[Federal Register Volume 84, Number 93 (Tuesday, May 14, 2019)]
[Proposed Rules]
[Pages 21256-21267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09684]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 84, No. 93 / Tuesday, May 14, 2019 / Proposed 
Rules  

[[Page 21256]]



SMALL BUSINESS ADMINISTRATION

13 CFR Parts 124 and 127

RIN 3245-AG75


Women-Owned Small Business and Economically Disadvantaged Women-
Owned Small Business--Certification

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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

SUMMARY: The Small Business Administration (SBA) is proposing to amend 
its regulations to implement a statutory requirement to certify Women-
Owned Small Business Concerns (WOSB) and Economically Disadvantaged 
Women-Owned Small Business Concerns (EDWOSB) participating in the 
Women-Owned Small Business Contract Program.

DATES: Comments must be received on or before July 15, 2019.

ADDRESSES: You may submit comments, identified by RIN: 3245-AG75, by 
any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     For mail, paper, disk, or CD/ROM submissions: Brenda 
Fernandez, U.S. Small Business Administration, Office of Policy, 
Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 
20416.
     Hand Delivery/Courier: Brenda Fernandez, U.S. Small 
Business Administration, Office of Policy, Planning and Liaison, 409 
Third Street SW, 8th Floor, Washington, DC 20416.

SBA will post all comments on www.regulations.gov. If you wish to 
submit confidential business information (CBI) as defined in the User 
Notice at www.regulations.gov, please submit the information to Brenda 
Fernandez, U.S. Small Business Administration, Office of Policy, 
Planning and Liaison, 409 Third Street SW, 8th Floor, Washington, DC 
20416, or send an email to sba.gov">brenda.fernandez@sba.gov. Highlight the 
information that you consider to be CBI and explain why you believe SBA 
should hold this information as confidential. SBA will review the 
information and make the final determination on whether it will publish 
the information.

FOR FURTHER INFORMATION CONTACT: Brenda Fernandez, U.S. Small Business 
Administration, Office of Policy, Planning and Liaison, 409 Third 
Street SW, Washington, DC 20416; (202) 207-7337; 
sba.gov">brenda.fernandez@sba.gov.

SUPPLEMENTARY INFORMATION: The WOSB Federal Contract Program 
(hereinafter referred to as the ``Program''), set forth in section 8(m) 
of the Small Business Act, 15 U.S.C. 637(m), authorizes Federal 
contracting officers to restrict competition to eligible WOSBs or 
EDWOSBs for Federal contracts in certain industries. Section 825 of the 
National Defense Authorization Act for Fiscal Year 2015, Public Law 
113-291, 128 Stat. 3292 (December 19, 2014) (2015 NDAA), amended the 
Small Business Act to grant contracting officers the authority to award 
sole source awards to WOSBs and EDWOSBs and shorten the time period for 
SBA to conduct a required study to determine the industries in which 
WOSBs are underrepresented. In addition, section 825 of the 2015 NDAA 
amended the Small Business Act to create a requirement that a concern 
be certified as a WOSB or EDWOSB by a Federal agency, a State 
government, SBA, or a national certifying entity approved by SBA, in 
order to be awarded a set aside or sole source contract under the 
authority of section 8(m) of the Small Business Act. 15 U.S.C. 
637(m)(2)(E). The certification requirement applies only to 
participants wishing to compete for set-aside or sole source contracts 
under the Program. Once this rule is finalized, WOSBs that are not 
certified will not be eligible to compete on set asides for the 
Program. Other women-owned small business concerns that do not 
participate in the Program may continue to self-certify their status, 
receive contract awards outside the Program as WOSBs, and count toward 
an agency's goal for awards to WOSBs. For those purposes, contracting 
officers would be able to accept self-certifications without requiring 
them to verify any documentation. SBA is proposing to provide 
certification, to accept certification from certain identified 
government entities, and to allow certification by SBA-approved third 
party certifiers. As part of the changes necessary to implement a 
certification program, SBA is also proposing to amend its regulations 
with regard to continuing eligibility and program examinations. SBA is 
also proposing to adjust the economic disadvantage thresholds 
applicable to determining whether an individual qualifies as 
economically disadvantaged for participation in the 8(a) Business 
Development (BD) Program to make them consistent with the thresholds 
applicable to whether a woman qualifies as economically disadvantaged 
for EDWOSB status.
    On September 14, 2015, SBA published in the Federal Register a 
final rule to implement the sole source authority for WOSBs and EDWOSBs 
and the revised timeline for SBA to conduct a study to determine the 
industries in which WOSBs are underrepresented. 80 FR 55019. SBA did 
not address the certification portion of the 2015 NDAA in this final 
rule because its implementation is more complicated, could not be 
accomplished by merely incorporating the statutory language into the 
regulations, and would have delayed the implementation of the sole 
source authority unnecessarily. SBA notified the public that because it 
did not want to delay the implementation of the WOSB sole source 
authority by combining it with the new certification requirement, SBA 
decided to implement the certification requirement through a separate 
rulemaking.
    As part of the process to craft the regulations governing the WOSB/
EDWOSB certification program, SBA issued an Advance Notice of Proposed 
Rulemaking (ANPR) on December 18, 2015. 80 FR 78984. The ANPR solicited 
public comments to assist SBA in drafting a proposed rule to implement 
a WOSB/EDWOSB certification program. SBA received 122 comments in 
response to the ANPR. SBA has reviewed all the comments while crafting 
this proposed rule and received additional input from interested 
stakeholders.
    This proposed rule also proposes changes to Sec.  124.104(c), to 
make the economic disadvantage requirements for the 8(a) BD program 
consistent to the economic disadvantage requirements for women-owned 
firms seeking EDWOSB

[[Page 21257]]

status. The proposed change would eliminate the distinction in the 8(a) 
BD program for initial entry into and continued eligibility for the 
program. The economic disadvantage criteria for EDWOSBs equate to the 
continuing eligibility criteria for the 8(a) BD program. This has 
resulted in the anomaly of a concern applying for EDWOSB and 8(a) BD 
status simultaneously and being found to be economically disadvantaged 
for EDWOSB purposes, but denied eligibility for the 8(a) BD program 
based on not being economically disadvantaged. This proposed rule 
intends to make economic disadvantage for the 8(a) BD program 
consistent to that for a woman seeking to qualify as economically 
disadvantaged for the EDWOSB program. SBA does not believe that it 
makes sense to allow a woman to qualify as economically disadvantaged 
for EDWOSB purposes, but to then be declined from 8(a) BD participation 
for not being economically disadvantaged.
    In addition, SBA notes that in September 2017, SBA awarded a 
contract to conduct a study to assist the Office of Business 
Development in defining or establishing criteria for determining what 
constitutes ``economic disadvantage'' for purposes of firms applying to 
the 8(a) BD program. The results supported a $375,000 adjusted net 
worth for initial eligibility, as compared to the current $250,000 
threshold. The study did not, however, consider differences in economic 
disadvantage between applying to the 8(a) BD program and continuing in 
the program once admitted. Because SBA believes that it is important to 
have the same economic disadvantage criteria for the 8(a) BD program as 
for the EDWOSB program, to avoid confusion and inconsistency between 
the programs, SBA considered applying a $375,000 net worth standard to 
both the 8(a) BD and EDWOSB programs. SBA concluded that the $375,000 
net worth standard may not be appropriate as the standard for 
determining economic disadvantage because it related to entry into the 
8(a) BD program as opposed to participation in the free enterprise 
system as an economically disadvantaged business owner. As such, this 
rule proposes to adopt the $750,000 net worth continuing eligibility 
standard for all economic disadvantage determinations in the 8(a) BD 
program. SBA specifically requests comments on whether the $375,000 net 
worth standard or the $750,000 net worth standard should be used for 
both the 8(a) BD and EDWOSB programs. In particular, SBA requests 
comments on how the different standards would affect small business 
owners participating in the federal marketplace.
    SBA is proposing to amend 13 CFR 127 subpart C to establish the 
process by which SBA will certify firms as WOSBs or EDWOSBs. Proposed 
Sec.  127.300(a) would provide that SBA will provide a free electronic 
application process to all firms seeking to be certified as WOSBs or 
EDWOSBs. In the pursuit of speed, efficiency, and ease of 
administrative burden, applicants would apply online through an 
electronic application process. Electronic applications are much faster 
to process than paper applications as the information can be sorted and 
searched for digitally. Electronic applications force all mandatory 
fields to be completed, thereby eliminating incomplete applications. 
Moreover, through electronic applications, notifications can be sent to 
applicants to confirm receipt of their applications, along with any 
follow-up electronic correspondence, rather than through time-consuming 
paper mail. Transitioning to purely electronic applications will also 
reduce transactions costs for the agency, saving taxpayer dollars in 
the process. Data analysis will also be enhanced as applications move 
to be only electronic. The ability to process WOSB and EDWOSB 
certifications in an expedited fashion will further SBA's mission to 
increase the number of WOSBs that win Federal Government contracts.
    SBA is proposing that applicants would have the opportunity to 
request reconsideration of an initial decline decision, which would be 
consistent with the 8(a) BD application process. The contract protest 
mechanism, allowing interested parties to challenge the WOSB/EDWOSB 
status of an apparent successful offeror, will remain the same with an 
appeal right and will serve as a means to ensure that concerns awarded 
a Federal contract based on their WOSB or EDWOSB certifications are 
eligible for award.
    SBA's regulations currently authorize the following WOSB/EDWOSB 
certifications: (1) Certification by third party national certifying 
entities approved by SBA, (2) certification by SBA as a Participant in 
the 8(a) BD program where the concern is owned and controlled by one or 
more women, and (3) concerns certified as owned and controlled by women 
and certified as Disadvantaged Business Enterprises (DBEs) by states 
pursuant to the U.S. Department of Transportation's (DOT's) DBE 
program. 13 CFR 127.300(d). Although the current program principally 
relies on self-certification, it also permits SBA to have non-
governmental third party certifiers approved by SBA. SBA approved four 
non-governmental entities for that purpose as an alternative option for 
WOSB or EDWOSBs. These entities are not restricted from assessing fees 
for certification. In the ANPR, SBA sought comments on how those 
certification processes are working, how they can be improved, and how 
best to incorporate them into the new certification requirements. 
Almost all of the 122 comments that SBA received mentioned third party 
certifiers or their process. Overwhelmingly the commenters urged SBA to 
craft a system that would be as uniform as possible, with applicants 
not being treated differently depending on whom they chose for 
certification purposes. Almost every commenter that mentioned the topic 
also wanted the certification process by SBA to be free for all 
applicants. Commenters noted that 8(a) BD program applicants and 
HUBZone program applicants do not pay a fee for certification. Overall, 
commenters suggested that SBA create a clear, transparent, consistent, 
and free certification process. Commenters supportive of authorized 
third party certifiers offered that speed to certification is one 
attraction that might be worth the cost. SBA also received comments 
concerning whether a third party certifier could be a for-profit 
entity. The legislation does not limit participation as a third party 
certifier to entities that are non-profit, and SBA is not proposing any 
limitation. The proposed rule would also require any approved third 
party certifier to notify an applicant of its fees and the ability to 
apply online with SBA at no cost.
    After evaluating the comments, SBA has determined that the new 
legislation permits a balance of options for the public. SBA has 
previously determined that the act of certifying a firm as eligible to 
receive a federal contract is generally an inherently governmental 
function. However, the 2015 NDAA specifically gives to SBA the 
authority to use a non-governmental certifying entity approved by SBA 
which is unique to the WOSB Program and does not affect inherently 
governmental authorities for approval as required in the 8(a) BD or 
HUBZone programs. SBA proposes to exercise this authority and will 
promulgate the requirements that prospective national certifying 
entities must adhere to in order to be approved.
    SBA also proposes to use existing government entities at the 
Federal and State levels that have valid certification programs which 
SBA could accept in

[[Page 21258]]

lieu of an SBA only process. In addition to those that will apply 
directly to SBA for WOSB or EDWOSB certification, or through an 
approved national entity, the proposed rule would authorize SBA to 
accept certifications that have been issued by SBA, a Federal agency or 
State authority under the DOT/DBE program. SBA already certifies firms 
as eligible for its 8(a) BD and HUBZone programs without concerns being 
charged a fee for applying. The Department of Veterans Affairs (VA) 
certifies veteran-owned small businesses (VOSBs) and service-disabled 
veteran-owned small businesses (SDVOSBs) at no cost through its Center 
for Verification and Evaluation (CVE). Many veterans are also women. 
This rule proposes that SBA accept certifications by SBA (for the 8(a) 
BD and HUBZone programs) and VA that a firm is owned and controlled by 
women for purposes of WOSB/EDWOSB certification. The DOT DBE program 
has authority for certifying women under its State-run programs. 
Similarly, SBA proposes to accept these certifications that a firm is 
owned and controlled by women as well. SBA is therefore proposing to 
amend Sec.  127.300 by deleting paragraphs (b) through (f) and 
explaining that the certification process will be handled by SBA and 
that SBA will accept, under certain conditions, the aforementioned 
Federal or State third party certifications.
    SBA will accept from the VA, VOSB or SDVOSB certification for women 
veterans, provided that the business concern is 51% owned and 
controlled by one or more women who are veterans or service-disabled 
veterans. VA applies SBA's standards of ownership and control under its 
Center for Verification and Evaluation (CVE) program. Because VA does 
not determine economic disadvantage, SBA will only accept VA 
certifications as evidence of ownership and control by women. Women 
veterans or service-disabled veterans seeking EDWOSB status would have 
to apply directly to SBA for this certification. In such a case, SBA 
would accept VA's determination that the firm is owned and controlled 
by women, but the firm would still have to demonstrate that the women 
are economically disadvantaged.
    Similarly, SBA will accept the DOT/DBE certification for WOSB 
eligibility. Because the thresholds of economic disadvantage are 
different between SBA and DOT's DBE program, SBA cannot accept the 
economic disadvantage determination of a DBE for the EDWOSB 
certification. Interested parties seeking EDWOSB status will have to 
apply directly to SBA for this certification.
    SBA believes that there may difficulty in processing all the 
potential applications of those seeking WOSB or EDWOSB certifications 
in a timely manner. There are currently approximately 10,000 firms in 
the WOSB repository. SBA's 8(a) Business Development program processes 
approximately 3,000 applications a year, and SBA's HUBZone program 
processes approximately 1,500 applications per year. Because the WOSB/
EDWOSB program is being designed so that only firms that have been 
certified are eligible for contracts through the program, SBA expects a 
large influx of applications as soon as these rules are finalized. If 
all those firms currently in the repository seek WOSB/EDWOSB 
certification from SBA immediately, there most likely will be a delay 
for many firms seeking certification. SBA is requesting comments on 
possible solutions to this potential bottleneck. One solution that SBA 
is considering is to adapt a process similar to that previously used by 
SBA in certifying firms as small disadvantaged businesses (SDBs) when 
there was an SDB program. Under such an approach, a firm could submit 
an offer as a WOSB or EDWOSB if it had submitted an application to SBA 
and had not received a negative determination regarding that 
application at the time it submits its offer. A concern would be 
required to notify the procuring agency of this conditional status in 
its offer. If a concern then becomes the apparent successful offeror on 
a WOSB/EDWOSB contract, the contracting officer would notify SBA and 
SBA would prioritize the firm's application and make a determination 
within 15 days from the date SBA received the contracting officer's 
notification. Such a timeframe should not be detrimental since it is 
the same afforded for size and status protests today. SBA specifically 
requests comments on this alternative and other possible approaches 
that would help ease the transition from self-certification to a 
required certification program.
    Proposed Sec.  127.301 and Sec.  127.306 would provide guidance on 
how a concern may apply to the WOSB/EDWOSB Program. Proposed Sec.  
127.301 would provide guidance on initial applications, and proposed 
Sec.  127.306 would address the procedures for denied applications and 
decertifications. Proposed Sec.  127.305 would provide that WOSB 
Program applicants will be permitted to request reconsideration, within 
30 calendar days of notification of an initial decline decision. In 
proposed Sec.  127.306, SBA would require a one-year waiting period for 
a concern to re-apply after a decline or decertification. Currently the 
8(a) BD program requires a concern to wait one year to reapply after a 
denied application. 13 CFR 124.207. SBA will render a final decision 
within 60 calendar days of a reconsideration request. In response to 
the SBA ANPR, many commenters requested that SBA adopt an appeal 
process for denied applications similar to the 8(a) BD development 
program. Other commenters wanted to emphasize giving concerns an 
ability to ask SBA to reconsider the application and make changes. 
SBA's HUBZone certification process does not currently utilize an 
appeal or reconsideration process. SBA is not proposing to adopt an 
appeal process similar to the 8(a) BD program for the WOSB Program, but 
would allow concerns the ability to request reconsideration. SBA 
believes that the reconsideration process should be sufficient for a 
firm to understand its deficiencies and come into compliance with the 
HUBZone eligibility requirements.
    Proposed Sec.  127.302 would provide information on how a concern 
may apply for certification. SBA is proposing to process all 
applications online. SBA is currently already processing all 8(a) BD 
program and HUBZone program applications electronically, and this would 
be an extension of that application process to the WOSB Program. 
Current participants in the WOSB Program have been using https://
certify.sba.gov to self-certify for the past year.
    Proposed Sec.  127.303(a) would describe the information and 
documents that must be submitted during the electronic application 
process. In the ANPR, SBA requested comments on what information and 
documents should be collected during an application. Most commenters 
believed that SBA should continue to collect the documents listed in 
the current version of Sec.  127.300(e). SBA agrees with these comments 
and while that list is not exhaustive, SBA believes that it is 
illustrative of the amount and types of documents that SBA will be 
collecting during the electronic application process. SBA is proposing 
to maintain the list of required documents on its website, and that the 
list of required documents ``may include, but is not limited to, 
corporate records, and business and personal financial records, 
including copies of signed Federal personal and business tax returns, 
individual and business bank statements.'' This is similar to the 
approach of SBA's other programs, in which SBA provides more detail of 
the documents required on SBA's website as well as part of the 
application process.

[[Page 21259]]

    Proposed Sec.  127.303(b) would make clear that SBA may need to 
request additional documents during the application process in order to 
confirm eligibility. Proposed Sec.  127.303(c) would state that it is 
the concern's responsibility to notify SBA of any changes that could 
affect the firm's eligibility while SBA is reviewing the application. 
SBA is proposing to add new paragraphs Sec.  127.303(d) and (e) to 
detail the additional information that concerns reapplying after a 
denial or decertification are required to submit. The proposed rule 
provides that concerns reapplying for certification will have to submit 
information showing what changes have been made to remedy the issues of 
ineligibility in the initial application.
    Proposed Sec.  127.304 would detail how SBA will process 
applications. WOSB program applicants will have their packages 
reviewed, similar to the 8(a) BD program, within 15 calendar days for 
completeness of an application. Concerns will be notified if required 
information is missing, and that SBA will not process incomplete 
applications. SBA proposes that it will make its determination within 
90 days after a concern submits a complete application. This is 
consistent with the time frames and policies established for SBA's 
other certification programs. The 90-day time frame will not begin to 
run on submitted but incomplete applications. SBA proposes that after a 
complete application is submitted, SBA could still need additional 
information from an applicant. Proposed paragraph (c) would provide 
that it is the applicant's responsibility to demonstrate its 
eligibility and that SBA could draw adverse inferences when a concern 
fails to provide documents and information that SBA has requested. 
Proposed paragraph (d) would provide that a concern must be eligible 
when it applies, and must maintain its eligibility throughout the time 
SBA is evaluating its application. Proposed paragraph (e) would provide 
that any changes in circumstances may be relevant to a concern's 
eligibility, that a concern has an affirmative duty to notify SBA of 
any changes, and that SBA may decline to certify a concern that fails 
to notify SBA of changed circumstances. Proposed paragraphs (f) and (g) 
would provide that any decision regarding an application will be in 
writing. Proposed paragraph (f) would also state that it will be SBA's 
responsibility to update https://certify.sba.gov (or any successor 
system) and the System for Award Management, to indicate the firm has 
been certified by SBA.
    Proposed Sec.  127.305 would authorize a reconsideration process, 
which would permit a firm found to be ineligible to address 
deficiencies and change its bylaws, articles of incorporation, or other 
ownership documents to come into compliance with SBA's ownership and 
control requirements. As mentioned above, this is consistent with SBA's 
current application and continuing eligibility process for the 8(a) BD 
program. The goal of this proposed change is to allow eligible concerns 
to become certified as quickly as possible, even if there were 
deficiencies or eligibility issues on their initial applications.
    Proposed Sec.  127.306 would provide that concerns may reapply to 
the program one year after a final decline or decertification decision.

Third Party Certification

    SBA is proposing to further amend subpart C of part 127 to 
establish procedures for Third Party Certification in the context of a 
required certification program. In proposed Sec.  127.350, SBA is 
proposing that all Third Party Certifiers (TPCs) must be approved by 
SBA. Under the proposed rule, an approved TPC need not be a non-profit 
entity. SBA is also clarifying that a TPC is a non-governmental entity, 
in contrast to the governmental certifications (8(a), DOT/DBE, VA/CVE) 
that SBA will accept for WOSB/EDWOSB certification purposes.
    SBA is proposing that in order to be certified by a TPC, an 
applicant must be registered in the System for Award Management (SAM) 
and must upload all required documents in certify.gov. An applicant 
using a TPC would be required to provide the TPC with access to the 
documents in certify.sba.gov. A firm certified by a TPC would need to 
upload the written certification from a TPC to https://certify.sba.gov 
(or any successor system). Proposed Sec.  127.352 would provide that 
SBA will maintain the instructions for becoming a TPC on SBA's website.
    Proposed Sec.  127.353(a) would permit TPCs to charge a fee. As 
noted above, commenters generally favored free certification, but those 
comments pertained to certification by the Government and other 
commenters recognized a value to having TPCs in certain instances. SBA 
notes that any applicant that wishes to have its application for 
certification processed without a fee would always be able to submit 
its application to SBA. SBA recognizes that TPCs currently charge a fee 
to certify WOSBs, and believes that this option should not be 
eliminated for any applicant seeking the services of a TPC. Further, 
Sec.  127.353(a)(1) and (2) would provide that all TPCs must notify 
potential applicants of the free option offered by SBA at the beginning 
of the application process. In addition, proposed Sec.  127.353(b) 
would require that the method of the notification must be approved by 
SBA.
    Proposed Sec.  127.354 would provide the certification standards 
that TPCs must meet. The proposed rule identifies minimum standards 
that need to be met. As noted above, SBA received suggestions that 
consistency between certification options offered by various certifiers 
would be helpful for participants, and help alleviate possible 
confusion from having multiple certification options. These baseline 
standards will provide some consistency between various certifiers, 
ensuring that all certifiers are meeting the same minimum requirements.
    Proposed Sec.  127.355 would establish procedures that SBA will 
utilize to ensure that TPCs are meeting the requirements of subpart D. 
Specifically, SBA is proposing that it will conduct periodic compliance 
reviews, and that SBA may revoke its approval of a TPC that is not 
meeting the requirements.
    Proposed Sec.  127.356 would create the process for certification 
by a TPC. SBA is proposing that concerns submit their applications 
directly to the TPC, register in SAM, and upload all of the documents 
to certify.sba.gov. The applicant will provide the TPC with access to 
its documents in certify.sba.gov. Once certified, the applicant will 
upload the approval document to certify.sba.gov.
    Proposed Sec.  127.357 would address ineligibility determinations 
made by TPCs. Proposed Sec.  127.357(a) would permit a concern found to 
be ineligible by a TPC to request reconsideration and a 
redetermination, at no additional cost to the concern. Proposed Sec.  
127.357(a) would also require the TPC to complete the reconsideration 
process within 60 calendar days. Finally, the proposed rule would 
prohibit a declined firm from reapplying for WOSB or EDWOSB 
certification by SBA or a TPC for a one-year period.
    SBA is proposing to amend subpart D of part 127 to establish 
procedures for maintaining a concern's certification as WOSB or EDWOSB 
and conducting program examinations of WOSB program participants after 
certification. Proposed Sec.  127.400 would require that concerns 
recertify their eligibility every three years. SBA proposes that 
failure to recertify in the time period provided will result in the 
concern being decertified, and thus removed as a certified WOSB or 
EDWOSB from the

[[Page 21260]]

Dynamic Small Business Search (DSBS) system.
    Proposed Sec.  127.401 would establish the ongoing obligations of 
certified WOSB Program participants. Specifically, this provision would 
provide that all certified concerns have an affirmative duty to notify 
SBA of any material changes in writing. Proposed Sec.  127.402 would 
address the failure of a concern to recertify every three years or to 
notify SBA of a material change. The proposed language makes clear that 
such concerns would be decertified.
    Proposed Sec.  127.403 pertains to program examinations. Program 
examinations under the new regulations will serve a similar function as 
they had previously. However, they will be inherently different with 
the proposed new SBA certification. Proposed paragraph (a) would 
establish that an examination is an investigation by SBA to verify the 
accuracy of any WOSB/EDWOSB certification and to ensure that currently 
certified concerns continue to meet the eligibility criteria of the 
WOSB Program. Proposed paragraph (b) would provide that program 
examinations will be conducted by SBA staff, SBA field staff or others 
designated by the SBA's Director of Government Contracting (D/GC).
    Proposed paragraph Sec.  127.403(c) establishes that the scope of 
review for examinations is any information that is related to a 
concern's eligibility. SBA may conduct site visits when appropriate as 
part of the program examination. Further, proposed paragraph (d) would 
require that it is the program participant's responsibility to ensure 
that all required information has been submitted to SBA and that all 
that information is up to date and accurate. Additionally, this 
proposed section would provide that all of the required information is 
considered material by SBA in determining a concern's eligibility and 
that the information is assumed to be truthful and current.
    Proposed Sec.  127.404 would authorize SBA to conduct program 
examinations at its discretion any time after a concern has submitted 
an application to be certified. This regulation also clarifies that SBA 
may initiate an examination of a concern without notification. As noted 
above, in order to apply to the WOSB program and maintain eligibility a 
concern must provide SBA with required documents and information. This 
provision would provide that SBA may review any previously submitted 
information at any time as part of a program examination. Given that 
SBA may not need additional information when it begins the examination, 
it is not necessary to notify concerns that SBA is reviewing material 
that has already been submitted to SBA. Proposed Sec.  127.405 would 
make clear that in addition to reviewing material already submitted, 
SBA may also request additional information when conducting a program 
examination.
    Proposed Sec.  127.406 would authorize SBA to decertify concerns 
that fail to provide or maintain the required certifications or 
documents. As noted above, SBA will maintain a list of all the required 
documents that a concern must provide and keep up-to-date. Concerns 
that fail to meet this requirement would be proposed for 
decertification. SBA would also propose decertification for firms that 
SBA determines no longer meet the eligibility requirements. Concerns 
would be proposed for decertification pursuant to Sec.  127.406(a). 
Concerns proposed for decertification would be given 15 calendar days 
to respond. Proposed Sec.  127.406(a)(3) would be added to establish 
that SBA will generally not consider new evidence in a response. SBA 
also proposes to add Sec.  127.406(b) which would state that when a 
concern is decertified pursuant to this section, the D/GC will issue 
that decision in writing and will consider all the reasons why the firm 
was proposed for decertification. Further, this section would provide 
that SBA may draw adverse inferences when making this eligibility 
determination. Proposed Sec.  127.406(c) would provide that decertified 
firms would be able to reapply to the program one year after 
decertification.
    SBA is proposing to remove Sec.  127.505, as the pertinent 
information in this provision is already detailed in Sec.  121.406(b).
    This proposed rule would not change the general procedures 
concerning WOSB/EDWOSB protests in relation to contract actions. A 
concern that has been determined ineligible as part of a status protest 
could continue to appeal that decision pursuant to newly redesignated 
Sec.  127.605. However, SBA is proposing to amend newly redesignated 
Sec.  127.604(f)(4) to clarify that firms found to be ineligible would 
need to reapply rather than request a reexamination. The proposed 
language also provides a citation to the appropriate regulation for 
reapplication procedures.

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 the purposes of 
Executive Order 12866. Accordingly, the next section contains SBA's 
Regulatory Impact Analysis. This is not a major rule, however, under 
the Congressional Review Act.

Regulatory Impact Analysis

1. Is there a need for the regulatory action?

    The U.S. Small Business Administration (SBA) is required by statute 
to administer the WOSB Federal Contract Program (WOSB Program). The 
Small Business Act (Act) sets forth the certification criteria for the 
WOSB Program. Specifically, the Act states that a WOSB or EDWOSB must, 
``be certified by a Federal agency, a State government, the 
Administrator, or a national certifying entity approved by the SBA 
Administrator, as a small business concern owned and controlled by 
women.'' 15 U.S.C. 637(m)(2)(E).
    The Federal Acquisition Regulation (FAR) and SBA regulations 
require that in order to be certified as a WOSB or EDWOSB a small 
business concern must provide documents supporting its WOSB or EDWOSB 
status to SBA. See 13 CFR 127.300 and FAR 19.1503(b)(3). The specific 
documents firms are required to provide are outlined in Sec. Sec.  
127.300(d) and (e). The Act also states that the SBA is authorized to 
conduct eligibility examinations of any certified WOSB or EDWOSB, and 
to handle protests and appeals related to such certifications. Id. 
Sec.  637(m)(5)(A) and (5)(B).
    Under the current system firms may be certified by third party 
certifiers, or they may essentially self-certify and upload the 
required documents to sba.certify.gov. In order to award a WOSB set-
aside or sole source contract, the contracting officer must document 
that the contracting officer reviewed the firm's certifications and 
documentation. 13 CFR 127.503(g); FAR 19.1503(b)(3). The lack of 
required certification, coupled with the requirement that the 
contracting officer must verify that documents have been uploaded, may 
contribute to reluctance to use the program, resulting in the failure 
to meet the statutory goal of 5% of all prime contract dollars being 
awarded to

[[Page 21261]]

WOSBs. In FY 2017, the government wide WOSB goal of 5% was not met with 
actual performance at 4.71% ($20.8B). The government has only met the 
goal once (FY 2015). While the amount of dollars awarded to WOSBs under 
the set aside program are trending up, they still account for less than 
0.016% of dollars awarded to WOSBs. A certification could help entice 
agencies to set aside more contracts for WOSBs, so that the government 
can meet the statutory 5% goal.

2. What are the potential benefits and costs of this regulatory action?

    The benefit of the proposed regulation is a significant improvement 
in the confidence of contracting officers to make Federal contract 
awards to eligible firms. Under the existing system, the burden of 
eligibility compliance is placed upon the awarding contracting officer. 
Contracting officers must review the documentation of the apparent 
successful offeror on a WOSB or EDWOSB contract. Under this proposed 
rule, the burden is placed upon SBA and/or third party certifiers. All 
that a contracting officer need do is to verify that the firm is fact a 
certified WOSB or EDWOSB in SAM. A contracting officer would not have 
to look at any documentation provided by a firm or prepare any internal 
memorandum memorializing any review. This will encourage more 
contracting officers to set aside opportunities for WOSB Program 
participants as the validation process will be controlled by SBA in 
both SAM and DSBS. Increased procurement awards to WOSB concerns can 
further close a gap of under-representation of women in industries 
where in the aggregate WOSB represent 12 percent of all sales in 
contrast with male-owned businesses that represent 79% of all sales 
(per SBA Office of Advocacy Issue Brief Number 13, dated May 31, 2017 
https://www.sba.gov/sites/default/files/advocacy/Womens-Business-Ownership-in-the-US.pdf).
    Another benefit of the proposed regulation is to reduce the cost 
associated with the time required for completing WOSB certification by 
replacing the WOSB Program Repository with Certify.SBA.gov 
(``Certify'') in the regulation. It is also anticipated that the 
proposed WOSB certification methodology and likely increased use of 
WOSB/EDWOSB set asides may increase program participation levels by 
approximately 32%. Under the prior WOSB Program Repository, SBA 
determined that the average time required to complete the process 
required by the WOSB Program Repository was two hours, whereas the use 
of Certify results requires only one hour. Across an estimated 12,347 
firms, the total cost savings is significant, as discussed below. 
Another potential benefit is the reduction of time and costs to WOSB 
firms through the reduction of program participation costs. By 
successfully leveraging technology, SBA has reduced the total cost of 
burden hours substantially from $2,533,200 to $967,965.
    Based on the calculations below, the total estimated number of 
respondents (WOSBs and EDWOSBs) for this collection of information 
varies depending upon the types of certification that a business 
concern is seeking. For initial certification, the total estimated 
number of respondents is 9,349. The total number was calculated using 
the two-year average number of business concerns that have provided 
information through Certify from March 2016 through February 2018. For 
annual updates, the total number is 12,347. For examinations and 
protests, the total number is 130.

------------------------------------------------------------------------
                                    Number of
     Type of certification         respondents            Source
------------------------------------------------------------------------
Initial certification..........           9,349  Average annual number
                                                  of respondents to
                                                  Certify between March
                                                  2016 and February
                                                  2018.
New certifications each year...             500  Program participation
                                                  is expected to remain
                                                  constant after initial
                                                  year of certification,
                                                  with 500 new
                                                  certifications
                                                  annually.
Annual updates to certification          11,847  Program participation
                                                  is expected to remain
                                                  constant after initial
                                                  year of certification,
                                                  with a reduction of
                                                  500 participants
                                                  annually through
                                                  attrition.
                                ----------------
    Total annual responses.....          12,347  Annual new
                                                  certifications plus
                                                  annual updates.
------------------------------------------------------------------------

    Each respondent submits one response at the time of initial 
certification and one at the time of annual update. Estimated burden 
hours vary depending upon the type of certification that a WOSB or 
EDWOSB pursues. SBA conducted a survey among a sample of entities that 
assist WOSBs and EDWOSBs to provide information through Certify. The 
majority of those surveyed stated that for initial certifications the 
estimated time for completion is one hour per submission. For annual 
updates, because of the need to submit little if any additional 
information, the estimated burden is 0.5 hour per submission. For 
examinations and protests, the estimated burden is 0.25, which is much 
lower because firms have already provided the required documents 
identified in 13 CFR 127.300(d) and (e) through Certify. It is 
estimated that the initial certification will involve 9,349 existing 
participants and 2,998 new respondents in the first year. After the 
first year, initial certifications are expected for 500 new respondents 
annually with an additional 11,847 annual certifications for existing 
participants for a total of 12,347 participants in each succeeding 
year. The participant level is expected to remain stable at 12,347 
participants annually with 500 new respondents and 500 attritions from 
the program annually. Further, 130 respondents are expected to 
participate in protests and appeals. The respondent's cost of burden 
hours for a five year period and average is provided in the following 
table.

[[Page 21262]]



                             Cost of Burden Hours--5 Year Cost Estimate and Average
----------------------------------------------------------------------------------------------------------------
                                                   Initial--new                    Examinations
                               Initial--existing  participants 1  Annual updates   and protests
             Year              1 hr @ $77.58 per    hr @ $77.58   .5 hr @ $77.58     .25 hr @      Annual totals
                                  participant           per             per         $77.58 per
                                                    participant     participant     participant
----------------------------------------------------------------------------------------------------------------
                                         Number of Program Participants
----------------------------------------------------------------------------------------------------------------
1............................             9,349            2,998  ..............             130          12,477
2............................  .................             500          11,847             130          12,477
3............................  .................             500          11,847             130          12,477
4............................  .................             500          11,847             130          12,477
5............................  .................             500          11,847             130          12,477
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
1............................          $725,295         $232,585  ..............          $2,521        $960,402
2............................  .................          38,790        $459,545           2,521         500,856
3............................  .................          38,790         459,545           2,521         500,856
4............................  .................          38,790         459,545           2,521         500,856
5............................  .................          38,790         459,545           2,521         500,856
                              ----------------------------------------------------------------------------------
    5 Year Total:............  .................  ..............  ..............  ..............       2,963,828
                              ----------------------------------------------------------------------------------
        Annual Cost Avg......  .................  ..............  ..............  ..............         592,766
----------------------------------------------------------------------------------------------------------------

    (a) Respondent's Cost of Burden Hours:
    Initial certification--transition of existing participants (one 
time cost):
    Estimated officer's salary = $77.58/hour (based on General Schedule 
15 Step 10, Washington-Baltimore-Northern Virginia area), which would 
be equivalent to a senior manager in an average small business firm.)
    Total estimated burden: 9,349 x 1 hour x $77.58/hour = $725,295.
    Initial certification--new participants (first year cost):
    Estimated officer's salary = $77.58/hour (based on General Schedule 
15 Step 10, Washington-Baltimore-Northern Virginia area), which would 
be equivalent to a senior manager in an average small business firm.)
    Total estimated burden: 2998 x 1 hour x $77.58/hour = $232,585.
    Initial certification--new participants (cost for each succeeding 
year after initial year):
    Estimated officer's salary = $77.58/hour (based on General Schedule 
15 Step 10, Washington-Baltimore-Northern Virginia area), which would 
be equivalent to a senior manager in an average small business firm.)
    Total estimated burden: 500 x 1 hour x $77.58/hour = $38,790.
    Annual update:
    Estimated officer's salary = $77.58/hour (based on General Schedule 
15 Step 10, Washington-Baltimore-Northern Virginia area), which would 
be equivalent to a senior manager in an average small business firm.)
    Total estimated burden: 11,847 x .5 hour x $77.58/hour = $459,545.
    Examinations and Protests (each year):
    Estimated officer's salary = $77.58/hour (based on General Schedule 
15 Step 10, Washington-Baltimore-Northern Virginia area), which would 
be equivalent to a senior manager in an average small business firm.)
    Total estimated burden: 130 x .25 hour x $77.58/hour = $2,521.
    SBA previously stated that the estimated total respondent's cost of 
burden hours was $2,533,200 annually. By successfully leveraging 
technology, SBA has reduced the total cost of burden hours 
substantially from $2,533,200 to $960,402 for the initial year and 
$500,856 annually in succeeding years, with respective savings of 
$1,572,798 in the initial year and annual savings in successive years 
of $2,032,344 and a five year savings of $9,702,174 for WOSB to 
redirect as revenue generating resources to close the noted revenue 
disparity with male-owned businesses.
    SBA believes that there are no additional capital or start-up costs 
or operation and maintenance costs and purchases of services costs to 
respondents as a result of this rule because there should be no cost in 
setting up or maintaining systems to collect the required information. 
As stated previously, the information requested should be collected and 
retained in the ordinary course of business.

3. What are the alternatives to this proposed rule?

    The proposed regulations are required to implement specific 
statutory provisions which require promulgation of implementing 
regulations. One alternative considered would be to rely solely on 
third party certifiers to certify WOSBs and EDWOSBs. However, there is 
a cost to small businesses for third party certifiers. Firms submit the 
same documentation to third party certifiers that would submit to SBA, 
but third party certifiers charge on average $380 annually. 
Consequently, the cost of relying completely on third party certifiers 
would be $3,552,620.00 a year (9,349 initial applicants x $380). If 
third party certifiers were used for the anticipated increase to 12,477 
annual participants, the cost would be $4,741,260. In addition, SBA 
maintains that certification for Federal procurement purposes is an 
inherently governmental function. Consequently, even if SBA utilized 
third party certifiers for an initial or preliminary review, SBA or a 
governmental entity would still have to be involved in reviewing those 
certifications. In addition, there is an intended benefit of 
certification. The intent is to increase confidence in the eligibility 
of firms so that contracting officers and activities utilize the sole 
source authority. Although trending upwards, WOSB/EDWOSB set aside and 
sole awards only accounted for 3.4% of total dollars awarded to WOSBs 
in FY 2017. The Federal Government has met the statutory WOSB goal of 
5% of total

[[Page 21263]]

dollars awarded to WOSBs only once (FY 2015).

Executive Order 13563

    As part of its ongoing efforts to engage stakeholders in the 
development of its regulations, on December 18, 2015, SBA issued an 
Advance Notice of Proposed Rulemaking in the Federal Register, 80 FR 
78984. In response to that notice, SBA received 122 comments. SBA has 
incorporated those comments and suggestions in the proposed regulation 
to the extent feasible. In addition, SBA shared the proposed rule with 
the Small Business Procurement Advisory Council and the Federal 
Acquisition Regulation small business committee. In addition, the 
agency met with stakeholders.

Executive Order 12988

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

Executive Order 13132

    For the purpose of Executive Order 13132, SBA has determined that 
this 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 layers 
of government. Therefore, 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 
regulatory action. Details on the estimated costs of this proposed rule 
can be found in the rule's economic analysis.

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

    In carrying out its statutory mandate to provide oversight of 
certification related to SBA's WOSB Federal Contract Program, SBA is 
currently approved to collect information from the WOSB applicants or 
participants through SBA Form 2413, and for EDWOSB applicants or 
participants, through SBA Form 2414. (OMB Control Number 3245-0374). 
This collection of information also requires submission or retention of 
documents that support the applicant's certification.
    SBA has implemented a certification and information collection 
platform--Certify--that replicates the currently approved information 
collection. In other words, the information collected through Certify 
includes eligibility documents previously collected in the WOSB 
Repository, and information collected on SBA Form 2413 (WOSB) and SBA 
Form 2414 (EDWOSB). SBA recently revised this information collection to 
establish that the agency has discontinued these paper forms and will 
collect the information and supporting documents electronically through 
Certify. The recent submission made minor changes to add one question 
to request information on classes of stock for a corporation and 
eliminated one question that was redundant.
    As currently approved this collection of information is submitted 
by small business applicants or program participants who self-certify 
or who obtain certification from an SBA approved third-party certifier. 
SBA has determined that this proposed rule does not add any additional 
burden to what is already in place for the current documentation 
required for self-certification.
    As discussed above, this rule proposes to fully implement the 
statutory requirement for small business concerns to be certified by a 
Federal agency, a State government, SBA, or a national certifying 
entity approved by SBA, in order to be awarded a set aside or sole 
source contract under the WOSB program. As a result of these changes, 
the rule proposes to eliminate the option to self-certify, set the 
standards for certification by SBA, and clarify the third-party 
certification requirements. SBA does not anticipate that these changes 
would impact the content of the information currently collected; 
however, it would be necessary to propose changes to the instructions, 
especially as they relate to self-certification, to make it clear that 
the option is no longer available. SBA does not believe that any 
required change to the instructions require the agency to resubmit the 
information collection to OMB for review and approval.
    SBA notes that personal financial information reported on SBA Form 
413 (Control Number 3245-0188) will also be submitted electronically 
through Certify by those applicants seeking SBA certification as an 
EDWOSB. However, applicants using third-party certifiers will continue 
to use the paper version of Form 413. This rule does not propose to 
make any changes to that collection. However, if comments on this 
proposed rule result in revisions to these WOSB/EDWOSB related 
collections of information, SBA will seek OMB approval, if necessary, 
before the rule is finalized.

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 
contracting programs. As such, the rule relates to small business 
concerns, but would not affect ``small organizations'' or ``small 
governmental jurisdictions.'' SBA's contracting 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.
    As stated in the regulatory impact analysis this rule will impact 
approximately 9,000-12,000 women-owned small businesses. If adopted in 
final form, these businesses will have to apply to SBA for 
certification. However, SBA has proposed to minimize the impact on 
WOSBs by accepting certifications already received from SBA, through 
DOT's DBE program, or the VA's CVE program, and by providing firms that 
have been certified by third party certifiers with a one-year grace 
period for certification. The costs to WOSBs for certification should 
be de minimis, because the required documentation already exists: Such 
as articles of incorporation, bylaws, stock ledgers or certificates, 
tax records, etc. In addition, this information is already required to 
be provided either to third party certifiers, governmental certifying 
entities (e.g., DOT DBE, SBA 8(a) Business Development, VA CVE) or to 
SBA through Certify. Thus, the Administrator certifies that the 
rulemaking is not expected to have a significant economic impact on a 
substantial number of small entities.

[[Page 21264]]

List of Subjects

13 CFR Part 124

    Administrative practice and procedure, Government procurement, 
Minority businesses, Reporting and recordkeeping requirements, 
Technical assistance.

13 CFR Part 127

    Government contracts, Reporting and recordkeeping requirements, 
Small businesses.

    For the reasons stated in the preamble, SBA proposes to amend 13 
CFR parts 124 and 127 as follows:

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

0
1. The authority citation for part 124 continues to read as follows:

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), 644 and 
Pub. L. 99-661, Pub. L. 100-656, sec.1207, Pub. L. 101-37, Pub. L. 
101-574, section 8021, Pub. L. 108-87, and 42 U.S.C. 9815.

0
2. Amend Sec.  124.104 as follows:
0
a. Remove the first two sentences of paragraph (c)(2) introductory text 
and add one sentence in their place;
0
b. Remove the first two sentences of paragraph (c)(3)(i) and add one 
sentence in their place; and
0
c. Revise the first sentence of paragraph (c)(4).
    The additions and revision read as follows:


Sec.  124.104  Who is economically disadvantaged?

* * * * *
    (c) * * *
    (2) * * * The net worth of an individual claiming disadvantage must 
be less than $750,000. * * *
    (3) * * * (i) SBA will presume that an individual is not 
economically disadvantaged if his or her adjusted gross income averaged 
over the three preceding years exceeds $350,000. * * *
    (4) * * * An individual will generally not be considered 
economically disadvantaged if the fair market value of all his or her 
assets (including his or her primary residence and the value of the 
applicant/Participant firm) exceeds $6 million. * * *

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

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

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

0
4. Revise subpart C to read as follows:
Subpart C--Certification of EDWOSB or WOSB Status

Certification by SBA

Sec.
127.300 How is a concern certified as an WOSB or EDWOSB?
127.301 When may a concern apply to SBA for certification?
127.302 Where can a concern apply for certification from SBA?
127.303 What must a concern submit to SBA?
127.304 How will SBA process the application for certification?
127.305 Can an applicant ask SBA to reconsider SBA's initial 
decision to decline its application?
127.306 May declined or decertified concerns seek recertification at 
a later date?

Certification by Third Party

Sec.
127.350 What is a third party certifier?
127.351 What third party certifications may a concern use as 
evidence of its status as a qualified WOSB or EDWOSB?
127.352 What is the process for becoming a third party certifier?
127.353 May third party certifiers charge a fee?
127.354 What are the minimum required certification standards for a 
third party certifier?
127.355 How will SBA ensure that approved third party certifiers are 
meeting the requirements?
127.356 How does a concern obtain certification from an approved 
certifier?
127.357 What happens if a firm is found not eligible by a third 
party certifier?

Subpart C--Certification of WOSB or EDWOSB Status

Certification by SBA


Sec.  127.300   How is a concern certified as an WOSB or EDWOSB?

    (a) WOSB certification. (1) A concern may apply to SBA for WOSB 
certification. There is no cost to apply to SBA for certification. SBA 
will consider the information provided by the concern in order to 
determine whether the concern qualifies. SBA, in its discretion, may 
rely solely upon the information submitted to establish eligibility, 
may request additional information, or may verify the information 
before making a determination. SBA may draw an adverse inference and 
deny the certification where the concern fails to cooperate with SBA or 
submit information requested by SBA.
    (2) A concern may submit evidence to SBA that it is a women-owned 
concern that is a certified 8(a) Participant, certified by the 
Department of Veterans Affairs (VA) CVE as a Service-Disabled Veteran 
Owned Business or Veteran-Owned Business, or certified as a 
Disadvantaged Business Enterprise (DBE) by a state agency authorized by 
the Department of Transportation (DOT); or
    (3) A concern may submit evidence that it has been certified as a 
WOSB by an approved Third Party Certifier in accordance with this 
subpart.
    (b) EDWOSB certification. (1) A concern may apply to SBA for EDWOSB 
certification. There is no cost to apply to SBA for certification. SBA 
will consider the information provided by the concern in order to 
determine whether the concern qualifies. SBA, in its discretion, may 
rely solely upon the information submitted to establish eligibility, 
may request additional information, or may verify the information 
before making a determination. SBA may draw an adverse inference and 
deny the certification where the concern fails to cooperate with SBA or 
submit information requested by SBA.
    (2) A women-owned business that is a certified 8(a) Participant 
qualifies as an EDWOSB;
    (3) Firms certified by the VA or under DOT's DBE program as women-
owned business concerns will be deemed to be owned and controlled by 
women, but must apply to SBA to demonstrate their economic disadvantage 
in order to be certified as EDWOSBs; or
    (4) A concern may submit evidence that it has been certified as an 
EDWOSB by a third party certifier under this subpart.
    (c) SBA notification and designation. If SBA determines that the 
concern is a qualified WOSB or EDWOSB, it will issue a letter of 
certification and designate the firm as a certified WOSB or EDWOSB on 
the Dynamic Small Business Search (DSBS) system, or successor system.


Sec.  127.301   When may a concern apply to SBA for certification?

    A concern may apply for WOSB or EDWOSB certification and submit the 
required information whenever it can represent that it meets the 
eligibility requirements, subject to the restrictions of Sec.  127.306. 
All representations and supporting information contained in the 
application must be complete and accurate as of the date of submission. 
The application must be signed by an officer of the concern who is 
authorized to represent the concern.


Sec.  127.302   Where can a concern apply for certification from SBA?

    A concern seeking certification as a WOSB or EDWOSB may apply to 
SBA

[[Page 21265]]

for certification via https://certify.sba.gov or any successor system. 
Certification pages must be validated electronically or signed by a 
person authorized to represent the concern.


Sec.  127.303   What must a concern submit to SBA?

    (a) To be certified by SBA as a WOSB or EDWOSB, a concern must 
provide documents and information demonstrating that it meets the 
requirements set forth in part 127 subpart B. SBA maintains a list of 
the minimum required documents that can be found at https://
certify.sba.gov. A firm may submit additional documents and information 
to support its eligibility. The required documents must be provided to 
SBA during the application process electronically. This may include, 
but is not limited to, corporate records, business and personal 
financial records, including copies of signed Federal personal and 
business tax returns, and individual and business bank statements.
    (b) In addition to the minimum required documents, SBA may request 
additional information from applicants in order to verify eligibility.
    (c) After submitting the application, an applicant must notify SBA 
of any changes that could affect its eligibility.
    (d) If a concern was decertified or previously denied 
certification, it must include with its application for certification a 
full explanation of why it was decertified or denied certification, and 
what, if any, changes have been made. If SBA is not satisfied with the 
explanation provided, SBA may decline to certify the concern.
    (e) If the concern was decertified for failure to notify SBA of a 
material change affecting its eligibility pursuant to Sec.  127.401, it 
must include with its application for certification a full explanation 
of why it failed to notify SBA of the material change. If SBA is not 
satisfied with the explanation provided, SBA may decline to certify the 
concern.


Sec.  127.304   How will SBA process the application for certification?

    (a) The SBA's Director of Government Contracting (D/GC) or designee 
is authorized to approve or decline applications for certification. SBA 
must receive all required information and supporting documents before 
it will begin processing a concern's application. SBA will not process 
incomplete applications. SBA will advise each applicant within 15 
calendar days after the receipt of an application whether the 
application is complete and suitable for evaluation and, if not, what 
additional information or clarification is required to complete the 
application. SBA will make its determination within ninety (90) 
calendar days after receipt of a complete package, whenever 
practicable.
    (b) SBA may request additional information or clarification of 
information contained in an application or document submission at any 
time.
    (c) 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 presume that disclosure of the missing information 
would adversely affect the business concern's eligibility or 
demonstrate a lack of eligibility in the area or areas to which the 
information relates.
    (d) The applicant must be eligible as of the date it submitted its 
application and up until the time the D/GC issues a decision. The 
decision will be based on the facts contained in the application, any 
information received in response to SBA's request for clarification, 
and any changed circumstances since the date of application.
    (e) Any changed circumstances occurring after an applicant has 
submitted an application will be considered and may constitute grounds 
for decline. After submitting the application and signed 
representation, an applicant must notify SBA of any changes that could 
affect its eligibility. The D/GC may propose decertification for any 
EDWOSB or WOSB that fails to inform SBA of any changed circumstances 
that affected its eligibility for the program during the processing of 
the application.
    (f) If SBA approves the application, SBA will send a written notice 
to the concern and update https://certify.sba.gov or any successor 
system, and update DSBS and the System for Award Management (or any 
successor systems) to indicate the firm has been certified by SBA.
    (g) A decision to deny eligibility must be in writing and state the 
specific reasons for denial.
    (h) A copy of the decision letter will be sent to the electronic 
mail address provided with the application. SBA will consider any 
decision sent to this electronic mail address provided to have been 
received by the applicant firm.
    (i) The decision of SBA to decline certification is the final 
Agency decision, unless the applicant seeks reconsideration pursuant to 
Sec.  127.305.


Sec.  127.305   Can an applicant ask SBA to reconsider SBA's initial 
decision to decline its application?

    (a) A concern whose application is declined may request that SBA 
reconsider its decision by filing a request for reconsideration at 
https://certify.sba.gov, or any successor system, within 30 calendar 
days of the date of SBA's decision.
    (b) At the time of its request for reconsideration, the applicant 
must provide any additional information and documentation pertinent to 
overcoming the reason(s) for the initial decline, whether or not 
available at the time of initial application, including information and 
documentation regarding changed circumstances.
    (c) SBA will issue a written decision within 60 calendar days of 
SBA's receipt of the applicant's request for reconsideration. SBA may 
approve the application, deny it on the same grounds as the original 
decision, or deny it on other grounds. If denied, the D/GC will explain 
why the applicant is not eligible for admission to the EDWOSB or WOSB 
program and give specific reasons for the decline.
    (d) If SBA 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.
    (e) The decision of SBA to decline certification is the final 
Agency decision.


Sec.  127.306   May declined or decertified concerns seek 
recertification at a later date?

    A concern that SBA has declined or decertified may seek 
certification after one year from the date of decline or 
decertification if it believes that it has overcome all of the reasons 
for decline or decertification and is currently eligible. A concern 
found to be ineligible during a WOSB/EDWOSB status protest is precluded 
from applying for certification for one year from the date of the final 
agency decision (the D/GC's decision if no appeal is filed or the 
decision of SBA's Office of Hearings and Appeals (OHA) where an appeal 
is filed pursuant to Sec.  127.605.

Certification by Third Party


Sec.  127. 350  What is a third party certifier?

    A third party certifier is a non-governmental entity that SBA may 
approve to certify that an applicant firm is qualified for the WOSB or 
EDWOSB contracting program. A third party certifier may be a for-profit 
or non-profit entity. The list of SBA-approved third

[[Page 21266]]

party certifiers may be found on SBA's website at sba.gov.


Sec.  127.351   What third party certifications may a concern use as 
evidence of its status as a qualified EDWOSB or WOSB?

    In order for SBA to accept a third party certification that a 
concern qualifies as a WOSB or EDWOSB, the concern must have a current, 
valid certification from an entity designated as an SBA-approved 
certifier. The third party certification must be submitted to SBA 
through https://certify.sba.gov (or a successor system).


Sec.  127.352  What is the process for becoming a third party 
certifier?

    SBA will periodically hold open solicitations. All entities that 
believe they meet the criteria to act as a third party certifier will 
be free to respond to the solicitation. SBA will review the 
submissions, and if SBA determines that an entity has demonstrated it 
meets SBA criteria, SBA will enter into an agreement and designate the 
entity as an approved third party certifier.


Sec.  127.353   May third party certifiers charge a fee?

    (a) Third party certifiers may charge a reasonable fee, but must 
notify applicants first, in writing, that SBA offers certification for 
free.
    (b) The method of notification and the language that will be used 
for this notification must be approved by SBA. The third party 
certifier may not change its method or the language without SBA 
approval.


Sec.  127.354   What are the minimum required certification standards 
for a third party certifier?

    (a) All third party certifiers must enter into written agreements 
with SBA. This agreement will detail the requirements that the third 
party certifier must meet. SBA may terminate the agreement if SBA 
subsequently determines that the entity's certification process does 
not comply with SBA-approved certification standards or is not based on 
the same program eligibility requirements as set forth in subpart B of 
this part or conducts itself in a manner contrary to SBA's values.
    (b) Third party certifiers' certification process must comply with 
SBA-approved certification standards and track the WOSB or EDWOSB 
eligibility requirements set forth in subpart B of this part.
    (c) In order for SBA to enter into an agreement with a third party 
certifier, the entity must establish the following:
    (1) It will render fair and impartial WOSB/EDWOSB Federal Contract 
Program eligibility determinations;
    (2) It will provide the approved applicant a valid certificate for 
entering into the SBA electronic platform, and will retain documents 
used to determine eligibility for a period of six (6) years to support 
SBA's responsibility to conduct a status protest, eligibility 
examination, agency investigation or audit of the third party 
determinations;
    (3) Its certification process will require applicant concerns to 
register in SAM (or any successor system) and submit sufficient 
information as determined by SBA to enable it to determine whether the 
concern qualifies as a WOSB. This information must include 
documentation demonstrating whether the concern is:
    (i) A small business concern under the SBA size standard 
corresponding to the concern's primary industry, as defined in 13 CFR 
121.107;
    (ii) At least 51 percent owned and controlled by one or more women 
who are United States citizens; and
    (4) It will not decline to accept a concern's application for WOSB/
EDWOSB certification on the basis of race, color, national origin, 
religion, age, disability, sexual orientation, marital or family 
status, or political affiliation.


Sec.  127.355   How will SBA ensure that approved third party 
certifiers are meeting the requirements?

    (a) SBA will require third party certifiers to submit quarterly 
reports to SBA. These reports will contain information including the 
number of applications received, number of applications approved and 
denied, and other information that SBA determines may be helpful for 
ensuring that third party certifiers are meeting their obligations or 
information or data that may be useful for improving the program.
    (b) SBA will conduct periodic compliance reviews of third party 
certifiers to ensure that they are properly applying SBA's WOSB/EDWOSB 
requirements and certifying firms in accordance with those 
requirements.
    (1) SBA will conduct a compliance review on at least one third 
party certifier per year and will ensure that every third party 
certifier undergoes a full compliance review every three years.
    (2) At the conclusion of each compliance review SBA will provide 
the third party certifier with a written report detailing SBA's 
findings with regard to the third party certifier's compliance with 
SBA's requirements. The report will include recommendations for 
possible improvements, and detailed explanations for any deficiencies 
identified by SBA.
    (c) If SBA determines that a third party certifier is not meeting 
the requirements, SBA may revoke the approval of that third party 
certifier.


Sec.  127.356   How does a concern obtain certification from an 
approved certifier?

    (a) A concern that seeks WOSB or EDWOSB certification from an SBA-
approved third party certifier must submit its application directly to 
the approved certifier in accordance with the specific application 
procedures of the particular certifier.
    (b) The concern must register in the System for Award Management 
(SAM), or any successor system.
    (c) The approved certifier must ensure that all documents used to 
determine that a firm is approved for certification are uploaded in 
https://certify.sba.gov or any successor system.


Sec.  127.357  What happens if a firm is found not eligible by a third 
party certifier?

    (a) The concern may request, at no additional cost to the 
applicant, a redetermination within 30 calendar days from the third 
party certifier that initially declined its application and cannot 
represent itself as a qualified WOSB or EDWOSB unless and until it 
receives a determination of eligibility.
    (b) The third party certifier must complete the redetermination 
within 60 calendar days of request. If the applicant is declined, the 
third party certifier shall notify SBA.
    (c) The concern must wait one year to request a reexamination from 
either SBA or a third party certifier.
    (d) The concern may not seek certification from any other third 
party certifier during this waiting period.
0
5. Revise subpart D to read as follows:
Subpart D--Maintaining WOSB and EDWOSB Status and Eligibility 
Examinations
Sec.
127.400 How does a concern maintain its WOSB or EDWOSB 
certification?
127.401 What are an EDWOSB's and WOSB's ongoing obligations to SBA?
127.402 What happens if a concern fails to recertify or notify SBA 
of a material change?
127.403 What is a program examination, who will conduct it, and what 
will SBA examine?
127.404 When may SBA conduct program examinations?
127.405 May SBA require additional information from a WOSB or EDWOSB 
during a program examination?
127.406 What happens if SBA determines that the concern is no longer 
eligible for the program?

[[Page 21267]]

Subpart D--Maintaining WOSB and EDWOSB Status and Eligibility 
Examinations


Sec.  127.400   How does a concern maintain its WOSB or EDWOSB 
certification?

    (a) A certified WOSB or EDWOSB must recertify every three years to 
SBA that it continues to meet all of the WOSB and EDWOSB eligibility 
requirements. Concerns wishing to remain in the program without any 
interruption must recertify their continued eligibility to SBA within 
30 calendar days before the third anniversary date of their initial 
certification and each subsequent three-year period. Failure to do so 
will result in the concern being decertified. The process for 
completing the recertification can be found on SBA's website at https://certify.sba.gov (or successor system).
    (b) A concern certified by a third party certifier prior to the 
effective date of SBA's certification may maintain that status for 
three years from the date of its certification or most recent 
recertification by the third party certifier.


Sec.  127.401   What are an EDWOSB's and WOSB's ongoing obligations to 
SBA?

    Once certified, a WOSB or EDWOSB must immediately notify SBA of any 
material changes that could affect its eligibility. Material change 
includes, but is not limited to, a change in the ownership, business 
structure, or management. The notification must be in writing, and must 
be uploaded into the firm's profile with SBA. The method for notifying 
SBA can be found on https://certify.sba.gov. A concern's failure to 
notify SBA of such a material change may result in decertification and 
removal from SAM and DSBS (or any successor system) as a designated 
certified WOSB/EDWOSB concern. In addition, SBA may seek the imposition 
of penalties under Sec.  127.700.


Sec.  127.402   What happens if a concern fails to recertify?

    If a WOSB or EDWOSB fails to recertify its status on https://
certify.sba.gov (or successor system) pursuant to Sec.  127.400 or SBA 
determines that a concern has not notified SBA of a change that could 
affect its WOSB or EDWOSB eligibility, SBA will decertify the concern 
from the program. In the case of a concern failing to recertify its 
status as a WOSB or EDWOSB, SBA will decertify the firm from the 
program on the day after the third anniversary date of initial 
certification or recertification. SBA will issue a written notice 
explaining why the concern has been decertified. This decertification 
will be SBA's final decision and may not be appealed.


Sec.  127.403   What is a program examination, who will conduct it, and 
what will SBA examine?

    (a) A program examination is an investigation by SBA officials, 
which verifies the accuracy of any certification of a concern issued by 
a third party certifier or other Federal or State agency or in 
connection with a WOSB or EDWOSB contract. Thus, examiners may verify 
that the concern currently meets the program's eligibility 
requirements, and that it met such requirements at the time of its 
application for certification, its most recent recertification, or its 
certification in connection with a WOSB or EDWOSB contract.
    (b) Examiners may review any information related to the concern's 
eligibility requirements. SBA may also conduct site visits.
    (c) It is the responsibility of program participants to ensure the 
information provided to SBA is kept up to date and is accurate. SBA 
considers all required information and documents material to a 
concern's eligibility, and assumes that all information and 
documentation submitted are up to date and accurate unless SBA has 
information that indicates otherwise.


Sec.  127.404   When may SBA conduct program examinations?

    SBA may conduct a program examination at any time after a concern 
has been certified as a WOSB or EDWOSB.


Sec.  127.405   May SBA require additional information from a WOSB or 
EDWOSB during a program examination?

    At the discretion of the D/GC, SBA has the right to require that a 
WOSB or EDWOSB submit additional information as part of the 
certification process, or at any time thereafter. SBA may draw an 
adverse inference from the failure of a concern to cooperate with a 
program examination or provide requested information.


Sec.  127.406   What happens if SBA determines that the concern is no 
longer eligible for the program?

    If SBA believes that a concern does not meet the program 
eligibility requirements, the concern has not provided or maintained 
all the required certifications and documentation, or the concern has 
failed to notify SBA of a material change, SBA will propose the concern 
for decertification from the program.
    (a) Proposed Decertification. The D/GC or designee will notify the 
concern in writing that it has been proposed for decertification. This 
notice will state the reasons why SBA has proposed decertification, and 
that the WOSB or EDWOSB must respond to each of the reasons set forth.
    (1) The WOSB or EDWOSB must respond in writing to a proposed 
decertification within 20 calendar days from the date of the proposed 
decertification.
    (2) If the initial certification was done by a third party, SBA 
will also notify the third party certifier of the proposed 
decertification in writing.
    (b) Decertification. The D/GC or designee will consider the reasons 
for proposed decertification and the concern's response before making a 
written decision whether to decertify. The D/GC may draw an adverse 
inference where a concern fails to cooperate with SBA or provide the 
information requested. The D/GC's decision is the final Agency 
decision.
    (c) Reapplication. A concern decertified pursuant to this section 
may reapply to the program pursuant to Sec.  127.306.


Sec.  127.505  [Removed and reserved]

0
6. Remove and reserve Sec.  127.505.


Sec.  127.602  [Amended]

0
7. Amend Sec.  127.602 by removing the last sentence.


Sec.  127.603  [Amended]

0
8. Amend Sec.  127.603 by removing the second to last sentence in 
paragraph (d).
0
9. Revise Sec.  127.604(f)(4) to read as follows:


Sec.  127.604  How will SBA process an EDWOSB or WOSB status protest?

* * * * *
    (f) * * *
    (4) A concern that has been found to be ineligible will be 
decertified from the program and may not submit an offer as a WOSB or 
EDWOSB on another procurement until it is recertified. A concern may be 
recertified by reapplying to the program pursuant to Sec.  127.306.

Christopher M. Pilkerton,
Acting Administrator.
[FR Doc. 2019-09684 Filed 5-13-19; 8:45 am]
 BILLING CODE P