In

place on the list names of firms or individuals doing business within the areas for which they are responsible, for any of the causes and under the conditions set forth in §§ 1.609-6 and 1.609-7. Overseas commanders or unified commanders overseas other than CINCEUR, CINCPAC, and CINCARIB are similarly authorized to designate firms or individuals in their command areas and will promptly notify either CINCEUR, CINCPAC, or CINCARIB, who will add the names to their consolidated lists. these cases the information contained in § 1.609-2 will be furnished. The listing shall operate to deny contracts to such firms or individuals throughout the Department of Defense. Unified Commanders will be notified of the action based on causes and under conditions set forth in §§ 1.609-6 and 1.609-7 through the "Economic Defense List", transmitted by the Department of Commerce through State Department channels, which contains the names of firms and individuals affected, or by direct communication from the Office of the Assistant Secretary of Defense (International Security Affairs). [28 F.R. 2573, Mar. 16, 1963]

§ 1.609-9 Liaison with United States diplomatic missions.

The Chief of the United States Diplomatic Mission, or such attaché or other officer as he directs, in the country where the firm or individual concerned is located, will be notified of actions contemplated under the foregoing sections which may have important political significance. In such cases of contemplated action against a branch or subsidiary firm or agency in one or more countries, the Chief of the United States Diplomatic Mission in each country, including that in which the parent or principal is located, will be notified.

§ 1.610 Use of lists.

(a) Due to the length of the lists, the numerous revisions and distances involved, as well as the infrequent contracting by offices with suppliers outside their respective areas, the United States, CINCEUR, CINCPAC, and CINCARIB consolidated lists of ineligible, debarred, and suspended bidders will not be distributed to contracting officers outside the area covered by the respective lists. However, no contracts will be awarded by contracting officers to suppliers with

out ascertaining that the names of the firms or individuals involved do not appear on the consolidated list for the geographical area in which the contractor is located. All lists will be held for reference in each of the military departments, the Defense Supply Agency and in offices designated by CINCEUR, CINCPAC, and CINCARIB and will be utilized in accordance with procedures established by them.

(b) When a contracting officer becomes aware that a prospective contractor proposes to furnish products of a concern that has been placed on an overseas list in accordance with § 1.609-6 (a), (b), (c), or (d), the matter shall, in accordance with Departmental procedures, be referred to the Assistant Secretary of Defense (ISA) for advice. In the Army, referral will be through the Assistant Secretary of the Army (Installations and Logistics) (Assistant Judge Advocate General) with an information copy of the Deputy Chief of Staff for Logistics, Attn: Chief, Contracts Division; in the Navy, through the Office of Naval Material, Code M-30; in the Air Force, through Headquarters USAF AFSPM-PO; in the Defense Supply Agency, to the Counsel with an information copy to the Executive Director, Procurement and Production.

[27 F.R. 11645, Nov. 27, 1962 and 28 F.R. 2573, Mar. 6, 1963]

Subpart G-Small Business Concerns § 1.700 Scope of subpart.

This subpart, which applies only in the United States, its possessions, and Puerto Rico, implements the Armed Services Procurement Act, as amended (10 U.S.C. 2301), and the Small Business Act, as amended (15 U.S.C. 631 et seq.), and sets forth policy and procedures governing (a) contract awards to small business concerns, (b) relationships with the Small Business Administration (SBA), (c) small business set-asides, and (d) small business subcontracting. [29 F.R. 11810, Aug. 19, 1964] § 1.701

Definitions.

The definitions of small business concerns are promulgated by the Small Business Administration. As used throughout this subpart, the following terms shall have the meanings set forth below.

[27 F.R. 1685, Feb. 22, 1962]

§ 1.701-1

Small business concern.

(a) (1) General Definition. A small business concern is a concern that 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, can further qualify under the criteria set forth in subparagraphs (2) and (3) of this paragraph. "Concern" means any business entity organized for profit with a place of business in the United States, its possessions or Puerto Rico, including but not limited to an individual, partnership, corporation, joint venture, association, or cooperative. For the purpose of a procurement of a product classified into two or more industries with different size standards, the smallest of such size standards shall be used in determining a bidder's size status.

(2) Industry small business size standards. In addition to being independently owned and operated, and not dominant in the field of operation in which it is bidding on Government contracts, a small business concern in order to qualify as such must meet the criteria established for the industries set forth below. Annual sales or annual receipts, as used throughout this part, means the annual sales or annual receipts, less returns and allowances, of a concern and its affiliates during its most recently completed fiscal year.

(i) Construction industries. For construction, alteration, or repair (including painting and decorating), of buildings, bridges, roads, or other real property, the average annual receipts of the concern and its affiliates for its preceding three fiscal years must not exceed $7,500,000, except that if the concern is located in Alaska, such receipts must not exceed $9,375,000. For dredging, the average annual receipts of the concern and its affiliates for its preceding three fiscal years must not exceed $5,000,000, except that if the concern is located in Alaska, such receipts must not exceed $6,250,000.

(ii) Manufacturing industries-(a) Food canning and preserving industry. For food canning and preserving, the number of employees of the concern and its affiliates must not exceed 500 persons, exclusive of "agricultural labor" as defined in 26 U.S.C. 3306(k),

(b) Petroleum industry. For petroleum, other than lubricants and miscellaneous petroleum products, the number

of employees of the concern and its affiliates must not exceed 1,000, and it must not have more than 30,000 barrels-perday crude oil capacity from owned or leased facilities. ("Crude oil capacity" means the maximum daily average crude throughput of a refinery in complete operation with allowances for necessary shutdown time for routine maintenance, repairs, etc. It approximates the maximum daily average crude runs to stills that can be maintained for an extended period.)

(c) Manufacturing industries listed in § 1.701-4. For a product classified within an industry listed in § 1.701-4, the number of employees of the concern and its affiliates must not exceed the small business size standard established therein for that industry.

(d) Manufacturing industries not listed in § 1.701-4. For a product classified within an industry not set forth in this section or in § 1.701-4, the number of employees of the concern and its affiliates must not exceed 500 persons.

(iii) Nonmanufacturing industries. For a product not manufactured by the concern submitting a bid or proposal, other than for a construction or service contract, the number of employees of that concern must not exceed 500 persons, and in the case of a procurement set aside for small business (see § 1.706) or involving equal low bids (see § 2.407-6 of this chapter), or otherwise involving the preferential treatment of small business, it 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. However, if the goods to be furnished are wool, worsted, knitwear, duck, webbing, and thread (spinning and finishing), nonmanufacturers (dealers and converters), shall furnish such products which have been manufactured or produced by a small weaver (small knitter for knitwear) and, if finishing is required, by a small finisher.

(iv) Service industries. For services not elsewhere defined in this section, the average annual sales or receipts of the concern and its affiliates for the preceding three fiscal years must not exceed $1 million ($1,250,000 if located in Alaska).

(v) Transportation industries-(a) General. Except as provided in (b) and (c) of this subdivision, for passenger or

freight transportation the number of employees of the concern and its affiliates must not exceed 500 persons.

(b) Air transportation. For air transportation, the number of employees of the concern and its affiliates must not exceed 1,000 persons.

(c) Trucking (local and long distance), warehousing, packing and crating, and/or freight forwarding. For trucking (local and long distance), warehousing, packing and crating, and/or freight forwarding, the annual receipts of the concern and its affiliates must not exceed $3,000,000 except that if the concern is located in Alaska, such receipts must not exceed $3,750,000. No such concern, however, will be denied small business status for the purpose of Government procurement solely because of its contractual relationship with a large interstate van line if (1) the concern's annual receipts have not exceeded $3,000,000 during its most recently completed fiscal year ($3,750,000 if located in Alaska), and (2) not more than fifty percent (50%) of such annual receipts are directly attributable to the concern's relationship with an interstate van line. (vi) Research, development or testing industries. For research, development, or testing, which requires delivery of a manufactured product, a concern must (a) qualify as a small business manufacturer within the meaning of subdivision (ii) of this subparagraph for the industry in which the product is classified, or (b) qualify as a small business nonmanufacturer within the meaning of subdivision (iii) of this subparagraph. For research, development, or testing, which does not require delivery of a manufactured product, the number of employees of the concern and its affiliates must not exceed 500 persons.

(3) Small business subcontractors. In connection with subcontracts of $2,500 or less, any concern will be considered a small business concern if it, with its affiliates, employs not more than 500 employees. In connection with subcontracts exceeding $2,500, any concern shall be considered a small business concern if it qualifies as such under subparagraphs (1) and (2) of this paragraph.

(b) Dominance in field of operations. A concern "is not dominant in its field of operations" when it does not exercise a controlling or major influence in a kind of business activity in which a number of

business concerns are primarily engaged. In determining whether dominance exists, consideration is given to all appropriate factors including volume of business, number of employees, financial resources, competitive status or position, ownership or control of materials, processes, patents and license agreements, facilities, sales territory, and nature of business activity.

(c) Affiliates. Business concerns are affiliates of each other when either directly or indirectly (1) one concern controls or has the power to control the other, or (2) a third party controls or has the power to control both. In determining whether concerns are independently owned and operated and whether or not affiliation exists, consideration is given to all appropriate factors including common ownership, common management, and contractual relationships.

(d) Service industries. For services not elsewhere defined in this part, the average annual sales or receipts of the concern and its affiliates for the preceding three fiscal years must not exceed $1 million ($1,250,000 if located in Alaska). Any concern bidding on a contract for engineering services or naval architectural services is classified as small if its average annual sales or receipts for its preceding three fiscal years do not exceed $5 million.

(e) Small business certificate. A small business certificate is a certificate issued by SBA pursuant to the authority contained in sections 3 and 8(b)(6) of the Small Business Act certifying that the holder of the certificate is a small business concern for the purpose of Government procurement and in accordance with the terms of the certificate.

[29 F.R. 2813, Feb. 29, 1964, as amended at 29 F.R. 9748, July 21, 1964; 29 F.R. 14818, Oct. 31, 1964]

§ 1.701-2 Established supplier.

An "established supplier" of an item is a concern which has supplied the items satisfactorily to one or more Military Departments, or a concern with which mobilization planning is in effect. [27 F.R. 11645, Nov. 27, 1962]

§ 1.701-3 Potential supplier.

A "potential supplier" of an item is a concern which is a source of supplies, but, which is not an established supplier. [27 FR. 11645, Nov. 27, 1962]

1 The "number of employees" means the average em ployment of any concern and its affiliates based on the number of persons employed during the pay period ending nearest the last day of the third month in each calendar quarter for the preceding four quarters.

Together with its affiliates does not employ more than 1,000 persons and does not have more than 30,000 barrelsper-day capacity from owned and leased facilities.

The three Standard Industrial Classification industries (3711, 3712, and 3714) have been combined because of a major problem of defining the reporting unit in terms of these industries. This difficulty arises from the fact that many large establishments have integrated operations which include the production of parts or bodies and the assembly of complete vehicles at the same location.

Includes maintenance as defined in the Federal Aviation Regulations (14 CFR 1.1) but excludes contracts solely for preventive maintenance as defined in 14 CFR 1.1. As defined in the Federal Aviation Regulations: "Maintenance' means inspection, overhaul, repair, preservation, and the replacement of parts, but excludes preventive maintenance." "Preventive

maintenance' means simple or minor preservation operations and the replacement of small standard parts not involving complex assembly operations."

Guided missile engines and engine parts are classified in SIC 3722. Missile control systems are classified in SIC 3662.

Shipbuilding and repairing industry includes establishments primarily engaged in building and repairing all types of ships, barges, canal boats, and lighters, of 5 gross tons and over, whether propelled by sail of motor power or towed by other craft. Establishments primarily engaged in fabrication or repairing structural assemblies or components for ships, or subcontractors engaged in ship painting, joinery, carpentry work, electrical wiring installation, etc., are not included. The size standard for Boatbuilding and Repairing (establishments primarily engaged in building and repairing all types of boats, except rubber boats, under 5 gross tons) is 500.

[29 F.R. 2814, Feb. 29, 1964, as amended at 29 F.R. 11810, Aug. 19, 1964; 29 F.R. 14818, Oct. 31, 1964]

§ 1.702 General policy.

(a) It is the policy of the Department of Defense to place a fair proportion of its total purchases and contracts for supplies, research and development, and services (including but not limited to contracts for maintenance, repairs and

construction) with small business concerns. Every effort should be made to encourage participation by such concerns in the procurement of supplies and services that are within their capabilities. Heads of procuring activities and heads of field purchasing and contract administration activities are responsible for the effective implementation of the Small Business Program within their respective activities. Procurement and technical personnel attached to such activities shall be informed of the benefits that accrue to the Nation and to the Department of Defense through the proper use of the capabilities of small business concerns in the procurement of military requirements.

(b) Small business concerns, both esestablished and potential supplies (§§ 1.701-2 and 1.701-3), shall be afforded an equitable opportunity to compete for all contracts that they can perform. Therefore, the Military Departments shall, to the extent consistent with the best interests of the Government, and in order to broaden the industrial base:

(1) Attempt to locate additional qualified small business suppliers by all appropriate methods, including use of the facilities of SBA, particularly where only a limited number of small business concerns are on bidders' mailing lists; (2) Give wide publicity to purchasing methods and practices;

(3) Publicize proposed procurements by use of advance notices or other appropriate methods (see § 1.1003);

(4) Include all established and qualified potential small business suppliers on the bidders' mailing lists (see § 2.205 of this chapter);

(5) Send solicitations to all firms on the appropriate list, except that, where less than a complete list is to be used pursuant to § 2.205-4, at least a pro rata number of small business concerns shall be solicited;

(6) Divide proposed procurement of supplies and services, except construction, into quantities not less than economic production runs, so as to permit bidding on quantities less than the total requirements; allow the maximum time practicable for preparation and submission of bids, proposals, or quotations; where feasible, establish delivery schedules which will encourage small business participation;

(7) Examine each major procurement to determine the extent to which