[Federal Register: May 17, 2000 (Volume 65, Number 96)]
[Rules and Regulations]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 361
Minority and Women Outreach Program--Contracting
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Final rule.
SUMMARY: The Board of Directors of the Federal Deposit Insurance
Corporation (FDIC) is amending its regulation establishing an outreach
program for minority- and women-owned businesses and announcing its
policy to utilize that portion of the Federal Affirmative Action
Contracting Program, set forth in the Federal Acquisition Regulations,
providing contracting benefits to Small Disadvantaged Businesses. The
FDIC will no longer grant a price incentive based solely on race and
gender criteria. The FDIC will, however, continue its outreach programs
for minorities and women, and entities owned by them.
EFFECTIVE DATE: May 10, 2000.
FOR FURTHER INFORMATION CONTACT: Martin Blumenthal, Counsel, Legal
Division, Corporate Operations Branch, Corporate Legal Issues Section,
Contracting Law Unit (202) 736-0756; David McDermott, Chief, Policy and
Compliance Unit, Acquisition and Corporate Services Branch, Division of
Administration, (202) 942-3434; Rita Wiles Ross, Counsel, Legal
Division, Corporate Operations Branch, Legal Operations Section, Legal
Services Unit, (202) 736-3072; or Judith M. Wood, Chief, Diversity
Branch, Office of Diversity and Economic Opportunity, (202) 416-2456.
In 1989, with enactment of the Financial Institutions Reform,
Recovery and Enforcement Act (FIRREA), Congress mandated that the FDIC
augment its program for contracting activities by prescribing
``regulations to establish and oversee minority outreach program [s]
* * * to ensure inclusion, to the maximum extent possible, of
minorities and women, and entities owned by minorities and women * *
* in all contracts entered into by the agency * * *'' 12 U.S.C.
In response, the FDIC adopted a regulation that obligates and
requires the Corporation to engage in outreach efforts to identify and
register minority-and women-owned businesses (MWOBs) that can provide
the goods and services utilized by the FDIC. 12 CFR 361.6(b); Minority
and Women Outreach Program--Contracting, 57 FR 15004 (April 24, 1992).
In addition, to ensure that MWOBs are ``being included in each
solicitation, the solicitation process will include: * * * (3) Allowing
qualified MWOBs a 3% price incentive and additional technical
consideration for competitively bid services; * * *'' 12 CFR
However, the Supreme Court has held that all such racial
classifications, whether imposed by federal, state, or local
governments, must be analyzed by a reviewing court under strict
scrutiny. Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 227; 115
S.Ct. 2097, 2113 (1995). Thereafter, in 1996, the Department of Justice
invited public comments on a system designed to reform affirmative
action in federal procurement in response to Adarand. 61 FR 26042, May
23, 1996. Continuing in that vein, in 1998, the Department of Defense,
the General Services Administration, and the National Aeronautics and
Space Administration published a revision to the Federal Acquisition
Regulations (FAR) implementing a new program of affirmative action in
federal procurement. 63 FR 52426, September 30, 1998.
In this program, each year, the Department of Commerce makes a
determination as to which industries demonstrate the results of past
discrimination and are thereby eligible for a benefit in federal
contracting. The Department of Commerce also determines the size of a
price evaluation adjustment, not to exceed 10%, to be available in
those industries. In the first year of the program, eligible industries
that are generally used by the FDIC include accounting firms, asset
managers, information technology contractors, office services, and
building services. The amount of the price evaluation adjustment for
1999 is 10%.
The price evaluation adjustment is available to firms certified as
Small Disadvantaged Businesses (SDBs) by the Small Business
Administration (SBA). An SDB is a small business firm that is at least
51% owned by individuals who are both socially and economically
disadvantaged. Socially disadvantaged individuals include Black
Hispanic Americans, Asian Pacific Americans, Subcontinent Asian
Americans, and Native Americans as a class, as well as other groups
that the SBA may from time to time designate, and individuals that can
prove by a preponderance of the evidence previous discrimination on a
case-by-case basis. Economically disadvantaged individuals have an
individual net worth of less than $750,000.\1\ The standard for
determining whether a firm qualifies as ``small'' varies between
industry classifications and may be based on revenue or number of
\1\ The $750,000 excludes individual equity in a primary
residence and the value of the individual's ownership interest in
the firm seeking SDB status.
In lieu of a price incentive, an SDB may take advantage of an SDB
participation factor, if the contracting agency includes such a factor
in the procurement. A non-SDB may take advantage of the factor by
proposing to partner with an SDB or to use SDB subcontractors. An SDB
can also take advantage of this factor as the prime contractor.
However, the SDB would only be eligible for the participation factor if
it first waives the price evaluation adjustment. Utilization of SDBs as
subcontractors may also be encouraged, at the discretion of the
contracting agency, by offering prime contractors a financial incentive
to exceed the proposed SDB subcontracting. An additional payment can be
authorized where the prime contractor promises a particular monetary
target of SDB subcontracting and its actual performance exceeds that
promise. The monetary incentive can be up to 10% of the SDB
subcontracting dollars in excess of the target amount.
II. Utilization of SDB Program
The FDIC has determined that it was unlikely that the FDIC MWOB
price incentive, as implemented, would pass the Constitutional tests
enunciated by the Supreme Court in Adarand. Accordingly, although the
FDIC is not subject to the FAR, it believes that the FAR's affirmative
action contracting program provides a constitutionally sustainable
means of enhancing the opportunities for SDBs in FDIC contracting. The
FDIC will, therefore, voluntarily utilize that program in lieu of the
constitutionally questionable price incentive based on race and gender
that has been awarded in the past. 64 FR 42862 (August 6, 1999). No
comments were filed in response to that Notice.
The program, to be included in the FDIC Acquisition Policy Manual
(APM), will provide that, for goods and services acquired under Formal
Contracting Procedures, as defined in the APM, generally involving
expenditures of $100,000 or more, a price evaluation adjustment will be
available to technically qualified SDB bidders in the following
circumstances: (a) The bidder has been certified as an SDB by the SBA
under procedures set forth in 13 CFR part 124; and (b) the Standard
Industrial Classification (SIC) code for the prime contract is one in
which the Department of Commerce has authorized the use of a
preference. The eligible SICs and amount of the price evaluation
adjustment is established annually by the Department of Commerce
pursuant to 48 CFR 19.201(b).
Moreover, solicitations issued under the Formal Contracting
Procedures involving awards of $500,000 or more ($1,000,000 for
construction contracts) may also include an evaluation factor for SDB
participation in the performance of the contract. The value to be
assigned this factor, if any, is determined by the contracting officer
on a contract-by-contract basis. The prime contract need not be in a
SIC code identified as authorized by the Department of Commerce for the
use of preferences, but only SDB participation in authorized SIC codes
would be considered in the evaluation of the participation factor. SDB
participation may be in the form of subcontracts, joint ventures or
teaming partners.\2\ Where the SDB is bidding as a prime contractor in
response to a solicitation that includes an SDB participation factor,
the SDB will not be eligible for the participation factor unless it
first waives its price evaluation adjustment.\3\
\2\ Any joint venture in which an SDB undertakes to perform a
portion of the work could qualify for consideration under the SDB
participation factor. The technical value assigned to such joint
venture under the SDB participation factor would, of course, depend
on the proportion of the work to be performed by the SDB joint
venture. In other circumstances, a joint venture may itself qualify
as an SDB under SBA regulations. Generally, for a joint venture to
qualify, the SDB participant must have at least a 51% ownership
share, perform 51% of the work, and the managing partner must be
from the SDB participant.
\3\ In evaluating this factor, the contracting officer may
consider the specificity of the proposal, the enforceability of the
commitments, the complexity and variety of the work to be performed
by SDBs, the realism of the proposal, and the contractor's past
performance in complying with SDB participation goals.
Utilization of SDBs as subcontractors may also be encouraged, at
the FDIC's discretion, by offering prime contractors a financial
incentive to exceed the proposed SDB subcontracting. An additional
payment can be authorized where the prime contractor promises a
particular monetary target of SDB subcontracting and its actual
performance exceeds that promise. The monetary incentive can be up to
10% of the SDB subcontracting dollars in excess of the target amount.
The FDIC will not certify SDBs. That process will be carried out by
the SBA under procedures established in the SBA's regulations, 13 CFR
part 124. SDBs responding to FDIC solicitations are responsible for
identifying themselves and certifying their current status as an SDB.
An SDB that has applied for, but not yet received, SBA certification
may be entitled to treatment as an SDB where certification can be
obtained before the contract is awarded. It is the intention of the
FDIC to establish procedures whereby the SBA will treat FDIC
contractors seeking SDB certification in the same manner as contractors
with FAR agencies that are similarly situated. However, if
certification cannot be obtained in a timely manner, the contract may
be awarded to another bidder. \4\
\4\ The FDIC will communicate with the SBA to ensure that FDIC
contractors seeking certificaiton as SDBs are given the same
consideration as other contractors seeking similar certification.
\5\ In July 1999, the Board withdrew its proposal to amend 12
CFR part 361 that would have, inter alia, established an outreach
program for individuals with disabilities. Nevertheless, the FDIC
will continue its outreach program for individuals with disabilities
and entities owned by them as a matter of policy.
III. Final Rule
To facilitate the implementation of the policy enunciated above, we
have repealed the provisions of part 361 that confer a price incentive,
12 CFR 361.8(b)(3), as well as made other conforming amendments to the
regulations. The FDIC Office of Diversity and Economic Opportunity
(ODEO) will continue to have overall responsibility for providing the
FDIC with technical assistance and guidance to facilitate the
identification, registration and solicitation of MWOBs. ODEO is also
responsible for the Corporation's outreach efforts, such as:
(1) Identifying MWOBs that can provide legal or other services to
(2) Conducting seminars, meetings, workshops and other various
functions to promote the identification of MWOBs; and
(3) Participating in conventions, seminars, meetings, workshops and
other functions to promote the identification and inclusion of MWOBs.
Moreover, ODEO has specific responsibility for the Outreach Program
with respect to providers of non-legal services, and in addition to the
functions noted above, it will distribute information concerning the
FDIC program for outreach to MWOBs. Generally, ODEO will work with
contracting officials to ensure that
MWOBs are included on FDIC solicitation lists. \5\
ODEO will also collect information from each FDIC office and
division that performs contracting or outreach activities, on a
quarterly basis or upon request, including statistical information on
contract awards and solicitations by designated demographic categories
and related outreach activities. The FDIC will request and maintain
information on firms that have represented themselves as minority- or
women-owned for purposes of outreach efforts and statistical reporting.
The Legal Division will perform outreach efforts targeted at
providers of legal services. Generally, in addition to the functions
listed above, the Legal Division's National Outreach Coordinator will
require, at a minimum, quarterly submissions of statistical information
on legal fees and expenses paid to outside counsel by designated
demographic categories. FDIC will also encourage use of minority and
women lawyers within other firms and partnering of firms with MWOBs.
Moreover, specific procedures and activities will be detailed in the
Legal Division's Outside Counsel Deskbook as well as the FDIC's web
site at: www.fdic.gov.
Final Rule Changes
In addition to a general editorial updating and simplification of
the rule, the FDIC has amended Sec. 361.3 to remove unnecessary
definitions and to conform the definition of a minority to the SBA
definition. Section 361.4 remains essentially unchanged.
The FDIC has removed Secs. 361.7-361.10 because the FDIC will no
longer grant a price incentive based on race and gender criteria.
Statistics based on self-certification of minorities and women and
entities owned by them will be used in conjunction with survey efforts
solely for monitoring the FDIC's outreach efforts.
The FDIC is presenting this final rule in a question-and-answer
format in an effort to make the regulation easier to use. This change
does not, however, affect the substance of the regulation.
IV. Matters of Regulatory Procedure
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.), the FDIC may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid Office of Management and Budget (OMB) control number.
Public comment and OMB approval has previously been obtained for an
FDIC collection of information titled ``Acquisition Services
Information Requirements'' which includes questions regarding
contractors' minority status. This information collection, approved
under OMB control number 3064-0072, will not be changed by this final
Regulatory Flexibility Act
The FDIC has determined that this final rule may have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S.C. 604, et seq.,
because the amendment repeals the 3% incentive that FDIC rules had
provided to MWOBs, including small businesses. We invited comments on
the proposal and our initial regulatory flexibility analysis, but none
were filed. Accordingly, this final regulatory flexibility analysis has
been prepared in accordance with 5 U.S.C. 604.
In Adarand Constructors, Inc. v. Pena, 115 S.Ct. 2097 (1995), the
Supreme Court applied strict judicial scrutiny to federal affirmative
action programs that use racial or ethnic criteria as a basis for
decision making. The FDIC has determined that its price incentive for
MWOBs may not pass the Constitutional tests enunciated by the Supreme
Court in Adarand. Therefore, in this final rule, the FDIC is amending
its regulation to repeal that part of the regulation which provides a
3% incentive to MWOBs that bid on FDIC contracts. The FDIC believes
that this approach is the only readily apparent solution, because
providing any price incentive without meeting the criteria of the Court
would be constitutionally suspect.
The Federal Acquisition Regulations (FAR), 63 FR 52426 (September
30, 1998), Reform of Affirmative Action in Federal Procurement, provide
a constitutionally sustainable means of enhancing opportunities for
SDBs. The FDIC will voluntarily utilize the FAR's affirmative action
The objective of this final rule is to implement an outreach and
affirmative action procurement program consistent the Supreme Court's
decision in Adarand.
The 3% price incentive being repealed was available to MWOBs
without regard to whether such firms were also ``small'' businesses. 12
CFR 361.8(b)(3). In 1999, the FDIC awarded 2,778 contracts, including
626 (22.5%) to MWOBs. However, the overwhelming majority of those
contracts were awarded without reference to the price incentive because
the contract was for less than the $50,000 threshold in the rule, or
the purchase was made off the Federal Supply Schedule. Of the 278
awards that were subject to the price incentive, 54 (19.4%) went to
MWOBs. Based on a self-certification, the majority of those firms
(about 60%) identified themselves as small business concerns. The FDIC
anticipates that there will be no significant change in its contracting
activity for 2000. Thus, there may be some adverse effect on small
entities that enjoyed the price incentive under the regulation,
principally small, women-owned firms. However, given the FDIC's record
of contract awards where the price incentive was not applicable as well
as the benefits being conferred on SDBs under the federal affirmative
action contracting program, it is anticipated that the economic impact
on small businesses may be substantially attenuated.
Repeal of regulations establishing a 3% incentive will not impose
any new paperwork burden. Public comment and Office of Management and
Budget approval has previously been obtained for an FDIC collection of
information titled ``Acquisition Services Information Requirements''
which includes questions regarding contractors' minority- and/or women-
owned status. This information collection, approved under OMB control
number 3064-0072, will not be changed by this final rule. This rule
does not duplicate, overlap, or conflict with any other federal rules.
Because the 3% price incentive for MWOBs would likely fail the
constitutionally mandated strict scrutiny test established in the
Adarand case, the only readily apparent alternative is to repeal the
Assessment of Impact of Federal Regulation on Families
The FDIC has determined that this amendment will not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act of 1999 (Public Law 105-277).
Small Business Regulatory Enforcement and Fairness Act
Pursuant to the congressional review provisions of the Contract
with America Advancement Act of 1996, 5 U.S.C. 801 et seq., the FDIC
must report certain final rules to Congress. The Office of Management
and Budget has determined that this rule is not a ``major rule'' within
the meaning of the relevant
section of the Small Business Regulatory Enforcement Fairness Act of
1996 (SBREFA), 5 U.S.C. 801, et seq. As required by SBREFA, the FDIC
will file the appropriate reports with Congress and the General
List of Subjects in 12 CFR Part 361
Government contracts, Lawyers, Legal services, Minority businesses,
Reporting and recordkeeping requirements, Women businesses.
For the reasons set forth above, the Board of Directors of the
Federal Deposit Insurance Corporation revises part 361 of chapter III
of title 12 of the Code of Federal Regulations as follows:
PART 361--MINORITY AND WOMEN OUTREACH PROGRAM CONTRACTING
361.1 Why do minority- and women-owned businesses need this
361.2 Why does the FDIC have this outreach program?
361.3 Who may participate in this outreach program?
361.4 What contracts are eligible for this outreach program?
361.5 What are the FDIC's oversight and monitoring
responsibilities in administering this program?
361.6 What outreach efforts are included in this program?
Authority: 12 U.S.C. 1833e.
Sec. 361.1 Why do minority- and women-owned businesses need this
The purpose of the FDIC Minority and Women Outreach Program (MWOP)
is to ensure that minority- and women-owned businesses (MWOBs) are
given the opportunity to participate fully in all contracts entered
into by the FDIC.
Sec. 361.2 Why does the FDIC have this outreach program?
It is the policy of the FDIC that minorities and women, and
businesses owned by them have the maximum practicable opportunity to
participate in contracts awarded by the FDIC.
Sec. 361.3 Who may participate in this outreach program?
For purposes of this part:
(a) Minority has the same meaning as defined by the Small Business
Administration at 13 CFR 124.103(b).
(b) Legal Services means all services provided by attorneys or law
firms (including services of support staff).
Sec. 361.4 What contracts are eligible for this outreach program?
The FDIC outreach program applies to all contracts entered into by
the FDIC. The outreach program is incorporated into FDIC policies and
guidelines governing contracting and the retention of legal services.
Sec. 361.5 What are the FDIC's oversight and monitoring
responsibilities in administering this program?
(a) The FDIC Office of Diversity and Economic Opportunity (ODEO)
has overall responsibility for nationwide outreach oversight, which
includes, but is not limited to, the monitoring, review and
interpretation of relevant regulations. In addition, the ODEO is
responsible for providing the FDIC with technical assistance and
guidance to facilitate the identification, registration, and
solicitation of MWOBs.
(b) Each FDIC office that performs contracting or outreach
activities will submit information to the ODEO on a quarterly basis, or
upon request. Quarterly submissions will include, at a minimum,
statistical information on contract awards and solicitations by
designated demographic categories.
Sec. 361.6 What outreach efforts are included in this program?
(a) Each office engaged in contracting with the private sector will
designate one or more MWOP coordinators. The coordinators will perform
outreach activities for MWOP and act as liaison between the FDIC and
the public on MWOP issues. On a quarterly basis, or as requested by the
ODEO, the coordinators will report to the ODEO on their implementation
of the outreach program.
(b) Outreach includes the identification and registration of MWOBs
who can provide goods and services utilized by the FDIC. This includes
distributing information concerning the MWOP.
(c) The identification of MWOBs for the provision of legal and non-
legal services will primarily be accomplished by:
(1) Obtaining various lists and directories of MWOBs maintained by
other federal, state, and local governmental agencies;
(2) Participating in conventions, seminars and professional
meetings comprised of, or attended predominately by, MWOBs;
(3) Conducting seminars, meetings, workshops and other various
functions to promote the identification and registration of MWOBs;
(4) Placing MWOP promotional advertisements indicating
opportunities with the FDIC in minority- and women-owned media; and
(5) Monitoring to assure that FDIC staff interfacing with the
contracting community are knowledgeable of, and actively promoting, the
By Order of the Board of Directors.
Dated at Washington, DC, this 10th day of May 2000.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
[FR Doc. 00-12408 Filed 5-16-00; 8:45 am]
BILLING CODE 6714-01-P