SMALL BUSINESS AND LABOR SURPLUS AREA SUBCONTRACTING PROGRAM

(a) The Contractor agrees to establish and conduct a program to afford small business concerns and labor surplus area concerns an equitable opportunity to compete for subcontracts within their capabilities. In this connection, the Contractor shall

(1) Designate a liaison officer, who will (i) maintain liaison with the procuring activity and SBA on small business matters and with duly authorized representatives of the Government on labor surplus area matters,

(ii) supervise compliance with the "Utilization of Small Business Concerns," and "Utilization of Concerns in Labor Surplus Areas" clauses, and (iii) administer the Contractor's Small Business and Labor Surplus Area Program. (If deemed necessary, separate liaison officers may be appointed for small business matters and for labor surplus area matters);

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

(3) Assure that small business concerns and 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 small business concerns and labor surplus area concerns;

(i)

(4) Maintain records showing whether each prospective subcontractor is a small business concern and (ii) procedures which have been adopted to comply with the policies set forth in this clause;

(5) Include the "Utilization of Small Business Concerns" and "Utilization of Concerns in Labor Surplus Areas" clauses in subcontracts which offer substantial small business or labor surplus area subcontracting opportunities; and

(6) Submit such information on subcontracting to small business concerns and labor surplus area concerns as is called for by the Contracting Officer.

(b) A "small business concern" is a concern that (1) is certified as a small business concern by the Small Business Administration, or (2) is independently owned and operated, is not dominant in its field of operation and, with its affiliates, employs either not more than 500 employees or, if the concern qualifies as a labor surplus area concern, not more than 625 employees.

(c) 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 Labor Surplus" (also called "Areas of Substantial Unemployment"), so 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 per

§ 1-1.801-1 Labor surplus area concern.

The term "labor surplus area concern" includes persistent labor surplus area concerns and substantial labor surplus area concerns as defined below:

(a) "Persistent labor surplus area concern" means a concern which will 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

1 §§ 1-1.800 to 1-1.807 appear at 26 F.R. 6715, July 27, 1961, 26 F.R. 8595, Sept. 14, 1961.

subcontractors) amount to more than 50 percent of the contract price.

(b) "Substantial labor surplus area concern" means a concern which will 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.

§ 1-1.801-2 Labor surplus area.

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:

(a) "Persistent labor surplus area” means an area which (1) 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 (2) is certified as an area of substantial and persistent labor surplus by the Department of Labor pursuant to a request by a prospective contractor.

(b) "Substantial labor surplus area" means an area which (1) 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 (2) is certified as an area of substantial labor surplus by the Department of Labor pursuant to a request by a prospective contractor.

§ 1-1.801-3 Small business concern.

For definition of small business concern, see Subpart 1-1.7.

§ 1-1.802 Labor surplus area policies. § 1-1.802-1 General policy.

It is the policy of the Government to aid labor surplus areas by placing contracts with labor surplus area concerns, to the extent consistent with procurement objectives and where such contracts can be awarded at prices no higher than those obtainable from other con

cerns, and by encouraging prime contractors to place subcontracts with concerns which will perform a substantial proportion of the production in labor surplus areas.

§ 1-1.802-2 Specific policies.

To further the general policy, the following specific policies shall be applied: (a) Best efforts shall be used to award negotiated contracts to labor surplus area concerns. However, in no case may price differentials be paid for the purpose of carrying out this policy.

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

(1) Where either a partial labor surplus area set-aside or a partial small business set-aside can be appropriately made for any given procurement, the setaside shall be made for labor surplus area concerns.

(2) In order to accommodate both labor surplus area and small business policies, labor surplus area set-aside awards shall be made in accordance with the following order of priority: (i) Persistent labor surplus area concerns which are also small business concerns; (ii) other persistent labor surplus area concerns; (iii) 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.

(c) Procurement agencies shall disseminate promptly to appropriate procurement personnel available publications and other information identifying labor surplus areas and production capabilities therein.

(d) The classification and certification of labor surplus areas by the Department of Labor shall be considered conclusive with respect to the particular procurement concerned.

(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) Procurement agencies shall cooperate with the Departments of Labor and Commerce, the Small Business Administration, and the Office of Civil and Defense Mobilization to achieve the objectives of this subpart.

(j) Procurement placed in labor surplus areas as a result of preference procedures shall be reported in accordance with § 1-1.807.

§ 1-1.802-3 Buy American Act.

Any preference under the "Buy American Act" due to performance in labor surplus areas (see section 3 (c) of Executive Order No. 10582 of December 17, 1954, which prescribes uniform procedures for certain determinations under the Buy American Act) shall be in addition to the assistance accorded pursuant to this subpart.

§ 1-1.803

§ 1-1.804

[Reserved]

Partial set-asides for labor surplus area concerns.

§ 1-1.804-1 General.

(a) In accordance with the policies set forth in § 1-1.802, a portion (total setasides shall not be made) of each procurement which is estimated to exceed $10,000 shall be set aside by the contracting officer for labor surplus area concerns if:

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

(2) One or more labor surplus area concerns, having the technical competency and productive capacity to furnish a severable portion of the procurement at a reasonable price, is expected to submit bids or offers.

(b) If deemed practicable by the contracting officer, procurements between $2,500 and $10,000 may be partially set aside for labor surplus area concerns.

(c) In furtherance of the policy to assure that a fair proportion of the total

purchases and contracts are 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 award of any set-aside quantities not awarded to labor surplus area concerns (see § 1-1.804-2).

(d) None of the following is, in itself, sufficient cause for not making a labor surplus area set-aside:

(1) A large part of previous procurements 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 thirty days from the date of issuance of invitations for bids or requests for proposals is prescribed for the submission of bids or proposals; or

(5) The procurement is classified. (e) Where it is determined that a portion of a procurement is to be set aside for labor surplus areas, the procurement shall be divided into a non-set-aside portion and a set-aside portion. 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 set-aside portion of an item and those applicable to the non-set-aside portion of that item shall be comparable.

or

(a) Invitations for bids or requests for proposals, involving set-asides pursuant to this subpart, shall contain a notice substantially as set forth in either paragraph (b) (c) below. Where the definition of a small business concern for a given industry differs from that set forth in the prescribed notices, the notice used shall be appropriately modified to reflect such definition. The notice used shall be made a part of each contract under the set-aside portion of the procurement.

(b) Short-form notice.

NOTICE OF LABOR SURPLUS AREA SET

ASIDE

(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 responsible labor surplus area concerns (and small business concerns to the extent indicated below) which 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 non-set-aside portion. Negotiations for the set-aside 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 nonset-aside 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 a persistent labor surplus area or a substantial labor surplus area, or both, as defined below:

as

(i) "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 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.

(ii) "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 De

partment 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 that (i) is certified as a small business concern by the Small Business Administration, or (ii) is independently owned and operated, is not dominant in its field of operation and, with its affiliates, employs either not more than 500 employees or, if the concern qualifies as a labor surplus area concern, not more than 625 employees. In addition to meeting these criteria, a manufacturer or 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, 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.

[End of Notice]

(c) Long-form notice. Where it is anticipated that bids may be received which appear designed to take unfair advantage of other bidders, by devices such as unrealistically low bids on mere token quantities, the notice set forth below may be used instead of the shortform notice in paragraph (b) above.

NOTICE OF LABOR SURPLUS AREA SET ASIDE (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-setaside 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 (2) 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 labor surplus area, labor surplus area concern, and small business concern are set forth in paragraph (d) of this notice.

(1) A bidder which is not a labor surplus area concern or 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 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 this 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-setaside 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 to furnish 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-setaside portion. However, a labor surplus

area concern 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. Award 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.

(1) Eligibility. To be eligible for consideration for the set-aside portion of an Item, the labor surplus area concern 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 non-set-aside portion. However, see (5) below when separate quantities are offered at different prices and see (6) below when separate quantities are offered at tie-in prices.

(2) Priorities. Negotiations for the set-aside portion will be conducted with eligible 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 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 bid. 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.