Small Disadvantaged Business Program, 57490-57495 [E8-23472]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 73, Number 193 (Friday, October 3, 2008)]
[Rules and Regulations]
[Pages 57490-57495]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23472]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 124

RIN 3245-AF79


Small Disadvantaged Business Program

AGENCY: U.S. Small Business Administration.

ACTION: Interim final rule, with request for comments.

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SUMMARY: This rule changes the requirements relating to which firms may 
certify their status as small disadvantaged businesses (SDBs) for 
purposes of federal prime contracts and subcontracts. Currently, only 
those firms that have applied to and been certified as SDBs by SBA may 
certify themselves to be SDBs for federal prime and subcontracts. This 
rule allows firms to self-represent their status for subcontracting 
purposes without first receiving any SDB certification. It also 
recognizes that the benefits of being an SDB for federal prime 
contracts has been greatly diminished over the past years, and shifts 
the responsibility of identifying firms as SDBs for federal prime 
contracts to those limited agencies that have authority and chose to 
use price evaluation adjustments to SDBs.

DATES: Effective Date: This rule is effective October 3, 2008.
    Comment Date: Comments must be received on or before November 3, 
2008.

ADDRESSES: You may submit comments, identified by RIN: 3245-AF79, by 
any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail, for paper, disk, or CD/ROM submissions: Joseph 
Loddo, Associate Administrator, Office of Business Development, 409 
Third Street, SW., Mail Code, Washington, DC 20416.
     Hand Delivery/Courier: Joseph Loddo, Associate 
Administrator, Office of Business Development, 409 Third Street, SW., 
Washington, DC 20416.
    SBA will post all comments on www.regulations.gov. If you wish to 
submit confidential business information (CBI) as defined in the User 
Notice at www.regulations.gov, please submit the information to LeAnn 
Delaney, Deputy Director, Office of Business Development, 409 Third 
Street, SW., Washington, DC 20416, or send an e-mail to 
LeAnn.Delaney@sba.gov. Highlight the information that you consider to 
be CBI and explain why you believe SBA should hold this information as 
confidential. SBA will review the information and make the final 
determination of whether it will publish the information or not.

FOR FURTHER INFORMATION CONTACT: LeAnn Delaney, Deputy Director, Office 
of Business Development, at (202) 205-5852, or LeAnn.Delaney@sba.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1207 of the 1987 Defense Authorization Act (Pub. L. 99-661, 
codified in 10 U.S.C. 2323) for the first time established a 5 percent 
goal for all Department of Defense (DOD) contracts to be awarded to 
SDBs. To achieve the 5 percent SDB goal, the statute authorized the 
award of contracts to SDBs using less than full and open competitive 
procedures. Specifically, DOD developed through regulation a practice 
known as the ``rule of two'' for SDBs. Pursuant to the ``rule of two,'' 
whenever a contracting officer identified two or more SDBs that it 
believed could perform a specific procurement at a fair and reasonable 
price, the contracting officer was required to set the contract aside 
for bidding exclusively among SDBs. In addition, SDBs would receive a 
10% price evaluation adjustment in the evaluation of offers in an 
unrestricted or full and open competition. The DOD's SDB program was a 
self-certification program. SBA established eligibility criteria, but 
firms certified their SDB status for particular procurements. SBA

[[Page 57491]]

did, however, process protests and appeals relating to SDB status in 
connection with individual procurements.
    In 1994, Congress extended the authority granted to DOD by 10 
U.S.C. 2323 to all agencies of the Federal Government through enactment 
of the Federal Acquisition Streamlining Act (FASA), Public Law 103-355. 
However, as a result of the Supreme Court's decision in Adarand 
Constructors, Inc. v. Pe[ntilde]a, 515 U.S. 200 (1995), President 
Clinton ordered the Department of Justice (DOJ) to work with Federal 
agencies to conduct a review of all race and gender conscious Federal 
contracting programs and implement necessary regulatory reforms to 
comply with the Court's ruling. Regulations to implement FASA were 
delayed until the completion of this review.
    In 1996, DOJ completed its review and, on May 23, 1996, published 
in the Federal Register proposed reforms to these Federal preferential 
contracting programs. 61 FR 26042-6063. The ``rule of two'' and the 
corresponding SDB set-aside authority were put on hold pending further 
review. This left the price evaluation adjustment for SDBs on 
unrestricted or full and open competitions as the primary benefit for 
SDB contractors. The Department of Commerce was tasked with the 
responsibility to determine those industries in which a price 
evaluation adjustment could be used in Federal procurements. This 
included developing the methodology for determining the benchmark 
limitation and developing the methodology for calculating the size of 
the price evaluation adjustments for eligible industries.
    DOJ also proposed governmental SDB certification for all firms 
seeking to submit offers as SDBs for Federal prime contracts and 
subcontracts. DOJ believed that a governmental certification would 
ensure that those who were receiving SDB benefits were truly SDB 
qualified in accordance with the standards established by SBA, and 
would readily meet the Adarand strict scrutiny test. The proposal 
included language that allowed procuring agencies to certify concerns 
as eligible for the SDB program, or ``In the alternative, an agency may 
enter into an agreement with SBA to have SBA make all determinations, 
including the initial determination of eligibility.'' Id. at 26044. 
Because of SBA's long-term experience in determining social and 
economic disadvantage for the 8(a) program and in connection with SDB 
protests, agencies were strongly encouraged to enter into an agreement 
with SBA. In August 1997 and June 1998, SBA published regulations, 
including standards and procedures, governing the SDB certification 
process.
    On December 9, 2004, Congress allowed the price evaluation 
adjustment authority for SDBs to expire for the majority of Federal 
procuring agencies. Nevertheless, it remains in effect through 2009 for 
DOD, the National Aeronautics and Space Administration (NASA), and the 
Coast Guard. However, Section 801 of the Strom Thurmond National 
Defense Authorization Act for Fiscal Year 1999, Public Law, 105-261, 
amended 10 U.S.C. Sec.  2323(e) to prohibit DOD from using the SDB 
price evaluation preference if the Secretary determines at the 
beginning of the fiscal year that DOD achieved the SDB 5% goal in the 
most recent fiscal year for which data are available. DOD has met the 
5% goal each year since. As such, DOD has not used the SDB price 
evaluation preference in DOD prime contracts since 1999. Data in the 
Federal Procurement Data System indicates that NASA and the Coast Guard 
rarely use the price evaluation adjustment.
    Thus, at this point, only two agencies (NASA and the Coast Guard) 
are currently able to use the SDB price evaluation preference, and 
their use is minimal. Considering this, having SBA certify SDBs 
Government-wide for prime contracts is no longer the most efficient or 
effective way to certify firms. This rule removes SBA from the SDB 
certification process. In terms of prime contracts, the rule will have 
those procuring agencies that have an SDB prime contracts program 
certify firms as SDBs where the need to do so arises. In other words, 
if an agency uses the Price Evaluation Adjustment, then they should 
develop procedures for certifying SDBs. But in all other cases, 
agencies can rely on self-certification of SDBs. The rule recognizes 
that the approximately 9,545 firms currently participating in the 8(a) 
Business Development (BD) program are deemed certified SDB firms during 
their tenure in the 8(a) BD program. In addition, the approximately 
2,814 SBA-certified SDB firms will remain as SDB certified firms for a 
period of three years from the date of their certifications where they 
continue to meet all applicable requirements. Finally, the rule gives 
procuring agencies that have an SDB prime contracts program the 
authority to accept SDB certifications made by private certifying 
entities and state and local governments where the procuring agencies 
believe that it is appropriate to do so. For all of these reasons, SBA 
does not believe that there will be a great burden on these procuring 
agencies to certify firms as SDBs for their programs.
    The rule's effect of having procuring agencies make SDB 
certifications is consistent with one of the alternatives set forth in 
the 1996 DOJ SDB proposal. In order to make the transition smoother, 
SBA will conduct training seminars designed to instruct personnel from 
other agencies on the procedures for making eligibility determinations. 
This training component is also consistent with the DOJ proposal.
    Moreover, as noted above, any firm seeking to represent itself as a 
SDB for a subcontract on a federal prime contract must currently also 
be certified as an SDB by SBA. Requiring certification for subcontracts 
is not required by law, and may contradict the express language of the 
Small Business Act. In this regard, Sec.  8(d)(3)(F) of the Small 
Business Act, 15 U.S.C. 637(d)(3)(F), states: ``Contractors acting in 
good faith may rely on written representations by their subcontractors 
regarding their status as * * * a small business concern owned and 
controlled by socially and economically disadvantaged individuals * * 
*'' (Emphasis added). This language clearly suggests that Congress 
intended to allow large business prime contractors to rely on the self 
representations of subcontractors claiming to be SDBs.
    SBA believes that the clear language of the Small Business Act 
should be adhered to. As such, SBA's regulatory change permits firms to 
self-represent their status as SDBs for subcontracts.

Specific Regulatory Changes

    Section 124.1001 is amended to eliminate references to SBA 
performing SDB certifications. It also changes the provisions regarding 
which firms can certify their status as SDBs for both federal prime 
contracts and subcontracts on federal prime contracts. The rule 
eliminates the requirement that a firm must have received an SDB 
certification from SBA before it can represent itself to be an SDB. In 
order for a concern to represent that it is an SDB in order to receive 
a benefit as a prime contractor on a Federal Government procurement, 
the rule states that a firm must: (1) Be a current Participant in SBA's 
8(a) BD program; (2) have been certified by SBA as an SDB within three 
years of the date it seeks to certify as an SDB; (3) have received 
certification from the procuring agency that it qualifies as an SDB; or 
(4) have submitted an application for SDB certification to the 
procuring agency and must not have received a negative determination 
regarding that application. For subcontracts, the rule permits a firm 
to represent that it

[[Page 57492]]

qualifies as an SDB if it believes in good faith that it is owned and 
controlled by one or more socially and economically disadvantaged 
individuals.
    The rule eliminates current Sec. Sec.  124.1003 through 124.1007 
relating to Private Certifiers. When SBA first promulgated regulations 
implementing the Government-wide SDB program, SBA anticipated having 
entities called ``Private Certifiers'' to assist in processing SDB 
applications. The Private Certifier aspect of the SDB program never 
materialized. As such, there do not need to be regulations pertaining 
to them.
    The rule moves the content of current Sec.  124.1008, regarding how 
a firm becomes certified as an SDB, to Sec.  124.1003. It also removes 
the elaborate procedures for applying to SBA (or a Private Certifier) 
to become certified as an SDB. While the procedures are eliminated from 
SBA's regulations, SBA expects that some of the substance would be 
preserved in any procedures developed by procuring agencies. For 
example, the provision requiring individuals who are not members of 
groups presumed to be socially disadvantaged to submit statements 
identifying personally how their entry into or advancement in the 
business world has been impaired due to their having one or more 
distinguishing features would be required by individual procuring 
agencies that process applications for SDB certification.
    Section 124.1004 pertains to misrepresentations of SDB status, and 
evolves from current Sec.  124.1011. On a prime contract, a firm that 
represents that it is an SDB will be deemed to have misrepresented its 
status as an SDB if it (1) is not currently a Participant in the 8(a) 
BD program; (2) did not receive an SBA SDB certification within three 
years of its representation; (3) has not received an SDB certification 
from the procuring agency, or has not applied to the procuring agency 
for SDB certification; or (4) has received a negative determination. 
For a subcontract, a misrepresentation will occur where there is not a 
good faith belief that the firm is owned and controlled by one or more 
socially and economically disadvantaged individuals. Any certification 
by a firm that SBA found not to qualify as an SDB in connection with an 
SDB protest or otherwise will be deemed a misrepresentation of SDB 
status if the firm has not overcome the reason(s) for the negative 
determination.
    The rule also removes current sections 124.1012 and 124.1013. 
Because SBA will no longer certify firms as SDBs, provisions relating 
to firms reapplying to SBA after receiving a negative determination 
similarly will no longer be needed. In addition, other than its list of 
certified 8(a) firms, SBA will no longer maintain a list of certified 
SDB firms. As such, any references to such a list will be eliminated.
    The substance of current Sec. Sec.  124.1014 and 124.1016 is moved 
to Sec. Sec.  124.1005 and 124.1006, respectively. Current Sec.  
124.1015 is removed as unnecessary.
    Finally, under this rule, SBA continues to handle protests and 
appeals of SDB status in the same manner as it does currently. The 
protest procedures are similar to applying to SBA for SDB 
certification. SBA requires the same information and whatever forms or 
supporting materials deemed relevant. Current Sec. Sec.  124.1017 
through 124.1024 are redesignated as Sec. Sec.  124.1007 through 
124.1014, respectively. SBA's final decision in an SDB protest or 
appeal is binding on all interested parties. If for example a procuring 
agency had found a firm to qualify as an SDB and SBA, through an SDB 
protest or appeal, ruled that the firm did not qualify as an SDB, SBA's 
decision would overrule the procuring agency determination. In 
addition, if in connection with a protest SBA finds that a firm does 
not qualify as a SDB for a contract that has been awarded, the 
procuring agency cannot take SDB goaling credit for that contract.

II. Justification for Publication as Interim Final Status Rule

    In general, SBA publishes a rule for public comment before issuing 
a final rule, in accordance with the Administrative Procedure Act and 
SBA regulations. 5 U.S.C. 553 and 13 CFR 101.108. The Administrative 
Procedure Act provides an exception to this standard rulemaking 
process, however, where an agency finds good cause to adopt a rule 
without prior public participation. 5 U.S.C. 553(b)(3)(B). The good 
cause requirement is satisfied when prior public participation is 
impracticable, unnecessary, or contrary to the public interest. Under 
such circumstances, an agency may publish an interim final rule without 
soliciting public comment.
    In enacting the good cause exception to standard rulemaking 
procedures, Congress recognized that emergency situations arise where 
an agency must issue a rule without public participation. SBA must 
cease performing SDB certifications as of September 30, 2008. If this 
rule is not effective before that date, SBA might risk a violation of 
the Anti-Deficiency Act. SBA does not receive any Congressional funding 
for processing applications for SDB certification, but instead seeks 
re-imbursement from those Federal Agencies that utilize SBA's 
certification in making SDB awards under the Economy Act, (31 U.S.C. 
1535). Some of these top 20 procuring agencies have notified SBA that 
they will cease reimbursement for the SDB certification services as of 
September 30, 2008. The SDB Program is a statutory requirement for only 
two agencies, the Coast Guard and the NASA. Other Agencies have 
benefited from the SDB price evaluation preference in the past, but 
that law expired for most agencies in 2004. In order for an Agency to 
order and reimburse for services under the Economy Act, it must receive 
a benefit from those services. The benefit most procuring Agencies 
receive from the SDB certification services is minimal in their view, 
and some have notified SBA that they will not continue reimbursements 
in Fiscal Year 2009. Basically, the main residual benefit is for the 
procuring agencies to track their SDB goaling requirement in 15 U.S.C. 
644(g)(1) (the SDB goal is 5 percent of all prime contract and 
subcontract awards for each fiscal year). The loss of so many paying 
agencies and the inability of SBA to use its own appropriations to make 
up for shortfalls, results in a lack of funding for a viable SDB 
certification program. SBA is unable to use its own funds to make up 
any shortfall because the SDB Program is not an SBA program; the SDB 
program is a government wide service that SBA agreed to provide under 
Economy Act through interagency shared funding in 1996. Therefore, SBA 
cannot provide these SDB certification services beyond the end of 
Fiscal Year 2008 using SBA appropriations.
    SBA has 2,814 SDB firms other than 8(a) participants as eligible 
solely for SDB status. Without this Interim Final Rule, which will 
allow them to self-represent their SDB status in good faith to 
Agencies, there will be no way, after SBA ceases certification 
services, for Agencies to continue to meet their annual SDB goaling 
requirements or for any SDBs that are not certified to be considered 
for SDB procurements. It is critical that this rule be issued so these 
affected businesses can prepare for the self-representation process.
    Accordingly, SBA finds that good cause exists to publish this rule 
as an interim final rule in light of the urgent need. Advance 
solicitation of comments for this rulemaking would be impracticable and 
contrary to the public interest, as it would harm those small 
businesses seeking SDB procurements.

[[Page 57493]]

Any such delay would be extremely prejudicial to the affected 
businesses.
    Although this rule is being published as an interim final rule, 
comments are hereby solicited from interested members of the public. 
These comments must be received on or before November 3, 2008. SBA may 
then consider these comments in making any necessary revisions to these 
regulations.

III. Justification for Immediate Effective Date of Interim Final Rule

    The APA requires that ``publication or service of a substantive 
rule shall be made not less than 30 days before its effective date, 
except * * * as otherwise provided by the agency for good cause found 
and published with the rule.'' 5 U.S.C. 553(d)(3). SBA finds that good 
cause exists to make this final rule effective the same day it is 
published in the Federal Register.
    The purpose of the APA provision is to provide interested and 
affected members of the public sufficient time to adjust their behavior 
before the rule takes effect. For the reasons set forth above in II, 
Justification of Publication of Interim Final Status Rule, SBA finds 
that good cause exists for making this interim final rule effective 
immediately, instead of observing the 30-day period between publication 
and effective date.
    SBA is aware of many entities that will be assisted by the 
immediate adoption of this rule.

Compliance with Executive Orders 12866, 12988, 13175, and 13132, the 
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork 
Reduction Act (44 U.S.C., Ch. 35)

Executive Order 12866

    OMB has determined that this rule is significant regulatory action 
for purposes of Executive Order 12866. OMB has also determined that 
this rule is not major under the Congressional Review Act.
    Because this rule is a significant regulatory action, a Regulatory 
Impact Analysis, discussing the need, cost, benefits and alternatives 
to the rule is required.
1. Is there a need for this regulatory action?
    Yes, there is a need for this regulatory action. Under the existing 
regulation, SBA is required to perform SDB certification services for 
other Agencies. 13 CFR s. 124.1001(c). In addition, the FAR defines an 
SDB as a small business that has received certification from SBA as a 
SDB consistent with 13 CFR 124, Subpart B. This Interim Final Rule is 
necessary since SBA must cease performing SDB certifications as of the 
end of Fiscal Year 2008 due to a lack of funding. By the time this 
Interim Final Rule has been published, SBA will have initiated a FAR 
case to make the conforming changes to the FAR. These changes will 
ensure that eligible SDBs will be able to continue to compete for SDB 
procurements that Agencies use to meet their SDB statutory goals, as 
well as use the SDB price evaluation preference for NASA and Coast 
Guard, by self-representing their SDB status. It may also open up other 
Agencies using either private SDB certifiers or establishing Agency-
specific SDB programs. In addition, it will allow these SDBs to 
continue to participate in the Department of Transportation's (DOTs) 
Disadvantaged Business Enterprise Program, 49 CFR 26.5, which has 
relied upon the SBA and FAR SDBs status. Moreover, the SBA Office of 
Inspector General early on recognized that the current funding 
structure for the SDB Program is unreliable and unpredictable and that 
there was no legal basis that assured the other Agencies would continue 
funding the SDB Program. SBA OIG Audit Report No. 00-19, SDB 
Certification Program Obligations and Expenditures. Without continued 
interagency funding, SBA is unable to continue to support the existing 
rule process by certifying SDBs for the entire Federal Government.
2. What are the potential benefits and costs of this regulatory action?
    Currently, SBA has certified only 2,814 firms other than 8(a) 
participants as eligible solely for SDB status. From FY 98 through FY 
07 SBA has been reimbursed by procuring agencies over $27.5 million for 
these SDB certifications. The procuring agencies are obligated to 
reimburse SBA another $1.2 million in FY 2008, so total reimbursements 
from procuring agencies will exceed $28.7 million since FY 1998.
    The SDB procurement goal achievement calculation includes 8(a) 
certified firms (9,994) and SDB certified firms (2,814). Firms 
certified as 8(a) are also considered to be SDB for statistical 
purposes. In FY 2005 Federal agencies reported SDB contracts awarded to 
SDBs totaling $21.7 billion. When 8(a) contract award dollars are 
subtracted, the contracts awarded to SDBs in dollars totaled $11.2 
billion, of which DoD awarded $7.4 billion or 66%. DoD was successful 
in awarding this amount without the use of the SDB price evaluation 
adjustment. Based on conversations with the other Federal agencies, 
virtually all of the remaining SDB dollars, $3.8 billion, were awarded 
under full and open competition without the use of the SDB price 
evaluation adjustment. During this same period, the Federal Government 
exceeded the SDB 5% goal, reaching 6.92%.
    The SDB certification process is time consuming and costly for many 
small businesses. During the past five years, the Federal Government 
has exceeded the statutory 5% SDB goal without the use of the SDB price 
evaluation adjustment. Eliminating SDB certification would have little 
negative impact on the SDB community as long as self-representation is 
allowed. Presently, there is minimal use of the SDB price evaluation 
adjustment at the Federal prime contract level. Specifically, Congress 
allowed the SDB price evaluation adjustment authority to expire on 
December 9, 2004 for all but two agencies. Authority for the two 
remaining agencies was reauthorized for another three years to 2009. 
However, for the most part these agencies are not using the price 
evaluation preference to meet the 5% SDB goal. Therefore, at the prime 
contract level, there is little or no benefit for a firm to expend 
substantial time and expense to obtain SDB certification.
    Therefore, continuation of the existing SDB certification process 
is costly, time consuming and burdensome. As opposed to this, self-
representation by firms of their status in good faith is cheaper, 
quicker and less burdensome. SBA will continue to provide an appeal 
process for contract protests and SDB status. Allowing firms to self 
represent at the subcontracting level appears to be consistent with 
Congressional intent.
3. What are the alternatives to this rule?
    SBA has identified three separate alternatives to this rule: (1) 
Self-representation; (2) private certification, and (3) agency specific 
SDB certification programs.
    We believe self-representation is supported by the relevant 
statute. In terms of subcontracting, Sec.  8(d)(3)(F) of the Small 
Business Act, 15 U.S.C. 637(d)(3)(F), states: ``Contractors acting in 
good faith may rely on written representations by their subcontractors 
regarding their status as * * * a small business concern owned and 
controlled by socially and economically disadvantaged individuals, * * 
* '' (Emphasis added). This language suggests that Congress intended to 
allow large business prime contractors to rely on self certifications 
by companies claiming to be SDBs. Small business concerns would make 
the self-representation as an SDB in good faith and the determination 
would be subject

[[Page 57494]]

to SBA SDB protest and appeal procedures.
    Private certifiers were contemplated under the existing SBA SDB 
regulations, but none were ever approved. 13 CFR 124.1003-.1009. 
However, the Private Certifier structure is available if an Agency 
wanted to go replicate or approximate those regulations and proceed 
with that option. Since a Private Certifier must be compensated by the 
Agency hiring them under contract, this option does require a 
procurement action and Agency funding and oversight.
    Agency-specific SDB certification programs could also be 
established by interested Agencies. We believe this would require 
rulemaking and the commitment of Agency resources to creation and 
maintenance of each Agency's SDB program. SBA will also provide 
training and educational assistance on how to implement and administer 
a SDB certification program to any interested Agency.

Executive Order 12988

    This action meets applicable standards set forth in Sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.

Executive Order 13132

    For purposes of E.O. 13132, the SBA has determined that the rule 
will not have substantial, direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. Therefore, for the purpose of Executive Order 13132, 
Federalism, SBA determines that this Interim Final Rule has no 
federalism implications warranting preparation of a federalism 
assessment.

Executive Order 13175, Tribal Summary Impact Statement

    For the purposes of Executive Order 13175, Consultation and 
Coordination with Indian Tribal Governments, SBA has determined that 
this Interim Final Rule will not have a substantial direct effect on 
one or more Indian tribes, on the relationship between the Federal 
Government and Indian Tribes, or on the distribution of power and 
responsibilities between the Federal Government and Indian tribes.

Paperwork Reduction Act, 44 U.S.C. Ch. 35

    SBA has determined that this proposed rule does not impose 
additional reporting or recordkeeping requirements under the Paperwork 
Reduction Act, 44 U.S.C., Chapter 35.

Regulatory Flexibility Act, 5 U.S.C. 601-612

    Because the rule is an interim final rule, there is no requirement 
for SBA to prepare an Initial Regulatory Flexibility Act (IRFA) 
analysis. The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small non-profit businesses, and small local 
governments. Pursuant to the RFA, when an agency issues a rule, the 
agency must prepare an IRFA which describes whether the impact of the 
rule will have a significant economic impact on a substantial number of 
small entities. However, the RFA requires analysis of a rule only where 
notice and comment rulemaking are required. Rules are exempt from 
Administrative Procedure Act (APA) notice and comment requirements and 
therefore from the RFA requirements when the agency for good cause 
finds (and incorporates the finding and a brief statement of reasons in 
the rules issued) that notice and public procedure thereon is 
impracticable, unnecessary, or contrary to the public interest. In this 
case it would be contrary to the public interest to delay the 
promulgation of the rule.

List of Subjects in 13 CFR Part 124

    Administrative practice and procedure, Government procurement, 
Hawaiian Natives, Indians--business and finance, Minority businesses, 
Reporting and recordkeeping requirements, Technical assistance.

0
For the reasons stated in the preamble, the Small Business 
Administration amends title 13 CFR part 124 as follows:

PART 124--8(A) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS 
STATUS DETERMINATIONS

Subpart B--Eligibility and Protests Relating to Federal Small 
Disadvantaged Business Programs

0
1. The authority citation for part 124 continues to read as follows:

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d) and 
Public Law 99-661, Public Law 100-656, sec. 1207, Public Law 101-37, 
Public Law 101-574, section 8021, Public Law 108-87, and 42 U.S.C. 
9815.


0
2. Revise Sec.  124.1001 to read as follows:


Sec.  124.1001  General applicability.

    (a) This subpart defines a Small Disadvantaged Business (SDB). It 
also establishes procedures by which SBA determines whether a 
particular concern qualifies as an SDB in response to a protest 
challenging the concern's status as disadvantaged. Unless specifically 
stated otherwise, the phrase ``socially and economically disadvantaged 
individuals'' in this subpart includes, Indian tribes, ANCs, CDCs, and 
NHOs.
    (b) In order for a concern to represent that it is an SDB in order 
to receive a benefit as a prime contractor on a Federal Government 
procurement, it must:
    (1) Be a current Participant, as defined in Sec.  124.3 of this 
part, in SBA's 8(a) BD as described in Sec.  124.1 of this part, 
program;
    (2) Have been certified by SBA as an SDB within three years of the 
date it seeks to certify as an SDB;
    (3) Have received certification from the procuring agency that it 
qualifies as an SDB; or
    (4) Have submitted an application for SDB certification to the 
procuring agency and must not have received a negative determination 
regarding that application.
    (c) A firm may represent that it qualifies as an SDB for any 
Federal subcontracting program if it believes in good faith that it is 
owned and controlled by one or more socially and economically 
disadvantaged individuals.
0
3. Revise Sec. Sec.  124.1003 through 124.1006 to read as follows:


Sec.  124.1003  How does a firm become certified as an SDB?

    (a) All firms that are current Participants in SBA's 8(a) BD 
program are automatically deemed to be certified SDBs.
    (b) Any firm seeking to be certified as an SDB in order to 
represent that it qualifies and is eligible to obtain a benefit on a 
federal prime contract as an SDB may apply to the procuring agency for 
such certification.
    (c) A procuring agency may accept a certification from another 
entity (e.g., a private certifying entity, or a state or local 
government) that a firm qualifies as an SDB if the agency deems it 
appropriate.


Sec.  124.1004  What is a misrepresentation of SDB status?

    (a) Any person or entity that misrepresents a firm's status as a 
``small business concern owned and controlled by socially and 
economically disadvantaged individuals'' (``SDB status'') in order to 
obtain an 8(d) or

[[Page 57495]]

SDB contracting opportunity or preference will be subject to the 
penalties imposed by section 16(d) of the Small Business Act, 15 U.S.C. 
645(d), as well as any other penalty authorized by law.
    (b)(1) A representation of SDB status on a federal prime contract 
will be deemed a misrepresentation of SDB status if the firm does not 
meet the requirements of Sec.  124.1001(b).
    (2) A representation of SDB status on a subcontract to a federal 
prime contract will be deemed a misrepresentation of SDB status if the 
firm does not have a good faith belief that it is owned and controlled 
by one or more socially and economically disadvantaged individuals. Any 
certification by a firm that SBA found not to qualify as an SDB in 
connection with an SDB protest or otherwise will be deemed a 
misrepresentation of SDB status if the firm has not overcome the 
reason(s) for the negative determination.
    (3) Any representation of SDB status by a firm that SBA has found 
not to qualify as an SDB in connection with a protest or SBA-initiated 
SDB determination will be deemed a misrepresentation of SDB status if 
the firm has not overcome the reason(s) set forth in SBA's written 
decision.


Sec.  124.1005  How long does an SDB certification last?

    (a) A firm that is certified to be an SDB will generally be 
certified for a period of three years from the date of the 
certification.
    (b) A firm's SDB certification will extend beyond three years where 
SBA finds the firm to be an SDB:
    (1) In connection with a protest challenging the firm's SDB status 
(see Sec.  124.1013(h)(2));
    (2) In connection with an SBA-initiated SDB determination (see 
Sec.  124.1006); or
    (3) As part of an 8(a) BD annual review.
    (c) A firm that completes its nine-year program term in the 8(a) BD 
program will continue to be deemed a certified SDB firm for a period of 
three years from the date of its last 8(a) annual review.


Sec.  124.1006  Can SBA initiate a review of the SDB status of a firm 
claiming to be an SDB?

    SBA may initiate an SDB determination on any firm that has been 
certified to be an SDB by a procuring agency or that has represented 
itself to be an SDB on a subcontract to a federal prime contract 
whenever it receives credible information calling into question the SDB 
status of the firm. Upon its completion of an SDB determination, SBA 
will issue a written decision regarding the SDB status of the 
questioned firm. If SBA finds that the firm continues to qualify as an 
SDB, the determination remains in effect for three years from the date 
of the decision.

0
3. Remove Sec. Sec.  124.1007 through 124.1016 and redesignate 
Sec. Sec.  124.1017 through 124.1024 as Sec. Sec.  124.1007 through 
124.1014, respectively.

Sandy K. Baruah,
Acting Administrator.
 [FR Doc. E8-23472 Filed 10-2-08; 8:45 am]
BILLING CODE 8025-01-P