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(e) The responsible Department will determine the adequacy of the contractor's Small Business Subcontracting Program and bring any deficiencies to the attention of the contractor's designated liaison officer with a request for corrective action, (27 F.R. 3444, Apr. 11, 1962, as amended at 29 F.R. 2818, Feb. 29, 1964) $ 1.707–5 Reports on DD Form 1140-1.

In connection with the submission of DD Form 1140-1 Reports under the "Small Business Subcontracting Program" clause, a subcontractor may contact the nearest military purchasing or contract administration activity and request advice as to the Department to which he uld submit reports. The military purchasing or contract administration activity shall, through channels, submit such a request to the Small Business Advisor of the Department concerned. The Small Business Advisor shall submit it to the Director for Small Business Policy of the Department of Defense for his determination in coordination with the Small Business Advisors of the Departments. (29 F.R. 2818, Feb, 29, 1964) 8 1.707–6 Subcontracting studies and

surveys. Each purchasing activity shall assist the SBA to obtain such reasonably obtainable information and records concerning the subcontracting of its prime contractors and its subcontractors, having contracts that contain the Small Business Subcontracting Program clause, as the SBA may deem necessary. Accordingly, the contracting officer or his representative, separately, or together with a representative of SBA may 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 purchasing activity 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 purchasing activity regarding methods for increasing small business participation in subcontract awards. SBA and the purchasing activity will

freely interchange, at the operating level, information resulting from these surveys. (27 F.R. 3444, Apr. 11, 1962) § 1.707–7 SBA review of agency records.

To the extent that subcontracting records are maintained in purchasing or contract administration activities, such records shall be made available to SBA, upon request for review. 127 F.R. 3445, Apr. 11, 1962) $ 1.708 Mobilization planning.

The policy of placing a fair proportion of purchases and contracts with small business concerns (see $ 1.702) applies in the field of mobilization planning and each Military Department shall continually study its industrial readiness planning procedures to include the Small Business Program, to the maximum practical extent. (27 F.R. 3445, Apr. 11, 1962] Subpart H-Labor Surplus Area

Concerns $ 1.800 Scope of subpart.

This subpart sets forth Department of Defense procurement policy and procedures with respect to aiding areas of persistent or substantial labor surplus, hereinafter referred to as labor surplus areas, in the United States, its possessions, and Puerto Rico. This subpart implements Defense Manpower Policy No. 4 (Revised) 6 June 1960 (32 ACFR Chapter I). (25 F.R. 14097, Dec. 31, 1960) 8 1.801 Definitions. [25 F.R. 14097, Dec. 31, 1960) $ 1.801-1 Labor surplus area concern.

Labor surplus area concern includes:

(a) Persistent labor surplus area concerns which will 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"; and

(b) Substantial labor surplus area concerns which will 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 & contract substantially in “Areas of Substantial and Persistent Labor Surplus" if the costs that it incurs on account of manufacturing or production (by itself

or its subcontractors) in such areas partment in conjunction with its publiamount to more than 50 percent of the cation “Area Labor Market Trends"; contract price. A concern shall be or deemed to perform a contract substan- (b) Not classified as in paragraph (a) tially in "Areas of Substantial Labor of this section, but which is individually Surplus” if the costs that it incurs on certified as an area of persistent or subaccount of manufacturing or production stantial labor surplus by the Department (by itself or its subcontractors) in such of Labor at the request of any prospecareas or in "Areas of Substantial or Per- tive contractor. sistent Labor Surplus” amount to more [27 F.R. 1690, Feb. 22, 1962] than 50 percent of the contract price.

$ 1.801–3 Small business concern. Example A. ABC Company, manufacturing in a full employment area bids on a con

Small business concern is defined in tract at $1,000. ABC Company will incur $ 1.701. the following costs:

(25 F.R. 14097, Dec. 31, 1960) Direct labor.-

$200
$ 1.802

General policy.
Overhead.-----

200

Except as provided in § 1.806 with rePurchase of materials from XYZ, which manufactures the materials in a la

spect to depressed industries, it is the bor surplus area----

510

policy of the Department of Defense to

aid labor surplus areas by placing conABC Company qualifies as a labor surplus

tracts with labor surplus area concerns, area concern.

to the extent consistent with procureExample B. DEF Company, manufacturing in a labor surplus area, bids on a con

ment objectives and where such contract at $1,000. DEF Company will incur tracts can be awarded at prices no higher the following costs:

than those obtainable from other conDirect labor.-

$200

cerns, and by encouraging prime conOverhead.--

200 tractors to place subcontracts with

concerns which will perform substanPurchase of materials from UVW, which is located in a labor surplus

tially in labor surplus areas. In carryarea but which merely distributes

ing out this policy, to accommodate the the materials from stocks on hand

small business policies of Subpart G of (the materials having been manufac

this part, preference shall be given in tured by UVW's supplier) -

---------- $550

the following order of priority to (a) DEF Company does not qualify as a labor

persistent labor surplus area concerns surplus area concern regardless of whether which are also small business concerns, UVW's supplier manufactures in a labor (b) other persistent labor surplus area surplus area.

concerns, (c) substantial labor surplus Example C. GHI Company, manufactur- area concerns which are also small busiing in a labor surplus area, bids on a con

ness concerns, (d) other substantial tract at $1,000. GHI Company will incur

labor surplus area concerns and (e) the following costs:

small business concerns which are not Direct labor.

$230

labor surplus area concerns. But in no Overhead----

275

case will price differentials be paid for Purchase of materials from RST, which the purpose of carrying out this policy. manufactured the materials in a full

[25 F.R. 14097, Dec. 31, 1980) employment area---

425

$ 1.803 Application of policy. GHI Company qualifies as a labor surplus area concern.

(a) Within the policy set forth in (26 F.R. 2599, Mar. 28, 1961)

§ 1.802, the following shall be applied 8 1.801-2 Labor surplus area.

to procurements which are estimated to

exceed $10,000: Labor surplus area means a geographi- (1) Negotiated procurements shall, cal area which at the time of award is: where procurement objectives permit, be

(a) Classified by the Department of awarded to labor surplus area concerns: Labor as an “Area of Substantial Labor Provided, That in no case shall price Surplus” or as an “Area of Substantial differentials be paid for the purpose of and Persistent Labor Surplus" (also carrying out this policy; called "Area of Substantial and Per- (2) Where appropriate, procurements sistent Unemployment”) (herein re- shall be made from labor surplus area ferred to as an area of persistent labor concerns by partial set-aside procedures, surplus) and listed as such by that De- in accordance with $ 1.804, and such setasides shall be given preference over any to furnish a severable portion of the prosmall business set-aside (but no total set- curement at a reasonable price. aside shall be made for labor surplus (2) In determining whether a proposed area concerns);

procurement is susceptible to division (3) Each Department shall assure into two or more economic production that information identifying labor sur- runs or reasonable lots, consideration plus areas is disseminated promptly to should be given to the following factors procurement personnel;

and any others de ed appropriate: (4) Department of Labor certification (i) Price and procurement history of (see $ 1.801-2(b) shall be considered the items, conclusive with respect to the particular (ii) Open industry capacity, procurement concerned.

(iii) Startup cost including special (5) even though less than a complete tooling requirements, bidders list is to be used pursuant to (iv) Delivery schedule, and $ 2.205-4 of this subchapter, all prospec- (v) Nature of item and quantity being tive contractors in labor surplus areas procured. shall be solicited, except that only a pro Before a portion or portions constituting rata number of prospective labor surplus

more than 50 percent of the total requirearea concerns may be solicited when the

ment may be set aside, a determination bidders list is composed predominantly of

must be made that there is a reasonable labor surplus area concerns and the esti

expectation the action proposed will not mated award is not expected to be more

result in the payment of a price differthan $25,000;

ential. The determination and support(6) Subcontracting with concerns in ing information will be made part of the labor surplus areas shall be encouraged

contract file. in accordance with $ 1.805.

(3) In furtherance of the policy to (b) Records of the total value of all assure that a fair proportion of procurecontracts in excess of $10,000 placed

ments is placed with small business conwith labor surplus area concerns during

cerns, each labor surplus area set-aside each fiscal year, and reports based there

shall provide that, in addition to labor on, are maintained by each Department

surplus area concerns, small business through the Department of Defense Re

concerns not performing in such areas porting Sytem described in $$ 1.110.

are also eligible for participation in the Accordingly, each Department in solicit

set-aside for such quantities thereof as ing bids and proposals for any procure- are not awarded to labor surplus area ment estimated to exceed $10,000 shall

concerns. In this respect, see applicable request from any bidder or offeror, or

provisions of g 1.304–2 (b) and (c) for other source, any information needed to

notices to bidders or offerors, and § 1.804– determine whether the bidder or offeror

2(d) for conduct of set-aside negotiais & labor surplus area concern. Con

tions. tract files shall be documented to in- (b) None of the following is, in itself, dicate the extent to which labor surplus sufficient cause for not making a seturea concerns were considered and the

aside: action taken with respect thereto.

(1) A large part of previous procure(25 F.R. 14098, Dec. 31, 1960, as amended at ments of the item in question has been 26 F.R. 5300, June 14, 1961]

placed with labor surplus area concerns; $ 1.804 Partial set-asides for labor sur

(2) The item to be purchased is on an plus area concerns.

established planning list under the In

dustrial Readiness Planning Program; [25 F.R. 14098, Dec. 31, 1960)

(3) The item to be purchased is on a $ 1.804–1 General.

Qualified Products List;

(4) A period of less than thirty days (a) (1) In accordance with the policy from the date of issuance of invitations set for the in $$ 1.802 and 1.803, a portion for bids or requests for proposals is preof each procurement shall be set aside

scribed for the submission of bids or for labor surplus area concerns if:

proposals; (i) The procurement is severable into

(5) The procurement is classified; or two or more economic production runs or (6) Labor surplus area concerns are reasonable lots; and

receiving a fair proportion of contracts. (ii) One or more labor surplus area (c) Procurement of supplies which concerns are expected to have the techni- were developed and financed in whole or cal competency and productive capacity in part by Canadian sources under the

33-605

65

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U.S.-Canadian Defense Development Sharing Program shall not be set aside for labor surplus areas. Identification of the supplies covered by the Program will be in accordance with Departmental procedures. [25 F.R. 14098, Dec. 31, 1960, as amended at 26 F.R. 9633, Oct. 12, 1961; 29 F.R. 2818, Feb. 29, 1964) 8 1.804–2 Set-aside procedures.

(a) Where a portion of a procurement is to be set aside pursuant to $ 1.804–1, the procurement shall be divided into a non-set-aside portion and set-aside portion, each of which shall be not less than an economic production run or reasonable lot. Insofar as practical, the setaside portion will be such as to make the maximum use of the capacity of labor surplus area concerns. Delivery terms and other terms applicable to the setaside portion of an item and those applicable to the non-set-aside portion of that item shall be comparable.

(b) In advertised procurements involving set-asides pursuant to this part, each invitation for bids shall contain either substantially the following notice or the notice set forth in paragraph (c) of this section. In negotiated procurements, whichever notice is used will be appropriately modified for use with requests for proposals. The appropriate notice shall be made a part of each contract under the set-aside portion of the procurement. NOTICE OF LABOR SURPLUS AREA 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 labor surplus area concerns, and, to a limited extent, to small business concerns which do not qualify as labor surplus area concerns. Negotiations for award of the setaside portion will be conducted only with responsible labor surplus area concerns (and small business concerns to the extent indicated below) who have submitted responsive bids or proposals on the non-set-aside portion at a unit price no greater than 120 percent of the highest award made on the nonset-aside portion. Negotiations for the setaside portion will be conducted with such bidders in the following order of priority:

Group 1. Persistent labor surplus area concerns which are also small business concerns.

Group 2. Other persistent labor surplus area concerns.

Group 3. Substantial labor surplus area concerns which are also small business concerns.

Group 4. Other substantial labor surplus area concerns.

Group 5. 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 portion 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.

(b) Definitions. (1) The term "labor surplus area” means a geographical area which is & persistent labor surplus area or a substantial labor surplus area, or both, as defined below:

(1) “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.

(11) "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.

(2) The term "labor surplus area concern" includes persistent labor surplus area concerns and substantial labor surplus area concerns 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 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.

(11) "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.

(3) 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, Section 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.

(c) Identification of areas of performance. Each bidder desiring to be considered for award as a 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 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, 11 awarded a contract as a 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 & 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.

(c) 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 (b) of this section.

NOTICE OF LABOR SURPLUS AREA SET-ASIDE

(Nov, 1963) (a) General. This procurement has been divided into two parts. All concerns whether labor surplus area concerns 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 (1) by labor surplus area concerns, and (ii) to a limited extent, by small business concerns which do not qualify as labor surplus area 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. Definitions of the following terms are set forth in paragraph (d) of this Notice.

(1) Labor Surplus Area
(2) Labor Surplus Area Concern
(3) Small Business Concern

(b) Non-set-aside portion and award procedure. (1) A bidder which is not a labor surplus area concern or a small business concern shall submit a bid only for the non-setaside portion of the procurement. Award thereof will be made in accordance with customary procedures.

(2) A bidder which is a labor surplus area concern or 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-set-aside portion of 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-setaside 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 labor surplus area or 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-setaside 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 labor surplus area or 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.

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