DATE: January 29, 2004

SUBJECT: Department of Defense; Suspension of the Price Evaluation Adjustment for Small Disadvantaged Businesses

SOURCE: Department of Defense Memorandum, dated January 23, 2004

AGENCIES: Department of Defense (DOD)

ACTION: Federal Acquisition Regulation (FAR) Deviation

SYNOPSIS: On January 23, 2004, Director of Defense Procurement and Acquisition Policy Deidre Lee issued a memorandum to the directors of defense agencies, the services' deputies for acquisition, and the Defense Logistics Agency's executive director for logistics policy and acquisition management suspending the use of the 10% price evaluation adjustment for small disadvantaged businesses (SDBs) prescribed in Federal Acquisition Regulation (FAR) Subpart 19.11, Price Evaluation Adjustment for Small Disadvantaged Business Concerns.

EFFECTIVE DATES: This deviation, which is an extension of the deviation that has been in effect between February 24, 2003, and February 23, 2004, will apply to all solicitations issued between February 24, 2004, and February 23, 2005.

SUPPLEMENTAL INFORMATION: Title 10 of the U.S. Code, Section 2323, Contract Goal for Small Disadvantaged Businesses and Certain Institutions of Higher Education, sets for the DOD, the National Aeronautics and Space Administration (NASA), and the Coast Guard a 5% goal of contract awards to SDBs, historically Black colleges and universities (HBCUs), and minority institutions (MIs). Subsection 2323(e) authorizes DOD, NASA, and the Coast Guard to take actions to achieve this 5% goal, including the payment of a price that exceeds the fair market cost by no more than 10%.

FAR Subpart 19.11 provides for the application of a price evaluation adjustment to competitive offers of SDBs that exceed the $100,000 simplified acquisition threshold and are not set aside for small businesses in industries determined by the Department of Commerce to have "persistent and significant underutilization of minority firms." The Department of Commerce has determined that a 10% price evaluation adjustment is appropriate for 56 industries.

However, the National Defense Authorization Act for Fiscal Year 1999 (Public Law 105-261), contains Section 801, Limitation on Use of Price Preference Upon Achievement of Contract Goal for Small and Disadvantaged Business. Section 801 revised 10 U.S.C. 2323(e) to prohibit DOD from paying a price that exceeds the fair market cost if the secretary of defense determines that DOD achieved the 5% goal in the most recent fiscal year. If the secretary of defense makes this determination, the secretary must suspend the regulations that implement Subsection 2323(e), and the suspension will be in effect for one year beginning 30 days after the suspension is issued.

The secretary of defense has determined that DOD exceeded the 5% goal for contract awards to SDBs in fiscal year 2003, so the FAR Subpart 19.11 price evaluation adjustment is suspended as of February 24, 2004, through February 23, 2005. This suspension applies to all contracts awarded through solicitations issued during that period.

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

Copyright 2004 by Panoptic Enterprises. All Rights Reserved.

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