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(a) and which, in the opinion of the procuring activity, offer substantial subcontracting possibilities. Furthermore, prime contractors who are to be awarded contracts which may not exceed $500,000, but which, in the opinion of the procuring activity, offer substantial subcontracting possibilities, shall be urged to accept this clause. SMALL BUSINESS SUBCONTRACTING PROGRAM

(a) The Contractor agrees to establish and conduct a small business subcontracting program which will enable small business concerns to be considered fairly as subcontractors and suppliers under this contract. In this connection, the Contractor shall

(1) Designate a liaison officer who will (i) maintain liaison with the Government on small business matters, (ii) supervise compliance with the Utilization of Small Business Concerns clause, and (iii) administer the Contractor's "Small Business Subcontracting Program.”

(2) Provide adequate and timely consideration of the potentialities of small business concerns in all “make-or-buy” decisions.

(3) Assure that small business concerns will have an equitable opportunity to compete for subcontracts, particularly by arranging solicitations, time for the preparation of bids, quantities, specifications, and delivery schedules so as to facilitate the participation of small business concerns. Where the Contractor's lists of potential small business subcontractors are excessively long, reasonable effort shall be made to give all such small business concerns an opportunity to compete over a period of time.

(4) Maintain records showing (1) whether each prospective subcontractor is a small business concern, (ii) procedures which have been adopted to comply with the policies set forth in this clause, and (iii) with respect to the letting of any subcontract (including purchase orders) exceeding $10,000, information substantially as follows:

(A) Whether the award went to large or small business.

(B) Whether less than three or more than two small business concerns were solicited.

(C) The reason for non-solicitation of small business if such was the case.

(D) The reason for small business failure to receive the award if such was the case when small business was solicited. The records maintained in accordance with (iii) above may be in such form as the Contractor may determine, and the information shall be summarized quarterly and submitted by the purchasing department of each individual plant or division to the Contractor's cognizant small business liaison officer. Such quarterly summaries will be considered to be management records only and need not be submitted routinely to the Government; however, records maintained

pursuant to this clause will be kept available for review.

(5) Notify the Contracting Officer before soliciting bids or quotations on any subcontract (including purchase orders) in excess of $10,000 if (1) no small business concern is to be solicited, and (ii) the Contracting Officer's consent to the subcontract (or ratification) is required by a "Subcontracts" clause in this contract. Such notice will state the Contractor's reasons for nonsolicitation of small business concerns, and will be given as early in the procurement cycle as possible so that the Contracting Officer may give SBA timely notice to permit SBA a reasonable period to suggest potentially qualified small business concerns through the contracting Officer. In no case will the procurement action be held up when to do so would, in the Contractor's judgment, delay performance under the contract.

(6) Include the Utilization of Small Business Concerns clause in subcontracts which offer substantial small business subcontracting opportunities.

(7) Cooperate with the Contracting Officer in any studies and surveys of the Contractor's subcontracting procedures and practices that the Contracting Officer may from time to time conduct.

(8) Submit quarterly reports of subcontracting to small business concerns on either Optional Form 61, Small Business Subcontracting Program Quarterly Report of Participating Large Company on Subcontract Commitments to Small Business Concerns, or such other form as may be specified in the contract. Except as otherwise provided in this contract, the reporting requirements of this subparagraph (8) do not apply to small business contractors, small business subcontractors, educational and nonprofit institutions, and contractors or subcontractors for standard commercial items.

(b) A "small business concern" is a concern that meets the pertinent criteria established by the Small Business Administration and set forth in § 1-1.701 of the Federal Procurement Regulations.

(c) The Contractor agrees that, in the event he fails to comply with his contractual obligations concerning the small business subcontracting program, this contract may be terminated, in whole or in part, for

ault. (d) The Contractor further agrees to insert, in any subcontract hereunder which may exceed $500,000 and which contains the Utilization of Small Business Concerns clause, provisions which shall conform substantially to the language of this clause, including this paragraph (d), and to notify the Contracting Officer of the names of such subcontractors.

(End of Clause) [29 F.R. 10104, July 24, 1964, as amended at 33 F.R. 17293, Nov. 22, 1968]

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§ 1-1.710_4 Review of subcontracting classified as having concentrated unemprogram.

ployment or underemployment and areas (a) The adequacy of the contractor's of persistent or substantial labor surplus “Small Business Subcontracting Pro

hereinafter referred to as labor surplus gram” shall be reviewed by the procuring

areas, in the United States, its possesagency concerned, and any deficiencies

sions, and Puerto Rico. This subpart shall be brought to the attention of the

implements Defense Manpower Policy contractor's liaison officer with a request

No. 4 (Revised), October 16, 1967 (32A for corrective action.

CFR ch. 1), and U.S. Department of (b) Each procuring agency shall as

Labor Regulations (Revised), October 16, sist the SBA to obtain such reasonable

1967 (29 CFR Part 8). obtainable information and records con (32 F.R. 18046, Dec. 16, 1967] cerning the subcontracting of its prime § 1-1.801 Definitions. contractors and its subcontractors, hav

§ 1-1.801-1 Labor surplus area coning contracts which contain the Small Business Subcontracting Program clause,

cern. as the SBA may deem necessary. Ac The term “labor surplus area concern" cordingly, the contracting officer may includes certified-eligible concerns, perseparately or together with a representa- sistent labor surplus area concerns, and tive of SBA, periodically conduct studies substantial labor surplus area concerns, and surveys of the contractor's subcon as defined in this § 1-1.801-1. tracting procedures and practices and (a) “Certified-eligible concern" means those of his subcontractors. Such studies a concern located in or near a section of and surveys may originate with the pro concentrated unemployment or undercuring agency in order to have available employment which has been certified by the pertinent data concerning subcon the Secretary of Labor in accordance tracting by its primes, or, if such data with 29 CFR 8.7(b) with respect to emis not currently available, the studies and ployment of disadvantaged persons surveys may originate upon the request residing within such sections, and which of the SBA for such data. On the basis will agree to perform, or cause to be of the foregoing studies, surveys, and performed by a certified concern, a

Is the SBA may make recommen- substantial proportion of a contract in dations to the procuring agency regard or near such sections; it includes a coning methods for increasing small busi cern, which, though not so certified, ness participation in the contractor's agrees to have a substantial proportion subcontract awards. SBA and the pro of a contract performed by certified concuring agency will freely interchange, cerns in or near such sections. A concern at the operating level, information re shall be deemed to perform a substantial sulting from these surveys.

proportion of a contract in or near sec(c) Subcontracting records main tions of concentrated unemployment or tained by Government offices shall be underemployment if the costs that the made available for review, as requested, concern will incur on account of manuby SBA.

facturing or production in or near such

sections (by itself, if a certified concern, § 1-1.711 Federal Supply Schedule con

or by certified concerns acting as firsttracts.

tier subcontractors) amount to more Where orders are placed under Federal

than 30 percent of the contract price. Supply Schedule contracts and one or

(b) “Persistent labor surplus area more of the contractors for an item on

concern" means a concern which will a given schedule are small business

perform, or cause to be performed, a concerns, the orders shall be placed in

substantial proportion of a contract in accordance with the policies and proce

persistent labor surplus areas. A condures set forth in $ 101-26.408–4(b) of the Federal Property Management

cern shall be deemed to perform a sub

stantial proportion of a contract in perRegulations. [32 F.R. 6568, Apr. 28, 1967]

sistent labor surplus areas if the costs

that the concern will incur on account Subpart 1-1.8—Labor Surplus Area

of manufacturing or production perConcerns

formed in such areas (by itself or its 8 1-1.800 Scope of subpart.

first-tier subcontractors amount to This subpart sets forth policies and more than 50 percent of the contract procedures with respect to aiding sections price.

57 99–187—69— 5

(c) “Substantial labor surplus area concern” means a concern which will perform, or cause to be performed, a substantial proportion of a contract in substantial labor surplus areas. A concern shall be deemed to perform a substantial proportion of a contract in substantial labor surplus areas if the costs that the concern will incur on account of manufacturing or production performed in substantial labor surplus areas or in substantial and persistent labor surplus areas (by itself or its first-tier subcontractors) amount to more than 50 percent of the contract price. [32 F.R. 18046, Dec. 16, 1967] $1–1.801-2 Labor surplus area.

The term "labor surplus area” means a geographical area which at the time of award is either a section of concentrated unemployment or underemployment, a persistent labor surplus area, or a substantial labor surplus area, as defined in this § 1-1.801-2.

(a) "Section of concentrated unemployment or underemployment” means appropriate sections of States or "labor areas” so classified by the Secretary of Labor.

(b) “Persistent labor surplus area" means an area which (1) is classified by the Department of Labor as an "Area of Substantial and Persistent Labor Surplus" (also called "Area of Substantial and Persistent Unemployment”) and is listed as such by that Department in conjunction with its publication “Area Trends in Employment and Unemployment” or (2) is certified as an area of substantial and persistent labor surplus by the Department of Labor pursuant to a request by a prospective contractor.

(c) “Substantial labor surplus area”. means an area which (1) is classified by the Department of Labor as an “Area of Substantial Labor Surplus" (also called “Area of Substantial Unemployment”) and which is listed as such by that Department in conjunction with its public cation “Area Trends in Employment and Unemployment” or (2) is certified as an area of substantial labor surplus by the Department of Labor pursuant to a request by a prospective contractor. (32 F.R. 18046, Dec. 16, 1967) § 1-1.801-3 Small business concern.

For definition of small business concern, see Subpart 1-1.7. 132 F.R. 18047, Dec. 16, 1967)

§ 1-1.802 Labor surplus area policies. § 1-1.802–1 General policy.

It is the policy of the Government to encourage the placing of contracts in sections of concentrated unemployment and underemployment and in areas of persistent and substantial labor surplus, to the extent consistent with procurement objectives, and where such contracts can be awarded at prices no higher than those obtainable from other concerns, and by encouraging prime contractors to place subcontracts with concerns which will perform a substantial proportion of the production in such sections and in labor surplus areas. (32 F.R. 18047, Dec. 16, 1967) § 1-1.802–2 Specific policies.

To further the general policy, the following specific policies shall be applied to procurements which are estimated to exceed $10,000 and may, if deemed practicable by the contracting officer, be applied to procurements between $2,500 and $10,000:

(a) Best efforts shall be used to award negotiated contracts to labor surplus area concerns. However, in no case may price differentials be paid for the purpose of carrying out this policy.

(b) Procurements shall be set aside for award to labor surplus area concerns in accordance with $ 1–1.804.

(1) Where either a partial labor surplus area set-aside or a partial small business set-aside can be appropriately made for any given procurement, the setaside shall be made for labor surplus area concerns.

(2) In order to accommodate both labor surplus area and small business policies, labor surplus area set-aside awards shall be made in accordance with the following order of priority: (i) Certified-eligible concerns which are also small business concerns; (ii) other certified-eligible concerns; (iii) persistent labor surplus area concerns which are also small business concerns; (iv) other persistent labor surplus area concerns; (v) substantial labor surplus area concerns which are also small business concerns; (vi) other substantial labor surplus area concerns; and (vii) small business concerns which are not labor surplus area concerns.

(c) Procurement agencies shall disseminate promptly to appropriate procurement personnel available publications and other information identifying

sections of concentrated unemployment § 1-1.804 Partial set-asides for labor and underemployment and other labor surplus area concerns. surplus areas and production capabilities

§ 1-1.804–1 General. therein. (d) The classification and certifica

(a) In accordance with the policies set tion of labor surplus areas and concerns forth in § 1-1.802, a portion of each proby the Department of Labor shall be con curement shall be set aside by the considered conclusive with respect to the

tracting officer for labor surplus area particular procurement concerned.

concerns if: (e) Concerns located in labor surplus

(1) The procurement is severable into areas, which are on appropriate bidders

two or more economic production runs lists, shall be given the opportunity to or reasonable lots; and submit bids or proposals on all procure

(2) One or more labor surplus area ments for which they are qualified, ex

concerns are expected to have the techcept where the procurement has been nical competency and productive capacset aside in its entirety for a specific ity to furnish a severable portion of the class of firms, such as small business con

procurement at a reasonable price. cerns. Where less than a complete bid (b) In determining whether a proders list is to be used, pursuant to posed procurement is susceptible to divi§ 1-2.205–4, all prospective contractors in

sion into two or more economic produclabor surplus areas shall be solicited, ex

tion runs or reasonable lots, consideracept that only a pro rata number of pro tion should be given to the following spective labor surplus area concerns need

factors and any others deemed approbe solicited when the bidders list is com

priate: (1) Price and procurement posed predominantly of labor surplus

history of the items, (2) open industry area concerns and the estimated award

capacity, (3) startup cost including speis not expected to be more than $25,000.

cial tooling requirements, (4) delivery (f) Subcontracting with concerns in schedule, and (5) nature of item and labor surplus areas shall be encouraged quantity being procured. in accordance with § 1-1.805.

Before a portion or portions constitut(g) In the event of equal low bids,

ing more than 50 percent of the total preference shall be given to labor surplus

requirement may be set aside, a deterarea concerns in accordance with

mination must be made that there is a § 1-2.407-6.

reasonable expectation that the action (h) Depressed industries shall be as

proposed will not result in the payment sisted in accordance with § 1-1.806.

of a price differential. (i) Procurement agencies shall co

(c) In furtherance of the policy to asoperate with the Departments of Labor sure that a fair proportion of the total and Commerce, the Small Business Ad purchases and contracts are placed with ministration, and the Office of Emer

small business concerns, each labor surgency Planning to achieve the objectives

plus area set-aside shall provide that, of this subpart.

in addition to labor surplus area con(j) Procurement placed in labor sur cerns, small business concerns not perplus areas as a result of preference pro

forming in such areas are also eligible for cedures shall be reported in accordance

award of any set-aside quantities not with § 1-1.807.

awarded to labor surplus area concerns (29 F.R. 10104, July 24, 1964, as amended at

(see § 1-1.804–2). 32 F.R. 18047, Dec. 16, 1967]

(d) None of the following is, in itself, § 1-1.802–3 Buy American Act.

sufficient cause for not making a labor

surplus area set-aside: Any preference under the “Buy Ameri

(1) A large part of previous procurecan Act” due to performance in labor

ments of the item in question has been surplus areas (see section 3(c) of Execu

placed with labor surplus area concerns; tive Order No. 10582 of December 17,

(2) The item to be purchased is on 1954, which prescribes uniform proce

an established planning list under the dures for certain determinations under

Industrial Readiness Planning Program; the Buy American Act) shall be in addi

(3) The item to be purchased is on tion to the assistance accorded pursuant

a Qualified Products List; to this subpart.

(4) A period of less than thirty days 8 1-1.803 [Reserved]

from the date of issuance of invitations

for bids or requests for proposals is prescribed for the submission of bids or proposals; or

(5) The procurement is classified.

(e) Where it is determined that a portion of a procurement is to be set aside for labor surplus areas, the procurement shall be divided into a non-set-aside portion and a set-aside portion. Insofar as practical, the set-aside portion will be such as to make the maximum use of the capacity of labor surplus area concerns. Delivery terms and other terms applicable to the set-aside portion of an item and those applicable to the non-set-aside portion of that item shall be comparable. § 1-1.804–2 Notice to bidders or offer

ors. (a) Invitations for bids or requests for proposals involving set-asides, pursuant to this subpart, shall contain a notice substantially as set forth in paragraph (b) of this section. The notice may be modified to include the applicable specific small business definition. The notice used shall be made a part of each contract under the set-aside portion of the procurement.

(b) Notice: NOTICE OF LABOR SURPLUS AREA SET-ASIDE

(a) General. A portion of this procurement, as identified elsewhere in the Schedule, has been set aside for award only to one or more labor surplus area concerns and, to a limited extent, to small business concerns which do not qualify as labor surplus area concerns. Negotiations for award of the setaside portion will be conducted only with responsible labor surplus area concerns (and small business concerns to the extent indicated below) which have submitted responsive bids or proposals on the non-set-aside portion at a unit price no greater than 120 percent of the highest award made on the non-set-aside portion. Negotiations for the set-aside portion will be conducted with such bidders in the following order of priority:

Group 1. Certified-eligible concerns which are also small business concerns.

Group 2. Other certified-eligible concerns. Group 3. Persistent labor surplus area concerns which are also small business concerns.

Group 4. Other persistent labor surplus area concerns.

Group 5. Substantial labor surplus area concerns which are also small business concerns.

Group 6. Other substantial labor surplus area concerns.

Group 7. Small business concerns which are not labor surplus area concerns.

Within each of the above groups, negotiations with such concerns will be in the order of their bids on the non-set-aside portion, beginning with the lowest responsive bid. The set-aside portion shall be awarded at the highest unit price awarded on the nonset-aside portion, adjusted to reflect transportation and other cost factors which were considered in evaluating bids on the nonset-aside portion. However, the Government reserves the right not to consider token bids or other devices designed to secure an unfair advantage over other bidders eligible for the set-aside portion.

(b) Definitions. (1) The term "labor sur

(b) Definitions plus area” means a geographical area which is either a section of concentrated unemployment or underemployment, a persistent labor surplus area, or a substantial labor surplus area, as defined below:

(i) "Section of concentrated unemployment or underemployment” means appropriate sections of States or "labor areas" so classified by the Secretary of Labor.

(ii) "Persistent labor surplus area” means an area which (A) is classified by the Department of Labor as an "Area of Substantial and Persistent Labor Surplus" (also called “Area of Substantial and Persistent Unemployment”) and is listed as such by that Department in conjunction with its publication “Area Trends in Employment and Unemployment” or (B) is certified as an area of substantial and persistent labor surplus by the Department of Labor pursuant to a request by a prospective contractor.

(iii) “Substantial labor surplus area" means an area which (A) is classified by the Department of Labor as an “Area of Substantial Labor Surplus" (also called "Area of Substantial Unemployment”) and is listed as such by that Department in conjunction with its publication “Area Trends in Employment and Unemployment” or (B) is certified as an area of substantial labor surplus by the Department of Labor pursuant to a request by a prospective contractor.

(2) The term "labor surplus area concern" includes certified-eligible concerns, persistent labor surplus area concerns, and substantial labor surplus area concerns, as defined below:

(i) “Certified-eligible concern" means & concern located in or near a section of concentrated unemployment or underemployment which has been certified by the Secretary of Labor in accordance with 29 CFR 8.7(b) with respect to employment of disadvantaged persons residing within such sections, and which will agree to perform, or cause to be performed by a certified concern, a substantial proportion of a contract in or near such sections; it includes a concern which, though not so certified, agrees to have a substantial proportion of a contract performed by certified concerns in or near such sections. A concern shall be deemed to perform a substantial proportion of a contract in or near sections of concen

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