[Federal Register Volume 86, Number 8 (Wednesday, January 13, 2021)]
[Rules and Regulations]
[Pages 2529-2533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00602]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 124
RIN 3245-AH64
Extension of Participation in 8(a) Business Development Program
AGENCY: U.S. Small Business Administration.
ACTION: Interim final rule.
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SUMMARY: This interim final rule contains amendments to the regulations
governing the 8(a) Business Development (BD) program. The U.S. Small
Business Administration (SBA) is revising its regulations to implement
a provision in the Consolidated Appropriations Act, 2021
(Appropriations Act), and the National Defense Authorization Act for
Fiscal Year 2021 (NDAA 2021), which authorized certain 8(a)
Participants to extend their 8(a) BD program term by a period of one
year. This interim final rule amends the 8(a) BD program regulations to
carry out the changes made by the Act.
[[Page 2530]]
DATES:
Effective date: This interim final rule is effective on January 13,
2021.
Comment date: Comments must be received no later than March 15,
2021.
ADDRESSES: You may submit comments, identified by RIN: 3245-AH64 by any
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Email: Van Tran, Deputy Associate Administrator, Office of
Business Development, Small Business Administration, at
[email protected].
SBA will post all comments on http://www.regulations.gov. If you
wish to submit confidential business information (CBI), as defined in
the User Notice at http://www.regulations.gov, please submit the
information to Van Tran, Deputy Associate Administrator, Office of
Business Development, Small Business Administration at
[email protected]. Highlight the information that you consider to be
CBI and explain why you believe SBA should hold this information as
confidential. SBA will review the information and make the final
determination on whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: Van Tran, Deputy Associate
Administrator, Office of Business Development, Office of Government
Contracting and Business Development, at [email protected], or SBA's
8(a) BD information line at (415) 744-0328.
SUPPLEMENTARY INFORMATION:
I. Background Information
On December 27, 2020, President Trump signed into law the
Appropriations Act, Public Law 116-260, Div. N, title III, sec. 330
(Dec. 27, 2020), to, among other things, make appropriations for the
2021 fiscal year and to provide coronavirus emergency response and
relief. Section 330 of the Appropriations Act mandates that SBA must
ensure that any small business concern participating in the 8(a) BD
program on or before September 9, 2020 has the option to extend such
participation for a period of one year from the end of its program
term, regardless of whether the concern previously elected to
voluntarily suspend its program participation in connection with the
President's nationwide coronavirus emergency disaster declaration on
March 13, 2020. (Presidential Disaster Declaration on Declaring a
National Emergency Concerning the Novel Coronavirus Disease (COVID-19)
Outbreak (March 13, 2020) (https://www.whitehouse.gov/presidential-actions/proclamation-declaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak).
Section 869 of the National Defense Authorization Act for Fiscal
Year 2021, Public Law 116-283, title VIII, sec. 869 (January 1, 2021)
(NDAA 2021) also contained the same language authorizing business
concerns participating in the 8(a) BD program on or before September 9,
2020 to extend their participation in the program for a period of one
year from the end of their program terms. The statutory language of
both the Appropriations Act and NDAA 2021 authorizes an extension for
firms participating in the program ``on or before September 9, 2020.''
There is no further clarifying language as to what ``before'' September
9, 2020 is intended to encompass. It is SBA's understanding that
Congress extended the term of participation in the 8(a) BD program
because it believed that the pandemic has adversely affected 8(a)
concerns and their ability to participate in and receive the full
benefits of the program. Thus, SBA believes it is reasonable to
conclude that any firms participating in the program as of the date the
national disaster was declared due to the pandemic (i.e., March 13,
2020) should receive the program term extension authorized by Congress.
This extension authority does not extend to business concerns that
graduated from or otherwise left the 8(a) BD program prior to March 13,
2020, or to business concerns that were admitted to the 8(a) BD program
after September 9, 2020. In addition, this rule clarifies that the
extension will not apply to business concerns that were Participants in
the 8(a) BD program at any point between March 13, 2020, and September
9, 2020, but were terminated, early graduated or voluntarily withdrew
from the program in lieu of being terminated or early graduated. SBA
has already determined that such business concerns are no longer
eligible to participate in the 8(a) BD program.
In addition, both the Appropriations Act and the NDAA 2021 provide
that SBA shall issue regulations implementing the provision not later
than 15 days after the date of enactment, and that the regulations
shall be issued without regard to the notice requirements under section
553(b) of title 5, United States Code. As such, this rule is being
implemented as an interim final rule with an immediate effective date.
In order to implement the statutory language of section 330 of the
Appropriations Act and section 869 of the NDAA 2021, SBA is amending
Sec. 124.2 of its regulations to incorporate the optional program term
extension for small business concerns participating in the 8(a) BD
program on March 13, 2020. Specifically, revised Sec. 124.2 provides
that for a firm participating in the 8(a) BD program as of March 13,
2020 and through January 13, 2021, SBA will extend its program term by
one year unless the concern declines such extension. A firm that was
participating in the 8(a) BD program as of March 13, 2020, but has
since graduated or otherwise left the program before January 13, 2021
must notify SBA of its intent to be readmitted for a period of one year
from the date it completed its program term. Any such notification must
be received by SBA no later than March 15, 2021. In addition, a firm
seeking to be readmitted must certify that it continues to meet the
applicable eligibility requirements as set forth in Sec. Sec. 124.101
through 124.111.
SBA is also revising Sec. 124.2 to clarify that any period of
extension under the Act will be added to a Participant's transitional
stage of participation in the 8(a) BD program. SBA has selected this
approach for two reasons. First, in authorizing an extension of 8(a) BD
program participation, Congress clearly intended to give certain 8(a)
Participants the opportunity to recover and take full advantage of the
program's business development assistance, including the additional
assistance available to firms in the transitional stage as set forth in
Sec. 124.404(c). Second, it would be administratively burdensome and
illogical to place a Participant that has already entered the
transitional stage (or completed its program term) back in the
development stage during its period of extension.
As part of this revision, SBA is also making conforming amendments
to Sec. 124.404 to clarify the respective terms of the developmental
and transitional stages of program participation.
Lastly, SBA is revising Sec. 124.509 of its regulations to clarify
how an extension of participation under the Act will impact an 8(a)
Participant's requirement to attain the targeted dollar levels of non-
8(a) revenue in its extended program term. Currently, under SBA's
regulations, a Participant in the transitional stage of the 8(a) BD
program (i.e., years five through nine) must generally achieve certain
targets of revenue derived from sources other than sole source or
competitive 8(a) contracts. The purpose of these targets is to ensure
that Participants do not develop an unreasonable reliance on 8(a)
awards, and to ease their transition into the competitive marketplace
after
[[Page 2531]]
leaving the 8(a) BD program. As such, the targets increase
incrementally during the transitional stage of the program. Where a
Participant fails to meet its applicable competitive business activity
target for the just completed program year and SBA determines that the
Participant did not make good faith efforts to obtain the requisite
non-8(a) revenue, that Participant will be ineligible for sole source
8(a) contracts in the current program year unless a waiver is granted
by SBA.
Currently, a Participant in the ninth year of its program term must
derive at least 50 percent of its revenues from sources other than sole
source or competitive 8(a) contracts. As noted above, the statutory
language contained in section 330 of the Appropriations Act and section
869 of the NDAA 2021 was added because Congress believed that firms
participating in the 8(a) BD program may not have been able to
experience the full benefits of the program due to complications caused
by the pandemic. Thus, it is our view that firms that were in program
year nine as of March 13, 2020 should not be subject to a higher
business activity target for the time added on to the end of their
program terms by section 330 and section 869. As such, the same 50
percent business activity target that applies to program year nine will
also apply to the extended program term. In order to receive sole
source 8(a) contracts during the extended program term a Participant
must meet (or have met) the applicable 50 percent non-8(a) business
activity target or have made good faith efforts to obtain the requisite
non-8(a) revenue in the ninth program year (or fifth year of the
transitional stage). Because the period of extension for firms that
were participating as of March 13, 2020 but have since graduated or
otherwise left the program may be less than a full year, SBA
understands that it may be more difficult to meet the 50 percent non-
8(a) business activity target for the extended program term. However,
SBA encourages Participants to make good faith efforts to obtain at
least 50 percent of their revenue from non-8(a) sources during the
extension period in order to ease the transition to the competitive
marketplace after graduating from the 8(a) BD program. As a point of
clarification, SBA notes that this interim final rule does not revise
the schedule of the transitional stage or the corresponding business
activity target requirements for current 8(a) Participants in years one
through five of the transitional stage of the program. In other words,
for purposes of the business activity target requirements any such
Participant that elects to extend its participation in the program
under the Act will not repeat a year in the transitional stage or
revert back to a prior year in the transitional stage as a result of
the program extension.
II. Comments and Immediate Effective Date
This interim final rule is effective without advance notice and
public comment because section 330(b) of the Appropriations Act and
section 869(b) of the NDAA 2021 authorize SBA to issue implementing
regulations without regard to notice requirements under 5 U.S.C.
553(b). However, SBA is providing a 60-day comment period for the
public to comment on this Interim Final Rule. SBA's justification for
the use of an interim final rule and immediate effective date follow.
III. Justification for Interim Final Rule
In general, SBA publishes a rule for public comment before issuing
a final rule, in accordance with the Administrative Procedure Act, 5
U.S.C. 553. The Administrative Procedure Act provides an exception to
this standard rulemaking process, however, where an agency finds good
cause to adopt a rule without prior public participation. 5 U.S.C.
553(b)(3)(B). The good cause requirement is satisfied when prior public
participation is impracticable, unnecessary, or contrary to the public
interest. Under such circumstances, an agency may publish an interim
final rule without soliciting public comment.
SBA has determined that there is good cause for dispensing with
advance public notice and comment on the grounds that that it would be
contrary to the public interest. Specifically, advance public notice
and comment would delay the delivery of critical business development
assistance Congress sought to extend to firms that are presently not
eligible for the program's assistance because they have already
graduated or otherwise left the 8(a) BD program. As explained above,
such firms will need to notify SBA that they would like to be
readmitted to the program as soon as possible in order to take full
advantage of the extension period.
In addition, both the Appropriations Act and the NDAA provisions
cited provide specific authority for SBA to proceed with this rule.
Section 330(b) of the Appropriation Act provides: ``(b). Emergency
Rulemaking Authority--Not later than 15 days after the date of
enactment of this Act, the Administrator shall issue regulations to
carry out this section without regard to the notice requirements under
section 553(b) of title 5, United States Code.'' Similarly, section
869(b) of the NDAA 21 provides: ``(b) Emergency Rulemaking Authority.--
Not later than 15 days after the date of enactment of this section, the
Administrator shall issue regulations to carry out this section without
regard to the notice requirements under section 553(b) of title 5,
United States Code.''
Although this interim final rule is effective immediately, comments
are solicited from interested members of the public on all aspects of
the interim final rule. These comments must be received on or before
the close of the comment period noted in the DATES section of this
interim final rule. SBA will then consider these comments in making any
necessary revisions to these regulations.
IV. Justification for Immediate Effective Date
The APA requires that ``publication or service of a substantive
rule shall be made not less than 30 days before its effective date,
except as--otherwise provided by the agency for good cause found and
published with the rule.'' 5 U.S.C. 553(d)(3). The purpose of this
provision is to provide interested and affected member of the public
sufficient time to adjust their behavior before the rule takes effect.
In light of the urgent need to assist 8(a) small business concerns
during the pandemic, SBA finds that there is good cause for making this
rule effective immediately instead of observing the 30-day period
between publication and effective date. While this interim final rule
is effective immediately upon publication, SBA is inviting public
comment on the rule during a 60-day period and will consider the
comments in developing a final rule. SBA has included an applicability
date to make clear that the rule is applicable for eligible 8(a)
companies to either retain or regain their 8(a) status as quickly as
possible.
V. Compliance With Executive Orders 12866, 13771, 12988, 13132, and
13175, 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 Information and Regulatory Affairs has determined
that this interim final rule is not significant for the purposes of
Executive Order 12866 and is not considered a major rule under the
Congressional Review Act.
This interim final rule is necessary to implement section 330 of
the Appropriations act and section 869 of
[[Page 2532]]
the NDAA 2021 in order to provide relief to 8(a) firms adversely
impacted by the March 13, 2020, emergency declaration. SBA anticipates
that this rule will substantially benefit such 8(a) firms, their
employees, and the communities they serve. The rule will allow 8(a)
firms to continue to be eligible to be awarded both competitive and
sole source 8(a) contracts for an extended period in the program. In FY
2019, 8(a) firms were awarded 5.15% of federal contract dollars
amounting to $30.39 billion with $8.62 billion awarded through set
asides, $9.90 billion awarded as sole-source, and $11.87 billion
awarded though open competition or with another preference (e.g.,
HUBZone) applied.\1\ In the past five years (FY 2016-FY 2020) the
average total contract awards per 8(a) firm ranged from $3.15 million
in FY 2018 to $4.45 million in FY 2016.
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\1\ Congressional Research Service, SBA's ``8(a) Program'':
Overview, History, and Current Issues, Page 36-37, https://crsreports.congress.gov/product/pdf/R/R44844.
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An addition of one year to the term of 8(a) firms will increase the
pool of firms participating in the program by up to 400 to 600 8(a)
firms each year for the next ten years, which reflects the amount of
firms that have graduated from the 8(a) program annually in the past
five years, on average. Approximately 4,150 8(a) firms would be
eligible to receive benefits for an additional year in the 8(a) program
during the course of the next ten years based on the number of firms
within the current 8(a) portfolio and including those firms that
graduated since March 13, 2020. While more firms will be eligible to
participate in the 8(a) program each year, the impact on 8(a) contract
dollars awarded is anticipated to be non-substantive.
SBA will also need to account for costs associated with the
management of an additional year of eligibility for 8(a) firms, which
includes business development assistance and compliance oversight. In
FY 2019, with nearly 5,200 8(a) firms in the program, SBA expended
approximately $12,150 per 8(a) Program Participant based on a total
program cost of $63.17 million; this figure includes overhead costs
\2\. An additional year of eligibility would likely increase total
program costs stemming from program services. However, some of these
costs (e.g., overhead) would be redistributed across the 8(a) program
and other SBA programs or reduced due to economies of scale. SBA is
unable to estimate the marginal costs associated with an additional
year at the end of a firm's term in the 8(a) program, but anticipates
that it would not exceed SBA's annual costs for an 8(a) Participant.
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\2\ SBA's FY 2021 Congressional Justification and Annual
Performance Report, Table 10, Page 16, https://www.sba.gov/cj.
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Executive Order 13771
This rule is not an E.O. 13771 regulatory action because this rule
is not significant under E.O. 12866.
Executive Order 12988
This action meets applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have retroactive or preemptive effect.
Executive Order 13132
This rule does not have federalism implications as defined in
Executive Order 13132. It will not have substantial direct effects on
the States, on the relationship between the National Government and the
States, or on the distribution of power and responsibilities among the
various levels of government, as specified in the Executive Order. As
such it does not warrant the preparation of a Federalism Assessment.
Executive Order 13175
This rule does not have tribal implications under Executive Order
13175, Consultation and Coordination with Indian Tribal Governments,
because it would not have a substantial direct effect on one or more
Indian tribes, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.
Paperwork Reduction Act
The SBA has determined that this rule does not affect any existing
collection of information. The rule does require a concern seeking to
be readmitted to the 8(a) BD program to notify SBA of its intent to be
readmitted and make a certification that it continues to meet the
applicable 8(a) BD program eligibility requirements as set forth in
Sec. Sec. 124.101 through 124.111 of title 13 of the Code of Federal
Regulations. SBA is not seeking to collect information through any
required form, but rather is anticipating a simple email from the
business concern to SBA notifying SBA of its intent to be readmitted to
the 8(a) BD program. There are 346 business concerns whose program
terms have expired since March 13, 2020. Those are the only business
concerns who would be subject to the notification requirement.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires
administrative agencies to consider the effect of their actions on
small entities, small nonprofit enterprises, and small local
governments. Pursuant to the RFA, when an agency issues a rulemaking,
the agency must prepare a regulatory flexibility analysis which
describes the impact of the rule on small entities. However, rules that
are exempt from notice and comment are exempt from the RFA requirements
when the agency for good cause finds that notice and public procedure
are impracticable, unnecessary, or contrary to the public interest.
Small Business Administration's Office of Advocacy guide: How to Comply
with the Regulatory Flexibility Ac. Ch.1. p.9. Accordingly, SBA is not
required to conduct a regulatory flexibility analysis.
List of Subjects in 13 CFR Part 124
Administrative practice and procedure, Government procurement,
Government property, Small businesses.
Accordingly, for the reasons stated in the preamble, SBA is
amending 13 CFR part 124 as follows:
PART 124--8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS
STATUS DETERMINATIONS
0
1. The authority citation for part 124 is revised to read as follows:
Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), 644 and
Pub. L. 99-661, Pub. L. 100-656, sec. 1207, Pub. L. 101-37, Pub. L.
101-574, section 8021, Pub. L. 108-87, Pub. L. 116-260, sec. 330,
and 42 U.S.C. 9815.
0
2. Revise Sec. 124.2 to read as follows:
Sec. 124.2 What length of time may a business participate in the 8(a)
BD program?
(a) Except as set forth in paragraph (b) of this section, a
Participant receives a program term of nine years from the date of
SBA's approval letter certifying the concern's admission to the
program. The Participant must maintain its program eligibility during
its tenure in the program and must inform SBA of any changes that would
adversely affect its program eligibility. The nine-year program term
may be shortened only by termination, early graduation (including
voluntary early graduation) or voluntary withdrawal as provided for in
this subpart.
(b) Pursuant to section 330 of the Consolidated Appropriations Act,
2021,
[[Page 2533]]
and section 869 of the National Defense Authorization Act for Fiscal
Year 2021, a small business concern participating the 8(a) BD program
on March 13, 2020, may elect to extend such participation by a period
of one year from the end of its program term, regardless of whether it
previously elected to suspend participation in the program under the
procedures set forth in Sec. 124.305(h)(1)(iii).
(1) Unless expressly declined in writing, SBA will extend a
Participant's program term by one year if the concern was a Participant
in the 8(a) BD program on March 13, 2020, and continued its
participation through January 13, 2021. Declines of such extension must
be submitted to: Deputy Associate Administrator, Office of Business
Development, Small Business Administration, 409 Third Street SW,
Washington, DC 20416, or email to [email protected].
(2) Except as set forth in paragraph (b)(2)(iii) of this section
any concern that was a Participant in the 8(a) BD program on March 13,
2020, but graduated or otherwise left the program before January 13,
2021 may elect to be readmitted to the 8(a) BD program for the period
of time equal to one year from the date of the original expiration of
the concern's program term. A concern seeking to be readmitted to the
8(a) BD program must notify SBA of its intent to be readmitted no later
than March 15, 2021.
Example 1 to paragraph (b)(2) introductory text. Business Concern A
was a Participant in the 8(a) BD program on September 9, 2020, and its
program term expired on November 25, 2020. On January 28, 2021,
Business Concern A notified SBA of its election to be readmitted to the
8(a) BD program under the process outlined in this paragraph (b)(2).
Business Concern A would be eligible to participate in the 8(a) BD
program until November 25, 2021.
(i) All requests for readmittance must be submitted to: Associate
Administrator, Office of Business Development, Small Business
Administration, 409 Third Street SW, Washington, DC 20416, or email to
[email protected].
(ii) As part of a concern's notification to SBA of its intent to be
readmitted to the 8(a) BD program, the concern must certify that it
continues to meet the applicable 8(a) BD program eligibility
requirements as set forth in Sec. Sec. 124.101 through 124.111. SBA
may, in its discretion, request information or documentation to assess
whether the concern meets the eligibility criteria for readmittance.
(iii) Business concerns that were Participants in the 8(a) BD
program on March 13, 2020, but were terminated or early graduated by
SBA or elected to voluntarily withdraw or early graduate in lieu of
termination are not eligible to extend their program terms.
(iv) The readmittance of a business concern owned and controlled by
a tribe, ANC, NHO, or CDC to the 8(a) BD program under this paragraph
(b)(2) will be disregarded for purposes of the ownership restrictions
applicable to Participants owned by a tribe, ANC, NHO, or CDC as set
forth in Sec. Sec. 124.109(c)(3)(ii), 124.110(e), and 124.111(d). The
date to commence the two-year waiting period for the tribe, ANC, NHO,
or CDC to own another business concern in the 8(a) BD program with the
same primary NAICS code as the readmitted concern will not be
readjusted with the firm's readmittance.
0
3. Amend Sec. 124.404 by revising the second sentence of paragraph (a)
to read as follows:
Sec. 124.404 What business development assistance is available to
Participants during the two stages of participation in the 8(a) BD
program?
(a) * * * The developmental stage will last four years, and the
transitional stage will last five years, unless the concern has exited
the program by one of the means set forth in Sec. 124.301 prior to the
expiration of its program term or has elected to extend its
participation pursuant to Sec. 124.2(b).
* * * * *
0
4. Amend Sec. 124.509 by revising paragraph (b)(2) and adding an
example to paragraph (d)(4) to read as follows:
Sec. 124.509 What are non-8(a) business activity targets?
* * * * *
(b) * * *
(2) Non-8(a) business activity targets.--(i) During their
transitional stage of program participation, Participants must meet the
following non-8(a) business activity targets each year:
Table 1 to Paragraph (b)(2)(i)
------------------------------------------------------------------------
Non-8(a) business
activity targets
(required minimum
Participant's year in the transitional stage non-8(a) revenue as
a percentage of
total revenue)
------------------------------------------------------------------------
1.................................................. 15
2.................................................. 25
3.................................................. 30
4.................................................. 40
5.................................................. 50
------------------------------------------------------------------------
(ii) Any Participant that extended its program term pursuant to
Sec. 124.2(b) of this chapter must meet the business activity target
for year 5 or meet the applicable requirements of paragraph (d) or (e)
of this section in order to preserve its eligibility for sole source
8(a) contracts during the extended program period. The applicable
business activity target for the extended program period will be the
same as that for year 5 of the transitional stage (i.e., 50% non-8(a)
revenue).
* * * * *
(d) * * *
(4) * * *
Example 3 to paragraph (d)(4): Firm C elected to extend its
participation in the 8(a) BD program as set forth in Sec. 124.2 of
this chapter. Firm C had $10 million in total revenue during year 5 in
the transitional stage (year 9 in the program), of which $8.5 million
were 8(a) revenues and $1.5 million were non-8(a) revenues, and SBA
determined that Firm C did not make good faith efforts to meet its non-
8(a) business activity target. In order to be eligible for sole source
8(a) contracts during year 6 of the transitional stage (year 10 in the
program), Firm C must demonstrate at its first or second quarterly
review that it had received at least $3.5 million in non-8(a) revenue
and new non-8(a) awards (the amount by which it failed to meet the 50%
non-8(a) business activity target for year 5 in the transitional
stage). If, at its first two quarterly reviews during year 6 of the
transitional stage (year 10 in the program), Firm C could not
demonstrate that it had received at least $3.5 million in non-8(a)
revenue and new non-8(a) awards, Firm C would not be eligible for sole
source 8(a) contracts for the remainder of its program term.
* * * * *
Jovita Carranza,
Administrator.
[FR Doc. 2021-00602 Filed 1-12-21; 8:45 am]
BILLING CODE 8026-03-P