[Federal Register Volume 60, Number 186 (Tuesday, September 26, 1995)]
[Notices]
[Pages 49644-49648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23880]
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OFFICE OF MANAGEMENT AND BUDGET
Office of Federal Procurement Policy; Policy Letter on
Subcontracting Plans
AGENCY: Executive Office of the President, Office of Management and
Budget (OMB), Office of Federal Procurement Policy (OFPP).
ACTION: OFPP is requesting comments on a proposed Policy Letter on
Subcontracting Plans as required by section 8(d) of the Small Business
Act and amended by the Federal Acquisition Streamlining Act of 1994
(FASA).
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SUMMARY: It is a fundamental policy of the United States Government
that a fair proportion of its contracts be placed with small business
concerns, small business concerns owned and controlled by socially and
economically disadvantaged individuals, and small businesses owned and
controlled by women and that such businesses be provided the maximum
practicable opportunity to participate as subcontractors in the
performance of Government prime contracts consistent with their
efficient performance.
Section 8(d) of the Small Business Act (15 U.S.C. 637(d)) requires
that before award can be made of a contract that exceeds $500,000 ($1
million in the case of construction of a public facility) to other than
a small business concern, the apparent successful offeror must
negotiate a subcontracting plan describing how it will provide
subcontracting opportunities to small businesses.
This Policy Letter, when issued in final, will supersede and cancel
OFPP Policy Letter 80-1, ``Pubic Law 95-507, Section 211,
SubContracting: Agency Coordination with the Small Business
Administration Resident Procurement Center Representatives,'' dated
January 24, 1980; OFPP Policy Letter 80-2, ``Regulatory Guidance on
Section 211 of Public Law 95-507,'' dated April 29, 1980; Supplement
No. 1 to Policy Letter 80-2, dated May 29, 1981; and OFPP Policy Letter
80-4, ``Women's Business Enterprise Program,'' dated April 29, 1980.
The Policy Letter consolidates previously issued guidance contained in
the above Policy Letters; adds clarification on issues that have arisen
since the issuance of the earlier Policy Letters; addresses the FASA
concern about the burden of government-unique requirements for
companies supplying commercial items by establishing a preference for
commercial plans; and provides additional guidance on the
administration and enforcement of subcontracting plans and liquidated
damages.
COMMENT DATE: Comments must be received on or before November 27, 1995.
ADDRESSES: Comments should be submitted to Linda Mesaros, Deputy
Associate Administrator, Office of Federal Procurement Policy, New
Executive Office Building, Room 9001, 725 17th Street, NW, Washington,
DC 20503.
FOR FURTHER INFORMATION CONTACT: Linda Mesaros at 202-395-4821.
Steven Kelman,
Administrator.
Policy Letter 94-X
To the Heads of Executive Departments and Establishments
Subject: Policy Regarding SubContracting Plans
1. Purpose. This directive provides Executive Branch policies
concerning subcontracting plans required by section 8(d) of the
Small Business Act (15 U.S.C. 637(d)) as amended by the Federal
Acquisition Streamlining Act of 1994 (FASA).
2. Supersession Information. This Policy Letter supersedes and
cancels OFPP Policy Letter 80-1, Public Law 95-507, Section 211,
``Subcontracting: Agency Coordination with the Small Business
Administration Resident Procurement Center Representatives,'' dated
January 24, 1980; OFPP Policy Letter 80-2, ``Regulatory Guidance on
Section 211 of Public Law 95-507,'' dated April 29, 1980; Supplement
No. 1 to Policy Letter 80-2, dated May 29, 1981; and OFPP Policy
Letter 80-4, ``Women's Business Enterprise Program,'' dated April
29, 1980.
3. Authority. This Policy Letter is issued pursuant to section 6
of the Office of Federal Procurement Policy Act, as amended, 41
U.S.C. 405.
4. Definitions.
a. Small business concern. Means a concern, including its
affiliates, that is independently owned and operated, not dominant
in the field of operation in which it is bidding on government
contracts, and qualified as a small business under the criteria and
size standards in 13 CFR Part 121.
b. Small business subcontractor. Means a concern, including its
affiliates, whose (1) number of employees does not exceed 500
employees, provided the subcontract is $10,000 or less, or (2)
number of employees or average annual receipts does not exceed the
size standard under 13 CFR 121.601 when the value of the product or
service it is providing on a subcontract exceeds $10,000.
c. Small disadvantaged business concern. Normally means a small
business concern that is at least 51 percent unconditionally owned
by one or more individuals who are both socially and economically
disadvantaged, or a publicly owned business that has at least 51
percent of its stock unconditionally owned by one or more socially
and economically disadvantaged individuals, and that has its
management and daily business controlled by one or more such
individuals. The term also means a small business concern that is at
least 51 percent unconditionally owned by an economically
disadvantaged Indian tribe or Native Hawaiian Organization, or a
publicly owned business that has at least 51 percent of its stock
unconditionally owned by one of these entities, that has its
management and daily business controlled by members of an
economically disadvantaged Indian tribe or Native Hawaiian
Organization, and that meets the requirements of 13 CFR Part 124.
This definition may not apply to all agencies when a different one
is established by statute.
d. Socially disadvantaged individuals. Means individuals who
have been subjected to racial or ethnic prejudice or cultural bias
because of their identity as a member of a group without regard to
their qualities as individuals. Individuals who certify that they
are members of these named groups, Black Americans, Hispanic
Americans, Native Americans, Asian-Pacific Americans, and
Subcontinent-Asian Americans, are considered to be socially
disadvantaged.
(1) Subcontinent-Asian Americans means United States citizens
whose origins are in India, Pakistan, Bangladesh, Sri Lanka, Bhutan,
Nepal, or the Maldive Islands.
(2) Asian-Pacific Americans means United States citizens whose
origins are in Japan, China, the Philippines, Vietnam, Korea, Samoa,
Guam, the U.S. Trust Territory of the Pacific Islands (Republic of
Palau), the Commonwealth of the Northern Mariana Islands, Laos,
Kampuchea (Cambodia), Taiwan, Burma, Thailand, Malaysia,
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Indonesia, Singapore, Brunei, Republic of the Marshall Islands, the
Federated States of Micronesia, Macao, Hong Kong, Fiji, Tonga,
Kiribati, Tuvalu, or Nauru.
(3) Native Americans means American Indians, Eskimos, Aleuts,
and Native Hawaiians.
e. Economically disadvantaged individuals. Means a socially
disadvantaged individual whose ability to compete in the free
enterprise system is impaired due to diminished opportunities to
obtain capital and credit as compared to others in the same line of
business who are not socially disadvantaged (see 13 CFR Part 124).
f. Small business concerns owned and controlled by women (women-
owned small business concerns). Means a small business concern (1)
which is at least 51 percent owned by one or more women, or, in the
case of any publicly owned business, at least 51 percent of the
stock of which is owned by one or more women, and (2) whose
management and daily business operations are controlled by one or
more women.
g. Subcontract. Means any agreement (other than one involving an
employer-employee relationship) entered into by a Government prime
contractor or subcontractor calling for supplies and/or services
required for contract performance, contract modification, or
subcontract. However, purchases from a corporation, company or
division which are affiliates, as defined in 13 CFR 121.401, of a
prime contractor are not considered ``subcontracts.''
h. Individual contract plan. Means a subcontracting plan that
covers the entire contract period (including option periods),
applies to a specific contract, and has goals which are based on the
offeror's planned subcontracting in support of the specific
contract, except that indirect costs incurred for common or joint
purposes may be allocated on a prorated basis to the contract.
i. Master plan. Means a subcontracting plan that contains all of
the required elements except goals and may be incorporated into an
individual contract plan provided the master plan has been approved.
j. Commercial plan. Means a subcontracting plan covering the
offeror's fiscal year and which is applicable to the entire
production of commercial items sold by either the entire company or
portion thereof (e.g., division, plant, or product line). As used in
this Policy Letter, the term ``commercial item'' is a product or
service that satisfies the definition of commercial item in section
8001 of FASA (41 U.S.C. 403).
k. Failure to make a good faith effort to comply with the
subcontracting plan. Means willful or intentional failure to perform
in accordance with the requirements of the subcontracting plan, or
willful or intentional action to frustrate the plan.
5. Background
a. It is a fundamental policy of the United States Government
that a fair proportion of its contracts be placed with small
business concerns, small business concerns owned and controlled by
socially and economically disadvantaged individuals, and small
business concerns owned and controlled by women and that such
businesses be provided the maximum practicable opportunity to
participate as subcontractors in the performance of Government prime
contracts consistent with their efficient performance. In
furtherance of the policy for providing the maximum practicable
opportunity to small business concerns to perform as subcontractors
on Government contracts, the laws governing Federal procurement do
not require contractors to subcontract specific percentages of the
work on Government contracts to small, small disadvantaged, or
women-owned small business concerns. The policy does require that to
the extent a Government contractor does subcontract a portion of the
work on the Government contract, it must provide the maximum
practicable opportunity to small, small disadvantaged, and women-
owned small business concerns to perform the subcontracted portion
of that contract.
b. Section 8(d) of the Small Business Act (15 U.S.C. 637(d))
requires that before award can be made of a contract that exceeds
$500,000 ($1 million in the case of construction of a public
facility) to other than a small business concern, the apparent
successful offeror must negotiate a subcontracting plan describing
how it will provide subcontracting opportunities to small
businesses. This requirement does not apply if the contract offers
no subcontracting opportunities. The subcontracting plan shall
become a material part of the contract.
c. Regulations implementing the policies of Section 8(d) of the
Small Business Act have been implemented in Part 19 of the Federal
Acquisition Regulation (FAR). This Policy Letter consolidates
previously issued guidance contained in Policy Letters 80-1, 80-2
and its Supplement No. 1, and 80-4; adds clarification on issues
that have arisen since the issuance of the earlier Policy Letters;
addresses the Congress' concern about the burden of government-
unique requirements for companies supplying commercial items by
establishing a preference for commercial plans; and provides
additional guidance on the use and administration of commercial
plans.
6. Solicitation and Subcontracting Plan Requirements
a. The FAR shall prescribe a clause entitled ``Utilization of
Small, Small Disadvantaged and Women-Owned Small Business Concerns''
to be inserted in solicitations and contracts when the acquisition
is expected to exceed the simplified acquisition threshold, except
when (1) A personal services contract is contemplated, or (2) the
contract and all of its subcontracts will be performed and awarded
entirely outside of the United States, its possessions, Puerto Rico,
or the Trust Territory of the Pacific Islands. This clause shall
express the policy of the United States for providing maximum
practicable opportunity to small, small disadvantaged, and women-
owned small business concerns to participate in the performance of
prime contracts let by the Federal Government and subcontracts. The
clause also shall require prime contractors to establish procedures
to ensure timely payment to such small business concerns performing
as subcontractors and commit the prime contractor to carrying out
these policies and cooperating with the Small Business
Administration (SBA) in studies to determine the extent of the prime
contractor's compliance. The requirements of the clause also shall
apply to small business concerns.
b. For each subcontract the prime contractor will award to a
small business subcontractor, the prime contractor must obtain a
written representation from the subcontractor that it qualifies
under the size and ownership standards applicable for the
subcontract (see 13 CFR 121.911 and the definition at subparagraph
4.b. The contractor may rely on this written representation, unless
it has reason to believe otherwise. Before including a firm on its
source list, a contractor should obtain written acknowledgment that
the potential subcontractor is aware of the adverse consequences for
misrepresentation provided for in Section 16(d) of the Small
Business Act (15 U.S.C. 645(d)).
(1) Upon receipt of a formal protest, the Office of Government
Contracting in the SBA has the final authority to determine the
eligibility of a concern to be designated as a small business and to
answer inquiries from prime contractors and others regarding such
eligibility.
(2) Similar authority to make determinations of the formally
protested eligibility of small disadvantaged businesses has been
given to the SBA's Office of Minority Enterprise Development.
(3) Women-owned eligibility determinations will be made in
accordance with regulations established by the SBA.
c. The FAR shall prescribe a clause entitled ``Small, Small
Disadvantaged and Women-Owned Small Business Subcontracting Plan''
in solicitations and contracts if the award is expected to exceed
$500,000 ($1 million for construction of a public facility), unless
the acquisition is reserved for small business concerns, offers no
subcontracting opportunities, or unless the contract will be
performed and awarded outside the United States, its possessions,
Puerto Rico or the Trust Territory of the Pacific Islands. Other
exceptions include contracts with Federal Prison Industries and
contracts with workshops for the blind or severely disabled awarded
under the provisions of the Javits-Wagner-O'Day Act. The clause
shall apply to all other entities including large businesses, state
and local governments, non-profit associations, public utilities,
Historically Black Colleges and Universities, Minority Institutions,
and foreign-owned firms that receive Federal contracts if any
portion of that contract will be performed in the United States.
There is an exemption to the clause for the Department of Defense
(DOD), the Coast Guard, and National Aeronautics and Space
Administration (NASA) in regard to Historically Black Colleges and
Universities and Minority Institutions. The actual or estimated
value of the contract for the entire term of the contract, including
any option periods, determines whether the threshold is met. The
clause shall require that the subcontracting plan include the
following elements:
(1) A statement of total dollars to be subcontracted and
statements of total dollars to be subcontracted to small business,
to small disadvantaged business, and to
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women-owned small business. Small disadvantaged and women-owned small
business dollars are included in the small business category. This
means, for example, that a small business owned by a minority woman
is counted as a small business, a small disadvantaged business, and
as a women-owned small business. An individual contract plan for a
contract with options shall contain a separate statement for the
basic contract and individual statements for each option.
(2) Separate goals expressed as percentages of total planned
subcontracting dollars for small, small disadvantaged, and women-
owned small business. Unless a commercial plan is involved, goals
are stated separately for the basic contract and for any option
periods or quantities.
(3) A statement as to whether or not the offeror included
indirect costs in establishing subcontracting goals and a
description of the methods used to determine the proportionate share
of indirect costs to be incurred with small, small disadvantaged,
and women-owned small business concerns.
(4) A description of the principal types of supplies and
services to be subcontracted (to large, small, small disadvantaged,
and women-owned small business concerns) and an identification of
the specific types to be subcontracted to each small business
category.
(5) A description of the methods that were used in developing
the subcontracting goals.
(6) The name and a description of the duties of the individual
employed by the offeror who will administer the offeror's
subcontracting program.
(7) A description of the methods used to identify potential
sources for solicitation purposes. Offerors may rely on information
contained in SBA's Procurement Automated Source System (PASS). The
information included in PASS will be incorporated into the Federal
Acquisition Computer Network (FACNET) Contractor Registration Data
Base.
(8) A description of the efforts the offeror will make to assure
that small, small disadvantaged, and women-owned small business
concerns have an equitable opportunity to compete for subcontracts.
(9) Assurances that the offeror will include the Utilization of
Small, Small Disadvantaged and Women-Owned Small Business Concerns
clause in all subcontracts over the simplified opportunities.
(10) Assurances that subcontractors (except small business
concerns) who receive subcontracts in excess of $500,000 ($1 million
for construction of a public facility) will adopt a plan similar to
the plan agreed to by the offeror. For individual contract plans,
offerors are required to describe their procedures for reviewing,
approving, and monitoring their subcontractors' compliance with
subcontracting plans. Copies of subcontractors' subcontracting plans
must be retained by the prime contractor until completion of the
subcontract. A ``certificate of compliance'' or statement from the
subcontractor that it has a subcontracting plan does not satisfy
this requirement.
(11) Assurances that the offeror will cooperate in any studies
or surveys that may be required; submit periodic reports so the
Government can determine the extent of compliance by the offeror
with the subcontracting plan; submit Standard Form (SF) 294,
Subcontracting Report for Individual Contracts, and/or SF 295,
Summary Subcontract Report, following the instructions on the form
or as provided in agency regulations; and ensure that its
subcontractors agree to submit SF 294s and 295s.
(12) A description of the type of records that will be
maintained concerning procedures that will ensure compliance with
the plan and its goals.
(13) A description of the efforts that will be made to locate
and award subcontracts to small, small disadvantaged, and women-
owned small business concerns.
d. A contractor's failure to make a good faith effort to comply
with the subcontracting plan is a material breach of the contract.
Section 8(d)(4)(F) of the Small Business Act requires that contracts
that include the Utilization and Subcontracting Plan clauses also
contain a clause requiring the payment of liquidated damages upon a
finding that the contractor failed to make a good faith effort to
comply with the requirements of these clauses. The FAR shall
prescribe a clause entitled ``Liquidated Damages-Subcontracting
Plan'' that shall describe the procedures for making such a
determination.
e. Nothing in this Policy Letter precludes an agency from
establishing additional requirements regarding subcontracting plans.
(1) The contracting officer may also use informational goals in
solicitations to inform potential offerors of the Government's
expectations concerning the goals in an acceptable subcontracting
plan. Informational goals shall not be interpreted as minimal
acceptable requirements.
7. Instructions to Contracting Officers. Contracting officers
are required to determine the acceptability of the subcontracting
plan before awarding the contract. The following policy and
procedural guidance is provided to contracting officers to assist
them in making their determinations. This guidance is not intended
to be all inclusive. Ultimately, there is no substitute for the
reasoned and objective judgment of a contracting officer exercised
on a case-by-case basis.
a. Reviewing the Subcontracting Plan. Many factors warrant
consideration in reviewing the adequacy of a subcontracting plan.
Consequently, the contracting officer should be flexible and avoid
establishing arbitrary criteria. Potential weaknesses in the plan
should be identified and brought to the attention of the offeror.
For example, by regulation, a zero goal is not acceptable. A
positive goal is required to establish a gauge for measuring results
and to provide an incentive for continuing efforts to increase the
dollar value of subcontracts placed with small, small disadvantaged,
and women-owned small business concerns. During the contract period,
the contractor is expected to make continuing efforts to locate and
identify new small, small disadvantaged, and women-owned small
business concerns as potential subcontractors. Subcontracting goals
should not be negotiated upward if they would significantly increase
the Government's cost or seriously impede the attainment of the
acquisition's objective. The contracting officer shall take the
following actions:
(1) Evaluate the anticipated potential for subcontracting to
small, small disadvantaged, and women-owned small business concerns
taking into consideration the make-or-buy policies or programs of
the offeror, the nature of the products or services to be
subcontracted and the known availability of small, small
disadvantaged, and women-owned small business concerns in the
geographical area where the work will be performed.
(2) If informational goals are stated in the solicitation,
require an offeror that proposes lower goals to explain why its
subcontracting plan cannot achieve the stated goals.
(3) If the proposed goals are questionable, advise the offeror
of (a) the names of any known potential small, small disadvantaged,
and women-owned small business subcontract sources and (b) the
availability of the sources of information on potential small, small
disadvantaged, and women-owned small business subcontractors. The
contracting officer shall emphasize that one or more of the
available sources of information concerning potential small, small
disadvantaged, and women-owned small business subcontract sources
should be considered in developing realistic and acceptable goals.
Sources of information include:
(i) Local SBA offices.
(ii) The Department of Commerce, Minority Business Development
Agency (MBDA). An offeror can ask for access to the MBDA's Profile
System.
(iii) State, county, and city government minority business
offices.
(iv) Small, minority, and women business associations.
(v) Local chambers of commerce.
(vi) The Commerce Business Daily (CDB), the FACNET Contractor
Registration Data Base, newspapers, and other communication media.
An offeror can synopsize in the CBD or advertise in trade newspapers
or journals seeking competition for subcontracts and to increase
participation by small, small disadvantaged, and women-owned small
business concerns to meet subcontract goals.
(4) Obtain advice and recommendations of the agency Small
Business Specialist and the SBA Procurement Center Representative
(SBA PCR) concerning the acceptability of the proposed plan. The FAR
shall require that the contracting officer provide the SBA PCR a
reasonable opportunity to review subcontracting plans and make
recommendations, which are advisory in nature.
(5) Consider the offeror's performance on other Government
contracts that required subcontracting plans. The contracting
officer should encourage the offeror to identify other contracts
that had subcontracting plans and contact the contracting officers
who administered those earlier plans to ascertain whether the
objectives of those plans were realized and whether required reports
were submitted in a timely manner. Overall compliance should be
considered, not merely whether or not the goals established in the
plan were met.
[[Page 49647]]
(6) Incorporate by reference the terms of a master plan into an
individual contract plan provided:
(a) The master plan contained all the required elements;
(b) The master plan has been approved within the last three
years and the SBA PCR had an opportunity to comment on the master
plan;
(c) Subcontract goals for small, small disadvantaged, and women-
owned small business concerns are specifically set forth in each
contract or modification over the threshold;
(d) Any changes to the plan deemed necessary and required by the
contracting officer in areas other than goals are specifically set
forth in the contract or modification; and
(e) The contracting officer has copies of the complete plan.
(7) A preliminary subcontracting plan may be accepted for letter
contracts and similar undefinitized instruments provided negotiation
of the final plan is accomplished within 90 days after award or
before definitization, whichever occurs first.
b. Award of Contract or Contract Modification
(1) After award of a contract or contract modification
containing a subcontracting plan, the contracting officer shall
provide a copy of the award document to the SBA Area Director for
Government Contracting in the Area where the contract will be
performed. A copy of any subcontracting plan submitted pursuant to a
sealed bid solicitation or the subcontracting plan incorporated into
a negotiated contract or modification shall be provided to the SBA
PCR.
(2) The following policies apply to contract modifications other
than options. The Small Business Act treats contracts and
modifications separately. If a subcontracting plan is not required
at the time of award because the value of the contract is below the
threshold, a subcontracting plan will not be required even if a
subsequent modification increases the value of the contract to an
amount exceeding the threshold. The only exception to this rule is
when the value of the modification itself exceeds $500,000 ($1
million for construction of a public facility). Moreover, it is not
necessary to obtain another subcontracting plan for a modification
exceeding the applicable threshold if the contract already includes
a subcontracting plan. However, the original plan must be modified
to adjust goals accordingly for the new effort. If the value of the
modification does not exceed the threshold, the original plan does
not need to be modified.
(3) The following policies apply to contractors and
subcontractors that no longer meet the size or ownership status as a
small, small disadvantaged, or women-owned small business concern
during the period of contract performance as a result of growth, a
buy-out, or a merger:
(a) A subcontracting plan is not required of any former small
business prime contractor that, during contract performance, no
longer meets the definition of a small business concern. Similarly,
the requirement to submit periodic reports does not apply. However,
a subcontracting plan is required if the prime contractor
erroneously considered itself small at the time of contract award.
Under this circumstance, the contracting officer should request a
subcontracting plan from the contractor and the responsibility to
submit the periodic reports would apply.
(b) If a prime contractor awards a subcontract to a small
business, it may continue to report those subcontract dollars as a
small business award for the duration of the subcontract, including
all option years.
c. Contract Awards Involving Commercial Plans
(1) A commercial plan is an annual subcontracting plan which is
effective during the offeror's fiscal year and applies to all of the
offeror's production of both commercial and noncommercial items.
This type of plan is useful for companies that normally rely on
their existing network of suppliers for all of their business and do
not enter into specific subcontracts to fill Government contracts.
The plan may apply to the production of the offeror's entire
company, or it may be limited to a corporation, company, division,
plant or product line. A commercial plan is approved by the first
Federal agency awarding a contract for commercial products or
services during the contractor's fiscal year, and is applicable to
every additional Federal contract for those items awarded to that
contractor during the contractor's same fiscal year. The cutoff date
for applying a previously approved commercial plan to additional
Federal contracts is the end of the company's fiscal year in which
the commercial plan was approved. If a contract extends beyond the
expiration date of the plan, a new plan must be obtained and
approved by the contracting officer monitoring the plan. The new
plan should be requested 30 days before the old plan expires.
(2) Commercial plans are recognized as one way the burdens of
government-unique requirements can be reduced for companies that
provide commercial items on Government contracts and subcontracts.
(a) It is the policy of the United States Government that
commercial plans, when authorized under this Policy Letter, shall be
the preferred method of compliance with the requirements of section
8(d) of the Small Business Act. Commercial plans are only authorized
for products or services that meet the definition of commercial item
as provided in subparagraph 4j.
(b) Agencies, in all solicitations expected to trigger the
requirements for a subcontracting plan, shall inform prospective
offerors of the opportunity for them and/or their subcontractors to
develop commercial plans if they are supplying commercial items.
Commercial plans are authorized for subcontractors that provide
commercial items under a prime contract even when the prime
contractor is not supplying a commercial item.
(3) When a contractor has a commercial plan previously approved
by another agency's contracting activity or another Federal agency
for the company's fiscal year, the contracting officer shall obtain
a copy of the plan and the approval document from the contractor.
These documents shall be incorporated into the contract.
(4) Since a commercial plan may be applicable to contracts
awarded by more than one contracting activity or Federal agency,
contracting officers must ensure that the commercial plan is not
allowed to expire prior to the negotiation of a new commercial plan.
This eventuality may occur when the contract of the contracting
officer monitoring the plan is completed and no new contract is
awarded to that contractor during the contractor's fiscal year. To
prevent such an occurrence, 30 days prior to contract completion,
the contracting officer monitoring the commercial plan shall obtain
from the contractor the name of the contracting officer
administering the contract with the latest completion date and
arrange for the transfer of the monitoring responsibilities to that
contracting officer.
d. Contract Administration of Subcontracting Plans
(1) The contracting officer administering a contract with an
individual contract plan is responsible for monitoring receipt of
the SF 294 reports. The SF 294 is used to evaluate the contractor's
progress toward meeting the subcontracting goals established in the
individual contract plan. The contracting officer shall pay
particular attention to reviewing the SF 294 required at contract
completion. The SF 294 is not required for contracts with an
approved commercial plan.
(2) The SF 295 is used to evaluate the contractor's progress
toward meeting the subcontracting goals in subcontracting plans. The
contracting officer monitoring a subcontracting plan is responsible
for ensuring receipt and review of the SF 295. The SF 295 report
summarizes all subcontract awards under contracts with a particular
federal agency and is due on or before October 30th of each year.
Since this report measures progress during the Government's fiscal
year and the commercial plan applies to the contractor's fiscal
year, a second SF 295 will be required from contractors with
commercial plans whose fiscal year is different from the
Government's. This second SF 295 report shall enable the contracting
officer monitoring the commercial plan to evaluate progress in
meeting subcontracting goals by comparing the applicable report with
the plan.
(3) For contracts containing a commercial plan, the contracting
officer monitoring the plan shall review the contractor's
performance at the close of the fiscal year for which the plan is
applicable in order to determine whether it is appropriate to assess
liquidated damages under the FAR clause entitled ``Liquidated
Damages-Subcontracting Plan.'' For contracts containing individual
contract plans, the contracting officer should evaluate contract
performances at the time of contract completion, unless the contract
contains options for extending contract performance. In this case, a
decision would be made upon completion of the initial period of
performance and at the end of each option period.
(4) In making a determination regarding the assessment of
liquidated damages, the
[[Page 49648]]
contracting officer should consider whether the contractor made a good
faith effort to comply with the subcontracting plan. Failure by the
contractor to meet the subcontracting goals established in the
subcontracting plan does not, in and of itself, constitute a failure
to make a good faith effort. The contracting officer shall consider
the totality of the contractor's effort. If the contractor failed to
make a good faith effort to comply, section 8(d) of the Small
Business Act mandates that liquidated damages must be assessed. When
considering whether a good faith effort has been made, the
contracting officer should examine whether the contractor:
(a) Submitted the periodic reports required by the
subcontracting plan in a timely manner.
(b) Failed to meet its subcontracting goals because of a lack of
diligence. Factors such as unavailability of anticipated sources or
unreasonable prices may impact on the achievement of the
contractor's goals.
(c) Made efforts to identify, contact, solicit and consider for
award small, small disadvantaged, and women-owned small business
concerns. Factors such as the contractor's efforts to request
assistance from SBA or to reach out to other organizations, i.e.,
trade associations, business development associations, etc., in an
effort to locate small, small disadvantaged, and women-owned small
business concerns should be considered in evaluating the
contractor's efforts.
(d) Maintained records and established procedures to comply with
the subcontracting plan. The contracting officer should look for
documentation of efforts to contact organizations to locate small,
small disadvantaged, and women-owned small business concerns,
participation in business fairs, information on who was solicited
for particular solicitations, and any documentation of reasons for
not awarding to small, small disadvantaged, or women-owned business
concerns.
(e) Maintained a company official to administer the
subcontracting program and monitor and enforce compliance.
(f) Assisted small, small disadvantaged, and women-owned small
business concerns in responding to solicitations issued by the
contractor.
(5) If the contracting officer's initial assessment is that the
contractor did not make a good faith effort to comply with the
subcontracting plan, the contracting officer must notify the
contractor, in writing, calling the contractor's attention to the
suspected failure. As part of the notification, the contractor must
be given the opportunity to demonstrate that good faith efforts have
been made. The contractor must be advised that failure to respond to
the notice may be taken as an admission that no valid explanation
exists.
(6) Before making a final decision, the contracting officer
shall consider the contractor's response, if any, along with any
pertinent information available. The contracting officer's final
decision shall be documented in a ``final decision'' which is
appealable by the contractor under the ``Disputes'' clause of the
contract. The contracting officer's final decision should include:
(a) A description of the contractor's failure;
(b) Reference to the appropriate contract terms;
(c) A statement of the factual areas of agreement and
disagreement;
(d) A statement of the contracting officer's decision with
supporting rationale;
(e) A demand for liquidated damages; and
(f) An explanation of the contractor's appeal rights.
(7) For a contract containing an individual contract plan, the
amount of liquidated damages to be assessed is the sum of the
amounts by which the contractor failed to meet each subcontracting
goal for small, and/or small disadvantaged, and/or women-owned small
business concerns. For contracts containing a commercial plan, the
amount of liquidated damages to be assessed is calculated based upon
the total payments made under contracts subject to the commercial
plan as a percentage of the contractor's total sales. For example,
if the contractor's total sales are $50 million and the Government's
total payments under contracts subject to the commercial plan are $5
million, the Government accounts for 10 percent of the contractor's
total sales. The commercial plan stated that the subcontracting
dollars to support the sales would be $20 million. Therefore, the
pro rata share of subcontracting attributable to the Government
contracts would be 10 percent of the $20 million or $2 million. If
the contractor failed to achieve its small business goal by 1
percent, the liquidated damages would be calculated as 1 percent of
the $2 million or $20,000. The contracting officer shall make
similar calculations for each category of small business where the
contractor failed to achieve its goal and the sum of the dollars for
all of the categories equals the amount of the liquidated damages to
be assessed. The contracting officer of the agency that originally
approved the plan will exercise the functions of the contracting
officer on behalf of all agencies that awarded contracts subject to
the commercial plan.
(8) Liquidated damages shall be in addition to any other
remedies available to the Government by law or under the contract.
8. Responsibilities. The Federal Acquisition Regulatory Council
shall ensure that the policies established herein are incorporated
in the FAR within 210 days from the date this Policy Letter is
published final in the Federal Register. Promulgation of final
regulations within that 210 day period shall be considered issuance
in a ``timely manner'' as prescribed in 41 U.S.C. 405(b).
9. Information Contact. Questions regarding this Policy Letter
should be directed to Linda Mesaros, Deputy Associate Administrator,
Office of Federal Procurement Policy, 725 17th Street, NW,
Washington, DC 20503, telephone 202-395-3501, facsimile 202-395-
5105.
10. Judicial Review. This Policy Letter is not intended to
provide a constitutional or statutory interpretation of any kind and
it is not intended, and should not be construed, to create any right
or benefit, substantive or procedural, enforceable at law by a party
against the United States, its agencies, its officers, or any
persons. It is intended only to provide policy guidance to agencies
in the exercise of their discretion concerning Federal contracting.
Thus, this Policy Letter is not intended, and should not be
construed, to create any substantive or procedural basis on which to
challenge any agency action or inaction on the ground that such
action or inaction was not in accordance with this policy letter.
11. Effective Date. The Policy Letter is effective 30 days after
the date of issuance.
Steven Kelman,
Administrator.
[FR Doc. 95-23880 Filed 9-25-95; 8:45 am]
BILLING CODE 3110-01-M
