[Federal Register Volume 61, Number 179 (Friday, September 13, 1996)]
[Notices]
[Pages 48463-48465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23591]
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DEPARTMENT OF COMMERCE
[Docket No. 960828234-6234-01]
RIN 0690-AA25
Guidelines for Empowerment Contracting
AGENCY: Department of Commerce.
ACTION: Proposed guidelines; request for comment.
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SUMMARY: The Department of Commerce is issuing these proposed
guidelines requesting public comment on policies and procedures
intended to promote economy and efficiency in Federal procurement by
granting qualified large businesses and qualified small businesses
appropriate incentives to encourage business activity in areas of
general economic distress. This action is taken in accordance with the
President's Executive Order entitled, ``Empowerment Contracting.'' The
standards set forth in these proposed guidelines will serve as the
basis for a proposed revision to the Federal Acquisition Regulation
(``FAR''). Information obtained from public comment on these guidelines
will be used to help draft the proposed FAR revision.
DATES: Comments must be submitted on or before October 15, 1996.
ADDRESSES: Comments may be mailed to the Department of Commerce, Office
of the Assistant General Counsel for Finance and Litigation, Room 5896,
14th and Constitution Street, NW., Washington, DC 20230.
FOR FURTHER INFORMATION CONTACT:
Joe Levine, 202-482-1071.
SUPPLEMENTARY INFORMATION: On May 21, 1996, President Clinton issued
Executive Order 13005, ``Empowerment Contracting'' (the ``Order''). The
purpose of the Order is to strengthen the economy and secure broad-
based competition for Federal contracts by fostering growth of Federal
contractors in economically distressed communities. In the Order, the
President charged the Secretary of Commerce (the ``Secretary''), in
consultation with the Secretaries of Housing and Urban Development,
Labor and Defense; and the Administrators of the General Services
Administration, the National Aeronautics and Space Administration, the
Small Business Administration, and the Office of Federal Procurement
Policy, to develop policies and procedures to ensure that Federal
agencies, when awarding contracts in unrestricted competitions, grant
qualified large and small businesses appropriate price or evaluation
incentives to encourage business activity in areas of general economic
distress.
Specifically, the Order requires the Secretary to ``develop
policies and procedures to ensure that agencies, to the extent
permitted by law, grant qualified large businesses and qualified small
businesses appropriate incentives to encourage business activity in
areas of general economic distress, including a price or a non-price
evaluation credit, when assessing offers for government contracts in
unrestricted competitions, where the incentives would promote the
policy set forth in this Order.'' The Order also calls upon the
Secretary to (1) monitor the implementation and operation of the
procedures developed; (2) ensure proper administration of the program
and reduce the potential for fraud by intended beneficiaries; (3)
develop a process to evaluate the effectiveness of the procedures
developed; and (4) issue an annual report to the President on the
status and effectiveness of the program. In addition, the Secretary
must ensure that all policies, procedures and regulations developed
pursuant to the Order minimize the administrative burden on affected
agencies and the procurement process.
These proposed guidelines, which are being published for 30 days'
public comment, respond to the requirement in section 4(b) of the Order
that the Secretary of Commerce draft rules, regulations, and guidelines
necessary to implement the Order within 90 days of the date of the
Order. The standards set forth in these proposed guidelines will not,
in and of themselves, have force and effect in Federal procurements.
Rather, they will serve as the basis for a proposed revision to the
Federal Acquisition Regulation (``FAR'') pursuant to the policies and
procedures set forth in FAR Subpart 1.5., 48 CFR Subpart 1.5. That
proposed revision will be published for public comment, pursuant to 48
CFR 1.501-2.
It has been determined that these proposed guidelines are
significant for purposes of Executive Order 12866. Because these
proposed guidelines relate to a matter of public property, loans,
grants, benefits, or contracts, they are exempted from all the
procedural requirements of the Administrative Procedure Act (5 U.S.C.
553). Because notice and comment are not required by 5 U.S.C. 553 or
any other law, a Regulatory Flexibility Analysis is not required and
was not done for purposes of the Regulatory Flexibility Act. The
guidelines do not contain information collection requirements for
purposes of the Paperwork Reduction Act.
Guidelines for Empowerment Contracting
I. Definitions
``Agency'' means any authority of the United States that is an
``agency'' under 44 U.S.C. 3502(1), other than those considered to be
independent regulatory agencies, as defined in 44 U.S.C. 3502(10).
``Area of general economic distress'' means, for all urban and
rural communities, any census tract that has a poverty rate of at least
20 percent or any designated Federal Empowerment Zone, Supplemental
Empowerment Zone, Enhanced Enterprise Community, or Enterprise
Community. ``Area of general distress'' also means any rural or Indian
reservation area that currently meets the criteria for designation as a
redevelopment area under Sec. 401(a) of the Public Works and Economic
Development Act of 1965, as amended (42 U.S.C. 3161(a)), as set forth
at 15 CFR 301.2 (loss of population); 15 CFR 301.4 (Indian Lands) and
15 CFR 301.7 (special impact areas).
The Department of Commerce shall develop and maintain the official
listing of eligible areas, based on the 1990 decennial Census of
Population data. The listing shall contain the Census tract and block
numbering for all eligible areas.
``Qualified large business'' means a large for-profit or not-for-
profit trade or business that (1) employs a significant number of
residents from the area of general economic distress; and (2) either
has a significant physical presence in the area of general economic
distress or has a direct impact on generating significant economic
activity in the area of general economic distress.
``Qualified small business'' means a small for-profit or not-for-
profit trade or business that (1) employs a significant number of
residents from the area of general economic distress; (2) has a
significant physical presence in the area of general economic distress;
or (3) has a direct impact on generating significant economic activity
in the area of general economic distress.
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``Eligible businesses'':
(1) ``Business'' means the legal entity responsible for performance
of the contract for which a preference is sought.
(2) ``Small business'' is defined by the definitions and procedures
set forth by the Small Business Administration for determining size
eligibility for government procurements (13 CFR 121.901-911).
(3) ``Large business'' means any business that is not a small
business.
(4) ``Not-for-profit businesses''--Notwithstanding 13 CFR 121.403
(the SBA regulations that defines ``business or concern'' to mean for-
profit entities), size determinations for not-for-profit entities will
follow the same procedures as those of for-profit entities, i.e., the
Standard Industrial Code (SIC) of the procurement will govern.
(5) ``Employs a significant number of residents from the area.''
This means a business allocates or will (based on a showing made at the
time of certification of eligibility for a preference) allocate at
least 15 to 25 percent of its total labor costs associated with
performing the contract in wages to residents from the area of general
economic distress;
(6) ``Has a significant physical presence in the area.'' This means
a business with physical plant(s) in eligible areas which comprises at
least 25 percent of the total area of the physical plant(s) of the
business;
(7) ``Has a direct impact on generating significant economic
activity in the area.'' This means a business which: (1) allocates or
will (based on a showing made at the time of certification of
eligibility for a preference) allocate at least 40 to 50 percent of its
total labor costs associated with performing the contract in wages to
residents from the area of economic distress; or (2) during the six
months prior to submitting its bid or proposal, has incurred at least
15 percent of its expenses on goods, materials, and services from firms
located in eligible areas; or (3) is owned \1\ by permanent resident(s)
of the area of economic distress who lives full time in the area of
economic distress.
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\1\ For these purposes, an individual ``owns'' a business if he
or she has a 50 percent or greater financial interest in such
business.
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II. Challenges
Businesses shall ``certify'' their qualifications pursuant to the
definitions set forth in the ``Definitions'' section of these
guidelines. The Commerce Department may develop a system for verifying
key information, and criminal sanctions shall apply for false
applications. Challenges regarding certification as to size will
continue to be handled under SBA's Procedures for Size Protests and
Appeals (13 CFR 121.1601-121.1722). Challenges to certifications
regarding other elements required for qualification shall be heard by
the Commerce Department under procedures to be developed.
III. Applicability
Subject to the provisions contained in the ``Phased Implementation
of the Program'' section of these proposed guidelines, these of the
Program'' section of these proposed guidelines, these proposed
guidelines shall apply to unrestricted competitions for contracts
exceeding $100,000.
IV. Incentive Structure
Both price and non-price incentives shall be available in contracts
subject to these proposed guidelines. While applying these incentives,
the Contracting Officer will be authorized to determine the size and
type of incentive to apply to any particular procurement. Preferences
in the form of incentives shall represent a price preference of 5 to 10
percent or an evaluation credit 5 to 10 percent.\2\ Any preference a
business receives under these guidelines shall be added to the
preferences it may receive pursuant to other statutory or regulatory
programs.
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\2\ If, for example, a price preference were used in an IFB or
an RFP, a qualifying firm's offered price would be reduced by 5% to
10%. If an evaluation preference were used in an RFP, an offeror
that received a preference would have its overall non-price related
evaluation increased by 5% to 10% above the score it would have
otherwise received.
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V. Monitoring and Evaluation
Subject to the provisions of the ``Phased Implementation of the
Program'' section of these proposed guidelines, the Commerce
Department, in conjunction with procuring agencies, shall monitor the
process as follows:
(1) Monitoring the Federal Procurement Process. We would expect
that the benefit to the federal procurement system would begin to be
realized during the latter years of phase two of the program. To assist
in monitoring and evaluating the efficiency of this new program,
agencies awarding contracts to qualified businesses shall provide the
following information to the Department of Commerce:
(A) The startup costs and ongoing administrative costs of
implementing the program;
(B) The extent to which incentives were used in evaluating awards
under this program;
(C) The extent to which incentives changed the outcome of the
procurement;
(D) The advantages and disadvantages to the agency of awarding
contracts with these preferences; and
(E) The savings and/or quality improvements in supplies or services
bought under contracts subject to the program (or increased costs and/
or decreased quality of such supplies or services).
(2) Monitoring the Impact on Business Development. Evaluation
criteria shall be established on national goals and objectives. A
sample of businesses receiving contracts under the program would be
examined with the following issues being addressed:
(A) Did the business locate or remain in a particular place so that
it would be eligible for preferences under these guidelines;
(B) Did the business hire new workers or provide additional
benefits to existing workers from eligible areas so that it would be
eligible for preferences under these guidelines;
(C) Did the business purchase additional goods and services from
firms located in eligible areas so that it would be eligible for
preferences under these guidelines;
(D) Did the business propose to hire more workers in eligible areas
as a result of bidding or proposing under the subject contract;
(E) Is this contract new work that the business would not have
received but for this program.
(3) Monitoring the Impact on Distressed Communities. In order to
examine impacts of the program on distressed communities, outcomes
should be measured in the context of local conditions and community
priorities, as well as broad national goals. The local vision for a
community's transformation should provide the principal criteria for
measuring local outcomes. The monitoring and evaluation process should
have both an initial and a longer term phase. The principal objectives
of the initial phase would be to:
(A) Establish baseline measurements of demographics, economic
indicators, physical infrastructure conditions and needs, and social
conditions;
(B) Identify local outcome measures and common national measures
toward which long-term evaluation will be directed, including
employment, crime, education, and poverty; and
(C) Develop a strategy and mechanism for evaluating progress toward
local and national goals over time.
The longer-term evaluation should have the capacity to answer
[[Page 48465]]
fundamental questions about the efficacy of targeted Federal
contracting, specifically its ability to revitalize distressed
communities and to improve the social and economic well-being of
residents. This phase will examine such questions as:
(A) To what extent does the program create or improve the quality
of jobs and economic opportunities in the distressed area?
(B) To what extent does the program result in new businesses
locating in the community or increased rates of business retention in
the community?
(C) To what extent does the program affect areas outside the
distressed community by either connecting residents with opportunities
in the larger community or by increasing growth in the larger area?
(D) How have the changes in these communities affected the
jurisdictions in which they are located?
(E) How have areas (and residents) adjacent to the distressed
communities been affected?
(F) At what cost have these outcomes been achieved? The evaluation
must ultimately provide an empirical basis for assessing program costs
relative to benefits.
(G) How effectively does the program interact with other government
programs designed to promote the development of economically distressed
communities?
In monitoring the program, the Department of Commerce can request
additional information to the extent that it deems appropriate.
VI. Phased Implementation of the Program
(1) First phase--six month testing period. These guidelines will
apply initially, during a first phase of six months' duration, only to
a limited number of contracts involving industries whose two digit
Standard Industrial Classification (or ``SIC'') Codes will be listed in
the revision to the FAR based upon these guidelines (see SUPPLEMENTARY
INFORMATION). The contracts to be selected shall be developed with the
concurrence of the Department of Commerce and the procuring agency in
question. We seek public comment on the industries to be listed. During
the first phase, the efficacy of alternative forms of preferences in
different industry settings will be tested and assessed.
(2) Second phase--further implementation. Further implementation of
the Order will be instituted in the second phase of the program, which
will begin after the first phase of the program has ended. In the
second phase, the program will be applied to a larger number of
contracts within selected two digit SIC Code industries involved in
competitive Federal procurements, consistent with efficient
administration of the program. Industries included in the second phase
will be identified in advance of being included. The contracts to be
selected shall be developed with the concurrence of the Department of
Commerce and the procuring agency in question. The efficacy of the
program will be monitored and evaluated during the second phase,
subject to the criteria set forth in the ``Monitoring and Evaluation''
section of these guidelines. At the end of this five or so year period,
we would ascertain whether the program is meeting its goals.
Specifically, we would determine whether the program (a) stimulated
economic activity (through, among other things, job creation or new
investment) in areas of general economic distress and (b) benefited the
federal procurement system. If the program meets these objectives, it
would be expanded to other selected industries for similar
implementation and evaluation.
VII. Effective Date
The standards set forth in these guidelines will serve as the basis
for a proposed revision to the Federal Acquisition Regulation pursuant
to the policies and procedures set forth in FAR Subpart 1.5. The
proposed FAR revision will be published for public comment, pursuant to
48 CFR 1.501-2.
Dated: September 10, 1996.
Michael Kantor,
Secretary of Commerce.
[FR Doc. 96-23591 Filed 9-12-96; 8:45 am]
BILLING CODE 3510-17-M
