National Defense Authorization Act of 2020, Credit for Lower Tier Subcontracting and Other Amendments, 77529-77532 [2022-27213]
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77529
Proposed Rules
Federal Register
Vol. 87, No. 242
Monday, December 19, 2022
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
FEDERAL RESERVE SYSTEM
12 CFR Chapter II
[Docket No. R–1786]
RIN 7100–AG44
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Chapter III
RIN 3064–AF86
Resolution-Related Resource
Requirements for Large Banking
Organizations; Extension of Comment
Period
Board of Governors of the
Federal Reserve System, Federal Deposit
Insurance Corporation.
ACTION: Advance notice of proposed
rulemaking; extension of comment
period.
AGENCY:
On October 24, 2022, the
Board of Governors of the Federal
Reserve System (Board) and the Federal
Deposit Insurance Corporation (FDIC)
(together, the agencies) published in the
Federal Register an advance notice of
proposed rulemaking (ANPR) to solicit
public input regarding whether an extra
layer of loss-absorbing capacity could
improve optionality in resolving a large
banking organization or its insured
depository institution, and the costs and
benefits of such a requirement. The
agencies have determined that an
extension of the comment period until
January 23, 2023, is appropriate, and are
therefore making that extension.
DATES: The comment period for the
advance notice of proposed rulemaking
published October 24, 2022, at 87 FR
64170, is extended. Comments must be
received by January 23, 2023.
ADDRESSES: You may submit comments
by any of the methods identified in the
ANPR.
FOR FURTHER INFORMATION CONTACT:
Board: Molly Mahar, Senior Associate
Director, (202) 973–7360; Catherine
Tilford, Deputy Associate Director, (202)
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SUMMARY:
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452–5240; Lesley Chao, Lead Financial
Institution Policy Analyst, Policy
Development, (202) 974–7063, Division
of Supervision and Regulation; Charles
Gray, Deputy General Counsel, (202)
510–3484, Reena Sahni, Associate
General Counsel, (202) 452–2026, Jay
Schwarz, Assistant General Counsel,
(202) 452–2970, Andrew Hartlage,
Senior Counsel, (202) 452–6483, Legal
Division, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551. For users of TTY–TRS, please
call 711 from any telephone, anywhere
in the United States.
FDIC: Andrew J. Felton, Deputy
Director, (202) 898–3691; Ryan P.
Tetrick, Deputy Director, (202) 898–
7028; Jenny G. Traille, Associate
Director, (202) 898–3608; Julia E. Paris,
Senior Cross-Border Specialist, (202)
898–3821; Division of Complex
Institution Supervision and Resolution;
R. Penfield Starke, Assistant General
Counsel, (202) 898–8501, rstarke@
fdic.gov; David N. Wall, Assistant
General Counsel, (202) 898–6575, Legal
Division, Federal Deposit Insurance
Corporation, 550 17th Street NW,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION: On
October 24, 2022, the agencies
published in the Federal Register an
ANPR to solicit public input regarding
whether an extra layer of loss-absorbing
capacity could improve optionality in
resolving a large banking organization or
its insured depository institution, and
the costs and benefits of such a
requirement.1 This may, among other
things, address financial stability by
limiting contagion risk through the
reduction in the likelihood of uninsured
depositors suffering loss, and keep
various resolution options open for the
FDIC to resolve a firm in a way that
minimizes the long term risk to
financial stability and preserves
optionality. The agencies are seeking
comment on all aspects of the ANPR
from all interested parties and also
request commenters to identify other
issues that the Board and FDIC should
consider.
The ANPR stated that the comment
period would close on December 23,
2022. The agencies have received a
request to extend the comment period.
An extension of the comment period
1 87
PO 00000
FR 64170 (October 24, 2022).
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would provide additional opportunity
for the public to prepare comments to
address questions posed by the
agencies. Therefore, the agencies are
extending the end of the comment
period for the ANPR from December 23,
2022, to January 23, 2022.
By order of the Board of Governors of the
Federal Reserve System, acting through the
Secretary of the Board under delegated
authority.
Ann E. Misback,
Secretary of the Board, Federal Deposit
Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on December 14,
2022.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2022–27475 Filed 12–16–22; 8:45 am]
BILLING CODE 6714–01–P; 6210–01–P
SMALL BUSINESS ADMINISTRATION
13 CFR Part 125
RIN 3245–AH28
National Defense Authorization Act of
2020, Credit for Lower Tier
Subcontracting and Other
Amendments
U.S. Small Business
Administration.
ACTION: Proposed rule.
AGENCY:
The U.S. Small Business
Administration (SBA or Agency) is
proposing to amend its regulations to
implement provisions of the National
Defense Authorization Act for Fiscal
Year 2020. The proposal would permit
a prime contractor with an individual
subcontracting plan to apply credit for
subcontracts to small businesses at
lower tiers toward its subcontracting
goals. To do so, the prime contractor
would incorporate the lower-tier
subcontracting performance into its
subcontracting-plan goals.
DATES: Comments must be received on
or before February 17, 2023.
ADDRESSES: You may submit comments,
identified by RIN 3245–AH28, by any of
the following methods:
• Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Email: Roman Ivey, Program
Analyst, Office of Policy Planning and
SUMMARY:
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Federal Register / Vol. 87, No. 242 / Monday, December 19, 2022 / Proposed Rules
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Liaison, Small Business Administration,
at Roman.Ivey@sba.gov.
SBA will post all comments on
https://www.regulations.gov. If you wish
to submit confidential business
information (CBI), as defined in the User
Notice at https://www.regulations.gov,
please submit the information to Roman
Ivey, Small Business Administration at
Roman.Ivey@sba.gov. Highlight the
information that you consider to be CBI
and explain why you believe SBA
should hold this information as
confidential. SBA will review the
information and make the final
determination on whether it will
publish the information.
FOR FURTHER INFORMATION CONTACT:
Roman Ivey, Program Analyst, Office of
Policy Planning and Liaison, Small
Business Administration, at
Roman.Ivey@sba.gov, (202) 401–1420. If
you are deaf, hard of hearing, or have a
speech disability, please dial 7–1–1 to
access telecommunications relay
services.
SUPPLEMENTARY INFORMATION:
Background
The SBA proposes to revise its Small
Business Subcontracting Plan
regulations in 13 CFR 125.3 in response
to changes made in section 870 of the
National Defense Authorization Act
(NDAA) of 2020, Public Law 116–92.
Specifically, section 870 made changes
to section 8(d) of the Small Business
Act, 15 U.S.C. 637(d), regarding the
requirements that apply to a Federal
contractor seeking to obtain
subcontracting credit on certain types of
Federal contracts.
Most Federal contracts require the
awardee to enter into a subcontracting
plan that includes percentage goals for
using small businesses and
subcategories of small businesses.
Subcontracting plans apply to Federal
contracts exceeding $750,000 ($1.5
million for construction), unless the
awardee is a small business, the contract
does not offer subcontracting
opportunities, or the contract will be
performed entirely outside the United
States and its outlying areas. Prior to
SBA’s Final Rule published on
December 23, 2016, 81 FR 94246, SBA’s
regulations permitted a prime contractor
to count only its first-tier subcontracts
toward the goals in its subcontracting
plan. The December 2016 Final Rule,
however, mandated that prime
contractors receive credit for lower-tier
subcontracts under certain
circumstances. Section 870 changed the
criteria for receiving credit for lower-tier
subcontracting, and this proposed rule
implements those statutory changes.
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Section 870 made three changes to
subcontracting plan requirements. First,
a prime contractor may elect, in some
instances, to receive credit toward its
subcontracting plan for lower-tier
subcontracts to small businesses.
Second, agencies are prohibited from
setting tier-specific goals for prime
contractors that use lower-tier credit.
Third, subcontracting plans are required
to recite the records that contractors will
maintain to substantiate lower-tier
credit.
These changes require SBA to change
some of the provisions set forth in the
December 2016 Final Rule. Most
importantly, relying on statutory
language, the December 2016 Final Rule
made it mandatory for contractors with
individual subcontracting plans to take
credit for lower-tier subcontract. Section
870, by contrast, removes the mandate
and states that prime contractors ‘‘may
elect to receive credit’’ for either firsttier subcontracts on their own, or
subcontracts at any tier. Accordingly,
SBA proposes to change the prior
mandate to an election.
Additionally, the December 2016
Final Rule allowed for contractors to
receive credit for subcontracts awarded
to small businesses below the first tier,
but only where the contractor had two
sets of subcontracting goals. A
contractor was required to have a goal
for small-business subcontracting at the
first tier, and an additional goal for
small business subcontracting at lower
tiers. Section 870 prohibits agencies
from setting tier-specific goals for prime
contractors that use lower-tier credit. To
address that statutory change, SBA
proposes that prime contractors will
only have one set of subcontracting
goals. Prime contractors may elect under
certain circumstances to have
subcontracts awarded to small
businesses at lower tiers counted toward
this goal.
This proposed rule also implements
the requirement from section 870 that
contractors include in their
subcontracting plans a statement of the
types of records they will maintain to
substantiate subcontracting credit.
Section 870 further created a new
subparagraph 8(d)(16)(B) in the Small
Business Act, 15 U.S.C. 637(d)(16)(B), to
require agencies to collect, report, and
review data on compliance with
subcontracting plans. The new
subparagraph duplicates existing
statutory language in section 8(d)(7) of
the Small Business Act, 15 U.S.C.
637(d)(7), and has already been
implemented in SBA’s regulations at 13
CFR 125.6(f)(8). Therefore, no regulatory
changes are necessary to implement
new subparagraph 8(d)(16)(B).
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Section-By-Section Analysis
13 CFR 125.3(a)
SBA proposes to change the threshold
for a required subcontracting plan to
$750,000. This would make the
threshold consistent with the Federal
Acquisition Regulation (FAR) subpart
19.7 and with other references to the
threshold in section 125.3.
13 CFR 125.3(a)(1)(i)(C)
SBA proposes to revise the language
of 13 CFR 125.3(a)(1)(i)(C) to
incorporate the two statutory changes
from section 870 that differ from SBA’s
December 2016 rule: creating an
election for using lower-tier
subcontracting credit and prohibiting
more than one set of goals.
First, the proposed language makes
lower-tier subcontracting credit
discretionary, in some circumstances. A
prime contractor may elect to take credit
for lower-tier subcontractors only when
the subcontracting plan applies to a
single contract with one Federal agency.
In other situations—i.e., where the plan
applies to more than one contract or to
a single contract with more than one
agency—section 870 prohibits the prime
contractor from receiving credit for
lower-tier subcontracting. Commercial
plans and comprehensive
subcontracting plans therefore are not
eligible to use lower-tier subcontracting
credit. They must instead rely solely on
first-tier subcontracts. Additionally,
governmentwide contracts and multiagency contracts are not permitted to
use lower-tier subcontracting credit.
Where a prime contractor elects to
include lower-tier subcontracts towards
its goal, the prime contractor would be
credited with lower-tier subcontracts
that are reported under lower-tier
subcontracting plans. This proposed
rule does not require prime contractors
to submit additional reports. Prime
contractors would be required to report
only their first-tier awards. Lower-tier
subcontracting awards are required to be
reported by the prime contractor’s
lower-tier subcontractors in accordance
with their subcontracting plans and
SBA’s regulations. SBA believes that
only having each subcontract at any tier
reported once will help prevent
duplicative counting of the same
awards.
Second, the proposed rule eliminates
the prior provision that a prime
contractor would have two sets of
subcontracting goals—one for the first
tier and one for lower tiers. Instead,
SBA proposes that the prime contractor
would incorporate the subcontractingplan goals of its lower-tier
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Federal Register / Vol. 87, No. 242 / Monday, December 19, 2022 / Proposed Rules
Executive Order 13132
subcontractors into its individualsubcontracting-plan goals.
13 CFR 125.3(c)
SBA proposes to create a new 13 CFR
125.3(c)(1)(xii) to incorporate the new
recordkeeping requirements on
contractors with subcontracting plans.
Specifically, prime contractors are
required to maintain records of the
procedures used to substantiate the
credit they elect to receive for lower-tier
subcontracting under 13 CFR
125.3(a)(1)(i)(C).
Compliance with Executive Orders
12866, 13563, 12988, 13175, and 13132,
the Paperwork Reduction Act (44 U.S.C.
Ch. 35), the Regulatory Flexibility Act (5
U.S.C. 601–612), and the Congressional
Review Act (5 U.S.C. 801–808).
Executive Order 12866
The Office of Management and Budget
(OMB) has determined that this
proposed rule is not a significant
regulatory action for the purposes of
Executive Order 12866.
Executive Order 13563
SBA previously solicited comments
from the public on a proposal to provide
credit for lower-tier subcontracting. 80
FR 60300. Those comments were
considered for this rulemaking.
Additionally, as part of its ongoing
efforts to engage stakeholders in the
development of its regulations, SBA has
solicited comments and suggestions
from procuring agencies on how to best
implement section 870. SBA has
incorporated those comments and
suggestions to the extent feasible. SBA
intends to incorporate, where feasible,
public input into the final rule.
Executive Order 12988
For purposes of Executive Order
12988, SBA has drafted this proposed
rule, to the extent practicable, in
accordance with the standards set forth
in section 3(a) and 3(b)(2) of that
Executive Order, to minimize litigation,
eliminate ambiguity, and reduce
burden. This rule has no preemptive or
retroactive effect.
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Executive Order 13175
This proposed rule does not have
tribal implications under Executive
Order 13175, Consultation and
Coordination with Indian Tribal
Governments, because it would not have
a substantial direct effect on one or
more Indian tribes, on the relationship
between the Federal Government and
Indian tribes, or on the distribution of
power and responsibilities between the
Federal Government and Indian tribes.
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For the purpose 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
layers of government. Therefore, SBA
has determined that this proposed rule
has no federalism implications
warranting preparation of a federalism
assessment.
Paperwork Reduction Act, 44 U.S.C.
Ch. 35
This rule, if adopted in final form,
would update the requirements for
small business subcontracting plans to
add a requirement for prime contractors
to include in their subcontracting plans
a statement of the types of records they
will maintain to substantiate
subcontracting credit. The FAR rule
implementing this requirement will
account for this information collection,
and clearance for the information
collection will be obtained by the FAR
Council.
Regulatory Flexibility Act, 5 U.S.C.
601–612
According to the Regulatory
Flexibility Act (RFA), 5 U.S.C. 601,
when an agency issues a rulemaking, it
must prepare a regulatory flexibility
analysis to address the impact of the
rule on small entities. However, section
605 of the RFA allows an agency to
certify a rule, in lieu of preparing an
analysis, if the rulemaking is not
expected to have a significant economic
impact on a substantial number of small
entities. The RFA defines ‘‘small entity’’
to include ‘‘small businesses,’’ ‘‘small
organizations,’’ and ‘‘small
governmental jurisdictions.’’ This
proposed rule concerns various aspects
of SBA’s contracting programs. As such,
the rule relates to small business
concerns, but would not affect ‘‘small
organizations’’ or ‘‘small governmental
jurisdictions’’ because those programs
generally apply only to ‘‘business
concerns’’ as defined by SBA
regulations, in other words, to small
businesses organized for profit. ‘‘Small
organizations’’ or ‘‘small governmental
jurisdictions’’ are non-profits or
governmental entities and do not
generally qualify as ‘‘business concerns’’
within the meaning of SBA’s
regulations.
There are approximately 350,000
concerns registered as small business
concerns in the System for Award
Management (SAM) that could
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77531
potentially be impacted by the
implementation of section 870.
However, SBA cannot say with any
certainty how many will be impacted
because we do not know how many of
these concerns participate in
government contracting as
subcontractors. A firm is required to
register in SAM in order to participate
in Federal contracting as a prime
contractor, but not for purposes of
subcontracting. Therefore, there are no
known compliance or other costs
imposed by the proposed rule on small
business concerns.
In sum, the proposed amendments
would not have a disparate impact on
small businesses and would increase
their opportunities to participate in
Federal Government contracting as
subcontractors without imposing any
additional costs. For the reasons
discussed, SBA certifies that this
proposed rule would not have a
significant economic impact on a
substantial number of small business
concerns.
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 rulemaking 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 rulemaking has
been reviewed and determined by OMB
not to be a ‘‘major rule’’ under 5 U.S.C.
804(2).
List of Subjects in 13 CFR Part 125
Government contracts, Government
procurement, Reporting and
recordkeeping requirements, Small
businesses, Small business
subcontracting.
For the reasons stated in the
preamble, SBA proposes to amend 13
CFR part 125 as follows:
PART 125—GOVERNMENT
CONTRACTING PROGRAMS
1. The authority citation for 13 CFR
part 125 is revised to read as follows:
■
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Federal Register / Vol. 87, No. 242 / Monday, December 19, 2022 / Proposed Rules
Authority: 15 U.S.C. 632(p), (q), 634(b)(6),
637, 644, 657f, 657q, 657r, and 657s; 38
U.S.C. 501 and 8127.
2. Amend § 125.3 by:
a. Removing the number ‘‘$650,000’’
in paragraph (a) introductory text and
adding in its place the number
‘‘$750,000’’;
■ b. Revising paragraph (a)(1)(i)(C);
■ c. Removing the word ‘‘and’’ after the
semicolon at the end of paragraph
(c)(1)(xi);
■ d. Redesignating paragraph (c)(1)(xii)
as paragraph (c)(1)(xiii); and
■ e. Adding a new paragraph (c)(1)(xii).
The revision and addition read as
follows:
■
■
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§ 125.3 What types of subcontracting
assistance are available to small
businesses?
(a) * * *
(1) * * *
(i) * * *
(C) Where the subcontracting goals
pertain only to a single contract with
one Federal agency, the contractor may
elect to receive credit for small business
concerns performing as first-tier
subcontractors or subcontractors at any
tier pursuant to the subcontracting plans
required under paragraph (c) of this
section in an amount equal to the dollar
value of work awarded to such small
business concerns. The election must be
recorded in the subcontracting plan. If
the contractor elects to receive credit for
subcontractors at any tier, the following
requirements apply:
(1) The prime contractor must
incorporate the subcontracting-plan
goals of their lower-tier subcontractors
in its individual-subcontracting-plan
goals.
(2) To receive credit for their
subcontracting, lower-tier
subcontractors must have their own
individual subcontracting plans.
(3) The prime contractor and any
subcontractor with a subcontracting
plan are responsible for reporting on
subcontracting performance under their
contracts or subcontracts at their first
tier. This reporting method applies to
both individual subcontracting reports
and summary subcontracting reports.
(4) The prime contractor’s
performance under its individual
subcontracting plan will be calculated
by aggregating the prime contractor’s
first-tier subcontracting achievements
with the achievements of the prime
contractor’s lower-tier subcontractors
that have flow-down subcontracting
plans.
(5) If the subcontracting goals pertain
to more than one contract with one or
more Federal agencies, or to one
contract with more than one Federal
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agency, the prime contractor shall only
receive credit for first tier
subcontractors that are small business
concerns. This restriction applies to all
commercial plans, all comprehensive
subcontracting plans with the
Department of Defense,
governmentwide contracts, and multiagency contracts.
*
*
*
*
*
(c) * * *
(1) * * *
(xii) The prime contractor must
provide a written statement of the types
of records it will maintain to
demonstrate that procedures have been
adopted to substantiate the
subcontracting credit that the prime
contractor elects under paragraph
(a)(1)(i)(C) of this section; and
*
*
*
*
*
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022–27213 Filed 12–16–22; 8:45 am]
BILLING CODE 8026–09–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2022–1585; Project
Identifier MCAI–2022–00892–T]
RIN 2120–AA64
Airworthiness Directives; Dassault
Aviation Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
The FAA proposes to
supersede Airworthiness Directive (AD)
2021–03–11, which applies to all
Dassault Aviation Model FALCON 2000
airplanes. AD 2021–03–11 requires
revising the existing maintenance or
inspection program, as applicable, to
incorporate new or more restrictive
airworthiness limitations. Since the
FAA issued AD 2021–03–11, the FAA
has determined that new or more
restrictive airworthiness limitations are
necessary. This proposed AD would
continue to require the actions in AD
2021–03–11 and would require revising
the existing maintenance or inspection
program, as applicable, to incorporate
new or more restrictive airworthiness
limitations, as specified in a European
Union Aviation Safety Agency (EASA)
AD, which is proposed for incorporation
by reference (IBR). The FAA is
proposing this AD to address the unsafe
condition on these products.
SUMMARY:
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The FAA must receive comments
on this proposed AD by February 2,
2023.
DATES:
You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
regulations.gov. Follow the instructions
for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
AD Docket: You may examine the AD
docket at regulations.gov under Docket
No. FAA–2022–1585; or in person at
Docket Operations between 9 a.m. and
5 p.m., Monday through Friday, except
Federal holidays. The AD docket
contains this NPRM, the mandatory
continuing airworthiness information
(MCAI), any comments received, and
other information. The street address for
Docket Operations is listed above.
Material Incorporated by Reference:
• For material that is proposed for
IBR in this NPRM, contact EASA,
Konrad-Adenauer-Ufer 3, 50668
Cologne, Germany; telephone +49 221
8999 000; email ADs@easa.europa.eu;
website easa.europa.eu. You may find
this material on the EASA website at
ad.easa.europa.eu. It is also available at
regulations.gov under Docket No. FAA–
2022–1585.
• You may view this service
information at the FAA, Airworthiness
Products Section, Operational Safety
Branch, 2200 South 216th St., Des
Moines, WA. For information on the
availability of this material at the FAA,
call 206–231–3195.
FOR FURTHER INFORMATION CONTACT: Tom
Rodriguez, Aerospace Engineer, Large
Aircraft Section, International
Validation Branch, FAA, 2200 South
216th St., Des Moines, WA 98198;
telephone 206–231–3226; email
Tom.Rodriguez@faa.gov.
SUPPLEMENTARY INFORMATION:
ADDRESSES:
Comments Invited
The FAA invites you to send any
written relevant data, views, or
arguments about this proposal. Send
your comments to an address listed
under ADDRESSES. Include ‘‘Docket No.
FAA–2022–1585; Project Identifier
MCAI–2022–00892–T’’ at the beginning
of your comments. The most helpful
comments reference a specific portion of
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Agencies
[Federal Register Volume 87, Number 242 (Monday, December 19, 2022)]
[Proposed Rules]
[Pages 77529-77532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27213]
=======================================================================
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 125
RIN 3245-AH28
National Defense Authorization Act of 2020, Credit for Lower Tier
Subcontracting and Other Amendments
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (SBA or Agency) is
proposing to amend its regulations to implement provisions of the
National Defense Authorization Act for Fiscal Year 2020. The proposal
would permit a prime contractor with an individual subcontracting plan
to apply credit for subcontracts to small businesses at lower tiers
toward its subcontracting goals. To do so, the prime contractor would
incorporate the lower-tier subcontracting performance into its
subcontracting-plan goals.
DATES: Comments must be received on or before February 17, 2023.
ADDRESSES: You may submit comments, identified by RIN 3245-AH28, by any
of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Email: Roman Ivey, Program Analyst, Office of Policy
Planning and
[[Page 77530]]
Liaison, Small Business Administration, at [email protected].
SBA will post all comments on https://www.regulations.gov. If you
wish to submit confidential business information (CBI), as defined in
the User Notice at https://www.regulations.gov, please submit the
information to Roman Ivey, Small Business Administration at
[email protected]. Highlight the information that you consider to be
CBI and explain why you believe SBA should hold this information as
confidential. SBA will review the information and make the final
determination on whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: Roman Ivey, Program Analyst, Office of
Policy Planning and Liaison, Small Business Administration, at
[email protected], (202) 401-1420. If you are deaf, hard of hearing,
or have a speech disability, please dial 7-1-1 to access
telecommunications relay services.
SUPPLEMENTARY INFORMATION:
Background
The SBA proposes to revise its Small Business Subcontracting Plan
regulations in 13 CFR 125.3 in response to changes made in section 870
of the National Defense Authorization Act (NDAA) of 2020, Public Law
116-92. Specifically, section 870 made changes to section 8(d) of the
Small Business Act, 15 U.S.C. 637(d), regarding the requirements that
apply to a Federal contractor seeking to obtain subcontracting credit
on certain types of Federal contracts.
Most Federal contracts require the awardee to enter into a
subcontracting plan that includes percentage goals for using small
businesses and subcategories of small businesses. Subcontracting plans
apply to Federal contracts exceeding $750,000 ($1.5 million for
construction), unless the awardee is a small business, the contract
does not offer subcontracting opportunities, or the contract will be
performed entirely outside the United States and its outlying areas.
Prior to SBA's Final Rule published on December 23, 2016, 81 FR 94246,
SBA's regulations permitted a prime contractor to count only its first-
tier subcontracts toward the goals in its subcontracting plan. The
December 2016 Final Rule, however, mandated that prime contractors
receive credit for lower-tier subcontracts under certain circumstances.
Section 870 changed the criteria for receiving credit for lower-tier
subcontracting, and this proposed rule implements those statutory
changes.
Section 870 made three changes to subcontracting plan requirements.
First, a prime contractor may elect, in some instances, to receive
credit toward its subcontracting plan for lower-tier subcontracts to
small businesses. Second, agencies are prohibited from setting tier-
specific goals for prime contractors that use lower-tier credit. Third,
subcontracting plans are required to recite the records that
contractors will maintain to substantiate lower-tier credit.
These changes require SBA to change some of the provisions set
forth in the December 2016 Final Rule. Most importantly, relying on
statutory language, the December 2016 Final Rule made it mandatory for
contractors with individual subcontracting plans to take credit for
lower-tier subcontract. Section 870, by contrast, removes the mandate
and states that prime contractors ``may elect to receive credit'' for
either first-tier subcontracts on their own, or subcontracts at any
tier. Accordingly, SBA proposes to change the prior mandate to an
election.
Additionally, the December 2016 Final Rule allowed for contractors
to receive credit for subcontracts awarded to small businesses below
the first tier, but only where the contractor had two sets of
subcontracting goals. A contractor was required to have a goal for
small-business subcontracting at the first tier, and an additional goal
for small business subcontracting at lower tiers. Section 870 prohibits
agencies from setting tier-specific goals for prime contractors that
use lower-tier credit. To address that statutory change, SBA proposes
that prime contractors will only have one set of subcontracting goals.
Prime contractors may elect under certain circumstances to have
subcontracts awarded to small businesses at lower tiers counted toward
this goal.
This proposed rule also implements the requirement from section 870
that contractors include in their subcontracting plans a statement of
the types of records they will maintain to substantiate subcontracting
credit.
Section 870 further created a new subparagraph 8(d)(16)(B) in the
Small Business Act, 15 U.S.C. 637(d)(16)(B), to require agencies to
collect, report, and review data on compliance with subcontracting
plans. The new subparagraph duplicates existing statutory language in
section 8(d)(7) of the Small Business Act, 15 U.S.C. 637(d)(7), and has
already been implemented in SBA's regulations at 13 CFR 125.6(f)(8).
Therefore, no regulatory changes are necessary to implement new
subparagraph 8(d)(16)(B).
Section-By-Section Analysis
13 CFR 125.3(a)
SBA proposes to change the threshold for a required subcontracting
plan to $750,000. This would make the threshold consistent with the
Federal Acquisition Regulation (FAR) subpart 19.7 and with other
references to the threshold in section 125.3.
13 CFR 125.3(a)(1)(i)(C)
SBA proposes to revise the language of 13 CFR 125.3(a)(1)(i)(C) to
incorporate the two statutory changes from section 870 that differ from
SBA's December 2016 rule: creating an election for using lower-tier
subcontracting credit and prohibiting more than one set of goals.
First, the proposed language makes lower-tier subcontracting credit
discretionary, in some circumstances. A prime contractor may elect to
take credit for lower-tier subcontractors only when the subcontracting
plan applies to a single contract with one Federal agency. In other
situations--i.e., where the plan applies to more than one contract or
to a single contract with more than one agency--section 870 prohibits
the prime contractor from receiving credit for lower-tier
subcontracting. Commercial plans and comprehensive subcontracting plans
therefore are not eligible to use lower-tier subcontracting credit.
They must instead rely solely on first-tier subcontracts. Additionally,
governmentwide contracts and multi-agency contracts are not permitted
to use lower-tier subcontracting credit.
Where a prime contractor elects to include lower-tier subcontracts
towards its goal, the prime contractor would be credited with lower-
tier subcontracts that are reported under lower-tier subcontracting
plans. This proposed rule does not require prime contractors to submit
additional reports. Prime contractors would be required to report only
their first-tier awards. Lower-tier subcontracting awards are required
to be reported by the prime contractor's lower-tier subcontractors in
accordance with their subcontracting plans and SBA's regulations. SBA
believes that only having each subcontract at any tier reported once
will help prevent duplicative counting of the same awards.
Second, the proposed rule eliminates the prior provision that a
prime contractor would have two sets of subcontracting goals--one for
the first tier and one for lower tiers. Instead, SBA proposes that the
prime contractor would incorporate the subcontracting-plan goals of its
lower-tier
[[Page 77531]]
subcontractors into its individual-subcontracting-plan goals.
13 CFR 125.3(c)
SBA proposes to create a new 13 CFR 125.3(c)(1)(xii) to incorporate
the new recordkeeping requirements on contractors with subcontracting
plans. Specifically, prime contractors are required to maintain records
of the procedures used to substantiate the credit they elect to receive
for lower-tier subcontracting under 13 CFR 125.3(a)(1)(i)(C).
Compliance with Executive Orders 12866, 13563, 12988, 13175, and
13132, the Paperwork Reduction Act (44 U.S.C. Ch. 35), the Regulatory
Flexibility Act (5 U.S.C. 601-612), and the Congressional Review Act (5
U.S.C. 801-808).
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
proposed rule is not a significant regulatory action for the purposes
of Executive Order 12866.
Executive Order 13563
SBA previously solicited comments from the public on a proposal to
provide credit for lower-tier subcontracting. 80 FR 60300. Those
comments were considered for this rulemaking. Additionally, as part of
its ongoing efforts to engage stakeholders in the development of its
regulations, SBA has solicited comments and suggestions from procuring
agencies on how to best implement section 870. SBA has incorporated
those comments and suggestions to the extent feasible. SBA intends to
incorporate, where feasible, public input into the final rule.
Executive Order 12988
For purposes of Executive Order 12988, SBA has drafted this
proposed rule, to the extent practicable, in accordance with the
standards set forth in section 3(a) and 3(b)(2) of that Executive
Order, to minimize litigation, eliminate ambiguity, and reduce burden.
This rule has no preemptive or retroactive effect.
Executive Order 13175
This proposed rule does not have tribal implications under
Executive Order 13175, Consultation and Coordination with Indian Tribal
Governments, because it would not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.
Executive Order 13132
For the purpose 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 layers of government. Therefore, SBA has determined that this
proposed rule has no federalism implications warranting preparation of
a federalism assessment.
Paperwork Reduction Act, 44 U.S.C. Ch. 35
This rule, if adopted in final form, would update the requirements
for small business subcontracting plans to add a requirement for prime
contractors to include in their subcontracting plans a statement of the
types of records they will maintain to substantiate subcontracting
credit. The FAR rule implementing this requirement will account for
this information collection, and clearance for the information
collection will be obtained by the FAR Council.
Regulatory Flexibility Act, 5 U.S.C. 601-612
According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601,
when an agency issues a rulemaking, it must prepare a regulatory
flexibility analysis to address the impact of the rule on small
entities. However, section 605 of the RFA allows an agency to certify a
rule, in lieu of preparing an analysis, if the rulemaking is not
expected to have a significant economic impact on a substantial number
of small entities. The RFA defines ``small entity'' to include ``small
businesses,'' ``small organizations,'' and ``small governmental
jurisdictions.'' This proposed rule concerns various aspects of SBA's
contracting programs. As such, the rule relates to small business
concerns, but would not affect ``small organizations'' or ``small
governmental jurisdictions'' because those programs generally apply
only to ``business concerns'' as defined by SBA regulations, in other
words, to small businesses organized for profit. ``Small
organizations'' or ``small governmental jurisdictions'' are non-profits
or governmental entities and do not generally qualify as ``business
concerns'' within the meaning of SBA's regulations.
There are approximately 350,000 concerns registered as small
business concerns in the System for Award Management (SAM) that could
potentially be impacted by the implementation of section 870. However,
SBA cannot say with any certainty how many will be impacted because we
do not know how many of these concerns participate in government
contracting as subcontractors. A firm is required to register in SAM in
order to participate in Federal contracting as a prime contractor, but
not for purposes of subcontracting. Therefore, there are no known
compliance or other costs imposed by the proposed rule on small
business concerns.
In sum, the proposed amendments would not have a disparate impact
on small businesses and would increase their opportunities to
participate in Federal Government contracting as subcontractors without
imposing any additional costs. For the reasons discussed, SBA certifies
that this proposed rule would not have a significant economic impact on
a substantial number of small business concerns.
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 rulemaking 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 rulemaking has been
reviewed and determined by OMB not to be a ``major rule'' under 5
U.S.C. 804(2).
List of Subjects in 13 CFR Part 125
Government contracts, Government procurement, Reporting and
recordkeeping requirements, Small businesses, Small business
subcontracting.
For the reasons stated in the preamble, SBA proposes to amend 13
CFR part 125 as follows:
PART 125--GOVERNMENT CONTRACTING PROGRAMS
0
1. The authority citation for 13 CFR part 125 is revised to read as
follows:
[[Page 77532]]
Authority: 15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657f,
657q, 657r, and 657s; 38 U.S.C. 501 and 8127.
0
2. Amend Sec. 125.3 by:
0
a. Removing the number ``$650,000'' in paragraph (a) introductory text
and adding in its place the number ``$750,000'';
0
b. Revising paragraph (a)(1)(i)(C);
0
c. Removing the word ``and'' after the semicolon at the end of
paragraph (c)(1)(xi);
0
d. Redesignating paragraph (c)(1)(xii) as paragraph (c)(1)(xiii); and
0
e. Adding a new paragraph (c)(1)(xii).
The revision and addition read as follows:
Sec. 125.3 What types of subcontracting assistance are available to
small businesses?
(a) * * *
(1) * * *
(i) * * *
(C) Where the subcontracting goals pertain only to a single
contract with one Federal agency, the contractor may elect to receive
credit for small business concerns performing as first-tier
subcontractors or subcontractors at any tier pursuant to the
subcontracting plans required under paragraph (c) of this section in an
amount equal to the dollar value of work awarded to such small business
concerns. The election must be recorded in the subcontracting plan. If
the contractor elects to receive credit for subcontractors at any tier,
the following requirements apply:
(1) The prime contractor must incorporate the subcontracting-plan
goals of their lower-tier subcontractors in its individual-
subcontracting-plan goals.
(2) To receive credit for their subcontracting, lower-tier
subcontractors must have their own individual subcontracting plans.
(3) The prime contractor and any subcontractor with a
subcontracting plan are responsible for reporting on subcontracting
performance under their contracts or subcontracts at their first tier.
This reporting method applies to both individual subcontracting reports
and summary subcontracting reports.
(4) The prime contractor's performance under its individual
subcontracting plan will be calculated by aggregating the prime
contractor's first-tier subcontracting achievements with the
achievements of the prime contractor's lower-tier subcontractors that
have flow-down subcontracting plans.
(5) If the subcontracting goals pertain to more than one contract
with one or more Federal agencies, or to one contract with more than
one Federal agency, the prime contractor shall only receive credit for
first tier subcontractors that are small business concerns. This
restriction applies to all commercial plans, all comprehensive
subcontracting plans with the Department of Defense, governmentwide
contracts, and multi-agency contracts.
* * * * *
(c) * * *
(1) * * *
(xii) The prime contractor must provide a written statement of the
types of records it will maintain to demonstrate that procedures have
been adopted to substantiate the subcontracting credit that the prime
contractor elects under paragraph (a)(1)(i)(C) of this section; and
* * * * *
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-27213 Filed 12-16-22; 8:45 am]
BILLING CODE 8026-09-P