However, if the head of the purchasing activity determines that such review would unduly delay action in procurements not expected to exceed $10,000, the SBA representative shall be furnished instead a copy of such determination and the justification therefor.

(c) In class set-asides, the SBA representative shall be afforded an opportunity to recommend that current and future procurements, or portions thereof, of selected items or services or groups of like items or services shall be set aside for exclusive small business participation. Such set-asides, when agreed to by the contracting officer, shall be known as class set-asides. Concurrence in a class set-aside shall not depend on the existence of a current procurement if future procurements can be clearly foreseen. Class set-asides shall apply only to the purchasing activity making or participating in the agreement, and shall not apply to an individual procurement for which small purchase procedures are to be used. A class set-aside agreement should specifically identify the items or services subject thereto, and provide for annual joint review by an SBA representative and the contracting officer, to determine whether it should be withdrawn (see § 1.706-3). Any class of procurements proposed to be totally set aside shall satisfy the requirements of § 1.7065. The set-aside determination for any class of procurements proposed to be partially set aside shall specify that it does not apply to any individual procurement not severable into two or more economic production runs or reasonable lots. Records of individual procurements under each class set-aside shall be maintained by individual purchasing activities and shall include the solicitation number and date, item or service, unilateral or joint class set-aside and number, estimated dollar amount of the procurement, and estimated dollar amount of the set-aside. A copy of each such record shall be made available by each purchasing activity to SBA upon request.

(d) None of the following is, in itself, sufficient cause for not making a setaside:

(1) A large percentage of previous procurements of the item has been placed with small business concerns;

(2) The item is on an established planning list under the Industrial Readiness Planning Program, except that a total set-aside shall not be authorized

when one or more large business Planned Emergency Producers of the item desire to participate in the procurement (but see § 1.706-6 as to partial set-asides);

(3) The item 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 (but see § 1.706-6 as to partial set-asides).

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

(5) The procurement is classified;

(6) Small business concerns are considered to be receiving a fair proportion of total contracts for supplies or services;

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

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

(e) Procurement of supplies which were developed and financed in whole or in part by Canadian sources under the U.S.-Canadian Defense Development Sharing Program shall not be set aside for small business. Supplies covered by the program shall be identified by the cognizant Military Department.

[29 F.R. 11812, Aug. 19, 1964]

§ 1.706-2 Contract authority.

Contracts for total or partial set-asides entered into by conventional negotiation (see §§ 1.706-5(b) and 1.706-6(c) 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 a joint determination, or 10 U.S.C. 2304(a) (1) in the case of a unilateral determination (see §3.201-2(b) (2) of this chapter.

[29 F.R. 11813, Aug. 19, 1964]

§ 1.706-3 Review, withdrawal, or modification of set-asides or set-aside proposals.

(a) Prior to issuing solicitations each individual procurement governed by a class set-aside shall be carefully reviewed to ensure that any changes in the magnitude of anticipated requirements, specifications, 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 unreasonable price by the Government or in a change in small business capability. If, prior to award of a contract involving an individual or class setaside, the contracting officer considers that procurement of the set-aside from a small business concern would be detrimental to the public interest (e.g., because of unreasonable price), he may withdraw a unilateral set-aside determination or initiate the withdrawal of a joint set-aside determination by giving written notice to the SBA representative stating the reasons for the withdrawal. Similarly, a class set-aside may be modified with the concurrence of SBA to withdraw one or more individual procurements.

(b) Upon a recommendation of the SBA representative that an individual procurement or class of procurements, or portion thereof, be set aside, the contracting officer shall promptly either (1) concur in the recommendation, or (2) disapprove, stating in writing his reasons for disapproval.

(c) If the contracting officer disagrees with the recommendation of the SBA representative regarding a small business set-aside for an individual procurement or class of procurements or a portion thereof and so notifies the SBA representative in writing, or if the SBA representative disagrees with the contracting officer regarding a withdrawal or modification of a joint set-aside determination, the SBA representative shall be allowed 2 working days to appeal in writing to the head of the purchasing activity or his designee for decision. Within one working day after receipt of a decision from the head of the purchasing activity or his designee approving the action of the contracting officer, the SBA representative may request the contracting officer, in writing, to suspend procurement action pending a further appeal by the Administrator of the SBA to the Secretary of the Military Department concerned. The SBA shall be allowed 7 working days after making such written request within which (1) the Administrator of SBA may appeal to the Secretary of the Military Department concerned, and (2) notify the contracting officer whether the further appeal has in fact been taken. If notification is not received by the contracting officer

within the 7 day period, it shall be deemed that the SBA request to suspend procurement action has been withdrawn and that an appeal to the Secretary was not taken. Where an appeal to the Secretary concerned has been taken and the contracting officer has been notified of that fact within the 7 day period, the head of the purchasing activity through his normal channels shall forward the matter to the Secretary of the Military Department concerned through the appropriate Departmental Small Business Advisor as identified in § 1.704-2 with a full justification of his decision.

(d) Any procurement action which has been appealed by the SBA representative shall be suspended pending the decision of the head of the purchasing activity or his designee. If the decision sustains the contracting officer, and if the SBA representative requests further suspension in accordance with paragraph (c) of this section, the suspension shall continue until (1) the SBA appeal is deemed to have been withdrawn (as provided in paragraph (c) of this section), or (2) the matter is determined by the Secretary of the Military Department concerned. However, this procedure shall not apply to any particular procurement action which the contracting officer determines must be initiated without delay in order to protect the public interest, and as to which he inserts in the contract file a signed statement of justification. The contracting officer shall promptly give written notice to the SBA representative of any such procurement action initiated.

(e) A signed memorandum of nonconcurrence in a recommended set-aside action or of any withdrawal or modification shall be made and retained. [29 F.R. 11813, Aug. 19, 1964]

§ 1.706-4 Reporting for Department of Commerce Procurement Synopsis.

ing officer determines that there is reasonable expectation that bids for 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. (But see § 1.706-6 as to partial set-asides.) Although past procurement history of the item or similar items is always important, it is not the only factor which should be considered in determining whether a reasonable expectation exists.

(2) Every proposed procurement for construction, including maintenance and repairs, in excess of $2,500 and under $500,000 shall be considered individually as though SBA had initiated a set-aside request, and the procedures of § 1.706-3 shall apply.

(3) Every proposed procurement of $500,000 or more for construction shall be considered on an individual procurement basis under subparagraph (1) of this paragraph.

(b) Contracts for total small business set-asides may be entered into by conventional negotiation or by a special method of procurement known as "Small Business Restricted Advertising." The latter method shall be used wherever possible. Where multi-year procurement procedures are appropriate (see § 1.322). total set-asides may be made in connection therewith. Invitations for bids and requests for proposals shall be restricted to small business concerns. Small business restricted advertising, including awards thereunder, shall be conducted in the same way as prescribed for formal advertising in Part 2 of this chapter except that bids and awards shall be restricted to small business concerns. Bids received from firms which do not qualify as small business concerns shall be considered as nonresponsive and shall be rejected.

(c) In procurements involving total set-asides for small business, each invitation for bids or requests for proposals shall contain substantially the following notice, except that such notice may be modified to include the applicable specific small business definition.

NOTICE OF TOTAL SMALL BUSINESS
SET-ASIDE (Nov. 1963)

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

(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 (Code of Federal Regulations, Title 13, § 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. 2815, Feb. 29, 1964 and 29 F.R. 11812, Aug. 19, 1964]

§ 1.706-6 Partial set-asides.

(a) Subject to any applicable preference for labor surplus area set-asides as provided in § 1.803 (a) (3), a portion of a procurement, not including construction, shall be set aside for exclusive small business participation (see § 1.706-1) where:

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

(2) The procurement is severable into two or more economic production runs or reasonable lots (see § 1.804-1(a) (2) (i) through (v) ; and

(3) One or more small business concerns are expected to have the technical competency and productive capacity to furnish a severable portion of the procurement at a reasonable price, except that a partial set-aside shall not be made if there is a reasonable expectation that only two concerns (one large and one small) with technical competency and productive capacity will respond with bids or proposals; when the contracting officer is uncertain whether the latter situation exists, he may make advance written inquiries to all known sources to determine the number of interested

concerns.

Similarly, a class of procurements, not including construction, may be partially set aside in accordance with § 1.706-1(c).

(b) Where a portion of a procurement is to set aside for small business pursuant to paragraph (a) of this section, 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 practical, the 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, each invitation for bids shall contain either substantially the following notice or the notice set forth in paragraph (d) of this section. The notice may be appropriately modified to include the applicable specific small business definition. In negotiated procurements whichever notice is used will be appropriately modified for use with request for proposals.

NOTICE OF PARTIAL SMALL BUSINESS
SET-ASIDE (Nov. 1963)

(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-setaside portion, adjusted to reflect transportation and other cost factors which were considered in evaluating bids on the non-setaside 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 (Code of Federal Regulations, Title 13, § 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.

(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(i) 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 agrees 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 firsttier 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 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.

(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 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 award, or at the time of performance of the contract, as substantial or persistent labor surplus areas.

(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 (Nov. 1963)

(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. The other portion of the items to be procured has been set aside for participation by small business concerns. This is called the "set-aside portion" and awards therefor are made in

accordance with special procedures set forth in paragraph (c) of this Notice. This apportionment is based on a determination by the Contracting Officer, alone or in conjunc. tion 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 is placed with small business concerns. "Small business concern" 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 nonset-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-set-aside 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