notify the SBA that it intends to proceed with the procurement without further regard to the section 8(a) procedures, unless additional time is requested by SBA and granted by the procuring activity after due consideration for the urgency of the proposed procurement.

(g) Provisions of contracts with SBA. The procuring agency shall prepare two sets of contract documents as provided by this paragraph (g) after: (1) The SBA has completed negotiations with the eligible concern pursuant to the commitment made by the procuring agency; (2) the SBA and the prode curing agency have reached mutual agreement concerning all terms and a conditions (including price) to be inof cluded in the contract to be awarded by the procuring agency to SBA; and (3) the SBA and the procuring agency the have agreed upon all the terms and conditions (including price) to be included in the subcontract to be awarded by SBA to the eligible concern.

(1) The contract to be executed bechetween the SBA and the procuring

agency shall be prepared by the proEt curing agency on Standard Form 19, Invitation, Bid, and Award (Construction, Alteration or Repair), Standard Form 23, Construction Contract, as may be appropriate. Authority for negotiation of the contract shall be cited as 41 U.S.C. 252(c)(15) and 15 U.S.C. 637(a). The contract shall be prepared in the same detail as would be required for a normal procurement contract to be awarded by the procuring agency to a private business, recognizing at the same time, however, that the contract documents are to be executed by the SBA and the procuring I agency. No requirement for the SBA to furnish payment and performance bonds shall be included in the contract. In addition to including the terms and conditions (including price) which have been mutually agreed upon between SBA and the procuring agency, there shall also be incorporated in the contract Standard Form 19A, Labor Standards Provisions Applicable to Contracts in Excess of $2,000, if the contract is in excess of $2,000, and Standard Form 23-A, General Provisions (Construction Contract), or the General Provisions on Standard

Form 19, whichever is appropriate, together with such other procuring agency forms and special conditions as may be required. The contract shall also contain a provision that the SBA shall not be entitled to any commission on work performed by its subcontractor or any lower tier subcontractor. Unless otherwise agreed upon between the SBA and the procuring agency, the following additional clause (or a similar clause) shall be incorporated in contracts prepared on Standard Form 19 or Standard Form 23.

SPECIAL 8(a) CONTRACT CONDITIONS The Small Business Administration (SBA) agrees as follows:

(a) SBA will perform the work set forth in this contract according to the specifications and drawings and the terms and conditions hereof by subcontracting with an eligible concern pursuant to the provisions of section 8(a) of the Small Business Act, as amended (15 U.S.C. 637(a)).

(b) If SBA does not award a subcontract for the work hereunder, this contract may be terminated without cost to either party. (c) The SBA hereby delegates to the (insert name of procuring agency) responsibility for administering the subcontract to be awarded hereunder with complete authority to take any action on behalf of the Government under the terms and conditions of the subcontract.

(d) Progress payments to be made under the subcontract awarded under this contract shall be made directly to the subcontractor by the (insert name of procuring agency). However, final payment under the subcontract will be made only upon the written authorization of the SBA and after receipt of an executed release of claims from the subcontractor.

(e) The subcontractor awarded a subcontract hereunder shall have the right of appeal from decisions of the contracting officer under the "Disputes" clause of the subcontract, which shall be identical to Clause 3 on Standard Form 19 or to Clause 6 on Standard Form 23-A, whichever is applicable. Further, the subcontract to be executed between the SBA and its subcontractor pursuant to this contract shall contain the following clause:

For the purpose of this subcontract, the reference to the "head of the Federal agency" and "his duly authorized representative" in the "Disputes" clause of this subcontract (Article 3 of Standard Form 19 or Article 6 of Standard Form 23-A, whichever is applicable) shall be deemed to mean, respectively, the (insert Secretary or Administrator)

of the (insert name of procuring agency) and the Board of Contract Appeals of the (insert name of procuring agency).

(2) The original and one duplicate copy of the contract documents shall be executed by an authorized official of the SBA and the contracting officer of the procuring agency. The original executed contract (and such additional authenticated, conformed, or reproduced copies as may be required by the procuring agency) shall be retained by the procuring agency and distribution shall be made in accordance with its internal regulations and procedures. The duplicate original copy of the contract (and such additional authenticated, conformed, or reproduced copies as may be required by SBA) shall be forwarded by the procuring agency to SBA for distribution in accordance with its internal regulations and procedures.

(h) Provisions of subcontracts awarded by SBA. (1) The subcontract which will be executed by SBA and its subcontractor shall be prepared by the procuring agency on Standard Form 19, Invitation, Bid, and Award (Construction, Alteration or Repair), or Standard Form 23, Construction Contract, as appropriate. It shall be prepared in the same detail as would be required for a normal procurement contract awarded by the procuring agency, recognizing at the same time, however, that the subcontract is to be executed by the SBA and its subcontractor. A provision shall be included in the subcontract which requires the subcontractor to furnish a performance bond on Standard Form 25, Performance Bond, and a payment bond on Standard Form

25A, Payment

Bond, as required by the Miller Act (40 U.S.C. 270a-270e). Applicable policies and procedures regarding the use of these bonds appear in §§ 1-10.104-1 and 1-10.105-1. In addition to incorporating the terms and conditions (including price) which have been agreed upon and incorporated in the contract between SBA and the procuring agency, and which, in turn, have been agreed upon during the negotiations between SBA and its subcontractor, the following shall also be incorporated in the subcontract: (i) Standard Form 19-A, if the subcontract is in

excess of $2,000, (ii) Standard Form 23-A. General Provisions (Construction Contract), or the General Provisions on Standard Form 19, as appropriate, and (iii) such other procuring agency forms and special conditions as may be required. Unless otherwise agreed to by the SBA and the procuring agency, the following clause (or a similar clause) shall be included in the subcontract:

SPECIAL 8(a) SUBCONTRACT CONDITIONS

(a) The Small Business Administration (SBA) has entered into Contract No. (insert contract number) with the (insert name of procuring agency) to perform the work as described therein. A copy of said contract is attached hereto and made a part hereof.

(b) The Small Business Administration and (insert name of subcontractor), hereinafter called the subcontractor, agree as follows:

(1) The subcontractor shall, for and on behalf of the SBA, fulfill and perform all of the requirements of Contract No. (insert contract number) for the consideration stated therein. The subcontractor acknowledges that it has read and is familiar with each and every part of said contract.

(2) The SBA has delegated responsibility for the administration of this subcontract to the (insert name of procuring agency) with complete authority to take any action on behalf of the Government under the terms and conditions of this subcontract.

(3) The term "Contracting Officer" as used in the General Provisions (Standard Form 19 or Standard Form 23-A, whichever applies) means the person designated by the (insert name of procuring agency) as contracting Officer. The Contracting Officer designated for this subcontract shall be (name), (address), (insert name of procuring activity and the name of the procuring agency) or his duly appointed successor or authorized representative.

(4) The term "Contractor" as used in the General Provisions (Standard Form 19 or Standard Form 23-A, whichever applies) means the "subcontractor" who has entered into this subcontract with SBA for the performance of all of the work under this subcontract.

(5) The reference to the "head of the Federal agency" and to "his duly authorized representative" in the "Disputes" clause of this subcontract (General Provisions, Article 3 of Standard Form 19 or Article 6 of Standard Form 23-A, whichever applies) shall be deemed to mean, respectively, the (insert Secretary or Administrator) of the (insert name of procuring agency) and the

Board of Contract Appeals of the (insert S name of procuring agency).

(6) The subcontractor will not subcontract the performance of any of the requirements of this subcontract to a lower tier subcontractor without the prior written approval of the SBA and the designated Contracting Officer of the (insert name of procuring agency), or his duly appointed successor or authorized representative.

(7) Nothing contained in this contract shall be construed as creating any contractual relationship between the Government and any second or lower tier subcontractor which may be authorized by the SBA and the Contracting Officer. The divisions or sections of the specifications are not intended to control the subcontractor in dividing the work among any duly authorized second tier subcontractors, or to limit the work of any trade.

(8) The subcontractor shall be responsible to the Government for the acts or omissions of his own employees and of any duly authorized lower tier subcontractors and their employees. He shall also be responsible for the coordination of the work of the trades, any duly authorized lower tier subcontractors, and suppliers.

(9) Any progress payments to be made under this subcontract will be made directly to the subcontractor by the (insert name of procuring agency). However, the final payment under the subcontract will be made only upon the written authorization of the en SBA and after receipt of an executed release of claims from the subcontractor.

the

(2) The original and two duplicate original copies of the subcontract shall Sbe executed by the subcontractor and The an authorized official of the SBA. The ted original executed subcontract (and such additional authenticated, conformed, or reproduced copies as may be required by SBA) shall be retained by SBA for internal distribution in accordance with its regulations and procedures. One duplicate original copy of the executed subcontract (and such additional authenticated, conformed, or reproduced copies as may be reequired by the procuring agency) shall the be furnished to the procuring agency for internal distribution in accordance with its regulations and procedures. The second duplicate original copy of the executed subcontract (together with an attached copy of the contract between the SBA and the procuring agency) shall be furnished to the subcontractor.

E

he

[37 FR 1039, Jan. 22, 1972]

(a) The term "labor surplus area" means a geographical area identified by the Department of Labor as an area of concentrated unemployment or underemployment or an area of labor surplus.

(b) The term "concern located in labor surplus area" means a labor surplus area concern.

(c) The term "labor surplus area concern" means a concern that together with its first-tier subcontractors will perform substantially in labor surplus areas.

(d) The term "perform substantially in labor surplus areas" means that the costs incurred on account of manufacturing, production, or appropriate services in labor surplus areas exceed 50 percent of the contract price.

(e) The term "Labor Surplus Area Restricted Advertising" means a special method of negotiated procurement conducted in the same manner as that for formal advertising, except that competition and awards are restricted to labor surplus area concerns. [43 FR 26009, June 16, 1978]

§ 1-1.802 Labor surplus area policies.

§ 1-1.802-1 General policy.

It is the policy of the Government to award appropriate contracts and grants to, and to execute agreements with, eligible labor surplus area concerns and to encourage prime contractors to place subcontracts with con

cerns which will perform substantially in labor surplus areas.

[43 FR 26009, June 16, 1978]

§ 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 $2,500:

(a) [Reserved]

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

(c) Procuring activities shall disseminate available publications and other information identifying labor surplus areas promptly to appropriate procurement personnel.

(d) The Department of Labor classifications of labor surplus areas shall be considered conclusive with respect to individual procurement actions.

(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) Procuring activities shall cooperate with the Departments of Labor and Commerce, the Small Business Administration, and the Federal Preparedness Agency, GSA, to achieve the objectives of this Subpart 1-1.8.

(j) Procurement placed in labor surplus areas as a result of preference

(a) Subject to the conditions set forth in §§ 1-1.706-1 and 1-1.706-2, the entire amount of an individual procurement or class of procurements shall be set aside for labor surplus area concerns where there is a reasonable expectation that bids or proposals will be obtained from a sufficient number of responsible labor surplus area concerns so that awards will be made at reasonable prices. Total setasides shall not be made unless such a reasonable expectation exists. Although past procurement history of the item or similar items is always important, it is not the only controlling factor which should be considered in determining whether a reasonable expectation exists.

(b) Contracts involving total labor surplus area set-asides shall be entered into by conventional negotiation or by a special method of procurement known as "Labor Surplus Area Restricted Advertising." Whenever possible, the restricted advertising method, as defined in § 1-1.801(e), shall be used.

(c) In procurements involving total set-asides for labor surplus area concerns, each invitation for bids or request for proposals shall contain the following notice.

NOTICE OF TOTAL LABOR Surplus AREA SET

ASIDE

(a) General. Bids or proposals under this procurement are solicited from concerns that will agree to perform as labor surplus area concerns. This action is based on the provisions of the Small Business Act (15 U.S.C. 644(e)) and Defense Manpower Policy 4A. Bids or proposals received from concerns which do not agree to perform as labor surplus area concerns will be considered nonresponsive.

(b) Definitions. (1) The term "labor surplus area" means a geographical area identified by the Department of Labor as an area of concentrated unemployment or underemployment or an area of labor surplus.

(2) The term "concern located in a labor surplus area" means a labor surplus area

concern.

(3) The term “labor surplus area concern" means a concern that together with its firsttier subcontractors will perform substantially in labor surplus areas.

(4) The term "perform substantially in labor surplus areas" means that the costs incurred on account of manufacturing, production, or appropriate services in labor surplus areas exceed 50 percent of the contract price.

(c) Agreement. The bidder or offeror agrees that, if awarded a contract as a labor surplus area concern, he will:

(1) Perform the contract, or cause it to be performed, substantially in areas classified as labor surplus areas on the date of the solicitation. However, if an area selected by the bidder or offeror is no longer classified as a labor surplus area at the time of performance, he is encouraged to select another area for performance which is classified at that time as a labor surplus area.

(2) Submit a report to the Contracting Officer 30 days after the award of the contract (if it exceeds $10,000), or such longer time as prescribed by the contracting officer, which contains the following information.

(1)

(1)

1 Costs incurred by the Contractor or his first-tier subcontractors on account of production, manufacturing, or appropriate services performed in the labor surplus area.

[End of Notice]

(d) The rejection of a labor surplus area set-aside may not be based on any of the following:

(1) A large part of the previous procurement 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 30 days from the date of issuance of an invitation for bids or a request for proposals is prescribed for the submission of bids or proposals.

(5) The procurement is classified. [43 FR 26009, June 16, 1978]

§ 1-1.804-2 [Reserved]

§ 1-1.804-3 Award procedures.

(a) Awarding the set-aside. Contracts involving total labor surplus area setasides shall be effected by negotiation, through the use of the Labor Surplus Area Restricted Advertising procedures or conventional negotiation, with eligible concerns, as provided in the solicitation. Awards shall be made in accordance with the Notice provisions of the solicitation.

(b) Nonawarded set-aside. If a setaside cannot be awarded by the methods described in this § 1-1.804, any unawarded portion may be procured by advertising or negotiation, as appropriate, in accordance with applicable regulations. A record of the reasons the set-aside portion of a procurement could not be awarded to labor surplus area concerns shall be included in the contract file.

[43 FR 26010, June 16, 1978]