Ownership and Control and Contractual Assistance Requirements for the 8(a) Business Development Program, 26164-26217 [2023-07855]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 88, Number 81 (Thursday, April 27, 2023)]
[Rules and Regulations]
[Pages 26164-26217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07855]



[[Page 26163]]

Vol. 88

Thursday,

No. 81

April 27, 2023

Part IV





Small Business Administration





-----------------------------------------------------------------------





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





Ownership and Control and Contractual Assistance Requirements for the 
8(a) Business Development Program; Final Rule

Federal Register / Vol. 88, No. 81 / Thursday, April 27, 2023 / Rules 
and Regulations

[[Page 26164]]


-----------------------------------------------------------------------

SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 124, 125, 126, 127, and 128

RIN 3245-AH70


Ownership and Control and Contractual Assistance Requirements for 
the 8(a) Business Development Program

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule makes 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 makes 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 rule also makes 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, to include blanket purchase agreements in the list of contracting 
vehicles that are covered by the definitions of consolidation and 
bundling, and to more clearly specify the requirements relating to 
waivers of the nonmanufacturer rule.

DATES: This rule is effective on May 30, 2023. It applies to all 
solicitations issued on or after that date.

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: On September 9, 2022, SBA published in the 
Federal Register a comprehensive proposal that primarily proposed 
changes to the 8(a) Business Development (BD) program, but also 
proposed changes to SBA's size regulations and SBA's other small 
business contracting programs. 87 FR 55642. Specifically, the rule 
proposed to make several changes to the ownership and control 
requirements for the 8(a) 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, and to provisions relating to the award of 
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 rule also 
proposed to 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, to include blanket purchase agreements in the 
list of contracting vehicles that are covered by the definitions of 
consolidation and bundling, and to more clearly specify the 
requirements relating to waivers of the nonmanufacturer rule. 
Contemporaneously, on August 26, 2022, SBA also published a Notice in 
the Federal Register announcing that SBA intended to conduct tribal 
consultations and listening sessions relating to a proposal to require 
a Community Benefits Plan laying out how a tribe, Alaska Native 
Corporation (ANC) or Native Hawaiian Organization (NHO) that owned and 
controlled one or more 8(a) BD Participants intended to give benefits 
back to the Native community as a result of its 8(a) BD participation. 
87 FR 52602. SBA held consultations in Anchorage, AK on September 14, 
2022, in Albuquerque, NM on September 20, 2022, in Oklahoma City, OK on 
September 22, 2022, and in Washington, DC on October 5, 2022. In 
addition, SBA held a listening session on this topic in Honolulu, HI on 
September 28, 2022. The tribal, ANC and NHO representatives 
overwhelmingly opposed SBA imposing any target that a certain 
percentage of an entity's 8(a) receipts should be distributed to 
benefit the affected Native community or that there should be any 
specific consequences if the benefit targets were not reached. They 
believed that any such requirement infringed on self-determination and 
tribal sovereignty, that the entity (tribe/ANC/NHO) is in the best 
position to determine how and when to best reinvest in the 8(a) 
Participant for long-term growth, and that the tribal members or ANC 
shareholders, and not SBA, are the ones who determine what type of 
benefits the tribe/ANC provides. SBA listened to the concerns voiced at 
the tribal consultations. In response to those concerns, at the October 
5, 2022, consultation in Washington, DC, SBA announced that the SBA 
Administrator determined that this final rule would not change any 
current requirements relating to Native community benefits. As such, 
the proposed changes to Sec.  124.604 regarding the imposition of a 
Community Benefits Plan are not included in this final rule. In 
addition, the questions raised in the proposed rule and the August 26, 
2022, Federal Register Notice regarding benefit targets or consequences 
for failure to meet those targets are also not included in this final 
rule.
    During the proposed rule's 60-day comment period, SBA timely 
received over 650 comments from 125 commenters, with a high percentage 
of commenters favoring the proposed changes. A substantial number of 
commenters applauded SBA's effort to clarify and address ambiguities 
contained in the current rules. For the most part, the comments 
supported the substantive changes proposed by SBA.

Section-By-Section Analysis

Section 121.103(h)

    Section 121.103(h) sets forth the rules pertaining to affiliation 
through joint ventures. SBA proposed to make several changes to this 
section. SBA first proposed to take some of the language currently 
contained in the introductory paragraph and add it to a new Sec.  
121.103(h)(1) for ease of use. SBA believes that the current 
introductory paragraph is overly complex and separating some of the 
requirements into a separate subparagraph will be easier to understand 
and use. In adding a new Sec.  121.103(h)(1), the proposed rule also 
made corresponding numbering and cross reference adjustments. SBA 
received no objections to these changes. As such, they are adopted as 
final in this rule.
    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. The proposed rule added a sentence to the introductory text of 
Sec.  121.103(h) to capture SBA's current policy that allows orders to 
be issued under previously awarded contracts

[[Page 26165]]

beyond the two-year period (since the restriction is on additional 
contracts, not continued performance on contracts already awarded). All 
comments that SBA received regarding this provision supported the 
clarification pertaining to orders. As such, the final rule adopts the 
clarification as proposed.
    The proposed rule also sought to 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 clarified 
that this requirement was meant to apply only to contracts set aside or 
reserved 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 proposed rule 
clarified 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 clarified that SBA will aggregate 
the revenues or employees of all partners to the joint venture. 
Commenters supported the change to clarify 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. Although several commenters agreed with the language in the 
proposed rule aggregating the size of joint venture partners where a 
joint venture is populated, two commenters recommended that populated 
joint ventures should be permitted for set-aside contracts as long as 
each party to the joint venture individually qualifies as small under 
the size standard corresponding to the North American Classification 
System (NAICS) code assigned to the contract and has any socioeconomic 
designation that may be required for the contract (i.e., is similarly 
situated). SBA disagrees. SBA has consistently stated its view that a 
joint venture is not an on-going business entity, but rather something 
that is formed for a limited purpose and duration. If two or more 
separate business entities seek to join together through another entity 
on a continuing, unlimited basis, SBA views that as a separate business 
concern with each partner affiliated with each other. Where two or more 
parties form a separate business entity (e.g., a limited liability 
company or partnership) and populate that entity with employees 
intended to perform work on behalf of that entity, SBA similarly views 
that as an ongoing business entity and will aggregate the receipts/
employees of the parties that formed the separate business entity in 
determining its size. SBA's joint venture regulations provide generally 
that as long as each partner to the joint venture individually 
qualifies as small under the NAICS code assigned to the contract, the 
joint venture will qualify as small. However, that rule assumes that 
each partner to the joint venture individually performs work under a 
contract won by the joint venture with its own separate employees. That 
is not the case where two or more parties form a separate legal entity, 
populate that entity with employees, and intend to perform contracts 
with the employees hired by that separate entity. As such, the final 
rule adopts the language contained in the proposed rule that where two 
parties form a populated joint venture, the joint venture will qualify 
as small only where the parties to the joint venture meet the 
applicable size standard in the aggregate.
    In addition, the proposed rule revised the ostensible subcontractor 
rule in redesignated Sec.  121.103(h)(3) in two ways. First, it 
clarified how the ostensible subcontractor rule should apply to general 
construction contracts. Second, it proposed to add factors to consider 
in determining whether a specific subcontractor should be considered an 
ostensible subcontractor to comport with recent decisions of SBA's 
Office of Hearings and Appeals (OHA).
    The proposed rule clarified that the primary role of a prime 
contractor in a general construction project is to oversee and 
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 received 17 
comments regarding the proposed clarification to the ostensible 
subcontractor rule for general construction contracts. All 17 comments 
supported the clarification. A few commenters suggested adding the word 
``supervise'' and to specifically identify that one of the primary 
functions of a general construction prime contractor is to coordinate 
the work of subcontractors. Although SBA does not see a real 
distinction between oversight and supervision, the final rule 
nevertheless adds supervision as a primary and vital requirement as 
well as adding the coordination of subcontractor work. One commenter 
recommended adding more specificity as to what managing the contract 
entails. SBA believes that a general requirement to supervise, oversee, 
manage, and schedule the work on a contract, including coordinating the 
work of various subcontractors, is sufficient. SBA is concerned that 
adding any specificity beyond that or highlighting one or two specific 
items of managing a contract might be read as SBA believing those one 
or two items are more important in the analysis than any others. That 
is not SBA's intent, and SBA believes that an SBA Size Specialist 
should have discretion to analyze all the facts in determining whether 
an arrangement rises to the level of an ostensible subcontractor.
    One commenter noted that the proposed rule also amended Sec.  
126.401(d) to provide that SBA will find that a prime HUBZone 
contractor is performing the primary and vital requirements of the 
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. The commenter sought 
clarification of that provision in light of the proposed language 
relating to general construction contractors. Specifically, the 
commenter believed the two provisions might conflict because a general 
contractor could perform 15 percent of a construction contract but 
still be unduly reliant on a

[[Page 26166]]

large business for the supervision and oversight of the contract. SBA 
agrees. For a services, specialty trade construction, or supply 
contract or order, SBA believes that meeting the applicable limitation 
on subcontracting requirement is sufficient to overcome any claim of 
the existence of an ostensible subcontractor. However, as the commenter 
noted, for a general construction contract a prime contractor could 
conceivably perform 15 percent of the contract but subcontract out all 
the supervision and oversight responsibilities to another business 
entity. If that business entity is not a similarly situated entity, 
that subcontracting could render the prime contractor ineligible due to 
the ostensible subcontractor rule. The final rule amends Sec.  
121.103(h)(3) to clarify the distinction between meeting the limitation 
on subcontracting for contracts or orders for services, specialty trade 
construction or supplies and those for general construction. To ensure 
consistency between the various programs, the final rule also makes 
similar changes to Sec.  126.601(d) for the HUBZone program, to Sec.  
127.504(g) for the WOSB program, and to Sec.  128.401(g) for the SDVO 
program.
    SBA further proposed to revise the ostensible subcontractor rule in 
light of the decision of SBA's Office of Hearings and Appeals (OHA) in 
Size Appeal of DoverStaffing, Inc., SBA No. SIZ-5300 (2011). In that 
decision, 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 proposed 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. SBA did not include plans to hire a large majority of its 
intended workforce on a contract from the incumbent contractor as a 
factor because a successful concern is often required to offer to 
qualified employees of a predecessor contract the right of first 
refusal on a subsequent contract, and must hire such individuals if 
they so opt. Because of this and other practical reasons, it is common 
for the same individuals to work for multiple different business 
concerns over time while performing the same function on follow-on 
contracts.
    SBA received comments on both sides of this issue, with seven 
commenters agreeing with including the identified Doverstaffing factors 
and nine commenters opposing their inclusion. Those opposing the 
inclusion of these factors into the regulations highlighted that 
leveraging the experience of a subcontractor is a tool needed to assist 
a small business gain experience necessary to compete and win work. 
They believed that reliance on a subcontractor's experience alone 
should never result in a finding of an ostensible subcontractor. One 
commenter argued that as long as the new prime contractor is meeting 
the limitation on subcontracting requirement, SBA should not care who 
the subcontractor is. Another commenter believed that it should not 
matter whether a subcontractor previously performed the requirement or 
was the incumbent contractor, and that all that should be looked at is 
determining whether a subcontractor is performing primary and vital 
requirements of the contract. One commenter similarly argued that 
whether the prime contractor's proposed management previously served 
with the subcontractor on the incumbent contract is also irrelevant. 
The commenter believed that as long as those individuals are now 
employed by and under the control of the prime contractor, that should 
not negatively affect whether the subcontractor is an ostensible 
subcontractor. Even three of the commenters who favored adding the two 
identified factors to regulatory text believed that identifying factors 
to consider was appropriate as long as SBA did not apply any 
mechanically. SBA agrees that the ultimate determination in every case 
depends upon who is performing the primary and vital requirements of a 
contract or order and whether a prime contractor is unusually reliant 
on a subcontractor. SBA also agrees that no factor is determinative and 
that a prime contractor should be able to use the experience and past 
performance of its subcontractors to strengthen its offer, even where a 
subcontractor is the incumbent contractor. As with the existing rule, 
SBA intends to consider all aspects of the prime contractor's 
relationship with the subcontractor and would not limit its inquiry to 
any enumerated 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. That being said, SBA believes that identifying factors that 
can be considered is helpful to contractors. As such, the final rule 
retains factors that SBA may consider but adds a provision identifying 
that no single factor is determinative. The final rules also 
specifically clarifies that a prime contractor may use the experience 
and past performance of a subcontractor to enhance or strengthen its 
offer, including that of an incumbent contractor. It also reenforces 
that it is only where that subcontractor will perform primary and vital 
requirements of a contract or order, or where the prime contractor is 
unusually reliant on the subcontractor, that SBA will find the 
subcontractor to be an ostensible subcontractor.
    One commenter requested that SBA clarify that the ostensible 
subcontractor rule does not apply to similarly-situated entities. SBA 
believes that is unnecessary as the current rule already specifies that 
an ``ostensible subcontractor is a subcontractor that is not a 
similarly situated entity'' and that language has been retained in this 
final rule.
    One commenter also questioned whether the ostensible subcontractor 
rule applied to contracts below the Simplified Acquisition Threshold 
(SAT). SBA notes that the limitations on subcontracting requirements do 
not apply to small business acquisitions with an estimated value 
between the micro-purchase threshold and the simplified acquisition 
threshold. See 13 CFR 121.406(c). That being the case, a small business 
can subcontract to any business for such contracts and it does not 
matter who is performing the primary and vital functions of the 
contract. Although SBA believes that can be inferred from the current 
regulatory language, the final rule adds clarifying language to Sec.  
121.406(c) to eliminate any confusion.
    Finally, the proposed rule revised 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

[[Page 26167]]

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. The proposed rule 
specifically incorporated into redesignated Sec.  121.103(h)(4) SBA's 
belief that revenues should be divided by ownership interest. Comments 
supported this clarification, and SBA adopts the proposed language in 
the final rule.
    In connection with the comments relating to the proposed changes to 
Sec.  121.103, SBA also received comments seeking clarification to the 
joint venture provisions in Sec.  125.8. Specifically, several 
commenters recommended that SBA provide further guidance regarding what 
decisions non-managing partners to the joint venture can participate 
in. The regulations provide that the managing venturer must control all 
aspects of the day-to-day management and administration of the 
contractual performance of the joint venture, and that other partners 
to the joint venture may participate in all corporate governance 
activities and decisions of the joint venture as is commercially 
customary. One commenter recommended that SBA add language providing 
that a non-managing joint venture partner could participate in 
decisions that were customary for joint ventures outside of the small 
business Government contracting environment. SBA believes that is 
unnecessary as it does not add anything substantively different from 
the current regulatory language. Another commenter recommended that SBA 
specifically include in the regulation instances in which a non-
managing joint venture partner's concurrence could be required and 
identified the ability of the joint venture to initiate litigation on 
behalf of the joint venture as such an instance. As previously noted, 
the managing joint venture partner must independently control all 
aspects of the day-to-day management and administration of the 
contractual performance of the joint venture. SBA believes that 
initiating contract litigation is outside the scope of the management 
of daily contractual performance and instead represents a decision that 
reasonably falls into the exception that allows other joint venture 
partners to participate in commercially customary decisions. A joint 
venture is a mutual agreement between joint venture partners to combine 
resources for a specific contract or contracts, and litigation is 
sometimes required to protect those resources. Litigation on behalf of 
the joint venture is a decision that carries significant risk for both 
partners and as a result, it is unreasonable and outside the bounds of 
customary commercial practices to limit that decision to only one 
partner. Similarly, SBA believes that requiring the concurrence of a 
non-managing joint venture partner in deciding what contract 
opportunities the joint venture should seek is also something that 
would be commercially customary. The partners to a joint venture have 
formed a joint venture in order to seek contract opportunities. Since 
the parties will be jointly and severally liable for any contracts 
awarded to the joint venture, it makes sense that all parties to the 
joint venture should have a say in what opportunities the joint venture 
pursues. The final rule adds language specifying that a non-managing 
venturer's approval may be required in determining what contract 
opportunities the joint venture should seek and in initiating 
litigation on behalf of the joint venture. That addition is not meant 
to be the only decisions in which a non-managing member may participate 
but is merely illustrative of corporate governance activities and 
decisions of the joint venture that SBA believes non-managing venturer 
participation is commercially customary.
    Another commenter also sought clarification to a perceived 
inconsistency in the regulations between Sec.  125.8(b)(2)(xii) and 
Sec.  125.8(h)(2). Paragraph 125.8(b)(2)(xii) provides that a joint 
venture must submit a project-end performance-of-work report to SBA and 
the relevant contracting officer no later than 90 days after completion 
of the contract. Paragraph (h)(2) provides that at the completion of 
every contract set aside or reserved for small business that is awarded 
to a joint venture between a prot[eacute]g[eacute] small business and 
its SBA-approved mentor, and upon request by SBA or the relevant 
contracting officer, the small business partner to the joint venture 
must submit a report to the relevant contracting officer and to SBA. 
The commenter believed that Sec.  125.8(b)(2)(xii) required a 
performance-of-work report at contract completion while Sec.  
125.8(h)(2) stated that such a report must be submitted only when 
requested by SBA or the contracting officer. The commenter 
misunderstood SBA's intent in Sec.  125.8(h)(2). That provision meant 
to require the submission of a performance-of-work report in two 
instances: first, always at the completion of the contract; and second, 
whenever requested to do so by SBA or the contracting officer prior to 
completion of the contract. In order to eliminate any confusion, the 
final rule adds clarifying language to Sec.  125.8(h)(2).

Section 121.103(i)

    The proposed rule 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. The proposed rule merely added back into the regulations 
the provision that was inadvertently removed. Several commenters 
supported adding this provision back into the regulations and no 
comments opposed. As such, SBA the final rule adopts adding this 
provision back into the regulations.

Section 121.404

    SBA proposed 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. The proposed clarification intended to treat orders 
issued pursuant to a multiple award contract that did not itself 
include price similarly to orders under multiple award contracts 
generally. SBA believes there is no justification for treating orders 
issued on these contracts differently, simply because the contract did 
not require price with initial offer. Thus, size for set-aside orders 
will be determined in accordance with subparagraphs (a)(1)(i)(A), 
(a)(1)(i)(B), (a)(1)(ii)(A), or (a)(1)(ii)(B), as appropriate, which 
means that for orders issued under any set-aside contract, size will be 
determined at the time of offer for the multiple award contract and not 
at the time of each

[[Page 26168]]

individual order unless a contracting officer requests size 
recertification with respect to an individual order.
    SBA received comments both supporting and opposing this 
clarification. Commenters generally agreed that orders for multiple 
award contracts should be treated similarly whether offers included 
price for the underlying multiple award contract itself. Several 
commenters, however, repeated previous concerns raised with SBA 
regarding the amendments to Sec.  121.404 that were made in 2020. 
Section 121.404 states that where an order under an unrestricted 
multiple award contract is set-aside exclusively for small business 
(i.e., small business, 8(a) small business, service-disabled veteran-
owned small business, HUBZone small business, or women-owned small 
business), a concern must recertify its size status and qualify as a 
small business at the time it submits its initial offer, which includes 
price, for the particular order. Although the proposed rule did not 
seek to change that provision, several commenters voiced the view that 
that provision should not apply to previously awarded multiple award 
contracts.
    A firm's status as a small business does not generally affect 
whether the firm does or does not qualify for the award of an 
unrestricted multiple award contract. As such, competitors are very 
unlikely to protest the size of a concern that self-certifies as small 
for an unrestricted multiple award contract. In SBA's view, when a 
contracting officer sets aside an order for small business under an 
unrestricted multiple award contract, the order is the first time that 
size status is important because competition is being limited under the 
contract. That is the first time that some firms will be eligible to 
compete for the order while others will be excluded from competition 
because of their size status. SBA never intended to allow a firm's 
self-certification for the underlying unrestricted multiple award 
contract to control whether a firm is small at the time of an order is 
set-aside for small business years after the multiple award contract 
was awarded. These few commenters believed that SBA attempted to 
retroactively change the rules pertaining to previously awarded 
unrestricted multiple award contracts. SBA disagrees. Small business 
set-aside orders under unrestricted vehicles are completely 
discretionary. When a contracting officer exercises this discretion, 
Federal Acquisition Regulation (FAR, Title 48 of the Code of Federal 
Regulations) Part 19 and SBA rules apply and change the eligibility 
requirements of the contract for that order. For example, the 
contractor must comply with the applicable limitations on 
subcontracting for that order (whereas the limitations on 
subcontracting do not generally apply to unrestricted contracts). When 
a procuring agency for the first time decides to set aside a specific 
order under an unrestricted multiple award contract for small business, 
the agency is making an exception to the fair opportunity regularly 
provided to all the contract holders to be considered for each order 
under the unrestricted contract. Thus, it follows that a business 
concern must qualify as small for an order set aside for small business 
under SBA's regulations in effect at the time of the order to ensure 
that the exception is applied appropriately at the order level because 
being a small business concern was not a requirement for any awardees 
under the unrestricted contract and verifying awardees' size status was 
not prerequisite to awarding the unrestricted contract. Moreover, the 
applicable size standard for any specific order set-aside for small 
business would be the one currently codified in SBA's regulations (not 
the one that was in effect at the time the underlying multiple award 
contract was awarded). All firms that self-certified as small for the 
underlying multiple award contract will continue to be considered to be 
small businesses for goaling purposes for all orders issued under the 
multiple award contract on an unrestricted basis.
    SBA also proposed 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 added language to 
clarify SBA's current intent. The comments supported this 
clarification, and SBA adopts the proposed language in this final rule.
    The proposed rule also clarified the recertification requirements 
set forth in Sec.  121.404(g) for joint ventures. Specifically, the 
proposed rule added a new Sec.  121.404(g)(6) which 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 also clarified 
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. Commenters supported both of those 
clarifications. As such, SBA adopts them as final.

Sections 121.404(a)(1)(i)(B), 121.404(a)(1)(ii)(B), 124.501(h), and 
124.502(a)

    Sections 121.404(a)(1)(i)(B) and 121.404(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). The proposed rule clarified that because 
size is something SBA looks at in making an eligibility determination 
in accepting a sole source offering, 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). The proposed rule amended Sec. Sec.  
121.404(a)(1)(i)(B), 121.404(a)(1)(ii)(B), 124.501(h), and 124.502(a) 
to clarify that position. Although a few commenters opposed this 
clarification, the majority of commenters supported it. It has always 
been SBA's interpretation of its statutory authority that a firm must 
be an eligible Participant on the date of any

[[Page 26169]]

8(a) sole source award. As noted, an eligibility determination includes 
size. As such, the final rule adopts the language proposed that a 
Participant must currently qualify as a small business for any sole 
source award.

Section 121.411(c)

    The proposed rule corrected an inconsistency between Sec.  
121.411(c) and Sec.  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 added 
the over the simplified acquisition threshold condition to Sec.  
121.411(c) and adjusted the language in Sec.  125.3(c)(1)(viii) to make 
the two provisions consistent. SBA received three comments regarding 
this provision. All three supported SBA's proposal to resolve the 
inconsistency in the regulations. As such, SBA adopts the proposed 
language in this final rule.

Section 121.413

    Section 121.413 is currently a Reserved section, with no text. This 
final rule merely removes Sec.  121.413 entirely. Section 121.401 
currently refers to the rules set forth Sec. Sec.  121.401 through 
121.413. With the elimination of Sec.  121.413, the final rule also 
amends this reference to instead refer to the rules set forth in 
Sec. Sec.  121.401 through 121.412.

Sections 121.506 and 121.507

    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 its control such as natural disasters, 
national emergencies, or other extenuating circumstances.
    As proposed, SBA added Sec.  121.507(d) to allow the SBA's Director 
of Government Contracting (D/GC) 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 sought 
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.
    SBA received ten comments on the proposed rule with five supporting 
the proposed amendment and five opposing it. Commenters in opposition 
focused on the importance of the 30/70 requirement to ensure access to 
timber for small businesses and expressed concern that the waiver could 
weaken the program. While generally in opposition to the waiver, two of 
the five comments suggested that if SBA were to finalize the proposed 
amendment, a waiver request must meet a set of strict criteria to 
ensure that all avenues for compliance have been exhausted. SBA 
recognizes that the 30/70 requirement is an integral part of the Small 
Business Timber Set-Aside Program and is committed to a full and fair 
implementation of the program. SBA does not intend to weaken the 
requirement with this amendment, it merely establishes the D/GC's 
authority to approve a waiver in limited circumstances when justified. 
Historically, SBA has granted few waivers and only in extremely rare 
circumstances. Due to that rarity, SBA has no internal procedure to 
process requests or established criteria to evaluate and approve 
waivers when needed. This amendment gives SBA the opportunity to set 
procedure and criteria for processing waiver requests in the future. 
SBA will continue to apply a strict standard and does not intend to 
grant a waiver in circumstances of inconvenience, changes in market 
value, ignorance of contract requirements, or unsupported claims of 
changed conditions. Accordingly, SBA implements the Sec.  121.507(d) as 
proposed.
    SBA also received comments that urged the agency to amend 
regulations to reflect the revised terms of the Memorandum of 
Understanding (MOU) signed by SBA and Forest Service (FS) in 2020. With 
the updated terms of the MOU, SBA and FS agreed to revise the 
computation of market share to include timber volume sold under 
Stewardship Integrated Resource Timber Contracts. To date, SBA has not 
amended its regulations to reflect the revised agreed upon computation 
of market share. The commenter recommended that SBA's regulations 
should be updated to merely include the policy included in the MOU 
agreed upon by SBA and FS to ensure that that policy is consistently 
applied and to avoid any confusion regarding the policy. SBA agrees and 
adopts this comment.
    The MOU governs timber sales by FS under the Small Business Timber 
Set-Aside Program and establishes guidelines for determining ``fair 
proportion,'' sets a five-year re-computation period for determining 
the base average shares of timber purchases and establishes a 
``trigger'' mechanism for initiating set-aside timber sales. In 2016, 
SBA proposed a change to regulations that included both Integrated 
Resource Timber Contracts and Integrated Services Timber Contracts in 
the small business market share calculation. (81 FR 66199). Although 
SBA received comments supporting the amendment, it did not become final 
due to ongoing negotiations with FS on the updated MOU. Ultimately, the 
MOU included only Integrated Resource Timber Contracts in the small 
business market share calculation. To reflect the 2020 update to the 
MOU, SBA amends its regulations at Sec.  121.506 to add relevant 
definitions and adds Sec.  121.507(e) to include Integrated Resource 
Timber Contracts in the small business market share calculation.

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 clarified that when an SBIR/STTR offeror 
is determined to be a joint venturer with its ostensible subcontractor, 
all rules applicable to joint ventures apply. This means that SBA will 
apply Sec.  121.702(a)(1)(iii) or Sec.  121.702(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. SBA received 
five comments in response to this clarification. All five supported the 
change. The commenters felt that if SBA determines that a subcontractor 
really is a joint venture partner because it is

[[Page 26170]]

performing primary and vital aspects of the requirement, it makes sense 
that all requirements that apply to joint ventures generally would 
apply to the relationship deemed in effect to be a joint venture. SBA 
adopts the proposed language in this final rule.
    Section 121.702(c) relates to size and affiliation for the SBIR/
STTR programs. Some of the exceptions to affiliation that are 
applicable to the SBIR/STTR programs are listed in Sec.  121.702(c). 
However, others are listed in the general exceptions to size 
affiliation that are located in section 121.103(b). Currently, there is 
an exception to affiliation noted in Sec.  121.103(b)(1) for business 
concerns owned in whole or substantial part by Small Business 
Investment Companies (SBICs) licensed under the Small Business 
Investment Act of 1958, as amended. Pursuant to Sec.  121.103(b)(8), 
this exception applies to entities awarded SBIR or STTR contracts or 
grants that are wholly or substantially owned by SBICs. SBA received a 
comment recommending that SBA specifically clarify that the exception 
applies to the SBIR/STTR programs. In response, the final rule 
clarifies this longstanding exception to affiliation and its 
applicability to the SBIR/STTR programs by specifically referencing the 
exception at Sec.  121.103(b)(1) in a new Sec.  121.702(c)(11).

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 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 will remove any confusion and provide more 
consistent implementation of the size protest procedures. The proposed 
rule adopted 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. SBA received ten comments on this 
change. All commenters supported making the protest language for all 
SBA small business programs identical. As such the final rule make 
conforming 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. The proposed rule provided 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 also authorized 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. SBA received four comments supporting this 
change. Without any opposing comments, SBA adopts the language as 
proposed.

Sections 121.1004(a)(ii), 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. The proposed rule 
specifically provided 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. Eight commenters supported this 
change, noting that the change was needed in order to preserve protests 
rights when an initial low bidder ultimately does not receive the 
award. SBA adopts the proposed provision in this final rule.
    The final rule makes this change in Sec.  121.1004(a)(ii) for size 
protests, 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. Although the proposed rule also amended Sec.  
125.28(d)(2) for protests relating to SDVO status, this final rule does 
not amend provisions relating to the timeliness of SDVO status protests 
because SBA included the same provision in the final rule implementing 
the Veteran Small Business Certification Program and is already 
contained in Sec.  134.1004(a)(4) of SBA's regulations. See 87 FR 73400 
(Nov. 29, 2022).

Section 121.1004

    The proposed rule added Sec.  121.1004(f) to specify that size 
protests may be filed only against an apparent

[[Page 26171]]

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 provided additional clarity to Sec.  121.1004(e), which 
specifies that premature protests will be dismissed. SBA received three 
comments, all supporting this clarification. The final rule adopts the 
proposed language.
    Where an agency decides to reevaluate offers as a corrective action 
in response to a protest at the Government Accountability Office (GAO), 
the proposed rule added 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, the proposed rule 
authorized them to again have the opportunity to protest the size of 
the apparent successful offeror within five business days after such 
notification. One commenter agreed with proposed Sec.  121.1004(g) as 
written, and one commenter agreed with the intent of the proposal but 
sought further clarification. That commenter first recommended that all 
protests under FAR subpart 33.1 should be treated similarly, meaning 
that the same consequences should result where there is an agency level 
protest, a protest at GAO or a case filed regarding the affected 
procurement at the Court of Federal Claims. SBA agrees and has made 
that clarification in the final rule both here and in Sec.  121.1009. 
Additionally, the commenter recommended that the regulation allow a 
procuring agency to request that a size determination be completed, and 
for SBA in its discretion to process the size protest, despite 
corrective actions. It is SBA's policy that with respect to a specific 
contract, SBA will generally process size protests relating only to the 
apparent successful offeror. Where a corrective action could cause a 
procuring agency to change who it selects as the apparent successful 
offeror, SBA would not agree to continue to process a size protest 
relating to the initially identified apparent successful offeror. 
Nevertheless, if a procuring agency can demonstrate that the corrective 
action would not result in a change in the apparent successful offeror, 
SBA believes that it could continue to process the size protest. The 
final rule adds language providing that SBA will complete the size 
determination where the procuring agency makes a written request to SBA 
within two business days of the agency informing SBA of the corrective 
action and demonstrates that the corrective action will not result in a 
change of the apparent successful offeror. SBA will not, however, 
continue to process a size protest where the size protest involves size 
issues that are determined as of the date of final proposal revision 
per Sec.  121.404(d).

Section 121.1009

    Section 121.1009 details the procedures SBA's Government 
Contracting Area Offices use in making formal size determinations. 
Paragraph 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. As noted 
above, 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 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 
incorporated 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 proposed rule noted that 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. 
Similar to the comment in response to proposed Sec.  121.1004(g), one 
commenter believed that if SBA is going to suspend processing a size 
protest pending the outcome of a GAO protest, the same should be done 
for agency level protests and cases filed with the Court of Federal 
Claims relating to the affected procurement. The commenter also 
recommended that if the bid protest is not resolved within 40 days, the 
SBA Area Office should resume consideration of the size protest and 
issue a formal size determination within 15 business days thereafter, 
if possible. SBA disagrees with this recommendation. Again, SBA's 
policy is to process size protests only regarding firms that are in 
line for award (i.e., for firms that have been selected as the apparent 
successful offerors). If the apparent successful offeror could change 
in light of the FAR subpart 33.1 protest, it does not make sense to SBA 
to recommence processing a size protest regarding the firm initially 
determined to be the apparent successful offeror, regardless of the 
amount of time that has passed since the FAR subpart 33.1 protest was 
filed. As such, the final rule amends the language to clarify that SBA 
will suspend processing a size protest whenever a FAR subpart 33.1 
protest is filed regarding the same procurement, but does not adopt the 
recommendation that SBA restart processing the protest if a certain 
amount of time passes. If the FAR subpart 33.1 decision does not change 
the apparent successful offeror, SBA will generally issue a formal size 
determination within 15 business days of the decision. If the decision 
results in a cancellation of the award or a change of the apparent 
successful offeror, SBA will dismiss the protest as moot. If the award 
is cancelled and re-evaluation or other corrective action takes place, 
interested parties may file a timely size protest with respect to the 
newly identified apparent successful offeror after the notification of 
award. Where re-evaluation results in the selection of the same 
apparent successful offeror, a timely size protest may be filed with 
respect to that firm.

Sections 121.1009(g)(5), 126.503(a)(2), 127.405(d), and 128.500(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 statute 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

[[Page 26172]]

the determination affects the eligibility of the concern to be awarded 
the contract. The proposed rule implemented these provisions by 
amending SBA's regulations in Sec.  121.1009(g)(5) (for size 
determinations), Sec.  125.30(g)(4) (for SDVO status determinations), 
Sec.  126.503(a)(2) (for HUBZone status determinations), and Sec.  
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 did 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 required SBA to make such a change within four business days. 
Several commenters supported the proposed regulatory changes in 
response to the statutory change. A few commenters also complained 
about difficulties they encountered trying to update SAM.gov, but those 
issues are not relevant to the statutory requirements or SBA's 
implementation of those requirements.
    The final rule adopts the language proposed with a few 
modifications. Because SBA renumbered all SDVO provisions when 
implementing the Veteran Small Business Certification Program, this 
final rule implements the provisions relating to section 863 for SDVO 
status in a new Sec.  128.500(d) instead of Sec.  125.30(g)(4) as 
proposed. See 87 FR 73400 (Nov. 29, 2022). To take into account SBA's 
new authority to certify and decide protests relating to VOSB status, 
the final rule also includes VOSB status as something that needs to be 
changed in response to a final SBA determination finding a firm 
ineligible as a VOSB. Additionally, the final rule applies the two-day 
requirement on self-certifications to situations where SBA denies 
applicants' requests for VOSB or SDVOSB certification or for WOSB 
certification. Those changes are reflected in Sec.  128.302(f) for 
VOSB/SDVOSB and in Sec.  127.304(g) for WOSB. For WOSB, the two-day 
requirement applies where SBA's determination is based on the ownership 
or control of the applicant.
    SBA's protest decisions are appealable to OHA, and VOSB/SDVOSB 
certification decisions also are appealable. If a participant or 
applicant has appealed SBA's determination, the two-day requirement 
does not apply until OHA issues a final decision finding the firm 
ineligible. If there is no appeal available, the two-day requirement 
applies immediately after the firm receives SBA's determination that 
the firm is ineligible. If an appeal is available but the firm 
ultimately chooses not to appeal the decision, the two-day requirement 
applies immediately after the right to appeal lapses.
    One commenter sought clarification as to whether there are any 
consequences if a firm fails to change its status timely in SAM.gov. 
Specifically, the commenter questioned whether a failure to change 
status within two days would be a cause to initiate debarment or 
suspension proceedings. Under the provisions of section 863, the 
consequence of a firm failing to change its status is that SBA would 
have authority to change the status on behalf of the firm. SBA will 
work with the System for Award Management to exercise such authority, 
but SBA does not presently have the ability in SAM.gov to change a 
firm's certification status without the firm taking action to accept 
the change.
    Section 863 also requires firms to alert agencies with which the 
firm has a pending offer when the firm receives a relevant negative 
status determination. Failure to do so in that instance could lead to 
protests or penalties. Initiating a debarment or suspension action 
depends on the facts. If the only thing a firm did was not change its 
status in SAM.gov within two days, SBA does not believe that would be 
sufficient cause for debarment or suspension. Failure to notify 
contracting officers on pending procurements of a firm's change in 
status could be if SBA believed there was an intent to misrepresent the 
firm's status in order to win an award. Submitting offers for new set-
aside awards would be. Similarly, failure to take timely action to 
allow an SBA status change to be reflected on the firm's SAM.gov 
profile could also be grounds for government-wide debarment or 
suspension if SBA believed that the firm's failure to accept the change 
was an intent to conceal the status change or otherwise deceive 
procuring agencies of its current status. SBA does not believe that 
that needs to be addressed in this regulation as the debarment and 
suspension regulations provide authority to initiate actions where a 
firm intentionally misrepresents its size or status.

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 
section 121.1204 identifies the procedures for requesting and granting 
waivers.
    The proposed rule sought 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 clarified that for a multiple item procurement, a contracting 
officer must specifically identify each item for which a waiver is 
sought when the procuring agency believes that at least 50 percent of 
the estimated contract value is available only from other than small 
business manufacturers and processors. Of course, if at least 50% of 
the estimated contract value of the contract is composed of items 
manufactured or processed by small business, then a waiver of the 
nonmanufacturer rule is not required and there is no requirement that 
each item acquired in a multiple-item acquisition be manufactured or 
processed by a small business. The proposed rule also clarified that 
because a waiver is granted for specific items, 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.
    SBA received comments both supporting and opposing the 
clarification that a contracting officer must specifically identify 
each item for which a waiver is sought. Those opposing the 
clarification believed it would disrupt and delay procurements, 
negatively affect the supply chain and the delivery of services to 
warfighters, and significantly harm small business opportunities. One 
commenter stated

[[Page 26173]]

that it understood why SBA proposed to require contracting officers to 
specifically identify each item in the multi-item procurement for which 
a contract-specific waiver is sought but was concerned that this will 
increase the administrative burden and make contracting officers less 
likely to request contract-specific waivers. Those supporting the 
clarification stated that the regulations already require this and that 
it is the appropriate approach to ensure that small business is 
actually benefitting from set-aside contracts. One commenter believed 
that if most of the items to be supplied through a multiple item 
procurement really are not made by small business manufacturers, maybe 
that procurement should not be set-aside for small business. It is true 
that small business resellers or nonmanufacturers would still benefit 
from such a procurement, but the value of the contract going to those 
small business nonmanufacturers versus the total value of the contract 
can be only a fraction of what could go to large business 
manufacturers. Another commenter stated too many times an agency uses 
some broad waiver (that doesn't specify exact items) to supply the 
product of a large business to the detriment of legitimate small 
business manufacturers. That commenter believed that it is fine to help 
small business non-manufacturers, but not at the expense of small 
business manufacturers.
    One commenter believed that proposed Sec.  121.1203(f) seemed to 
contradict Sec.  121.406(d)(1). Section 121.406(d)(1) provides that if 
at least 50% of the estimated contract value of a multiple item 
procurement is composed of items that are manufactured by small 
business concerns, then a waiver of the nonmanufacturer rule is not 
required. Proposed Sec.  121.1203(f) provided that 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 agrees that proposed Sec.  
121.1203(f) was misleading. SBA intended that provision to apply only 
where waivers were necessary to meet at least 50% of the value of the 
contract, not where it is clear that at least 50% of the value of the 
items to be procured will be supplied by small business. In addition, 
waivers are needed only to the extent that would enable at least 50% of 
the total estimated value of the items to be purchased to come from 
small business manufacturers or from large businesses for those items 
subject to a waiver. In other words, small plus waiver must equal at 
least 50% of the value of the contract. Small plus waiver does not need 
to equal 100% of the value of the contract. A contracting officer can 
select some items that are not manufactured by small business to 
request a waiver, but not others. As long as at least 50% of the 
anticipated value of the items to be procured in the aggregate come 
from small business or large business subject to a waiver, then the 
nonmanufacturer rule is met. The final rule clarifies that a waiver 
need not be sought if the conditions in Sec.  121.406(d)(1) are present 
(i.e., where at least 50% of the estimated contract value of the items 
to be procured are manufactured by small business concerns). The final 
rule also clarifies that a contracting officer need not seek a waiver 
for each item for which the procuring agency believes no small business 
manufacturer or processor can reasonably be expected to offer, but 
rather must seek a waiver with respect to such items in an amount that 
would bring the total estimated value of items to be supplied by small 
business and items subject to a waiver to be at least 50% of the value 
of the contract.
    SBA again notes that prior to the proposed rule, SBA's regulations 
already required a contracting officer to provide ``[a] definitive 
statement of the specific item to be waived and justification as to why 
the specific item is required'' in order for SBA to grant a contract 
specific waiver. 13 CFR 121.1204(b)(1)(i). Thus, it is not a change in 
policy to require that in a multiple item procurement each item for 
which a waiver is sought must be specifically identified. However, SBA 
also understands the concern that specifying every part of a 
multifaceted end item could be overly burdensome. For example, aircraft 
X has many thousands of parts that make up the aircraft. To specify 
every part of the aircraft that might need to be replaced as a separate 
item for which a waiver must be sought would be burdensome. SBA does 
not expect that. In such a case, the waiver request should state spare 
parts relating to aircraft X as the item for which a waiver is sought. 
However, a waiver request cannot be so broad as to have no real 
identification (e.g., all medical supplies). SBA has added clarifying 
language in the final rule to address what an ``item'' is for which a 
waiver needs to be sought.
    SBA also does not agree that contracting officers would be less 
likely to use set-asides. In order to have a set-aside, at least 50% of 
the value of the expected items to be procured in the aggregate must 
come from small business manufacturers or large business manufacturers 
for which a waiver (either class or contract specific) has been 
granted. SBA has been told that more than 50% of the value of these 
multiple item procurements is often supplied by small businesses. When 
that is the case, waivers for individual items would not be required. 
Where at least 50% of the estimated value of items to be procured are 
not manufactured by small business, the contracting officer should 
request a waiver of one or more specific items that are required under 
the contract to achieve that 50% value requirement. And, as identified 
above, the waiver request can be somewhat broad if it is also specific 
(e.g., all spare parts relating to aircraft X). SBA also notes that 
contracting officers should be able to rely on past performance. In 
other words, for a follow-on multiple item procurement if more than 50% 
of the value of the items on the previously awarded contract came from 
small business manufacturers or large business manufacturers for which 
the identified item(s) supplied were subject to a contract specific 
waiver, the follow-on contract should be set-aside for some type of 
small business. Contracting officers can project future compliance with 
the non-manufacturer rule based on past performance, and not knowing 
precisely what will be purchased under a multiple item procurement 
should not prevent the procurement from being set aside for small 
business.
    The proposed rule also added a provision that prohibited 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). SBA firmly believes that 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

[[Page 26174]]

quantity or time constraints required by the contract could become 
available to meet the agency's requirements. As an alternative, SBA 
noted in the supplementary information to the proposed rule that SBA 
was also 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. The proposed rule specifically 
asked for comments on both approaches. SBA received three comments on 
the proposal relating to long-term contracts. All three favored the 
alternative approach which would allow a contracting officer to request 
a second contract-specific waiver to be effective after the first five 
years of a contract where the contracting officer can demonstrate that 
a waiver is still needed. SBA adopts the alternative approach in this 
final rule. This will make waivers relating to long-term contracts 
similar to what is required for a follow-on contract to a normal base 
and four option years contract. In that context, 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. The same will be required 
for a long-term contract. A procuring agency will be required to 
conduct new market research and demonstrate that a waiver is still 
needed beyond the first five years.
    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 waiverdecision 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 beyond 
five years on 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 specifically 
incorporated this policy into a new Sec.  121.1204(b)(5). SBA received 
three comments on this provision. Two commenters indicated that they 
had no objection to the proposal. One comment recommended that SBA 
should consider allowing a waiver decision to last for two years but 
did not provide accompanying rationale for that position. Presumably, 
the commenter believes that some procurement actions take longer than 
one year to finalize. As noted above, circumstances (availability and 
new manufacturers coming into the market) can change in a year. SBA 
believes that is the appropriate amount of time for a contract specific 
waiver to last for a pending procurement. SBA adopts the proposed 
language as final in this rule.
    Although SBA believes that there is no current ambiguity, the 
proposed rule also added 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 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 added this 
language nevertheless to dispel any possible misunderstanding. There 
was no opposition to this clarification, and SBA adopts it as final.
    Finally, the proposed rule clarified 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. SBA received 
no comments specifically addressing this provision. As such, SBA adopts 
it as final.

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 updated the reference 
to the correct website. A few commenters supported this update, and SBA 
adopts adding 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 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 made 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 
provided 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. 
SBA received seven comments on proposed Sec.  124.102. All comments 
received supported the proposed change that a concern whose application 
is denied due to size by 8(a) BD program officials should be able to 
request a formal size determination. The commenters also agreed that if 
size is the only reason for decline and OHA reverses SBA, the firm 
should be admitted to the 8(a) BD program without any further action 
being necessary on the part of the firm. As such, SBA adopts the 
proposed language in this final rule.

[[Page 26175]]

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 
changed the words physical handicap to identifiable disability. SBA 
received two comments supporting the proposed change and no comments 
objecting to it. As such, SBA adopts the proposed language in this 
final rule.

Section 124.104

    Section 124.104 specifies the rules pertaining to whether an 
individual may be considered economically disadvantaged. Paragraph 
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 changed 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. SBA received 
four comments supporting the change and one comment in opposition. The 
commenter opposing the change believed that removing the requirement 
could water down the economically disadvantaged criteria. SBA 
disagrees. The change will not affect SBA's ability to seek additional 
information relating to an IRA where appropriate. It merely eliminates 
the unnecessary burden of requiring an applicant to submit such 
information in every instance. SBA adopts the proposed change in this 
final rule.
    This rule also deletes 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. Paragraph 
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 added 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. SBA received four 
comments regarding the proposed clarification that a mentor in the same 
or similar line of business can own up to 40 percent of its 
prot[eacute]g[eacute] firm. All four commenters supported the 
clarification. The final rule adopts the proposed language.
    Paragraph 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. As noted in the proposed rule, 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. 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) 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 clarified that a change of ownership could apply to a 
former Participant as well as to a current Participant. SBA received 
nine comments supporting this clarification and no comments opposing 
it. The final rule adopts the proposed language.

[[Page 26176]]

    Paragraph 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. 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 provided 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. Three commenters supported 
the change. One commenter supported the change but sought further 
clarification. That commenter believed that the term ``immediate family 
members'' in the proposed rule need to be defined and suggested that 
SBA either reference the list of family members stated in Sec.  
121.103(f), or add a definition of the term to Sec.  124.105(i)(2). 
That commenter also believed that it was inconsistent for the change to 
cover immediate family members, but not any other ``persons with an 
identity of interest'' under Sec.  121.103(f). Given that SBA treats 
persons with an identity of interest (regardless of type) as being 
``one party,'' the commenter recommended that SBA should add persons 
with an identity of interest generally, such as individuals who are not 
family members but through common investments are deemed to be ``one 
party'' under Sec.  121.103(f). SBA agrees and has made those changes 
in the final rule.

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 Sec.  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 added language clarifying 
that intent. SBA received eight comments in response to the proposed 
clarification to Sec.  124.107. All eight comments supported the 
proposed clarification that a firm can demonstrate potential for 
success with prior commercial and government contracts, including state 
and local government contract work. As such, SBA adopts the proposed 
language in this final rule.

Section 124.108

    Section 124.108 establishes other eligibility requirements that 
pertain to firms applying to and participating in the 8(a) BD program. 
Paragraph 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 added language clarifying 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 will be eligible for the program. Five 
commenters supported this clarification as proposed. One commenter 
believed that the terms ``financial obligations owed'' and ``financial 
obligations have been settled and discharged/forgiven by the Federal 
Government'' are vague. SBA disagrees. The eligibility requirement 
pertaining to owing federal obligations to the Government has been in 
SBA's regulations for some time without confusion as to its meaning. 
Specifically, the regulation prior to the proposed change provided that 
``[n]either a firm nor any of its principals that fails to pay 
significant financial obligations owed to the Federal Government . . . 
is eligible for admission to or participation in the 8(a) BD program.'' 
The proposed rule merely attempted to clarify that if the Government 
has settled a debt (i.e., accepting less than the full amount owed to 
discharge the debt), the firm/individual would not be barred from 
participating in the 8(a) BD program on that basis alone. SBA adopts 
the proposed language in this final rule.

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. The proposed rule sought to make two 
changes with respect to that provision. First, the proposed rule 
clarified that 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. 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 proposed to add language allowing 
tribally-owned concerns organized under tribal law to waive sovereign 
immunity in any similar documents authorized under tribal law.
    The proposed rule also sought to make a change relating to the 
potential for success requirement for tribes. 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

[[Page 26177]]

a tribally-owned concern to demonstrate its business history. The 
proposed rule added 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 primary industry 
in which it seeks 8(a) BD certification.
    SBA received six comments supporting these two changes and no 
comments opposing them. As such, SBA adopts the proposed language as 
final in this rule. SBA also received two comments pertaining to other 
provisions of Sec.  124.109 that were not addressed in the proposed 
rule. Because any potential changes pertaining to those provisions are 
outside the scope of this rulemaking, SBA does not address them in this 
final rule.

Section 124.110

    The proposed rule added 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 clarified 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 made that requirement explicit in the regulations.
    SBA received six comments supporting these two changes and no 
comments opposing them. Although one comment supported allowing an 
individual to be involved in controlling two NHO-owned 8(a) concerns, 
the commenter questioned what SBA means by a ``Native Hawaiian leader'' 
in the context of this regulation. The proposed language provided that 
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. This language was copied from the provision in 
Sec.  124.109 for tribally owned firms. In the context of a tribe, the 
term ``leader'', as in tribal leader, has some definite meaning. SBA 
agrees that in the context of Native Hawaiians it does not. As such, 
the final rule adopts the proposed language with one change. The final 
rule deletes the reference to Native Hawaiian leader. SBA also received 
one comment questioning why NHOs cannot use holding companies as part 
of their ownership of 8(a) BD applicants and Participants as tribes and 
ANCs can. Although this issue is not part of this rulemaking, SBA will 
nevertheless address the reason for the disparate treatment. Section 
8(a)(4)(A) of the Small Business Act, 15 U.S.C. 637(a)(4)(A), provides 
in pertinent part that the term ``socially and economically 
disadvantaged small business concern'' means any small business concern 
which is at least 51 percent unconditionally owned by ``(II) an 
economically disadvantaged Indian tribe (or a wholly owned business 
entity of such tribe), or (III) an economically disadvantaged Native 
Hawaiian organization . . .'' As noted, the statute specifically 
authorizes tribes (which is also defined to include ANCs) to own an 
8(a) Participant through ``a wholly owned business entity of such 
tribe'' or in other words through a holding company. The statute does 
not provide similar authority for NHOs. NHOs have the same statutory 
requirement as socially and economically disadvantaged individuals, 
meaning that they must directly own at least 51 percent of an applicant 
or Participant concern. SBA does not have the authority to change that 
statutory requirement.

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. Sec.  124.107(a) and 124.107(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. Sec.  124.107(a) and 124.107(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 identified these four threshold issues 
that must be addressed before an application will be reviewed. SBA 
received two comments supporting identifying these four reasons that 
will stop the processing of an 8(a) BD application, one comment stating 
that threshold application questions are for SBA to determine, and no 
comments opposing this identification. The final rule adopts the 
proposed language.

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

[[Page 26178]]

such, the proposed rule removed Sec.  124.302(b)(5), as not consistent 
with the statutory oversight responsibilities. The supplementary 
information to the proposed rule also noted that the requirements for 
graduation are adequately set forth in Sec.  124.302(a)(1) of SBA's 
regulations and requested comments on whether the entire Sec.  
124.302(b) can be eliminated as unnecessary.
    SBA received nine comments supporting the removal of Sec.  
124.302(b)(5). In addition, seven commenters recommended that the 
entire Sec.  124.302(b) be removed as the provisions in Sec.  
124.302(a)(1) adequately establish the requirements for graduation. One 
commenter also believed that the language in Sec.  124.302(b) is overly 
subjective and should be eliminated on that basis as well. In response 
to this comment, SBA more closely reviewed Sec.  124.302(b). Although 
the paragraph is titled ``Criteria for determining whether a 
Participant has met its goals and objectives,'' much of Sec.  
124.302(b) pertains to the overall financial condition of the 8(a) BD 
Participant and not to the specific goals and objectives contained in 
the Participant's business plan. For that reason and because SBA agrees 
that Sec.  124.302(a)(1) adequately explains what graduation means and 
what must occur in order for a firm to be graduated from the 8(a) BD 
program, the final rule removes the entire Sec.  124.302(b) as 
unnecessary.

Section 124.304

    Section 124.304 sets forth the procedures for early graduation and 
termination from the 8(a) BD program. The proposed rule added a 
provision to clarify that 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. SBA 
received two comments supporting this provision and no comments 
opposing it. The final rule adopts the proposed language. SBA continues 
to believe requiring SBA to go through the normal process to terminate 
a Participant from the 8(a) BD program (i.e., providing an intent to 
terminate notice and a 30-day opportunity to respond) is unnecessary 
where it can be demonstrated that the concern has ceased its business 
operations. Nevertheless, the final rule requires SBA to notify the 
concern of its termination and provide it the right to appeal that 
decision to OHA.

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). The proposed rule clarified that, consistent with the 
statutory language, 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 merely prioritized 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 provided 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.
    SBA received 11 comments in response to the proposed change to 
Sec.  124.402. Seven comments supported the rule to prioritize business 
plan review and approval for new 8(a) firms that were offered a sole 
source 8(a) requirement or were the apparent successful offeror for a 
competitive 8(a) requirement. Three comments opposed requiring business 
plan approval prior to a firm being awarded any 8(a) contract. These 
commenters believed that if a firm submitted its business plan to SBA 
within 60 days of certification, it should not matter whether SBA 
approved it before award. They rationalized that if the firm did 
everything it needed to do, the firm should not be penalized by SBA's 
failure to approve the business plan. As indicated above, SBA again 
notes that the authorizing legislation requires business plan approval 
prior to award. SBA cannot waive or disregard that statutory 
requirement. However, the intent of the proposed regulation was to 
ensure that business plan approval occurred in connection with a normal 
eligibility determination and that by doing so every Participant on 
whose behalf a sole source 8(a) requirement is offered or who was 
identified as the apparent successful offeror in an 8(a) competitive 
procurement would receive the award. Prioritizing business plan review 
and approval will ensure that such approval can be timely done and not 
adversely affect any 8(a) procurement. One comment recognized the 
statutory requirement but was concerned that performing a business plan 
review as part of an eligibility determination would slow down 
eligibility determinations and could cause procuring agencies to avoid 
using the 8(a) program. SBA disagrees. Currently, SBA generally 
performs an eligibility determination (either for a sole source 
offering or a competitive award) within five days, unless SBA seeks and 
a procuring agency agrees to a longer period. SBA's intent is to review 
and approve business plans within that same five-day period. Thus, SBA 
does not envision any additional time being added to the normal 
eligibility review timeframe. The final rule adopts the proposed 
language.

Section 124.403

    Section 124.403 sets forth the requirements relating to business 
plans. Paragraph 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 clarified that a Participant must submit

[[Page 26179]]

a new or modified business plan only if its business plan has changed 
from the previous year.
    SBA received seven comments supporting the provision to require 
business plan submissions only if a business plan had changed or been 
modified from the previous year and no comments opposing the provision. 
The commenters believed that eliminating needless submissions would 
reduce the paperwork burden on Participants and enable them to more 
thoroughly focus on business development. The final rule adopts the 
proposed language.

Sections 124.501, 126.609, 127.503(e), and 128.404(d)

    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 Sec.  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 added a sentence to Sec.  124.501(b) to clarify SBA's 
position that prohibits a contracting activity from restricting an 8(a) 
competition to Participants that are also certified HUBZone small 
businesses, certified WOSBs or certified SDVO small businesses. SBA 
also proposed 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. As noted earlier, the SDVO program 
regulations have been moved to a new part 128 as part of implementing 
the Veteran Small Business Certification Program. See 87 FR 73400 (Nov. 
29, 2022). As such, the final rule amends Sec.  128.404(d) as opposed 
to Sec.  125.22(d) as proposed.
    SBA received ten comments supporting the clarification to more 
clearly set forth SBA's position prohibiting a contracting activity 
from restricting a competition to firms with multiple certifications. 
One commenter supported the provision but also recommended further 
clarification. Specifically, the commenter believed that agencies could 
follow the prohibition (i.e., not limiting competition to firms with 
multiple certifications) but circumvent SBA's intent by providing 
significant evaluation preferences to firms with one or more other 
certifications, and thus exclude firms with one certification from any 
meaningful opportunity to be awarded a specific contract or order. The 
commenter recommended that SBA amend this provision to also specify 
that a procuring activity also cannot give additional evaluation points 
or any evaluation preference to firms having one or more additional 
certifications. SBA agrees and has added this language to each of the 
associated regulatory provisions: Sec.  124.501(b) for the 8(a) BD 
program; Sec.  126.609 for the HUBZone program; Sec.  127.503(e) for 
the WOSB program; and Sec.  128.404(d) for the SDVO program.
    SBA also proposed 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. 
SBA received six comments in response to this provision. All comments 
received supported the proposed language. As such, SBA adopts the 
proposed language in this final rule.
    The proposed rule also revised the introductory language to Sec.  
124.501(g). The revised language first required 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 FAR 19.805-2, and is something that 
should occur routinely, but believes that highlighting this in SBA's 
regulations would be helpful. SBA also proposed 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 sought 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. SBA received three 
comments supporting this clarification regarding the eligibility of a 
joint venture offeror, and no comments opposing it. One commenter also 
requested clarification as to whether a review of the joint venture 
agreement is required where a joint venture is offered a sole source 
order under a previously awarded competitive 8(a) multiple award 
contract. SBA does not believe that SBA should review the joint venture 
agreement itself in this context. The underlying contract is an 8(a) 
competitive award. SBA's regulations do not require review of joint 
venture agreements with respect to 8(a) competitive awards. Once 
awarded, SBA does not believe it should review joint venture agreements 
in connection with one or more individual sole source orders under the 
8(a) multiple award contract. As such, SBA adopts the proposed language 
in this final rule with the added clarification regarding sole source 
orders to a joint venture under a previously competitively awarded 8(a) 
multiple award contract.
    Finally, the proposed rule also made 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

[[Page 26180]]

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, for whatever reason. 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, because of the COVID-19 pandemic, employees in both the public 
and private sector were expected to telework on a significant basis. In 
response, 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 during the maximum telework 
policies. SBA Policy Notice 6000-819056 (August 25, 2021). Prior to the 
expiration of that Policy Notice, the SBA Administrator determined that 
requiring a bona fide place of business in a particular location 
continues to be impracticable due to the lingering effects of the 
COVID-19 pandemic and extended the moratorium on the requirement 
through September 30, 2023. SBA will continue to examine the 
practicality of the rule considering economic realities. Once the 
conditions exist that demonstrate that it is no longer impracticable to 
require a bona fide place of business, SBA will again implement the 
statutory provision to do so with respect to all construction 
requirements offered to the 8(a) program. As such, the proposed rule 
sought to clarify several components of the bona fide place of business 
requirement to be in place when the circumstances dictate that it is 
again practicable to enforce the rule.
    Before discussing the specific proposed changes to the bona fide 
place of business rule and the comments received regarding those 
changes, SBA will first discuss the comments received to the rule in 
general. Several commenters agreed that current circumstances make it 
impracticable to require a bona fide place of business at this time and 
recommended that the moratorium be extended. As noted above, the 
moratorium is currently in place through September 30, 2023. Before the 
expiration of the moratorium, SBA will examine workplace realities. If 
telework policies and other economic conditions continue to make 
requiring a bona fide place of business impracticable, SBA will again 
extend the moratorium. SBA cannot, however, make that commitment at 
this point. Several other commenters urged SBA to eliminate the bona 
fide place of business rule entirely, believing that the rule is 
outdated and no longer makes sense. One commenter noted that the 
moratorium has demonstrated that construction work can be performed 
without a brick-and-mortar presence and recommended that the bona fide 
place of business rule be eliminated. SBA believes that it does not 
have the option of eliminating the requirement entirely. As noted 
above, the Small Business Act statutorily imposes a strong preference 
for local construction firms in the performance of 8(a) contracts. SBA 
has implemented that preference through the bona fide place of business 
rule. SBA cannot ignore that statutory language. A few commenters 
believed that the rule should apply only to competitive 8(a) 
construction requirements, but not to sole source 8(a) construction 
requirements. The statutory authority does not make a distinction 
between sole source and competitive requirements, but rather talks of 
all ``construction'' contracts awarded through the 8(a) BD program. As 
such, SBA believes that the statutory preference must be applied 
equally to all competitive and sole source 8(a) construction 
procurements. Recognizing the Small Business Act requirement, several 
other commenters applauded SBA's efforts to lessen the burden to 
establish a bona fide office. SBA will now address those proposed 
changes, the comments to them and SBA's response.
    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 sought 
clarification of SBA's intent. The proposed rule clarified SBA's 
intent.
    The proposed rule also clarified 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 
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, however, limited 
that exclusion only to the state where the firm is currently performing 
a contract. It provided 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 (or in that contiguous state or another state 
touching that contiguous state).
    The proposed rule also clarified 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 provided 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

[[Page 26181]]

putting it in the regulations will clarify any confusion that currently 
exists. For a single award 8(a) construction contract requiring work in 
multiple locations, the proposed rule provided 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 required a Participant to have a bona fide 
place of business in any location where work is to be performed.
    Commenters overwhelmingly supported the specific proposed changes 
to make it easier to meet the bona fide place of business requirement. 
Commenters supported the changes regarding allowing home offices to 
meet the bona fide place of business requirement, noting that this will 
reduce overhead costs. Commenters also supported the clarification that 
an individual need not be a full-time resident of a state in order to 
count as an employee for bona fide office purposes. They believed that 
this clarification to allow ``floaters'' will provide needed 
flexibility to enable a firm to engage with clients in different states 
as needed and meet client needs more efficiently at a lower cost. SBA 
adopts the proposed language for those provisions in this final rule.
    SBA also received several comments supporting the clarification 
regarding having an approved bona fide place of business in one state 
and being eligible for work in a contiguous state. One commenter sought 
further clarification of that provision. Specifically, the commenter 
asked whether an 8(a) construction firm that has a bona fide office in 
Virginia, but does not have a bona fide office in North Carolina, will 
qualify for an 8(a) sole source construction project in North Carolina 
because the states border each other. The language of the rule states 
that a firm will be eligible for work that will be performed in the 
geographical area serviced by a contiguous SBA district office to where 
the firm has a bona fide place of business (in addition to stating a 
firm will be eligible for work anywhere in a state in which the firm 
has a bona fide place of business). There are two SBA district offices 
servicing Virginia: the Washington Metropolitan Area District Office 
services northern Virginia and the Richmond District Office services 
the rest of Virginia. North Carolina has only one SBA district office, 
so any district office whose geographic area touches any part of North 
Carolina will be eligible for any 8(a) construction contract anywhere 
in the entire state. Only the geographic area serviced by the Richmond 
District Office touches North Carolina. As such, a firm having a bona 
fide place of business in the geographic area serviced by the Richmond 
District Office will be eligible for 8(a) construction contracts in 
North Carolina. Firms having a bona fide place of business in the 
geographic area serviced by the Washington Metropolitan Area District 
Office will be not eligible because the geographic area serviced by 
that office is not contiguous to that of the area serviced by the North 
Carolina District Office. SBA believes that the proposed regulatory 
language clearly stated that, and thus no change is needed to the 
regulatory text as proposed.
    Several commenters also supported the proposed change regarding the 
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. Commenters agreed that a 
firm should not be required to have a bona fide place of business in 
each state in which work will be performed. One commenter requested SBA 
to define how it will determine what a ``majority'' of work will be for 
contracts with more than one location. SBA intends to apply this by the 
dollar value of the work to be performed. SBA also understands that a 
requirement may have an indefinite aspect to it where the dollar value 
to be performed at each location is not exactly known at the time of 
contract award. As such, the final rule adds language defining majority 
in terms of dollar value but also ties it to the ``anticipated'' work 
to be performed. A procuring agency should be able to identify where it 
anticipates a majority of the dollars on a contract will be spent.
    Finally, several commenters recommended that the rule allow part-
time employees to count in establishing a bona fide place of business. 
Although several commenters agreed that part-time employees should be 
sufficient to establish a bona fide place of business, most did not 
define what they believed a ``part-time'' employee to be. One commenter 
recommended that SBA adopt the definition of part-time employee used in 
the HUBZone program, believing that consistency between the programs 
was important. One commenter recommended that an individual who works 
at least 20 hours per week should count in establishing a bona fide 
place of business. This commenter believed that 20 hours per week 
evidences the small business concern's commitment to establish a bona 
fide place of business while at the same time giving it some needed 
flexibility. In the HUBZone program, a part-time employee counts as a 
HUBZone employee if the individual works a minimum of 40 hours during 
the four-week period immediately prior to the relevant date of review. 
13 CFR 126.103. SBA does not believe that definition works in 
establishing a bona fide place of business for 8(a) construction 
contracts. If SBA applied that definition to the bona fide place of 
business rule, an individual could work 40 hours in one week and the 
``office'' could be empty and closed for the remaining three weeks of 
the month. As noted above, the Small Business Act directs that 8(a) 
construction contracts generally be awarded within the county or State 
where the work is to be performed. SBA believes this means that a 
Participant small business concern must have a legitimate presence in 
the geographic area close to where the work is to be performed. SBA 
does not believe that a firm that could be closed three weeks every 
month meets that legitimate presence, but rather that there should be a 
presence at the bona fide place of business every week. SBA agrees with 
the commenter that 20 hours per week creates the proper balance between 
establishing a legitimate presence in a location and providing needed 
flexibility to small business construction firms. As such, SBA amends 
the definition of bona fide place of business in Sec.  124.3 to allow a 
Participant to demonstrate a bona fide place of business in a location 
with at least one employee who works at least 20 hours per week at that 
location.

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 
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 business days unless the agency grants an extension. This 
proposed rule clarified that the ten-day acceptance timeframe under 
section 124.503(a) applies only to 8(a) offers made outside the 8(a) 
Partnership Agreement authority. One commenter recommended that the 
ten-day period be calendar days instead of business days. The 
regulatory text before this clarification identified the acceptance 
period as ten business days. The proposed rule did not seek to alter 
that timeframe. Rather, it merely intended to

[[Page 26182]]

formally recognize in the regulation that 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. As such, SBA adopts the proposed language in this final 
rule.
    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 merely clarified 
that requirement in SBA's regulations. SBA received two comments 
supporting the clarification that SBA determines eligibility in cases 
where it has delegated 8(a) contract authority to procuring agency. 
Thus, SBA adopts the proposed language in this final rule.
    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 clarified that this ten-day time 
period is intended to be ten business days. One commenter supported the 
clarification, and one opposed it. The comment in opposition 
recommended instead that the time frame be measured in calendar days. 
Because the language in Sec.  124.503(a) is measured in business days, 
SBA believes it makes sense to consistently identify time periods 
throughout the section in the same way. As such, SBA adopts the 
proposed language as final in this rule.

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 amended 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.
    SBA received six comments agreeing that SBA should be notified when 
standalone 8(a) work is migrating as an order under an 8(a) multiple 
award contract. SBA adopts the proposed language.

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-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 and 
otherwise eligible 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, the proposed rule 
clarified 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 clarified 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. SBA received 21 comments in response 
to this proposal. Nineteen comments supported the

[[Page 26183]]

proposed language specifically authorizing sole source awards under 
8(a) multiple award contracts and requiring eligibility and business 
activity target compliance at the time of the order award. These 
commenters believed that any sole source award, whether an individual 
contract or an order under a previously awarded multiple award 
contract, should be treated similarly. In other words, these commenters 
agreed with SBA's position that eligibility for a sole source 8(a) 
order must be determined as of the date of the order, not the 
underlying multiple award contract itself. Two commenters opposed the 
proposed change. They believed that it would harm 8(a) firms that were 
awarded 8(a) multiple award contracts but have grown throughout the 
life of the contract. SBA notes that Participants that received an 8(a) 
multiple award contract will generally continue to be eligible for 
orders that are competitively awarded under that contract throughout 
the life of the contract. Of course, a contracting officer may request 
recertification of size and/or eligibility with respect to a specific 
order and recertification of size and status must occur after the fifth 
year on a long-term contract, but firms that grow to be other than 
small and/or firms that have graduated or otherwise left the 8(a) BD 
program may be awarded competitive orders under the multiple award 
contract. However, SBA continues to believe that sole source awards are 
unique. Sole source authority does not derive directly from an 
underlying competitively awarded 8(a) multiple award contract. SBA 
believes that the rules governing the award of a sole source 8(a) 
contract should also apply to the award of a sole source 8(a) order. 
That means that a firm must still be an eligible Participant that 
qualifies as small as of the date the order is issued. Part of any 
eligibility determination for a sole source award is an examination of 
a Participant's compliance with its applicable business activity 
target. Therefore, SBA adopts the proposed language as final.
    In addition, the proposed rule further clarified 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 proposed rule specifically clarified 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 provided 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. SBA received two comments 
supporting the proposed clarifications relating to joint ventures and 
no comments opposing them. As such, SBA adopts the proposed language in 
this final rule.
    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 rule amends 
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. The proposed rule clarified 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. 
Several commenters supported these clarifications, and none opposed. As 
such, SBA adopts the proposed language as final in this rule.

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

[[Page 26184]]

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 amended 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 factor 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 clarified that release may occur whenever a procuring 
agency identifies a procurement strategy that would emphasize or target 
small business participation.
    SBA received 11 comments supporting this clarification and no 
comments opposing it. Commenters believed that 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 (such as a FSS 
holder) because the incumbent, who may have done a fantastic job in the 
past, would have no opportunity to be awarded for the follow-on 
contract, nor would it have the opportunity to demonstrate that it 
would be adversely impacted by the loss of the opportunity to compete 
for the follow-on procurement. Commenters also supported the provision 
requiring a procuring agency to ``coordinate with'' SBA when it seeks 
to re-procure a follow-on requirement through a pre-existing, limited 
contracting vehicle that is not available to all 8(a) Participants. 
They believed that this will facilitate meaningful dialogue between the 
procurement agency and SBA and promote the purposes of the 8(a) 
program. SBA agrees with the comments and adopts the proposed language 
in this final rule.

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) provided 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 added language clarifying that 
intent. SBA received 12 comments supporting the clarification to allow 
a sole source award to an entity-owned Participant where the procuring 
activity has not evidenced its intent to fulfill the current 
requirement as a competitive 8(a) procurement and no comments opposing 
it. As such, SBA adopts the proposed language in this final rule.
    The proposed rule also sought 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 
where the follow-on procurement is offered to SBA as a sole source 8(a) 
procurement on behalf of an entity-owned Participant. In response, SBA 
received five comments. The comments opposed adding such a provision to 
the regulations. Commenters noted that while they understood SBA's 
intent to ensure program participants are not negatively impacted when 
a follow-on 8(a) procurement is awarded on a sole source basis, they 
believed that procuring agencies should have discretion in how best to 
procure a requirement through the 8(a) BD program. Commenters also 
noted that a procuring agency oftentimes changes its procurement 
strategy because of an incumbent's unsatisfactory performance on a 
contract. They believed that a procuring agency should not be saddled 
with a contractor whose performance is lacking merely because the 
contract would advance the firm's business development. Finally, one 
commenter also believed that it is important to consider the business 
development needs of all Participants, meaning both the entity-owned 
Participants as well as the Participants who previously performed 
certain incumbent contracts in this context. SBA believes that a 
specific regulatory change is not needed to capture SBA's role in 
ensuring that

[[Page 26185]]

the business development purposes of the 8(a) BD program are served. As 
such, SBA makes no further changes to this section in the final rule.

Section 124.506(d)

    The proposed rule clarified SBA's rules pertaining to the award of 
sole source 8(a) contracts to individually-owned 8(a) Participants. The 
proposed rule added 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 one 
of the exceptions to full and open competition set forth in FAR 6.302 
exists. For example, if a procuring agency has determined that an 
unusual and compelling urgency exists and has identified an 
individually-owned 8(a) Participant that is capable of fulfilling its 
needs, the agency 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. Because the agency could 
use its authority under FAR 6.302 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 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 also clarified 
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 added language to clarify what SBA believes the 
current requirement is and does so in order to avoid any confusion.
    SBA received four comments on these proposed clarifications. Three 
supported the clarifications and one opposed. The one comment in 
opposition believed that allowing a sole source award above the 
competitive thresholds to an individually-owned Participant could lead 
to small businesses being exploited. The three comments supporting the 
changes agreed that if an agency could justify the use of a sole source 
award outside the 8(a) program, it makes sense to allow them to use the 
8(a) program instead. SBA does not agree with the one commenter's 
concerns that a small business could be exploited because of this 
change. The authority that SBA recognizes is very limited. A procuring 
activity must be able to justify a sole source award to a particular 
Participant based on one of the FAR 6.302 exceptions to full and open 
competition. If that justification exists, SBA not allowing the 
procuring activity to use the 8(a) BD program would not prevent an 
award to the identified concern from occurring. The award could still 
be made to the same small business concern, and the activity could 
still count the award towards its small disadvantaged business goal. A 
sole source award outside the 8(a) BD program, however, would not 
necessarily require inclusion of the applicable limitations on 
subcontracting provision. If the limitations on subcontracting 
provision were not included, the concern could subcontract any portion 
of the award to one or more other business concerns. SBA believes that 
there is a greater chance for exploitation in that scenario than 
through an 8(a) award. Thus, SBA adopts the language as proposed in 
this final rule.

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 how they may 
demonstrate their good faith efforts. The proposed rule sought to 
provide guidance by incorporating SBA's interpretation of good faith 
efforts in this context. Specifically, the proposed rule provided 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 also identified 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.
    Commenters largely supported SBA's efforts to provide clarity on 
how a Participant may demonstrate that it made good faith efforts to 
meet its applicable non-8(a) business activity target. One commenter 
urged SBA to adjust the period of measurement for submitting offers for 
non-8(a) procurements, which, if awarded, would have given the 
Participant sufficient non-8(a) revenues to achieve the applicable non-
8(a) business activity target during its just completed program year. 
This commenter believed that providing a list of proposals submitted 
during the applicable program year (irrespective of award or when 
contract revenues would be realized) would provide a more bright-line 
and consistent approach. While SBA recognizes the value of clear 
regulatory standards, compliance with the business activity target 
requirement is measured based on a Participant's 8(a) and non-8(a) 
revenues in a given program year. As such, in assessing whether a 
Participant has made good faith efforts to meet its applicable non-8(a) 
business activity target, SBA believes it should only consider non-8(a) 
receipts which would have been realized during the relevant program 
year. In addition, it is unclear how SBA should treat contract revenues 
that would not be derived in the pertinent program year. In SBA's view, 
a Participant must demonstrate to SBA that it submitted offers for one 
or more non-8(a) procurements which, if awarded during its just 
completed program year, would have given the Participant sufficient 
revenues to achieve the applicable non-8(a) business activity target 
during that same program year. The final rule revises the proposed 
language to clarify this policy. In addition, two commenters urged SBA 
to expand the list of extenuating circumstances that may be considered 
to include: unanticipated labor or supply shortages which may preclude 
a Participant from submitting a proposal;

[[Page 26186]]

and marketing efforts such as responding to an agency's Request for 
Information or attendance at industry days or other procurement 
conferences. As proposed, the regulatory text provides that the list of 
extenuating circumstances is not exhaustive. This is consistent with 
SBA's intent to consider all relevant circumstances out of the 
Participant's control which adversely impacted its efforts to obtain 
sufficient non-8(a) revenues. This rule adopts the proposed language as 
final.
    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. However, it was 
brought to SBA's attention that these sales estimates were difficult to 
prepare and inaccurate. In response to these concerns, the proposed 
rule specifically requested comments as to how firms believe it would 
be easiest for them to meet the program year information requirements. 
The supplementary information to the proposed rule explained that SBA 
was considering an approach 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. While this approach would exclude revenues derived during 
the final weeks or months leading up to a Participant's program 
anniversary date, SBA explained that it 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.
    Commenters were split on SBA's approach to capture program year 
business activity based on interim financial statement figures. Three 
commenters confirmed that the incumbent policy requiring Participants 
to estimate their 8(a) and non-8(a) sales on a program year basis is 
challenging and yields inaccurate figures, especially where a 
Participant's program anniversary date falls in the middle of a 
calendar month. On the other hand, four commenters voiced concern that 
requiring a Participant to submit its interim financial statements 
would impose an undue administrative burden and cost on the 8(a) 
community. One such commenter urged SBA to accept interim financial 
statements prepared in-house if this approach is adopted. Through its 
independent research, SBA recognizes that it could be burdensome on 
some businesses to report sales estimates based on interim reporting 
periods spanning different fiscal years where they do not currently 
prepare interim quarterly statements. After carefully considering these 
comments and findings, SBA will continue to allow Participants to 
estimate as best they can program year revenues for both 8(a) and non-
8(a) activities. The final rule revises Sec.  124.509 to explicitly 
incorporate SBA's current business activity reporting policy. However, 
as noted above, SBA is mindful that estimating program year sales in 
this manner is neither practical nor precise for some 8(a) 
Participants. To address these concerns, the final rule will also 
revise Sec.  124.509 to permit program year sales reporting based on 
the Participant's interim financial statement figures, which may be 
prepared in-house. Because SBA does not seek to impose unnecessary 
reporting or compliance burdens on the 8(a) portfolio, the final rule 
provides that a Participant need not submit the underlying monthly, 
quarterly, or semi-annual financial statements in connection with its 
annual review. SBA believes this approach will reduce administrative 
burdens across the entire 8(a) portfolio while simultaneously promoting 
accurate reporting and oversight.

Sections 124.513(a), 126.616(a)(2), 127.506(a)(3), and 128.402(a)(3)

    The proposed rule added 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 applied 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 added similar language as that added to Sec.  124.513(a)(3) for 
those programs in proposed Sec.  125.18(b) (for SDVOSB), Sec.  
126.616(a)(2) (for HUBZone), and Sec.  127.506(a)(3) (for WOSB).
    The proposed rule also specifically requested 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.
    SBA received seven comments responding to whether a firm should be 
able to be a joint venture partner on more than one joint venture that 
submits an offer for a specific small business contract. All commenters 
supported the proposed change. Commenters believed that the changes 
will help maintain fair market competition within the small business 
programs and prevent firms from unduly benefiting from the programs at 
the expense of other, less sophisticated small business concerns. 
Commenters also believed that the rule should apply to all contracts 
set-aside or reserved for

[[Page 26187]]

8(a)/HUBZone/WOSB/SDVOSB, and to all orders set-aside for such 
businesses under unrestricted multiple award contracts. As such, SBA 
adopts the changes to Sec.  124.513(a)(3) (for the 8(a) program), to 
Sec.  126.616(a)(2) (for the HUBZone program), and to Sec.  
127.506(a)(3) (for the WOSB program). Although the proposed rule also 
amended Sec.  125.18(b) for joint ventures relating to the SDVO 
program, the final rule modifies Sec.  128.402(a)(3) instead. SBA 
included the same provision in the final rule implementing the Veteran 
Small Business Certification Program and is already contained in Sec.  
128.402(a)(3) of SBA's regulations for the SDVO program. See 87 FR 
73400 (Nov. 29, 2022). This final rule slightly modifies the language 
in Sec.  128.402(a)(3) to be identical to that for the HUBZone and WOSB 
programs. The restriction on being a member of more than one joint 
venture will apply equally to apply to all contracts or orders set-
aside or reserved for the 8(a), HUBZone, WOSB, or SDVO programs.

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 the contract. 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, grants a waiver based on one or 
more of five statutorily identified reasons. The proposed rule revised 
Sec.  124.515(c) for clarity. Specifically, it broke one longer 
paragraph into several smaller subparagraphs and clarified 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.
    Under the procedures that existed prior to this rule, a Participant 
(or former Participant that is still performing an 8(a) contract) 
submitted 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. To streamline the process, the proposed rule sought 
comments regarding where requests for waivers should be initiated. 
Specifically, SBA sought comments as to whether waiver requests should 
be sent directly to the AA/BD instead of to the servicing district 
office.
    SBA received 13 comments regarding the proposed changes to Sec.  
124.515. One commenter believed there was no need to change the request 
for waiver process. Twelve commenters supported changing the process. 
The commenters supporting a change believed that streamlining the 
waiver process is beneficial to small businesses. Commenters noted that 
the process initiating at the district office level was lengthy and 
often dissuaded firms from initiating a waiver request. They believed 
that requests get bogged down in SBA for months, which can make deals 
fall apart. Commenters noted that disadvantaged individuals are 
penalized in the waiver process because it is difficult to negotiate a 
price for a business that will be acquired a year or more into the 
future. Commenters recommended that waiver requests be initiated with 
the AA/BD. Commenters also recommended that time limits be put into the 
regulation to provide that SBA will process such requests in a certain 
amount of time. SBA agrees that the termination for convenience waiver 
process was oftentimes exceedingly lengthy. In order to streamline the 
process, the final rule provides that waiver requests will be initiated 
with the AA/BD and that SBA will process a request for waiver within 90 
days of receipt of a complete waiver package by the AA/BD.
    SBA also received a comment questioning SBA's implementation of a 
waiver based on the transfer of ownership and control to another 
eligible Program Participant. Specifically, the commenter questioned 
why SBA would not grant a waiver with respect to a specific 8(a) 
contract if the work to be performed under the contract is not similar 
to the type of work previously performed by the acquiring 8(a) 
Participant. The commenter believed that SBA should be looking at the 
eligibility of the acquiring firm, as required by the statutory 
authority, but should not be attempting to determine the responsibility 
of the acquiring firm to perform the contract prior to the acquisition 
or question the acquiring firm's business strategy going forward. SBA 
agrees. The statutory authority speaks solely to requiring SBA to 
ensure that the acquiring firm is an eligible Participant prior to the 
transfer. As such, the final rule deletes the last sentence of current 
Sec.  124.515(d), which restricted the transfer of 8(a) contracts to 
another Participant that had not previously performed work similar to 
that being transferred.

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.
    The proposed rule sought to add 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. The proposed rule also sought 
comments regarding such a Community Benefits Plan and whether and how 
SBA should seek to ensure that benefits derived from the 8(a) BD 
program flow back to the native or disadvantaged communities served by 
tribes, ANCs, NHOs and CDCs. As noted above, SBA held five tribal 
consultations and listening sessions to hear from the Native 
communities. The tribal, ANC and NHO representatives overwhelmingly 
opposed any changes to the benefits reporting provisions. In addition, 
in response to the proposed rule SBA received 35 comments further 
opposing any changes to the benefits reporting requirements and 
imposing a new Community Benefits Plan requirement. One commenter, 
however, agreed that entities should have a Community Benefits Plan 
given the unique benefits available to entity-owned firms and that it 
makes sense that entity-owned firms should demonstrate how they are 
substantively improving the lives of the communities they serve. During 
the last tribal consultation in Washington, DC, SBA announced that it 
would not finalize anything new pertaining to benefits reporting. As 
such, this final rule does not adopt any new language to Sec.  124.604 
or any new language to Sec.  124.108 dealing with benefits or 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

[[Page 26188]]

awarded under the 8(a) BD program. The ``Section 1207'' or 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 to the ruling, the FAR Council revised the SBA protest 
process for SDBs in the FAR to a ``review'' process in a final rule 
effective October 2014 (79 FR 61746). 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 added 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 copied 
similar text contained in FAR 19.305.
    SBA did not receive any comments relating to Sec.  124.1002, and 
SBA adopts the proposed language in this final rule. Under the rule, 
SBA will be able to 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, a contracting officer or the SBA may protest the SDB status of 
a proposed subcontractor or subcontract awardee. Finally, where SBA 
determines that a subcontractor does not qualify as an SDB, prime 
contractors must 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 rule 
disallows SDB subcontracting credit only prospectively from the point 
of an adverse SDB determination.

Sections 125.1, 125.3(c)(1)(i), 125.3(c)(1)(x), and 125.3(c)(2)

    SBA proposed 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 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 proposed to amend its regulations to adopt 
these changes when SBA's regulation is referring to a commercial 
product, a commercial service, or both. Specifically, the proposed rule 
amended the definition for ``cost of materials'' in 125.1 to refer only 
to commercial products. Further, SBA proposed to amend 125.3(c)(1)(i), 
(c)(1)(x), and (c)(2) to update the references to both commercial 
products and commercial services.
    SBA received no comments in response to these proposed changes and 
adopts them as final in this rule.

Section 125.1

    The proposed rule added 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 sought to implement consistency among 
SBA's programs and referred to requirements set forth in part 124 for 
8(a) eligibility. SBA received no comments on this proposed change and 
adopts it as final in this rule. SBA believes that the change will 
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 also proposed 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). The proposed rule requested comments as to 
whether the list should apply to both types of BPAs, FSS and FAR 
13.303, and whether it should apply to both BPAs established with more 
than one supplier and BPAs established with a single firm. Generally, a 
consolidated requirement is one that consolidates two or more previous 
requirements performed under smaller contracts 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 likely 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

[[Page 26189]]

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.
    SBA received ten comments regarding the change to include BPAs in 
the definition of bundling. All ten commenters supported the inclusion 
of BPAs. Commenters agreed that the consolidation and bundling 
requirements should not be limited to either BPAs established with more 
than one supplier or a single firm and should apply to both BPAs 
established under FAR Part 8 or Part 13 procedures. One commenter 
commended SBA for this change, believing that it can prevent contracts 
from being bundled and taken away from small business. Several 
commenters also recommended that SBA amend the definition of 
consolidation to include BPAs as well. SBA agrees that the 
consolidation and bundling requirements should apply to BPAs 
established with a more than one supplier or a single firm and to both 
BPAs established under FAR Part 8 or Part 13 procedures. SBA has added 
BPAs to both the definitions of bundling and consolidation in this 
final rule.
    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. 
The statutory language speaks solely to the value of existing work. As 
long as the combined existing work is greater than $2 million, the 
statute defines it to be consolidation. New work is not relevant to 
that determination. To eliminate any confusion, the proposed rule 
clarified 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.'' Commenters agreed that 
``consolidation'' and ``bundling'' can occur regardless of whether an 
agency adds additional new requirements to a procurement or whether the 
overall requirement can be considered ``new'' due to its increase in 
scope, value or magnitude. SBA adopts that language in this final rule.

Section 125.2

    Section 125.2 sets forth guidance as to SBA's and procuring 
agencies' responsibilities when providing contracting assistance to 
small businesses. Paragraph 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 
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 Sec.  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 paragraph 
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 proposed 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 contract 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.
    SBA received five comments on the proposal to require a cost/price 
comparative analysis as part of any bundling justification. Commenters 
first noted that bundling has a serious negative impact on small 
businesses because the requirements will result in diminished 
opportunities for many small businesses to compete for prime contracts. 
One commenter believed such a comparative analysis was not necessary 
without providing any reasons for that belief. Four commenters agreed 
that no bundling analysis could have real meaning without such a 
comparison. They believed that a procuring activity could not 
adequately justify any consolidation or bundling without comparing the 
cost/price to previously acquire the goods or services to the projected 
cost/price to acquire those same goods or services through the 
consolidated or bundled requirement and demonstrating the required 
savings. A commenter also noted that if services that were previously 
provided in-house were added to a consolidated or bundled requirement, 
the analysis should include a comparison of Government in-house cost to 
that of the projected contract cost. SBA agrees such an analysis should 
be performed in those circumstances. SBA adopts the proposed 
comparative cost/price analysis language in this final rule.

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. Paragraph 125.3(a)(1)(i)(B) provides that 
purchases from a corporation, company, or subdivision that is an 
affiliate of the prime

[[Page 26190]]

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 proposed to add clarifying language to that effect.
    Several commenters sought revisions to the clarifying language and 
argued that the proposal is, in fact, a change in policy and not a 
clarification. One commenter asked that SBA still allow subcontracting 
credit for the amount performed by the small business partner in a 
joint venture. Another asked that ``or sales to'' be removed from the 
proposed language, believing that is the exact opposite of what the 
proposal is seeking to do. One commenter noted that SBA's proposed 
language does not implement its intended change to the rule, because it 
states, ``joint venture . . . that is an affiliate of the prime 
contractor.'' The commenter pointed out that a large business that is 
also a minority-member of a mentor-prot[eacute]g[eacute] joint venture 
is not affiliated with that joint venture due to the exclusion to 
affiliation afforded mentor-prot[eacute]g[eacute] joint ventures. As a 
result, SBA's proposed language would not effectuate the rule change it 
seeks. SBA agrees that the proposed language did not adequately capture 
SBA's intent and clarifies that intent in this final rule. First, the 
final rule separates out the treatment of joint ventures from that of 
affiliates. Second, SBA is not including the ``or sales to'' language 
in the final rule. SBA notes that, where an other-than-small contractor 
subcontracts to its own unpopulated joint venture, the work performed 
by a small-business member of that joint venture is considered a 
subcontract and the contractor may take subcontracting credit for that 
small-business work.
    SBA also proposed 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 did not believe bank fees should be excluded from the 
subcontracting base. SBA received several comments supporting this 
change. One commenter opposed this change, arguing that bank fees are 
often not allowable expenses. SBA's exclusions, though, do not apply 
broadly to all unallowable expenses, so that classification as 
unallowable does not, by itself, mean that bank fees should be excluded 
from the subcontracting plan.
    In addition, SBA proposed 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 
stated 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.
    SBA received some supportive comments to the proposal, but comments 
were primarily negative. Commenters asserted that tracking, collecting, 
and allocating indirect costs will be overly burdensome on the 
businesses with subcontracting plans. They also observed that indirect 
costs already are included in summary subcontracting reports, but those 
costs are unpredictable, making it very difficult to include them in 
subcontracting goals. Another commenter observed that SBA's definition 
of ``subcontracts'' does not cover the indirect costs that SBA was most 
concerned with because those costs are not typically related to the 
work that the contractor with the plan has undertaken. The same 
commenter questioned whether contractors with subcontracting plans are 
properly recording the size of their subcontractors.
    To the comment about SBA's definition of subcontract, SBA did not 
propose to change the present definition. Such a change would be a 
major change in practice, and SBA did not intend to change what types 
of work fall under that definition. Instead, SBA sought to have some 
accountability for the indirect costs that contractors currently report 
on their summary subcontracting plans. Based on the comments received, 
SBA understands including indirect costs in all subcontracting plans 
would result in a significant, widespread burden. Therefore, SBA is 
limiting the revision in three ways. First, only prime contractors 
would be required to include indirect costs in the individual 
subcontracting plans and reports; other contractors may continue to 
choose whether or not to continue to include them. Second, including 
the indirect costs would be required only for contracts valued at $7.5 
million or more, which is 10 times the threshold at which a 
subcontracting plan is required for most contracts. Third, prime 
contractors may rely on a pro-rata formula to allocate indirect costs 
to covered individual contracts, to the extent that the indirect costs 
are not already allocable to specific contracts.

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 clarified Sec.  
125.6(d) accordingly.
    SBA received five comments on the proposed clarification to Sec.  
125.6(d). Four comments, including one executive agency, supported the 
change, agreeing that no procuring activity is accountable where no one 
tracks the cumulative work ordered under a multi-agency set aside 
contract. These commenters wanted to ensure that small businesses 
(either directly or with similarly situated entities) actually 
performed the required percentages of work and that large businesses or 
non-similarly situated small businesses did not unduly benefit from 
small business set aside contracts. One commenter believed that the 
change was not needed since the rules currently permit

[[Page 26191]]

contracting officers from ordering agencies to require compliance with 
the limitations on subcontracting on an order-by-order basis. SBA 
believes this comment misses the point. SBA recognizes that contracting 
officers may require compliance with the limitations on subcontracting 
on an order-by-order basis. However, if they do not, there is no one 
agency tracking overall limitations on subcontracting compliance with 
the aggregate of all orders issued by multiple agencies. SBA adopts the 
proposed language in this final rule.
    SBA also proposed 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 provided 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.
    SBA received comments both supporting and opposing this proposal. 
Those supporting the proposal believed that in order to promote the 
integrity of small business contracting, there should be consequences 
for those business concerns that do not take seriously the limitations 
on subcontracting and make minimal, superficial efforts to meet the 
applicable requirement. Several commenters who opposed the proposal 
believed that compliance with the limitations on subcontracting is a 
complex calculation, that there should be a safe harbor for contractors 
that made good faith efforts to meet the application limitation on 
subcontracting, and that a contractor should be able to provide 
extenuating or mitigating circumstances that impacted its ability to 
meet the applicable requirement. SBA maintains 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 the Small Business Act. However, SBA also 
believes that a contractor should not be penalized for circumstances 
beyond its control. In extenuating circumstances, SBA supports 
providing discretion authorizing a contracting officer to give a 
satisfactory orpositive past performance evaluation for the appropriate 
evaluation factor or subfactor to a contractor that did not meet the 
applicable limitation on subcontracting requirement. SBA is concerned 
that a negative past performance evaluation could be repeatedly avoided 
in situations in which a concern continually and knowingly exceeds the 
limitation on subcontracting, as extenuating circumstances could be 
argued by such a concern in every instance where the limitation is not 
met under a contract or order. SBA believes there should be greater 
accountability for these determinations, through the use of higher-
level review, to ensure that concerns that knowingly exceed the 
limitations experience adverse consequences.
    Whenever a contracting officer determines at the conclusion of 
contract performance that a small business did not meet the applicable 
limitation on subcontracting on any set-aside contract, the final rule 
would first give the business concern the opportunity to explain 
contributing circumstances that negatively impacted its ability to do 
so. The final rule adds language authorizing a contracting officer to 
give a satisfactory orpositive past performance evaluation for the 
appropriate evaluation factor or subfactor to a contractor that did not 
meet the applicable limitation on subcontracting requirement where the 
contracting officer determines that the reason for noncompliance was 
outside of the firm's control and an individual at least one level 
above the contracting officer concurs with that determination. Examples 
of extenuating or mitigating circumstances that could lead to a 
satisfactory/positive rating include, but are not limited to, 
unforeseen labor shortages, modifications to the contract's scope of 
work which were requested or directed by the Government, emergency or 
rapid response requirements that demand immediate subcontracting 
actions by the prime small business concern, unexpected changes to a 
subcontractor's designation as a similarly situated entity (as defined 
in Sec.  125.1), differing site or environmental conditions which arose 
during the course of performance, force majeure events, and the 
contractor's good faith reliance upon a similarly situated 
subcontractor's representation of size or relevant socioeconomic 
status. The contracting officer could not rely on any circumstances 
that were within the contractor's control, or those which could have 
been mitigated without imposing an undue cost or burden on the 
contractor. Without this discretionary authority, SBA agrees that long-
term deleterious consequences could result to otherwise well-performing 
small business prime contractors.

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 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

[[Page 26192]]

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 added language to Sec.  
125.9(b)(3)(ii) to recognize this exemption. Specifically, the proposed 
rule added 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.
    SBA received six comments in response to this proposed 
clarification. Five commenters supported the proposal and one opposed. 
The commenter opposing the clarification believed that the current 
three prot[eacute]g[eacute] limit is a good one. SBA generally agrees 
with the current provision limiting a mentor to three 
prot[eacute]g[eacute] firms at one time. However, as noted above, 
imposing that limit in the context of an acquisition by a firm that is 
a mentor could harm small business prot[eacute]g[eacute]s. SBA believes 
that the exception in the context of one mentor purchasing another 
makes sense. SBA also believes that this is not something that will 
occur often, but that protection of prot[eacute]g[eacute] firms should 
be in place in those limited instances when it does. The five comments 
supporting the clarification cited SBA's intent to not harm 
prot[eacute]g[eacute] firms as a worthwhile objective. SBA adopts the 
proposed language in this final rule.
    The proposed rule also amended 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 provided 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.
    SBA received five comments in response to this proposed change. 
Commenters agreed with SBA's proposal to allow mentor companies 
additional flexibility in assigning their subsidiaries to assist 
prot[eacute]g[eacute] small business concerns. In addition to making 
the terms more attractive to mentors, they believed that this change 
will also benefit those prot[eacute]g[eacute]s where the mentor parent 
company is not specialized in the prot[eacute]g[eacute]'s industry. One 
commenter was concerned with allowing a subsidiary company with no 
experience in a prot[eacute]g[eacute]'s primary industry to joint 
venture with the prot[eacute]g[eacute], limiting the role of and 
benefit to the prot[eacute]g[eacute]. SBA believes this comment misses 
the intent of the change. The purpose of allowing subsidiary companies 
of a mentor to participate in the business development of a 
prot[eacute]g[eacute] firm and to form joint ventures to seek 
procurement opportunities with the prot[eacute]g[eacute] is to broaden 
the prot[eacute]g[eacute]'s experience, not limit it. In most cases, 
the parent mentor has experience in the primary industry of the 
prot[eacute]g[eacute] business concern. The prot[eacute]g[eacute] 
expects to joint venture with and gain experience from that parent 
mentor in that industry. However, if a subsidiary of the mentor has 
experience in a different industry in which the prot[eacute]g[eacute] 
seeks to enter, that subsidiary should be able to assist the 
prot[eacute]g[eacute] firm gain experience in that distinct industry as 
well. SBA adopts the proposed language in this final rule.
    Finally, one commenter sought clarification as to whether a 
prot[eacute]g[eacute] could extend or renew its mentor-
prot[eacute]g[eacute] relationship for an additional six years with the 
same mentor instead of ending that relationship at the end of six years 
and seeking a new business entity to be its mentor. SBA believes that 
the current regulations allow that to occur and has administratively 
permitted it in appropriate circumstances. The final rule adds specific 
language authorizing a second six-year mentor-prot[eacute]g[eacute] 
relationship with the same mentor. In order for SBA to approve a second 
six-year mentor-prot[eacute]g[eacute] relationship with the same 
mentor, the mentor-prot[eacute]g[eacute] agreement for the second six-
year term must provide additional business development assistance to 
the prot[eacute]g[eacute] firm.

Sections 126.306(b), 127.304(c), and 128.302(d)

    Sections 126.306 and 127.304 set forth the procedures by which SBA 
processes applications for the HUBZone and WOSB programs, respectively. 
The proposed rule added 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, the proposed rule added 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. SBA 
received four comments in response to these proposed changes. All four 
comments supported the proposals as consistent with the 8(a) 
application procedures. Commenters believed all SBA certification 
programs should have similar provisions. The final rule adopts the 
proposed language with clarifying edits and also adds identical 
language to the provisions pertaining to VOSB and SDVOSB certification 
in Sec.  128.302(d).

Sections 126.503(c), 127.405(d), and 128.310(d)

    The proposed rule amended 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 proposed to add this 
provision to eliminate any doubt. SBA received four comments supporting 
this provision and no comments opposing it. As such, SBA adopts the 
proposed language in this final rule. SBA also adds the same language 
to Sec.  127.405(d) for the WOSB program. The SDVO program has similar 
language contained in Sec.  128.201(b). The final rule deletes that 
language from Sec.  128.201(b) and instead adopts the identical 
language that was added for the HUBZone and WOSB programs to Sec.  
128.310(d) for the SDVO program. SBA believes that Sec.  128.310(d) is 
a better location than Sec.  128.201(b) since that section pertains to 
decertification, which is the same substantive topic as that contained 
in Sec. Sec.  126.503(c) and 127.405(d) for the HUBZone and WOSB 
programs, respectively.

Section 126.601(d)

    The proposed rule amended 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

[[Page 26193]]

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. SBA received five 
comments supporting this clarification and no comments opposing it. As 
such, SBA adopts the proposed language in this final rule.

Section 126.616(a)(1)

    The proposed rule amended Sec.  126.616(a) to clarify that a 
HUBZone joint venture should be registered in 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 proposed 
to amend Sec.  126.616(a) by adding a new subparagraph (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. Two commenters supported the proposed change. One of the two 
also requested that SBA clarify whether and if so how this applies to 
multiple award contracts. Section 126.616(a) provides that 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 for the purpose of submitting an offer for a HUBZone contract. 
Thus, the provision applies whenever submitting an offer for ``a 
HUBZone contract.'' That is meant to apply to all HUBZone contracts, 
whether a single award or multiple award contract. SBA does not believe 
that further clarification is necessary. SBA adopts the proposed 
language in this final rule.

Section 126.801

    The proposed rule amended 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 amended 
Sec.  126.801(d)(1), addressing timeliness for HUBZone protests.
    The proposed rule added a new subparagraph (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 
added a new subparagraph (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.
    SBA received four comments in response to the proposed changes to 
Sec.  126.801. All four supported the proposed changes without any 
further comment. As such, SBA adopts the proposed language in this 
final rule.

126.801(e)(2) and 127.603(d)(2)

    For purposes of HUBZone and WOSB/EDWOSB contracts, the 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 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 
HUBZone/WOSB/EDWOSB status protest where an interested party believes 
that will occur. The proposed rule added a paragraph to each of the 
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 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 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

[[Page 26194]]

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 added clarifying 
language in Sec.  126.801(e)(2) (for HUBZone), and Sec.  127.603(d) 
(for WOSB/EDWOSB). The proposed rule also added similar language in 
Sec.  125.28(e) (for SDVO status protests). The language added with 
respect to SDVO status has been overcome by SBA's implementation of the 
Veteran Small Business Certification Program. See 87 FR 73400 (Nov. 29, 
2022). That rule authorized OHA to hear and decide protests relating to 
VOSB and SDVOSB status. That office will decide all issues relating to 
VOSB and SDVOSB status, including issues relating to the ostensible 
subcontractor rule. As such, there is no need to involve SBA's 
Government Contracting Area Offices in VOSB and SDVOSB status protests 
relating to the ostensible subcontractor rule. The Veteran Small 
Business Certification Program rule specifically recognizes OHA's 
authority to decide protests relating to the ostensible subcontractor 
rule in Sec.  134.1003(c). Thus, the final rule adopts the proposed 
changes relating to the WOSB and HUBZone programs, but not those with 
respect to the SDVO program.

Section 127.102

    SBA proposed 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 clarified that intent.
    SBA received three comments on this proposed change, two of which 
supported the revised definition. The third commenter was opposed, but 
the purported opposition is based on a misunderstanding of the proposed 
change. The commenter mistakenly thought SBA was proposing to permit a 
WOSB Program participant to compete for a WOSB set-aside award even if 
the participant was not small for the NAICS code attached to the award; 
the proposed language would not affect this rule. SBA adopts the change 
as proposed.

Sections 127.200 and 126.200

    Section 127.200 specifies the requirements a concern must meet to 
qualify as an EDWOSB or WOSB. To qualify as an EDWOSB, an entity must 
be a small business. Paragraph 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. The proposed rule provided that 
the applicant must represent 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. 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 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. 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.
    SBA received six comments on the proposed changes to Section 
127.200. All six supported bringing Sec.  127.200(a) in line with Sec.  
127.200(b). The proposed rule also noted that SBA believes 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 finalized its rules pertaining to VOSB 
and SDVOSB certification on November 29, 2022. 87 FR 73400. In that 
final rule, SBA requires a VOSB/SDVOSB to be a small business concern 
as defined in part 121 under the size standard corresponding to any 
NAICS code listed in its SAM profile. See 13 CFR 128.200(a)(1). To 
ensure consistency between the WOSB and SDVOSB programs, the final rule 
modifies the WOSB regulations regarding size to adopt the same language 
as that used in the VOSB/SDVOSB regulations. Specifically, the final 
rule changes the requirement that a WOSB must qualify as small for the 
size standard corresponding to any NAICS code under which it currently 
conducts business activities to requiring a WOSB to be small under the 
size standard corresponding to any NAICS code listed in its profile in 
the System for Award Management (SAM.gov). The wording of both 
provisions was intended to have the same meaning. However, to avoid any 
confusion and to dispel any concerns that SBA intended to apply size 
requirements differently between the two programs, SBA adopts the 
SDVOSB program language in the WOSB regulations. Since all comments 
supported the changes to Sec.  127.200, no other changes are being made 
to that section in this final rule.
    Finally, one commenter recommended that the same rule should apply 
to initial HUBZone eligibility. In other words, the commenter 
recommended that an applicant to the HUBZone program should qualify as 
a small business concern for HUBZone certification purposes if it meets 
the size standard corresponding to any NAICS code listed in its SAM.gov 
profile. SBA agrees. Unlike the 8(a) BD program, the HUBZone program is 
not a business development program, and the focus is not on developing 
a business in any one particular area. It is more in line with the WOSB 
and SDVO programs in which SBA certifies general eligibility and a 
certified business concern can then submit offers and seek awards for 
any HUBZone contracts for which the concern qualifies as small under 
the size standard corresponding to the NAICS code assigned to the 
contract. Thus, the final rule amends Sec.  126.200 to change initial 
size eligibility to be in line with the WOSB and SDVO programs. In 
making the change to Sec.  126.200, SBA noticed that the same 
requirements contained in Sec.  126.200 are also contained in Sec.  
126.203. This final rule removes the provisions contained in Sec.  
126.203 as duplicative and unnecessary.

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 clarified that this 
requirement was not meant to preclude

[[Page 26195]]

a condition that can be given effect only after the death or incapacity 
of the woman owner. The proposed change intended to make the WOSB 
Program unconditional ownership requirement the same as that for 
eligibility for the 8(a) BD program.
    SBA received four comments on Sec.  127.201(b). All four supported 
SBA clarifying the unconditional ownership requirements for WOSBs and 
EDWOSBs. As such, SBA adopts the language as proposed.

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. 
Taken together, the two provisions allow a woman or economically-
disadvantaged woman to 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.
    The proposed rule revised the limitations on outside activities. 
SBA views its role as ensuring that one or more women or economically 
disadvantaged women actually control the long-term planning and daily 
operations of the business, not ensuring that they are physically 
present at the business location during the normal hours of operation 
for similar businesses or prohibiting them from engaging in outside 
employment that does not affect their ability to control the business. 
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 whether the number of hours she devotes to the 
business aligns with those working in similar businesses, and SBA 
believes that such a business should be eligible to be certified by SBA 
as a WOSB.
    SBA received ten comments on the proposed changes to the WOSB 
Program's limitations on outside employment. Seven supported, two 
opposed, and one misunderstood the change. The seven commenters in 
support of the change all noted that the new regulatory language would 
provide valuable flexibility to women small business owners. The 
mistaken commenter articulated opposition to the WOSB Program's current 
limitation on outside employment, not the proposed revision. The two 
commenters opposed both thought that the proposed rule was overly 
broad. One thought that the language requiring a managing woman to 
devote ``sufficient time and attention'' to the business was too 
ambiguous, and that SBA must define the number of hours per week, as 
well as when the woman manager must work at the small business concern. 
The second commenter recommended that SBA specifically require the 
woman manager to be ``involved to some extent during normal business 
hours.'' SBA agrees that the individual identified as the one who 
controls the business concern must spend some time actually managing 
the concern, but believes that both commenters' recommendations are 
unduly limiting. SBA does not believe that such control necessarily 
must be exercised only during normal business hours or across a 
specified number of hours. As noted above, where an identified woman is 
the only individual involved in a specific business concern and 
operates that business 10, 20 or any other number fewer than 40 hours 
per week, there is no doubt that a woman ``controls'' that business. 
That is what SBA is charged with determining--whether the business 
concern is controlled by one or more women. Determining who controls a 
business, including whether there is any negative control that can be 
exercised by one or more individuals who are not women, is a factual 
issue. SBA must consider all the facts presented by each applicant. 
Where the identified managing woman spends no time at a business that 
employs several people and operates 40 hours per week but claims to 
manage the business in her spare time, the facts would lead SBA to 
question her management role in that business. SBA is cognizant of 
ineligible individuals who may seek to gain entry into the program 
through the use of front companies. However, SBA firmly believes that a 
proper analysis of all the facts will expose those companies. Thus, 
although SBA understands the concerns raised by the commenters, SBA 
believes that the flexibility that 70% of commenters noted would be 
welcome and beneficial to women business owners outweighs those 
concerns and that moving forward with the revised requirement on 
outside employment will help a greater number of eligible women 
entrepreneurs who are juggling multiple priorities.
    One commenter in opposition suggested that if SBA were going to go 
forward with the revision, it should change the proposed language 
referring to ``outside obligations'' to ``multiple professional or 
employment obligations.'' SBA agrees that ``[l]imitation on outside 
obligations'' does not capture its intent, which is to offer women 
small business owners flexibility in their professional pursuits. 
``Limitation on outside obligations'' could potentially imply that a 
woman small business owner's eligibility could be affected by factors 
outside of the professional realm, which it cannot. Accordingly, SBA is 
changing the proposed language in Sec.  127.202(c) from ``[l]imitation 
on outside obligations'' to read ``[l]imitation on outside 
employment.'' SBA adopts the rest of the proposed language as written.
    In the interest of regulatory alignment and consistency, the final 
rule also revises Sec.  128.203(i) in the SDVO regulations to change 
``outside obligations'' to ``outside employment'' to clarify that SBA 
does not intend to require or consider different factors in determining 
whether a woman or a veteran or service-disabled veteran controls the 
business concern at issue.

Section 127.400

    Section 127.400 describes how a concern maintains its certification 
as a WOSB or EDWOSB. SBA proposed 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

[[Page 26196]]

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 also amended the examples to Sec.  127.400 to reflect the 
proposed change.
    SBA received nine comments on the proposed removal of Sec.  
127.400(a). Seven supported the change, one opposed, and one discussed 
the details of a different proposed change. The supportive commenters 
noted that removing the annual attestation requirement would 
significantly reduce the administrative burden on small businesses. One 
noted that the change would bring the WOSB Program re-certification 
timeframe in line with other certification programs. Another agreed 
that SBA will be able to assess ongoing eligibility for the WOSB 
Program through other means. The commenter opposed to removing Sec.  
127.400(a) believed that three years is too long for a firm to operate 
under the assumption of eligibility. The commenter expressed concern 
that a firm could receive several contracts during its three-year 
certification period, even if its ownership changed during that period. 
The commenter asserted that this would be unfair to eligible WOSBs and 
EDWOSBs in the same industry. SBA believes that the reduced burdens on 
WOSBs and SBA outweigh any potential eligibility issues that could 
arise during a firm's three-year certification period. WOSBs will still 
be required to notify SBA of material changes that affect eligibility, 
which includes changes in ownership. SBA believes material change 
reviews, along with all the other program eligibility assessments, 
including program examinations and status protests, address the 
commenter's concerns that ineligible firms may get contracts that would 
have otherwise been awarded to eligible WOSBs and EDWOSBs in the same 
industry.
    One commenter who supported the change also noted that SBA should 
remove the requirement that applicants must use third-party certifiers 
to re-certify. The WOSB Program regulations have never required 
applicants to use third-party certifiers for re-certification and this 
has not changed. SBA adopts the changes to Sec.  127.400 as proposed.

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) has determined that this 
rule is 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.

Regulatory Impact Analysis

1. Is there a need for the regulatory action?
    This action implements a statutory enactment--the NDAA FY22--as 
well as codifies a federal court decision into regulation, and revises 
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 amended 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 rule includes eight provisions that 
are associated with incremental benefits or incremental costs. Outside 
of the following eight provisions, the other changes 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 SBC protests, HUBZone protests, or WOSB Program 
protests.
    SBA amends section 127.405(c) to provide that a firm found 
ineligible through a final WOSB 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 and 
SDVOSB protests.
    The change extends the requirement to the WOSB program. SBA has 
determined that this change will impose costs on the business 
associated with its notification of contracting agencies of the adverse 
decision. The number of adverse protest decisions in the 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\
---------------------------------------------------------------------------

    \1\ From 2.5 hours saved valued at the mean 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.
---------------------------------------------------------------------------

    b. Prohibit nonmanufacturer rule waivers from specifically applying 
to a contract with a duration longer than five years, including 
options.
    SBA amends section 121.1203 to restrict the grant of individual 
(i.e., contract-specific) nonmanufacturer rule waivers to contracts 
with durations of five years or less. A procuring agency may seek, and 
SBA may grant, a waiver for an additional five years on the same long-
term contract if, after conducting market research at the end of five 
years, the procuring agency demonstrates that there continues to be no 
available small business manufacturers and that a waiver remains 
appropriate.
    In the prior fiscal year, SBA granted 24 individual waivers 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 may 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

[[Page 26197]]

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 amends section 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. Instead, SBA will 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 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 mean 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.
    The final rule amends Sec.  124.108(e) to provide 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 change results in 
an estimated annual benefit to future 8(a) applications of $20,000, 
from an 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 amends section 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 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 will 
be additional dollars subcontracted to small business. Assuming that 
the total level of small-business subcontracting stays consistent at 
32%, contractors will 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 will be about $228,000 annually.
    The final rule poses 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 will 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) requires prime contractors with individual 
subcontracting plans to report indirect costs in their individual 
subcontracting reports (ISRs) where the contract value exceeds $7.5 
million. Contractors already are required to report indirect costs in 
their summary subcontracting reports (SSRs). Thus, the only cost 
associated with the change will 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 and 
responses received from public comment, SBA estimates the cost to be 
$100 per ISR.\3\ Between FY18 and FY22, there were 8,172 contracts 
awarded that exceeded $7.5 million in total base-plus-options value and 
that required individual subcontracting plans. Those contracts were 
awarded to 3,126 vendors. Based on the number of vendors affected, the 
aggregate cost of this change amounts to $312,600 annually.
---------------------------------------------------------------------------

    \3\ This number is based on results from OMB's ICR Agency 
Submission, dated March 15, 2022, available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202203-9000-003.
---------------------------------------------------------------------------

    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

[[Page 26198]]

the contracting officer determined that the small business failed to 
meet required limitations on subcontracting.
    The final rule requires that where a contracting officer determines 
at the conclusion of contract performance that a small business 
contractor fails to satisfy the limitations on subcontracting for a 
particular contract and that the reason for noncompliance was outside 
of the firm's control, 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, and 
the final rule gives procuring agencies discretion to give positive 
evaluations where the contracting officer determines compliance to be 
outside the small business' control. 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 final 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 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 
rule already have been applied at the case level but are not widely 
known. This rule makes those clarifications known to the public.
    Additionally, this 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 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 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 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 public; and 
(c) seek the views of those who are likely to be affected by the 
rulemaking, even before issuing a notice of proposed rulemaking. As far 
as practicable or relevant, SBA considered these requirements in 
developing this rule, as discussed below.
    1. Did the agency use the best available techniques to quantify 
anticipated present and future costs when responding to 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?
    SBA afforded a 60-day comment period to the proposed rule and 
posted comments on www.regulations.gov to allow the public to comment 
meaningfully on its provisions. SBA received over 650 comments from 125 
commenters, with a high percentage of commenters favoring the proposed 
changes. SBA also discussed the proposals in the proposed 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 final 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 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 rule is not 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. 
This final rule does not alter the contracting officer's discretion to 
require a contractor to demonstrate its compliance with the limitations 
on subcontracting at any time during

[[Page 26199]]

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 final 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 rule relates to various small 
entities. The number of entities affected by the 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 final 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 final rule's changes, such as 
that to documentation for retirement plans, reduce reporting 
requirements for small entities that are Participants. Additionally, 
the final rule's clarification of practices and interpretations 
decreases uncertainty for Participants. Therefore, SBA does not believe 
the rule will have a disparate impact on small entities or will impose 
any additional significant costs on them. For the reasons discussed, 
SBA certifies that this final 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.

13 CFR Part 127

    Government contracts, Reporting and recordkeeping requirements, 
Small businesses.

13 CFR Part 128

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

    Accordingly, for the reasons stated in the preamble, SBA amends 13 
CFR parts 121, 124, 125, 126, 127 and 128 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 (h)(4) as paragraphs (h)(2) 
through (h)(5), respectively;
0
c. Adding a new paragraph (h)(1);
0
d. Revising newly redesignated paragraphs (h)(3) and (h)(4); and
0
e. Adding paragraph (i).
    The revisions and additions to 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

[[Page 26200]]

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 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 (whether 
one involving similarly situated entities or not), 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 solely 
on the subcontractor's experience because it lacks any relevant 
experience of its own. No one factor is determinative.
    (ii) A prime contractor may use the experience and past performance 
of a subcontractor to enhance or strengthen its offer, including that 
of an incumbent contractor. It is only where that subcontractor will 
perform primary and vital requirements of a contract or order, or the 
prime contractor is unusually reliant on the subcontractor, that SBA 
will find the subcontractor to be an ostensible subcontractor.
    (iii) In the case of a contract or order set-aside or reserved for 
small business for services, specialty trade construction or supplies, 
SBA will find that a small business prime contractor is performing the 
primary and vital requirements of the contract or order, and is not 
unduly reliant on one or more subcontractors that are not small 
businesses, where the prime contractor can demonstrate that it, 
together with any subcontractors that qualify as small businesses, will 
meet the limitations on subcontracting provisions set forth in Sec.  
125.6 of this chapter.
    (iv) In a general construction contract, the primary and vital 
requirements of the contract are the management, supervision and 
oversight of the project, including coordinating the work of various 
subcontractors, not the actual 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 individuals 
employed by the joint venture. 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 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.
* * * * *
    (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.


Sec.  121.401  [Amended]

0
3. Amend Sec.  121.401 by removing the words ``Sec. Sec.  121.401 
through 121.413'' and adding in their place the words ``Sec. Sec.  
121.401 through 121.412''.


0
4. 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 to ``Sec.  121.103(h)(2)'' in paragraph (d) 
and adding in its place a reference to ``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 to ``Sec.  121.103(h)(4)'' in paragraph 
(g)(5) and adding in its place a reference to ``Sec.  121.103(h)(3)''; 
and
0
e. Adding paragraph (g)(6).
    The revisions and addition to 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) for sole source 8(a)

[[Page 26201]]

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) 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) 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 subparagraphs (i)(A), (i)(B), (ii)(A), or (ii)(B), 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), 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
5. Amend Sec.  121.406 by revising paragraph (c) to read as follows:


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

* * * * *
    (c) The limitations on subcontracting (performance of work) 
requirements, the ostensible subcontracting rule, and the 
nonmanufacturer rule do not apply to small business set-aside 
acquisitions with an estimated value between the micro-purchase 
threshold and the simplified acquisition threshold (as both terms are 
defined in the FAR at 48 CFR 2.101).
* * * * *


0
6. 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) 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.
* * * * *


Sec.  121.413  [Removed]

0
7. Remove Sec.  121.413.


0
8. Amend Sec.  121.506 by redesignating paragraphs (a), (b), (c), (d), 
and (e), as paragraphs (b), (d), (e), (f), and (g) respectively, and 
adding paragraphs (a) and (c) to read as follows:


Sec.  121.506  What definitions are important for sales or leases of 
Government-owned timber?

    (a) Computation of Market Share means the small business share, 
expressed as a percentage for a market area, based on the purchase by 
small business over the preceding 5-year period. The computation is 
done every five years.
* * * * *
    (c) Integrated Resource Timber Contracts means contracts that 
combine product removal and service work when the value of included 
timber exceeds the value of services.
* * * * *


0
9. Amend Sec.  121.507 by adding new paragraphs (d) and (e) 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 may waive one or more of 
the requirements set forth in paragraphs (a)(3) and (a)(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 Director of Government Contracting and contain facts, 
arguments, and any appropriate supporting documentation as to why a 
waiver should be granted.
    (e) Sawtimber volume from Integrated Resource Timber Contracts 
shall be included in the Computation of Market Share and set-aside 
trigger.


0
10. Amend Sec.  121.702 by:
0
a. In paragraph (c)(7), revising the first sentence and adding a new 
second sentence;
0
b. Adding paragraph (c)(11).
    The revisions and addition to read as follows:


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

* * * * *
    (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. * * *
* * * * *
    (11) Exception to affiliation for certain investment companies. 
There is an exception to affiliation for Small Business Investment 
Companies (SBICs) that invest in SBIR or STTR awardees,

[[Page 26202]]

in accordance with 13 CFR 121.103(b)(1).
* * * * *


0
11. Amend Sec.  121.1001 by revising paragraphs (a)(6)(i), (a)(8)(i) 
and (a)(9)(i), paragraph (b)(2)(ii) introductory text, and paragraphs 
(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 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
12. Amend Sec.  121.1004 by revising paragraph (a)(1), adding the words 
``without a reserve'' at the end of paragraph (a)(2)(iii), and adding 
paragraphs (f) and (g) to 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) Bid protest corrective action. SBA will generally 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 FAR subpart 33.1 bid protest.
    (1) SBA will complete the size determination where the procuring 
agency makes a written request to SBA within two business days of the 
agency informing SBA of the corrective action and demonstrates that the 
corrective action will not result in a change of the apparent 
successful offeror, unless the protest involves size issues determined 
as of the date of final proposal revision per Sec.  121.404(d).
    (2) 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
13. Amend Sec.  121.1009 by:
0
a. Revising paragraph (a)(1);
0
b. Redesignating paragraphs (a)(2) and (a)(3) as paragraphs (a)(3) and 
(a)(4), respectively; and adding a new paragraph (a)(2); and
0
c. Revising newly redesignated paragraph (a)(4) and paragraph (g)(5).
    The revisions and additions 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, if no protest is pending under FAR subpart 33.1, the SBA 
Area Office will issue a formal size determination within 15 business 
days, if possible;
    (2) If a protest is pending under FAR subpart 33.1, the SBA Area 
Office will suspend processing a valid, timely and specific size 
protest. Once the procuring agency, GAO or the Court of Federal Claims 
issues a decision under FAR subpart 33.1, the SBA Area Office will 
recommence the size determination process.
    (i) If the FAR subpart 33.1 decision denies the protest, SBA will 
issue a formal size determination within 15 business days of the 
decision, if possible.
    (ii) If the decision results in a cancellation of the award or 
change of the apparent successful offeror, SBA will dismiss the size 
protest as moot.
    (iii) If the decision requires re-evaluation of offers or other 
corrective action but the award is not cancelled, SBA will continue to 
suspend processing the protest.
    (A) If after re-evaluation or other corrective action occurs the 
protested concern remains the apparent successful offeror, SBA will 
issue a formal size determination within 15 business days after 
notification of the apparent successful offeror, if possible.
    (B) If after re-evaluation or other corrective action occurs a 
different apparent successful offeror is identified, SBA will dismiss 
the size protest as moot. Interested parties may file a timely size 
protest with respect to the newly identified apparent successful 
offeror after the notification of award.
* * * * *
    (4) If SBA does not issue its determination in accordance with 
paragraph (a)(1) of this section (or request an extension that is 
granted), the

[[Page 26203]]

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 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
14. Amend Sec.  121.1203 by redesignating paragraph (d) as paragraph 
(g) and by adding new paragraphs (d), (e) and (f) to read as follows:


Sec.  121.1203  When will a waiver of the Nonmanufacturer Rule be 
granted for an individual contract?

* * * * *
    (d) 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) An individual waiver in connection with a long-term contract 
(i.e., a contract with a duration of longer than five years, including 
options) cannot exceed five years. A procuring agency may 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.
    (f) For a multiple item procurement, except those described in 
Sec.  121.406(d)(1), a waiver must be sought and granted for each item 
that the procuring agency believes no small business manufacturer or 
processor can reasonably be expected to offer a product meeting the 
specifications of the solicitation and which will bring the total value 
of items to be procured from small business or subject to a waiver to 
at least 50% of the estimated value of the contract.
    (1) SBA's waiver applies only to the specific item(s) identified, 
not to the entire contract.
    (2) The estimated aggregate value of all items manufactured by 
small business and those subject to a waiver must equal at least 50% of 
the value of the contract. A contracting officer need not seek a waiver 
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.
    (3) When a contracting officer seeks a waiver for an individual 
item, the term ``item'' can be a specific broad identifying thing 
(e.g., all spare parts related to aircraft X), but cannot be so broad 
as to have no real identification (e.g., all medical supplies).
* * * * *

0
15. Amend Sec.  121.1204 by:
0
a. Revising paragraphs (b)(1)(i) and (ii);
0
b. Adding a new 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 and adding new paragraph (b)(2)
0
d. Revising newly redesignated paragraph (b)(4) and adding paragraph 
(b)(5).
    The revisions and additions to 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.

[[Page 26204]]

Sec.  121.1205  [Amended]

0
16. 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
17. 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
18. Amend Sec.  124.3 by revising the definition of ``Bona fide place 
of business'' to read as follows:


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

* * * * *
    Bona fide place of business, for purposes of 8(a) construction 
procurements, means a location where a Participant regularly maintains 
an office within the appropriate geographical boundary which employs at 
least one individual who works at least 20 hours per week at that 
location. The term does not include construction trailers or other 
temporary construction sites.
* * * * *

0
19. 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 SBA 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 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
20. 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
21. Amend Sec.  124.104 by:
0
a. Revising the second sentence of paragraph (c)(2)(ii);
0
b. Removing paragraph (c)(2)(iii); and
0
c. Redesignating paragraph (c)(2)(iv) as paragraph (c)(2)(iii).
    The revision to read 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
22. Amend Sec.  124.105 by revising paragraphs (h)(2) and (i)(1), and 
adding a new sentence after the first sentence in paragraph (i)(2) to 
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 as set forth in Sec.  124.3, as well as any individuals 
who are affiliated based on an identity of interest under Sec.  
121.103(f). * * *
* * * * *

0
23. 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
24. Amend Sec.  124.108 by adding a new 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
25. Amend Sec.  124.109 by revising the second sentence of paragraph 
(c)(1) and by revising paragraph (c)(6)(i) to read as follows:

[[Page 26205]]

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
26. Amend Sec.  124.110 by adding paragraph (d)(3), by redesignating 
paragraphs (e) through (h) as paragraphs (f) through (i), respectively, 
and by adding a new paragraph (e) to read as follows:


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

* * * * *
    (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 or membership on the board of 
directors 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 and/or board members 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 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.
* * * * *


Sec.  124.111  [Amended]

0
27. In Sec.  124.111 amend paragraph (d) by removing the words ``SIC 
code'' and adding in their place the words ``NAICS code.''

0
28. 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 
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 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. Sec.  124.107(a) and 124.107(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 an application package 
deemed complete 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.
* * * * *


Sec.  124.302  [Amended]

0
29. Amend Sec.  124.302 by removing paragraph (b), and redesignating 
paragraphs (c) and (d) as paragraphs (b) and (c), respectively.


Sec.  124.303  [Amended]

0
30. In Sec.  124.303 amend paragraph (a)(15) by removing the reference 
to ``Sec.  124.507'' and adding in its place a reference to ``Sec.  
124.509.''

0
31. Amend Sec.  124.304 by:
0
a. revising paragraph (b); and
0
b. In paragraph (f)(3) removing the reference to ``Sec.  124.1010'' and 
adding in its place a reference to ``Sec.  124.1002''.
    The revision reads 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
32. Amend Sec.  124.402 by adding a sentence at 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
33. Amend Sec.  124.403 by

[[Page 26206]]

0
a. In paragraph (a) adding two new sentences after the first sentence; 
and
0
b. In paragraph (c)(1) removing the reference to ``Sec.  124.507'' and 
adding in its place a reference to ``Sec.  124.509''.
    The additions read 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 plan. A Participant must 
submit a new or modified business plan only if its business plan has 
changed from the previous year. * * *
* * * * *

0
34. Amend Sec.  124.501 by:
0
a. Revising paragraph (b);
0
b. Revising paragraph (g) introductory text;
0
c. Revising the first sentence of paragraph (h);
0
d. Revising paragraph (k) introductory text;
0
e. Redesignating paragraphs (k)(4) and (5) as paragraphs (k)(7) and 
(8), respectively; and
0
f. Adding new paragraphs (k)(4), (k)(5), (k)(6), and (k)(9).
    The revisions and additions to 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 performance of work and/or non-manufacturer rule 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 WOSB, or 8(a) and SDVO) or give evaluation 
preferences to firms having one or more other certifications.
* * * * *
    (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 or is offered a sole source order under a previously 
competitively awarded 8(a) multiple award contract, 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 (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, in the contiguous state or in a 
location in another state in which the geographical area serviced by 
the SBA district office is contiguous to the district office in the 
state where the work will be performed.
    (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 (as identified by the 
dollar value of the work) is anticipated 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 to be performed.

0
35. 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 Sec.  
124.503(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
36. Amend Sec.  124.503 by:
0
a. Revising paragraph (a) introductory text, paragraphs (a)(4)(ii) and 
(a)(5);
0
b. Adding two sentences at the end of paragraph (i)(1)(ii); and
0
c. Revising paragraphs (i)(1)(iv) and (i)(2)(ii).
    The revisions and additions to read as follows:

[[Page 26207]]

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 business 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 and consult with SBA prior to issuing the order that 
it intends to procure such specified work through an order under an 
8(a) Multiple Award Contract. Consultation with SBA does not require 
SBA concurrence or approval. 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. SBA will provide any 
feedback in response to the procuring agency's notification within 10 
business days.
* * * * *
    (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) 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
37. Amend Sec.  124.504 by:
0
a. In paragraph (d)(1) introductory text:
0
i. Revising the second sentence;
0
ii. Adding a sentence between the second and third sentences; and
0
c. In the fourth sentence, removing the word ``notify'' adding in its 
place ``coordinate with''; and
0
d. Revising paragraph (d)(3).
    The addition and revisions read as follows:


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

* * * * *
    (d) * * *
    (1) * * * Where a procurement will contain work currently performed 
under one or more 8(a) contracts, and the procuring agency determines 
that the procurement should not be considered a follow-on requirement 
to the 8(a) contract(s), the procuring agency must coordinate with 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 that it intends to procure 
such specified work outside the 8(a) BD program through a requirement 
that it considers to be new. 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 only where 
the procuring activity agrees to procure the

[[Page 26208]]

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
38. Amend Sec.  124.506 by revising paragraph (b)(3) and by adding two 
sentences at 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 
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 Sec.  19.808-1 or DFAR Sec.  219.808-1(a).

0
39. Amend Sec.  124.509 by revising paragraph (c)(1) and adding 
paragraphs (d)(1)(i) and (ii) to read as follows:


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

* * * * *
    (c) * * *
    (1) As part of its annual review after being admitted to the 8(a) 
BD program, a Participant must provide to SBA within 30 days from the 
end of its program year:
    (i) Annual financial statements with a breakdown of 8(a) and non-
8(a) revenue in accord with Sec.  124.602;
    (ii) An annual report of all non-8(a) contracts, options, and 
modifications affecting price executed during the program year; and
    (ii) An estimate of 8(a) and non-8(a) revenue derived during the 
program year, which may be obtained from monthly, quarterly or semi-
annual interim financial statements or otherwise.
* * * * *
    (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 to the Participant during its just completed program 
year, would have given the Participant sufficient revenues to achieve 
the applicable non-8(a) business activity target during that same 
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 
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
40. Amend Sec.  124.513 by adding paragraphs (a)(3) and (4) to read as 
follows:


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

    (a) * * *
    (3) As long as a joint venture qualifies as small under the size 
standard corresponding to the NAICS code assigned to a specific 
contract or order (see Sec.  124.513(b)), it will be eligible for award 
based on the status of its 8(a) managing venturer.
    (4) 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 or for an 8(a) order under a multiple award contract that is 
not itself an 8(a) contract.
* * * * *

0
41. Amend Sec.  124.515 by revising paragraphs (a)(1) and (c) and 
removing the last sentence of paragraph (d) to read as follows:


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

    (a) * * *
    (1) An 8(a) contract or order, whether in the base or an option 
year, must be terminated for the convenience of the Government if one 
or more of the individuals upon whom eligibility for the 8(a) BD 
program was based relinquishes or enters into any agreement to 
relinquish ownership or control of the Participant such that the 
Participant would no longer be controlled or at least 51% owned by 
disadvantaged individuals.
* * * * *
    (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) A request for a waiver to the termination for convenience 
requirement must be sent to the AA/BD.
    (2) 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.
    (3) 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.

[[Page 26209]]

    (4) SBA will process a request for waiver within 90 days of receipt 
of a complete waiver package by the AA/BD.
* * * * *

0
42. 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
43. 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
44. 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
45. The authority citation for part 125 is revised to read as follows:

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


0
46. Amend Sec.  125.1 by:
0
a. Revising the definitions of ``Consolidation of contract 
requirements, consolidated contract, or consolidated requirement'', and 
``Contract bundling, bundled requirement, bundled contract, or 
bundling'';
0
b. In the definition of ``Cost of materials'' removing the words 
``commercial items'' 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''; and
0
d. Revising the definition of ``Substantial bundling''.
    The revisions and additions to read as follows:


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

* * * * *
    Consolidation of contract requirements, consolidated contract, or 
consolidated requirement means a solicitation for a single contract, a 
Multiple Award Contract, or Blanket Purchase Agreement to:
    (1) Satisfy two or more requirements of the Federal agency for 
goods or services that have been provided to or performed for the 
Federal agency under two or more separate contracts each of which was 
lower in cost than the total cost of the contract or agreement for 
which the offers are solicited, the total cost of which exceeds $2 
million (including options), regardless of whether new work is added to 
the solicitation for the contract or agreement; or
    (2) Satisfy requirements of the Federal agency for construction 
projects to be performed at two or more discrete sites.
* * * * *
    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), regardless of whether new work is added 
to the solicitation for the contract or agreement, 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 concern 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;

[[Page 26210]]

    (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
47. Amend Sec.  125.2 by adding a new sentence after the second 
sentence in paragraph (d)(2)(ii), 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
48. 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);
0
e. Revising the first sentence of paragraph (c)(1)(viii);
0
f. Removing the words ``commercial items'' in paragraph (c)(1)(x) and 
adding in their place the words ``commercial products or commercial 
services''; and
0
g. 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 a corporation, company, or subdivision that is 
an affiliate of the prime contractor or subcontractor, or a joint 
venture in which the contractor is one of the joint venturers, are not 
included in the subcontracting base. Subcontracts by first-tier 
affiliates, and subcontracts by a joint venture in which the prime 
contractor is one of the joint venturers, 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 determine whether to 
include indirect costs in its subcontracting goals. A prime contractor 
must include indirect costs in its subcontracting goals if the contract 
exceeds $7.5 million. Below $7.5 million, a prime contractor may 
include indirect costs in its subcontracting plan at its option. If 
indirect costs are included in the 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). Contractors may use a pro rata formula to allocate 
indirect costs to covered individual contracts, if the indirect costs 
are not already allocable to specific contracts. Regardless of whether 
the contractor has included indirect costs in the subcontracting plan, 
indirect costs must 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 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
49. Amend Sec.  125.6 by:
0
a. In paragraph (c) in the second sentence:
0
i. Removing the reference to ``Sec.  121.103(h)(4)'' and adding in its 
place a reference to ``Sec.  121.103(h)(3)'';
0
ii. Adding a ``.''after the words ``shall be considered subcontracted'' 
and before the words ``SBA will also'';
0
b. Revising the first sentence of paragraph (d) introductory text and 
adding a new second sentence;
0
c. Redesignating paragraphs (e), (f) and (g) as paragraphs (f), (g) and 
(h), respectively; and
0
d. Adding a new paragraph (e).
    The revision and additions to read as follows:


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

* * * * *
    (d) Determining compliance with applicable limitation on 
subcontracting. 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 an agency determines that a 
contractor has not met the applicable limitation on subcontracting 
requirement at the conclusion of contract performance, the agency must 
notify the business concern and give it the opportunity to explain any 
extenuating or mitigating circumstances

[[Page 26211]]

that negatively impacted its ability to do so.
    (1) Where a small business does not provide any extenuating or 
mitigating circumstances or the agency determines that the concern's 
failure to meet the applicable limitation on subcontracting requirement 
was not beyond the concern's control, the agency may not give a 
satisfactory or higher past performance rating for the appropriate 
factor or subfactor in accordance with FAR 42.1503.
    (2) Where a contracting officer determines that extenuating 
circumstances warrant a satisfactory/positive past performance 
evaluation for the appropriate evaluation factor or subfactor and the 
individual at least one level above the contracting officer concurs 
with that determination, a satisfactory or higher past performance 
rating may be given.
    (i) Extenuating or mitigating circumstances that could lead to a 
satisfactory/positive rating include, but are not limited to, 
unforeseen labor shortages, modifications to the contract's scope of 
work which were requested or directed by the Government, emergency or 
rapid response requirements that demand immediate subcontracting 
actions by the prime small business concern, unexpected changes to a 
subcontractor's designation as a similarly situated entity (as defined 
in Sec.  125.1), differing site or environmental conditions which arose 
during the course of performance, force majeure events, and the 
contractor's good faith reliance upon a similarly situated 
subcontractor's representation of size or relevant socioeconomic 
status.
    (ii) An agency cannot rely on any circumstances that were within 
the contractor's control, or those which could have been mitigated 
without imposing an undue cost or burden on the contractor.
* * * * *

0
50. Amend Sec.  125.8 by:
0
a. Removing the reference to ``Sec.  121.103(h)(3)'' in paragraph (a) 
and adding in its place a reference to ``Sec.  121.103(h)(4)'';
0
b. Revising paragraph (b)(2) introductory text;
0
c. Adding two sentences at the end of paragraph (b)(2)(ii)(A);
0
d. Removing the reference to ``paragraph (d)'' in paragraph (b)(2)(vii) 
wherever it appears and adding in its place a reference to ``paragraph 
(c)''; and
0
e. Revising paragraph (h)(2).

    The revisions and addition to read as follows:


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

* * * * *
    (b) * * *
    (2) Every joint venture agreement to perform a contract set aside 
or reserved for small business between a prot[eacute]g[eacute] small 
business and its SBA-approved mentor authorized by Sec.  125.9 must 
contain a provision:
    (ii) * * *
    (A) * * * The joint venture agreement may not give to a non-
managing venturer negative control over activities of the joint 
venture, unless those provisions would otherwise be commercially 
customary for a joint venture agreement for a government contract 
outside of SBA's programs. A non-managing venturer's approval may be 
required in, among other things, determining what contract 
opportunities the joint venture should seek and initiating litigation 
on behalf of the joint venture.
* * * * *
    (iv) Stating that the small business participant(s) must receive 
profits from the joint venture commensurate with the work performed by 
them, or a percentage agreed to by the parties to the joint venture 
whereby the small business participant(s) receive profits from the 
joint venture that exceed the percentage commensurate with the work 
performed by them, and that at the conclusion of the joint venture 
contract(s) and/or the termination of the joint venture, any funds 
remaining in the joint venture bank account shall be distributed 
according to the percentage of ownership;
* * * * *
    (h) * * *
    (2) At the completion of every contract set aside or reserved for 
small business that is awarded to a joint venture between a 
prot[eacute]g[eacute] small business and a mentor authorized by Sec.  
125.9, and upon request by SBA or the relevant contracting officer 
prior to contract completion, the small business partner to the joint 
venture must submit a report to the relevant contracting officer and to 
SBA, signed by an authorized official of each partner to the joint 
venture, explaining how and certifying that the performance of work 
requirements were met for the contract, and further certifying that the 
contract was performed in accordance with the provisions of the joint 
venture agreement that are required under paragraph (b) of this 
section.
* * * * *

0
51. 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;
0
c. Adding a new paragraph (e)(1)(ii); and
0
d. Adding paragraph (e)(6)(iv).

    The revision and addition to 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 proteges 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 (i.e., those of the purchased concern in 
addition to those of its own). 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;
* * * * *
    (6) * * *
    (iv) Instead of having a six-year mentor-prot[eacute]g[eacute] 
relationship with two separate mentors, a prot[eacute]g[eacute] may 
elect to extend or renew a mentor-prot[eacute]g[eacute] relationship 
with the same mentor for a second six-year term. In order for SBA to 
approve an extension or renewal of a mentor-prot[eacute]g[eacute] 
relationship with the same mentor, the mentor must commit to providing 
additional business development assistance to the 
prot[eacute]g[eacute].
* * * * *

PART 126--HUBZONE PROGRAM

0
52. 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.


[[Page 26212]]



0
53. Amend Sec.  126.200 by revising paragraph (b)


Sec.  126.200  What requirements must a concern meet to be eligible as 
a certified HUBZone small business concern?

* * * * *
    (b) Size. (1) In order to be eligible for HUBZone certification and 
remain eligible as a certified HUBZone small business concern, a 
concern, together with its affiliates, must qualify as a small business 
concern as defined in part 121 of this chapter under the size standard 
corresponding to any NAICS code listed in its profile in the System for 
Award Management (SAM.gov).
    (2) In order to be eligible for a HUBZone contract, a certified 
HUBZone small business concern must qualify as small under the size 
standard corresponding to the NAICS code assigned to the HUBZone 
contract.
    (3) If the concern is a small agricultural cooperative, in 
determining size, the small agricultural cooperative is treated as a 
``business concern'' and its member shareholders are not considered 
affiliated with the cooperative by virtue of their membership in the 
cooperative.


Sec.  126.203  [Removed and Reserved]

0
54. Remove and reserve Sec.  126.203.

0
55. Amend Sec.  126.306 by adding paragraphs (b)(1) and (b)(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
56. 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 and the System for Award Management (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 SBA 
discovers that a certified HUBZone small business concern or its 
representative knowingly submitted false information, SBA will propose 
the firm for decertification. In addition, SBA will refer the matter to 
the SBA Office of Inspector General for review and may request that 
Government-wide debarment or suspension proceedings be initiated by the 
agency.
    (d) Effect of decertification. Once SBA has decertified a concern, 
the concern cannot submit an offer or quote 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
57. Amend Sec.  126.601 by revising paragraph (d) and adding paragraph 
(e) 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) In the case of a contract or order for services, specialty 
trade construction or supplies, SBA will find that a prime HUBZone 
contractor is performing the primary and vital requirements of the 
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.
    (3) In a general construction contract, the primary and vital 
requirements of the contract are the management, supervision and 
oversight of the project, including coordinating the work of various 
subcontractors, not the actual construction work performed.
    (e) For two-step procurements (including architect-engineering and 
design-build procurements) to be awarded as HUBZone contracts, a 
concern must be a certified HUBZone small business concern as of the 
date that it submits its initial bid or proposal (which may or may not 
include price) during phase one.

0
58. Add Sec.  126.609 to read as follows:


Sec.  126.609  Can a HUBZone competition be limited or authorize 
preferences 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) or give evaluation preferences to firms 
having one or more other certifications.

0
59. Amend Sec.  126.616 by revising paragraph (a) to read as follows:

[[Page 26213]]

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 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 or order set-aside or reserved for certified 
HUBZone small business concerns.
* * * * *


Sec.  126.618  [Amended]

0
60. Amend Sec.  126.618 in paragraph (c)(2) by removing the reference 
to ``Sec.  121.103(h)(4)'' and adding in its place a reference to 
``Sec.  121.103(h)(3)''.

0
61. Amend Sec.  126.801 by revising paragraphs (b), (d) introductory 
text, (d)(1) and (2), and (e) to 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;
    (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, or that it did not meet the principal 
office and/or 35% residency requirements, without setting forth 
specific facts or allegations, is insufficient and will be dismissed.
    (3) 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.
    (4) 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.
    (5) 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 
that at least 20% of the protested firm's employees do not reside in a 
HUBZone.
* * * * *
    (d) Timeliness. 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 contract, 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 26214]]

    (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
62. 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
63. Amend Sec.  127.102 by revising the definition of ``WOSB'' 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 qualifies as 
small pursuant to part 121 of this chapter under the size standard 
corresponding to any NAICS code listed in its SAM profile, 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
64. 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 concern as defined in part 121 of this chapter 
under the size standard corresponding to any NAICS code listed in its 
SAM profile; and
* * * * *
    (b) * * *
    (1) A small business as defined in part 121 of this chapter for the 
size standard corresponding to any NAICS code listed in its SAM 
profile; and
* * * * *

0
65. Amend Sec.  127.201 by revising the first sentence of paragraph (b) 
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). * * *
* * * * *

0
66. 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 employment. The woman or economically-
disadvantaged woman who holds the highest officer position of the 
business concern may not engage in outside employment 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
67. Amend Sec.  127.304 by adding paragraphs (c)(1), (c)(2), (g)(1), 
and (g)(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 or its representative 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.
* * * * *
    (g) * * *
    (1) If SBA denies a business concern's application for WOSB 
certification based on lack of ownership or lack of control by women, 
within two days of SBA's denial, the applicant concern must update its 
WOSB self-certification status in the System for Award Management (or 
any successor system) to reflect that the concern is not an eligible 
WOSB.
    (2) If a business concern fails to update its WOSB self-
certification status in the System for Award Management (or any 
successor system), SBA will make such update within two days of the 
business's failure to do so.
* * * * *

0
68. 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 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

[[Page 26215]]

it is an eligible WOSB. Concern A's new certification date is May 15, 
2025. 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 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
69. Amend Sec.  127.405 by redesignating paragraph (c) as paragraph 
(f), and by adding new paragraphs (c), (d) and (e) 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) Decertification due to submission of false information. If SBA 
discovers that a WOSB or EDWOSB or its representative knowingly 
submitted false information, SBA will propose the firm for 
decertification. In addition, SBA will refer the matter to the SBA 
Office of Inspector General for review and may request that Government-
wide debarment or suspension proceedings be initiated by the agency.
    (e) 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
70. Amend Sec.  127.503 by redesignating paragraphs (e), (f) and (g) as 
paragraphs (f), (g), and (h), respectively, and by 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 or favoring 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 SDVO) or give evaluation preferences to firms having one or more 
other certifications.
* * * * *

0
71. Amend Sec.  127.504 by
0
a. In paragraph (g)(1) removing the reference to ``Sec.  
121.103(h)(2)'' and adding in its place a reference to ``Sec.  
121.103(h)(3)'';
0
b. Revising paragraph (g)(2), and
0
c. Adding paragraph (g)(3).
    The addition and revision read as follows:


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

* * * * *
    (g) * * *
    (2) In the case of a contract or order for services, specialty 
trade construction or supplies, SBA will find that a prime WOSB or 
EDWOSB contractor is performing the primary and vital requirements of 
the contract or order, and is not unduly reliant on one or more 
subcontractors that are not certified WOSBs or EDWOSBs, where the prime 
contractor can demonstrate that it, together with any subcontractors 
that are certified WOSBs or EDWOSBs, will meet the limitations on 
subcontracting provisions set forth in Sec.  125.6 of this chapter.
    (3) In a general construction contract, the primary and vital 
requirements of the contract are the management, supervision and 
oversight of the project, including coordinating the work of various 
subcontractors, not the actual construction work performed.
* * * * *

0
72. 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 or 
order set-aside or reserved for WOSBs or EDWOSBs.
* * * * *

0
73. 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

[[Page 26216]]

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 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.

PART 128--VETERAN SMALL BUSINESS CERTIFICATION PROGRAM

0
74. The authority citation for part 128 continues to read as follows:

    Authority:  15 U.S.C. 15 U.S.C. 632(q), 634(b)(6), 644, 645, 
657f, 657f-1.


Sec.  128.201  [Amended]

0
75. Amend Sec.  128.201 by removing paragraph (b) and redesignating 
paragraph (c) as paragraph (b).


Sec.  128.203  [Amended]

0
76. In Sec.  128.203 amend paragraph (i) by removing the words 
``outside obligations'' wherever they appear and adding in their place 
the words ``outside employment''.

0
77. Amend Sec.  128.302 by adding paragraphs (d)(1), (d)(2), (f)(1), 
and (f)(2) to read as follows:


Sec.  128.302  How does SBA process applications for certification?

* * * * *
    (d) * * *
    (1) If a concern submits inconsistent information that results in 
SBA's inability to determine the concern's compliance with any of the 
VOSB or SDVOSB 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.
* * * * *
    (f) * * *
    (1) If SBA denies a business concern's application for VOSB or 
SDVOSB certification, within two days of SBA's denial becoming a final 
agency decision, the applicant concern must update its VOSB or SDVOSB 
self-certification status in the System for Award Management (or any 
successor system) to reflect that the concern is not an eligible VOSB 
or SDVOSB.
    (i) If an applicant appeals the D/GC's denial decision to SBA's 
Office of Hearings and Appeals (OHA) in accordance with part 134 of 
this chapter and OHA affirms the ineligibility determination, the two-
day requirement applies immediately upon OHA's final decision.
    (ii) If an applicant does not appeal the D/GC's denial decision to 
OHA, the two-day requirement begins 10 business days after receipt of 
the D/GC's denial.
    (2) If a business concern fails to update its VOSB or SDVOSB self-
certification status in the System for Award Management (or any 
successor system) after a final SBA decision, SBA will make such update 
within two days of the business's failure to do so.

0
78. Amend Sec.  128.310 by redesignating paragraphs (d) and (e) as 
paragraphs (e) and (f) respectively, and by adding a new paragraph (d) 
to read as follows:


Sec.  128.310  What are the procedures for decertification?

* * * * *
    (d) Decertification due to submission of false information. If SBA 
discovers that a VOSB/SDVOSB or its representative knowingly submitted 
false information, SBA will propose the firm for decertification. In 
addition, SBA will refer the matter to the SBA Office of Inspector 
General for review and may request that Government-wide debarment or 
suspension proceedings be initiated by the agency.
* * * * *

0
79. Amend Sec.  128.401 by revising paragraph (g)(2) and adding 
paragraph (g)(3) to read as follows:


Sec.  128.401  What requirements must a VOSB or SDVOSB meet to submit 
an offer on a contract?

* * * * *
    (g) * * *
    (2) In the case of a contract or order for services, specialty 
trade construction or supplies, SBA will find that a prime VOSB or 
SDVOSB contractor is performing the primary and vital requirements of 
the contract or order, and is not unduly reliant on one or more 
subcontractors that are not certified VOSBs or SDVOSBs, where the prime 
contractor can demonstrate that it, together with any subcontractors 
that are certified VOSBs or SDVOSBs, will meet the limitations on 
subcontracting provisions set forth in Sec.  125.6 of this chapter.
    (3) In a general construction contract, the primary and vital 
requirements of the contract are the management, supervision and 
oversight of the project, including coordinating the work of various 
subcontractors, not the actual construction work performed.
* * * * *

0
80. Amend Sec.  128.402 by revising paragraph (a)(3) to read as 
follows:


Sec.  128.402  When may a joint venture submit an offer on a VOSB or 
SDVOSB contract?

* * * * *
    (a) * * *
    (3) A VOSB or SDVOSB cannot be a joint venture partner on more than 
one joint venture that submits an offer for a specific contract or 
order set-aside or reserved for VOSBs or SDVOSBs.
* * * * *

0
81. Amend Sec.  128.404 by revising paragraph (d) to read as follows:


Sec.  128.404  When may a contracting officer set aside a procurement 
for VOSBs or SDVOSBs?

* * * * *
    (d) Prohibition on competitions requiring or favoring additional 
socioeconomic certifications. A procuring activity cannot restrict an 
SDVOSB competition (for either a contract or order) to require 
certifications other than SDVOSB certification (i.e., a competition 
cannot be limited only to business concerns that are both SDVOSB and 
8(a), SDVOSB and HUBZone, or SDVOSB and WOSB) or give evaluation 
preferences to firms having one or more other certifications.

0
82. Amend Sec.  128.500 by adding paragraph (d) to read as follows:


Sec.  128.500  What are the requirements for filing a VOSB or SDVOSB 
status protest?

* * * * *
    (d) A concern found not to qualify as a VOSB or SDVOSB in a status 
protest may not submit an offer on a future VOSB or SDVOSB procurement 
until the protested concern reapplies to the Veteran Small Business 
Certification Program and has been designated by SBA as a VOSB or 
SDVOSB into the certification database. 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

[[Page 26217]]

concern has already certified itself as a VOSB or SDVOSB on a pending 
procurement, the concern must immediately inform the contracting 
officer for the procuring agency of the adverse determination.
    (1) Not later than two days after SBA's final determination finding 
a concern ineligible as a VOSB or SDVOSB, such concern must update its 
VOSB or SDVOSB status in the System for Award Management (or any 
successor system).
    (2) If a business concern fails to update its VOSB or SDVOSB 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.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2023-07855 Filed 4-26-23; 8:45 am]
BILLING CODE 8026-03-P