Office of Small and Disadvantaged Business Utilization

Small Business Program Policy Manual

Small Disadvantaged Business (SDB) Assistance Program

A. SMALL DISADVANTAGED BUSINESS (SDB) CERTIFICATION PROGRAM

The Federal Acquisition Regulation (FAR), Part 19.304 requires that small disadvantaged business concern must be certified by the Small Business Administration (SBA) to be eligible to receive a benefit as a prime or subcontractor based on its disadvantaged status. The small disadvantaged business must be certified as a small disadvantaged business (SDB) concern or have a completed SDB application pending at the SBA or a Private Certifier. The certification period for all SDBs is three years. All small disadvantaged businesses that want to claim their status must be certified by October 1, 1999. 8(a) firms have been automatically certified by the Small Business Administration.

The contracting officer may accept an offeror’s representation that it is an SDB concern for general statistical purposes. The provision at FAR 52.219-1, Small Business Program Representations, or 52.212-3(c)(2), Offeror Representations and Certifications - Commercial Items, is used to collect SDB data for general statistical purposes.

This philosophy expresses the basis for Federal programs supporting minority business enterprise, begun in 1969. At that time, Federal contracts were viewed as an effective means to stimulate the growth of the minority business community. Section 8(a) of the Small Business Investment Act of 1958 was determined to be an appropriate mechanism for awarding those contracts.

B. PRICE EVALUATION ADJUSTMENT FOR A SDB

A price evaluation adjustment for SDBs shall be applied as determined by the U.S. Department of Commerce (DOC) to use in Federal procurement programs. In addition, it determines adjustments (in the form of percentages) by North American Industry Code System (NAICS) major groups (the first two digits of the NAICS Code) and U.S. regions annually. The listing of the industries eligible for an adjustment is located at http://www.arnet.gov/.

The price evaluation adjustment shall be used in competitive acquisitions. The adjustment shall not be used in acquisitions that (1) are less than or equal to the simplified acquisition threshold; (2) are awarded pursuant to the 8(a) Program; (3) are set aside for small business concerns; or (4) are set aside for HUBZone small business concerns, (5) where price is not a selection factor so that a price evaluation adjustment would not be considered (e.g., architect/engineer acquisitions); or (6) where all fair and reasonable offers are accepted (e.g., the award of multiple award schedule contracts). The price evaluation adjustment shall be used for competitive, unrestricted Commercial Item Acquisitions. SDBs must elect to accept or waive the evaluation adjustment.

The price evaluation adjustment gives offers from SDBs a price evaluation adjustment by adding the factor determined by the DOC to all offers, except - (1) Offers from SDBs that have not waived the evaluation adjustment, or if a price evaluation adjustment for SDBs is authorized on a regional basis, offers from SDBs, whose address is in such a region, that have not waived the evaluation adjustment; (2) An otherwise successful offer of eligible products under the Trade Agreements Act when the acquisition equals or exceeds the dollar threshold in 25.402; and (3) An otherwise successful offers where application of the factor would be inconsistent with a Memorandum of Understanding or other international agreement with a foreign government.

An example of the use of the price evaluation adjustment is detailed below:

Do not evaluate offers using the price evaluation adjustment when it would cause award as a result of this adjustment to be made at a price that exceeds fair market price by more than the factor as determined by the DOC (see FAR 19.202-6(a)).

C. SMALL DISADVANTAGED BUSINESS PARTICIPATION PROGRAM (EVALUATION FACTOR)

Two mechanisms are addressed in Federal Acquisition Regulation (FAR) Part 19.12, Small Disadvantaged Business Participation Program. These two mechanisms are: (a) an evaluation factor or sub-factor for the participation of SDB concerns in performance of the contract; and (b) an incentive subcontracting program for SDB concerns.

1. Evaluation factor or sub-factor.

   The extent of participation of SDB concerns in performance of the contract, in the NAICS Major Groups (the first two digits of the NAICS Code) as determined by the DOC shall be evaluated. The listing of the industries eligible for the evaluation factor or sub-factor can be found on the Internet at http://www.arnet.gov/. Participation in performance of the contract includes joint ventures, teaming arrangements, and subcontracts. Credit under the evaluation factor or sub-factor is not available to SDB concerns that receive a price evaluation adjustment under FAR Subpart 19.11.

   If an SDB concern waives the price evaluation adjustment at FAR Subpart 19.11, participation in performance of that contract includes the work expected to be performed by the SDB concern at the prime contract level.

   The extent of participation of SDB concerns in performance of the contract in the authorized NAICS Major Groups shall be evaluated in competitive, negotiated acquisitions expected to exceed $500,000 ($1,000,000 for construction). The extent of participation of SDB concerns in performance of the contract in the authorized NAICS Major Groups shall not be evaluated in (1) Small business set-asides and HUBZone set-asides; (2) 8(a) acquisitions, (3) Negotiated acquisitions where the lowest price technically acceptable source selection process is used; or (4) Contract actions that will be performed entirely outside of any State, territory, or possession of the United States, the District of Columbia, and the Commonwealth of Puerto Rico.

   In developing an SDB participation evaluation factor or sub-factor, agencies may consider - a) The extent to which SDB concerns are specifically identified; b) The extent of commitment to use SDB concerns (for example, enforceable commitments are to be weighted more heavily than non-enforceable ones); c) The complexity and variety of the work SDB concerns are to perform; d) The realism of the proposal; e) Past performance of offerors in complying with subcontracting plan goals for SDB concerns and monetary targets for SDB participation; and f) The extent of participation of SDB concerns in terms of the value of the total acquisition. The factor or sub-factor must be included in Section M and must be point scored. The amount of points given and language of the factor or sub-factor shall be individually tailored to fit the acquisition and should be developed in conjunction with the bureau Small Business Specialist.

   The solicitation shall describe the SDB participation evaluation factor or sub-factor. The solicitation shall require an SDB offeror that waives the SDB price evaluation adjustment in the clause at FAR 52.219-23, Notice of Price Evaluation Adjustment for SDBs, to provide with its offer a target for the work that it intends to perform as the prime contractor. The solicitation shall state that any targets will be incorporated into and become part of any resulting contract. Contractors with SDB participation targets shall be required to report SDB participation.

   When an evaluation includes an SDB participation evaluation factor or sub-factor that considers the extent to which SDB concerns the extent to which SDB concerns are specifically identified, the SDB concerns considered in the evaluation shall be listed in the contract, and the contractor shall be required to notify the contracting officer of any substitutions of firms that are not SDB concerns.

2. Incentive subcontracting with SDBs

   The contracting officer may encourage increased subcontracting opportunities in the NAICS Major Groups as determined by the DOC for SDB concerns in negotiated acquisitions by providing monetary incentives. Monetary incentives shall be based on actual achievement as compared to proposed monetary targets for SDB subcontracting. The incentive subcontracting program is separate and distinct from the establishment, monitoring, and enforcement of SDB subcontracting goals in a subcontracting plan.

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