[Federal Register Volume 83, Number 58 (Monday, March 26, 2018)]
[Rules and Regulations]
[Pages 12849-12852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06033]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Rules 
and Regulations

[[Page 12849]]



SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 125, 126, and 127

RIN 3245-AH02


Conforming Statutory Amendments and Technical Corrections to 
Small Business Government Contracting Regulations

AGENCY: U.S. Small Business Administration.

ACTION: Direct final rule; request for comments.

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

SUMMARY: The U.S. Small Business Administration (SBA or Agency) is 
amending its regulations to incorporate a provision of the National 
Defense Authorization Act of 2018 (NDAA 2018) and to update and provide 
several technical corrections to SBA's regulations. Specifically, the 
NDAA 2018 amended the Small Business Act by replacing fixed dollar 
amount thresholds with references to the micro-purchase and simplified 
acquisition thresholds. SBA is updating its regulations to conform to 
this new statutory language. SBA is also updating the sole source 
dollar amounts for the Service-Disabled Veteran-Owned (SDVO) small 
business and the Historically Underutilized Business Zone (HUBZone) 
small business regulations. The thresholds for sole source contracting 
are contained in the Small Business Act, SBA's regulations, and the 
Federal Acquisition Regulations (FAR). These thresholds are updated in 
the FAR for inflation periodically, and therefore, over time, SBA's 
regulations and the FAR's numbers diverge. SBA is making this change to 
conform the thresholds contained in SBA's regulations to those in the 
FAR. This rule also allows indirect ownership by United States citizens 
in the HUBZone program to more accurately align with the underlying 
statutory authority. Finally, SBA is making several technical changes 
to address mistakes and typos made in previous rulemakings. For 
example, this final rule will update some cross-references that were 
not updated when a previous rulemaking changed numbering. Other changes 
made are for errors, grammar, syntax, and clarity.

DATES: This rule is effective on May 25, 2018 without further action, 
unless significant adverse comment is received by April 25, 2018. If 
significant adverse comment is received, SBA will publish a timely 
withdrawal of the rule in the Federal Register.

ADDRESSES: You may submit comments, identified by RIN 3245-AH02, by any 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail, for paper, disk, or CD-ROM submissions: Kenneth 
Dodds, Director, Office of Procurement Policy and Liaison, 409 Third 
Street SW, Washington, DC 20416.
     Hand Delivery/Courier: Kenneth Dodds, Director, Office of 
Procurement Policy and Liaison, 409 Third Street SW, Washington, DC 
20416.
    SBA will post all comments 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 Brenda 
Fernandez, Office of Procurement Policy and Liaison, 409 Third Street 
SW, Washington, DC 20416, or send an email to Brenda.fernandez@sba.gov. 
Highlight the information that you consider CBI and explain why you 
believe SBA should hold this information as confidential. SBA will 
review the information and make the final determination of whether it 
will publish the information or not.

FOR FURTHER INFORMATION CONTACT: Brenda Fernandez, Office of 
Procurement Policy and Liaison, 409 Third Street SW, Washington, DC 
20416, 202-205-7337, Brenda.fernandez@sba.gov.

SUPPLEMENTARY INFORMATION: On December 12, 2017, President Trump signed 
into law the National Defense Authorization Act for Fiscal Year 2018 
(NDAA 2018), Public Law 115-91, 131 Stat. 1283. Section 1702 of NDAA 
2018 amended section 15(j)(1) of the Small Business Act, 15 U.S.C. 
644(j)(1), by removing the $2,500 and $100,000 thresholds found in the 
Small Business Act and replacing them with references to the micro-
purchase threshold and the simplified acquisition threshold, 
respectively. The Small Business Act previously required competition 
reserved exclusively for small business concerns for procurements with 
values falling between $2,500 and $100,000 (adjusted for inflation in 
regulations to $150,000). SBA also uses dollar value thresholds for the 
application of the limitations on subcontracting requirements and 
nonmanufacturer rule to small business set-asides. This direct final 
rule merely adopts the statutory change by replacing the dollar 
thresholds with references to the micro-purchase and simplified 
acquisition thresholds in an identical way that the Small Business Act 
was amended.
    SBA is also updating the sole source dollar amounts for the 
Service-Disabled Veteran-Owned (SDVO) small business and the 
Historically Underutilized Business Zone (HUBZone) small business 
regulations. The thresholds for sole source contracting are contained 
in the Small Business Act, SBA's regulations (Title 13 of the Code of 
Federal Regulations), and the Federal Acquisition Regulations (FAR) 
(Title 48 of the Code of Federal Regulations). These thresholds are 
updated in the FAR for inflation periodically, and therefore over time, 
SBA's regulations and the FAR's numbers diverge. The dollar thresholds 
set forth in the FAR below which contracts may be awarded on a sole 
source basis, as adjusted for inflation, are as follows: For the 8(a) 
Business Development (BD) program (FAR 19.805-1), $7 million, including 
options, for contracts assigned a manufacturing North American 
Industrial Classification System (NAICS) code, and $4 million, 
including options, for all other contracts; for the SDVO small business 
program (FAR 19.1406) and Women-Owned Small Business (WOSB) program 
(FAR 19.1506), $6.5 million, including options, for contracts assigned 
a manufacturing NAICS code, and $4 million, including options, for all 
other contracts; and for the HUBZone program (FAR 19.1306), $7 million, 
including options, for contracts assigned a manufacturing NAICS code, 
and $4 million, including options, for all other contracts. SBA's 
regulations for the 8(a) BD and WOSB programs have previously been 
updated in 13 CFR 124.506(a)(2) and 127.503(c)(2),

[[Page 12850]]

respectively, to synchronize those programs with the inflation 
adjustments made by the FAR. The sole source thresholds for the SDVO 
and HUBZone programs have not been similarly updated. This direct final 
rule merely incorporates the inflation adjustments made by the FAR for 
the SDVO and HUBZone programs into SBA's regulations.
    The rule also amends the HUBZone regulations to allow indirect 
ownership by United States citizens to more accurately align with the 
underlying statutory authority. Direct ownership is not statutorily 
mandated, and SBA believes that the purposes of the HUBZone program--
capital infusion in underutilized geographic areas and employment of 
individuals living in those areas--may be achieved whether ownership by 
U.S. citizens is direct or indirect. The regulations first implementing 
the HUBZone program were largely based on those governing the Small 
Disadvantaged Business (SDB) program, which is no longer in existence 
and which served different goals than the HUBZone program. The SDB 
program and SBA's other currently active socioeconomic programs 
(including the 8(a) BD program, the WOSB small business program, and 
the SDVO small business program) are intended to assist the business 
development of small concerns owned and controlled by certain 
individuals, so requiring direct ownership for these programs is 
consistent with their purposes. The HUBZone program differs in that the 
program's goals do not center on the socioeconomic status of the SBC 
owner but rather the location of the business and the residence of its 
employees. This direct final rule deletes the requirement that 
ownership by United States citizens in the HUBZone program must be 
direct, and instead it merely copies the statutory requirement that a 
HUBZone small business concern must be at least 51% owned and 
controlled by United States citizens.
    Finally, SBA is making several technical changes to address 
mistakes and typos made in previous rulemakings. For example, this 
final rule will update some cross-references that were not updated when 
a previous rulemaking changed numbering.

Section by Section Analysis

Section 121.103(h)(3)(ii)

    This section deals with exceptions to SBA's general affiliations 
rule for joint ventures. Specifically, the exception in subparagraph 
(ii) is for joint ventures participating in SBA's mentor 
prot[eacute]g[eacute] program. The rule is intended to classify a joint 
venture between a small business and its SBA-approved mentor as small, 
as long as the prot[eacute]g[eacute] qualifies as small for the size 
standard corresponding to the NAICS code assigned to the contract and 
meets SBA's general joint venture requirements for the type of contract 
at issue. In other words, the joint venture can qualify as small for 
any contract (8(a), small business set aside, WOSB, SDVO, or HUBZone) 
provided it meets SBA's joint venture rules for the type of contract to 
be performed. However, the current regulation is missing cross-
references to the joint venture requirements for 8(a) contracts and 
small business set asides. These cross-references were inadvertently 
left out. This change merely fixes that error.

Sections 121.404(g), 125.18(e)(1), 126.601(h)(1), and 127.503(h)(1)

    SBA is making a technical correction to these sections. The 
paragraphs in question deal with the identical issue, recertification 
of size and/or status. The language and intent of each regulation is 
the same; the only difference is that each section deals with a 
separate socio-economic contracting program. It has been brought to 
SBA's attention that as drafted, it is not clear which sentence or 
clause the final sentence is referencing. It was SBA's intent, as made 
clear in the proposed and final rule enacting this regulation, entitled 
Acquisition Process: Task and Delivery Order Contracts, Bundling, 
Consolidation, 78 FR 61114 (Oct. 2, 2013), that SBA wanted the sentence 
and the referenced exceptions to be applied to the entirety of the 
preceding paragraph. 78 FR 61114, 61119-20 (Oct. 2, 2013). Therefore, 
SBA is adding additional language to clearly align the paragraph to the 
intent of the regulation. This rule is not intended to make any 
substantive change to the paragraphs. SBA is also changing the heading 
to Sec.  126.601(h), the recertification paragraph for the HUBZone 
program, in order to make it identical to the recertification 
paragraphs relating to the other programs. There is no intended 
difference regarding recertification between the programs, so there is 
no need for the additional language in the HUBZone paragraph after the 
word recertification.

Section 121.406(a)

    SBA is making a correction to paragraph (a) of this section in 
order to correct a missing word. With reference to the clause dealing 
with SDVO SBC contracting, SBA left out the modifier ``sole'' before 
``source contract'' in the final rule enacting this regulation, 
entitled Small Business Government Contracting and National Defense 
Authorization Act of 2013 Amendments, 81 FR 34243, 34259 (May 31, 
2016).

Section 121.406(d)

    SBA is making a change to paragraph (d) of this section. This 
change removes the dollar value thresholds and replaces them with 
references to the micro-purchase and simplified acquisition thresholds, 
respectively. As explained above, the NDAA 2018 modified the Small 
Business Act by changing the dollar thresholds to references to the 
micro-purchase threshold and the simplified acquisition threshold. This 
direct final rule merely conforms the regulation to the statutory 
changes made by the NDAA 2018.

Section 125.3

    This change removes the term ``$150,000'' in paragraphs 
(c)(1)(viii) and (ix) and replaces it with a reference to the 
simplified acquisition threshold. As explained above, the NDAA 2018 
modified the Small Business Act by changing the dollar thresholds to 
references to the micro-purchase threshold and the simplified 
acquisition threshold. Thus, this direct final rule merely conforms the 
regulation to the statutory changes made by the NDAA 2018 and does not 
make any substantive change to the regulations.

Section 125.6

    This change removes the dollar value thresholds and replaces them 
with references to the micro-purchase and simplified acquisition 
thresholds, respectively. As explained above, the NDAA 2018 modified 
the Small Business Act by changing the dollar thresholds to references 
to the micro-purchase threshold and the simplified acquisition 
threshold. Thus, this direct final rule merely conforms the regulation 
to the statutory changes made by the NDAA 2018 and does not make any 
substantive change to the regulations.

Sections 125.22 and 125.23

    This direct final rule changes Sec. Sec.  125.22 and 125.23 to 
correct cross-reference citations that were not updated when SBA 
renumbered its regulations. SBA is also amending the values authorized 
for SDVO small business sole source awards in order to be consistent 
with the current values set forth in FAR 19.1406, as adjusted for 
inflation.

Section 126.200(b)(1)

    As set forth above in more detail, this rule deletes the 
requirement that

[[Page 12851]]

ownership by United States citizens in the HUBZone program must be 
direct, and instead it merely copies the statutory requirement that a 
HUBZone small business concern must be at least 51% owned and 
controlled by United States citizens.

Section 126.612(b)(1) and (2)

    SBA is amending these paragraphs to update the values authorized 
for HUBZone sole source awards in order to be consistent with the 
current values set forth in FAR 19.1306, as adjusted for inflation.

Section 126.616(d)(2)

    SBA is amending this paragraph by replacing the word 
prot[eacute]g[eacute] with the term SBC. The inclusion of the word 
prot[eacute]g[eacute] was a mistake. The mistake could be interpreted 
to mean the availability of the benefits of this provision were 
available only to HUBZone SBCs partaking in the SBA's mentor-
prot[eacute]g[eacute] program. However, the clear intent of the final 
rule entitled ``Small Business Mentor Prot[eacute]g[eacute] Programs, 
81 FR 48557 (July 25, 2016), was for the joint venture benefits to be 
available to all certified HUBZone SBCs. In this regard, the 
supplementary information to the Small Business Mentor 
Prot[eacute]g[eacute] Programs rule, in which this provision was 
adopted, provided that ``the final rule revises the joint venture 
provisions contained in Sec.  125.15(b) (for SDVO SBCs, which are now 
contained in Sec.  125.18(b)), Sec.  126.616 (for HUBZone SBCs), and 
Sec.  127.506 (for WOSB and Economically Disadvantaged Women-Owned 
Small Business (EDWOSB) concerns) to more fully align those 
requirements to the requirements of the 8(a) BD program.'' 81 FR 48557, 
48558, 48559 (July 25, 2016) (Emphasis added). This direct final rule 
merely conforms the HUBZone regulatory language to that of the other 
programs, something that was specifically intended in the original 
regulatory authority.

Compliance With Executive Orders 12866, 12988, 13132, and 13771, 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 
direct final rule does not constitute a significant regulatory action 
under Executive Order 12866. This rule is also not a major rule under 
the Congressional Review Act, 5 U.S.C. 800.

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 the purposes of Executive Order 13132, SBA has determined that 
this direct final 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 has determined that this direct final rule 
has no federalism implications warranting preparation of a Federalism 
assessment.

Executive Order 13771

    This final rule is not an Executive Order 13771 regulatory action 
because it is not significant under Executive Order 12866.

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

    SBA has determined that this direct final rule does not impose 
additional reporting or recordkeeping requirements under the Paperwork 
Reduction Act, 44 U.S.C., Chapter 35.

Regulatory Flexibility Act, 5 U.S.C. 601-612

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small non-profit enterprises, and small local 
governments. Pursuant to the RFA, when an agency issues a rulemaking, 
the agency must prepare a regulatory flexibility analysis, which 
describes the impact of the rule on small entities. However, section 
605 of the RFA allows an agency to certify a rule, in lieu of preparing 
an analysis, if the rulemaking is not expected to have a significant 
economic impact on a substantial number of small entities. Within the 
meaning of RFA, SBA certifies that this direct final rule will not have 
a significant economic impact on a substantial number of small 
entities.

List of Subjects

13 CFR Part 121

    Government procurement, Government property, Grant programs--
business, Individuals with disabilities, Loan programs--business, Small 
businesses.

13 CFR Part 125

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

13 CFR Part 126

    Administrative practice and procedure, Government procurement, 
Penalties, Reporting and recordkeeping requirements, Small businesses.

13 CFR Part 127

    Government contracts, Reporting and recordkeeping requirements, 
Small businesses.

    Accordingly, for the reasons stated in the preamble, SBA amends 13 
CFR parts 121, 125, 126, and 127 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), 662 and 694a(9).


0
2. Amend Sec.  121.103 by revising paragraph (h)(3)(ii) to read as 
follows:


Sec.  121.103  How does SBA determine affiliation?

* * * * *
    (h) * * *
    (3) * * *
    (ii) Two firms approved by SBA to be a mentor and 
prot[eacute]g[eacute] under Sec.  125.9 of this chapter may joint 
venture as a small business for any Federal government prime contract 
or subcontract, provided the prot[eacute]g[eacute] qualifies as small 
for the size standard corresponding to the NAICS code assigned to the 
procurement, and the joint venture meets the requirements of Sec. Sec.  
124.513 (c) and (d), Sec. Sec.  125.8(b) and (c), Sec. Sec.  
125.18(b)(2) and (3), Sec. Sec.  126.616(c) and (d), or Sec. Sec.  
127.506(c) and (d) of this chapter, as appropriate.
* * * * *

0
3. Amend Sec.  121.404 by revising the last sentence of the 
introductory text of paragraph (g) to read as follows:


Sec.  121.404  When is the size status of a business concern 
determined?

* * * * *
    (g) * * * However, the following exceptions apply to this paragraph 
(g):
* * * * *

0
4. Amend Sec.  121.406 by:
0
a. Adding the word ``sole'' after the words ``veteran-owned small 
business set-aside or'' and before the words ``source contract,'' in 
paragraph (a); and
0
b. Revising paragraph (d) to read as follows:

[[Page 12852]]

Sec.  121.406  How does a small business concern qualify to provide 
manufactured products or other supply items under a small business set-
aside, service-disabled veteran-owned small business, HUBZone, WOSB or 
EDWOSB, or 8(a) contract?

* * * * *
    (d) The performance requirements (limitations on subcontracting) 
and the nonmanufacturer rule do not apply to small business set-aside 
acquisitions with an estimated value between the micro-purchase 
threshold and the simplified acquisition threshold (as both terms are 
defined in the FAR at 48 CFR 2.101).
* * * * *

PART 125--GOVERNMENT CONTRACTING PROGRAMS

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

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


Sec.  125.3  [Amended]

0
6. Amend Sec.  125.3 by removing the term ``$150,000'' and adding in 
its place the phrase ``the simplified acquisition threshold (as defined 
in the FAR at 48 CFR 2.101)'' in paragraphs (c)(1)(viii) and (ix).

0
7. Amend Sec.  125.6 by:
0
a. Removing the term ``$150,000'' and adding in its place the phrase 
``the simplified acquisition threshold (as defined in the FAR at 48 CFR 
2.101)'' in paragraph (a) introductory text; and
0
b. Revising paragraph (f)(1) to read as follows:


Sec.  125.6  What are the prime contractor's limitations on 
subcontracting?

* * * * *
    (f) * * *
    (1) Small business set-aside contracts with a value that is greater 
than the micro-purchase threshold but less than or equal to the 
simplified acquisition threshold (as both terms are defined in the FAR 
at 48 CFR 2.101); or
* * * * *

0
8. Amend Sec.  125.18 by revising the last sentence of paragraph (e)(1) 
to read as follows:


Sec.  125.18  What requirements must an SDVO SBC meet to submit an 
offer on a contract?

* * * * *
    (e) * * * (1) * * * However, the following exceptions apply to this 
paragraph (e)(1):
* * * * *

0
9. Amend Sec.  125.22 by revising paragraph (a) to read as follows:


Sec.  125.22  When may a contracting officer set-aside a procurement 
for SDVO SBCs?

    (a) The contracting officer first must review a requirement to 
determine whether it is excluded from SDVO contracting pursuant to 
Sec.  125.21.
* * * * *

0
10. Amend Sec.  125.23 by revising paragraphs (a), and (b)(1) and (2) 
to read as follows:


Sec.  125.23  When may a contracting officer award sole source 
contracts to SDVO SBCs?

* * * * *
    (a) None of the provisions of Sec. Sec.  125.21 or 125.22 apply;
    (b) * * *
    (1) $6,500,000 for a contract assigned a manufacturing NAICS code, 
or
    (2) $4,000,000 for all other contracts;
* * * * *

PART 126--HUBZONE PROGRAM

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

    Authority: 15 U.S.C. 632(a), 632(j), 632(p), 644, and 657a.


Sec.  126.200  [Amended]

0
12. Amend Sec.  126.200 by removing the words ``unconditionally and 
directly'' in paragraph (b)(1)(i).

0
13. Amend Sec.  126.601 by revising the heading of paragraph (h) and 
the last sentence of the introductory text of paragraph (h)(1) to read 
as follows:


Sec.  126.601  What additional requirements must a qualified HUBZone 
SBC meet to bid on a contract?

* * * * *
    (h) Recertification. (1) * * * However, the following exceptions 
apply to this paragraph (h)(1):
* * * * *

0
14. Amend Sec.  126.612 by revising paragraphs (b)(1) and (2) to read 
as follows:


Sec.  126.612  When may a CO award sole source contracts to qualified 
HUBZone SBCs?

* * * * *
    (b) * * *
    (1) $7,000,000 for a contract assigned a manufacturing NAICS code, 
or
    (2) $4,000,000 for all other contracts.
* * * * *


Sec.  126.616  [Amended]

0
15. Amend Sec.  126.616 by removing the words ``HUBZone 
prot[eacute]g[eacute]'' and adding in their place the words ``HUBZone 
SBC'' in paragraph (d)(2).

PART 127--WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM

0
16. The authority citation for part 127 continues to read as follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 637(m), 644 and 657r.


0
17. Amend Sec.  127.503 by revising the last sentence of the 
introductory text of paragraph (h)(1) to read as follows:


Sec.  127.503  When is a contracting officer authorized to restrict 
competition or award a sole source contract or order under this part?

* * * * *
    (h) * * *
    (1) * * * However, the following exceptions apply to this paragraph 
(h)(1):
* * * * *

    Dated: March 19, 2018.
Linda E. McMahon,
Administrator.
[FR Doc. 2018-06033 Filed 3-23-18; 8:45 am]
BILLING CODE 8025-01-P