4.

Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.

The Office of Minority Small Business and Capital Ownership Development in the Small Business Administration shall answer inquiries from prime contractors and others relative to the class of eligibles.

C. Small Business and Small Disadvantaged Business Subcontracting (Negotiated). DOD and GSA are requested to provide in Section 1-332 and Section 1, Part 7 of the DAR, and subparts 1-1.13 and 1-1.7 of the FPR as follows:

All solicitations for negotiated contracts or negotiated amendments or modifications (including contracts, amendments, and modifications placed on a sole source basis) which [(a) offer subcontracting possibilities, (b)] are expected to exceed $500,000, or in the case of contracts for the construction of any public facility, $1,000,000, and [(c)] are required to include the clause entitled Utilization of Small Business Concerns and Small Business Concerns Owned and Controlled by Socially and Economically Disadvantaged Individuals, shall include a provision which requires the apparent successful offeror, provided the offeror is not a small business concern, to negotiate a detailed subcontracting plan. The provision is as follows:

SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS
SUBCONTRACTING PLAN (NEGOTIATED)

(a) The offeror acknowledges that it is aware of the subcontracting plan requirements in this provision, and, if it is the apparent successful offeror, and if the contract offers subcontracting possibilities agrees to negotiate a plan which includes:

(1) Percentage goals (expressed in terms of percentage of total planned subcontracting dollars) for the utilization as subcontractors of small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals; (For the purposes of the subcontracting plan, the contractor [shall] may include all purchases which contribute to the performance of the contract, including a proportionate share of products, services, etc., whose costs are normally allocatd as indirect or overhead costs.)

(2) The name of an individual within the employ of the offeror who will administer the subcontracting program of the offeror and a description of the duties of such individual;

(3) A description of the efforts the offeror will take to assure that small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals will have an equitable opportunity to compete for subcontracts;

(4) Assurances that the offeror will include the clause entitled Utilization of Small Business Concerns and Small Business Concerns Owned and Controlled by Socially and Economically Disadvantaged Individuals in all subcontracts which offer further subcontracting opportunities and to require all subcontractors (except small business concerns) who receive subcontracts in excess of $500,000, or in the case of a contract for the construction of any public facility, $1,000,000, to adopt a plan similar to the plan agreed to by the offeror;

(5) Assurances that the offeror will submit such periodic reports and cooperate in any studies or surveys as may be required by the contracting agency or the Small Business Administration in order to determine the extent of compliance by the offeror with the subcontracting plan; and

(6) A recitation of the types of records the offeror will maintain to demonstrate procedures which have been adopted to comply with the requirements and goals set forth in the plan, including the establishment of source lists of small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals; and efforts to identify and award

subcontracts to such small business concerns.

(b) The offeror understands that:

(1) No contract will be awarded unless and until an acceptable plan is negotiated with the contracting officer and that an acceptable plan will be incorporated into the contract, as a material part thereof.

(2) An acceptable plan must, in the determination of the contracting officer, provide the maximum practicable opportunity for small business concerns owned and controlled by socially and economically disadvantaged persons to participate in the performance of the

contract.

(3) If a subcontracting plan acceptable to the contracting officer is not negotiated within the time limits prescribed, the offeror shall be ineligible for an award. The contracting officer shall notify the contractor in writing of his reasons for determining a subcontracting plan to be unacceptable. Such notice shall be given early enough in the

negotiation process to allow the contractor to modify the plan within the time limits prescribed.

(4) Prior compliance of the offeror with other such subcontracting plans under previous contracts will be considered by the contracting officer in determining the responsibility of the offeror for award of the contract.

(5) It is the offeror's responsibility to develop a satisfactory subcontracting plan with respect to both small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals and that each such aspect of the offeror's plan will be judged independently of the other.

(c) Subcontracting plans are not required of small business concerns.

(d) The failure of any contractor or subcontractor to comply in good faith with (1) the clause entitled Utilization of Small Business Concerns and Small Business Concerns Owned and Controlled by Socially and Economically Disadvantaged Individuals or (2) an approved plan required by this Small Business and Small Disadvantaged Business Subcontracting Plan (Negotiated) provision, will be a material breach of such contract or subcontract.

(e) Nothing contained in this provision supersedes the requirements of Defense Manpower Policy 4A or any successor policy.

(a) With the exception of (a)(3) below, the apparent successful offeror shall include in its proposed detailed subcontracting plan the following elements in addition to those required by the Solicitation.

(1) Total dollar planned subcontracting; (i) total dollar small business concerns, and (ii) total dollar small disadvantaged business subcontractors.

(2) A description of the principal product and service areas to be subcontracted and an identification of those areas where it is planned to use (1) small business, and (ii) small disadvantaged business subcontractors.

(3) To the extent available, the contracting officer shall be furnished the names and locations of principal proposed (1) small business, and (ii) small disadvantaged business subcontractors including the type of product or service and the dollar value thereof to be awarded to each principal subcontractor. (This information will be used only to assist the contracting officer in making a determination as to the acceptability of the proposed percentage and dollar subcontract goals. The offeror will not be contractually bound to make subcontract awards to the designated contractors nor will the names of the subcontractors be included in any subsequent approved plan).

(4) Method used in developing proposed subcontracting goals for (i) small business, (ii) small disadvantaged business concerns (e.g., did the offeror use for subcontract solicitation purposes company source lists, the small business and disadvantaged small business source identification system provided by the Small Business Administration's Procurement Automated Source System, the National Minority Purchasing Council Vendor Information Service, the Office of Minority Business Data Center in the Department of Commerce, and the facilities of local minority associations?).

(5) Method used in determining the proportionate share of indirect and overhead costs incurred with (i) small business, and (ii) small disadvantaged business subcontractors to be allocated to the specific acquisition.

(b) In making determinations concerning the acceptability of proposed subcontracting plans, the contracting officer, in concert with the Small and Didsadvantaged Business Utilization Specialist and the Small Business Administration representatives, should take the following actions:

(1) Obtain and review information from all appropriate sources, including the prospective contractor, contract administration activities, Small and Disadvantaged Business Utilization Specialist, and SBA representatives concerning the apparent successful offeror's historical performance and achievements in placing subcontracts for the same or similar products or services with (1) small business, and (i) small disadvantaged business subcontractors -- if this information is not available for a specific product or service, the offeror's past performance and achievements in the placement of total subcontract awards to (i) small business, and (ii) small disadvantaged business subcontractors shall be examined.

(2)

Evaluate the anticipated potential for subcontracting to (i) small business, and (11) small disadvantaged business considering the make-or-buy policies or programs of the apparent successful offeror, the nature of the products or services to be subcontracted, and the known availability of (1) small business, and (ii) small disadvantaged business concerns in the geographical area where the work will be performed.

(3) Advise the apparent successful offeror of (i) the availability of the sources of information on potential small business and small disadvantaged business subcontractors described in a(4) above, and (ii) the names of any known potential small business and small disadvantaged business subcontract sources. If the proposed goals are questionable, the contracting officer should insist that one or more of the sources of information be used and potential small business and small disadvantaged business subcontract sources be considered to ensure development of realistic and acceptable goals.

(4) Obtain advice and recommendations of the Small and Disadvantaged Business Utilization Specialist and the assigned Small Business Administration Procurement Center Representative (if available) concerning the acceptability of the proposed goals.

(5) Negotiate subcontracting goals at a level which represents a good faith, aggressive, and comprehensive effort of the apparent successful offeror to use to the maximum practicable extent small and small disadvantaged subcontractors after appropriate consideration of their price, technical capability, and other pertinent factors. No goals will be negotiated upwards If it is apparent that such higher goals must result in significant increased costs to the Government or will seriously impede acquisition objectives. However, incentive subcontracting clauses should be considered in those cases where it is believed that additional and unique prime contractor effort could significantly increase small business and small disadvantaged business subcontract awards.

(6) The contracting officer shall promptly negotiate appropriate revisions to agreed subcontracting percentage and dollar goals if any subsequent amendments to the contract will have a major impact on the original planned volume or type of subcontracting effort. If agreement cannot be reached, the matter will be resolved under the Disputes Clause of the contract.

Records to be maintained