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cents, small business concerns not performing in such areas are also eligible for award of any set-aside quantities not awarded to labor surplus area concerns (see§ 1-1.804-2).

(d) None of the following is, in itself, sufficient cause for not making a labor surplus area set-aside:

(1) A large part of previous procurements of the Item in question has been placed with labor surplus area concerns;

(2) The item to be purchased is on an established planning list under the Industrial Readiness Planning Program;

(3) The item to be purchased is on a Qualified Products List;

(4) A period of less than thirty days 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 offerers.

(a) Invitations for bids or requests for proposals. Involving set-asides pursuant to this subpart, shall contain a notice substantially as set forth In either paragraph (b) or (c) 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) Short-form notice.

Notice or Labor Surplus Area Set-aside

'a i General. A portion of this procurement, aa Identified elsewhere In the Schedule, .-. .11 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 set.-- 'de portion will be conducted only with responsible labor surplus area concerns (and •mall business concerns to the extent Indicated below) which have submitted respon

sive bids or proposals on the non-set-aslde portion at a unit price no greater than 120 percent of the highest award made on the non-set-aslde portion. Negotiations for the set-aside portion will be conducted with such bidders In the following order of priority:

Group 1. Persistent labor surplus area concerns which are also small business concerns.

Group 2. Other persistent labor surplus area concerns.

Group 3. Substantial labor surplus area concerns which are also small business concerns.

Group 4. Other substantial labor surplus area concerns.

Group 5. 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 non-setaslde portion, adjusted to reflect transportation and other cost factors which were considered In evaluating bids on the nonset-aslde 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 surplus area" means a geographical area which is a persistent labor surplus area or a substantial labor surplus area, or both, as denned below:

(1) "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.

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

(1) "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 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 firsttier subcontractors) amount to more than 60 percent of the contract price.

(11) "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 acount 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.

(3) A "small business concern" Is a concern, including its affiliates, which is Independently owned and operated, is not dominant In the field of operation In which it is bidding on Government contracts, and can further qualify under the criteria set forth In regulations of the Small Business Administration (13 CPR 121.3-8). In addition to meeting these criteria, a manufacturer or a 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.

(c) Identification of Areas of Performance. Each bidder desiring to be considered for award as a 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 set-aside 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.

(d) Agreement. The bidder agrees that, If awarded a contract as a 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 tune of performance of the contract, as persistent labor surplus areas; and that If awarded a contract as a substantial labor surplus area concern under the set-aside portion of this procure

ment, 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.

[End of Notice]

(c) Long-form notice. Where it ia anticipated that bids may be received which appear designed to take unfair advantage of other bidders, by devices such as unrealistically low bids on mere token quantities, the notice set forth below may be used instead of the shortform notice in paragraph (b) of this section.

Notice or Labor Surplus Abba Set Aside

(a) General. This procurement has been divided Into two parts. All concerns, whether labor surplus area concerns or not, may participate, In accordance with customary procedures, in that portion of this procurement herein called the "non-set-aslde portion." The quantities of the non-setaslde portion are set forth elsewhere In this Schedule. The other portion of the Items to be procured has been set aside for participation (1) by labor surplus area concerns and (2) to a limited extent, by small business concerns which do not qualify as labor surplus area concerns. This la called the "set-aside portion" and awards therefor are made in accordance with special procedures set forth In paragraph (c) of this notice. Definitions of labor surplus area, labor surplus area concern, and small business concern are set forth in paragraph (d) of this notice.

(b) Non-Set-Aside Portion and Award Procedure. (1) A bidder which la not . labor surplus area concern or Is not a small business concern shall submit a bid only for the non-set-aslde portion of the procurement. Award thereof will be made In accordance with customary procedures.

(2) A bidder which is a labor surplus area concern or a small business concern and is Interested in receiving an award for a quantity of an Item not exceeding the quantity set forth in the non-set-aslde portion of this procurement, should submit a bid in the same manner as other concerns bidding only on the non-set-aslde portion. If such a bidder la Interested In receiving an award for a quantity of an Item In addition to the quantity set forth in the non-setaslde portion, he must bid the entire quantity of the non-set-aslde portion of the Item, and Indicate such additional quantity of the Item as he desires to furnish by so specifying on the Bidder's Statement of Set-AsmQuantity Desired. Thus, the Bidder's Statement of Set-Aside Quantity Desired is not to be used unless the bidder has bid the entire quantity of an Item under the non-setaside portion. However, a labor surplus area concern or small business concern which receives no award, or receives an award for Ims than the total quantity of an Item for which it submitted a bid under the non-set-s.de portion, may be eligible for an award of the quantity It bid, or the unawarded quantity thereof, under the following procedure governing the set-aside portion:

(c) Set-Aside Portion and Award Procedure. Award of the set-aside portion of this procurement will be made after award has been completed on the non-set-aslde portion. Award will be made only to labor surplus area or small business concerns which are found to be eligible In accordance with (1) below; on the basis of priorities for award act forth in (2) below; for quantities as provided In (3) below; and at prices determined in accordance with (4) below.

(1) Eligibility. To be eligible for consideration for the set-aside portion of an Item, the labor surplus area concern or small business concern must have submitted a responsive bid on such Item In accordance with the requirements of (b) (2) above at a unit price no greater than 120 percent of the highest unit price for such Item awarded under the non-set-aslde portion. However, see (6) below when separate quantities are offered at different prices and see (6) below when separate quantities are offered at tie-In price*.

(2) Priorities. Negotiations for the setaside portion will be conducted with eligible bidders in the following order of priority:

Group 1. Persistent labor surplus area concerns which are also small business concerns.

Group 2. Other persistent labor surplus area, concerns.

Group 3. Substantial labor surplus area concerns which are also small business concerns.

Group 4. Other substantial labor surplus area concerns.

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

Within each of the above groups, negotiations for each Item will be conducted with eligible concerns in the order of their bids on the non-set-aslde portion, beginning with the lowest responsive bid. However, see (5) below for the method of determining the bid wtaen separate quantities are offered at different prices and see (6) below when separate quantities are offered at tie-In prices.

(8) Quantity. The quantity of the setaside portion of an Item which may be awarded to an eligible concern shall be as follows:

(1) Where a concern has not specified a quantity of the Item on the Bidder's Statement of Set-Aside Quantity Desired, the quantity shall be no greater than the quantity of such concern's bid on the non-setportion of that Item, less the quantity.

If any, of that Item awarded to that concern under the non-set-aslde portion.

(11) Where a concern has specified a quantity of the Item on the Bidder's Statement of Set-Aside Quantity Desired, the quantity shall be no greater than the total of the entire non-set-aslde portion of the Item and the quantity thereof specified on the Bidder's Statement of Set-Aside Quantity Desired, less the quantity. If any, of that Item awarded to that concern under the nonset-aslde portion.

(4) Price. The set-aside portion shall be awarded at the highest unit price awarded on the non-set-aslde portion, adjusted to reflect transportation and other cost factors which were considered In evalulatlng bids on the non-set-aslde portion. However, see (6) and (7) below for the highest unit price when the highest award Is made as a result of tie-In bids or all-or-none type of qualification.

(5) Separate Quantities at Different Prices. Where a concern has submitted a bid for separate quantities of the non-set-aslde portion of an Item at different prices, without conditioning the Government's right to accept one or more such quantities upon its concurrent acceptance of another quantity of the Item, each separate quantity shall be considered as a separate bid for the purpose of determining the eligibility of the concern with respect to the 120 percent limit prescribed In (c)(l) above, and for the purpose of determining under (c) (2) above the standing of that bid In the order of negotiations for the set-aside portion of that Item.

(6) Separate Quantities at Tie-in-Prices. Where a concern has submitted a bid for separate quantities of the non-set-aside

.portion of an Item at different prices, and has conditioned the Government's right to accept any one or more of such quantities upon Its concurrent acceptance of another quantity of the Item, the weighted average of the prices for such conditioned quantities shall be considered the unit price for the purpose of determining, with respect to such conditioned quantities, (1) the eligibility of the firm with respect to the 120 percent limit of (c)(l) above, (11) the priority status of the firm under (c) (2) above, and (ill) the highest unit price for awards under (c) (4) above If the highest award on the non-setaslde portion was made on such conditioned bid.

(7) All or None Bids. Where a concern has submitted an "all or none" bid for more than one Item and thereby has conditioned the Government's right to award any Item upon its concurrent award of another Item, the unit prices bid for each Item on an "all or none" basis shall be considered Independent 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 bid for the Item on the non-set-aslde portion.

(d) Definitions. (1) 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.

(1) "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.

(2) 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 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 60 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 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.

(3) A "small business concern" Is a concern, Including its affiliates, which Is Independently owned and operated, is not dominant In the field of operation In which It is bidding on Government contracts, and can further qualify under the criteria set forth in regulations of the Small Business Administration (13 CFR 1213-8). In addition to

meeting these criteria, a manufacturer or a 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, b> small business concerns: Provided, That this additional requirement doea not apply in connection with construction or service contracts.

(e) Identification of Areas of Performance. Each bidder desiring to be considered for award as a 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 hai 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 set-aside 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 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 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 o/ 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 labor surplus area concerns and small business concerns, as provided in (b)(2) above. Furthermore, it 1* to be used by such a bidder only when (1) he has submitted a bid for the entire nonset-aslde quantity of an Item, and (3) he desires a total quantity in excess of the nonset-aslde quantity thereof. Whether or not a labor surplus area concern or small business concern may participate In the set-aside portion Is dependent on Its eligibility in ac

[merged small][table]

[Columns numbered 1 and 2 will be filled In by the truing office. Column No. 3 will be left blank (or the bidder or offerer to fill In.]

(End of Notice] § 1-1.804-3 Award procedures.

(a) Awarding the non-set-aside portion. Awards on the non-set-aside portion shall be made In accordance with normal procurement procedures.

(b) Awarding the set-aside portion. U) After all awards have been made on the non-set-aslde portion, award of the set-aside portion shall be effected by negotiation with eligible concerns as provided in the applicable Notice used. To determine whether a concern Is eligible for preferential consideration as a labor surplus area concern the area classification of the Department of Labor In effect at the time of the award shall be used. Contracts for the setaside portion shall specify the preferential status of the bidder or offerer on which the award was based.

(2) If equal low bids were received on the non-set-aslde portion from concerns which are eligible for the set-aside portion, the concern which is awarded the non-set-aside portion (under the equal low bid procedures of § 1-2.407-6) shall have the first priority with respect to negotiations for the set-aside portion.

(c) Non-awarded set-aside portion. If any part of the set-aside quantity cannot be awarded by the method described In this § 1-1.804, any unawarded portion may be procured by advertising or negotiation, as appropriate, In accordance with existing regulations. A record of the reasons for failure to award the Bet-aside portion to labor surplus area concerns shall be Included in the contract file.

§1-1.804-4 Withdrawal of set-asides.

If, prior to the award of a contract Involving a labor surplus set-aside, the contracting officer considers that the setaside Is detrimental to the public Interest, e.g., because of unreasonable prices, the contracting officer shall withdraw the set-aside and complete the procurement by advertising or negotiation, as appropriate, in accordance with existing regulations. A record of the reasons for the withdrawal of any set-aside shall be made and included in the contract file.

§ 1-1.804-5 Contract authority.

Contracts for set-asides made under this subpart shall cite as legal authority for negotiation section 302(c)(l) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 252(c) (1)), the revised Armed Services Procurement Act of 1947 (10 U.S.C. 2304 (a) (1)), or other applicable proper authority (see 11-3.201).

§ 1—1.805 Subcontracting with labor surplus area concerns.

§ 1-1.805-1 General.

(a) In furtherance of the general policy stated in § 1-1.802, procuring agencies shall encourage prime contractors to place subcontracts with concerns which will perform a substantial proportion of the production in areas of labor surplus, where this can be done consistent with efficient performance of contracts and at prices no higher than are obtainable elsewhere. (See § 1-1.710 for subcontracting policies with respect to small business concerns.)

(b) As used In this Subpart 1-1.8, the term subcontractor Includes a supplier and applies at any level of performance of the contract; and the term subconract includes a purchase order.

§ 1—1.805—2 Labor surplus area subcontracting program.

The Government's labor surplus area subcontracting program requires Government prime contractors to assume an affirmative obligation with respect to subcontracting with labor surplus area concerns. In contracts which range from $5,000 to $500,000, the contractor undertakes the obligation of using his best efforts to place his subcontracts with concerns which will perform such subcontracts substantially In areas of labor surplus, where this can be done con

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