Consolidation of Mentor Protégé Programs and Other Government Contracting Amendments, 60846-60881 [2019-23141]

Download as PDF 60846 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules SMALL BUSINESS ADMINISTRATION 13 CFR Parts 121, 124, 125, 126, 127, and 134 RIN 3245–AG94 Consolidation of Mentor Prote´ge´ Programs and Other Government Contracting Amendments U.S. Small Business Administration. ACTION: Proposed rule. AGENCY: In response to President Trump’s government-wide regulatory reform initiative, the Small Business Administration (SBA) initiated a review of its regulations to determine which might be revised or eliminated. As a result, SBA is proposing to merge the 8(a) Business Development (BD) Mentor-Prote´ge´ Program and the All Small Mentor-Prote´ge´ Program to eliminate confusion and remove unnecessary duplication of functions within SBA. This rule proposes to eliminate the requirement that 8(a) Participants seeking to be awarded an 8(a) contract as a joint venture submit the joint venture to SBA for review and approval prior to contract award, revise several 8(a) BD program regulations to reduce unnecessary or excessive burdens on 8(a) Participants, and clarify other related regulatory provisions to eliminate confusion among small businesses and procuring activities. In addition, except for orders and Blanket Purchase Agreements issued under the General Services Administration’s Federal Supply Schedule Program, the rule proposes to require a business concern to recertify its size and/or socioeconomic status for all set-aside orders under unrestricted multiple award contracts (MACs) The rule also proposes to require a business concern to recertify its socioeconomic status for all set-aside orders where the required socioeconomic status for the order differs from that of the underlying setaside MAC contract (e.g., HUBZone setaside order against a small business setaside MAC). Finally, except for orders or Blanket Purchase Agreements issued under any Federal Supply Schedule contract, the rule also allows for size and/or socioeconomic protests at the order-level for set-aside orders issued against unrestricted MACs, or for setaside orders based on a different socioeconomic status from the underlying set-aside MAC. DATES: Comments must be received on or before January 17, 2020. ADDRESSES: You may submit comments, identified by RIN 3245–AG94 by any of the following methods: khammond on DSKJM1Z7X2PROD with PROPOSALS3 SUMMARY: VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 • Federal eRulemaking Portal: https:// www.regulations.gov. Follow the instructions for submitting comments. • Mail, for Paper, Disk, or CD/ROM Submissions: Brenda Fernandez, U.S. Small Business Administration, Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 20416. • Hand Delivery/Courier: Brenda Fernandez, U.S. Small Business Administration, Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 20416. SBA will post all comments on https:// www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at https://www.regulations.gov, please submit the information to Brenda Fernandez, U.S. Small Business Administration, Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 20416, or send an email to brenda.fernandez@ sba.gov. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make the final determination of whether it will publish the information. FOR FURTHER INFORMATION CONTACT: Brenda Fernandez, U.S. Small Business Administration, Office of Policy, Planning and Liaison, 409 Third Street SW, Washington, DC 20416; (202) 205– 7337; brenda.fernandez@sba.gov. SUPPLEMENTARY INFORMATION: I. Background Information On January 30, 2017, President Trump issued Executive Order 13771, ‘‘Reducing Regulation and Controlling Regulatory Costs’’, which is designed to reduce unnecessary and burdensome regulations and to control costs associated with regulations. In response to the President’s directive to simplify regulations, SBA initiated a review of its regulations to determine which might be revised or eliminated. Based on this analysis, SBA has identified provisions in many areas of its regulations that can be simplified or eliminated. Firstly, this proposed rule would merge the 8(a) BD Mentor-Prote´ge´ Program and the All Small Mentor-Prote´ge´ Program. This rule also proposes to eliminate the requirement that 8(a) Participants seeking to be awarded an 8(a) contract as a joint venture must submit the joint venture to SBA for review and approval prior to contract award. This rule also proposes to make several changes to the 8(a) BD Program to eliminate or reduce unnecessary or excessive burdens on 8(a) Participants. As part of this PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 proposed rulemaking process, SBA also held tribal consultations pursuant to Executive Order 13175, Tribal Consultations, in Anchorage, AK, Albuquerque, NM and Oklahoma City, OK to provide interested tribal representatives with an opportunity to discuss their views on various 8(a) BDrelated issues. SBA considers tribal consultation meetings a valuable component of its deliberations and believes that these tribal consultation meetings allowed for constructive dialogue with the Tribal community, Tribal Leaders, Tribal Elders, elected members of Alaska Native Villages or their appointed representatives, and principals of tribally-owned and Alaska Native Corporation (ANC) owned firms participating in the 8(a) BD Program. SBA has taken these discussions into account in drafting this proposed rule. SBA seeks to combine the 8(a) BD Mentor-Prote´ge´ Program and the All Small Mentor-Prote´ge´ Program at this time in order to eliminate confusion regarding perceived differences between the two Programs, remove unnecessary duplication of functions within SBA, and establish one, unified staff to better coordinate and process mentor-prote´ge´ applications. SBA originally established a mentor-prote´ge´ program for 8(a) Participants a little more than twenty years ago. 63 FR 35726, 35764 (June 30, 1998). The purpose of that program was to encourage approved mentors to provide various forms of business assistance to eligible 8(a) Participants to aid in their development. On September 27, 2010, the Small Business Jobs Act of 2010 (Jobs Act), Public Law 111–240 was enacted. The Jobs Act was designed to protect the interests of small businesses and increase opportunities in the Federal marketplace. The Jobs Act was drafted by Congress in recognition of the fact that mentor-prote´ge´ programs serve an important business development function for small businesses and therefore included language authorizing SBA to establish separate mentor-prote´ge´ programs for the Service-Disabled Veteran-Owned Small Business Concern (SDVO SBC) Program, the HUBZone Program, and the Women-Owned Small Business (WOSB) Program, each of which was modeled on SBA’s existing mentorprote´ge´ program available to 8(a) Participants. See section 1347(b)(3) of the Jobs Act. Thereafter, on January 2, 2013, the National Defense Authorization Act for Fiscal Year 2013 (NDAA 2013), Public Law 112–239 was enacted. Section 1641 of the NDAA 2013 authorized SBA to establish a mentor-prote´ge´ program for all small E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules business concerns. This section further provided that a small business mentorprote´ge´ program must be identical to the 8(a) BD Mentor-Prote´ge´ Program, except that SBA could modify each program to the extent necessary, given the types of small business concerns to be included as prote´ge´s. Subsequently, SBA published a Final Rule in the Federal Register combining the authorities contained in the Jobs Act and the NDAA 2013 to create a mentorprote´ge´ program for all small businesses. 81 FR 48558 (July 25, 2016). Currently, the mentor-prote´ge´ program available to firms participating in the 8(a) BD Program (contained in 13 CFR 124.520) is used as a business development tool in which mentors provide diverse types of business assistance to eligible 8(a) BD prote´ge´s. This assistance may include, among other things, technical and/or management assistance; financial assistance in the form of equity investments and/or loans; subcontracts; and/or assistance in performing Federal prime contracts through joint venture arrangements. The explicit purpose of the 8(a) BD Mentor-Prote´ge´ relationship is to enhance the capabilities of prote´ge´s and to improve their ability to successfully compete for both government and commercial contracts. Similarly, the All Small Mentor-Prote´ge´ Program is designed to require approved mentors to aid prote´ge´ firms so that they may enhance their capabilities, meet their business goals, and improve their ability to compete for contracts. The purposes of the two programs are identical. In addition, the benefits available under both programs are identical. Small businesses and 8(a) Program Participants receive valuable business development assistance and any joint venture formed between a prote´ge´ firm and its SBA-approved mentor receives an exclusion from affiliation, such that the joint venture will qualify as a small business provided the prote´ge´ individually qualifies as small under the size standard corresponding to the NAICS code assigned to the procurement. A prote´ge´ firm may enter a joint venture with its SBA-approved mentor and be eligible for any contract opportunity for which the prote´ge´ qualifies. If a prote´ge´ firm is an 8(a) Program Participant, a joint venture between the prote´ge´ and its mentor could seek any 8(a) contract, regardless of whether the mentorprote´ge´ agreement was approved through the 8(a) BD Mentor-Prote´ge´ Program or the All Small MentorProte´ge´ Program. Moreover, a firm could be certified as an 8(a) Participant after its mentor-prote´ge´ relationship has been VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 approved by SBA through the All Small Mentor-Prote´ge´ Program and be eligible for 8(a) contracts as a joint venture with its mentor once certified. Because the benefits and purposes of the two programs are identical, SBA believes that having two separate mentor-prote´ge´ programs is unnecessary and causes needless confusion in the small business community. As such, this proposed rule would eliminate a separate 8(a) BD Mentor-Prote´ge´ Program and continue to allow any 8(a) Participant to enter a mentor-prote´ge´ relationship through the All Small Mentor-Prote´ge´ Program. Specifically, the proposed rule would revise § 124.520 to merely recognize that an 8(a) Participant, as any other small business, may participate in SBA’s Small Business Mentor-Prote´ge´ Program. In merging the 8(a) BD MentorProte´ge´ Program with the All Small Mentor-Prote´ge´ Program, the proposed rule would also make conforming amendments to SBA’s size regulations (13 CFR part 121), the joint venture provisions (13 CFR 125.8), and the All Small Mentor-Prote´ge´ Program regulations (13 CFR 125.9). As stated previously, SBA has also taken this action partly in response to the President’s directive that each agency review its regulations. Therefore, this rule also proposes to revise regulations pertaining to the 8(a) BD and size programs in order to further reduce unnecessary or excessive burdens on small businesses and to eliminate confusion or more clearly delineate SBA’s intent in certain regulations. Specifically, this rule proposes additional changes to the size and socioeconomic status recertification requirements for orders issued against MACs. A detailed discussion of these proposed changes is contained below in the Section-by-Section Analysis. II. Section-by-Section Analysis Section 121.103(b)(6) The proposed rule would amend the references to SBA’s mentor-prote´ge´ programs in this provision, which specifying that a prote´ge´ firm cannot be considered affiliated with its mentor based solely on assistance received by the prote´ge´ under the mentor-prote´ge´ agreement. The proposed rule would eliminate the cross-reference to the regulation regarding the 8(a) BD MentorProte´ge´ Program (13 CFR 124.520), leaving only the reference to the regulation regarding the All Small Business Mentor-Prote´ge´ Program. PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 60847 Section 121.103(g) The proposed rule would amend the newly organized concern rule contained in § 121.103(g) by clarifying that affiliation may be found where both former and ‘‘current’’ officers, directors, principal stockholders, managing members, or key employees of one concern organize a new concern in the same or related industry or field of operation, and serve as the new concern’s officers, directors, principal stockholders, managing members, or key employees. The rule would merely add the word ‘‘current’’ to the regulatory text to ensure that affiliation may arise where the key individuals are still associated with the first company. SBA believes that such a finding of affiliation is authorized in the present regulations, but merely seeks to clarify its intent to make sure there is no confusion. Section 121.103(h) The proposed rule would amend the introductory text to § 121.103(h) to revise the requirements for joint ventures. SBA believes that a joint venture is not an on-going business entity, but rather something that is formed for a limited purpose and duration. If two or more separate business entities seek to join together through another entity on a continuing, unlimited basis, SBA views that as a separate business concern with each partner affiliated with each other. To capture SBA’s intent on limited scope and duration, SBA’s current regulations provide that a joint venture is something that can be formed for no more than three contracts over a two-year period. If the parties intend to jointly seek work beyond three contracts or beyond two years from the date of the first award, they must form a new joint venture entity. That new entity would then be able to perform an additional three contracts over two years from the date of its first award. Several firms have commented to SBA that the threecontract limit unduly restricts small business and can disrupt normal business operations. SBA does not seek to impose unnecessary burdens on small businesses but continues to believe that a joint venture should be a limited duration vehicle. In response to these concerns, SBA proposes to eliminate the three-contract limit for a joint venture, but continue to prescribe that a joint venture cannot exceed two years from the date of its first award. In addition, the proposed rule would clarify SBA’s current intent that a novation to the joint venture would start the two-year period if that were the first award received by the joint venture. The E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 60848 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules change removing the limit of three awards to any joint venture would relieve small businesses of the requirement of forming additional joint venture entities to perform a fourth contract within that two-year period. The proposed rule attempts to lessen the burden on small businesses, while still preserving SBA’s belief that a joint venture is not intended to be an ongoing business entity. In addition, SBA is interested in comments regarding the exception to affiliation for joint ventures composed of multiple small businesses in which firms enter and leave the joint venture based on their size status. In this scenario, in an effort to retain small business status, joint venture partners expel firms that have exceeded the size standard and then possibly add firms that qualify under the size standard. Generally, this should not be a problem because joint ventures are limited in duration to two years and generally can be awarded no more than three contracts during those two years. However, if the joint venture is awarded a Federal Supply Schedule (FSS) contract or any other multiple award contract vehicle, the awarding of the multiple award contract itself counts against the limit of three contract awards that a joint venture can receive, but individual orders do not count against the limit. As such, a joint venture that is awarded a multiple award contract could receive many orders beyond the two-year limitation for joint venture awards (since the contract was awarded within that twoyear period), and could remain small for any order requiring recertification simply by exchanging one joint venture partner for another (i.e., a new small business for one that has grown to be other than small). SBA never intended for the composition of joint ventures to be fluid. The joint venture generally should have the same partners throughout its lifetime, unless one of the partners is acquired. SBA considers a joint venture composed of different partners to be a different joint venture than the original one. To reflect this understanding, SBA could specify that the size of a joint venture outside of the mentor-prote´ge´ program will be determined based on the current size status and affiliations of all past and present joint venture partners, even if a partner has left the joint venture. SBA invites comment on this proposal and whether there are alternative ways to address this issue. The rule also proposes to add clarifying language to the introductory text of § 121.103(h) to recognize that, although a joint venture cannot be VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 populated with individuals intended to perform contracts awarded to the joint venture, the joint venture can directly employ administrative personnel and such personnel may specifically include Facility Security Officers. It has also been brought to SBA’s attention that some procuring agencies will not award a contract requiring a facility security clearance to a joint venture if the joint venture itself does not have such clearance, even if both partners to the joint venture individually have such clearance. SBA does not believe that such a restriction is appropriate and seeks comments on how best to address that in a final rule. SBA is considering a provision which would require either the joint venture itself or the lead small business partner to the joint venture to have the required facility security clearance. If such a provision were finalized, a joint venture lacking its own separate facility security clearance could still be awarded a contract requiring such a clearance provided the lead small business partner to the joint venture had the required facility security clearance and committed to keep at its cleared facility all records relating to the contract awarded to the joint venture. Additionally, if it is established that the security portion of the contract requiring a facility security clearance is ancillary to the principal purpose of the procurement, SBA believes that the nonlead partner to the joint venture (which may include a large business mentor) could possess such clearance. SBA specifically requests comments on this possible provision as well as other recommendations regarding how best to address this perceived problem. The rule would also remove current § 121.103(h)(3)(iii), which provides that a joint venture between a prote´ge´ firm and its mentor that was approved through the 8(a) BD Mentor-Prote´ge´ Program is considered small provided the prote´ge´ qualifies as individually small. Because this proposed rule would eliminate the 8(a) BD Mentor-Prote´ge´ Program as a separate program, this provision is no longer needed. The proposed rule also clarifies how to account for joint venture receipts and employees during the process of determining size for a joint venture partner. The joint venture partner must include its percentage share of joint venture receipts and employees in its own receipts or employees. The appropriate percentage share is the same percentage figure as the percentage figure corresponding to the joint venture partner’s share of work performed by the joint venture. PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 Section 121.402 This rule proposes to amend how NAICS codes are applied to task orders to ensure that the NAICS codes assigned to specific procurement actions, and the corresponding size standards, are an accurate reflection of the contracts and orders being awarded and performed. Under the proposed rule, a contracting officer would be required to assign a single NAICS code for each order issued against a Multiple Award Contract (MAC), and that NAICS code must be a NAICS code that is included in the underlying MAC and represents the principal purpose of the order. SBA believes that the NAICS code assigned to a task order must reflect the principal purpose of that order. Currently, based on the business rules of the Federal Procurement Data System (FPDS), if a MAC is assigned a service NAICS code, then that service NAICS code flows down to each individual order under that MAC. SBA does not believe it is appropriate for a task order that is nearly entirely for supplies to have a service NAICS code. In such a case, a firm being awarded such an order would not have to comply with the nonmanufacturer rule. In particular, setaside orders should be assigned a manufacturing/supply NAICS code, so that the nonmanufacturer rule will apply to the order if it is awarded to a nonmanufacturer. Additionally, the current method for NAICS code assignment can also be problematic where a MAC is assigned a NAICS code for supplies but a particular order under that MAC is almost entirely for services. In such a case, firms that qualified as small for the larger employee-based size standard associated with a manufacturing/supply NAICS code may not qualify as small businesses under a smaller receipts-based services size standard. As such, because the order is assigned the manufacturing/supply NAICS code associated with the MAC, firms that should not qualify as small for a particular procurement that is predominantly for services may do so. Thus, this proposed rule attempts to ensure that the NAICS codes assigned to specific procurement actions, and the corresponding size standards, are an accurate reflection of the contracts and orders being awarded and performed. There will still be anomalies where a procuring agency seeks to award an order whose principal purpose is different than the assigned NAICS code for the MAC until the Federal Acquisition Regulation (FAR) and the FPDS is amended to include multiple NAICS codes at the contract level. SBA does not believe that the order should E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules be assigned a NAICS code that does not properly reflect its principal purpose. SBA believes that the better approach would be to fulfill such requirement through a different contracting vehicle. khammond on DSKJM1Z7X2PROD with PROPOSALS3 Sections 121.404(a)(1), 124.503(i), 125.18(d), and 127.504(c) Size Status SBA has been criticized for allowing agencies to receive credit towards their small business goals for awards made to firms that no longer qualify as small. SBA believes that much of this criticism is misplaced. Where a small business concern is awarded a small business setaside contract with a duration of not more than five years and grows to be other than small during the performance of the contract, some have criticized the exercise of an option as an award to an other than small business. SBA disagrees with such a characterization. Small business set-aside contracts are restricted only to firms that qualify as small as of the date of a firm’s offer for the contract. A firm’s status as a small business is relevant to its qualifying for the award of the contract. If a concern qualifies as small for a contract with a duration of not more than five years, it is considered a small business throughout the life of that contract. Even for MACs that are set-aside for small business, once a concern is awarded a contract as a small business it is eligible to receive orders under that contract and perform as a small business. Again, in such a case, size was relevant to the initial award of the contract. Any competitor small business concern could protest the size status of an apparent successful offeror for a small business set-aside contract (whether single award or multiple award), and render a concern ineligible for award where SBA finds that the concern does not qualify as small under the size standard corresponding to the NAICS code assigned to the contract. Furthermore, firms awarded a long-term contract must recertify their size status at five years and every option thereafter. Firms are eligible to receive orders under that contract and perform as a small business so long as they continue to recertify as small at the required times (e.g., at five years and every option thereafter). Not allowing a concern that legitimately qualified at award and/or recertified later as small to receive orders and continue performance as a small business during the base and option periods, even if it has naturally grown to be other than small, would discourage firms from wanting to do business with the Government, would be disruptive to the VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 procurement process, and would disincentivize contracting officers from using small business set-asides. SBA agrees that contract performance by a concern that merges with, acquires, or is acquired by another business concern and no longer qualifies as small should not count towards small business goals. However, SBA already requires a concern to recertify its size status within 30 days of a merger, sale, or acquisition becoming final. See 13 CFR 121.404(g). Under the current regulation, if the contractor is other than small, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its small business goals. Id. SBA, believes, however, that there is a legitimate concern where a concern self-certifies as small for an unrestricted MAC and at some point later in time when the concern no longer qualifies as small the contracting officer seeks to award an order as a small business setaside and the firm uses its selfcertification as a small business for the underlying unrestricted MAC. Under the current process, size status for an unrestricted MAC is generally determined as of the date a firm submits its offer for the MAC. If a concern selfcertifies as small at the time of its offer for the underlying MAC, the concern is generally considered to be small for goaling purposes for each order issued against the contract, unless a contracting officer requests a new size certification in connection with a specific order. Therefore, when a contracting officer seeks to set-aside an order for small business off an unrestricted MAC, the firm’s size relates back to its selfcertification for the underlying MAC. As such, orders may be set-aside for small businesses and a concern may be awarded one or more orders as a small business even though it does not currently qualify as small and may not have qualified as small for several years. SBA agrees that this situation needs to be addressed. A firm’s status as a small business does not generally affect whether the firm does or does not qualify for the award of an unrestricted MAC contract. As such, competitors are very unlikely to protest the size of a concern that self-certifies as small for an unrestricted MAC. In SBA’s view, where a contracting officer sets aside an order for small business under an unrestricted MAC, the order is the first time size status is important. That is the first time that some firms will be eligible to compete for the order while others will be excluded from competition because of their size status. As noted above, no one is considering protesting the size or status of a firm at the time an PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 60849 unrestricted MAC is awarded. It is only when an order is restricted by size status that firms focus on their competitors’ size status. To allow a firm’s self-certification for the underlying MAC to control whether a firm is small at the time of an order years after the MAC was awarded does not make sense to SBA. SBA has considered several alternative proposals. If an order under an unrestricted MAC is set-aside exclusively for small business (i.e., small business set-aside, 8(a) small business, service-disabled veteranowned small business, HUBZone small business, or women-owned small business), SBA considered requiring a concern to certify its size status and qualify as such at the time it submits its initial offer, which includes price, for the particular order under all unrestricted MACs. SBA has also considered exempting FSS contracts from any recertification requirement, and instead applying it only to all other MACs. SBA does not seek to disrupt the procurement process, but rather to ensure that small business set-aside awards are made to firms that qualify as small at the time of the award. GSA is concerned that requiring firms to certify their size status for an order that is setaside under a FSS would discourage firms from wanting to do business with the Government, would dissuade contracting officers from setting aside orders, and that this will in turn hurt small businesses. In considering the issue, SBA looked at the data for orders that were awarded as small business set-asides off unrestricted base multiple award vehicles in FY 2018. In total, 8,666 orders were awarded as small business set-asides off unrestricted MACs in FY 2018. Of those set-aside orders, 10% are estimated to have been awarded to firms that no longer qualified as small under the NAICS code size standard at the time of the order award. Although the vast majority of set-aside orders under unrestricted MACs were awarded off of FSS contracts. Further, it is estimated that only 7.1% of small business setaside orders off the FSS were awarded to firms that no longer qualified as small under the NAICS code size standard at the time of the order (510 out of 7,266 orders). That amounted to 12.1% of the dollars set-aside for small business off the FSS ($129.6 million to firms that no longer qualified as small out of a total of $1.0723 billion in small business setaside orders). Whereas, it is estimated that 49.4% of small business set-aside orders off of government-wide acquisition contracts (GWACs) were awarded to firms that no longer E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 60850 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules qualified as small under the NAICS code size standard at the time of the order (261 out of 528 orders). That amounted to 67% of the dollars setaside for small business off of GWACs ($119.6 million to firms that no longer qualified as small out of a total of $178.6 million in small business set-aside orders). SBA then considered the number and dollar value of new orders that were awarded as small business setasides off unrestricted base multiple award vehicles in FY 2018 using the size standard ‘‘exceptions’’ that apply in some of SBA’s size standards (e.g., the IT Value-Added Reseller exception to NAICS 541519). Taking into account all current size standards exceptions, which allow a firm to qualify under an alternative size standard for certain types of contracts, it is estimated that 6.5% of small business set-aside orders off the FSS were awarded to firms that no longer qualified as small at the time of the order (468 out of 7,266 orders). That amounted to 11.3% of the dollars set-aside for small business off the FSS ($120.7 million to firms that no longer qualified as small out of a total of $1.0723 billion in small business setaside orders). Considering exceptions for set-aside orders off of GWACs, it is estimated that 11.6% were awarded to firms that no longer qualified as small at the time of the order (61 out of 528 orders). That amounted to 39.5% of the dollars set-aside for small business off of GWACs ($70.5 million to firms that no longer qualified as small out of a total of $178.6 million in small business setaside orders). It is not possible to tell from FPDS whether the ‘‘exception’’ size standard applied to the contract or whether the agency applied the general size standard for the identified NAICS code. Thus, all that can be said with certainty is that for small business setaside orders off of the FSS, between 11.3% and 12.1% of the order dollars set-aside for small business were awarded to firms that no longer qualified as small. This amounted to somewhere between $120.7 million and $129.6 that were awarded to firms that no longer qualified as small. For GWACs, the percentage of orders and order dollars being awarded to firms that no longer qualify as small is significantly greater. Between 39.5% and 67.0% of the order dollars set-aside for small business off GWACs were awarded to firms that no longer qualified as small. This amounted to somewhere between $70.5 million and $119.6 million that were awarded to firms that no longer qualified as small. So, set-aside orders off of GWACs, for example, that may potentially go to VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 other than small businesses are more significant at 11.6–49.4%. However, the data shows that discretionary set-asides under the FSS programs have proven effective in making awards to small business under the schedules program. The data also shows that the percent of dollars going to other than small business off of FSS set-asides is limited. Thus, SBA is considering exempting FSS contracts from the recertification requirement as it may not be efficient. SBA determined that the added burden to the public and Government to implement additional control measures and the potential effect on small business participation in Government contracting outweighed any potential benefits from trying to mitigate the limited risk. As such, this rule proposes to exempt the FSS contracts from the rule. SBA believes that a contracting vehicle that intends to award to small businesses but instead permits as much as 49.4% of its orders and between 39.5% and 67% of its dollars to be awarded to firms that do not qualify as small is the appropriate area to address. As such, pursuant to this proposed rule, except for orders or Blanket Purchase Agreements issued under any FSS contract, if an order under an unrestricted MAC is set-aside exclusively for small business (i.e., small business set-aside, 8(a) small business, service-disabled veteranowned small business, HUBZone small business, or women-owned small business), a concern must recertify its size status and qualify as such at the time it submits its initial offer, which includes price, for the particular order. A firm whose size certification in SAM is current and accurate will not need to submit a new certification or additional documentation. For a MAC that is set aside for small business (i.e., small business set-aside, 8(a) small business, SDVO small business, HUBZone small business, or WOSB), the proposed rule would generally set size statusas of the date of the offer for the underlying MAC itself. A concern that is small at the time of its offer for the MAC would be considered small for each order issued against the contract, unless a contracting officer requests a size recertification in connection with a specific order. As is currently the case, a contracting officer has the discretion to request recertification of size status on MAC orders. If that occurs, size status would be determined at the time of the order. That would not be a change from the current regulations. PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 Socioeconomic Status Where the required status for an order differs from that of the underlying contract (e.g., the MAC is a small business set-aside award, and the procuring agency seeks to restrict competition on the order to only certified HUBZone small business concerns), SBA believes that a firm must qualify for the socioeconomic status of a set-aside order at the time it submits an offer for that order. Although size may flow down from the underlying contract, status in this case cannot. Similar to where a procuring agency seeks to compete an order on an unrestricted procurement as a small business set-aside and SBA would require offerors to qualify as small with respect to that order (except for orders under FSS contracts), SBA believes that where the socioeconomic status is first required at the order level, an offeror seeking that order must qualify for the socioeconomic status of the set-aside order when it submits its offer for the order. Under current policy and regulations, where a contracting officer seeks to restrict competition of an order off an unrestricted MAC to eligible 8(a) Participants only, the contracting officer must offer the order to SBA to be awarded through the 8(a) program, and SBA must accept the order for the 8(a) program. In determining whether a concern is eligible for such an 8(a) order, SBA would apply the provisions of the Small Business Act and its current regulations which require a firm to be an eligible Program Participant as of the date set forth in the solicitation for the initial receipt of offers for the order. SBA requests comments on the alternative approaches considered as well as any other approaches that would reduce the set-aside awards to firms that do not qualify as small or qualify for the socioeconomic status of a set-aside order while at the same time not disrupting the procurement process or imposing unnecessary burdens on small businesses or contracting officers. The rule proposes to make these changes in § 121.404(a)(1) for size, § 124.503(i) for 8(a) BD eligibility, § 125.18(d) for SDVO eligibility, and § 127.504(c) for WOSB eligibility. Section 121.404 In addition to the revision to § 121.404(a)(1) identified above, the rule proposes to make several other changes or clarifications to § 121.404. In order to make this section easier to use and understand, the proposed rule would add headings to each subsection, which E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules would identify the subject matter of the subsection. The rule proposes to amend § 121.404(b), which requires a firm applying to SBA’s programs to qualify as a small business for its primary industry classification as of the date of its application. The rule would eliminate references to SBA’s small disadvantaged business (SDB) program as obsolete, and add a reference to the WOSB program. The proposed rule would also amend § 121.404(d) to clarify that size status for purposes of compliance with the nonmanufacturer rule, the ostensible subcontractor rule and joint venture agreement requirements is determined as of the date of the final proposal revision for negotiated acquisitions and final bid for sealed bidding. Currently, only compliance with the nonmanufacturer rule is specifically addressed in this paragraph, but SBA’s policy has been to apply the same rule to determine size with respect to the ostensible subcontractor rule and joint venture agreement requirements. This would not be a change in policy, but rather a clarification of existing policy. The proposed rule would also add a clarifying sentence to § 121.404(e) that would recognize that prime contractors may rely on the self-certifications of their subcontractors provided they do not have a reason to doubt any specific self-certification. SBA believes that this has always been the case, but has added this clarifying sentence, nevertheless, at the request of many prime contractors. The proposed rule would make several revisions to the size recertification provisions in § 121.404(g). First, the recertification rule pertaining to a joint venture that had previously received a contract as a small business was not clear. If a partner to the joint venture has been acquired, is acquiring or has merged with another business entity, the joint venture must recertify its size status. In order to remain small, however, it was not clear whether only the partner which has been acquired, is acquiring or has merged with another business entity needed to recertify its size status or whether all partners to the joint venture had to do so. SBA believes that the intent of the regulation was to require size recertification only for the affected partner. To do otherwise could unfairly prejudice the joint venture and the procuring activity. For example, assume that a joint venture has two partners, a 75% managing partner and a 25% nonmanaging partner. In order to have initially been awarded a contract as a small business, both partners to the joint venture had to individually qualify as VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 small (unless one was an SBA-approved mentor of the other). If since the date of the award the 75% partner has naturally grown to exceed the size standard assigned to the contract and the 25% partner has been acquired by another small business, the joint venture could not recertify as small if both partners had to recertify their individual size status even if the 25% partner still qualified as small after its acquisition. SBA does not believe that would be fair to the 75% partner or to the procuring activity, which could no longer count the contract as an award to small business. Just as SBA allows, under certain conditions, a contract to continue to count as an award to small business if a concern awarded the contract has grown to exceed the applicable size standard after award, so too should a contract to a joint venture continue to count as an award to small business if the non-affected partner has grown to be other than small and the partner that has been acquired continues to be small after the acquisition. Thus, the proposed rule clarifies that only the partner to the joint venture that has been acquired, is acquiring, or has merged with another business entity must recertify its size status in order for the joint venture to recertify its size. Additionally, the proposed rule clarifies that if a merger or acquisition causes a firm to recertify as an other than small business concern between time of offer and award, then the recertified firm is not considered a small business for the solicitation. Under this proposed rule, SBA would accept size protests with specific facts showing that an apparent awardee of a set-aside has recertified or should have recertified as other than small due to a merger or acquisition before award. The proposed rule would also clarify that recertification is not required when the ownership of a concern that is at least 51% owned by an entity (i.e., tribe, ANC, or Community Development Corporation (CDC)) changes to or from a wholly-owned business concern of the same entity, as long as the ultimate owner remains that entity. When the small business continues to be owned to the same extent by the tribe, ANC or CDC, SBA does not believe that the real ownership of the concern has changed, and, therefore that recertification is not needed. The proposed rule would make this same change to § 121.603 for 8(a) contracts as well. Finally, the proposed rule would amend § 121.404(g)(3) to specifically permit a contracting officer to request size recertification as he or she deems appropriate at any point in a long-term PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 60851 contract. SBA believes that this authority exists within the current regulatory language but is merely articulating it more clearly in this rule. Section 121.406 The proposed rule would merely correct a typographical error by replacing the word ‘‘provided’’ with the word ‘‘provide.’’ Section 121.702 The proposed rule would clarify the size requirements applicable to joint ventures in the Small Business Innovation Research (SBIR) program. Although the current regulation authorizes joint ventures in the SBIR program and recognizes the exclusion from affiliation afforded to joint ventures between a prote´ge´ firm and its SBA-approved mentor, it does not specifically apply SBA’s general size requirements for joint ventures to the SBIR program. The proposed rule would merely apply the general size rule for joint ventures to the SBIR program. In other words, a joint venture for an SBIR award would be considered a small business provided each partner to the joint venture, including its affiliates, meets the applicable size standard. In the case of the SBIR program, this means that each partner does not have more than 500 employees. Section 121.1001 The rule proposes to provide authority to SBA’s Associate General Counsel for Procurement Law to independently initiate or file a size protest, where appropriate. Sections 121.1004, 125.28, 126.801, and 127.603 The proposed rule would add clarifying language to § 121.1004, § 125.28, § 126.801, and § 127.603 regarding size and/or socioeconomic status protests in connection with orders issued against a MAC. Currently, the provisions authorize a size protest where an order is issued against a MAC if the contracting officer requested a recertification in connection with that order. The proposed rule specifically authorizes a size protest relating to an order issued against a MAC where the order is set-aside for small business and the underlying MAC was awarded on an unrestricted basis, except for orders or Blanket Purchase Agreements issued under any FSS contract. The proposed rule also specifically authorizes a socioeconomic protest relating to setaside orders based on a different socioeconomic status from the underlying set-aside MAC. E:\FR\FM\08NOP3.SGM 08NOP3 60852 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules Section 121.1103 An explanation of the change is provided with the explanation for § 134.318. khammond on DSKJM1Z7X2PROD with PROPOSALS3 Section 124.3 In response to concerns raised to SBA by several Program Participants, the proposed rule would add a definition of what a follow-on requirement or contract is. Whether a procurement requirement may be considered a follow-on procurement is important in several contexts related to the 8(a) BD program. First, SBA’s regulations provide that where a procurement is awarded as an 8(a) contract, its followon or renewable acquisition must remain in the 8(a) BD program unless SBA agrees to release it for non-8(a) competition. 13 CFR 124.504(d)(1). SBA’s regulations also require SBA to conduct an adverse impact analysis when accepting requirements into the 8(a) BD program. However, an adverse impact analysis is not required for follow-on 8(a) acquisitions or new requirements. 13 CFR 124.504(c). Finally, SBA’s regulations provide that once an applicant is admitted to the 8(a) BD program, it may not receive an 8(a) sole source contract that is a follow-on procurement to an 8(a) contract that was performed immediately previously by another Participant (or former Participant) owned by the same tribe, ANC, Native Hawaiian Organization (NHO), or CDC. 13 CFR 124.109(c)(3)(ii), 124.110(e) and 124.111(d). In order to properly assess what each of these regulations requires, the rule proposes to define the term ‘‘follow-on requirement or contract’’. The definition provides the determination considerations for whether a particular procurement is a follow-on requirement or contract: (1) Whether the scope has changed significantly, requiring meaningful different types of work or different capabilities; (2) whether the magnitude or value of the requirement has changed by at least 25 percent; and (3) whether the end user of the requirement has changed. As a general guide, if the procurement satisfies at least one of these three conditions, it may be considered a new requirement. Conversely, if the procurement satisfies none of these conditions, it is considered a follow-on procurement. However, with respect to a change in the value or magnitude of the requirement, SBA intends the 25% amount to be a guide, and not necessarily dispositive of whether a requirement qualifies as ‘‘new.’’ Applying the 25 percent rule contained in this definition rigidly could permit VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 procuring agencies and entity-owned firms to circumvent the intent of release, sister company restriction, and adverse impact rules. For example, a procuring agency may argue that two procurement requirements that were previously awarded as individual 8(a) contracts can be removed from the 8(a) program without requesting release from SBA because the value of the combined requirement would be at least 25 percent more than the value of either of the two previously awarded individual 8(a) contracts, and thus would be considered a new requirement. This application of the new requirement definition would permit an agency to remove two requirements from the 8(a) BD program without requesting and receiving SBA’s permission for release from the program. We believe that would be inappropriate and that a procuring agency must seek SBA’s approval to release the two procurements previously awarded through the 8(a) BD program. Likewise, if an entity-owned 8(a) Participant previously performed two sole source 8(a) contracts and a procuring agency sought to offer a sole source requirement to the 8(a) BD program on behalf of another Participant owned by the same entity (tribe, ANC, NHO, or CDC) that, in effect, was a consolidation of the two previously awarded 8(a) procurements, we believe it would be inappropriate for SBA to accept the offer on behalf of the sister company. Similarly, if a small business concern previously performed two requirements outside the 8(a) program and a procuring agency wanted to combine those two requirements into a larger requirement to be offered to the 8(a) program, SBA should perform an adverse impact analysis with respect to that small business even though the combined requirement had a value that was greater than 25 percent of either of the previously awarded contracts. Section 124.105 The proposed rule would amend § 124.105(g) to provide more clarity regarding situations in which an applicant has an immediate family member that has used his or her disadvantaged status to qualify another current or former Participant. The purpose of the immediate family member restriction is to ensure that one individual does not unduly benefit from the 8(a) BD program by participating in the program beyond nine years, albeit through a second firm. This most often happens when a second family member in the same or similar line of business seeks 8(a) BD certification. However, it is not necessarily the type of business PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 which is a problem, but, rather, the involvement in the applicant firm of the family member that previously participated in the program. The current regulatory language requires an applicant firm to demonstrate that ‘‘no connection exists’’ between the applicant and the other current or former Participant. SBA believes that requiring no connections is a bit extreme. If two brothers own two totally separate businesses, one as a general construction contractor and one as a specialty trade construction contractor, in normal circumstances it would be completely reasonable for the brother of the general construction firm to hire his brother’s specialty trade construction firm to perform work on contracts that the general construction firm was doing. Unfortunately, if either firm was a current or former Participant, SBA’s current regulations would prohibit SBA from certifying the second firm for participation in the program, even if the general construction firm would pay the specialty trade firm the exact same rate that it would have to pay to any other specialty trade construction firm. SBA does not believe that makes sense. An individual should not be required to avoid all contact with the business of an immediate family member. He or she should merely have to demonstrate that the two businesses are truly separate and distinct entities. To this end, the rule proposes that an individual would not be able to use his or her disadvantaged status to qualify a concern for participation in the 8(a) BD program if that individual has an immediate family member who is using or has used his or her disadvantaged status to qualify another concern for the 8(a) BD program and the concerns are connected by any common ownership or management, regardless of amount or position, or the concerns have a contractual relationship that was not conducted at arm’s length. In the first instance, if one of the two family members (or business entities owned by the family member) owned any portion of the business owned by the other family member, the second in time family member could not qualify his or her business for the 8(a) BD program. Similarly, if one of the two family members had any role as a director, officer or key employee in the business owned by the other family member, the second in time family member could not qualify his or her business for the 8(a) BD program. In the second instance, the second in time family member could not qualify his or her business for the 8(a) BD program if it received or gave work to the business owned by the other E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules family member at other than fair market value. With these changes, SBA believes that the proposed rule more accurately captures SBA’s intent not to permit one individual from unduly benefitting from the program, while at the same time permitting normal business relations between two firms. SBA specifically requests comments on this provision. The proposed rule would also amend the 8(a) BD change of ownership requirements in § 124.105(i). First, the proposed rule would lessen the burden on 8(a) Participants seeking minor changes in ownership by providing that prior SBA approval is not needed where a previous owner held less than a 20 percent interest in the concern both before and after the transaction. This would be a change from the current requirement which allows a Participant to change its ownership without SBA’s prior approval where the previous owner held less than a 10 percent interest. This change from 10 percent to 20 percent would permit Participants to make minor changes in ownership more frequently without requiring them to wait for SBA approval. It would also be consistent with other changes SBA has made to reduce burdens on 8(a) applicants and Participants. For example, in 2016, SBA changed the percentage amount related to the requirement that individuals owning a certain percent of the business concern must demonstrate good character from 10 percent to 20 percent (see 81 FR 48580). This proposed revision would be consistent with that change and would also eliminate additional burdens on an 8(a) applicant or Participant relating to owners holding between 10 and 20 percent interest. In addition, the proposed rule would also eliminate the requirement that all changes of ownership affecting the disadvantaged individual or entity must receive SBA prior approval before they can occur. Specifically, proposed revisions to § 124.105(i)(2) would provide that prior SBA approval is not needed where the disadvantaged individual (or entity) in control of the Participant will increase the percentage of his or her (its) ownership interest. SBA believes that prior approval is not needed in such a case because there could be no question as to whether the Participant continues to meet the program’s ownership and control requirements. Again, this proposed change would decrease the amount of times and the time spent by Participant firms seeking SBA approval of a change in ownership. SBA would nevertheless continue to review all changes in ownership for which prior approval is not required, including those VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 contemplated by the proposed rule, to ensure that the transfer was fair and equitable to the disadvantaged individual(s) (or entity) and has not unduly benefited non-disadvantaged parties to the transaction. Where SBA has determined that a change in ownership does not meet such requirements, the Agency may, in its discretion, require remedial action or initiate an appropriate adverse action, such as program suspension or termination. Section 124.109 In order to eliminate confusion, the proposed rule would clarify several provisions relating to tribally-owned 8(a) applicants and Participants. First, SBA proposes to amend § 124.109(a)(7) and § 124.109(c)(3)(iv) to clarify that a Participant owned by an ANC or tribe need not request a change of ownership from SBA where the ANC or tribe merely reorganizes its ownership of a Participant in the 8(a) BD program by inserting or removing a wholly-owned business entity between the ANC/tribe and the Participant. SBA believes that a tribe or ANC should be able to replace one wholly-owned intermediary company with another without going through the change of ownership process and obtaining prior SBA approval. In each of these cases, SBA believes that the underlying ownership of the Participant is not changing substantively and that requiring a Participant to request approval from SBA is unnecessary. The recommendation and approval process for a change of ownership can take several months, so this change would relieve Participants owned by tribes and ANCs from this unnecessary burden and allow them to proactively conduct normal business operations without interruption. Second, the proposed rule would amend § 124.109(c)(3)(ii) to clarify the rules pertaining to a tribe/ANC owning more than one Participant in the 8(a) BD program. The proposed rule would add two subparagraphs and an example to § 124.109(c)(3)(ii) for ease of use and understanding. In addition, SBA would clarify that if the primary NAICS code of a tribally-owned Participant is changed pursuant to § 124.112(e), the tribe could then submit an application to qualify another of its firms for participation in the 8(a) BD program under the primary NAICS code that was previously held by the Participant whose primary NAICS code was changed. A change in a primary NAICS code under § 124.112(e) should occur only where SBA has determined that the greatest portion of a Participant’s PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 60853 revenues for the past three years are in a NAICS code other than the one identified as its primary NAICS code. In such a case, SBA has determined that in effect the second NAICS code really has been the Participant’s primary NAICS code for the past three years. SBA’s rules have historically provided that a Tribe or ANC may not own 51% or more of another firm which, either at the time of application or within the previous two years, has been operating in the 8(a) program under the same primary NAICS code as the applicant. Thus, this proposed rule will clarify that when SBA has changed the primary NAICS code change for a Participant, SBA has determined that first NAICS code was not the Participant’s primary NAICS code for the last two years, and the tribe/ANC would be permitted to have another of its firms apply to and be admitted to the 8(a) BD program under the former primary NAICS code of the sister company. Finally, the proposed rule would clarify the 8(a) BD program admission requirements governing how a triballyowned applicant may demonstrate that it possesses the necessary potential for success. SBA’s regulations currently permit the tribe to make a firm written commitment to support the operations of the applicant concern to demonstrate a tribally-owned firm’s potential for success. Due to the increased trend of tribes establishing tribally-owned economic development corporations to oversee tribally owned businesses, SBA recognizes that in some circumstances it may be adequate to accept a letter of support from the tribally-owned economic development company rather than the tribal leadership. SBA also recognizes that in most cases, tribes are not establishing these economic development corporations as Section 17 corporations, which SBA has previously determined should be treated as an arm of the tribe and thus, the tribe itself for purposes of the 8(a) BD regulations. Rather, these corporations are often tribally owned holding companies that have been delegated authority to oversee tribal economic development and tribal business ventures. In response, this proposed rule would permit a triballyowned applicant to satisfy the potential for success requirements by submitting a letter of support from a tribally-owned economic development corporation or other relevant tribally-owned holding company. In order for a letter of support from the tribally owned holding company to be sufficient, there must be sufficient evidence that the triballyowned holding company has the financial resources to support the E:\FR\FM\08NOP3.SGM 08NOP3 60854 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules applicant and that the tribally-owned company is controlled by the tribe. Section 124.110 The proposed rule would make some of the same changes to § 124.110 for applicants and Participants owned and controlled by NHOs as it would to § 124.109 for tribally-owned applicants and Participants. Specifically, the proposed rule would subdivide § 124.110(e) for ease of use and understanding and would clarify that if the primary NAICS code of an NHOowned Participant is changed pursuant to § 124.112(e), the NHO could submit an application and qualify another firm owned by the NHO for participation in the 8(a) BD program under the NAICS code that was the previous primary NAICS code of the Participant whose primary NAICS code was changed. khammond on DSKJM1Z7X2PROD with PROPOSALS3 Section 124.111 The proposed rule would make the same change for CDCs and CDC-owned firms as for tribes and ANCs mentioned above. It would clarify that a Participant owned by a CDC need not request a change of ownership from SBA where the CDC merely reorganizes its ownership of a Participant in the 8(a) BD program by inserting or removing a wholly-owned business entity between the CDC and the Participant. It would also subdivide the current subparagraph (d) into three smaller paragraphs for ease of use and understanding, and would clarify that if the primary NAICS code of a CDC-owned Participant is changed pursuant to § 124.112(e), the CDC could submit an application and qualify another firm owned by the CDC for participation in the 8(a) BD program under the NAICS code that was the previous primary NAICS code of the Participant whose primary NAICS code was changed. Section 124.112 SBA proposes to amend § 124.112(d)(5) regarding excessive withdrawals in connection with entityowned 8(a) Participants. There has been some confusion as to whether an 8(a) Participant that is owned at least 51% by a tribe, ANC, NHO or CDC can make a distribution to a non-disadvantaged individual that exceeds the applicable excessive withdrawal limitation dollar amount if it is made as part of a pro rata distribution to all shareholders. SBA believes that it generally should be able to do so. Through a pro rata distribution, the only way that an entityowned firm can increase its distribution to the tribe, ANC, NHO or CDC is if it also increases the distribution to the non-entity owner. Since the intent is to VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 increase the distribution to the tribe, ANC, NHO or CDC, and thus increase the benefits flowing back to the community, SBA believes this serves the purposes of the program. The rule also proposes, however, that SBA could deem the distributions excessive if SBA determines that they would adversely affect the business development of the Participant. In 2016, SBA amended § 124.112(e) to implement procedures to allow SBA to change the primary NAICS code of a Participant where SBA determined that the greatest portion of the Participant’s total revenues during a three-year period have evolved from one NAICS code to another. 81 FR 48558, 48581 (July 25, 2016). The procedures require SBA to notify the Participant of its intent to change the Participant’s primary industry classification and afford the Participant the opportunity to submit information explaining why such a change would be inappropriate. Several individuals have asked SBA to permit an appeal process, whereby a Participant whose primary NAICS code was changed by its servicing district office could seek further review of that determination at a different level. After hearing this concern repeated several times at the tribal consultations conducted by SBA, this proposed rule would authorize such an appeal process. Section 124.201 This proposed rule does not amend § 124.201. However, SBA is considering adding a provision that would require a small business concern that seeks to apply for participation in the 8(a) BD program to first take an SBA-sponsored preparatory course regarding the requirements and expectations of the 8(a) BD program. SBA specifically requests comments on such a requirement. Section 124.203 Section 124.203 requires applicants to the 8(a) BD program to submit certain specified supporting documentation, including financial statements, copies of signed Federal personal and business tax returns and individual and business bank statements. In 2016, SBA removed the requirement that an applicant must submit a signed Internal Revenue Service (IRS) Form 4506T, Request for Copy or Transcript of Tax Form, in all cases. 81 FR 48558, 48569 (July 25, 2016). At that time, SBA agreed with a commenter to the proposed rule that questioned the need for every applicant to submit IRS Form 4506T. In eliminating that requirement for every applicant, SBA reasoned that it always PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 has the right to request any applicant to submit specific information that may be needed in connection with a specific application. As long as SBA’s regulations clearly provide that SBA may request any additional documents SBA deems necessary to determine whether a specific applicant is eligible to participate in the 8(a) BD program, SBA will be able to request that a particular firm submit IRS Form 4506T where SBA believes it to be appropriate. This proposed rule would amend § 124.203 to add back the requirement that every applicant to the 8(a) BD program submit IRS Form 4506T (or when available, IRS Form 4506C). SBA believes that not having that Form readily available when needed has unduly delayed the application process for those affected applicants. In addition, SBA believes that requiring Form 4506T in every case will serve as a deterrent to firms that may think it is not necessary to fully disclose all necessary financial information. Although SBA does not often use IRS Form 4506T to verify an applicant’s information, SBA believes that this additional requirement imposes a minimal burden on 8(a) BD program applicants. Additionally, SBA believes that the collection of Form 4506T will help to maintain the integrity of the program. Section 124.204 SBA proposes to suspend the time to process an 8(a) application where SBA requests clarifying, revised or other information from the applicant. While SBA is waiting on the applicant to provide clarifying or responsive information, the Agency is not continuing to process the application. Section 124.207 The proposed rule would amend § 124.207 to allow a concern that has been declined for 8(a) BD program participation to submit a new application 90 days after the date of the Agency’s final decision to decline. This would change the current rule which requires a concern to wait 12 months from the date of the final agency decision to reapply, and would make the 8(a) BD program consistent with the HUBZone program. See 13 CFR 126.309. SBA believes that this change would reduce the number of appeals to SBA’s Office of Hearings and Appeals (OHA) and greatly reduce the costs associated with appeals borne by disappointed applicants. If a firm can correct the deficiencies in its initial application and reapply within 90 days, it may be much more likely to forego appealing to OHA, where the process can take 90 days or E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 more for resolution. Because a firm that is declined could submit a new application 90 days after the decline decision, SBA requests comments on whether the current reconsideration process should be eliminated. Section 124.300 and 124.301 The proposed rule would redesignate the current § 124.301 (which discusses the various ways a business may leave the 8(a) BD program) as § 124.300 and add a new § 124.301 to specifically enunciate the voluntary withdrawal and early graduation procedures. The rule would set forth SBA’s current policy that a Participant may voluntarily withdraw from the 8(a) BD program at any time prior to the expiration of its program term. In addition, where a Participant believes it has substantially achieved the goals and objectives set forth in its business plan, SBA would allow the Participant to elect to voluntarily early graduate from the 8(a) BD program. That too is SBA’s current policy, and the proposed rule merely captures it in SBA’s regulations. The proposed rule would, however, change the level at which voluntary withdrawal and voluntary early graduation could be finalized by SBA. Currently, a firm submits its request to voluntarily withdraw or early graduate to its servicing SBA district office. Once the district office concurs, the request is sent to the Associate Administrator for Business Development (AA/BD) for final approval. SBA believes that requiring several layers of review to permit a concern to voluntarily exit the 8(a) BD program is unnecessary. Because an entity cannot have a second firm admitted to the 8(a) BD program with the same primary NAICS code as a sister company for a period of two years from the date that the sister company left the program, requiring firms to wait a potentially significant amount of time for several layers of SBA reviewers to approve a voluntary withdrawal or voluntary early graduation action could adversely impact the overall business operations of the entity and other concerns owned by the entity. Thus, the rule proposes that a Participant must still request voluntary withdrawal or voluntary early graduation from its servicing district office, but the action would be complete once the District Director recognizes the voluntary withdrawal or voluntary early graduation. SBA believes this would eliminate unnecessary delay in processing these actions. Section 124.304 The proposed rule would clarify the effect of a decision made by the AA/BD VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 to terminate or early graduate a Program Participant. Under SBA’s current procedures, once the AA/BD renders a decision to early graduate or terminate a Participant from the 8(a) BD program, the affected Participant has 45 days to appeal that decision to SBA’s OHA. If no appeal is made, the AA/BD’s decision becomes the final agency decision after that 45-day period. If the Participant appeals to OHA, the final agency decision will be the decision of the administrative law judge at OHA. There has been some confusion as to what the effect of the AA/BD decision is pending the decision becoming the final agency decision. The proposed rule clarifies that where the AA/BD issues a decision terminating or early graduating a Participant, SBA would treat the firm as being suspended. SBA does not believe that it would not make sense to allow a Participant to continue to receive program benefits after the AA/BD has terminated or early graduated the firm from the program. If OHA ultimately overrules the AA/BD decision, the suspension would be lifted and the length of the suspension would be added to the Participant’s program term. Sections 124.305 and 124.402 Section 124.402 requires each firm admitted to the 8(a) BD program to develop a comprehensive business plan and to submit that business plan to SBA. Currently, § 124.402(b) provides that a newly admitted Participant must submit its business plan to SBA as soon as possible after program admission and that the Participant will not be eligible for 8(a) BD benefits, including 8(a) contracts, until SBA approves its business plan. Several firms have complained that they missed contract opportunities because SBA did not approve their business plans before procuring agencies sought to award contracts to fulfill certain requirements. While SBA continues to believe that it is important for a newly admitted Participant to submit its business plan to SBA as expeditiously as possible, SBA also understands the adverse consequences that can ensue if a firm loses an opportunity that it has lined up because its business plan is not approved prior to the time that a procuring agency seeks to fulfill a particular procurement requirement. In response, the proposed rule would amend § 124.402(b) to eliminate the provision that a Participant cannot receive any 8(a) BD benefits until SBA has approved its business plan. A firm coming in to the 8(a) BD program with commitments from one or more procuring agencies could immediately PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 60855 be awarded one or more 8(a) contracts. Instead, the proposed rule would provide that SBA would suspend a Participant from receiving 8(a) BD program benefits if it has not submitted its business plan to the servicing district office and received SBA’s approval within 60 days after program admission. SBA believes that firms coming into the 8(a) BD program possessing the potential for success required for program entry would most likely have business plans in place and should be able to have their business plans approved by SBA within 60 days of program admission. If that cannot happen within 60 days, SBA would suspend the Participant’s business plan under the proposed changes to § 124.305(h). This would freeze a firm’s program term, and a firm would not lose any time in the program. The proposed rule would also correct a typographical error contained in § 124.305(h)(1)(ii). Under § 124.305(h)(1)(ii), an 8(a) Participant can elect to be suspended from the 8(a) program where a disadvantaged individual who is involved in controlling the day-to-day management and control of the Participant is called to active military duty by the United States. Currently, the regulation states that the Participant may elect to be suspended where the individual’s participation in the firm’s management and daily business operations is critical to the firm’s continued eligibility, and the Participant elects not to designate a non-disadvantaged individual to control the concern during the call-up period. That should read where the Participant elects not to designate another disadvantaged individual to control the concern during the call-up period. It was not SBA’s intent to allow a nondisadvantaged individual to control the firm during the call-up period and permit the firm to continue to be eligible for the program. Sections 124.501 and 124.507 Section 124.501 is entitled ‘‘What general provisions apply to the award of 8(a) contracts?’’ SBA must determine that a Participant is eligible for the award of both competitive and sole source 8(a) contracts. However, the requirement that SBA determine eligibility is currently contained specifically only in the 8(a) competitive procedures at § 124.507(b)(2). Although SBA determines eligibility for sole source 8(a) awards at the time it accepts a requirement for the 8(a) BD program, that process is not specifically stated in the regulations. The proposed rule would move the eligibility determination procedures for E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 60856 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules competitive 8(a) contracts from § 124.507(b)(2) to the general provisions of § 124.501 and would specifically address eligibility determinations for sole source 8(a) contracts. To accomplish this, the proposed rule would revise current § 124.501(g). Similarly, SBA believes that the provisions requiring a bona fide place of business within a particular geographic area for 8(a) construction awards should also appear in the general provisions applying to 8(a) contracts set forth in § 124.501. Section 8(a)(11) of the Small Business Act, 15 U.S.C. 637(a)(11), requires that to the maximum extent practicable 8(a) construction contracts ‘‘shall be awarded within the county or State where the work is to be performed.’’ SBA has implemented this statutory provision by requiring a Participant to have a bona fide place of business within a specific geographic location. Currently, the bona fide place of business rules appear only in the procedures applying to competitive 8(a) procurements in § 124.507(c)(2). The proposed rule would move those procedures to a new § 124.501(k), which would clearly make them applicable to both sole source and competitive 8(a) awards. Based on the statutory language, SBA believes that the requirement to have a bona fide place of business in a particular geographic area currently applies to both sole source and competitive 8(a) procurements, but moving the requirement to the general applicability section would remove any doubt or confusion. In response to concerns raised by Participants, the proposed rule would also impose time limits within which SBA district offices should process requests to add a bona fide place of business. SBA has heard that several Participants missed out on 8(a) procurement opportunities because their requests for SBA to verify their bona fide places of business were not timely processed. In order to alleviate this perceived problem, the proposed rule would provide that in connection with a specific 8(a) competitive solicitation, the reviewing office will make a determination whether or not the Participant has a bona fide place of business in its geographical boundaries within 5 working days of a site visit or within 15 working days of its receipt of the request from the servicing district office if a site visit is not practical in that timeframe. SBA requests comments on whether a Participant that has filed a request to have a bona fide place of business recognized by SBA in time for a particular 8(a) construction procurement may submit an offer for that procurement where it has not VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 received a response from SBA before the date offers are due. In other words, should a Participant that has requested the recognition of a bona fide place of business beyond the time limits set forth in this proposed rule be able to presume approval and submit an offer as an eligible Participant? SBA does not want to harm Participants that truly have set up bona fide places of business, but at the same time does not want to give eligibility to firms that have not met the requirements necessary to establish a bona fide place of business. Section 124.503 Currently, § 124.503(g) provides that a Basic Ordering Agreement (BOA) is not a contract under the FAR. Rather, each order to be issued under the BOA is an individual contract. As such, a procuring activity must offer, and SBA must accept, each task order under a BOA in addition to offering and accepting the BOA itself. Once a Participant leaves the 8(a) BD program or otherwise becomes ineligible for future 8(a) contracts (e.g., becomes other than small under the size standard assigned to a particular contract) it cannot receive further 8(a) orders under a BOA. Similarly, a blanket purchase agreement (BPA) is also not a contract. A BPA (whether a BPA under part 13 of the Federal Acquisition Regulation (FAR) or a BPA under subpart 8.4 of the FAR)) is not a contract because it neither obligates funds nor requires placement of any orders against it. Instead, it is an understanding between an ordering agency and a contractor that allows the agency to place future orders more quickly by identifying terms and conditions applying to those orders, a description of the supplies or services to be provided, and methods for issuing and pricing each order. The government is not obligated to place any orders, and either party may cancel a BPA at any time. Although current § 124.503(g) addresses BOAs, it does not specifically mention BPAs. The proposed rule would amend § 124.503 to merely specifically recognize that BPAs are also not contracts and should be afforded the same treatment as BOAs. Section 124.504 This rule also proposes to make several changes to § 124.504. The proposed rule would amend § 124.504(b) to alter the provision prohibiting SBA from accepting a requirement into the 8(a) BD program where a procuring activity competed a requirement among 8(a) Participants prior to offering the requirement to SBA and receiving SBA’s formal acceptance PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 of the requirement. SBA believes that the restriction as written is overly harsh and burdensome to procuring agencies. Several contracting officers have not offered a follow-on procurement to the 8(a) program prior to conducting a competition restricted to eligible 8(a) Participants because they believed that as a follow-on it must be procured through the 8(a) program. They issued solicitations identifying them as competitive 8(a) procurements, selected an apparent successful offeror and then sought SBA’s eligibility determination prior to making an award. A strict interpretation of the current regulatory language would prohibit SBA from accepting such a requirement. Such an interpretation could seriously adversely affect an agency’s procurement strategy by unduly delaying the award of a contract. That was never SBA’s intent. As long as a procuring agency clearly identified a requirement as a competitive 8(a) procurement and the public fully understood it to be restricted only to eligible 8(a) Participants, SBA should be able to accept that requirement regardless of when the offering occurred. The rule would clarify SBA’s intent regarding the requirement that a procuring agency must seek and obtain SBA’s concurrence to release any follow-on procurement from the 8(a) BD program. This is not a change in policy, but rather a clarification of SBA’s current policy and the position SBA has taken in several protests before the General Accountability Office. Some agencies have attempted to remove a follow-on procurement from the 8(a) program and reprocure the requirement through a MAC or Government-wide Acquisition Contract (GWAC) that is not an 8(a) contract without seeking release by saying that they intend to issue a competitive 8(a) order off the MAC or GWAC. In other words, because the order off the MAC or GWAC would be offered to and accepted for award through the 8(a) BD program and the follow-on work would be performed through the 8(a) BD program, some procuring agencies believe that release is not needed. SBA does not agree. In such a case, the underlying contract is not an 8(a) contract. The procuring agency is attempting to remove a requirement from the 8(a) program to a contract that is not an 8(a) contract. That is precisely what release is intended to apply to. Moreover, because § 124.504(d)(4) provides that the requirement to seek release of an 8(a) requirement from SBA does not apply to orders offered to and accepted for the 8(a) program where the underlying MAC E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules or GWAC is not itself an 8(a) contract, allowing a procuring agency to move an 8(a) contract to an 8(a) order off a non8(a) contract vehicle would allow the procuring agency to then remove the next follow-on to the 8(a) order out of the 8(a) program entirely without any input from SBA. A procuring agency could take an 8(a) contract with a base year and four one-year option periods, turn it into a one-year 8(a) order off a non-8(a) contract vehicle, and then remove it from the 8(a) program entirely after that one-year performance period. That was certainly not the intent of SBA’s regulations. As such, this rule clarifies that the request for and granting of a release of a follow-on procurement from the 8(a) BD program is required when the procurement will be moved out of the 8(a) BD program as an independent contract into a MAC or GWAC. SBA has received additional comments recommending that release should also apply even if the underlying pre-existing MAC or GWAC to which a procuring agency seeks to move a follow-on requirement is itself an 8(a) contract. These commenters argue that an 8(a) incumbent contractor may be seriously hurt by moving a procurement from a general 8(a) competitive procurement to an 8(a) MAC or GWAC to which the incumbent is not a contract holder. In such a case, the incumbent would have no opportunity to win the award for the follow-on contract, and, without the release process, would have no opportunity to demonstrate that it would be adversely impacted or to try to dissuade SBA from agreeing to release the procurement. In response, the proposed rule would provide that SBA must agree to release any followon requirement where a procuring agency seeks to reprocure that requirement through a limited contracting vehicle which is not available to all 8(a) BD Program Participants (e.g., any multiple award or Governmentwide acquisition contract, whether or not the underlying MAC or GWAC is itself an 8(a) contract). If an agency seeks to reprocure a current 8(a) requirement as a competitive 8(a) award for a new 8(a) MAC or GWAC vehicle, SBA’s concurrence would not be required because such a competition would be available to all 8(a) BD Program Participants. The proposed rule would also clarify that in all cases where a procuring agency seeks to fulfill a follow-on requirement outside of the 8(a) BD program, except where it is statutorily or otherwise required to use a mandatory source (see FAR subpart 8.6 and 8.7), it must make a written request VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 to and receive the concurrence of SBA to do so. In such a case, the proposed rule would require a procuring agency to notify SBA that it will take a followon procurement out of the 8(a) procurement because of a mandatory source. Such notification would be required at least 30 days before the end of the contract period to give the 8(a) Participant the opportunity to make alternative plans. In addition, SBA does not typically consider the value of a bridge contract when determining whether an offered procurement is a new requirement. A bridge contract is meant to be a temporary stop-gap measure intended to ensure the continuation of service while an agency finalizes a long-term procurement approach. As such, SBA does not typically consider a bridge contract as part of the new requirement analysis, unless there is some basis to believe that the agency is altering the duration of the option periods to avoid particular regulatory requirements. Whether to consider the bridge contract is determined on a case-by-case basis given the facts of the procurement at issue. SBA seeks comments as to whether this long-standing policy should also be incorporated into the regulations. Section 124.509 The proposed rule would revise § 124.509(e), regarding how a Participant can obtain a waiver to the requirement prohibiting it from receiving further sole source 8(a) contracts where the Participant does not meet its applicable non-8(a) business activity target. Currently, the regulations require the AA/BD to process a Participant’s request for a waiver in every case. The proposed rule would substitute SBA for the AA/BD to allow flexibility to SBA to determine the level of processing in a standard operating procedure outside the regulations. SBA believes that at least at some level, the district office should be able to process such requests for waiver. That correct level could be any requirement below the Simplified Acquisition Threshold (SAT), or maybe some other specific dollar value. Putting such a requirement in an SOP, instead of the regulations, however, would give flexibility to SBA to adjust the requirement as necessary, and allow more straightforward requests to be processed more expeditiously. The current regulation also requires the SBA Administrator on a nondelegable bases to decide requests for waiver from a procuring agency. In other words, if the Participant itself does not request a waiver to the requirement prohibiting it from PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 60857 receiving further sole source 8(a) contracts, but an agency does because it believes that the award of a sole source contract to the identified Participant is needed to achieve significant interests of the Government, the SBA Administrator must currently make that determination. Requiring such a request to be processed by several levels of SBA reviewers and then by the Administrator slows down the processing. If a procuring agency truly needs something quickly, it could be harmed by the processing time. The proposed rule would change the Administrator from making these determinations to SBA. This should allow these requests to be processed more quickly. Section 124.513 Currently, § 124.513(e) provides that SBA must approve a joint venture agreement prior to the award of an 8(a) contract on behalf of the joint venture. This requirement applies to both competitive and sole source 8(a) procurements. SBA does not approve joint venture agreements in any other context, including a joint venture between an 8(a) Participant and its SBAapproved mentor (which may be other than small) in connection with a non8(a) contract (i.e., small business setaside, HUBZone, SDVO small business, or WOSB contract). In order to be considered an award to a small disadvantaged business (SDB) for a non8(a) contract, a joint venture between an 8(a) Participant and a non-8(a) Participant must be controlled by the 8(a) partner to the joint venture and otherwise meet the provisions of § 124.513(c) and (d). If the non-8(a) partner to the joint venture is also a small business under the size standard corresponding to the NAICS code assigned to the procurement, the joint venture could qualify as small if the provisions of § 124.513(c) and (d) were not met (see § 121.103(h)(3)(i), where a joint venture can qualify as small as long as each party to the joint venture individually qualifies as small), but the joint venture could not qualify as an award to an SDB in such case. If the joint venture were between an 8(a) Participant and its large business mentor, the joint venture could not qualify as small if the provisions of § 124.513(c) and (d) were not met. The size of a joint venture between a small business prote´ge´ and its large business mentor is determined without looking at the size of the mentor only when the joint venture complies with SBA’s regulations regarding control of the joint venture. Where another offeror believes that a joint venture between a prote´ge´ and its large business mentor has not E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 60858 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules complied with the applicable control regulations, it may protest the size of the joint venture. The applicable Area Office of SBA’s Office of Government Contracting would then look at the joint venture agreement to determine if the small business is in control of the joint venture within the meaning of SBA’s regulations. If that Office determines that the applicable regulations were not followed, the joint venture would lose its exclusion from affiliation, be found to be other than small, and, thus, ineligible for an award as a small business. This size protest process has worked well in ensuring that small business joint venture partners do in fact control non-8(a) contracts with their large business mentors. Because size protests are authorized for competitive 8(a) contracts, SBA and believes that the size protest process could work similarly for competitive 8(a) contracts. As such, this proposed rule would eliminate the need for 8(a) Participants to seek and receive approval from SBA of every joint venture for competitive 8(a) contracts. SBA believes that this would significantly lessen the burden imposed on 8(a) small business Participants. Participants would not be required to submit additional paperwork to SBA and would not have to wait for SBA approval in order to seek competitive 8(a) awards. However, the proposed rule would not eliminate the requirement that SBA must approve joint ventures in connection with sole source 8(a) awards. Because size protests from other Participants are not permitted with respect to sole source 8(a) procurements, there would be no way to ensure that a joint venture for an 8(a) sole source contract between an 8(a) Participant and its large business mentor is controlled by the 8(a) Participant and otherwise meets SBA’s joint venture requirements if SBA did not continue to look at joint ventures in that context. SBA believes that it is important to ensure that the joint venture rules would continue to be followed, and without any other enforcement mechanism, SBA must continue to approve joint ventures for 8(a) sole source contracts. The only other alternative approach would be to allow size protests in connection with sole source 8(a) contracts, but SBA believes that is not appropriate because other Participants are not really interested parties with respect to a sole source 8(a) procurement offered to the 8(a) program on behalf of another Participant. VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 Section 124.519 Section 124.519 limits the ability of 8(a) Participants to obtain additional sole source 8(a) contracts once they have reached a certain dollar level of overall 8(a) contracts. Currently, for a firm having a receipts-based size standard corresponding to its primary NAICS code, the limit above which a Participant can no longer receive sole source 8(a) contracts is five times the size standard corresponding to its primary NAICS code, or $100,000,000, whichever is less. For a firm having an employee-based size standard corresponding to its primary NAICS code, the limit is $100,000,000. In order to simplify this requirement, this proposed rule would provide that a Participant may not receive sole source 8(a) contract awards where it has received a combined total of competitive and sole source 8(a) contracts in excess of $100,000,000 during its participation in the 8(a) BD program, regardless of its primary NAICS code. In addition, the rule would clarify that in determining whether a Participant has reached the limit identified in paragraph (a) of this section, SBA would look at the 8(a) revenues a Participant has actually received, not projected 8(a) revenues that a Participant might receive through an indefinite delivery or indefinite quantity contract, a multiple award contract, or options or modifications. Finally, the proposed rule would amend what types of small dollar value 8(a) contracts should not be considered in determining whether a Participant has reached the 8(a) revenue limit. Currently, SBA does not consider 8(a) contracts awarded under $100,000 in determining whether a Participant has reached the ‘1 8(a) revenue limit. The proposed rule would replace the $100,000 amount with a reference to the SAT. SBA has delegated to procuring agencies the ability to award sole source 8(a) contracts without offer and acceptance for contracts valued at or below the SAT. Because SBA does not accept such procurements into the 8(a) BD program, it is difficult for SBA to monitor these awards. The proposed rule would merely align the 8(a) revenue limit with that authority. Section 125.2 The proposed rule would add a new paragraph (g) requiring contracting officers to consider the past performance and experience of first tier subcontractors in certain instances. This consideration is statutorily required for bundled or consolidated contracts (15 U.S.C. 644(e)(4)(B)(i)) and for multiple PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 award contracts valued above a certain dollar amount that corresponds to the agency’s substantial bundling threshold (15 U.S.C. 644(q)(1)(B)). Following the statutory provisions, the proposed rule requires a contracting officer to consider the past performance and experience of first tier subcontractors in those two categories of contracts. The proposed rule would not require a contracting officer to consider the past performance, capabilities and experience of each first tier subcontractor as the capabilities and past performance of the small business prime contractor in other instances. Instead, it would provide discretion to contracting officers to consider such past performance, capabilities and experience of each first tier subcontractor where appropriate. SBA specifically requests comments as to whether as a policy matter such consideration should be required in all cases, or limited only to the statutorily required instances as proposed. Section 125.3 The Small Business Act explicitly prohibits the Government from requiring small businesses to submit subcontracting plans. 15 U.S.C. 637(d)(8). This prohibition is set forth in § 125.3(b) of SBA’s regulations and in FAR 19.702(b)(1). Under the Alaska Native Claims Settlement Act (ANCSA), a contractor receives credit towards the satisfaction of its small or small disadvantaged business subcontracting goals when contracting with an ANCowned firm. 43 U.S.C. 1626(e)(4)(B). There has been some confusion as to whether an ANC-owned firm that does not individually qualify as small but counts as a small business or a small disadvantaged business for subcontracting goaling purposes under 43 U.S.C. 1626(e)(4)(B) must itself submit a subcontracting plan. SBA believes that such a firm is not currently required to submit a subcontracting plan, but proposes to add clarifying language to § 125.3(b) to clear up any confusion. The proposed rule would make clear that all firms considered to be small businesses, whether the firm qualifies as a small business concern for the size standard corresponding to the NAICS code assigned to the contract or is deemed to be treated as a small business concern by statute, would not be required to submit subcontracting plans. Section 125.5 The proposed rule clarifies that SBA does not use the certificate of competency (COC) procedures for 8(a) sole source contracts. This has long been SBA’s policy. See 62 FR 43584, E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 43592 (Aug. 14, 1997). Instead of using SBA COC procedures, an agency that finds a potential 8(a) sole source awardee to be non-responsible should proceed through the substitution or withdrawal procedures in the proposed § 124.503(e). The proposed rule also changes the threshold for COC appeals from $100,000 to the simplified acquisition threshold. Section 125.6 Section 125.6(b) provides guidance on which limitation on subcontracting requirement applies to a ‘‘mixed contract.’’ The section currently refers to a mixed contract as one that combines both services and supplies. SBA inadvertently did not include the possibility that a mixed contact could include construction work, although in practice SBA has applied this section to a contract requiring, for example, both services and construction work. The proposed revision would merely recognize that a mixed contract is one that integrates any combination of services, supplies, or construction. A contracting officer would then select the appropriate NAICS code, and that NAICS code is determinative as to which limitation on subcontracting and performance requirement applies. SBA also asks for comments regarding how the nonmanufacturer rule should be applied in multiple item procurements (reference § 125.6(a)(2)(ii)). Currently, for a multiple item procurement where a nonmanufacturer waiver is granted for one or more items, compliance with the limitation on subcontracting requirement will not consider the value of items subject to a waiver. As such, more than 50% of the value of the products to be supplied by the nonmanufacturer that are not subject to a waiver must be the products of one or more domestic small business manufacturers or processors. The regulation gives an example where a contract is for $1,000,000 and calls for the acquisition of 10 items. Market research shows that nine of the items can be sourced from small business manufacturers and one item is subject to an SBA class waiver. The projected value of the item that is waived is $10,000. Under the current regulatory language, at least 50% of the value of the items not subject to a waiver, or $495,000 (50% of $990,000), must be supplied by one or more domestic small business manufacturers, and the prime small business nonmanufacturer may act as a manufacturer for one or more items. Several small business nonmanufacturers have disagreed with this provision. They believe that in VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 order to qualify as a small business nonmanufacturer, at least 50% of the value of the contract must come from either small business manufacturers or from any businesses for items which have been granted a waiver (or that small business manufacturers plus waiver must equal at least 50%). In other words, in the above example, $500,000 (50% of the value of the contract) must come from small business manufacturers or be subject to a waiver. If items totaling $10,000 are subject to a waiver, then only $490,000 worth of items must come from small business manufacturers; requiring $5,000 less from small business manufacturers. SBA is considering changing this in the final rule, but seeks comments on whether this approach makes sense. The current approach provides added incentives for small business manufacturers. The recommended approach might cause more requirements to be set aside for small business, but SBA questions whether this would truly benefit small business if small business manufactures are not ultimately providing the products. Section 125.8 The proposed rule would make conforming changes to § 125.8 in order to take into account merging the 8(a) BD Mentor-Prote´ge´ Program with the All Small Mentor-Prote´ge´ Program. Proposed § 125.8(b)(2)(iv) would permit the parties to a joint venture to agree to distribute profits from the joint venture so that the small business participant(s) receive profits from the joint venture that exceed the percentage commensurate with the work performed by them. Normally, profits would be distributed commensurate with the work performed. However, several small businesses have asked SBA to allow the parties to agree to pay a small business more if they would like to do so. Of course, SBA would not permit any agreement that would pay a small business less than that corresponding to the work it performed. But, if the parties would like to distribute the profits to further benefit a small business, SBA would not want to prohibit that. Section 125.9 The proposed rule would first reorganize some of the current provisions in § 125.9 for ease of use and understanding. Paragraph 125.9(b) would be reorganized and clarified. The proposed rule clarifies that in order to qualify as a mentor, SBA will look at three things, whether the proposed mentor: Is capable of carrying out its responsibilities to assist the prote´ge´ firm PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 60859 under the proposed mentor-prote´ge´ agreement; does not appear on the Federal list of debarred or suspended contractors; and can impart value to a prote´ge´ firm. Instead of requiring SBA to look at and determine that a proposed mentor possesses good character in every case, the proposed rule would amend this provision to specify that SBA will decline an application if SBA determines that the mentor does not possess good character. The proposed rule would also clarify that a mentor that has more than one prote´ge´ cannot submit competing offers in response to a solicitation for a specific procurement through separate joint ventures with different prote´ge´s. That has always been SBA’s intent (the current rule specifies that a second mentor-prote´ge´ relationship cannot be a competitor of the first), but SBA wants to make this clear in response to questions SBA has received regarding this issue. SBA is also considering whether to limit mentors only to those firms having average annual revenues of less than $100 million. Currently, any concern that demonstrates a commitment and the ability to assist small business concerns may act as a mentor. This includes large businesses of any size. SBA has received several suggestions from ‘‘mid-size’’ companies (i.e., those that no longer qualify as small under their primary NAICS codes, but believe that they cannot adequately compete against the much larger companies) that a mentor-prote´ge´ program that excluded very large businesses would be beneficial to the mid-size firms and allow them to more effectively compete. SBA’s focus in the mentor-prote´ge´ program is the prote´ge´ firm, what business development assistance a proposed mentor can provide to a prote´ge´ to enable that firm to more effectively compete on its own in the future. Whether a mentor is $1,000 over the size standard corresponding to its primary NAICS code or many millions of dollars over has not been a concern to SBA. SBA seeks a program that will provide the most effective business development assistance to small business prote´ge´ firms. SBA requests comments on whether the size of a mentor should be restricted in the regulations, and whether small businesses would be better or worse served by such a restriction. The proposed rule would implement Section 861 of the National Defense Authorization Act (NDAA) of 2019, Public Law 115–232, to make three changes to the mentor-prote´ge´ program in order to benefit Puerto Rican small businesses. First, the proposed rule would amend § 125.9(b) regarding the E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 60860 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules number of prote´ge´ firms that one mentor can have at any one time. Currently, the regulation provides that under no circumstances can a mentor have more than three prote´ge´s at one time. Section 861 of the NDAA provides that the restriction on the number of prote´ge´ firms a mentor can have shall not apply to up to two mentor-protege relationships if such relationships are with a small business that has its principal office located in the Commonwealth of Puerto Rico. As such, proposed § 125.9(b)(3)(ii) would provide that a mentor generally cannot have more than three prote´ge´s at one time, but that the first two mentor-prote´ge´ relationships between a specific mentor and a small business that has its principal office located in the Commonwealth of Puerto Rico would not count against the limit of three proteges that a mentor can have at one time. Thus, if a mentor did have two prote´ge´s that had their principal offices in Puerto Rico, it could have an additional three prote´ge´s, or a total of five prote´ge´s, and comply with SBA’s requirements. The proposed rule would also add a new § 125.9(d)(6) to implement a provision of Section 861 of NDAA 2019, which authorizes contracting incentives to mentors that subcontract to prote´ge´ firms that are Puerto Rico businesses. Specifically, proposed § 125.9(d)(6) would provide that a mentor that provides a subcontract to a prote´ge´ that has its principal office located in Puerto Rico may (i) receive positive consideration for the mentor’s past performance evaluation, and (ii) apply costs incurred for providing training to such prote´ge´ toward the subcontracting goals contained in the subcontracting plan of the mentor. SBA requests comments as to whether the term ‘‘positive consideration’’ can be better defined. Section 861 specifically authorizes these two incentives, but suggests that other incentives may also be appropriate. SBA also seeks comments as to whether any other contracting incentives could be feasible. The proposed rule would clarify the requirements for a firm seeking to form a mentor-prote´ge´ relationship in a NAICS code that is not the firm’s primary NAICS code (§ 125.9(c)(1)(ii)). SBA intended that a firm could be a prote´ge´ in a secondary NAICS code for which it qualifies as small if it has done work previously in that secondary NAICS code. SBA did not want a firm that had grown to be other than small in its primary NAICS codes to form a mentor-prote´ge´ relationship in a NAICS code in which it had no experience VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 simply because it qualified as small in that other NAICS code. SBA believes that such a situation (i.e., having a prote´ge´ with no experience in a secondary NAICS code) could lead to abuse of the program. It would be hard for a firm with no experience in a secondary NAICS code to be the lead on a joint venture with its mentor. Similarly, a mentor with all the experience could easily take control of a joint venture and perform all of the work required of the joint venture. The current regulation, however, has caused some confusion. It states that where a firm is other than small in its primary NAICS code, the firm can qualify as a prote´ge´ in a secondary NAICS code if it is small in that secondary NAICS code and has prior experience or previously performed work in that secondary NAICS code. Some have read this provision as permitting a mentorprote´ge´ relationship in a secondary NAICS code only where the firm is other than small in its primary NAICS code. That was not SBA’s intent. In addition, others have read this provision as requiring prior experience in a secondary NAICS code only where the firm is other than small in its primary NAICS code, but not where it qualifies as small in its primary NAICS code. This too was not SBA’s intent. The proposed rule clarifies that a firm may seek to be a prote´ge´ in any NAICS code for which it qualifies as small and can form a mentor-prote´ge´ relationship in a secondary NAICS code if it qualifies as small and has prior experience or previously performed work in that NAICS code. In addition, although SBA does not believe that a regulatory change is needed, SBA would like to clarify SBA’s position on what experience a prote´ge´ firm must have if it seeks a mentorprote´ge´ relationship in its primary NAICS code. As noted above, SBA’s regulations require a firm seeking to be a prote´ge´ in a secondary NAICS code to demonstrate that it has prior experience in that secondary NAICS code. The regulation is silent with respect to a firm having experience in its primary NAICS code. Generally, a firm would have performed some work in its primary NAICS code—normally, that is how SBA determines what the firm’s primary NAICS code is (i.e., the code in which it has received the majority of its revenues). However, a firm owned by an entity (i.e., tribe, ANC, NHO or CDC), can be admitted to the 8(a) BD without much experience in its self-identified primary NAICS code if the entity has made a firm commitment to support the operations of the applicant concern and PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 it has the financial ability to do so. In these limited instances, where a new entity-owned 8(a) Participant seeks to form a mentor-prote´ge´ relationship, it may not have any expertise in its identified primary NAICS code. The 8(a) BD Mentor-Prote´ge´ Program has allowed mentor-prote´ge´ relationships in these circumstances. Because the 8(a) BD Mentor-Prote´ge´ Program is being merged with the All Small Mentor-Prote´ge´ Program, it follows that SBA would continue to allow such mentor-prote´ge´ relationships. The proposed rule would also respond to concerns raised by small businesses regarding the regulatory limit of permitting only two mentor-prote´ge´ relationships even where the small business prote´ge´ receives no or limited assistance from its mentor through a particular mentor-prote´ge´ agreement. SBA has informally permitted a mentorprote´ge´ relationship not to count against the limit of two such relationships in total where the prote´ge´ can demonstrate that it has not received any assistance from its mentor under the mentorprote´ge´ relationship. SBA believes that a relationship that provides no business development assistance or contracting opportunities to a prote´ge´ should not be counted against the firm, or that the firm should not be restricted to having only one additional mentor-prote´ge´ relationship in such a case. SBA considered implementing in this proposed rule a provision which would formalize its previous policy—i.e., to not count a mentor-prote´ge´ relationship where the prote´ge´ can demonstrate that it received no assistance from the relationship. In order to eliminate any disagreements as to whether a firm did or did not receive any assistance under its mentor-prote´ge´ agreement, this rule proposes to establish an easily understandable and objective basis for counting or not counting a mentorprote´ge´ relationship. Specifically, the rule proposes to amend § 125.9(e)(6) to not count any mentor-prote´ge´ relationship toward a firm’s two permitted lifetime mentor-prote´ge´ relationships where the mentor-prote´ge´ agreement is terminated within 18 months from the date SBA approved the agreement. This rule also proposes to eliminate the reconsideration process for declined mentor-prote´ge´ agreements in § 125.9(f) as unnecessary. Currently, if SBA declines a mentor-prote´ge´ agreement, the prospective small business prote´ge´ may make changes to its agreement and seek reconsideration from SBA within 45 days of SBA’s decision to decline the mentor-prote´ge´ relationship. The current regulations also allow the small E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules business to submit a new (or revised) mentor-prote´ge´ agreement to SBA at any point after 60 days from the date of SBA’s final decision declining a mentorprote´ge´ relationship. SBA believes that this ability to submit a new or revised mentor-prote´ge´ agreement after 60 days is sufficient. Finally, the proposed rule would add clarifying language regarding the annual review of mentor-prote´ge´ relationships. It is important that SBA receive an honest assessment from the prote´ge´ of how the mentor-prote´ge´ relationship is working, whether the prote´ge´ has received the agreed-upon business development assistance, and whether the prote´ge´ would recommend the mentor to be a mentor for another small business in the future. SBA needs to know if the mentor is not providing the agreed-upon business development assistance to the prote´ge´. This would affect that firm’s ability to be a mentor in the future. The rule would also provide that if a prote´ge´ does not provide information relating to the mentor-prote´ge´ relationship, thereby hindering SBA’s ability to properly evaluate the relationship, SBA may decide not to approve continuation of the mentor-prote´ge´ relationship. SBA has also received several complaints from small business prote´ge´s whose mentor-prote´ge´ relationships were terminated by the mentor soon after a joint venture between the prote´ge´ and mentor received a Government contract as a small business. SBA considered adding additional protections for prote´ge´ firms, but is not certain how best to remedy this situation. Current § 125.9(h) provides consequences for when a mentor does not provide to the prote´ge´ firm the business development assistance set forth in its mentor-prote´ge´ agreement. Under the current regulations, where that occurs, the firm will be ineligible to again act as a mentor for a period of two years from the date SBA terminates the mentor-prote´ge´ agreement, SBA may recommend to the relevant procuring agency to issue a stop work order for each Federal contract for which the mentor and prote´ge´ are performing as a small business joint venture, and SBA may seek to substitute the prote´ge´ firm for the joint venture if the prote´ge´ firm is able to independently complete performance of any joint venture contract without the mentor. SBA believes that provision should be sufficient to dissuade mentors from early terminating mentor-prote´ge´ agreements. SBA also considered adding a provision requiring a joint venture between a prote´ge´ and its mentor to recertify its size if the mentor-prote´ge´ VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 relationship prematurely ends. In such a case, if the mentor was an other than small business and the joint venture could not recertify as small, the procuring agency could no longer count the contract as an award to small business. SBA specifically requests comments on this alternative and seeks comments on other possible alternatives to remedy this perceived problem. Section 125.18 In addition to the revision to § 125.18(c) identified above, the rule proposes to amend the language in § 125.18(a) to clarify what representations and certifications a business concern seeking to be awarded a SDVO contract must submit as part of its offer. Sections 126.616 and 126.618 The proposed rule would make minor revisions to §§ 126.616 and 126.618 by merely deleting references to the 8(a) BD Mentor-Prote´ge´ Program, since that program would no longer exist as a separate program. Sections 127.503(h) and 127.504 In addition to the revision to § 127.504(c) identified above, the rule proposed to make other changes or clarifications to § 127.504. The proposed rule would rename and revise § 127.504 for better understanding and ease of use. The section heading would be changed to ‘‘What requirements must an EDWOSB or WOSB meet to be eligible for an EDWOSB or WOSB contract?’’. The text would then more clearly define those requirements and, as identified above, add language similar to that contained in the regulations governing the other socio-economic programs. The proposed rule would move the recertification procedures for WOSBs from § 127.503(h) to § 127.504(e). Sections 134.318 and 121.1103 The proposed rule would amend § 134.318 to make it consistent with SBA’s size regulations. In this regard, § 121.1103(c)(1)(i) of SBA’s size regulations provides that upon receipt of the service copy of a NAICS code appeal, the contracting officer must ‘‘stay the solicitation.’’ However, when that rule was implemented, a corresponding change was not made to the procedural rules for SBA’s OHA contained in part 134. Section 134.318(b) provides that if OHA changes a NAICS code in response to a NAICS code appeal, and the contracting officer must amend the solicitation to reflect the new NAICS code if ‘‘the contracting officer receives OHA’s decision by the date offers are due.’’ Otherwise, OHA’s PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 60861 decision does not apply to the pending procurement, but will apply only to future solicitations for the same supplies or services. If the solicitation is stayed, as required by § 121.1103(c)(1)(i), the contracting officer will always receive OHA’s decision before the date offers are due. As such, this rule proposes to simply require that the contracting officer must amend the solicitation to reflect the new NAICS code whenever OHA changes a NAICS code in response to a NAICS code appeal. In addition, for clarity purposes, the proposed rule would revise § 121.1103(c)(1)(i) to provide that a contracting officer must stay the date of the closing of the receipt of offers instead of requiring that he or she must stay the solicitation. SBA is not revising these regulations to reflect a change in policy, but merely to more precisely capture what actually is being stayed. III. Compliance With Executive Orders 12866, 12988, 13132, 13175, 13563, 13771, the Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory Flexibility Act (5 U.S.C. 601–612) Executive Order 12866 The Office of Management and Budget (OMB) has determined that this proposed rule is a significant regulatory action for the purposes of Executive Order 12866. Accordingly, the next section contains SBA’s Regulatory Impact Analysis. This is not a major rule, however, under the Congressional Review Act. Regulatory Impact Analysis 1. Is there a need for the regulatory action? In combining the 8(a) BD MentorProte´ge´ Program and the All Small Mentor-Prote´ge´ Program, SBA seeks to eliminate confusion regarding perceived differences between the two Programs, remove unnecessary duplication of functions within SBA, and establish one, unified staff to better coordinate and process mentor-prote´ge´ applications. In addition, eliminating the requirement that SBA approve every joint venture in connection with an 8(a) contract will greatly reduce the time required for 8(a) BD Participants to come into and SBA to ensure compliance with SBA’s joint venture requirements. SBA is also proposing to make several changes to clarify its regulations. Through the years, SBA has spoken with small business and representatives and has determined that several regulations need further refinement so that they are easier to understand and implement. The proposed rule would E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 60862 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules make several changes to ensure that the rules pertaining to SBA’s various small business procurement programs are consistent. SBA believes that making the programs as consistent and similar as possible, where practicable, will make it easier for small businesses to understand what is expected of them and to comply with those requirements. 2. What is the baseline, and the incremental benefits and costs of this regulatory action? The proposed regulations seek to address or clarify several issues, which will provide clarity to small businesses and contracting personnel. Further, SBA is proposing to eliminate the burden that 8(a) Participants seeking to be awarded an 8(a) contract as a joint venture must submit the joint venture to SBA for review and approval prior to contract award. There are currently approximately 4500 8(a) BD Participants in the portfolio. Of those, about 10% or roughly 450 Participants have entered a joint venture agreement to seek the award of an 8(a) contract. Under the current rules, SBA must approve the initial joint venture agreement itself and each addendum to the joint venture agreement—identifying the type of work and what percentage each partner to the joint venture would perform of a specific 8(a) procurement—prior to contract award. SBA reviews the terms of the joint venture agreement for regulatory compliance and must also assess the 8(a) BD Participant’s capacity and whether the agreement is fair and equitable and will be of substantial benefit to the 8(a) concern. It is difficult to calculate the costs associated with submitting a joint venture agreement to SBA because the review process is highly fact-intensive and typically requires that 8(a) firms provide additional information and clarification. However, in the Agency’s best professional judgment, it is estimated that an 8(a) Participant currently spends approximately three hours submitting a joint venture agreement to SBA and responding to questions regarding that submission. That equates to approximately 1,350 hours at an estimated rate of $44.06 per hour—the median wage plus benefits for accountants and auditors according to 2018 data from the Bureau of Labor Statistics—for an annual total cost savings to 8(a) Participants of about $59,500. In addition, merging the 8(a) BD Mentor-Prote´ge´ Program into the All Small Mentor-Prote´ge´ Program would also provide cost savings. Firms seeking a mentor-prote´ge´ relationship through the All Small Mentor-Prote´ge´ Program apply through an on-line, electronic VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 application system. 8(a) Participants seeking SBA’s approval of a mentorprote´ge´ relationship through the 8(a) BD program do not apply through an online, electronic system, but rather apply manually through their servicing SBA district office. In SBA’s best professional judgment, the additional cost for submitting a manual mentor-prote´ge´ agreement to SBA for review and approval and responding manually to questions regarding that submission is estimated at two hours. SBA receives approximately 150 applications for 8(a) mentor-prote´ge´ relationships annually, which equates to an annual savings to prospective prote´ge´ firms of about 300 hours. At an estimated rate of $44.06 per hour, the annual savings in costs related to the reduced time for mentor-prote´ge´ applications through the All Small Mentor Prote´ge´ process is about $13,000 per year. Moreover, eliminating the 8(a) BD Mentor-Prote´ge´ Program as a separate program and merging it with the All Small Mentor-Prote´ge´ Program will eliminate confusion firms seeking a mentor-prote´ge´ relationship have between the two programs. When SBA first implemented the All Small MentorProte´ge´ Program, it intended to establish a program substantively identical to the 8(a) BD mentor-prote´ge´ program, as required by Section 1641 of the NDAA of 2013. Nevertheless, feedback from the small business community reveals a widespread misconception that the two programs offer different benefits. By merging the 8(a) BD Mentor-Prote´ge´ Program into the All Small-Mentor Prote´ge´ Program, firms will not have to read the requirements for both programs and try to decipher any perceived differences. SBA estimates that having one combined program will eliminate about one hour of preparation time for each firm seeking a mentor-prote´ge´ relationship. Based on approximately 600 mentor-prote´ge´ applications each year (about 450 for the All Small Mentor-Prote´ge´ Program and about 150 for the 8(a) BD Mentor-Prote´ge´ Program), this would equate to an annual cost savings to prospective prote´ge´ firms of about 600 hours. At an estimated rate of $44.06 per hour, the annual savings in costs related to the elimination of confusion caused by having two separate programs is about $26,500. Thus, in total, the merger of the 8(a) BD mentor-prote´ge´ program into the All Small Business Mentor-Prote´ge´ Program would provide a cost savings of about $39,500 per year. In addition, it generally takes between 60 and 90 days for SBA to approve a mentor-prote´ge´ relationship through the PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 8(a) BD program. Conversely, the average time it takes to approve a mentor-prote´ge´ relationship through the All Small Mentor-Prote´ge´ Program is about 20 working days. To firms seeking to submit offers through a joint venture with their mentors, this difference is significant. Such joint ventures are only eligible for the regulatory exclusion from affiliation if they are formed after SBA approves the underlying mentorprote´ge´ relationship. It follows that firms applying through the 8(a) BD Mentor-Prote´ge´ Program could miss out on contract opportunities waiting for their mentor-prote´ge´ relationships to be approved. These contract opportunity costs are inherently difficult to measure, so SBA is requesting comments to better inform our understanding of the costs to the small business community. However, in SBA’s best judgment, faster approval timeframes will mitigate such costs by giving program participants more certainty in planning their proposal strategies. This rule also proposes to eliminate the requirement that any specific joint venture can be awarded no more than three contracts over a two year period, but would instead permit a joint venture to be awarded an unlimited number of contracts over a two year period. The change removing the limit of three awards to any joint venture would reduce the burden of small businesses being required to form additional joint venture entities to perform a fourth contract within that two-year period. SBA has observed that joint ventures are often established as separate legal entities—specifically as limited liability corporations—based on considerations related to individual venture liability, tax liability, regulatory requirements, and exit strategies. Under the current rule joint venture partners must form a new joint venture entity after receiving three contracts lest they be deemed affiliated for all purposes. The proposed rule which allows a joint venture to continue to seek and be awarded contracts without requiring the partners to form a new joint venture entity after receiving its third contract would save small businesses significant legal costs in establishing new joint ventures and ensuring that those entities meet all applicable regulatory requirements. The proposed rule would also make several changes to reduce the burden of recertifying small business status generally and requesting changes of ownership in the 8(a) BD program. Specifically, the proposed rule would clarify that a concern that is at least 51% owned by an entity (i.e., tribe, ANC, or Community Development Corporation (CDC)) need not recertify its E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules status as a small business when the ownership of the concern changes to or from a wholly-owned business concern of the same entity, as long as the ultimate owner remains that entity. In addition, the proposed rule would also provide that a Participant in SBA’s 8(a) BD program that is owned by an ANC or tribe need not request a change of ownership from SBA where the ANC or tribe merely reorganizes its ownership of a Participant in the 8(a) BD program by inserting or removing a whollyowned business entity between the ANC/tribe and the Participant. Both of these changes would save entity-owned small business concerns a significant amount of time and money. Similarly, the proposed rule would provide that prior SBA approval is not needed where the disadvantaged individual (or entity) in control of a Participant in the 8(a) BD program will increase the percentage of his or her (its) ownership interest. The proposed rule would also allow a concern that has been declined for 8(a) BD program participation to submit a new application 90 days after the date of the Agency’s final decision to decline. This would change the current rule which requires a concern to wait 12 months from the date of the final agency decision to reapply. This would allow firms that have been declined from participating in the 8(a) BD program the opportunity to correct deficiencies, come into compliance with program eligibility requirements, reapply and be admitted to the program and receive the benefits of the program much more quickly. SBA understands that by reducing the re-application waiting period there is the potential to strain the agency’s resources with higher application volumes. Because these potential costs are difficult to quantify, SBA is seeking comments to further examine this proposal. However, in the Agency’s best judgment, any costs associated with the increase in application volume would be outweighed by the potential benefit of providing business development assistance and contracting benefits sooner to eligible firms. This rule also proposes to clarify SBA’s position with respect to size and socioeconomic status certifications on task orders under MACs. Currently, size certifications at the order level are not required unless the contracting officer, in his or her discretion, requests a recertification in connection with a specific order. The proposed rule would require a concern to submit a recertification or confirm its size and/or socioeconomic status for all set-aside orders (i.e., small business set-aside, 8(a) small business, service-disabled VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 veteran-owned small business, HUBZone small business, or womenowned small business) under unrestricted MACs, except for orders or Blanket Purchase Agreements issued under any FSS contracts. Additionally, the proposed rule would require a concern to submit a recertification or confirm its socioeconomic status for all set-aside orders where the required socioeconomic status for the order differs from that of the underlying set aside MAC. If the firm’s size and status in SAM is current and accurate when the firm submits its offer, the concern would not need to submit a new certification or submit any additional documentation with its offer. SBA recognizes that confirming accurate size and socioeconomic status imposes a burden on a small business contract holder, but the burden is minimal. SBA intends that confirmation of size and status under this rule would be satisfied by confirming that the firm’s size and status in SAM is currently accurate and qualifies the firm for award. FPDS–NG indicates that, in Fiscal Year 2018, agencies set aside about 1,400 orders per year off unrestricted MACs, excluding orders under FSS contracts. SBA adopts the assumption from FAR Case 2014–002 that on average there are three offers per setaside order. The annual cost of requiring present size and socioeconomic status on set-aside orders under unrestricted MACs, excluding FSS orders, therefore is calculated as 1,400 orders × 3 offers per order × 15 minutes per offer × $44.06 cost per hour. This amounts to an annual public burden of about $46,250. FPDS–NG indicates that, in Fiscal Year 2018, agencies set aside about 400 orders per year off set-aside MACs, other than the FSS, in the categories covered by this rule. These categories are WOSB or EDWOSB set-aside/solesource orders off small business setaside MACs; SDVOSB set-aside/solesource orders off small business setaside MACs; WOSB or EDWOSB setaside/sole-source orders off any small business program MAC (8(a), HUBZone, WOSB/EDWOSB, and SDVOSB); and SDVOSB set-aside/sole-source order off 8 any small business program MAC (8(a), HUBZone, WOSB/EDWOSB, and SDVOSB). Following the same calculations, the annual cost of requiring present socioeconomic status on set-aside orders under set-aside MACs, is calculated as 400 orders × 3 offers per order × 15 minutes per offer × $44.06 cost per hour. This amounts to an annual public burden of about $13,200. PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 60863 As reflected in the calculation, SBA believes that being presently qualified for the required size or socioeconomic status on an order, where required, would impose a burden on small businesses. A concern already is required by law to update its size and status certifications in SAM at least annually. As such, the added burden to industry is limited to confirming that the firm’s certification is current and accurate. The added burden to ordering agencies includes the act of checking a firm’s size and status certification in SAM at the time of order award. Since ordering agencies are already familiar with checking SAM information, such as to ensure that an order awardee is not debarred, suspended, or proposed for debarment, this verification is de minimis. Further, checking SAM at time of order award replaces the check of the offeror’s contract level certification. SBA recognizes, however, that an agency’s market research for the order level may be impacted where the agency intends to issue a set-aside order off an unrestricted vehicle (or a socioeconomic set-aside off a small business set-aside vehicle). The ordering agency may need to identify MAC-eligible vendors and then find their status in SAM. This is particularly the case where the agency is applying the Rule of Two and verifying that there are at least two small businesses or small businesses with the required status sufficient to set aside the order. SBA does not believe that conducting SAM research is onerous; however, because this rule does not cover the FSS and does not cover orders set aside within the same category as the contract, agencies have readily available alternatives to avoid using SAM. Using the same set-aside order data, the annual cost of additional market research efforts for applicable set-aside orders under MACs, is calculated as 2,400 orders (1,400 + 1,000) × 10 minutes per order × $44.06 cost per hour. This amounts to an annual government burden of about $17,600. The annual cost is partially offset by the cost savings that result from other changes in this rule. This proposed change goes more to accountability and ensuring that small business contracting vehicles truly benefit small business concerns. Nevertheless, SBA is requesting comments to further assess potential incremental costs. 3. What are the alternatives to this proposed rule? As noted above, this rule proposes to make a number of changes intended to reduce unnecessary or excessive burdens on small businesses, and to E:\FR\FM\08NOP3.SGM 08NOP3 60864 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules clarify other regulatory provisions to eliminate confusion among small businesses and procuring activities. SBA has also considered other alternative proposals to achieve these ends. Concerning SBA’s role in approving 8(a) joint venture agreements, the Agency could also eliminate the requirement that SBA must approve joint ventures in connection with sole source 8(a) awards. However, as noted above, SBA believes that such approval is an important enforcement mechanism to ensure that the joint venture rules are followed. With respect to the requirement that a concern must wait 90 days to re-apply to the 8(a) BD program after the date of the Agency’s final decline decision, SBA could instead eliminate the application waiting period altogether. This would allow a concern to re-apply as soon as it reasonably believed it had overcome the grounds for decline. However, SBA believes that such an alternative would encompass significant administrative burden on SBA. Under the proposed rule, if an order under an unrestricted MAC is set-aside exclusively for small business (i.e., small business set-aside, 8(a) small business, service-disabled veteranowned small business, HUBZone small business, or women-owned small business), or the order is set aside in a different category than was the set-aside MAC, a concern must be qualified for the required size and socioeconomic status at the time it submits its initial offer, which includes price, for the particular order. In SBA’s view, the order is the first time size or socioeconomic status is important where the underlying MAC is unrestricted or set aside in a different category than the set-aside MAC, and therefore, that is the date at which eligibility should be examined. SBA considered maintaining the status quo; allowing a one-time certification as to size and socioeconomic status (i.e., at the time of the initial offer for the underlying contract) to control all orders under the contract, unless one of recertification requirements applies (see 121.404(g)). SBA believes the current policy does not properly promote the interests of small business. Long-term contracting vehicles that reward firms that once were, but no longer qualify as, small or a particular socioeconomic status adversely affect truly small or otherwise eligible businesses. Another alternative is to require business concerns to notify contracting agencies when there is a change to a concern’s socioeconomic status (e.g., HUBZone, WOSB, etc.), such that they would no longer qualify for set-aside orders. The contracting agency would then be required to issue a contract modification within 30 days, and from that point forward, ordering agencies would no longer be able to count options or orders issued pursuant to the contract for small business goaling purposes. This could be less burdensome than recertification of socioeconomic status for each set-aside order. SBA invites comments on consideration of this approach. Summary of Costs and Cost Savings Table 1: Summary of Incremental Costs and Cost Savings, below, sets out the estimated net incremental cost/(cost saving) associated with this proposed rule. Table 2: Detailed Breakdown of Incremental Costs and Cost Savings, below, provides a detailed explanation of the annual cost/(cost saving) estimates associated with this proposed rule. This proposed rule is expected to be an E.O. 13771 deregulatory action. The annualized cost savings of this rule is expected to be $21,065 in 2016 dollars with a net present value of $300,935 over perpetuity. TABLE 1—SUMMARY OF INCREMENTAL COSTS AND COST SAVINGS Annual cost/ (cost saving) estimate Item No. Regulatory action item 1 ..................... 2 ..................... Eliminating SBA approval of joint venture agreements to perform competitive 8(a) contracts .............................. Merging the 8(a) BD Mentor-Prote´ge´ Program into the All Small Mentor-Prote´ge´ Program—Elimination of manual application process. Merging the 8(a) BD Mentor-Prote´ge´ Program into the All Small Mentor-Prote´ge´ Program—Elimination of confusion among firms seeking a mentor-prote´ge´ relationship. Requiring recertification for set-aside orders issued off unrestricted Multiple Award Contracts ............................ Requiring recertification for set-aside orders issued off set-aside Multiple Award Contracts ................................ Additional Government detailed market research to identify qualified sources for set-aside orders ..................... 3 ..................... 4 ..................... 5 ..................... 6 ..................... ($59,500) (13,000) (26,500) 46,250 13,200 17,600 khammond on DSKJM1Z7X2PROD with PROPOSALS3 TABLE 2—DETAILED BREAKDOWN OF INCREMENTAL COSTS AND COST SAVINGS Annual cost/ (cost saving) estimate breakdown Item No. Regulatory action item details 1 ...................... Proposed regulatory change: SBA is proposing to eliminate the burden that 8(a) Participants seeking to be awarded an 8(a) contract as a joint venture must submit the joint venture to SBA for review and approval prior to contract award. Estimated number of impacted entities: There are currently approximately 4500 8(a) BD Participants in the portfolio. Of those, about 10% or roughly 450 Participants have entered a joint venture agreement to seek the award of an 8(a) contract. Estimated average impact * (labor hour): SBA estimates that an 8(a) BD Participant currently spends approximately three hours submitting a joint venture agreement to SBA and responding to questions regarding that submission. 2017 Median Pay ** (per hour): Most 8(a) firms use an accountant or someone with similar skills for this task Estimated Cost/(Cost Saving) ................................................................................................................................. Proposed regulatory change: SBA is proposing to merge the 8(a) BD Mentor-Prote´ge´ Program into the All Small Mentor-Prote´ge´ Program. This will reduce the burden on 8(a) Participants seeking a mentor-prote´ge´. Estimated number of impacted entities: SBA receives approximately 150 applications for 8(a) mentor-prote´ge´ relationships annually. 2 ...................... VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 E:\FR\FM\08NOP3.SGM 08NOP3 450 entities. 3 hours $44.06. ($59,500) 150 entities. Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules 60865 TABLE 2—DETAILED BREAKDOWN OF INCREMENTAL COSTS AND COST SAVINGS—Continued Item No. Annual cost/ (cost saving) estimate breakdown Regulatory action item details 3 ...................... 4 ...................... 5 ...................... 6 ...................... Estimated average impact * (labor hour): In SBA’s best professional judgment, the additional cost for submitting a manual mentor-prote´ge´ agreement to SBA for review and approval and responding manually to questions regarding that submission is estimated at two hours. 2017 Median Pay ** (per hour): Most 8(a) firms use an accountant or someone with similar skills for this task Estimated Cost/(Cost Saving) ................................................................................................................................. Proposed regulatory change: SBA is proposing to merge the 8(a) BD Mentor-Prote´ge´ Program into the All Small Mentor-Prote´ge´ Program. In doing so, firms will not have to read the requirements for both programs and try to decipher any perceived differences.. Estimated number of impacted entities: SBA receives approximately 600 mentor-prote´ge´ applications each year—about 450 for the All Small Mentor-Prote´ge´ Program and about 150 for the 8(a) BD Mentor-Prote´ge´ Program). Estimated average impact * (labor hour): SBA estimates that having one combined program will eliminate about one hour of preparation time for each firm seeking a mentor-prote´ge´ relationship. 2017 Median Pay ** (per hour): Most small business concerns use an accountant or someone with similar skills for this task. Estimated Cost/(Cost Saving) ................................................................................................................................. Proposed regulatory change: SBA is proposing to require that a firm be accurately certified and presently qualified as to size and/or status for set-aside orders issued off Multiple Award Contracts that were not set aside or set aside in a separate category, except for the Federal Supply Schedule. Estimated number of impacted entities: Approximately 1,400 set-aside orders are issued annually on Multiple Award Contracts that are not set aside in the same category, other than on the Federal Supply Schedule. SBA estimates that three offers are submitted for each order. Estimated average impact * (labor hour): SBA estimates that a small business will spend an average of 15 minutes confirming that size and status is accurate prior to submitting an offer. 2017 Median Pay ** (per hour): Most small business concerns use an accountant or someone with similar skills for this task. Estimated Cost/(Cost Saving) ................................................................................................................................. Proposed regulatory change: SBA is proposing to require that a firm be accurately certified and presently qualified as to socioeconomic status for set-aside orders issued off Multiple Award Contracts that were set aside in a separate category, except for the Federal Supply Schedule contracts. Estimated number of impacted entities: Approximately 400 set-aside orders are issued annually on Multiple Award Contracts that are not set aside in the same category, other than on the Federal Supply Schedule, are affected by this rule. SBA estimates that three offers are submitted for each order. Estimated average impact * (labor hour): SBA estimates that a small business will spend an average of 15 minutes confirming that size and status is accurate prior to submitting an offer. 2017 Median Pay ** (per hour): Most small business concerns use an accountant or someone with similar skills for this task. Estimated Cost/(Cost Saving) ................................................................................................................................. Proposed regulatory change: SBA is proposing to require that firms be accurately certified and presently qualified as to size and socioeconomic status for certain set-aside orders issued off Multiple Award Contracts, except for the Federal Supply Schedule contracts. This change impacts the market research required by ordering activities to determine if a set-aside order for small business or for any of the socioeconomic programs may be pursued. Estimated number of impacted entities: Approximately 2,400 set-aside orders are issued annually as described in the proposed rule on Multiple Award Contracts, other than on the Federal Supply Schedule. 33000. Estimated average impact * (labor hour): SBA estimates that ordering activities applying the Rule of Two will spend an average of 10 additional minutes to locate contractors awarded MACs and looking up the current business size for each of the contractors in SAM to determine if a set-aside order can be pursued. 2017 Median Pay ** (per hour): Contracting officers typically perform the market research for the acquisition plan. Estimated Cost/(Cost Saving) ................................................................................................................................. 2 hours. $44.06. ($13,000) 600 entities. 1 hour. $44.06. ($26,500) 4,200 offers. 0.25 hours. $44.06 $46,250. 1,200 offers. 0.25 hours. $44.06. $13,200. 2,400 orders. 0.16 hours. $44.06. $17,600. khammond on DSKJM1Z7X2PROD with PROPOSALS3 * This estimate is based on SBA’s best professional judgment. ** Source: Bureau of Labor Statistics, Accountants and Auditors. Executive Order 12988 Executive Order 13132 This action meets applicable standards set forth in Sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect. For the purposes of Executive Order 13132, SBA has determined that this proposed rule will not have substantial, direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, for the VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 purpose of Executive Order 13132, Federalism, SBA has determined that this proposed rule has no federalism implications warranting preparation of a federalism assessment. Executive Order 13175 As part of this proposed rulemaking process SBA held tribal consultations pursuant to Executive Order 13175, Tribal Consultations, in Anchorage, AK E:\FR\FM\08NOP3.SGM 08NOP3 60866 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 (see 83 FR 17626), Albuquerque, NM (see 83 FR 24684), and Oklahoma City, OK (see 83 FR 24684). This executive order reaffirms the Federal Government’s commitment to tribal sovereignty and requires Federal agencies to consult with Indian tribal governments when developing policies that would impact the tribal community. The purpose of the abovereferenced tribal consultation meetings was to provide interested parties with an opportunity to discuss their views on the issues, and for SBA to obtain the views of SBA’s stakeholders on approaches to the 8(a) BD program regulations. SBA has always considered tribal consultation meetings a valuable component of its deliberations and believes that these tribal consultation meetings allow for constructive dialogue with the Tribal community, Tribal Leaders, Tribal Elders, elected members of Alaska Native Villages or their appointed representatives, and principals of tribally-owned and ANCowned firms participating in the 8(a) BD program. In general, tribal stakeholders were supportive of SBA’s intent to implement changes that will make it easier for small business concerns to understand and comply with the regulations governing the 8(a) BD program, and agreed that this rulemaking will make the program more effective and accessible to the small business community. SBA received significant comments on its approaches to the proposed regulatory changes, as well as several recommendations regarding the 8(a) BD program not initially contemplated by this planned rulemaking. SBA has taken these discussions into account in drafting this proposed rule. SBA intends to hold additional tribal consultations before issuing a final rule. 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 VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 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)? To the extent possible, the agency utilized the most recent data available in the Federal Procurement Data System—Next Generation (FPDS–NG), Dynamic Small Business Search (DSBS) and System for Award Management (SAM). 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 proposed rule will have a 60-day comment period and will be posted on www.regulations.gov to allow the public to comment meaningfully on its provisions. In addition, SBA submitted the proposed rule to the Office of Management and Budget for interagency review. 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 proposed rule is intended to reduce unnecessary or excessive burdens on 8(a) Participants, and clarify other regulatory related provisions to eliminate confusion among small businesses and procuring activities. Executive Order 13771 This proposed rule is expected to be an E.O. 13771 deregulatory action. The annualized cost savings of this rule is expected to be $21,065 in 2016 dollars with a net present value of $300,935 over perpetuity. A detailed discussion of the estimated cost of this proposed rule can be found in the above Regulatory Impact Analysis. Paperwork Reduction Act, 44 U.S.C. Ch. 35 This proposed rule does impose additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C. Chapter 35. The rule provides a number of size and/ or socioeconomic status recertification requirements for set-aside orders under MACs. The annual total public reporting PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 burden for this collection of information is estimated to be 1,800 total hours ($79,300), including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing information reporting. Respondents: 7,200. Responses per respondent: 1. Total annual responses: 7,200. Preparation hours per response: 0.25 (15 min). Total response burden hours: 1,800. Cost per hour: $44.06. Estimated cost burden to the public: $79,300. This added information collection burden will be officially reflected through OMB Control Number 9000– 0163 if the rule is implemented. SBA invites comments, particularly on: Whether this collection of information is necessary; whether it will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology. Regulatory Flexibility Act, 5 U.S.C. 601– 612 The Regulatory Flexibility Act (RFA) requires administrative agencies to consider the effect of their actions on small entities, small non-profit enterprises, and small local governments. Pursuant to the RFA, when an agency issues a rulemaking, the agency must prepare a regulatory flexibility analysis which describes the impact of the rule on small entities. However, section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities. The RFA defines ‘‘small entity’’ to include ‘‘small businesses,’’ ‘‘small organizations,’’ and ‘‘small governmental jurisdictions.’’ This proposed rule concerns various aspects of SBA’s 8(a) BD program, as such the rule relates to small business concerns but would not affect ‘‘small organizations’’ or ‘‘small governmental jurisdictions’’ because those programs generally apply only to ‘‘business concerns’’ as defined by SBA regulations, in other words, to small businesses organized for profit. ‘‘Small organizations’’ or ‘‘small governmental E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules jurisdictions’’ are non-profits or governmental entities and do not generally qualify as ‘‘business concerns’’ within the meaning of SBA’s regulations. There are currently approximately 4500 8(a) BD Participants in the portfolio. Most of the proposed changes are clarification of current policy or designed to reduce unnecessary or excessive burdens on 8(a) BD Participants and therefore should not impact many of these concerns. There are about 385 Participants with 8(a) BD mentor-prote´ge´ agreements and about another 850 small businesses that have SBA-approved mentor-prote´ge´ agreements through the All Small Mentor-Prote´ge´ Program. The consolidation of SBA’s two mentorprote´ge´ programs into one program will not have a significant economic impact on small businesses. In fact, it should have no affect at all on those small businesses that currently have or on those that seek to have an SBAapproved mentor-prote´ge´ relationship. The proposed rule would eliminate confusion regarding perceived differences between the two Programs, remove unnecessary duplication of functions within SBA, and establish one, unified staff to better coordinate and process mentor-prote´ge´ applications. The benefits of the two programs are identical, and will not change under the proposed rule. SBA is also proposing to require a business to be qualified for the required size and status when under consideration for a set-aside order off a MAC that was awarded outside of the same set-aside category. Pursuant to the Small Business Goaling Report (SBGR) Federal Procurement Data System— Next Generation (FPDS–NG) records, 60867 about 236,000 new orders were awarded off MACs per year from FY 2014 to FY 2018. Around 199,000, or 84.3 percent, were awarded off MACs established without a small business set aside. For this analysis, small business set asides include all total or partial small business set asides; and all 8(a), WOSB, SDVOSB, and HUBZone awards. There were about 9,000 new orders awarded annually with a small business set aside off MACs established without a small business set aside. These orders were issued to approximately 2,600 firms. The 9,000 new orders awarded with a small business set aside off a MAC without a small business set aside were 4.0 percent of the 236,000 new orders off MACs in a year (Table 3). In FY 2018, only 1,400 for these set-aside orders used MACs other than the FSS Program. TABLE 3—0.47% OF NEW MAC ORDERS IN A FY ARE NON-FSS ORDERS SET ASIDE FOR SMALL BUSINESS WHERE UNDERLYING BASE CONTRACT NOT SET ASIDE FOR SMALL BUSINESS FY 014 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Total new modification 0 orders off MACs in FY .......................................... Orders awarded with SB set aside without MAC IDV SB set aside .................. Non-FSS orders awarded with SB set aside without MAC IDV SB set aside .. Percent ..................................................... If all firms receiving a non-FSS small business set aside order off a MAC that was not itself set aside for small business were adversely affected by the proposed rule (i.e., every such firm receiving an award as a small business had grown to be other than a small business or no longer qualified as 8(a), WOSB, SDVO, or HUBZone), the rule requiring a business to be certified as small for a non-FSS small business set aside orders off MACs not set aside for small business would impact only 0.47 percent of annual new MAC orders. As such, SBA certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities. Nevertheless, throughout the supplementary information to this proposed rule, SBA has identified the reasons why the proposed changes are being considered, the objectives and basis for the proposed rule, a description of the number of small entities to which the proposed rule will apply, and a description of alternatives considered. FY 015 FY 016 18:28 Nov 07, 2019 Jkt 250001 FY 018 AVG 244,664 231,694 245,978 234,304 223,861 236,100 10,089 9,347 9,729 9,198 8,666 9,406 902 0.37% 780 0.34% 1,019 0.41% 1,422 0.61% 1,400 0.63% 1,105 0.47% List of Subjects 13 CFR Part 134 13 CFR Part 121 Administrative practice and procedure, Claims, Equal employment opportunity, Lawyers, Organization and functions (Government agencies). Accordingly, for the reasons stated in the preamble, SBA proposes to amend 13 CFR parts 121, 124, 125, 126, 127, and 134 as follows: Administrative practice and procedure, 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, Government property, Small businesses. 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 businesses. 13 CFR Part 127 Government contracts, Reporting and recordkeeping requirements, Small businesses. VerDate Sep<11>2014 FY 017 PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 PART 121—SMALL BUSINESS SIZE REGULATIONS 1. The authority citation for part 121 continues to read as follows: ■ Authority: 15 U.S.C. 632, 634(b)(6), 662 and 694a(9). 2. Amend § 121.103 by: a. Revising the first sentence of paragraphs (b)(6) and (9); ■ b. Revising paragraph (f)(2)(i); ■ c. Revising the first sentence of paragraph (g); ■ d. Revising paragraph (h) introductory text and example 1 to paragraph (h) introductory text; ■ e. Adding two sentences to the end of paragraph (h)(3)(ii); ■ f. Removing paragraph (h)(3)(iii); and ■ g. Revising paragraph (h)(5). ■ ■ E:\FR\FM\08NOP3.SGM 08NOP3 60868 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules The revisions and addition read as follows: § 121.103 How does SBA determine affiliation? khammond on DSKJM1Z7X2PROD with PROPOSALS3 * * * * * (b) * * * (6) A firm that has an SBA-approved mentor-prote´ge´ agreement authorized under § 125.9 of this chapter is not affiliated with its mentor or prote´ge´ firm solely because the prote´ge´ firm receives assistance from the mentor under the agreement. * * * * * * * * (9) In the case of a solicitation for a bundled contract or a Multiple Award Contract with a value in excess of the agency’s substantial bundling threshold, a small business contractor may enter into a Small Business Teaming Arrangement with one or more small business subcontractors and submit an offer as a small business without regard to affiliation, so long as each team member is small for the size standard assigned to the contract or subcontract. * * * * * * * * (f) * * * (2) * * * (i) This presumption may be rebutted by a showing that despite the contractual relations with another concern, the concern at issue is not solely dependent on that other concern, such as where the concern has been in business for a short amount of time and has only been able to secure a limited number of contracts or where the contractual relations do not restrict the concern in question from selling the same type of products or services to another purchaser. * * * * * (g) Affiliation based on the newly organized concern rule. Affiliation may arise where former or current officers, directors, principal stockholders, managing members, or key employees of one concern organize a new concern in the same or related industry or field of operation, and serve as the new concern’s officers, directors, principal stockholders, managing members, or key employees, and the one concern is furnishing or will furnish the new concern with contracts, financial or technical assistance, indemnification on bid or performance bonds, and/or other facilities, whether for a fee or otherwise. * * * (h) Affiliation based on joint ventures. A joint venture is an association of individuals and/or concerns with interests in any degree or proportion consorting to engage in and carry out business ventures for joint profit over a VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 two year period, for which purpose they combine their efforts, property, money, skill, or knowledge, but not on a continuing or permanent basis for conducting business generally. This means that a specific joint venture entity generally may not be awarded contracts beyond a two-year period, starting from the date of the award of the first contract, without the partners to the joint venture being deemed affiliated for the joint venture. Once a joint venture receives a contract, it may submit additional offers for a period of two years from the date of that first award. An individual joint venture may be awarded one or more contracts after that two-year period as long as it submitted an offer including price prior to the end of that two-year period. SBA will find joint venture partners to be affiliated, and thus will aggregate their receipts and/or employees in determining the size of the joint venture for all small business programs, where the joint venture submits an offer after two years from the date of the first award. The same two (or more) entities may create additional joint ventures, and each new joint venture entity may submit offers for a period of two years from the date of the first contract to the joint venture without the partners to the joint venture being deemed affiliates. At some point, however, such a longstanding inter-relationship or contractual dependence between the same joint venture partners will lead to a finding of general affiliation between and among them. A joint venture: Must be in writing; must do business under its own name and be identified as a joint venture in the System for Award Management (SAM) for the award of a prime contract; may be in the form of a formal or informal partnership or exist as a separate limited liability company or other separate legal entity; and, if it exists as a formal separate legal entity, may not be populated with individuals intended to perform contracts awarded to the joint venture (i.e., the joint venture may have its own separate employees to perform administrative functions, including one or more Facility Security Officer(s), but may not have its own separate employees to perform contracts awarded to the joint venture). SBA may also determine that the relationship between a prime contractor and its subcontractor is a joint venture pursuant to paragraph (h)(4) of this section. For purposes of this paragraph (h), contract refers to prime contracts, novations of prime contracts, and any subcontract in which the joint venture is treated as a similarly PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 situated entity as the term is defined in part 125 of this chapter. Example 1 to paragraph (h) introductory text. Joint Venture AB receives a contract on April 2, year 1. Joint Venture AB may receive additional contracts through April 2, year 3. On June 6, year 2, Joint Venture AB submits an offer for Solicitation 1. On July 13, year 2, Joint Venture AB submits an offer for Solicitation 2. In May, year 3, Joint Venture AB is found to be the apparent successful offeror for Solicitation 1. In June, year 3, Joint Venture AB is found to be the apparent successful offeror for Solicitation 2. Even though the award of the two contracts emanating from Solicitations 1 and 2 would occur after April 2, year 3, Joint Venture AB may receive those awards without causing general affiliation between its joint venture partners because the offers occurred prior to the expiration of the two-year period. * * * * * (3) * * * (ii) * * * Except for sole source 8(a) awards, the joint venture must meet the requirements of § 124.513(c) and (d), § 125.8(b) and (c), § 125.18(b)(2) and (3), § 126.616(c) and (d), or § 127.506(c) and (d) of this chapter, as appropriate, at the time it submits its initial offer including price. For a sole source 8(a) award, the joint venture must demonstrate that it meets the requirements of § 124.513(c) and (d) prior to the award of the contract. * * * * * (5) For size purposes, a concern must include in its receipts its proportionate share of joint venture receipts, unless the proportionate share already is accounted for in receipts reflecting transactions between the concern and its joint ventures (e.g., subcontracts from a joint venture entity to joint venture partners). In determining the number of employees, a concern must include in its total number of employees its proportionate share of joint venture employees. For both the calculation of receipts and of employees, the appropriate proportionate share is the same percentage of receipts or employees as the joint venture partner’s percentage share of the work performed by the joint venture. Example 1 to paragraph (h)(5). Joint Venture AB is awarded a contract for $10M. The joint venture will perform 50% of the work, with A performing $2M (40% of the 50%, or 20% of the total value of the contract) and B performing $3M (60% of the 50% or 30% of the total value of the contract). Since A will perform 40% of the work done by the joint venture, its share of the revenues for the entire contract is 40%, which means that the receipts from the contract awarded to Joint Venture AB that must be included in A’s receipts for size purposes are $4M. A must add $4M to its receipts for size purposes, unless its receipts E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules already account for the $4M in transactions between A and Joint Venture AB. * * * * * 3. Amend § 121.402 by: a. Revising the first sentence of paragraph (b)(2); ■ b. Revising paragraph (c)(1)(i); ■ c. Redesignating paragraph (c)(2)(ii) as paragraph (c)(2)(iii); and ■ d. Adding a new paragraph (c)(2)(ii). The revisions and addition read as follows: ■ ■ § 121.402 What size standards are applicable to Federal Government Contracting programs? khammond on DSKJM1Z7X2PROD with PROPOSALS3 * * * * * (b) * * * (2) A procurement is generally classified according to the component which accounts for the greatest percentage of contract value. * * * (c) * * * (1) * * * (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; or * * * * * (2) * * * (ii) The contracting officer must assign a single NAICS code for each order issued against a Multiple Award Contract. The NAICS code assigned to an order must be a NAICS code included in the underlying 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 principal 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. If the base contract has not been assigned a NAICS code that reflects the principal purpose of the order, the contracting officer shall select a new NAICS code and corresponding size standard for the order. * * * * * ■ 4. In § 121.404: ■ a. Amend paragraph (a) by: ■ i. Revising paragraphs (a) introductory text and (a)(1); and ■ ii. Adding a subject heading to paragraph (a)(2); ■ b. Revise paragraph (b); ■ c. Add a subject heading to paragraph (c); VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 d. Revise paragraph (d); e. Add a subject heading to paragraph (e) and a sentence at the end of paragraph (e); ■ f. Add a subject heading to paragraph (f); ■ g. Amend paragraph (g) by: ■ i. Revising paragraph (g) introductory text and paragraphs (g)(2)(ii)(C) and (D); ■ ii. Adding paragraph (g)(2)(iii) and a new second sentence to paragraph (g)(3) introductory text; and ■ h. Add a subject heading to paragraph (h). The additions and revisions read as follows: ■ ■ § 121.404 When is the size status of a business concern determined? (a) Time of size—(1) Multiple award contracts. With respect to Multiple Award Contracts, orders issued against a Multiple Award Contract, and Blanket Purchase Agreements issued against a Multiple Award Contract: (i) Single NAICS. If a single NAICS code is assigned as set forth in § 121.402(c)(1)(i), SBA determines size status for the underlying Multiple Award Contract at the time of initial offer (or other formal response to a solicitation), which includes price, based upon the size standard set forth in the solicitation for the Multiple Award Contract, unless the concern was required to recertify under paragraph (g)(1), (2), or (3). (A) Unrestricted Multiple Award Contracts. For an unrestricted Multiple Award Contract, if a business concern is small at the time of offer and contractlevel recertification for the Multiple Award Contract, it is small for goaling purposes for each order issued against the contract, unless a contracting officer requests a size recertification for a specific order or Blanket Purchase Agreement. However, except for orders and Blanket Purchase Agreements issued under any Federal Supply Schedule contract, if an order or a Blanket Purchase Agreement under an unrestricted Multiple Award Contract is set-aside exclusively for small business (i.e., small business set-aside, 8(a) small business, service-disabled veteranowned small business, HUBZone small business, or women-owned small business), a concern must recertify its size status and qualify as a small business at the time it submits its initial offer, which includes price, for the particular order or Blanket Purchase Agreement. (B) Set-aside Multiple Award Contracts. For a Multiple Award Contract that is set aside for small business (i.e., small business set, 8(a) small business, service-disabled PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 60869 veteran-owned small business, HUBZone small business, or womenowned small business), if a business concern is small at the time of offer and contract-level recertification for the Multiple Award Contract, it is small for each order or Blanket Purchase Agreement issued against the contract, unless a contracting officer requests a size recertification for a specific order or Blanket Purchase Agreement. (ii) Multiple NAICS. If multiple NAICS codes are assigned as set forth in § 121.402(c)(1)(ii), SBA determines size status 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, unless the firm was required to recertify under paragraph (g)(1), (2), or (3). 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). (A) Unrestricted Multiple Award Contracts. For an unrestricted Multiple Award Contract, if a business concern is small at the time of offer and contractlevel recertification for discrete categories on the Multiple Award Contract, it is small for goaling purposes for each order issued against any of those categories, unless a contracting officer requests a size recertification for a specific order or Blanket Purchase Agreement. However, except for orders or Blanket Purchase Agreements issued under any Federal Supply Schedule contract, if an order or Blanket Purchase Agreement for a discrete category under an unrestricted Multiple Award Contract is set-aside exclusively for small business (i.e., small business set, 8(a) small business, service-disabled veteran-owned small business, HUBZone small business, or womenowned small business), a concern must recertify its size status and qualify as a small business at the time it submits its initial offer, which includes price, for the particular order or Agreement. (B) Set-aside Multiple Award Contracts. For a Multiple Award Contract that is set aside for small business (i.e., small business set, 8(a) small business, service-disabled veteran-owned small business, HUBZone small business, or womenowned small business), if a business is small at the time of offer and contractlevel recertification for discrete categories on the Multiple Award E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 60870 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules Contract, it is small for each order or Agreement issued against any of those categories, unless a contracting officer requests a size recertification for a specific order or Blanket Purchase. (iii) SBA will determine size at the time of initial offer (or other formal response to a solicitation), which includes price, for an order or Agreement issued against a Multiple Award Contract if the contracting officer requests a new size certification for the order or Agreement. (2) Agreements. * * * (b) Eligibility for SBA programs. A concern applying to be certified as a Participant in SBA’s 8(a) Business Development program (under part 124, subpart A, of this chapter), as a HUBZone small business (under part 126 of this chapter), or as a womenowned small business concern (under part 127 of this chapter) must qualify as a small business for its primary industry classification as of the date of its application and, where applicable, the date the SBA program office requests a formal size determination in connection with a concern that otherwise appears eligible for program certification. (c) Certificates of competency. * * * (d) Nonmanufacturer rule, ostensible subcontractor rule, and joint venture agreements. Size status is determined as of the date of the final proposal revision for negotiated acquisitions and final bid for sealed bidding for the following purposes: compliance with the nonmanufacturer rule set forth in § 121.406(b)(1), the ostensible subcontractor rule set forth in § 121.103(h)(4), and the joint venture agreement requirements in § 124.513(c) and (d), § 125.8(b) and (c), § 125.18(b)(2) and (3), § 126.616(c) and (d), or § 127.506(c) and (d) of this chapter, as appropriate. (e) Subcontracting. * * * A prime contractor may rely on the selfcertification of subcontractor provided it does not have a reason to doubt the concern’s self-certification. (f) Two-step procurements. * * * (g) Effect of size certification and recertification. 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, and after a required recertification under paragraph (g)(1), (2), or (3) of this section is generally considered to be a small business throughout the life of that contract. 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, except that a required recertification as other than small under VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 paragraph (g)(1), (2), or (3) of this section changes the firm’s status for future options and orders. The following exceptions apply to this paragraph (g): * * * * * (2) * * * (ii) * * * (C) In the context of a joint venture that has been awarded a contract or order as a small business, from any partner to the joint venture that has been acquired, is acquiring, or has merged with another business entity. (D) If the merger, sale or acquisition occurs after offer but prior to award, the offeror must recertify its size to the contracting officer prior to award. If the offeror is unable to recertify as small, it will not be eligible as a small business for the award of the contract. (iii) Recertification is not required when the ownership of a concern that is at least 51% owned by an entity (i.e., tribe, Alaska Native Corporation, or Community Development Corporation) changes to or from a wholly-owned business concern of the same entity, as long as the ultimate owner remains that entity. Example 1 to paragraph (g)(2)(iii). Indian Tribe X owns 100% of small business ABC. ABC wins an award for a small business setaside contract. In year two of contract performance, X changes the ownership of ABC so that X owns 100% of a holding company XYZ, Inc., which in turn owns 100% of ABC. This restructuring does not require ABC to recertify its status as a small business because it continues to be 100% owned (indirectly rather than directly) by Indian Tribe X. (3) * * * A contracting officer may also request size recertification, as he or she deems appropriate, prior to the 120day point in the fifth year of a long-term contract. * * * * * * * * (h) Follow-on contracts. * * * § 121.406 [Amended] 5. Amend § 121.406 by removing the word ‘‘provided’’ and adding in its place the word ‘‘provide’’ in paragraph (a) introductory text. ■ 6. Amend § 121.603 by adding paragraph (c)(3) to read as follows: ■ § 121.603 How does SBA determine whether a Participant is small for a particular 8(a) BD subcontract? * * * * * (c) * * * (3) Recertification is not required when the ownership of a concern that is at least 51% owned by an entity (i.e., tribe, Alaska Native Corporation, or Community Development Corporation) changes to or from a wholly-owned business concern of the same entity, as PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 long as the ultimate owner remains that entity. * * * * * ■ 7. Amend § 121.702 by revising paragraph (c)(6) to read as follows: § 121.702 What size and eligibility standards are applicable to the SBIR and STTR programs? * * * * * (c) * * * (6) Size requirement for joint ventures. Two or more small business concerns may submit an application as a joint venture. The joint venture will qualify as small as long as each concern is small under the size standard for the SBIR program, found at § 121.702(c), or the joint venture meets the exception at § 121.103(h)(3)(ii) for two firms approved to be a mentor and prote´ge´ under SBA’s All Small Mentor-Prote´ge´ Program. * * * * * ■ 8. Amend § 121.1001 by revising paragraphs (a)(1)(iii), (a)(2)(iii), (a)(3)(iv), (a)(4)(iii), (a)(6)(iv), (a)(7)(iii), (a)(8)(iv), and (a)(9)(iv) to read as follows: § 121.1001 Who may initiate a size protest or request a formal size determination? (a) * * * (1) * * * (iii) The SBA Government Contracting Area Director having responsibility for the area in which the headquarters of the protested offeror is located, regardless of the location of a parent company or affiliates, the Director, Office of Government Contracting, or the Associate General Counsel for Procurement Law; and * * * * * (2) * * * (iii) The SBA District Director, or designee, in either the district office serving the geographical area in which the procuring activity is located or the district office that services the apparent successful offeror, the Associate Administrator for Business Development, or the Associate General Counsel for Procurement Law. * * * * * (3) * * * (iv) The responsible SBA Government Contracting Area Director or the Director, Office of Government Contracting, or the SBA’s Associate General Counsel for Procurement Law; and * * * * * (4) * * * (iii) The responsible SBA Government Contracting Area Director; the Director, Office of Government Contracting; the Associate Administrator, Investment E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules Division, or the Associate General Counsel for Procurement Law. * * * * * (6) * * * (iv) The SBA Director, Office of HUBZone, or designee, or the SBA Associate General Counsel for Procurement Law. * * * * * (7) * * * (iii) The responsible SBA Government Contracting Area Director, the Director, Office of Government Contracting, the Associate Administrator for Business Development, or the Associate General Counsel for Procurement Law. * * * * * (8) * * * (iv) The Director, Office of Government Contracting, or designee, or the Associate General Counsel for Procurement Law. * * * * * (9) * * * (iv) The Director, Office of Government Contracting, or designee, or the Associate General Counsel for Procurement Law. * * * * * ■ 9. Amend § 121.1004 by revising paragraph (a)(2)(ii) and adding paragraph (a)(2)(iii) to read as follows: § 121.1004 protests? What time limits apply to size khammond on DSKJM1Z7X2PROD with PROPOSALS3 (a) * * * (2) * * * (ii) An order issued against a Multiple Award Contract if the contracting officer requested a size recertification in connection with that order; or (iii) Except for orders or Blanket Purchase Agreements issued under any Federal Supply Schedule contract, an order or Blanket Purchase Agreement set-aside for small business (i.e., small business set-aside, 8(a) small business, service-disabled veteran-owned small business, HUBZone small business, or women-owned small business) where the underlying Multiple Award Contract was awarded on an unrestricted basis. * * * * * ■ 10. Amend § 121.1103 by revising paragraph (c)(1)(i) to read as follows: § 121.1103 What are the procedures for appealing a NAICS code or size standard designation? * * * * * (c) * * * (1) * * * (i) Stay the date for the closing of receipt of offers; * * * * * VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 PART 124—8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS STATUS DETERMINATIONS 11. The authority citation for part 124 continues to read as follows: ■ Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), 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. 12. Amend § 124.3 by adding in alphabetical order a definition for ‘‘Follow-on requirement or contract’’ to read as follows: ■ § 124.3 What definitions are important in the 8(a) BD program? * * * * * Follow-on requirement or contract. The determination of whether a particular procurement is a follow-on includes the following considerations: (1) Whether the scope has changed significantly, requiring meaningful different types of work or different capabilities; (2) Whether the magnitude or value of the requirement has changed by at least 25 percent; and (3) Whether the end user of the requirement has changed. As a general guide, if the procurement satisfies at least one of these three conditions, it may be considered a new requirement. Conversely, if the procurement satisfies none of these conditions, it is considered a follow-on procurement. The 25 percent rule, however, cannot be applied rigidly in all cases because by doing so could encourage a result that is inconsistent with the intent of another provision in this part. * * * * * ■ 13. Amend § 124.105 by revising paragraphs (g) and (i)(2) and (4) to read as follows: § 124.105 What does it mean to be unconditionally owned by one or more disadvantaged individuals? * * * * * (g) Ownership of another current or former Participant by an immediate family member. (1) An individual may not use his or her disadvantaged status to qualify a concern if that individual has an immediate family member who is using or has used his or her disadvantaged status to qualify another concern for the 8(a) BD program and any of the following circumstances exist: (i) The concerns are connected by any common ownership or management, regardless of amount or position; or (ii) The concerns have a contractual relationship that was not conducted at arm’s length. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 60871 Example 1 to paragraph (g)(1). X applies to the 8(a) BD program. X is 95% owned by A and 5% by B, A’s father and the majority owner in a former 8(a) Participant. Even though B has no involvement in X, X would be ineligible for the program. Example 2 to paragraph (g)(1). Y applies to the 8(a) BD program. C owns 100% of Y. However, D, C’s sister and the majority owner in a former 8(a) Participant, is acting as a Vice President in Y. Y would be ineligible for the program. Example 3 to paragraph (g)(1). X seeks to apply to the 8(a) BD program with a primary NAICS code in plumbing. X is 100% owned by A. Z, a former 8(a) participant with a primary industry in general construction, is owned 100% by B, A’s brother. For general construction jobs, Z has subcontracted plumbing work to X in the past at normal commercial rates. Subcontracting work at normal commercial rates would not preclude X from being admitted to the 8(a) BD program. X would be eligible for the program. (2) If the AA/BD approves an application under paragraph (g)(1) of this section, SBA will, as part of its annual review, assess whether the firm continues to operate independently of the other current or former 8(a) concern of an immediate family member. SBA may initiate proceedings to terminate a firm from further participation in the 8(a) BD program if it is apparent that there are connections between the two firms that were not disclosed to the AA/ BD at the time of application or that came into existence after program admittance. * * * * * (i) * * * (2) Prior approval by the AA/BD is not needed where all non-disadvantaged individual (or entity) owners involved in the change of ownership own no more than a 20 percent interest in the concern both before and after the transaction, the transfer results from the death or incapacity due to a serious, long-term illness or injury of a disadvantaged principal, or the disadvantaged individual or entity in control of the Participant will increase the percentage of its ownership interest. The concern must notify SBA within 60 days of such a change in ownership. Example 1 to paragraph (i)(2). Disadvantaged individual A owns 90% of 8(a) Participant X; non-disadvantaged individual B owns 10% of X. In order to raise additional capital, X seeks to change its ownership structure such that A would own 80%, B would own 10% and C would own 10%. X can accomplish this change in ownership without prior SBA approval. Nondisadvantaged owner B is not involved in the transaction and non-disadvantaged individual C owns less than 20% of X both before and after the transaction. Example 2 to paragraph (i)(2). Disadvantaged individual C owns 60% of 8(a) Participant Y; non-disadvantaged E:\FR\FM\08NOP3.SGM 08NOP3 60872 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules individual D owns 30% of Y; and nondisadvantaged individual E owns 10% of Y. C seeks to transfer 5% of Y to E. Prior SBA approval is not needed. Although nondisadvantaged individual D owns more than 20% of Y, D is not involved in the transfer. Because the only non-disadvantaged individual involved in the transfer, E, owns less than 20% of Y both before and after the transaction, prior approval is not needed. Example 3 to paragraph (i)(2). Disadvantaged individual A owns 85% of 8(a) Participant X; non-disadvantaged individual B owns 15% of X. A seeks to transfer 15% of X to B. Prior SBA approval is needed. Although B, the nondisadvantaged owner of X, owns less than 20% of X prior to the transaction, prior approval is needed because B would own more than 20% after the transaction. Example 4 to paragraph (i)(2). ANC A owns 60% of 8(a) Participant X; nondisadvantaged individual B owns 40% of X. X seeks to transfer 15% to A. Prior SBA approval is not needed. Although a nondisadvantaged individual who is involved in the transaction, B, owns more than 20% of X both before and after the transaction, SBA approval is not needed because the change only increases the percentage of A’s ownership interest in X. * * * * (4) Where a Participant requests a change of ownership or business structure, and proceeds with the change prior to receiving SBA approval (or where a change of ownership results from the death or incapacity of a disadvantaged individual for which a request prior to the change in ownership could not occur), SBA may suspend the Participant from program benefits pending resolution of the request. If the change is approved, the length of the suspension will be restored to the Participant’s program term in the case of death or incapacity, or if the firm requested prior approval and waited 60 days for SBA approval. * * * * * ■ 14. Amend § 124.109 by: ■ a. Revising the section heading; ■ b. Adding paragraph (a)(7); ■ c. Revising paragraph (c)(3)(ii); ■ d. Adding paragraphs (c)(3)(iv) and (c)(4)(iii)(C); and ■ e. Revising paragraphs (c)(6)(iii) and (c)(7)(ii). The revisions and additions to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS3 * § 124.109 Do Indian tribes and Alaska Native Corporations have any special rules for applying to and remaining eligible for the 8(a) BD program? (a) * * * (7) Notwithstanding § 124.105(i), where an ANC merely reorganizes its ownership of a Participant in the 8(a) BD program by inserting or removing a wholly-owned business entity between the ANC and the Participant, the VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 Participant need not request a change of ownership from SBA. The Participant must, however, notify SBA of the change within 30 days of the transfer. * * * * * (c) * * * (3) * * * (ii) A Tribe may not own 51% or more of another firm which, either at the time of application or within the previous two years, has been operating in the 8(a) program under the same primary NAICS code as the applicant. A Tribe may, however, own a Participant or other applicant that conducts or will conduct secondary business in the 8(a) BD program under the NAICS code which is the primary NAICS code of the applicant concern. (A) Once an applicant is admitted to the 8(a) BD program, it may not receive an 8(a) sole source contract that is a follow-on contract to an 8(a) contract that was performed immediately previously by another Participant (or former Participant) owned by the same Tribe. For purposes of this paragraph, the same primary NAICS code means the six-digit NAICS code having the same corresponding size standard. (B) If the primary NAICS code of a tribally-owned Participant is changed pursuant to § 124.112(e), the tribe can submit an application and qualify another firm owned by the tribe for participation in the 8(a) BD program under the NAICS code that was the previous primary NAICS code of the Participant whose primary NAICS code was changed. Example 1 to paragraph (c)(3)(ii)(B). Tribe X owns 100% of 8(a) Participant A. A entered the 8(a) BD program with a primary NAICS code of 236115, New Single-Family Housing Construction (except For-Sale Builders). After four years in the program, SBA noticed that the vast majority of A’s revenues were in NAICS Code 237310, Highway, Street, and Bridge Construction, and notified A that SBA intended to change its primary NAICS code pursuant to § 124.112(e). A agreed to change its primary NAICS Code to 237310. Once the change is finalized, Tribe X can immediately submit a new application to qualify another firm that it owns for participation in the 8(a) BD program with a primary NAICS Code of 236115. * * * * * (iv) Notwithstanding § 124.105(i), where a Tribe merely reorganizes its ownership of a Participant in the 8(a) BD program by inserting or removing a wholly-owned business entity between the Tribe and the Participant, the Participant need not request a change of ownership from SBA. The Participant must, however, notify SBA of the change within 30 days of the transfer. * * * * * PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 (4) * * * (iii) * * * (C) Because an individual may be responsible for the management and daily business operations of two tribally-owned concerns, the full-time devotion requirement does not apply to tribally-owned applicants and Participants. * * * * * (6) * * * (iii) The Tribe, a tribally-owned economic development corporation, or other relevant tribally-owned holding company vested with the authority to oversee tribal economic development or business ventures has made a firm written commitment to support the operations of the applicant concern and it has the financial ability to do so. (7) * * * (ii) The officers, directors, and all shareholders owning an interest of 20% or more (other than the tribe itself) of a tribally-owned applicant or Participant must demonstrate good character (see § 124.108(a)) and cannot fail to pay significant Federal obligations owed to the Federal Government (see § 124.108(e)). ■ 15. Amend § 124.110 by revising the section heading and paragraph (e) to read as follows: § 124.110 Do Native Hawaiian Organizations (NHOs) have any special rules for applying to and remaining eligible for the 8(a) BD program? * * * * * (e) An NHO cannot own 51% or more of another firm which, either at the time of application or within the previous two years, has been operating in the 8(a) program under the same primary NAICS code as the applicant. An NHO may, however, own a Participant or an applicant that conducts or will conduct secondary business in the 8(a) BD program under the same NAICS code that a current Participant owned by the NHO operates in the 8(a) BD program as its primary NAICS code. (1) Once an applicant is admitted to the 8(a) BD program, it may not receive an 8(a) sole source contract that is a follow-on contract to an 8(a) contract that was performed immediately previously by another Participant (or former Participant) owned by the same NHO. For purposes of this paragraph, the same primary NAICS code means the six-digit NAICS code having the same corresponding size standard. (2) If the primary NAICS code of a Participant owned by an NHO is changed pursuant to § 124.112(e), the NHO can submit an application and qualify another firm owned by the NHO for participation in the 8(a) BD program E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules under the NAICS code that was the previous primary NAICS code of the Participant whose primary NAICS code was changed. * * * * * ■ 16. Amend § 124.111 by revising the section heading, adding paragraph (c)(3), and revising paragraph (d) to read as follows: § 124.111 Do Community Development Corporations (CDCs) have any special rules for applying to and remaining eligible for the 8(a) BD program? khammond on DSKJM1Z7X2PROD with PROPOSALS3 * * * * * (c) * * * (3) Notwithstanding § 124.105(i), where a CDC merely reorganizes its ownership of a Participant in the 8(a) BD program by inserting or removing a wholly-owned business entity between the CDC and the Participant, the Participant need not request a change of ownership from SBA. The Participant must, however, notify SBA of the change within 30 days of the transfer. (d) A CDC cannot own 51% or more of another firm which, either at the time of application or within the previous two years, has been operating in the 8(a) program under the same primary NAICS code as the applicant. A CDC may, however, own a Participant or an applicant that conducts or will conduct secondary business in the 8(a) BD program under the same NAICS code that a current Participant owned by the CDC operates in the 8(a) BD program as its primary SIC code. (1) Once an applicant is admitted to the 8(a) BD program, it may not receive an 8(a) sole source contract that is a follow-on contract to an 8(a) contract that was performed immediately previously by another Participant (or former Participant) owned by the same CDC. For purposes of this paragraph, the same primary NAICS code means the six-digit NAICS code having the same corresponding size standard. (2) If the primary NAICS code of a Participant owned by a CDC is changed pursuant to § 124.112(e), the CDC can submit an application and qualify another firm owned by the CDC for participation in the 8(a) BD program under the NAICS code that was the previous primary NAICS code of the Participant whose primary NAICS code was changed. * * * * * ■ 17. Amend § 124.112 by revising paragraph (d)(5), redesignating paragraph (e)(2)(iv) as paragraph (e)(2)(v), and adding a new paragraph (e)(2)(iv). The revision and addition read as follows: VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 § 124.112 What criteria must a business meet to remain eligible to participate in the 8(a) BD program? * * * * * (d) * * * (5) The excessive withdrawal analysis does not apply to Participants owned by Tribes, ANCs, NHOs, or CDCs where a withdrawal is made for the benefit of the Tribe, ANC, NHO, CDC or the native or shareholder community. It does, however, apply to withdrawals from a firm owned by a Tribe, ANC, NHO, or CDC that do not benefit the relevant entity or community. Thus, if funds or assets are withdrawn from an entityowned Participant for the benefit of a non-disadvantaged manager or owner that exceed the withdrawal thresholds, SBA may find that withdrawal to be excessive. However, a nondisadvantaged minority owner may receive a payout in excess of the excessive withdrawal amount if it is a pro rata distribution paid to all shareholders (i.e., the only way to increase the distribution to the Tribe, ANC, NHO or CDC is to increase the distribution to all shareholders) and it does not adversely affect the business development of the Participant. Example 1 to paragraph (d)(5). Triballyowned Participant X pays $1,000,000 to a non-disadvantaged manager. That would be deemed an excessive withdrawal. Example 2 to paragraph (d)(5). ANCowned Participant Y seeks to distribute $550,000 to the ANC and $450,000 to nondisadvantaged individual A based on their 55%/45% ownership interests. Because the distribution is based on the pro rata share of ownership, this would not be prohibited as an excessive withdrawal unless SBA determined that Y would be adversely affected. (e) * * * (2) * * * (iv) A Participant may appeal a district office’s decision to change its primary NAICS code to SBA’s Associate General Counsel for Procurement Law (AGC/PL) within 10 business days of receiving the district office’s final determination. The AGC/PL will examine the record, including all information submitted by the Participant in support of its position as to why the primary NAICS code contained in its business plan continues to be appropriate despite performing more work in another NAICS code, and issue a final agency decision within 15 business days of receiving the appeal. * * * * * ■ 18. Amend § 124.203 by revising the first two sentences and adding a new third sentence to read as follows: PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 60873 § 124.203 What must a concern submit to apply to the 8(a) BD program? Each 8(a) BD applicant concern must submit information and supporting documents required by SBA when applying for admission to the 8(a) BD program. This information may include, but not be limited to, financial data and statements, copies of filed Federal personal and business tax returns, individual and business bank statements, personal history statements, and any additional information or documents SBA deems necessary to determine eligibility. Each individual claiming disadvantaged status must also submit a signed IRS Form 4506T, Request for Copy or Transcript of TAX Form, to SBA. * * * ■ 19. Amend § 124.204 by adding a sentence to the end of paragraph (a) to read as follows: § 124.204 How does SBA process applications for 8(a) BD program admission? (a) * * * Where during its review SBA requests clarifying, revised or other information from the applicant, SBA’s processing time for the application will be suspended pending the receipt of such information. * * * * * ■ 20. Revise § 124.207 to read as follows: § 124.207 Can an applicant reapply for admission to the 8(a) BD program? A concern which has been declined for 8(a) BD program participation may submit a new application for admission to the program at any time after 90 days from the date of the Agency’s final decision to decline. § 124.301 [Redesignated as § 124.300] 21. Redesignate § 124.301 as § 124.300. ■ 22. Add new § 124.301 to read as follows: ■ § 124.301 Voluntary withdrawal or voluntary early graduation. (a) A Participant may voluntarily withdraw from the 8(a) BD program at any time prior to the expiration of its program term. Where a Participant has substantially achieved the goals and objectives set forth in its business plan, it may elect to voluntarily early graduate from the 8(a) BD program. (b) To initiate withdrawal or early graduation from the 8(a) BD program, a Participant must notify its servicing SBA district office of its intent to do so in writing. Once the SBA servicing district office processes the request and the District Director recognizes the withdrawal or early graduation, the E:\FR\FM\08NOP3.SGM 08NOP3 60874 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules Participant is no longer eligible to receive any 8(a) BD program assistance. ■ 23. Amend § 124.304 by revising the paragraph (d) subject heading and adding a sentence at the end of paragraph (d) to read as follows: § 124.304 What are the procedures for early graduation and termination? * * * * * (d) Notice requirements and effect of decision. * * * Once the AA/BD issues a decision to early graduate or terminate a Participant, the Participant will be immediately suspended from receiving further program assistance until the determination becomes the final agency decision. * * * * * ■ 24. Amend § 124.305 by revising paragraphs (h)(1)(ii) and (iv), and adding paragraph (h)(1)(v) to read as follows: § 124.305 What is suspension and how is a Participant suspended from the 8(a) BD program? khammond on DSKJM1Z7X2PROD with PROPOSALS3 * * * * * (h) * * * (1) * * * (ii) A disadvantaged individual who is involved in controlling the day-to-day management and control of the Participant is called to active military duty by the United States, his or her participation in the firm’s management and daily business operations is critical to the firm’s continued eligibility, the Participant does not designate another disadvantaged individual to control the concern during the call-up period, and the Participant requests to be suspended during the call-up period; * * * * * (iv) Federal appropriations for one or more Federal departments or agencies have lapsed, a Participant would lose an 8(a) sole source award due to the lapse in appropriations (e.g., SBA has previously accepted an offer for a sole source 8(a) award on behalf of the Participant or an agency could not offer a sole source 8(a) requirement to the program on behalf of the Participant due to the lapse in appropriations, and the Participant’s program term would end during the lapse), and the Participant elects to suspend its participation in the 8(a) BD program during the lapse in Federal appropriations; or (v) A Participant has not submitted a business plan to its SBA servicing office within 60 days after program admission. * * * * * ■ 25. Amend § 124.402 by revising paragraph (b) to read as follows: VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 § 124.402 How does a Participant develop a business plan? * * * * * (b) Submission of initial business plan. Each Participant must submit a business plan to its SBA servicing office as soon as possible after program admission. SBA will suspend a Participant from receiving 8(a) BD program benefits, including 8(a) contracts, if it has not submitted its business plan to the servicing district office within 60 days after program admission. * * * * * ■ 26. Amend § 124.501 by redesignating paragraphs (g) through (i) as paragraphs (h) through (j), respectively, and by adding new paragraphs (g) and (k) to read as follows: § 124.501 What general provisions apply to the award of 8(a) contracts? * * * * * (g) Before a Participant may be awarded either a sole source or competitive 8(a) contract, SBA must determine that the Participant is eligible for award. SBA will determine eligibility at the time of its acceptance of the underlying requirement into the 8(a) BD program for a sole source 8(a) contract, and after the apparent successful offeror is identified for a competitive 8(a) contract. Eligibility is based on 8(a) BD program criteria, including whether the Participant: (1) Qualifies as a small business under the size standard corresponding to the NAICS code assigned to the requirement; (2) Is in compliance with any applicable competitive business mix targets established or remedial measure imposed by § 124.509 that does not include the denial of future sole source 8(a) contracts or 8(a) contracts generally, as applicable; (3) Complies with the continued eligibility reporting requirements set forth in § 124.112(b); (4) Has a bona fide place of business in the applicable geographic area if the procurement is for construction; (5) Has not received 8(a) contracts in excess of the dollar limits set forth in § 124.519 for a sole source 8(a) procurement; (6) Has complied with the provisions of § 124.513(c) and (d) if it is seeking a sole source 8(a) award through a joint venture; and (7) Can demonstrate that it, together with any similarly situated entity, will meet the limitations on subcontracting provisions set forth in § 124.510. * * * * * (k) In order to be awarded a sole source or competitive 8(a) construction PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 contract, a Participant must have a bona fide place of business within the applicable geographic location determined by SBA. This will generally be the geographic area serviced by the SBA district office in which the work will be performed. SBA may determine that a Participant with a bona fide place of business within the entire state (if the state is serviced by more than one SBA district office), a contiguous SBA district office (in the same or another state), or another nearby area is eligible for the award of an 8(a) construction contract. (1) A Participant may have bona fide places of business in more than one location. (2) In order for a Participant to establish a bona fide place of business in a particular geographic location, the SBA district office serving the geographic area of that location must determine if that location in fact qualifies as a bona fide place of business under SBA’s requirements. (i) A Participant must submit a request for a bona fide business determination to the SBA district office servicing it. Such request may, but need not, relate to a specific 8(a) requirement. In order to apply to a specific competitive 8(a) solicitation, such request must be submitted at least 20 working days before initial offers that include price are due. (ii) The servicing district office will immediately forward the request to the SBA district office serving the geographic area of the particular location for processing. Within 10 working days of receipt of the submission, the reviewing district office will conduct a site visit, if practicable. If not practicable, the reviewing district office will contact the Participant within such 10-day period to inform the Participant that the reviewing office has received the request and may ask for additional documentation to support the request. (iii) In connection with a specific competitive solicitation, the reviewing office will make a determination whether or not the Participant has a bona fide place of business in its geographical area within 5 working days of a site visit or within 15 working days of its receipt of the request from the servicing district office if a site visit is not practical in that timeframe. If the request is not related to a specific procurement, the reviewing office will make a determination within 30 working days of its receipt of the request from the servicing district office, if practicable. (3) The effective date of a bona fide place of business is the date that the E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules evidence (paperwork) shows that the business in fact regularly maintained its business at the new geographic location. (4) In order for a Participant to be eligible to submit an offer for an 8(a) procurement limited to a specific geographic area, it must receive from SBA a determination that it has a bona fide place of business within that area prior to submitting its offer for the procurement. (5) Once a Participant has established a bona fide place of business, the Participant may change the location of the recognized office without prior SBA approval. However, the Participant must notify SBA and provide documentation demonstrating an office at that new location within 30 days after the move. Failure to timely notify SBA will render the Participant ineligible for new 8(a) construction procurements limited to that geographic area. ■ 27. Amend § 124.503 by: ■ a. Removing the phrase ‘‘in § 124.507(b)(2)’’ and adding in its place the phrase ‘‘in § 124.501(g)’’ in paragraph (a)(1); ■ b. Redesignating paragraphs (e) through (j) as paragraphs (f) through (k), respectively; ■ c. Adding a new paragraph (e); ■ d. Revising the introductory text of the newly redesignated paragraph (h); ■ e. Adding the phrase ‘‘or BPA’’ after the phrase ‘‘BOA’’, wherever it appears, in the newly redesignated paragraphs (h)(1) through (4); ■ f. Revising newly redesignated paragraph (i)(1)(iii); ■ g. Adding a sentence at the end of newly redesignated paragraph (i)(1)(iv); and ■ h. Revising newly redesignated paragraph (i)(2)(iv). The additions and revisions read as follows: § 124.503 How does SBA accept a procurement for award through the 8(a) BD program? khammond on DSKJM1Z7X2PROD with PROPOSALS3 * * * * * (e) Withdrawal/substitution of offered requirement or Participant. After SBA has accepted a requirement for award as a sole source 8(a) contract on behalf of a specific Participant (whether nominated by the procuring agency or identified by SBA for an open requirement), if the procuring agency believes that the identified Participant is not a good match for the procurement— including for such reasons as the procuring agency finding the Participant non-responsible or the negotiations between the procuring agency and the Participant otherwise failing—the procuring agency may seek to substitute another Participant for the originally VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 identified Participant. The procuring agency must inform SBA of its concerns regarding the originally identified Participant and identify whether it believes another Participant could fulfill its needs. (1) If the procuring agency and SBA agree that another Participant can fulfill its needs, the procuring agency will withdraw the original offering and reoffer the requirement on behalf of another 8(a) Participant. SBA will then accept the requirement on behalf of the newly identified Participant and authorize the procuring agency to negotiate directly with that Participant. (2) If the procuring agency and SBA agree that another Participant cannot fulfill its needs, the procuring agency will withdraw the original offering letter and fulfill its needs outside the 8(a) BD program. (3) If the procuring agency believes that another Participant cannot fulfill its needs, but SBA does not agree, SBA may appeal that decision to the head of the procuring agency pursuant to § 124.505(a)(2). * * * * * (h) Basic Ordering Agreements (BOAs) and Blanket Purchase Agreements (BPAs). Neither a Basic Ordering Agreement (BOA) nor a Blanket Purchase Agreement (BPA) is a contract under the FAR. See 48 CFR 16.703(a). Each order to be issued under a BOA or BPA is an individual contract. As such, the procuring activity must offer, and SBA must accept, each task order under a BOA or BPA in addition to offering and accepting the BOA or BPA itself. * * * * * (i) (1) * * * (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 SDB credit toward their prime contracting goals for orders awarded to 8(a) Participants. However, a firm will be ineligible for the award of an order if the procuring agency asks contract holders to recertify their 8(a) BD status in connection with a specific order and the firm is unable to do so. Where a contracting officer asks contract holders to recertify their 8(a) BD status in connection with a specific order, a firm must be an eligible Participant in accordance with § 124.501(g) as of the PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 60875 initial date specified for the receipt of offers contained in the order solicitation, or at the date of award of the order if there is no solicitation. (iv) * * * To be eligible for the award of a sole source order, a concern must be a current Participant in the 8(a) BD program at the time of award. (2) * * * (iv) SBA must verify that a concern is an eligible 8(a) Participant in accordance with § 124.501(g) as of the initial date specified for the receipt of offers contained in the order solicitation, or at the date of award of the order if there is no solicitation. If a concern has exited the 8(a) BD program prior to that date, it will be ineligible for the award of the order. * * * * * ■ 28. Amend § 124.504 by: ■ a. Revising the section heading and paragraph (b); ■ b. Removing the term ‘‘Simplified Acquisition Procedures’’ and adding in its place the phrase ‘‘the simplified acquisition threshold (as defined in the FAR at 48 CFR 2.101)’’ in paragraph (c) introductory text; ■ c. Removing the word ‘‘will’’ and adding in its place the word ‘‘may’’ in paragraph (c)(1)(ii)(C); ■ d. Revising the subject heading for paragraph (d) and paragraphs (d)(1) introductory text and (d)(4). The revisions read as follows: § 124.504 What circumstances limit SBA’s ability to accept a procurement for award as an 8(a) contract, and when can a requirement be released from the 8(a) BD program? * * * * * (b) Competition prior to offer and acceptance. The procuring activity competed a requirement among 8(a) Participants prior to offering the requirement to SBA and did not clearly evidence its intent to conduct an 8(a) competitive acquisition. * * * * * (d) Release for non-8(a) or limited 8(a) competition. (1) Except as set forth in paragraph (d)(4) of this section, where a procurement is awarded as an 8(a) contract, its follow-on requirement must remain in the 8(a) BD program unless SBA agrees to release it for non-8(a) competition. Additionally, SBA must agree to release any follow-on requirement where a procuring agency seeks to reprocure that requirement through a pre-existing limited contracting vehicle which is not available to all 8(a) BD Program Participants (e.g., any multiple award or Governmentwide acquisition contract, whether or not the underlying MAC or GWAC is itself an 8(a) contract), and the E:\FR\FM\08NOP3.SGM 08NOP3 60876 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules previous/current 8(a) award was not so limited. If a procuring agency would like to fulfill a follow-on requirement outside of the 8(a) BD program, it must make a written request to and receive the concurrence of the AA/BD to do so. In determining whether to release a requirement from the 8(a) BD program, SBA will consider: * * * * * (4) The requirement that a follow-on procurement must be released from the 8(a) BD program in order for it to be fulfilled outside the 8(a) BD program does not apply: (i) Where previous orders were offered to and accepted for the 8(a) BD program pursuant to § 124.503(i)(2); or (ii) Where a procuring agency will use a mandatory source (see FAR Subparts 8.6 and 8.7). In such a case, the procuring agency must notify SBA at least 30 days prior to the end of the contract or order. ■ 29. Amend § 124.505 by: ■ a. Removing the word ‘‘and’’ at the end of paragraph (a)(2); ■ b. Redesignating paragraph (a)(3) as paragraph (a)(4); and ■ c. Adding new paragraph (a)(3). The addition reads as follows: § 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? (a) * * * (3) A decision by a contracting officer that a particular procurement is a new requirement that is not subject to the release requirements set forth in § 124.504(d); and * * * * * ■ 30. Amend § 124.507 by: ■ a. Revising paragraph (b)(2); ■ b. Removing paragraph (b)(3); ■ c. Redesignating paragraphs (b)(4) through (6) as paragraphs (b)(3) through (5), respectively; ■ d. Removing paragraph (c)(1); ■ e. Redesignating paragraphs (c)(2) and (3) as paragraphs (c)(1) and (2), respectively; and ■ f. Revising newly redesignated paragraph (c)(1). The revisions read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS3 § 124.507 What procedures apply to competitive 8(a) procurements? * * * * * (b) * * * (2) SBA determines a Participant’s eligibility pursuant to § 124.501(g). * * * * * (c) * * * (1) Construction competitions. Based on its knowledge of the 8(a) BD portfolio, SBA will determine whether a competitive 8(a) construction VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 requirement should be competed among only those Participants having a bona fide place of business within the geographical boundaries of one or more SBA district offices, within a state, or within the state and nearby areas. Only those Participants with bona fide places of business within the appropriate geographical boundaries are eligible to submit offers. * * * * * ■ 31. Amend § 124.509 by: ■ a. Removing the word ‘‘maximum’’ and adding in its place the words ‘‘good faith’’ in paragraph (a)(1); ■ b. Removing the words ‘‘substantial and sustained’’ and adding in their place the words ‘‘good faith’’ in paragraph (a)(2); and ■ c. Revising paragraph (e). The revision reads as follows: § 124.509 What are non-8(a) business activity targets? * * * * * (e) Waiver of sole source prohibition. (1) SBA may waive the requirement prohibiting a Participant from receiving further sole source 8(a) contracts when a Participant does not meet its non-8(a) business activity target where a denial of a sole source contract would cause severe economic hardship on the Participant so that the Participant’s survival may be jeopardized, or where extenuating circumstances beyond the Participant’s control caused the Participant not to meet its non-8(a) business activity target. (2) SBA may waive the requirement prohibiting a Participant from receiving further sole source 8(a) contracts when the Participant does not meet its non8(a) business activity target where the head of a procuring activity represents to the SBA that award of a sole source 8(a) contract to the Participant is needed to achieve significant interests of the Government. (3) The decision to grant or deny a request for a waiver is at SBA’s discretion, and no appeal may be taken with respect to that decision. (4) A waiver generally applies to a specific sole source opportunity. If SBA grants a waiver with respect to a specific procurement, the firm will be able to self-market its capabilities to the applicable procuring activity with respect to that procurement. If the Participant seeks an additional sole source opportunity, it must request a waiver with respect to that specific opportunity. Where, however, a Participant can demonstrate that the same extenuating circumstances beyond its control affect its ability to receive specific multiple 8(a) contracts, one PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 waiver can apply to those multiple contract opportunities. ■ 32. Amend § 124.513 by revising paragraphs (c)(4) and (e) to read as follows: § 124.513 Under what circumstances can a joint venture be awarded an 8(a) contract? * * * * * (c) * * * (4) Stating that the 8(a) Participant(s) must receive profits from the joint venture commensurate with the work performed by the 8(a) Participant(s), or a percentage agreed to by the parties to the joint venture whereby the 8(a) Participant(s) receive profits from the joint venture that exceed the percentage commensurate with the work performed by the 8(a) Participant(s); * * * * * (e) Prior approval by SBA. (1) When a joint venture between one or more 8(a) Participants seeks a sole source 8(a) award, SBA must approve the joint venture prior to the award of the sole source 8(a) contract. SBA will not approve joint ventures in connection with competitive 8(a) awards. (2) Where a joint venture has been established for one 8(a) contract, the joint venture may receive additional 8(a) contracts provided the parties create an addendum to the joint venture agreement setting forth the performance requirements for each additional award (and provided any contract is awarded within two years of the first award as set forth in § 121.103(h)). If an additional 8(a) contract is a sole source award, SBA must also approve the addendum prior to contract award. * * * * * ■ 33. Amend § 124.515 by revising paragraph (d) to read as follows: § 124.515 Can a Participant change its ownership or control and continue to perform an 8(a) contract, and can it transfer performance to another firm? * * * * * (d) SBA determines the eligibility of an acquiring Participant under paragraph (b)(2) of this section by referring to the items identified in § 124.501(g) and deciding whether at the time of the request for waiver (and prior to the transaction) the acquiring Participant is an eligible concern with respect to each contract for which a waiver is sought. As part of the waiver request, the acquiring concern must certify that it is a small business for the size standard corresponding to the NAICS code assigned to each contract for which a waiver is sought. SBA will not grant a waiver for any contract if the work to be performed under the contract is not similar to the type of work E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules previously performed by the acquiring concern. * * * * * ■ 34. Amend § 124.519 by: ■ a. Revising paragraph (a); ■ b. Removing paragraph (c); ■ c. Redesignating paragraph (b) as paragraph (c); and ■ d. Adding a new paragraph (b). The revision and addition read as follows: § 124.519 Are there any dollar limits on the amount of 8(a) contracts that a Participant may receive? (a) A Participant (other than one owned by an Indian Tribe, ANC, NHO, or CDC) may not receive sole source 8(a) contract awards where it has received a combined total of competitive and sole source 8(a) contracts in excess of $100,000,000 during its participation in the 8(a) BD program. (b) In determining whether a Participant has reached the limit identified in paragraph (a) of this section, SBA: (1) Looks at the 8(a) revenues a Participant has actually received, not projected 8(a) revenues that a Participant might receive through an indefinite delivery or indefinite quantity contract, a multiple award contract, or options or modifications; and (2) Will not consider 8(a) contracts awarded under the Simplified Acquisition Threshold. * * * * * ■ 35. Revise § 124.520 to read as follows: § 124.520 Can 8(a) BD Program Participants participate in SBA’s MentorProte´ge´ program? khammond on DSKJM1Z7X2PROD with PROPOSALS3 (a) An 8(a) BD Program Participant, as any other small business, may participate in SBA’s All Small MentorProte´ge´ Program authorized under § 125.9 of this chapter. (b) In order for a joint venture between a prote´ge´ and its SBA-approved mentor to receive the exclusion from affiliation with respect to a sole source or competitive 8(a) contract, the joint venture must meet the requirements set forth in § 124.513(c) and (d). PART 125—GOVERNMENT CONTRACTING PROGRAMS 36. The authority citation for part 125 continues to read as follows: ■ Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 637; 644; 657(f); 657q; and 657s; 38 U.S.C. 501 and 8127. 37. Amend § 125.2 by adding paragraph (g) to read as follows: ■ VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 § 125.2 What are SBA’s and the procuring agency’s responsibilities when providing contracting assistance to small businesses? * * * * * (g) Past performance and experience. (1) In the case of a solicitation for a bundled contract, a consolidated contract, or a multiple award contract above the substantial bundling threshold of the Federal agency, the head of the agency must consider the past performance, capabilities and experience of each first tier subcontractor that is part of the team as the capabilities and past performance of the small business prime contractor when evaluating an offer of a small business prime contractor that includes a proposed team of small business subcontractors. (2) For other solicitations, based on the circumstances of the procurement, the agency may consider the past performance, capabilities and experience of each first tier subcontractor that is part of the team as the capabilities and past performance of the small business prime contractor. ■ 38. Amend § 125.3 by adding a sentence to the end of paragraph (b)(2) to read as follows: § 125.3 What types of subcontracting assistance are available to small businesses? * * * * * (b) * * * (2) * * * This applies whether the firm qualifies as a small business concern for the size standard corresponding to the NAICS code assigned to the contract, or is deemed to be treated as a small business concern by statute (see e.g., 43 U.S.C. 1626(e)(4)(B)). * * * * * ■ 39. Amend § 125.5 by: ■ a. Revising the third sentence of paragraph (a)(1); ■ b. Removing the phrase ‘‘$100,000 or less, or in accordance with Simplified Acquisition Threshold procedures’’ and adding in its place the phrase ‘‘Less than the Simplified Acquisition Threshold’’ in paragraph (g); ■ c. Removing the phrase ‘‘Between $100,000 and $25 million’’ and adding in its place the phrase ‘‘Between the Simplified Acquisition Threshold and $25 million’’ in paragraph (g); ■ d. Removing the term ‘‘$100,000’’ and adding in its place ‘‘the simplified acquisition threshold’’ in paragraphs (h) and (i). The revision reads as follows: § 125.5 What is the Certificate of Competency Program? (a) * * * PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 60877 (1) * * * The COC Program is applicable to all Government procurement actions, with the exception of 8(a) sole source awards but 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. * * * * * * * * ■ 40. Amend § 125.6 by revising the paragraph (b) introductory text and adding example 3 to paragraph (b) to read as follows: § 125.6 What are the prime contractor’s limitations on subcontracting? * * * * * (b) Mixed contracts. Where a contract integrates any combination of services, supplies, or construction, the contracting officer shall select the appropriate NAICS code as prescribed in § 121.402(b) of this chapter. The contracting officer’s selection of the applicable NAICS code is determinative as to which limitation on subcontracting and performance requirement applies. Based on the NAICS code selected, the relevant limitation on subcontracting requirement identified in paragraphs (a)(1) through (4) of this section will apply only to that portion of the contract award amount. In no case shall more than one limitation on subcontracting requirement apply to the same contract. * * * * * Example 3 to paragraph (b). A procuring activity is acquiring both services and general construction through a small business setaside. The total value of the requirement is $10,000,000, with the construction portion comprising $8,000,000, and the services portion comprising $2,000,000. The contracting officer appropriately assigns a construction NAICS code to the requirement. The 85% limitation on subcontracting identified in paragraph (a)(3) would apply to this procurement. Because the services portion of the contract is excluded from consideration, the relevant amount for purposes of calculating the limitation on subcontracting requirement is $8,000,000. As such, the prime contractor cannot subcontract more than $6,800,000 to nonsimilarly situated entities, and the prime and/or similarly situated entities must perform at least $1,200,000. * * * * * 41. Amend § 125.8 by revising paragraphs (b)(2)(iv), (xi), and (xii), (e), and (h)(2) to read as follows: ■ § 125.8 What requirements must a joint venture satisfy to submit an offer for a procurement or sale set aside or reserved for small business? * * * (b) * * * E:\FR\FM\08NOP3.SGM 08NOP3 * * khammond on DSKJM1Z7X2PROD with PROPOSALS3 60878 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules (2) * * * (iv) Stating that the small business participant(s) must receive profits from the joint venture commensurate with the work performed by them, or a percentage agreed to by the parties to the joint venture whereby the small business participant(s) receive profits from the joint venture that exceed the percentage commensurate with the work performed by them; * * * * * (xi) Stating that annual performanceof-work statements required by paragraph (h)(1) must be submitted to SBA and the relevant contracting officer not later than 45 days after each operating year of the joint venture; and (xii) Stating that the project-end performance-of-work required by paragraph (h)(2) must be submitted to SBA and the relevant contracting officer no later than 90 days after completion of the contract. * * * * * (e) Past performance and experience. When evaluating the past performance, experience, business systems and certifications of an entity submitting an offer for a contract set aside or reserved for small business as a joint venture established pursuant to this section, a procuring activity must consider work done and qualifications held individually by each partner to the joint venture as well as any work done by the joint venture itself previously. * * * * * (h) * * * (2) At the completion of every contract set aside or reserved for small business that is awarded to a joint venture between a prote´ge´ small business and a mentor authorized by § 125.9, and upon request by the SBA or the relevant contracting officer, the small business partner to the joint venture must submit a report to the relevant contracting officer and to the SBA, signed by an authorized official of each partner to the joint venture, explaining how and certifying that the performance of work requirements were met for the contract, and further certifying that the contract was performed in accordance with the provisions of the joint venture agreement that are required under paragraph (b) of this section. * * * * * ■ 42. Amend § 125.9 by: ■ a. Revising paragraphs (b), (c)(1)(ii), and (c)(2) introductory text; ■ b. Removing paragraph (c)(4); ■ c. Revising paragraphs (d)(1)(iii) introductory text and (d)(1)(iii)(B); ■ d. Adding paragraph (d)(6); VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 e. Removing ‘‘(e.g., management and/ or technical assistance, loans and/or equity investments, cooperation on joint venture projects, or subcontracts under prime contracts being performed by the mentor)’’ and adding in its place ‘‘(e.g., management and or technical assistance; loans and/or equity investments; bonding; use of equipment; export assistance; assistance as a subcontractor under prime contracts being performed by the prote´ge´; cooperation on joint venture projects; or subcontracts under prime contracts being performed by the mentor)’’ in paragraph (e)(1) introductory text. ■ f. Revising paragraph (e)(1)(i); ■ g. Removing the first sentence and revising the new first sentence of paragraph (e)(5); ■ h. Redesignating paragraphs (e)(6) through (8) as paragraphs (e)(7) through (9), respectively; ■ i. Adding new paragraph (e)(6); ■ j. Revising paragraph (f); ■ k. Adding paragraph (g) introductory text; and ■ l. Revising paragraph (g)(4). The revisions and additions to read as follows: ■ § 125.9 What are the rules governing SBA’s small business mentor-prote´ge´ program? * * * * * (b) Mentors. Any concern that demonstrates a commitment and the ability to assist small business concerns may act as a mentor and receive benefits as set forth in this section. This includes other than small businesses. (1) In order to qualify as a mentor, a concern must demonstrate that it: (i) Is capable of carrying out its responsibilities to assist the prote´ge´ firm under the proposed mentor-prote´ge´ agreement; (ii) Does not appear on the Federal list of debarred or suspended contractors; and (iii) Can impart value to a prote´ge´ firm due to lessons learned and practical experience gained or through its knowledge of general business operations and government contracting. (2) SBA will decline an application if SBA determines that the mentor does not possess good character or a favorable financial position, employs or otherwise controls the managers of the prote´ge´, or is otherwise affiliated with the prote´ge´. Once approved, SBA may terminate the mentor-prote´ge´ agreement if the mentor does not possess good character or a favorable financial position, was affiliated with the prote´ge´ at time of application, or is affiliated with the prote´ge´ for reasons other than the mentor-prote´ge´ agreement or PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 assistance provided under the agreement. (3) In order for SBA to agree to allow a mentor to have more than one prote´ge´ at time, the mentor and proposed additional prote´ge´ must demonstrate that the added mentor-prote´ge´ relationship will not adversely affect the development of either prote´ge´ firm (e.g., the second firm may not be a competitor of the first firm). (i) A mentor that has more than one prote´ge´ cannot submit competing offers in response to a solicitation for a specific procurement through separate joint ventures with different prote´ge´s. (ii) A mentor generally cannot have more than three prote´ge´s at one time. However, the first two mentor-prote´ge´ relationships approved by SBA between a specific mentor and a small business that has its principal office located in the Commonwealth of Puerto Rico do not count against the limit of three proteges that a mentor can have at one time. (c) * * * (1) * * * (ii) Where a small business seeks to qualify as a prote´ge´ in a secondary NAICS code, the firm must demonstrate how the mentor-prote´ge´ relationship will help the firm further develop or expand its current capabilities in that secondary NAICS code. SBA will not approve a mentor-prote´ge´ relationship in a secondary NAICS code in which the firm has no prior experience. (2) A prote´ge´ firm may generally have only one mentor at a time. SBA may approve a second mentor for a particular prote´ge´ firm where the second relationship will not compete or otherwise conflict with the first mentorprote´ge´ relationship, and: * * * * * (d) * * * (1) * * * (iii) Once a prote´ge´ firm no longer qualifies as a small business for the size standard corresponding to the NAICS code under which SBA approved its mentor-prote´ge´ relationship, any joint venture between the prote´ge´ and its mentor will not continue to receive the exclusion from affiliation authorized by paragraph (a) of this section. However, a change in the prote´ge´’s size status does not generally affect contracts previously awarded to a joint venture between the prote´ge´ and its mentor. (A) * * * (B) For contracts with durations of more than five years (including options), where size re-certification is required under § 121.404(g)(3) of this chapter no more than 120 days prior to the end of the fifth year of the contract E:\FR\FM\08NOP3.SGM 08NOP3 khammond on DSKJM1Z7X2PROD with PROPOSALS3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules and no more than 120 days prior to exercising any option thereafter, once the prote´ge´ no longer qualifies as small for the size standard corresponding to the NAICS code assigned to the contract, the joint venture will not be able re-certify itself to be a small business for that contract. The rules set forth in § 121.404(g)(3) of this chapter apply in such circumstances. * * * * * (6) A mentor that provides a subcontract to a prote´ge´ that has its principal office located in the Commonwealth of Puerto Rico may (i) receive positive consideration for the mentor’s past performance evaluation, and (ii) apply costs incurred for providing training to such protege toward the subcontracting goals contained in the subcontracting plan of the mentor. (e) * * * (1) * * * (i) Specifically identify the business development assistance to be provided and address how the assistance will help the prote´ge´ enhance its growth and/or foster or acquire needed capabilities; * * * * * (5) Unless rescinded in writing as a result of an SBA review, the mentorprote´ge´ relationship will automatically renew without additional written notice of continuation or extension to the prote´ge´ firm. * * * (6) A prote´ge´ may generally have a total of two mentor-prote´ge´ agreements with different mentors. (i) Each mentor-prote´ge´ agreement may be for an initial period of three years and may be extended an additional three years provided the prote´ge´ has received the agreed-upon business development assistance and will continue to receive additional assistance through the extended mentorprote´ge´ agreement. (ii) If a mentor-prote´ge´ agreement is terminated within a year from the date SBA approved the agreement, that mentor-prote´ge´ relationship will not count as one of the two mentor-prote´ge´ relationships that a small business may enter as a prote´ge´. * * * * * (f) Decision to decline mentor-prote´ge´ relationship. Where SBA declines to approve a specific mentor-prote´ge´ agreement, SBA will issue a written decision setting forth its reason(s) for the decline. The small business concern seeking to be a prote´ge´ cannot attempt to enter into another mentor-prote´ge´ relationship with the same mentor for a period of 60 calendar days from the date of the final decision. The small business VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 concern may, however, submit another proposed mentor-prote´ge´ agreement with a different proposed mentor at any time after the SBA’s final decline decision. (g) Evaluating the mentor-prote´ge´ relationship. SBA will review the mentor-prote´ge´ relationship annually. SBA will ask the prote´ge´ for its assessment of how the mentor-prote´ge´ relationship is working, whether or not the prote´ge´ received the agreed upon business development assistance, and whether the prote´ge´ would recommend the mentor to be a mentor for another small business in the future. * * * * * (4) SBA may decide not to approve continuation of a mentor-prote´ge´ agreement where: (i) SBA finds that the mentor has not provided the assistance set forth in the mentor-prote´ge´ agreement; (ii) SBA finds that the assistance provided by the mentor has not resulted in any material benefits or developmental gains to the prote´ge´; or (iii) A prote´ge´ does not provide information relating to the mentorprote´ge´ relationship, as set forth in paragraph (g). * * * * * ■ 43. Amend § 125.18 by: ■ a. Revising paragraph (a); ■ b. Removing ‘‘(see §§ 125.9 and 124.520 of this chapter)’’ and adding in its place ‘‘(see § 125.9 of this chapter)’’ in paragraph (b)(1)(ii); ■ c. Removing ‘‘§ 124.520 or’’ in paragraph (b)(2) introductory text; ■ d. Removing ‘‘or § 124.520’’ in paragraph (b)(3)(i); ■ e. Redesignating paragraphs (d)(1) through (4) as paragraphs (d)(2) through (5), respectively; and ■ f. Adding a new paragraph (d)(1). The revision and addition read as follows: § 125.18 What requirements must an SDVO SBC meet to submit an offer on a contract? (a) General. In order for a business concern to submit an offer and be eligible for the award of a specific SDVO contract, the concern must submit the appropriate representations and certifications at the time it submits its initial offer which includes price (or other formal response to a solicitation) to the contracting officer, including, but not limited to, the fact that: (1) It is small under the size standard corresponding to the NAICS code(s) assigned to the contract; (2) It is an SDVO SBC; and PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 60879 (3) There has been no material change in any of its circumstances affecting its SDVO SBC eligibility. * * * * * (d) Multiple Award Contracts—(1) SDVO status. With respect to Multiple Award Contracts, orders issued against a Multiple Award Contract, and Blanket Purchase Agreements issued against a Multiple Award Contract: (i) SBA determines SDVO small business eligibility for the underlying Multiple Award Contract as of the date a business concern certifies its status as an SDVO small business concern as part of its initial offer (or other formal response to a solicitation), which includes price, unless the firm was required to recertify under paragraph (e) of this section. (A) Unrestricted Multiple Award Contracts or Set-Aside Multiple Award Contracts for Other than SDVO. For an unrestricted Multiple Award Contract or other Multiple Award Contract not specifically set aside for SDVO, if a business concern is an SDVO small business concern at the time of offer and contract-level recertification for the Multiple Award Contract, it is an SDVO small business concern for goaling purposes for each order issued against the contract, unless a contracting officer requests recertification as an SDVO small business for a specific order or Blanket Purchase Agreement. However, except for orders and Blanket Purchase Agreements issued off any Federal Supply Schedule contract, if an order or a Blanket Purchase Agreement under an unrestricted Multiple Award Contract is set-aside exclusively for SDVO small business, a concern must recertify that it qualifies as an SDVO small business at the time it submits its initial offer, which includes price, for the particular order or Blanket Purchase Agreement. (B) SDVO Set-Aside Multiple Award Contracts. For a Multiple Award Contract that is specifically set aside for SDVO small business, if a business concern is an SDVO small business at the time of offer and contract-level recertification for the Multiple Award Contract, it is an SDVO small business for each order issued against the contract, unless a contracting officer requests recertification as an SDVO small business for a specific order or Blanket Purchase Agreement. (ii) SBA will determine SDVO small business status at the time of initial offer (or other formal response to a solicitation), which includes price, for an order or an Agreement issued against a Multiple Award Contract if the contracting officer requests a new SDVO E:\FR\FM\08NOP3.SGM 08NOP3 60880 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules small business certification for the order or Agreement. * * * * * ■ 44. Amend § 125.28 by revising the section heading and adding a sentence to the end of paragraph (d)(1) to read as follows: § 125.28 What are the requirements for filing a service-disabled veteran-owned status protest? * * * * * (d) * * * (1) * * * Except for an order or Blanket Purchase Agreement issued under any Federal Supply Schedule contract, an order or a Blanket Purchase Agreement that is set-aside or reserved for SDVO small business off a Multiple Award Contract that is not itself set aside for SDVO small business (or any SDVO order where the contracting officer has requested recertification of SDVO status), an interested party must submit its protest challenging the SDVO status of a concern for the order or Agreement by close of business on the fifth business day after notification by the contracting officer of the apparent successful offeror. * * * * * PART 126—HUBZONE PROGRAM 45. The authority citation for part 126 continues to read as follows: ■ Authority: 15 U.S.C. 632(a), 632(j), 632(p), 644 and 657a. § 126.616 [Amended] 46. Amend § 126.616 by removing ‘‘(or, if also an 8(a) BD Participant, with an approved mentor authorized by § 124.520 of this chapter)’’ in paragraph (a). ■ § 126.618 [Amended] 47. Amend § 126.618 by removing ‘‘(or, if also an 8(a) BD Participant, under § 124.520 of this chapter)’’ in paragraph (a). ■ 48. Amend § 126.801 by adding a sentence to the end of paragraph (d)(1) to read as follows: ■ § 126.801 How does an interested party file a HUBZone status protest? khammond on DSKJM1Z7X2PROD with PROPOSALS3 * * * * * (d) * * * (1) * * * In connection with an order or an Agreement that is set-aside or reserved for a certified HUBZone small business concern off a Multiple Award Contract that is not itself set aside for certified HUBZone small business concerns, except for an order or Blanket Purchase Agreement issued under any Federal Supply Schedule contact, (or any HUBZone set-aside order where the contracting officer has requested VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 recertification of such status), an interested party must submit its protest challenging the HUBZone status of a concern for the order or Agreement by close of business on the fifth business day after notification by the contracting officer of the intended awardee of the order or Agreement. * * * * * PART 127—WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM 49. The authority citation for part 127 continues to read as follows: ■ Authority: 15 U.S.C. 632, 634(b)(6), 637(m), 644 and 657r. § 127.503 [Amended] 50. Amend § 127.503 by removing paragraph (h). ■ 51. Revise § 127.504 to read as follows: ■ § 127.504 What requirements must an EDWOSB or WOSB meet to be eligible for an EDWOSB or WOSB contract? (a) General. In order for a business concern to submit an offer and be eligible for the award of a specific EDWOSB or WOSB contract, the concern must submit the appropriate representations and certifications at the time it submits its initial offer which includes price (or other formal response to a solicitation) to the contracting officer, including, but not limited to, the fact that: (1) It is small under the size standard corresponding to the NAICS code(s) assigned to the contract; (2) It is listed in SAM (or any successor system) as a WOSB or EDWOSB; and (3) There has been no material change in any of its circumstances affecting its EDWOSB or WOSB eligibility. (b) Joint ventures. A business concern seeking an EDWOSB or WOSB contract as a joint venture may submit an offer if the joint venture meets the requirements as set forth in § 127.506. (c) Multiple Award Contracts. With respect to Multiple Award Contracts, orders issued against a Multiple Award Contract, and Blanket Purchase Agreements issued against a Multiple Award Contract: (1) SBA determines EDWOSB or WOSB eligibility for the underlying Multiple Award Contract as of the date a concern certifies its status as an EDWOSB or WOSB as part of its initial offer (or other formal response to a solicitation), which includes price, unless the concern was required to recertify its status as a WOSB or EDWOSB under paragraph (f) of this section. PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 (i) Unrestricted Multiple Award Contracts or Set-Aside Multiple Award Contracts for Other than EDWOSB or WOSB. For an unrestricted Multiple Award Contract or other Multiple Award Contract not set aside specifically for EDWOSB or WOSB, if a business concern is an EDWOSB or WOSB at the time of offer and contractlevel recertification for the Multiple Award Contract, it is an EDWOSB or WOSB for goaling purposes for each order issued against the contract, unless a contracting officer requests recertification as an EDWOSB or WOSB fora specific order or Blanket Purchase Agreement. However, except for orders and Blanket Purchase Agreements issued under any Federal Supply Schedule contract, if an order or a Blanket Purchase Agreement under an unrestricted Multiple Award Contract is set-aside exclusively for EDWOSB or WOSB, a concern must recertify it qualifies as an EDWOSB or WOSB at the time it submits its initial offer, which includes price, for the particular order or Agreement. (ii) EDWOSB or WOSB Set-Aside Multiple Award Contracts. For a Multiple Award Contract that is set aside specifically for EDWOSB or WOSB, if a business concern is an EDWOSB or WOSB at the time of offer and contract-level recertification for the Multiple Award Contract, it is an EDWOSB or WOSB for each order issued against the contract, unless a contracting officer requests recertification as an EDWOSB or WOSB fora specific order or Blanket Purchase Agreement. (2) SBA will determine EDWOSB or WOSB status at the time of initial offer (or other formal response to a solicitation), which includes price, for an order or an Agreement issued against a Multiple Award Contract if the contracting officer requests a new EDWOSB or WOSB certification for the order or Agreement. (d) Limitations on subcontracting. A business concern seeking an EDWOSB or WOSB contract must also meet the applicable limitations on subcontracting requirements as set forth in § 125.6 of this chapter for the performance of contracts totally set aside for EDWOSB or WOSB, the performance of the setaside portion of a partial set-aside contract, or the performance of orders set-aside for EDWOSB or WOSB. However, EDWOSB or WOSB concerns will not have to comply with the limitations on subcontracting provisions for any order issued against an unrestricted Multiple Award Contract if the order is competed amongst EDWOSB or WOSB concerns and at E:\FR\FM\08NOP3.SGM 08NOP3 Federal Register / Vol. 84, No. 217 / Friday, November 8, 2019 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS3 least one other-than-small business concern. (e) Non-manufacturers. An EDWOSB or WOSB that is a non-manufacturer, as defined in § 121.406(b) of this chapter, may submit an offer on an EDWOSB or WOSB contract for supplies, if it meets the requirements under the nonmanufacturer rule set forth in § 121.406(b) of this chapter. (f) Recertification. (1) Where a contract being performed by an EDWOSB or WOSB is novated to another business concern, the concern that will continue performance on the contract must recertify its status as an EDWOSB or WOSB to the procuring agency, or inform the procuring agency that it does not qualify as an EDWOSB or WOSB, within 30 days of the novation approval. If the concern cannot recertify its status as an EDWOSB or WOSB, the agency must modify the contract to reflect the new status, and may not count the options or orders issued pursuant to the contract, from that point forward, towards its womenowned small business goals. (2) Where an EDWOSB or WOSB concern that is performing a 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 EDWOSB or WOSB status to the procuring agency, or inform the procuring agency that it no longer qualifies as an EDWOSB or WOSB. If the concern is unable to recertify its status as an EDWOSB or WOSB, the agency must modify the contract to reflect the new status, and may not count the options or orders issued pursuant to the contract, from that point forward, towards its womenowned small business goals. (3) For 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 VerDate Sep<11>2014 18:28 Nov 07, 2019 Jkt 250001 recertify its EDWOSB or WOSB 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. If the concern is unable to recertify its status as an EDWOSB or WOSB, the agency must modify the contract to reflect the new status, and may not count the options or orders issued pursuant to the contract, from that point forward, towards its womenowned small business goals. (4) A business concern that did not certify as an EDWOSB or WOSB, either initially or prior to an option being exercised, may recertify as an EDWOSB or WOSB for a subsequent option period if it meets the eligibility requirements at that time. The agency must modify the contract to reflect the new status, and may count the options or orders issued pursuant to the contract, from that point forward, towards its women-owned small business goals. (5) 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. (6) A concern’s status will be determined at the time of a response to a solicitation for an Agreement and each order issued pursuant to the Agreement. § 127.505 [Removed and Reserved] 52. Remove and reserve § 127.505. 53. Amend § 127.603 by revising the section heading and adding a sentence to the end of paragraph (c)(1) to read as follows: ■ ■ § 127.603 What are the requirements for filing an EDWOSB or WOSB status protest? * * * * * (c) * * * (1) * * * Except for an order or Blanket Purchase Agreement issued under any Federal Supply Schedule contact, an order or a Blanket Purchase Agreement that is set-aside or reserved PO 00000 Frm 00037 Fmt 4701 Sfmt 9990 60881 for EDWOSB or WOSB small business under a Multiple Award Contract that is not itself set aside for EDWOSB or WOSB small business (or any EDWOSB or WOSB order where the contracting officer has requested recertification of such status), an interested party must submit its protest challenging the EDWOSB or WOSB status of a concern for the order or Blanket Purchase Agreement by close of business on the fifth business day after notification by the contracting officer of the apparent successful offeror. * * * * * PART 134—RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF HEARINGS AND APPEALS 54. The authority citation for part 134 continues to read as follows: ■ Authority: 5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 634(i), 637(a), 648(l), 656(i), and 687(c); 38 U.S.C. 8127(f); E.O. 12549, 51 FR 6370, 3 CFR, 1986 Comp., p. 189. Subpart J issued under 38 U.S.C. 8127(f)(8)(B). Subpart K issued under 38 U.S.C. 8127(f)(8)(A). 55. Amend § 134.318 by adding a subject heading to paragraph (a) and revising paragraph (b) to read as follows: ■ § 134.318 NAICS Appeals. (a) General. * * * (b) Effect of OHA’s decision. If OHA grants the appeal (changes the NAICS code), the contracting officer must amend the solicitation to reflect the new NAICS code. The decision will also apply to future solicitations for the same supplies or services. * * * * * Dated: October 16, 2019. Christopher Pilkerton, Acting Administrator. [FR Doc. 2019–23141 Filed 11–7–19; 8:45 am] BILLING CODE P E:\FR\FM\08NOP3.SGM 08NOP3

Agencies

SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 84, Number 217 (Friday, November 8, 2019)]
[Proposed Rules]
[Pages 60846-60881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23141]



[[Page 60845]]

Vol. 84

Friday,

No. 217

November 8, 2019

Part V





Small Business Administration





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





 Consolidation of Mentor Prot[eacute]g[eacute] Programs and Other 
Government Contracting Amendments; Proposed Rule

Federal Register / Vol. 84 , No. 217 / Friday, November 8, 2019 / 
Proposed Rules

[[Page 60846]]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 124, 125, 126, 127, and 134

RIN 3245-AG94


Consolidation of Mentor Prot[eacute]g[eacute] Programs and Other 
Government Contracting Amendments

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: In response to President Trump's government-wide regulatory 
reform initiative, the Small Business Administration (SBA) initiated a 
review of its regulations to determine which might be revised or 
eliminated. As a result, SBA is proposing to merge the 8(a) Business 
Development (BD) Mentor-Prot[eacute]g[eacute] Program and the All Small 
Mentor-Prot[eacute]g[eacute] Program to eliminate confusion and remove 
unnecessary duplication of functions within SBA. This rule proposes to 
eliminate the requirement that 8(a) Participants seeking to be awarded 
an 8(a) contract as a joint venture submit the joint venture to SBA for 
review and approval prior to contract award, revise several 8(a) BD 
program regulations to reduce unnecessary or excessive burdens on 8(a) 
Participants, and clarify other related regulatory provisions to 
eliminate confusion among small businesses and procuring activities. In 
addition, except for orders and Blanket Purchase Agreements issued 
under the General Services Administration's Federal Supply Schedule 
Program, the rule proposes to require a business concern to recertify 
its size and/or socioeconomic status for all set-aside orders under 
unrestricted multiple award contracts (MACs) The rule also proposes to 
require a business concern to recertify its socioeconomic status for 
all set-aside orders where the required socioeconomic status for the 
order differs from that of the underlying set-aside MAC contract (e.g., 
HUBZone set-aside order against a small business set-aside MAC). 
Finally, except for orders or Blanket Purchase Agreements issued under 
any Federal Supply Schedule contract, the rule also allows for size 
and/or socioeconomic protests at the order-level for set-aside orders 
issued against unrestricted MACs, or for set-aside orders based on a 
different socioeconomic status from the underlying set-aside MAC.

DATES: Comments must be received on or before January 17, 2020.

ADDRESSES: You may submit comments, identified by RIN 3245-AG94 by any 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail, for Paper, Disk, or CD/ROM Submissions: Brenda 
Fernandez, U.S. Small Business Administration, Office of Policy, 
Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 
20416.
     Hand Delivery/Courier: Brenda Fernandez, U.S. Small 
Business Administration, Office of Policy, Planning and Liaison, 409 
Third Street SW, 8th Floor, Washington, DC 20416.
    SBA will post all comments on https://www.regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at https://www.regulations.gov, please submit the 
information to Brenda Fernandez, U.S. Small Business Administration, 
Office of Policy, Planning and Liaison, 409 Third Street SW, 8th Floor, 
Washington, DC 20416, or send an email to [email protected]. 
Highlight the information that you consider to be CBI and explain why 
you believe SBA should hold this information as confidential. SBA will 
review the information and make the final determination of whether it 
will publish the information.

FOR FURTHER INFORMATION CONTACT: Brenda Fernandez, U.S. Small Business 
Administration, Office of Policy, Planning and Liaison, 409 Third 
Street SW, Washington, DC 20416; (202) 205-7337; 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background Information

    On January 30, 2017, President Trump issued Executive Order 13771, 
``Reducing Regulation and Controlling Regulatory Costs'', which is 
designed to reduce unnecessary and burdensome regulations and to 
control costs associated with regulations. In response to the 
President's directive to simplify regulations, SBA initiated a review 
of its regulations to determine which might be revised or eliminated. 
Based on this analysis, SBA has identified provisions in many areas of 
its regulations that can be simplified or eliminated. Firstly, this 
proposed rule would merge the 8(a) BD Mentor-Prot[eacute]g[eacute] 
Program and the All Small Mentor-Prot[eacute]g[eacute] Program. This 
rule also proposes to eliminate the requirement that 8(a) Participants 
seeking to be awarded an 8(a) contract as a joint venture must submit 
the joint venture to SBA for review and approval prior to contract 
award. This rule also proposes to make several changes to the 8(a) BD 
Program to eliminate or reduce unnecessary or excessive burdens on 8(a) 
Participants. As part of this proposed rulemaking process, SBA also 
held tribal consultations pursuant to Executive Order 13175, Tribal 
Consultations, in Anchorage, AK, Albuquerque, NM and Oklahoma City, OK 
to provide interested tribal representatives with an opportunity to 
discuss their views on various 8(a) BD-related issues. SBA considers 
tribal consultation meetings a valuable component of its deliberations 
and believes that these tribal consultation meetings allowed for 
constructive dialogue with the Tribal community, Tribal Leaders, Tribal 
Elders, elected members of Alaska Native Villages or their appointed 
representatives, and principals of tribally-owned and Alaska Native 
Corporation (ANC) owned firms participating in the 8(a) BD Program. SBA 
has taken these discussions into account in drafting this proposed 
rule.
    SBA seeks to combine the 8(a) BD Mentor-Prot[eacute]g[eacute] 
Program and the All Small Mentor-Prot[eacute]g[eacute] Program at this 
time in order to eliminate confusion regarding perceived differences 
between the two Programs, remove unnecessary duplication of functions 
within SBA, and establish one, unified staff to better coordinate and 
process mentor-prot[eacute]g[eacute] applications. SBA originally 
established a mentor-prot[eacute]g[eacute] program for 8(a) 
Participants a little more than twenty years ago. 63 FR 35726, 35764 
(June 30, 1998). The purpose of that program was to encourage approved 
mentors to provide various forms of business assistance to eligible 
8(a) Participants to aid in their development. On September 27, 2010, 
the Small Business Jobs Act of 2010 (Jobs Act), Public Law 111-240 was 
enacted. The Jobs Act was designed to protect the interests of small 
businesses and increase opportunities in the Federal marketplace. The 
Jobs Act was drafted by Congress in recognition of the fact that 
mentor-prot[eacute]g[eacute] programs serve an important business 
development function for small businesses and therefore included 
language authorizing SBA to establish separate mentor-
prot[eacute]g[eacute] programs for the Service-Disabled Veteran-Owned 
Small Business Concern (SDVO SBC) Program, the HUBZone Program, and the 
Women-Owned Small Business (WOSB) Program, each of which was modeled on 
SBA's existing mentor-prot[eacute]g[eacute] program available to 8(a) 
Participants. See section 1347(b)(3) of the Jobs Act. Thereafter, on 
January 2, 2013, the National Defense Authorization Act for Fiscal Year 
2013 (NDAA 2013), Public Law 112-239 was enacted. Section 1641 of the 
NDAA 2013 authorized SBA to establish a mentor-prot[eacute]g[eacute] 
program for all small

[[Page 60847]]

business concerns. This section further provided that a small business 
mentor-prot[eacute]g[eacute] program must be identical to the 8(a) BD 
Mentor-Prot[eacute]g[eacute] Program, except that SBA could modify each 
program to the extent necessary, given the types of small business 
concerns to be included as prot[eacute]g[eacute]s.
    Subsequently, SBA published a Final Rule in the Federal Register 
combining the authorities contained in the Jobs Act and the NDAA 2013 
to create a mentor-prot[eacute]g[eacute] program for all small 
businesses. 81 FR 48558 (July 25, 2016).
    Currently, the mentor-prot[eacute]g[eacute] program available to 
firms participating in the 8(a) BD Program (contained in 13 CFR 
124.520) is used as a business development tool in which mentors 
provide diverse types of business assistance to eligible 8(a) BD 
prot[eacute]g[eacute]s. This assistance may include, among other 
things, technical and/or management assistance; financial assistance in 
the form of equity investments and/or loans; subcontracts; and/or 
assistance in performing Federal prime contracts through joint venture 
arrangements. The explicit purpose of the 8(a) BD Mentor-
Prot[eacute]g[eacute] relationship is to enhance the capabilities of 
prot[eacute]g[eacute]s and to improve their ability to successfully 
compete for both government and commercial contracts. Similarly, the 
All Small Mentor-Prot[eacute]g[eacute] Program is designed to require 
approved mentors to aid prot[eacute]g[eacute] firms so that they may 
enhance their capabilities, meet their business goals, and improve 
their ability to compete for contracts. The purposes of the two 
programs are identical. In addition, the benefits available under both 
programs are identical. Small businesses and 8(a) Program Participants 
receive valuable business development assistance and any joint venture 
formed between a prot[eacute]g[eacute] firm and its SBA-approved mentor 
receives an exclusion from affiliation, such that the joint venture 
will qualify as a small business provided the prot[eacute]g[eacute] 
individually qualifies as small under the size standard corresponding 
to the NAICS code assigned to the procurement. A prot[eacute]g[eacute] 
firm may enter a joint venture with its SBA-approved mentor and be 
eligible for any contract opportunity for which the 
prot[eacute]g[eacute] qualifies. If a prot[eacute]g[eacute] firm is an 
8(a) Program Participant, a joint venture between the 
prot[eacute]g[eacute] and its mentor could seek any 8(a) contract, 
regardless of whether the mentor-prot[eacute]g[eacute] agreement was 
approved through the 8(a) BD Mentor-Prot[eacute]g[eacute] Program or 
the All Small Mentor-Prot[eacute]g[eacute] Program. Moreover, a firm 
could be certified as an 8(a) Participant after its mentor-
prot[eacute]g[eacute] relationship has been approved by SBA through the 
All Small Mentor-Prot[eacute]g[eacute] Program and be eligible for 8(a) 
contracts as a joint venture with its mentor once certified.
    Because the benefits and purposes of the two programs are 
identical, SBA believes that having two separate mentor-
prot[eacute]g[eacute] programs is unnecessary and causes needless 
confusion in the small business community. As such, this proposed rule 
would eliminate a separate 8(a) BD Mentor-Prot[eacute]g[eacute] Program 
and continue to allow any 8(a) Participant to enter a mentor-
prot[eacute]g[eacute] relationship through the All Small Mentor-
Prot[eacute]g[eacute] Program. Specifically, the proposed rule would 
revise Sec.  124.520 to merely recognize that an 8(a) Participant, as 
any other small business, may participate in SBA's Small Business 
Mentor-Prot[eacute]g[eacute] Program. In merging the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program with the All Small Mentor-
Prot[eacute]g[eacute] Program, the proposed rule would also make 
conforming amendments to SBA's size regulations (13 CFR part 121), the 
joint venture provisions (13 CFR 125.8), and the All Small Mentor-
Prot[eacute]g[eacute] Program regulations (13 CFR 125.9).
    As stated previously, SBA has also taken this action partly in 
response to the President's directive that each agency review its 
regulations. Therefore, this rule also proposes to revise regulations 
pertaining to the 8(a) BD and size programs in order to further reduce 
unnecessary or excessive burdens on small businesses and to eliminate 
confusion or more clearly delineate SBA's intent in certain 
regulations. Specifically, this rule proposes additional changes to the 
size and socioeconomic status recertification requirements for orders 
issued against MACs. A detailed discussion of these proposed changes is 
contained below in the Section-by-Section Analysis.

II. Section-by-Section Analysis

Section 121.103(b)(6)

    The proposed rule would amend the references to SBA's mentor-
prot[eacute]g[eacute] programs in this provision, which specifying that 
a prot[eacute]g[eacute] firm cannot be considered affiliated with its 
mentor based solely on assistance received by the prot[eacute]g[eacute] 
under the mentor-prot[eacute]g[eacute] agreement. The proposed rule 
would eliminate the cross-reference to the regulation regarding the 
8(a) BD Mentor-Prot[eacute]g[eacute] Program (13 CFR 124.520), leaving 
only the reference to the regulation regarding the All Small Business 
Mentor-Prot[eacute]g[eacute] Program.

Section 121.103(g)

    The proposed rule would amend the newly organized concern rule 
contained in Sec.  121.103(g) by clarifying that affiliation may be 
found where both former and ``current'' officers, directors, principal 
stockholders, managing members, or key employees of one concern 
organize a new concern in the same or related industry or field of 
operation, and serve as the new concern's officers, directors, 
principal stockholders, managing members, or key employees. The rule 
would merely add the word ``current'' to the regulatory text to ensure 
that affiliation may arise where the key individuals are still 
associated with the first company. SBA believes that such a finding of 
affiliation is authorized in the present regulations, but merely seeks 
to clarify its intent to make sure there is no confusion.

Section 121.103(h)

    The proposed rule would amend the introductory text to Sec.  
121.103(h) to revise the requirements for joint ventures. SBA believes 
that a joint venture is not an on-going business entity, but rather 
something that is formed for a limited purpose and duration. If two or 
more separate business entities seek to join together through another 
entity on a continuing, unlimited basis, SBA views that as a separate 
business concern with each partner affiliated with each other. To 
capture SBA's intent on limited scope and duration, SBA's current 
regulations provide that a joint venture is something that can be 
formed for no more than three contracts over a two-year period. If the 
parties intend to jointly seek work beyond three contracts or beyond 
two years from the date of the first award, they must form a new joint 
venture entity. That new entity would then be able to perform an 
additional three contracts over two years from the date of its first 
award. Several firms have commented to SBA that the three-contract 
limit unduly restricts small business and can disrupt normal business 
operations. SBA does not seek to impose unnecessary burdens on small 
businesses but continues to believe that a joint venture should be a 
limited duration vehicle. In response to these concerns, SBA proposes 
to eliminate the three-contract limit for a joint venture, but continue 
to prescribe that a joint venture cannot exceed two years from the date 
of its first award. In addition, the proposed rule would clarify SBA's 
current intent that a novation to the joint venture would start the 
two-year period if that were the first award received by the joint 
venture. The

[[Page 60848]]

change removing the limit of three awards to any joint venture would 
relieve small businesses of the requirement of forming additional joint 
venture entities to perform a fourth contract within that two-year 
period. The proposed rule attempts to lessen the burden on small 
businesses, while still preserving SBA's belief that a joint venture is 
not intended to be an on-going business entity.
    In addition, SBA is interested in comments regarding the exception 
to affiliation for joint ventures composed of multiple small businesses 
in which firms enter and leave the joint venture based on their size 
status. In this scenario, in an effort to retain small business status, 
joint venture partners expel firms that have exceeded the size standard 
and then possibly add firms that qualify under the size standard. 
Generally, this should not be a problem because joint ventures are 
limited in duration to two years and generally can be awarded no more 
than three contracts during those two years. However, if the joint 
venture is awarded a Federal Supply Schedule (FSS) contract or any 
other multiple award contract vehicle, the awarding of the multiple 
award contract itself counts against the limit of three contract awards 
that a joint venture can receive, but individual orders do not count 
against the limit. As such, a joint venture that is awarded a multiple 
award contract could receive many orders beyond the two-year limitation 
for joint venture awards (since the contract was awarded within that 
two-year period), and could remain small for any order requiring 
recertification simply by exchanging one joint venture partner for 
another (i.e., a new small business for one that has grown to be other 
than small). SBA never intended for the composition of joint ventures 
to be fluid. The joint venture generally should have the same partners 
throughout its lifetime, unless one of the partners is acquired. SBA 
considers a joint venture composed of different partners to be a 
different joint venture than the original one. To reflect this 
understanding, SBA could specify that the size of a joint venture 
outside of the mentor-prot[eacute]g[eacute] program will be determined 
based on the current size status and affiliations of all past and 
present joint venture partners, even if a partner has left the joint 
venture. SBA invites comment on this proposal and whether there are 
alternative ways to address this issue.
    The rule also proposes to add clarifying language to the 
introductory text of Sec.  121.103(h) to recognize that, although a 
joint venture cannot be populated with individuals intended to perform 
contracts awarded to the joint venture, the joint venture can directly 
employ administrative personnel and such personnel may specifically 
include Facility Security Officers.
    It has also been brought to SBA's attention that some procuring 
agencies will not award a contract requiring a facility security 
clearance to a joint venture if the joint venture itself does not have 
such clearance, even if both partners to the joint venture individually 
have such clearance. SBA does not believe that such a restriction is 
appropriate and seeks comments on how best to address that in a final 
rule. SBA is considering a provision which would require either the 
joint venture itself or the lead small business partner to the joint 
venture to have the required facility security clearance. If such a 
provision were finalized, a joint venture lacking its own separate 
facility security clearance could still be awarded a contract requiring 
such a clearance provided the lead small business partner to the joint 
venture had the required facility security clearance and committed to 
keep at its cleared facility all records relating to the contract 
awarded to the joint venture. Additionally, if it is established that 
the security portion of the contract requiring a facility security 
clearance is ancillary to the principal purpose of the procurement, SBA 
believes that the non-lead partner to the joint venture (which may 
include a large business mentor) could possess such clearance. SBA 
specifically requests comments on this possible provision as well as 
other recommendations regarding how best to address this perceived 
problem.
    The rule would also remove current Sec.  121.103(h)(3)(iii), which 
provides that a joint venture between a prot[eacute]g[eacute] firm and 
its mentor that was approved through the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program is considered small provided the 
prot[eacute]g[eacute] qualifies as individually small. Because this 
proposed rule would eliminate the 8(a) BD Mentor-Prot[eacute]g[eacute] 
Program as a separate program, this provision is no longer needed.
    The proposed rule also clarifies how to account for joint venture 
receipts and employees during the process of determining size for a 
joint venture partner. The joint venture partner must include its 
percentage share of joint venture receipts and employees in its own 
receipts or employees. The appropriate percentage share is the same 
percentage figure as the percentage figure corresponding to the joint 
venture partner's share of work performed by the joint venture.

Section 121.402

    This rule proposes to amend how NAICS codes are applied to task 
orders to ensure that the NAICS codes assigned to specific procurement 
actions, and the corresponding size standards, are an accurate 
reflection of the contracts and orders being awarded and performed. 
Under the proposed rule, a contracting officer would be required to 
assign a single NAICS code for each order issued against a Multiple 
Award Contract (MAC), and that NAICS code must be a NAICS code that is 
included in the underlying MAC and represents the principal purpose of 
the order. SBA believes that the NAICS code assigned to a task order 
must reflect the principal purpose of that order. Currently, based on 
the business rules of the Federal Procurement Data System (FPDS), if a 
MAC is assigned a service NAICS code, then that service NAICS code 
flows down to each individual order under that MAC. SBA does not 
believe it is appropriate for a task order that is nearly entirely for 
supplies to have a service NAICS code. In such a case, a firm being 
awarded such an order would not have to comply with the nonmanufacturer 
rule. In particular, set-aside orders should be assigned a 
manufacturing/supply NAICS code, so that the nonmanufacturer rule will 
apply to the order if it is awarded to a nonmanufacturer. Additionally, 
the current method for NAICS code assignment can also be problematic 
where a MAC is assigned a NAICS code for supplies but a particular 
order under that MAC is almost entirely for services. In such a case, 
firms that qualified as small for the larger employee-based size 
standard associated with a manufacturing/supply NAICS code may not 
qualify as small businesses under a smaller receipts-based services 
size standard. As such, because the order is assigned the 
manufacturing/supply NAICS code associated with the MAC, firms that 
should not qualify as small for a particular procurement that is 
predominantly for services may do so. Thus, this proposed rule attempts 
to ensure that the NAICS codes assigned to specific procurement 
actions, and the corresponding size standards, are an accurate 
reflection of the contracts and orders being awarded and performed.
    There will still be anomalies where a procuring agency seeks to 
award an order whose principal purpose is different than the assigned 
NAICS code for the MAC until the Federal Acquisition Regulation (FAR) 
and the FPDS is amended to include multiple NAICS codes at the contract 
level. SBA does not believe that the order should

[[Page 60849]]

be assigned a NAICS code that does not properly reflect its principal 
purpose. SBA believes that the better approach would be to fulfill such 
requirement through a different contracting vehicle.

Sections 121.404(a)(1), 124.503(i), 125.18(d), and 127.504(c)

Size Status
    SBA has been criticized for allowing agencies to receive credit 
towards their small business goals for awards made to firms that no 
longer qualify as small. SBA believes that much of this criticism is 
misplaced. Where a small business concern is awarded a small business 
set-aside contract with a duration of not more than five years and 
grows to be other than small during the performance of the contract, 
some have criticized the exercise of an option as an award to an other 
than small business. SBA disagrees with such a characterization. Small 
business set-aside contracts are restricted only to firms that qualify 
as small as of the date of a firm's offer for the contract. A firm's 
status as a small business is relevant to its qualifying for the award 
of the contract. If a concern qualifies as small for a contract with a 
duration of not more than five years, it is considered a small business 
throughout the life of that contract. Even for MACs that are set-aside 
for small business, once a concern is awarded a contract as a small 
business it is eligible to receive orders under that contract and 
perform as a small business. Again, in such a case, size was relevant 
to the initial award of the contract. Any competitor small business 
concern could protest the size status of an apparent successful offeror 
for a small business set-aside contract (whether single award or 
multiple award), and render a concern ineligible for award where SBA 
finds that the concern does not qualify as small under the size 
standard corresponding to the NAICS code assigned to the contract. 
Furthermore, firms awarded a long-term contract must recertify their 
size status at five years and every option thereafter. Firms are 
eligible to receive orders under that contract and perform as a small 
business so long as they continue to recertify as small at the required 
times (e.g., at five years and every option thereafter). Not allowing a 
concern that legitimately qualified at award and/or recertified later 
as small to receive orders and continue performance as a small business 
during the base and option periods, even if it has naturally grown to 
be other than small, would discourage firms from wanting to do business 
with the Government, would be disruptive to the procurement process, 
and would disincentivize contracting officers from using small business 
set-asides.
    SBA agrees that contract performance by a concern that merges with, 
acquires, or is acquired by another business concern and no longer 
qualifies as small should not count towards small business goals. 
However, SBA already requires a concern to recertify its size status 
within 30 days of a merger, sale, or acquisition becoming final. See 13 
CFR 121.404(g). Under the current regulation, if the contractor is 
other than small, the agency can no longer count the options or orders 
issued pursuant to the contract, from that point forward, towards its 
small business goals. Id.
    SBA, believes, however, that there is a legitimate concern where a 
concern self-certifies as small for an unrestricted MAC and at some 
point later in time when the concern no longer qualifies as small the 
contracting officer seeks to award an order as a small business set-
aside and the firm uses its self-certification as a small business for 
the underlying unrestricted MAC. Under the current process, size status 
for an unrestricted MAC is generally determined as of the date a firm 
submits its offer for the MAC. If a concern self-certifies as small at 
the time of its offer for the underlying MAC, the concern is generally 
considered to be small for goaling purposes for each order issued 
against the contract, unless a contracting officer requests a new size 
certification in connection with a specific order. Therefore, when a 
contracting officer seeks to set-aside an order for small business off 
an unrestricted MAC, the firm's size relates back to its self-
certification for the underlying MAC. As such, orders may be set-aside 
for small businesses and a concern may be awarded one or more orders as 
a small business even though it does not currently qualify as small and 
may not have qualified as small for several years.
    SBA agrees that this situation needs to be addressed. A firm's 
status as a small business does not generally affect whether the firm 
does or does not qualify for the award of an unrestricted MAC contract. 
As such, competitors are very unlikely to protest the size of a concern 
that self-certifies as small for an unrestricted MAC. In SBA's view, 
where a contracting officer sets aside an order for small business 
under an unrestricted MAC, the order is the first time size status is 
important. That is the first time that some firms will be eligible to 
compete for the order while others will be excluded from competition 
because of their size status. As noted above, no one is considering 
protesting the size or status of a firm at the time an unrestricted MAC 
is awarded. It is only when an order is restricted by size status that 
firms focus on their competitors' size status. To allow a firm's self-
certification for the underlying MAC to control whether a firm is small 
at the time of an order years after the MAC was awarded does not make 
sense to SBA.
    SBA has considered several alternative proposals. If an order under 
an unrestricted MAC is set-aside exclusively for small business (i.e., 
small business set-aside, 8(a) small business, service-disabled 
veteran-owned small business, HUBZone small business, or women-owned 
small business), SBA considered requiring a concern to certify its size 
status and qualify as such at the time it submits its initial offer, 
which includes price, for the particular order under all unrestricted 
MACs. SBA has also considered exempting FSS contracts from any 
recertification requirement, and instead applying it only to all other 
MACs. SBA does not seek to disrupt the procurement process, but rather 
to ensure that small business set-aside awards are made to firms that 
qualify as small at the time of the award. GSA is concerned that 
requiring firms to certify their size status for an order that is set-
aside under a FSS would discourage firms from wanting to do business 
with the Government, would dissuade contracting officers from setting 
aside orders, and that this will in turn hurt small businesses.
    In considering the issue, SBA looked at the data for orders that 
were awarded as small business set-asides off unrestricted base 
multiple award vehicles in FY 2018. In total, 8,666 orders were awarded 
as small business set-asides off unrestricted MACs in FY 2018. Of those 
set-aside orders, 10% are estimated to have been awarded to firms that 
no longer qualified as small under the NAICS code size standard at the 
time of the order award. Although the vast majority of set-aside orders 
under unrestricted MACs were awarded off of FSS contracts. Further, it 
is estimated that only 7.1% of small business set-aside orders off the 
FSS were awarded to firms that no longer qualified as small under the 
NAICS code size standard at the time of the order (510 out of 7,266 
orders). That amounted to 12.1% of the dollars set-aside for small 
business off the FSS ($129.6 million to firms that no longer qualified 
as small out of a total of $1.0723 billion in small business set-aside 
orders). Whereas, it is estimated that 49.4% of small business set-
aside orders off of government-wide acquisition contracts (GWACs) were 
awarded to firms that no longer

[[Page 60850]]

qualified as small under the NAICS code size standard at the time of 
the order (261 out of 528 orders). That amounted to 67% of the dollars 
set-aside for small business off of GWACs ($119.6 million to firms that 
no longer qualified as small out of a total of $178.6 million in small 
business set-aside orders). SBA then considered the number and dollar 
value of new orders that were awarded as small business set-asides off 
unrestricted base multiple award vehicles in FY 2018 using the size 
standard ``exceptions'' that apply in some of SBA's size standards 
(e.g., the IT Value-Added Reseller exception to NAICS 541519). Taking 
into account all current size standards exceptions, which allow a firm 
to qualify under an alternative size standard for certain types of 
contracts, it is estimated that 6.5% of small business set-aside orders 
off the FSS were awarded to firms that no longer qualified as small at 
the time of the order (468 out of 7,266 orders). That amounted to 11.3% 
of the dollars set-aside for small business off the FSS ($120.7 million 
to firms that no longer qualified as small out of a total of $1.0723 
billion in small business set-aside orders). Considering exceptions for 
set-aside orders off of GWACs, it is estimated that 11.6% were awarded 
to firms that no longer qualified as small at the time of the order (61 
out of 528 orders). That amounted to 39.5% of the dollars set-aside for 
small business off of GWACs ($70.5 million to firms that no longer 
qualified as small out of a total of $178.6 million in small business 
set-aside orders). It is not possible to tell from FPDS whether the 
``exception'' size standard applied to the contract or whether the 
agency applied the general size standard for the identified NAICS code. 
Thus, all that can be said with certainty is that for small business 
set-aside orders off of the FSS, between 11.3% and 12.1% of the order 
dollars set-aside for small business were awarded to firms that no 
longer qualified as small. This amounted to somewhere between $120.7 
million and $129.6 that were awarded to firms that no longer qualified 
as small. For GWACs, the percentage of orders and order dollars being 
awarded to firms that no longer qualify as small is significantly 
greater. Between 39.5% and 67.0% of the order dollars set-aside for 
small business off GWACs were awarded to firms that no longer qualified 
as small. This amounted to somewhere between $70.5 million and $119.6 
million that were awarded to firms that no longer qualified as small. 
So, set-aside orders off of GWACs, for example, that may potentially go 
to other than small businesses are more significant at 11.6-49.4%. 
However, the data shows that discretionary set-asides under the FSS 
programs have proven effective in making awards to small business under 
the schedules program. The data also shows that the percent of dollars 
going to other than small business off of FSS set-asides is limited. 
Thus, SBA is considering exempting FSS contracts from the 
recertification requirement as it may not be efficient. SBA determined 
that the added burden to the public and Government to implement 
additional control measures and the potential effect on small business 
participation in Government contracting outweighed any potential 
benefits from trying to mitigate the limited risk. As such, this rule 
proposes to exempt the FSS contracts from the rule.
    SBA believes that a contracting vehicle that intends to award to 
small businesses but instead permits as much as 49.4% of its orders and 
between 39.5% and 67% of its dollars to be awarded to firms that do not 
qualify as small is the appropriate area to address. As such, pursuant 
to this proposed rule, except for orders or Blanket Purchase Agreements 
issued under any FSS contract, if an order under an unrestricted MAC is 
set-aside exclusively for small business (i.e., small business set-
aside, 8(a) small business, service-disabled veteran-owned small 
business, HUBZone small business, or women-owned small business), a 
concern must recertify its size status and qualify as such at the time 
it submits its initial offer, which includes price, for the particular 
order. A firm whose size certification in SAM is current and accurate 
will not need to submit a new certification or additional 
documentation.
    For a MAC that is set aside for small business (i.e., small 
business set-aside, 8(a) small business, SDVO small business, HUBZone 
small business, or WOSB), the proposed rule would generally set size 
statusas of the date of the offer for the underlying MAC itself. A 
concern that is small at the time of its offer for the MAC would be 
considered small for each order issued against the contract, unless a 
contracting officer requests a size recertification in connection with 
a specific order. As is currently the case, a contracting officer has 
the discretion to request recertification of size status on MAC orders. 
If that occurs, size status would be determined at the time of the 
order. That would not be a change from the current regulations.
Socioeconomic Status
    Where the required status for an order differs from that of the 
underlying contract (e.g., the MAC is a small business set-aside award, 
and the procuring agency seeks to restrict competition on the order to 
only certified HUBZone small business concerns), SBA believes that a 
firm must qualify for the socioeconomic status of a set-aside order at 
the time it submits an offer for that order. Although size may flow 
down from the underlying contract, status in this case cannot. Similar 
to where a procuring agency seeks to compete an order on an 
unrestricted procurement as a small business set-aside and SBA would 
require offerors to qualify as small with respect to that order (except 
for orders under FSS contracts), SBA believes that where the 
socioeconomic status is first required at the order level, an offeror 
seeking that order must qualify for the socioeconomic status of the 
set-aside order when it submits its offer for the order.
    Under current policy and regulations, where a contracting officer 
seeks to restrict competition of an order off an unrestricted MAC to 
eligible 8(a) Participants only, the contracting officer must offer the 
order to SBA to be awarded through the 8(a) program, and SBA must 
accept the order for the 8(a) program. In determining whether a concern 
is eligible for such an 8(a) order, SBA would apply the provisions of 
the Small Business Act and its current regulations which require a firm 
to be an eligible Program Participant as of the date set forth in the 
solicitation for the initial receipt of offers for the order. SBA 
requests comments on the alternative approaches considered as well as 
any other approaches that would reduce the set-aside awards to firms 
that do not qualify as small or qualify for the socioeconomic status of 
a set-aside order while at the same time not disrupting the procurement 
process or imposing unnecessary burdens on small businesses or 
contracting officers.
    The rule proposes to make these changes in Sec.  121.404(a)(1) for 
size, Sec.  124.503(i) for 8(a) BD eligibility, Sec.  125.18(d) for 
SDVO eligibility, and Sec.  127.504(c) for WOSB eligibility.

Section 121.404

    In addition to the revision to Sec.  121.404(a)(1) identified 
above, the rule proposes to make several other changes or 
clarifications to Sec.  121.404. In order to make this section easier 
to use and understand, the proposed rule would add headings to each 
subsection, which

[[Page 60851]]

would identify the subject matter of the subsection.
    The rule proposes to amend Sec.  121.404(b), which requires a firm 
applying to SBA's programs to qualify as a small business for its 
primary industry classification as of the date of its application. The 
rule would eliminate references to SBA's small disadvantaged business 
(SDB) program as obsolete, and add a reference to the WOSB program.
    The proposed rule would also amend Sec.  121.404(d) to clarify that 
size status for purposes of compliance with the nonmanufacturer rule, 
the ostensible subcontractor rule and joint venture agreement 
requirements is determined as of the date of the final proposal 
revision for negotiated acquisitions and final bid for sealed bidding. 
Currently, only compliance with the nonmanufacturer rule is 
specifically addressed in this paragraph, but SBA's policy has been to 
apply the same rule to determine size with respect to the ostensible 
subcontractor rule and joint venture agreement requirements. This would 
not be a change in policy, but rather a clarification of existing 
policy.
    The proposed rule would also add a clarifying sentence to Sec.  
121.404(e) that would recognize that prime contractors may rely on the 
self-certifications of their subcontractors provided they do not have a 
reason to doubt any specific self-certification. SBA believes that this 
has always been the case, but has added this clarifying sentence, 
nevertheless, at the request of many prime contractors.
    The proposed rule would make several revisions to the size 
recertification provisions in Sec.  121.404(g). First, the 
recertification rule pertaining to a joint venture that had previously 
received a contract as a small business was not clear. If a partner to 
the joint venture has been acquired, is acquiring or has merged with 
another business entity, the joint venture must recertify its size 
status. In order to remain small, however, it was not clear whether 
only the partner which has been acquired, is acquiring or has merged 
with another business entity needed to recertify its size status or 
whether all partners to the joint venture had to do so. SBA believes 
that the intent of the regulation was to require size recertification 
only for the affected partner. To do otherwise could unfairly prejudice 
the joint venture and the procuring activity. For example, assume that 
a joint venture has two partners, a 75% managing partner and a 25% non-
managing partner. In order to have initially been awarded a contract as 
a small business, both partners to the joint venture had to 
individually qualify as small (unless one was an SBA-approved mentor of 
the other). If since the date of the award the 75% partner has 
naturally grown to exceed the size standard assigned to the contract 
and the 25% partner has been acquired by another small business, the 
joint venture could not recertify as small if both partners had to 
recertify their individual size status even if the 25% partner still 
qualified as small after its acquisition. SBA does not believe that 
would be fair to the 75% partner or to the procuring activity, which 
could no longer count the contract as an award to small business. Just 
as SBA allows, under certain conditions, a contract to continue to 
count as an award to small business if a concern awarded the contract 
has grown to exceed the applicable size standard after award, so too 
should a contract to a joint venture continue to count as an award to 
small business if the non-affected partner has grown to be other than 
small and the partner that has been acquired continues to be small 
after the acquisition. Thus, the proposed rule clarifies that only the 
partner to the joint venture that has been acquired, is acquiring, or 
has merged with another business entity must recertify its size status 
in order for the joint venture to recertify its size.
    Additionally, the proposed rule clarifies that if a merger or 
acquisition causes a firm to recertify as an other than small business 
concern between time of offer and award, then the recertified firm is 
not considered a small business for the solicitation. Under this 
proposed rule, SBA would accept size protests with specific facts 
showing that an apparent awardee of a set-aside has recertified or 
should have recertified as other than small due to a merger or 
acquisition before award.
    The proposed rule would also clarify that recertification is not 
required when the ownership of a concern that is at least 51% owned by 
an entity (i.e., tribe, ANC, or Community Development Corporation 
(CDC)) changes to or from a wholly-owned business concern of the same 
entity, as long as the ultimate owner remains that entity. When the 
small business continues to be owned to the same extent by the tribe, 
ANC or CDC, SBA does not believe that the real ownership of the concern 
has changed, and, therefore that recertification is not needed. The 
proposed rule would make this same change to Sec.  121.603 for 8(a) 
contracts as well.
    Finally, the proposed rule would amend Sec.  121.404(g)(3) to 
specifically permit a contracting officer to request size 
recertification as he or she deems appropriate at any point in a long-
term contract. SBA believes that this authority exists within the 
current regulatory language but is merely articulating it more clearly 
in this rule.

Section 121.406

    The proposed rule would merely correct a typographical error by 
replacing the word ``provided'' with the word ``provide.''

Section 121.702

    The proposed rule would clarify the size requirements applicable to 
joint ventures in the Small Business Innovation Research (SBIR) 
program. Although the current regulation authorizes joint ventures in 
the SBIR program and recognizes the exclusion from affiliation afforded 
to joint ventures between a prot[eacute]g[eacute] firm and its SBA-
approved mentor, it does not specifically apply SBA's general size 
requirements for joint ventures to the SBIR program. The proposed rule 
would merely apply the general size rule for joint ventures to the SBIR 
program. In other words, a joint venture for an SBIR award would be 
considered a small business provided each partner to the joint venture, 
including its affiliates, meets the applicable size standard. In the 
case of the SBIR program, this means that each partner does not have 
more than 500 employees.

Section 121.1001

    The rule proposes to provide authority to SBA's Associate General 
Counsel for Procurement Law to independently initiate or file a size 
protest, where appropriate.

Sections 121.1004, 125.28, 126.801, and 127.603

    The proposed rule would add clarifying language to Sec.  121.1004, 
Sec.  125.28, Sec.  126.801, and Sec.  127.603 regarding size and/or 
socioeconomic status protests in connection with orders issued against 
a MAC. Currently, the provisions authorize a size protest where an 
order is issued against a MAC if the contracting officer requested a 
recertification in connection with that order. The proposed rule 
specifically authorizes a size protest relating to an order issued 
against a MAC where the order is set-aside for small business and the 
underlying MAC was awarded on an unrestricted basis, except for orders 
or Blanket Purchase Agreements issued under any FSS contract. The 
proposed rule also specifically authorizes a socioeconomic protest 
relating to set-aside orders based on a different socioeconomic status 
from the underlying set-aside MAC.

[[Page 60852]]

Section 121.1103

    An explanation of the change is provided with the explanation for 
Sec.  134.318.

Section 124.3

    In response to concerns raised to SBA by several Program 
Participants, the proposed rule would add a definition of what a 
follow-on requirement or contract is. Whether a procurement requirement 
may be considered a follow-on procurement is important in several 
contexts related to the 8(a) BD program. First, SBA's regulations 
provide that where a procurement is awarded as an 8(a) contract, its 
follow-on or renewable acquisition must remain in the 8(a) BD program 
unless SBA agrees to release it for non-8(a) competition. 13 CFR 
124.504(d)(1). SBA's regulations also require SBA to conduct an adverse 
impact analysis when accepting requirements into the 8(a) BD program. 
However, an adverse impact analysis is not required for follow-on 8(a) 
acquisitions or new requirements. 13 CFR 124.504(c). Finally, SBA's 
regulations provide that once an applicant is admitted to the 8(a) BD 
program, it may not receive an 8(a) sole source contract that is a 
follow-on procurement to an 8(a) contract that was performed 
immediately previously by another Participant (or former Participant) 
owned by the same tribe, ANC, Native Hawaiian Organization (NHO), or 
CDC. 13 CFR 124.109(c)(3)(ii), 124.110(e) and 124.111(d).
    In order to properly assess what each of these regulations 
requires, the rule proposes to define the term ``follow-on requirement 
or contract''. The definition provides the determination considerations 
for whether a particular procurement is a follow-on requirement or 
contract: (1) Whether the scope has changed significantly, requiring 
meaningful different types of work or different capabilities; (2) 
whether the magnitude or value of the requirement has changed by at 
least 25 percent; and (3) whether the end user of the requirement has 
changed. As a general guide, if the procurement satisfies at least one 
of these three conditions, it may be considered a new requirement. 
Conversely, if the procurement satisfies none of these conditions, it 
is considered a follow-on procurement. However, with respect to a 
change in the value or magnitude of the requirement, SBA intends the 
25% amount to be a guide, and not necessarily dispositive of whether a 
requirement qualifies as ``new.'' Applying the 25 percent rule 
contained in this definition rigidly could permit procuring agencies 
and entity-owned firms to circumvent the intent of release, sister 
company restriction, and adverse impact rules.
    For example, a procuring agency may argue that two procurement 
requirements that were previously awarded as individual 8(a) contracts 
can be removed from the 8(a) program without requesting release from 
SBA because the value of the combined requirement would be at least 25 
percent more than the value of either of the two previously awarded 
individual 8(a) contracts, and thus would be considered a new 
requirement. This application of the new requirement definition would 
permit an agency to remove two requirements from the 8(a) BD program 
without requesting and receiving SBA's permission for release from the 
program. We believe that would be inappropriate and that a procuring 
agency must seek SBA's approval to release the two procurements 
previously awarded through the 8(a) BD program. Likewise, if an entity-
owned 8(a) Participant previously performed two sole source 8(a) 
contracts and a procuring agency sought to offer a sole source 
requirement to the 8(a) BD program on behalf of another Participant 
owned by the same entity (tribe, ANC, NHO, or CDC) that, in effect, was 
a consolidation of the two previously awarded 8(a) procurements, we 
believe it would be inappropriate for SBA to accept the offer on behalf 
of the sister company. Similarly, if a small business concern 
previously performed two requirements outside the 8(a) program and a 
procuring agency wanted to combine those two requirements into a larger 
requirement to be offered to the 8(a) program, SBA should perform an 
adverse impact analysis with respect to that small business even though 
the combined requirement had a value that was greater than 25 percent 
of either of the previously awarded contracts.

Section 124.105

    The proposed rule would amend Sec.  124.105(g) to provide more 
clarity regarding situations in which an applicant has an immediate 
family member that has used his or her disadvantaged status to qualify 
another current or former Participant. The purpose of the immediate 
family member restriction is to ensure that one individual does not 
unduly benefit from the 8(a) BD program by participating in the program 
beyond nine years, albeit through a second firm. This most often 
happens when a second family member in the same or similar line of 
business seeks 8(a) BD certification. However, it is not necessarily 
the type of business which is a problem, but, rather, the involvement 
in the applicant firm of the family member that previously participated 
in the program. The current regulatory language requires an applicant 
firm to demonstrate that ``no connection exists'' between the applicant 
and the other current or former Participant. SBA believes that 
requiring no connections is a bit extreme. If two brothers own two 
totally separate businesses, one as a general construction contractor 
and one as a specialty trade construction contractor, in normal 
circumstances it would be completely reasonable for the brother of the 
general construction firm to hire his brother's specialty trade 
construction firm to perform work on contracts that the general 
construction firm was doing. Unfortunately, if either firm was a 
current or former Participant, SBA's current regulations would prohibit 
SBA from certifying the second firm for participation in the program, 
even if the general construction firm would pay the specialty trade 
firm the exact same rate that it would have to pay to any other 
specialty trade construction firm. SBA does not believe that makes 
sense. An individual should not be required to avoid all contact with 
the business of an immediate family member. He or she should merely 
have to demonstrate that the two businesses are truly separate and 
distinct entities.
    To this end, the rule proposes that an individual would not be able 
to use his or her disadvantaged status to qualify a concern for 
participation in the 8(a) BD program if that individual has an 
immediate family member who is using or has used his or her 
disadvantaged status to qualify another concern for the 8(a) BD program 
and the concerns are connected by any common ownership or management, 
regardless of amount or position, or the concerns have a contractual 
relationship that was not conducted at arm's length. In the first 
instance, if one of the two family members (or business entities owned 
by the family member) owned any portion of the business owned by the 
other family member, the second in time family member could not qualify 
his or her business for the 8(a) BD program. Similarly, if one of the 
two family members had any role as a director, officer or key employee 
in the business owned by the other family member, the second in time 
family member could not qualify his or her business for the 8(a) BD 
program. In the second instance, the second in time family member could 
not qualify his or her business for the 8(a) BD program if it received 
or gave work to the business owned by the other

[[Page 60853]]

family member at other than fair market value. With these changes, SBA 
believes that the proposed rule more accurately captures SBA's intent 
not to permit one individual from unduly benefitting from the program, 
while at the same time permitting normal business relations between two 
firms. SBA specifically requests comments on this provision.
    The proposed rule would also amend the 8(a) BD change of ownership 
requirements in Sec.  124.105(i). First, the proposed rule would lessen 
the burden on 8(a) Participants seeking minor changes in ownership by 
providing that prior SBA approval is not needed where a previous owner 
held less than a 20 percent interest in the concern both before and 
after the transaction. This would be a change from the current 
requirement which allows a Participant to change its ownership without 
SBA's prior approval where the previous owner held less than a 10 
percent interest. This change from 10 percent to 20 percent would 
permit Participants to make minor changes in ownership more frequently 
without requiring them to wait for SBA approval. It would also be 
consistent with other changes SBA has made to reduce burdens on 8(a) 
applicants and Participants. For example, in 2016, SBA changed the 
percentage amount related to the requirement that individuals owning a 
certain percent of the business concern must demonstrate good character 
from 10 percent to 20 percent (see 81 FR 48580). This proposed revision 
would be consistent with that change and would also eliminate 
additional burdens on an 8(a) applicant or Participant relating to 
owners holding between 10 and 20 percent interest.
    In addition, the proposed rule would also eliminate the requirement 
that all changes of ownership affecting the disadvantaged individual or 
entity must receive SBA prior approval before they can occur. 
Specifically, proposed revisions to Sec.  124.105(i)(2) would provide 
that prior SBA approval is not needed where the disadvantaged 
individual (or entity) in control of the Participant will increase the 
percentage of his or her (its) ownership interest. SBA believes that 
prior approval is not needed in such a case because there could be no 
question as to whether the Participant continues to meet the program's 
ownership and control requirements. Again, this proposed change would 
decrease the amount of times and the time spent by Participant firms 
seeking SBA approval of a change in ownership. SBA would nevertheless 
continue to review all changes in ownership for which prior approval is 
not required, including those contemplated by the proposed rule, to 
ensure that the transfer was fair and equitable to the disadvantaged 
individual(s) (or entity) and has not unduly benefited non-
disadvantaged parties to the transaction. Where SBA has determined that 
a change in ownership does not meet such requirements, the Agency may, 
in its discretion, require remedial action or initiate an appropriate 
adverse action, such as program suspension or termination.

Section 124.109

    In order to eliminate confusion, the proposed rule would clarify 
several provisions relating to tribally-owned 8(a) applicants and 
Participants. First, SBA proposes to amend Sec.  124.109(a)(7) and 
Sec.  124.109(c)(3)(iv) to clarify that a Participant owned by an ANC 
or tribe need not request a change of ownership from SBA where the ANC 
or tribe merely reorganizes its ownership of a Participant in the 8(a) 
BD program by inserting or removing a wholly-owned business entity 
between the ANC/tribe and the Participant. SBA believes that a tribe or 
ANC should be able to replace one wholly-owned intermediary company 
with another without going through the change of ownership process and 
obtaining prior SBA approval. In each of these cases, SBA believes that 
the underlying ownership of the Participant is not changing 
substantively and that requiring a Participant to request approval from 
SBA is unnecessary. The recommendation and approval process for a 
change of ownership can take several months, so this change would 
relieve Participants owned by tribes and ANCs from this unnecessary 
burden and allow them to proactively conduct normal business operations 
without interruption.
    Second, the proposed rule would amend Sec.  124.109(c)(3)(ii) to 
clarify the rules pertaining to a tribe/ANC owning more than one 
Participant in the 8(a) BD program. The proposed rule would add two 
subparagraphs and an example to Sec.  124.109(c)(3)(ii) for ease of use 
and understanding. In addition, SBA would clarify that if the primary 
NAICS code of a tribally-owned Participant is changed pursuant to Sec.  
124.112(e), the tribe could then submit an application to qualify 
another of its firms for participation in the 8(a) BD program under the 
primary NAICS code that was previously held by the Participant whose 
primary NAICS code was changed. A change in a primary NAICS code under 
Sec.  124.112(e) should occur only where SBA has determined that the 
greatest portion of a Participant's revenues for the past three years 
are in a NAICS code other than the one identified as its primary NAICS 
code. In such a case, SBA has determined that in effect the second 
NAICS code really has been the Participant's primary NAICS code for the 
past three years. SBA's rules have historically provided that a Tribe 
or ANC may not own 51% or more of another firm which, either at the 
time of application or within the previous two years, has been 
operating in the 8(a) program under the same primary NAICS code as the 
applicant. Thus, this proposed rule will clarify that when SBA has 
changed the primary NAICS code change for a Participant, SBA has 
determined that first NAICS code was not the Participant's primary 
NAICS code for the last two years, and the tribe/ANC would be permitted 
to have another of its firms apply to and be admitted to the 8(a) BD 
program under the former primary NAICS code of the sister company.
    Finally, the proposed rule would clarify the 8(a) BD program 
admission requirements governing how a tribally-owned applicant may 
demonstrate that it possesses the necessary potential for success. 
SBA's regulations currently permit the tribe to make a firm written 
commitment to support the operations of the applicant concern to 
demonstrate a tribally-owned firm's potential for success. Due to the 
increased trend of tribes establishing tribally-owned economic 
development corporations to oversee tribally owned businesses, SBA 
recognizes that in some circumstances it may be adequate to accept a 
letter of support from the tribally-owned economic development company 
rather than the tribal leadership. SBA also recognizes that in most 
cases, tribes are not establishing these economic development 
corporations as Section 17 corporations, which SBA has previously 
determined should be treated as an arm of the tribe and thus, the tribe 
itself for purposes of the 8(a) BD regulations. Rather, these 
corporations are often tribally owned holding companies that have been 
delegated authority to oversee tribal economic development and tribal 
business ventures. In response, this proposed rule would permit a 
tribally-owned applicant to satisfy the potential for success 
requirements by submitting a letter of support from a tribally-owned 
economic development corporation or other relevant tribally-owned 
holding company. In order for a letter of support from the tribally 
owned holding company to be sufficient, there must be sufficient 
evidence that the tribally-owned holding company has the financial 
resources to support the

[[Page 60854]]

applicant and that the tribally-owned company is controlled by the 
tribe.

Section 124.110

    The proposed rule would make some of the same changes to Sec.  
124.110 for applicants and Participants owned and controlled by NHOs as 
it would to Sec.  124.109 for tribally-owned applicants and 
Participants. Specifically, the proposed rule would subdivide Sec.  
124.110(e) for ease of use and understanding and would clarify that if 
the primary NAICS code of an NHO-owned Participant is changed pursuant 
to Sec.  124.112(e), the NHO could submit an application and qualify 
another firm owned by the NHO for participation in the 8(a) BD program 
under the NAICS code that was the previous primary NAICS code of the 
Participant whose primary NAICS code was changed.

Section 124.111

    The proposed rule would make the same change for CDCs and CDC-owned 
firms as for tribes and ANCs mentioned above. It would clarify that a 
Participant owned by a CDC need not request a change of ownership from 
SBA where the CDC merely reorganizes its ownership of a Participant in 
the 8(a) BD program by inserting or removing a wholly-owned business 
entity between the CDC and the Participant. It would also subdivide the 
current subparagraph (d) into three smaller paragraphs for ease of use 
and understanding, and would clarify that if the primary NAICS code of 
a CDC-owned Participant is changed pursuant to Sec.  124.112(e), the 
CDC could submit an application and qualify another firm owned by the 
CDC for participation in the 8(a) BD program under the NAICS code that 
was the previous primary NAICS code of the Participant whose primary 
NAICS code was changed.

Section 124.112

    SBA proposes to amend Sec.  124.112(d)(5) regarding excessive 
withdrawals in connection with entity-owned 8(a) Participants. There 
has been some confusion as to whether an 8(a) Participant that is owned 
at least 51% by a tribe, ANC, NHO or CDC can make a distribution to a 
non-disadvantaged individual that exceeds the applicable excessive 
withdrawal limitation dollar amount if it is made as part of a pro rata 
distribution to all shareholders. SBA believes that it generally should 
be able to do so. Through a pro rata distribution, the only way that an 
entity-owned firm can increase its distribution to the tribe, ANC, NHO 
or CDC is if it also increases the distribution to the non-entity 
owner. Since the intent is to increase the distribution to the tribe, 
ANC, NHO or CDC, and thus increase the benefits flowing back to the 
community, SBA believes this serves the purposes of the program. The 
rule also proposes, however, that SBA could deem the distributions 
excessive if SBA determines that they would adversely affect the 
business development of the Participant.
    In 2016, SBA amended Sec.  124.112(e) to implement procedures to 
allow SBA to change the primary NAICS code of a Participant where SBA 
determined that the greatest portion of the Participant's total 
revenues during a three-year period have evolved from one NAICS code to 
another. 81 FR 48558, 48581 (July 25, 2016). The procedures require SBA 
to notify the Participant of its intent to change the Participant's 
primary industry classification and afford the Participant the 
opportunity to submit information explaining why such a change would be 
inappropriate. Several individuals have asked SBA to permit an appeal 
process, whereby a Participant whose primary NAICS code was changed by 
its servicing district office could seek further review of that 
determination at a different level. After hearing this concern repeated 
several times at the tribal consultations conducted by SBA, this 
proposed rule would authorize such an appeal process.

Section 124.201

    This proposed rule does not amend Sec.  124.201. However, SBA is 
considering adding a provision that would require a small business 
concern that seeks to apply for participation in the 8(a) BD program to 
first take an SBA-sponsored preparatory course regarding the 
requirements and expectations of the 8(a) BD program. SBA specifically 
requests comments on such a requirement.

Section 124.203

    Section 124.203 requires applicants to the 8(a) BD program to 
submit certain specified supporting documentation, including financial 
statements, copies of signed Federal personal and business tax returns 
and individual and business bank statements. In 2016, SBA removed the 
requirement that an applicant must submit a signed Internal Revenue 
Service (IRS) Form 4506T, Request for Copy or Transcript of Tax Form, 
in all cases. 81 FR 48558, 48569 (July 25, 2016). At that time, SBA 
agreed with a commenter to the proposed rule that questioned the need 
for every applicant to submit IRS Form 4506T. In eliminating that 
requirement for every applicant, SBA reasoned that it always has the 
right to request any applicant to submit specific information that may 
be needed in connection with a specific application. As long as SBA's 
regulations clearly provide that SBA may request any additional 
documents SBA deems necessary to determine whether a specific applicant 
is eligible to participate in the 8(a) BD program, SBA will be able to 
request that a particular firm submit IRS Form 4506T where SBA believes 
it to be appropriate. This proposed rule would amend Sec.  124.203 to 
add back the requirement that every applicant to the 8(a) BD program 
submit IRS Form 4506T (or when available, IRS Form 4506C). SBA believes 
that not having that Form readily available when needed has unduly 
delayed the application process for those affected applicants. In 
addition, SBA believes that requiring Form 4506T in every case will 
serve as a deterrent to firms that may think it is not necessary to 
fully disclose all necessary financial information. Although SBA does 
not often use IRS Form 4506T to verify an applicant's information, SBA 
believes that this additional requirement imposes a minimal burden on 
8(a) BD program applicants. Additionally, SBA believes that the 
collection of Form 4506T will help to maintain the integrity of the 
program.

Section 124.204

    SBA proposes to suspend the time to process an 8(a) application 
where SBA requests clarifying, revised or other information from the 
applicant. While SBA is waiting on the applicant to provide clarifying 
or responsive information, the Agency is not continuing to process the 
application.

Section 124.207

    The proposed rule would amend Sec.  124.207 to allow a concern that 
has been declined for 8(a) BD program participation to submit a new 
application 90 days after the date of the Agency's final decision to 
decline. This would change the current rule which requires a concern to 
wait 12 months from the date of the final agency decision to reapply, 
and would make the 8(a) BD program consistent with the HUBZone program. 
See 13 CFR 126.309. SBA believes that this change would reduce the 
number of appeals to SBA's Office of Hearings and Appeals (OHA) and 
greatly reduce the costs associated with appeals borne by disappointed 
applicants. If a firm can correct the deficiencies in its initial 
application and reapply within 90 days, it may be much more likely to 
forego appealing to OHA, where the process can take 90 days or

[[Page 60855]]

more for resolution. Because a firm that is declined could submit a new 
application 90 days after the decline decision, SBA requests comments 
on whether the current reconsideration process should be eliminated.

Section 124.300 and 124.301

    The proposed rule would redesignate the current Sec.  124.301 
(which discusses the various ways a business may leave the 8(a) BD 
program) as Sec.  124.300 and add a new Sec.  124.301 to specifically 
enunciate the voluntary withdrawal and early graduation procedures. The 
rule would set forth SBA's current policy that a Participant may 
voluntarily withdraw from the 8(a) BD program at any time prior to the 
expiration of its program term. In addition, where a Participant 
believes it has substantially achieved the goals and objectives set 
forth in its business plan, SBA would allow the Participant to elect to 
voluntarily early graduate from the 8(a) BD program. That too is SBA's 
current policy, and the proposed rule merely captures it in SBA's 
regulations.
    The proposed rule would, however, change the level at which 
voluntary withdrawal and voluntary early graduation could be finalized 
by SBA. Currently, a firm submits its request to voluntarily withdraw 
or early graduate to its servicing SBA district office. Once the 
district office concurs, the request is sent to the Associate 
Administrator for Business Development (AA/BD) for final approval. SBA 
believes that requiring several layers of review to permit a concern to 
voluntarily exit the 8(a) BD program is unnecessary. Because an entity 
cannot have a second firm admitted to the 8(a) BD program with the same 
primary NAICS code as a sister company for a period of two years from 
the date that the sister company left the program, requiring firms to 
wait a potentially significant amount of time for several layers of SBA 
reviewers to approve a voluntary withdrawal or voluntary early 
graduation action could adversely impact the overall business 
operations of the entity and other concerns owned by the entity. Thus, 
the rule proposes that a Participant must still request voluntary 
withdrawal or voluntary early graduation from its servicing district 
office, but the action would be complete once the District Director 
recognizes the voluntary withdrawal or voluntary early graduation. SBA 
believes this would eliminate unnecessary delay in processing these 
actions.

Section 124.304

    The proposed rule would clarify the effect of a decision made by 
the AA/BD to terminate or early graduate a Program Participant. Under 
SBA's current procedures, once the AA/BD renders a decision to early 
graduate or terminate a Participant from the 8(a) BD program, the 
affected Participant has 45 days to appeal that decision to SBA's OHA. 
If no appeal is made, the AA/BD's decision becomes the final agency 
decision after that 45-day period. If the Participant appeals to OHA, 
the final agency decision will be the decision of the administrative 
law judge at OHA. There has been some confusion as to what the effect 
of the AA/BD decision is pending the decision becoming the final agency 
decision. The proposed rule clarifies that where the AA/BD issues a 
decision terminating or early graduating a Participant, SBA would treat 
the firm as being suspended. SBA does not believe that it would not 
make sense to allow a Participant to continue to receive program 
benefits after the AA/BD has terminated or early graduated the firm 
from the program. If OHA ultimately overrules the AA/BD decision, the 
suspension would be lifted and the length of the suspension would be 
added to the Participant's program term.

Sections 124.305 and 124.402

    Section 124.402 requires each firm admitted to the 8(a) BD program 
to develop a comprehensive business plan and to submit that business 
plan to SBA. Currently, Sec.  124.402(b) provides that a newly admitted 
Participant must submit its business plan to SBA as soon as possible 
after program admission and that the Participant will not be eligible 
for 8(a) BD benefits, including 8(a) contracts, until SBA approves its 
business plan. Several firms have complained that they missed contract 
opportunities because SBA did not approve their business plans before 
procuring agencies sought to award contracts to fulfill certain 
requirements. While SBA continues to believe that it is important for a 
newly admitted Participant to submit its business plan to SBA as 
expeditiously as possible, SBA also understands the adverse 
consequences that can ensue if a firm loses an opportunity that it has 
lined up because its business plan is not approved prior to the time 
that a procuring agency seeks to fulfill a particular procurement 
requirement. In response, the proposed rule would amend Sec.  
124.402(b) to eliminate the provision that a Participant cannot receive 
any 8(a) BD benefits until SBA has approved its business plan. A firm 
coming in to the 8(a) BD program with commitments from one or more 
procuring agencies could immediately be awarded one or more 8(a) 
contracts. Instead, the proposed rule would provide that SBA would 
suspend a Participant from receiving 8(a) BD program benefits if it has 
not submitted its business plan to the servicing district office and 
received SBA's approval within 60 days after program admission. SBA 
believes that firms coming into the 8(a) BD program possessing the 
potential for success required for program entry would most likely have 
business plans in place and should be able to have their business plans 
approved by SBA within 60 days of program admission. If that cannot 
happen within 60 days, SBA would suspend the Participant's business 
plan under the proposed changes to Sec.  124.305(h). This would freeze 
a firm's program term, and a firm would not lose any time in the 
program.
    The proposed rule would also correct a typographical error 
contained in Sec.  124.305(h)(1)(ii). Under Sec.  124.305(h)(1)(ii), an 
8(a) Participant can elect to be suspended from the 8(a) program where 
a disadvantaged individual who is involved in controlling the day-to-
day management and control of the Participant is called to active 
military duty by the United States. Currently, the regulation states 
that the Participant may elect to be suspended where the individual's 
participation in the firm's management and daily business operations is 
critical to the firm's continued eligibility, and the Participant 
elects not to designate a non-disadvantaged individual to control the 
concern during the call-up period. That should read where the 
Participant elects not to designate another disadvantaged individual to 
control the concern during the call-up period. It was not SBA's intent 
to allow a non-disadvantaged individual to control the firm during the 
call-up period and permit the firm to continue to be eligible for the 
program.

Sections 124.501 and 124.507

    Section 124.501 is entitled ``What general provisions apply to the 
award of 8(a) contracts?'' SBA must determine that a Participant is 
eligible for the award of both competitive and sole source 8(a) 
contracts. However, the requirement that SBA determine eligibility is 
currently contained specifically only in the 8(a) competitive 
procedures at Sec.  124.507(b)(2). Although SBA determines eligibility 
for sole source 8(a) awards at the time it accepts a requirement for 
the 8(a) BD program, that process is not specifically stated in the 
regulations. The proposed rule would move the eligibility determination 
procedures for

[[Page 60856]]

competitive 8(a) contracts from Sec.  124.507(b)(2) to the general 
provisions of Sec.  124.501 and would specifically address eligibility 
determinations for sole source 8(a) contracts. To accomplish this, the 
proposed rule would revise current Sec.  124.501(g).
    Similarly, SBA believes that the provisions requiring a bona fide 
place of business within a particular geographic area for 8(a) 
construction awards should also appear in the general provisions 
applying to 8(a) contracts set forth in Sec.  124.501. Section 8(a)(11) 
of the Small Business Act, 15 U.S.C. 637(a)(11), requires that to the 
maximum extent practicable 8(a) construction contracts ``shall be 
awarded within the county or State where the work is to be performed.'' 
SBA has implemented this statutory provision by requiring a Participant 
to have a bona fide place of business within a specific geographic 
location. Currently, the bona fide place of business rules appear only 
in the procedures applying to competitive 8(a) procurements in Sec.  
124.507(c)(2). The proposed rule would move those procedures to a new 
Sec.  124.501(k), which would clearly make them applicable to both sole 
source and competitive 8(a) awards. Based on the statutory language, 
SBA believes that the requirement to have a bona fide place of business 
in a particular geographic area currently applies to both sole source 
and competitive 8(a) procurements, but moving the requirement to the 
general applicability section would remove any doubt or confusion.
    In response to concerns raised by Participants, the proposed rule 
would also impose time limits within which SBA district offices should 
process requests to add a bona fide place of business. SBA has heard 
that several Participants missed out on 8(a) procurement opportunities 
because their requests for SBA to verify their bona fide places of 
business were not timely processed. In order to alleviate this 
perceived problem, the proposed rule would provide that in connection 
with a specific 8(a) competitive solicitation, the reviewing office 
will make a determination whether or not the Participant has a bona 
fide place of business in its geographical boundaries within 5 working 
days of a site visit or within 15 working days of its receipt of the 
request from the servicing district office if a site visit is not 
practical in that timeframe. SBA requests comments on whether a 
Participant that has filed a request to have a bona fide place of 
business recognized by SBA in time for a particular 8(a) construction 
procurement may submit an offer for that procurement where it has not 
received a response from SBA before the date offers are due. In other 
words, should a Participant that has requested the recognition of a 
bona fide place of business beyond the time limits set forth in this 
proposed rule be able to presume approval and submit an offer as an 
eligible Participant? SBA does not want to harm Participants that truly 
have set up bona fide places of business, but at the same time does not 
want to give eligibility to firms that have not met the requirements 
necessary to establish a bona fide place of business.

Section 124.503

    Currently, Sec.  124.503(g) provides that a Basic Ordering 
Agreement (BOA) is not a contract under the FAR. Rather, each order to 
be issued under the BOA is an individual contract. As such, a procuring 
activity must offer, and SBA must accept, each task order under a BOA 
in addition to offering and accepting the BOA itself. Once a 
Participant leaves the 8(a) BD program or otherwise becomes ineligible 
for future 8(a) contracts (e.g., becomes other than small under the 
size standard assigned to a particular contract) it cannot receive 
further 8(a) orders under a BOA. Similarly, a blanket purchase 
agreement (BPA) is also not a contract. A BPA (whether a BPA under part 
13 of the Federal Acquisition Regulation (FAR) or a BPA under subpart 
8.4 of the FAR)) is not a contract because it neither obligates funds 
nor requires placement of any orders against it. Instead, it is an 
understanding between an ordering agency and a contractor that allows 
the agency to place future orders more quickly by identifying terms and 
conditions applying to those orders, a description of the supplies or 
services to be provided, and methods for issuing and pricing each 
order. The government is not obligated to place any orders, and either 
party may cancel a BPA at any time.
    Although current Sec.  124.503(g) addresses BOAs, it does not 
specifically mention BPAs. The proposed rule would amend Sec.  124.503 
to merely specifically recognize that BPAs are also not contracts and 
should be afforded the same treatment as BOAs.

Section 124.504

    This rule also proposes to make several changes to Sec.  124.504.
    The proposed rule would amend Sec.  124.504(b) to alter the 
provision prohibiting SBA from accepting a requirement into the 8(a) BD 
program where a procuring activity competed a requirement among 8(a) 
Participants prior to offering the requirement to SBA and receiving 
SBA's formal acceptance of the requirement. SBA believes that the 
restriction as written is overly harsh and burdensome to procuring 
agencies. Several contracting officers have not offered a follow-on 
procurement to the 8(a) program prior to conducting a competition 
restricted to eligible 8(a) Participants because they believed that as 
a follow-on it must be procured through the 8(a) program. They issued 
solicitations identifying them as competitive 8(a) procurements, 
selected an apparent successful offeror and then sought SBA's 
eligibility determination prior to making an award. A strict 
interpretation of the current regulatory language would prohibit SBA 
from accepting such a requirement. Such an interpretation could 
seriously adversely affect an agency's procurement strategy by unduly 
delaying the award of a contract. That was never SBA's intent. As long 
as a procuring agency clearly identified a requirement as a competitive 
8(a) procurement and the public fully understood it to be restricted 
only to eligible 8(a) Participants, SBA should be able to accept that 
requirement regardless of when the offering occurred.
    The rule would clarify SBA's intent regarding the requirement that 
a procuring agency must seek and obtain SBA's concurrence to release 
any follow-on procurement from the 8(a) BD program. This is not a 
change in policy, but rather a clarification of SBA's current policy 
and the position SBA has taken in several protests before the General 
Accountability Office. Some agencies have attempted to remove a follow-
on procurement from the 8(a) program and reprocure the requirement 
through a MAC or Government-wide Acquisition Contract (GWAC) that is 
not an 8(a) contract without seeking release by saying that they intend 
to issue a competitive 8(a) order off the MAC or GWAC. In other words, 
because the order off the MAC or GWAC would be offered to and accepted 
for award through the 8(a) BD program and the follow-on work would be 
performed through the 8(a) BD program, some procuring agencies believe 
that release is not needed. SBA does not agree. In such a case, the 
underlying contract is not an 8(a) contract. The procuring agency is 
attempting to remove a requirement from the 8(a) program to a contract 
that is not an 8(a) contract. That is precisely what release is 
intended to apply to. Moreover, because Sec.  124.504(d)(4) provides 
that the requirement to seek release of an 8(a) requirement from SBA 
does not apply to orders offered to and accepted for the 8(a) program 
where the underlying MAC

[[Page 60857]]

or GWAC is not itself an 8(a) contract, allowing a procuring agency to 
move an 8(a) contract to an 8(a) order off a non-8(a) contract vehicle 
would allow the procuring agency to then remove the next follow-on to 
the 8(a) order out of the 8(a) program entirely without any input from 
SBA. A procuring agency could take an 8(a) contract with a base year 
and four one-year option periods, turn it into a one-year 8(a) order 
off a non-8(a) contract vehicle, and then remove it from the 8(a) 
program entirely after that one-year performance period. That was 
certainly not the intent of SBA's regulations. As such, this rule 
clarifies that the request for and granting of a release of a follow-on 
procurement from the 8(a) BD program is required when the procurement 
will be moved out of the 8(a) BD program as an independent contract 
into a MAC or GWAC. SBA has received additional comments recommending 
that release should also apply even if the underlying pre-existing MAC 
or GWAC to which a procuring agency seeks to move a follow-on 
requirement is itself an 8(a) contract. These commenters argue that an 
8(a) incumbent contractor may be seriously hurt by moving a procurement 
from a general 8(a) competitive procurement to an 8(a) MAC or GWAC to 
which the incumbent is not a contract holder. In such a case, the 
incumbent would have no opportunity to win the award for the follow-on 
contract, and, without the release process, would have no opportunity 
to demonstrate that it would be adversely impacted or to try to 
dissuade SBA from agreeing to release the procurement. In response, the 
proposed rule would provide that SBA must agree to release any follow-
on requirement where a procuring agency seeks to reprocure that 
requirement through a limited contracting vehicle which is not 
available to all 8(a) BD Program Participants (e.g., any multiple award 
or Governmentwide acquisition contract, whether or not the underlying 
MAC or GWAC is itself an 8(a) contract). If an agency seeks to 
reprocure a current 8(a) requirement as a competitive 8(a) award for a 
new 8(a) MAC or GWAC vehicle, SBA's concurrence would not be required 
because such a competition would be available to all 8(a) BD Program 
Participants.
    The proposed rule would also clarify that in all cases where a 
procuring agency seeks to fulfill a follow-on requirement outside of 
the 8(a) BD program, except where it is statutorily or otherwise 
required to use a mandatory source (see FAR subpart 8.6 and 8.7), it 
must make a written request to and receive the concurrence of SBA to do 
so. In such a case, the proposed rule would require a procuring agency 
to notify SBA that it will take a follow-on procurement out of the 8(a) 
procurement because of a mandatory source. Such notification would be 
required at least 30 days before the end of the contract period to give 
the 8(a) Participant the opportunity to make alternative plans.
    In addition, SBA does not typically consider the value of a bridge 
contract when determining whether an offered procurement is a new 
requirement. A bridge contract is meant to be a temporary stop-gap 
measure intended to ensure the continuation of service while an agency 
finalizes a long-term procurement approach. As such, SBA does not 
typically consider a bridge contract as part of the new requirement 
analysis, unless there is some basis to believe that the agency is 
altering the duration of the option periods to avoid particular 
regulatory requirements. Whether to consider the bridge contract is 
determined on a case-by-case basis given the facts of the procurement 
at issue. SBA seeks comments as to whether this long-standing policy 
should also be incorporated into the regulations.

Section 124.509

    The proposed rule would revise Sec.  124.509(e), regarding how a 
Participant can obtain a waiver to the requirement prohibiting it from 
receiving further sole source 8(a) contracts where the Participant does 
not meet its applicable non-8(a) business activity target. Currently, 
the regulations require the AA/BD to process a Participant's request 
for a waiver in every case. The proposed rule would substitute SBA for 
the AA/BD to allow flexibility to SBA to determine the level of 
processing in a standard operating procedure outside the regulations. 
SBA believes that at least at some level, the district office should be 
able to process such requests for waiver. That correct level could be 
any requirement below the Simplified Acquisition Threshold (SAT), or 
maybe some other specific dollar value. Putting such a requirement in 
an SOP, instead of the regulations, however, would give flexibility to 
SBA to adjust the requirement as necessary, and allow more 
straightforward requests to be processed more expeditiously.
    The current regulation also requires the SBA Administrator on a 
non-delegable bases to decide requests for waiver from a procuring 
agency. In other words, if the Participant itself does not request a 
waiver to the requirement prohibiting it from receiving further sole 
source 8(a) contracts, but an agency does because it believes that the 
award of a sole source contract to the identified Participant is needed 
to achieve significant interests of the Government, the SBA 
Administrator must currently make that determination. Requiring such a 
request to be processed by several levels of SBA reviewers and then by 
the Administrator slows down the processing. If a procuring agency 
truly needs something quickly, it could be harmed by the processing 
time. The proposed rule would change the Administrator from making 
these determinations to SBA. This should allow these requests to be 
processed more quickly.

Section 124.513

    Currently, Sec.  124.513(e) provides that SBA must approve a joint 
venture agreement prior to the award of an 8(a) contract on behalf of 
the joint venture. This requirement applies to both competitive and 
sole source 8(a) procurements. SBA does not approve joint venture 
agreements in any other context, including a joint venture between an 
8(a) Participant and its SBA-approved mentor (which may be other than 
small) in connection with a non-8(a) contract (i.e., small business 
set-aside, HUBZone, SDVO small business, or WOSB contract). In order to 
be considered an award to a small disadvantaged business (SDB) for a 
non-8(a) contract, a joint venture between an 8(a) Participant and a 
non-8(a) Participant must be controlled by the 8(a) partner to the 
joint venture and otherwise meet the provisions of Sec.  124.513(c) and 
(d). If the non-8(a) partner to the joint venture is also a small 
business under the size standard corresponding to the NAICS code 
assigned to the procurement, the joint venture could qualify as small 
if the provisions of Sec.  124.513(c) and (d) were not met (see Sec.  
121.103(h)(3)(i), where a joint venture can qualify as small as long as 
each party to the joint venture individually qualifies as small), but 
the joint venture could not qualify as an award to an SDB in such case. 
If the joint venture were between an 8(a) Participant and its large 
business mentor, the joint venture could not qualify as small if the 
provisions of Sec.  124.513(c) and (d) were not met. The size of a 
joint venture between a small business prot[eacute]g[eacute] and its 
large business mentor is determined without looking at the size of the 
mentor only when the joint venture complies with SBA's regulations 
regarding control of the joint venture. Where another offeror believes 
that a joint venture between a prot[eacute]g[eacute] and its large 
business mentor has not

[[Page 60858]]

complied with the applicable control regulations, it may protest the 
size of the joint venture. The applicable Area Office of SBA's Office 
of Government Contracting would then look at the joint venture 
agreement to determine if the small business is in control of the joint 
venture within the meaning of SBA's regulations. If that Office 
determines that the applicable regulations were not followed, the joint 
venture would lose its exclusion from affiliation, be found to be other 
than small, and, thus, ineligible for an award as a small business. 
This size protest process has worked well in ensuring that small 
business joint venture partners do in fact control non-8(a) contracts 
with their large business mentors. Because size protests are authorized 
for competitive 8(a) contracts, SBA and believes that the size protest 
process could work similarly for competitive 8(a) contracts. As such, 
this proposed rule would eliminate the need for 8(a) Participants to 
seek and receive approval from SBA of every joint venture for 
competitive 8(a) contracts. SBA believes that this would significantly 
lessen the burden imposed on 8(a) small business Participants. 
Participants would not be required to submit additional paperwork to 
SBA and would not have to wait for SBA approval in order to seek 
competitive 8(a) awards.
    However, the proposed rule would not eliminate the requirement that 
SBA must approve joint ventures in connection with sole source 8(a) 
awards. Because size protests from other Participants are not permitted 
with respect to sole source 8(a) procurements, there would be no way to 
ensure that a joint venture for an 8(a) sole source contract between an 
8(a) Participant and its large business mentor is controlled by the 
8(a) Participant and otherwise meets SBA's joint venture requirements 
if SBA did not continue to look at joint ventures in that context. SBA 
believes that it is important to ensure that the joint venture rules 
would continue to be followed, and without any other enforcement 
mechanism, SBA must continue to approve joint ventures for 8(a) sole 
source contracts. The only other alternative approach would be to allow 
size protests in connection with sole source 8(a) contracts, but SBA 
believes that is not appropriate because other Participants are not 
really interested parties with respect to a sole source 8(a) 
procurement offered to the 8(a) program on behalf of another 
Participant.

Section 124.519

    Section 124.519 limits the ability of 8(a) Participants to obtain 
additional sole source 8(a) contracts once they have reached a certain 
dollar level of overall 8(a) contracts. Currently, for a firm having a 
receipts-based size standard corresponding to its primary NAICS code, 
the limit above which a Participant can no longer receive sole source 
8(a) contracts is five times the size standard corresponding to its 
primary NAICS code, or $100,000,000, whichever is less. For a firm 
having an employee-based size standard corresponding to its primary 
NAICS code, the limit is $100,000,000. In order to simplify this 
requirement, this proposed rule would provide that a Participant may 
not receive sole source 8(a) contract awards where it has received a 
combined total of competitive and sole source 8(a) contracts in excess 
of $100,000,000 during its participation in the 8(a) BD program, 
regardless of its primary NAICS code. In addition, the rule would 
clarify that in determining whether a Participant has reached the limit 
identified in paragraph (a) of this section, SBA would look at the 8(a) 
revenues a Participant has actually received, not projected 8(a) 
revenues that a Participant might receive through an indefinite 
delivery or indefinite quantity contract, a multiple award contract, or 
options or modifications. Finally, the proposed rule would amend what 
types of small dollar value 8(a) contracts should not be considered in 
determining whether a Participant has reached the 8(a) revenue limit. 
Currently, SBA does not consider 8(a) contracts awarded under $100,000 
in determining whether a Participant has reached the `1 8(a) revenue 
limit. The proposed rule would replace the $100,000 amount with a 
reference to the SAT. SBA has delegated to procuring agencies the 
ability to award sole source 8(a) contracts without offer and 
acceptance for contracts valued at or below the SAT. Because SBA does 
not accept such procurements into the 8(a) BD program, it is difficult 
for SBA to monitor these awards. The proposed rule would merely align 
the 8(a) revenue limit with that authority.

Section 125.2

    The proposed rule would add a new paragraph (g) requiring 
contracting officers to consider the past performance and experience of 
first tier subcontractors in certain instances. This consideration is 
statutorily required for bundled or consolidated contracts (15 U.S.C. 
644(e)(4)(B)(i)) and for multiple award contracts valued above a 
certain dollar amount that corresponds to the agency's substantial 
bundling threshold (15 U.S.C. 644(q)(1)(B)). Following the statutory 
provisions, the proposed rule requires a contracting officer to 
consider the past performance and experience of first tier 
subcontractors in those two categories of contracts. The proposed rule 
would not require a contracting officer to consider the past 
performance, capabilities and experience of each first tier 
subcontractor as the capabilities and past performance of the small 
business prime contractor in other instances. Instead, it would provide 
discretion to contracting officers to consider such past performance, 
capabilities and experience of each first tier subcontractor where 
appropriate. SBA specifically requests comments as to whether as a 
policy matter such consideration should be required in all cases, or 
limited only to the statutorily required instances as proposed.

Section 125.3

    The Small Business Act explicitly prohibits the Government from 
requiring small businesses to submit subcontracting plans. 15 U.S.C. 
637(d)(8). This prohibition is set forth in Sec.  125.3(b) of SBA's 
regulations and in FAR 19.702(b)(1). Under the Alaska Native Claims 
Settlement Act (ANCSA), a contractor receives credit towards the 
satisfaction of its small or small disadvantaged business 
subcontracting goals when contracting with an ANC-owned firm. 43 U.S.C. 
1626(e)(4)(B). There has been some confusion as to whether an ANC-owned 
firm that does not individually qualify as small but counts as a small 
business or a small disadvantaged business for subcontracting goaling 
purposes under 43 U.S.C. 1626(e)(4)(B) must itself submit a 
subcontracting plan. SBA believes that such a firm is not currently 
required to submit a subcontracting plan, but proposes to add 
clarifying language to Sec.  125.3(b) to clear up any confusion. The 
proposed rule would make clear that all firms considered to be small 
businesses, whether the firm qualifies as a small business concern for 
the size standard corresponding to the NAICS code assigned to the 
contract or is deemed to be treated as a small business concern by 
statute, would not be required to submit subcontracting plans.

Section 125.5

    The proposed rule clarifies that SBA does not use the certificate 
of competency (COC) procedures for 8(a) sole source contracts. This has 
long been SBA's policy. See 62 FR 43584,

[[Page 60859]]

43592 (Aug. 14, 1997). Instead of using SBA COC procedures, an agency 
that finds a potential 8(a) sole source awardee to be non-responsible 
should proceed through the substitution or withdrawal procedures in the 
proposed Sec.  124.503(e). The proposed rule also changes the threshold 
for COC appeals from $100,000 to the simplified acquisition threshold.

Section 125.6

    Section 125.6(b) provides guidance on which limitation on 
subcontracting requirement applies to a ``mixed contract.'' The section 
currently refers to a mixed contract as one that combines both services 
and supplies. SBA inadvertently did not include the possibility that a 
mixed contact could include construction work, although in practice SBA 
has applied this section to a contract requiring, for example, both 
services and construction work. The proposed revision would merely 
recognize that a mixed contract is one that integrates any combination 
of services, supplies, or construction. A contracting officer would 
then select the appropriate NAICS code, and that NAICS code is 
determinative as to which limitation on subcontracting and performance 
requirement applies.
    SBA also asks for comments regarding how the nonmanufacturer rule 
should be applied in multiple item procurements (reference Sec.  
125.6(a)(2)(ii)). Currently, for a multiple item procurement where a 
nonmanufacturer waiver is granted for one or more items, compliance 
with the limitation on subcontracting requirement will not consider the 
value of items subject to a waiver. As such, more than 50% of the value 
of the products to be supplied by the nonmanufacturer that are not 
subject to a waiver must be the products of one or more domestic small 
business manufacturers or processors. The regulation gives an example 
where a contract is for $1,000,000 and calls for the acquisition of 10 
items. Market research shows that nine of the items can be sourced from 
small business manufacturers and one item is subject to an SBA class 
waiver. The projected value of the item that is waived is $10,000. 
Under the current regulatory language, at least 50% of the value of the 
items not subject to a waiver, or $495,000 (50% of $990,000), must be 
supplied by one or more domestic small business manufacturers, and the 
prime small business nonmanufacturer may act as a manufacturer for one 
or more items. Several small business nonmanufacturers have disagreed 
with this provision. They believe that in order to qualify as a small 
business nonmanufacturer, at least 50% of the value of the contract 
must come from either small business manufacturers or from any 
businesses for items which have been granted a waiver (or that small 
business manufacturers plus waiver must equal at least 50%). In other 
words, in the above example, $500,000 (50% of the value of the 
contract) must come from small business manufacturers or be subject to 
a waiver. If items totaling $10,000 are subject to a waiver, then only 
$490,000 worth of items must come from small business manufacturers; 
requiring $5,000 less from small business manufacturers. SBA is 
considering changing this in the final rule, but seeks comments on 
whether this approach makes sense. The current approach provides added 
incentives for small business manufacturers. The recommended approach 
might cause more requirements to be set aside for small business, but 
SBA questions whether this would truly benefit small business if small 
business manufactures are not ultimately providing the products.

Section 125.8

    The proposed rule would make conforming changes to Sec.  125.8 in 
order to take into account merging the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program with the All Small Mentor-
Prot[eacute]g[eacute] Program.
    Proposed Sec.  125.8(b)(2)(iv) would permit the parties to a joint 
venture to agree to distribute profits from the joint venture so that 
the small business participant(s) receive profits from the joint 
venture that exceed the percentage commensurate with the work performed 
by them. Normally, profits would be distributed commensurate with the 
work performed. However, several small businesses have asked SBA to 
allow the parties to agree to pay a small business more if they would 
like to do so. Of course, SBA would not permit any agreement that would 
pay a small business less than that corresponding to the work it 
performed. But, if the parties would like to distribute the profits to 
further benefit a small business, SBA would not want to prohibit that.

Section 125.9

    The proposed rule would first reorganize some of the current 
provisions in Sec.  125.9 for ease of use and understanding. Paragraph 
125.9(b) would be reorganized and clarified. The proposed rule 
clarifies that in order to qualify as a mentor, SBA will look at three 
things, whether the proposed mentor: Is capable of carrying out its 
responsibilities to assist the prot[eacute]g[eacute] firm under the 
proposed mentor-prot[eacute]g[eacute] agreement; does not appear on the 
Federal list of debarred or suspended contractors; and can impart value 
to a prot[eacute]g[eacute] firm. Instead of requiring SBA to look at 
and determine that a proposed mentor possesses good character in every 
case, the proposed rule would amend this provision to specify that SBA 
will decline an application if SBA determines that the mentor does not 
possess good character. The proposed rule would also clarify that a 
mentor that has more than one prot[eacute]g[eacute] cannot submit 
competing offers in response to a solicitation for a specific 
procurement through separate joint ventures with different 
prot[eacute]g[eacute]s. That has always been SBA's intent (the current 
rule specifies that a second mentor-prot[eacute]g[eacute] relationship 
cannot be a competitor of the first), but SBA wants to make this clear 
in response to questions SBA has received regarding this issue.
    SBA is also considering whether to limit mentors only to those 
firms having average annual revenues of less than $100 million. 
Currently, any concern that demonstrates a commitment and the ability 
to assist small business concerns may act as a mentor. This includes 
large businesses of any size. SBA has received several suggestions from 
``mid-size'' companies (i.e., those that no longer qualify as small 
under their primary NAICS codes, but believe that they cannot 
adequately compete against the much larger companies) that a mentor-
prot[eacute]g[eacute] program that excluded very large businesses would 
be beneficial to the mid-size firms and allow them to more effectively 
compete. SBA's focus in the mentor-prot[eacute]g[eacute] program is the 
prot[eacute]g[eacute] firm, what business development assistance a 
proposed mentor can provide to a prot[eacute]g[eacute] to enable that 
firm to more effectively compete on its own in the future. Whether a 
mentor is $1,000 over the size standard corresponding to its primary 
NAICS code or many millions of dollars over has not been a concern to 
SBA. SBA seeks a program that will provide the most effective business 
development assistance to small business prot[eacute]g[eacute] firms. 
SBA requests comments on whether the size of a mentor should be 
restricted in the regulations, and whether small businesses would be 
better or worse served by such a restriction.
    The proposed rule would implement Section 861 of the National 
Defense Authorization Act (NDAA) of 2019, Public Law 115-232, to make 
three changes to the mentor-prot[eacute]g[eacute] program in order to 
benefit Puerto Rican small businesses. First, the proposed rule would 
amend Sec.  125.9(b) regarding the

[[Page 60860]]

number of prot[eacute]g[eacute] firms that one mentor can have at any 
one time. Currently, the regulation provides that under no 
circumstances can a mentor have more than three prot[eacute]g[eacute]s 
at one time. Section 861 of the NDAA provides that the restriction on 
the number of prot[eacute]g[eacute] firms a mentor can have shall not 
apply to up to two mentor-protege relationships if such relationships 
are with a small business that has its principal office located in the 
Commonwealth of Puerto Rico. As such, proposed Sec.  125.9(b)(3)(ii) 
would provide that a mentor generally cannot have more than three 
prot[eacute]g[eacute]s at one time, but that the first two mentor-
prot[eacute]g[eacute] relationships between a specific mentor and a 
small business that has its principal office located in the 
Commonwealth of Puerto Rico would not count against the limit of three 
proteges that a mentor can have at one time. Thus, if a mentor did have 
two prot[eacute]g[eacute]s that had their principal offices in Puerto 
Rico, it could have an additional three prot[eacute]g[eacute]s, or a 
total of five prot[eacute]g[eacute]s, and comply with SBA's 
requirements. The proposed rule would also add a new Sec.  125.9(d)(6) 
to implement a provision of Section 861 of NDAA 2019, which authorizes 
contracting incentives to mentors that subcontract to 
prot[eacute]g[eacute] firms that are Puerto Rico businesses. 
Specifically, proposed Sec.  125.9(d)(6) would provide that a mentor 
that provides a subcontract to a prot[eacute]g[eacute] that has its 
principal office located in Puerto Rico may (i) receive positive 
consideration for the mentor's past performance evaluation, and (ii) 
apply costs incurred for providing training to such 
prot[eacute]g[eacute] toward the subcontracting goals contained in the 
subcontracting plan of the mentor. SBA requests comments as to whether 
the term ``positive consideration'' can be better defined. Section 861 
specifically authorizes these two incentives, but suggests that other 
incentives may also be appropriate. SBA also seeks comments as to 
whether any other contracting incentives could be feasible.
    The proposed rule would clarify the requirements for a firm seeking 
to form a mentor-prot[eacute]g[eacute] relationship in a NAICS code 
that is not the firm's primary NAICS code (Sec.  125.9(c)(1)(ii)). SBA 
intended that a firm could be a prot[eacute]g[eacute] in a secondary 
NAICS code for which it qualifies as small if it has done work 
previously in that secondary NAICS code. SBA did not want a firm that 
had grown to be other than small in its primary NAICS codes to form a 
mentor-prot[eacute]g[eacute] relationship in a NAICS code in which it 
had no experience simply because it qualified as small in that other 
NAICS code. SBA believes that such a situation (i.e., having a 
prot[eacute]g[eacute] with no experience in a secondary NAICS code) 
could lead to abuse of the program. It would be hard for a firm with no 
experience in a secondary NAICS code to be the lead on a joint venture 
with its mentor. Similarly, a mentor with all the experience could 
easily take control of a joint venture and perform all of the work 
required of the joint venture. The current regulation, however, has 
caused some confusion. It states that where a firm is other than small 
in its primary NAICS code, the firm can qualify as a 
prot[eacute]g[eacute] in a secondary NAICS code if it is small in that 
secondary NAICS code and has prior experience or previously performed 
work in that secondary NAICS code. Some have read this provision as 
permitting a mentor-prot[eacute]g[eacute] relationship in a secondary 
NAICS code only where the firm is other than small in its primary NAICS 
code. That was not SBA's intent. In addition, others have read this 
provision as requiring prior experience in a secondary NAICS code only 
where the firm is other than small in its primary NAICS code, but not 
where it qualifies as small in its primary NAICS code. This too was not 
SBA's intent. The proposed rule clarifies that a firm may seek to be a 
prot[eacute]g[eacute] in any NAICS code for which it qualifies as small 
and can form a mentor-prot[eacute]g[eacute] relationship in a secondary 
NAICS code if it qualifies as small and has prior experience or 
previously performed work in that NAICS code.
    In addition, although SBA does not believe that a regulatory change 
is needed, SBA would like to clarify SBA's position on what experience 
a prot[eacute]g[eacute] firm must have if it seeks a mentor-
prot[eacute]g[eacute] relationship in its primary NAICS code. As noted 
above, SBA's regulations require a firm seeking to be a 
prot[eacute]g[eacute] in a secondary NAICS code to demonstrate that it 
has prior experience in that secondary NAICS code. The regulation is 
silent with respect to a firm having experience in its primary NAICS 
code. Generally, a firm would have performed some work in its primary 
NAICS code--normally, that is how SBA determines what the firm's 
primary NAICS code is (i.e., the code in which it has received the 
majority of its revenues). However, a firm owned by an entity (i.e., 
tribe, ANC, NHO or CDC), can be admitted to the 8(a) BD without much 
experience in its self-identified primary NAICS code if the entity has 
made a firm commitment to support the operations of the applicant 
concern and it has the financial ability to do so. In these limited 
instances, where a new entity-owned 8(a) Participant seeks to form a 
mentor-prot[eacute]g[eacute] relationship, it may not have any 
expertise in its identified primary NAICS code. The 8(a) BD Mentor-
Prot[eacute]g[eacute] Program has allowed mentor-prot[eacute]g[eacute] 
relationships in these circumstances. Because the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program is being merged with the All Small 
Mentor-Prot[eacute]g[eacute] Program, it follows that SBA would 
continue to allow such mentor-prot[eacute]g[eacute] relationships.
    The proposed rule would also respond to concerns raised by small 
businesses regarding the regulatory limit of permitting only two 
mentor-prot[eacute]g[eacute] relationships even where the small 
business prot[eacute]g[eacute] receives no or limited assistance from 
its mentor through a particular mentor-prot[eacute]g[eacute] agreement. 
SBA has informally permitted a mentor-prot[eacute]g[eacute] 
relationship not to count against the limit of two such relationships 
in total where the prot[eacute]g[eacute] can demonstrate that it has 
not received any assistance from its mentor under the mentor-
prot[eacute]g[eacute] relationship. SBA believes that a relationship 
that provides no business development assistance or contracting 
opportunities to a prot[eacute]g[eacute] should not be counted against 
the firm, or that the firm should not be restricted to having only one 
additional mentor-prot[eacute]g[eacute] relationship in such a case. 
SBA considered implementing in this proposed rule a provision which 
would formalize its previous policy--i.e., to not count a mentor-
prot[eacute]g[eacute] relationship where the prot[eacute]g[eacute] can 
demonstrate that it received no assistance from the relationship. In 
order to eliminate any disagreements as to whether a firm did or did 
not receive any assistance under its mentor-prot[eacute]g[eacute] 
agreement, this rule proposes to establish an easily understandable and 
objective basis for counting or not counting a mentor-
prot[eacute]g[eacute] relationship. Specifically, the rule proposes to 
amend Sec.  125.9(e)(6) to not count any mentor-prot[eacute]g[eacute] 
relationship toward a firm's two permitted lifetime mentor-
prot[eacute]g[eacute] relationships where the mentor-
prot[eacute]g[eacute] agreement is terminated within 18 months from the 
date SBA approved the agreement.
    This rule also proposes to eliminate the reconsideration process 
for declined mentor-prot[eacute]g[eacute] agreements in Sec.  125.9(f) 
as unnecessary. Currently, if SBA declines a mentor-
prot[eacute]g[eacute] agreement, the prospective small business 
prot[eacute]g[eacute] may make changes to its agreement and seek 
reconsideration from SBA within 45 days of SBA's decision to decline 
the mentor-prot[eacute]g[eacute] relationship. The current regulations 
also allow the small

[[Page 60861]]

business to submit a new (or revised) mentor-prot[eacute]g[eacute] 
agreement to SBA at any point after 60 days from the date of SBA's 
final decision declining a mentor-prot[eacute]g[eacute] relationship. 
SBA believes that this ability to submit a new or revised mentor-
prot[eacute]g[eacute] agreement after 60 days is sufficient.
    Finally, the proposed rule would add clarifying language regarding 
the annual review of mentor-prot[eacute]g[eacute] relationships. It is 
important that SBA receive an honest assessment from the 
prot[eacute]g[eacute] of how the mentor-prot[eacute]g[eacute] 
relationship is working, whether the prot[eacute]g[eacute] has received 
the agreed-upon business development assistance, and whether the 
prot[eacute]g[eacute] would recommend the mentor to be a mentor for 
another small business in the future. SBA needs to know if the mentor 
is not providing the agreed-upon business development assistance to the 
prot[eacute]g[eacute]. This would affect that firm's ability to be a 
mentor in the future. The rule would also provide that if a 
prot[eacute]g[eacute] does not provide information relating to the 
mentor-prot[eacute]g[eacute] relationship, thereby hindering SBA's 
ability to properly evaluate the relationship, SBA may decide not to 
approve continuation of the mentor-prot[eacute]g[eacute] relationship.
    SBA has also received several complaints from small business 
prot[eacute]g[eacute]s whose mentor-prot[eacute]g[eacute] relationships 
were terminated by the mentor soon after a joint venture between the 
prot[eacute]g[eacute] and mentor received a Government contract as a 
small business. SBA considered adding additional protections for 
prot[eacute]g[eacute] firms, but is not certain how best to remedy this 
situation. Current Sec.  125.9(h) provides consequences for when a 
mentor does not provide to the prot[eacute]g[eacute] firm the business 
development assistance set forth in its mentor-prot[eacute]g[eacute] 
agreement. Under the current regulations, where that occurs, the firm 
will be ineligible to again act as a mentor for a period of two years 
from the date SBA terminates the mentor-prot[eacute]g[eacute] 
agreement, SBA may recommend to the relevant procuring agency to issue 
a stop work order for each Federal contract for which the mentor and 
prot[eacute]g[eacute] are performing as a small business joint venture, 
and SBA may seek to substitute the prot[eacute]g[eacute] firm for the 
joint venture if the prot[eacute]g[eacute] firm is able to 
independently complete performance of any joint venture contract 
without the mentor. SBA believes that provision should be sufficient to 
dissuade mentors from early terminating mentor-prot[eacute]g[eacute] 
agreements. SBA also considered adding a provision requiring a joint 
venture between a prot[eacute]g[eacute] and its mentor to recertify its 
size if the mentor-prot[eacute]g[eacute] relationship prematurely ends. 
In such a case, if the mentor was an other than small business and the 
joint venture could not recertify as small, the procuring agency could 
no longer count the contract as an award to small business. SBA 
specifically requests comments on this alternative and seeks comments 
on other possible alternatives to remedy this perceived problem.

Section 125.18

    In addition to the revision to Sec.  125.18(c) identified above, 
the rule proposes to amend the language in Sec.  125.18(a) to clarify 
what representations and certifications a business concern seeking to 
be awarded a SDVO contract must submit as part of its offer.

Sections 126.616 and 126.618

    The proposed rule would make minor revisions to Sec. Sec.  126.616 
and 126.618 by merely deleting references to the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program, since that program would no longer exist 
as a separate program.

Sections 127.503(h) and 127.504

    In addition to the revision to Sec.  127.504(c) identified above, 
the rule proposed to make other changes or clarifications to Sec.  
127.504. The proposed rule would rename and revise Sec.  127.504 for 
better understanding and ease of use. The section heading would be 
changed to ``What requirements must an EDWOSB or WOSB meet to be 
eligible for an EDWOSB or WOSB contract?''. The text would then more 
clearly define those requirements and, as identified above, add 
language similar to that contained in the regulations governing the 
other socio-economic programs.
    The proposed rule would move the recertification procedures for 
WOSBs from Sec.  127.503(h) to Sec.  127.504(e).

Sections 134.318 and 121.1103

    The proposed rule would amend Sec.  134.318 to make it consistent 
with SBA's size regulations. In this regard, Sec.  121.1103(c)(1)(i) of 
SBA's size regulations provides that upon receipt of the service copy 
of a NAICS code appeal, the contracting officer must ``stay the 
solicitation.'' However, when that rule was implemented, a 
corresponding change was not made to the procedural rules for SBA's OHA 
contained in part 134. Section 134.318(b) provides that if OHA changes 
a NAICS code in response to a NAICS code appeal, and the contracting 
officer must amend the solicitation to reflect the new NAICS code if 
``the contracting officer receives OHA's decision by the date offers 
are due.'' Otherwise, OHA's decision does not apply to the pending 
procurement, but will apply only to future solicitations for the same 
supplies or services. If the solicitation is stayed, as required by 
Sec.  121.1103(c)(1)(i), the contracting officer will always receive 
OHA's decision before the date offers are due. As such, this rule 
proposes to simply require that the contracting officer must amend the 
solicitation to reflect the new NAICS code whenever OHA changes a NAICS 
code in response to a NAICS code appeal. In addition, for clarity 
purposes, the proposed rule would revise Sec.  121.1103(c)(1)(i) to 
provide that a contracting officer must stay the date of the closing of 
the receipt of offers instead of requiring that he or she must stay the 
solicitation. SBA is not revising these regulations to reflect a change 
in policy, but merely to more precisely capture what actually is being 
stayed.

III. Compliance With Executive Orders 12866, 12988, 13132, 13175, 
13563, 13771, the Paperwork Reduction Act (44 U.S.C. Ch. 35) and the 
Regulatory Flexibility Act (5 U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
proposed rule is a significant regulatory action for the purposes of 
Executive Order 12866. Accordingly, the next section contains SBA's 
Regulatory Impact Analysis. This is not a major rule, however, under 
the Congressional Review Act.
Regulatory Impact Analysis
    1. Is there a need for the regulatory action?
    In combining the 8(a) BD Mentor-Prot[eacute]g[eacute] Program and 
the All Small Mentor-Prot[eacute]g[eacute] Program, SBA seeks to 
eliminate confusion regarding perceived differences between the two 
Programs, remove unnecessary duplication of functions within SBA, and 
establish one, unified staff to better coordinate and process mentor-
prot[eacute]g[eacute] applications. In addition, eliminating the 
requirement that SBA approve every joint venture in connection with an 
8(a) contract will greatly reduce the time required for 8(a) BD 
Participants to come into and SBA to ensure compliance with SBA's joint 
venture requirements.
    SBA is also proposing to make several changes to clarify its 
regulations. Through the years, SBA has spoken with small business and 
representatives and has determined that several regulations need 
further refinement so that they are easier to understand and implement. 
The proposed rule would

[[Page 60862]]

make several changes to ensure that the rules pertaining to SBA's 
various small business procurement programs are consistent. SBA 
believes that making the programs as consistent and similar as 
possible, where practicable, will make it easier for small businesses 
to understand what is expected of them and to comply with those 
requirements.
    2. What is the baseline, and the incremental benefits and costs of 
this regulatory action?
    The proposed regulations seek to address or clarify several issues, 
which will provide clarity to small businesses and contracting 
personnel. Further, SBA is proposing to eliminate the burden that 8(a) 
Participants seeking to be awarded an 8(a) contract as a joint venture 
must submit the joint venture to SBA for review and approval prior to 
contract award. There are currently approximately 4500 8(a) BD 
Participants in the portfolio. Of those, about 10% or roughly 450 
Participants have entered a joint venture agreement to seek the award 
of an 8(a) contract. Under the current rules, SBA must approve the 
initial joint venture agreement itself and each addendum to the joint 
venture agreement--identifying the type of work and what percentage 
each partner to the joint venture would perform of a specific 8(a) 
procurement--prior to contract award. SBA reviews the terms of the 
joint venture agreement for regulatory compliance and must also assess 
the 8(a) BD Participant's capacity and whether the agreement is fair 
and equitable and will be of substantial benefit to the 8(a) concern. 
It is difficult to calculate the costs associated with submitting a 
joint venture agreement to SBA because the review process is highly 
fact-intensive and typically requires that 8(a) firms provide 
additional information and clarification. However, in the Agency's best 
professional judgment, it is estimated that an 8(a) Participant 
currently spends approximately three hours submitting a joint venture 
agreement to SBA and responding to questions regarding that submission. 
That equates to approximately 1,350 hours at an estimated rate of 
$44.06 per hour--the median wage plus benefits for accountants and 
auditors according to 2018 data from the Bureau of Labor Statistics--
for an annual total cost savings to 8(a) Participants of about $59,500.
    In addition, merging the 8(a) BD Mentor-Prot[eacute]g[eacute] 
Program into the All Small Mentor-Prot[eacute]g[eacute] Program would 
also provide cost savings. Firms seeking a mentor-prot[eacute]g[eacute] 
relationship through the All Small Mentor-Prot[eacute]g[eacute] Program 
apply through an on-line, electronic application system. 8(a) 
Participants seeking SBA's approval of a mentor-prot[eacute]g[eacute] 
relationship through the 8(a) BD program do not apply through an on-
line, electronic system, but rather apply manually through their 
servicing SBA district office. In SBA's best professional judgment, the 
additional cost for submitting a manual mentor-prot[eacute]g[eacute] 
agreement to SBA for review and approval and responding manually to 
questions regarding that submission is estimated at two hours. SBA 
receives approximately 150 applications for 8(a) mentor-
prot[eacute]g[eacute] relationships annually, which equates to an 
annual savings to prospective prot[eacute]g[eacute] firms of about 300 
hours. At an estimated rate of $44.06 per hour, the annual savings in 
costs related to the reduced time for mentor-prot[eacute]g[eacute] 
applications through the All Small Mentor Prot[eacute]g[eacute] process 
is about $13,000 per year.
    Moreover, eliminating the 8(a) BD Mentor-Prot[eacute]g[eacute] 
Program as a separate program and merging it with the All Small Mentor-
Prot[eacute]g[eacute] Program will eliminate confusion firms seeking a 
mentor-prot[eacute]g[eacute] relationship have between the two 
programs. When SBA first implemented the All Small Mentor-
Prot[eacute]g[eacute] Program, it intended to establish a program 
substantively identical to the 8(a) BD mentor-prot[eacute]g[eacute] 
program, as required by Section 1641 of the NDAA of 2013. Nevertheless, 
feedback from the small business community reveals a widespread 
misconception that the two programs offer different benefits. By 
merging the 8(a) BD Mentor-Prot[eacute]g[eacute] Program into the All 
Small-Mentor Prot[eacute]g[eacute] Program, firms will not have to read 
the requirements for both programs and try to decipher any perceived 
differences. SBA estimates that having one combined program will 
eliminate about one hour of preparation time for each firm seeking a 
mentor-prot[eacute]g[eacute] relationship. Based on approximately 600 
mentor-prot[eacute]g[eacute] applications each year (about 450 for the 
All Small Mentor-Prot[eacute]g[eacute] Program and about 150 for the 
8(a) BD Mentor-Prot[eacute]g[eacute] Program), this would equate to an 
annual cost savings to prospective prot[eacute]g[eacute] firms of about 
600 hours. At an estimated rate of $44.06 per hour, the annual savings 
in costs related to the elimination of confusion caused by having two 
separate programs is about $26,500.
    Thus, in total, the merger of the 8(a) BD mentor-
prot[eacute]g[eacute] program into the All Small Business Mentor-
Prot[eacute]g[eacute] Program would provide a cost savings of about 
$39,500 per year.
    In addition, it generally takes between 60 and 90 days for SBA to 
approve a mentor-prot[eacute]g[eacute] relationship through the 8(a) BD 
program. Conversely, the average time it takes to approve a mentor-
prot[eacute]g[eacute] relationship through the All Small Mentor-
Prot[eacute]g[eacute] Program is about 20 working days. To firms 
seeking to submit offers through a joint venture with their mentors, 
this difference is significant. Such joint ventures are only eligible 
for the regulatory exclusion from affiliation if they are formed after 
SBA approves the underlying mentor-prot[eacute]g[eacute] relationship. 
It follows that firms applying through the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program could miss out on contract opportunities 
waiting for their mentor-prot[eacute]g[eacute] relationships to be 
approved. These contract opportunity costs are inherently difficult to 
measure, so SBA is requesting comments to better inform our 
understanding of the costs to the small business community. However, in 
SBA's best judgment, faster approval timeframes will mitigate such 
costs by giving program participants more certainty in planning their 
proposal strategies.
    This rule also proposes to eliminate the requirement that any 
specific joint venture can be awarded no more than three contracts over 
a two year period, but would instead permit a joint venture to be 
awarded an unlimited number of contracts over a two year period. The 
change removing the limit of three awards to any joint venture would 
reduce the burden of small businesses being required to form additional 
joint venture entities to perform a fourth contract within that two-
year period. SBA has observed that joint ventures are often established 
as separate legal entities--specifically as limited liability 
corporations--based on considerations related to individual venture 
liability, tax liability, regulatory requirements, and exit strategies. 
Under the current rule joint venture partners must form a new joint 
venture entity after receiving three contracts lest they be deemed 
affiliated for all purposes. The proposed rule which allows a joint 
venture to continue to seek and be awarded contracts without requiring 
the partners to form a new joint venture entity after receiving its 
third contract would save small businesses significant legal costs in 
establishing new joint ventures and ensuring that those entities meet 
all applicable regulatory requirements.
    The proposed rule would also make several changes to reduce the 
burden of recertifying small business status generally and requesting 
changes of ownership in the 8(a) BD program. Specifically, the proposed 
rule would clarify that a concern that is at least 51% owned by an 
entity (i.e., tribe, ANC, or Community Development Corporation (CDC)) 
need not recertify its

[[Page 60863]]

status as a small business when the ownership of the concern changes to 
or from a wholly-owned business concern of the same entity, as long as 
the ultimate owner remains that entity. In addition, the proposed rule 
would also provide that a Participant in SBA's 8(a) BD program that is 
owned by an ANC or tribe need not request a change of ownership from 
SBA where the ANC or tribe merely reorganizes its ownership of a 
Participant in the 8(a) BD program by inserting or removing a wholly-
owned business entity between the ANC/tribe and the Participant. Both 
of these changes would save entity-owned small business concerns a 
significant amount of time and money. Similarly, the proposed rule 
would provide that prior SBA approval is not needed where the 
disadvantaged individual (or entity) in control of a Participant in the 
8(a) BD program will increase the percentage of his or her (its) 
ownership interest.
    The proposed rule would also allow a concern that has been declined 
for 8(a) BD program participation to submit a new application 90 days 
after the date of the Agency's final decision to decline. This would 
change the current rule which requires a concern to wait 12 months from 
the date of the final agency decision to reapply. This would allow 
firms that have been declined from participating in the 8(a) BD program 
the opportunity to correct deficiencies, come into compliance with 
program eligibility requirements, reapply and be admitted to the 
program and receive the benefits of the program much more quickly. SBA 
understands that by reducing the re-application waiting period there is 
the potential to strain the agency's resources with higher application 
volumes. Because these potential costs are difficult to quantify, SBA 
is seeking comments to further examine this proposal. However, in the 
Agency's best judgment, any costs associated with the increase in 
application volume would be outweighed by the potential benefit of 
providing business development assistance and contracting benefits 
sooner to eligible firms.
    This rule also proposes to clarify SBA's position with respect to 
size and socioeconomic status certifications on task orders under MACs. 
Currently, size certifications at the order level are not required 
unless the contracting officer, in his or her discretion, requests a 
recertification in connection with a specific order. The proposed rule 
would require a concern to submit a recertification or confirm its size 
and/or socioeconomic status for all set-aside orders (i.e., small 
business set-aside, 8(a) small business, service-disabled veteran-owned 
small business, HUBZone small business, or women-owned small business) 
under unrestricted MACs, except for orders or Blanket Purchase 
Agreements issued under any FSS contracts. Additionally, the proposed 
rule would require a concern to submit a recertification or confirm its 
socioeconomic status for all set-aside orders where the required 
socioeconomic status for the order differs from that of the underlying 
set aside MAC. If the firm's size and status in SAM is current and 
accurate when the firm submits its offer, the concern would not need to 
submit a new certification or submit any additional documentation with 
its offer. SBA recognizes that confirming accurate size and 
socioeconomic status imposes a burden on a small business contract 
holder, but the burden is minimal. SBA intends that confirmation of 
size and status under this rule would be satisfied by confirming that 
the firm's size and status in SAM is currently accurate and qualifies 
the firm for award.
    FPDS-NG indicates that, in Fiscal Year 2018, agencies set aside 
about 1,400 orders per year off unrestricted MACs, excluding orders 
under FSS contracts. SBA adopts the assumption from FAR Case 2014-002 
that on average there are three offers per set-aside order. The annual 
cost of requiring present size and socioeconomic status on set-aside 
orders under unrestricted MACs, excluding FSS orders, therefore is 
calculated as 1,400 orders x 3 offers per order x 15 minutes per offer 
x $44.06 cost per hour. This amounts to an annual public burden of 
about $46,250.
    FPDS-NG indicates that, in Fiscal Year 2018, agencies set aside 
about 400 orders per year off set-aside MACs, other than the FSS, in 
the categories covered by this rule. These categories are WOSB or 
EDWOSB set-aside/sole-source orders off small business set-aside MACs; 
SDVOSB set-aside/sole-source orders off small business set-aside MACs; 
WOSB or EDWOSB set-aside/sole-source orders off any small business 
program MAC (8(a), HUBZone, WOSB/EDWOSB, and SDVOSB); and SDVOSB set-
aside/sole-source order off 8 any small business program MAC (8(a), 
HUBZone, WOSB/EDWOSB, and SDVOSB). Following the same calculations, the 
annual cost of requiring present socioeconomic status on set-aside 
orders under set-aside MACs, is calculated as 400 orders x 3 offers per 
order x 15 minutes per offer x $44.06 cost per hour. This amounts to an 
annual public burden of about $13,200.
    As reflected in the calculation, SBA believes that being presently 
qualified for the required size or socioeconomic status on an order, 
where required, would impose a burden on small businesses. A concern 
already is required by law to update its size and status certifications 
in SAM at least annually. As such, the added burden to industry is 
limited to confirming that the firm's certification is current and 
accurate.
    The added burden to ordering agencies includes the act of checking 
a firm's size and status certification in SAM at the time of order 
award. Since ordering agencies are already familiar with checking SAM 
information, such as to ensure that an order awardee is not debarred, 
suspended, or proposed for debarment, this verification is de minimis. 
Further, checking SAM at time of order award replaces the check of the 
offeror's contract level certification. SBA recognizes, however, that 
an agency's market research for the order level may be impacted where 
the agency intends to issue a set-aside order off an unrestricted 
vehicle (or a socioeconomic set-aside off a small business set-aside 
vehicle). The ordering agency may need to identify MAC-eligible vendors 
and then find their status in SAM. This is particularly the case where 
the agency is applying the Rule of Two and verifying that there are at 
least two small businesses or small businesses with the required status 
sufficient to set aside the order. SBA does not believe that conducting 
SAM research is onerous; however, because this rule does not cover the 
FSS and does not cover orders set aside within the same category as the 
contract, agencies have readily available alternatives to avoid using 
SAM.
    Using the same set-aside order data, the annual cost of additional 
market research efforts for applicable set-aside orders under MACs, is 
calculated as 2,400 orders (1,400 + 1,000) x 10 minutes per order x 
$44.06 cost per hour. This amounts to an annual government burden of 
about $17,600.
    The annual cost is partially offset by the cost savings that result 
from other changes in this rule. This proposed change goes more to 
accountability and ensuring that small business contracting vehicles 
truly benefit small business concerns. Nevertheless, SBA is requesting 
comments to further assess potential incremental costs.
    3. What are the alternatives to this proposed rule?
    As noted above, this rule proposes to make a number of changes 
intended to reduce unnecessary or excessive burdens on small 
businesses, and to

[[Page 60864]]

clarify other regulatory provisions to eliminate confusion among small 
businesses and procuring activities. SBA has also considered other 
alternative proposals to achieve these ends. Concerning SBA's role in 
approving 8(a) joint venture agreements, the Agency could also 
eliminate the requirement that SBA must approve joint ventures in 
connection with sole source 8(a) awards. However, as noted above, SBA 
believes that such approval is an important enforcement mechanism to 
ensure that the joint venture rules are followed. With respect to the 
requirement that a concern must wait 90 days to re-apply to the 8(a) BD 
program after the date of the Agency's final decline decision, SBA 
could instead eliminate the application waiting period altogether. This 
would allow a concern to re-apply as soon as it reasonably believed it 
had overcome the grounds for decline. However, SBA believes that such 
an alternative would encompass significant administrative burden on 
SBA.
    Under the proposed rule, if an order under an unrestricted MAC is 
set-aside exclusively for small business (i.e., small business set-
aside, 8(a) small business, service-disabled veteran-owned small 
business, HUBZone small business, or women-owned small business), or 
the order is set aside in a different category than was the set-aside 
MAC, a concern must be qualified for the required size and 
socioeconomic status at the time it submits its initial offer, which 
includes price, for the particular order. In SBA's view, the order is 
the first time size or socioeconomic status is important where the 
underlying MAC is unrestricted or set aside in a different category 
than the set-aside MAC, and therefore, that is the date at which 
eligibility should be examined. SBA considered maintaining the status 
quo; allowing a one-time certification as to size and socioeconomic 
status (i.e., at the time of the initial offer for the underlying 
contract) to control all orders under the contract, unless one of 
recertification requirements applies (see 121.404(g)). SBA believes the 
current policy does not properly promote the interests of small 
business. Long-term contracting vehicles that reward firms that once 
were, but no longer qualify as, small or a particular socioeconomic 
status adversely affect truly small or otherwise eligible businesses.
    Another alternative is to require business concerns to notify 
contracting agencies when there is a change to a concern's 
socioeconomic status (e.g., HUBZone, WOSB, etc.), such that they would 
no longer qualify for set-aside orders. The contracting agency would 
then be required to issue a contract modification within 30 days, and 
from that point forward, ordering agencies would no longer be able to 
count options or orders issued pursuant to the contract for small 
business goaling purposes. This could be less burdensome than 
recertification of socioeconomic status for each set-aside order. SBA 
invites comments on consideration of this approach.

Summary of Costs and Cost Savings

    Table 1: Summary of Incremental Costs and Cost Savings, below, sets 
out the estimated net incremental cost/(cost saving) associated with 
this proposed rule. Table 2: Detailed Breakdown of Incremental Costs 
and Cost Savings, below, provides a detailed explanation of the annual 
cost/(cost saving) estimates associated with this proposed rule. This 
proposed rule is expected to be an E.O. 13771 deregulatory action. The 
annualized cost savings of this rule is expected to be $21,065 in 2016 
dollars with a net present value of $300,935 over perpetuity.

                             Table 1--Summary of Incremental Costs and Cost Savings
----------------------------------------------------------------------------------------------------------------
                                                                                                   Annual cost/
              Item No.                                  Regulatory action item                     (cost saving)
                                                                                                     estimate
----------------------------------------------------------------------------------------------------------------
1...................................  Eliminating SBA approval of joint venture agreements to          ($59,500)
                                       perform competitive 8(a) contracts.
2...................................  Merging the 8(a) BD Mentor-Prot[eacute]g[eacute] Program          (13,000)
                                       into the All Small Mentor-Prot[eacute]g[eacute] Program--
                                       Elimination of manual application process.
3...................................  Merging the 8(a) BD Mentor-Prot[eacute]g[eacute] Program          (26,500)
                                       into the All Small Mentor-Prot[eacute]g[eacute] Program--
                                       Elimination of confusion among firms seeking a mentor-
                                       prot[eacute]g[eacute] relationship.
4...................................  Requiring recertification for set-aside orders issued off           46,250
                                       unrestricted Multiple Award Contracts.
5...................................  Requiring recertification for set-aside orders issued off           13,200
                                       set-aside Multiple Award Contracts.
6...................................  Additional Government detailed market research to identify          17,600
                                       qualified sources for set-aside orders.
----------------------------------------------------------------------------------------------------------------


                        Table 2--Detailed Breakdown of Incremental Costs and Cost Savings
----------------------------------------------------------------------------------------------------------------
                                                                                     Annual cost/ (cost saving)
           Item No.                       Regulatory action item details                 estimate  breakdown
----------------------------------------------------------------------------------------------------------------
1............................  Proposed regulatory change: SBA is proposing to
                                eliminate the burden that 8(a) Participants
                                seeking to be awarded an 8(a) contract as a joint
                                venture must submit the joint venture to SBA for
                                review and approval prior to contract award.
                               Estimated number of impacted entities: There are     450 entities.
                                currently approximately 4500 8(a) BD Participants
                                in the portfolio. Of those, about 10% or roughly
                                450 Participants have entered a joint venture
                                agreement to seek the award of an 8(a) contract.
                               Estimated average impact * (labor hour): SBA         3 hours
                                estimates that an 8(a) BD Participant currently
                                spends approximately three hours submitting a
                                joint venture agreement to SBA and responding to
                                questions regarding that submission.
                               2017 Median Pay ** (per hour): Most 8(a) firms use   $44.06.
                                an accountant or someone with similar skills for
                                this task.
                               Estimated Cost/(Cost Saving).......................  ($59,500)
2............................  Proposed regulatory change: SBA is proposing to
                                merge the 8(a) BD Mentor-Prot[eacute]g[eacute]
                                Program into the All Small Mentor-
                                Prot[eacute]g[eacute] Program. This will reduce
                                the burden on 8(a) Participants seeking a mentor-
                                prot[eacute]g[eacute].
                               Estimated number of impacted entities: SBA receives  150 entities.
                                approximately 150 applications for 8(a) mentor-
                                prot[eacute]g[eacute] relationships annually.

[[Page 60865]]

 
                               Estimated average impact * (labor hour): In SBA's    2 hours.
                                best professional judgment, the additional cost
                                for submitting a manual mentor-
                                prot[eacute]g[eacute] agreement to SBA for review
                                and approval and responding manually to questions
                                regarding that submission is estimated at two
                                hours.
                               2017 Median Pay ** (per hour): Most 8(a) firms use   $44.06.
                                an accountant or someone with similar skills for
                                this task.
                               Estimated Cost/(Cost Saving).......................  ($13,000)
3............................  Proposed regulatory change: SBA is proposing to
                                merge the 8(a) BD Mentor-Prot[eacute]g[eacute]
                                Program into the All Small Mentor-
                                Prot[eacute]g[eacute] Program. In doing so, firms
                                will not have to read the requirements for both
                                programs and try to decipher any perceived
                                differences..
                               Estimated number of impacted entities: SBA receives  600 entities.
                                approximately 600 mentor-prot[eacute]g[eacute]
                                applications each year--about 450 for the All
                                Small Mentor-Prot[eacute]g[eacute] Program and
                                about 150 for the 8(a) BD Mentor-
                                Prot[eacute]g[eacute] Program).
                               Estimated average impact * (labor hour): SBA         1 hour.
                                estimates that having one combined program will
                                eliminate about one hour of preparation time for
                                each firm seeking a mentor-prot[eacute]g[eacute]
                                relationship.
                               2017 Median Pay ** (per hour): Most small business   $44.06.
                                concerns use an accountant or someone with similar
                                skills for this task.
                               Estimated Cost/(Cost Saving).......................  ($26,500)
4............................  Proposed regulatory change: SBA is proposing to
                                require that a firm be accurately certified and
                                presently qualified as to size and/or status for
                                set-aside orders issued off Multiple Award
                                Contracts that were not set aside or set aside in
                                a separate category, except for the Federal Supply
                                Schedule.
                               Estimated number of impacted entities:               4,200 offers.
                                Approximately 1,400 set-aside orders are issued
                                annually on Multiple Award Contracts that are not
                                set aside in the same category, other than on the
                                Federal Supply Schedule. SBA estimates that three
                                offers are submitted for each order.
                               Estimated average impact * (labor hour): SBA         0.25 hours.
                                estimates that a small business will spend an
                                average of 15 minutes confirming that size and
                                status is accurate prior to submitting an offer.
                               2017 Median Pay ** (per hour): Most small business   $44.06
                                concerns use an accountant or someone with similar
                                skills for this task.
                               Estimated Cost/(Cost Saving).......................  $46,250.
5............................  Proposed regulatory change: SBA is proposing to
                                require that a firm be accurately certified and
                                presently qualified as to socioeconomic status for
                                set-aside orders issued off Multiple Award
                                Contracts that were set aside in a separate
                                category, except for the Federal Supply Schedule
                                contracts.
                               Estimated number of impacted entities:               1,200 offers.
                                Approximately 400 set-aside orders are issued
                                annually on Multiple Award Contracts that are not
                                set aside in the same category, other than on the
                                Federal Supply Schedule, are affected by this
                                rule. SBA estimates that three offers are
                                submitted for each order.
                               Estimated average impact * (labor hour): SBA         0.25 hours.
                                estimates that a small business will spend an
                                average of 15 minutes confirming that size and
                                status is accurate prior to submitting an offer.
                               2017 Median Pay ** (per hour): Most small business   $44.06.
                                concerns use an accountant or someone with similar
                                skills for this task.
                               Estimated Cost/(Cost Saving).......................  $13,200.
6............................  Proposed regulatory change: SBA is proposing to
                                require that firms be accurately certified and
                                presently qualified as to size and socioeconomic
                                status for certain set-aside orders issued off
                                Multiple Award Contracts, except for the Federal
                                Supply Schedule contracts. This change impacts the
                                market research required by ordering activities to
                                determine if a set-aside order for small business
                                or for any of the socioeconomic programs may be
                                pursued.
                               Estimated number of impacted entities:               2,400 orders.
                                Approximately 2,400 set-aside orders are issued
                                annually as described in the proposed rule on
                                Multiple Award Contracts, other than on the
                                Federal Supply Schedule. 33000.
                               Estimated average impact * (labor hour): SBA         0.16 hours.
                                estimates that ordering activities applying the
                                Rule of Two will spend an average of 10 additional
                                minutes to locate contractors awarded MACs and
                                looking up the current business size for each of
                                the contractors in SAM to determine if a set-aside
                                order can be pursued.
                               2017 Median Pay ** (per hour): Contracting officers  $44.06.
                                typically perform the market research for the
                                acquisition plan.
                               Estimated Cost/(Cost Saving).......................  $17,600.
----------------------------------------------------------------------------------------------------------------
* This estimate is based on SBA's best professional judgment.
** Source: Bureau of Labor Statistics, Accountants and Auditors.

Executive Order 12988

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

Executive Order 13132

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

Executive Order 13175

    As part of this proposed rulemaking process SBA held tribal 
consultations pursuant to Executive Order 13175, Tribal Consultations, 
in Anchorage, AK

[[Page 60866]]

(see 83 FR 17626), Albuquerque, NM (see 83 FR 24684), and Oklahoma 
City, OK (see 83 FR 24684). This executive order reaffirms the Federal 
Government's commitment to tribal sovereignty and requires Federal 
agencies to consult with Indian tribal governments when developing 
policies that would impact the tribal community. The purpose of the 
above-referenced tribal consultation meetings was to provide interested 
parties with an opportunity to discuss their views on the issues, and 
for SBA to obtain the views of SBA's stakeholders on approaches to the 
8(a) BD program regulations. SBA has always considered tribal 
consultation meetings a valuable component of its deliberations and 
believes that these tribal consultation meetings allow for constructive 
dialogue with the Tribal community, Tribal Leaders, Tribal Elders, 
elected members of Alaska Native Villages or their appointed 
representatives, and principals of tribally-owned and ANC-owned firms 
participating in the 8(a) BD program.
    In general, tribal stakeholders were supportive of SBA's intent to 
implement changes that will make it easier for small business concerns 
to understand and comply with the regulations governing the 8(a) BD 
program, and agreed that this rulemaking will make the program more 
effective and accessible to the small business community. SBA received 
significant comments on its approaches to the proposed regulatory 
changes, as well as several recommendations regarding the 8(a) BD 
program not initially contemplated by this planned rulemaking. SBA has 
taken these discussions into account in drafting this proposed rule. 
SBA intends to hold additional tribal consultations before issuing a 
final rule.

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)?
    To the extent possible, the agency utilized the most recent data 
available in the Federal Procurement Data System--Next Generation 
(FPDS-NG), Dynamic Small Business Search (DSBS) and System for Award 
Management (SAM).
    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 proposed rule will have a 60-day comment period and will be 
posted on www.regulations.gov to allow the public to comment 
meaningfully on its provisions. In addition, SBA submitted the proposed 
rule to the Office of Management and Budget for interagency review.
    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 proposed rule is intended to reduce unnecessary or 
excessive burdens on 8(a) Participants, and clarify other regulatory 
related provisions to eliminate confusion among small businesses and 
procuring activities.

Executive Order 13771

    This proposed rule is expected to be an E.O. 13771 deregulatory 
action. The annualized cost savings of this rule is expected to be 
$21,065 in 2016 dollars with a net present value of $300,935 over 
perpetuity. A detailed discussion of the estimated cost of this 
proposed rule can be found in the above Regulatory Impact Analysis.

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

    This proposed rule does impose additional reporting or 
recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C. 
Chapter 35. The rule provides a number of size and/or socioeconomic 
status recertification requirements for set-aside orders under MACs. 
The annual total public reporting burden for this collection of 
information is estimated to be 1,800 total hours ($79,300), including 
the time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing information 
reporting.
    Respondents: 7,200.
    Responses per respondent: 1.
    Total annual responses: 7,200.
    Preparation hours per response: 0.25 (15 min).
    Total response burden hours: 1,800.
    Cost per hour: $44.06.
    Estimated cost burden to the public: $79,300.
    This added information collection burden will be officially 
reflected through OMB Control Number 9000-0163 if the rule is 
implemented.
    SBA invites comments, particularly on: Whether this collection of 
information is necessary; whether it will have practical utility; 
whether our estimate of the public burden of this collection of 
information is accurate, and based on valid assumptions and 
methodology; ways to enhance the quality, utility, and clarity of the 
information to be collected; and ways in which we can minimize the 
burden of the collection of information on those who are to respond, 
through the use of appropriate technological collection techniques or 
other forms of information technology.

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

    The Regulatory Flexibility Act (RFA) requires administrative 
agencies to consider the effect of their actions on small entities, 
small non-profit enterprises, and small local governments. Pursuant to 
the RFA, when an agency issues a rulemaking, the agency must prepare a 
regulatory flexibility analysis which describes the impact of the rule 
on small entities. However, section 605 of the RFA allows an agency to 
certify a rule, in lieu of preparing an analysis, if the rulemaking is 
not expected to have a significant economic impact on a substantial 
number of small entities. The RFA defines ``small entity'' to include 
``small businesses,'' ``small organizations,'' and ``small governmental 
jurisdictions.''
    This proposed rule concerns various aspects of SBA's 8(a) BD 
program, as such the rule relates to small business concerns but would 
not affect ``small organizations'' or ``small governmental 
jurisdictions'' because those programs generally apply only to 
``business concerns'' as defined by SBA regulations, in other words, to 
small businesses organized for profit. ``Small organizations'' or 
``small governmental

[[Page 60867]]

jurisdictions'' are non-profits or governmental entities and do not 
generally qualify as ``business concerns'' within the meaning of SBA's 
regulations.
    There are currently approximately 4500 8(a) BD Participants in the 
portfolio. Most of the proposed changes are clarification of current 
policy or designed to reduce unnecessary or excessive burdens on 8(a) 
BD Participants and therefore should not impact many of these concerns. 
There are about 385 Participants with 8(a) BD mentor-
prot[eacute]g[eacute] agreements and about another 850 small businesses 
that have SBA-approved mentor-prot[eacute]g[eacute] agreements through 
the All Small Mentor-Prot[eacute]g[eacute] Program. The consolidation 
of SBA's two mentor-prot[eacute]g[eacute] programs into one program 
will not have a significant economic impact on small businesses. In 
fact, it should have no affect at all on those small businesses that 
currently have or on those that seek to have an SBA-approved mentor-
prot[eacute]g[eacute] relationship. The proposed rule would eliminate 
confusion regarding perceived differences between the two Programs, 
remove unnecessary duplication of functions within SBA, and establish 
one, unified staff to better coordinate and process mentor-
prot[eacute]g[eacute] applications. The benefits of the two programs 
are identical, and will not change under the proposed rule.
    SBA is also proposing to require a business to be qualified for the 
required size and status when under consideration for a set-aside order 
off a MAC that was awarded outside of the same set-aside category. 
Pursuant to the Small Business Goaling Report (SBGR) Federal 
Procurement Data System--Next Generation (FPDS-NG) records, about 
236,000 new orders were awarded off MACs per year from FY 2014 to FY 
2018. Around 199,000, or 84.3 percent, were awarded off MACs 
established without a small business set aside. For this analysis, 
small business set asides include all total or partial small business 
set asides; and all 8(a), WOSB, SDVOSB, and HUBZone awards. There were 
about 9,000 new orders awarded annually with a small business set aside 
off MACs established without a small business set aside. These orders 
were issued to approximately 2,600 firms. The 9,000 new orders awarded 
with a small business set aside off a MAC without a small business set 
aside were 4.0 percent of the 236,000 new orders off MACs in a year 
(Table 3). In FY 2018, only 1,400 for these set-aside orders used MACs 
other than the FSS Program.

Table 3--0.47% of New MAC Orders In a FY Are Non-FSS Orders Set Aside for Small Business Where Underlying Base Contract Not Set Aside for Small Business
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              FY 014          FY 015          FY 016          FY 017          FY 018            AVG
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total new modification 0 orders off MACs in FY..........         244,664         231,694         245,978         234,304         223,861         236,100
Orders awarded with SB set aside without MAC IDV SB set           10,089           9,347           9,729           9,198           8,666           9,406
 aside..................................................
Non-FSS orders awarded with SB set aside without MAC IDV             902             780           1,019           1,422           1,400           1,105
 SB set aside...........................................
Percent.................................................           0.37%           0.34%           0.41%           0.61%           0.63%           0.47%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    If all firms receiving a non-FSS small business set aside order off 
a MAC that was not itself set aside for small business were adversely 
affected by the proposed rule (i.e., every such firm receiving an award 
as a small business had grown to be other than a small business or no 
longer qualified as 8(a), WOSB, SDVO, or HUBZone), the rule requiring a 
business to be certified as small for a non-FSS small business set 
aside orders off MACs not set aside for small business would impact 
only 0.47 percent of annual new MAC orders. As such, SBA certifies that 
this proposed rule will not have a significant economic impact on a 
substantial number of small entities. Nevertheless, throughout the 
supplementary information to this proposed rule, SBA has identified the 
reasons why the proposed changes are being considered, the objectives 
and basis for the proposed rule, a description of the number of small 
entities to which the proposed rule will apply, and a description of 
alternatives considered.

List of Subjects

13 CFR Part 121

    Administrative practice and procedure, 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, 
Government property, Small businesses.

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 businesses.

13 CFR Part 127

    Government contracts, Reporting and recordkeeping requirements, 
Small businesses.

13 CFR Part 134

    Administrative practice and procedure, Claims, Equal employment 
opportunity, Lawyers, Organization and functions (Government agencies).

    Accordingly, for the reasons stated in the preamble, SBA proposes 
to amend 13 CFR parts 121, 124, 125, 126, 127, and 134 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

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

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

0
2. Amend Sec.  121.103 by:
0
a. Revising the first sentence of paragraphs (b)(6) and (9);
0
b. Revising paragraph (f)(2)(i);
0
c. Revising the first sentence of paragraph (g);
0
d. Revising paragraph (h) introductory text and example 1 to paragraph 
(h) introductory text;
0
e. Adding two sentences to the end of paragraph (h)(3)(ii);
0
f. Removing paragraph (h)(3)(iii); and
0
g. Revising paragraph (h)(5).

[[Page 60868]]

    The revisions and addition read as follows:


Sec.  121.103  How does SBA determine affiliation?

* * * * *
    (b) * * *
    (6) A firm that has an SBA-approved mentor-prot[eacute]g[eacute] 
agreement authorized under Sec.  125.9 of this chapter is not 
affiliated with its mentor or prot[eacute]g[eacute] firm solely because 
the prot[eacute]g[eacute] firm receives assistance from the mentor 
under the agreement. * * *
* * * * *
    (9) In the case of a solicitation for a bundled contract or a 
Multiple Award Contract with a value in excess of the agency's 
substantial bundling threshold, a small business contractor may enter 
into a Small Business Teaming Arrangement with one or more small 
business subcontractors and submit an offer as a small business without 
regard to affiliation, so long as each team member is small for the 
size standard assigned to the contract or subcontract. * * *
* * * * *
    (f) * * *
    (2) * * *
    (i) This presumption may be rebutted by a showing that despite the 
contractual relations with another concern, the concern at issue is not 
solely dependent on that other concern, such as where the concern has 
been in business for a short amount of time and has only been able to 
secure a limited number of contracts or where the contractual relations 
do not restrict the concern in question from selling the same type of 
products or services to another purchaser.
* * * * *
    (g) Affiliation based on the newly organized concern rule. 
Affiliation may arise where former or current officers, directors, 
principal stockholders, managing members, or key employees of one 
concern organize a new concern in the same or related industry or field 
of operation, and serve as the new concern's officers, directors, 
principal stockholders, managing members, or key employees, and the one 
concern is furnishing or will furnish the new concern with contracts, 
financial or technical assistance, indemnification on bid or 
performance bonds, and/or other facilities, whether for a fee or 
otherwise. * * *
    (h) Affiliation based on joint ventures. A joint venture is an 
association of individuals and/or concerns with interests in any degree 
or proportion consorting to engage in and carry out business ventures 
for joint profit over a two year period, for which purpose they combine 
their efforts, property, money, skill, or knowledge, but not on a 
continuing or permanent basis for conducting business generally. This 
means that a specific joint venture entity generally may not be awarded 
contracts beyond a two-year period, starting from the date of the award 
of the first contract, without the partners to the joint venture being 
deemed affiliated for the joint venture. Once a joint venture receives 
a contract, it may submit additional offers for a period of two years 
from the date of that first award. An individual joint venture may be 
awarded one or more contracts after that two-year period as long as it 
submitted an offer including price prior to the end of that two-year 
period. SBA will find joint venture partners to be affiliated, and thus 
will aggregate their receipts and/or employees in determining the size 
of the joint venture for all small business programs, where the joint 
venture submits an offer after two years from the date of the first 
award. The same two (or more) entities may create additional joint 
ventures, and each new joint venture entity may submit offers for a 
period of two years from the date of the first contract to the joint 
venture without the partners to the joint venture being deemed 
affiliates. At some point, however, such a longstanding inter-
relationship or contractual dependence between the same joint venture 
partners will lead to a finding of general affiliation between and 
among them. A joint venture: Must be in writing; must do business under 
its own name and be identified as a joint venture in the System for 
Award Management (SAM) for the award of a prime contract; may be in the 
form of a formal or informal partnership or exist as a separate limited 
liability company or other separate legal entity; and, if it exists as 
a formal separate legal entity, may not be populated with individuals 
intended to perform contracts awarded to the joint venture (i.e., the 
joint venture may have its own separate employees to perform 
administrative functions, including one or more Facility Security 
Officer(s), but may not have its own separate employees to perform 
contracts awarded to the joint venture). SBA may also determine that 
the relationship between a prime contractor and its subcontractor is a 
joint venture pursuant to paragraph (h)(4) of this section. For 
purposes of this paragraph (h), contract refers to prime contracts, 
novations of prime contracts, and any subcontract in which the joint 
venture is treated as a similarly situated entity as the term is 
defined in part 125 of this chapter.

    Example 1 to paragraph (h) introductory text. Joint Venture AB 
receives a contract on April 2, year 1. Joint Venture AB may receive 
additional contracts through April 2, year 3. On June 6, year 2, 
Joint Venture AB submits an offer for Solicitation 1. On July 13, 
year 2, Joint Venture AB submits an offer for Solicitation 2. In 
May, year 3, Joint Venture AB is found to be the apparent successful 
offeror for Solicitation 1. In June, year 3, Joint Venture AB is 
found to be the apparent successful offeror for Solicitation 2. Even 
though the award of the two contracts emanating from Solicitations 1 
and 2 would occur after April 2, year 3, Joint Venture AB may 
receive those awards without causing general affiliation between its 
joint venture partners because the offers occurred prior to the 
expiration of the two-year period.
* * * * *
    (3) * * *
    (ii) * * * Except for sole source 8(a) awards, the joint venture 
must meet the requirements of Sec.  124.513(c) and (d), Sec.  125.8(b) 
and (c), Sec.  125.18(b)(2) and (3), Sec.  126.616(c) and (d), or Sec.  
127.506(c) and (d) of this chapter, as appropriate, at the time it 
submits its initial offer including price. For a sole source 8(a) 
award, the joint venture must demonstrate that it meets the 
requirements of Sec.  124.513(c) and (d) prior to the award of the 
contract.
* * * * *
    (5) For size purposes, a concern must include in its receipts its 
proportionate share of joint venture receipts, unless the proportionate 
share already is accounted for in receipts reflecting transactions 
between the concern and its joint ventures (e.g., subcontracts from a 
joint venture entity to joint venture partners). In determining the 
number of employees, a concern must include in its total number of 
employees its proportionate share of joint venture employees. For both 
the calculation of receipts and of employees, the appropriate 
proportionate share is the same percentage of receipts or employees as 
the joint venture partner's percentage share of the work performed by 
the joint venture.

    Example 1 to paragraph (h)(5). Joint Venture AB is awarded a 
contract for $10M. The joint venture will perform 50% of the work, 
with A performing $2M (40% of the 50%, or 20% of the total value of 
the contract) and B performing $3M (60% of the 50% or 30% of the 
total value of the contract). Since A will perform 40% of the work 
done by the joint venture, its share of the revenues for the entire 
contract is 40%, which means that the receipts from the contract 
awarded to Joint Venture AB that must be included in A's receipts 
for size purposes are $4M. A must add $4M to its receipts for size 
purposes, unless its receipts

[[Page 60869]]

already account for the $4M in transactions between A and Joint 
Venture AB.
* * * * *
0
3. Amend Sec.  121.402 by:
0
a. Revising the first sentence of paragraph (b)(2);
0
b. Revising paragraph (c)(1)(i);
0
c. Redesignating paragraph (c)(2)(ii) as paragraph (c)(2)(iii); and
0
d. Adding a new paragraph (c)(2)(ii).
    The revisions and addition read as follows:


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

* * * * *
    (b) * * *
    (2) A procurement is generally classified according to the 
component which accounts for the greatest percentage of contract value. 
* * *
    (c) * * *
    (1) * * *
    (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; or
* * * * *
    (2) * * *
    (ii) The contracting officer must assign a single NAICS code for 
each order issued against a Multiple Award Contract. The NAICS code 
assigned to an order must be a NAICS code included in the underlying 
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 
principal 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. If the base contract has not been 
assigned a NAICS code that reflects the principal purpose of the order, 
the contracting officer shall select a new NAICS code and corresponding 
size standard for the order.
* * * * *
0
4. In Sec.  121.404:
0
a. Amend paragraph (a) by:
0
i. Revising paragraphs (a) introductory text and (a)(1); and
0
ii. Adding a subject heading to paragraph (a)(2);
0
b. Revise paragraph (b);
0
c. Add a subject heading to paragraph (c);
0
d. Revise paragraph (d);
0
e. Add a subject heading to paragraph (e) and a sentence at the end of 
paragraph (e);
0
f. Add a subject heading to paragraph (f);
0
g. Amend paragraph (g) by:
0
i. Revising paragraph (g) introductory text and paragraphs 
(g)(2)(ii)(C) and (D);
0
ii. Adding paragraph (g)(2)(iii) and a new second sentence to paragraph 
(g)(3) introductory text; and
0
h. Add a subject heading to paragraph (h).
    The additions and revisions read as follows:


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

    (a) Time of size--(1) Multiple award contracts. With respect to 
Multiple Award Contracts, orders issued against a Multiple Award 
Contract, and Blanket Purchase Agreements issued against a Multiple 
Award Contract:
    (i) Single NAICS. If a single NAICS code is assigned as set forth 
in Sec.  121.402(c)(1)(i), SBA determines size status for the 
underlying Multiple Award Contract at the time of initial offer (or 
other formal response to a solicitation), which includes price, based 
upon the size standard set forth in the solicitation for the Multiple 
Award Contract, unless the concern was required to recertify under 
paragraph (g)(1), (2), or (3).
    (A) Unrestricted Multiple Award Contracts. For an unrestricted 
Multiple Award Contract, if a business concern is small at the time of 
offer and contract-level recertification for the Multiple Award 
Contract, it is small for goaling purposes for each order issued 
against the contract, unless a contracting officer requests a size 
recertification for a specific order or Blanket Purchase Agreement. 
However, except for orders and Blanket Purchase Agreements issued under 
any Federal Supply Schedule contract, if an order or a Blanket Purchase 
Agreement under an unrestricted Multiple Award Contract is set-aside 
exclusively for small business (i.e., small business set-aside, 8(a) 
small business, service-disabled veteran-owned small business, HUBZone 
small business, or women-owned small business), a concern must 
recertify its size status and qualify as a small business at the time 
it submits its initial offer, which includes price, for the particular 
order or Blanket Purchase Agreement.
    (B) Set-aside Multiple Award Contracts. For a Multiple Award 
Contract that is set aside for small business (i.e., small business 
set, 8(a) small business, service-disabled veteran-owned small 
business, HUBZone small business, or women-owned small business), if a 
business concern is small at the time of offer and contract-level 
recertification for the Multiple Award Contract, it is small for each 
order or Blanket Purchase Agreement issued against the contract, unless 
a contracting officer requests a size recertification for a specific 
order or Blanket Purchase Agreement.
    (ii) Multiple NAICS. If multiple NAICS codes are assigned as set 
forth in Sec.  121.402(c)(1)(ii), SBA determines size status 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, unless the firm 
was required to recertify under paragraph (g)(1), (2), or (3). 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).
    (A) Unrestricted Multiple Award Contracts. For an unrestricted 
Multiple Award Contract, if a business concern is small at the time of 
offer and contract-level recertification for discrete categories on the 
Multiple Award Contract, it is small for goaling purposes for each 
order issued against any of those categories, unless a contracting 
officer requests a size recertification for a specific order or Blanket 
Purchase Agreement. However, except for orders or Blanket Purchase 
Agreements issued under any Federal Supply Schedule contract, if an 
order or Blanket Purchase Agreement for a discrete category under an 
unrestricted Multiple Award Contract is set-aside exclusively for small 
business (i.e., small business set, 8(a) small business, service-
disabled veteran-owned small business, HUBZone small business, or 
women-owned small business), a concern must recertify its size status 
and qualify as a small business at the time it submits its initial 
offer, which includes price, for the particular order or Agreement.
    (B) Set-aside Multiple Award Contracts. For a Multiple Award 
Contract that is set aside for small business (i.e., small business 
set, 8(a) small business, service-disabled veteran-owned small 
business, HUBZone small business, or women-owned small business), if a 
business is small at the time of offer and contract-level 
recertification for discrete categories on the Multiple Award

[[Page 60870]]

Contract, it is small for each order or Agreement issued against any of 
those categories, unless a contracting officer requests a size 
recertification for a specific order or Blanket Purchase.
    (iii) SBA will determine size at the time of initial offer (or 
other formal response to a solicitation), which includes price, for an 
order or Agreement issued against a Multiple Award Contract if the 
contracting officer requests a new size certification for the order or 
Agreement.
    (2) Agreements. * * *
    (b) Eligibility for SBA programs. A concern applying to be 
certified as a Participant in SBA's 8(a) Business Development program 
(under part 124, subpart A, of this chapter), as a HUBZone small 
business (under part 126 of this chapter), or as a women-owned small 
business concern (under part 127 of this chapter) must qualify as a 
small business for its primary industry classification as of the date 
of its application and, where applicable, the date the SBA program 
office requests a formal size determination in connection with a 
concern that otherwise appears eligible for program certification.
    (c) Certificates of competency. * * *
    (d) Nonmanufacturer rule, ostensible subcontractor rule, and joint 
venture agreements. Size status is determined as of the date of the 
final proposal revision for negotiated acquisitions and final bid for 
sealed bidding for the following purposes: compliance with the 
nonmanufacturer rule set forth in Sec.  121.406(b)(1), the ostensible 
subcontractor rule set forth in Sec.  121.103(h)(4), and the joint 
venture agreement requirements in Sec.  124.513(c) and (d), Sec.  
125.8(b) and (c), Sec.  125.18(b)(2) and (3), Sec.  126.616(c) and (d), 
or Sec.  127.506(c) and (d) of this chapter, as appropriate.
    (e) Subcontracting. * * * A prime contractor may rely on the self-
certification of subcontractor provided it does not have a reason to 
doubt the concern's self-certification.
    (f) Two-step procurements. * * *
    (g) Effect of size certification and recertification. 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, and after a required 
recertification under paragraph (g)(1), (2), or (3) of this section is 
generally considered to be a small business throughout the life of that 
contract. 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, except that a required recertification as other than 
small under paragraph (g)(1), (2), or (3) of this section changes the 
firm's status for future options and orders. The following exceptions 
apply to this paragraph (g):
* * * * *
    (2) * * *
    (ii) * * *
    (C) In the context of a joint venture that has been awarded a 
contract or order as a small business, from any partner to the joint 
venture that has been acquired, is acquiring, or has merged with 
another business entity.
    (D) If the merger, sale or acquisition occurs after offer but prior 
to award, the offeror must recertify its size to the contracting 
officer prior to award. If the offeror is unable to recertify as small, 
it will not be eligible as a small business for the award of the 
contract.
    (iii) Recertification is not required when the ownership of a 
concern that is at least 51% owned by an entity (i.e., tribe, Alaska 
Native Corporation, or Community Development Corporation) changes to or 
from a wholly-owned business concern of the same entity, as long as the 
ultimate owner remains that entity.

    Example 1 to paragraph (g)(2)(iii). Indian Tribe X owns 100% of 
small business ABC. ABC wins an award for a small business set-aside 
contract. In year two of contract performance, X changes the 
ownership of ABC so that X owns 100% of a holding company XYZ, Inc., 
which in turn owns 100% of ABC. This restructuring does not require 
ABC to recertify its status as a small business because it continues 
to be 100% owned (indirectly rather than directly) by Indian Tribe 
X.

    (3) * * * A contracting officer may also request size 
recertification, as he or she deems appropriate, prior to the 120-day 
point in the fifth year of a long-term contract. * * *
* * * * *
    (h) Follow-on contracts. * * *


Sec.  121.406   [Amended]

0
5. Amend Sec.  121.406 by removing the word ``provided'' and adding in 
its place the word ``provide'' in paragraph (a) introductory text.
0
6. Amend Sec.  121.603 by adding paragraph (c)(3) to read as follows:


Sec.  121.603   How does SBA determine whether a Participant is small 
for a particular 8(a) BD subcontract?

* * * * *
    (c) * * *
    (3) Recertification is not required when the ownership of a concern 
that is at least 51% owned by an entity (i.e., tribe, Alaska Native 
Corporation, or Community Development Corporation) changes to or from a 
wholly-owned business concern of the same entity, as long as the 
ultimate owner remains that entity.
* * * * *
0
7. Amend Sec.  121.702 by revising paragraph (c)(6) to read as follows:


Sec.  121.702   What size and eligibility standards are applicable to 
the SBIR and STTR programs?

* * * * *
    (c) * * *
    (6) Size requirement for joint ventures. Two or more small business 
concerns may submit an application as a joint venture. The joint 
venture will qualify as small as long as each concern is small under 
the size standard for the SBIR program, found at Sec.  121.702(c), or 
the joint venture meets the exception at Sec.  121.103(h)(3)(ii) for 
two firms approved to be a mentor and prot[eacute]g[eacute] under SBA's 
All Small Mentor-Prot[eacute]g[eacute] Program.
* * * * *
0
8. Amend Sec.  121.1001 by revising paragraphs (a)(1)(iii), 
(a)(2)(iii), (a)(3)(iv), (a)(4)(iii), (a)(6)(iv), (a)(7)(iii), 
(a)(8)(iv), and (a)(9)(iv) to read as follows:


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

    (a) * * *
    (1) * * *
    (iii) The SBA Government Contracting Area Director having 
responsibility for the area in which the headquarters of the protested 
offeror is located, regardless of the location of a parent company or 
affiliates, the Director, Office of Government Contracting, or the 
Associate General Counsel for Procurement Law; and
* * * * *
    (2) * * *
    (iii) The SBA District Director, or designee, in either the 
district office serving the geographical area in which the procuring 
activity is located or the district office that services the apparent 
successful offeror, the Associate Administrator for Business 
Development, or the Associate General Counsel for Procurement Law.
* * * * *
    (3) * * *
    (iv) The responsible SBA Government Contracting Area Director or 
the Director, Office of Government Contracting, or the SBA's Associate 
General Counsel for Procurement Law; and
* * * * *
    (4) * * *
    (iii) The responsible SBA Government Contracting Area Director; the 
Director, Office of Government Contracting; the Associate 
Administrator, Investment

[[Page 60871]]

Division, or the Associate General Counsel for Procurement Law.
* * * * *
    (6) * * *
    (iv) The SBA Director, Office of HUBZone, or designee, or the SBA 
Associate General Counsel for Procurement Law.
* * * * *
    (7) * * *
    (iii) The responsible SBA Government Contracting Area Director, the 
Director, Office of Government Contracting, the Associate Administrator 
for Business Development, or the Associate General Counsel for 
Procurement Law.
* * * * *
    (8) * * *
    (iv) The Director, Office of Government Contracting, or designee, 
or the Associate General Counsel for Procurement Law.
* * * * *
    (9) * * *
    (iv) The Director, Office of Government Contracting, or designee, 
or the Associate General Counsel for Procurement Law.
* * * * *
0
9. Amend Sec.  121.1004 by revising paragraph (a)(2)(ii) and adding 
paragraph (a)(2)(iii) to read as follows:


Sec.  121.1004   What time limits apply to size protests?

    (a) * * *
    (2) * * *
    (ii) An order issued against a Multiple Award Contract if the 
contracting officer requested a size recertification in connection with 
that order; or
    (iii) Except for orders or Blanket Purchase Agreements issued under 
any Federal Supply Schedule contract, an order or Blanket Purchase 
Agreement set-aside for small business (i.e., small business set-aside, 
8(a) small business, service-disabled veteran-owned small business, 
HUBZone small business, or women-owned small business) where the 
underlying Multiple Award Contract was awarded on an unrestricted 
basis.
* * * * *
0
10. Amend Sec.  121.1103 by revising paragraph (c)(1)(i) to read as 
follows:


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

* * * * *
    (c) * * *
    (1) * * *
    (i) Stay the date for the closing of receipt of offers;
* * * * *

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

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

    Authority:  15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), 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
12. Amend Sec.  124.3 by adding in alphabetical order a definition for 
``Follow-on requirement or contract'' to read as follows:


Sec.  124.3   What definitions are important in the 8(a) BD program?

* * * * *
    Follow-on requirement or contract. The determination of whether a 
particular procurement is a follow-on includes the following 
considerations:
    (1) Whether the scope has changed significantly, requiring 
meaningful different types of work or different capabilities;
    (2) Whether the magnitude or value of the requirement has changed 
by at least 25 percent; and
    (3) Whether the end user of the requirement has changed. As a 
general guide, if the procurement satisfies at least one of these three 
conditions, it may be considered a new requirement. Conversely, if the 
procurement satisfies none of these conditions, it is considered a 
follow-on procurement. The 25 percent rule, however, cannot be applied 
rigidly in all cases because by doing so could encourage a result that 
is inconsistent with the intent of another provision in this part.
* * * * *
0
13. Amend Sec.  124.105 by revising paragraphs (g) and (i)(2) and (4) 
to read as follows:


Sec.  124.105   What does it mean to be unconditionally owned by one or 
more disadvantaged individuals?

* * * * *
    (g) Ownership of another current or former Participant by an 
immediate family member. (1) An individual may not use his or her 
disadvantaged status to qualify a concern if that individual has an 
immediate family member who is using or has used his or her 
disadvantaged status to qualify another concern for the 8(a) BD program 
and any of the following circumstances exist:
    (i) The concerns are connected by any common ownership or 
management, regardless of amount or position; or
    (ii) The concerns have a contractual relationship that was not 
conducted at arm's length.

    Example 1 to paragraph (g)(1). X applies to the 8(a) BD program. 
X is 95% owned by A and 5% by B, A's father and the majority owner 
in a former 8(a) Participant. Even though B has no involvement in X, 
X would be ineligible for the program.
    Example 2 to paragraph (g)(1). Y applies to the 8(a) BD program. 
C owns 100% of Y. However, D, C's sister and the majority owner in a 
former 8(a) Participant, is acting as a Vice President in Y. Y would 
be ineligible for the program.
    Example 3 to paragraph (g)(1). X seeks to apply to the 8(a) BD 
program with a primary NAICS code in plumbing. X is 100% owned by A. 
Z, a former 8(a) participant with a primary industry in general 
construction, is owned 100% by B, A's brother. For general 
construction jobs, Z has subcontracted plumbing work to X in the 
past at normal commercial rates. Subcontracting work at normal 
commercial rates would not preclude X from being admitted to the 
8(a) BD program. X would be eligible for the program.

    (2) If the AA/BD approves an application under paragraph (g)(1) of 
this section, SBA will, as part of its annual review, assess whether 
the firm continues to operate independently of the other current or 
former 8(a) concern of an immediate family member. SBA may initiate 
proceedings to terminate a firm from further participation in the 8(a) 
BD program if it is apparent that there are connections between the two 
firms that were not disclosed to the AA/BD at the time of application 
or that came into existence after program admittance.
* * * * *
    (i) * * *
    (2) Prior approval by the AA/BD is not needed where all non-
disadvantaged individual (or entity) owners involved in the change of 
ownership own no more than a 20 percent interest in the concern both 
before and after the transaction, the transfer results from the death 
or incapacity due to a serious, long-term illness or injury of a 
disadvantaged principal, or the disadvantaged individual or entity in 
control of the Participant will increase the percentage of its 
ownership interest. The concern must notify SBA within 60 days of such 
a change in ownership.

    Example 1 to paragraph (i)(2). Disadvantaged individual A owns 
90% of 8(a) Participant X; non-disadvantaged individual B owns 10% 
of X. In order to raise additional capital, X seeks to change its 
ownership structure such that A would own 80%, B would own 10% and C 
would own 10%. X can accomplish this change in ownership without 
prior SBA approval. Non-disadvantaged owner B is not involved in the 
transaction and non-disadvantaged individual C owns less than 20% of 
X both before and after the transaction.
    Example 2 to paragraph (i)(2). Disadvantaged individual C owns 
60% of 8(a) Participant Y; non-disadvantaged

[[Page 60872]]

individual D owns 30% of Y; and non-disadvantaged individual E owns 
10% of Y. C seeks to transfer 5% of Y to E. Prior SBA approval is 
not needed. Although non-disadvantaged individual D owns more than 
20% of Y, D is not involved in the transfer. Because the only non-
disadvantaged individual involved in the transfer, E, owns less than 
20% of Y both before and after the transaction, prior approval is 
not needed.
    Example 3 to paragraph (i)(2). Disadvantaged individual A owns 
85% of 8(a) Participant X; non-disadvantaged individual B owns 15% 
of X. A seeks to transfer 15% of X to B. Prior SBA approval is 
needed. Although B, the non-disadvantaged owner of X, owns less than 
20% of X prior to the transaction, prior approval is needed because 
B would own more than 20% after the transaction.
    Example 4 to paragraph (i)(2). ANC A owns 60% of 8(a) 
Participant X; non-disadvantaged individual B owns 40% of X. X seeks 
to transfer 15% to A. Prior SBA approval is not needed. Although a 
non-disadvantaged individual who is involved in the transaction, B, 
owns more than 20% of X both before and after the transaction, SBA 
approval is not needed because the change only increases the 
percentage of A's ownership interest in X.
* * * * *
    (4) Where a Participant requests a change of ownership or business 
structure, and proceeds with the change prior to receiving SBA approval 
(or where a change of ownership results from the death or incapacity of 
a disadvantaged individual for which a request prior to the change in 
ownership could not occur), SBA may suspend the Participant from 
program benefits pending resolution of the request. If the change is 
approved, the length of the suspension will be restored to the 
Participant's program term in the case of death or incapacity, or if 
the firm requested prior approval and waited 60 days for SBA approval.
* * * * *
0
14. Amend Sec.  124.109 by:
0
a. Revising the section heading;
0
b. Adding paragraph (a)(7);
0
c. Revising paragraph (c)(3)(ii);
0
d. Adding paragraphs (c)(3)(iv) and (c)(4)(iii)(C); and
0
e. Revising paragraphs (c)(6)(iii) and (c)(7)(ii).
    The revisions and additions to read as follows:


Sec.  124.109   Do Indian tribes and Alaska Native Corporations have 
any special rules for applying to and remaining eligible for the 8(a) 
BD program?

    (a) * * *
    (7) Notwithstanding Sec.  124.105(i), where an ANC merely 
reorganizes its ownership of a Participant in the 8(a) BD program by 
inserting or removing a wholly-owned business entity between the ANC 
and the Participant, the Participant need not request a change of 
ownership from SBA. The Participant must, however, notify SBA of the 
change within 30 days of the transfer.
* * * * *
    (c) * * *
    (3) * * *
    (ii) A Tribe may not own 51% or more of another firm which, either 
at the time of application or within the previous two years, has been 
operating in the 8(a) program under the same primary NAICS code as the 
applicant. A Tribe may, however, own a Participant or other applicant 
that conducts or will conduct secondary business in the 8(a) BD program 
under the NAICS code which is the primary NAICS code of the applicant 
concern.
    (A) Once an applicant is admitted to the 8(a) BD program, it may 
not receive an 8(a) sole source contract that is a follow-on contract 
to an 8(a) contract that was performed immediately previously by 
another Participant (or former Participant) owned by the same Tribe. 
For purposes of this paragraph, the same primary NAICS code means the 
six-digit NAICS code having the same corresponding size standard.
    (B) If the primary NAICS code of a tribally-owned Participant is 
changed pursuant to Sec.  124.112(e), the tribe can submit an 
application and qualify another firm owned by the tribe for 
participation in the 8(a) BD program under the NAICS code that was the 
previous primary NAICS code of the Participant whose primary NAICS code 
was changed.

    Example 1 to paragraph (c)(3)(ii)(B). Tribe X owns 100% of 8(a) 
Participant A. A entered the 8(a) BD program with a primary NAICS 
code of 236115, New Single-Family Housing Construction (except For-
Sale Builders). After four years in the program, SBA noticed that 
the vast majority of A's revenues were in NAICS Code 237310, 
Highway, Street, and Bridge Construction, and notified A that SBA 
intended to change its primary NAICS code pursuant to Sec.  
124.112(e). A agreed to change its primary NAICS Code to 237310. 
Once the change is finalized, Tribe X can immediately submit a new 
application to qualify another firm that it owns for participation 
in the 8(a) BD program with a primary NAICS Code of 236115.
* * * * *
    (iv) Notwithstanding Sec.  124.105(i), where a Tribe merely 
reorganizes its ownership of a Participant in the 8(a) BD program by 
inserting or removing a wholly-owned business entity between the Tribe 
and the Participant, the Participant need not request a change of 
ownership from SBA. The Participant must, however, notify SBA of the 
change within 30 days of the transfer.
* * * * *
    (4) * * *
    (iii) * * *
    (C) Because an individual may be responsible for the management and 
daily business operations of two tribally-owned concerns, the full-time 
devotion requirement does not apply to tribally-owned applicants and 
Participants.
* * * * *
    (6) * * *
    (iii) The Tribe, a tribally-owned economic development corporation, 
or other relevant tribally-owned holding company vested with the 
authority to oversee tribal economic development or business ventures 
has made a firm written commitment to support the operations of the 
applicant concern and it has the financial ability to do so.
    (7) * * *
    (ii) The officers, directors, and all shareholders owning an 
interest of 20% or more (other than the tribe itself) of a tribally-
owned applicant or Participant must demonstrate good character (see 
Sec.  124.108(a)) and cannot fail to pay significant Federal 
obligations owed to the Federal Government (see Sec.  124.108(e)).
0
15. Amend Sec.  124.110 by revising the section heading and paragraph 
(e) to read as follows:


Sec.  124.110   Do Native Hawaiian Organizations (NHOs) have any 
special rules for applying to and remaining eligible for the 8(a) BD 
program?

* * * * *
    (e) An NHO cannot own 51% or more of another firm which, either at 
the time of application or within the previous two years, has been 
operating in the 8(a) program under the same primary NAICS code as the 
applicant. An NHO may, however, own a Participant or an applicant that 
conducts or will conduct secondary business in the 8(a) BD program 
under the same NAICS code that a current Participant owned by the NHO 
operates in the 8(a) BD program as its primary NAICS code.
    (1) Once an applicant is admitted to the 8(a) BD program, it may 
not receive an 8(a) sole source contract that is a follow-on contract 
to an 8(a) contract that was performed immediately previously by 
another Participant (or former Participant) owned by the same NHO. For 
purposes of this paragraph, the same primary NAICS code means the six-
digit NAICS code having the same corresponding size standard.
    (2) If the primary NAICS code of a Participant owned by an NHO is 
changed pursuant to Sec.  124.112(e), the NHO can submit an application 
and qualify another firm owned by the NHO for participation in the 8(a) 
BD program

[[Page 60873]]

under the NAICS code that was the previous primary NAICS code of the 
Participant whose primary NAICS code was changed.
* * * * *
0
16. Amend Sec.  124.111 by revising the section heading, adding 
paragraph (c)(3), and revising paragraph (d) to read as follows:


Sec.  124.111   Do Community Development Corporations (CDCs) have any 
special rules for applying to and remaining eligible for the 8(a) BD 
program?

* * * * *
    (c) * * *
    (3) Notwithstanding Sec.  124.105(i), where a CDC merely 
reorganizes its ownership of a Participant in the 8(a) BD program by 
inserting or removing a wholly-owned business entity between the CDC 
and the Participant, the Participant need not request a change of 
ownership from SBA. The Participant must, however, notify SBA of the 
change within 30 days of the transfer.
    (d) A CDC cannot own 51% or more of another firm which, either at 
the time of application or within the previous two years, has been 
operating in the 8(a) program under the same primary NAICS code as the 
applicant. A CDC may, however, own a Participant or an applicant that 
conducts or will conduct secondary business in the 8(a) BD program 
under the same NAICS code that a current Participant owned by the CDC 
operates in the 8(a) BD program as its primary SIC code.
    (1) Once an applicant is admitted to the 8(a) BD program, it may 
not receive an 8(a) sole source contract that is a follow-on contract 
to an 8(a) contract that was performed immediately previously by 
another Participant (or former Participant) owned by the same CDC. For 
purposes of this paragraph, the same primary NAICS code means the six-
digit NAICS code having the same corresponding size standard.
    (2) If the primary NAICS code of a Participant owned by a CDC is 
changed pursuant to Sec.  124.112(e), the CDC can submit an application 
and qualify another firm owned by the CDC for participation in the 8(a) 
BD program under the NAICS code that was the previous primary NAICS 
code of the Participant whose primary NAICS code was changed.
* * * * *
0
17. Amend Sec.  124.112 by revising paragraph (d)(5), redesignating 
paragraph (e)(2)(iv) as paragraph (e)(2)(v), and adding a new paragraph 
(e)(2)(iv).
    The revision and addition read as follows:


Sec.  124.112   What criteria must a business meet to remain eligible 
to participate in the 8(a) BD program?

* * * * *
    (d) * * *
    (5) The excessive withdrawal analysis does not apply to 
Participants owned by Tribes, ANCs, NHOs, or CDCs where a withdrawal is 
made for the benefit of the Tribe, ANC, NHO, CDC or the native or 
shareholder community. It does, however, apply to withdrawals from a 
firm owned by a Tribe, ANC, NHO, or CDC that do not benefit the 
relevant entity or community. Thus, if funds or assets are withdrawn 
from an entity-owned Participant for the benefit of a non-disadvantaged 
manager or owner that exceed the withdrawal thresholds, SBA may find 
that withdrawal to be excessive. However, a non-disadvantaged minority 
owner may receive a payout in excess of the excessive withdrawal amount 
if it is a pro rata distribution paid to all shareholders (i.e., the 
only way to increase the distribution to the Tribe, ANC, NHO or CDC is 
to increase the distribution to all shareholders) and it does not 
adversely affect the business development of the Participant.

    Example 1 to paragraph (d)(5). Tribally-owned Participant X pays 
$1,000,000 to a non-disadvantaged manager. That would be deemed an 
excessive withdrawal.
    Example 2 to paragraph (d)(5). ANC-owned Participant Y seeks to 
distribute $550,000 to the ANC and $450,000 to non-disadvantaged 
individual A based on their 55%/45% ownership interests. Because the 
distribution is based on the pro rata share of ownership, this would 
not be prohibited as an excessive withdrawal unless SBA determined 
that Y would be adversely affected.

    (e) * * *
    (2) * * *
    (iv) A Participant may appeal a district office's decision to 
change its primary NAICS code to SBA's Associate General Counsel for 
Procurement Law (AGC/PL) within 10 business days of receiving the 
district office's final determination. The AGC/PL will examine the 
record, including all information submitted by the Participant in 
support of its position as to why the primary NAICS code contained in 
its business plan continues to be appropriate despite performing more 
work in another NAICS code, and issue a final agency decision within 15 
business days of receiving the appeal.
* * * * *
0
18. Amend Sec.  124.203 by revising the first two sentences and adding 
a new third sentence to read as follows:


Sec.  124.203   What must a concern submit to apply to the 8(a) BD 
program?

    Each 8(a) BD applicant concern must submit information and 
supporting documents required by SBA when applying for admission to the 
8(a) BD program. This information may include, but not be limited to, 
financial data and statements, copies of filed Federal personal and 
business tax returns, individual and business bank statements, personal 
history statements, and any additional information or documents SBA 
deems necessary to determine eligibility. Each individual claiming 
disadvantaged status must also submit a signed IRS Form 4506T, Request 
for Copy or Transcript of TAX Form, to SBA. * * *
0
19. Amend Sec.  124.204 by adding a sentence to the end of paragraph 
(a) to read as follows:


Sec.  124.204   How does SBA process applications for 8(a) BD program 
admission?

    (a) * * * Where during its review SBA requests clarifying, revised 
or other information from the applicant, SBA's processing time for the 
application will be suspended pending the receipt of such information.
* * * * *
0
20. Revise Sec.  124.207 to read as follows:


Sec.  124.207   Can an applicant reapply for admission to the 8(a) BD 
program?

    A concern which has been declined for 8(a) BD program participation 
may submit a new application for admission to the program at any time 
after 90 days from the date of the Agency's final decision to decline.


Sec.  124.301   [Redesignated as Sec.  124.300]

0
21. Redesignate Sec.  124.301 as Sec.  124.300.
0
22. Add new Sec.  124.301 to read as follows:


Sec.  124.301   Voluntary withdrawal or voluntary early graduation.

    (a) A Participant may voluntarily withdraw from the 8(a) BD program 
at any time prior to the expiration of its program term. Where a 
Participant has substantially achieved the goals and objectives set 
forth in its business plan, it may elect to voluntarily early graduate 
from the 8(a) BD program.
    (b) To initiate withdrawal or early graduation from the 8(a) BD 
program, a Participant must notify its servicing SBA district office of 
its intent to do so in writing. Once the SBA servicing district office 
processes the request and the District Director recognizes the 
withdrawal or early graduation, the

[[Page 60874]]

Participant is no longer eligible to receive any 8(a) BD program 
assistance.
0
23. Amend Sec.  124.304 by revising the paragraph (d) subject heading 
and adding a sentence at the end of paragraph (d) to read as follows:


Sec.  124.304   What are the procedures for early graduation and 
termination?

* * * * *
    (d) Notice requirements and effect of decision. * * * Once the AA/
BD issues a decision to early graduate or terminate a Participant, the 
Participant will be immediately suspended from receiving further 
program assistance until the determination becomes the final agency 
decision.
* * * * *
0
24. Amend Sec.  124.305 by revising paragraphs (h)(1)(ii) and (iv), and 
adding paragraph (h)(1)(v) to read as follows:


Sec.  124.305   What is suspension and how is a Participant suspended 
from the 8(a) BD program?

* * * * *
    (h) * * *
    (1) * * *
    (ii) A disadvantaged individual who is involved in controlling the 
day-to-day management and control of the Participant is called to 
active military duty by the United States, his or her participation in 
the firm's management and daily business operations is critical to the 
firm's continued eligibility, the Participant does not designate 
another disadvantaged individual to control the concern during the 
call-up period, and the Participant requests to be suspended during the 
call-up period;
* * * * *
    (iv) Federal appropriations for one or more Federal departments or 
agencies have lapsed, a Participant would lose an 8(a) sole source 
award due to the lapse in appropriations (e.g., SBA has previously 
accepted an offer for a sole source 8(a) award on behalf of the 
Participant or an agency could not offer a sole source 8(a) requirement 
to the program on behalf of the Participant due to the lapse in 
appropriations, and the Participant's program term would end during the 
lapse), and the Participant elects to suspend its participation in the 
8(a) BD program during the lapse in Federal appropriations; or
    (v) A Participant has not submitted a business plan to its SBA 
servicing office within 60 days after program admission.
* * * * *
0
25. Amend Sec.  124.402 by revising paragraph (b) to read as follows:


Sec.  124.402   How does a Participant develop a business plan?

* * * * *
    (b) Submission of initial business plan. Each Participant must 
submit a business plan to its SBA servicing office as soon as possible 
after program admission. SBA will suspend a Participant from receiving 
8(a) BD program benefits, including 8(a) contracts, if it has not 
submitted its business plan to the servicing district office within 60 
days after program admission.
* * * * *
0
26. Amend Sec.  124.501 by redesignating paragraphs (g) through (i) as 
paragraphs (h) through (j), respectively, and by adding new paragraphs 
(g) and (k) to read as follows:


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

* * * * *
    (g) Before a Participant may be awarded either a sole source or 
competitive 8(a) contract, SBA must determine that the Participant is 
eligible for award. SBA will determine eligibility at the time of its 
acceptance of the underlying requirement into the 8(a) BD program for a 
sole source 8(a) contract, and after the apparent successful offeror is 
identified for a competitive 8(a) contract. Eligibility is based on 
8(a) BD program criteria, including whether the Participant:
    (1) Qualifies as a small business under the size standard 
corresponding to the NAICS code assigned to the requirement;
    (2) Is in compliance with any applicable competitive business mix 
targets established or remedial measure imposed by Sec.  124.509 that 
does not include the denial of future sole source 8(a) contracts or 
8(a) contracts generally, as applicable;
    (3) Complies with the continued eligibility reporting requirements 
set forth in Sec.  124.112(b);
    (4) Has a bona fide place of business in the applicable geographic 
area if the procurement is for construction;
    (5) Has not received 8(a) contracts in excess of the dollar limits 
set forth in Sec.  124.519 for a sole source 8(a) procurement;
    (6) Has complied with the provisions of Sec.  124.513(c) and (d) if 
it is seeking a sole source 8(a) award through a joint venture; and
    (7) Can demonstrate that it, together with any similarly situated 
entity, will meet the limitations on subcontracting provisions set 
forth in Sec.  124.510.
* * * * *
    (k) In order to be awarded a sole source or competitive 8(a) 
construction contract, a Participant must have a bona fide place of 
business within the applicable geographic location determined by SBA. 
This will generally be the geographic area serviced by the SBA district 
office in which the work will be performed. SBA may determine that a 
Participant with a bona fide place of business within the entire state 
(if the state is serviced by more than one SBA district office), a 
contiguous SBA district office (in the same or another state), or 
another nearby area is eligible for the award of an 8(a) construction 
contract.
    (1) A Participant may have bona fide places of business in more 
than one location.
    (2) In order for a Participant to establish a bona fide place of 
business in a particular geographic location, the SBA district office 
serving the geographic area of that location must determine if that 
location in fact qualifies as a bona fide place of business under SBA's 
requirements.
    (i) A Participant must submit a request for a bona fide business 
determination to the SBA district office servicing it. Such request 
may, but need not, relate to a specific 8(a) requirement. In order to 
apply to a specific competitive 8(a) solicitation, such request must be 
submitted at least 20 working days before initial offers that include 
price are due.
    (ii) The servicing district office will immediately forward the 
request to the SBA district office serving the geographic area of the 
particular location for processing. Within 10 working days of receipt 
of the submission, the reviewing district office will conduct a site 
visit, if practicable. If not practicable, the reviewing district 
office will contact the Participant within such 10-day period to inform 
the Participant that the reviewing office has received the request and 
may ask for additional documentation to support the request.
    (iii) In connection with a specific competitive solicitation, the 
reviewing office will make a determination whether or not the 
Participant has a bona fide place of business in its geographical area 
within 5 working days of a site visit or within 15 working days of its 
receipt of the request from the servicing district office if a site 
visit is not practical in that timeframe. If the request is not related 
to a specific procurement, the reviewing office will make a 
determination within 30 working days of its receipt of the request from 
the servicing district office, if practicable.
    (3) The effective date of a bona fide place of business is the date 
that the

[[Page 60875]]

evidence (paperwork) shows that the business in fact regularly 
maintained its business at the new geographic location.
    (4) In order for a Participant to be eligible to submit an offer 
for an 8(a) procurement limited to a specific geographic area, it must 
receive from SBA a determination that it has a bona fide place of 
business within that area prior to submitting its offer for the 
procurement.
    (5) Once a Participant has established a bona fide place of 
business, the Participant may change the location of the recognized 
office without prior SBA approval. However, the Participant must notify 
SBA and provide documentation demonstrating an office at that new 
location within 30 days after the move. Failure to timely notify SBA 
will render the Participant ineligible for new 8(a) construction 
procurements limited to that geographic area.
0
27. Amend Sec.  124.503 by:
0
a. Removing the phrase ``in Sec.  124.507(b)(2)'' and adding in its 
place the phrase ``in Sec.  124.501(g)'' in paragraph (a)(1);
0
b. Redesignating paragraphs (e) through (j) as paragraphs (f) through 
(k), respectively;
0
c. Adding a new paragraph (e);
0
d. Revising the introductory text of the newly redesignated paragraph 
(h);
0
e. Adding the phrase ``or BPA'' after the phrase ``BOA'', wherever it 
appears, in the newly redesignated paragraphs (h)(1) through (4);
0
f. Revising newly redesignated paragraph (i)(1)(iii);
0
g. Adding a sentence at the end of newly redesignated paragraph 
(i)(1)(iv); and
0
h. Revising newly redesignated paragraph (i)(2)(iv).
    The additions and revisions read as follows:


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

* * * * *
    (e) Withdrawal/substitution of offered requirement or Participant. 
After SBA has accepted a requirement for award as a sole source 8(a) 
contract on behalf of a specific Participant (whether nominated by the 
procuring agency or identified by SBA for an open requirement), if the 
procuring agency believes that the identified Participant is not a good 
match for the procurement--including for such reasons as the procuring 
agency finding the Participant non-responsible or the negotiations 
between the procuring agency and the Participant otherwise failing--the 
procuring agency may seek to substitute another Participant for the 
originally identified Participant. The procuring agency must inform SBA 
of its concerns regarding the originally identified Participant and 
identify whether it believes another Participant could fulfill its 
needs.
    (1) If the procuring agency and SBA agree that another Participant 
can fulfill its needs, the procuring agency will withdraw the original 
offering and reoffer the requirement on behalf of another 8(a) 
Participant. SBA will then accept the requirement on behalf of the 
newly identified Participant and authorize the procuring agency to 
negotiate directly with that Participant.
    (2) If the procuring agency and SBA agree that another Participant 
cannot fulfill its needs, the procuring agency will withdraw the 
original offering letter and fulfill its needs outside the 8(a) BD 
program.
    (3) If the procuring agency believes that another Participant 
cannot fulfill its needs, but SBA does not agree, SBA may appeal that 
decision to the head of the procuring agency pursuant to Sec.  
124.505(a)(2).
* * * * *
    (h) Basic Ordering Agreements (BOAs) and Blanket Purchase 
Agreements (BPAs). Neither a Basic Ordering Agreement (BOA) nor a 
Blanket Purchase Agreement (BPA) is a contract under the FAR. See 48 
CFR 16.703(a). Each order to be issued under a BOA or BPA is an 
individual contract. As such, the procuring activity must offer, and 
SBA must accept, each task order under a BOA or BPA in addition to 
offering and accepting the BOA or BPA itself.
* * * * *
    (i)
    (1) * * *
    (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 SDB 
credit toward their prime contracting goals for orders awarded to 8(a) 
Participants. However, a firm will be ineligible for the award of an 
order if the procuring agency asks contract holders to recertify their 
8(a) BD status in connection with a specific order and the firm is 
unable to do so. Where a contracting officer asks contract holders to 
recertify their 8(a) BD status in connection with a specific order, a 
firm must be an eligible Participant in accordance with Sec.  
124.501(g) as of the initial date specified for the receipt of offers 
contained in the order solicitation, or at the date of award of the 
order if there is no solicitation.
    (iv) * * * To be eligible for the award of a sole source order, a 
concern must be a current Participant in the 8(a) BD program at the 
time of award.
    (2) * * *
    (iv) SBA must verify that a concern is an eligible 8(a) Participant 
in accordance with Sec.  124.501(g) as of the initial date specified 
for the receipt of offers contained in the order solicitation, or at 
the date of award of the order if there is no solicitation. If a 
concern has exited the 8(a) BD program prior to that date, it will be 
ineligible for the award of the order.
* * * * *
0
28. Amend Sec.  124.504 by:
0
a. Revising the section heading and paragraph (b);
0
b. Removing the term ``Simplified Acquisition Procedures'' and adding 
in its place the phrase ``the simplified acquisition threshold (as 
defined in the FAR at 48 CFR 2.101)'' in paragraph (c) introductory 
text;
0
c. Removing the word ``will'' and adding in its place the word ``may'' 
in paragraph (c)(1)(ii)(C);
0
d. Revising the subject heading for paragraph (d) and paragraphs (d)(1) 
introductory text and (d)(4).
    The revisions read as follows:


Sec.  124.504   What circumstances limit SBA's ability to accept a 
procurement for award as an 8(a) contract, and when can a requirement 
be released from the 8(a) BD program?

* * * * *
    (b) Competition prior to offer and acceptance. The procuring 
activity competed a requirement among 8(a) Participants prior to 
offering the requirement to SBA and did not clearly evidence its intent 
to conduct an 8(a) competitive acquisition.
* * * * *
    (d) Release for non-8(a) or limited 8(a) competition. (1) Except as 
set forth in paragraph (d)(4) of this section, where a procurement is 
awarded as an 8(a) contract, its follow-on requirement must remain in 
the 8(a) BD program unless SBA agrees to release it for non-8(a) 
competition. Additionally, SBA must agree to release any follow-on 
requirement where a procuring agency seeks to reprocure that 
requirement through a pre-existing limited contracting vehicle which is 
not available to all 8(a) BD Program Participants (e.g., any multiple 
award or Governmentwide acquisition contract, whether or not the 
underlying MAC or GWAC is itself an 8(a) contract), and the

[[Page 60876]]

previous/current 8(a) award was not so limited. If a procuring agency 
would like to fulfill a follow-on requirement outside of the 8(a) BD 
program, it must make a written request to and receive the concurrence 
of the AA/BD to do so. In determining whether to release a requirement 
from the 8(a) BD program, SBA will consider:
* * * * *
    (4) The requirement that a follow-on procurement must be released 
from the 8(a) BD program in order for it to be fulfilled outside the 
8(a) BD program does not apply:
    (i) Where previous orders were offered to and accepted for the 8(a) 
BD program pursuant to Sec.  124.503(i)(2); or
    (ii) Where a procuring agency will use a mandatory source (see FAR 
Subparts 8.6 and 8.7). In such a case, the procuring agency must notify 
SBA at least 30 days prior to the end of the contract or order.
0
29. Amend Sec.  124.505 by:
0
a. Removing the word ``and'' at the end of paragraph (a)(2);
0
b. Redesignating paragraph (a)(3) as paragraph (a)(4); and
0
c. Adding new paragraph (a)(3).
    The addition reads 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?

    (a) * * *
    (3) A decision by a contracting officer that a particular 
procurement is a new requirement that is not subject to the release 
requirements set forth in Sec.  124.504(d); and
* * * * *
0
30. Amend Sec.  124.507 by:
0
a. Revising paragraph (b)(2);
0
b. Removing paragraph (b)(3);
0
c. Redesignating paragraphs (b)(4) through (6) as paragraphs (b)(3) 
through (5), respectively;
0
d. Removing paragraph (c)(1);
0
e. Redesignating paragraphs (c)(2) and (3) as paragraphs (c)(1) and 
(2), respectively; and
0
f. Revising newly redesignated paragraph (c)(1).
    The revisions read as follows:


Sec.  124.507   What procedures apply to competitive 8(a) procurements?

* * * * *
    (b) * * *
    (2) SBA determines a Participant's eligibility pursuant to Sec.  
124.501(g).
* * * * *
    (c) * * *
    (1) Construction competitions. Based on its knowledge of the 8(a) 
BD portfolio, SBA will determine whether a competitive 8(a) 
construction requirement should be competed among only those 
Participants having a bona fide place of business within the 
geographical boundaries of one or more SBA district offices, within a 
state, or within the state and nearby areas. Only those Participants 
with bona fide places of business within the appropriate geographical 
boundaries are eligible to submit offers.
* * * * *
0
31. Amend Sec.  124.509 by:
0
a. Removing the word ``maximum'' and adding in its place the words 
``good faith'' in paragraph (a)(1);
0
b. Removing the words ``substantial and sustained'' and adding in their 
place the words ``good faith'' in paragraph (a)(2); and
0
c. Revising paragraph (e).
    The revision reads as follows:


Sec.  124.509   What are non-8(a) business activity targets?

* * * * *
    (e) Waiver of sole source prohibition. (1) SBA may waive the 
requirement prohibiting a Participant from receiving further sole 
source 8(a) contracts when a Participant does not meet its non-8(a) 
business activity target where a denial of a sole source contract would 
cause severe economic hardship on the Participant so that the 
Participant's survival may be jeopardized, or where extenuating 
circumstances beyond the Participant's control caused the Participant 
not to meet its non-8(a) business activity target.
    (2) SBA may waive the requirement prohibiting a Participant from 
receiving further sole source 8(a) contracts when the Participant does 
not meet its non-8(a) business activity target where the head of a 
procuring activity represents to the SBA that award of a sole source 
8(a) contract to the Participant is needed to achieve significant 
interests of the Government.
    (3) The decision to grant or deny a request for a waiver is at 
SBA's discretion, and no appeal may be taken with respect to that 
decision.
    (4) A waiver generally applies to a specific sole source 
opportunity. If SBA grants a waiver with respect to a specific 
procurement, the firm will be able to self-market its capabilities to 
the applicable procuring activity with respect to that procurement. If 
the Participant seeks an additional sole source opportunity, it must 
request a waiver with respect to that specific opportunity. Where, 
however, a Participant can demonstrate that the same extenuating 
circumstances beyond its control affect its ability to receive specific 
multiple 8(a) contracts, one waiver can apply to those multiple 
contract opportunities.
0
32. Amend Sec.  124.513 by revising paragraphs (c)(4) and (e) to read 
as follows:


Sec.  124.513   Under what circumstances can a joint venture be awarded 
an 8(a) contract?

* * * * *
    (c) * * *
    (4) Stating that the 8(a) Participant(s) must receive profits from 
the joint venture commensurate with the work performed by the 8(a) 
Participant(s), or a percentage agreed to by the parties to the joint 
venture whereby the 8(a) Participant(s) receive profits from the joint 
venture that exceed the percentage commensurate with the work performed 
by the 8(a) Participant(s);
* * * * *
    (e) Prior approval by SBA. (1) When a joint venture between one or 
more 8(a) Participants seeks a sole source 8(a) award, SBA must approve 
the joint venture prior to the award of the sole source 8(a) contract. 
SBA will not approve joint ventures in connection with competitive 8(a) 
awards.
    (2) Where a joint venture has been established for one 8(a) 
contract, the joint venture may receive additional 8(a) contracts 
provided the parties create an addendum to the joint venture agreement 
setting forth the performance requirements for each additional award 
(and provided any contract is awarded within two years of the first 
award as set forth in Sec.  121.103(h)). If an additional 8(a) contract 
is a sole source award, SBA must also approve the addendum prior to 
contract award.
* * * * *
0
33. Amend Sec.  124.515 by revising paragraph (d) to read as follows:


Sec.  124.515   Can a Participant change its ownership or control and 
continue to perform an 8(a) contract, and can it transfer performance 
to another firm?

* * * * *
    (d) SBA determines the eligibility of an acquiring Participant 
under paragraph (b)(2) of this section by referring to the items 
identified in Sec.  124.501(g) and deciding whether at the time of the 
request for waiver (and prior to the transaction) the acquiring 
Participant is an eligible concern with respect to each contract for 
which a waiver is sought. As part of the waiver request, the acquiring 
concern must certify that it is a small business for the size standard 
corresponding to the NAICS code assigned to each contract for which a 
waiver is sought. SBA will not grant a waiver for any contract if the 
work to be performed under the contract is not similar to the type of 
work

[[Page 60877]]

previously performed by the acquiring concern.
* * * * *
0
34. Amend Sec.  124.519 by:
0
a. Revising paragraph (a);
0
b. Removing paragraph (c);
0
c. Redesignating paragraph (b) as paragraph (c); and
0
d. Adding a new paragraph (b).
    The revision and addition read as follows:


Sec.  124.519  Are there any dollar limits on the amount of 8(a) 
contracts that a Participant may receive?

    (a) A Participant (other than one owned by an Indian Tribe, ANC, 
NHO, or CDC) may not receive sole source 8(a) contract awards where it 
has received a combined total of competitive and sole source 8(a) 
contracts in excess of $100,000,000 during its participation in the 
8(a) BD program.
    (b) In determining whether a Participant has reached the limit 
identified in paragraph (a) of this section, SBA:
    (1) Looks at the 8(a) revenues a Participant has actually received, 
not projected 8(a) revenues that a Participant might receive through an 
indefinite delivery or indefinite quantity contract, a multiple award 
contract, or options or modifications; and
    (2) Will not consider 8(a) contracts awarded under the Simplified 
Acquisition Threshold.
* * * * *
0
35. Revise Sec.  124.520 to read as follows:


Sec.  124.520  Can 8(a) BD Program Participants participate in SBA's 
Mentor-Prot[eacute]g[eacute] program?

    (a) An 8(a) BD Program Participant, as any other small business, 
may participate in SBA's All Small Mentor-Prot[eacute]g[eacute] Program 
authorized under Sec.  125.9 of this chapter.
    (b) In order for a joint venture between a prot[eacute]g[eacute] 
and its SBA-approved mentor to receive the exclusion from affiliation 
with respect to a sole source or competitive 8(a) contract, the joint 
venture must meet the requirements set forth in Sec.  124.513(c) and 
(d).

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
36. The authority citation for part 125 continues to read as follows:

    Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 637; 644; 657(f); 
657q; and 657s; 38 U.S.C. 501 and 8127.

0
37. Amend Sec.  125.2 by adding paragraph (g) to read as follows:


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

* * * * *
    (g) Past performance and experience. (1) In the case of a 
solicitation for a bundled contract, a consolidated contract, or a 
multiple award contract above the substantial bundling threshold of the 
Federal agency, the head of the agency must consider the past 
performance, capabilities and experience of each first tier 
subcontractor that is part of the team as the capabilities and past 
performance of the small business prime contractor when evaluating an 
offer of a small business prime contractor that includes a proposed 
team of small business subcontractors.
    (2) For other solicitations, based on the circumstances of the 
procurement, the agency may consider the past performance, capabilities 
and experience of each first tier subcontractor that is part of the 
team as the capabilities and past performance of the small business 
prime contractor.
0
38. Amend Sec.  125.3 by adding a sentence to the end of paragraph 
(b)(2) to read as follows:


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

* * * * *
    (b) * * *
    (2) * * * This applies whether the firm qualifies as a small 
business concern for the size standard corresponding to the NAICS code 
assigned to the contract, or is deemed to be treated as a small 
business concern by statute (see e.g., 43 U.S.C. 1626(e)(4)(B)).
* * * * *
0
39. Amend Sec.  125.5 by:
0
a. Revising the third sentence of paragraph (a)(1);
0
b. Removing the phrase ``$100,000 or less, or in accordance with 
Simplified Acquisition Threshold procedures'' and adding in its place 
the phrase ``Less than the Simplified Acquisition Threshold'' in 
paragraph (g);
0
c. Removing the phrase ``Between $100,000 and $25 million'' and adding 
in its place the phrase ``Between the Simplified Acquisition Threshold 
and $25 million'' in paragraph (g);
0
d. Removing the term ``$100,000'' and adding in its place ``the 
simplified acquisition threshold'' in paragraphs (h) and (i).
    The revision reads as follows:


Sec.  125.5   What is the Certificate of Competency Program?

    (a) * * *
    (1) * * * The COC Program is applicable to all Government 
procurement actions, with the exception of 8(a) sole source awards but 
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. * * *
* * * * *
0
40. Amend Sec.  125.6 by revising the paragraph (b) introductory text 
and adding example 3 to paragraph (b) to read as follows:


Sec.  125.6  What are the prime contractor's limitations on 
subcontracting?

* * * * *
    (b) Mixed contracts. Where a contract integrates any combination of 
services, supplies, or construction, the contracting officer shall 
select the appropriate NAICS code as prescribed in Sec.  121.402(b) of 
this chapter. The contracting officer's selection of the applicable 
NAICS code is determinative as to which limitation on subcontracting 
and performance requirement applies. Based on the NAICS code selected, 
the relevant limitation on subcontracting requirement identified in 
paragraphs (a)(1) through (4) of this section will apply only to that 
portion of the contract award amount. In no case shall more than one 
limitation on subcontracting requirement apply to the same contract.
* * * * *
    Example 3 to paragraph (b). A procuring activity is acquiring 
both services and general construction through a small business set-
aside. The total value of the requirement is $10,000,000, with the 
construction portion comprising $8,000,000, and the services portion 
comprising $2,000,000. The contracting officer appropriately assigns 
a construction NAICS code to the requirement. The 85% limitation on 
subcontracting identified in paragraph (a)(3) would apply to this 
procurement. Because the services portion of the contract is 
excluded from consideration, the relevant amount for purposes of 
calculating the limitation on subcontracting requirement is 
$8,000,000. As such, the prime contractor cannot subcontract more 
than $6,800,000 to non-similarly situated entities, and the prime 
and/or similarly situated entities must perform at least $1,200,000.
* * * * *
0
41. Amend Sec.  125.8 by revising paragraphs (b)(2)(iv), (xi), and 
(xii), (e), and (h)(2) to read as follows:


Sec.  125.8  What requirements must a joint venture satisfy to submit 
an offer for a procurement or sale set aside or reserved for small 
business?

* * * * *
    (b) * * *

[[Page 60878]]

    (2) * * *
    (iv) Stating that the small business participant(s) must receive 
profits from the joint venture commensurate with the work performed by 
them, or a percentage agreed to by the parties to the joint venture 
whereby the small business participant(s) receive profits from the 
joint venture that exceed the percentage commensurate with the work 
performed by them;
* * * * *
    (xi) Stating that annual performance-of-work statements required by 
paragraph (h)(1) must be submitted to SBA and the relevant contracting 
officer not later than 45 days after each operating year of the joint 
venture; and
    (xii) Stating that the project-end performance-of-work required by 
paragraph (h)(2) must be submitted to SBA and the relevant contracting 
officer no later than 90 days after completion of the contract.
* * * * *
    (e) Past performance and experience. When evaluating the past 
performance, experience, business systems and certifications of an 
entity submitting an offer for a contract set aside or reserved for 
small business as a joint venture established pursuant to this section, 
a procuring activity must consider work done and qualifications held 
individually by each partner to the joint venture as well as any work 
done by the joint venture itself previously.
* * * * *
    (h) * * *
    (2) At the completion of every contract set aside or reserved for 
small business that is awarded to a joint venture between a 
prot[eacute]g[eacute] small business and a mentor authorized by Sec.  
125.9, and upon request by the SBA or the relevant contracting officer, 
the small business partner to the joint venture must submit a report to 
the relevant contracting officer and to the SBA, signed by an 
authorized official of each partner to the joint venture, explaining 
how and certifying that the performance of work requirements were met 
for the contract, and further certifying that the contract was 
performed in accordance with the provisions of the joint venture 
agreement that are required under paragraph (b) of this section.
* * * * *
0
42. Amend Sec.  125.9 by:
0
a. Revising paragraphs (b), (c)(1)(ii), and (c)(2) introductory text;
0
b. Removing paragraph (c)(4);
0
c. Revising paragraphs (d)(1)(iii) introductory text and 
(d)(1)(iii)(B);
0
d. Adding paragraph (d)(6);
0
e. Removing ``(e.g., management and/or technical assistance, loans and/
or equity investments, cooperation on joint venture projects, or 
subcontracts under prime contracts being performed by the mentor)'' and 
adding in its place ``(e.g., management and or technical assistance; 
loans and/or equity investments; bonding; use of equipment; export 
assistance; assistance as a subcontractor under prime contracts being 
performed by the prot[eacute]g[eacute]; cooperation on joint venture 
projects; or subcontracts under prime contracts being performed by the 
mentor)'' in paragraph (e)(1) introductory text.
0
f. Revising paragraph (e)(1)(i);
0
g. Removing the first sentence and revising the new first sentence of 
paragraph (e)(5);
0
h. Redesignating paragraphs (e)(6) through (8) as paragraphs (e)(7) 
through (9), respectively;
0
i. Adding new paragraph (e)(6);
0
j. Revising paragraph (f);
0
k. Adding paragraph (g) introductory text; and
0
l. Revising paragraph (g)(4).
    The revisions and additions to read as follows:


Sec.  125.9  What are the rules governing SBA's small business mentor-
prot[eacute]g[eacute] program?

* * * * *
    (b) Mentors. Any concern that demonstrates a commitment and the 
ability to assist small business concerns may act as a mentor and 
receive benefits as set forth in this section. This includes other than 
small businesses.
    (1) In order to qualify as a mentor, a concern must demonstrate 
that it:
    (i) Is capable of carrying out its responsibilities to assist the 
prot[eacute]g[eacute] firm under the proposed mentor-
prot[eacute]g[eacute] agreement;
    (ii) Does not appear on the Federal list of debarred or suspended 
contractors; and
    (iii) Can impart value to a prot[eacute]g[eacute] firm due to 
lessons learned and practical experience gained or through its 
knowledge of general business operations and government contracting.
    (2) SBA will decline an application if SBA determines that the 
mentor does not possess good character or a favorable financial 
position, employs or otherwise controls the managers of the 
prot[eacute]g[eacute], or is otherwise affiliated with the 
prot[eacute]g[eacute]. Once approved, SBA may terminate the mentor-
prot[eacute]g[eacute] agreement if the mentor does not possess good 
character or a favorable financial position, was affiliated with the 
prot[eacute]g[eacute] at time of application, or is affiliated with the 
prot[eacute]g[eacute] for reasons other than the mentor-
prot[eacute]g[eacute] agreement or assistance provided under the 
agreement.
    (3) In order for SBA to agree to allow a mentor to have more than 
one prot[eacute]g[eacute] at time, the mentor and proposed additional 
prot[eacute]g[eacute] must demonstrate that the added mentor-
prot[eacute]g[eacute] relationship will not adversely affect the 
development of either prot[eacute]g[eacute] firm (e.g., the second firm 
may not be a competitor of the first firm).
    (i) A mentor that has more than one prot[eacute]g[eacute] cannot 
submit competing offers in response to a solicitation for a specific 
procurement through separate joint ventures with different 
prot[eacute]g[eacute]s.
    (ii) A mentor generally cannot have more than three 
prot[eacute]g[eacute]s at one time. However, the first two mentor-
prot[eacute]g[eacute] relationships approved by SBA between a specific 
mentor and a small business that has its principal office located in 
the Commonwealth of Puerto Rico do not count against the limit of three 
proteges that a mentor can have at one time.
    (c) * * *
    (1) * * *
    (ii) Where a small business seeks to qualify as a 
prot[eacute]g[eacute] in a secondary NAICS code, the firm must 
demonstrate how the mentor-prot[eacute]g[eacute] relationship will help 
the firm further develop or expand its current capabilities in that 
secondary NAICS code. SBA will not approve a mentor-
prot[eacute]g[eacute] relationship in a secondary NAICS code in which 
the firm has no prior experience.
    (2) A prot[eacute]g[eacute] firm may generally have only one mentor 
at a time. SBA may approve a second mentor for a particular 
prot[eacute]g[eacute] firm where the second relationship will not 
compete or otherwise conflict with the first mentor-
prot[eacute]g[eacute] relationship, and:
* * * * *
    (d) * * *
    (1) * * *
    (iii) Once a prot[eacute]g[eacute] firm no longer qualifies as a 
small business for the size standard corresponding to the NAICS code 
under which SBA approved its mentor-prot[eacute]g[eacute] relationship, 
any joint venture between the prot[eacute]g[eacute] and its mentor will 
not continue to receive the exclusion from affiliation authorized by 
paragraph (a) of this section. However, a change in the 
prot[eacute]g[eacute]'s size status does not generally affect contracts 
previously awarded to a joint venture between the prot[eacute]g[eacute] 
and its mentor.
    (A) * * *
    (B) For contracts with durations of more than five years (including 
options), where size re-certification is required under Sec.  
121.404(g)(3) of this chapter no more than 120 days prior to the end of 
the fifth year of the contract

[[Page 60879]]

and no more than 120 days prior to exercising any option thereafter, 
once the prot[eacute]g[eacute] no longer qualifies as small for the 
size standard corresponding to the NAICS code assigned to the contract, 
the joint venture will not be able re-certify itself to be a small 
business for that contract. The rules set forth in Sec.  121.404(g)(3) 
of this chapter apply in such circumstances.
* * * * *
    (6) A mentor that provides a subcontract to a prot[eacute]g[eacute] 
that has its principal office located in the Commonwealth of Puerto 
Rico may (i) receive positive consideration for the mentor's past 
performance evaluation, and (ii) apply costs incurred for providing 
training to such protege toward the subcontracting goals contained in 
the subcontracting plan of the mentor.
    (e) * * *
    (1) * * *
    (i) Specifically identify the business development assistance to be 
provided and address how the assistance will help the 
prot[eacute]g[eacute] enhance its growth and/or foster or acquire 
needed capabilities;
* * * * *
    (5) Unless rescinded in writing as a result of an SBA review, the 
mentor-prot[eacute]g[eacute] relationship will automatically renew 
without additional written notice of continuation or extension to the 
prot[eacute]g[eacute] firm. * * *
    (6) A prot[eacute]g[eacute] may generally have a total of two 
mentor-prot[eacute]g[eacute] agreements with different mentors.
    (i) Each mentor-prot[eacute]g[eacute] agreement may be for an 
initial period of three years and may be extended an additional three 
years provided the prot[eacute]g[eacute] has received the agreed-upon 
business development assistance and will continue to receive additional 
assistance through the extended mentor-prot[eacute]g[eacute] agreement.
    (ii) If a mentor-prot[eacute]g[eacute] agreement is terminated 
within a year from the date SBA approved the agreement, that mentor-
prot[eacute]g[eacute] relationship will not count as one of the two 
mentor-prot[eacute]g[eacute] relationships that a small business may 
enter as a prot[eacute]g[eacute].
* * * * *
    (f) Decision to decline mentor-prot[eacute]g[eacute] relationship. 
Where SBA declines to approve a specific mentor-prot[eacute]g[eacute] 
agreement, SBA will issue a written decision setting forth its 
reason(s) for the decline. The small business concern seeking to be a 
prot[eacute]g[eacute] cannot attempt to enter into another mentor-
prot[eacute]g[eacute] relationship with the same mentor for a period of 
60 calendar days from the date of the final decision. The small 
business concern may, however, submit another proposed mentor-
prot[eacute]g[eacute] agreement with a different proposed mentor at any 
time after the SBA's final decline decision.
    (g) Evaluating the mentor-prot[eacute]g[eacute] relationship. SBA 
will review the mentor-prot[eacute]g[eacute] relationship annually. SBA 
will ask the prot[eacute]g[eacute] for its assessment of how the 
mentor-prot[eacute]g[eacute] relationship is working, whether or not 
the prot[eacute]g[eacute] received the agreed upon business development 
assistance, and whether the prot[eacute]g[eacute] would recommend the 
mentor to be a mentor for another small business in the future.
* * * * *
    (4) SBA may decide not to approve continuation of a mentor-
prot[eacute]g[eacute] agreement where:
    (i) SBA finds that the mentor has not provided the assistance set 
forth in the mentor-prot[eacute]g[eacute] agreement;
    (ii) SBA finds that the assistance provided by the mentor has not 
resulted in any material benefits or developmental gains to the 
prot[eacute]g[eacute]; or
    (iii) A prot[eacute]g[eacute] does not provide information relating 
to the mentor-prot[eacute]g[eacute] relationship, as set forth in 
paragraph (g).
* * * * *
0
43. Amend Sec.  125.18 by:
0
a. Revising paragraph (a);
0
b. Removing ``(see Sec. Sec.  125.9 and 124.520 of this chapter)'' and 
adding in its place ``(see Sec.  125.9 of this chapter)'' in paragraph 
(b)(1)(ii);
0
c. Removing ``Sec.  124.520 or'' in paragraph (b)(2) introductory text;
0
d. Removing ``or Sec.  124.520'' in paragraph (b)(3)(i);
0
e. Redesignating paragraphs (d)(1) through (4) as paragraphs (d)(2) 
through (5), respectively; and
0
f. Adding a new paragraph (d)(1).
    The revision and addition read as follows:


Sec.  125.18   What requirements must an SDVO SBC meet to submit an 
offer on a contract?

    (a) General. In order for a business concern to submit an offer and 
be eligible for the award of a specific SDVO contract, the concern must 
submit the appropriate representations and certifications at the time 
it submits its initial offer which includes price (or other formal 
response to a solicitation) to the contracting officer, including, but 
not limited to, the fact that:
    (1) It is small under the size standard corresponding to the NAICS 
code(s) assigned to the contract;
    (2) It is an SDVO SBC; and
    (3) There has been no material change in any of its circumstances 
affecting its SDVO SBC eligibility.
* * * * *
    (d) Multiple Award Contracts--(1) SDVO status. With respect to 
Multiple Award Contracts, orders issued against a Multiple Award 
Contract, and Blanket Purchase Agreements issued against a Multiple 
Award Contract:
    (i) SBA determines SDVO small business eligibility for the 
underlying Multiple Award Contract as of the date a business concern 
certifies its status as an SDVO small business concern as part of its 
initial offer (or other formal response to a solicitation), which 
includes price, unless the firm was required to recertify under 
paragraph (e) of this section.
    (A) Unrestricted Multiple Award Contracts or Set-Aside Multiple 
Award Contracts for Other than SDVO. For an unrestricted Multiple Award 
Contract or other Multiple Award Contract not specifically set aside 
for SDVO, if a business concern is an SDVO small business concern at 
the time of offer and contract-level recertification for the Multiple 
Award Contract, it is an SDVO small business concern for goaling 
purposes for each order issued against the contract, unless a 
contracting officer requests recertification as an SDVO small business 
for a specific order or Blanket Purchase Agreement. However, except for 
orders and Blanket Purchase Agreements issued off any Federal Supply 
Schedule contract, if an order or a Blanket Purchase Agreement under an 
unrestricted Multiple Award Contract is set-aside exclusively for SDVO 
small business, a concern must recertify that it qualifies as an SDVO 
small business at the time it submits its initial offer, which includes 
price, for the particular order or Blanket Purchase Agreement.
    (B) SDVO Set-Aside Multiple Award Contracts. For a Multiple Award 
Contract that is specifically set aside for SDVO small business, if a 
business concern is an SDVO small business at the time of offer and 
contract-level recertification for the Multiple Award Contract, it is 
an SDVO small business for each order issued against the contract, 
unless a contracting officer requests recertification as an SDVO small 
business for a specific order or Blanket Purchase Agreement.
    (ii) SBA will determine SDVO small business status at the time of 
initial offer (or other formal response to a solicitation), which 
includes price, for an order or an Agreement issued against a Multiple 
Award Contract if the contracting officer requests a new SDVO

[[Page 60880]]

small business certification for the order or Agreement.
* * * * *
0
44. Amend Sec.  125.28 by revising the section heading and adding a 
sentence to the end of paragraph (d)(1) to read as follows:


Sec.  125.28   What are the requirements for filing a service-disabled 
veteran-owned status protest?

* * * * *
    (d) * * *
    (1) * * * Except for an order or Blanket Purchase Agreement issued 
under any Federal Supply Schedule contract, an order or a Blanket 
Purchase Agreement that is set-aside or reserved for SDVO small 
business off a Multiple Award Contract that is not itself set aside for 
SDVO small business (or any SDVO order where the contracting officer 
has requested recertification of SDVO status), an interested party must 
submit its protest challenging the SDVO status of a concern for the 
order or Agreement by close of business on the fifth business day after 
notification by the contracting officer of the apparent successful 
offeror.
* * * * *

PART 126--HUBZONE PROGRAM

0
45. The authority citation for part 126 continues to read as follows:

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


Sec.  126.616   [Amended]

0
46. Amend Sec.  126.616 by removing ``(or, if also an 8(a) BD 
Participant, with an approved mentor authorized by Sec.  124.520 of 
this chapter)'' in paragraph (a).


Sec.  126.618   [Amended]

0
47. Amend Sec.  126.618 by removing ``(or, if also an 8(a) BD 
Participant, under Sec.  124.520 of this chapter)'' in paragraph (a).
0
48. Amend Sec.  126.801 by adding a sentence to the end of paragraph 
(d)(1) to read as follows:


Sec.  126.801   How does an interested party file a HUBZone status 
protest?

* * * * *
    (d) * * *
    (1) * * * In connection with an order or an Agreement that is set-
aside or reserved for a certified HUBZone small business concern off a 
Multiple Award Contract that is not itself set aside for certified 
HUBZone small business concerns, except for an order or Blanket 
Purchase Agreement issued under any Federal Supply Schedule contact, 
(or any HUBZone set-aside order where the contracting officer has 
requested recertification of such status), an interested party must 
submit its protest challenging the HUBZone status of a concern for the 
order or Agreement by close of business on the fifth business day after 
notification by the contracting officer of the intended awardee of the 
order or Agreement.
* * * * *

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

0
49. The authority citation for part 127 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 637(m), 644 and 657r.


Sec.  127.503   [Amended]

0
50. Amend Sec.  127.503 by removing paragraph (h).
0
51. Revise Sec.  127.504 to read as follows:


Sec.  127.504   What requirements must an EDWOSB or WOSB meet to be 
eligible for an EDWOSB or WOSB contract?

    (a) General. In order for a business concern to submit an offer and 
be eligible for the award of a specific EDWOSB or WOSB contract, the 
concern must submit the appropriate representations and certifications 
at the time it submits its initial offer which includes price (or other 
formal response to a solicitation) to the contracting officer, 
including, but not limited to, the fact that:
    (1) It is small under the size standard corresponding to the NAICS 
code(s) assigned to the contract;
    (2) It is listed in SAM (or any successor system) as a WOSB or 
EDWOSB; and
    (3) There has been no material change in any of its circumstances 
affecting its EDWOSB or WOSB eligibility.
    (b) Joint ventures. A business concern seeking an EDWOSB or WOSB 
contract as a joint venture may submit an offer if the joint venture 
meets the requirements as set forth in Sec.  127.506.
    (c) Multiple Award Contracts. With respect to Multiple Award 
Contracts, orders issued against a Multiple Award Contract, and Blanket 
Purchase Agreements issued against a Multiple Award Contract:
    (1) SBA determines EDWOSB or WOSB eligibility for the underlying 
Multiple Award Contract as of the date a concern certifies its status 
as an EDWOSB or WOSB as part of its initial offer (or other formal 
response to a solicitation), which includes price, unless the concern 
was required to recertify its status as a WOSB or EDWOSB under 
paragraph (f) of this section.
    (i) Unrestricted Multiple Award Contracts or Set-Aside Multiple 
Award Contracts for Other than EDWOSB or WOSB. For an unrestricted 
Multiple Award Contract or other Multiple Award Contract not set aside 
specifically for EDWOSB or WOSB, if a business concern is an EDWOSB or 
WOSB at the time of offer and contract-level recertification for the 
Multiple Award Contract, it is an EDWOSB or WOSB for goaling purposes 
for each order issued against the contract, unless a contracting 
officer requests recertification as an EDWOSB or WOSB fora specific 
order or Blanket Purchase Agreement. However, except for orders and 
Blanket Purchase Agreements issued under any Federal Supply Schedule 
contract, if an order or a Blanket Purchase Agreement under an 
unrestricted Multiple Award Contract is set-aside exclusively for 
EDWOSB or WOSB, a concern must recertify it qualifies as an EDWOSB or 
WOSB at the time it submits its initial offer, which includes price, 
for the particular order or Agreement.
    (ii) EDWOSB or WOSB Set-Aside Multiple Award Contracts. For a 
Multiple Award Contract that is set aside specifically for EDWOSB or 
WOSB, if a business concern is an EDWOSB or WOSB at the time of offer 
and contract-level recertification for the Multiple Award Contract, it 
is an EDWOSB or WOSB for each order issued against the contract, unless 
a contracting officer requests recertification as an EDWOSB or WOSB 
fora specific order or Blanket Purchase Agreement.
    (2) SBA will determine EDWOSB or WOSB status at the time of initial 
offer (or other formal response to a solicitation), which includes 
price, for an order or an Agreement issued against a Multiple Award 
Contract if the contracting officer requests a new EDWOSB or WOSB 
certification for the order or Agreement.
    (d) Limitations on subcontracting. A business concern seeking an 
EDWOSB or WOSB contract must also meet the applicable limitations on 
subcontracting requirements as set forth in Sec.  125.6 of this chapter 
for the performance of contracts totally set aside for EDWOSB or WOSB, 
the performance of the set-aside portion of a partial set-aside 
contract, or the performance of orders set-aside for EDWOSB or WOSB. 
However, EDWOSB or WOSB concerns will not have to comply with the 
limitations on subcontracting provisions for any order issued against 
an unrestricted Multiple Award Contract if the order is competed 
amongst EDWOSB or WOSB concerns and at

[[Page 60881]]

least one other-than-small business concern.
    (e) Non-manufacturers. An EDWOSB or WOSB that is a non-
manufacturer, as defined in Sec.  121.406(b) of this chapter, may 
submit an offer on an EDWOSB or WOSB contract for supplies, if it meets 
the requirements under the non-manufacturer rule set forth in Sec.  
121.406(b) of this chapter.
    (f) Recertification. (1) Where a contract being performed by an 
EDWOSB or WOSB is novated to another business concern, the concern that 
will continue performance on the contract must recertify its status as 
an EDWOSB or WOSB to the procuring agency, or inform the procuring 
agency that it does not qualify as an EDWOSB or WOSB, within 30 days of 
the novation approval. If the concern cannot recertify its status as an 
EDWOSB or WOSB, the agency must modify the contract to reflect the new 
status, and may not count the options or orders issued pursuant to the 
contract, from that point forward, towards its women-owned small 
business goals.
    (2) Where an EDWOSB or WOSB concern that is performing a 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 EDWOSB or WOSB status to the 
procuring agency, or inform the procuring agency that it no longer 
qualifies as an EDWOSB or WOSB. If the concern is unable to recertify 
its status as an EDWOSB or WOSB, the agency must modify the contract to 
reflect the new status, and may not count the options or orders issued 
pursuant to the contract, from that point forward, towards its women-
owned small business goals.
    (3) For 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 
EDWOSB or WOSB 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. If the concern is unable to recertify its status 
as an EDWOSB or WOSB, the agency must modify the contract to reflect 
the new status, and may not count the options or orders issued pursuant 
to the contract, from that point forward, towards its women-owned small 
business goals.
    (4) A business concern that did not certify as an EDWOSB or WOSB, 
either initially or prior to an option being exercised, may recertify 
as an EDWOSB or WOSB for a subsequent option period if it meets the 
eligibility requirements at that time. The agency must modify the 
contract to reflect the new status, and may count the options or orders 
issued pursuant to the contract, from that point forward, towards its 
women-owned small business goals.
    (5) 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.
    (6) A concern's status will be determined at the time of a response 
to a solicitation for an Agreement and each order issued pursuant to 
the Agreement.


Sec.  127.505   [Removed and Reserved]

0
52. Remove and reserve Sec.  127.505.
0
53. Amend Sec.  127.603 by revising the section heading and adding a 
sentence to the end of paragraph (c)(1) to read as follows:


Sec.  127.603   What are the requirements for filing an EDWOSB or WOSB 
status protest?

* * * * *
    (c) * * *
    (1) * * * Except for an order or Blanket Purchase Agreement issued 
under any Federal Supply Schedule contact, an order or a Blanket 
Purchase Agreement that is set-aside or reserved for EDWOSB or WOSB 
small business under a Multiple Award Contract that is not itself set 
aside for EDWOSB or WOSB small business (or any EDWOSB or WOSB order 
where the contracting officer has requested recertification of such 
status), an interested party must submit its protest challenging the 
EDWOSB or WOSB status of a concern for the order or Blanket Purchase 
Agreement by close of business on the fifth business day after 
notification by the contracting officer of the apparent successful 
offeror.
* * * * *

PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF 
HEARINGS AND APPEALS

0
54. The authority citation for part 134 continues to read as follows:

    Authority:  5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 634(i), 
637(a), 648(l), 656(i), and 687(c); 38 U.S.C. 8127(f); E.O. 12549, 
51 FR 6370, 3 CFR, 1986 Comp., p. 189.
    Subpart J issued under 38 U.S.C. 8127(f)(8)(B).
    Subpart K issued under 38 U.S.C. 8127(f)(8)(A).

0
55. Amend Sec.  134.318 by adding a subject heading to paragraph (a) 
and revising paragraph (b) to read as follows:


Sec.  134.318   NAICS Appeals.

    (a) General. * * *
    (b) Effect of OHA's decision. If OHA grants the appeal (changes the 
NAICS code), the contracting officer must amend the solicitation to 
reflect the new NAICS code. The decision will also apply to future 
solicitations for the same supplies or services.
* * * * *

    Dated: October 16, 2019.
Christopher Pilkerton,
Acting Administrator.
[FR Doc. 2019-23141 Filed 11-7-19; 8:45 am]
BILLING CODE P

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