with procedures of the agency concerned. In cases referred to higher authority, SBA may be requested to consider withdrawal of the certificate and, in any event, the contracting officer will be informed of the final decision in the matter.

§ 1-1.709 Records and reports.

Executive agencies shall maintain records of the value of procurement contracts placed with small business concerns. Accordingly, each procuring activity shall, in soliciting bids, or proposals, request from any bidder or offeror any information needed to determine whether the bidder or offeror is a small business concern (when Standard Forms 18, 19–B, and 33 are used, this information is available from the small business representation included on these forms). Agencies shall summarize and report such procurement data on Standard Form 37 (Report on Procurement by Civilian Executive Agencies) in accordance with § 1-16.804.

[31 F.R. 5880, Apr. 16, 1966]

§ 1-1.710 Subcontracting with small business concerns.

(a) It is the policy of the Government to enable small business concerns to be considered fairly as subcontractors and suppliers 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 appropriate procuring agency with the Small Business Administration when requested by SBA. However, the Small Business Administration is not authorized to prescribe the extent to which any contractor or subcontractor shall subcontract or specify the concerns to which subcontracts shall be granted, and is not vested with authority respecting the administration of individual prime contracts or subcontracts. (See § 1-1.805 for subcontracting policies with respect to labor surplus area concerns.)

(b) This § 1-1.710 sets forth the program for furtherance of this policy and, together with Subpart 1-3.9, prescribes the contract clauses and procedures for use in carrying out the small business subcontracting program.

(c) As used in this Subpart 1-1.7, the term subcontractor includes a supplier and applies at any level of performance of the contract; and the term subcontract includes a purchase order.

§ 1-1.710-2 Small business subcontracting program.

The Government's small business subcontracting program requires 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 § 1-1.710-3 (a). In contracts which may exceed $500,000, the contractor is required, pursuant to the clause set forth in § 1-1.710-3 (b), to undertake a number of specific responsibilities designed to assure that small business concerns are considered fairly in the subcontracting role and to impose similar responsibilities on major subcontractors. (The liaison officer required by the latter clause may also serve as liaison officer for labor surplus area matters.)

§ 1-1.710-3 Required clauses.

(a) The Utilization of Small Business Concerns clause, set forth in this § 1-1.710-3, shall be included in all contracts in amounts which may exceed $5,000 except (1) contracts which, including all subcontracts thereunder, are to be performed entirely outside the United States, its possessions, and Puerto Rico, and (2) contracts for services which are personal in nature:

UTILIZATION OF SMALL BUSINESS CONCERNS

(a) It is the policy of the Government as declared by the Congress that a fair proportion of the purchases and contracts for supplies and services for the Government be placed with small business concerns.

(b) The Contractor agrees to accomplish the maximum amount of subcontracting to small business concerns that the Contractor finds to be consistent with the efficient performance of this contract.

[End of Clause]

(b) The Small Business Subcontracting Program clause, set forth in this § 1-1.710-3, shall be included in all contracts which may exceed $500,000, which contain the clause required by § 1-1.710-3

(a) and which, in the opinion of the procuring activity, offer substantial subcontracting possibilities. Furthermore, prime contractors who are to be awarded contracts which may not exceed $500,000, but which, in the opinion of the procuring activity, offer substantial subcontracting possibilities, shall be urged to accept this clause.

SMALL BUSINESS SUBCONTRACTING PROGRAM

(a) The Contractor agrees to establish and conduct a small business subcontracting program which will enable small business concerns to be considered fairly as subcontractors and suppliers under this contract. In this connection, the Contractor shall

(1) Designate a liaison officer who will (i) maintain liaison with the Government on small business matters, (ii) supervise compliance with the Utilization of Small Business Concerns clause, and (iii) administer the Contractor's "Small Business Subcontracting Program."

(2) Provide adequate and timely consideration of the potentialities of small business concerns in all "make-or-buy" decisions.

(3) Assure that small business concerns will have an equitable opportunity to compete for subcontracts, particularly by arranging solicitations, time for the preparation of bids, quantities, specifications, and delivery schedules so as to facilitate the participation of small business concerns. Where the Contractor's lists of potential small business subcontractors are excessively long, reasonable effort shall be made to give all such small business concerns an opportunity to compete over a period of time.

(4) Maintain records showing (1) whether each prospective subcontractor is a small business concern, (ii) procedures which have been adopted to comply with the policies set forth in this clause, and (iii) with respect to the letting of any subcontract (including purchase orders) exceeding $10,000, information substantially as follows:

(A) Whether the award went to large or small business.

(B) Whether less than three or more than two small business concerns were solicited.

(C) The reason for non-solicitation of small business if such was the case.

(D) The reason for small business failure to receive the award if such was the case when small business was solicited.

The records maintained in accordance with (iii) above may be in such form as the Contractor may determine, and the information shall be summarized quarterly and submitted by the purchasing department of each individual plant or division to the Contractor's cognizant small business liaison officer. Such quarterly summaries will be considered to be management records only and need not be submitted routinely to the Government; however, records maintained

pursuant to this clause will be kept available for review.

(5) Notify the Contracting Officer before soliciting bids or quotations on any subcontract (including purchase orders) in excess of $10,000 if (1) no small business concern is to be solicited, and (ii) the Contracting Officer's consent to the subcontract (or ratification) is required by a "Subcontracts" clause in this contract. Such notice will state the Contractor's reasons for nonsolicitation of small business concerns, and will be given as early in the procurement cycle as possible so that the Contracting Officer may give SBA timely notice to permit SBA a reasonable period to suggest potenbusiness tially qualified small concerns through the Contracting Officer. In no case will the procurement action be held up when to do so would, in the Contractor's judgment, delay performance under the contract.

(6) Include the Utilization of Small Business Concerns clause in subcontracts which offer substantial small business subcontracting opportunities.

(7) Cooperate with the Contracting Officer in any studies and surveys of the Contractor's subcontracting procedures and practices that the Contracting Officer may from time to time conduct.

(8) Submit quarterly reports of subcontracting to small business concerns on either Optional Form 61, Small Business Subcontracting Program Quarterly Report of Participating Large Company on Subcontract Commitments to Small Business Concerns, or such other form as may be specified in the contract. Except as otherwise provided in this contract, the reporting requirements of this subparagraph (8) do not apply to small business contractors, small business subcontractors, educational and nonprofit institutions, and contractors or subcontractors for standard commercial items.

(b) A "small business concern" is a concern that meets the pertinent criteria established by the Small Business Administration and set forth in § 1-1.701 of the Federal Procurement Regulations.

(c) The Contractor agrees that, in the event he fails to comply with his contractual obligations concerning the small business subcontracting program, this contract may be terminated, in whole or in part, for default.

(d) The Contractor further agrees to insert, in any subcontract hereunder which may exceed $500,000 and which contains the Utilization of Small Business Concerns clause, provisions which shall conform substantially to the language of this clause, including this paragraph (d), and to notify the Contracting Officer of the names of such subcontractors.

[End of Clause]

[29 F.R. 10104, July 24, 1964, as amended at 33 F.R. 17293, Nov. 22, 1968]

§ 1-1.710-4 Review of subcontracting

program.

(a) The adequacy of the contractor's "Small Business Subcontracting Program" shall be reviewed by the procuring agency concerned, and any deficiencies shall be brought to the attention of the contractor's liaison officer with a request for corrective action.

(b) Each procuring agency shall assist the SBA to obtain such reasonable obtainable information and records concerning the subcontracting of its prime contractors and its subcontractors, having contracts which contain the Small Business Subcontracting Program clause, as the SBA may deem necessary. Accordingly, the contracting officer may separately or together with a representative of SBA, periodically conduct studies and surveys of the contractor's subcontracting procedures and practices and those of his subcontractors. Such studies and surveys may originate with the procuring agency in order to have available the pertinent data concerning subcontracting by its primes, or, if such data is not currently available, the studies and surveys may originate upon the request of the SBA for such data. On the basis of the foregoing studies, surveys, and records, the SBA may make recommendations to the procuring agency regarding methods for increasing small business participation in the contractor's subcontract awards. SBA and the procuring agency will freely interchange, at the operating level, information resulting from these surveys.

(c) Subcontracting records maintained by Government offices shall be made available for review, as requested, by SBA.

§ 1-1.711 Federal Supply Schedule con

tracts.

Where orders are placed under Federal Supply Schedule contracts and one or more of the contractors for an item on a given schedule are small business concerns, the orders shall be placed in accordance with the policies and procedures set forth in § 101-26.408-4(b) of the Federal Property Management Regulations.

[32 F.R. 6568, Apr. 28, 1967] Subpart 1-1.8-Labor Surplus Area Concerns

§ 1-1.800 Scope of subpart.

This subpart sets forth policies and procedures with respect to aiding sections

57

The term "labor surplus area concern" includes certified-eligible concerns, persistent labor surplus area concerns, and substantial labor surplus area concerns, as defined in this § 1-1.801-1.

(a) "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 firsttier subcontractors) amount to more than 30 percent of the contract price.

(b) "Persistent labor surplus area concern" means a concern which will 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.

(c) "Substantial labor surplus area concern" means a concern which will 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.

[32 F.R. 18046, Dec. 16, 1967]

§ 1-1.801-2 Labor surplus area.

The term "labor surplus area" means a geographical area which at the time of award is either a section of concentrated unemployment or underemployment, a persistent labor surplus area, or a substantial labor surplus area, as defined in this § 1-1.801-2.

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

(b) "Persistent labor surplus area" means an area which (1) 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 (2) is certified as an area of substantial and persistent labor surplus by the Department of Labor pursuant to a request by a prospective contractor.

(c) "Substantial labor surplus area" means an area which (1) 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 (2) is certified as an area of substantial labor surplus by the Department of Labor pursuant to a request by a prospective contractor. [32 F.R. 18046, Dec. 16, 1967]

§ 1-1.801-3 Small business concern. For definition of small business concern, see Subpart 1-1.7.

[32 F.R. 18047, Dec. 16, 1967]

§ 1-1.802 Labor surplus area policies. § 1-1.802-1 General policy.

It is the policy of the Government to encourage the placing of contracts in sections of concentrated unemployment and underemployment and in areas of persistent and substantial labor surplus, to the extent consistent with procurement objectives, and where such contracts can be awarded at prices no higher than those obtainable from other concerns, and by encouraging prime contractors to place subcontracts with concerns which will perform a substantial proportion of the production in such sections and in labor surplus areas. [32 F.R. 18047, Dec. 16, 1967] § 1-1.802-2 Specific policies.

To further the general policy, the following specific policies shall be applied to procurements which are estimated to exceed $10,000 and may, if deemed practicable by the contracting officer, be applied to procurements between $2,500 and $10,000:

(a) Best efforts shall be used to award negotiated contracts to labor surplus area concerns. However, in no case may price differentials be paid for the purpose of carrying out this policy.

(b) Procurements shall be set aside for award to labor surplus area concerns in accordance with § 1-1.804.

(1) Where either a partial labor surplus area set-aside or a partial small business set-aside can be appropriately made for any given procurement, the setaside shall be made for labor surplus area concerns.

(2) In order to accommodate both labor surplus area and small business policies, labor surplus area set-aside awards shall be made in accordance with the following order of priority: (i) Certified-eligible concerns which are also small business concerns; (ii) other certified-eligible concerns; (iii) persistent labor surplus area concerns which are also small business concerns; (iv) other persistent labor surplus area concerns; (v) substantial labor surplus area concerns which are also small business concerns; (vi) other substantial labor surplus area concerns; and (vii) small business concerns which are not labor surplus area concerns.

(c) Procurement agencies shall disseminate promptly to appropriate procurement personnel available publications and other information identifying

sections of concentrated unemployment and underemployment and other labor surplus areas and production capabilities therein.

(d) The classification and certification of labor surplus areas and concerns by the Department of Labor shall be considered conclusive with respect to the particular procurement concerned.

(e) Concerns located in labor surplus areas, which are on appropriate bidders lists, shall be given the opportunity to submit bids or proposals on all procurements for which they are qualified, except where the procurement has been set aside in its entirety for a specific class of firms, such as small business concerns. Where less than a complete bidders list is to be used, pursuant to § 1-2.205-4, all prospective contractors in labor surplus areas shall be solicited, except that only a pro rata number of prospective labor surplus area concerns need be solicited when the bidders list is composed predominantly of labor surplus area concerns and the estimated award is not expected to be more than $25,000. (f) Subcontracting with concerns in labor surplus areas shall be encouraged in accordance with § 1-1.805.

(g) In the event of equal low bids, preference shall be given to labor surplus area concerns in accordance with § 1-2.407-6.

(h) Depressed industries shall be assisted in accordance with § 1-1.806.

(i) Procurement agencies shall cooperate with the Departments of Labor and Commerce, the Small Business Administration, and the Office of Emergency Planning to achieve the objectives of this subpart.

(j) Procurement placed in labor surplus areas as a result of preference procedures shall be reported in accordance with § 1-1.807.

[29 F.R. 10104, July 24, 1964, as amended at 32 F.R. 18047, Dec. 16, 1967]

§ 1-1.802-3 Buy American Act.

Any preference under the "Buy American Act" due to performance in labor surplus areas (see section 3 (c) of Executive Order No. 10582 of December 17, 1954, which prescribes uniform procedures for certain determinations under the Buy American Act) shall be in addition to the assistance accorded pursuant to this subpart. § 1-1.803

[Reserved]

§ 1-1.804 Partial set-asides for labor surplus area concerns.

§ 1-1.804-1 General.

(a) In accordance with the policies set forth in § 1-1.802, a portion of each procurement shall be set aside by the contracting officer for labor surplus area concerns if:

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

(2) One or more labor surplus area concerns are expected to have the technical competency and productive capacity to furnish a severable portion of the procurement at a reasonable price.

(b) In determining whether a proposed procurement is susceptible to division into two or more economic production runs or reasonable lots, consideration should be given to the following factors and any others deemed appropriate: (1) Price and procurement history of the items, (2) open industry capacity, (3) startup cost including special tooling requirements, (4) delivery schedule, and (5) nature of item and quantity being procured.

Before a portion or portions constituting more than 50 percent of the total requirement may be set aside, a determination must be made that there is a reasonable expectation that the action proposed will not result in the payment of a price differential.

(c) In furtherance of the policy to assure that a fair proportion of the total purchases and contracts are placed with small business concerns, each labor surplus area set-aside shall provide that, in addition to labor surplus area concerns, small business concerns not performing in such areas are also eligible for award of any set-aside quantities not awarded to labor surplus area concerns (see § 1-1.804-2).

(d) None of the following is, in itself, sufficient cause for not making a labor surplus area set-aside:

(1) A large part of previous procurements of the item in question has been placed with labor surplus area concerns;

(2) The item to be purchased is on an established planning list under the Industrial Readiness Planning Program;

(3) The item to be purchased is on a Qualified Products List;

(4) A period of less than thirty days from the date of issuance of invitations