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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, bezinning 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 (1) is certified as a small business concern by the Small Busi

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.

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If the Department of Labor classification of is placed with small business concerns. any such area changes after the bidder has "Small business concerns" is defined in parasubmitted his bid, the bidder may change graph (d) of this Notice. the areas in which he proposes to perform, (b) Non-set-aside portion and award proprovided, that he so notifies the Contracting cedure. (1) A bidder which is not a small Officer before award of the set-aside portion. business concern shall submit a bid only for Priority for negotiation will be based upon the non-set-aside portion of the procurethe labor surplus classification of the desig- ment. Award thereof will be made in acnate d production areas as of the time of the cordance with customary procedures. proposed award.

(2) A bidder which is a small business (d) Agreement. The bidder agrees that, if concern and is interested in receiving an awarded a contract as a small business per award for a quantity of an Item not exceedsistent labor surplus area concern under the ing the quantity set forth in the non-setset-aside portion of this procurement, heaside portion of the procurement, should su will perform, or cause to be performed, a mit a bid in the same manner as other consubstantial portion of the production in cerns bidding only on the non-set-aside areas classified at the time of award, or at portion. If such a bidder is interested in the time of performance of the contract. as receiving an award for a quantity of an Item persistent labor surplus areas; and that if

in addition to the quantity set forth in the awarded a contract as a small business sub

non-set-aside portion, he must bid the enstantial labor surplus area concern under the

tire quantity of the non-set-aside portion of set-aside portion of this procurement, he

wurement. he the Item; and indicate such additional quanwill perform, or cause to be performed, a

tity of the Item as he desires by so specifying substantial proportion of the production in on the Bidder's Statement of Set-Aside areas classified at the time of award, or at

Quantity Desired. Thus, the Bidder's Statethe time of performance of the contract, as ment of Set-Aside Quantity Desired is not to substantial or persistent labor surplus areas.

be used unless the bidder has bid the entire

quantity of an Item under the non-set-aside Where the definition of a small business con

portion. cern for a given industry, as prescribed by

However, a small business concern which the Small Business Administration and pro

receives no award, or receives an award for mulgated within the Department of Defense

less than the total quantity of an Item for differs from that set forth in the notice in

which it submitted a bid under the non-setthis paragraph, the notice shall be appro

aside portion, may be eligible for an award priately modified to reflect such definition.

of the quantity it bid, or the unawarded (d) Where it is anticipated that bids quantity thereof, under the following promay be received which appear designed cedure governing the set-aside portion. to take unfair advantage of bona fide

(c) Set-aside portion and award pro

cedure. Award of the set-aside portion of bidders, by devices such as unrealisti

this procurement will be made after award cally low bids on mere token quantities,

has been completed on the non-set-aside the notice set forth below may be used

portion. It will be made only to small busiinstead of that in paragraph (c) of this ness concerns which are found to be eligible section.

in accordance with (1) below; on the basis

of priorities for award set forth in (2) below; NOTICE OF PARTIAL SMALL BUSINESS SET-ASIDE

for quantities as provided in (3) below; and (Oct. 1962)

at prices determined in accordance with (a) General. This procurement has been (4) below. divided into two parts. All concerns, (1) Eligibility. To be eligible for considwhether small business or not, may partici

eration for the set-aside portion of an item, pate in accordance with customary proce

the small business concern must have subdures in that portion of this procurement

mitted a responsive bid on such Item in herein called the "non-set-aside" portion.

accordance with the requirements of (b) (2) The quantities of the non-set-aside portion

above at a unit price no greater than 120

percent of the highest unit price for such are set forth elsewhere in this Schedule. The

Item awarded under the non-set-aside porother portion of the items to be procured has been set aside for participation by small

tion. However, see (5) below when separate business concerns. This is called the "set

quantities are offered at different prices, (6)

below when separate quantities are offered aside portion" and awards therefor are made in accordance with special procedures set

at tie-in prices, and (7) below when all-or

none bids are offered for more than one item. forth in paragraph (c) of this Notice. This

(2) Priorities. Negotiations for the setapportionment is based on a determination

aside portion will be conducted with eligible by the Contracting Officer, alone or in con

concerns in the following order of priority: junction with a representative of the Small

Group 1. Small business concerns which Business Administration, that it is in the

are also interest of maintaining or mobilizing the

persistent labor surplus area Nation's full production capacity, or in the concerns. interest of war or national defense pro

Group 2. Small business concerns which grams, or in the interest of assuring that a are also substantial labor surplus aren fair proportion of Government procurement concerns.

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 set aside portion of an Item which may be awarded to an eligible concern shall be as follows:

(i) 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 of qualification.

(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 (il) 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 & 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

other bidders eligible for the set-aside portion.

(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) be 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

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cerns and substantial labor surplus area con cerns 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 & substantial proportion of a contract in persistent labor surplus areas of 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.

(il) "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 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

Portion 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, are negotiated procurements and shall where equal low bids are received on the cite as authority 10 U.S.C. 2304(a) (17) nonset-aside portion from concerns and section 15 of the Small Business Act which are equally eligible for the set in the case of joint determination, or aside portion, the concern which is 10 U.S.C. 2304(a) (1) in the case of an awarded the nonset-aside portion (un unilateral determination (see $ 3.201der the equal low bid procedures of 2(b) (2) of this chapter). § 2.407-6 of this chapter) shall have (26 F.R. 9633, Oct. 12, 1961) first priority with respect to negotiations

§ 1.707 Subcontracting with small busifor the set-aside portion. The set-aside

ness concerns. portion will be awarded at the highest unit price awarded or to be awarded for

(27 F.R. 3443, Apr. 11, 1962] the non-set-aside portion.

Prior Amendments (2) When the award price for the

1961: 26 F.R. 5300, June 14. nonset-aside portion has been determined and where an award will be made

$ 1.707-1 General. to a small business concern and the same (a) It is the policy of the Government small business concern is entitled to re to enable small business concerns to be ceive the set-aside portion of a solicita considered fairly as subcontractors to tion, the set-aside portion may be added contractors performing work or renderto the basic contract by supplemental ing services as prime contractors or agreement. The supplemental agree subcontractors under Government proment shall include the Examination of curement contracts, and to assure that Records clause, applicable to the set prime contractors and subcontractors aside portion only.

having small business subcontracting CODIFICATION: $ 1.706-6 was revised, 26 F.R.

programs will consult through the pur5298, June 14, 1961, and subsequently amend chasing activity with the SBA at its ed in the following respects:

request. 1. Paragraph (c) was amended in its en (b) The SBA is not authorized, howtirety, 27 F.R. 1688, Feb. 22, 1962. Subse

ever, to prescribe the extent to which quently, the clause heading and clause para

any contractor or subcontractor shall graph (b) (1) were amended, 27 F.R. 11646, Nov. 27, 1962.

subcontract or specify the concerns to 2. Paragraph (d) was amended in its en

which subcontracts shall be granted, nor tirety, 27 F.R. 1688, Feb. 22, 1962. Subse does it vest in SBA authority respecting quently, the cause heading and clause para the administration of individual prime graph (d) (1) were amended, 27 F.R. 11646, contracts or subcontracts. Nov. 27, 1962.

[27 F.R. 3443, Apr. 11, 1962) 3. Paragraph (e) was amended, 27 F.R. 6120, June 29, 1962.

Prior Amendments § 1.706–7 Automatic dissolution of set.

1961: 26 F.R. 5300, June 14. asides.

§ 1.707-2 Small business subcontractIf the entire set-aside portion is not ing program. procured by the method set forth in The Government's small business sub$ 1.706–5, as to total set-asides, or in contracting program requiries Govern$ 1.706-6, as to partial set-asides, the de- ment prime contractors to assume an aftermination referred to in § 1.706–1 is firmative obligation with respect to subautomatically dissolved as to the un contracting with small business concerns. awarded portion of the set-aside and

tion of the set-aside and In contracts which range from $5,000 to such unawarded portion may be pro- $500,000, the contractor undertakes the cur

ed by advertising or negotiation as obligation of accomplishing the maxiappropriate in accordance with existing mum amount of small business subconregulations (see $$ 3.201-2(b) (2) and tracting which is consistent with the ef3.210-3 of this chapter as to negotiation). ficient performance of the contract. [28 F.R. 12547, Nov. 23, 1963]

This undertaking is set forth in the con§ 1.706–8 Contract authority.

tract clause prescribed in § 1.707-3(a).

In contracts which may exceed $500,000, Contracts for total or partial set the contractor is required, pursuant to asides entered into by conventional the clause set forth in $ 1.707–3(b) to negotiation (see $$ 1.706-5(b) and undertake a number of specific respon1.706-6(e)) or by "Small Business Re- sibilities designed to assure that small stricted Advertising" (see $ 1.706–5(b)) business concerns are considered fairly

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