Ownership and Control and Contractual Assistance Requirements for the 8(a) Business Development Program, 55642-55678 [2022-18068]
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Federal Register / Vol. 87, No. 174 / Friday, September 9, 2022 / Proposed Rules
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 124, 125, 126, and
127
RIN 3245–AH70
Ownership and Control and
Contractual Assistance Requirements
for the 8(a) Business Development
Program
U.S. Small Business
Administration.
ACTION: Proposed rule.
AGENCY:
This proposed rule would
make several changes to the ownership
and control requirements for the 8(a)
Business Development (BD) program,
including recognizing a process for
allowing a change of ownership for a
former Participant that is still
performing one or more 8(a) contracts
and permitting an individual to own an
applicant or Participant where the
individual can demonstrate that
financial obligations have been settled
and discharged by the Federal
Government. The rule also proposes to
make several changes relating to 8(a)
contracts, including clarifying that a
contracting officer cannot limit an 8(a)
competition to Participants having more
than one certification and clarifying the
rules pertaining to issuing sole source
8(a) orders under an 8(a) multiple award
contract. The proposed rule would also
make several other revisions to
incorporate changes to SBA’s other
government contracting programs,
including changes to implement a
statutory amendment from the National
Defense Authorization Act for Fiscal
Year 2022, include blanket purchase
agreements in the list of contracting
vehicles that are covered by the
definitions of consolidation and
bundling, and more clearly specify the
requirements relating to waivers of the
nonmanufacturer rule.
DATES: Comments must be received on
or before November 8, 2022.
ADDRESSES: You may submit comments,
identified by RIN 3245–AH70, by any of
the following methods:
• Federal eRulemaking Portal:
https://www.regulations.gov and follow
the instructions for submitting
comments.
• Mail (for paper, disk, or CD–ROM
submissions): Mark Hagedorn, Attorney
Advisor, Office of General Counsel, U.S.
Small Business Administration, 409
Third Street SW, Washington, DC
20416.
Instructions: All submissions received
must include the agency name and
docket number or Regulatory
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SUMMARY:
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Information Number (RIN) for this
rulemaking. All comments received will
be posted on https://
www.regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at https://www.regulations.gov,
please submit the comments to Mark
Hagedorn and highlight the information
that you consider to be CBI and explain
why you believe this information
should be held confidential.
FOR FURTHER INFORMATION CONTACT:
Mark Hagedorn, U.S. Small Business
Administration, Office of General
Counsel, 409 Third Street SW,
Washington, DC 20416; (202) 205–7625;
mark.hagedorn@sba.gov.
SUPPLEMENTARY INFORMATION: SBA
proposes to make several changes to the
ownership and control requirements for
the 8(a) Business Development (BD)
program, including recognizing a
process for allowing a change of
ownership for a former Participant that
is still performing one or more 8(a)
contracts and permitting an individual
to own an applicant or Participant
where the individual can demonstrate
that financial obligations have been
settled and discharged by the Federal
Government. SBA also proposes to make
several changes relating to 8(a)
contracts, including clarifying that a
contracting officer cannot limit an 8(a)
competition to Participants having more
than one certification and clarifying the
rules pertaining to issuing sole source
8(a) orders under an 8(a) multiple award
contract. The proposed rule would also
make several other revisions to
incorporate changes to SBA’s other
government contracting programs to
implement a statutory amendment from
the National Defense Authorization Act
for Fiscal Year 2022.
Section-by-Section Analysis
Section 121.103(h)
Section 121.103(h) sets forth the rules
pertaining to affiliation through joint
ventures. This rule first proposes to take
some of the language currently
contained in the introductory text and
add it to a new § 121.103(h)(1) for ease
of use. SBA believes that the current
introductory text is overly complex and
separating some of the requirements
into a separate paragraphs will be easier
to understand and use. In adding a new
§ 121.103(h)(1), the proposed rule
would redesignate paragraphs (h)(1), (2),
(3), and (4) as paragraphs (h)(2), (3), (4),
and (5), respectively, and would adjust
cross references contained in
§ 121.103(h) in §§ 121.404(d) and (g)(5),
125.6(c), 125.8(a), 125.18(f)(1),
126.601(d)(1), and 126.618(c)(2).
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SBA’s regulations currently provide
that a specific joint venture 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. Although SBA’s current policy
is to allow orders to be issued under
previously awarded contracts beyond
the two-year period (since the
restriction is on additional contracts,
not continued performance on contracts
already awarded), SBA continues to
receive questions as to whether orders
beyond the two-year period are
permissible. To clear up any confusion,
the proposed rule would add a sentence
to the introductory text of § 121.103(h)
to capture SBA’s current policy. SBA
notes that current policy also allows for
award of contracts beyond the two-year
period if the offer, including price, was
submitted prior to the end of the twoyear period. Because there does not
appear to be any confusion regarding
that policy, this proposed rule does not
change or amend that policy in any way.
The proposed rule would also revise
Example 2 to paragraph (h) introductory
text. SBA’s joint venture rule previously
prohibited a joint venture from
receiving more than three contracts over
a two-year period. SBA amended that
rule to allow a joint venture to seek and
be awarded an unlimited number of
contracts over the two-year period. See
85 FR 66146, 66179 (Oct. 16, 2020).
Unfortunately, when SBA amended the
regulatory text to paragraph (h) it did
not also amend the language in Example
2 to paragraph (h). Example 2 to
paragraph (h) introductory text gave an
illustration of a joint venture receiving
two contracts during a two-year period
and not submitting offers for any
additional contracts. Because the
example illustrated a situation with
only two contracts, some were confused
as to whether the example was applying
the old three contracts over two years
rule instead of the amended unlimited
contracts over two years. That was not
SBA’s intent. This proposed rule would
adjust the language in the example to
specifically recognize that a joint
venture can receive more than three
contracts over a two-year period.
The proposed rule would also clarify
SBA’s distinct treatment of populated
and unpopulated joint ventures. The
current regulation provides that if a
joint venture exists as a formal separate
legal entity, it may not be populated
with individuals intended to perform
contracts awarded to the joint venture.
The proposed rule would clarify that
this requirement was meant to apply
only to contracts set aside or reserved
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for small business (i.e., small business
set-aside, 8(a), women-owned small
business (WOSB), HUBZone, and
service-disabled veteran owned small
business (SDVOSB) contracts). The
reason for this requirement is to allow
SBA and procuring agencies to track the
work done by each partner to the joint
venture and to ensure that the lead
small business partner upon whom
eligibility for the contract is based (e.g.,
the 8(a) partner in a joint venture for an
8(a) contract between an 8(a) prote´ge´
and its large business mentor) is
actually performing a significant portion
of the contract and benefitting from that
performance. As SBA has previously
explained, if a joint venture were
permitted to be populated, employees
from a large business mentor could be
hired by the joint venture, perform the
contract, return to the large business
after contract performance, and leave
the small prote´ge´ firm with few or no
benefits or business development from
that contract. The proposed rule would
clarify, however, that a populated joint
venture could be awarded a contract set
aside or reserved for small business
where each of the partners to the joint
venture were similarly situated (e.g.,
both partners to a joint venture seeking
a HUBZone contract were certified
HUBZone small business concerns).
Any time the size of a populated joint
venture is questioned, the proposed rule
also clarifies that SBA will aggregate the
revenues or employees of all partners to
the joint venture.
In addition, this proposed rule would
revise the ostensible subcontractor rule
in redesignated § 121.103(h)(3). The
proposed rule would first divide the
current text contained in § 121.103(h)(2)
into § 121.103(h)(3) introductory text
and § 121.103(h)(3)(i) for ease of use.
SBA also proposes to clarify how the
ostensible subcontractor rule should
apply to general construction contracts.
General construction types of contracts
regularly involve subcontractors with
specialized experience in the specialty
construction trades. The primary role of
a prime contractor in a general
construction project is to superintend,
manage, and schedule the work,
including coordinating the work of
various subcontractors. Those are the
functions that are the primary and vital
requirements of a general construction
contract and ones that a prime
contractor must perform. Although the
prime contractor for a general
construction contract must meet the
limitation on subcontracting
requirement set forth in § 125.6(a)(3),
SBA recognizes that subcontractors
often perform the majority of the actual
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construction work because the prime
contractor frequently must engage
multiple subcontractors specializing in
a variety of trades and disciplines. As
such, SBA believes that the ostensible
subcontractor rule for general
construction contracts should be
applied to the management and
oversight of the project, not to the actual
construction or specialty trade
construction work performed. The
prime contractor must retain
management of the contract but may
delegate a large portion of the actual
construction work to its subcontractors.
SBA further proposes to revise the
ostensible subcontractor rule to comport
with recent decisions of SBA’s Office of
Hearings and Appeals (OHA). In Size
Appeal of DoverStaffing, Inc., SBA No.
SIZ–5300 (2011), OHA created a fourfactor test to indicate when a prime
contractor’s relationship with a
subcontractor is suggestive of unusual
reliance under the ostensible
subcontractor rule. The four factors are
(1) the proposed subcontractor is the
incumbent contractor and ineligible to
compete for the procurement, (2) the
prime contractor plans to hire the large
majority of its workforce from the
subcontractor, (3) the prime contractor’s
proposed management previously
served with the subcontractor on the
incumbent contract, and (4) the prime
contractor lacks relevant experience and
must rely upon its more experienced
subcontractor to win the contract. Under
OHA’s decisions, when these factors are
present, violation of the ostensible
subcontractor rule is more likely to be
found if the subcontractor will perform
40% or more of the contract. SBA
proposes to add two of these four factors
to the ostensible subcontractor rule: the
reliance on incumbent management and
the reliance on the subcontractor’s
experience. As with the existing rule,
SBA still would consider all aspects of
the prime contractor’s relationship with
the subcontractor and would not limit
its inquiry to the enumerated
DoverStaffing factors. SBA continues to
believe that the SBA Area Offices
should be given discretion to consider
and weigh all factors in rendering a
formal size determination, and that
unique circumstances could lead to a
result that does not fully align with the
DoverStaffing analysis. SBA seeks
comment on these proposed changes to
the ostensible subcontracting rule.
Finally, the proposed rule would
revise redesignated § 121.103(h)(4) to
clarify how receipts are to be counted
where a joint venture hires individuals
to perform one or more specific
contracts (i.e., where the joint venture is
populated). Although SBA requires joint
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ventures to be unpopulated for purposes
of performing set-aside contracts in
order to properly track work performed
and benefits derived by the lead small/
8(a)/HUBZone/WOSB/SDVOSB entity
to the joint venture, some joint ventures
are nevertheless populated for other
purposes. Generally, the appropriate
share of a joint venture’s revenues that
a partner to the joint venture must
include in its own revenues is the same
percentage as the joint venture partner’s
share of the work performed by the joint
venture. However, that general rule
cannot apply to populated joint
ventures. Where a joint venture is
populated, each individual partner to
the joint venture does not perform any
percentage of the contract—the joint
venture entity itself performs the work.
As such, revenues cannot be divided
according to the same percentage as
work performed because to do so would
give each partner $0 corresponding to
the 0% of the work performed by the
individual partner. In such a case, SBA
believes that revenues must be divided
according to the same percentage as the
joint venture partner’s percentage
ownership share in the joint venture.
Although SBA believes that is the intent
of the current regulation, the proposed
rule specifically incorporates that intent
into redesignated § 121.103(h)(4).
Section 121.103(i)
The proposed rule would put back
into the regulations a paragraph
pertaining to affiliation based on
franchise and license agreements. This
provision was inadvertently deleted
from § 121.103 when SBA deleted other
provisions of § 121.103 in its October
2020 rulemaking (85 FR 66146 (Oct. 16,
2020)). The proposed rule merely adds
back into the regulations the provision
that was inadvertently removed.
Section 121.404
SBA proposes to clarify
§ 121.404(a)(1)(iv), which provides that
size is determined for a multiple award
contract at the time of initial offer on the
contract even if the initial offer might
not include price. As stated in the
existing regulation, this size
determination applies to the contract.
However, SBA never intended that
orders issued pursuant to that contract
follow the same rule. SBA is aware of
some confusion on that point.
Accordingly, the proposed clarification
would make clear that orders issued
pursuant to such a multiple award
contract that do not include price are
treated similarly to orders under
multiple award contracts generally. SBA
believes there is no justification for
exempting orders issued on these
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contracts differently, simply because the
contract did not require price with
initial offer. Thus, the proposed rule
would specifically add that size for setaside orders will be determined in
accordance with paragraph (a)(1)(i)(A)
or (B) or (a)(1)(ii)(A) or (B), as
appropriate.
SBA also proposes to clarify when
size recertification is required in
connection with a sale or acquisition. In
2016, SBA amended its regulation
regarding recertification of size to add
the word ‘‘sale’’ in addition to mergers
and acquisitions as an instance when
recertification is required. See 81 FR
34243, 34259 (May 31, 2016). Since that
time, some have questioned whether
recertification of size status may be
required whenever any sale of stock
occurs, even de minimis amounts. That
was not SBA’s intent. Recertification is
required whenever there is a merger.
However, recertification in connection
with a ‘‘sale’’ or ‘‘acquisition’’ is
required only where the sale or
acquisition results in a change in
control or negative control of the
concern. Recertification is not required
where small sales or acquisitions of
stock that do not appear to affect the
control of the selling or acquiring firm
occur. The proposed rule would add
language to clarify SBA’s current intent.
The proposed rule would also clarify
the recertification requirements set forth
in § 121.404(g) for joint ventures.
Specifically, the proposed rule would
add a new § 121.404(g)(6) which would
set forth the general rule that a joint
venture can recertify its status as a small
business where all parties to the joint
venture qualify as small at the time of
recertification, or the prote´ge´ small
business in a still active mentor-prote´ge´
joint venture qualifies as small at the
time of recertification. The proposed
rule would also clarify that the two-year
limitation on contract awards to joint
ventures set forth in § 121.103(h) does
not apply to recertification. In other
words, recertification is not a new
contract award, and thus can occur even
if its timing is more than two years after
the joint venture received its first
contract.
Sections 121.404(a)(1)(i)(B) and
(a)(1)(ii)(B), 124.501(h), and 124.502(a)
Section 121.404(a)(1)(i)(B) and
(a)(1)(ii)(B) provide generally that a
business concern that qualifies as small
at the time of an offer for a multiple
award contract that is set aside or
reserved for the 8(a) BD program will be
deemed a small business for each order
issued against the contract, unless a
contracting officer requests a size
recertification for a specific order.
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However, for sole source 8(a) orders
issued under a multiple award contract
set-aside for exclusive competition
among 8(a) Participants,
§ 124.503(i)(1)(iv) requires an agency to
offer and SBA to accept the order into
the 8(a) program on behalf of the
identified 8(a) contract holder. As part
of the offer and acceptance process, SBA
must determine that a concern is
currently an eligible Participant in the
8(a) BD program at the time of award.
See § 124.501(h). There has been some
confusion as to whether a concern must
qualify as small at the time of the offer
of the order or whether size relates back
to the award of the underlying 8(a)
multiple award contract. Because size is
something SBA looks at in making an
eligibility determination in accepting a
sole source offering, SBA intended that
a Participant must currently qualify as
a small business for any sole source
award in addition to currently being a
Participant in the program (i.e., firms
that have graduated from or otherwise
left the 8(a) BD program are not eligible
for any 8(a) sole source award). SBA
believes that the regulations are not
clear on this point, and as such this
proposed rule would amend
§§ 121.404(a)(1)(i)(B) and (a)(1)(ii)(B),
124.501(h), and 124.502(a) to clarify that
position.
Section 121.411(c)
The proposed rule would correct an
inconsistency between §§ 121.411(c)
and 125.3(c)(1)(viii). In requiring a
prime contractor to notify unsuccessful
small business offerors of the apparent
successful offeror on subcontracts,
§ 125.3(c)(1)(viii) provides that a prime
contractor must provide pre-award
written notification to unsuccessful
small business offerors on all
subcontracts over the simplified
acquisition threshold, while
§ 121.411(c) requires a prime contractor
to inform each unsuccessful subcontract
offeror in connection with any
competitive subcontract. The proposed
rule would add the over the simplified
acquisition threshold condition to
§ 121.411(c) and adjust the language in
§ 125.3(c)(1)(viii) to make the two
provisions consistent.
Section 121.507
SBA is seeking comments on a
proposed amendment to its Small
Business Timber Set-Aside Program
regulations. The Small Business Timber
Set-Aside Program establishes small
business set-aside sales of sawtimber
from the federal forests managed by the
U.S. Department of Agriculture’s Forest
Service and the U.S. Department of the
Interior’s Bureau of Land Management.
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Current regulations require that a small
business concern cannot resell or
exchange more than 30% of the
sawtimber volume to ‘‘other than small’’
businesses. SBA regulations do not
address situations where a small
business concern is unable to meet the
30% requirement due to circumstances
outside of their control.
Several timber industry stakeholders
have petitioned SBA to allow a waiver
of the 30% requirement in limited
circumstances such as natural disasters,
national emergencies, or other
attenuating circumstances. SBA is
proposing an amendment to § 121.507 to
add paragraph (d), which would allow
the Director of Government Contracting
to grant a waiver in limited
circumstances when a small business is
unable to meet the 30% requirement
due to circumstances out of its control.
SBA seeks comments on the following:
whether a waiver is needed; if it is
needed, under what circumstances
should a waiver be granted; whether
SBA should allow partial waivers (i.e.,
for some but not all of the 30/70
requirement); and how SBA should
evaluate a waiver request.
Section 121.702
Section 121.702 sets forth the size and
eligibility standards that apply to the
Small Business Innovation Research
(SBIR) and Small Business Technology
Transfer (STTR) programs. Paragraph
(c)(7) provides guidance relating to the
ostensible subcontractor rule in the
SBIR/STTR programs. That rule treats a
prime contractor and its subcontractor
or subgrantee as joint venturers when a
subcontractor or subgrantee performs
primary and vital requirements of an
SBIR or STTR funding agreement. The
proposed rule would clarify that when
an SBIR/STTR offeror is determined to
be a joint venturer with its ostensible
subcontractor, all rules applicable to
joint ventures would apply. This means
that SBA will apply § 121.702(a)(1)(iii)
or (b)(1)(ii), which contains the
ownership and control requirements for
SBIR/STTR joint ventures. This
clarification is consistent with how SBA
treats entities that are determined to be
joint venturers with an ostensible
subcontractor for other small business
program set-asides.
Section 121.1001
Section 121.1001 identifies who may
initiate a size protest or request a formal
size determination in any
circumstances. Currently, the language
identifying who may protest the size of
an apparent successful offeror is not
identical for all of SBA’s programs. For
small business set-aside contracts and
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competitive 8(a) contracts, any offeror
that the contracting officer has not
eliminated from consideration for any
procurement-related reason may initiate
a size protest. For contracts set aside for
WOSBs or SDVOSBs, any concern that
submits an offer may initiate a size
protest. For contracts set aside for
certified HUBZone small business
concerns, any concern that submits an
offer and has not been eliminated for
reasons unrelated to size may submit a
size protest. SBA believes that making
the language for all programs identical
would remove any confusion and
provide more consistent
implementation of the size protest
procedures. As such, this rule proposes
to adopt the language currently
pertaining to small business set-asides
and competitive 8(a) contracts to all of
SBA’s programs. Thus, any offeror that
the contracting officer has not
eliminated from consideration for any
procurement-related reason could
initiate a size protest in each of those
programs. The proposed rule would
make these changes in
§ 121.1001(a)(6)(i) for the HUBZone
program, in § 121.1001(a)(8)(i) for the
SDVO program, and in
§ 121.1001(a)(9)(i) for the WOSB
program.
With respect to 8(a) contracts,
§ 121.1001(a)(2) identifies interested
parties who may protest the size status
of an apparent successful offeror for an
8(a) competitive contract, and
§ 121.1001(b)(2)(ii) identifies those who
can request a formal size determination
with respect to a sole source 8(a)
contract award. Pursuant to
§ 124.501(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. For a sole
source contract, if SBA determines a
Participant to be ineligible because SBA
believes the concern to be other than
small, § 121.1001(b)(2)(ii) authorizes the
Participant determined to be ineligible
to request a formal size determination.
However, § 121.1001(b)(2)(ii) does not
currently authorize a Participant
determined to be ineligible based on
size to request a formal size
determination in connection with a
competitive 8(a) contract award. SBA
does not believe that the protest
authority of § 121.1001(a)(2) was meant
to apply to this situation since protests
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normally relate to another firm
challenging the small business status of
the apparent successful offeror, not the
apparent successful offeror challenging
its own size status. This rule proposes
to provide specific authority to allow a
firm determined to be ineligible for a
competitive 8(a) award based on size to
request a formal size determination. It
would also authorize the contracting
officer, the SBA District Director in the
district office that services the
Participant, the Associate Administrator
for Business Development, and the
SBA’s Associate General Counsel for
Procurement Law to do so as well.
Sections 121.1004(a)(ii), 125.28(d)(2),
126.801(d)(2)(i), and 127.603(c)(2)
In the context of a sealed bid
procurement, SBA’s regulations provide
that an interested party must protest the
size or socioeconomic status (i.e.,
service-disabled veteran-owned small
business (SDVOSB), HUBZone or
women-owned small business (WOSB)/
economically-disadvantaged womenowned small business (EDWOSB)) of the
low bidder prior to the close of business
on the fifth business day after bid
opening. However, the regulations do
not specifically take into account the
situation where a low bidder is timely
protested and found to be ineligible, the
procuring agency identifies another low
bidder, and an interested party seeks to
challenge the size or socioeconomic
status of the newly identified low
bidder. In such a situation, the new low
bidder is identified well beyond five
days of bid opening. As such, it is
impossible for an interested party to file
a timely protest (i.e., one within five
days of bid opening). It was not SBA’s
intent to disallow size protests in these
circumstances. SBA believes that a
protest in these circumstances should be
deemed timely if it is received within
five days of notification of the new low
bidder. A few firms have questioned
whether such a protest should be
deemed timely because the regulations
speak only to filing a protest within five
days of bid opening. Because a protest
by SBA is always timely, when
timeliness has been questioned in these
circumstances, and the protest is
sufficiently specific, SBA has adopted
the protest as its own and processed it
accordingly. To eliminate this needless
additional step where timeliness is
questioned, the proposed rule would
specifically provide that where the
identified low bidder is determined to
be ineligible for award, a protest of any
other identified low bidder would be
deemed timely if received within five
business days after the contracting
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55645
officer has notified the protestor of the
identity of that new low bidder.
SBA proposes to make this change in
§ 121.1004(a)(ii) for size protests, in
§ 125.28(d)(2) for protests relating to
SDVO status, in § 126.801(d)(2)(i) for
protests relating to HUBZone status, and
in § 127.603(c)(2) for protests relating to
WOSB or EDWOSB status.
Section 121.1004
The proposed rule would add a new
§ 121.1004(f) to specify that size protests
may be filed only against an apparent
successful offeror (or offerors) or an
offeror in line to receive an award. SBA
will not consider size protests relating
to offerors who are not in line for award.
This is the current SBA policy and the
proposed rule merely provides
additional clarity to § 121.1004(e),
which specifies that premature protests
will be dismissed.
Where an agency decides to
reevaluate offers as a corrective action
in response to a GAO protest, the
proposed rule would add a new
§ 121.1004(g) providing that SBA would
dismiss any size protest relating to the
initial apparent successful offeror.
When offerors are made aware of the
new or same apparent successful offeror
after reevaluation, they will again have
the opportunity to protest the size of the
apparent successful offeror within five
business days after such notification.
Section 121.1009
Section 121.1009 details the
procedures SBA’s Government
Contracting Area Offices use in making
formal size determinations. Section
121.1009(a)(1) provides that the Area
Office will generally issue a formal size
determination within 15 business days
after receipt of a protest or a request for
a formal size determination. With
respect to a specific contract, SBA will
generally process size protests relating
only to the apparent successful offeror.
SBA sometimes receives a size protest
where the award is simultaneously
being protested at the Government
Accountability Office (GAO). Where this
happens, SBA suspends processing the
size protest pending the outcome of the
GAO decision since that decision may
require corrective action which could
affect the apparent successful offeror.
Although that has been SBA’s policy in
practice, it is not specifically set forth in
SBA’s regulations. The proposed rule
would incorporate that policy,
providing that if a protest is pending
before GAO, the SBA Area Office will
suspend the size determination case.
Once GAO issues a decision, the Area
Office will recommence the size
determination process and issue a
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formal size determination within 15
business days of the GAO decision, if
possible.
Sections 121.1009(g)(5), 125.30(g)(4),
126.503(a)(2), and 127.405(d)
Section 863 of the National Defense
Authorization Act for Fiscal Year 2022
(NDAA FY22), Public Law 117–81,
amended section 5 of the Small
Business Act, 15 U.S.C. 634, to add
three requirements related to size and
socioeconomic status determinations.
First, section 863 mandates that a
business concern or SBA, as applicable,
‘‘shall’’ update the concern’s status in
SAM.gov not later than two days after a
final determination by SBA that the
concern does not meet the size or
socioeconomic status requirements that
it certified to be. SBA believes that the
statue intends that a business concern
be required to update SAM.gov in all
instances in which it is capable of doing
so. Only where a business concern is
unable to change a particular status
(e.g., only SBA can identify a concern as
a certified HUBZone small business)
will the business concern not be
required to change that status in
SAM.gov. Second, section 863 requires
that, in the event that the business does
not update its status within this
timeframe, SBA ‘‘shall’’ make the
update within two days of the
business’s failure to do so. Third,
section 863 requires that, where the
business is required to make an update,
it also must notify the contracting
officer for each contract with which the
business has a pending bid or offer, if
the business finds, in good faith, that
the determination affects the eligibility
of the concern to be awarded the
contract. The proposed rule would
implement these provisions by
amending SBA’s regulations in
§§ 121.1009(g)(5) (for size
determinations), 125.30(g)(4) (for SDVO
status determinations), 126.503(a)(2) (for
HUBZone status determinations), and
127.405(c) (for WOSB/EDWOSB status
determinations). Because only SBA can
change a firm’s status as a certified
HUBZone small business concern in
SAM.gov, it is not ‘‘applicable’’ under
the statute for the business concern to
do so. As such, the proposed rule would
not add language requiring a HUBZone
concern to change its status in SAM.gov
within two business days of an adverse
status determination. Instead, it would
require SBA to make such a change
within four business days.
Sections 121.1203 and 121.1204
Section 46(a)(4)(A) of the Small
Business Act, 15 U.S.C. 657s(a)(4)(A),
provides that in a contract mainly for
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supplies a small business concern shall
supply the product of a domestic small
business manufacturer or processor
unless a waiver is granted after SBA
reviews a determination by the
applicable contracting officer that no
small business manufacturer or
processor can reasonably be expected to
offer a product meeting the
specifications (including the period of
performance) required by the contract.
Section 121.1203 of SBA’s regulations
provides guidance as to when SBA will
grant a waiver to the nonmanufacturer
rule in connection with an individual
contract, and § 121.1204 identifies the
procedures for requesting and granting
waivers.
The proposed rule seeks to clarify
perceived ambiguities relating to the
effect of a waiver in a multiple item
procurement. For a multiple item setaside contract, in order to qualify as a
small business nonmanufacturer, at
least 50 percent 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 to the
nonmanufacturer rule (or small business
manufacturers plus waiver must equal
at least 50 percent). See 13 CFR
125.6(a)(2)(ii)(B). In seeking a contractspecific waiver to the nonmanufacturer
rule, SBA’s regulations provide that a
contracting officer’s waiver request must
include a definitive statement of the
specific item to be waived. The
proposed rule would clarify that for a
multiple item procurement, a
contracting officer must specifically
identify each item for which a waiver is
sought. The proposed rule would also
provide that once SBA reviews and
concurs with an agency’s request, SBA’s
waiver applies only to the specific
item(s) identified, not to the entire
contract.
This rule also proposes to add a
provision that would prohibit contractspecific waivers for contracts with a
duration of longer than five years,
including options. When SBA grants an
individual waiver with respect to a
particular item, it does not necessarily
mean that there are no small business
manufacturers of that item. Instead, it
could merely relate to the lack of
availability of small business
manufacturers for the specific contract
at issue due to timing (e.g., small
business manufacturers are currently
tied up with other commitments) or
capacity (e.g., there are small business
manufacturers, but those manufacturers
cannot provide the item in the quantity
that is required). The circumstances
surrounding the availability of a specific
item from small business manufacturers
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can greatly change in five years. Beyond
five years, new small business
manufacturers of a particular item could
come into the market, or those
previously committed to other projects
or who were unable to previously
supply the product in the quantity or
time constraints required by the contract
could become available to meet the
agency’s requirements. After a five-year
contract is completed and an agency
seeks to award a follow-on contract for
the same requirements, an agency
would be required to again conduct
market research and determine that no
small business manufacturer or
processor reasonably can be expected to
offer one or more specific products
required by the new solicitation. As an
alternative, SBA is considering limiting
waivers to five years for long term
contracts, but allowing a procuring
agency to seek a new waiver for an
additional five years if, after conducting
market research, it demonstrates that
there are no available small business
manufacturers and that a waiver
remains appropriate. SBA seeks
comments on both approaches.
When an agency seeks an individual
waiver to the nonmanufacturer rule in
connection with a specific acquisition,
SBA believes that the agency is ready to
move forward with the acquisition
process as soon as SBA makes a wavier
decision and expects the solicitation to
be issued shortly after such a decision
is made. That is why SBA’s waiver
decision letters provide that the waiver
will expire in one year from the date of
the waiver decision. SBA expects award
to be made within one year. If it is not,
SBA believes that the agency should
come back to SBA with revised market
research requesting that the waiver (or
waivers in the case of a multiple item
procurement) be extended. Similar to
the rationale for not allowing individual
waivers to apply to long-term contracts,
the circumstances surrounding whether
there are any small business
manufacturers who are capable and
available to supply products for a
specific procurement may change in one
year. Where an agency demonstrates
that small business manufacturers
continue to be unavailable to fulfill the
requirement, SBA will extend the
waiver(s). The proposed rule would
specifically incorporate this policy into
a new § 121.1204(b)(5).
Although SBA believes that there is
no current ambiguity, the proposed rule
would also add language specifying that
an individual waiver applies only to the
contract for which it is granted and does
not apply to modifications outside the
scope of the contract or other
procurement actions. A waiver granted
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for one contract does not and was never
intended to apply to another contract
(whether that separate contract was a
follow-on contract, bridge contract, or
some other contract or order under
another contract), but the proposed rule
would add this language nevertheless to
dispel any possible misunderstanding.
Finally, the proposed rule would
clarify that where an agency requests a
waiver for multiple items, SBA may
grant the request in full, deny it in full,
or grant a waiver for some but not all of
the items for which a waiver was
sought. SBA’s decision letter would
identify the specific items that SBA
identifies as waived for the
procurement.
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Section 121.1205
Section 121.1205 refers to the list of
classes of products for which SBA has
granted waivers to the Nonmanufacturer
Rule. The reference in the current
version of the regulation provides a link
to a website that no longer exists. The
proposed rule would update the
reference to the correct website, which
is https://www.sba.gov/document/
support-non-manufacturer-rule-classwaiver-list.
Section 124.102
Section 124.102(c) provides that a
concern whose application is denied
due to size by 8(a) BD program officials
may request a formal size determination
with the SBA Government Contracting
Area Office serving the geographic area
in which the principal office of the
business is located. SBA notes that
during the processing of an application
SBA itself can request a formal size
determination pursuant to
§ 121.1001(b)(2)(i). The § 124.102(c)
process applies only where SBA has not
requested a formal size determination
with respect to a specific applicant.
Under § 124.102(c), if the concern
requests a formal size determination and
the Area Office finds it to be small
under the size standard corresponding
to its primary North American
Classification System (NAICS) code, the
concern can immediately reapply to the
8(a) BD program. SBA believes that a
concern should not need to reapply to
the 8(a) BD program if size was the only
reason for decline. In such a case, SBA
believes that the Associate
Administrator for Business
Development (AA/BD) should
immediately certify the firm as eligible
for the 8(a) BD program. The proposed
rule would make a distinction for
applications denied solely based on size
and those where size is one of several
reasons for decline. Where size is not
the only reason for decline, the
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proposed rule would provide that the
concern could reapply for participation
in the 8(a) BD program at any point after
90 days from the AA/BD’s decline. The
AA/BD would then accept the size
determination as conclusive of the
concern’s small business status,
provided the applicant concern has not
completed an additional fiscal year in
the intervening period and SBA believes
that the additional fiscal year changes
the applicant’s size.
Section 124.103
Section 124.103 describes the rules
pertaining to social disadvantage status.
Section 124.103(c) details how an
individual who is not a member of one
of the groups presumed to be socially
disadvantaged may establish his or her
individual social disadvantage. It
provides that an individual must
identify an objective distinguishing
feature that has contributed to his or her
social disadvantage, and lists physical
handicap as one such possible
identifiable feature. In order to be
consistent with recent changes in terms
made by the General Services
Administration (GSA), 87 FR 6044, as
well as with the Americans with
Disabilities Act, the proposed rule
would change the words physical
handicap to identifiable disability.
Section 124.104
Section 124.104 specifies the rules
pertaining to whether an individual may
be considered economically
disadvantaged. Section 124.104(c)(2)(ii)
provides that funds invested in an
Individual Retirement Account (IRA) or
other official retirement account will
not be considered in determining an
individual’s net worth. The paragraph
then requires the individual to provide
information about the terms and
restrictions of the account to SBA in
order for SBA to determine whether the
funds invested in the account should be
excluded from the individual’s net
worth. SBA does not believe that it is
necessary for an individual to provide
information about the terms and
restrictions of a retirement account to
SBA in every instance. As such, the
proposed rule would change this
provision to requiring an individual to
provide information about the terms and
restrictions of an IRA or other
retirement account only when requested
to do so by SBA.
The proposed rule would also delete
current § 124.104(c)(2)(iii). That
provision provides that income received
from an applicant or Participant that is
an S corporation, limited liability
company (LLC) or partnership will be
excluded from an individual’s net worth
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where the applicant or Participant
provides documentary evidence
demonstrating that the income was
reinvested in the firm or used to pay
taxes arising in the normal course of
operations of the firm. SBA does not
believe that this provision is necessary
because the exact provision is contained
in § 124.104(c)(3)(ii) in discussing how
SBA treats personal income.
Section 124.105
Section 124.105 describes the
ownership requirements pertaining to
applicants and Participants for the 8(a)
BD program. Section 124.105(h) sets
forth ownership restrictions for nondisadvantaged individuals and
concerns, and § 124.105(h)(2) specifies
ownership restrictions for nonParticipant concerns in the same or
similar line of business and for
principals of such concerns. Current
§ 124.105(h)(2) recognizes a limited
exception to the general ownership
restriction for a former Participant in the
same or similar line of business or a
principal of such a former Participant.
This paragraph does not, however, refer
to or recognize another exception set
forth elsewhere in SBA’s regulations,
and that is the exception set forth in
§ 125.9(d)(2) which allows an SBAapproved mentor to own up to 40
percent of its prote´ge´. This proposed
rule adds language clarifying that the
§ 125.9(d)(2) authority applies equally to
mentors in the same line of business as
its prote´ge´ that is also a current 8(a) BD
Program Participant.
Section 124.105(i) provides guidance
with respect to changes of ownership,
and § 124.105(i)(1) specifies that any
Participant that was awarded one or
more 8(a) contracts may substitute one
disadvantaged individual for another
disadvantaged individual without
requiring the termination of those
contracts or a request for waiver under
§ 124.515. There has been some
confusion as to whether there can be a
change of ownership for a former
Participant that is still performing one
or more 8(a) contracts. This would
generally not occur with one
disadvantaged individual seeking to buy
out a disadvantaged principal of a
former 8(a) Participant. That is because
of the one-time eligibility restriction. In
order for any change of ownership to be
approved by SBA, SBA must determine
that the individual seeking to replace a
former principal does in fact qualify as
socially and economically
disadvantaged under SBA’s regulations.
An individual who has previously
participated in the 8(a) BD program and
has used his or her individual
disadvantaged status to qualify one 8(a)
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Participant would not be deemed
disadvantaged if the individual sought
to replace a principal of a second 8(a)
Participant. Thus, the only individuals
who could seek to replace the principal
of a former 8(a) Participant would be
those who have never participated in
the 8(a) BD program before. To do so,
such individuals would have to use
their one-time eligibility to complete
performance on previously awarded 8(a)
contracts. The business concern could
not be awarded any additional contracts
because it is no longer an eligible
Participant. If an individual thought the
opportunity was sufficient to entice him
or her to forego his/her one-time
eligibility, he or she might proceed with
such a transaction, but SBA does not
believe that would often happen. The
more likely scenario would be where an
entity (tribe, ANC), Native Hawaiian
Organization (NHO), or Community
Development Corporation (CDC)) seeks
to replace the principal of a former 8(a)
Participant. The one-time eligibility
restriction does not apply to entities. A
tribe, ANC, NHO or CDC can own more
than one business concern that
participates in the 8(a) BD program. As
such, an entity could purchase a former
Participant and complete performance
of any remaining 8(a) contracts. If the
tribe, ANC, NHO, or CDC seeking to
replace the principal of a former 8(a)
Participant has or has had a Participant
in the 8(a) BD program, its general
eligibility has already been established.
However, if this would be the first time
that a specific entity would own a
business seeking 8(a) BD benefits, the
entity must establish its overall
eligibility. In the case of an Indian tribe
or NHO, it must, among other things,
demonstrate that it is economically
disadvantaged. The proposed rule
would clarify that a change of
ownership could apply to a former
Participant as well as to a current
Participant.
Section 124.105(i)(2) permits a change
of ownership to occur without receiving
prior SBA approval in certain specified
circumstances, including where all nondisadvantaged individual owners
involved in the change of ownership
own no more than a 20 percent interest
in the concern both before and after the
transaction. In order to ensure that
ownership interests are not divided up
among two or more immediate family
members to avoid SBA’s immediate
review of a change of ownership, the
proposed rule would provide that SBA
will aggregate the interests of all
immediate family members in
determining whether a nondisadvantaged individual involved in a
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change of ownership has more than a 20
percent interest in the concern.
Section 124.107
Section 124.107 describes the policies
relating to potential for success. In order
to be eligible for the 8(a) BD program an
applicant concern must possess
reasonable prospects for success in
competing in the private sector. This
requirement stems from the language
contained in section 8(a)(7)(A) of the
Small Business Act, 15 U.S.C.
637(a)(7)(A), which provides that no
small business concern shall be deemed
eligible for the 8(a) BD program unless
SBA determines that with contract,
financial, technical, and management
support the concern will be able to
perform 8(a) contracts and has
reasonable prospects for success in
competing in the private sector. There
has been some confusion as to whether
an applicant must demonstrate that it
has specifically performed work in the
private sector prior to applying to
participate in the 8(a) BD program. That
is not the case. The statutory
requirement is that SBA must determine
that with assistance from the 8(a) BD
program a business concern will have
reasonable prospects for success in
competing in the private sector in the
future. The regulation requires an
applicant to demonstrate that it has
been in business and received revenues
in its primary industry classification for
at least two full years immediately prior
to the date of its 8(a) BD application, but
it does not say that those revenues must
have come from the private sector. A
business concern that has performed no
private sector work but has
demonstrated successful performance of
state, local or federal government
contracts is eligible to participate in the
8(a) BD program. The proposed rule
would add language clarifying that
intent.
Section 124.108
Section 124.108 establishes other
eligibility requirements that pertain to
firms applying to and participating in
the 8(a) BD program. Section 124.108(e)
provides that an applicant will be
ineligible for the 8(a) BD program where
the firm or any of its principals has
failed to pay significant financial
obligations owed to the Federal
Government. This proposed rule would
clarify that where the firm or the
affected principals can demonstrate that
the financial obligations have been
settled and discharged/forgiven by the
Federal Government, the applicant
would be eligible for the program.
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Section 124.109
Section 124.109 provides specific
rules applicable to Indian tribes and
Alaska Native Corporations for applying
to and remaining eligible for the 8(a) BD
program. SBA’s regulations currently
provide that the articles of
incorporation, partnership agreement or
limited liability company articles of
organization of a tribally-owned
applicant or Participant must contain
express sovereign immunity waiver
language, or a ‘‘sue and be sued’’ clause
which designates United States Federal
Courts to be among the courts of
competent jurisdiction for all matters
relating to SBA’s programs. This rule
proposes two changes with respect to
that provision. First, the waiver of
sovereign immunity should apply only
to concerns owned by Federally
recognized Indian tribes. State
recognized tribes are not deemed
sovereign and, thus, do not need to
waive sovereign immunity because they
are already subject to suit. As such, SBA
proposes to amend this provision to
clarify that it is intended to apply only
to concerns owned by Federally
recognized tribes. Second, concerns that
are organized under tribal law may not
have articles of incorporation,
partnership agreements or limited
liability company articles of
organization and may be unable to
strictly comply with the regulatory
language. In response, SBA proposes to
add language allowing tribally-owned
concerns organized under tribal law to
waive sovereign immunity in any
similar documents authorized under
tribal law.
One of the ways a tribally-owned
business can demonstrate potential for
success needed to be eligible for the
program is to demonstrate that it has
been in business for at least two years,
as evidenced by income tax returns for
each of the two previous tax years
showing operating revenues in the
primary industry in which the applicant
is seeking 8(a) BD certification. Not all
tribally-owned concerns file federal
income tax returns. The tax return
requirement is intended to be an
objective means by which a triballyowned concern can show that it has
been in business for at least two years
with operating revenues. SBA believes
that tax returns are not the only way for
a tribally-owned concern to demonstrate
its business history. The proposed rule
would add a provision allowing a
tribally-owned applicant to submit
financial statements demonstrating that
it has been in business for at least two
years with operating revenues in the
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primary industry in which it seeks 8(a)
BD certification.
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Section 124.110
The proposed rule would add a new
§ 124.110(d)(3) to allow the individuals
responsible for the management and
daily operations of an NHO-owned
concern to manage two Program
Participants. This would make the
control requirements relating to NHOowned applicants/Participants
consistent with those applying to
applicants/Participants owned by tribes
and Alaska Native Corporations (ANCs).
Although this is a statutory exemption
for firms owned by tribes and ANCs,
and is not for firms owned by NHOs,
SBA believes that the policies relating to
all three entity-owned applicants/
Participants should be consistent
whenever possible. SBA does not
believe that this change for NHO-owned
firms in any way contradicts any
statutory requirement and would merely
allow more flexibility for NHO-owned
firms.
In addition, the proposed rule would
clarify the current policy regarding NHO
ownership of an applicant or Participant
small business concern. Although SBA
currently requires an NHO to
unconditionally own at least 51 percent
of the applicant or Participant, the
proposed rule merely makes that
requirement explicit in the regulations.
Section 124.204
Section 124.204 details how SBA
processes applications for 8(a) BD
program admission. It identifies that
only the AA/BD can approve or decline
an application for participation in the
8(a) BD program. There are, however,
certain threshold issues that must be
addressed before an application will be
fully processed. Specifically, in SBA’s
electronic 8(a) application system, there
are four fundamental eligibility
questions that must be answered before
an application will be reviewed: an
applicant must be a for-profit business
(see §§ 121.105 and 124.101); every
individual claiming disadvantaged
status must be a United States citizen
(see § 124.101); neither the applicant
firm nor any of the individuals upon
whom eligibility is based could have
previously participated in the 8(a) BD
program (see § 124.108(b)); and any
individually-owned applicant must
have generated some revenues (see
§ 124.107(a) and (b)(1)(iv)). If an
applicant answers that it is not a forprofit business entity, that one or more
of the individuals upon whom
eligibility is based is not a United States
citizen (see § 124.104), that the
applicant or one or more of the
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individuals upon whom eligibility is
based has previously participated in the
8(a) BD program (see § 124.108(b)), or
that the applicant is not an entityowned business and has generated no
revenues (see § 124.107(a) and
(b)(1)(iv)), its application will be closed
and it will be prevented from
completing a full electronic application.
Each of those four bases automatically
renders the applicant ineligible for the
program and further review would not
be warranted. The proposed rule would
identify these four threshold issues that
must be addressed before an application
will be reviewed.
Section 124.302
Section 124.302 addresses graduation
and early graduation from the 8(a) BD
program. In determining whether an
applicant or Participant should be
deemed economically disadvantaged,
SBA previously required a concern to
compare its financial condition to non8(a) BD business concerns in the same
or similar line of business. SBA
eliminated that requirement as not being
consistent with the statutory authority
which requires only that an applicant or
concern be owned and controlled by
one or more individuals who are
economically disadvantaged, not that
the concern itself be economically
disadvantaged. In addressing
graduation, § 124.302(b) retained some
of that same language requiring a
comparison of an 8(a) BD Participant to
non-8(a) businesses. SBA believes that
too is inconsistent with the statutory
language, which defines the term
‘‘graduated’’ or ‘‘graduation’’ to mean
that a Program Participant is recognized
as successfully completing the 8(a) BD
program by substantially achieving the
targets, objectives, and goals contained
in its business plan, and demonstrating
its ability to compete in the marketplace
without assistance from the 8(a) BD
program. 15 U.S.C. 636(j)(10)(H). As
such, the proposed rule would remove
§ 124.302(b)(5), as not consistent with
the statutory oversight responsibilities.
SBA also believes that the requirements
for graduation are adequately set forth
in § 124.302(a)(1) of SBA’s regulations
and requests comments on whether the
entire § 124.302(b) can be eliminated as
unnecessary.
Section 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
as soon as possible after program
admission. Currently, § 124.402(b)
provides that SBA will suspend a
Participant from receiving 8(a) BD
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program benefits if it has not submitted
its business plan to its servicing district
office within 60 days after program
admission. There is a concern that
§ 124.402(b) does not clearly provide
that a Participant’s business plan must
be approved by SBA before the concern
is eligible for 8(a) contracts, as required
by section 7(j)(10)(D)(i) of the Small
Business Act, 15 U.S.C. 636(j)(10)(D)(i).
This proposed rule would clarify that
SBA must approve a Participant’s
business plan before the firm is eligible
to receive 8(a) contracts. However, SBA
recognizes that some firms are admitted
to the 8(a) BD program with selfmarketed procurement commitments
from one or more procuring agencies.
SBA also understands that several
newly admitted Participants have
missed 8(a) contract opportunities in the
past because SBA did not approve their
business plans before the procuring
agencies sought to award such
procurement commitments as 8(a)
contracts. SBA does not wish to
discourage self-marketing activities or
prevent a newly admitted Participant
from receiving critical business
development assistance. At the same
time, SBA is constrained by the
statutory language requiring business
plan approval prior to the award of 8(a)
contracts. The proposed rule would
merely prioritize business plan approval
for any firm that is offered a sole source
8(a) requirement or is the apparent
successful offeror for a competitive 8(a)
requirement. Specifically, the proposed
rule would provide that where a sole
source 8(a) requirement is offered to
SBA on behalf of a Participant or a
Participant is the apparent successful
offeror for a competitive 8(a)
requirement and SBA has not yet
approved the Participant’s business
plan, SBA will approve the Participant’s
business plan as part of its eligibility
determination prior to contract award.
Section 124.403
Section 124.403 sets forth the
requirements relating to business plans.
Section 124.403(a) provides that Each
Participant must annually review its
business plan with its assigned Business
Opportunity Specialist (BOS) and
modify the plan as appropriate. The
wording of this paragraph caused some
to believe that a Participant needed to
submit a business plan to SBA every
year even where nothing had changed
from the previous year. That was not
SBA’s intent. The ‘‘as appropriate’’
language was meant to infer that a
Participant need not submit a business
plan if nothing had changed from the
previous year. The proposed rule
clarifies that a Participant must submit
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a new or modified business plan only if
its business plan has changed from the
previous year.
Sections 124.501, 125.22(d), 126.609,
and 127.503(e)
There has been some confusion as to
whether a contracting officer can limit
an 8(a) competition (whether for an 8(a)
contract or an order set-aside for 8(a)
competition under an unrestricted
contract) to Participants having more
than one certification (e.g., 8(a) and
HUBZone). SBA believes that section
8(a)(1)(D)(i) of the Small Business Act,
15 U.S.C. 637(a)(1)(D)(i), requires any
8(a) competition to be available to all
eligible Program Participants. SBA has
consistently interpreted this provision
as prohibiting SBA from accepting a
requirement for the 8(a) BD program
that seeks to limit an 8(a) competition
only to certain types of 8(a) Participants,
rather than allowing competition among
all eligible Participants. In other words,
SBA has interpreted this authority to
prohibit an agency from requiring one or
more other certifications in addition to
its 8(a) certification. This interpretation
is currently contained in § 125.2(e)(6)(i),
but is not specifically contained in the
8(a) BD regulations. Likewise, the
statutory authority for HUBZone set
asides, 15 U.S.C. 657a(c)(2)(B), provides
authority for competition restricted to
certified HUBZone small business
concerns and does not permit a ‘‘dual’’
set-aside for firms that are both
HUBZone-certified and 8(a)
Participants. The proposed rule would
merely add a sentence to § 124.501(b) to
clarify SBA’s current position that
would prohibit a contracting activity
from restricting an 8(a) competition to
Participants that are also certified
HUBZone small businesses, certified
WOSBs or eligible SDVO small
businesses. SBA also proposes to make
similar clarifications to the regulations
for the SDVO (in § 125.22(d)), HUBZone
(in new § 126.609), and WOSB (in
§ 127.503(e)) programs.
SBA also proposes to clarify
§ 124.501(b) by noting that an agency
may award an 8(a) sole source order
against a multiple award contract that
was not set aside for competition only
among 8(a) Participants. SBA believes
that such awards are consistent with
SBA’s statutory authority at section
8(a)(16) of the Small Business Act, 15
U.S.C. 637(a)(16), to enter 8(a) sole
source awards. Furthermore, this type of
8(a) sole source order is beneficial to
both 8(a) Participants, who benefit from
increased contracting opportunities, and
to procuring agencies, that can take
advantage of pre-negotiated terms and
pricing.
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The proposed rule would also revise
the introductory text to § 124.501(g).
The revised language would first require
SBA to notify an 8(a) Participant any
time SBA determines the Participant to
be ineligible for a specific sole source or
competitive 8(a) award. SBA notes that
this is currently required in section
19.805–2 of the Federal Acquisition
Regulation (FAR), title 48 of the Code of
Federal Regulations, and is something
that should occur routinely, but believes
that highlighting this in SBA’s
regulations would be helpful. SBA also
proposes to clarify that where a joint
venture is the apparent successful
offeror in connection with a competitive
8(a) procurement, SBA will determine
whether the 8(a) partner to the joint
venture is eligible for award, but will
not review the joint venture agreement
to determine compliance with
§ 124.513. SBA believes that there was
some confusion as to what an eligibility
determination entailed in the context of
a competitive 8(a) joint venture
apparent successful offeror. The
proposed rule seeks to make clear that
SBA’s determination of eligibility
relates solely to the 8(a) partner to the
joint venture and does not represent a
full review of the 8(a) joint venture
under § 124.513.
Finally, the proposed rule would also
make several clarifications to the bona
fide place of business requirement
contained in § 124.501(k). 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. In
the October 2020 rulemaking, supra,
SBA clarified that the Small Business
Act does not differentiate between sole
source 8(a) construction contracts and
competitive 8(a) construction contracts.
As such, the statutory ‘‘maximum extent
practicable’’ requirement applies
equally to sole source and competitive
8(a) contracts. SBA understands that
some have expressed the view that the
‘‘to the maximum extent practicable’’
statutory language should be read in a
way that affords procuring agencies the
discretion to broaden or do away with
the bona fide place of business
requirement where they deem it to be
appropriate. SBA disagrees that the
statutory language affords such
flexibility. In SBA’s view, ‘‘to the
maximum extent practicable’’ denotes
Congress’s intent that something be
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followed whenever possible, not merely
when a procuring agency thinks it is the
best option or appropriate in particular
circumstances. Thus, SBA will continue
to apply the bona fide place of business
requirement to both sole source and
competitive 8(a) construction
procurements unless SBA determines
that it is not ‘‘practicable’’ to do so. In
this regard, with employees expected to
telework on a significant basis due to
the COVID–19 pandemic, SBA issued a
Policy Notice temporarily placing a
moratorium on the bona fide place of
business requirement with respect to all
8(a) construction contracts offered to the
8(a) BD program prior to September 30,
2022, based on SBA’s determination
that it was not ‘‘practicable’’ to impose
that requirement at this time. SBA
Policy Notice 6000–819056 (August 25,
2021). Due to the lingering effects of the
COVID–19 pandemic, the SBA
Administrator has determined that
requiring a bona fide place of business
in a particular location continues to be
impracticable and has extended the
moratorium on the requirement through
September 30, 2023. Once SBA
determines that it is no longer
impracticable to require a bona fide
place of business, SBA will again
require a Participant to have a bona fide
place of business in a particular
geographic location with respect to all
construction requirements offered to the
8(a) program. As such, SBA seeks to
clarify several components of the bona
fide place of business requirement in
this proposed rule.
When SBA revised the bona fide place
of business rule in October 2020, it
intended that a Participant with a bona
fide place of business anywhere in a
particular state should be deemed
eligible for a construction contract
throughout that entire state (even if the
state is serviced by more than one SBA
district office). However, because the
regulatory text used the word ‘‘may’’,
several Participants have sought
clarification of SBA’s intent. The
proposed rule clarifies SBA’s intent.
The proposed rule would also clarify
that where a Participant is currently
performing a contract in a specific state,
it would qualify as having a bona fide
place of business in that state for one or
more additional contracts. This
clarification is specifically intended to
apply to the situation where a business
concern is performing a construction
contract in a specific location, the
procuring activity likes the work done
by the business concern and seeks to
award an 8(a) construction contract to
the same business concern in the same
location as the previous contract. SBA
believes that it does not make sense to
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say that a business concern is not
eligible for such award because it has
not officially sought and approved to
have a bona fide place of business in
that location. The proposed clarification
would also provide that the Participant
could not use contract performance in
one state to allow it to be eligible for an
8(a) contract in a contiguous state unless
it officially establishes a bona fide place
of business in the location in which it
is currently performing a contract. The
proposed rule would also clarify that a
Participant could establish a bona fide
place of business through a full-time
employee in a home office. In addition,
an individual designated as the full-time
employee of the Participant seeking to
establish a bona fide place of business
in a specific geographic location need
not be a resident of the state where he/
she is conducting business. In the past,
some SBA district offices have required
the designated employee to possess a
driver’s license issued by the state
corresponding to the location of the
office. SBA believes that is not
appropriate. There is no requirement
that a specific employee must
permanently reside in a specific
location. A Participant merely needs to
demonstrate that one or more employees
are operating in an office within the
identified geographic location. A
Participant should be able to rotate
employees in and out of a specific
location as it sees fit, and as long as one
individual (but not necessarily the same
individual) remains at that location, that
location can be considered a bona fide
place of business. Finally, the proposed
rule would provide guidance on how
SBA interprets the bona fide place of
business requirement where a contract
requires work to be performed in more
than one location and those different
locations may not be within the
boundaries of the bona fide place of
business. Although this is SBA’s current
interpretation of the bona fide place of
business requirement, SBA believes
putting it in the regulations would
clarify any confusion that currently
exists. For a single award 8(a)
construction contract requiring work in
multiple locations, the proposed rule
would provide that a Participant is
eligible if it has a bona fide place of
business where a majority of the work
is to be performed. For a multiple award
8(a) construction contract, the proposed
rule would require a Participant to have
a bona fide place of business in any
location where work is to be performed.
Section 124.503(a)
Section 124.503(a) provides that SBA
will decide whether to accept a
requirement offered to the 8(a) BD
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program within ten working days of
receipt of a written offering letter if the
contract value exceeds the Simplified
Acquisition Threshold (SAT). In
consideration of mutual responsibilities
under SBA’s 8(a) Partnership
Agreements with federal procuring
agencies, SBA has agreed to issue an
acceptance letter or rejection letter for
such offers within five working days
unless the agency grants an extension.
This proposed rule would clarify that
the ten-day acceptance timeframe under
§ 124.503(a) applies only to 8(a) offers
made outside the 8(a) Partnership
Agreement authority.
Section 124.503(a)(4)(ii) authorizes a
procuring activity to award an 8(a)
contract without requiring an offer and
acceptance where the requirement is
valued at or below the SAT and SBA
has delegated its 8(a) contract execution
functions to the agency. The paragraph
goes on to provide that in such a case,
the procuring activity must notify SBA
of all 8(a) awards made under this
authority. Some agencies have relied on
this language to justify proceeding to
award an 8(a) contract under the SAT
without first requesting an eligibility
determination from SBA of the apparent
successful 8(a) contractor (which is
required by § 124.501(g)). It was not
SBA’s intent to allow an award without
a determination of eligibility being
made. To do otherwise could result in
agencies awarding 8(a) contracts to
ineligible firms. Although it authorizes
an expedited review, the partnership
agreement between SBA and procuring
agencies identifies that an eligibility
determination must still be made in
these cases. The proposed rule would
merely clarify that requirement in SBA’s
regulations.
Section 124.503(a)(5) authorizes a
procuring agency to seek acceptance of
an 8(a) offering letter with the AA/BD
where SBA does not respond to an
offering letter within the ten-day period
set forth under § 124.503(a). The
proposed rule clarifies that this ten-day
time period is intended to be ten
business days.
Section 124.503(i)(1)(ii)
SBA’s current regulations require a
procuring agency to notify SBA where it
seeks to reprocure a follow-on
requirement through a pre-existing
limited contracting vehicle which is not
available to all 8(a) BD Program
Participants and the previous/current
8(a) award was not so limited. See 13
CFR 124.504(d)(1). There has been some
confusion as to whether this conflicts
with § 124.503(i)(1)(ii), which provides
that an agency need not offer or receive
acceptance of individual orders into the
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8(a) BD program if the underlying
multiple award contract was awarded
through the 8(a) BD program. These
provisions were not meant to conflict.
Although formal offer and acceptance is
not required, it is important for SBA to
be notified of any work that is intended
to be moved to an 8(a) multiple award
contract that was previously performed
under an 8(a) contract that was not
limited to specific 8(a) Participants (i.e.,
either a sole source award to a specific
Participant or an 8(a) competitive award
that was open to all eligible Program
Participants). As SBA noted in the
supplementary information to the final
rule implementing the notification
requirement contained in
§ 124.504(d)(1), an 8(a) incumbent
contractor may be seriously hurt by
moving a procurement from an 8(a) sole
source or competitive procurement to an
8(a) multiple award contract to which
the incumbent is not a contract holder.
See 85 FR 66146, 66163 (Oct. 16, 2020).
In such a case, the incumbent would
have no opportunity to win the award
for the follow-on contract and would
have no opportunity to demonstrate that
it would be adversely impacted by the
loss of the opportunity to compete for
the follow-on procurement. SBA
believes that not allowing an incumbent
8(a) contractor to compete for a followon contract where that contract accounts
for a significant portion of its revenues
contradicts the business development
purposes of the 8(a) BD program.
In order to eliminate any confusion
and ensure that notification occurs
where a procuring agency seeks to issue
an order under an 8(a) multiple award
contract and some or all of the work
contemplated in that order was
previously performed through one or
more other 8(a) contracts, the proposed
rule would amend § 124.503(i)(1)(ii) to
clarify that an agency must notify SBA
where it seeks to issue an order under
an 8(a) multiple award contract that
contains work that was previously
performed through another 8(a)
contract. Where that work is critical to
the business development of a current
Participant that previously performed
the work through another 8(a) contract
and that Participant is not a contract
holder of the 8(a) multiple award
contract, SBA may request that the
procuring agency fulfill the requirement
through a competition available to all
8(a) BD Program Participants.
Section 124.503(i)(1)(iv)
SBA’s current regulations authorize a
sole source 8(a) order to be awarded
under a multiple award contract to a
multiple award contract holder where
the multiple award contract was set-
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aside or reserved for exclusive
competition among 8(a) Participants.
The procuring agency must offer and
SBA must accept the order into the 8(a)
BD program on behalf of the identified
8(a) contract holder. To be eligible for
the award of a sole source order, SBA’s
regulations currently specify that a
concern must be a current Participant in
the 8(a) BD program at the time of award
of the order. There has been some
confusion as to whether the business
activity target requirements set forth in
§ 124.509 apply to the award of such an
order. In other words, it was not clear
whether a Participant seeking a sole
source 8(a) order under a multiple
award contract set-aside or reserved for
eligible 8(a) Participants needed to be in
compliance with any applicable
competitive business mix target
established or remedial measure
imposed by § 124.509 at the time of the
offer/acceptance of the order. Because
SBA is determining eligibility anew at
the time of a new sole source order, it
was always SBA’s intent to not only
require a firm to still be a current 8(a)
Participant at the time of offer/
acceptance of a sole source order, but to
also require the firm to be in compliance
with any applicable competitive
business mix target established or
remedial measure imposed by § 124.509.
As such, this proposed rule clarifies that
compliance with the § 124.509 business
activity target requirements will be
considered before SBA will accept a
sole source 8(a) order on behalf of a
specific 8(a) Participant multiple award
contract holder. Where an agency seeks
to issue a sole source order to a joint
venture, the proposed rule clarifies that
SBA will review and determine whether
the lead 8(a) partner to the joint venture
is currently an eligible Program
Participant and in compliance with any
applicable competitive business mix
target established or remedial measure
imposed by § 124.509.
In addition, the proposed rule further
clarifies the rules pertaining to issuing
sole source orders to joint ventures
under an 8(a) multiple award contract.
There has been some confusion as to
whether the requirement set forth in
§ 121.103(h) that a joint venture may not
be awarded contracts beyond a two-year
period, starting from the date of the
award of the first contract, applies to
such sole source orders and whether
SBA must approve the joint venture in
connection with the sole source order as
generally required by § 124.513(e)(1).
The restriction in § 121.103(h) stems
from SBA’s belief that a joint venture
should not be an on-going entity, but
something with limited scope and
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limited duration. Thus, SBA has limited
the duration that a joint venture can
submit offers for the award of contracts
to two years from the date of its first
contract award. However, that two-year
restriction does not apply to orders
issued under an already awarded
contract. The proposed rule would
specifically clarify that the two-year
restriction does not apply to a sole
source 8(a) order under an 8(a) multiple
award contract. In other words, the sole
source order can be issued more than
two years after the date the joint venture
received its first contract award. In
addition, the proposed rule would
provide that SBA would not review and
approve a joint venture where the joint
venture had already been awarded a
competitive 8(a) multiple award
contract and is seeking a sole source 8(a)
order under that multiple award
contract at some point during the
performance period of the contract. SBA
believes that the general requirement set
forth in § 124.513(e)(1) that SBA review
a joint venture in connection with a sole
source 8(a) award should not apply to
sole source orders issued under a
competitively awarded 8(a) multiple
award contract because the joint
venture’s eligibility for the contract was
already established at the award of the
underlying contract. The procuring
agency and other interested parties had
the opportunity to challenge whether
the joint venture was properly formed at
that time.
Finally, in making this clarification to
§ 124.509, SBA noticed two instances in
SBA’s rules where SBA intended to
cross reference § 124.509, but instead
cited to § 124.507. This proposed rule
would amend §§ 124.303(a)(15) and
124.403(c)(1) to change the cross
reference to § 124.509.
Section 124.503(i)(2)(ii)
SBA has received inquiries as to
whether an agency can issue an order
under the Federal Supply Schedule
(FSS) as an 8(a) award, and if so, what
procedures must be used. As with any
unrestricted multiple award contract,
SBA believes that an order can be issued
under the FSS as an 8(a) award if the
procedures set forth in § 124.503(i)(2)
are followed. This means that the
following requirements must be met: the
order must be offered to and accepted
into the 8(a) BD program; the order must
require the concern to comply with
applicable limitations on subcontracting
provisions and the nonmanufacturer
rule, if applicable, in the performance of
the individual order; before award, SBA
must verify that the identified apparent
successful offeror is an eligible 8(a)
Participant as of the initial date
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specified for the receipt of proposals
contained in the order solicitation, or at
the date of award of the order if there
is no solicitation; and the order must be
competed exclusively among only the
8(a) awardees of the underlying
multiple award contract. There is some
confusion as to what that last
requirement means. In the case of a
multiple award contract awarded under
full and open competition, SBA believes
that the current regulatory language is
clear. All contract holders that have
certified as 8(a) eligible must be able to
submit an offer for the order if they
choose. An agency cannot limit
competition to a subset of contract
holders that have claimed to be 8(a)
eligible. Of course, the apparent
successful offeror’s eligibility must be
verified by SBA prior to award to ensure
that the concern was in fact an eligible
Participant 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. For an order under the
FSS that an agency seeks to issue
through the 8(a) BD program, there has
been some confusion as to what
procedures must be used to issue the
order. Specifically, agencies have told
SBA that it is not clear whether an
agency can merely follow the FAR 8.4
requirements or must allow all FSS
holders who claim 8(a) status the
opportunity to compete. SBA believes
that orders issued under the FSS are
unique from orders issued under
multiple award contracts competed
using full and open competition. GSA
has established procedures for issuing
orders under the FSS. SBA believes that
those procedures should be used when
an agency seeks to issue an 8(a) award
under the FSS. This proposed rule
would clarify that distinction. An
agency need not open the order up to
competition among all FSS contract
holders claiming 8(a) status. However,
an agency must consider the quote from
any FSS contract holder claiming 8(a)
status who submits one. As with 8(a)
orders issued under unrestricted
multiple award contracts, however, the
apparent successful offeror for an 8(a)
order under the FSS must be an eligible
Participant as of the initial date
specified for the receipt of offers
contained in the request for quote, or at
the date of award of the order if there
is no solicitation.
SBA proposes to clarify
§ 124.503(i)(2)(ii) by noting that an
agency may award an 8(a) sole source
order under a multiple award contract
that was awarded under full and open
competition or as a small business set-
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aside where the identified 8(a)
Participant is a contract holder of the
multiple award contract. It was not
SBA’s intent to prohibit agencies from
entering 8(a) sole source orders in this
context. Such orders are consistent with
SBA’s statutory authority at section
8(a)(16) of the Small Business Act, 15
U.S.C. 637(a)(16), to enter 8(a) sole
source awards. Additionally,
clarification of this flexibility is
beneficial to both 8(a) Participants, who
benefit from increased contracting
opportunities, and to procuring agencies
that can take advantage of prenegotiated terms and pricing. Of course,
a procuring agency must offer and SBA
must accept the requirement sought to
be fulfilled as an 8(a) sole source order
before the order can be issued.
Section 124.504
Section 124.504(d) sets forth the
procedures authorizing release of a
follow-on requirement from the 8(a) BD
program. Paragraph (d)(3) provides that
SBA will release a requirement where
the procuring activity agrees to procure
the requirement as a small business,
HUBZone, SDVO small business, or
WOSB set-aside. Some procuring
activities have read this to mean that
SBA will always release a requirement
from the 8(a) BD program if the
procuring activity agrees to procure the
requirement as a small business,
HUBZone, SDVO small business, or
WOSB set-aside. That was not SBA’s
intent. The 8(a) BD program is a
business development program. SBA
takes that purpose seriously and will
always consider whether an incumbent
8(a) contractor would be adversely
affected by the release of a follow-on
procurement from the 8(a) BD program.
Accordingly, the proposed rule would
amend § 124.504(d)(3) by changing the
words ‘‘SBA will release’’ to ‘‘SBA may
release’’ to clarify that SBA has
discretion in any release decision. The
fact that a procuring activity agrees to
procure the requirement as a small
business, HUBZone, SDVO small
business, or WOSB set-aside is a
positive for release, but SBA must still
consider any adverse consequences to
an incumbent 8(a) Participant. The
release process has also caused some
confusion regarding how a follow-on
requirement may be procured if SBA
agrees to release. Again, the current rule
provides that release may occur only
where a procuring activity agrees to
procure the requirement as a small
business, HUBZone, SDVO small
business, or WOSB set-aside. In other
words, a strict reading of the rule would
not allow release where an agency seeks
to award a follow-on requirement as a
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set-aside order under a multiple award
contract that is not itself a set-aside
contract. Thus, even if an agency sought
to procure a follow-on requirement as
an 8(a) order under an unrestricted
multiple award contract, the current
regulatory language could be read to
preclude that approach. That was not
SBA’s intent. As long as an agency
identifies a procurement strategy that
would target small businesses for a
follow-on procurement, release may
occur. In fact, release to such a contract
vehicle may be appropriate where the
incumbent 8(a) contractor has graduated
from the program but still qualifies as a
small business, the requirement is
critical to the incumbent contractor’s
overall business development, the
incumbent contractor is a contract
holder on an unrestricted multiple
award contract, and the procuring
agency has evidenced its intent to setaside an order for small business under
the multiple award contract for which
the incumbent contractor is a contract
holder. This would give the incumbent
contractor the opportunity to compete
for the follow-on procurement and
ensure that award would be made to a
small business. The proposed rule
would clarify that release may occur
whenever a procuring agency identifies
a procurement strategy that would
emphasize or target small business
participation.
Section 124.506(b)(3)
In explaining SBA’s ability to accept
a sole source 8(a) requirement on behalf
of a tribally-owned, ANC-owned or
NHO-owned Participant above the
general competitive threshold amounts,
§ 124.506(b)(2) currently provides that a
procurement may not be removed from
competition to award it to a Triballyowned, ANC-owned or NHO-owned
concern on a sole source basis. There
has been some confusion as to what the
phrase ‘‘may not be removed from
competition’’ means. Some have
misinterpreted this provision to believe
that a follow-on requirement to one that
was previously awarded as a
competitive 8(a) procurement cannot be
awarded to an entity-owned firm on a
sole source basis above the applicable
competitive threshold. That is not SBA’s
intent. The provision prohibiting a
procurement from being removed from
competition and awarded to an entityowned Participant on a sole source basis
was meant to apply only to a current
procurement, not the predecessor to a
current procurement. A procuring
agency may not evidence its intent to
fulfill a requirement as a competitive
8(a) procurement, through the issuance
of a competitive 8(a) solicitation or
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otherwise, cancel the solicitation or
change its public intent, and then
procure the requirement as a sole source
8(a) procurement to an entity-owned
Participant. A follow-on procurement is
a new contracting action for the same
underlying requirement, and if the
procuring agency has not evidenced a
public intent to fulfill it as a competitive
8(a) procurement it can be fulfilled on
a sole source basis to an entity-owned
Participant. The proposed rule adds
language clarifying that intent.
However, as identified above, SBA is
concerned about the business
development aspects of the program for
an incumbent Participant. In other
words, where a Participant was
previously awarded a competitive 8(a)
contract, is still an eligible Participant at
the completion of the contract, and is
hoping to compete again for the followon procurement to the contract it
previously performed, SBA may take
that into account in its decision whether
to accept a follow-on procurement on a
sole source basis on behalf of an entityowned Participant if the contract is
critical to the incumbent Participant’s
overall business development. SBA
requests comments as to whether a
specific provision should be added to
the regulations requiring SBA to
consider the effect that losing an
opportunity to compete for a follow-on
contract would have on an incumbent
Participant’s business development.
Section 124.506(d)
The proposed rule clarifies SBA’s
rules pertaining to the award of sole
source 8(a) contracts to individuallyowned 8(a) Participants. The proposed
rule would add a provision to
§ 124.506(d) to clarify that an
individually-owned 8(a) Participant
could receive a sole source award in
excess of the $4.5M and $7M
competitive threshold amounts set forth
in § 124.506(a)(2) where a procuring
agency has determined that a FAR 6.302
exception to full and open competition
exists. For example, if a procuring
agency has determined that there exists
an unusual and compelling urgency and
has identified an individually-owned
8(a) Participant that is capable of
fulfilling its needs, it can offer that
requirement to SBA as a sole source
award on behalf of the identified
Participant even if the requirement
exceeds the applicable competitive
threshold. The Agency would be free to
use its FAR 6.302 authority to award a
sole source contract outside the 8(a) BD
program. SBA believes that it only
makes sense to allow the agency to
make an award as a sole source contract
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within the 8(a) BD program if it chooses
to do so.
In addition, if such an award exceeds
$25M, or $100M for a Department of
Defense (DoD) agency, the proposed rule
would also clarify that the agency
would be required to justify the use of
a sole source contract under FAR
19.808–1 or Defense Federal Acquisition
Regulation Supplement (DFARS)
219.808–1(a) before SBA could accept
the requirement as a sole source 8(a)
award. Although those justifications and
approvals generally apply to sole source
8(a) contracts offered to SBA on behalf
of entity-owned Program Participants,
the FAR and DFARS justification and
approval provisions are not restricted to
entity-owned Participants. Instead,
those provisions apply to any 8(a) sole
source contract that exceeds the $25M
or $100M threshold. As such the
proposed rule merely adds language to
clarify what SBA believes the current
requirement is and does so in order to
avoid any confusion.
Section 124.509
Section 124.509 establishes non-8(a)
business activity targets to ensure that
Participants do not develop an
unreasonable reliance on 8(a) awards.
SBA amended this section as part of a
comprehensive final rule in October
2020. See 85 FR 66146, 66189 (Oct. 16,
2020). In that final rule, SBA recognized
that a strict prohibition on a Participant
receiving new sole source 8(a) contracts
should be imposed only where the
Participant has not made good faith
efforts to meet its applicable non-8(a)
business activity target. Since that rule
became effective in November 2020,
Participants have sought guidance as to
what ‘‘good faith efforts’’ means in this
context. This proposed rule seeks to
provide guidance. The proposed
regulatory language is how SBA has
been interpreting good faith efforts since
the good faith efforts change was
effective. The proposed rule would
provide two ways by which a
Participant could establish that it has
made good faith efforts. Specifically, a
Participant could demonstrate to SBA
either that it submitted offers for one or
more non-8(a) procurements which, if
awarded, would have given the
Participant sufficient revenues to
achieve the applicable non-8(a) business
activity target during its just completed
program year, or explain that there were
extenuating circumstances that
adversely impacted its efforts to obtain
non-8(a) revenues. This proposed rule
would also identify possible extenuating
circumstances, which would include
but not be limited to a reduction in
government funding, continuing
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resolutions and budget uncertainties,
increased competition driving prices
down, or having one or more prime
contractors award less work to the
Participant than originally
contemplated.
There has also been some confusion
as to how SBA should best track
business activity targets. The statutory
requirement for such targets relates to
program years, meaning a Participant
should receive a certain percentage of
non-8(a) business during certain years
in the program. In the October 2020
final rule, SBA changed all references to
looking at business activity compliance
from fiscal year to program year to align
with the statutory authority. A program
year lines up with the date that a
Participant was certified as eligible to
participate in the 8(a) BD program. That
date generally is not the same as a
Participant’s fiscal year. Participants
have financial statements relating to
their fiscal year activities, but most do
not have financial statements relating to
program year. To capture program year
data, SBA has asked Participants to
estimate as best they can program year
revenues for both 8(a) and non-8(a)
activities. Although this rule proposes
no specific changes as to the revenue
information provided to SBA, SBA
specifically requests comments as to
how firms believe it would be easiest for
them to meet the program year
information requirements. One
approach that SBA is considering is to
capture program year data based on the
Participant’s interim financial
statements. This would require a
Participant to submit monthly,
quarterly, or semi-annual financial
statements, as appropriate, to SBA
where the close of its fiscal year and its
program anniversary date are separated
by more than 90 calendar days. SBA
could then assess the Participant’s
compliance with the business activity
target based on the breakdown of 8(a)
and non-8(a) sales set forth in the
applicable interim financial statements.
For example, Participant A’s fiscal year
closes on December 31, and its program
anniversary date is May 9. In connection
with its annual review, Participant A
would submit quarterly financial
statements for the periods of April 1–
June 30, July 1–September 30, and
October 1–December 31, from its most
recently completed fiscal year, and the
period of January 1–March 31 in its
current fiscal year. SBA could then
determine Participant A’s compliance
with the applicable business activity
target based on the breakdown of 8(a)
and non-8(a) sales during the 12-month
period covered by these quarterly
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financial statements. SBA recognizes
that this approach would exclude
revenues derived during the final weeks
or months leading up to a Participant’s
program anniversary date. However,
SBA believes that this approach would
most closely capture a Participant’s
program year activities without placing
an undue burden on the Participant to
estimate its 8(a) and non-8(a) revenues
on a program year basis.
Sections 124.513(a), 125.18(b),
126.616(a)(2), and 127.506(a)(3)
The proposed rule would add a new
§ 124.513(a)(3) to provide that a Program
Participant cannot be a joint venture
partner on more than one joint venture
that submits an offer for a specific 8(a)
contract. Although the proposed rule
would apply this requirement to all
contracts, procuring agencies and small
businesses have raised concerns to SBA
in the context of multiple award
contracts where it is possible that one
firm could be a member of several joint
ventures that receive contracts. In such
a situation, several agencies were
troubled that orders under the multiple
award contract may not be fairly
competed if one firm was part of two,
three or more quotes. They believed that
one firm having access to pricing
information for several quotes could
skew the pricing received for the order.
To ensure that the HUBZone, WOSB
and SDVOSB programs have rules as
consistent as possible to those for the
8(a) BD program, the proposed rule adds
similar language as that added to
§ 124.513(a)(3) for those programs in
proposed §§ 125.18(b) (for SDVOSB),
126.616(a)(2) (for HUBZone), and
127.506(a)(3) (for WOSB).
SBA specifically requests comments
as to whether this provision should be
limited only to 8(a)/HUBZone/WOSB/
SDVOSB multiple award contracts or
whether it should apply to all contracts
set-aside or reserved for 8(a)/HUBZone/
WOSB/SDVOSB, and to all orders setaside for such businesses under
unrestricted multiple award contracts.
Section 124.515
Section 124.515 implements section
8(a)(21) of the Small Business Act, 15
U.S.C. 637(a)(21), which generally
requires an 8(a) contract to be performed
by the concern that initially received it.
In addition, the statute and § 124.515
provide that where the owner or owners
upon whom eligibility was based
relinquish ownership or control of such
concern, any 8(a) contract that the
concern is performing shall be
terminated for the convenience of the
Government unless the SBA
Administrator, on a nondelegable basis,
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grants a waiver based on one or more of
five statutorily identified reasons. This
proposed rule would revise § 124.515(c)
for clarity. Specifically, it would break
one longer paragraph into several
smaller paragraphs and would clarify
that if a Participant seeks a waiver based
on the impairment of the agency’s
mission or objectives, it must identify
and provide a certification from the
procuring agency relating to each 8(a)
contract for which a waiver is sought.
Currently, a Participant (or former
Participant that is still performing an
8(a) contract) must submit its request for
a waiver to the termination for
convenience requirement to the
Participant’s (or former Participant’s)
SBA servicing district office. These
requests for waivers are often
complicated and can take a long time to
be approved. Processing a waiver
request can take several months in an
SBA district office and then several
months in SBA’s Office of Business
Development in SBA’s Headquarters. In
order to streamline the process, SBA is
also considering changing where
requests for waivers must be initiated
from the servicing district office to the
AA/BD, and requests comments on
whether that would be beneficial.
Sections 124.604 and 124.108
Section 124.604 currently requires
each Participant owned by a Tribe,
ANC, NHO, or CDC to submit to SBA
information showing how the Tribe,
ANC, NHO, or CDC has provided
benefits to the Tribal or native members
and/or the Tribal, native or other
community due to the Tribe’s/ANC’s/
NHO’s/CDC’s participation in the 8(a)
BD program through one or more firms.
This rule proposes to require more
precise benefits back to the Native
community.
Specifically, SBA is proposing a
requirement that each entity having one
or more Participants in the 8(a) BD
program establish a Community Benefits
Plan that outlines the anticipated
approach it expects to deliver to
strengthen its Native or underserved
community over the next three or five
years. Each entity would decide how
best to serve and meet the needs of its
community, though SBA would expect
some commitment in areas relating to
health, education, housing,
infrastructure, cultural preservation,
and economic development, as
appropriate. SBA requests comments on
whether this Community Benefits Plan
should be its own, separate plan or be
included in the business plan
submission and updates required as part
of the annual review process. Further,
SBA requests comment on the period
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the Community Benefits Plan should
cover.
SBA understands the dual purposes of
the entity-owned component of the 8(a)
BD program: to develop viable small
business concerns while at the same
time creating opportunities to provide
significant benefits to the native or
disadvantaged communities that they
serve. SBA seeks to ensure that both of
those purposes are advanced and
requests comments on how best that can
be accomplished. Specifically, SBA
seeks comments as to whether specific
monetary targets should be established
for providing support to the native or
disadvantaged communities, and if that
amount should change based upon the
length of time an entity owns business
concerns participating in the 8(a) BD
program and depending upon the
number of Participants an entity owns
that are operating in the program. In
addition, SBA requests comments as to
whether there should be consequences
to an entity or an entity-owned
Participant that does not meet or does
not make good faith efforts to meet the
commitments that it made in its initial
application to provide benefits to its
native or underserved community.
Section 124.604 requires each entityowned Participant to submit
information relating to the benefits that
the entity has provided to the Native or
underserved community as part of its
annual review submissions. The SBA
collects this information and provides
summary level reporting as part of
SBA’s Annual 408 Report to the
Congress as required by section 408 of
the Business Opportunity Development
Reform Act of 1988, Public Law 100–
656 (codified at section 7(j)(16) of the
Small Business Act, 15 U.S.C.
636(j)(16)). For more transparent
reporting, the proposed rule would
provide that each entity-owned
Participant must submit to SBA
information showing how the Tribe,
ANC, NHO, or CDC has provided
benefits to the Tribal or native members
and/or the Tribal, native or other
community due to the Tribe’s/ANC’s/
NHO’s/CDC’s participation in the 8(a)
BD program through one or more firms,
whether the benefits provided meet the
benefits target set forth in its
Community Benefits Plan, and how the
benefits provided directly impacted the
native or underserved community.
SBA specifically asks for comments
on how best to implement proposed
changes for benefits reporting.
Section 124.1002
Section 1207 of the National Defense
Authorization Act for Fiscal Year 1987,
Public Law 99–661 (100 Stat. 3816,
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3973), authorized a set-aside program at
DoD for small disadvantaged businesses,
separate from the authority for contracts
awarded under the 8(a) BD program.
The ‘‘Section 1207’’ or Small
Disadvantaged Business (SDB) Program
also had a price evaluation preference
and a subcontracting component. SBA
implemented regulations establishing
the eligibility requirements for the SDB
Program and authorizing a protest and
appeal process to SBA regarding the
SDB status of apparent successful
offerors. In 2008, the United States
Court of Appeals for the Federal Circuit
ruled that preferential treatment in the
award of DoD prime defense contracts
based on race under the Section 1207
program (as implemented in 10 U.S.C.
2323) was unconstitutional. Rothe Dev.
Corp. v. DoD, 545 F.3d 1023. This
effectively eliminated the SDB Program.
In response, the FAR Council changed
the SBA protest process for SDBs in the
FAR to a ‘‘review’’ process in a final
rule effective October 2014 (79 FR
61746). The FAR Council stated that its
changes to the SDB program were based
on the Federal Circuit’s decision in the
Rothe case. SBA brought its own
regulations up to date in 2020 by
removing references to an SDB protest.
85 FR 27290 (May 8, 2020). Recently,
SBA’s Office of Inspector General (OIG)
has questioned why a protest process no
longer exists to challenge a firm’s SDB
status. Despite SBA’s explanation that
the Section 1207 program (the basis for
SBA’s previous SDB regulatory
authorities) no longer exists, OIG
continues to believe that general
authority to protest a firm’s SDB status
should exist. SBA notes that since the
FAR Council replaced the protest
process with a review process in 2014,
SBA has not received any requests for
review. Although SBA believes that
such authority would not be often
utilized, in response to OIG’s concerns
the proposed rule would add a new
§ 124.1002 authorizing reviews and
protests of SDB status in connection
with prime contracts and subcontracts
to a federal prime contract.
The proposed rule copies similar
authority contained in section 19.305 of
the Federal Acquisition Regulation, title
48 of the Code of Federal Regulations.
Under proposed § 124.1002, SBA could
initiate the review of the SDB status on
any firm that has represented itself to be
an SDB on a prime contract (for goaling
purposes or otherwise) or subcontract to
a federal prime contract whenever it
receives credible information calling
into question the SDB status of the firm.
In addition, as already stated in the
FAR, the proposed rule would allow the
contracting officer or the SBA to protest
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the SDB status of a proposed
subcontractor or subcontract awardee.
Finally, where SBA determines that a
subcontractor does not qualify as an
SDB, the proposed rule would require
prime contractors to exclude
subcontracts to that subcontractor as
subcontracts to an SDB in its
subcontracting reports, starting from the
time that the protest was decided. SBA
believes that a prime contractor should
not get SDB credit for using a
subcontractor that does not qualify as an
SDB. However, in order not to penalize
a prime contractor who acted in good
faith in awarding a subcontract or to
impose an additional burden of
correcting past subcontracting reports,
the proposed rule would disallow SDB
subcontracting credit only prospectively
from the point of an adverse SDB
determination.
Sections 125.1 and 125.3(c)(1)(i) and (x)
and (c)(2)
SBA proposes to make changes to
several provisions in part 125 that
reference the term commercial item.
This is in response to recent changes
made to the Federal Acquisition
Regulation (FAR) with regard to the
definition of ‘‘commercial item’’. 86 FR
61017. Primarily, the changes to the
FAR split the definition of commercial
items into two categories, commercial
products and commercial services. SBA
is proposing to amend its regulations to
adopt these changes when SBA’s
regulation is referring to a commercial
product, a commercial service, or both.
Specifically, SBA is amending the
definition for ‘‘cost of materials’’ in
125.1 to refer only to commercial
products. Further, SBA proposes to
amend § 125.3(c)(1)(i) and (x) and (c)(2)
to update the references to both
commercial products and commercial
services.
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Section 125.1
The proposed rule would add
definitions of the terms ‘‘Small business
concerns owned and controlled by
socially and economically
disadvantaged individuals’’ and
‘‘Socially and economically
disadvantaged individuals’’ for
purposes of both SBA’s subcontracting
assistance program in 15 U.S.C. 637(d)
and the goals described in 15 U.S.C.
644(g). The proposed rule seeks to
implement consistency among SBA’s
programs and would refer to
requirements set forth in part 124 for
8(a) eligibility. SBA believes that this
change is also needed to provide clarity
for small disadvantaged business
eligibility requirements contained in
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other statutes that refer to 15 U.S.C.
637(d) for their eligibility.
SBA proposes to include blanket
purchase agreements (BPAs) in the list
of contracting vehicles that are covered
by the definitions of consolidation and
bundling. There are two kinds of BPAs:
GSA’s FSS BPAs covered under FAR 8.4
and BPAs established under Simplified
Acquisition Procedures (see FAR
13.303). SBA requests comments as to
whether this should apply to both types
of BPAs, FSS, and FAR 13.303, and
whether it should apply to both singleaward and multiple-award BPAs.
Generally, a consolidated requirement is
one that consolidates two or more
previous requirements into one action.
A bundled requirement is a type of
consolidated requirement in which
multiple small-business requirements
are consolidated into a single, larger
requirement that is not suitable for
award to small businesses. In most
cases, because of the potential negative
impact on small business contracting
opportunities, the contracting agency is
required to conduct a financial analysis,
execute a determination that the action
is necessary and justified, and in some
cases notify impacted small businesses
and the public, before proceeding with
a bundled or consolidated requirement.
The Small Business Act, 15 U.S.C.
632(j), requires agencies to avoid
unnecessary bundling of ‘‘contract
requirements.’’ SBA interprets the term
‘‘contract requirements’’ to include
BPAs for the purposes of this statutory
provision on avoiding bundling. This is
similar to how SBA interprets the term
‘‘proposed procurement’’ under the
Small Business Act’s requirement for
agencies to coordinate with
procurement center representatives on
prime contract opportunities.
SBA thus intended the consolidation
and bundling provisions to apply to
BPAs. The Government Accountability
Office (GAO), however, ruled in two
recent bid protests that, because SBA’s
regulations do not specifically address
BPAs, the consolidation and bundling
procedures do not apply when the
resulting requirement is a BPA.
SBA routinely sees consolidation in
BPAs. Bundling on a BPA has the same
detrimental effect on small-business
incumbents as bundling on other
vehicles, such as contracts or orders.
Regardless of whether the resulting
requirement is a BPA, the bundled
action will convert multiple small
business contracting actions into a
single action to be awarded to a large
business. If agencies are not required to
follow SBA regulations regarding
notification and a written determination
for bundled BPAs, the small business
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incumbents may not know that work
that they are currently performing has
been bundled and moved to a single
award to a large business and may not
have the opportunity to challenge such
action. Awarding a requirement as a
BPA does not lessen the negative impact
of bundling on small businesses, and,
therefore, SBA proposes to incorporate
into the regulations its current belief
that the bundling and consolidation
rules should apply with equal force
where the resulting award will be a
BPA.
Additionally, several procuring
agencies have asserted that the analysis,
determination, and notification
requirements for consolidation or
bundling do not apply when existing
requirements are combined with new
requirements. SBA disagrees. There is
no basis in statute, regulation, or case
law for agencies to interpret
‘‘requirement’’ as excluding a
combination of existing and new work.
To eliminate any confusion, the
proposed rule clarifies SBA’s current
position that agencies are required to
comply with the Small Business Act
and all SBA regulations regarding
consolidation or bundling regardless of
whether the requirement at issue
combines both existing and new
requirements into one larger
procurement that is considered to be
‘‘new.’’
Section 125.2
Section 125.2 sets forth guidance as to
SBA’s and procuring agencies’
responsibilities when providing
contracting assistance to small
businesses. Section 125.2(d) contains
guidance on how procuring agencies
determine whether contract bundling
and substantial bundling is necessary
and justified. Specifically,
§ 125.2(d)(2)(ii) states that a cost or price
analysis may be included to support an
agency’s determination of the benefits of
bundling. This language combined with
the language at § 125.2(d)(2)(v) is
intended to mean that price analysis is
always necessary, and, if the analysis
results in a price reduction, the agency
may use the price reduction to
demonstrate benefits of the bundled
approach. In order to demonstrate
‘‘measurably substantial’’ benefits as
required by the Small Business Act,
SBA’s regulations and the FAR (benefits
equivalent to 10 percent of the contract
or order value where the contract or
order value is $94 million or less, or
benefits equivalent to 5 percent of the
contract or order value or $9.4 million,
whichever is greater, where the contract
or order value exceeds $94 million),
SBA believes that a cost or price
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analysis must be conducted. Some have
argued that the Small Business Act does
not require a cost/price analysis. They
point to the language of section
15(e)(2)(B) of the Small Business Act
which provides that in demonstrating
‘‘measurably substantial benefits’’ the
identified benefits ‘‘may include’’ cost
savings, quality improvements,
reduction in acquisition cycle times,
better terms and conditions, and any
other benefits. 15 U.S.C. 644(e)(2)(B).
However, if a cost/price analysis is not
required, SBA does not believe that it is
possible to demonstrate benefits
equivalent to 10 percent (or 5 percent/
$9.4 million) of the contract or order
value—exactly what is required by
SBA’s regulations and the FAR. This
interpretation is even clearer in
§ 125.2(d)(2)(v), which acknowledges
that an agency will perform a price
analysis and describes a specific type of
price comparison to include in the
analysis.
In order to clarify any misperceptions,
SBA proposes to clarify § 125.2(d)(2)(ii)
to plainly state that an analysis
comparing the cumulative total value of
all separate smaller contracts with the
estimated cumulative total value of the
bundled procurement is required as part
of the analysis of whether bundling is
necessary and justified. Neither a
procuring agency nor SBA can have a
complete view of the small business
contact dollars impacted by a bundled
procurement if this price analysis is not
performed. The analysis requires that an
agency identify all impacted separate
smaller contracts. An agency can search
the Federal Procurement Data System or
use the agency’s own contract records to
determine the complete universe of
separate contracts impacted by the
bundled procurement. Identification of
every impacted firm is not only
important for purposes of the price
analysis but is also necessary to comply
with the statutory and regulatory notice
requirements for bundled contracts.
Furthermore, if 8(a) contracts will be
subsumed in the bundled procurement,
an agency must know which 8(a)
contracts are impacted in order to
comply with the required 8(a) program
release or notification requirements.
Section 125.3
Section 125.3 discusses the types of
subcontracting assistance that are
available to small businesses and the
rules pertaining to subcontracting
generally. Section 125.3(a)(1)(i)(B)
provides that purchases from a
corporation, company, or subdivision
that is an affiliate of the prime
contractor or subcontractor are not
included in the subcontracting base.
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SBA received an inquiry as to whether
this language would allow a prime
contractor to count an award to a joint
venture in which it is a partner as
subcontracting credit. That was not
SBA’s intent. SBA believes that
exclusion is covered in the current
regulatory text, which already alludes to
not counting awards to affiliates.
Nevertheless, in order to clarify that a
prime contractor cannot count an award
to a joint venture in which it is a partner
as subcontracting credit, SBA has added
clarifying language to that effect.
SBA also proposes to amend
§ 125.3(a)(1)(iii) to delete bank fees from
the list of exclusions from the
subcontracting base. SBA’s current
regulations provide that bank fees are
excluded from the subcontracting base.
This means that when a large contractor
is calculating the percentage of work
being subcontracted to small businesses,
it does not have to factor bank fees into
this calculation. This gives the
contractor little incentive to work with
small banks. However, there are over
900 small businesses registered in the
Dynamic Small Business Search (DSBS)
database under banking NAICS codes.
Given the number of small banks
available to do work on federal prime
contracts, SBA does not believe bank
fees should be excluded from the
subcontracting base.
In addition, SBA proposes to amend
§ 125.3(c)(1)(iv) to require that large
businesses include indirect costs in
their subcontracting plans. Currently,
large businesses have the option of
including or excluding indirect costs in
their individual subcontracting plans.
Many large businesses opt to exclude
indirect costs. As a result, small
businesses that provide services
generally considered to be indirect
costs—such as legal services, accounting
services, investment banking, and asset
management—are often overlooked by
large contractors. SBA believes that by
requiring indirect costs to be included
in their individual subcontracting plans,
large businesses will have an incentive
to give work to small businesses that
provide those services.
Section 125.6
Section 125.6 sets forth the
requirements pertaining to the
limitations on subcontracting applicable
to prime contractors for contracts and
orders set-aside or reserved for small
business. Section 125.6(d) provides that
the period of time used to determine
compliance for a total or partial setaside contract will generally be the base
term and then each subsequent option
period. This makes sense when one
agency oversees and monitors a
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contract. However, on a multi-agency
set aside contract, where more than one
agency can issue orders under the
contract, no one agency can practically
monitor and track compliance. In order
to ensure that this statutory requirement
is met for the contract, SBA believes
that compliance should be measured
order by order by each ordering agency.
The proposed rule would clarify
§ 125.6(d) accordingly.
SBA is proposing to add a new
§ 125.6(e) to provide consequences to a
small business where a contracting
officer determines at the conclusion of
contract performance that the business
did not meet the applicable limitation
on subcontracting on any set-aside
contract (small business set-aside; 8(a);
WOSB; HUBZone; or SDVOSB). The
current rules provide discretion to
contracting officers to require
contractors to demonstrate compliance
with the limitations on subcontracting
at any time during performance and
upon completion of a contract. SBA’s
current rules do not, however, address
what happens if a contracting officer
determines that a firm fails to meet the
statutorily required limitation on
subcontracting requirement at the
conclusion of contract performance.
SBA’s proposed rule would provide that
a contracting officer could not give a
satisfactory/positive past performance
evaluation for the appropriate
evaluation factor or subfactor to a
contractor that the contracting officer
determined did not meet the applicable
limitation on subcontracting
requirement at the conclusion of
contract performance. Of course, if a
small business were found to be in noncompliance during the performance of
the contract and took steps to come into
compliance before completion of the
contract, the contractor’s final rating for
conformance to requirements could be
satisfactory. The proposed rule would
not alter the contracting officer’s
discretion to require contractors to
demonstrate compliance with the
limitations on subcontracting where the
contracting officer deems it to be
appropriate; it merely would provide
consequences (i.e., negative past
performance evaluation) where the
contracting officer determined that a
contractor did not meet the limitation
on subcontracting requirement at the
conclusion of contract performance.
SBA believes that having negative
consequences for not meeting the
applicable limitation on subcontracting
would help ensure the requirements are
being met, and that set-aside contracts
are being performed in a manner
consistent with SBA’s regulations and
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the Small Business Act. Some have
argued that there should be extenuating
circumstances under which a
contracting officer should still be able to
give a satisfactory/positive past
performance evaluation to a contractor
that the contractor officer determined
did not meet the applicable limitation
on subcontracting requirement. SBA
believes that any such discretion, if
ultimately authorized, should be very
limited in scope. Again, SBA believes
that it is important to have
consequences for small business
concerns that do not meet the applicable
limitation on subcontracting. SBA wants
small businesses to take those
requirements seriously and strive to
achieve them. Nevertheless, SBA
requests comments as to whether the
regulations should allow a contracting
officer to give a satisfactory/positive
past performance evaluation to a
contractor that the contractor officer
determined did not meet the applicable
limitation on subcontracting
requirement, and, if so, under what
limited circumstances should that
discretion be authorized.
Section 125.9
Section 125.9 sets forth the rules
governing SBA’s small business mentorprote´ge´ program. SBA’s regulations
currently provide that a mentor can
have no more than three prote´ge´ small
business concerns at one time. SBA has
been asked whether a mentor that
purchases another business concern that
is also an SBA-approved mentor can
take on those mentor-prote´ge´
relationships if the total number of
prote´ge´s would exceed three. The
reason SBA has limited the number of
prote´ge´ firms one mentor can have at
any time is to ensure that a large
business mentor does not unduly
benefit from programs intended to
benefit small businesses. That is also the
reason that the limit of three prote´ge´s
applies to the mentor family (i.e., the
parent and all of its subsidiaries in the
aggregate cannot have more than three
prote´ge´ small business concerns at one
time). If each separate business entity
could itself have three prote´ge´s,
conceivably a parent with three
subsidiaries could have 12 small
business prote´ge´ firms. SBA believes
that that would allow a large business
to unduly benefit from small business
programs. The regulations
implementing the mentor-prote´ge´
program also provide that a small
business can have only two mentorprote´ge´ relationships in total. Thus, if
SBA were to say that a mentor that
purchased another business entity
which is also a mentor could not take
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on the selling business entity’s mentorprote´ge´ relationships, the ones who
would be hurt the most would be the
small business prote´ge´s of the selling
business. Their mentor-prote´ge´
relationships with the selling mentor
would end early and would count as
one of the two mentor-prote´ge´
relationships that they were authorized
to have. Because SBA did not intend to
adversely affect prote´ge´ firms in these
circumstances, SBA has informally
permitted a mentor to take on the
mentor-prote´ge´ relationships of a firm
that it purchased even where its total
number of mentor-prote´ge´ relationships
would exceed three. The proposed rule
would add language to § 125.9(b)(3)(ii)
to recognize this exemption.
Specifically, the proposed rule would
add a paragraph that where a mentor
purchases another business entity that is
also an SBA-approved mentor of one or
more prote´ge´ small business concerns
and the purchasing mentor commits to
honoring the obligations under the
seller’s mentor-prote´ge´ agreement(s),
that entity may have more than three
prote´ge´s. In such a case, the entity could
not add another prote´ge´ until it fell
below three in total.
The proposed rule would also amend
§ 125.9(e) to add language recognizing
that a mentor that is a parent or
subsidiary of a larger family group may
identify one or more subsidiary firms
that it plans to participate in the
mentor-prote´ge´ arrangement by
providing assistance and/or
participating in joint ventures with the
prote´ge´ firm. The proposed rule would
provide that all entities intended to
participate in the mentor-prote´ge´
relationship should be identified in the
mentor-prote´ge´ agreement itself.
Sections 126.306(b) and 127.304(c)
Sections 126.306 and 127.304 set
forth the procedures by which SBA
processes applications for the HUBZone
and WOSB programs, respectively. This
proposed rule would add language to
both processes to provide that where
SBA is unable to determine a concern’s
compliance with any of the HUBZone or
WOSB/EDWOSB eligibility
requirements due to inconsistent
information contained in the
application, SBA will decline the
concern’s application. In addition, this
proposed rule would add language
providing that if, during the processing
of an application, SBA determines that
an applicant has knowingly submitted
false information, regardless of whether
correct information would cause SBA to
deny the application, and regardless of
whether correct information was given
to SBA in accompanying documents,
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SBA will deny the application. This
language is consistent with that already
appearing in SBA’s regulations for the
8(a) BD program, and SBA believes that
all of SBA’s certification programs
should have similar language on this
issue.
Sections 125.28(e), 126.801(e)(2), and
127.603(d)(2)
For purposes of SDVO, HUBZone and
WOSB/EDWOSB contracts, the SDVO/
HUBZone/WOSB/EDWOSB prime
contractor together with any similarly
situated entities must meet the
applicable limitation on subcontracting
(or must perform a certain portion of the
contract). If a subcontractor is intended
to perform primary and vital aspects of
the contract, the subcontractor may be
determined to be an ostensible
subcontractor under proposed
§ 121.103(h)(3), and the prime
contractor and its ostensible
subcontractor would be treated as a joint
venture. However, if the ostensible
subcontractor qualifies independently
as a small business, a size protest would
not find the arrangement ineligible for
any small business contract. To address
that situation, the current regulations for
the SDVO program (in §§ 125.18(f) and
125.29(c)), the HUBZone program (in
§§ 126.601(d) and 126.801(a)(1)) and the
WOSB program (in §§ 127.504(g) and
127.602(a)) prohibit a non-similarly
situated subcontractor from performing
primary and vital requirements of a
contract and permit a SDVO/HUBZone/
WOSB/EDWOSB status protest where
an interested party believes that will
occur. The proposed rule would add a
paragraph to each of the SDVO/
HUBZone/WOSB/EDWOSB status
protest provisions to clarify that any
protests relating to whether a nonsimilarly situated subcontractor will
perform primary and vital aspects of the
contract will be reviewed by the SBA
Government Contracting Area Office
serving the geographic area in which the
principal office of the SDVO/HUBZone/
WOSB/EDWOSB business is located.
SBA’s Government Contracting Area
Offices are the offices that decide size
protests and render formal size
determinations. They are the offices
with the expertise to decide ostensible
subcontractor issues. Thus, for example,
if a status protest filed in connection
with a WOSB contract alleges that the
apparent successful offeror should not
qualify as a WOSB because (1) the
husband of the firm’s owner actually
controls the business, and (2) a nonWOSB subcontractor will perform
primary and vital requirements of the
contract, SBA’s WOSB staff in the Office
of Government Contracting will review
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the control issue and refer the ostensible
subcontractor issue to the appropriate
SBA Government Contracting Area
Office. The SBA Government
Contracting Area Office would
determine whether the proposed
subcontractor should be considered an
ostensible subcontractor and send that
determination to the Director of
Government Contracting, who then
would issue one WOSB status
determination addressing both the
ostensible subcontractor and control
issues. The same would be true for
SDVO status protests and HUBZone
status protests (except that in the
HUBZone context the Director of the
Office of HUBZones would issue the
HUBZone status determination). To
accomplish this, the proposed rule
would add clarifying language in
§§ 125.28(e) (for SDVO), 126.801(e)(2)
(for HUBZone), and 127.603(d) (for
WOSB/EDWOSB).
Section 126.503(c)
The proposed rule would § 126.503 by
adding a new paragraph (c) to
specifically authorize SBA to initiate
decertification proceedings if after
admission to the HUBZone program
SBA discovers that false information has
been knowingly submitted by a certified
HUBZone small business concern. SBA
believes that this is currently permitted
under the HUBZone regulations, but
proposes to add this provision to
eliminate any doubt.
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Section 126.601(d)
The proposed rule would amend
§ 126.601(d) to clarify how the
ostensible subcontractor rule may affect
a concern’s eligibility for a HUBZone
contract. Where a subcontractor that is
not a certified HUBZone small business
will perform the primary and vital
requirements of a HUBZone contract, or
where a HUBZone prime contractor is
unduly reliant on one or more small
businesses that are not HUBZonecertified to perform the HUBZone
contract, the prime contractor would not
be eligible for award of that HUBZone
contract.
Section 126.616(a)(1)
The proposed rule would amend
§ 126.616(a) to clarify that a HUBZone
joint venture should be registered in the
System for Award Management (SAM)
(or successor system) and identified as
a HUBZone joint venture, with the
HUBZone-certified joint venture partner
identified. SBA has received numerous
questions from HUBZone firms and
contracting officers expressing
confusion about how to determine
whether an entity qualifies as a
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HUBZone joint venture and thus is
eligible to submit an offer for a
HUBZone contract. Part of the confusion
stems from the fact that there is no way
for an entity to be designated as a
HUBZone joint venture in SBA’s DSBS
database; this certification can only be
made in SAM. In addition, the process
for self-certifying as a HUBZone joint
venture in SAM is apparently unclear
because such certification does not
appear in the same section as the other
socioeconomic self-certifications. Since
it is not known when these systems
might be updated to clear up this
confusion, SBA is proposing to amend
§ 126.616(a) by adding a new paragraph
(a)(1) to help HUBZone firms and
contracting officers understand how to
determine whether an entity may be
eligible to submit an offer as a HUBZone
joint venture.
Section 126.801
The proposed rule would amend
§ 126.801(b) to clarify the bases on
which a HUBZone protest may be filed,
which include: (i) the protested concern
did not meet the HUBZone eligibility
requirements set forth in § 126.200 at
the time the concern applied for
HUBZone certification or on the
anniversary date of such certification;
(ii) the protested joint venture does not
meet the requirements set forth in
§ 126.616; (iii) the protested concern, as
a HUBZone prime contractor, is unduly
reliant on one or more small
subcontractors that are not HUBZonecertified, or subcontractors that are not
HUBZone-certified will perform the
primary and vital requirements of the
contract; and/or (iv) the protested
concern, on the anniversary date of its
initial HUBZone certification, failed to
attempt to maintain compliance with
the 35% HUBZone residence
requirement. The proposed rule also
would amend § 126.801(d)(1),
addressing timeliness for HUBZone
protests.
The proposed rule would add a new
paragraph (d)(1)(i) to clarify the
timeliness rules for protests relating to
orders or agreements that are set-aside
for certified HUBZone small business
concerns where the underlying multiple
award contract was not itself set-aside
or reserved for certified HUBZone small
business concerns. Specifically, a
protest challenging the HUBZone status
of an apparent successful offeror for
such an order or agreement will be
considered timely if it is submitted
within 5 business days of notification of
the identity of the apparent successful
offeror for the order or agreement. The
proposed rule also would add a new
paragraph (d)(1)(ii) to clarify that where
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a contracting officer requires
recertification in connection with a
specific order under a multiple award
contract that itself was set-aside or
reserved for certified HUBZone small
business concerns, a protest challenging
the HUBZone status of an apparent
successful offeror will be considered
timely if it is submitted within five
business days of notification of the
identity of the apparent successful
offeror for the order.
Section 127.102
SBA proposes to amend the definition
of WOSB to clarify that the definition
applies to any certification as to a
concern’s status as a WOSB, not solely
to those certifications relating to a
WOSB contract. SBA has received
inquiries as to whether this definition
applies to a firm that certifies as a
WOSB for goaling purposes on an
unrestricted procurement. It has always
been SBA’s intent to apply that
definition to all instances where a
concern certifies as a WOSB, and this
proposed rule merely clarifies that
intent.
Section 127.200
Section 127.200 specifies the
requirements a concern must meet to
qualify as an EDWOSB or WOSB. In
order to qualify as an EDWOSB, an
entity must be a small business. Section
127.200(a)(1) requires a concern to be a
small business for its primary industry
classification to qualify as an EDWOSB,
while § 127.200(b)(1) merely states that
a concern must be a small business to
qualify as a WOSB. In terms of
demonstrating that an applicant for
either WOSB or EDWOSB certification
qualifies as a small business, the
proposed rule would provide that the
applicant must demonstrate that it
qualifies as small under the size
standard corresponding to any NAICS
code under which it currently conducts
business activities. SBA believes that
this standard makes more sense than
requiring an applicant to qualify as
small under the size standard
corresponding to its primary industry
classification. In order to be eligible for
a specific WOSB/EDWOSB contract, a
firm must qualify as small under the
size standard corresponding to the
NAICS code assigned to that contract.
Whether a firm qualifies as small under
its primary industry classification is not
relevant to that determination (unless
the size standard for the firm’s primary
industry classification is that same as
that for the NAICS code assigned to the
contract, but even then, the only
relevant size standard is that
corresponding to the NAICS code
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assigned to the contract). SBA believes
that a firm that does not qualify as small
under its primary industry classification
should not be precluded from seeking
and being awarded WOSB/EDWOSB
contracts if it qualifies as small for those
contracts. SBA believes that the
certification process should ensure that
an applicant is owned and controlled by
one or more women and that it could
qualify as a small business for a WOSB/
EDWOSB set-aside contract. As such,
SBA believes that requiring an applicant
to demonstrate that it qualifies as small
for any industry under which it
currently conducts business is more
appropriate than requiring it to
demonstrate that it qualifies as small
under its primary industry
classification. Finally, SBA believes that
it is important to align the WOSB/
EDWOSB eligibility requirements with
the eligibility requirements for veteranowned small business (VOSB) concerns
and service-disabled veteran-owned
small business (SDVOSB) concerns
wherever possible. SBA is also
proposing that a VOSB or SDVOSB must
be small under the size standard
corresponding to any NAICS code under
which it currently conducts business
activities in a separate rulemaking.
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Section 127.201(b)
Section 127.201 sets forth the
requirements for control of a WOSB or
EDWOSB. Paragraph (b) specifies that
one or more women or economically
disadvantaged women must
unconditionally own the concern
seeking WOSB or EDWOSB status. The
proposed rule would clarify that this
requirement was not meant to preclude
a condition that can be given effect only
after the death or incapacity of the
woman owner. This change would make
the WOSB unconditional ownership
requirement the same as that for
eligibility for the 8(a) BD program.
Section 127.202(c)
Section 127.202 sets forth the
requirements for control of a WOSB or
EDWOSB. The current regulatory
language has caused confusion as to
whether a woman or economicallydisadvantaged woman claiming to
control a WOSB or EDWOSB can engage
in employment other than that for the
WOSB or EDWOSB. The current
regulations provide that the woman or
economically-disadvantaged woman
who holds the highest officer position
may not engage in outside employment
that prevents her from devoting
sufficient time and attention to the daily
affairs of the concern to control its
management and daily business
operations. The regulations also provide
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that such individual must manage the
business concern on a full-time basis
and devote full-time to it during the
normal working hours of business
concerns in the same or similar line of
business. Taking the two provisions
together, a woman or economicallydisadvantaged woman can engage in
outside employment, but only if such
employment occurs outside the normal
working hours of business concerns in
the same or similar line of business and
does not prevent her from devoting
sufficient time and attention to control
the concern’s management and daily
business operations. SBA believes that
this requirement is overly restrictive.
SBA is charged with determining
whether a business concern is owned
and controlled by one or more women
or economically-disadvantaged women.
If a woman starts a small business that
she alone operates, SBA does not
believe that it makes sense to conclude
that she does not control the business
simply because she operates it outside
the normal hours of similar businesses.
Whether the business can win and
perform government contracts is a
different question, and not one
contemplated by SBA’s regulations.
Where a woman is the sole individual
involved in operating a specific
business, there is no question that she
controls the business, regardless of how
many hours she devotes to the business.
This rule proposes to revise the
limitations on outside activities. Per
§ 127.202(a), a woman or economicallydisadvantaged woman must
demonstrate that she controls the longterm planning and daily operations of
the business. The proposed rule would
continue to provide that a woman or
economically-disadvantaged woman
cannot engage in outside activities that
prevent her from devoting sufficient
time and attention to the business
concern to control its management and
daily operations. Where a woman
claiming to control a business concern
devotes fewer hours to the business than
its normal hours of operation, the
proposed rule would impose a
rebuttable presumption that she does
not control the business concern. This is
not meant to imply that a specific
individual must be present at the
business premises all hours that the
business is open, particularly if the
business is open more than a normal
workday (e.g., where the business is
open 24 hours and has multiple shifts).
In such instances the woman would
merely be required to provide evidence
that she has ultimate managerial and
supervisory control over both the longterm decision making and day-to-day
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management and administration of the
business.
Section 127.400
Section 127.400 describes how a
concern maintains its certification as a
WOSB or EDWOSB. This rule proposes
to amend § 127.400 by omitting
§ 127.400(a), which requires a certified
concern to annually represent to SBA
that it meets all program eligibility
requirements, and replacing it with
§ 127.400(b), which states that a
certified concern must undergo a
program examination at least every
three years to maintain program
eligibility. SBA believes that these
program examinations, in conjunction
with other eligibility assessments like
material change reviews, status protests,
third-party certifier compliance reviews,
and program audits, will sufficiently
capture eligibility information. The
proposed rule would also amend the
examples to § 127.400 to reflect the
proposed change and provide additional
clarity to small businesses.
SBA believes small businesses will
further benefit from the proposed
change because it will align the WOSB
Program regulations with the continuing
eligibility requirements for veteranowned small business concerns outlined
in 13 CFR 128.306. The WOSB Program
permits veteran owned-certified small
business concerns to submit evidence of
their veteran-owned certification, along
with documentation demonstrating that
the firms are 51% owned and controlled
by one or more women, to support their
applications for WOSB Program
certification. Going forward, the reverse
will also be true. SBA believes that
when there is reciprocity between
programs, small businesses benefit from
as much consistency as practicable.
Regulatory alignment reduces
confusion, ambiguity, and
administrative burden for firms that are
eligible for more than one program.
Compliance With Executive Orders
12866, 12988, 13132, 13563, the
Congressional Review Act (5 U.S.C.
801–808), 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) anticipates that this proposed
rule will be a significant regulatory
action and, therefore, was subject to
review under section 6(b) of Executive
Order 12866, Regulatory Planning and
Review, dated September 30, 1993.
Accordingly, the next section contains
SBA’s Regulatory Impact Analysis.
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Regulatory Impact Analysis
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1. Is there a need for the regulatory
action?
This action proposes to implement a
statutory enactment—the NDAA FY22—
as well as codify a federal court decision
into regulation, and revise SBA
guidelines on 8(a) BD program
eligibility, 8(a) BD program
participation, and subcontracting plan
compliance. With respect to the 8(a) BD
program, this action is needed to clarify
several policies that SBA already has
put in place and to apply existing
regulations to new scenarios, such as
the recently created SBA mentor-prote´ge´
program. This action also is needed to
integrate section 863 of NDAA FY22
into SBA regulations and to adopt the
holding of a recent federal court
decision.
2. What is the baseline, and the
incremental benefits and costs of this
regulatory action?
SBA has determined that this
proposed rule includes eight proposals
that are associated with incremental
benefits or incremental costs. Outside of
the following eight proposals, the other
changes would merely clarify existing
policy, modify language to avoid
confusion, or adopt interpretations
already issued by SBA’s Office of
Hearings and Appeals or through SBA
casework.
a. Require a firm to update SAM
within two days and notify certain
contracting officers if the firm is found
ineligible through size determination,
SDVO Small Business Concern (SBC)
protests, HUBZone protests, or WOSB
Program protests.
SBA would amend §§ 125.30(g)(4) and
127.405(c) to provide that a firm found
ineligible through a final program
protest must update SAM.gov within
two days with its new status and notify
agencies with which it has pending
offers that are affected by the status
change. This requirement already exists
in SBA’s regulations for size protests.
The change extends the requirement
to the SDVO SBC and WOSB programs.
SBA has determined that this proposed
change would impose costs on the
business associated with its notification
of contracting agencies of the adverse
decision. The number of adverse protest
decisions in the SDVOSBC and WOSB
programs is less than five per year. For
each such protest, the ineligible
business is estimated to be required to
notify two agencies. The notification
does not take any particular form, so
SBA estimates that each notification
would take 15 minutes. Thus, the total
cost of this change would be 2.5 hours
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across all firms. At a project-managerequivalent level, the total cost is less
than $280 annually.1
b. Prohibit nonmanufacturer rule
waivers from specifically applying to a
contract with a duration longer than five
years, including options.
SBA proposes to amend § 121.1203 to
restrict the grant of individual (i.e.,
contract-specific) nonmanufacturer rule
waivers to contracts with durations of
five years or less. In the prior fiscal year,
SBA granted 24 individual waivers each
year for contracts that exceed five years.
The estimated total value for contracts
covered by these waivers was $4.6
billion.
The most probable effect of denying
waivers for such contracts in the future
is that the procuring agencies will
choose not to set aside those contracts
for small business resellers. Instead, the
procuring agencies would solicit many
of those contracts as full-and-open
competitions. It is also possible,
however, that the agencies could limit
the duration of the contracts to five
years in order to promote small-business
opportunity through the use of a setaside.
Of those two possibilities, the first (a
full-and-open solicitation) is an
economic transfer of the reseller’s
markup from a small business reseller to
what most likely would be an otherthan-small reseller. The second (limiting
the contract to five years) creates
possible benefits at the sixth year for
newly established domestic smallbusiness manufacturers. Under the
current policy, those manufacturers
might be overlooked by the agency and
its contractors (i.e., resellers) because
the ongoing contract does not require
the contractor to purchase from a
domestic small-business manufacturer.
SBA estimates that, in a quarter of the
cases in which an agency would
otherwise seek a waiver for a contract
exceeding five years, the agencies would
choose to limit the contract (and thus
the effect of the waiver) to five years.
This amounts to six contracts, with a
total value of $1.2 billion. Assuming
that these contracts are ten years in
length and agencies would recompete
the contracts in the five final years, the
potential recompeted value is $575
million, unadjusted for inflation.
However, it is unknown whether
domestic small-business manufacturers
would be available to supply the
resellers at the point of recompetition—
five years after the initial award. Thus,
although this change results in potential
more opportunities for small business
manufacturers in years six and beyond,
the benefits of the additional
opportunities are not quantifiable
because of lack of information about the
domestic small-business manufacturing
base in the future.
c. Require information from 8(a)
applicants about the terms and
restrictions of a retirement account only
at the request of SBA, instead of in every
instance.
SBA proposes to amend
§ 124.104(c)(2)(ii) to eliminate the prior
requirement that 8(a) applicants must
provide the terms and conditions of
retirement accounts in order to have the
values of those accounts excluded from
the owner’s net worth. SBA would
require the applicant to submit
documentation of a retirement account
only upon SBA’s request.
SBA processes approximately 600 8(a)
applications from individual-owned
firms per year. Based on sampling, SBA
found that 70 percent of those
applications disclosed retirement
accounts to SBA. Thus, this regulatory
change will reduce the documentation
burden for about 420 8(a) applicants per
year. SBA estimates the existing burden
to be 20 minutes per applicant, and the
benefit of the proposed rule’s
cancellation of the documentation
requirement therefore to be about
$15,500 per year.2
d. Permit 8(a) applications to go
forward where the firm or its affected
principals can demonstrate that federal
financial obligations have been settled
and discharged or forgiven by the
Federal Government.
Section 124.108(e) of the proposed
rule states that an applicant will not be
denied eligibility to the 8(a) program on
the basis that the applicant’s prior
federal financial obligations have been
settled and either discharged or forgiven
by the Federal Government. In rare
cases, SBA has denied 8(a) eligibility
based on prior federal financial
obligations, even though the
government has discharged the
obligation. SBA internal data shows that
SBA rejects approximately two
applications per year on this basis. SBA
estimates that the average financial
obligation in those cases is $10,000.
Therefore, this proposed change results
in an estimated annual benefit to future
8(a) applications of $20,000, from an
1 From 2.5 hours saved valued at the median wage
of $55.41 for General and Operations Managers,
according to the Bureau of Labor Statistics (BLS)
General and Operations Managers (bls.gov)
(retrieved April 12, 2022), plus 100% for benefits
and overhead.
2 From 20 minutes of time saved by 420
applicants valued at the median wage of $55.41 for
General and Operations Managers, according to the
BLS General and Operations Managers (bls.gov)
(retrieved April 12, 2022), plus 100% for benefits
and overhead.
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average of two applicants annually with
obligations of $10,000 each.
e. Delete bank fees from the list of
exclusions in the subcontracting base.
SBA would amend § 125.3(a)(1)(iii) to
delete bank fees from the list of costs
excludable from the subcontracting base
when a contractor seeks to comply with
a subcontracting plan. After reviewing
Federal Deposit Insurance Corporation
(FDIC) and Federal Reserve data, SBA
estimates that the average bank fee
expense per account holder is $300 per
year. The number of contractors that
hold a subcontracting plan is 5,500.
Thus, the total amount to be added to
the subcontracting base across all
contractors is $1.65 million.
The benefit to small-business
subcontractors of the amendment would
be additional dollars subcontracted to
small business. Assuming that the total
level of small-business subcontracting
stays consistent at 32%, contractors
would spend $525,000 of the added
amount with small businesses.
However, 18% of economy-wide
spending on banking services is spent
with banks that qualify as small
businesses. Assuming contractor
spending approximates economy-wide
spending, this equates to $297,000 of
the current spending on bank fees
through contractors with subcontracting
plans. Thus, after subtracting the
amount already spent with smallbusiness banks, new spending with
small business subcontractors would be
$228,000 annually.
The proposed rule would pose a cost
to contractors to track their spending on
bank fees in order to include them in
the subcontracting base. This may
require updating vendor management
systems. To determine a cost per
contractor for this change, SBA
reviewed the Paperwork Reduction Act
Supporting Statement for the FAR’s
Subcontracting Plan forms, under OMB
Control No. 9000–0007. Considering the
burdens estimated in the Supporting
Statement, SBA estimates that the
average cost of this change would come
to $100 per contractor annually. The
cost therefore amounts to $550,000
across all contractors with
subcontracting plans.
The total regulatory impact is
therefore a net cost of $322,000
annually. The benefits accrue to small
business subcontractors, whereas the
cost is borne by other-than-small prime
contractors with subcontracting plans.
f. Require businesses to include
indirect costs in their subcontracting
plans.
Section 125.3(c)(1)(iv) would require
contractors with individual
subcontracting plans to report indirect
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costs in their individual subcontracting
reports (ISRs). Contractors already are
required to report indirect costs in their
summary subcontracting reports (SSRs).
Thus, the only cost associated with the
proposed change would be the cost of
allocating indirect costs to the ISRs. To
determine a cost per contractor for this
change, SBA reviewed the Paperwork
Reduction Act Supporting Statement for
the FAR’s Subcontracting Plan forms,
under OMB Control No. 9000–0007.
Considering the burdens estimated in
the Supporting Statement, SBA
estimates the cost to be $50 per
contractor with an ISR.3 In FY20, 4,389
contractors submitted an ISR. Thus, the
aggregate cost of this proposed change
amounts to $220,000 annually.
There may be a benefit to the change
because agencies use the ISR to evaluate
a contractor’s compliance with its
subcontracting plan. Thus, by including
more indirect costs in the base
subcontracting value, contractors will
have the incentive to subcontract more
to small businesses in order to meet
small business goals in their
subcontracting plans. This effect may be
short-lived because contractors can
compensate by negotiating lower
subcontracting goals. Thus, SBA cannot
quantify the potential benefit for this
change.
g. Require agencies to assign a
negative past performance rating to a
small-business contract awardee where
the contracting officer determined that
the small business failed to meet
required limitations on subcontracting.
SBA proposes to require that, where
a contracting officer determines that at
the conclusion of contract performance
a small business contractor fails to
satisfy the limitations on subcontracting
for a particular contract, that contractor
would receive a negative pastperformance rating for that contract for
the appropriate factor or subfactor in
accordance with FAR 42.1503. SBA
determines that this change does not
have any incremental cost or
incremental benefit. Agencies already
are required to submit past performance
ratings. Though a negative rating might
affect a firm’s ability to obtain a contract
in the future, there is no way to gauge
the impact on the firm’s odds, and,
regardless, the end result would likely
be only a transfer in the contract award
from the noncompliant firm to a firm
without a negative past-performance
rating. This change therefore does not
present a net cost nor net benefit.
3 This number is based on results from OMB’s ICR
Agency Submission, available at View Information
Collection Request (ICR) Package (reginfo.gov).
Retrieved April 12, 2022.
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3. What are the alternatives to this rule?
The alternative to the proposed rule
would be to keep SBA’s processes and
procedures as currently stated in the
Code of Federal Regulations. However,
because so much of this proposed rule
codifies practices and interpretations
already in place, using the alternative
would impose an information-search
cost on 8(a) BD participants in
particular and small business
contractors in general. Many of the
clarifications in this proposed rule
already have been applied at the case
level but are not widely known. This
proposed rule makes those clarifications
known to the public.
Additionally, this proposed rule
implements section 863 of NDAA FY22,
regarding changes to SAM.gov after an
adverse SBA status decision. There is no
alternative to implementing this
statutory requirement.
Summary of Costs and Cost Savings
SBA calculates $262,000 in annual
aggregate benefits, and approximately
$770,500 in annual aggregate costs, with
many costs and benefits uncertain. SBA
calculates the net annual cost of the
proposed rule to be $500,000.
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 13563
Executive Order 13563, Improving
Regulation and Regulatory Review,
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
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public; and (c) seek the views of those
who are likely to be affected by the
rulemaking, even before issuing a notice
of proposed rulemaking. As far as
practicable or relevant, SBA considered
these requirements in developing this
proposed rule, as discussed below.
1. Did the agency use the best
available techniques to quantify
anticipated present and future costs
when responding to Executive Order
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, DSBS, and
SAM.
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. SBA has also discussed
some of the proposals in this rule with
stakeholders at various small business
on-line procurement conferences.
Flexibility: Did the agency identify
and consider regulatory approaches that
reduce burdens and maintain flexibility
and freedom of choice for the public?
The proposed rule is intended to
eliminate confusion in its existing
regulations and reduce unnecessary
burdens on small business.
Congressional Review Act (5 U.S.C. 801–
808)
The Congressional Review Act, 5
U.S.C. 801 et seq., as amended by the
Small Business Regulatory Enforcement
Fairness Act of 1996, generally provides
that before a ‘‘major rule’’ may take
effect, the agency promulgating the rule
must submit a rule report, which
includes a copy of the rule, to each
House of the Congress and to the
Comptroller General of the United
States. SBA will submit a report
containing this proposed rule and other
required information to the U.S. Senate,
the U.S. House of Representatives, and
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the Comptroller General of the United
States. A major rule cannot take effect
until 60 days after it is published in the
Federal Register. This proposed rule is
not anticipated to be a ‘‘major rule’’
under 5 U.S.C. 804(2).
Paperwork Reduction Act, 44 U.S.C. Ch.
35
This rule does not impose additional
reporting or recordkeeping requirements
under the Paperwork Reduction Act, 44
U.S.C. chapter 35.
In 2019, SBA revised its regulations to
give contracting officers discretion to
request information demonstrating
compliance with the limitations on
subcontracting requirements. See 84 FR
65647 (Nov. 29, 2019). In conjunction
with this revision, SBA requested an
Information Collection Review by OMB
(Limitations on Subcontracting
Reporting, OMB Control Number 3245–
0400). OMB approved the Information
Collection. The proposed rule would
not alter the contracting officer’s
discretion to require a contractor to
demonstrate its compliance with the
limitations on subcontracting at any
time during performance and upon
completion of a contract. It merely
provides consequences where a
contracting officer, utilizing his or her
discretion, determines that a contractor
did not meet the applicable limitation of
subcontracting requirement. The
estimated number of respondents,
burden hours, and costs remain the
same as that identified by SBA in the
previous Information Collection. As
such, SBA believes this provision is
covered by its existing Information
Collection, Limitations on
Subcontracting Reporting.
Regulatory Flexibility Act, 5 U.S.C. 601–
612
The Regulatory Flexibility Act (RFA),
5 U.S.C. 601, requires administrative
agencies to consider the effect of their
actions on small entities, small
nonprofit 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
involves requirements for participation
in SBA’s 8(a) Business Development
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(BD) Program. Some BD Participants are
owned by Tribes, ANCs, NHOs, or
CDCs. As such, the proposed rule relates
to various small entities. The number of
entities affected by the proposed rule
includes all Participants in SBA’s 8(a)
BD program. For reference, SBA
Business Opportunity Specialists
assisted over 11,000 entities in 2020.
This proposed rule implements a
statutory enactment and a federal court
decision and codifies practices and
interpretations already in place for
Participants. In doing so, it adds
reporting requirements but these
requirements relate to information
collected in the normal course of
business. SBA therefore expects the
collection costs to be de minimis and
the costs of reporting to be minimal.
Moreover, the reporting requirements,
such as the requirement that contractors
report indirect costs in their individual
subcontracting reports (ISRs), will not
fall on small entities. Some of the
proposed rule’s changes, such as that to
documentation for retirement plans,
reduce reporting requirements for small
entities that are Participants.
Additionally, the proposed rule’s
clarification of practices and
interpretations decreases uncertainty for
Participants. Therefore, SBA does not
believe the proposed rule would have a
disparate impact on small entities or
would impose any additional significant
costs on them. For the reasons
discussed, SBA certifies that this
proposed rule does not have a
significant economic impact on a
substantial number of small entities.
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.
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13 CFR Part 127
Government contracts, Reporting and
recordkeeping requirements, Small
businesses.
Accordingly, for the reasons stated in
the preamble, SBA proposes to amend
13 CFR parts 121, 124, 125, 126, and
127 as follows:
PART 121—SMALL BUSINESS SIZE
REGULATIONS
1. The authority citation for part 121
is revised to read as follows:
■
Authority: 15 U.S.C. 632, 634(b)(6),
636(a)(36), 662, 694a(9), and 9012.
2. Amend § 121.103 by:
a. Revising paragraph (h) introductory
text and the third sentence of Example
2 to paragraph (h) introductory text;
■ b. Redesignating paragraphs (h)(1)
through (4) as paragraphs (h)(2) through
(5), respectively;
■ c. Adding a new paragraph (h)(1);
■ d. Revising newly redesignated
paragraphs (h)(3) and (4); and
■ e. Adding paragraph (i).
The revisions and additions read as
follows:
■
■
§ 121.103 How does SBA determine
affiliation?
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*
*
*
*
*
(h) Affiliation based on joint ventures.
A joint venture is an association of
individuals and/or concerns with
interests in any degree or proportion
intending 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
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. However, a joint
venture may be issued an order under
a previously awarded contract beyond
the two-year period. 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 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
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date of the first award. The same two (or
more) entities may create additional
joint ventures, and each new joint
venture 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 interrelationship or contractual dependence
between the same joint venture partners
may lead to a finding of general
affiliation between and among them.
SBA may also determine that the
relationship between a prime contractor
and its subcontractor is a joint venture
pursuant to paragraph (h)(3) 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 2 to paragraph (h)
introductory text. * * * On March 19,
year 3, XY receives its fifth contract.
* * *
*
*
*
*
*
(1) Form of joint venture. 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 or
agreement; and may be in the form of a
formal or informal partnership or exist
as a separate limited liability company
or other separate legal entity.
(i) If a joint venture exists as a formal
separate legal entity, it cannot not be
populated with individuals intended to
perform contracts awarded to the joint
venture for any contract or agreement
which is set aside or reserved for small
business, unless all parties to the joint
venture are similarly situated as that
term is defined in part 125 of this
chapter (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).
(ii) A populated joint venture that is
not comprised entirely of similarly
situated entities will be ineligible for
any contract or agreement which is set
aside or reserved for small business.
(iii) In determining the size of a
populated joint venture, SBA will
aggregate the revenues or employees of
all partners to the joint venture.
*
*
*
*
*
(3) Ostensible subcontractors. A
contractor and its ostensible
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subcontractor are treated as joint
venturers for size determination
purposes. An ostensible subcontractor is
a subcontractor that is not a similarly
situated entity, as that term is defined
in § 125.1 of this chapter, and performs
primary and vital requirements of a
contract, or of an order, or is a
subcontractor upon which the prime
contractor is unusually reliant. As long
as each concern is small under the size
standard corresponding to the NAICS
code assigned to the contract (or the
prime contractor is small if the
subcontractor is the SBA-approved
mentor to the prime contractor), the
arrangement will qualify as a small
business.
(i) All aspects of the relationship
between the prime and subcontractor
are considered, including, but not
limited to, the terms of the proposal
(such as contract management, transfer
of the subcontractor’s incumbent
managers, technical responsibilities,
and the percentage of subcontracted
work), agreements between the prime
and subcontractor (such as bonding
assistance or the teaming agreement),
whether the subcontractor is the
incumbent contractor and is ineligible
to submit a proposal because it exceeds
the applicable size standard for that
solicitation, and whether the prime
contractor relies on the subcontractor’s
experience because it lacks relevance
experience of its own.
(ii) In a general construction contract,
the primary and vital requirements of
the contract are the management and
oversight of the project, not the actual
construction or specialty trade
construction work performed.
(4) Receipts/employees attributable to
joint venture partners. For size
purposes, a concern must include in its
receipts its proportionate share of joint
venture receipts. Proportionate receipts
do not include proceeds from
transactions between the concern and
its joint ventures (e.g., subcontracts from
a joint venture entity to joint venture
partners) already accounted for in the
concern’s tax return. In determining the
number of employees, a concern must
include in its total number of employees
its proportionate share of joint venture
employees. For the calculation of
receipts, 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. For a
populated joint venture (where work is
performed by the joint venture entity
itself and not by the individual joint
venture partners) the appropriate share
is the same percentage as the joint
venture partner’s percentage ownership
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share in the joint venture. For the
calculation of employees, the
appropriate share is the same percentage
of employees as the joint venture
partner’s percentage ownership share in
the joint venture, after first subtracting
any joint venture employee already
accounted for in one of the partner’s
employee counts.
Example 1 to paragraph (h)(4). 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 already
account for the $4M in transactions
between A and Joint Venture AB.
*
*
*
*
*
(i) Affiliation based on franchise and
license agreements. The restraints
imposed on a franchisee or licensee by
its franchise or license agreement
relating to standardized quality,
advertising, accounting format and other
similar provisions, generally will not be
considered in determining whether the
franchisor or licensor is affiliated with
the franchisee or licensee provided the
franchisee or licensee has the right to
profit from its efforts and bears the risk
of loss commensurate with ownership.
Affiliation may arise, however, through
other means, such as common
ownership, common management or
excessive restrictions upon the sale of
the franchise interest.
■ 3. Amend § 121.404 by:
■ a. Revising paragraphs (a)(1)(i)(B),
(a)(1)(ii)(B), and (a)(1)(iv);
■ b. Removing the reference
‘‘§ 121.103(h)(2)’’ in paragraph (d) and
adding in its place ‘‘§ 121.103(h)(3)’’;
■ c. Revising the first sentence in
paragraph (g)(2)(i) and the second
sentence in paragraph (g)(2)(iii);
■ d. Removing the reference
‘‘§ 121.103(h)(4)’’ in paragraph (g)(5)
and adding in its place
‘‘§ 121.103(h)(3)’’; and
■ e. Adding paragraph (g)(6).
The revisions and addition read as
follows:
§ 121.404 When is the size status of a
business concern determined?
(a) * * *
(1) * * *
(i) * * *
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(B) Set-aside Multiple Award
Contracts. Except as set forth in
§ 124.503(i)(1)(iv) of this chapter for sole
source 8(a) orders, for a Multiple Award
Contract that is set aside or reserved for
small business (i.e., small business setaside, 8(a) small business, servicedisabled veteran-owned small business,
HUBZone small business, or womenowned small business), if a business
concern (including a joint venture) is
small at the time of offer and contractlevel 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) * * *
(B) Set-aside Multiple Award
Contracts. Except as set forth in
§ 124.503(i)(1)(iv) of this chapter for sole
source 8(a) orders, for a Multiple Award
Contract that is set aside or reserved for
small business (i.e., small business setaside, 8(a) small business, servicedisabled veteran-owned small business,
HUBZone small business, or womenowned small business), if a business
concern (including a joint venture) is
small at the time of offer and contractlevel recertification for discrete
categories on the Multiple Award
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.
*
*
*
*
*
(iv) Multiple award contract where
price not required. For a Multiple
Award Contract, where concerns are not
required to submit price as part of the
offer for the contract, size for the
contract will be determined as of the
date of initial offer, which may not
include price. Size for set-aside orders
will be determined in accordance with
paragraph (a)(1)(i)(A) or (B) or
(a)(1)(ii)(A) or (B) of this section, as
appropriate.
*
*
*
*
*
(g) * * *
(2)(i) In the case of a merger,
acquisition, or sale which results in a
change in controlling interest under
§ 121.103, where contract novation is
not required, the contractor must,
within 30 days of the transaction
becoming final, recertify its small
business size status to the procuring
agency, or inform the procuring agency
that it is other than small. * * *
*
*
*
*
*
(iii) * * * If the merger, sale, or
acquisition (including agreements in
principle) occurs within 180 days of the
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date of an offer relating to the award of
a contract, order, or agreement and the
offeror is unable to recertify as small, it
will not be eligible as a small business
to receive the award of the contract,
order, or agreement. * * *
*
*
*
*
*
(6) Where a joint venture must
recertify its small business size status
under paragraph (g) of this section, the
joint venture can recertify as small
where all parties to the joint venture
qualify as small at the time of
recertification, or the prote´ge´ small
business in a still active mentor-prote´ge´
joint venture qualifies as small at the
time of recertification. A joint venture
can recertify as small even though the
date of recertification occurs more than
two years after the joint venture
received its first contract award (i.e.,
recertification is not considered a new
contract award under § 121.103(h)).
*
*
*
*
*
■ 4. Amend § 121.411 by revising
paragraph (c) to read as follows:
§ 121.411 What are the size procedures for
SBA’s Section 8(d) Subcontracting
Program?
*
*
*
*
*
(c) Notice of awardee. Upon
determination of the successful
subcontract offeror for a competitive
subcontract over the simplified
acquisition threshold, but prior to
award, the prime contractor must
inform each unsuccessful subcontract
offeror in writing of the name and
location of the apparent successful
offeror.
*
*
*
*
*
■ 5. Amend § 121.507 by adding
paragraph (d) to read as follows:
§ 121.507 What are the size standards and
other requirements for the purchase of
Government-owned timber (other than
Special Salvage Timber)?
*
*
*
*
*
(d) The Director of Government
Contracting (D/GC) may waive one or
more of the requirements set forth in
paragraphs (a)(3) and (4) of this section
in limited circumstances where
conditions make the requirement(s)
impractical or prohibitive. A request for
waiver must be made to the D/GC and
contain facts, arguments, and any
appropriate supporting documentation
as to why a waiver should be granted.
■ 6. Amend § 121.702 in paragraph
(c)(7) by revising the first sentence and
adding a sentence following the first
sentence to read as follows:
§ 121.702 What size and eligibility
standards are applicable to the SBIR and
STTR programs?
*
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(c) * * *
(7) * * * A concern and its ostensible
subcontractor are treated as joint
venturers. As such, they are affiliates for
size determination purposes and must
meet the ownership and control
requirements applicable to joint
ventures. * * *
*
*
*
*
*
■ 6. Amend § 121.1001 by revising
paragraphs (a)(6)(i), (a)(8)(i), (a)(9)(i),
(b)(2)(ii) introductory text, and
(b)(2)(ii)(A) and (C) to read as follows:
jspears on DSK121TN23PROD with PROPOSALS2
§ 121.1001 Who may initiate a size protest
or request a formal size determination?
(a) * * *
(6) * * *
(i) Any offeror for a specific HUBZone
set-aside contract that the contracting
officer has not eliminated from
consideration for any procurementrelated reason, such as nonresponsiveness, technical
unacceptability, or outside of the
competitive range;
*
*
*
*
*
(8) * * *
(i) Any offeror for a specific servicedisabled veteran-owned small business
set-aside contract that the contracting
officer has not eliminated from
consideration for any procurementrelated reason, such as nonresponsiveness, technical
unacceptability, or outside of the
competitive range;
*
*
*
*
*
(9) * * *
(i) Any offeror for a specific contract
set aside for WOSBs or WOSBs owned
by one or more women who are
economically disadvantaged (EDWOSB)
that the contracting officer has not
eliminated from consideration for any
procurement-related reason, such as
non-responsiveness, technical
unacceptability or outside of the
competitive range;
*
*
*
*
*
(b) * * *
(2) * * *
(ii) Concerning individual sole source
8(a) contract awards and competitive
8(a) contract awards where SBA cannot
verify the eligibility of the apparent
successful offeror because SBA finds the
concern to be other than small, the
following entities may request a formal
size determination:
(A) The Participant nominated for
award of the particular sole source
contract, or found to be ineligible for a
competitive 8(a) contract due to its size;
*
*
*
*
*
(C) The SBA District Director in the
district office that services the
Participant, the Associate Administrator
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for Business Development, or the
Associate General Counsel for
Procurement Law.
*
*
*
*
*
■ 7. Amend § 121.1004 by:
■ a. Revising paragraph (a)(1);
■ b. Adding the words ‘‘without a
reserve’’ at the end of paragraph
(a)(2)(iii); and
■ c. Adding paragraphs (f) and (g).
The revision and addition read as
follows:
§ 121.1004
protests?
What time limits apply to size
(a) * * *
(1) Sealed bids or sales (including
protests on partial set-asides and
reserves of Multiple Award Contracts
and set-asides of orders against Multiple
Award Contracts). (i) A protest must be
received by the contracting officer prior
to the close of business on the 5th day,
exclusive of Saturdays, Sundays, and
legal holidays, after bid opening for:
(A) The contract;
(B) An order issued against a Multiple
Award Contract if the contracting officer
requested a new size certification in
connection with that order; or
(C) 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.
(ii) Where the identified low bidder is
determined to be ineligible for award, a
protest of any other identified low
bidder must be received prior to the
close of business on the 5th day,
exclusive of Saturdays, Sundays, and
legal holidays, after the contracting
officer has notified interested parties of
the identity of that low bidder.
*
*
*
*
*
(f) Apparent successful offeror. A
party with standing, as set forth in
§ 121.1001(a), may file a protest only
against an apparent successful offeror or
an offeror in line to receive an award.
(g) GAO corrective action. SBA will
dismiss any size protest relating to an
initial apparent successful offeror where
an agency decides to reevaluate offers as
a corrective action in response to a
protest before the Government
Accountability Office (GAO). When the
apparent successful offeror is
announced after reevaluation, interested
parties will again have the opportunity
to protest the size of the new or same
apparent successful offeror within five
business days after such notification.
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8. Amend § 121.1009 by revising
paragraphs (a)(1) and (3) and (g)(5) to
read as follows:
■
§ 121.1009 What are the procedures for
making the size determination?
(a) * * *
(1) After receipt of a protest or a
request for a formal size determination:
(i) If no protest is pending before
GAO, the SBA Area Office will issue a
formal size determination within 15
business days, if possible;
(ii) If a protest is pending before GAO,
the SBA Area Office will place the size
determination case in suspense. Once
GAO issues a decision, the SBA the
Area Office will recommence the size
determination process and issue a
formal size determination within 15
business days of the GAO decision, if
possible.
*
*
*
*
*
(3) If SBA does not issue its
determination in accordance with
paragraph (a)(1) of this section (or
request an extension that is granted), the
contracting officer may award the
contract if he or she determines in
writing that there is an immediate need
to award the contract and that waiting
until SBA makes its determination will
be disadvantageous to the Government.
Notwithstanding such a determination,
the provisions of paragraph (g) of this
section apply to the procurement in
question.
*
*
*
*
*
(g) * * *
(5) A concern determined to be other
than small under a particular size
standard is ineligible for any
procurement or any assistance
authorized by the Small Business Act or
the Small Business Investment Act of
1958 which requires the same or a lower
size standard, unless SBA recertifies the
concern to be small pursuant to
§ 121.1010 or OHA reverses the adverse
size determination. After an adverse size
determination, a concern cannot selfcertify as small under the same or lower
size standard unless it is first recertified
as small by SBA. If a concern does so,
it may be in violation of criminal laws,
including section 16(d) of the Small
Business Act, 15 U.S.C. 645(d). If the
concern has already certified itself as
small under the same or a smaller size
standard on a pending procurement or
on an application for SBA assistance,
the concern must immediately inform
the contracting officer or responsible
official of the adverse size
determination.
(i) Not later than two days after the
date on which SBA issues a final size
determination finding a business
concern to be other than small, such
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concern must update its size status in
the System for Award Management (or
any successor system).
(ii) If a business concern fails to
update its size status in the System for
Award Management (or any successor
system) in response to an adverse size
determination, SBA will make such
update within two days of the
business’s failure to do so.
*
*
*
*
*
■ 9. Amend § 121.1203 by:
■ a. Redesignating paragraph (d) as
paragraph (g);
■ b. Adding a new paragraph (d) and
paragraphs (e) and (f); and
■ c. In newly redesignated paragraph
(g)(2), removing ‘‘(d)(1)’’ and adding
‘‘(g)(1)’’ in its place.
The additions read as follows:
§ 121.1203 When will a waiver of the
Nonmanufacturer Rule be granted for an
individual contract?
jspears on DSK121TN23PROD with PROPOSALS2
*
*
*
*
*
(d) Applicability of individual waiver.
An individual waiver applies only to
the contract for which it is granted and
does not apply to modifications outside
the scope of the contract or other
procurement actions (e.g., follow-on or
bridge contracts).
(e) Long term contracts. SBA will not
grant an individual waiver in
connection with a long-term contract
(i.e., a contract with a duration of longer
than five years, including options).
(f) Multiple item procurements. For a
multiple item procurement, a waiver
must be sought and granted for each
item for which the procuring agency
believes no small business manufacturer
or processor can reasonably be expected
to offer a product meeting the
specifications of the solicitation. SBA’s
waiver applies only to the specific
item(s) identified, not to the entire
contract.
*
*
*
*
*
■ 10. Amend § 121.1204 by:
■ a. Revising paragraphs (b)(1)(i) and
(ii);
■ b. Adding a sentence after the first
sentence in paragraph (b)(1)(iii);
■ c. Redesignating paragraphs (b)(2) and
(3) as paragraphs (b)(3) and (4),
respectively;
■ d. Adding a new paragraph (b)(2);
■ e. Revising newly redesignated
paragraph (b)(4); and
■ f. Adding paragraph (b)(5).
The revisions and additions read as
follows:
§ 121.1204 What are the procedures for
requesting and granting waivers?
*
*
*
(b) * * *
(1) * * *
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(i) A definitive statement of each
specific item sought to be waived and
justification as to why the specific item
is required;
(ii) The proposed solicitation number,
NAICS code, dollar amount of the
procurement, dollar amount of the
item(s) for which a waiver is sought,
and a brief statement of the procurement
history;
(iii) * * * For a multiple item
procurement, a contracting officer must
determine that no small business
manufacturer or processor reasonably
can be expected to offer each item for
which a waiver is sought. * * *
*
*
*
*
*
(2) Unless an agency has justified a
brand-name acquisition, the market
research conducted to support the
waiver request should be tailored to
attract the attention of potential small
business manufacturers or processors,
not resellers or distributors.
*
*
*
*
*
(4) SBA will examine the contracting
officer’s determination and any other
information it deems necessary to make
an informed decision on the individual
waiver request.
(i) If SBA’s research verifies that no
small business manufacturers or
processors exist for the item, the
Director, Office of Government
Contracting will grant an individual,
one-time waiver.
(ii) If a small business manufacturer
or processor is found for the product in
question, the Director, Office of
Government Contracting will deny the
request.
(iii) Where an agency requests a
waiver for multiple items, SBA may
grant a waiver for all items requested,
deny a waiver for all items requested, or
grant a waiver for some but not all of the
items requested. SBA’s determination
will specifically identify the items for
which a waiver is granted, and the
procuring agency must then identify the
specific items for which the waiver
applies in its solicitation.
(iv) The Director, Office of
Government Contracting’s decision to
grant or deny a waiver request
represents the final agency decision by
SBA.
(5) A nonmanufacturer rule waiver for
a specific solicitation expires one year
after SBA’s determination to grant the
waiver. This means that contract award
must occur within one year of the date
SBA granted the waiver. Where a
contract is not awarded within one year,
the procuring agency must come back to
SBA with revised market research
requesting that the waiver (or waivers in
the case of a multiple item procurement)
be extended.
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55667
[Amended]
11. Amend § 121.1205 by removing
‘‘https://www.sba.gov/aboutsba/
sbaprograms/gc/programs/gc_waivers_
nonmanufacturer.html’’ and adding in
its place ‘‘https://www.sba.gov/
document/support-non-manufacturerrule-class-waiver-list’’.
■
PART 124—8(a) BUSINESS
DEVELOPMENT/SMALL
DISADVANTAGED BUSINESS STATUS
DETERMINATIONS
12. 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, 42 U.S.C. 9815; and Pub.
L. 99–661, 100 Stat. 3816; Sec. 1207, Pub. L.
100–656, 102 Stat. 3853; Pub. L. 101–37, 103
Stat. 70; Pub. L. 101–574, 104 Stat. 2814; Sec.
8021, Pub. L. 108–87, 117 Stat. 1054; and
Sec. 330, Pub. L. 116–260.
13. Amend § 124.102 by revising
paragraph (c) to read as follows:
■
§ 124.102 What size business is eligible to
participate in the 8(a) BD program?
*
*
*
*
*
(c) A concern whose application is
denied due to size by 8(a) BD program
officials may request a formal size
determination with the SBA
Government Contracting Area Office
serving the geographic area in which the
principal office of the business is
located under part 121 of this chapter.
Where the SBA Government Contracting
Area Office determines that an applicant
qualifies as a small business concern for
the size standard corresponding to its
primary NAICS code:
(1) The Associate Administrator for
Business Development (AA/BD) will
certify the concern as eligible to
participate in the 8(a) BD program if size
was the only reason for decline; or
(2) The concern may reapply for
participation in the 8(a) BD program at
any point after 90 days from the AA/
BD’s decline if size was not the only
reason for decline. In such a case, the
AA/BD will accept the size
determination as conclusive of the
concern’s small business status,
provided the applicant concern has not
completed an additional fiscal year in
the intervening period and SBA believes
that the additional fiscal year changes
the applicant’s size.
§ 124.103
[Amended]
14. Amend § 124.103 by removing the
words ‘‘physical handicap’’ in
paragraph (c)(2)(i) and adding in their
place the words ‘‘identifiable
disability’’.
■ 15. Amend § 124.104 by:
■ a. Revising the second sentence of
paragraph (c)(2)(ii);
■
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b. Removing paragraph (c)(2)(iii); and
c. Redesignating paragraph (c)(2)(iv)
as paragraph (c)(2)(iii).
The revision reads as follows:
■
■
§ 124.104 Who is economically
disadvantaged?
*
*
*
*
*
(c) * * *
(2) * * *
(ii) * * * In order to properly assess
whether funds invested in a retirement
account may be excluded from an
individual’s net worth, SBA may require
the individual to provide information
about the terms and restrictions of the
account to SBA and certify that the
retirement account is legitimate.
*
*
*
*
*
■ 16. Amend § 124.105 by:
■ a. Revising paragraphs (h)(2) and
(i)(1); and
■ b. Adding a sentence after the first
sentence in paragraph (i)(2).
The revisions and addition read as
follows:
§ 124.105 What does it mean to be
unconditionally owned by one or more
disadvantaged individuals?
jspears on DSK121TN23PROD with PROPOSALS2
*
*
*
*
*
(h) * * *
(2) A non-Participant concern in the
same or similar line of business or a
principal of such concern may generally
not own more than a 10 percent interest
in a Participant that is in the
developmental stage or more than a 20
percent interest in a Participant in the
transitional stage of the program, except
that:
(i) A former Participant in the same or
similar line of business or a principal of
such a former Participant (except those
that have been terminated from 8(a) BD
program participation pursuant to
§§ 124.303 and 124.304) may have an
equity ownership interest of up to 20
percent in a current Participant in the
developmental stage of the program or
up to 30 percent in a transitional stage
Participant; and
(ii) A business concern approved by
SBA to be a mentor pursuant to § 125.9
of this chapter may own up to 40
percent of its 8(a) Participant prote´ge´ as
set forth in § 125.9(d)(2) of this chapter,
whether or not that concern is in the
same or similar line of business as the
Participant.
(i) * * *
(1) Any Participant or former
Participant that is performing one or
more 8(a) contracts may substitute one
disadvantaged individual or entity for
another disadvantaged individual or
entity without requiring the termination
of those contracts or a request for waiver
under § 124.515, as long as it receives
SBA’s approval prior to the change.
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(2) * * * In determining whether a
non-disadvantaged individual involved
in a change of ownership has more than
a 20 percent interest in the concern,
SBA will aggregate the interests of all
immediate family members. * * *
*
*
*
*
*
■ 17. Amend § 124.107 by revising the
introductory text to read as follows:
§ 124.107
What is potential for success?
SBA must determine that with
contract, financial, technical, and
management support from the 8(a) BD
program, the applicant concern is able
to perform 8(a) contracts and possess
reasonable prospects for success in
competing in the private sector. To do
so, the applicant concern must show
that it has operated and received
contracts (either in the private sector, at
the state or local government level, or
with the Federal Government) in its
primary industry classification for at
least two full years immediately prior to
the date of its 8(a) BD application,
unless a waiver for this requirement is
granted pursuant to paragraph (b) of this
section.
*
*
*
*
*
■ 18. Amend § 124.108 by adding a
sentence at the end of paragraph (e) to
read as follows:
§ 124.108 What other eligibility
requirements apply for individuals or
businesses?
*
*
*
*
*
(e) * * * However, a firm will not be
ineligible to participate in the 8(a) BD
program if the firm or the affected
principals can demonstrate that the
financial obligations owed have been
settled and discharged/forgiven by the
Federal Government.
■ 19. Amend § 124.109 by revising the
second sentence of paragraph (c)(1) and
paragraph (c)(6)(i) to read as follows:
§ 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?
*
*
*
*
*
(c) * * *
(1) * * * Where an applicant or
participating concern is owned by a
federally recognized tribe, the concern’s
articles of incorporation, partnership
agreement, limited liability company
articles of organization, or other similar
incorporating documents for tribally
incorporated applicants must contain
express sovereign immunity waiver
language, or a ‘‘sue and be sued’’ clause
which designates United States Federal
Courts to be among the courts of
competent jurisdiction for all matters
relating to SBA’s programs including,
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but not limited to, 8(a) BD program
participation, loans, and contract
performance. * * *
*
*
*
*
*
(6) * * *
(i) It has been in business for at least
two years, as evidenced by income tax
returns (individual or consolidated) or
financial statements (either audited,
reviewed or in-house as set-forth in
§ 124.602) for each of the two previous
tax years showing operating revenues in
the primary industry in which the
applicant seeks 8(a) BD certification; or
*
*
*
*
*
■ 20. Amend § 124.110 by:
■ a. Adding paragraph (d)(3);
■ b. Redesignating paragraphs (e)
through (h) as paragraphs (f) through (i),
respectively; and
■ c. Adding a new paragraph (e).
The additions 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?
*
*
*
*
*
(d) * * *
(3) The individuals responsible for the
management and daily operations of an
NHO-owned concern cannot manage
more than two Program Participants at
the same time.
(i) An individual’s officer position,
membership on the board of directors,
or position as a Native Hawaiian leader
does not necessarily imply that the
individual is responsible for the
management and daily operations of a
given concern. SBA looks beyond these
corporate formalities and examines the
totality of the information submitted by
the applicant to determine which
individual(s) manage the actual day-today operations of the applicant concern.
(ii) NHO officers, board members,
and/or leaders may control a holding
company overseeing several NHOowned business concerns, provided
they do not actually control the day-today management of more than two
current 8(a) BD Program Participant
firms.
(iii) Because an individual may be
responsible for the management and
daily business operations of two NHOowned concerns, the full-time devotion
requirement (§ 124.106(a)) does not
apply to NHO-owned applicants and
Participants.
(e) For corporate entities, an NHO
must unconditionally own at least 51
percent of the voting stock and at least
51 percent of the aggregate of all classes
of stock. For non-corporate entities, an
NHO must unconditionally own at least
a 51 percent interest.
*
*
*
*
*
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§ 124.111
[Amended]
21. Amend § 124.111 by removing the
words ‘‘SIC code’’ in paragraph (d)
introductory text and adding in their
place the words ‘‘NAICS code.’’
■ 22. Amend § 124.204 by revising
paragraph (a) to read as follows:
■
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§ 124.204 How does SBA process
applications for 8(a) BD program
admission?
(a) The AA/BD is authorized to
approve or decline applications for
admission to the 8(a) BD program.
(1) Except as set forth in paragraph
(a)(2) of this section, the Division of
Program Certification and Eligibility
(DPCE) will receive, review and
evaluate all 8(a) BD applications.
(2) Where an applicant answers on its
electronic application that it is not a forprofit business (see §§ 121.105 of this
chapter and 124.104), that one or more
of the individuals upon whom
eligibility is based is not a United States
citizen (see § 124.104), that the
applicant or one or more of the
individuals upon whom eligibility is
based has previously participated in the
8(a) BD program (see § 124.108(b)), or
that the applicant is not an entityowned business and has generated no
revenues (see § 124.107(a) and
(b)(1)(iv)), its application will be closed
automatically and it will be prevented
from completing a full electronic
application.
(3) SBA will advise each program
applicant within 15 days after the
receipt of an application whether the
application is complete and suitable for
evaluation and, if not, what additional
information or clarification is required
to complete the application.
(4) SBA will process an application
for 8(a) BD program participation within
90 days of receipt of a complete
application package by the DPCE.
Incomplete packages will not be
processed. Where during its screening
or 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.
*
*
*
*
*
■ 23. Amend § 124.302 by:
■ a. Revising paragraph (b)(4);
■ b. Removing paragraph (b)(5); and
■ c. Redesignating paragraphs (b)(6) and
(7) as paragraphs (b)(5) and (6),
respectively.
The revision reads as follows:
§ 124.302 What is graduation and what is
early graduation?
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*
(b) * * *
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(4) Current ability to obtain bonding,
where applicable;
*
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*
*
§ 124.303
[Amended]
24. Amend § 124.303 by removing
‘‘§ 124.507’’ in paragraph (a)(15) and
adding in its place ‘‘§ 124.509.’’
■ 25. Amend § 124.304 by:
■ a. Revising paragraph (b); and
■ b. Removing ‘‘§ 124.1010’’ in
paragraph (f)(3) and adding in its place
‘‘§ 124.1002’’.
The revision reads as follows:
■
§ 124.304 What are the procedures for
early graduation and termination?
*
*
*
*
*
(b) Letter of Intent to Terminate or
Graduate Early. (1) Except as set forth
in paragraph (b)(2) of this section, when
SBA believes that a Participant should
be terminated or graduated prior to the
expiration of its program term, SBA will
notify the concern in writing. The Letter
of Intent to Terminate or Graduate Early
will set forth the specific facts and
reasons for SBA’s findings, and will
notify the concern that it has 30 days
from the date it receives the letter to
submit a written response to SBA
explaining why the proposed ground(s)
should not justify termination or early
graduation.
(2) Where SBA obtains evidence that
a Participant has ceased its operations,
the AA/BD may immediately terminate
a concern’s participation in the 8(a) BD
program by notifying the concern of its
termination and right to appeal that
decision to OHA.
*
*
*
*
*
■ 26. Amend § 124.402 by adding a
sentence to the end of paragraph (b) to
read as follows:
§ 124.402 How does a Participant develop
a business plan?
*
*
*
*
*
(b) * * * Where a sole source 8(a)
requirement is offered to SBA on behalf
of a Participant or a Participant is the
apparent successful offeror for a
competitive 8(a) requirement and SBA
has not yet approved the Participant’s
business plan, SBA will approve the
Participant’s business plan as part of its
eligibility determination prior to
contract award.
*
*
*
*
*
■ 27. Amend § 124.403 by:
■ a. Adding two sentences after the first
sentence in paragraph (a); and
■ b. Removing ‘‘§ 124.507’’ in paragraph
(c)(1) and adding in its place
‘‘§ 124.509’’.
The addition reads as follows:
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§ 124.403 How is a business plan updated
and modified?
(a) * * * If there are no changes in a
Participant’s business plan, the
Participant need not resubmit its
business. A Participant must submit a
new or modified business plan only if
its business plan has changed from the
previous year. * * *
*
*
*
*
*
■ 28. Amend § 124.501 by:
■ a. Revising paragraph (b), the
introductory text to paragraph (g), the
first sentence of paragraph (h), and the
introductory text to paragraph (k);
■ b. Redesignating paragraph (k)(4) and
(5) as paragraphs (k)(7) and (8),
respectively; and
■ c. Adding new paragraphs (k)(4) and
(5) and paragraphs (k)(6) and (9).
The revisions and additions read as
follows:
§ 124.501 What general provisions apply
to the award of 8(a) contracts?
*
*
*
*
*
(b) 8(a) contracts may either be sole
source awards or awards won through
competition with other Participants. In
addition, for multiple award contracts
not set aside for the 8(a) BD program, a
procuring agency may award an 8(a)
sole source order or set aside one or
more specific orders to be competed
only among eligible 8(a) Participants.
Such an order may be awarded as an
8(a) award where the order was offered
to and accepted by SBA as an 8(a) award
and the order specifies that the
limitations on subcontracting
(§ 124.510) and/or non-manufacturer
rule (§ 121.406(b)) requirements apply
as appropriate. A procuring activity
cannot restrict an 8(a) competition (for
either a contract or order) to require
SBA socioeconomic certifications other
than 8(a) certification (i.e., a
competition cannot be limited only to
business concerns that are both 8(a) and
HUBZone, 8(a) and women-owned
small business (WOSB), or 8(a) and
service-disabled veteran-owned (SDVO)
small business).
*
*
*
*
*
(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. Where a joint
venture is the apparent successful
offeror in connection with a competitive
8(a) procurement, SBA will determine
whether the 8(a) partner to the joint
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venture is eligible for award, but will
not review the joint venture agreement
to determine compliance with § 124.
513 (see § 124.513(e)(1)). In any case in
which an 8(a) Participant is determined
to be ineligible, SBA will notify the 8(a)
Participant of that determination.
Eligibility is based on 8(a) BD program
criteria, including whether the 8(a)
Participant:
*
*
*
*
*
(h) For a sole source 8(a)
procurement, a concern must be a
current Participant in the 8(a) BD
program at the time of award and must
qualify as small for the size standard
corresponding to the NAICS code
assigned to the contract or order on the
date the contract or order is offered to
the 8(a) BD program. * * *
*
*
*
*
*
(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, a Metropolitan
Statistical Area (MSA), a contiguous
county (whether in the same or different
state), or the geographical area serviced
by a contiguous SBA district office to
where the work will be performed. A
Participant with a bona fide place of
business within a state will be deemed
eligible for a construction contract
anywhere in that state (even if that state
is serviced by more than one SBA
district office). SBA may also determine
that a Participant with a bona fide place
of business in the geographic area
served by one of several SBA district
offices or another nearby area is eligible
for the award of an 8(a) construction
contract.
*
*
*
*
*
(4) If a Participant is currently
performing a contract in a specific state,
it qualifies as having a bona fide place
of business in that state for one or more
additional contracts. The Participant
may not use contract performance in
one state to allow it to be eligible for an
8(a) contract in a contiguous state unless
it officially establishes a bona fide place
of business in the location in which it
is currently performing a contract.
(5) A Participant may establish a bona
fide place of business through a fulltime employee in a home office.
(6) An individual designated as the
full-time employee of the Participant
seeking to establish a bona fide place of
business in a specific geographic
location need not be a resident of the
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state where he/she is conducting
business.
*
*
*
*
*
(9) For an 8(a) construction contract
requiring work in multiple locations, a
Participant is eligible if:
(i) For a single award contract, the
Participant has a bona fide place of
business where a majority of the work
is to be performed; and
(ii) For a multiple award contract, the
Participant has a bona fide place of
business in any location where work is
be performed.
*
*
*
*
*
■ 29. Amend § 124.502 by revising
paragraph (a) to read as follows:
§ 124.502 How does an agency offer a
procurement to SBA for award through the
8(a) BD program?
(a) A procuring activity contracting
officer indicates his or her formal intent
to award a procurement requirement as
an 8(a) contract by submitting a written
offering letter to SBA.
(1) Except as set forth in
§ 124.503(a)(4)(ii) and (i)(1)(ii), a
procuring activity contracting officer
must submit an offering letter for each
intended 8(a) procurement, including
follow-on 8(a) contracts, competitive
8(a) orders issued under non-8(a)
multiple award contracts, and sole
source 8(a) orders issued under 8(a)
multiple award contracts.
(2) The procuring activity may
transmit the offering letter to SBA by
electronic mail, if available, or by
facsimile transmission, as well as by
mail or commercial delivery service.
*
*
*
*
*
■ 30. Amend § 124.503 by:
■ a. Revising the introductory text to
paragraph (a) and paragraphs (a)(4)(ii)
and (a)(5);
■ b. Adding two sentences to the end of
paragraph (i)(1)(ii); and
■ c. Revising paragraphs (i)(1)(iv) and
(i)(2)(ii).
The revisions and additions read as
follows:
§ 124.503 How does SBA accept a
procurement for award through the 8(a) BD
program?
(a) Acceptance of the requirement.
Upon receipt of the procuring activity’s
offer of a procurement requirement,
SBA will determine whether it will
accept the requirement for the 8(a) BD
program. SBA’s decision whether to
accept the requirement will be sent to
the procuring activity in writing within
10 business days of receipt of the
written offering letter if the contract is
valued at more than the simplified
acquisition threshold, and within two
days of receipt of the offering letter if
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the contract is valued at or below the
simplified acquisition threshold, unless
SBA requests, and the procuring activity
grants, an extension. SBA and the
procuring activity may agree to a shorter
timeframe for SBA’s review under a
Partnership Agreement delegating 8(a)
contract execution functions to the
agency. SBA is not required to accept
any particular procurement offered to
the 8(a) BD program.
*
*
*
*
*
(4) * * *
(ii) Where SBA has delegated its 8(a)
contract execution functions to an
agency through a signed Partnership
Agreement, SBA may authorize the
procuring activity to award an 8(a)
contract below the simplified
acquisition threshold without requiring
an offer and acceptance of the
requirement for the 8(a) BD program.
However, the procuring activity must
request SBA to determine the eligibility
of the intended awardee prior to award.
SBA shall review the 8(a) Participant’s
eligibility and issue an eligibility
determination within two business days
after a request from the procuring
activity. If SBA does not respond within
this timeframe, the procuring activity
may assume the 8(a) Participant is
eligible and proceed with award. The
procuring activity shall provide a copy
of the executed contract to the SBA
servicing district office within fifteen
business days of award.
(5) Where SBA does not respond to an
offering letter within the normal 10
business-day time period, the procuring
activity may seek SBA’s acceptance
through the AA/BD. The procuring
activity may assume that SBA accepts
its offer for the 8(a) program if it does
not receive a reply from the AA/BD
within 5 business days of his or her
receipt of the procuring activity request.
*
*
*
*
*
(i) * * *
(1) * * *
(ii) * * * However, where the order
includes work that was previously
performed through another 8(a)
contract, the procuring agency must
notify SBA prior to issuing the order
that it intends to procure such specified
work through an order under an 8(a)
Multiple Award Contract. Where that
work is critical to the business
development of a current Participant
that previously performed the work
through another 8(a) contract and that
Participant is not a contract holder of
the 8(a) Multiple Award Contract, SBA
may request that the procuring agency
fulfill the requirement through a
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competition available to all 8(a) BD
Program Participants.
*
*
*
*
*
(iv) An agency may issue a sole source
award against a Multiple Award
Contract that has been set aside
exclusively for 8(a) Program
Participants, partially set-aside for 8(a)
BD Program Participants or reserved
solely for 8(a) Program Participants if
the required dollar thresholds for sole
source awards are met. Where an agency
seeks to award an order on a sole source
basis (i.e., to one particular 8(a) contract
holder without competition among all
8(a) contract holders), the agency must
offer and SBA must accept the order
into the 8(a) program on behalf of the
identified 8(a) contract holder.
(A) 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 of the
order, qualify as small for the size
standard corresponding to the NAICS
code assigned to the order on the date
the order is offered to the 8(a) BD
program, and be in compliance with any
applicable competitive business mix
target established or remedial measure
imposed by § 124.509. Where the
intended sole source recipient is a joint
venture, the 8(a) managing partner to
the joint venture is the concern whose
eligibility is considered.
(B) Where an agency seeks to issue a
sole source order to a joint venture, the
two-year restriction for joint venture
awards set forth in § 121.103(h) of this
chapter does not apply and SBA will
not review and approve the joint
venture agreement as set forth in
§ 124.513(e)(1).
(2) * * *
(ii) The order must be either an 8(a)
sole source award or be competed
exclusively among only the 8(a)
awardees of the underlying multiple
award contract. Where an agency seeks
to issue an 8(a) competitive order under
a multiple award contract that was
awarded under full and open
competition or as a small business setaside, all eligible 8(a) BD Participants
who are contract holders of the
underlying multiple award contract
must have the opportunity to compete
for the order. Where an agency seeks to
issue an 8(a) competitive order under
the Federal Supply Schedule, an agency
can utilize the procedures set forth in
FAR subpart 8.4 (48 CFR part 8, subpart
8.4) to award to an eligible 8(a) BD
Participant. Where an agency seeks to
issue an 8(a) sole source order under a
multiple award contract that was
awarded under full and open
competition or as a small business set-
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aside, the identified 8(a) Participant that
is a contract holder of the underlying
multiple award contract must be an
eligible Participant on the date of the
issuance of the order;
*
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*
■ 31. Amend § 124.504 by:
■ a. In paragraph (d)(1) introductory
text:
■ i. Removing the word ‘‘notify’’ and
adding in its place ‘‘coordinate with’’
wherever it appears;
■ ii. Removing the word ‘‘SBA’’ in the
second sentence of paragraph (d)(1)
introductory text and adding in its place
the words ‘‘the SBA District Office
servicing the 8(a) incumbent firm and
the SBA Procurement Center
Representative assigned to the
contracting activity initiating a non-8(a)
procurement action’’; and
■ iii. Adding a sentence following the
second; and
■ b. Revising paragraph (d)(3).
The addition and revision 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?
*
*
*
*
*
(d) * * *
(1) * * * Such notification must
identify the scope and dollar value of
any work previously performed through
another 8(a) contract and the scope and
dollar value of the contract determined
to be new. * * *
*
*
*
*
*
(3) SBA may release a requirement
under this paragraph (d) only where the
procuring activity agrees to procure the
requirement as a small business,
HUBZone, SDVO small business, or
WOSB set-aside or otherwise identifies
a procurement strategy that would
emphasize or target small business
participation.
*
*
*
*
*
■ 32. Amend § 124.506 by revising
paragraph (b)(3) and adding two
sentences to the end of paragraph (d) to
read as follows:
§ 124.506 At what dollar threshold must an
8(a) procurement be competed among
eligible Participants?
*
*
*
*
*
(b) * * *
(3) There is no requirement that a
procurement must be competed
whenever possible before it can be
accepted on a sole source basis for a
Tribally-owned or ANC-owned concern,
or a concern owned by an NHO for DoD
contracts. However, a current
procurement requirement may not be
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removed from competition and awarded
to a Tribally-owned, ANC-owned, or
NHO-owned concern on a sole source
basis (i.e., a procuring agency may not
evidence its intent to fulfill a
requirement as a competitive 8(a)
procurement, through the issuance of a
competitive 8(a) solicitation or
otherwise, cancel the solicitation or
change its public intent, and then
procure the requirement as a sole source
8(a) procurement to an entity-owned
Participant). A follow-on requirement to
one that was previously awarded as a
competitive 8(a) procurement may be
offered, accepted and awarded on a sole
source basis to a Tribally-owned or
ANC-owned concern, or a concern
owned by an NHO for DoD contracts.
*
*
*
*
*
(d) * * * The AA/BD may also accept
a requirement that exceeds the
applicable competitive threshold
amount for a sole source 8(a) award if
he or she determines that a FAR
exception (48 CFR 6.302) to full and
open competition exists (e.g., unusual
and compelling urgency). An agency
may not award an 8(a) sole source
contract under this paragraph (d) for an
amount exceeding $25,000,000, or
$100,000,000 for an agency of the
Department of Defense, unless the
contracting officer justifies the use of a
sole source contract in writing and has
obtained the necessary approval under
FAR 19.808–1 or the Defense Federal
Acquisition Regulation Supplement
(DFARS) at 48 CFR 219.808–1(a).
■ 33. Amend § 124.509 by adding
paragraphs (d)(1)(i) and (ii) to read as
follows:
§ 124.509 What are non-8(a) business
activity targets?
*
*
*
*
*
(d) * * *
(1) * * *
(i) SBA will determine whether the
Participant made good faith efforts to
attain the targeted non-8(a) revenues
during the just completed program year.
A Participant may establish that it made
good faith efforts by demonstrating to
SBA that:
(A) It submitted offers for one or more
non-8(a) procurements which, if
awarded, would have given the
Participant sufficient revenues to
achieve the applicable non-8(a) business
activity target during its just completed
program year. In such a case, the
Participant must provide copies of offers
submitted in response to solicitations
and documentary evidence of its
projected revenues under these missed
contract opportunities; or
(B) Individual extenuating
circumstances adversely impacted its
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efforts to obtain non-8(a) revenues,
including but not limited to: a reduction
in government funding, continuing
resolutions and budget uncertainties,
increased competition driving prices
down, or having one or more prime
contractors award less work to the
Participant than originally
contemplated. Where available,
supporting information and
documentation must be included to
show how such extenuating
circumstances specifically prevented
the Participant from attaining its
targeted non-8(a) revenues during the
just completed program year.
(ii) The Participant bears the burden
of establishing that it made good faith
efforts to meet its non-8(a) business
activity target. SBA’s determination as
to whether a Participant made good
faith efforts is final and no appeal may
be taken with respect to that decision.
*
*
*
*
*
■ 34. Amend § 124.513 by adding
paragraph (a)(3) to read as follows:
§ 124.513 Under what circumstances can a
joint venture be awarded an 8(a) contract?
(a) * * *
(3) A Program Participant cannot be a
joint venture partner on more than one
joint venture that submits an offer for a
specific 8(a) contract.
*
*
*
*
*
■ 35. Amend § 124.515 by revising
paragraph (c) 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?
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*
(c) The 8(a) contractor must request a
waiver in writing prior to the change of
ownership and control except in the
case of death or incapacity. A request
for waiver due to incapacity or death
must be submitted within 60 calendar
days after such occurrence.
(1) The Participant seeking to change
ownership or control must specify the
grounds upon which it requests a
waiver, and must demonstrate that the
proposed transaction would meet such
grounds.
(2) If a Participant seeks a waiver
based on the impairment of the agency’s
objectives under paragraph (b)(4) of this
section, it must identify and provide a
certification from the procuring agency
relating to each 8(a) contract for which
a waiver is sought.
*
*
*
*
*
■ 36. Amend § 124.521 by revising
paragraph (e)(2) to read as follows:
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§ 124.521 What are the requirements for
representing 8(a) status, and what are the
penalties for misrepresentation?
*
*
*
*
*
(e) * * *
(2) For the purposes of 8(a) contracts
(including Multiple Award Contracts)
with durations of more than five years
(including options), a contracting officer
must verify in SAM.gov (or successor
system) whether a business concern
continues to be an eligible 8(a)
Participant no more than 120 days prior
to the end of the fifth year of the
contract, and no more than 120 days
prior to exercising any option thereafter.
Where a concern fails to qualify or will
no longer qualify as an eligible 8(a)
Participant at any point during the 120
days prior to the end of the fifth year of
the contract, the option shall not be
exercised.
*
*
*
*
*
§ 124.603
[Amended]
37. Amend § 124.603 by removing the
words ‘‘graduates or is terminated from
the program’’ and adding in their place
the words ‘‘leaves the 8(a) BD program
(either through the expiration of the
firm’s program term, graduation, or
termination)’’.
■ 38. Revise § 124.604 to read as
follows:
■
§ 124.604 Report of benefits for firms
owned by Tribes, ANCs, NHOs, and CDCs.
(a) Each entity having one or more
Participants in the 8(a) BD program
must establish a Community Benefits
Plan that outlines the anticipated
approach it expects to deliver to
strengthen its Native or underserved
community.
(b) As part of its annual review
submission (see § 124.602), each
Participant owned by a Tribe, ANC,
NHO, or CDC must submit to SBA
information showing how the Tribe,
ANC, NHO, or CDC has provided
benefits to the Tribal or native members
and/or the Tribal, native, or other
community due to the Tribe’s/ANC’s/
NHO’s/CDC’s participation in the 8(a)
BD program through one or more firms,
whether the benefits provided meet the
benefits target set forth in its
Community Benefits Plan, and how the
benefits provided directly impacted the
native or underserved community. This
data includes information relating to
funding cultural programs, employment
assistance, jobs, scholarships,
internships, subsistence activities, and
other services provided by the Tribe,
ANC, NHO, or CDC to the affected
community.
■ 39. Add § 124.1002 to read as follows:
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§ 124.1002
status.
Reviews and protests of SDB
(a) SBA may initiate the review of
SDB status on any firm that has
represented itself to be an SDB on a
prime contract (for goaling purposes or
otherwise) or subcontract to a Federal
prime contract whenever SBA receives
credible information calling into
question the SDB status of the firm.
(b) Requests for an SBA review of SDB
status may be forwarded to the Small
Business Administration, Associate
Administrator for Business
Development (AA/BD), 409 Third Street
SW, Washington, DC 20416.
(c) The contracting officer or the SBA
may protest the SDB status of a
proposed subcontractor or subcontract
awardee. Other interested parties may
submit information to the contracting
officer or the SBA in an effort to
persuade the contracting officer or the
SBA to initiate a protest. Such protests,
in order to be considered timely, must
be submitted to the SBA prior to
completion of performance by the
intended subcontractor.
(1) SBA will request relevant
information from the protested concern
pertaining to:
(i) The social and economic
disadvantage of the individual(s)
claiming to own and control the
protested concern;
(ii) The ownership and control of the
protested concern; and
(iii) The size of the protested concern.
(2) The concern whose disadvantaged
status is under consideration has the
burden of establishing that it qualifies as
an SDB.
(3) Where SBA requests specific
information and the concern does not
submit it, SBA may draw adverse
inferences against the concern.
(4) SBA will base its SDB
determination upon the record,
including reasonable inferences from
the record, and will state in writing the
basis for its findings and conclusions.
(d) Where SBA determines that a
subcontractor does not qualify as an
SDB, the prime contractor must not
include subcontracts to that
subcontractor as subcontracts to an SDB
in its subcontracting reports, starting
from the time that the protest was
decided.
PART 125—GOVERNMENT
CONTRACTING PROGRAMS
40. The authority citation for part 125
continues to read as follows:
■
Authority: 15 U.S.C. 632(p), (q), 634(b)(6),
637, 644, 657b, 657(f), and 657r.
■
41. Amend § 125.1 by:
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a. Revising the definition of ‘‘Contract
bundling, bundled requirement,
bundled contract, or bundling’’;
■ b. Removing the words ‘‘commercial
items’’ from the definition of ‘‘Cost of
materials’’ and adding in their place the
words ‘‘commercial products’’;
■ c. Adding definitions of ‘‘Small
business concerns owned and
controlled by socially and economically
disadvantaged individuals’’ and
‘‘Socially and economically
disadvantaged individuals’’ in
alphabetical order; and
■ d. Revising the definition of
‘‘Substantial bundling’’.
The revisions and additions read as
follows:
■
§ 125.1 What definitions are important to
SBA’s Government Contracting Programs?
jspears on DSK121TN23PROD with PROPOSALS2
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*
*
*
*
Contract bundling, bundled
requirement, bundled contract, or
bundling means the consolidation of
two or more procurement requirements
for goods or services previously
provided or performed under separate
smaller contracts into a solicitation of
offers for a single contract, a Multiple
Award Contract, or Blanket Purchase
Agreement that is likely to be unsuitable
for award to a small business concern
(but may be suitable for award to a small
business with a Small Business Teaming
Arrangement) due to:
(1) The diversity, size, or specialized
nature of the elements of the
performance specified;
(2) The aggregate dollar value of the
anticipated award;
(3) The geographical dispersion of the
contract performance sites; or
(4) Any combination of the factors
described in paragraphs (1), (2), and (3)
of this definition.
*
*
*
*
*
Small business concerns owned and
controlled by socially and economically
disadvantaged individuals means, for
both SBA’s subcontracting assistance
program in 15 U.S.C. 637(d) and for the
goals described in 15 U.S.C. 644(g), a
small business concern unconditionally
and directly owned by and controlled
by one or more socially and
economically disadvantaged
individuals.
Socially and economically
disadvantaged individuals, for both
SBA’s subcontracting assistance
program in 15 U.S.C. 637(d) and for the
goals described in 15 U.S.C. 644(g),
means:
(1) Individuals who meet the criteria
for social disadvantage in § 124.103(a)
through (c) of this chapter and the
criteria for economic disadvantage in
§ 124.104(a) and (c) of this chapter;
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(2) Indian tribes and Alaska Native
Corporations that satisfy the ownership,
control, and disadvantage criteria in
§ 124.109 of this chapter;
(3) Native Hawaiian Organizations
that satisfy the ownership, control, and
disadvantage criteria in § 124.110 of this
chapter; or
(4) Community Development
Corporations that satisfy the ownership
and control criteria in § 124.111 of this
chapter.
*
*
*
*
*
Substantial bundling means any
bundling that meets or exceeds the
following dollar amounts (if the
acquisition strategy contemplates
multiple award contracts, orders placed
under unrestricted multiple award
contracts, or a Blanket Purchase
Agreement issued against a GSA
Schedule contract or a task or delivery
order contract awarded by another
agency, these thresholds apply to the
cumulative estimated value of the
Multiple Award Contracts, orders, or
Blanket Purchase Agreement, including
options):
(1) $8.0 million or more for the
Department of Defense;
(2) $6.0 million or more for the
National Aeronautics and Space
Administration, the General Services
Administration, and the Department of
Energy; and
(3) $2.5 million or more for all other
agencies.
■ 42. Amend § 125.2 by adding a
sentence after the second sentence in
paragraph (d)(2)(ii) introductory text
and revising paragraph (d)(3)(i) to read
as follows:
§ 125.2 What are SBA’s and the procuring
agency’s responsibilities when providing
contracting assistance to small
businesses?
*
*
*
*
*
(d) * * *
(2) * * *
(ii) * * * This analysis must include
quantification of the reduction or
increase in price of the proposed
bundled strategy as compared to the
cumulative value of the separate
contracts. * * *
*
*
*
*
*
(3) * * *
(i) The analysis for bundled
requirements set forth in paragraphs
(d)(2)(i) and (ii) of this section;
*
*
*
*
*
■ 43. Amend § 125.3 by:
■ a. Revising paragraph (a)(1)(i)(B);
■ b. Removing the words ‘‘bank fees;’’
from paragraph (a)(1)(iii);
■ c. Removing the words ‘‘commercial
item’’ in paragraph (c)(1)(i) and adding
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55673
in their place the words ‘‘commercial
product or commercial service’’;
■ d. Revising paragraph (c)(1)(iv) and
the first sentence of paragraph
(c)(1)(viii);
■ e. Removing the words ‘‘commercial
items’’ in paragraph (c)(1)(x) and adding
in their place the words ‘‘commercial
products or commercial services’’; and
■ f. Revising paragraph (c)(2).
The revisions read as follows:
§ 125.3 What types of subcontracting
assistance are available to small
businesses?
(a) * * *
(1) * * *
(i) * * *
(B) Purchases from or sales to a
corporation, company, joint venture, or
subdivision that is an affiliate of the
prime contractor or subcontractor are
not included in the subcontracting base.
Subcontracts by first-tier affiliates shall
be treated as subcontracts of the prime.
*
*
*
*
*
(c) * * *
(1) * * *
(iv) When developing an individual
subcontracting plan (also called
individual contract plan), the contractor
must include indirect costs in its
subcontracting goals. These costs must
be included in the Individual
Subcontract Report (ISR) in
www.esrs.gov (eSRS) or Subcontract
Reports for Individual Contracts (the
paper SF–294, if authorized). These
costs must also be included on a
prorated basis in the Summary
Subcontracting Report (SSR) in the
eSRS system. A contractor authorized to
use a commercial subcontracting plan
must include all indirect costs in its
subcontracting goals and in its SSR;
*
*
*
*
*
(viii) The contractor must provide
pre-award written notification to
unsuccessful small business offerors on
all competitive subcontracts over the
simplified acquisition threshold (as
defined in the FAR at 48 CFR 2.101).
* * *
*
*
*
*
*
(2) A commercial plan, also referred
to as an annual plan or company-wide
plan, is the preferred type of
subcontracting plan for contractors
furnishing commercial products and
commercial services. A commercial plan
covers the offeror’s fiscal year and
applies to all of the commercial
products and commercial services sold
by either the entire company or a
portion thereof (e.g., division, plant, or
product line). Once approved, the plan
remains in effect during the federal
fiscal year for all Federal Government
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contracts in effect during that period.
The contracting officer of the agency
that originally approved the commercial
plan will exercise the functions of the
contracting officer on behalf of all
agencies that award contracts covered
by the plan.
*
*
*
*
*
■ 44. Amend § 125.6 by:
■ a. Removing ‘‘§ 121.103(h)(4)’’ in
paragraph (c) and adding in its place
‘‘§ 121.103(h)(3)’’;
■ b. In paragraph (d) introductory text:
■ i. Revising the first sentence; and
■ ii. Adding a sentence after the first
sentence;
■ c. Redesignating paragraphs (e)
through (g) as paragraphs (f) through (h),
respectively; and
■ d. Adding a new paragraph (e).
The revision and additions read as
follows:
§ 125.6 What are the prime contractor’s
limitations on subcontracting?
*
*
*
*
*
(d) * * * The period of time used to
determine compliance for a total or
partial set-aside contract will generally
be the base term and then each
subsequent option period. However, for
a multi-agency set aside contract where
more than one agency can issue orders
under the contract, the ordering agency
must use the period of performance for
each order to determine compliance.
* * *
*
*
*
*
*
(e) Past performance evaluation.
Where a contracting officer determines
that a contractor has not met the
applicable limitation on subcontracting
requirement at the conclusion of
contract performance, the contracting
officer may not give a satisfactory or
higher past performance rating for the
appropriate factor or subfactor in
accordance with the FAR at 48 CFR
42.1503.
*
*
*
*
*
§ 125.8
[Amended]
45. Amend § 125.8 by:
■ a. Removing ‘‘§ 121.103(h)(3)’’ in
paragraph (a) and adding in its place
‘‘§ 121.103(h)(4)’’; and
■ b. Removing ‘‘paragraph (d)’’ in
paragraph (b)(2)(vii) wherever it appears
and adding in its place ‘‘paragraph (c)’’.
■ 46. Amend § 125.9 by:
■ a. Revising paragraph (b)(3)(ii);
■ b. Redesignating paragraphs (e)(1)(ii)
and (iii) as paragraphs (e)(1)(iii) and (iv),
respectively; and
■ c. Adding a new paragraph (e)(1)(ii).
The revision and addition read as
follows:
jspears on DSK121TN23PROD with PROPOSALS2
■
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§ 125.9 What are the rules governing
SBA’s small business mentor-prote´ge´
program?
*
*
*
*
*
(b) * * *
(3) * * *
(ii) A mentor (including in the
aggregate a parent company and all of
its subsidiaries) generally cannot have
more than three prote´ge´s at one time.
(A) 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
prote´ge´s that a mentor can have at one
time.
(B) Where a mentor purchases another
business entity that is also an SBAapproved mentor of one or more prote´ge´
small business concerns and the
purchasing mentor commits to honoring
the obligations under the seller’s
mentor-prote´ge´ agreement(s), that entity
may have more than three prote´ge´s. In
such a case, the entity could not add
another prote´ge´ until it fell below three
in total.
*
*
*
*
*
(e) * * *
(1) * * *
(ii) Identify the specific entity or
entities that will provide assistance to or
participate in joint ventures with the
prote´ge´ where the mentor is a parent or
subsidiary concern;
*
*
*
*
*
■ 47. Amend § 125.18 by:
■ a. Adding a sentence to the end of
paragraph (b) introductory text; and
■ b. Removing ‘‘§ 121.103(h)(4)’’ in
paragraph (f)(1) and adding in its place
‘‘§ 121.103(h)(3)’’.
The addition reads as follows:
§ 125.18 What requirements must an
SDVO SBC meet to submit an offer on a
contract?
*
*
*
*
*
(b) * * * ASDVO SBC cannot be a
joint venture partner on more than one
joint venture that submits an offer for a
specific contract set-aside or reserved
for SDVOs.
*
*
*
*
*
■ 48. Amend § 125.22 by adding
paragraph (d) to read as follows:
§ 125.22 When may a contracting officer
set-aside a procurement for SDVO SBCs?
*
*
*
*
*
(d) Restricting competition. A
procuring activity cannot restrict an
SDVO SBC competition (for either a
contract or order) to require SBA
socioeconomic certifications other than
SDVO SBC certification (i.e., a
competition cannot be limited only to
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business concerns that are both SDVO
SBC and 8(a), SDVO SBC and HUBZone,
or SDVO SBC and WOSB).
■ 49. Amend § 125.28 by adding a
sentence to the end of paragraph (d)(2)
and revising paragraph (e) to read as
follows:
§ 125.28 What are the requirements for
filing a service-disabled veteran-owned
status protest?
*
*
*
*
*
(d) * * *
(2) * * * Where the identified low
bidder is determined to be ineligible for
award, a protest of any other identified
low bidder must be received prior to the
close of business on the 5th business
day after the contracting officer has
notified interested parties of the identity
of that low bidder.
*
*
*
*
*
(e) Referral to SBA. The contracting
officer must forward to SBA any nonpremature SDVO status protest received,
notwithstanding whether he or she
believes it is sufficiently specific or
timely. The contracting officer must
send all protests, along with a referral
letter, directly to the Director, Office of
Government Contracting, U.S. Small
Business Administration, 409 Third
Street SW, Washington, DC 20416 or by
fax to (202) 205–6390, marked Attn:
Service-Disabled Veteran Status Protest.
(1) The contracting officer’s referral
letter must include information
pertaining to the solicitation that may be
necessary for SBA to determine
timeliness and standing, including: the
solicitation number; the name, address,
telephone number, and facsimile
number of the contracting officer;
whether the contract was sole source or
set-aside; whether the protester
submitted an offer; whether the
protested concern was the apparent
successful offeror; when the protested
concern submitted its offer (i.e., made
the self-representation that it was a
SDVO SBC); whether the procurement
was conducted using sealed bid or
negotiated procedures; the bid opening
date, if applicable; when the protest was
submitted to the contracting officer;
when the protester received notification
about the apparent successful offeror, if
applicable; and whether a contract has
been awarded.
(2) Where a protestor alleges that an
SDVO SBC is unduly reliant on one or
more subcontractors that are not SDVO
SBCs or a subcontractor that is not an
SDVO SBC will perform primary and
vital requirements of the contract, the D/
GC or designee will refer the matter to
the Government Contracting Area Office
serving the geographic area in which the
principal office of the SDVO SBC is
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located for a determination as to
whether the ostensible subcontractor
rule has been met.
■ 50. Amend § 125.30 by revising
paragraph (g)(4) to read as follows:
§ 125.30 How will SBA process an SDVO
protest?
*
*
*
*
*
(g) * * *
(4) A concern found to be ineligible
may not submit an offer as an SDVO
SBC on a future procurement unless it
demonstrates to SBA’s satisfaction that
it has overcome the reasons for its
ineligibility set forth in the protest (e.g.,
it changes its ownership to satisfy the
definition of an SDVO SBC set forth in
§ 125.8) and SBA issues a decision to
this effect. If a concern found to be
ineligible submits an offer, it may be in
violation of criminal laws, including
section 16(d) of the Small Business Act,
15 U.S.C. 645(d). If the concern has
already certified itself as an SDVO SBC
on a pending procurement, the concern
must immediately inform the
contracting officer for the procuring
agency of the adverse SDVO SBC
determination.
(i) Not later than two days after SBA’s
determination finding a concern
ineligible as an SDVO SBC, such
concern must update its SDVO SBC
status in the System for Award
Management (or any successor system).
(ii) If a business concern fails to
update its SDVO SBC status in the
System for Award Management (or any
successor system) in response to
decertification, SBA will make such
update within two days of the
business’s failure to do so.
PART 126—HUBZONE PROGRAM
51. 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; Pub. L. 111–240, 124 Stat.
2504.
52. Amend § 126.306 by adding
paragraphs (b)(1) and (2) to read as
follows:
■
§ 126.306 How will SBA process an
application for HUBZone certification?
jspears on DSK121TN23PROD with PROPOSALS2
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*
*
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*
(b) * * *
(1) If a concern submits inconsistent
information that results in SBA’s
inability to determine the concern’s
compliance with any of the HUBZone
eligibility requirements, SBA will
decline the concern’s application.
(2) If, during the processing of an
application, SBA determines that an
applicant has knowingly submitted false
information, regardless of whether
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correct information would cause SBA to
deny the application, and regardless of
whether correct information was given
to SBA in accompanying documents,
SBA will deny the application.
*
*
*
*
*
■ 53. Amend § 126.503 by revising
paragraph (a)(2) and adding paragraphs
(c) and (d) to read as follows:
§ 126.503 What happens if SBA is unable
to verify a HUBZone small business
concern’s eligibility or determines that a
concern is no longer eligible for the
program?
(a) * * *
(2) SBA’s decision. SBA will
determine whether the HUBZone small
business concern remains eligible for
the program within 90 calendar days
after receiving all requested
information, when practicable. The D/
HUB will provide written notice to the
concern stating the basis for the
determination.
(i) If SBA finds that the concern is not
eligible, the D/HUB will decertify the
concern and remove its designation as a
certified HUBZone small business
concern in DSBS (or successor system)
within four business days of the
determination.
(ii) If SBA finds that the concern is
eligible, the concern will continue to be
designated as a certified HUBZone small
business concern in DSBS (or successor
system).
*
*
*
*
*
(c) Decertification due to submission
of false information. If, after admission
to the HUBZone program, SBA
discovers that false information has
been knowingly submitted by a certified
HUBZone small business concern, SBA
will propose the firm for decertification
pursuant to the procedures described in
paragraph (a) of this section.
(d) Effect of decertification. Once SBA
has decertified a concern, the concern
cannot self-certify as a HUBZone small
business concern. If a concern does so,
it may be in violation of criminal laws,
including section 16(d) of the Small
Business Act, 15 U.S.C. 645(d). If the
concern has already certified as a
HUBZone small business on a pending
procurement, the concern must
immediately inform the contracting
officer for the procuring agency of the
adverse eligibility determination. A
contracting officer shall not award a
HUBZone contract to a concern that the
D/HUB has determined is not an eligible
HUBZone small business concern for
the procurement in question.
■ 54. Amend § 126.601 by revising
paragraph (d) to read as follows:
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§ 126.601 What additional requirements
must a certified HUBZone small business
concern meet to submit an offer on a
HUBZone contract?
*
*
*
*
*
(d) Where a subcontractor that is not
a certified HUBZone small business will
perform the primary and vital
requirements of a HUBZone contract, or
where a HUBZone prime contractor is
unduly reliant on one or more small
businesses that are not HUBZonecertified to perform the HUBZone
contract, the prime contractor is not
eligible for award of that HUBZone
contract.
(1) When the subcontractor qualifies
as small for the size standard assigned
to the procurement, this issue may be
grounds for a HUBZone status protest,
as described in § 126.801. When the
subcontractor is alleged to be other than
small for the size standard assigned to
the procurement, this issue may be
grounds for a size protest under the
ostensible subcontractor rule, as
described at § 121.103(h)(3) of this
chapter.
(2) SBA will find that a prime
HUBZone contractor is performing the
primary and vital requirements of a
contract or order, and is not unduly
reliant on one or more subcontractors
that are not HUBZone-certified, where
the prime contractor can demonstrate
that it, together with any subcontractors
that are certified HUBZone small
business concerns, will meet the
limitations on subcontracting provisions
set forth in § 125.6 of this chapter.
■ 55. Add § 126.609 to read as follows:
§ 126.609 Can a HUBZone competition be
limited to small business concerns having
additional socioeconomic certifications?
A procuring activity cannot restrict a
HUBZone competition (for either a
contract or order) to require SBA
socioeconomic certifications other than
HUBZone certification (i.e., a
competition cannot be limited only to
business concerns that are both
HUBZone and 8(a), HUBZone and
WOSB, or HUBZone and SDVO).
■ 56. Amend § 126.616 by revising
paragraph (a) to read as follows:
§ 126.616 What requirements must a joint
venture satisfy to submit an offer and be
eligible to perform on a HUBZone contract?
(a) General. A certified HUBZone
small business concern may enter into
a joint venture agreement with one or
more other small business concerns, or
with an SBA-approved mentor
authorized by § 125.9 of this chapter, for
the purpose of submitting an offer for a
HUBZone contract.
(1) The joint venture itself need not be
a certified HUBZone small business
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concern, but the joint venture should be
designated as a HUBZone joint venture
in SAM (or successor system) with the
HUBZone-certified joint venture partner
identified.
(2) A certified HUBZone small
business concern cannot be a joint
venture partner on more than one joint
venture that submits an offer for a
specific contract set-aside or reserved
for certified HUBZone small business
concerns.
*
*
*
*
*
§ 126.618
[Amended]
57. Amend § 126.618 by removing
‘‘§ 121.103(h)(4)’’ in paragraph (c)(2)
and adding in its place
‘‘§ 121.103(h)(3)’’.
■ 58. Amend § 126.801 by:
■ a. Revising paragraph (b);
■ b. Adding paragraph (d) introductory
text; and
■ c. Revising paragraphs (d)(1) and (2)
and (e).
The revisions and additions read as
follows:
■
§ 126.801 How does an interested party file
a HUBZone status protest?
jspears on DSK121TN23PROD with PROPOSALS2
*
*
*
*
*
(b) Format and specificity. (1) Protests
must be in writing and must state all
specific grounds as to why the protestor
believes the protested concern should
not qualify as a certified HUBZone
small business concern. Specifically, a
protestor must explain why:
(i) The protested concern did not meet
the HUBZone eligibility requirements
set forth in § 126.200 at the time the
concern applied for HUBZone
certification or on the anniversary date
of such certification;
(ii) The protested joint venture does
not meet the requirements set forth in
§ 126.616;
(iii) The protested concern, as a
HUBZone prime contractor, is unduly
reliant on one or more small
subcontractors that are not HUBZonecertified, or subcontractors that are not
HUBZone-certified will perform the
primary and vital requirements of the
contract; and/or
(iv) The protested concern, on the
anniversary date of its initial HUBZone
certification, failed to attempt to
maintain compliance with the 35%
HUBZone residency requirement during
the performance of a HUBZone contract.
(2) Specificity requires more than
conclusions of ineligibility. A protest
merely asserting that the protested
concern did not qualify as a HUBZone
small business concern at the time of its
initial certification or its most recent
annual recertification, without setting
forth specific facts or allegations, is
insufficient and will be dismissed.
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(3) A protest asserting that a concern
was not in compliance with the
HUBZone principal office and/or 35%
HUBZone residency requirements at the
time of offer or award will be dismissed.
(4) For a protest filed against a
HUBZone joint venture, the protest
must state all specific grounds as to
why:
(i) The HUBZone small business
partner to the joint venture did not meet
the HUBZone eligibility requirements
set forth in § 126.200 at the time the
concern applied for certification or on
the anniversary of such certification;
and/or
(ii) The protested HUBZone joint
venture does not meet the requirements
set forth in § 126.616.
(5) For a protest alleging that the
prime contractor has an ostensible
subcontractor, the protest must state all
specific grounds as to why:
(i) The protested concern is unduly
reliant on one or more small
subcontractors that are not HUBZonecertified; or
(ii) One or more subcontractors that
are not HUBZone-certified will perform
the primary and vital requirements of
the contract.
(6) For a protest alleging that the
protested concern failed to attempt to
maintain compliance with the 35%
HUBZone residency requirement during
the performance of a HUBZone contract,
the protest must state all specific
grounds explaining why the protester
believes the protested firm did not have
at least 20% of its employees residing in
a HUBZone on the anniversary of its
HUBZone certification.
*
*
*
*
*
(d) * * * A protest challenging the
HUBZone status of an apparent
successful offeror on a HUBZone
contract must be timely, or it will be
dismissed.
(1) For negotiated acquisitions, an
interested party must submit its protest
by close of business on the fifth
business day after notification by the
contracting officer of the apparent
successful offeror.
(i) Except for an order or Blanket
Purchase Agreement issued under a
Federal Supply Schedule contact, for an
order or Agreement that is set-aside for
certified HUBZone small business
concerns under a multiple award
contract that was not itself set aside or
reserved for certified HUBZone small
business concerns, an interested party
must submit its protest by close of
business on the fifth business day after
notification by the contracting officer of
the intended awardee of the order or
Agreement.
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(ii) Where a contracting officer has
required offerors for a specific order
under a multiple award HUBZone
contract to recertify their HUBZone
status, an interested party must submit
its protest by close of business on the
fifth business day after notification by
the contracting officer of the intended
awardee of the order.
(2) For sealed bid acquisitions:
(i) An interested party must submit its
protest by close of business on the fifth
business day after bid opening, or where
the identified low bidder is determined
to be ineligible for award, by close of
business on the fifth business day after
the contracting officer has notified
interested parties of the identity of that
low bidder; or
(ii) If the price evaluation preference
was not applied at the time of bid
opening, an interested party must
submit its protest by close of business
on the fifth business day after the date
of identification of the apparent
successful low bidder.
*
*
*
*
*
(e) Referral to SBA. The contracting
officer must forward to SBA any nonpremature HUBZone status protest
received, notwithstanding whether he or
she believes it is sufficiently specific or
timely. The contracting officer must
send the protest, along with a referral
letter, to the D/HUB by email to
hzprotests@sba.gov.
(1) The contracting officer’s referral
letter must include information
pertaining to the solicitation that may be
necessary for SBA to determine
timeliness and standing, including the
following:
(i) The solicitation number;
(ii) The name, address, telephone
number, email address, and facsimile
number of the contracting officer;
(iii) The type of HUBZone contract at
issue (i.e., HUBZone set-aside;
HUBZone sole source; full and open
competition with a HUBZone price
evaluation preference applied; reserve
for HUBZone small business concerns
under a Multiple Award Contract; or
order set-aside for HUBZone small
business concerns against a Multiple
Award Contract);
(iv) If the procurement was conducted
using full and open competition with a
HUBZone price evaluation preference,
whether the protester’s opportunity for
award was affected by the preference;
(v) If the procurement was a
HUBZone set-aside, whether the
protester submitted an offer;
(vi) Whether the protested concern
was the apparent successful offeror;
(vii) Whether the procurement was
conducted using sealed bid or
negotiated procedures;
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(viii) If the procurement was
conducted using sealed bid procedures,
the bid opening date;
(ix) The date the protester was
notified of the apparent successful
offeror;
(x) The date the protest was submitted
to the contracting officer;
(xi) The date the protested concern
submitted its initial offer or bid to the
contracting activity; and
(xii) Whether a contract has been
awarded, and if applicable, the date of
contract award and contract number.
(2) Where a protestor alleges that a
certified HUBZone small business
concern is unduly reliant on one or
more subcontractors that are not
certified HUBZone small business
concerns or a subcontractor that is not
a certified HUBZone small business
concern will perform primary and vital
requirements of the contract, the D/HUB
will refer the matter to the Government
Contracting Area Office serving the
geographic area in which the principal
office of the certified HUBZone small
business concern is located for a
determination as to whether the
ostensible subcontractor rule has been
met.
PART 127—WOMEN-OWNED SMALL
BUSINESS FEDERAL CONTRACT
PROGRAM
59. 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.
60. Amend § 127.102 by removing the
definition of ‘‘WOSB’’ and adding the
definition of ‘‘Women-Owned Small
Business (WOSB)’’ in alphabetical order
to read as follows:
■
§ 127.102 What are the definitions of the
terms used in this part?
jspears on DSK121TN23PROD with PROPOSALS2
*
*
*
*
*
Women-Owned Small Business
(WOSB) means a concern that is small
pursuant to part 121 of this chapter, and
that is at least 51 percent owned and
controlled by one or more women who
are citizens in accordance with
§§ 127.200, 127.201, and 127.202. This
definition applies to any certification as
to a concern’s status as a WOSB, not
solely to those certifications relating to
a WOSB contract.
*
*
*
*
*
■ 61. Amend § 127.200 by revising
paragraphs (a)(1) and (b)(1) to read as
follows:
§ 127.200 What are the requirements a
concern must meet to qualify as an
EDWOSB or WOSB?
(a) * * *
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(1) A small business as defined in part
121 of this chapter for the size standard
corresponding to any NAICS code under
which it currently conducts business
activities; and
*
*
*
*
*
(b) * * *
(1) A small business as defined in part
121 of this chapter for the size standard
corresponding to any NAICS code under
which it currently conducts business
activities; and
*
*
*
*
*
■ 62. Amend § 127.202 by revising the
first sentence of paragraph (b) and
paragraph (c) to read as follows:
fewer hours to the business than its
normal hours of operation, there is a
rebuttable presumption that she does
not control the business concern. In
such a case, the woman must provide
evidence that she has ultimate
managerial and supervisory control over
both the long-term decision making and
day-to-day management and
administration of the business.
*
*
*
*
*
■ 64. Amend § 127.304 by adding
paragraphs (c)(1) and (2) to read as
follows:
§ 127.201 What are the requirements for
ownership of an EDWOSB and WOSB?
*
*
*
*
*
*
(b) * * * To be considered
unconditional, the ownership must not
be subject to any conditions, executory
agreements, voting trusts, or other
arrangements that cause or potentially
cause ownership benefits to go to
another (other than after death or
incapacity). * * *
(c) Limitation on outside obligations.
The woman or economicallydisadvantaged woman who holds the
highest officer position of the business
concern may not engage in outside
obligations that prevent her from
devoting sufficient time and attention to
the business concern to control its
management and daily operations.
Where a woman or economically
disadvantaged woman claiming to
control a business concern devotes
fewer hours to the business than its
normal hours of operation, there is a
rebuttable presumption that she does
not control the business concern. In
such a case, the woman must provide
evidence that she has ultimate
managerial and supervisory control over
both the long-term decision making and
day-to-day management and
administration of the business.
*
*
*
*
*
■ 63. Amend § 127.202 by revising
paragraph (c) to read as follows:
§ 127.202 What are the requirements for
control of an EDWOSB or WOSB?
*
*
*
*
*
(c) Limitation on outside obligations.
The woman or economicallydisadvantaged woman who holds the
highest officer position of the business
concern may not engage in outside
obligations that prevent her from
devoting sufficient time and attention to
the business concern to control its
management and daily operations.
Where a woman or economically
disadvantaged woman claiming to
control a business concern devotes
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§ 127.304 How is an application for
certification processed?
*
*
*
*
(c) * * *
(1) If a concern submits inconsistent
information that results in SBA’s
inability to determine the concern’s
compliance with any of the WOSB or
EDWOSB eligibility requirements, SBA
will decline the concern’s application.
(2) If, during the processing of an
application, SBA determines that an
applicant has knowingly submitted false
information, regardless of whether
correct information would cause SBA to
deny the application, and regardless of
whether correct information was given
to SBA in accompanying documents,
SBA will deny the application.
*
*
*
*
*
■ 65. Revise § 127.400 to read as
follows:
§ 127.400 How does a concern maintain its
WOSB or EDWOSB certification?
Any concern seeking to remain a
certified WOSB or EDWOSB must
undergo a program examination every
three years.
(a) SBA or a third-party certifier will
conduct a program examination three
years after the concern’s initial WOSB
or EDWOSB certification (whether by
SBA or a third-party certifier) or three
years after the date of the concern’s last
program examination, whichever date is
later.
Example 1 to paragraph (a). Concern
A is certified by SBA to be eligible for
the WOSB Program on March 31, 2023.
Concern A is considered a certified
WOSB that is eligible to receive WOSB
contracts (as long as it is small for the
size standard corresponding to the
NAICS code assigned to the contract)
through March 30, 2026. On April 22,
2025, after Concern A is identified as
the apparent successful offeror on a
WOSB set-aside contract, its status as an
eligible WOSB is protested. On May 15,
2025, Concern A receives a positive
determination from SBA confirming that
it is an eligible WOSB. Concern A’s new
certification date is May 15, 2025.
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Concern A is now considered a certified
WOSB that is eligible to receive WOSB
contracts (as long as it is small for the
size standard corresponding to the
NAICS code assigned to the contract)
through May 14, 2028.
(b) The concern must either request a
program examination from SBA or
notify SBA that it has requested a
program examination from a third-party
certifier no later than 30 days prior to
its certification anniversary. Failure to
do so will result in the concern being
decertified.
Example 1 to paragraph (b). Concern
B is certified by a third-party certifier to
be eligible for the WOSB Program on
July 20, 2023. Concern B is considered
a certified WOSB that is eligible to
receive WOSB contracts (as long as it is
small for the size standard
corresponding to the NAICS code
assigned to the contract) through July
19, 2026. Concern B must request a
program examination from SBA, or
notify SBA that it has requested a
program examination from a third-party
certifier, by June 20, 2026, to continue
participating in the WOSB Program after
July 19, 2026.
■ 66. Amend § 127.405 by redesignating
paragraph (c) as paragraph (e) and
adding paragraph (c) and paragraph (d)
to read as follows:
§ 127.405 What happens if SBA
determines that the concern is no longer
eligible for the program?
jspears on DSK121TN23PROD with PROPOSALS2
*
*
*
*
*
(c) Decertification in response to
adverse protest decision. SBA will
decertify a concern found to be
ineligible during a WOSB/EDWOSB
status protest.
(d) Effect of decertification. Once SBA
has decertified a concern, the concern
cannot self-certify as a WOSB or
EDWOSB, as applicable, for any WOSB
or EDWOSB contract. If a concern does
so, it may be in violation of criminal
laws, including section 16(d) of the
Small Business Act, 15 U.S.C. 645(d). If
the concern has already certified itself
as a WOSB or EDWOSB on a pending
procurement, the concern must
immediately inform the contracting
officer for the procuring agency of its
decertification.
(1) Not later than two days after the
date on which SBA decertifies a
business concern, such concern must
update its WOSB/EDWOSB status in the
System for Award Management (or any
successor system).
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(2) If a business concern fails to
update its WOSB/EDWOSB status in the
System for Award Management (or any
successor system) in response to
decertification, SBA will make such
update within two days of the
business’s failure to do so.
*
*
*
*
*
■ 67. Amend § 127.503 by redesignating
paragraphs (e) through (g) as paragraphs
(f) through (h), respectively, and adding
a new paragraph (e) to read as follows:
§ 127.503 When is a contracting officer
authorized to restrict competition or award
a sole source contract or order under this
part?
*
*
*
*
*
(e) Competitions requiring additional
socioeconomic certifications. A
procuring activity cannot restrict a
WOSB or EDWOSB competition (for
either a contract or order) to require
SBA socioeconomic certifications other
than WOSB/EDWOSB certification (i.e.,
a competition cannot be limited only to
business concerns that are both WOSB/
EDWOSB and 8(a), WOSB/EDWOSB
and HUBZone, or WOSB/EDWOSB and
service-disabled veteran owned
(SDVO)).
*
*
*
*
*
§ 127.504
[Amended]
68. Amend § 127.504 by removing
‘‘§ 121.103(h)(2)’’ in paragraph (g)(1)
and adding in its place
‘‘§ 121.103(h)(3)’’.
■ 69. Amend § 127.506 by adding
paragraph (a)(3) to read as follows:
■
§ 127.506 May a joint venture submit an
offer on an EDWOSB or WOSB
requirement?
*
*
*
*
*
(a) * * *
(3) A WOSB or EDWOSB cannot be a
joint venture partner on more than one
joint venture that submits an offer for a
specific contract set-aside or reserved
for WOSBs or EDWOSBs.
*
*
*
*
*
■ 70. Amend § 127.603 by adding a
sentence to the end of paragraph (c)(2)
and revising paragraph (d) to read as
follows:
§ 127.603 What are the requirements for
filing an EDWOSB or WOSB status protest?
*
*
*
*
*
(c) * * *
(2) * * * Where the identified low
bidder is determined to be ineligible for
award, a protest of any other identified
low bidder must be received prior to the
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close of business on the 5th business
day after the contracting officer has
notified interested parties of the identity
of that low bidder.
*
*
*
*
*
(d) Referral to SBA. The contracting
officer must forward to SBA any WOSB
or EDWOSB status protest received,
notwithstanding whether he or she
believes it is premature, sufficiently
specific, or timely. The contracting
officer must send all WOSB and
EDWOSB status protests, along with a
referral letter and documents, directly to
the Director for Government
Contracting, U.S. Small Business
Administration, 409 Third Street SW,
Washington, DC 20416, or by fax to
(202) 205–6390, Attn: Women-Owned
Small Business Status Protest.
(1) The contracting officer’s referral
letter must include information
pertaining to the solicitation that may be
necessary for SBA to determine
timeliness and standing, including: the
solicitation number; the name, address,
telephone number, and facsimile
number of the contracting officer;
whether the protestor submitted an
offer; whether the protested concern
was the apparent successful offeror;
when the protested concern submitted
its offer; whether the procurement was
conducted using sealed bid or
negotiated procedures; the bid opening
date, if applicable; when the protest was
submitted to the contracting officer;
when the protestor received notification
about the apparent successful offeror, if
applicable; and whether a contract has
been awarded.
(2) Where a protestor alleges that a
WOSB/EDWOSB is unduly reliant on
one or more subcontractors that are not
WOSBs/EDWOSBs or a subcontractor
that is not a WOSB/EDWOSB will
perform primary and vital requirements
of the contract, the D/GC or designee
will refer the matter to the Government
Contracting Area Office serving the
geographic area in which the principal
office of the SDVO small business
concern (SBC) is located for a
determination as to whether the
ostensible subcontractor rule has been
met.
(3) The D/GC or designee will decide
the merits of EDWOSB or WOSB status
protests.
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022–18068 Filed 9–8–22; 8:45 am]
BILLING CODE 8026–03–P
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Agencies
[Federal Register Volume 87, Number 174 (Friday, September 9, 2022)]
[Proposed Rules]
[Pages 55642-55678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18068]
[[Page 55641]]
Vol. 87
Friday,
No. 174
September 9, 2022
Part III
Small Business Administration
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13 CFR Parts 121, 124, 125, Et al.
Ownership and Control and Contractual Assistance Requirements for the
8(a) Business Development Program; Proposed Rule
Federal Register / Vol. 87 , No. 174 / Friday, September 9, 2022 /
Proposed Rules
[[Page 55642]]
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 124, 125, 126, and 127
RIN 3245-AH70
Ownership and Control and Contractual Assistance Requirements for
the 8(a) Business Development Program
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would make several changes to the ownership
and control requirements for the 8(a) Business Development (BD)
program, including recognizing a process for allowing a change of
ownership for a former Participant that is still performing one or more
8(a) contracts and permitting an individual to own an applicant or
Participant where the individual can demonstrate that financial
obligations have been settled and discharged by the Federal Government.
The rule also proposes to make several changes relating to 8(a)
contracts, including clarifying that a contracting officer cannot limit
an 8(a) competition to Participants having more than one certification
and clarifying the rules pertaining to issuing sole source 8(a) orders
under an 8(a) multiple award contract. The proposed rule would also
make several other revisions to incorporate changes to SBA's other
government contracting programs, including changes to implement a
statutory amendment from the National Defense Authorization Act for
Fiscal Year 2022, include blanket purchase agreements in the list of
contracting vehicles that are covered by the definitions of
consolidation and bundling, and more clearly specify the requirements
relating to waivers of the nonmanufacturer rule.
DATES: Comments must be received on or before November 8, 2022.
ADDRESSES: You may submit comments, identified by RIN 3245-AH70, by any
of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov
and follow the instructions for submitting comments.
Mail (for paper, disk, or CD-ROM submissions): Mark
Hagedorn, Attorney Advisor, Office of General Counsel, U.S. Small
Business Administration, 409 Third Street SW, Washington, DC 20416.
Instructions: All submissions received must include the agency name
and docket number or Regulatory Information Number (RIN) for this
rulemaking. All comments received will be posted on https://www.regulations.gov. If you wish to submit confidential business
information (CBI) as defined in the User Notice at https://www.regulations.gov, please submit the comments to Mark Hagedorn and
highlight the information that you consider to be CBI and explain why
you believe this information should be held confidential.
FOR FURTHER INFORMATION CONTACT: Mark Hagedorn, U.S. Small Business
Administration, Office of General Counsel, 409 Third Street SW,
Washington, DC 20416; (202) 205-7625; [email protected].
SUPPLEMENTARY INFORMATION: SBA proposes to make several changes to the
ownership and control requirements for the 8(a) Business Development
(BD) program, including recognizing a process for allowing a change of
ownership for a former Participant that is still performing one or more
8(a) contracts and permitting an individual to own an applicant or
Participant where the individual can demonstrate that financial
obligations have been settled and discharged by the Federal Government.
SBA also proposes to make several changes relating to 8(a) contracts,
including clarifying that a contracting officer cannot limit an 8(a)
competition to Participants having more than one certification and
clarifying the rules pertaining to issuing sole source 8(a) orders
under an 8(a) multiple award contract. The proposed rule would also
make several other revisions to incorporate changes to SBA's other
government contracting programs to implement a statutory amendment from
the National Defense Authorization Act for Fiscal Year 2022.
Section-by-Section Analysis
Section 121.103(h)
Section 121.103(h) sets forth the rules pertaining to affiliation
through joint ventures. This rule first proposes to take some of the
language currently contained in the introductory text and add it to a
new Sec. 121.103(h)(1) for ease of use. SBA believes that the current
introductory text is overly complex and separating some of the
requirements into a separate paragraphs will be easier to understand
and use. In adding a new Sec. 121.103(h)(1), the proposed rule would
redesignate paragraphs (h)(1), (2), (3), and (4) as paragraphs (h)(2),
(3), (4), and (5), respectively, and would adjust cross references
contained in Sec. 121.103(h) in Sec. Sec. 121.404(d) and (g)(5),
125.6(c), 125.8(a), 125.18(f)(1), 126.601(d)(1), and 126.618(c)(2).
SBA's regulations currently provide that a specific joint venture
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. Although SBA's current policy is to allow orders to be issued
under previously awarded contracts beyond the two-year period (since
the restriction is on additional contracts, not continued performance
on contracts already awarded), SBA continues to receive questions as to
whether orders beyond the two-year period are permissible. To clear up
any confusion, the proposed rule would add a sentence to the
introductory text of Sec. 121.103(h) to capture SBA's current policy.
SBA notes that current policy also allows for award of contracts beyond
the two-year period if the offer, including price, was submitted prior
to the end of the two-year period. Because there does not appear to be
any confusion regarding that policy, this proposed rule does not change
or amend that policy in any way.
The proposed rule would also revise Example 2 to paragraph (h)
introductory text. SBA's joint venture rule previously prohibited a
joint venture from receiving more than three contracts over a two-year
period. SBA amended that rule to allow a joint venture to seek and be
awarded an unlimited number of contracts over the two-year period. See
85 FR 66146, 66179 (Oct. 16, 2020). Unfortunately, when SBA amended the
regulatory text to paragraph (h) it did not also amend the language in
Example 2 to paragraph (h). Example 2 to paragraph (h) introductory
text gave an illustration of a joint venture receiving two contracts
during a two-year period and not submitting offers for any additional
contracts. Because the example illustrated a situation with only two
contracts, some were confused as to whether the example was applying
the old three contracts over two years rule instead of the amended
unlimited contracts over two years. That was not SBA's intent. This
proposed rule would adjust the language in the example to specifically
recognize that a joint venture can receive more than three contracts
over a two-year period.
The proposed rule would also clarify SBA's distinct treatment of
populated and unpopulated joint ventures. The current regulation
provides that if a joint venture exists as a formal separate legal
entity, it may not be populated with individuals intended to perform
contracts awarded to the joint venture. The proposed rule would clarify
that this requirement was meant to apply only to contracts set aside or
reserved
[[Page 55643]]
for small business (i.e., small business set-aside, 8(a), women-owned
small business (WOSB), HUBZone, and service-disabled veteran owned
small business (SDVOSB) contracts). The reason for this requirement is
to allow SBA and procuring agencies to track the work done by each
partner to the joint venture and to ensure that the lead small business
partner upon whom eligibility for the contract is based (e.g., the 8(a)
partner in a joint venture for an 8(a) contract between an 8(a)
prot[eacute]g[eacute] and its large business mentor) is actually
performing a significant portion of the contract and benefitting from
that performance. As SBA has previously explained, if a joint venture
were permitted to be populated, employees from a large business mentor
could be hired by the joint venture, perform the contract, return to
the large business after contract performance, and leave the small
prot[eacute]g[eacute] firm with few or no benefits or business
development from that contract. The proposed rule would clarify,
however, that a populated joint venture could be awarded a contract set
aside or reserved for small business where each of the partners to the
joint venture were similarly situated (e.g., both partners to a joint
venture seeking a HUBZone contract were certified HUBZone small
business concerns). Any time the size of a populated joint venture is
questioned, the proposed rule also clarifies that SBA will aggregate
the revenues or employees of all partners to the joint venture.
In addition, this proposed rule would revise the ostensible
subcontractor rule in redesignated Sec. 121.103(h)(3). The proposed
rule would first divide the current text contained in Sec.
121.103(h)(2) into Sec. 121.103(h)(3) introductory text and Sec.
121.103(h)(3)(i) for ease of use. SBA also proposes to clarify how the
ostensible subcontractor rule should apply to general construction
contracts. General construction types of contracts regularly involve
subcontractors with specialized experience in the specialty
construction trades. The primary role of a prime contractor in a
general construction project is to superintend, manage, and schedule
the work, including coordinating the work of various subcontractors.
Those are the functions that are the primary and vital requirements of
a general construction contract and ones that a prime contractor must
perform. Although the prime contractor for a general construction
contract must meet the limitation on subcontracting requirement set
forth in Sec. 125.6(a)(3), SBA recognizes that subcontractors often
perform the majority of the actual construction work because the prime
contractor frequently must engage multiple subcontractors specializing
in a variety of trades and disciplines. As such, SBA believes that the
ostensible subcontractor rule for general construction contracts should
be applied to the management and oversight of the project, not to the
actual construction or specialty trade construction work performed. The
prime contractor must retain management of the contract but may
delegate a large portion of the actual construction work to its
subcontractors.
SBA further proposes to revise the ostensible subcontractor rule to
comport with recent decisions of SBA's Office of Hearings and Appeals
(OHA). In Size Appeal of DoverStaffing, Inc., SBA No. SIZ-5300 (2011),
OHA created a four-factor test to indicate when a prime contractor's
relationship with a subcontractor is suggestive of unusual reliance
under the ostensible subcontractor rule. The four factors are (1) the
proposed subcontractor is the incumbent contractor and ineligible to
compete for the procurement, (2) the prime contractor plans to hire the
large majority of its workforce from the subcontractor, (3) the prime
contractor's proposed management previously served with the
subcontractor on the incumbent contract, and (4) the prime contractor
lacks relevant experience and must rely upon its more experienced
subcontractor to win the contract. Under OHA's decisions, when these
factors are present, violation of the ostensible subcontractor rule is
more likely to be found if the subcontractor will perform 40% or more
of the contract. SBA proposes to add two of these four factors to the
ostensible subcontractor rule: the reliance on incumbent management and
the reliance on the subcontractor's experience. As with the existing
rule, SBA still would consider all aspects of the prime contractor's
relationship with the subcontractor and would not limit its inquiry to
the enumerated DoverStaffing factors. SBA continues to believe that the
SBA Area Offices should be given discretion to consider and weigh all
factors in rendering a formal size determination, and that unique
circumstances could lead to a result that does not fully align with the
DoverStaffing analysis. SBA seeks comment on these proposed changes to
the ostensible subcontracting rule.
Finally, the proposed rule would revise redesignated Sec.
121.103(h)(4) to clarify how receipts are to be counted where a joint
venture hires individuals to perform one or more specific contracts
(i.e., where the joint venture is populated). Although SBA requires
joint ventures to be unpopulated for purposes of performing set-aside
contracts in order to properly track work performed and benefits
derived by the lead small/8(a)/HUBZone/WOSB/SDVOSB entity to the joint
venture, some joint ventures are nevertheless populated for other
purposes. Generally, the appropriate share of a joint venture's
revenues that a partner to the joint venture must include in its own
revenues is the same percentage as the joint venture partner's share of
the work performed by the joint venture. However, that general rule
cannot apply to populated joint ventures. Where a joint venture is
populated, each individual partner to the joint venture does not
perform any percentage of the contract--the joint venture entity itself
performs the work. As such, revenues cannot be divided according to the
same percentage as work performed because to do so would give each
partner $0 corresponding to the 0% of the work performed by the
individual partner. In such a case, SBA believes that revenues must be
divided according to the same percentage as the joint venture partner's
percentage ownership share in the joint venture. Although SBA believes
that is the intent of the current regulation, the proposed rule
specifically incorporates that intent into redesignated Sec.
121.103(h)(4).
Section 121.103(i)
The proposed rule would put back into the regulations a paragraph
pertaining to affiliation based on franchise and license agreements.
This provision was inadvertently deleted from Sec. 121.103 when SBA
deleted other provisions of Sec. 121.103 in its October 2020
rulemaking (85 FR 66146 (Oct. 16, 2020)). The proposed rule merely adds
back into the regulations the provision that was inadvertently removed.
Section 121.404
SBA proposes to clarify Sec. 121.404(a)(1)(iv), which provides
that size is determined for a multiple award contract at the time of
initial offer on the contract even if the initial offer might not
include price. As stated in the existing regulation, this size
determination applies to the contract. However, SBA never intended that
orders issued pursuant to that contract follow the same rule. SBA is
aware of some confusion on that point. Accordingly, the proposed
clarification would make clear that orders issued pursuant to such a
multiple award contract that do not include price are treated similarly
to orders under multiple award contracts generally. SBA believes there
is no justification for exempting orders issued on these
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contracts differently, simply because the contract did not require
price with initial offer. Thus, the proposed rule would specifically
add that size for set-aside orders will be determined in accordance
with paragraph (a)(1)(i)(A) or (B) or (a)(1)(ii)(A) or (B), as
appropriate.
SBA also proposes to clarify when size recertification is required
in connection with a sale or acquisition. In 2016, SBA amended its
regulation regarding recertification of size to add the word ``sale''
in addition to mergers and acquisitions as an instance when
recertification is required. See 81 FR 34243, 34259 (May 31, 2016).
Since that time, some have questioned whether recertification of size
status may be required whenever any sale of stock occurs, even de
minimis amounts. That was not SBA's intent. Recertification is required
whenever there is a merger. However, recertification in connection with
a ``sale'' or ``acquisition'' is required only where the sale or
acquisition results in a change in control or negative control of the
concern. Recertification is not required where small sales or
acquisitions of stock that do not appear to affect the control of the
selling or acquiring firm occur. The proposed rule would add language
to clarify SBA's current intent.
The proposed rule would also clarify the recertification
requirements set forth in Sec. 121.404(g) for joint ventures.
Specifically, the proposed rule would add a new Sec. 121.404(g)(6)
which would set forth the general rule that a joint venture can
recertify its status as a small business where all parties to the joint
venture qualify as small at the time of recertification, or the
prot[eacute]g[eacute] small business in a still active mentor-
prot[eacute]g[eacute] joint venture qualifies as small at the time of
recertification. The proposed rule would also clarify that the two-year
limitation on contract awards to joint ventures set forth in Sec.
121.103(h) does not apply to recertification. In other words,
recertification is not a new contract award, and thus can occur even if
its timing is more than two years after the joint venture received its
first contract.
Sections 121.404(a)(1)(i)(B) and (a)(1)(ii)(B), 124.501(h), and
124.502(a)
Section 121.404(a)(1)(i)(B) and (a)(1)(ii)(B) provide generally
that a business concern that qualifies as small at the time of an offer
for a multiple award contract that is set aside or reserved for the
8(a) BD program will be deemed a small business for each order issued
against the contract, unless a contracting officer requests a size
recertification for a specific order. However, for sole source 8(a)
orders issued under a multiple award contract set-aside for exclusive
competition among 8(a) Participants, Sec. 124.503(i)(1)(iv) requires
an agency to offer and SBA to accept the order into the 8(a) program on
behalf of the identified 8(a) contract holder. As part of the offer and
acceptance process, SBA must determine that a concern is currently an
eligible Participant in the 8(a) BD program at the time of award. See
Sec. 124.501(h). There has been some confusion as to whether a concern
must qualify as small at the time of the offer of the order or whether
size relates back to the award of the underlying 8(a) multiple award
contract. Because size is something SBA looks at in making an
eligibility determination in accepting a sole source offering, SBA
intended that a Participant must currently qualify as a small business
for any sole source award in addition to currently being a Participant
in the program (i.e., firms that have graduated from or otherwise left
the 8(a) BD program are not eligible for any 8(a) sole source award).
SBA believes that the regulations are not clear on this point, and as
such this proposed rule would amend Sec. Sec. 121.404(a)(1)(i)(B) and
(a)(1)(ii)(B), 124.501(h), and 124.502(a) to clarify that position.
Section 121.411(c)
The proposed rule would correct an inconsistency between Sec. Sec.
121.411(c) and 125.3(c)(1)(viii). In requiring a prime contractor to
notify unsuccessful small business offerors of the apparent successful
offeror on subcontracts, Sec. 125.3(c)(1)(viii) provides that a prime
contractor must provide pre-award written notification to unsuccessful
small business offerors on all subcontracts over the simplified
acquisition threshold, while Sec. 121.411(c) requires a prime
contractor to inform each unsuccessful subcontract offeror in
connection with any competitive subcontract. The proposed rule would
add the over the simplified acquisition threshold condition to Sec.
121.411(c) and adjust the language in Sec. 125.3(c)(1)(viii) to make
the two provisions consistent.
Section 121.507
SBA is seeking comments on a proposed amendment to its Small
Business Timber Set-Aside Program regulations. The Small Business
Timber Set-Aside Program establishes small business set-aside sales of
sawtimber from the federal forests managed by the U.S. Department of
Agriculture's Forest Service and the U.S. Department of the Interior's
Bureau of Land Management. Current regulations require that a small
business concern cannot resell or exchange more than 30% of the
sawtimber volume to ``other than small'' businesses. SBA regulations do
not address situations where a small business concern is unable to meet
the 30% requirement due to circumstances outside of their control.
Several timber industry stakeholders have petitioned SBA to allow a
waiver of the 30% requirement in limited circumstances such as natural
disasters, national emergencies, or other attenuating circumstances.
SBA is proposing an amendment to Sec. 121.507 to add paragraph (d),
which would allow the Director of Government Contracting to grant a
waiver in limited circumstances when a small business is unable to meet
the 30% requirement due to circumstances out of its control. SBA seeks
comments on the following: whether a waiver is needed; if it is needed,
under what circumstances should a waiver be granted; whether SBA should
allow partial waivers (i.e., for some but not all of the 30/70
requirement); and how SBA should evaluate a waiver request.
Section 121.702
Section 121.702 sets forth the size and eligibility standards that
apply to the Small Business Innovation Research (SBIR) and Small
Business Technology Transfer (STTR) programs. Paragraph (c)(7) provides
guidance relating to the ostensible subcontractor rule in the SBIR/STTR
programs. That rule treats a prime contractor and its subcontractor or
subgrantee as joint venturers when a subcontractor or subgrantee
performs primary and vital requirements of an SBIR or STTR funding
agreement. The proposed rule would clarify that when an SBIR/STTR
offeror is determined to be a joint venturer with its ostensible
subcontractor, all rules applicable to joint ventures would apply. This
means that SBA will apply Sec. 121.702(a)(1)(iii) or (b)(1)(ii), which
contains the ownership and control requirements for SBIR/STTR joint
ventures. This clarification is consistent with how SBA treats entities
that are determined to be joint venturers with an ostensible
subcontractor for other small business program set-asides.
Section 121.1001
Section 121.1001 identifies who may initiate a size protest or
request a formal size determination in any circumstances. Currently,
the language identifying who may protest the size of an apparent
successful offeror is not identical for all of SBA's programs. For
small business set-aside contracts and
[[Page 55645]]
competitive 8(a) contracts, any offeror that the contracting officer
has not eliminated from consideration for any procurement-related
reason may initiate a size protest. For contracts set aside for WOSBs
or SDVOSBs, any concern that submits an offer may initiate a size
protest. For contracts set aside for certified HUBZone small business
concerns, any concern that submits an offer and has not been eliminated
for reasons unrelated to size may submit a size protest. SBA believes
that making the language for all programs identical would remove any
confusion and provide more consistent implementation of the size
protest procedures. As such, this rule proposes to adopt the language
currently pertaining to small business set-asides and competitive 8(a)
contracts to all of SBA's programs. Thus, any offeror that the
contracting officer has not eliminated from consideration for any
procurement-related reason could initiate a size protest in each of
those programs. The proposed rule would make these changes in Sec.
121.1001(a)(6)(i) for the HUBZone program, in Sec. 121.1001(a)(8)(i)
for the SDVO program, and in Sec. 121.1001(a)(9)(i) for the WOSB
program.
With respect to 8(a) contracts, Sec. 121.1001(a)(2) identifies
interested parties who may protest the size status of an apparent
successful offeror for an 8(a) competitive contract, and Sec.
121.1001(b)(2)(ii) identifies those who can request a formal size
determination with respect to a sole source 8(a) contract award.
Pursuant to Sec. 124.501(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. For a sole source contract, if SBA determines a Participant
to be ineligible because SBA believes the concern to be other than
small, Sec. 121.1001(b)(2)(ii) authorizes the Participant determined
to be ineligible to request a formal size determination. However, Sec.
121.1001(b)(2)(ii) does not currently authorize a Participant
determined to be ineligible based on size to request a formal size
determination in connection with a competitive 8(a) contract award. SBA
does not believe that the protest authority of Sec. 121.1001(a)(2) was
meant to apply to this situation since protests normally relate to
another firm challenging the small business status of the apparent
successful offeror, not the apparent successful offeror challenging its
own size status. This rule proposes to provide specific authority to
allow a firm determined to be ineligible for a competitive 8(a) award
based on size to request a formal size determination. It would also
authorize the contracting officer, the SBA District Director in the
district office that services the Participant, the Associate
Administrator for Business Development, and the SBA's Associate General
Counsel for Procurement Law to do so as well.
Sections 121.1004(a)(ii), 125.28(d)(2), 126.801(d)(2)(i), and
127.603(c)(2)
In the context of a sealed bid procurement, SBA's regulations
provide that an interested party must protest the size or socioeconomic
status (i.e., service-disabled veteran-owned small business (SDVOSB),
HUBZone or women-owned small business (WOSB)/economically-disadvantaged
women-owned small business (EDWOSB)) of the low bidder prior to the
close of business on the fifth business day after bid opening. However,
the regulations do not specifically take into account the situation
where a low bidder is timely protested and found to be ineligible, the
procuring agency identifies another low bidder, and an interested party
seeks to challenge the size or socioeconomic status of the newly
identified low bidder. In such a situation, the new low bidder is
identified well beyond five days of bid opening. As such, it is
impossible for an interested party to file a timely protest (i.e., one
within five days of bid opening). It was not SBA's intent to disallow
size protests in these circumstances. SBA believes that a protest in
these circumstances should be deemed timely if it is received within
five days of notification of the new low bidder. A few firms have
questioned whether such a protest should be deemed timely because the
regulations speak only to filing a protest within five days of bid
opening. Because a protest by SBA is always timely, when timeliness has
been questioned in these circumstances, and the protest is sufficiently
specific, SBA has adopted the protest as its own and processed it
accordingly. To eliminate this needless additional step where
timeliness is questioned, the proposed rule would specifically provide
that where the identified low bidder is determined to be ineligible for
award, a protest of any other identified low bidder would be deemed
timely if received within five business days after the contracting
officer has notified the protestor of the identity of that new low
bidder.
SBA proposes to make this change in Sec. 121.1004(a)(ii) for size
protests, in Sec. 125.28(d)(2) for protests relating to SDVO status,
in Sec. 126.801(d)(2)(i) for protests relating to HUBZone status, and
in Sec. 127.603(c)(2) for protests relating to WOSB or EDWOSB status.
Section 121.1004
The proposed rule would add a new Sec. 121.1004(f) to specify that
size protests may be filed only against an apparent successful offeror
(or offerors) or an offeror in line to receive an award. SBA will not
consider size protests relating to offerors who are not in line for
award. This is the current SBA policy and the proposed rule merely
provides additional clarity to Sec. 121.1004(e), which specifies that
premature protests will be dismissed.
Where an agency decides to reevaluate offers as a corrective action
in response to a GAO protest, the proposed rule would add a new Sec.
121.1004(g) providing that SBA would dismiss any size protest relating
to the initial apparent successful offeror. When offerors are made
aware of the new or same apparent successful offeror after
reevaluation, they will again have the opportunity to protest the size
of the apparent successful offeror within five business days after such
notification.
Section 121.1009
Section 121.1009 details the procedures SBA's Government
Contracting Area Offices use in making formal size determinations.
Section 121.1009(a)(1) provides that the Area Office will generally
issue a formal size determination within 15 business days after receipt
of a protest or a request for a formal size determination. With respect
to a specific contract, SBA will generally process size protests
relating only to the apparent successful offeror. SBA sometimes
receives a size protest where the award is simultaneously being
protested at the Government Accountability Office (GAO). Where this
happens, SBA suspends processing the size protest pending the outcome
of the GAO decision since that decision may require corrective action
which could affect the apparent successful offeror. Although that has
been SBA's policy in practice, it is not specifically set forth in
SBA's regulations. The proposed rule would incorporate that policy,
providing that if a protest is pending before GAO, the SBA Area Office
will suspend the size determination case. Once GAO issues a decision,
the Area Office will recommence the size determination process and
issue a
[[Page 55646]]
formal size determination within 15 business days of the GAO decision,
if possible.
Sections 121.1009(g)(5), 125.30(g)(4), 126.503(a)(2), and 127.405(d)
Section 863 of the National Defense Authorization Act for Fiscal
Year 2022 (NDAA FY22), Public Law 117-81, amended section 5 of the
Small Business Act, 15 U.S.C. 634, to add three requirements related to
size and socioeconomic status determinations. First, section 863
mandates that a business concern or SBA, as applicable, ``shall''
update the concern's status in SAM.gov not later than two days after a
final determination by SBA that the concern does not meet the size or
socioeconomic status requirements that it certified to be. SBA believes
that the statue intends that a business concern be required to update
SAM.gov in all instances in which it is capable of doing so. Only where
a business concern is unable to change a particular status (e.g., only
SBA can identify a concern as a certified HUBZone small business) will
the business concern not be required to change that status in SAM.gov.
Second, section 863 requires that, in the event that the business does
not update its status within this timeframe, SBA ``shall'' make the
update within two days of the business's failure to do so. Third,
section 863 requires that, where the business is required to make an
update, it also must notify the contracting officer for each contract
with which the business has a pending bid or offer, if the business
finds, in good faith, that the determination affects the eligibility of
the concern to be awarded the contract. The proposed rule would
implement these provisions by amending SBA's regulations in Sec. Sec.
121.1009(g)(5) (for size determinations), 125.30(g)(4) (for SDVO status
determinations), 126.503(a)(2) (for HUBZone status determinations), and
127.405(c) (for WOSB/EDWOSB status determinations). Because only SBA
can change a firm's status as a certified HUBZone small business
concern in SAM.gov, it is not ``applicable'' under the statute for the
business concern to do so. As such, the proposed rule would not add
language requiring a HUBZone concern to change its status in SAM.gov
within two business days of an adverse status determination. Instead,
it would require SBA to make such a change within four business days.
Sections 121.1203 and 121.1204
Section 46(a)(4)(A) of the Small Business Act, 15 U.S.C.
657s(a)(4)(A), provides that in a contract mainly for supplies a small
business concern shall supply the product of a domestic small business
manufacturer or processor unless a waiver is granted after SBA reviews
a determination by the applicable contracting officer that no small
business manufacturer or processor can reasonably be expected to offer
a product meeting the specifications (including the period of
performance) required by the contract. Section 121.1203 of SBA's
regulations provides guidance as to when SBA will grant a waiver to the
nonmanufacturer rule in connection with an individual contract, and
Sec. 121.1204 identifies the procedures for requesting and granting
waivers.
The proposed rule seeks to clarify perceived ambiguities relating
to the effect of a waiver in a multiple item procurement. For a
multiple item set-aside contract, in order to qualify as a small
business nonmanufacturer, at least 50 percent 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 to the
nonmanufacturer rule (or small business manufacturers plus waiver must
equal at least 50 percent). See 13 CFR 125.6(a)(2)(ii)(B). In seeking a
contract-specific waiver to the nonmanufacturer rule, SBA's regulations
provide that a contracting officer's waiver request must include a
definitive statement of the specific item to be waived. The proposed
rule would clarify that for a multiple item procurement, a contracting
officer must specifically identify each item for which a waiver is
sought. The proposed rule would also provide that once SBA reviews and
concurs with an agency's request, SBA's waiver applies only to the
specific item(s) identified, not to the entire contract.
This rule also proposes to add a provision that would prohibit
contract-specific waivers for contracts with a duration of longer than
five years, including options. When SBA grants an individual waiver
with respect to a particular item, it does not necessarily mean that
there are no small business manufacturers of that item. Instead, it
could merely relate to the lack of availability of small business
manufacturers for the specific contract at issue due to timing (e.g.,
small business manufacturers are currently tied up with other
commitments) or capacity (e.g., there are small business manufacturers,
but those manufacturers cannot provide the item in the quantity that is
required). The circumstances surrounding the availability of a specific
item from small business manufacturers can greatly change in five
years. Beyond five years, new small business manufacturers of a
particular item could come into the market, or those previously
committed to other projects or who were unable to previously supply the
product in the quantity or time constraints required by the contract
could become available to meet the agency's requirements. After a five-
year contract is completed and an agency seeks to award a follow-on
contract for the same requirements, an agency would be required to
again conduct market research and determine that no small business
manufacturer or processor reasonably can be expected to offer one or
more specific products required by the new solicitation. As an
alternative, SBA is considering limiting waivers to five years for long
term contracts, but allowing a procuring agency to seek a new waiver
for an additional five years if, after conducting market research, it
demonstrates that there are no available small business manufacturers
and that a waiver remains appropriate. SBA seeks comments on both
approaches.
When an agency seeks an individual waiver to the nonmanufacturer
rule in connection with a specific acquisition, SBA believes that the
agency is ready to move forward with the acquisition process as soon as
SBA makes a wavier decision and expects the solicitation to be issued
shortly after such a decision is made. That is why SBA's waiver
decision letters provide that the waiver will expire in one year from
the date of the waiver decision. SBA expects award to be made within
one year. If it is not, SBA believes that the agency should come back
to SBA with revised market research requesting that the waiver (or
waivers in the case of a multiple item procurement) be extended.
Similar to the rationale for not allowing individual waivers to apply
to long-term contracts, the circumstances surrounding whether there are
any small business manufacturers who are capable and available to
supply products for a specific procurement may change in one year.
Where an agency demonstrates that small business manufacturers continue
to be unavailable to fulfill the requirement, SBA will extend the
waiver(s). The proposed rule would specifically incorporate this policy
into a new Sec. 121.1204(b)(5).
Although SBA believes that there is no current ambiguity, the
proposed rule would also add language specifying that an individual
waiver applies only to the contract for which it is granted and does
not apply to modifications outside the scope of the contract or other
procurement actions. A waiver granted
[[Page 55647]]
for one contract does not and was never intended to apply to another
contract (whether that separate contract was a follow-on contract,
bridge contract, or some other contract or order under another
contract), but the proposed rule would add this language nevertheless
to dispel any possible misunderstanding.
Finally, the proposed rule would clarify that where an agency
requests a waiver for multiple items, SBA may grant the request in
full, deny it in full, or grant a waiver for some but not all of the
items for which a waiver was sought. SBA's decision letter would
identify the specific items that SBA identifies as waived for the
procurement.
Section 121.1205
Section 121.1205 refers to the list of classes of products for
which SBA has granted waivers to the Nonmanufacturer Rule. The
reference in the current version of the regulation provides a link to a
website that no longer exists. The proposed rule would update the
reference to the correct website, which is https://www.sba.gov/document/support-non-manufacturer-rule-class-waiver-list.
Section 124.102
Section 124.102(c) provides that a concern whose application is
denied due to size by 8(a) BD program officials may request a formal
size determination with the SBA Government Contracting Area Office
serving the geographic area in which the principal office of the
business is located. SBA notes that during the processing of an
application SBA itself can request a formal size determination pursuant
to Sec. 121.1001(b)(2)(i). The Sec. 124.102(c) process applies only
where SBA has not requested a formal size determination with respect to
a specific applicant. Under Sec. 124.102(c), if the concern requests a
formal size determination and the Area Office finds it to be small
under the size standard corresponding to its primary North American
Classification System (NAICS) code, the concern can immediately reapply
to the 8(a) BD program. SBA believes that a concern should not need to
reapply to the 8(a) BD program if size was the only reason for decline.
In such a case, SBA believes that the Associate Administrator for
Business Development (AA/BD) should immediately certify the firm as
eligible for the 8(a) BD program. The proposed rule would make a
distinction for applications denied solely based on size and those
where size is one of several reasons for decline. Where size is not the
only reason for decline, the proposed rule would provide that the
concern could reapply for participation in the 8(a) BD program at any
point after 90 days from the AA/BD's decline. The AA/BD would then
accept the size determination as conclusive of the concern's small
business status, provided the applicant concern has not completed an
additional fiscal year in the intervening period and SBA believes that
the additional fiscal year changes the applicant's size.
Section 124.103
Section 124.103 describes the rules pertaining to social
disadvantage status. Section 124.103(c) details how an individual who
is not a member of one of the groups presumed to be socially
disadvantaged may establish his or her individual social disadvantage.
It provides that an individual must identify an objective
distinguishing feature that has contributed to his or her social
disadvantage, and lists physical handicap as one such possible
identifiable feature. In order to be consistent with recent changes in
terms made by the General Services Administration (GSA), 87 FR 6044, as
well as with the Americans with Disabilities Act, the proposed rule
would change the words physical handicap to identifiable disability.
Section 124.104
Section 124.104 specifies the rules pertaining to whether an
individual may be considered economically disadvantaged. Section
124.104(c)(2)(ii) provides that funds invested in an Individual
Retirement Account (IRA) or other official retirement account will not
be considered in determining an individual's net worth. The paragraph
then requires the individual to provide information about the terms and
restrictions of the account to SBA in order for SBA to determine
whether the funds invested in the account should be excluded from the
individual's net worth. SBA does not believe that it is necessary for
an individual to provide information about the terms and restrictions
of a retirement account to SBA in every instance. As such, the proposed
rule would change this provision to requiring an individual to provide
information about the terms and restrictions of an IRA or other
retirement account only when requested to do so by SBA.
The proposed rule would also delete current Sec.
124.104(c)(2)(iii). That provision provides that income received from
an applicant or Participant that is an S corporation, limited liability
company (LLC) or partnership will be excluded from an individual's net
worth where the applicant or Participant provides documentary evidence
demonstrating that the income was reinvested in the firm or used to pay
taxes arising in the normal course of operations of the firm. SBA does
not believe that this provision is necessary because the exact
provision is contained in Sec. 124.104(c)(3)(ii) in discussing how SBA
treats personal income.
Section 124.105
Section 124.105 describes the ownership requirements pertaining to
applicants and Participants for the 8(a) BD program. Section 124.105(h)
sets forth ownership restrictions for non-disadvantaged individuals and
concerns, and Sec. 124.105(h)(2) specifies ownership restrictions for
non-Participant concerns in the same or similar line of business and
for principals of such concerns. Current Sec. 124.105(h)(2) recognizes
a limited exception to the general ownership restriction for a former
Participant in the same or similar line of business or a principal of
such a former Participant. This paragraph does not, however, refer to
or recognize another exception set forth elsewhere in SBA's
regulations, and that is the exception set forth in Sec. 125.9(d)(2)
which allows an SBA-approved mentor to own up to 40 percent of its
prot[eacute]g[eacute]. This proposed rule adds language clarifying that
the Sec. 125.9(d)(2) authority applies equally to mentors in the same
line of business as its prot[eacute]g[eacute] that is also a current
8(a) BD Program Participant.
Section 124.105(i) provides guidance with respect to changes of
ownership, and Sec. 124.105(i)(1) specifies that any Participant that
was awarded one or more 8(a) contracts may substitute one disadvantaged
individual for another disadvantaged individual without requiring the
termination of those contracts or a request for waiver under Sec.
124.515. There has been some confusion as to whether there can be a
change of ownership for a former Participant that is still performing
one or more 8(a) contracts. This would generally not occur with one
disadvantaged individual seeking to buy out a disadvantaged principal
of a former 8(a) Participant. That is because of the one-time
eligibility restriction. In order for any change of ownership to be
approved by SBA, SBA must determine that the individual seeking to
replace a former principal does in fact qualify as socially and
economically disadvantaged under SBA's regulations. An individual who
has previously participated in the 8(a) BD program and has used his or
her individual disadvantaged status to qualify one 8(a)
[[Page 55648]]
Participant would not be deemed disadvantaged if the individual sought
to replace a principal of a second 8(a) Participant. Thus, the only
individuals who could seek to replace the principal of a former 8(a)
Participant would be those who have never participated in the 8(a) BD
program before. To do so, such individuals would have to use their one-
time eligibility to complete performance on previously awarded 8(a)
contracts. The business concern could not be awarded any additional
contracts because it is no longer an eligible Participant. If an
individual thought the opportunity was sufficient to entice him or her
to forego his/her one-time eligibility, he or she might proceed with
such a transaction, but SBA does not believe that would often happen.
The more likely scenario would be where an entity (tribe, ANC), Native
Hawaiian Organization (NHO), or Community Development Corporation
(CDC)) seeks to replace the principal of a former 8(a) Participant. The
one-time eligibility restriction does not apply to entities. A tribe,
ANC, NHO or CDC can own more than one business concern that
participates in the 8(a) BD program. As such, an entity could purchase
a former Participant and complete performance of any remaining 8(a)
contracts. If the tribe, ANC, NHO, or CDC seeking to replace the
principal of a former 8(a) Participant has or has had a Participant in
the 8(a) BD program, its general eligibility has already been
established. However, if this would be the first time that a specific
entity would own a business seeking 8(a) BD benefits, the entity must
establish its overall eligibility. In the case of an Indian tribe or
NHO, it must, among other things, demonstrate that it is economically
disadvantaged. The proposed rule would clarify that a change of
ownership could apply to a former Participant as well as to a current
Participant.
Section 124.105(i)(2) permits a change of ownership to occur
without receiving prior SBA approval in certain specified
circumstances, including where all non-disadvantaged individual owners
involved in the change of ownership own no more than a 20 percent
interest in the concern both before and after the transaction. In order
to ensure that ownership interests are not divided up among two or more
immediate family members to avoid SBA's immediate review of a change of
ownership, the proposed rule would provide that SBA will aggregate the
interests of all immediate family members in determining whether a non-
disadvantaged individual involved in a change of ownership has more
than a 20 percent interest in the concern.
Section 124.107
Section 124.107 describes the policies relating to potential for
success. In order to be eligible for the 8(a) BD program an applicant
concern must possess reasonable prospects for success in competing in
the private sector. This requirement stems from the language contained
in section 8(a)(7)(A) of the Small Business Act, 15 U.S.C.
637(a)(7)(A), which provides that no small business concern shall be
deemed eligible for the 8(a) BD program unless SBA determines that with
contract, financial, technical, and management support the concern will
be able to perform 8(a) contracts and has reasonable prospects for
success in competing in the private sector. There has been some
confusion as to whether an applicant must demonstrate that it has
specifically performed work in the private sector prior to applying to
participate in the 8(a) BD program. That is not the case. The statutory
requirement is that SBA must determine that with assistance from the
8(a) BD program a business concern will have reasonable prospects for
success in competing in the private sector in the future. The
regulation requires an applicant to demonstrate that it has been in
business and received revenues in its primary industry classification
for at least two full years immediately prior to the date of its 8(a)
BD application, but it does not say that those revenues must have come
from the private sector. A business concern that has performed no
private sector work but has demonstrated successful performance of
state, local or federal government contracts is eligible to participate
in the 8(a) BD program. The proposed rule would add language clarifying
that intent.
Section 124.108
Section 124.108 establishes other eligibility requirements that
pertain to firms applying to and participating in the 8(a) BD program.
Section 124.108(e) provides that an applicant will be ineligible for
the 8(a) BD program where the firm or any of its principals has failed
to pay significant financial obligations owed to the Federal
Government. This proposed rule would clarify that where the firm or the
affected principals can demonstrate that the financial obligations have
been settled and discharged/forgiven by the Federal Government, the
applicant would be eligible for the program.
Section 124.109
Section 124.109 provides specific rules applicable to Indian tribes
and Alaska Native Corporations for applying to and remaining eligible
for the 8(a) BD program. SBA's regulations currently provide that the
articles of incorporation, partnership agreement or limited liability
company articles of organization of a tribally-owned applicant or
Participant must contain express sovereign immunity waiver language, or
a ``sue and be sued'' clause which designates United States Federal
Courts to be among the courts of competent jurisdiction for all matters
relating to SBA's programs. This rule proposes two changes with respect
to that provision. First, the waiver of sovereign immunity should apply
only to concerns owned by Federally recognized Indian tribes. State
recognized tribes are not deemed sovereign and, thus, do not need to
waive sovereign immunity because they are already subject to suit. As
such, SBA proposes to amend this provision to clarify that it is
intended to apply only to concerns owned by Federally recognized
tribes. Second, concerns that are organized under tribal law may not
have articles of incorporation, partnership agreements or limited
liability company articles of organization and may be unable to
strictly comply with the regulatory language. In response, SBA proposes
to add language allowing tribally-owned concerns organized under tribal
law to waive sovereign immunity in any similar documents authorized
under tribal law.
One of the ways a tribally-owned business can demonstrate potential
for success needed to be eligible for the program is to demonstrate
that it has been in business for at least two years, as evidenced by
income tax returns for each of the two previous tax years showing
operating revenues in the primary industry in which the applicant is
seeking 8(a) BD certification. Not all tribally-owned concerns file
federal income tax returns. The tax return requirement is intended to
be an objective means by which a tribally-owned concern can show that
it has been in business for at least two years with operating revenues.
SBA believes that tax returns are not the only way for a tribally-owned
concern to demonstrate its business history. The proposed rule would
add a provision allowing a tribally-owned applicant to submit financial
statements demonstrating that it has been in business for at least two
years with operating revenues in the
[[Page 55649]]
primary industry in which it seeks 8(a) BD certification.
Section 124.110
The proposed rule would add a new Sec. 124.110(d)(3) to allow the
individuals responsible for the management and daily operations of an
NHO-owned concern to manage two Program Participants. This would make
the control requirements relating to NHO-owned applicants/Participants
consistent with those applying to applicants/Participants owned by
tribes and Alaska Native Corporations (ANCs). Although this is a
statutory exemption for firms owned by tribes and ANCs, and is not for
firms owned by NHOs, SBA believes that the policies relating to all
three entity-owned applicants/Participants should be consistent
whenever possible. SBA does not believe that this change for NHO-owned
firms in any way contradicts any statutory requirement and would merely
allow more flexibility for NHO-owned firms.
In addition, the proposed rule would clarify the current policy
regarding NHO ownership of an applicant or Participant small business
concern. Although SBA currently requires an NHO to unconditionally own
at least 51 percent of the applicant or Participant, the proposed rule
merely makes that requirement explicit in the regulations.
Section 124.204
Section 124.204 details how SBA processes applications for 8(a) BD
program admission. It identifies that only the AA/BD can approve or
decline an application for participation in the 8(a) BD program. There
are, however, certain threshold issues that must be addressed before an
application will be fully processed. Specifically, in SBA's electronic
8(a) application system, there are four fundamental eligibility
questions that must be answered before an application will be reviewed:
an applicant must be a for-profit business (see Sec. Sec. 121.105 and
124.101); every individual claiming disadvantaged status must be a
United States citizen (see Sec. 124.101); neither the applicant firm
nor any of the individuals upon whom eligibility is based could have
previously participated in the 8(a) BD program (see Sec. 124.108(b));
and any individually-owned applicant must have generated some revenues
(see Sec. 124.107(a) and (b)(1)(iv)). If an applicant answers that it
is not a for-profit business entity, that one or more of the
individuals upon whom eligibility is based is not a United States
citizen (see Sec. 124.104), that the applicant or one or more of the
individuals upon whom eligibility is based has previously participated
in the 8(a) BD program (see Sec. 124.108(b)), or that the applicant is
not an entity-owned business and has generated no revenues (see Sec.
124.107(a) and (b)(1)(iv)), its application will be closed and it will
be prevented from completing a full electronic application. Each of
those four bases automatically renders the applicant ineligible for the
program and further review would not be warranted. The proposed rule
would identify these four threshold issues that must be addressed
before an application will be reviewed.
Section 124.302
Section 124.302 addresses graduation and early graduation from the
8(a) BD program. In determining whether an applicant or Participant
should be deemed economically disadvantaged, SBA previously required a
concern to compare its financial condition to non-8(a) BD business
concerns in the same or similar line of business. SBA eliminated that
requirement as not being consistent with the statutory authority which
requires only that an applicant or concern be owned and controlled by
one or more individuals who are economically disadvantaged, not that
the concern itself be economically disadvantaged. In addressing
graduation, Sec. 124.302(b) retained some of that same language
requiring a comparison of an 8(a) BD Participant to non-8(a)
businesses. SBA believes that too is inconsistent with the statutory
language, which defines the term ``graduated'' or ``graduation'' to
mean that a Program Participant is recognized as successfully
completing the 8(a) BD program by substantially achieving the targets,
objectives, and goals contained in its business plan, and demonstrating
its ability to compete in the marketplace without assistance from the
8(a) BD program. 15 U.S.C. 636(j)(10)(H). As such, the proposed rule
would remove Sec. 124.302(b)(5), as not consistent with the statutory
oversight responsibilities. SBA also believes that the requirements for
graduation are adequately set forth in Sec. 124.302(a)(1) of SBA's
regulations and requests comments on whether the entire Sec.
124.302(b) can be eliminated as unnecessary.
Section 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 as soon as possible after program admission. Currently,
Sec. 124.402(b) provides that SBA will suspend a Participant from
receiving 8(a) BD program benefits if it has not submitted its business
plan to its servicing district office within 60 days after program
admission. There is a concern that Sec. 124.402(b) does not clearly
provide that a Participant's business plan must be approved by SBA
before the concern is eligible for 8(a) contracts, as required by
section 7(j)(10)(D)(i) of the Small Business Act, 15 U.S.C.
636(j)(10)(D)(i). This proposed rule would clarify that SBA must
approve a Participant's business plan before the firm is eligible to
receive 8(a) contracts. However, SBA recognizes that some firms are
admitted to the 8(a) BD program with self-marketed procurement
commitments from one or more procuring agencies. SBA also understands
that several newly admitted Participants have missed 8(a) contract
opportunities in the past because SBA did not approve their business
plans before the procuring agencies sought to award such procurement
commitments as 8(a) contracts. SBA does not wish to discourage self-
marketing activities or prevent a newly admitted Participant from
receiving critical business development assistance. At the same time,
SBA is constrained by the statutory language requiring business plan
approval prior to the award of 8(a) contracts. The proposed rule would
merely prioritize business plan approval for any firm that is offered a
sole source 8(a) requirement or is the apparent successful offeror for
a competitive 8(a) requirement. Specifically, the proposed rule would
provide that where a sole source 8(a) requirement is offered to SBA on
behalf of a Participant or a Participant is the apparent successful
offeror for a competitive 8(a) requirement and SBA has not yet approved
the Participant's business plan, SBA will approve the Participant's
business plan as part of its eligibility determination prior to
contract award.
Section 124.403
Section 124.403 sets forth the requirements relating to business
plans. Section 124.403(a) provides that Each Participant must annually
review its business plan with its assigned Business Opportunity
Specialist (BOS) and modify the plan as appropriate. The wording of
this paragraph caused some to believe that a Participant needed to
submit a business plan to SBA every year even where nothing had changed
from the previous year. That was not SBA's intent. The ``as
appropriate'' language was meant to infer that a Participant need not
submit a business plan if nothing had changed from the previous year.
The proposed rule clarifies that a Participant must submit
[[Page 55650]]
a new or modified business plan only if its business plan has changed
from the previous year.
Sections 124.501, 125.22(d), 126.609, and 127.503(e)
There has been some confusion as to whether a contracting officer
can limit an 8(a) competition (whether for an 8(a) contract or an order
set-aside for 8(a) competition under an unrestricted contract) to
Participants having more than one certification (e.g., 8(a) and
HUBZone). SBA believes that section 8(a)(1)(D)(i) of the Small Business
Act, 15 U.S.C. 637(a)(1)(D)(i), requires any 8(a) competition to be
available to all eligible Program Participants. SBA has consistently
interpreted this provision as prohibiting SBA from accepting a
requirement for the 8(a) BD program that seeks to limit an 8(a)
competition only to certain types of 8(a) Participants, rather than
allowing competition among all eligible Participants. In other words,
SBA has interpreted this authority to prohibit an agency from requiring
one or more other certifications in addition to its 8(a) certification.
This interpretation is currently contained in Sec. 125.2(e)(6)(i), but
is not specifically contained in the 8(a) BD regulations. Likewise, the
statutory authority for HUBZone set asides, 15 U.S.C. 657a(c)(2)(B),
provides authority for competition restricted to certified HUBZone
small business concerns and does not permit a ``dual'' set-aside for
firms that are both HUBZone-certified and 8(a) Participants. The
proposed rule would merely add a sentence to Sec. 124.501(b) to
clarify SBA's current position that would prohibit a contracting
activity from restricting an 8(a) competition to Participants that are
also certified HUBZone small businesses, certified WOSBs or eligible
SDVO small businesses. SBA also proposes to make similar clarifications
to the regulations for the SDVO (in Sec. 125.22(d)), HUBZone (in new
Sec. 126.609), and WOSB (in Sec. 127.503(e)) programs.
SBA also proposes to clarify Sec. 124.501(b) by noting that an
agency may award an 8(a) sole source order against a multiple award
contract that was not set aside for competition only among 8(a)
Participants. SBA believes that such awards are consistent with SBA's
statutory authority at section 8(a)(16) of the Small Business Act, 15
U.S.C. 637(a)(16), to enter 8(a) sole source awards. Furthermore, this
type of 8(a) sole source order is beneficial to both 8(a) Participants,
who benefit from increased contracting opportunities, and to procuring
agencies, that can take advantage of pre-negotiated terms and pricing.
The proposed rule would also revise the introductory text to Sec.
124.501(g). The revised language would first require SBA to notify an
8(a) Participant any time SBA determines the Participant to be
ineligible for a specific sole source or competitive 8(a) award. SBA
notes that this is currently required in section 19.805-2 of the
Federal Acquisition Regulation (FAR), title 48 of the Code of Federal
Regulations, and is something that should occur routinely, but believes
that highlighting this in SBA's regulations would be helpful. SBA also
proposes to clarify that where a joint venture is the apparent
successful offeror in connection with a competitive 8(a) procurement,
SBA will determine whether the 8(a) partner to the joint venture is
eligible for award, but will not review the joint venture agreement to
determine compliance with Sec. 124.513. SBA believes that there was
some confusion as to what an eligibility determination entailed in the
context of a competitive 8(a) joint venture apparent successful
offeror. The proposed rule seeks to make clear that SBA's determination
of eligibility relates solely to the 8(a) partner to the joint venture
and does not represent a full review of the 8(a) joint venture under
Sec. 124.513.
Finally, the proposed rule would also make several clarifications
to the bona fide place of business requirement contained in Sec.
124.501(k). 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. In the October 2020
rulemaking, supra, SBA clarified that the Small Business Act does not
differentiate between sole source 8(a) construction contracts and
competitive 8(a) construction contracts. As such, the statutory
``maximum extent practicable'' requirement applies equally to sole
source and competitive 8(a) contracts. SBA understands that some have
expressed the view that the ``to the maximum extent practicable''
statutory language should be read in a way that affords procuring
agencies the discretion to broaden or do away with the bona fide place
of business requirement where they deem it to be appropriate. SBA
disagrees that the statutory language affords such flexibility. In
SBA's view, ``to the maximum extent practicable'' denotes Congress's
intent that something be followed whenever possible, not merely when a
procuring agency thinks it is the best option or appropriate in
particular circumstances. Thus, SBA will continue to apply the bona
fide place of business requirement to both sole source and competitive
8(a) construction procurements unless SBA determines that it is not
``practicable'' to do so. In this regard, with employees expected to
telework on a significant basis due to the COVID-19 pandemic, SBA
issued a Policy Notice temporarily placing a moratorium on the bona
fide place of business requirement with respect to all 8(a)
construction contracts offered to the 8(a) BD program prior to
September 30, 2022, based on SBA's determination that it was not
``practicable'' to impose that requirement at this time. SBA Policy
Notice 6000-819056 (August 25, 2021). Due to the lingering effects of
the COVID-19 pandemic, the SBA Administrator has determined that
requiring a bona fide place of business in a particular location
continues to be impracticable and has extended the moratorium on the
requirement through September 30, 2023. Once SBA determines that it is
no longer impracticable to require a bona fide place of business, SBA
will again require a Participant to have a bona fide place of business
in a particular geographic location with respect to all construction
requirements offered to the 8(a) program. As such, SBA seeks to clarify
several components of the bona fide place of business requirement in
this proposed rule.
When SBA revised the bona fide place of business rule in October
2020, it intended that a Participant with a bona fide place of business
anywhere in a particular state should be deemed eligible for a
construction contract throughout that entire state (even if the state
is serviced by more than one SBA district office). However, because the
regulatory text used the word ``may'', several Participants have sought
clarification of SBA's intent. The proposed rule clarifies SBA's
intent.
The proposed rule would also clarify that where a Participant is
currently performing a contract in a specific state, it would qualify
as having a bona fide place of business in that state for one or more
additional contracts. This clarification is specifically intended to
apply to the situation where a business concern is performing a
construction contract in a specific location, the procuring activity
likes the work done by the business concern and seeks to award an 8(a)
construction contract to the same business concern in the same location
as the previous contract. SBA believes that it does not make sense to
[[Page 55651]]
say that a business concern is not eligible for such award because it
has not officially sought and approved to have a bona fide place of
business in that location. The proposed clarification would also
provide that the Participant could not use contract performance in one
state to allow it to be eligible for an 8(a) contract in a contiguous
state unless it officially establishes a bona fide place of business in
the location in which it is currently performing a contract. The
proposed rule would also clarify that a Participant could establish a
bona fide place of business through a full-time employee in a home
office. In addition, an individual designated as the full-time employee
of the Participant seeking to establish a bona fide place of business
in a specific geographic location need not be a resident of the state
where he/she is conducting business. In the past, some SBA district
offices have required the designated employee to possess a driver's
license issued by the state corresponding to the location of the
office. SBA believes that is not appropriate. There is no requirement
that a specific employee must permanently reside in a specific
location. A Participant merely needs to demonstrate that one or more
employees are operating in an office within the identified geographic
location. A Participant should be able to rotate employees in and out
of a specific location as it sees fit, and as long as one individual
(but not necessarily the same individual) remains at that location,
that location can be considered a bona fide place of business. Finally,
the proposed rule would provide guidance on how SBA interprets the bona
fide place of business requirement where a contract requires work to be
performed in more than one location and those different locations may
not be within the boundaries of the bona fide place of business.
Although this is SBA's current interpretation of the bona fide place of
business requirement, SBA believes putting it in the regulations would
clarify any confusion that currently exists. For a single award 8(a)
construction contract requiring work in multiple locations, the
proposed rule would provide that a Participant is eligible if it has a
bona fide place of business where a majority of the work is to be
performed. For a multiple award 8(a) construction contract, the
proposed rule would require a Participant to have a bona fide place of
business in any location where work is to be performed.
Section 124.503(a)
Section 124.503(a) provides that SBA will decide whether to accept
a requirement offered to the 8(a) BD program within ten working days of
receipt of a written offering letter if the contract value exceeds the
Simplified Acquisition Threshold (SAT). In consideration of mutual
responsibilities under SBA's 8(a) Partnership Agreements with federal
procuring agencies, SBA has agreed to issue an acceptance letter or
rejection letter for such offers within five working days unless the
agency grants an extension. This proposed rule would clarify that the
ten-day acceptance timeframe under Sec. 124.503(a) applies only to
8(a) offers made outside the 8(a) Partnership Agreement authority.
Section 124.503(a)(4)(ii) authorizes a procuring activity to award
an 8(a) contract without requiring an offer and acceptance where the
requirement is valued at or below the SAT and SBA has delegated its
8(a) contract execution functions to the agency. The paragraph goes on
to provide that in such a case, the procuring activity must notify SBA
of all 8(a) awards made under this authority. Some agencies have relied
on this language to justify proceeding to award an 8(a) contract under
the SAT without first requesting an eligibility determination from SBA
of the apparent successful 8(a) contractor (which is required by Sec.
124.501(g)). It was not SBA's intent to allow an award without a
determination of eligibility being made. To do otherwise could result
in agencies awarding 8(a) contracts to ineligible firms. Although it
authorizes an expedited review, the partnership agreement between SBA
and procuring agencies identifies that an eligibility determination
must still be made in these cases. The proposed rule would merely
clarify that requirement in SBA's regulations.
Section 124.503(a)(5) authorizes a procuring agency to seek
acceptance of an 8(a) offering letter with the AA/BD where SBA does not
respond to an offering letter within the ten-day period set forth under
Sec. 124.503(a). The proposed rule clarifies that this ten-day time
period is intended to be ten business days.
Section 124.503(i)(1)(ii)
SBA's current regulations require a procuring agency to notify SBA
where it seeks to reprocure a follow-on requirement through a pre-
existing limited contracting vehicle which is not available to all 8(a)
BD Program Participants and the previous/current 8(a) award was not so
limited. See 13 CFR 124.504(d)(1). There has been some confusion as to
whether this conflicts with Sec. 124.503(i)(1)(ii), which provides
that an agency need not offer or receive acceptance of individual
orders into the 8(a) BD program if the underlying multiple award
contract was awarded through the 8(a) BD program. These provisions were
not meant to conflict. Although formal offer and acceptance is not
required, it is important for SBA to be notified of any work that is
intended to be moved to an 8(a) multiple award contract that was
previously performed under an 8(a) contract that was not limited to
specific 8(a) Participants (i.e., either a sole source award to a
specific Participant or an 8(a) competitive award that was open to all
eligible Program Participants). As SBA noted in the supplementary
information to the final rule implementing the notification requirement
contained in Sec. 124.504(d)(1), an 8(a) incumbent contractor may be
seriously hurt by moving a procurement from an 8(a) sole source or
competitive procurement to an 8(a) multiple award contract to which the
incumbent is not a contract holder. See 85 FR 66146, 66163 (Oct. 16,
2020). In such a case, the incumbent would have no opportunity to win
the award for the follow-on contract and would have no opportunity to
demonstrate that it would be adversely impacted by the loss of the
opportunity to compete for the follow-on procurement. SBA believes that
not allowing an incumbent 8(a) contractor to compete for a follow-on
contract where that contract accounts for a significant portion of its
revenues contradicts the business development purposes of the 8(a) BD
program.
In order to eliminate any confusion and ensure that notification
occurs where a procuring agency seeks to issue an order under an 8(a)
multiple award contract and some or all of the work contemplated in
that order was previously performed through one or more other 8(a)
contracts, the proposed rule would amend Sec. 124.503(i)(1)(ii) to
clarify that an agency must notify SBA where it seeks to issue an order
under an 8(a) multiple award contract that contains work that was
previously performed through another 8(a) contract. Where that work is
critical to the business development of a current Participant that
previously performed the work through another 8(a) contract and that
Participant is not a contract holder of the 8(a) multiple award
contract, SBA may request that the procuring agency fulfill the
requirement through a competition available to all 8(a) BD Program
Participants.
Section 124.503(i)(1)(iv)
SBA's current regulations authorize a sole source 8(a) order to be
awarded under a multiple award contract to a multiple award contract
holder where the multiple award contract was set-
[[Page 55652]]
aside or reserved for exclusive competition among 8(a) Participants.
The procuring agency must offer and SBA must accept the order into the
8(a) BD program on behalf of the identified 8(a) contract holder. To be
eligible for the award of a sole source order, SBA's regulations
currently specify that a concern must be a current Participant in the
8(a) BD program at the time of award of the order. There has been some
confusion as to whether the business activity target requirements set
forth in Sec. 124.509 apply to the award of such an order. In other
words, it was not clear whether a Participant seeking a sole source
8(a) order under a multiple award contract set-aside or reserved for
eligible 8(a) Participants needed to be in compliance with any
applicable competitive business mix target established or remedial
measure imposed by Sec. 124.509 at the time of the offer/acceptance of
the order. Because SBA is determining eligibility anew at the time of a
new sole source order, it was always SBA's intent to not only require a
firm to still be a current 8(a) Participant at the time of offer/
acceptance of a sole source order, but to also require the firm to be
in compliance with any applicable competitive business mix target
established or remedial measure imposed by Sec. 124.509. As such, this
proposed rule clarifies that compliance with the Sec. 124.509 business
activity target requirements will be considered before SBA will accept
a sole source 8(a) order on behalf of a specific 8(a) Participant
multiple award contract holder. Where an agency seeks to issue a sole
source order to a joint venture, the proposed rule clarifies that SBA
will review and determine whether the lead 8(a) partner to the joint
venture is currently an eligible Program Participant and in compliance
with any applicable competitive business mix target established or
remedial measure imposed by Sec. 124.509.
In addition, the proposed rule further clarifies the rules
pertaining to issuing sole source orders to joint ventures under an
8(a) multiple award contract. There has been some confusion as to
whether the requirement set forth in Sec. 121.103(h) that a joint
venture may not be awarded contracts beyond a two-year period, starting
from the date of the award of the first contract, applies to such sole
source orders and whether SBA must approve the joint venture in
connection with the sole source order as generally required by Sec.
124.513(e)(1). The restriction in Sec. 121.103(h) stems from SBA's
belief that a joint venture should not be an on-going entity, but
something with limited scope and limited duration. Thus, SBA has
limited the duration that a joint venture can submit offers for the
award of contracts to two years from the date of its first contract
award. However, that two-year restriction does not apply to orders
issued under an already awarded contract. The proposed rule would
specifically clarify that the two-year restriction does not apply to a
sole source 8(a) order under an 8(a) multiple award contract. In other
words, the sole source order can be issued more than two years after
the date the joint venture received its first contract award. In
addition, the proposed rule would provide that SBA would not review and
approve a joint venture where the joint venture had already been
awarded a competitive 8(a) multiple award contract and is seeking a
sole source 8(a) order under that multiple award contract at some point
during the performance period of the contract. SBA believes that the
general requirement set forth in Sec. 124.513(e)(1) that SBA review a
joint venture in connection with a sole source 8(a) award should not
apply to sole source orders issued under a competitively awarded 8(a)
multiple award contract because the joint venture's eligibility for the
contract was already established at the award of the underlying
contract. The procuring agency and other interested parties had the
opportunity to challenge whether the joint venture was properly formed
at that time.
Finally, in making this clarification to Sec. 124.509, SBA noticed
two instances in SBA's rules where SBA intended to cross reference
Sec. 124.509, but instead cited to Sec. 124.507. This proposed rule
would amend Sec. Sec. 124.303(a)(15) and 124.403(c)(1) to change the
cross reference to Sec. 124.509.
Section 124.503(i)(2)(ii)
SBA has received inquiries as to whether an agency can issue an
order under the Federal Supply Schedule (FSS) as an 8(a) award, and if
so, what procedures must be used. As with any unrestricted multiple
award contract, SBA believes that an order can be issued under the FSS
as an 8(a) award if the procedures set forth in Sec. 124.503(i)(2) are
followed. This means that the following requirements must be met: the
order must be offered to and accepted into the 8(a) BD program; the
order must require the concern to comply with applicable limitations on
subcontracting provisions and the nonmanufacturer rule, if applicable,
in the performance of the individual order; before award, SBA must
verify that the identified apparent successful offeror is an eligible
8(a) Participant as of the initial date specified for the receipt of
proposals contained in the order solicitation, or at the date of award
of the order if there is no solicitation; and the order must be
competed exclusively among only the 8(a) awardees of the underlying
multiple award contract. There is some confusion as to what that last
requirement means. In the case of a multiple award contract awarded
under full and open competition, SBA believes that the current
regulatory language is clear. All contract holders that have certified
as 8(a) eligible must be able to submit an offer for the order if they
choose. An agency cannot limit competition to a subset of contract
holders that have claimed to be 8(a) eligible. Of course, the apparent
successful offeror's eligibility must be verified by SBA prior to award
to ensure that the concern was in fact an eligible Participant 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. For an order under the FSS that an agency seeks to issue
through the 8(a) BD program, there has been some confusion as to what
procedures must be used to issue the order. Specifically, agencies have
told SBA that it is not clear whether an agency can merely follow the
FAR 8.4 requirements or must allow all FSS holders who claim 8(a)
status the opportunity to compete. SBA believes that orders issued
under the FSS are unique from orders issued under multiple award
contracts competed using full and open competition. GSA has established
procedures for issuing orders under the FSS. SBA believes that those
procedures should be used when an agency seeks to issue an 8(a) award
under the FSS. This proposed rule would clarify that distinction. An
agency need not open the order up to competition among all FSS contract
holders claiming 8(a) status. However, an agency must consider the
quote from any FSS contract holder claiming 8(a) status who submits
one. As with 8(a) orders issued under unrestricted multiple award
contracts, however, the apparent successful offeror for an 8(a) order
under the FSS must be an eligible Participant as of the initial date
specified for the receipt of offers contained in the request for quote,
or at the date of award of the order if there is no solicitation.
SBA proposes to clarify Sec. 124.503(i)(2)(ii) by noting that an
agency may award an 8(a) sole source order under a multiple award
contract that was awarded under full and open competition or as a small
business set-
[[Page 55653]]
aside where the identified 8(a) Participant is a contract holder of the
multiple award contract. It was not SBA's intent to prohibit agencies
from entering 8(a) sole source orders in this context. Such orders are
consistent with SBA's statutory authority at section 8(a)(16) of the
Small Business Act, 15 U.S.C. 637(a)(16), to enter 8(a) sole source
awards. Additionally, clarification of this flexibility is beneficial
to both 8(a) Participants, who benefit from increased contracting
opportunities, and to procuring agencies that can take advantage of
pre-negotiated terms and pricing. Of course, a procuring agency must
offer and SBA must accept the requirement sought to be fulfilled as an
8(a) sole source order before the order can be issued.
Section 124.504
Section 124.504(d) sets forth the procedures authorizing release of
a follow-on requirement from the 8(a) BD program. Paragraph (d)(3)
provides that SBA will release a requirement where the procuring
activity agrees to procure the requirement as a small business,
HUBZone, SDVO small business, or WOSB set-aside. Some procuring
activities have read this to mean that SBA will always release a
requirement from the 8(a) BD program if the procuring activity agrees
to procure the requirement as a small business, HUBZone, SDVO small
business, or WOSB set-aside. That was not SBA's intent. The 8(a) BD
program is a business development program. SBA takes that purpose
seriously and will always consider whether an incumbent 8(a) contractor
would be adversely affected by the release of a follow-on procurement
from the 8(a) BD program. Accordingly, the proposed rule would amend
Sec. 124.504(d)(3) by changing the words ``SBA will release'' to ``SBA
may release'' to clarify that SBA has discretion in any release
decision. The fact that a procuring activity agrees to procure the
requirement as a small business, HUBZone, SDVO small business, or WOSB
set-aside is a positive for release, but SBA must still consider any
adverse consequences to an incumbent 8(a) Participant. The release
process has also caused some confusion regarding how a follow-on
requirement may be procured if SBA agrees to release. Again, the
current rule provides that release may occur only where a procuring
activity agrees to procure the requirement as a small business,
HUBZone, SDVO small business, or WOSB set-aside. In other words, a
strict reading of the rule would not allow release where an agency
seeks to award a follow-on requirement as a set-aside order under a
multiple award contract that is not itself a set-aside contract. Thus,
even if an agency sought to procure a follow-on requirement as an 8(a)
order under an unrestricted multiple award contract, the current
regulatory language could be read to preclude that approach. That was
not SBA's intent. As long as an agency identifies a procurement
strategy that would target small businesses for a follow-on
procurement, release may occur. In fact, release to such a contract
vehicle may be appropriate where the incumbent 8(a) contractor has
graduated from the program but still qualifies as a small business, the
requirement is critical to the incumbent contractor's overall business
development, the incumbent contractor is a contract holder on an
unrestricted multiple award contract, and the procuring agency has
evidenced its intent to set-aside an order for small business under the
multiple award contract for which the incumbent contractor is a
contract holder. This would give the incumbent contractor the
opportunity to compete for the follow-on procurement and ensure that
award would be made to a small business. The proposed rule would
clarify that release may occur whenever a procuring agency identifies a
procurement strategy that would emphasize or target small business
participation.
Section 124.506(b)(3)
In explaining SBA's ability to accept a sole source 8(a)
requirement on behalf of a tribally-owned, ANC-owned or NHO-owned
Participant above the general competitive threshold amounts, Sec.
124.506(b)(2) currently provides that a procurement may not be removed
from competition to award it to a Tribally-owned, ANC-owned or NHO-
owned concern on a sole source basis. There has been some confusion as
to what the phrase ``may not be removed from competition'' means. Some
have misinterpreted this provision to believe that a follow-on
requirement to one that was previously awarded as a competitive 8(a)
procurement cannot be awarded to an entity-owned firm on a sole source
basis above the applicable competitive threshold. That is not SBA's
intent. The provision prohibiting a procurement from being removed from
competition and awarded to an entity-owned Participant on a sole source
basis was meant to apply only to a current procurement, not the
predecessor to a current procurement. A procuring agency may not
evidence its intent to fulfill a requirement as a competitive 8(a)
procurement, through the issuance of a competitive 8(a) solicitation or
otherwise, cancel the solicitation or change its public intent, and
then procure the requirement as a sole source 8(a) procurement to an
entity-owned Participant. A follow-on procurement is a new contracting
action for the same underlying requirement, and if the procuring agency
has not evidenced a public intent to fulfill it as a competitive 8(a)
procurement it can be fulfilled on a sole source basis to an entity-
owned Participant. The proposed rule adds language clarifying that
intent.
However, as identified above, SBA is concerned about the business
development aspects of the program for an incumbent Participant. In
other words, where a Participant was previously awarded a competitive
8(a) contract, is still an eligible Participant at the completion of
the contract, and is hoping to compete again for the follow-on
procurement to the contract it previously performed, SBA may take that
into account in its decision whether to accept a follow-on procurement
on a sole source basis on behalf of an entity-owned Participant if the
contract is critical to the incumbent Participant's overall business
development. SBA requests comments as to whether a specific provision
should be added to the regulations requiring SBA to consider the effect
that losing an opportunity to compete for a follow-on contract would
have on an incumbent Participant's business development.
Section 124.506(d)
The proposed rule clarifies SBA's rules pertaining to the award of
sole source 8(a) contracts to individually-owned 8(a) Participants. The
proposed rule would add a provision to Sec. 124.506(d) to clarify that
an individually-owned 8(a) Participant could receive a sole source
award in excess of the $4.5M and $7M competitive threshold amounts set
forth in Sec. 124.506(a)(2) where a procuring agency has determined
that a FAR 6.302 exception to full and open competition exists. For
example, if a procuring agency has determined that there exists an
unusual and compelling urgency and has identified an individually-owned
8(a) Participant that is capable of fulfilling its needs, it can offer
that requirement to SBA as a sole source award on behalf of the
identified Participant even if the requirement exceeds the applicable
competitive threshold. The Agency would be free to use its FAR 6.302
authority to award a sole source contract outside the 8(a) BD program.
SBA believes that it only makes sense to allow the agency to make an
award as a sole source contract
[[Page 55654]]
within the 8(a) BD program if it chooses to do so.
In addition, if such an award exceeds $25M, or $100M for a
Department of Defense (DoD) agency, the proposed rule would also
clarify that the agency would be required to justify the use of a sole
source contract under FAR 19.808-1 or Defense Federal Acquisition
Regulation Supplement (DFARS) 219.808-1(a) before SBA could accept the
requirement as a sole source 8(a) award. Although those justifications
and approvals generally apply to sole source 8(a) contracts offered to
SBA on behalf of entity-owned Program Participants, the FAR and DFARS
justification and approval provisions are not restricted to entity-
owned Participants. Instead, those provisions apply to any 8(a) sole
source contract that exceeds the $25M or $100M threshold. As such the
proposed rule merely adds language to clarify what SBA believes the
current requirement is and does so in order to avoid any confusion.
Section 124.509
Section 124.509 establishes non-8(a) business activity targets to
ensure that Participants do not develop an unreasonable reliance on
8(a) awards. SBA amended this section as part of a comprehensive final
rule in October 2020. See 85 FR 66146, 66189 (Oct. 16, 2020). In that
final rule, SBA recognized that a strict prohibition on a Participant
receiving new sole source 8(a) contracts should be imposed only where
the Participant has not made good faith efforts to meet its applicable
non-8(a) business activity target. Since that rule became effective in
November 2020, Participants have sought guidance as to what ``good
faith efforts'' means in this context. This proposed rule seeks to
provide guidance. The proposed regulatory language is how SBA has been
interpreting good faith efforts since the good faith efforts change was
effective. The proposed rule would provide two ways by which a
Participant could establish that it has made good faith efforts.
Specifically, a Participant could demonstrate to SBA either that it
submitted offers for one or more non-8(a) procurements which, if
awarded, would have given the Participant sufficient revenues to
achieve the applicable non-8(a) business activity target during its
just completed program year, or explain that there were extenuating
circumstances that adversely impacted its efforts to obtain non-8(a)
revenues. This proposed rule would also identify possible extenuating
circumstances, which would include but not be limited to a reduction in
government funding, continuing resolutions and budget uncertainties,
increased competition driving prices down, or having one or more prime
contractors award less work to the Participant than originally
contemplated.
There has also been some confusion as to how SBA should best track
business activity targets. The statutory requirement for such targets
relates to program years, meaning a Participant should receive a
certain percentage of non-8(a) business during certain years in the
program. In the October 2020 final rule, SBA changed all references to
looking at business activity compliance from fiscal year to program
year to align with the statutory authority. A program year lines up
with the date that a Participant was certified as eligible to
participate in the 8(a) BD program. That date generally is not the same
as a Participant's fiscal year. Participants have financial statements
relating to their fiscal year activities, but most do not have
financial statements relating to program year. To capture program year
data, SBA has asked Participants to estimate as best they can program
year revenues for both 8(a) and non-8(a) activities. Although this rule
proposes no specific changes as to the revenue information provided to
SBA, SBA specifically requests comments as to how firms believe it
would be easiest for them to meet the program year information
requirements. One approach that SBA is considering is to capture
program year data based on the Participant's interim financial
statements. This would require a Participant to submit monthly,
quarterly, or semi-annual financial statements, as appropriate, to SBA
where the close of its fiscal year and its program anniversary date are
separated by more than 90 calendar days. SBA could then assess the
Participant's compliance with the business activity target based on the
breakdown of 8(a) and non-8(a) sales set forth in the applicable
interim financial statements. For example, Participant A's fiscal year
closes on December 31, and its program anniversary date is May 9. In
connection with its annual review, Participant A would submit quarterly
financial statements for the periods of April 1-June 30, July 1-
September 30, and October 1-December 31, from its most recently
completed fiscal year, and the period of January 1-March 31 in its
current fiscal year. SBA could then determine Participant A's
compliance with the applicable business activity target based on the
breakdown of 8(a) and non-8(a) sales during the 12-month period covered
by these quarterly financial statements. SBA recognizes that this
approach would exclude revenues derived during the final weeks or
months leading up to a Participant's program anniversary date. However,
SBA believes that this approach would most closely capture a
Participant's program year activities without placing an undue burden
on the Participant to estimate its 8(a) and non-8(a) revenues on a
program year basis.
Sections 124.513(a), 125.18(b), 126.616(a)(2), and 127.506(a)(3)
The proposed rule would add a new Sec. 124.513(a)(3) to provide
that a Program Participant cannot be a joint venture partner on more
than one joint venture that submits an offer for a specific 8(a)
contract. Although the proposed rule would apply this requirement to
all contracts, procuring agencies and small businesses have raised
concerns to SBA in the context of multiple award contracts where it is
possible that one firm could be a member of several joint ventures that
receive contracts. In such a situation, several agencies were troubled
that orders under the multiple award contract may not be fairly
competed if one firm was part of two, three or more quotes. They
believed that one firm having access to pricing information for several
quotes could skew the pricing received for the order.
To ensure that the HUBZone, WOSB and SDVOSB programs have rules as
consistent as possible to those for the 8(a) BD program, the proposed
rule adds similar language as that added to Sec. 124.513(a)(3) for
those programs in proposed Sec. Sec. 125.18(b) (for SDVOSB),
126.616(a)(2) (for HUBZone), and 127.506(a)(3) (for WOSB).
SBA specifically requests comments as to whether this provision
should be limited only to 8(a)/HUBZone/WOSB/SDVOSB multiple award
contracts or whether it should apply to all contracts set-aside or
reserved for 8(a)/HUBZone/WOSB/SDVOSB, and to all orders set-aside for
such businesses under unrestricted multiple award contracts.
Section 124.515
Section 124.515 implements section 8(a)(21) of the Small Business
Act, 15 U.S.C. 637(a)(21), which generally requires an 8(a) contract to
be performed by the concern that initially received it. In addition,
the statute and Sec. 124.515 provide that where the owner or owners
upon whom eligibility was based relinquish ownership or control of such
concern, any 8(a) contract that the concern is performing shall be
terminated for the convenience of the Government unless the SBA
Administrator, on a nondelegable basis,
[[Page 55655]]
grants a waiver based on one or more of five statutorily identified
reasons. This proposed rule would revise Sec. 124.515(c) for clarity.
Specifically, it would break one longer paragraph into several smaller
paragraphs and would clarify that if a Participant seeks a waiver based
on the impairment of the agency's mission or objectives, it must
identify and provide a certification from the procuring agency relating
to each 8(a) contract for which a waiver is sought.
Currently, a Participant (or former Participant that is still
performing an 8(a) contract) must submit its request for a waiver to
the termination for convenience requirement to the Participant's (or
former Participant's) SBA servicing district office. These requests for
waivers are often complicated and can take a long time to be approved.
Processing a waiver request can take several months in an SBA district
office and then several months in SBA's Office of Business Development
in SBA's Headquarters. In order to streamline the process, SBA is also
considering changing where requests for waivers must be initiated from
the servicing district office to the AA/BD, and requests comments on
whether that would be beneficial.
Sections 124.604 and 124.108
Section 124.604 currently requires each Participant owned by a
Tribe, ANC, NHO, or CDC to submit to SBA information showing how the
Tribe, ANC, NHO, or CDC has provided benefits to the Tribal or native
members and/or the Tribal, native or other community due to the
Tribe's/ANC's/NHO's/CDC's participation in the 8(a) BD program through
one or more firms. This rule proposes to require more precise benefits
back to the Native community.
Specifically, SBA is proposing a requirement that each entity
having one or more Participants in the 8(a) BD program establish a
Community Benefits Plan that outlines the anticipated approach it
expects to deliver to strengthen its Native or underserved community
over the next three or five years. Each entity would decide how best to
serve and meet the needs of its community, though SBA would expect some
commitment in areas relating to health, education, housing,
infrastructure, cultural preservation, and economic development, as
appropriate. SBA requests comments on whether this Community Benefits
Plan should be its own, separate plan or be included in the business
plan submission and updates required as part of the annual review
process. Further, SBA requests comment on the period the Community
Benefits Plan should cover.
SBA understands the dual purposes of the entity-owned component of
the 8(a) BD program: to develop viable small business concerns while at
the same time creating opportunities to provide significant benefits to
the native or disadvantaged communities that they serve. SBA seeks to
ensure that both of those purposes are advanced and requests comments
on how best that can be accomplished. Specifically, SBA seeks comments
as to whether specific monetary targets should be established for
providing support to the native or disadvantaged communities, and if
that amount should change based upon the length of time an entity owns
business concerns participating in the 8(a) BD program and depending
upon the number of Participants an entity owns that are operating in
the program. In addition, SBA requests comments as to whether there
should be consequences to an entity or an entity-owned Participant that
does not meet or does not make good faith efforts to meet the
commitments that it made in its initial application to provide benefits
to its native or underserved community.
Section 124.604 requires each entity-owned Participant to submit
information relating to the benefits that the entity has provided to
the Native or underserved community as part of its annual review
submissions. The SBA collects this information and provides summary
level reporting as part of SBA's Annual 408 Report to the Congress as
required by section 408 of the Business Opportunity Development Reform
Act of 1988, Public Law 100-656 (codified at section 7(j)(16) of the
Small Business Act, 15 U.S.C. 636(j)(16)). For more transparent
reporting, the proposed rule would provide that each entity-owned
Participant must submit to SBA information showing how the Tribe, ANC,
NHO, or CDC has provided benefits to the Tribal or native members and/
or the Tribal, native or other community due to the Tribe's/ANC's/
NHO's/CDC's participation in the 8(a) BD program through one or more
firms, whether the benefits provided meet the benefits target set forth
in its Community Benefits Plan, and how the benefits provided directly
impacted the native or underserved community.
SBA specifically asks for comments on how best to implement
proposed changes for benefits reporting.
Section 124.1002
Section 1207 of the National Defense Authorization Act for Fiscal
Year 1987, Public Law 99-661 (100 Stat. 3816, 3973), authorized a set-
aside program at DoD for small disadvantaged businesses, separate from
the authority for contracts awarded under the 8(a) BD program. The
``Section 1207'' or Small Disadvantaged Business (SDB) Program also had
a price evaluation preference and a subcontracting component. SBA
implemented regulations establishing the eligibility requirements for
the SDB Program and authorizing a protest and appeal process to SBA
regarding the SDB status of apparent successful offerors. In 2008, the
United States Court of Appeals for the Federal Circuit ruled that
preferential treatment in the award of DoD prime defense contracts
based on race under the Section 1207 program (as implemented in 10
U.S.C. 2323) was unconstitutional. Rothe Dev. Corp. v. DoD, 545 F.3d
1023. This effectively eliminated the SDB Program.
In response, the FAR Council changed the SBA protest process for
SDBs in the FAR to a ``review'' process in a final rule effective
October 2014 (79 FR 61746). The FAR Council stated that its changes to
the SDB program were based on the Federal Circuit's decision in the
Rothe case. SBA brought its own regulations up to date in 2020 by
removing references to an SDB protest. 85 FR 27290 (May 8, 2020).
Recently, SBA's Office of Inspector General (OIG) has questioned why a
protest process no longer exists to challenge a firm's SDB status.
Despite SBA's explanation that the Section 1207 program (the basis for
SBA's previous SDB regulatory authorities) no longer exists, OIG
continues to believe that general authority to protest a firm's SDB
status should exist. SBA notes that since the FAR Council replaced the
protest process with a review process in 2014, SBA has not received any
requests for review. Although SBA believes that such authority would
not be often utilized, in response to OIG's concerns the proposed rule
would add a new Sec. 124.1002 authorizing reviews and protests of SDB
status in connection with prime contracts and subcontracts to a federal
prime contract.
The proposed rule copies similar authority contained in section
19.305 of the Federal Acquisition Regulation, title 48 of the Code of
Federal Regulations. Under proposed Sec. 124.1002, SBA could initiate
the review of the SDB status on any firm that has represented itself to
be an SDB on a prime contract (for goaling purposes or otherwise) or
subcontract to a federal prime contract whenever it receives credible
information calling into question the SDB status of the firm. In
addition, as already stated in the FAR, the proposed rule would allow
the contracting officer or the SBA to protest
[[Page 55656]]
the SDB status of a proposed subcontractor or subcontract awardee.
Finally, where SBA determines that a subcontractor does not qualify as
an SDB, the proposed rule would require prime contractors to exclude
subcontracts to that subcontractor as subcontracts to an SDB in its
subcontracting reports, starting from the time that the protest was
decided. SBA believes that a prime contractor should not get SDB credit
for using a subcontractor that does not qualify as an SDB. However, in
order not to penalize a prime contractor who acted in good faith in
awarding a subcontract or to impose an additional burden of correcting
past subcontracting reports, the proposed rule would disallow SDB
subcontracting credit only prospectively from the point of an adverse
SDB determination.
Sections 125.1 and 125.3(c)(1)(i) and (x) and (c)(2)
SBA proposes to make changes to several provisions in part 125 that
reference the term commercial item. This is in response to recent
changes made to the Federal Acquisition Regulation (FAR) with regard to
the definition of ``commercial item''. 86 FR 61017. Primarily, the
changes to the FAR split the definition of commercial items into two
categories, commercial products and commercial services. SBA is
proposing to amend its regulations to adopt these changes when SBA's
regulation is referring to a commercial product, a commercial service,
or both. Specifically, SBA is amending the definition for ``cost of
materials'' in 125.1 to refer only to commercial products. Further, SBA
proposes to amend Sec. 125.3(c)(1)(i) and (x) and (c)(2) to update the
references to both commercial products and commercial services.
Section 125.1
The proposed rule would add definitions of the terms ``Small
business concerns owned and controlled by socially and economically
disadvantaged individuals'' and ``Socially and economically
disadvantaged individuals'' for purposes of both SBA's subcontracting
assistance program in 15 U.S.C. 637(d) and the goals described in 15
U.S.C. 644(g). The proposed rule seeks to implement consistency among
SBA's programs and would refer to requirements set forth in part 124
for 8(a) eligibility. SBA believes that this change is also needed to
provide clarity for small disadvantaged business eligibility
requirements contained in other statutes that refer to 15 U.S.C. 637(d)
for their eligibility.
SBA proposes to include blanket purchase agreements (BPAs) in the
list of contracting vehicles that are covered by the definitions of
consolidation and bundling. There are two kinds of BPAs: GSA's FSS BPAs
covered under FAR 8.4 and BPAs established under Simplified Acquisition
Procedures (see FAR 13.303). SBA requests comments as to whether this
should apply to both types of BPAs, FSS, and FAR 13.303, and whether it
should apply to both single-award and multiple-award BPAs. Generally, a
consolidated requirement is one that consolidates two or more previous
requirements into one action. A bundled requirement is a type of
consolidated requirement in which multiple small-business requirements
are consolidated into a single, larger requirement that is not suitable
for award to small businesses. In most cases, because of the potential
negative impact on small business contracting opportunities, the
contracting agency is required to conduct a financial analysis, execute
a determination that the action is necessary and justified, and in some
cases notify impacted small businesses and the public, before
proceeding with a bundled or consolidated requirement. The Small
Business Act, 15 U.S.C. 632(j), requires agencies to avoid unnecessary
bundling of ``contract requirements.'' SBA interprets the term
``contract requirements'' to include BPAs for the purposes of this
statutory provision on avoiding bundling. This is similar to how SBA
interprets the term ``proposed procurement'' under the Small Business
Act's requirement for agencies to coordinate with procurement center
representatives on prime contract opportunities.
SBA thus intended the consolidation and bundling provisions to
apply to BPAs. The Government Accountability Office (GAO), however,
ruled in two recent bid protests that, because SBA's regulations do not
specifically address BPAs, the consolidation and bundling procedures do
not apply when the resulting requirement is a BPA.
SBA routinely sees consolidation in BPAs. Bundling on a BPA has the
same detrimental effect on small-business incumbents as bundling on
other vehicles, such as contracts or orders. Regardless of whether the
resulting requirement is a BPA, the bundled action will convert
multiple small business contracting actions into a single action to be
awarded to a large business. If agencies are not required to follow SBA
regulations regarding notification and a written determination for
bundled BPAs, the small business incumbents may not know that work that
they are currently performing has been bundled and moved to a single
award to a large business and may not have the opportunity to challenge
such action. Awarding a requirement as a BPA does not lessen the
negative impact of bundling on small businesses, and, therefore, SBA
proposes to incorporate into the regulations its current belief that
the bundling and consolidation rules should apply with equal force
where the resulting award will be a BPA.
Additionally, several procuring agencies have asserted that the
analysis, determination, and notification requirements for
consolidation or bundling do not apply when existing requirements are
combined with new requirements. SBA disagrees. There is no basis in
statute, regulation, or case law for agencies to interpret
``requirement'' as excluding a combination of existing and new work. To
eliminate any confusion, the proposed rule clarifies SBA's current
position that agencies are required to comply with the Small Business
Act and all SBA regulations regarding consolidation or bundling
regardless of whether the requirement at issue combines both existing
and new requirements into one larger procurement that is considered to
be ``new.''
Section 125.2
Section 125.2 sets forth guidance as to SBA's and procuring
agencies' responsibilities when providing contracting assistance to
small businesses. Section 125.2(d) contains guidance on how procuring
agencies determine whether contract bundling and substantial bundling
is necessary and justified. Specifically, Sec. 125.2(d)(2)(ii) states
that a cost or price analysis may be included to support an agency's
determination of the benefits of bundling. This language combined with
the language at Sec. 125.2(d)(2)(v) is intended to mean that price
analysis is always necessary, and, if the analysis results in a price
reduction, the agency may use the price reduction to demonstrate
benefits of the bundled approach. In order to demonstrate ``measurably
substantial'' benefits as required by the Small Business Act, SBA's
regulations and the FAR (benefits equivalent to 10 percent of the
contract or order value where the contract or order value is $94
million or less, or benefits equivalent to 5 percent of the contract or
order value or $9.4 million, whichever is greater, where the contract
or order value exceeds $94 million), SBA believes that a cost or price
[[Page 55657]]
analysis must be conducted. Some have argued that the Small Business
Act does not require a cost/price analysis. They point to the language
of section 15(e)(2)(B) of the Small Business Act which provides that in
demonstrating ``measurably substantial benefits'' the identified
benefits ``may include'' cost savings, quality improvements, reduction
in acquisition cycle times, better terms and conditions, and any other
benefits. 15 U.S.C. 644(e)(2)(B). However, if a cost/price analysis is
not required, SBA does not believe that it is possible to demonstrate
benefits equivalent to 10 percent (or 5 percent/$9.4 million) of the
contract or order value--exactly what is required by SBA's regulations
and the FAR. This interpretation is even clearer in Sec.
125.2(d)(2)(v), which acknowledges that an agency will perform a price
analysis and describes a specific type of price comparison to include
in the analysis.
In order to clarify any misperceptions, SBA proposes to clarify
Sec. 125.2(d)(2)(ii) to plainly state that an analysis comparing the
cumulative total value of all separate smaller contracts with the
estimated cumulative total value of the bundled procurement is required
as part of the analysis of whether bundling is necessary and justified.
Neither a procuring agency nor SBA can have a complete view of the
small business contact dollars impacted by a bundled procurement if
this price analysis is not performed. The analysis requires that an
agency identify all impacted separate smaller contracts. An agency can
search the Federal Procurement Data System or use the agency's own
contract records to determine the complete universe of separate
contracts impacted by the bundled procurement. Identification of every
impacted firm is not only important for purposes of the price analysis
but is also necessary to comply with the statutory and regulatory
notice requirements for bundled contracts. Furthermore, if 8(a)
contracts will be subsumed in the bundled procurement, an agency must
know which 8(a) contracts are impacted in order to comply with the
required 8(a) program release or notification requirements.
Section 125.3
Section 125.3 discusses the types of subcontracting assistance that
are available to small businesses and the rules pertaining to
subcontracting generally. Section 125.3(a)(1)(i)(B) provides that
purchases from a corporation, company, or subdivision that is an
affiliate of the prime contractor or subcontractor are not included in
the subcontracting base. SBA received an inquiry as to whether this
language would allow a prime contractor to count an award to a joint
venture in which it is a partner as subcontracting credit. That was not
SBA's intent. SBA believes that exclusion is covered in the current
regulatory text, which already alludes to not counting awards to
affiliates. Nevertheless, in order to clarify that a prime contractor
cannot count an award to a joint venture in which it is a partner as
subcontracting credit, SBA has added clarifying language to that
effect.
SBA also proposes to amend Sec. 125.3(a)(1)(iii) to delete bank
fees from the list of exclusions from the subcontracting base. SBA's
current regulations provide that bank fees are excluded from the
subcontracting base. This means that when a large contractor is
calculating the percentage of work being subcontracted to small
businesses, it does not have to factor bank fees into this calculation.
This gives the contractor little incentive to work with small banks.
However, there are over 900 small businesses registered in the Dynamic
Small Business Search (DSBS) database under banking NAICS codes. Given
the number of small banks available to do work on federal prime
contracts, SBA does not believe bank fees should be excluded from the
subcontracting base.
In addition, SBA proposes to amend Sec. 125.3(c)(1)(iv) to require
that large businesses include indirect costs in their subcontracting
plans. Currently, large businesses have the option of including or
excluding indirect costs in their individual subcontracting plans. Many
large businesses opt to exclude indirect costs. As a result, small
businesses that provide services generally considered to be indirect
costs--such as legal services, accounting services, investment banking,
and asset management--are often overlooked by large contractors. SBA
believes that by requiring indirect costs to be included in their
individual subcontracting plans, large businesses will have an
incentive to give work to small businesses that provide those services.
Section 125.6
Section 125.6 sets forth the requirements pertaining to the
limitations on subcontracting applicable to prime contractors for
contracts and orders set-aside or reserved for small business. Section
125.6(d) provides that the period of time used to determine compliance
for a total or partial set-aside contract will generally be the base
term and then each subsequent option period. This makes sense when one
agency oversees and monitors a contract. However, on a multi-agency set
aside contract, where more than one agency can issue orders under the
contract, no one agency can practically monitor and track compliance.
In order to ensure that this statutory requirement is met for the
contract, SBA believes that compliance should be measured order by
order by each ordering agency. The proposed rule would clarify Sec.
125.6(d) accordingly.
SBA is proposing to add a new Sec. 125.6(e) to provide
consequences to a small business where a contracting officer determines
at the conclusion of contract performance that the business did not
meet the applicable limitation on subcontracting on any set-aside
contract (small business set-aside; 8(a); WOSB; HUBZone; or SDVOSB).
The current rules provide discretion to contracting officers to require
contractors to demonstrate compliance with the limitations on
subcontracting at any time during performance and upon completion of a
contract. SBA's current rules do not, however, address what happens if
a contracting officer determines that a firm fails to meet the
statutorily required limitation on subcontracting requirement at the
conclusion of contract performance. SBA's proposed rule would provide
that a contracting officer could not give a satisfactory/positive past
performance evaluation for the appropriate evaluation factor or
subfactor to a contractor that the contracting officer determined did
not meet the applicable limitation on subcontracting requirement at the
conclusion of contract performance. Of course, if a small business were
found to be in non-compliance during the performance of the contract
and took steps to come into compliance before completion of the
contract, the contractor's final rating for conformance to requirements
could be satisfactory. The proposed rule would not alter the
contracting officer's discretion to require contractors to demonstrate
compliance with the limitations on subcontracting where the contracting
officer deems it to be appropriate; it merely would provide
consequences (i.e., negative past performance evaluation) where the
contracting officer determined that a contractor did not meet the
limitation on subcontracting requirement at the conclusion of contract
performance. SBA believes that having negative consequences for not
meeting the applicable limitation on subcontracting would help ensure
the requirements are being met, and that set-aside contracts are being
performed in a manner consistent with SBA's regulations and
[[Page 55658]]
the Small Business Act. Some have argued that there should be
extenuating circumstances under which a contracting officer should
still be able to give a satisfactory/positive past performance
evaluation to a contractor that the contractor officer determined did
not meet the applicable limitation on subcontracting requirement. SBA
believes that any such discretion, if ultimately authorized, should be
very limited in scope. Again, SBA believes that it is important to have
consequences for small business concerns that do not meet the
applicable limitation on subcontracting. SBA wants small businesses to
take those requirements seriously and strive to achieve them.
Nevertheless, SBA requests comments as to whether the regulations
should allow a contracting officer to give a satisfactory/positive past
performance evaluation to a contractor that the contractor officer
determined did not meet the applicable limitation on subcontracting
requirement, and, if so, under what limited circumstances should that
discretion be authorized.
Section 125.9
Section 125.9 sets forth the rules governing SBA's small business
mentor-prot[eacute]g[eacute] program. SBA's regulations currently
provide that a mentor can have no more than three prot[eacute]g[eacute]
small business concerns at one time. SBA has been asked whether a
mentor that purchases another business concern that is also an SBA-
approved mentor can take on those mentor-prot[eacute]g[eacute]
relationships if the total number of prot[eacute]g[eacute]s would
exceed three. The reason SBA has limited the number of
prot[eacute]g[eacute] firms one mentor can have at any time is to
ensure that a large business mentor does not unduly benefit from
programs intended to benefit small businesses. That is also the reason
that the limit of three prot[eacute]g[eacute]s applies to the mentor
family (i.e., the parent and all of its subsidiaries in the aggregate
cannot have more than three prot[eacute]g[eacute] small business
concerns at one time). If each separate business entity could itself
have three prot[eacute]g[eacute]s, conceivably a parent with three
subsidiaries could have 12 small business prot[eacute]g[eacute] firms.
SBA believes that that would allow a large business to unduly benefit
from small business programs. The regulations implementing the mentor-
prot[eacute]g[eacute] program also provide that a small business can
have only two mentor-prot[eacute]g[eacute] relationships in total.
Thus, if SBA were to say that a mentor that purchased another business
entity which is also a mentor could not take on the selling business
entity's mentor-prot[eacute]g[eacute] relationships, the ones who would
be hurt the most would be the small business prot[eacute]g[eacute]s of
the selling business. Their mentor-prot[eacute]g[eacute] relationships
with the selling mentor would end early and would count as one of the
two mentor-prot[eacute]g[eacute] relationships that they were
authorized to have. Because SBA did not intend to adversely affect
prot[eacute]g[eacute] firms in these circumstances, SBA has informally
permitted a mentor to take on the mentor-prot[eacute]g[eacute]
relationships of a firm that it purchased even where its total number
of mentor-prot[eacute]g[eacute] relationships would exceed three. The
proposed rule would add language to Sec. 125.9(b)(3)(ii) to recognize
this exemption. Specifically, the proposed rule would add a paragraph
that where a mentor purchases another business entity that is also an
SBA-approved mentor of one or more prot[eacute]g[eacute] small business
concerns and the purchasing mentor commits to honoring the obligations
under the seller's mentor-prot[eacute]g[eacute] agreement(s), that
entity may have more than three prot[eacute]g[eacute]s. In such a case,
the entity could not add another prot[eacute]g[eacute] until it fell
below three in total.
The proposed rule would also amend Sec. 125.9(e) to add language
recognizing that a mentor that is a parent or subsidiary of a larger
family group may identify one or more subsidiary firms that it plans to
participate in the mentor-prot[eacute]g[eacute] arrangement by
providing assistance and/or participating in joint ventures with the
prot[eacute]g[eacute] firm. The proposed rule would provide that all
entities intended to participate in the mentor-prot[eacute]g[eacute]
relationship should be identified in the mentor-prot[eacute]g[eacute]
agreement itself.
Sections 126.306(b) and 127.304(c)
Sections 126.306 and 127.304 set forth the procedures by which SBA
processes applications for the HUBZone and WOSB programs, respectively.
This proposed rule would add language to both processes to provide that
where SBA is unable to determine a concern's compliance with any of the
HUBZone or WOSB/EDWOSB eligibility requirements due to inconsistent
information contained in the application, SBA will decline the
concern's application. In addition, this proposed rule would add
language providing that if, during the processing of an application,
SBA determines that an applicant has knowingly submitted false
information, regardless of whether correct information would cause SBA
to deny the application, and regardless of whether correct information
was given to SBA in accompanying documents, SBA will deny the
application. This language is consistent with that already appearing in
SBA's regulations for the 8(a) BD program, and SBA believes that all of
SBA's certification programs should have similar language on this
issue.
Sections 125.28(e), 126.801(e)(2), and 127.603(d)(2)
For purposes of SDVO, HUBZone and WOSB/EDWOSB contracts, the SDVO/
HUBZone/WOSB/EDWOSB prime contractor together with any similarly
situated entities must meet the applicable limitation on subcontracting
(or must perform a certain portion of the contract). If a subcontractor
is intended to perform primary and vital aspects of the contract, the
subcontractor may be determined to be an ostensible subcontractor under
proposed Sec. 121.103(h)(3), and the prime contractor and its
ostensible subcontractor would be treated as a joint venture. However,
if the ostensible subcontractor qualifies independently as a small
business, a size protest would not find the arrangement ineligible for
any small business contract. To address that situation, the current
regulations for the SDVO program (in Sec. Sec. 125.18(f) and
125.29(c)), the HUBZone program (in Sec. Sec. 126.601(d) and
126.801(a)(1)) and the WOSB program (in Sec. Sec. 127.504(g) and
127.602(a)) prohibit a non-similarly situated subcontractor from
performing primary and vital requirements of a contract and permit a
SDVO/HUBZone/WOSB/EDWOSB status protest where an interested party
believes that will occur. The proposed rule would add a paragraph to
each of the SDVO/HUBZone/WOSB/EDWOSB status protest provisions to
clarify that any protests relating to whether a non-similarly situated
subcontractor will perform primary and vital aspects of the contract
will be reviewed by the SBA Government Contracting Area Office serving
the geographic area in which the principal office of the SDVO/HUBZone/
WOSB/EDWOSB business is located. SBA's Government Contracting Area
Offices are the offices that decide size protests and render formal
size determinations. They are the offices with the expertise to decide
ostensible subcontractor issues. Thus, for example, if a status protest
filed in connection with a WOSB contract alleges that the apparent
successful offeror should not qualify as a WOSB because (1) the husband
of the firm's owner actually controls the business, and (2) a non-WOSB
subcontractor will perform primary and vital requirements of the
contract, SBA's WOSB staff in the Office of Government Contracting will
review
[[Page 55659]]
the control issue and refer the ostensible subcontractor issue to the
appropriate SBA Government Contracting Area Office. The SBA Government
Contracting Area Office would determine whether the proposed
subcontractor should be considered an ostensible subcontractor and send
that determination to the Director of Government Contracting, who then
would issue one WOSB status determination addressing both the
ostensible subcontractor and control issues. The same would be true for
SDVO status protests and HUBZone status protests (except that in the
HUBZone context the Director of the Office of HUBZones would issue the
HUBZone status determination). To accomplish this, the proposed rule
would add clarifying language in Sec. Sec. 125.28(e) (for SDVO),
126.801(e)(2) (for HUBZone), and 127.603(d) (for WOSB/EDWOSB).
Section 126.503(c)
The proposed rule would Sec. 126.503 by adding a new paragraph (c)
to specifically authorize SBA to initiate decertification proceedings
if after admission to the HUBZone program SBA discovers that false
information has been knowingly submitted by a certified HUBZone small
business concern. SBA believes that this is currently permitted under
the HUBZone regulations, but proposes to add this provision to
eliminate any doubt.
Section 126.601(d)
The proposed rule would amend Sec. 126.601(d) to clarify how the
ostensible subcontractor rule may affect a concern's eligibility for a
HUBZone contract. Where a subcontractor that is not a certified HUBZone
small business will perform the primary and vital requirements of a
HUBZone contract, or where a HUBZone prime contractor is unduly reliant
on one or more small businesses that are not HUBZone-certified to
perform the HUBZone contract, the prime contractor would not be
eligible for award of that HUBZone contract.
Section 126.616(a)(1)
The proposed rule would amend Sec. 126.616(a) to clarify that a
HUBZone joint venture should be registered in the System for Award
Management (SAM) (or successor system) and identified as a HUBZone
joint venture, with the HUBZone-certified joint venture partner
identified. SBA has received numerous questions from HUBZone firms and
contracting officers expressing confusion about how to determine
whether an entity qualifies as a HUBZone joint venture and thus is
eligible to submit an offer for a HUBZone contract. Part of the
confusion stems from the fact that there is no way for an entity to be
designated as a HUBZone joint venture in SBA's DSBS database; this
certification can only be made in SAM. In addition, the process for
self-certifying as a HUBZone joint venture in SAM is apparently unclear
because such certification does not appear in the same section as the
other socioeconomic self-certifications. Since it is not known when
these systems might be updated to clear up this confusion, SBA is
proposing to amend Sec. 126.616(a) by adding a new paragraph (a)(1) to
help HUBZone firms and contracting officers understand how to determine
whether an entity may be eligible to submit an offer as a HUBZone joint
venture.
Section 126.801
The proposed rule would amend Sec. 126.801(b) to clarify the bases
on which a HUBZone protest may be filed, which include: (i) the
protested concern did not meet the HUBZone eligibility requirements set
forth in Sec. 126.200 at the time the concern applied for HUBZone
certification or on the anniversary date of such certification; (ii)
the protested joint venture does not meet the requirements set forth in
Sec. 126.616; (iii) the protested concern, as a HUBZone prime
contractor, is unduly reliant on one or more small subcontractors that
are not HUBZone-certified, or subcontractors that are not HUBZone-
certified will perform the primary and vital requirements of the
contract; and/or (iv) the protested concern, on the anniversary date of
its initial HUBZone certification, failed to attempt to maintain
compliance with the 35% HUBZone residence requirement. The proposed
rule also would amend Sec. 126.801(d)(1), addressing timeliness for
HUBZone protests.
The proposed rule would add a new paragraph (d)(1)(i) to clarify
the timeliness rules for protests relating to orders or agreements that
are set-aside for certified HUBZone small business concerns where the
underlying multiple award contract was not itself set-aside or reserved
for certified HUBZone small business concerns. Specifically, a protest
challenging the HUBZone status of an apparent successful offeror for
such an order or agreement will be considered timely if it is submitted
within 5 business days of notification of the identity of the apparent
successful offeror for the order or agreement. The proposed rule also
would add a new paragraph (d)(1)(ii) to clarify that where a
contracting officer requires recertification in connection with a
specific order under a multiple award contract that itself was set-
aside or reserved for certified HUBZone small business concerns, a
protest challenging the HUBZone status of an apparent successful
offeror will be considered timely if it is submitted within five
business days of notification of the identity of the apparent
successful offeror for the order.
Section 127.102
SBA proposes to amend the definition of WOSB to clarify that the
definition applies to any certification as to a concern's status as a
WOSB, not solely to those certifications relating to a WOSB contract.
SBA has received inquiries as to whether this definition applies to a
firm that certifies as a WOSB for goaling purposes on an unrestricted
procurement. It has always been SBA's intent to apply that definition
to all instances where a concern certifies as a WOSB, and this proposed
rule merely clarifies that intent.
Section 127.200
Section 127.200 specifies the requirements a concern must meet to
qualify as an EDWOSB or WOSB. In order to qualify as an EDWOSB, an
entity must be a small business. Section 127.200(a)(1) requires a
concern to be a small business for its primary industry classification
to qualify as an EDWOSB, while Sec. 127.200(b)(1) merely states that a
concern must be a small business to qualify as a WOSB. In terms of
demonstrating that an applicant for either WOSB or EDWOSB certification
qualifies as a small business, the proposed rule would provide that the
applicant must demonstrate that it qualifies as small under the size
standard corresponding to any NAICS code under which it currently
conducts business activities. SBA believes that this standard makes
more sense than requiring an applicant to qualify as small under the
size standard corresponding to its primary industry classification. In
order to be eligible for a specific WOSB/EDWOSB contract, a firm must
qualify as small under the size standard corresponding to the NAICS
code assigned to that contract. Whether a firm qualifies as small under
its primary industry classification is not relevant to that
determination (unless the size standard for the firm's primary industry
classification is that same as that for the NAICS code assigned to the
contract, but even then, the only relevant size standard is that
corresponding to the NAICS code
[[Page 55660]]
assigned to the contract). SBA believes that a firm that does not
qualify as small under its primary industry classification should not
be precluded from seeking and being awarded WOSB/EDWOSB contracts if it
qualifies as small for those contracts. SBA believes that the
certification process should ensure that an applicant is owned and
controlled by one or more women and that it could qualify as a small
business for a WOSB/EDWOSB set-aside contract. As such, SBA believes
that requiring an applicant to demonstrate that it qualifies as small
for any industry under which it currently conducts business is more
appropriate than requiring it to demonstrate that it qualifies as small
under its primary industry classification. Finally, SBA believes that
it is important to align the WOSB/EDWOSB eligibility requirements with
the eligibility requirements for veteran-owned small business (VOSB)
concerns and service-disabled veteran-owned small business (SDVOSB)
concerns wherever possible. SBA is also proposing that a VOSB or SDVOSB
must be small under the size standard corresponding to any NAICS code
under which it currently conducts business activities in a separate
rulemaking.
Section 127.201(b)
Section 127.201 sets forth the requirements for control of a WOSB
or EDWOSB. Paragraph (b) specifies that one or more women or
economically disadvantaged women must unconditionally own the concern
seeking WOSB or EDWOSB status. The proposed rule would clarify that
this requirement was not meant to preclude a condition that can be
given effect only after the death or incapacity of the woman owner.
This change would make the WOSB unconditional ownership requirement the
same as that for eligibility for the 8(a) BD program.
Section 127.202(c)
Section 127.202 sets forth the requirements for control of a WOSB
or EDWOSB. The current regulatory language has caused confusion as to
whether a woman or economically-disadvantaged woman claiming to control
a WOSB or EDWOSB can engage in employment other than that for the WOSB
or EDWOSB. The current regulations provide that the woman or
economically-disadvantaged woman who holds the highest officer position
may not engage in outside employment that prevents her from devoting
sufficient time and attention to the daily affairs of the concern to
control its management and daily business operations. The regulations
also provide that such individual must manage the business concern on a
full-time basis and devote full-time to it during the normal working
hours of business concerns in the same or similar line of business.
Taking the two provisions together, a woman or economically-
disadvantaged woman can engage in outside employment, but only if such
employment occurs outside the normal working hours of business concerns
in the same or similar line of business and does not prevent her from
devoting sufficient time and attention to control the concern's
management and daily business operations. SBA believes that this
requirement is overly restrictive. SBA is charged with determining
whether a business concern is owned and controlled by one or more women
or economically-disadvantaged women. If a woman starts a small business
that she alone operates, SBA does not believe that it makes sense to
conclude that she does not control the business simply because she
operates it outside the normal hours of similar businesses. Whether the
business can win and perform government contracts is a different
question, and not one contemplated by SBA's regulations. Where a woman
is the sole individual involved in operating a specific business, there
is no question that she controls the business, regardless of how many
hours she devotes to the business.
This rule proposes to revise the limitations on outside activities.
Per Sec. 127.202(a), a woman or economically-disadvantaged woman must
demonstrate that she controls the long-term planning and daily
operations of the business. The proposed rule would continue to provide
that a woman or economically-disadvantaged woman cannot engage in
outside activities that prevent her from devoting sufficient time and
attention to the business concern to control its management and daily
operations. Where a woman claiming to control a business concern
devotes fewer hours to the business than its normal hours of operation,
the proposed rule would impose a rebuttable presumption that she does
not control the business concern. This is not meant to imply that a
specific individual must be present at the business premises all hours
that the business is open, particularly if the business is open more
than a normal workday (e.g., where the business is open 24 hours and
has multiple shifts). In such instances the woman would merely be
required to provide evidence that she has ultimate managerial and
supervisory control over both the long-term decision making and day-to-
day management and administration of the business.
Section 127.400
Section 127.400 describes how a concern maintains its certification
as a WOSB or EDWOSB. This rule proposes to amend Sec. 127.400 by
omitting Sec. 127.400(a), which requires a certified concern to
annually represent to SBA that it meets all program eligibility
requirements, and replacing it with Sec. 127.400(b), which states that
a certified concern must undergo a program examination at least every
three years to maintain program eligibility. SBA believes that these
program examinations, in conjunction with other eligibility assessments
like material change reviews, status protests, third-party certifier
compliance reviews, and program audits, will sufficiently capture
eligibility information. The proposed rule would also amend the
examples to Sec. 127.400 to reflect the proposed change and provide
additional clarity to small businesses.
SBA believes small businesses will further benefit from the
proposed change because it will align the WOSB Program regulations with
the continuing eligibility requirements for veteran-owned small
business concerns outlined in 13 CFR 128.306. The WOSB Program permits
veteran owned-certified small business concerns to submit evidence of
their veteran-owned certification, along with documentation
demonstrating that the firms are 51% owned and controlled by one or
more women, to support their applications for WOSB Program
certification. Going forward, the reverse will also be true. SBA
believes that when there is reciprocity between programs, small
businesses benefit from as much consistency as practicable. Regulatory
alignment reduces confusion, ambiguity, and administrative burden for
firms that are eligible for more than one program.
Compliance With Executive Orders 12866, 12988, 13132, 13563, the
Congressional Review Act (5 U.S.C. 801-808), 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) anticipates that this
proposed rule will be a significant regulatory action and, therefore,
was subject to review under section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. Accordingly,
the next section contains SBA's Regulatory Impact Analysis.
[[Page 55661]]
Regulatory Impact Analysis
1. Is there a need for the regulatory action?
This action proposes to implement a statutory enactment--the NDAA
FY22--as well as codify a federal court decision into regulation, and
revise SBA guidelines on 8(a) BD program eligibility, 8(a) BD program
participation, and subcontracting plan compliance. With respect to the
8(a) BD program, this action is needed to clarify several policies that
SBA already has put in place and to apply existing regulations to new
scenarios, such as the recently created SBA mentor-
prot[eacute]g[eacute] program. This action also is needed to integrate
section 863 of NDAA FY22 into SBA regulations and to adopt the holding
of a recent federal court decision.
2. What is the baseline, and the incremental benefits and costs of this
regulatory action?
SBA has determined that this proposed rule includes eight proposals
that are associated with incremental benefits or incremental costs.
Outside of the following eight proposals, the other changes would
merely clarify existing policy, modify language to avoid confusion, or
adopt interpretations already issued by SBA's Office of Hearings and
Appeals or through SBA casework.
a. Require a firm to update SAM within two days and notify certain
contracting officers if the firm is found ineligible through size
determination, SDVO Small Business Concern (SBC) protests, HUBZone
protests, or WOSB Program protests.
SBA would amend Sec. Sec. 125.30(g)(4) and 127.405(c) to provide
that a firm found ineligible through a final program protest must
update SAM.gov within two days with its new status and notify agencies
with which it has pending offers that are affected by the status
change. This requirement already exists in SBA's regulations for size
protests.
The change extends the requirement to the SDVO SBC and WOSB
programs. SBA has determined that this proposed change would impose
costs on the business associated with its notification of contracting
agencies of the adverse decision. The number of adverse protest
decisions in the SDVOSBC and WOSB programs is less than five per year.
For each such protest, the ineligible business is estimated to be
required to notify two agencies. The notification does not take any
particular form, so SBA estimates that each notification would take 15
minutes. Thus, the total cost of this change would be 2.5 hours across
all firms. At a project-manager-equivalent level, the total cost is
less than $280 annually.\1\
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\1\ From 2.5 hours saved valued at the median wage of $55.41 for
General and Operations Managers, according to the Bureau of Labor
Statistics (BLS) General and Operations Managers (bls.gov)
(retrieved April 12, 2022), plus 100% for benefits and overhead.
---------------------------------------------------------------------------
b. Prohibit nonmanufacturer rule waivers from specifically applying
to a contract with a duration longer than five years, including
options.
SBA proposes to amend Sec. 121.1203 to restrict the grant of
individual (i.e., contract-specific) nonmanufacturer rule waivers to
contracts with durations of five years or less. In the prior fiscal
year, SBA granted 24 individual waivers each year for contracts that
exceed five years. The estimated total value for contracts covered by
these waivers was $4.6 billion.
The most probable effect of denying waivers for such contracts in
the future is that the procuring agencies will choose not to set aside
those contracts for small business resellers. Instead, the procuring
agencies would solicit many of those contracts as full-and-open
competitions. It is also possible, however, that the agencies could
limit the duration of the contracts to five years in order to promote
small-business opportunity through the use of a set-aside.
Of those two possibilities, the first (a full-and-open
solicitation) is an economic transfer of the reseller's markup from a
small business reseller to what most likely would be an other-than-
small reseller. The second (limiting the contract to five years)
creates possible benefits at the sixth year for newly established
domestic small-business manufacturers. Under the current policy, those
manufacturers might be overlooked by the agency and its contractors
(i.e., resellers) because the ongoing contract does not require the
contractor to purchase from a domestic small-business manufacturer.
SBA estimates that, in a quarter of the cases in which an agency
would otherwise seek a waiver for a contract exceeding five years, the
agencies would choose to limit the contract (and thus the effect of the
waiver) to five years. This amounts to six contracts, with a total
value of $1.2 billion. Assuming that these contracts are ten years in
length and agencies would recompete the contracts in the five final
years, the potential recompeted value is $575 million, unadjusted for
inflation. However, it is unknown whether domestic small-business
manufacturers would be available to supply the resellers at the point
of recompetition--five years after the initial award. Thus, although
this change results in potential more opportunities for small business
manufacturers in years six and beyond, the benefits of the additional
opportunities are not quantifiable because of lack of information about
the domestic small-business manufacturing base in the future.
c. Require information from 8(a) applicants about the terms and
restrictions of a retirement account only at the request of SBA,
instead of in every instance.
SBA proposes to amend Sec. 124.104(c)(2)(ii) to eliminate the
prior requirement that 8(a) applicants must provide the terms and
conditions of retirement accounts in order to have the values of those
accounts excluded from the owner's net worth. SBA would require the
applicant to submit documentation of a retirement account only upon
SBA's request.
SBA processes approximately 600 8(a) applications from individual-
owned firms per year. Based on sampling, SBA found that 70 percent of
those applications disclosed retirement accounts to SBA. Thus, this
regulatory change will reduce the documentation burden for about 420
8(a) applicants per year. SBA estimates the existing burden to be 20
minutes per applicant, and the benefit of the proposed rule's
cancellation of the documentation requirement therefore to be about
$15,500 per year.\2\
---------------------------------------------------------------------------
\2\ From 20 minutes of time saved by 420 applicants valued at
the median wage of $55.41 for General and Operations Managers,
according to the BLS General and Operations Managers (bls.gov)
(retrieved April 12, 2022), plus 100% for benefits and overhead.
---------------------------------------------------------------------------
d. Permit 8(a) applications to go forward where the firm or its
affected principals can demonstrate that federal financial obligations
have been settled and discharged or forgiven by the Federal Government.
Section 124.108(e) of the proposed rule states that an applicant
will not be denied eligibility to the 8(a) program on the basis that
the applicant's prior federal financial obligations have been settled
and either discharged or forgiven by the Federal Government. In rare
cases, SBA has denied 8(a) eligibility based on prior federal financial
obligations, even though the government has discharged the obligation.
SBA internal data shows that SBA rejects approximately two applications
per year on this basis. SBA estimates that the average financial
obligation in those cases is $10,000. Therefore, this proposed change
results in an estimated annual benefit to future 8(a) applications of
$20,000, from an
[[Page 55662]]
average of two applicants annually with obligations of $10,000 each.
e. Delete bank fees from the list of exclusions in the
subcontracting base.
SBA would amend Sec. 125.3(a)(1)(iii) to delete bank fees from the
list of costs excludable from the subcontracting base when a contractor
seeks to comply with a subcontracting plan. After reviewing Federal
Deposit Insurance Corporation (FDIC) and Federal Reserve data, SBA
estimates that the average bank fee expense per account holder is $300
per year. The number of contractors that hold a subcontracting plan is
5,500. Thus, the total amount to be added to the subcontracting base
across all contractors is $1.65 million.
The benefit to small-business subcontractors of the amendment would
be additional dollars subcontracted to small business. Assuming that
the total level of small-business subcontracting stays consistent at
32%, contractors would spend $525,000 of the added amount with small
businesses. However, 18% of economy-wide spending on banking services
is spent with banks that qualify as small businesses. Assuming
contractor spending approximates economy-wide spending, this equates to
$297,000 of the current spending on bank fees through contractors with
subcontracting plans. Thus, after subtracting the amount already spent
with small-business banks, new spending with small business
subcontractors would be $228,000 annually.
The proposed rule would pose a cost to contractors to track their
spending on bank fees in order to include them in the subcontracting
base. This may require updating vendor management systems. To determine
a cost per contractor for this change, SBA reviewed the Paperwork
Reduction Act Supporting Statement for the FAR's Subcontracting Plan
forms, under OMB Control No. 9000-0007. Considering the burdens
estimated in the Supporting Statement, SBA estimates that the average
cost of this change would come to $100 per contractor annually. The
cost therefore amounts to $550,000 across all contractors with
subcontracting plans.
The total regulatory impact is therefore a net cost of $322,000
annually. The benefits accrue to small business subcontractors, whereas
the cost is borne by other-than-small prime contractors with
subcontracting plans.
f. Require businesses to include indirect costs in their
subcontracting plans.
Section 125.3(c)(1)(iv) would require contractors with individual
subcontracting plans to report indirect costs in their individual
subcontracting reports (ISRs). Contractors already are required to
report indirect costs in their summary subcontracting reports (SSRs).
Thus, the only cost associated with the proposed change would be the
cost of allocating indirect costs to the ISRs. To determine a cost per
contractor for this change, SBA reviewed the Paperwork Reduction Act
Supporting Statement for the FAR's Subcontracting Plan forms, under OMB
Control No. 9000-0007. Considering the burdens estimated in the
Supporting Statement, SBA estimates the cost to be $50 per contractor
with an ISR.\3\ In FY20, 4,389 contractors submitted an ISR. Thus, the
aggregate cost of this proposed change amounts to $220,000 annually.
---------------------------------------------------------------------------
\3\ This number is based on results from OMB's ICR Agency
Submission, available at View Information Collection Request (ICR)
Package (reginfo.gov). Retrieved April 12, 2022.
---------------------------------------------------------------------------
There may be a benefit to the change because agencies use the ISR
to evaluate a contractor's compliance with its subcontracting plan.
Thus, by including more indirect costs in the base subcontracting
value, contractors will have the incentive to subcontract more to small
businesses in order to meet small business goals in their
subcontracting plans. This effect may be short-lived because
contractors can compensate by negotiating lower subcontracting goals.
Thus, SBA cannot quantify the potential benefit for this change.
g. Require agencies to assign a negative past performance rating to
a small-business contract awardee where the contracting officer
determined that the small business failed to meet required limitations
on subcontracting.
SBA proposes to require that, where a contracting officer
determines that at the conclusion of contract performance a small
business contractor fails to satisfy the limitations on subcontracting
for a particular contract, that contractor would receive a negative
past-performance rating for that contract for the appropriate factor or
subfactor in accordance with FAR 42.1503. SBA determines that this
change does not have any incremental cost or incremental benefit.
Agencies already are required to submit past performance ratings.
Though a negative rating might affect a firm's ability to obtain a
contract in the future, there is no way to gauge the impact on the
firm's odds, and, regardless, the end result would likely be only a
transfer in the contract award from the noncompliant firm to a firm
without a negative past-performance rating. This change therefore does
not present a net cost nor net benefit.
3. What are the alternatives to this rule?
The alternative to the proposed rule would be to keep SBA's
processes and procedures as currently stated in the Code of Federal
Regulations. However, because so much of this proposed rule codifies
practices and interpretations already in place, using the alternative
would impose an information-search cost on 8(a) BD participants in
particular and small business contractors in general. Many of the
clarifications in this proposed rule already have been applied at the
case level but are not widely known. This proposed rule makes those
clarifications known to the public.
Additionally, this proposed rule implements section 863 of NDAA
FY22, regarding changes to SAM.gov after an adverse SBA status
decision. There is no alternative to implementing this statutory
requirement.
Summary of Costs and Cost Savings
SBA calculates $262,000 in annual aggregate benefits, and
approximately $770,500 in annual aggregate costs, with many costs and
benefits uncertain. SBA calculates the net annual cost of the proposed
rule to be $500,000.
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 13563
Executive Order 13563, Improving Regulation and Regulatory Review,
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
[[Page 55663]]
public; and (c) seek the views of those who are likely to be affected
by the rulemaking, even before issuing a notice of proposed rulemaking.
As far as practicable or relevant, SBA considered these requirements in
developing this proposed rule, as discussed below.
1. Did the agency use the best available techniques to quantify
anticipated present and future costs when responding to Executive Order
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,
DSBS, and SAM.
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. SBA has also discussed some of the
proposals in this rule with stakeholders at various small business on-
line procurement conferences.
Flexibility: Did the agency identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public?
The proposed rule is intended to eliminate confusion in its
existing regulations and reduce unnecessary burdens on small business.
Congressional Review Act (5 U.S.C. 801-808)
The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a ``major rule'' may take effect, the
agency promulgating the rule must submit a rule report, which includes
a copy of the rule, to each House of the Congress and to the
Comptroller General of the United States. SBA will submit a report
containing this proposed rule and other required information to the
U.S. Senate, the U.S. House of Representatives, and the Comptroller
General of the United States. A major rule cannot take effect until 60
days after it is published in the Federal Register. This proposed rule
is not anticipated to be a ``major rule'' under 5 U.S.C. 804(2).
Paperwork Reduction Act, 44 U.S.C. Ch. 35
This rule does not impose additional reporting or recordkeeping
requirements under the Paperwork Reduction Act, 44 U.S.C. chapter 35.
In 2019, SBA revised its regulations to give contracting officers
discretion to request information demonstrating compliance with the
limitations on subcontracting requirements. See 84 FR 65647 (Nov. 29,
2019). In conjunction with this revision, SBA requested an Information
Collection Review by OMB (Limitations on Subcontracting Reporting, OMB
Control Number 3245-0400). OMB approved the Information Collection. The
proposed rule would not alter the contracting officer's discretion to
require a contractor to demonstrate its compliance with the limitations
on subcontracting at any time during performance and upon completion of
a contract. It merely provides consequences where a contracting
officer, utilizing his or her discretion, determines that a contractor
did not meet the applicable limitation of subcontracting requirement.
The estimated number of respondents, burden hours, and costs remain the
same as that identified by SBA in the previous Information Collection.
As such, SBA believes this provision is covered by its existing
Information Collection, Limitations on Subcontracting Reporting.
Regulatory Flexibility Act, 5 U.S.C. 601-612
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires
administrative agencies to consider the effect of their actions on
small entities, small nonprofit 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
involves requirements for participation in SBA's 8(a) Business
Development (BD) Program. Some BD Participants are owned by Tribes,
ANCs, NHOs, or CDCs. As such, the proposed rule relates to various
small entities. The number of entities affected by the proposed rule
includes all Participants in SBA's 8(a) BD program. For reference, SBA
Business Opportunity Specialists assisted over 11,000 entities in 2020.
This proposed rule implements a statutory enactment and a federal
court decision and codifies practices and interpretations already in
place for Participants. In doing so, it adds reporting requirements but
these requirements relate to information collected in the normal course
of business. SBA therefore expects the collection costs to be de
minimis and the costs of reporting to be minimal. Moreover, the
reporting requirements, such as the requirement that contractors report
indirect costs in their individual subcontracting reports (ISRs), will
not fall on small entities. Some of the proposed rule's changes, such
as that to documentation for retirement plans, reduce reporting
requirements for small entities that are Participants. Additionally,
the proposed rule's clarification of practices and interpretations
decreases uncertainty for Participants. Therefore, SBA does not believe
the proposed rule would have a disparate impact on small entities or
would impose any additional significant costs on them. For the reasons
discussed, SBA certifies that this proposed rule does not have a
significant economic impact on a substantial number of small entities.
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.
[[Page 55664]]
13 CFR Part 127
Government contracts, Reporting and recordkeeping requirements,
Small businesses.
Accordingly, for the reasons stated in the preamble, SBA proposes
to amend 13 CFR parts 121, 124, 125, 126, and 127 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. The authority citation for part 121 is revised to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, 694a(9),
and 9012.
0
2. Amend Sec. 121.103 by:
0
a. Revising paragraph (h) introductory text and the third sentence of
Example 2 to paragraph (h) introductory text;
0
b. Redesignating paragraphs (h)(1) through (4) as paragraphs (h)(2)
through (5), respectively;
0
c. Adding a new paragraph (h)(1);
0
d. Revising newly redesignated paragraphs (h)(3) and (4); and
0
e. Adding paragraph (i).
The revisions and additions read as follows:
Sec. 121.103 How does SBA determine affiliation?
* * * * *
(h) Affiliation based on joint ventures. A joint venture is an
association of individuals and/or concerns with interests in any degree
or proportion intending 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 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. However, a joint venture may
be issued an order under a previously awarded contract beyond the two-
year period. 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 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 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 may lead to a finding of general affiliation between
and among them. SBA may also determine that the relationship between a
prime contractor and its subcontractor is a joint venture pursuant to
paragraph (h)(3) 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 2 to paragraph (h) introductory text. * * * On March 19,
year 3, XY receives its fifth contract. * * *
* * * * *
(1) Form of joint venture. 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 or agreement; and may be in the form of a formal or
informal partnership or exist as a separate limited liability company
or other separate legal entity.
(i) If a joint venture exists as a formal separate legal entity, it
cannot not be populated with individuals intended to perform contracts
awarded to the joint venture for any contract or agreement which is set
aside or reserved for small business, unless all parties to the joint
venture are similarly situated as that term is defined in part 125 of
this chapter (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).
(ii) A populated joint venture that is not comprised entirely of
similarly situated entities will be ineligible for any contract or
agreement which is set aside or reserved for small business.
(iii) In determining the size of a populated joint venture, SBA
will aggregate the revenues or employees of all partners to the joint
venture.
* * * * *
(3) Ostensible subcontractors. A contractor and its ostensible
subcontractor are treated as joint venturers for size determination
purposes. An ostensible subcontractor is a subcontractor that is not a
similarly situated entity, as that term is defined in Sec. 125.1 of
this chapter, and performs primary and vital requirements of a
contract, or of an order, or is a subcontractor upon which the prime
contractor is unusually reliant. As long as each concern is small under
the size standard corresponding to the NAICS code assigned to the
contract (or the prime contractor is small if the subcontractor is the
SBA-approved mentor to the prime contractor), the arrangement will
qualify as a small business.
(i) All aspects of the relationship between the prime and
subcontractor are considered, including, but not limited to, the terms
of the proposal (such as contract management, transfer of the
subcontractor's incumbent managers, technical responsibilities, and the
percentage of subcontracted work), agreements between the prime and
subcontractor (such as bonding assistance or the teaming agreement),
whether the subcontractor is the incumbent contractor and is ineligible
to submit a proposal because it exceeds the applicable size standard
for that solicitation, and whether the prime contractor relies on the
subcontractor's experience because it lacks relevance experience of its
own.
(ii) In a general construction contract, the primary and vital
requirements of the contract are the management and oversight of the
project, not the actual construction or specialty trade construction
work performed.
(4) Receipts/employees attributable to joint venture partners. For
size purposes, a concern must include in its receipts its proportionate
share of joint venture receipts. Proportionate receipts do not include
proceeds from transactions between the concern and its joint ventures
(e.g., subcontracts from a joint venture entity to joint venture
partners) already accounted for in the concern's tax return. In
determining the number of employees, a concern must include in its
total number of employees its proportionate share of joint venture
employees. For the calculation of receipts, 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. For a populated joint venture (where work is
performed by the joint venture entity itself and not by the individual
joint venture partners) the appropriate share is the same percentage as
the joint venture partner's percentage ownership
[[Page 55665]]
share in the joint venture. For the calculation of employees, the
appropriate share is the same percentage of employees as the joint
venture partner's percentage ownership share in the joint venture,
after first subtracting any joint venture employee already accounted
for in one of the partner's employee counts.
Example 1 to paragraph (h)(4). 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 already account for the $4M in transactions between A and
Joint Venture AB.
* * * * *
(i) Affiliation based on franchise and license agreements. The
restraints imposed on a franchisee or licensee by its franchise or
license agreement relating to standardized quality, advertising,
accounting format and other similar provisions, generally will not be
considered in determining whether the franchisor or licensor is
affiliated with the franchisee or licensee provided the franchisee or
licensee has the right to profit from its efforts and bears the risk of
loss commensurate with ownership. Affiliation may arise, however,
through other means, such as common ownership, common management or
excessive restrictions upon the sale of the franchise interest.
0
3. Amend Sec. 121.404 by:
0
a. Revising paragraphs (a)(1)(i)(B), (a)(1)(ii)(B), and (a)(1)(iv);
0
b. Removing the reference ``Sec. 121.103(h)(2)'' in paragraph (d) and
adding in its place ``Sec. 121.103(h)(3)'';
0
c. Revising the first sentence in paragraph (g)(2)(i) and the second
sentence in paragraph (g)(2)(iii);
0
d. Removing the reference ``Sec. 121.103(h)(4)'' in paragraph (g)(5)
and adding in its place ``Sec. 121.103(h)(3)''; and
0
e. Adding paragraph (g)(6).
The revisions and addition read as follows:
Sec. 121.404 When is the size status of a business concern
determined?
(a) * * *
(1) * * *
(i) * * *
(B) Set-aside Multiple Award Contracts. Except as set forth in
Sec. 124.503(i)(1)(iv) of this chapter for sole source 8(a) orders,
for a Multiple Award Contract that is set aside or reserved 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), if a business concern (including a joint
venture) 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) * * *
(B) Set-aside Multiple Award Contracts. Except as set forth in
Sec. 124.503(i)(1)(iv) of this chapter for sole source 8(a) orders,
for a Multiple Award Contract that is set aside or reserved 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), if a business concern (including a joint
venture) is small at the time of offer and contract-level
recertification for discrete categories on the Multiple Award 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.
* * * * *
(iv) Multiple award contract where price not required. For a
Multiple Award Contract, where concerns are not required to submit
price as part of the offer for the contract, size for the contract will
be determined as of the date of initial offer, which may not include
price. Size for set-aside orders will be determined in accordance with
paragraph (a)(1)(i)(A) or (B) or (a)(1)(ii)(A) or (B) of this section,
as appropriate.
* * * * *
(g) * * *
(2)(i) In the case of a merger, acquisition, or sale which results
in a change in controlling interest under Sec. 121.103, where contract
novation is not required, the contractor must, within 30 days of the
transaction becoming final, recertify its small business size status to
the procuring agency, or inform the procuring agency that it is other
than small. * * *
* * * * *
(iii) * * * If the merger, sale, or acquisition (including
agreements in principle) occurs within 180 days of the date of an offer
relating to the award of a contract, order, or agreement and the
offeror is unable to recertify as small, it will not be eligible as a
small business to receive the award of the contract, order, or
agreement. * * *
* * * * *
(6) Where a joint venture must recertify its small business size
status under paragraph (g) of this section, the joint venture can
recertify as small where all parties to the joint venture qualify as
small at the time of recertification, or the prot[eacute]g[eacute]
small business in a still active mentor-prot[eacute]g[eacute] joint
venture qualifies as small at the time of recertification. A joint
venture can recertify as small even though the date of recertification
occurs more than two years after the joint venture received its first
contract award (i.e., recertification is not considered a new contract
award under Sec. 121.103(h)).
* * * * *
0
4. Amend Sec. 121.411 by revising paragraph (c) to read as follows:
Sec. 121.411 What are the size procedures for SBA's Section 8(d)
Subcontracting Program?
* * * * *
(c) Notice of awardee. Upon determination of the successful
subcontract offeror for a competitive subcontract over the simplified
acquisition threshold, but prior to award, the prime contractor must
inform each unsuccessful subcontract offeror in writing of the name and
location of the apparent successful offeror.
* * * * *
0
5. Amend Sec. 121.507 by adding paragraph (d) to read as follows:
Sec. 121.507 What are the size standards and other requirements for
the purchase of Government-owned timber (other than Special Salvage
Timber)?
* * * * *
(d) The Director of Government Contracting (D/GC) may waive one or
more of the requirements set forth in paragraphs (a)(3) and (4) of this
section in limited circumstances where conditions make the
requirement(s) impractical or prohibitive. A request for waiver must be
made to the D/GC and contain facts, arguments, and any appropriate
supporting documentation as to why a waiver should be granted.
0
6. Amend Sec. 121.702 in paragraph (c)(7) by revising the first
sentence and adding a sentence following the first sentence to read as
follows:
Sec. 121.702 What size and eligibility standards are applicable to
the SBIR and STTR programs?
* * * * *
[[Page 55666]]
(c) * * *
(7) * * * A concern and its ostensible subcontractor are treated as
joint venturers. As such, they are affiliates for size determination
purposes and must meet the ownership and control requirements
applicable to joint ventures. * * *
* * * * *
0
6. Amend Sec. 121.1001 by revising paragraphs (a)(6)(i), (a)(8)(i),
(a)(9)(i), (b)(2)(ii) introductory text, and (b)(2)(ii)(A) and (C) to
read as follows:
Sec. 121.1001 Who may initiate a size protest or request a formal
size determination?
(a) * * *
(6) * * *
(i) Any offeror for a specific HUBZone set-aside contract that the
contracting officer has not eliminated from consideration for any
procurement-related reason, such as non-responsiveness, technical
unacceptability, or outside of the competitive range;
* * * * *
(8) * * *
(i) Any offeror for a specific service-disabled veteran-owned small
business set-aside contract that the contracting officer has not
eliminated from consideration for any procurement-related reason, such
as non-responsiveness, technical unacceptability, or outside of the
competitive range;
* * * * *
(9) * * *
(i) Any offeror for a specific contract set aside for WOSBs or
WOSBs owned by one or more women who are economically disadvantaged
(EDWOSB) that the contracting officer has not eliminated from
consideration for any procurement-related reason, such as non-
responsiveness, technical unacceptability or outside of the competitive
range;
* * * * *
(b) * * *
(2) * * *
(ii) Concerning individual sole source 8(a) contract awards and
competitive 8(a) contract awards where SBA cannot verify the
eligibility of the apparent successful offeror because SBA finds the
concern to be other than small, the following entities may request a
formal size determination:
(A) The Participant nominated for award of the particular sole
source contract, or found to be ineligible for a competitive 8(a)
contract due to its size;
* * * * *
(C) The SBA District Director in the district office that services
the Participant, the Associate Administrator for Business Development,
or the Associate General Counsel for Procurement Law.
* * * * *
0
7. Amend Sec. 121.1004 by:
0
a. Revising paragraph (a)(1);
0
b. Adding the words ``without a reserve'' at the end of paragraph
(a)(2)(iii); and
0
c. Adding paragraphs (f) and (g).
The revision and addition read as follows:
Sec. 121.1004 What time limits apply to size protests?
(a) * * *
(1) Sealed bids or sales (including protests on partial set-asides
and reserves of Multiple Award Contracts and set-asides of orders
against Multiple Award Contracts). (i) A protest must be received by
the contracting officer prior to the close of business on the 5th day,
exclusive of Saturdays, Sundays, and legal holidays, after bid opening
for:
(A) The contract;
(B) An order issued against a Multiple Award Contract if the
contracting officer requested a new size certification in connection
with that order; or
(C) 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.
(ii) Where the identified low bidder is determined to be ineligible
for award, a protest of any other identified low bidder must be
received prior to the close of business on the 5th day, exclusive of
Saturdays, Sundays, and legal holidays, after the contracting officer
has notified interested parties of the identity of that low bidder.
* * * * *
(f) Apparent successful offeror. A party with standing, as set
forth in Sec. 121.1001(a), may file a protest only against an apparent
successful offeror or an offeror in line to receive an award.
(g) GAO corrective action. SBA will dismiss any size protest
relating to an initial apparent successful offeror where an agency
decides to reevaluate offers as a corrective action in response to a
protest before the Government Accountability Office (GAO). When the
apparent successful offeror is announced after reevaluation, interested
parties will again have the opportunity to protest the size of the new
or same apparent successful offeror within five business days after
such notification.
0
8. Amend Sec. 121.1009 by revising paragraphs (a)(1) and (3) and
(g)(5) to read as follows:
Sec. 121.1009 What are the procedures for making the size
determination?
(a) * * *
(1) After receipt of a protest or a request for a formal size
determination:
(i) If no protest is pending before GAO, the SBA Area Office will
issue a formal size determination within 15 business days, if possible;
(ii) If a protest is pending before GAO, the SBA Area Office will
place the size determination case in suspense. Once GAO issues a
decision, the SBA the Area Office will recommence the size
determination process and issue a formal size determination within 15
business days of the GAO decision, if possible.
* * * * *
(3) If SBA does not issue its determination in accordance with
paragraph (a)(1) of this section (or request an extension that is
granted), the contracting officer may award the contract if he or she
determines in writing that there is an immediate need to award the
contract and that waiting until SBA makes its determination will be
disadvantageous to the Government. Notwithstanding such a
determination, the provisions of paragraph (g) of this section apply to
the procurement in question.
* * * * *
(g) * * *
(5) A concern determined to be other than small under a particular
size standard is ineligible for any procurement or any assistance
authorized by the Small Business Act or the Small Business Investment
Act of 1958 which requires the same or a lower size standard, unless
SBA recertifies the concern to be small pursuant to Sec. 121.1010 or
OHA reverses the adverse size determination. After an adverse size
determination, a concern cannot self-certify as small under the same or
lower size standard unless it is first recertified as small by SBA. If
a concern does so, it may be in violation of criminal laws, including
section 16(d) of the Small Business Act, 15 U.S.C. 645(d). If the
concern has already certified itself as small under the same or a
smaller size standard on a pending procurement or on an application for
SBA assistance, the concern must immediately inform the contracting
officer or responsible official of the adverse size determination.
(i) Not later than two days after the date on which SBA issues a
final size determination finding a business concern to be other than
small, such
[[Page 55667]]
concern must update its size status in the System for Award Management
(or any successor system).
(ii) If a business concern fails to update its size status in the
System for Award Management (or any successor system) in response to an
adverse size determination, SBA will make such update within two days
of the business's failure to do so.
* * * * *
0
9. Amend Sec. 121.1203 by:
0
a. Redesignating paragraph (d) as paragraph (g);
0
b. Adding a new paragraph (d) and paragraphs (e) and (f); and
0
c. In newly redesignated paragraph (g)(2), removing ``(d)(1)'' and
adding ``(g)(1)'' in its place.
The additions read as follows:
Sec. 121.1203 When will a waiver of the Nonmanufacturer Rule be
granted for an individual contract?
* * * * *
(d) Applicability of individual waiver. An individual waiver
applies only to the contract for which it is granted and does not apply
to modifications outside the scope of the contract or other procurement
actions (e.g., follow-on or bridge contracts).
(e) Long term contracts. SBA will not grant an individual waiver in
connection with a long-term contract (i.e., a contract with a duration
of longer than five years, including options).
(f) Multiple item procurements. For a multiple item procurement, a
waiver must be sought and granted for each item for which the procuring
agency believes no small business manufacturer or processor can
reasonably be expected to offer a product meeting the specifications of
the solicitation. SBA's waiver applies only to the specific item(s)
identified, not to the entire contract.
* * * * *
0
10. Amend Sec. 121.1204 by:
0
a. Revising paragraphs (b)(1)(i) and (ii);
0
b. Adding a sentence after the first sentence in paragraph (b)(1)(iii);
0
c. Redesignating paragraphs (b)(2) and (3) as paragraphs (b)(3) and
(4), respectively;
0
d. Adding a new paragraph (b)(2);
0
e. Revising newly redesignated paragraph (b)(4); and
0
f. Adding paragraph (b)(5).
The revisions and additions read as follows:
Sec. 121.1204 What are the procedures for requesting and granting
waivers?
* * * * *
(b) * * *
(1) * * *
(i) A definitive statement of each specific item sought to be
waived and justification as to why the specific item is required;
(ii) The proposed solicitation number, NAICS code, dollar amount of
the procurement, dollar amount of the item(s) for which a waiver is
sought, and a brief statement of the procurement history;
(iii) * * * For a multiple item procurement, a contracting officer
must determine that no small business manufacturer or processor
reasonably can be expected to offer each item for which a waiver is
sought. * * *
* * * * *
(2) Unless an agency has justified a brand-name acquisition, the
market research conducted to support the waiver request should be
tailored to attract the attention of potential small business
manufacturers or processors, not resellers or distributors.
* * * * *
(4) SBA will examine the contracting officer's determination and
any other information it deems necessary to make an informed decision
on the individual waiver request.
(i) If SBA's research verifies that no small business manufacturers
or processors exist for the item, the Director, Office of Government
Contracting will grant an individual, one-time waiver.
(ii) If a small business manufacturer or processor is found for the
product in question, the Director, Office of Government Contracting
will deny the request.
(iii) Where an agency requests a waiver for multiple items, SBA may
grant a waiver for all items requested, deny a waiver for all items
requested, or grant a waiver for some but not all of the items
requested. SBA's determination will specifically identify the items for
which a waiver is granted, and the procuring agency must then identify
the specific items for which the waiver applies in its solicitation.
(iv) The Director, Office of Government Contracting's decision to
grant or deny a waiver request represents the final agency decision by
SBA.
(5) A nonmanufacturer rule waiver for a specific solicitation
expires one year after SBA's determination to grant the waiver. This
means that contract award must occur within one year of the date SBA
granted the waiver. Where a contract is not awarded within one year,
the procuring agency must come back to SBA with revised market research
requesting that the waiver (or waivers in the case of a multiple item
procurement) be extended.
Sec. 121.1205 [Amended]
0
11. Amend Sec. 121.1205 by removing ``https://www.sba.gov/aboutsba/sbaprograms/gc/programs/gc_waivers_nonmanufacturer.html'' and adding in
its place ``https://www.sba.gov/document/support-non-manufacturer-rule-class-waiver-list''.
PART 124--8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS
STATUS DETERMINATIONS
0
12. 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, 42
U.S.C. 9815; and Pub. L. 99-661, 100 Stat. 3816; Sec. 1207, Pub. L.
100-656, 102 Stat. 3853; Pub. L. 101-37, 103 Stat. 70; Pub. L. 101-
574, 104 Stat. 2814; Sec. 8021, Pub. L. 108-87, 117 Stat. 1054; and
Sec. 330, Pub. L. 116-260.
0
13. Amend Sec. 124.102 by revising paragraph (c) to read as follows:
Sec. 124.102 What size business is eligible to participate in the
8(a) BD program?
* * * * *
(c) A concern whose application is denied due to size by 8(a) BD
program officials may request a formal size determination with the SBA
Government Contracting Area Office serving the geographic area in which
the principal office of the business is located under part 121 of this
chapter. Where the SBA Government Contracting Area Office determines
that an applicant qualifies as a small business concern for the size
standard corresponding to its primary NAICS code:
(1) The Associate Administrator for Business Development (AA/BD)
will certify the concern as eligible to participate in the 8(a) BD
program if size was the only reason for decline; or
(2) The concern may reapply for participation in the 8(a) BD
program at any point after 90 days from the AA/BD's decline if size was
not the only reason for decline. In such a case, the AA/BD will accept
the size determination as conclusive of the concern's small business
status, provided the applicant concern has not completed an additional
fiscal year in the intervening period and SBA believes that the
additional fiscal year changes the applicant's size.
Sec. 124.103 [Amended]
0
14. Amend Sec. 124.103 by removing the words ``physical handicap'' in
paragraph (c)(2)(i) and adding in their place the words ``identifiable
disability''.
0
15. Amend Sec. 124.104 by:
0
a. Revising the second sentence of paragraph (c)(2)(ii);
[[Page 55668]]
0
b. Removing paragraph (c)(2)(iii); and
0
c. Redesignating paragraph (c)(2)(iv) as paragraph (c)(2)(iii).
The revision reads as follows:
Sec. 124.104 Who is economically disadvantaged?
* * * * *
(c) * * *
(2) * * *
(ii) * * * In order to properly assess whether funds invested in a
retirement account may be excluded from an individual's net worth, SBA
may require the individual to provide information about the terms and
restrictions of the account to SBA and certify that the retirement
account is legitimate.
* * * * *
0
16. Amend Sec. 124.105 by:
0
a. Revising paragraphs (h)(2) and (i)(1); and
0
b. Adding a sentence after the first sentence in paragraph (i)(2).
The revisions and addition read as follows:
Sec. 124.105 What does it mean to be unconditionally owned by one or
more disadvantaged individuals?
* * * * *
(h) * * *
(2) A non-Participant concern in the same or similar line of
business or a principal of such concern may generally not own more than
a 10 percent interest in a Participant that is in the developmental
stage or more than a 20 percent interest in a Participant in the
transitional stage of the program, except that:
(i) A former Participant in the same or similar line of business or
a principal of such a former Participant (except those that have been
terminated from 8(a) BD program participation pursuant to Sec. Sec.
124.303 and 124.304) may have an equity ownership interest of up to 20
percent in a current Participant in the developmental stage of the
program or up to 30 percent in a transitional stage Participant; and
(ii) A business concern approved by SBA to be a mentor pursuant to
Sec. 125.9 of this chapter may own up to 40 percent of its 8(a)
Participant prot[eacute]g[eacute] as set forth in Sec. 125.9(d)(2) of
this chapter, whether or not that concern is in the same or similar
line of business as the Participant.
(i) * * *
(1) Any Participant or former Participant that is performing one or
more 8(a) contracts may substitute one disadvantaged individual or
entity for another disadvantaged individual or entity without requiring
the termination of those contracts or a request for waiver under Sec.
124.515, as long as it receives SBA's approval prior to the change.
(2) * * * In determining whether a non-disadvantaged individual
involved in a change of ownership has more than a 20 percent interest
in the concern, SBA will aggregate the interests of all immediate
family members. * * *
* * * * *
0
17. Amend Sec. 124.107 by revising the introductory text to read as
follows:
Sec. 124.107 What is potential for success?
SBA must determine that with contract, financial, technical, and
management support from the 8(a) BD program, the applicant concern is
able to perform 8(a) contracts and possess reasonable prospects for
success in competing in the private sector. To do so, the applicant
concern must show that it has operated and received contracts (either
in the private sector, at the state or local government level, or with
the Federal Government) in its primary industry classification for at
least two full years immediately prior to the date of its 8(a) BD
application, unless a waiver for this requirement is granted pursuant
to paragraph (b) of this section.
* * * * *
0
18. Amend Sec. 124.108 by adding a sentence at the end of paragraph
(e) to read as follows:
Sec. 124.108 What other eligibility requirements apply for
individuals or businesses?
* * * * *
(e) * * * However, a firm will not be ineligible to participate in
the 8(a) BD program if the firm or the affected principals can
demonstrate that the financial obligations owed have been settled and
discharged/forgiven by the Federal Government.
0
19. Amend Sec. 124.109 by revising the second sentence of paragraph
(c)(1) and paragraph (c)(6)(i) 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?
* * * * *
(c) * * *
(1) * * * Where an applicant or participating concern is owned by a
federally recognized tribe, the concern's articles of incorporation,
partnership agreement, limited liability company articles of
organization, or other similar incorporating documents for tribally
incorporated applicants must contain express sovereign immunity waiver
language, or a ``sue and be sued'' clause which designates United
States Federal Courts to be among the courts of competent jurisdiction
for all matters relating to SBA's programs including, but not limited
to, 8(a) BD program participation, loans, and contract performance. * *
*
* * * * *
(6) * * *
(i) It has been in business for at least two years, as evidenced by
income tax returns (individual or consolidated) or financial statements
(either audited, reviewed or in-house as set-forth in Sec. 124.602)
for each of the two previous tax years showing operating revenues in
the primary industry in which the applicant seeks 8(a) BD
certification; or
* * * * *
0
20. Amend Sec. 124.110 by:
0
a. Adding paragraph (d)(3);
0
b. Redesignating paragraphs (e) through (h) as paragraphs (f) through
(i), respectively; and
0
c. Adding a new paragraph (e).
The additions 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?
* * * * *
(d) * * *
(3) The individuals responsible for the management and daily
operations of an NHO-owned concern cannot manage more than two Program
Participants at the same time.
(i) An individual's officer position, membership on the board of
directors, or position as a Native Hawaiian leader does not necessarily
imply that the individual is responsible for the management and daily
operations of a given concern. SBA looks beyond these corporate
formalities and examines the totality of the information submitted by
the applicant to determine which individual(s) manage the actual day-
to-day operations of the applicant concern.
(ii) NHO officers, board members, and/or leaders may control a
holding company overseeing several NHO-owned business concerns,
provided they do not actually control the day-to-day management of more
than two current 8(a) BD Program Participant firms.
(iii) Because an individual may be responsible for the management
and daily business operations of two NHO-owned concerns, the full-time
devotion requirement (Sec. 124.106(a)) does not apply to NHO-owned
applicants and Participants.
(e) For corporate entities, an NHO must unconditionally own at
least 51 percent of the voting stock and at least 51 percent of the
aggregate of all classes of stock. For non-corporate entities, an NHO
must unconditionally own at least a 51 percent interest.
* * * * *
[[Page 55669]]
Sec. 124.111 [Amended]
0
21. Amend Sec. 124.111 by removing the words ``SIC code'' in paragraph
(d) introductory text and adding in their place the words ``NAICS
code.''
0
22. Amend Sec. 124.204 by revising paragraph (a) to read as follows:
Sec. 124.204 How does SBA process applications for 8(a) BD program
admission?
(a) The AA/BD is authorized to approve or decline applications for
admission to the 8(a) BD program.
(1) Except as set forth in paragraph (a)(2) of this section, the
Division of Program Certification and Eligibility (DPCE) will receive,
review and evaluate all 8(a) BD applications.
(2) Where an applicant answers on its electronic application that
it is not a for-profit business (see Sec. Sec. 121.105 of this chapter
and 124.104), that one or more of the individuals upon whom eligibility
is based is not a United States citizen (see Sec. 124.104), that the
applicant or one or more of the individuals upon whom eligibility is
based has previously participated in the 8(a) BD program (see Sec.
124.108(b)), or that the applicant is not an entity-owned business and
has generated no revenues (see Sec. 124.107(a) and (b)(1)(iv)), its
application will be closed automatically and it will be prevented from
completing a full electronic application.
(3) SBA will advise each program applicant within 15 days after the
receipt of an application whether the application is complete and
suitable for evaluation and, if not, what additional information or
clarification is required to complete the application.
(4) SBA will process an application for 8(a) BD program
participation within 90 days of receipt of a complete application
package by the DPCE. Incomplete packages will not be processed. Where
during its screening or 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
23. Amend Sec. 124.302 by:
0
a. Revising paragraph (b)(4);
0
b. Removing paragraph (b)(5); and
0
c. Redesignating paragraphs (b)(6) and (7) as paragraphs (b)(5) and
(6), respectively.
The revision reads as follows:
Sec. 124.302 What is graduation and what is early graduation?
* * * * *
(b) * * *
(4) Current ability to obtain bonding, where applicable;
* * * * *
Sec. 124.303 [Amended]
0
24. Amend Sec. 124.303 by removing ``Sec. 124.507'' in paragraph
(a)(15) and adding in its place ``Sec. 124.509.''
0
25. Amend Sec. 124.304 by:
0
a. Revising paragraph (b); and
0
b. Removing ``Sec. 124.1010'' in paragraph (f)(3) and adding in its
place ``Sec. 124.1002''.
The revision reads as follows:
Sec. 124.304 What are the procedures for early graduation and
termination?
* * * * *
(b) Letter of Intent to Terminate or Graduate Early. (1) Except as
set forth in paragraph (b)(2) of this section, when SBA believes that a
Participant should be terminated or graduated prior to the expiration
of its program term, SBA will notify the concern in writing. The Letter
of Intent to Terminate or Graduate Early will set forth the specific
facts and reasons for SBA's findings, and will notify the concern that
it has 30 days from the date it receives the letter to submit a written
response to SBA explaining why the proposed ground(s) should not
justify termination or early graduation.
(2) Where SBA obtains evidence that a Participant has ceased its
operations, the AA/BD may immediately terminate a concern's
participation in the 8(a) BD program by notifying the concern of its
termination and right to appeal that decision to OHA.
* * * * *
0
26. Amend Sec. 124.402 by adding a sentence to the end of paragraph
(b) to read as follows:
Sec. 124.402 How does a Participant develop a business plan?
* * * * *
(b) * * * Where a sole source 8(a) requirement is offered to SBA on
behalf of a Participant or a Participant is the apparent successful
offeror for a competitive 8(a) requirement and SBA has not yet approved
the Participant's business plan, SBA will approve the Participant's
business plan as part of its eligibility determination prior to
contract award.
* * * * *
0
27. Amend Sec. 124.403 by:
0
a. Adding two sentences after the first sentence in paragraph (a); and
0
b. Removing ``Sec. 124.507'' in paragraph (c)(1) and adding in its
place ``Sec. 124.509''.
The addition reads as follows:
Sec. 124.403 How is a business plan updated and modified?
(a) * * * If there are no changes in a Participant's business plan,
the Participant need not resubmit its business. A Participant must
submit a new or modified business plan only if its business plan has
changed from the previous year. * * *
* * * * *
0
28. Amend Sec. 124.501 by:
0
a. Revising paragraph (b), the introductory text to paragraph (g), the
first sentence of paragraph (h), and the introductory text to paragraph
(k);
0
b. Redesignating paragraph (k)(4) and (5) as paragraphs (k)(7) and (8),
respectively; and
0
c. Adding new paragraphs (k)(4) and (5) and paragraphs (k)(6) and (9).
The revisions and additions read as follows:
Sec. 124.501 What general provisions apply to the award of 8(a)
contracts?
* * * * *
(b) 8(a) contracts may either be sole source awards or awards won
through competition with other Participants. In addition, for multiple
award contracts not set aside for the 8(a) BD program, a procuring
agency may award an 8(a) sole source order or set aside one or more
specific orders to be competed only among eligible 8(a) Participants.
Such an order may be awarded as an 8(a) award where the order was
offered to and accepted by SBA as an 8(a) award and the order specifies
that the limitations on subcontracting (Sec. 124.510) and/or non-
manufacturer rule (Sec. 121.406(b)) requirements apply as appropriate.
A procuring activity cannot restrict an 8(a) competition (for either a
contract or order) to require SBA socioeconomic certifications other
than 8(a) certification (i.e., a competition cannot be limited only to
business concerns that are both 8(a) and HUBZone, 8(a) and women-owned
small business (WOSB), or 8(a) and service-disabled veteran-owned
(SDVO) small business).
* * * * *
(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. Where a joint venture is
the apparent successful offeror in connection with a competitive 8(a)
procurement, SBA will determine whether the 8(a) partner to the joint
[[Page 55670]]
venture is eligible for award, but will not review the joint venture
agreement to determine compliance with Sec. 124. 513 (see Sec.
124.513(e)(1)). In any case in which an 8(a) Participant is determined
to be ineligible, SBA will notify the 8(a) Participant of that
determination. Eligibility is based on 8(a) BD program criteria,
including whether the 8(a) Participant:
* * * * *
(h) For a sole source 8(a) procurement, a concern must be a current
Participant in the 8(a) BD program at the time of award and must
qualify as small for the size standard corresponding to the NAICS code
assigned to the contract or order on the date the contract or order is
offered to the 8(a) BD program. * * *
* * * * *
(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, a Metropolitan Statistical Area (MSA), a contiguous county
(whether in the same or different state), or the geographical area
serviced by a contiguous SBA district office to where the work will be
performed. A Participant with a bona fide place of business within a
state will be deemed eligible for a construction contract anywhere in
that state (even if that state is serviced by more than one SBA
district office). SBA may also determine that a Participant with a bona
fide place of business in the geographic area served by one of several
SBA district offices or another nearby area is eligible for the award
of an 8(a) construction contract.
* * * * *
(4) If a Participant is currently performing a contract in a
specific state, it qualifies as having a bona fide place of business in
that state for one or more additional contracts. The Participant may
not use contract performance in one state to allow it to be eligible
for an 8(a) contract in a contiguous state unless it officially
establishes a bona fide place of business in the location in which it
is currently performing a contract.
(5) A Participant may establish a bona fide place of business
through a full-time employee in a home office.
(6) An individual designated as the full-time employee of the
Participant seeking to establish a bona fide place of business in a
specific geographic location need not be a resident of the state where
he/she is conducting business.
* * * * *
(9) For an 8(a) construction contract requiring work in multiple
locations, a Participant is eligible if:
(i) For a single award contract, the Participant has a bona fide
place of business where a majority of the work is to be performed; and
(ii) For a multiple award contract, the Participant has a bona fide
place of business in any location where work is be performed.
* * * * *
0
29. Amend Sec. 124.502 by revising paragraph (a) to read as follows:
Sec. 124.502 How does an agency offer a procurement to SBA for award
through the 8(a) BD program?
(a) A procuring activity contracting officer indicates his or her
formal intent to award a procurement requirement as an 8(a) contract by
submitting a written offering letter to SBA.
(1) Except as set forth in Sec. 124.503(a)(4)(ii) and (i)(1)(ii),
a procuring activity contracting officer must submit an offering letter
for each intended 8(a) procurement, including follow-on 8(a) contracts,
competitive 8(a) orders issued under non-8(a) multiple award contracts,
and sole source 8(a) orders issued under 8(a) multiple award contracts.
(2) The procuring activity may transmit the offering letter to SBA
by electronic mail, if available, or by facsimile transmission, as well
as by mail or commercial delivery service.
* * * * *
0
30. Amend Sec. 124.503 by:
0
a. Revising the introductory text to paragraph (a) and paragraphs
(a)(4)(ii) and (a)(5);
0
b. Adding two sentences to the end of paragraph (i)(1)(ii); and
0
c. Revising paragraphs (i)(1)(iv) and (i)(2)(ii).
The revisions and additions read as follows:
Sec. 124.503 How does SBA accept a procurement for award through the
8(a) BD program?
(a) Acceptance of the requirement. Upon receipt of the procuring
activity's offer of a procurement requirement, SBA will determine
whether it will accept the requirement for the 8(a) BD program. SBA's
decision whether to accept the requirement will be sent to the
procuring activity in writing within 10 business days of receipt of the
written offering letter if the contract is valued at more than the
simplified acquisition threshold, and within two days of receipt of the
offering letter if the contract is valued at or below the simplified
acquisition threshold, unless SBA requests, and the procuring activity
grants, an extension. SBA and the procuring activity may agree to a
shorter timeframe for SBA's review under a Partnership Agreement
delegating 8(a) contract execution functions to the agency. SBA is not
required to accept any particular procurement offered to the 8(a) BD
program.
* * * * *
(4) * * *
(ii) Where SBA has delegated its 8(a) contract execution functions
to an agency through a signed Partnership Agreement, SBA may authorize
the procuring activity to award an 8(a) contract below the simplified
acquisition threshold without requiring an offer and acceptance of the
requirement for the 8(a) BD program. However, the procuring activity
must request SBA to determine the eligibility of the intended awardee
prior to award. SBA shall review the 8(a) Participant's eligibility and
issue an eligibility determination within two business days after a
request from the procuring activity. If SBA does not respond within
this timeframe, the procuring activity may assume the 8(a) Participant
is eligible and proceed with award. The procuring activity shall
provide a copy of the executed contract to the SBA servicing district
office within fifteen business days of award.
(5) Where SBA does not respond to an offering letter within the
normal 10 business-day time period, the procuring activity may seek
SBA's acceptance through the AA/BD. The procuring activity may assume
that SBA accepts its offer for the 8(a) program if it does not receive
a reply from the AA/BD within 5 business days of his or her receipt of
the procuring activity request.
* * * * *
(i) * * *
(1) * * *
(ii) * * * However, where the order includes work that was
previously performed through another 8(a) contract, the procuring
agency must notify SBA prior to issuing the order that it intends to
procure such specified work through an order under an 8(a) Multiple
Award Contract. Where that work is critical to the business development
of a current Participant that previously performed the work through
another 8(a) contract and that Participant is not a contract holder of
the 8(a) Multiple Award Contract, SBA may request that the procuring
agency fulfill the requirement through a
[[Page 55671]]
competition available to all 8(a) BD Program Participants.
* * * * *
(iv) An agency may issue a sole source award against a Multiple
Award Contract that has been set aside exclusively for 8(a) Program
Participants, partially set-aside for 8(a) BD Program Participants or
reserved solely for 8(a) Program Participants if the required dollar
thresholds for sole source awards are met. Where an agency seeks to
award an order on a sole source basis (i.e., to one particular 8(a)
contract holder without competition among all 8(a) contract holders),
the agency must offer and SBA must accept the order into the 8(a)
program on behalf of the identified 8(a) contract holder.
(A) 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 of the order, qualify as small for the size standard
corresponding to the NAICS code assigned to the order on the date the
order is offered to the 8(a) BD program, and be in compliance with any
applicable competitive business mix target established or remedial
measure imposed by Sec. 124.509. Where the intended sole source
recipient is a joint venture, the 8(a) managing partner to the joint
venture is the concern whose eligibility is considered.
(B) Where an agency seeks to issue a sole source order to a joint
venture, the two-year restriction for joint venture awards set forth in
Sec. 121.103(h) of this chapter does not apply and SBA will not review
and approve the joint venture agreement as set forth in Sec.
124.513(e)(1).
(2) * * *
(ii) The order must be either an 8(a) sole source award or be
competed exclusively among only the 8(a) awardees of the underlying
multiple award contract. Where an agency seeks to issue an 8(a)
competitive order under a multiple award contract that was awarded
under full and open competition or as a small business set-aside, all
eligible 8(a) BD Participants who are contract holders of the
underlying multiple award contract must have the opportunity to compete
for the order. Where an agency seeks to issue an 8(a) competitive order
under the Federal Supply Schedule, an agency can utilize the procedures
set forth in FAR subpart 8.4 (48 CFR part 8, subpart 8.4) to award to
an eligible 8(a) BD Participant. Where an agency seeks to issue an 8(a)
sole source order under a multiple award contract that was awarded
under full and open competition or as a small business set-aside, the
identified 8(a) Participant that is a contract holder of the underlying
multiple award contract must be an eligible Participant on the date of
the issuance of the order;
* * * * *
0
31. Amend Sec. 124.504 by:
0
a. In paragraph (d)(1) introductory text:
0
i. Removing the word ``notify'' and adding in its place ``coordinate
with'' wherever it appears;
0
ii. Removing the word ``SBA'' in the second sentence of paragraph
(d)(1) introductory text and adding in its place the words ``the SBA
District Office servicing the 8(a) incumbent firm and the SBA
Procurement Center Representative assigned to the contracting activity
initiating a non-8(a) procurement action''; and
0
iii. Adding a sentence following the second; and
0
b. Revising paragraph (d)(3).
The addition and revision 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?
* * * * *
(d) * * *
(1) * * * Such notification must identify the scope and dollar
value of any work previously performed through another 8(a) contract
and the scope and dollar value of the contract determined to be new. *
* *
* * * * *
(3) SBA may release a requirement under this paragraph (d) only
where the procuring activity agrees to procure the requirement as a
small business, HUBZone, SDVO small business, or WOSB set-aside or
otherwise identifies a procurement strategy that would emphasize or
target small business participation.
* * * * *
0
32. Amend Sec. 124.506 by revising paragraph (b)(3) and adding two
sentences to the end of paragraph (d) to read as follows:
Sec. 124.506 At what dollar threshold must an 8(a) procurement be
competed among eligible Participants?
* * * * *
(b) * * *
(3) There is no requirement that a procurement must be competed
whenever possible before it can be accepted on a sole source basis for
a Tribally-owned or ANC-owned concern, or a concern owned by an NHO for
DoD contracts. However, a current procurement requirement may not be
removed from competition and awarded to a Tribally-owned, ANC-owned, or
NHO-owned concern on a sole source basis (i.e., a procuring agency may
not evidence its intent to fulfill a requirement as a competitive 8(a)
procurement, through the issuance of a competitive 8(a) solicitation or
otherwise, cancel the solicitation or change its public intent, and
then procure the requirement as a sole source 8(a) procurement to an
entity-owned Participant). A follow-on requirement to one that was
previously awarded as a competitive 8(a) procurement may be offered,
accepted and awarded on a sole source basis to a Tribally-owned or ANC-
owned concern, or a concern owned by an NHO for DoD contracts.
* * * * *
(d) * * * The AA/BD may also accept a requirement that exceeds the
applicable competitive threshold amount for a sole source 8(a) award if
he or she determines that a FAR exception (48 CFR 6.302) to full and
open competition exists (e.g., unusual and compelling urgency). An
agency may not award an 8(a) sole source contract under this paragraph
(d) for an amount exceeding $25,000,000, or $100,000,000 for an agency
of the Department of Defense, unless the contracting officer justifies
the use of a sole source contract in writing and has obtained the
necessary approval under FAR 19.808-1 or the Defense Federal
Acquisition Regulation Supplement (DFARS) at 48 CFR 219.808-1(a).
0
33. Amend Sec. 124.509 by adding paragraphs (d)(1)(i) and (ii) to read
as follows:
Sec. 124.509 What are non-8(a) business activity targets?
* * * * *
(d) * * *
(1) * * *
(i) SBA will determine whether the Participant made good faith
efforts to attain the targeted non-8(a) revenues during the just
completed program year. A Participant may establish that it made good
faith efforts by demonstrating to SBA that:
(A) It submitted offers for one or more non-8(a) procurements
which, if awarded, would have given the Participant sufficient revenues
to achieve the applicable non-8(a) business activity target during its
just completed program year. In such a case, the Participant must
provide copies of offers submitted in response to solicitations and
documentary evidence of its projected revenues under these missed
contract opportunities; or
(B) Individual extenuating circumstances adversely impacted its
[[Page 55672]]
efforts to obtain non-8(a) revenues, including but not limited to: a
reduction in government funding, continuing resolutions and budget
uncertainties, increased competition driving prices down, or having one
or more prime contractors award less work to the Participant than
originally contemplated. Where available, supporting information and
documentation must be included to show how such extenuating
circumstances specifically prevented the Participant from attaining its
targeted non-8(a) revenues during the just completed program year.
(ii) The Participant bears the burden of establishing that it made
good faith efforts to meet its non-8(a) business activity target. SBA's
determination as to whether a Participant made good faith efforts is
final and no appeal may be taken with respect to that decision.
* * * * *
0
34. Amend Sec. 124.513 by adding paragraph (a)(3) to read as follows:
Sec. 124.513 Under what circumstances can a joint venture be awarded
an 8(a) contract?
(a) * * *
(3) A Program Participant cannot be a joint venture partner on more
than one joint venture that submits an offer for a specific 8(a)
contract.
* * * * *
0
35. Amend Sec. 124.515 by revising paragraph (c) 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?
* * * * *
(c) The 8(a) contractor must request a waiver in writing prior to
the change of ownership and control except in the case of death or
incapacity. A request for waiver due to incapacity or death must be
submitted within 60 calendar days after such occurrence.
(1) The Participant seeking to change ownership or control must
specify the grounds upon which it requests a waiver, and must
demonstrate that the proposed transaction would meet such grounds.
(2) If a Participant seeks a waiver based on the impairment of the
agency's objectives under paragraph (b)(4) of this section, it must
identify and provide a certification from the procuring agency relating
to each 8(a) contract for which a waiver is sought.
* * * * *
0
36. Amend Sec. 124.521 by revising paragraph (e)(2) to read as
follows:
Sec. 124.521 What are the requirements for representing 8(a) status,
and what are the penalties for misrepresentation?
* * * * *
(e) * * *
(2) For the purposes of 8(a) contracts (including Multiple Award
Contracts) with durations of more than five years (including options),
a contracting officer must verify in SAM.gov (or successor system)
whether a business concern continues to be an eligible 8(a) Participant
no more than 120 days prior to the end of the fifth year of the
contract, and no more than 120 days prior to exercising any option
thereafter. Where a concern fails to qualify or will no longer qualify
as an eligible 8(a) Participant at any point during the 120 days prior
to the end of the fifth year of the contract, the option shall not be
exercised.
* * * * *
Sec. 124.603 [Amended]
0
37. Amend Sec. 124.603 by removing the words ``graduates or is
terminated from the program'' and adding in their place the words
``leaves the 8(a) BD program (either through the expiration of the
firm's program term, graduation, or termination)''.
0
38. Revise Sec. 124.604 to read as follows:
Sec. 124.604 Report of benefits for firms owned by Tribes, ANCs,
NHOs, and CDCs.
(a) Each entity having one or more Participants in the 8(a) BD
program must establish a Community Benefits Plan that outlines the
anticipated approach it expects to deliver to strengthen its Native or
underserved community.
(b) As part of its annual review submission (see Sec. 124.602),
each Participant owned by a Tribe, ANC, NHO, or CDC must submit to SBA
information showing how the Tribe, ANC, NHO, or CDC has provided
benefits to the Tribal or native members and/or the Tribal, native, or
other community due to the Tribe's/ANC's/NHO's/CDC's participation in
the 8(a) BD program through one or more firms, whether the benefits
provided meet the benefits target set forth in its Community Benefits
Plan, and how the benefits provided directly impacted the native or
underserved community. This data includes information relating to
funding cultural programs, employment assistance, jobs, scholarships,
internships, subsistence activities, and other services provided by the
Tribe, ANC, NHO, or CDC to the affected community.
0
39. Add Sec. 124.1002 to read as follows:
Sec. 124.1002 Reviews and protests of SDB status.
(a) SBA may initiate the review of SDB status on any firm that has
represented itself to be an SDB on a prime contract (for goaling
purposes or otherwise) or subcontract to a Federal prime contract
whenever SBA receives credible information calling into question the
SDB status of the firm.
(b) Requests for an SBA review of SDB status may be forwarded to
the Small Business Administration, Associate Administrator for Business
Development (AA/BD), 409 Third Street SW, Washington, DC 20416.
(c) The contracting officer or the SBA may protest the SDB status
of a proposed subcontractor or subcontract awardee. Other interested
parties may submit information to the contracting officer or the SBA in
an effort to persuade the contracting officer or the SBA to initiate a
protest. Such protests, in order to be considered timely, must be
submitted to the SBA prior to completion of performance by the intended
subcontractor.
(1) SBA will request relevant information from the protested
concern pertaining to:
(i) The social and economic disadvantage of the individual(s)
claiming to own and control the protested concern;
(ii) The ownership and control of the protested concern; and
(iii) The size of the protested concern.
(2) The concern whose disadvantaged status is under consideration
has the burden of establishing that it qualifies as an SDB.
(3) Where SBA requests specific information and the concern does
not submit it, SBA may draw adverse inferences against the concern.
(4) SBA will base its SDB determination upon the record, including
reasonable inferences from the record, and will state in writing the
basis for its findings and conclusions.
(d) Where SBA determines that a subcontractor does not qualify as
an SDB, the prime contractor must not include subcontracts to that
subcontractor as subcontracts to an SDB in its subcontracting reports,
starting from the time that the protest was decided.
PART 125--GOVERNMENT CONTRACTING PROGRAMS
0
40. The authority citation for part 125 continues to read as follows:
Authority: 15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657b,
657(f), and 657r.
0
41. Amend Sec. 125.1 by:
[[Page 55673]]
0
a. Revising the definition of ``Contract bundling, bundled requirement,
bundled contract, or bundling'';
0
b. Removing the words ``commercial items'' from the definition of
``Cost of materials'' and adding in their place the words ``commercial
products'';
0
c. Adding definitions of ``Small business concerns owned and controlled
by socially and economically disadvantaged individuals'' and ``Socially
and economically disadvantaged individuals'' in alphabetical order; and
0
d. Revising the definition of ``Substantial bundling''.
The revisions and additions read as follows:
Sec. 125.1 What definitions are important to SBA's Government
Contracting Programs?
* * * * *
Contract bundling, bundled requirement, bundled contract, or
bundling means the consolidation of two or more procurement
requirements for goods or services previously provided or performed
under separate smaller contracts into a solicitation of offers for a
single contract, a Multiple Award Contract, or Blanket Purchase
Agreement that is likely to be unsuitable for award to a small business
concern (but may be suitable for award to a small business with a Small
Business Teaming Arrangement) due to:
(1) The diversity, size, or specialized nature of the elements of
the performance specified;
(2) The aggregate dollar value of the anticipated award;
(3) The geographical dispersion of the contract performance sites;
or
(4) Any combination of the factors described in paragraphs (1),
(2), and (3) of this definition.
* * * * *
Small business concerns owned and controlled by socially and
economically disadvantaged individuals means, for both SBA's
subcontracting assistance program in 15 U.S.C. 637(d) and for the goals
described in 15 U.S.C. 644(g), a small business concern unconditionally
and directly owned by and controlled by one or more socially and
economically disadvantaged individuals.
Socially and economically disadvantaged individuals, for both SBA's
subcontracting assistance program in 15 U.S.C. 637(d) and for the goals
described in 15 U.S.C. 644(g), means:
(1) Individuals who meet the criteria for social disadvantage in
Sec. 124.103(a) through (c) of this chapter and the criteria for
economic disadvantage in Sec. 124.104(a) and (c) of this chapter;
(2) Indian tribes and Alaska Native Corporations that satisfy the
ownership, control, and disadvantage criteria in Sec. 124.109 of this
chapter;
(3) Native Hawaiian Organizations that satisfy the ownership,
control, and disadvantage criteria in Sec. 124.110 of this chapter; or
(4) Community Development Corporations that satisfy the ownership
and control criteria in Sec. 124.111 of this chapter.
* * * * *
Substantial bundling means any bundling that meets or exceeds the
following dollar amounts (if the acquisition strategy contemplates
multiple award contracts, orders placed under unrestricted multiple
award contracts, or a Blanket Purchase Agreement issued against a GSA
Schedule contract or a task or delivery order contract awarded by
another agency, these thresholds apply to the cumulative estimated
value of the Multiple Award Contracts, orders, or Blanket Purchase
Agreement, including options):
(1) $8.0 million or more for the Department of Defense;
(2) $6.0 million or more for the National Aeronautics and Space
Administration, the General Services Administration, and the Department
of Energy; and
(3) $2.5 million or more for all other agencies.
0
42. Amend Sec. 125.2 by adding a sentence after the second sentence in
paragraph (d)(2)(ii) introductory text and revising paragraph (d)(3)(i)
to read as follows:
Sec. 125.2 What are SBA's and the procuring agency's
responsibilities when providing contracting assistance to small
businesses?
* * * * *
(d) * * *
(2) * * *
(ii) * * * This analysis must include quantification of the
reduction or increase in price of the proposed bundled strategy as
compared to the cumulative value of the separate contracts. * * *
* * * * *
(3) * * *
(i) The analysis for bundled requirements set forth in paragraphs
(d)(2)(i) and (ii) of this section;
* * * * *
0
43. Amend Sec. 125.3 by:
0
a. Revising paragraph (a)(1)(i)(B);
0
b. Removing the words ``bank fees;'' from paragraph (a)(1)(iii);
0
c. Removing the words ``commercial item'' in paragraph (c)(1)(i) and
adding in their place the words ``commercial product or commercial
service'';
0
d. Revising paragraph (c)(1)(iv) and the first sentence of paragraph
(c)(1)(viii);
0
e. Removing the words ``commercial items'' in paragraph (c)(1)(x) and
adding in their place the words ``commercial products or commercial
services''; and
0
f. Revising paragraph (c)(2).
The revisions read as follows:
Sec. 125.3 What types of subcontracting assistance are available to
small businesses?
(a) * * *
(1) * * *
(i) * * *
(B) Purchases from or sales to a corporation, company, joint
venture, or subdivision that is an affiliate of the prime contractor or
subcontractor are not included in the subcontracting base. Subcontracts
by first-tier affiliates shall be treated as subcontracts of the prime.
* * * * *
(c) * * *
(1) * * *
(iv) When developing an individual subcontracting plan (also called
individual contract plan), the contractor must include indirect costs
in its subcontracting goals. These costs must be included in the
Individual Subcontract Report (ISR) in www.esrs.gov (eSRS) or
Subcontract Reports for Individual Contracts (the paper SF-294, if
authorized). These costs must also be included on a prorated basis in
the Summary Subcontracting Report (SSR) in the eSRS system. A
contractor authorized to use a commercial subcontracting plan must
include all indirect costs in its subcontracting goals and in its SSR;
* * * * *
(viii) The contractor must provide pre-award written notification
to unsuccessful small business offerors on all competitive subcontracts
over the simplified acquisition threshold (as defined in the FAR at 48
CFR 2.101). * * *
* * * * *
(2) A commercial plan, also referred to as an annual plan or
company-wide plan, is the preferred type of subcontracting plan for
contractors furnishing commercial products and commercial services. A
commercial plan covers the offeror's fiscal year and applies to all of
the commercial products and commercial services sold by either the
entire company or a portion thereof (e.g., division, plant, or product
line). Once approved, the plan remains in effect during the federal
fiscal year for all Federal Government
[[Page 55674]]
contracts in effect during that period. The contracting officer of the
agency that originally approved the commercial plan will exercise the
functions of the contracting officer on behalf of all agencies that
award contracts covered by the plan.
* * * * *
0
44. Amend Sec. 125.6 by:
0
a. Removing ``Sec. 121.103(h)(4)'' in paragraph (c) and adding in its
place ``Sec. 121.103(h)(3)'';
0
b. In paragraph (d) introductory text:
0
i. Revising the first sentence; and
0
ii. Adding a sentence after the first sentence;
0
c. Redesignating paragraphs (e) through (g) as paragraphs (f) through
(h), respectively; and
0
d. Adding a new paragraph (e).
The revision and additions read as follows:
Sec. 125.6 What are the prime contractor's limitations on
subcontracting?
* * * * *
(d) * * * The period of time used to determine compliance for a
total or partial set-aside contract will generally be the base term and
then each subsequent option period. However, for a multi-agency set
aside contract where more than one agency can issue orders under the
contract, the ordering agency must use the period of performance for
each order to determine compliance. * * *
* * * * *
(e) Past performance evaluation. Where a contracting officer
determines that a contractor has not met the applicable limitation on
subcontracting requirement at the conclusion of contract performance,
the contracting officer may not give a satisfactory or higher past
performance rating for the appropriate factor or subfactor in
accordance with the FAR at 48 CFR 42.1503.
* * * * *
Sec. 125.8 [Amended]
0
45. Amend Sec. 125.8 by:
0
a. Removing ``Sec. 121.103(h)(3)'' in paragraph (a) and adding in its
place ``Sec. 121.103(h)(4)''; and
0
b. Removing ``paragraph (d)'' in paragraph (b)(2)(vii) wherever it
appears and adding in its place ``paragraph (c)''.
0
46. Amend Sec. 125.9 by:
0
a. Revising paragraph (b)(3)(ii);
0
b. Redesignating paragraphs (e)(1)(ii) and (iii) as paragraphs
(e)(1)(iii) and (iv), respectively; and
0
c. Adding a new paragraph (e)(1)(ii).
The revision and addition read as follows:
Sec. 125.9 What are the rules governing SBA's small business mentor-
prot[eacute]g[eacute] program?
* * * * *
(b) * * *
(3) * * *
(ii) A mentor (including in the aggregate a parent company and all
of its subsidiaries) generally cannot have more than three
prot[eacute]g[eacute]s at one time.
(A) 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 prot[eacute]g[eacute]s that a mentor
can have at one time.
(B) Where a mentor purchases another business entity that is also
an SBA-approved mentor of one or more prot[eacute]g[eacute] small
business concerns and the purchasing mentor commits to honoring the
obligations under the seller's mentor-prot[eacute]g[eacute]
agreement(s), that entity may have more than three
prot[eacute]g[eacute]s. In such a case, the entity could not add
another prot[eacute]g[eacute] until it fell below three in total.
* * * * *
(e) * * *
(1) * * *
(ii) Identify the specific entity or entities that will provide
assistance to or participate in joint ventures with the
prot[eacute]g[eacute] where the mentor is a parent or subsidiary
concern;
* * * * *
0
47. Amend Sec. 125.18 by:
0
a. Adding a sentence to the end of paragraph (b) introductory text; and
0
b. Removing ``Sec. 121.103(h)(4)'' in paragraph (f)(1) and adding in
its place ``Sec. 121.103(h)(3)''.
The addition reads as follows:
Sec. 125.18 What requirements must an SDVO SBC meet to submit an
offer on a contract?
* * * * *
(b) * * * ASDVO SBC cannot be a joint venture partner on more than
one joint venture that submits an offer for a specific contract set-
aside or reserved for SDVOs.
* * * * *
0
48. Amend Sec. 125.22 by adding paragraph (d) to read as follows:
Sec. 125.22 When may a contracting officer set-aside a procurement
for SDVO SBCs?
* * * * *
(d) Restricting competition. A procuring activity cannot restrict
an SDVO SBC competition (for either a contract or order) to require SBA
socioeconomic certifications other than SDVO SBC certification (i.e., a
competition cannot be limited only to business concerns that are both
SDVO SBC and 8(a), SDVO SBC and HUBZone, or SDVO SBC and WOSB).
0
49. Amend Sec. 125.28 by adding a sentence to the end of paragraph
(d)(2) and revising paragraph (e) to read as follows:
Sec. 125.28 What are the requirements for filing a service-disabled
veteran-owned status protest?
* * * * *
(d) * * *
(2) * * * Where the identified low bidder is determined to be
ineligible for award, a protest of any other identified low bidder must
be received prior to the close of business on the 5th business day
after the contracting officer has notified interested parties of the
identity of that low bidder.
* * * * *
(e) Referral to SBA. The contracting officer must forward to SBA
any non-premature SDVO status protest received, notwithstanding whether
he or she believes it is sufficiently specific or timely. The
contracting officer must send all protests, along with a referral
letter, directly to the Director, Office of Government Contracting,
U.S. Small Business Administration, 409 Third Street SW, Washington, DC
20416 or by fax to (202) 205-6390, marked Attn: Service-Disabled
Veteran Status Protest.
(1) The contracting officer's referral letter must include
information pertaining to the solicitation that may be necessary for
SBA to determine timeliness and standing, including: the solicitation
number; the name, address, telephone number, and facsimile number of
the contracting officer; whether the contract was sole source or set-
aside; whether the protester submitted an offer; whether the protested
concern was the apparent successful offeror; when the protested concern
submitted its offer (i.e., made the self-representation that it was a
SDVO SBC); whether the procurement was conducted using sealed bid or
negotiated procedures; the bid opening date, if applicable; when the
protest was submitted to the contracting officer; when the protester
received notification about the apparent successful offeror, if
applicable; and whether a contract has been awarded.
(2) Where a protestor alleges that an SDVO SBC is unduly reliant on
one or more subcontractors that are not SDVO SBCs or a subcontractor
that is not an SDVO SBC will perform primary and vital requirements of
the contract, the D/GC or designee will refer the matter to the
Government Contracting Area Office serving the geographic area in which
the principal office of the SDVO SBC is
[[Page 55675]]
located for a determination as to whether the ostensible subcontractor
rule has been met.
0
50. Amend Sec. 125.30 by revising paragraph (g)(4) to read as follows:
Sec. 125.30 How will SBA process an SDVO protest?
* * * * *
(g) * * *
(4) A concern found to be ineligible may not submit an offer as an
SDVO SBC on a future procurement unless it demonstrates to SBA's
satisfaction that it has overcome the reasons for its ineligibility set
forth in the protest (e.g., it changes its ownership to satisfy the
definition of an SDVO SBC set forth in Sec. 125.8) and SBA issues a
decision to this effect. If a concern found to be ineligible submits an
offer, it may be in violation of criminal laws, including section 16(d)
of the Small Business Act, 15 U.S.C. 645(d). If the concern has already
certified itself as an SDVO SBC on a pending procurement, the concern
must immediately inform the contracting officer for the procuring
agency of the adverse SDVO SBC determination.
(i) Not later than two days after SBA's determination finding a
concern ineligible as an SDVO SBC, such concern must update its SDVO
SBC status in the System for Award Management (or any successor
system).
(ii) If a business concern fails to update its SDVO SBC status in
the System for Award Management (or any successor system) in response
to decertification, SBA will make such update within two days of the
business's failure to do so.
PART 126--HUBZONE PROGRAM
0
51. 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; Pub.
L. 111-240, 124 Stat. 2504.
0
52. Amend Sec. 126.306 by adding paragraphs (b)(1) and (2) to read as
follows:
Sec. 126.306 How will SBA process an application for HUBZone
certification?
* * * * *
(b) * * *
(1) If a concern submits inconsistent information that results in
SBA's inability to determine the concern's compliance with any of the
HUBZone eligibility requirements, SBA will decline the concern's
application.
(2) If, during the processing of an application, SBA determines
that an applicant has knowingly submitted false information, regardless
of whether correct information would cause SBA to deny the application,
and regardless of whether correct information was given to SBA in
accompanying documents, SBA will deny the application.
* * * * *
0
53. Amend Sec. 126.503 by revising paragraph (a)(2) and adding
paragraphs (c) and (d) to read as follows:
Sec. 126.503 What happens if SBA is unable to verify a HUBZone small
business concern's eligibility or determines that a concern is no
longer eligible for the program?
(a) * * *
(2) SBA's decision. SBA will determine whether the HUBZone small
business concern remains eligible for the program within 90 calendar
days after receiving all requested information, when practicable. The
D/HUB will provide written notice to the concern stating the basis for
the determination.
(i) If SBA finds that the concern is not eligible, the D/HUB will
decertify the concern and remove its designation as a certified HUBZone
small business concern in DSBS (or successor system) within four
business days of the determination.
(ii) If SBA finds that the concern is eligible, the concern will
continue to be designated as a certified HUBZone small business concern
in DSBS (or successor system).
* * * * *
(c) Decertification due to submission of false information. If,
after admission to the HUBZone program, SBA discovers that false
information has been knowingly submitted by a certified HUBZone small
business concern, SBA will propose the firm for decertification
pursuant to the procedures described in paragraph (a) of this section.
(d) Effect of decertification. Once SBA has decertified a concern,
the concern cannot self-certify as a HUBZone small business concern. If
a concern does so, it may be in violation of criminal laws, including
section 16(d) of the Small Business Act, 15 U.S.C. 645(d). If the
concern has already certified as a HUBZone small business on a pending
procurement, the concern must immediately inform the contracting
officer for the procuring agency of the adverse eligibility
determination. A contracting officer shall not award a HUBZone contract
to a concern that the D/HUB has determined is not an eligible HUBZone
small business concern for the procurement in question.
0
54. Amend Sec. 126.601 by revising paragraph (d) to read as follows:
Sec. 126.601 What additional requirements must a certified HUBZone
small business concern meet to submit an offer on a HUBZone contract?
* * * * *
(d) Where a subcontractor that is not a certified HUBZone small
business will perform the primary and vital requirements of a HUBZone
contract, or where a HUBZone prime contractor is unduly reliant on one
or more small businesses that are not HUBZone-certified to perform the
HUBZone contract, the prime contractor is not eligible for award of
that HUBZone contract.
(1) When the subcontractor qualifies as small for the size standard
assigned to the procurement, this issue may be grounds for a HUBZone
status protest, as described in Sec. 126.801. When the subcontractor
is alleged to be other than small for the size standard assigned to the
procurement, this issue may be grounds for a size protest under the
ostensible subcontractor rule, as described at Sec. 121.103(h)(3) of
this chapter.
(2) SBA will find that a prime HUBZone contractor is performing the
primary and vital requirements of a contract or order, and is not
unduly reliant on one or more subcontractors that are not HUBZone-
certified, where the prime contractor can demonstrate that it, together
with any subcontractors that are certified HUBZone small business
concerns, will meet the limitations on subcontracting provisions set
forth in Sec. 125.6 of this chapter.
0
55. Add Sec. 126.609 to read as follows:
Sec. 126.609 Can a HUBZone competition be limited to small business
concerns having additional socioeconomic certifications?
A procuring activity cannot restrict a HUBZone competition (for
either a contract or order) to require SBA socioeconomic certifications
other than HUBZone certification (i.e., a competition cannot be limited
only to business concerns that are both HUBZone and 8(a), HUBZone and
WOSB, or HUBZone and SDVO).
0
56. Amend Sec. 126.616 by revising paragraph (a) to read as follows:
Sec. 126.616 What requirements must a joint venture satisfy to
submit an offer and be eligible to perform on a HUBZone contract?
(a) General. A certified HUBZone small business concern may enter
into a joint venture agreement with one or more other small business
concerns, or with an SBA-approved mentor authorized by Sec. 125.9 of
this chapter, for the purpose of submitting an offer for a HUBZone
contract.
(1) The joint venture itself need not be a certified HUBZone small
business
[[Page 55676]]
concern, but the joint venture should be designated as a HUBZone joint
venture in SAM (or successor system) with the HUBZone-certified joint
venture partner identified.
(2) A certified HUBZone small business concern cannot be a joint
venture partner on more than one joint venture that submits an offer
for a specific contract set-aside or reserved for certified HUBZone
small business concerns.
* * * * *
Sec. 126.618 [Amended]
0
57. Amend Sec. 126.618 by removing ``Sec. 121.103(h)(4)'' in
paragraph (c)(2) and adding in its place ``Sec. 121.103(h)(3)''.
0
58. Amend Sec. 126.801 by:
0
a. Revising paragraph (b);
0
b. Adding paragraph (d) introductory text; and
0
c. Revising paragraphs (d)(1) and (2) and (e).
The revisions and additions read as follows:
Sec. 126.801 How does an interested party file a HUBZone status
protest?
* * * * *
(b) Format and specificity. (1) Protests must be in writing and
must state all specific grounds as to why the protestor believes the
protested concern should not qualify as a certified HUBZone small
business concern. Specifically, a protestor must explain why:
(i) The protested concern did not meet the HUBZone eligibility
requirements set forth in Sec. 126.200 at the time the concern applied
for HUBZone certification or on the anniversary date of such
certification;
(ii) The protested joint venture does not meet the requirements set
forth in Sec. 126.616;
(iii) The protested concern, as a HUBZone prime contractor, is
unduly reliant on one or more small subcontractors that are not
HUBZone-certified, or subcontractors that are not HUBZone-certified
will perform the primary and vital requirements of the contract; and/or
(iv) The protested concern, on the anniversary date of its initial
HUBZone certification, failed to attempt to maintain compliance with
the 35% HUBZone residency requirement during the performance of a
HUBZone contract.
(2) Specificity requires more than conclusions of ineligibility. A
protest merely asserting that the protested concern did not qualify as
a HUBZone small business concern at the time of its initial
certification or its most recent annual recertification, without
setting forth specific facts or allegations, is insufficient and will
be dismissed.
(3) A protest asserting that a concern was not in compliance with
the HUBZone principal office and/or 35% HUBZone residency requirements
at the time of offer or award will be dismissed.
(4) For a protest filed against a HUBZone joint venture, the
protest must state all specific grounds as to why:
(i) The HUBZone small business partner to the joint venture did not
meet the HUBZone eligibility requirements set forth in Sec. 126.200 at
the time the concern applied for certification or on the anniversary of
such certification; and/or
(ii) The protested HUBZone joint venture does not meet the
requirements set forth in Sec. 126.616.
(5) For a protest alleging that the prime contractor has an
ostensible subcontractor, the protest must state all specific grounds
as to why:
(i) The protested concern is unduly reliant on one or more small
subcontractors that are not HUBZone-certified; or
(ii) One or more subcontractors that are not HUBZone-certified will
perform the primary and vital requirements of the contract.
(6) For a protest alleging that the protested concern failed to
attempt to maintain compliance with the 35% HUBZone residency
requirement during the performance of a HUBZone contract, the protest
must state all specific grounds explaining why the protester believes
the protested firm did not have at least 20% of its employees residing
in a HUBZone on the anniversary of its HUBZone certification.
* * * * *
(d) * * * A protest challenging the HUBZone status of an apparent
successful offeror on a HUBZone contract must be timely, or it will be
dismissed.
(1) For negotiated acquisitions, an interested party must submit
its protest by close of business on the fifth business day after
notification by the contracting officer of the apparent successful
offeror.
(i) Except for an order or Blanket Purchase Agreement issued under
a Federal Supply Schedule contact, for an order or Agreement that is
set-aside for certified HUBZone small business concerns under a
multiple award contract that was not itself set aside or reserved for
certified HUBZone small business concerns, an interested party must
submit its protest by close of business on the fifth business day after
notification by the contracting officer of the intended awardee of the
order or Agreement.
(ii) Where a contracting officer has required offerors for a
specific order under a multiple award HUBZone contract to recertify
their HUBZone status, an interested party must submit its protest by
close of business on the fifth business day after notification by the
contracting officer of the intended awardee of the order.
(2) For sealed bid acquisitions:
(i) An interested party must submit its protest by close of
business on the fifth business day after bid opening, or where the
identified low bidder is determined to be ineligible for award, by
close of business on the fifth business day after the contracting
officer has notified interested parties of the identity of that low
bidder; or
(ii) If the price evaluation preference was not applied at the time
of bid opening, an interested party must submit its protest by close of
business on the fifth business day after the date of identification of
the apparent successful low bidder.
* * * * *
(e) Referral to SBA. The contracting officer must forward to SBA
any non-premature HUBZone status protest received, notwithstanding
whether he or she believes it is sufficiently specific or timely. The
contracting officer must send the protest, along with a referral
letter, to the D/HUB by email to [email protected].
(1) The contracting officer's referral letter must include
information pertaining to the solicitation that may be necessary for
SBA to determine timeliness and standing, including the following:
(i) The solicitation number;
(ii) The name, address, telephone number, email address, and
facsimile number of the contracting officer;
(iii) The type of HUBZone contract at issue (i.e., HUBZone set-
aside; HUBZone sole source; full and open competition with a HUBZone
price evaluation preference applied; reserve for HUBZone small business
concerns under a Multiple Award Contract; or order set-aside for
HUBZone small business concerns against a Multiple Award Contract);
(iv) If the procurement was conducted using full and open
competition with a HUBZone price evaluation preference, whether the
protester's opportunity for award was affected by the preference;
(v) If the procurement was a HUBZone set-aside, whether the
protester submitted an offer;
(vi) Whether the protested concern was the apparent successful
offeror;
(vii) Whether the procurement was conducted using sealed bid or
negotiated procedures;
[[Page 55677]]
(viii) If the procurement was conducted using sealed bid
procedures, the bid opening date;
(ix) The date the protester was notified of the apparent successful
offeror;
(x) The date the protest was submitted to the contracting officer;
(xi) The date the protested concern submitted its initial offer or
bid to the contracting activity; and
(xii) Whether a contract has been awarded, and if applicable, the
date of contract award and contract number.
(2) Where a protestor alleges that a certified HUBZone small
business concern is unduly reliant on one or more subcontractors that
are not certified HUBZone small business concerns or a subcontractor
that is not a certified HUBZone small business concern will perform
primary and vital requirements of the contract, the D/HUB will refer
the matter to the Government Contracting Area Office serving the
geographic area in which the principal office of the certified HUBZone
small business concern is located for a determination as to whether the
ostensible subcontractor rule has been met.
PART 127--WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM
0
59. 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.
0
60. Amend Sec. 127.102 by removing the definition of ``WOSB'' and
adding the definition of ``Women-Owned Small Business (WOSB)'' in
alphabetical order to read as follows:
Sec. 127.102 What are the definitions of the terms used in this
part?
* * * * *
Women-Owned Small Business (WOSB) means a concern that is small
pursuant to part 121 of this chapter, and that is at least 51 percent
owned and controlled by one or more women who are citizens in
accordance with Sec. Sec. 127.200, 127.201, and 127.202. This
definition applies to any certification as to a concern's status as a
WOSB, not solely to those certifications relating to a WOSB contract.
* * * * *
0
61. Amend Sec. 127.200 by revising paragraphs (a)(1) and (b)(1) to
read as follows:
Sec. 127.200 What are the requirements a concern must meet to
qualify as an EDWOSB or WOSB?
(a) * * *
(1) A small business as defined in part 121 of this chapter for the
size standard corresponding to any NAICS code under which it currently
conducts business activities; and
* * * * *
(b) * * *
(1) A small business as defined in part 121 of this chapter for the
size standard corresponding to any NAICS code under which it currently
conducts business activities; and
* * * * *
0
62. Amend Sec. 127.202 by revising the first sentence of paragraph (b)
and paragraph (c) to read as follows:
Sec. 127.201 What are the requirements for ownership of an EDWOSB
and WOSB?
* * * * *
(b) * * * To be considered unconditional, the ownership must not be
subject to any conditions, executory agreements, voting trusts, or
other arrangements that cause or potentially cause ownership benefits
to go to another (other than after death or incapacity). * * *
(c) Limitation on outside obligations. The woman or economically-
disadvantaged woman who holds the highest officer position of the
business concern may not engage in outside obligations that prevent her
from devoting sufficient time and attention to the business concern to
control its management and daily operations. Where a woman or
economically disadvantaged woman claiming to control a business concern
devotes fewer hours to the business than its normal hours of operation,
there is a rebuttable presumption that she does not control the
business concern. In such a case, the woman must provide evidence that
she has ultimate managerial and supervisory control over both the long-
term decision making and day-to-day management and administration of
the business.
* * * * *
0
63. Amend Sec. 127.202 by revising paragraph (c) to read as follows:
Sec. 127.202 What are the requirements for control of an EDWOSB or
WOSB?
* * * * *
(c) Limitation on outside obligations. The woman or economically-
disadvantaged woman who holds the highest officer position of the
business concern may not engage in outside obligations that prevent her
from devoting sufficient time and attention to the business concern to
control its management and daily operations. Where a woman or
economically disadvantaged woman claiming to control a business concern
devotes fewer hours to the business than its normal hours of operation,
there is a rebuttable presumption that she does not control the
business concern. In such a case, the woman must provide evidence that
she has ultimate managerial and supervisory control over both the long-
term decision making and day-to-day management and administration of
the business.
* * * * *
0
64. Amend Sec. 127.304 by adding paragraphs (c)(1) and (2) to read as
follows:
Sec. 127.304 How is an application for certification processed?
* * * * *
(c) * * *
(1) If a concern submits inconsistent information that results in
SBA's inability to determine the concern's compliance with any of the
WOSB or EDWOSB eligibility requirements, SBA will decline the concern's
application.
(2) If, during the processing of an application, SBA determines
that an applicant has knowingly submitted false information, regardless
of whether correct information would cause SBA to deny the application,
and regardless of whether correct information was given to SBA in
accompanying documents, SBA will deny the application.
* * * * *
0
65. Revise Sec. 127.400 to read as follows:
Sec. 127.400 How does a concern maintain its WOSB or EDWOSB
certification?
Any concern seeking to remain a certified WOSB or EDWOSB must
undergo a program examination every three years.
(a) SBA or a third-party certifier will conduct a program
examination three years after the concern's initial WOSB or EDWOSB
certification (whether by SBA or a third-party certifier) or three
years after the date of the concern's last program examination,
whichever date is later.
Example 1 to paragraph (a). Concern A is certified by SBA to be
eligible for the WOSB Program on March 31, 2023. Concern A is
considered a certified WOSB that is eligible to receive WOSB contracts
(as long as it is small for the size standard corresponding to the
NAICS code assigned to the contract) through March 30, 2026. On April
22, 2025, after Concern A is identified as the apparent successful
offeror on a WOSB set-aside contract, its status as an eligible WOSB is
protested. On May 15, 2025, Concern A receives a positive determination
from SBA confirming that it is an eligible WOSB. Concern A's new
certification date is May 15, 2025.
[[Page 55678]]
Concern A is now considered a certified WOSB that is eligible to
receive WOSB contracts (as long as it is small for the size standard
corresponding to the NAICS code assigned to the contract) through May
14, 2028.
(b) The concern must either request a program examination from SBA
or notify SBA that it has requested a program examination from a third-
party certifier no later than 30 days prior to its certification
anniversary. Failure to do so will result in the concern being
decertified.
Example 1 to paragraph (b). Concern B is certified by a third-party
certifier to be eligible for the WOSB Program on July 20, 2023. Concern
B is considered a certified WOSB that is eligible to receive WOSB
contracts (as long as it is small for the size standard corresponding
to the NAICS code assigned to the contract) through July 19, 2026.
Concern B must request a program examination from SBA, or notify SBA
that it has requested a program examination from a third-party
certifier, by June 20, 2026, to continue participating in the WOSB
Program after July 19, 2026.
0
66. Amend Sec. 127.405 by redesignating paragraph (c) as paragraph (e)
and adding paragraph (c) and paragraph (d) to read as follows:
Sec. 127.405 What happens if SBA determines that the concern is no
longer eligible for the program?
* * * * *
(c) Decertification in response to adverse protest decision. SBA
will decertify a concern found to be ineligible during a WOSB/EDWOSB
status protest.
(d) Effect of decertification. Once SBA has decertified a concern,
the concern cannot self-certify as a WOSB or EDWOSB, as applicable, for
any WOSB or EDWOSB contract. If a concern does so, it may be in
violation of criminal laws, including section 16(d) of the Small
Business Act, 15 U.S.C. 645(d). If the concern has already certified
itself as a WOSB or EDWOSB on a pending procurement, the concern must
immediately inform the contracting officer for the procuring agency of
its decertification.
(1) Not later than two days after the date on which SBA decertifies
a business concern, such concern must update its WOSB/EDWOSB status in
the System for Award Management (or any successor system).
(2) If a business concern fails to update its WOSB/EDWOSB status in
the System for Award Management (or any successor system) in response
to decertification, SBA will make such update within two days of the
business's failure to do so.
* * * * *
0
67. Amend Sec. 127.503 by redesignating paragraphs (e) through (g) as
paragraphs (f) through (h), respectively, and adding a new paragraph
(e) to read as follows:
Sec. 127.503 When is a contracting officer authorized to restrict
competition or award a sole source contract or order under this part?
* * * * *
(e) Competitions requiring additional socioeconomic certifications.
A procuring activity cannot restrict a WOSB or EDWOSB competition (for
either a contract or order) to require SBA socioeconomic certifications
other than WOSB/EDWOSB certification (i.e., a competition cannot be
limited only to business concerns that are both WOSB/EDWOSB and 8(a),
WOSB/EDWOSB and HUBZone, or WOSB/EDWOSB and service-disabled veteran
owned (SDVO)).
* * * * *
Sec. 127.504 [Amended]
0
68. Amend Sec. 127.504 by removing ``Sec. 121.103(h)(2)'' in
paragraph (g)(1) and adding in its place ``Sec. 121.103(h)(3)''.
0
69. Amend Sec. 127.506 by adding paragraph (a)(3) to read as follows:
Sec. 127.506 May a joint venture submit an offer on an EDWOSB or
WOSB requirement?
* * * * *
(a) * * *
(3) A WOSB or EDWOSB cannot be a joint venture partner on more than
one joint venture that submits an offer for a specific contract set-
aside or reserved for WOSBs or EDWOSBs.
* * * * *
0
70. Amend Sec. 127.603 by adding a sentence to the end of paragraph
(c)(2) and revising paragraph (d) to read as follows:
Sec. 127.603 What are the requirements for filing an EDWOSB or WOSB
status protest?
* * * * *
(c) * * *
(2) * * * Where the identified low bidder is determined to be
ineligible for award, a protest of any other identified low bidder must
be received prior to the close of business on the 5th business day
after the contracting officer has notified interested parties of the
identity of that low bidder.
* * * * *
(d) Referral to SBA. The contracting officer must forward to SBA
any WOSB or EDWOSB status protest received, notwithstanding whether he
or she believes it is premature, sufficiently specific, or timely. The
contracting officer must send all WOSB and EDWOSB status protests,
along with a referral letter and documents, directly to the Director
for Government Contracting, U.S. Small Business Administration, 409
Third Street SW, Washington, DC 20416, or by fax to (202) 205-6390,
Attn: Women-Owned Small Business Status Protest.
(1) The contracting officer's referral letter must include
information pertaining to the solicitation that may be necessary for
SBA to determine timeliness and standing, including: the solicitation
number; the name, address, telephone number, and facsimile number of
the contracting officer; whether the protestor submitted an offer;
whether the protested concern was the apparent successful offeror; when
the protested concern submitted its offer; whether the procurement was
conducted using sealed bid or negotiated procedures; the bid opening
date, if applicable; when the protest was submitted to the contracting
officer; when the protestor received notification about the apparent
successful offeror, if applicable; and whether a contract has been
awarded.
(2) Where a protestor alleges that a WOSB/EDWOSB is unduly reliant
on one or more subcontractors that are not WOSBs/EDWOSBs or a
subcontractor that is not a WOSB/EDWOSB will perform primary and vital
requirements of the contract, the D/GC or designee will refer the
matter to the Government Contracting Area Office serving the geographic
area in which the principal office of the SDVO small business concern
(SBC) is located for a determination as to whether the ostensible
subcontractor rule has been met.
(3) The D/GC or designee will decide the merits of EDWOSB or WOSB
status protests.
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-18068 Filed 9-8-22; 8:45 am]
BILLING CODE 8026-03-P