[Federal Register Volume 85, Number 91 (Monday, May 11, 2020)]
[Rules and Regulations]
[Pages 27650-27665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09022]



[[Page 27650]]

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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 124, 125, 126, and 127

RIN 3245-AG75


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

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: The Small Business Administration (SBA or the Agency) amends 
its regulations to implement a statutory requirement to certify Women-
Owned Small Business Concerns (WOSBs) and Economically Disadvantaged 
Women-Owned Small Business Concerns (EDWOSBs) participating in the 
Procurement Program for Women-Owned Small Business Concerns (the 
Program). The certification requirement applies only to those 
businesses wishing to compete for set-aside or sole source contracts 
under the Program, and to those seeking to be awarded multiple award 
contracts for pools reserved for WOSBs and EDWOSBs. Once this rule is 
effective, WOSBs and EDWOSBs that are not certified will not be 
eligible for contracts under the Program. Other women-owned small 
business concerns that do not participate in the Program may continue 
to self-certify their status, receive contract awards outside the 
Program, and count toward an agency's goal for awards to WOSBs. For 
those purposes, contracting officers would be able to accept self-
certifications without requiring them to verify any documentation. In 
this rule, SBA implements the statutory mandate to provide 
certification, to accept certification from certain identified 
government entities, and to allow certification by SBA-approved third-
party certifiers. As part of the changes necessary to implement a 
certification program, this final rule amends SBA's regulations with 
regard to continuing eligibility and program examinations. This rule 
also adjusts the economic disadvantage thresholds for determining 
whether an individual qualifies as economically disadvantaged. The new 
thresholds will be used for assessing the economic disadvantage of 
applicants to the 8(a) Business Development (BD) Program, as well as 
applicants seeking EDWOSB status.

DATES: This rule is effective on July 15, 2020, except for the 
amendments to Sec. Sec.  127.300, 127.304, 127.305, the addition of 
Sec.  127.351, and the amendments to Sec. Sec.  127.400, 127.401, 
127.403, 127.405, 127.504, 127.505, 127.603, and 127.604, which are 
effective on October 15, 2020. The addition of Sec.  127.355 is delayed 
indefinitely and we will publish a document in the Federal Register 
announcing the effective date.

FOR FURTHER INFORMATION CONTACT: Nikki Burley, U.S. Small Business 
Administration, Office of Policy, Planning and Liaison, 409 Third 
Street SW, Washington, DC 20416; (202) 205-6459; sba.gov">nikki.burley@sba.gov.

SUPPLEMENTARY INFORMATION: As set forth in section 8(m) of the Small 
Business Act, 15 U.S.C. 637(m), the Program authorizes Federal 
contracting officers to restrict competition to eligible WOSBs or 
EDWOSBs for Federal contracts in certain industries. Section 825 of the 
National Defense Authorization Act for Fiscal Year 2015, Public Law 
113-291, 128 Stat. 3292 (December 19, 2014) (2015 NDAA), amended the 
Small Business Act to grant contracting officers the authority to award 
sole source awards to WOSBs and EDWOSBs. In addition, section 825 of 
the 2015 NDAA amended the Small Business Act to create a requirement 
that a concern be certified as a WOSB or EDWOSB by a Federal agency, a 
State government, SBA, or a national certifying entity approved by SBA, 
in order to be awarded a set aside or sole source contract under the 
authority of section 8(m) of the Small Business Act. 15 U.S.C. 
637(m)(2)(E). SBA believes that certification is also required where an 
agency establishes a pool of WOSBs or EDWOSBs on a multiple award 
contract and intends to set-aside or reserve one or more orders for 
WOSBs or EDWOSBs.
    On September 14, 2015, SBA published in the Federal Register a 
final rule to implement the sole source authority for WOSBs and 
EDWOSBs. 80 FR 55019 (effective October 14, 2015). SBA did not address 
the certification portion of the 2015 NDAA in that final rule because 
its implementation could not be accomplished by merely incorporating 
the statutory language into the regulations and would have delayed the 
implementation of the sole source authority. SBA notified the public 
that because it did not want to delay the implementation of the WOSB 
sole source authority, it would implement the certification requirement 
through a separate rulemaking.
    As part of the process to draft the regulations governing the WOSB/
EDWOSB certification program, SBA published an Advance Notice of 
Proposed Rulemaking in the Federal Register on December 18, 2015 (80 FR 
78984) and a proposed rule in the Federal Register on May 14, 2019 (84 
FR 21256). The proposed rule solicited public comments to assist SBA in 
drafting a final rule to implement a WOSB/EDWOSB certification program. 
SBA received 898 comments from 307 commenters in response to the 
proposed rule (Regulations.Gov Docket #SBA-2019-0003). SBA has reviewed 
all input from interested stakeholders while drafting this rule.
    The proposed rule also revised Sec.  124.104(c) to make the 
economic disadvantage requirements for the 8(a) BD Program consistent 
with the economic disadvantage requirements for women-owned small 
businesses seeking EDWOSB status. The proposed change eliminated the 
distinction in the 8(a) BD Program for initial entry into and continued 
eligibility for the program.

Economic Disadvantage

    Currently, the economic disadvantage criteria for EDWOSBs is 
$750,000, which is the same as the continuing eligibility threshold for 
the 8(a) BD program, but higher than the $250,000 initial eligibility 
threshold for that program. A concern applying for EDWOSB and 8(a) BD 
status simultaneously could thus be found economically disadvantaged 
for EDWOSB purposes, but not economically disadvantaged for the 8(a) BD 
Program. This result would introduce unnecessary confusion and 
uncertainty into the application and certification processes. To remedy 
this, this final rule makes economic disadvantage consistent across 
programs.
    SBA commissioned a study to assist the Office of Business 
Development in defining or establishing criteria for determining what 
constitutes ``economic disadvantage'' for purposes of firms applying to 
the 8(a) BD program. The study concluded that the available data 
support an economic disadvantage threshold between $375,000 and $1.2 
million. This range reflects the complexity of establishing a threshold 
that considers the ability of disadvantaged business owners to compete 
in the free enterprise system, as well as those individuals' access to 
credit and capital. That inherent complexity is evident in the varied 
economic disadvantage thresholds established by other Federal and state 
programs. For example, the Disadvantaged Business Enterprise Program 
(DBE), administered by agencies authorized by the U.S. Department of 
Transportation (DOT), uses a $1.32 million economic disadvantage 
threshold. States with similar programs for ``minority and

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women business enterprises'' have economic disadvantage thresholds up 
to $1.6 million. The study commissioned by SBA did not come to a 
definitive conclusion on which threshold the Agency should use. One 
suggestion was to use a $1.1 million ``unadjusted'' (home and business 
equity included) personal net worth standard, which would be equal to a 
$375,000 ``adjusted'' (home and business equity excluded) standard. The 
study did not, however, consider differences in economic disadvantage 
between applying to the 8(a) BD program and continuing in the program 
once admitted, nor did it consider economic disadvantage in the context 
of EDWOSB eligibility. Because SBA believes that it is important to 
have the same economic disadvantage criteria for the 8(a) BD program as 
for the EDWOSB program to avoid confusion and inconsistency between the 
programs, SBA considered applying a $375,000 net worth standard to both 
the 8(a) BD and EDWOSB programs. SBA requested comments on whether the 
$375,000 net worth standard or the $750,000 net worth standard should 
be used for the EDWOSB and 8(a) BD and Programs.
    In response, SBA received 146 comments that supported $750,000 as 
the appropriate economic disadvantage threshold. Of these, a 
substantial number explicitly expressed support for changing the 
regulations to make the economic disadvantage threshold consistent 
between programs, while the rest expressed support more broadly for 
maintaining EDWOSB's economic disadvantage threshold of $750,000. SBA 
did not receive any comments supporting a common $375,000 net worth 
standard for the EDWOSB and 8(a) BD programs. SBA also received four 
comments that offered alternative methods to establish an economic 
threshold. One argued that the standard should be variable and based on 
inflation, one thought the standard should be locality-based, and two 
suggested a tiered system. Three additional commenters opposed an 
economic disadvantage threshold of $750,000. One recommended an 
economic disadvantage threshold of $1 million, one opposed having an 
economic disadvantage threshold at all, and the third merely thought 
that $750,000 was inappropriate. SBA believes that varying the economic 
disadvantage threshold depending on fluid external factors such as 
inflation, or applying different thresholds depending on locality, 
would introduce too much volatility and confusion into the application 
process and lead to inconsistency between programs. Increasing the 
economic disadvantage threshold to $1 million or abolishing economic 
disadvantage thresholds altogether were not contemplated in the 
proposed rule and are not under consideration now. Based on the study's 
conclusion that SBA could set an economic disadvantage threshold 
between $375,000 and $1.2 million, stakeholders' clear affirmation of a 
$750,000 economic disadvantage threshold, and the preference for 
uniform standards across programs, SBA is keeping the EDWOSB economic 
disadvantage threshold and adjusting the 8(a) BD economic disadvantage 
thresholds accordingly.
    SBA also received comments regarding how economic disadvantage 
would be assessed going forward. Specifically, commenters asked about 
whether there is any difference between the EDWOSB and the 8(a) BD 
regulations governing how retirement accounts are calculated when 
determining an economically disadvantaged individual's net worth, and 
if the change in the economic disadvantage threshold will affect that 
calculation. In light of this feedback, SBA has revised Sec.  
124.104(c)(2)(ii) and Sec.  127.203(b)(3) in the final rule to note 
that retirement accounts will now be excluded from calculations of an 
economically disadvantaged individual's net worth, irrespective of the 
individual's age. SBA has previously contemplated this change, 
believing that it accords with the valuable public policy of 
incentivizing, rather than punishing, saving for retirement. It also 
expands the pool of potential EDWOSB and 8(a) BD participants because 
retirement-age small business owners will no longer be ineligible 
solely due to their retirement savings. Changing the EDWOSB and 8(a) BD 
net worth provisions now, in conjunction with the changes to the 
economic disadvantage threshold for both programs, furthers SBA's long-
term aim of promoting regulatory consistency and continuity.

Women-Owned Small Business Certification Program

    The 2015 NDAA amended the Small Business Act to require that 
concerns participating in the Program must be certified by SBA, a 
Federal agency, a state government, or an approved national certifying 
entity. In response, SBA proposed amending the regulations in part 127 
to remove references to self-certification with respect to the award of 
WOSB/EDWOSB contracts. The certification requirement applies only to 
participants wishing to compete for set-aside or sole source contracts 
under the Program. Once this rule is effective, WOSBs and EDWOSBs that 
are not certified will not be eligible for contracts under the Program. 
Other women-owned small business concerns that do not participate in 
the Program may continue to self-certify their status, receive contract 
awards outside the Program, and count toward an agency's goal for 
awards to WOSBs. The final rule adds a new Sec.  127.200(c) to make 
clear that a concern may continue to self-certify as a WOSB for goaling 
purposes. Revised Sec.  127.300 establishes options for small business 
concerns seeking certification as WOSBs or EDWOSBs: Applying via SBA's 
free online application, submitting evidence of certification from 
another approved Government entity, or submitting evidence of 
certification from an approved third-party certifier.
    SBA received over 400 comments on the proposed revisions to Sec.  
127.300(a) and (b), which detail the options for certification. Of 
these, 170 commenters expressed a general sentiment that there should 
be ``a fair and unified set of requirements and application processes 
for all participants'' and ``the process of submitting an application . 
. . should be fully uniform and completed at certify.sba.gov.'' An 
additional sixteen commenters explicitly supported the proposed 
processes, and two commenters opposed them.
    SBA shares the view that certification requirements must be fair 
and consistently applied. To ensure this consistency, SBA is the final 
authority for all of the certification processes. Congress' intent in 
allowing SBA to delegate certification to other authorized parties was 
to ensure that the public has access to the broadest range of 
certification options while at the same time ensuring that consistent 
Program eligibility requirements are met. There will naturally be 
differences between each of the processes because they will be 
administered by different entities, but the foundation for all the 
processes is SBA's Program eligibility requirements. Each applicant 
will be providing evidence to SBA that it meets these requirements; the 
application processes outlined in Sec. Sec.  127.300-127.305 differ 
primarily in what kind of documentation demonstrates eligibility.
    Based on the comments received, SBA understands that many 
stakeholders harbor reservations about the fairness and uniformity of 
the application process. As such, the final rule will clarify in 
subpart C, ``Certification of WOSB or EDWOSB Status,'' that there is no 
distinction between ``Certification by SBA'' and ``Certification by 
Third Party,'' as written in the proposed rule.

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Instead, the regulations will refer to all the provisions covering the 
different application processes in Sec. Sec.  127.300-127.305 as 
``Certification.'' SBA also removed references to SBA in the headings 
for Sec. Sec.  127.301-127.305 so that concerns understand that the 
regulations apply to all applicants, regardless of how they opt to seek 
certification. The rules for third-party certifiers, covered 
extensively in new Sec. Sec.  127.350-127.356, will be labeled as 
``Requirements for Third-Party Certifiers.'' SBA believes this will 
reaffirm that ``Certification'' is a unitary process, that all concerns 
must meet the same eligibility requirements, and that the only 
difference is in how they can present evidence that they have met those 
requirements.
    SBA received four comments regarding the proposed change to Sec.  
127.300(a)(1), which specifies that concerns can apply for WOSB 
certification from SBA. Three commenters were supportive. The fourth 
opposed the provision because it believes that concerns should continue 
to have the option to self-certify. Because the statutory language 
mandates the methods for certification, SBA has no authority to retain 
self-certification as an option for concerns seeking to compete for 
WOSB and EDWOSB set-aside procurements (as noted above, concerns can 
still self-certify for non-WOSB and non-EDWOSB set-aside procurements, 
still self-identify as women-owned small businesses, and awards to 
firms self-identifying as WOSBs may be counted by a procuring agency 
towards its WOSB goal). SBA adopts the proposed language as final.
    SBA received 12 comments that specifically touched on Sec.  
127.300(a)(2), which outlines the options for non-SBA, government-
entity certification options. The proposed rule stated that a concern 
could submit evidence that it was a certified participant of the 8(a) 
BD Program or the DBE Program, or that it was certified as a Veteran-
Owned or Service-Disabled Veteran-Owned Small Business by the U.S. 
Department of Veterans Affairs (VA) Center for Verification and 
Evaluation (CVE). The Supplementary Information in the proposed rule 
also contemplated potentially accepting evidence that a concern 
participated in SBA's HUBZone Program.
    The final rule removes reference to the 8(a) BD Program in Sec.  
127.300(a)(2) and instead includes it only in Sec.  127.300(b)(2), 
which details EDWOSB certification. Every current 8(a) BD participant 
that is 51% owned and controlled by a woman or women is an EDWOSB 
because economic disadvantage is a component of 8(a) BD eligibility, 
and all EDWOSBs are WOSBs. As such, including this information in the 
EDWOSB certification sub-section covers both EDWOSB and WOSB 
participation.
    The final rule also omits reference to the HUBZone Program in that 
section. While evidence of HUBZone participation would indicate a 
concern is small, it would not provide any of the other information to 
demonstrate WOSB/EDWOSB eligibility. Specifically, a firm need not 
demonstrate that it is owned and controlled by a specific individual in 
order to be eligible for the HUBZone program. Thus, such a 
certification does not include a finding by SBA of any ownership and 
control. The purpose of Sec.  127.300(a)(2) and (b)(2) is to expand the 
options for concerns to demonstrate Program eligibility as efficiently 
as possible. A certification option that necessitates submitting 
documentation of all but one of the elements of Program eligibility 
does not meaningfully effectuate this purpose. Similarly, the final 
rule removes DBE certification from the list of options. After 
discussions with stakeholders, SBA concluded that evidence of DBE 
certification would not provide the requisite level of certainty that a 
concern was eligible for the Program. While the DOT DBE regulations 
refer back to SBA's size regulations at 13 CFR part 121, concerns would 
still need to provide documentation to confirm they met SBA's distinct 
requirements for ownership and control by one or more women, or that 
they met SBA's economic disadvantage criteria if they were seeking 
EDWOSB certification. As with HUBZone Program participation, evidence 
of DBE participation would not help small businesses demonstrate 
eligibility as efficiently and easily as possible while still ensuring 
the requirements are met. In contrast, the governing regulations for 
the CVE program (38 CFR 74.2-74.4) refer to SBA's standards for size, 
socioeconomic status, ownership, and control. Documentation of CVE 
certification, along with confirmation that the concern was owned and 
controlled by one or more women, would demonstrate that a concern had 
met all the eligibility requirements for the Program. To help concerns 
better understand how to demonstrate their Program eligibility with 
their CVE certification, the final rule details the application process 
in Sec.  127.303.
    SBA received 188 comments on Sec.  127.300(a)(3), which provides 
that a concern may submit evidence that it has been certified as an 
eligible Program participant by a Third-Party Certifier. Of these, 170 
stated generally that SBA should have oversight of third-party 
certifiers and implement standards for certifiers. SBA agrees with 
these commenters and Sec. Sec.  127.350-127.356, discussed below, 
detail requirements for third-party certifiers. These commenters also 
requested that SBA update SAM.gov to reflect that they are certified, 
including third-party certified. SBA does not oversee SAM.gov but will 
maintain its own internal records that will reflect up-to-date 
information and that information will be relayed to the General 
Services Administration, the agency that maintains SAM.gov.
    Fifteen commenters opposed proposed Sec.  127.300(a)(3) for a wide 
variety of reasons. One commenter stated that there should not be 
``required'' third-party certification. SBA believes that this 
commenter misinterpreted the rule. As outlined in the rule, there are 
several different certification options, and concerns are not required 
to choose third-party certification. Which way to seek WOSB or EDWOSB 
certification is a business decision up to discretion of each firm. 
Three commenters said all certification should be handled by SBA, 
rather than by third-party certifiers that may have differing 
standards. In response, SBA notes that Congress specifically enumerated 
several different certification options in the statutory language, 
making clear that SBA should not be the sole entity processing 
certification applications. However, SBA retains responsibility for 
overseeing the Program eligibility requirements, and these requirements 
are the standards by which all applicants will be assessed. Certifiers 
will not be able to impose their own application standards for Program 
applicants.
    Six commenters opposed third-party certification because of the 
associated fees, which commenters perceived as prohibitively expensive 
for many small businesses. Both Congress and SBA understand the 
importance of ensuring certification is available to every eligible 
concern. As such, Congress authorized several free certification 
options, and SBA will not distinguish between concerns based on how 
they were certified. No firm will be required to pay a fee for 
certification. Again, it is up to each firm seeking WOSB or EDWOSB 
certification to determine which method of certification makes sense 
for it. One commenter opposed third-party certification because of the 
``frequency of certification'' associated with third-party certifiers. 
Currently, third-party-

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certified concerns are recertified annually. Under the new regulations, 
all concerns, whether certified directly by SBA or otherwise, will be 
required to attest to SBA annually that they remain eligible for the 
Program and undergo a full program examination every three years. As 
such, third-party-certified concerns will not face a greater 
administrative burden than concerns certified via other processes. SBA 
updated subpart D to discuss the requirements for recertification, and 
these changes are discussed in greater detail below.
    SBA received six comments on Sec.  127.300(b), which discusses how 
SBA will certify concerns as EDWOSBs. One commenter supported having an 
array of certification options. Two others requested clarification 
about how SBA will accept certification from other government entities. 
SBA has provided additional detail about what applicants must submit in 
order to demonstrate certification via non-SBA government entity 
certifiers in Sec.  127.303.
    SBA received seven comments related to Sec.  127.300(b)(2), which 
states that a woman- or women-owned business that is a certified 8(a) 
BD participant qualifies as an EDWOSB. One commenter said that EDWOSB 
should be a ``sub-set'' of the 8(a) BD Program. Another commenter said 
that EDWOSB certification should automatically confer 8(a) BD 
certification. There is significant overlap between the eligibility 
requirements of the two programs, but they are not identical. The most 
important difference is that a concern can participate in the WOSB 
Program for as long as it is eligible, whereas participation in the 
8(a) BD Program is limited to nine years. Further, the 8(a) BD Program 
has unique eligibility requirements that do not apply to the WOSB 
Program. In particular, the 8(a) BD Program requires the principal of a 
business to be socially disadvantaged in order to qualify for 
participation, and women as a group are not presumed to be socially 
disadvantaged. An individual seeking to qualify as socially 
disadvantaged based on her status as a woman must demonstrate that she 
personally has suffered discrimination or bias that has adversely 
affected her entry into or advancement in the business world. 
Determining whether an individual woman can demonstrate social 
disadvantage requires fact-specific analysis and cannot be 
automatically presumed. Thus, EDWOSB qualification does not 
automatically confer 8(a) BD qualification, even though the converse is 
true. In addition, the 8(a) BD certification process requires an 
applicant to demonstrate that it possesses the necessary ``potential 
for success,'' as defined in the 8(a) BD regulations, and WOSB 
certification has no corresponding requirement.
    Two commenters said that SBA should adjust goaling requirements so 
that more 8(a) BD awards are apportioned for WOSBs/EDWOSBs. Goaling 
thresholds are set by Congress and SBA establishes them in a way that 
seeks to ensure that the statutory goal is met Government-wide. 
Although SBA has some discretion in the setting of a particular 
agency's goals, SBA cannot establish goals that do not meet the overall 
Government-wide statutory goal. SBA is always seeking to enhance small 
business participation in Federal contracting and will continue to do 
so. One commenter suggested that the Program should mirror the outreach 
and public education efforts of the 8(a) BD Program because the 
contracting community is not aware of or familiar with WOSB and EDWOSB 
opportunities. SBA hopes that the increased public outreach during the 
rulemaking process has helped ameliorate this perceived lack of 
awareness and that the certification application process will further 
familiarize concerns with Program benefits and responsibilities. SBA 
adopts the proposed language as final.
    One commenter opposed Sec.  127.300(b)(3), specifically asking why 
veteran-owned small business that are owned and controlled by women 
could not be automatically certified as WOSBs, but rather had to submit 
additional information to SBA to be so designated. CVE eligibility is 
not based on gender and thus evidence of CVE certification would not 
automatically communicate that an applicant had necessarily satisfied 
all Program requirements, including 51% ownership and control by a 
woman or women. A CVE certification demonstrates that a firm is owned 
and controlled by one or more veterans or service-disabled veterans, 
but not necessarily by women veterans or women service-disabled 
veterans. The process for CVE-certified small businesses will be to 
demonstrate that the individuals certified to own and control the 
business concern are women and, if they seek EDWOSB status, that they 
are economically disadvantaged. CVE certification alone would also not 
demonstrate an applicant's economic disadvantage, which is a necessary 
component of EDWOSB participation. SBA adopts the proposed language as 
final.
    SBA did not receive any comments on proposed Sec.  127.301, which 
provides guidance on when concerns should apply for Program 
certification. As such, SBA adopts it as final in this rule. SBA did, 
however, receive comments regarding who will be deemed certified as a 
WOSB or EDWOSB upon this rule becoming effective and, therefore, be 
immediately eligible to be awarded set-aside and sole source WOSB and 
EDWOSB contracts. SBA agrees that this is an important issue that 
should be clarified.
    Pursuant to the underlying statutory authority, a concern must be 
certified as a WOSB or EDWOSB in order to be awarded a WOSB or EDWOSB 
set-aside or sole-source contract. The change in the regulations 
implementing that statutory provision does not affect contracts 
previously awarded through the Program, so a concern that was 
previously awarded a WOSB or EDWOSB contract may continue to perform 
that contract and the procuring agency may continue to count the 
contract towards its WOSB goal. Once this rule is effective, however, a 
concern performing on a long-term WOSB or EDWOSB contract (i.e., one in 
excess of five years) must represent that it is a certified WOSB or 
EDWOSB in order for the award to continue to count towards an agency's 
WOSB goal. For new WOSB and EDWOSB set-aside contracts, a concern must 
be able to demonstrate that it has applied for certification before the 
date it submitted a bid, and that it has not previously sought and been 
denied certification. For new WOSB or EDWOSB sole-source contracts, a 
concern must already be certified at the time it seeks to obtain the 
sole-source contract. In both situations, the concern must be certified 
prior to award. Concerns that are owned and controlled by one or more 
women and certified through the 8(a) BD Program, concerns that are 
third-party certified, and concerns that were subject to a program 
examination or status protest and received a concomitant positive 
decision in the three years prior to the rule's effective date will all 
be considered certified the day the rule is effective. SBA trusts this 
information will help concerns plan for when and how to apply for 
certification so that they are ready to compete for new WOSB and EDWOSB 
set-aside contracts and able to continue working on existing set-aside 
contracts without interruption.
    SBA received one comment on Sec.  127.302, which provides that 
concerns will apply for certification on certify.sba.gov or any 
successor system. The commenter opposed having an electronic-only 
application process. SBA believes that an electronic process is the 
most efficient and timely way to

[[Page 27654]]

process the number of applications SBA is expecting once the rule is 
effective. In today's business environment, SBA believes that every 
business concern seeking to contract with the Federal Government must 
have access to a computer and that this is the easiest and best way to 
transmit and process applications. SBA adopts the proposed language and 
will remove ``from SBA'' from the heading in the final rule.
    SBA did not receive any comments on Sec.  127.303, which outlines 
what documentation concerns must submit for certification. Based on 
questions and feedback received on related sections, SBA has expanded 
Sec.  127.303 in the final rule. This section now refers to the 
documentation applicants must submit for each of the certification 
options detailed in Sec.  127.300(a) and (b). This additional 
information is intended to help applicants better prepare their 
applications and will hopefully facilitate a more efficient process.
    SBA received two comments on Sec.  127.304, which discusses how SBA 
will process applications. Both commenters opposed the 90-day timeframe 
for making determinations after receipt of a completed application. 
Neither commenter offered an alternative timeframe that would better 
suit the needs of the small business community. This 90-day processing 
time aligns with that of the 8(a) BD and HUBZone Programs, and SBA 
believes that is appropriate for the WOSB Programs as well. As such, 
SBA adopts the proposed language as final.
    SBA received eight comments on Sec. Sec.  127.305 and 127.306, 
which dealt with how and when applicants could reapply or seek 
recertification after being declined or decertified. Five commenters 
opposed the provisions, two were supportive, and one sought 
clarification. The commenters in opposition vigorously disagreed with 
the proposed one-year ``cooling-off'' period, during which time a 
concern could not reapply for Program certification. One commenter 
noted that not being able to appeal or rectify a negative certification 
decision until a year has passed was ``the worst of both worlds.'' In 
response to the comments, SBA has amended these provisions. The final 
rule removes proposed Sec.  127.305 (reconsideration) and moves the 
language in proposed Sec.  127.306 to that section. The final rule also 
amends the language in proposed Sec.  127.306 (now Sec.  127.305) to 
align with the HUBZone Program regulations, which do not have a 
reconsideration or appeal process and instead allow concerns to remedy 
their eligibility deficits and reapply after 90 days. In addition to 
responding to industry concerns, mirroring the HUBZone Program 
regulations has the added benefit of furthering SBA's aim of promoting 
consistency between its programs.

Requirements for Third-Party Certifiers

    SBA proposed to amend subpart C of part 127 to establish procedures 
for Third-Party Certification in the context of a required 
certification program. In Sec.  127.350, SBA proposed that all Third-
Party Certifiers must be approved by SBA. Under this rule, an approved 
third-party certifier need not be a non-profit entity. SBA also 
clarified that a third-party certifier is a non-governmental entity, in 
contrast to the governmental certifications (8(a) BD and VA CVE) that 
SBA will accept for WOSB/EDWOSB certification purposes. The proposed 
rule also stipulated what concerns must do to be certified by a third-
party certifier.
    SBA received five comments on revised Sec. Sec.  127.350-127.356. 
One commenter said that new third-party certifiers must be 
``credible.'' SBA does not have concerns about the credibility of 
third-party certifiers. The statutory language stipulates that only 
SBA-approved third-party certifiers are authorized to certify concerns. 
There are currently four SBA-approved third-party certifiers. In 
advance of effectuating the final rule, SBA has focused on providing 
clarity and guidance on the certification process as a whole and not on 
third-party certifiers specifically, but foresees expanding the list of 
authorized third-party certifiers in the future. All third-party 
certifiers participating in the Program are required to abide by both 
the regulations in part 127, and their agreements with SBA. SBA 
communicates regularly with third-party certifiers, collects monthly 
data about the WOSBs and EDWOSBs they work with, and periodically 
reviews their application processes. This is all intended to ensure 
that SBA's eligibility requirements are consistently applied. As such, 
SBA feels confident the third-party certifiers are, and will continue 
to be, credible partners in the certification process.
    Three other commenters sought clarification on different provisions 
in this section. In response to Sec.  127.353(b), one commenter 
suggested SBA provide language that third-party certifiers can use to 
advise applicants that SBA offers a free certification option. SBA 
agrees that providing that language would be helpful, but including it 
in the regulations would preclude the Agency from refining the language 
in response to feedback from applicants once the certification process 
is underway. SBA will plan to communicate with third-party certifiers 
in the coming months on what the advisory language should look like. 
Similarly, another commenter requested additional detail about what 
information SBA will require in reports from third-party certifiers 
under Sec.  127.355(a). The proposed language was drafted deliberately 
to allow for SBA to make determinations about what third-party 
certifiers will have to submit regularly once the certification program 
is underway and it becomes clear what type of information would be 
helpful. A third commenter asked for clarification on the timeline for 
periodic compliance reviews, which SBA believes is adequately spelled 
out in Sec.  127.355(b)(1).
    Finally, several commenters opposed this section on the grounds 
that SBA should not allow for-profit entities to certify concerns, that 
there will be too many discrepancies between third-party certification 
and certification via other entities, and that ``SBA's failure to act 
appropriately in the budgetary process'' deprived the Program of the 
funds necessary to manage a certification process. On the first point, 
the authorizing legislation does not limit third-party certifier 
participation to entities that are non-profit, so going forward, SBA 
will not require third-party certifiers to maintain non-profit status. 
In response to the second concern, SBA reiterates that all certifying 
entities will assess applicants against the same eligibility 
requirements. The third point, which expressed concern that the 
certification program was not appropriately funded, was echoed by many 
commenters. All of these commenters used identical language to urge SBA 
to, ``act immediately to move budgetary (taxpayer) funds from programs 
that have not been sanctioned by Congress towards the full and 
effective implementation of this nearly twenty-year-old 
Congressionally-mandated program and advise Congress of the full budget 
needed so that SBA may receive the necessary funding to assure this 
program is well run.'' SBA appreciates these commenters' sense of 
urgency about the implementation of the certification program and 
understands commenters' frustrations. SBA notes, however, that the 
requirement that a concern must be certified as a WOSB or EDWOSB in 
order to be awarded a set-aside or sole source contract under the 
Program was enacted as part of 2015 NDAA. Further, the Agency's ability 
to spend funds that ``have not been sanctioned by Congress'' is 
proscribed by law, and its ability to shift money

[[Page 27655]]

between unrelated programs is limited. SBA believes Congress is well-
apprised of the scope and breadth of the certification program. The 
plan continues to be to stand up Program certification by leveraging 
existing resources.
    SBA did not receive specific comments on Sec.  127.354, but in 
light of the broader concerns expressed about discrepancies between 
third-party certification and certification by a government entity, the 
final rule revises the heading of this paragraph to emphasize that SBA 
will require third-party certifiers to follow detailed, uniform 
guidance to demonstrate capability to certify concerns.
    Proposed Sec.  127.357(a) permitted a concern found to be 
ineligible by a third-party certifier to request reconsideration and a 
redetermination. Proposed Sec.  127.357(c) prohibited a declined 
concern from reapplying for WOSB or EDWOSB certification by SBA or a 
third-party certifier for a one-year period, and proposed Sec.  
127.357(d) prohibited concerns from reapplying through another third-
party certifier during that time. In light of the changes to Sec.  
127.305, which shortens the reapplication timeframe from one year to 90 
days, Sec.  127.357 is omitted in the final rule. As discussed, SBA's 
aim is to ensure consistency and uniformity between the certification 
options, both as a policy matter and in response to the 168 commenters 
who stressed the importance of, ``a fair and unified set of 
requirements and application processes for all participants.'' Allowing 
concerns that opt for third-party certification to seek reconsideration 
if they are declined would privilege them over concerns that apply for 
certification from SBA or another government entity, because the latter 
groups will not have a reconsideration option. Removing this proposed 
section better facilitates alignment between the certification options 
and is responsive to stakeholders' concerns.
    SBA received eight comments on proposed Sec.  127.400, which 
requires that concerns recertify eligibility every three years. Four 
commenters supported recertification every three years and four 
opposed. Of the four commenters opposed, three suggested annual 
recertification because that is what SBA's other programs require. SBA 
believes that a helpful comparison is to look at the requirements of 
the HUBZone Program. Per the HUBZone Program regulations at Sec.  
126.500, SBA conducts a program examination and recertification of each 
HUBZone concern every three years, and concerns are required to 
represent annually that they continue to meet all program criteria. In 
contrast, proposed Sec.  127.400 would only have required WOSBs and 
EDWOSBs to recertify every three years. In an effort to more closely 
align the WOSB Program regulations with other SBA regulations, and in 
response to the commenters concerned that recertification every three 
years is insufficient, the final rule revises Sec.  127.400 to require 
concerns to annually attest to SBA that they meet the Program 
requirements, and undergo a full program examination and 
recertification every three years. SBA added two examples to this 
section to help illustrate the recertification requirements detailed in 
the final rule.
    Proposed Sec.  127.401 provided that all certified concerns have an 
affirmative duty to notify SBA of any material changes in writing. SBA 
did not receive any comments on this section and adopts the proposed 
language as final.
    Proposed Sec.  127.402 addressed the failure of a concern to 
recertify every three years or to notify SBA of a material change. SBA 
did not receive any comments on this section. In light of the changes 
to the rest of this subpart, Sec.  127.402 is omitted in the final rule 
and the subsequent sections have been renumbered. The information 
detailed in proposed Sec.  127.402 is included in Sec.  127.405 
(formerly Sec.  127.406) in the final rule, which discusses the 
consequences if SBA is unable to determine a concern's eligibility or 
determines that a concern is no longer eligible for the Program.
    Proposed Sec.  127.403 detailed how SBA would conduct program 
examinations and specifically how program examinations would change 
after the certification process is implemented. SBA did not receive any 
comments on this section. To align with the changes discussed above, 
SBA has renumbered sections Sec. Sec.  127.403-127.406. Aside from 
renumbering, SBA adopts as final the language in proposed Sec.  127.403 
(now Sec.  127.402).
    Proposed Sec.  127.404 detailed when SBA was authorized to conduct 
program examinations. SBA did not receive any comments on this section. 
SBA revised this section in the final rule to reflect that concerns 
will undergo program examinations every three years in accordance with 
the recertification process set forth in Sec.  127.400. SBA also 
renumbered this section to Sec.  127.403 in the final rule. SBA adopts 
as final the revised and renumbered paragraph.
    Proposed Sec.  127.405 authorized SBA to request additional 
information, in addition to material already submitted, when conducting 
a program examination. SBA did not receive any comments on this 
section. SBA renumbered this section to Sec.  127.404 in the final 
rule. SBA adopts as final the proposed language and renumbered 
paragraph.
    Proposed Sec.  127.406 authorized SBA to decertify concerns that 
fail to provide or maintain the required certifications or documents. 
SBA did not receive any comments on this section. This section has been 
renumbered to Sec.  127.405 in the final rule. SBA also revised this 
provision in the final rule to more clearly lay out the causes for 
which SBA can propose decertification, including a failure to follow 
the recertification processes in Sec.  127.400. Paragraph (a) describes 
the steps SBA will take to propose decertification and how a concern 
must respond to a notice of proposed decertification. Paragraph (b) 
states that SBA's decision on decertification is final and cannot be 
appealed, and paragraph (c) permits concerns to reapply to the Program 
after decertification. SBA adopts as final the revised and renumbered 
paragraph.
    The final rule revises Sec.  127.503(h)(2) to confirm that if a 
concern cannot recertify as a WOSB or EDWOSB by the end of the fifth 
year of a long-term contract, the procuring agency can no longer count 
awards made pursuant to that contract as WOSB/EDWOSB awards. SBA's 
rules have long required recertification of size for contracts with a 
duration of more than five years. If a concern is unable to recertify 
its size, the contracting officer could no longer consider awards to 
that concern towards the procuring agency's small business goals. The 
Agency's intent in drafting Sec.  127.503(h)(2), and its corresponding 
paragraphs in Sec. Sec.  124.1015(f), 125.18(f), and 126.601(i), was to 
mandate that contracting officers must request that a concern recertify 
its status on long-term contracts, including Multiple Award Contracts. 
If a concern were unable to recertify its status as a WOSB, for 
example, the contracting officer could no longer consider awards to 
that concern towards the procuring agency's WOSB goals. Procuring 
agencies understood this was SBA's intent in drafting Sec. Sec.  
124.1015, 125.18(e), 126.601(h), and 127.503(h)(2), and have read them 
accordingly. The revision to these paragraphs in the final rule 
confirms that agencies correctly deduced SBA's intent and brings the 
regulatory text into alignment with already-existing practice, which 
SBA believes will provide helpful clarity to small businesses and 
contracting officers.
    SBA proposed to remove Sec.  127.505, as the pertinent information 
in this provision was already detailed in

[[Page 27656]]

Sec.  121.406(b). SBA did not receive any comments on this proposed 
change and finalizes the deletion in the final rule.
    SBA proposed to revise Sec.  127.604(f)(4) to clarify that concerns 
found to be ineligible would need to reapply, rather than request a 
reexamination. SBA did not receive any comments on this change and 
adopts the proposed language as final, except for updating a citation 
to the appropriate regulation for reapplication procedures (formerly at 
Sec.  127.306 and now at Sec.  127.305).

Compliance With Executive Orders 12866, 13563, 12988, 13132, and 13771, 
the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory 
Flexibility Act (5 U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule is a significant regulatory action for the purposes of Executive 
Order 12866. Accordingly, the next section contains SBA's Regulatory 
Impact Analysis. This is not a major rule, however, under the 
Congressional Review Act.

Regulatory Impact Analysis

1. Is there a need for the regulatory action?

    The U.S. Small Business Administration (SBA) is required by statute 
to administer the WOSB Federal Contract Program (WOSB Program). The 
Small Business Act (Act) sets forth the certification criteria for the 
WOSB Program. Specifically, the Act states that a WOSB or EDWOSB must, 
``be certified by a Federal agency, a State government, the 
Administrator, or a national certifying entity approved by the SBA 
Administrator, as a small business concern owned and controlled by 
women.'' 15 U.S.C. 637(m)(2)(E).
    The Federal Acquisition Regulation (FAR) and SBA regulations 
require that in order to be certified as a WOSB or EDWOSB a small 
business concern must provide documents supporting its WOSB or EDWOSB 
status to SBA. See 13 CFR 127.300 and FAR 19.1503(b)(3). The specific 
documents concerns are required to provide are outlined in Sec.  
127.303. The Act also states that the SBA is authorized to conduct 
eligibility examinations of any certified WOSB or EDWOSB, and to handle 
protests and appeals related to such certifications. 15 U.S.C. 
637(m)(5)(A) and (5)(B).
    Under the current system, WOSBs and EDWOSBs may be certified by 
third-party certifiers, or they may essentially self-certify and upload 
the required documents to sba.certify.gov. In order to award a WOSB 
set-aside or sole source contract, the contracting officer must 
document that the contracting officer reviewed the concern's 
certifications and documentation. 13 CFR 127.503(g); FAR 19.1503(b)(3). 
The lack of required certification, coupled with the requirement that 
the contracting officer must verify that documents have been uploaded, 
may contribute to reluctance by procuring agencies to use the program, 
resulting in the failure to meet the statutory goal of 5% of all prime 
contract dollars being awarded to WOSBs. In FY 2018, the government-
wide WOSB goal of 5% was not met with actual performance at 4.75% 
($22.9B). The government has only met the goal once (FY 2015). While 
the amount of dollars awarded to WOSBs under the set aside program is 
trending up, they still account for less than 0.016% of dollars awarded 
to WOSBs. A certification could help entice agencies to set aside more 
contracts for WOSBs, so that the government can meet the statutory 5% 
goal.

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

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

[[Page 27657]]



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

    Each respondent submits one response at the time of initial 
certification and one at the time of annual update. Estimated burden 
hours vary depending upon the type of certification that a WOSB or 
EDWOSB pursues. SBA conducted a survey among a sample of entities that 
assist WOSBs and EDWOSBs to provide information through Certify. The 
majority of those surveyed stated that for initial certifications the 
estimated time for completion is one hour per submission. For annual 
updates, because of the need to submit little if any additional 
information, the estimated burden is 0.5 hour per submission. For 
examinations and protests, the estimated burden is 0.25, which is much 
lower because firms have already provided the documentation referred to 
in 13 CFR 127.303 through Certify. It is estimated that the initial 
certification will involve 9,349 existing participants and 2,998 new 
respondents in the first year. After the first year, initial 
certifications are expected for 500 new respondents annually with an 
additional 11,847 annual certifications for existing participants for a 
total of 12,347 participants in each succeeding year. The participant 
level is expected to remain stable at 12,347 participants annually with 
500 new respondents and 500 attritions from the program annually. Based 
on the number of protests and appeals received in years past, 130 
respondents are expected to participate in protests and appeals. The 
respondent's cost of burden hours for a five-year period and average is 
provided in the following table and detailed below.

                             Cost of Burden Hours--5 Year Cost Estimate and Average
----------------------------------------------------------------------------------------------------------------
                                     Initial--     Initial--new                    Protests and
                                    existing 1    participants 1  Annual updates    appeals .25
              Year                    hour at         hour at       .5 hour at        hour at      Annual totals
                                    $164.23 per     $164.23 per     $164.23 per     $164.23 per
                                    participant     participant     participant     participant
----------------------------------------------------------------------------------------------------------------
                                         Number of Program Participants
----------------------------------------------------------------------------------------------------------------
1...............................           9,349           2,998  ..............             130          12,477
2...............................  ..............             500          11,847             130          12,477
3...............................  ..............             500          11,847             130          12,477
4...............................  ..............             500          11,847             130          12,477
5...............................  ..............             500          11,847             130          12,477
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
1...............................      $1,535,386        $492,362  ..............          $5,337      $2,033,085
2...............................  ..............          82,115         972,816           5,337       1,060,269
3...............................  ..............          82,115         972,816           5,337       1,060,269
4...............................  ..............          82,115         972,816           5,337       1,060,269
5...............................  ..............          82,115         972,816           5,337       1,060,269
                                 -------------------------------------------------------------------------------
    5 Year Total................  ..............  ..............  ..............  ..............       6,274,161
                                 -------------------------------------------------------------------------------
        Annual Cost Avg.........  ..............  ..............  ..............  ..............       1,254,832
----------------------------------------------------------------------------------------------------------------

    Initial certification--transition of existing participants (one-
time cost):
    Estimated officer's salary = $164.23/hour (based on General 
Schedule 15 Step 10, Washington-Baltimore-Northern Virginia area, plus 
an additional 100% to account for the cost of benefits and overhead, 
which would be equivalent to a senior manager in an average small 
business firm).
    Total estimated burden: 9,349 x 1 hour x $164.23/hour = $1,535,386.
    Initial certification--new participants (first year cost):
    Estimated officer's salary = $164.23/hour (based on General 
Schedule 15 Step 10, Washington-Baltimore-Northern Virginia area, plus 
an additional 100% to account for the costs of benefits and overhead, 
which would be equivalent to a senior manager in an average small 
business firm).
    Total estimated burden: 2998 x 1 hour x $164.23/hour = $492,362.
    Initial certification--new participants (cost for each succeeding 
year after initial year):
    Estimated officer's salary = $164.23/hour (based on General 
Schedule 15 Step 10, Washington-Baltimore-Northern Virginia area, plus 
an additional 100% to account for the cost of benefits and overhead, 
which would be equivalent to a senior manager in an average small 
business firm).
    Total estimated burden: 500 x 1 hour x $164.23/hour = $82,115.
    Annual update:
    Estimated officer's salary = $164.23/hour (based on General 
Schedule 15 Step 10, Washington-Baltimore-Northern Virginia area, plus 
an additional 100% to account for the cost of benefits and overhead, 
which would

[[Page 27658]]

be equivalent to a senior manager in an average small business firm).
    Total estimated burden: 11,847 x .5 hour x $164.23/hour = $72,816.
    Examinations and Protests (each year):
    Estimated officer's salary = $164.23/hour (based on General 
Schedule 15 Step 10, Washington-Baltimore-Northern Virginia area, plus 
an additional 100% to account for the cost of benefits and overhead, 
which would be equivalent to a senior manager in an average small 
business firm).
    Total estimated burden: 130 x .25 hour x $164.23/hour = $5,337.
    Previously, the estimated respondents' cost of burden hours was 
determined to be $4,066,170 for the initial year of certification and 
$2,120,538 in subsequent years. By successfully leveraging technology, 
SBA has reduced the cost of burden hours substantially, from $4,066,170 
to $2,033,085 in the initial year of certification, and from $2,120,538 
to $1,060,269 in subsequent years. This results in annual savings of 
$2,033,085 initially and $1,060,269 each year thereafter, with a total 
five-year savings of $6,274,161 for WOSBs to redirect as revenue 
generating resources to close the noted revenue disparity with male-
owned businesses. SBA believes that there are no additional capital or 
start-up costs or operation and maintenance costs and purchases of 
services costs to respondents as a result of this rule because there 
should be no cost in setting up or maintaining systems to collect the 
required information. As stated previously, the information requested 
should be collected and retained in the ordinary course of business.
    SBA estimates the cost to the government of implementing the 
certification program to be $3,126,184 in the initial year of 
certification, and approximately $2,704,140 annually thereafter. SBA is 
currently working to enhance its existing information technology 
infrastructure, Certify, to expand its capacity to support SBA's 
government contracting certification programs. The cost to develop the 
WOSB and EDWOSB certification processing systems in Certify is 
$1,654,000. After the initial improvements, Certify should not require 
a substantial investment of capital. In FY2020, SBA hired a Program 
Lead, Team Lead, and two Analysts, and brought on via internal transfer 
a third Analyst and a Marketing and Outreach specialist. The total cost 
of bringing onboard the new hires and backfilling the positions left 
vacant by the internal transfers is $1,472,184 (based on General 
Schedule 13 Step 1 through General Schedule 15 Step 1, Washington-
Baltimore-Northern Virginia area plus 100% to account for the cost of 
benefits and overhead). In the future, the Program hopes to hire an 
additional six FTEs to further support Program Operations, the cost of 
which would be $1,231,956 (based on General Schedule 13 Step 1, 
Washington-Baltimore-Northern Virginia area plus 100% to account for 
the cost of benefits and overhead).

3. What are the alternatives to this rule?

    This rule is required to implement specific statutory provisions 
which require promulgation of implementing regulations. One alternative 
considered would be to rely solely on third-party certifiers to certify 
WOSBs and EDWOSBs. However, there is a cost to small businesses for 
third-party certifiers. Firms submit the same documentation to third-
party certifiers that would submit to SBA, but third-party certifiers 
charge on average $380 annually. Consequently, the cost of relying 
completely on third-party certifiers would be $3,552,620 a year (9,349 
initial applicants x $380). If third-party certifiers were used for the 
anticipated increase to 12,477 annual participants, the cost would be 
$4,741,260. In addition, SBA maintains that certification for Federal 
procurement purposes is an inherently governmental function. 
Consequently, even if SBA utilized third-party certifiers for an 
initial or preliminary review, SBA or a governmental entity would still 
have to be involved in reviewing those certifications. In addition, 
there is an intended benefit of certification. The intent is to 
increase confidence in the eligibility of firms so that contracting 
officers and activities utilize the sole source authority. Although 
trending upwards, the government-wide WOSB goal of 5% was not met with 
actual performance at 4.75%. In addition, WOSB/EDWOSB set-aside and 
sole-source awards only accounted for 4.1% of total dollars awarded to 
WOSBs in FY 2018. The Federal Government has met the statutory WOSB 
goal of 5% of total dollars awarded to WOSBs only once (FY 2015).

Executive Order 13563

    A description of the need for this regulatory action and the 
benefits and costs associated with this action, including possible 
distributional impacts that relate to Executive Order 13563, are 
included above in the Regulatory Impact Analysis under Executive Order 
12866. As part of its ongoing efforts to engage stakeholders in the 
development of its regulations, SBA issued an Advance Notice of 
Proposed Rulemaking (ANPR) on December 18, 2015. 80 FR 78984. The ANPR 
solicited public comments to assist SBA in drafting a proposed rule to 
implement a WOSB/EDWOSB certification program. SBA received 122 
comments in response to the ANPR. SBA issued a Proposed Rule in the 
Federal Register on May 14, 2019. 84 FR 21256. The Proposed Rule 
solicited public comments to assist SBA in drafting a final rule to 
implement a WOSB/EDWOSB certification program. SBA received 898 
comments from 307 commenters in response to the Proposed Rule. SBA has 
reviewed all the comments while drafting this final rule.

Executive Order 12988

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

Executive Order 13132

    For the purpose of Executive Order 13132, SBA has determined that 
this rule will not have substantial direct effects on the States, on 
the relationship between the national government and the States, or on 
the distribution of power and responsibilities among the various layers 
of government. Therefore, SBA has determined that this rule has no 
federalism implications warranting preparation of a federalism 
assessment.

Executive Order 13771

    This rule is an Executive Order 13771 regulatory action with 
annualized net costs of $1,514,179 and a net present value of 
$21,631,135, both in 2016 dollars. Details on the estimated costs of 
this rule can be found in the rule's economic analysis. Table 1 
summarizes the savings and costs of the first three years of 
implementation, with the savings and costs in Year 3 expected to 
continue into perpetuity. Table 2 presents the annualized savings in 
perpetuity using a 7% discount rate, in 2016 dollars.

    Table 1--Schedule of Costs/(Savings) Over 3 Year Horizon, Current
                                 Dollars
------------------------------------------------------------------------
                                              Savings          Costs
------------------------------------------------------------------------
Year 1..................................    $(2,033,085)      $3,126,184
Year 2..................................     (1,060,269)       2,704,140
Year 3..................................     (1,060,269)       2,704,140
------------------------------------------------------------------------


[[Page 27659]]


  Table 2--Annualized Savings in Perpetuity With 7% Discount Rate, 2016
                                 Dollars
------------------------------------------------------------------------
                                                             Estimate
------------------------------------------------------------------------
Annualized Savings......................................     (1,058,441)
Annualized Costs........................................       2,572,621
Annualized Net Costs....................................       1,514,179
------------------------------------------------------------------------

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

    In carrying out its statutory mandate to provide oversight of 
certification related to SBA's WOSB Federal Contract Program, SBA is 
currently approved to collect information from the WOSB applicants or 
participants through SBA Form 2413, and for EDWOSB applicants or 
participants, through SBA Form 2414. (OMB Control Number 3245-0374, 
Certification for the Women-Owned Small Business Federal Contract 
Program). This collection of information also requires submission or 
retention of documents that support the applicant's certification. The 
information collected through Certify includes eligibility documents 
previously collected in the WOSB Repository, and information collected 
on SBA Form 2413 (WOSB) and SBA Form 2414 (EDWOSB). SBA revised this 
information collection in 2018 to establish that the Agency has 
discontinued these paper forms and will collect the information and 
supporting documents electronically through Certify, as well as to make 
minor changes to the requests for information.
    As discussed above, this rule will fully implement the statutory 
requirement for small business concerns to be certified by a Federal 
agency, a State government, SBA, or a national certifying entity 
approved by SBA, in order to be awarded a set-aside or sole source 
contract under the WOSB program. As a result of these changes, the rule 
eliminates the option to self-certify for WOSB/EDWOSB set-aside and 
sole source contracts, permits applicants to provide their CVE 
certification, along with documentation that they meet Program 
eligibility requirements, as a certification option, and clarifies the 
third-party certification requirements.
    The clarifications for authorized Third-party certifiers impose an 
additional reporting or recordkeeping requirements under the Paperwork 
Reduction Act, 44 U.S.C. Chapter 35. A summary description of the 
reporting requirement, description of respondents, and estimate of the 
annual burden is provided below.
    Summary Description of Compliance Information: Third-party 
certifiers will be required to provide SBA with monthly reports that 
include the number of applications received, number of applications 
approved and denied, and other information that SBA determines may be 
helpful for ensuring that third-party certifiers are meeting their 
obligations or information or data that may be useful for improving the 
program.
    Description of and Estimated Number of Respondents: There are four 
third-party certifiers authorized by SBA to certify WOSB and EDWOSB 
applicants. The four third-party certifiers will be required to submit 
reports to SBA monthly, for a total of 48 reports.
    Respondents: 4.
    Responses per respondent: 12.
    Total annual responses: 48.
    Preparation hours per response: 0.5 hour.
    Total response burden hours: 24 hours.
    Cost per hour: $67.78/hour (based on 2018 Median Pay for 
accountants and auditors, Bureau of Labor Statistics, plus an 
additional 100% to account for cost of benefits and overhead).
    Total estimated annual cost burden: $1,626.72.
    SBA will revise the information collection accordingly and resubmit 
to OMB for review and approval.

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

    According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601, 
when an agency issues a rulemaking, it must prepare a regulatory 
flexibility analysis to address the impact of the rule on small 
entities. However, section 605 of the RFA allows an agency to certify a 
rule, in lieu of preparing an analysis, if the rulemaking is not 
expected to have a significant economic impact on a substantial number 
of small entities. The RFA defines ``small entity'' to include ``small 
businesses,'' ``small organizations,'' and ``small governmental 
jurisdictions.'' This rule concerns various aspects of SBA's 
contracting programs. As such, the rule relates to small business 
concerns, but would not affect ``small organizations'' or ``small 
governmental jurisdictions.'' SBA's contracting programs generally 
apply only to ``business concerns'' as defined by SBA regulations, in 
other words, to small businesses organized for profit. ``Small 
organizations'' or ``small governmental jurisdictions'' are non-profits 
or governmental entities and do not generally qualify as ``business 
concerns'' within the meaning of SBA's regulations.
    As stated in the regulatory impact analysis, this rule will impact 
approximately 9,000-12,000 women-owned small businesses. These 
businesses will have to apply to be certified as WOSBs or EDWOSBs to 
SBA or third-party certifiers in order to be eligible to be awarded any 
WOSB or EDWOSB set-aside contract. However, SBA has minimized the 
impact on WOSBs by accepting certifications already conferred by SBA 
(through the 8(a) BD Program or a positive determination after a status 
protest or program examination), VA, and third-party certifiers. The 
costs to WOSBs for certification should be de minimis, because the 
required documentation (articles of incorporation, bylaws, stock 
ledgers or certificates, tax records, etc.) already exists. In 
addition, this information is already required to be provided either to 
third-party certifiers, governmental certifying entities, or to SBA 
through Certify. SBA expects WOSBs to see a reduction in burden because 
under the prior WOSB Program Repository, SBA determined that the 
average time required to complete the process required by the WOSB 
Program Repository was two hours, whereas the use of Certify results 
requires only one hour due to technological improvements. Thus, the 
Administrator certifies that the rulemaking is not expected to have a 
significant economic impact on a substantial number of small entities.

List of Subjects

13 CFR Part 124

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

13 CFR Part 125

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

13 CFR Part 126

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

13 CFR Part 127

    Government contracts, Reporting and recordkeeping requirements, 
Small businesses.

    For the reasons stated in the preamble, SBA amends 13 CFR parts 
124, 125, 126, and 127 as follows:

[[Page 27660]]

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

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

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), and 644.


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


Sec.  124.104  Who is economically disadvantaged?

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

0
3. Amend Sec.  124.1015 by adding a sentence at the end of paragraph 
(f)(2) to read as follows:


Sec.  124.1015  What are the requirements for representing SDB status, 
and what are the penalties for misrepresentation?

* * * * *
    (f) * * *
    (2) * * * If the business is unable to recertify its SDB status, 
the procuring agency may no longer be able to count the options or 
orders issued pursuant to the contract, from that point forward, 
towards its SDB goals.
* * * * *

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
4. 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), 
and 657r.


0
5. Amend Sec.  125.18 by adding a sentence at the end of paragraph 
(e)(2) to read as follows:


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

* * * * *
    (e) * * *
    (2) * * * If the business is unable to recertify its SDVO status, 
the procuring agency may no longer be able to count the options or 
orders issued pursuant to the contract, from that point forward, 
towards its SDVO goals.
* * * * *

PART 126--HUBZONE PROGRAM

0
 6. 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.


0
7. Amend Sec.  126.619 by adding a sentence at the end of paragraph (b) 
introductory text to read as follows:


Sec.  126.619  When must a certified HUBZone small business concern 
recertify its status for a HUBZone contract?

* * * * *
    (b) * * * If the business is unable to recertify its HUBZone 
status, the procuring agency may no longer be able to count the options 
or orders issued pursuant to the contract, from that point forward, 
towards its HUBZone goals.
* * * * *

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

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

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


0
9. Amend Sec.  127.200 by adding paragraphs (c) and (d) to read as 
follows:


Sec.  127.200   What are the requirements a concern must meet to 
qualify as an EDWOSB or WOSB?

* * * * *
    (c) WOSB and EDWOSB certifications. (1) A concern must be certified 
as a WOSB or EDWOSB pursuant to Sec.  127.300 in order to be awarded a 
WOSB or EDWOSB set-aside or sole-source contract.
    (2) Other women-owned small business concerns that do not seek WOSB 
or EDWOSB set-aside or sole-source contracts may continue to self-
certify their status, receive contract awards outside the Program, and 
count toward an agency's goal for awards to WOSBs.
    (d) Suspension and debarment. In order to be eligible for WOSB and 
EDWOSB certification and to remain certified, the concern and any of 
its owners must not have an active exclusion in the System for Award 
Management at the time of application or recertification.

0
10. Amend Sec.  127.203 by revising the first sentence of paragraph 
(b)(3) to read as follows:


Sec.  127.203  What are the rules governing the requirement that 
economically disadvantaged women must own EDWOSBs?

* * * * *
    (b) * * *
    (3) Funds invested in an Individual Retirement Account (IRA) or 
other official retirement account will not be considered in determining 
an individual's net worth. * * *
* * * * *

Subpart C--[Amended]

0
 11. Subpart C is amended by adding the undesignated center heading 
``Certification'' above Sec.  127.300.

0
12. Effective October 15, 2020, Sec.  127.300 is revised to read as 
follows:


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

    (a) WOSB certification. (1) A concern may apply to SBA for WOSB 
certification. There is no cost to apply to SBA for certification. SBA 
will consider the information provided by the concern in order to 
determine whether the concern qualifies. SBA, in its discretion, may 
rely solely upon the information submitted to establish eligibility, 
may request additional information, or may verify the information 
before making a determination. SBA may draw an adverse inference and 
deny the certification where the concern fails to cooperate with SBA or 
submit information requested by SBA.
    (2) A concern may submit evidence to SBA that it is a women-owned 
and controlled small business that is certified by the U.S. Department 
of Veterans Affairs Center for Verification and Evaluation as a 
Service-Disabled Veteran Owned Business or Veteran-Owned Business.
    (3) A concern may submit evidence that it has been certified as a 
WOSB by an approved Third-Party Certifier in accordance with this 
subpart.

[[Page 27661]]

    (b) EDWOSB certification. (1) A concern may apply to SBA for EDWOSB 
certification. There is no cost to apply to SBA for certification. SBA 
will consider the information provided by the concern in order to 
determine whether the concern qualifies. SBA, in its discretion, may 
rely solely upon the information submitted to establish eligibility, 
may request additional information, or may verify the information 
before making a determination. SBA may draw an adverse inference and 
deny the certification where the concern fails to cooperate with SBA or 
submit information requested by SBA.
    (2) A concern that is a certified participant in the 8(a) BD 
Program and owned and controlled by one or more women qualifies as an 
EDWOSB.
    (3) A concern may submit evidence to SBA that it is an economically 
disadvantaged women-owned and controlled small business that is 
certified by the U.S. Department of Veterans Affairs Center for 
Verification and Evaluation as a Service-Disabled Veteran Owned 
Business or Veteran-Owned Business.
    (4) A concern may submit evidence that it has been certified as an 
EDWOSB by a Third-Party Certifier under this subpart.
    (c) SBA notification and designation. If SBA determines that the 
concern is a qualified WOSB or EDWOSB, it will issue a letter of 
certification and designate the concern as a certified WOSB or EDWOSB 
on the Dynamic Small Business Search (DSBS) system, or successor 
system.

0
13. Sections 127.301 through 127.303 are revised to read as follows:
Sec.
* * * * *
127.301 When may a concern apply for certification?
127.302 Where can a concern apply for certification?
127.303 What must a concern submit for certification?
* * * * *


Sec.  127.301   When may a concern apply for certification?

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


Sec.  127.302   Where can a concern apply for certification?

    A concern seeking certification as a WOSB or EDWOSB may apply to 
SBA for certification via https://certify.sba.gov or any successor 
system. Certification pages must be validated electronically or signed 
by a person authorized to represent the concern.


Sec.  127.303   What must a concern submit for certification?

    (a)(1) SBA certification. (i) To be certified by SBA as a WOSB or 
EDWOSB, a concern must provide documents and information demonstrating 
that it meets the requirements set forth in part 127, subpart B. SBA 
maintains a list of the minimum required documents that can be found at 
https://certify.sba.gov or any successor system. A concern may submit 
additional documents and information to support its eligibility. The 
required documents must be provided to SBA during the application 
process electronically. This may include, but is not limited to, 
corporate records, business and personal financial records, including 
copies of signed Federal personal and business tax returns, and 
individual and business bank statements.
    (ii) A concern that is certified by the 8(a) BD Program and is 
owned and controlled by one or more women may use documentation of its 
most recent annual review, or documentation of its 8(a) acceptance if 
it has not yet had an annual review, in support of its application for 
certification.
    (iii) A concern that is certified through a program examination or 
status protest may use the positive determination from SBA as evidence 
for certification.
    (2) CVE certification. (i) To be certified as a WOSB, a concern 
that is certified by the U.S. Department of Veterans Affairs Center for 
Verification and Evaluation may submit documentation of its most recent 
certification, along with documentation confirming that it is owned and 
controlled by one or more women, in support of its application for 
certification.
    (ii) To be certified as an EDWOSB, a concern that is certified by 
the U.S. Department of Veterans Affairs Center for Verification and 
Evaluation may submit documentation of its most recent certification, 
along with documentation confirming that it is owned and controlled by 
one or more women who are economically disadvantaged in accordance with 
Sec.  127.203(b)(3), in support of its application for certification.
    (3) Third-Party Certifier certification. A concern that is 
certified by a Third-Party Certifier must provide a current, valid 
certification from an entity designated as an SBA-approved certifier.
    (b) In addition to the minimum required documents, SBA may request 
additional information from applicants in order to verify eligibility.
    (c) After submitting the required documentation, an applicant must 
notify SBA of any changes that could affect its eligibility.
    (d) If a concern was decertified or previously denied 
certification, it must include with its application for certification a 
full explanation of why it was decertified or denied certification, and 
what, if any, changes have been made. If SBA is not satisfied with the 
explanation provided, SBA will decline to certify the concern.
    (e) If the concern was decertified for failure to notify SBA of a 
material change affecting its eligibility pursuant to Sec.  127.401, it 
must include with its application for certification a full explanation 
of why it failed to notify SBA of the material change. If SBA is not 
satisfied with the explanation provided, SBA will decline to certify 
the concern.

0
14. Effective October 15, 2020, Sec. Sec.  127.304 and 127.305 are 
revised to read as follows:


Sec.  127.304   How is an application for certification processed?

    (a) The SBA's Director of Government Contracting (D/GC) or designee 
is authorized to approve or decline applications for certification. SBA 
must receive all required information and supporting documents before 
it will begin processing a concern's application. SBA will not process 
incomplete applications. SBA will advise each applicant within 15 
calendar days after the receipt of an application whether the 
application is complete and suitable for evaluation and, if not, what 
additional information or clarification is required to complete the 
application. SBA will make its determination within ninety (90) 
calendar days after receipt of a complete package, whenever 
practicable.
    (b) SBA may request additional information or clarification of 
information contained in an application or document submission at any 
time.
    (c) The burden of proof to demonstrate eligibility is on the 
applicant concern. If a concern does not provide requested information 
within the allotted time provided by SBA, or if it submits incomplete 
information, SBA may presume that disclosure of the

[[Page 27662]]

missing information would adversely affect the business concern's 
eligibility or demonstrate a lack of eligibility in the area or areas 
to which the information relates.
    (d) The applicant must be eligible as of the date it submitted its 
application and up until the time the D/GC issues a decision. The 
decision will be based on the facts contained in the application, any 
information received in response to SBA's request for clarification, 
and any changed circumstances since the date of application.
    (e) Any changed circumstances occurring after an applicant has 
submitted an application will be considered and may constitute grounds 
for decline. After submitting the application and signed 
representation, an applicant must notify SBA of any changes that could 
affect its eligibility. The D/GC may propose decertification for any 
EDWOSB or WOSB that fails to inform SBA of any changed circumstances 
that affected its eligibility for the program during the processing of 
the application.
    (f) If SBA approves the application, SBA will send a written notice 
to the concern and update https://certify.sba.gov or any successor 
system, and update DSBS and the System for Award Management (or any 
successor systems) to indicate the concern has been certified by SBA as 
a WOSB and/or EDWOSB.
    (g) A decision to deny eligibility must be in writing and state the 
specific reasons for denial.
    (h) SBA will send a copy of the decision letter to the electronic 
mail address provided with the application. SBA will consider any 
decision sent to this electronic mail address provided to have been 
received by the applicant concern.
    (i) The decision of the D/GC to decline certification is the final 
agency decision. The concern can reapply for certification after ninety 
(90) days, as set forth in Sec.  127.305.


Sec.  127.305   May declined or decertified concerns seek 
recertification at a later date?

    (a) A concern that SBA or a third-party certifier has declined or 
that SBA has decertified may seek certification after ninety (90) days 
from the date of decline or decertification if it believes that it has 
overcome all of the reasons for decline or decertification and is 
currently eligible. A concern that has been declined may seek 
certification by any of the certification options listed in Sec.  
127.300.
    (b) A concern found to be ineligible during a WOSB/EDWOSB status 
protest or program examination is precluded from applying for 
certification for ninety (90) days from the date of the final agency 
decision (the D/GC's decision if no appeal is filed or the decision of 
SBA's Office of Hearings and Appeals (OHA) where an appeal is filed 
pursuant to Sec.  127.605).

0
15. An undesignated center heading and Sec.  127.350 are added to 
subpart C to read as follows:

Requirements for Third-Party Certifiers


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

    A third-party certifier is a non-governmental entity that SBA has 
authorized to certify that an applicant concern is eligible for the 
WOSB or EDWOSB contracting program. A third-party certifier may be a 
for-profit or non-profit entity. The list of SBA-approved third-party 
certifiers may be found on SBA's website at sba.gov.

0
16. Effective October 15, 2020, Sec.  127.351 is added to subpart C to 
read as follows:


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

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

0
17. Sections 127.352 through 127.356 are added to subpart C to read as 
follows:
Subpart C--Certification of EDWOSB or WOSB Status
* * * * *
Sec.
127.352 What is the process for becoming a third-party certifier?
127.353 May third-party certifiers charge a fee?
127.354 What requirements must a third-party certifier follow to 
demonstrate capability to certify concerns?
127.355 How will SBA ensure that approved third-party certifiers are 
meeting the requirements?
127.356 How does a concern obtain certification from an approved 
certifier?


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

    SBA will periodically hold open solicitations. All entities that 
believe they meet the criteria to act as a third-party certifier will 
be free to respond to the solicitation.


Sec.  127.353   May third-party certifiers charge a fee?

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


Sec.  127.354   What requirements must a third-party certifier follow 
to demonstrate capability to certify concerns?

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

[[Page 27663]]

    (4) It will not decline to accept a concern's application for WOSB/
EDWOSB certification on the basis of race, color, national origin, 
religion, age, disability, sexual orientation, marital or family 
status, or political affiliation.


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

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


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

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

0
18. Effective October 15, 2020, Sec. Sec.  127.400 and 127.401 are 
revised to read as follows:


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

    (a) Any concern seeking to remain a certified WOSB or EDWOSB must 
annually represent to SBA that it continues to meet all WOSB/EDWOSB 
eligibility criteria.
    (1) Except as provided in paragraph (b) of this section, unless SBA 
has reason to question the concern's representation of its continued 
eligibility, SBA will accept the representation without requiring the 
certified WOSB or EDWOSB to submit any supporting information or 
documentation.
    (2) The concern's recertification must be submitted within 30 days 
of the anniversary date of its original certification. The date of 
certification is the date specified in the concern's certification 
letter. If the concern fails to recertify, SBA may propose the concern 
for decertification pursuant to Sec.  127.405.
    (b) Any concern seeking to remain a certified WOSB or EDWOSB must 
undergo a program examination and recertify its continued eligibility 
to SBA every three years.
    (1) SBA or a third-party certifier will conduct a program 
examination three years after the concern's initial WOSB or EDWOSB 
certification (whether by SBA or a third-party certifier) or three 
years after the date of the concern's last program examination, 
whichever date is later.
    (i) Example 1. Concern A is certified by SBA to be eligible for the 
WOSB program on July 20, 2021. Concern A must recertify its eligibility 
to SBA between June 20, 2022 and July 19, 2022. Concern A will continue 
to be a certified WOSB that is eligible to receive WOSB contracts (as 
long as it is small for the size standard corresponding to the NAICS 
code assigned to the contract) through July 19, 2023. Concern A must 
recertify its eligibility to SBA between June 20, 2023 and July 19, 
2023. Concern A will continue to be a certified WOSB that is eligible 
to receive WOSB contracts (as long as it is small for the size standard 
corresponding to the NAICS code assigned to the contract) through July 
19, 2024. Concern A must recertify its eligibility to SBA between June 
20, 2024 and July 19, 2024. Because three years have elapsed since its 
application and original certification, SBA will conduct a program 
examination of Concern A at that time. In addition to its 
representation that it continues to be an eligible WOSB, Concern A must 
provide additional information as requested by SBA to demonstrate that 
it continues to meet all the eligibility requirements of the WOSB 
Program.
    (ii) Example 2. Concern B is certified by a third-party certifier 
to be eligible for the WOSB program on September 27, 2021. Concern B 
must recertify its eligibility to SBA between August 28, 2022 and 
September 26, 2022. Concern B will continue to be a certified WOSB that 
is eligible to receive WOSB contracts (as long as it is small for the 
size standard corresponding to the NAICS code assigned to the contract) 
through September 26, 2023. On March 31, 2023, Concern B is awarded a 
WOSB set-aside contract. Subsequently, Concern B's status as an 
eligible WOSB is protested. On June 28, 2023, Concern B receives a 
positive determination from SBA confirming that it is an eligible WOSB. 
Concern B's new certification date is June 28, 2023. Concern B must 
recertify its eligibility to SBA between May 29, 2024 and June 27, 
2024. Concern B will continue to be a certified WOSB that is eligible 
to receive WOSB contracts (as long as it is small for the size standard 
corresponding to the NAICS code assigned to the contract) through June 
27, 2025. Concern B must recertify its eligibility to SBA between May 
29, 2025 and June 27, 2025. Concern B will continue to be a certified 
WOSB that is eligible to receive WOSB contracts (as long as it is small 
for the size standard corresponding to the NAICS code assigned to the 
contract) until June 27, 2026. Concern B must recertify its eligibility 
to SBA between May 29, 2026 and June 27, 2025. Because three years have 
elapsed since its certification date of June 28, 2022, Concern B must 
seek a program examination, by SBA or a third-party certifier, between 
May 29, 2025 and June 27, 2026. In addition to its representation that 
it continues to be an eligible WOSB, Concern B must provide additional 
information as requested by SBA or a third-party certifier to 
demonstrate that it continues to meet all the eligibility requirements 
of the WOSB Program.
    (2) The concern must either request a program examination from SBA 
or notify SBA that it has requested a program examination by a third-
party certifier no later than 30 days prior to its certification 
anniversary. Failure to do so will result in the concern being 
decertified.


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

    Once certified, a WOSB or EDWOSB must notify SBA of any material 
changes that could affect its eligibility within 30 calendar days of 
any such change. Material change includes, but is not limited to, a 
change in the ownership, business structure, or

[[Page 27664]]

management. The notification must be in writing and must be uploaded 
into the concern's profile with SBA. The method for notifying SBA can 
be found on https://certify.sba.gov. A concern's failure to notify SBA 
of such a material change may result in decertification and removal 
from SAM and DSBS (or any successor system) as a designated certified 
WOSB/EDWOSB concern. In addition, SBA may seek the imposition of 
penalties under Sec.  127.700.

0
19. Section 127.402 is revised to read as follows:


Sec.  127.402   What is a program examination, who will conduct it, and 
what will SBA examine?

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

0
20. Effective October 15, 2020, Sec.  127.403 is revised to read as 
follows:


Sec.  127.403   When will SBA conduct program examinations?

    (a) SBA may conduct a program examination at any time after the 
concern submits its application, during the processing of the 
application, and at any time while the concern is a certified WOSB or 
EDWOSB.
    (b) SBA will conduct program examinations periodically as part of 
the recertification process set forth in Sec.  127.400.

0
21. Section 127.404 is revised to read as follows:


Sec.  127.404   May SBA require additional information from a WOSB or 
EDWOSB during a program examination?

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

0
22. Effective October 15, 2020, Sec.  127.405 is revised to read as 
follows:


Sec.  127.405   What happens if SBA determines that the concern is no 
longer eligible for the program?

    If SBA believes that a concern does not meet the program 
eligibility requirements, the concern fails to recertify in accordance 
with the requirements in Sec.  127.400, or the concern has failed to 
notify SBA of a material change, SBA will propose the concern for 
decertification from the program.
    (a) Proposed decertification. The D/GC or designee will notify the 
concern in writing that it has been proposed for decertification. This 
notice will state the reasons why SBA has proposed decertification, and 
that the WOSB or EDWOSB must respond to each of the reasons set forth.
    (1) The WOSB or EDWOSB must respond in writing to a proposed 
decertification within 20 calendar days from the date of the proposed 
decertification.
    (2) If the initial certification was done by a third-party 
certifier, SBA will also notify the third-party certifier of the 
proposed decertification in writing.
    (b) Decertification. The D/GC or designee will consider the reasons 
for proposed decertification and the concern's response before making a 
written decision whether to decertify. The D/GC may draw an adverse 
inference where a concern fails to cooperate with SBA or provide the 
information requested. The D/GC's decision is the final agency 
decision.
    (c) Reapplication. A concern decertified pursuant to this section 
may reapply to the program pursuant to Sec.  127.305.

0
 23. Amend Sec.  127.503 by adding a sentence at the end of paragraph 
(h)(2) to read as follows:


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

* * * * *
    (h) * * *
    (2) * * * If the business is unable to recertify its WOSB/EDWOSB 
status, the procuring agency may no longer be able to count the options 
or orders issued pursuant to the contract, from that point forward, 
towards its women-owned small business goals.
* * * * *

0
24. Effective October 15, 2020, amend Sec.  127.504 by revising 
paragraph (a), redesignating paragraphs (b) and (c) as paragraphs (c) 
and (d) respectively, and adding a new paragraph (b).
    The revision and addition read as follows:


Sec.  127.504   What additional requirements must a concern satisfy to 
submit an offer on an EDWOSB or WOSB requirement?

    (a) In order for a concern to submit an offer on a specific EDWOSB 
or WOSB set-aside requirement, the concern must qualify as a small 
business concern under the size standard corresponding to the NAICS 
code assigned to the contract, and either be a certified EDWOSB or WOSB 
pursuant to Sec.  127.300, or represent that it has submitted a 
complete application for WOSB or EDWOSB certification to SBA or a 
third-party certifier and has not received a negative determination 
regarding that application from SBA or the third party certifier.
    (1) If a concern becomes the apparent successful offeror while its 
application for WOSB or EDWOSB certification is pending, either at SBA 
or a third-party certifier, the contracting officer for the particular 
contract must immediately inform SBA's D/GC. SBA will then prioritize 
the concern's WOSB or EDWOSB application and make a determination 
regarding the firm's status as a WOSB or EDWOSB within 15 calendar days 
from the date that SBA received the contracting officer's notification. 
Where the application is pending with a third-party certifier, SBA will 
immediately contact the third-party certifier to require the third-
party certifier to complete its determination within 15 calendar days.
    (2) If the contracting officer does not receive an SBA or third-
party certifier determination within 15 calendar days after the SBA's 
receipt of the notification, the contracting officer may presume that 
the apparently successful offeror is not an eligible WOSB or EDWOSB and 
may make award accordingly, unless the contracting officer grants an 
extension to the 15-day response period.
    (b) In order for a concern to seek a specific sole source EDWOSB or 
WOSB requirement, the concern must be a certified EDWOSB or WOSB 
pursuant to Sec.  127.300 and qualify as small under the size standard 
corresponding to the requirement being sought.
* * * * *

[[Page 27665]]

Sec.  127.505   [Removed and Reserved]

0
25. Effective October 15, 2020, remove and reserve Sec.  127.505.


Sec.  127.603  [Amended]

0
26. Effective October 15, 2020, amend Sec.  127.603 by removing the 
next to last sentence in paragraph (d).

0
27. Effective October 15, 2020, amend Sec.  127.604 by revising 
paragraph (f)(4) to read as follows:


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

* * * * *
    (f) * * *
    (4) A concern that has been found to be ineligible will be 
decertified from the program and may not submit an offer as a WOSB or 
EDWOSB on another procurement until it is recertified. A concern may be 
recertified by reapplying to the program pursuant to Sec.  127.305.

Jovita Carranza,
Administrator.
[FR Doc. 2020-09022 Filed 5-8-20; 8:45 am]
 BILLING CODE 8026-03-P