(1) Eligibility. To be eligible for consideration for the set-aside portion of an Item, the labor surplus area or 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 nonset-aside portion. However, see (5) below when separate quantities are offered at different prices, (6) below when separate quantities are offered at tie-in prices, and (7) below when all-or-none bids are offered for more than one item.

(2) Priorities. 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 con

cerns.

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 for each Item will be conducted with eligible concerns in the order of their bids on the non-set-aside portion, beginning with the lowest responsive bids. However, see (5) below for the method of determining the bid when separate quantities are offered at different prices and see (6) below when separate quantities are offered at tie-in prices.

(3) Quantity. The quantity of the setaside portion of an Item which may be awarded to an eligible concern shall be as follows:

(1) Where a concern has not specified a quantity of the Item on the Bidder's Statement of Set-Aside Quantity Desired, the quantity shall be no greater than the quantity of such concern's bid on the non-setaside portion of that Item, less the quantity, if any, of that Item awarded to that concern under the non-set-aside portion.

(ii) Where a concern has specified a quantity of the Item on the Bidder's Statement of Set-Aside Quantity Desired, the quantity shall be no greater than the total of the entire non-set-aside portion of the Item and the quantity thereof specified on the Bidder's Statement of Set-Aside Quantity Desired, less the quantity, if any, of that Item awarded to that concern under the non-set-aside portion.

(4) Price. The set-aside portion 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, see (6) and (7) below for the highest unit price when the highest award is made as a result of tie-in bids or all-or-none type of qualification.

(5) Separate quantities at different prices. Where a concern has submitted a bid for separate quantities of the non-set-aside portion of an Item at different prices, without conditioning the Government's right to accept one or more such quantities upon its concurrent acceptance of another quantity of the Item each separate quantity shall be considered as a separate bid for the purpose of determining the eligibility of the concern with respect to the 120 percent limit prescribed in (c) (1) above, and for the purpose of determining under (c) (2) above standing of that bid in the order of negotiations for the set-aside portion of that Item.

the

(6) Separate quantities at tie-in prices. Where a concern has submitted a bid for separate quantities of the non-set-aside portion of an Item at different prices, and has conditioned the Government's right to accept any one or more such quantities upon its concurrent acceptance of another quantity of the Item, the weighted average of the prices for such conditioned quantities shall be considered the unit price for the purpose of determining, with respect to such conditioned quantities, (1) the eligibility of the firm, with respect to the 120 percent limit of (c) (1) above, (ii) the priority status of the firm under (c) (2) above, and (iii) the highest unit price for awards under (c) (4) above if the highest award on the non-setaside portion was made on such conditioned bid.

(7) All-or-none bids. Where a concern has submitted an "all-or-none" bid for more than one Item and thereby has conditioned the Government's right to award any Item upon its concurrent award of another Item, the unit prices bid for each Item, on an “allor-none" basis shall be considered independent unit prices for the purpose of determining the eligibility and priority status of the concern for the set-aside portion of each Item. In no event will a set-aside award be made for an Item to such bidder at a higher unit price than his "all-or-none” unit price bid for the Item on the non-set-aside portion.

(d) Definitions. (1) The term "labor surplus area" means a geographical area which is a 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:

(i) "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 firsttier subcontractors) amount to more than 50 percent of the contract price.

(ii) "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 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.

(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, § 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.

(e) 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 negotiations will be based upon

the labor surplus classification of the designated production areas as of the time of the proposed award.

(f) Agreement. The bidder agrees that, if 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 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.

(g) Token bids. Notwithstanding the provisions of this Notice, the Government reserves the right, in determining eligibility or priority for set-aside negotiations, not to consider token bids or other devices designed to secure an unfair advantage over other bidders eligible for the set-aside portion.

(h) Instruction for indicating portion of set-aside quantity desired. The quantity

of each item which has been set aside is set forth on the attached Bidder's Statement of Set-Aside Quantity Desired, which is to be filled in only by labor surplus area concerns and small business concerns, as provided in (b)(2) above. Furthermore, it is to be used by such a bidder only when (1) he has submitted a bid for the entire non-set-aside quantity of an Item, and (2) he desires a total quantity in excess of the the non-set-aside quantity thereof. Whether or not a labor surplus concern or small business concern may participate in the setaside portion is dependent on its eligibility in accordance with (c) above. It should be noted, however, that to be eligible for the set-aside portion the bidder need not have filled in the Bidder's Statement of Set-Aside

Quantity Desired. The latter should only be filled in where the bidder desires a quantity in excess of the non-set-aside quantity. BIDDER'S STATEMENT OF SET-ASIDE QUANTITY DESIRED 3

1

Item No.

2 Set-Aside Quantity

Portion of Set-Aside Quantity Desired

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 or to be made on the non-set-aside portion and who are determined to be responsible prospective contractors for the set-aside portion of the procurement. Negotiations shall be conducted in the order of priority indicated in the foregoing notices; provided that, where equal low bids are received on the non-set-aside portion from concerns which are equally eligible for the set-aside portion, the concern which is awarded the non-set-aside portion (under the equal low bid procedures of § 2.407-6 of this chapter) shall have first priority with respect to negotiations for the set-aside portion. The set-aside portion shall be awarded at the highest unit price awarded or to be awarded for the non-set-aside portion. If the entire set-aside portion cannot be awarded by the method described herein, any unawarded portion may be procured by advertising or negotiation, as appropriate, in accordance with existing regulations (see §§3.201–2(b) (1) and 3.210-3 of this chapter as to negotiation).

(2) When the award price for a nonset-aside portion has been determined and where an award will be made to a labor surplus area concern and the same labor surplus area concern is entitled to receive a set-aside portion of the solicitation, the set-aside portion may be added to the basic contract by supplemental agreement. The supplemental agreement shall include the Examination of Records clause, applicable to the setaside portion only.

[25 F.R. 14098, Dec. 31, 1960, as amended at 27 F.R. 6121, June 29, 1962; 28 F.R. 12547, Nov. 23, 1963; 29 F.R. 2818, Feb. 29, 1964] § 1.804-3 Withdrawal of set-asides.

If, prior to the award of a contract involving a labor surplus set-aside, the contracting officer considers that the set-aside is detrimental to the public interest, e.g., because of unreasonable prices, the contracting officer shall withdraw the set-aside and complete the procurement by advertising or negotiation as appropriate in accordance with existing regulations. A signed memorandum setting forth the basis of the withdrawal of any set-aside shall be made and retained.

[25 F.R. 14100, Dec. 31, 1960]

§ 1.804-4 Contract authority.

Contracts for set-asides made under this Subpart H shall cite as authority 10 U.S.C. 2304(a)(1). For reporting purposes, see §3.201-2(b)(1) of this chapter for contracts awarded to labor surplus area concerns and §3.201-2 (b) (2) for contracts awarded to small business concerns which are not labor surplus area concerns.

[25 F.R. 14100, Dec. 31, 1960]

§ 1.805

Subcontracting with labor surplus area concerns.

[27 F.R. 3445, Apr. 11, 1962]

§ 1.805-1 General policy.

It is the policy of the Government to promote equitable opportunities for labor surplus area concerns to compete for defense subcontracts and to encourage placement of subcontracts with concerns which will perform such contracts substantially in areas of persistent or substantial labor surplus, in the order of priority described in § 1.802 where this can be done, consistent with efficient performance of contracts, at prices no higher than are obtainable elsewhere. [27 F.R. 3445, Apr. 11, 1962]

§ 1.805-2 Labor surplus area subcontracting program.

The Government's labor surplus area subcontracting program requires Government prime contractors to assume an affirmative obligation with respect to subcontracting with labor surplus area concerns. In contracts which range from $5,000 to $500,000, the contractor undertakes the simple obligation of using his best efforts to place his subcontracts with concerns which will perform such subcontracts substantially in areas of persistent or substantial labor surplus where this can be done, consistent with the efficient performance of the contract, at prices no higher than are obtainable elsewhere. This undertaking is set forth in the contract clause prescribed in § 1.805-3(a). In contracts which may exceed $500,000, the contractor is required, pursuant to the clause set forth in § 1.805-3 (b), to undertake a number of specific responsibilities designed to insure achievement of the objectives referred to above and to impose similar responsibilities on major subcontractors.

[27 F.R. 3445, Apr. 11, 1962]

(a) The "Utilization of Concerns in Labor Surplus Areas" clause set forth below shall be inserted in all contracts in amounts which may exceed $5,000, except:

(1) Contracts with foreign contractors which, including all subcontracts thereunder, are to be performed entirely outside the United States, its possessions, and Puerto Rico;

(2) Contracts for services which are personal in nature; and

(3) Contracts for construction. UTILIZATION OF CONCERNS IN LABOR Surplus AREAS (FEB. 1962)

It is the policy of the Government to place contracts with concerns which will perform such contracts substantially in areas of persistent or substantial labor surplus where this can be done, consistent with the efficient performance of the contract, at prices no higher than are obtainable elsewhere. The Contractor agrees to use his best efforts to place his subcontracts in accordance with this policy. In complying with the foregoing and with paragraph (b) of the clause of this contract entitled "Utilization of Small Business Concerns," the Contractor in placing his subcontracts shall observe the following order of preference: (1) Persistent labor surplus area concerns which are also small business concerns; (11) other persistent labor surplus area concerns; (111) substantial labor surplus area concerns which are also small business concerns; (iv) other substantial labor surplus area concerns; and (v) small business concerns which are not labor surplus area concerns.

(b) The "Labor Surplus Area Subcontracting Program" clause below shall be included in all contracts which may exceed $500,000, but which contain the clause required by paragraph (a) of this section and which, in the opinion of the purchasing activity, offer substantial subcontracting possibilities. Prime contractors who are to be awarded contracts that do not exceed $500,000, which in the opinion of the purchasing activity offer substantial subcontracting possibilities, shall be urged to accept the following clause:

LABOR SURPLUS AREA SUBCONTRACTING PROGRAM (FEB. 1962)

(a) The Contractor agrees to establish and conduct a program which will encourage labor surplus area concerns to compete for subcontracts within their capabilities. this connection, the Contractor shall:

In

(1) Designate a liaison officer who will (1) maintain liaison with duly authorized representatives of the Government on labor

surplus area matters, (ii) supervise compliance with the "Utilization of Concerns in Labor Surplus Areas" clause, (iii) administer the Contractor's Labor Surplus Area Subcontracting Program;

(2) Provide adequate and timely consideration of the potentialities of labor surplus area concerns in all "make-or-buy" decisions;

(3) Assure that labor surplus area 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 labor surplus area concerns;

(4) Maintain records showing procedures which have been adopted to comply with the policies set forth in this clause; and

(5) Include the "Utilization of Concerns in Labor Surplus Areas" clause in subcontracts which offer substantial labor surplus area subcontracting opportunities.

(b) A "labor surplus area concern" is a concern which will perform, or cause to be performed, a substantial proportion of any contract awarded to it in "Areas of Substantial and Persistent Labor Surplus" or in "Areas of Substantial Labor Surplus," as designated by the Department of Labor. A concern shall be deemed to perform a substantial proportion of a contract in a labor surplus area if the costs that the concern will incur on account of manufacturing or production (by itself or its first-tier subcontractors) in such areas amount to more than 50 percent of the price of such contract.

(c) The Contractor further agrees, with respect to any subcontract hereunder which is in excess of $500,000 and which contains the clause entitled "Utilization of Concerns in Labor Surplus Areas," that he will insert provisions in the subcontract which will conform substantially to the language of this clause, including this paragraph (c), and that he will furnish the names of such subcontractors to the Contracting Officer. [27 F.R. 3445, Apr. 11, 1962]

§ 1.805-4 Responsibility for reviewing subcontracting program.

Only one Department shall be responsible for reviewing a contractor's labor Surplus Area Subcontracting Program. Departmental responsibility shall be assigned and carried out in accordance with § 1.707-4.

[27 F.R. 3445, Apr. 11, 1962]

§ 1.806 Depressed industries.
[25 F.R. 14100, Dec. 31, 1960]
§ 1.806-1 General.

When an entire industry is depressed, the Director of Civil and Defense Mobilization may, under Defense Manpower Policy No. 4, establish appropriate

measures on an industry-wide, rather than on an area, basis. Designations of such industries are made by Office of Civil and Defense Mobilization Notifications, and such industries will be given special treatment as specified therein, §§ 1.806-2 through 1.806-5 reflect pertinent requirements of such Notifications with respect to the industries indicated. No price differentials will be paid to carry out policies of these Notifications. [25 F.R. 14100, Dec. 31, 1960]

§ 1.806-2 Apparel industry (Notification No. 53).

(a) As used in this section the "apparel industry” means all of the industry identified in the "Standard Industrial Classification Manual," under Major Group 23, except Group No. 239.

(b) There shall be no labor surplus area set-asides in this industry. Where feasible, under the same invitation, bids should be requested for jackets or coats and trousers as separate items so that bidders may bid in combinations of units, and if requirements warrant, at least an equal amount of trousers should be included.

[25 F.R. 14100, Dec. 31, 1960]

§ 1.806-3

Petroleum and petroleum products industry (Notification No. 58).

There shall be no labor surplus area set-asides in this industry. [25 F.R. 14100, Dec. 31, 1960]

§ 1.806-4 Shipbuilding and repairing industry (Notification No. 57).

(a) As used in this section, the "shipbuilding and repairing industry" (Industry Category 3731) includes establishments primarily engaged in building and repair of all types of ships, barges, canal boats, and lighters of five gross tons and over, whether propelled by sail or motor power or towed by other craft. Establishments primarily engaged in fabricating or repairing structural assemblies or components for ships, or subcontractors engaged in ship painting, joinery, carpentry work, electrical wiring installation, etc., are not included.

contracts without substantial use of overtime labor and without constructing new facilities. So as to spread work among a large number of private yards, bids or proposals shall be invited, and contracts awarded, on a small-lot basis rather than on a large-lot basis, to the extent practicable.

[25 F.R. 14100, Dec. 31, 1960, as amended at 29 F.R. 14818, Oct. 31, 1964]

§ 1.806-5 Textile industry (Notification No. 38).

(a) As used in this section, the "textile industry" means all of the industry identified in the "Standard Industrial Classification Manual" under Major Group 22 (Textile Mill Products) and Industry Nos. 2391 and 2392 (Curtains and draperies, and house-furnishings), except that it does not include Industry No. 2274 (Linoleum, asphalt-felt base, and other hard-surface floor covering, not elsewhere classified), and Industry No. 2298 (Cordage and twine).

(b) No preference shall be given to any area or city in placing contracts in this industry. For the purpose of maintaining the effective functioning of the textile industry as a whole, purchasing activities shall try to place contracts with manufacturers whose weaving operations (in the case of weaving or integrated mills) or whose spinning operations (in the case of spinning mills) during the period of performance of such contracts will not exceed 80 hours per week (not including other supporting activities).

(c) In all procurements from the textile industry which are estimated to exceed $10,000, partial set-asides, exclusively for textile industry concerns whose "weaving" or "spinning" operations (as described in (b) above) will not exceed 80 hours per week, shall be made substantially in accordance with the procedures set forth in § 1.804, except that all "textile industry concerns whose weaving or spinning operations will not exceed 80 hours per week" will be treated as "labor surplus area concerns." The notice set forth in § 1.804-2 (b) shall be designated "Notice of 80Hour Week Set-Aside" and appropriately modified for use in accordance with this subparagraph.

[25 F.R. 14100, Dec. 31, 1960]