425

Purchase of materials from RST, which manufactures the materials in a full employment area‒‒‒‒‒‒ GHI Co. qualifies as a substantial labor surplus area concern since it will incur costs in a labor surplus area amounting to more than 50 percent of the contract price. [36 F.R. 21461, Nov. 10, 1971]

§ 18-1.801-2 Labor surplus area.

The term "labor surplus area" means a geographic area which at the time of award is:

(a) An appropriate section of a city, State, or an Indian Reservation classified by the Secretary of Labor as a "section of concentrated unemployment or underemployment" (cities and States with classified sections of unemployment or underemployment, as well as eligible Indian Reservations are listed by the Department of Labor in its publication "Area Trends in Employment and Unemployment."); or

(b) Classified by the Department of Labor as an "Area of Persistent Unemployment" (herein referred to as an area of persistent labor surplus) and listed as such by that Department in its publication "Area Trends in Employment and Unemployment," or

(c) Classified by the Department of Labor as an "Area of Substantial Unemployment" (herein referred to as an area of substantial labor surplus) and listed as such by that Department in its publication "Area Trends in Employment and Unemployment," or

(d) Not classified as in paragraph (b) or (c) of this section, but which is individually certified as an area of persistent or substantial unemployment by the ap

propriate State Employment Security Agency or the Department of Labor at the request of a prospective contractor. [36 F.R. 21462, Nov. 10, 1971]

§ 18-1.801-3 Small business concern. See § 18-1.701.

[36 F.R. 21463, Nov. 10, 1971]

§ 18-1.802 General policy.

Except as provided in § 18-1.806 with respect to depressed industries, it is the policy of NASA to aid labor surplus areas and encourage increased hiring of disadvantaged individuals by placing contracts with labor surplus area concerns, to the extent consistent with procurement objectives and when such contracts can be awarded at prices no higher than those obtainable from other concerns and by encouraging prime contractors to place subcontracts with labor surplus area concerns. In carrying out this policy, to accommodate the small business policies of Subpart 18-1.7, preference shall be given in the following order of priority to (a) certified-eligible concerns with a first preference which are also small business concerns, (b) other certified-eligible concerns with a first preference, (c) certified-eligible concerns with a second preference which are also small business concerns, (d) other certified-eligible concerns with a second preference, (e) persistent or substantial labor surplus area concerns which are also small business concerns, (f) other persistent or substantial labor surplus area concerns; and (g) small business concerns which are not labor surplus area concerns. But in no case will price differentials be paid for the purpose of carrying out this policy. Heads of installations and procurement officers are responsible for the effective implementation of the Labor Surplus Area Program within their respective installations. The contracting officer is responsible for compliance with the policy and procedures relating to labor surplus areas and for determining the final action to be taken with respect to individual procurement actions. The labor surplus area functions should generally be performed by the small business specialist or the individual designated to perform the small business functions where a fulltime small business specialist is not warranted (see § 18.1.704-2). [36 F.R. 21463, Nov. 10, 1971]

(1) Negotiated

procurements shall,

where procurement objectives permit, be awarded to labor surplus area concerns: Provided, That in no case shall price differentials be paid for the purpose of carrying out this policy;

(2) Where appropriate, procurements shall be made from labor surplus area concerns by partial set-aside procedures, in accordance with § 18-1.804, and such set-asides shall be given preference over any small business set-aside (but no total set-aside shall be made for labor surplus area concerns);

(3) Information identifying labor surplus areas shall be disseminated promptly to procurement personnel;

(4) Department of Labor certification (see § 18-1.801-2(d)) shall be considered conclusive with respect to the particular procurement concerned;

(5) Even though less than a complete bidders' list is to be used pursuant to § 18-2.205-4, all prospective contractors in labor surplus areas shall be solicited, except that only a pro rata number of prospective labor surplus area concerns may 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;

(6) Subcontracting with concerns in labor surplus areas shall be encouraged in accordance with § 18-1.805.

(b) Procurements placed in labor surplus areas as a result of preference procedures shall be reported on NASA Form 507, Individual Procurement Action Report, in accordance with procedures prescribed in § 18-16.901.

(c) Any preference under the "Buy American Act" due to performance in labor surplus areas (see § 18-6.104-4) shall be in addition to the assistance accorded pursuant to this subpart.

(d) The Procurement Office, NASA Headquarters shall cooperate with the Departments of Labor and Commerce, the Small Business Administration, and the Office of Emergency Preparedness to achieve the objectives of this subpart.

(a) (1) In accordance with the policies and procedures set forth in § 181.802 and § 18-1.803, a portion of each procurement shall be set aside for labor surplus area concerns if:

(i) The procurement is severable into two or more economic production runs or reasonable lots; and

(ii) One or more labor surplus area concerns are expected to qualify as labor surplus area concerns and 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 bids or proposals will be received from only two concerns with technical competency and productive capacity (one concern which will not qualify as a labor surplus area concern and one concern which will qualify as a labor surplus area concern).

(2) In determining whether a proposed procurement is susceptible to division into two or more economic production runs or reasonable lots, consideration should be given to the following factors and any others deemed appropriate:

(i) Price and procurement history of the items;

(ii) Open industry capacity; (iii) Startup cost including special tooling requirements;

(iv) Delivery schedule; and

(v) Nature of item and quantity being procured.

Before a portion or portions constituting more than 50 percent of the total requirement may be set aside, a determination must be made that there is a reasonable expectation the action proposed will not result in the payment of a price differential. The determination and supporting information will be made part of the contract file.

(3) In furtherance of the policy to assure that a fair proportion of procurement is placed with small business concerns, each labor surplus area set aside shall provide that, in addition to labor surplus area concerns, small business concerns not performing in such areas are also eligible for participation in the set-aside for such quantities thereof as

are not awarded to labor surplus area concerns. In this respect, see applicable provisions of § 18-1.804-2(b) for notice to bidders or offerors, and § 18-1.804-2 (c) for conduct of set-aside negotiations.

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

(1) A large part of previous procurements of the item in question has been placed with labor surplus area concerns;

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

(3) The procurement is classified; or (4) Labor surplus area concerns are receiving a fair proportion of contracts. § 18-1.804-2 Set-aside procedures.

(a) Where a portion of a procurement is to be set aside pursuant to § 18-1.804-1, the procurement shall be divided into a nonset-aside portion and a 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 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 nonset-aside portion of that item shall be comparable.

(b) (1) In advertised procurements involving set-asides pursuant to this subpart, each invitation for bids shall contain substantially the following notice. In negotiated procurements, the notice shall be appropriately modified for use with requests for proposals. The notice shall be made a part of each contract under the set-aside portion of the procurement.

NOTICE OF LABOR SURPLUS AREA SET-ASIDE (SEPTEMBER 1970)

(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 set-aside portion will be conducted only with labor surplus area concerns (and small business concerns to the extent indicated below) who have submitted responsive bids or proposals on the nonset-aside portion at a unit price no greater than 130 percent of the highest unit price at which an award is made on the nonset-aside portion. Negotiations for the set-aside portion will be conducted with

Group 4. Other certified-eligible concerns with a second preference.

Group 5. Persistent or substantial labor surplus area concerns which are also small business concerns.

Group 6. Other persistent or substantial labor surplus area concerns.

Group 7. 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 are considered in evaluating bids on the non-setaside portion except where a responsive bid has been submitted on the non-set-aside portion at a unit price which when so adjusted is lower than the adjusted highest unit price awarded on the non-set-aside portion but could not be accepted because of quantity limitations or other consideration (such as the bidder's responsibility). In the latter case if the quantity limitation or other considerations do not preclude consideration of the unit price of such unaccepted bid at the time of negotiation for the set-aside portion, a quantity of the set-aside portion equal to the quantity of such unaccepted bid shall be offered to eligible concerns in their order of priority at the adjusted unit price of such unaccepted bid. If no eligible bidder will take the entire quantity so offered at the adjusted unit price of the unaccepted bid, then all eligible concerns in their order of priority shall be offered any lesser portion at the same price. (In the event more than one such unaccepted bid is involved, the same procedure shall be applied successively to each such bid on negotiation for the setaside portion.) Subject to the conditions set forth below any remaining quantity of the set-aside portion shall be offered to eligible concerns in their order of priority at the adjusted highest unit price awarded on the non-set-aside portion. If such an unaccepted bid is submitted by a concern eligible to participate in the set-aside, such concern must accept a quantity of the set-aside portion equal to the quantity of the unaccepted bid at the adjusted unit price of the unaccepted bid before any portion of the set-aside may be awarded to that concern at a higher price. If such an unaccepted bid is submitted by a concern not eligible to participate in the set-aside, a quantity of the set-aside

portion equal to the quantity of the unaccepted bid must be awarded at the adjusted unit price of such unaccepted bid before any portion of the set-aside is awarded to any eligible concern at a higher price. 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 a section of concentrated unemployment or underemployment, a persistent labor surplus area, or a substantial labor surplus area. as defined below:

(i) "Section of concentrated unemployment or underemployment" means appropriate sections of a city, State, or an Indian Reservation so classified by the Secretary of Labor. (Cities and States with classified sections of unemployment and underemployment, as well as eligible Indian Reservations are listed by the Department of Labor in its publication "Area Trends in Employment and Unemployment.")

(ii) "Persistent labor surplus area" means an area which (A) is classified by the Department of Labor as an "Area of Persistent Labor Surplus" (also called "Area of Persistent Unemployment") and is listed as such by that Department in conjunction with its publication "Area Trends in Employment and Unemployment," or (B) is certified as an area of persistent labor surplus by the appropriate State Employment Security Agency or Department of Labor pursuant to a request by a prospective Contractor.

(iii) "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 Trends in Employment and Unemployment," or (B) is certified as an area of substantial labor surplus by the appropriate State Employment Agency or Department of Labor pursuant to a request by a prospective Contractor.

(2) The term "labor surplus area concern" includes certified-eligible concerns with a first or second preference and persistent or substantial labor surplus area concerns as defined below:

(i) "Certified-eligible concern with a first preference" means a concern (located in or near a section of concentrated unemployment or underemployment or in an area of persistent or substantial labor surplus) which has been certified by the Secretary of Labor in accordance with CFR 8.7(b) and 8.9 (c), with respect to the employment of disadvantaged individuals residing within such sections or areas, and which will agree to perform or cause to be performed by certified concerns with a first preference a substantial proportion of a contract in or near such sections or in such areas; it includes a

concern which, though not so certified, agrees to have a substantial proportion of a contract performed by certified concerns with a first preference in or near such sections or in such areas. A concern shall be deemed to perform a substantial proportion of the contract in or near sections of concentrated unemployment or underemployment or in persistent or substantial labor surplus area if the costs that the concern will incur on account of manufacturing or production in or near such section or in such areas (by itself if a certified concern, or by certified concerns with a first preference acting as first tier subcontractors) amount to more than 25 percent of the contract price.

concern

(ii) "Certified-eligible with a second preference" means a concern (located in any area) which has been certified by the Secretary of Labor in accordance with 29 CFR 8.7 (c) and 8.9 (d), with respect to the employment of disadvantaged individuals, and which will agree to perform or cause to be performed by certified concerns with a first or second preference a substantial proportion of the contract; it includes a concern which, though not so certified, agrees to have a substantial proportion of a contract performed by such certified concerns. A concern shall be deemed to perform a substantial proportion of the contract if the costs that the concern will incur on account of manufacturing or production (by itself if a certified concern, or by certified concerns with a first or second preference acting as first tier subcontractors) amount to more than 25 percent of the contract price.

(iii) "Persistent or substantial labor surplus area concern" means a concern that agrees to perform or cause to be performed a substantial proportion of a contract in persistent or substantial labor surplus areas. A concern shall be deemed to perform substantial proportion of a contract in persistent or substantial labor surplus areas if the aggregate costs that will be incurred by the concern or its first tier subcontractors on account of manufacturing or production performed in persistent or substantial labor surplus areas and in any area, by itself if a certified concern or by its first tier certified 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 by small business concerns: Provided, That this additional requirement does not apply in con

(4) "Unit price" shall include evaluation factors added for the rent-free use of Government property.

(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) Eligibility Based on Certification. Where eligibility for preference is based upon the status of the bidder as a "certifiedeligible concern," the bidder shall furnish with his bid evidence of its certification or its first tier subcontractors' certification by the Secretary of Labor.

(e) Agreement. The bidder agrees that (i) if awarded a contract as a certified-eligible concern with a first preference under the set-aside portion of this procurement, he will perform or cause to be performed a substantial proportion of the contract in or near sections of concentrated unemployment or underemployment or in persistent or substantial labor surplus areas and, in the performance of such contract, will employ or require certified first tier subcontractors with a first preference to employ a proportionate number of disadvantaged individuals, as defined by the Department of Labor in 29 CFR 8.2(d), residing within such sections or areas in accordance with plans approved by the Secretary of Labor; (ii) if awarded a contract as a certified-eligible concern with a second preference under the set-aside portion of the procurement, he will perform or cause to be performed a substantial proportion of the contract, in certified facilities and in the performance of such contract will employ or require certified first tier subcontractors with a first or second preference to employ disadvantaged individuals in accordance with plans approved by the Secretary of Labor; and (iii) if awarded a contract as a persistent or 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 contract in (A) areas classified at the time of award or at the time of performance of the contract as persistent or substantial labor surplus areas, or (B) in any area, by himself if a certified concern or by its first tier certified subcontractors.

(2) In requirements contracts involving a labor surplus area set-aside add the following to the above clause:

(f) Requirements Contract. Only one award will be made for each item or subitem of the nonset-aside portion and only one award will be made for each item or subitem of the set-aside portion. For the purpose of equitably distributing orders in accordance with this "Notice of Labor Surplus Area Set-Aside," the Government will apportion the quantities to be ordered as equally as possible between the nonset-aside Contractor and the set-aside Contractor to whom the awards are made.

(c) (1) After the award price for the nonset-aside portion has been determined, negotiations may be conducted for the set-aside portion. Procurement of the set-aside portion shall in all instances be effected by negotiation. Negotiations shall be conducted only with those bidders or offerors who have submitted responsive bids or proposals on the nonset-aside portion at a unit price no greater than 130 percent of the highest award made or to be made on the nonset-aside portion, taking into account the evaluation factors for rent-free use of Government property pursuant to Subpart 18-13.5 (provided, however, where the successful bidder which establishes the highest award price on the nonset-aside portion is a foreign bidder, the 130 percent rule shall be applied to the evaluated price on the nonset-aside portion (see § 18-6.104.4)). Negotiations shall be conducted in the order of priority indicated in the foregoing notice: Provided, That, where equal low bids are received on the nonset-aside portion from concerns which are equally eligible for the set-aside portion, the concern which is awarded the nonset-aside portion (under the equal low bid procedures of § 18-2.407-6) shall have first priority with respect to negotiations for the setaside portion. The set-aside portion shall be awarded at the highest unit price awarded or to be awarded for the nonsetaside portion except that where the successful bidder which establishes the highest award price on the nonset-aside portion is a foreign bidder, the award price for the set-aside portion shall be the highest evaluated price (used for the purpose of determining eligibility of the foreign bidder for award) on the nonsetaside portion. A bidder or offer entitled to receive the award for quantities of an item under the nonset-aside portion and who accepts the award of additional