set-aside portion will be such as to make the maximum use of small business capacity. Delivery and other terms applicable to the set-aside portion of an item and those applicable to the nonset-aside portion of that item shall be comparable. (c) In advertised procurements involving partial set-asides for small business, Invitations for Bids shall contain either substantially the following notice or the notice set forth in paragraph (d) of this section. In negotiated procurements, whichever notice is used will be appropriately modified for use with requests for proposals. NOTICE OF PARTIAL SMALL BUSINESS SET-ASIDE (OCT. 1962) (a) General. A portion of this procurement, as identified elsewhere in the Schedule, has been set aside for award only to one or more small business concerns. Negotiations for award of this set-aside portion will be conducted only with responsible small business concerns who have submitted responsive bids on the non-set-aside portion at a unit price within 120 percent of the highest award made on the non-set-aside portion. Negotiations shall be conducted with such small business concerns in the following order of priority: Group 1. Small business concerns which are also persistent labor surplus area concerns. Group 2. Small business concerns which are also substantial labor surplus area concerns. Group. 3. 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 shall be awarded at the highest unit price awarded on the non-set-aside portion, adjusted to reflect transportation and other cost factors which were considered in evaluating bids on the non-set-aside 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. The partial set-aside of this procurement for small business concerns 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, or in the interest of war or national defense programs, or in the interest of assuring that a fair portion of Government procurement is placed with small business concerns. (b) Definitions. (1) A "small business concern" is a concern that (i) is certified as a small business concern by the Small Busi 22-051-64 -3 ness 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. (2) A "labor surplus area" is a geographical area which is: (1) Classified by the Department of Labor as an "Area of Substantial Labor Surplus" or as an "Area of Substantial and Persistent Labor Surplus" (also called "Area of Substantial and Persistent Unemployment") and listed as such by that Department in conjunction with its publication "Area Labor Market Trends"; or (ii) Not classified as in (1) above, but which is individually certified as an area of persistent or substantial labor surplus by the Department of Labor at the request of any prospective contractor. (3) Labor surplus area concern includes: (1) Persistent labor surplus area concerns which agree to perform or cause to be performed any contracts awarded to them as labor surplus area concerns substantially in "Areas of Substantial and Persistent Labor Surplus" (also called "Areas of Substantial and Persistent Unemployment"); and (ii) Substantial labor surplus area concerns which agree to perform or cause to be performed any contracts awarded to them as labor surplus area concerns substantially in "Areas of Substantial Labor Surplus". A concern shall be deemed to perform a contract substantially in "Areas of Substantial and Persistent Labor Surplus" (also called "Areas of Substantial and Persistent Unemployment") if the cost that it incurs on account of manufacturing or production (by itself or its first-tier subcontractors) in such areas amount to more than 50 percent of the contract price. A concern shall be deemed to perform a contract substantially in "Areas of Substantial Labor Surplus" if the costs that it incurs on account of manufacturing or production (by itself or its first-tier subcontractors) in such areas or in "Areas of Substantial or Persistent Labor Surplus" (also called "Areas of Substantial and Persistent Unemployment") amount to more than 50 percent of the contract price. (c) 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 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 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 portion 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. 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 in this paragraph, the notice shall be appropriately modified to reflect such definition. (d) Where it is anticipated that bids may be received which appear designed to take unfair advantage of bona fide bidders, by devices such as unrealistically low bids on mere token quantities, the notice set forth below may be used instead of that in paragraph (c) of this section. NOTICE OF PARTIAL SMALL BUSINESS SET-ASIDE (OCT. 1962) The (a) General. This procurement has been divided into two parts. All concerns, whether small business or not, may participate in accordance with customary procedures in that portion of this procurement herein called the "non-set-aside" portion. The quantities of the non-set-aside portion are set forth elsewhere in this Schedule. other portion of the items to be procured has been set aside for participation by small business concerns. This is called the "setaside portion" and awards therefor are made in accordance with special procedures set forth in paragraph (c) of this Notice. apportionment 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 production capacity, or in the interest of war or national defense programs, or in the interest of assuring that a fair proportion of Government procurement This is placed with small business concerns. "Small business concerns" is defined in paragraph (d) of this Notice. (b) Non-set-aside portion and award procedure. (1) A bidder which is not a small business concern shall submit a bid only for the non-set-aside portion of the procurement. Award thereof will be made in accordance with customary procedures. (2) A bidder which is 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-setaside portion of the procurement, should submit a bid in the same manner as other concerns bidding only on the non-set-aside portion. If such a bidder is interested in receiving an award for a quantity of an Item in addition to the quantity set forth in the non-set-aside portion, he must bid the entire quantity of the non-set-aside portion of the Item; and indicate such additional quantity of the Item as he desires by so specifying on the Bidder's Statement of Set-Aside Quantity 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-set-aside portion. However, a small business concern which receives no award, or receives an award for less than the total quantity of an Item for which it submitted a bid under the non-setaside 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-aside portion. It will be made only to small business concerns which are found to be eligible in accordance with (1) below; on the basis of priorities for award set 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 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-aside portion. However, see (5) below when separate quantities are offered at different prices, (6) below when separate quantities are offered at tie-in prices, and (7) below when all-ornone bids are offered for more than one item. (2) Priorities. Negotiations for the setaside portion will be conducted with eligible concerns in the following order of priority: Group 1. Small business concerns which are also persistent labor surplus area Group 3. Small business concerns which are not labor surplus area concerns. Within each of the above groups, negotiation for each Item will be conducted with eligible concerns in the order of their bids on the non-set-aside portion, beginning with the lowest responsive bid. However, see (5) below for the method of determining the bid when separate quantities are offered at different prices, (6) below when separate quantities are offered at tie-in prices, and (7) below when all-or-none bids are offered for more than one item. (3) 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-setaside portion of that Item, less the quantity, if any, of that Item awarded to that concern under the non-set-aside portion. (ii) 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 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 non-setaside portion. (4) Price. The set-aside portion shall be awarded at the highest unit price awarded on the non-set-aside portion, adjusted to reflect transportation and other cost factors which were considered in evaluating bids on the non-set-aside 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 qualification. of (5) Separate quantities at different prices. Where a concern has submitted a bid for separate quantities of the non-set-aside 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) (1) 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 condi tioned quantities, (1) the eligibility of the firm with respect to the 120 percent limit of (c) (1) above, (ii) the priority status of the firm under (c) (2) above, and (iii) the highest unit price for awards under (c) (4) above if the highest award on the non-setaside portion was made on such conditioned bid. (7) All-or-none bids. Where a concern has submited 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 for each Item on an "all-ornone" 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 for the Item on the non-set-aside portion. (d) Definitions. (1) 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 its field of operation and, with it 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. (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. (ii) "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 con cerns 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 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. (1) 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 performance of the contract, as substantial or persistent labor surplus (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 nonset-aside quantity of an Item, and (2) he desires a total quantity in excess of the nonset-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-setaside 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 nonset-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 nonset-aside portion at a unit price no greater than 120 percent of the highest award made or to be made on the nonset-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 setaside portion, the concern which is awarded the nonset-aside portion (under the equal low bid procedures of § 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 non-set-aside portion. (2) When the award price for the nonset-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. CODIFICATION: § 1.706-6 was revised, 26 F.R. 5298, June 14, 1961, and subsequently amended in the following respects: 1. Paragraph (c) was amended in its entirety, 27 F.R. 1688, Feb. 22, 1962. Subsequently, the clause heading and clause paragraph (b) (1) were amended, 27 F.R. 11646, Nov. 27, 1962. 2. Paragraph (d) was amended in its entirety, 27 F.R. 1688, Feb. 22, 1962. Subsequently, the cause heading and clause paragraph (d) (1) were amended, 27 F.R. 11646, Nov. 27, 1962. 3. Paragraph (e) was amended, 27 F.R. 6120, June 29, 1962. If the entire set-aside portion is not procured by the method set forth in § 1.706-5, as to total set-asides, or in § 1.706-6, as to partial set-asides, the determination referred to in § 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 §§ 3.201-2(b) (2) and 3.210-3 of this chapter as to negotiation). [28 F.R. 12547, Nov. 23, 1963] § 1.706-8 Contract authority. Contracts for total or partial setasides entered into by conventional negotiation (see §§ 1.706-5(b) and 1.706-6(e)) or by "Small Business Restricted Advertising" (see § 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 joint determination, or 10 U.S.C. 2304 (a) (1) in the case of an unilateral determination (see § 3.2012(b) (2) of this chapter). [26 F.R. 9633, Oct. 12, 1961] § 1.707 Subcontracting with small busi ness concerns. [27 F.R. 3443, Apr. 11, 1962] (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 assure that prime contractors and subcontractors having small business subcontracting programs will consult through the purchasing activity with the SBA at 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 does it vest in SBA authority respecting the administration of individual prime contracts or subcontracts. [27 F.R. 3443, Apr. 11, 1962] § 1.707-2 Small business subcontracting program. The Government's small business subcontracting program requiries 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 § 1.707-3(a). In contracts which may exceed $500,000, the contractor is required, pursuant to the clause set forth in § 1.707-3 (b) to undertake a number of specific responsibilities designed to assure that small business concerns are considered fairly |