[Federal Register Volume 76, Number 22 (Wednesday, February 2, 2011)]
[Rules and Regulations]
[Pages 5680-5685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2177]



[[Page 5680]]

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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 124, 125, 126, and 134

RIN 3245-AF65


Small Business, Small Disadvantaged Business, HUBZone, and 
Service-Disabled Veteran-Owned Business Status Protest and Appeal 
Regulations.

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA or Agency) is 
amending its regulations to clarify the effect, across all small 
business programs, of initial and appeal eligibility decisions on the 
procurement in question; increase the amount of time that SBA has to 
render formal size determinations; require that SBA's Office of 
Hearings and Appeals (OHA) issue a size appeal decision within 60 
calendar days of the close of the record, if possible; increase the 
amount of time that SBA has to file North American Industry 
Classification System (NAICS) code appeals; alter the NAICS code appeal 
procedures to comply with a Federal Court decision; clarify that 
contracting officers must reflect final agency eligibility decisions in 
Federal procurement databases and goaling statistics; and make other 
changes to size status protest and appeal rules.

DATES: Effective date: March 4, 2011. Applicability date: The 
amendments to 13 CFR 121.402(b), 121.404(a), and 121.407 apply to 
solicitations issued on or after March 4, 2011.

FOR FURTHER INFORMATION CONTACT: Jon Haitsuka, Program Analyst, Office 
of Size Standards, Office of Government Contracting, (202) 401-1420 or 
[email protected].

SUPPLEMENTARY INFORMATION: On March 1, 2010, SBA published a proposed 
rule in the Federal Register (75 FR 9129) to clarify the effect, across 
all small business programs, of initial and appeal eligibility 
decisions on the procurement in question; increase the amount of time 
that SBA has to render formal size determinations; require that SBA's 
OHA issue a size appeal decision within 60 calendar days of the close 
of the record, if possible; increase the amount of time that SBA has to 
file NAICS code appeals; alter the NAICS code appeal procedures to 
comply with a Federal Court decision; clarify that contracting officers 
must reflect final agency eligibility decisions in Federal procurement 
databases and goaling statistics; clarify how a contracting officer 
assigns a NAICS code and size standard to a multiple award procurement; 
and make other changes to status protest and appeal rules.
    SBA received comments from four individuals or entities in response 
to the proposed rule. The comments, as well as SBA's response to them, 
are discussed below. For a section-by-section analysis of the revised 
Parts 121, 124, 125, 126, and 134, see the supplementary information 
published as part of the proposed rule (75 FR 9129).

Analysis of Comments Received

    SBA received three supportive comments concerning its proposed 
removal of the second sentence of paragraph 121.404(a), which required 
recertification if a procuring agency modifies a solicitation to such 
an extent that original offers are no longer responsive. All three 
commenters maintained that it is unfair to disqualify a firm from 
consideration after the firm has spent a great deal of time and 
resources pursuing a contract opportunity that it was eligible for at 
the time of its initial offer including price. The commenters also 
noted that the current rule reduces competition by eliminating 
offerors, which is not necessarily in the best interests of the 
procuring agency. As we explained in the proposed rule, if a 
requirement changes so much that it is essentially new, the agency 
should cancel the solicitation and issue a new solicitation and open 
the competition up to all eligible offerors. In that case, size will be 
determined as of the date of the initial offer including price in 
response to the new solicitation. Consequently, SBA has adopted its 
proposed rule.
    Two commenters supported SBA's proposed amendment of Sec.  121.407 
to address the assignment of NAICS codes and corresponding size 
standards to task or delivery order contracts with contract line item 
numbers (CLINs) for divergent goods and services. One commenter found 
the proposed rule confusing and suggested requiring NAICS codes and 
size standards for orders with a value above $500,000. On September 27, 
2010, Congress enacted the Small Business Jobs Act of 2010, Pub. L. No. 
111-240, 124 Stat. 2504 (Jobs Act), which contained several provisions 
addressing small business contracting in the context of multiple award 
contracts. Consequently, we have decided to address the issue of 
assignment of NAICS codes and size standards to multiple award 
contracts when we address all of the statutory provisions of the Jobs 
Act that pertain to multiple award contracts, to ensure that multiple 
award small business contracting is addressed in a holistic manner.
    Several commenters supported SBA's proposed amendment of Sec.  
121.1009 to allow itself more time to decide size protests. One 
commenter suggested that SBA use calendar days instead of business 
days. SBA has historically used business days to measure timeframes 
concerning protest filing and processing. Consequently, SBA has 
retained business days to measure status protest determination 
timeframes, and has not adopted the commenter's suggestion.
    Several commenters supported SBA's proposed amendment of Sec. Sec.  
121.1009, 124.1013, 125.27, 126.803, and 134.504 to address the effect 
of status determinations on the procurement in question. However, two 
commenters did not support the provision which addresses situations 
where a contracting officer withholds award, SBA finds the protested 
concern to be eligible, the procuring agency then awards to that 
concern, and the initial determination is subsequently overturned on 
appeal. In that circumstance, the contracting officer may take some 
action based on the appellate decision, but is not required to do so. 
One commenter also noted the possibility that a firm found to be 
ineligible as a result of a formal size determination could 
successfully challenge the decision on appeal, yet not be awarded the 
contract. Both of these outcomes are consistent with the regulatory 
framework which has been in place for many years. The existing 
framework provides contracting officers with an incentive to withhold 
award until SBA renders a formal size determination. If SBA issues a 
formal size determination finding an apparent successful offeror to be 
small, the agency may proceed with award, even if an appeal is filed. 
Similarly, if SBA finds an apparent successful offeror to be other than 
small, the agency may proceed with award to another offeror, even if an 
appeal is filed. Size appeals can take several months or more to 
resolve, and agencies typically cannot delay their procurements for 
months and await an appeal decision. Consequently, SBA has never 
required contracting officers to apply appellate decisions to the 
procurement in question when the contracting officer waited for SBA's 
formal size determination and awarded to a concern based on SBA's 
formal size determination. If in all cases the contracting officer was 
required to take some action based on an appellate decision, regardless 
of whether the contracting officer withheld award and

[[Page 5681]]

waited for SBA's formal size determination, contracting officers would 
likely award before SBA issues a formal size determination, which could 
result in an increase in the number of ineligible firms performing the 
base terms of set-aside contracts. Similarly, if SBA issues a formal 
size determination finding the apparent successful offeror to be other 
than small and the contracting officer awards to another concern, it 
would be costly for the Government to have to terminate the award to an 
eligible concern based on an appellate decision finding the initial 
successful offeror to be eligible. Thus, SBA is adopting the proposed 
rule without modification.
    One commenter supported SBA's proposed amendment of Sec.  134.316 
to require OHA to issue a NAICS code appeal decision within 15 calendar 
days of the close of the record. However, after further internal review 
and discussion SBA decided to remove the NAICS code appeal decision 
deadline. OHA prioritizes NAICS code appeals and issues decisions as 
soon as practicable, because of the time sensitive nature of such an 
appeal.
    One commenter objected to SBA's proposed amendment of Sec.  134.304 
to allow SBA to file a NAICS code appeal at any time before offers are 
due. The commenter recommended that SBA be allowed to file a NAICS code 
appeal up to 15 calendar days before offers are due. However, the 
commenter's proposal would extend the deadline for an SBA NAICS code 
appeal by only five days in many cases, since offers are often due 30 
days after issuance of a solicitation and SBA currently must file a 
NAICS code appeal within 10 calendar days of issuance of a 
solicitation. As SBA stated in the preamble of the proposed rule, SBA 
often does not find out about egregious NAICS codes and/or size 
standard designations until well after the solicitation has been 
issued. SBA anticipates that it will file relatively few NAICS code and 
size standard appeals, but needs to be able to intervene to stop clear-
cut abuses. Thus, SBA is adopting the proposed rule without 
modification.
    One commenter suggested that SBA should require firms to recertify 
their size prior to award and on an annual basis. The commenter 
suggested that procuring agencies should not exercise any option with a 
firm that is other than small. This comment is beyond the scope of this 
rule. SBA considered these issues when it issued its recertification 
rule (71 FR 66434), and believes requiring such action could seriously 
disrupt the procurement process and result in unacceptable costs for 
procuring agencies and contractors. SBA notes that recertification is 
required in all cases where there is an acquisition, merger or novation 
and, for long-term contracts, prior to the sixth year and prior to each 
option thereafter (see Sec.  121.404(g)).

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

    The Office of Management and Budget (OMB) has determined that this 
final rule is a significant regulatory action for purposes of Executive 
Order 12866. Accordingly, the next section contains SBA's Regulatory 
Impact Analysis. This is not a major rule, however, under the 
Congressional Review Act, 5 U.S.C. 800.

Regulatory Impact Analysis

    1. Is there a need for the regulatory action?
    SBA's mission is to aid and assist small businesses through a 
variety of financial, procurement, business development, and advocacy 
programs. To effectively assist the intended beneficiaries of these 
programs, SBA must establish distinct definitions of which businesses 
are deemed small businesses. The Small Business Act (15 U.S.C. 632(a)) 
delegates the responsibility for establishing small business 
definitions to SBA's Administrator. This act also provides SBA with the 
authority to determine which businesses are small businesses concerns 
(15 U.S.C. 637(b)(1)(G)(6)). The supplementary information section of 
the proposed and final rule explains SBA's reasons for revising the 
size protest and appeal timeframes and application of final decisions 
on size and other small business status determinations. SBA believes 
that these changes are needed to provide clarity to procuring agencies 
and contractors.
    2. What are the potential benefits and costs of this regulatory 
action?
    SBA believes that more realistic timeframes for filing and 
rendering decisions on size protest and NAICS code appeal cases will 
improve the functioning of the size protest and size determination 
processes. Small businesses will have a sufficient time in which to 
raise size and NAICS classification issues and SBA will have more time, 
if needed, to prepare thorough decisions.
    The final provisions may have cost implications associated with 
delays to the contracting process. Contracting officers may have to 
wait an additional five business days in some cases before SBA renders 
a size determination. However, contracting officers are already 
generally required to withhold award for 15 days for a Historically 
Underutilized Business Zone (HUBZone), Small Disadvantaged Business 
(SDB), or Service-Disabled Veteran-Owned (SDVO) status protest. SBA 
believes that the potential costs associated with delays in the 
contracting process are relatively minor and are significantly 
outweighed by the benefits to the integrity of small business 
procurement programs and the intended beneficiaries.
    3. What are the alternatives to this final rule?
    SBA considered as an alternative completing size determinations 
within 10 business days of receiving all requested information from the 
protested concern. Although this would also achieve the objective of 
this final rule, it would create uncertainty as to when a size 
determination would actually be rendered. If the necessary information 
requested of a business is received within the three-day period 
requested by SBA, a size determination will be completed within 13 
days. However, if the protested concern submits incomplete information, 
the size determination period will vary depending on the circumstances. 
SBA believes a 15-day period is sufficient in most cases and provides a 
degree of certainty to contracting officers. It also reinforces the 
importance of promptly providing information to SBA.

Executive Order 12988

    For purposes of Executive Order 12988, SBA has drafted this final 
rule, to the extent practicable, in accordance with the standards set 
forth in section 3(a) and 3(b)(2) of that Order, to minimize 
litigation, eliminate ambiguity, and reduce burden. This rule has no 
preemptive or retroactive effect.

Executive Order 13132

    This rule does not have federalism implications as defined in 
Executive Order 13132. It will not have substantial direct effects on 
the States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various layers of government, as specified in the order. As such, it 
does not warrant the preparation of a Federalism Assessment.

Paperwork Reduction Act

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this final rule will not impose new reporting 
requirements nor will require new recordkeeping requirements.

[[Page 5682]]

Regulatory Flexibility Act

    SBA has determined that this final rule could have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. 
Therefore, SBA has prepared a Final Regulatory Flexibility Act (FRFA) 
analysis addressing this final rule.

FRFA

    When preparing a Regulatory Flexibility Analysis, an agency shall 
address all of the following: the need for, and objectives of, the 
rule; the estimated number of small entities to which the rule may 
apply; the projected reporting, recordkeeping and other compliance 
requirements; steps taken to minimize the significant economic impact 
on small entities. This FRFA considers these points and the impact this 
final rule may have on small entities.

a. Need for, and Objectives of, the Rule

    Under the Small Business Act, SBA is authorized to determine the 
size of a business entity. 15 U.S.C. 632. SBA's standards and 
definitions relating to formal size determinations and NAICS code 
designation for small business concerns are set forth in 13 CFR part 
121. The rules for procedures governing cases before OHA are set forth 
in 13 CFR part 134.
    SBA's regulations currently provide that SBA will issue a formal 
size determination within 10 working days of its receipt of a size 
protest, ``if possible.'' 13 CFR 121.1009(e). The FAR currently 
provides that a contracting officer should withhold award for 10 
business days after SBA's receipt of a size protest, after which time 
the contracting officer may proceed with award if ``further delay would 
be disadvantageous to the Government.'' FAR 19.302(h)(2). The FAR 
further provides that a contracting officer need not withhold award if 
he or she determines in writing that award must be made to protect the 
public interest. FAR 19.302(h)(1).
    After SBA receives a size protest it notifies the protested 
concern, and the protested concern is provided three business days to 
respond to the protest. Thus, SBA generally has only five business days 
to draft a formal size determination. In some cases, protested concerns 
ask for additional time to submit the requested information. In other 
cases, the information submitted by the protested concern leads the 
size specialist to request additional information. Size specialists 
typically have to sift through voluminous documentation before reaching 
a decision.
    Current regulations provide SBA with 15 business days to decide 
socio-economic status protests, such as HUBZone, SDB and SDVO. 13 CFR 
124.1013(a), 125.27(d), 126.803(b). Increasing the amount of time SBA 
has to make a size determination will allow size specialists adequate 
time to perform a thorough review and prepare a carefully constructed 
determination. Increasing the amount of time SBA has to render a formal 
size determination will also make SBA's regulations consistent and 
coherent across programs.
    SBA's regulations currently do not address the amount of time OHA 
has to render a decision in connection with a size or NAICS code 
appeal. SBA is amending its regulations to require OHA to issue size 
appeal decisions within 60 business days of the close of the record, if 
possible, and render NAICS code appeal decision as soon as practicable.
    The final rule will require the contracting officer to update 
Federal procurement databases to reflect final agency status 
determinations.

b. 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 entities that may be affected by 
the final rule. 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, this final rule (like the 
regulation currently in effect) will not impact small organizations or 
small governmental jurisdictions.
    The final rule will have no direct negative impact on any small 
business concern, since it is aimed at preventing other than small 
concerns from receiving or performing contracts set aside for small 
business concerns. The final rule will indirectly benefit small 
business concerns by preventing awards to ineligible concerns, or 
shortening the length of time other than small concerns perform small 
business set-aside contracts. SBA maintains an internal database of all 
size protest processed by the agency and the following table was 
constructed to illustrate the number of protest processed in the last 
five fiscal years.

----------------------------------------------------------------------------------------------------------------
          Size protests               FY 2005         FY 2006         FY 2007         FY 2008         FY 2009
----------------------------------------------------------------------------------------------------------------
Total Determinations Requested..             459             593             451             493             488
Cases Dismissed.................             122             139             131             104             146
Determined Small Business.......             190             219             193             200             207
Determined Other Than Small.....             115             163             119             115             128
Cases in Process/Other                        32              72               8              74               7
 Determinations.................
----------------------------------------------------------------------------------------------------------------

    There are more than 330,000 concerns listed as small business 
concerns in the Dynamic Small Business Search of the Central Contractor 
Registration database. Based on data for fiscal years 2005-2009, SBA 
processes an average of nearly 500 size protests each fiscal year, 
resulting in 41 percent being determined to be small and 26 percent 
determined to be other than small. The rest are dismissed on procedural 
grounds. Thus, the number of concerns affected by this rule, regardless 
of size, will be approximately 330 per year, as compared to 330,000 
small business concerns that are active in the Federal Government 
marketplace. The number of protests in other small business programs is 
significantly less than the numbers of size protests received.

c. Projected Reporting, Recordkeeping and Other Compliance Requirements

    This final rule would not impose any new information collection 
requirement on small businesses. This final rule will require 
contracting officers to update Federal procurement databases to reflect 
final agency status decisions. Contracting officers should currently be 
updating these databases, and this rule will make it clear that this 
must be done.

[[Page 5683]]

d. Steps Taken to Minimize the Significant Economic Impact on Small 
Entities

    This final rule should not result in a significant economic impact 
on small entities. This final rule will extend the timeframe SBA has 
for determining size of an entity resulting from a size protest. The 
addition of the five business days will allow SBA more time to 
adequately review the documentation needed to render a decision and 
will make SBA's regulations consistent across programs. The timeframe 
imposed on OHA for rendering decision resulting from appeals should 
minimize the economic impact on small entities by providing a decision 
in a timely manner.

e. Conclusion

    Based on the foregoing, SBA has determined that this final rule 
will not have a significant impact on a substantial number of small 
entities with the meaning of the RFA.

List of Subjects in 13 CFR Parts 121, 124, 125, 126, and 134

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

    For the reasons stated in the preamble, SBA amends parts 121, 124, 
125, 126, and 134 of title 13 of the Code of Federal Regulations as 
follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 continues to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 636(b), 637(a), 644, 
662(5) and 694a; Public Law 105-135, sec. 401 et seq., 111 Stat. 
2592.

Subpart A--Size Eligibility Provisions and Standards


Sec.  121.402  [Amended]

0
2. Amend Sec.  121.402(b) by removing the third sentence.


Sec.  121.404  [Amended]

0
3. Amend Sec.  121.404(a) by removing the second sentence.

0
4. Amend Sec.  121.1009 by revising paragraphs (a), (g)(1), (g)(2), 
(g)(3), and (h) to read as follows:


Sec.  121.1009  What are the procedures for making the size 
determination?

    (a) Time frame for making size determination. (1) After receipt of 
a protest or a request for a formal size determination, the SBA Area 
Office will issue a formal size determination within 15 business days, 
if possible.
    (2) The contracting officer may award a contract after receipt of a 
protest if the contracting officer determines in writing that an award 
must be made to protect the public interest. Notwithstanding such a 
determination, the provisions of paragraph (g) of this section apply to 
the procurement in question.
    (3) If SBA does not issue its determination within 15 business days 
(or request an extension that is granted), the contracting officer may 
award the contract if he or she determines in writing that there is an 
immediate need to award the contract and that waiting until SBA makes 
its determination will be disadvantageous to the Government. 
Notwithstanding such a determination, the provisions of paragraph (g) 
of this section apply to the procurement in question.
* * * * *
    (g) * * *
    (1) A contracting officer may award a contract to a protested 
concern after the SBA Area Office has determined either that the 
protested concern is an eligible small business or has dismissed all 
protests against it. If OHA subsequently overturns the Area Office's 
determination or dismissal, the contracting officer may apply the OHA 
decision to the procurement in question.
    (2) A contracting officer shall not award a contract to a protested 
concern that the Area Office has determined is not an eligible small 
business for the procurement in question.
    (i) If a contracting officer receives such a determination after 
contract award, and no OHA appeal has been filed, the contracting 
officer shall terminate the award.
    (ii) If a timely OHA appeal is filed after contract award, the 
contracting officer must consider whether performance can be suspended 
until an appellate decision is rendered.
    (iii) If OHA affirms the size determination finding the protested 
concern ineligible, the contracting officer shall either terminate the 
contract or not exercise the next option.
    (3) The contracting officer must update the Federal Procurement 
Data System and other procurement reporting databases to reflect the 
final agency size decision (the formal size determination if no appeal 
is filed or the appellate decision).
* * * * *
    (h) Limited reopening of size determinations. SBA may, in its sole 
discretion, reopen a formal size determination to correct an error or 
mistake, provided it is within the appeal period and no appeal has been 
filed with OHA. Once the agency has issued a final decision (either a 
formal size determination that is not timely appealed or an appellate 
decision), SBA cannot re-open the size determination.

0
5. Amend Sec.  121.1101 by revising paragraph (b) to read as follows:


Sec.  121.1101  Are formal size determinations subject to appeal?

* * * * *
    (b) OHA will review all timely appeals of size determinations.

0
6. Amend Sec.  121.1103 as follows:
0
a. Revise the section heading;
0
b. In paragraph (a), add a new sentence after the first sentence and 
before the second sentence;
0
c. Revise paragraph (b)(1);
0
d. Remove paragraphs (b)(4), and (b)(5); and
0
e. Add new paragraph (c).


Sec.  121.1103  What are the procedures for appealing a NAICS code or 
size standard designation?

    (a) * * * A NAICS code appeal may include an appeal involving the 
applicable size standard, such as where more than one size standard 
corresponds to the selected NAICS code or there is a question as to the 
size standard in effect at the time the solicitation was issued or 
amended. * * *
    (b) * * *
    (1) An appeal from a contracting officer's NAICS code or size 
standard designation must be served and filed within 10 business days 
after the issuance of the solicitation or amendment affecting the NAICS 
code or size standard. However, SBA may file a NAICS code appeal at any 
time before offers are due. OHA will summarily dismiss an untimely 
NAICS code appeal.
* * * * *
    (c) Procedure after a NAICS code appeal is filed and served.
    (1) Upon receipt of the service copy of a NAICS code appeal, the 
contracting officer shall:
    (i) Stay the solicitation;
    (ii) Advise the public, by amendment to the solicitation or other 
method, of the existence of the NAICS code appeal and the procedures 
and deadline for interested parties to file and serve arguments 
concerning the appeal;
    (iii) Send a copy of (or an electronic link to) the entire 
solicitation, including amendments, to OHA;
    (iv) File and serve any response to the appeal prior to the close 
of the record; and
    (v) Inform OHA of any amendments, actions or developments 
concerning the procurement in question.

[[Page 5684]]

    (2) Upon receipt of a NAICS code appeal, OHA shall:
    (i) Notify the appellant, the contracting officer, the SBA and any 
other known party of the date OHA received the appeal and the date the 
record will close; and
    (ii) Conduct the appeal in accordance with part 134 of this 
chapter.
    (3) Any interested party may file and serve its response to the 
NAICS code appeal.

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

0
7. 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. 100-656, Pub. L. 101-
37, Pub. L. 101-574, and 42 U.S.C. 9815.

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

0
8. Amend Sec.  124.1013 as follows:
0
a. Remove the second sentence in paragraph (a);
0
b. Revise paragraph (b);
0
c. Revise paragraph (d)(1);
0
d. Revise paragraphs (h)(1) and (h)(2); and
0
e. Add new paragraphs (h)(3) and (h)(4).


Sec.  124.1013  How does SBA make disadvantaged status determinations 
in considering an SDB protest?

* * * * *
    (b) Award of contract. (1) The contracting officer may award a 
contract after receipt of a protest if the contracting officer 
determines in writing that an award must be made to protect the public 
interest. Notwithstanding such a determination, the provisions of 
paragraph (h) of this section apply to the procurement in question.
    (2) If SBA does not issue its determination within 15 business days 
(or request an extension that is granted), the contracting officer may 
award the contract if he or she determines in writing that there is an 
immediate need to award the contract and that waiting until SBA makes 
its determination will be disadvantageous to the Government, 
Notwithstanding such a determination, the provisions of paragraph (h) 
of this section apply to the procurement in question.
* * * * *
    (d) * * *
    (1) Except with respect to a concern which is a current Participant 
in SBA's 8(a) BD program and is authorized under Sec.  124.1013(b)(3) 
to submit an affidavit concerning its disadvantaged status, the 
disadvantaged status determination will be based on the protest record, 
including reasonable inferences therefrom, as supplied by the protested 
concern, SBA or others.
* * * * *
    (h) * * *
    (1) A contracting officer may award a contract to a protested 
concern after the DC/SDBCE has determined either that the protested 
concern is an eligible SDB or has dismissed all protests against it. If 
the AA/GCBD subsequently overturns the initial determination or 
dismissal, the contracting officer may apply the appeal decision to the 
procurement in question.
    (2) A contracting officer shall not award a contract to a protested 
concern that the DC/SDBCE has determined is not an eligible SDB for the 
procurement in question.
    (i) If a contracting officer receives such a determination after 
contract award, and no appeal has been filed, the contracting officer 
shall terminate the award.
    (ii) If a timely appeal is filed after contract award, the 
contracting officer must consider whether performance can be suspended 
until an appellate decision is rendered.
    (iii) If the AA/GCBD affirms the initial determination finding that 
the protested concern ineligible, the contracting officer shall either 
terminate the contract or not exercise the next option.
    (3) The contracting officer must update the Federal Procurement 
Data System and other procurement reporting databases to reflect the 
final agency SDB decision (the decision of the AA/SDBCE if no appeal is 
filed or the decision of the AA/GCBD).
    (4) A concern found to be ineligible is precluded from applying for 
SDB certification for 12 months from the date of the final agency 
decision (whether by the DC/SDBCE, without an appeal, or by the AA/GCBD 
on appeal). A concern found to be ineligible is also precluded from 
representing itself as an SDB for a subcontract unless it overcomes the 
reasons for the protest (e.g., it changes its ownership to satisfy the 
definition of an SDB set forth in Sec.  124.1002).


Sec.  124.1014  [Amended]

0
9. Amend Sec.  124.1014 by removing paragraph (f) and redesignating 
paragraphs (g) through (i) as paragraphs (f) through (h), respectively.

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
10. The authority citation for part 125 continues to read as follows:

    Authority:  15 U.S.C. 632(p), (q); 634(b)(6); 637; 644 and 
657(f).

Subpart D--Protests Concerning SDVO SBCs

0
11. Amend Sec.  125.27 by revising paragraphs (e) and (g) to read as 
follows:


Sec.  125.27  How will SBA process an SDVO protest?

* * * * *
    (e) Award of contract. (1) The contracting officer may award a 
contract after receipt of a protest if the contracting officer 
determines in writing that an award must be made to protect the public 
interest. Notwithstanding such a determination, the provisions of 
paragraph (g) of this section apply to the procurement in question.
    (2) If SBA does not issue its determination within 15 business days 
(or request an extension that is granted), the contracting officer may 
award the contract if he or she determines in writing that there is an 
immediate need to award the contract and that waiting until SBA makes 
its determination will be disadvantageous to the Government. 
Notwithstanding such a determination, the provisions of paragraph (g) 
of this section apply to the procurement in question.
* * * * *
    (g) Effect of determination. (1) A contracting officer may award a 
contract to a protested concern after the Director, Office of 
Government Contracting (D/GC) has determined either that the protested 
concern is an eligible SDVO or has dismissed all protests against it. 
If OHA subsequently overturns the D/GC's determination or dismissal, 
the contracting officer may apply the OHA decision to the procurement 
in question.
    (2) A contracting officer shall not award a contract to a protested 
concern that the D/GC has determined is not an eligible SDVO for the 
procurement in question.
    (i) If a contracting officer receives such a determination after 
contract award, and no OHA appeal has been filed, the contracting 
officer shall terminate the award.
    (ii) If a timely OHA appeal is filed after award, the contracting 
officer must consider whether performance can be suspended until an 
appellate decision is rendered.
    (iii) If OHA affirms the D/GC's determination finding the protested 
concern ineligible, the contracting

[[Page 5685]]

officer shall either terminate the contract or not exercise the next 
option.
    (3) The contracting officer must update the Federal Procurement 
Data System and other procurement reporting databases to reflect the 
final agency decision (the D/GC's decision if no appeal is filed or 
OHA's decision).
    (4) A concern found to be ineligible may not submit an offer as an 
SDVO SBC on a future procurement unless it demonstrates to SBA's 
satisfaction that it has overcome 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) and SBA issues a decision to this effect.

0
12. 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.

PART 126--HUBZONE PROGRAM

0
13. The authority citation for part 126 continues to read as follows:

    Authority:  15 U.S.C. 632(a), 632(j), 632(p), and 657a.

Subpart H--Protests

0
14. Amend Sec.  126.803 by revising paragraphs (b)(2) and (b)(3), 
redesignating paragraph (d) as paragraph (d)(1), and adding new 
paragraphs (d)(2), (d)(3), (d)(4) and (d)(5) to read as follows:


Sec.  126.803  How will SBA process a HUBZone status protest?

* * * * *
    (b) * * *
    (2) The contracting officer may award a contract after receipt of a 
protest if the contracting officer determines in writing that an award 
must be made to protect the public interest. Notwithstanding such a 
determination, the provisions of paragraph (d) of this section apply to 
the procurement in question.
    (3) If SBA does not issue its determination within 15 business days 
(or request an extension that is granted), the contracting officer may 
award the contract if he or she determines in writing that there is an 
immediate need to award the contract and that waiting until SBA makes 
its determination will be disadvantageous to the Government. 
Notwithstanding such a determination, the provisions of paragraph (d) 
of this section apply to the procurement in question.
* * * * *
    (d) * * *
    (2) A contracting officer may award a contract to a protested 
concern after the D/HUB has determined either that the protested 
concern is an eligible HUBZone or has dismissed all protests against 
it. If the AA/GCBD subsequently overturns the initial determination or 
dismissal, the contracting officer may apply the appeal decision to the 
procurement in question.
    (3) A contracting officer shall not award a contract to a protested 
concern that the D/HUB has determined is not an eligible HUBZone for 
the procurement in question.
    (i) If a contracting officer receives such a determination after 
contract award, and no appeal has been filed, the contracting officer 
shall terminate the award.
    (ii) If a timely appeal is filed after contract award, the 
contracting officer must consider whether performance can be suspended 
until an appellate decision is rendered.
    (iii) If the AA/GCBD affirms the initial determination finding the 
protested concern ineligible, the contracting officer shall either 
terminate the contract or not exercise the next option.
    (4) The contracting officer must update the Federal Procurement 
Data System and other procurement reporting databases to reflect the 
final agency HUBZone decision (the D/HUB's decision if no appeal is 
filed or the decision of the AA/GCBD).
    (5) A concern found to be ineligible is precluded from applying for 
HUBZone certification for 12 months from the date of the final agency 
decision (the D/HUB's decision if no appeal is filed or the decision of 
the AA/GCBD).


Sec.  126.805  [Amended]

0
15. Amend Sec.  126.805 by removing paragraph (g) and redesignating 
paragraph (h) as paragraph (g).

PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF 
HEARINGS AND APPEALS

0
16. The authority citation for part 134 continues to read as follows:

    Authority:  5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 637(a), 
637(m), 648(1), 656(i), and 687(c); E.O. 12549, 51 FR 6370, 3 CFR, 
1986 Comp., p. 189.

Subpart C--Rules of Practice for Appeals From Size Determinations 
and NAICS Code Designations

0
17. Revise Sec.  134.304 to read as follows:


Sec.  134.304  Commencement of appeals from size determinations and 
NAICS code designations.

    (a) Size appeals must be filed within 15 calendar days after 
receipt of the formal size determination.
    (b) NAICS code appeals must be filed within 10 calendar days after 
issuance of the solicitation, or amendment to the solicitation 
affecting the NAICS code or size standard. However, SBA may file a 
NAICS code appeal at any time before offers or bids are due.
    (c) An untimely appeal will be dismissed.

0
18. Amend Sec.  134.316 by redesignating paragraphs (a), (b), (c), and 
(d) as paragraphs (c), (d), (e) and (f), respectively, and adding new 
paragraphs (a) and (b) to read as follows:


Sec.  134.316  The decision.

    (a) The Judge shall issue a size appeal decision, insofar as 
practicable, within 60 calendar days after close of the record.
    (b) The Judge shall issue a NAICS code appeal decision as soon as 
practicable after close of the record.
* * * * *

Subpart E--Rules of Practice for Appeals From Service-Disabled 
Veteran Owned Small Business Concern Protests


Sec.  134.504  [Removed and Reserved]

0
19. Remove and reserve Sec.  134.504.


Sec.  134.514  [Amended]

0
20. Amend Sec.  134.514 by removing the second sentence.


Sec.  134.515  [Amended]

0
21. Amend Sec.  134.515(b) by removing the word ``service'' in the 
second sentence and adding in its place the word ``issuance.''

    Dated: January 25, 2011.
Karen Mills,
Administrator.
[FR Doc. 2011-2177 Filed 2-1-11; 8:45 am]
BILLING CODE 8025-01-P