[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR125.2]

[Page 418-423]
 
                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) Responsibilities in the acquisition planning process. (1) SBA 
Procurement Center Representatives (PCRs) are generally located at 
Federal agencies and buying activities which have major contracting 
programs. PCRs are responsible for reviewing all acquisitions not set-
aside for small businesses to determine whether a set-aside is 
appropriate and to identify alternative strategies to maximize the 
participation of small businesses in the procurement.

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    (2) As early in the acquisition planning process as practicable, but 
no later than 30 days before the issuance of a solicitation, or prior to 
placing an order without a solicitation, the procuring activity must 
coordinate with the procuring activity's Small Business Specialist (SBS) 
when the acquisition strategy contemplates an acquisition meeting the 
dollar amounts in paragraph (b)(2)(i) of this section, unless the 
contract or order is entirely reserved or set-aside for small business 
concerns as authorized under the Small Business Act. The SBS must notify 
the agency Office of Small and Disadvantaged Business Utilization 
(OSDBU) if the strategy or plan includes bundled requirements that the 
agency has not identified as bundled or includes unnecessary or 
unjustified bundling of requirements. If the strategy involves 
substantial bundling, the SBS shall assist in identifying alternative 
strategies that would reduce or minimize the scope of the bundling.
    (i) The procuring activity must coordinate the acquisition strategy 
with the cognizant SBS in accordance with paragraph (b)(2) of this 
section if the estimated acquisition, contract or order value is:
    (A) $7 million or more for the Department of Defense;
    (B) $5 million or more for the National Aeronautics and Space 
Administration, the General Services Administration, and the Department 
of Energy; and
    (C) $2 million or more for all other agencies.
    (ii) If the strategy contemplates multiple award contracts or 
multiple award orders under the Federal Supply Schedule or a task or 
delivery order contract awarded by another agency, the thresholds in 
paragraph (b)(2)(i) of this section apply to the cumulative estimated 
value of the multiple award contracts or orders, including options.
    (3) 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.
    (4) 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
    (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.
    (5) In conjunction with their duties to promote the set-aside of 
procurements for small business, PCRs will

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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).
    (6)(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 teaming arrangements and 
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;
    (B) Recommending that the small business subcontracting goals be 
based on total contract dollars instead of subcontract dollars;
    (C) Reviewing an agency's oversight of its subcontracting program, 
including its overall and individual assessment of a contractor's 
compliance with its small business subcontracting plans. The PCR will 
furnish a copy of the information to the SBA Commercial Market 
Representative (CMR) servicing the contractor; and
    (D) Recommending that a separate evaluation factor with significant 
weight is established for the extent to which offerors attained their 
subcontracting goals on previous contracts.
    (7) 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).
    (8) PCRs will work with the cognizant SBS and agency OSDBU as early 
in the acquisition process as practicable 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 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).

[[Page 421]]

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) Single contract, as used in this definition, includes:
    (A) Multiple awards of indefinite-quantity contracts under a single 
solicitation for the same or similar supplies or services to two or more 
sources; and
    (B) An order placed against an indefinite quantity contract under a 
Federal Supply Schedule contract or a task or delivery order contract 
awarded by another agency (i.e., Government-wide acquisition contract or 
multi-agency contract).
    (iv) Substantial bundling means any bundling that meets the dollar 
amounts specified in paragraph (b)(2)(i) of this section.
    (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 business concerns 
owned and controlled by veterans, small business concerns owned and 
controlled by service-disabled veterans, qualified HUBZone small 
business concerns, small business concerns owned and controlled by 
socially and economically disadvantaged individuals and small business 
concerns owned and controlled by women; 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

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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 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 or order value 
(including options) where the contract or order value is $75 million or 
less; or
    (B) Benefits equivalent to 5 percent of the contract or order value 
(including options) or $7.5 million, whichever is greater, where the 
contract or order 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. (i) 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:
    (A) The analysis for bundled requirements set forth in paragraph 
(d)(5)(i) of this section;
    (B) An assessment of the specific impediments to participation by 
small business concerns as prime contractors that will result from the 
substantial bundling;
    (C) Actions designed to maximize small business participation as 
prime contractors, including provisions that encourage small business 
teaming for the substantially bundled requirement;
    (D) 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; and
    (E) The identification of the alternative strategies that would 
reduce or

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minimize the scope of the bundling, and the rationale for not choosing 
those alternatives (i.e., consider the strategies under paragraphs 
(b)(6) (i) and (d) of this section).
    (ii) At least 30 days prior to the solicitation release, the 
procuring activity shall provide the PCR and the agency OSDBU a copy of 
the proposed acquisition, including the analysis required by paragraph 
(d)(7) of this section, the acquisition plan, any bundling information 
required under paragraph (b)(3) of this section, and any other relevant 
information. The PCR and agency OSDBU or SBS, as applicable, shall work 
together to develop alternative acquisition strategies identified in 
paragraph (b)(6) of this section to enhance small business 
participation.
    (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 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.
    (e) OSDBU Oversight Functions. The Agency OSDBU must:
    (1) Conduct annual reviews to assess the:
    (i) Extent to which small businesses are receiving their fair share 
of Federal procurements, including contract opportunities under programs 
administered under the Small Business Act;
    (ii) Adequacy of the bundling documentation and justification; and
    (iii) Adequacy of actions taken to mitigate the effects of necessary 
and justified contract bundling on small businesses (e.g., review agency 
oversight of prime contractor subcontracting plan compliance under the 
subcontracting program).
    (2) Provide a copy of the assessment under paragraph (e)(1) of this 
section to the Agency Head and SBA Administrator.

[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; 68 FR 60012, Oct. 
20, 2003]