[Federal Register Volume 70, Number 55 (Wednesday, March 23, 2005)]
[Rules and Regulations]
[Pages 14523-14529]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-5466]



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  Federal Register / Vol. 70, No. 55 / Wednesday, March 23, 2005 / 
Rules and Regulations  

[[Page 14523]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 125

RIN 3245-AF16


Government Contracting Programs

AGENCY: Small Business Administration.

ACTION: Final rule.

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

SUMMARY: This final rule amends the interim final regulations governing 
the Service-Disabled Veteran Owned Small Business Concern (SDVO SBC) 
Program. In particular, this rule clarifies several regulations, 
specifically those concerning protest procedures.

DATES: This rule is effective March 23, 2005.

FOR FURTHER INFORMATION CONTACT: Dean Koppel, Assistant Administrator, 
Office of Policy and Research, (202) 205-7322 or at 
[email protected].

SUPPLEMENTARY INFORMATION: On May 5, 2004, the U.S. Small Business 
Administration (SBA or Agency) published in the Federal Register, 69 FR 
25261, an interim final rule, with request for comments, to implement 
that section of the Veterans Benefits Act of 2003 (VBA), which 
addressed procurement programs for SBCs owned and controlled by 
service-disabled veterans. Specifically, the interim final rule defined 
the term service-disabled veterans, explained when competition may be 
restricted to SDVO SBCs, and established procedures for protesting the 
status of an SDVO SBC.

Discussion of Comments on the Interim Final Rule

    The comment period for the interim final rule closed on July 6, 
2004. SBA received 45 comments. The majority of the commenters fully 
supported the regulatory amendments. Twenty-seven of the 45 commenters 
provided substantive comments. The following is a synopsis of those 
substantive comments.

Section-by-Section Analysis of Comments

    In the interim final rule, SBA amended Sec.  121.401 by adding the 
phrase ``the Service-Disabled Veteran-Owned Small Business Concern 
Program (SDVO SBC Program)'' to state that the SDVO SBC Program is 
subject to size determinations. SBA received three comments on this 
section. The commenters stated that by SBA imposing size restrictions, 
SDVO SBCs will be excluded from certain industries, especially those 
industries where few employees or affiliation are needed. Consequently, 
these commenters believed that agencies will not be able to reach their 
3% SDVO SBC goal.
    In response to these comments, SBA notes that the VBA specifically 
applies to SBCs. Thus, to be eligible for a SDVO SBC contract, the 
business concern must meet the small business size standard for the 
applicable North American Industry Classification System code contained 
in the contract, in accordance with SBA's size regulations contained in 
13 CFR part 121. Therefore, SBA did not adopt this comment and has not 
amended the rule.
    SBA received one comment on Sec.  125.6, which added subcontracting 
limitations for SDVO SBCs so that all subcontracting limitations would 
be centrally located and easy for SBCs and contracting officials to 
locate. The commenter stated that SBA should amend the subcontracting 
rules so that if a SDVO SBC subcontracts work to another company, the 
amount of the subcontract would be excluded from the total revenues of 
the SDVO SBC when calculating size. We note that Sec.  121.104 of SBA's 
size regulations defines the term receipts and does not exclude 
subcontracting costs from its definition. In fact, SBA includes 
subcontracting costs as a factor when developing the size standards. 
Consequently, SBA believes that this comment is outside the scope of 
this rulemaking and therefore, SBA has not adopted the commenter's 
recommendation.
    SBA notes that it has clarified Sec.  125.6 to state that the SDVO 
SBC joint venture must perform the applicable percentage of work. This 
same requirement is also set forth in Sec.  125.15(b)(3); however, SBA 
believes it would be helpful to set forth this requirement in Sec.  
125.6 as well.
    SBA has also clarified the definition of service-disabled veteran 
with permanent and severe disability in Sec.  125.8 to explain that it 
is relying on written documentation from the U.S. Department of 
Veterans Affairs (VA) that the veteran has a service-connected, 
permanent and total disability, as set forth in the VA's regulations.
    In addition, SBA has corrected a typographical error in the 
definition of the term spouse. The definition refers readers to the 
correct cite--38 U.S.C. 101(31)--for that definition.
    SBA defined who owns and controls an SDVO SBC in Subpart B, Sec.  
125.9 and Sec.  125.10. SBA received two comments on these sections. 
One commenter stated that SDVO SBCs should be allowed to own and 
control holding companies for the purpose of program participation. One 
commenter stated that SBA should allow a surviving spouse to own and 
control a SDVO SBC following the death of the service-disabled veteran. 
Further, one commenter stated that all veterans should be considered, 
not just service-disabled veterans.
    In response to these comments, SBA notes that the VBA and Small 
Business Act (Act) set forth specific criteria for program eligibility. 
For example, the Act states that in the case of a publicly-owned 
business, not less than 51% of the stock must be owned by one or more 
service-disabled veterans. Thus, we believe that the statute expresses 
a clear intent for direct ownership of the SBC by service-disabled 
veterans. SBA has created an exception for certain trusts because SBA 
believes that living trusts may be treated as the functional equivalent 
of ownership by service-disabled veterans where the trust is revocable, 
and the service-disabled veterans are, at all times, the grantors, 
trustees, and the current beneficiaries of the trust.
    Further, the statute does not provide for ownership by surviving 
spouses of service-disabled veterans or for ownership by a veteran that 
is not service-disabled. Therefore, SBA has not amended the interim 
final rule to allow for ownership by holding companies, surviving 
spouses or veterans that are not service-disabled.
    SBA is correcting a typographical error at the heading for Subpart 
C to change ``gurantee'' to ``guarantee.''

[[Page 14524]]

    SBA received six comments regarding the eligibility requirements 
set forth in Sec.  125.15, including the joint venture and 
nonmanufacturer requirements. Four commenters stated that this program 
should not allow self-representation on a contract and to avoid a 
firm's misrepresentation as a SDVO SBC, SBA should require proof of 
status. SBA notes that it did consider proposing a certification 
program, similar to others administered by the Agency, which would have 
required proof of eligibility prior to certification on a particular 
contract. However, SBA did not believe such a certification program was 
necessary to implement the VBA or was required by the VBA. In addition, 
SBA believes that allowing other SDVO SBCs to protest the self-
representation made on an offer is a self-policing process and will 
prevent business concerns from misrepresenting their status. This 
procedure--allowing self-representation on an offer and then a protest 
on the self-representation--is the same procedure used for small 
business set-asides, which SBA believes has worked well in the past and 
continues to work well.
    With respect to the joint venture requirements set forth in Sec.  
125.15, one commenter stated that SBA's established joint venture 
process is unduly restrictive and recommended that SBA allow SDVO SBCs 
to participate in joint ventures with small and large businesses. This 
commenter believed that SBA should increase the number of permitted 
joint ventures for SDVO SBCs. In response to this comment, SBA notes 
that the joint venture requirements are similar to those for SBA's 
other programs, including 8(a) and HUBZone. Further, SBA believes that 
it would not meet the purpose and intent of the VBA--to assist service-
disabled veteran-owned SBCs through government contracting 
preferences--if such concerns were allowed to joint venture with an 
other-than-small business and together exceed the size requirements of 
the contract. In such instances, SBA believes the benefits would likely 
flow to the large business, and not the SDVO SBC and this does not 
serve the purpose of the VBA.
    In addition, with respect to Sec.  125.15(c), one commenter stated 
that SDVO SBC distributors should be allowed to supply the product of 
any business, large or small, above and below $25,000. This commenter 
believes that the nonmanufacturer rule and the waiver process is 
tedious and onerous for the SBC. First, SBA would like to clarify that 
waivers to the nonmanufacturers rule are not requested by a SBC as the 
result of a published Federal requirement. Rather, contracting officers 
can request a waiver to the rule when: (1) Market research indicates 
that no small business manufacturer or processor reasonably can be 
expected to offer a product meeting the specifications (including 
period for performance) required by a particular solicitation; or (2) 
SBA determines that no small business manufacturer or processor of the 
product or class of products is available to participate in the Federal 
procurement market. Section 121.406(b)(3) of SBA's size regulations 
further defines the guidelines for contracting officers to request a 
waiver. Waiver requests are processed after the contracting officer 
conducts market research and prior to the issuance of a Federal 
requirement by the contracting officer and are not a burden to a SBC. 
In this way, SBC non-manufacturers can compete in restricted 
procurements.
    Second, SBA believes that the nonmanufacturer rule is necessary to 
maintain the small business industrial base. Further, the rule applies 
to all of SBA's programs. Thus, SBA has not amended the interim final 
rule to adopt this comment.
    SBA received three comments on Sec.  125.18, which addresses what 
requirements are not available for SDVO SBC contracts. The commenters 
recommended that only requirements made through the Federal Prison 
Industries, Inc. and Javits-Wagner-O'Day Programs be excluded from the 
SDVO SBC Program. The commenters stated that procurements under the 
8(a) Business Development (BD) Program should be released for possible 
award under the SDVO SBC Program. In response to this comment, SBA 
notes that this regulation is necessary to ensure the integrity of the 
business development aspects of the 8(a) BD program. Generally, the 
requirement will be retained for exclusive 8(a) participation, but may 
be released by SBA as indicated in the regulation. Thus, SBA has not 
amended the interim final rule to adopt this comment.
    Six commenters stated that SBA should change ``may'' to ``shall'' 
in Sec.  125.19 and Sec.  125.20. In other words, these commenters 
believe that a CO should be required to award set-aside and sole source 
contracts to SDVO SBCs and the program should therefore be mandatory 
rather than discretionary. In response, SBA notes that the VBA 
specifically states that the contracting officer of a procuring agency 
``may'' award a sole source or set-aside contract to a SDVO SBC, if 
certain conditions are met. Thus, SBA's regulations are following the 
statutory mandate and therefore the interim final rule has not been 
changed.
    Seven commenters recommended changes to the regulations regarding 
the sole source provisions for SDVO SBCs set forth in 125.20. Two 
commenters recommended that the $3 million threshold for contract 
opportunities, other than manufacturing, be clarified to read $3 
million annually. SBA cannot make that change. The statute specifically 
provides that a contracting officer may award a sole source contract to 
a SDVO SBC if the anticipated award price of the contract (including 
options) will not exceed $3 million for contract opportunities other 
than manufacturing. Thus, the $3 million is based upon the contract 
price, including options, and not the annual cost of the contract.
    Five commenters stated that SDVO SBC Program sole source 
procurements should be equivalent to sole source procurements under the 
8(a) BD Program. For example, in the 8(a) BD Program, a contracting 
officer may award a sole source contract to an 8(a) BD SBC even if 
there is a reasonable expectation that two or more 8(a) SBCs can 
perform the requirement. In contrast, a contracting officer may only 
award a sole source SDVO SBC contract if he or she does not have a 
reasonable expectation that two or more SDVO SBCs will submit offers on 
the requirements (and other criteria are met). In response to this 
comment, SBA notes that both sole source requirements, for the 8(a) BD 
Program and the SDVO SBC Program, are set forth in statute. SBA's 
regulations follow the statutory mandate for each program and 
therefore, SBA's regulation regarding SDVO SBC sole source contracts 
remains unchanged.
    SBA also received three comments recommending that SDVO SBCs be 
given a 10% price evaluation preference similar to the SDB or the 
HUBZone Program. In response to this comment, SBA notes that the SDB 
and HUBZone price evaluation preferences are statutory mandates. There 
is no statutory mandate for SDVO SBCs to receive such a price 
evaluation preference. Therefore, SBA has not amended the regulation to 
provide for one.
    Similarly, SBA received three comments recommending that the SDVO 
SBC Program be given program parity with the other socio-economic 
programs, in particular, the 8(a) BD Program. SBA notes that in Sec.  
125.19, regarding set-asides for SDVO SBCs, it states that contracting 
officers should consider setting aside the requirement for SDVO SBCs, 
8(a) SBCs and

[[Page 14525]]

HUBZone SBCs before considering setting aside the requirement for SBCs 
in general. SBA believes that this regulation does provide parity for 
SDVO SBCs with SBA's other programs, to the extent the VBA and other 
sections of the Small Business Act, as implemented in the Federal 
Acquisition Regulations, permits such parity.
    SBA has amended Sec.  125.25 to clarify, with an example, an 
insufficient protest allegation. In addition, SBA has amended Sec.  
125.25(e), referrals to SBA of protests from the contracting officer. 
In Sec.  125.25(e), SBA is also requesting the contracting officer 
inform SBA the date the protested concern submitted its offer and when 
the protester received notification about the apparent successful 
offeror. This information is necessary for SBA to determine whether the 
protest has been submitted on time and the date SBA must look at to 
determine eligibility.
    SBA has amended Sec.  125.26 based upon information it has received 
concerning service-disabled veteran status documents. SBA has learned 
that as a result of a fire sometime ago, many of these records were 
destroyed. Thus, the affected veterans would have to contact the U.S. 
National Archives and Records Administration (NARA) for documents 
evidencing their status as a service-disabled veteran. Consequently, 
SBA has amended Sec.  125.26 to state that a protest must present 
specific allegations supporting the contention that the owner(s) cannot 
provide documentation from the VA, U.S. Department of Defense (DoD), or 
NARA to show that they meet the definition of service-disabled veteran 
or service-disabled veteran with a permanent and severe disability as 
set forth in Sec.  125.8.
    SBA has amended the timeline for which a protested SDVO SBC concern 
must submit information in response to a protest. According to Sec.  
125.27(c)(1), the protested concern was required to submit information 
responding to the protest within five business days of receipt of the 
protest. SBA has amended this to state that the protested concern must 
submit information responding to the protest within ten business days 
of receipt of the protest. SBA notes that it has done extensive 
research on veteran records. SBA has learned that it could take a 
service-disabled veteran up to ten days to receive information from 
NARA (a repository for official government documents), and perhaps 
longer from the different services, about their service-disabled 
veteran status. Thus, SBA has amended Sec.  125.27 to take this into 
account, despite the fact SBA believes that each SDVO SBC certifying as 
such for a Federal procurement should have all of the necessary 
documents prior to making the representation.
    SBA notes that copies of most military personnel and medical 
records are on file at the National Personnel Records Center in St 
Louis, MO; however some military personnel records are maintained by 
the Military Services depending on when the veteran was discharged. 
Veterans who filed or are filing a medical claim should contact the VA 
regional office in their state in order to determine if their medical 
record and claim for service connected disability is already on file. 
To request military personnel records, the below contact information is 
provided:

                       Table 1.--Contact Information To Request Military Personnel Records
----------------------------------------------------------------------------------------------------------------
         Branch of service              Discharge date             Information                  Address
----------------------------------------------------------------------------------------------------------------
1. Air Force......................  Discharged or retired  Full name, Social Security  National Personnel
                                     since September 25,    Number and/or Service       Records Center, 9700
                                     1947.                  Number (both when           Page Avenue, St. Louis,
                                                            available), enlistment      MO 63132-5100, (314) 801-
                                                            and discharge dates, date   0800, http://
                                                            of birth and place of       vetrecs.archives.gov.
                                                            birth (city and state),
                                                            rank upon discharge or
                                                            release, address where
                                                            record is to be mailed,
                                                            and signature.
2. Army...........................  Discharged or retired  Full name, Social Security  National Personnel
                                     between November 1,    Number and/or Service       Records Center, 9700
                                     1912-September 30,     Number (both when           Page Avenue, St. Louis,
                                     2002.                  available), enlistment      MO 63132-5100, (314) 801-
                                                            and discharge dates, date   0800, http://
                                                            of birth and place of       vetrecs.archives.gov.
                                                            birth (city and state),
                                                            rank upon discharge or
                                                            release, address where
                                                            record is to be mailed,
                                                            and signature.
                                    Discharged or retired  Full name, Social Security  U.S. Army Human Resources
                                     since October 1,       Number, enlistment and      Command, ATTN: AHRC-PAV-
                                     2002.                  discharge dates, date of    V, 1 Reserve Way, St.
                                                            birth and place of birth    Louis, MO 63132-5200,
                                                            (city and state), rank      (314) 592-0521.
                                                            upon discharge or
                                                            release, address where
                                                            record is to be mailed,
                                                            and signature.
3. Marine Corps...................  Discharged or retired  Full name, Social Security  National Personnel
                                     between 1905-Dec 31,   Number and/or Service       Records Center, 9700
                                     1998.                  Number (both when           Page Avenue, St. Louis,
                                                            available), enlistment      MO 63132-5100, (314) 801-
                                                            and discharge dates, date   0800, http://
                                                            of birth and place of       vetrecs.archives.gov.
                                                            birth (city and state),
                                                            rank upon discharge or
                                                            release, address where
                                                            record is to be mailed,
                                                            and signature.
                                    Discharged or retired  Full name, Social Security  Commandant of the Marine
                                     since 1999.            Number, date discharged     Corps, Headquarters,
                                                            from Marine Corps           USMC (MMSB-10), 2008
                                                            service, address where      Elliot Road, Quantico,
                                                            record is to be mailed,     VA 22134-5030.
                                                            and signature of member.
4. Navy...........................  Discharged or retired  Full name, Social Security  National Personnel
                                     between 1885-Dec 31,   Number and/or Service       Records Center, 9700
                                     1994.                  Number (both when           Page Avenue, St. Louis,
                                                            available), enlistment      MO 63132-5100, (314) 801-
                                                            and discharge dates, date   0800, http://
                                                            of birth and place of       vetrecs.archives.gov.
                                                            birth (city and state),
                                                            rank/rate upon discharge
                                                            or release, address where
                                                            record is to be mailed,
                                                            and signature.
                                    Discharged or retired  Full name, Social Security  Navy Personnel Command,
                                     since 1995.            Number, date discharged     PERS-312E, 5720
                                                            from Naval service,         Integrity Drive,
                                                            address where record is     Millington, TN 38055-
                                                            to be mailed, and           3120, DSN: 882-4885 or
                                                            signature of member.        COM: 901-874-4885.
----------------------------------------------------------------------------------------------------------------


[[Page 14526]]

All requests for records and information must be in writing. Generally, 
there is no charge for military personnel and health record information 
provided to veterans. With respect to records regarding the status of a 
veteran with a permanent and severe disability, the VA has informed SBA 
that the veteran can request a document that specifically states that 
the veteran has a permanent and total disability for purposes of 38 CFR 
3.340.
    SBA has also clarified the stay provisions in Sec.  125.27. In the 
interim final rule, SBA explained that the CO may award the contract if 
SBA does not issue its protest determination within the 15-day period 
required by the regulations. SBA has added a new paragraph (e) to allow 
the CO to award the contract after receipt of a protest if the CO 
determines in writing that an award must be made to protect the public 
interest. This provision has two purposes. First, it reinforces that 
the CO should stay the procurement until the protest and appeal process 
is completed. Second, SBA understands that in certain situations, the 
CO may be unable to wait until the process is completed. In those 
cases, the CO must make the determination in writing.
    In response to one commenter, SBA has also amended Sec. Sec.  
125.27(g) and 125.28 to clarify the effects of a protest or appeal 
determination. With respect to both a protest and an appeal, if the 
contract has already been awarded and the protest is sustained, or on 
appeal the Office of Hearings and Appeals (OHA) Judge affirms that the 
SDVO SBC does not meet a status or ownership and control requirement 
set forth in these regulations, then the procuring agency cannot count 
the award as an award to a SDVO SBC. If a contract has not yet been 
awarded and the protest is sustained, or on appeal the OHA Judge 
affirms that the protested concern does not meet a status or ownership 
and control requirement set forth in these regulations, then the 
protested concern is ineligible for an SDVO SBC contract award. There 
is a statutory basis for this clarification. According to the VBA, sole 
source and set-aside contracts can only be awarded to SDVO SBCs as 
defined by statute and as implemented in SBA's regulations. If the 
concern is not an SDVO SBC, then it is not an award pursuant to the VBA 
to a SDVO SBC and should not be counted as such.
    SBA received one comment asking for a clarification of the appeal 
procedures discussed in part 134. SBA has reviewed the OHA appeal 
procedures set forth in the interim final rule and agrees that further 
clarification is necessary. Consequently, SBA has amended the rule to 
include a separate subpart in 13 CFR part 134 to specifically address 
appeals of SDVO SBC protests. SBA has issued those changes in a 
separate rule, however, and has requested further comment on the OHA 
appeal procedures in that rule.
    In addition, SBA received several comments on the general nature of 
the SDVO SBC Program. For example, three commenters recommended that 
provisions be made for mentor-prot[eacute]g[eacute] relationships in 
the SDVO SBC Program. SBA has reviewed this issue thoroughly and 
believes that the SDVO SBC Program, unlike the 8(a) BD Program, is not 
developmental in nature. Rather, it is the result of a recognized need 
to increase the participation of ``established'' SDVO SBCs in the 
Federal marketplace. The first attempt, Public Law 106-50, instituted 
the 3% goal for SDVO SBCs. When data indicated that the desired results 
were not being achieved, Public Law 108-183 was enacted. Public Law 
108-183 established tools (a restricted competition and sole source 
authority) for contracting officers to use to reach that segment of the 
small business population. Although there is no prohibition against SBA 
establishing an SDVO SBC Mentor-Prot[eacute]g[eacute] Program, at this 
juncture, SBA prefers to wait and see if implementation of the 
procurement tools in Public Law 108-183 will allow contracting 
activities to reach their SDVO SBC goals. SBA notes that there is no 
prohibition for SDVO SBCs, when eligible, to participate in the Mentor-
Prot[eacute]g[eacute] Programs of other agencies.
    One commenter recommended that Small Business Innovation and 
Research (SBIR) contracts be available under the SDVO SBC Program. SBA 
notes that the SBIR Program was established by the Small Business 
Innovation Development Act of 1982, codified at 15 U.S.C. 638. The 
statutory purpose of the SBIR Program is to strengthen the role of 
innovative SBCs in Federally-funded research and research and 
development (R/R&D). The SBIR Program is a phased process, uniform 
throughout the Federal Government, of soliciting proposals and awarding 
funding agreements for R/R&D to meet stated agency needs or missions. 
SBA believes that as a result of the nature and purpose of the program 
and the way it is structured, it would not be beneficial to allow for 
set-aside or sole source SBIR awards to a SBC simply because they are a 
SDVO SBC (or any other type of SBC such as a HUBZone or 8(a) BD 
concern). However, SBA can request agencies to conduct outreach efforts 
to find and place innovative SDVO SBCs in the SBIR Program information 
system and encourage such business concerns to participate in the 
program. In addition, agencies may count SBIR contract awards to SDVO 
SBCs towards their small business goals.
    One commenter stated that the Central Contractor Registration (CCR) 
should be more efficient at providing marketing assistance to SDVO 
SBCs. SBA believes that this comment is outside the scope of this 
rulemaking and therefore, SBA will take no further action on it.

Compliance With Executive Orders 12866, 12988, and 13132, the Paperwork 
Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 
U.S.C. 601-612)

    SBA has determined that this final rule does not impose additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act, 44 U.S.C., chapter 35.
    This action meets applicable standards set forth in Sec. Sec.  3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.
    This regulation will not have substantial direct effects on the 
States, on the relationship between the Federal government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, for the purposes of Executive 
Order 13132, SBA determines that this final rule has no federalism 
implications warranting preparation of a federalism assessment.
    Because the rule was initially issued as an interim final rule, 
there was no requirement for SBA to prepare an Initial Regulatory 
Flexibility Act analysis. Therefore, there is no requirement for SBA to 
issue a final Regulatory Flexibility Act analysis. However, because OMB 
has determined that this rule constitutes a ``significant regulatory 
action'' under Executive Order 12866, SBA reported a Regulatory Impact 
Analysis (RIA) in the interim final rule. The Agency believes that this 
RIA is still accurate, and accordingly, sets forth a final RIA below.

Regulatory Impact Analysis

    In June 2004, SBA's Office of Advocacy issued a report entitled 
``Characteristics of Federal Government Procurement Spending with 
Veteran-Owned Businesses FY2000-FY2003 (3Q),'' stating that Agencies 
have made little use of veteran-owned businesses (http://www.sba.gov/advo/research/#procurement). As stated in the preamble above, SBA 
believes there is a

[[Page 14527]]

significant need for this regulatory action and implementing the 
changes in this rule would provide considerable benefits, including 
attracting more SDVO SBCs to the Federal procurement arena and 
assisting Agencies in achieving the statutorily mandated 3% government-
wide goal for procurement from SDVO SBCs.
    Congress found that agencies were falling far short of reaching 
this goal. Consequently, the legislative history specifically states 
that Congress urges SBA and the Office of Federal Procurement Policy to 
expeditiously and transparently implement the Service-Disabled Veteran-
Owned Small Business Concern is program. SBA is implementing this 
program through regulations because there are no other viable 
alternatives.
    SBA cannot accurately determine how many concerns will be competing 
for SDVO SBC contract awards because there is insufficient data on SDVO 
SBCs to support a reasonable estimate of the cost or benefit. The 
Federal Government has only been collecting procurement statistics on 
veteran-owned businesses since FY 2000. These statistics do not 
demarcate SDVO SBCs. According to the VA, there were 2.5 million 
veterans with a service connected disability. (See http://www.va.gov/vetdata/demographics/index.htm). This does not mean that each of those 
veterans own a SBC or own a business concern that would qualify for the 
program.
    SBA reviewed information contained in DoD's CCR database (http://www.ccr.gov). Currently, there are 4,825 SDVO SBCs registered in CCR. 
This represents a small portion, 15.9%, of the 30,434 veteran-owned 
businesses registered in CCR. Again, it is not known what percentage of 
the service-disabled veterans based their representation on the 
``service-connected'' disability as defined by 38 U.S.C. 101.
    SBA also reviewed data from the Federal Procurement Data System 
(http://www.fpds.gov). In FY 2001, there were 9,142 contract actions 
awarded to SDVO SBCs in the amount of $554,167,000. This represented 
.25% of all Federal contracts awarded. In FY 2002, 7,131 contract 
actions were awarded to SDVO SBCs in the amount of $298,901,000. This 
represented .13% of all Federal contracts awarded. SBA believes that 
the number of contracts awarded to SDVO SBCs will increase as a result 
of this regulation implementing the VBA. Few contracts were awarded to 
SDVO SBCs in the Federal or State arena. This number could increase as 
a result of the implementation of the VBA through this regulation.
    Although there are over 2 million service-disabled veterans, only a 
small portion own small businesses. However, it is assumed that the 
establishment of a sole source and set-aside procurement vehicle for 
SDVO SBCs will attract more of these entities to the Federal 
procurement arena.
    This rule will potentially benefit all SDVO SBCs. However, SBA 
believes currently eligible SDVO SBCs will benefit immediately since 
they are ready and able to tender an offer for a Federal procurement. 
Nonetheless, SBA notes that because of the relatively small percentage 
of SDVO SBCs (2.4%) registered in the CCR (4,852), as compared to the 
total number of SBCs (201,742), SBA believes that this rule will not 
have a major impact on other SBCs in the Federal procurement arena. 
Federal Government agencies will also benefit from this regulation 
because they will be able to tap the resources of SDVO SBCs using a 
sole source or set-aside mechanism and therefore have more 
opportunities to achieve their SDVO SBC goals, including meeting their 
Federally-mandated goal to award contracts to SDVO SBCs.
    SBA estimates that the Federal government will require no 
additional appropriations for agencies to implement this program. The 
awards would come from existing appropriated funds and current agency 
procurement needs and therefore there would be no increase in the cost 
to the Government.
    SBA estimates that implementation of this regulation for SDVO SBCs 
will require no additional proposal costs under this program as 
compared to submitting proposals under any other small business set-
aside program. In addition, SDVO SBCs currently represent their status 
for purposes of data collecting in small business goaling in accordance 
with 15 U.S.C. 644(g).

List of Subjects in 13 CFR Part 125

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


0
For the reasons set forth in the preamble, amend part 125 of title 13 
of the Code of Federal Regulations as follows:

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
1. The authority citation for 13 CFR part 125 continues to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), 637, 644, and 657f; 31 U.S.C. 
9701, 9702.


0
2. In Sec.  125.6, add a new paragraph (b)(5) to read as follows:


Sec.  125.6  Prime contractor performance requirements (limitations on 
subcontracting).

* * * * *
    (b) * * *
    (5) In accordance with Sec.  125.15(b)(3), the SDVO SBC joint 
venture must perform the applicable percentage of work.
* * * * *
0
3. Amend Sec.  125.8 to revise paragraphs (c), (d) and (h) to read as 
follows:


Sec.  125.8  What definitions are important in the Service-Disabled 
Veteran-Owned (SDVO) Small Business Concern (SBC) Program?

* * * * *
    (c) Permanent caregiver is the spouse, or an individual, 18 years 
of age or older, who is legally designated, in writing, to undertake 
responsibility for managing the well-being of the service-disabled 
veteran with a permanent and severe disability, to include housing, 
health and safety. A permanent caregiver may, but does not need to, 
reside in the same household as the service-disabled veteran with a 
permanent and severe disability. In the case of a service-disabled 
veteran with a permanent and severe disability lacking legal capacity, 
the permanent caregiver shall be a parent, guardian, or person having 
legal custody. There may be no more than one permanent caregiver per 
service-disabled veteran with a permanent and severe disability.
    (d) Service-Disabled Veteran with a Permanent and Severe Disability 
means a veteran with a service-connected disability that has been 
determined by the VA, in writing, to have a permanent and total 
service-connected disability as set forth in 38 CFR 3.340 for purposes 
of receiving disability compensation or a disability pension.
* * * * *
    (h) Spouse has the meaning given the term in section 101(31) of 
Title 38, United States Code.
* * * * *

0
4. Correct the term ``gurantee'' in the Table of Contents in Subpart C 
to read ``guarantee.''

0
5. Revise paragraph (a) introductory text of Sec.  125.15 to read as 
follows:


Sec.  125.15  What requirements must an SDVO SBC meet to submit an 
offer on a contract?

    (a) Representation of SDVO SBC status. An SDVO SBC must submit the 
following representations with its initial offer (which includes price) 
on a specific contract:
* * * * *

0
6. Revise paragraphs (a), (b), and (e) of Sec.  125.25 to read as 
follows:

[[Page 14528]]

Sec.  125.25  How does one file a service disabled veteran-owned status 
protest?

    (a) General. The protest procedures described in this part are 
separate from those governing size protests and appeals. All protests 
relating to whether an eligible SDVO SBC is a ``small'' business for 
purposes of any Federal program are subject to part 121 of this chapter 
and must be filed in accordance with that part. If a protester protests 
both the size of the SDVO SBC and whether the concern meets the SDVO 
SBC requirements set forth in Sec.  125.15(a), SBA will process each 
protest concurrently, under the procedures set forth in part 121 of 
this chapter and this part. SBA does not review issues concerning the 
administration of an SDVO contract.
    (b) Format. Protests must be in writing and must specify all the 
grounds upon which the protest is based. A protest merely asserting 
that the protested concern is not an eligible SDVO SBC, without setting 
forth specific facts or allegations is insufficient. Example: A 
protester submits a protest stating that the awardee's owner is not a 
service-disabled veteran. The protest does not state any basis for this 
assertion. The protest allegation is insufficient.
* * * * *
    (e) Referral to SBA. The contracting officer must forward to SBA 
any non-premature protest received, notwithstanding whether he or she 
believes it is sufficiently specific or timely. The contracting officer 
must send all protests, along with a referral letter, directly to the 
Associate Administrator for Government Contracting, U.S. Small Business 
Administration, 409 Third Street, SW., Washington, DC 20416 or by fax 
to (202) 205-6390, marked Attn: Service-Disabled Veteran Status 
Protest. The CO's referral letter must include information pertaining 
to the solicitation that may be necessary for SBA to determine 
timeliness and standing, including: the solicitation number; the name, 
address, telephone number and facsimile number of the CO; whether the 
contract was sole source or set-aside; whether the protester submitted 
an offer; whether the protested concern was the apparent successful 
offeror; when the protested concern submitted its offer (i.e., made the 
self-representation that it was a SDVO SBC); whether the procurement 
was conducted using sealed bid or negotiated procedures; the bid 
opening date, if applicable; when the protest was submitted to the CO; 
when the protester received notification about the apparent successful 
offeror, if applicable; and whether a contract has been awarded.

0
7. Revise Sec.  125.26 to read as follows:


Sec.  125.26  What are the grounds for filing an SDVO SBC protest?

    (a) Status. In cases where the protest is based on service-
connected disability, permanent and severe disability, or veteran 
status, the Associate Administrator for Government Contracting will 
only consider a protest that presents specific allegations supporting 
the contention that the owner(s) cannot provide documentation from the 
VA, DoD, or the U.S. National Archives and Records Administration to 
show that they meet the definition of service-disabled veteran or 
service disabled veteran with a permanent and severe disability as set 
forth in Sec.  125.8.
    (b) Ownership and control. In cases where the protest is based on 
ownership and control, the Associate Administrator for Government 
Contracting will consider a protest only if the protester presents 
credible evidence that the concern is not 51% owned and controlled by 
one or more service-disabled veterans. In the case of a veteran with a 
permanent and severe disability, the protester must present credible 
evidence that the concern is not controlled by the veteran, spouse or 
permanent caregiver of such veteran.

0
8. Revise Sec.  125.27 to read as follows:


Sec.  125.27  How will SBA process an SDVO protest?

    (a) Notice of receipt of protest. Upon receipt of the protest, SBA 
will notify the contracting officer and the protester of the date SBA 
received the protest and whether SBA will process the protest or 
dismiss it under paragraph (b) of this section.
    (b) Dismissal of protest. If SBA determines that the protest is 
premature, untimely, nonspecific, or is based on non-protestable 
allegations, SBA will dismiss the protest and will send the contracting 
officer and the protester a notice of dismissal, citing the reason(s) 
for the dismissal. The dismissal notice must also advise the protester 
of his/her right to appeal the dismissal to SBA's Office of Hearings 
and Appeals (OHA) in accordance with part 134 of this chapter.
    (c) Notice to protested concern. If SBA determines that the protest 
is timely, sufficiently specific and is based upon protestable 
allegations, SBA will:
    (1) Notify the protested concern of the protest and of its right to 
submit information responding to the protest within ten business days 
from the date of the notice; and
    (2) Forward a copy of the protest to the protested concern, with a 
copy to the contracting officer if one has not already been made 
available.
    (d) Time period for determination. SBA will determine the SDVO SBC 
status of the protested concern within 15 business days after receipt 
of the protest, or within any extension of that time which the 
contracting officer may grant SBA. If SBA does not issue its 
determination within the 15-day period, the contracting officer may 
award the contract, unless the contracting officer has granted SBA an 
extension.
    (e) Award of contract. The CO may award the contract after receipt 
of a protest if the contracting officer determines in writing that an 
award must be made to protect the public interest.
    (f) Notification of determination. SBA will notify the contracting 
officer, the protester, and the protested concern in writing of its 
determination.
    (g) Effect of determination. SBA's determination is effective 
immediately and is final unless overturned by OHA on appeal. If SBA 
sustains the protest, and the contract has not yet been awarded, then 
the protested concern is ineligible for an SDVO SBC contract award. If 
a contract has already been awarded, and SBA sustains the protest, then 
the contracting officer cannot count the award as an award to an SDVO 
SBC and the concern cannot submit another offer as an SDVO SBC on a 
future SDVO SBC procurement unless it overcomes the reasons for the 
protest (e.g., it changes its ownership to satisfy the definition of an 
SDVO SBC set forth in Sec.  125.8).

0
9. Revise Sec.  125.28 to read as follows:


Sec.  125.28  What are the procedures for appealing an SDVO status 
protest?

    The protested concern, the protester, or the contracting officer 
may file an appeal of an SDVO status protest determination with OHA in 
accordance with part 134 of this chapter. If the contract has already 
been awarded and on appeal, the OHA Judge affirms that the SDVO SBC 
does not meet a status or ownership and control requirement set forth 
in these regulations, then the procuring agency cannot count the award 
as an award to a SDVO SBC. In addition, the protested concern cannot 
self-represent its status for another procurement until it has cured 
the eligibility issue. If a contract has not yet been awarded and on 
appeal the OHA Judge affirms that the protested concern does not meet 
the status or ownership and control requirement set forth in this part, 
then the protested concern is

[[Page 14529]]

ineligible for an SDVO SBC contract award.

    Dated: December 1, 2005.
Hector V. Barreto,
Administrator.
[FR Doc. 05-5466 Filed 3-22-05; 8:45 am]
BILLING CODE 8025-01-P