to
the Office of Federal Procurement Policy.
7. Section 219.201-5 is amended by revising the introductory text
and paragraphs (1), (2), and (3) to read as follows:
219.202-5 Data collection and reporting requirements.
Determine the premium percentage to be entered in Item D4E of the
Individual Contracting Action Report (DD Form 350), (see 253.204-70),
as follows:
(1) For small disadvantaged business or historically black college
and university/minority institution set-asides, divide the difference
between the fair market price and the award price by the fair market
price.
(2) For price evaluation adjustment awards (see FAR Subpart 19.11),
divide the difference between the low responsive offer and the award
price by the low responsive offer.
(3) For partial small business set-asides with preferential
consideration for small disadvantaged business concerns, divide the
difference between the award price on the non-set-aside
[[Page 41974]]
portion and the award price on the set-aside portion by the award price
on the non-set-aside portion.
* * * * *
Subpart 219.3 [Removed]
8. Subpart 219.3 is removed.
219.501 [Removed]
9. Section 219.501 is removed.
219.502-2-70 [Removed]
10. Section 219.502-2-70 is removed.
11. Section 219.502-3 is revised to read as follows:
219.502-3 Partial set-asides.
(c)(1) If the Standard Industrial Classification Major Group of the
acquisition is one in which use of a price evaluation adjustment for
small disadvantaged business concerns is currently authorized (see FAR
19.201(b)), the adjustment shall be applied to the non-set-aside
portion.
219.502-4, 219.504, 219.506, 219.508, and 219.508-70 [Removed]
12. Section 219.502-4, 219.504, 219.506, 219.508, and 219.508-70
are removed.
13. Section 219.703 is amended by revising paragraph (a)(2)(A) to
read as follows:
219.703 Eligibility requirements for participating in the program.
(1) * * *
(2)(A) To be eligible as an SDB subcontractor, a concern must meet
the definition in 219.001.
* * * * *
14. Section 219.705-4 is amended in paragraph (d) by revising the
first sentence to read as follows:
219.705-4 Reviewing the subcontracting plan.
(d) Challenge any subcontracting plan that does not contain
positive goals and consider the extent to which an offeror plans to use
competition restricted to historically black colleges and universities
or minority institutions. * * *
15. Section 219.803 is amended by revising paragraph (c) to read as
follows:
219.803 Selecting acquisitions for the 8(a) Program.
* * * * *
(c) Before considering a small business set-aside, review the
acquisition for offering under the 8(a) Program.
16. Section 219.804-1 is revised to read as follows:
219.804-1 Agency evaluation.
(f) The 8(a) firms should be offered the opportunity to give a
technical presentation.
17. Section 219.1005 is amended by revising paragraph (a)(3)(A) to
read as follows:
219.1005 Applicability.
(a)(3)(A) Architect-engineering services in support of military
construction projects or military family housing projects are exempt
from the Small Business Competitiveness Demonstration Program, except
for the emerging small business (ESB) set-aside requirements.
Accordingly, these shall--
(1) Be reviewed for possible award under the 8(a) Program
regardless of dollar value.
(2) Not be set aside for small business if the estimated value is
$85,000 or more (including indefinite delivery-indefinite quantity
contracts if the value of all anticipated orders exceeds $85,000).
(3) Be considered for ESB set-aside if the estimated value is both
less than the emerging small business reserve amount and less than
$85,000.
(4) Be considered for small business set-aside if the estimated
value is less than $85,000, regardless of whether small business set-
asides for other architect-engineer services are prohibited under the
Small Business Competitiveness Demonstration Program, when an ESB set-
aside is not appropriate.
* * * * *
219.1006 [Amended]
18. Section 219.1006 is amended by removing paragraph (b)(1); and
in paragraph (b)(2) by removing the phrase ``Office of the Deputy Under
Secretary of Defense (International & Commercial Programs)'' and
inserting in its place the phrase ``Office of the Under Secretary of
Defense (Acquisition and Technology)''.
219.1007 [Removed]
19. Section 219.1007 is removed.
20. Subpart 219.11 is added to read as follows:
Subpart 219.11--Price Evaluation Adjustments for Small Disadvantaged
Business Concerns
Sec.
219.1102 Applicability.
Subpart 219.11--Price Evaluation Adjustment for Small Disadvantaged
Business Concerns
219.1102 Applicability.
(b) The price evaluation adjustment also shall not be used in
acquisitions that are for commissary or exchange resale.
Subpart 219.70 [Removed and Reserved]
21. Subpart 219.70 is removed and reserved.
Subpart 219.72 [Removed]
22. Subpart 219.72 is removed.
PART 225--FOREIGN ACQUISITION
225.403 [Amended]
23. Section 225.403 is amended by removing paragraph (b).
PART 226--OTHER SOCIOECONOMIC PROGRAMS
226.7004 [Removed and Reserved]
24. Section 226.7004 is removed and reserved.
25. Section 226.7008 is amended by revising paragraph (b) to read
as follows:
226.7008 Solicitation provision and contract clause.
* * * * *
(b) Use the provision at FAR 52.226-2, Historically Black College
or University and Minority Institution Representation, in solicitations
set aside for HBCU/MIs and in solicitations that contain the clause at
FAR 52.219-23, Notice of Price Evaluation Adjustment for Small
Disadvantaged Business Concerns.
226.7103 [Amended]
26. Section 226.7103 is amended by removing paragraph (c)(2) and by
redesignating paragraph (c)(3) as paragraph (c)(2).
PART 236--CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS
27. Section 236.602-1 is amended by revising paragraph (a)(i)(6)(A)
introductory text and paragraph (a)(i)(6)(C) to read as follows:
236.602-1 Selection criteria.
(a)(i) * * *
(6) * * *
(A) Consider the volume of work awarded by DoD during the previous
12 months. In considering equitable distribution of work among A-E
firms, include small business concerns; historically black colleges and
universities and minority institutions; firms that have not had prior
DoD contracts; and small disadvantaged business concerns and joint
ventures with small disadvantaged business participants if the Standard
Industrial Classification Major Group of the acquisition is one in
which use of a price evaluation adjustment is currently authorized (see
FAR 19.201(b)).
* * * * *
[[Page 41975]]
(C) Consider the extent to which potential contractors identify and
commit to small business and to small advantaged business, historically
black college and university, or minority institution performance of
the contract as subcontractors.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
252.212-7001 [Amended]
28. Section 252.212-7001 is amended by revising the clause date to
read ``OCT 1998''; and in paragraph (b) by removing the entries at
252.219-7001, 252.219-7002, and 252.219-7006.
252.219-7000, 252.219-7001, 252.219-7002, 252.219-7006, and 252.219-
7008 [Removed and Reserved]
29. Sections 252.219-7000, 252.219-7001, 252.219-7002, 252.219-
7006, and 252.219-7008 are removed and reserved.
PART 253--FORMS
30. Section 253.204-70 is amended--
a. In paragraph (c)(4)(viii)(B)(8)(ii) by removing the
parenthetical ``(see 206.203)'';
b. In paragraphs (d)(5)(iv)(A)(4) and (d)(5)(iv)(B)(3) by removing
the parenthetical ``(219.502-2-70)'';
c. By revising paragraphs (d)(5)(iv)(B)(4);
d. In paragraph (d)(5)(iv)(B)(5) by removing the parenthetical
``(219.502-3)'';
e. By removing paragraph (d)(5)(iv)(B)(6); and
f. By revising paragraph (d)(5)(v)(B) introductory text and
paragraph (e)(3)(ii). The revised text reads as follows:
Sec. 253.204-70 DD Form 350, Individual Contracting Action Report.
* * * * *
(d) * * *
(5) * * *
(iv) * * *
(B) * * *
(4) Code D--SDB Price Evaluation Adjustment--Unrestricted. Enter
code D if the action was unrestricted but an SDB received an award as a
result of a price evaluation adjustment (see FAR Subpart 19.11).
* * * * *
(v) * * *
(B) Enter the code from the following list which corresponds to the
ethnic group marked by the contractor in the solicitation provision at
FAR 52.219-1, Small Business Program Representation, or FAR 52.212-
3(c).
* * * * *
(e) * * *
(3) * * *
(ii) If Block E1 or E2 is completed, enter the offered price from
the small business firm that would have been the low offeror if
qualified nonprofit agencies employing people who are blind or severely
disabled had not participated in the acquisition.
* * * * *
31. Section 253.204-71 is amended in paragraph (g)(2)(ii)(B)(1) by
removing the parenthetical ``(219.502-2-70)''; by revising paragraph
(g)(2)(ii)(B)(2); and in paragraph (g)(2)(ii)(B)(3) by removing the
parenthetical ``(219.502-3)''. The revised text reads as follows:
Sec. 253.204-71 DD Form 1057, Monthly Contracting Summary of Actions
$25,000 or Less.
* * * * *
(g) * * *
(2) * * *
(ii) * * *
(B) * * *
(2) Application of an SDB price evaluation adjustment (see FAR
Subpart 19.11); or
* * * * *
[FR Doc. 98-21043 Filed 8-5-98; 8:45 am]
BILLING CODE 5000-04-M
