APPENDIX G DEVIATION AUTHORITY BY ARMED SERVICES PROCUREMENT REGULATION COMMITTEE, JULY 16, 1973 DEPARTMENT OF THE AIR FORCE, HEADQUARTERS UNITED STATES AIR FORCE, Washington, D.C., July 16, 1973. ASPR CASE 73-59, PROPOSED AIR FORCE TEST OF SMALL BUSINESS SUBCONTRACTING PROVISION FOR MODERNIZATION, MAINTENANCE AND REPAIR WORK UNDER FACILITIES CONTRACTS AFSC/PP 1. Reference your letter, 20 April 1973, requesting an ASPR deviation to permit directed small business subcontracting for work under prime contractor managed and operated facilities contracts. 2. The issue as a deviation per se was turned down by the ASPR Committee in May 1973; however, it was resubmitted on 27 June 1973 as a proposed test. The service test of the concept, as outlined in the appended Memorandum (Atch 1) was approved by the ASPR Committee on 11 July 1973 under the provisions of ASPR 1-108 (a)(iv) (B). The test is to cover the FY 74 period, and is to be restricted to facilities under AFPRO cognizance. 3. An evaluation of the results of the test is to be submitted to the ASPR Committee, through this office, by 31 July 1974. For the Chief of Staff. JAMES F. HODGDON, Jr., Assistant for ASPR Directorate, Procurement Policy. DEPARTMENT OF THE AIR FORCE, HEADQUARTERS UNITED STATES AIR FORCE, Washington, D.C., June 27, 1973. Memorandum for: The chairman, ASPR Committee. Subject: Proposed Air Force test of small business subcontracting provision for modernization, maintenance, and repair of work under facilities contracts. I. PROBLEM The attached letter from the Air Force Systems Command, 20 April 1973 (TAB A), outlines a proposed program for subcontracting with small business firms for maintenance and repair work performed by the prime contractor under major production facilities contracts. II. RECOMMENDATION That the Air Force be authorized to test the concept outlined in TAB A during FY 74. III. DISCUSSION a. The proposed test is distinguishable from recommendation #48 of the Procurement Commission concerning mandatory small business subcontracting. That recommendation and others like it, would apply to contracts where, for in consideration of a profit or fee, a contractor is obligated to supply an item or perform a service. If he fails, the contractor can lose money or be terminated for default. Under such circumstances, any interference in the manner in which he performs the contract must be limited only to that which is vital to protect the Government's basic interests. b. The proposed test would apply to facilities contracts without profit or fee, for work necessary to modernize, maintain, and repair the facilities, including in some cases real property (brick and mortar) and production equipment, which is wholly owned by the Government but which is being operated and/or used by the contractor in question. The proposed test is analogous to the same type of situation which could exist in a GOCO operation, except that here, the contractor receives no fee for his efforts in seeing that the work is done. There is no risk of loss to the contractor nor is there a Termination for Default provision in these contracts. c. The other key distinguishing factor is that if the Government were to contract for this work itself, most of it would be set aside for small business. This is particularly true in the case of construction work where all projects under $500,000 are set aside automatically for small business participation. In the case of facilities contracts, the prime contractor is really exercising a Government function and is acting as a purchasing agent for the Government. This should not be permitted to frustrate the intent of the Small Business Act. d. The most serious argument against mandatory subcontracting is that it interferes with the competitive process and dilutes the authority which must accompany the responsibility for getting a job done. The proposed test does not involve that-no competition is involved in the award of the facilities contracts and the Government closely controls what will be done through its funding process and by authorizing specific projects. Thus, it is practical and possible to determine in advance on a case by case basis whether an individual project is suitable for a set-aside or not. In this regard, reference ASPR 23-201 as relates to exceptional circumstances wherein certain subcontracts or classes thereof may be selected for extraordinary Government surveillance. e. The proposed test should not be rejected as a matter of policy, in view of recent remarks made by Mr. Malloy on 15 May 1973 at the Sixth Annual Subcontracting Conference (TAB B), where he states on page 6: I am not suggesting that mandatory subcontracting is totally work in a unique set of circumstances. If such a situation occurs again, I would favor similar action, all other things being equal. It is our view that the proposed test meets the requirement of being unique and should be adopted, particularly in light of the other factors cited above. JAMES F. HODGDON, Jr., Air Force Policy Member, ASPR Committee. DEPARTMENT OF THE AIR FORCE, HEADQUARTERS AIR FORCE SYSTEMS COMMAND, ANDREWS AIR FORCE BASE, Washington, D.C., April 20, 1973. Subject: ASD request for facilities contract ASPR deviation approval. To: HQ USAF/LGPC. 1. Attached is an ASD request for an ASPR deviation. The requested deviation would permit ASD to direct a prime facilities contractor to contract with small business concerns for the accomplishment of selected projects determined to be suitable for performance by such firms. 2. This request for deviation is the result of an agreement between ASD and the Small Business Administration Procurement Center representative on an effort to benefit the National Small Business Program. It would result in a practical and workable procedure and this headquarters endorses the ASD request for an ASPR deviation. 3. Your earliest consideration of this request will be appreciated. For the Commander. CHARLES L. WILSON, Brigadier General, USAF. DEPARTMENT OF THE AIR FORCE, HEADQUARTERS, AERONAUTICAL SYSTEMS DIVISION (AFSC), Wright-Patterson Air Force Base, Ohio, April 6, 1973. Subject: Request for facilities contract ASPR deviation approvalASPR 7-702.34, 7-104.14 (a), 7-203.8 (a), small business set-asides. To: AFSC/PP. 1. The Aeronautical Systems Division has a portion of the Air Force responsibility for the management of Government owned production facilities consisting of both manufacturing plants and production equipment. In contracting for the modernization, maintenance, and repair of the Government-owned contractor-operated facilities (see ASPR 13-101.8) including in some cases real property (brick and mortar) and for the preparation of equipment (see ASPR B-102.10) for shipment, ASD has, in effect, utilized the purchasing capabilities of the contractors who are either operating and/or using the facilities. ASD has authorized these facility prime contractors to perform work which may include the placing of subcontracts for facility type work described above after the project has been reviewed and approved by ASD. Generally, these subcontracts have been competitively placed by the prime. This has proven to be a satisfactory method of contracting for facilities work. It has been advantageous to the Government, as the contractors using the Government-owned facilities have acted on behalf of the Air Force in placing this work, without fee or profit, for the service. It has been a mutually beneficial arrangement; the contractor who has intimate and current knowledge of the exact nature of and need for the work has been able to have it performed properly and promptly; the Air Force on the other hand, has realized a substantial savings of in-house manpower. The contractor has also contributed a most important feature, i.e., the specific definition of work to be done and insuring its accomplishment. 2. Much of the facility work subcontracted by the prime contractor is suitable for performance by small business concerns and a substantial portion is, in all probability routinely placed with small business firms. The Resident Procurement Center (ASD) Representative of the Small Business Administration, recognizing that some of this work could be performed by small business concerns, initiated a number of joint set-aside actions. ASD agreed that it was desirable to insure that the work be placed with small business concerns but could not do other than to object to the set-aside approach which would necessitate the placing of the work by means of Air Force prime contracts. Manpower and other considerations make such action impossible. The efficient method of acquiring such service through our facilities contracts now being used would be destroyed. 3. A method of contract placement was sought that would insure that suitable facilities related work was directed to small business concerns but which would not impact the present Air Force contract relationship with the facilities prime contractor. A method has been devised that will accomplish the desired results and is acceptable to both ASD and SBA, and which recognizes that the relationship of ASD with the prime facilities contractor and his subcontractors is not the normal relationship that is found in a production or service type procurement. In these cases the prime facilities contractor is placing subcontracts for work to be performed on Government owned facilities at the authorization/direction of the Government after each project is individually approved (in concept-not detail) by the Government. ASD and SBA have agreed that it would be beneficial to the Government to direct the prime facilities contractor to contract with small business concerns for the accomplishment of selected projects determined to be suitable for performance by such firms. It should be recognized that much of the work will be authorized pursuant to the clause set forth in ASPR 7-702.14(d). 4. It is requested that you review the foregoing and if you concur, request a multi-contract ASPR deviation, in accordance with ASPR 1-109.3, for the use of a clause reading substantially as follows: ----9 Item In the event that small business firms are not available to do the work in the time required, subcontracts to other than small business firms will not be placed without the prior written concurrence of the Procuring Contracting Officer at HQ ASD. 5. Pursuant to ASPR 7-702.34 all of our facilities (consolidated and/or acquisition) contracts and leases normally contain the clauses set forth in ASPR 7-104.14(a) and 7-203.8 (a) including alternate (j). ASPR 1-406 (xii) and (xiii) grants to the ACO certain of the authorities that we propose to retain at the PCO level. ASPR 23000 (a) (policy of minimum surveillance of contractors purchasing system) would also be impacted. 6. Your prompt consideration would be appreciated. For the Commander. JAMES E. COLEMAN, Director of Procurement and Production, |