[Federal Register Volume 61, Number 21 (Wednesday, January 31, 1996)]
[Rules and Regulations]
[Pages 3280-3304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1348]
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Part 121
Small Business Size Standards
AGENCY: Small Business Administration.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In response to President Clinton's government-wide regulatory
reform initiative, the Small Business Administration (SBA) has
completed a page-by-page, line-by-line review of all of its existing
regulations. As a result, SBA is clarifying and streamlining its
regulations. This final rule improves the Agency's size program by
simplifying and clarifying language in the existing rules, conforming
these rules to present SBA policies and practices, and providing some
substantive modifications to streamline the delivery of services to the
public. The revised regulations will be more understandable and much
easier to use, and will reduce the number of sections comprising Part
121 from eighteen to thirteen. The rule improves language, but does not
change the existing size standards which apply to particular
industries.
EFFECTIVE DATE: This rule is effective on March 1, 1996.
FOR FURTHER INFORMATION CONTACT: John W. Klein, Chief Counsel for
Special Programs, Office of General Counsel, at (202) 205-6645.
SUPPLEMENTARY INFORMATION: On November 24, 1995, SBA published a
proposed rule in the Federal Register (60 FR 57982) to completely
revise its regulations governing the size determination program. SBA's
intent in finalizing that rule is to streamline the size standards
operation by simplifying and clarifying existing regulatory language
and by eliminating unnecessary, irrelevant, or obsolete provisions. The
final rule amends office titles to reflect a previous reorganization of
functions within the structure of SBA. SBA has attempted to rewrite
Part 121 in plain English in order to make the regulations more
readable and less confusing.
The proposed rule contained eligibility requirements for
organizations for the handicapped to receive awards of contracts set
aside for small business and procedures for filing protests regarding
the status of handicapped organizations (proposed Secs. 121.1201-
121.1206). Those sections have been removed from this final rule
because the authority for such eligibility has expired. As a
consequence, Secs. 121.1301-121.1305 of the proposed rule have been
renumbered as Secs. 121.1201-121.1205 in this final rule.
SBA received and considered 25 timely comments in response to the
proposed rule. The comments, as well as SBA's response to them, are
discussed below. Other than the changes identified below in response to
the comments and the elimination of proposed Secs. 121.1201-121.1206
(as discussed above), the regulatory text of Part 121 has not been
changed from the proposed rule. For a section by section analysis of
the revised Part 121 and SBA's rationale for any changes from the pre-
existing regulations, see the supplementary information published as
part of the proposed rule (60 FR 57982).
Analysis of Comments Received
SBA received and considered eight comments to the proposed text for
its affiliation regulation (proposed Sec. 121.103). Six of these
comments responded to the proposed exclusion from affiliation coverage
afforded certain private investors that are engaged in the business of
providing equity and/or debt financing to third parties. In addition to
the existing exclusion from affiliation for Small Business Investment
Companies (SBICs) and Development Companies, the proposed rule added an
exclusion, for purposes of SBIC assistance only, for concerns owned by
certain venture capital firms, pension funds, and charitable entities
exempt from federal taxation under Sec. 501(c) of the Internal Revenue
Code. The proposed rule imposed the same control limitations on these
investors as those imposed by SBA on SBICs under 13 CFR Part 107.
While the commenters supported SBA's intent to add an exclusion
from affiliation for the listed investors, they thought that the
proposal did not go far enough. One commenter agreed with the proposal
to include venture capital operating companies (VCOCs) in the list of
investors which would not be affiliated with applicant concerns, but
felt that limiting the exception to financial investors that
technically qualify as VCOCs might not achieve the desired goal. The
commenter pointed out that a fund which resembles a VCOC because it has
at least 50% of its portfolio in ``qualified venture capital
investments'' and it obtains and exercises certain ``management
rights'' with respect to those investments may nevertheless fail to
qualify as a VCOC if its first investment was a passive investment. The
commenter suggested that the affiliation exemption should be made
available to any investing company that (1) has 50% of its portfolio in
``qualified venture capital investments'' at the time size is
determined, or (2) would qualify as a VCOC but for its first
investment.
SBA has considered the suggestion but has decided to limit
Sec. 121.103(b)(5)(i) to VCOCs, as proposed. SBA understands that other
investors may exist whose investment goals, policies and activities are
[[Page 3281]]
identical to those of a VCOC, but who for one reason or another are not
considered VCOCs. However, to properly administer a regulation that
refers to the type of investments of a private entity would demand
resources far in excess of those available to SBA. If, on the other
hand, the private investor's status as a VCOC is the criteria for
exemption from affiliation, SBA examiners need look no farther than a
statement from the entity that it is a VCOC. SBA believes a statement
of this type is likely to be reliable, since any company that is a VCOC
is subject to certain requirements under Department of Labor
regulations.
Another commenter recommended that the exclusion from affiliation
be broadened to include any non-registered investment company
beneficially owned by less than 100 persons if such company's sales
literature or organization documents indicate that its principal
purpose is investment in securities rather than the operation of
commercial enterprises. The commenter felt that a concern that meets
the definition of an ``investment company'' under the Investment
Company Act of 1940, as amended (the 1940 Act), has the necessary
investment characteristics even though it is not registered under the
1940 Act due to the number of its beneficial owners. SBA agrees and has
added a new paragraph (vi) to Sec. 121.103(b)(5).
Three commenters argued that lack of control over the small concern
should not be a requirement for an investor to benefit from the
exclusion from affiliation. SBA disagrees. A small concern must be
independently owned and operated, in addition to being small, in order
to be eligible for SBIC assistance. See 15 USC 632 and 15 USC 662.
Generally, a business that is controlled by its large investors does
not satisfy this statutory requirement. In Part 107, however, SBA has
identified certain special circumstances under which SBICs are
permitted to assume control over a small concern. See 13 CFR
Sec. 107.865(c) and (d). In the proposed rule covering Part 121, SBA
proposed to extend those exceptions to the private firms listed in
Sec. 121.103(b)(5). SBA is finalizing that proposal, but would like to
clarify two points regarding the application of the control test to
those private investors:
First, ``control'' will be determined under Sec. 107.865, which
incorporates the definition of Control under Sec. 107.50. Second, the
requirement in Sec. 107.865(e) for an SBIC assuming temporary control
over a concern to file a control certification with SBA would not apply
to non-SBIC investors in the concern.
SBA is also taking this opportunity to correct a drafting error in
current Sec. 121.401(b), which was repeated in proposed
Sec. 121.103(b)(1). Both sections provide an unconditional exclusion
from the affiliation rules for the entities listed therein, and both
sections mention investment companies registered under the 1940 Act.
However, it was never SBA's intent to provide an exclusion from
affiliation for all investment companies registered under the 1940 Act.
The regulation was intended to cover only those registered investment
companies that are also SBICs. See 54 FR 52634 (December 21, 1989). In
the final rule adopted today, registered investment companies are
treated the same as non-registered investment companies--they will not
be considered affiliated with the applicant concern if they satisfy the
control test under Sec. 107.865. Registered investment companies are
listed under new Sec. 121.103(b)(5)(v) in the final rule.
Finally, one commenter recommended expanding the exclusion from
affiliation in Sec. 121.103(b)(5) to include all investors primarily
engaged in the business of providing equity and/or debt financing to
third parties. SBA believes that such an exclusion is too broad, and
does not adopt it in this final rule.
One commenter expressed concern that ``common facilities'' had been
eliminated as a separate basis for finding affiliation in the proposed
rule, and recommended that it be reinserted in the final rule. Although
the proposed rule eliminated ``common facilities'' as a separate basis
for finding affiliation, it was not SBA's intent to prohibit SBA from
considering all appropriate factors, including ``common facilities,''
in determining whether affiliation exists. Section 121.103(a)(2) lists
certain factors that may be considered by SBA in determining whether
affiliation exists. It states that SBA considers factors such as
ownership, management, and contractual relationships, but does not
intend that list to be exhaustive. SBA believes that the flexibility to
make an appropriate affiliation determination was in the proposed
regulation, and does not add another separate basis for finding
affiliation in this rule.
Another commenter objected to the language of proposed
Sec. 121.103(c)(1) that eliminated the ``presumption'' of control for
persons that own, control, or have the power to control 50 percent or
more of a concern's voting stock contained in the predecessor
regulation at Sec. 121.401(e)(1). The commenter felt that the
regulation should provide only for a presumption of control which can
be negated by specific facts in a particular case (e.g., person may own
over 50% of voting stock, but through voting agreements or proxies may
have divested control of the company). SBA disagrees. SBA believes that
a person owning 50 percent of a concern should be deemed to control
that concern regardless of any voting agreements. A person that has
voting control of 50 percent of a concern, even if he or she does not
own the stock associated with the voting rights, would also be deemed
to control the concern, but that does not do away with the interests
attendant to a 50 percent owner.
SBA received 12 comments to its proposed revision to the definition
of ``annual receipts'' (proposed Sec. 121.104). Ten commenters
enthusiastically supported the revision of annual receipts that
eliminated the requirement that businesses operating on a cash basis
maintain a separate set of accrual basis books. They noted that such a
change will reduce paper work and expense. No change in the final rule
is made to that provision.
One commenter strongly supported the exclusion from annual receipts
for amounts collected by another by a conference management services
provider. Again, SBA concurs, and no change is made in this final rule.
One commenter recommended that custom brokers (businesses that
collect customs duties and federal revenues) should be able to exclude
``pass-through'' amounts from their annual receipts in determining
their size. The commenter felt that this added income distorts their
status as a small business. Pass-through amounts for custom brokers was
not an issue before the public in SBA's November 24, 1995 proposed
rule. As such, SBA cannot add such an exclusion in this final rule. In
addition, SBA has not performed an analysis of this industry to
determine whether such an exclusion is warranted. In order for such a
review to be done, interested parties must submit a request to the
Assistant Administrator of SBA's Size Standards Staff in Washington,
DC.
Finally, SBA has clarified what the term ``receipts'' encompasses
in this final rule. There was some internal confusion that the proposed
rule would have required a double counting of certain amounts by
requiring the inclusion of ``gross or total income'' plus ``cost of
goods sold.'' No double counting was intended, nor will it occur under
this regulation. The terms ``total income,'' ``gross income,'' and
``cost of goods sold'' come directly from the definitions of those
terms as set forth in applicable Internal Revenue Service (IRS) Federal
tax return forms. For a corporation (IRS Form 1120, line 11), a
[[Page 3282]]
sub-chapter S corporation (IRS Form 1120S, line 6), or a partnership
(IRS Form 1065, line 8), the applicable term is ``total income.'' For a
sole proprietorship (Schedule C, IRS Form 1040, line 7), the applicable
term is ``gross income.'' To this amount, the ``cost of goods sold''
(IRS Form 1120, line 2; IRS Form 1120S, line 2; IRS Form 1065, line 2;
IRS Form 1040, Schedule C, line 4) is added to determine ``receipts''
for SBA purposes. SBA never intended to add ``cost of goods sold'' to
the ``gross receipts or sales'' figures identified in these IRS forms,
which would have resulted in some double counting.
One commenter believed that proposed Sec. 121.105(c) needed to be
clarified in the final rule. The proposed rule added that provision to
make it clear that if one entity is replaced by another having the same
assets and liabilities, the successor firm would not be treated as a
new entity for purposes of calculating annual receipts or employees.
SBA's regulations have historically required a concern that has
acquired or been acquired as an affiliate during the applicable
averaging period to include the receipts of both concerns in
determining size. See 13 CFR 121.402(e)(1) (1995). That provision is
retained in this final rule at Sec. 121.104(d). This new provision is
not intended to repeat that rule. It is intended to apply to the
situation where a business entity ceases and a ``new'' business entity
emerges with basically the same assets and liabilities as the previous
entity. In such a case, instead of treating the successor business
entity as a ``new'' concern, with Sec. 121.104((b)(2) or
Sec. 121.106(b)(3) applying as appropriate, the revenues or employees
of the predecessor concern will be counted for the full averaging
period. A business entity cannot reorganize and be able to avoid the
full application of SBA's size requirements.
One commenter recommended that the $6 million net worth and $2
million net income size standards for the Development Company program
should be increased for inflation because they have not changed since
their inception in 1980. The numerical value of specific size standards
was not an item proposed for change in the November 24, 1995 proposed
rule. As such, any change at this time would be contrary to the
requirements of the Administrative Procedures Act and inappropriate.
Anyone believing that specific size standards should be altered should
write to the Assistant Administrator of SBA's Size Standards Staff at
SBA's Headquarters, giving detailed reasons for the desired change.
Two commenters recommended that the reference to ``net worth'' in
proposed Sec. 121.301(b)(1) should be to ``tangible net worth,''
because items such as goodwill have no tangible value and should not be
taken into account during calculation of net worth for loan approval
purposes. SBA concurs and makes that revision in this final rule.
Four commenters opposed the elimination of a size standard
differential for Redevelopment Areas in the context of SBA financial
assistance (proposed Sec. 121.301(e)). They supported keeping the
differential for Redevelopment Areas for concerns seeking such
financial assistance. Alternatively, if the differential is eliminated,
they proposed increasing all receipt-based size standards by 25%. SBA
disagrees. The reason for the differential was to assist distressed
geographical areas needing development, not to increase all size
standards by 25% for purposes of SBA financial assistance. Because
Redevelopment Areas have become so common, however, that is effectively
what has occurred. In addition, unlike Labor Surplus Areas, which are
reviewed on a regular basis, a Redevelopment Area remains so designated
once it receives the designation. Thus, areas that are no longer
distressed remain eligible for the increased size standards. Given
these circumstances, SBA continues to believe that the Redevelopment
Area differential should be eliminated and the final rule reflects
that.
One commenter disagreed with the provision of Sec. 121.302
establishing size for financial assistance at the time the application
for assistance is received by SBA, stating that concerns do not make
applications directly to SBA. The commenter recommended that size
should be determined as of the date of the funding or commitment to
fund. SBA believes that the date of funding or commitment to fund is
too far along in the process to determine a concern's size. SBA should
not use its limited resources to determine loan-worthiness of a concern
that is ineligible to receive the financial assistance because of its
size. Thus, SBA believes that size must be determined when SBA starts
its analysis. That, however, may not occur when the application is
first received by SBA. Sometimes an application is not acted on
immediately because it is not complete. In response to this comment and
SBA's re-evaluation of its position, the final rule makes the date that
an application is accepted for processing by SBA as the date that a
concern's size is determined.
One commenter objected to the provision of proposed Sec. 121.304
which permits a business concern with an existing SBA loan to be
considered small for purposes of refinancing that loan even though it
exceeds the applicable size standard at the time of the refinancing.
This is a pre-existing SBA policy that was not changed by the November
24, 1995 proposed rule. That policy has existed for many years in order
to protect the Government's investment. SBA has added a sentence to
this section in this final rule to clarify that such refinancing would
occur only where SBA determines that it is necessary to protect the
Government's financial interest.
SBA received three comments regarding waivers to its
nonmanufacturer rule (Sec. 121.406(b)). One comment recommended that
the local SBA district office be empowered with the authority to
approve or disapprove requests for waivers of the non-manufacturer
rule. SBA disagrees. The statutory authority for such waivers is given
to SBA's Administrator. This authority has been delegated to SBA's
Associate Administrator for Government Contracting. While SBA has moved
more and more authority to local district offices wherever possible,
SBA believes that the authority to waive the nonmanufacturer rule needs
to remain at this level to ensure consistency and fairness in all SBA
offices.
Two commenters responded to SBA's proposed implementation of the
nonmanufacturer rule under Simplified Acquisition Procedures (SAP)
(proposed Sec. 121.406(d)). One commenter supported the provision as
written and applauded SBA's effort to consider the dilemma of regular
dealers, suppliers and distributors under SAP. The other commenter
recommended that the $25,000 ceiling below which a nonmanufacturer need
not supply the product of a small business (provided that the product
is manufactured or produced in the United States) should be increased
to $100,000. That commenter reasoned that the ceiling was $25,000 when
the Small Purchase amount was $25,000. Since SAP have replaced Small
Purchase Procedures and the threshold for SAP is $100,000, the
commenter believed that the nonmanufacturer ceiling should similarly be
raised to $100,000.
Existing SBA regulations (13 CFR 121.906 and 121.1106) implement
amendments made in 1988 to the Small Business Act (15 U.S.C.
637(a)(17)). Those regulations specify that to qualify for a small
business set-aside or section 8(a) procurement of a manufactured or
processed product, a small
[[Page 3283]]
nonmanufacturer must provide the product of a domestic small
manufacturer. Specifically, an offeror that is not the manufacturer of
the product (1) must itself be a small business concern, and (2) must
also supply a product manufactured by a domestic small business
concern. This requirement is commonly referred to as the
``nonmanufacturer rule.'' SBA may waive the nonmanufacturer rule if one
of the following conditions exists: (1) SBA determines that no small
business manufacturer can reasonably be expected to offer a product
meeting the specifications required by a solicitation (individual
waiver); or (2) SBA determines that no small business manufacturer of
an item is available to participate in the federal market generally
(class waiver).
On May 26, 1995 SBA published in the Federal Register (60 FR 27924)
a proposed rule that would require a small business dealer or
nonmanufacturer to provide the product of a small manufacturer on all
small business set-aside or section 8(a) supply contracts over $2,500,
including those processed under SAP. This proposed rule was not
finalized, and the comments received by SBA and further study of the
issue persuaded SBA that the May 26th proposed rule should not be
adopted as final. As indicated above, the section in the November 24th
proposed rule dealing with this issue resulted in only two comments.
SBA has decided to finalize the rule as proposed on November 24th. In
order to set forth its reasoning on this matter, SBA discusses below
the comments earlier received in response to its May 26th proposed
rule.
SBA's May 26th proposed rule would have extended the
nonmanufacturer rule to all procurements processed under the SAP
established by the Federal Acquisition Streamlining Act (FASA) of 1994.
SBA offered two alternatives to this proposal, and invited comments on
both along with the proposal. SBA's first alternative was to exempt
from the nonmanufacturer rule contracts of $100,000 or less. The second
alternative was to exempt contracts of $25,000 or less. (Contracts
below the micro-purchases level of $2,500 would be exempt regardless of
the approach in the proposed rule or either alternative.) This second
alternative was the one proposed as part of SBA's November 24, 1995
proposed revision to the entire Part 121.
After considering the forty comments received in response to the
May 26th proposed rule, as well as the two received in response to the
November 24th proposed rule, SBA has concluded that applying the
nonmanufacturer rule to all procurements reserved for small business,
including those handled under SAP, would place inappropriate and
substantial administrative burdens on a great number of small-dollar
value contracts. Given the large volume of contracts of $25,000 or less
(98 percent of procurement actions), contracting officers would likely
experience burdensome delays in order to identify small manufacturer
sources and to verify that small dealers were supplying the product of
domestic small manufacturers. The likely significant increase in
requests for waivers of the nonmanufacturer rule would overly burden
contracting agencies and the SBA, creating further delays in the
procurement process. SBA also has concluded that adoption of the
proposed rule could have an undesirable effect of diminishing
opportunities for small dealers in the federal market. For many
products purchased in small-dollar quantities, there often appears to
be few or no small business manufacturers participating in the federal
market. Consequently, many dealers who have been supplying the federal
government with products on contracts of $25,000 or less would, under
the May 26th proposed rule, not be eligible for an award of a set-aside
contract since they do not have or could not obtain products of a small
manufacturer.
At the same time, SBA strongly believes that an exemption from the
nonmanufacturer rule for contracts greater than $25,000 would have a
substantial damaging effect on domestic small manufacturers. In fiscal
years 1991 through 1993, small manufacturers averaged over $500 million
in set-aside and 8(a) contracts ranging between $25,000 and $100,000.
An exemption from the nonmanufacturer rule for these procurements would
potentially shift much of this contracting from small to large
manufacturers, and would defeat the very purpose of the nonmanufacturer
rule.
The selection of the $25,000 level for applying the nonmanufacturer
rule to contracts reserved for small business is consistent with the
threshold formerly established for small purchase procedures
(discontinued under FASA) and balances the important objectives of
simplifying the procurement process with continuing to ensure that most
of the benefits of procurements reserved for small business actually
flow to small business. Utilizing this threshold of $25,000 will
continue the level of competition between small and large manufacturers
that existed under small purchase procedures. A higher threshold would
introduce a new level of competition that would adversely affect small
manufacturing enterprises. At the same time, small business dealers
will continue to have the same level of contract opportunities at
$25,000 and below that they formerly had under small purchase
procedures. That is, they will continue to be able to provide the
products of large manufacturers on procurements of $25,000 or less.
Selecting this threshold will add no new requirements to the vast
majority of smaller-sized procurements.
SBA received 40 comments in response to the May 26th proposed rule.
Of the 40 comments, ten were from federal contracting activities, one
from a State University Economic Development Institute (EDI), 28 from
businesses (27 dealers and 1 manufacturer), and one was from a trade
association. All but one of the commenters opposed applying the
nonmanufacturer rule as the May 26th rule proposed to do. The one, a
federal contracting activity, indicated its commitment to supporting
the rule however implemented. Thirty-six commenters supported the first
alternative of the proposed rule (a $100,000 threshold), and three
indicated some support for the second alternative (a $25,000
threshold).
The ten federal contracting activities and one EDI that commented
on the proposed rule favored exempting procurements of $100,000 or less
from the nonmanufacturer rule. They believe that applying the rule to
all procurements reserved for small business will place additional
administrative burdens on contracting personnel, which is contrary to
the intent of FASA. They pointed out that the proposed policy could
result in a reluctance on the part of some contracting personnel to set
aside procurements for small business, thus actually reducing small
business participation and increasing government costs because of
lessened cost competitiveness. They also anticipated a need to request
more waivers, causing administrative burdens and processing delays at
the SBA. Two of the federal contracting activities indicated that they
would support retaining the $25,000 threshold as a practical
alternative to requiring the application of the nonmanufacturer rule to
all contracts over $2,500. The EDI's comments, while supporting some of
the above, more fully describe the effects of the proposed rule upon
small dealers and distributors. (SBA addresses the effects upon dealers
later in this discussion.)
SBA recognizes that these points are legitimate concerns of federal
procurement personnel with regard to
[[Page 3284]]
the proposed rule. Therefore, SBA has decided that the nonmanufacturer
rule shall apply only to those contracts set aside for small business
that are above $25,000. The exemption from the nonmanufacturer rule for
contracts processed under small purchase procedures of $25,000 and
below had proven quite workable in the past. SBA agrees that
establishing a $100,000 threshold for the nonmanufacturer rule would
certainly further simplify the procurement process and reduce the
administrative burden on contracting officers. However, this
administrative relief would come at significant expense to domestic
small manufacturers who have traditionally provided products in
response to procurements set aside for small business. With this final
rule, administrative burdens will be no more and no less than they had
been under small purchase procedures. Also, small business set-aside
opportunities would not be diminished as a result of extending the
nonmanufacturer rule to previously exempted procurements. SBA has
concluded that the adverse effect of a $100,000 threshold upon such a
significant part of the market for small manufacturers is not
appropriate, and that the $25,000 threshold strikes a proper balance
with the FASA goal of reducing administrative matters associated with
federal procurement.
To alleviate the potential delays in the procurement process by
applying the nonmanufacturer rule to procurements reserved for small
business, two federal contracting activities recommended that SBA
delegate waiver authority to contracting officers for these
procurements. The SBA does not agree with this recommendation.
Delegating this decision to literally thousands of contracting offices
would likely lead to an inconsistent application of the nonmanufacturer
rule. However, to address concerns regarding delays in the procurement
process, SBA will attempt to complete the processing of individual
waiver requests in connection with procurements processed under
simplified acquisition procedures within five (5) business days of the
receipt of a complete waiver request instead of the normal fifteen (15)
business days. Generally, a contracting office submits, and SBA
processes, a waiver request before it issues its solicitation. The
markedly reduced time involved should lessen significantly any direct
negative impact on small manufacturers or dealers or on the procurement
process.
All but one of the 28 business commenters and the sole trade
association commenting are associated with one affected industry,
namely military surplus aircraft parts, and all supported the adoption
of the $100,000 threshold. Firms in this industry purchase at auction
military surplus aircraft parts from the Department of Defense (DoD),
inventory them, and resell them to U.S. and friendly foreign military
services. Items they purchase are generally new and unused, and are
products almost exclusively of large manufacturers. As suppliers of
products they do not manufacture, they would be unable to compete on
small business set-aside and section 8(a) procurements if the
nonmanufacturer rule were applicable.
Uniformly these commenters favored adoption of the alternative that
would establish a $100,000 threshold instead of the proposed rule. They
stated that the May 26, 1995 proposal to apply the nonmanufacturer rule
to all procurements reserved for small business would harm small
dealers of military surplus aircraft parts by effectively rendering
them unable to compete on most procurements reserved for small
business. This diminished opportunity to compete would result because
there are few DoD approved small manufacturers of military aircraft
parts, and most procurements are below the $100,000 simplified
acquisition threshold. With few or no small manufacturers to supply
products for these dealers, more federal solicitations would likely
become open and unrestricted. On unrestricted procurements, these
dealers believe they are at a competitive disadvantage when placed into
direct competition with the same large manufacturers whose products
they would propose to supply. Therefore, they believe such an
application of the nonmanufacturer rule would in fact harm small
businesses, and benefit large defense contractors.
SBA shares the concern about the impact of the proposed rule on the
opportunities for small dealers in the federal market. As these
comments point out, as well as comments received from several of the
federal contracting activities, small dealers find it difficult to
comply with the nonmanufacturer rule on small-dollar contracts due to
the limited number of small manufacturer sources. To address this
concern, the final rule re-establishes an exemption of the
nonmanufacturer rule on contracts of $25,000 or less. The SBA, however,
does not believe that a higher threshold is in the best interests of
all small businesses.
As stated in this final rule as well as the May 26th proposed rule,
SBA is particularly concerned about the impact on small business
manufacturers of an exemption to the nonmanufacturer rule.
Participation of small business in the federal procurement of aircraft
parts offers an excellent example of the reasons for the SBA's
concerns. In fiscal year 1993, small manufacturers of aircraft parts
received direct awards of over $20 million in set-aside and 8(a)
contracts that ranged between $25,000 and $100,000. (This figure does
not include set-aside and 8(a) contracts for products that small
manufacturers provided through small dealers.) An exemption of the
nonmanufacturer rule to small business set-aside procurements between
$25,000 and $100,000 could significantly reduce the opportunities for
small business manufacturers. The SBA has found that a number of other
industries would be affected in a similar manner if the $100,000
threshold were adopted. In recognition of the business practices of
small dealers in the federal market, while at the same time protecting
opportunities for small manufacturers and ensuring that the substantial
value of small business set-asides flow to small business, the SBA
believes that this final rule is in the overall best interest of small
business.
The commenting membership of the association of dealers in military
surplus aircraft parts also emphasized the unique character of their
commodity, and they requested that it be treated as such. As a minimum
alternative to the proposed rule, they requested that SBA grant a class
waiver for military aircraft spare parts. As a response to this
alternative, the Agency notes that Secs. 121.1201-121.1205 of this
final rule provide the policies and procedures that apply to all class
waivers of the nonmanufacturer rule. SBA will consider a request for a
class waiver for military surplus aircraft parts that is submitted with
adequate support in accordance with the procedures laid out in the
preceding reference.
The only business commenter not associated with the military
surplus aircraft parts industry believes that the proposed rule would
be inconsistent with U.S. policy regarding free trade barriers with its
global trading partners. SBA disagrees. In accordance with the General
Agreement on Tariffs and Trade, the North American Free Trade Agreement
and the Canadian Free Trade Agreement, governments may establish
procurement preference programs to assist small business, and this rule
pertains to policies concerning the eligibility of business concerns
who may participate in U.S. small business procurement programs.
SBA received three comments to Sec. 121.603 of the November 24th
proposed rule. The first comment
[[Page 3285]]
recommended that the section be revised to include the time at which
size is determined for specific 8(a) subcontracts, believing that SBA
must have inadvertently omitted this requirement from the November 24th
proposed rule. That requirement was not omitted from the proposed rule,
but, rather, appeared in proposed Sec. 121.404. Proposed Sec. 121.401
stated that the requirements set forth in Secs. 121.401-121.412 applied
to procurement programs including SBA's Minority Enterprise Development
(i.e., the 8(a)) program. Proposed Sec. 121.404 set forth the time at
which size is determined for these procurement programs. While the time
at which size is determined for 8(a) subcontracts continues to be
contained in Sec. 121.404, the final rule adds a cross reference in
Sec. 121.603 to Sec. 121.404 for clarification.
The second comment believed that notification of size verification
by SBA (proposed Sec. 121.603(b)) is an unnecessary burden on SBA. SBA
believes that such notification is needed to ensure fairness and the
integrity of the program, and that any self-imposed burden is
outweighed by this benefit.
The last comment suggested that Sec. 121.603(c) be eliminated as
unnecessary and redundant. This provision does not appear elsewhere in
Part 121, and SBA believes that it is needed within the size provisions
specifically relating to the 8(a) program.
As part of the supplementary information to the November 24, 1995
proposed rule, SBA published a table of statutory and regulatory size
standards established by agencies other than SBA. That table is not
repeated in this final rule. Anyone with an interest in size standards
established by other agencies for specific programs within their
authority should consult the table published with the proposed rule. 60
FR 57982, 57988.
Compliance With Executive Orders 12612, 12778, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA believes that this final rule will have a significant impact on
a substantial number of small entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601, et seq. In addition, this
rule constitutes a significant regulatory action for the purpose of
Executive Order 12866. A regulatory assessment and a regulatory
flexibility analysis follow:
(1) Description of Entities to Which This Rule Applies
This rule will primarily apply to small business nonmanufacturers
(wholesale trade and retail trade firms) and will allow them to furnish
the product of any manufacturer on procurements of $25,000 or less.
Also, small business manufacturers will have to compete on certain
procurements with small nonmanufacturers supplying products of large
manufacturers. The lack of detailed data on contracts of $25,000 or
less precludes an estimate of the number of small nonmanufacturers and
small manufacturers this rule will affect. However, comments on the
proposed rule suggest that a significantly greater number of small
nonmanufacturers will be impacted by this rule than small
manufacturers.
(2) Description of Potential Benefits of This Rule
The benefits of this rule are threefold. First, small business
nonmanufacturers will maintain the same procurement opportunities for
contracts of $25,000 and below as they had under small purchase
procedures. Although the amount of contracting cannot be estimated, it
does represent a significant proportion of the $7.9 billion awarded to
small businesses under small purchase procedures in FY 1993. Second,
small manufacturers will have the same or greater level of procurement
opportunities under the simplified acquisition threshold as they had
under small business set-aside and 8(a) procurements of $25,000 to
$100,000. As discussed in the proposed rule, small manufacturers have
received over $500 million annually in set-aside and 8(a) contracts
within this dollar range. Finally, administrative burdens to small
nonmanufacturers and contracting officers will be reduced since there
will be no need to determine the size status of a manufacturing source
on thousands of small-dollar contracts.
(3) Description of Potential Costs of This Rule
SBA believes there will be minimal costs to the federal government
by reserving procurements of $25,000 or less to small nonmanufacturers.
All small business set-aside and section 8(a) contracts are expected to
be awarded at no more than fair-market value. Contracting officers, who
determine that on a given procurement there will not be two or more
small businesses competitive in market price, quality and delivery, may
issue an unrestricted procurement. Therefore, there should be no
significant increased costs to the government.
(4) Description of the Potential Net Benefits of the Rule
SBA believes that the benefits to small business exceed any costs
to federal procurement as a result of this final rule. In the May 26th
proposed rule, SBA expressed its belief that small business
opportunities would be greater if small nonmanufacturers were required
to supply the product of a domestic small business manufacturer. In
light of the comments received, SBA has concluded that small
nonmanufacturers participate much more significantly in small-dollar
procurements than do small manufacturers. Thus, the net benefits of
this final rule to small dealers, in terms of federal contracting
opportunities for small business, would be substantially greater than
the net benefits to small manufacturers from the proposed rule.
(5) Legal Basis for This Rule
The legal basis for this rule is sections 3(a), 5(a), 8(a) and
15(a) of the Small Business Act, 15 U.S.C. 632(a), 634(b)(6), 637(a)
and 644(a).
(6) Federal Rules
There are no federal rules that duplicate, overlap or conflict with
this final rule. SBA has exclusive statutory jurisdiction in
establishing size standards. In establishing the $100,000 threshold for
simplified acquisition procedures under which all procurements are
reserved exclusively for small business, FASA did not address the
application of the nonmanufacturer rule.
(7) Significant Alternatives to This Rule
In compliance with the Regulatory Flexibility Act, SBA considered
two alternatives in its proposed rule of May 26, 1995. One alternative
is the proposed rule itself, which would have the nonmanufacturer rule
apply to all small business set-aside and section 8(a) procurements
over $2,500. In proposing that rule, SBA offered and requested comments
on two alternatives. The proposed rule, together with the alternatives,
are discussed in the ``Supplementary Information,'' above. SBA has
concluded for the reasons more fully presented above to adopt the
second alternative.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this final rule contains no new reporting or
recordkeeping requirements.
For purposes of Executive Order 12612, SBA certifies that this rule
does
[[Page 3286]]
not have any federalism implications warranting the preparation of a
Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in Section 2 of that Order.
List of Subjects in 13 CFR Part 121
Government procurement, Government property, Grant programs--
business, Individuals with disabilities, Loan programs--business, Small
businesses.
Accordingly, pursuant to the authority set forth in sections 3(a)
and 5(b)(6) of the Small Business Act, 15 U.S.C. 632(a) and 634(b)(6),
SBA hereby revises part 121 of Title 13, Code of Federal Regulations
(CFR), to read as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
Subpart A--Size Eligibility Provisions and Standards
Provisions of General Applicability
Sec.
121.101 What are SBA size standards?
121.102 How does SBA establish size standards?
121.103 What is affiliation?
121.104 How does SBA calculate annual receipts?
121.105 How does SBA define ``business concern or concern''?
121.106 How does SBA calculate number of employees?
121.107 How does SBA determine a concern's ``primary industry''?
121.108 What are the penalties for misrepresentation of size
status?
Size Standards Used to Define Small Business Concerns
121.201 What size standards has SBA identified by Standard
Industrial Classification codes?
Size Eligibility Requirements for SBA Financial Assistance
121.301 What size standards are applicable to financial assistance
programs?
121.302 When does SBA determine the size status of an applicant?
121.303 What size procedures are used by SBA before it makes a
formal size determination?
121.304 What are the size requirements for refinancing an existing
SBA loan?
121.305 What size eligibility requirements exist for obtaining
business loans relating to particular procurements?
Size Eligibility Requirements for Government Procurement
121.401 What procurement programs are subject to size
determinations?
121.402 What size standards are applicable to procurement
assistance programs?
121.403 Are SBA size determinations and SIC code designations
binding on parties?
121.404 When does SBA determine the size status of a business
concern?
121.405 May a business concern self-certify its small business size
status?
121.406 How does a small business concern qualify to provide
manufactured products under small business set-aside or MED
procurements?
121.407 What are the size procedures for multiple item
procurements?
121.408 What are the size procedures for SBA's Certificate of
Competency Program?
121.409 What size standard applies in an unrestricted procurement
for Certificate of Competency purposes?
121.410 What are the size standards for SBA's Section 8(d)
Subcontracting Program?
121.411 What are the size procedures for SBA's Section 8(d)
Subcontracting Program?
121.412 What are the size procedures for partial small business
set-asides?
Size Eligibility Requirements for Sales or Lease of Government Property
121.501 What programs for sales or leases of Government property
are subject to size determinations?
121.502 What size standards are applicable to programs for sales or
leases of Government property?
121.503 Are SBA size determinations binding on parties?
121.504 When does SBA determine the size status of a business
concern?
121.505 What is the effect of a self-certification?
121.506 What definitions are important for sales or leases of
Government-owned timber?
121.507 What are the size standards and other requirements for the
purchase of Government-owned timber (other than Special Salvage
timber)?
121.508 What are the size standards and other requirements for the
purchase of Government-owned Special Salvage Timber?
121.509 What is the size standard for leasing of Government land
for coal mining?
121.510 What is the size standard for leasing of Government land
for uranium mining?
121.511 What is the size standard for buying Government-owned
petroleum?
121.512 What is the size standard for stockpile purchases?
Size Eligibility Requirements for the Minority Enterprise Development
(MED) Program
121.601 What is a small business for purposes of admission to SBA's
Minority Enterprise Development (MED) Program?
121.602 At what point in time must a MED applicant be small?
121.603 How does SBA determine whether a Participant is small for a
particular MED subcontract?
121.604 Are MED Participants considered small for purposes of other
SBA assistance?
Size Eligibility Requirements for the Small Business Innovation
Research (SBIR) Program
121.701 What SBIR programs are subject to size determinations?
121.702 What size standards are applicable to the SBIR programs?
121.703 Are formal size determinations binding on parties?
121.704 When does SBA determine the size status of a business
concern?
121.705 Must a business concern self-certify its size status?
Size Eligibility Requirements for Paying Reduced Patent Fees
121.801 May patent fees be reduced if a concern is small?
121.802 What size standards are applicable to the reduced patent
fees program?
121.803 Are formal size determinations binding on parties?
121.804 When does SBA determine the size status of a business
concern?
121.805 May a business concern self-certify its size status?
Size Eligibility Requirements for Compliance With Programs of Other
Agencies
121.901 Can other Government agencies obtain SBA size
determinations?
121.902 What size standards are applicable to programs of other
agencies?
121.903 When does SBA determine the size status of a business
concern?
Procedures for Size Protests and Requests for Formal Size
Determinations
121.1001 Who may initiate a size protest or a request for formal
size determination?
121.1002 Who makes a formal size determination?
121.1003 Where should a size protest be filed?
121.1004 What time limits apply to size protests?
121.1005 How must a protest be filed with the contracting officer?
121.1006 When will a size protest be referred to an SBA Government
Contracting Area Office?
121.1007 Must a protest of size status relate to a particular
procurement and be specific?
121.1008 What happens after SBA receives a size protest or a
request for a formal size determination?
121.1009 What are the procedures for making the size determination?
121.1010 How does a concern become recertified as a small business?
Appeals of Size Determinations and SIC Code Designations
121.1101 Are formal size determinations subject to appeal?
121.1102 Are SIC code designations subject to appeal?
121.1103 What are the procedures for appealing a SIC code
designation?
[[Page 3287]]
Subpart B--Other Applicable Provisions
Waivers of the Nonmanufacturer Rule for Classes of Products and
Individual Contracts
121.1201 What is the Nonmanufacturer Rule?
121.1202 When will a waiver of the Nonmanufacturer Rule be granted
for a class of products?
121.1203 When will a waiver of the Nonmanufacturer Rule be granted
for an individual contract?
121.1204 What are the procedures for requesting and granting
waivers?
121.1205 How is a list of previously granted class waivers
obtained?
Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a) and 644(c); and
Pub. L. 102-486, 106 Stat. 2776, 3133.
Subpart A--Size Eligibility Provisions and Standards
Provisions of General Applicability
Sec. 121.101 What are SBA size standards?
SBA's size standards define whether a business entity is small and,
thus, eligible for Government programs and preferences reserved for
``small business'' concerns. Size standards have been established for
types of economic activity, or industry, generally under the Standard
Industrial Classification (SIC) System. The SIC System is described in
the ``Standard Industrial Classification Manual'' published by the
Office of Management and Budget, Executive Office of the President, and
sold by the U.S. Government Printing Office, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. The SIC System
assigns four-digit SIC codes to all economic activity within ten major
divisions. Section 121.201 describes the size standards now
established. A full table matching a size standard with each four-digit
SIC code is also published annually by SBA in the Federal Register.
Sec. 121.102 How does SBA establish size standards?
(a) SBA considers economic characteristics comprising the structure
of an industry, including degree of competition, average firm size,
start-up costs and entry barriers, and distribution of firms by size.
It also considers technological changes, competition from other
industries, growth trends, historical activity within an industry,
unique factors occurring in the industry which may distinguish small
firms from other firms, and the objectives of its programs and the
impact on those programs of different size standard levels.
(b) As part of its review of a size standard, SBA will investigate
if any concern at or below a particular standard would be dominant in
the industry. SBA will take into consideration market share of a
concern and other appropriate factors which may allow a concern to
exercise a major controlling influence on a national basis in which a
number of business concerns are engaged. Size standards seek to ensure
that a concern that meets a specific size standard is not dominant in
its field of operation.
(c) Please address any requests to change existing size standards
or establish new ones for emerging industries to the Assistant
Administrator for Size Standards, Small Business Administration, 409
3rd Street, S.W., Washington, D.C. 20416.
Sec. 121.103 What is affiliation?
(a) General Principles of Affiliation. (1) Concerns are affiliates
of each other when one concern controls or has the power to control the
other, or a third party or parties controls or has the power to control
both.
(2) SBA considers factors such as ownership, management, previous
relationships with or ties to another concern, and contractual
relationships, in determining whether affiliation exists.
(3) Individuals or firms that have identical or substantially
identical business or economic interests, such as family members,
persons with common investments, or firms that are economically
dependent through contractual or other relationships, may be treated as
one party with such interests aggregated.
(4) SBA counts the receipts or employees of the concern whose size
is at issue and those of all its domestic and foreign affiliates,
regardless of whether the affiliates are organized for profit, in
determining the concern's size.
(b) Exclusion from affiliation coverage. (1) Business concerns
owned in whole or substantial part by investment companies licensed, or
development companies qualifying, under the Small Business Investment
Act of 1958, as amended, are not considered affiliates of such
investment companies or development companies.
(2) Business concerns owned and controlled by Indian Tribes, Alaska
Regional or Village Corporations organized pursuant to the Alaska
Native Claims Settlement Act (43 U.S.C. 1601), Native Hawaiian
Organizations, or Community Development Corporations authorized by 42
U.S.C. 9805 are not considered affiliates of such entities, or with
other concerns owned by these entities solely because of their common
ownership.
(3) Business concerns which are part of an SBA approved pool of
concerns for a joint program of research and development as authorized
by the Small Business Act are not affiliates of one another because of
the pool.
(4) Business concerns which lease employees from concerns primarily
engaged in leasing employees to other businesses are not affiliated
with the leasing company solely on the basis of a leasing agreement.
(5) For financial, management or technical assistance under the
Small Business Investment Company program, an applicant concern is not
affiliated with the investors listed in paragraphs (b)(5)(i) through
(vi) of this section if the investors do not control the concern except
under those circumstances set forth in Sec. 107.865(c) or (d) of this
chapter. For purposes of this paragraph (b)(5), ``control'' is
determined under Sec. 107.865 of this chapter.
(i) Venture capital operating companies, as defined in the U.S.
Department of Labor regulations found at 29 CFR 2510.3-101(d);
(ii) Employee benefit or pension plans established and maintained
by the Federal government or any state, or their political
subdivisions, or any agency or instrumentality thereof, for the benefit
of employees;
(iii) Employee benefit or pension plans within the meaning of the
Employee Retirement Income Security Act of 1974, as amended (29 U.S.C.
1001, et seq.);
(iv) Charitable trusts, foundations, endowments, or similar
organizations exempt from Federal income taxation under section 501(c)
of the Internal Revenue Code of 1986, as amended (26 U.S.C. 501(c));
(v) Investment companies registered under the Investment Company
Act of 1940, as amended (1940 Act) (15 U.S.C. 80a-1, et seq.); and
(vi) Investment companies, as defined under the 1940 Act, which are
not registered under the 1940 Act because they are beneficially owned
by less than 100 persons, if the company's sales literature or
organizational documents indicate that its principal purpose is
investment in securities rather than the operation of commercial
enterprises.
(6) A protege firm is not an affiliate of a mentor firm solely
because the protege firm receives assistance from the mentor firm under
Federal Mentor-Protege programs.
(c) Affiliation based on stock ownership. (1) A person is an
affiliate of a concern if the person owns or controls, or has the power
to control 50 percent or more of its voting stock, or a block of stock
which affords control because it is large compared to other outstanding
blocks of stock.
[[Page 3288]]
(2) If two or more persons each owns, controls or has the power to
control less than 50 percent of the voting stock of a concern, with
minority holdings that are equal or approximately equal in size, but
the aggregate of these minority holdings is large as compared with any
other stock holding, each such person is presumed to be an affiliate of
the concern.
(d) Affiliation arising under stock options, convertible
debentures, and agreements to merge. Since stock options, convertible
debentures, and agreements to merge (including agreements in principle)
affect the power to control a concern, SBA treats them as though the
rights granted have been exercised (except that an affiliate cannot use
them to appear to terminate control over another concern before it
actually does so). SBA gives present effect to an agreement to merge or
sell stock whether such agreement is unconditional, conditional, or
finalized but unexecuted. Agreements to open or continue negotiations
towards the possibility of a merger or a sale of stock at some later
date are not considered ``agreements in principle'' and, thus, are not
given present effect.
(e) Affiliation based on common management. Affiliation arises
where one or more officers, directors or general partners controls the
board of directors and/or the management of another concern.
(f) Affiliation based on joint venture arrangements. (1) Parties to
a joint venture are affiliates if any one of them seeks SBA financial
assistance for use in connection with the joint venture.
(2) Concerns bidding on a particular procurement or property sale
as joint venturers are affiliated with each other with regard to
performance of that contract.
(3) A contractor and subcontractor are treated as joint venturers
if the ostensible subcontractor will perform primary and vital
requirements of a contract or if the prime contractor is unusually
reliant upon the ostensible subcontractor. All requirements of the
contract are considered in reviewing such relationship, including
contract management, technical responsibilities, and the percentage of
subcontracted work.
(4) For size purposes, a concern must include in its revenues its
proportionate share of joint venture receipts.
(g) 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. 121.104 How does SBA calculate annual receipts?
(a) Definitions. In determining annual receipts of a concern:
(1) Receipts means ``total income'' (or in the case of a sole
proprietorship, ``gross income'') plus the ``cost of goods sold'' as
these terms are defined or reported on Internal Revenue Service (IRS)
Federal tax return forms (Form 1120 for corporations; Form 1120S for
Subchapter S corporations; Form 1065 for partnerships; and Form 1040,
Schedule F for farm or Schedule C for other sole proprietorships).
However, the term receipts excludes net capital gains or losses, taxes
collected for and remitted to a taxing authority if included in gross
or total income, proceeds from the transactions between a concern and
its domestic or foreign affiliates (if also excluded from gross or
total income on a consolidated return filed with the IRS), and amounts
collected for another by a travel agent, real estate agent, advertising
agent, or conference management service provider.
(2) Completed fiscal year means a taxable year including any short
period. Taxable year and short period have the meaning attributed to
them by the IRS.
(3) Unless otherwise defined in this section, all terms shall have
the meaning attributed to them by the IRS.
(b) Period of measurement. (1) Annual receipts of a concern which
has been in business for 3 or more completed fiscal years means the
receipts of the concern over its last 3 completed fiscal years divided
by three.
(2) Annual receipts of a concern which has been in business for
less than 3 complete fiscal years means the receipts for the period the
concern has been in business divided by the number of weeks in
business, multiplied by 52.
(3) Annual receipts of a concern which has been in business 3 or
more complete fiscal years but has a short year as one of those years
means the receipts for the short year and the two full fiscal years
divided by the number of weeks in the short year and the two full
fiscal years, multiplied by 52.
(c) Use of information other than the Federal tax return. Where
other information gives SBA reason to regard Federal Income Tax returns
as false, SBA may base its size determination on such other
information.
(d) Annual receipts of affiliates. (1) If a concern has acquired an
affiliate or been acquired as an affiliate during the applicable
averaging period or before small business self-certification, the
annual receipts in determining size status include the receipts of both
firms. Furthermore, this aggregation applies for the entire applicable
period used in computing size rather than only for the period after the
affiliation arose. Receipts are determined for the concern and its
affiliates in accordance with paragraph (b) of this section even though
this may result in different periods being used to calculate annual
receipts.
(2) The annual receipts of a former affiliate are not included as
annual receipts if affiliation ceased before the date used for
determining size. This exclusion of annual receipts of a former
affiliate applies during the entire period used in computing size,
rather than only for the period after which the affiliation ceased .
Sec. 121.105 How does SBA define ``business concern or concern''?
(a) A business concern eligible for assistance from SBA as a small
business is a business entity organized for profit, with a place of
business located in the United States, and which operates primarily
within the United States or which makes a significant contribution to
the U.S. economy through payment of taxes or use of American products,
materials or labor.
(b) A business concern may be in the legal form of an individual
proprietorship, partnership, limited liability company, corporation,
joint venture, association, trust or cooperative, except that where the
form is a joint venture there can be no more than 49 percent
participation by foreign business entities in the joint venture.
(c) A firm will not be treated as a separate business concern if a
substantial portion of its assets and/or liabilities are the same as
those of a predecessor entity. In such a case, the annual receipts and
employees of the predecessor will be taken into account in determining
size.
Sec. 121.106 How does SBA calculate number of employees?
(a) Employees counted in determining size include all individuals
employed on a full-time, part-time, temporary, or other basis. SBA will
consider the totality of the circumstances, including factors relevant
for tax purposes, in
[[Page 3289]]
determining whether individuals are employees of the concern in
question.
(b) Where the size standard is number of employees, the method for
determining a concern's size includes the following principles:
(1) The average number of employees of the concern is used
(including the employees of its domestic and foreign affiliates) based
upon numbers of employees for each of the pay periods for the preceding
completed 12 calendar months.
(2) Part-time and temporary employees are counted the same as full-
time employees.
(3) If a concern has not been in business for 12 months, the
average number of employees is used for each of the pay periods during
which it has been in business.
(4) The treatment of employees of former affiliates or recently
acquired affiliates is the same as for size determinations using annual
receipts in Sec. 121.104(d).
Sec. 121.107 How does SBA determine a concern's ``primary industry''?
In determining the primary industry in which a concern or a concern
combined with its affiliates is engaged, SBA considers the distribution
of receipts, employees and costs of doing business among the different
industries in which business operations occurred for the most recently
completed fiscal year. SBA may also consider other factors, such as the
distribution of patents, contract awards, and assets.
Sec. 121.108 What are the penalties for misrepresentation of size
status?
In addition to other laws which may be applicable, section 16(d) of
the Small Business Act, 15 U.S.C. 645(d), provides severe criminal
penalties for knowingly misrepresenting the small business size status
of a concern in connection with procurement programs. Section 16(a) of
the Act also provides, in part, for criminal penalties for knowingly
making false statements or misrepresentations to SBA for the purpose of
influencing in any way the actions of the Agency.
Size Standards Used To Define Small Business Concerns
Sec. 121.201 What size standards has SBA identified by Standard
Industrial Classification codes?
The size standards described in this section apply to all SBA
programs unless otherwise specified. The size standards themselves are
expressed either in number of employees or annual receipts in millions
of dollars, unless otherwise specified. The number of employees or
annual receipts indicates the maximum allowed for a concern and its
affiliates to be considered small. The following is a listing of size
standards for industries under the SIC System. Size standards are
listed by Division and apply to all industries in that Division except
those specifically listed with separate size standards for a specific
two-digit major group or four-digit industry code. The industry code
applicable to an industry that cannot be otherwise classified will be
SIC code 9999, Nonclassifiable Establishments, with a corresponding
size standard of $5.0 million in annual receipts.
Size Standards by SIC Industry
------------------------------------------------------------------------
Size standards in number of
SIC code and description employees or millions of
dollars
------------------------------------------------------------------------
DIVISION A--AGRICULTURE
------------------------------------------------------------------------
MAJOR GROUP 01--AGRICULTURAL PRODUCTION $0.5
CROPS.
MAJOR GROUP 02--LIVESTOCK AND ANIMAL $0.5
SPECIALTIES.
Except:
0211 Beef Cattle Feedlots (Custom).... $0.5
0252 Chicken Eggs..................... $9.0
MAJOR GROUP 07--AGRICULTURAL SERVICES...... $5.0
MAJOR GROUP 08--FORESTRY................... $5.0
MAJOR GROUP 09--FISHING, HUNTING, AND $3.0
TRAPPING.
------------------------------------------------------------------------
DIVISION B--MININ
------------------------------------------------------------------------
MAJOR GROUP 10--METAL MINING............... $500
MAJOR GROUP 12--COAL MINING................ $500
MAJOR GROUP 13--OIL AND GAS EXTRACTION AND $500
MAJOR GROUP 14--MINING AND QUARRYING OF
NONMETALLIC MINERALS, EXCEPT FUELS.
EXCEPT:
1081 Metal Mining Services............ $5.0
1241 Coal Mining Services............. $5.0
1382 Oil and Gas Field Exploration $5.0
Services.
1389 Oil and Gas Field Services, $5.0
N.E.C..
1481 Nonmetallic Minerals Services, $5.0
Except Fuels.
------------------------------------------------------------------------
DIVISION C--CONSTRUCTION
------------------------------------------------------------------------
MAJOR GROUP 15--GENERAL BUILDING $17.0
CONTRACTORS.
MAJOR GROUP 16--HEAVY CONSTRUCTION, NON $17.0
BUILDING.
EXCEPT:
1629 (Part) Dredging and Surface $13.5 \1\
Cleanup Activities.
MAJOR GROUP 17--CONSTRUCTION--SPECIAL TRADE $7.0
CONTRACTORS.
------------------------------------------------------------------------
DIVISION D--MANUFACTURING,\2\.............. 500
------------------------------------------------------------------------
EXCEPT:
2032 Canned Specialties............... 1,000
[[Page 3290]]
2033 Canned Fruits, Vegetables, 500 \3\
Preserves, Jams and Jellies.
2043 Cereal Breakfast Foods........... 1,000
2046 Wet Corn Milling................. 750
2052 Cookies and Crackers............. 750
2062 Cane Sugar Refining.............. 750
2063 Beet Sugar....................... 750
2076 Vegetable Oil Mills, Except Corn, 1,000
Cottonseed, and Soybean.
2079 Shortening, Table Oils, 750
Margarine, and Other Edible Fats and
Oils, N.E.C.
2085 Distilled and Blended Liquors.... 750
2111 Cigarettes....................... 1,000
2211 Broadwoven Fabric Mills, Cotton.. 1,000
2261 Finishers of Broadwoven Fabrics 1,000
of Cotton.
2295 Coated Fabrics, Not Rubberized... 1,000
2296 Tire Cord and Fabrics............ 1,000
2611 Pulp Mills....................... 750
2621 Paper Mills...................... 750
2631 Paperboard Mills................. 750
2656 Sanitary Food Containers, Except 750
Folding.
2657 Folding Paperboard Boxes, 750
Including Sanitary.
2812 Alkalies and Chlorine............ 1,000
2813 Industrial Gases................. 1,000
2816 Inorganic Pigments............... 1,000
2819 Industrial Inorganic Chemicals, 1,000
N.E.C.
2821 Plastics Materials, Synthetic 750
Resins, and Nonvulcanizable Elastomers.
2822 Synthetic Rubber (Vulcanizable 1,000
Elastomers).
2823 Cellulosic Manmade Fibers........ 1,000
2824 Manmade Organic Fibers, Except 1,000
Cellulosic.
2833 Medicinal Chemicals and Botanical 750
Products.
2834 Pharmaceutical Preparations...... 750
2841 Soap and Other Detergents, Except 750
Specialty Cleaners.
2865 Cyclic Organic Crudes and 750
Intermediates, and Organic Dyes and
Pigments.
2869 Industrial Organic Chemicals, 1,000
N.E.C..
2873 Nitrogenous Fertilizers.......... 1,000
2892 Explosives....................... 750
2911 Petroleum Refining............... 1,500 \4\
2952 Asphalt Felts and Coatings....... 750
3011 Tires and Inner Tubes............ 1,000 \5\
3021 Rubber and Plastics Footwear..... 1,000
3211 Flat Glass....................... 1,000
3221 Glass Containers................. 750
3229 Pressed and Blown Glass and 750
Glassware, N.E.C.
3241 Cement, Hydraulic................ 750
3261 Vitreous China Plumbing Fixtures 750
and China and Earthenware Fittings and
Bathroom Accessories.
3275 Gypsum Products.................. 1,000
3292 Asbestos Products................ 750
3296 Mineral Wool..................... 750
3297 Nonclay Refractories............. 750
3312 Steel Works, Blast Furnaces 1,000
(Including Coke Ovens), and Rolling
Mills.
3313 Electrometallurgical Products, 750
Except Steel.
3315 Steel Wiredrawing and Steel Nails 1,000
and Spikes.
3316 Cold-Rolled Steel Sheet, Strip, 1,000
and Bars.
3317 Steel Pipe and Tubes............. 1,000
3331 Primary Smelting and Refining of 1,000
Copper.
3334 Primary Production of Aluminum... 1,000
3339 Primary Smelting and Refining of 750
Nonferrous Metals, Except Copper and
Aluminum.
3351 Rolling, Drawing, and Extruding 750
of Copper.
3353 Aluminum Sheet, Plate, and Foil.. 750
3354 Aluminum Extruded Products....... 750
3355 Aluminum Rolling and Drawing, 750
N.E.C.
3356 Rolling, Drawing, and Extruding 750
of Nonferrous Metals, Except Copper
and Aluminum.
3357 Drawing and Insulating of 1,000
Nonferrous Wire.
3398 Metal Heat Treating.............. 750
3399 Primary Metal Products, N.E.C.... 750
3411 Metal Cans....................... 1,000
3431 Enameled Iron and Metal Sanitary 750
Ware.
3482 Small Arms Ammunition............ 1,000
3483 Ammunition, Except for Small Arms 1,500
3484 Small Arms....................... 1,000
3511 Steam, Gas, and Hydraulic 1,000
Turbines, and Turbine Generator Set
Units.
[[Page 3291]]
3519 Internal Combustion Engines, 1,000
N.E.C.
3531 Construction Machinery and 750
Equipment.
3537 Industrial Trucks, Tractors, 750
Trailers, and Stackers.
3562 Ball and Roller Bearings......... 750
3571 Electronic Computers............. 1,000
3572 Computer Storage Devices......... 1,000
3575 Computer Terminals............... 1,000
3577 Computer Peripheral Equipment, 1,000
N.E.C.
3578 Calculating and Accounting 1,000
Machines, Except Electronic Computers.
3585 Air-Conditioning and Warm Air 750
Heating Equipment and Commercial and
Industrial Refrigeration Equipment.
3612 Power, Distribution, and 750
Specialty Transformers.
3613 Switchgear and Switchboard 750
Apparatus.
3621 Motors and Generators............ 1,000
3624 Carbon and Graphite Products..... 750
3625 Relays and Industrial Controls... 750
3631 Household Cooking Equipment...... 750
3632 Household Refrigerators and Home 1,000
and Farm Freezers.
3633 Household Laundry Equipment...... 1,000
3634 Electronic Housewares and Fans... 750
3635 Household Vacuum Cleaners........ 750
3641 Electric Lamp Bulbs and Tubes.... 1,000
3651 Household Audio and Video 750
Equipment.
3652 Phonograph Records and 750
Prerecorded Audio Tapes and Disks.
3661 Telephone and Telegraph Apparatus 1,000
3663 Radio and Television Broadcasting 750
and Communications Equipment.
3669 Communications Equipment, N.E.C.. 750
3671 Electron Tubes................... 750
3692 Primary Batteries, Dry and Wet... 1,000
3694 Electrical Equipment for Internal 750
Combustion Engines.
3695 Magnetic and Optical Recording 1,000
Media.
3699 Electrical Machinery, Equipment, 750
and Supplies, N.E.C.
3711 Motor Vehicles and Passenger Car 1,000
Bodies.
3714 Motor Vehicle Parts and 750
Accessories.
3716 Motor Homes...................... 1,000
3721 Aircraft......................... 1,500
3724 Aircraft Engines and Engine Parts 1,000
3728 Aircraft Parts and Auxiliary 1,000 \9\
Equipment, N.E.C.
3731 Shipbuilding and Repair of 1,000
Nuclear Propelled Ships.
Shipbuilding of Nonnuclear 1,000
Propelled Ships and Nonpropelled
Ships.
Ship Repair (Including Overhauls 1,000
and Conversions) Performed on
Nonnuclear Propelled and
Nonpropelled Ships East of the 108
Meridian.
Ship Repair (Including Overhauls 1,000
and Conversion) Performed on
Nonnuclear Propelled and
Nonpropelled Ships West of the 108
Meridian.
3743 Railroad Equipment............... 1,000
3761 Guided Missiles and Space 1,000
Vehicles.
3764 Guided Missile and Space Vehicle 1,000
Propulsion Units and Propulsion Units
Parts.
3769 Guided Missile and Space Vehicle 1,000
Parts and Auxiliary Equipment, N.E.C.
3795 Tanks and Tank Components........ 1,000
3812 Search, Detection, Navigation, 750
Guidance, Aeronautical, and Nautical
Systems and Instruments.
3996 Linoleum, Asphalted-Felt-Base, 750
and other Hard Surface Floor
Coverings, N.E.C.
------------------------------------------------------------------------
DIVISION E--TRANSPORTATION, COMMUNICATIONS ELECTRIC, GAS, AND SANITARY
SERVICES
------------------------------------------------------------------------
MAJOR GROUP 40--RAILROAD TRANSPORTATION.... 1500
EXCEPT:
4013 Railroad Switching and Terminal 500
Establishments.
MAJOR GROUP 41--LOCAL AND SUBURBAN TRANSIT $5.0
AND INTERURBAN HIGHWAY AND PASSENGER
TRANSPORTATION.
MAJOR GROUP 42--MOTOR FREIGHT $18.5
TRANSPORTATION AND WAREHOUSING.
EXCEPT:
4212 (Part) Garbage and Refuse $6.0
Collection, Without Disposal.
4231 Terminal and Joint Terminal $5.0
Maintenance Facilities for Motor
Freight Transportation.
MAJOR GROUP 44--WATER TRANSPORTATION....... 500
EXCEPT:
4491 Marine Cargo Handling............ $18.5
4492 Towing and Tugboat Services...... $5.0
4493 Marinas.......................... $5.0
4499 Water Transportation Services, $5.0
N.E.C..
--Offshore Marine Water $20.5
Transportation Services.
[[Page 3292]]
MAJOR GROUP 45--TRANSPORTATION BY AIR...... 1500
EXCEPT:
4522 Air Transportation, Nonscheduled. 1500
--Offshore Marine Air $20.5
Transportation Services.
4581 Airports, Flying Fields, and $5.0
Airport Terminal Services.
MAJOR GROUP 46--PIPELINES, EXCEPT NATURAL 1500
GAS,.
EXCEPT:
4619 Pipelines, N.E.C................. $25.0
MAJOR GROUP 47--TRANSPORTATION SERVICES,... $5.0
EXCEPT:
4724 Travel Agencies.................. $1.0\6\
4731 Arrangement of Transportation of $18.5
Freight and Cargo.
4783 Packing and Crating.............. $18.5
MAJOR GROUP 48--COMMUNICATIONS.............
4812 Radiotelephone Communications.... 1,500
4813 Telephone Communications, Except 1,500
Radiotelephone.
4822 Telegraph and Other Message $5.0
Communications.
4832 Radio Broadcasting Stations...... $5.0
4833 Television Broadcasting Stations. $10.5
4841 Cable and Other Pay Television $11.0
Services.
4899 Communications Services, N.E.C... $11.0
MAJOR GROUP 49--ELECTRIC, GAS, AND SANITARY $5.0
SERVICES,.
EXCEPT:
4911 Electric Services................ 4 million megawatt hrs.
4924 Natural Gas Distribution......... 500
4953 Refuse Systems................... $6.0
4961 Steam and Air-Conditioning Supply $9.0
------------------------------------------------------------------------
DIVISION F--WHOLESALE TRADE................ 100
------------------------------------------------------------------------
(Not Applicable to Government
procurement of supplies. The
nonmanufacturer size standard of 500
employees shall be used for purposes
of Government procurement of
supplies.)
------------------------------------------------------------------------
DIVISION G--RETAIL TRADE................... $5.0
(Not Applicable to Government
procurement of supplies. The
nonmanufacturer size standard of 500
employees shall be used for purposes
of Government procurement of
supplies.)
------------------------------------------------------------------------
5271 Mobile Home Dealers.............. $9.5
5311 Department Stores................ $20.0
5331 Variety Stores................... $8.0
5411 Grocery Stores................... $20.0
5511 Motor Vehicle Dealers (New and $21.0
Used).
5521 Motor Vehicle Dealers (Used Only) $17.0
5541 Gasoline Service Stations........ $6.5
5599 Automobile Dealers, N.E.C........ $5.0
--Aircraft Dealers, Retail....... $7.5
5611 Men's and Boys' Clothing and $6.5
Accessory Stores.
5621 Women's Clothing Stores.......... $6.5
5651 Family Clothing Stores........... $6.5
5661 Shoe Stores...................... $6.5
5722 Household Appliance Stores....... $6.5
5731 Radio, Television, and Consumer $6.5
Electronics Stores.
5734 Computer and Computer Software $6.5
Stores.
5812 (Part) Food Service, $15.0
Institutional.
5961 Catalog and Mail-Order Houses.... $18.5
5983 Fuel Oil Dealers................. $9.0
------------------------------------------------------------------------
DIVISION H--FINANCE, INSURANCE, AND REAL $5.0
ESTATE.
------------------------------------------------------------------------
EXCEPT:
6021-6082 National and Commercial $100 Million in assets \7\
Banks, Savings, Institutions and
Credit Unions.
6331 Fire, Marine, and Casualty 1,500
Insurance.
6515 (Part) Leasing of Building Space $15.0 \8\
to Federal Government by Owners.
6531 Real Estate Agents and Managers.. $1.5 \6\
------------------------------------------------------------------------
DIVISION I--SERVICES....................... $5.0
------------------------------------------------------------------------
EXCEPT:
[[Page 3293]]
7211 Power Laundries, Family and $10.5
Commercial.
7213 Linen Supply..................... $10.5
7216 Drycleaning Plants, Except Rug $3.5
Cleaning.
7217 Carpet and Upholstery Cleaning... $3.5
7218 Industries Launderers............ $10.0
7311 Advertising Agencies............. $5.0 \6\
7312 Outdoor Advertising Services..... $5.0 \6\
7313 Radio, Television, and $5.0 \6\
Publishers' Advertising
Representatives.
7319 Advertising, N.E.C............... $5.0 \6\
7349 Building Cleaning and Maintenance $12.0
Services, N.E.C..
7371 Computer Programming Services.... $18.0
7372 Prepackaged Software............. $18.0
7373 Computer Integrated Systems $18.0
Design.
7374 Computer Processing and Data $18.0
Preparation and Processing Services.
7375 Information Retrieval Services... $18.0
7376 Computer Facilities Management $18.0
Services.
7377 Computer Rental and Leasing...... $18.0
7378 Computer Maintenance and Repair.. $18.0
7379 Computer Related Services, N.E.C. $18.0
7381 Detective, Guard, and Armord Car $9.0
Services.
7382 Security Systems Services........ $9.0
7389 Business Services, N.E.C......... $5.0
Map Drafting Services, Mapmaking $3.5
(Including Aerial) and
Photogrammetric Mapping Services.
7513 Truck Rental and Leasing Without $18.5
Drivers.
7514 Passenger Car Rental............. $18.5
7515 Passenger Car Leasing............ $18.5
7534 Tire Retreading and Repair Shops. $10.5
7699 Repair Shops and Related $5.0 \9\
Services, N.E.C.
7812 Motion Picture and Video Tape $21.5
Production.
7819 Services Allied to Motion Picture $21.5
Production.
7822 Motion Picture and Video Tape $21.5
Distribution.
8299 (Part) Flight Training Services.. $18.5
8711 Engineering Services............. $2.5
Military and Aerospace Equipment $20.0
and Military Weapons.
Contracts and Subcontracts for $20.0
Engineering Services Awarded Under
the National Energy Policy Act of
1992.
Marine Engineering and Naval $13.5
Architecture.
8712 Architectural Services (Other $2.5
Than Naval).
8713 Surveying Services............... $2.5
8721 Accounting, Auditing, and $6.0
Bookkeeping Services.
8731 Commercial Physical and 500 \10\
Biological Research.
Aircraft........................... 1,500
Aircraft Parts, and Auxiliary 1,000
Equipment, and Aircraft Engines
and Engine Parts.
Space Vehicles and Guided Missiles, 1,000
their Propulsion Units, their
Propulsion Units Parts, and their
Auxiliary Equipment and Parts.
8741 (Part) Conference Management $5.0 \6\
Services.
8744 Facilities Support Management $5.0 \11\
Services.
Base Maintenance................... $20.0 \12\
Environmental Remediation Services. 500 \13\
------------------------------------------------------------------------
Footnotes:
\1\ SIC code 1629--Dredging: To be considered small for purposes of
Government procurement, a firm must perform at least 40 percent of the
volume dredged with its own equipment or equipment owned by another
small dredging concern.
\2\ SIC Division D--Manufacturing: For rebuilding machinery or equipment
on a factory basis, or equivalent, use the SIC code for a newly
manufactured product. Concerns performing major rebuilding or overhaul
activities do not necessarily have to meet the criteria for being a
``manufacturer'' although the activities may be classified under a
manufacturing SIC code. Ordinary repair services or preservation are
not considered rebuilding.
\3\ SIC code 2033: For purposes of Government procurement for food
canning and preserving, the standard of 500 employees excludes
agricultural labor as defined in section 3306(k) of the Internal
Revenue Code, 26 U.S.C. 3306(k).
\4\ SIC code 2911: For purposes of Government procurement, the firm may
not have more than 1,500 employees nor more than 75,000 barrels per
day capacity of petroleum-based inputs, including crude oil or bona
fide feedstocks. Capacity includes owned or leased facilities as well
as facilities under a processing agreement or an arrangement such as
an exchange agreement or a throughput. The total product to be
delivered under the contract must be at least 90 percent refined by
the successful bidder from either crude oil or bona fide feedstocks.
\5\ SIC code 3011: For purposes of Government procurement, a firm is
small for bidding on a contract for pneumatic tires within Census
Classification codes 30111 and 30112, provided that:
(1) The value of tires within Census Classification codes 30111 and
30112 which it manufactured in the United States during the previous
calendar year is more than 50 percent of the value of its total
worldwide manufacture;
(2) The value of pneumatic tires within Census Classification codes
30111 and 30112 comprising its total worldwide manufacture during the
preceding calendar year was less than 5 percent of the value of all
such tires manufactured in the United States during that period; and
(3) the value of the principal product which it manufactured or
otherwise produced, or sold worldwide during the preceding calendar
year is less than 10 percent of the total value of such products
manufactured or otherwise produced or sold in the United States during
that period.
\6\ SIC codes 4724, 6531, 7311, 7312, 7313, 7319, and 8741 (part): As
measured by total revenues, but excluding funds received in trust for
an unaffiliated third party, such as bookings or sales subject to
commissions. The commissions received are included as revenue.
[[Page 3294]]
\7\ A financial institution's assets are determined by averaging the
assets reported on its four quarterly financial statements for the
preceding year. Assets for the purposes of this size standard means
the assets defined according to the Federal Financial Institutions
Examination Council 034 call report form.
\8\ SIC code 6515: Leasing of building space to the Federal Government
by Owners: For Government procurement, a size standard of $15.0
million in gross receipts applies to the owners of building space
leased to the Federal Government. The standard does not apply to an
agent.
\9\ SIC codes 7699 and 3728: Contracts for the rebuilding or overhaul of
aircraft ground support equipment on a contract basis are classified
under SIC code 3728.
\10\ SIC code 8731: For research and development contracts requiring the
delivery of a manufactured product, the appropriate size standard is
that of the manufacturing industry.
(1) Research and Development means laboratory or other physical research
and development. It does not include economic, educational,
engineering, operations, systems, or other nonphysical research; or
computer programming, data processing, commercial and/or medical
laboratory testing.
(2) For purposes of the Small Business Innovation Research (SBIR)
program only, a different definition has been established by law. See
Sec. 121.701.
(3) Research and development for guided missiles and space vehicles
includes evaluations and simulation, and other services requiring
thorough knowledge of complete missiles and spacecraft.
\11\ Facilities Management, a component of SIC code 8744, includes
establishments, not elsewhere classified, which provide overall
management and the personnel to perform a variety of related support
services in operating a complete facility in or around a specific
building, or within another business or Government establishment.
Facilities management means furnishing three or more personnel supply
services which may include, but are not limited to, secretarial
services, typists, telephone answering, reproduction or mimeograph
service, mailing service, financial or business management, public
relations, conference planning, travel arrangements, word processing,
maintaining files and/or libraries, switchboard operation, writers,
bookkeeping, minor office equipment maintenance and repair, or use of
information systems (not programming).
\12\ SIC code 8744:
(1) If one of the activities of base maintenance, as defined in
paragraph (2) of this footnote, can be identified with a separate
industry and that activity (or industry) accounts for 50 percent or
more of the value of an entire contract, then the proper size standard
is that of the particular industry, and not the base maintenance size
standard.
(2) ``Base Maintenance'' requires the performance of three or more
separate activities in the areas of service or special trade
construction industries. If services are performed, these activities
must each be in a separate SIC code including, but not limited to,
Janitorial and Custodial Service, Fire Prevention Service, Messenger
Service, Commissary Service, Protective Guard Service, and Grounds
Maintenance and Landscaping Service. If the contract requires the use
of special trade contractors (plumbing, painting, plastering,
carpentry, etc.), all such special trade construction activities are
considered a single activity and classified as Base Housing
Maintenance. Since Base Housing Maintenance is only one activity, two
additional activities are required for a contract to be classified as
``Base Maintenance.''
\13\ SIC codre 8744: (1) For SBA assistance as a small business concern
in the industry of Environmental Remediation Services, other than for
Government procurement, a concern must be engaged primarily in
furnishing a range of services for the remediation of a contaminated
environment to an acceptable condition including, but not limited to,
preliminary assessment, site inspection, testing, remedial
investigation, feasibility studies, remedial design, containment,
remedial action, removal of contaminated materials, storage of
contaminated materials and security and site closeouts. If one of such
activities accounts for 50 percent or more of a concern's total
revenues, employees, or other related factors, the concern's primary
industry is that of the particular industry and not the Environmental
Remediation Services Industry.
(2) For purposes of classifying a Government procurement as
Environmental Remediation Services, the general purpose of the
procurement must be to restore a contaminated environment and also the
procurement must be composed of activities in three or more separate
industries with separate SIC codes or, in some instances (e.g.,
engineering), smaller sub-components of SIC codes with separate,
distinct size standards. These activities may include, but are not
limited to, separate activities in industries such as: Heavy
Construction; Special Trade Construction; Engineering Services;
Architectural Services; Management Services; Refuse Systems; Sanitary
Services, Not Elsewhere Classified; Local Trucking Without Storage;
Testing Laboratories; and Commercial, Physical and Biological
Research. If any activity in the procurement can be identified with a
separate SIC code, or component of a code with a separate distinct
size standard, and that industry accounts for 50 percent or more of
the value of the entire procurement, then the proper size standard is
the one for that particular industry, and not the Environmental
Remediation Service size standard.
Size Eligibility Requirements For SBA Financial Assistance
Sec. 121.301 What size standards are applicable to financial
assistance programs?
(a) For Business Loans and Disaster Loans (other than physical
disaster loans), an applicant must not exceed the size standard for the
industry in which:
(1) The applicant combined with its affiliates is primarily
engaged; and
(2) The applicant alone is primarily engaged.
(b) For Development Company programs, an applicant must meet one of
the following standards:
(1) Including its affiliates, tangible net worth not in excess of
$6 million, and average net income after Federal income taxes
(excluding any carry-over losses) for the preceding two completed
fiscal years not in excess of $2 million; or
(2) The same standards applicable under paragraph (a) of this
section.
(c) For the Small Business Investment Company (SBIC) program, an
applicant must meet one of the following standards:
(1) Including its affiliates, tangible net worth not in excess of
$18 million, and average net income after Federal income taxes
(excluding any carry-over losses) for the preceding 2 completed fiscal
years not in excess of $6 million; or
(2) The same standards applicable under paragraph (a) of this
section.
(d) For Surety Bond Guarantee assistance--
(1) Any construction (general or special trade) concern or concern
performing a contract for services is small if its average annual
receipts do not exceed $5.0 million.
(2) Any concern not specified in paragraph (d)(1) of this section
must meet the size standard for the primary industry in which it,
combined with its affiliates, is engaged.
(e) The applicable size standards for the purpose of all SBA
financial assistance programs, excluding the Surety Bond Guarantee
assistance program, are increased by 25 percent whenever the applicant
agrees to use the assistance within a labor surplus area. Labor surplus
areas are listed monthly in the Department of Labor publication called
``Area Trends.''
Sec. 121.302 When does SBA determine the size status of an applicant?
(a) The size of an applicant for SBA financial assistance is
determined as of the date the application for such financial assistance
is accepted for processing by SBA, except for the Disaster Loan and
Preferred Lenders programs.
(b) For the Preferred Lenders program, size is determined as of the
date of approval of the loan by the Preferred Lender.
(c) For disaster loan assistance (other than physical disaster
loans), size status is determined as of the date the disaster
commenced, as set forth in the Disaster Declaration.
(d) Changes in size subsequent to the applicable date when size is
determined will not disqualify an applicant for assistance.
[[Page 3295]]
Sec. 121.303 What size procedures are used by SBA before it makes a
formal size determination?
(a) A concern that submits an application for financial assistance
is deemed to have certified that it is small under the applicable size
standard. SBA may question the concern's status based on information
supplied in the application or from any other source.
(b) A small business investment company, a development company, a
surety bond company, or a preferred lender may accept as true the size
information provided by an applicant, unless credible evidence to the
contrary is apparent.
(c) Size is initially considered by the individual with final
financial assistance authority. This is not a formal size
determination. A formal determination may be requested prior to a
denial of eligibility based on size.
(d) An applicant may request a formal size determination when
assistance has been denied for size ineligibility. Except for disaster
loan eligibility, a request for a formal size determination must be
made to the Government Contracting Area Director serving the area in
which the headquarters of the applicant is located, regardless of the
location of the parent company or affiliates. For disaster loan
assistance, the request for a size determination must be made to the
Area Director for the Disaster Area Office which denied the assistance.
(e) There are no time limitations for making a formal size
determination for purposes of financial assistance. The official making
the formal size determination must provide a copy of the determination
to the applicant, to the requesting SBA official, and to other
interested SBA program officials.
Sec. 121.304 What are the size requirements for refinancing an
existing SBA loan?
(a) A concern that applies to refinance an existing SBA loan or
guarantee will be considered small for the refinancing even though its
size has increased since the date of the original financing to exceed
its applicable size standard, provided that:
(1) The increase in size is due to natural growth (as distinguished
from merger, acquisition or similar management action); and
(2) SBA determines that refinancing is necessary to protect the
Government's financial interest.
(b) If a concern's size has increased other than by natural growth,
the concern and its affiliates must be small at the time the
application for refinancing is accepted for processing by SBA.
Sec. 121.305 What size eligibility requirements exist for obtaining
business loans relating to particular procurements?
A concern qualified as small for a particular procurement,
including an 8(a) subcontract, is small for financial assistance
directly and primarily relating to the performance of the particular
procurement.
Size Eligibility Requirements for Government Procurement
Sec. 121.401 What procurement programs are subject to size
determinations?
The requirements set forth in Secs. 121.401 through 121.412 cover
all procurement programs for which status as a small business is
required, including the small business set-aside program, SBA's
Certificate of Competency Program, SBA's Minority Enterprise
Development program, the Small Business Subcontracting program
authorized under section 8(d) of the Small Business Act, and Federal
Small Disadvantaged Business programs.
Sec. 121.402 What size standards are applicable to procurement
assistance programs?
(a) A concern must meet the size standard for the SIC code
specified in the solicitation.
(b) The procuring agency contracting officer, or authorized
representative, designates the proper SIC code and size standard in a
solicitation, selecting the SIC code which best describes the principal
purpose of the product or service being acquired. Primary consideration
is given to the industry descriptions in the SIC Manual, the product or
service description in the solicitation and any attachments to it, the
relative value and importance of the components of the procurement
making up the end item being procured, and the function of the goods or
services being purchased. Other factors considered include previous
Government procurement classifications of the same or similar products
or services, and the classification which would best serve the purposes
of the Small Business Act. A procurement is usually classified
according to the component which accounts for the greatest percentage
of contract value.
(c) The SIC code assigned to a procurement and its corresponding
size standard is final unless timely appealed to SBA's Office of
Hearings and Appeals (OHA), or unless SBA assigns a SIC code or size
standard as provided in paragraph (d) of this section.
(d) An unclear, incomplete or missing SIC code designation or size
standard in the solicitation may be clarified, completed or supplied by
SBA in connection with a formal size determination or size appeal.
(e) Any offeror or other interested party adversely affected by a
SIC code designation or size standard designation may appeal the
designations to OHA under Part 134 of this chapter.
Sec. 121.403 Are SBA size determinations and SIC code designations
binding on parties?
Formal size determinations and SIC code designations made by
authorized SBA officials are binding upon the parties. Opinions
otherwise provided by SBA officials to contracting officers or others
are advisory in nature, and are not binding or appealable.
Sec. 121.404 When does SBA determine the size status of a business
concern?
Generally, SBA determines the size status of a concern (including
its affiliates) as of the date the concern submits a written self-
certification that it is small to the procuring agency as part of its
initial offer including price. The following are two exceptions to this
rule:
(a) The size status of an applicant for a Certificate of Competency
(COC) relating to an unrestricted procurement is determined as of the
date of the concern's application for the COC.
(b) Size status for purposes of compliance with the nonmanufacturer
rule set forth in Sec. 121.406(b)(1) and the ostensible subcontractor
rule set forth in Sec. 121.103(f)(3) is determined as of the date of
the best and final offer.
Sec. 121.405 May a business concern self-certify its small business
size status?
(a) A concern must self-certify it is small under the size standard
specified in the solicitation, or as clarified, completed or supplied
by SBA pursuant to Sec. 121.402(d).
(b) A contracting officer may accept a concern's self-certification
as true for the particular procurement involved in the absence of a
written protest by other offerors or other credible information which
causes the contracting officer or SBA to question the size of the
concern.
(c) Procedures for protesting the self-certification of an offeror
are set forth in Secs. 121.1001 through 121.1009.
Sec. 121.406 How does a small business concern qualify to provide
manufactured products under small business set-aside or MED
procurements?
(a) General. In order to qualify as a small business concern for a
small business set-aside or 8(a) contract to provide manufactured
products, an offeror must either:
(1) Be the manufacturer of the end item being procured (and the end
item
[[Page 3296]]
must be manufactured or produced in the United States); or
(2) Comply with the requirements of paragraph (b), (c) or (d) of
this section as a nonmanufacturer, a kit assembler or a supplier under
Simplified Acquisition Procedures.
(b) Nonmanufacturers. (1) A concern may qualify for a requirement
to provide manufactured products as a nonmanufacturer if it:
(i) Does not exceed 500 employees;
(ii) Is primarily engaged in the wholesale or retail trade and
normally sells the items being supplied to the general public; and
(iii) Will supply the end item of a small business manufacturer or
processor made in the United States, or obtains a waiver of such
requirement pursuant to paragraph (b)(3) of this section.
(2) For size purposes, there can be only one manufacturer of the
end item being acquired. The manufacturer is the concern which, with
its own facilities, performs the primary activities in transforming
inorganic or organic substances, including the assembly of parts and
components, into the end item being acquired. The end item must possess
characteristics which, as a result of mechanical, chemical or human
action, it did not possess before the original substances, parts or
components were assembled or transformed. The end item may be finished
and ready for utilization or consumption, or it may be semifinished as
a raw material to be used in further manufacturing. Firms which perform
only minimal operations upon the item being procured do not qualify as
manufacturers of the end item. SBA will evaluate the following factors
in determining whether a concern is the manufacturer of the end item:
(i) The proportion of total value in the end item added by the
efforts of the concern, excluding costs of overhead, testing, quality
control, and profit; and
(ii) The importance of the elements added by the concern to the
function of the end item, regardless of their relative value.
(3) The Administrator or designee may waive the requirement set
forth in paragraph (b)(1)(iii) of this section under the following two
circumstances:
(i) The contracting officer has determined that no small business
manufacturer or processor reasonably can be expected to offer a product
meeting the specifications (including period for performance) required
by a particular solicitation and SBA reviews and accepts that
determination; or
(ii) SBA determines that no small business manufacturer or
processor of the product or class of products is available to
participate in the Federal procurement market.
(4) The two waiver possibilities identified in paragraph (b)(3) of
this section are called ``class'' waivers and ``individual'' waivers
respectively, and the procedures for them are contained in
Sec. 121.1204 .
(5) Any SBA waiver of the nonmanufacturer rule has no effect on
requirements external to the Small Business Act which involve domestic
sources of supply, such as the Buy American Act.
(c) Kit assemblers. (1) Where the manufactured item being acquired
is a kit of supplies or other goods provided by an offeror for a
special purpose, the offeror cannot exceed 500 employees, and 50
percent of the total value of the components of the kit must be
manufactured by business concerns in the United States which are small
under the size standards for the SIC codes of the components being
assembled. The offeror need not itself be the manufacturer of any of
the items assembled.
(2) Where the Government has specified an item for the kit which is
not produced by U.S. small business concerns, such item shall be
excluded from the calculation of total value in paragraph (c)(1) of
this section.
(d) Simplified Acquisition Procedures. Where the procurement of a
manufactured item is processed under Simplified Acquisition Procedures,
as defined in Sec. 13.101 of the Federal Acquisition Regulation (FAR)
(48 CFR 13.101), and where the anticipated cost of the procurement will
not exceed $25,000, the offeror need not supply the end product of a
small business concern as long as the product acquired is manufactured
or produced in the United States, and the offeror does not exceed 500
employees. The offeror need not itself be the manufacturer of any of
the items acquired.
Sec. 121.407 What are the size procedures for multiple item
procurements?
If a procurement calls for two or more specific end items or types
of services with different size standards and the offeror may submit an
offer on any or all end items or types of services, the offeror must
meet the size standard for each end item or service item for which it
submits an offer. If the procurement calls for more than one specific
end item or type of service and an offeror is required to submit an
offer on all items, the offeror may qualify as a small business for the
procurement if it meets the size standard of the item which accounts
for the greatest percentage of the total contract value.
Sec. 121.408 What are the size procedures for SBA's Certificate of
Competency Program?
(a) A firm which applies for a COC must file an ``Application for
Small Business Size Determination'' (SBA Form 355). If the initial
review of SBA Form 355 indicates the applicant, including its
affiliates, is small for purposes of the COC program, SBA will process
the application for COC. If the review indicates the applicant,
including its affiliates, is other than small, SBA will initiate a
formal size determination as set forth in Sec. 121.1009. In such a
case, SBA will not further process the COC application until a formal
size determination is made.
(b) A concern is ineligible for a COC if a formal SBA size
determination finds the concern other than small.
Sec. 121.409 What size standard applies in an unrestricted procurement
for Certificate of Competency purposes?
For the purpose of receiving a Certificate of Competency in an
unrestricted procurement, the applicable size standard is that
corresponding to the SIC code set forth in the solicitation. For a
manufactured product, a concern must also furnish a domestically
produced or manufactured product, regardless of the size status of the
product manufacturer. The offeror need not be the manufacturer of any
of the items acquired.
Sec. 121.410 What are the size standards for SBA's Section 8(d)
Subcontracting Program?
For subcontracting purposes pursuant to section 8(d) of the Small
Business Act, a concern is small:
(a) For subcontracts of $10,000 or less which relate to Government
procurements, if its number of employees (including its affiliates)
does not exceed 500 employees. However, subcontracts for engineering
services awarded under the National Energy Policy Act of 1992 have the
same size standard as Military and Aerospace Equipment and Military
Weapons under SIC code 8711;
(b) For subcontracts exceeding $10,000 which relate to Government
procurements, if its number of employees or average annual receipts
(including its affiliates) does not exceed the size standard for the
product or service it is providing on the subcontract; and
(c) For subcontracts for financial services, if the concern
(including its affiliates) is a commercial bank or savings and loan
association whose assets do not exceed $100 million.
[[Page 3297]]
Sec. 121.411 What are the size procedures for SBA's Section 8(d)
Subcontracting Program?
(a) Prime contractors may rely on the information contained in
SBA's Procurement Automated Source System (PASS), or equivalent data
base maintained or sanctioned by SBA, as an accurate representation of
a concern's size and ownership characteristics for purposes of
maintaining a small business source list. Even though a concern is on a
small business source list, it must still qualify and self-certify as a
small business at the time it submits its offer as a section 8(d)
subcontractor.
(b) Upon determination of the successful subcontract offeror for a
competitive subcontract, 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.
(c) The self-certification of a concern subcontracting or proposing
to subcontract under section 8(d) of the Small Business Act may be
protested by the contracting officer, the prime contractor, the
appropriate SBA official or any other interested party.
Sec. 121.412 What are the size procedures for partial small business
set-asides?
A firm is required to meet size standard requirements only for the
small business set-aside portion of a procurement, and is not required
to qualify as a small business for the unrestricted portion.
Size Eligibility Requirements For Sales Or Lease Of Government Property
Sec. 121.501 What programs for sales or leases of Government property
are subject to size determinations?
Sections 121.501 through 121.512 apply to small business size
determinations for the purpose of the sale or lease of Government
property, including the Timber Sales Program, the Special Salvage
Timber Sales Program, and the sale of Government petroleum, coal and
uranium.
Sec. 121.502 What size standards are applicable to programs for sales
or leases of Government property?
(a) Unless otherwise specified in this part--
(1) A concern primarily engaged in manufacturing is small for sales
or leases of Government property if it does not exceed 500 employees;
(2) A concern not primarily engaged in manufacturing is small for
sales or leases of Government property if it has annual receipts not
exceeding $2 million.
(b) Size status for such sales and leases is determined by the
primary industry of the applicant business concern.
Sec. 121.503 Are SBA size determinations binding on parties?
Formal size determinations based upon a specific Government sale or
lease, or made in response to a request from another Government agency
under Sec. 121.901, are binding upon the parties. Other SBA opinions
provided to contracting officers or others are only advisory, and are
not binding or appealable.
Sec. 121.504 When does SBA determine the size status of a business
concern?
SBA determines the size status of a concern (including its
affiliates) as of the date the concern submits a written self-
certification that it is small to the Government as part of its initial
offer including price where there is a specific sale or lease at issue,
or as set forth in Sec. 121.903 if made in response to a request of
another Government agency.
Sec. 121.505 What is the effect of a self-certification?
(a) A contracting officer may accept a concern's self-certification
as true for the particular sale or lease involved, in the absence of a
written protest by other offerors or other credible information which
would cause the contracting officer or SBA to question the size of the
concern.
(b) Procedures for protesting the self-certification of an offeror
are set forth in Secs. 121.1001 through 121.1009.
Sec. 121.506 What definitions are important for sales or leases of
Government-owned timber?
(a) Forest product industry means logging, wood preserving, and the
manufacture of lumber and wood related products such as veneer,
plywood, hardboard, particle board, or wood pulp, and of products of
which lumber or wood related products are the principal raw materials.
(b) Logging of timber means felling and bucking, yarding, and/or
loading. It does not mean hauling.
(c) Manufacture of logs means, at a minimum, breaking down logs
into rough cuts of the finished product.
(d) Sell means, in addition to its usual and customary meaning, the
exchange of sawlogs for sawlogs on a product-for-product basis with or
without monetary adjustment, and an indirect transfer, such as the sale
of the assets of a concern after it has been awarded one or more set-
aside sales of timber.
(e) Significant logging of timber means that a concern uses its own
employees to perform at least two of the following: felling and
bucking, yarding, and loading.
Sec. 121.507 What are the size standard and other requirements for the
purchase of Government-owned timber (other than Special Salvage
Timber)?
(a) To be small for purposes of the sale of Government-owned timber
(other than Special Salvage Timber) a concern must:
(1) Be primarily engaged in the logging or forest products
industry;
(2) Not exceed 500 employees, taking into account its affiliates;
and
(3) If it does not intend at the time of the offer to resell the
timber--
(i) Agree that it will manufacture the logs with its own facilities
or those of another business which meets the requirements of paragraphs
(a)(1) and (a)(2) of this section;
(ii) Agree that if it eventually resells the timber, it will resell
no more than 30% of the sawtimber volume to other businesses which do
not meet the requirements of paragraphs (a)(1) and (a)(2) of this
section; and
(iii) Agree that if it becomes acquired or controlled by a business
which does not meet the requirements of paragraphs (a)(1) and (a)(2) of
this section, it will require as a condition of the acquisition or
change of control that the acquiring or controlling business resell at
least 70% of the sawtimber volume to businesses which do meet the
requirements of paragraphs
(a)(1) and (a)(2) of this section; or
(4) If it intends at the time of offer to resell the timber--
(i) Agree that it will not sell more than 30% of such timber (50%
of such timber if the concern is an Alaskan business) to a business
which does not meet the requirements of paragraphs (a)(1) and (a)(2) of
this section; and
(ii) Agree that if it becomes acquired or controlled by a business
which does not meet the requirements of paragraphs (a)(1) and (a)(2) of
this section, it will require as a condition of the acquisition or
change of control that the acquiring or controlling business resell at
least 70% of the sawtimber volume (or at least 50% of the sawtimber
volume, if it is an Alaskan business) to businesses which meet the
requirements of paragraphs (a)(1) and (a)(2) of this section.
(b) For a period of three years following the date upon which a
concern purchases timber under a small business set-aside (other than
through the Special Salvage Timber Sale program), it must maintain a
record of:
(1) The name, address and size status of every concern to which it
sells the timber or sawlogs; and
[[Page 3298]]
(2) The species, grades and volumes of sawlogs sold.
(c) For a period of three years following the date upon which a
concern purchases timber, it must by contract require all small
business repurchasers of the sawlogs or timber it purchased under the
small business set-aside to maintain the records described in paragraph
(b) of this section.
Sec. 121.508 What are the size standard and other requirements for the
purchase of Government-owned Special Salvage Timber?
(a) In order to purchase Government-owned Special Salvage Timber
from the United States Forest Service or the Bureau of Land Management
as a small business, a concern must:
(1) Be primarily engaged in the logging or forest product industry;
(2) Have, together with its affiliates, no more than twenty-five
employees during any pay period for the last twelve months; and
(3) If it does not intend at the time of offer to resell the
timber--
(i) Agree that it will manufacture a significant portion of the
logs with its own employees; and
(ii) Agree that it will log the timber only with its own employees
or with employees of another business which is eligible for award of a
Special Salvage Timber sales contract; or
(4) If it intends at the time of offer to resell the timber, agree
that it will perform a significant portion of timber logging with its
own employees and that it will subcontract the remainder of the timber
logging to a concern which is eligible for award of a Special Salvage
Timber sales contract.
Sec. 121.509 What is the size standard for leasing of Government land
for coal mining?
A concern is small for this purpose if it:
(a) Together with its affiliates, does not have more than 250
employees;
(b) Maintains management and control of the actual mining
operations of the tract; and
(c) Agrees that if it subleases the Government land, it will be to
another small business, and that it will require its sublessors to
agree to the same.
Sec. 121.510 What is the size standard for leasing of Government land
for uranium mining?
A concern is small for this purpose if it, together with its
affiliates, does not have more than 100 employees.
Sec. 121.511 What is the size standard for buying Government-owned
petroleum?
A concern is small for this purpose if it is primarily engaged in
petroleum refining and meets the size standard for a petroleum refining
business.
Sec. 121.512 What is the size standard for stockpile purchases?
A concern is small for this purpose if:
(a) It is primarily engaged in the purchase of materials which are
not domestic products; and
(b) Its annual receipts, together with its affiliates, do not
exceed $42 million.
Size Eligibility Requirements for the Minority Enterprise Development
(MED) Program
Sec. 121.601 What is a small business for purposes of admission to
SBA's Minority Enterprise Development (MED) program?
An applicant must be small under the size standard corresponding to
its primary industry classification in order to be admitted to SBA's
Minority Enterprise Development (MED) program.
Sec. 121.602 At what point in time must a MED applicant be small?
A MED applicant must be small for its primary industry at the time
SBA certifies it for admission into the program.
Sec. 121.603 How does SBA determine whether a Participant is small for
a particular MED subcontract?
(a) Self certification by Participant. A MED Participant must
certify that it qualifies as a small business under the SIC code
assigned to a particular MED subcontract as part of its initial offer
including price to the procuring agency. The Participant also must
submit a copy of its offer, including its self-certification as to
size, to the appropriate SBA district office at the same time it
submits the offer to the procuring agency. See Sec. 121.404 for the
time at which size is determined for, and Sec. 121.406 for the
applicability of the nonmanufacturer rule to, MED procurements.
(b) Verification of size by SBA. Within 30 days of its receipt of a
Participant's size self-certification for a particular MED subcontract,
the SBA district office serving the geographic area in which the
Participant's principal office is located will review the Participant's
self-certification and determine if it is small for purposes of that
subcontract. The SBA district office will review the Participant's most
recent financial statements and other relevant data and then notify the
Participant of its decision.
(c) Changes in size between date of self-certification and date of
award. (1) Where SBA verifies that the selected Participant is small
for a particular procurement, subsequent changes in size up to the date
of award, except those due to merger with or acquisition by another
business concern, will not affect the firm's size status for that
procurement.
(2) Where a Participant has merged with or been acquired by another
business concern between the date of its self-certification and the
date of award, the concern must recertify its size status, and SBA must
verify the new certification before award can occur.
(d) Finding Participant to be other than small. (1) A Participant
may request a formal size determination (pursuant to Secs. 121.1001
through 121.1009) with the SBA Government Contracting Area Office
serving the geographic area in which the principal office of the
Participant is located within 5 working days of its receipt of notice
from the SBA district office that it is not small for a particular MED
subcontract.
(2) Where the Participant does not timely request a formal size
determination, SBA may accept the procurement in support of another
Participant, or may rescind its acceptance of the offer for the MED
program, as appropriate.
Sec. 121.604 Are MED Participants considered small for purposes of
other SBA assistance?
A concern which SBA determines to be a small business for the award
of a MED subcontract will be considered to have met applicable size
eligibility requirements of other SBA programs where that assistance
directly and primarily relates to the performance of the MED
subcontract in question.
Size Eligibility Requirements for the Small Business Innovation
Research (SBIR) Program
Sec. 121.701 What SBIR programs are subject to size determinations?
(a) These sections apply to size status for award of a funding
agreement pursuant to the Small Business Innovation Development Act of
1982 (Pub. L. 97-219, 15 U.S.C. 638(e) through (k)).
(b) Funding agreement officer means a contracting officer, a grants
officer, or a cooperative agreement officer.
(c) Funding agreement means any contract, grant or cooperative
agreement entered into between any Federal agency and any small
business for the performance of experimental, developmental, or
research work funded in whole or in part by the Federal Government.
Such work includes:
(1) A systematic, intensive study directed toward greater knowledge
or understanding of the subject studied;
[[Page 3299]]
(2) A systematic study directed specifically toward applying new
knowledge to meet a recognized need; or
(3) A systematic application of knowledge toward the production of
useful materials, devices, and systems or methods, including design,
development, and improvement of prototypes and new processes to meet
specific requirements.
Sec. 121.702 What size standards are applicable to the SBIR program?
To be eligible to compete for award of funding agreements in SBA's
Small Business Innovation Research (SBIR) program, a business concern
must:
(a) Be at least 51 percent owned and controlled by one or more
individuals who are citizens of, or permanent resident aliens in, the
United States; and
(b) Not have more than 500 employees, including its affiliates.
Sec. 121.703 Are formal size determinations binding on parties?
Size determinations by authorized SBA officials are formal actions
based upon a specific funding agreement, and are binding upon the
parties. Other SBA opinions provided to funding agreement officers or
others, are only advisory, and are not binding or appealable.
Sec. 121.704 When does SBA determine the size status of a business
concern?
The size status of a concern for the purpose of a funding agreement
under the SBIR program is determined as of the date of the award for
both Phase I and Phase II SBIR awards.
Sec. 121.705 Must a business concern self-certify its size status?
(a) A firm must self-certify it is small in its SBIR funding
proposal.
(b) A funding agreement officer may accept a concern's self-
certification as true for the particular funding agreement involved in
the absence of a written protest by other offerors or other credible
information which would cause the funding agreement officer or SBA to
question the size of the concern.
(c) Procedures for protesting an offeror's self-certification are
set forth in Secs. 121.1001 through 121.1009.
Size Eligibility Requirements For Paying Reduced Patent Fees
Sec. 121.801 May patent fees be reduced if a concern is small?
These sections apply to size status for the purpose of paying
reduced patent fees authorized by Pub. L. 97-247, 96 Stat. 317. The
eligibility requirements for independent inventors and nonprofit
organizations for the purpose of paying reduced patent fees are set
forth in regulations of the Patent and Trademark Office of the
Department of Commerce, 37 CFR 1.9, 1.27, 1.28.
Sec. 121.802 What size standards are applicable to reduced patent fees
programs?
A concern eligible for reduced patent fees is one:
(a) Whose number of employees, including affiliates, does not
exceed 500 persons; and
(b) Which has not assigned, granted, conveyed, or licensed (and is
under no obligation to do so) any rights in the invention to any person
who made it and could not be classified as an independent inventor, or
to any concern which would not qualify as a non-profit organization or
a small business concern under this section.
Sec. 121.803 Are formal size determinations binding on parties?
Size determinations by authorized SBA officials are formal actions,
based upon a specific patent application pursuant to the rules of the
Patent and Trademark Office, Department of Commerce, and are binding
upon the parties. Other SBA opinions provided to patent applicants or
others are only advisory, and are not binding or appealable.
Sec. 121.804 When does SBA determine the size status of a business
concern?
Size status is determined as of the date of the patent applicant's
written verification of size.
Sec. 121.805 May a business concern self-certify its size status?
(a) A concern verifies its size status with its submission of its
patent application.
(b) Any attempt to establish small size status improperly
(fraudulently, through gross negligence, or otherwise) may result in
remedial action by the Patent and Trademark Office.
(c) In the absence of credible information indicating otherwise,
the Patent and Trademark Office may accept the verification by the
concern as a small business as true.
(d) Questions concerning the size verification are resolved
initially by the Patent and Trademark Office. If not verified as small,
the applicant may request a formal SBA size determination.
Size Eligibility Requirements for Compliance With Programs of Other
Agencies
Sec. 121.901 Can other Government agencies obtain SBA size
determinations?
Upon request by another Government agency, SBA will provide a size
determination, under SBA rules, standards and procedures, for its use
in determining compliance with small business requirements of its
statutes, regulations or programs.
Sec. 121.902 What size standards are applicable to programs of other
agencies?
(a) SBA size standards. The size standards for compliance with
programs of other agencies are those for SBA programs which are most
comparable to the programs of such other agencies, unless otherwise
agreed by the agency and SBA.
(b) Special size standards. (1) Federal agencies or departments
promulgating regulations relating to small businesses usually use SBA
size criteria. In limited circumstances, if they decide the SBA size
standard is not appropriate, then agency heads may establish a small
business definition for the exclusive use of such program which is more
appropriate, but only when:
(i) The size standard is first proposed for public comment pursuant
to the Administrative Procedure Act, 4 U.S.C. 553;
(ii) The proposed size standard provides for determining size
measured by average number of employees over 12 months for
manufacturing concerns, average annual revenues over three years for
concerns providing services, and data over a period of not less than
three years for all other concerns (unless approved by SBA, ``annual
receipts'' and ``number of employees'' must be determined in accordance
with Secs. 121.104 and 121.106, respectively); and
(iii) The proposed size standard is approved by SBA's
Administrator.
(2) In order to receive the approval of SBA's Administrator, the
agency head must:
(i) Request approval prior to publishing the proposed rule
containing the size standard. The request must include: an explanation
of the contemplated industry size standard, the reasons the SBA size
standard is not appropriate, and the reasons the proposed size standard
would be appropriate; and a certification that there will be compliance
with the criteria set forth in paragraphs (b)(1)(i) and (b)(1)(ii) of
this section; and
(ii) Agree to provide written notice to SBA's Administrator prior
to publishing the contemplated size standard as a final rule. The
notice must include: a copy of the intended final rule, including the
preamble, or a separate written justification for the intended size
standard followed by a copy of the intended final rule and preamble
prior to its publication; copies of all public
[[Page 3300]]
comments relating to the size standard received in response to the
proposed rule; and any other supporting documentation relevant to the
size standard and requested by SBA's Administrator.
(3) When approving any size standard established pursuant to
subsection (b) of this section, SBA's Administrator will ensure that
the size standard varies from industry to industry to the extent
necessary to reflect the differing characteristics of the various
industries, and consider other relevant factors.
(4) Where the agency head is developing a size standard for the
sole purpose of performing a Regulatory Flexibility Analysis pursuant
to the Regulatory Flexibility Act, the department or agency may, after
consultation with the SBA Office of Advocacy, establish a size standard
different from SBA's which is more appropriate for such analysis.
Sec. 121.903 When does SBA determine the size status of a business
concern?
For the purpose of compliance with programs of other agencies, SBA
will base its size determination on the size of the concern as of the
date set forth in the request of the other agency.
Procedures for Size Protests and Requests for Formal Size
Determinations
Sec. 121.1001 Who may initiate a size protest or a request for formal
size determination?
(a) Size Status Protests. (1) For SBA's Small Business Set-Aside
Program, including the Property Sales Program, the following entities
may file a size protest in connection with a particular procurement or
sale:
(i) Any offeror;
(ii) The contracting officer;
(iii) The SBA Government Contracting Area Director having
responsibility for the area in which the headquarters of the protested
offeror is located, regardless of the location of a parent company or
affiliates, or the Associate Administrator for Government Contracting;
and
(iv) Other interested parties. Other interested parties include
large businesses where only one concern submitted an offer for the
specific procurement in question. A concern found to be other than
small in connection with the procurement is not an interested party
unless there is only one remaining offeror after the concern is found
to be other than small.
(2) For SBA's Subcontracting Program, the following entities may
protest:
(i) The prime contractor;
(ii) The contracting officer;
(iii) Other potential subcontractors;
(iv) The responsible SBA Government Contracting Area Director or
the Associate Administrator for Government Contracting; and
(v) Other interested parties.
(3) For SBA's Small Business Innovation Research (SBIR) Program,
the following entities may protest:
(i) A prospective offeror;
(ii) The funding agreement officer;
(iii) The responsible SBA Government Contracting Area Director or
the Assistant Administrator for Technology; and
(iv) Other interested parties.
(4) For the Department of Defense's Small Disadvantaged Business
(SDB) Program, and any other similar program of another Federal agency,
the following entities may file a protest in connection with a
particular SDB procurement:
(i) Any offeror for the specific SDB requirement;
(ii) The contracting officer; and
(iii) The responsible SBA Government Contracting Area Director, the
Associate Administrator for Government Contracting, or the Associate
Administrator for MED.
(5) For any unrestricted Government procurement in which status as
a small business may be beneficial, including, but not limited to, the
award of a contract to a small business where there are tie bids, the
opportunity to seek a Certificate of Competency by a small business,
and SDB price evaluation preferences, the following entities may
protest in connection with a particular procurement:
(i) Any offeror;
(ii) The contracting officer; and
(iii) The responsible SBA Government Contracting Area Director, the
Associate Administrator for Government Contracting, or the Associate
Administrator for MED.
(b) Request for Size Determinations. (1) For SBA's Financial
Assistance Programs, the following entities may request a formal size
determination:
(i) The applicant for assistance; and
(ii) The SBA official with authority to take final action on the
assistance requested. That official may also request the appropriate
Government Contracting Area Office to determine whether affiliation
exists between an applicant for financial assistance and one or more
other entities for purposes of determining whether the applicant would
exceed the loan limit amount imposed by Sec. 120.151 of this chapter.
(2) For SBA's MED program--
(i) Concerning initial MED eligibility, the following entities may
request a formal size determination:
(A) The MED applicant concern; and
(B) The Director of the Division of Program Certification and
Eligibility or the Associate Administrator for MED.
(ii) Concerning individual 8(a) subcontract awards, whether sole
source or competitive, the following entities may request a formal size
determination:
(A) The MED concern nominated by SBA for the particular sole source
8(a) award or the apparent successful offeror for the particular
competitive 8(a) award;
(B) The SBA program official with authority to execute the 8(a)
subcontract; and
(C) The SBA District Director in the district serving the area in
which the headquarters of the MED concern is located, regardless of the
location of a parent company and affiliates, or the Associate
Administrator for MED.
(3) For SBA's Certificate of Competency Program, the following
entities may request a formal size determination:
(i) The offeror who has applied for a COC; and
(ii) The responsible SBA Government Contracting Area Director or
the Associate Administrator for Government Contracting.
(4) For SBA's sale or lease of government property, the following
entities may request a formal size determination:
(i) The responsible SBA Government Contracting Area Director or the
Associate Administrator for Government Contracting; and
(ii) Authorized officials of other Federal agencies administering a
property sales program.
(5) For eligibility to pay reduced patent fees, the following
entities may request a formal size determination:
(i) The applicant for the reduced patent fees; and
(ii) The Patent and Trademark Office.
(6) For purposes of determining compliance with small business
requirements of another Government agency program not otherwise
specified in this section, an official with authority to administer the
program involved may request a formal size determination.
Sec. 121.1002 Who makes a formal size determination?
The responsible Government Contracting Area Director or designee
makes all formal size determinations in response to either a size
protest or a request for a formal size determination, with the
exception of size determinations for purposes of the Disaster Loan
Program, which will be made by the Disaster Area Office Director or
designee responsible for the area in which the disaster occurred.
[[Page 3301]]
Sec. 121.1003 Where should a size protest be filed?
A protest involving a government procurement or sale must be filed
with the contracting officer for the procurement or sale, who must
forward the protest to the SBA Government Contracting Area Office
serving the area in which the headquarters of the protested concern is
located, regardless of the location of any parent company or
affiliates.
Sec. 121.1004 What time limits apply to protests?
(a) Protests by entities other than contracting officers or SBA.
(1) Non-negotiated procurement or sale. 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 or
proposal opening.
(2) Negotiated procurement. A protest must be received by the
contracting officer prior to the close of business on the 5th day,
exclusive of Saturdays, Sundays, and legal holidays, after the
contracting officer has notified the protestor of the identity of the
prospective awardee.
(3) Multiple award schedule. On a multiple award schedule
procurement set aside for small business, protests will be considered
timely if received by SBA at any time prior to the expiration of the
contract period (including renewals).
(b) Protests by contracting officers or SBA. The time limitations
in paragraph (a) of this section do not apply to contracting officers
or SBA, and they may file protests before or after awards, except to
the extent set forth in paragraph (e) of this section.
(c) Effect of contract award. A timely filed protest applies to the
procurement in question even though a contracting officer awarded the
contract prior to receipt of the protest.
(d) Untimely protests. A protest received after the allotted time
limits must still be forwarded to SBA. SBA will dismiss untimely
protests.
(e) Premature protests. A protest filed by any party, including the
contracting officer, before bid opening or notification to offerors of
the selection of the apparent successful offer will be dismissed as
premature.
Sec. 121.1005 How must a protest be filed with the contracting
officer?
A protest must be delivered to the contracting officer by hand,
telegram, mail, FAX, or telephone. If a protest is made by telephone,
the contracting officer must later receive a confirming letter either
within the 5-day period in Sec. 121.1004(a)(1) or postmarked no later
than one day after the date of the telephone protest.
Sec. 121.1006 When will a size protest be referred to an SBA
Government Contracting Area Office?
(a) A contracting officer who receives a protest (other than from
SBA) must forward the protest promptly to the SBA Government
Contracting Area Office serving the area in which the headquarters of
the offeror is located.
(b) A contracting officer's referral must contain the following
information:
(1) The protest and any accompanying materials;
(2) A copy of the self-certification as to size;
(3) Identification of the applicable size standard;
(4) A copy of the solicitation;
(5) Identification of the date of bid opening or notification
provided to unsuccessful offerors;
(6) The date on which the protest was received; and
(7) A complete address and point of contact for the protested
concern.
Sec. 121.1007 Must a protest of size status relate to a particular
procurement and be specific?
(a) Particular procurement. A protest challenging the size of a
concern which does not pertain to a particular procurement or sale will
not be acted on by SBA.
(b) A protest must include specific facts. A protest must be
sufficiently specific to provide reasonable notice as to the grounds
upon which the protested concern's size is questioned. Some basis for
the belief or allegation stated in the protest must be given. A protest
merely alleging that the protested concern is not small or is
affiliated with unnamed other concerns does not specify adequate
grounds for the protest. No particular form is prescribed for a
protest. Where materials supporting the protest are available, they
should be submitted with the protest.
(c) Non-specific protests will be dismissed. Protests which do not
contain sufficient specificity will be dismissed by SBA.
Sec. 121.1008 What happens after SBA receives a size protest or a
request for a formal size determination?
(a) When a size protest is received, the SBA Government Contracting
Area Director, or designee, will promptly notify the contracting
officer, the protested concern, and the protestor that a protest has
been received. In the event the size protest pertains to a requirement
involving SBA's SBIR Program, the Government Contracting Area Director
will advise the Assistant Administrator for Technology of the receipt
of the protest. SBA will provide a copy of the protest to the protested
concern along with a blank SBA Application for Small Business Size
Determination (SBA Form 355) by certified mail, return receipt
requested, or by any overnight delivery service that provides proof of
receipt. SBA will ask the protested concern to respond to the
allegations of the protestor.
(b) When SBA receives a request for a formal size determination in
accord with Sec. 121.1001(b), SBA will provide a blank copy of SBA Form
355 to the concern whose size is at issue.
(c) The protested concern or concern whose size is at issue must
return the completed SBA Form 355 and all other requested information
to SBA within 3 working days from the date of receipt of the blank form
from SBA. SBA has discretion to grant an extension of time to file the
form. The firm must attach to the completed SBA Form 355 its answers to
the allegations contained in the protest, where applicable, together
with any supporting material.
(d) If a concern does not submit a completed SBA Form 355, answers
to the protest allegations, or other requested information within the
allotted time provided by SBA, or if it submits incomplete information,
SBA may presume that disclosure of the form, any information missing
from it, or other missing information would show or tend to show that
the concern is other than a small business.
Sec. 121.1009 What are the procedures for making the size
determination?
(a) Time frame for making size determination. After receipt of a
protest or a request for a formal size determination, SBA will make a
formal size determination within 10 working days, if possible.
(b) Basis for determination. The size determination will be based
primarily on information supplied by the protestor or the entity
requesting the size determination and the subject concern. The
determination, however, may also be based on other grounds not raised
in the protest or request for size determination. SBA may utilize other
information in its files and may make inquiries including requests to
the protestor, the protested concern and any alleged affiliates, or
other persons for additional specific information.
(c) Burden of persuasion. The concern whose size is under
consideration has the burden of establishing its small business size.
[[Page 3302]]
(d) Weight of evidence. SBA will give greater weight to specific,
signed, factual evidence than to general, unsupported allegations or
opinions. In the case of refusal or failure to furnish requested
information within a required time period, SBA may assume that
disclosure would be contrary to the interests of the party failing to
make disclosure.
(e) Formal size determination. The SBA will base its formal size
determination upon the record, including reasonable inferences from the
record, and will state in writing the basis for its findings and
conclusions.
(f) Notification of determination. SBA will promptly notify the
contracting officer, the protestor, and the protested offeror, as well
as each affiliate or alleged affiliate, of the size determination. The
notification will be by certified mail, return receipt requested, or by
any overnight delivery service that provides proof of receipt.
(g) Results of an SBA size determination. (1) A formal size
determination becomes effective immediately and remains in full force
and effect unless and until reversed by OHA.
(2) Once SBA has determined that a concern is other than small for
purposes of a particular procurement, the concern cannot later become
eligible for the procurement by reducing its size.
(3) A concern determined to be other than small for a particular
size standard is ineligible for any procurement or assistance
authorized by the Small Business Act or the Small Business Investment
Act of 1958, requiring the same or a lower size standard, unless
recertified as small pursuant to Sec. 121.1010. Following an adverse
size determination, a concern cannot again self-certify as small within
the same or a lower size standard unless it is recertified as small by
SBA. If it 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 on a pending procurement
or on another assistance application, the concern must immediately
inform the officials responsible for the pending procurement or other
requested assistance of the adverse size determination.
(h) Limited reopening of size determinations. In cases where the
size determination contains clear administrative error or a clear
mistake of fact, SBA may, in its sole discretion, reopen the size
determination to correct the error or mistake, provided the case has
not been accepted for review by OHA.
Sec. 121.1010 How does a concern become recertified as a small
business?
(a) A concern may request SBA to recertify it as small at any time
by filing an application for recertification with the Government
Contracting Area Office responsible for the area in which the
headquarters of the applicant is located, regardless of the location of
parent companies or affiliates. No particular form is prescribed for
the application; however, the request for recertification must be
accompanied by a current completed SBA Form 355 and any other
information sufficient to show a significant change in its ownership,
management, or other factors bearing on its status as a small concern.
(b) Recertification will not be required nor will the prohibition
against future self-certification apply if the adverse SBA size
determination is based solely on a finding of affiliation due to a
joint venture (e.g., ostensible subcontracting) limited to a particular
Government procurement or property sale, or is based on an ineligible
manufacturer where the eligible small business bidder or offeror is a
nonmanufacturer on a particular Government procurement.
(c) A denial of an application for recertification is a formal size
determination and may be reviewed by OHA at the discretion of that
office.
(d) The granting of an application for recertification has future
effect only. While it is a formal size determination, notice of
recertification is required to be given only to the applicant.
Appeals of Size Determinations and SIC Code Designations
Sec. 121.1101 Are formal size determinations subject to appeal?
There is no right of appeal of a size determination. OHA, however,
may, in its sole discretion, review a formal size determination made by
a SBA Government Contracting Area Office or by a Disaster Area Office.
Unless OHA accepts a petition for review of a formal size
determination, the size determination made by a SBA Government
Contracting Area Office or by a Disaster Area Office is the final
decision of SBA. The procedures for requesting discretionary reviews by
OHA of formal size determinations are set forth in part 134 of this
chapter.
Sec. 121.1102 Are SIC code designations subject to appeal?
Appeals may be made to OHA, which has exclusive jurisdiction to
determine appeals of SIC code designations pursuant to part 134 of this
chapter.
Sec. 121.1103 What are the procedures for appealing a SIC code
designation?
(a) Generally, any interested party who has been adversely affected
by a SIC code designation may appeal the designation to OHA. However,
with respect to a particular MED contract, only the Associate
Administrator for MED may appeal.
(b) Procedures for perfecting SIC code appeals with OHA are
contained in Sec. 19.303 of the Federal Acquisition Regulations, 48 CFR
19.303.
Subpart B--Other Applicable Provisions
Waivers of the Nonmanufacturer Rule for Classes of Products and
Individual Contracts
Sec. 121.1201 What is the Nonmanufacturer Rule?
The Nonmanufacturer Rule is set forth in Sec. 121.406(b).
Sec. 121.1202 When will a waiver of the Nonmanufacturer Rule be
granted for a class of products?
(a) A waiver for a class of products (class waiver) will be granted
when there are no small business manufacturers or processors available
to participate in the Federal market for that class of products.
(b) Federal market means acquisitions by the Federal Government
from offerors located in the United States, or such smaller area as SBA
designates if it concludes that the class of products is not supplied
on a national basis.
(1) When considering the appropriate market area for a product, SBA
presumes that the entire United States is the relevant Federal market,
unless it is clearly demonstrated that a class of products cannot be
procured on a national basis. This presumption may be particularly
difficult to overcome in the case of manufactured products, since such
items typically have a market area encompassing the entire United
States.
(2) When considering geographic segmentation of a Federal market,
SBA will not necessarily use market definitions dependent on airline
radius, political, or SBA regional boundaries. Market areas typically
follow established transportation routes rather than jurisdictional
borders. SBA examines the following factors, among others, in cases
where geographic segmentation for a class of products is urged:
(i) Whether perishability affects the area in which the product can
practically be sold;
(ii) Whether transportation costs are high as a proportion of the
total value
[[Page 3303]]
of the product so as to limit the economic distribution of the product;
(iii) Whether there are legal barriers to transportation of the
item;
(iv) Whether a fixed, well-delineated boundary exists for the
purported market area and whether this boundary has been stable over
time; and
(v) Whether a small business, not currently selling in the defined
market area, could potentially enter the market from another area and
supply the market at a reasonable price.
(c) Available to participate in the context of the Federal market
means that contractors exist that have been awarded or have performed a
contract to supply a specific class of products to the Federal
Government within 24 months from the date of the request for waiver,
either directly or through a dealer, or who have submitted an offer on
a solicitation for that class of products within that time frame.
(d) Class of products is an individual subdivision within a four-
digit Industry Number as established by the Office of Management and
Budget in the SIC Manual.
Sec. 121.1203 When will a waiver of the Nonmanufacturer Rule be
granted for an individual contract?
An individual waiver for a product in a specific solicitation will
be approved when the SBA Associate Administrator for Government
Contracting reviews and accepts a contracting officer's determination
that no small business manufacturer or processor can reasonably be
expected to offer a product meeting the specifications of a
solicitation, including the period of performance.
Sec. 121.1204 What are the procedures for requesting and granting
waivers?
(a) Waivers for classes of products. (1) SBA may, at its own
initiative, examine a class of products for possible waiver of the
Nonmanufacturer Rule.
(2) Any interested person, business, association, or Federal agency
may submit a request for a waiver for a particular class of products.
Requests should be addressed or hand-carried to the Associate
Administrator of Government Contracting, Small Business Administration,
409 3rd Street S.W., Washington, D.C. 20416.
(3) Requests for a waiver of a class of products need not be in any
particular form, but should include a statement of the class of
products to be waived, the applicable SIC code, and detailed
information on the efforts made to identify small business
manufacturers or processors for the class.
(4) If SBA decides that there are small business manufacturers or
processors in the Federal procurement market, it will deny the request
for waiver, issue notice of the denial, and provide the names,
addresses, and telephone numbers of the sources found. If SBA does not
initially confirm the existence of small business manufacturers or
processors in the Federal market, it will:
(i) Publish notices in the Commerce Business Daily and the Federal
Register seeking information on small business manufacturers or
processors, announcing a notice of intent to waive the Nonmanufacturer
Rule for that class of products and affording the public a 15-day
comment period; and
(ii) If no small business sources are identified, publish a notice
in the Federal Register stating that no small business sources were
found and that a waiver of the Nonmanufacturer Rule for that class of
products has been granted.
(5) An expedited procedure for issuing a class waiver may be used
for emergency situations, but only if the contracting officer provides
a determination to the Associate Administrator for Government
Contracting that the procurement is proceeding under the authority of
FAR Sec. 6.302-2 (48 CFR 6.302-2) for ``unusual and compelling
urgency,'' or provides a determination materially the same as one of
unusual and compelling urgency. Under the expedited procedure, if a
small business manufacturer or processor is not identified by a PASS
search, the SBA will grant the waiver for the class of products and
then publish a notice in the Federal Register. The notice will state
that a waiver has been granted, and solicit public comment for future
procurements.
(6) The decision by the Associate Administrator for Government
Contracting to grant or deny a waiver is the final decision by the
Agency.
(7) A waiver of the Nonmanufacturer Rule for classes of products
has no specific time limitation. SBA will, however, periodically review
existing class waivers to the Nonmanufacturer Rule to determine if
small business manufacturers or processors have become available to
participate in the Federal market for the waived classes of products
and the waiver should be terminated.
(i) Upon SBA's receipt of evidence that a small business
manufacturer or processor exists in the Federal market for a waived
class of products, the waiver will be terminated by the Associate
Administrator for Government Contracting. This evidence may be
discovered by SBA during a periodic review of existing waivers or may
be brought to SBA's attention by other sources.
(ii) SBA will announce its intent to terminate a waiver for a class
of products through the publication of a notice in the Federal
Register, asking for comments regarding the proposed termination.
(iii) Unless public comment reveals that no small business
manufacturer or processor in fact exists for the class of products in
question, SBA will publish a final Notice of Termination in the Federal
Register.
(b) Individual waivers for specific solicitations. (1) A
contracting officer's request for a waiver of the Nonmanufacturer Rule
for specific solicitations need not be in any particular form, but
must, at a minimum, include:
(i) A definitive statement of the specific item to be waived and
justification as to why the specific item is required;
(ii) The solicitation number, SIC code, dollar amount of the
procurement, and a brief statement of the procurement history;
(iii) A determination by the contracting officer that there are no
known small business manufacturers or processors for the requested
items (the determination must contain a narrative statement of the
contracting officer's efforts to search for small business
manufacturers or processors of the item and the results of those
efforts, and a statement by the contracting officer that there are no
known small business manufacturers for the items and that no small
business manufacturer or processor can reasonably be expected to offer
the required items); and
(iv) For contracts expected to exceed $500,000, a copy of the
Statement of Work.
(2) Requests should be addressed to the Associate Administrator for
Government Contracting, Small Business Administration, 409 3rd Street,
S.W., Washington, D.C. 20416.
(3) 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. If SBA's research verifies that no
small business manufacturers or processors exist for the item, the
Associate Administrator for Government Contracting will grant an
individual, one-time waiver. If a small business manufacturer or
processor is found for the product in question, the Associate
Administrator will deny the request. Either decision represents a final
decision by SBA.
[[Page 3304]]
Sec. 121.1205 How is a list of previously granted class waivers
obtained?
A list of classes of products for which waivers of the
Nonmanufacturer Rule have been granted will be maintained in SBA's
Procurement Automated Source System (PASS). A list of such waivers may
also be obtained by contacting the Office of Government Contracting at
the Small Business Administration, 409 3rd Street, S.W., Washington,
D.C. 20416, or at the nearest SBA Government Contracting Area Office.
Dated: January 22, 1996.
John T. Spotila,
Acting Administrator.
[FR Doc. 96-1348 Filed 1-30-96; 8:45 am]
BILLING CODE 8025-01-P