Acquisition Process: Task and Delivery Order Contracts, Bundling, Consolidation, 29130-29165 [2012-11317]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 77, Number 95 (Wednesday, May 16, 2012)]
[Proposed Rules]
[Pages 29130-29165]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-11317]



[[Page 29129]]

Vol. 77

Wednesday,

No. 95

May 16, 2012

Part VI





Small Business Administration





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13 CFR Parts 121, 124, 125 et al.





 Acquisition Process: Task and Delivery Order Contracts, Bundling, 
Consolidation; Proposed Rule

Federal Register / Vol. 77 , No. 95 / Wednesday, May 16, 2012 / 
Proposed Rules

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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 124, 125, 126, and 127

[Docket No.: SBA-2011-011]
RIN 3245-AG20


Acquisition Process: Task and Delivery Order Contracts, Bundling, 
Consolidation

AGENCY: Small Business Administration.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The U.S. Small Business Administration (SBA) proposes to amend 
its regulations governing small business contracting procedures. This 
proposed rule would amend SBA's regulations to implement the following 
sections of the Small Business Jobs Act of 2010: section 1311 
(definition of multiple award contract); section 1313 (consolidation of 
contracts definitions, policy, limitations on use, determination on 
necessary and justified); and section 1331 (reservation and set-aside 
of multiple award contracts and orders against multiple award contracts 
for small businesses). In addition, the proposed rule revises 13 CFR 
part 125 by reorganizing the part for clarity and creating a definition 
section.

DATES: You must submit your comments on or before July 16, 2012.

ADDRESSES: You may submit comments, identified by RIN: 3245-AG20, by 
any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail, Hand Delivery/Courier: Dean Koppel, Assistant 
Director, Office of Policy and Research, Office of Government 
Contracting, U.S. Small Business Administration, 409 Third Street SW., 
Washington, DC 20416.
    All comments will be posted on https://www.regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at https://www.regulations.gov, please submit the 
comments to Dean Koppel and highlight the information that you consider 
to be CBI and explain why you believe this information should be held 
confidential. SBA will make a final determination as to whether the 
comments will be published or not.

FOR FURTHER INFORMATION CONTACT: Dean Koppel, Assistant Director, 
Office of Policy and Research, Office of Government Contracting, U.S. 
Small Business Administration, 409 Third Street SW., Washington, DC 
20416, (202) 205-7322.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

    This proposed rule seeks to ensure the increased consideration of 
small businesses in connection with the establishment and use of 
multiple award contracts and acquisitions that consolidate contracts, 
consistent with sections 1311, 1313, and 1331 of the Jobs Act. Over the 
past 15 years, Federal agencies have increasingly used multiple award 
contracts--including the Multiple Award Schedules (MAS) contracts 
managed by the General Services Administration (GSA), governmentwide 
acquisition contracts, multi-agency contracts, and agency-specific 
indefinite-delivery indefinite-quantity (IDIQ) contracts--to acquire a 
wide range of products and services. They have also consolidated 
acquisitions, often through the use of multiple award contracts, to 
eliminate duplicative efforts, save money by pooling their buying 
power, and reduce administrative costs. While these actions provide an 
important foundation for achieving greater fiscal responsibility, they 
have also created challenges for agencies seeking to take full 
advantage of the many benefits that small business provide to our 
taxpayers: creativity, innovation, cost-effective technical expertise, 
and job growth and economic expansion, as well as maximizing awards to 
small businesses as both prime and subcontractors in fulfilling the 
Government's statutory small business goals.
    In September 2010, the President's Interagency Task Force on Small 
Business Contracting made a series of recommendations to increase 
procurement opportunities for small businesses in the federal 
marketplace. These recommendations included a strengthened policy on 
set-asides that ``rationalizes and appropriately balances the need for 
efficiency with the need to maximize opportunities for small 
businesses.'' The Task Force further recommended guidance to clarify 
practices and strategies to prevent unjustified contract bundling and 
mitigate any negative effects of justified contract bundling on small 
businesses. The same month these recommendations were issued, the 
President signed the Jobs Act which included provisions that address 
both of these issues. Both actions recognize the significant 
opportunities that exist to increase small business participation on 
multiple award contracts and the ability of set asides--the most 
powerful small business contracting tool--to unlock these 
opportunities. These actions also recognize the continued attention 
that is required to ensure agencies avoid unjustified bundling and 
mitigate the negative effects of justified bundling. This proposed rule 
is designed to address these important issues and implement the 
provisions of the Jobs Act that deal with them.

A. Multiple Award Contracts and the Use of Set-Asides, Partial Set-
Asides and Reserves

    Section 1331 of the Jobs Act requires the Administrator for the 
Office of Federal Procurement Policy (OFPP) and the Administrator for 
the Small Business Administration (SBA), in consultation with the 
Administrator of GSA, to establish regulations under which Federal 
agencies may: (1) Set-aside part or parts of a multiple award contract 
for small business, (2) reserve one or more awards on multiple award 
contracts that are established through full and open competition, and 
(3) set aside orders under multiple award contracts awarded pursuant to 
full and open competition that have not been set aside, partially set 
aside, or include a reserve for small businesses. Section 1331 of the 
Jobs Act does not revise or repeal the requirement for a contracting 
officer to set aside a contract for exclusive small business 
participation if the contracting officer determines that capable small 
businesses can meet the contract's requirements.
    Last November, SBA and OFPP, in consultation with GSA, requested 
that the Department of Defense (DOD), GSA, and the National Aeronautics 
and Space Administration (NASA) publish an interim rule in order to 
provide agencies with initial guidance that they can use to take 
advantage of the authorities addressed in section 1331. Among other 
things, the interim rule makes clear that set-asides may be used in 
connection with the placement of orders under multiple award contracts, 
notwithstanding the requirement to provide each contract holder a fair 
opportunity to be considered, and further makes clear that order set-
asides may be used in connection with the placement of orders and 
blanket purchase agreements under Multiple Award Schedule contracts. 
While the interim rule amends existing solicitation provisions and 
contract clauses to provide notice of set-asides, it does not define 
terms, such as ``reserve''; nor does it provide guidance for how to 
apply the various section 1331 authorities.
    This proposed rule provides more specific guidance to ensure both 
that meaningful consideration of set-asides and reserves is given in 
connection with the award of multiple award contracts

[[Page 29131]]

and task and delivery orders placed against them, and that these tools 
are used in a consistent manner across agencies. To achieve these 
results, including the requirement in section 1331 that use of the 
tools be left to the discretion of agencies, SBA's proposed rule takes 
the following four steps:
    1. Definition of terms and processes. As stated above, section 1331 
covers three authorities: (i) Partial set-asides, (ii) contract 
reserves, and (iii) order set-asides for small businesses. The proposed 
rule provides guidance on each of these authorities, defining key terms 
and laying out processes for each tool.
    (i) Partial set-asides. The proposed rule explains at Sec.  
125.1(n) that the term ``partial set-aside'' for a multiple award 
contract means a contracting vehicle that can be used when market 
research indicates that a total set-aside is not appropriate but the 
procurement can be broken up into smaller discrete portions or 
categories (such as contract line items) and two or more small business 
concerns, including 8(a) Business Development (BD) Participants, 
Historically Underutilized Business Zone (HUBZone) small business 
concerns, Service Disabled Veteran-Owned small business concerns (SDVO 
SBCs) and Women-Owned Small businesses concerns (WOSBs) or Economically 
Disadvantaged WOSBs are expected to submit an offer on the set-aside 
part or parts of the requirement at a fair market price. The rule would 
allow for small businesses to submit an offer on the set-aside portion, 
non-set aside portion, or both. See proposed Sec.  125.2(e)(3). This 
approach would replace the more cumbersome process currently found at 
Federal Acquisition Regulation (FAR) Sec.  19.502-3 that requires small 
businesses to first submit responsive offers on the non-set-aside 
portion in order to be considered for the set-aside portion. The FAR's 
partial set-aside process has proven to be unnecessarily complicated, 
which has resulted in its underutilization over time.
    (ii) Contract reserves. The proposed rule establishes a process, at 
Sec.  125.2(e)(4), for agencies to reserve awards for small businesses 
(including Small Business Teaming Arrangements) under a multiple award 
contract awarded pursuant to full and open competition if the 
requirement cannot be broken into discrete components to support a 
partial set-aside and market research shows that either at least two 
small businesses could perform on a part of the contract or at least 
one small business could perform all of the contract. Reserves have 
been used by a number of agencies, but there has not been a common 
understanding of what the term means or a uniform approach to its 
application. Many agencies have reserved awards for small businesses 
only to make them compete on an unrestricted basis with other-than-
small business contract holders because of the statutory requirement to 
provide a fair opportunity for all multiple award contract holders to 
be considered. Small businesses were especially vocal in providing 
feedback to SBA during its 2011 Jobs Tour about their frustration at 
having to expend resources to become contract holders only to find 
themselves repeatedly competing against large businesses for work when 
two or more small businesses were available under the contract and 
could have competed effectively under a set-aside to perform work at a 
fair and reasonable price. To address this concern, the rule provides 
that orders must be set-aside aside for small businesses if the rule-
of-two or any alternative set-aside requirements provided in SBA's 
small business program have been met.
    (iii) Order set-asides. The proposed rule also lays out processes, 
at Sec.  125.2(e)(6), that permit agencies, when awarding multiple 
award contracts pursuant to full and open competition without either 
partial set-asides or reserves, to make commitments to set aside 
orders, or preserve the right to consider set-asides, when the rule of 
two is met. The contracting officer would state in the solicitation and 
resulting contract what process would be used--e.g., automatic 
application of set-asidesor preservation of right to consider set-
asides. These alternatives maximize agencies' flexibility in exercising 
their discretion to determine when and how best to use set-asides under 
multiple award contracts.
    Finally, the proposed rule states at Sec.  125.1(k) that the term 
``multiple award contract'' includes MAS contracts issued by GSA--or 
agencies to which GSA has delegated authority. This clarification is 
consistent with the interim FAR rule which, as explained above, states 
(at FAR 8.405-5(a)) that order set-asides may be used in connection 
with the placement of orders and BPAs under MAS contracts. The MAS 
Program provides an important contracting gateway to help agencies 
reach small businesses. It is the largest acquisition program in the 
Federal Government built on MACs; nearly $40 billion in sales went 
through the MAS contracts managed by GSA in FY 2011. As a general 
matter, SBA anticipates that Schedule orders would be conducted using a 
modified version of the process set forth at 125.2(e)(6). A contracting 
officer, at his or her discretion, may set aside a Schedule order by 
including language in its request for quote that the order is a set 
aside for small business and only quotes submitted by a small business 
concern (or a specific category of small businesses) will be accepted. 
GSA's Federal Acquisition Service is modifying its schedules to include 
all appropriate set-aside clauses and has developed both written and 
webinar training for agency customers. For additional information on 
using set-asides on orders, agencies should go to www.gsa.gov.
    2. Documentation of consideration given to section 1331 
authorities. SBA seeks to ensure that agencies give meaningful 
consideration to the tools provided by section 1331 without either 
prescribing use of any specific tool in any given circumstance or 
imposing significant new burdens. The proposed rule recognizes that 
consideration of these tools, which can open up new and previously 
untapped opportunities for small businesses, is especially important 
for agencies that have not met their small business goals. For this 
reason, the proposed rule would require at Sec.  125.2(e)(1)(iii) that 
the contracting officer document the contract file to provide an 
explanation if the contracting officer decided not to use any of the 
1331 tools in connection with the award of a multiple-award contract 
when at least one of these authorities could have been used--i.e., 
partial contract set-aside, contract reserve, or contract clause that 
commits the agency to setting aside orders, or preserving the right to 
set aside orders, when the rule of two is met. In addition, where an 
agency commits to using or preserving the right to use set-asides for 
orders under multiple award contracts that have not been set-aside, 
partially set-aside or reserved, the agency must document the file 
whenever a task order or delivery order is not set-aside for a small 
business.
    Although these documentation requirements are spelled out in the 
proposed rule, SBA does not view them as creating new burdens for 
agency contracting officers. To the contrary, SBA believes these 
requirements reinforce responsibilities which serve the purpose of 
increasing opportunities for small businesses that already are in the 
FAR, such as FAR 19.501(c), which states, as a general matter, that 
``the contracting officer shall perform market research and document 
why a small business set-aside is inappropriate when an acquisition is 
not set aside for small business.''

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    3. Preservation of agency discretion. The proposed rule preserves 
the discretion that section 1331 vests in agencies to decide whether or 
not to use any of the enumerated set-aside and reserve tools. See 
proposed Sec.  125.2(e)(1)(ii). There is nothing in the rule that 
compels an agency to award a multiple award contract with a partial 
set-aside, contract reserve, or contract clause that commits (or 
preserves the right) to set aside orders when the rule of two is met. 
The rule only requires that agencies consider these tools before 
awarding the multiple award contract and, if they choose not to use any 
of them, document the rationale. This discretion would not apply to 
total set-asides, which, as explained above, are not addressed by 
section 1331. Consistent with current policies in SBA's regulations and 
the FAR, agencies are required to set aside a multiple award contract 
if the requirements for a set-aside are met. This includes set-asides 
for small businesses, 8(a) Participants, HUBZone SBCs, SDVO SBCs, 
WOSBs, or EDWOSBs.
    Agencies have the discretion to forego using the section 1331 tools 
even if the rule of two could be met; they simply need to explain how 
their planned action is consistent with the best interests of the 
agency (e.g., agency met its small business goal in the last year; 
agency has a history of successfully awarding significant amounts of 
work to small businesses for the stated requirements under multiple 
award contracts without set-asides, and has received substantial value 
from being able to select from among small and other than small 
businesses as needs arise; agency can get better overall value by using 
the fair opportunity process without restriction for the stated 
requirements and has developed a strategy with the help of its Office 
of Small Disadvantaged Business Utilization (OSDBU) or Office of Small 
Business Programs (OSBP) that involves use of order set asides whenever 
the rule of two is met on a number of multiple award contracts for 
other requirements). Once an agency has exercised its discretion to use 
one of the Sec.  1331 tools, it must honor the commitment when placing 
orders. For example, if an agency inserts a clause in a multiple award 
contract awarded pursuant to full and open competition stating that it 
will set-aside orders when the rule of two is met, it must do so. 
Alternatively, if the agency preserves the right to set aside orders, 
they would not be required to set aside an order every time the rule of 
two can be met, but should document the file with an explanation when 
they do not do so.
    SBA's procurement center representatives (PCRs) may review 
acquisitions involving the award of multiple award contracts or orders 
issued against such contracts that are not set-aside for small 
businesses or where no awards have been reserved for small businesses. 
See proposed Sec.  125.2(b). This review process is consistent with 
PCRs' longstanding responsibility to assist small business concerns in 
obtaining a fair share of Federal Government contracting opportunities. 
As these authorities are implemented, PCRs may look to work more 
closely with agencies that have not met their small business goals in 
the prior year. However, the ultimate decision of whether to apply a 
Sec.  1331 tool to any given procurement action is a decision of the 
contracting officer, as expressly stated in proposed Sec.  
125.2(e)(1)(ii).
    In issuing their interim rule, the FAR signatories (i.e., DoD, GSA, 
and NASA) made clear that agencies are expected to consider using the 
1331 tools. SBA joins in this expectation for careful and meaningful 
consideration. While use of the 1331 tools is discretionary, the 
responsibility to give small businesses maximum practicable opportunity 
is mandatory and agencies will be held accountable for taking all 
reasonable steps to meet their small business goals. This means that 
each agency must figure out how best to use these tools with others 
already available to increase awards to small businesses and help the 
Federal Government meet and exceed its government-wide small business 
contracting goals year over year.
    SBA seeks to strike the best balance to maximize small business 
participation on multiple award contracts without compromising the 
greater flexibility and leverage agencies gain in conducting 
procurements through multiple award contracts. Throughout the preamble, 
SBA poses a number of questions to draw attention to particular aspects 
of the rule on which it is particularly interested in receiving comment 
to evaluate if the proposed rule has achieved this balance, such as:
     Whether the proposed definitions and processes make sense, 
including the proposal to require set-asides of orders under reserves 
if the rule of two can be met; and
     Whether the proposed documentation requirements are 
adequate, too stringent, or too weak. For respondents who believe the 
documentation requirements are too weak, they are encouraged to comment 
on how they should be strengthened (e.g., by requiring higher level 
approval and/or posting online concurrent with the issuance of the 
solicitation, similar to steps that agencies will need to take in the 
context of explaining decisions to consolidate contracts). For 
respondents who believe the documentation requirements are too 
stringent, they are encouraged to offer views on what changes might be 
considered.
    4. Application of size standards to multiple award contracts. Under 
SBA's current rules, a North American Industry Classification System 
(NAICS) code and size standard is required for all contracts, and for 
all orders under long-term contracts greater than five years. In some 
instances, SBA has seen that an agency will assign multiple NAICS codes 
to a multiple award contract where a business may be small for one or 
more of the NAICs codes, but not all, and the agency receives credit 
for an award to a small business even though the business is not small 
for the NAICs code assigned or that should have been assigned to that 
particular order. The proposed rule provides several alternatives at 
Sec.  121.402(c)(i)(A) and (B) to ensure every contract and every order 
issued against a contract contains a NAICS code with a corresponding 
size standard and that coding for orders more accurately reflects the 
size of the business for the work being performed. For example, a 
contracting officer may divide a multiple award contract for divergent 
goods and services into discrete categories (which could be by contract 
line item numbers, special item numbers, functional areas, sectors, or 
any other means for identifying various parts of a requirement 
identified by the contracting officer), each of which is assigned a 
NAICS code with a corresponding size standard. The NAICS code assigned 
to the order would be the same as the NAICS code assigned to the 
category in the contract. It is SBA's intention in proposing these 
changes that only small businesses receive the benefits afforded to 
small business concerns and that agencies receive credit only for 
awards to small businesses.

B. Consolidation of Contract Requirements

    Section 1313 of the Jobs Act amends the Small Business Act to 
require that agencies address contract consolidation, which is defined 
as use of a solicitation to obtain offers for a single contract or a 
multiple award contract to satisfy two or more requirements of the 
Federal agency with a total value over $2 million for goods or services 
that have

[[Page 29133]]

been provided to or performed for the Federal agency under two or more 
separate contracts each lower in cost than the total cost of the 
contract for which the offers are solicited. For a number of years, DoD 
has had responsibilities, set forth in 10 U.S.C. 2383, to address 
contract consolidation. The proposed rule builds on much of DoD's 
existing guidance and explains that an agency may not conduct an 
acquisition that is a consolidation of contract requirements unless the 
senior procurement executive (SPE) or chief acquisition officer (CAO): 
(1) Justifies the consolidation by showing that the benefits of the 
consolidated acquisition substantially exceed the benefits of each 
possible alternative approach that would involve a lesser degree of 
consolidation and (2) identifies the negative impact on small 
businesses. The proposed rule also requires SBA's PCR to work with the 
agency's small business specialist and OSDBU or OSBP to identify 
bundled or consolidated requirements and promote set-asides and 
reserves.
    Additional detail about the proposed rule and the various 
considerations that have shaped it is set forth below.

II. Background

    On September 27, 2010, the President signed into law the Small 
Business Jobs Act of 2010 (Jobs Act), Public Law 111-240, which was 
designed to protect the interests of small businesses and boost their 
opportunities in the Federal marketplace. The law not only makes 
significant improvements to the Small Business Act's procurement 
programs, it creates new programs and new initiatives. This proposed 
rule addresses two important parts of the Jobs Act: (1) Application of 
the SBA's small business programs to multiple award contracts, and (2) 
limitations on contract consolidation and bundling.

A. Multiple Award Contracts

    The FAR permit agencies to issue several awards to different 
offerors that submitted an acceptable response to the same solicitation 
for an IDIQ contract.See FAR subpart 16.5 (publicly available at 
www.acquisition.gov/far/). In fact, the FAR states that the 
contracting officer must give preference to making ``multiple awards'' 
of IDIQ contracts under a single solicitation for the same or similar 
supplies or services to two or more offerors. FAR Sec.  16.504(c). 
Hence, these types of contracts are referred to as multiple award 
contracts. Agencies issue either task orders (order for services) or 
delivery orders (order for supplies) for competition against the 
multiple award contract. Multiple award contracts are often used to 
support interagency contracting through: (1) Multi-agency contracts 
(MACs), which are established by one agency for use by it or other 
Government agencies to obtain supplies and services, and (2) 
governmentwide acquisition contracts for information technology 
requirements, which are established for governmentwide use and operated 
by an executive agent designated by the Office of Management and Budget 
(OMB). FAR Sec.  2.101.
    Multiple award contracts are used by Federal agencies because they 
provide greater flexibility and leverage for the agency in conducting 
their procurements and obtaining competition. However, until recently, 
there had been no clear guidance in regulations on the application of 
the SBA's small business programs to multiple award contracts, 
including the GSA's MAS Program (which includes Federal Supply 
Schedules and other Multiple Award Schedules), although there has been 
much discussion on this issue. For example, in Delex Systems, Inc., B-
400403, Oct. 8, 2008, 2008 CPD ] 181 (publicly available at 
www.gao.gov/decisions/bidpro/40043.htm), the GAO held that the small 
business set-aside provisions of FAR Sec.  19.502-2(b) applied to 
competitions for task and delivery orders issued under certain multiple 
award contracts. Despite this opinion, many agencies had been reluctant 
to set-aside such task and delivery orders for small businesses without 
specific procurement guidance or regulations.
    On April 26, 2010, the President issued Presidential Memorandum on 
the Interagency Task Force on Federal Contracting Opportunities for 
Small Businesses, which established an Interagency Task Force on 
Federal Contracting Opportunities for Small Business (Interagency Task 
Force), co-chaired by the Director of OMB, the SBA Administrator, and 
the Secretary of Commerce. The report issued by the task force outlined 
several recommendations to further increase opportunities for small 
businesses in Federal contracting. In particular, the task force 
recommended the following as it relates to multiple award contracts:
     That OFPP lead an effort, in close collaboration with SBA 
and GSA, as well as the DoD and other contracting agencies, to 
determine which steps are (or should be) permitted and encouraged, and 
which are required with respect to reserving individual orders for 
small businesses under task-and-delivery-order and GSA Multiple Award 
Schedule (GSA Schedules) contracts.
     In conducting the analysis, OFPP should reach out to 
interested stakeholders, including agency CAOs, SPEs, and Small 
Business Directors; OSDBU, including the Department of Defense 
Directors, OSBP; Procurement Technical Assistance Centers; Congress; 
small and large businesses; and professional and trade associations.
     When appropriate (taking into account possible statutory 
and regulatory changes), OFPP should issue guidance addressing the use 
of set-asides and related authorities for limiting consideration for 
task and delivery orders to small businesses. Guidance should also 
address existing set-aside and related policies, as necessary. General 
guidance should be drafted jointly with SBA, and with GSA as to 
guidance affecting the Schedules.

Report on Small Business Federal Contracting Opportunities, at pages 9-
10 (publicly available at https://www.sba.gov/sites/default/files/contracting_task_force_report_0.pdf).
    Prior to this, the Acquisition Advisory Panel (Advisory Panel), 
which was authorized by section 1423 of the Services Acquisition Reform 
Act of 2003 (Section 843 of Title VIII of the National Defense 
Authorization Act for Fiscal Year 2006 (Pub. L. 109-163)) also 
addressed this issue in its Final Report. By law, the Panel was tasked 
with reviewing laws, regulations, and Governmentwide acquisition 
policies regarding the use of commercial practices, performance-based 
contracting, performance of acquisition functions across agency lines 
of responsibility, and the use of Governmentwide contracts. In its 
final report, which devoted an entire chapter to small business 
contracting, the Panel noted that ``[t]he passage of FASA [Federal 
Acquisition Streamlining Act of 1994], the enactment of the Clinger-
Cohen Act two years later, and the expansion of the GSA Schedules [MAS] 
Program has led to a marked increase in the use of multiple award 
indefinite delivery, indefinite quantity (IDIQ) contracting vehicles.'' 
Final Report, Chapter 4 at 297 (publicly available at https://www.acquisition.gov/comp/aap/documents/Chapter4.pdf).
    The report explained that agencies have used innovative means to 
ensure small businesses receive some of these multiple award contracts, 
such as by ``reserving'' one or more awards for small businesses in an 
otherwise full and open competition. The report further explained that 
there was no specific statutory authority for such reserves.

[[Page 29134]]

    Both reports demonstrated that agency officials needed clear 
guidance and they wanted specific statutory authority to apply the 
authorities of the SBA's small business programs to multiple award 
contracts. The Jobs Act provides the needed guidance and specific 
statutory authority on this issue. With respect to multiple award 
contracts, the Jobs Acts does two things--it defines the term and it 
establishes a framework to address the application of SBA's small 
business programs when awarding such a contract, or orders issued 
against a multiple award contract. In fact, the Jobs Act broadly 
defines the term multiple award contract to include all task and 
delivery contracts, which necessarily includes the GSA Multiple Award 
Schedules Program and other MACs. The Schedules is the largest 
governmentwide program in the Federal government relying on the use of 
multiple award contracts. Thus, the Jobs Act provides a needed tool to 
further assist agencies in contracting with small businesses.
    In addition, the Jobs Act amended the Small Business Act (Act) to 
permit Federal agencies to:
     Set-aside part or parts of multiple award contracts for 
small business concerns, including small business concerns owned and 
controlled by socially and economically disadvantaged individuals that 
are 8(a) Business Development (BD) Participants, HUBZone small business 
concerns, SDVO SBCs, WOSBs, and EDWOSBs;
     Set-aside orders placed against multiple award contracts 
(notwithstanding the fair opportunity requirements set forth in 10 
U.S.C. 2304c and 41 U.S.C. 253j) for small business concerns, including 
8(a) BD Participants, HUBZone small business concerns, SDVO SBCs, and 
WOSBs or EDWOSBs; and
     Reserve one or more contract awards for small business 
concerns under full and open competition, when the agency intends to 
make multiple contract awards, including reserves for 8(a) BD 
Participants, HUBZone small business concerns, SDVO SBCs, and WOSBs or 
EDWOSBs.
    The legislative history for a precursor bill to the Jobs Act 
explains that the purpose of such provisions is to ``correct'' the 
mixed level of participation of small businesses in multiple award 
contracts since small businesses have had trouble securing contract 
awards through the multiple award contract system. See S. Rep. 111-343 
at 7 (publicly available at https://thomas.loc.gov/cgi-bin/cpquery/R?cp111:FLD010:@1(sr343)). As an example, the Senate Report explains 
that in FY 2007, although small businesses represented about 80.8% of 
the contractors under the GSA Multiple Award Schedules Program, they 
received only about 37.33% of the sales dollars (i.e., task or delivery 
orders). Id. It further explains that although the Small Business Act 
and the FAR require Federal agencies to set contracts aside for small 
businesses if there is a reasonable expectation that two or more small 
businesses would submit offers at reasonable prices, as noted above, 
many agencies have not applied these small business set-aside 
requirements to multiple award contracts and even fewer have considered 
application of these requirements to orders issued against such 
contracts
    In addition to providing statutory authority to further assist 
small businesses in obtaining awards of multiple award contracts and 
orders against such contracts, the Jobs Act mandates that SBA and OFPP, 
in consultation with the Administrator of GSA, issue regulations 
implementing Sec.  1331. The regulatory guidance issued in response to 
Sec.  1331 will help agencies leverage opportunities for small 
businesses under multiple award contacts that can be secured through 
the use of partial contract set-asides, order set-asides, and contract 
reserves. The SBA met with OFPP and representatives of GSA and other 
major contracting agencies several times over the course of the last 
year in an attempt to produce a draft proposed regulation that took 
into account the concerns of the various affected parties. In late 
2011, SBA and OFPP held the required statutory consultations with 
senior GSA officials to further refine the proposed rule.
    As a first step to implement Sec.  1331, both SBA and OFPP 
requested DoD, GSA, and NASA publish an interim FAR rule so that 
agencies could begin taking advantage of this important tool. On 
November 2, 2011, the FAR issued an interim final rule that amended the 
following FAR subparts:
     FAR subpart 8.4 to clarify that agencies may set-asides 
orders and blanket purchase agreements for small business concerns 
under the Schedule;
     FAR subpart 16.5 to clarify that agencies may set-aside 
orders for small business concerns in connection with multiple award 
contracts, notwithstanding the statutory requirement to provide each 
contract holder a fair opportunity to be considered.
     FAR subpart 19.5 to add a new section, based on Section 
1331, authorizing agencies to: (1) Set aside part or parts of a 
multiple-award contract for small business concerns, including set-
asides for small business concerns under the 8(a) Program, the HUBZone 
Program, the SDVOSB Program, and the WOSB Program; (2) set-aside orders 
placed against multiple-award contracts for small business concerns, 
including small businesses in the 8(a), HUBZone, SDVOSB, and WOSB 
Programs; and (3) reserve one or more contract awards for small 
business concerns, including small businesses in the 8(a), HUBZone, 
SDVOSB, and WOSB Programs, under full and open multiple-award 
procurements.

See 76 FR 68032.
    Although the FAR interim final rule permits agencies to begin using 
the Jobs Act authority, there are several issues that still remain to 
be addressed. This proposed rule attempts to address those issues as 
they relate to the application of SBA's programs to multiple award 
contracts. In drafting the rule, the SBA has taken into consideration 
all of the above, as well as information obtained from meetings with 
various stakeholders concerning these issues.
    In sum, this rule seeks to provide adequate tools and assurances 
that agencies will maximize small business participation on multiple 
award contracts without compromising the greater flexibility and 
leverage agencies have in conducting procurements through multiple 
award contracts. For example, although the MAS Program already affords 
opportunities for small businesses competing for orders, SBA, OFPP, and 
GSA hope this rule, which specifically authorizes the use of small 
business order set-asides in connection with the MAS Program, will 
provide agencies further means to reach more small businesses and 
increase awards to small businesses. SBA and OFPP, after consultation 
with GSA, have attempted to strike the right balance and seek comments 
regarding the proposed rule. The discussion that follows explains in 
detail the specific changes the SBA proposes to its regulations to 
address this issue.

B. Contract Consolidation/Bundling

    The Jobs Act amended the Small Business Act to include provisions 
relating to contract consolidation and bundling. Contract bundling and 
consolidation have been used in the Federal government for many years 
now. Agencies generally consolidate or bundle two or more requirements 
into one solicitation in order to streamline the procurement process, 
reduce administrative functions (fewer number of contracts for a 
contracting officer to administer) and leverage buying power.

[[Page 29135]]

See U.S. Government Accountability Office, GAO-04-454, Impact of 
Strategy to Mitigate Effects of Contract Bundling on Small Business is 
Uncertain, at 4 (May 2004) (publicly available at https://www.gao.gov/new.items/d04454.pdf). Although such contract consolidation and 
bundling may provide efficiency for the Federal government, the end 
result often precludes small business participation at the prime 
contractor level and generally provides for awards to a fewer number of 
contractors. See 15 U.S.C. 631(j); see also S. Rep. No. 105-62, at 21 
(1997) (``Often bundling results in contracts of a size or geographic 
dispersion that small businesses cannot compete for or obtain. As a 
result, the government can experience a dramatic reduction in the 
number of offerors. This practice, intended to reduce short term 
administrative costs, can result in a monopolistic environment with a 
few large businesses controlling the market supply.'')
    The Small Business Act contains provisions defining bundling and 
limiting the use of bundling and its effect on small businesses. 15 
U.S.C. 632(o). Bundling as defined by the Small Business Act is not per 
se prohibited; rather, bundling is permissible where an agency can 
adequately justify the projected bundled contract.
    Despite the provisions in the Small Business Act and implementing 
regulations, bundling contracts and orders is still having harmful 
effects on the ability of small business concerns to compete for and 
receive contracting opportunities and, therefore, mitigation is 
necessary. Thus, the Jobs Act has amended the Small Business Act to 
provide for certain policies to further reduce contract bundling, 
including requiring that agencies publish on Web sites a list of 
bundled contracts and rationale for each such bundled contract. It also 
requires agencies that bundle requirements to include in their 
solicitation for any multiple award contract above the substantial 
bundling threshold a provision soliciting offers from any responsible 
source, including responsible small business concerns and teams or 
joint ventures of small business concerns.
    The Small Business Act, however, had never addressed contract 
consolidation (although contract consolidation is addressed in 10 
U.S.C. 2383 for DoD). Consequently, the Jobs Act has now amended the 
Small Business Act to address and define contract consolidation in a 
broader manner than bundling. As it is now defined, contract 
consolidation occurs when an agency uses a single solicitation to 
obtain offers to satisfy two or more requirements of the Federal agency 
for goods or services that have been provided to or performed for the 
Federal agency under two or more separate contracts lower in cost than 
the total cost of the contract for which the offers are solicited in 
the single solicitation. Thus, a consolidated contract combines 
contracts performed by small or large businesses into one solicitation 
while a bundled procurement combines work previously performed only by 
small businesses or work that could have been performed only by small 
businesses. As with bundling, the statute permits an agency to justify 
the consolidation.
    We note that the Interagency Task Force also addressed this issue 
and outlined several recommendations to increase opportunities for 
small businesses in Federal contracting. In particular, the Interagency 
Task Force recommended that SBA strengthen the regulations addressing 
the reviews of contract bundling to prevent unjustified bundling and 
ensure the use of appropriate mitigation strategies. Report on Small 
Business Federal Contracting Opportunities, at 10 (publicly available 
at https://www.sba.gov/sites/default/files/contracting_task_force_report_0.pdf).
    Likewise, the Advisory Panel addressed contract bundling and 
consolidation and noted that reports by OFPP and the SBA's Office of 
Advocacy indicated that the use of bundled and consolidated contracts 
had resulted in a decline of awards to small businesses. The Panel 
determined that the contracting community does not properly apply and 
follow the governing contract bundling definition and requirements in 
planning acquisitions because there is a general misunderstanding of 
contract bundling. Final Report, Chapter 4 at 289-90 (publicly 
available at https://www.acquisition.gov/comp/aap/documents/Chapter4.pdf).
    The proposed rule addresses the statutory amendments to the Small 
Business Act as they relate to mitigation of bundling and contract 
consolidation. SBA has taken into consideration all of the above when 
drafting these rules. The supplementary information below explains in 
detail the specific changes the SBA proposes to each of its regulations 
to address this issue.

C. Public and Federal Outreach

    Last spring, the SBA conducted a Small Business Jobs Act Tour that 
covered 13 cities, including: Albuquerque, Miami, Atlanta, Boston, 
Chicago, San Antonio, Seattle, Columbus, New York, Huntsville, Denver, 
San Diego and Washington, DC. See 76 FR 12395 (March 7, 2011); 76 FR 
16703 (March 25, 2011); 76 FR 26948 (May 10, 2011). The objective of 
the tour was to provide information and receive input on significant 
Jobs Act provisions. In its Federal Register notice announcing the 
tour, the SBA set forth some key questions concerning multiple award 
contracts, bundling and consolidation, on which it specifically sought 
public input. During the tour, the SBA gained valuable information and 
insight on small businesses in Federal contracting that it utilized 
when drafting the following proposed regulations. The SBA also 
requested and received written comments from the public on these 
provisions.
    Further, the SBA met with various agencies that are members of the 
Federal Acquisition Regulatory Council (FAR Council) to discuss the 
provisions of the Jobs Act. The input provided during these meetings 
was also utilized in drafting these proposed regulations, especially as 
they relate to set-asides of multiple award contracts.
    Finally, as discussed above, the Jobs Act requires that SBA and 
OFPP, after consultation with GSA, issue regulations relating to 
partial set-asides, reserves and set-asides of orders against multiple 
award contracts. The SBA has met with GSA several times over the course 
of the last year, including recently in the latter half of 2011. Many 
of GSA's comments have been incorporated into this proposed rule.

III. Proposed Amendments

    The SBA is proposing to amend its regulations to address small 
business contracting as it relates to multiple award contracts and to 
address and clarify the regulations on bundling and contract 
consolidation. Because these issues affect the various SBA programs, 
the SBA must propose amendments to several sections of its regulations. 
In addition, because these two issues require changes to the same 
sections of SBA's regulations and some of the issues are 
interconnected, the SBA determined it would be best to propose 
amendments relating to the two issues in one rule. The proposed 
amendments are set forth in a part-by-part analysis below.

A. Part 121--Size

    The SBA is proposing to amend its size regulations to address both 
bundling and contract consolidation as well as multiple award 
contracts. The Small Business Act, 15 U.S.C. 644(e)(4), specifically 
states that for bundled

[[Page 29136]]

contracts, a small business concern may submit an offer that provides 
for use of a particular team of subcontractors for the performance of 
the contract and the agency must evaluate the offer in the same manner 
as other offers. Further, the Act states that if a small business 
concern forms a team for this purpose (i.e., enters into a formal 
written Small Business Teaming Arrangement), it must not affect its 
status as a small business concern for any other purpose. The purpose 
of this section is to encourage small businesses to form teams to 
compete on larger contracts for which, by definition, a small business 
is not on its own able to compete. Therefore, the SBA proposes to amend 
Sec.  121.103 by creating an exception to affiliation for teams of 
small businesses for bundled contracts.
    The SBA proposes to amend Sec.  121.402 to explain how small 
business size standards are assigned to multiple award contracts and 
orders issued against such contracts. Under SBA's current regulations, 
a NAICS code and size standard is required for contracts, and all 
orders under long-term contracts (i.e., contract greater than five 
years). SBA has seen instances where an agency assigns a NAICS code to 
a multiple award contract and then issues orders using a different 
NAICS code with a different, lower size standard or issues an order 
with no NAICS code or size standard assigned. The agency then counts 
each of the orders as an award to a small business even if the business 
represented it was small for the higher size standard corresponding to 
the NAICS code assigned to the contract and not for the lower size 
standard assigned to the order. In other instances, SBA has seen that 
an agency will assign multiple NAICS codes to a multiple award contract 
where a business concern may be small for one or more of the NAICS 
codes, but not all, and the agency receives credit on an order for an 
award to a ``small business'' even though the business is not small for 
the NAICS code assigned or that should have been assigned to that 
particular order.
    To address this situation, the proposed rule provides a contracting 
officer with two different alternatives in assigning NAICS codes on 
multiple award contracts. First, a contracting officer may assign one 
NAICS code and corresponding size standard to the multiple award 
contract if all of the orders issued against that contract can also be 
classified under that same NAICS code and corresponding size standard.
    Second, the contracting officer may divide a multiple award 
contract for divergent goods and services into discrete categories, 
each of which is assigned a NAICS code with a corresponding size 
standard. The contracting officer is vested with the discretion to 
decide how to assign the requirements to the various categories--
whether it is by contract line item numbers (CLINs), special item 
numbers (SINs), functional area (FA), sectors, or other method of 
identifying various parts of a requirement. Thus, an agency would 
assign multiple NAICS codes to a multiple award contract only if the 
agency can divide the contract into different categories and can then 
compete or award orders in that category, notwithstanding the 
nomenclature the procuring agency utilizes to describe the category 
(e.g., CLIN, SIN, FA). The NAICS code assigned to the order would be 
the same as the NAICS code assigned to the category (e.g. CLIN) in the 
contract.
    Regardless of which method the contracting officer uses to assign a 
NAICS code, the proposed rule requires that every contract and every 
order issued against a contract must contain a NAICS code with a 
corresponding size standard. With respect to assigning a NAICS code to 
an order in cases like the GSA Schedule where an agency can issue an 
order against multiple categories on a multiple award contract, the 
contracting officer would be required to select the single NAICS code 
that best represents the principal nature of the acquisition (i.e., 
usually the component that accounts for the greatest percentage of 
contract value) for that order. That would mean if the agency is buying 
services and supplies with the order, but the greatest percentage of 
the order value is for services, the agency would assign a services 
NAICS code for the order. The purpose of this proposal is twofold: to 
ensure that agencies receive credit only for awards to small businesses 
and to ensure that only small businesses receive the benefits afforded 
to such business concerns.
    The SBA notes that it considered one alternative to this proposed 
rule where an order contains items/services from multiple NAICS codes 
and size standards assigned to a multiple award contract. Specifically, 
the SBA considered requiring that a business meet only the smallest 
size standard corresponding to any NAICS code of any of the items/
services (line items) to be procured under the contract. Any order 
issued against the contract, regardless of the NAICS code assigned to 
the order, would then be considered an order placed with a small 
business. If the contract contained size standards that were receipts-
based and employee-based, the business would have to meet the smallest 
receipts-based size standard to be considered small for the contract 
and each order.
    The SBA welcomes comments on its proposed amendments to Sec.  
121.402 explaining how small business size standards are assigned to 
multiple award contracts and orders issued against such contracts. SBA 
requests comments on the alternatives afforded to contracting officers 
under the proposed rule, including whether they offer a workable 
alternative and give sufficient discretion to contracting officers. 
Specifically, the SBA would like comments addressing any burden that 
may be imposed by requiring the contracting officer to divide the 
requirement into multiple categories with associated NAICS codes and 
size standards on a multiple award contract and placing a NAICS code on 
each order that flows down from the underlying contract. The SBA would 
also like the comments to address whether this burden is outweighed by 
the purpose of the proposed rule--to more effectively capture true 
small business participation. Finally, SBA would welcome comments on 
the alternative described in the prior paragraph, which was not adopted 
in the proposed rule.
    Next, the SBA proposes to amend Sec.  121.404, which addresses when 
the size status of a small business concern is determined. In order to 
provide certainty in the procurement process, SBA's regulations require 
that size generally be determined at one specific point in time--size 
is determined as of the date a business concern self-certifies its size 
status as part of its initial offer including price. When a business 
represents that it is small, it is then considered small for the life 
of that specific contract, and the concern is not required to again 
certify that it qualifies as small for that contract unless the 
contract is a long term contract (i.e., the contract exceeds five 
years) or there is a merger, acquisition, or novation. If the contract 
is greater than five years, then the contractor must recertify its 
small business size status no more than 120 days prior to the end of 
the fifth year of the contract or prior to exercising any option 
thereafter. Similarly, a contractor must also recertify its size status 
whenever there has been a contract novation, or merger or acquisition 
and no novation has been required.
    SBA is proposing to clarify two issues that have been raised under 
this recertification rule that SBA issued in 2006. First, while the 
regulations clearly required a business that was bought by another 
entity to recertify its size status after the acquisition, such a 
requirement

[[Page 29137]]

was not as clear where a business that had previously certified itself 
to be small acquired another business. SBA believes that re-
certification should be required in either case since the acquisition 
may render the concern other than small for the particular contract. As 
such, the proposed rule clarifies that recertification is required from 
both the acquired concern and the acquiring concern. Second, SBA 
proposes to clarify that recertification is required when a participant 
in a joint venture is involved in a merger or acquisition, regardless 
of whether the participant is the acquired concern or the acquiring 
concern.
    In addition, the SBA is proposing that, in general, all of these 
same rules concerning when size is determined apply to multiple award 
contracts. For multiple award contracts, SBA will determine size at the 
time of initial offer of the contract based upon the size standard set 
forth in the solicitation for that contract. If the contract is divided 
into categories (CLINs, SINs, FAs, sectors or the equivalent), then 
each such category will have a NAICS code and corresponding size 
standard. A business will have to represent its status for each of 
those NAICS codes at the time of initial offer of the multiple award 
contract. When the agency places an order against the contract, it must 
assign a NAICS code with the corresponding size standard to the order 
using one of the NAICS codes assigned to the contract which best 
describes the principal purpose of the good or service being acquired. 
If the business concern represented it was small for that NAICS code at 
the time of contract award, then it will be considered small for that 
order with the same NAICS code. Of course, a contracting officer may 
always, on his or her own initiative, require a business concern to 
recertify its size status with respect to each order, but the 
regulations do not require that in every instance.
    The following examples demonstrate how this would work:
     An agency issues a multiple award contract and assigns a 
single NAICS code to the contract. A business concern has represented 
it is small for that NAICS code. The business concern is small for the 
life of the contract and for each order issued against that contract 
with the same NAICS code. If the contract exceeds five years or there 
has been a contract novation, or merger or acquisition and no novation 
has been required, the business concern would be required to recertify 
its size status.
     An agency issues a multiple award contract that has been 
separated into two categories by CLINs--graphic design services and 
computer systems design services. The agency assigns two NAICS codes to 
the contract, one for the CLIN for graphic design services (with a $7 
million size standard) and one for the CLIN for computer systems design 
services (with a $25 million size standard). A business concern has 
represented that it is small for the NAICS code assigned to the CLIN 
for computer systems design services and other-than-small for the NAICS 
code assigned to the CLIN for graphic design services. If the agency 
issues an order that is predominately for computer systems design 
services, it must assign to the order the same NAICS code used in the 
contract for computer systems design services. Because the business 
represented that it was small for that NAICS code at the time of 
initial offer for the contract CLIN for computer systems design 
services, it would be considered small for the order. Similarly, if the 
agency issues an order that is predominantly for graphic design 
services, it must assign to the order the same NAICS code used in the 
contract for graphic design services. Because the business represented 
that it was other-than-small at the time of initial offer for the 
contract CLIN for graphic design services, it would be considered 
other-than-small for the order. If the contract exceeds five years or 
there has been a contract novation, or merger or acquisition and no 
novation has been required, the business concern would be required to 
recertify its status for both NAICS codes.
     An agency issues an order against the GSA Schedule 
Contract. The ordering agency has assigned a single NAICS code to the 
order, which corresponds to a NAICS code assigned to the Schedule 
category (e.g., SIN). A business concern has represented that it is 
small for that NAICS code assigned to the SIN on the GSA Schedule 
Contract. The business concern is then considered small for the order. 
If the contract exceeds five years or there has been a contract 
novation, or merger or acquisition and no novation has been required, 
the business concern would be required to recertify its status for the 
NAICS code.
    The SBA notes that in drafting this proposed rule it considered 
requiring businesses to recertify their size for long term orders 
(i.e.--orders greater than five years). The SBA is concerned that if an 
agency issues a long term order just prior to a business recertifying 
its status as other-than-small on a multiple award contract, then the 
long term order will be counted as an award to a small business for an 
indefinite amount of time. However, the SBA is unsure of how often this 
situation occurs and is requesting comments specifically on whether 
small businesses should be required to recertify their size and status 
for long term orders. The SBA also welcomes comments on all of these 
proposed amendments as they relate to size and multiple award 
contracts.
    In addition to the above, the SBA has proposed amending its 
regulations at Sec.  121.404 to address ``Agreements,'' such as Blanket 
Purchase Agreements (BPAs), Basic Agreements (BAs) or Basic Ordering 
Agreements (BOAs). These Agreements are not considered contracts under 
the FAR. See FAR Sec.  16.702(a)(2) (a basic agreement is not a 
contract). However, the SBA has seen examples where agencies are 
setting aside such Agreements for small businesses. Consequently, the 
SBA is proposing an amendment to its regulations to address this 
practice.
    Specifically, SBA proposes that if such an Agreement is set-aside, 
SBA will determine size at the time of the response to the solicitation 
for the Agreement, to ensure only small businesses receive the 
Agreement. In addition, because such an Agreement is not considered a 
contract, the business concern must also qualify as small at the time 
it submits its offer or otherwise responds to a solicitation for each 
order under the Agreement in order for the procuring agency to count 
the award of the order as an award to small business for purposes of 
goaling. If agencies were permitted to set aside BPAs, BOAs and other 
Agreements to small businesses without having to verify size, then it 
is not clear that small businesses would actually be receiving the 
awards and it is not clear that the small business would have to meet 
the Act's provisions, for example, subcontracting limitations 
requirements, which we believe creates a loophole.
    The only exception to this proposed rule on Agreements is for BPAs 
issued against the GSA Schedule. Because the business will have 
represented its status at the time of award of the GSA Schedule 
contract, the SBA does not believe there is a need to represent its 
size again for the BPA.
    The SBA has also proposed amending its size regulations to include 
multiple award contracts in the sections addressing who may initiate a 
size protest (13 CFR 121.1001) and what time limits apply to size 
protests (13 CFR 121.1004).
    In addition, SBA proposes to amend Sec.  121.1103 to specify that 
NAICS appeals may be filed at SBA's Office of Hearings and Appeals 
(OHA) by any concern seeking to be considered a small business for a 
challenged

[[Page 29138]]

procurement and regardless of whether the procurement is set aside for 
small businesses or unrestricted. This would change OHA's current 
policy of declining jurisdiction on NAICS code appeals related to 
unrestricted procurements or finding that appellants lack standing in 
such appeals. See NAICS Appeal of McKissack & McKissack, SBA No. NAICS-
5154 (2010). Neither the FAR nor SBA's existing regulations place 
restrictions on the types of solicitations that may be challenged in a 
NAICS appeal. Thus, OHA's current policy prevents an avenue of relief 
that SBA intended to be available to a business that is denied the 
benefits of its small status by an incorrect NAICS designation. The 
proposed rule makes it clear that SBA will adjudicate NAICS appeals on 
unrestricted procurements, so long as the appellant is seeking to be 
considered a small business for the procurement.
    The SBA welcomes comments on all of these proposed amendments to 
part 121.

B. Part 125--Small Business Programs

    Part 125 of SBA's regulations covers SBA's small business prime 
contracting program, subcontracting, the Certificate of Competency 
(COC) program and the limitations on subcontracting requirements. 
Encompassed in these regulations are issues such as bundling and 
Procurement Center Representative (PCR) reviews. Thus, the greatest 
number of proposed amendments that address the issues relating to 
multiple award contracts and bundling/consolidation have been to part 
125.
    SBA first reviewed part 125 and determined that it needed better 
organization. In Sec.  125.1, SBA has proposed a definitions section 
and has moved all of the definitions in part 125 (except for the 
definitions relating the SDVO SBC Program) into that one section. SBA 
also added all of the definitions and terms set forth in the Jobs Act 
to this one section in order to provide ease of use for the readers.
    One important definition proposed relates to contract 
consolidation. The SBA has implemented the statute and defined that 
term to mean a solicitation for a single contract or a multiple award 
contract to satisfy two or more requirements of the Federal agency for 
goods or services that have been provided to or performed for the 
Federal agency under two or more separate contracts each of which was 
lower in cost than the total cost of the contract for which the offers 
are solicited, the total cost of which exceeds $2 million (including 
options). The SBA notes that the $2 million price is a statutory 
threshold (see 15 U.S.C. 657q), not subject to amendment by the SBA. 
Based upon this definition, an example of a consolidated contract would 
include the following:
     An agency had two separate contracts for janitorial 
services. One was performed by a small business and had a contract 
value of $1 million and the other by a large business that had a 
contract value of $2 million. The agency places both those requirements 
into one solicitation for $3 million. This is a consolidated contract 
because it combines two separate contracts into one and the costs of 
each of the two contracts is less than the total cost of the 
consolidated contract. In addition, the consolidated contract's value 
exceeds $2 million.
    Another important term SBA defined is ``multiple award contract.'' 
Section 1311 of the Jobs Act defines the term multiple award contract 
to mean: (1) A multiple award contract (either task or delivery order 
contract) entered into under the authority of 41 U.S.C. 253h (the 
authority for task and delivery order contracts), 41 U.S.C. 253(i) (the 
authority for task and delivery order contracts for advisory and 
assistance services), 41 U.S.C. 253(j) (issuance of orders off of task 
and delivery order contracts) and 41 U.S.C. 253k (definition of task 
order contract and delivery order contract); and (2) any other multiple 
award, indefinite delivery, indefinite quantity contract that is 
entered into by an agency.
    The SBA believes that it is important to have a clearly understood 
definition of what a multiple award contract is because the Jobs Act 
permits those contracts to be conducted as a partial set-aside, or 
reserve and further permits the set-aside of orders against such 
contracts. In this regard, SBA's proposed rule expressly includes the 
GSA Multiple Award Schedules Program within the scope of the definition 
of the term ``multiple award contract.'' As noted above the Multiple 
Award Schedules Program is the largest contract program in the Federal 
Government relying on multiple award contracts. It is fully consistent 
with the Jobs Act to defining this term to be inclusive of the 
Schedules. Even though the Act does not specifically reference the GSA 
Multiple Award Schedules Program in its definition of multiple award 
contract, the definition set forth in statute clearly states that a 
multiple award contract is ``any other multiple award, indefinite 
delivery, indefinite quantity contract that is entered into by an 
agency.'' 15 U.S.C. 632(v)(2) (emphasis added). Further, the Jobs Act 
states that the Administrator of OFPP and SBA, ``in consultation with 
the Administrator of General Services,'' must establish guidance by 
regulation that addresses application of the SBA's programs to multiple 
award contracts. Id. Sec.  644(r) (emphasis added). Congress' inclusion 
of GSA within the consultation process clearly signals its intent to 
allow small business set-asides within the context of the GSA Multiple 
Award Schedules Program. In addition, the legislative history for a 
prior version of a bill similar to the Jobs Act specifically included 
GSA Multiple Award Schedules Contracts as multiple award contracts as 
follows:

    The bill improves small business participation in the 
acquisition process. The bill also authorizes small business set-
asides in multiple award multi-agency contracting vehicles in order 
to correct the very mixed record of small business participation in 
such contracts. These contract types were intended to reduce the 
administrative costs of contracting by reducing both the number of 
businesses and the types of terms and conditions which had to be 
completed for each task or delivery order. Under such contracts, the 
government negotiates an up-front agreement on future price 
discounts and delivery terms, but no actual work is performed or 
paid for until task and delivery orders are issued. In many 
instances, small businesses have had trouble securing business 
through the multiple-award contract system. For example, within the 
GSA Federal Supply Schedules (FSS or Schedules), small businesses 
represented about 80.8 percent of Schedule holders, but only 37.33 
percent of Schedule sales dollars in FY 2007.

    See S. Rep. 111-343 at 7 (publicly available at https://thomas.loc.gov/cgi-bin/cpquery/R?cp111:FLD010:@1(sr343)) (emphasis 
added). Further, we note that the Defense Federal Acquisition 
Regulation Supplement (DFARS) already includes GSA Schedule Contracts 
in its definition of multiple award contracts. See DFARS Sec.  207.170-
2.
    We also note that the interim FAR rule, which is co-signed by GSA, 
the manager of the MAS Program, amends FAR subpart 8.4 to make clear 
that the Jobs Act provisions apply and states that order set-asides may 
be used in connection with the placement of orders and blanket purchase 
agreements under the MAS Program.
    Moreover, the Interagency Task Force sought to determine which 
steps are (or should be) permitted and which are required with respect 
to reserving individual orders for small businesses under task-and-
delivery-order and GSA Schedule Contracts. Report on Small Business 
Federal Contracting Opportunities, at 9 (publicly available at https://www.sba.gov/sites/default/files/contracting_task_force_report_0.pdf).

[[Page 29139]]

Likewise, the Advisory Panel's Final Report noted how inconsistently 
agencies were applying the small business regulations to the GSA 
Schedule Contracts and recommended that specific guidance be provided 
and that the FAR be amended to permit set-asides against the GSA 
Schedule. Final Report, Chapter 4 at 310 (publicly available at https://www.acquisition.gov/comp/aap/documents/Chapter4.pdf).
    Finally, during the SBA's Jobs Act tour, the SBA received input 
from many small businesses that it would be beneficial if multiple 
award contracts under the Jobs Act included the GSA MAS Program. Those 
small businesses holding GSA Schedule Contracts stated that it was time 
consuming to attain the GSA Schedule Contract, and even more difficult 
to receive orders against the contract. They noted that if no orders 
are placed on the contract within a certain time frame, they would then 
lose the contract. Consequently, these small businesses supported the 
set-aside of orders against GSA Schedule Contracts. In fact, from the 
input received, it would appear that the Jobs Act would have a greater 
impact on small businesses if set-asides were permitted against the GSA 
Schedule since more small businesses have a GSA Schedule Contract than 
other types of multiple award contracts.
    Based on all of these considerations, the SBA has proposed to 
define the term multiple award contract to mean: (1) A multiple award 
schedule contract issued by the GSA (e.g., GSA Federal Supply Schedule 
contract) or agencies granted Multiple Award Schedule contract 
authority by GSA (e.g., Department of Veterans Affairs) as described in 
FAR part 38 and subpart 8.4; (2) a multiple award task-order or 
delivery-order contract issued in accordance with FAR subpart 16.5, 
including Governmentwide acquisition contracts; and (3) any other IDIQ 
contract entered into with two or more sources pursuant to the same 
solicitation. SBA notes that although it is proposing to include a 
specific reference to GSA Schedules as part of the definition of 
multiple award contract, the proposed rule is not meant to infringe 
upon GSA's authority for the MAS Program pursuant to 41 U.S.C. 152(3). 
The SBA welcomes comments on this definition.
    The proposed rule also defines the terms ``partial set-asides'' and 
``reserve'' since those terms are used in the Jobs Act as it relates to 
multiple award contracts. The SBA has defined those terms in the 
definitions section of part 125 (Sec.  125.1), which is discussed next; 
however, it has also set forth the mechanics of how such partial set-
asides and reserves work in Sec.  125.2(e), which is discussed later in 
the preamble supplementary information to this proposed rule.
    With respect to partial set-asides, currently the FAR requires 
partial set-asides for small businesses when a total set-aside is not 
appropriate; the requirement is severable into two or more economic 
production runs or reasonable lots; one or more small business concerns 
are expected to have the technical competence and productive capacity 
to satisfy the set-aside portion of the requirement at a fair market 
price; and the acquisition is not subject to simplified acquisition 
procedures. FAR Sec.  19.502-3(a).
    In general, the SBA's proposed rule has adopted this definition but 
has updated the procedures. For example, instead of dividing the 
requirement into production runs or lots, the SBA's proposed rule 
recommends severing the acquisition into discrete components or 
categories, similar to how SBA proposes NAICS codes can be assigned to 
a multiple award contract. Thus, according to the definition in the 
proposed rule, a partial set-aside occurs when market research 
indicates that the ``rule of two'' (i.e., the contracting officer has a 
reasonable expectation that it will receive at least two offers from 
small businesses and award can be made at fair market price) will not 
be met for the entire requirement (e.g., each CLIN or SIN). However, 
the procurement can be broken into smaller, discrete portions such that 
the ``rule of two'' can be met and applied for some of those discrete 
components or categories (e.g., one or more CLINs). Under a partial 
set-aside, orders placed against the multiple award contract must be 
set-aside and competed among only small businesses for the portion of 
the contract that has been set aside; however, the contracting officer 
may state in the solicitation that small businesses can also compete 
against other-than-small businesses for the non-set-aside portion if 
they also submitted an offer on the non-set-aside portion.
    The SBA believes that with this proposed rule, the contracting 
officer would not be required to award the non-set-aside portion first 
and negotiate with eligible concerns on the set-aside portion only 
after all awards have been made on the non-set-aside portion, as 
required by the current FAR Sec.  19.502-3(c). Further, small 
businesses would not be required to submit offers for both the set-
aside and non-set-aside portions of the solicitation and the 
contracting officer would no longer be required to conduct negotiations 
only with those offerors who have submitted responsive offers on the 
non-set-aside portion, as currently required under the FAR; nor is 
there any statutory requirement to do so. The small business could 
submit an offer for both or either the set-aside and non-set-aside 
portions.
    The SBA notes that it considered an additional definition for a 
partial set-aside. The SBA has seen instances where an agency issues 
one solicitation that is entirely set-aside for some or all of the 
various categories of small businesses. The solicitation is divided 
into categories where one is for HUBZone small businesses, another is 
for SDVO SBCs, etc. The agency then states an intention to issue orders 
against the various categories so that only the HUBZone small 
businesses would be competing against each other, etc. The SBA believes 
that this could be another type of partial set-aside, where the 
multiple award contract is set-aside in part for the different small 
business programs. The SBA requests comments on this alternative.
    The SBA has also defined the term ``reserve,'' which is a term used 
in the Jobs Act, but not specifically defined. We understand that 
agencies have been ``reserving'' contract awards for small businesses 
for several years, but there has been no clear definition of that term 
or understanding of a ``reserve.'' For example, we have seen, and heard 
during the Jobs Act tour, that agencies ``reserve'' an award for small 
business participation, but do not require the small business to meet 
any contractor performance requirements (e.g., limitations on 
subcontracting). Some agencies then require that the small business 
compete with other-than-small businesses for orders, which some small 
businesses stated during the Jobs Act tour is difficult to do. This 
rule proposes to amend that practice to afford small businesses more 
opportunities to compete on orders where a reserve has been used by the 
procuring agency for a multiple award contract.
    The SBA proposes that a reserve is separate and distinct from a 
partial set-aside since the Jobs Act refers separately to both partial 
set-asides of multiple award contracts and reserves. In addition, the 
Jobs Act explains that an agency may reserve one or more awards for 
small businesses--a partial set-aside would require that the ``rule of 
two'' be met for the portion that is set-aside for small businesses.
    Thus, as proposed, a reserve is used when an acquisition for a 
multiple award contract will be conducted using full and open 
competition and the contracting officer's market research and recent 
past experience evidence that:

[[Page 29140]]

     At least two small businesses could perform one part of 
the requirement, but the contracting officer was unable to divide the 
requirement into smaller discrete categories such that the solicitation 
could have been partially set-aside; or
     At least one small business can perform the entire 
requirement, but there is not a reasonable expectation of receiving at 
least two offers from small business concerns at fair market price for 
all the work contemplated throughout the term of the contract.
    If either is the case, the contracting officer must then state an 
intention to make one or more awards to any one type of small business 
concern (e.g., small business, 8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) 
for the portion of the requirements they can perform and compete any 
orders solely amongst the specified types of small business concerns in 
accordance with that program's specific procedures. In the alternative, 
the contracting officer can state an intention to make several awards 
to several different types of small businesses (e.g., one to 8(a), one 
to HUBZone, one to SDVO SBC, one to WOSB or EDWOSB) and compete the 
orders solely amongst all of the small businesses for the portion of 
the requirements they can perform.
    The following sets forth two examples of how a set-aside, partial 
set-aside and reserve could be used for a multiple award contract:

                                                     Table 1
----------------------------------------------------------------------------------------------------------------
          Supply requirement               Total set-aside         Partial set-aside             Reserve
----------------------------------------------------------------------------------------------------------------
Description of Requirement...........   Five year        Five year        Five year
                                        requirement for          requirement for          requirement for
                                        couches and modular      couches and modular      couches and modular
                                        office furniture.        office furniture.        office furniture.
                                        No individual    No individual    Orders for
                                        order expected to        order expected to        couches and modular
                                        exceed 5 units.          exceed 5 units but       office furniture could
                                        Total            orders for modular       range from 5-50 units
                                        requirement not          furniture could range    per order.
                                        expected to exceed       from 5-50 units.         Total
                                        1000 units over 5        Total            requirement not
                                        years.                   requirement not          expected to exceed
                                                                 expected to exceed       1000 units over 5
                                                                 1000 units over 5        years
                                                                 years.
----------------------------------------------------------------------------------------------------------------
Market Research......................  Shows that many small    Shows that many small    Shows that many small
                                        businesses can meet      businesses can provide   businesses can provide
                                        the projected needs.     the couches, but none    5-15 units but none
                                                                 can provide the          can provide more than
                                                                 modular office           25 units at a time.
                                                                 furniture at the
                                                                 potential level of
                                                                 demand.
----------------------------------------------------------------------------------------------------------------
Action...............................  Total set-aside of       Partial set-aside for    Reserve for small
                                        contract for small       small businesses--       businesses--announce
                                        businesses.              break the requirement    in solicitation that
                                                                 into separate CLINS      agency will make one
                                                                 etc. and set-aside the   or more awards to
                                                                 requirement for          small businesses and
                                                                 couches for small        if two or more awards
                                                                 businesses. Compete      to small businesses,
                                                                 orders for couches       apply the rule of two
                                                                 only among small         when placing orders.
                                                                 business awardees.
----------------------------------------------------------------------------------------------------------------


                                                     Table 2
----------------------------------------------------------------------------------------------------------------
         Service requirement               Total set-aside         Partial set-aside             Reserve
----------------------------------------------------------------------------------------------------------------
Description of Requirement...........   Five year        Five year        Five year
                                        requirement for IT       requirement for IT       requirement for IT
                                        services and IT          services and IT          services and supplies.
                                        supplies.                supplies.                Orders for IT
                                        No individual    No orders        services and supplies
                                        order expected to        expected to exceed       could range from
                                        exceed $250,000.         $250,000 for IT          $250,000 to $2
                                        Total            services in certain      million.
                                        requirement not          geographic regions,      Total
                                        expected to exceed $10   but some orders for IT   requirement not
                                        million over 5 years.    services could exceed    expected to exceed
                                                                 $500,000 in other        $100 million over 5
                                                                 geographic regions and   years.
                                                                 delivery of IT
                                                                 supplies must be
                                                                 accomplished in short
                                                                 period of time.
                                                                 Total
                                                                 requirement not
                                                                 expected to exceed
                                                                 $100 million over 5
                                                                 years
----------------------------------------------------------------------------------------------------------------
Market Research......................  Shows that many small    Shows that many small    Shows that many small
                                        businesses can meet      businesses can provide   businesses can provide
                                        the projected needs.     the services and         IT services and
                                                                 supplies in certain      supplies at certain
                                                                 geographic regions and   dollar thresholds, but
                                                                 in a certain time        none can provide IT
                                                                 allotment, but none      services and supplies
                                                                 can provide the IT       for all orders
                                                                 services and supplies    proposed to be issued
                                                                 in other regions in      up to $2 million.
                                                                 the abbreviated
                                                                 timeframe.
----------------------------------------------------------------------------------------------------------------
Action...............................  Total set-aside of       Partial set-aside for    Reserve for small
                                        contract for small       small businesses--       businesses--announce
                                        businesses.              break the requirement    in solicitation that
                                                                 into separate CLINS      agency will make one
                                                                 for IT services and IT   or more awards to
                                                                 supplies in certain      small businesses and
                                                                 geographic regions.      if there are two or
                                                                 Compete orders for IT    more awards to small
                                                                 services and supplies    businesses, apply the
                                                                 in those regions only    rule of two when
                                                                 among small business     placing orders.
                                                                 awardees.
----------------------------------------------------------------------------------------------------------------


[[Page 29141]]

    In the examples above, the contracting officer can reserve one or 
more awards for a specific category of small businesses that can show 
they can perform some of the work (e.g., an SDVO SBC reserve). In the 
alternative, the contracting officer can reserve one or more awards for 
several categories of small businesses (e.g., one for 8(a), one for 
HUBZone, one for SDVO SBCs, and one for WOSBs or EDWOSBs), which would 
be known as a small business reserve. Under a small business reserve, 
an agency cannot state that an award will be made to a HUBZone small 
business concern only if no award is made to an 8(a) BD Participant or 
vice versa. In other words, unless the agency has specific statutory 
authority to ``cascade'' the awards as such, it cannot do so. Once 
awarded, certain orders will be competed amongst only small business 
awardees if the ``rule of two'' is met at the order level. All other 
orders will be competed amongst all of the awardees (which can include 
the small businesses if their contract includes those supplies or 
services).
    In addition, the SBA has proposed that a reserve can occur on a 
bundled contract where a Small Business Teaming Arrangement will submit 
an offer or receive a contract award. In that case, the individual 
members of the Small Business Team Arrangement will not be affiliated 
for the bundled contract or other purposes, the small business 
subcontracting limitations or nonmanufacturer rule requirement will 
apply (as applicable) to each order, and the cooperative efforts of the 
team members will be able to meet the subcontracting limitations 
requirement. Under such a reserve, the Small Business Teaming 
Arrangement would be competing on the orders with all awardees.
    The SBA is proposing this type of reserve because, as discussed 
above, there is a statutory exception to affiliation for the small 
business team members in a Small Business Teaming Arrangement for 
bundled contracts. Affiliation is important when size would be an 
issue, which is generally not the case for bundled contracts, which are 
competed using full and open competition. The SBA believes, therefore, 
that the purpose of this provision and the exception to affiliation (as 
well as the Jobs Act's Small Business Teaming Pilot Program, which will 
offer assistance to small business teams and joint ventures) is to 
permit such teams to compete on a bundled contract against large 
businesses and retain their small business size status for future 
federal acquisitions.
    Some of the above are types of ``reserves'' SBA has seen used to 
promote small businesses as prime contractors when an acquisition is 
conducted using full and open competition. The SBA has also seen 
instances where agencies will issue a multiple award contract using 
full and open competition, but state in the solicitation that all 
orders valued at less than a certain dollar threshold (e.g., $150,000) 
are ``reserved'' for small businesses. However, we believe that this 
could actually be a partial set-aside, since the agency could place 
into a separate category all orders at this dollar threshold, but 
welcomes comments on this issue.
    The SBA understands that a reserve is a new type of procurement 
mechanism. Therefore, the SBA specifically requests comments on the 
proposed definition of the term ``reserve,'' including: (1) Whether the 
definition effectively implements the statutory intent of the Jobs Act; 
(2) whether there are other instances of ``reserves'' being used by 
Federal agencies that promote small businesses as prime contractors 
that would not be covered under the proposed definition; (3) how the 
agency should handle the situation where there is only one small 
business awardee under a reserve (e.g., award certain task orders 
solely to the small business awardee); (4) whether there is a clear 
enough distinction between a partial set-aside and a reserve; and (5) 
whether the agency should require in the solicitation and contract that 
a certain percentage of the orders must be awarded to small businesses 
(e.g., a minimum of 30% of total dollar value of contract will be 
awarded to small businesses) and, if so, whether this option could be 
used in connection with not requiring the agency to compete orders 
solely amongst small businesses if the ``rule of two'' is met.
    SBA has also proposed adding a definition for a common term used by 
procurement professionals--``rule of two''. The ``rule of two'' is the 
commonly used phrase to identify the requirement that in order for an 
agency to proceed with a set-aside, the contracting officer must have a 
reasonable expectation that he or she will obtain offers from at least 
two small businesses and award will be made at fair market price. This 
basic premise--that at least two offers will be received at fair market 
price--serves as the foundation for a set-aside pursuant to the 8(a) 
BD, HUBZone, SDVO SBC and WOSB programs as well as small business set-
asides in general. Because the term ``rule of two'' is referenced in 
the proposed regulations as it relates to reserves, the SBA believed it 
was necessary to propose a definition for the term. This definition of 
the ``rule of two'' is not meant in any way to change the set-aside 
requirements set forth in SBA's regulations or the FAR (e.g., shall set 
aside for small businesses, may set-aside for SDVO SBC). It is simply 
meant to be a definition for the ``rule of two''.
    SBA also proposed a definition for the term ``Small Business 
Teaming Arrangement'' in Sec.  125.1. The Jobs Act requires that 
agencies encourage the participation of small business teams for 
bundled acquisitions, since by definition, a small business alone could 
not perform on a bundled contract. The FAR defines the term 
``contractor team arrangements'' in FAR Sec.  9.601 and GSA also 
permits Contractor Team Arrangements for orders competed against its 
Multiple Award Schedule contracts where two or more GSA Schedule 
contractors work together to meet the ordering activity's needs. In 
order to avoid confusion, the SBA has proposed the term ``Small 
Business Teaming Arrangement'' and set forth a specific definition for 
this term.
    Under such an arrangement, two or more small businesses can form a 
joint venture or enter into a written agreement where one small 
business acts as the prime and the other small business or small 
businesses are the subcontractors. The SBA requires the agreement be in 
writing and submitted to the contracting officer as part of the 
proposal so that he/she understands that a small business team has 
submitted the proposal.
    SBA is also proposing to amend its definition of the term 
subcontracting to clarify subcontracting costs. SBA has removed the 
language, ``or services'', in order to provide clarity on costs that 
should properly be considered subcontracting costs, and not cost for 
materials.
    In addition to adding a definition section to Sec.  125.1, the SBA 
has proposed amending Sec.  125.2. Specifically, the SBA has 
reorganized this section by breaking it into specific parts to address 
SBA's and the procuring agency's responsibilities when providing small 
business contracting assistance. The SBA has not entirely re-written 
this section of the rule, but has generally reorganized it for easier 
reference.
    Paragraph 125.2(a) addresses the general objective of SBA's 
contracting programs, which is to assist small businesses in obtaining 
a fair share of Federal Government prime contracts, subcontracts, 
orders, and property sales.
    Proposed paragraph 125.2(b) sets forth SBA's responsibility during 
an agency's acquisition planning. At the earliest

[[Page 29142]]

stage possible, the SBA's PCRs work with the buying activity or agency 
by reviewing acquisitions and ensuring that it has complied with all 
applicable statutory and regulatory small business requirements. SBA's 
PCRs work with the procuring agency's small business specialist (SBS) 
and the procuring agency's OSDBU or OSBP to identify bundled or 
consolidated requirements, and promote set-asides and reserves. The 
PCRs may make recommendations to break up the procurement so that small 
businesses can compete as prime contractors or encourage small business 
prime contractor participation on justified, bundled contracts through 
Small Business Teaming Arrangements and through increased small 
business subcontracting goals. In addition, with respect to the new 
Jobs Act provision relating to multiple award contracts, PCRs may work 
more closely with agencies that have not met their small business goals 
in the prior year to identify small business opportunities on multiple 
award contracts. However, the ultimate decision of whether to apply a 
section 1331 Jobs Act tool (partial set-aside, reserve, or set-aside of 
an order) to any given procurement action is a decision of the 
contracting officer.
    Proposed paragraph 125.2(c) addresses the procuring agency's 
responsibilities. This includes structuring the acquisition to ensure 
competition by small business concerns, avoiding unnecessary bundling 
and consolidation, and conducting sufficient market research to help 
determine the type of acquisition to be used. This paragraph also 
addresses the need for and requirement that the procuring agency work 
closely with SBA and its PCRs on acquisitions to promote the use of 
small businesses.
    Proposed paragraph 125.2(d) addresses contract consolidation and 
bundling and adds new provisions set forth in the Jobs Act. 
Specifically, the proposed regulation explains that an agency may not 
conduct an acquisition that is a consolidation of contract requirements 
with a total value of more than $2 million unless the SPE or CAO 
justifies the consolidation and identifies the negative impact on small 
businesses. The Jobs Act states that the agency can justify the action 
if the benefits of the consolidated acquisition substantially exceed 
the benefits of each possible alternative approach that would involve a 
lesser degree of consolidation.
    The Jobs Act does not define the terms ``substantially exceed'' or 
``benefits''. The SBA has therefore proposed to use the definitions for 
those terms currently set forth in the bundling regulations in part 
125. The SBA does not believe that those terms should be defined 
differently or inconsistently, but welcomes comments on this approach.
    The SBA also sets forth the same requirements for bundling and 
substantial bundling that are currently set forth in Sec.  125.2(d). 
However, the SBA reorganized those sections and proposed updates to all 
of the dollar values to be consistent with the FAR. Specifically, the 
FAR Council has the responsibility of adjusting each acquisition-
related dollar threshold on October 1, of each year that is evenly 
divisible by five. The FAR Council publishes a notice of the adjusted 
dollar thresholds in the Federal Register. The adjusted dollar 
thresholds must take effect on the date of publication. In this case, 
the FAR Council adjusted the bundling thresholds on August 30, 2010 in 
75 FR 53129. The proposed amendment seeks to ensure that the FAR and 
SBA's regulations will be consistent.
    In addition, the SBA has proposed regulations to address the Jobs 
Act requirement that agencies post their rationale for any bundled 
requirement. The SBA actually published a direct rule implementing this 
Jobs Act requirement at 76 FR 63542 (Oct. 13, 2011), which was 
effective November 28, 2011. According to the Jobs Act and implementing 
rule, an agency must publish on its Web site a list and rationale for 
each bundled requirement on which the agency solicited offers or issued 
an award. With this proposed rule, however, SBA is encouraging agencies 
to post the list and rationale prior to the time the agency solicits 
offers, rather than wait until awards have been made.
    The SBA believes that posting the bundling rationale and list prior 
to or at the same time the agency announces the solicitation should be 
easy for each agency to achieve, especially since the Act already 
requires agencies to notify every affected small business of its intent 
to bundle. In addition, we note that DoD is already posting such a 
notice at least 30 days prior to issuance of a bundled solicitation. 
Specifically, DFARS Sec.  205.205-70, ``Notification of bundling of DoD 
contracts'' states that a contracting officer must publish in 
FedBizOpps.gov a notification of the intent to bundle all DoD funded 
acquisitions that involve bundling, including the measurably 
substantial benefits that are expected to be derived as a result of the 
bundling. The contracting officer must post the requirement at least 30 
days prior to the release of the solicitation or 30 days before placing 
an order. 48 CFR 205.205-70. The SBA welcomes comments on this issue, 
and in particular comments on whether agencies should be required to 
post the rationale prior to the release of the solicitation.
    The SBA has also proposed amendments to Sec.  125.2(e), which 
addresses application of SBA's programs to multiple award contracts, 
and is one of the key provisions of the Jobs Act. SBA proposed to 
define certain terms relating to this key provision--such as multiple 
award contract, partial set-aside and reserve in Sec.  125.1, which was 
discussed above. In Sec.  125.2, the SBA proposes regulations to 
explain how and when such partial set-asides, reserves and set-asides 
of orders can be used in an acquisition involving multiple award 
contracts.
    The SBA notes that on November 2, 2011, the FAR Council issued an 
interim rule to address the basic authorities of this provision. See 76 
FR 68032. Proposed Sec.  125.2(e) is intended to provide additional 
guidance to help contracting officers as they take advantage of the 
discretionary authorities in section 1331 to use a partial set-aside or 
reserve for a multiple award contract or set-aside of orders against a 
multiple award contract.
    The proposed rule first addresses the contracting officer's 
authority to use these Jobs Act provisions. The Jobs Act states that 
agencies may, at their discretion, partially set-aside or reserve a 
multiple award contract, and may set-aside orders issued against a 
multiple award contract, for small businesses. Therefore, the 
contracting officer is not required to partially set-aside or reserve a 
multiple award contract, or set-aside an order against a full and 
openly competed multiple award contract for small businesses; rather, 
the contracting officer has the discretion to do so.
    However, the Small Business Act, SBA's regulations, and the FAR 
state that small businesses ``shall'' receive awards for acquisitions 
valued above the micro-purchase threshold but below the simplified 
acquisition threshold (SAT) when the ``rule of two'' is met. In 
addition, the Act also states that small businesses ``shall receive any 
award or contract or any part thereof, * * * as to which it is 
determined by the Administration and the contracting procurement or 
disposal agency (1) to be in the interest of maintaining or mobilizing 
the Nation's full productive capacity, (2) to be in the interest of war 
or national defense programs, (3) to be in the interest of assuring 
that a fair proportion of the total purchases and contracts for 
property and services for the Government in each industry category are 
placed with small-business

[[Page 29143]]

concerns, or (4) to be in the interest of assuring that a fair 
proportion of the total sales of Government property be made to small-
business concerns; * * *.'' 15 U.S.C. 644(a) (emphasis added).
    To ensure that agencies comply with this and other provisions 
relating to small businesses, the Act sets forth certain Governmentwide 
statutory goals, the percentages of which are based on the aggregate of 
all Federal procurement. Id. Sec.  644(g)(1). The Act also requires 
that each Federal department and agency have an annual goal that 
presents, for that agency, the maximum practicable opportunity for 
small businesses. Id. This agency goal is separate from the 
Governmentwide goal. With respect to the agency goal, the Small 
Business Act explains that if an agency is not meeting its goals, it 
must explain to SBA why it did not meet its goals, and offer strategies 
to expand the award of contracts to small business concerns.
    In consideration of the foregoing, this proposed rule explains that 
if the ``rule of two'' is met, then the contracting officer must set-
aside the contract. If however, the ``rule of two'' is not met, then 
the contracting officer has the discretion to: (1) Set-aside part or 
parts of the multiple award contract for small business concerns, 
including the subcategories of small business concerns; (2) reserve one 
or more contract awards for small business concerns under full and open 
multiple award procurements, including the subcategories of small 
business concerns; or (3) set aside orders for small business concerns, 
including the subcategories of small business concerns, under multiple 
award contracts awarded that are full and openly competed where the 
rule of two is met for a specific order.
    When exercising his or her discretion to decide among these 
options, there is no order of precedence--the contracting officer is 
not required to consider partial set-asides first, and then reserves 
and then the set-aside of orders. In other words, if an agency could do 
a partial set-aside or set-aside orders under a full an open 
competition, there is no preference for doing the former over the 
latter. Rather, all three should be considered as part of acquisition 
planning and, if more than one option is available (the circumstances 
fit the definition of more than one tool), the agency should give 
careful consideration to the option that works best for the agency. 
Whether the agency ultimately uses any of the three authorities is left 
to the agency's discretion, but the agency must keep in mind that it 
will be held accountable for taking all reasonable steps to meet their 
small business goals. In other words, when utilizing this discretion, 
the procuring agency and contracting officer should consider the 
statutory requirements and small business contracting goals that are 
designed to help ensure that small businesses receive a fair proportion 
of awards. All agencies, especially those that are not meeting their 
small business contracting goals, are to consider strategies that can 
expand opportunities for making contract awards to all categories of 
small businesses.
    We believe that awarding multiple award contracts to small 
businesses is one strategy to improve the agency's ability to attain 
its small business goals. Consequently, the SBA has proposed that if 
the contracting officer decides not to partially set-aside or reserve a 
multiple award contract, or include a clause in the contract that 
commits the agency to set-aside or preserve the right to set-aside 
orders against a multiple award contract that is full and openly 
competed, then the contracting officer must explain the decision and 
document it in the contract file. The procuring agency contracting 
officer would need to document the contract file only if he/she decides 
not use any of these Jobs Act authorities. Of course, once an agency 
has exercised its discretion at the contract level to use one of the 
Sec.  1331 tools, it must honor the commitment when placing orders. For 
example, if an agency inserts a clause in the contract awarded pursuant 
to full and open competition stating that it will set aside orders when 
the rule of two is met, it must do so.
    SBA considered whether documentation requirement would create a 
chilling effect and prevent contracting officers from using these new 
Jobs Act authorities, which are discretionary. The SBA believes, that 
the requirement to document a decision to not utilize small businesses 
is already in the FAR and therefore not a new requirement.
    When conducting acquisition planning, the contracting officer must 
consider small business utilization. In fact, FAR Sec.  7.103 states 
that agencies shall ensure that acquisition planners structure their 
requirements to facilitate competition by and among small business 
concerns. Likewise, FAR Sec.  7.105(b)(1) requires not only that the 
acquisition plan indicate the prospective sources of supplies or 
services that can meet the need, but must include consideration of 
small business and address the extent and results of the market 
research. Further, the acquisition plan must explain how the proposed 
action benefits the Government, including when ``[o]rdering through an 
indefinite delivery contract facilitates access to small disadvantaged 
business concerns, 8(a) contractors, women-owned small business 
concerns, HUBZone small business concerns, veteran-owned small business 
concerns, or service-disabled veteran-owned small business concerns.'' 
FAR Sec.  7.105(b)(5)(B)(ii).
    Finally, agencies must document their decision to not proceed with 
a set-aside pursuant to FAR Sec.  19.501(c). FAR Sec.  19.501(c) states 
that: ``The contracting officer shall perform market research and 
document why a small business set-aside is inappropriate when an 
acquisition is not set aside for small business, unless an award is 
anticipated to a small business under the 8(a), HUBZone, service-
disabled veteran-owned, or WOSB programs.''
    Thus, the SBA believes that this proposed rule requires no new FAR 
market research, acquisition planning or documentation requirements. 
Rather, it reinforces requirements that are already in the FAR, which 
is that contracting officers must give meaningful consideration to the 
utilization of small businesses, and serve the purpose of increasing 
opportunities for small businesses.
    The SBA requests comments on this proposed implementation of 
section 1331 of the Jobs Act and whether there are more effective 
regulatory alternatives that might be considered. Specifically, the SBA 
requests comments on whether the contracting officer's documentation 
for deciding not to partially set-aside, reserve contracts or commit to 
setting aside or preserving the right to set aside orders on a multiple 
award contract should be approved at a higher level and/or posted 
online concurrent with the issuance of the solicitation. The SBA notes 
that under the Jobs Act, the Senior Procurement Executive or Chief 
Acquisition Officer must approve certain actions related to 
consolidation. Further, agencies are required to post online their 
bundling justifications.
    In addition, the SBA requests comments on what the documentation in 
the file should demonstrate. The SBA believes that for example, the 
documentation could explain that the agency has met its small business 
goals for the prior year or that it is currently meeting some or all of 
its goals, and then explain the results of the market research. The 
documentation, like any other market research documentation, could 
explain the acquisition history for the requirement and whether there 
is

[[Page 29144]]

sufficient competition at the contract or order level for a partial 
set-aside, reserve, or set-aside of an order against a full and openly 
competed multiple award contract.
    Since the Sec.  1331 authority is discretionary, an agency has the 
discretion to forego using these tools even if the rule of two could be 
met; but would still need to explain how its planned action is 
consistent with the best interest of the agency (e.g., agency has a 
history of successfully awarding significant amounts of work to small 
businesses for the stated requirements under multiple award contracts 
without set-asides, and has received substantial value from being able 
to select from among small and other than small businesses as needs 
arise; agency can get better overall value by using the fair 
opportunity process without restriction for the stated requirements and 
has developed a strategy with the help of its OSDBU or OSBP that 
involves use of order set asides whenever the rule of two is met on a 
number of multiple award contracts for other requirements).
    In addition to the above, the SBA's proposed rule sets forth the 
mechanics of how a contracting officer would use one of these Jobs Act 
authorities (reserve, partial set-aside, set-aside of orders). The 
proposed definitions for these terms were discussed prior in the 
preamble. This part of the proposed rule explains that if the ``rule of 
two'' can be met at the contract level, the agency must set-aside the 
multiple award contract for small businesses (including a specific 
category of small businesses). Section 1331 does not change the 
requirements to set aside acquisitions at the contract level if the 
``rule of two'' is satisfied.
    This section of the proposed rule also explains that if the ``rule 
of two'' is not met at the contract level, an agency has other options. 
Pursuant to section 1331, it may partially set-aside or reserve the 
requirement, or set-aside (or preserve the right to set-aside) orders 
against a multiple award contract that was awarded pursuant to full and 
open competition. These options, although discretionary, allow 
procuring agencies to provide more prime contracting opportunities to 
small businesses.
    For example, an agency may have a requirement for services that 
would cover different parts of the country. If market research 
indicates that two or more small businesses can perform some of the 
requirement (e.g., can perform for some of the states but not all), and 
the solicitation can be separated into categories, the agency may 
partially set-aside the requirement for small business concerns (or 
8(a) BD Participants, HUBZone small business concerns, SDVO SBCs, WOSBs 
or EDWOSBs, if the requirements for such a set-aside are met such as 
the dollar value thresholds). In other words, the agency could do a 
partial set-aside and set-aside part of the requirement for the 
services for one or more states for small businesses (by setting this 
forth in separate categories) and the rest of the requirement for 
services for the remaining states for all other business concerns 
(which can include the small businesses on the partial set-aside).
    In the alternative, if the requirement cannot be broken into 
smaller, discrete components or categories and market research 
indicates that one small business can perform the entire requirement or 
two or more small businesses can perform part of the requirement, it 
may reserve one or more awards for small business (or 8(a) BD 
Participants, HUBZone small business concerns, SDVO SBCs, WOSBs or 
EDWOSBs).
    Finally, irrespective of whether an agency could do a partial 
contract set-aside or contract reserve, the contracting officer may 
issue the solicitation using full and open competition and state that 
it intends to set-aside orders, or preserve the right to set-aside 
orders, if the ``rule of two'' is met.
    For example, the agency may specifically state in the contract that 
if the ``rule of two'' is met, it is preserving the right to set-aside 
orders for small businesses (or any subcategory of small business). If 
it preserves this right and then opts not to set-aside an order when 
the ``rule of two'' is met, it must provide a written explanation for 
its actions in the contract file--namely how its action is consistent 
with the best interest of the agency.
    In sum, an agency must first determine if it can set-aside the 
requirement. If it cannot, it must consider whether it should partially 
set-aside or reserve the multiple award contract for small businesses 
or set aside or preserve the right to set aside orders against multiple 
award contracts that were awarded in full and open competition. If the 
agency decides not to take any one of these actions when it otherwise 
could, it must explain its decision and document the decision in the 
contract file.
    We note that when setting aside orders against the GSA Schedules, 
certain regulations in FAR Part 8.4 must be followed. For example, the 
FAR states that agencies must survey at least three schedule 
contractors through the GSA Advantage!, or request quotations from at 
least three schedule contractors for acquisitions valued below the 
simplified acquisition threshold. The SBA does not believe that this 
requirement conflicts with the set-aside ``rule of two'' requirement; 
rather, the two can be reconciled. The agency would first apply the 
``rule of two'' to determine whether a set-aside is appropriate; 
however, the agency can request quotes from more than two small 
businesses. The same is true for acquisitions above the simplified 
acquisition threshold, where the FAR requires the ordering activity 
contracting officer to post a request for quotes (RFQ) on e-Buy or 
provide the RFQ to as many schedule contractors as practicable, 
consistent with market research appropriate to the circumstances. 
Agencies would not be required to document the circumstances for 
restricting consideration to less than three small business schedule 
contractors based on one of the reasons at FAR Sec.  8.405.
    The SBA's proposed rule also addresses multiple award contracts and 
partial set-asides or reserves for 8(a) BD Program Participants. If the 
contracting officer partially set-aside or reserved awards for a 
multiple award contract solely for the 8(a) Program (i.e., there was an 
offer and acceptance to the 8(a) Program), then orders could be issued 
on a sole source basis using 8(a) Program authority, if the requisite 
dollar thresholds are met. The SBA understands that there is at least 
one Governmentwide contract that has been set-aside for the 8(a) BD 
Program that permits 8(a) sole source awards on the order level and it 
has served as a useful tool for contracting officers. In order to 
continue to provide such flexibility to contracting officers, the SBA 
is proposing to permit this with the proposed rule.
    In this rule, the SBA has also proposed that agencies consider the 
use of ``on and off ramp'' provisions when using set-asides, partial 
set-asides or reserves for multiple award contracts. These provisions, 
which are relatively new to contracting, are used by some agencies as a 
means of ensuring that there are a sufficient number of small business 
contract awardees for a multiple award contract that had been set-
aside. Agencies use ``on ramp'' provisions to award new contracts to 
small businesses under a multiple award contract where some of the 
current awardees are no longer small as a result of a size 
recertification. Agencies use ``off ramp'' provisions to remove or 
terminate a contractor that has recertified its status as other-than-
small and therefore is no longer eligible to receive new task orders as 
a small business.

[[Page 29145]]

    The SBA welcomes comments on these approaches. Further, the SBA 
requests comments on the use of 8(a) sole source awards on orders 
issued against an 8(a) set-aside, partially set-aside or reserved 
multiple award contracts. In addition, the SBA welcomes comments on the 
use of ``on ramp/off ramp'' procedures.
    The SBA notes that consistent with the interim FAR rule, SBA 
strongly encourages contracting officers to modify, on a bilateral 
basis, existing multiple award contracts in accordance with FAR 
1.108(d)(3) to address the new FAR provisions on multiple award 
contracts, if the remaining period of performance extends at least six 
months after the effective date of that rule, and the amount of work or 
number of orders expected under the remaining performance period is 
substantial. There are many valuable opportunities under existing 
multiple award contracts to help small businesses through order set-
asides. These opportunities should not be lost. To this end, GSA's 
Federal Acquisition Service, which is responsible for managing the MAS 
Program, is in the process of modifying their existing contract 
vehicles to include all appropriate set-aside clauses.
    The SBA has also proposed amendments to Sec.  125.5 concerning its 
COC program to address multiple award contracts and permit COCs on such 
contracts, including ``reserves,'' and orders issued against multiple 
award contracts. SBA acknowledges that contracting officers should be 
making responsibility determinations at the contract level for multiple 
award contracts. However, if a contracting officer makes a 
responsibility determination at the order level that affects a small 
business apparent successful offeror, then the contracting officer must 
refer the matter to SBA for a COC.
    In addition, the SBA has proposed amendments to the limitations on 
subcontracting set forth in Sec.  125.6 to explain that the period of 
performance for each order issued against a multiple award contract 
will be used to determine compliance with the limitations on 
subcontracting requirements. The SBA has proposed amendments to the 
8(a) BD (13 CFR 124.510), HUBZone (13 CFR 126.601, 126.700), and SDVO 
Program (13 CFR 125.15) regulations to state the same.
    The SBA notes that it considered two options with respect to 
application of the limitations on subcontracting for multiple award 
contracts: (1) On an order by order basis; or (2) in the aggregate at 
any point in time over the course of the contract. The SBA believed 
that requiring the limitations on subcontracting to apply on an order 
by order basis for a multiple award contract (if the contract is a set-
aside, partial set-aside or reserve, or if the order was set-aside) is 
the best approach to allow contracting officers to monitor such 
compliance.
    We understand that allowing a small business to meet this 
requirement in the aggregate at certain points in time provides greater 
flexibility to both the small business and procuring activity, 
especially with respect to multiple award contracts where the small 
business prime contractor may utilize different subcontractors for 
different task orders. However, we believe that it is too difficult to 
monitor compliance and that in fact, agencies are not monitoring such 
compliance. In fact, we believe it would be extremely difficult to 
monitor compliance on a multi-agency multiple award contract where 
contracting officers from different agencies are awarding task orders 
against the same contract. We note that GSA has informed SBA that it 
monitors compliance through designated FAC-C contracting officer 
representatives. SBA specifically requests comments on this issue.
    We note that for 8(a) contracts, the SBA has retained a provision 
that permits the SBA to waive this requirement and allow an 8(a) BD 
Participant to meet the subcontracting limitations for the combined 
total of all orders issued to date at the end of any six-month period 
where he or she makes a written determination that larger amounts of 
subcontracting are essential during certain stages of performance, 
provided that there are written assurances from both the 8(a) BD 
Participant and the procuring activity that the contract will 
ultimately comply with the requirements of this section. The SBA has 
retained this ``waiver'' in the proposed rule because it affords 
additional business development opportunities for 8(a) BD Participants, 
but welcomes comments on whether the ``waiver'' should remain solely 
for 8(a) contracts, or whether the requirements should be the same for 
all programs.
    In addition, and with respect to the limitations on subcontracting, 
SBA has proposed that a contracting officer must document a small 
business concern's performance of work requirements as part of the 
small business's performance evaluation. This means that if the small 
business meets the applicable limitation on subcontracting, its efforts 
must be documented. This also means that if a small business fails to 
meet the applicable limitations on subcontracting for the program, the 
contracting officer must document this failure. Contracting officers 
must use this information, which will be available to all contracting 
officers on the Past Performance Information Retrieval System (PPIRS), 
when evaluating compliance on future contract awards. The FAR requires 
agencies to post contractor evaluations in the PPIRS database, which 
now serves as the single, authorized application to retrieve contractor 
performance information.
    We note that if a small business fails to meet the subcontracting 
limitations requirement set forth in the contract, the contracting 
officer may terminate the contract for default pursuant to FAR Sec.  
49.401. Specifically, the FAR permits the contracting officer to 
completely or partially terminate a contract because of the 
contractor's actual or anticipated failure to perform its contractual 
obligations--in this case, the failure to meet the limitations on 
subcontracting. If the small business can establish or the contracting 
officer determines that the failure to perform is excusable (e.g., 
arose out of causes beyond the control and without the fault or 
negligence of the contractor), then no termination for default would be 
required.

C. Amendments to Other Parts Addressing SBA's Procurement Programs--
Parts 124, 125, 126 and 127

    The SBA has also proposed amendments to the various parts of its 
regulations that cover specific procurement programs: Part 124 (8(a) BD 
Program); part 125 (SDVO SBC Program); part 126 (HUBZone Program); and 
part 127 (WOSB Program). The proposed amendments to these parts conform 
to the general proposed amendments in part 125 concerning multiple 
award contracts. For example, the SBA amended each of these parts to 
include multiple award contracts as types of contracts available for 
set-asides, partial set-asides and reserves under these programs. The 
SBA also amended each of these parts to address status protests and 
appeals relating to multiple award contracts or orders issued against 
multiple award contracts, and the limitations on subcontracting and 
nonmanufacturer rule requirements.
    With respect to the WOSB Program, we note that a contracting 
officer may restrict competition to EDWOSBs if the contract is in an 
industry that SBA has designated as underrepresented and the 
contracting officer has a reasonable expectation based on market 
research that two or more EDWOSBs will submit offers, the anticipated 
award price (including options) does not exceed $6.5 million for a 
contract assigned a NAICS

[[Page 29146]]

code for manufacturing or $4 million for a contract assigned any other 
NAICS code, and the contract may be awarded at a fair and reasonable 
price. The contracting officer may restrict competition for WOSBs in an 
industry that SBA has designated as substantially underrepresented if 
the contracting officer has a reasonable expectation based on market 
research that two or more WOSBs will submit offers, the anticipated 
award price (including options) does not exceed $6.5 million for a 
contract assigned a NAICS code for manufacturing or $4 million for a 
contract assigned any other NAICS code, and the contract may be awarded 
at a fair and reasonable price.
    Because the Jobs Act specifically permits set-asides, partial set-
asides and reserves of multiple award contracts, as well as set-asides 
of orders against multiple award contracts that were themselves awarded 
through full and open competition, the SBA has proposed amending the 
WOSB Program regulations to address application of the contracting 
thresholds for that program with respect to multiple award contracts. 
The SBA's proposed regulations explain that the thresholds for the WOSB 
Program ($6.5 million for manufacturing and $4 million for everything 
else) will apply to each order issued against the multiple award 
contract, rather than the estimated contract value for the multiple 
award contract and rather than the total value of all orders issued 
against the multiple award contract. If SBA were to apply the 
thresholds to the value of the multiple award contract, then it would 
be difficult to set-aside, partially set-aside or reserve a multiple 
award contract under the WOSB Program because the estimated dollar 
value of the acquisition will almost always exceed the $4 and $6.5 
million thresholds (since the estimated dollar value of such an 
acquisition would be the total value of several different contracts). 
The SBA welcomes comments on this proposal.
    In addition, the SBA has proposed regulations to the SDVO SBC 
Program, HUBZone Program and WOSB Program to address the situation 
where an awardee under one of these programs is later decertified or 
deemed ineligible for the program. The SBA has proposed that a concern 
that represents itself as eligible for the program or is certified into 
the program and receives a contract award keeps its status throughout 
the life of the contract, unless the contract exceeds five years, there 
is a contract novation, or there has been a merger or acquisition. In 
those instances, the concern will have to recertify its status. 
Essentially, the SBA has proposed applying the current size re-
certification rule to the status of a small business for each of its 
programs. The SBA welcomes comments on this proposal.

IV. Request for Comments

    The Jobs Act has set forth the necessary tools to ensure that small 
businesses receive their fair share of Federal awards. It opens the 
door for small businesses by providing them access to multiple award 
contracts and orders issued against multiple award contracts. It also 
sets forth limitations on contract consolidation and provides for 
greater bundling enforcement.
    As such, the SBA requests comments on each proposed amendment to 
the rule. We have noted above specific issues on which the agency would 
like to receive comments. However, SBA seeks comments on all aspects of 
this proposed rule.

Compliance With Executive Orders 12866, 12988, 13132, 13563, the 
Paperwork Reduction Act (44 U.S.C., Chapter 35) and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Order 12866
    OMB has determined that this rule is a ``significant'' regulatory 
action under Executive Order 12866. The Regulatory Impact Analysis is 
set forth below.
Regulatory Impact Analysis
1. Necessity of Regulation
    This regulatory action implements the Small Business Jobs Act of 
2010, Public Law 111-240. Specifically, it implements the following 
sections of the Jobs Act: section 1311 (definition of multiple award 
contract); section 1312 (publication on Web site a list and rationale 
for bundled contracts); section 1313 (consolidation of contracts 
definitions, policy, limitations on use, determination on necessary and 
justified); and section 1331 (reservation of multiple award contracts 
and orders against multiple award contracts for small businesses). 
Those sections of the Jobs Act address small business set-asides and 
reserves of multiple award contracts and orders issued pursuant to such 
contracts, as well as bundling and contract consolidation.
    The SBA's current regulations address bundling with respect to 
multiple award contracts as well as set-asides of its various programs, 
in general. However, the regulations do not provide the specific 
guidance needed by the contracting community, which is set forth in 
this proposed rule. The SBA believes it is necessary and beneficial to 
address these recent amendments to the Small Business Act in its 
regulations to ensure consistency and clarity on these issues as they 
relate to small businesses. This is especially true since these 
provisions of the Jobs Act are creating new procurement mechanisms for 
contracting officers to use to award small businesses contracts and 
orders issued against contracts.
2. Alternative Approaches to Proposed Rule
    The SBA considered numerous alternatives when drafting this 
regulation. The SBA considered an alternative approach with respect to 
the definition of multiple award contract. The Jobs Act sets forth a 
definition of that term. However, the DFARS also set forth a more 
specific definition of multiple award contracts. After reviewing 
legislative history and other reports relating to this issue, the SBA 
believes that the DFARS definition is a reasonable interpretation of 
the definition set forth in the Jobs Act as well as a more specific 
definition of the term because it specifically addresses multiple award 
contracts issued by the GSA as part of the MAS Program. Consequently, 
the SBA based its definition of multiple award contract on the DFARS 
definition, although it changed the wording slightly.
    In addition, the SBA considered various approaches with respect to 
application of its programs to multiple award contracts. As noted in 
the discussion above, the proposed rule states that agencies may 
partially set-aside or reserve awards of multiple award contracts (and 
set-aside orders issued against multiple award contracts) for small 
businesses even if the agency did not meet its prior fiscal year's 
small business goals or is currently not meeting its goals. The SBA 
explored other options when drafting this rule (e.g., should the 
contracting officer be required to partially set-aside a multiple award 
contract if the agency is failing to currently meet its goals).
    The SBA also considered several alternatives as it relates to 
partial set-asides against multiple award contracts. The FAR currently 
addresses partial set-asides for small businesses, but the procedures 
seem out-of-date and complex. The SBA believes that the best 
alternative is to propose a change in the current method of conducting 
a partial set-aside.
    Other examples of alternatives considered are discussed in the 
preamble above (e.g., how to determine a small business is meeting the 
subcontracting limitations requirement).

[[Page 29147]]

3. What are the potential benefits and costs of this regulatory action?
    The potential benefits of this rule are to increase small business 
participation in Federal prime contracts by limiting a procuring 
agency's use of bundled and consolidated contracts, ensuring small 
businesses have opportunities with respect to justified bundled and 
consolidated contracts, and ensuring that small businesses have greater 
access to multiple award contracts, including orders issued against 
such contracts. Currently, there is inadequate guidance for agencies 
regarding application of the SBA's programs to multiple award contracts 
and orders issued against such contracts. As a result, we believe that 
small businesses have been denied many opportunities to submit offers 
on and potentially receive awards on these contracts or the orders.
    For example, Congress established an annual goal that 23 percent of 
the dollar value of prime contracts awarded by the Federal government 
must be awarded to small business. In fiscal year (FY) 2010, small 
businesses received 22.65 percent of federal dollars; in FY 2009, small 
businesses received 21.89 percent of federal dollars; and in FY 2008, 
small businesses received 21.50 percent of federal dollars. Although it 
is getting close, the Federal government is still not meeting this 
statutory goal. One benefit of this rule is to provide needed 
mechanisms and guidance to assist agencies and the Federal government 
in meeting this goal.
    In addition, the Federal Procurement Data System shows that there 
were over 137,000 actions for small businesses on the Federal Supply 
Schedule in FY 2009, which amounted to over $5,000,000,000 in 
obligations to small businesses. Of that amount, over $700,000,000 was 
obligated as part of a BPA. There were 470 actions for small businesses 
on a GSA Governmentwide Acquisition Contract in FY 2009, which amounted 
to over $200,000,000 in obligations to small businesses. That means 
there were almost 138,000 actions against a GSA multiple award contract 
for small businesses amounting to over $5,200,000,000 in dollars 
obligated in FY 2009.
    The data also shows that there were over 1500 actions where there 
was a set-aside for small business (or a specific category of small 
business), which amounted to over $180,000,000 in obligations to small 
businesses. The data also shows that there were over 1400 actions 
against a BPA where there was a set-aside for small business (or a 
specific category of small business), which amounted to over 
$43,000,000 in obligations to small businesses awarded that year.
    In comparison, there were over 364,000 actions against a GSA 
Multiple Award Schedule contract awarded to other-than-small businesses 
amounting to over $7,000,000,000 in dollars obligated in FY 2009. Of 
that amount, over $2,000,000,000 was obligated as part of a BPA.
    According to this data, small businesses do receive orders from 
agencies using the GSA Schedule. However, some of these awards may have 
been made to businesses that represented themselves as small for a 
specific NAICS code assigned to one of several SINs, which are assigned 
to a specific GSA Schedule Contract. An agency may have awarded an 
order with a different or no NAICS code and still have taken credit for 
an award to a small business. Further, agencies may have set-aside the 
orders against the GSA Schedule Contract and not required any 
limitations on subcontracting which could have permitted a large 
business to perform most or all of the work.
    Regardless, we do not believe that this rule would impact the 
agencies, who would continue to use the GSA Schedule and make awards to 
small businesses using one standard set of criteria when making such 
awards. However, we have heard from many small businesses with a GSA 
Schedule Contract that they are not utilized by agencies. This proposed 
rule aims to help increase opportunities for small businesses. The 
rule's intent is that more small businesses can have the chance to 
compete and succeed on more multiple award contract orders. Therefore, 
this rule could impact small businesses that are underutilized on the 
Schedule by providing more of them with more opportunities.
    In addition, we note that the Congressional Budget Office believed 
that agencies would continue to encourage the use of small businesses 
to procure goods and services and that doing so would not significantly 
increase procurement costs. See S. Rep. 111-343 at 12 (publicly 
available at https://thomas.loc.gov/cgi-bin/cpquery/R?cp111:FLD010:@1(sr343)).
    However, we do note that once implemented as final, it is likely 
that changes would need to be made to the Interagency Acquisition 
Environment (IAE). For example, modifications may need to be made to 
the Government's contract award database, the Federal Procurement Data 
System-NG (FPDS-NG). We understand that this process will take some 
time and the Government will incur a cost for these changes to the 
system.
    With respect to bundled contracts, data from FY 2009 shows that 
there were 36 bundled contracts with a value of over $3,448,000,000 and 
63 consolidated contracts with a value of over $7,645,000,000. This 
regulation is intended to reduce the number of bundled and consolidated 
contracts, since they exclude small business participation at the prime 
contract level. SBA anticipates that this will have a beneficial impact 
for small businesses as well as the agencies. For example, although 
many agencies believe that combining numerous requirements into one 
contract would lessen the administrative burden for the agency, the 
fact is that it could increase the burden. For example, if an agency 
awards 10 contracts in response to a single solicitation, then it could 
receive 10 responses every time it solicits a quote for an order. In 
the end, it may have been less time-consuming overall to merely have 
broken up the requirement into smaller pieces and issued fixed price 
contracts for parts of the requirement to small businesses.
Executive Order 13563
    This executive order directs agencies to, among other things: (a) 
Afford the public a meaningful opportunity to comment through the 
Internet on proposed regulations, with a comment period that should 
generally consist of not less than 60 days; (b) provide for an ``open 
exchange'' of information among government officials, experts, 
stakeholders, and the public; and (c) seek the views of those who are 
likely to be affected by the rulemaking, even before issuing a notice 
of proposed rulemaking. As far as practicable or relevant, SBA 
considered these requirements in developing this proposed rule, as 
discussed below.
1. Did the agency use the best available techniques to quantify 
anticipated present and future costs when responding to E.O. 12866 
(e.g., identifying changing future compliance costs that might result 
from technological innovation or anticipated behavioral changes)?
    Yes, the agency utilized the most recent data available on the 
Federal Procurement Data System (FYs 2010 and 2009 data).

[[Page 29148]]

2. Public participation: Did the agency: (a) Afford the public a 
meaningful opportunity to comment through the Internet on any proposed 
regulation, with a comment period that should generally consist of not 
less than 60 days; (b) provide for an ``open exchange'' of information 
among government officials, experts, stakeholders, and the public; (c) 
provide timely online access to the rulemaking docket on 
Regulations.gov; and (d) seek the views of those who are likely to be 
affected by rulemaking, even before issuing a notice of proposed 
rulemaking?
    The Jobs Act imposes a specific statutory time by which the SBA 
must issue a final regulation. The SBA and OFPP worked with DoD, GSA 
and NASA to implement these provisions relating to multiple award 
contracts in an interim final rule in the FAR. The FAR interim final 
rule provides some, but all the guidance needed by procuring officials 
on this issue. Therefore, to provide this needed guidance quickly, the 
SBA intends to issue this rule with a 60-day comment period suggested 
by the executive order. As indicated above in the ADDRESSES section of 
this rule, the public is provided with the link to the online 
rulemaking Web site and is encouraged to use this medium to submit 
comments and view the comments of others.
    In addition, we note that SBA has taken other steps to encourage 
public participation in its rulemakings. Specifically, SBA has 
conducted a ``listening tour'' to discuss the issues presented in the 
Jobs Act with interested members of the public. The SBA toured 13 
cities, transcribed the input from the public and requested and 
received written comments (comments could be submitted to SBA employees 
or to www.regulations.gov). See 76 FR 12395 (March 7, 2011); 76 FR 
16703 (March 25, 2011); 76 FR 26948 (May 10, 2011). Further, we note 
that as the sole agency that is charged with representing the interests 
of small businesses, SBA receives calls every day from small business 
owners and procurement officials discussing the very issues set forth 
in the Jobs Act. SBA gave appropriate consideration to the various 
suggestions, recommendations and relevant information received from 
these sources when drafting this rule.
    The Jobs Act required SBA to consult with other agencies, such as 
GSA, when drafting the regulations, and SBA has done so. The SBA met 
with several procuring agencies to discuss the effects of the Jobs Act 
on each agency, in particular the GSA Schedule. Specifically, the SBA 
met with agency Offices of Small Business Programs, Chief Acquisition 
Officers, and Senior Procurement Executives. The SBA also gathered 
input and ideas from various agencies on their procurement practices, 
which were used when drafting these rules.
3. Flexibility: Did the agency identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public?
    Yes, the agency considered several approaches, as discussed in the 
preamble. We believe the proposed rule provides flexibility to 
procuring agencies with respect to application of the SBA's programs to 
multiple award contracts.
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, eliminates ambiguity, and reduce burden. As discussed above 
in Section IV of the preamble, the action does not have retroactive or 
preemptive effect.
Executive Order 13132
    This rule does not have federalism implications as defined in the 
Executive Order. It 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, as specified in Executive Order 13132.
Paperwork Reduction Act (PRA), 44 U.S.C., Ch. 35
    For purposes of the Paperwork Reduction Act, 44 U.S.C. Chapter 35, 
SBA has determined that this proposed rule will not impose any new 
reporting or recordkeeping requirements. Small business must already 
represent their status at the time of submission of initial offer. This 
rule only seeks to clarify when such businesses represent their status 
for multiple award contracts and orders issued against multiple award 
contracts.
    In addition, in accordance with FAR Sec. Sec.  4.1202, 52.204-8, 
52.219-1 and 13 CFR part 121, concerns must submit paper or electronic 
representations or certifications in connection with prime contracts 
and subcontracts. The Jobs Act requires that each offeror or applicant 
for a Federal contract, subcontract, or grant shall contain a 
certification concerning the small business size and status of a 
business concern seeking the Federal contract, subcontract or grant.
Regulatory Flexibility Act, 5 U.S.C., 601-612
    SBA has determined that this proposed rule may have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq. 
Accordingly, SBA has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) addressing the impact of this Rule. The IRFA examines 
the objectives and legal basis for this proposed rule; the kind and 
number of small entities that may be affected; the projected 
recordkeeping, reporting, and other requirements; whether there are any 
Federal rules that may duplicate, overlap, or conflict with this 
proposed rule; and whether there are any significant alternatives to 
this proposed rule.
1. What are the reasons for, and objectives of, this proposed rule?
    This regulatory action implements several sections of the Small 
Business Jobs Act of 2010, Public Law 111-240. These sections of the 
Jobs Act address small business set-asides and reserves of multiple 
award contracts and orders issued pursuant to such contracts, as well 
as bundling and contract consolidation.
    The objective of the rule is to implement these statutory changes 
by further defining terms and expanding on the concepts set forth in 
the Jobs Act.
2. What is the legal basis for this proposed rule?
    Small Business Jobs Act of 2010, Public Law 111-240.
3. What is SBA's description and estimate of the number of small 
entities to which the rule will apply?
    This rule addresses the application of all of SBA's small business 
programs on multiple award contracts and addresses the limitations on 
bundled and consolidated contracts. As of February 2011, there were 
over 348,000 small business registered in the Central Contractor 
Registration (CCR) with a Dynamic Small Business Search Supplemental 
(DSBS) page. According to the FAR Sec.  4.11, prospective vendors must 
be registered in CCR prior to the award of a contract; basic agreement, 
basic ordering agreement, or blanket purchase agreement. Therefore, CCR 
and DSBS are the primary databases used by Federal contracting officers 
when conducting market research and it shows the small businesses that 
will be affected by this rule, since those are the small businesses 
that conduct or would

[[Page 29149]]

like to conduct business with the Federal Government.
    The SBA notes that not all of these small businesses have received 
multiple award contracts in the past and therefore, the number of 
affected small businesses could be less. However, the SBA believes that 
this rule will open the door to many more Federal procurement 
opportunities to small businesses, including opportunities for orders 
against the GSA Schedule. Therefore, the SBA believes that all small 
businesses could be impacted by this rule.
4. What are the projected reporting, recordkeeping, Paperwork Reduction 
Act and Other Compliance Requirements?
    The SBA does not believe that there are any new recordkeeping 
requirements. The proposed rule does provide that businesses will need 
to report their size status at the time of contract award for a 
multiple award contract, similar to how it is done now. However, the 
business will need to represent its status for a single or multiple 
NAICS codes in order to be deemed a small business for the orders 
issued against the multiple award contract and each order will contain 
a NAICS code.
    In addition, the SBA has proposed a new compliance requirement with 
respect to the limitations on subcontracting. Under the limitations on 
subcontracting, a small business must perform a certain percentage of 
the work itself and it limited as to how much work it can subcontract. 
This is generally easy to monitor for single award contracts, but not 
so easy with a multiple award contract where many task or delivery 
orders will be issued, sometimes by different agencies. As such, the 
SBA has proposed that small business comply with the limitations on 
subcontracting for each order, rather than the total multiple award 
contract.
5. What relevant federal rules may duplicate, overlap, or conflict with 
this rule?
    This proposed rule may conflict with current FAR and General 
Services Administration regulations. As a result, those regulations 
will need to be amended once this rule is issued as final. The SBA 
consulted with both prior to issuing this proposed rule. However, as 
noted in the discussion in the preamble, SBA attempted to draft the 
regulations to avoid unnecessary conflicts. For example, the FAR and 
GSA define the term ``teaming'' to mean something in particular. Rather 
than define the term ``teaming'' to conflict with those rules, SBA 
defined the term ``Small Business Teaming Arrangement.''
6. What significant alternatives did SBA consider that accomplish the 
stated objectives and minimize any significant economic impact on small 
entities?
    One of the major parts of this rule is size status for multiple 
award contracts and orders issued against multiple award contracts, 
including the GSA Schedule. The agency first considered that a business 
concern represent its size status at the time of submission of initial 
offer and on each and every order issued against a multiple award 
contract. The SBA proposed, however, that the small business represent 
its status at the time of submission of initial offer for the multiple 
award contract and that representation would generally be good for up 
to five years, including for all orders issued against that multiple 
award contract with the same or higher size standard. This is less of a 
burden on small businesses, yet ensures that an agency's goals truly 
reflect awards to small businesses.
    The other alternatives are discussed in the preamble as well as the 
Regulatory Impact Analysis.

List of Subjects

13 CFR Part 121

    Government procurement, Government property, Grant programs-- 
business, Individuals with disabilities, Loan programs--business, Small 
businesses.

13 CFR Part 124

    Administrative practice and procedure, Government procurement, 
Minority businesses, Reporting and recordkeeping requirements, Small 
business, Technical assistance.

13 CFR Part 125

    Government contracts, Government procurement, Reporting and 
recordkeeping requirements, Small businesses, Technical assistance.

13 CFR Part 126

    Administrative practice and procedure, Government procurement, 
Penalties, Reporting and recordkeeping requirements, Small business.

13 CFR Part 127

    Government procurement, Reporting and recordkeeping requirements, 
Small businesses.

    Accordingly, for the reasons stated in the preamble, SBA proposes 
to amend 13 CFR parts 121, 124, 125, 126, and 127 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

    1. The authority citation for 13 CFR part 121 continues to read as 
follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 636(b), 637(a), 644, 
662(5), and 694a; and Public Law 105-135, sec. 401 et seq., 111 
Stat. 2592.

    2. Amend Sec.  121.103 by adding new paragraph (b)(8) to read as 
follows:


Sec.  121.103  How does SBA determine affiliation?

* * * * *
    (a) * * *
    (b) * * *
    (8) In the case of a solicitation of offers for a bundled contract 
with a reserve (as defined in Sec.  125.1), a small business concern 
prime contractor may enter into a Small Business Teaming Arrangement 
with one or more other small business concerns and submit an offer as a 
small business for a Federal procurement without regard to affiliation 
so long as each team member is small under the size standard 
corresponding to the NAICS code assigned to the contract and there is a 
written, signed teaming or joint venture agreement amongst the small 
business concerns. See Sec.  125.1 for the definition of Small Business 
Teaming Arrangement. With respect to Small Business Teaming 
Arrangements that are joint ventures, see 121.103(h) for specific 
requirements and limitations.
* * * * *
    3. Amend Sec.  121.402 by:
    a. Revising paragraphs (a) and (b);
    b. Redesignating paragraphs (c), (d) and (e) as (d), (e), and (f), 
respectively; and
    c. Adding a new paragraph (c) to read as follows:


Sec.  121.402  What size standards are applicable to Federal Government 
Contracting Programs?

    (a) A concern must not exceed the size standard for the NAICS code 
specified in the solicitation. The contracting officer must specify the 
size standard in effect on the date the solicitation is issued. If SBA 
amends the size standard and it becomes effective before the date 
initial offers (including price) are due, the contracting officer may 
amend the solicitation and use the new size standard.
    (b) The procuring agency contracting officer, or authorized 
representative, designates the proper NAICS code and corresponding size 
standard in a solicitation, selecting the NAICS code which best 
describes the principal purpose of the product or service being 
acquired. Every solicitation, including a request for quotes, must 
contain a NAICS code.

[[Page 29150]]

    (i) Primary consideration is given to the industry descriptions in 
the NAICS United States Manual, the product or service description in 
the solicitation and any attachments to it, the relative value and 
importance of the components of the procurement making up the end item 
being procured, and the function of the goods or services being 
purchased.
    (ii) A procurement is usually classified according to the component 
which accounts for the greatest percentage of contract value. 
Acquisitions for supplies must be classified under the appropriate 
manufacturing or supply NAICS code, not under a Wholesale Trade or 
Retail Trade NAICS code. A concern that submits an offer or quote for a 
contract, order or subcontract where the NAICS code assigned to the 
contract, order or subcontract is one for supplies, and furnishes a 
product it did not itself manufacture or produce, is categorized as a 
nonmanufacturer and deemed small if it has 500 or fewer employees and 
meets the requirements of Sec.  121.406(b).
    (c) Multiple Award Contracts (see definition at Sec.  125.1).
    (i) For Multiple Award Contracts, the contracting officer must:
    (A) Assign the solicitation a single NAICS code and corresponding 
size standard which best describes the principal purpose of the 
acquisition as set forth in paragraph (b) above, only if the NAICS code 
will also best describe the principal purpose of each order to be 
placed under the Multiple Award Contract. If a service NAICS code has 
been assigned to the Multiple Award Contract, then a service NAICS code 
must be assigned to the solicitation for the order, including an order 
for services that also requires some supplies; or
    (B) Divide the solicitation into discrete categories (Contract Line 
Item Numbers (CLINs), Special Item Numbers (SINs), Sectors, Functional 
Areas (FAs), or the equivalent), and assign each discrete category the 
single NAICS code and size standard that best describes the principal 
purpose of the good or services to be acquired under that category 
(CLIN, SIN, Sector, FA or equivalent)as set forth in paragraph (b) 
above. A concern must meet the applicable size standard for 
eachcategory (CLIN, SIN, Sector, FA or equivalent) for which it seeks 
an award as a small business concern.
    (ii)(A) The contracting officer must assign a single NAICS code for 
each order issued against a Multiple Award Contract. When placing an 
order under a multiple award contract with multiple NAICS codes, the 
contracting officer must assign the NAICS code and corresponding size 
standard that best describes the principle purpose of each order. In 
cases like the GSA Schedule, where an agency can issue an order against 
multiple SINs with different NAICS codes, the contracting officer must 
select the single NAICS code that best represents the acquisition.
    (B) With respect to an order issued against a multiple award 
contract, an agency will receive small business credit for goaling only 
if the business concern awarded the order has represented its status as 
small for the underlying multiple award contract for the same NAICS 
code as that for the order or if the contracting officer requires the 
business to represent its status in response to that particular order 
solicitation.
* * * * *
    4. Amend Sec.  121.404 by:
    a. Revising the heading;
    b. Revising paragraph (a);
    c. Revising paragraph (b) by removing ``date of certification by 
SBA'' and adding in its place ``date the program office requests a 
formal size determination in connection with a concern that is 
otherwise eligible for program certification.''
    d. Revising paragraph (f);
    e. Revising the first sentence in paragraph (g), introductory text 
and adding a new second sentence;
    f. Revising paragraph (g)(2) by redesignating it as paragraph 
(g)(2)(i) and adding the following new paragraph (g)(2)(ii);
    g. Revising the first sentence in paragraph (g)(3);
    h. Revising the second sentence in paragraph (g)(3)(iv);
    i.Removing paragraph (g)(3)(vi);
    j. Redesignating paragraph (g)(4) as (g)(5); and
    k. Adding a new paragraph (g)(4), to read as follows:


Sec.  121.404  When is the size status of a business concern 
determined?

    (a) SBA determines the size status of a concern, including its 
affiliates, as of the date the concern submits a written self-
certification that it is small to the procuring activity as part of its 
initial offer (or other formal response to a solicitation), which 
includes price.
    (1) With respect to Multiple Award Contracts and orders issued 
against the Multiple Award Contract:
    (i) SBA will determine size at the time of initial offer (or other 
formal response to a solicitation), which includes price, for the 
Multiple Award Contract based upon the size standard set forth in the 
solicitation for the Multiple Award Contract if a single NAICS codes is 
assigned as set forth in Sec.  121.402(c)(i)(A). If a business is small 
at the time of offer for the Multiple Award Contract, it is small for 
each order issued against the contract, unless a contracting officer 
requests a new size certification in connection with a specific order.
    (ii) SBA will determine size at the time of initial offer (or other 
formal response to a solicitation), which includes price, for the 
Multiple Award Contract based upon the size standard set forth for each 
discrete category (e.g., CLIN, SIN, Sector, FA or equivalent) for which 
a business concern submits an offer and represents it is small for a 
Multiple Award Contract as set forth in Sec.  121.402(c)(i)(B). If the 
business concern submits an offer for the entire Multiple Award 
Contract, SBA will determine whether it meets the size standard for 
each discrete category (CLIN, SIN, Sector, FA or equivalent). If a 
business is small at the time of offer for a discrete category on the 
Multiple Award Contract, it is small for each order issued against that 
category with the same NAICS code and size standard, unless a 
contracting officer requests a new size certification in connection 
with a specific order.
    (iii) SBA will determine size at the time of initial offer (or 
other formal response to a solicitation), which includes price, for an 
order issued against a Multiple Award Contract if the contracting 
officer requires the business concern to recertify its status at the 
time of initial offer for an order.
    (2) With respect to ``Agreements'' such as Blanket Purchase 
Agreements (BPAs) (except for BPA's issued against a GSA Schedule 
Contract), Basic Agreements, Basic Ordering Agreements, or any other 
Agreement that a contracting officer sets aside or reserves awards to 
any type of small business, a concern must qualify as small at the time 
of its initial offer (or other formal response to a solicitation), 
which includes price, for the Agreement. Because an Agreement is not a 
contract, the concern must also qualify as small for each order issued 
pursuant to the Agreement in order to be considered small for the order 
and for an agency to receive small business goaling credit for the 
order.
* * * * *
    (f) For purposes of architect-engineering or two-step sealed 
bidding procurements, a concern must qualify as small as of the date 
that it certifies that it is small as part of its initial bid or 
proposal (which may not include price).
    (g) A concern that represents itself as a small business and 
qualifies as a small

[[Page 29151]]

business at the time of initial offer (or other formal response to a 
solicitation), which includes price, is considered a small business 
throughout the life of that contract. This means that if a business 
concern is small at the time of initial offer for a Multiple Award 
Contract (see 121.1042(c) for designation of NAICS codes on a Multiple 
Award Contract), then it will be considered small for each order issued 
against the contract with the same NAICS code and size standard, unless 
a contracting officer requests a new size certification in connection 
with a specific order. * * *
* * * * *
    (2)(i) * * *
    (ii) Recertification is required:
    (A) when a concern acquires or is acquired by another concern;
    (B) from both the acquired concern and the acquiring concern if 
each has been awarded a contract as a small business; and
    (C) from a joint venture when the acquired concern, acquiring 
concern, or merged concern is a participant in a joint venture that has 
been awarded a contract or order as a small business.
* * * * *
    (3) For the purposes of contracts (including Multiple Award 
Contracts) with durations of more than five years (including options), 
a contracting officer must request that a business concern recertify 
its small business size status no more than 120 days prior to the end 
of the fifth year of the contract, and no more than 120 days prior to 
exercising any option thereafter. * * *
* * * * *
    (iv) * * * The NAICS code and size standard assigned to an order 
must correspond to a NAICS code and size standard assigned to the 
underlying long-term contract and must be assigned in accordance with 
Sec.  121.402(b) & (c).
    (4) The requirements in paragraphs (1), (2), and (3) of this 
section apply to Multiple Award Contracts. However, if the Multiple 
Award Contract was set-aside for small businesses, was partially set-
aside for small businesses, or reserved for small business, then in the 
case of a contract novation or merger or acquisition where no novation 
is required and the resulting contractor is now otherthansmall, the 
agency cannot exercise the next option and cannot count any new orders 
issued pursuant to the contract, including options on current orders, 
from that point forward, towards its small business goals. This 
includes set-asides, partial set-asides, and reserves for 8(a) BD 
Participants, HUBZone SBCs, SDVO SBCs, and WOSB/EDWOSBs.
* * * * *
    5. Amend Sec.  121.406 by revising paragraph (a) to read as 
follows:


Sec.  121.406  How does a small business concern qualify to provide 
manufactured products or other supply items under a small business set-
aside, service-disabled veteran-owned small business set-aside, WOSB or 
EDWOSB set-aside, or 8(a) contract?

    (a) General. In order to qualify as a small business concern for a 
small business set-aside, service-disabled veteran-owned small business 
set-aside, WOSB or EDWOSB set-aside, or 8(a) contract, apartial set-
aside, reserve, or set-aside of orders against a multiple award 
contract to provide manufactured products or other supply items, an 
offeror must either: * * *
* * * * *


Sec.  121.407  [Removed and Reserved]

    6. Remove and reserve Sec.  121.407.
    7. Amend Sec.  121.1001 by:
    a. Revising paragraph (a)(1);


Sec.  121.1001  Who may initiate a size protest or request a formal 
size determination?

    (a) Size Status Protests. (1) For SBA's Small Business Set-Aside 
Program, including the Property Sales Program, or any instance in which 
a procurement or order has been restricted to or reserved for small 
business or a particular group of small business (including a partial 
set-aside), the following entities may file a size protest in 
connection with a particular procurement, sale or order: * * *
* * * * *
    8. Amend Sec.  121.1004 by revising paragraphs (a)(1), (a)(2) and 
(a)(3) to read as follows:


Sec.  121.1004  What time limits apply to size protests?

    (a) Protests by entities other than contracting officers or SBA--
(1) Sealed bids or sales (including protests on partial set-asides and 
reserves of Multiple Award Contracts and set-asides of orders against 
Multiple Award Contracts). A protest must be received by the 
contracting officer prior to the close of business on the 5th day, 
exclusive of Saturdays, Sundays, and legal holidays, after bid or 
proposal opening.
    (2) Negotiated procurement (including protests on partial set-
asides and reserves of Multiple Award Contracts and set-asides of 
orders against Multiple Award Contracts). A protest must be received by 
the contracting officer prior to the close of business on the 5th day, 
exclusive of Saturdays, Sundays, and legal holidays, after the 
contracting officer has notified the protestor of the identity of the 
prospective awardee.
    (3) Long-Term Contracts. For contracts with durations greater than 
five years (including options), including all existing long-term 
contracts, Multi-agency contracts (MACs), Government Wide Acquisition 
Contracts and Multiple Award Contracts: * * *
* * * * *
    9. Amend Sec.  121.1103 by revising paragraph (a) to read as 
follows:


Sec.  121.1103  What are the procedures for appealing a NAICS code or 
size standard designation?

    (a)(1) Any interested party adversely affected by a NAICS code 
designation may appeal the designation to OHA. An interested party 
would include a business concern seeking to change the NAICS code 
designation in order to be considered a small business for the 
challenged procurement, regardless of whether the procurement is 
reserved for small businesses or unrestricted. The only exception is 
that, for a sole source contract reserved under SBA's 8(a) Business 
Development program (see part 124 of this chapter), only SBA's 
Associate Administrator for Business Development may appeal the NAICS 
code designation.
    (2) A NAICS code appeal may include an appeal involving the 
applicable size standard, such as where more than one size standard 
corresponds to the selected NAICS code, or a question relating to the 
size standard in effect at the time the solicitation was issued or 
amended.
* * * * *

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

    10. The authority citation for 13 CFR part 124 is amended to read 
as follows:

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), 644 and 
Pub. L. 99-661, Pub. L. 100-656, sec. 1207, Pub. L. 101-37, Pub. L. 
101-574, section 8021, Pub. L. 108-87, and 42 U.S.C. 9815.

    11. Amend Sec.  124.501 by adding a sentence after the first 
sentence in paragraph (a) to read as follows:


Sec.  124.501  What general provisions apply to the award of 8(a) 
contracts?

    (a) * * * This includes set-asides, partial set-asides and reserves 
of Multiple Award Contracts and set-asides of orders issued against 
Multiple Award Contracts. * * *
* * * * *
    12. Amend Sec.  124.503 by:

[[Page 29152]]

    a. Revising heading in paragraph (h);
    b. Revising paragraphs (h)(1)(i), (h)(1)(ii), and (h)(1)(iv);
    c. Revising the heading and first sentence in paragraph (h)(2); and
    d. Adding new paragraph (h)(3) to read as follows:


Sec.  124.503  How does SBA accept a procurement for award through the 
8(a) BD program?

* * * * *
    (h) Task or Delivery Order Contracts, including Multiple Award 
Contracts--(1) Contracts set-aside for exclusive competition among 8(a) 
Participants. (i) A task or delivery order contract, Multiple Award 
Contract, or order issued against a Multiple Award Contract that is 
set-aside exclusively for 8(a) Program Participants, partially set-
aside for 8(a) Program Participants or reserved solely for 8(a) Program 
Participants must follow the established 8(a) competitive procedures, 
including an offering to and acceptance into the 8(a) program, SBA 
eligibility verification of the apparent successful offerors prior to 
contract award, application of the performance of work requirements set 
forth in Sec.  124.510, and the nonmanufacturer rule, if applicable, 
(see Sec.  121.406(b)).
    (ii) An agency is not required to offer or receive acceptance of 
individual orders into the 8(a) BD program if the task or delivery 
order contract or Multiple Award Contract was set-aside exclusively for 
8(a) Program Participants, partially set-aside for 8(a) Program 
Participants or reserved solely for 8(a) Program Participants. * * *
    (iv) An agency may issue a sole source award against a Multiple 
Award Contract that has been set-aside exclusively for 8(a) Program 
Participants, partially set-aside for 8(a) Program Participants or 
reserved solely for 8(a) Program Participants if the required dollar 
thresholds for sole source awards are met.
    (2) Allowing orders issued to 8(a) Participants under Multiple 
Award Contracts that were not set-aside for exclusive competition among 
eligible 8(a) Participants to be considered 8(a) awards. In order for 
an order issued to an 8(a) Participant and placed against a Multiple 
Award Contract to be considered an 8(a) award, where the Multiple Award 
contract was not initially set-aside, partially set-aside or reserved 
for exclusive competition among 8(a) Participants, the following 
conditions must be met: * * *
* * * * *
    (3) Reserves. A procuring activity must offer and SBA must accept a 
requirement that is reserved for 8(a) concerns (e.g., an acquisition 
where the contracting officer states an intention to make one or more 
awards to only 8(a) concerns under full and open competition). However, 
a contracting officer does not have to offer the requirement to SBA 
where the acquisition has been reserved for small businesses, even if 
the contracting officer states an intention to make one or more awards 
to several types of small business including 8(a) Participants since 
that is not an 8(a) contract award.
* * * * *
    13. Amend Sec.  124.504 by:
    a. Revising paragraph (a) to read as follows; and
    b. Revising paragraph (c)(3) by removing ``reserved for'' and 
replacing it with ``in''.


Sec.  124.504  What circumstances limit SBA's ability to accept a 
procurement for award as an 8(a) contract?

* * * * *
    (a) Prior intent to award as a small business set-aside, or use the 
HUBZone, Service Disabled Veteran-Owned Small Business, or Women-Owned 
Small Business programs. The procuring activity issued a solicitation 
for or otherwise expressed publicly a clear intent to award the 
contract as a small business set-aside, or to use the HUBZone, Service 
Disabled Veteran-Owned Small Business, or Women-Owned Small Business 
programs prior to offering the requirement to SBA for award as an 8(a) 
contract. The AA/BD may permit the acceptance of the requirement, 
however, under extraordinary circumstances.
* * * * *
    14. Amend Sec.  124.505 by revising the heading to read as follows: 
``Sec.  124.505 When will SBA appeal the terms or conditions of a 
particular 8(a) contract or a procuring activity decision not to use 
the 8(a) BD program?''.
    15. Amend Sec.  124.510 by revising paragraph (c) to read as 
follows:


Sec.  124.510  What percentage of work must a Participant perform on an 
8(a) contract?

* * * * *
    (c) Indefinite delivery and indefinite quantity contracts. (1) In 
order to ensure that the required percentage of costs on an indefinite 
delivery or indefinite quantity 8(a) award is performed by the 
Participant, the Participant must demonstrate that it has performed the 
required percentage for each order. This includes Multiple Award 
Contracts that were set-aside, partially set-aside or reserved solely 
for 8(a) BD Participants as well as orders issued against Multiple 
Award Contracts that were set-aside solely for 8(a) BD Participants. 
For a service or supply contract, this means that the Participant must 
perform 50 percent of the applicable costs for each task or delivery 
order with its own employees or the cost of manufacturing the supplies 
or products, whichever is applicable.
    (2) The applicable SBA District Director may waive the provisions 
in paragraph (c)(1) of this section requiring a Participant to meet the 
applicable performance of work requirement for each task or delivery 
order. Instead, the District Director may permit the Participant to 
meet the applicable performance of work for the combined total of all 
orders issued to date at the end of any six-month period where he or 
she makes a written determination that larger amounts of subcontracting 
are essential during certain stages of performance. However, the 8(a) 
Participant and procuring activity's contracting officer must provide 
written assurances that the contract will ultimately comply with the 
requirements of this section. The procuring activity's contracting 
officer does not have authority to waive the provisions in paragraph 
(c)(1) of this section requiring a Participant to meet the applicable 
performance of work requirement for each task or delivery order, even 
if the agency has a Partnership Agreement with SBA.

    Example. Two task orders are issued under an 8(a) indefinite 
quantity service contract during the first six months of the 
contract. The contract requires $100,000 in personnel costs to be 
incurred on the first task order, and 90% of those costs ($90,000) 
are incurred for performance by the Participant's own work force. 
The second task order issued during the first six months also 
requires $100,000 in personnel costs to be incurred. Where the 
relevant SBA District Director has waived the requirements of 
paragraph (c)(1), the 8(a) Participant would have to incur only 10 
percent of the personnel costs on the second task order ($10,000) 
because it would still have performed 50% of the total personnel 
costs ($200,000) at the end of the six-month period ($100,000).

    (3) Where the Participant does not ultimately comply with the 
performance of work requirements by the end of the contract, SBA will 
not grant future waivers for the Participant. Further, the contracting 
officer must document an 8(a) Participant's performance of work 
requirements as part of its performance evaluation in accordance with 
the procedures set forth in FAR 42.1502. The contracting officer must 
also evaluate compliance for future contract awards in accordance with 
the procedures set forth in FAR 9.104-6.

[[Page 29153]]

PART 125--GOVERNMENT CONTRACTING PROGRAMS

    16. The authority citation for 13 CFR part 125 is amended to read 
as follows:

    Authority:  15 U.S.C. 632(p), (q); 634(b)(6), 637, 644, 657f, 
and 657q.

    17. Revise Sec.  125.1 to read as follows:


Sec.  125.1  What definitions are important to SBA's Government 
Contracting Programs?

    (a) Chief Acquisition Officer means the employee of a Federal 
agency designated as such pursuant to section 16(a) of the Office of 
Federal Procurement Policy Act (41 U.S.C. 414(a)).
    (b) Commercial off-the-shelf item has the same definition as set 
forth in 41 U.S.C. 101 (as renumbered) and Federal Acquisition 
Regulation (FAR) Sec.  2.101.
    (c) Consolidation of contract requirements, consolidated contract 
or consolidated requirement means a solicitation for a single contract 
or a Multiple Award Contract to satisfy two or more requirements of the 
Federal agency for goods or services that have been provided to or 
performed for the Federal agency under two or more separate contracts 
each of which was lower in cost than the total cost of the contract for 
which the offers are solicited, the total cost of which exceeds $2 
million (including options).
    (d) Contract unless otherwise noted, has the same definition as set 
forth in FAR Sec.  2.101 and includes orders issued against Multiple 
Award Contracts and orders competed under agreements where the 
execution of the order is the contract (e.g., a Blanket Purchase 
Agreement (BPA), a Basic Agreement (BA), or Basic Ordering Agreement 
(BOA)).
    (e) Contract bundling, bundled requirement, bundled contract, or 
bundling means 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 or a Multiple Award Contract that is likely to be 
unsuitable for award to a small business concern (but may be suitable 
for award to a small business with a Small Business Teaming 
Arrangement) due to:
    (1) The diversity, size, or specialized nature of the elements of 
the performance specified;
    (2) The aggregate dollar value of the anticipated award;
    (3) The geographical dispersion of the contract performance sites; 
or
    (4) Any combination of the factors described in the above 
paragraphs (1), (2), and (3) of this section.
    (f) Cost of the contract means all allowable direct and indirect 
costs allocable to the contract, excluding profit or fees.
    (g) Cost of contract performance incurred for personnel means 
direct labor costs and any overhead which has only direct labor as its 
base, plus the concern's General and Administrative rate multiplied by 
the labor cost.
    (h) Cost of manufacturing means costs incurred by the business 
concern in the production of the end item being acquired, including the 
costs associated with crop production. These are costs associated with 
producing the item being acquired, including the direct costs of 
fabrication, assembly, or other production activities, and indirect 
costs which are allocable and allowable. The cost of materials, as well 
as the profit or fee from the contract, are excluded.
    (i) Cost of materials means costs of the items purchased, handling 
and associated shipping costs for the purchased items (which includes 
raw materials), commercial off-the-shelf items (and similar common 
supply items or commercial items that require additional manufacturing, 
modification or integration to become end items), special tooling, 
special testing equipment, and construction equipment purchased for and 
required to perform on the contract. In the case of a supply contract, 
include the acquisition of services or products from outside sources 
following normal commercial practices within the industry.
    (j) General Services Administration (GSA) Schedule Contract means a 
Multiple Award Contract issued by GSA and includes the Federal Supply 
Schedules and other Multiple Award Schedules.
    (k) Multiple Award Contracts means contracts that are:
    (1) A multiple award schedule contract issued by GSA (e.g., GSA 
Schedule Contract) or agencies granted Multiple Award Schedule contract 
authority by GSA (e.g., Department of Veterans Affairs) as described in 
FAR part 38 and subpart 8.4;
    (2) A multiple award task-order or delivery-order contract issued 
in accordance with FAR subpart 16.5, including Governmentwide 
acquisition contracts; and
    (3) Any other indefinite-delivery, indefinite-quantity contract 
entered into with two or more sources pursuant to the same 
solicitation.
    (l) Office of Small and Disadvantaged Business Utilization (OSDBU) 
or the Office of Small Business Programs (OSBP) means the office in 
each Federal agency having procurement powers that is responsible for 
ensuring that small businesses receive a fair proportion of Federal 
contracts in that agency. The office is managed by a Director, who is 
responsible and reports directly to the head of the agency or deputy to 
the agency (except that for DoD, they report to the Secretary or the 
Secretary's designee).
    (m) Personnel means individuals who are ``employees'' under Sec.  
121.106 of this chapter except for purposes of the HUBZone program, 
where the definition of ``employee'' is found in Sec.  126.103 of this 
chapter.
    (n) Partial set-aside (or partially set-aside) means, for a 
Multiple Award Contract, a contracting vehicle that can be used: When 
market research indicates that a total set-aside is not appropriate; 
the procurement can be broken up into smaller discrete portions or 
discrete categories such as by Contract Line Items, Special Item 
Numbers, Sectors or Functional Areas or other equivalent; and two or 
more small business concerns, 8(a) BD Participants, HUBZone SBCs, SDVO 
SBCs, WOSBs or EDWOSBs are expected to submit an offer on the set-aside 
part or parts of the requirement at a fair market price. A contracting 
officer has the discretion, but is not required, to set-aside the 
discrete portions or categories for different small businesses 
participating in SBA's small business programs (e.g., CLIN 0001, 8(a) 
set-aside; CLIN 0002, HUBZone set-aside; CLIN 0003, SDVO SBC set-aside; 
CLIN 0004, WOSB set-aside; CLIN 0005 EDWOSB set-aside; CLIN 0006, small 
business set-aside).
    (o) Reserve means, for a Multiple Award Contract:
    (1) An acquisition conducted using full and open competition where 
the contracting officer's market research and recent past experience 
evidence that--
    (i) At least two small businesses, 8(a) BD Participants, HUBZone 
SBCs, SDVO SBCs, WOSBs or EDWOSBs could perform one part of the 
requirement, but the contracting officer was unable to divide the 
requirement into smaller discrete portions or discrete categories by 
utilizing individual Contract Line Items (CLINs), Special Item Numbers 
(SINs), Functional Areas (FAs), or other equivalent; or
    (ii) At least one small business, 8(a) BD Participant, HUBZone SBC, 
SDVO SBC, WOSB or EDWOSB can perform the entire requirement, but there 
is not a reasonable expectation of receiving at least two offers from 
small business concerns, 8(a) BD Participants, HUBZone SBCs, SDVO SBCs, 
WOSBs or EDWOSBs at a fair market price for all the work contemplated 
throughout the term of the contract; and
    (2) The contracting officer makes--

[[Page 29154]]

    (i) Two or more contract awards to any one type of small business 
concern (e.g., small business, 8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) 
and competes any orders solely amongst the specified types of small 
business concerns if the rule of two or any alternative set-aside 
requirements provided in the small business program have been met;
    (ii) Several awards to several different types of small businesses 
(e.g., one to 8(a), one to HUBZone, one to SDVO SBC, one to WOSB or 
EDWOSB) and competes any orders solely amongst all of the small 
business concerns if the rule of two has been met; or
    (iii) One contract award to any one type of small business concern 
(e.g., small business, 8(a), HUBZone, SDVO SBC, WOSB or EDWOSB) and 
subsequently issues orders directly to that concern.
    (3) A bundled contract where the contracting officer's market 
research and recent past experience evidence that one or more Small 
Business Teaming Arrangement (but not any individual small business 
concerns) may submit an offer or receive a contract award and the 
contracting officer states an intention to make at least one award to a 
Small Business Teaming Arrangement.
    (p) Rule of Two refers to the requirements set forth in Sec. Sec.  
124.506, 125.2(f), 125.19(c), 126.607(c) and 127.503 of this chapter 
that there is a reasonable expectation that the contracting officer 
will obtain offers from at least two small businesses and award will be 
made at fair market price.
    (q) Senior Procurement Executive means the employee of a Federal 
agency designated as such pursuant to section 16(c) of the Office of 
Federal Procurement Policy Act (41 U.S.C. 414(c)).
    (r) Separate contract means a contract or order (including those 
placed against a GSA Schedule Contract or an indefinite delivery/
indefinite quantity contract) that has previously been performed by any 
business, including an other-than-small business or small business 
concern.
    (s) Separate smaller contract means 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.
    (t) Single contract means any contract or order (including those 
placed against a GSA Schedule Contract or an indefinite delivery/
indefinite quantity contract) resulting in one or more awardee.
    (u) Small Business Teaming Arrangement means an arrangement where:
    (1) Two or more small business concerns have formed a joint venture 
to act as a potential prime contractor (for the definition of and 
exceptions to affiliation for joint ventures, see Sec.  121.103); or
    (2) A potential small business prime contractor agrees with one or 
more other small business concerns to have them act as its 
subcontractors under a specified Government contract. A Small Business 
Teaming Arrangement between a prime and its small business 
subcontractor(s) must exist through a written agreement between the 
parties that is specifically referred to as a ``Small Business Teaming 
Arrangement'' or ``Small Business Teaming Agreement;'' and sets forth 
the different responsibilities, roles and percentages of work as it 
relates to the acquisition.
    (3) A small business teaming arrangement can include two business 
concerns in a mentor/prot[eacute]g[eacute] relationship so long as both 
the mentor and prot[eacute]g[eacute] are small or the 
prot[eacute]g[eacute] is small and the concerns have received an 
exception to affiliation pursuant to Sec.  121.103(h)(3)(ii) or (iii) 
of this chapter.
    (4) The agreement must be provided to the contracting officer as 
part of the proposal.
    (v) Subcontract or subcontracting means that portion of the 
contract performed by a business concern, other than the business 
concern awarded the contract, under a second contract, purchase order, 
or agreement for any parts, supplies, components, or subassemblies 
which are not available commercial off-the-shelf items, and which are 
manufactured in accordance with drawings, specifications, or designs 
furnished by the contractor, or by the government as a portion of the 
solicitation. Raw castings, forgings, and moldings are considered as 
materials, not as subcontracting costs. Where the prime contractor has 
been directed by the Government as part of the contract to use any 
specific source for parts, supplies, or components subassemblies, the 
costs associated with those purchases will be considered as part of the 
cost of materials, not subcontracting costs.
    (w) Substantial bundling means any bundling that meets the 
following dollar amounts (if the acquisition strategy contemplates 
Multiple Award Contracts or multiple award orders issued against a GSA 
Schedule Contract or a task or delivery order contract awarded by 
another agency, these thresholds apply to the cumulative estimated 
value of the Multiple Award Contracts or orders, including options):
    (1) $8.0 million or more for the Department of Defense;
    (2) $6.0 million or more for the National Aeronautics and Space 
Administration, the General Services Administration, and the Department 
of Energy; and
    (3) $2.5 million or more for all other agencies.
    18. Amend Sec.  125.2 by:
    a. Revising the section heading;
    b. Revising paragraphs (a), (b), (c), (d) and (e) to read as 
follows:


Sec.  125.2  What are SBA's and the procuring agency's responsibilities 
when providing contracting assistance to small businesses?

    (a) General. The objective of the SBA's contracting programs is to 
assist small business concerns, including 8(a) BD Participants, HUBZone 
small business concerns, Service Disabled Veteran-Owned Small Business 
Concerns, Women-Owned Small Businesses and Economically Disadvantaged 
Women-Owned Small Businesses, in obtaining a fair share of Federal 
Government prime contracts, subcontracts, orders, and property sales. 
Therefore, these regulations apply to all types of Federal Government 
contracts, including Multiple Award Contracts, and contracts for 
architectural and engineering services, research, development, test and 
evaluation. Small business concerns must receive any award (including 
orders, and orders placed against Multiple Award Contracts) or 
contract, part of any such award or contract, and any contract for the 
sale of Government property, regardless of the place of performance, 
which 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) SBA's responsibilities in the acquisition planning process--(1) 
SBA Procurement Center Representative (PCR) Responsibilities--(i) PCR 
Review.
    (A) SBA has PCRs who are generally located at Federal agencies and 
buying activities that have major contracting programs. At the SBA's 
discretion, PCRs will review all acquisitions that are

[[Page 29155]]

issued on a sole source basis or not set-aside or reserved for small 
businesses above or below the Simplified Acquisition Threshold, to 
determine whether a set-aside or sole source award to a small business 
under one of SBA's programs is appropriate and to identify alternative 
strategies to maximize the participation of small businesses in the 
procurement. This review includes acquisitions that are Multiple Award 
Contracts where the agency has failed to set-aside all or part of the 
acquisition or reserve the acquisition for small businesses. It also 
includes acquisitions where the agency has failed to set-aside orders 
placed against Multiple Award Contracts for small business concerns.
    (B) PCRs will work with the cognizant Small Business Specialist 
(SBS) and agency OSDBU or OSBP 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 and Small Business Teaming 
Arrangements, as prime contractors.
    (C) In conjunction with their duties to promote the set-aside of 
procurements for small business, PCRs may identify small businesses 
that are capable of performing particular requirements.
    (D) PCRs will also ensure that any Federal agency decision made 
concerning the consolidation of contract requirements considers the use 
of small businesses and ways to provide small businesses with maximum 
opportunities to participate as prime contractors and subcontractors in 
the acquisition or sale of real property.
    (E) PCRs will review whether for bundled and consolidated contracts 
that are recompeted, the amount of savings and benefits was achieved 
under the prior bundling or consolidation of contract requirements, 
that such savings and benefits will continue to be realized if the 
contract remains bundled or consolidated, or such savings and benefits 
would be greater if the procurement requirements were divided into 
separate solicitations suitable for award to small business concerns.
    (ii) PCR Recommendations in General. The PCR must recommend to the 
procurement activity alternative procurement methods that would 
increase small business prime contract participation if a PCR believes 
that a proposed procurement: includes in its statement of work goods or 
services currently being performed by a small business and is in a 
quantity or estimated dollar value the magnitude of which renders small 
business prime contract participation unlikely; will render small 
business prime contract participation unlikely (e.g., ensure 
geographical preferences are justified); is for construction and seeks 
to package or consolidate discrete construction projects; or if a PCR 
does not believe a bundled or consolidated requirement is necessary and 
justified. Such alternatives may include:
    (A) Breaking up the procurement into smaller discrete procurements, 
especially construction acquisitions that can be procured as separate 
projects;
    (B) Breaking out one or more discrete components, for which a small 
business set-aside may be appropriate;
    (C) Reserving one or more awards for small businesses when issuing 
Multiple Award Contracts;
    (D) Using a partial set-aside;
    (E) Stating in the solicitation for a Multiple Award Contract that 
the orders will be set-aside for small businesses; and
    (F) Where the bundled or consolidated requirement 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) PCR Recommendations for Small Business Teaming and 
Subcontracting. The PCR will work to ensure that small business 
participation is maximized through Small Business 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 or in addition to 
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;
    (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;
    (E) Recommending that a separate evaluation factor with significant 
weight is established for evaluating the offerors' proposed approach to 
small business utilization, the extent to which offerors propose small 
business utilization, and the extent to which offerors attain their 
subcontracting goals on previous contracts;
    (F) For bundled and consolidated requirements, requiring that a 
separate evaluation factor with significant weight is established for 
evaluating the offerors' proposed approach to small business 
utilization, the extent to which offerors propose small business 
utilization, and the extent to which offerors attain their 
subcontracting goals on previous contracts;
    (G) For bundled or consolidated requirements, recommending the 
solicitation state that the agency must evaluate offers from teams of 
small businesses the same as other offers, with due consideration to 
the capabilities and past performance of all proposed subcontractors. 
It may also include recommending that the agency reserve at least one 
award to a small business prime contractor with a Small Business 
Teaming Arrangement;
    (H) For Multiple Award Contracts and multiple award requirements 
above the substantial bundling threshold, recommending or requiring 
that the solicitation state that the agency will solicit offers from 
small business concerns and small business concerns with Small Business 
Teaming Arrangements; and
    (I) For consolidated contracts, ensuring that agencies have 
provided small business concerns with appropriate opportunities to 
participate as prime contractors and subcontractors and making 
recommendations on such opportunities as appropriate.
    (iv) Appeals of PCR and BPCR Recommendations. 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, 
partial set-aside or reserve, whether or not the acquisition is a 
bundled, substantially bundled or consolidated requirement, 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 FAR Sec.  
19.505 (48 CFR 19.505).
    (2) SBA BPCR Responsibilities. (i) Breakout PCRs (BPCRs) are 
assigned 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. (ii) BPCRs 
advocate full and open

[[Page 29156]]

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 in paragraph (b)(1)(v) of this section. 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) (FAR Sec.  19.403(c)) and Section 15(l) of the Small 
Business Act (15 U.S.C. 644(l)).
    (c) Procuring Agency Responsibilities--(1) 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 and subcontractors in the contracting 
opportunities of the Government regardless of the place of performance 
of the contract. In addition, Federal agencies must ensure that all 
bundled and consolidated contracts contain the required analysis and 
justification and provide small business concerns with appropriate 
opportunities to participate as prime contractors and subcontractors. 
To comply with these requirements, 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 service-disabled veteran-owned small business 
concerns, 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;
    (ii) Avoid unnecessary and unjustified bundling of contracts or 
consolidation of contract requirements that inhibits or precludes small 
business participation in procurements as prime contractors;
    (iii) Follow the limitations on use of consolidated contracts;
    (iv) With respect to any work to be performed the amount of which 
would exceed the maximum amount of any contract for which a surety may 
be guaranteed against loss under 15 U.S.C. 694b, the contracting 
procurement agency must, to the extent practicable, place contracts so 
as to allow more than one small business concern to perform such work;
    (v) Ensure that prior to placing an order against another agency's 
Multiple Award Contract, a determination that use of another agency's 
contract vehicle is the best procurement approach and promotes small 
business participation; and
    (vi) Provide SBA the necessary information relating to the 
acquisition under review. This includes providing PCRs (to the extent 
of their security clearance) copies of all documents relating to the 
acquisition under review, including, but not limited to, the 
performance work statement/statement of work, technical data, market 
research, hard copies or their electronic equivalents of Department of 
Defense (DoD) Form 2579 or equivalent, etc. The DoD Form 2579 or 
equivalent must be sent electronically to the PCR (or if a PCR is not 
assigned to the procuring activity, to the SBA Office of Government 
Contracting Area Office serving the area in which the buying activity 
is located).
    (2) Requirement for market research. Each agency must conduct 
market research to determine the type and extent of small business 
participation in the acquisition. In addition, each agency must conduct 
market research and any required analysis and justifications before 
proceeding with an acquisition strategy that could lead to a bundled, 
substantially bundled, or consolidated contract. The purpose of the 
market research and analysis is to determine whether the bundling or 
consolidation of the requirements is necessary and justified and all 
statutory requirements for such a strategy have been met. Agencies 
should be as broad as possible in their search for qualified small 
businesses, using key words as well as NAICS codes in their examination 
of the Dynamic Small Business Search Engine that is available in CCR, 
and must not place unnecessary and unjustified restrictions when 
conducting market research (e.g., requiring that small businesses prove 
they can provide the best scientific and technological sources) when 
determining whether to set-aside, partially set-aside, reserve or sole 
source a requirement to small businesses. During the market research 
phase, the acquisition team must 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) and the activity's Small Business Specialist.
    (3) Proposed Acquisition Strategy. A procuring activity must 
provide 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:
    (i) A copy of a proposed acquisition strategy (e.g.,DoD Form 2579, 
or equivalent) whenever a proposed acquisition strategy:
    (A) 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;
    (B) Seeks to package or consolidate discrete construction projects;
    (C) Is a bundled or substantially bundled requirement; or
    (D) Is a consolidation of contract requirements.
    (ii) A written statement explaining why, if the proposed 
acquisition strategy involves a bundled or consolidated requirement, 
the procuring activity believes that the bundled or consolidated 
requirement is necessary and justified, the analysis required by 
paragraph (d)(2)(i) of this section, the acquisition plan, any bundling 
information required under paragraph (d)(3) of this section, and any 
other relevant information. The PCR and agency OSDBU or OSBP, as 
applicable, must then work together to develop alternative acquisition 
strategies identified in paragraph (b)(1) of this section to enhance 
small business participation.
    (iii) All required clearances for the bundled, substantially 
bundled, or consolidated requirement.
    (iv) A written statement explaining why, 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) Procuring Agency Small Business Specialist (SBS) 
Responsibilities. (i) As early in the acquisition planning process as 
practicable, but no later than 30 days before the issuance of a

[[Page 29157]]

solicitation, or prior to placing an order without a solicitation, the 
procuring activity must coordinate with the procuring activity's SBS 
when the acquisition strategy contemplates an acquisition meeting the 
dollar amounts set forth for substantial bundling. If the acquisition 
strategy contemplates Multiple Award Contracts or orders under the GSA 
Multiple Award Schedule Program or a task or delivery order contract 
awarded by another agency, these thresholds apply to the cumulative 
estimated value of the Multiple Award Contracts or orders, including 
options. The procuring activity is not required to coordinate with its 
SBS if the contract or order is entirely set-aside for small business 
concerns, or small businesses under one of SBA's small business 
programs, as authorized under the Small Business Act.
    (ii) The SBS must notify the agency OSDBU or OSBP if the agency's 
acquisition strategy or plan includes bundled or consolidated 
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 must assist in identifying 
alternative strategies that would reduce or minimize the scope of the 
bundling.
    (iii) The SBS must coordinate on all required determinations and 
findings for bundling and/or consolidation, and acquisition planning 
and strategy documentation.
    (5) OSDBU and OSBP Oversight Functions. The Agency OSDBU or OSBP 
must:
    (i) Conduct annual reviews to assess the:
    (A) Extent to which small businesses are receiving their fair share 
of Federal procurements, including contract opportunities under 
programs administered under the Small Business Act;
    (B) Adequacy of the bundling or consolidation documentation and 
justification; and
    (C) Adequacy of actions taken to mitigate the effects of necessary 
and justified contract bundling or consolidation on small businesses 
(e.g., review agency oversight of prime contractor subcontracting plan 
compliance under the subcontracting program).
    (ii) Provide a copy of the assessment under paragraph (c)(5)(i) of 
this section to the agency head and SBA Administrator.
    (iii) Identify proposed solicitations that involve significant 
bundling of contract requirements, and work with the agency acquisition 
officials and the SBA to revise the procurement strategies for such 
proposed solicitations to increase the probability of participation by 
small businesses as prime contractors;
    (iv) Facilitate small business participation as subcontractors and 
suppliers, if a solicitation for a substantially bundled contract is to 
be issued;
    (v) Assist small business concerns to obtain payments, required 
late payment interest penalties, or information regarding payments due 
to such concerns from an executive agency or a contractor, in 
conformity with chapter 39 of Title 31 or any other protection for 
contractors or subcontractors (including suppliers) that is included in 
the FAR or any individual agency supplement to such Governmentwide 
regulation;
    (vi) Cooperate, and consult on a regular basis, with the SBA with 
respect to carrying out these functions and duties;
    (vii) Make recommendations to contracting officers as to whether a 
particular contract requirement should be awarded to any type of small 
business. The failure of the contracting officer to accept any such 
recommendations must be documented and included within the appropriate 
contract file; and
    (viii) Coordinate on any acquisition planning and strategy 
documentation, including bundling and consolidation determinations at 
the agency level.
    (6) Communication on Achieving Goals. All Senior Procurement 
Executives, senior program managers, Directors of OSDBU or Directors of 
OSBP must communicate to their subordinates the importance of achieving 
small business goals and ensuring that a fair proportion of awards are 
made to small businesses.
    (d) Contract Consolidation and Bundling--(1) Limitation on the Use 
of Consolidated Contracts. (i) An agency may not conduct an acquisition 
that is a consolidation of contract requirements unless the Senior 
Procurement Executive or Chief Acquisition Officer for the Federal 
agency, before carrying out the acquisition strategy:
    (A) Conducts market research;
    (B) Identifies any alternative contracting approaches that would 
involve a lesser degree of consolidation of contract requirements;
    (C) Makes a written determination, which is coordinated with the 
agency's OSDBU/OSBP, that the consolidation of contract requirements is 
necessary and justified;
    (D) Identifies any negative impact by the acquisition strategy on 
contracting with small business concerns; and
    (E) Certifies to the head of the Federal agency that steps will be 
taken to include small business concerns in the acquisition strategy.
    (ii) A Senior Procurement Executive or Chief Acquisition Officer 
may determine that an acquisition strategy involving a consolidation of 
contract requirements is necessary and justified.
    (A) A consolidation of contract requirements may be necessary and 
justified if the benefits of the acquisition strategy substantially 
exceed the benefits of each of the possible alternative contracting 
approaches identified under paragraph (d)(1)(i)(B).
    (B) 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: benefits equivalent to 
10 percent of the contract or order value (including options) where the 
contract or order value is $94 million or less; or benefits equivalent 
to 5 percent of the contract or order value (including options) or $9.4 
million, whichever is greater, where the contract or order value 
exceeds $94 million.
    (C) Savings in administrative or personnel costs alone do not 
constitute a sufficient justification for a consolidation of contract 
requirements in a procurement unless the expected total amount of the 
cost savings, as determined by the Senior Procurement Executive or 
Chief Acquisition Officer, is expected to be substantial in relation to 
the total cost of the procurement. To be substantial, such 
administrative or personnel cost savings must be at least 10 percent of 
the contract value (including options).
    (iii) DoD and each military department must comply with this 
section until the SBA determines that DoD and each military department 
are in compliance with its Governmentwide and agency specific 
contracting goals. If SBA determines that DoD and the military 
departments are in compliance with such goals, then consolidated 
contracts must be conducted in accordance with 10 U.S.C. 2382.
    (iv) Each agency must ensure that any decision made concerning the 
consolidation of contract requirements considers the use of small 
businesses and ways to provide small businesses with opportunities to 
participate as prime contractors and subcontractors in the acquisition.

[[Page 29158]]

    (v) If the consolidated requirement is also considered a bundled 
requirement, then the contracting officer must instead follow the 
provisions regarding bundling set forth in paragraphs (d)(2)-(7) or 
(d)(3) of this section, whichever is applicable.
    (2) Limitation on the Use of Contract Bundling. (i) 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.
    (ii) A bundled requirement is necessary and justified if, as 
compared to the benefits that it would derive from contracting to meet 
those requirements if not bundled, 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 $94 
million or less; or
    (B) Benefits equivalent to 5 percent of the contract or order value 
(including options) or $9.4 million, whichever is greater, where the 
contract or order value exceeds $94 million.
    (iii) Notwithstanding paragraph (d)(2)(ii) of this section, the 
Senior Procurement 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 
bundled requirement is necessary and justified when:
    (A) There are benefits that do not meet the thresholds set forth in 
paragraph (d)(2)(ii) 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.
    (iv) The reduction of administrative or personnel costs alone must 
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 
bundled (including options). To be substantial, such administrative or 
personnel cost savings must be at least 10 percent of the contract 
value (including options).
    (v) 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.
    (vi) The substantial benefit analysis set forth in paragraph 
(d)(2)(ii) of this section is still required where a requirement is 
subject to a Cost Comparison Analysis under OMB Circular A-76.
    (3) Limitations on the Use of 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)(2)(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;
    (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; and
    (v) The identification of the alternative strategies that would 
reduce or minimize the scope of the bundling, and the rationale for not 
choosing those alternatives (i.e., consider the strategies under 
paragraphs (b)(1)(ii) of this section).
    (4) Significant Subcontracting Opportunities in Justified 
Consolidated, Bundled and Substantially Bundled Requirements. (i) Where 
a justified consolidated, 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 contract qualifies as a small 
business concern, the procuring agency must give to the offeror the 
highest score possible for the evaluation factors identified above.
    (5) Notification to 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). This notification 
must be documented in the contract file.
    (6) Notification to Public of Rationale for Bundled Requirement. 
The head of a Federal agency must publish on the agency's Web site a 
list and rationale for any bundled requirement for which the agency 
solicited offers or issued an award. The notification must be made 
within 30 days of the agency's data certification regarding the 
validity and verification of data entered in that Federal Procurement 
Data Base to the Office of Federal Procurement Policy. However, to 
foster transparency in Federal procurement, the agency is encouraged to 
provide such notification before issuance of the solicitation.
    (7) Notification to SBA of Recompeted Bundled or Consolidated 
Requirement. For each bundled or consolidated contract that is to be 
recompeted (even if additional requirements have been added or deleted) 
the procuring agency must notify SBA's PCR as soon as possible but no 
later than 30 days prior to issuance of the solicitation of:
    (i) The amount of savings and benefits achieved under the prior 
bundling or consolidation of contract requirements,
    (ii) Whether such savings and benefits will continue to be realized 
if the contract remains bundled or consolidated, and

[[Page 29159]]

    (iii) Whether such savings and benefits would be greater if the 
procurement requirements were divided into separate solicitations 
suitable for award to small business concerns.
    (e) Multiple Award Contracts--(1) General. (i) The contracting 
officer must set-aside a Multiple Award Contract if the requirements 
for a set-aside are met. This includes set-asides for small businesses, 
8(a) Participants, HUBZone SBCs, SDVO SBCs, WOSBs or EDWOSBs.
    (ii) The contracting officer in his or her discretion may partially 
set-aside or reserve a Multiple Award Contract, or set-aside, or 
preserve the right to set aside, orders against a Multiple Award 
Contract that was not itself set aside for small business. The ultimate 
decision of whether to use any of the above-mentioned tools in any 
given procurement action is a decision of the contracting agency.
    (iii) The procuring contracting officer must document the contract 
file and explain why the procuring agency did not partially set-aside 
or reserve a Multiple Award Contract, or set-aside orders issued 
against a Multiple Award Contract, when these authorities could have 
been used.
    (2) Set-aside of Multiple Award Contracts. (i) The contracting 
officer must follow the procedures for a set-aside set forth in 
paragraph (f) of this section.
    (ii) The contracting officer must assign a NAICS code to the 
solicitation for the Multiple Award Contract and each order pursuant to 
Sec.  121.402(c) of this chapter. See Sec.  121.404 for further 
determination on size status for the Multiple Award Contract and each 
order issued against that contract.
    (iii) When drafting the solicitation for the contract, agencies 
should consider an on-ramp provision that permits the agency to refresh 
the awards by adding more small business contractors. Agencies should 
also consider the need to transition off existing contractors that no 
longer qualify as small for the size standard corresponding to the 
NAICS code assigned to the contract (e.g., termination for 
convenience). However, agencies must transition off existing 
contractors that were required to, but unable to, recertify their small 
business status pursuant to Sec.  121.104(g) of this chapter.
    (iv) A business must comply with the applicable limitations on 
subcontracting provisions (see Sec.  125.6) and the nonmanufacturer 
rule, if applicable, (see Sec.  121.406(b)) in the performance of the 
contract and each order.
    (3) Partial Set-asides of Multiple Award Contracts. (i) If the 
contracting officer decides to partially set-aside a Multiple Award 
Contract, the contracting officer must follow the procedures for a set-
aside set forth in paragraph (f) of this section for the part or parts 
of the contract that have been set-aside.
    (ii) The contracting officer must assign a NAICS code to the 
solicitation for the Multiple Award Contract and each order issued 
against the Multiple Award Contract pursuant to Sec.  121.402(c) of 
this chapter. See Sec.  121.404 for further determination on size 
status for the Multiple Award Contract and each order issued against 
that contract.
    (iii) A contracting officer must state in the solicitation that the 
small business will not compete against other-than-small businesses for 
any order issued against that part or parts of the Multiple Award 
Contract that are set-aside.
    (iv) A contracting officer must state in the solicitation that the 
small business will be permitted to compete against other-than-small 
businesses for an order issued against the portion of the Multiple 
Award Contract that has not been partially set-aside if the small 
business submits an offer for the non-set-aside portion. The business 
concern will not have to comply with the limitations on subcontracting 
provision (see Sec.  125.6) and the nonmanufacturer rule for any order 
issued against the Multiple Award Contract if the order is competed and 
awarded under the portion of the contract that is not set-aside.
    (v) When drafting the solicitation for the contract, agencies 
should consider an on-ramp provision that permits the agency to refresh 
these awards by adding more small business contractors to that portion 
of the contract that was set-aside. Agencies should also consider the 
need to transition off existing contractors that no longer qualify as 
small for the size standard corresponding to the NAICS code assigned to 
the contract (e.g., termination for convenience). However, for that 
portion of the contract that was set-aside, agencies must transition 
off existing contractors that were required to but unable to recertify 
their small business status pursuant to Sec.  121.104(g) of this 
chapter.
    (vi) A small business (or 8(a) Participant, HUBZone SBC, SDVO SBC 
or WOSB/EDWOSB) is not required to submit an offer on the part of the 
solicitation that is not set-aside. However, a small business may, if 
it chooses, submit an offer on the part or parts of the solicitation 
that have been set-aside and/or on the parts that have not been set-
aside.
    (vii) A small business must comply with the applicable limitations 
on subcontracting provisions (see Sec.  125.6) and the nonmanufacturer 
rule, if applicable, (see Sec.  121.406(b)) in the performance of the 
contract and each order that is set-aside against the contract.
    (4) Reserves of Multiple Award Contracts Awarded in Full and Open 
Competition. (i) If the contracting officer decides to reserve a 
multiple award contract established through full and open competition, 
the contracting officer must assign a NAICS code to the solicitation 
for the Multiple Award Contract and each order issued against the 
Multiple Award Contract pursuant to Sec.  121.402(c) of this chapter. 
See Sec.  121.404 for further determination on size status for the 
Multiple Award Contract and each order issued against that contract.
    (ii) A contracting officer must state in the solicitation that if 
there are two or more contract awards to any one type of small business 
concern (e.g., small business, 8(a), HUBZone, SDVO SBC, WOSB or 
EDWOSB), the agency will compete any orders solely amongst the 
specified types of small business concerns if the rule of two or an 
alternative set-aside requirement provided in the small business 
program have been met.
    (iii) A contracting officer must state in the solicitation that if 
there are several awards to several different types of small businesses 
(e.g., one to 8(a), one to HUBZone, one to SDVO SBC, one to WOSB or 
EDWOSB), the agency will compete any orders solely amongst all of the 
small business concerns if the rule of two has been met.
    (iv) A contracting officer must state in the solicitation that if 
there is only one contract award to any one type of small business 
concern (e.g., small business, 8(a), HUBZone, SDVO SBC, WOSB or 
EDWOSB), the agency may issue orders directly to that concern for work 
that it can perform.
    (v) Small businesses are permitted to compete against other-than-
small businesses for an order issued against the Multiple Award 
Contract if the small business has been awarded a contract for those 
supplies or services.
    (v) A business must comply with the applicable limitations on 
subcontracting provisions (see Sec.  125.6) and the nonmanufacturer 
rule, if applicable, for any order issued against the Multiple Award 
Contract if the order is competed and awarded under the set-aside 
portion of the contract (see Sec.  121.406(b)). However, a business 
need not comply with the limitations on subcontracting provisions (see 
Sec.  125.6) and the

[[Page 29160]]

nonmanufacturer rule for any order issued against the Multiple Award 
Contract if the order is competed amongst small and other-than-small 
business concerns.
    (5) Reserve of Multiple Award Contracts that are Bundled. (i) If 
the contracting officer decides to reserve a multiple award contract 
established through full and open competition that is a bundled 
contract, the contracting officer must assign a NAICS code to the 
solicitation for the Multiple Award Contract and each order issued 
against the Multiple Award Contract pursuant to Sec.  121.402(c) of 
this chapter. See Sec.  121.404 for further determination on size 
status for the Multiple Award Contract and each order issued against 
that contract.
    (ii) The Small Business Teaming Arrangement must comply with the 
applicable limitations on subcontracting provisions (see Sec.  125.6) 
and the nonmanufacturer rule, if applicable, (see Sec.  121.406(b)) on 
all orders issued against the Multiple Award Contract, although the 
cooperative efforts of the team members will be considered in 
determining whether the subcontracting limitations requirement is met 
(see Sec.  125.6(j)).
    (iii) Team members of the Small Business Teaming Arrangement will 
not be affiliated (see Sec.  121.103(b)(8)).
    (6) Set-aside of orders against Multiple Award Contracts that have 
not been Set-Aside, Partially Set-Aside or Reserved for Small 
Businesses. (i) Notwithstanding the fair opportunity requirements set 
forth in 10 U.S.C. 2304c and 41 U.S.C. 253j, the contracting officer 
has the authority to set-aside orders against Multiple Award Contracts 
that were competed on a full and open basis.
    (ii) The contracting officer may state in the solicitation and 
resulting contract for the Multiple Award Contract that:
    (A) Based on the results of market research, orders issued against 
the Multiple Award Contract will be set-aside for small businesses or 
any subcategory of small businesses whenever the rule of two or any 
alternative set-aside requirements provided in the small business 
program have been met; or
    (B) The agency is preserving the right to consider set-asides using 
the rule of two or any alternative set-aside requirements provided in 
the small business program, on an order-by-order basis.
    (iii) After conducting market research, the contracting officer 
shall first consider whether there is a reasonable expectation that 
offers will be obtained from at least two 8(a) BD, HUBZone, SDVO or 
WOSB small business concerns under the respective programs, before 
setting aside the requirement as a small business set-aside. There is 
no order of precedence among the 8(a) BD, HUBZone, SDVO SBC or WOSB 
programs.
    (iv) The contracting officer must assign a NAICS code to the 
solicitation for each order issued against the Multiple Award Contract 
pursuant to Sec.  121.402(c) of this chapter. See Sec.  121.404 for 
further determination on size status for each order issued against that 
contract.
    (v) A business must comply with applicable limitations on 
subcontracting provisions (see Sec.  125.6) and the nonmanufacturer 
rule, if applicable, (see Sec.  121.406(b)) in the performance of each 
order that is set-aside against the contract.
    (7) Tiered evaluation of offers, or cascading. An agency cannot 
create a tiered evaluation of offers or ``cascade'' unless it has 
specific statutory authority to do so. This is a procedure used in 
negotiated acquisitions when the contracting officer establishes a 
tiered or cascading order of precedence for evaluating offers that is 
specified in the solicitation, which states that if no award can be 
made at the first tier, it will evaluate offers at the next lower tier, 
until award can be made. For example, an agency is not permitted to 
state an intention to award one contract to an 8(a) BD Participant and 
one to a HUBZone SBC, but only if no awards are made to 8(a) BD 
Participants, unless the agency has specific statutory authority to do 
so.
    19. Amend Sec.  125.3 by:
    a. Revising the section heading; and
    b. Adding a new paragraph (h) to read as follows:


Sec.  125.3  What types of subcontracting assistance are available to 
small businesses?

* * * * *
    (h) Subcontracting consideration in bundled and consolidated 
contracts. (1) For bundled requirements, the agency must evaluate 
offers from teams of small businesses the same as other offers, with 
due consideration to the capabilities of all proposed subcontractors.
    (2) For substantial bundling, the agency must design actions 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.
    (3) For significant subcontracting opportunities in consolidated 
contracts, bundled and substantially bundled requirements see Sec.  
125.2(d)(4).
    20. Amend Sec.  125.4 by revising the heading to read as follows:


Sec.  125.4  What is the Government property sales assistance program?

* * * * *
    21. Amend Sec.  125.5 by:
    a. Revising the heading;
    b. Revising paragraphs (a)(1) and (a)(2);
    c. Revising paragraph (b)(1)(i), (b)(1)(ii), and (b)(1)(iii);
    d. Revising paragraph (b)(1)(v)(A) by removing ``SIC'' and 
replacing it with ``NAICS'';
    e. Revising paragraph (b)(1)(v)(C) by adding ``or reserve'' after 
``In the case of a set-aside'';
    f. Revising the first sentence in paragraph (c)(1);
    g. Revising paragraph (h);
    h. Revising the first sentence in paragraph (i)(2);
    i. Revising paragraph (l)(1)(iii); and
    j. Revising paragraph (m) by inserting the following at the end of 
the paragraph.


Sec.  125.5  What is the Certificate of Competency Program?

    (a) General. (1) The Certificate of Competency (COC) Program is 
authorized under section 8(b)(7) of the Small Business Act. A COC is a 
written instrument issued by SBA to a Government contracting officer, 
certifying that one or more named small business concerns possess the 
responsibility to perform a specific Government procurement (or sale) 
contract, which includes Multiple Award Contracts and orders placed 
against Multiple Award Contracts, where responsibility type issues are 
used to determine award or establish the competitive range. The COC 
Program is applicable to all Government procurement actions, including 
Multiple Award Contracts and orders placed against Multiple Award 
Contracts where the contracting officer has used any issues of capacity 
or credit (responsibility) to determine suitability for an award. With 
respect to Multiple Award Contracts, contracting officers should 
determine responsibility at the time of award of the contract. However, 
if a contracting officer makes any of the responsibility determinations 
set forth in paragraph (2) below for an order issued against a Multiple 
Award Contract, the contracting officer must refer the matter to SBA 
for a COC. The COC procedures apply to all Federal procurements, 
regardless of the location of performance or the location of the 
procuring activity.
    (2) A contracting officer must refer a small business concern to 
SBA for a

[[Page 29161]]

possible COC, even if the next apparent successful offeror is also a 
small business, when the contracting officer:
    (i) Denies an apparent successful small business offeror award of a 
contract or order on responsibility grounds;
    (ii) Refuses to consider a business concern for award of a contract 
or order after evaluating the concern's offer on a pass/fail (or go/no 
go) basis under a responsibility-related evaluation factor (such as 
experience or past performance); or
    (iii) Refuses to consider a business concern for award of a 
contract or order because it failed to meet a definitive responsibility 
criterion contained in the solicitation.
    (3) * * *
* * * * *
    (b) COC Eligibility. (1) The offeror seeking a COC has the burden 
of proof to demonstrate its eligibility for COC review.
    (i) To be eligible for a COC, an offeror must qualify as a small 
business under the applicable size standard in accordance with part 121 
of this chapter.
    (ii) To be eligible for a COC, an offeror must have agreed to 
comply with applicable limitations on subcontracting (see Sec.  125.6). 
Whether an offeror has agreed to comply with the limitations on 
subcontracting is a matter of technical acceptability or 
responsiveness. Whether an offeror will be able to comply with the 
limitations on subcontracting is a matter of responsibility.
    (iii) A non-manufacturer making an offer on a contract for supplies 
that is set-aside or reserved for small business (where the small 
business will be competing against other small businesses for orders) 
must furnish end items that have been manufactured in the United States 
by a small business. A waiver of this requirement may be requested 
under Sec. Sec.  121.1301 through 121.1305 of this chapter for either 
the type of product being procured or the specific contract at issue.* 
* *
* * * * *
    (c) Referral of nonresponsibility determination to SBA. (1) The 
contracting officer must refer the matter in writing to the SBA 
Government Contracting Area Office (Area Office) serving the area in 
which the headquarters of the offeror is located. * * *
* * * * *
    (h) Notification of intent to issue on a contract or order with a 
value between $100,000 and $25 million. Where the Director determines 
that a COC is warranted, he or she will notify the contracting officer 
(or the procurement official with the authority to accept SBA's 
decision) of the intent to issue a COC, and of the reasons for that 
decision, prior to issuing the COC. At the time of notification, the 
contracting officer or the procurement official with the authority to 
accept SBA's decision has the following options: * * *
    (i) * * *
    (2) SBA Headquarters will furnish written notice to the Director, 
OSDBU or OSBP of the procuring agency, with a copy to the contracting 
officer, that the case file has been received and that an appeal 
decision may be requested by an authorized official. * * *
* * * * *
    (l) * * *
    (1) * * *
* * * * *
    (iii) The COC has been issued for more than 60 days (in which case 
SBA may investigate the business concern's current circumstances and 
the reason why the contract has not been issued).
* * * * *
    (m) * * * Where SBA issues a COC with respect to a business concern 
that was not going to be considered for award for the reasons contained 
in (a)(2)(ii) or (a)(2)(iii) of this section, award need not be made to 
that offeror where the contracting officer considers the offeror for 
award, but does not issue the award to that offeror for reasons 
unrelated to the SBA's responsibility determination.
    22. Amend Sec.  125.6 by:
    a. Revising the heading;
    b. Revising paragraph (a);
    c. Removing current paragraph (e);
    d. Redesignating paragraphs (f), (g), (h), and (i) as (e), (f), 
(g), and (h) respectively;
    e. Revising newly designated paragraph (f);
    f. Adding a new paragraph (i); and
    g. Adding a new paragraph (j) to read as follows:


Sec.  125.6  What are the prime contractor performance requirements 
(limitations on subcontracting)?

    (a) In order to be awarded a full or partial small business set-
aside contract, an 8(a) contract, a WOSB or EDWOSB contract pursuant to 
part 127 of this chapter, or a small business reserve, a small business 
concern must agree that:
* * * * *
    (f) The period of time used to determine compliance will be the 
period of performance which the evaluating agency uses to evaluate the 
offer. If the evaluating agency fails to state in its solicitation the 
period of performance it will use to evaluate the offer, it will use 
the base contract period (excluding options) to determine compliance. 
In indefinite delivery or indefinite quantity contracts, the agency 
will use the maximum authorized in the base contract period (excluding 
options) to determine compliance. In Multiple Award Contracts, the 
agency will use the period of performance for each order issued against 
the Multiple Award Contract to determine compliance unless the order is 
competed amongst small and other-than-small businesses (in which case 
the subcontracting limitations will not apply).
* * * * *
    (i) Where an offeror is exempt from affiliation under Sec.  
121.103(b)(8) of this chapter and qualifies as a small business concern 
for a reserve of a bundled contract, the performance of work 
requirements set forth in this section apply to the cooperative effort 
of the small business team members of the Small Business Teaming 
Arrangement, not its individual members.
    (j) The contracting officer must document a small business 
concern's performance of work requirements as part of the small 
business' performance evaluation in accordance with the procedures set 
forth in FAR 42.1502. The contracting officer must also evaluate 
compliance for future contract awards in accordance with the procedures 
set forth in FAR 9.104-6.
    23. Amend Sec.  125.8 by revising paragraph (b) to read as follows:


Sec.  125.8  What definitions are important in the Service-Disabled 
Veteran-Owned (SDVO) Small Business Concern (SBC) Program?

    (a) * * *
    (b) Interested Party means the contracting activity's contracting 
officer, the SBA, any concern that submits an offer for a specific SDVO 
contract (including Multiple Award Contracts), or any concern that 
submitted an offer in a full and open competition and its opportunity 
for award will be affected by a reserve of an award given to a SDVO 
SBC.
* * * * *
    24. Revise Sec.  125.14 it to read as follows:


Sec.  125.14  What are SDVO contracts?

    SDVO contracts, including Multiple Award Contracts (see Sec.  
125.1), are those awarded to an SDVO SBC through any of the following 
procurement methods:
    (a) Sole source awards to an SDVO SBC;

[[Page 29162]]

    (b) Set-aside awards, including partial set-asides, based on 
competition restricted to SDVO SBCs;
    (c) Awards based on a reserve for SDVO SBCs in a solicitation for a 
Multiple Award Contract (see Sec.  125.1); or
    (d) Orders set-aside for SDVO SBCs against a Multiple Award 
Contract, which had been awarded in full and open competition.
    25. Amend Sec.  125.15 by adding new paragraphs (d) and (e) to read 
as follows:


Sec.  125.15  What requirements must an SDVO SBC meet to submit an 
offer on a contract?

* * * * *
    (d) Multiple Award Contracts. (1) Partial set-asides.The SDVO SBC 
must comply with the applicable limitations on subcontracting 
provisions (see Sec.  125.6) and the nonmanufacturer rule, if 
applicable (see Sec.  121.406(b)), in the performance of a contract 
partially set-aside for SDVO SBCs.
    (2) Set-aside of orders. The SDVO SBC must comply with the 
applicable limitations on subcontracting provisions (see Sec.  125.6) 
and the nonmanufacturer rule, if applicable, (see Sec.  121.406(b)) in 
the performance of each individual order that has been set-aside for 
SDVO SBCs.
    (3) Reserves.The SDVO SBC must comply with the applicable 
limitations on subcontracting provisions (see Sec.  125.6) and the 
nonmanufacturer rule, if applicable, (see Sec.  121.406(b)) in the 
performance of the contract that is reserved for one or more SDVO SBCs. 
However, the SDVO SBC will not have to comply with the limitations on 
subcontracting provisions (see Sec.  125.6) and the nonmanufacturer 
rule for any order issued against the Multiple Award Contract if the 
order is competed amongst SDVO SBCs and other-than-small business 
concerns.
    (e) Recertification. (1) A concern that represents itself and 
qualifies as an SDVO SBC at the time of initial offer (or other formal 
response to a solicitation), which includes price, including a Multiple 
Award Contract, is considered an SDVO SBC throughout the life of that 
contract. This means that if an SDVO SBC is qualified at the time of 
initial offer for a Multiple Award Contract, then it will be considered 
an SDVO SBC for each order issued against the contract, unless a 
contracting officer requests a new SDVO SBC certification in connection 
with a specific order. Where a concern later fails to qualify as an 
SDVO SBC, the procuring agency may exercise options and still count the 
award as an award to an SDVO SBC. The following exceptions apply:
    (i) Where an SDVO contract is novated to another business concern, 
the concern that will continue performance on the contract must certify 
its status as an SDVO SBC to the procuring agency, or inform the 
procuring agency that it does not qualify as an SDVO SBC, within 30 
days of the novation approval. If the concern is not an SDVO SBC, the 
agency can no longer count the options or orders issued pursuant to the 
contract, from that point forward, towards its SDVO goals.
    (ii) Where a concern that is performing an SDVO SBC contract 
acquires, is acquired by, or merges with another concernand contract 
novation is not required, the concern must, within 30 days of the 
transaction becoming final, recertify its SDVO SBC status to the 
procuring agency, or inform the procuring agency that it no longer 
qualifies as an SDVO SBC. If the contractor is not an SDVO SBC, the 
agency can no longer count the options or orders issued pursuant to the 
contract, from that point forward, towards its SDVO goals. The agency 
and the contractor must immediately revise all applicable Federal 
contract databases to reflect the new status.
    (iii) There has been an SDVO SBC status protest on the solicitation 
or contract. See 125.27(e) for the effect of the status determination 
on the contract award.
    (2) For the purposes of contracts (including Multiple Award 
Contracts) with durations of more than five years (including options), 
a contracting officer must request that a business concern recertify 
its SDVO SBC status no more than 120 days prior to the end of the fifth 
year of the contract, and no more than 120 days prior to exercising any 
option.
    (3) A business concern that did not certify itself as an SDVO SBC, 
either initially or prior to an option being exercised, may recertify 
itself as an SDVO SBC for a subsequent option period if it meets the 
eligibility requirements.
    (4) Re-certification does not change the terms and conditions of 
the contract. The limitations on subcontracting, nonmanufacturer and 
subcontracting plan requirements in effect at the time of contract 
award remain in effect throughout the life of the contract.
    (5) Where the contracting officer explicitly requires concerns to 
recertify their status in response to a solicitation for an order, SBA 
will determine eligibility as of the date the concern submits its self-
representation as part of its response to the solicitation for the 
order.
    (6) A concern's status may be determined at the time of a response 
to a solicitation for an Agreement and each order issued pursuant to 
the Agreement.
    26. Amend Sec.  125.22 by revising the heading to read as follows: 
``Sec.  125.22 May SBA appeal a contracting officer's decision not to 
make a procurement available for award as an SDVO contract?''.
    27. Amend Sec.  125.24 by revising paragraph (b) to read as 
follows:


Sec.  125.24  Who may protest the status of an SDVO SBC?

* * * * *
    (b) For all other procurements, including Multiple Award Contracts 
(see Sec.  125.1), any interested party may protest the apparent 
successful offeror's SDVO SBC status.

PART 126--HUBZONE PROGRAM

    28. The authority citation for part 126 is amended to read as 
follows:

    Authority:  15 U.S.C. 632(a), 632(j), 632(p), 644 and 657a.

    29. Amend Sec.  126.103 by revising the definition of the term 
``Interested party'' to read as follows:


Sec.  126.103  What definitions are important in the HUBZone program?

* * * * *
    Interested party means any concern that submits an offer for a 
specific HUBZone sole source or set-aside contract (including Multiple 
Award Contracts), any concern that submitted an offer in full and open 
competition and its opportunity for award will be affected by a price 
evaluation preference given a qualified HUBZone SBC, any concern that 
submitted an offer in a full and open competition and its opportunity 
for award will be affected by a reserve of an award given to a 
qualified HUBZone SBC, the contracting activity's contracting officer, 
or SBA.
* * * * *
    30. Revise Sec.  126.600 to read as follows:


Sec.  126.600  What are HUBZone contracts?

    HUBZone contracts, including Multiple Award Contracts (see 125.1), 
are those awarded to a qualified HUBZone SBC through any of the 
following procurement methods:
    (a) Sole source awards to qualified HUBZone SBCs;
    (b) Set-aside awards, including partial set-asides, based on 
competition restricted to qualified HUBZone SBCs;
    (c) Awards to qualified HUBZone SBCs through full and open 
competition after a price evaluation preference in favor of qualified 
HUBZone SBCs;

[[Page 29163]]

    (d) Awards based on a reserve for HUBZone SBCs in a solicitation 
for a Multiple Award Contract (see Sec.  125.1); or
    (e) Orders set-aside for HUBZone SBCs against a Multiple Award 
Contract, which had been awarded in full and open competition.
    31. Amend Sec.  126.601 by adding new paragraphs (g) and (h) to 
read as follows:


Sec.  126.601  What additional requirements must a qualified HUBZone 
SBC meet to bid on a contract?

* * * * *
    (g) Multiple Award Contracts--(1) Partial set-asides.The qualified 
HUBZone SBC must comply with the applicable limitations on 
subcontracting provisions (see Sec.  126.700) and the nonmanufacturer 
rule, if applicable, in the performance of a contract partially set-
aside for HUBZone SBCs.
    (2) Set-aside of orders. The qualified HUBZone SBC must comply with 
the applicable limitations on subcontracting provisions (see Sec.  
126.700) and the nonmanufacturer rule, if applicable, in the 
performance of each individual order that has been set-aside for 
HUBZone SBCs.
    (3) Reserves. The qualified HUBZone SBC must comply with the 
applicable limitations on subcontracting provisions (see Sec.  126.700) 
and the nonmanufacturer rule, if applicable, in the performance of the 
contract that is reserved for one or more HUBZone SBCs. However, the 
qualified HUBZone SBC will not have to comply with the limitations on 
subcontracting provisions (see Sec.  126.700) and the nonmanufacturer 
rule for any order issued against the Multiple Award Contract if the 
order is competed amongst qualified HUBZone SBCs and other-than-small 
business concerns.
    (h) Recertification of Status for an Award. (1) A concern that is a 
qualified HUBZone SBC at the time of initial offer and contract 
award,including a Multiple Award Contract, is considered a HUBZone SBC 
throughout the life of that contract. This means that if a HUBZone SBC 
is certified at the time of initial offer and contract award for a 
Multiple Award Contract, then it will be considered a HUBZone SBC for 
each order issued against the contract, unless a contracting officer 
requests a new HUBZone SBC certification in connection with a specific 
order. Where a concern later is decertified, the procuring agency may 
exercise options and still count the award as an award to a HUBZone 
SBC. The following exceptions apply:
    (i) Where a HUBZone contract (or a contract awarded through full 
and open competition based on the HUBZone price evaluation preference) 
is novated to another business concern, the concern that will continue 
performance on the contract must certify its status as a HUBZone SBC to 
the procuring agency, or inform the procuring agency that it does not 
qualify as a HUBZone SBC,within 30 days of the novation approval. If 
the concern cannot certify that it qualifies as a HUBZone SBC, the 
agency can no longer count the options or orders issued pursuant to the 
contract, from that point forward, towards its HUBZone goals.
    (ii) Where a concern that is performing a HUBZone contract 
acquires, is acquired by, or merges with another concern and contract 
novation is not required, the concern must, within 30 days of the 
transaction becoming final, recertify its HUBZone SBC status to the 
procuring agency, or inform the procuring agency that it has been 
decertified or no longer qualifies as a HUBZone SBC. If the 
contractoris unable to recertify its status as a HUBZone SBC, the 
agency can no longer count the options or orders issued pursuant to the 
contract, from that point forward, towards its HUBZone goals. The 
agency and the contractor must immediately revise all applicable 
Federal contract databases to reflect the new status.
    (iii) There has been a HUBZone status protest on the solicitation 
or contract. See 126.803(d) for the effect of the status determination 
on the contract award.
    (2) For the purposes of contracts (including Multiple Award 
Contracts) with durations of more than five years (including options) a 
contracting officer must request that a business concern recertify its 
HUBZone SBC status no more than 120 days prior to the end of the fifth 
year of the contract, and no more than 120 days prior to exercising any 
option.
    (3) A business concern that did not certify itself as a HUBZone 
SBC, either initially or prior to an option being exercised, may 
recertify itself as a HUBZone SBC for a subsequent option period if it 
meets the eligibility requirements.
    (4) Re-certification does not change the terms and conditions of 
the contract. The limitations on subcontracting, non-manufacturer and 
subcontracting plan requirements in effect at the time of contract 
award remain in effect throughout the life of the contract.
    (5) Where the contracting officer explicitly requires concerns to 
recertify their status in response to a solicitation for an order, SBA 
will determine eligibility as of the date the concern submits its self-
representation as part of its response to the solicitation for the 
order and at the time of award.
    (6) A concern's status may be determined at the time of submission 
of its initial response to a solicitation for and award of an 
Agreementand each order issued pursuant to the Agreement.
    32. Revise Sec.  126.602 to read as follows:


Sec.  126.602  Must a qualified HUBZone SBC maintain the employee 
residency percentage during contract performance?

    (a) Qualified HUBZone SBCs eligible for the program pursuant to 
Sec.  126.200(b) must meet the HUBZone residency requirement at all 
times while certified in the program. However, the qualified HUBZone 
SBC may ``attempt to maintain'' (See Sec.  126.103) the required 
percentage of employees who reside in a HUBZone during the performance 
of any HUBZone contract awarded to the concern on the basis of its 
HUBZone status, except as set forth in paragraph (d).
    (b) For indefinite delivery/indefinite quantity contracts, 
including Multiple Award Contracts, the qualified HUBZone SBC must 
attempt to maintain the residency requirement during the performance of 
each order issued against that contract.
    (c) A qualified HUBZone SBC eligible for the program pursuant to 
Sec.  126.200(a) must have at least 35% of its employees engaged in 
performing a HUBZone contract residing within any Indian reservation 
governed by one or more of the concern's Indian Tribal Government 
owners, or residing within any HUBZone adjoining any such Indian 
reservation. To monitor compliance, SBA will conduct program 
examinations, pursuant to Sec. Sec.  126.400 through 126.403, where 
appropriate.
    (d) Every time a qualified HUBZone SBC submits and offer and is 
awarded a HUBZone contract, it must meet all of the HUBZone Program's 
eligibility requirements, including the employee residency requirement 
at the time it submits its initial offer and up until and at the time 
of award. This means that if a HUBZone SBC is performing on a HUBZone 
contract and submits an offer for another HUBZone contract, it can no 
longer attempt to maintain the HUBZone residency requirement; rather, 
it must meet the requirement at the time it submits its initial offer 
and up until and at the time of award.
    33. Amend Sec.  126.610 by revising the heading to read as follows:


Sec.  126.610  May SBA appeal a contracting officer's decision not to 
make a procurement available for award as a HUBZone contract?''

    34. Amend Sec.  126.613 by:

[[Page 29164]]

    a. Adding a new sentence at the end of paragraph (a)(1); and
    b. Adding an Example 4 in paragraph (b).


Sec.  126.613  How does a price evaluation preference affect the bid of 
a qualified HUBZone SBC in full and open competition?

    (a) * * *
    (1) * * * This does not apply if the HUBZone SBC will receive the 
contract as part of a reserve for HUBZone SBCs.
* * * * *
    (b) * * *

    Example 4: In a full and open competition, a qualified HUBZone 
SBC submits an offer of $98 and a large business submits an offer of 
$93. The contracting officer has stated in the solicitation that one 
contract will be reserved for a HUBZone SBC. The contracting officer 
would not apply the price evaluation preference when determining 
which HUBZone SBC would receive the contract reserved for HUBZone 
SBCs, but would apply the price evaluation preference when 
determining the awardees for the non-reserved portion.

* * * * *


Sec.  126.614  [Removed and Reserved]

    35. Remove and reserve Sec.  126.614.
    36. Amend Sec.  126.800 by revising paragraph (b) as follows:


Sec.  126.800  Who may protest the status of a qualified HUBZone SBC?

* * * * *
    (b) For all other procurements, including Multiple Award Contracts 
(see 125.1), SBA, the CO, or any other interested party may protest the 
apparent successful offeror's qualified HUBZone SBC status.

PART 127--WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT ASSISTANCE 
PROGRAM

    37. The authority for 13 CFR part 127 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 637(m), and 644.

    38. Revise Sec.  127.101 to read as follows:


Sec.  127.101  What type of assistance is available under this part?

    This part authorizes contracting officers to restrict competition 
to eligible Economically Disadvantaged Women-Owned Small Businesses 
(EDWOSBs) for certain Federal contracts or orders in industries in 
which the Small Business Administration (SBA) determines that WOSBs are 
underrepresented in Federal procurement. It also authorizes contracting 
officers to restrict competition to eligible WOSBs for certain Federal 
contracts or orders in industries in which SBA determines that WOSBs 
are substantially underrepresented in Federal procurement and has 
waived the economically disadvantaged requirement.
    39. Amend Sec.  127.102 by revising the following definitions to 
read as follows:


Sec.  127.102  What are the definitions of the terms used in this part?

* * * * *
    EDWOSB requirement means a Federal requirement for services or 
supplies for which a contracting officer has restricted competition to 
eligible EDWOSBs, including Multiple Award Contracts, partial set-
asides, reserves, and orders set-aside for EDWOSBs issued against a 
Multiple Award Contract. * * *
    Interested party means any concern that submits an offer for a 
specific EDWOSB or WOSB requirement (including Multiple Award 
Contracts), any concern that submitted an offer in a full and open 
competition and its opportunity for award will be affected by a reserve 
of an award given a WOSB or EDWOSB, the contracting activity's 
contracting officer, or SBA. * * *
    WOSB requirement means a Federal requirement for services or 
supplies for which a contracting officer has restricted competition to 
eligible WOSBs, including Multiple Award Contracts, partial set-asides, 
reserves, and orders set-aside for WOSBs issued against a Multiple 
Award Contract.
    40. Amend Sec.  127.300 by revising paragraph (a) to read as 
follows:


Sec.  127.300  How is a concern certified as an EDWOSB or WOSB?

    (a) General. At the time a concern submits an offer on a specific 
contract (including a Multiple Award Contract) or order reserved for 
competition among EDWOSBs or WOSBs under this Part, it must be 
registered in the Central Contractor Registration (CCR), have a current 
representation posted on the Online Representations and Certifications 
Application (ORCA) that it qualifies as an EDWOSB or WOSB and have 
provided the required documents to the WOSB Program Repository, or if 
the repository is unavailable, be prepared to submit the documents to 
the contracting officer if selected as the apparent successful offeror.
* * * * *
    41. Amend Sec.  127.400 by revising the first sentence of paragraph 
(a) to read as follows:


Sec.  127.400  What is an eligibility examination?

    (a) Purpose of examination. Eligibility examinations are 
investigations that verify the accuracy of any certification made or 
information provided as part of the certification process (including 
third-party certifications) or in connection with an EDWOSB or WOSB 
requirement. * * *
* * * * *
    42. Amend Sec.  127.401 by revising paragraph (a) to read as 
follows:


Sec.  127.401  What is the difference between an eligibility 
examination and an EDWOSB or WOSB status protest pursuant to subpart F 
of this part?

    (a) Eligibility examination. An eligibility examination is the 
formal process through which SBA verifies and monitors the accuracy of 
any certification made or information provided as part of the 
certification process or in connection with an EDWOSB or WOSB 
requirement. * * *
* * * * *
    43. Amend Sec.  127.503 by:
    a. Revising paragraphs (a)(2), (a)(3), (b)(2), and (b)(3); and
    b. Adding a new paragraph (f) to read as follows:


Sec.  127.503  When is a contracting officer authorized to restrict 
competition under this part?

    (a) * * *
    (1) * * *
    (2)(i) The anticipated award price (including options) of the 
contract does not exceed $6,500,000 in the case of a contract assigned 
a NAICS code for manufacturing, or $4,000,000 in the case of all other 
contracts; or
    (ii) For Multiple Award Contracts, the anticipated award price 
(including options) of each order issued against the Multiple Award 
Contract does not exceed $6,500,000 in the case of an order assigned a 
NAICS code for manufacturing, or $4,000,000 in the case of all other 
orders; and
    (3) Award may be made at a fair and reasonable price.
    (b) WOSB requirements. * * *
    (1) * * *
    (2) The anticipated award price (including options) of the contract 
will not exceed $6,500,000 in the case of a contract or order assigned 
an NAICS code for manufacturing, or $4,000,000 in the case of all other 
contracts; or
    (ii) For Multiple Award Contracts, the anticipated award price 
(including options) of each order issued against a Multiple Award 
Contract does not exceed $6,500,000 in the case of an order assigned a 
NAICS code for manufacturing, or $4,000,000 in the case of all other 
orders; and

[[Page 29165]]

    (3) Award may be made at a fair and reasonable price.
* * * * *
    (f) Recertification. (1) A concern that represents itself and 
qualifies as a WOSB or EDWOSB at the time of initial offer (or other 
formal response to a solicitation), which includes price, including a 
Multiple Award Contract, is considered a WOSB or EDWOSB throughout the 
life of that contract. This means that if a WOSB/EDWOSB is qualified at 
the time of initial offer for a Multiple Award Contract, then it will 
be considered an WOSB/EDWOSB for each order issued against the 
contract, unless a contracting officer requests a new WOSB or EDWOSB 
certification in connection with a specific order. Where a concern 
later fails to qualify as a WOSB/EDWOSB, the procuring agency may 
exercise options and still count the award as an award to a WOSB/
EDWOSB. The following exceptions apply:
    (i) Where a WOSB/EDWOSB contract is novated to another business 
concern, the concern that will continue performance on the contract 
must certify its status as a WOSB/EDWOSB to the procuring agency, or 
inform the procuring agency that it does not qualify as a WOSB/
EDWOSB,within 30 days of the novation approval. If the concern cannot 
certify its status as a WOSB/EDWOSB, the agency may no longer be able 
to count the options or orders issued pursuant to the contract, from 
that point forward, towards its women-owned small business goals.
    (ii) Where a concern that is performing a WOSB/EDWOSB contract 
acquires, is acquired by, or merges with another concern and contract 
novation is not required, the concern must, within 30 days of the 
transaction becoming final, recertify its WOSB/EDWOSB status to the 
procuring agency, or inform the procuring agency that it no longer 
qualifies as a WOSB/EDWOSB.If the contractor is not a WOSB/EDWOSB, the 
agency may no longer be able to count the options or orders issued 
pursuant to the contract, from that point forward, towards its women-
owned small business goals. The agency and the contractor must 
immediately revise all applicable Federal contract databases to reflect 
the new status if necessary.
    (iii) There has been a WOSB or EDWOSB status protest on the 
solicitation or contract. See127.604(f) for the effect of the status 
determination on the contract award.
    (2) For the purposes of contracts (including Multiple Award 
Contracts) with durations of more than five years (including options), 
a contracting officer must request that a business concern recertify 
its WOSB/EDWOSB status no more than 120 days prior to the end of the 
fifth year of the contract, and no more than 120 days prior to 
exercising any option.
    (3) A business concern that did not certify itself as a WOSB/
EDWOSB, either initially or prior to an option being exercised, may 
recertify itself as a WOSB/EDWOSB for a subsequent option period if it 
meets the eligibility requirements.
    (4) Re-certification does not change the terms and conditions of 
the contract. The limitations on subcontracting, nonmanufacturer and 
subcontracting plan requirements in effect at the time of contract 
award remain in effect throughout the life of the contract.
    (5) Where the contracting officer explicitly requires concerns to 
recertify their status in response to a solicitation for an order, SBA 
will determine eligibility as of the date the concern submits its self-
representation as part of its response to the solicitation for the 
order.
    (6) A concern's status may be determined at the time of a response 
to a solicitation for an Agreement and each order issued pursuant to 
the Agreement.
    44. Amend Sec.  127.506 by:
    a. Adding the word, ``order'' at the end of paragraph (a); and
    b. Removing the word ``contract'' and adding the words ``contract 
or order'' in paragraphs (c)(2), (c)(4), (c)(5) and (d).


Sec.  127.506  May a joint venture submit an offer on an EDWOSB or WOSB 
requirement?

    A joint venture may submit an offer on an EDWOSB or WOSB 
requirement if the joint venture meets all of the following 
requirements:
    (a) Except as provided in Sec.  121.103(h)(3) of this chapter, the 
combined annual receipts or employees of the concerns entering into the 
joint venture must meet the applicable size standard corresponding to 
the NAICS code assigned to the contract or order;
* * * * *
    45. Amend Sec.  127.508 by revising the heading to read as follows:


Sec.  127.508  May SBA appeal a contracting officer's decision not to 
make a requirement available for award as a WOSB Program contract?

    46. Amend Sec.  127.600 by revising the first sentence of paragraph 
(a) to read as follows:


Sec.  127.600  Who may protest the status of a concern as an EDWOSB or 
WOSB?

    An interested party may protest the EDWOSB or WOSB status of an 
apparent successful offeror on an EDWOSB or WOSB requirement or 
contract. * * *

    Dated: May 4, 2012.
Karen Gordon Mills,
Administrator.
[FR Doc. 2012-11317 Filed 5-15-12; 8:45 am]
BILLING CODE 8025-01-P