Acquisition Process: Task and Delivery Order Contracts, Bundling, Consolidation, 61113-61148 [2013-22064]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 78, Number 191 (Wednesday, October 2, 2013)]
[Rules and Regulations]
[Pages 61113-61148]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22064]



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Vol. 78

Wednesday,

No. 191

October 2, 2013

Part V





Small Business Administration





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13 CFR Parts 121, 124, 125, et al.





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

Federal Register / Vol. 78 , No. 191 / Wednesday, October 2, 2013 / 
Rules and Regulations

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SMALL BUSINESS ADMINISTRATION

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

RIN 3245-AG20


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

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA) is amending its 
regulations governing small business contracting procedures. 
Specifically, this rule amends SBA's regulations to establish policies 
and procedures for setting aside, partially setting aside and reserving 
Multiple Award Contracts for small business concerns. SBA is also is 
establishing policies and procedures for setting aside task and 
delivery orders for small business concerns under Multiple Award 
Contracts. In addition, SBA is addressing how it will determine size 
under certain Agreements and when recertification of status will be 
required. Finally, SBA is establishing a new definition of 
consolidation and reorganizing its prime contracting assistance 
regulations.

DATES: This rule is effective on or before December 31, 2013.

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. Background

    On September 27, 2010, President Obama 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 also creates new programs and new initiatives. This final 
rule addresses two important parts of the Jobs Act: (1) the application 
of the Small Business Administration's (SBA's) small business programs 
to multiple award contracts; and (2) limitations on contract 
consolidation and bundling.
    Over the past 15 years, Federal agencies have increasingly used 
multiple award contracts--including the Multiple Award Schedules (MAS 
or Schedule) contracts managed by the General Services Administration 
(GSA), Government-wide acquisition contracts (GWACs), 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 
businesses provide to our taxpayers, including creativity, innovation, 
cost-effective technical expertise, 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. This 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.

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

    Section 1331 of the Jobs Act recognizes 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. Section 1331 requires the Administrator for the Office 
of Federal Procurement Policy (OFPP) and the Administrator of SBA, in 
consultation with the Administrator of GSA, to establish regulations 
under which Federal agencies may: (1) set aside part or parts of 
multiple award contracts for small business; (2) reserve one or more 
awards for small businesses 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 or partially set-aside, nor 
include a reserve for small businesses. This applies to multiple award 
contracts issued and used by only one agency as well as to multiple 
award multi-agency contracts (MMACs), which can be used by more than 
one agency. 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 at least two capable small businesses can meet the 
contract's requirements.
    In November 2011, 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. 76 FR 68032 
(Nov. 2, 2011). 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.
    In May 2012, SBA issued a proposed rule to provide 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 and task and delivery orders placed against them, and that 
these tools are used in a consistent manner across agencies. The 
proposed rule included the following:
     Processes for using partial set-asides. The proposed rule 
explained that partial set-asides may be used in connection with a 
multiple award contract 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 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(s) of the requirement at a fair market price. The proposed rule 
would allow for small businesses to submit an offer on the set-aside 
portion, non-set-aside portion, or both. 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

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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.
     Processes for using contract reserves. The proposed rule 
established a process for agencies to reserve awards for small 
businesses 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. The proposed rule provided that orders must be set-aside for 
small businesses under a reserved contract if the ``rule of two'' or 
any alternative set-aside requirements provided in SBA's small business 
programs have been met.
     Processes for order set-asides. The proposed rule laid out 
processes to 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 
order set-asides or preservation of right to consider order set-asides. 
These alternatives would maximize agencies' flexibility in exercising 
their discretion to determine when and how best to use set-asides under 
multiple award contracts.
     On Ramps/Off Ramps. The proposed rule added new coverage 
to SBA's regulations addressing on ramps and off ramps--i.e., 
mechanisms for allowing small businesses to enter and exit a contract 
during the performance period. Specifically, the proposed rule provided 
that for multiple award contracts that had been set-aside, if a small 
business becomes other than small (e.g., due to a merger or 
acquisition), it must be ``off ramped.'' With all other multiple award 
contracts, the decision regarding how to apply and use ``on ramp/off-
ramp'' provisions would be at the discretion of the contracting agency.
     Required Documentation. The proposed rule would require 
that the contracting officer document the contract file to provide an 
explanation if the contracting officer decided not to use any of the 
section 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.
     Review by SBA's procurement center representatives (PCRs). 
The proposed rule provided that SBA's PCR 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, consistent 
with the PCRs' longstanding responsibility to assist small business 
concerns in obtaining a fair share of Federal Government contracting 
opportunities. At the same time, the proposed rule made clear that the 
ultimate decision of whether to apply a section 1331 tool to any given 
procurement action is at the discretion of the contracting officer.
     Application of size standards to multiple award contracts. 
Under SBA's current rules, a predominant North American Industry 
Classification System (NAICS) code and size standard is required for 
all contracts, as well as for all orders. SBA has seen some instances 
in which an agency assigns multiple NAICS codes to a multiple award 
contract and a business may be small for one or some 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 the NAICS code that should have been assigned) to a 
particular order. In response, the proposed rule provided several 
alternatives 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 could 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. Under this option, the NAICS code and 
associated size standard assigned to the order must be pulled from the 
named NAICS code and size standard certified at the base contract 
level. Alternatively, the contracting officer could 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.
     Limitation on subcontracting. When an order is set-aside--
under a contract awarded pursuant to full and open competition or under 
a contract reserve, or is issued against a set-aside or partial-set 
aside multiple award contract, the contractor must comply with the 
limitation on subcontracting (and the non-manufacturer rule) for that 
order.
     Agreements. With respect to ``Agreements'' including 
Blanket Purchase Agreements (BPAs) (except for BPAs issued against a 
GSA Schedule contract), Basic Agreements, Basic Ordering Agreements, or 
any other Agreement for which a contracting officer sets aside or 
reserves awards to any type of small business, the proposed rule would 
require that a concern 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 would also be required to qualify as small for each order 
issued pursuant to the Agreement in order to be considered small for 
the order and in order for an agency to receive small business goaling 
credit for the order.
    Additional details regarding the proposed rule may be found at 77 
FR 29130-29165 (May 16, 2012).
    Based on the comments received on the proposed rule (which are 
discussed in greater detail below) and additional deliberations, SBA 
has adopted the proposed changes described above with some refinements, 
including the following:
     Contract reserves. The final rule amends the procedures 
related to reserves to clarify that contracting officers may, but are 
not required to, set forth targets in the contract showing the dollar 
value of awards to small businesses.
     Limitations on subcontracting. The final rule generally 
retains the requirement in the proposed rule stating that when an order 
is set aside under a contract awarded pursuant to full and open 
competition or a contract reserve, the contractor must comply with the 
limitations on subcontracting and non-manufacturer rule for that order. 
The final rule modifies the proposed rule's

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handling for orders made under total or partial set-aside contracts. In 
these cases, the contractor must meet the limitations on subcontracting 
(as well as the nonmanufacturer rule) in each performance period of the 
contract--e.g., the base term and each option period as defined in the 
contract's period of performance. However, the rule gives contracting 
officers the discretion, on a contract-by-contract basis, to require 
compliance at the order level.
     PCRs. SBA has clarified in the final rule that PCRs will 
only review multiple award contracts where the agency has not set-aside 
all or part of the acquisition or reserved the acquisition for small 
businesses.
     On Ramps/Off Ramps. In the final rule, SBA provided 
greater discretion to the contracting officers on the use of ``on 
ramps/off ramps.'' Specifically, the final rule states that if a small 
business awarded a total or partial set-aside multiple award contract 
becomes other than small as a result of a merger or acquisition, it is 
up to the contracting officer to decide whether to terminate, or ``off-
ramp'' the contractor. However, any awards issued to such a contractor 
will not count as an award to a small business.
     PCRs. SBA has clarified in the final rule that PCRs will 
only review multiple award contracts where the agency has not set-aside 
all or part of the acquisition or reserved the acquisition for small 
businesses.
    Of particular note, the final rule, like 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. 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. Agencies have the discretion to forego using the section 
1331 tools even if the requirements could be met; they simply need to 
explain how their planned action is consistent with the best interests 
of the agency and the agency's overarching responsibility to provide 
maximum practicable opportunities for small businesses (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 section 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 are not 
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.
    In sum, this final rule will 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.
    SBA acknowledges that these changes will require a significant 
planning and implementation effort that will require changes to the 
central government procurement data systems, such as the Federal 
Procurement Data System (FPDS), and also each agency's system or 
systems. A change of this magnitude is estimated to take as many as 
five years to be fully implemented across the myriad of interdependent 
government systems. The funding for this initiative, both for the 
agencies and the Integrated Acquisition Environment (IAE), will need to 
be addressed across government. The Federal Acquisition Institute and 
the Defense Acquisition University will also have to revise curriculum 
and agencies will have to engage in an extensive retraining effort of 
their acquisition workforce.

B. Consolidation of Contract Requirements

    In addition to the provisions relating to multiple award contracts, 
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. The Jobs Act amended the Small Business Act to provide for certain 
policies to further highlight when agencies conduct contract bundling, 
including requiring that agencies publish on Web sites a list of 
bundled contracts and rationale for each such bundled contract. The 
Jobs Act also requires agencies that bundle requirements to include in 
their solicitation for multiple award contracts 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. Finally, the Jobs Act also 
amended the Small Business Act to address consolidation. (Although 
contract consolidation was addressed in 10 U.S.C. 2383 for DoD, it had 
never before been addressed in the Small Business Act.)
    The proposed rule built on much of DoD's existing guidance 
regarding consolidation and explained 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 required 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.
    The final rule adopts the proposed rule with certain refinements 
(mostly technical in nature) as discussed in the section below.

II. Summary of and Response to Comments

    On May 16, 2012, SBA published its proposed rule implementing the 
Jobs Act provisions described above (77 FR 29130). SBA received 
comments from over 25 respondents on this proposed rule. In addition, 
SBA requested and received comments from various Federal agencies. In 
total, SBA received over 120 comments on the various issues set forth 
in the proposed rule. Most of the comments supported SBA's rule and 
believed that it was a major step toward increasing Federal procurement 
opportunities for small businesses. The comments relating to specific 
sections of the rule are discussed in further detail below.

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A. Small Business Teaming Arrangements (13 CFR 121.103 & 125.1)

    In its proposed rule, SBA explained that it was proposing to amend 
its size regulations to address both bundling and contract 
consolidation as well as multiple award contracts. The Small Business 
Act, at 15 U.S.C. 644(e)(4), specifically states that for bundled 
contracts, a small business concern may submit an offer that provides 
for the 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), this 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, SBA proposed to 
amend Sec.  121.103 by creating an exception to affiliation for teams 
of small businesses for bundled contracts that are multiple award 
contracts.
    SBA also proposed a definition for the term ``Small Business 
Teaming Arrangement'' in Sec.  125.1. SBA proposed that a Small 
Business Teaming Arrangement is when two or more small businesses 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 proposed rule required 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 received several comments in response to this proposal. Several 
of the respondents supported this exception to affiliation for teams on 
bundled contracts and thought that such teaming may be an incentive for 
small businesses.
    However, one respondent thought that a small business team could 
subcontract out all the work to a large business on a small business 
reserve for a bundled contract and not perform any of the work itself. 
On a full and open contract, there is no limitation on the amount of 
work that a large business can subcontract. Consequently, there is no 
reason to limit a small business team's ability to subcontract. On the 
other hand, where a contract or order is set aside for small business, 
the general limitation on subcontracting rules would apply.
    This same respondent thought SBA should limit the size of these 
teams by either number of combined employees or some other measurable 
criteria. This respondent did not believe it was fair for a small 
business to have a large business on its team. In response to this 
comment, SBA notes that the requirement for the teaming arrangement is 
that it must be comprised solely of small businesses. The proposed rule 
had explicitly stated that each team member must be small under the 
size standard corresponding to the NAICS code assigned to the contract. 
Therefore, SBA does not agree with this comment that a small business 
can have a large business on its team. In addition, SBA does not 
believe it is necessary to limit the team's size. These teams are 
forming to compete against large businesses on bundled (very large) 
contracts. Limiting a team's size could affect its ability to compete.
    One respondent believed that SBA should allow the small business to 
team with Ability One (www.abilityone.org). As SBA explained in the 
proposed rule, however, the purpose of this rule is to encourage small 
businesses to team together to perform on a contract. SBA does not 
believe that allowing the small business to form a team with Ability 
One, which is not a small business, would promote or be beneficial to 
small businesses in Federal contracting.
    One respondent believed that it was overly restrictive to require 
that the teaming arrangement set forth percentages of work that team 
members will perform and recommended that SBA allow team members to set 
forth the percentages or other allocations of work in the agreement. 
SBA agrees that small business team arrangements should have this type 
of flexibility and has amended the final rule accordingly.
    Similarly, another respondent believed that small businesses should 
be allowed to modify the terms of the teaming arrangement. SBA agrees 
and notes that there is nothing in the rule that prevents a small 
business from doing so, as long as the team continues to meet the 
definition and requirements set forth in regulations, the modification 
is consistent with any terms in the solicitation or contract, and the 
contracting officer approves the modification.
    One respondent believed that SBA's regulation only permitted a 
small business team to submit an offer on a bundled contract and that 
the regulations did not permit an individual small business that could 
perform the requirement itself, without the team, to submit an offer on 
a bundled contract. This is not the case; any business can submit an 
offer in response to a bundled acquisition.

B. NAICS Codes (13 CFR 121.402)

    In its proposed rule, SBA had proposed to amend Sec.  121.402 to 
explain how small business size standards would be assigned to multiple 
award contracts and orders issued against such contracts. Specifically, 
the proposed rule provided that a contracting officer could: (1) 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; 
or (2) 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. Thus, an agency could assign 
multiple NAICS codes to a multiple award contract only if the agency 
could divide the contract into different categories (e.g., Contract 
Line Item Number (CLIN), Special Item Number (SIN), functional area 
(FA)) and then compete or award orders in that category. 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 
required 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 
those involving a GSA Multiple Award Schedule contract, 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 from the contract that best represents the principal 
nature of the acquisition for that order (i.e., usually the component 
that accounts for the greatest percentage of contract value). 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. In such a 
case, a firm that qualifies as small for a supply/manufacturing 
contract but is other than small for a services contract could not be 
considered a small business for the order.
    SBA notes that it had considered at least 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, SBA

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considered requiring that a business meet only the smallest size 
standard corresponding to any NAICS code of any of the combined 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. SBA specifically requested comments on this alternative.
    SBA received several comments on these proposals. One respondent 
supported the approach set forth in the proposed rule, but disagreed 
strongly with the alternative considered. Two respondents believed it 
would be too burdensome on contracting officers to assign several NAICS 
codes to a solicitation and contract. These respondents thought that 
managing various NAICS codes and size standards under one contract 
would impose too much of an administrative burden and therefore, one of 
the respondents suggested having a maximum of three NAICS codes per 
multiple award contract. One respondent thought this proposal could 
negatively impact the construction industry because contracting 
officers do not have the expertise to create the discrete categories. 
Another respondent did not believe that a contracting officer could 
assign multiple NAICS codes to SINs (used on the GSA MAS contract) 
since SIN descriptions are broad and may cover a number of different 
services/product categories.
    SBA believes that if the requirement can be broken down into 
discrete requirements, it would not be difficult to then assign a NAICS 
code to each discrete component. As discussed above, this is a 
necessary fix to a larger problem that is currently occurring on the 
schedule, where multiple NAICS codes are often assigned to a multiple 
award contract solicitation and a business concern may be small for one 
or some of the NAICS codes, but not all. In such a case, agencies are 
receiving small business credit on an order for an award to a ``small 
business'' where a firm qualifies as small for any NAICS code assigned 
to the contract, even though the business is not small for the NAICS 
code assigned or that should have been assigned to that particular 
order. SBA believes this should not occur. As a result, SBA believes 
that any potential or perceived burden created by assigning NAICS codes 
to discrete components of a contract is outweighed by the need to 
ensure that actual small businesses receive the awards so intended for 
them.
    Several respondents stated that these changes should not be 
implemented until the changes to FPDS are made. These respondents did 
not believe the current FPDS system supported the application of 
various NAICS codes to one contract and thought that perhaps the NAICS 
on the contract should be left blank and only NAICS codes for the 
orders should be assigned in the system. The General Services 
Administration has stated that there will need to be significant 
changes to the government-wide system that will take a substantial 
amount of time and funding. The Integrated Acquisition Environment is 
reviewing the required changes.
    SBA also received comments concerning the assignment of NAICS codes 
to task or delivery orders. One respondent supported this proposal. 
Another respondent stated that we should not require NAICS codes for 
each task or delivery order because it will take too much time to 
execute, increase the amount of data for the government to manage and 
therefore increase the contracting officer's workload. SBA does not 
agree. According to SBA's current regulations, every contract and order 
for a long term contract is to be assigned a NAICS code with a 
corresponding size standard. Thus, this is not a substantive change. 
This provision of the rule merely clarifies that this requirement 
applies to all contracts and orders. Also, SBA does not believe it will 
take too much time or effort to select one of the NAICS codes already 
assigned to the contract and apply it to the order.
    SBA has implemented the proposed rule as final. SBA has not 
implemented as final the alternative discussed in the preamble 
concerning NAICS codes. While the changes in NAICS code assignments 
will improve the reliability of the data, leading to greater 
transparency, SBA acknowledges that these changes will require a 
significant planning and implementation effort. Not only will the 
changes in NAICS code assignment levels impact central government 
procurement data systems, such as the FPDS, they will also impact 
systems at each agency--frequently multiple systems within a single 
agency. Identifying the impacts to systems and planning for this level 
of change is a significant undertaking that will require analyses of 
interdependencies to ensure efficient and cost-effective 
implementation. A change of this magnitude is estimated to take as many 
as five years to fully implement across the myriad of interdependent 
government systems. The Federal Acquisition Institute and the Defense 
Acquisition University will have to revise curriculum and agencies will 
have to engage in an extensive retraining effort of their acquisition 
workforce. The funding for this initiative, both for the agencies and 
the IAE, will need to be addressed across government.

C. Recertification (13 CFR 121.404)

    SBA also proposed 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 will generally be determined at one specific point in time--
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. The concern is not required to again certify that it 
qualifies as small for that contract unless it has been awarded 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.
    SBA proposed to clarify only two issues that have been raised over 
the past few years relating to this recertification rule, which has 
been in effect for several years. First, while the regulations clearly 
required a business that was acquired by another entity to recertify 
its size status after the acquisition, such a requirement was not as 
clear where a business that had previously certified itself to be small 
acquired another business. SBA proposed that re-certification should be 
required in either case since the acquisition may render the concern 
other than small for the particular contract. Second, SBA proposed 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.
    One respondent believed that a business should not have to 
recertify if it is acquired by or merges with another business because 
it will hurt the market value of the small business. This respondent 
believes that SBA should allow two small businesses to merge and should 
create a new size standard for those two merged businesses. Another 
respondent did not believe a business should have to recertify if it 
has been acquired because that company would have eventually grown to 
be large and been allowed to keep the contract and not recertify. This

[[Page 61119]]

respondent notes that a business is essentially penalized when it has 
been acquired but not when it grows ``naturally''. One respondent 
believes that a large business should not be allowed to purchase a 
small business and keep the contract award. One respondent supported 
recertification if there is an acquisition or merger by one party to a 
joint venture, but questioned how the recertification rule would apply 
to a large business in a mentor-prot[eacute]g[eacute] relationship.
    SBA believes that if a business is acquired or merges, or acquires 
another company, then it should recertify its size because when such 
events occur, there is an increased likelihood that the business is 
other than small. SBA does not believe it should create a new size 
standard for these types of acquisitions or mergers. If, after the 
acquisition, the business meets the size standard corresponding to the 
NAICS code assigned to the contract, then it is small. Finally, this 
could impact a mentor-prot[eacute]g[eacute] joint venture if the small 
business prot[eacute]g[eacute] becomes other than small. In that case, 
the mentor-prot[eacute]g[eacute] joint venture would not be considered 
small from that point forward or for that order.
    In addition, SBA proposed that, in general, all of the 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 submitted in response to the solicitation for 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 size status for each of those NAICS codes at the time 
of initial offer for the multiple award contract. When the agency 
places an order against the contract, it must assign to the order a 
NAICS code with the corresponding size standard, using one of the NAICS 
codes assigned to the contract which best describes the principal 
purpose of the good or service being acquired under the order. 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. SBA also stated in the proposed rule that a 
contracting officer may always, on his or her own initiative, require a 
business concern to recertify its size status at the time of each 
order, but the regulations do not require that in every instance.
    SBA had also considered requiring businesses to recertify their 
size for long-term orders (i.e., orders greater than five years). SBA 
was 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, SBA was 
unsure how often this situation occurs and requested comments 
specifically on whether small businesses should be required to 
recertify their size and status for long-term orders.
    SBA received several comments on these proposals. One respondent 
stated that contracting officers should not be permitted to request 
recertification on every order since it could create confusion; rather, 
the contracting officer should rely on the contractor's status at the 
time of submission of the offer for the Blanket Purchase Agreement 
(BPA) or contract. Another respondent thought that small businesses 
should be required to recertify their size only on long-term orders, 
but not on every order issued against a multiple award contract because 
it would be too cumbersome. In contrast, two respondents believed that 
businesses that are no longer small, for any reason, should be required 
to immediately recertify and any order should not be counted as an 
award to a small business.
    In addition, three respondents believed that businesses should be 
required to recertify their size for each order and if the company is 
large, the order should not be counted as an award to a small business. 
These respondents stated that at this time, they do not believe 
agencies follow SBA's current recertification rule. They believed that 
requiring recertification for each order is not unduly burdensome.
    One respondent represented a group of small businesses that had 
mixed opinions on this issue. Some of its members believe that size 
should be determined at the time of offer for each order and the 
contracting officer should be allowed to award the contract if the 
business is not small (but the award would not count toward the 
agency's small business goals). The respondent's other members believe 
that size should be determined at the time of submission of the offer 
for a contract, since that has always been SBA's policy, and SBA should 
continue to allow contracting officers the discretion to request 
recertification on the order.
    SBA has reviewed all of these comments and believes that requiring 
a business to certify its size at the time of offer for a multiple 
award contract, and not for each order issued against the contract, 
strikes the right balance and is consistent with SBA's current policy. 
If the contract were not a multiple award contract, then the business 
would represent its size at the time of offer and if it were small, it 
would be considered small for the life of the contract up to and 
including the fifth year. This policy should be the same for multiple 
award contracts. If a business is small for a size standard assigned to 
a NAICS code at the time of offer for a multiple award contract, then 
it is small for all orders with that same NAICS code and size standard 
for the life of the contract up to and including the fifth year of the 
multiple award contract. The exceptions for mergers, acquisitions, 
long-term contracts, and requests for recertification at the discretion 
of the contracting officer would apply for multiple award contracts as 
they do for all other contracts. Although some did not agree that 
contracting officers should have the discretion to request 
recertification at the order level, SBA notes that this is currently 
permitted in the regulations and has been upheld by SBA's Office of 
Hearings and Appeals (see Size Appeal of Quantum Professional Services, 
Inc., SBA No. SIZ-5207 (2011), available at www.oha.gov (``[A]pplicable 
regulations permit a size protest to be filed either upon award of an 
ID/IQ base contract, or upon award of an individual task order if the 
procuring agency requires recertification of size status for that 
order.''). SBA does not have a basis to change this current policy. 
However, recertification for an order applies only to the size or 
socioeconomic status for the order, and does not apply to the firm's 
overall size or socioeconomic status for the underlying contract.
    With respect to the respondents that believe agencies are not 
following these requirements, SBA notes that it works with the 
procuring agencies on these issues. SBA can initiate a size protest at 
any time, so information can be submitted to SBA for possible action 
(see 13 CFR 121.1004(b), 121.1001). In addition, SBA can notify 
procuring agencies of errors or anomalies in the data that procuring 
agencies submit to SBA for purposes of the goaling report.
    One respondent believed that SBA deleted an important requirement 
concerning recertification--the requirement that where a concern grows 
to be other than small, the procuring agency may exercise the options 
and still count the award as an award to small business unless certain 
exceptions apply. SBA did not delete this sentence. Since we were not 
changing that

[[Page 61120]]

sentence, SBA did not need to put it in the Federal Register proposed 
rule. However, to avoid any confusion, SBA has added the sentence in 
the final rule below.
    Finally, one respondent noted that SBA's regulations use the term 
``recertification'' and the FAR uses the term ``rerepresentation.'' The 
respondent believes the two should be consistent. SBA agrees that there 
appears to be a disconnect between the two terms as used in the FAR and 
SBA's regulations. SBA is looking into the issue and will work closely 
with the FAR Council to ensure that the intent of this final rule is 
clear.

D. Agreements (13 CFR 121.404)

    SBA also proposed amending Sec.  121.404 to address size status for 
``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 16.702(a)(2) (``A 
basic agreement is not a contract.''). However, SBA has seen examples 
where agencies are setting aside such Agreements for small businesses. 
Consequently, SBA proposed an amendment to its regulations to address 
this practice. Specifically, SBA proposed that if such an Agreement is 
set-aside, SBA would determine size at the time of the response to the 
solicitation for the Agreement in order to ensure that only small 
businesses receive the Agreement. In addition, because such an 
Agreement is not considered a contract (acceptance and execution of the 
order is the contract action), 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 Small Business Act's provisions 
concerning subcontracting limitations, for example, which we believe 
creates a loophole. The only exception SBA proposed for Agreements was 
for BPAs issued against the GSA MAS contracts. Because the business 
represents its status at the time of award of the GSA Schedule 
contract, SBA did not believe there is a need for the business to 
represent its size again for the BPA.
    SBA received two comments on this section of the proposed rule. One 
respondent agreed that there has been an increase in the use of BPAs 
and that size should be determined at the time of solicitation for the 
BPA. However, the respondent disagreed with SBA's proposal to waive 
size certification requirements for contractors awarded a BPA against 
the GSA Schedule since such contracts have a term of at least five 
years. In contrast, another respondent believed that we should not 
require certification at the time of each order for a BPA because it 
seemed excessive and unnecessary considering the large volume of orders 
generated against a BPA. This respondent believed that SBA should 
require size certification at the time of proposal submission only.
    SBA does not believe that size needs to be determined at the time 
of the BPA issued against a GSA Schedule because size has already been 
determined at the time of submission of the offer for the GSA Schedule 
contract. Requiring additional certifications other than those already 
required under this rule would be a burden. With respect to requiring 
certifications at the time of each order for a BPA that is not issued 
against a GSA Schedule, SBA agrees that it could be a burden and is 
unnecessary since the business will have been required to represent its 
size at the time of submission of the offer for the BPA. However, SBA 
notes that the procuring agency contracting officer may request a size 
certification at the time of submission of the offer for the order, if 
he or she so chooses, in accordance with SBA's current size 
regulations.

E. Bundling and Consolidation (13 CFR 125.2)

    Part 125 of SBA's regulations addresses SBA's small business prime 
contracting program, subcontracting program, the Certificate of 
Competency (COC) program and the performance of work requirements 
(limitations on subcontracting). Encompassed in these regulations are 
issues such as bundling and Procurement Center Representative reviews. 
SBA proposed reorganizing this part and including a definitions 
section.
    One important proposed definition related to contract 
consolidation. SBA had implemented the Jobs Act 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). SBA notes that the $2 million price is a statutory threshold 
(see 15 U.S.C. 657q), not subject to amendment by the SBA. SBA received 
one comment supporting this definition.
    In addition, SBA's proposed rule, at Sec.  125.2(d), addressed 
contract consolidation and bundling and added new provisions set forth 
in the Jobs Act. Specifically, the proposed regulation explained 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. SBA received one 
comment supporting the clarification that agencies are responsible for 
determining the impact on small businesses when requirements have been 
consolidated.
    In the proposed rule, SBA explained that the Jobs Act does not 
define the terms ``substantially exceed'' or ``benefits'' for contract 
consolidation. SBA had therefore proposed to use the definitions for 
those terms currently set forth in the bundling regulations in part 
125. SBA received one comment on this proposal. According to this 
respondent, the definition of ``substantially exceed'' would provide an 
opportunity to consolidate or bundle even more contracts into a large, 
single bundled or consolidated acquisition whenever possible so that 
the cost savings will result in an amount determined to substantially 
exceed other alternatives. In response to this comment, SBA notes that 
the Jobs Act specifically permits agencies to justify consolidating or 
bundling contract requirements if the benefits of the acquisition 
strategy substantially exceed the benefits of each of the possible 
alternative contracting approaches identified (see 15 U.S.C. 
657q(c)(2)(A)). Therefore, SBA has implemented the statutory provisions 
in the final rule.
    In addition, SBA had proposed regulations to address the Jobs Act 
requirement that agencies post their rationale for any bundled 
requirement. 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

[[Page 61121]]

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 the proposed rule, however, SBA 
encouraged agencies to post the list and rationale prior to the time 
the agency solicits offers, rather than wait until awards have been 
made. In the proposed rule, SBA noted that DoD is already posting such 
a notice at least 30 days prior to issuance of a bundled solicitation. 
Specifically, DFARS 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. SBA believed that the DoD policy is a good 
one, and proposed to implement it Governmentwide.
    SBA received two comments on this proposal. Two respondents 
supported the rule and believed that the bundling rationale should be 
posted prior to the release of the solicitation. One respondent did not 
believe this would be burdensome since the decision is already made and 
it would make the agencies consider the effects on small businesses 
more so than if they posted after award. The other respondent believed 
that posting prior to issuing the solicitation would allow small 
businesses the opportunity to review the rationale. SBA agrees with 
these comments and has adopted the proposed rule as final.

F. Procurement Center Representatives (PCRs) (13 CFR 125.2)

    In the proposed rule, SBA addressed in part 125 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. Specifically, in 
proposed Sec.  125.2(b), SBA set forth its responsibilities during the 
procuring agency's acquisition planning and stated that at the earliest 
stage possible, SBA's PCRs must work with the buying activity or agency 
by reviewing acquisitions and ensuring that the buying activity 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.
    SBA received one comment supporting this provision. SBA received 
two comments stating that the paragraph requiring that agencies ensure 
they are structuring procurement requirements to facilitate competition 
by and among small business concerns, including the various categories 
of small business concerns, could be interpreted to exclude Native-
owned companies. SBA has amended the rule to clarify that when 
structuring procurement requirements, agencies must facilitate 
competition among small businesses, including small businesses 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 (including those owned by ANCs, Indian Tribes 
and NHOs), and small business concerns owned and controlled by women.

G. Section 1331 Authorities (13 CFR 125.1 & 125.2)

    Most of the comments SBA received concerned the new authorities set 
forth in section 1331 of the Jobs Act. The respondents largely 
supported SBA's rule, but sought more clarification on certain issues. 
These are discussed by topic below.
1. Definition of Multiple Award Contract (13 CFR 125.1)
    The section 1331 authorities apply to ``multiple award contracts.'' 
As SBA stated in the preamble to the proposed rule, the FAR permits 
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 (48 CFR subpart 16.5). 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 16.504(c) (48 
CFR 16.504(c)). Hence, these types of contracts are referred to as 
multiple award contracts. The FAR, however, does not define the term.
    In order to provide clarity and certainty about the applicability 
of section 1331 to multiple award contracts, SBA proposed to define the 
term to mean: (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 (48 CFR part 38 
and subpart 8.4); (2) a multiple award task-order or delivery-order 
contract issued in accordance with FAR subpart 16.5 (48 CFR 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.
    SBA's proposed rule expressly includes the GSA Multiple Award 
Schedules (MAS) Program within the scope of the definition of the term 
``multiple award contract.'' This was consistent with the interim FAR 
rule, which is co-signed by GSA, the manager of the MAS Program. 76 FR 
68032. That interim rule amended FAR subpart 8.4 (48 CFR subpart 8.4) 
to make clear that the Jobs Act provisions apply to that part and 
states that order set-asides may be used in connection with the 
placement of orders and blanket purchase agreements under the MAS 
Program.
    SBA received several comments on this proposed definition. All but 
one of these comments supported the definition proposed. Most of the 
respondents believed that including a specific reference to the GSA MAS 
Program provided clarity and was especially important in light of the 
increased use of such contract vehicles over the years. Only one 
respondent believed that SBA should delete all references to the GSA 
MAS program from its rule. This respondent stated that GSA should be 
charged with incorporating the principles of SBA's final rule into the 
GSA Schedule ordering procedures, to the maximum extent practicable.
    SBA has reviewed these comments and believes it is necessary to 
include the GSA MAS program under the definition of multiple award 
contract. SBA set forth all of the reasons for this inclusion in the 
preamble to the proposed rule, including the fact that the statute 
defines the term multiple award contract to include all such contracts; 
there is no exception for the GSA MAS program. Further, since the Jobs 
Act amends the Small Business Act, we believe that SBA should address 
this issue in its rule. However, since GSA is charged with implementing 
the MAS Program, it will also need to implement regulations or guidance 
on this issue.
2. Types of Section 1331 Authorities (13 CFR 125.2)
    In the proposed rule, SBA explained that there are three types of 
section 1331 authorities for multiple award contracts:

[[Page 61122]]

(1) set-asides for part or parts of a multiple award contract for small 
business; (2) reserves of one or more awards on multiple award 
contracts that are established through full and open competition; and 
(3) set-asides of orders against multiple award contracts awarded 
pursuant to full and open competition that have not been set-aside or 
partially set-aside, nor include a reserve for small businesses. The 
proposed rule defined the term ``partial set-aside'' and ``reserve'' 
and also set forth the mechanics of how such partial set-asides and 
reserves would work.
    Two respondents suggested SBA clarify that this authority is 
discretionary. However, one of these respondents thought SBA should 
provide guidelines for the exercise of the discretion, otherwise it 
will differ from agency to agency and it will be too unpredictable for 
small and large businesses. Two respondents requested that SBA explain 
further the interplay of these discretionary authorities with the 
``rule of two'' set-aside authority. Specifically, one respondent 
stated that SBA should clarify that when the ``rule of two'' is met for 
a solicitation that will result in multiple award contracts, the 
contracting officer must set it aside. One respondent stated that SBA 
should explain that Delex Systems, Inc., B-400403, Oct. 8, 2008, 2008 
CPD ] 181 (publicly available at www.gao.gov/decisions/bidpro/40043.htm) is still valid. In Delex Systems, Inc., GAO held that the 
small business set-aside provisions of FAR 19.502-2(b) apply to 
competitions for task and delivery orders issued under multiple award 
contracts.
    Both the proposed and final rule explain that if a contracting 
officer has conducted market research on an acquisition that will 
result in multiple award contracts, and has a reasonable expectation 
that at least two small businesses can provide the service or supplies 
and award will be made at fair market price, the contracting officer 
shall set-aside the contract for small business (or 8(a), HUBZone, SDVO 
SBC or WOSB/EDWOSB). Section 1331 did not change the mandatory 
requirement of a set-aside for a contract if the ``rule of two'' is 
met.
    Therefore, section 1331 will come into play only on a multiple 
award acquisition if the ``rule of two'' cannot be determined through 
market research prior to the issuance of a solicitation. At that time, 
in order to ensure that small businesses have the maximum practicable 
opportunity to participate in contracting, the contracting officer has 
the discretion to utilize at least one of the three section 1331 
authorities--partial set-aside, reserve, or set-aside of orders under a 
full and openly competed contract. The FAR has already been amended, at 
FAR 19.502-4 (48 CFR 19.502-4), ``Multiple-Award Contracts and Small 
Business Set-Asides,'' to address this discretionary authority.
    With respect to partial set-asides, currently the FAR requires the 
small business to submit an offer on the non-set-aside portion as well 
as the set-aside portion and requires the contracting officer 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. See FAR 19.502-3(c) (48 CFR 19.502-3(c)). SBA 
proposed that 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. The small business could submit an 
offer for both or either the set-aside and non-set-aside portions.
    One respondent stated that it agreed with SBA's new partial set-
aside provisions. One respondent did not agree with allowing a 
``large'' small business to submit an offer on both the set-aside and 
non-set-aside portion. This respondent believes this will hurt both 
small and large businesses. SBA does not agree with this comment. A 
small business should have the flexibility to submit an offer on either 
or both the set-aside or non-set-aside portion of the contract and to 
structure its offer(s) accordingly. SBA believes this provides the 
maximum practicable opportunity for small businesses to participate in 
Federal contracting.
    Several respondents also thought SBA should further clarify the 
difference between a partial set-aside and a reserve and provide 
examples in the regulations and FAR, as well as examples in addition to 
the ones provided in the proposed rule, to explain the two authorities. 
SBA does not believe that the examples need to be placed in its 
regulations but intends to issue further guidance along with the final 
rule on this issue. SBA has provided the following discussion that 
explains these different types of authorities.
    As stated 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 contract's 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 amongst 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.
    SBA notes that it considered an additional definition for a partial 
set-aside. 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. 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. SBA requested comments on this alternative and did 
not receive any. At this time, SBA is not implementing this alternative 
as SBA believes that the intent of section 1331 was to afford 
contracting officers maximum discretion to select among all qualified 
SBA program participants and afford the agency the opportunity of using 
that contracting vehicle to help it meet its small business goals.
    In comparison, SBA's proposed rule explained that a reserve is 
separate and distinct from a partial set-aside and is used when an 
acquisition for a multiple award contract cannot be broken into 
discrete components or portions. A reserve will be conducted using full 
and open competition and:
     The contracting officer's market research and recent past 
experience evidence that 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
     The contracting officer's market research and recent past 
experience evidence that at least one small business can perform the 
entire requirement, but there is not a reasonable expectation of

[[Page 61123]]

receiving at least two offers from small business concerns at fair 
market price for all the work contemplated throughout the term of the 
contract; and
     The contracting officer states an intention in the 
solicitation 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 type of small business 
concern in accordance with that program's specific procedures. In the 
alternative, the contracting officer states 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 purpose of the reserve is to acknowledge that requirements 
cannot always be identified specifically at the contract level, but can 
be at the order level. The reserve ensures that small businesses will 
receive a contract under a multiple award contract scenario. If small 
businesses are awarded a contract and are capable of performing at the 
order level, then the contracting officer can compete the order amongst 
only the small business or small businesses.
    In addition to the above, in the proposed rule SBA had specifically 
requested comments on whether the procuring agency should state in the 
solicitation and contract where there is a reserve that a certain 
percentage of the orders must be awarded to small businesses (e.g., a 
minimum of 30% of the contract's total dollar value 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 received four comments on this issue. One respondent stated 
that there should be a minimum total dollar value to be awarded to 
small business on reserves, such as 30%. Another respondent believed 
that the solicitation should state what types of orders (nature of 
work, corresponding NAICS code, dollar value, location of work) may be 
set-aside for small businesses under a reserve because that would help 
both large and small businesses decide whether or not to submit an 
offer. Two respondents did not believe that SBA should require that the 
solicitation set forth a minimum dollar value to be awarded to small 
businesses because such a minimum would restrict a contracting 
officer's flexibility in awarding orders with the best solution. One of 
these respondents thought that SBA could require the solicitation to 
set forth a target value to be awarded to small business, but that 
there should be no penalty or legally enforceable right or ground of 
protest if the target is not met.
    SBA agrees with the comments that the contracting officer needs 
flexibility in awarding orders. Therefore, SBA has amended the rule to 
state that contracting officers may, but are not required to, set forth 
targets in the contract showing the dollar value of awards to small 
businesses.
    In addition, one respondent believed that allowing reserves lets an 
agency circumvent the requirements for a partial set-aside and a large 
business would expend time and money in preparing proposals and not 
submit offers at the order level. This respondent did not believe 
reserves were ``fair.''
    SBA notes that the Jobs Act specifically states that contracting 
officers may ``reserve'' awards in a multiple award contract 
acquisition for small businesses, and that a ``reserve'' is something 
in addition to a set-aside or a partial set-aside. SBA has defined the 
term reserve in a way that distinguishes this type of acquisition from 
a partial set-aside and provides the contracting officer with the 
flexibility he/she needs to structure the acquisition. Reserves are 
currently being used in the Federal marketplace. There has been no 
study to show that reserves prevent large businesses from competing, 
being awarded contracts or receiving orders. In fact, the purpose of 
the reserve is to ensure that a small business receives a fair share of 
an acquisition that is clearly too large for a set-aside. Therefore, we 
do not believe that reserves are ``unfair'' to large businesses.
    In addition, SBA had 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 Teaming Arrangement will not be affiliated for 
the bundled contract, the small business subcontracting limitations or 
nonmanufacturer rule 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.
    SBA received one comment supporting this type of reserve for a 
bundled acquisition. SBA has therefore implemented the proposed rule as 
final.
    Finally, the contracting officer may decide to not use either a 
partial set-aside or a reserve. The contracting officer would have a 
third alternative to consider--the set-aside of orders issued against 
full and openly competed multiple award contracts. The contracting 
officer would need to state in the solicitation and contract, using FAR 
clause 52.219-13 (48 CFR 52.219-13), Notice of Set-Aside of Orders, 
that the procuring agency intends to set aside orders for small 
businesses. This third alternative obviously works only if there are 
small business awardees on the multiple award contract. This third 
alternative can be used to set aside orders against multiple award 
contracts such as GSA Schedule contracts.
    The following provides a comparison of the three authorities to be 
considered during acquisition planning:
     Partial Set-Aside
    [cir] The acquisition can be broken into smaller, discrete portions 
such as CLINs, SINs, FAs.
    [cir] Market research shows that the ``rule of two'' will not be 
met for the entire acquisition.
    [cir] The ``rule of two'' can be met for some of the smaller, 
discrete portions of the requirement.
    [cir] The contracting officer will issue the solicitation as a 
small business partial set-aside, 8(a) partial set-aside, HUBZone 
partial set-aside, SDVO SBC partial set-aside, WOSB partial set-aside 
or EDWOSB partial set-aside.
    [cir] The orders will be competed amongst only small businesses 
awarded the partial set-aside.
    [cir] The small businesses may be able to compete against other-
than-small businesses for the non-set-aside portion if they also 
submitted an offer on that portion.
     Reserve
    [cir] The acquisition cannot be broken into smaller, discrete 
portions because the requirements cannot be clearly identified until 
the individual task orders are drafted.
    [cir] Market research shows that two or more awards can be made to 
small businesses that can perform part of the requirement, but not all 
of it. The contracting officer will issue the solicitation as a small 
business reserve (and may state an intention to issue awards to several 
different types of small businesses under a small business reserve such 
as one to 8(a), one to HUBZone, one to SDVO SBC, one to WOSB or 
EDWOSB); an 8(a) reserve; a HUBZone reserve; an SDVO SBC reserve; a 
WOSB reserve; or an EDWOSB reserve. If the ``rule of two'' is met on 
the order, the order is competed solely amongst the small businesses,

[[Page 61124]]

8(a) Participants, HUBZone SBCs, SDVO SBCs, WOSBs, or EDWOSBs that 
received the reserve.
    [cir] In the alternative, market research shows that at least one 
small business can perform the entire requirement, but there is no 
reasonable expectation of receiving at least two offers from small 
businesses at fair market price for the entire requirement. The 
contracting officer will issue the solicitation as a small business 
reserve; an 8(a) reserve; a HUBZone reserve; an SDVO SBC reserve; a 
WOSB reserve; or an EDWOSB reserve. The orders can be issued directly 
to the one small business awardee.
    [cir] For bundled acquisitions that have been justified, market 
research shows that the ``rule of two'' will not be met for the entire 
requirement and that no small business can perform it because it is 
bundled. However, the contracting officer can issue the solicitation as 
a reserve for a Small Business Teaming Arrangement and an award can be 
made to a Small Business Teaming Arrangement. The orders are then 
competed amongst all awardees.
     Set-Aside of Orders
    [cir] Market research shows that goods or services can be acquired 
by using an already established multiple award contract.
    [cir] Market research shows that the ``rule of two'' will be met 
for the requirement of an individual order.
    [cir] The contracting officer can set-aside the order for small 
businesses, 8(a) Participants, HUBZone SBCs, SDVO SBCs, WOSBs, or 
EDWOSBs in accordance with the program's requirements (e.g., the offer 
and acceptance requirements for an 8(a) award).
    SBA received one comment stating that because the use of these 
authorities is subject to broad interpretation, SBA should monitor how 
agencies use them with the Chief Acquisition Officers (CAO) Council. 
This respondent believes that monitoring this will let us determine 
whether additional regulatory or other guidance is needed. SBA agrees 
and intends to monitor the use of these authorities.
    Finally, one respondent questioned whether FPDS will be updated to 
reflect the new procurement method of a reserve. SBA understands that 
the government is updating FPDS to reflect these new authorities, which 
are already implemented in the FAR.
    Respondents have questioned whether orders may be set aside for 
certain socioeconomic categories under contracts that have already been 
set aside for a broader socioeconomic category--e.g., whether an order 
can be set aside for HUBZone SBCs under a total small business set-
aside multiple award contract. SBA believes that such an outcome would 
be unfair to the other small business concerns that competed for and 
obtained the contract. We also believe that the current differences in 
program requirements, such as the differences in limitations on 
subcontracting and the nonmanufacturer rule among the programs, make 
such an approach impractical. However, we note that SBA will be 
exploring the differences in performance requirements among the various 
programs when it implements Section 1651 of the National Defense 
Authorization Act of 2013.
3. Documentation
    SBA explained in the proposed rule that when exercising his or her 
discretion to decide among the three section 1331 authorities, a 
contracting officer need not follow any particular order of 
precedence--that is, 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 and openly competed contract, 
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 agency should give careful 
consideration to the option that works best for the agency.
    As stated above, whether the agency ultimately uses any of the 
three authorities is left to the agency's discretion. However, the 
agency is ultimately held accountable for taking all reasonable steps 
to meet its small business goals. In other words, when utilizing this 
discretion, the procuring agency and contracting officer must consider 
the statutory requirements and small business contracting goals that 
are designed to help ensure that small businesses receive a fair 
proportion of all awards. Consequently, SBA proposed that if the 
contracting officer decides not to partially set aside or reserve a 
multiple award contract, or set aside orders against a multiple award 
contract that is full and openly competed when it could have, then the 
contracting officer must explain the decision and document it in the 
contract file.
    SBA explained that the requirement to document a decision not to 
utilize small businesses is already in the FAR and therefore not a new 
requirement. However, this change would result in new documentation 
requirements for orders under multiple award contracts. Agencies must 
consider small business utilization during acquisition planning. 
Specifically, agencies must include in the acquisition plan all of the 
prospective sources of supplies or services that can meet the need, 
giving consideration to small business and addressing the extent and 
results of the market research. FAR 7.105(b)(1) (48 CFR 7.105(b)(1)). 
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 7.105(b)(5)(B)(ii) (48 CFR 7.105(b)(5)(B)(ii)).
    Finally, agencies must document their decision to not proceed with 
a set-aside pursuant to FAR 19.501(c) (48 CFR 19.501(c)), which 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.''
    SBA requested comments on this proposal and 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. In addition, SBA requested comments on what the 
documentation in the file should demonstrate.
    SBA received several comments on this issue. At least seven 
respondents supported the requirement that contracting officers 
document the decision not to use one of these authorities since it 
would demonstrate that meaningful consideration was given to using 
small businesses. Two respondents did not believe that the 
documentation should be based on whether the agency met its goals the 
previous year. Two respondents believed that agencies that did not meet 
their goals in the previous year should be held to higher standards or 
a more stringent documentation requirement. One respondent believed 
that SBA should check agency contract files for those agencies that 
fail to meet their goals and review the rationale.

[[Page 61125]]

    One respondent believed that the documentation should either be 
coordinated with the agency's OSDBU or OSBP, while another stated it 
should not be approved at a higher level because the action to use 
these authorities is discretionary. In comparison, one respondent 
stated the head of the contracting agency should be required to approve 
the use of any ``carve-outs'' of multiple award contracts for small 
businesses. Two respondents believed that the documentation should be 
posted online and one disagreed with this proposal.
    One respondent stated that while the requirement to document the 
decision may serve a purpose in promoting compliance, it acts as a 
limitation on what is supposed to be a discretionary tool. Therefore, 
this respondent believed that SBA should rely on current FAR provisions 
to address this. Similarly, one respondent thought the documentation 
could be too much of a burden on contracting officers.
    Two respondents addressed what the documentation could state. One 
stated that high costs could be a sufficient rationale for not using 
the authority and another believed that whatever is sufficient for an 
acquisition plan would be fine.
    The majority of respondents believe, and SBA agrees, that the 
contracting officer should be required to document the decision to not 
use one of the authorities and that this is not a burden on contracting 
officers since they are always required to consider the use of small 
businesses during acquisition planning. In addition, we believe that 
the rule needs to specifically address this fact in order to avoid any 
confusion on this issue. However, because this authority is 
discretionary, we do not believe that agencies should be required to 
post their rationale online, receive approval from higher authorities, 
or be held to a higher standard if they failed to meet their small 
business goals the prior year. We believe that requiring agencies to 
document the decision is sufficient to ensure that the contracting 
officer and program managers considered the use of small businesses.

H. GSA Multiple Award Schedule Program

    In the proposed rule, SBA explained that when setting aside orders 
against a GSA MAS contract, certain regulations in FAR Part 8.4 (48 CFR 
part 8.4) must be followed. For example, the FAR states that agencies 
must survey at least three schedule contractors through the GSA 
Advantage! (https://www.gsaadvantage.gov/), or request quotations from 
at least three schedule contractors for acquisitions valued below the 
simplified acquisition threshold. SBA does not believe that this 
requirement conflicts with the set-aside ``rule of two'' requirement; 
rather, the two requirements can be reconciled. SBA explained that 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 (https://www.gsa.gov/portal/content/104675) 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 in FAR 8.405 (48 CFR 8.405).
    One respondent stated that the ``rule of two'' does not apply first 
when considering an order using the GSA Schedule. This respondent 
believes that a contracting officer would first select the GSA Schedule 
that is applicable and then determine whether the ``rule of two'' could 
apply. This same respondent believes that the number of orders against 
the GSA Schedule will decrease as a result of this rule because 
companies that are now small under the GSA Schedule may not qualify as 
small under the rule.
    SBA believes that contracting officers must give appropriate 
consideration to the utilization of small businesses during acquisition 
planning. This consideration could help determine which contracting 
vehicle or acquisition method to utilize. SBA does not believe that the 
number of orders against the GSA MAS program will decrease as a result 
of this rule. Rather, we believe it will increase. In fact, data shows 
that one in every five request for quotes issued in E-Buy are set-aside 
for small business and that since April 2011, the number of set-asides 
on the GSA Schedule have increased threefold. Agencies realize they are 
able to use the GSA MAS program for strategic sourcing purposes while 
at the same time setting aside orders for small business to maximize 
participation of small businesses in Federal contracting and assist in 
meeting the govermentwide small business goal.
    Another respondent asked SBA to clarify whether a particular 
program's requirements apply to these section 1331 authorities, such as 
set-asides of orders against the GSA Schedule and the requirement for 
an offer and acceptance in the 8(a) program. SBA had proposed that 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 one or more 8(a) Program 
Participants must follow the established 8(a) procedures, which would 
include an offering to and acceptance by SBA of a requirement into the 
8(a) program. This is consistent with the FAR's implementation of the 
Jobs Act, which states at sections 8.405-5 and 16.505 (48 CFR 8.405-5 
and 16.505) that the specific program eligibility requirements 
identified in part 19 (48 CFR part 19) apply to set-asides of orders 
(as well as reserves and partial set-asides). SBA has adopted this 
proposed rule as final.
    Another respondent asked SBA to clarify whether 8(a) joint ventures 
that become new legal entities are recognized by the GSA MAS program 
for 8(a) set-asides if only one party to the legal entity is a schedule 
contract holder. The answer is no, that entity would not be eligible 
for an award. This is pursuant to GSA's rules, not SBA's 8(a) rules. 
According to GSA's Web site, if there is a contractor teaming 
arrangement, then all parties to the team must be schedule contract 
holders. See https://www.gsa.gov/portal/content/200553. If the joint 
venture is a new legal entity, then that joint venture would need to be 
a schedule contract holder.

I. On Ramps/Off Ramps

    SBA had 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 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 
was 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 and there has been a decreased pool of small business 
awardees from which to purchase. 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 
orders as a small business.
    SBA received several comments on these provisions of the proposed 
rule.

[[Page 61126]]

One respondent stated that they supported the proposal because it 
ensures that contracting officers can respond to the changing market 
capabilities of small businesses. Two of the respondents believed that 
any small business that is no longer small and is ``off ramped'' should 
be allowed to be ``on ramped'' to the non-set-aside portion of the 
multiple award contract. Another two respondents believed that 
businesses that are no longer small should be allowed to retain the 
contract, but that any orders issued against the contract would not 
count toward the agency's small business goal. One respondent 
questioned whether the rule allowed a small business to migrate from a 
set-aside to the unrestricted portion and stated that if that is the 
case, then large businesses would never get an award.
    SBA believes that it would be a decision of the contracting agency 
as to whether and how a business would move to the non-set-aside 
portion of a multiple award contract if it did not initially submit an 
offer for the non-set-aside portion. We believe that if the contracting 
officer has an ``on ramp'' provision for the non-set-aside portion and 
the business submits an offer, it could receive the contract award.
    In addition, SBA believes that if a business has recertified that 
it is other than small because there was a merger or acquisition or the 
contract exceeded five years, it is best left to the contracting agency 
to determine continuation of the contract. However, the agency cannot 
receive credit towards it goals for dollars or orders awarded to such a 
concern after recertification. A concern that has recertified as other 
than small will also not be eligible for orders that are set aside for 
small business concerns.

J. Limitations on Subcontracting/Nonmanufacturer Rule

    SBA had proposed amendments to the limitations on subcontracting 
requirements 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. SBA proposed amendments to the regulations 
governing the 8(a) BD program (13 CFR 124.510), HUBZone program (13 CFR 
126.601, 126.700), and SDVO program (13 CFR 125.15) to state the same.
    In the proposed rule, SBA explained that it considered two options 
with respect to application of the limitations on subcontracting 
requirements 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. 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, but 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.
    SBA noted that for 8(a) contracts, it retained a provision that 
permits 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 the 
District Director 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. SBA retained 
this ``waiver'' in the proposed rule because it affords additional 
business development opportunities for 8(a) BD Participants. SBA 
welcomed comments on whether the ``waiver'' should remain solely for 
8(a) contracts, or whether the requirements should be the same for all 
programs.
    SBA received several comments on this proposal. Many of the 
commenters believed that the limitations on subcontracting and 
nonmanufacturer rule should not apply on an order-by-order basis and 
stated that there were alternatives, but did not provide any. These 
respondents did not believe the small business could perform these 
requirements for each order and that would limit competition on the 
task orders. Four of the respondents agreed that SBA should retain the 
waiver provision that is currently set forth in the rule for the 8(a) 
BD program, and that SBA should apply it to all of its programs. One 
respondent believed that SBA should analyze the results from the FAR 
interim rule, which requires a small business to meet the limitations 
on subcontracting on an order-by-order basis to determine its impact on 
small businesses and the GSA Schedule small business holders.
    Based on the comments received, SBA has clarified that for total or 
partial set-aside contracts, the contractor must meet the limitations 
on subcontracting and nonmanufacturer rule in each period of the 
contract--i.e., the base term and each option period. However, the rule 
also gives contracting officers the discretion, on a contract-by-
contract basis, to require compliance at the order level for these 
types of contracts. In addition, SBA has also clarified that where an 
order is set aside (under a full and open contract or reserve), the 
contractor must comply with the limitations on subcontracting and 
nonmanufacturer rule for that order.
    SBA has retained a provision that permits the SBA to waive the 
order-by-order requirement and allow an 8(a) BD Participant to exceed 
the subcontracting limitations during a period of performance where the 
District Director 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 limitations of subcontracting requirements 
prior to contract completion. SBA retained this provision only for the 
8(a) program because it is a business development program and SBA 
conducts annual reviews on its Participants to assess compliance. SBA 
is not required to conduct such reviews for small businesses in its 
other programs.
    In addition, and with respect to the limitations on subcontracting, 
SBA had proposed that a contracting officer must document a small 
business concern's compliance with the performance of work requirements 
as part of the small business's performance evaluation. This means that 
if the small business meets the applicable performance of work 
requirements, its efforts must be documented. This also means that if a 
small business fails to comply with 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.
    SBA explained in the proposed rule that if a small business fails 
to meet the subcontracting limitations requirement set forth in the 
contract, the contracting officer could take action to protect the 
government's interests, such as a Cure Notice, Show Cause notice, 
Termination for Convenience, or in the extreme, may

[[Page 61127]]

terminate the contract for default pursuant to FAR 49.401 (48 CFR 
49.401). SBA also stated that 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 a termination for default 
would be unnecessary.
    SBA received two comments on this proposal. One respondent stated 
that if a contracting officer enters information into PPIRS about a 
small business's failure to meet the limitations on subcontracting or 
nonmanufacturer rule requirements, there should be a chance for the 
small business to respond or cure its failure. FAR 42.1503(b) (48 CFR 
42.1503(b)) addresses past performance and explains that ``[a]gency 
evaluations of contractor performance prepared under this subpart shall 
be provided to the contractor as soon as practicable after completion 
of the evaluation. Contractors shall be given a minimum of 30 days to 
submit comments, rebutting statements, or additional information.''
    Another respondent stated that while it agrees the contracting 
officer should document the small business's failure to meet the 
limitations on subcontracting or nonmanufacturer rule requirements, the 
contracting officer should be required to explain whether there was a 
good faith effort by the business to meet the requirement. This 
respondent believed SBA should consider the good faith effort 
requirements set forth in FAR 19.705-7 (48 CFR 19.705-7), concerning 
subcontracting plans. SBA believes that whether the contractor makes a 
good faith effort should be part of the rebutting statements or 
additional information a small business provides to the contracting 
officer as a result of the past performance evaluation. Otherwise, the 
contracting officer would not know if the small business made good 
faith efforts.

K. Amendments to Parts 124, 125, 126 and 127

    SBA had 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). For example, SBA had proposed amending 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 and 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. SBA received only one comment supporting application 
of the ``recertification rule'' (the recertification requirements used 
to determine size) to its status programs. Therefore, SBA has adopted 
these proposed regulations as final in this rule, with one exception.
    In the proposed rule, SBA proposed amending the WOSB Program 
regulations to address application of the contracting thresholds for 
that program with respect to multiple award contracts. SBA's proposed 
regulations explained that the thresholds for the WOSB Program would 
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. However, recently, the President signed into law the 
National Defense Authorization Act for Fiscal Year 2013 (NDAA), Public 
Law 112-239. Section 1697 of the NDAA removed the statutory limitation 
on the dollar amount of a contract that women-owned small businesses 
can compete for under the WOSB Program. As a result, contracting 
officers may now set-aside contracts under the WOSB Program at any 
dollar level, as long as the other requirements for a set-aside under 
the program are met. Therefore, SBA has removed the limitations on the 
anticipated award price of a for a WOSB or EDWOSB set-aside.

L. Other

    SBA also received several comments that it believes are outside the 
scope of this rulemaking. For example, SBA received one comment 
requesting that SBA report accurately the prime and subcontract amounts 
awarded to legitimate small business in its goaling report. SBA notes 
that agencies report each award over $25,000 to FPDS, which is the 
government's official system for collecting, developing and 
disseminating procurement data. SBA then uses the information in FPDS 
to monitor agencies' achievements against goals throughout the year.
    Another respondent stated that prime contractors and GSA Schedule 
holders do not meet the required subcontracting plans and there are no 
consequences for these large businesses. SBA notes that MAS contract 
holders that are large businesses are required to have a subcontracting 
plan. In fact, GSA has a Web page listing those awardees that are 
required to have such a plan in its Subcontracting Directory for Small 
Businesses, with contact information. See https://www.gsa.gov/portal/service/SubContractDir/category/102831/hostUri/portal.
    One respondent stated that SBA's regulations should state that 
AbilityOne has priority over small business set-asides. The AbilityOne 
Program is a statutory initiative that assists people who are blind or 
have other significant disabilities to find employment by working with 
nonprofit agencies that sell products and services to the Federal 
government. SBA believes that this issue is covered by the FAR and it 
is unnecessary to amend its regulations to address this policy.

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. SBA set forth its Regulatory Impact 
Analysis in the proposed rule and received one comment on it.

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.
    In addition, 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 did not provide 
the specific guidance needed by the contracting community, which is set 
forth in this rule.
    One respondent believed that in some instances concerning the GSA 
Schedule, SBA should not implement the Jobs Act in its regulations, but 
should let GSA implement those provisions. SBA does not agree. The Jobs 
Act amended the Small Business Act. SBA is charged with implementing 
the provisions of the Small Business Act to promote small

[[Page 61128]]

business in government contracting. Therefore, SBA continues to believe 
that 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
    SBA considered numerous alternatives when drafting this regulation, 
which had been set forth in the preamble. In addition, SBA reviewed all 
of the comments received on the proposed rule and considered any 
alternative set forth in a comment. These alternatives are discussed 
above, as well. For example, SBA considered various approaches with 
respect to application of its programs to multiple award contracts. As 
noted in the discussion above, the proposed and final 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. SBA had 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) and considered the comments received.
    Other examples of alternatives considered are discussed in the 
preamble above (e.g., teaming arrangements, application of NAICS 
codes).
3. What are the potential benefits and costs of this regulatory action?
    The potential benefits of this rule are increasing 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 some guidance for agencies 
regarding application of the SBA's programs to multiple award contracts 
and orders issued against such contracts, which is set forth in the 
FAR. This final rule provides needed clarification on this issue.
    In addition, 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) 2011, small 
business received 21.64% of federal dollars; in FY 2010, small 
businesses received 22.65% of federal dollars; in FY 2009, small 
businesses received 21.89% of federal dollars; and in FY 2008, small 
businesses received 21.50% 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.
    However, we do note that once implemented as final, it is likely 
that changes would need to be made to the System for Award Management 
(SAM). For example, modifications will 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.

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 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 2011 and 2010 data).
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 SBA must 
issue a final regulation. 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, SBA issued the 
proposed rule with a 60-day comment period suggested by the executive 
order. SBA received numerous comments on the rule and made changes to 
this final rule in response to comments received.
    In addition, we note that SBA had taken other steps to encourage 
public participation in its rulemaking. Specifically, SBA had conducted 
a ``listening tour'' to discuss the issues presented in the Jobs Act 
with interested members of the public. 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 the proposed and final rule.
    The Jobs Act required SBA to consult with other agencies, such as 
GSA, when drafting the proposed regulations, and SBA has done so. SBA 
met with several procuring agencies to discuss the effects of the Jobs 
Act on each agency, and in particular its effects on the GSA Schedule. 
Specifically, the SBA met with agency Offices of Small Business

[[Page 61129]]

Programs, Chief Acquisition Officers, and Senior Procurement 
Executives. SBA also gathered input and ideas from various agencies on 
their procurement practices, which were used when drafting these rules. 
In addition, after the rule was issued as proposed, SBA again requested 
comments from the various agencies. SBA received comments from several 
agencies, which are discussed in the preamble above.
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 final 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 final 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. Chapter 35

    For purposes of the Paperwork Reduction Act, 44 U.S.C. Chapter 35, 
SBA has determined that this final 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 
final 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 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

    In the proposed rule, SBA stated that it believed the 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 prepared an Initial Regulatory 
Flexibility Analysis (IRFA) addressing the impact of this Rule. The 
IRFA examined the objectives and legal basis for the 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 the 
proposed rule; and whether there are any significant alternatives to 
the proposed rule. SBA did not receive any comments on the IRFA and 
therefore has adopted it as final for this rule.
1. What are the reasons for, and objectives of, this final 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 final 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. (CCR and DSBS are now part of the System for Awards 
Management (SAM).) According to the FAR 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 (now SAM) 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 like to conduct business 
with the Federal Government.
    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, 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, 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 rule does provide that businesses will need to report 
their size status at the time of contract award for a multiple award 
contract. As stated above in the discussion of the Paperwork Reduction 
Act, this is essentially the same reporting that is done now. The rule 
merely clarifies this requirement. 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 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. 
The limitations on subcontracting will apply to each performance period 
under the contractor to specific orders, depending on either the type 
of multiple award contract awarded or the contracting officer's 
determination.
5. What relevant Federal rules may duplicate, overlap, or conflict with 
this rule?
    This final rule may conflict with current FAR and General Services 
Administration regulations. In fact, one respondent commented that SBA 
should provide a detailed analysis as to how the SBA and FAR rules 
differ. SBA believes that as a result of this final rule, the FAR will 
need to be amended. SBA

[[Page 61130]]

consulted with the FAR Councils and GSA prior to issuing the proposed 
and final 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. SBA requires 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. SBA had 
considered both in the proposed and final rule in response to comments 
received 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. SBA believes this would be too much 
of a burden on small businesses. SBA believes its final rule imposes 
less of a burden yet still 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 amends 13 
CFR parts 121, 124, 125, 126, and 127 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for 13 CFR part 121 continues to read as 
follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 638, 662, and 694a(9).


0
2. Amend Sec.  121.103 by:
0
a. Adding new paragraph (b)(9);
0
b. Revising paragraph (h)(3)(i)(A); and
0
c. Revising paragraph (h)(3)(i)(B) to read as follows:


Sec.  121.103  How does SBA determine affiliation?

* * * * *
    (b) * * *
    (9) 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 Sec.  121.103(h) for specific 
requirements and limitations.
* * * * *
    (h) * * *
    (3) * * *
    (i) * * *
    (A) The procurement qualifies as a bundled or consolidated 
requirement, at any dollar value, within the meaning of Sec.  125.2(d) 
of this chapter; or
    (B) The procurement is other than bundled or consolidated 
requirement within the meaning of Sec.  125.2(d) of this chapter, and:
* * * * *

0
3. Amend Sec.  121.402 by:
0
a. Revising paragraph (b);
0
b. Redesignating paragraphs (c), (d) and (e) as (d), (e), and (f), 
respectively; and
0
c. Adding a new paragraph (c) to read as follows:


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

* * * * *
    (b) The procuring agency contracting officer, or authorized 
representative, designates the proper NAICS code and corresponding size 
standard in a solicitation, selecting the single NAICS code which best 
describes the principal purpose of the product or service being 
acquired. Except for multiple award contracts as set forth in paragraph 
(c) of this section, every solicitation, including a request for 
quotations, must contain only one NAICS code and only one corresponding 
size standard.
    (1) Primary consideration is given to the industry descriptions in 
the U.S. NAICS 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.
    (2) 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).
    (1) For a Multiple Award Contract, the contracting officer must:
    (i) 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) of this section, 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

[[Page 61131]]

    (ii) Divide the solicitation into discrete categories (such as 
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 corresponding size standard 
that best describes the principal purpose of the goods or services to 
be acquired under that category (CLIN, SIN, Sector, FA or equivalent) 
as set forth in paragraph (b) of this section. A concern must meet the 
applicable size standard for each category (CLIN, SIN, Sector, FA or 
equivalent) for which it seeks an award as a small business concern.
    (2)(i) 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.
    (ii) 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 assigned to the order, provided recertification has not 
been required or occurred for the contract or order.
* * * * *

0
4. Amend Sec.  121.404 by:
0
a. Revising the heading;
0
b. Revising paragraph (a);
0
c. Amending paragraph (b) by removing ``date of certification by SBA'' 
and adding in its place ``date the Director of the Division of Program 
Certification and Eligibility or the Associate Administrator for 
Business Development requests a formal size determination in connection 
with a concern that is otherwise eligible for program certification.''
0
d. Revising paragraph (f);
0
e. Revising the introductory text to paragraph (g);
0
f. Amending paragraph (g)(2) by redesignating it as paragraph (g)(2)(i) 
and adding a new paragraph (g)(2)(ii);
0
g. Revising the first sentence in paragraph (g)(3) introductory text;
0
h. Revising the second sentence in paragraph (g)(3)(iv);
0
i. Removing paragraph (g)(3)(vi);
0
j. Redesignating paragraph (g)(4) as (g)(5); and
0
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 a Multiple Award Contract:
    (i) SBA determines size at the time of initial offer (or other 
formal response to a solicitation), which includes price, for a 
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 determines size at the time of initial offer (or other 
formal response to a solicitation), which includes price, for a 
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 the 
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 corresponding 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 requests a new size certification for the order.
    (2) With respect to ``Agreements'' including Blanket Purchase 
Agreements (BPAs) (except for BPAs 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 or may not include price).
    (g) A concern that represents itself as a small business and 
qualifies as small at the time of its initial offer (or other formal 
response to a solicitation), which includes price, is considered to be 
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 Sec.  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. Where a concern 
grows to be other than small, the procuring agency may exercise options 
and still count the award as an award to a small business. However, the 
following exceptions apply:
* * * * *
    (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 an 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

[[Page 61132]]

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. Sec.  121.402(b) and (c). * * *
* * * * *
    (4) The requirements in paragraphs (g)(1), (2), and (3) of this 
section apply to Multiple Award Contracts. However, if the Multiple 
Award Contract was set-aside for small businesses, 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, where the resulting contractor is now other than small, the 
agency cannot count any new orders issued pursuant to the contract, 
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 ED/WOSBs.
* * * * *

0
5. Amend Sec.  121.406 by revising paragraphs (a) introductory text and 
paragraph (d) 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, 8(a) contract, partial 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:
* * * * *
    (d) Simplified Acquisition Procedures and Orders Set-Aside Against 
Full and Openly Competed Multiple Award Contracts. Where the 
procurement of supplies or manufactured items is processed under 
Simplified Acquisition Procedures as defined in FAR 13.101 (48 CFR 
13.101), or an order for supplies or manufactured items is set-aside 
against a full and openly competed multiple award contract, and the 
anticipated cost will not exceed $25,000, the offeror does not have to 
supply the end product of a small business concern. However, the 
product acquired must be manufactured or produced in the United States, 
and the small business offeror must meet the requirements of paragraph 
(b)(1)(i) through(b)(1)(iv) of this section. The offeror need not 
itself be the manufacturer of any of the items acquired.
* * * * *

0
6. Amend Sec.  121.1001 by:
0
a. Revising paragraph (a)(1) introductory text to read as follows; and
0
b. Amending paragraph (b)(9) by removing the phrase ``Central 
Contractor Registration database'' and adding in its place ``System for 
Award Management (SAM) (or any successor system)''.


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 
businesses or a particular group of small businesses (including a 
partial set-aside), the following entities may file a size protest in 
connection with a particular procurement, sale or order:
* * * * *

0
7. Amend Sec.  121.1004 by revising paragraphs (a)(1), (a)(2) and 
(a)(3) introductory text 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 opening 
for
    (i) The contract; or
    (ii) An order issued against a Multiple Award Contract if the 
contracting officer requested a new size certification in connection 
with that order.
    (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 for
    (i) The contract; or
    (ii) An order issued against a Multiple Award Contract if the 
contracting officer requested a new size certification in connection 
with that order.
    (3) Long-Term Contracts. For contracts with durations greater than 
five years (including options), including all existing long-term 
contracts, Multi-agency contracts, Governmentwide Acquisition Contracts 
and Multiple Award Contracts:
* * * * *

0
8. Amend Sec.  121.1103 by:
0
a. Revising paragraph (a); and
0
b. Amending paragraph (b)(1) by removing the phrase ``business days'' 
and adding in its place ``calendar days''.


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.
* * * * *


Sec.  121.1204  [Amended]

0
9. Amend Sec.  121.1204(b)(iv) by removing ``For contracts'' and adding 
in its place ``For contracts or orders''.

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

0
10. Revise the authority citation for 13 CFR part 124 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.


0
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

[[Page 61133]]

Multiple Award Contracts and set-asides of orders issued against 
Multiple Award Contracts. * * *
* * * * *

0
12. Amend Sec.  124.503 by:
0
a. Revising the heading in paragraph (h);
0
b. Revising paragraphs (h)(1);
0
c. Revising the heading and first sentence in paragraph (h)(2); and
0
d. Adding new paragraph (h)(3); and
0
e. Amending paragraph (j)(2)(i) by removing the phrase ``ORCA'' and 
adding in its place ``System for Award Management (SAM) (or any 
successor system)'':


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. This includes 
an offering to and acceptance into the 8(a) program, SBA eligibility 
verification of the apparent successful offerors prior to contract 
award, compliance with the performance of work requirements set forth 
in Sec.  124.510, and compliance with the nonmanufacturer rule (see 
Sec.  121.406(b)), if applicable.
    (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, and the 
individual order is to be competed among all 8(a) contract holders.
    (iii) A concern awarded a task or delivery order contract or 
Multiple Award Contract that 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 may generally continue to 
receive new orders even if it has grown to be other than small or has 
exited the 8(a) BD program, and agencies may continue to take credit 
toward their prime contracting goals for orders awarded to 8(a) 
Participants. However, agencies may not take SDB or small business 
credit for an order where the concern has been asked by the procuring 
agency to recertify its size, 8(a) or SDB status and is unable to do so 
(see Sec.  121.404(g)), or where ownership or control of the concern 
has changed and SBA has granted a waiver to allow performance to 
continue (see Sec.  124.515).
    (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. Where an agency seeks to 
award an order on a sole source basis (i.e., to one particular 8(a) 
contract holder without competition among all 8(a) contract holders), 
the agency must offer and SBA must accept the order into the 8(a) 
program on behalf of the identified 8(a) contract holder.
    (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) Participants (i.e., an 
acquisition where the contracting officer states an intention to make 
one or more awards to only 8(a) Participants 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 any such award to 8(a) Participants would not be 
considered an 8(a) contract award.
* * * * *
0
13. Amend Sec.  124.504 by:
0
a. Revising paragraph (a) to read as follows; and
0
b. Amending paragraph (c)(3) by removing ``reserved for'' and adding in 
its place ``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. However, the AA/BD may permit the acceptance of the 
requirement under extraordinary circumstances.
* * * * *

0
14. Amend Sec.  124.505 by revising the section 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?''

* * * * *


Sec.   124.506 [Amended]

0
15. Amend Sec.  124.506(a)(3) by removing the second sentence.


Sec.  124.510  [Amended]

0
16. 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) 
Total Set-Aside Contracts. The Participant must perform the required 
percentage of work and comply with the nonmanufacturer rule for each 
performance period of the contract--i.e., during the base term and then 
during each option period thereafter. However, the contracting officer, 
in his or her discretion, may require the Participant to perform the 
applicable amount of work or comply with the nonmanufacturer rule for 
each order.
    (2) Partial Set-Aside Contracts. For orders awarded under a partial 
small business set-aside, the concern must perform the required 
percentage of work and comply with the nonmanufacturer rule for each 
performance period of the contract--i.e., during the base term and then 
during each option period thereafter. However, the contracting officer, 
in his or her discretion, may require the Participant to perform the 
applicable amount of work or comply with the nonmanufacturer rule for 
each order awarded under a partial set aside contract. For orders 
awarded under the non-set-aside portion, the concern need not comply 
with any limitations on

[[Page 61134]]

subcontracting or nonmanufacturer rule requirements
    (3) Orders. For orders that are set aside under full and open 
contracts or reserves, the Participant must perform the applicable 
amount of work or comply with the nonmanufacturer rule for each order.
    (4) The applicable SBA District Director may waive the provisions 
in paragraphs (c)(1) and (c)(2) of this section requiring a Participant 
to meet the applicable performance of work requirement for each period 
of performance or for each order. Instead, the District Director may 
permit the Participant to subcontract in excess of the limitations on 
subcontracting where the District Director 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 Participant will ultimately comply with the 
requirements of this section prior to contract completion. The 
procuring activity's contracting officer does not have the authority to 
waive the provisions of this section requiring a Participant to meet 
the applicable performance of work requirements, even if the agency has 
a Partnership Agreement with SBA.
    (5) 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.

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
17. 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.

0
18. 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) 2.101 (48 U.S.C. 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: (1) 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); or (2) Satisfy requirements of 
the Federal agency for construction projects to be performed at two or 
more discrete sites.
    (d) Contract, unless otherwise noted, has the same definition as 
set forth in FAR 2.101 (48 U.S.C. 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 a 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 paragraphs (e)(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, 
cost of materials includes 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 Contract means a contract that is:
    (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; or
    (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, the Director reports 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.

[[Page 61135]]

    (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.
    (o) Reserve means, for a Multiple Award Contract,
    (1) An acquisition conducted using full and open competition where 
the contracting officer makes--
    (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.
    (2) An award on a bundled contract to one or more small businesses 
with 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 (SPE) 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(s).
    (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 which sets 
forth the different responsibilities, roles, and percentages (or other 
allocations) of work as it relates to the acquisition.
    (i) 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 the 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 
121.103(h)(3)(iii) of this chapter.
    (ii) The agreement must be provided to the contracting officer as 
part of the proposal.
    (v) Subcontract or subcontracting means, except for purposes of 
Sec.  125.3, 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 or exceeds 
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.

0
19. Amend Sec.  125.2 by:
0
a. Revising the section heading;
0
b. Revising paragraphs (a), (b), (c), (d) and (e) to read as follows; 
and
0
c. Amending paragraph (f)(2)(i) by removing ``ORCA certifications'' and 
adding in its place ``certifications in the System for Award Management 
(SAM) (or successor system)'':


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:

[[Page 61136]]

    (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 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 not set-aside all or 
part of the acquisition or reserved the acquisition for small 
businesses. It also includes acquisitions where the agency has not 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 
procuring 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 contract participation to the 
maximum extent practicable.
    (iii) PCR Recommendations for Small Business Teaming Arrangements 
and Subcontracting. The PCR will work to ensure that small business 
participation is maximized both at the prime contract level such as 
through Small Business Teaming Arrangements and through subcontracting 
opportunities. This may include the subcontracting considerations in 
source selections set forth in Sec.  125.3(g), as well as the 
following:
    (A) 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;
    (B) Recommending that the solicitation and resultant contract 
specifically state the small business subcontracting goals that are 
expected of the contractor awardee;
    (C) Recommending that the small business subcontracting goals be 
based on total contract dollars instead of, or in addition to, 
subcontract dollars;
    (D) Recommending that separate evaluation factors be established 
for evaluating the offerors' proposed approach to small business 
subcontracting participation in the subject procurement, the extent to 
which the offeror has met its small business subcontracting goals on 
previous contracts; and/or the extent to which the offeror actually 
paid small business subcontractors within the specified number of days;
    (E) Recommending that a contracting officer include an evaluation 
factor in a solicitation which evaluates an offeror's commitment to pay 
small business subcontractors within a specified number of days after 
receipt of payment from the Government for goods and services 
previously rendered by the small business subcontractor. The 
contracting officer will comparatively evaluate the proposed timelines. 
Such a commitment shall become a material part of the contract. The 
contracting officer must consider the contractor's compliance with the 
commitment in evaluating performance, including for purposes of 
contract continuation (such as exercising options);
    (F) For bundled and consolidated requirements, recommending that a 
separate evaluation factor with significant weight be established for 
evaluating the offeror's proposed approach to small business 
utilization, the extent to which the offeror has met its small business 
subcontracting goals on previous contracts; and the extent to which the 
other than small business offeror actually paid small business 
subcontractors within the specified number of days;
    (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

[[Page 61137]]

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;
    (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; and
    (J) Recommending paragraphs (B) through (I) above apply to an 
ordering agency placing an order against a Multiple Award Contract or 
Agreement.
    (2) SBA Breakout PCR (BPCR) Responsibilities.
    (i) 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 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)(3) 
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 19.403(c)) 
and Section 15(l) of the Small Business Act (15 U.S.C. 644(l)).
    (3) Appeals of PCR and Breakout PCR (BPCR) Recommendations. In 
cases where there is disagreement between a PCR or BPCR 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 or BPCR 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 19.505 (48 CFR 19.505).
    (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. 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 veterans, qualified HUBZone 
small business concerns, 8(a) BD small business concerns (including 
those owned by ANCs, Indian Tribes and NHOs), 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, to the extent 
practicable, place contracts so as to allow more than one small 
business concern to perform such work; and
    (v) Provide SBA the necessary information relating to the 
acquisition under review at least 30 days prior to issuance of a 
solicitation. This includes providing PCRs (to the extent allowable 
pursuant to their security clearance) copies of all documents relating 
to the acquisition under review, including, but not limited to, the 
performance of work statement/statement of work, technical data, market 
research, hard copies or their electronic equivalents of Department of 
Defense (DoD) Form 2579 or equivalent, and other relevant information. 
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, as part of its 
acquisition planning, must conduct market research to determine the 
type and extent of foreseeable 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 System for 
Award Management (SAM) and the Dynamic Small Business Search (DSBS), 
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 the magnitude of 
the quantity or estimated dollar value of which 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

[[Page 61138]]

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; and
    (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 through 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 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 with the procuring activity and PCR 
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's 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 through Small Business Teaming 
Arrangements;
    (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 Government-wide 
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 Contracting Officer must document any reason not to 
accept such recommendations and include the documentation in 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 adequate 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) Ensures 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

[[Page 61139]]

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) 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.
    (iv) 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) through 
(7) of this section.
    (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 the procuring activity 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) The 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 
paragraph (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

[[Page 61140]]

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
    (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 agency 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) Total Set-aside of Multiple Award Contracts.
    (i) The contracting officer must conduct market research to 
determine whether the ``rule of two'' can be met. If the ``rule of 
two'' can be met, 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 throughout 
the life of the contract. Agencies should also consider the need to 
``off-ramp'' 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).
    (iv) A business must comply with the applicable limitations on 
subcontracting provisions (see Sec.  125.6) and the nonmanufacturer 
rule (see Sec.  121.406(b)), if applicable, during each performance 
period of the contract (e.g., the base term and each subsequent option 
period). However, the contracting officer, in his or her discretion, 
may require the contractor perform the applicable amount of work or 
comply with the nonmanufacturer rule for each order awarded under the 
contract.
    (3) Partial Set-asides of Multiple Award Contracts.
    (i) A contracting officer may partially set-aside a multiple award 
contract 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). 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 and 
corresponding size standard 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 
(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 throughout the life of the 
contract. Agencies should also consider the need to ''off ramp'' 
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).
    (vi) The small business must submit one offer that addresses each 
part of the solicitation for which it wants to compete. A small 
business (or 8(a) Participant, HUBZone SBC, SDVO SBC or ED/WOSB) is not 
required to submit an offer on the part of the solicitation that is not 
set-aside. However, a small business may choose to 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

[[Page 61141]]

subcontracting provisions (see Sec.  125.6) and the nonmanufacturer 
rule (see Sec.  121.406(b)), if applicable, during each performance 
period of the contract (e.g., during the base term and then during 
option period thereafter). However, the contracting officer, in his or 
her discretion, may require the contractor perform the applicable 
amount of work or comply with the nonmanufacturer rule for each order 
awarded under the contract.
    (4) Reserves of Multiple Award Contracts Awarded in Full and Open 
Competition. (i) A contracting officer may reserve one or more awards 
for small business where:
    (A) The market research and recent past experience evidence that--
    (1) 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
    (2) 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; or
    (B) The contracting officer makes:
    (1) 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;
    (2) 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
    (3) 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.
    (ii) 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.
    (iii) 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 may 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.
    (iv) 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 may compete any orders solely amongst all of the 
small business concerns if the ``rule of two'' has been met.
    (v) 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.
    (vi) A contracting officers may, but is not required to, set forth 
targets in the contract showing the estimated dollar value or 
percentage of the total contract to be awarded to small businesses.
    (vii) A small business offeror must submit one offer that addresses 
each part of the solicitation for which it wants to compete.
    (viii) Small businesses are permitted to compete against other-
than-small businesses for an order issued against the Multiple Award 
Contract if agency issued the small business a contract for those 
supplies or services.
    (ix) A business must comply with the applicable limitations on 
subcontracting provisions (see Sec.  125.6) and the nonmanufacturer 
rule (see Sec.  121.406(b)), if applicable, for any order issued 
against the Multiple Award Contract if the order is set aside or 
awarded on a sole source basis. However, a business need not 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 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 (see Sec.  121.406(b)), if applicable, 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 for the specific solicitation or contract (see Sec.  
121.103(b)(8)).
    (6) Set-aside of orders against Full and Open Multiple Award 
Contracts.
    (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) For the acquisition of orders valued at or below the 
simplified acquisition threshold (SAT), the contracting officer may 
set-aside the order for small businesses, 8(a) BD Participants, HUBZone 
SBCs, SDVO SBCs, WOSBs or EDWOSBs in accordance with the relevant 
program's regulations. For the acquisition of orders valued above the 
SAT, the contracting officer shall first consider whether there

[[Page 61142]]

is a reasonable expectation that offers will be obtained from at least 
two 8(a) BD Participants, HUBZone SBCs, SDVO SBCs, WOSBs or EDWOSBs in 
accordance with the program's regulations, 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 (see Sec.  121.406(b)), if applicable 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, unless the agency has specific 
statutory authority to do so, 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.
* * * * *

0
20. Amend Sec.  125.3 by:
0
a. Revising the section heading; and
0
b. Adding a new paragraph (i) to read as follows:


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

* * * * *
    (i) 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 requirements, and substantially bundled 
requirements, see Sec.  125.2(d)(4).

0
21. Amend Sec.  125.4 by revising the section heading to read as 
follows:


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

* * * * *

0
22. Amend Sec.  125.5 by:
0
a. Revising the section heading;
0
b. Revising paragraphs (a)(1) and (a)(2);
0
c. Revising paragraphs (b)(1)(i), (b)(1)(ii), and (b)(1)(iii);
0
d. Amending paragraph (b)(1)(v)(A) by removing ``SIC'' and adding in 
its place ``NAICS'';
0
e. Amending paragraph (b)(1)(v)(C) by adding ``or reserve'' after ``In 
the case of a set-aside'';
0
f. Revising the first sentence in paragraph (c)(1);
0
g. Revising paragraph (h) introductory text;
0
h. Revising the first sentence in paragraph (i)(2);
0
i. Revising paragraph (l)(1)(iii); and
0
j. Amending paragraph (m) by adding a sentence 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 (15 U.S.C. 
637(b)(7)). A COC is a written instrument issued by SBA to a Government 
contracting officer, certifying that one or more named small business 
concerns possess(es) 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 generally determine responsibility at 
the time of award of the contract. However, if a contracting officer 
makes a responsibility determination as set forth in paragraph (a)(2) 
of this section 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 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 the basis of responsibility (including those bases 
set forth in paragraphs (a)(1)(ii) and (iii) of this section);
    (ii) Refuses to consider a small business concern for award of a 
contract or order after evaluating the concern's offer on a non-
comparative basis (e.g., a pass/fail, go/no go, or acceptable/
unacceptable) under one or more responsibility type evaluation factors 
(such as experience of the company or key personnel or past 
performance); or
    (iii) Refuses to consider a small business concern for award of a 
contract or order because it failed to meet a definitive responsibility 
criterion contained in the solicitation.
* * * * *
    (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 requirements if 
the acquisition was set-aside or reserved (see Sec.  125.6). Whether an 
offeror has agreed to comply with the limitations on subcontracting is 
a matter of proposal acceptability or responsiveness. Whether an 
offeror will be able to comply with the limitations on subcontracting 
is a matter of responsibility.
    (iii) A nonmanufacturer making an offer on a contract for supplies 
that is set-aside, partially 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.  121.1201 through 121.1205 
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

[[Page 61143]]

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) * * *
    (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 referral in 
paragraph (a)(2)(ii) or (a)(2)(iii) of this section, the contracting 
officer is not required to issue an award to that offeror if the 
contracting officer denies the contract for reasons unrelated to 
responsibility.

0
23. Amend Sec.  125.6 by:
0
a. Revising the section heading;
0
b. Revising paragraph (a);
0
c. Removing paragraph (e);
0
d. Redesignating paragraphs (f), (g), (h), and (i) as (e), (f), (g), 
and (h) respectively;
0
e. Revising newly designated paragraph (f);
0
f. Adding a new paragraph (i); and
0
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, or a WOSB or EDWOSB contract pursuant 
to part 127 of this chapter, a small business concern must agree that:
* * * * *
    (f) The period of time used to determine compliance for a total or 
partial set-aside contract will be the base term and then each 
subsequent option period. For an order set aside under a full and open 
contract or a full and open contract with reserve, the agency will use 
the period of performance for each order to determine compliance unless 
the order is competed amongst small and other-than-small businesses (in 
which case the subcontracting limitations will not apply). However, the 
contracting officer, in his or her discretion, may require the concern 
to perform the applicable amount of work or comply with the 
nonmanufacturer rule for each order awarded under a total or partial 
set aside contract.
* * * * *
    (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 
evaluatecompliance for future contract awards in accordance with the 
procedures set forth in FAR 9.104-6.

0
24. 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?

* * * * *
    (b) Interested Party means the contracting activity's contracting 
officer, SBA, any concern that submits an offer for a specific sole 
source or set-aside SDVO contract or order (including Multiple Award 
Contracts), or any concern that submitted an offer in full and open 
competition and its opportunity for award will be affected by a reserve 
of an award given to a SDVO SBC.
* * * * *

0
25. Revise Sec.  125.14 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;
    (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.

0
26. 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) Total Set-Aside Contracts. The SDVO SBC must comply with the 
applicable limitations on subcontracting provisions (see Sec.  125.6) 
and the nonmanufacturer rule (see Sec.  121.406(b)), if applicable, in 
the performance of a contract totally set-aside for SDVO SBCs. However, 
the contracting officer, in his or her discretion, may require the 
concern to perform the applicable amount of work or comply with the 
nonmanufacturer rule for each order awarded under the contract.
    (2) Partial Set-Aside Contracts. For orders awarded under a partial 
set-aside contract, the SDVO SBC must comply with the applicable 
limitations on subcontracting provisions (see Sec.  125.6) and the 
nonmanufacturer rule (see Sec.  121.406(b)), if applicable, during each 
performance period of the contract--e.g., during the base term and then 
during each option period thereafter. For orders awarded under the non-
set-aside portion, the SDVO SBC need not comply with any limitations on 
subcontracting or nonmanufacturer rule requirements. However, the 
contracting officer, in his or her discretion, may require the concern 
to perform the applicable amount of work or comply with the 
nonmanufacturer rule for each order awarded under the contract.
    (3) Orders. The SDVO SBC must comply with the applicable 
limitations on subcontracting provisions (see Sec.  125.6) and the 
nonmanufacturer rule (see Sec.  121.406(b)), if applicable, in the 
performance of each individual order that has been set-aside for SDVO 
SBCs.
    (4) Reserves. The SDVO SBC must comply with the applicable 
limitations on subcontracting provisions (see Sec.  125.6) and the 
nonmanufacturer rule (see Sec.  121.406(b)), if applicable, in the 
performance of an order that is set aside for SDVO SBCs. However, the 
SDVO SBC will not have to comply with the

[[Page 61144]]

limitations on subcontracting provisions and the nonmanufacturer rule 
for any order issued against the Multiple Award Contract if the order 
is competed amongst SDVO SBCs and one or more 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. However, 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 concern and 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) Where there has been an SDVO SBC status protest on the 
solicitation or contract, see Sec.  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 at that time.
    (4) Recertification 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.


Sec.  125.19  [Amended]

0
27. Amend Sec.  125.19 by removing ``ORCA certifications'' and adding 
in its place ``certifications in System for Award Management (SAM) (or 
any successor system)'' in paragraph (b)(2)(i).

0
28. Amend Sec.  125.22 by revising the section 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?

* * * * *

0
29. 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

0
30. 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.

0
31. 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) or order, 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.
* * * * *

0
32. Revise Sec.  126.307 to read as follows:


Sec.  126.307  Where will SBA maintain the List of qualified HUBZone 
SBCs?

    Qualified HUBZone SBCs are identified by running a search on the 
Dynamic Small Business Search at https://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm. In addition, requesters may obtain a copy of the List by 
writing to the D/HUB at U.S. Small Business Administration, 409 3rd 
Street SW., Washington, DC 20416 or at hubzone@sba.gov.

0
33. Revise Sec.  126.600 to read as follows:


Sec.  126.600  What are HUBZone contracts?

    HUBZone contracts, including Multiple Award Contracts (see Sec.  
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 is applied to an other 
than small business in favor of qualified HUBZone SBCs;
    (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.

0
34. 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?

* * * * *

[[Page 61145]]

    (g) Multiple Award Contracts--(1) Total Set-Aside Contracts. The 
qualified HUBZone SBC must comply with the applicable limitations on 
subcontracting provisions (see Sec.  126.700) and the nonmanufacturer 
rule (see Sec.  126.601), if applicable, in the performance of a 
contract totally set-aside for HUBZone SBCs. However, the contracting 
officer, in his or her discretion, may require the concern to perform 
the applicable amount of work or comply with the nonmanufacturer rule 
for each order awarded under the contract.
    (2) Partial Set-Aside Contracts. For orders awarded under a partial 
set-aside contract, the qualified HUBZone SBC must comply with the 
applicable limitations on subcontracting provisions (see Sec.  126.700) 
and the nonmanufacturer rule (see Sec.  126.601), if applicable, during 
each performance period of the contract--e.g., during the base term and 
then during each subsequent option thereafter. For orders awarded under 
the non-set-aside portion, the qualified HUBZone SBC need not comply 
with any limitations on subcontracting or nonmanufacturer rule 
requirements. However, the contracting officer, in his or her 
discretion, may require the concern to perform the applicable amount of 
work or comply with the nonmanufacturer rule for each order awarded 
under the contract.
    (3) Orders. The qualified HUBZone SBC must comply with the 
applicable limitations on subcontracting provisions (see Sec.  126.700) 
and the nonmanufacturer rule (see Sec.  126.601), if applicable, in the 
performance of each individual order that has been set-aside for 
HUBZone SBCs.
    (4) Reserves. The qualified HUBZone SBC must comply with the 
applicable limitations on subcontracting provisions (see Sec.  126.700) 
and the nonmanufacturer rule (see Sec.  126.601), if applicable, in the 
performance of an order that is set aside for HUBZone SBCs. However, 
the qualified HUBZone SBC will not have to comply with the limitations 
on subcontracting provisions and the nonmanufacturer rule for any order 
issued against the Multiple Award Contract if the order is competed 
amongst qualified HUBZone SBCs and one or more 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 is later decertified, the procuring agency may 
exercise options and still count the award as an award to a HUBZone 
SBC. However, 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 contractor 
is 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 must 
immediately revise all applicable Federal contract databases to reflect 
the new status.
    (iii) Where there has been a HUBZone status protest on the 
solicitation or contract, see Sec.  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 at that time.
    (4) Recertification 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 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 Agreement 
and each order issued pursuant to the Agreement.

0
35. 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 that is set-aside for HUBZone SBCs.
    (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 an 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 including the 
time of award. This means that if a HUBZone SBC is performing on a 
HUBZone contract and submits an

[[Page 61146]]

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 
including the time of award.


Sec.  126.607  [Amended]

0
36. Amend Sec.  126.607 by removing ``ORCA certifications'' and adding 
in its place ``certifications in the System for Award Management (SAM) 
(or any successor system)'' in paragraph (b)(2)(i).

0
37. Amend Sec.  126.610 by revising the section 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?

* * * * *

0
38. Amend Sec.  126.613 by:
0
a. Adding a new sentence at the end of paragraph (a)(1); and
0
b. Adding an Example 4 in paragraph (a).


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.
* * * * *
    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]

0
39. Remove and reserve Sec.  126.614.

0
40. Amend Sec.  126.800 by revising paragraph (b) to read 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 Sec.  125.1), SBA, the contracting officer, 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

0
41. 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.

0
42. 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.

0
43. Amend Sec.  127.102 by:
0
a. Removing the definitions for ``Central Contractor Registration 
(CCR)'' and ``ORCA'';
0
b. Adding the definition for ``System for Award Management (SAM) (or 
any successor system)'' to read as follows; and
0
c. Revising the definitions for ``EDWOSB requirement'', ``Interested 
party'', ``System for Award Management (SAM) (or any successor 
system)'', ``WOSB requirement'', 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.
* * * * *
    System for Award Management (SAM) (or any successor system) means a 
federal system that consolidates various federal procurement systems 
(e.g., Central Contractor Registration (CCR), Federal Agency 
Registration (Fedreg), Online Representations and Certifications 
Application (ORCA), Excluded Parties List System (EPLS)) and the 
Catalog of Federal Domestic Assistance into one system.
* * * * *
    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.


0
44. Amend Sec.  127.300 by:
0
a. Revising paragraph (a) to read as follows;
0
b. Amending paragraph (b) by removing ``CCR database'' and adding in 
its place ``SAM (or any successor system)'';
0
c. Amending paragraph (d)(1) by removing ``ORCA'' and adding in its 
place ``SAM (or any successor system)''; and
0
d. Amending paragraph (f)(1) by removing ``on ORCA'' and adding in its 
place ``in SAM (or any successor system)'':


Sec.  127.300  How does a concern self-certify 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 System for Award Management (SAM) (or any successor 
system), have a current representation posted on SAM (or any successor 
system) 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.
* * * * *

Sec.  127.301  [Amended]

0
45. Amend Sec.  127.301 by removing ``on ORCA'' and adding in its place 
``in SAM (or any successor system)'' in paragraph (a)(1), and by 
removing ``ORCA'' and adding in its place ``SAM (or any successor 
system) in paragraph (a)(2).

[[Page 61147]]

Sec.  127.302  [Amended]


0
46. Amend Sec.  127.302 by removing ``ORCA'' and adding in its place 
``SAM (or any successor system)'' in the introductory language.


Sec.  127.303  [Amended]


0
47. Amend Sec.  127.303 by removing ``on CCR'' and adding in its place 
``in SAM (or any successor system)'' in paragraph (b)(3).


0
48. Amend Sec.  127.400 by revising paragraphs (a) and (b) 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. In addition, eligibility examinations may verify that a 
concern meets the EDWOSB or WOSB eligibility requirements at the time 
of the examination. SBA will, in its sole discretion, perform 
eligibility examinations at any time after a concern self-certifies in 
SAM (or any successor system) that it is an EDWOSB or WOSB. SBA may 
conduct the examination, or parts of the examination, at one or all of 
the concern's offices.
    (b) Determination on conduct of an examination. SBA may consider 
protest allegations set forth in a protest in determining whether to 
conduct an examination of a concern pursuant to subpart D of this part, 
notwithstanding a dismissal or denial of a protest pursuant to Sec.  
127.604. SBA may also consider information provided to the D/GC by a 
third-party that questions the eligibility of a WOSB or EDWOSB that has 
certified its status in SAM in determining whether to conduct an 
eligibility examination.


0
49. Amend Sec.  127.401 by revising the first sentence 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. * * *
* * * * *


Sec.  127.403  [Amended]


0
50. Amend Sec.  127.403 by removing ``CCR and ORCA'' and adding in its 
place ``SAM (or any successor system)''.


Sec.  127.404  [Amended]


0
51. Amend Sec.  127.404 by removing ``the CCR and ORCA'' and adding in 
its place ``SAM (or any successor system)'' in paragraph (b)(1).

0
52. Amend Sec.  127.503 by:
0
a. Revising paragraphs (a)(1), (a)(2), (b)(1) and (b)(2) to read as 
follows;
0
b. Amending paragraphs (d)(2)(i) and (e) by removing ``ORCA 
certifications'' and replacing it with ``certifications in SAM (or any 
successor system)''; and
0
c. Revising paragraph (f) to read as follows.


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

    (a) * * *
    (1) Two or more EDWOSBs will submit offers for the contract; and
    (2) Contract award may be made at a fair and reasonable price.
* * * * *
    (b) * * *
    (1) Two or more WOSBs will submit offers (this includes EDWOSBs, 
which are also WOSBs); and
    (2) Contract 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. However, 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 concern is unable to recertify 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. The agency and 
the contractor must immediately revise all applicable Federal contract 
databases to reflect the new status if necessary.
    (iii) Where there has been a WOSB or EDWOSB status protest on the 
solicitation or contract, see Sec.  127.604(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 at that time.
    (4) Recertification 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.


[[Page 61148]]




Sec.  127.504  [Amended]

0
53. Amend Sec.  127.504(a) by removing ``on ORCA'' and replacing it 
with ``in SAM (or any successor system)'' in paragraph (a) and by 
removing ``on CCR and ORCA'' and adding in its place ``in SAM (or any 
successor system)'' in paragraph (a)(2).

0
54. Amend Sec.  127.506 by:
0
a. Revising the introductory text and paragraph (a) to read as follows; 
and
0
b. Amending paragraph (b) by removing ``on the CCR and the ORCA'' and 
adding in its place ``in SAM (or any successor system)''.


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;
* * * * *


0
55. Amend Sec.  127.508 by revising the section 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? * * 
*

* * * * *

0
56. Amend Sec.  127.600 by revising the first sentence of the 
introductory text 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. * * *


Sec.  127.604  [Amended]


0
57. Amend Sec.  127.604 by removing the phrase ``on the CCR and the 
ORCA'' and adding in its place ``in SAM (or any successor system)'' in 
paragraph (e).

    Dated: August 22, 2013.
Karen G. Mills,
Administrator.
[FR Doc. 2013-22064 Filed 10-1-13; 8:45 am]
BILLING CODE 8025-01-P