[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: 13CFR125.2]

[Page 403-407]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 125--GOVERNMENT CONTRACTING PROGRAMS--Table of Contents
 
Sec. 125.2  Prime contracting assistance.

    (a) General. Small business concerns must receive any award or 
contract, or any contract for the sale of Government property, that SBA 
and the procuring or disposal agency determine to be in the interest of:
    (1) Maintaining or mobilizing the Nation's full productive capacity;
    (2) War or national defense programs;
    (3) Assuring that a fair proportion of the total purchases and 
contracts for property, services and construction for the Government in 
each industry category are placed with small business concerns; or
    (4) Assuring that a fair proportion of the total sales of Government 
property is made to small business concerns.
    (b) PCR and procuring activity responsibilities. (1) SBA Procurement 
Center Representatives (PCRs) are generally located at Federal agencies 
and buying activities which have major contracting programs. PCRs review 
all acquisitions not set-aside for small businesses to determine whether 
a set-aside is appropriate.
    (2) A procuring activity must provide a copy of a proposed 
acquisition strategy (e.g., Department of Defense Form 2579, or 
equivalent) to the applicable PCR (or to the SBA Office of Government 
Contracting Area Office serving the area in which the buying activity is 
located if a PCR is not assigned to the procuring activity) at least 30 
days prior to a solicitation's issuance whenever a proposed acquisition 
strategy:
    (i) Includes in its description goods or services currently being 
performed by a small business and the magnitude of the quantity or 
estimated dollar value of the proposed procurement would render small 
business prime contract participation unlikely;
    (ii) Seeks to package or consolidate discrete construction projects; 
or
    (iii) Meets the definition of a bundled requirement as defined in 
paragraph (d)(1)(i) of this section.
    (3) Whenever any of the circumstances identified in paragraph (b)(2) 
of this section exist, the procuring activity must also submit to the 
applicable PCR (or to the SBA Office of Government Contracting Area 
Office serving the area in which the buying activity is located if a PCR 
is not assigned to the procuring activity) a written statement 
explaining why:
    (i) If the proposed acquisition strategy involves a bundled 
requirement, the procuring activity believes that the bundled 
requirement is necessary and justified under the analysis required by 
paragraph (d)(3)(iii) of this section; or

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    (ii) If the description of the requirement includes goods or 
services currently being performed by a small business and the magnitude 
of the quantity or estimated dollar value of the proposed procurement 
would render small business prime contract participation unlikely, or if 
a proposed procurement for construction seeks to package or consolidate 
discrete construction projects:
    (A) The proposed acquisition cannot be divided into reasonably small 
lots to permit offers on quantities less than the total requirement;
    (B) Delivery schedules cannot be established on a basis that will 
encourage small business participation;
    (C) The proposed acquisition cannot be offered so as to make small 
business participation likely; or
    (D) Construction cannot be procured as separate discrete projects.
    (4) In conjunction with their duties to promote the set-aside of 
procurements for small business, PCRs will identify small businesses 
that are capable of performing particular requirements, including teams 
of small business concerns for larger or bundled requirements (see 
Sec. 121.103(f)(3) of this chapter).
    (5)(i) If a PCR believes that a proposed procurement will render 
small business prime contract participation unlikely, or if a PCR does 
not believe a bundled requirement to be necessary and justified, the PCR 
shall recommend to the procurement activity alternative procurement 
methods which would increase small business prime contract 
participation. Such alternatives may include:
    (A) Breaking up the procurement into smaller discrete procurements;
    (B) Breaking out one or more discrete components, for which a small 
business set-aside may be appropriate; and
    (C) Reserving one or more awards for small companies when issuing 
multiple awards under task order contracts.
    (ii) Where bundling is necessary and justified, the PCR will work 
with the procuring activity to tailor a strategy that preserves small 
business prime contract participation to the maximum extent practicable.
    (iii) The PCR will also work to ensure that small business 
participation is maximized through subcontracting opportunities. This 
may include:
    (A) Recommending that the solicitation and resultant contract 
specifically state the small business subcontracting goals which are 
expected of the contractor awardee; and
    (B) Recommending that the small business subcontracting goals be 
based on total contract dollars instead of subcontract dollars.
    (6) In cases where there is disagreement between a PCR and the 
contracting officer over the suitability of a particular acquisition for 
a small business set-aside, whether or not the acquisition is a bundled 
or substantially bundled requirement within the meaning of paragraph (d) 
of this section, the PCR may initiate an appeal to the head of the 
contracting activity. If the head of the contracting activity agrees 
with the contracting officer, SBA may appeal the matter to the secretary 
of the department or head of the agency. The time limits for such 
appeals are set forth in 19.505 of the Federal Acquisition Regulation 
(FAR) (48 CFR 19.505).
    (7) PCRs will work with a procuring activity's Small Business 
Specialist (SBS) to identify proposed solicitations that involve 
bundling, and with the agency acquisition officials to revise the 
acquisition strategies for such proposed solicitations, where 
appropriate, to increase the probability of participation by small 
businesses, including small business contract teams, as prime 
contractors. If small business participation as prime contractors 
appears unlikely, the SBS and PCR will facilitate small business 
participation as subcontractors or suppliers.
    (c) BPCR responsibilities. (1) SBA is required by section 403 of 
Public Law 98-577 (15 U.S.C. 644(l)) to assign a breakout PCR (BPCR) to 
major contracting centers. A major contracting center is a center that, 
as determined by SBA, purchases substantial dollar amounts of other than 
commercial items, and which has the potential to achieve significant 
savings as a result of the assignment of a BPCR.
    (2) BPCRs advocate full and open competition in the Federal 
contracting

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process and recommend the breakout for competition of items and 
requirements which previously have not been competed. They may appeal 
the failure by the buying activity to act favorably on a recommendation 
in accord with the appeal procedures set forth in Sec. 19.505 of the FAR 
(48 CFR 19.505). BPCRs also review restrictions and obstacles to 
competition and make recommendations for improvement. Other authorized 
functions of a BPCR are set forth in 48 CFR 19.403(c) of the FAR and 
Section 15(l) of the Act (15 U.S.C. 644(l)).
    (d) Contract bundling--(1) Definitions--(i) Bundled requirement or 
bundling. The term bundled requirement or bundling refers to the 
consolidation of two or more procurement requirements for goods or 
services previously provided or performed under separate smaller 
contracts into a solicitation of offers for a single contract that is 
likely to be unsuitable for award to a small business concern due to:
    (A) The diversity, size, or specialized nature of the elements of 
the performance specified;
    (B) The aggregate dollar value of the anticipated award;
    (C) The geographical dispersion of the contract performance sites; 
or
    (D) Any combination of the factors described in paragraphs (d)(1)(i) 
(A), (B), and (C) of this section.
    (ii) Separate smaller contract. A separate smaller contract is a 
contract that has previously been performed by one or more small 
business concerns or was suitable for award to one or more small 
business concerns.
    (iii) Substantial bundling. Substantial bundling is any contract 
consolidation, which results in an award whose average annual value is 
$10 million or more.
    (2) Requirement to foster small business participation. The Small 
Business Act requires each Federal agency to foster the participation of 
small business concerns as prime contractors, subcontractors, and 
suppliers in the contracting opportunities of the Government. To comply 
with this requirement, agency acquisition planners must:
    (i) Structure procurement requirements to facilitate competition by 
and among small business concerns, including small disadvantaged, 8(a) 
and women-owned business concerns; and
    (ii) Avoid unnecessary and unjustified bundling of contract 
requirements that inhibits or precludes small business participation in 
procurements as prime contractors.
    (3) Requirement for market research. In addition to the requirements 
of paragraph (b)(2) of this section and before proceeding with an 
acquisition strategy that could lead to a contract containing bundled or 
substantially bundled requirements, an agency must conduct market 
research to determine whether bundling of the requirements is necessary 
and justified. During the market research phase, the acquisition team 
should consult with the applicable PCR (or if a PCR is not assigned to 
the procuring activity, the SBA Office of Government Contracting Area 
Office serving the area in which the buying activity is located).
    (4) Requirement to notify current small business contractors of 
intent to bundle. The procuring activity must notify each small business 
which is performing a contract that it intends to bundle that 
requirement with one or more other requirements at least 30 days prior 
to the issuance of the solicitation for the bundled or substantially 
bundled requirement. The procuring activity, at that time, should also 
provide to the small business the name, phone number and address of the 
applicable SBA PCR (or if a PCR is not assigned to the procuring 
activity, the SBA Office of Government Contracting Area Office serving 
the area in which the buying activity is located).
    (5) Determining requirements to be necessary and justified. When the 
procuring activity intends to proceed with an acquisition involving 
bundled or substantially bundled procurement requirements, it must 
document the acquisition strategy to include a determination that the 
bundling is necessary and justified, when compared to the benefits that 
could be derived from meeting the agency's requirements through separate 
smaller contracts.
    (i) The procuring activity may determine a consolidated requirement 
to be necessary and justified if, as compared to the benefits that it 
would derive

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from contracting to meet those requirements if not consolidated, it 
would derive measurably substantial benefits. The procuring activity 
must quantify the identified benefits and explain how their impact would 
be measurably substantial. The benefits may include cost savings and/or 
price reduction, quality improvements that will save time or improve or 
enhance performance or efficiency, reduction in acquisition cycle times, 
better terms and conditions, and any other benefits that individually, 
in combination, or in the aggregate would lead to:
    (A) Benefits equivalent to 10 percent of the contract value 
(including options) where the contract value is $75 million or less; or
    (B) Benefits equivalent to 5 percent of the contract value 
(including options) or $7.5 million, whichever is greater, where the 
contract value exceeds $75 million.
    (ii) Notwithstanding paragraph (d)(5)(i) of this section, the 
Assistant Secretaries with responsibility for acquisition matters 
(Service Acquisition Executives) or the Under Secretary of Defense for 
Acquisition and Technology (for other Defense Agencies) in the 
Department of Defense and the Deputy Secretary or equivalent in civilian 
agencies may, on a non-delegable basis determine that a consolidated 
requirement is necessary and justified when:
    (A) There are benefits that do not meet the thresholds set forth in 
paragraph (d)(5)(i) of this section but, in the aggregate, are critical 
to the agency's mission success; and
    (B) Procurement strategy provides for maximum practicable 
participation by small business.
    (iii) The reduction of administrative or personnel costs alone shall 
not be a justification for bundling of contract requirements unless the 
administrative or personnel cost savings are expected to be substantial, 
in relation to the dollar value of the procurement to be consolidated 
(including options). To be substantial, such cost savings must be at 
least 10 percent of the contract value (including options).
    (iv) In assessing whether cost savings and/or a price reduction 
would be achieved through bundling, the procuring activity and SBA must 
compare the price that has been charged by small businesses for the work 
that they have performed and, where available, the price that could have 
been or could be charged by small businesses for the work not previously 
performed by small business.
    (6) OMB Circular A-76 Cost Comparison Analysis. The substantial 
benefit analysis set forth in paragraph (d)(5)(i) of this section is not 
required where a requirement is subject to a Cost Comparison Analysis 
under OMB Circular A-76 (See 5 CFR 1310.3 for availability).
    (7) Substantial bundling. Where a proposed procurement strategy 
involves a substantial bundling of contract requirements, the procuring 
agency must, in the documentation of that strategy, include a 
determination that the anticipated benefits of the proposed bundled 
contract justify its use, and must include, at a minimum:
    (i) The analysis for bundled requirements set forth in paragraph 
(d)(5)(i) of this section;
    (ii) An assessment of the specific impediments to participation by 
small business concerns as prime contractors that will result from the 
substantial bundling;
    (iii) Actions designed to maximize small business participation as 
prime contractors, including provisions that encourage small business 
teaming for the substantially bundled requirement; and
    (iv) Actions designed to maximize small business participation as 
subcontractors (including suppliers) at any tier under the contract or 
contracts that may be awarded to meet the requirements.
    (8) Significant subcontracting opportunity. (i) Where a bundled or 
substantially bundled requirement offers a significant opportunity for 
subcontracting, the procuring agency must designate the following 
factors as significant factors in evaluating offers:
    (A) A factor that is based on the rate of participation provided 
under the subcontracting plan for small business in the performance of 
the contract; and
    (B) For the evaluation of past performance of an offeror, a factor 
that is based on the extent to which the offeror attained applicable 
goals for small

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business participation in the performance of contracts.
    (ii) Where the offeror for such a bundled contract qualifies as a 
small business concern, the procuring agency must give to the offeror 
the highest score possible for the evaluation factors identified in 
paragraph (d)(5)(i) of this section.

[61 FR 3312, Jan. 31, 1996, as amended at 63 FR 31908, June 11, 1998; 64 
FR 57370, Oct. 25, 1999; 65 FR 45833, July 26, 2000]