[Federal Register Volume 79, Number 122 (Wednesday, June 25, 2014)]
[Proposed Rules]
[Pages 35963-35966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14337]


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SMALL BUSINESS ADMINISTRATION

13 CFR Part 121

RIN 3245-AG59


Advisory Small Business Size Decisions

AGENCY: Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to implement provisions of the National 
Defense Authorization Act of 2013 (NDAA) pertaining to small business 
size. Specifically, the rule proposes to amend the Small Business 
Administration's (SBA or Agency) program regulations to implement 
statutory provisions establishing a safe harbor from fraud penalties 
for individuals or firms that misrepresent business concerns as being 
small for purposes of Federal procurement opportunities if they acted 
in good faith reliance upon small business status advisory opinions 
received from Small Business Development Centers (SBDCs) or Procurement 
Technical Assistance Centers (PTACs). The rule also proposes to amend 
SBA's regulations to establish the criteria small business status 
advisory opinions must meet in order to be deemed adequate and specify 
the review process for such opinions. Finally, the proposed rule would 
amend SBA's regulations to update the circumstances under which SBA may 
initiate a formal size determination.

DATES: Comments must be received on or before August 25, 2014.

ADDRESSES: You may submit comments, identified by RIN: 3245-AG59, 
[Docket Number: SBA-2014-0007] by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail or Hand Delivery/Courier: Dean R. Koppel, Assistant 
Director, Office of Policy and Research, Office of Government 
Contracting, U.S. Small Business Administration, 409 3rd Street SW., 
8th Floor, Washington, DC 20416.
    All comments will be posted on www.regulations.gov. If you wish to 
submit confidential business information (CBI) as defined in the User 
Notice at www.regulations.gov, please submit the information to Dean R. 
Koppel, Assistant Director, Office of Policy and Research, Office of 
Government Contracting, U.S. Small Business Administration, 409 3rd 
Street SW., 8th floor, Washington, DC 20416, or send an email to 
[email protected]. Highlight the information that you consider to be 
CBI and explain why

[[Page 35964]]

you believe SBA should hold this information as confidential. SBA will 
review the information and make the final determination whether it will 
make the information public.

FOR FURTHER INFORMATION CONTACT: Dean R. Koppel, Assistant Director, 
Office of Policy and Research, Office of Government Contracting, U.S. 
Small Business Administration, 409 3rd Street SW., 8th Floor, 
Washington, DC 20416; (202) 205-7322; [email protected].

SUPPLEMENTARY INFORMATION: On January 2, 2013, Congress amended the 
Small Business Act to provide that the penalties created under 15 
U.S.C. 645(a) for misrepresentation of a firm as a small business 
concern do not apply to individuals or firms that act in good faith 
reliance upon small business status advisory opinions they receive from 
SBDCs or PTACs. Additionally, the Small Business Act was amended to 
give responsibility for reviewing, accepting, or rejecting these small 
business status advisory opinions to SBA's Office of General Counsel. 
Finally, the Small Business Act was further amended to require that SBA 
promulgate regulations to implement this safe harbor provision no later 
than 270 days after the date of passage of the statutory amendment.
    This rule proposes to make a number of changes to SBA's size 
regulations. Some of the changes involve technical issues. Other 
changes are more substantive and result from SBA's experience in 
implementing the current regulations.
    The following three specific changes are being proposed to SBA's 
size regulations.

Exemption From Penalties for Misrepresentation of Size Status

    Section 1681 of the NDAA requires that SBA create an exemption to 
the penalties imposed under 15 U.S.C. 645(a) for misrepresentation of 
small business status in cases where the person or concern making the 
misrepresentation acted in good faith reliance on a written advisory 
opinion from an SBDC or PTAC. SBA's first proposed change is to 
implement the statutory requirement at section 1681 of the NDAA by 
changing SBA's small business size regulations.

Small Business Status Advisory Opinions

    The second proposed change to the small business size rules is to 
define what constitutes an adequate small business status advisory 
opinion.

Circumstances in Which SBA May Request a Formal Size Determination

    The third proposed change to the size rules pertains to the 
circumstances under which SBA officials may request formal size 
determinations. Current Sec.  121.1001(b)(9) references the Central 
Contractor Registry, a procurement related federal government database 
that has been replaced by the System for Award Management. The proposed 
change clarifies the stated purpose of this provision and updates it to 
refer to the System for Award Management.

Compliance With Executive Orders 12866, 12988, 13175, and 13132, the 
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork 
Reduction Act (44 U.S.C., Ch. 35).

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
proposed rule does not constitute a significant regulatory action under 
Executive Order 12866, and as a result a regulatory impact analysis is 
not required.

Executive Order 12988

    This action meets applicable standards set forth in Sections 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.

Executive Order 13132

    For purposes of Executive Order 13132, SBA has determined that this 
proposed rule 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 
levels of government. Therefore, for the purpose of Executive Order 
13132, Federalism, SBA determines that this proposed rule has no 
federalism implications warranting preparation of federal assessment.

Executive Order 13175

    For purposes of Executive Order 12175, SBA has determined that this 
proposed rule will not have substantial direct effects on one or more 
Indian Tribes, on the relationship between the Federal Government and 
Indian Tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes. Therefore, for the 
purpose of Executive Order 13175, Consultation and Coordination with 
Indian Tribal Governments, SBA determines that this proposed rule does 
not require consultations with tribal officials or warrant the 
publication of a Tribal Summary Impact Statement.

Executive Order 13563

    As part of its ongoing efforts to engage stakeholders in the 
development of its regulations, SBA consulted with representatives from 
both industry and the general public to review the intent of the 
proposed rule and various components related to it. No concerns were 
raised during those calls and no comments were raised that needed to be 
addressed in this proposed rule.

Initial Regulatory Flexibility Analysis, 5 U.S.C. 601-612

    This rule, if finalized, may have a significant impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601-612. In accordance with 5 
U.S.C. 603(b), SBA sets forth an initial regulatory flexibility 
analysis (IRFA) of this proposed rule addressing the following topics: 
(1) The legal basis, need for, and objective of the rule; (2) a 
description and estimate of the number of small entities to which the 
rule will apply; (3) the projected reporting, record keeping, and other 
compliance requirements of the rule; (4) the relevant Federal rules 
which may duplicate, overlap or conflict with the rule; and (5) any 
significant alternatives that would allow the Agency to accomplish its 
regulatory objectives while minimizing the impact on small entities.
    1. What is the legal basis, need for, and objective of the rule? 
Pursuant to section 1681 of Public Law 112-239, SBA is statutorily 
required to publish a regulation granting an exemption from the 
misrepresentation penalties imposed under 15 U.S.C. 645(a) in cases 
where a party's erroneous claim to small business status stems from its 
good faith reliance upon an advisory opinion issued by an SBDC or PTAC. 
SBA is also obligated under section 1681 to define via regulation what 
constitutes an adequate advisory opinion and to review and accept or 
reject all advisory opinions issued by SBDCs and PTACs. In addition to 
giving effect to these statutory mandates, the proposed rule also 
establishes the procedures and timeline by which SBA will review 
advisory opinions.
    2. What is SBA's description and estimate of the number of small 
entities to which the rule will apply? Because SBA's programs do not 
apply to small governmental jurisdictions or small organizations, only 
small businesses will be affected by this proposed rule.

[[Page 35965]]

Additionally, the proposed rule will not apply to all small businesses 
generally, but only to those firms that represent themselves as being 
small for purposes of federal procurement opportunities.
    The safe harbor provision of the proposed rule will only affect 
those firms that incorrectly claim status as small business concerns 
after obtaining small business status advisory opinions from SBDCs or 
PTACs. In Fiscal Year 2010, SBA determined that approximately 150 firms 
that had represented themselves as being small for purposes of federal 
procurement opportunities were not small. Most of these cases did not 
involve fraud, but instead were the result of errors or 
misunderstandings of the size regulations. To date, SBA is unaware of 
any firms being penalized under 15 U.S.C. 645(a) for fraudulently 
misrepresenting themselves as small business concerns. Therefore, SBA 
anticipates that the safe harbor provision of the proposed rule will 
impact very few concerns.
    With regard to the small business status advisory opinion provision 
of the proposed rule, SBA notes that neither SBDCs nor PTACs are 
required to provide such opinions under the language of the statute. It 
is currently unknown how many SBDCs and PTACs will elect to provide 
such services, particularly given that no additional funding will be 
awarded to them to cover the cost of these services. Moreover, it is 
unclear how much demand there will be for such services from those 
SBDCs and PTACs that offer them. While it is thus impossible to gauge 
the number of small businesses that will obtain these services, SBA 
anticipates that very few concerns will be affected by the small 
business status advisory opinion provision of the proposed rule.
    3. What are the projected reporting, record keeping, and other 
compliance requirements of the rule and an estimate of the classes of 
small entities which will be subject to the requirements? There would 
be no additional reporting or recordkeeping requirements imposed by the 
rule, but there would be certain minor compliance requirements. 
Businesses that believe themselves to be small and that wish to receive 
advisory opinions to that effect from SBDCs or PTACs would be required 
to provide information documenting the basis for that belief to SBDCs 
or PTACs and attest to its accuracy.
    4. What are the relevant Federal rules which may duplicate, overlap 
or conflict with the rule? The Federal Acquisition Regulation (FAR) 
defers to and incorporates the substance of the provisions set forth in 
SBA's regulations for issues pertaining to business size. To the extent 
the FAR is inconsistent with size rules implemented by SBA, the FAR 
would need to be changed to be consistent.
    5. Are there any significant alternatives that would allow the 
Agency to accomplish its regulatory objectives while minimizing the 
impact on small entities? SBA has considered a number of alternatives 
to the proposed rule. One alternative SBA has considered would have 
permitted firms to simply self-certify to SBDCs or PTACs that they are 
small. Another alternative SBA considered would have had the General 
Counsel review the SBDC or PTAC advisory opinions rather than the 
Associate General Counsel, Office of Procurement Law. SBA has not 
proposed the first alternative because it would render any advisory 
opinion pro forma and would not provide the Agency with any basis for 
accepting or rejecting the opinion. With regard to the second 
alternative, SBA did not propose it given the substantial time demands 
already placed upon the General Counsel. SBA believes that delegating 
this responsibility to the Associate General Counsel, Office of 
Procurement Law would permit the Agency to provide a quicker turnaround 
time for reviewing advisory opinions and would take advantage of the 
established subject matter expertise of that official. SBA is very 
interested in comments from the public on these issues.

Paperwork Reduction Act, 44 U.S.C. Ch. 35

    SBA has determined that this proposed rule imposes no additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act, 44 U.S.C., Chapter 35.

List of Subjects in 13 CFR Part 121

    Administrative practice and procedure, Reporting and recordkeeping 
requirements, Small businesses.
    For the reasons set forth in the preamble, SBA proposes to amend 13 
CFR part 121 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

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

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

0
2. Amend Sec.  121.108 by revising the section heading and adding 
paragraph (e)(4) to read as follows:


Sec.  121.108  What are the penalties for misrepresentation of size 
status?

* * * * *
    (e) * * *
    (4) Limitation of Liability. An individual or business concern will 
not be subject to the penalties imposed under 15 U.S.C. 645(a) where it 
acted in good faith reliance on a small business status advisory 
opinion accepted by SBA under Sec.  121.109.


Sec.  121.109  [Redesignated as Sec.  121.110]

0
3. Redesignate Sec.  121.109 as Sec.  121.110.
0
4. Add new Sec.  121.109 to read as follows:


Sec.  121.109  What is a small business status advisory opinion?

    (a) Defined. A small business status advisory opinion is a written 
opinion issued by either a Small Business Development Center (SBDC) 
operating under part 130 of this chapter or a Procurement Technical 
Assistance Center (PTAC) operating under 10 U.S.C. Chapter 142 which 
concludes that a firm is entitled to represent itself as a small 
business concern for purposes of federal government procurement 
opportunities.
    (b) Submission. An SBDC or PTAC must submit a copy of each small 
business status advisory opinion it issues to the following Agency 
official for review: Associate General Counsel, Office of Procurement 
Law, U.S. Small Business Administration, 409 Third Street SW., 
Washington, DC 20416 or by fax to (202) 205-6390 marked Attn: Small 
Business Status Advisory Opinion. A small business status advisory 
opinion must:
    (1) Include the name, address, Employer Identification Number or 
Dun & Bradstreet Number, and one or more principals of the covered 
concern.
    (2) Identify the individual NAICS code(s) and accompanying size 
standard(s) to which the advisory opinion applies.
    (3) A determination that the covered concern does not exceed the 
size standard(s) dated and signed by a counselor or similarly qualified 
employee of an SBDC or PTAC.
    (4) Include, as an attachment, copies of the evidence provided by 
the covered concern to the SBDC or PTAC clearly documenting its annual 
receipts and/or number of employees as those terms are defined by 
Sec. Sec.  121.104 and 121.106.
    (5) Include, as an attachment, a written statement signed by at 
least one principal of the concern affirming that all the information 
provided to the SBDC or PTAC for the purpose of obtaining the small 
business status advisory opinion is, to the best of his/

[[Page 35966]]

her knowledge, true, accurate, and complete.
    (c) Review. Unless a referral is made under paragraph (e) of this 
section, SBA will decide within 10 business days of receiving a small 
business status advisory opinion to accept or reject it based on its 
consistency with this part. SBA will provide written notification of 
that decision to the SBDC or PTAC that issued the small business status 
advisory opinion as well as to the covered concern.
    (d) Reliance. A concern that receives a small business status 
advisory opinion holding that it does not exceed the applicable size 
standard(s) may rely upon that determination for purposes of responding 
to federal procurement opportunities from the date it is issued unless 
and until that advisory opinion is rejected by SBA in accordance with 
paragraph (c) of this section or Sec.  121.1009.
    (e) Referral for Size Determination. Nothing in this section 
precludes SBA from requesting a formal size determination for a concern 
that is the subject of a small business status advisory opinion 
pursuant to Sec.  121.1001(b)(9).
0
5. Amend Sec.  121.1001 by revising paragraph (b)(9) to read as 
follows:


Sec.  121.1001  Who may initiate a size protest or request a formal 
size determination?

* * * * *
    (b) * * *
    (9) For other purposes related to protecting the integrity of the 
Federal procurement process, including validating that firms listed in 
the System for Award Management database are small and firms can rely 
upon advisory size status opinions, the Government Contracting Area 
Director or the Director, Office of Government Contracting may initiate 
a formal size determination when sufficient information exists that 
calls into question a firm's small business status. The current date 
will be used to determine size, and SBA will initiate the process to 
remove from the database the small business designation of any firm 
found to be other than small.
* * * * *

Maria Contreras-Sweet,
Administrator.
[FR Doc. 2014-14337 Filed 6-24-14; 8:45 am]
BILLING CODE 8025-01-P