unit prices for the purpose of determining the eligibility and priority status of the concern for the set-aside portion of each Item. In no event will a set-aside award be made for an Item to such bidder at a higher unit price than his "all-or-none" unit price for the Item on the non-set-aside portion.

(d) Definitions.

(1) A "small business concern" is a concern that is independently owned and operated, is not dominant in the field of operation in which it is bidding on Government contracts, and, with its affiliates, has not more than (----*) employees, except that where a concern is a regular dealer or nonmanufacturer, such concern must have not more than 500 employees. In addition to meeting these criteria, a manufacturer or regular dealer submitting bids or proposals in his own name must agree to furnish in the performance of the contract end items manufactured or produced in the United States, its possessions, or Puerto Rico, by small business concerns: Provided, That this additional requirement does not apply in connection with construction or service contracts.

(2) The term "labor surplus area" means a geographical area which is a persistent labor surplus area or a substantial labor surplus area, or both, as defined below:

(i) "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 Labor Market Trends," 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.

(11) "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 which is listed as such by that Department in conjunction with its publication "Area Labor Market Trends," or (B) is certified as an area of substantial labor surplus by the Department of Labor pursuant to a request by a prospective contractor.

(3) The term "labor surplus area concern" includes persistent labor surplus area concerns and substantial labor surplus area concerns as defined below:

(i) "Persistent labor surplus area concern" means a concern that agrees to perform, or cause to be performed, a substantial proportion of a contract in persistent labor surplus areas. A concern shall be deemed to

*The appropriate number of employees (500, 750, or 1,000) shall be inserted in accordance with §§ 18-1.701-1 and 18-1.701-4.

perform a substantial proportion of a contract in persistent labor surplus areas if the costs that the concern will incur on account of manufacturing or production performed in such areas (by itself or its first-tier subcontractors) amount to more than 50 percent of the contract price.

(ii) "Substantial labor surplus area concern" means a concern that agrees to 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.

(e) Identification of areas of performance. Each bidder desiring to be considered for award as a small business labor surplus area concern on the set-aside portion of this procurement shall identify in his bid the geographical areas in which he proposes to perform, or cause to be performed, a substantial proportion of the production of the contract. If the Department of Labor classification of any such area changes after the bidder has submitted his bid, the bidder may change the areas in which he proposes to perform: Provided, That he so notifies the Contracting Officer before award of the setaside portion. Priority for negotiation will be based upon the labor surplus classification of the designated production areas as of the time of the proposed award.

(f) Agreement. The bidder agrees that, if awarded a contract as a small business persistent labor surplus area concern under the set-aside portion of this procurement, he will perform, or cause to be performed, a substantial proportion of the production in areas classified at the time of award, or at the time of performance of the contract, as persistent labor surplus areas; and that if awarded a contract as a small business substantial labor surplus area concern under the set-aside portion of this procurement, he will perform, or cause to be performed, a substantial proportion of the production in areas classified at the time of award, or at the time of performance of the contract, as substantial or persistent labor surplus

areas.

(g) Token bids. Notwithstanding the provisions of this Notice, the Government reserves the right, in determining eligibility or priority for set-aside negotiations, not to consider token bids or other devices designed to secure an unfair advantage over other bidders eligible for the set-aside portion.

(h) Instruction for indicating portion of set-aside quantity desired. The quantity of

each item which has been set aside is set forth on the attached Bidder's Statement of Set-Aside Quantity Desired, which is to be filled in only by small business concerns, as provided in (b) (2) above. Furthermore, it is to be used by such a bidder only when (1) he has submitted a bid for the entire non-set-aside quantity of an Item, and (2) he desires a total quantity in excess of the non-set-aside quantity thereof. Whether or not a small business concern may participate in the set-aside portion is dependent on its eligibility in accordance with (c) above. It should be noted, however, that to be eligible for the set-aside portion the bidder need not have filled in the Bidder's Statement of Set-Aside Quantity Desired. The latter should only be filled in where the bidder desires a quantity in excess of the non-set-aside quantity. BIDDER'S STATEMENT OF SET-ASIDE QUANTITY DESIRED

[The issuing office will identify by line item number the supplies being procured as to which a portion is set aside and will designate the quantity set aside for each such item. The portion of set-aside quantity desired column will be left blank for the bidder or offeror to fill in. Where the definition of a small business concern for a given industry, as prescribed by the Small Business Administration and promulgated within the Department of Defense, differs from that set forth in the Notice above, the Notice shall be appropriately modified to reflect such definition.]

(e) (1) After the award price for the non-set-aside portion has been determined, negotiations may be conducted for the set aside portion. Procurement of the set-aside portion shall in all instances be effected by negotiation. Negotiations shall be conducted only with those bidders or offerors who 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 or to be made on the non-set-aside portion and who are determined to be responsible prospective contractors for the set-aside portion of the procurement. Negotiations shall be conducted with small business concerns in the order of priority as indicated in the foregoing notices: Provided, That, where equal low bids are received on the nonset-aside portion from concerns which are equally eligible for the set-aside portion, the concern which is awarded the non-set-aside portion (under the equal low bid procedures of § 18-2.407-6 of this

chapter) shall have first priority with respect to negotiations for the set-aside portion. The set-aside portion will be awarded at the highest unit price awarded or to be awarded for the nonset-aside portion.

(2) When the award price for the non-set-aside portion has been determined and where an award will be made to a small business concern and the same small business concern is entitled to receive the set-aside portion of a solicitation, the set-aside portion may be added to the basic contract by supplemental agreement. The supplemental agreement shall include the Examination of Records clause, applicable to the setaside portion only.

If the entire set-aside portion is not procured by the method set forth in § 18-1.706-5, as to total set-asides, or in § 18-1.706-6, as to partial set-asides, the determination referred to in § 18-1.706-1 is automatically dissolved as to the unawarded portion of the set-aside and such unawarded portion may be procured by advertising or negotiation, as appropriate, in accordance with existing regulations. (See § 18-3.201-2(c) of this chapter as to negotiation.)

§ 18-1.706-8 Contract authority.

Contracts for total or partial set-asides entered into by conventional negotiation (see §§ 18-1.706-5(b) and 18-1.7066(d)) or by "Small Business Restricted Advertising" (see § 18-1.706-5(b)) are negotiated procurements and shall cite as authority 10 U.S.C. 2304 (a) (17) and Section 15 of the Small Business Act in the case of a joint determination, or 10 U.S.C. 2304(a) (1) in the case of a unilateral determination. (See § 18-3.2012(b) of this chapter.)

§ 18-1.706-9 Maintenance of records.

Records pertaining to the initiation of individual procurements under each class set-aside shall be maintained by small business specialists at each procurement office. Such records shall include:

(a) Invitation for bids or request for proposals number and date;

(b) Item or service;

(c) Unilateral or joint class set-aside and number;

§ 18-1.707-1 General.

(a) It is the policy of the Government to enable small business concerns to be considered fairly as subcontractors to contractors performing work or rendering services as prime contractors or subcontractors under Government procurement contracts, and to ensure that prime contractors and subcontractors having small business subcontracting programs will consult through the procurement office with the SBA upon its request.

(b) The SBA is not authorized, however, to prescribe the extent to which any contractor or subcontractor shall subcontract or specify the concerns to which subcontracts shall be granted, nor is authority vested in the SBA respecting the administration of individual prime contracts or subcontracts.

§ 18-1.707-2 Small business subcontracting program.

The Government's small business subcontracting program requires Government prime contractors to assume an affirmative obligation with respect to subcontracting with small business concerns. In contracts which range from $5,000 to $500,000, the contractor undertakes the obligation of accomplishing the maximum amount of small business subcontracting which is consistent with the efficient performance of the contract. This undertaking is set forth in the contract clause prescribed in § 18-1.707-3 (a). In contracts which may exceed $500,000, the contractor is required, pursuant to the clause set forth in § 181.707-3(b), to undertake a number of specific responsibilities designed to ensure that small business concerns are considered fairly in the subcontracting role and to impose similar responsibilities on major subcontractors. (The liaison officer required by the latter clause also may serve as liaison officer for labor surplus area matters.)

Required clauses.

(a) The "Utilization of Small Business Concerns" clause set forth below shall be included in all contracts in amounts which may exceed $5,000 except:

(1) Contracts which, including all subcontracts thereunder, are to be performed entirely outside the United States, its possessions, and Puerto Rico; and

(2) Contracts for services which are personal in nature.

UTILIZATION OF SMALL BUSINESS CONCERNS (JULY 1962)

(a) It is the policy of the Government as declared by the Congress that a fair proportion of the purchases and contracts for supplies and services for the Government be placed with small business concerns.

(b) The Contractor agrees to accomplish the maximum amount of subcontracting to small business concerns that the Contractor finds to be consistent with the efficient performance of this contract.

(b) The "Small Business Subcontract

ing Program" clause set forth in this paragraph shall be included in all contracts which may exceed $500,000, which contain the clause required by paragraph (a) of this section and which, in the opinion of the contracting officer, offer substantial subcontracting possibilities. Prime contractors who are to be awarded contracts that do not exceed $500,000 but which, in the opinion of the contracting officer, offer substantial subcontracting possibilities, shall be urged to accept the clause.

SMALL BUSINESS SUBCONTRACTING PROGRAM (SEPTEMBER 1963)

(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 (1) maintain liaison with the Government on small business matters, (ii) supervise compliance with the "Utilization of Small Bus!ness 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 com

pete 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 (11) 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 (ii) above may be in such form as the individual 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 (i) no small business concern is to be solicited, and (11) 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 Offcer may give the Small Business Administration timely notice to permit the 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 Contrac

tor's subcontracting procedures and practices that the Contracting Officer may from time to time conduct.

(8) Submit NASA Form 524 reports each month, in triplicate, to the Office of Procurement, NASA Headquarters, Washington, D.C., 20546, in accordance with the instructions contained therein. The reporting requirements of this subparagraph (8) do not apply to small business contractors or subcontractors.

(b) A "small business concern" is a concern that meets the pertinent criteria established by the Small Business Administration and set forth in paragraph 1.701 of the NASA Procurement Regulation.

(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 default.

(d) The Contractor further agrees to insert, in any subcontract hereunder which is in excess of $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; except that the subcontractor will submit the NASA Form 524 reports, in triplicate, to NASA Headquarters, Washington, D.C., 20546, in accordance with the instructions contained therein.

§ 18-1.707-4 Responsibility for reviewing the subcontracting program.

To achieve compliance with § 18-1.7073, the Small Business Advisor, NASA Headquarters, will assign responsibility for reviewing the adequacy of the contractor's small business subcontracting program to a Small Business Specialist at one of the NASA field installations, except that where the preponderance of Government contracts in a contractor's plant is with the Military Departments, the Small Business Advisor, NASA Headquarters, may arrange to utilize the reviews conducted by the cognizant Military Departments (as determined under 32 CFR 1.700-4). In those cases where NASA conducts the review, reports of findings shall be forwarded to the Small Business Advisor, NASA Headquarters, and any deficiencies in the contractor's small business subcontracting program will be brought to the attention of the contractor's designated small business liaison officer with a request for corrective action.

§ 18-1.707-5 Reports on NASA Form 524.

In accordance with § 18-1.707-3, all

Subpart 18-1.8-Labor Surplus Area Concerns

the Small Business Subcontracting Program shall provide monthly the prescribed information on NASA Form 524, to be submitted in duplicate, in accordance with the instructions provided on the form. The reports shall be submitted directly to the Office of Procurement, NASA Headquarters, Washington, D.C., 20546. Copies of the reports will be furnished to the small business specialists at the appropriate NASA field installations.

§ 18-1.707-6 Subcontracting studies and surveys.

Each procurement office shall assist the SBA to obtain such reasonably obtainable information and records concerning the subcontracting of its prime contractors and its subcontractors having contracts that contain the Small Business Subcontracting Program clause, as the SBA may deem necessary. Accordingly, the contracting officer or his representative, separately, or together with a representative of the SBA, may periodically conduct studies and surveys of the contractor's subcontracting procedures and practices and those of his subcontractors. Such studies and surveys may originate with the procurement office in order to have available the pertinent data concerning subcontracting by its primes, or, if such data is not currently available, the studies and surveys may originate upon the request of the SBA for such data. On the basis of the foregoing studies, surveys, and records, the SBA may make recommendations to the procurement office regarding methods for increasing small business participation in subcontract awards. The SBA and the procurement office will freely interchange, at the operating level, information resulting from these surveys. § 18-1.707-7 Small Business Administration review of agency records.

To the extent that subcontracting records are maintained in procurement offices, such records shall be made available to the Small Business Administration, upon request, for review.

with respect to labor surplus area

concerns.

(a) Forwarding of information. Procurement offices shall forward to the Office of Procurement, Industry Assistance Officer (Code KD-2), the following information with respect to all proposed unclassified procurements in excess of $250,000, including sole-source procurements, at the earliest possible date, and, in any event, not less than 10 days prior to issuance of the invitation for bids or request for proposals:

(1) A detailed description of the item or work and the quantity involved (a copy of the purchase request may be forwarded in lieu of the detailed description);

(2) Estimated value of the procurement;

(3) Names and locations of firms to be solicited;

(4) Estimated date of issuance of invitation for bids or request for proposals;

(5) Whether a small business or labor surplus set-aside will be made; and

(6) Any special requirements or unusual aspects to be included in the solicitation, e.g., those which will require special capabilities or facilities for development, manufacture, or test pur

poses.

(b) Action of Office of Procurement. The Industry Assistance Officer shall:

(1) Review such proposed procurements to determine if adequate consideration has been given to qualified firms in labor surplus areas;

(2) Suggest additions of qualified firms, when considered feasible, to the proposed source list of firms in labor surplus areas; and

(3) Serve as a central point of contact for representatives of the Area Redevelopment Administration, the Small Business Administration, and for special State representatives on proposed NASA procurements, and afford such representatives opportunities to suggest additions of qualified firms to the proposed source list.

The Industry Assistance Officer shall promptly inform the procurement office