a fair proportion of the total sales of Government property The legislative history of the Small Business Act of 1958, reveals an intention to remove doubt that small business should obtain a fair share of all types of Government contracts. See House Report No. 555, 85th Congress, 1st Session, to accompany H.R. 7963, page 5. Section 202 of the 1953 Small Business Act, 15 U.S.C. 631, was accordingly amended to provide that small business concerns shall obtain a fair proportion of contracts for "property and services for the Government (including but not limited to contracts for maintenance, repair, and construction)." In addition, section 214 of the 1953 act, as amended, 15 U.S.C. 644, the forerunner of the present section 15, was amended to provide for joint determination set-asides when such action is in the interest of assuring that a fair proportion of the total purchases and contracts for property and services for the Government are placed with small business concerns. Also, the section was amended to authorize class set-asides. These changes are explained in Senate Committee on Banking and Currency Report No. 1714, 85th Congress, 2nd Session, to accompany H.R. 7963, pages 9-10, as follows: H.R. 7963, as passed by the House of Representatives, was amended by the committee to include certain language contained in S. 3224. This language was prepared by the General Services Administration and is intended to make it easier for small-business concerns to do business with the Government. Existing law directs the Small Business Administration to assist small-business concerns in obtaining a fair proportion of Government contracts for property and services. Under existing law such assistance may be made only when it is found to be in the interest of maintaining or mobilizing full productive capacity or in the interest of war or civil defense programs. This amendment puts the procurement assistance program on a peacetime basis, and permits assistance to be rendered for all types of Federal procurement without regard to any relationship to the maintenance of full productive capacity or any relationship to war or civil defense programs. In addition, the amendment would make the assistance program more efficient by authorizing classes of Federal contracts to be earmarked for small-business concerns without the necessity for earmarking every individual contract. While the intent of the 1958 Small Business legislation was to broaden the base and increase the share of small business participation in the total Government procurement program, it appears that a specific definition was not given as to what constitutes a "fair proportion" of the Government's total purchases to be placed with small business concerns. The phrase "fair proportion" or similar language appeared in several Congressional enactments prior to the Small Business Act of 1953 in relation to small business participation under Government procurement programs. See, for example, section 2(b) of the Armed Services Procurement Act of 1947, 62 Stat. 21, 41 U.S.C. 151(b) (1952 Ed.); section 18 (a) of the Selective Service Act of 1948, 62 Stat. 625, 50 U.S.C. App. 468 (a); section 302(b) of the Federal Property and Administrative Services Act of 1949, 63 Stat. 393, 41 U.S.C. 252(b); and section 714(f) (2) of the Defense Production Act of 1950, as amended, 65 Stat. 143, 50 U.S.C. App. 2163a (f) (2). However, we do not find that the phrase "fair proportion" or any similar language was defined in these prior acts. Any "proportion" of contract awards between large and small business will change as the demarcation between large and small business changes. And this is so whether small business be defined on an industry-by-industry basis or otherwise. Consequently, the question whether any particular share of Federal contracts is a "fair proportion" for small business cannot be answered or even considered until some definition of small business is first made and accepted. It is clear from the language of sections 3 and 8(b) (6) of the Small Business Act of 1958, 15 U.S.C. 632 and 637 (b) (6), respectively, that small business is to be defined on an industry-by-industry basis. This concept comports with common knowledge that the percentage of small business may vary from industry to industry. And, so far as any particular industry is concerned, it seems probable that production and delivery problems will tend to fix a limit on the procurements which can be set aside for small business, regardless of the size standards for the industry. In our prior decision we considered your contention that the small business size standard of 500 employees is too high as applied to wooden household furniture manufacturers. The determination of size standards for small business is specifically vested in the Small Business Administration by sections 3 and 8(b) (6) of the Small Business Act. We must assume that the size determination made by the SBA in the case of the wooden household furniture gave full cognizance to all the factors relevant to the making of such a determination. Hearings have been held by SBA on this size standards, and the 500-employee size standard has been retained. We do not feel that we have the authority to determine a size standard fixed by SBA to be erroneous, and we must therefore consider the question whether more than a "fair proportion" of Federal procurements of wooden household furniture is being placed with small business in the light of the existing size standard. According to information you have furnished, only 42 out of 4,577 plants engaged in the manufacture of wooden household furniture have over 500 employees. Hence, assuming, as we must, the validity of the present industry size standard, we find that over 99 percent of all plants in the industry are small business. In the light of this fact we cannot conclude that the placement of some 90 percent of Federal wooden household furniture procurements with small business results in giving an unfair proportion of such procurements to small business. You are therefore advised that we do not feel we can legally question the propriety of the set-asides to which you have objected. APPENDIX B ARMED SERVICES PROCUREMENT REGULATION 1-707.3; FEDERAL PROCUREMENT REGULATIONS 1-1.710-3 ARMED SERVICES PROCUREMENT REGULATION 1-707.3 1-707.3. Required Clauses.-(a) The Utilization of Small Business Concerns clause below shall be included in all contracts in amounts which may exceed $5,000 except (i) contracts which, including all subcontracts thereunder, are to be performed entirely outside the United States, its possessions, Puerto Rico, and the Trust Territory of the Pacific Islands; and (ii) contracts for services which are personal in nature: UTILIZATION OF SMALL BUSINESS CONCERNS (1958 JAN) (a) It is the policy of the Government as declared by the Congress that a fair proportion of the purchases and contracts for supplies and services for the Government be placed with small business concerns. (b) The Contractor agrees to accomplish the maximum amount of subcontracting to small business concerns that the Contractor finds to be consistent with the efficient performance of this contract. (c) The Small Business Subcontracting Program clause below shall be included in all contracts (except maintenance, repair and construction contracts) which may exceed $500,000, which contain the clause required by (a) above and which in the opinion of the contracting officer, offer substantial subcontracting possibilities. Prime contractors who are to be awarded contracts that do not exceed $500,000 but which, in the opinion of the contracting officer, offer substantial subcontracting possibilities, shall be urged to accept the clause. SMALL BUSINESS SUBCONTRACTING PROGRAM (1965 JUN) (a) The Contractor agrees to establish and conduct a small business subcontracting program which will enable small business concerns to be considered fairly as subcontractors and suppliers under this contract. In this connection, the Contractor shall (1) Designate a liaison officer who will (i) maintain liaison with the Government on small business matters, (ii) supervise compliance with the "Utilization of Small Business Concerns" clause, and (iii) administer the Contractor's "Small Business Subcontracting Program.” (2) Provide adequate and timely consideration of the potentialities of small business concerns in all "make-or-buy" decisions. (3) Assure that small business concerns will have an equitable opportunity to compete for subcontracts, particularly by arranging solici tations, time for the preparation of bids, quantities, specifications, and delivery schedules so as to facilitate the participation of small business concerns. Where the Contractor's lists of potential small business subcontractors are excessively long, reasonable effort shall be made to give all such small business concerns an opportunity to compete over a period of time. (4) Maintain records showing (i) whether each prospective subcontractor is a small business concern, (ii) procedures which have been adopted to comply with the policies set forth in this clause, and (iii) with respect to the letting of any subcontract (including purchase orders) exceeding $10,000, information substantially as follows: (A) Whether the award went to large or small business. (B) Whether less than three or more than two small business concerns were solicited. (C) The reason for non-solicitation of small business if such was the case. (D) The reason for small business failure to receive the award if such was the case when small business was solicited. The records maintained in accordance with (iii) above may be in such form as the individual Contractor may determine, and the information shall be summarized quarterly and submitted by the purchasing department of each individual plant or division to the Contractor's cognizant small business liaison officer. Such quarterly summaries will be considered to be management records only and need not be submitted routinely to the Government; however, records maintained pursuant to this clause will be kept available for review. (5) Notify the Contracting Officer before soliciting bids or quotations on any subcontract (including purchase orders) in excess of $10,000 if (i) no small business concern is to be solicited, and (ii) the Contracting Officer's consent to the subcontract (or ratification) is required by a "Subcontracts" clause in this contract. Such notice will state the Contractor's reasons for nonsolicitation of small business concerns, and will be given as early in the procurement cycle as possible so that the Contracting Officer may give the Small Business Administration timely notice to permit SBA a reasonable period to suggest potentially qualified small business concerns through the Contracting Officer. In no case will the procurement action be held up when to do so would, in the Contractor's judgment, delay performance under the contract. (6) Include the "Utilization of Small Business Concerns" clause in subcontracts which offer substantial small business subcontracting opportunities. (7) Cooperate with the Contracting Officer in any studies and surveys of the Contractor's subcontracting procedures and practices that the Contracting Officer may from time to time conduct. (8) Submit DD Form 1140-1 each quarter in accordance with instructions provided on the form, except that where the Contractor elects to report on a corporate rather than a plant basis, he may submit his reports to the Military Department having the responsibility for the Small Business Subcontracting Program at the corporate headquarters. The reporting requirements of this subparagraph (8) do not apply to Small Business Contractors, Small Business Subcontractors, or educational and nonprofit institutions. (b) A "small business concern" is a concern that meets the pertinent criteria established by the SBA and set forth in paragraph 1-701 of the Armed Services Procurement Regulation. (c) The Contractor agrees that, in the event he fails to comply with his contractual obligations concerning the small business subcontracting program, this contract may be terminated, in whole or in part, for default. (d) The Contractor further agrees to insert, in any subcontract hereunder which is in excess of $500,000 and which contains the "Utilization of Small Business Concerns" clause, provisions which shall conform substantially to the language of this clause, including this paragraph (d), and to notify the Contracting Officer of the names of such subcontractors; except that the subcontractor will submit the DD Form 1140-1 reports to the Military Department having the responsibility for reviewing its Small Business Subcontracting Program (A subcontractor may request advice from the nearest military purchasing or contract administration activity as to the Military Department to which he should submit his reports.) (c) The "Small Business Subcontracting Program (Maintenance, Repair and Construction)" clause below shall be included in all contracts for maintenance, repair and construction work which may exceed $500,000, which contain the clause required in (a) above and which in the opinion of the purchasing activity, offer substantial subcontracting possibilities. SMALL BUSINESS SUBCONTRACTING PROGRAM (MAINTENANCE, REPAIR AND CONSTRUCTION) (1967 JUN) (a) The Contractor agrees to establish and conduct a small business subcontracting program which will enable small business concerns to be considered fairly as subcontractors, including suppliers, under this contract. In this connection, the Contractor shall designate an individual to (i) maintain liaison with the Government on small business matters, and (ii) administer the Contractor's Small Business Subcontracting Program. (b) Notwithstanding the instructions on DD Form 1140-1, prior to completion of the contract and as soon as the final information is available, the Contractor shall submit a one-time completed DD Form 1140-1 to the Government addressees prescribed thereon. The DD Form 1140-1 shall show the prime contract number in lieu of identifying a quarterly report period. This subparagraph (b) is not applicable if the Contractor is a small business concern. (c) The Contractor further agrees (i) to insert the "Utilization of Small Business Concerns" clause in subcontracts which offer substantial subcontracting opportunities, and (ii) to insert in each such subcontract exceeding $500,000 a clause conforming substantially to the language of this clause except that subcontractors shall submit DD Form 1140-1 direct to the Government addressees prescribed on the Form. The Contractor will notify the Contracting Office of the name and address of each subcontractor that will be required to submit a report on DD Form 1140-1. |