[Federal Register Volume 68, Number 80 (Friday, April 25, 2003)]
[Proposed Rules]
[Pages 20350-20356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10286]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 68, No. 80 / Friday, April 25, 2003 / 
Proposed Rules

[[Page 20350]]



SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121 and 124

RIN 3245-AF06


Size for Purposes of the Multiple Award Schedule and Other 
Multiple Award Contracts; Small Business Size Regulations; 8(a) 
Business Development/Small Disadvantaged Business Status Determinations

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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

SUMMARY: The U.S. Small Business Administration (SBA) proposes to amend 
its regulations to address the time at which size is determined for 
purposes of the General Services Administration's (GSA) Multiple Award 
Schedule (MAS) Program, including the Federal Supply Schedule (FSS), 
and other multiple award contracts, including Governmentwide 
Acquisition Contracts and multi-agency contracts. SBA also proposes to 
amend its 8(a) Business Development regulations to address when a 
business concern may receive orders as an 8(a) program participant 
under GSA's MAS Program, including the FSS, and other multiple award 
contracts.

DATES: Comments must be received on or before June 24, 2003.

ADDRESSES: Written comments should be addressed to Linda G. Williams, 
Associate Administrator, Office of Government Contracting, U.S. Small 
Business Administration, 409 3rd Street, SW., Washington, DC 20416, or 
by FAX to (202) 205-6390 or by e-mail to Linda.Williams@sba.gov. You 
may also submit comments electronically to http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Dean Koppel, Assistant Administrator, 
Office of Policy and Research, Office of Government Contracting, (202) 
205-7322, dean.koppel@sba.gov.

SUPPLEMENTARY INFORMATION: The SBA's small business size regulations 
(13 CFR part 121) are used to determine eligibility for all SBA and 
Federal programs that require a concern to be a small business. 
Currently, SBA's regulations provide that SBA determines the size of a 
concern as of the date the concern submits a written self-certification 
that it is small to the procuring agency as part of its initial offer, 
including price. 13 CFR 121.404. Therefore, for a multiple award 
schedule (MAS), Federal Supply Schedule (FSS), multiple award, or 
Governmentwide Acquisition (GWAC) contract, size is determined as of 
the date of a concern's initial offer, including price. If a concern is 
small as of that date, agencies may place orders pursuant to the 
original contract and consider these orders as awards to a ``small 
business'' for the length of the MAS, FSS, multiple award contract or 
GWAC.
    This has led to skewed and, in SBA's view, misleading results. Such 
contracts may have terms of five, ten, or twenty years, and can be 
amended to incorporate goods and services with varying size standards, 
and unlimited quantities. Therefore, orders to concerns receiving such 
contracts would be considered to be awards to small business even 
though a firm had grown to be large (either through natural growth or 
by merger or acquisition) during the term of the contract, and even 
though the firm is not (and may never have been) small with respect to 
the size standard corresponding to the work to be performed under a 
particular order.
    For example, SBA has reviewed Federal Procurement Data System 
(FPDS) statistics as they relate to four business concerns that 
received contracts as small businesses under the GSA's MAS Program, but 
which have become other than small since that time. These four business 
concerns are continuing to receive orders issued pursuant to a MAS 
contract in which each certified that they were small at the time of 
the original MAS contract. In fiscal year 2000, these four business 
concerns received over $190 million in such orders. Because these 
concerns were considered small at the time of the original MAS 
contract, each of these 1,313 contracting actions, valued at over $190 
million, could be counted as awards to small businesses. The figures 
for these same concerns in fiscal year 2001 are equally astounding--
1,271 contracting actions amounting to over $200 million in awards to 
other than small businesses.
    In addition, SBA's Office of Hearings and Appeals (OHA) recently 
decided a size appeal relating to an order issued pursuant to the FSS. 
In Size Appeals of SETA Corporation and Federal Emergency Management 
Agency, SBA No. SIZ-4477 (2002) (OHA decisions are available at 
www.sba.gov/oha/searchpage.html or by contacting OHA by e-mail at 
oha@sba.gov or by phone at 202-401-8200), OHA ruled that a request for 
quotations (RFQ) issued pursuant to a FSS contract was a new small 
business set-aside procurement. As such, OHA held that size should be 
determined as of the date of the firm's submission of its certification 
as an eligible small business with its price quotation in response to 
the RFQ, and not at the date of the firm's offer in response to the 
initial FSS solicitation.
    Further, the U.S. General Accounting Office (GAO) weighed in on the 
issue in a recent bid protest. In CMS Information Services, Inc., B-
290541 (Aug. 7, 2002) (available at http://www.gao.gov or contact the 
Government Printing Office at 202-512-1530), the procuring agency 
limited competition to small businesses and required businesses to 
certify their size at the time they submitted their quotations. The 
protester argued that this certification requirement was improper 
because the offerors had each certified their size at the time they 
submitted their initial offer to GSA for award of its FSS contract. GAO 
ruled that when an agency limits competition to small business vendors 
under a competitive RFQ issued pursuant to the FSS, the agency may 
properly require firms to certify as to their small business size 
status as of the time they submit their quotations.
    In addition, GSA implemented a Federal Acquisition Regulation (FAR) 
deviation requiring contractors operating under the MAS Program or any 
other multiple award contract (such as the FAST program in GSA's 
Federal Technology Service), to recertify that the concern qualifies as 
a small business each time their contract is up for renewal. See GSA 
News Release  9991 (November 15, 2002) (available at http://www.gsa.gov/Portal/newsreleases.jsp).
    This evidence indicates that agencies may be counting orders issued 
pursuant to a MAS or other multiple award

[[Page 20351]]

contract as awards to small businesses when, in reality, the order is 
actually made to an entity other than a small business. As a result, 
agencies, including GSA, are attempting to remedy the situation, as are 
administrative tribunals such as OHA and GAO. Consequently, SBA is 
proposing a regulation at 13 CFR 121.404(c) to specifically address 
size as it relates to awards issued pursuant to multiple award 
contracts, including specifically GSA's MAS Program.
    Under the proposed rule, a firm that receives a MAS or other 
multiple award contract must certify annually on the anniversary date 
of the contract award that it continues to be a small business for a 
specified size standard. A concern that is small at the time of the 
initial offer for a MAS or other multiple award contract would be 
considered small for one year from the date of its certification. The 
concern would then have to re-certify its size each year, for the term 
of the contract. Under the proposed rule, procuring agencies would then 
publish a list of the re-certifications received, within 10 days of 
receipt, on their agency's Web site, in the Federal Register, or 
otherwise. The rule would permit any interested party to file a protest 
with the contracting officer challenging the size of the concern 
seeking re-certification. If the recertification is challenged, SBA 
would then perform a formal size determination with respect to the 
challenged firm. SBA specifically requests comments as to the best or 
most expedient way to post these re-certifications so as to ensure that 
interested parties may appropriately protest, but at the same time not 
imposing an undue burden on procuring agencies or on the small business 
concerns.
    SBA also may review or request a formal size determination with 
respect to any re-certification. However, once a firm is recertified, 
the concern will be considered to be a small business with respect to 
any order it receives with a North American Industry Classification 
Code (NAICS) code having the same or higher size standard during that 
one year period. Each order issued pursuant to the contract could then 
be counted as an award to small business.
    However, under the GAO decision in CMS cited above, a contracting 
officer would have the discretion to ask for size certifications for 
individual orders. This proposed rule does not seek to, and does not in 
fact, change such discretion.
    The proposed rule is based on SBA's view that receiving a multiple 
award contract or getting on GSA's FSS is similar to being admitted to 
SBA's 8(a) Business Development (BD) or HUBZone programs, and orders 
issued under multiple award contracts or off the schedule are similar 
to the actual award of an 8(a) BD or HUBZone contract. In the 8(a) BD 
and HUBZone programs, a concern must be small (for its primary NAICS 
code) at the time it is admitted to the program, and it must be small 
for each 8(a) BD or HUBZone contract it is awarded. Although the 
proposed rule would not require a firm to certify its status as (and in 
fact be) a small business for each order it receives under a multiple 
award contract (as an 8(a) or HUBZone concern must do for individual 
contracts once admitted to either of those programs), its requirement 
for annual certification makes size relevant for orders.
    SBA also recognizes, however, that an order issued pursuant to a 
multiple award contract is intended to be a simple, fast way to procure 
needed goods and services. SBA does not seek to delay the procurement 
process or make it more complicated.
    SBA considered three other alternatives to the proposed rule. The 
first alternative would require that for an agency to count an award 
issued under a multiple award or schedule contract as an award to a 
small business, the concern must be small as of the date of each order 
(in addition to being small at the time of its self-certification for 
the multiple award or schedule contract). The second alternative would 
require a firm to re-certify its status as a small business at the time 
of any option on the multiple award or schedule contract. SBA believes 
that the first alternative might require size certifications too often 
(and could delay the procurement process), and that the second 
alternative would require them too infrequently (letting a firm that 
has been purchased by a large business immediately after receiving its 
multiple award or schedule contract, for example, to be considered a 
small business for almost five years after becoming large). The third 
alternative SBA considered is similar to that proposed, but would 
require annual recertification or notification for a MAS or other 
multiple award contract only where a firm's size status for the MAS or 
other multiple award contract at issue has changed. While this 
alternative would significantly reduce paperwork and have a minimal 
effect on the procurement process, SBA was concerned about timely 
compliance with such a requirement. For example, if a firm that has 
grown to be other than small is seeking a substantial order as a small 
business under a MAS or other multiple award contract, it might not 
notify the contracting officer of its changed status until after it 
received the order. SBA specifically requests comments on each of these 
three alternatives.
    SBA also proposes to amend 13 CFR 121.1004(a)(3), regarding time 
limits for size protests in the case of multiple award and schedule 
procurements, including FSS contracts. The proposed regulation would 
authorize size protests challenging firms seeking re-certification of 
their status as small businesses for a MAS or other multiple award 
contract. In addition, it would specifically authorize size protests in 
connection with orders issued under those contracts. Since time of size 
for an order issued under a MAS or other multiple award contract is 
determined as of the date the concern submits a written self-
certification that it is small to the procuring agency as part of its 
initial offer, including price (during the one-year period immediately 
following contract award) and as of the date the concern submits its 
re-certification (for the one-year period after any re-certification), 
a protest challenging the size of a concern for a specific order under 
a MAS or other multiple award contract relates to the date of the 
certification or re-certification, as applicable. Again, a contracting 
officer can request size certifications in connection with a specific 
order. In such a case, size would then be determined as of the date of 
the certification in connection with the order. Absent such a request 
by a contracting officer, the certification or re-certifcation date is 
the date at which SBA would determine a concern's size for a specific 
order.
    SBA specifically requests comments on the appropriate time frame 
within which to require size protests relating to such orders. SBA 
recognizes that multiple award and schedule contracts are intended to 
be a fast, easy way for an agency to meet its procurement needs. 
However, SBA does not believe that a size protest would slow down the 
process or delay performance. A size protest in this context most 
probably would relate to whether an agency can count the award as an 
award to small business. Whether an award counts or does not count as a 
small business award has no bearing on whether the award can be made to 
a particular firm, or whether that firm can perform the award. Thus, 
the proposed rule would permit a protest to be made at any time prior 
to the expiration of the underlying multiple award or schedule 
contract.
    Finally, the proposed rule would amend 13 CFR 124.503(h)(2) to 
ensure that size eligibility for 8(a) multiple award contracts is 
consistent with the

[[Page 20352]]

changes made to the size regulations generally by this rule. A concern 
would be able to continue to receive orders as an 8(a) small business 
under an 8(a) MAS contract (including the Federal Supply Schedule 
(FSS)) or other multiple award contract (including a GWAC, with respect 
to any orders issued pursuant to the MAS or other multiple award 
contract having a NAICS code with the same or higher size standard as 
the one(s) under which it qualified for a period of one year from the 
date of its certification or re-certification as a small business.

Compliance With Executive Orders 12612, 12988, and 12866, the 
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork 
Reduction Act (44 U.S.C. Ch. 35)

    OMB has determined that this proposed rule constitutes a 
significant regulatory action under Executive Order 12866.
    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA 
has determined that this rule, if adopted in final form, would impose a 
new reporting requirement but not a new recordkeeping requirement. The 
proposed rule provides that in order to be considered small for 
purposes of an order issued pursuant to a multiple award or schedule 
contract, a concern must qualify as small at the time it receives the 
intial contract and annually. SBA does not believe that this 
requirement imposes a new recordkeeping requirement. SBCs have always 
been required to keep records pertaining to their size and to certify 
as to their size status to receive Federal benefits. Firms have always 
had to certify their size status with respect to new solicitations/
contracts. No new records would be required in order to meet this 
change regarding multiple award contracts. In addition, these records 
are those kept in the ordinary course of business, such as federal 
income tax returns.
    However, the proposed regulation would require business concerns to 
certify annually as to their size, in addition to certifying at the 
time of the intial MAS or other multiple award contract. Thus, the 
proposed regulation imposes a new reporting requirement. SBA believes 
that this additional certification would not be a burden to small 
business. In fact, small businesses have contacted SBA requesting such 
an additional certification in order to ensure that those receiving 
awards as small businesses are in fact small. The following sets forth 
further detail about this information collection request and 
specifically requests comments on the issue.

A. Application

    Title: Re-Certification of Size for Multiple Award Contracts.
    Summary: This application, described in proposed 13 CFR 
121.404(c)(i), would require each business concern that certifies as 
small at the time of award for purposes of the General Services 
Administration's Multiple Award Schedule Program, including the Federal 
Supply Schedule, and other multiple award contracts, including 
Governmentwide Acquisition Contracts and multi-agency contracts, to re-
certify once each year to the procuring agency's contracting officer 
that it is still small for purposes of that contract and consequently 
for any orders issued pursuant to the MAS or other multiple award 
contract having a NAICS code with the same or higher size standard. The 
application information provided to the contracting officers and 
subsequently published on the agency's Web site, in the Federal 
Register, or otherwise will allow all parties to determine whether a 
business concern is small pursuant to SBA's size regulations.
    Need and Purpose: Pursuant to SBA's current regulations, a 
concern's size status is determined as of the date that it submits its 
initial offer, including price, for MAS and other multiple award 
contracts. If a concern is small as of that date, it is deemed to be 
small for the life of the contract and all orders issued pursuant to 
that contract. Contracts issued pursuant to some multiple award 
schedules are being extended for ten or twenty years. Therefore, a 
business concern that certified as small to receive a schedule contract 
ten years ago may still be considered small for orders issued pursuant 
to the same contract even if the business concern is clearly no longer 
small. Agencies are then able to count these orders as awards to small 
business even though the firm may have grown to be other than small or 
has merged with or been acquired by a large business many years ago. 
Unfortunately, this means that Federal agencies that meet their SBC 
goals by counting awards to former SBCs do so at the expense of 
legitimately defined SBCs. The information submitted in the re-
certification will help determine whether or not these business 
concerns continue to be small and thus whether the orders issued 
pursuant to the initial schedule or other multiple award contract may 
be deemed an award to a small business concern.
    Description of Respondents: All business concerns that certified as 
small for the initial MAS or other multiple award contract will be 
required to re-certify each year as to the concern's size pursuant to 
this proposed rule. SBA estimates that approximately 6,000 SBCs receive 
MAS or other multiple award contracts each year. SBA estimates the 
burden of this collection of information as follows: A business concern 
will re-certify annually as to its size for each MAS or other multiple 
award contract it receives and to which it initially certified itself 
as small. SBA estimates the time needed to complete this collection 
will average at most a half hour. SBA estimates the cost to complete 
this collection will be approximately $30 per hour. The total estimated 
aggregated burden is 3,000 hours per annum costing an aggregated 
$45,000 for the year.
    SBA invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of SBA's functions, 
including whether the information will have a practical utility; (2) 
the accuracy of SBA's estimate of the burden of the proposed collection 
of information, including the validity of the methodology and 
assumptions used; (3) ways to enhance the quality, utility, and clarity 
of the information to be collected; and (4) ways to minimize the burden 
of the collection on respondents, including through the use of 
automated collection techniques, when appropriate, and other forms of 
information technology.
    Please send comments about this information collection request by 
the closing date for this proposed rule to David Rostker, Office of 
Management and Budget, Office of Information and Regulatory Affairs, 
725 17th Street, NW., Washington, DC 20503 and to Linda Williams, 
Associate Administrator for Government Contracting, Office of 
Government Contracting and Business Development, U.S. Small Business 
Administration, 409 Third Street, SW., Washington, DC 20416.
    For purposes of Executive Order 12988, SBA has drafted this 
proposed rule, to the extent practicable, in accordance with the 
standards set forth in section 3 of that Order.
    For purposes of Executive Order 13132, SBA has determined that this 
proposed rule has no federalism implications warranting the preparation 
of a Federalism Assessment.
    SBA has determined that this proposed rule, if adopted in final 
form, could have a significant economic impact on a substantial number 
of small

[[Page 20353]]

entities within the meaning of the Regulatory Flexibility Act (RFA), 5 
U.S.C. 601-612. Therefore, SBA has prepared an Initial Regulatory 
Flexibility Act (IRFA) analysis addressing the proposed regulation.

B. IRFA

    The RFA provides that when preparing a Regulatory Flexibility 
Analysis, an agency shall address all of the following: the reasons, 
objectives, and legal basis for the proposed rule; the kind and number 
of small entities which may be affected; the projected recordkeeping, 
reporting, and other compliance requirements of the proposed rule, 
including an estimate of the classes of small entities which will be 
subject to the requirement and the type of professional skills 
necessary for preparation of the report or record; federal rules which 
may duplicate, overlap, or conflict with the proposed rule; and any 
significant alternatives to the proposed rule. This IRFA considers 
these points and the impact the proposed regulation concerning multiple 
award or schedule contracts may have on small entities.
(a) Reasons, Objectives and Legal Basis
    Under the Small Business Act, SBA is authorized to specify detailed 
definitions and standards by which an entity may be determined to be a 
small business concern. 15 U.S.C. 632(a)(2). SBA's definitions and 
standards relating to SBCs are set forth in 13 CFR part 121.
    Pursuant to SBA's current regulations, a concern's size status is 
determined as of the date that it submits its initial offer, including 
price, for the MAS or other multiple award contract. If a concern is 
small as of that date, it is deemed to be small for the life of the 
contract and for all orders issued pursuant to that contract. It is our 
understanding that contracts issued pursuant to some multiple award 
schedules are being extended for ten or twenty years. This means that a 
concern that certified as small to receive a schedule contract ten 
years ago, could still be considered small for orders issued pursuant 
to the same contract even if the business concern is clearly no longer 
small. Agencies are then able to count these orders as awards to small 
business even though the firm may have grown to be other than small or 
has merged with or been acquired by a large business many years ago. 
Unfortunately, this means that Federal agencies that meet their SBC 
goals by counting awards to former SBCs do so at the expense of 
legitimately defined SBCs. Agencies may not seek other procurement 
opportunities with legitimate SBCs because they have met their SBC goal 
through schedule orders to firms that are no longer small. As a result 
of the increasing use of these schedules and other multiple award 
contracts, SBA believes it is necessary to amend its regulations and 
address these size eligibility issues for orders issued pursuant to MAS 
and other multiple award contracts.
(b) Description and Estimate of the Number of Small Entities to Which 
the Rule May Apply
    The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA defines ``small 
entity'' to include ``small businesses,'' ``small organizations,'' and 
``small governmental jurisdictions.'' SBA's programs do not apply to 
``small organizations'' or ``small governmental jurisdictions'' because 
they are non-profit or governmental entities and do not qualify as 
``business concerns'' within the meaning of SBA's regulations. SBA's 
programs apply only to for-profit business concerns. Therefore, the 
proposed regulation (like the regulation currently in effect) will not 
impact small organizations or small governmental jurisdictions.
    Small businesses that participate in federal government contracting 
are the specific group of small entities affected most by this proposed 
rule. While there is no precise estimate for the number of SBCs that 
will be affected by this proposed rule, SBA has reasoned the following. 
First, there are over 200,000 SBCs registered on PRO-Net. PRO-Net is a 
database containing profiles of SBCs that includes information from 
SBA's files and other available databases, as well as information 
inputted by SBCs. Second, in 2001, SBA approved over 48,000 loans. 
Thus, based on a simplistic review of PRO-Net, it may appear that the 
proposed rule could affect, at a minimum, at least 250,000 SBCs. SBA 
notes, however, that this rule would likely affect only those small 
businesses having a MAS or other multiple award contract that were 
small at the time of the initial schedule or multiple award contract, 
and are no longer small. The number of SBCs awarded a MAS or other 
multiple award contract are much less than the PRO-Net figure, and 
those that have grown to be other than small since the award of their 
MAS or other multiple award contract is even smaller than that. 
Therefore, this rule will not impact all of the ``SBCs'' with MAS or 
other multiple award contracts, but, as identified below, would impact 
at least 6-12 businesses each year.
    According to the Federal Procurement Data System (FPDS), in fiscal 
year 2001, there were 241,581 orders issued pursuant to the FSS and 
648,522 orders issued pursuant to other Federal schedules for prime 
contract actions of $25,000 or less. (Federal Procurement Report, 
Section III, Agency Views, http://www.fpdc.gov/fpdc/fpr.htm). Over $600 
million of these FSS orders and over $180 million of the other Federal 
schedule orders were reported as orders to SBCs. For contract actions 
over $25,000, there were over 61,000 orders, or $13.8 billion in orders 
issued pursuant to the FSS, and over 47,000 or $15 billion in orders 
issued pursuant to MAS contracts. Id. For FSS contracts above $25,000, 
approximately $4 billion was reported as awarded to 2,610 small 
businesses. This means that the average of orders awarded to SBCs is 
about $1.5 million (3,950,853,000/2610=1,513,737).
    In addition to examining FPDS data, SBA has examined the growth 
trends of businesses between the 1992 and 1997 Economic Censuses using 
the 1992 and 1997 Special Tabulation of the Economic Census for SBA. 
The data shows that the share of total businesses with 100 employees or 
more (an approximate average employment size of all size standards) 
increased by 0.2 percent. According to the Census data 
(www.census.gov), the share of total businesses with 100 employees or 
more increased by only 0.1 percent and according to SBA's Office of 
Advocacy data (see www.sba.gov/advo/stats/us88_99.pdf), the increase 
was 0.1 between 1992-1997 and about 0.15 percent between 1992-1999. 
Applying these general trends to the 6,000 small businesses SBA 
believes are participating in the GSA's MAS program, approximately 3 to 
4 small businesses per year would outgrow their small business 
classification. SBA, however, expects the actual number of businesses 
that outgrow their small business classification would be two to three 
times higher (6 to 12 business concerns) than this estimate, since 
studies have shown businesses receiving Federal contracts tend to be 
stronger businesses. Therefore, SBA expects 6 to 12 business concerns 
each year that have a multiple award contract to become other than 
small during the year. SBA expects the number of concerns affected the 
first year to be greater because firms have not had to certify their 
size status annually since being awarded a multiple award contract, and 
firms may have received such contracts several years ago and

[[Page 20354]]

could not recertify their small business status today.
    SBA welcomes comments on the potential number of small businesses 
that would have to change their business designation and its 
implications as a result of this proposed provision.
    This proposed rule could have a significant economic impact on 
SBCs. Using both the census and FPDS data discussed above, concerns 
that grow and no longer qualify as SBCs (about 6-12 a year) attain over 
$18 million a year in FSS awards (average of task order awards to SBCs 
is $1.5 million). Therefore, this rule could result in a corresponding 
increase in over $18 million in awards to those concerns that are 
actually small, although such a result is unlikely.
    As an example, SBA has researched four actual business concerns 
that it believes are no longer small, and yet are still receiving 
orders issued pursuant to a MAS contract where each business certified 
itself as small on the original contract. The concerns, and the number 
of schedule orders received, as well as the total value of the awards, 
were obtained from FPDS data and are as follows:

----------------------------------------------------------------------------------------------------------------
                                                     FY2000                          FY2001
                                                        Dollars ($000)         Dollars ($000)
                                                     actions                         actions
----------------------------------------------------------------------------------------------------------------
Business 1.............................         1,019           154,321           902           124,063
Business 2.............................            88             8,043            55             6,073
Business 3.............................            28            18,217             0                 0
Business 4.............................           178            16,235           314            77,360
----------------------------------------------------------------------------------------------------------------

SBA notes that it is difficult to access FPDS data with only a business 
concern's name because concerns typically have many different 
variations of their name (i.e., divisions, sections, etc). Therefore, 
the total number of actions and dollar value may be higher for the four 
concerns listed above.
    SBA also notes that some could argue that this rule provides a 
disincentive for contracting officers to select a small business. 
Contracting officers may fear that there will be a size protest that 
would ultimately slow down the contracting process.
    SBA does not believe this rule would alter the decisions of 
contracting officers in any way. First, the procuring activity will 
select a concern for an order because it is the best value to the 
Federal Government. Second, SBA does not believe that the activity will 
refuse to issue the order, which results in the best value to the 
Government, because the concern has to certify its size and may no 
longer be small. SBA believes that the only consequence is that the 
procuring activity will not be able to count the award as one to a SBC.
    SBA believes that this is similar to how orders issued pursuant to 
MAS contracts currently interact with the 8(a) BD program. Today, a 
contracting officer can consider an offer from an 8(a) BD program 
participant, a SBC, and a large business simultaneously. Under a 
Memorandum of Understanding between SBA and the GSA, if the contracting 
officer determines that the best value to the Government is the offer 
submitted by the 8(a) BD participant, the order to that firm may be 
counted as an 8(a) award and counted towards the agency's SDB goal. If 
the best value to the Government is the offer from the large business, 
the large business would receive the award and the order would not 
count toward any small business goal. It is SBA's view that the same 
would happen under the proposed rule where a schedule holder grows to 
be other than small. In that case, if a firm that is no longer small 
would provide the best value to the Government, SBA believes that the 
firm would still get the MAS or FSS order, but, as with an award to any 
other large business, the order could not count toward any small 
business goal.
    Therefore, if implemented, SBA believes this rule will ultimately 
impact the data collected on orders issued to SBCs, rather than affect 
the number of orders received by business concerns who have grown to be 
other than small since they received a federal multiple award or 
schedule contract.
(c) Additional Reporting or Record Keeping Requirements on Small 
Businesses
    This proposed rule would impose a new information collection 
requirement on small businesses. However, the information collection is 
the same as that small business concerns currently submit for 
Government contracts to receive a preference or for an agency to count 
the award as one to a small business.
    SBA does not believe that this provision imposes any new 
recordkeeping requirements. SBCs have always been required to keep 
records pertaining to their size and to certify as to their size status 
to receive Federal benefits. In addition, these records are those kept 
in the ordinary course of businesses, such as federal income tax 
returns.
(d) Relevant Federal Rules That May Duplicate, Overlap or Conflict With 
This Rule
    This rule does not duplicate, overlap, or conflict with any other 
Federal rules. Under this proposed rule, SBCs would have to certify 
that they are small at the time they receive the MAS or other multiple 
award contract and then annually each year thereafter, so long as the 
MAS or other multiple award contract is still in effect, in order for 
the procuring activity to count the order as an award to a SBC. SBA 
does not believe this rule conflicts with any FAR rule. For example, 
according to FAR 19.804-6, separate offers and acceptances need not be 
made for individual orders under MAS or FSS contracts for the 8(a) BD 
Program. SBA's acceptance of the original multiple award or MAS 
contract is valid for the term of the contract. The same is set forth 
in 13 CFR 124.503(h) of SBA's regulations. The rule proposed does not 
conflict with this FAR regulation, which addresses offer and acceptance 
of a contract for the 8(a) BD Program.
    In addition, typically, SBCs only certify their size on initial 
contracts and not annually, and therefore the FAR will need to be 
amended to address this rule, if promulgated as final. SBA does not 
believe this rule conflicts with FAR rules addressing multiple award or 
schedule orders and notes that SBA has exclusive statutory jurisdiction 
in establishing size definitions and standards. It is important to 
remember, however, that size eligibility generally, and in this case 
size for purposes of a multiple award or schedule order, falls within 
SBA's jurisdiction. The Small Business Act gives to SBA the exclusive 
authority to determine when and under what circumstances a business 
entity may be considered small.
(e) Alternatives That SBA Considered
    SBA has proposed a new provision addressing orders issued pursuant 
to MAS and other multiple award contracts. Currently, size is 
determined

[[Page 20355]]

as of the date of a concern's initial offer on the MAS or other 
multiple award contract, not for each order issued pursuant to that 
contract. If a concern is small on that date, orders may be placed and 
considered to be awards to ``small business'' for the length of the MAS 
or other multiple award contracts. SBA understands that such contracts 
may have terms of five, ten, or more years, and can be amended to 
incorporate goods and services with varying size standards and 
unlimited quantities. Orders to concerns issued pursuant to a MAS or 
other multiple award contract would be deemed awards to small 
businesses even if a concern had grown to be large many years ago and 
even though the concern is not small with respect to the size standard 
corresponding to the work to be performed under a particular task 
order.
    In determining how to address this issue, SBA considered first not 
amending the current regulation. However, SBA believes that if it does 
not address this issue, then awards will continue to be made to 
concerns that are not small businesses, yet agencies will get credit 
for making an award to a small business. SBA believes that this would 
harm legitimate small business concerns by reducing the number of 
opportunities and additional awards to them, either through the MAS 
program or otherwise. In addition, SBA has been contacted by several 
legitimate small businesses complaining that MAS orders are going to 
firms clearly not small, but that such awards are being counted as 
awards to small business. These businesses believe that their 
opportunites of receiving orders are reduced because agencies can go to 
large businesses and count the orders as awards to small businesses.
    SBA also considered that, instead of determining size eligibility 
annually for purposes of orders issued pursuant to a MAS or other 
multiple award contract, it would determine size as of the date that a 
firm certifies that it is small for a particular order. Although this 
approach is appealing to SBA, SBA believes that some procuring agencies 
would oppose it. They could argue that such an approach would delay the 
procurement process, which is contrary to the intent of the MAS 
program. SBA also considered a longer time period, such as five years 
(one contract year plus four option years), in which the concern could 
be considered small. SBA decided not to propose this approach because 
it would not adequately address the perceived problem (i.e., awards to 
other than small businesses would continue to be counted as small 
business awards for too long a period of time and too often, since 
agencies are increasingly using multiple award and schedule contracts). 
SBA believes that a process which requires a concern to self-certify 
annually that it continues to be small for orders issued pursuant to a 
MAS or other multiple award contract represents little or no burden to 
the SBC or to the procurement process.
    SBA also proposes a rule regarding time limits for size protests in 
the case of MAS procurements, including FSS contracts. The proposed 
rule would specifically authorize protests in connection with awards 
and orders issued under those contracts as well as multiple award 
contracts. SBA proposes that a protest relating to an individual order 
is timely so long as it is received anytime before the expiration of 
the contract period. SBA considered the fact that multiple award and 
schedule contracts are intended to be a fast and easy way for an agency 
to contract. SBA does not believe that a size protest would slow down 
the contracting process or delay performance because a size protest, in 
this instance, would likely relate to whether an agency can count the 
award as an award to a SBC, not to whether award can or should be made 
to a particular business entity. SBA specifically requests comments as 
to other options for these time limits.
(f) Conclusion
    Based upon the foregoing, SBA has determined that this proposed 
rule may have a significant impact on a substantial number of small 
entities within the meaning of the RFA. SBA requests comments 
addressing any of the issues raised in this IRFA, including comments on 
the economic effect this rule could have on small entities.

List of Subjects

13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Loan programs--business, 
Reporting and recordkeeping requirements, Small businesses.

13 CFR Part 124

    Administrative practice and procedure, Minority businesses, 
Reporting and recordkeeping requirements, Technical assistance.

    For the reasons set forth in the preamble, SBA proposes to amend 
parts 121 and 124 of Title 13 of the Code of Federal Regulations, as 
follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

    1. The authority citation for part 121 continues to read as 
follows:

    Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c) and 
662(5) and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188.

    2. In Sec.  121.404 add paragraph (c) to read as follows:


Sec.  121.404  When does SBA determine the size status of a business 
concern?

* * * * *
    (c) In order to be considered small for purposes of the General 
Services Administration's Multiple Award Schedule (MAS) Program, 
including the Federal Supply Schedule, and other multiple award 
contracts, including Governmentwide Acquisition Contracts (GWAC) and 
multi-agency contracts, a concern must qualify as small as of the date 
it submits a written self-certification to the procuring agency as part 
of its initial offer including price. The concern will be considered 
small with respect to any orders issued under the MAS or other multiple 
award contract having a NAICS code with the same or higher size 
standard as the one(s) under which it qualified for a period of one 
year from the date of its certification.
    (1) A business concern awarded a MAS or other multiple award 
contract must annually re-certify to the contracting officer on the 
anniversary date of the contract award that it continues to qualify as 
a small business for the contract. Contracting officers will publish a 
list of the re-certifications received, within 10 days of receipt, on 
their agency's website, and may also publish it in the Federal Register 
or otherwise. SBA may review or request a formal size determination 
with respect to that re-certification, and any interested party may 
protest that re-certification pursuant to Sec.  121.1004(a)(3)(iii). 
The business concern may be considered small with respect to any orders 
issued pursuant to the MAS or other multiple award contract having a 
NAICS code with the same or higher size standard as the one(s) under 
which it re-certified for a period of one year from the date of its re-
certification.
    (2) The contracting officer must assign an appropriate NAICS code 
to each order issued under a MAS or other multiple award contract to 
assist in determining whether a concern is small for a particular 
order.
    (3) Time of size for a specific order relates back to the date of 
the initial written self-certification that it is small to the 
procuring agency for the award of

[[Page 20356]]

the MAS or other multiple award contract (during the one-year period 
immediately following contract award) and as of the date the concern 
submits its re-certification (for the one-year period after any re-
certification).
    3. Revise Sec.  121.1004(a)(3) to read as follows:


Sec.  121.1004  What time limits apply to size protests?

    (a) * * *
    (3) Multiple Award Contracts. (i) Except as set forth in paragraph 
(a)(3)(ii) of this section, protests relating to the award of a MAS or 
other multiple award contract are considered timely if they meet the 
requirements of paragraphs (a)(1) or (a)(2) of this section.
    (ii) Protests relating to the award of a contract under the General 
Services Administration's MAS Program, including the Federal Supply 
Schedule, are considered timely if received by the contracting officer 
within 10 days of a concern being listed on the multiple award 
schedule.
    (iii) Protests relating to re-certifications issued pursuant to 
Sec.  121.404(c) are considered timely if received by the contracting 
officer within 10 days of a concern being listed on an agency's website 
or published in the Federal Register or otherwise. Protests relating to 
individual awards or orders issued pursuant to the MAS Program or other 
multiple award contracts are considered timely if received by the 
contracting officer at any time prior to the expiration of the contract 
period (including renewals).
* * * * *

PART 124--8(A) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS 
STATUS DETERMINATIONS

    4. The authority citation for part 124 continues to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d) 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.

    5. Revise Sec.  124.503(h)(2) to read as follows:


Sec.  124.503  How does SBA accept a procurement for award through the 
8(a) BD program?

* * * * *
    (h) * * *
    (2)(i) A concern can continue to receive orders as an 8(a) small 
business under the General Services Administration's Multiple Award 
Schedule (MAS) Program, including the Federal Supply Schedule, and 
other multiple award contracts, including Governmentwide Acquisition 
Contracts (GWACs) and multi-agency contracts, with respect to any 
orders issued pursuant to the MAS or other multiple award contract 
having a NAICS code with the same or higher size standard as the one(s) 
under which it qualified for a period of one year from the date of its 
certification or re-certification as a small business.
    (ii) A concern can continue to receive orders under the MAS 
Program, including the Federal Supply Schedule, and multiple award 
contracts, including GWACs and multi-agency contracts, even after it no 
longer meets the requirement of paragraph (h)(2)(i) of this section, 
but such award will not count as an award to an 8(a) small business.
* * * * *

    Dated: April 21, 2003.
Hector V. Barreto,
Administrator.
[FR Doc. 03-10286 Filed 4-24-03; 8:45 am]
BILLING CODE 8025-01-P