[Federal Register Volume 62, Number 13 (Tuesday, January 21, 1997)]
[Proposed Rules]
[Pages 2979-2981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1308]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 62, No. 13 / Tuesday, January 21, 1997 / 
Proposed Rules  

[[Page 2979]]



SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121 and 125


Small Business Size Regulations and Government Contracting 
Assistance Regulations; Very Small Business Concern

AGENCY: Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: Small Business Administration (SBA) proposes to amend its size 
and government contracting assistance regulations to incorporate the 
Very Small Business Program together with a definition of a very small 
business concern for purposes of the SBA's small business set-aside 
program. Section 304 of the Small Business Administration 
Reauthorization and Amendments Act of 1994 (Pub. L. 103-403) authorized 
the SBA Administrator to establish and carry out a pilot program for 
very small business concerns. The Act defines a very small business 
concern as one that has 15 or fewer employees together with average 
annual receipts that do not exceed $1 million. The Act establishes 
September 30, 1998, as the expiration date for this pilot.

DATES: Comments must be submitted on or before March 24, 1997.

ADDRESSES: Send comments to: Nancyellen Gentile, Office of Prime 
Contracts, U.S. Small Business Administration, 409 Third Street, SW., 
Mail Code 6250, Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Nancyellen Gentile, Office of 
Government Contracting, (202) 205-6471, or Carl J. Jordan, Office of 
Size Standards, (202) 205-6618.

SUPPLEMENTARY INFORMATION: The Small Business Administration 
Reauthorization and Amendments Act of 1994 (Act) authorized the SBA to 
establish a pilot program for very small business concerns. (See Pub. 
L. 103-403, Section 304) The purpose of this pilot program is to 
improve access to Federal contract opportunities for concerns that are 
substantially below SBA's size standards by reserving certain 
procurements for competition among very small business concerns. Very 
small business concerns that receive a very small business set-aside 
contract are eligible for loan application support and assistance under 
the very small business prequalification component of this pilot 
program. This pilot program will expire on September 30, 1998, unless 
extended through legislation.
    The Very Small Business Program is being established in Sec. 125.7 
of these regulations and the definition of a very small business 
concern is being established in Sec. 121.413. Under section 304(j)(4) 
of the Act, a very small business concern is one that has no more than 
15 employees and average annual receipts that total no more than $1 
million. The size standard requirements applicable to small business 
concerns contained in Part 121 of this chapter, such as the definitions 
and calculation of average annual receipts and number of employees, 
self-certification, and size status protests, also will apply to very 
small business concerns. Section 125.7 also describes the types of 
procurements which will be eligible for the pilot program.
    Under this pilot, the SBA proposes that procurements of $50,000 or 
less that could be set-aside for small business will be reserved for 
concerns meeting the statutory definition of a very small business. 
Currently, the simplified acquisition procedures apply to all 
requirements less than $100,000. The SBA has elected $50,000 as the 
very small business set-aside threshold for the following reasons. The 
nature of requirements ranging in value between $2,500 and $50,000 is 
that of standard off-the-shelf products and services which typically 
lend themselves to performance by very small businesses. The SBA 
analyzed the fiscal year 1995 Federal procurement activity within the 
Small Business Competitiveness Demonstration Program and determined 
that the average dollar value of a contract action awarded to an 
emerging small business (a small business concern whose size is no 
greater than 50 percent of the numerical size standard applicable to 
the standard industrial classification code assigned to a contracting 
opportunity) was $51,842. Further analysis of this data shows that the 
average dollar value of a contract action awarded to an emerging small 
business in the architectural and engineering services industry was 
$31,317. Smaller requirements will develop the ability of very small 
business concerns to do business in the federal marketplace at a 
gradual pace. The dollar size of this requirement will enable a very 
small business concern to take on the requirement without greatly 
disrupting operations. It will also allow the very small business 
concern to take advantage of multiple opportunities. A review of fiscal 
year 1995 federal procurement data shows that awards of $50,000 or less 
totaled $544,212,000. This represents 1.3 percent of the total awards 
received by small business concerns. Therefore, this threshold for very 
small business set-aside requirements will minimize any adverse impact 
on existing procurement assistance programs for larger small business 
concerns. Requirements above the $50,000 threshold will continue to be 
reserved for small businesses where appropriate. (Note: Procurements of 
$2,500 and below are processed under new micro-purchase procedures 
contained in FASA and are not reserved for small business competition. 
Thus, the proposed rule would not apply.)
    The SBA is proposing that to qualify for an award under this 
program a firm must be an eligible small business concern under 13 CFR 
part 121 as well as one that has 15 or fewer employees and average 
annual receipts that do not exceed $1 million. Also, due to the limited 
number of, and geographical distance between the designated SBA 
districts, the SBA believes that eligible firms should be those whose 
headquarters are located within a geographical area serviced by a 
designated SBA district office where the procurement is offered, as 
opposed to all very small businesses in the country. This will also 
serve to ensure that SBA and participating federal agencies are 
familiar with potential very small business sources. Since very small 
businesses receiving contract awards are entitled to prequalification 
financial assistance under this program, the SBA believes that 
eligibility should be limited to firms located within those SBA 
districts that offer a prequalification loan program to ensure 
consistent and efficient administration of both programs.

[[Page 2980]]

    The Act authorizes administration of this pilot program in not less 
than five (5) nor more than ten (10) SBA districts. The Act permits SBA 
to determine the operating details of the program. For informational 
purposes, the following are the SBA districts where this pilot program 
will be implemented:

Albuquerque, NM
Boston, MA
Columbus, OH
Detroit, MI
El Paso, TX
Los Angeles, CA
Louisville, KY
New Orleans, LA
Philadelphia, PA
Santa Ana, CA

These SBA districts have the required available resources to implement 
and administer the pilot. A prequalification loan pilot program is 
available in each of these designated districts to provide loan 
application support and assistance. Also, SBA will achieve nationwide 
geographical coverage by designating at least one pilot site within 
broad regional areas of the country. Each site will have a procurement 
center representative to work with the various procuring activities to 
implement the program. SBA may, from time to time, through notice in 
the Federal Register, find it necessary to make modifications to this 
list, provided, however, the total number of participating districts 
will remain within the legislated number.
    Federal agencies will implement this program, working with SBA 
procurement center representatives to identify opportunities 
appropriate to be set aside for very small businesses. The SBA district 
offices and procurement center representatives will assist the buying 
activities in identifying very small business concerns likely to 
compete. The contracting officer will advertise very small business 
set-aside opportunities. The contracting officer will rely on the 
offeror's self-certification in a specific bid or proposal. If the 
self-certification of a very small business concern is protested on a 
very small business set-aside, the size determination will be made 
using the statutorily imposed size standard of 15 or fewer employees 
and average annual receipts of $1 million or less. If there are not two 
or more very small business concerns eligible to compete on a specific 
procurement, then the very small business program will not apply to 
that contract.
    The Act establishes April 30, 1997, as the date by which the 
Administrator of SBA will report the results of this pilot program to 
the Congress. Before that date, SBA will obtain from participating 
agencies a record of all contract awards under this program, after 
advising them of the manner and frequency of such reporting. At a 
minimum, reports will include the date of solicitation, the date of an 
award, the contractor's name and address, the standard industrial 
classification code or a brief description of the product or service, 
and the dollar value of the agency's purchase.

Compliance With Executive Orders 12612, 12788 and 12866, the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), and the Paperwork Reduction Act 
(44 U.S.C. Chapter 3501 et seq.)

    The SBA certifies that this rule, if adopted in final form, would 
not be a significant rule within the meaning of Executive Order 12866. 
The value of procurements awarded under the Very Small Business Program 
is expected to be less than $100 million since the program is being 
implemented as a pilot program in only eight locations and is targeted 
to businesses that have historically experienced limited participation 
in the federal market. This rule does not impose costs upon the 
businesses which might be affected by it. The rule would have no effect 
on the amount or dollar value of any contract requirement or the number 
of requirements reserved for the small business set-aside program, 
since it is administered within the small business set-aside program. 
Therefore, it would not have an annual economic effect of $100 million 
or more, result in a major increase in costs or prices, or have a 
significant adverse effect on competition or the United States economy.
    As required by the Regulatory Flexibility Act, 5 U.S.C. 601-612, 
the SBA has prepared a regulatory flexibility analysis of this proposed 
rule. This analysis has been submitted to the Chief Counsel for 
Advocacy of the Small Business Administration, and is available upon 
request.
    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA certifies that this rule would not impose new reporting or record 
keeping requirements, other than those required of SBA.
    For purposes of Executive Order 12612, SBA certifies that this rule 
does not have any federalism implications warranting the preparation of 
a Federalism Assessment.
    For purposes of Executive Order 12778, the SBA certifies that this 
rule is drafted, to the extent practicable, in accordance with the 
standards set forth in section 2 of this order.
    For the reasons set forth above, Title 13, Code of Federal 
Regulations (CFR) is amended as set forth below.

List of Subjects in 13 CFR Part 121

    Government procurement; Government property; Grant programs--
business; Loan programs--business; Small businesses.

13 CFR Part 125

    Government contracts, Government procurement, Reporting and record 
keeping requirements, Small businesses, Technical assistance.

PART 121--[AMENDED]

    1. The authority citation for 13 CFR part 121 is revised to read as 
follows:

    Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), and 644(c); Pub. 
L. 102-486, 106 Stat. 2776, 3133; and Sec. 304, Pub. L. 103-403, 108 
Stat. 4175, 4188.

    2. Section 121.401 is revised to read as follows:


Sec. 121.401  What procurement programs are subject to size 
determinations?

    The requirements set forth in Secs. 121.401 through 121.413 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, the Federal 
Small Disadvantaged Business programs, and the Very Small Business 
program.
    3. The following new Sec. 121.413 is added after Sec. 121.412 to 
read as follows:


Sec. 121.413  What size firm is eligible for the Very Small Business 
Program?

    A concern eligible for the very small business program, as 
established in Sec. 125.7, is one that, together with its affiliates, 
has no more than 15 employees and has average annual receipts that do 
not exceed $1 million.

PART 125--[AMENDED]

    1. The authority citation for 13 CFR part 125 is revised to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), 637, and 644; 31 U.S.C. 9701, 
9702; and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188.

    2. The following new Sec. 125.7 is added after Sec. 125.6 to read 
as follows:


Sec. 125.7  What is the Very Small Business Program?

    (a) The Very Small Business Program is an extension of the small 
business set-aside program, administered by the SBA as a pilot to 
increase opportunities for very small business concerns. The program is 
limited to contracts of $50,000 or less that could be set aside for 
small business, and to concerns that

[[Page 2981]]

meet the very small business size standard defined in Sec. 121.413.
    (b) If there are not two or more very small business concerns 
eligible to compete on a specific procurement, then the very small 
business program will not apply to that contract.
    (c) This pilot program will be implemented in the following SBA 
districts: Albuquerque, NM; Los Angeles, CA; Boston, MA; Louisville, 
KY; Columbus, OH; New Orleans, LA; Detroit, MI; Philadelphia, PA; El 
Paso, TX; Santa Ana, CA. Only very small businesses whose headquarters 
are located within the geographical area serviced by a designated SBA 
district office where the procurement is offered are eligible for award 
of a contract under this pilot program.
    (d) This pilot program terminates on September 30, 1998.

    Dated: January 14, 1997.
Philip Lader,
Administrator.
[FR Doc. 97-1308 Filed 1-17-97; 8:45 am]
BILLING CODE 8025-01-P