[Code of Federal Regulations]

[Title 13, Volume 1]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 13CFR121.406]



[Page 323-325]

 

                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 8(a) contracts?



    (a) General. In order to qualify as a small business concern for a 

small business set-aside or 8(a) contract to 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:



[[Page 324]]



    (i) Does not exceed 500 employees;

    (ii) Is primarily engaged in the retail or wholesale trade and 

normally sells the type of item being supplied; 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. Firms that add substances, parts, or components to an 

existing end item to modify its performance will not be considered the 

end item manufacturer where those identical modifications can be 

performed by and are available from the manufacturer of the existing end 

item:

    (i) SBA will evaluate the following factors in determining whether a 

concern is the manufacturer of the end item:

    (A) 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;

    (B) The importance of the elements added by the concern to the 

function of the end item, regardless of their relative value; and

    (C) The concern's technical capabilities; plant, facilities and 

equipment; production or assembly line processes; packaging and boxing 

operations; labeling of products; and product warranties.

    (ii) Firms that provide computer and other information technology 

equipment primarily consisting of component parts (such as motherboards, 

video cards, network cards, memory, power supplies, storage devices, and 

similar items) who install components totaling less than 50% of the 

value of the end item are generally not considered the manufacturer of 

the end item.

    (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.



[[Page 325]]



    (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 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.

    (e) These requirements do not apply to small business concern 

subcontractors.



[61 FR 3286, Jan. 31, 1996; 61 FR 7986, Mar. 1, 1996, as amended at 65 

FR 30863, May 15, 2000; 69 FR 29205, May 21, 2004]