[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR121.406]

[Page 306-308]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 121--SMALL BUSINESS SIZE REGULATIONS--Table of Contents
 
          Subpart A--Size Eligibility Provisions and Standards
 
Sec. 121.406  How does a small business concern qualify to provide manufactured products under small business set-aside or MED procurements?

    (a) General. In order to qualify as a small business concern for a 
small business set-aside or 8(a) contract to

[[Page 307]]

provide manufactured products, an offeror must either:
    (1) Be the manufacturer of the end item being procured (and the end 
item must be manufactured or produced in the United States); or
    (2) Comply with the requirements of paragraph (b), (c) or (d) of 
this section as a nonmanufacturer, a kit assembler or a supplier under 
Simplified Acquisition Procedures.
    (b) Nonmanufacturers. (1) A concern may qualify for a requirement to 
provide manufactured products as a nonmanufacturer if it:
    (i) Does not exceed 500 employees;
    (ii) Is primarily engaged in the wholesale or retail trade and 
normally sells the items being supplied to the general public; and
    (iii) Will supply the end item of a small business manufacturer or 
processor made in the United States, or obtains a waiver of such 
requirement pursuant to paragraph (b)(3) of this section.
    (2) For size purposes, there can be only one manufacturer of the end 
item being acquired. The manufacturer is the concern which, with its own 
facilities, performs the primary activities in transforming inorganic or 
organic substances, including the assembly of parts and components, into 
the end item being acquired. The end item must possess characteristics 
which, as a result of mechanical, chemical or human action, it did not 
possess before the original substances, parts or components were 
assembled or transformed. The end item may be finished and ready for 
utilization or consumption, or it may be semifinished as a raw material 
to be used in further manufacturing. Firms which perform only minimal 
operations upon the item being procured do not qualify as manufacturers 
of the end item. SBA will evaluate the following factors in determining 
whether a concern is the manufacturer of the end item:
    (i) The proportion of total value in the end item added by the 
efforts of the concern, excluding costs of overhead, testing, quality 
control, and profit; and
    (ii) The importance of the elements added by the concern to the 
function of the end item, regardless of their relative value.
    (3) The Administrator or designee may waive the requirement set 
forth in paragraph (b)(1)(iii) of this section under the following two 
circumstances:
    (i) The contracting officer has determined that no small business 
manufacturer or processor reasonably can be expected to offer a product 
meeting the specifications (including period for performance) required 
by a particular solicitation and SBA reviews and accepts that 
determination; or
    (ii) SBA determines that no small business manufacturer or processor 
of the product or class of products is available to participate in the 
Federal procurement market.
    (4) The two waiver possibilities identified in paragraph (b)(3) of 
this section are called ``individual'' and ``class'' waivers 
respectively, and the procedures for them are contained in Sec. 121.1204 
.
    (5) Any SBA waiver of the nonmanufacturer rule has no effect on 
requirements external to the Small Business Act which involve domestic 
sources of supply, such as the Buy American Act.
    (c) Kit assemblers. (1) Where the manufactured item being acquired 
is a kit of supplies or other goods provided by an offeror for a special 
purpose, the offeror cannot exceed 500 employees, and 50 percent of the 
total value of the components of the kit must be manufactured by 
business concerns in the United States which are small under the size 
standards for the NAICS codes of the components being assembled. The 
offeror need not itself be the manufacturer of any of the items 
assembled.
    (2) Where the Government has specified an item for the kit which is 
not produced by U.S. small business concerns, such item shall be 
excluded from the calculation of total value in paragraph (c)(1) of this 
section.
    (d) Simplified Acquisition Procedures. Where the procurement of a 
manufactured item is processed under Simplified Acquisition Procedures, 
as defined in Sec. 13.101 of the Federal Acquisition Regulation (FAR) 
(48 CFR 13.101), and where the anticipated cost of the procurement will 
not exceed $25,000, the offeror need not supply the end product of a 
small business concern as

[[Page 308]]

long as the product acquired is manufactured or produced in the United 
States, and the offeror does not exceed 500 employees. The offeror need 
not itself be the manufacturer of any of the items acquired.

[61 FR 3286, Jan. 31, 1996; 61 FR 7986, Mar. 1, 1996, as amended at 65 
FR 30863, May 15, 2000]