areas of outstanding achievement where they may have exceeded contractual requirements. To motivate a contractor to improve his program, he should be advised in general terms as to the type of actions that will result in a reward, penalty, or no impact on profit or fee. Any evaluation and remarks to the contractor, including areas of suggested improvement and areas where the contractor has exceeded contractual requirements, must be documented to furnish a basis for evaluation in connection with future awards.

(c) 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. These obligations are in addition to those required by the minority business enterprise subcontracting program (§ 18-1.332) and the labor surplus area subcontracting program (§ 18-1.805). 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 § 181.707-3(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.)

[39 FR 13087, Apr. 11, 1974]

§ 18-1.707-3 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

contracts which, including all subcontracts thereunder, are to be performed entirely outside the United States, its possessions, Puerto Rico, and the Trust Territory of the Pacific Islands:

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 Subcontracting Program" clause below shall be inIcluded in all contracts (except maintenance, repair and construction 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 (MARCH 1970)

(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, (11) 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 nonsolicitation 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 (1) 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 Officer may give the Small Business Administration 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 NASA Form 524 reports to the Procurement Office, 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, to NASA Headquarters, Washington, D.C. 20546, in accordance with the instructions contained therein.

(c) The "Small Business Subcontracting Program (Maintenance, Repair and Construction)" clause below shall be included in all contracts for maintenance, repair and construction work which may exceed $500,000, which contain the clause required in paragraph (a) of this section and which in the opinion of the contracting officer, offer substantial subcontracting possibilities.

SMALL BUSINESS SUBCONTRACTING PROGRAM (MAINTENANCE, REPAIR And ConstruCTION) (MAY 1965)

(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, including suppliers, under this contract. In this connection, the Contractor shall designate an individual to (1) maintain liaison with the Government on small business matters, and (ii) administer the Contractor's Small Business Subcontracting Program.

(b) Prior to completion of the contract and as soon as the final information is available, the Contractor shall submit a completed NASA Form 524 to the Government addresses prescribed thereon. This subparagraph (b) is not applicable if the Contractor is a small business concern.

(c) The Contractor further agrees (1) to insert the "Utilization of Small Business Concerns" clause in subcontracts which offer substantial subcontracting opportunities, and (11) to insert in each such subcontract exceeding $500,000 a clause conforming substantially to the language of this clause except that subcontractors shall submit NASA Form 524 direct to the Government addressees prescribed on the Form. The Contractor will notify the Contracting Officer of the name and address of each subcontractor that will be required to submit a report on NASA Form 524.

[35 F.R. 18803, Dec. 11, 1970, as amended at 36 F.R. 21461, Nov. 10, 1971]

§ 18-1.707-4 Responsibility for review

ing the subcontracting program.

(a) Prime contractor's program. To ensure compliance with the provisions of the clauses set forth in § 18-1.707-3, the small business specialist at the NASA installation administering the contract is responsible for assisting the contracting officer in reviewing and determining the adequacy of a contractor's small business subcontracting program. Where the preponderance of contracts in a contractor's plant is with the Department of Defense or administration of the contract has been delegated to an agency of the Department of Defense, the reviews conducted by the cognizant Military Department or the Defense Supply Agency will be used. The Small Business Advisor, NASA Headquarters, will receive a copy of each subcontracting program review report. Adverse reports involving NASA contractors will be forwarded to the Small Business Specialist at the NASA Installation with primary interest, for appropriate action. 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 by the reviewing activity, with a request for appropriate corrective action. Appropriate followup action will be taken as necessary, by the reviewing activity.

(b) Subcontractor's program. In those instances in which subcontractors are required to establish such a program in accordance with the clause in § 18-1.707-3 (b) and (c), reviews of the subcontractor's program shall be made in the same manner as the review of the prime contractor's program.

(c) Procedures for conducting reviews. (1) Periodic Reviews. The reviewing activity will establish the date for a periodic review by consulting with the contractor or subcontractor and the SBA. Such consultation shall precede the review by a reasonable period of time. Normally, surveillance reviews will be accomplished in accordance with time schedules to be established by the reviewing activity.

(2) SBA participation. The DOD or NASA reviewing official shall invite a rep

resentative of the appropriate SBA district office to participate in all periodic reviews and will make all appropriate records available for the information of that representative. The SBA representative will be provided an opportunity to comment on and make recommendations concerning the review. (See paragraph (d) of this section.) The review shall include evaluation of the extent of compliance with both the mandatory program (§ 18–1.707-2) and the SBA Voluntary Referral Program; but, the requirements of the Voluntary Program shall not be used as a basis for determining the adequacy or inadequacy of a contractor's performance under the mandatory program. Should the SBA desire information on the contractor's program prior to the meeting, such request will be coordinated prior to the program review.

(3) Evaluation of contractor's small business subcontracting program. The following factors and areas shall be considered in the evaluation of a contractor's small business subcontracting program: (i) Has a Liaison Officer and/or Administrator been appointed?

(a) Is liaison maintained with concerned Government agencies?

(b) Is supervision maintained in accordance with the Small Business Subcontracting Program clause?

(ii) Are the contractor's small business subcontracting policies and procedures current and consistent with applicable regulations?

(iii) Does the contractor hold small business program training meetings or otherwise orient concerned personnel to explain policies, procedures, problems, attitudes, and accomplishments?

(iv) How does the contractor's management provide appropriate support and surveillance to assure effectiveness of his small business program? Is the corrective action taken when deficiencies are observed?

(v) What are the principal Government programs and subprograms subject to the small business contracting clause?

(vi) Does the contractor maintain records consistent with procuring agency regulations?

(a) On business sizes of subcontractors?

(b) On solicitation of, and awards to, small business?

(c) of reasons small business did not receive awards?

(vii) Analyze statistical data maintained by the contractor as required in applicable small business subcontracting procurement regulations. If statistical data warrant, review sample procurements and comment on the findings.

(viii) How do changes in the ratio of small to large business participation in subcontracting reflect current changes in procurement volume and product mix?

(ix) Does the contractor evidence consideration of small business potentials in manufacture or purchase decisions? Does it include a formal breakout program? If so, where located? Is it effective?

(x) What is the extent of the contractor's efforts to place with small business concerns developmental work likely to result in later production opportunities?

(xi) Is there evidence that the contractor affords equitable opportunities for small business to compete?

(xii) When no small business was to be solicited on bids expected to exceed $10,000 and there was a requirement for contracting officer's consent to the subsequent order, was he notified prior to solicitation of bids?

(xiii) Is the appropriate small business subcontracting program flowdown clause included in subcontracts offering substantial small business subcontracting opportunity?

(xiv) What is the policy concerning advance and progress payments? Does it extend the same benefits to its small subcontractors as it receives from the purchasing agency?

(xv) Does the contractor cooperate with the contract administration office in studies and surveys of his small business subcontracting policies and procedures?

(xvi) Does the contractor furnish the contracting officer with notification of awards of subcontracts which contain the requirement for establishing a small business subcontracting program?

(xvii) How is small business considered and made a part of proposals for Government prime contracts?

(xviii) What information media does the contractor utilize for the promotion of interest in small business subcontracting?

(xix) What provisions had the contractor made to:

(a) Encourage small business participation in his programs?

(b) Facilitate introduction and establishment of additional small firms?

(xx) What other uncommon or unique efforts does the contractor make to: (a) Implement the small business subcontracting program?

(b) Participate in or support local, area or national activities concerning the small business community?

(c) Assist small subcontractors by offering, within reason, procurement, technical, or managerial counseling to small firms?

(d) Inform the small business community of opportunities to compete for the award of business?

(xxi) Does the contractor submit the appropriate reports?

(a) Are they on schedule?

(b) Are they accurate?

(xxii) Review past deficiencies brought to the attention of the contractor and determine if corrective action has been taken. List the deficiencies along with the corrective action.

(d) Reports. (1) Reports resulting from the stated subcontracting program DDD/SBA review are intended to reflect a coordinated view of the contractor's program and that no additional reports will be required for either the Mandatory Subcontracting Program or the Voluntary Referral Program. Within 10 days after receipt of comments and recommendations from SBA, or as soon thereafter as possible, a detailed report evaluating the contractor's small business subcontracting program and a narrative summary thereof, will be prepared by the reviewer. The SBA participant normally is expected to provide his observations, comments and recommendations, in writing, to the reviewing official, within 10 days after completion of the review, or at such other time as may be agreed upon. In preparing the report, the reviewing official shall take cognizance of such observations, recommendations and comments by the SBA participant. The report will indicate the extent of contractor compliance with all contractual provisions pertaining to the assistance rendered to small business firms. Areas of deficiency or superior performance of the contractor will be noted in the narrative summary; and when im

provement is necessary, the reviewer will make appropriate recommendations to the cognizant contract administration office, or to the NASA contracting officer when the review has been conducted by NASA, or as the result of a specific NASA request, and to the company. The preparation of an objective and current evaluation report which precisely describes the effectiveness of a contractor's program requires continuous and intensive surveillance. Factors and areas to be considered in the evaluation of a contractor's small business and labor surplus area subcontracting programs are set forth above. Additional factors and areas may be considered by the reviewer, as appropriate.

(2) Distribution of copies of the review report prepared by the reviewing official will be as follows:

(i) The narrative summary of the findings or recommendations will be sent to the contractor's small business liaison officer.

(ii) Copies of the narrative summary and the detailed evaluation report will be provided to the SBA participant.

(iii) One copy of the detailed report, and narrative summary, for these cases where major deficiencies are noted will be forwarded to the Small Business Advisor's office, as indicated in § 18-1.704, for review and appropriate action.

(iv) Copies of the detailed report and narrative summary will be made available to procuring contracting officers and small business specialists, upon request.

(v) The original of all detailed reports and narrative summaries will be maintained in the office of the appropriate reviewing official.

(3) The program clause prescribed in § 18-1.707-3 (b) requires submission of NASA Form 524 by the contractor as directed on the form. Pursuant to this § 18-1.707-4 and the terms of the subcontracts, the subcontractor will submit the original form directly to the Procurement Office, NASA Headquarters. It should be noted that the specific instructions on NASA Form 524 require the reporting organization to report statistics on the net dollar amount of subcontracting commitments to both small and large businesses for NASA contracts and purchases. This reporting requirement is not to be confused with the recordkeeping requirement for quarterly review purposes contained in the § 18-1.707-3(b) clause which establishes an over $10,000

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.

§ 18-1.708 Purchases under Federal Supply Schedule contracts.

Where orders are placed under Federal Supply Schedule contracts and one or