[Federal Register Volume 84, Number 217 (Friday, November 8, 2019)]
[Proposed Rules]
[Pages 60846-60881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23141]
[[Page 60845]]
Vol. 84
Friday,
No. 217
November 8, 2019
Part V
Small Business Administration
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13 CFR Parts 121, 124, 125, et al.
Consolidation of Mentor Prot[eacute]g[eacute] Programs and Other
Government Contracting Amendments; Proposed Rule
Federal Register / Vol. 84 , No. 217 / Friday, November 8, 2019 /
Proposed Rules
[[Page 60846]]
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 124, 125, 126, 127, and 134
RIN 3245-AG94
Consolidation of Mentor Prot[eacute]g[eacute] Programs and Other
Government Contracting Amendments
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: In response to President Trump's government-wide regulatory
reform initiative, the Small Business Administration (SBA) initiated a
review of its regulations to determine which might be revised or
eliminated. As a result, SBA is proposing to merge the 8(a) Business
Development (BD) Mentor-Prot[eacute]g[eacute] Program and the All Small
Mentor-Prot[eacute]g[eacute] Program to eliminate confusion and remove
unnecessary duplication of functions within SBA. This rule proposes to
eliminate the requirement that 8(a) Participants seeking to be awarded
an 8(a) contract as a joint venture submit the joint venture to SBA for
review and approval prior to contract award, revise several 8(a) BD
program regulations to reduce unnecessary or excessive burdens on 8(a)
Participants, and clarify other related regulatory provisions to
eliminate confusion among small businesses and procuring activities. In
addition, except for orders and Blanket Purchase Agreements issued
under the General Services Administration's Federal Supply Schedule
Program, the rule proposes to require a business concern to recertify
its size and/or socioeconomic status for all set-aside orders under
unrestricted multiple award contracts (MACs) The rule also proposes to
require a business concern to recertify its socioeconomic status for
all set-aside orders where the required socioeconomic status for the
order differs from that of the underlying set-aside MAC contract (e.g.,
HUBZone set-aside order against a small business set-aside MAC).
Finally, except for orders or Blanket Purchase Agreements issued under
any Federal Supply Schedule contract, the rule also allows for size
and/or socioeconomic protests at the order-level for set-aside orders
issued against unrestricted MACs, or for set-aside orders based on a
different socioeconomic status from the underlying set-aside MAC.
DATES: Comments must be received on or before January 17, 2020.
ADDRESSES: You may submit comments, identified by RIN 3245-AG94 by any
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail, for Paper, Disk, or CD/ROM Submissions: 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 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
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 [email protected].
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 of 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) 205-7337;
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background Information
On January 30, 2017, President Trump issued Executive Order 13771,
``Reducing Regulation and Controlling Regulatory Costs'', which is
designed to reduce unnecessary and burdensome regulations and to
control costs associated with regulations. In response to the
President's directive to simplify regulations, SBA initiated a review
of its regulations to determine which might be revised or eliminated.
Based on this analysis, SBA has identified provisions in many areas of
its regulations that can be simplified or eliminated. Firstly, this
proposed rule would merge the 8(a) BD Mentor-Prot[eacute]g[eacute]
Program and the All Small Mentor-Prot[eacute]g[eacute] Program. This
rule also proposes to eliminate the requirement that 8(a) Participants
seeking to be awarded an 8(a) contract as a joint venture must submit
the joint venture to SBA for review and approval prior to contract
award. This rule also proposes to make several changes to the 8(a) BD
Program to eliminate or reduce unnecessary or excessive burdens on 8(a)
Participants. 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 8(a) BD-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
Corporation (ANC) owned firms participating in the 8(a) BD Program. SBA
has taken these discussions into account in drafting this proposed
rule.
SBA seeks to combine the 8(a) BD Mentor-Prot[eacute]g[eacute]
Program and the All Small Mentor-Prot[eacute]g[eacute] Program at this
time in order to eliminate confusion regarding perceived differences
between the two Programs, remove unnecessary duplication of functions
within SBA, and establish one, unified staff to better coordinate and
process mentor-prot[eacute]g[eacute] applications. SBA originally
established a mentor-prot[eacute]g[eacute] program for 8(a)
Participants a little more than twenty years ago. 63 FR 35726, 35764
(June 30, 1998). The purpose of that program was to encourage approved
mentors to provide various forms of business assistance to eligible
8(a) Participants to aid in their development. On September 27, 2010,
the Small Business Jobs Act of 2010 (Jobs Act), Public Law 111-240 was
enacted. The Jobs Act was designed to protect the interests of small
businesses and increase opportunities in the Federal marketplace. The
Jobs Act was drafted by Congress in recognition of the fact that
mentor-prot[eacute]g[eacute] programs serve an important business
development function for small businesses and therefore included
language authorizing SBA to establish separate mentor-
prot[eacute]g[eacute] programs for the Service-Disabled Veteran-Owned
Small Business Concern (SDVO SBC) Program, the HUBZone Program, and the
Women-Owned Small Business (WOSB) Program, each of which was modeled on
SBA's existing mentor-prot[eacute]g[eacute] program available to 8(a)
Participants. See section 1347(b)(3) of the Jobs Act. Thereafter, on
January 2, 2013, the National Defense Authorization Act for Fiscal Year
2013 (NDAA 2013), Public Law 112-239 was enacted. Section 1641 of the
NDAA 2013 authorized SBA to establish a mentor-prot[eacute]g[eacute]
program for all small
[[Page 60847]]
business concerns. This section further provided that a small business
mentor-prot[eacute]g[eacute] program must be identical to the 8(a) BD
Mentor-Prot[eacute]g[eacute] Program, except that SBA could modify each
program to the extent necessary, given the types of small business
concerns to be included as prot[eacute]g[eacute]s.
Subsequently, SBA published a Final Rule in the Federal Register
combining the authorities contained in the Jobs Act and the NDAA 2013
to create a mentor-prot[eacute]g[eacute] program for all small
businesses. 81 FR 48558 (July 25, 2016).
Currently, the mentor-prot[eacute]g[eacute] program available to
firms participating in the 8(a) BD Program (contained in 13 CFR
124.520) is used as a business development tool in which mentors
provide diverse types of business assistance to eligible 8(a) BD
prot[eacute]g[eacute]s. This assistance may include, among other
things, technical and/or management assistance; financial assistance in
the form of equity investments and/or loans; subcontracts; and/or
assistance in performing Federal prime contracts through joint venture
arrangements. The explicit purpose of the 8(a) BD Mentor-
Prot[eacute]g[eacute] relationship is to enhance the capabilities of
prot[eacute]g[eacute]s and to improve their ability to successfully
compete for both government and commercial contracts. Similarly, the
All Small Mentor-Prot[eacute]g[eacute] Program is designed to require
approved mentors to aid prot[eacute]g[eacute] firms so that they may
enhance their capabilities, meet their business goals, and improve
their ability to compete for contracts. The purposes of the two
programs are identical. In addition, the benefits available under both
programs are identical. Small businesses and 8(a) Program Participants
receive valuable business development assistance and any joint venture
formed between a prot[eacute]g[eacute] firm and its SBA-approved mentor
receives an exclusion from affiliation, such that the joint venture
will qualify as a small business provided the prot[eacute]g[eacute]
individually qualifies as small under the size standard corresponding
to the NAICS code assigned to the procurement. A prot[eacute]g[eacute]
firm may enter a joint venture with its SBA-approved mentor and be
eligible for any contract opportunity for which the
prot[eacute]g[eacute] qualifies. If a prot[eacute]g[eacute] firm is an
8(a) Program Participant, a joint venture between the
prot[eacute]g[eacute] and its mentor could seek any 8(a) contract,
regardless of whether the mentor-prot[eacute]g[eacute] agreement was
approved through the 8(a) BD Mentor-Prot[eacute]g[eacute] Program or
the All Small Mentor-Prot[eacute]g[eacute] Program. Moreover, a firm
could be certified as an 8(a) Participant after its mentor-
prot[eacute]g[eacute] relationship has been approved by SBA through the
All Small Mentor-Prot[eacute]g[eacute] Program and be eligible for 8(a)
contracts as a joint venture with its mentor once certified.
Because the benefits and purposes of the two programs are
identical, SBA believes that having two separate mentor-
prot[eacute]g[eacute] programs is unnecessary and causes needless
confusion in the small business community. As such, this proposed rule
would eliminate a separate 8(a) BD Mentor-Prot[eacute]g[eacute] Program
and continue to allow any 8(a) Participant to enter a mentor-
prot[eacute]g[eacute] relationship through the All Small Mentor-
Prot[eacute]g[eacute] Program. Specifically, the proposed rule would
revise Sec. 124.520 to merely recognize that an 8(a) Participant, as
any other small business, may participate in SBA's Small Business
Mentor-Prot[eacute]g[eacute] Program. In merging the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program with the All Small Mentor-
Prot[eacute]g[eacute] Program, the proposed rule would also make
conforming amendments to SBA's size regulations (13 CFR part 121), the
joint venture provisions (13 CFR 125.8), and the All Small Mentor-
Prot[eacute]g[eacute] Program regulations (13 CFR 125.9).
As stated previously, SBA has also taken this action partly in
response to the President's directive that each agency review its
regulations. Therefore, this rule also proposes to revise regulations
pertaining to the 8(a) BD and size programs in order to further reduce
unnecessary or excessive burdens on small businesses and to eliminate
confusion or more clearly delineate SBA's intent in certain
regulations. Specifically, this rule proposes additional changes to the
size and socioeconomic status recertification requirements for orders
issued against MACs. A detailed discussion of these proposed changes is
contained below in the Section-by-Section Analysis.
II. Section-by-Section Analysis
Section 121.103(b)(6)
The proposed rule would amend the references to SBA's mentor-
prot[eacute]g[eacute] programs in this provision, which specifying that
a prot[eacute]g[eacute] firm cannot be considered affiliated with its
mentor based solely on assistance received by the prot[eacute]g[eacute]
under the mentor-prot[eacute]g[eacute] agreement. The proposed rule
would eliminate the cross-reference to the regulation regarding the
8(a) BD Mentor-Prot[eacute]g[eacute] Program (13 CFR 124.520), leaving
only the reference to the regulation regarding the All Small Business
Mentor-Prot[eacute]g[eacute] Program.
Section 121.103(g)
The proposed rule would amend the newly organized concern rule
contained in Sec. 121.103(g) by clarifying that affiliation may be
found where both former and ``current'' officers, directors, principal
stockholders, managing members, or key employees of one concern
organize a new concern in the same or related industry or field of
operation, and serve as the new concern's officers, directors,
principal stockholders, managing members, or key employees. The rule
would merely add the word ``current'' to the regulatory text to ensure
that affiliation may arise where the key individuals are still
associated with the first company. SBA believes that such a finding of
affiliation is authorized in the present regulations, but merely seeks
to clarify its intent to make sure there is no confusion.
Section 121.103(h)
The proposed rule would amend the introductory text to Sec.
121.103(h) to revise the requirements for joint ventures. SBA believes
that a joint venture is not an on-going business entity, but rather
something that is formed for a limited purpose and duration. If two or
more separate business entities seek to join together through another
entity on a continuing, unlimited basis, SBA views that as a separate
business concern with each partner affiliated with each other. To
capture SBA's intent on limited scope and duration, SBA's current
regulations provide that a joint venture is something that can be
formed for no more than three contracts over a two-year period. If the
parties intend to jointly seek work beyond three contracts or beyond
two years from the date of the first award, they must form a new joint
venture entity. That new entity would then be able to perform an
additional three contracts over two years from the date of its first
award. Several firms have commented to SBA that the three-contract
limit unduly restricts small business and can disrupt normal business
operations. SBA does not seek to impose unnecessary burdens on small
businesses but continues to believe that a joint venture should be a
limited duration vehicle. In response to these concerns, SBA proposes
to eliminate the three-contract limit for a joint venture, but continue
to prescribe that a joint venture cannot exceed two years from the date
of its first award. In addition, the proposed rule would clarify SBA's
current intent that a novation to the joint venture would start the
two-year period if that were the first award received by the joint
venture. The
[[Page 60848]]
change removing the limit of three awards to any joint venture would
relieve small businesses of the requirement of forming additional joint
venture entities to perform a fourth contract within that two-year
period. The proposed rule attempts to lessen the burden on small
businesses, while still preserving SBA's belief that a joint venture is
not intended to be an on-going business entity.
In addition, SBA is interested in comments regarding the exception
to affiliation for joint ventures composed of multiple small businesses
in which firms enter and leave the joint venture based on their size
status. In this scenario, in an effort to retain small business status,
joint venture partners expel firms that have exceeded the size standard
and then possibly add firms that qualify under the size standard.
Generally, this should not be a problem because joint ventures are
limited in duration to two years and generally can be awarded no more
than three contracts during those two years. However, if the joint
venture is awarded a Federal Supply Schedule (FSS) contract or any
other multiple award contract vehicle, the awarding of the multiple
award contract itself counts against the limit of three contract awards
that a joint venture can receive, but individual orders do not count
against the limit. As such, a joint venture that is awarded a multiple
award contract could receive many orders beyond the two-year limitation
for joint venture awards (since the contract was awarded within that
two-year period), and could remain small for any order requiring
recertification simply by exchanging one joint venture partner for
another (i.e., a new small business for one that has grown to be other
than small). SBA never intended for the composition of joint ventures
to be fluid. The joint venture generally should have the same partners
throughout its lifetime, unless one of the partners is acquired. SBA
considers a joint venture composed of different partners to be a
different joint venture than the original one. To reflect this
understanding, SBA could specify that the size of a joint venture
outside of the mentor-prot[eacute]g[eacute] program will be determined
based on the current size status and affiliations of all past and
present joint venture partners, even if a partner has left the joint
venture. SBA invites comment on this proposal and whether there are
alternative ways to address this issue.
The rule also proposes to add clarifying language to the
introductory text of Sec. 121.103(h) to recognize that, although a
joint venture cannot be populated with individuals intended to perform
contracts awarded to the joint venture, the joint venture can directly
employ administrative personnel and such personnel may specifically
include Facility Security Officers.
It has also been brought to SBA's attention that some procuring
agencies will not award a contract requiring a facility security
clearance to a joint venture if the joint venture itself does not have
such clearance, even if both partners to the joint venture individually
have such clearance. SBA does not believe that such a restriction is
appropriate and seeks comments on how best to address that in a final
rule. SBA is considering a provision which would require either the
joint venture itself or the lead small business partner to the joint
venture to have the required facility security clearance. If such a
provision were finalized, a joint venture lacking its own separate
facility security clearance could still be awarded a contract requiring
such a clearance provided the lead small business partner to the joint
venture had the required facility security clearance and committed to
keep at its cleared facility all records relating to the contract
awarded to the joint venture. Additionally, if it is established that
the security portion of the contract requiring a facility security
clearance is ancillary to the principal purpose of the procurement, SBA
believes that the non-lead partner to the joint venture (which may
include a large business mentor) could possess such clearance. SBA
specifically requests comments on this possible provision as well as
other recommendations regarding how best to address this perceived
problem.
The rule would also remove current Sec. 121.103(h)(3)(iii), which
provides that a joint venture between a prot[eacute]g[eacute] firm and
its mentor that was approved through the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program is considered small provided the
prot[eacute]g[eacute] qualifies as individually small. Because this
proposed rule would eliminate the 8(a) BD Mentor-Prot[eacute]g[eacute]
Program as a separate program, this provision is no longer needed.
The proposed rule also clarifies how to account for joint venture
receipts and employees during the process of determining size for a
joint venture partner. The joint venture partner must include its
percentage share of joint venture receipts and employees in its own
receipts or employees. The appropriate percentage share is the same
percentage figure as the percentage figure corresponding to the joint
venture partner's share of work performed by the joint venture.
Section 121.402
This rule proposes to amend how NAICS codes are applied to task
orders to ensure that the NAICS codes assigned to specific procurement
actions, and the corresponding size standards, are an accurate
reflection of the contracts and orders being awarded and performed.
Under the proposed rule, a contracting officer would be required to
assign a single NAICS code for each order issued against a Multiple
Award Contract (MAC), and that NAICS code must be a NAICS code that is
included in the underlying MAC and represents the principal purpose of
the order. SBA believes that the NAICS code assigned to a task order
must reflect the principal purpose of that order. Currently, based on
the business rules of the Federal Procurement Data System (FPDS), if a
MAC is assigned a service NAICS code, then that service NAICS code
flows down to each individual order under that MAC. SBA does not
believe it is appropriate for a task order that is nearly entirely for
supplies to have a service NAICS code. In such a case, a firm being
awarded such an order would not have to comply with the nonmanufacturer
rule. In particular, set-aside orders should be assigned a
manufacturing/supply NAICS code, so that the nonmanufacturer rule will
apply to the order if it is awarded to a nonmanufacturer. Additionally,
the current method for NAICS code assignment can also be problematic
where a MAC is assigned a NAICS code for supplies but a particular
order under that MAC is almost entirely for services. In such a case,
firms that qualified as small for the larger employee-based size
standard associated with a manufacturing/supply NAICS code may not
qualify as small businesses under a smaller receipts-based services
size standard. As such, because the order is assigned the
manufacturing/supply NAICS code associated with the MAC, firms that
should not qualify as small for a particular procurement that is
predominantly for services may do so. Thus, this proposed rule attempts
to ensure that the NAICS codes assigned to specific procurement
actions, and the corresponding size standards, are an accurate
reflection of the contracts and orders being awarded and performed.
There will still be anomalies where a procuring agency seeks to
award an order whose principal purpose is different than the assigned
NAICS code for the MAC until the Federal Acquisition Regulation (FAR)
and the FPDS is amended to include multiple NAICS codes at the contract
level. SBA does not believe that the order should
[[Page 60849]]
be assigned a NAICS code that does not properly reflect its principal
purpose. SBA believes that the better approach would be to fulfill such
requirement through a different contracting vehicle.
Sections 121.404(a)(1), 124.503(i), 125.18(d), and 127.504(c)
Size Status
SBA has been criticized for allowing agencies to receive credit
towards their small business goals for awards made to firms that no
longer qualify as small. SBA believes that much of this criticism is
misplaced. Where a small business concern is awarded a small business
set-aside contract with a duration of not more than five years and
grows to be other than small during the performance of the contract,
some have criticized the exercise of an option as an award to an other
than small business. SBA disagrees with such a characterization. Small
business set-aside contracts are restricted only to firms that qualify
as small as of the date of a firm's offer for the contract. A firm's
status as a small business is relevant to its qualifying for the award
of the contract. If a concern qualifies as small for a contract with a
duration of not more than five years, it is considered a small business
throughout the life of that contract. Even for MACs that are set-aside
for small business, once a concern is awarded a contract as a small
business it is eligible to receive orders under that contract and
perform as a small business. Again, in such a case, size was relevant
to the initial award of the contract. Any competitor small business
concern could protest the size status of an apparent successful offeror
for a small business set-aside contract (whether single award or
multiple award), and render a concern ineligible for award where SBA
finds that the concern does not qualify as small under the size
standard corresponding to the NAICS code assigned to the contract.
Furthermore, firms awarded a long-term contract must recertify their
size status at five years and every option thereafter. Firms are
eligible to receive orders under that contract and perform as a small
business so long as they continue to recertify as small at the required
times (e.g., at five years and every option thereafter). Not allowing a
concern that legitimately qualified at award and/or recertified later
as small to receive orders and continue performance as a small business
during the base and option periods, even if it has naturally grown to
be other than small, would discourage firms from wanting to do business
with the Government, would be disruptive to the procurement process,
and would disincentivize contracting officers from using small business
set-asides.
SBA agrees that contract performance by a concern that merges with,
acquires, or is acquired by another business concern and no longer
qualifies as small should not count towards small business goals.
However, SBA already requires a concern to recertify its size status
within 30 days of a merger, sale, or acquisition becoming final. See 13
CFR 121.404(g). Under the current regulation, if the contractor is
other than small, the agency can no longer count the options or orders
issued pursuant to the contract, from that point forward, towards its
small business goals. Id.
SBA, believes, however, that there is a legitimate concern where a
concern self-certifies as small for an unrestricted MAC and at some
point later in time when the concern no longer qualifies as small the
contracting officer seeks to award an order as a small business set-
aside and the firm uses its self-certification as a small business for
the underlying unrestricted MAC. Under the current process, size status
for an unrestricted MAC is generally determined as of the date a firm
submits its offer for the MAC. If a concern self-certifies as small at
the time of its offer for the underlying MAC, the concern is generally
considered to be small for goaling purposes for each order issued
against the contract, unless a contracting officer requests a new size
certification in connection with a specific order. Therefore, when a
contracting officer seeks to set-aside an order for small business off
an unrestricted MAC, the firm's size relates back to its self-
certification for the underlying MAC. As such, orders may be set-aside
for small businesses and a concern may be awarded one or more orders as
a small business even though it does not currently qualify as small and
may not have qualified as small for several years.
SBA agrees that this situation needs to be addressed. A firm's
status as a small business does not generally affect whether the firm
does or does not qualify for the award of an unrestricted MAC contract.
As such, competitors are very unlikely to protest the size of a concern
that self-certifies as small for an unrestricted MAC. In SBA's view,
where a contracting officer sets aside an order for small business
under an unrestricted MAC, the order is the first time size status is
important. That is the first time that some firms will be eligible to
compete for the order while others will be excluded from competition
because of their size status. As noted above, no one is considering
protesting the size or status of a firm at the time an unrestricted MAC
is awarded. It is only when an order is restricted by size status that
firms focus on their competitors' size status. To allow a firm's self-
certification for the underlying MAC to control whether a firm is small
at the time of an order years after the MAC was awarded does not make
sense to SBA.
SBA has considered several alternative proposals. If an order under
an unrestricted MAC is set-aside exclusively for small business (i.e.,
small business set-aside, 8(a) small business, service-disabled
veteran-owned small business, HUBZone small business, or women-owned
small business), SBA considered requiring a concern to certify its size
status and qualify as such at the time it submits its initial offer,
which includes price, for the particular order under all unrestricted
MACs. SBA has also considered exempting FSS contracts from any
recertification requirement, and instead applying it only to all other
MACs. SBA does not seek to disrupt the procurement process, but rather
to ensure that small business set-aside awards are made to firms that
qualify as small at the time of the award. GSA is concerned that
requiring firms to certify their size status for an order that is set-
aside under a FSS would discourage firms from wanting to do business
with the Government, would dissuade contracting officers from setting
aside orders, and that this will in turn hurt small businesses.
In considering the issue, SBA looked at the data for orders that
were awarded as small business set-asides off unrestricted base
multiple award vehicles in FY 2018. In total, 8,666 orders were awarded
as small business set-asides off unrestricted MACs in FY 2018. Of those
set-aside orders, 10% are estimated to have been awarded to firms that
no longer qualified as small under the NAICS code size standard at the
time of the order award. Although the vast majority of set-aside orders
under unrestricted MACs were awarded off of FSS contracts. Further, it
is estimated that only 7.1% of small business set-aside orders off the
FSS were awarded to firms that no longer qualified as small under the
NAICS code size standard at the time of the order (510 out of 7,266
orders). That amounted to 12.1% of the dollars set-aside for small
business off the FSS ($129.6 million to firms that no longer qualified
as small out of a total of $1.0723 billion in small business set-aside
orders). Whereas, it is estimated that 49.4% of small business set-
aside orders off of government-wide acquisition contracts (GWACs) were
awarded to firms that no longer
[[Page 60850]]
qualified as small under the NAICS code size standard at the time of
the order (261 out of 528 orders). That amounted to 67% of the dollars
set-aside for small business off of GWACs ($119.6 million to firms that
no longer qualified as small out of a total of $178.6 million in small
business set-aside orders). SBA then considered the number and dollar
value of new orders that were awarded as small business set-asides off
unrestricted base multiple award vehicles in FY 2018 using the size
standard ``exceptions'' that apply in some of SBA's size standards
(e.g., the IT Value-Added Reseller exception to NAICS 541519). Taking
into account all current size standards exceptions, which allow a firm
to qualify under an alternative size standard for certain types of
contracts, it is estimated that 6.5% of small business set-aside orders
off the FSS were awarded to firms that no longer qualified as small at
the time of the order (468 out of 7,266 orders). That amounted to 11.3%
of the dollars set-aside for small business off the FSS ($120.7 million
to firms that no longer qualified as small out of a total of $1.0723
billion in small business set-aside orders). Considering exceptions for
set-aside orders off of GWACs, it is estimated that 11.6% were awarded
to firms that no longer qualified as small at the time of the order (61
out of 528 orders). That amounted to 39.5% of the dollars set-aside for
small business off of GWACs ($70.5 million to firms that no longer
qualified as small out of a total of $178.6 million in small business
set-aside orders). It is not possible to tell from FPDS whether the
``exception'' size standard applied to the contract or whether the
agency applied the general size standard for the identified NAICS code.
Thus, all that can be said with certainty is that for small business
set-aside orders off of the FSS, between 11.3% and 12.1% of the order
dollars set-aside for small business were awarded to firms that no
longer qualified as small. This amounted to somewhere between $120.7
million and $129.6 that were awarded to firms that no longer qualified
as small. For GWACs, the percentage of orders and order dollars being
awarded to firms that no longer qualify as small is significantly
greater. Between 39.5% and 67.0% of the order dollars set-aside for
small business off GWACs were awarded to firms that no longer qualified
as small. This amounted to somewhere between $70.5 million and $119.6
million that were awarded to firms that no longer qualified as small.
So, set-aside orders off of GWACs, for example, that may potentially go
to other than small businesses are more significant at 11.6-49.4%.
However, the data shows that discretionary set-asides under the FSS
programs have proven effective in making awards to small business under
the schedules program. The data also shows that the percent of dollars
going to other than small business off of FSS set-asides is limited.
Thus, SBA is considering exempting FSS contracts from the
recertification requirement as it may not be efficient. SBA determined
that the added burden to the public and Government to implement
additional control measures and the potential effect on small business
participation in Government contracting outweighed any potential
benefits from trying to mitigate the limited risk. As such, this rule
proposes to exempt the FSS contracts from the rule.
SBA believes that a contracting vehicle that intends to award to
small businesses but instead permits as much as 49.4% of its orders and
between 39.5% and 67% of its dollars to be awarded to firms that do not
qualify as small is the appropriate area to address. As such, pursuant
to this proposed rule, except for orders or Blanket Purchase Agreements
issued under any FSS contract, if an order under an unrestricted MAC is
set-aside exclusively for small business (i.e., small business set-
aside, 8(a) small business, service-disabled veteran-owned small
business, HUBZone small business, or women-owned small business), a
concern must recertify its size status and qualify as such at the time
it submits its initial offer, which includes price, for the particular
order. A firm whose size certification in SAM is current and accurate
will not need to submit a new certification or additional
documentation.
For a MAC that is set aside for small business (i.e., small
business set-aside, 8(a) small business, SDVO small business, HUBZone
small business, or WOSB), the proposed rule would generally set size
statusas of the date of the offer for the underlying MAC itself. A
concern that is small at the time of its offer for the MAC would be
considered small for each order issued against the contract, unless a
contracting officer requests a size recertification in connection with
a specific order. As is currently the case, a contracting officer has
the discretion to request recertification of size status on MAC orders.
If that occurs, size status would be determined at the time of the
order. That would not be a change from the current regulations.
Socioeconomic Status
Where the required status for an order differs from that of the
underlying contract (e.g., the MAC is a small business set-aside award,
and the procuring agency seeks to restrict competition on the order to
only certified HUBZone small business concerns), SBA believes that a
firm must qualify for the socioeconomic status of a set-aside order at
the time it submits an offer for that order. Although size may flow
down from the underlying contract, status in this case cannot. Similar
to where a procuring agency seeks to compete an order on an
unrestricted procurement as a small business set-aside and SBA would
require offerors to qualify as small with respect to that order (except
for orders under FSS contracts), SBA believes that where the
socioeconomic status is first required at the order level, an offeror
seeking that order must qualify for the socioeconomic status of the
set-aside order when it submits its offer for the order.
Under current policy and regulations, where a contracting officer
seeks to restrict competition of an order off an unrestricted MAC to
eligible 8(a) Participants only, the contracting officer must offer the
order to SBA to be awarded through the 8(a) program, and SBA must
accept the order for the 8(a) program. In determining whether a concern
is eligible for such an 8(a) order, SBA would apply the provisions of
the Small Business Act and its current regulations which require a firm
to be an eligible Program Participant as of the date set forth in the
solicitation for the initial receipt of offers for the order. SBA
requests comments on the alternative approaches considered as well as
any other approaches that would reduce the set-aside awards to firms
that do not qualify as small or qualify for the socioeconomic status of
a set-aside order while at the same time not disrupting the procurement
process or imposing unnecessary burdens on small businesses or
contracting officers.
The rule proposes to make these changes in Sec. 121.404(a)(1) for
size, Sec. 124.503(i) for 8(a) BD eligibility, Sec. 125.18(d) for
SDVO eligibility, and Sec. 127.504(c) for WOSB eligibility.
Section 121.404
In addition to the revision to Sec. 121.404(a)(1) identified
above, the rule proposes to make several other changes or
clarifications to Sec. 121.404. In order to make this section easier
to use and understand, the proposed rule would add headings to each
subsection, which
[[Page 60851]]
would identify the subject matter of the subsection.
The rule proposes to amend Sec. 121.404(b), which requires a firm
applying to SBA's programs to qualify as a small business for its
primary industry classification as of the date of its application. The
rule would eliminate references to SBA's small disadvantaged business
(SDB) program as obsolete, and add a reference to the WOSB program.
The proposed rule would also amend Sec. 121.404(d) to clarify that
size status for purposes of compliance with the nonmanufacturer rule,
the ostensible subcontractor rule and joint venture agreement
requirements is determined as of the date of the final proposal
revision for negotiated acquisitions and final bid for sealed bidding.
Currently, only compliance with the nonmanufacturer rule is
specifically addressed in this paragraph, but SBA's policy has been to
apply the same rule to determine size with respect to the ostensible
subcontractor rule and joint venture agreement requirements. This would
not be a change in policy, but rather a clarification of existing
policy.
The proposed rule would also add a clarifying sentence to Sec.
121.404(e) that would recognize that prime contractors may rely on the
self-certifications of their subcontractors provided they do not have a
reason to doubt any specific self-certification. SBA believes that this
has always been the case, but has added this clarifying sentence,
nevertheless, at the request of many prime contractors.
The proposed rule would make several revisions to the size
recertification provisions in Sec. 121.404(g). First, the
recertification rule pertaining to a joint venture that had previously
received a contract as a small business was not clear. If a partner to
the joint venture has been acquired, is acquiring or has merged with
another business entity, the joint venture must recertify its size
status. In order to remain small, however, it was not clear whether
only the partner which has been acquired, is acquiring or has merged
with another business entity needed to recertify its size status or
whether all partners to the joint venture had to do so. SBA believes
that the intent of the regulation was to require size recertification
only for the affected partner. To do otherwise could unfairly prejudice
the joint venture and the procuring activity. For example, assume that
a joint venture has two partners, a 75% managing partner and a 25% non-
managing partner. In order to have initially been awarded a contract as
a small business, both partners to the joint venture had to
individually qualify as small (unless one was an SBA-approved mentor of
the other). If since the date of the award the 75% partner has
naturally grown to exceed the size standard assigned to the contract
and the 25% partner has been acquired by another small business, the
joint venture could not recertify as small if both partners had to
recertify their individual size status even if the 25% partner still
qualified as small after its acquisition. SBA does not believe that
would be fair to the 75% partner or to the procuring activity, which
could no longer count the contract as an award to small business. Just
as SBA allows, under certain conditions, a contract to continue to
count as an award to small business if a concern awarded the contract
has grown to exceed the applicable size standard after award, so too
should a contract to a joint venture continue to count as an award to
small business if the non-affected partner has grown to be other than
small and the partner that has been acquired continues to be small
after the acquisition. Thus, the proposed rule clarifies that only the
partner to the joint venture that has been acquired, is acquiring, or
has merged with another business entity must recertify its size status
in order for the joint venture to recertify its size.
Additionally, the proposed rule clarifies that if a merger or
acquisition causes a firm to recertify as an other than small business
concern between time of offer and award, then the recertified firm is
not considered a small business for the solicitation. Under this
proposed rule, SBA would accept size protests with specific facts
showing that an apparent awardee of a set-aside has recertified or
should have recertified as other than small due to a merger or
acquisition before award.
The proposed rule would also clarify that recertification is not
required when the ownership of a concern that is at least 51% owned by
an entity (i.e., tribe, ANC, or Community Development Corporation
(CDC)) changes to or from a wholly-owned business concern of the same
entity, as long as the ultimate owner remains that entity. When the
small business continues to be owned to the same extent by the tribe,
ANC or CDC, SBA does not believe that the real ownership of the concern
has changed, and, therefore that recertification is not needed. The
proposed rule would make this same change to Sec. 121.603 for 8(a)
contracts as well.
Finally, the proposed rule would amend Sec. 121.404(g)(3) to
specifically permit a contracting officer to request size
recertification as he or she deems appropriate at any point in a long-
term contract. SBA believes that this authority exists within the
current regulatory language but is merely articulating it more clearly
in this rule.
Section 121.406
The proposed rule would merely correct a typographical error by
replacing the word ``provided'' with the word ``provide.''
Section 121.702
The proposed rule would clarify the size requirements applicable to
joint ventures in the Small Business Innovation Research (SBIR)
program. Although the current regulation authorizes joint ventures in
the SBIR program and recognizes the exclusion from affiliation afforded
to joint ventures between a prot[eacute]g[eacute] firm and its SBA-
approved mentor, it does not specifically apply SBA's general size
requirements for joint ventures to the SBIR program. The proposed rule
would merely apply the general size rule for joint ventures to the SBIR
program. In other words, a joint venture for an SBIR award would be
considered a small business provided each partner to the joint venture,
including its affiliates, meets the applicable size standard. In the
case of the SBIR program, this means that each partner does not have
more than 500 employees.
Section 121.1001
The rule proposes to provide authority to SBA's Associate General
Counsel for Procurement Law to independently initiate or file a size
protest, where appropriate.
Sections 121.1004, 125.28, 126.801, and 127.603
The proposed rule would add clarifying language to Sec. 121.1004,
Sec. 125.28, Sec. 126.801, and Sec. 127.603 regarding size and/or
socioeconomic status protests in connection with orders issued against
a MAC. Currently, the provisions authorize a size protest where an
order is issued against a MAC if the contracting officer requested a
recertification in connection with that order. The proposed rule
specifically authorizes a size protest relating to an order issued
against a MAC where the order is set-aside for small business and the
underlying MAC was awarded on an unrestricted basis, except for orders
or Blanket Purchase Agreements issued under any FSS contract. The
proposed rule also specifically authorizes a socioeconomic protest
relating to set-aside orders based on a different socioeconomic status
from the underlying set-aside MAC.
[[Page 60852]]
Section 121.1103
An explanation of the change is provided with the explanation for
Sec. 134.318.
Section 124.3
In response to concerns raised to SBA by several Program
Participants, the proposed rule would add a definition of what a
follow-on requirement or contract is. Whether a procurement requirement
may be considered a follow-on procurement is important in several
contexts related to the 8(a) BD program. First, SBA's regulations
provide that where a procurement is awarded as an 8(a) contract, its
follow-on or renewable acquisition must remain in the 8(a) BD program
unless SBA agrees to release it for non-8(a) competition. 13 CFR
124.504(d)(1). SBA's regulations also require SBA to conduct an adverse
impact analysis when accepting requirements into the 8(a) BD program.
However, an adverse impact analysis is not required for follow-on 8(a)
acquisitions or new requirements. 13 CFR 124.504(c). Finally, SBA's
regulations provide that once an applicant is admitted to the 8(a) BD
program, it may not receive an 8(a) sole source contract that is a
follow-on procurement to an 8(a) contract that was performed
immediately previously by another Participant (or former Participant)
owned by the same tribe, ANC, Native Hawaiian Organization (NHO), or
CDC. 13 CFR 124.109(c)(3)(ii), 124.110(e) and 124.111(d).
In order to properly assess what each of these regulations
requires, the rule proposes to define the term ``follow-on requirement
or contract''. The definition provides the determination considerations
for whether a particular procurement is a follow-on requirement or
contract: (1) Whether the scope has changed significantly, requiring
meaningful different types of work or different capabilities; (2)
whether the magnitude or value of the requirement has changed by at
least 25 percent; and (3) whether the end user of the requirement has
changed. As a general guide, if the procurement satisfies at least one
of these three conditions, it may be considered a new requirement.
Conversely, if the procurement satisfies none of these conditions, it
is considered a follow-on procurement. However, with respect to a
change in the value or magnitude of the requirement, SBA intends the
25% amount to be a guide, and not necessarily dispositive of whether a
requirement qualifies as ``new.'' Applying the 25 percent rule
contained in this definition rigidly could permit procuring agencies
and entity-owned firms to circumvent the intent of release, sister
company restriction, and adverse impact rules.
For example, a procuring agency may argue that two procurement
requirements that were previously awarded as individual 8(a) contracts
can be removed from the 8(a) program without requesting release from
SBA because the value of the combined requirement would be at least 25
percent more than the value of either of the two previously awarded
individual 8(a) contracts, and thus would be considered a new
requirement. This application of the new requirement definition would
permit an agency to remove two requirements from the 8(a) BD program
without requesting and receiving SBA's permission for release from the
program. We believe that would be inappropriate and that a procuring
agency must seek SBA's approval to release the two procurements
previously awarded through the 8(a) BD program. Likewise, if an entity-
owned 8(a) Participant previously performed two sole source 8(a)
contracts and a procuring agency sought to offer a sole source
requirement to the 8(a) BD program on behalf of another Participant
owned by the same entity (tribe, ANC, NHO, or CDC) that, in effect, was
a consolidation of the two previously awarded 8(a) procurements, we
believe it would be inappropriate for SBA to accept the offer on behalf
of the sister company. Similarly, if a small business concern
previously performed two requirements outside the 8(a) program and a
procuring agency wanted to combine those two requirements into a larger
requirement to be offered to the 8(a) program, SBA should perform an
adverse impact analysis with respect to that small business even though
the combined requirement had a value that was greater than 25 percent
of either of the previously awarded contracts.
Section 124.105
The proposed rule would amend Sec. 124.105(g) to provide more
clarity regarding situations in which an applicant has an immediate
family member that has used his or her disadvantaged status to qualify
another current or former Participant. The purpose of the immediate
family member restriction is to ensure that one individual does not
unduly benefit from the 8(a) BD program by participating in the program
beyond nine years, albeit through a second firm. This most often
happens when a second family member in the same or similar line of
business seeks 8(a) BD certification. However, it is not necessarily
the type of business which is a problem, but, rather, the involvement
in the applicant firm of the family member that previously participated
in the program. The current regulatory language requires an applicant
firm to demonstrate that ``no connection exists'' between the applicant
and the other current or former Participant. SBA believes that
requiring no connections is a bit extreme. If two brothers own two
totally separate businesses, one as a general construction contractor
and one as a specialty trade construction contractor, in normal
circumstances it would be completely reasonable for the brother of the
general construction firm to hire his brother's specialty trade
construction firm to perform work on contracts that the general
construction firm was doing. Unfortunately, if either firm was a
current or former Participant, SBA's current regulations would prohibit
SBA from certifying the second firm for participation in the program,
even if the general construction firm would pay the specialty trade
firm the exact same rate that it would have to pay to any other
specialty trade construction firm. SBA does not believe that makes
sense. An individual should not be required to avoid all contact with
the business of an immediate family member. He or she should merely
have to demonstrate that the two businesses are truly separate and
distinct entities.
To this end, the rule proposes that an individual would not be able
to use his or her disadvantaged status to qualify a concern for
participation in the 8(a) BD program if that individual has an
immediate family member who is using or has used his or her
disadvantaged status to qualify another concern for the 8(a) BD program
and the concerns are connected by any common ownership or management,
regardless of amount or position, or the concerns have a contractual
relationship that was not conducted at arm's length. In the first
instance, if one of the two family members (or business entities owned
by the family member) owned any portion of the business owned by the
other family member, the second in time family member could not qualify
his or her business for the 8(a) BD program. Similarly, if one of the
two family members had any role as a director, officer or key employee
in the business owned by the other family member, the second in time
family member could not qualify his or her business for the 8(a) BD
program. In the second instance, the second in time family member could
not qualify his or her business for the 8(a) BD program if it received
or gave work to the business owned by the other
[[Page 60853]]
family member at other than fair market value. With these changes, SBA
believes that the proposed rule more accurately captures SBA's intent
not to permit one individual from unduly benefitting from the program,
while at the same time permitting normal business relations between two
firms. SBA specifically requests comments on this provision.
The proposed rule would also amend the 8(a) BD change of ownership
requirements in Sec. 124.105(i). First, the proposed rule would lessen
the burden on 8(a) Participants seeking minor changes in ownership by
providing that prior SBA approval is not needed where a previous owner
held less than a 20 percent interest in the concern both before and
after the transaction. This would be a change from the current
requirement which allows a Participant to change its ownership without
SBA's prior approval where the previous owner held less than a 10
percent interest. This change from 10 percent to 20 percent would
permit Participants to make minor changes in ownership more frequently
without requiring them to wait for SBA approval. It would also be
consistent with other changes SBA has made to reduce burdens on 8(a)
applicants and Participants. For example, in 2016, SBA changed the
percentage amount related to the requirement that individuals owning a
certain percent of the business concern must demonstrate good character
from 10 percent to 20 percent (see 81 FR 48580). This proposed revision
would be consistent with that change and would also eliminate
additional burdens on an 8(a) applicant or Participant relating to
owners holding between 10 and 20 percent interest.
In addition, the proposed rule would also eliminate the requirement
that all changes of ownership affecting the disadvantaged individual or
entity must receive SBA prior approval before they can occur.
Specifically, proposed revisions to Sec. 124.105(i)(2) would provide
that prior SBA approval is not needed where the disadvantaged
individual (or entity) in control of the Participant will increase the
percentage of his or her (its) ownership interest. SBA believes that
prior approval is not needed in such a case because there could be no
question as to whether the Participant continues to meet the program's
ownership and control requirements. Again, this proposed change would
decrease the amount of times and the time spent by Participant firms
seeking SBA approval of a change in ownership. SBA would nevertheless
continue to review all changes in ownership for which prior approval is
not required, including those contemplated by the proposed rule, to
ensure that the transfer was fair and equitable to the disadvantaged
individual(s) (or entity) and has not unduly benefited non-
disadvantaged parties to the transaction. Where SBA has determined that
a change in ownership does not meet such requirements, the Agency may,
in its discretion, require remedial action or initiate an appropriate
adverse action, such as program suspension or termination.
Section 124.109
In order to eliminate confusion, the proposed rule would clarify
several provisions relating to tribally-owned 8(a) applicants and
Participants. First, SBA proposes to amend Sec. 124.109(a)(7) and
Sec. 124.109(c)(3)(iv) to clarify that a Participant owned by an ANC
or tribe need not request a change of ownership from SBA where the ANC
or tribe merely reorganizes its ownership of a Participant in the 8(a)
BD program by inserting or removing a wholly-owned business entity
between the ANC/tribe and the Participant. SBA believes that a tribe or
ANC should be able to replace one wholly-owned intermediary company
with another without going through the change of ownership process and
obtaining prior SBA approval. In each of these cases, SBA believes that
the underlying ownership of the Participant is not changing
substantively and that requiring a Participant to request approval from
SBA is unnecessary. The recommendation and approval process for a
change of ownership can take several months, so this change would
relieve Participants owned by tribes and ANCs from this unnecessary
burden and allow them to proactively conduct normal business operations
without interruption.
Second, the proposed rule would amend Sec. 124.109(c)(3)(ii) to
clarify the rules pertaining to a tribe/ANC owning more than one
Participant in the 8(a) BD program. The proposed rule would add two
subparagraphs and an example to Sec. 124.109(c)(3)(ii) for ease of use
and understanding. In addition, SBA would clarify that if the primary
NAICS code of a tribally-owned Participant is changed pursuant to Sec.
124.112(e), the tribe could then submit an application to qualify
another of its firms for participation in the 8(a) BD program under the
primary NAICS code that was previously held by the Participant whose
primary NAICS code was changed. A change in a primary NAICS code under
Sec. 124.112(e) should occur only where SBA has determined that the
greatest portion of a Participant's revenues for the past three years
are in a NAICS code other than the one identified as its primary NAICS
code. In such a case, SBA has determined that in effect the second
NAICS code really has been the Participant's primary NAICS code for the
past three years. SBA's rules have historically provided that a Tribe
or ANC may not own 51% or more of another firm which, either at the
time of application or within the previous two years, has been
operating in the 8(a) program under the same primary NAICS code as the
applicant. Thus, this proposed rule will clarify that when SBA has
changed the primary NAICS code change for a Participant, SBA has
determined that first NAICS code was not the Participant's primary
NAICS code for the last two years, and the tribe/ANC would be permitted
to have another of its firms apply to and be admitted to the 8(a) BD
program under the former primary NAICS code of the sister company.
Finally, the proposed rule would clarify the 8(a) BD program
admission requirements governing how a tribally-owned applicant may
demonstrate that it possesses the necessary potential for success.
SBA's regulations currently permit the tribe to make a firm written
commitment to support the operations of the applicant concern to
demonstrate a tribally-owned firm's potential for success. Due to the
increased trend of tribes establishing tribally-owned economic
development corporations to oversee tribally owned businesses, SBA
recognizes that in some circumstances it may be adequate to accept a
letter of support from the tribally-owned economic development company
rather than the tribal leadership. SBA also recognizes that in most
cases, tribes are not establishing these economic development
corporations as Section 17 corporations, which SBA has previously
determined should be treated as an arm of the tribe and thus, the tribe
itself for purposes of the 8(a) BD regulations. Rather, these
corporations are often tribally owned holding companies that have been
delegated authority to oversee tribal economic development and tribal
business ventures. In response, this proposed rule would permit a
tribally-owned applicant to satisfy the potential for success
requirements by submitting a letter of support from a tribally-owned
economic development corporation or other relevant tribally-owned
holding company. In order for a letter of support from the tribally
owned holding company to be sufficient, there must be sufficient
evidence that the tribally-owned holding company has the financial
resources to support the
[[Page 60854]]
applicant and that the tribally-owned company is controlled by the
tribe.
Section 124.110
The proposed rule would make some of the same changes to Sec.
124.110 for applicants and Participants owned and controlled by NHOs as
it would to Sec. 124.109 for tribally-owned applicants and
Participants. Specifically, the proposed rule would subdivide Sec.
124.110(e) for ease of use and understanding and would clarify that if
the primary NAICS code of an NHO-owned Participant is changed pursuant
to Sec. 124.112(e), the NHO could submit an application and qualify
another firm owned by the NHO for participation in the 8(a) BD program
under the NAICS code that was the previous primary NAICS code of the
Participant whose primary NAICS code was changed.
Section 124.111
The proposed rule would make the same change for CDCs and CDC-owned
firms as for tribes and ANCs mentioned above. It would clarify that a
Participant owned by a CDC need not request a change of ownership from
SBA where the CDC merely reorganizes its ownership of a Participant in
the 8(a) BD program by inserting or removing a wholly-owned business
entity between the CDC and the Participant. It would also subdivide the
current subparagraph (d) into three smaller paragraphs for ease of use
and understanding, and would clarify that if the primary NAICS code of
a CDC-owned Participant is changed pursuant to Sec. 124.112(e), the
CDC could submit an application and qualify another firm owned by the
CDC for participation in the 8(a) BD program under the NAICS code that
was the previous primary NAICS code of the Participant whose primary
NAICS code was changed.
Section 124.112
SBA proposes to amend Sec. 124.112(d)(5) regarding excessive
withdrawals in connection with entity-owned 8(a) Participants. There
has been some confusion as to whether an 8(a) Participant that is owned
at least 51% by a tribe, ANC, NHO or CDC can make a distribution to a
non-disadvantaged individual that exceeds the applicable excessive
withdrawal limitation dollar amount if it is made as part of a pro rata
distribution to all shareholders. SBA believes that it generally should
be able to do so. Through a pro rata distribution, the only way that an
entity-owned firm can increase its distribution to the tribe, ANC, NHO
or CDC is if it also increases the distribution to the non-entity
owner. Since the intent is to increase the distribution to the tribe,
ANC, NHO or CDC, and thus increase the benefits flowing back to the
community, SBA believes this serves the purposes of the program. The
rule also proposes, however, that SBA could deem the distributions
excessive if SBA determines that they would adversely affect the
business development of the Participant.
In 2016, SBA amended Sec. 124.112(e) to implement procedures to
allow SBA to change the primary NAICS code of a Participant where SBA
determined that the greatest portion of the Participant's total
revenues during a three-year period have evolved from one NAICS code to
another. 81 FR 48558, 48581 (July 25, 2016). The procedures require SBA
to notify the Participant of its intent to change the Participant's
primary industry classification and afford the Participant the
opportunity to submit information explaining why such a change would be
inappropriate. Several individuals have asked SBA to permit an appeal
process, whereby a Participant whose primary NAICS code was changed by
its servicing district office could seek further review of that
determination at a different level. After hearing this concern repeated
several times at the tribal consultations conducted by SBA, this
proposed rule would authorize such an appeal process.
Section 124.201
This proposed rule does not amend Sec. 124.201. However, SBA is
considering adding a provision that would require a small business
concern that seeks to apply for participation in the 8(a) BD program to
first take an SBA-sponsored preparatory course regarding the
requirements and expectations of the 8(a) BD program. SBA specifically
requests comments on such a requirement.
Section 124.203
Section 124.203 requires applicants to the 8(a) BD program to
submit certain specified supporting documentation, including financial
statements, copies of signed Federal personal and business tax returns
and individual and business bank statements. In 2016, SBA removed the
requirement that an applicant must submit a signed Internal Revenue
Service (IRS) Form 4506T, Request for Copy or Transcript of Tax Form,
in all cases. 81 FR 48558, 48569 (July 25, 2016). At that time, SBA
agreed with a commenter to the proposed rule that questioned the need
for every applicant to submit IRS Form 4506T. In eliminating that
requirement for every applicant, SBA reasoned that it always has the
right to request any applicant to submit specific information that may
be needed in connection with a specific application. As long as SBA's
regulations clearly provide that SBA may request any additional
documents SBA deems necessary to determine whether a specific applicant
is eligible to participate in the 8(a) BD program, SBA will be able to
request that a particular firm submit IRS Form 4506T where SBA believes
it to be appropriate. This proposed rule would amend Sec. 124.203 to
add back the requirement that every applicant to the 8(a) BD program
submit IRS Form 4506T (or when available, IRS Form 4506C). SBA believes
that not having that Form readily available when needed has unduly
delayed the application process for those affected applicants. In
addition, SBA believes that requiring Form 4506T in every case will
serve as a deterrent to firms that may think it is not necessary to
fully disclose all necessary financial information. Although SBA does
not often use IRS Form 4506T to verify an applicant's information, SBA
believes that this additional requirement imposes a minimal burden on
8(a) BD program applicants. Additionally, SBA believes that the
collection of Form 4506T will help to maintain the integrity of the
program.
Section 124.204
SBA proposes to suspend the time to process an 8(a) application
where SBA requests clarifying, revised or other information from the
applicant. While SBA is waiting on the applicant to provide clarifying
or responsive information, the Agency is not continuing to process the
application.
Section 124.207
The proposed rule would amend Sec. 124.207 to allow a concern that
has been declined for 8(a) BD program participation to submit a new
application 90 days after the date of the Agency's final decision to
decline. This would change the current rule which requires a concern to
wait 12 months from the date of the final agency decision to reapply,
and would make the 8(a) BD program consistent with the HUBZone program.
See 13 CFR 126.309. SBA believes that this change would reduce the
number of appeals to SBA's Office of Hearings and Appeals (OHA) and
greatly reduce the costs associated with appeals borne by disappointed
applicants. If a firm can correct the deficiencies in its initial
application and reapply within 90 days, it may be much more likely to
forego appealing to OHA, where the process can take 90 days or
[[Page 60855]]
more for resolution. Because a firm that is declined could submit a new
application 90 days after the decline decision, SBA requests comments
on whether the current reconsideration process should be eliminated.
Section 124.300 and 124.301
The proposed rule would redesignate the current Sec. 124.301
(which discusses the various ways a business may leave the 8(a) BD
program) as Sec. 124.300 and add a new Sec. 124.301 to specifically
enunciate the voluntary withdrawal and early graduation procedures. The
rule would set forth SBA's current policy that a Participant may
voluntarily withdraw from the 8(a) BD program at any time prior to the
expiration of its program term. In addition, where a Participant
believes it has substantially achieved the goals and objectives set
forth in its business plan, SBA would allow the Participant to elect to
voluntarily early graduate from the 8(a) BD program. That too is SBA's
current policy, and the proposed rule merely captures it in SBA's
regulations.
The proposed rule would, however, change the level at which
voluntary withdrawal and voluntary early graduation could be finalized
by SBA. Currently, a firm submits its request to voluntarily withdraw
or early graduate to its servicing SBA district office. Once the
district office concurs, the request is sent to the Associate
Administrator for Business Development (AA/BD) for final approval. SBA
believes that requiring several layers of review to permit a concern to
voluntarily exit the 8(a) BD program is unnecessary. Because an entity
cannot have a second firm admitted to the 8(a) BD program with the same
primary NAICS code as a sister company for a period of two years from
the date that the sister company left the program, requiring firms to
wait a potentially significant amount of time for several layers of SBA
reviewers to approve a voluntary withdrawal or voluntary early
graduation action could adversely impact the overall business
operations of the entity and other concerns owned by the entity. Thus,
the rule proposes that a Participant must still request voluntary
withdrawal or voluntary early graduation from its servicing district
office, but the action would be complete once the District Director
recognizes the voluntary withdrawal or voluntary early graduation. SBA
believes this would eliminate unnecessary delay in processing these
actions.
Section 124.304
The proposed rule would clarify the effect of a decision made by
the AA/BD to terminate or early graduate a Program Participant. Under
SBA's current procedures, once the AA/BD renders a decision to early
graduate or terminate a Participant from the 8(a) BD program, the
affected Participant has 45 days to appeal that decision to SBA's OHA.
If no appeal is made, the AA/BD's decision becomes the final agency
decision after that 45-day period. If the Participant appeals to OHA,
the final agency decision will be the decision of the administrative
law judge at OHA. There has been some confusion as to what the effect
of the AA/BD decision is pending the decision becoming the final agency
decision. The proposed rule clarifies that where the AA/BD issues a
decision terminating or early graduating a Participant, SBA would treat
the firm as being suspended. SBA does not believe that it would not
make sense to allow a Participant to continue to receive program
benefits after the AA/BD has terminated or early graduated the firm
from the program. If OHA ultimately overrules the AA/BD decision, the
suspension would be lifted and the length of the suspension would be
added to the Participant's program term.
Sections 124.305 and 124.402
Section 124.402 requires each firm admitted to the 8(a) BD program
to develop a comprehensive business plan and to submit that business
plan to SBA. Currently, Sec. 124.402(b) provides that a newly admitted
Participant must submit its business plan to SBA as soon as possible
after program admission and that the Participant will not be eligible
for 8(a) BD benefits, including 8(a) contracts, until SBA approves its
business plan. Several firms have complained that they missed contract
opportunities because SBA did not approve their business plans before
procuring agencies sought to award contracts to fulfill certain
requirements. While SBA continues to believe that it is important for a
newly admitted Participant to submit its business plan to SBA as
expeditiously as possible, SBA also understands the adverse
consequences that can ensue if a firm loses an opportunity that it has
lined up because its business plan is not approved prior to the time
that a procuring agency seeks to fulfill a particular procurement
requirement. In response, the proposed rule would amend Sec.
124.402(b) to eliminate the provision that a Participant cannot receive
any 8(a) BD benefits until SBA has approved its business plan. A firm
coming in to the 8(a) BD program with commitments from one or more
procuring agencies could immediately be awarded one or more 8(a)
contracts. Instead, the proposed rule would provide that SBA would
suspend a Participant from receiving 8(a) BD program benefits if it has
not submitted its business plan to the servicing district office and
received SBA's approval within 60 days after program admission. SBA
believes that firms coming into the 8(a) BD program possessing the
potential for success required for program entry would most likely have
business plans in place and should be able to have their business plans
approved by SBA within 60 days of program admission. If that cannot
happen within 60 days, SBA would suspend the Participant's business
plan under the proposed changes to Sec. 124.305(h). This would freeze
a firm's program term, and a firm would not lose any time in the
program.
The proposed rule would also correct a typographical error
contained in Sec. 124.305(h)(1)(ii). Under Sec. 124.305(h)(1)(ii), an
8(a) Participant can elect to be suspended from the 8(a) program where
a disadvantaged individual who is involved in controlling the day-to-
day management and control of the Participant is called to active
military duty by the United States. Currently, the regulation states
that the Participant may elect to be suspended where the individual's
participation in the firm's management and daily business operations is
critical to the firm's continued eligibility, and the Participant
elects not to designate a non-disadvantaged individual to control the
concern during the call-up period. That should read where the
Participant elects not to designate another disadvantaged individual to
control the concern during the call-up period. It was not SBA's intent
to allow a non-disadvantaged individual to control the firm during the
call-up period and permit the firm to continue to be eligible for the
program.
Sections 124.501 and 124.507
Section 124.501 is entitled ``What general provisions apply to the
award of 8(a) contracts?'' SBA must determine that a Participant is
eligible for the award of both competitive and sole source 8(a)
contracts. However, the requirement that SBA determine eligibility is
currently contained specifically only in the 8(a) competitive
procedures at Sec. 124.507(b)(2). Although SBA determines eligibility
for sole source 8(a) awards at the time it accepts a requirement for
the 8(a) BD program, that process is not specifically stated in the
regulations. The proposed rule would move the eligibility determination
procedures for
[[Page 60856]]
competitive 8(a) contracts from Sec. 124.507(b)(2) to the general
provisions of Sec. 124.501 and would specifically address eligibility
determinations for sole source 8(a) contracts. To accomplish this, the
proposed rule would revise current Sec. 124.501(g).
Similarly, SBA believes that the provisions requiring a bona fide
place of business within a particular geographic area for 8(a)
construction awards should also appear in the general provisions
applying to 8(a) contracts set forth in Sec. 124.501. Section 8(a)(11)
of the Small Business Act, 15 U.S.C. 637(a)(11), requires that to the
maximum extent practicable 8(a) construction contracts ``shall be
awarded within the county or State where the work is to be performed.''
SBA has implemented this statutory provision by requiring a Participant
to have a bona fide place of business within a specific geographic
location. Currently, the bona fide place of business rules appear only
in the procedures applying to competitive 8(a) procurements in Sec.
124.507(c)(2). The proposed rule would move those procedures to a new
Sec. 124.501(k), which would clearly make them applicable to both sole
source and competitive 8(a) awards. Based on the statutory language,
SBA believes that the requirement to have a bona fide place of business
in a particular geographic area currently applies to both sole source
and competitive 8(a) procurements, but moving the requirement to the
general applicability section would remove any doubt or confusion.
In response to concerns raised by Participants, the proposed rule
would also impose time limits within which SBA district offices should
process requests to add a bona fide place of business. SBA has heard
that several Participants missed out on 8(a) procurement opportunities
because their requests for SBA to verify their bona fide places of
business were not timely processed. In order to alleviate this
perceived problem, the proposed rule would provide that in connection
with a specific 8(a) competitive solicitation, the reviewing office
will make a determination whether or not the Participant has a bona
fide place of business in its geographical boundaries within 5 working
days of a site visit or within 15 working days of its receipt of the
request from the servicing district office if a site visit is not
practical in that timeframe. SBA requests comments on whether a
Participant that has filed a request to have a bona fide place of
business recognized by SBA in time for a particular 8(a) construction
procurement may submit an offer for that procurement where it has not
received a response from SBA before the date offers are due. In other
words, should a Participant that has requested the recognition of a
bona fide place of business beyond the time limits set forth in this
proposed rule be able to presume approval and submit an offer as an
eligible Participant? SBA does not want to harm Participants that truly
have set up bona fide places of business, but at the same time does not
want to give eligibility to firms that have not met the requirements
necessary to establish a bona fide place of business.
Section 124.503
Currently, Sec. 124.503(g) provides that a Basic Ordering
Agreement (BOA) is not a contract under the FAR. Rather, each order to
be issued under the BOA is an individual contract. As such, a procuring
activity must offer, and SBA must accept, each task order under a BOA
in addition to offering and accepting the BOA itself. Once a
Participant leaves the 8(a) BD program or otherwise becomes ineligible
for future 8(a) contracts (e.g., becomes other than small under the
size standard assigned to a particular contract) it cannot receive
further 8(a) orders under a BOA. Similarly, a blanket purchase
agreement (BPA) is also not a contract. A BPA (whether a BPA under part
13 of the Federal Acquisition Regulation (FAR) or a BPA under subpart
8.4 of the FAR)) is not a contract because it neither obligates funds
nor requires placement of any orders against it. Instead, it is an
understanding between an ordering agency and a contractor that allows
the agency to place future orders more quickly by identifying terms and
conditions applying to those orders, a description of the supplies or
services to be provided, and methods for issuing and pricing each
order. The government is not obligated to place any orders, and either
party may cancel a BPA at any time.
Although current Sec. 124.503(g) addresses BOAs, it does not
specifically mention BPAs. The proposed rule would amend Sec. 124.503
to merely specifically recognize that BPAs are also not contracts and
should be afforded the same treatment as BOAs.
Section 124.504
This rule also proposes to make several changes to Sec. 124.504.
The proposed rule would amend Sec. 124.504(b) to alter the
provision prohibiting SBA from accepting a requirement into the 8(a) BD
program where a procuring activity competed a requirement among 8(a)
Participants prior to offering the requirement to SBA and receiving
SBA's formal acceptance of the requirement. SBA believes that the
restriction as written is overly harsh and burdensome to procuring
agencies. Several contracting officers have not offered a follow-on
procurement to the 8(a) program prior to conducting a competition
restricted to eligible 8(a) Participants because they believed that as
a follow-on it must be procured through the 8(a) program. They issued
solicitations identifying them as competitive 8(a) procurements,
selected an apparent successful offeror and then sought SBA's
eligibility determination prior to making an award. A strict
interpretation of the current regulatory language would prohibit SBA
from accepting such a requirement. Such an interpretation could
seriously adversely affect an agency's procurement strategy by unduly
delaying the award of a contract. That was never SBA's intent. As long
as a procuring agency clearly identified a requirement as a competitive
8(a) procurement and the public fully understood it to be restricted
only to eligible 8(a) Participants, SBA should be able to accept that
requirement regardless of when the offering occurred.
The rule would clarify SBA's intent regarding the requirement that
a procuring agency must seek and obtain SBA's concurrence to release
any follow-on procurement from the 8(a) BD program. This is not a
change in policy, but rather a clarification of SBA's current policy
and the position SBA has taken in several protests before the General
Accountability Office. Some agencies have attempted to remove a follow-
on procurement from the 8(a) program and reprocure the requirement
through a MAC or Government-wide Acquisition Contract (GWAC) that is
not an 8(a) contract without seeking release by saying that they intend
to issue a competitive 8(a) order off the MAC or GWAC. In other words,
because the order off the MAC or GWAC would be offered to and accepted
for award through the 8(a) BD program and the follow-on work would be
performed through the 8(a) BD program, some procuring agencies believe
that release is not needed. SBA does not agree. In such a case, the
underlying contract is not an 8(a) contract. The procuring agency is
attempting to remove a requirement from the 8(a) program to a contract
that is not an 8(a) contract. That is precisely what release is
intended to apply to. Moreover, because Sec. 124.504(d)(4) provides
that the requirement to seek release of an 8(a) requirement from SBA
does not apply to orders offered to and accepted for the 8(a) program
where the underlying MAC
[[Page 60857]]
or GWAC is not itself an 8(a) contract, allowing a procuring agency to
move an 8(a) contract to an 8(a) order off a non-8(a) contract vehicle
would allow the procuring agency to then remove the next follow-on to
the 8(a) order out of the 8(a) program entirely without any input from
SBA. A procuring agency could take an 8(a) contract with a base year
and four one-year option periods, turn it into a one-year 8(a) order
off a non-8(a) contract vehicle, and then remove it from the 8(a)
program entirely after that one-year performance period. That was
certainly not the intent of SBA's regulations. As such, this rule
clarifies that the request for and granting of a release of a follow-on
procurement from the 8(a) BD program is required when the procurement
will be moved out of the 8(a) BD program as an independent contract
into a MAC or GWAC. SBA has received additional comments recommending
that release should also apply even if the underlying pre-existing MAC
or GWAC to which a procuring agency seeks to move a follow-on
requirement is itself an 8(a) contract. These commenters argue that an
8(a) incumbent contractor may be seriously hurt by moving a procurement
from a general 8(a) competitive procurement to an 8(a) MAC or GWAC to
which the incumbent is not a contract holder. In such a case, the
incumbent would have no opportunity to win the award for the follow-on
contract, and, without the release process, would have no opportunity
to demonstrate that it would be adversely impacted or to try to
dissuade SBA from agreeing to release the procurement. In response, the
proposed rule would provide that SBA must agree to release any follow-
on requirement where a procuring agency seeks to reprocure that
requirement through a limited contracting vehicle which is not
available to all 8(a) BD Program Participants (e.g., any multiple award
or Governmentwide acquisition contract, whether or not the underlying
MAC or GWAC is itself an 8(a) contract). If an agency seeks to
reprocure a current 8(a) requirement as a competitive 8(a) award for a
new 8(a) MAC or GWAC vehicle, SBA's concurrence would not be required
because such a competition would be available to all 8(a) BD Program
Participants.
The proposed rule would also clarify that in all cases where a
procuring agency seeks to fulfill a follow-on requirement outside of
the 8(a) BD program, except where it is statutorily or otherwise
required to use a mandatory source (see FAR subpart 8.6 and 8.7), it
must make a written request to and receive the concurrence of SBA to do
so. In such a case, the proposed rule would require a procuring agency
to notify SBA that it will take a follow-on procurement out of the 8(a)
procurement because of a mandatory source. Such notification would be
required at least 30 days before the end of the contract period to give
the 8(a) Participant the opportunity to make alternative plans.
In addition, SBA does not typically consider the value of a bridge
contract when determining whether an offered procurement is a new
requirement. A bridge contract is meant to be a temporary stop-gap
measure intended to ensure the continuation of service while an agency
finalizes a long-term procurement approach. As such, SBA does not
typically consider a bridge contract as part of the new requirement
analysis, unless there is some basis to believe that the agency is
altering the duration of the option periods to avoid particular
regulatory requirements. Whether to consider the bridge contract is
determined on a case-by-case basis given the facts of the procurement
at issue. SBA seeks comments as to whether this long-standing policy
should also be incorporated into the regulations.
Section 124.509
The proposed rule would revise Sec. 124.509(e), regarding how a
Participant can obtain a waiver to the requirement prohibiting it from
receiving further sole source 8(a) contracts where the Participant does
not meet its applicable non-8(a) business activity target. Currently,
the regulations require the AA/BD to process a Participant's request
for a waiver in every case. The proposed rule would substitute SBA for
the AA/BD to allow flexibility to SBA to determine the level of
processing in a standard operating procedure outside the regulations.
SBA believes that at least at some level, the district office should be
able to process such requests for waiver. That correct level could be
any requirement below the Simplified Acquisition Threshold (SAT), or
maybe some other specific dollar value. Putting such a requirement in
an SOP, instead of the regulations, however, would give flexibility to
SBA to adjust the requirement as necessary, and allow more
straightforward requests to be processed more expeditiously.
The current regulation also requires the SBA Administrator on a
non-delegable bases to decide requests for waiver from a procuring
agency. In other words, if the Participant itself does not request a
waiver to the requirement prohibiting it from receiving further sole
source 8(a) contracts, but an agency does because it believes that the
award of a sole source contract to the identified Participant is needed
to achieve significant interests of the Government, the SBA
Administrator must currently make that determination. Requiring such a
request to be processed by several levels of SBA reviewers and then by
the Administrator slows down the processing. If a procuring agency
truly needs something quickly, it could be harmed by the processing
time. The proposed rule would change the Administrator from making
these determinations to SBA. This should allow these requests to be
processed more quickly.
Section 124.513
Currently, Sec. 124.513(e) provides that SBA must approve a joint
venture agreement prior to the award of an 8(a) contract on behalf of
the joint venture. This requirement applies to both competitive and
sole source 8(a) procurements. SBA does not approve joint venture
agreements in any other context, including a joint venture between an
8(a) Participant and its SBA-approved mentor (which may be other than
small) in connection with a non-8(a) contract (i.e., small business
set-aside, HUBZone, SDVO small business, or WOSB contract). In order to
be considered an award to a small disadvantaged business (SDB) for a
non-8(a) contract, a joint venture between an 8(a) Participant and a
non-8(a) Participant must be controlled by the 8(a) partner to the
joint venture and otherwise meet the provisions of Sec. 124.513(c) and
(d). If the non-8(a) partner to the joint venture is also a small
business under the size standard corresponding to the NAICS code
assigned to the procurement, the joint venture could qualify as small
if the provisions of Sec. 124.513(c) and (d) were not met (see Sec.
121.103(h)(3)(i), where a joint venture can qualify as small as long as
each party to the joint venture individually qualifies as small), but
the joint venture could not qualify as an award to an SDB in such case.
If the joint venture were between an 8(a) Participant and its large
business mentor, the joint venture could not qualify as small if the
provisions of Sec. 124.513(c) and (d) were not met. The size of a
joint venture between a small business prot[eacute]g[eacute] and its
large business mentor is determined without looking at the size of the
mentor only when the joint venture complies with SBA's regulations
regarding control of the joint venture. Where another offeror believes
that a joint venture between a prot[eacute]g[eacute] and its large
business mentor has not
[[Page 60858]]
complied with the applicable control regulations, it may protest the
size of the joint venture. The applicable Area Office of SBA's Office
of Government Contracting would then look at the joint venture
agreement to determine if the small business is in control of the joint
venture within the meaning of SBA's regulations. If that Office
determines that the applicable regulations were not followed, the joint
venture would lose its exclusion from affiliation, be found to be other
than small, and, thus, ineligible for an award as a small business.
This size protest process has worked well in ensuring that small
business joint venture partners do in fact control non-8(a) contracts
with their large business mentors. Because size protests are authorized
for competitive 8(a) contracts, SBA and believes that the size protest
process could work similarly for competitive 8(a) contracts. As such,
this proposed rule would eliminate the need for 8(a) Participants to
seek and receive approval from SBA of every joint venture for
competitive 8(a) contracts. SBA believes that this would significantly
lessen the burden imposed on 8(a) small business Participants.
Participants would not be required to submit additional paperwork to
SBA and would not have to wait for SBA approval in order to seek
competitive 8(a) awards.
However, the proposed rule would not eliminate the requirement that
SBA must approve joint ventures in connection with sole source 8(a)
awards. Because size protests from other Participants are not permitted
with respect to sole source 8(a) procurements, there would be no way to
ensure that a joint venture for an 8(a) sole source contract between an
8(a) Participant and its large business mentor is controlled by the
8(a) Participant and otherwise meets SBA's joint venture requirements
if SBA did not continue to look at joint ventures in that context. SBA
believes that it is important to ensure that the joint venture rules
would continue to be followed, and without any other enforcement
mechanism, SBA must continue to approve joint ventures for 8(a) sole
source contracts. The only other alternative approach would be to allow
size protests in connection with sole source 8(a) contracts, but SBA
believes that is not appropriate because other Participants are not
really interested parties with respect to a sole source 8(a)
procurement offered to the 8(a) program on behalf of another
Participant.
Section 124.519
Section 124.519 limits the ability of 8(a) Participants to obtain
additional sole source 8(a) contracts once they have reached a certain
dollar level of overall 8(a) contracts. Currently, for a firm having a
receipts-based size standard corresponding to its primary NAICS code,
the limit above which a Participant can no longer receive sole source
8(a) contracts is five times the size standard corresponding to its
primary NAICS code, or $100,000,000, whichever is less. For a firm
having an employee-based size standard corresponding to its primary
NAICS code, the limit is $100,000,000. In order to simplify this
requirement, this proposed rule would provide that a Participant may
not receive sole source 8(a) contract awards where it has received a
combined total of competitive and sole source 8(a) contracts in excess
of $100,000,000 during its participation in the 8(a) BD program,
regardless of its primary NAICS code. In addition, the rule would
clarify that in determining whether a Participant has reached the limit
identified in paragraph (a) of this section, SBA would look at the 8(a)
revenues a Participant has actually received, not projected 8(a)
revenues that a Participant might receive through an indefinite
delivery or indefinite quantity contract, a multiple award contract, or
options or modifications. Finally, the proposed rule would amend what
types of small dollar value 8(a) contracts should not be considered in
determining whether a Participant has reached the 8(a) revenue limit.
Currently, SBA does not consider 8(a) contracts awarded under $100,000
in determining whether a Participant has reached the `1 8(a) revenue
limit. The proposed rule would replace the $100,000 amount with a
reference to the SAT. SBA has delegated to procuring agencies the
ability to award sole source 8(a) contracts without offer and
acceptance for contracts valued at or below the SAT. Because SBA does
not accept such procurements into the 8(a) BD program, it is difficult
for SBA to monitor these awards. The proposed rule would merely align
the 8(a) revenue limit with that authority.
Section 125.2
The proposed rule would add a new paragraph (g) requiring
contracting officers to consider the past performance and experience of
first tier subcontractors in certain instances. This consideration is
statutorily required for bundled or consolidated contracts (15 U.S.C.
644(e)(4)(B)(i)) and for multiple award contracts valued above a
certain dollar amount that corresponds to the agency's substantial
bundling threshold (15 U.S.C. 644(q)(1)(B)). Following the statutory
provisions, the proposed rule requires a contracting officer to
consider the past performance and experience of first tier
subcontractors in those two categories of contracts. The proposed rule
would not require a contracting officer to consider the past
performance, capabilities and experience of each first tier
subcontractor as the capabilities and past performance of the small
business prime contractor in other instances. Instead, it would provide
discretion to contracting officers to consider such past performance,
capabilities and experience of each first tier subcontractor where
appropriate. SBA specifically requests comments as to whether as a
policy matter such consideration should be required in all cases, or
limited only to the statutorily required instances as proposed.
Section 125.3
The Small Business Act explicitly prohibits the Government from
requiring small businesses to submit subcontracting plans. 15 U.S.C.
637(d)(8). This prohibition is set forth in Sec. 125.3(b) of SBA's
regulations and in FAR 19.702(b)(1). Under the Alaska Native Claims
Settlement Act (ANCSA), a contractor receives credit towards the
satisfaction of its small or small disadvantaged business
subcontracting goals when contracting with an ANC-owned firm. 43 U.S.C.
1626(e)(4)(B). There has been some confusion as to whether an ANC-owned
firm that does not individually qualify as small but counts as a small
business or a small disadvantaged business for subcontracting goaling
purposes under 43 U.S.C. 1626(e)(4)(B) must itself submit a
subcontracting plan. SBA believes that such a firm is not currently
required to submit a subcontracting plan, but proposes to add
clarifying language to Sec. 125.3(b) to clear up any confusion. The
proposed rule would make clear that all firms considered to be small
businesses, whether the firm qualifies as a small business concern for
the size standard corresponding to the NAICS code assigned to the
contract or is deemed to be treated as a small business concern by
statute, would not be required to submit subcontracting plans.
Section 125.5
The proposed rule clarifies that SBA does not use the certificate
of competency (COC) procedures for 8(a) sole source contracts. This has
long been SBA's policy. See 62 FR 43584,
[[Page 60859]]
43592 (Aug. 14, 1997). Instead of using SBA COC procedures, an agency
that finds a potential 8(a) sole source awardee to be non-responsible
should proceed through the substitution or withdrawal procedures in the
proposed Sec. 124.503(e). The proposed rule also changes the threshold
for COC appeals from $100,000 to the simplified acquisition threshold.
Section 125.6
Section 125.6(b) provides guidance on which limitation on
subcontracting requirement applies to a ``mixed contract.'' The section
currently refers to a mixed contract as one that combines both services
and supplies. SBA inadvertently did not include the possibility that a
mixed contact could include construction work, although in practice SBA
has applied this section to a contract requiring, for example, both
services and construction work. The proposed revision would merely
recognize that a mixed contract is one that integrates any combination
of services, supplies, or construction. A contracting officer would
then select the appropriate NAICS code, and that NAICS code is
determinative as to which limitation on subcontracting and performance
requirement applies.
SBA also asks for comments regarding how the nonmanufacturer rule
should be applied in multiple item procurements (reference Sec.
125.6(a)(2)(ii)). Currently, for a multiple item procurement where a
nonmanufacturer waiver is granted for one or more items, compliance
with the limitation on subcontracting requirement will not consider the
value of items subject to a waiver. As such, more than 50% of the value
of the products to be supplied by the nonmanufacturer that are not
subject to a waiver must be the products of one or more domestic small
business manufacturers or processors. The regulation gives an example
where a contract is for $1,000,000 and calls for the acquisition of 10
items. Market research shows that nine of the items can be sourced from
small business manufacturers and one item is subject to an SBA class
waiver. The projected value of the item that is waived is $10,000.
Under the current regulatory language, at least 50% of the value of the
items not subject to a waiver, or $495,000 (50% of $990,000), must be
supplied by one or more domestic small business manufacturers, and the
prime small business nonmanufacturer may act as a manufacturer for one
or more items. Several small business nonmanufacturers have disagreed
with this provision. They believe that in order to qualify as a small
business nonmanufacturer, at least 50% of the value of the contract
must come from either small business manufacturers or from any
businesses for items which have been granted a waiver (or that small
business manufacturers plus waiver must equal at least 50%). In other
words, in the above example, $500,000 (50% of the value of the
contract) must come from small business manufacturers or be subject to
a waiver. If items totaling $10,000 are subject to a waiver, then only
$490,000 worth of items must come from small business manufacturers;
requiring $5,000 less from small business manufacturers. SBA is
considering changing this in the final rule, but seeks comments on
whether this approach makes sense. The current approach provides added
incentives for small business manufacturers. The recommended approach
might cause more requirements to be set aside for small business, but
SBA questions whether this would truly benefit small business if small
business manufactures are not ultimately providing the products.
Section 125.8
The proposed rule would make conforming changes to Sec. 125.8 in
order to take into account merging the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program with the All Small Mentor-
Prot[eacute]g[eacute] Program.
Proposed Sec. 125.8(b)(2)(iv) would permit the parties to a joint
venture to agree to distribute profits from the joint venture so that
the small business participant(s) receive profits from the joint
venture that exceed the percentage commensurate with the work performed
by them. Normally, profits would be distributed commensurate with the
work performed. However, several small businesses have asked SBA to
allow the parties to agree to pay a small business more if they would
like to do so. Of course, SBA would not permit any agreement that would
pay a small business less than that corresponding to the work it
performed. But, if the parties would like to distribute the profits to
further benefit a small business, SBA would not want to prohibit that.
Section 125.9
The proposed rule would first reorganize some of the current
provisions in Sec. 125.9 for ease of use and understanding. Paragraph
125.9(b) would be reorganized and clarified. The proposed rule
clarifies that in order to qualify as a mentor, SBA will look at three
things, whether the proposed mentor: Is capable of carrying out its
responsibilities to assist the prot[eacute]g[eacute] firm under the
proposed mentor-prot[eacute]g[eacute] agreement; does not appear on the
Federal list of debarred or suspended contractors; and can impart value
to a prot[eacute]g[eacute] firm. Instead of requiring SBA to look at
and determine that a proposed mentor possesses good character in every
case, the proposed rule would amend this provision to specify that SBA
will decline an application if SBA determines that the mentor does not
possess good character. The proposed rule would also clarify that a
mentor that has more than one prot[eacute]g[eacute] cannot submit
competing offers in response to a solicitation for a specific
procurement through separate joint ventures with different
prot[eacute]g[eacute]s. That has always been SBA's intent (the current
rule specifies that a second mentor-prot[eacute]g[eacute] relationship
cannot be a competitor of the first), but SBA wants to make this clear
in response to questions SBA has received regarding this issue.
SBA is also considering whether to limit mentors only to those
firms having average annual revenues of less than $100 million.
Currently, any concern that demonstrates a commitment and the ability
to assist small business concerns may act as a mentor. This includes
large businesses of any size. SBA has received several suggestions from
``mid-size'' companies (i.e., those that no longer qualify as small
under their primary NAICS codes, but believe that they cannot
adequately compete against the much larger companies) that a mentor-
prot[eacute]g[eacute] program that excluded very large businesses would
be beneficial to the mid-size firms and allow them to more effectively
compete. SBA's focus in the mentor-prot[eacute]g[eacute] program is the
prot[eacute]g[eacute] firm, what business development assistance a
proposed mentor can provide to a prot[eacute]g[eacute] to enable that
firm to more effectively compete on its own in the future. Whether a
mentor is $1,000 over the size standard corresponding to its primary
NAICS code or many millions of dollars over has not been a concern to
SBA. SBA seeks a program that will provide the most effective business
development assistance to small business prot[eacute]g[eacute] firms.
SBA requests comments on whether the size of a mentor should be
restricted in the regulations, and whether small businesses would be
better or worse served by such a restriction.
The proposed rule would implement Section 861 of the National
Defense Authorization Act (NDAA) of 2019, Public Law 115-232, to make
three changes to the mentor-prot[eacute]g[eacute] program in order to
benefit Puerto Rican small businesses. First, the proposed rule would
amend Sec. 125.9(b) regarding the
[[Page 60860]]
number of prot[eacute]g[eacute] firms that one mentor can have at any
one time. Currently, the regulation provides that under no
circumstances can a mentor have more than three prot[eacute]g[eacute]s
at one time. Section 861 of the NDAA provides that the restriction on
the number of prot[eacute]g[eacute] firms a mentor can have shall not
apply to up to two mentor-protege relationships if such relationships
are with a small business that has its principal office located in the
Commonwealth of Puerto Rico. As such, proposed Sec. 125.9(b)(3)(ii)
would provide that a mentor generally cannot have more than three
prot[eacute]g[eacute]s at one time, but that the first two mentor-
prot[eacute]g[eacute] relationships between a specific mentor and a
small business that has its principal office located in the
Commonwealth of Puerto Rico would not count against the limit of three
proteges that a mentor can have at one time. Thus, if a mentor did have
two prot[eacute]g[eacute]s that had their principal offices in Puerto
Rico, it could have an additional three prot[eacute]g[eacute]s, or a
total of five prot[eacute]g[eacute]s, and comply with SBA's
requirements. The proposed rule would also add a new Sec. 125.9(d)(6)
to implement a provision of Section 861 of NDAA 2019, which authorizes
contracting incentives to mentors that subcontract to
prot[eacute]g[eacute] firms that are Puerto Rico businesses.
Specifically, proposed Sec. 125.9(d)(6) would provide that a mentor
that provides a subcontract to a prot[eacute]g[eacute] that has its
principal office located in Puerto Rico may (i) receive positive
consideration for the mentor's past performance evaluation, and (ii)
apply costs incurred for providing training to such
prot[eacute]g[eacute] toward the subcontracting goals contained in the
subcontracting plan of the mentor. SBA requests comments as to whether
the term ``positive consideration'' can be better defined. Section 861
specifically authorizes these two incentives, but suggests that other
incentives may also be appropriate. SBA also seeks comments as to
whether any other contracting incentives could be feasible.
The proposed rule would clarify the requirements for a firm seeking
to form a mentor-prot[eacute]g[eacute] relationship in a NAICS code
that is not the firm's primary NAICS code (Sec. 125.9(c)(1)(ii)). SBA
intended that a firm could be a prot[eacute]g[eacute] in a secondary
NAICS code for which it qualifies as small if it has done work
previously in that secondary NAICS code. SBA did not want a firm that
had grown to be other than small in its primary NAICS codes to form a
mentor-prot[eacute]g[eacute] relationship in a NAICS code in which it
had no experience simply because it qualified as small in that other
NAICS code. SBA believes that such a situation (i.e., having a
prot[eacute]g[eacute] with no experience in a secondary NAICS code)
could lead to abuse of the program. It would be hard for a firm with no
experience in a secondary NAICS code to be the lead on a joint venture
with its mentor. Similarly, a mentor with all the experience could
easily take control of a joint venture and perform all of the work
required of the joint venture. The current regulation, however, has
caused some confusion. It states that where a firm is other than small
in its primary NAICS code, the firm can qualify as a
prot[eacute]g[eacute] in a secondary NAICS code if it is small in that
secondary NAICS code and has prior experience or previously performed
work in that secondary NAICS code. Some have read this provision as
permitting a mentor-prot[eacute]g[eacute] relationship in a secondary
NAICS code only where the firm is other than small in its primary NAICS
code. That was not SBA's intent. In addition, others have read this
provision as requiring prior experience in a secondary NAICS code only
where the firm is other than small in its primary NAICS code, but not
where it qualifies as small in its primary NAICS code. This too was not
SBA's intent. The proposed rule clarifies that a firm may seek to be a
prot[eacute]g[eacute] in any NAICS code for which it qualifies as small
and can form a mentor-prot[eacute]g[eacute] relationship in a secondary
NAICS code if it qualifies as small and has prior experience or
previously performed work in that NAICS code.
In addition, although SBA does not believe that a regulatory change
is needed, SBA would like to clarify SBA's position on what experience
a prot[eacute]g[eacute] firm must have if it seeks a mentor-
prot[eacute]g[eacute] relationship in its primary NAICS code. As noted
above, SBA's regulations require a firm seeking to be a
prot[eacute]g[eacute] in a secondary NAICS code to demonstrate that it
has prior experience in that secondary NAICS code. The regulation is
silent with respect to a firm having experience in its primary NAICS
code. Generally, a firm would have performed some work in its primary
NAICS code--normally, that is how SBA determines what the firm's
primary NAICS code is (i.e., the code in which it has received the
majority of its revenues). However, a firm owned by an entity (i.e.,
tribe, ANC, NHO or CDC), can be admitted to the 8(a) BD without much
experience in its self-identified primary NAICS code if the entity has
made a firm commitment to support the operations of the applicant
concern and it has the financial ability to do so. In these limited
instances, where a new entity-owned 8(a) Participant seeks to form a
mentor-prot[eacute]g[eacute] relationship, it may not have any
expertise in its identified primary NAICS code. The 8(a) BD Mentor-
Prot[eacute]g[eacute] Program has allowed mentor-prot[eacute]g[eacute]
relationships in these circumstances. Because the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program is being merged with the All Small
Mentor-Prot[eacute]g[eacute] Program, it follows that SBA would
continue to allow such mentor-prot[eacute]g[eacute] relationships.
The proposed rule would also respond to concerns raised by small
businesses regarding the regulatory limit of permitting only two
mentor-prot[eacute]g[eacute] relationships even where the small
business prot[eacute]g[eacute] receives no or limited assistance from
its mentor through a particular mentor-prot[eacute]g[eacute] agreement.
SBA has informally permitted a mentor-prot[eacute]g[eacute]
relationship not to count against the limit of two such relationships
in total where the prot[eacute]g[eacute] can demonstrate that it has
not received any assistance from its mentor under the mentor-
prot[eacute]g[eacute] relationship. SBA believes that a relationship
that provides no business development assistance or contracting
opportunities to a prot[eacute]g[eacute] should not be counted against
the firm, or that the firm should not be restricted to having only one
additional mentor-prot[eacute]g[eacute] relationship in such a case.
SBA considered implementing in this proposed rule a provision which
would formalize its previous policy--i.e., to not count a mentor-
prot[eacute]g[eacute] relationship where the prot[eacute]g[eacute] can
demonstrate that it received no assistance from the relationship. In
order to eliminate any disagreements as to whether a firm did or did
not receive any assistance under its mentor-prot[eacute]g[eacute]
agreement, this rule proposes to establish an easily understandable and
objective basis for counting or not counting a mentor-
prot[eacute]g[eacute] relationship. Specifically, the rule proposes to
amend Sec. 125.9(e)(6) to not count any mentor-prot[eacute]g[eacute]
relationship toward a firm's two permitted lifetime mentor-
prot[eacute]g[eacute] relationships where the mentor-
prot[eacute]g[eacute] agreement is terminated within 18 months from the
date SBA approved the agreement.
This rule also proposes to eliminate the reconsideration process
for declined mentor-prot[eacute]g[eacute] agreements in Sec. 125.9(f)
as unnecessary. Currently, if SBA declines a mentor-
prot[eacute]g[eacute] agreement, the prospective small business
prot[eacute]g[eacute] may make changes to its agreement and seek
reconsideration from SBA within 45 days of SBA's decision to decline
the mentor-prot[eacute]g[eacute] relationship. The current regulations
also allow the small
[[Page 60861]]
business to submit a new (or revised) mentor-prot[eacute]g[eacute]
agreement to SBA at any point after 60 days from the date of SBA's
final decision declining a mentor-prot[eacute]g[eacute] relationship.
SBA believes that this ability to submit a new or revised mentor-
prot[eacute]g[eacute] agreement after 60 days is sufficient.
Finally, the proposed rule would add clarifying language regarding
the annual review of mentor-prot[eacute]g[eacute] relationships. It is
important that SBA receive an honest assessment from the
prot[eacute]g[eacute] of how the mentor-prot[eacute]g[eacute]
relationship is working, whether the prot[eacute]g[eacute] has received
the agreed-upon business development assistance, and whether the
prot[eacute]g[eacute] would recommend the mentor to be a mentor for
another small business in the future. SBA needs to know if the mentor
is not providing the agreed-upon business development assistance to the
prot[eacute]g[eacute]. This would affect that firm's ability to be a
mentor in the future. The rule would also provide that if a
prot[eacute]g[eacute] does not provide information relating to the
mentor-prot[eacute]g[eacute] relationship, thereby hindering SBA's
ability to properly evaluate the relationship, SBA may decide not to
approve continuation of the mentor-prot[eacute]g[eacute] relationship.
SBA has also received several complaints from small business
prot[eacute]g[eacute]s whose mentor-prot[eacute]g[eacute] relationships
were terminated by the mentor soon after a joint venture between the
prot[eacute]g[eacute] and mentor received a Government contract as a
small business. SBA considered adding additional protections for
prot[eacute]g[eacute] firms, but is not certain how best to remedy this
situation. Current Sec. 125.9(h) provides consequences for when a
mentor does not provide to the prot[eacute]g[eacute] firm the business
development assistance set forth in its mentor-prot[eacute]g[eacute]
agreement. Under the current regulations, where that occurs, the firm
will be ineligible to again act as a mentor for a period of two years
from the date SBA terminates the mentor-prot[eacute]g[eacute]
agreement, SBA may recommend to the relevant procuring agency to issue
a stop work order for each Federal contract for which the mentor and
prot[eacute]g[eacute] are performing as a small business joint venture,
and SBA may seek to substitute the prot[eacute]g[eacute] firm for the
joint venture if the prot[eacute]g[eacute] firm is able to
independently complete performance of any joint venture contract
without the mentor. SBA believes that provision should be sufficient to
dissuade mentors from early terminating mentor-prot[eacute]g[eacute]
agreements. SBA also considered adding a provision requiring a joint
venture between a prot[eacute]g[eacute] and its mentor to recertify its
size if the mentor-prot[eacute]g[eacute] relationship prematurely ends.
In such a case, if the mentor was an other than small business and the
joint venture could not recertify as small, the procuring agency could
no longer count the contract as an award to small business. SBA
specifically requests comments on this alternative and seeks comments
on other possible alternatives to remedy this perceived problem.
Section 125.18
In addition to the revision to Sec. 125.18(c) identified above,
the rule proposes to amend the language in Sec. 125.18(a) to clarify
what representations and certifications a business concern seeking to
be awarded a SDVO contract must submit as part of its offer.
Sections 126.616 and 126.618
The proposed rule would make minor revisions to Sec. Sec. 126.616
and 126.618 by merely deleting references to the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program, since that program would no longer exist
as a separate program.
Sections 127.503(h) and 127.504
In addition to the revision to Sec. 127.504(c) identified above,
the rule proposed to make other changes or clarifications to Sec.
127.504. The proposed rule would rename and revise Sec. 127.504 for
better understanding and ease of use. The section heading would be
changed to ``What requirements must an EDWOSB or WOSB meet to be
eligible for an EDWOSB or WOSB contract?''. The text would then more
clearly define those requirements and, as identified above, add
language similar to that contained in the regulations governing the
other socio-economic programs.
The proposed rule would move the recertification procedures for
WOSBs from Sec. 127.503(h) to Sec. 127.504(e).
Sections 134.318 and 121.1103
The proposed rule would amend Sec. 134.318 to make it consistent
with SBA's size regulations. In this regard, Sec. 121.1103(c)(1)(i) of
SBA's size regulations provides that upon receipt of the service copy
of a NAICS code appeal, the contracting officer must ``stay the
solicitation.'' However, when that rule was implemented, a
corresponding change was not made to the procedural rules for SBA's OHA
contained in part 134. Section 134.318(b) provides that if OHA changes
a NAICS code in response to a NAICS code appeal, and the contracting
officer must amend the solicitation to reflect the new NAICS code if
``the contracting officer receives OHA's decision by the date offers
are due.'' Otherwise, OHA's decision does not apply to the pending
procurement, but will apply only to future solicitations for the same
supplies or services. If the solicitation is stayed, as required by
Sec. 121.1103(c)(1)(i), the contracting officer will always receive
OHA's decision before the date offers are due. As such, this rule
proposes to simply require that the contracting officer must amend the
solicitation to reflect the new NAICS code whenever OHA changes a NAICS
code in response to a NAICS code appeal. In addition, for clarity
purposes, the proposed rule would revise Sec. 121.1103(c)(1)(i) to
provide that a contracting officer must stay the date of the closing of
the receipt of offers instead of requiring that he or she must stay the
solicitation. SBA is not revising these regulations to reflect a change
in policy, but merely to more precisely capture what actually is being
stayed.
III. Compliance With Executive Orders 12866, 12988, 13132, 13175,
13563, 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?
In combining the 8(a) BD Mentor-Prot[eacute]g[eacute] Program and
the All Small Mentor-Prot[eacute]g[eacute] Program, SBA seeks to
eliminate confusion regarding perceived differences between the two
Programs, remove unnecessary duplication of functions within SBA, and
establish one, unified staff to better coordinate and process mentor-
prot[eacute]g[eacute] applications. In addition, eliminating the
requirement that SBA approve every joint venture in connection with an
8(a) contract will greatly reduce the time required for 8(a) BD
Participants to come into and SBA to ensure compliance with SBA's joint
venture requirements.
SBA is also 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.
The proposed rule would
[[Page 60862]]
make several changes to ensure that the rules pertaining to SBA's
various small business procurement programs are consistent. SBA
believes that making the programs as consistent and similar as
possible, where practicable, will make it easier for small businesses
to understand what is expected of them and to comply with those
requirements.
2. What is the baseline, and the incremental benefits and costs of
this regulatory action?
The proposed regulations seek to address or clarify several issues,
which will provide clarity to small businesses and contracting
personnel. Further, SBA is proposing to eliminate the burden that 8(a)
Participants seeking to be awarded an 8(a) contract as a joint venture
must submit the joint venture to SBA for review and approval prior to
contract award. There are currently approximately 4500 8(a) BD
Participants in the portfolio. Of those, about 10% or roughly 450
Participants have entered a joint venture agreement to seek the award
of an 8(a) contract. Under the current rules, SBA must approve the
initial joint venture agreement itself and each addendum to the joint
venture agreement--identifying the type of work and what percentage
each partner to the joint venture would perform of a specific 8(a)
procurement--prior to contract award. SBA reviews the terms of the
joint venture agreement for regulatory compliance and must also assess
the 8(a) BD Participant's capacity and whether the agreement is fair
and equitable and will be of substantial benefit to the 8(a) concern.
It is difficult to calculate the costs associated with submitting a
joint venture agreement to SBA because the review process is highly
fact-intensive and typically requires that 8(a) firms provide
additional information and clarification. However, in the Agency's best
professional judgment, it is estimated that an 8(a) Participant
currently spends approximately three hours submitting a joint venture
agreement to SBA and responding to questions regarding that submission.
That equates to approximately 1,350 hours at an estimated rate of
$44.06 per hour--the median wage plus benefits for accountants and
auditors according to 2018 data from the Bureau of Labor Statistics--
for an annual total cost savings to 8(a) Participants of about $59,500.
In addition, merging the 8(a) BD Mentor-Prot[eacute]g[eacute]
Program into the All Small Mentor-Prot[eacute]g[eacute] Program would
also provide cost savings. Firms seeking a mentor-prot[eacute]g[eacute]
relationship through the All Small Mentor-Prot[eacute]g[eacute] Program
apply through an on-line, electronic application system. 8(a)
Participants seeking SBA's approval of a mentor-prot[eacute]g[eacute]
relationship through the 8(a) BD program do not apply through an on-
line, electronic system, but rather apply manually through their
servicing SBA district office. In SBA's best professional judgment, the
additional cost for submitting a manual mentor-prot[eacute]g[eacute]
agreement to SBA for review and approval and responding manually to
questions regarding that submission is estimated at two hours. SBA
receives approximately 150 applications for 8(a) mentor-
prot[eacute]g[eacute] relationships annually, which equates to an
annual savings to prospective prot[eacute]g[eacute] firms of about 300
hours. At an estimated rate of $44.06 per hour, the annual savings in
costs related to the reduced time for mentor-prot[eacute]g[eacute]
applications through the All Small Mentor Prot[eacute]g[eacute] process
is about $13,000 per year.
Moreover, eliminating the 8(a) BD Mentor-Prot[eacute]g[eacute]
Program as a separate program and merging it with the All Small Mentor-
Prot[eacute]g[eacute] Program will eliminate confusion firms seeking a
mentor-prot[eacute]g[eacute] relationship have between the two
programs. When SBA first implemented the All Small Mentor-
Prot[eacute]g[eacute] Program, it intended to establish a program
substantively identical to the 8(a) BD mentor-prot[eacute]g[eacute]
program, as required by Section 1641 of the NDAA of 2013. Nevertheless,
feedback from the small business community reveals a widespread
misconception that the two programs offer different benefits. By
merging the 8(a) BD Mentor-Prot[eacute]g[eacute] Program into the All
Small-Mentor Prot[eacute]g[eacute] Program, firms will not have to read
the requirements for both programs and try to decipher any perceived
differences. SBA estimates that having one combined program will
eliminate about one hour of preparation time for each firm seeking a
mentor-prot[eacute]g[eacute] relationship. Based on approximately 600
mentor-prot[eacute]g[eacute] applications each year (about 450 for the
All Small Mentor-Prot[eacute]g[eacute] Program and about 150 for the
8(a) BD Mentor-Prot[eacute]g[eacute] Program), this would equate to an
annual cost savings to prospective prot[eacute]g[eacute] firms of about
600 hours. At an estimated rate of $44.06 per hour, the annual savings
in costs related to the elimination of confusion caused by having two
separate programs is about $26,500.
Thus, in total, the merger of the 8(a) BD mentor-
prot[eacute]g[eacute] program into the All Small Business Mentor-
Prot[eacute]g[eacute] Program would provide a cost savings of about
$39,500 per year.
In addition, it generally takes between 60 and 90 days for SBA to
approve a mentor-prot[eacute]g[eacute] relationship through the 8(a) BD
program. Conversely, the average time it takes to approve a mentor-
prot[eacute]g[eacute] relationship through the All Small Mentor-
Prot[eacute]g[eacute] Program is about 20 working days. To firms
seeking to submit offers through a joint venture with their mentors,
this difference is significant. Such joint ventures are only eligible
for the regulatory exclusion from affiliation if they are formed after
SBA approves the underlying mentor-prot[eacute]g[eacute] relationship.
It follows that firms applying through the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program could miss out on contract opportunities
waiting for their mentor-prot[eacute]g[eacute] relationships to be
approved. These contract opportunity costs are inherently difficult to
measure, so SBA is requesting comments to better inform our
understanding of the costs to the small business community. However, in
SBA's best judgment, faster approval timeframes will mitigate such
costs by giving program participants more certainty in planning their
proposal strategies.
This rule also proposes to eliminate the requirement that any
specific joint venture can be awarded no more than three contracts over
a two year period, but would instead permit a joint venture to be
awarded an unlimited number of contracts over a two year period. The
change removing the limit of three awards to any joint venture would
reduce the burden of small businesses being required to form additional
joint venture entities to perform a fourth contract within that two-
year period. SBA has observed that joint ventures are often established
as separate legal entities--specifically as limited liability
corporations--based on considerations related to individual venture
liability, tax liability, regulatory requirements, and exit strategies.
Under the current rule joint venture partners must form a new joint
venture entity after receiving three contracts lest they be deemed
affiliated for all purposes. The proposed rule which allows a joint
venture to continue to seek and be awarded contracts without requiring
the partners to form a new joint venture entity after receiving its
third contract would save small businesses significant legal costs in
establishing new joint ventures and ensuring that those entities meet
all applicable regulatory requirements.
The proposed rule would also make several changes to reduce the
burden of recertifying small business status generally and requesting
changes of ownership in the 8(a) BD program. Specifically, the proposed
rule would clarify that a concern that is at least 51% owned by an
entity (i.e., tribe, ANC, or Community Development Corporation (CDC))
need not recertify its
[[Page 60863]]
status as a small business when the ownership of the concern changes to
or from a wholly-owned business concern of the same entity, as long as
the ultimate owner remains that entity. In addition, the proposed rule
would also provide that a Participant in SBA's 8(a) BD program that is
owned by an ANC or tribe need not request a change of ownership from
SBA where the ANC or tribe merely reorganizes its ownership of a
Participant in the 8(a) BD program by inserting or removing a wholly-
owned business entity between the ANC/tribe and the Participant. Both
of these changes would save entity-owned small business concerns a
significant amount of time and money. Similarly, the proposed rule
would provide that prior SBA approval is not needed where the
disadvantaged individual (or entity) in control of a Participant in the
8(a) BD program will increase the percentage of his or her (its)
ownership interest.
The proposed rule would also allow a concern that has been declined
for 8(a) BD program participation to submit a new application 90 days
after the date of the Agency's final decision to decline. This would
change the current rule which requires a concern to wait 12 months from
the date of the final agency decision to reapply. This would allow
firms that have been declined from participating in the 8(a) BD program
the opportunity to correct deficiencies, come into compliance with
program eligibility requirements, reapply and be admitted to the
program and receive the benefits of the program much more quickly. SBA
understands that by reducing the re-application waiting period there is
the potential to strain the agency's resources with higher application
volumes. Because these potential costs are difficult to quantify, SBA
is seeking comments to further examine this proposal. However, in the
Agency's best judgment, any costs associated with the increase in
application volume would be outweighed by the potential benefit of
providing business development assistance and contracting benefits
sooner to eligible firms.
This rule also proposes to clarify SBA's position with respect to
size and socioeconomic status certifications on task orders under MACs.
Currently, size certifications at the order level are not required
unless the contracting officer, in his or her discretion, requests a
recertification in connection with a specific order. The proposed rule
would require a concern to submit a recertification or confirm its size
and/or socioeconomic status for all set-aside orders (i.e., small
business set-aside, 8(a) small business, service-disabled veteran-owned
small business, HUBZone small business, or women-owned small business)
under unrestricted MACs, except for orders or Blanket Purchase
Agreements issued under any FSS contracts. Additionally, the proposed
rule would require a concern to submit a recertification or confirm its
socioeconomic status for all set-aside orders where the required
socioeconomic status for the order differs from that of the underlying
set aside MAC. If the firm's size and status in SAM is current and
accurate when the firm submits its offer, the concern would not need to
submit a new certification or submit any additional documentation with
its offer. SBA recognizes that confirming accurate size and
socioeconomic status imposes a burden on a small business contract
holder, but the burden is minimal. SBA intends that confirmation of
size and status under this rule would be satisfied by confirming that
the firm's size and status in SAM is currently accurate and qualifies
the firm for award.
FPDS-NG indicates that, in Fiscal Year 2018, agencies set aside
about 1,400 orders per year off unrestricted MACs, excluding orders
under FSS contracts. SBA adopts the assumption from FAR Case 2014-002
that on average there are three offers per set-aside order. The annual
cost of requiring present size and socioeconomic status on set-aside
orders under unrestricted MACs, excluding FSS orders, therefore is
calculated as 1,400 orders x 3 offers per order x 15 minutes per offer
x $44.06 cost per hour. This amounts to an annual public burden of
about $46,250.
FPDS-NG indicates that, in Fiscal Year 2018, agencies set aside
about 400 orders per year off set-aside MACs, other than the FSS, in
the categories covered by this rule. These categories are WOSB or
EDWOSB set-aside/sole-source orders off small business set-aside MACs;
SDVOSB set-aside/sole-source orders off small business set-aside MACs;
WOSB or EDWOSB set-aside/sole-source orders off any small business
program MAC (8(a), HUBZone, WOSB/EDWOSB, and SDVOSB); and SDVOSB set-
aside/sole-source order off 8 any small business program MAC (8(a),
HUBZone, WOSB/EDWOSB, and SDVOSB). Following the same calculations, the
annual cost of requiring present socioeconomic status on set-aside
orders under set-aside MACs, is calculated as 400 orders x 3 offers per
order x 15 minutes per offer x $44.06 cost per hour. This amounts to an
annual public burden of about $13,200.
As reflected in the calculation, SBA believes that being presently
qualified for the required size or socioeconomic status on an order,
where required, would impose a burden on small businesses. A concern
already is required by law to update its size and status certifications
in SAM at least annually. As such, the added burden to industry is
limited to confirming that the firm's certification is current and
accurate.
The added burden to ordering agencies includes the act of checking
a firm's size and status certification in SAM at the time of order
award. Since ordering agencies are already familiar with checking SAM
information, such as to ensure that an order awardee is not debarred,
suspended, or proposed for debarment, this verification is de minimis.
Further, checking SAM at time of order award replaces the check of the
offeror's contract level certification. SBA recognizes, however, that
an agency's market research for the order level may be impacted where
the agency intends to issue a set-aside order off an unrestricted
vehicle (or a socioeconomic set-aside off a small business set-aside
vehicle). The ordering agency may need to identify MAC-eligible vendors
and then find their status in SAM. This is particularly the case where
the agency is applying the Rule of Two and verifying that there are at
least two small businesses or small businesses with the required status
sufficient to set aside the order. SBA does not believe that conducting
SAM research is onerous; however, because this rule does not cover the
FSS and does not cover orders set aside within the same category as the
contract, agencies have readily available alternatives to avoid using
SAM.
Using the same set-aside order data, the annual cost of additional
market research efforts for applicable set-aside orders under MACs, is
calculated as 2,400 orders (1,400 + 1,000) x 10 minutes per order x
$44.06 cost per hour. This amounts to an annual government burden of
about $17,600.
The annual cost is partially offset by the cost savings that result
from other changes in this rule. This proposed change goes more to
accountability and ensuring that small business contracting vehicles
truly benefit small business concerns. Nevertheless, SBA is requesting
comments to further assess potential incremental costs.
3. What are the alternatives to this proposed rule?
As noted above, this rule proposes to make a number of changes
intended to reduce unnecessary or excessive burdens on small
businesses, and to
[[Page 60864]]
clarify other regulatory provisions to eliminate confusion among small
businesses and procuring activities. SBA has also considered other
alternative proposals to achieve these ends. Concerning SBA's role in
approving 8(a) joint venture agreements, the Agency could also
eliminate the requirement that SBA must approve joint ventures in
connection with sole source 8(a) awards. However, as noted above, SBA
believes that such approval is an important enforcement mechanism to
ensure that the joint venture rules are followed. With respect to the
requirement that a concern must wait 90 days to re-apply to the 8(a) BD
program after the date of the Agency's final decline decision, SBA
could instead eliminate the application waiting period altogether. This
would allow a concern to re-apply as soon as it reasonably believed it
had overcome the grounds for decline. However, SBA believes that such
an alternative would encompass significant administrative burden on
SBA.
Under the proposed rule, if an order under an unrestricted MAC is
set-aside exclusively for small business (i.e., small business set-
aside, 8(a) small business, service-disabled veteran-owned small
business, HUBZone small business, or women-owned small business), or
the order is set aside in a different category than was the set-aside
MAC, a concern must be qualified for the required size and
socioeconomic status at the time it submits its initial offer, which
includes price, for the particular order. In SBA's view, the order is
the first time size or socioeconomic status is important where the
underlying MAC is unrestricted or set aside in a different category
than the set-aside MAC, and therefore, that is the date at which
eligibility should be examined. SBA considered maintaining the status
quo; allowing a one-time certification as to size and socioeconomic
status (i.e., at the time of the initial offer for the underlying
contract) to control all orders under the contract, unless one of
recertification requirements applies (see 121.404(g)). SBA believes the
current policy does not properly promote the interests of small
business. Long-term contracting vehicles that reward firms that once
were, but no longer qualify as, small or a particular socioeconomic
status adversely affect truly small or otherwise eligible businesses.
Another alternative is to require business concerns to notify
contracting agencies when there is a change to a concern's
socioeconomic status (e.g., HUBZone, WOSB, etc.), such that they would
no longer qualify for set-aside orders. The contracting agency would
then be required to issue a contract modification within 30 days, and
from that point forward, ordering agencies would no longer be able to
count options or orders issued pursuant to the contract for small
business goaling purposes. This could be less burdensome than
recertification of socioeconomic status for each set-aside order. SBA
invites comments on consideration of this approach.
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. This
proposed rule is expected to be an E.O. 13771 deregulatory action. The
annualized cost savings of this rule is expected to be $21,065 in 2016
dollars with a net present value of $300,935 over perpetuity.
Table 1--Summary of Incremental Costs and Cost Savings
----------------------------------------------------------------------------------------------------------------
Annual cost/
Item No. Regulatory action item (cost saving)
estimate
----------------------------------------------------------------------------------------------------------------
1................................... Eliminating SBA approval of joint venture agreements to ($59,500)
perform competitive 8(a) contracts.
2................................... Merging the 8(a) BD Mentor-Prot[eacute]g[eacute] Program (13,000)
into the All Small Mentor-Prot[eacute]g[eacute] Program--
Elimination of manual application process.
3................................... Merging the 8(a) BD Mentor-Prot[eacute]g[eacute] Program (26,500)
into the All Small Mentor-Prot[eacute]g[eacute] Program--
Elimination of confusion among firms seeking a mentor-
prot[eacute]g[eacute] relationship.
4................................... Requiring recertification for set-aside orders issued off 46,250
unrestricted Multiple Award Contracts.
5................................... Requiring recertification for set-aside orders issued off 13,200
set-aside Multiple Award Contracts.
6................................... Additional Government detailed market research to identify 17,600
qualified sources for set-aside orders.
----------------------------------------------------------------------------------------------------------------
Table 2--Detailed Breakdown of Incremental Costs and Cost Savings
----------------------------------------------------------------------------------------------------------------
Annual cost/ (cost saving)
Item No. Regulatory action item details estimate breakdown
----------------------------------------------------------------------------------------------------------------
1............................ Proposed regulatory change: SBA is proposing to
eliminate the burden that 8(a) Participants
seeking to be awarded an 8(a) contract as a joint
venture must submit the joint venture to SBA for
review and approval prior to contract award.
Estimated number of impacted entities: There are 450 entities.
currently approximately 4500 8(a) BD Participants
in the portfolio. Of those, about 10% or roughly
450 Participants have entered a joint venture
agreement to seek the award of an 8(a) contract.
Estimated average impact * (labor hour): SBA 3 hours
estimates that an 8(a) BD Participant currently
spends approximately three hours submitting a
joint venture agreement to SBA and responding to
questions regarding that submission.
2017 Median Pay ** (per hour): Most 8(a) firms use $44.06.
an accountant or someone with similar skills for
this task.
Estimated Cost/(Cost Saving)....................... ($59,500)
2............................ Proposed regulatory change: SBA is proposing to
merge the 8(a) BD Mentor-Prot[eacute]g[eacute]
Program into the All Small Mentor-
Prot[eacute]g[eacute] Program. This will reduce
the burden on 8(a) Participants seeking a mentor-
prot[eacute]g[eacute].
Estimated number of impacted entities: SBA receives 150 entities.
approximately 150 applications for 8(a) mentor-
prot[eacute]g[eacute] relationships annually.
[[Page 60865]]
Estimated average impact * (labor hour): In SBA's 2 hours.
best professional judgment, the additional cost
for submitting a manual mentor-
prot[eacute]g[eacute] agreement to SBA for review
and approval and responding manually to questions
regarding that submission is estimated at two
hours.
2017 Median Pay ** (per hour): Most 8(a) firms use $44.06.
an accountant or someone with similar skills for
this task.
Estimated Cost/(Cost Saving)....................... ($13,000)
3............................ Proposed regulatory change: SBA is proposing to
merge the 8(a) BD Mentor-Prot[eacute]g[eacute]
Program into the All Small Mentor-
Prot[eacute]g[eacute] Program. In doing so, firms
will not have to read the requirements for both
programs and try to decipher any perceived
differences..
Estimated number of impacted entities: SBA receives 600 entities.
approximately 600 mentor-prot[eacute]g[eacute]
applications each year--about 450 for the All
Small Mentor-Prot[eacute]g[eacute] Program and
about 150 for the 8(a) BD Mentor-
Prot[eacute]g[eacute] Program).
Estimated average impact * (labor hour): SBA 1 hour.
estimates that having one combined program will
eliminate about one hour of preparation time for
each firm seeking a mentor-prot[eacute]g[eacute]
relationship.
2017 Median Pay ** (per hour): Most small business $44.06.
concerns use an accountant or someone with similar
skills for this task.
Estimated Cost/(Cost Saving)....................... ($26,500)
4............................ Proposed regulatory change: SBA is proposing to
require that a firm be accurately certified and
presently qualified as to size and/or status for
set-aside orders issued off Multiple Award
Contracts that were not set aside or set aside in
a separate category, except for the Federal Supply
Schedule.
Estimated number of impacted entities: 4,200 offers.
Approximately 1,400 set-aside orders are issued
annually on Multiple Award Contracts that are not
set aside in the same category, other than on the
Federal Supply Schedule. SBA estimates that three
offers are submitted for each order.
Estimated average impact * (labor hour): SBA 0.25 hours.
estimates that a small business will spend an
average of 15 minutes confirming that size and
status is accurate prior to submitting an offer.
2017 Median Pay ** (per hour): Most small business $44.06
concerns use an accountant or someone with similar
skills for this task.
Estimated Cost/(Cost Saving)....................... $46,250.
5............................ Proposed regulatory change: SBA is proposing to
require that a firm be accurately certified and
presently qualified as to socioeconomic status for
set-aside orders issued off Multiple Award
Contracts that were set aside in a separate
category, except for the Federal Supply Schedule
contracts.
Estimated number of impacted entities: 1,200 offers.
Approximately 400 set-aside orders are issued
annually on Multiple Award Contracts that are not
set aside in the same category, other than on the
Federal Supply Schedule, are affected by this
rule. SBA estimates that three offers are
submitted for each order.
Estimated average impact * (labor hour): SBA 0.25 hours.
estimates that a small business will spend an
average of 15 minutes confirming that size and
status is accurate prior to submitting an offer.
2017 Median Pay ** (per hour): Most small business $44.06.
concerns use an accountant or someone with similar
skills for this task.
Estimated Cost/(Cost Saving)....................... $13,200.
6............................ Proposed regulatory change: SBA is proposing to
require that firms be accurately certified and
presently qualified as to size and socioeconomic
status for certain set-aside orders issued off
Multiple Award Contracts, except for the Federal
Supply Schedule contracts. This change impacts the
market research required by ordering activities to
determine if a set-aside order for small business
or for any of the socioeconomic programs may be
pursued.
Estimated number of impacted entities: 2,400 orders.
Approximately 2,400 set-aside orders are issued
annually as described in the proposed rule on
Multiple Award Contracts, other than on the
Federal Supply Schedule. 33000.
Estimated average impact * (labor hour): SBA 0.16 hours.
estimates that ordering activities applying the
Rule of Two will spend an average of 10 additional
minutes to locate contractors awarded MACs and
looking up the current business size for each of
the contractors in SAM to determine if a set-aside
order can be pursued.
2017 Median Pay ** (per hour): Contracting officers $44.06.
typically perform the market research for the
acquisition plan.
Estimated Cost/(Cost Saving)....................... $17,600.
----------------------------------------------------------------------------------------------------------------
* This estimate is based on SBA's best professional judgment.
** Source: Bureau of Labor Statistics, Accountants and Auditors.
Executive Order 12988
This action meets applicable standards set forth in Sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have retroactive or preemptive effect.
Executive Order 13132
For the purposes of Executive Order 13132, SBA has determined that
this proposed rule will not have substantial, direct effects on the
States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Therefore, for the purpose of Executive
Order 13132, Federalism, SBA has determined that this proposed rule has
no federalism implications warranting preparation of a federalism
assessment.
Executive Order 13175
As part of this proposed rulemaking process SBA held tribal
consultations pursuant to Executive Order 13175, Tribal Consultations,
in Anchorage, AK
[[Page 60866]]
(see 83 FR 17626), Albuquerque, NM (see 83 FR 24684), and Oklahoma
City, OK (see 83 FR 24684). This executive order reaffirms the Federal
Government's commitment to tribal sovereignty and requires Federal
agencies to consult with Indian tribal governments when developing
policies that would impact the tribal community. The purpose of the
above-referenced tribal consultation meetings was to provide interested
parties with an opportunity to discuss their views on the issues, and
for SBA to obtain the views of SBA's stakeholders on approaches to the
8(a) BD program regulations. SBA has always considered tribal
consultation meetings a valuable component of its deliberations and
believes that these tribal consultation meetings allow 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 ANC-owned firms
participating in the 8(a) BD program.
In general, tribal stakeholders were supportive of SBA's intent to
implement changes that will make it easier for small business concerns
to understand and comply with the regulations governing the 8(a) BD
program, and agreed that this rulemaking will make the program more
effective and accessible to the small business community. SBA received
significant comments on its approaches to the proposed regulatory
changes, as well as several recommendations regarding the 8(a) BD
program not initially contemplated by this planned rulemaking. SBA has
taken these discussions into account in drafting this proposed rule.
SBA intends to hold additional tribal consultations before issuing a
final rule.
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 E.O. 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
(FPDS-NG), Dynamic Small Business Search (DSBS) and System for Award
Management (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?
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. In addition, SBA submitted the proposed
rule to the Office of Management and Budget for interagency review.
3. Flexibility: Did the agency identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public?
Yes, the proposed rule is intended to reduce unnecessary or
excessive burdens on 8(a) Participants, and clarify other regulatory
related provisions to eliminate confusion among small businesses and
procuring activities.
Executive Order 13771
This proposed rule is expected to be an E.O. 13771 deregulatory
action. The annualized cost savings of this rule is expected to be
$21,065 in 2016 dollars with a net present value of $300,935 over
perpetuity. A detailed discussion of the estimated cost of this
proposed rule can be found in the above Regulatory Impact Analysis.
Paperwork Reduction Act, 44 U.S.C. Ch. 35
This proposed rule does impose additional reporting or
recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C.
Chapter 35. The rule provides a number of size and/or socioeconomic
status recertification requirements for set-aside orders under MACs.
The annual total public reporting burden for this collection of
information is estimated to be 1,800 total hours ($79,300), including
the time for reviewing instructions, searching existing data sources,
gathering and maintaining the data needed, and completing information
reporting.
Respondents: 7,200.
Responses per respondent: 1.
Total annual responses: 7,200.
Preparation hours per response: 0.25 (15 min).
Total response burden hours: 1,800.
Cost per hour: $44.06.
Estimated cost burden to the public: $79,300.
This added information collection burden will be officially
reflected through OMB Control Number 9000-0163 if the rule is
implemented.
SBA invites comments, particularly on: Whether this collection of
information is necessary; whether it will have practical utility;
whether our estimate of the public burden of this collection of
information is accurate, and based on valid assumptions and
methodology; ways to enhance the quality, utility, and clarity of the
information to be collected; and ways in which we can minimize the
burden of the collection of information on those who are to respond,
through the use of appropriate technological collection techniques or
other forms of information technology.
Regulatory Flexibility Act, 5 U.S.C. 601-612
The Regulatory Flexibility Act (RFA) requires administrative
agencies to consider the effect of their actions on small entities,
small non-profit enterprises, and small local governments. Pursuant to
the RFA, when an agency issues a rulemaking, the agency must prepare a
regulatory flexibility analysis which describes the impact of the rule
on small entities. However, section 605 of the RFA allows an agency to
certify a rule, in lieu of preparing an analysis, if the rulemaking is
not expected to have a significant economic impact on a substantial
number of small entities. The RFA defines ``small entity'' to include
``small businesses,'' ``small organizations,'' and ``small governmental
jurisdictions.''
This proposed rule concerns various aspects of SBA's 8(a) BD
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
[[Page 60867]]
jurisdictions'' are non-profits or governmental entities and do not
generally qualify as ``business concerns'' within the meaning of SBA's
regulations.
There are currently approximately 4500 8(a) BD Participants in the
portfolio. Most of the proposed changes are clarification of current
policy or designed to reduce unnecessary or excessive burdens on 8(a)
BD Participants and therefore should not impact many of these concerns.
There are about 385 Participants with 8(a) BD mentor-
prot[eacute]g[eacute] agreements and about another 850 small businesses
that have SBA-approved mentor-prot[eacute]g[eacute] agreements through
the All Small Mentor-Prot[eacute]g[eacute] Program. The consolidation
of SBA's two mentor-prot[eacute]g[eacute] programs into one program
will not have a significant economic impact on small businesses. In
fact, it should have no affect at all on those small businesses that
currently have or on those that seek to have an SBA-approved mentor-
prot[eacute]g[eacute] relationship. The proposed rule would eliminate
confusion regarding perceived differences between the two Programs,
remove unnecessary duplication of functions within SBA, and establish
one, unified staff to better coordinate and process mentor-
prot[eacute]g[eacute] applications. The benefits of the two programs
are identical, and will not change under the proposed rule.
SBA is also proposing to require a business to be qualified for the
required size and status when under consideration for a set-aside order
off a MAC that was awarded outside of the same set-aside category.
Pursuant to the Small Business Goaling Report (SBGR) Federal
Procurement Data System--Next Generation (FPDS-NG) records, about
236,000 new orders were awarded off MACs per year from FY 2014 to FY
2018. Around 199,000, or 84.3 percent, were awarded off MACs
established without a small business set aside. For this analysis,
small business set asides include all total or partial small business
set asides; and all 8(a), WOSB, SDVOSB, and HUBZone awards. There were
about 9,000 new orders awarded annually with a small business set aside
off MACs established without a small business set aside. These orders
were issued to approximately 2,600 firms. The 9,000 new orders awarded
with a small business set aside off a MAC without a small business set
aside were 4.0 percent of the 236,000 new orders off MACs in a year
(Table 3). In FY 2018, only 1,400 for these set-aside orders used MACs
other than the FSS Program.
Table 3--0.47% of New MAC Orders In a FY Are Non-FSS Orders Set Aside for Small Business Where Underlying Base Contract Not Set Aside for Small Business
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 014 FY 015 FY 016 FY 017 FY 018 AVG
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total new modification 0 orders off MACs in FY.......... 244,664 231,694 245,978 234,304 223,861 236,100
Orders awarded with SB set aside without MAC IDV SB set 10,089 9,347 9,729 9,198 8,666 9,406
aside..................................................
Non-FSS orders awarded with SB set aside without MAC IDV 902 780 1,019 1,422 1,400 1,105
SB set aside...........................................
Percent................................................. 0.37% 0.34% 0.41% 0.61% 0.63% 0.47%
--------------------------------------------------------------------------------------------------------------------------------------------------------
If all firms receiving a non-FSS small business set aside order off
a MAC that was not itself set aside for small business were adversely
affected by the proposed rule (i.e., every such firm receiving an award
as a small business had grown to be other than a small business or no
longer qualified as 8(a), WOSB, SDVO, or HUBZone), the rule requiring a
business to be certified as small for a non-FSS small business set
aside orders off MACs not set aside for small business would impact
only 0.47 percent of annual new MAC orders. As such, SBA certifies that
this proposed rule will not have a significant economic impact on a
substantial number of small entities. Nevertheless, throughout the
supplementary information to this proposed rule, SBA has identified the
reasons why the proposed changes are being considered, the objectives
and basis for the proposed rule, a description of the number of small
entities to which the proposed rule will apply, and a description of
alternatives considered.
List of Subjects
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 124
Administrative practice and procedure, Government procurement,
Government property, Small businesses.
13 CFR Part 125
Government contracts, Government procurement, Reporting and
recordkeeping requirements, Small businesses, Technical assistance.
13 CFR Part 126
Administrative practice and procedure, Government procurement,
Penalties, Reporting and recordkeeping requirements, Small businesses.
13 CFR Part 127
Government contracts, Reporting and recordkeeping requirements,
Small businesses.
13 CFR Part 134
Administrative practice and procedure, Claims, Equal employment
opportunity, Lawyers, Organization and functions (Government agencies).
Accordingly, for the reasons stated in the preamble, SBA proposes
to amend 13 CFR parts 121, 124, 125, 126, 127, and 134 as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. The authority citation for part 121 continues to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 662 and 694a(9).
0
2. Amend Sec. 121.103 by:
0
a. Revising the first sentence of paragraphs (b)(6) and (9);
0
b. Revising paragraph (f)(2)(i);
0
c. Revising the first sentence of paragraph (g);
0
d. Revising paragraph (h) introductory text and example 1 to paragraph
(h) introductory text;
0
e. Adding two sentences to the end of paragraph (h)(3)(ii);
0
f. Removing paragraph (h)(3)(iii); and
0
g. Revising paragraph (h)(5).
[[Page 60868]]
The revisions and addition read as follows:
Sec. 121.103 How does SBA determine affiliation?
* * * * *
(b) * * *
(6) A firm that has an SBA-approved mentor-prot[eacute]g[eacute]
agreement authorized under Sec. 125.9 of this chapter is not
affiliated with its mentor or prot[eacute]g[eacute] firm solely because
the prot[eacute]g[eacute] firm receives assistance from the mentor
under the agreement. * * *
* * * * *
(9) In the case of a solicitation for a bundled contract or a
Multiple Award Contract with a value in excess of the agency's
substantial bundling threshold, a small business contractor may enter
into a Small Business Teaming Arrangement with one or more small
business subcontractors and submit an offer as a small business without
regard to affiliation, so long as each team member is small for the
size standard assigned to the contract or subcontract. * * *
* * * * *
(f) * * *
(2) * * *
(i) This presumption may be rebutted by a showing that despite the
contractual relations with another concern, the concern at issue is not
solely dependent on that other concern, such as where the concern has
been in business for a short amount of time and has only been able to
secure a limited number of contracts or where the contractual relations
do not restrict the concern in question from selling the same type of
products or services to another purchaser.
* * * * *
(g) Affiliation based on the newly organized concern rule.
Affiliation may arise where former or current officers, directors,
principal stockholders, managing members, or key employees of one
concern organize a new concern in the same or related industry or field
of operation, and serve as the new concern's officers, directors,
principal stockholders, managing members, or key employees, and the one
concern is furnishing or will furnish the new concern with contracts,
financial or technical assistance, indemnification on bid or
performance bonds, and/or other facilities, whether for a fee or
otherwise. * * *
(h) Affiliation based on joint ventures. A joint venture is an
association of individuals and/or concerns with interests in any degree
or proportion consorting to engage in and carry out business ventures
for joint profit over a two year period, for which purpose they combine
their efforts, property, money, skill, or knowledge, but not on a
continuing or permanent basis for conducting business generally. This
means that a specific joint venture entity generally may not be awarded
contracts beyond a two-year period, starting from the date of the award
of the first contract, without the partners to the joint venture being
deemed affiliated for the joint venture. Once a joint venture receives
a contract, it may submit additional offers for a period of two years
from the date of that first award. An individual joint venture may be
awarded one or more contracts after that two-year period as long as it
submitted an offer including price prior to the end of that two-year
period. SBA will find joint venture partners to be affiliated, and thus
will aggregate their receipts and/or employees in determining the size
of the joint venture for all small business programs, where the joint
venture submits an offer after two years from the date of the first
award. The same two (or more) entities may create additional joint
ventures, and each new joint venture entity may submit offers for a
period of two years from the date of the first contract to the joint
venture without the partners to the joint venture being deemed
affiliates. At some point, however, such a longstanding inter-
relationship or contractual dependence between the same joint venture
partners will lead to a finding of general affiliation between and
among them. A joint venture: Must be in writing; must do business under
its own name and be identified as a joint venture in the System for
Award Management (SAM) for the award of a prime contract; may be in the
form of a formal or informal partnership or exist as a separate limited
liability company or other separate legal entity; and, if it exists as
a formal separate legal entity, may not be populated with individuals
intended to perform contracts awarded to the joint venture (i.e., the
joint venture may have its own separate employees to perform
administrative functions, including one or more Facility Security
Officer(s), but may not have its own separate employees to perform
contracts awarded to the joint venture). SBA may also determine that
the relationship between a prime contractor and its subcontractor is a
joint venture pursuant to paragraph (h)(4) of this section. For
purposes of this paragraph (h), contract refers to prime contracts,
novations of prime contracts, and any subcontract in which the joint
venture is treated as a similarly situated entity as the term is
defined in part 125 of this chapter.
Example 1 to paragraph (h) introductory text. Joint Venture AB
receives a contract on April 2, year 1. Joint Venture AB may receive
additional contracts through April 2, year 3. On June 6, year 2,
Joint Venture AB submits an offer for Solicitation 1. On July 13,
year 2, Joint Venture AB submits an offer for Solicitation 2. In
May, year 3, Joint Venture AB is found to be the apparent successful
offeror for Solicitation 1. In June, year 3, Joint Venture AB is
found to be the apparent successful offeror for Solicitation 2. Even
though the award of the two contracts emanating from Solicitations 1
and 2 would occur after April 2, year 3, Joint Venture AB may
receive those awards without causing general affiliation between its
joint venture partners because the offers occurred prior to the
expiration of the two-year period.
* * * * *
(3) * * *
(ii) * * * Except for sole source 8(a) awards, the joint venture
must meet the requirements of Sec. 124.513(c) and (d), Sec. 125.8(b)
and (c), Sec. 125.18(b)(2) and (3), Sec. 126.616(c) and (d), or Sec.
127.506(c) and (d) of this chapter, as appropriate, at the time it
submits its initial offer including price. For a sole source 8(a)
award, the joint venture must demonstrate that it meets the
requirements of Sec. 124.513(c) and (d) prior to the award of the
contract.
* * * * *
(5) For size purposes, a concern must include in its receipts its
proportionate share of joint venture receipts, unless the proportionate
share already is accounted for in receipts reflecting transactions
between the concern and its joint ventures (e.g., subcontracts from a
joint venture entity to joint venture partners). In determining the
number of employees, a concern must include in its total number of
employees its proportionate share of joint venture employees. For both
the calculation of receipts and of employees, the appropriate
proportionate share is the same percentage of receipts or employees as
the joint venture partner's percentage share of the work performed by
the joint venture.
Example 1 to paragraph (h)(5). Joint Venture AB is awarded a
contract for $10M. The joint venture will perform 50% of the work,
with A performing $2M (40% of the 50%, or 20% of the total value of
the contract) and B performing $3M (60% of the 50% or 30% of the
total value of the contract). Since A will perform 40% of the work
done by the joint venture, its share of the revenues for the entire
contract is 40%, which means that the receipts from the contract
awarded to Joint Venture AB that must be included in A's receipts
for size purposes are $4M. A must add $4M to its receipts for size
purposes, unless its receipts
[[Page 60869]]
already account for the $4M in transactions between A and Joint
Venture AB.
* * * * *
0
3. Amend Sec. 121.402 by:
0
a. Revising the first sentence of paragraph (b)(2);
0
b. Revising paragraph (c)(1)(i);
0
c. Redesignating paragraph (c)(2)(ii) as paragraph (c)(2)(iii); and
0
d. Adding a new paragraph (c)(2)(ii).
The revisions and addition read as follows:
Sec. 121.402 What size standards are applicable to Federal
Government Contracting programs?
* * * * *
(b) * * *
(2) A procurement is generally classified according to the
component which accounts for the greatest percentage of contract value.
* * *
(c) * * *
(1) * * *
(i) Assign the solicitation a single NAICS code and corresponding
size standard which best describes the principal purpose of the
acquisition as set forth in paragraph (b) of this section, only if the
NAICS code will also best describe the principal purpose of each order
to be placed under the Multiple Award Contract; or
* * * * *
(2) * * *
(ii) The contracting officer must assign a single NAICS code for
each order issued against a Multiple Award Contract. The NAICS code
assigned to an order must be a NAICS code included in the underlying
Multiple Award Contract. When placing an order under a Multiple Award
Contract with multiple NAICS codes, the contracting officer must assign
the NAICS code and corresponding size standard that best describes the
principal purpose of each order. In cases like the GSA Schedule, where
an agency can issue an order against multiple SINs with different NAICS
codes, the contracting officer must select the single NAICS code that
best represents the acquisition. If the base contract has not been
assigned a NAICS code that reflects the principal purpose of the order,
the contracting officer shall select a new NAICS code and corresponding
size standard for the order.
* * * * *
0
4. In Sec. 121.404:
0
a. Amend paragraph (a) by:
0
i. Revising paragraphs (a) introductory text and (a)(1); and
0
ii. Adding a subject heading to paragraph (a)(2);
0
b. Revise paragraph (b);
0
c. Add a subject heading to paragraph (c);
0
d. Revise paragraph (d);
0
e. Add a subject heading to paragraph (e) and a sentence at the end of
paragraph (e);
0
f. Add a subject heading to paragraph (f);
0
g. Amend paragraph (g) by:
0
i. Revising paragraph (g) introductory text and paragraphs
(g)(2)(ii)(C) and (D);
0
ii. Adding paragraph (g)(2)(iii) and a new second sentence to paragraph
(g)(3) introductory text; and
0
h. Add a subject heading to paragraph (h).
The additions and revisions read as follows:
Sec. 121.404 When is the size status of a business concern
determined?
(a) Time of size--(1) Multiple award contracts. With respect to
Multiple Award Contracts, orders issued against a Multiple Award
Contract, and Blanket Purchase Agreements issued against a Multiple
Award Contract:
(i) Single NAICS. If a single NAICS code is assigned as set forth
in Sec. 121.402(c)(1)(i), SBA determines size status for the
underlying Multiple Award Contract at the time of initial offer (or
other formal response to a solicitation), which includes price, based
upon the size standard set forth in the solicitation for the Multiple
Award Contract, unless the concern was required to recertify under
paragraph (g)(1), (2), or (3).
(A) Unrestricted Multiple Award Contracts. For an unrestricted
Multiple Award Contract, if a business concern is small at the time of
offer and contract-level recertification for the Multiple Award
Contract, it is small for goaling purposes for each order issued
against the contract, unless a contracting officer requests a size
recertification for a specific order or Blanket Purchase Agreement.
However, except for orders and Blanket Purchase Agreements issued under
any Federal Supply Schedule contract, if an order or a Blanket Purchase
Agreement under an unrestricted Multiple Award Contract is set-aside
exclusively for small business (i.e., small business set-aside, 8(a)
small business, service-disabled veteran-owned small business, HUBZone
small business, or women-owned small business), a concern must
recertify its size status and qualify as a small business at the time
it submits its initial offer, which includes price, for the particular
order or Blanket Purchase Agreement.
(B) Set-aside Multiple Award Contracts. For a Multiple Award
Contract that is set aside for small business (i.e., small business
set, 8(a) small business, service-disabled veteran-owned small
business, HUBZone small business, or women-owned small business), if a
business concern is small at the time of offer and contract-level
recertification for the Multiple Award Contract, it is small for each
order or Blanket Purchase Agreement issued against the contract, unless
a contracting officer requests a size recertification for a specific
order or Blanket Purchase Agreement.
(ii) Multiple NAICS. If multiple NAICS codes are assigned as set
forth in Sec. 121.402(c)(1)(ii), SBA determines size status at the
time of initial offer (or other formal response to a solicitation),
which includes price, for a Multiple Award Contract based upon the size
standard set forth for each discrete category (e.g., CLIN, SIN, Sector,
FA or equivalent) for which a business concern submits an offer and
represents it is small for the Multiple Award Contract, unless the firm
was required to recertify under paragraph (g)(1), (2), or (3). If the
business concern submits an offer for the entire Multiple Award
Contract, SBA will determine whether it meets the size standard for
each discrete category (CLIN, SIN, Sector, FA or equivalent).
(A) Unrestricted Multiple Award Contracts. For an unrestricted
Multiple Award Contract, if a business concern is small at the time of
offer and contract-level recertification for discrete categories on the
Multiple Award Contract, it is small for goaling purposes for each
order issued against any of those categories, unless a contracting
officer requests a size recertification for a specific order or Blanket
Purchase Agreement. However, except for orders or Blanket Purchase
Agreements issued under any Federal Supply Schedule contract, if an
order or Blanket Purchase Agreement for a discrete category under an
unrestricted Multiple Award Contract is set-aside exclusively for small
business (i.e., small business set, 8(a) small business, service-
disabled veteran-owned small business, HUBZone small business, or
women-owned small business), a concern must recertify its size status
and qualify as a small business at the time it submits its initial
offer, which includes price, for the particular order or Agreement.
(B) Set-aside Multiple Award Contracts. For a Multiple Award
Contract that is set aside for small business (i.e., small business
set, 8(a) small business, service-disabled veteran-owned small
business, HUBZone small business, or women-owned small business), if a
business is small at the time of offer and contract-level
recertification for discrete categories on the Multiple Award
[[Page 60870]]
Contract, it is small for each order or Agreement issued against any of
those categories, unless a contracting officer requests a size
recertification for a specific order or Blanket Purchase.
(iii) SBA will determine size at the time of initial offer (or
other formal response to a solicitation), which includes price, for an
order or Agreement issued against a Multiple Award Contract if the
contracting officer requests a new size certification for the order or
Agreement.
(2) Agreements. * * *
(b) Eligibility for SBA programs. A concern applying to be
certified as a Participant in SBA's 8(a) Business Development program
(under part 124, subpart A, of this chapter), as a HUBZone small
business (under part 126 of this chapter), or as a women-owned small
business concern (under part 127 of this chapter) must qualify as a
small business for its primary industry classification as of the date
of its application and, where applicable, the date the SBA program
office requests a formal size determination in connection with a
concern that otherwise appears eligible for program certification.
(c) Certificates of competency. * * *
(d) Nonmanufacturer rule, ostensible subcontractor rule, and joint
venture agreements. Size status is determined as of the date of the
final proposal revision for negotiated acquisitions and final bid for
sealed bidding for the following purposes: compliance with the
nonmanufacturer rule set forth in Sec. 121.406(b)(1), the ostensible
subcontractor rule set forth in Sec. 121.103(h)(4), and the joint
venture agreement requirements in Sec. 124.513(c) and (d), Sec.
125.8(b) and (c), Sec. 125.18(b)(2) and (3), Sec. 126.616(c) and (d),
or Sec. 127.506(c) and (d) of this chapter, as appropriate.
(e) Subcontracting. * * * A prime contractor may rely on the self-
certification of subcontractor provided it does not have a reason to
doubt the concern's self-certification.
(f) Two-step procurements. * * *
(g) Effect of size certification and recertification. A concern
that represents itself as a small business and qualifies as small at
the time of its initial offer (or other formal response to a
solicitation), which includes price, and after a required
recertification under paragraph (g)(1), (2), or (3) of this section is
generally considered to be a small business throughout the life of that
contract. Where a concern grows to be other than small, the procuring
agency may exercise options and still count the award as an award to a
small business, except that a required recertification as other than
small under paragraph (g)(1), (2), or (3) of this section changes the
firm's status for future options and orders. The following exceptions
apply to this paragraph (g):
* * * * *
(2) * * *
(ii) * * *
(C) In the context of a joint venture that has been awarded a
contract or order as a small business, from any partner to the joint
venture that has been acquired, is acquiring, or has merged with
another business entity.
(D) If the merger, sale or acquisition occurs after offer but prior
to award, the offeror must recertify its size to the contracting
officer prior to award. If the offeror is unable to recertify as small,
it will not be eligible as a small business for the award of the
contract.
(iii) Recertification is not required when the ownership of a
concern that is at least 51% owned by an entity (i.e., tribe, Alaska
Native Corporation, or Community Development Corporation) changes to or
from a wholly-owned business concern of the same entity, as long as the
ultimate owner remains that entity.
Example 1 to paragraph (g)(2)(iii). Indian Tribe X owns 100% of
small business ABC. ABC wins an award for a small business set-aside
contract. In year two of contract performance, X changes the
ownership of ABC so that X owns 100% of a holding company XYZ, Inc.,
which in turn owns 100% of ABC. This restructuring does not require
ABC to recertify its status as a small business because it continues
to be 100% owned (indirectly rather than directly) by Indian Tribe
X.
(3) * * * A contracting officer may also request size
recertification, as he or she deems appropriate, prior to the 120-day
point in the fifth year of a long-term contract. * * *
* * * * *
(h) Follow-on contracts. * * *
Sec. 121.406 [Amended]
0
5. Amend Sec. 121.406 by removing the word ``provided'' and adding in
its place the word ``provide'' in paragraph (a) introductory text.
0
6. Amend Sec. 121.603 by adding paragraph (c)(3) to read as follows:
Sec. 121.603 How does SBA determine whether a Participant is small
for a particular 8(a) BD subcontract?
* * * * *
(c) * * *
(3) Recertification is not required when the ownership of a concern
that is at least 51% owned by an entity (i.e., tribe, Alaska Native
Corporation, or Community Development Corporation) changes to or from a
wholly-owned business concern of the same entity, as long as the
ultimate owner remains that entity.
* * * * *
0
7. Amend Sec. 121.702 by revising paragraph (c)(6) to read as follows:
Sec. 121.702 What size and eligibility standards are applicable to
the SBIR and STTR programs?
* * * * *
(c) * * *
(6) Size requirement for joint ventures. Two or more small business
concerns may submit an application as a joint venture. The joint
venture will qualify as small as long as each concern is small under
the size standard for the SBIR program, found at Sec. 121.702(c), or
the joint venture meets the exception at Sec. 121.103(h)(3)(ii) for
two firms approved to be a mentor and prot[eacute]g[eacute] under SBA's
All Small Mentor-Prot[eacute]g[eacute] Program.
* * * * *
0
8. Amend Sec. 121.1001 by revising paragraphs (a)(1)(iii),
(a)(2)(iii), (a)(3)(iv), (a)(4)(iii), (a)(6)(iv), (a)(7)(iii),
(a)(8)(iv), and (a)(9)(iv) to read as follows:
Sec. 121.1001 Who may initiate a size protest or request a formal
size determination?
(a) * * *
(1) * * *
(iii) The SBA Government Contracting Area Director having
responsibility for the area in which the headquarters of the protested
offeror is located, regardless of the location of a parent company or
affiliates, the Director, Office of Government Contracting, or the
Associate General Counsel for Procurement Law; and
* * * * *
(2) * * *
(iii) The SBA District Director, or designee, in either the
district office serving the geographical area in which the procuring
activity is located or the district office that services the apparent
successful offeror, the Associate Administrator for Business
Development, or the Associate General Counsel for Procurement Law.
* * * * *
(3) * * *
(iv) The responsible SBA Government Contracting Area Director or
the Director, Office of Government Contracting, or the SBA's Associate
General Counsel for Procurement Law; and
* * * * *
(4) * * *
(iii) The responsible SBA Government Contracting Area Director; the
Director, Office of Government Contracting; the Associate
Administrator, Investment
[[Page 60871]]
Division, or the Associate General Counsel for Procurement Law.
* * * * *
(6) * * *
(iv) The SBA Director, Office of HUBZone, or designee, or the SBA
Associate General Counsel for Procurement Law.
* * * * *
(7) * * *
(iii) The responsible SBA Government Contracting Area Director, the
Director, Office of Government Contracting, the Associate Administrator
for Business Development, or the Associate General Counsel for
Procurement Law.
* * * * *
(8) * * *
(iv) The Director, Office of Government Contracting, or designee,
or the Associate General Counsel for Procurement Law.
* * * * *
(9) * * *
(iv) The Director, Office of Government Contracting, or designee,
or the Associate General Counsel for Procurement Law.
* * * * *
0
9. Amend Sec. 121.1004 by revising paragraph (a)(2)(ii) and adding
paragraph (a)(2)(iii) to read as follows:
Sec. 121.1004 What time limits apply to size protests?
(a) * * *
(2) * * *
(ii) An order issued against a Multiple Award Contract if the
contracting officer requested a size recertification in connection with
that order; or
(iii) Except for orders or Blanket Purchase Agreements issued under
any Federal Supply Schedule contract, an order or Blanket Purchase
Agreement set-aside for small business (i.e., small business set-aside,
8(a) small business, service-disabled veteran-owned small business,
HUBZone small business, or women-owned small business) where the
underlying Multiple Award Contract was awarded on an unrestricted
basis.
* * * * *
0
10. Amend Sec. 121.1103 by revising paragraph (c)(1)(i) to read as
follows:
Sec. 121.1103 What are the procedures for appealing a NAICS code or
size standard designation?
* * * * *
(c) * * *
(1) * * *
(i) Stay the date for the closing of receipt of offers;
* * * * *
PART 124--8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS
STATUS DETERMINATIONS
0
11. 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
12. Amend Sec. 124.3 by adding in alphabetical order a definition for
``Follow-on requirement or contract'' to read as follows:
Sec. 124.3 What definitions are important in the 8(a) BD program?
* * * * *
Follow-on requirement or contract. The determination of whether a
particular procurement is a follow-on includes the following
considerations:
(1) Whether the scope has changed significantly, requiring
meaningful different types of work or different capabilities;
(2) Whether the magnitude or value of the requirement has changed
by at least 25 percent; and
(3) Whether the end user of the requirement has changed. As a
general guide, if the procurement satisfies at least one of these three
conditions, it may be considered a new requirement. Conversely, if the
procurement satisfies none of these conditions, it is considered a
follow-on procurement. The 25 percent rule, however, cannot be applied
rigidly in all cases because by doing so could encourage a result that
is inconsistent with the intent of another provision in this part.
* * * * *
0
13. Amend Sec. 124.105 by revising paragraphs (g) and (i)(2) and (4)
to read as follows:
Sec. 124.105 What does it mean to be unconditionally owned by one or
more disadvantaged individuals?
* * * * *
(g) Ownership of another current or former Participant by an
immediate family member. (1) An individual may not use his or her
disadvantaged status to qualify a concern if that individual has an
immediate family member who is using or has used his or her
disadvantaged status to qualify another concern for the 8(a) BD program
and any of the following circumstances exist:
(i) The concerns are connected by any common ownership or
management, regardless of amount or position; or
(ii) The concerns have a contractual relationship that was not
conducted at arm's length.
Example 1 to paragraph (g)(1). X applies to the 8(a) BD program.
X is 95% owned by A and 5% by B, A's father and the majority owner
in a former 8(a) Participant. Even though B has no involvement in X,
X would be ineligible for the program.
Example 2 to paragraph (g)(1). Y applies to the 8(a) BD program.
C owns 100% of Y. However, D, C's sister and the majority owner in a
former 8(a) Participant, is acting as a Vice President in Y. Y would
be ineligible for the program.
Example 3 to paragraph (g)(1). X seeks to apply to the 8(a) BD
program with a primary NAICS code in plumbing. X is 100% owned by A.
Z, a former 8(a) participant with a primary industry in general
construction, is owned 100% by B, A's brother. For general
construction jobs, Z has subcontracted plumbing work to X in the
past at normal commercial rates. Subcontracting work at normal
commercial rates would not preclude X from being admitted to the
8(a) BD program. X would be eligible for the program.
(2) If the AA/BD approves an application under paragraph (g)(1) of
this section, SBA will, as part of its annual review, assess whether
the firm continues to operate independently of the other current or
former 8(a) concern of an immediate family member. SBA may initiate
proceedings to terminate a firm from further participation in the 8(a)
BD program if it is apparent that there are connections between the two
firms that were not disclosed to the AA/BD at the time of application
or that came into existence after program admittance.
* * * * *
(i) * * *
(2) Prior approval by the AA/BD is not needed where all non-
disadvantaged individual (or entity) owners involved in the change of
ownership own no more than a 20 percent interest in the concern both
before and after the transaction, the transfer results from the death
or incapacity due to a serious, long-term illness or injury of a
disadvantaged principal, or the disadvantaged individual or entity in
control of the Participant will increase the percentage of its
ownership interest. The concern must notify SBA within 60 days of such
a change in ownership.
Example 1 to paragraph (i)(2). Disadvantaged individual A owns
90% of 8(a) Participant X; non-disadvantaged individual B owns 10%
of X. In order to raise additional capital, X seeks to change its
ownership structure such that A would own 80%, B would own 10% and C
would own 10%. X can accomplish this change in ownership without
prior SBA approval. Non-disadvantaged owner B is not involved in the
transaction and non-disadvantaged individual C owns less than 20% of
X both before and after the transaction.
Example 2 to paragraph (i)(2). Disadvantaged individual C owns
60% of 8(a) Participant Y; non-disadvantaged
[[Page 60872]]
individual D owns 30% of Y; and non-disadvantaged individual E owns
10% of Y. C seeks to transfer 5% of Y to E. Prior SBA approval is
not needed. Although non-disadvantaged individual D owns more than
20% of Y, D is not involved in the transfer. Because the only non-
disadvantaged individual involved in the transfer, E, owns less than
20% of Y both before and after the transaction, prior approval is
not needed.
Example 3 to paragraph (i)(2). Disadvantaged individual A owns
85% of 8(a) Participant X; non-disadvantaged individual B owns 15%
of X. A seeks to transfer 15% of X to B. Prior SBA approval is
needed. Although B, the non-disadvantaged owner of X, owns less than
20% of X prior to the transaction, prior approval is needed because
B would own more than 20% after the transaction.
Example 4 to paragraph (i)(2). ANC A owns 60% of 8(a)
Participant X; non-disadvantaged individual B owns 40% of X. X seeks
to transfer 15% to A. Prior SBA approval is not needed. Although a
non-disadvantaged individual who is involved in the transaction, B,
owns more than 20% of X both before and after the transaction, SBA
approval is not needed because the change only increases the
percentage of A's ownership interest in X.
* * * * *
(4) Where a Participant requests a change of ownership or business
structure, and proceeds with the change prior to receiving SBA approval
(or where a change of ownership results from the death or incapacity of
a disadvantaged individual for which a request prior to the change in
ownership could not occur), SBA may suspend the Participant from
program benefits pending resolution of the request. If the change is
approved, the length of the suspension will be restored to the
Participant's program term in the case of death or incapacity, or if
the firm requested prior approval and waited 60 days for SBA approval.
* * * * *
0
14. Amend Sec. 124.109 by:
0
a. Revising the section heading;
0
b. Adding paragraph (a)(7);
0
c. Revising paragraph (c)(3)(ii);
0
d. Adding paragraphs (c)(3)(iv) and (c)(4)(iii)(C); and
0
e. Revising paragraphs (c)(6)(iii) and (c)(7)(ii).
The revisions and additions to read as follows:
Sec. 124.109 Do Indian tribes and Alaska Native Corporations have
any special rules for applying to and remaining eligible for the 8(a)
BD program?
(a) * * *
(7) Notwithstanding Sec. 124.105(i), where an ANC merely
reorganizes its ownership of a Participant in the 8(a) BD program by
inserting or removing a wholly-owned business entity between the ANC
and the Participant, the Participant need not request a change of
ownership from SBA. The Participant must, however, notify SBA of the
change within 30 days of the transfer.
* * * * *
(c) * * *
(3) * * *
(ii) A Tribe may not own 51% or more of another firm which, either
at the time of application or within the previous two years, has been
operating in the 8(a) program under the same primary NAICS code as the
applicant. A Tribe may, however, own a Participant or other applicant
that conducts or will conduct secondary business in the 8(a) BD program
under the NAICS code which is the primary NAICS code of the applicant
concern.
(A) Once an applicant is admitted to the 8(a) BD program, it may
not receive an 8(a) sole source contract that is a follow-on contract
to an 8(a) contract that was performed immediately previously by
another Participant (or former Participant) owned by the same Tribe.
For purposes of this paragraph, the same primary NAICS code means the
six-digit NAICS code having the same corresponding size standard.
(B) If the primary NAICS code of a tribally-owned Participant is
changed pursuant to Sec. 124.112(e), the tribe can submit an
application and qualify another firm owned by the tribe for
participation in the 8(a) BD program under the NAICS code that was the
previous primary NAICS code of the Participant whose primary NAICS code
was changed.
Example 1 to paragraph (c)(3)(ii)(B). Tribe X owns 100% of 8(a)
Participant A. A entered the 8(a) BD program with a primary NAICS
code of 236115, New Single-Family Housing Construction (except For-
Sale Builders). After four years in the program, SBA noticed that
the vast majority of A's revenues were in NAICS Code 237310,
Highway, Street, and Bridge Construction, and notified A that SBA
intended to change its primary NAICS code pursuant to Sec.
124.112(e). A agreed to change its primary NAICS Code to 237310.
Once the change is finalized, Tribe X can immediately submit a new
application to qualify another firm that it owns for participation
in the 8(a) BD program with a primary NAICS Code of 236115.
* * * * *
(iv) Notwithstanding Sec. 124.105(i), where a Tribe merely
reorganizes its ownership of a Participant in the 8(a) BD program by
inserting or removing a wholly-owned business entity between the Tribe
and the Participant, the Participant need not request a change of
ownership from SBA. The Participant must, however, notify SBA of the
change within 30 days of the transfer.
* * * * *
(4) * * *
(iii) * * *
(C) Because an individual may be responsible for the management and
daily business operations of two tribally-owned concerns, the full-time
devotion requirement does not apply to tribally-owned applicants and
Participants.
* * * * *
(6) * * *
(iii) The Tribe, a tribally-owned economic development corporation,
or other relevant tribally-owned holding company vested with the
authority to oversee tribal economic development or business ventures
has made a firm written commitment to support the operations of the
applicant concern and it has the financial ability to do so.
(7) * * *
(ii) The officers, directors, and all shareholders owning an
interest of 20% or more (other than the tribe itself) of a tribally-
owned applicant or Participant must demonstrate good character (see
Sec. 124.108(a)) and cannot fail to pay significant Federal
obligations owed to the Federal Government (see Sec. 124.108(e)).
0
15. Amend Sec. 124.110 by revising the section heading and paragraph
(e) to read as follows:
Sec. 124.110 Do Native Hawaiian Organizations (NHOs) have any
special rules for applying to and remaining eligible for the 8(a) BD
program?
* * * * *
(e) An NHO cannot own 51% or more of another firm which, either at
the time of application or within the previous two years, has been
operating in the 8(a) program under the same primary NAICS code as the
applicant. An NHO may, however, own a Participant or an applicant that
conducts or will conduct secondary business in the 8(a) BD program
under the same NAICS code that a current Participant owned by the NHO
operates in the 8(a) BD program as its primary NAICS code.
(1) Once an applicant is admitted to the 8(a) BD program, it may
not receive an 8(a) sole source contract that is a follow-on contract
to an 8(a) contract that was performed immediately previously by
another Participant (or former Participant) owned by the same NHO. For
purposes of this paragraph, the same primary NAICS code means the six-
digit NAICS code having the same corresponding size standard.
(2) If the primary NAICS code of a Participant owned by an NHO is
changed pursuant to Sec. 124.112(e), the NHO can submit an application
and qualify another firm owned by the NHO for participation in the 8(a)
BD program
[[Page 60873]]
under the NAICS code that was the previous primary NAICS code of the
Participant whose primary NAICS code was changed.
* * * * *
0
16. Amend Sec. 124.111 by revising the section heading, adding
paragraph (c)(3), and revising paragraph (d) to read as follows:
Sec. 124.111 Do Community Development Corporations (CDCs) have any
special rules for applying to and remaining eligible for the 8(a) BD
program?
* * * * *
(c) * * *
(3) Notwithstanding Sec. 124.105(i), where a CDC merely
reorganizes its ownership of a Participant in the 8(a) BD program by
inserting or removing a wholly-owned business entity between the CDC
and the Participant, the Participant need not request a change of
ownership from SBA. The Participant must, however, notify SBA of the
change within 30 days of the transfer.
(d) A CDC cannot own 51% or more of another firm which, either at
the time of application or within the previous two years, has been
operating in the 8(a) program under the same primary NAICS code as the
applicant. A CDC may, however, own a Participant or an applicant that
conducts or will conduct secondary business in the 8(a) BD program
under the same NAICS code that a current Participant owned by the CDC
operates in the 8(a) BD program as its primary SIC code.
(1) Once an applicant is admitted to the 8(a) BD program, it may
not receive an 8(a) sole source contract that is a follow-on contract
to an 8(a) contract that was performed immediately previously by
another Participant (or former Participant) owned by the same CDC. For
purposes of this paragraph, the same primary NAICS code means the six-
digit NAICS code having the same corresponding size standard.
(2) If the primary NAICS code of a Participant owned by a CDC is
changed pursuant to Sec. 124.112(e), the CDC can submit an application
and qualify another firm owned by the CDC for participation in the 8(a)
BD program under the NAICS code that was the previous primary NAICS
code of the Participant whose primary NAICS code was changed.
* * * * *
0
17. Amend Sec. 124.112 by revising paragraph (d)(5), redesignating
paragraph (e)(2)(iv) as paragraph (e)(2)(v), and adding a new paragraph
(e)(2)(iv).
The revision and addition read as follows:
Sec. 124.112 What criteria must a business meet to remain eligible
to participate in the 8(a) BD program?
* * * * *
(d) * * *
(5) The excessive withdrawal analysis does not apply to
Participants owned by Tribes, ANCs, NHOs, or CDCs where a withdrawal is
made for the benefit of the Tribe, ANC, NHO, CDC or the native or
shareholder community. It does, however, apply to withdrawals from a
firm owned by a Tribe, ANC, NHO, or CDC that do not benefit the
relevant entity or community. Thus, if funds or assets are withdrawn
from an entity-owned Participant for the benefit of a non-disadvantaged
manager or owner that exceed the withdrawal thresholds, SBA may find
that withdrawal to be excessive. However, a non-disadvantaged minority
owner may receive a payout in excess of the excessive withdrawal amount
if it is a pro rata distribution paid to all shareholders (i.e., the
only way to increase the distribution to the Tribe, ANC, NHO or CDC is
to increase the distribution to all shareholders) and it does not
adversely affect the business development of the Participant.
Example 1 to paragraph (d)(5). Tribally-owned Participant X pays
$1,000,000 to a non-disadvantaged manager. That would be deemed an
excessive withdrawal.
Example 2 to paragraph (d)(5). ANC-owned Participant Y seeks to
distribute $550,000 to the ANC and $450,000 to non-disadvantaged
individual A based on their 55%/45% ownership interests. Because the
distribution is based on the pro rata share of ownership, this would
not be prohibited as an excessive withdrawal unless SBA determined
that Y would be adversely affected.
(e) * * *
(2) * * *
(iv) A Participant may appeal a district office's decision to
change its primary NAICS code to SBA's Associate General Counsel for
Procurement Law (AGC/PL) within 10 business days of receiving the
district office's final determination. The AGC/PL will examine the
record, including all information submitted by the Participant in
support of its position as to why the primary NAICS code contained in
its business plan continues to be appropriate despite performing more
work in another NAICS code, and issue a final agency decision within 15
business days of receiving the appeal.
* * * * *
0
18. Amend Sec. 124.203 by revising the first two sentences and adding
a new third sentence to read as follows:
Sec. 124.203 What must a concern submit to apply to the 8(a) BD
program?
Each 8(a) BD applicant concern must submit information and
supporting documents required by SBA when applying for admission to the
8(a) BD program. This information may include, but not be limited to,
financial data and statements, copies of filed Federal personal and
business tax returns, individual and business bank statements, personal
history statements, and any additional information or documents SBA
deems necessary to determine eligibility. Each individual claiming
disadvantaged status must also submit a signed IRS Form 4506T, Request
for Copy or Transcript of TAX Form, to SBA. * * *
0
19. Amend Sec. 124.204 by adding a sentence to the end of paragraph
(a) to read as follows:
Sec. 124.204 How does SBA process applications for 8(a) BD program
admission?
(a) * * * Where during its review SBA requests clarifying, revised
or other information from the applicant, SBA's processing time for the
application will be suspended pending the receipt of such information.
* * * * *
0
20. Revise Sec. 124.207 to read as follows:
Sec. 124.207 Can an applicant reapply for admission to the 8(a) BD
program?
A concern which has been declined for 8(a) BD program participation
may submit a new application for admission to the program at any time
after 90 days from the date of the Agency's final decision to decline.
Sec. 124.301 [Redesignated as Sec. 124.300]
0
21. Redesignate Sec. 124.301 as Sec. 124.300.
0
22. Add new Sec. 124.301 to read as follows:
Sec. 124.301 Voluntary withdrawal or voluntary early graduation.
(a) A Participant may voluntarily withdraw from the 8(a) BD program
at any time prior to the expiration of its program term. Where a
Participant has substantially achieved the goals and objectives set
forth in its business plan, it may elect to voluntarily early graduate
from the 8(a) BD program.
(b) To initiate withdrawal or early graduation from the 8(a) BD
program, a Participant must notify its servicing SBA district office of
its intent to do so in writing. Once the SBA servicing district office
processes the request and the District Director recognizes the
withdrawal or early graduation, the
[[Page 60874]]
Participant is no longer eligible to receive any 8(a) BD program
assistance.
0
23. Amend Sec. 124.304 by revising the paragraph (d) subject heading
and adding a sentence at the end of paragraph (d) to read as follows:
Sec. 124.304 What are the procedures for early graduation and
termination?
* * * * *
(d) Notice requirements and effect of decision. * * * Once the AA/
BD issues a decision to early graduate or terminate a Participant, the
Participant will be immediately suspended from receiving further
program assistance until the determination becomes the final agency
decision.
* * * * *
0
24. Amend Sec. 124.305 by revising paragraphs (h)(1)(ii) and (iv), and
adding paragraph (h)(1)(v) to read as follows:
Sec. 124.305 What is suspension and how is a Participant suspended
from the 8(a) BD program?
* * * * *
(h) * * *
(1) * * *
(ii) A disadvantaged individual who is involved in controlling the
day-to-day management and control of the Participant is called to
active military duty by the United States, his or her participation in
the firm's management and daily business operations is critical to the
firm's continued eligibility, the Participant does not designate
another disadvantaged individual to control the concern during the
call-up period, and the Participant requests to be suspended during the
call-up period;
* * * * *
(iv) Federal appropriations for one or more Federal departments or
agencies have lapsed, a Participant would lose an 8(a) sole source
award due to the lapse in appropriations (e.g., SBA has previously
accepted an offer for a sole source 8(a) award on behalf of the
Participant or an agency could not offer a sole source 8(a) requirement
to the program on behalf of the Participant due to the lapse in
appropriations, and the Participant's program term would end during the
lapse), and the Participant elects to suspend its participation in the
8(a) BD program during the lapse in Federal appropriations; or
(v) A Participant has not submitted a business plan to its SBA
servicing office within 60 days after program admission.
* * * * *
0
25. Amend Sec. 124.402 by revising paragraph (b) to read as follows:
Sec. 124.402 How does a Participant develop a business plan?
* * * * *
(b) Submission of initial business plan. Each Participant must
submit a business plan to its SBA servicing office as soon as possible
after program admission. SBA will suspend a Participant from receiving
8(a) BD program benefits, including 8(a) contracts, if it has not
submitted its business plan to the servicing district office within 60
days after program admission.
* * * * *
0
26. Amend Sec. 124.501 by redesignating paragraphs (g) through (i) as
paragraphs (h) through (j), respectively, and by adding new paragraphs
(g) and (k) to read as follows:
Sec. 124.501 What general provisions apply to the award of 8(a)
contracts?
* * * * *
(g) Before a Participant may be awarded either a sole source or
competitive 8(a) contract, SBA must determine that the Participant is
eligible for award. SBA will determine eligibility at the time of its
acceptance of the underlying requirement into the 8(a) BD program for a
sole source 8(a) contract, and after the apparent successful offeror is
identified for a competitive 8(a) contract. Eligibility is based on
8(a) BD program criteria, including whether the Participant:
(1) Qualifies as a small business under the size standard
corresponding to the NAICS code assigned to the requirement;
(2) Is in compliance with any applicable competitive business mix
targets established or remedial measure imposed by Sec. 124.509 that
does not include the denial of future sole source 8(a) contracts or
8(a) contracts generally, as applicable;
(3) Complies with the continued eligibility reporting requirements
set forth in Sec. 124.112(b);
(4) Has a bona fide place of business in the applicable geographic
area if the procurement is for construction;
(5) Has not received 8(a) contracts in excess of the dollar limits
set forth in Sec. 124.519 for a sole source 8(a) procurement;
(6) Has complied with the provisions of Sec. 124.513(c) and (d) if
it is seeking a sole source 8(a) award through a joint venture; and
(7) Can demonstrate that it, together with any similarly situated
entity, will meet the limitations on subcontracting provisions set
forth in Sec. 124.510.
* * * * *
(k) In order to be awarded a sole source or competitive 8(a)
construction contract, a Participant must have a bona fide place of
business within the applicable geographic location determined by SBA.
This will generally be the geographic area serviced by the SBA district
office in which the work will be performed. SBA may determine that a
Participant with a bona fide place of business within the entire state
(if the state is serviced by more than one SBA district office), a
contiguous SBA district office (in the same or another state), or
another nearby area is eligible for the award of an 8(a) construction
contract.
(1) A Participant may have bona fide places of business in more
than one location.
(2) In order for a Participant to establish a bona fide place of
business in a particular geographic location, the SBA district office
serving the geographic area of that location must determine if that
location in fact qualifies as a bona fide place of business under SBA's
requirements.
(i) A Participant must submit a request for a bona fide business
determination to the SBA district office servicing it. Such request
may, but need not, relate to a specific 8(a) requirement. In order to
apply to a specific competitive 8(a) solicitation, such request must be
submitted at least 20 working days before initial offers that include
price are due.
(ii) The servicing district office will immediately forward the
request to the SBA district office serving the geographic area of the
particular location for processing. Within 10 working days of receipt
of the submission, the reviewing district office will conduct a site
visit, if practicable. If not practicable, the reviewing district
office will contact the Participant within such 10-day period to inform
the Participant that the reviewing office has received the request and
may ask for additional documentation to support the request.
(iii) In connection with a specific competitive solicitation, the
reviewing office will make a determination whether or not the
Participant has a bona fide place of business in its geographical area
within 5 working days of a site visit or within 15 working days of its
receipt of the request from the servicing district office if a site
visit is not practical in that timeframe. If the request is not related
to a specific procurement, the reviewing office will make a
determination within 30 working days of its receipt of the request from
the servicing district office, if practicable.
(3) The effective date of a bona fide place of business is the date
that the
[[Page 60875]]
evidence (paperwork) shows that the business in fact regularly
maintained its business at the new geographic location.
(4) In order for a Participant to be eligible to submit an offer
for an 8(a) procurement limited to a specific geographic area, it must
receive from SBA a determination that it has a bona fide place of
business within that area prior to submitting its offer for the
procurement.
(5) Once a Participant has established a bona fide place of
business, the Participant may change the location of the recognized
office without prior SBA approval. However, the Participant must notify
SBA and provide documentation demonstrating an office at that new
location within 30 days after the move. Failure to timely notify SBA
will render the Participant ineligible for new 8(a) construction
procurements limited to that geographic area.
0
27. Amend Sec. 124.503 by:
0
a. Removing the phrase ``in Sec. 124.507(b)(2)'' and adding in its
place the phrase ``in Sec. 124.501(g)'' in paragraph (a)(1);
0
b. Redesignating paragraphs (e) through (j) as paragraphs (f) through
(k), respectively;
0
c. Adding a new paragraph (e);
0
d. Revising the introductory text of the newly redesignated paragraph
(h);
0
e. Adding the phrase ``or BPA'' after the phrase ``BOA'', wherever it
appears, in the newly redesignated paragraphs (h)(1) through (4);
0
f. Revising newly redesignated paragraph (i)(1)(iii);
0
g. Adding a sentence at the end of newly redesignated paragraph
(i)(1)(iv); and
0
h. Revising newly redesignated paragraph (i)(2)(iv).
The additions and revisions read as follows:
Sec. 124.503 How does SBA accept a procurement for award through the
8(a) BD program?
* * * * *
(e) Withdrawal/substitution of offered requirement or Participant.
After SBA has accepted a requirement for award as a sole source 8(a)
contract on behalf of a specific Participant (whether nominated by the
procuring agency or identified by SBA for an open requirement), if the
procuring agency believes that the identified Participant is not a good
match for the procurement--including for such reasons as the procuring
agency finding the Participant non-responsible or the negotiations
between the procuring agency and the Participant otherwise failing--the
procuring agency may seek to substitute another Participant for the
originally identified Participant. The procuring agency must inform SBA
of its concerns regarding the originally identified Participant and
identify whether it believes another Participant could fulfill its
needs.
(1) If the procuring agency and SBA agree that another Participant
can fulfill its needs, the procuring agency will withdraw the original
offering and reoffer the requirement on behalf of another 8(a)
Participant. SBA will then accept the requirement on behalf of the
newly identified Participant and authorize the procuring agency to
negotiate directly with that Participant.
(2) If the procuring agency and SBA agree that another Participant
cannot fulfill its needs, the procuring agency will withdraw the
original offering letter and fulfill its needs outside the 8(a) BD
program.
(3) If the procuring agency believes that another Participant
cannot fulfill its needs, but SBA does not agree, SBA may appeal that
decision to the head of the procuring agency pursuant to Sec.
124.505(a)(2).
* * * * *
(h) Basic Ordering Agreements (BOAs) and Blanket Purchase
Agreements (BPAs). Neither a Basic Ordering Agreement (BOA) nor a
Blanket Purchase Agreement (BPA) is a contract under the FAR. See 48
CFR 16.703(a). Each order to be issued under a BOA or BPA is an
individual contract. As such, the procuring activity must offer, and
SBA must accept, each task order under a BOA or BPA in addition to
offering and accepting the BOA or BPA itself.
* * * * *
(i)
(1) * * *
(iii) A concern awarded a task or delivery order contract or
Multiple Award Contract that was set-aside exclusively for 8(a) Program
Participants, partially set-aside for 8(a) Program Participants or
reserved solely for 8(a) Program Participants may generally continue to
receive new orders even if it has grown to be other than small or has
exited the 8(a) BD program, and agencies may continue to take SDB
credit toward their prime contracting goals for orders awarded to 8(a)
Participants. However, a firm will be ineligible for the award of an
order if the procuring agency asks contract holders to recertify their
8(a) BD status in connection with a specific order and the firm is
unable to do so. Where a contracting officer asks contract holders to
recertify their 8(a) BD status in connection with a specific order, a
firm must be an eligible Participant in accordance with Sec.
124.501(g) as of the initial date specified for the receipt of offers
contained in the order solicitation, or at the date of award of the
order if there is no solicitation.
(iv) * * * To be eligible for the award of a sole source order, a
concern must be a current Participant in the 8(a) BD program at the
time of award.
(2) * * *
(iv) SBA must verify that a concern is an eligible 8(a) Participant
in accordance with Sec. 124.501(g) as of the initial date specified
for the receipt of offers contained in the order solicitation, or at
the date of award of the order if there is no solicitation. If a
concern has exited the 8(a) BD program prior to that date, it will be
ineligible for the award of the order.
* * * * *
0
28. Amend Sec. 124.504 by:
0
a. Revising the section heading and paragraph (b);
0
b. Removing the term ``Simplified Acquisition Procedures'' and adding
in its place the phrase ``the simplified acquisition threshold (as
defined in the FAR at 48 CFR 2.101)'' in paragraph (c) introductory
text;
0
c. Removing the word ``will'' and adding in its place the word ``may''
in paragraph (c)(1)(ii)(C);
0
d. Revising the subject heading for paragraph (d) and paragraphs (d)(1)
introductory text and (d)(4).
The revisions read as follows:
Sec. 124.504 What circumstances limit SBA's ability to accept a
procurement for award as an 8(a) contract, and when can a requirement
be released from the 8(a) BD program?
* * * * *
(b) Competition prior to offer and acceptance. The procuring
activity competed a requirement among 8(a) Participants prior to
offering the requirement to SBA and did not clearly evidence its intent
to conduct an 8(a) competitive acquisition.
* * * * *
(d) Release for non-8(a) or limited 8(a) competition. (1) Except as
set forth in paragraph (d)(4) of this section, where a procurement is
awarded as an 8(a) contract, its follow-on requirement must remain in
the 8(a) BD program unless SBA agrees to release it for non-8(a)
competition. Additionally, SBA must agree to release any follow-on
requirement where a procuring agency seeks to reprocure that
requirement through a pre-existing limited contracting vehicle which is
not available to all 8(a) BD Program Participants (e.g., any multiple
award or Governmentwide acquisition contract, whether or not the
underlying MAC or GWAC is itself an 8(a) contract), and the
[[Page 60876]]
previous/current 8(a) award was not so limited. If a procuring agency
would like to fulfill a follow-on requirement outside of the 8(a) BD
program, it must make a written request to and receive the concurrence
of the AA/BD to do so. In determining whether to release a requirement
from the 8(a) BD program, SBA will consider:
* * * * *
(4) The requirement that a follow-on procurement must be released
from the 8(a) BD program in order for it to be fulfilled outside the
8(a) BD program does not apply:
(i) Where previous orders were offered to and accepted for the 8(a)
BD program pursuant to Sec. 124.503(i)(2); or
(ii) Where a procuring agency will use a mandatory source (see FAR
Subparts 8.6 and 8.7). In such a case, the procuring agency must notify
SBA at least 30 days prior to the end of the contract or order.
0
29. Amend Sec. 124.505 by:
0
a. Removing the word ``and'' at the end of paragraph (a)(2);
0
b. Redesignating paragraph (a)(3) as paragraph (a)(4); and
0
c. Adding new paragraph (a)(3).
The addition reads as follows:
Sec. 124.505 When will SBA appeal the terms or conditions of a
particular 8(a) contract or a procuring activity decision not to use
the 8(a) BD program?
(a) * * *
(3) A decision by a contracting officer that a particular
procurement is a new requirement that is not subject to the release
requirements set forth in Sec. 124.504(d); and
* * * * *
0
30. Amend Sec. 124.507 by:
0
a. Revising paragraph (b)(2);
0
b. Removing paragraph (b)(3);
0
c. Redesignating paragraphs (b)(4) through (6) as paragraphs (b)(3)
through (5), respectively;
0
d. Removing paragraph (c)(1);
0
e. Redesignating paragraphs (c)(2) and (3) as paragraphs (c)(1) and
(2), respectively; and
0
f. Revising newly redesignated paragraph (c)(1).
The revisions read as follows:
Sec. 124.507 What procedures apply to competitive 8(a) procurements?
* * * * *
(b) * * *
(2) SBA determines a Participant's eligibility pursuant to Sec.
124.501(g).
* * * * *
(c) * * *
(1) Construction competitions. Based on its knowledge of the 8(a)
BD portfolio, SBA will determine whether a competitive 8(a)
construction requirement should be competed among only those
Participants having a bona fide place of business within the
geographical boundaries of one or more SBA district offices, within a
state, or within the state and nearby areas. Only those Participants
with bona fide places of business within the appropriate geographical
boundaries are eligible to submit offers.
* * * * *
0
31. Amend Sec. 124.509 by:
0
a. Removing the word ``maximum'' and adding in its place the words
``good faith'' in paragraph (a)(1);
0
b. Removing the words ``substantial and sustained'' and adding in their
place the words ``good faith'' in paragraph (a)(2); and
0
c. Revising paragraph (e).
The revision reads as follows:
Sec. 124.509 What are non-8(a) business activity targets?
* * * * *
(e) Waiver of sole source prohibition. (1) SBA may waive the
requirement prohibiting a Participant from receiving further sole
source 8(a) contracts when a Participant does not meet its non-8(a)
business activity target where a denial of a sole source contract would
cause severe economic hardship on the Participant so that the
Participant's survival may be jeopardized, or where extenuating
circumstances beyond the Participant's control caused the Participant
not to meet its non-8(a) business activity target.
(2) SBA may waive the requirement prohibiting a Participant from
receiving further sole source 8(a) contracts when the Participant does
not meet its non-8(a) business activity target where the head of a
procuring activity represents to the SBA that award of a sole source
8(a) contract to the Participant is needed to achieve significant
interests of the Government.
(3) The decision to grant or deny a request for a waiver is at
SBA's discretion, and no appeal may be taken with respect to that
decision.
(4) A waiver generally applies to a specific sole source
opportunity. If SBA grants a waiver with respect to a specific
procurement, the firm will be able to self-market its capabilities to
the applicable procuring activity with respect to that procurement. If
the Participant seeks an additional sole source opportunity, it must
request a waiver with respect to that specific opportunity. Where,
however, a Participant can demonstrate that the same extenuating
circumstances beyond its control affect its ability to receive specific
multiple 8(a) contracts, one waiver can apply to those multiple
contract opportunities.
0
32. Amend Sec. 124.513 by revising paragraphs (c)(4) and (e) to read
as follows:
Sec. 124.513 Under what circumstances can a joint venture be awarded
an 8(a) contract?
* * * * *
(c) * * *
(4) Stating that the 8(a) Participant(s) must receive profits from
the joint venture commensurate with the work performed by the 8(a)
Participant(s), or a percentage agreed to by the parties to the joint
venture whereby the 8(a) Participant(s) receive profits from the joint
venture that exceed the percentage commensurate with the work performed
by the 8(a) Participant(s);
* * * * *
(e) Prior approval by SBA. (1) When a joint venture between one or
more 8(a) Participants seeks a sole source 8(a) award, SBA must approve
the joint venture prior to the award of the sole source 8(a) contract.
SBA will not approve joint ventures in connection with competitive 8(a)
awards.
(2) Where a joint venture has been established for one 8(a)
contract, the joint venture may receive additional 8(a) contracts
provided the parties create an addendum to the joint venture agreement
setting forth the performance requirements for each additional award
(and provided any contract is awarded within two years of the first
award as set forth in Sec. 121.103(h)). If an additional 8(a) contract
is a sole source award, SBA must also approve the addendum prior to
contract award.
* * * * *
0
33. Amend Sec. 124.515 by revising paragraph (d) to read as follows:
Sec. 124.515 Can a Participant change its ownership or control and
continue to perform an 8(a) contract, and can it transfer performance
to another firm?
* * * * *
(d) SBA determines the eligibility of an acquiring Participant
under paragraph (b)(2) of this section by referring to the items
identified in Sec. 124.501(g) and deciding whether at the time of the
request for waiver (and prior to the transaction) the acquiring
Participant is an eligible concern with respect to each contract for
which a waiver is sought. As part of the waiver request, the acquiring
concern must certify that it is a small business for the size standard
corresponding to the NAICS code assigned to each contract for which a
waiver is sought. SBA will not grant a waiver for any contract if the
work to be performed under the contract is not similar to the type of
work
[[Page 60877]]
previously performed by the acquiring concern.
* * * * *
0
34. Amend Sec. 124.519 by:
0
a. Revising paragraph (a);
0
b. Removing paragraph (c);
0
c. Redesignating paragraph (b) as paragraph (c); and
0
d. Adding a new paragraph (b).
The revision and addition read as follows:
Sec. 124.519 Are there any dollar limits on the amount of 8(a)
contracts that a Participant may receive?
(a) A Participant (other than one owned by an Indian Tribe, ANC,
NHO, or CDC) may not receive sole source 8(a) contract awards where it
has received a combined total of competitive and sole source 8(a)
contracts in excess of $100,000,000 during its participation in the
8(a) BD program.
(b) In determining whether a Participant has reached the limit
identified in paragraph (a) of this section, SBA:
(1) Looks at the 8(a) revenues a Participant has actually received,
not projected 8(a) revenues that a Participant might receive through an
indefinite delivery or indefinite quantity contract, a multiple award
contract, or options or modifications; and
(2) Will not consider 8(a) contracts awarded under the Simplified
Acquisition Threshold.
* * * * *
0
35. Revise Sec. 124.520 to read as follows:
Sec. 124.520 Can 8(a) BD Program Participants participate in SBA's
Mentor-Prot[eacute]g[eacute] program?
(a) An 8(a) BD Program Participant, as any other small business,
may participate in SBA's All Small Mentor-Prot[eacute]g[eacute] Program
authorized under Sec. 125.9 of this chapter.
(b) In order for a joint venture between a prot[eacute]g[eacute]
and its SBA-approved mentor to receive the exclusion from affiliation
with respect to a sole source or competitive 8(a) contract, the joint
venture must meet the requirements set forth in Sec. 124.513(c) and
(d).
PART 125--GOVERNMENT CONTRACTING PROGRAMS
0
36. The authority citation for part 125 continues to read as follows:
Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 637; 644; 657(f);
657q; and 657s; 38 U.S.C. 501 and 8127.
0
37. Amend Sec. 125.2 by adding paragraph (g) to read as follows:
Sec. 125.2 What are SBA's and the procuring agency's responsibilities
when providing contracting assistance to small businesses?
* * * * *
(g) Past performance and experience. (1) In the case of a
solicitation for a bundled contract, a consolidated contract, or a
multiple award contract above the substantial bundling threshold of the
Federal agency, the head of the agency must consider the past
performance, capabilities and experience of each first tier
subcontractor that is part of the team as the capabilities and past
performance of the small business prime contractor when evaluating an
offer of a small business prime contractor that includes a proposed
team of small business subcontractors.
(2) For other solicitations, based on the circumstances of the
procurement, the agency may consider the past performance, capabilities
and experience of each first tier subcontractor that is part of the
team as the capabilities and past performance of the small business
prime contractor.
0
38. Amend Sec. 125.3 by adding a sentence to the end of paragraph
(b)(2) to read as follows:
Sec. 125.3 What types of subcontracting assistance are available to
small businesses?
* * * * *
(b) * * *
(2) * * * This applies whether the firm qualifies as a small
business concern for the size standard corresponding to the NAICS code
assigned to the contract, or is deemed to be treated as a small
business concern by statute (see e.g., 43 U.S.C. 1626(e)(4)(B)).
* * * * *
0
39. Amend Sec. 125.5 by:
0
a. Revising the third sentence of paragraph (a)(1);
0
b. Removing the phrase ``$100,000 or less, or in accordance with
Simplified Acquisition Threshold procedures'' and adding in its place
the phrase ``Less than the Simplified Acquisition Threshold'' in
paragraph (g);
0
c. Removing the phrase ``Between $100,000 and $25 million'' and adding
in its place the phrase ``Between the Simplified Acquisition Threshold
and $25 million'' in paragraph (g);
0
d. Removing the term ``$100,000'' and adding in its place ``the
simplified acquisition threshold'' in paragraphs (h) and (i).
The revision reads as follows:
Sec. 125.5 What is the Certificate of Competency Program?
(a) * * *
(1) * * * The COC Program is applicable to all Government
procurement actions, with the exception of 8(a) sole source awards but
including Multiple Award Contracts and orders placed against Multiple
Award Contracts, where the contracting officer has used any issues of
capacity or credit (responsibility) to determine suitability for an
award. * * *
* * * * *
0
40. Amend Sec. 125.6 by revising the paragraph (b) introductory text
and adding example 3 to paragraph (b) to read as follows:
Sec. 125.6 What are the prime contractor's limitations on
subcontracting?
* * * * *
(b) Mixed contracts. Where a contract integrates any combination of
services, supplies, or construction, the contracting officer shall
select the appropriate NAICS code as prescribed in Sec. 121.402(b) of
this chapter. The contracting officer's selection of the applicable
NAICS code is determinative as to which limitation on subcontracting
and performance requirement applies. Based on the NAICS code selected,
the relevant limitation on subcontracting requirement identified in
paragraphs (a)(1) through (4) of this section will apply only to that
portion of the contract award amount. In no case shall more than one
limitation on subcontracting requirement apply to the same contract.
* * * * *
Example 3 to paragraph (b). A procuring activity is acquiring
both services and general construction through a small business set-
aside. The total value of the requirement is $10,000,000, with the
construction portion comprising $8,000,000, and the services portion
comprising $2,000,000. The contracting officer appropriately assigns
a construction NAICS code to the requirement. The 85% limitation on
subcontracting identified in paragraph (a)(3) would apply to this
procurement. Because the services portion of the contract is
excluded from consideration, the relevant amount for purposes of
calculating the limitation on subcontracting requirement is
$8,000,000. As such, the prime contractor cannot subcontract more
than $6,800,000 to non-similarly situated entities, and the prime
and/or similarly situated entities must perform at least $1,200,000.
* * * * *
0
41. Amend Sec. 125.8 by revising paragraphs (b)(2)(iv), (xi), and
(xii), (e), and (h)(2) to read as follows:
Sec. 125.8 What requirements must a joint venture satisfy to submit
an offer for a procurement or sale set aside or reserved for small
business?
* * * * *
(b) * * *
[[Page 60878]]
(2) * * *
(iv) Stating that the small business participant(s) must receive
profits from the joint venture commensurate with the work performed by
them, or a percentage agreed to by the parties to the joint venture
whereby the small business participant(s) receive profits from the
joint venture that exceed the percentage commensurate with the work
performed by them;
* * * * *
(xi) Stating that annual performance-of-work statements required by
paragraph (h)(1) must be submitted to SBA and the relevant contracting
officer not later than 45 days after each operating year of the joint
venture; and
(xii) Stating that the project-end performance-of-work required by
paragraph (h)(2) must be submitted to SBA and the relevant contracting
officer no later than 90 days after completion of the contract.
* * * * *
(e) Past performance and experience. When evaluating the past
performance, experience, business systems and certifications of an
entity submitting an offer for a contract set aside or reserved for
small business as a joint venture established pursuant to this section,
a procuring activity must consider work done and qualifications held
individually by each partner to the joint venture as well as any work
done by the joint venture itself previously.
* * * * *
(h) * * *
(2) At the completion of every contract set aside or reserved for
small business that is awarded to a joint venture between a
prot[eacute]g[eacute] small business and a mentor authorized by Sec.
125.9, and upon request by the SBA or the relevant contracting officer,
the small business partner to the joint venture must submit a report to
the relevant contracting officer and to the SBA, signed by an
authorized official of each partner to the joint venture, explaining
how and certifying that the performance of work requirements were met
for the contract, and further certifying that the contract was
performed in accordance with the provisions of the joint venture
agreement that are required under paragraph (b) of this section.
* * * * *
0
42. Amend Sec. 125.9 by:
0
a. Revising paragraphs (b), (c)(1)(ii), and (c)(2) introductory text;
0
b. Removing paragraph (c)(4);
0
c. Revising paragraphs (d)(1)(iii) introductory text and
(d)(1)(iii)(B);
0
d. Adding paragraph (d)(6);
0
e. Removing ``(e.g., management and/or technical assistance, loans and/
or equity investments, cooperation on joint venture projects, or
subcontracts under prime contracts being performed by the mentor)'' and
adding in its place ``(e.g., management and or technical assistance;
loans and/or equity investments; bonding; use of equipment; export
assistance; assistance as a subcontractor under prime contracts being
performed by the prot[eacute]g[eacute]; cooperation on joint venture
projects; or subcontracts under prime contracts being performed by the
mentor)'' in paragraph (e)(1) introductory text.
0
f. Revising paragraph (e)(1)(i);
0
g. Removing the first sentence and revising the new first sentence of
paragraph (e)(5);
0
h. Redesignating paragraphs (e)(6) through (8) as paragraphs (e)(7)
through (9), respectively;
0
i. Adding new paragraph (e)(6);
0
j. Revising paragraph (f);
0
k. Adding paragraph (g) introductory text; and
0
l. Revising paragraph (g)(4).
The revisions and additions to read as follows:
Sec. 125.9 What are the rules governing SBA's small business mentor-
prot[eacute]g[eacute] program?
* * * * *
(b) Mentors. Any concern that demonstrates a commitment and the
ability to assist small business concerns may act as a mentor and
receive benefits as set forth in this section. This includes other than
small businesses.
(1) In order to qualify as a mentor, a concern must demonstrate
that it:
(i) Is capable of carrying out its responsibilities to assist the
prot[eacute]g[eacute] firm under the proposed mentor-
prot[eacute]g[eacute] agreement;
(ii) Does not appear on the Federal list of debarred or suspended
contractors; and
(iii) Can impart value to a prot[eacute]g[eacute] firm due to
lessons learned and practical experience gained or through its
knowledge of general business operations and government contracting.
(2) SBA will decline an application if SBA determines that the
mentor does not possess good character or a favorable financial
position, employs or otherwise controls the managers of the
prot[eacute]g[eacute], or is otherwise affiliated with the
prot[eacute]g[eacute]. Once approved, SBA may terminate the mentor-
prot[eacute]g[eacute] agreement if the mentor does not possess good
character or a favorable financial position, was affiliated with the
prot[eacute]g[eacute] at time of application, or is affiliated with the
prot[eacute]g[eacute] for reasons other than the mentor-
prot[eacute]g[eacute] agreement or assistance provided under the
agreement.
(3) In order for SBA to agree to allow a mentor to have more than
one prot[eacute]g[eacute] at time, the mentor and proposed additional
prot[eacute]g[eacute] must demonstrate that the added mentor-
prot[eacute]g[eacute] relationship will not adversely affect the
development of either prot[eacute]g[eacute] firm (e.g., the second firm
may not be a competitor of the first firm).
(i) A mentor that has more than one prot[eacute]g[eacute] cannot
submit competing offers in response to a solicitation for a specific
procurement through separate joint ventures with different
prot[eacute]g[eacute]s.
(ii) A mentor generally cannot have more than three
prot[eacute]g[eacute]s at one time. However, the first two mentor-
prot[eacute]g[eacute] relationships approved by SBA between a specific
mentor and a small business that has its principal office located in
the Commonwealth of Puerto Rico do not count against the limit of three
proteges that a mentor can have at one time.
(c) * * *
(1) * * *
(ii) Where a small business seeks to qualify as a
prot[eacute]g[eacute] in a secondary NAICS code, the firm must
demonstrate how the mentor-prot[eacute]g[eacute] relationship will help
the firm further develop or expand its current capabilities in that
secondary NAICS code. SBA will not approve a mentor-
prot[eacute]g[eacute] relationship in a secondary NAICS code in which
the firm has no prior experience.
(2) A prot[eacute]g[eacute] firm may generally have only one mentor
at a time. SBA may approve a second mentor for a particular
prot[eacute]g[eacute] firm where the second relationship will not
compete or otherwise conflict with the first mentor-
prot[eacute]g[eacute] relationship, and:
* * * * *
(d) * * *
(1) * * *
(iii) Once a prot[eacute]g[eacute] firm no longer qualifies as a
small business for the size standard corresponding to the NAICS code
under which SBA approved its mentor-prot[eacute]g[eacute] relationship,
any joint venture between the prot[eacute]g[eacute] and its mentor will
not continue to receive the exclusion from affiliation authorized by
paragraph (a) of this section. However, a change in the
prot[eacute]g[eacute]'s size status does not generally affect contracts
previously awarded to a joint venture between the prot[eacute]g[eacute]
and its mentor.
(A) * * *
(B) For contracts with durations of more than five years (including
options), where size re-certification is required under Sec.
121.404(g)(3) of this chapter no more than 120 days prior to the end of
the fifth year of the contract
[[Page 60879]]
and no more than 120 days prior to exercising any option thereafter,
once the prot[eacute]g[eacute] no longer qualifies as small for the
size standard corresponding to the NAICS code assigned to the contract,
the joint venture will not be able re-certify itself to be a small
business for that contract. The rules set forth in Sec. 121.404(g)(3)
of this chapter apply in such circumstances.
* * * * *
(6) A mentor that provides a subcontract to a prot[eacute]g[eacute]
that has its principal office located in the Commonwealth of Puerto
Rico may (i) receive positive consideration for the mentor's past
performance evaluation, and (ii) apply costs incurred for providing
training to such protege toward the subcontracting goals contained in
the subcontracting plan of the mentor.
(e) * * *
(1) * * *
(i) Specifically identify the business development assistance to be
provided and address how the assistance will help the
prot[eacute]g[eacute] enhance its growth and/or foster or acquire
needed capabilities;
* * * * *
(5) Unless rescinded in writing as a result of an SBA review, the
mentor-prot[eacute]g[eacute] relationship will automatically renew
without additional written notice of continuation or extension to the
prot[eacute]g[eacute] firm. * * *
(6) A prot[eacute]g[eacute] may generally have a total of two
mentor-prot[eacute]g[eacute] agreements with different mentors.
(i) Each mentor-prot[eacute]g[eacute] agreement may be for an
initial period of three years and may be extended an additional three
years provided the prot[eacute]g[eacute] has received the agreed-upon
business development assistance and will continue to receive additional
assistance through the extended mentor-prot[eacute]g[eacute] agreement.
(ii) If a mentor-prot[eacute]g[eacute] agreement is terminated
within a year from the date SBA approved the agreement, that mentor-
prot[eacute]g[eacute] relationship will not count as one of the two
mentor-prot[eacute]g[eacute] relationships that a small business may
enter as a prot[eacute]g[eacute].
* * * * *
(f) Decision to decline mentor-prot[eacute]g[eacute] relationship.
Where SBA declines to approve a specific mentor-prot[eacute]g[eacute]
agreement, SBA will issue a written decision setting forth its
reason(s) for the decline. The small business concern seeking to be a
prot[eacute]g[eacute] cannot attempt to enter into another mentor-
prot[eacute]g[eacute] relationship with the same mentor for a period of
60 calendar days from the date of the final decision. The small
business concern may, however, submit another proposed mentor-
prot[eacute]g[eacute] agreement with a different proposed mentor at any
time after the SBA's final decline decision.
(g) Evaluating the mentor-prot[eacute]g[eacute] relationship. SBA
will review the mentor-prot[eacute]g[eacute] relationship annually. SBA
will ask the prot[eacute]g[eacute] for its assessment of how the
mentor-prot[eacute]g[eacute] relationship is working, whether or not
the prot[eacute]g[eacute] received the agreed upon business development
assistance, and whether the prot[eacute]g[eacute] would recommend the
mentor to be a mentor for another small business in the future.
* * * * *
(4) SBA may decide not to approve continuation of a mentor-
prot[eacute]g[eacute] agreement where:
(i) SBA finds that the mentor has not provided the assistance set
forth in the mentor-prot[eacute]g[eacute] agreement;
(ii) SBA finds that the assistance provided by the mentor has not
resulted in any material benefits or developmental gains to the
prot[eacute]g[eacute]; or
(iii) A prot[eacute]g[eacute] does not provide information relating
to the mentor-prot[eacute]g[eacute] relationship, as set forth in
paragraph (g).
* * * * *
0
43. Amend Sec. 125.18 by:
0
a. Revising paragraph (a);
0
b. Removing ``(see Sec. Sec. 125.9 and 124.520 of this chapter)'' and
adding in its place ``(see Sec. 125.9 of this chapter)'' in paragraph
(b)(1)(ii);
0
c. Removing ``Sec. 124.520 or'' in paragraph (b)(2) introductory text;
0
d. Removing ``or Sec. 124.520'' in paragraph (b)(3)(i);
0
e. Redesignating paragraphs (d)(1) through (4) as paragraphs (d)(2)
through (5), respectively; and
0
f. Adding a new paragraph (d)(1).
The revision and addition read as follows:
Sec. 125.18 What requirements must an SDVO SBC meet to submit an
offer on a contract?
(a) General. In order for a business concern to submit an offer and
be eligible for the award of a specific SDVO contract, the concern must
submit the appropriate representations and certifications at the time
it submits its initial offer which includes price (or other formal
response to a solicitation) to the contracting officer, including, but
not limited to, the fact that:
(1) It is small under the size standard corresponding to the NAICS
code(s) assigned to the contract;
(2) It is an SDVO SBC; and
(3) There has been no material change in any of its circumstances
affecting its SDVO SBC eligibility.
* * * * *
(d) Multiple Award Contracts--(1) SDVO status. With respect to
Multiple Award Contracts, orders issued against a Multiple Award
Contract, and Blanket Purchase Agreements issued against a Multiple
Award Contract:
(i) SBA determines SDVO small business eligibility for the
underlying Multiple Award Contract as of the date a business concern
certifies its status as an SDVO small business concern as part of its
initial offer (or other formal response to a solicitation), which
includes price, unless the firm was required to recertify under
paragraph (e) of this section.
(A) Unrestricted Multiple Award Contracts or Set-Aside Multiple
Award Contracts for Other than SDVO. For an unrestricted Multiple Award
Contract or other Multiple Award Contract not specifically set aside
for SDVO, if a business concern is an SDVO small business concern at
the time of offer and contract-level recertification for the Multiple
Award Contract, it is an SDVO small business concern for goaling
purposes for each order issued against the contract, unless a
contracting officer requests recertification as an SDVO small business
for a specific order or Blanket Purchase Agreement. However, except for
orders and Blanket Purchase Agreements issued off any Federal Supply
Schedule contract, if an order or a Blanket Purchase Agreement under an
unrestricted Multiple Award Contract is set-aside exclusively for SDVO
small business, a concern must recertify that it qualifies as an SDVO
small business at the time it submits its initial offer, which includes
price, for the particular order or Blanket Purchase Agreement.
(B) SDVO Set-Aside Multiple Award Contracts. For a Multiple Award
Contract that is specifically set aside for SDVO small business, if a
business concern is an SDVO small business at the time of offer and
contract-level recertification for the Multiple Award Contract, it is
an SDVO small business for each order issued against the contract,
unless a contracting officer requests recertification as an SDVO small
business for a specific order or Blanket Purchase Agreement.
(ii) SBA will determine SDVO small business status at the time of
initial offer (or other formal response to a solicitation), which
includes price, for an order or an Agreement issued against a Multiple
Award Contract if the contracting officer requests a new SDVO
[[Page 60880]]
small business certification for the order or Agreement.
* * * * *
0
44. Amend Sec. 125.28 by revising the section heading and adding a
sentence to the end of paragraph (d)(1) to read as follows:
Sec. 125.28 What are the requirements for filing a service-disabled
veteran-owned status protest?
* * * * *
(d) * * *
(1) * * * Except for an order or Blanket Purchase Agreement issued
under any Federal Supply Schedule contract, an order or a Blanket
Purchase Agreement that is set-aside or reserved for SDVO small
business off a Multiple Award Contract that is not itself set aside for
SDVO small business (or any SDVO order where the contracting officer
has requested recertification of SDVO status), an interested party must
submit its protest challenging the SDVO status of a concern for the
order or Agreement by close of business on the fifth business day after
notification by the contracting officer of the apparent successful
offeror.
* * * * *
PART 126--HUBZONE PROGRAM
0
45. 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. 126.616 [Amended]
0
46. Amend Sec. 126.616 by removing ``(or, if also an 8(a) BD
Participant, with an approved mentor authorized by Sec. 124.520 of
this chapter)'' in paragraph (a).
Sec. 126.618 [Amended]
0
47. Amend Sec. 126.618 by removing ``(or, if also an 8(a) BD
Participant, under Sec. 124.520 of this chapter)'' in paragraph (a).
0
48. Amend Sec. 126.801 by adding a sentence to the end of paragraph
(d)(1) to read as follows:
Sec. 126.801 How does an interested party file a HUBZone status
protest?
* * * * *
(d) * * *
(1) * * * In connection with an order or an Agreement that is set-
aside or reserved for a certified HUBZone small business concern off a
Multiple Award Contract that is not itself set aside for certified
HUBZone small business concerns, except for an order or Blanket
Purchase Agreement issued under any Federal Supply Schedule contact,
(or any HUBZone set-aside order where the contracting officer has
requested recertification of such status), an interested party must
submit its protest challenging the HUBZone status of a concern for the
order or Agreement by close of business on the fifth business day after
notification by the contracting officer of the intended awardee of the
order or Agreement.
* * * * *
PART 127--WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT PROGRAM
0
49. 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.
Sec. 127.503 [Amended]
0
50. Amend Sec. 127.503 by removing paragraph (h).
0
51. Revise Sec. 127.504 to read as follows:
Sec. 127.504 What requirements must an EDWOSB or WOSB meet to be
eligible for an EDWOSB or WOSB contract?
(a) General. In order for a business concern to submit an offer and
be eligible for the award of a specific EDWOSB or WOSB contract, the
concern must submit the appropriate representations and certifications
at the time it submits its initial offer which includes price (or other
formal response to a solicitation) to the contracting officer,
including, but not limited to, the fact that:
(1) It is small under the size standard corresponding to the NAICS
code(s) assigned to the contract;
(2) It is listed in SAM (or any successor system) as a WOSB or
EDWOSB; and
(3) There has been no material change in any of its circumstances
affecting its EDWOSB or WOSB eligibility.
(b) Joint ventures. A business concern seeking an EDWOSB or WOSB
contract as a joint venture may submit an offer if the joint venture
meets the requirements as set forth in Sec. 127.506.
(c) Multiple Award Contracts. With respect to Multiple Award
Contracts, orders issued against a Multiple Award Contract, and Blanket
Purchase Agreements issued against a Multiple Award Contract:
(1) SBA determines EDWOSB or WOSB eligibility for the underlying
Multiple Award Contract as of the date a concern certifies its status
as an EDWOSB or WOSB as part of its initial offer (or other formal
response to a solicitation), which includes price, unless the concern
was required to recertify its status as a WOSB or EDWOSB under
paragraph (f) of this section.
(i) Unrestricted Multiple Award Contracts or Set-Aside Multiple
Award Contracts for Other than EDWOSB or WOSB. For an unrestricted
Multiple Award Contract or other Multiple Award Contract not set aside
specifically for EDWOSB or WOSB, if a business concern is an EDWOSB or
WOSB at the time of offer and contract-level recertification for the
Multiple Award Contract, it is an EDWOSB or WOSB for goaling purposes
for each order issued against the contract, unless a contracting
officer requests recertification as an EDWOSB or WOSB fora specific
order or Blanket Purchase Agreement. However, except for orders and
Blanket Purchase Agreements issued under any Federal Supply Schedule
contract, if an order or a Blanket Purchase Agreement under an
unrestricted Multiple Award Contract is set-aside exclusively for
EDWOSB or WOSB, a concern must recertify it qualifies as an EDWOSB or
WOSB at the time it submits its initial offer, which includes price,
for the particular order or Agreement.
(ii) EDWOSB or WOSB Set-Aside Multiple Award Contracts. For a
Multiple Award Contract that is set aside specifically for EDWOSB or
WOSB, if a business concern is an EDWOSB or WOSB at the time of offer
and contract-level recertification for the Multiple Award Contract, it
is an EDWOSB or WOSB for each order issued against the contract, unless
a contracting officer requests recertification as an EDWOSB or WOSB
fora specific order or Blanket Purchase Agreement.
(2) SBA will determine EDWOSB or WOSB status at the time of initial
offer (or other formal response to a solicitation), which includes
price, for an order or an Agreement issued against a Multiple Award
Contract if the contracting officer requests a new EDWOSB or WOSB
certification for the order or Agreement.
(d) Limitations on subcontracting. A business concern seeking an
EDWOSB or WOSB contract must also meet the applicable limitations on
subcontracting requirements as set forth in Sec. 125.6 of this chapter
for the performance of contracts totally set aside for EDWOSB or WOSB,
the performance of the set-aside portion of a partial set-aside
contract, or the performance of orders set-aside for EDWOSB or WOSB.
However, EDWOSB or WOSB concerns will not have to comply with the
limitations on subcontracting provisions for any order issued against
an unrestricted Multiple Award Contract if the order is competed
amongst EDWOSB or WOSB concerns and at
[[Page 60881]]
least one other-than-small business concern.
(e) Non-manufacturers. An EDWOSB or WOSB that is a non-
manufacturer, as defined in Sec. 121.406(b) of this chapter, may
submit an offer on an EDWOSB or WOSB contract for supplies, if it meets
the requirements under the non-manufacturer rule set forth in Sec.
121.406(b) of this chapter.
(f) Recertification. (1) Where a contract being performed by an
EDWOSB or WOSB is novated to another business concern, the concern that
will continue performance on the contract must recertify its status as
an EDWOSB or WOSB to the procuring agency, or inform the procuring
agency that it does not qualify as an EDWOSB or WOSB, within 30 days of
the novation approval. If the concern cannot recertify its status as an
EDWOSB or WOSB, the agency must modify the contract to reflect the new
status, and may not count the options or orders issued pursuant to the
contract, from that point forward, towards its women-owned small
business goals.
(2) Where an EDWOSB or WOSB concern that is performing a 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 EDWOSB or WOSB status to the
procuring agency, or inform the procuring agency that it no longer
qualifies as an EDWOSB or WOSB. If the concern is unable to recertify
its status as an EDWOSB or WOSB, the agency must modify the contract to
reflect the new status, and may not count the options or orders issued
pursuant to the contract, from that point forward, towards its women-
owned small business goals.
(3) For 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
EDWOSB or WOSB status 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. If the concern is unable to recertify its status
as an EDWOSB or WOSB, the agency must modify the contract to reflect
the new status, and may not count the options or orders issued pursuant
to the contract, from that point forward, towards its women-owned small
business goals.
(4) A business concern that did not certify as an EDWOSB or WOSB,
either initially or prior to an option being exercised, may recertify
as an EDWOSB or WOSB for a subsequent option period if it meets the
eligibility requirements at that time. The agency must modify the
contract to reflect the new status, and may count the options or orders
issued pursuant to the contract, from that point forward, towards its
women-owned small business goals.
(5) 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.
(6) A concern's status will be determined at the time of a response
to a solicitation for an Agreement and each order issued pursuant to
the Agreement.
Sec. 127.505 [Removed and Reserved]
0
52. Remove and reserve Sec. 127.505.
0
53. Amend Sec. 127.603 by revising the section heading and adding a
sentence to the end of paragraph (c)(1) to read as follows:
Sec. 127.603 What are the requirements for filing an EDWOSB or WOSB
status protest?
* * * * *
(c) * * *
(1) * * * Except for an order or Blanket Purchase Agreement issued
under any Federal Supply Schedule contact, an order or a Blanket
Purchase Agreement that is set-aside or reserved for EDWOSB or WOSB
small business under a Multiple Award Contract that is not itself set
aside for EDWOSB or WOSB small business (or any EDWOSB or WOSB order
where the contracting officer has requested recertification of such
status), an interested party must submit its protest challenging the
EDWOSB or WOSB status of a concern for the order or Blanket Purchase
Agreement by close of business on the fifth business day after
notification by the contracting officer of the apparent successful
offeror.
* * * * *
PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF
HEARINGS AND APPEALS
0
54. The authority citation for part 134 continues to read as follows:
Authority: 5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 634(i),
637(a), 648(l), 656(i), and 687(c); 38 U.S.C. 8127(f); E.O. 12549,
51 FR 6370, 3 CFR, 1986 Comp., p. 189.
Subpart J issued under 38 U.S.C. 8127(f)(8)(B).
Subpart K issued under 38 U.S.C. 8127(f)(8)(A).
0
55. Amend Sec. 134.318 by adding a subject heading to paragraph (a)
and revising paragraph (b) to read as follows:
Sec. 134.318 NAICS Appeals.
(a) General. * * *
(b) Effect of OHA's decision. If OHA grants the appeal (changes the
NAICS code), the contracting officer must amend the solicitation to
reflect the new NAICS code. The decision will also apply to future
solicitations for the same supplies or services.
* * * * *
Dated: October 16, 2019.
Christopher Pilkerton,
Acting Administrator.
[FR Doc. 2019-23141 Filed 11-7-19; 8:45 am]
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