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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: May 5, 2004

SUBJECT: Federal Acquisition Circular (FAC) 2001-23 and Small Business Administration (SBA); Program for Service-Disabled Veteran-Owned Small Business Concerns

SOURCE: Federal Register, May 5, 2004, Vol. 69, No. 87, pages 25261 and 27253

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), National Aeronautics and Space Administration (NASA), and Small Business Administration (SBA)

ACTION: Interim Rules

SYNOPSIS: The Federal Acquisition Secretariat and the SBA are simultaneously issuing interim rules to implement Section 308, Procurement Program for Small Business Concerns Owned and Controlled by Service-Disabled Veterans, of the Veterans Benefits Act of 2003 (Public Law 108-183), which permits set-aside and sole source procurements for service-disabled veteran-owned small business (SDVOSB) concerns.

EDITOR'S NOTE: For more on Section 308 of Public Law 108-183, see the December 18, 2003, FEDERAL CONTRACTS DISPATCH "Enactment of the Veterans Benefits Act of 2003."

DATES: The effective date of these interim rules is May 5, 2004. Comments on the interim rules must be submitted on or before July 6, 2004.

ADDRESSES: Comments on FAC 2001-23 must be submitted to General Services Administration, FAR Secretariat (MVA), 1800 F Street, NW, Room 4035, Attn: Laurie Duarte, Washington, DC 20405; or by e-mail to farcase.2004-002@gsa.gov. Cite "FAC 2001-23, FAR case 2004-002" in correspondence related to the interim rule.

Comments on SBA's interim rule must be submitted through http://www.regulations.gov; by e-mail to SDVOSBCProgram@sba.gov; or by mail to Dean Koppel, Assistant Administrator, Office of Policy and Research, 409 3rd Street, SW, Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: For FAC 2001-23, Rhonda Cundiff, 202-501-0044. For general information, contact the FAR Secretariat, Room 4035, GS Building, Washington, DC 20405, 202-501-4755.

For the SBA interim rule: Dean Koppel, Assistant Administrator, Office of Policy and Research, 202-205-7322.

SUPPLEMENTAL INFORMATION: Section 308, Procurement Program for Small Business Concerns Owned and Controlled by Service-Disabled Veterans, amends the Small Business Act to establish a SDVOSB set-aside program. The SDVOSB program is implemented in new FAR Subpart 19.14, Service-Disabled Veteran-Owned Small Business, and it is patterned after the Historically Underutilized Business Zone (HUBZone) program implemented in Federal Acquisition Regulation (FAR) Subpart 19.13.

The following are the major changes being made to the FAR and SBA's regulations:

FAR

• The definition of "service-disabled veteran-owned small business" in FAR 2.101, Definitions, is revised to state that a SDVOSB means a small business "(i) not less than 51 percent of which is owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more service-disabled veterans; and (ii) the management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran" (the italicized "service-disabled" is added to clarify that those controlling the management and daily business operations of the SDVOSB cannot be mere "veterans").
  
  
• Paragraph (b)(2) of FAR 13.003, Policy, is amended to add language pertaining to SDVOSB set-asides under the simplified acquisition threshold: "The contracting officer may set aside for HUBZone small business concerns (see [FAR] 19.1305 [HUBZone Set-Aside Procedures]) or service-disabled veteran-owned small business concerns (see [FAR] 19.1405 [Service-Disabled Veteran-Owned Small Business Set-Aside Procedures]) an acquisition of supplies or services that has an anticipated dollar value exceeding the micro-purchase threshold and not exceeding the simplified acquisition threshold. The contracting officer's decision not to set aside an acquisition for HUBZone small business or service-disabled veteran-owned small business concerns participation below the simplified acquisition threshold is not subject to review under [FAR] Subpart 19.4 [Cooperation with the Small Business Administration]."
  
  
• FAR 19.307, Solicitation Provision, is redesignated as FAR 19.308, and new FAR 19.307, Protesting a Firm's Status as a Service-Disabled Veteran-Owned Small Business Concern, is added. It is essentially the same as FAR 19.306, Protesting a Firm's Status as a HUBZone Small Business Concern. (EDITOR'S NOTE: The introduction to SBA's SDVOSB regulations observes that many businesses are representing themselves as SDVOSBs, but "the FAR does not provide a mechanism to check the status of these representations." Because SDVOSBs "will be attesting to their eligibility at the time of offer, and not through a certification process established by the SBA, it is important to have some mechanism to check eligibility for receipt of a contract issued as a sole source or set-aside for SDVOSBs." SBA has decided to rely on protests as the enforcement mechanism.)
  
  
• FAR Subpart 19.14 is added:
  
  
  • FAR 19.1403, Status as a Service-Disabled Veteran-Owned Small Business Concern, requires that a concern must be both a SDVOSB and a small business under the North American Industry Classification System (NAICS) code assigned to the procurement when it submits its offer.
    
    FAR 19.1403 goes on to state that a joint venture may be considered a SDVOSB if (1) at least one member of the joint venture is a service-disabled veteran-owned small business concern, (2) each concern is small under the NAICS code assigned to the procurement, and (3)(i) if a revenue-based size standard applies to the NAICS code (for example, gross receipts of less than $6 million per year), the estimated contract value, including options, exceeds one-half the size standard (that is, if the size standard is $6 million, the estimated contract value must exceed $3 million), or (ii) if an employee-based size standard applies to the NAICS code (for example, the concern has fewer than 500 employees), the estimate contract value, including options, exceeds $10 million.
    
    For sole source SDVOSB procurements and competitive SDVOSB procurements that do not exceed the dollar levels above, the combined annual receipts or employees of the joint venture members must meet the small business size standard under the NAICS assigned to the procurement.
    
    
  • FAR 19.1404, Exclusions, excludes from the SDVOSB program and the provisions of FAR Subpart 19.14 requirements that can be satisfied through award to Federal Prison Industries, Inc. (see FAR Subpart 8.6); requirements that can be satisfied through award to Javits-Wagner-O'Day Act participating non-profit agencies for the blind or severely disabled (see FAR Subpart 8.7); orders under indefinite-delivery contracts (see FAR Subpart 16.5); orders against Federal Supply Schedules (see FAR Subpart 8.4); requirements currently being performed by an 8(a) participant or requirements SBA has accepted for performance under the authority of the 8(a) program, unless SBA has consented to release the requirements from the 8(a) Program (see FAR Subpart 19.8); or requirements for commissary or exchange resale items.
    
    
  • FAR 19.1405, Service-Disabled Veteran-Owned Small Business Set-Aside Procedures, states that a contracting officer may set-aside an acquisition exceeding the micro-purchase threshold for competition among SDVOSBs if the contracting officer has a reasonable expectation offers will be received from two or more SDVOSBs and award will be made at a fair market price. It goes on to state, "If the contracting officer receives only one acceptable offer from a service-disabled veteran-owned small business concern in response to a set-aside, the contracting officer should make an award to that concern. If the contracting officer receives no acceptable offers from service-disabled veteran-owned small business concerns, the service-disabled veteran-owned set-aside shall be withdrawn and the requirement, if still valid, set aside for small business concerns..." (EDITOR'S NOTE: Unlike the HUBZone program (and the small business set-aside program), the SDVOSB set-aside is discretionary, not mandatory -- "the contracting officer may set-aside an acquisition..."
    
    
  • FAR 19.1406, Sole Source Awards to Service-Disabled Veteran-Owned Small Business Concerns, states that a contracting officer may award contracts to SDVOSBs on a sole source basis if (1) only one SDVOSB can satisfy the requirement; (2) the anticipated award price of the contract (including options) will not exceed either $5 million for a requirement within the NAICS codes for manufacturing, or $3 million for a requirement within any other NAICS code; (3) the SDVOSB has been determined to be a responsible contractor; and (4) award can be made at a fair and reasonable price.
  
  
• FAR 52.219-27, Notice of Total Service-Disabled Veteran-Owned Small Business Set-Aside, is added. It is required to be included in SDVOSB set-asides and sole source awards. It reflects the requirements and provisions of FAR Subpart 19.14. In addition, it requires the SDVOSB to agree that (1) for services (except construction), at least 50% of the cost of personnel for contract performance will be spent for employees of the concern or employees of other SDVOSB concerns; (2) for supplies (other than acquisition from a nonmanufacturer of the supplies), at least 50% of the cost of manufacturing, excluding the cost of materials, will be performed by the concern or other SDVOSBs; (3) for general construction, at least 15% of the cost of the contract performance incurred for personnel will be spent on the concern's employees or the employees of other SDVOSBs; or (4) for construction by special trade contractors, at least 25% of the cost of the contract performance incurred for personnel will be spent on the concern's employees or the employees of other SDVOSBs.

EDITOR'S NOTE: One other difference between the HUBZone and SDVOSB programs is that there is no provision for applying a price evaluation preference for SDVOSBs in acquisitions conducted under full and open competition as there is for HUBZone concerns competing under full and open competition.

SBA

SBA's additions to its regulations in Title 13 of the Code of Federal Regulations (CFR), Part 125, Government Contracting Programs, parallel those in FAC 2001-23 for the most part. There is more emphasis on SBA's participation in the process, particularly appeals (Section 125.22, May SBA appeal a contracting officer's decision not to reserve a procurement for award as an SDVO contract?, and Section 125.23 What is the process for such as appeal?), protests (Sections 125.24 through 125.28, which constitute Subpart D, Protests Concerning SDVO SBCs [Service-Disabled Veteran-Owned Small Business Concerns]), and penalties (Section 125.29, What penalties may be imposed under this part?).

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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