[Federal Register Volume 63, Number 125 (Tuesday, June 30, 1998)]
[Rules and Regulations]
[Pages 35767-35780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17195]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 124


8(a) Business Development/Small Disadvantaged Business Status 
Determinations

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: In response to the Department of Justice's review of Federal 
procurement affirmative action programs and amendments to the Federal 
Acquisition Regulation to implement a government-wide small 
disadvantaged business (SDB) program, the Small Business Administration 
(SBA) issues this final rule establishing the procedural framework for 
certifying firms as SDBs and for processing protests challenging the 
disadvantaged status of a firm claiming to be an SDB.

DATES: Effectove Dates. The amendments made by this rule to subpart A 
of 13 CFR part 124 are effective on June 30, 1998. Sections 124.1001 
through 124.1016 of subpart B of 13 CFR part 124 are effective on 
August 24, 1998. With the exeptions of Secs. 124.1017(b) and 
124.1020(c)(2), Secs. 124.1017 through 124.1024 of subpart B of 13 CFR 
part 124 are effective on October 1, 1998. Sections 124.1017(b) and 
124.1020(c)(2) of subpart B of 13 CFR part 124 are effective on January 
1, 1999.
    Compliance Dates. SBA will begin to accept and process applications 
for SDB certifications as of August 24, 1998.

FOR FURTHER INFORMATION CONTACT: Calvin Jenkins, Deputy Associate 
Deputy Administrator for Government Contracting and Minority Enterprise 
Development, at (202) 205-6459.

SUPPLEMENTARY INFORMATION: On May 9, 1997, the Department of Defense 
(DOD), the General Services Administration (GSA), and the National 
Aeronautics and Space Administration (NASA) proposed amendments to the 
Federal Acquisition Regulation (FAR) concerning programs for small 
disadvantaged business concerns. 62 FR 25786. The amendments were 
intended to conform to a Department of Justice (DOJ) proposal to reform 
affirmative action in Federal procurement (see 61 FR 26042) and to 
comply with the constitutional standards established by the Supreme 
Court in Adarand Constructors, Inc. v. Pena, 115 S.Ct. 2097 (1995). The 
proposed amendments to the FAR included procedures by which a firm 
claiming to be owned and controlled by one or more disadvantaged 
individuals could certify its status as a small disadvantaged business 
(SDB) concern for purposes of receiving a benefit as an SDB in 
connection with a Federal procurement. The proposed FAR change also 
contained procedures by which an interested party may protest a small 
business concern's disadvantaged status to the Small Business 
Administration (SBA). In response to and in conjunction with the DOJ 
and FAR reform proposals, on August 14, 1997, SBA published in the 
Federal Register, 62 FR 43584, a proposed rule to amend 13 CFR part 
124. Subpart A of the proposed part 124 dealt with changes pertaining 
to the 8(a) Business Development (8(a) BD) program which is authorized 
by sections 7(j)(10) and 8(a) of the Small Business Act, 15 U.S.C. 
636(j)(10), 637(a). Subpart B of proposed

[[Page 35768]]

part 124 dealt with SBA's role in the certification and protest of 
small disadvantaged businesses, as contemplated by the DOJ and FAR 
proposals. SBA is finalizing the vast majority of subpart A of 13 CFR 
part 124 as a separate rulemaking action. This rule finalizes subpart B 
of 13 CFR part 124, discussing fully all substantive comments received 
regarding subpart B in response to the August 14, 1997 proposed rule. 
This rule also makes four changes to subpart A of 13 CFR part 124 in 
order to take into account the effect that benchmark achievement, 
explained below, may have on the 8(a) BD program.
    As recommended in the DOJ review of Federal affirmative action 
procurement programs, subpart B of part 124 as set forth in this rule 
describes standards and procedures by which a firm can apply to be 
recognized as a small disadvantaged business (SDB). Under the rule, 
SBA, or, where SBA deems it appropriate, SBA-approved state agencies, 
private sector organizations or business concerns (called Private 
Certifiers), will determine whether a firm is owned and controlled by 
specified individuals claiming to be disadvantaged. Where a Private 
Certifier determines ownership and control, the Private Certifier will 
issue a written decision as to whether the applicant is actually owned 
and controlled by the individuals identified as claiming disadvantaged 
status, and will forward the application along with a copy of its 
decision to SBA for further processing as to the other aspects of SDB 
eligibility. Where the Private Certifier finds that the applicant is 
not owned and controlled by the individuals claiming disadvantaged 
status, its decision will state the specific reasons for the finding, 
and inform the applicant of its right to appeal the decision to SBA's 
Office of Hearings and Appeals (OHA). Where SBA determines ownership 
and control, SBA will first determine whether the applicant is owned 
and controlled by the individual(s) claiming to be disadvantaged. If 
SBA determines that the applicant is not owned and controlled by the 
individual(s) claiming disadvantaged status, SBA will issue a written 
decision addressing only the ownership and control issues. If SBA 
determines that the applicant is owned and controlled by the 
individual(s) claiming disadvantaged status, SBA will issue a single 
written decision as to whether the applicant qualifies as an SDB. Such 
a decision will include the ownership and control of the firm, the size 
status of the firm, and the disadvantaged status of those individuals 
claiming to be disadvantaged. An applicant may appeal SBA's 
determination that it is not owned and controlled by those individuals 
claiming disadvantaged status, or its decision that one or more of the 
individuals claiming disadvantaged status are not actually 
disadvantaged to OHA. An applicant may also request a formal size 
determination with the applicable SBA Government Contracting Area 
Office.
    Individuals who are members of certain designated groups are 
presumed to be socially and economically disadvantaged. SBA will 
consider evidence presented to it which is contrary to the 
presumptions, and may seek further information from the applicant 
individuals. Other individuals must submit a narrative statement 
identifying personally how their entry into or advancement in the 
business world has been impaired because of their individual social 
disadvantage, and how their ability to compete in the free enterprise 
system has been impaired due to diminished capital and credit 
opportunities. These procedures are completely separate from the 8(a) 
BD requirements. The rule describes procedures for listing and removing 
firms from an SBA-maintained on-line register of certified SDBs. With 
respect to the 8(a) BD program, the rule also provides regulatory 
authority for SBA, in its discretion, to limit program entry, 
accelerate program graduation, and limit the numbers of 8(a) contracts 
available when the benchmarks referred to in the FAR are achieved in 
particular industries.
    SBA has attempted to write the regulations in plain English.

Discussion of Public Comment

    SBA received several comments concerning the application of 
benchmarks to the 8(a) BD program. Some comments questioned the 
methodology of establishing benchmarks. Neither the proposed rule nor 
this final rule addresses the way in which benchmarks will be 
developed. As such, those comments are not relevant to this rulemaking, 
and SBA makes no changes in response to them. A few comments expressed 
concern about the actions SBA may take when the benchmark is exceeded 
in a particular industry (i.e., SBA may decide not to accept an 
application for the 8(a) BD program from a concern in that industry 
(Sec. 124.108(f)); SBA may accelerate graduation of Participants 
(Sec. 124.302(d)); or SBA may elect not to accept a requirement as an 
8(a) contract (Sec. 124.504(d)). While the regulations give SBA 
discretion to take any of those actions in appropriate circumstances, 
they do not mandate that such actions be taken in any case. In 
considering whether to take action under these provisions, the SBA 
Administrator will weigh the business development purposes of the 
program in every case.
    Part 124, subpart B: Subpart B of the August 14, 1997 proposed rule 
defined what an SDB is and set forth the procedures by which a firm can 
be recognized as an SDB. Each of the significant comments received 
regarding subpart B and the changes made to subpart B are identified 
below.
    Proposed Sec. 124.1001 defined an SDB as a business which is owned 
and controlled by one or more disadvantaged individuals. One commenter 
noted that this omitted references to certain entities which are 
considered disadvantaged. SBA agrees with this comment, and this final 
rule changes Sec. 124.1001 to make clear that firms owned and 
controlled by the following entities, i.e., Alaska Native Corporations 
(ANCs), Community Development Corporations (CDCs), Indian tribes 
(tribes) or Native Hawaiian Organizations (NHOs), are considered 
disadvantaged.
    Proposed Sec. 124.1002(d) would have required SBA to consider the 
``character'' of each individual claiming disadvantaged status in 
determining whether a firm qualified as an SDB. Upon further 
reflection, SBA does not believe that SBA should look at the character 
of the firm or individuals claiming disadvantaged status as part of its 
SDB determination. The requirement that a firm and its principals 
possess ``good character'' should be a responsibility issue to be 
determined by the contracting officer in connection with each contract 
for which the firm is the apparent successful offeror, and should have 
no bearing on whether a firm should be classified as an SDB. As such, 
SBA has deleted that requirement from this final rule.
    Proposed Sec. 124.1002(b)(4) listed as a requirement for SDB status 
(relating to DOD, NASA and Coast Guard procurements) the additional 
requirement that a majority of the SDB's earnings accrue directly to 
the disadvantaged individuals. One commenter questioned why this 
restriction applied only to DOD, NASA and the Coast Guard. The reason 
for the limited applicability is that the restriction appears in the 
authorizing legislation for the SDB program applying to DOD, NASA and 
Coast Guard (see section 1207 of the Defense Acquisition Improvement 
Act of 1986, Public Law 99-661), but not in the authorizing legislation 
for the

[[Page 35769]]

Government-wide SDB program (see section 7102 of the Federal 
Acquisition Streamlining Act of 1994, Public Law 103-355). This rule is 
consistent with this statutory distinction.
    Proposed Sec. 124.1002(f)(4) required that a majority of a joint 
venture's earnings must accrue directly to disadvantaged individuals 
and entities. One commenter noted that this provision could be read to 
impose an additional requirement on ANCs that would be contrary to 43 
U.S.C. 1626(e). SBA does not believe this to be true because the 
provision was meant to apply to SDBs owned by disadvantaged individuals 
and not to those owned by tribes, ANCs, CDCs or NHOs. Nevertheless, SBA 
has deleted this provision from the final rule because it is contract 
specific and should not affect whether a firm should be considered an 
SDB generally.
    The final rule deletes proposed Sec. 124.1002(g), the requirement 
that an SDB must perform certain specified percentages of work with its 
own employees. Upon further deliberation, SBA believes that this 
requirement is a contract specific requirement and does not belong in 
the regulations defining what an SDB is. SBA has added a new paragraph 
(g) clarifying that the ownership restrictions contained in 
Secs. 124.105(g) and (h) do not apply to SDB eligibility. Those 
restrictions apply to the 8(a) BD program because it is a business 
development program.
    Proposed Secs. 124.1003 through 124.1009 set forth various 
requirements relating to Private Certifiers. The proposed rule stated 
that Private Certifiers would perform determinations of ownership and 
control and that SBA would perform such determinations where ``a 
Private Certifier is not reasonably available.'' SBA received several 
comments on the proposed use of Private Certifiers. One commenter 
stated that the use of Private Certifiers provided a quick and cost 
effective certification process. Several commenters were concerned 
about the required qualifications, if any, of the Private Certifiers, 
the procedures to be used by them in the certification process, and the 
monitoring of the Private Certifiers. One commenter strongly disagreed 
with the use of Private Certifiers to determine ownership and control 
in any case, and believed that SBA was better suited for this 
responsibility.
    Upon further deliberation, SBA does not believe it is prudent to 
limit its ability to perform ownership and control determinations only 
to situations where Private Certifiers are not available. The final 
rule still authorizes SBA to approve Private Certifiers and for Private 
Certifiers to perform ownership and control determinations in 
appropriate circumstances. However, it will be within SBA's discretion 
as to when and to what extent Private Certifiers will be utilized in 
the SDB certification process. A firm seeking to be certified as an SDB 
should contact its local SBA field office to learn whether to submit 
its SDB application to SBA or to a Private Certifier. SBA's Homepage on 
the Internet will also identify this information.
    In addition, in response to concerns about SBA's monitoring Private 
Certifiers, the final rule (Sec. 124.1003) provides that SBA will 
establish standards regarding qualifications, monitoring, procedures 
and use, if any, of Private Certifiers. SBA will establish these 
standards in the document approving an organization or concern as a 
Private Certifier.
    Proposed Sec. 124.1004 described how an organization or business 
concern becomes a Private Certifier. The SBA received five comments 
regarding this proposed section. One commenter stated that training 
should be mandatory. While SBA believes that training will be necessary 
in many cases, it may not be needed in every case. As such, SBA has 
retained its flexibility to require training where appropriate. A 
second commenter stated that a monitoring system should be developed. 
SBA agrees and has provided for SBA monitoring in Sec. 124.1003. A 
third commenter stated that the Private Certifiers should be nonprofit 
organizations or governmental agencies and not private sector 
organizations. SBA considered this comment, but has decided not to 
restrict Private Certifiers in this way. Nonprofit organizations and 
state and local governmental agencies may apply and be granted status 
as Private Certifiers. However, SBA does not believe that those are the 
only entities reasonably capable of providing this service. Such a 
restriction is unnecessary and would be contrary to policies that 
generally encourage competition.
    Proposed Sec. 124.1004(f) prohibited a Private Certifier from 
certifying any company with which it has other business dealings, but 
did not specify a timeframe for limiting such dealings or what types of 
activities SBA was in fact attempting to limit. Upon further 
deliberation, SBA believes that this regulation should provide the 
general authority for SBA to prohibit conflicts of interest between a 
Private Certifier and those firms that come to it seeking an ownership 
and control determination and protect the integrity of the Private 
Certifier decision-making process. SBA believes that the document 
(e.g., contract) that authorizes an entity to act as a Private 
Certifier should detail the specific conditions or limitations on other 
business transactions between the Private Certifier and those firms for 
which it performs an ownership and control determination. These 
restrictions may pertain to past relationships (so that a Private 
Certifier could not process an SDB application for a firm with which it 
had certain business dealings in the past) or to future transactions 
(so that the Private Certifier could not engage in certain business 
relationships with a firm for a specified period of time after 
processing the firm's SDB application). SBA does not intend to preclude 
a Private Certifier from making a determination with respect to a 
firm's SDB status for both federal and state/local SDB programs. That 
is not the type of ``other business transactions'' that this regulation 
is intended to prohibit.
    Proposed Sec. 124.1005 allowed Private Certifiers to charge a 
reasonable fee to process the firm's determination of ownership and 
control. There were two comments on this section. The first commenter 
noted that the language was confusing. SBA revised the language in the 
first sentence in response to this comment. The second commenter, a 
Federal agency, stated that the fee should be the same whether or not 
the applicant receives SDB certification. SBA agrees and has adopted 
this language in the final regulation. In addition, SBA has amended 
this section to provide that SBA may charge a fee to process ownership 
and control determinations where SBA performs ownership and control 
determinations. From time to time, SBA will publish a Notice in the 
Federal Register identifying any fee that SBA decides to charge to 
process a firm's determination of ownership and control. Any funds 
received by SBA to make these determinations will be remitted promptly 
to the Treasury of the United States as miscellaneous receipts.
    Proposed Sec. 124.1008 explained the process to become certified as 
an SDB. SBA received several comments on this proposed section. Three 
comments supported the proposed language, and stated that this section 
would improve the efficiency of the process and reduce paperwork. A few 
comments addressed the need for a method of monitoring the Private 
Certifiers and their fees. As noted above, Sec. 124.1003 of the final 
rule provides authority for SBA to include specific monitoring 
provisions in the

[[Page 35770]]

document approving an organization or concern to be a Private 
Certifier.
    One commenter questioned the automatic inclusion of current 8(a) BD 
Participants as SDBs. SBA continues to believe that such inclusion is 
proper. An 8(a) BD concern's continuing eligibility as an SDB will be 
reviewed as part of the concern's annual review for the 8(a) BD 
program.
    The final rule also removes all references in Sec. 124.1008 to 
procuring agencies as certifiers. All SDB certifications will be made 
by SBA and its Private Certifiers.
    One commenter specifically requested that an ANC-owned firm be 
permitted to apply for SDB status through the SBA Anchorage Office. To 
address this concern, SBA has added language to Sec. 124.1008(a)(1) 
allowing SBA flexibility to direct where applications should be made.
    Proposed Sec. 124.1008(b) listed the required forms and documents 
to be submitted by the applicant for SDB certification. One commenter, 
noted that the required ``small business self certification'' should be 
included in this section. SBA does not adopt this comment. SBA 
concluded that it was not necessary to detail every form or piece of 
information that SBA might request from an SDB applicant. Instead, the 
final rule condenses Sec. 124.1008(b) to provide that an SDB applicant 
must submit the same forms and attachments required by SBA when 
applying to the 8(a) BD program. This change gives SBA the flexibility 
to request whatever information is needed to make an informed decision.
    SBA has clarified throughout this section that ownership and 
control determinations may be made by either SBA, or where SBA deems it 
appropriate, by Private Certifiers. SBA has added a new 
Sec. 124.1008(d)(3) giving SBA the discretion in any case to analyze 
and determine whether a firm is owned and controlled by one or more 
individuals claiming disadvantage. SBA believes that this paragraph 
provides needed flexibility to the regulation to ensure that the SDB 
certification process runs smoothly in all circumstances. The final 
rule also adds a new Sec. 124.1008(d)(4) which authorizes SBA's program 
office to re-evaluate an ownership and control decision by a Private 
Certifier where SBA receives credible evidence that the Private 
Certifier has substantially disregarded the applicable eligibility 
criteria. This provision provides to SBA the authority to quickly 
correct a determination that it believes to be clearly contrary to the 
eligibility requirements, and should promote more consistent decisions.
    Proposed Sec. 124.1008(e) was originally entitled ``SDB 
Certification.'' A commenter stated that this was misleading in light 
of the fact that subsection (e) dealt with disadvantaged status. SBA 
agrees and has renamed subsection (e) ``Disadvantaged determination.''
    Proposed Sec. 124.1008(e)(1) stated that those claiming 
disadvantaged status who are members of a designated group are presumed 
to be socially and economically disadvantaged. A Federal agency 
commenter suggested deleting the phrase ``and economically 
disadvantaged,'' contained in Sec. 124.1008(e)(1) as inconsistent with 
proposed Sec. 124.1002(c), which requires a net worth of less than 
$750,000. SBA does not agree that the language contained in 
Sec. 124.1008(e)(1) conflicts with the monetary requirement of 
Sec. 124.1002(c), and believes that eliminating the presumption for 
economic disadvantage would be contrary to the underlying statutory 
authority. The presumption of disadvantage for Federal SDB programs is 
based on the authority set forth in section 8(d) of the Small Business 
Act, 15 U.S.C. Sec. 637(d). Section 8(d)(3)(C)(ii) clearly authorizes a 
presumption of both social and economic disadvantaged for members of 
certain designated groups. When members of the designated groups 
represent to SBA that they are disadvantaged, as part of a firm's 
application for SDB status, they represent that they meet the $750,000 
net worth requirement for economic disadvantage. Absent credible 
evidence to the contrary, SBA will accept this representation because 
of the statutory presumption. Accordingly, SBA did not change the 
presumption in the final rule.
    The final rule adds a new Sec. 124.1008(e)(2)(ii). This provision 
states the obligations of the Private Certifier in the application 
process concerning individuals who are not members of a designated 
group. Proposed Secs. 124.1008(e)(2) (ii) through (f) have been 
renumbered for easier understanding and subsection (f) has been renamed 
``SDB Determination.''
    Proposed Sec. 124.1008(e)(2)(ii) stated that if one or more of the 
individuals upon whose status the Private Certifier relied in making 
its ownership and control decision is not disadvantaged, the Private 
Certifier would reject the firm's application for SDB status. One 
commenter stated that this language should be clarified to state that 
the firm would be rejected only if the disadvantaged status of that 
individual was needed to establish ownership and control. SBA agrees, 
and has amended renumbered Sec. 124.1008(f)(2) to include this 
language.
    The final rule also adds a new Sec. 124.1008(i). This new paragraph 
provides that if a firm applying for SDB certification has a current, 
valid certification as a disadvantaged business enterprise (DBE) from a 
Department of Transportation (DOT) recipient, SBA may adopt the DBE 
certification as an SDB certification when determined to be 
appropriate.
    Proposed Sec. 124.1009 did not provide a procedure to remand an 
application back to a Private Certifier. A Federal agency commenter 
expressed concern that there was no such procedure in place when OHA 
overruled the Private Certifier's decision regarding ownership and 
control by those claiming disadvantaged status. SBA has revised 
Sec. 124.1009 to remedy this omission. SBA has also expanded and 
clarified the procedures that will apply to an appeal of a decision of 
a Private Certifier in Sec. 124.1009, and those relating to an appeal 
of an SBA decision in Sec. 124.1008(f).
    Proposed Sec. 124.1010 provided that a firm could not represent 
itself as an SDB concern for purposes of receiving procurement 
preferences if it was not on the SBA-maintained list of qualified SDBs. 
SBA has amended this section to coincide with the final version of the 
FAR to provide that a firm may represent itself as an SDB if it has 
submitted an application for certification and that application is 
pending either at SBA or with a Private Certifier. The final rule 
further provides that SBA will make a determination on SDB status 
within 15 days where an SDB applicant is determined to be the 
successful offeror on a contract. In the event that SBA fails to make a 
determination within 15 days, the firm will not be eligible for award, 
and the procuring activity will award to another offeror.
    Proposed Sec. 124.1012 stated that a firm may reapply for 
certification 12 months after the date of the final SBA decision to 
decline the application. One commenter requested that the period for 
reapplication begin from the date of submission of the application, 
rather than denial. SBA does not agree with this suggestion, and has 
made no change.
    Proposed Sec. 124.1013 listed the criteria SBA would use to delete 
names on the SDB register. A Federal agency commenter noted that recent 
graduates of the 8(a) BD program are reviewed for social and economic 
disadvantage each year, through their final year of participation and, 
therefore, it is unnecessarily burdensome to require

[[Page 35771]]

them to apply for SDB certification immediately. SBA agreed and adopted 
this suggestion by adding a new Sec. 124.1014, which clarifies how long 
an SDB certification lasts, and specifically allows a firm that has 
graduated from the 8(a) BD program to remain on the SBA-maintained list 
of qualified SDBs for a period of three years from the date of its last 
annual review in the 8(a) BD program.
    Proposed Sec. 124.1014 (Sec. 124.1015 in the final rule) addressed 
the effect of receiving an SDB certification. Proposed Sec. 124.1014(d) 
stated that a firm must submit a new application every three years to 
remain on the SDB register. One commenter noted that a contract award 
that is not successfully challenged (i.e., the SDB status is upheld) 
should obviate the need for applying for a new certification. SBA 
agreed with this comment and has incorporated it in the new 
Sec. 124.1014, dealing with how long an SDB certification lasts. The 
final rule provides that SDB status will run three years from the date 
SBA determines a firm to be disadvantaged in connection with a protest 
challenging its SDB status. This extension of SDB status applies only 
where SBA determines a firm to be an SDB on the merits. A firm's SDB 
status will not be extended where SBA merely dismisses a protest 
against it for some procedural reason (e.g., lack of timeliness or 
specificity). In addition, SBA added a new paragraph to clarify that 
8(a) BD graduated firms will remain on the qualified list of SDBs for a 
period of three years from the date of their last annual review in the 
8(a) BD program.
    The final rule adds a new Sec. 124.1016, authorizing SBA, in the 
absence of a protest, to re-evaluate the SDB status of a firm that is 
certified as an SDB where SBA receives credible evidence calling into 
question a firm's eligibility as an SDB. SBA added this section in 
response to a comment that was concerned about the possibility of a 
firm remaining on the list of qualified SDBs where it was clear that it 
no longer qualified as an SDB because no one had protested its SDB 
status. This section also provides that an SDB firm has an affirmative 
obligation to report any changes in ownership or control or any other 
circumstances that could adversely affect the firm's eligibility for 
SDB status to SBA.
    The final rule adds a new Sec. 124.1021(c) to clarify that SBA will 
consider a protest against a previously certified SDB which is an 
apparent successful offeror only where the protest presents credible 
evidence that the firm's circumstances have materially changed since 
SBA certified it as an SDB, or credible evidence that the firm's SDB 
application contained false or misleading information. SBA believes 
that this change is needed to give value to the SDB certification 
process. Without such a change, a firm's status as ``disadvantaged'' 
could be repeatedly challenged despite SBA ruling in its favor on one 
protest and despite its ownership and control remaining unchanged. Such 
challenges would impose a significant and costly burden on a firm 
having to defend its SDB status, as well as on SBA, and serve no useful 
purpose. SBA has also made conforming amendments to Secs. 124.1015(c) 
and 124.1018(d) to recognize the limited right to protest the SDB 
status of a concern that has received an SDB certification from SBA.

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 has determined that this rule is not a major rule as defined by 
Executive Order 12866 in that it is not likely to have an annual 
economic effect of $100 million or more on the economy, result in a 
major increase in costs or prices, or have a significant adverse effect 
on competition or the United States economy. SBA has determined that 
this rule may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq. A summary of the Regulatory 
Flexibility Analysis follows. For a copy of the complete analysis, 
contact Calvin Jenkins, Deputy Associate Deputy Administrator for 
Government Contracting and Minority Enterprise Development, at (202) 
205-6459.

Executive Order 12866

    On May 9, 1997, the Department of Defense, the General Services 
Administration, and the National Aeronautics and Space Administration 
proposed amendments to the Federal Acquisition Regulation (FAR) 
concerning programs for small disadvantaged business concerns. 62 FR 
25786. The amendments were intended to conform to a Department of 
Justice (DOJ) proposal to reform affirmative action in Federal 
procurement (see 61 FR 26042) and to comply with the constitutional 
standards established by the Supreme Court in Adarand Constructors, 
Inc. v. Pena, 115 S.Ct. 2097 (1995). The DOJ proposal addresses federal 
contracting with SDBs. Full implementation of the DOJ proposal requires 
revisions to the FAR, as well as regulatory changes by SBA and the 
Department of Commerce. For a full economic analysis of the changes to 
be made by the implementation of a government-wide SDB program, please 
refer to the analysis published with the FAR rule.
    This final rule addresses only SBA's responsibilities under the SDB 
program. In brief summary, this rule requires SBA to (1) certify SDB 
concerns, including those owned by non-designated group members, and 
establish and maintain an updated list of qualified SDBs; and (2) 
resolve protests made challenging the eligibility of firms as SDBs for 
Federal procurement requirements. It also authorizes SBA to establish 
and oversee a national network of private entities to determine, where 
SBA deems it appropriate, whether firms seeking to be certified as SDBs 
are owned and controlled by individuals claiming to be socially and 
economically disadvantaged.
    SBA's determination that this rule is not a major rule within the 
meaning of Executive Order 12866 is based on its analysis of the costs 
of implementing its responsibilities under the government-wide SDB 
program.
    SBA has examined current information on procurement patterns, 
including the bidding behavior of small and small disadvantaged 
businesses to estimate the number of firms that will seek to be 
certified for the SDB program. In the first year, SBA estimates that 
about 30,000 firms will seek to be certified as SDBs. Current 8(a) 
firms (approximately 6,000 in number) meet all the tests for qualifying 
as SDBs, and will automatically be certified as SDBs.
    Where SBA approves and authorizes a Private Certifier to make 
ownership and control determinations of firms seeking SDB 
certification, a Private Certifier may charge a reasonable fee for 
screening applications for completeness and for processing the 
ownership and control portion of applications. At the present time, it 
is uncertain to what extent Private Certifiers will be approved or used 
to make ownership and control determinations. SBA will make those 
determinations initially. The regulations authorize SBA to charge a fee 
in the future following a notice in the Federal Register. Should SBA 
elect to charge a fee, the notice will provide information as to the 
amount and when it will be charged.
    SBA projects the impact of this program, based on this analysis, on 
those small businesses seeking to become certified SDBs, will be less 
than $15 million. This analysis is an estimate of costs for the first 
year of the program. Absent material changes or a successful protest, a 
certification of SDB status will

[[Page 35772]]

last three years. Firms claiming to be SDBs will certify that they 
continue to meet all applicable eligibility criteria for any federal 
contract during the three-year period.

Summary of the Analysis Prepared Pursuant to the Regulatory 
Flexibility Act

    SBA believes that this rule may have a significant impact on a 
substantial number of small businesses. In fiscal year 1996, the 
federal government spent $197.6 billion on the procurement of goods and 
services. Small businesses were awarded $41.1 billion in prime 
contracts, representing approximately a 21 percent share of the total 
federal contract dollars. SDBs were awarded $10.3 billion in federal 
contracts, about 5 percent of all federal contract dollars. In 
addition, the federal contract dollars that went to SDBs was about 25 
percent of all federal dollars that went to small businesses for the 
same period.
    There are approximately 180,000 small firms registered on PRO-Net, 
SBA's database of small businesses actively seeking federal government 
contracts. SBA estimates that 30,000 small businesses will apply to be 
certified as SDBs in the first year of the program. This is a 
substantial number of small disadvantaged businesses interested in 
bidding on federal government contracts. In the proposed rule issued on 
August 14, 1998 (62 FR 43584-43628), SBA stated its intent to use 
Private Certifiers to determine ``ownership and control'' for purposes 
of the small and disadvantaged business program. We received no 
comments from the public concerning the economic impact of using 
Private Certifiers on small business. Although it is uncertain whether 
SBA will use Private Certifiers, SBA estimates, based on the fees 
charged by Private Certifiers for similar services, that the cost of a 
certification would range from $500 to $1,000. Similarly, if SBA elects 
to charge fees for certification, the fees would be equivalent to the 
fees charged by Private Certifiers. We have no estimates of the size of 
the small businesses that will apply to be certified or the value of 
the contracts that these small businesses will receive. Therefore, we 
cannot determine precisely the significance of the economic impact on 
small businesses.
    For purposes of the Paperwork Reduction Act of 1995 (Public Law 
104-13), this rule imposes new reporting or recordkeeping requirements 
on firms applying to be certified as SDBS. The rule requires such firms 
to submit evidence that they are owned and controlled by one or more 
disadvantaged individuals. It further requires the individuals claiming 
to be disadvantaged to submit representations of group membership and 
disadvantaged status or evidence of disadvantaged status to SBA. Once 
certified as an SDB, this rule does not require an SDB to report any 
other information to SBA or to maintain additional records.
    For purposes of Executive Order 12612, SBA certifies that this rule 
has no 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 124

    Government procurement, Hawaiian Natives, Minority businesses, 
Reporting and recordkeeping requirements, Technical assistance, 
Tribally-owned concerns.

    Accordingly, for the reasons set forth above, SBA amends Title 13, 
Code of Federal Regulations (CFR), as follows:

PART 124--[AMENDED]

    1. The authority citation for 13 CFR part 124 continues to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d) and Pub. 
L. 99-661, Pub. L. 100-656, sec. 1207, Pub. L. 101-37, Pub. L. 101-
574, and 42 U.S.C. 9815.

    2. Section 124.108 is amended by adding the following paragraph 
(f):


Sec. 124.108  What other eligibility requirements apply for individuals 
or businesses?

* * * * *
    (f) Achievement of benchmarks. Where actual participation by 
disadvantaged businesses in a particular SIC Major Group exceeds the 
benchmark limitations established by the Department of Commerce, SBA, 
in its discretion, may decide not to accept an application for 8(a) BD 
participation from a concern whose primary industry classification 
falls within that Major Group.
    3. Section 124.302 is amended by adding the following paragraph 
(d):


Sec. 124.302  What is early graduation?

* * * * *
    (d) Benchmark achievement. SBA may graduate a Participant prior to 
the expiration of its program term where the Participant has 
substantially achieved the targets, objectives and goals of its 
business plan as adjusted under Sec. 124.403(d) and its primary 
industry classification falls within a SIC Major Group in which the 
benchmarks described in Sec. 124.403(d) have been achieved.
    4. Section 124.403 is amended by adding paragraph (d) to read as 
follows:


Sec. 124.403  How is a business plan updated and modified?

* * * * *
    (d) Benchmark achievement. Where actual participation by 
disadvantaged businesses in a particular SIC Major Group exceeds the 
benchmark limitations established by the Department of Commerce for 
that Major Group, SBA may adjust the targets, objectives and goals 
contained in the business plans of Participants whose primary industry 
classification falls within that Major Group. Any adjustment will take 
into account projected decreases in 8(a) and SDB contracting 
opportunities.
    5. Section 124.504 is amended by redesignating paragraph (d) as 
paragraph (e), and by adding a new paragraph (d) to read as follows:


Sec. 124.504  What circumstances limit SBA's ability to accept a 
procurement for award as an 8(a) contract?

* * * * *
    (d) Benchmark achievement. Where actual participation by 
disadvantaged businesses in a SIC Major Group exceeds the benchmark 
limitations established by the Department of Commerce for that Major 
Group, SBA may elect not to accept a requirement having a SIC code 
within the Major Group that is offered to SBA for award as an 8(a) 
contract. In determining whether to accept a requirement in such a 
case, SBA will consider the developmental needs of Participants and 
other anticipated contracting opportunities available to them.
* * * * *
    6. Subpart B to part 124 is revised to read as follows:

Subpart B--Eligibility, Certification, and Protests Relating to 
Federal Small Disadvantaged Business Programs

124.1001  General applicability.
124.1002  What is a Small Disadvantaged Business (SDB)?
124.1003  What is a Private Certifier?
124.1004  How does an organization or business concern become a 
Private Certifier?
124.1005  Can a fee be charged to a firm to process the firm's 
application for SDB certification?
124.1006  Is there a list of Private Certifiers?
124.1007  How long may an organization or business concern be a 
Private Certifier?
124.1008  How does a firm become certified as an SDB?

[[Page 35773]]

124.1009  How does a firm appeal a decision of a Private Certifier?
124.1010  Can a firm represent itself to be an SDB if it has not yet 
been certified as an SDB?
124.1011  What is a misrepresentation of SDB status?
124.1012  Can a firm reapply for SDB certification?
124.1013  Is there a list of certified SDBs?
124.1014  How long does an SDB certification last?
124.1015  What is the effect of receiving an SDB certification?
124.1016  Can SBA re-evaluate the SDB status of a firm after SBA 
certifies it to be SDB?
124.1017  Who may protest the disadvantaged status of a concern?
124.1018  When will SBA not decide an SDB protest?
124.1019  Who decides disadvantaged status protests?
124.1020  What procedures apply to disadvantaged status protests?
124.1021  What format, degree of specificity, and basis does SBA 
require to consider an SDB protest?
124.1022  What will SBA do when it receives an SDB protest?
124.1023  How does SBA make disadvantaged status determinations in 
considering an SDB protest?
124.1024  Appeals of disadvantaged status determinations.

Subpart B--Eligibility, Certification, and Protests Relating to 
Federal Small Disadvantaged Business Programs


Sec. 124.1001  General applicability.

    (a) This subpart defines a Small Disadvantaged Business (SDB). It 
also sets forth procedures by which a firm can apply to be recognized 
as an SDB, including procedures to be used by private sector entities 
approved by SBA for determining whether a particular concern is owned 
and controlled by one or more disadvantaged individuals or Alaska 
Native Corporations (ANCs), Community Development Corporations (CDCs), 
Indian tribes (tribes) or Native Hawaiian Organizations (NHOs). 
Finally, this subpart establishes procedures by which SBA determines 
whether a particular concern qualifies as an SDB in response to a 
protest challenging the concern's status as disadvantaged. Unless 
specifically stated otherwise, the phrase ``socially and economically 
disadvantaged individuals'' in this subpart includes tribes, ANCs, 
CDCs, and NHOs.
    (b) Only small firms that are owned and controlled by socially and 
economically disadvantaged individuals are eligible to participate in 
Federal SDB price evaluation adjustment, evaluation factor or 
subfactor, monetary subcontracting incentive, or set-aside programs, or 
SBA's section 8(d) subcontracting program.
    (c) In order for a concern to represent that it is an SDB as a 
prime contractor for purposes of a Federal Government procurement, it 
must have:
    (1) Received a certification from SBA that it qualifies as an SDB; 
or
    (2) Submitted an application for SDB certification to SBA or a 
Private Certifier, and must not have received a negative determination 
regarding that application from SBA or the Private Certifier.
    (d) A firm cannot represent itself to be an SDB concern in order to 
receive a preference as an SDB for any Federal subcontracting program 
if it is not on the SBA-maintained list of qualified SDBs.


Sec. 124.1002  What is a Small Disadvantaged Business (SDB)?

    (a) Reliance on 8(a) criteria. In determining whether a firm 
qualifies as an SDB, the criteria of social and economic disadvantage 
and other eligibility requirements established in subpart A of this 
part apply, including the requirements of ownership and control and 
disadvantaged status, unless otherwise provided in this subpart. 
Qualified Private Certifiers must use the 8(a) criteria applicable to 
ownership and control in determining whether a particular firm is 
actually owned and controlled by one or more individuals claiming 
disadvantaged status.
    (b) SDB eligibility criteria. A small disadvantaged business (SDB) 
is a concern:
    (1) Which qualifies as small under part 121 of this title for the 
size standard corresponding to the applicable four digit Standard 
Industrial Classification (SIC) code.
    (i) For purposes of SDB certification, the applicable SIC code is 
that which relates to the primary business activity of the concern;
    (ii) For purposes related to a specific Federal Government 
contract, the applicable SIC code is that assigned by the contracting 
officer to the procurement at issue;
    (2) Which is at least 51 percent unconditionally owned by one or 
more socially and economically disadvantaged individuals as set forth 
in Sec. 124.105. For the requirements relating to tribes and ANCs, 
NHOs, or CDCs, see Secs. 124.109, 124.110, and 124.111, respectively.
    (3) Except for tribes, ANCs, NHOs, and CDCs, whose management and 
daily business operations are controlled by one or more socially and 
economically disadvantaged individuals. For the requirements relating 
to tribes and ANCs, NHOs, or CDCs, see Secs. 124.109, 124.110, and 
124.111, respectively.
    (4) Which, for purposes of SDB procurement mechanisms authorized by 
10 U.S.C. 2323 (such as price evaluation adjustments, evaluation 
factors or subfactors, monetary subcontracting incentives, or SDB set-
asides) relating to the Department of Defense, NASA and the Coast Guard 
only, has the majority of its earnings accruing directly to the 
socially and economically disadvantaged individuals.
    (c) Disadvantaged status. In assessing the personal financial 
condition of an individual claiming economic disadvantage, his or her 
net worth must be less than $750,000 after taking into account the 
exclusions set forth in Sec. 124.104(c)(2).
    (d) Additional eligibility criteria. Except for tribes, ANCs, CDCs 
and NHOs, each individual claiming disadvantaged status must be a 
citizen of the United States.
    (e) Potential for success not required. The potential for success 
requirement set forth in Sec. 124.107 does not apply as an eligibility 
requirement for an SDB.
    (f) Joint ventures. Joint ventures are permitted for SDB 
procurement mechanisms (such as price evaluation adjustments, 
evaluation factors or subfactors, monetary subcontracting incentives, 
or SDB set-asides), provided that the requirements set forth in this 
paragraph are met.
    (1) The disadvantaged participant(s) to the joint venture must 
have:
    (i) Received an SDB certification from SBA; or
    (ii) Submitted an application for SDB certification to SBA or a 
Private Certifier, and must not have received a negative determination 
regarding that application.
    (2) For purposes of this paragraph, the term joint venture means 
two or more concerns forming an association to engage in and carry out 
a single, specific business venture for joint profit. Two or more 
concerns that form an ongoing relationship to conduct business would 
not be considered ``joint venturers'' within the meaning of this 
paragraph, and would also not be eligible to be certified as an SDB. 
The entity created by such a relationship would not be owned and 
controlled by one or more socially and economically disadvantaged 
individuals. Each contract for which a joint venture submits an offer 
will be evaluated on a case by case basis.
    (3) Except as set forth in 13 CFR 121.103(f)(3), a concern that is 
owned and controlled by one or more socially and economically 
disadvantaged

[[Page 35774]]

individuals entering into a joint venture agreement with one or more 
other business concerns is considered to be affiliated with such other 
concern(s) for size purposes. If the exception does not apply, the 
combined annual receipts or employees of the concerns entering into the 
joint venture must meet the applicable size standard corresponding to 
the SIC code designated for the contract.
    (4) An SDB must be the managing venturer of the joint venture, and 
an employee of the managing venturer must be the project manager 
responsible for performance of the contract.
    (5) The joint venture must perform any applicable percentage of 
work required of SDB offerors, and the SDB joint venturer(s) must 
perform a significant portion of the contract.
    (g) Ownership restrictions for non-disadvantaged individuals. The 
ownership restrictions set forth in Sec. 124.105 (g) and (h) for non-
disadvantaged individuals and concerns do not apply for purposes of 
determining SDB eligibility.


Sec. 124.1003  What is a Private Certifier?

    A Private Certifier is an organization or business concern approved 
by SBA to determine whether firms are owned and controlled by one or 
more individuals claiming disadvantaged status. SBA may elect to 
arrange for one or more Private Certifiers to perform certain functions 
in the SDB Certification process. When that election is made, the 
provisions of Secs. 124.1004 through 124.1007 will apply. SBA will 
establish more detailed standards regarding qualifications, monitoring, 
procedures and use, if any, of Private Certifiers in specific contracts 
or agreements between SBA and the Private Certifiers.


Sec. 124.1004  How does an organization or business concern become a 
Private Certifier?

    (a) SBA may execute contracts or agreements with organizations or 
business concerns seeking to become Private Certifiers. Any such 
contract or agreement will include provisions for the oversight, 
monitoring, and evaluation of all certification activities by SBA.
    (b) The organization or business concern must demonstrate a 
knowledge of SBA's regulations regarding ownership and control, as well 
as business organizations and the legal principles affecting their 
ownership and control generally, including stock issuances, voting 
rights, convertability of debt to equity, options, and powers and 
responsibilities of officers and directors, general and limited 
partners, and limited liability members.
    (c) The organization or concern must also, along with its 
principals, demonstrate good character. Good character does not exist 
for these purposes if the organization or concern or any of its 
principals:
    (1) Is debarred or suspended under any Federal procurement or non-
procurement debarment and suspension regulations; or
    (2) Has been indicted or convicted for any criminal offense or 
suffered a civil judgment indicating a lack of business integrity.
    (d) As a condition of approval, SBA may require that appropriate 
officers and/or key employees of the concern attend a training session 
on SBA's rules and requirements.
    (e) An organization or concern seeking to become a Private 
Certifier must agree to provide access to SBA of its books and records 
when requested, including records pertaining to its certification 
activities. Once SBA approves the organization or concern to be a 
Private Certifier, SBA may review this information, as well as the 
decisions of the Private Certifier, in determining whether it will 
renew or extend the term of the Private Certifier, or terminate the 
Private Certifier for cause.
    (f) SBA will include in any contract or agreement document 
authorizing an entity to act as a Private Certifier appropriate 
conditions to prohibit conflicts of interests between the Private 
Certifier and the firms for which it processes SDB applications and to 
protect the integrity of the decision-making process.


Sec. 124.1005  Can a fee be charged to a firm to process the firm's 
application for SDB certification?

    (a) With SBA's approval, a Private Certifier may charge a 
reasonable fee to a firm in order to screen the firm's application for 
completeness and to process a determination of ownership and control. 
The fee must be for actual services rendered and must not be related to 
whether or not the business concern is found to be owned and controlled 
by one or more individuals or entities claiming disadvantaged status.
    (b) Where SBA makes the determination of ownership and control, SBA 
may collect a fee comparable to that which would be charged by a 
Private Certifier. From time to time, SBA will publish a Notice in the 
Federal Register identifying any fee that SBA will charge to process a 
firm's determination of ownership and control. SBA will promptly remit 
any funds received pursuant to this section to the Treasury of the 
United States as miscellaneous receipts.


Sec. 124.1006  Is there a list of Private Certifiers?

    SBA will maintain a list of approved Private Certifiers on SBA's 
Home Page on the Internet. Any interested person may also obtain a copy 
of the list from the local SBA district office.


Sec. 124.1007  How long may an organization or business concern be a 
Private Certifier?

    (a) SBA's approval document will specify how long the organization 
or concern may be a Private Certifier. The initial contract or 
agreement will have a base period of one year, and may include option 
years or renewal provisions.
    (b) SBA may terminate a contract or agreement with an organization 
or business concern which is a Private Certifier for the convenience of 
the Government at any time, and may terminate the contract or agreement 
for default where appropriate. Specific grounds for termination for 
default include, but are not limited to:
    (1) Charging improper, unreasonable or contingent fees in violation 
of Sec. 124.1005;
    (2) Engaging in prohibited business transactions with the firms for 
which it processes SDB applications in violation of Sec. 124.1004(f); 
or
    (3) A demonstrated record of ownership and control determinations 
that are overturned on appeal by SBA's Office of Hearings and Appeals 
(OHA) or by SBA as part of an SDB protest.


Sec. 124.1008  How does a firm become certified as an SDB?

    Any firm may apply to be certified as an SDB. SBA's field offices 
will provide further information and required application forms to any 
firm interested in SDB certification. In order to become certified as 
an SDB, a firm must apply to SBA or, if directed by SBA, to a Private 
Certifier. The application must include evidence demonstrating that the 
firm is owned and controlled by one or more individuals claiming 
disadvantaged status, along with certifications or narratives regarding 
the disadvantaged status of such individuals. See paragraph (e)(1) of 
this section. The firm also must submit information necessary for a 
size determination. See Sec. 121.1008. Current 8(a) BD Participants do 
not need to submit applications for SDB status. These concerns 
automatically qualify as SDBs by virtue of their status as 8(a) BD 
concerns. An 8(a) Participant's continuing eligibility as an SDB will 
be

[[Page 35775]]

reviewed as part of the concern's 8(a) annual review.
    (a) Filing an SDB application. (1) An interested firm must first 
submit a complete application to SBA's Assistant Administrator for 
Small Disadvantaged Business Certification and Eligibility (AA/SDBCE), 
Small Business Administration, 409 3rd Street, SW, Washington, DC 
20416, or to a specific SBA field office or an approved Private 
Certifier if directed by SBA.
    (2) The firm must identify which individual(s) or entities are 
claiming disadvantaged status.
    (b) Required forms. Each firm seeking to be certified as an SDB 
must submit those forms and attachments required by SBA when applying 
for admission to the 8(a) BD program. These forms and attachments may 
include, but not be limited to, financial statements, Federal personal 
and business tax returns and personal history statements. The 
application package may be in the form of an electronic application.
    (c) Application processing. (1) SBA or a Private Certifier will 
advise each applicant generally within 15 days after the receipt of an 
application whether the application is complete and suitable for 
evaluation and, if not, what additional information or clarification is 
required. If the application is not complete, SBA or the Private 
Certifier will return the application to the firm, and will notify the 
firm that it may reapply when its application is complete.
    (2) The burden is on the applicant to demonstrate that those 
individuals claiming disadvantaged status own and control the concern.
    (d) Ownership and control decision. SBA or a Private Certifier will 
determine whether those individuals claiming disadvantaged status own 
and control the applicant firm within 30 days of receipt of a complete 
application package, whenever practicable..
    (1) Where a Private Certifier determines ownership and control, the 
Private Certifier will issue a written decision as to whether the 
applicant is owned and controlled by the individuals identified as 
claiming disadvantaged status.
    (i) If the Private Certifier finds that the applicant is owned and 
controlled by the individuals claiming disadvantaged status, the 
Private Certifier will forward the application to SBA along with a copy 
of its ownership and control determination and the information required 
by paragraph (e)(2)(ii) of this section, where appropriate.
    (ii) If the Private Certifier finds that the applicant is not owned 
and controlled by the individuals claiming disadvantaged status, its 
decision must state the specific reasons for the finding, and inform 
the applicant of its right to appeal the decision to SBA pursuant to 
Sec. 124.1009.
    (2) Where SBA determines ownership and control, SBA will first 
determine whether the applicant is owned and controlled by the 
individual(s) claiming to be disadvantaged. If SBA determines that the 
applicant is not owned and controlled by the individual(s) claiming 
disadvantaged status, SBA will issue a written decision addressing only 
the ownership and control issues. If SBA determines that the applicant 
is owned and controlled by the individual(s) claiming disadvantaged 
status, SBA will issue a single written decision as to whether the 
applicant qualifies as an SDB. Such a determination will include the 
ownership and control of the firm, the size status of the firm, and the 
disadvantaged status of those individuals claiming to be disadvantaged.
    (3) In its sole discretion, SBA may analyze and determine whether a 
firm is owned and controlled by one or more individuals claiming 
disadvantaged status notwithstanding the availability of a Private 
Certifier to make such a decision.
    (4) SBA reserves the right to re-evaluate an approved decision on 
ownership and control by a Private Certifier in a case where it has 
credible evidence that the Private Certifier has substantially 
disregarded the eligibility criteria.
    (e) Disadvantaged determination. Once a concern receives a decision 
finding that it is owned and controlled by those individuals or 
entities claiming disadvantaged status (either through an initial 
determination or on appeal), SBA will determine whether the other 
eligibility criteria are met, and, if so, will include the SDB on the 
SBA-maintained list of qualified SDBs. SBA will make this determination 
within 30 days of receiving an SDB application, if practicable.
    (1) Members of designated groups. (i) Those individuals claiming 
disadvantaged status that are members of the same designated groups 
that are presumed to be socially disadvantaged for purposes of SBA's 
8(a) BD program (see Sec. 124.103(b)) are presumed to be socially and 
economically disadvantaged for purposes of SDB certification. These 
individuals must represent that they are members of one of the 
designated groups, that they are identified as a member of one of the 
designated groups, that their net worth is less than $750,000 after 
taking into account the exclusions set forth in Sec. 124.104(c)(2), and 
that they are citizens of the United States.
    (ii) Absent credible evidence to the contrary, SBA may accept these 
representations as true and certify the firm as an SDB.
    (2) Individuals not members of designated groups. (i) Each 
individual claiming disadvantaged status who is not a member of one of 
the designated groups must submit a statement identifying personally 
how his or her entry into or advancement in the business world has been 
impaired because of personally specific factors (see Sec. 124.103(c)), 
and how his or her ability to compete in the free enterprise system has 
been impaired due to diminished capital and credit opportunities (see 
Secs. 124.103(c) and 124.104).
    (ii) Where a Private Certifier determines ownership and control, 
the Private Certifier must also review the disadvantaged status 
submission and any other required information, and send to SBA the 
following:
    (A) An executive summary and analysis of the disadvantaged status 
submission;
    (B) The application and all supporting documentation; and
    (C) A certification that the application is complete and suitable 
for evaluation.
    (3) Concerns owned by tribes, ANCs, CDCs, or NHOs: SBA will process 
SDB applications from concerns owned and controlled by tribes, ANCs, 
CDCs, or NHOs in the same way as those from concerns owned by 
individuals who are members of designated groups.
    (f) SDB Determination. (1) If SBA's AA/SDBCE determines that the 
individual(s) claiming disadvantage are disadvantaged and other 
eligibility criteria are met, he or she will certify the firm as an 
SDB.
    (2) If SBA's AA/SDBCE determines that one or more of the 
individuals claiming to be disadvantaged is not disadvantaged and their 
disadvantaged status is required to establish disadvantaged ownership 
and control of the applicant, or any of the other eligibility criteria 
are not met, he or she will reject the firm's application for SDB 
certification. The AA/SDBCE will issue a written decision setting forth 
SBA's reasons for decline.
    (3) Pursuant to part 134 of this title, a firm may appeal to OHA 
the AA/SDBCE's decision that one or more of the individuals claiming 
disadvantaged status is not disadvantaged, or, where SBA determines 
ownership and control, that those claiming disadvantaged status do not 
own and control the applicant. (See Sec. 124.1009 for appeals from 
decisions by Private Certifiers.)

[[Page 35776]]

    (i) The firm must serve SBA's Associate General Counsel for General 
Law with a copy of the appeal.
    (ii) OHA will determine whether SBA's decision in either case was 
arbitrary, capricious, or contrary to law. OHA's review is limited to 
the facts that were before SBA at the time of its decision and any 
arguments submitted in or in response to the appeal. OHA will not 
consider any facts beyond those that were already presented to SBA 
unless the administrative judge determines that manifest injustice 
would occur if the appeal were limited to the record.
    (4) A firm may also request a formal size determination pursuant to 
part 121 of this title where SBA finds that the firm is not small.
    (g) Current 8(a) BD program participants. Any firm that is 
currently a Participant in SBA's 8(a) BD program need not seek an 
ownership and control determination or apply to SBA for a separate 
certification as an SDB. SBA will certify current 8(a) BD Participants 
as SDBs, and automatically include them on the list of qualified SDBs.
    (h) 8(a) BD graduates. SBA will automatically certify a firm that 
has graduated from the SBA's 8(a) BD program to be an SDB, provided SBA 
determined that the firm continued to be eligible for the 8(a) BD 
program as part of an annual review within the last three years. (See 
Sec. 124.1014(b)).
    (i) Certification by DOT recipient. If a firm applying for SDB 
certification has a current, valid certification as a disadvantaged 
business enterprise (DBE) from a Department of Transportation (DOT) 
recipient, SBA may adopt the DBE certification as an SDB certification 
when determined by the AA/SDBCE or designee to be appropriate.


Sec. 124.1009  How does a firm appeal a decision of a Private 
Certifier?

    Where a Private Certifier performs an ownership and control 
determination and finds that a firm is not owned and controlled by the 
individual(s) claiming disadvantaged status, the firm may appeal that 
decision to OHA pursuant to part 134 of this title. The firm must serve 
SBA's Associate General Counsel for General Law and the applicable 
Private Certifier with a copy of the appeal.
    (a) The Private Certifier must submit to OHA the full record upon 
which its decision was based within two days of receiving notification 
that an appeal has been filed.
    (b) The Private Certifier and SBA may each elect to appear or not 
appear in an appeal proceeding.
    (c) OHA's review is limited to the facts that were before the 
Private Certifier at the time of its final decision and any arguments 
submitted in or in response to the appeal. OHA will not consider any 
facts beyond those that were already presented to the Private Certifier 
unless the administrative judge determines that manifest injustice 
would occur if the appeal were limited to the record.
    (d) OHA will decide whether it believes that the facts support by a 
preponderance of the evidence the Private Certifier's determination 
regarding ownership and control.
    (e) Where the facts presented in the record leave significant doubt 
as to whether the petitioner is or is not owned and controlled by one 
or more individuals claiming to be disadvantaged, the administrative 
judge may remand the case to the Private Certifier for reconsideration 
in accord with his or her remand order.
    (f) If OHA finds that the firm is owned and controlled by the 
individual(s) claiming disadvantaged status, OHA will refer the 
application to SBA for further processing. If OHA finds that the firm 
is not owned and controlled by such individual(s), the administrative 
judge will state the reasons for that decision, which will be the final 
decision of the Agency.


Sec. 124.1010  Can a firm represent itself to be an SDB if it has not 
yet been certified as an SDB?

    (a) General rule. Except as set forth in paragraph (d) of this 
section, a firm may represent itself to be an SDB concern in order to 
receive a preference as an SDB for any Federal procurement program if 
it has submitted a complete application for SDB certification to SBA or 
a Private Certifier and it has not received a negative determination 
regarding that application from SBA or the Private Certifier. A firm 
that has received a negative determination of ownership and control or 
a negative determination regarding its disadvantaged status and is 
awaiting the resolution of its appeal of that determination may not 
represent itself to be an SDB.
    (b) Where applicant becomes successful offeror. If a concern 
becomes the apparent successful offeror on a contract for which it 
would receive a benefit for being an SDB while its application for SDB 
certification is pending, either at SBA or a Private Certifier, the 
contracting officer for the particular contract must immediately inform 
SBA's AA/SDBCE. SBA will then prioritize the firm's SDB application and 
make a determination regarding the firm's status as an SDB within 15 
days from the date that SBA received the contracting officer's 
notification.
    (1) Where the apparent successful offeror's completed application 
is pending an ownership and control determination with a Private 
Certifier, the concern must inform SBA which Private Certifier has its 
application. SBA will immediately contact the Private Certifier to 
require the Private Certifier to complete its ownership and control 
determination within 5 days of SBA's notification. In appropriate 
circumstances, SBA may undertake to make the determination itself, and 
may recoup the cost of the determination from the Private Certifier.
    (2) If requested to do so by the procuring activity contracting 
officer, SBA will determine whether other offerors are SDBs where they 
have represented that their completed applications for SDB status are 
pending at SBA or a Private Certifier and they could receive the award 
if SBA determines that the apparently successful offeror is not an SDB.
    (3) If the contracting officer does not receive an SBA 
determination within 15 calendar days after the SBA's receipt of the 
notification, the contracting officer will presume that the apparently 
successful offeror, and any other offerors referred to SBA in 
connection with the same procurement by the contracting officer, are 
not disadvantaged, and will make award accordingly, unless the 
contracting officer grants an extension to the 15-day response period.
    (c) Representation as SDB for statistical purposes. A firm may 
represent itself as an SDB concern for general statistical purposes 
without regard to any application for SDB certification or its 
inclusion on the SBA-maintained list of qualified SDB's.
    (d) Subcontracting programs. Only firms that are on the SBA-
maintained list of qualified SDBs may represent themselves as SDB 
concerns in order to receive a preference as an SDB for any Federal 
subcontracting program.


Sec. 124.1011  What is a misrepresentation of SDB status?

    (a) Any person or entity that misrepresents a firm's status as a 
``small business concern owned and controlled by socially and 
economically disadvantaged individuals'' (``SDB status'') in order to 
obtain an 8(d) or SDB contracting opportunity or preference will be 
subject to the penalties imposed by section 16(d) of the Small Business 
Act, 15 U.S.C. 645(d), as well as any other penalty authorized by law.

[[Page 35777]]

    (b) A representation of SDB status by any firm that SBA has found 
not to be an SDB (either in connection with an SDB application or 
protest) will be deemed a misrepresentation of SDB status, unless and 
until the firm reapplies for and obtains SDB certification.


Sec. 124.1012  Can a firm reapply for SDB certification?

    (a) A concern which has been denied SDB certification may reapply 
for certification at any time 12 months or more after the date of the 
most recent final decision of SBA to decline its application (either on 
appeal of an ownership and control determination, or a negative finding 
of disadvantaged status).
    (b) A concern which received a decision that it was not owned and 
controlled by the individual(s) claiming disadvantaged status from a 
Private Certifier and does not appeal that decision to OHA may apply 
for a new ownership and control determination at any time.


Sec. 124.1013  Is there a list of certified SDBs?

    (a) If SBA certifies a firm to be an SDB, SBA will enter the name 
of the firm into an SBA-maintained central on-line register, such as 
PRO-Net.
    (b) The register of SDBs will contain the names of all firms that 
are currently certified to be SDBs, including the names of all firms 
currently participating in SBA's 8(a) BD program.
    (c) On a continuing basis, SBA will delete from the on-line 
register those firms that have:
    (1) Graduated or been terminated from SBA's 8(a) BD program for any 
reason and have not otherwise received SDB certification (see, 
Secs. 124.1008(h) and 124.1014(b) for treatment of 8(a) graduates);
    (2) Been determined not to be an SDB in response to an SDB protest 
brought under Sec. 124.1017; or
    (3) Other than current 8(a) Participants, not received a renewed 
SDB certification after being on the register for three years (see 
Sec. 124.1014(c)).


Sec. 124.1014  How long does an SDB certification last?

    (a) Once SBA certifies a firm to be an SDB by placing it on the 
list of qualified SDBs, the firm will generally remain on the SBA-
maintained list of certified SDBs for a period of three years from the 
date of its certification.
    (1) A firm's SDB certification will extend beyond three years where 
SBA finds the firm to be an SDB:
    (i) On the merits in connection with a particular protest (see 
Sec. 124.1023(h)(2));
    (ii) In connection with an SBA-initiated SDB determination (see 
Sec. 124.1016(a)(2)); or
    (iii) As part of an 8(a) BD annual review.
    (2) Where SBA finds a firm not to be an SDB in connection with an 
SDB protest, an SBA-initiated SDB determination, or an 8(a) BD annual 
review, SBA will immediately decertify the firm as an SDB and remove it 
from the qualified list of SDBs.
    (b) A firm that graduates from the 8(a) BD program will remain on 
the list of certified SDBs for a period of three years from the date of 
its last annual review.
    (c) To remain on the SDB register after three years, a firm whose 
status as an SDB has not been upheld in connection with a protest or an 
SBA-initiated SDB determination, or has not been certified as an 
eligible 8(a) Participant as part of an annual review, must submit a 
new application and receive a new certification.


Sec. 124.1015  What is the effect of receiving an SDB certification?

    (a) A firm that is certified to be an SDB may represent itself as 
an SDB for such purposes as Federal price evaluation adjustments, 
evaluation factors or subfactors, monetary subcontracting incentive 
programs, section 8(d) subcontracts, SDB set-asides, or any other 
programs which accept an SBA certification. A contracting officer may 
award a contract based on a firm's representation that it is a 
certified SDB absent a protest that the protested concern's 
circumstances have materially changed since SBA certified it as an SDB, 
or that the protested concern's SDB application contained false or 
misleading information (see Sec. 124.1018(d)).
    (b) For purposes of a particular Federal procurement, the firm must 
represent that it is both disadvantaged and small at the time it 
submits its initial offer including price (see part 121 of this title). 
At the same time, the firm must also represent that no material change 
has occurred in its SDB status since its SDB certification, or from the 
date of its application for SDB certification if its application has 
not yet been processed, and must specifically represent that the net 
worth of the disadvantaged individuals (not including concerns owned by 
tribes, ANCs, CDCs, or NHOs) upon whom the SDB certification was based 
still does not exceed $750,000.
    (c) A firm's status as ``disadvantaged'' or ``small'' may be 
protested pursuant to Secs. 124.1017 through 124.1021 and 
Secs. 121.1001 through 121.1005, respectively, despite the presence of 
the firm on the SDB register, provided the protest contains specific 
allegations that the firm's circumstances have materially changed since 
SBA certified it as an SDB, or that the firm's SDB application 
contained false or misleading information.


Sec. 124.1016  Can SBA re-evaluate the SDB status of a firm after SBA 
certifies it to be SDB?

    (a) SBA may initiate an SDB determination whenever it receives 
credible information calling into the question a firm's eligibility as 
an SDB, including an adverse determination from a DOT recipient of the 
firm's status as a DBE. Upon its completion of an SDB determination, 
SBA will issue a written decision regarding the SDB status of the 
questioned firm.
    (1) If SBA finds that the firm does not qualify as an SDB, SBA will 
decertify the firm as an SDB, and immediately remove the firm from the 
list of qualified SDBs. The firm may appeal SBA's decision to OHA 
consistent with the provisions of Sec. 124.1008(f) and part 134 of this 
chapter.
    (2) If SBA finds that the firm continues to qualify as an SDB, the 
determination remains in effect for three years from the date of the 
decision under the same conditions as if the concern had been granted 
SDB certification under Sec. 124.1008.
    (b) An SDB firm must report within 10 days to the AA/SDBCE any 
changes in ownership and control or any other circumstances which could 
adversely affect its eligibility as an SDB.


Sec. 124.1017  Who may protest the disadvantaged status of a concern?

    (a) In connection with a requirement for which the apparent 
successful offeror has invoked an SDB evaluation adjustment or an SDB 
set-aside, the following entities may protest the disadvantaged status 
of the apparent successful offeror:
    (1) Any other concern which submitted an offer for that 
requirement, unless the contracting officer has found the concern to be 
non-responsive or outside the competitive range, or SBA has previously 
found the protesting concern to be ineligible for the requirement at 
issue;
    (2) The procuring activity contracting officer; or
    (3) SBA.
    (b) In connection with an 8(d) subcontract, or a requirement for 
which the apparent successful offeror received an evaluation adjustment 
for proposing

[[Page 35778]]

one or more SDB subcontractors, the procuring activity contracting 
officer or SBA may protest the disadvantaged status of a proposed 
subcontractor. Other interested parties may submit information to the 
contracting officer or SBA in an effort to persuade the contracting 
officer or SBA to initiate a protest.
    (c) An interested party seeking to protest both the disadvantaged 
status and size of an apparent successful SDB offeror must submit two 
separate protests, one as to disadvantaged status pursuant to this 
subpart, and one as to size pursuant to part 121 of this title. An 
interested party seeking to protest only size of an apparent successful 
SDB offeror must submit a size protest to the contracting officer 
pursuant to part 121.


Sec. 124.1018  When will SBA not decide an SDB protest?

    (a) SBA will not decide a protest as to disadvantaged status of any 
concern other than the apparent successful offeror.
    (b) SBA will not normally consider a post award protest. SBA may 
consider a post award protest in its discretion where it determines 
that a protest decision after award would have a practical effect 
(e.g., where the contracting officer agrees to terminate the contract 
if the protest is sustained).
    (c) SBA will not decide an untimely protest (see Sec. 124.1020(c)).
    (d) SBA will not decide a non-specific protest or one that does not 
present credible evidence that the protested concern's circumstances 
have materially changed since SBA certified it as an SDB, or that the 
protested concern's SDB application contained false or misleading 
information (see Sec. 124.1021).
    (e) An interested party may appeal SBA's dismissal of a protest for 
lack of specificity, timeliness, or a basis upon which SBA will 
consider a protest to SBA's Deputy Associate Deputy Administrator for 
Government Contracting and Minority Enterprise Development (DADA/
GC&MED) pursuant to Sec. 124.1024.


Sec. 124.1019  Who decides disadvantaged status protests?

    In response to a protest challenging the disadvantaged status of a 
concern, the SBA's AA/SDBCE will determine whether the concern is 
disadvantaged.


Sec. 124.1020  What procedures apply to disadvantaged status protests?

    (a) General. The protest procedures described in this section are 
separate and distinct from those governing size protests and appeals. 
All protests relating to whether a concern is a ``small'' business for 
purposes of any Federal program, including SDB set-asides and SDB 
evaluation adjustments, must be filed and processed pursuant to part 
121 of this title.
    (b) Filing. (1) All protests challenging the disadvantaged status 
of a concern with respect to a particular Federal procurement 
requirement must be submitted in writing to the procuring activity 
contracting officer, except in cases where the contracting officer or 
SBA initiates a protest.
    (2) Any contracting officer who initiates a protest must submit the 
protest in writing to SBA in accord with paragraph (c) of this section.
    (3) In cases where SBA initiates a protest, the protest must be 
submitted in writing to the AA/SDBCE and notification provided in 
accord with Sec. 124.1022(a).
    (c) Timeliness of protest. (1) SDB evaluation adjustment and set-
aside protests. (i) General. In order for a protest to be timely, it 
must be received by the contracting officer prior to the close of 
business on the fifth day, exclusive of Saturdays, Sundays and legal 
holidays, after the bid opening date for sealed bids, or after the 
receipt from the contracting officer of notification of the identity of 
the prospective awardee in negotiated acquisitions.
    (ii) Oral protests. An oral protest relating to an SDB set-aside or 
SDB evaluation adjustment made to the contracting officer within the 
allotted 5-day period will be considered a timely protest only if the 
contracting officer receives a confirming letter postmarked, FAXed, or 
delivered no later than one calendar day after the date of such oral 
protest.
    (iii) Protests of contracting officers or SBA. The time limitations 
in paragraph (c)(1)(i) 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 (c)(3) of this section.
    (iv) Untimely protests. A protest received after the time limits 
set forth in this paragraph (c)(1) will be dismissed by SBA.
    (2) Section 8(d) protests. In connection with an 8(d) subcontract, 
the contracting officer or SBA must submit a protest to the AA/SDBCE 
prior to the completion of performance by the intended 8(d) 
subcontractor.
    (3) Premature protests. A protest in connection with any 
procurement which is submitted by any person, including the contracting 
officer, before bid opening or notification of intended award, 
whichever applies, will be considered premature, and will be returned 
to the protestor without action. A contracting officer that receives a 
premature protest must return it to the protestor without submitting it 
to the SBA.
    (d) Referral to SBA. (1) Any contracting officer who receives a 
protest that is not premature must promptly forward it to the SBA's AA/
SDBCE, 409 3rd Street, SW, Washington, DC 20416.
    (2) A contracting officer's referral of a protest to SBA must 
contain the following:
    (i) The written protest and any accompanying materials;
    (ii) The date on which the protest was received by the contracting 
officer;
    (iii) A copy of the protested concern's selfrepresentation as an 
SDB, and the date of such self-representation; and
    (iv) The date of bid opening or the date on which notification of 
the apparent successful offeror was sent to all unsuccessful offerors, 
as applicable.


Sec. 124.1021  What format, degree of specificity, and basis does SBA 
require to consider an SDB protest?

    (a) Format. An SDB protest need not be in any specific format in 
order for SBA to consider it.
    (b) Specificity. A protest must be sufficiently specific to provide 
reasonable notice as to all grounds upon which the protested concern's 
disadvantaged status is challenged.
    (1) SBA will dismiss a protest that merely asserts that the 
protested concern is not disadvantaged, without setting forth specific 
facts or allegations.
    (2) The contracting officer must forward to SBA any non-premature 
protest received, notwithstanding whether he or she believes it is 
sufficiently specific or timely.
    (c) Basis. SBA will consider a protest challenging whether the 
apparent successful offeror is owned and controlled by one or more 
socially and economically disadvantaged individuals, including whether 
one or more of the individuals claiming disadvantaged status is in fact 
socially or economically disadvantaged, only if the protest presents 
credible evidence that the firm's circumstances have materially changed 
since SBA certified it as an SDB, or that the firm's SDB application 
contained false or misleading information.


Sec. 124.1022  What will SBA do when it receives an SDB protest?

    (a) Upon receipt of a protest challenging the disadvantaged status 
of a concern, the AA/SDBCE, or designee, will immediately notify the 
protestor and the contracting officer of the date the protest was 
received and whether it

[[Page 35779]]

will be processed or dismissed for lack of timeliness or specificity.
    (b) In cases where the protest is timely and sufficiently specific, 
the AA/SDBCE, or designee, will also immediately advise the protested 
concern of the protest and forward a copy of it to the protested 
concern.
    (1) The AA/SDBCE, or designee, is authorized to ask the protested 
concern to provide any or all of the following information and 
documentation, completed so as to show the circumstances existing on 
the date of self-representation: SBA Form 1010A, ``Statement of 
Personal Eligibility'' for each individual claiming disadvantaged 
status; SBA Form 1010B, ``Statement of Business Eligibility;'' SBA Form 
413, ``Personal Financial Statement,'' for each individual claiming 
disadvantaged status; information as to whether the protested concern, 
or any of its owners, officers or directors, have applied for admission 
to or participated in the SBA's 8(a) BD program and if so, the name of 
the company which applied or participated and the date of the 
application or entry into the program; business tax returns for the 
last two completed fiscal years prior to the date of self-
representation; personal tax returns for the last two years prior to 
the date of self-representation for all individuals claiming 
disadvantaged status, all officers, all directors and for any 
individual owning at least 10% of the business entity; annual business 
financial statements for the last two completed fiscal years prior to 
the date of self-representation; a current monthly or quarterly 
business financial statement no older than 90 days; articles of 
incorporation; corporate by-laws; partnership agreements; limited 
liability company articles of organization; and any other relevant 
information as to whether the protested concern is disadvantaged.
    (2) SBA's disadvantaged status determination need not be limited to 
consideration only of the issues raised in the protest. SBA may 
consider other applicable criteria.
    (3) Unless the protest presents specific credible information which 
calls into question the veracity of application or other documents 
previously submitted to SBA by a current Participant in SBA's 8(a) BD 
program, SBA will allow the Participant to submit, in lieu of the 
information specified in paragraph (b)(1) of this section, a sworn 
affidavit or declaration that circumstances concerning the ownership 
and control of the business and the disadvantaged status of its 
principals have not changed since its application or entry into the 
program or its most recent annual review, and a copy of its most 
recently completed annual review.
    (i) If the ownership or control of the business or the 
disadvantaged status of any principals have changed, the protested 
concern must comply with paragraph (b)(1) of this section.
    (ii) An affidavit or declaration may be allowed only if SBA 
admitted the protested concern to the 8(a) BD program, or conducted an 
annual review of the protested concern, during the 12month period 
preceding the date on which SBA receives the protest, and if 
proceedings to suspend, terminate or early graduate the concern from 
the 8(a) BD program are not pending.
    (c) Within 10 working days of the date that notification of the 
protest was received from the AA/SDBCE or designee, the protested 
concern must submit to the AA/SDBCE or designee, by personal delivery, 
FAX, or mail, the information and documentation requested pursuant to 
paragraph (b)(1) of this section or the affidavit permitted by 
paragraph (b)(2) of this section. Materials submitted must be received 
by the close of business on the 10th working day.
    (1) SBA will consider only materials submitted timely, and the late 
or non-submission of materials needed to make a disadvantaged status 
determination may result in sustaining the protest.
    (2) The burden is on the protested concern to demonstrate its 
disadvantaged status, whether or not it is currently shown on the list 
of qualified SDBs.
    (3) The protested concern must timely submit to SBA any information 
it deems relevant to a determination of its disadvantaged status.


Sec. 124.1023  How does SBA make disadvantaged status determinations in 
considering an SDB protest?

    (a) General. The AA/SDBCE, or designee, will determine a protested 
concern's disadvantaged status within 15 working days after receipt of 
a protest. If the procuring activity contracting officer does not 
receive an SBA determination within 15 working days after the SBA's 
receipt of the protest, the contracting officer may presume that the 
challenged offeror is disadvantaged, unless the SBA requests and the 
contracting officer grants an extension to the 15-day response period.
    (b) Award after protest. (1) After receiving a protest involving an 
offeror being considered for award, the contracting officer shall not 
award the contract until:
    (i) The SBA has made an SDB determination, or
    (ii) 15 working days have expired since SBA's receipt of a protest 
and the contracting officer has not agreed to an extension of the 15-
day response period.
    (2) Notwithstanding paragraph (b)(1) of this section, the 
contracting officer may award a contract after the receipt of an SDB 
protest where he or she determines in writing that an award must be 
made to protect the public interest.
    (c) Withdrawal of protest. If a protest is withdrawn, SBA will not 
complete a new disadvantaged status determination, and a previous SDB 
certification will stand.
    (d) Basis for determination. (1) Except with respect to a concern 
which is a current Participant in SBA's 8(a) BD program and is 
authorized under Sec. 124.1022(b)(3) to submit an affidavit concerning 
its disadvantaged status, the disadvantaged status determination will 
be based on the protest record, including reasonable inferences 
therefrom, as supplied by the protestor, protested concern, SBA or 
others.
    (2) SBA may in its discretion make a part of the protest record 
information already in its files, and information submitted by the 
protestor, the protested concern, the contracting officer, or other 
persons contacted for additional specific information.
    (e) Disadvantaged status. In evaluating the social and economic 
disadvantage of individuals claiming disadvantaged status, SBA will 
consider the same information and factors set forth in Secs. 124.103 
and 124.104. As provided in Sec. 124.1002(c), individuals claiming 
disadvantaged status must have a net worth that is less than $750,000, 
after taking into account the exclusions set forth in 
Sec. 124.104(c)(2).
    (f) Disadvantaged status determination. SBA will render a written 
determination including the basis for its findings and conclusions.
    (g) Notification of determination. After making its disadvantaged 
status determination, the SBA will immediately notify the contracting 
officer, the protestor, and the protested concern of its determination. 
SBA will promptly provide by certified mail, return receipt requested, 
a copy of its written determination to the same entities, consistent 
with law.
    (h) Results of an SBA disadvantaged status determination. A 
disadvantaged status determination becomes effective immediately.
    (1) If the concern is found not to be disadvantaged, the 
determination remains in full force and effect unless reversed upon 
appeal by SBA's DADA/GC&MED, or designee, pursuant to Sec. 124.1024, or 
the concern is certified to

[[Page 35780]]

be an SDB under Sec. 124.1008. The concern is precluded from applying 
for SDB certification for 12 months from the date of the final agency 
decision (whether by the AA/SDBCE, or designee, without an appeal, or 
by the DADA/GC&MED, or designee, on appeal).
    (2) If the concern is found to be disadvantaged, the determination 
remains in full force and effect unless and until reversed upon appeal 
by SBA's DADA/GC&MED, or designee, pursuant to Sec. 124.1024. A final 
Agency decision (whether by the AA/SDBCE, or designee, without an 
appeal, or by the DADA/GC&MED, or designee, on appeal) finding the 
protested concern to be an SDB remains in effect for three years from 
the date of the decision under the same conditions as if the concern 
had been granted SDB certification under Sec. 124.1008.


Sec. 124.1024  Appeals of disadvantaged status determinations.

    (a) Who may appeal. Appeals of protest determinations may be filed 
with the SBA's DADA/GC&MED by the protested concern, the protestor, or 
the contracting officer.
    (b) Timeliness of appeal. An appeal must be in writing and must be 
received by the DADA/GC&MED no later than 5 working days after the date 
of receipt of the protest determination. SBA will dismiss any appeal 
received after the five-day time period.
    (c) Notice of appeal. Notice of the appeal must be provided by the 
party bringing an appeal to the procuring activity contracting officer 
and either the protested concern or original protestor, as appropriate.
    (d) Grounds for appeal. SBA will reexamine a protest determination 
only if there was a clear and significant error in the processing of 
the protest, or if the AA/SDBCE, or designee, failed to consider a 
significant material fact contained within the information supplied by 
the protestor or the protested concern. SBA will not consider protest 
determination appeals based on additional information or changed 
circumstances which were not disclosed at the time of the decision of 
the AA/SDBCE or designee, or which are based on disagreement with the 
findings and conclusions contained in the determination.
    (e) Contents of appeal. No specific format is required for the 
appeal. However, the appeal must identify the protest determination 
which is appealed, and set forth a full and specific statement as to 
why the determination is erroneous under paragraph (c) of this section.
    (f) Completion of appeal after award. An appeal may proceed to 
completion even though an award of the SDB acquisition or other 
procurement requirement which prompted the protest has been made, if so 
desired by the protested concern, or where SBA determines that a 
decision on appeal would have a material impact on contracting 
decisions, such as where the contracting officer agrees:
    (1) In the case where an award is made to a concern other than the 
protested concern, to terminate the contract and award to the protested 
concern if the appeal finds that the protested concern is 
disadvantaged; or
    (2) In the case where an award is made to the protested concern, to 
terminate the contract if the appeal finds that the protested concern 
is not disadvantaged.
    (g) The appeal will be decided by the DADA/GC&MED, within 5 working 
days of its receipt, if practicable.
    (h) The appeal decision will be based only on the information and 
documentation in the protest record as supplemented by the appeal. SBA 
will provide a copy of the decision to the contracting officer, the 
protestor, and the protested concern, consistent with law.
    (i) The decision of the DADA/GC&MED, is the final decision of the 
SBA, and cannot be further appealed to OHA.

    Dated: March 6, 1998.
Aida Alvarez,
Administrator.
[FR Doc. 98-17195 Filed 6-26-98; 8:45 am]
BILLING CODE 8025-01-P