[Federal Register Volume 63, Number 249 (Tuesday, December 29, 1998)]
[Notices]
[Page 71724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34364]



Federal Register / Vol. 63, No. 249 / Tuesday, December 29, 1998 / 
Notices

[[Page 71724]]



OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy


Small Disadvantaged Business Procurement: Reform of Affirmative 
Action in Federal Procurement

AGENCY: Office of Federal Procurement Policy (OFPP), OMB.

ACTION: Notice of Determination Concerning the Small Disadvantaged 
Business (SDB) Participation Program.

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SUMMARY: The Federal Acquisition Regulation (FAR), 48 CFR Subpart 
19.12, contains regulations providing for an SDB Participation Program 
to be used when evaluating the extent of participation of SDB concerns 
in performance of contracts in authorized standard industrial 
classification code (SIC) major groups. The FAR provides further that 
the Department of Commerce (DOC) will determine the authorized SIC 
major groups for use in the SDB Participation Program. The DOC, in the 
attached memorandum, determines that the SIC major groups eligible for 
the price evaluation adjustment program shall be applicable for the SDB 
Participation Program. OFPP published on June 30, 1998, the listing of 
the eligible SIC major groups [63 FR 35714 (1998)] for the price 
evaluation adjustment program.

EFFECTIVE DATE: January 1, 1999.

FOR FURTHER INFORMATION CONTACT: Ms. Linda G. Williams, Deputy 
Associate Administrator, Office of Federal Procurement Policy, 
Telephone 202-395-3302. For information on the Commerce determination, 
contact Jeffrey Mayer, Director of Policy Development, Economics and 
Statistics Administration, U.S. Department of Commerce, Telephone 202-
482-1728.

SUPPLEMENTARY INFORMATION:

Procurement Mechanisms and Factors

    FAR Subpart 19.12 provides for an SDB Participation Program that 
consists of two mechanisms: (1) An evaluation factor or subfactor when 
evaluating the extent of participation of SDBs in performance of 
contracts in authorized SIC major groups, and (2) an incentive 
subcontracting program for SDB concerns in authorized SIC major groups. 
OFPP gives notice that the attached Memorandum from the DOC determines 
that the SIC major groups eligible for the price evaluation adjustment 
program shall be applicable for the SDB Participation Program.

(See 63 FR 35714 (June 30, 1998)) for the listing of the eligible SIC 
major groups.) The SDB Participation Program is authorized for use in 
solicitations issued on or after January 1, 1999.
Deidre A. Lee,
Administrator.

December 15, 1998.

MEMORANDUM FOR OFFICE OF FEDERAL PROCUREMENT POLICY

From: Jeffrey L. Mayer, Director of Policy Development.
Subject: Department of Commerce Determination on the Small 
Disadvantaged Business Participation Program.

    Pursuant to new Federal Acquisition Regulation (FAR) subpart 
19.12, transmitted herein is a Department of Commerce (DOC) 
determination on the Small Disadvantaged Business Participation 
Program for use in Federal procurements.
    DOC transmitted a Notice of Determination Concerning Price 
Evaluation Adjustments to the Office of Federal Procurement Policy 
(OFPP), which was published in the Federal Register on June 30, 1998 
(see 63 Fed. Reg. 35714 (1998)). The Notice identified the standard 
industrial classification (SIC) major industry groups in which 
offers by small disadvantaged businesses (SDBs) on certain federal 
prime contracts would be eligible for price evaluation adjustments.
    In addition, FAR 19.1202-1 and 19.1203 required DOC to identify 
the SIC major industry groups in which the extent of participation 
of SDB concerns as subcontractors in performance of federal prime 
contracts would: (a) make certain offerors on these prime contracts 
eligible for an evaluation factor or subfactor; and (b) make 
successful offerors eligible for an incentive subcontracting 
program.
    DOC was asked to identify eligible major industry groups at the 
subcontract level for use in the Small Disadvantaged Business 
Participation Program that becomes effective January 1, 1999. To 
make its determination, DOC considered prime contracting data and 
published information on SDB participation in subcontracting.
    DOC's analysis of prime contracting revealed that in 59 out of 
98 major industry groups (and regions, in the case of the 
construction sector), SDBs win a smaller than expected (given their 
age and size) share of federal prime contract dollars. Evidence 
cited in U.S. Department of Justice, ``The Compelling Interest for 
Affirmative Action in Federal Procurement: A Preliminary Survey'' 
[see 61 Fed. Reg. 26050 (1996)] provides no indication that SDB 
subcontractors deal with substantially different financial 
institutions, private sector customers, and suppliers than do SDB 
prime contractors in the same industry, i.e., there is no basis for 
believing that SDB subcontractors face lower barriers to effective 
competition than those encountered by SDB prime contractors in the 
same industry. In addition, subcontracting tends to be dominated by 
informal networks of personal contacts, in which information is 
exchanged about prospective projects, low-cost suppliers, and credit 
opportunities. In those industries in which minority entrepreneurs 
have been excluded from these networks, their ability to participate 
in federal contracting as subcontractors has likely been diminished 
compared with their ability to participate as prime contractors. 
Therefore, SDBs are unlikely to win larger-than-expected shares of 
federal subcontract awards in the same major industry groups in 
which SDBs win smaller-than-expected shares of federal prime 
contract awards.
    Based on the reasons explained above which indicate that, in any 
given major industry group, discrimination affects federal prime 
contractors and subcontractors similarly, and on the basis of 
currently available data, DOC determines that the SIC major industry 
groups eligible for the price evaluation adjustment program (i.e., 
the prime contractor program) shall be applicable to the small 
disadvantaged business participation program (i.e., the 
subcontractors program). (See 63 Fed. Reg. 35714 (1998) for a 
listing of the eligible SIC major industry groups.)

[FR Doc. 98-34364 Filed 12-28-98; 8:45 am]
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