[Federal Register Volume 83, Number 211 (Wednesday, October 31, 2018)]
[Proposed Rules]
[Pages 54812-54835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23285]
[[Page 54811]]
Vol. 83
Wednesday,
No. 211
October 31, 2018
Part II
Small Business Administration
-----------------------------------------------------------------------
13 CFR Parts 115, 121, 125, et al.
Small Business HUBZone Program; Government Contracting Programs;
Proposed Rules
Federal Register / Vol. 83 , No. 211 / Wednesday, October 31, 2018 /
Proposed Rules
[[Page 54812]]
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 115, 121, 125, and 126
RIN 3245-AG38
Small Business HUBZone Program; Government Contracting Programs
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Small Business Administration (SBA or Agency)
proposes to amend its regulations for the Historically Underutilized
Business Zone (HUBZone) Program to reduce the regulatory burdens
imposed on HUBZone small business concerns and government agencies,
implement new statutory provisions, and eliminate ambiguities in the
regulations. SBA has reviewed all of its HUBZone regulations and is
proposing a comprehensive revision to the HUBZone Program to clarify
current HUBZone Program policies and procedures and to make changes
that will benefit the small business community by making the HUBZone
Program more efficient and effective. The proposed amendments are
intended to make it easier for small business concerns to understand
and comply with the program's requirements and to make the HUBZone
program a more attractive avenue for procuring agencies.
DATES: Comments must be received on or before December 31, 2018.
ADDRESSES: You may submit comments, identified by RIN 3245-AG38, by any
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov and
follow the instructions for submitting comments.
Mail (for paper, disk, or CD-ROM submissions): Mariana
Pardo, Director, HUBZone Program, 409 Third Street SW, Washington, DC
20416.
Instructions: All submissions received must include the agency name
and docket number or Regulatory Information Number (RIN) for this
rulemaking. All comments received will be posted on http://www.regulations.gov. If you wish to submit confidential business
information (CBI) as defined in the User Notice at http://www.regulations.gov, please submit the comments to Mariana Pardo and
highlight the information that you consider to be CBI and explain why
you believe this information should be held confidential. SBA will make
a final determination as to whether the comments will be published or
not.
FOR FURTHER INFORMATION CONTACT: Mariana Pardo, Director, Office of
HUBZone (D/HUB), 202-205-2985 or [email protected].
SUPPLEMENTARY INFORMATION: On January 30, 2017, President Trump issued
Executive Order 13771 directing federal departments and agencies to
reduce regulatory burdens and control regulatory costs. In response to
this directive, SBA initiated a review of all of its regulations to
determine which might be revised or eliminated. This proposed rule
would implement revisions to the HUBZone program. The HUBZone program
was established pursuant to the HUBZone Act of 1997 (HUBZone Act),
Title VI of the Small Business Reauthorization Act of 1997, Public Law
105-135, enacted December 2, 1997. The stated purpose of the HUBZone
program is to provide for Federal contracting assistance to HUBZone
small business concerns. 15 U.S.C. 657a(a).
In general, HUBZone small business concerns are those that have a
principal place of business located in a HUBZone and 35 percent of
their employees residing in one or more HUBZones. After SBA certifies
eligible businesses into the program, they become eligible for HUBZone
contracting preferences. HUBZone areas are generally defined as areas
with low income levels, high poverty and unemployment rates, Indian
reservations, closed military bases, or disaster areas.
SBA has not issued a comprehensive regulatory amendment to the
HUBZone program since the program's initial implementation nearly
twenty years ago, although SBA has issued numerous smaller amendments
to the HUBZone Program to implement specific changes in 1998, 2001,
2004, 2005, 2007, 2009, 2013, and 2016. As such, SBA's review of the
HUBZone program in response to President Trump's directive highlighted
several areas that needed revision. This proposed rule would clarify
and modify a number of the regulations implementing the program to
update the rules to reflect SBA's current policies, to eliminate
ambiguities in the regulations, and to reduce burdens on small
businesses and procuring agencies.
As part of this proposed rulemaking process, SBA also held tribal
consultations pursuant to Executive Order 13175, Tribal Consultations,
in Anchorage, AK, Albuquerque, NM, and Oklahoma City, OK to provide
interested tribal representatives with an opportunity to discuss their
views on various HUBZone-related issues. SBA considers tribal
consultation meetings a valuable component of its deliberations and
believes that these tribal consultation meetings allowed for
constructive dialogue with the Tribal community, Tribal Leaders, Tribal
Elders, elected members of Alaska Native Villages or their appointed
representatives, and principals of tribally-owned and Alaska Native
Corporations (ANC) owned firms participating in the HUBZone program.
SBA has taken these discussions into account in drafting this proposed
rule.
In addition, SBA is proposing to implement section 1701(i) of the
National Defense Authorization Act for Fiscal Year 2018 (NDAA 2018),
Public Law 115-91, Dec. 12, 2017, which allows certain certified
HUBZone small business concerns to maintain their HUBZone status until
2021, by amending the definition of ``HUBZone small business concern.''
The major challenge with the HUBZone program over the last two
decades is the lack of stability and predictability for program
participants. HUBZones change at different times based on economic
data. Once certified, it is unrealistic to expect a business concern,
or employee, to relocate in order to attempt to maintain the concern's
HUBZone status when the area where the business is located or the
employee resides loses its HUBZone status. This rule proposes changes
that will help the HUBZone program achieve its intended results--
investment in communities and continued employment. First, the rule
proposes to treat an individual as a HUBZone resident if that
individual worked for the firm and resided in a HUBZone at the time the
concern was certified or recertified as a HUBZone small business
concern and he or she continues to work for that same firm, even if the
area where the individual lives no longer qualifies as a HUBZone or the
individual has moved to a non-HUBZone area. Second, the proposed rule
would eliminate the burden on HUBZone small businesses to continually
demonstrate that they meet all eligibility requirements at the time of
each offer and award for any HUBZone contract opportunity. It is hard
for many firms to meet the requirement that at least 35% of the firm's
employees must live in a HUBZone. Firms with a significant number of
employees have a hard time meeting this requirement because it is often
difficult to find a large number of individuals living in a HUBZone who
possess the necessary qualifications. Smaller firms also have a hard
time meeting this requirement because the loss of one employee could
adversely affect their HUBZone eligibility. If a certified HUBZone
small business receives a Federal contract (HUBZone or otherwise), it
often must
[[Page 54813]]
hire additional employees to perform the contract and would lose its
status as a certified HUBZone small business if it no longer meets the
requirement that at least 35% of its employees reside in a HUBZone.
This makes it ineligible for any future HUBZone contracts. The 35%
HUBZone residency requirement also makes it hard for service
contractors to perform contracts in other locations. For example, if a
firm wins a contract in another state, it would most likely need to
hire additional employees from that state. If there is no HUBZone near
that location, the firm would have to hire non-HUBZone residents to
perform the contract, which would most likely make it ineligible for
future HUBZone contracts. To alleviate these problems, the proposed
rule would require only annual recertification rather than immediate
recertification at the time of every offer for a HUBZone contract
award. This reduced burden on certified HUBZone small businesses would
allow a firm to remain eligible for future HUBZone contracts for an
entire year, without requiring it to demonstrate that it continues to
meet all HUBZone eligibility requirements at the time it submits an
offer for each additional HUBZone opportunity. A concern would
represent that it is a certified HUBZone small business concern at the
time of each offer, but its eligibility would relate back to the date
of its certification or recertification, not to the date of the offer.
The concern would be required to come into compliance with the 35%
HUBZone residency requirement again at the time of its annual
recertification in order to continue to be eligible for additional
HUBZone contracts after the one-year certification period. During the
tribal consultation process, SBA also received a few comments
recommending that SBA count ``seasonal'' employees in a firm's count of
total employees for purposes of determining whether it meets the 35%
HUBZone residency requirement even if those individuals are currently
employed by the firm. SBA is concerned that counting any individuals
who are not currently on a firm's payroll (in the anticipation that
they will again be employed by the firm at some point) would allow
firms to circumvent the 35% residency requirement and subject the
program to abuse. SBA requests comments on whether seasonal employees
can or should be counted and still maintain the integrity of the
eligibility requirements.
SBA addresses each proposed amendment below.
II. Section-by-Section Analysis
1. Definitions
SBA has reviewed the current definitions set forth in 13 CFR
126.103 and has determined that several definitions need to be revised,
added, or eliminated to remove ambiguities and make the HUBZone program
easier for firms to use.
SBA proposes to delete the definitions of ``Alaska Native Village''
and ``ANCSA'' (i.e., Alaska Native Claims Settlement Act) and
incorporate those terms in an amended definition of ``Alaska Native
Corporation (ANC)'' to make the regulations more readable.
SBA proposes to amend the definition of ``attempt to maintain'' to
clarify what happens if a HUBZone small business concern's HUBZone
residency percentage drops too low. The Small Business Act provides
that a HUBZone small business concern must ``attempt to maintain''
compliance with the 35% employee HUBZone residency requirement during
the performance of a HUBZone contract. 15 U.S.C. 632(p)(5)(A)(i)(II).
This statutory requirement seeks to ensure that funds from HUBZone
contracts flow to HUBZone areas and the residents of those areas, while
at the same time recognizing that a HUBZone small business may need to
hire additional employees in order to fully meet the terms of a
contract. Under the ``attempt to maintain'' requirement, when hiring
additional employees to perform on a HUBZone contract, the HUBZone
small business must make efforts to hire HUBZone residents in order to
try to maintain compliance with the 35% HUBZone residency requirement.
The current regulation provides that ``attempt to maintain'' means
``making substantive and documented efforts such as written offers of
employment, published advertisements seeking employees, and attendance
at job fairs.'' 13 CFR 126.103. SBA believes it is necessary to clarify
that if the HUBZone residency percentage drops too low, then SBA will
find that the HUBZone small business has not made its best efforts to
``attempt to maintain'' compliance with this requirement. Therefore,
SBA is proposing to amend this definition to add that falling below 20%
HUBZone residency during the performance of a HUBZone contract will be
deemed a failure to attempt to maintain compliance with the statutory
35% HUBZone residency requirement. In such a case, SBA would propose
that the concern be decertified from the HUBZone program. The concern
would then have the opportunity to demonstrate that it in fact
continues to have at least 20% HUBZone employees and that it continues
to attempt to hire additional HUBZone residents in order to reach 35%.
SBA does not intend to require that employees be hired in any
particular order (i.e., in an order that ensures that at any moment in
time, at least 20% of its total employees reside in a HUBZone), but
merely that it always have at least 20% HUBZone employees once the
hiring for contract performance is complete (and continues to attempt
to hire more HUBZone employees). For example, if a certified HUBZone
small business has 4 employees, 2 of which reside in a HUBZone, and
wins a contract where it will be required to hire an additional 11
employees to perform the contract, SBA would not propose
decertification if the first 8 new hires were non-HUBZone residents
(meaning that for a time, only 2 employees out of 12 would be HUBZone
residents, which is less than 20% of the firm's total employees), as
long as the firm makes documented efforts to hire HUBZone residents and
at least 1 of the remaining individuals hired to perform the contract
lives in a HUBZone (i.e., after hiring is complete, the firm employs 3
HUBZone residents out of a total of 15 employees, which equals 20%,
thus allowing the firm to be deemed to have attempted to maintain the
35% HUBZone resident requirement). Of course, SBA would not believe
that a firm truly attempted to maintain the 35% HUBZone resident
requirement if it hired one HUBZone resident (in the example above, if
it hired the third HUBZone resident in total, or first of the 11
supposedly hired to perform the newly awarded contract) one day before
its annual HUBZone eligibility review and that individual really had no
input in contract performance. Thus, considering SBA's desire not to
insert itself into a firm's business decisions in hiring individuals to
perform a HUBZone contract and its responsibility to ensure that
additional HUBZone employees are in fact hired to perform the contract
and that the overall purposes of the program are served, SBA requests
comments on how best to look at this 20% minimum requirement. SBA also
believes that a lower percentage (i.e., allowing less than 20% HUBZone
residents) would unreasonably diminish the impact of the program on the
targeted areas and populations. However, SBA requests comments as to
whether a different percentage is also reasonable and would accomplish
the objectives of the HUBZone program while not unduly burdening firms
performing HUBZone contracts.
[[Page 54814]]
SBA proposes to eliminate the definition of ``county unemployment
rate'' and incorporate it into the definition of ``qualified non-
metropolitan county (QNMC),'' as discussed further below.
The proposed rule would amend the definition of ``D/HUB'' to make
clear that this term refers to the Director of SBA's Office of HUBZone.
SBA proposes to amend the definition of ``decertify'' to clarify
that the decertification procedures described in part 126 are
applicable to firms which voluntarily withdraw from the HUBZone
program. If a certified HUBZone small business concern is unable to
recertify its HUBZone eligibility at the time of its annual
recertification, or if it acquires, is acquired by, or merges with
another concern and no longer meets the HUBZone eligibility
requirements, it should submit a request to SBA to voluntarily
withdraw. Upon receipt of such request, SBA will remove the firm as a
certified HUBZone small business concern from the Dynamic Small
Business Search (DSBS) system.
SBA proposes to amend the definition of the term ``employee.'' This
term is key to the HUBZone program since the basic HUBZone eligibility
requirements for a small business are to have at least 35% of its
employees residing in a HUBZone and to have a principal office located
in a HUBZone. SBA believes that a clarification is necessary because
the existing definition's language--``a minimum of 40 hours per
month''--is ambiguous. The proposed rule would explain that an
individual is an employee if he or she works at least 40 hours during
the four-week period immediately prior to the relevant date--either the
date the concern submits its HUBZone application to SBA or the date of
recertification. SBA will review a firm's payroll records for the most
recently completed pay periods that account for the four-week period
immediately prior to the date of application or date of recertification
in order to determine which individuals meet this definition. If the
firm has weekly pay periods, then SBA will review the payroll records
for the most recently completed last four pay periods. If the firm has
two-week pay periods, then SBA will review the payroll records for the
last two most recently completed pay periods. If the payroll records
demonstrate that an individual worked forty or more hours during that
four-week period, he or she would be considered an employee of the
concern. Additionally, SBA is considering revising the requirement from
40 hours per month to 20 hours per week, due to concerns that the 40
hours per month requirement is not sufficient to stimulate employment
in HUBZones. Considering the purpose of the HUBZone program to
stimulate meaningful employment in communities with high unemployment,
SBA specifically requests comments on the number of hours SBA should
require in order to count an individual as an employee of the firm for
HUBZone eligibility purposes.
The proposed definition of ``employee'' continues to specify that
employees include temporary and leased employees, individuals obtained
through a union agreement, and those co-employed through a professional
employer organization (PEO) agreement. To further respond to the number
of hours an individual must work in order to be considered an employee
of the firm, SBA also requests comments on whether SBA should count
only full-time employees or full-time equivalents.
The proposed definition clarifies that all owners of a HUBZone
applicant or HUBZone small business who work at least 40 hours per
month will be considered employees, regardless of whether they receive
compensation. This current interpretation responds to situations where
the counting of one individual (i.e., a non-HUBZone resident owner who
works at the firm but does not collect a direct salary and claims not
to be an employee) would render the firm ineligible for HUBZone
participation. SBA believes that any time an owner works at least 40
hours per month for the concern, he or she should be counted as an
employee. In addition, the proposed definition adds that if the sole
owner of a firm works less than 40 hours during the four-week period
immediately prior to the relevant date of review, but has not hired
another individual to direct the actions of the concern's employees,
then that owner will be considered an employee as well.
The proposed definition clarifies that individuals who do not
receive compensation and those who receive deferred compensation are
generally not considered employees. The proposed definition further
clarifies that individuals who receive in-kind compensation
commensurate with the work performed will be considered employees. This
means that an individual who works at least 40 hours per month and
receives in-kind compensation equaling the value of 10 working hours
would generally not be considered an employee. SBA believes these
clarifications are needed because there has been confusion about
whether someone who receives in-kind compensation should be considered
an employee, about what SBA considers in-kind compensation, and about
what deferred compensation means. In general, in-kind compensation is
non-monetary compensation, or anything other than cash, wages, salary
or other monetary benefit received in exchange for work performed. An
example of in-kind compensation is housing received in exchange for
work performed. SBA generally treats individuals receiving in-kind
compensation as employees because they are receiving an economic
benefit from working for the firm, which is consistent with the
purposes of the HUBZone program. In a previous proposed rule amending
the definition of ``employee'' to address in-kind compensation, SBA
explained: ``SBA intended the term compensation to be read broadly and
to encompass more than wages. Thus, a person who receives food,
housing, or other non-monetary compensation in exchange for work
performed would not be considered a volunteer under that proposed
regulation. SBA believes that allowing volunteers to be counted as
employees would not fulfill the purpose of the HUBZone Act--job
creation and economic growth in underutilized communities.'' 67 FR 3826
(Jan. 28, 2002). SBA requests comments on whether it is reasonable to
continue treating in-kind compensation this way, and on how to measure
whether in-kind compensation is commensurate with work performed. There
has also been some confusion surrounding SBA's treatment of deferred
compensation. In general, deferred compensation means compensation that
is not received at the time it is earned, but is received sometime in
the future. SBA does not treat individuals receiving deferred
compensation as employees for HUBZone purposes because such individuals
are not receiving a present economic benefit from working for the firm,
which is not consistent with the purpose of the HUBZone program. The
Court of Federal Claims has found this policy to be reasonable. In
Aeolus Systems, LLC v. United States, 79 Fed. Cl. 1, 9 (2007), the
Court held that: ``(1) the concept of deferred compensation is contrary
to the program's goal of increasing gainful employment in HUBZones, and
(2) the identification of non-owner individuals who work for deferred
compensation as `employees' would open up the HUBZone program to
potential abuse.''
The proposed definition also clarifies that independent contractors
who receive compensation through Internal Revenue Service (IRS) Form
1099 generally are not considered employees,
[[Page 54815]]
as long as such individuals are not considered to be employees for size
purposes under SBA's Size Policy Statement No. 1. SBA believes that it
would not make sense to find an individual to be an employee of a firm
when determining the concern's size, but to then not consider that same
individual to be an employee when determining compliance with HUBZone
eligibility rules. If an independent contractor meets the employee test
under SBA Size Policy Statement No. 1, such individual should also be
considered an employee for HUBZone eligibility purposes. If someone is
truly acting as an independent contractor, that individual is acting as
a subcontractor, not an employee. Such an individual does not receive
the same benefits as an employee, but is also not under the same
control as an employee. The proposed rule also clarifies that
subcontractors are not considered employees when determining compliance
with the HUBZone eligibility rules.
Additionally, the proposed definition states that employees of
affiliates may be counted as employees of a HUBZone applicant or
certified HUBZone small business concern, if the totality of
circumstances demonstrates that there is no clear line of fracture
between the concerns. This has always been SBA's policy and this
amendment is intended to eliminate ambiguities in the regulation. When
looking at the totality of circumstances to determine whether
individuals are employees of a concern, SBA will review all
information, including criteria used by the Internal Revenue Service
(IRS) for Federal income tax purposes and those set forth in SBA's Size
Policy Statement No. 1. This means that SBA will consider the employees
of an affiliate firm as employees of the HUBZone small business if
there is no clear line of fracture between the business concerns in
question, the employees are in fact shared, or there is evidence of
intentional subterfuge. When determining whether there is a clear line
of fracture, SBA will review, among other criteria, whether the firms:
Operate in the same or similar line of business; operate in the same
geographic location; share office space or equipment; share any
employees; share payroll or other administrative or support services;
share or have similar websites or email addresses; share telephone
lines or facsimile machines; have entered into agreements together
(e.g., subcontracting, teaming, joint venture, or leasing agreements)
or otherwise use each other's services; share customers; have similar
names; have key employees participating in each other's business
decisions; or have hired each other's former employees. For example, if
John Smith owns 100% of Company A and 51% of Company B, the two
companies are affiliated under SBA's size regulations based on common
ownership. Thus, SBA would look at the totality of circumstances to
determine whether it would be reasonable to treat the employees of
Company B as employees of Company A for HUBZone program purposes. If
both companies do construction work and share office space and
equipment, then SBA would find that there is not a clear line of
fracture between the firms, and would treat the employees of Company B
as employees of Company A for HUBZone program purposes. This means that
the employees of Company B would be counted in determining Company A's
compliance with the 35% HUBZone residency requirement and the principal
office requirement. Conversely, SBA would not treat the employees of
one company as employees of another for HUBZone program purposes if the
two firms would not be considered affiliates for size purposes. SBA
will look at the totality of circumstances to determine whether it
would be reasonable to treat the employees of one concern as employees
of another for HUBZone program purposes only where SBA first determines
that the two firms should be considered affiliates for size purposes.
SBA specifically requests comments on these proposed changes to the
definition of ``employee.'' SBA also requests comments on how SBA
should treat individuals who are employed through an agreement with a
third-party business that specializes in providing HUBZone resident
employees to prospective HUBZone small business concerns for the
specific purpose of achieving and maintaining HUBZone eligibility. For
example, one individual could work 10 hours per month for four separate
businesses and be counted as a HUBZone resident employee for each of
those businesses. SBA has seen this arrangement several times in recent
years and requests public input on whether such an arrangement is
consistent with the purposes of the HUBZone program and/or how such
arrangements should be structured in order to be consistent with such
purposes.
SBA proposes to revise the definition of ``HUBZone small business
concern'' to remove ambiguities in the regulation. Currently, the
definition of this term is copied directly from the Small Business Act
and addresses only the ownership and control requirements. SBA proposes
to revise the definition to state that ``HUBZone small business
concern'' or ``certified HUBZone small business concern'' means a small
business concern that meets the requirements described in Sec. 126.200
and that SBA has certified as eligible for federal contracting
assistance under the HUBZone program. In addition, SBA proposes to
replace the term ``qualified HUBZone SBC'' with the term ``certified
HUBZone small business concern'' to make the regulations more clear,
since firms must apply to SBA and be certified as HUBZone small
business concerns before they are can qualify to receive the benefits
of the HUBZone program. Accordingly, this rule proposes to remove the
phrase ``qualified HUBZone SBC'' or ``qualified HUBZone small business
concern'' everywhere it appears in SBA's regulations and replace it
with ``certified HUBZone small business concern.''
In addition, SBA proposes to implement section 1701(i) of the NDAA
2018 in the amended definition of ``HUBZone small business concern.''
The NDAA 2018 was enacted on December 12, 2017. Section 1701 of the act
makes a number of amendments to sections 3(p) and 31 of the Small
Business Act, 15. U.S.C. 632(p), 657a, which govern the HUBZone
program. Most of these changes are not effective until January 1, 2020,
with the exception of the provision contained in section 1701(i). In
enacting section 1701(i), Congress intended for small businesses
located in redesignated areas that are set to expire to retain their
HUBZone eligibility until the date on which SBA updates the HUBZone
maps in accordance with the broader changes described in section 1701.
In other words, firms that were certified HUBZone small business
concerns as of the date of enactment (December 12, 2017), and that had
principal offices located in redesignated areas set to expire prior to
January 1, 2020, shall remain certified HUBZone small business concerns
until SBA updates the HUBZone maps after the 2020 decennial census, so
long as all other HUBZone eligibility requirements described in Sec.
126.200 are met. This means that in order to continue to be considered
a certified HUBZone small business concern, the firm must: Continue to
meet the HUBZone ownership and control requirements; continue to meet
the 35% HUBZone residency requirement; and maintain its principal
office in the redesignated area or another qualified HUBZone. SBA
[[Page 54816]]
notes that to implement this change, SBA will ``freeze'' the HUBZone
maps with respect to qualified census tracts, qualified non-
metropolitan counties, and redesignated areas. As a result, for all
redesignated areas in existence on December 12, 2017, the expiration of
their HUBZone treatment has been extended until December 31, 2021. SBA
selected this date because SBA estimates that the HUBZone maps will
have been updated to incorporate the results of the 2020 census and to
reflect the broad changes mandated by section 1701 by that time, and
selecting a specific date provides stability to program participants.
With respect to the 35% residency requirement, SBA notes that an
employee of a certified HUBZone small business concern who resided in a
redesignated area as of December 12, 2017, will continue to be treated
as a HUBZone resident through December 31, 2021.
SBA proposes to eliminate the definition of ``median household
income'' and incorporate it into the definition of ``qualified non-
metropolitan county,'' to make the regulations more readable and to
clarify that SBA obtains the data on median household income from the
Bureau of the Census' publication titled, ``American Community Survey
5-year estimates.''
SBA also proposes to remove the definition of ``non-metropolitan''
and incorporate it into the definition of ``qualified non-metropolitan
county'' to make the regulations more clear and explain that the term
``non-metropolitan'' is defined by the Bureau of the Census, United
States Department of Commerce, in its publications on the Census of
Population, Social and Economic Characteristics.
SBA proposes to remove the definition of ``metropolitan statistical
area'' and incorporate it into the definitions of the terms ``qualified
census tract'' and ``qualified non-metropolitan county'' to make the
regulations more readable.
SBA proposes to add a definition for ``primary industry
classification'' that refers to SBA's definition of such term in 13 CFR
121.107. To be certified into the HUBZone program, an applicant must be
small, which means it must meet the size standard corresponding to the
North American Industry Classification System (NAICS) code associated
with its primary industry classification.
SBA proposes to amend the definition of ``principal office'' to
eliminate ambiguities in the regulation. SBA proposes to clarify that
when determining whether a concern's principal office is located in a
HUBZone. SBA counts all employees of the concern, other than those
employees who work at jobsites. This includes both HUBZone residents
and non-HUBZone residents. SBA is proposing this clarification because
some applicants have been under the mistaken impression that only
HUBZone resident employees are counted for purposes of determining a
firm's principal office, but this is not and has never been SBA's
intent. In addition, SBA proposes to add that in order for a location
to be considered a concern's principal office, the concern must
demonstrate that it conducts business at this location. SBA has
included this clarification to address situations such as when firms
are only able to provide a lease document but not utility bills. SBA
believes that evidence that business is being conducted at the location
is necessary to ensure the purposes of the HUBZone Program are being
fulfilled. Finally, SBA proposes to add examples to the definition of
principal office, to illustrate how the agency treats situations in
which employees work at multiple locations. The first example provides
that if an employee spends more than 50% of his or her time at one
location, the employee is deemed to work at that location. If the
employee does not spend more than 50% of his or her time at any one
location, then generally the employee will be deemed to work at a non-
HUBZone location (assuming all locations are not in HUBZones). SBA
specifically requests comments on these proposed changes.
SBA proposes to amend the definition of ``qualified base closure
area'' to remove ambiguities in the regulation and to be consistent
with SBA's interpretation of the statutory text. In paragraph (1)(i) of
the definition, SBA proposes to replace the language ``The date the
Administrator makes a final determination as to whether or not to
implement the applicable designations in accordance with the results of
the decennial census conducted after the area was initially designated
as a base closure area'' with ``the date on which the results of the
decennial census conducted after the area was initially designated as a
base closure area are released.'' In paragraph (2), SBA proposes to
replace the language ``until such time as the Administrator makes a
final determination as to whether or not to implement the applicable
designations in accordance with the results of the 2020 decennial
census are released'' with ``until the results of the 2020 decennial
census are released.'' SBA believes these changes are needed to make
clear that SBA interprets ``the date the Administrator makes a final
determination as to whether or not to implement the applicable
designations'' to mean the date that the public data is released.
SBA proposes to amend the definition of ``qualified census tract''
to make the regulation more readable. The proposed definition provides
the criteria used to define the term in the Internal Revenue Code,
rather than simply cross-referencing it as the regulation currently
does.
SBA proposes to eliminate the definition of ``qualified HUBZone
SBC,'' as discussed above.
SBA proposes to amend the definition of ``qualified non-
metropolitan county'' to include Difficult Development Areas (DDAs) and
to reflect SBA's current policy of utilizing the most recent data from
the Local Area Unemployment Statistics report, which is annually
produced by the Department of Labor's Bureau of Labor and Statistics.
The proposed definition explains that a DDA is an area defined by the
Department of Housing and Urban Development that is within Alaska,
Hawaii, or any territory or possession of the United Sates outside the
48 contiguous states. DDAs may be HUBZones if they are also
nonmetropolitan counties. SBA notes that it has been including
qualified non-metropolitan counties that are DDAs in its program since
the statutory authority was enacted, but had not yet amended the term
qualified non-metropolitan county to include DDAs.
SBA proposes to amend the definition of ``redesignated area'' to
delete an obsolete reference to the 2010 census. SBA proposes to define
``redesignated area'' as a census tract or non-metropolitan county that
remains qualified as a HUBZone for 3 years after the date on which the
area ceased to be either a qualified census tract or a qualified non-
metropolitan county.
The proposed rule would also amend the definition of ``reside.''
This term is used when analyzing whether an employee should be
considered a HUBZone resident for purposes of determining a firm's
compliance with the 35% HUBZone residency requirement. SBA proposes to
remove the reference to primary residence, to eliminate the requirement
that an individual demonstrate the intent to live somewhere
indefinitely, and to provide clarifying examples. SBA proposes to
remove the reference to primary residence because many individuals do
not have primary residences as the term is traditionally defined. SBA
proposes to remove the requirement to prove intent to live somewhere
indefinitely
[[Page 54817]]
because SBA does not have a reasonably reliable method of enforcing
this requirement. In the alternative, SBA proposes that ``reside''
means to live at a location full-time and for at least 180 days
immediately prior to the date of application or date of
recertification, as applicable. SBA believes that this is consistent
with the purposes of the HUBZone program, while taking into account the
realities of the unique living arrangements that may be utilized by
certain small business' workforces. The definition also makes clear
that to determine an individual's residence, SBA will first look to an
individual's address as identified on his or her driver's license or
voter's registration card, which is SBA's current and long-standing
policy. Where such documentation is not available, SBA will require
other specific proof of residency, such as deeds or leases, or utility
bills. Additionally, this rule also proposes examples to add clarity to
these revisions. SBA specifically requests comments on these proposed
changes.
In addition, SBA notes that more small businesses are performing
contracts overseas and are faced with the problem of how to treat those
employees who reside in a HUBZone when in the United States or its
territories, but are temporarily residing overseas to perform a
contract. SBA proposes that it will consider the residence located in
the United States as that employee's residence, if the employee is
working overseas for the period of a contract. SBA believes that as
long as that employee can provide documents showing he or she is paying
rent or owns a home in a HUBZone, then the employee should be counted
as a HUBZone resident in determining whether the small business meets
the 35% HUBZone residency requirement. Because of the proposed change,
discussed below (which treats an individual as a HUBZone resident if
that individual resided in a HUBZone at the time his or her employer
was certified into the HUBZone program or at the time he or she first
worked for the certified HUBZone small business concern (i.e., the
individual was hired after the firm was certified into the HUBZone
program), so long as he or she continues to work for that same firm,
even if the area where the individual lives no longer qualifies as a
HUBZone or the individual has moved to a non-HUBZone area) this
provision would have meaning only with respect to firms that have
employees performing overseas contracts and are applying to the HUBZone
program for the first time. An individual who already qualified as a
HUBZone resident for a certified HUBZone small business would continue
to be treated as a resident of a HUBZone for HUBZone program
eligibility purposes as long as he or she continued to work for the
same certified HUBZone small business. SBA believes that this proposal
strikes the right balance between acknowledging the increased
prevalence of overseas contracting by small businesses and the need to
ensure that the program benefits HUBZone areas. However, SBA requests
comments on this issue.
SBA proposes to eliminate the definition of ``small disadvantaged
business (SDB)'' because SBA no longer certifies firms as SDBs, and SDB
set-asides and price evaluation preferences no longer exist. However,
the term SDB continues to be defined in part 124 for use in other
contexts such as subcontracting.
Finally, SBA proposes to remove the definition of ``statewide
average unemployment rate'' and incorporate it into the definition of
``qualified non-metropolitan county'' to make the regulations more
readable and to clarify that the statewide average unemployment rate is
determined using the Local Area Unemployment Statistics report, which
is produced by the Department of Labor's Bureau of Labor Statistics.
2. Eligibility Requirements
SBA proposes to reorganize Sec. 126.200 to make the section more
readable and to make the HUBZone eligibility requirements more clear.
With respect to the 35% HUBZone residency requirement, SBA proposes
to clarify that all employees are counted when determining a concern's
compliance with this requirement, regardless of where the employee
performs his or her work. This has always been SBA's policy, but it
appears that some applicants have misinterpreted SBA's rules. SBA has
received several comments indicating that some in the community
mistakenly believe that SBA would look only at those employees
performing work in the principal office, and not any employees
performing work at job site locations, in determining whether the firm
meets the 35% HUBZone residency requirement. This has never been the
case. SBA counts all individuals considered ``employees'' under the
HUBZone definition of the term toward the 35% HUBZone residency
requirement. SBA believes that the misunderstanding stems from the
definition of the term ``principal office.'' In determining a concern's
``principal office,'' SBA excludes the concern's employees who perform
the majority of their work at job-site locations. That exclusion,
however, applies only to the principal office determination, and not to
whether a concern meets the 35% HUBZone residency requirement. The
proposed rule seeks to clarify SBA's intent. In addition, SBA proposes
to change its application of how SBA requires a firm to meet the 35%
residency requirement when the calculation results in a fraction.
Previously, when the calculation of 35% of a concern's total employees
resulted in a fraction, SBA would round up to the nearest whole number.
For example, under the current rule, if a firm has 6 total employees,
since 35% of 6 is 2.1, then SBA would round 2.1 up to 3 and require the
firm to employ 3 HUBZone residents to meet the 35% HUBZone residency
requirement. This rule proposes rounding to the nearest whole number,
rather than rounding up in every instance. This means that if 35% of a
firm's employees equates to X plus .49 or less, SBA would round down to
X and not up to the next whole number. Thus, in the example above, SBA
would round 2.1 down to 2 and would only require the firm to employ 2
HUBZone residents. SBA believes that this proposed change would have a
minimal impact, but would clear up confusion that several small
businesses seeking HUBZone status have encountered.
In addition, SBA has proposed new examples relating to the HUBZone
residency requirement. With respect to the principal office and HUBZone
residency requirements for tribally owned entities, SBA has clarified
the regulatory language without making any substantive changes to the
rule. Specifically, the proposed rule would replace the word
``adjoining'' with the word ``adjacent'' as it was used to describe
HUBZones neighboring Indian reservations, because SBA believes this
term is more accurate.
In order to provide stability and certainty for program
participants, SBA is also proposing that an employee that resides in a
HUBZone at the time of a HUBZone small business concern's certification
or recertification shall continue to count as a HUBZone employee as
long as the individual remains an employee of the firm, even if the
employee moves to a location that is not in a qualified HUBZone area or
the area where the employee's residence is located is redesignated and
no longer qualifies as a HUBZone. SBA understands that a few HUBZone
concerns have become ineligible for further HUBZone contracts merely
because one or two of their employees
[[Page 54818]]
have moved their residences from a HUBZone to non-HUBZone area. This
has placed such businesses in the unenviable position of firing those
individuals and replacing them with other individuals currently living
in a HUBZone, or allowing the individuals to remain on the payroll and
either becoming ineligible for the HUBZone program or having to hire
additional HUBZone individuals that might cause a substantial hardship
on very small businesses by increasing costs and reducing profits of
those businesses. One of the purposes of the program is to promote job
creation for individuals living in HUBZones, enabling them to better
their lives and their communities. Someone who is hired by a HUBZone
small business concern and who is then able to better the lives of his
or her family by moving to a different location outside a HUBZone area
(due to that newly created job) should not face losing his or her job
because the HUBZone small business concern cannot maintain its HUBZone
eligibility with that individual on the payroll. Under this proposed
change, a certified HUBZone small business concern would have to
maintain records of the employee's original HUBZone address, as well as
records of the individual's continued and uninterrupted employment by
the HUBZone small business concern, for the duration of the firm's
participation in the HUBZone program.
Further, SBA proposes to clarify in proposed Sec. 126.200(g) that
the concern and its owners cannot have an active exclusion in the
System for Award Management and be certified into the program. SBA
believes that this logically follows from a debarred or suspended
status, but would amend the regulations for clarity nevertheless.
Debarred/suspended entities are ineligible for federal contracting
assistance and would thus not receive any benefits from being certified
as a HUBZone small business concern.
In Sec. 126.204, SBA proposes to clarify that a HUBZone small
business concern may have affiliates, but the affiliate's employees may
be counted as employees of the HUBZone applicant/participant when
determining the concern's compliance with the principal office and 35%
percent HUBZone residency requirements. Proposed Sec. 126.204
clarifies that where there is evidence that a HUBZone applicant/
participant and its affiliate are intertwined and acting as one, SBA
will count the employees of one as employees of the other. The HUBZone
applicant or concern must demonstrate a clear line of fracture between
it and any affiliate in order for SBA to not count the affiliate's
employees when determining the concern's principal office or compliance
with the 35% residency requirement. The above supplementary information
on the proposed definition of the term ``employee'' discusses this
issue in more detail.
In Sec. 126.205, SBA proposes to delete the following:
``Participation in other SBA Programs is not a requirement for
participation in the HUBZone Program.'' SBA believes that this language
is unnecessary and may merely confuse prospective HUBZone small
businesses.
In Sec. 126.206, SBA proposes to replace the term ``non-
manufacturers'' with ``nonmanufacturers'' to be consistent with SBA's
regulations at Sec. 121.406(b).
SBA proposes to amend the title and text of Sec. 126.207 to
clarify that a HUBZone small business concern may have multiple
offices, as long as the firm's principal office is located in a
HUBZone, and to clarify that a different rule applies to concerns owned
by Indian Tribal Governments.
3. Certification
The HUBZone program is a certification program. In other words, a
small business concern must submit an application and supporting
documents to SBA in order for SBA to determine eligibility and certify
the company into the program. SBA has proposed several clarifications
to its certification process.
SBA proposes to amend Sec. 126.300 by breaking up the section to
make it clearer and more readable, to move the discussion of the
adverse inference rule to Sec. 126.306, and to clarify that SBA may
conduct site visits, conduct independent research, and review
additional information (such as tax and property records, public
utility records, postal records, and other relevant information).
SBA proposes to revise Sec. 126.303 to update the instructions for
submitting electronic applications.
This proposed rule would also clarify that an applicant must submit
a completed application and all documents and a representation that it
meets the program's requirements as of the date of the application and
that the information provided and any subsequent information provided
is complete, true and accurate. Further, SBA proposes to require that
the representation be electronically signed by a person who is
authorized to represent the concern. SBA believes that this should
either an owner or officer of the applicant, and not an administrative
employee acting on behalf of an officer.
Further, SBA proposes to clarify that after an application has been
submitted, the applicant must notify SBA of any changes that could
affect its eligibility. The applicant would have to provide information
and documents to support the changes.
SBA also proposes to clarify that if an applicant believes that an
area is a HUBZone but SBA's website is not showing the area to be a
qualified HUBZone, the applicant must note this on the application.
Further, the applicant must provide documents demonstrating why it
believes that the area meets the statutory criteria of a HUBZone. It
cannot merely assert that it believes the area is underutilized and
should be a HUBZone; it must show that the area meets the statutory
criteria.
SBA proposes to delete and reserve Sec. 126.305, addressing what
format the certification to SBA must take, because this is addressed in
Sec. 126.303.
SBA proposes several changes to Sec. 126.306. First, SBA proposes
to clarify that the agency must receive all required information,
supporting documents, and a completed HUBZone representation before it
will begin processing a concern's application and that SBA will make a
final decision within 90 calendar days after receipt of a complete
package, whenever practicable. SBA proposes to clarify that the burden
of proof to demonstrate eligibility is on the applicant concern and if
the concern does not provide requested information within the allotted
time provided by SBA, or if it submits incomplete information, SBA may
presume that disclosure of the missing information would adversely
affect the business concern and demonstrate a lack of eligibility in
the area or areas to which the information relates and decline the
applicant.
Similarly, SBA proposes to clarify that an applicant must be
eligible as of the date it submitted its application and up until the
time the D/HUB issues a decision. SBA cannot certify a business into
the program that does not meet the eligibility requirements at that
time.
SBA proposes to amend Sec. 126.307 to make a general reference to
the website where SBA identifies where firms are listed as certified
HUBZone small business concerns so that the regulation itself does not
have to be updated every time a change in the website location occurs.
The proposed rule would also delete the reference to the ability of
requesters to obtain a copy of the list of certified HUBZone small
business concerns by writing to the D/HUB at SBA. An interested party
may find all firms that are certified HUBZone small business concerns
by searching the
[[Page 54819]]
Dynamic Small Business Search (DSBS) system, and can verify a specific
concern's HUBZone certification. SBA believes that the availability of
this search function makes written requests an outdated and inefficient
way of obtaining current information about certified HUBZone small
business concerns.
SBA proposes to amend Sec. 126.308 to clarify that certified
HUBZone small business concerns cannot ``opt out'' of being publicly
displayed in the DSBS system. All certified HUBZone small business
concerns appear in DSBS as certified HUBZone small business concerns,
and those not so appearing will not be eligible for HUBZone contracts.
Contracting officers refer to DSBS to ensure that potential awardees
are in fact HUBZone certified small business concerns.
SBA proposes to revise Sec. 126.309 to add a new provision
permitting a firm to submit a formal request for reconsideration when
it receives a determination denying admission to the HUBZone program.
Under the proposed regulation, the business would be able to submit a
request for reconsideration within 15 calendar days after receiving
SBA's decision. SBA will presume that written notice was provided if
SBA sends a communication to the concern at an address, email address,
or fax number provided in the concern's System for Award Management
(SAM) (or any successor system) profile. The applicant would be
required to set forth the reasons why it believes the D/HUB's initial
decision was erroneous and include information and documentation
pertinent to overcoming the reasons for the initial decline, whether or
not available at the time of initial application.
Proposed Sec. 126.309(a)(4) would explain that SBA would not add a
concern to DSBS as a certified HUBZone small business concern during
the reconsideration process. SBA would recognize a concern as a
certified HUBZone small business concern in DSBS only if the D/HUB
certifies the concern into the program. The D/HUB would have 30
calendar days to issue a decision and could either approve the
application, deny it on the same grounds as the original decision, or
deny it on other grounds. If the D/HUB declines the application solely
on issues not raised in the initial decline, the applicant could ask
for reconsideration as if it were an initial decline.
SBA proposes that if a concern that has been declined does not
request reconsideration of the D/HUB's decision, the concern could
reapply for certification 90 calendar days after the date of decline.
If a concern that has been declined requests reconsideration and the
decline is affirmed, the concern could apply for certification 90
calendar days after the date of the D/HUB's decision on the request for
reconsideration.
4. Program Examinations
As part of SBA's oversight responsibilities for the HUBZone
program, SBA monitors the HUBZone program and certified HUBZone small
business concerns, and verifies information submitted by HUBZone
applicants, by conducting program examinations.
SBA proposes to revise Sec. 126.401 to clarify what a program
examination is. The proposed rule would provide that a program
examination is a review by SBA that verifies the accuracy of any
certification made or information provided as part of the HUBZone
application or recertification process.
SBA proposes to revise Sec. 126.403 to clarify what SBA will
review during a program examination. SBA would be able to review any
information related to the concern's HUBZone eligibility, including
documentation related to the concern's ownership and principal office,
compliance with the 35% HUBZone residency requirement, and the
concern's ``attempt to maintain'' 35% of its employees from a HUBZone
during the performance of a HUBZone contract.
SBA proposes to add a new Sec. 126.404 to provide the procedures
and possible outcomes of a program examination. Whether the concern is
applying to the HUBZone program for the first time, is undergoing a
recertification analysis, or is subject to a program examination for
another reason, SBA's program examination can result in a decision
finding the concern either to be eligible to participate in the program
(either for the first time or to be able to continue in the program),
or not eligible to participate in the program (which would result in a
disapproval of an application or the decertification of a HUBZone
concern). The proposed regulation provides that SBA will make its
determination within 90 calendar days after receiving all requested
information, when practicable, and that possible outcomes of a program
examination include certification, denial of certification, continued
certification, or proposed decertification.
5. Maintaining HUBZone Status
SBA proposes to amend Sec. 126.500 to require HUBZone small
business concerns to recertify annually to SBA that they continue to
meet all of the HUBZone eligibility requirements, instead of requiring
them to undergo a recertification by SBA every three years. The
proposed rule also provides that when a concern fails to submit its
annual recertification to SBA, SBA will start proceedings to decertify
the concern.
SBA proposes to amend Sec. 126.501 to clarify that once certified,
a HUBZone small business concern will remain eligible for HUBZone
contract awards for one year from the date of certification, provided
that the concern qualifies as small for the size standard corresponding
to the NAICS code assigned to the contract. On the one-year anniversary
of the certification, the firm would be required to recertify that it
continues to meet the HUBZone eligibility requirements or voluntarily
withdraw from the HUBZone program. Although requiring annual
recertification instead of every three years may appear to impose
additional burdens on a HUBZone small business concern, the annual
recertification burden would be easily offset by the elimination of the
requirement that a firm must demonstrate that it continues to be an
eligible HUBZone small business concern both at the time of offer and
time of award for any HUBZone contract. As set forth in proposed Sec.
126.501(a), once SBA certifies a concern as eligible to participate in
the HUBZone program, the concern would be treated as an eligible
HUBZone small business for all HUBZone contracts for which the concern
qualifies as small for a period of one year from the date of its
initial certification or its annual recertification. Thus, any
certification that the firm makes representing that it qualifies as a
HUBZone small business concern relates back to the initial
certification or annual recertification. The HUBZone concern would not
have to review and demonstrate its continued compliance with all
HUBZone eligibility requirements throughout the year for each new
HUBZone contract that it seeks.
HUBZone status protests would also relate back to the date of
initial certification or most recent annual recertification (except for
protests against HUBZone joint ventures). Thus, the protest would have
to demonstrate that the information relied on by SBA in certifying or
recertifying the concern as an eligible HUBZone small business concern
was incorrect, not that there may have been changed circumstances since
that certification that would render the concern ineligible. For
HUBZone status protests filed against a
[[Page 54820]]
HUBZone joint venture in connection with a HUBZone contract, a
protester could challenge both the HUBZone status of the HUBZone
member(s) of the joint venture and the joint venture's compliance with
the requirements governing HUBZone joint ventures, including the
contents of the joint venture agreement. If a protester challenged the
HUBZone status of the HUBZone member(s) of the joint venture, the
protest would relate back to the date of that firm's initial
certification or annual recertification (whichever was more recent) and
the firm's HUBZone status would be determined as of that date. If the
protester challenged the joint venture's compliance with the HUBZone
joint venture requirements set forth in Sec. 126.616, the protest
would relate to the date on which the joint venture submitted its
initial offer including price and the joint venture's compliance with
Sec. 126.616 would be determined as of that date. SBA will also
utilize the program examination mechanism to review the status of
selected firms on the date of initial certification or recertification.
The proposed rule would also clarify that a HUBZone small business
concern could voluntarily withdraw from the program at any time. This
may be because the concern believes that it no longer meets the
program's eligibility requirements and could not be recertified or it
may simply no longer want to participate in the program for a variety
of other reasons. The proposed rule would also clarify that any firm
that voluntarily withdraws from the program could reapply to the
program at any point after 90 calendar days from the date it was
decertified. For a firm that voluntarily withdrew because it no longer
met all the HUBZone eligibility requirements, it could make the
necessary changes that would enable it to come back into compliance and
reapply to the program after 90 days.
SBA proposes to amend Sec. 126.503 to clarify that if SBA is
unable to verify a HUBZone small business concern's eligibility or
determines that it may not be eligible for the program, the SBA could
conduct a program examination or propose the concern for
decertification and the HUBZone small business concern would be
required to rebut each of the reasons SBA sets forth in its written
notification letter within 15 calendar days from the date that it
receives SBA's notification. If SBA finds that the concern is not
eligible, the SBA would provide notice to the concern stating the basis
for the determination, decertify the concern and remove it as a
certified HUBZone small business concern from DSBS. In addition, the
proposed rule would authorize SBA to propose decertification of a
HUBZone small business concern that is performing one or more HUBZone
contracts if SBA determines that the concern no longer has at least 20%
of its employees living in a HUBZone. As identified above, the proposed
rule has defined the statutory requirement that a HUBZone small
business concern ``attempt to maintain'' compliance with the 35%
HUBZone while performing a HUBZone contract to mean having not less
than 20% HUBZone employees. During the proposed decertification
process, the concern could demonstrate that it does in fact continue to
have at least 20% HUBZone employees and has otherwise attempted to meet
the 35% requirement.
SBA proposes to amend Sec. 126.504 to reflect the various ways
that a HUBZone small business concern could lose its designation in
DSBS as a certified HUBZone small business concern, including if it
has: (1) Been decertified as a result of a protest; (2) been
decertified as a result of the procedures set forth in the regulations;
or (3) submitted a voluntary withdrawal agreement to SBA. SBA proposes
to add a new Sec. 126.506 to provide that a decertified firm could
reapply for admission to the HUBZone program after ninety (90) calendar
days. This is the current rule for reapplying, but SBA has moved it to
a new section to make the process clearer.
6. Contractual Assistance
SBA proposes to revise Sec. 126.601 to remove the discussion of
the acquisition-related dollar thresholds in paragraph (a) because this
does not relate to additional requirements a certified HUBZone small
business concern must meet to submit an offer on a HUBZone contract. In
addition, SBA proposes to move the discussion of compliance with the
limitations on subcontracting for multiple award contracts currently in
paragraph Sec. 126.601(g) to proposed Sec. 126.700, which
specifically addresses the limitations on subcontracting requirements
for HUBZone contracts. Finally, SBA proposes to move the discussion of
recertification currently in paragraph Sec. 126.601(h) to proposed new
Sec. 126.619.
SBA proposes to amend Sec. 126.602 to be consistent with the
proposed change requiring certified HUBZone small businesses to
demonstrate their eligibility at the time of initial certification and
annual certification only. Under this proposed regulation, certified
HUBZone small business concerns would no longer be required to meet the
35% HUBZone residency requirement at all times while certified in the
program. This means that they no longer would have to meet this
requirement at the time of offer and time of award for a HUBZone
contract. HUBZone small businesses would continue to have to ``attempt
to maintain'' compliance with this requirement during the performance
of a HUBZone contract. With respect to HUBZone status for the
underlying contract, the agency will get credit if the firm was in the
HUBZone program at the time of offer, and that status will continue
unless and until recertification for the contract is required.
7. Protests
SBA proposes to amend Sec. 126.801 to clarify how a HUBZone status
protest should be filed and referred to SBA. Among other
clarifications, SBA proposes to clarify that HUBZone status protests
may be filed against HUBZone joint ventures. The grounds for such
protests would include (1) arguments that the HUBZone small business
concern partner(s) to the joint venture did not meet the HUBZone
eligibility requirements set forth in Sec. 126.200 at the time of the
concern's initial certification or most recent annual recertification,
and (2) arguments that the HUBZone joint venture did not meet the
requirements set forth in Sec. 126.616 at the time the joint venture
submitted its offer for the HUBZone contract. For consistency purposes,
SBA proposes to also make these clarifications for Service-Disabled
Veteran-Owned (SDVO) small business joint ventures and Women-Owned
Small Business (WOSB) joint ventures by amending sections 125.28(b) and
127.602. For the SDVO and WOSB programs, unlike the HUBZone program,
the eligibility of the SDVO/WOSB joint venture partner would continue
to be determined as of the date of offer.
SBA proposes to amend Sec. 126.803, addressing how SBA will
process a HUBZone status protest, to reduce the timeframe by which a
protested concern must respond to SBA's notification that an interested
party has filed a protest to 3 business days after the date of receipt
of the SBA's letter. SBA believes that businesses generally respond in
a short period of time since an award on a contract is pending and the
business has this information readily available. In addition to the
above, SBA proposes to update all instructions contained in the HUBZone
regulations related to submission of information and documentation to
SBA to specify that such submissions must be completed
[[Page 54821]]
electronically. The appropriate email addresses have been added and
updated where necessary, and mailing addresses and fax numbers have
been removed. This change is intended to reduce the paperwork burden on
program applicants and participants.
Compliance With Executive Orders 12866, 13563, 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
proposed rule is a significant regulatory action for purposes of
Executive Order 12866. Accordingly, the next section contains SBA's
Regulatory Impact Analysis. However, this is not a major rule under the
Congressional Review Act, 5 U.S.C. 801, et seq.
Regulatory Impact Analysis
1. Is there a need for the regulatory action?
SBA is proposing to make several changes to clarify its
regulations. Through the years, SBA has spoken with small business and
representatives and has determined that several regulations need
further refinement so that they are easier to understand and implement.
Further, SBA has added in new provisions providing for reconsiderations
of application denials and decertifications. Currently, there is no
request for reconsideration process in the regulations, unlike SBA's
other certification programs. SBA believes that making the programs as
consistent and similar as possible, where practicable, will make it
easier for small businesses to understand the process.
2. What are the potential benefits and costs of this regulatory
action?
The proposed regulations seek to address or clarify issues, which
will provide clarity to small businesses and contracting personnel.
Further, SBA is proposing a formal request for reconsideration process,
which could increase costs to the government (e.g., additional workload
for requests for reconsideration), but will provide consistency in the
processes for SBA's programs. SBA declined approximately 87 applicants
in fiscal year 2017. The cost for requesting reconsideration is
estimated at one and a half hours, and we estimate that approximately
ten applicants would request reconsideration. That equates to 15 hours
at an estimated rate of $33.34 an hour, for a de minimis annual total
of $500. However, a reconsideration process is beneficial to HUBZone
applicants because it allows them to correct deficiencies and come into
compliance without waiting 90 days to reapply for the program. This
should enable additional firms to be more quickly certified for the
HUBZone program, which should allow them to seek and be awarded HUBZone
contracts sooner. Thus, any costs associated with the voluntary request
for reconsideration would be outweighed by the potential benefit of
allowing firms to request reconsideration, although it is difficult to
quantify the opportunity cost avoidance associated with this benefit.
For example, if only one of the ten HUBZone firms applying for
reconsideration was able to be recertified earlier and received a set
aside contract of $150,000, it would clearly offset the entire cost
incurred by the ten applicants.
SBA proposes to require HUBZone small business concerns to
recertify annually to SBA that they continue to meet all of the HUBZone
eligibility requirements, instead of requiring them to undergo a
recertification by SBA every three years. There are approximately 5,000
firms in the HUBZone program. Under SBA's current rules, firms must
recertify every three years. Approximately 1,200 firms recertify each
year based on HUBZone data, and we estimate it takes approximately 1
hour to recertify. OMB Control #3245-0320. Consequently, these proposed
changes would increase the annual hourly burden for HUBZone firms by
3,800 hours or an estimated annual cost of $126,692.00. Instead, of
1,200 firms recertifying annually, all 5,000 would have to recertify
annually.
SBA is also proposing that HUBZone small business concerns will not
have to represent or certify that they are eligible at the time of
offer and award for every HUBZone contract, which are the current
program requirements. Under current rules, a HUBZone small business
concern must be eligible both at the time of offer and award of a
HUBZone contract. Based on FPDS data, approximately 2,100 new HUBZone
contracts are awarded each fiscal year. We estimate it takes
approximately 1 hour for a firm to determine it is eligible at the time
of offer and approximately 1 hour for a firm to determine it is
eligible at the time of award. Thus, this proposed rule will reduce
burden on HUBZone small business concerns by approximately 4,200 hours
for an estimated annual savings of $140,028.00.
SBA is proposing that an employee who resides in a HUBZone at the
time of a HUBZone concern's certification or recertification shall
continue to count as a HUBZone employee as long as the individual
remains an employee of the firm, even if the employee moves to a
location that is not in a qualified HUBZone area or the area where the
employee's residence is located is redesignated and no longer qualifies
as a HUBZone. This will greatly reduce burden on firms, as they will
not have to continuously track whether their employees still reside in
a HUBZone or seek to employ new individuals if the location that one or
more current employees reside loses its HUBZone status. We estimate
that it takes 1 hour to determine eligibility and that this proposed
change will save approximately 0.5 hours because once a HUBZone
employee is hired, the firm will never again have to examine where that
employee resides. Thus, this proposed rule should reduce the hourly
burden on approximately 5,000 HUBZone small business concerns by 2,500
hours annually for an estimated annual savings of $83,350.00.
3. What are the alternatives to this final rule?
The alternative to the proposed regulations would be the status
quo, where a firm must be eligible at the time of offer and time of
award. SBA has also identified other alternatives that SBA considered
in the supplementary information to this proposed rule. With respect to
the requirement to annually recertify, SBA could instead require firms
to certify at time of offer, as is done for the other small business or
socioeconomic set aside contract programs. In addition, SBA could
propose only a formal request for reconsideration process or could have
proposed no request for reconsideration process. However, as noted
above, SBA has modeled these processes from its other contracting
programs (e.g., 8(a) request for reconsideration) and believes that
these processes have worked well for these programs and should
therefore be utilized for the HUBZone program. SBA also considered
whether eligibility or protest decisions should be appealed to the
Office of Hearings and Appeals.
Summary of Costs and Cost Savings
Table 1: Summary of Incremental Costs and Cost Savings, below, sets
out the estimated net incremental cost/(cost saving) associated with
this proposed rule. Table 2: Detailed Breakdown of Incremental Costs
and Cost Savings, below, provides a detailed explanation of the annual
cost/(cost saving) estimates associated with this proposed rule.
[[Page 54822]]
Table 1--Summary of Incremental Costs and Cost Savings
------------------------------------------------------------------------
Regulatory action Annual cost/ (cost
Item No. item saving) estimate
------------------------------------------------------------------------
1............................ Annual $126,692
recertification
instead of every 3
years.
2............................ Requiring a formal 500
request of
reconsideration.
3............................ Removing requirement (140,028)
to present
eligibility at award.
4............................ Change to employee (83,350)
count eligibility.
-------------------
Estimated Net Incremental Cost/(Cost Saving).... (96,186)
------------------------------------------------------------------------
Table 2--Detailed Breakdown of Incremental Costs and Cost Savings
----------------------------------------------------------------------------------------------------------------
Annual cost/ (cost saving) estimate
Item No. Regulatory action item details breakdown
----------------------------------------------------------------------------------------------------------------
1....................................... Proposed regulatory change: SBA ....................................
proposes to require HUBZone
SBCs to recertify annually to
SBA that they continue to meet
all of the HUBZone eligibility
requirements instead of
requiring them to undergo a
recertification by SBA every
three years.
Estimated number of impacted 3,800 entities.
entities: There are
approximately 5,000 firms in
the HUBZone program, and under
the proposed rule all these
firms will need to recertify
each year. However, since 1,200
firms recertify each year
currently, the incremental
increase in recertifications is
3,800 firms annually.
Estimated average impact * 1 hour.
(labor hour): SBA estimates
that it takes the average
participating firm about 1 hour
to complete the recertification
process.
2017 Median Pay ** (per hour): $33.34.
Most HUBZone firms use an
accountant or someone with
similar skills for this task.
-------------------------------------
Estimated Cost/(Cost Saving).......................................... $126,692.
----------------------------------------------------------------------------------------------------------------
2....................................... Proposed regulatory change: SBA
proposes to add a new provision
permitting a firm to submit a
formal request for
reconsideration when it
receives a determination
denying admission to the
HUBZone program.
Estimated number of impacted 10 entities.
entities: SBA declined 87
applications in FY 2017. Of
these, we estimate that only 10
firms would seek
reconsideration.
Estimated average impact * 1.50 hours.
(labor hour): SBA estimates
that it would take 1.5 hours to
respond to the denial and to
request reconsideration.
2017 Median Pay ** (per hour): $33.34.
Most HUBZone firms use an
accountant or someone with
similar skills for this task.
-------------------------------------
Estimated Cost/(Cost Saving).......................................... $500.
----------------------------------------------------------------------------------------------------------------
3....................................... Proposed regulatory change: ....................................
Under current rules, a HUBZone
firm must be eligible at the
time of offer and award of a
HUBZone contract. SBA is
proposing that firms will not
have to represent or certify
that they are eligible at the
time of offer and award for
every contract, which are the
current program requirements.
Estimated number of impacted 4,200 entities.
entities: Approximately 2,100
new HUBZone contracts awarded
each fiscal year and each firm
will need to certify twice per
each contract.
Estimated average impact * 1 hour.
(labor hour): SBA estimates
that it takes the average
participating firm about 1 hour
to complete the recertification
process.
2017 Median Pay ** (per hour): $33.34.
Most HUBZone firms use an
accountant or someone with
similar skills for this task.
Estimated Cost/(Cost Saving).......................................... ($140,028).
----------------------------------------------------------------------------------------------------------------
4....................................... Proposed regulatory change: SBA ....................................
is proposing that an employee
that resides in a HUBZone at
the time of a HUBZone SBC's
certification or
recertification shall continue
to count as a HUBZone employee
as long as the individual
remains an employee of the
firm, even if the employee
moves to a location that is not
in a qualified HUBZone area or
the area where the employee's
residence is located is
redesignated and no longer
qualifies as a HUBZone. This
will greatly reduce burden on
firms, as they will not have to
continually track whether their
employees still reside in a
HUBZone.
Estimated number of impacted 5,000 entities.
entities: SBA estimates that
approximately 5,000 firms
participate in the HUBZone
program. All participating
firms will be impacted by this
change.
Estimated average impact * 0.50 hours.
(labor hour): SBA estimates
that it would take 1 hour to
determine eligibility but this
proposed change will save 0.5,
because once a HUBZone employee
is hired the firm will never
have to check residency for
that employee.
-------------------------------------
[[Page 54823]]
2017 Median Pay ** (per hour): $33.34.
Most HUBZone firms use an
accountant or someone with
similar skills for this task.
Estimated Cost/(Cost Saving).......................................... ($83,350).
----------------------------------------------------------------------------------------------------------------
Estimated Net Annual Impact........................................... ($96,186).
----------------------------------------------------------------------------------------------------------------
* This estimate is based on HUBZone and FPDS data, as well as best professional judgment.
** Source: Bureau of Labor Statistics, Accountants and Auditors.
Executive Order 13563
This executive order directs agencies to, among other things: (a)
Afford the public a meaningful opportunity to comment through the
internet on proposed regulations, with a comment period that should
generally consist of not less than 60 days; (b) provide for an ``open
exchange'' of information among government officials, experts,
stakeholders, and the public; and (c) seek the views of those who are
likely to be affected by the rulemaking, even before issuing a notice
of proposed rulemaking. As far as practicable or relevant, SBA
considered these requirements in developing this rule, as discussed
below.
1. Did the agency use the best available techniques to quantify
anticipated present and future costs when responding to Executive Order
12866 (e.g., identifying changing future compliance costs that might
result from technological innovation or anticipated behavioral
changes)?
To the extent possible, the agency utilized the most recent data
available in the Federal Procurement Data System--Next Generation, DSBS
and SAM.
2. Public participation: Did the agency: (a) Afford the public a
meaningful opportunity to comment through the internet on any proposed
regulation, with a comment period that should generally consist of not
less than 60 days; (b) provide for an ``open exchange'' of information
among government officials, experts, stakeholders, and the public; (c)
provide timely online access to the rulemaking docket on
Regulations.gov; and (d) seek the views of those who are likely to be
affected by rulemaking, even before issuing a notice of proposed
rulemaking? SBA has also discussed some of the proposals in this rule
with stakeholders at various small business procurement conferences,
and received written comments on suggested changes to the HUBZone
Program regulations generally in response to SBA's regulatory reform
initiative implementing Executive Order 13771.
The proposed rule will have a 60-day comment period and will be
posted on www.regulations.gov to allow the public to comment
meaningfully on its provisions.
3. Flexibility: Did the agency identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public?
The proposed rule is intended to make it easier for firms to apply
for, or participate in, the HUBZone program, as well as for procuring
agencies to utilize the program.
Executive Order 12988
This action meets applicable standards set forth in section 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. This action does
not have any retroactive or preemptive effect.
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 purposes of Executive Order 13132, SBA has determined that this
proposed rule has no federalism implications warranting preparation of
a federalism assessment.
Executive Order 13771
This proposed rule is expected to be an Executive Order 13771
deregulatory action. Details on the estimated cost savings of this
proposed rule can be found in this rule's regulatory impact analysis.
SBA proposes to require HUBZone small business concerns to recertify
annually to SBA that they continue to meet all of the HUBZone
eligibility requirements, instead of requiring them to undergo a
recertification by SBA every three years. While the proposal to require
firms to recertify annually will increase the burden on firms, this
burden will be offset by the proposal to no longer require firms to be
eligible at the time of offer and award for a contract, and will
provide that if a firm hires a HUBZone resident, the firm will be able
to count that employee towards the residency requirement, this reducing
the burden on the firm to determine whether it meets the 35 percent
residency requirement. Thus, the proposed rule will result in an
estimated annual savings of $96,185.00
Paperwork Reduction Act, 44 U.S.C. Ch. 35
For the purposes of the Paperwork Reduction Act, SBA has determined
that this rule, if adopted in final form, would impose new government-
wide reporting requirements on HUBZone small business concerns. In the
rule, SBA proposes that small businesses recertify annually to SBA
concerning their status. At this time, HUBZone small businesses
recertify every three years. Although requiring annual recertification
instead of every three years may appear to impose additional burdens on
a HUBZone small business concern, the annual recertification burden is
offset by the elimination of the requirement to be eligible at the time
of offer and award of a contract and the requirement to continually
monitor the residency status of an employee that resides in a HUBZone
at the time of hiring, resulting in an estimated annual savings of
$96,186.00. In addition, SBA believes the annual recertification would
assist in deterring fraud and abuse in the program. SBA also proposes
that certified HUBZone small business concerns maintain records
demonstrating the home address of employees who resided in a HUBZone at
the time of the concern's certification or recertification, as well as
records of the employee's continued employment with the firm. SBA
believes allowing a HUBZone small business concern to continue
employing individuals who once lived in HUBZones is consistent with the
purpose of the HUBZone
[[Page 54824]]
program of increasing employment and would provide greater
opportunities for certified HUBZone small business concerns to be
eligible for and receive HUBZone contracts. Further, this will reduce
burden as the firm will not have to continually determine whether the
employee that resided in a HUBZone at the time of certification
continues to reside in a HUBZone in connection with the offer and offer
of each contract or future recertifications. A firm's ability to
request reconsideration will be added to the existing information
collection for the HUBZone program (OMB Control #3245-0320).
Regulatory Flexibility Act, 5 U.S.C. 601-612
According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601,
when an agency issues a rulemaking, it must prepare a regulatory
flexibility analysis to address 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. The RFA defines ``small entity'' to include ``small
businesses,'' ``small organizations,'' and ``small governmental
jurisdictions.'' This proposed rule concerns various aspects of SBA's
HUBZone program, as such the rule relates to small business concerns
but would not affect ``small organizations'' or ``small governmental
jurisdictions'' because those programs generally apply only to
``business concerns'' as defined by SBA regulations, in other words, to
small businesses organized for profit. ``Small organizations'' or
``small governmental jurisdictions'' are non-profits or governmental
entities and do not generally qualify as ``business concerns'' within
the meaning of SBA's regulations.
There are approximately 5,000 certified HUBZone small business
concerns that are listed as certified HUBZone small businesses in DSBS,
and SBA receives approximately 1,500 applications annually. Most of the
changes are clarification of current policy and therefore should not
impact many of these concerns. Further, there is a new compliance or
other costs imposed by the proposed rule on current or prospective
HUBZone small business concerns. Under current law, HUBZone small
business concerns must recertify every three years and under the
proposed rule, the same firms will need to recertify every year.
Nonetheless, most of these costs relating to reconsideration and
appeals will be borne by the agency and not the small business. In
addition, recertifying every year should not impose a significant cost
on small business since the rules already require the business to
actively monitor its compliance from the moment it applies to the
program. As a result, SBA does not believe that the proposed amendments
would have a disparate impact on small businesses or would impose any
additional significant costs. For the reasons discussed, SBA certifies
that this proposed rule would not have a significant economic impact on
a substantial number of small business concerns.
List of Subjects
13 CFR Part 115
Claims, Reporting and recordkeeping requirements, Small businesses,
Surety bonds.
13 CFR Part 121
Administrative practice and procedure, 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,
Veterans.
13 CFR Part 126
Administrative practice and procedure, Government procurement,
Penalties, Reporting and recordkeeping requirements, Small businesses.
For the reasons set forth in the preamble, SBA proposes to amend 13
CFR parts 115, 121, 125, and 126 as set forth below:
PART 115--SURETY BOND GUARANTEE
0
1. The authority citation for part 115 continues to read as follows:
Authority: 5 U.S.C. app 3; 15 U.S.C. 687b, 687c, 694a, 694b
note; and Pub. L. 110-246, Sec. 12079, 122 Stat. 1651.
Sec. 115.31 [Amended]
0
2. Amend Sec. 115.31(a)(2) by removing the phrase ``qualified HUBZone
small business concern'' and adding in its place the phrase ``certified
HUBZone small business concern''.
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
3. The authority citation for part 121 continues to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 662, and 694a(9).
Sec. 121.404 [Amended]
0
4. Amend Sec. 121.404(g)(4) by removing the phrase ``HUBZone SBCs''
and adding in its place the phrase ``certified HUBZone small business
concerns''.
Sec. 121.1001 [Amended]
0
5. Amend Sec. 121.1001 as follows:
0
a. In paragraph (a)(6)(ii), remove the phrase ``qualified HUBZone SBC''
and add in its place the phrase ``certified HUBZone small business
concern''; and
0
b. In paragraph (b)(8)(i), remove the phrase ``qualified HUBZone
business concern'' and add in its place the phrase ``certified HUBZone
small business concern''.
PART 125--GOVERNMENT CONTRACTING PROGRAMS
0
6. The authority citation for part 125 is revised to read as follows:
Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 637; 644; 657f;
657q; 657r; and 657s.
Sec. 125.1 [Amended]
0
7. In Sec. 125.1, amend the definition of ``similarly situated
entity'' by removing the phrase ``qualified HUBZone small business
concern'' and adding in its place the phrase ``certified HUBZone small
business concern''.
Sec. 125.2 [Amended]
0
8. Amend Sec. 125.2(c)(1)(i) by removing the phrase ``qualified
HUBZone small business concerns'' and adding in its place the phrase
``certified HUBZone small business concerns''.
Sec. 125.3 [Amended]
0
9. Amend Sec. 125.3(c)(1)(xi) by removing the phrase ``qualified
HUBZone small business concerns'' and adding in its place the phrase
``certified HUBZone small business concerns''.
Sec. 125.6 [Amended]
0
10. Amend Sec. 125.6 by removing paragraph (d) and redesignating
paragraphs (e) through (h) as paragraphs (d) through (g), respectively.
0
11. Revise Sec. 125.28(b) to read as follows:
Sec. 125.28 How does one file a service disabled veteran-owned status
protest?
* * * * *
(b) Format and specificity. (1) 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.
[[Page 54825]]
Example to paragraph (b)(1): A protester submits a protest
stating that the apparent successful offeror is not owned by a
service-disabled veteran. The protest does not state any basis for
this assertion. The protest allegation is insufficient.
(2) For a protest filed against a SDVO SBC joint venture, the
protest must state all specific grounds for why--
(i) The SDVO SBC partner to the joint venture did not meet the SDVO
SBC eligibility requirements set forth in subpart B of part 125; and/or
(ii) The protested SDVO SBC joint venture did not meet the
requirements set forth in Sec. 125.18.
* * * * *
PART 126--HUBZONE PROGRAM
0
12. 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. 126.101 [Amended]
0
13. Amend Sec. 126.101(b) by removing the phrase ``qualified HUBZone
SBCs'' and adding in its place the phrase ``certified HUBZone small
business concerns''.
0
14. Amend Sec. 126.103 as follows:
0
a. Remove the definitions of ``Alaska Native Village'', ``ANCSA'',
``County unemployment rate'', ``De-certify'', ``List'', ``Median
household income'', ``Metropolitan statistical area'', ``Qualified
HUBZone SBC'', ``Small Disadvantaged Business (SDB)'', and ``Statewide
average unemployment rate'';
0
b. Revise the definitions of ``Alaska Native Corporation'', ``Attempt
to maintain'', ``Certify'', ``D/HUB'', ``Employee'', ``HUBZone small
business concern'', ``Interested party'', ``Principal office'',
``Qualified base closure area'', ``Qualified census tract'',
``Qualified non-metropolitan county'', ``Redesignated area'',
``Reside''; and
0
c. Add definitions for ``Decertify'', ``Dynamic Small Business Search
(DSBS)'' and ``Primary industry classification or primary industry'' in
alphabetical order.
The revisions and additions read as follows:
Sec. 126.103 What definitions are important in the HUBZone Program?
* * * * *
Alaska Native Corporation (ANC) has the same meaning as the term
``Native Corporation'' in section 3 of the Alaska Native Claims
Settlement Act (ANCSA), 43 U.S.C. 1602.
Attempt to maintain means making substantive and documented
efforts, such as written offers of employment, published advertisements
seeking employees, and attendance at job fairs and applies only to
concerns during the performance of any HUBZone contract. A certified
HUBZone small business concern that has less than 20% of its total
employees residing in a HUBZone during the performance of a HUBZone
contract has failed to attempt to maintain the HUBZone residency
requirement.
* * * * *
Certify means the process by which SBA determines that a firm is
qualified for the HUBZone program and eligible to be designated by SBA
as a certified HUBZone small business concern in the Dynamic Small
Business Search (DSBS) system (or successor system).
* * * * *
D/HUB means the Director of SBA's Office of HUBZone.
Decertify means the process by which SBA determines that a concern
no longer qualifies as a HUBZone small business concern and removes
that concern as a certified HUBZone small business concern from DSBS
(or successor system), or the process by which SBA removes a concern as
a certified HUBZone small business concern from DSBS (or successor
system) after receiving a request to voluntarily withdraw from the
HUBZone program.
Dynamic Small Business Search (DSBS) means the database that
government agencies use to find small business contractors for upcoming
contracts. The information a business provides when registering in the
System for Award Management (SAM) is used to populate DSBS. For HUBZone
Program purposes, a firm's DSBS profile will indicate whether it is a
certified HUBZone small business concern, and if so, the date it was
certified or recertified.
Employee means all individuals employed on a full-time, part-time,
or other basis, so long as that individual works a minimum of 40 hours
during the four-week period immediately prior to the relevant date of
review, which is either the date the concern submits its HUBZone
application to SBA or the date of recertification. SBA will review a
firm's payroll records for the most recently completed pay periods that
account for the four-week period immediately prior to the date of
application or date of recertification in order to determine which
individuals meet this definition. To determine if an individual is an
employee, SBA reviews the totality of circumstances, including criteria
used by the Internal Revenue Service (IRS) for Federal income tax
purposes and the factors set forth in SBA's Size Policy Statement No. 1
(51 FR 6099, Feb. 20, 1986).
(1) In general, the following are considered employees:
(i) Individuals obtained from a temporary employee agency, leasing
concern, or through a union agreement, or co-employed pursuant to a
professional employer organization agreement;
(ii) An individual who has an ownership interest in the firm and
who works for the firm a minimum of 40 hours during the four-week
period immediately prior to the relevant date of review, whether or not
the individual receives compensation;
(iii) The sole owner of a firm who works less than 40 hours during
the four-week period immediately prior to the relevant date of review,
but who has not hired another individual to direct the actions of the
concern's employees;
(iv) Individuals who receive in-kind compensation commensurate with
work performed.
(2) In general, the following are not considered employees:
(i) Individuals who receive no compensation (including no in-kind
compensation) for work performed;
(ii) Individuals who receive deferred compensation for work
performed;
(iii) Independent contractors that receive payment via IRS Form
1099 and are not considered employees under SBA's Size Policy Statement
No. 1 (51 FR 6099, Feb. 20, 1986); and
(iv) Subcontractors.
(3) Employees of an affiliate may be considered employees, if the
totality of the circumstances shows that there is no clear line of
fracture between the HUBZone applicant (or certified HUBZone small
business concern) and its affiliate(s) (see Sec. 126.204).
* * * * *
HUBZone small business concern or certified HUBZone small business
concern (1) Means a small business concern that meets the requirements
described in Sec. 126.200 and that SBA has certified as eligible for
federal contracting assistance under the HUBZone program.
(2) A firm that was a certified HUBZone small business concern as
of December 12, 2017, and that had its principal office located in a
redesignated area set to expire prior to January 1, 2020, shall remain
a certified HUBZone small business concern until December 31, 2021, so
long as all other HUBZone eligibility requirements are met.
* * * * *
Interested party means any concern that submits an offer for a
specific
[[Page 54826]]
HUBZone set-aside contract (including Multiple Award Contracts) or
order, any concern that submitted an offer in full and open competition
and its opportunity for award will be affected by a price evaluation
preference given a qualified HUBZone small business concern, any
concern that submitted an offer in a full and open competition and its
opportunity for award will be affected by a reserve of an award given
to a qualified HUBZone small business concern, the contracting
activity's contracting officer, or SBA.
* * * * *
Primary industry classification or primary industry means the six
digit North American Industry Classification System (NAICS) code
designation which best describes the primary business activity of the
HUBZone applicant or HUBZone small business concern. SBA utilizes Sec.
121.107 of this chapter in determining a firm's primary industry
classification.
Principal office means the location where the greatest number of
the concern's employees at any one location perform their work.
(1) If an employee works at multiple locations, then the employee
will be deemed to work at the location where the employee spends more
than 50% of his or her time. If an employee does not spend more than
50% of his or her time at any one location and at least one of those
locations is a non-HUBZone location, then the employee will be deemed
to work at a non-HUBZone location;
(2) In order for a location to be considered the principal office,
the concern must conduct business at this location.
(3) For those concerns whose ``primary industry classification'' is
services or construction (see Sec. 121.201 of this chapter), the
determination of principal office excludes the concern's employees who
perform more than 50% of their work at job-site locations to fulfill
specific contract obligations. If all of a concern's employees perform
more than 50% of their work at job sites, the concern does not comply
with the principal office requirement.
Example 1: A business concern whose primary industry is
construction has a total of 78 employees, including the owners. The
business concern has one office (Office A), which is located in a
HUBZone, with 3 employees working at that location. The business
concern also has a job-site for a current contract, where 75
employees perform more than 50% of their work. The 75 job-site
employees are excluded for purposes of determining principal office.
Since the remaining 3 employees all work at Office A, Office A is
the firm's principal office. Since Office A is in a HUBZone, the
business concern complies with the principal office requirement.
Example 2: A business concern has a total of 4 employees,
including the owner. The business concern has one office located in
a HUBZone (Office A), where 2 employees perform more than 50% of
their work, and a second office not located in HUBZone (Office B),
where 2 employees perform more than 50% of their work. Since there
is not one location where the greatest number of the concern's
employees at any one location perform their work, the business
concern would not have a principal office in a HUBZone.
Example 3: A business concern whose primary industry is services
has a total of 6 employees, including the owner. Five of the
employees perform all of their work at jobsites fulfilling specific
contract obligations. The business concern's owner performs 45% of
her work at jobsites, and 55% of her work at an office located in a
HUBZone (Office A) conducting tasks such as writing proposals,
generating payroll, and responding to emails. Office A would be
considered the principal office of the firm since it is the only
location where any employees of the firm work that is not a job site
and the 1 individual working there spends more than 50% of her time
at Office A. Since Office A is located in a HUBZone, the small
business concern would meet the principal office requirement.
Qualified base closure area means:
(1) A base closure area that is treated by SBA as a HUBZone for a
period of at least 8 years, beginning on the date the military
installation undergoes final closure and ending on the latter of the
following:
(i) The date on which the results of the decennial census conducted
after the area was initially designated as a base closure area are
released; or
(ii) The date 8 years after the base closure area was initially
designated as a HUBZone.
(2) However, if a base closure area was treated as a HUBZone at any
time after 2010, it shall be treated as a HUBZone until the results of
the 2020 decennial census are released.
Qualified census tract (1) Means any census tract which is
designated by the Secretary of Housing and Urban Development, and for
the most recent year for which census data are available on household
income in such tract, either in which 50 percent or more of the
households have an income which is less than 60 percent of the area
median gross income for such year or which has a poverty rate of at
least 25 percent. See 26 U.S.C. 42(d)(5)(B)(ii)(I).
(2) The portion of a metropolitan statistical area (as defined by
the Bureau of the Census, United States Department of Commerce, in its
publications on the Census of Population, Social and Economic
Characteristics) which may be designated as ``qualified census tracts''
shall not exceed an area having 20 percent of the population of such
metropolitan statistical area. See 26 U.S.C. 42(d)(5)(B)(ii)(II). This
paragraph does not apply to any metropolitan statistical area in the
Commonwealth of Puerto Rico until December 22, 2027, or the date on
which the Financial Oversight and Management Board for the Commonwealth
of Puerto Rico created by the Puerto Rico Oversight, Management, and
Economic Stability Act (PROMESA) (Pub. L. 114-187, June 30, 2016)
ceases to exist, whichever event occurs first.
* * * * *
Qualified non-metropolitan county means any county that was not
located in a metropolitan statistical area (as defined by the Bureau of
the Census, United States Department of Commerce, in its publications
on the Census of Population, Social and Economic Characteristics) at
the time of the most recent census taken for purposes of selecting
qualified census tracts under section 26 U.S.C. 42(d)(5)(B)(ii), and in
which:
(1) The median household income is less than 80% of the non-
metropolitan State median household income, based on the most recent
data available from the American Community Survey 5-year estimates,
published by the Bureau of the Census of the Department of Commerce;
(2) The unemployment rate is not less than 140% of the average
unemployment rate for the United States or for the State in which such
county is located, whichever is less, based on the most recent data
available from the Local Area Unemployment Statistics report, produced
by the Department of Labor's Bureau of Labor Statistics; or
(3) There is located a Difficult Development Area within Alaska,
Hawaii, or any territory or possession of the United States outside the
48 contiguous States. A Difficult Development Area (DDA) is an area
designated by the Secretary of the Department of Housing and Urban
Development, in accordance with section 26 U.S.C. 42(d)(5)(B)(iii),
with high construction, land, and utility costs relative to its Area
Median Gross Income.
Redesignated area (1) Means any census tract that ceases to be a
``qualified census tract'' or any non-metropolitan county that ceases
to be a ``qualified non-metropolitan county.''
(2) A redesignated area generally shall be treated as a HUBZone for
a period of three years, starting from the date on
[[Page 54827]]
which the area ceased to be a qualified census tract or a qualified
non-metropolitan county. The date on which the census tract or non-
metropolitan county ceases to be qualified is the date on which the
official government data affecting the eligibility of the HUBZone is
released to the public. However, an area that was a redesignated area
on or after December 12, 2017 shall remain a redesignated area until
December 31, 2021.
Reside means to live at a location full-time and for at least 180
days immediately prior to the date of application or date of
recertification, as applicable.
(1) To determine residence, SBA will first look to an individual's
address identified on his or her driver's license or voter's
registration card. Where such documentation is not available, SBA will
require other specific proof of residency, such as deeds, leases, and
utility bills.
(2) For HUBZone purposes, SBA will consider individuals temporarily
residing overseas in connection with the performance of a contract to
reside at their U.S. residence.
Example 1: A person possesses the deed to a residential
property and pays utilities and property taxes for that property.
However, the person does not live at this property, but instead
rents out this property to another individual. For HUBZone purposes,
the person does not reside at the address listed on the deed.
Example 2: A person moves into an apartment under a month-to-
month lease and lives in that apartment full-time. SBA would
consider the person to reside at the address listed on the lease if
the person can show that he or she has lived at that address for at
least 180 days immediately prior to the date of application or date
of recertification.
Example 3: A person is working overseas on a contract for the
small business and is therefore temporarily living abroad. The
employee can provide documents showing he is paying rent for an
apartment located in a HUBZone. That person is deemed to reside in a
HUBZone.
* * * * *
Subpart B--Requirements To Be a Certified HUBZone Small Business
Concern
0
15. Revise the heading for subpart B to read as set forth above.
0
16. Revise Sec. 126.200 to read as follows:
Sec. 126.200 What requirements must a concern meet to be eligible as
a certified HUBZone small business concern?
(a) Ownership. In order to be eligible for HUBZone certification
and to continue to be certified, a small business concern must be owned
in accordance with this paragraph. The concern must be:
(1) At least 51% owned and controlled by one or more individuals
who are United States citizens;
(2) An ANC or at least 51% owned by an ANC or a wholly-owned
business entity of an ANC;
(3) At least 51% owned by one or more Indian Tribal Governments, or
by a corporation that is wholly owned by one or more Indian Tribal
Governments;
(4) At least 51% owned by one or more CDCs;
(5) A small agricultural cooperative organized or incorporated in
the United States, or at least 51% owned by one or more small
agricultural cooperatives organized or incorporated in the United
States; or
(6) At least 51% owned by one or more NHO, or by a corporation that
is wholly owned by one or more NHO.
(b) Size. (1) An applicant concern, together with its affiliates,
must qualify as a small business under the size standard corresponding
to its primary industry classification as defined in part 121 of this
chapter.
(2) In order to remain eligible as a certified HUBZone small
business concern, a firm must qualify as small under the size standard
corresponding to one or more NAICS codes in which it does business.
(3) If the concern is a small agricultural cooperative, in
determining size, the small agricultural cooperative is treated as a
``business concern'' and its member shareholders are not considered
affiliated with the cooperative by virtue of their membership in the
cooperative.
(c) Principal office. (1) The concern's principal office must be
located in a HUBZone, except for concerns owned in whole or in part by
one or more Indian Tribal Governments.
(2) A concern that is owned in whole or in part by one or more
Indian Tribal Governments (or by a corporation that is wholly owned by
Indian Tribal Governments) must either:
(i) Maintain a principal office located in a HUBZone and ensure
that at least 35% of its employees reside in a HUBZone as provided in
paragraph (d)(1) of this section; or
(ii) Certify that when performing a HUBZone contract, at least 35%
of its employees engaged in performing that contract will reside within
any Indian reservation governed by one or more of the Indian Tribal
Government owners, or reside within any HUBZone adjacent to such Indian
reservation.
(d) Employees. (1) At least 35% of the concern's employees must
reside in a HUBZone. When determining the percentage of employees that
reside in a HUBZone, if the percentage results in a fraction, SBA
rounds to the nearest whole number.
Example 1 to paragraph (d)(1): A concern has 25 employees; 35%
of 25, or 8.75, employees must reside in a HUBZone. The number 8.75
rounded to the nearest whole number is 9. Thus, 9 employees must
reside in a HUBZone.
Example 2 to paragraph (d)(1): A concern has 95 employees; 35%
of 95, or 33.25, employees must reside in a HUBZone. The number
33.25 rounded to the nearest whole number is 33. Thus, 33 employees
must reside in a HUBZone.
(2) If the concern is owned in whole or in part by one or more
Indian Tribal Governments (or by a corporation that is wholly owned by
one or more Indian Tribal Governments), see paragraph (c)(2) of this
section.
(3) An employee who resides in a HUBZone at the time of
certification or recertification shall continue to count as a HUBZone
resident employee as long as the individual remains an employee of the
firm, even if the employee moves to a location that is not in a HUBZone
or the area in which the employee's residence is located no longer
qualifies as a HUBZone. The certified HUBZone small business concern
must maintain records of the employee's original HUBZone address, as
well as records of the individual's continued and uninterrupted
employment by the HUBZone small business concern, for the duration of
the firm's participation in the HUBZone program.
(e) Attempt to maintain. (1) At the time of application, an
applicant concern must certify that it will ``attempt to maintain''
(see Sec. 126.103) having at least 35% of its employees reside in a
HUBZone during the performance of any HUBZone contract it receives.
(2) If the concern is owned in whole or in part by one or more
Indian Tribal Governments (or by a corporation that is wholly owned by
one or more Indian Tribal Governments), the concern must certify that
it will ``attempt to maintain'' (see Sec. 126.103) the applicable
employment percentage described in paragraph (c)(2) of this section
during the performance of any HUBZone contract it receives.
(f) Subcontracting. At the time of application, an applicant
concern must certify that it will comply with the applicable
limitations on subcontracting requirements in connection with any
procurement that it receives as a certified HUBZone small business
concern (see Sec. 126.5 and Sec. 126.700).
(g) Suspension and Debarment. The concern and any of its owners
must not
[[Page 54828]]
have an active exclusion in the System for Award Management, available
at www.SAM.gov, at the time of application.
Sec. 126.202 [Amended]
0
17. Amend Sec. 126.202 by removing the phrase ``Many persons share
control'' and adding in its place the phrase ``Many persons may share
control''.
Sec. 126.203 [Amended]
0
18. Amend Sec. 126.203 paragraph (a) by removing the phrase
``qualified HUBZone SBC'' and adding in its place the phrase
``certified HUBZone small business concern''.
0
19. Revise Sec. 126.204 to read as follows:
Sec. 126.204 May a HUBZone small business concern have affiliates?
(a) A HUBZone small business concern may have affiliates, provided
that the aggregate size of the concern together with all of its
affiliates is small as defined in part 121 of this title, except as
otherwise provided for small agricultural cooperatives in Sec.
126.103.
(b) The employees of an affiliate may be counted as employees of a
HUBZone applicant or HUBZone small business concern for purposes of
determining compliance with the HUBZone program's principal office and
35% residency requirements. In determining whether individuals should
be counted as employees of a HUBZone applicant or HUBZone small
business concern, SBA will review all information, including criteria
used by the Internal Revenue Service (IRS) for Federal income tax
purposes and those set forth in SBA's Size Policy Statement No. 1 (Pub.
L. 114-187, June 30, 2016). If the firms would be affiliated for size
purposes and the totality of the circumstances shows that there is no
clear line of fracture between the HUBZone applicant (or HUBZone small
business concern) and the affiliate, SBA will consider the employees of
the affiliate as employees of the HUBZone applicant (or HUBZone small
business concern).
0
20. Revise Sec. 126.205 to read as follows:
Sec. 126.205 May participants in other SBA programs be certified as
HUBZone small business concerns?
Participants in other SBA programs may be certified as HUBZone
small business concerns if they meet all of the requirements set forth
in this part.
0
21. Revise Sec. 126.206 to read as follows:
Sec. 126.206 May nonmanufacturers be certified as HUBZone small
business concerns?
Nonmanufacturers (referred to in the HUBZone Act of 1997 as
``regular dealers'') may be certified as HUBZone small business
concerns if they meet all of the requirements set forth in Sec.
126.200. For purposes of this part, a ``nonmanufacturer'' is defined in
Sec. 121.406(b) of this chapter.
0
22. Revise Sec. 126.207 to read as follows:
Sec. 126.207 Do all of the offices or facilities of a certified
HUBZone small business concern have to be located in a HUBZone?
A HUBZone small business concern may have offices or facilities in
multiple HUBZones or even outside a HUBZone. However, in order to be
certified as a HUBZone small business concern, the concern's principal
office must be located in a HUBZone (except see Sec. 126.200(c)(2) for
concerns owned by Indian Tribal Governments).
0
23. Revise Sec. 126.300 to read as follows:
Sec. 126.300 How may a concern be certified as a HUBZone small
business concern?
(a) A concern must apply to SBA for HUBZone certification. SBA will
consider the information provided by the concern in order to determine
whether the concern qualifies.
(b) SBA, at its discretion, may rely solely upon the information
submitted, may request additional information, may conduct independent
research, or may verify the information before making an eligibility
determination.
(c) If SBA determines that a concern meets the eligibility
requirements of a HUBZone small business concern, it will notify the
firm and designate the firm as a certified HUBZone small business
concern in DSBS (or successor system).
0
24. Revise Sec. 126.303 to read as follows:
Sec. 126.303 Where must a concern submit its application for
certification?
A concern seeking certification as a HUBZone small business concern
must submit an electronic application to SBA's HUBZone Program Office
via SBA's web page at www.SBA.gov. The application and any supporting
documentation must be submitted by a person authorized to represent the
concern.
0
25. Revise Sec. 126.304 to read as follows:
Sec. 126.304 What must a concern submit to SBA in order to be
certified as a HUBZone small business concern?
(a) General. To be certified by SBA as a HUBZone small business
concern, a concern must submit a completed application and all
documents requested by SBA. The concern must also represent to SBA that
it meets the requirements set forth in Sec. 126.200 and that all of
the information provided as of the date of the application (and any
subsequent information provided) is complete, true and accurate. The
representation must be electronically signed by an owner of the
applicant.
(b) Supporting documents. (1) SBA may request documents to verify
that the applicant meets the HUBZone program's eligibility
requirements. The documents must show that the concern meets the
program's requirements at the time it submits its application to SBA.
(2) The concern must document compliance with the requirements
listed in Sec. 126.200, including but not limited to employment
records and documentation showing the address of each HUBZone resident
employee. Records sufficient to demonstrate HUBZone residency include
copies of driver's licenses and voter registration cards; only where
such documentation is unavailable will SBA accept alternative
documentation (such as copies of leases, deeds, and/or utility bills)
accompanied by signed statements explaining why the alternative
documentation is being provided.
(c) Changes after submission of application. After submitting an
application, a concern applying for HUBZone certification must notify
SBA of any changes that could affect its eligibility, and provide
information and documents to verify the changes. If the changed
information indicates that the firm is not eligible, the applicant will
be given the option to withdraw its application, or SBA will decline
certification and the firm must wait 90 days to reapply.
(d) HUBZone areas. Concerns applying for HUBZone status must use
SBA's website (i.e., maps or other tools showing qualified HUBZones) to
verify that the location of the concern's principal office and the
residences of at least 35% of the concern's employees are within
HUBZones. If SBA's website indicates that a particular location is not
within a HUBZone and the applicant disagrees, then the applicant must
note this on the application and submit relevant documents showing why
the applicant believes the area meets the statutory criteria of a
HUBZone. SBA will determine whether the location is within a HUBZone
using available methods (e.g., contact Bureau of Indian Affairs for
Indian reservations or Department of Defense for BRACs).
(e) Record Maintenance. HUBZone small business concerns must retain
[[Page 54829]]
documentation demonstrating satisfaction of all qualifying requirements
for 6 years from date of submission of all initial and continuing
eligibility actions as required by this part. In addition, HUBZone
small business concerns must retain documentation as required in Sec.
126.200(d)(3).
Sec. 126.305 [Removed and reserved]
0
26. Remove and reserve Sec. 126.305.
0
27. Revise Sec. 126.306 to read as follows:
Sec. 126.306 How will SBA process an application for HUBZone
certification?
(a) The D/HUB or designee is authorized to approve or decline
applications for HUBZone certification. SBA will receive and review all
applications and request supporting documents. SBA must receive all
required information, supporting documents, and a completed HUBZone
representation before it will begin processing a concern's application.
SBA will not process incomplete packages. SBA will make its
determination within 90 calendar days after receipt of a complete
package whenever practicable.
(b) The burden of proof to demonstrate eligibility is on the
applicant concern. If a concern does not provide requested information
within the allotted time provided by SBA, or if it submits incomplete
information, SBA may draw an adverse inference and presume that the
information that the applicant failed to provide would demonstrate
ineligibility and deny certification on this basis.
(c) SBA's decision will be based on the facts set forth in the
application, any information received in response to SBA's request for
clarification, any independent research conducted by SBA, and any
changed circumstances.
(d) In order to be certified into the program, the applicant must
be eligible as of the date it submitted its application and at the time
the D/HUB issues a decision. An applicant must inform SBA of any
changes to its circumstances that occur after its application and
before its certification that may affect its eligibility. SBA will
consider such changed circumstances in determining whether to certify
the firm.
(e) If SBA approves the application, it will send a written notice
to the concern and designate the firm as a certified HUBZone small
business concern in DSBS (or successor system) as described in Sec.
126.307.
(f) If SBA denies the application, it will send a written notice to
the concern and state the specific reasons for denial. The decision
will also state the reconsideration rights.
(g) SBA will presume that notice of its decision was provided to an
applicant if SBA sends a communication to the concern at a mailing
address, email address, or fax number provided in the concern's profile
in the System for Award Management (or successor system).
0
28. Revise Sec. 126.307 to read as follows:
Sec. 126.307 Where is there a list of certified HUBZone small
business concerns?
SBA designates firms as certified HUBZone small business concerns
in DSBS (or successor system).
0
29. Revise Sec. 126.308 to read as follows:
Sec. 126.308 What happens if a HUBZone small business concern
receives notice of its certification but it does not appear in DSBS as
a certified HUBZone small business concern?
(a) A certified HUBZone small business concern that has received
SBA's notice of certification, but does not appear in DSBS (or
successor system) as a certified HUBZone small business concern within
10 business days, should immediately notify the D/HUB via email at
[email protected].
(b) A certified HUBZone small business concern that has received
SBA's notice of certification must appear as a certified HUBZone small
business concern in DSBS (or successor system) in order to be eligible
for HUBZone contracts (i.e., it cannot ``opt out'' of a public display
in the System for Award Management (SAM.gov) or DSBS (or successor
systems)).
0
30. Revise Sec. 126.309 to read as follows:
Sec. 126.309 May a declined concern request reconsideration or seek
certification at a later date?
(a) Reconsideration. An applicant may request that the D/HUB
reconsider the initial decline decision by filing a request for
reconsideration with SBA.
(1) Method of submission. The applicant must submit its request for
reconsideration to the SBA's HUBZone Program Office by email to
[email protected].
(2) Filing deadline. The request for reconsideration must be
submitted within 15 calendar days of receipt of written notice that the
concern's application was declined.
(3) Contents of request. The request for reconsideration must set
forth the reasons why the D/HUB's initial decision was erroneous and
include information and documentation pertinent to overcoming the
reason(s) for the initial decline, whether or not available at the time
of initial application.
(4) Decision on reconsideration. The D/HUB will issue a written
decision within 30 calendar days of SBA's receipt of the applicant's
request for reconsideration. The D/HUB may approve the application,
deny it on the same grounds as the original decision, or deny it on
other grounds.
(i) If denied, the D/HUB will provide written notice and explain
why the applicant is not eligible for admission to the program and give
specific reasons for the decline.
(ii) If the D/HUB declines the application solely on issues not
raised in the initial decline, the applicant can ask for
reconsideration as if it were an initial decline.
(b) Reapplying for certification. A declined concern may reapply
for certification ninety (90) calendar days after the date of the final
agency decision (i.e., the initial decision of the D/HUB where the
concern does not seek reconsideration, or the decision on
reconsideration), if it believes that it has overcome all reasons for
decline through changed circumstances and is currently eligible.
0
31. Revise Sec. 126.401 to read as follows:
Sec. 126.401 What is a program examination?
A program examination is an investigation by SBA officials, which
verifies the accuracy of any certification made or information provided
as part of the HUBZone application or recertification process.
Examiners may verify that the concern met the program's eligibility
requirements at the time of its certification or, if applicable, at the
time of its most recent recertification.
Sec. 126.402 [Amended]
0
32. Amend Sec. 126.402 by removing the phrase ``qualified HUBZone
SBC'' and adding in its place the phrase ``certified HUBZone small
business concern''.
0
33. Revise Sec. 126.403 to read as follows:
Sec. 126.403 What will SBA review during a program examination?
(a) SBA may conduct a program examination, or parts of an
examination, at one or more of the concern's offices. SBA will
determine the location and scope of the examination and may review any
information related to the concern's HUBZone eligibility including, but
not limited to, documentation related to the location and ownership of
the concern, compliance with the 35% HUBZone
[[Page 54830]]
residency requirement, and the concern's ``attempt to maintain'' (see
Sec. 126.103) this percentage.
(b) SBA may require that a HUBZone small business concern (or
applicant) submit additional information as part of the program
examination. If SBA requests additional information, SBA will presume
that written notice of the request was provided when SBA sends such
request to the concern at a mailing address, email address or fax
number provided in the concern's profile in the Dynamic Small Business
Search (DSBS) or the System for Award Management (SAM) (or successor
systems). SBA may draw an adverse inference from a concern's failure to
cooperate with a program examination or provide requested information
and assume that the information that the HUBZone small business concern
(or applicant) failed to provide would demonstrate ineligibility, and
decertify (or deny certification) on this basis.
(c) The concern must retain documentation provided in the course of
a program examination for 6 years from the date of submission.
0
34. Add Sec. 126.404 to read as follows:
Sec. 126.404 What are the possible outcomes of a program examination
and when will SBA make its determination?
(a) Timing. SBA will make its determination within 90 calendar days
after SBA receives all requested information, when practicable.
(b) Program examinations on certified HUBZone small business
concerns. If the program examination was conducted on a certified
HUBZone small business concern--
(1) And the D/HUB (or designee) determines that the firm is
eligible, SBA will send a written notice to the HUBZone small business
concern and continue to designate the concern as a certified HUBZone
small business concern in DSBS (or successor system).
(2) And the D/HUB (or designee) determines that the firm is not
eligible, SBA will propose the concern for decertification pursuant to
the procedures set forth in Sec. 126.503.
(c) Program examinations on applicants. If the program examination
was conducted on an applicant to the HUBZone program--
(1) And the D/HUB (or designee) determines that the firm is
eligible, SBA will send a written certification notice to the firm and
designate the concern as a certified HUBZone small business concern in
DSBS (or successor system).
(2) And the D/HUB (or designee) determines that the firm is
ineligible, SBA will send a written decline notice to the firm.
0
35. Revise Sec. 126.500 to read as follows:
Sec. 126.500 How does a concern maintain HUBZone certification?
Any concern seeking to remain a certified HUBZone small business
concern in DSBS (or successor system) must annually provide a written
recertification to SBA that it continues to meet all HUBZone
eligibility criteria (see Sec. 126.200) and provide supporting
documentation when requested to do so by SBA. In order to remain in the
program without any interruption, a HUBZone small business concern must
recertify its eligibility to SBA on the anniversary of the date of its
original HUBZone certification. The date of HUBZone certification is
the date specified in the firm's certification letter. If the business
fails to recertify, SBA may propose the firm for decertification
pursuant to Sec. 126.503.
0
36. Revise Sec. 126.501 to read as follows:
Sec. 126.501 How long does HUBZone certification last?
(a) Once SBA certifies a concern as eligible to participate in the
HUBZone program, the concern will be treated as a certified HUBZone
small business concern eligible for all HUBZone contracts for which the
concern qualifies as small, for a period of one year from the date of
its initial certification or recertification, unless the concern
acquires, is acquired by, or merges with another firm during that one-
year period. Where a HUBZone small business concern acquires, is
acquired by, or merges with another firm, the concern must demonstrate
to SBA that it continues to meet the HUBZone eligibility requirements
in order for it to remain eligible as a certified HUBZone small
business concern.
(b) On the annual anniversary of a firm's certification or
recertification, the firm must recertify that it is fully compliant
with all HUBZone eligibility requirements (see Sec. 126.200), or it
can request to voluntarily withdraw from the HUBZone program.
(c) SBA may review the firm's recertification through the program
examination process.
(1) If SBA determines that the firm is no longer eligible at the
time of its annual recertification, SBA will propose the HUBZone small
business concern for decertification pursuant to Sec. 126.503.
(2) If SBA determines that the firm continues to be eligible, SBA
will notify the firm of this determination. In such case, the concern
will:
(i) Continue to be designated as a certified HUBZone small business
concern in DSBS (or successor system); and
(ii) Be treated as an eligible HUBZone small business concern for
all HUBZone contracts for which the concern qualifies as small for a
period of one year from the date of the recertification.
(d) Voluntary withdrawal. A HUBZone small business concern may
request to voluntarily withdraw from the HUBZone program at any time.
Once SBA concurs, SBA will decertify the concern and no longer
designate it as a certified HUBZone small business concern in DSBS (or
successor system). The concern may apply again for certification at any
point after ninety (90) calendar days from the date of decertification.
At that point, the concern would have to demonstrate that it meets all
HUBZone eligibility requirements.
0
37. Revise Sec. 126.502 to read as follows:
Sec. 126.502 Is there a limit to the length of time a concern may be
a certified HUBZone small business concern?
There is no limit to the length of time a concern may remain
qualified as a certified HUBZone small business concern in DSBS (or
successor system) so long as it continues to comply with the provisions
of Sec. Sec. 126.200, 126.500, and 126.501.
0
38. Revise Sec. 126.503 to read as follows:
Sec. 126.503 What happens if SBA is unable to verify a HUBZone small
business concern's eligibility or determines that a concern is no
longer eligible for the program?
(a) Proposed decertification. (1) If SBA is unable to verify a
certified HUBZone small business concern's eligibility or has
information indicating that a firm was not eligible for the program at
the time of certification or recertification, SBA may propose
decertification of the concern. In addition, if during the one-year
period of time after certification or recertification SBA believes that
a HUBZone small business concern that is performing one or more HUBZone
contracts no longer has at least 20% of its employees living in a
HUBZone, SBA will propose the concern for decertification based on the
concern's failure to attempt to maintain compliance with the 35%
HUBZone residency requirement.
(i) Notice of proposed decertification. SBA will notify the HUBZone
small business concern in writing that SBA is proposing to decertify it
and state the reasons for the proposed decertification. SBA will
consider that written notice was provided if SBA sends the notice of
[[Page 54831]]
proposed decertification to the concern at a mailing address, email
address, or fax number provided in the concern's profile in the System
for Award Management (SAM.gov) or the Dynamic Small Business Search
(DSBS) (or successor systems).
(ii) Response to notice of proposed decertification. The HUBZone
small business concern must respond to the notice of proposed
decertification within the timeframe specified in the notice. In this
response, the HUBZone small business concern must rebut each of the
reasons set forth by SBA in the notice of proposed decertification, and
where appropriate, the rebuttal must include documents showing that the
concern is eligible for the HUBZone program as of the date specified in
the notice.
(iii) Adverse inference. If a HUBZone small business concern fails
to cooperate with SBA or fails to provide the information requested,
the D/HUB may draw an adverse inference and assume that the information
that the concern failed to provide would demonstrate ineligibility.
(2) SBA's decision. SBA will determine whether the HUBZone small
business concern remains eligible for the program within 90 calendar
days after receiving all requested information, when practicable. The
D/HUB will provide written notice to the concern stating the basis for
the determination. If SBA finds that the concern is not eligible, the
D/HUB will decertify the concern and remove its designation as a
certified HUBZone small business concern in DSBS (or successor system).
If SBA finds that the concern is eligible, the concern will continue to
be designated as a certified HUBZone small business concern in DSBS (or
successor system).
(b) Decertification pursuant to a protest. The procedures described
in paragraph (a) of this section do not apply to HUBZone status
protests. If the D/HUB sustains a protest pursuant to Sec. 126.803,
SBA will decertify the HUBZone small business concern immediately and
change the firm's status in DSBS (or successor system) to reflect that
it no longer qualifies as a certified HUBZone small business concern
without first proposing it for decertification.
0
39. Revise Sec. 126.504 to read as follows:
Sec. 126.504 When will SBA remove the designation of a concern in
DSBS (or successor system) as a certified HUBZone small business
concern?
(a) SBA will remove the designation of a concern in DSBS (or
successor system) as a certified HUBZone small business concern if the
concern has:
(1) Been decertified as a result of a HUBZone status protest
pursuant to Sec. 126.803;
(2) Been decertified as a result of the procedures set forth in
Sec. 126.503; or
(3) Voluntarily withdrawn from the HUBZone program pursuant to
Sec. 126.501(b).
(b) SBA may remove the designation of a concern in DSBS (or
successor system) as a certified HUBZone small business concern as soon
as the D/HUB issues a decision decertifying the concern from the
program.
(c) After a concern has been removed as a certified HUBZone small
business concern in DSBS (or successor system), it is ineligible for
the HUBZone program and may not submit an offer on or be an awarded a
HUBZone contract, or receive any other benefit as a HUBZone small
business concern.
Subpart F--Contracting with Certified HUBZone Small Business
Concerns
0
40. Revise the heading of subpart F to read as set forth above.
Sec. 126.600 [Amended]
0
41. Amend Sec. 126.600 as follows:
0
a. In the introductory text, remove the phrase ``qualified HUBZone
SBC'' and add in its place the phrase ``certified HUBZone small
business concern'';
0
b. In paragraphs (a), (b), and (c), remove the phrase ``qualified
HUBZone SBCs'' wherever it appears and add in its place the phrase
``certified HUBZone small business concerns'';
0
c. In paragraphs (d) and (e), remove the phrase ``HUBZone SBCs''
wherever it appears and add in its place the phrase ``certified HUBZone
small business concerns'';
0
d. In paragraph (e), remove the word ``against'' and add in its place
the word ``under'' and remove the phrase ``, which had been'' and add
in its place the phrase ``that was''.
0
42. Revise Sec. 126.601 to read as follows:
Sec. 126.601 What additional requirements must a certified HUBZone
small business concern meet to submit an offer on a HUBZone contract?
(a) Only certified HUBZone small business concerns are eligible to
submit offers for a HUBZone contract or to receive a price evaluation
preference under Sec. 126.613.
(b) At the time a certified HUBZone small business concern submits
its initial offer (including price) on a specific HUBZone contract, it
must certify to the contracting officer that it:
(1) Is a certified HUBZone small business concern in DSBS (or
successor system);
(2) Is small, together with its affiliates, at the time of its
offer under the size standard corresponding to the NAICS code assigned
to the procurement;
(3) Will ``attempt to maintain'' having at least 35% of its
employees residing in a HUBZone during the performance of the contract,
as set forth in Sec. 126.200(e); and
(4) Will comply with the applicable limitations on subcontracting
during performance of the contract, as set forth in Sec. 125.6 of this
chapter and Sec. Sec. 126.200(f), and 126.700.
(c) A certified HUBZone small business concern may submit an offer
on a HUBZone contract for supplies as a nonmanufacturer if it meets the
requirements of the nonmanufacturer rule set forth at Sec. 121.406 of
this chapter.
0
43. Revise Sec. 126.602 to read as follows:
Sec. 126.602 Must a certified HUBZone small business concern
maintain the employee residency percentage during contract performance?
(a) A certified HUBZone small business concern eligible for the
program pursuant to Sec. 126.200(b) must have at least 35% of its
employees residing within a HUBZone at the time of certification and
annual recertification. Such a certified HUBZone small business concern
must ``attempt to maintain'' (see Sec. 126.103) having at least 35% of
its employees residing in a HUBZone during the performance of any
HUBZone contract awarded to the concern on the basis of its HUBZone
status.
(b) For indefinite delivery, indefinite quantity contracts,
including multiple award contracts, a certified HUBZone small business
concern must ``attempt to maintain'' the HUBZone residency requirement
during the performance of each order that is set aside for HUBZone
small business concerns.
(c) A certified HUBZone small business concern eligible for the
program pursuant to Sec. 126.200(a) must have at least 35% of its
employees engaged in performing a HUBZone contract residing within any
Indian reservation governed by one or more of the concern's Indian
Tribal Government owners, or residing within any HUBZone adjoining any
such Indian reservation.
(d) A certified HUBZone small business concern that has less than
20% of its total employees residing in a HUBZone during the performance
of a HUBZone contract has failed to attempt
[[Page 54832]]
to maintain the HUBZone residency requirement. Such failure will result
in proposed decertification pursuant to Sec. 126.503.
Sec. 126.603 [Amended]
0
44. Amend Sec. 126.603 by removing the phrase ``qualified HUBZone
SBCs'' and adding in its place the phrase ``certified HUBZone small
business concerns''.
0
45. Amend Sec. 126.607 as follows:
0
a. Revise the section heading;
0
b. In paragraph (c), amend the introductory text by removing the phrase
``qualified HUBZone SBCs'' and adding in its place the phrase
``certified HUBZone small business concerns'';
0
c. In paragraph (c)(1), remove the phrase ``SBA's list of qualified
HUBZone SBCs'' and add in its place the phrase ``the list of certified
HUBZone small business concerns contained in DSBS (or successor
system)''.
The revision reads as follows:
Sec. 126.607 When must a contracting officer set aside a requirement
for certified HUBZone small business concerns?
* * * * *
Sec. 126.608 [Amended]
0
46. Amend Sec. 126.608 by removing the phrase ``HUBZone set-aside''
and adding in its place the phrase ``HUBZone set-aside or sole source
award''.
Sec. 126.611 [Amended]
0
47. Amend the heading of Sec. 126.611 by removing the phrase ``such an
appeal'' and adding in its place the phrase ``an appeal of a
contracting officer's decision not to issue a procurement as a HUBZone
contract''.
Sec. 126.612 [Amended]
0
48. Amend Sec. 126.612 as follows:
0
a. In the introductory text and paragraph (d), remove the phrase
``qualified HUBZone SBC'' wherever it appears and add in its place the
phrase ``certified HUBZone small business concern'';
0
b. In paragraph (c), remove the phrase ``qualified HUBZone SBCs'' and
add in its place the phrase ``certified HUBZone small business
concerns''.
Sec. 126.613 [Amended]
0
49. Amend Sec. 126.613 as follows:
0
a. In the section heading and paragraphs (a)(1), (a)(2), (b)(2), and
(d), remove the phrase ``qualified HUBZone SBC'' wherever it appears
and add in its place the phrase ``certified HUBZone small business
concern'';
0
b. In paragraph (a)(1):
0
i. Remove the phrase ``another SBC'' and add in its place the phrase
``another small business concern'';
0
ii. In the final sentence, remove the phrase ``HUBZone SBC'' and add in
its place the phrase ``certified HUBZone small business concern'';
0
iii. In the final sentence, remove the phrase ``HUBZone SBCs'' and add
in its place the phrase ``certified HUBZone small business concerns'';
0
c. In Examples 1, 2, and 3 in paragraph (a)(2), remove the phrase
``non-HUBZone SBC'' wherever it appears and add in its place the phrase
``non-HUBZone small business concern''
0
d. In the second and third sentences in Example 4 in paragraph (a)(2),
remove the phrase ``HUBZone SBC'' wherever it appears and add in its
place the phrase ``HUBZone small business concern'';
0
e. In the third sentence in Example 4 in paragraph (a)(2), remove the
phrase ``HUBZone SBCs'' and add in its place the phrase ``certified
HUBZone small business concerns'';
0
f. In paragraph (b)(2), remove the phrase ``qualified HUBZone SBCs''
and add in its place the phrase ``certified HUBZone small business
concerns''; and
0
g. In paragraph (d), remove the phrase ``SBCs'' and add in its place
the phrase ``small business concerns''.
0
50. Amend Sec. 126.616 as follows:
0
a. Revise the section heading;
0
b. Revise paragraph (a);
0
c. In paragraph (b) and (d)(1), remove the phrase ``qualified HUBZone
SBC'' wherever it appears and add in its place the phrase ``certified
HUBZone small business concern'';
0
d. In the introductory text of paragraph (c), remove the phrase
``HUBZone SBC'' and add in its place ``certified HUBZone small business
concern'';
0
e. In paragraphs (c)(2) through (4), (c)(9), (c)(10), (d)(2), (g), and
(i) remove the phrase ``HUBZone SBC'' wherever it appears'' and add in
its place the phrase ``certified HUBZone small business concern'';
0
f. In paragraphs (c)(7), (i), (j)(2), and (k), remove the phrase
``performance of work'' wherever it appears and add in its place the
phrase ``limitations on subcontracting''; and
0
g. Revise paragraph (e).
The revisions read as follows:
Sec. 126.616 What requirements must a joint venture satisfy to
submit an offer and be eligible to perform on a HUBZone contract?
(a) General. A certified HUBZone small business concern may enter
into a joint venture agreement with one or more other small business
concerns, or with an approved mentor authorized by Sec. 125.9 of this
chapter (or, if also an 8(a) BD Participant, with an approved mentor
authorized by Sec. 124.520 of this chapter), for the purpose of
submitting an offer for a HUBZone contract. The joint venture itself
need not be a certified HUBZone small business concern.
* * * * *
(e) Certification of compliance.--(1) At time of offer. If
submitting an offer as a joint venture for a HUBZone contract, at the
time of initial offer (and if applicable, final offer), each certified
HUBZone small business concern joint venture partner must make the
following certifications to the contracting officer separately under
its own name:
(i) It is a certified HUBZone small business concern that appears
in DSBS (or successor system) as a certified HUBZone small business
concern and it met the eligibility requirements in Sec. 126.200 at the
time of its initial certification or, if applicable, at the time of its
most recent recertification;
(ii) It, together with its affiliates, is small under the size
standard corresponding to the NAICS code assigned to the procurement;
(iii) It will ``attempt to maintain'' having at least 35% of its
employees residing in a HUBZone during performance of the contract; and
(iv) It will comply with the applicable limitations on
subcontracting during performance of the contract, as set forth in
Sec. 125.6 of this chapter and Sec. Sec. 126.200(f) and 126.700.
(2) Prior to performance. Prior to the performance of any HUBZone
contract as a joint venture, the HUBZone small business concern partner
to the joint venture must submit a written certification to the
contracting officer and SBA, signed by an authorized official of each
partner to the joint venture, stating the following:
(i) The parties have entered into a joint venture agreement that
fully complies with paragraph (c) of this section; and
(ii) The parties will perform the contract in compliance with the
joint venture agreement.
* * * * *
Sec. 126.617 [Amended]
0
51. Amend Sec. 126.617 as follows:
0
a. In the section heading, remove the phrase ``qualified HUBZone SBC''
and add in its place the phrase ``certified HUBZone small business
concern'';
0
b. Remove the phrase ``qualified HUBZone SBC'' and add in its place the
phrase ``certified HUBZone small business concern''.
[[Page 54833]]
Sec. 126.618 [Amended]
0
52. Amend Sec. 126.618 as follows:
0
a. In paragraph (a), remove the phrase ``the underlying HUBZone
requirements'' and add in its place the phrase ``the HUBZone
requirements described in Sec. 126.200'';
0
b. In paragraphs (a) through (c), remove the phrase ``qualified HUBZone
SBC'' wherever it appears and add in its place the phrase ``certified
HUBZone small business concern'';
0
c. In paragraph (c)(1), remove the phrase ``HUBZone SBC'' and add in
its place the phrase ``certified HUBZone small business concern'';
0
d. In paragraphs (c)(1) and (c)(2), remove the phrase ``performance of
work'' wherever it appears and add in its place the phrase
``limitations on subcontracting''.
0
53. Add Sec. 126.619 to read as follows:
Sec. 126.619 When must a certified HUBZone small business concern
recertify its status for a HUBZone contract?
(a) A concern that is a certified HUBZone small business concern at
the time of initial offer (including a Multiple Award Contract) is
generally considered a HUBZone small business concern throughout the
life of that contract.
(1) If a concern is a certified HUBZone small business concern at
the time of initial offer for a HUBZone Multiple Award Contract, then
it will be considered a certified HUBZone small business concern for
each order issued against the contract, unless a contracting officer
requests a new HUBZone certification in connection with a specific
order.
(2) Where the underlying Multiple Award Contract is not a HUBZone
contract and a procuring agency is setting aside an order for the
HUBZone program, a firm must be a certified HUBZone small business
concern and appear in DSBS (or successor system) as a certified HUBZone
small business concern at the time it submits its offer for the order.
(3) Where a HUBZone contract is novated to another business
concern, the concern that will continue performance on the contract
must certify its status as a certified HUBZone small business concern
to the procuring agency, or inform the procuring agency that it is not
a certified HUBZone small business concern, within 30 days of the
novation approval. If the concern is not a certified HUBZone small
business concern, the agency can no longer count any work performed
under the contract, including any options or orders issued pursuant to
the contract, from that point forward towards its HUBZone goals.
(4) Where a concern that is performing a HUBZone contract acquires,
is acquired by, or merges with another concern and contract novation is
not required, the concern must, within 30 days of the transaction
becoming final, recertify its status as a certified HUBZone small
business concern status to the procuring agency, or inform the
procuring agency that it no longer qualifies as a HUBZone small
business concern. If the contractor is unable to recertify its status
as a HUBZone small business concern, the agency can no longer count the
options or orders issued pursuant to the contract, from that point
forward, towards its HUBZone goals. The agency must immediately revise
all applicable Federal contract databases to reflect the new status.
(5) Where a concern is decertified after the award of a HUBZone
contract, the procuring agency may exercise options and still count the
award as an award to a HUBZone small business concern, except where
recertification is required or requested under this section.
(b) For the purposes of contracts (including Multiple Award
Contracts) with durations of more than five years (including options),
a contracting officer must request that a business concern recertify
its status as a HUBZone small business concern no more than 120 days
prior to the end of the fifth year of the contract, and no more than
120 days prior to exercising any option.
(1) If the concern cannot recertify that it qualifies as a HUBZone
small business concern, the agency can no longer count the options or
orders issued pursuant to the contract, from that point forward,
towards its HUBZone goals. This means that if the firm either no longer
meets the HUBZone eligibility requirements or no longer qualifies as
small for the size standard corresponding to NAICS code assigned to the
contract, the agency can no longer count the options or orders issued
pursuant to the contract, from that point forward, towards its HUBZone
goals.
(2) A concern that did not certify itself as a HUBZone small
business concern, either initially or prior to an option being
exercised, may recertify itself as a HUBZone small business concern for
a subsequent option period if it meets the eligibility requirements at
that time.
(3) Recertification does not change the terms and conditions of the
contract. The limitations on subcontracting, nonmanufacturer and
subcontracting plan requirements in effect at the time of contract
award remain in effect throughout the life of the contract.
(4) Where the contracting officer explicitly requires concerns to
recertify their status in response to a solicitation for an order, SBA
will determine eligibility as of the date of the firm's initial
certification or, if applicable, its most recent recertification.
(c) A concern's status will be determined at the time of submission
of its initial response to a solicitation for and award of an Agreement
(including Blanket Purchase Agreements (BPAs), Basic Agreements, Basic
Ordering Agreements, or any other Agreement that a contracting officer
sets aside or reserves awards for certified HUBZone small business
concerns) and each order issued pursuant to the Agreement.
0
54. Revise Sec. 126.700 to read as follows:
Sec. 126.700 What are the limitations on subcontracting requirements
for HUBZone contracts?
(a) Other than Multiple Award Contracts. For other than a Multiple
Award Contract, a prime contractor receiving an award as a certified
HUBZone small business concern must meet the limitations on
subcontracting requirements set forth in Sec. 125.6 of this chapter.
(b) Multiple Award Contracts.--(1) Total Set-Aside Contracts. For a
Multiple Award Contract that is totally set aside for certified HUBZone
small business concerns, a certified HUBZone small business concern
must comply with the applicable limitations on subcontracting (see
Sec. 126.5), or if applicable, the nonmanufacturer rule (see Sec.
121.406 of this chapter), during the base term and during each
subsequent option period. However, the contracting officer, at his or
her discretion, may also require the concern to comply with the
limitations on subcontracting or the nonmanufacturer rule for each
individual order awarded under the Multiple Award Contract.
(2) Partial Set-Aside Contracts. For Multiple Award Contracts that
are partially set aside for certified HUBZone small business concerns,
paragraph (b)(1) of this section applies to the set-aside portion of
the contract. For orders awarded under the non-set-aside portion of a
Multiple Award Contract, a certified HUBZone small business concern
need not comply with any limitations on subcontracting or
nonmanufacturer rule requirements.
(3) Orders Set Aside for certified HUBZone small business concerns.
For each individual order that is set aside for certified HUBZone small
business concerns under a Multiple Award Contract that is not itself
setaside for certified HUBZone small business
[[Page 54834]]
concerns, a certified HUBZone small business concern must comply with
the applicable limitations on subcontracting (see Sec. 125.6 of this
chapter), or if applicable, the nonmanufacturer rule (see Sec. 121.406
of this chapter), in the performance of such order.
(4) Reserves. For an order that is set aside for certified HUBZone
small business concerns against a Multiple Award Contract with a
HUBZone reserve, a certified HUBZone small business concern must comply
with the applicable limitations on subcontracting (see Sec. 125.6 of
this chapter), or if applicable, the nonmanufacturer rule (see Sec.
121.406 of this chapter), in the performance of such order. However,
the certified HUBZone small business concern does not have to comply
with the limitations on subcontracting or the nonmanufacturer rule for
any order issued against the Multiple Award Contract if the order is
competed amongst certified HUBZone small business concerns and one or
more other-than-small business concerns.
Sec. 126.800 [Amended]
0
55. Amend Sec. 126.800 as follows:
0
a. Amend the section heading by removing the phrase ``qualified HUBZone
SBC'' and adding in its place the phrase ``certified HUBZone small
business concern''; and
0
b. In paragraphs (a) and (b), remove the phrase ``qualified HUBZone
SBC'' wherever it appears and add in its place the phrase ``certified
HUBZone small business concern'';
0
56. Amend Sec. 126.801 as follows:
0
a. Revise the section heading;
0
b. Revise paragraphs (a), (b), and (c)(3); and
0
c. Revise the second and third sentences in paragraph (e).
The revisions read as follows:
Sec. 126.801 How does an interested party file a HUBZone status
protest?
(a) General. (1) A HUBZone status protest is the process by which
an interested party may challenge the HUBZone status of an apparent
successful offeror on a HUBZone contract, including a HUBZone joint
venture submitting an offer under Sec. 126.616.
(2) The protest procedures described in this part are separate from
those governing size protests and appeals. All protests relating to
whether a certified HUBZone small business concern is other than small
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 HUBZone small business concern and
whether the concern meets the HUBZone eligibility requirements set
forth in Sec. 126.200, SBA will process the protests concurrently,
under the procedures set forth in part 121 of this chapter and this
part.
(3) SBA does not review issues concerning the administration of a
HUBZone contract.
(b) Format and specificity. (1) Protests must be in writing and
must state all specific grounds for why the protested concern did not
meet the HUBZone eligibility requirements set forth in Sec. 126.200 at
the time the concern applied for certification or at the time SBA last
recertified the concern as a HUBZone small business concern. A protest
merely asserting that the protested concern did not qualify as a
HUBZone small business concern at the time of certification or
recertification, without setting forth specific facts or allegations,
is insufficient. A protest asserting that a firm was not in compliance
with the HUBZone eligibility requirements at the time of offer or award
will be dismissed.
(2) For a protest filed against a HUBZone joint venture, the
protest must state all specific grounds for why--
(i) The HUBZone small business concern partner to the joint venture
did not meet the HUBZone eligibility requirements set forth in Sec.
126.200 at the time the concern applied for certification or at the
time SBA last recertified the concern as a HUBZone small business
concern; and/or
(ii) The protested HUBZone joint venture did not meet the
requirements set forth in Sec. 126.616 at the time the joint venture
submitted an offer for a HUBZone contract.
(c) * * *
(3) Protestors may submit their protests by email to
[email protected].
* * * * *
(e) * * * The contracting officer must send the protest, along with
a referral letter, to the D/HUB by email to [email protected]. The
contracting officer's referral letter must include information
pertaining to the solicitation that may be necessary for SBA to
determine timeliness and standing, including the following:
(1) The solicitation number;
(2) The name, address, telephone number, email address, and
facsimile number of the contracting officer;
(3) The type of HUBZone contract at issue;
(4) If the procurement was conducted using full and open
competition with a HUBZone price evaluation preference, whether the
protester's opportunity for award was affected by the preference;
(5) If the procurement was a HUBZone set-aside, whether the
protester submitted an offer;
(6) Whether the protested concern was the apparent successful
offeror;
(7) Whether the procurement was conducted using sealed bid or
negotiated procedures;
(8) The bid opening date, if applicable;
(9) The date the protester was notified of the apparent successful
offeror;
(10) The date the protest was submitted to the contracting officer;
(11) The date the protested firm submitted its initial offer or bid
to the contracting activity; and
(12) Whether a contract has been awarded, and if applicable, the
date of contract award and contract number.
Sec. 126.802 [Amended]
0
57. Amend Sec. 126.802 by removing the phrase ``has qualified HUBZone
status'' and adding in its place the phrase ``qualifies as a certified
HUBZone small business concern''.
0
58. Amend Sec. 126.803 by:
0
a. Revising the section heading;
0
b. Redesignating paragraphs (a) through (d) as paragraphs (b) through
(e), respectively;
0
c. Adding new paragraph (a); and
0
d. Revising newly redesignated paragraphs (b)(2), (c), and (e).
The addition and revisions read as follows:
Sec. 126.803 How will SBA process a HUBZone status protest and what
are the possible outcomes?
(a) Date at which eligibility determined. SBA will determine the
eligibility of a concern subject to a HUBZone status protest as of the
date of its initial certification or, if applicable, its most recent
recertification.
(b) * * *
(2) If SBA determines the protest is timely and sufficiently
specific, SBA will notify the protested concern of the protest and the
identity of the protestor. The protested concern must submit
information responsive to the protest within 3 business days of the
date of receipt of the protest.
(c) Time period for determination. (1) SBA will determine the
HUBZone status of the protested concern within 15 business days after
receipt of a complete protest referral.
(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
[[Page 54835]]
be disadvantageous to the Government. Notwithstanding such a
determination, the provisions of paragraph (d) of this section apply to
the procurement in question.
* * * * *
(e) Effect of determination. The determination is effective
immediately and is final unless overturned on appeal by the AA/GC&BD,
or designee, pursuant to Sec. 126.805.
(1) Protest sustained. If the D/HUB finds the protested concern
ineligible and sustains the protest, SBA will decertify the concern and
remove its designation as a certified HUBZone small business concern in
DSBS (or successor system). A contracting officer shall not award a
contract to a protested concern that the D/HUB has determined is not an
eligible HUBZone small business concern for the procurement in
question.
(i) No appeal filed. If a contracting officer receives a
determination sustaining a protest after contract award, and no appeal
has been filed, the contracting officer shall terminate the award.
(ii) Appeal filed. (A) 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.
(B) 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.
(iii) Update FPDS-NG. Where the contract was awarded to a firm that
is found not to qualify as a HUBZone small business concern, the
contracting officer must update the Federal Procurement Data System-
Next Generation (FPDS-NG) and other procurement reporting databases to
reflect the final agency HUBZone decision (i.e., the D/HUB's decision
if no appeal is filed, or the decision of the AA/GCBD if the protest is
appealed).
(2) Protest dismissed or denied. If the D/HUB denies or dismisses
the protest, the contracting officer may award the contract to the
protested concern.
(i) No appeal filed. If a contracting officer receives a
determination dismissing or denying a protest and no appeal has been
filed, the contracting officer may:
(A) Award the contract to the protested concern if it has not yet
been awarded; or
(B) Authorize contract performance to proceed if the contract has
been awarded.
(ii) Appeal filed. If the AA/GCBD overturns the initial
determination or dismissal, the contracting officer may apply the
appeal decision to the procurement in question.
(3) A concern found to be ineligible is precluded from applying for
HUBZone certification for ninety (90) calendar days 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 if the protest is appealed).
PART 127--WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM
0
59. Amend Sec. 127.602 by redesignating the text of Sec. 127.602 as
paragraph (a) and adding paragraph (b).
The addition reads as follows:
Sec. 127.602 What are the grounds for filing an EDWOSB or WOSB
status protest?
* * * * *
(b) For a protest filed against an EDWOSB or WOSB joint venture,
the protest must state all specific grounds for why--
(1) The EDOWSB or WOSB partner to the joint venture did not meet
the EDWOSB or WOSB eligibility requirements set forth in Sec. 127.200;
and/or
(2) The protested EDWOSB or WOSB joint venture did not meet the
requirements set forth in Sec. 127.506.
Dated: October 19, 2018.
Linda E. McMahon,
Administrator.
[FR Doc. 2018-23285 Filed 10-30-18; 8:45 am]
BILLING CODE 8025-01-P