[Federal Register Volume 87, Number 37 (Thursday, February 24, 2022)]
[Proposed Rules]
[Pages 10327-10331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-03105]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 19, 49, and 52

[FAR Case 2019-008; Docket No. 2019-0008, Sequence No. 1]
RIN 9000-AN91


Federal Acquisition Regulation: Small Business Program Amendments

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to implement several changes to the Small 
Business Administration (SBA) regulations.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat Division at the address shown below on or before 
April 25, 2022 to be considered in the formation of the final rule.

ADDRESSES: Submit comments in response to FAR Case 2019-008 to the 
Federal eRulemaking portal at https://www.regulations.gov by searching 
for ``FAR Case 2019-008''. Select the link ``Comment Now'' that 
corresponds with ``FAR Case 2019-008''. Follow the instructions 
provided on the ``Comment Now'' screen. Please include your name, 
company name (if any), and ``FAR Case 2019-008'' on your attached 
document. If your comment cannot be submitted using https://www.regulations.gov, call or email the points of contact in the FOR 
FURTHER INFORMATION CONTACT section of this document for alternate 
instructions.
    Instructions: Please submit comments only and cite ``FAR Case 2019-
008'' in all correspondence related to this case. Comments received 
generally will be posted without change to https://www.regulations.gov, 
including any personal and/or business confidential information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two-to-three days after submission 
to verify posting.

FOR FURTHER INFORMATION CONTACT: Ms. Malissa Jones, Procurement 
Analyst, at 703-605-2815, or by email at [email protected], for 
clarification of content. For information pertaining to status or 
publication schedules, contact the Regulatory Secretariat Division at 
202-501-4755 or [email protected]. Please cite FAR Case 2019-008.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA are proposing to amend the FAR to implement 
several revisions that the Small Business Administration (SBA) made to 
its regulations in its final rule published on November 29, 2019, at 84 
FR 65647. SBA provided an explanation of the changes in its final rule 
preamble. The revisions address the following topics:
     The point in the procurement process at which small 
business size status is determined for offers for multiple-award 
contracts.
     A new ground for a socioeconomic status protest.
     The eligibility requirements for 8(a) participants under 
long-term contracts (i.e., contracts with a duration of more than 5 
years).
     The small business size standard for information 
technology value-added resellers under North American Industry 
Classification System (NAICS) code 541519.

II. Discussion and Analysis

    The proposed changes to the FAR are summarized in the following 
paragraphs.

A. Small Business Size Standards

    Part 19 is proposed to be revised to clarify SBA policy concerning 
size standards in three areas. First, while SBA generally determines 
small business size standards at the time of initial offer including 
price, for a multiple-award contract that does not require offers for 
the contract to include price, SBA will determine size as of the date 
of the initial offer for the multiple-award contract, whether or not 
the offer includes price or the price is evaluated; changes are made at 
FAR 19.102 and 19.301-1. This proposed rule merely informs contracting 
officers of SBA's policy on determinations of size status; it does not 
include guidance for contracting officers regarding solicitations that 
do not include price as an evaluation factor for multiple-award 
contracts. FAR case 2017-010, Evaluation Factors for Multiple-Award 
Contracts, and FAR case 2018-014, Increasing Task-order Level 
Competition, provide this guidance.
    Second, an information technology value-added reseller under NAICS 
code 541519, proposing to furnish an end product it did not manufacture 
(i.e., a ``nonmanufacturer''), is a small business if it has no more 
than 150 employees. This size standard is implemented at FAR 19.505; 
FAR 52.204-8, Annual Representations and Certifications and its 
Alternate I; FAR 52.212-1, Instructions to Offerors--Commercial Items; 
FAR 52.219-1, Small Business Program Representations and its Alternate 
II; and FAR 52.219-28, Post-Award Small Business Program 
Rerepresentation.
    Third, adding new grounds for a socioeconomic status protest based 
on an allegation that a contractor is unduly reliant on a small, non-
similarly situated entity subcontractor or if such subcontractor 
performs the primary and vital requirements of the contract (the 
``ostensible subcontractor rule''). Changes are made at FAR 19.306 to 
19.308.

B. Setting Aside Orders Under Multiple-Award Contracts That Were Set 
Aside for Small Business

    FAR 19.504 is proposed to be revised to clarify that, if a 
multiple-award

[[Page 10328]]

contract was totally set aside for small business, contracting officers 
may set aside orders under that contract for any of the small business 
socioeconomic programs. This subpart further clarifies that for these 
orders to be set aside, the rule of two and the specific socioeconomic 
program eligibility requirements must be met.

C. Determining Eligibility for the 8(a) Program

    Subpart 19.8 is proposed to be revised to specify that SBA 
designates concerns as 8(a) participants in the Dynamic Small Business 
Search (DSBS) at https://web.sba.gov/pro-net/search/dsp_dsbs.cfm and 
that SBA's designation also appears in the System for Award Management 
(SAM). In addition, for 8(a) contracts exceeding 5 years, including 
options, contracting officers are required to verify in DSBS or SAM 
that the concern is an SBA-certified 8(a) participant no more than 120 
days prior to the end of the fifth year of the contract. If the concern 
is not an SBA-certified 8(a) participant at that time, contracting 
officers shall not exercise the option.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Products (Including Commercially 
Available Off-the-Shelf (COTS) Items), or for Commercial Services

    This rule proposes to amend several clauses. However, this proposed 
rule does not impose any new requirements on contracts at or below the 
SAT, for commercial products including commercially available off-the-
shelf (COTS) items, or for commercial services. The clauses continue to 
apply to acquisitions at or below the SAT, to acquisitions for 
commercial products including commercially available off-the-shelf 
(COTS) items, and to acquisitions for commercial services.

IV. Expected Impact of the Rule

    This proposed rule will impact the operations of the Government and 
contractors as described in this section.
    This proposed rule will impact contracting officers for long-term 
8(a) contracts. These contracting officers will not be able to exercise 
options past the fifth year of long-term 8(a) contracts if the 8(a) 
contractor no longer qualifies for the 8(a) program.
    Contractors who are 8(a) participants with long-term contracts may 
find that the Government cannot exercise an option on that contract, if 
the contractor is no longer eligible for the 8(a) program.
    Offerors who are information technology value-added resellers 
should be able to understand more easily the size standard that applies 
to them.
    This proposed rule is not expected to result in any costs to 
contractors or offerors.
    The ``ostensible subcontractor rule'' is implemented in this 
proposed rule as a new ground for protest. Small business contractors 
must not be overly reliant on non-similarly situated small business 
subcontractors or have such a subcontractor perform primary and vital 
requirements of the contract. This means the contractor must have the 
necessary expertise within its own organization.

V. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993.

VI. Congressional Review Act

    As required by the Congressional Review Act (5 U.S.C. 801-808) 
before an interim or final rule takes effect, DoD, GSA, and NASA will 
send the rule and the ``Submission of Federal Rules Under the 
Congressional Review Act'' form to each House of the Congress and to 
the Comptroller General of the United States. A major rule cannot take 
effect until 60 days after it is published in the Federal Register. 
This proposed rule is not anticipated to be a major rule under 5 U.S.C. 
804.

VII. Regulatory Flexibility Act

    The change may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601-612. The Initial Regulatory Flexibility 
Analysis (IRFA) is summarized as follows:

    DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to implement several revisions made to 
the SBA regulations in SBA's final rule published on November 29, 
2019 (84 FR 65647). The revisions address the point in the 
procurement process at which small business size status is 
determined for offers for multiple-award contracts. SBA generally 
determines size status at the time of initial offer including price. 
However, for a solicitation for a multiple-award contract that does 
not require offers to include price, SBA will determine size as of 
the date of initial offer, whether or not the offer includes price 
or the price is evaluated. The revisions also address the 
eligibility requirements for 8(a) participants under long-term 
contracts (i.e., with a duration of more than five years including 
option periods). For long-term 8(a) contracts, contracting officers 
will be required to verify in the Dynamic Small Business Search 
(DSBS) or the System for Award Management (SAM) that the contractor 
is still an SBA-certified 8(a) participant no more than 120 days 
prior to the end of the fifth year of the contract. If the 
contractor is no longer an SBA-certified 8(a) participant, the 
contracting officer shall not exercise the option. In addition, 
SBA's revisions specified that the size standard for information 
technology value-added resellers under North American Industry 
Classification System (NAICS) code 541519 is 150 employees. The 
revisions also address SBA's new grounds for a socioeconomic status 
protest based on an allegation that a contractor is unduly reliant 
on a small, non-similarly situated entity subcontractor or if such 
subcontractor performs the primary and vital requirements of the 
contract (the ``ostensible subcontractor rule''). This proposed FAR 
rule includes all of these revisions.
    The objective of this proposed rule is to implement SBA's 
regulatory revisions in the FAR. The legal basis for this rule is 41 
U.S.C. 1303 and the SBA regulatory changes at 13 CFR 121.103(h), 13 
CFR 121.404, 13 CFR 121.406, 13 CFR 124.521(e), and 13 CFR 125.2(e).
    This proposed rule will apply to small entities that do business 
with the Federal Government. According to the data in SAM, 320,622 
of the active entity registrations are for entities that are small 
business concerns for at least one NAICS code. The proposed FAR 
changes, regarding the point at which SBA determines size status and 
SBA's new grounds for a socioeconomic protest, will provide these 
entities with straightforward guidance that will reduce confusion 
and uncertainty.
    The proposed changes regarding long-term 8(a) contracts will 
impact 8(a) participants who are Federal contractors with contracts 
that have a duration of more than five years, including options. An 
analysis of the data in the Federal Procurement Data System (FPDS) 
indicates that, for fiscal years 2017 through 2019, an average of 
257 long-term contracts (greater than five years) were awarded to 
227 unique entities each year under the 8(a) program. The proposed 
change may serve to reduce the number of long-term contracts awarded 
to 8(a) participants by agencies that are concerned about having a 
contract in place beyond the fifth year. Contracts outside the 8(a) 
program will not have such obstacles to continued performance.
    The proposed change regarding the size standard for information 
technology value-added resellers will affect such resellers who

[[Page 10329]]

do business with the Federal Government. An analysis of the data in 
FPDS shows that, for fiscal years 2017 through 2019, an average of 
727 unique large business entities and 1,347 unique small business 
concerns were awarded contracts each year under NAICS code 541519.
    This proposed rule does not include any new reporting, 
recordkeeping, or other compliance requirements for small entities.
    This proposed rule does not duplicate, overlap, or conflict with 
any other Federal rules.
    There are no known significant alternative approaches that would 
accomplish the stated objectives.

    The Regulatory Secretariat Division has submitted a copy of the 
IRFA to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the IRFA may be obtained from the Regulatory 
Secretariat Division. DoD, GSA, and NASA invite comments from small 
business concerns and other interested parties on the expected impact 
of this rule on small entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by the rule in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 610 (FAR Case 2019-008), 
in correspondence.

VIII. Paperwork Reduction Act

    This proposed rule does not contain any information collection 
requirements that require the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

List of Subjects in 48 CFR Parts 19, 49, and 52

    Government procurement.

William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA propose to amend 48 CFR parts 19, 49, 
and 52 as set forth below:

0
1. The authority citation for 48 CFR parts 19, 49, and 52 continues to 
read as follows:

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

PART 19--SMALL BUSINESS PROGRAMS

0
2. Amend section 19.102 by--
0
a. Revising the last sentence of paragraph (a)(1); and
0
b. Adding paragraphs (a)(3) and (4).
    The revision and additions read as follows:


19.102   Small business size standards and North American Industry 
Classification System codes.

    (a) * * *
    (1) * * * They are also available at https://www.sba.gov/document/support--table-size-standards.
* * * * *
    (3) SBA determines the size status of a concern, including its 
affiliates, as of the date the concern represents that it is small to 
the contracting officer as part of its initial offer, which includes 
price.
    (4) When an agency uses a solicitation for a multiple-award 
contract that does not require offers for the contract to include 
price, SBA determines size as of the date of initial offer for the 
multiple-award contract, whether or not the offer includes price or the 
price is evaluated. (See 13 CFR 121.404(a)(1)(iv).)
* * * * *


19.301-1   [Amended]

0
3. Amend section 19.301-1 by--
0
a. Removing from paragraph (b) introductory text the phrase ``initial 
offer'' and adding ``initial offer, (whether or not the offer includes 
price or the price is evaluated)'' in its place; and
0
b. Removing from paragraph (e)(1) the phrase ``offer for the contract'' 
and adding ``offer for the contract (whether or not the offer includes 
price or the price is evaluated (see 13 CFR 121.404(a)(1)(iv)),'' in 
its place.
0
4. Amend section 19.306 by--
0
a. Removing from the end of paragraph (d)(1)(ii) the word ``or'';
0
b. Removing from the end of paragraph (d)(1)(iii) the period and adding 
``; or'' in its place; and
0
c. Adding paragraph (d)(1)(iv).
    The addition reads as follows:


19.306   Protesting a firm's status as a HUBZone small business 
concern.

* * * * *
    (d) * * *
    (1) * * *
    (iv) For HUBZone set-aside or sole-source service contracts, a 
HUBZone prime contractor is unduly reliant on a small, non-similarly 
situated entity subcontractor or if such subcontractor performs the 
primary and vital requirements of the contract. For allegations that 
the prime contractor is unduly reliant on an other-than-small 
subcontractor, see size protests at 19.302, and 13 CFR 121.103(h)(2), 
which treats the pair as joint venturers for size determination 
purposes (the ``ostensible subcontractor rule'').
* * * * *
0
5. Amend section 19.307 by--
0
a. Removing from paragraph (d)(1) introductory text the phrase 
``service disabled'' and adding ``service-disabled'' in its place;
0
b. Removing from paragraph (d)(1)(i) the text ``service disabled'' and 
``125.8; or'' and adding ``service-disabled'' and ``125.11;'' in their 
places, respectively;
0
c. Removing from paragraph (d)(1)(ii) the period at the end and adding 
``; or'' in its place; and
0
d. Adding paragraph (d)(1)(iii).
    The addition reads as follows:


19.307   Protesting a firm's status as a service-disabled veteran-owned 
small business concern.

* * * * *
    (d) * * *
    (1) * * *
    (iii) For set-aside or sole-source service contract ostensible 
subcontractor protests, the protester presents credible evidence of the 
alleged undue reliance on a small, non-similarly situated entity 
subcontractor, or credible evidence that the small non-similarly 
situated entity is performing the primary and vital requirements of the 
contract. For allegations that the prime contractor is unduly reliant 
on an other-than-small subcontractor, see size protests at 19.302, and 
13 CFR 121.103(h)(2), which treats the pair as joint venturers for size 
determination purposes (the ``ostensible subcontractor rule'').
* * * * *
0
6. Amend section 19.308 by--
0
a. Removing from the end of paragraph (d)(1)(i) the word ``or'';
0
b. Removing from the end of paragraph (d)(1)(ii) the period and adding 
``; or'' in its place; and
0
c. Adding paragraph (d)(1)(iii).
    The addition reads as follows:


19.308   Protesting a firm's status as an economically disadvantaged 
women-owned small business concern or women-owned small business 
concern eligible under the Women-Owned Small Business Program.

* * * * *
    (d) * * *
    (1) * * *
    (iii) For WOSB or EDWOSB set-aside or sole-source service 
contracts, the protest presents evidence that the prime contractor is 
unusually reliant on a small, non-similarly situated entity 
subcontractor, as defined in 13 CFR 125.1, or a protest alleging that 
such subcontractor is performing the primary and vital requirements of 
a set-aside or sole-source WOSB or EDWOSB contract. For allegations 
that the prime contractor is unduly reliant on an other-than-small 
subcontractor, see size protests at 19.302, and 13 CFR 121.103(h)(2), 
which treats the pair as joint venturers for size determination 
purposes (the ``ostensible subcontractor rule'').
* * * * *

[[Page 10330]]

0
7. Amend section 19.504 by--
0
a. Removing from paragraph (b) heading the word ``partial'';
0
b. Redesignating paragraphs (b)(1) and (b)(2) as paragraphs (b)(2)(i) 
and (b)(2)(ii), respectively;
0
c. Adding a new paragraph (b)(1); and
0
d. Adding a heading for newly redesignated paragraph (b)(2).
    The additions read as follows:


19.504   Orders under multiple-award contracts.

* * * * *
    (b) * * *--(1) Orders under total set-aside contracts. Under a 
total small business set-aside, contracting officers may at their 
discretion set aside orders for any of the small business socioeconomic 
concerns identified in 19.000(a)(3) provided that the requirements at 
paragraph (a) of this section, 19.502-2(b), and the specific program 
eligibility requirements are met.
    (2) Orders under partial set-aside contracts. * * *
* * * * *


19.505   [Amended]

0
8. Amend section 19.505 by removing from paragraphs (c)(1)(ii) and 
(c)(2)(i) the phrase ``500 employees'' and adding ``500 employees, or 
150 employees for information technology value-added resellers under 
NAICS code 541519'' in its place.
0
9. Amend section 19.802 by adding two sentences at the end to read as 
follows:


19.802   Determining eligibility for the 8(a) program.

    * * * SBA designates the concern as an 8(a) participant in the 
Dynamic Small Business Search (DSBS) at https://web.sba.gov/pro-net/search/dsp_dsbs.cfm. SBA's designation also appears in the System for 
Award Management (SAM).
0
10. Amend section 19.804-1 by--
0
a. Removing from the end of paragraph (a)(1) the word ``and'';
0
b. Redesignating paragraph (a)(2) as paragraph (a)(3); and
0
c. Adding a new paragraph (a)(2).
    The addition reads as follows:


19.804-1   Agency evaluation.

    (a) * * *
    (2) Length of contract, including option periods (see 19.812(d)); 
and
* * * * *
0
11. Amend section 19.812 by--
0
a. Redesignating paragraph (d) as paragraph (e); and
0
b. Adding a new paragraph (d).
    The addition reads as follows:


19.812   Contract administration.

* * * * *
    (d) For 8(a) contracts exceeding 5 years including options, the 
contracting officer shall verify in DSBS or SAM that the concern is an 
SBA-certified 8(a) participant no more than 120 days prior to the end 
of the fifth year of the contract. If the concern is not an SBA-
certified 8(a) participant, the contracting officer shall not exercise 
the option (see 13 CFR 124.521(e)(2)).
* * * * *

PART 49--TERMINATION OF CONTRACTS


49.402-3   [Amended]

0
12. Amend section 49.402-3 by removing from paragraph (e)(4) the phrase 
``Small Business Administration Regional'' and adding ``Small Business 
Administration Area'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
13. Amend section 52.204-8 by--
0
a. Revising the date of the provision;
0
b. Removing from paragraph (a)(3) introductory text the phrase ``500 
employees'' and adding ``500 employees, or 150 employees for 
information technology value-added resellers under NAICS code 541519,'' 
in its place;
0
c. In Alternate I:
0
i. Revising the date of Alternate I; and
0
ii. Removing from paragraph (a)(2) introductory text the phrase ``500 
employees'' and adding ``500 employees, or 150 employees for 
information technology value-added resellers under NAICS code 541519,'' 
in its place.
    The revisions read as follows:


52.204-8   Annual Representations and Certifications.

* * * * *

Annual Representations and Certifications (DATE)

* * * * *

Alternate I (DATE). * * *

* * * * *
0
13. Amend section 52.212-1 by--
0
a. Revising the date of the provision; and
0
b. Removing from paragraph (a) introductory text the phrase ``500 
employees'' and adding ``500 employees, or 150 employees for 
information technology value-added resellers under NAICS code 541519,'' 
in its place.
    The revision reads as follows:


52.212-1   Instructions to Offerors--Commercial Products and Commercial 
Services.

* * * * *

Instructions to Offerors--Commercial Products and Commercial Services 
(DATE)

* * * * *
0
14. Amend section 52.212-5 by--
0
a. Revising the date of the provision; and
0
b. Removing from paragraph (b)(22)(i) the date ``(SEP 2021)'' and 
adding ``(DATE)'' in its place.
    The revision reads as follows:


52.212-5   Contract Terms and Conditions Required To Implement Statutes 
or Executive Orders--Commercial Products and Commercial Services.

* * * * *

Contract Terms and Conditions Required To Implement Statutes or 
Executive Orders--Commercial Products and Commercial Services (DATE)

* * * * *
0
15. Amend section 52.219-1 by--
0
a. Revising the date of the provision;
0
b. Removing from paragraph (b)(3) introductory text the phrase ``500 
employees'' and adding ``500 employees, or 150 employees for 
information technology value-added resellers under NAICS code 541519,'' 
in its place;
0
c. In Alternate II:
0
i. Revising the date of Alternate II; and
0
ii. Removing from paragraph (b)(2) introductory text the phrase ``500 
employees'' and adding ``500 employees, or 150 employees for 
information technology value-added resellers under NAICS code 541519,'' 
in its place.
    The revisions read as follows:


52.219-1   Small Business Program Representations.

* * * * *

Small Business Program Representations (DATE)

* * * * *

Alternate II (DATE) * * *

* * * * *
0
16. Amend section 52.219-18 by--
0
a. Revising the date of Alternate I; and
0
b. Removing from paragraph (a)(3) of Alternate I the phrase ``Regional 
Office(s)'' and adding ``Area Office(s)'' in its place.
    The revision reads as follows:


52.219-18   Notification of Competition Limited to Eligible 8(a) 
Participants.

* * * * *

Alternate I (DATE) * * *

* * * * *
0
17. Amend section 52.219-28 by--
0
a. Revising the date of the provision; and

[[Page 10331]]

0
b. Removing from paragraph (e) introductory text the phrase ``500 
employees'' and adding ``500 employees, or 150 employees for 
information technology value-added resellers under NAICS code 541519,'' 
in its place.
    The revision reads as follows:


52.219-28   Post-Award Small Business Program Rerepresentation.

* * * * *

Post-Award Small Business Program Rerepresentation (DATE)

* * * * *
[FR Doc. 2022-03105 Filed 2-23-22; 8:45 am]
BILLING CODE 6820-EP-P