(3) The item to be purchased is on a Qualified Products List, except that a total set-aside shall not be authorized when the products of one or more large businesses are on the Qualified Products List unless it has been confirmed that none of such large businesses desires to participate in the procurement.

(4) A period of less than 30 days from date of issuance of invitations for bids or requests for proposals is prescribed for the submission of the bids or proposals.

(5) The procurement is classified.

(6) Small business concerns are receiving a fair proportion of the total contracts for property or services.

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

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

(c) In approving a proposed class setaside, the contracting officer shall make sure that the set-aside determination (1) specifically identifies the items or services subject thereto; (2) provides that it will, at least once each year, be reviewed jointly by an SBA representative and the procuring activity to determine whether it should be withdrawn (see § 1-1.706-3 for withdrawal procedures); (3) provides that it does not apply to any individual procurement for which small purchase procedures are to be used; and (4) provides that such class set-aside applies only to the procuring activity making or participating in the set-aside determination. Any class of procurements proposed to be totally set aside shall satisfy the requirements of § 1-1.706-5(a). With respect to any class of procurements proposed to be partially set aside, the set-aside determination shall specify that it is not applicable to any individual procurement which is not severable into two or more economic production runs or reasonable lots.

§ 1-1.706-3 Withdrawal or modification of set-asides.

(a) Each individual procurement governed by a class set-aside shall be carefully reviewed to insure that any changes in the magnitude of anticipated requirements, specifications for the items or services, delivery requirements, or competitive market conditions, since the initial approval of the class set-aside, are not of such material nature as to result in the probable payment of an un

reasonable price by the Government or in a change in small business capability.

(b) If, prior to the award of a contract involving an individual or class setaside for small business, the contracting officer considers that procurement of the set-aside portion from a small business concern would be detrimental to the public interest (e.g., because of unreasonable price), the contracting officer shall withdraw a unilateral set-aside determination. In the case of a joint set-aside determination, the contracting officer may initiate the withdrawal thereof by giving notice, containing the reason therefor, to the SBA representative. Similarly, a class set-aside may be modified so as to withdraw one or more individual procurements therefrom. In the case of a joint set-aside determination, if the SBA representative does not agree to a withdrawal or modification, the action may be appealed in accordance with the procedures set forth in § 1-1.706-2(a).

(c) A statement supporting any withdrawal or modification of a set-aside shall be made by the procuring activity and retained in the contract file.

§ 1-1.706-4 Reporting for Department of Commerce Procurement Synopsis. Section 1-1.1003-7 contains special instructions concerning reporting of procurements involving small business setasides to the Department of Commerce for publication in the "Commerce Business Daily."

§ 1-1.706-5 Total set-asides.

(a) Subject to the conditions set forth in §§ 1-1.706-1 and 1-1.706-2, the entire amount of an individual procurement or class of procurements shall be set aside for exclusive small business participation 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, in the absence of such expectation, a partial set-aside shall be considered pursuant to § 1-1.706-6. Although 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 involving total small business set-asides shall be entered into

by conventional negotiation or by a special method of procurement known as "Small Business Restricted Advertising." Whenever possible, the small business restricted advertising method, as defined in § 1-1.701-9, shall be used. Invitations for bids and requests for proposals involving total small business set-asides shall be restricted to small business concerns. Bids received from firms which do not qualify as small business concerns shall be considered 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 the following notice. The applicable small business size standard shall be set forth in the schedule.

NOTICE OF TOTAL SMALL BUSINESS SET-ASIDE

(a) Restriction. Bids or proposals under this procurement are solicited from small business concerns only and this procurement is 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 proportion 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.

(b) Definition. 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 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.

[29 F.R. 10104, July 24, 1964, as amended at 30 F.R. 9591, July 31, 1965]

§ 1-1.706-6 Partial set-asides.

(a) General. Subject to the conditions set forth in § 1-1.706-1, a portion of a procurement shall be set aside for exclusive small business participation where

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

(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 competence 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 § 1-1.706-2(c).

(b) Dividing the procurement. Where a portion of a procurement is to be set aside for small business pursuant to (a) of this § 1-1.706-6, 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 practicable, the set-aside portion will be such as to make maximum use of small business capacity. Delivery 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.

(c) Notice. Invitations for bids or requests for proposals involving partial set-asides pursuant to this subpart shall contain a notice substantially as set forth in this paragraph. The applicable small business size standard shall be set forth in the schedule.

NOTICE OF PARTIAL SMALL BUSINESS SET-ASIDE

(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 certified-eligible concerns.

Group 2. Small business concerns which are also persistent labor surplus area con

cerns.

Group 3. Small business concerns which are also substantial labor surplus area con

cerns.

Group 4. 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, 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 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 contracts.

service

(2) The term "labor surplus area" means a geographical area which is either a section of concentrated unemployment or underemployment, a persistent labor surplus area, or a substantial labor surplus area, as defined below:

(i) "Section of concentrated unemployment or underemployment" means appropriate sections of States or "labor areas" so classified by the Secretary of Labor.

(ii) "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 Trends in Employment and Unemployment," 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. (iii) "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 Trends in Employment and Unemployment," 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 certified-eligible concerns, persistent labor surplus area concerns, and substantial labor surplus area concerns, as defined below:

(i) "Certified-eligible concern" means a concern located in or near a section of concentrated unemployment or underemployment which has been certified by the Secretary of Labor in accordance with 29 CFR 8.7 (b) with respect to employment of disadvantaged persons residing within such sections, and which will agree to perform, or cause to be performed by a certified concern, a substantial proportion of a contract in or near such sections; it includes a concern which, though not so certified, agrees to have a substantial proportion of a contract performed by certified concerns in or near such sections. A concern shall be deemed to perform a substantial proportion of a contract in or near sections of concentrated unemployment or underemployment if the costs that the concern will incur on account of manufacturing or production in or near such sections (by itself, if a certified concern, or by certified concerns acting as first-tier subcontractors) amount to more than 30 percent of the contract price.

con

(ii) "Persistent labor surplus area cern" 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.

(iii) "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 and persistent labor surplus areas (by itself or its first-tier subcontractors) 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 por

tion. 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) Eligibility Based on Certification. Where eligibility for preference is based upon the status of the bidder, or bidder's subcontractors, as a "certified-eligible concern," the bidder shall furnish with his bid evidence of certification by the Secretary of Labor.

(e) Agreement. The bidder agrees that: (1) If awarded a contract as a certifiedeligible concern under the set-aside portion of this procurement, he will perform, or cause to be performed, a substantial proportion of the contract in or near sections of concentrated unemployment or underemployment, and in the performance of such contract will employ, or require certified subcontractors to employ, a proportionate number of disadvantaged persons residing within sections of concentrated unemployment or underemployment in accordance with plans approved by the Secretary of Labor;

(2) If awarded a contract as a persistent labor surplus area concern under the setaside 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

(3) 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.

(End of Notice)

(d) [Reserved]

(e) Award procedures—(1) Awarding the non-set-aside portion. Awards of the non-set-aside portion shall be made in accordance with normal procurement procedures.

(2) Awarding the set-aside portion. After all awards have been made on the non-set-aside portion, award of the setaside portion shall be effected by negotiation with eligible concerns as provided in the applicable Notice used. If equal low bids were received on the non-setaside portion from concerns which are equally eligible for the set-aside portion, the concern which is awarded the nonset-aside portion (under the equal low bid procedures of § 1-2.407-6) shall have first priority with respect to negotiations for the set-aside portion.

[29 F.R. 10104, July 24, 1964, as amended at 30 F.R. 9591, July 31, 1965; 30 F.R. 16110, Dec. 28, 1965; 32 F.R. 18045, Dec. 16, 1967]

§ 1-1.706-7 Automatic dissolution of set-asides.

If the entire set-aside portion is not procured by the method set forth in § 1-1.706-5, as to total set-asides, or § 1-1.706-6, as to partial set-asides, the determination referred to in § 1-1.706-1 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 applicable regulations.

§ 1-1.706-8 Contract authority.

(a) Joint small business set-asides. Contracts resulting from either total or partial joint small business set-asides (see § 1-3.215), whether entered into by conventional negotiation or by Small Business Restricted Advertising, shall cite as legal authority for negotiation section 302(c) (15) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 252(c) (15)), the revised Armed Services Procurement Act of 1947 (10 U.S.C. 2304(a)(17)), or other applicable proper authority, together with section 15 of the Small Business Act.

(b) Unilateral small business setasides. Contracts resulting from unilateral small business set-asides shall cite the applicable legal authority for negotiation (see §1-3.201). [Reserved]

§ 1-1.707

Pursuant to authority of the Small Business Act (15 U.S.C. 637(b) (7)), SBA is empowered to certify to Government procurement officers the competency as to capacity and credit of any small business concern or group of such concerns to perform a specific Government contract. As used in this section, "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, "knowhow," technical equipment, and facilities. § 1-1.708-2 Applicability and procedure.

(a) If a small business concern has submitted an otherwise acceptable bid or proposal but has been found by the contracting officer not to be responsible

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. If a partial set-aside is involved and the bid of a small business concern on the unreserved portion is to be rejected for lack of capacity or credit and the same small business concern is entitled to consideration on the reserved portion of the set-aside if a certificate of competency is issued by SBA, the entire quantity of the procurement (reserved and unreserved) for which that small business concern may be entitled, if competent, shall be referred to SBA and the referral papers so noted, in which event SBA may certify the small business concern for the maximum in quantity for which it is eligible under the procurement. The award shall be withheld pending either SBA issuance of a certificate of competency or the expiration of 15 working days after SBA is so notified, whichever is earlier, subject to the following:

(1) This procedure is not mandatory where award must be made without delay and the contracting officer includes in the contract file a statement signed by him which justifies immediate action. A copy of the statement shall be furnished the SBA representative.

(2) This procedure does not apply to proposed awards of less 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 not to be responsible for a reason other than lack of capacity or credit.

(5) A determination by a contracting officer that a small business concern is not responsible for reasons other than deficiencies in capacity or credit (e.g., lack of integrity, business ethics, or persistent failure to apply necessary tenacity or perseverence to do an acceptable job) must be supported by substantial evidence documented in the contract file.

(6) 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, he shall forward the matter to higher authority within his agency for resolution. The decision of such higher authority shall be final.

(b) To assist SBA in determining the capacity and credit of small business concerns involved in a particular procurement, the procurement agency shall at the time of notification 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 invitation for bids or request for proposals, drawings, specifications, preaward surveys, and abstracts of bids.

(c) Nothing in this section shall be construed to prevent a contracting officer from selecting, in the first instance, the source of supply offering the highest competence obtainable or the best scientific approach where such source is needed in certain negotiated procurements of research and development, highly complex equipment, or personal or professional services. However, if a small business concern has been selected on the basis of the highest competence obtainable or best scientific approach and, prior to award, the contracting officer determines that the concern is not responsible because of lack of capacity or credit, the certificate of competency procedure in paragraph (a) of this § 1-1.708-2 is applicable.

(d) If the contracting officer learns, after referral of a negative finding as to capacity or credit, that an SBA regional office is planning to issue a certificate of competency or to refer the application therefor to the SBA Central Office, Washington, D.C., the contracting officer should ask the local office of SBA if there are new or additional facts in the case. If these facts warrant, the contracting officer should consider a reversal of his negative finding. Every effort should be made to resolve the differences between SBA and the contracting agency through a complete exchange of preaward information.

[30 F.R. 9591, July 31, 1965]

§ 1-1.708-3 Conclusiveness of certificate of competency.