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business concerns an equitable opportunity to compete for prime contracts in accordance with the following:

(1) Bidders mailing lists (see § 2.205 of this chapter) shall be maintained and shall include all established and potential small business suppliers who have made acceptable application for inclusion or who appear from other information (including recommendation by the SBA representative), to be qualified for inclusion therein;

(2) Invitations for bids or requests for proposals shall be sent to all firms on the appropriate list except that where less than a complete list is to be used pursuant to § 2.205-4 of this chapter, a pro rata number of small business suppliers shall be solicited;

(3) Procurement of supplies and services shall be divided into reasonably small lots (not less than economic production runs) in order to permit bidding on quantities less than the total requirements; the maximum amount of time practicable shall be allowed for preparation and submission of bids and proposals; and delivery schedules shall be established on a realistic basis which will encourage small business participation to the extent consistent with the actual requirements of the Government; and

(4) For specification requirements, see § 1.1203.

As to subcontracting, see § 1.707.

As to research and development contracts with small business concerns, see § 4.205 of this subchapter.

(c) Records of the total value of all contracts placed with small business concerns during each fiscal year, and reports based thereon, are maintained by each military department through the Department of Defense Procurement Reporting System described in § 1.110 of this chapter. Accordingly, each military department shall, in soliciting bids or proposals, request from any bidder or offeror, or other source, any information needed to determine whether the bidder or offeror is a small business concern.

CODIFICATION: § 1.702 was revised, 27 F.R. 1686, Feb. 22, 1962, and subsequently amended in the following respects:

1. Paragraph (b) was amended in the following respects:

a. Subparagraph (2) was amended, 28 F.R. 12547, Nov. 23, 1963.

b. An undesignated paragraph beginning "As to research and development contracts" was added following subparagraph (4), 27 F.R. 3443, Apr. 11, 1962. In the undesig

nated paragraph, the reference "§ 3.107” was changed to "§ 4.205", 27 F.R. 6120, June 29, 1962.

2. In paragraph (c), the words "and Subpart I, part 16" were deleted, 27 F.R. 8869, Sept. 6, 1962.

Prior Amendments 1961: 26 F.R. 9633, Oct. 12.

§ 1.703 Determination of status as small business concern.

(a) Except as provided in paragraph (b) of this section, the contracting officer shall accept at face value (1) a small business certificate (see § 1.701-1(e)) that a bidder or offeror is a small business concern or (2) a statement by the bidder or offeror that it is a small business concern (see §§ 1.701-1 and 1.701-4).

(b) Small business certificates and statements that a bidder or offeror is a small business concern shall be effective, even though questioned in accordance with the terms of this paragraph, unless the SBA, in response to such question and pursuant to the procedures in subparagraph (3) of this paragraph, determines that the bidder or offeror in question is not a small business concern. The controlling point in time for a determination concerning the size status of a questioned bidder or offeror shall be the date of award, except that no bidder or offeror shall be eligible for award as a small business concern unless he has in good faith represented himself as small business prior to the opening of bids or closing date for submission of offers (see § 2.405 (b) of this chapter with respect to minor informalities and irregularities in bids).

(1) Any bidder or offeror may, prior to award, question the small business status of the apparently successful bidder or offeror by sending a written protest to the contracting officer and to the SBA Regional Office for the region in which the questioned bidder or offeror has his principal place of business, SBA will promptly notify the contracting officer of the date of its receipt of any such protest and will advise the questioned bidder or offeror that his small business status is under review.

(2) A contracting officer may, prior to award, question the small business status of the apparently successful bidder or offeror by sending a written notice to the SBA Regional Office for the region in which the bidder or offeror has his principal place of business. Such notice shall contain a statement of the basis

for questioning and of available supporting facts. SBA will promptly notify the contracting officer of the date such notice was received and will advise the bidder or offeror in question that his small business status is under review.

(3) SBA will determine the small business status of the questioned bidder or offeror and notify the contracting officer and the bidder or offeror of its decision. If the SBA determination is not received by the contracting officer within ten working days after SBA's receipt of the protest or notice questioning small business status, it shall be presumed that the questioned bidder or offeror is a small business concern. This presumption will not be used as a basis for making an award to the questioned bidder or offeror without first ascertaining when a size determination can be expected from SBA and, where practicable, waiting for such determination, unless further delay in award would be disadvantageous to the Government. Pending SBA determination or expiration of the ten-day period, whichever is earlier, procurement action shall be suspended; provided that such ten-day suspension period shall not apply to any urgent procurement action which, as determined by the contracting officer, must, in order to protect the public interest, be awarded without delay and as to which he inserts in the contract file a statement signed by him justifying this determination.

[27 F.R. 1686, Feb. 22, 1962]

§ 1.704-1 Director for small business.

The Director for Small business for the Department of Defense advises the Assistant Secretary of Defense (Installations and Logistics) in matters relating to the establishment, implementation, and execution of an appropriate Small Business Program within the Department of Defense. Negotiations with SBA or other Government agencies or departments outside the Department of Defense concerning small business policy and programs shall be conducted through the Director for Small Business or with his authorization.

[26 F.R. 5297, June 14, 1961]

§ 1.704-2 Departmental Small Business Advisors.

Each military department shall maintain an Office of Small Business for the Department. The Chief of each Office of Small Business shall devote his efforts

primarily to small business matters. He advises the Secretary on small business matters and is responsible for implementing the Department of Defense Small Business Program within his department and for representing his department in negotiations with other military departments or Governmental agencies on small business matters.

[27 F.R. 11645, Nov. 27, 1962]

§ 1.704-3 Small business specialists.

Small business specialists shall be appointed in each principal procurement office and such other offices as the military departments may consider appropriate. They will perform such functions as are prescribed for them in furtherance of the Small Business Program, including but not limited to the screening of proposed procurement to assure that all small business objectives are given consideration.

[27 F.R. 1686, Feb. 22, 1962]

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The Assistant Secretary of Defense (Installation and Logistics) and the Administrator, SBA, are responsible for consulting, and cooperating in establishing policies and programs for small business participation in Defense procurement. All Department of Defense purchasing activities are responsible for working with SBA in carrying out these policies and programs, in accordance with the provisions of § 1.705. [26 F.R. 5297, June 14, 1961]

§ 1.705-3 Screening of procurements. (a) Individual set-asides. SBA representatives, when properly authorized and cleared for security, shall, upon request, promptly be afforded an opportunity at the purchasing activity to review all proposed classified and unclassified procurements if it is anticipated that the resulting contract or contracts will exceed $2,500 unless in the case of procurements which are not expected to exceed $10,000, the head of the purchasing activity determines that such review would unduly delay the procurement process. A copy of the determination and the justification therefor shall be furnished to the SBA representative. Where it is anticipated that the resulting contract or contracts will exceed $2,500, such SBA representatives shall, upon request, promptly be afforded an opportunity to make recommendations

concerning proposed procurements, including that they be exclusively or partially set aside for small business concerns.

The contracting officer shall afford the SBA representative an opportunity to recommend appropriate names of small business concerns for inclusion in lists of bidders for firms to be solicited in connection with current and future procurements.

(b) Class set-asides. SBA representatives shall be afforded an opportunity to make recommendations that current and future procurements, or portions thereof, of selected items or services or groups of like items or services shall be set aside as provided in § 1.706, for exclusive small business participation. Such set-asides, when approved by the contracting officer, shall be known as class set-asides. Concurrence in a class set-aside shall not be dependent upon the existence of a current procurement if future procurements can be clearly foreseen.

[27 F.R. 1686, Feb. 22, 1962]

§ 1.705-4 Access to procurement information.

Upon request, and subject to applicable security regulations, SBA representatives shall be given access to available or reasonably obtainable information, including technical data (including drawings and specifications), procurement history, and bidders lists, and planned requirements immediately upon receipt by the purchasing activity. The SBA representative will be furnished such other available or reasonably obtainable information as may be required for the SBA referral program.

[27 F.R. 1687, Feb. 22, 1962]

§ 1.705-6 Certificates of competency.

(a) SBA has statutory authority to certify the competency of any small business concern as to capacity and credit. "Capacity" means the overall ability of a prospective small business contractor to meet quality, quantity, and time requirements of a proposed contract and includes ability to perform, organization, experience, technical knowledge, skills, "know-how", technical equipment, and facilities. Contracting officers shall accept SBA certificates of competency as conclusive of a prospective contractor's responsibility as to capacity (see §§ 1.903-1 (c) and 1.903-2) and credit (see § 1.903-1(b)), unless the contracting

officer has substantial doubts as to the firm's ability to perform, in which case he shall, prior to award, promptly refer the matter to higher authority in accordance with procedures of the Department concerned. In cases referred to higher authority, SBA may be requested to consider the withdrawal of the certificate and, in any event, the contracting officer will be informed of the final decision. [Paragraph (a) amended, 27 F.R. 1687, Feb. 22, 1962]

(b) If a small business concern has submitted an otherwise acceptable bid or proposal but has been found by the contracting officer to be nonresponsible as to capacity or credit, and if the bid or proposal is to be rejected for this reason alone, SBA shall be notified of the circumstances so as to permit it to issue a certificate of competency, and award shall be withheld pending either SBA action concerning issuance of a certificate of competency or the expiration of fifteen working days after SBA is so notified, whichever is earlier, subject to the following:

(1) This procedure is not mandatory where the contracting officer certifies in writing that award must be made without delay, and promptly advises the SBA representative thereof, and includes in the contract file a statement signed by him which justifies the certificate. A copy of the statement shall be furnished the SBA representative.

(2) This procédure does not apply to proposed awards of not more than $2,500.

(3) This procedure is optional, within the discretion of the contracting officer, as to proposed awards of more than $2,500, but less than $10,000.

(4) This procedure does not apply where the contracting officer has found a small business concern nonresponsible for a reason other than lack of capacity or credit. Thus, it does not apply where a concern does not satisfy the criteria of responsibility in § 1.903-1 (a), (e), (f), and (g). Where the contracting officer determines that a concern does not meet the requirements of § 1.903-1(d) as to a satisfactory record of performance, the procedure is mandatory only if the unsatisfactory record of performance was due solely to inadequate capacity or credit. However, if the contracting officer has any doubt as to whether the unsatisfactory record of performance can reasonably be attributed solely to

lack of capacity or credit, the matter shall be discussed with the local SBA representative. If the local SBA representative is of the opinion that the unsatisfactory record of performance is attributable solely to a lack of capacity or credit, and the contracting officer disagrees, the contracting officer shall, in accordance with Departmental procedures, forward the matter to higher authority within his Department for resolution. The decision of such higher authority shall be final. To assist SBA in determining the capacity and credit of small business concerns involved in a particular procurement, the purchasing activity shall make available to SBA all pertinent technical and financial information with respect to the small business concern involved, including but not limited to copies of the IFB or RFP, drawings, specifications, pre-award surveys and abstracts of bids.

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(b) Procurement of supplies which were developed and financed in whole or in part by Canadian sources under the U.S.-Canadian Defense Development Sharing Program shall not be set aside for small business. Identification of the supplies covered by the Program will be in accordance with Departmental procedures.

[Paragraph (b) amended, 26 F.R. 9633, Oct. 12, 1961]

§ 1.706-2 Review of SBA set-aside proposals.

(a) (1) * (2) * * * The contracting officer shall promptly notify the SBA representative of any procurement action initiated pursuant to the proviso of the preceding sentence by supplying him with the copy of the justification.

(b) *

(6) Small business concerns are receiving a fair portion of the total contracts for supplies and services;

(7) A class set-aside of the item or service concerned has been made at some other purchasing activity; or

(8) The item will be described by "brand name or equal."

*

CODIFICATION: § 1.706-2 was amended in the following respects, 27 F.R. 1687, Feb. 22, 1962:

1. In paragraph (a), the last sentence in subparagraph (2) was amended.

2. In paragraph (b), subparagraphs (6) and (7) were amended and subparagraph (8) was added.

§ 1.706-3 Withdrawal or modification of set-asides.

(b) (1) If, prior to the award of a contract involving an individual or class set-aside for small business, the contracting officer considers that procurement of the set-aside from a small business concern would be detrimental to the public interest (e.g., because of unreasonable price), the contracting officer may withdraw a unilateral set-aside determination or initiate the withdrawal of a point set-aside determination by giving to the SBA representative written notice containing the reasons for withdrawing a joint determination. *

CODIFICATION: In § 1.706-3, the first sentence in paragraph (b) (1) was amended, 27 F.R. 1687, Feb. 22, 1962.

§ 1.706-4 Reporting for Department of Commerce Procurement Synopsis.

See § 1.1003-8.

[28 F.R. 12547, Nov. 23, 1963]

§ 1.706-5 Total set-asides.

(a) Subject to any applicable preference for labor surplus area set-asides as provided in § 1.803 (a) (2), the entire amount of an individual procurement or class of procurements (including but not limited to contracts for maintenance, repair, and construction) shall be set aside for exclusive small business participation (see § 1.706-1) where there is a reasonable expectation that bids or proposals will be obtained from a sufficient number of responsible small business concerns so that awards will be made at reasonable prices. Total set-asides shall not be made unless such a reasonable expectation exists; however, see

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§1.706-6 as to partial set-asides. though past procurement history of the item or similar items is always important, it is not the only controlling factor which should be considered in determining whether a reasonable expectation exists.

(b) Contracts for total small business set-asides may be entered into by conventional negotiation or by a special method of procurement known as "Small Business Restricted Advertising." The latter method shall be used wherever possible. Invitations for Bids and Requests for Proposals shall be restricted to small business concerns. Small Business Restricted Advertising, including awards thereunder, shall be conducted in the same way as prescribed for formal advertising in Part 2 of this chapter, except that bids and awards shall be restricted to small business concerns. Bids received from firms which do not qualify as small business concerns shall be considered as nonresponsive and shall be rejected.

(c) In procurements involving total set-asides for small business, each Invitation for Bids or Request for Proposals shall contain substantially the following notice:

NOTICE OF TOTAL SMALL BUSINESS SET-ASIDE (OCT. 1962)

(a) Restriction. Bids or proposals under this procurement are solicited from small business concerns only and this procurement is to be awarded only to one or more small business concerns. This action is based on a determination by the contracting officer, alone or in conjunction with a representative of the Small Business Administration, that it is in the interest of maintaining or mobilizing the Nation's full productive capacity, in the interest of war or national defense programs, or in the interest of assuring that a fair production of Government procurement is placed with small business concerns. Bids or proposals received from firms which are not small business concerns shall be considered nonresponsive and shall be rejected.

(b) Definition. A "small business concern" is a concern that (i) is certified as a small business concern by the Small Business Administration, or (ii) 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, employs 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.

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. For construction contracts, paragraph (b) of the foregoing notice should be deleted and the following substituted therefor:

A "small business concern" is a concern that:

(1) Is independently owned and operated; (11) Is not dominant in the field of operation in which it is bidding on Government contracts; and

(iii) The average annual receipts of the concern and its affiliates for the preceding three fiscal years do not exceed $7,500,000, or if the concern is located in Alaska do not exceed $9,375,000.

CODIFICATION: § 1.706-5 was revised 27 F.R. 1687, Feb. 22, 1962. Subsequently, paragraph (c) was amended, 27 F.R. 11646, Nov. 27, 1962. Prior Amendments

1961: 26 F.R. 5297, June 14.

§ 1.706-6 Partial set-asides.

(a) Subject to any applicable performance for labor surplus area setasides as provided in § 1.803 (a) (2), a portion of procurement (including but not limited to contracts for maintenance, repair, and construction) shall be set aside for exclusive small business participation (see § 1.706-1) where:

(1) The procurement is not appropriate for total set-aside pursuant to § 1.706-5;

(2) The procurement is severable into two or more economic production runs or reasonable lots; and

(3) One or more small business concerns are expected to have the technical competency and productive capacity to furnish a severable portion of the procurement at a reasonable price. Similarly, a class of procurements (including but not limited to contracts for maintenance, repair, and construction) may be partially set aside in accordance with § 1.706-2(c).

(b) Where a portion of a procurement is to set aside for small business pursuant to paragraph (a) of this section, the procurement shall be divided into a set-aside portion and a non-set-aside portion, each of which shall be not less than an economic production run or reasonable lot. Insofar as practical, the

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