[Federal Register Volume 87, Number 174 (Friday, September 9, 2022)]
[Proposed Rules]
[Pages 55642-55678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18068]



[[Page 55641]]

Vol. 87

Friday,

No. 174

September 9, 2022

Part III





Small Business Administration





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13 CFR Parts 121, 124, 125, Et al.





Ownership and Control and Contractual Assistance Requirements for the 
8(a) Business Development Program; Proposed Rule

  Federal Register / Vol. 87 , No. 174 / Friday, September 9, 2022 / 
Proposed Rules  

[[Page 55642]]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 124, 125, 126, and 127

RIN 3245-AH70


Ownership and Control and Contractual Assistance Requirements for 
the 8(a) Business Development Program

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would make several changes to the ownership 
and control requirements for the 8(a) Business Development (BD) 
program, including recognizing a process for allowing a change of 
ownership for a former Participant that is still performing one or more 
8(a) contracts and permitting an individual to own an applicant or 
Participant where the individual can demonstrate that financial 
obligations have been settled and discharged by the Federal Government. 
The rule also proposes to make several changes relating to 8(a) 
contracts, including clarifying that a contracting officer cannot limit 
an 8(a) competition to Participants having more than one certification 
and clarifying the rules pertaining to issuing sole source 8(a) orders 
under an 8(a) multiple award contract. The proposed rule would also 
make several other revisions to incorporate changes to SBA's other 
government contracting programs, including changes to implement a 
statutory amendment from the National Defense Authorization Act for 
Fiscal Year 2022, include blanket purchase agreements in the list of 
contracting vehicles that are covered by the definitions of 
consolidation and bundling, and more clearly specify the requirements 
relating to waivers of the nonmanufacturer rule.

DATES: Comments must be received on or before November 8, 2022.

ADDRESSES: You may submit comments, identified by RIN 3245-AH70, by any 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov 
and follow the instructions for submitting comments.
     Mail (for paper, disk, or CD-ROM submissions): Mark 
Hagedorn, Attorney Advisor, Office of General Counsel, U.S. Small 
Business Administration, 409 Third Street SW, Washington, DC 20416.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
rulemaking. All comments received will be posted on https://www.regulations.gov. If you wish to submit confidential business 
information (CBI) as defined in the User Notice at https://www.regulations.gov, please submit the comments to Mark Hagedorn and 
highlight the information that you consider to be CBI and explain why 
you believe this information should be held confidential.

FOR FURTHER INFORMATION CONTACT: Mark Hagedorn, U.S. Small Business 
Administration, Office of General Counsel, 409 Third Street SW, 
Washington, DC 20416; (202) 205-7625; [email protected].

SUPPLEMENTARY INFORMATION: SBA proposes to make several changes to the 
ownership and control requirements for the 8(a) Business Development 
(BD) program, including recognizing a process for allowing a change of 
ownership for a former Participant that is still performing one or more 
8(a) contracts and permitting an individual to own an applicant or 
Participant where the individual can demonstrate that financial 
obligations have been settled and discharged by the Federal Government. 
SBA also proposes to make several changes relating to 8(a) contracts, 
including clarifying that a contracting officer cannot limit an 8(a) 
competition to Participants having more than one certification and 
clarifying the rules pertaining to issuing sole source 8(a) orders 
under an 8(a) multiple award contract. The proposed rule would also 
make several other revisions to incorporate changes to SBA's other 
government contracting programs to implement a statutory amendment from 
the National Defense Authorization Act for Fiscal Year 2022.

Section-by-Section Analysis

Section 121.103(h)

    Section 121.103(h) sets forth the rules pertaining to affiliation 
through joint ventures. This rule first proposes to take some of the 
language currently contained in the introductory text and add it to a 
new Sec.  121.103(h)(1) for ease of use. SBA believes that the current 
introductory text is overly complex and separating some of the 
requirements into a separate paragraphs will be easier to understand 
and use. In adding a new Sec.  121.103(h)(1), the proposed rule would 
redesignate paragraphs (h)(1), (2), (3), and (4) as paragraphs (h)(2), 
(3), (4), and (5), respectively, and would adjust cross references 
contained in Sec.  121.103(h) in Sec. Sec.  121.404(d) and (g)(5), 
125.6(c), 125.8(a), 125.18(f)(1), 126.601(d)(1), and 126.618(c)(2).
    SBA's regulations currently provide that a specific joint venture 
generally may not be awarded contracts beyond a two-year period, 
starting from the date of the award of the first contract, without the 
partners to the joint venture being deemed affiliated for the joint 
venture. Although SBA's current policy is to allow orders to be issued 
under previously awarded contracts beyond the two-year period (since 
the restriction is on additional contracts, not continued performance 
on contracts already awarded), SBA continues to receive questions as to 
whether orders beyond the two-year period are permissible. To clear up 
any confusion, the proposed rule would add a sentence to the 
introductory text of Sec.  121.103(h) to capture SBA's current policy. 
SBA notes that current policy also allows for award of contracts beyond 
the two-year period if the offer, including price, was submitted prior 
to the end of the two-year period. Because there does not appear to be 
any confusion regarding that policy, this proposed rule does not change 
or amend that policy in any way.
    The proposed rule would also revise Example 2 to paragraph (h) 
introductory text. SBA's joint venture rule previously prohibited a 
joint venture from receiving more than three contracts over a two-year 
period. SBA amended that rule to allow a joint venture to seek and be 
awarded an unlimited number of contracts over the two-year period. See 
85 FR 66146, 66179 (Oct. 16, 2020). Unfortunately, when SBA amended the 
regulatory text to paragraph (h) it did not also amend the language in 
Example 2 to paragraph (h). Example 2 to paragraph (h) introductory 
text gave an illustration of a joint venture receiving two contracts 
during a two-year period and not submitting offers for any additional 
contracts. Because the example illustrated a situation with only two 
contracts, some were confused as to whether the example was applying 
the old three contracts over two years rule instead of the amended 
unlimited contracts over two years. That was not SBA's intent. This 
proposed rule would adjust the language in the example to specifically 
recognize that a joint venture can receive more than three contracts 
over a two-year period.
    The proposed rule would also clarify SBA's distinct treatment of 
populated and unpopulated joint ventures. The current regulation 
provides that if a joint venture exists as a formal separate legal 
entity, it may not be populated with individuals intended to perform 
contracts awarded to the joint venture. The proposed rule would clarify 
that this requirement was meant to apply only to contracts set aside or 
reserved

[[Page 55643]]

for small business (i.e., small business set-aside, 8(a), women-owned 
small business (WOSB), HUBZone, and service-disabled veteran owned 
small business (SDVOSB) contracts). The reason for this requirement is 
to allow SBA and procuring agencies to track the work done by each 
partner to the joint venture and to ensure that the lead small business 
partner upon whom eligibility for the contract is based (e.g., the 8(a) 
partner in a joint venture for an 8(a) contract between an 8(a) 
prot[eacute]g[eacute] and its large business mentor) is actually 
performing a significant portion of the contract and benefitting from 
that performance. As SBA has previously explained, if a joint venture 
were permitted to be populated, employees from a large business mentor 
could be hired by the joint venture, perform the contract, return to 
the large business after contract performance, and leave the small 
prot[eacute]g[eacute] firm with few or no benefits or business 
development from that contract. The proposed rule would clarify, 
however, that a populated joint venture could be awarded a contract set 
aside or reserved for small business where each of the partners to the 
joint venture were similarly situated (e.g., both partners to a joint 
venture seeking a HUBZone contract were certified HUBZone small 
business concerns). Any time the size of a populated joint venture is 
questioned, the proposed rule also clarifies that SBA will aggregate 
the revenues or employees of all partners to the joint venture.
    In addition, this proposed rule would revise the ostensible 
subcontractor rule in redesignated Sec.  121.103(h)(3). The proposed 
rule would first divide the current text contained in Sec.  
121.103(h)(2) into Sec.  121.103(h)(3) introductory text and Sec.  
121.103(h)(3)(i) for ease of use. SBA also proposes to clarify how the 
ostensible subcontractor rule should apply to general construction 
contracts. General construction types of contracts regularly involve 
subcontractors with specialized experience in the specialty 
construction trades. The primary role of a prime contractor in a 
general construction project is to superintend, manage, and schedule 
the work, including coordinating the work of various subcontractors. 
Those are the functions that are the primary and vital requirements of 
a general construction contract and ones that a prime contractor must 
perform. Although the prime contractor for a general construction 
contract must meet the limitation on subcontracting requirement set 
forth in Sec.  125.6(a)(3), SBA recognizes that subcontractors often 
perform the majority of the actual construction work because the prime 
contractor frequently must engage multiple subcontractors specializing 
in a variety of trades and disciplines. As such, SBA believes that the 
ostensible subcontractor rule for general construction contracts should 
be applied to the management and oversight of the project, not to the 
actual construction or specialty trade construction work performed. The 
prime contractor must retain management of the contract but may 
delegate a large portion of the actual construction work to its 
subcontractors.
    SBA further proposes to revise the ostensible subcontractor rule to 
comport with recent decisions of SBA's Office of Hearings and Appeals 
(OHA). In Size Appeal of DoverStaffing, Inc., SBA No. SIZ-5300 (2011), 
OHA created a four-factor test to indicate when a prime contractor's 
relationship with a subcontractor is suggestive of unusual reliance 
under the ostensible subcontractor rule. The four factors are (1) the 
proposed subcontractor is the incumbent contractor and ineligible to 
compete for the procurement, (2) the prime contractor plans to hire the 
large majority of its workforce from the subcontractor, (3) the prime 
contractor's proposed management previously served with the 
subcontractor on the incumbent contract, and (4) the prime contractor 
lacks relevant experience and must rely upon its more experienced 
subcontractor to win the contract. Under OHA's decisions, when these 
factors are present, violation of the ostensible subcontractor rule is 
more likely to be found if the subcontractor will perform 40% or more 
of the contract. SBA proposes to add two of these four factors to the 
ostensible subcontractor rule: the reliance on incumbent management and 
the reliance on the subcontractor's experience. As with the existing 
rule, SBA still would consider all aspects of the prime contractor's 
relationship with the subcontractor and would not limit its inquiry to 
the enumerated DoverStaffing factors. SBA continues to believe that the 
SBA Area Offices should be given discretion to consider and weigh all 
factors in rendering a formal size determination, and that unique 
circumstances could lead to a result that does not fully align with the 
DoverStaffing analysis. SBA seeks comment on these proposed changes to 
the ostensible subcontracting rule.
    Finally, the proposed rule would revise redesignated Sec.  
121.103(h)(4) to clarify how receipts are to be counted where a joint 
venture hires individuals to perform one or more specific contracts 
(i.e., where the joint venture is populated). Although SBA requires 
joint ventures to be unpopulated for purposes of performing set-aside 
contracts in order to properly track work performed and benefits 
derived by the lead small/8(a)/HUBZone/WOSB/SDVOSB entity to the joint 
venture, some joint ventures are nevertheless populated for other 
purposes. Generally, the appropriate share of a joint venture's 
revenues that a partner to the joint venture must include in its own 
revenues is the same percentage as the joint venture partner's share of 
the work performed by the joint venture. However, that general rule 
cannot apply to populated joint ventures. Where a joint venture is 
populated, each individual partner to the joint venture does not 
perform any percentage of the contract--the joint venture entity itself 
performs the work. As such, revenues cannot be divided according to the 
same percentage as work performed because to do so would give each 
partner $0 corresponding to the 0% of the work performed by the 
individual partner. In such a case, SBA believes that revenues must be 
divided according to the same percentage as the joint venture partner's 
percentage ownership share in the joint venture. Although SBA believes 
that is the intent of the current regulation, the proposed rule 
specifically incorporates that intent into redesignated Sec.  
121.103(h)(4).

Section 121.103(i)

    The proposed rule would put back into the regulations a paragraph 
pertaining to affiliation based on franchise and license agreements. 
This provision was inadvertently deleted from Sec.  121.103 when SBA 
deleted other provisions of Sec.  121.103 in its October 2020 
rulemaking (85 FR 66146 (Oct. 16, 2020)). The proposed rule merely adds 
back into the regulations the provision that was inadvertently removed.

Section 121.404

    SBA proposes to clarify Sec.  121.404(a)(1)(iv), which provides 
that size is determined for a multiple award contract at the time of 
initial offer on the contract even if the initial offer might not 
include price. As stated in the existing regulation, this size 
determination applies to the contract. However, SBA never intended that 
orders issued pursuant to that contract follow the same rule. SBA is 
aware of some confusion on that point. Accordingly, the proposed 
clarification would make clear that orders issued pursuant to such a 
multiple award contract that do not include price are treated similarly 
to orders under multiple award contracts generally. SBA believes there 
is no justification for exempting orders issued on these

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contracts differently, simply because the contract did not require 
price with initial offer. Thus, the proposed rule would specifically 
add that size for set-aside orders will be determined in accordance 
with paragraph (a)(1)(i)(A) or (B) or (a)(1)(ii)(A) or (B), as 
appropriate.
    SBA also proposes to clarify when size recertification is required 
in connection with a sale or acquisition. In 2016, SBA amended its 
regulation regarding recertification of size to add the word ``sale'' 
in addition to mergers and acquisitions as an instance when 
recertification is required. See 81 FR 34243, 34259 (May 31, 2016). 
Since that time, some have questioned whether recertification of size 
status may be required whenever any sale of stock occurs, even de 
minimis amounts. That was not SBA's intent. Recertification is required 
whenever there is a merger. However, recertification in connection with 
a ``sale'' or ``acquisition'' is required only where the sale or 
acquisition results in a change in control or negative control of the 
concern. Recertification is not required where small sales or 
acquisitions of stock that do not appear to affect the control of the 
selling or acquiring firm occur. The proposed rule would add language 
to clarify SBA's current intent.
    The proposed rule would also clarify the recertification 
requirements set forth in Sec.  121.404(g) for joint ventures. 
Specifically, the proposed rule would add a new Sec.  121.404(g)(6) 
which would set forth the general rule that a joint venture can 
recertify its status as a small business where all parties to the joint 
venture qualify as small at the time of recertification, or the 
prot[eacute]g[eacute] small business in a still active mentor-
prot[eacute]g[eacute] joint venture qualifies as small at the time of 
recertification. The proposed rule would also clarify that the two-year 
limitation on contract awards to joint ventures set forth in Sec.  
121.103(h) does not apply to recertification. In other words, 
recertification is not a new contract award, and thus can occur even if 
its timing is more than two years after the joint venture received its 
first contract.

Sections 121.404(a)(1)(i)(B) and (a)(1)(ii)(B), 124.501(h), and 
124.502(a)

    Section 121.404(a)(1)(i)(B) and (a)(1)(ii)(B) provide generally 
that a business concern that qualifies as small at the time of an offer 
for a multiple award contract that is set aside or reserved for the 
8(a) BD program will be deemed a small business for each order issued 
against the contract, unless a contracting officer requests a size 
recertification for a specific order. However, for sole source 8(a) 
orders issued under a multiple award contract set-aside for exclusive 
competition among 8(a) Participants, Sec.  124.503(i)(1)(iv) requires 
an agency to offer and SBA to accept the order into the 8(a) program on 
behalf of the identified 8(a) contract holder. As part of the offer and 
acceptance process, SBA must determine that a concern is currently an 
eligible Participant in the 8(a) BD program at the time of award. See 
Sec.  124.501(h). There has been some confusion as to whether a concern 
must qualify as small at the time of the offer of the order or whether 
size relates back to the award of the underlying 8(a) multiple award 
contract. Because size is something SBA looks at in making an 
eligibility determination in accepting a sole source offering, SBA 
intended that a Participant must currently qualify as a small business 
for any sole source award in addition to currently being a Participant 
in the program (i.e., firms that have graduated from or otherwise left 
the 8(a) BD program are not eligible for any 8(a) sole source award). 
SBA believes that the regulations are not clear on this point, and as 
such this proposed rule would amend Sec. Sec.  121.404(a)(1)(i)(B) and 
(a)(1)(ii)(B), 124.501(h), and 124.502(a) to clarify that position.

Section 121.411(c)

    The proposed rule would correct an inconsistency between Sec. Sec.  
121.411(c) and 125.3(c)(1)(viii). In requiring a prime contractor to 
notify unsuccessful small business offerors of the apparent successful 
offeror on subcontracts, Sec.  125.3(c)(1)(viii) provides that a prime 
contractor must provide pre-award written notification to unsuccessful 
small business offerors on all subcontracts over the simplified 
acquisition threshold, while Sec.  121.411(c) requires a prime 
contractor to inform each unsuccessful subcontract offeror in 
connection with any competitive subcontract. The proposed rule would 
add the over the simplified acquisition threshold condition to Sec.  
121.411(c) and adjust the language in Sec.  125.3(c)(1)(viii) to make 
the two provisions consistent.

Section 121.507

    SBA is seeking comments on a proposed amendment to its Small 
Business Timber Set-Aside Program regulations. The Small Business 
Timber Set-Aside Program establishes small business set-aside sales of 
sawtimber from the federal forests managed by the U.S. Department of 
Agriculture's Forest Service and the U.S. Department of the Interior's 
Bureau of Land Management. Current regulations require that a small 
business concern cannot resell or exchange more than 30% of the 
sawtimber volume to ``other than small'' businesses. SBA regulations do 
not address situations where a small business concern is unable to meet 
the 30% requirement due to circumstances outside of their control.
    Several timber industry stakeholders have petitioned SBA to allow a 
waiver of the 30% requirement in limited circumstances such as natural 
disasters, national emergencies, or other attenuating circumstances. 
SBA is proposing an amendment to Sec.  121.507 to add paragraph (d), 
which would allow the Director of Government Contracting to grant a 
waiver in limited circumstances when a small business is unable to meet 
the 30% requirement due to circumstances out of its control. SBA seeks 
comments on the following: whether a waiver is needed; if it is needed, 
under what circumstances should a waiver be granted; whether SBA should 
allow partial waivers (i.e., for some but not all of the 30/70 
requirement); and how SBA should evaluate a waiver request.

Section 121.702

    Section 121.702 sets forth the size and eligibility standards that 
apply to the Small Business Innovation Research (SBIR) and Small 
Business Technology Transfer (STTR) programs. Paragraph (c)(7) provides 
guidance relating to the ostensible subcontractor rule in the SBIR/STTR 
programs. That rule treats a prime contractor and its subcontractor or 
subgrantee as joint venturers when a subcontractor or subgrantee 
performs primary and vital requirements of an SBIR or STTR funding 
agreement. The proposed rule would clarify that when an SBIR/STTR 
offeror is determined to be a joint venturer with its ostensible 
subcontractor, all rules applicable to joint ventures would apply. This 
means that SBA will apply Sec.  121.702(a)(1)(iii) or (b)(1)(ii), which 
contains the ownership and control requirements for SBIR/STTR joint 
ventures. This clarification is consistent with how SBA treats entities 
that are determined to be joint venturers with an ostensible 
subcontractor for other small business program set-asides.

Section 121.1001

    Section 121.1001 identifies who may initiate a size protest or 
request a formal size determination in any circumstances. Currently, 
the language identifying who may protest the size of an apparent 
successful offeror is not identical for all of SBA's programs. For 
small business set-aside contracts and

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competitive 8(a) contracts, any offeror that the contracting officer 
has not eliminated from consideration for any procurement-related 
reason may initiate a size protest. For contracts set aside for WOSBs 
or SDVOSBs, any concern that submits an offer may initiate a size 
protest. For contracts set aside for certified HUBZone small business 
concerns, any concern that submits an offer and has not been eliminated 
for reasons unrelated to size may submit a size protest. SBA believes 
that making the language for all programs identical would remove any 
confusion and provide more consistent implementation of the size 
protest procedures. As such, this rule proposes to adopt the language 
currently pertaining to small business set-asides and competitive 8(a) 
contracts to all of SBA's programs. Thus, any offeror that the 
contracting officer has not eliminated from consideration for any 
procurement-related reason could initiate a size protest in each of 
those programs. The proposed rule would make these changes in Sec.  
121.1001(a)(6)(i) for the HUBZone program, in Sec.  121.1001(a)(8)(i) 
for the SDVO program, and in Sec.  121.1001(a)(9)(i) for the WOSB 
program.
    With respect to 8(a) contracts, Sec.  121.1001(a)(2) identifies 
interested parties who may protest the size status of an apparent 
successful offeror for an 8(a) competitive contract, and Sec.  
121.1001(b)(2)(ii) identifies those who can request a formal size 
determination with respect to a sole source 8(a) contract award. 
Pursuant to Sec.  124.501(g), before a Participant may be awarded 
either a sole source or competitive 8(a) contract, SBA must determine 
that the Participant is eligible for award. SBA will determine 
eligibility at the time of its acceptance of the underlying requirement 
into the 8(a) BD program for a sole source 8(a) contract, and after the 
apparent successful offeror is identified for a competitive 8(a) 
contract. For a sole source contract, if SBA determines a Participant 
to be ineligible because SBA believes the concern to be other than 
small, Sec.  121.1001(b)(2)(ii) authorizes the Participant determined 
to be ineligible to request a formal size determination. However, Sec.  
121.1001(b)(2)(ii) does not currently authorize a Participant 
determined to be ineligible based on size to request a formal size 
determination in connection with a competitive 8(a) contract award. SBA 
does not believe that the protest authority of Sec.  121.1001(a)(2) was 
meant to apply to this situation since protests normally relate to 
another firm challenging the small business status of the apparent 
successful offeror, not the apparent successful offeror challenging its 
own size status. This rule proposes to provide specific authority to 
allow a firm determined to be ineligible for a competitive 8(a) award 
based on size to request a formal size determination. It would also 
authorize the contracting officer, the SBA District Director in the 
district office that services the Participant, the Associate 
Administrator for Business Development, and the SBA's Associate General 
Counsel for Procurement Law to do so as well.

Sections 121.1004(a)(ii), 125.28(d)(2), 126.801(d)(2)(i), and 
127.603(c)(2)

    In the context of a sealed bid procurement, SBA's regulations 
provide that an interested party must protest the size or socioeconomic 
status (i.e., service-disabled veteran-owned small business (SDVOSB), 
HUBZone or women-owned small business (WOSB)/economically-disadvantaged 
women-owned small business (EDWOSB)) of the low bidder prior to the 
close of business on the fifth business day after bid opening. However, 
the regulations do not specifically take into account the situation 
where a low bidder is timely protested and found to be ineligible, the 
procuring agency identifies another low bidder, and an interested party 
seeks to challenge the size or socioeconomic status of the newly 
identified low bidder. In such a situation, the new low bidder is 
identified well beyond five days of bid opening. As such, it is 
impossible for an interested party to file a timely protest (i.e., one 
within five days of bid opening). It was not SBA's intent to disallow 
size protests in these circumstances. SBA believes that a protest in 
these circumstances should be deemed timely if it is received within 
five days of notification of the new low bidder. A few firms have 
questioned whether such a protest should be deemed timely because the 
regulations speak only to filing a protest within five days of bid 
opening. Because a protest by SBA is always timely, when timeliness has 
been questioned in these circumstances, and the protest is sufficiently 
specific, SBA has adopted the protest as its own and processed it 
accordingly. To eliminate this needless additional step where 
timeliness is questioned, the proposed rule would specifically provide 
that where the identified low bidder is determined to be ineligible for 
award, a protest of any other identified low bidder would be deemed 
timely if received within five business days after the contracting 
officer has notified the protestor of the identity of that new low 
bidder.
    SBA proposes to make this change in Sec.  121.1004(a)(ii) for size 
protests, in Sec.  125.28(d)(2) for protests relating to SDVO status, 
in Sec.  126.801(d)(2)(i) for protests relating to HUBZone status, and 
in Sec.  127.603(c)(2) for protests relating to WOSB or EDWOSB status.

Section 121.1004

    The proposed rule would add a new Sec.  121.1004(f) to specify that 
size protests may be filed only against an apparent successful offeror 
(or offerors) or an offeror in line to receive an award. SBA will not 
consider size protests relating to offerors who are not in line for 
award. This is the current SBA policy and the proposed rule merely 
provides additional clarity to Sec.  121.1004(e), which specifies that 
premature protests will be dismissed.
    Where an agency decides to reevaluate offers as a corrective action 
in response to a GAO protest, the proposed rule would add a new Sec.  
121.1004(g) providing that SBA would dismiss any size protest relating 
to the initial apparent successful offeror. When offerors are made 
aware of the new or same apparent successful offeror after 
reevaluation, they will again have the opportunity to protest the size 
of the apparent successful offeror within five business days after such 
notification.

Section 121.1009

    Section 121.1009 details the procedures SBA's Government 
Contracting Area Offices use in making formal size determinations. 
Section 121.1009(a)(1) provides that the Area Office will generally 
issue a formal size determination within 15 business days after receipt 
of a protest or a request for a formal size determination. With respect 
to a specific contract, SBA will generally process size protests 
relating only to the apparent successful offeror. SBA sometimes 
receives a size protest where the award is simultaneously being 
protested at the Government Accountability Office (GAO). Where this 
happens, SBA suspends processing the size protest pending the outcome 
of the GAO decision since that decision may require corrective action 
which could affect the apparent successful offeror. Although that has 
been SBA's policy in practice, it is not specifically set forth in 
SBA's regulations. The proposed rule would incorporate that policy, 
providing that if a protest is pending before GAO, the SBA Area Office 
will suspend the size determination case. Once GAO issues a decision, 
the Area Office will recommence the size determination process and 
issue a

[[Page 55646]]

formal size determination within 15 business days of the GAO decision, 
if possible.

Sections 121.1009(g)(5), 125.30(g)(4), 126.503(a)(2), and 127.405(d)

    Section 863 of the National Defense Authorization Act for Fiscal 
Year 2022 (NDAA FY22), Public Law 117-81, amended section 5 of the 
Small Business Act, 15 U.S.C. 634, to add three requirements related to 
size and socioeconomic status determinations. First, section 863 
mandates that a business concern or SBA, as applicable, ``shall'' 
update the concern's status in SAM.gov not later than two days after a 
final determination by SBA that the concern does not meet the size or 
socioeconomic status requirements that it certified to be. SBA believes 
that the statue intends that a business concern be required to update 
SAM.gov in all instances in which it is capable of doing so. Only where 
a business concern is unable to change a particular status (e.g., only 
SBA can identify a concern as a certified HUBZone small business) will 
the business concern not be required to change that status in SAM.gov. 
Second, section 863 requires that, in the event that the business does 
not update its status within this timeframe, SBA ``shall'' make the 
update within two days of the business's failure to do so. Third, 
section 863 requires that, where the business is required to make an 
update, it also must notify the contracting officer for each contract 
with which the business has a pending bid or offer, if the business 
finds, in good faith, that the determination affects the eligibility of 
the concern to be awarded the contract. The proposed rule would 
implement these provisions by amending SBA's regulations in Sec. Sec.  
121.1009(g)(5) (for size determinations), 125.30(g)(4) (for SDVO status 
determinations), 126.503(a)(2) (for HUBZone status determinations), and 
127.405(c) (for WOSB/EDWOSB status determinations). Because only SBA 
can change a firm's status as a certified HUBZone small business 
concern in SAM.gov, it is not ``applicable'' under the statute for the 
business concern to do so. As such, the proposed rule would not add 
language requiring a HUBZone concern to change its status in SAM.gov 
within two business days of an adverse status determination. Instead, 
it would require SBA to make such a change within four business days.

Sections 121.1203 and 121.1204

    Section 46(a)(4)(A) of the Small Business Act, 15 U.S.C. 
657s(a)(4)(A), provides that in a contract mainly for supplies a small 
business concern shall supply the product of a domestic small business 
manufacturer or processor unless a waiver is granted after SBA reviews 
a determination by the applicable contracting officer that no small 
business manufacturer or processor can reasonably be expected to offer 
a product meeting the specifications (including the period of 
performance) required by the contract. Section 121.1203 of SBA's 
regulations provides guidance as to when SBA will grant a waiver to the 
nonmanufacturer rule in connection with an individual contract, and 
Sec.  121.1204 identifies the procedures for requesting and granting 
waivers.
    The proposed rule seeks to clarify perceived ambiguities relating 
to the effect of a waiver in a multiple item procurement. For a 
multiple item set-aside contract, in order to qualify as a small 
business nonmanufacturer, at least 50 percent of the value of the 
contract must come from either small business manufacturers or from any 
businesses for items which have been granted a waiver to the 
nonmanufacturer rule (or small business manufacturers plus waiver must 
equal at least 50 percent). See 13 CFR 125.6(a)(2)(ii)(B). In seeking a 
contract-specific waiver to the nonmanufacturer rule, SBA's regulations 
provide that a contracting officer's waiver request must include a 
definitive statement of the specific item to be waived. The proposed 
rule would clarify that for a multiple item procurement, a contracting 
officer must specifically identify each item for which a waiver is 
sought. The proposed rule would also provide that once SBA reviews and 
concurs with an agency's request, SBA's waiver applies only to the 
specific item(s) identified, not to the entire contract.
    This rule also proposes to add a provision that would prohibit 
contract-specific waivers for contracts with a duration of longer than 
five years, including options. When SBA grants an individual waiver 
with respect to a particular item, it does not necessarily mean that 
there are no small business manufacturers of that item. Instead, it 
could merely relate to the lack of availability of small business 
manufacturers for the specific contract at issue due to timing (e.g., 
small business manufacturers are currently tied up with other 
commitments) or capacity (e.g., there are small business manufacturers, 
but those manufacturers cannot provide the item in the quantity that is 
required). The circumstances surrounding the availability of a specific 
item from small business manufacturers can greatly change in five 
years. Beyond five years, new small business manufacturers of a 
particular item could come into the market, or those previously 
committed to other projects or who were unable to previously supply the 
product in the quantity or time constraints required by the contract 
could become available to meet the agency's requirements. After a five-
year contract is completed and an agency seeks to award a follow-on 
contract for the same requirements, an agency would be required to 
again conduct market research and determine that no small business 
manufacturer or processor reasonably can be expected to offer one or 
more specific products required by the new solicitation. As an 
alternative, SBA is considering limiting waivers to five years for long 
term contracts, but allowing a procuring agency to seek a new waiver 
for an additional five years if, after conducting market research, it 
demonstrates that there are no available small business manufacturers 
and that a waiver remains appropriate. SBA seeks comments on both 
approaches.
    When an agency seeks an individual waiver to the nonmanufacturer 
rule in connection with a specific acquisition, SBA believes that the 
agency is ready to move forward with the acquisition process as soon as 
SBA makes a wavier decision and expects the solicitation to be issued 
shortly after such a decision is made. That is why SBA's waiver 
decision letters provide that the waiver will expire in one year from 
the date of the waiver decision. SBA expects award to be made within 
one year. If it is not, SBA believes that the agency should come back 
to SBA with revised market research requesting that the waiver (or 
waivers in the case of a multiple item procurement) be extended. 
Similar to the rationale for not allowing individual waivers to apply 
to long-term contracts, the circumstances surrounding whether there are 
any small business manufacturers who are capable and available to 
supply products for a specific procurement may change in one year. 
Where an agency demonstrates that small business manufacturers continue 
to be unavailable to fulfill the requirement, SBA will extend the 
waiver(s). The proposed rule would specifically incorporate this policy 
into a new Sec.  121.1204(b)(5).
    Although SBA believes that there is no current ambiguity, the 
proposed rule would also add language specifying that an individual 
waiver applies only to the contract for which it is granted and does 
not apply to modifications outside the scope of the contract or other 
procurement actions. A waiver granted

[[Page 55647]]

for one contract does not and was never intended to apply to another 
contract (whether that separate contract was a follow-on contract, 
bridge contract, or some other contract or order under another 
contract), but the proposed rule would add this language nevertheless 
to dispel any possible misunderstanding.
    Finally, the proposed rule would clarify that where an agency 
requests a waiver for multiple items, SBA may grant the request in 
full, deny it in full, or grant a waiver for some but not all of the 
items for which a waiver was sought. SBA's decision letter would 
identify the specific items that SBA identifies as waived for the 
procurement.

Section 121.1205

    Section 121.1205 refers to the list of classes of products for 
which SBA has granted waivers to the Nonmanufacturer Rule. The 
reference in the current version of the regulation provides a link to a 
website that no longer exists. The proposed rule would update the 
reference to the correct website, which is https://www.sba.gov/document/support-non-manufacturer-rule-class-waiver-list.

Section 124.102

    Section 124.102(c) provides that a concern whose application is 
denied due to size by 8(a) BD program officials may request a formal 
size determination with the SBA Government Contracting Area Office 
serving the geographic area in which the principal office of the 
business is located. SBA notes that during the processing of an 
application SBA itself can request a formal size determination pursuant 
to Sec.  121.1001(b)(2)(i). The Sec.  124.102(c) process applies only 
where SBA has not requested a formal size determination with respect to 
a specific applicant. Under Sec.  124.102(c), if the concern requests a 
formal size determination and the Area Office finds it to be small 
under the size standard corresponding to its primary North American 
Classification System (NAICS) code, the concern can immediately reapply 
to the 8(a) BD program. SBA believes that a concern should not need to 
reapply to the 8(a) BD program if size was the only reason for decline. 
In such a case, SBA believes that the Associate Administrator for 
Business Development (AA/BD) should immediately certify the firm as 
eligible for the 8(a) BD program. The proposed rule would make a 
distinction for applications denied solely based on size and those 
where size is one of several reasons for decline. Where size is not the 
only reason for decline, the proposed rule would provide that the 
concern could reapply for participation in the 8(a) BD program at any 
point after 90 days from the AA/BD's decline. The AA/BD would then 
accept the size determination as conclusive of the concern's small 
business status, provided the applicant concern has not completed an 
additional fiscal year in the intervening period and SBA believes that 
the additional fiscal year changes the applicant's size.

Section 124.103

    Section 124.103 describes the rules pertaining to social 
disadvantage status. Section 124.103(c) details how an individual who 
is not a member of one of the groups presumed to be socially 
disadvantaged may establish his or her individual social disadvantage. 
It provides that an individual must identify an objective 
distinguishing feature that has contributed to his or her social 
disadvantage, and lists physical handicap as one such possible 
identifiable feature. In order to be consistent with recent changes in 
terms made by the General Services Administration (GSA), 87 FR 6044, as 
well as with the Americans with Disabilities Act, the proposed rule 
would change the words physical handicap to identifiable disability.

Section 124.104

    Section 124.104 specifies the rules pertaining to whether an 
individual may be considered economically disadvantaged. Section 
124.104(c)(2)(ii) provides that funds invested in an Individual 
Retirement Account (IRA) or other official retirement account will not 
be considered in determining an individual's net worth. The paragraph 
then requires the individual to provide information about the terms and 
restrictions of the account to SBA in order for SBA to determine 
whether the funds invested in the account should be excluded from the 
individual's net worth. SBA does not believe that it is necessary for 
an individual to provide information about the terms and restrictions 
of a retirement account to SBA in every instance. As such, the proposed 
rule would change this provision to requiring an individual to provide 
information about the terms and restrictions of an IRA or other 
retirement account only when requested to do so by SBA.
    The proposed rule would also delete current Sec.  
124.104(c)(2)(iii). That provision provides that income received from 
an applicant or Participant that is an S corporation, limited liability 
company (LLC) or partnership will be excluded from an individual's net 
worth where the applicant or Participant provides documentary evidence 
demonstrating that the income was reinvested in the firm or used to pay 
taxes arising in the normal course of operations of the firm. SBA does 
not believe that this provision is necessary because the exact 
provision is contained in Sec.  124.104(c)(3)(ii) in discussing how SBA 
treats personal income.

Section 124.105

    Section 124.105 describes the ownership requirements pertaining to 
applicants and Participants for the 8(a) BD program. Section 124.105(h) 
sets forth ownership restrictions for non-disadvantaged individuals and 
concerns, and Sec.  124.105(h)(2) specifies ownership restrictions for 
non-Participant concerns in the same or similar line of business and 
for principals of such concerns. Current Sec.  124.105(h)(2) recognizes 
a limited exception to the general ownership restriction for a former 
Participant in the same or similar line of business or a principal of 
such a former Participant. This paragraph does not, however, refer to 
or recognize another exception set forth elsewhere in SBA's 
regulations, and that is the exception set forth in Sec.  125.9(d)(2) 
which allows an SBA-approved mentor to own up to 40 percent of its 
prot[eacute]g[eacute]. This proposed rule adds language clarifying that 
the Sec.  125.9(d)(2) authority applies equally to mentors in the same 
line of business as its prot[eacute]g[eacute] that is also a current 
8(a) BD Program Participant.
    Section 124.105(i) provides guidance with respect to changes of 
ownership, and Sec.  124.105(i)(1) specifies that any Participant that 
was awarded one or more 8(a) contracts may substitute one disadvantaged 
individual for another disadvantaged individual without requiring the 
termination of those contracts or a request for waiver under Sec.  
124.515. There has been some confusion as to whether there can be a 
change of ownership for a former Participant that is still performing 
one or more 8(a) contracts. This would generally not occur with one 
disadvantaged individual seeking to buy out a disadvantaged principal 
of a former 8(a) Participant. That is because of the one-time 
eligibility restriction. In order for any change of ownership to be 
approved by SBA, SBA must determine that the individual seeking to 
replace a former principal does in fact qualify as socially and 
economically disadvantaged under SBA's regulations. An individual who 
has previously participated in the 8(a) BD program and has used his or 
her individual disadvantaged status to qualify one 8(a)

[[Page 55648]]

Participant would not be deemed disadvantaged if the individual sought 
to replace a principal of a second 8(a) Participant. Thus, the only 
individuals who could seek to replace the principal of a former 8(a) 
Participant would be those who have never participated in the 8(a) BD 
program before. To do so, such individuals would have to use their one-
time eligibility to complete performance on previously awarded 8(a) 
contracts. The business concern could not be awarded any additional 
contracts because it is no longer an eligible Participant. If an 
individual thought the opportunity was sufficient to entice him or her 
to forego his/her one-time eligibility, he or she might proceed with 
such a transaction, but SBA does not believe that would often happen. 
The more likely scenario would be where an entity (tribe, ANC), Native 
Hawaiian Organization (NHO), or Community Development Corporation 
(CDC)) seeks to replace the principal of a former 8(a) Participant. The 
one-time eligibility restriction does not apply to entities. A tribe, 
ANC, NHO or CDC can own more than one business concern that 
participates in the 8(a) BD program. As such, an entity could purchase 
a former Participant and complete performance of any remaining 8(a) 
contracts. If the tribe, ANC, NHO, or CDC seeking to replace the 
principal of a former 8(a) Participant has or has had a Participant in 
the 8(a) BD program, its general eligibility has already been 
established. However, if this would be the first time that a specific 
entity would own a business seeking 8(a) BD benefits, the entity must 
establish its overall eligibility. In the case of an Indian tribe or 
NHO, it must, among other things, demonstrate that it is economically 
disadvantaged. The proposed rule would clarify that a change of 
ownership could apply to a former Participant as well as to a current 
Participant.
    Section 124.105(i)(2) permits a change of ownership to occur 
without receiving prior SBA approval in certain specified 
circumstances, including where all non-disadvantaged individual owners 
involved in the change of ownership own no more than a 20 percent 
interest in the concern both before and after the transaction. In order 
to ensure that ownership interests are not divided up among two or more 
immediate family members to avoid SBA's immediate review of a change of 
ownership, the proposed rule would provide that SBA will aggregate the 
interests of all immediate family members in determining whether a non-
disadvantaged individual involved in a change of ownership has more 
than a 20 percent interest in the concern.

Section 124.107

    Section 124.107 describes the policies relating to potential for 
success. In order to be eligible for the 8(a) BD program an applicant 
concern must possess reasonable prospects for success in competing in 
the private sector. This requirement stems from the language contained 
in section 8(a)(7)(A) of the Small Business Act, 15 U.S.C. 
637(a)(7)(A), which provides that no small business concern shall be 
deemed eligible for the 8(a) BD program unless SBA determines that with 
contract, financial, technical, and management support the concern will 
be able to perform 8(a) contracts and has reasonable prospects for 
success in competing in the private sector. There has been some 
confusion as to whether an applicant must demonstrate that it has 
specifically performed work in the private sector prior to applying to 
participate in the 8(a) BD program. That is not the case. The statutory 
requirement is that SBA must determine that with assistance from the 
8(a) BD program a business concern will have reasonable prospects for 
success in competing in the private sector in the future. The 
regulation requires an applicant to demonstrate that it has been in 
business and received revenues in its primary industry classification 
for at least two full years immediately prior to the date of its 8(a) 
BD application, but it does not say that those revenues must have come 
from the private sector. A business concern that has performed no 
private sector work but has demonstrated successful performance of 
state, local or federal government contracts is eligible to participate 
in the 8(a) BD program. The proposed rule would add language clarifying 
that intent.

Section 124.108

    Section 124.108 establishes other eligibility requirements that 
pertain to firms applying to and participating in the 8(a) BD program. 
Section 124.108(e) provides that an applicant will be ineligible for 
the 8(a) BD program where the firm or any of its principals has failed 
to pay significant financial obligations owed to the Federal 
Government. This proposed rule would clarify that where the firm or the 
affected principals can demonstrate that the financial obligations have 
been settled and discharged/forgiven by the Federal Government, the 
applicant would be eligible for the program.

Section 124.109

    Section 124.109 provides specific rules applicable to Indian tribes 
and Alaska Native Corporations for applying to and remaining eligible 
for the 8(a) BD program. SBA's regulations currently provide that the 
articles of incorporation, partnership agreement or limited liability 
company articles of organization of a tribally-owned applicant or 
Participant must contain express sovereign immunity waiver language, or 
a ``sue and be sued'' clause which designates United States Federal 
Courts to be among the courts of competent jurisdiction for all matters 
relating to SBA's programs. This rule proposes two changes with respect 
to that provision. First, the waiver of sovereign immunity should apply 
only to concerns owned by Federally recognized Indian tribes. State 
recognized tribes are not deemed sovereign and, thus, do not need to 
waive sovereign immunity because they are already subject to suit. As 
such, SBA proposes to amend this provision to clarify that it is 
intended to apply only to concerns owned by Federally recognized 
tribes. Second, concerns that are organized under tribal law may not 
have articles of incorporation, partnership agreements or limited 
liability company articles of organization and may be unable to 
strictly comply with the regulatory language. In response, SBA proposes 
to add language allowing tribally-owned concerns organized under tribal 
law to waive sovereign immunity in any similar documents authorized 
under tribal law.
    One of the ways a tribally-owned business can demonstrate potential 
for success needed to be eligible for the program is to demonstrate 
that it has been in business for at least two years, as evidenced by 
income tax returns for each of the two previous tax years showing 
operating revenues in the primary industry in which the applicant is 
seeking 8(a) BD certification. Not all tribally-owned concerns file 
federal income tax returns. The tax return requirement is intended to 
be an objective means by which a tribally-owned concern can show that 
it has been in business for at least two years with operating revenues. 
SBA believes that tax returns are not the only way for a tribally-owned 
concern to demonstrate its business history. The proposed rule would 
add a provision allowing a tribally-owned applicant to submit financial 
statements demonstrating that it has been in business for at least two 
years with operating revenues in the

[[Page 55649]]

primary industry in which it seeks 8(a) BD certification.

Section 124.110

    The proposed rule would add a new Sec.  124.110(d)(3) to allow the 
individuals responsible for the management and daily operations of an 
NHO-owned concern to manage two Program Participants. This would make 
the control requirements relating to NHO-owned applicants/Participants 
consistent with those applying to applicants/Participants owned by 
tribes and Alaska Native Corporations (ANCs). Although this is a 
statutory exemption for firms owned by tribes and ANCs, and is not for 
firms owned by NHOs, SBA believes that the policies relating to all 
three entity-owned applicants/Participants should be consistent 
whenever possible. SBA does not believe that this change for NHO-owned 
firms in any way contradicts any statutory requirement and would merely 
allow more flexibility for NHO-owned firms.
    In addition, the proposed rule would clarify the current policy 
regarding NHO ownership of an applicant or Participant small business 
concern. Although SBA currently requires an NHO to unconditionally own 
at least 51 percent of the applicant or Participant, the proposed rule 
merely makes that requirement explicit in the regulations.

Section 124.204

    Section 124.204 details how SBA processes applications for 8(a) BD 
program admission. It identifies that only the AA/BD can approve or 
decline an application for participation in the 8(a) BD program. There 
are, however, certain threshold issues that must be addressed before an 
application will be fully processed. Specifically, in SBA's electronic 
8(a) application system, there are four fundamental eligibility 
questions that must be answered before an application will be reviewed: 
an applicant must be a for-profit business (see Sec. Sec.  121.105 and 
124.101); every individual claiming disadvantaged status must be a 
United States citizen (see Sec.  124.101); neither the applicant firm 
nor any of the individuals upon whom eligibility is based could have 
previously participated in the 8(a) BD program (see Sec.  124.108(b)); 
and any individually-owned applicant must have generated some revenues 
(see Sec.  124.107(a) and (b)(1)(iv)). If an applicant answers that it 
is not a for-profit business entity, that one or more of the 
individuals upon whom eligibility is based is not a United States 
citizen (see Sec.  124.104), that the applicant or one or more of the 
individuals upon whom eligibility is based has previously participated 
in the 8(a) BD program (see Sec.  124.108(b)), or that the applicant is 
not an entity-owned business and has generated no revenues (see Sec.  
124.107(a) and (b)(1)(iv)), its application will be closed and it will 
be prevented from completing a full electronic application. Each of 
those four bases automatically renders the applicant ineligible for the 
program and further review would not be warranted. The proposed rule 
would identify these four threshold issues that must be addressed 
before an application will be reviewed.

Section 124.302

    Section 124.302 addresses graduation and early graduation from the 
8(a) BD program. In determining whether an applicant or Participant 
should be deemed economically disadvantaged, SBA previously required a 
concern to compare its financial condition to non-8(a) BD business 
concerns in the same or similar line of business. SBA eliminated that 
requirement as not being consistent with the statutory authority which 
requires only that an applicant or concern be owned and controlled by 
one or more individuals who are economically disadvantaged, not that 
the concern itself be economically disadvantaged. In addressing 
graduation, Sec.  124.302(b) retained some of that same language 
requiring a comparison of an 8(a) BD Participant to non-8(a) 
businesses. SBA believes that too is inconsistent with the statutory 
language, which defines the term ``graduated'' or ``graduation'' to 
mean that a Program Participant is recognized as successfully 
completing the 8(a) BD program by substantially achieving the targets, 
objectives, and goals contained in its business plan, and demonstrating 
its ability to compete in the marketplace without assistance from the 
8(a) BD program. 15 U.S.C. 636(j)(10)(H). As such, the proposed rule 
would remove Sec.  124.302(b)(5), as not consistent with the statutory 
oversight responsibilities. SBA also believes that the requirements for 
graduation are adequately set forth in Sec.  124.302(a)(1) of SBA's 
regulations and requests comments on whether the entire Sec.  
124.302(b) can be eliminated as unnecessary.

Section 124.402

    Section 124.402 requires each firm admitted to the 8(a) BD program 
to develop a comprehensive business plan and to submit that business 
plan to SBA as soon as possible after program admission. Currently, 
Sec.  124.402(b) provides that SBA will suspend a Participant from 
receiving 8(a) BD program benefits if it has not submitted its business 
plan to its servicing district office within 60 days after program 
admission. There is a concern that Sec.  124.402(b) does not clearly 
provide that a Participant's business plan must be approved by SBA 
before the concern is eligible for 8(a) contracts, as required by 
section 7(j)(10)(D)(i) of the Small Business Act, 15 U.S.C. 
636(j)(10)(D)(i). This proposed rule would clarify that SBA must 
approve a Participant's business plan before the firm is eligible to 
receive 8(a) contracts. However, SBA recognizes that some firms are 
admitted to the 8(a) BD program with self-marketed procurement 
commitments from one or more procuring agencies. SBA also understands 
that several newly admitted Participants have missed 8(a) contract 
opportunities in the past because SBA did not approve their business 
plans before the procuring agencies sought to award such procurement 
commitments as 8(a) contracts. SBA does not wish to discourage self-
marketing activities or prevent a newly admitted Participant from 
receiving critical business development assistance. At the same time, 
SBA is constrained by the statutory language requiring business plan 
approval prior to the award of 8(a) contracts. The proposed rule would 
merely prioritize business plan approval for any firm that is offered a 
sole source 8(a) requirement or is the apparent successful offeror for 
a competitive 8(a) requirement. Specifically, the proposed rule would 
provide that where a sole source 8(a) requirement is offered to SBA on 
behalf of a Participant or a Participant is the apparent successful 
offeror for a competitive 8(a) requirement and SBA has not yet approved 
the Participant's business plan, SBA will approve the Participant's 
business plan as part of its eligibility determination prior to 
contract award.

Section 124.403

    Section 124.403 sets forth the requirements relating to business 
plans. Section 124.403(a) provides that Each Participant must annually 
review its business plan with its assigned Business Opportunity 
Specialist (BOS) and modify the plan as appropriate. The wording of 
this paragraph caused some to believe that a Participant needed to 
submit a business plan to SBA every year even where nothing had changed 
from the previous year. That was not SBA's intent. The ``as 
appropriate'' language was meant to infer that a Participant need not 
submit a business plan if nothing had changed from the previous year. 
The proposed rule clarifies that a Participant must submit

[[Page 55650]]

a new or modified business plan only if its business plan has changed 
from the previous year.

Sections 124.501, 125.22(d), 126.609, and 127.503(e)

    There has been some confusion as to whether a contracting officer 
can limit an 8(a) competition (whether for an 8(a) contract or an order 
set-aside for 8(a) competition under an unrestricted contract) to 
Participants having more than one certification (e.g., 8(a) and 
HUBZone). SBA believes that section 8(a)(1)(D)(i) of the Small Business 
Act, 15 U.S.C. 637(a)(1)(D)(i), requires any 8(a) competition to be 
available to all eligible Program Participants. SBA has consistently 
interpreted this provision as prohibiting SBA from accepting a 
requirement for the 8(a) BD program that seeks to limit an 8(a) 
competition only to certain types of 8(a) Participants, rather than 
allowing competition among all eligible Participants. In other words, 
SBA has interpreted this authority to prohibit an agency from requiring 
one or more other certifications in addition to its 8(a) certification. 
This interpretation is currently contained in Sec.  125.2(e)(6)(i), but 
is not specifically contained in the 8(a) BD regulations. Likewise, the 
statutory authority for HUBZone set asides, 15 U.S.C. 657a(c)(2)(B), 
provides authority for competition restricted to certified HUBZone 
small business concerns and does not permit a ``dual'' set-aside for 
firms that are both HUBZone-certified and 8(a) Participants. The 
proposed rule would merely add a sentence to Sec.  124.501(b) to 
clarify SBA's current position that would prohibit a contracting 
activity from restricting an 8(a) competition to Participants that are 
also certified HUBZone small businesses, certified WOSBs or eligible 
SDVO small businesses. SBA also proposes to make similar clarifications 
to the regulations for the SDVO (in Sec.  125.22(d)), HUBZone (in new 
Sec.  126.609), and WOSB (in Sec.  127.503(e)) programs.
    SBA also proposes to clarify Sec.  124.501(b) by noting that an 
agency may award an 8(a) sole source order against a multiple award 
contract that was not set aside for competition only among 8(a) 
Participants. SBA believes that such awards are consistent with SBA's 
statutory authority at section 8(a)(16) of the Small Business Act, 15 
U.S.C. 637(a)(16), to enter 8(a) sole source awards. Furthermore, this 
type of 8(a) sole source order is beneficial to both 8(a) Participants, 
who benefit from increased contracting opportunities, and to procuring 
agencies, that can take advantage of pre-negotiated terms and pricing.
    The proposed rule would also revise the introductory text to Sec.  
124.501(g). The revised language would first require SBA to notify an 
8(a) Participant any time SBA determines the Participant to be 
ineligible for a specific sole source or competitive 8(a) award. SBA 
notes that this is currently required in section 19.805-2 of the 
Federal Acquisition Regulation (FAR), title 48 of the Code of Federal 
Regulations, and is something that should occur routinely, but believes 
that highlighting this in SBA's regulations would be helpful. SBA also 
proposes to clarify that where a joint venture is the apparent 
successful offeror in connection with a competitive 8(a) procurement, 
SBA will determine whether the 8(a) partner to the joint venture is 
eligible for award, but will not review the joint venture agreement to 
determine compliance with Sec.  124.513. SBA believes that there was 
some confusion as to what an eligibility determination entailed in the 
context of a competitive 8(a) joint venture apparent successful 
offeror. The proposed rule seeks to make clear that SBA's determination 
of eligibility relates solely to the 8(a) partner to the joint venture 
and does not represent a full review of the 8(a) joint venture under 
Sec.  124.513.
    Finally, the proposed rule would also make several clarifications 
to the bona fide place of business requirement contained in Sec.  
124.501(k). Section 8(a)(11) of the Small Business Act, 15 U.S.C. 
637(a)(11), requires that to the maximum extent practicable 8(a) 
construction contracts ``shall be awarded within the county or State 
where the work is to be performed.'' SBA has implemented this statutory 
provision by requiring a Participant to have a bona fide place of 
business within a specific geographic location. In the October 2020 
rulemaking, supra, SBA clarified that the Small Business Act does not 
differentiate between sole source 8(a) construction contracts and 
competitive 8(a) construction contracts. As such, the statutory 
``maximum extent practicable'' requirement applies equally to sole 
source and competitive 8(a) contracts. SBA understands that some have 
expressed the view that the ``to the maximum extent practicable'' 
statutory language should be read in a way that affords procuring 
agencies the discretion to broaden or do away with the bona fide place 
of business requirement where they deem it to be appropriate. SBA 
disagrees that the statutory language affords such flexibility. In 
SBA's view, ``to the maximum extent practicable'' denotes Congress's 
intent that something be followed whenever possible, not merely when a 
procuring agency thinks it is the best option or appropriate in 
particular circumstances. Thus, SBA will continue to apply the bona 
fide place of business requirement to both sole source and competitive 
8(a) construction procurements unless SBA determines that it is not 
``practicable'' to do so. In this regard, with employees expected to 
telework on a significant basis due to the COVID-19 pandemic, SBA 
issued a Policy Notice temporarily placing a moratorium on the bona 
fide place of business requirement with respect to all 8(a) 
construction contracts offered to the 8(a) BD program prior to 
September 30, 2022, based on SBA's determination that it was not 
``practicable'' to impose that requirement at this time. SBA Policy 
Notice 6000-819056 (August 25, 2021). Due to the lingering effects of 
the COVID-19 pandemic, the SBA Administrator has determined that 
requiring a bona fide place of business in a particular location 
continues to be impracticable and has extended the moratorium on the 
requirement through September 30, 2023. Once SBA determines that it is 
no longer impracticable to require a bona fide place of business, SBA 
will again require a Participant to have a bona fide place of business 
in a particular geographic location with respect to all construction 
requirements offered to the 8(a) program. As such, SBA seeks to clarify 
several components of the bona fide place of business requirement in 
this proposed rule.
    When SBA revised the bona fide place of business rule in October 
2020, it intended that a Participant with a bona fide place of business 
anywhere in a particular state should be deemed eligible for a 
construction contract throughout that entire state (even if the state 
is serviced by more than one SBA district office). However, because the 
regulatory text used the word ``may'', several Participants have sought 
clarification of SBA's intent. The proposed rule clarifies SBA's 
intent.
    The proposed rule would also clarify that where a Participant is 
currently performing a contract in a specific state, it would qualify 
as having a bona fide place of business in that state for one or more 
additional contracts. This clarification is specifically intended to 
apply to the situation where a business concern is performing a 
construction contract in a specific location, the procuring activity 
likes the work done by the business concern and seeks to award an 8(a) 
construction contract to the same business concern in the same location 
as the previous contract. SBA believes that it does not make sense to

[[Page 55651]]

say that a business concern is not eligible for such award because it 
has not officially sought and approved to have a bona fide place of 
business in that location. The proposed clarification would also 
provide that the Participant could not use contract performance in one 
state to allow it to be eligible for an 8(a) contract in a contiguous 
state unless it officially establishes a bona fide place of business in 
the location in which it is currently performing a contract. The 
proposed rule would also clarify that a Participant could establish a 
bona fide place of business through a full-time employee in a home 
office. In addition, an individual designated as the full-time employee 
of the Participant seeking to establish a bona fide place of business 
in a specific geographic location need not be a resident of the state 
where he/she is conducting business. In the past, some SBA district 
offices have required the designated employee to possess a driver's 
license issued by the state corresponding to the location of the 
office. SBA believes that is not appropriate. There is no requirement 
that a specific employee must permanently reside in a specific 
location. A Participant merely needs to demonstrate that one or more 
employees are operating in an office within the identified geographic 
location. A Participant should be able to rotate employees in and out 
of a specific location as it sees fit, and as long as one individual 
(but not necessarily the same individual) remains at that location, 
that location can be considered a bona fide place of business. Finally, 
the proposed rule would provide guidance on how SBA interprets the bona 
fide place of business requirement where a contract requires work to be 
performed in more than one location and those different locations may 
not be within the boundaries of the bona fide place of business. 
Although this is SBA's current interpretation of the bona fide place of 
business requirement, SBA believes putting it in the regulations would 
clarify any confusion that currently exists. For a single award 8(a) 
construction contract requiring work in multiple locations, the 
proposed rule would provide that a Participant is eligible if it has a 
bona fide place of business where a majority of the work is to be 
performed. For a multiple award 8(a) construction contract, the 
proposed rule would require a Participant to have a bona fide place of 
business in any location where work is to be performed.

Section 124.503(a)

    Section 124.503(a) provides that SBA will decide whether to accept 
a requirement offered to the 8(a) BD program within ten working days of 
receipt of a written offering letter if the contract value exceeds the 
Simplified Acquisition Threshold (SAT). In consideration of mutual 
responsibilities under SBA's 8(a) Partnership Agreements with federal 
procuring agencies, SBA has agreed to issue an acceptance letter or 
rejection letter for such offers within five working days unless the 
agency grants an extension. This proposed rule would clarify that the 
ten-day acceptance timeframe under Sec.  124.503(a) applies only to 
8(a) offers made outside the 8(a) Partnership Agreement authority.
    Section 124.503(a)(4)(ii) authorizes a procuring activity to award 
an 8(a) contract without requiring an offer and acceptance where the 
requirement is valued at or below the SAT and SBA has delegated its 
8(a) contract execution functions to the agency. The paragraph goes on 
to provide that in such a case, the procuring activity must notify SBA 
of all 8(a) awards made under this authority. Some agencies have relied 
on this language to justify proceeding to award an 8(a) contract under 
the SAT without first requesting an eligibility determination from SBA 
of the apparent successful 8(a) contractor (which is required by Sec.  
124.501(g)). It was not SBA's intent to allow an award without a 
determination of eligibility being made. To do otherwise could result 
in agencies awarding 8(a) contracts to ineligible firms. Although it 
authorizes an expedited review, the partnership agreement between SBA 
and procuring agencies identifies that an eligibility determination 
must still be made in these cases. The proposed rule would merely 
clarify that requirement in SBA's regulations.
    Section 124.503(a)(5) authorizes a procuring agency to seek 
acceptance of an 8(a) offering letter with the AA/BD where SBA does not 
respond to an offering letter within the ten-day period set forth under 
Sec.  124.503(a). The proposed rule clarifies that this ten-day time 
period is intended to be ten business days.

Section 124.503(i)(1)(ii)

    SBA's current regulations require a procuring agency to notify SBA 
where it seeks to reprocure a follow-on requirement through a pre-
existing limited contracting vehicle which is not available to all 8(a) 
BD Program Participants and the previous/current 8(a) award was not so 
limited. See 13 CFR 124.504(d)(1). There has been some confusion as to 
whether this conflicts with Sec.  124.503(i)(1)(ii), which provides 
that an agency need not offer or receive acceptance of individual 
orders into the 8(a) BD program if the underlying multiple award 
contract was awarded through the 8(a) BD program. These provisions were 
not meant to conflict. Although formal offer and acceptance is not 
required, it is important for SBA to be notified of any work that is 
intended to be moved to an 8(a) multiple award contract that was 
previously performed under an 8(a) contract that was not limited to 
specific 8(a) Participants (i.e., either a sole source award to a 
specific Participant or an 8(a) competitive award that was open to all 
eligible Program Participants). As SBA noted in the supplementary 
information to the final rule implementing the notification requirement 
contained in Sec.  124.504(d)(1), an 8(a) incumbent contractor may be 
seriously hurt by moving a procurement from an 8(a) sole source or 
competitive procurement to an 8(a) multiple award contract to which the 
incumbent is not a contract holder. See 85 FR 66146, 66163 (Oct. 16, 
2020). In such a case, the incumbent would have no opportunity to win 
the award for the follow-on contract and would have no opportunity to 
demonstrate that it would be adversely impacted by the loss of the 
opportunity to compete for the follow-on procurement. SBA believes that 
not allowing an incumbent 8(a) contractor to compete for a follow-on 
contract where that contract accounts for a significant portion of its 
revenues contradicts the business development purposes of the 8(a) BD 
program.
    In order to eliminate any confusion and ensure that notification 
occurs where a procuring agency seeks to issue an order under an 8(a) 
multiple award contract and some or all of the work contemplated in 
that order was previously performed through one or more other 8(a) 
contracts, the proposed rule would amend Sec.  124.503(i)(1)(ii) to 
clarify that an agency must notify SBA where it seeks to issue an order 
under an 8(a) multiple award contract that contains work that was 
previously performed through another 8(a) contract. Where that work is 
critical to the business development of a current Participant that 
previously performed the work through another 8(a) contract and that 
Participant is not a contract holder of the 8(a) multiple award 
contract, SBA may request that the procuring agency fulfill the 
requirement through a competition available to all 8(a) BD Program 
Participants.

Section 124.503(i)(1)(iv)

    SBA's current regulations authorize a sole source 8(a) order to be 
awarded under a multiple award contract to a multiple award contract 
holder where the multiple award contract was set-

[[Page 55652]]

aside or reserved for exclusive competition among 8(a) Participants. 
The procuring agency must offer and SBA must accept the order into the 
8(a) BD program on behalf of the identified 8(a) contract holder. To be 
eligible for the award of a sole source order, SBA's regulations 
currently specify that a concern must be a current Participant in the 
8(a) BD program at the time of award of the order. There has been some 
confusion as to whether the business activity target requirements set 
forth in Sec.  124.509 apply to the award of such an order. In other 
words, it was not clear whether a Participant seeking a sole source 
8(a) order under a multiple award contract set-aside or reserved for 
eligible 8(a) Participants needed to be in compliance with any 
applicable competitive business mix target established or remedial 
measure imposed by Sec.  124.509 at the time of the offer/acceptance of 
the order. Because SBA is determining eligibility anew at the time of a 
new sole source order, it was always SBA's intent to not only require a 
firm to still be a current 8(a) Participant at the time of offer/
acceptance of a sole source order, but to also require the firm to be 
in compliance with any applicable competitive business mix target 
established or remedial measure imposed by Sec.  124.509. As such, this 
proposed rule clarifies that compliance with the Sec.  124.509 business 
activity target requirements will be considered before SBA will accept 
a sole source 8(a) order on behalf of a specific 8(a) Participant 
multiple award contract holder. Where an agency seeks to issue a sole 
source order to a joint venture, the proposed rule clarifies that SBA 
will review and determine whether the lead 8(a) partner to the joint 
venture is currently an eligible Program Participant and in compliance 
with any applicable competitive business mix target established or 
remedial measure imposed by Sec.  124.509.
    In addition, the proposed rule further clarifies the rules 
pertaining to issuing sole source orders to joint ventures under an 
8(a) multiple award contract. There has been some confusion as to 
whether the requirement set forth in Sec.  121.103(h) that a joint 
venture may not be awarded contracts beyond a two-year period, starting 
from the date of the award of the first contract, applies to such sole 
source orders and whether SBA must approve the joint venture in 
connection with the sole source order as generally required by Sec.  
124.513(e)(1). The restriction in Sec.  121.103(h) stems from SBA's 
belief that a joint venture should not be an on-going entity, but 
something with limited scope and limited duration. Thus, SBA has 
limited the duration that a joint venture can submit offers for the 
award of contracts to two years from the date of its first contract 
award. However, that two-year restriction does not apply to orders 
issued under an already awarded contract. The proposed rule would 
specifically clarify that the two-year restriction does not apply to a 
sole source 8(a) order under an 8(a) multiple award contract. In other 
words, the sole source order can be issued more than two years after 
the date the joint venture received its first contract award. In 
addition, the proposed rule would provide that SBA would not review and 
approve a joint venture where the joint venture had already been 
awarded a competitive 8(a) multiple award contract and is seeking a 
sole source 8(a) order under that multiple award contract at some point 
during the performance period of the contract. SBA believes that the 
general requirement set forth in Sec.  124.513(e)(1) that SBA review a 
joint venture in connection with a sole source 8(a) award should not 
apply to sole source orders issued under a competitively awarded 8(a) 
multiple award contract because the joint venture's eligibility for the 
contract was already established at the award of the underlying 
contract. The procuring agency and other interested parties had the 
opportunity to challenge whether the joint venture was properly formed 
at that time.
    Finally, in making this clarification to Sec.  124.509, SBA noticed 
two instances in SBA's rules where SBA intended to cross reference 
Sec.  124.509, but instead cited to Sec.  124.507. This proposed rule 
would amend Sec. Sec.  124.303(a)(15) and 124.403(c)(1) to change the 
cross reference to Sec.  124.509.

Section 124.503(i)(2)(ii)

    SBA has received inquiries as to whether an agency can issue an 
order under the Federal Supply Schedule (FSS) as an 8(a) award, and if 
so, what procedures must be used. As with any unrestricted multiple 
award contract, SBA believes that an order can be issued under the FSS 
as an 8(a) award if the procedures set forth in Sec.  124.503(i)(2) are 
followed. This means that the following requirements must be met: the 
order must be offered to and accepted into the 8(a) BD program; the 
order must require the concern to comply with applicable limitations on 
subcontracting provisions and the nonmanufacturer rule, if applicable, 
in the performance of the individual order; before award, SBA must 
verify that the identified apparent successful offeror is an eligible 
8(a) Participant as of the initial date specified for the receipt of 
proposals contained in the order solicitation, or at the date of award 
of the order if there is no solicitation; and the order must be 
competed exclusively among only the 8(a) awardees of the underlying 
multiple award contract. There is some confusion as to what that last 
requirement means. In the case of a multiple award contract awarded 
under full and open competition, SBA believes that the current 
regulatory language is clear. All contract holders that have certified 
as 8(a) eligible must be able to submit an offer for the order if they 
choose. An agency cannot limit competition to a subset of contract 
holders that have claimed to be 8(a) eligible. Of course, the apparent 
successful offeror's eligibility must be verified by SBA prior to award 
to ensure that the concern was in fact an eligible Participant as of 
the initial date specified for the receipt of offers contained in the 
order solicitation, or at the date of award of the order if there is no 
solicitation. For an order under the FSS that an agency seeks to issue 
through the 8(a) BD program, there has been some confusion as to what 
procedures must be used to issue the order. Specifically, agencies have 
told SBA that it is not clear whether an agency can merely follow the 
FAR 8.4 requirements or must allow all FSS holders who claim 8(a) 
status the opportunity to compete. SBA believes that orders issued 
under the FSS are unique from orders issued under multiple award 
contracts competed using full and open competition. GSA has established 
procedures for issuing orders under the FSS. SBA believes that those 
procedures should be used when an agency seeks to issue an 8(a) award 
under the FSS. This proposed rule would clarify that distinction. An 
agency need not open the order up to competition among all FSS contract 
holders claiming 8(a) status. However, an agency must consider the 
quote from any FSS contract holder claiming 8(a) status who submits 
one. As with 8(a) orders issued under unrestricted multiple award 
contracts, however, the apparent successful offeror for an 8(a) order 
under the FSS must be an eligible Participant as of the initial date 
specified for the receipt of offers contained in the request for quote, 
or at the date of award of the order if there is no solicitation.
    SBA proposes to clarify Sec.  124.503(i)(2)(ii) by noting that an 
agency may award an 8(a) sole source order under a multiple award 
contract that was awarded under full and open competition or as a small 
business set-

[[Page 55653]]

aside where the identified 8(a) Participant is a contract holder of the 
multiple award contract. It was not SBA's intent to prohibit agencies 
from entering 8(a) sole source orders in this context. Such orders are 
consistent with SBA's statutory authority at section 8(a)(16) of the 
Small Business Act, 15 U.S.C. 637(a)(16), to enter 8(a) sole source 
awards. Additionally, clarification of this flexibility is beneficial 
to both 8(a) Participants, who benefit from increased contracting 
opportunities, and to procuring agencies that can take advantage of 
pre-negotiated terms and pricing. Of course, a procuring agency must 
offer and SBA must accept the requirement sought to be fulfilled as an 
8(a) sole source order before the order can be issued.

Section 124.504

    Section 124.504(d) sets forth the procedures authorizing release of 
a follow-on requirement from the 8(a) BD program. Paragraph (d)(3) 
provides that SBA will release a requirement where the procuring 
activity agrees to procure the requirement as a small business, 
HUBZone, SDVO small business, or WOSB set-aside. Some procuring 
activities have read this to mean that SBA will always release a 
requirement from the 8(a) BD program if the procuring activity agrees 
to procure the requirement as a small business, HUBZone, SDVO small 
business, or WOSB set-aside. That was not SBA's intent. The 8(a) BD 
program is a business development program. SBA takes that purpose 
seriously and will always consider whether an incumbent 8(a) contractor 
would be adversely affected by the release of a follow-on procurement 
from the 8(a) BD program. Accordingly, the proposed rule would amend 
Sec.  124.504(d)(3) by changing the words ``SBA will release'' to ``SBA 
may release'' to clarify that SBA has discretion in any release 
decision. The fact that a procuring activity agrees to procure the 
requirement as a small business, HUBZone, SDVO small business, or WOSB 
set-aside is a positive for release, but SBA must still consider any 
adverse consequences to an incumbent 8(a) Participant. The release 
process has also caused some confusion regarding how a follow-on 
requirement may be procured if SBA agrees to release. Again, the 
current rule provides that release may occur only where a procuring 
activity agrees to procure the requirement as a small business, 
HUBZone, SDVO small business, or WOSB set-aside. In other words, a 
strict reading of the rule would not allow release where an agency 
seeks to award a follow-on requirement as a set-aside order under a 
multiple award contract that is not itself a set-aside contract. Thus, 
even if an agency sought to procure a follow-on requirement as an 8(a) 
order under an unrestricted multiple award contract, the current 
regulatory language could be read to preclude that approach. That was 
not SBA's intent. As long as an agency identifies a procurement 
strategy that would target small businesses for a follow-on 
procurement, release may occur. In fact, release to such a contract 
vehicle may be appropriate where the incumbent 8(a) contractor has 
graduated from the program but still qualifies as a small business, the 
requirement is critical to the incumbent contractor's overall business 
development, the incumbent contractor is a contract holder on an 
unrestricted multiple award contract, and the procuring agency has 
evidenced its intent to set-aside an order for small business under the 
multiple award contract for which the incumbent contractor is a 
contract holder. This would give the incumbent contractor the 
opportunity to compete for the follow-on procurement and ensure that 
award would be made to a small business. The proposed rule would 
clarify that release may occur whenever a procuring agency identifies a 
procurement strategy that would emphasize or target small business 
participation.

Section 124.506(b)(3)

    In explaining SBA's ability to accept a sole source 8(a) 
requirement on behalf of a tribally-owned, ANC-owned or NHO-owned 
Participant above the general competitive threshold amounts, Sec.  
124.506(b)(2) currently provides that a procurement may not be removed 
from competition to award it to a Tribally-owned, ANC-owned or NHO-
owned concern on a sole source basis. There has been some confusion as 
to what the phrase ``may not be removed from competition'' means. Some 
have misinterpreted this provision to believe that a follow-on 
requirement to one that was previously awarded as a competitive 8(a) 
procurement cannot be awarded to an entity-owned firm on a sole source 
basis above the applicable competitive threshold. That is not SBA's 
intent. The provision prohibiting a procurement from being removed from 
competition and awarded to an entity-owned Participant on a sole source 
basis was meant to apply only to a current procurement, not the 
predecessor to a current procurement. A procuring agency may not 
evidence its intent to fulfill a requirement as a competitive 8(a) 
procurement, through the issuance of a competitive 8(a) solicitation or 
otherwise, cancel the solicitation or change its public intent, and 
then procure the requirement as a sole source 8(a) procurement to an 
entity-owned Participant. A follow-on procurement is a new contracting 
action for the same underlying requirement, and if the procuring agency 
has not evidenced a public intent to fulfill it as a competitive 8(a) 
procurement it can be fulfilled on a sole source basis to an entity-
owned Participant. The proposed rule adds language clarifying that 
intent.
    However, as identified above, SBA is concerned about the business 
development aspects of the program for an incumbent Participant. In 
other words, where a Participant was previously awarded a competitive 
8(a) contract, is still an eligible Participant at the completion of 
the contract, and is hoping to compete again for the follow-on 
procurement to the contract it previously performed, SBA may take that 
into account in its decision whether to accept a follow-on procurement 
on a sole source basis on behalf of an entity-owned Participant if the 
contract is critical to the incumbent Participant's overall business 
development. SBA requests comments as to whether a specific provision 
should be added to the regulations requiring SBA to consider the effect 
that losing an opportunity to compete for a follow-on contract would 
have on an incumbent Participant's business development.

Section 124.506(d)

    The proposed rule clarifies SBA's rules pertaining to the award of 
sole source 8(a) contracts to individually-owned 8(a) Participants. The 
proposed rule would add a provision to Sec.  124.506(d) to clarify that 
an individually-owned 8(a) Participant could receive a sole source 
award in excess of the $4.5M and $7M competitive threshold amounts set 
forth in Sec.  124.506(a)(2) where a procuring agency has determined 
that a FAR 6.302 exception to full and open competition exists. For 
example, if a procuring agency has determined that there exists an 
unusual and compelling urgency and has identified an individually-owned 
8(a) Participant that is capable of fulfilling its needs, it can offer 
that requirement to SBA as a sole source award on behalf of the 
identified Participant even if the requirement exceeds the applicable 
competitive threshold. The Agency would be free to use its FAR 6.302 
authority to award a sole source contract outside the 8(a) BD program. 
SBA believes that it only makes sense to allow the agency to make an 
award as a sole source contract

[[Page 55654]]

within the 8(a) BD program if it chooses to do so.
    In addition, if such an award exceeds $25M, or $100M for a 
Department of Defense (DoD) agency, the proposed rule would also 
clarify that the agency would be required to justify the use of a sole 
source contract under FAR 19.808-1 or Defense Federal Acquisition 
Regulation Supplement (DFARS) 219.808-1(a) before SBA could accept the 
requirement as a sole source 8(a) award. Although those justifications 
and approvals generally apply to sole source 8(a) contracts offered to 
SBA on behalf of entity-owned Program Participants, the FAR and DFARS 
justification and approval provisions are not restricted to entity-
owned Participants. Instead, those provisions apply to any 8(a) sole 
source contract that exceeds the $25M or $100M threshold. As such the 
proposed rule merely adds language to clarify what SBA believes the 
current requirement is and does so in order to avoid any confusion.

Section 124.509

    Section 124.509 establishes non-8(a) business activity targets to 
ensure that Participants do not develop an unreasonable reliance on 
8(a) awards. SBA amended this section as part of a comprehensive final 
rule in October 2020. See 85 FR 66146, 66189 (Oct. 16, 2020). In that 
final rule, SBA recognized that a strict prohibition on a Participant 
receiving new sole source 8(a) contracts should be imposed only where 
the Participant has not made good faith efforts to meet its applicable 
non-8(a) business activity target. Since that rule became effective in 
November 2020, Participants have sought guidance as to what ``good 
faith efforts'' means in this context. This proposed rule seeks to 
provide guidance. The proposed regulatory language is how SBA has been 
interpreting good faith efforts since the good faith efforts change was 
effective. The proposed rule would provide two ways by which a 
Participant could establish that it has made good faith efforts. 
Specifically, a Participant could demonstrate to SBA either that it 
submitted offers for one or more non-8(a) procurements which, if 
awarded, would have given the Participant sufficient revenues to 
achieve the applicable non-8(a) business activity target during its 
just completed program year, or explain that there were extenuating 
circumstances that adversely impacted its efforts to obtain non-8(a) 
revenues. This proposed rule would also identify possible extenuating 
circumstances, which would include but not be limited to a reduction in 
government funding, continuing resolutions and budget uncertainties, 
increased competition driving prices down, or having one or more prime 
contractors award less work to the Participant than originally 
contemplated.
    There has also been some confusion as to how SBA should best track 
business activity targets. The statutory requirement for such targets 
relates to program years, meaning a Participant should receive a 
certain percentage of non-8(a) business during certain years in the 
program. In the October 2020 final rule, SBA changed all references to 
looking at business activity compliance from fiscal year to program 
year to align with the statutory authority. A program year lines up 
with the date that a Participant was certified as eligible to 
participate in the 8(a) BD program. That date generally is not the same 
as a Participant's fiscal year. Participants have financial statements 
relating to their fiscal year activities, but most do not have 
financial statements relating to program year. To capture program year 
data, SBA has asked Participants to estimate as best they can program 
year revenues for both 8(a) and non-8(a) activities. Although this rule 
proposes no specific changes as to the revenue information provided to 
SBA, SBA specifically requests comments as to how firms believe it 
would be easiest for them to meet the program year information 
requirements. One approach that SBA is considering is to capture 
program year data based on the Participant's interim financial 
statements. This would require a Participant to submit monthly, 
quarterly, or semi-annual financial statements, as appropriate, to SBA 
where the close of its fiscal year and its program anniversary date are 
separated by more than 90 calendar days. SBA could then assess the 
Participant's compliance with the business activity target based on the 
breakdown of 8(a) and non-8(a) sales set forth in the applicable 
interim financial statements. For example, Participant A's fiscal year 
closes on December 31, and its program anniversary date is May 9. In 
connection with its annual review, Participant A would submit quarterly 
financial statements for the periods of April 1-June 30, July 1-
September 30, and October 1-December 31, from its most recently 
completed fiscal year, and the period of January 1-March 31 in its 
current fiscal year. SBA could then determine Participant A's 
compliance with the applicable business activity target based on the 
breakdown of 8(a) and non-8(a) sales during the 12-month period covered 
by these quarterly financial statements. SBA recognizes that this 
approach would exclude revenues derived during the final weeks or 
months leading up to a Participant's program anniversary date. However, 
SBA believes that this approach would most closely capture a 
Participant's program year activities without placing an undue burden 
on the Participant to estimate its 8(a) and non-8(a) revenues on a 
program year basis.

Sections 124.513(a), 125.18(b), 126.616(a)(2), and 127.506(a)(3)

    The proposed rule would add a new Sec.  124.513(a)(3) to provide 
that a Program Participant cannot be a joint venture partner on more 
than one joint venture that submits an offer for a specific 8(a) 
contract. Although the proposed rule would apply this requirement to 
all contracts, procuring agencies and small businesses have raised 
concerns to SBA in the context of multiple award contracts where it is 
possible that one firm could be a member of several joint ventures that 
receive contracts. In such a situation, several agencies were troubled 
that orders under the multiple award contract may not be fairly 
competed if one firm was part of two, three or more quotes. They 
believed that one firm having access to pricing information for several 
quotes could skew the pricing received for the order.
    To ensure that the HUBZone, WOSB and SDVOSB programs have rules as 
consistent as possible to those for the 8(a) BD program, the proposed 
rule adds similar language as that added to Sec.  124.513(a)(3) for 
those programs in proposed Sec. Sec.  125.18(b) (for SDVOSB), 
126.616(a)(2) (for HUBZone), and 127.506(a)(3) (for WOSB).
    SBA specifically requests comments as to whether this provision 
should be limited only to 8(a)/HUBZone/WOSB/SDVOSB multiple award 
contracts or whether it should apply to all contracts set-aside or 
reserved for 8(a)/HUBZone/WOSB/SDVOSB, and to all orders set-aside for 
such businesses under unrestricted multiple award contracts.

Section 124.515

    Section 124.515 implements section 8(a)(21) of the Small Business 
Act, 15 U.S.C. 637(a)(21), which generally requires an 8(a) contract to 
be performed by the concern that initially received it. In addition, 
the statute and Sec.  124.515 provide that where the owner or owners 
upon whom eligibility was based relinquish ownership or control of such 
concern, any 8(a) contract that the concern is performing shall be 
terminated for the convenience of the Government unless the SBA 
Administrator, on a nondelegable basis,

[[Page 55655]]

grants a waiver based on one or more of five statutorily identified 
reasons. This proposed rule would revise Sec.  124.515(c) for clarity. 
Specifically, it would break one longer paragraph into several smaller 
paragraphs and would clarify that if a Participant seeks a waiver based 
on the impairment of the agency's mission or objectives, it must 
identify and provide a certification from the procuring agency relating 
to each 8(a) contract for which a waiver is sought.
    Currently, a Participant (or former Participant that is still 
performing an 8(a) contract) must submit its request for a waiver to 
the termination for convenience requirement to the Participant's (or 
former Participant's) SBA servicing district office. These requests for 
waivers are often complicated and can take a long time to be approved. 
Processing a waiver request can take several months in an SBA district 
office and then several months in SBA's Office of Business Development 
in SBA's Headquarters. In order to streamline the process, SBA is also 
considering changing where requests for waivers must be initiated from 
the servicing district office to the AA/BD, and requests comments on 
whether that would be beneficial.

Sections 124.604 and 124.108

    Section 124.604 currently requires each Participant owned by a 
Tribe, ANC, NHO, or CDC to submit to SBA information showing how the 
Tribe, ANC, NHO, or CDC has provided benefits to the Tribal or native 
members and/or the Tribal, native or other community due to the 
Tribe's/ANC's/NHO's/CDC's participation in the 8(a) BD program through 
one or more firms. This rule proposes to require more precise benefits 
back to the Native community.
    Specifically, SBA is proposing a requirement that each entity 
having one or more Participants in the 8(a) BD program establish a 
Community Benefits Plan that outlines the anticipated approach it 
expects to deliver to strengthen its Native or underserved community 
over the next three or five years. Each entity would decide how best to 
serve and meet the needs of its community, though SBA would expect some 
commitment in areas relating to health, education, housing, 
infrastructure, cultural preservation, and economic development, as 
appropriate. SBA requests comments on whether this Community Benefits 
Plan should be its own, separate plan or be included in the business 
plan submission and updates required as part of the annual review 
process. Further, SBA requests comment on the period the Community 
Benefits Plan should cover.
    SBA understands the dual purposes of the entity-owned component of 
the 8(a) BD program: to develop viable small business concerns while at 
the same time creating opportunities to provide significant benefits to 
the native or disadvantaged communities that they serve. SBA seeks to 
ensure that both of those purposes are advanced and requests comments 
on how best that can be accomplished. Specifically, SBA seeks comments 
as to whether specific monetary targets should be established for 
providing support to the native or disadvantaged communities, and if 
that amount should change based upon the length of time an entity owns 
business concerns participating in the 8(a) BD program and depending 
upon the number of Participants an entity owns that are operating in 
the program. In addition, SBA requests comments as to whether there 
should be consequences to an entity or an entity-owned Participant that 
does not meet or does not make good faith efforts to meet the 
commitments that it made in its initial application to provide benefits 
to its native or underserved community.
    Section 124.604 requires each entity-owned Participant to submit 
information relating to the benefits that the entity has provided to 
the Native or underserved community as part of its annual review 
submissions. The SBA collects this information and provides summary 
level reporting as part of SBA's Annual 408 Report to the Congress as 
required by section 408 of the Business Opportunity Development Reform 
Act of 1988, Public Law 100-656 (codified at section 7(j)(16) of the 
Small Business Act, 15 U.S.C. 636(j)(16)). For more transparent 
reporting, the proposed rule would provide that each entity-owned 
Participant must submit to SBA information showing how the Tribe, ANC, 
NHO, or CDC has provided benefits to the Tribal or native members and/
or the Tribal, native or other community due to the Tribe's/ANC's/
NHO's/CDC's participation in the 8(a) BD program through one or more 
firms, whether the benefits provided meet the benefits target set forth 
in its Community Benefits Plan, and how the benefits provided directly 
impacted the native or underserved community.
    SBA specifically asks for comments on how best to implement 
proposed changes for benefits reporting.

Section 124.1002

    Section 1207 of the National Defense Authorization Act for Fiscal 
Year 1987, Public Law 99-661 (100 Stat. 3816, 3973), authorized a set-
aside program at DoD for small disadvantaged businesses, separate from 
the authority for contracts awarded under the 8(a) BD program. The 
``Section 1207'' or Small Disadvantaged Business (SDB) Program also had 
a price evaluation preference and a subcontracting component. SBA 
implemented regulations establishing the eligibility requirements for 
the SDB Program and authorizing a protest and appeal process to SBA 
regarding the SDB status of apparent successful offerors. In 2008, the 
United States Court of Appeals for the Federal Circuit ruled that 
preferential treatment in the award of DoD prime defense contracts 
based on race under the Section 1207 program (as implemented in 10 
U.S.C. 2323) was unconstitutional. Rothe Dev. Corp. v. DoD, 545 F.3d 
1023. This effectively eliminated the SDB Program.
    In response, the FAR Council changed the SBA protest process for 
SDBs in the FAR to a ``review'' process in a final rule effective 
October 2014 (79 FR 61746). The FAR Council stated that its changes to 
the SDB program were based on the Federal Circuit's decision in the 
Rothe case. SBA brought its own regulations up to date in 2020 by 
removing references to an SDB protest. 85 FR 27290 (May 8, 2020). 
Recently, SBA's Office of Inspector General (OIG) has questioned why a 
protest process no longer exists to challenge a firm's SDB status. 
Despite SBA's explanation that the Section 1207 program (the basis for 
SBA's previous SDB regulatory authorities) no longer exists, OIG 
continues to believe that general authority to protest a firm's SDB 
status should exist. SBA notes that since the FAR Council replaced the 
protest process with a review process in 2014, SBA has not received any 
requests for review. Although SBA believes that such authority would 
not be often utilized, in response to OIG's concerns the proposed rule 
would add a new Sec.  124.1002 authorizing reviews and protests of SDB 
status in connection with prime contracts and subcontracts to a federal 
prime contract.
    The proposed rule copies similar authority contained in section 
19.305 of the Federal Acquisition Regulation, title 48 of the Code of 
Federal Regulations. Under proposed Sec.  124.1002, SBA could initiate 
the review of the SDB status on any firm that has represented itself to 
be an SDB on a prime contract (for goaling purposes or otherwise) or 
subcontract to a federal prime contract whenever it receives credible 
information calling into question the SDB status of the firm. In 
addition, as already stated in the FAR, the proposed rule would allow 
the contracting officer or the SBA to protest

[[Page 55656]]

the SDB status of a proposed subcontractor or subcontract awardee. 
Finally, where SBA determines that a subcontractor does not qualify as 
an SDB, the proposed rule would require prime contractors to exclude 
subcontracts to that subcontractor as subcontracts to an SDB in its 
subcontracting reports, starting from the time that the protest was 
decided. SBA believes that a prime contractor should not get SDB credit 
for using a subcontractor that does not qualify as an SDB. However, in 
order not to penalize a prime contractor who acted in good faith in 
awarding a subcontract or to impose an additional burden of correcting 
past subcontracting reports, the proposed rule would disallow SDB 
subcontracting credit only prospectively from the point of an adverse 
SDB determination.

Sections 125.1 and 125.3(c)(1)(i) and (x) and (c)(2)

    SBA proposes to make changes to several provisions in part 125 that 
reference the term commercial item. This is in response to recent 
changes made to the Federal Acquisition Regulation (FAR) with regard to 
the definition of ``commercial item''. 86 FR 61017. Primarily, the 
changes to the FAR split the definition of commercial items into two 
categories, commercial products and commercial services. SBA is 
proposing to amend its regulations to adopt these changes when SBA's 
regulation is referring to a commercial product, a commercial service, 
or both. Specifically, SBA is amending the definition for ``cost of 
materials'' in 125.1 to refer only to commercial products. Further, SBA 
proposes to amend Sec.  125.3(c)(1)(i) and (x) and (c)(2) to update the 
references to both commercial products and commercial services.

Section 125.1

    The proposed rule would add definitions of the terms ``Small 
business concerns owned and controlled by socially and economically 
disadvantaged individuals'' and ``Socially and economically 
disadvantaged individuals'' for purposes of both SBA's subcontracting 
assistance program in 15 U.S.C. 637(d) and the goals described in 15 
U.S.C. 644(g). The proposed rule seeks to implement consistency among 
SBA's programs and would refer to requirements set forth in part 124 
for 8(a) eligibility. SBA believes that this change is also needed to 
provide clarity for small disadvantaged business eligibility 
requirements contained in other statutes that refer to 15 U.S.C. 637(d) 
for their eligibility.
    SBA proposes to include blanket purchase agreements (BPAs) in the 
list of contracting vehicles that are covered by the definitions of 
consolidation and bundling. There are two kinds of BPAs: GSA's FSS BPAs 
covered under FAR 8.4 and BPAs established under Simplified Acquisition 
Procedures (see FAR 13.303). SBA requests comments as to whether this 
should apply to both types of BPAs, FSS, and FAR 13.303, and whether it 
should apply to both single-award and multiple-award BPAs. Generally, a 
consolidated requirement is one that consolidates two or more previous 
requirements into one action. A bundled requirement is a type of 
consolidated requirement in which multiple small-business requirements 
are consolidated into a single, larger requirement that is not suitable 
for award to small businesses. In most cases, because of the potential 
negative impact on small business contracting opportunities, the 
contracting agency is required to conduct a financial analysis, execute 
a determination that the action is necessary and justified, and in some 
cases notify impacted small businesses and the public, before 
proceeding with a bundled or consolidated requirement. The Small 
Business Act, 15 U.S.C. 632(j), requires agencies to avoid unnecessary 
bundling of ``contract requirements.'' SBA interprets the term 
``contract requirements'' to include BPAs for the purposes of this 
statutory provision on avoiding bundling. This is similar to how SBA 
interprets the term ``proposed procurement'' under the Small Business 
Act's requirement for agencies to coordinate with procurement center 
representatives on prime contract opportunities.
    SBA thus intended the consolidation and bundling provisions to 
apply to BPAs. The Government Accountability Office (GAO), however, 
ruled in two recent bid protests that, because SBA's regulations do not 
specifically address BPAs, the consolidation and bundling procedures do 
not apply when the resulting requirement is a BPA.
    SBA routinely sees consolidation in BPAs. Bundling on a BPA has the 
same detrimental effect on small-business incumbents as bundling on 
other vehicles, such as contracts or orders. Regardless of whether the 
resulting requirement is a BPA, the bundled action will convert 
multiple small business contracting actions into a single action to be 
awarded to a large business. If agencies are not required to follow SBA 
regulations regarding notification and a written determination for 
bundled BPAs, the small business incumbents may not know that work that 
they are currently performing has been bundled and moved to a single 
award to a large business and may not have the opportunity to challenge 
such action. Awarding a requirement as a BPA does not lessen the 
negative impact of bundling on small businesses, and, therefore, SBA 
proposes to incorporate into the regulations its current belief that 
the bundling and consolidation rules should apply with equal force 
where the resulting award will be a BPA.
    Additionally, several procuring agencies have asserted that the 
analysis, determination, and notification requirements for 
consolidation or bundling do not apply when existing requirements are 
combined with new requirements. SBA disagrees. There is no basis in 
statute, regulation, or case law for agencies to interpret 
``requirement'' as excluding a combination of existing and new work. To 
eliminate any confusion, the proposed rule clarifies SBA's current 
position that agencies are required to comply with the Small Business 
Act and all SBA regulations regarding consolidation or bundling 
regardless of whether the requirement at issue combines both existing 
and new requirements into one larger procurement that is considered to 
be ``new.''

Section 125.2

    Section 125.2 sets forth guidance as to SBA's and procuring 
agencies' responsibilities when providing contracting assistance to 
small businesses. Section 125.2(d) contains guidance on how procuring 
agencies determine whether contract bundling and substantial bundling 
is necessary and justified. Specifically, Sec.  125.2(d)(2)(ii) states 
that a cost or price analysis may be included to support an agency's 
determination of the benefits of bundling. This language combined with 
the language at Sec.  125.2(d)(2)(v) is intended to mean that price 
analysis is always necessary, and, if the analysis results in a price 
reduction, the agency may use the price reduction to demonstrate 
benefits of the bundled approach. In order to demonstrate ``measurably 
substantial'' benefits as required by the Small Business Act, SBA's 
regulations and the FAR (benefits equivalent to 10 percent of the 
contract or order value where the contract or order value is $94 
million or less, or benefits equivalent to 5 percent of the contract or 
order value or $9.4 million, whichever is greater, where the contract 
or order value exceeds $94 million), SBA believes that a cost or price

[[Page 55657]]

analysis must be conducted. Some have argued that the Small Business 
Act does not require a cost/price analysis. They point to the language 
of section 15(e)(2)(B) of the Small Business Act which provides that in 
demonstrating ``measurably substantial benefits'' the identified 
benefits ``may include'' cost savings, quality improvements, reduction 
in acquisition cycle times, better terms and conditions, and any other 
benefits. 15 U.S.C. 644(e)(2)(B). However, if a cost/price analysis is 
not required, SBA does not believe that it is possible to demonstrate 
benefits equivalent to 10 percent (or 5 percent/$9.4 million) of the 
contract or order value--exactly what is required by SBA's regulations 
and the FAR. This interpretation is even clearer in Sec.  
125.2(d)(2)(v), which acknowledges that an agency will perform a price 
analysis and describes a specific type of price comparison to include 
in the analysis.
    In order to clarify any misperceptions, SBA proposes to clarify 
Sec.  125.2(d)(2)(ii) to plainly state that an analysis comparing the 
cumulative total value of all separate smaller contracts with the 
estimated cumulative total value of the bundled procurement is required 
as part of the analysis of whether bundling is necessary and justified. 
Neither a procuring agency nor SBA can have a complete view of the 
small business contact dollars impacted by a bundled procurement if 
this price analysis is not performed. The analysis requires that an 
agency identify all impacted separate smaller contracts. An agency can 
search the Federal Procurement Data System or use the agency's own 
contract records to determine the complete universe of separate 
contracts impacted by the bundled procurement. Identification of every 
impacted firm is not only important for purposes of the price analysis 
but is also necessary to comply with the statutory and regulatory 
notice requirements for bundled contracts. Furthermore, if 8(a) 
contracts will be subsumed in the bundled procurement, an agency must 
know which 8(a) contracts are impacted in order to comply with the 
required 8(a) program release or notification requirements.

Section 125.3

    Section 125.3 discusses the types of subcontracting assistance that 
are available to small businesses and the rules pertaining to 
subcontracting generally. Section 125.3(a)(1)(i)(B) provides that 
purchases from a corporation, company, or subdivision that is an 
affiliate of the prime contractor or subcontractor are not included in 
the subcontracting base. SBA received an inquiry as to whether this 
language would allow a prime contractor to count an award to a joint 
venture in which it is a partner as subcontracting credit. That was not 
SBA's intent. SBA believes that exclusion is covered in the current 
regulatory text, which already alludes to not counting awards to 
affiliates. Nevertheless, in order to clarify that a prime contractor 
cannot count an award to a joint venture in which it is a partner as 
subcontracting credit, SBA has added clarifying language to that 
effect.
    SBA also proposes to amend Sec.  125.3(a)(1)(iii) to delete bank 
fees from the list of exclusions from the subcontracting base. SBA's 
current regulations provide that bank fees are excluded from the 
subcontracting base. This means that when a large contractor is 
calculating the percentage of work being subcontracted to small 
businesses, it does not have to factor bank fees into this calculation. 
This gives the contractor little incentive to work with small banks. 
However, there are over 900 small businesses registered in the Dynamic 
Small Business Search (DSBS) database under banking NAICS codes. Given 
the number of small banks available to do work on federal prime 
contracts, SBA does not believe bank fees should be excluded from the 
subcontracting base.
    In addition, SBA proposes to amend Sec.  125.3(c)(1)(iv) to require 
that large businesses include indirect costs in their subcontracting 
plans. Currently, large businesses have the option of including or 
excluding indirect costs in their individual subcontracting plans. Many 
large businesses opt to exclude indirect costs. As a result, small 
businesses that provide services generally considered to be indirect 
costs--such as legal services, accounting services, investment banking, 
and asset management--are often overlooked by large contractors. SBA 
believes that by requiring indirect costs to be included in their 
individual subcontracting plans, large businesses will have an 
incentive to give work to small businesses that provide those services.

Section 125.6

    Section 125.6 sets forth the requirements pertaining to the 
limitations on subcontracting applicable to prime contractors for 
contracts and orders set-aside or reserved for small business. Section 
125.6(d) provides that the period of time used to determine compliance 
for a total or partial set-aside contract will generally be the base 
term and then each subsequent option period. This makes sense when one 
agency oversees and monitors a contract. However, on a multi-agency set 
aside contract, where more than one agency can issue orders under the 
contract, no one agency can practically monitor and track compliance. 
In order to ensure that this statutory requirement is met for the 
contract, SBA believes that compliance should be measured order by 
order by each ordering agency. The proposed rule would clarify Sec.  
125.6(d) accordingly.
    SBA is proposing to add a new Sec.  125.6(e) to provide 
consequences to a small business where a contracting officer determines 
at the conclusion of contract performance that the business did not 
meet the applicable limitation on subcontracting on any set-aside 
contract (small business set-aside; 8(a); WOSB; HUBZone; or SDVOSB). 
The current rules provide discretion to contracting officers to require 
contractors to demonstrate compliance with the limitations on 
subcontracting at any time during performance and upon completion of a 
contract. SBA's current rules do not, however, address what happens if 
a contracting officer determines that a firm fails to meet the 
statutorily required limitation on subcontracting requirement at the 
conclusion of contract performance. SBA's proposed rule would provide 
that a contracting officer could not give a satisfactory/positive past 
performance evaluation for the appropriate evaluation factor or 
subfactor to a contractor that the contracting officer determined did 
not meet the applicable limitation on subcontracting requirement at the 
conclusion of contract performance. Of course, if a small business were 
found to be in non-compliance during the performance of the contract 
and took steps to come into compliance before completion of the 
contract, the contractor's final rating for conformance to requirements 
could be satisfactory. The proposed rule would not alter the 
contracting officer's discretion to require contractors to demonstrate 
compliance with the limitations on subcontracting where the contracting 
officer deems it to be appropriate; it merely would provide 
consequences (i.e., negative past performance evaluation) where the 
contracting officer determined that a contractor did not meet the 
limitation on subcontracting requirement at the conclusion of contract 
performance. SBA believes that having negative consequences for not 
meeting the applicable limitation on subcontracting would help ensure 
the requirements are being met, and that set-aside contracts are being 
performed in a manner consistent with SBA's regulations and

[[Page 55658]]

the Small Business Act. Some have argued that there should be 
extenuating circumstances under which a contracting officer should 
still be able to give a satisfactory/positive past performance 
evaluation to a contractor that the contractor officer determined did 
not meet the applicable limitation on subcontracting requirement. SBA 
believes that any such discretion, if ultimately authorized, should be 
very limited in scope. Again, SBA believes that it is important to have 
consequences for small business concerns that do not meet the 
applicable limitation on subcontracting. SBA wants small businesses to 
take those requirements seriously and strive to achieve them. 
Nevertheless, SBA requests comments as to whether the regulations 
should allow a contracting officer to give a satisfactory/positive past 
performance evaluation to a contractor that the contractor officer 
determined did not meet the applicable limitation on subcontracting 
requirement, and, if so, under what limited circumstances should that 
discretion be authorized.

Section 125.9

    Section 125.9 sets forth the rules governing SBA's small business 
mentor-prot[eacute]g[eacute] program. SBA's regulations currently 
provide that a mentor can have no more than three prot[eacute]g[eacute] 
small business concerns at one time. SBA has been asked whether a 
mentor that purchases another business concern that is also an SBA-
approved mentor can take on those mentor-prot[eacute]g[eacute] 
relationships if the total number of prot[eacute]g[eacute]s would 
exceed three. The reason SBA has limited the number of 
prot[eacute]g[eacute] firms one mentor can have at any time is to 
ensure that a large business mentor does not unduly benefit from 
programs intended to benefit small businesses. That is also the reason 
that the limit of three prot[eacute]g[eacute]s applies to the mentor 
family (i.e., the parent and all of its subsidiaries in the aggregate 
cannot have more than three prot[eacute]g[eacute] small business 
concerns at one time). If each separate business entity could itself 
have three prot[eacute]g[eacute]s, conceivably a parent with three 
subsidiaries could have 12 small business prot[eacute]g[eacute] firms. 
SBA believes that that would allow a large business to unduly benefit 
from small business programs. The regulations implementing the mentor-
prot[eacute]g[eacute] program also provide that a small business can 
have only two mentor-prot[eacute]g[eacute] relationships in total. 
Thus, if SBA were to say that a mentor that purchased another business 
entity which is also a mentor could not take on the selling business 
entity's mentor-prot[eacute]g[eacute] relationships, the ones who would 
be hurt the most would be the small business prot[eacute]g[eacute]s of 
the selling business. Their mentor-prot[eacute]g[eacute] relationships 
with the selling mentor would end early and would count as one of the 
two mentor-prot[eacute]g[eacute] relationships that they were 
authorized to have. Because SBA did not intend to adversely affect 
prot[eacute]g[eacute] firms in these circumstances, SBA has informally 
permitted a mentor to take on the mentor-prot[eacute]g[eacute] 
relationships of a firm that it purchased even where its total number 
of mentor-prot[eacute]g[eacute] relationships would exceed three. The 
proposed rule would add language to Sec.  125.9(b)(3)(ii) to recognize 
this exemption. Specifically, the proposed rule would add a paragraph 
that where a mentor purchases another business entity that is also an 
SBA-approved mentor of one or more prot[eacute]g[eacute] small business 
concerns and the purchasing mentor commits to honoring the obligations 
under the seller's mentor-prot[eacute]g[eacute] agreement(s), that 
entity may have more than three prot[eacute]g[eacute]s. In such a case, 
the entity could not add another prot[eacute]g[eacute] until it fell 
below three in total.
    The proposed rule would also amend Sec.  125.9(e) to add language 
recognizing that a mentor that is a parent or subsidiary of a larger 
family group may identify one or more subsidiary firms that it plans to 
participate in the mentor-prot[eacute]g[eacute] arrangement by 
providing assistance and/or participating in joint ventures with the 
prot[eacute]g[eacute] firm. The proposed rule would provide that all 
entities intended to participate in the mentor-prot[eacute]g[eacute] 
relationship should be identified in the mentor-prot[eacute]g[eacute] 
agreement itself.

Sections 126.306(b) and 127.304(c)

    Sections 126.306 and 127.304 set forth the procedures by which SBA 
processes applications for the HUBZone and WOSB programs, respectively. 
This proposed rule would add language to both processes to provide that 
where SBA is unable to determine a concern's compliance with any of the 
HUBZone or WOSB/EDWOSB eligibility requirements due to inconsistent 
information contained in the application, SBA will decline the 
concern's application. In addition, this proposed rule would add 
language providing that if, during the processing of an application, 
SBA determines that an applicant has knowingly submitted false 
information, regardless of whether correct information would cause SBA 
to deny the application, and regardless of whether correct information 
was given to SBA in accompanying documents, SBA will deny the 
application. This language is consistent with that already appearing in 
SBA's regulations for the 8(a) BD program, and SBA believes that all of 
SBA's certification programs should have similar language on this 
issue.

Sections 125.28(e), 126.801(e)(2), and 127.603(d)(2)

    For purposes of SDVO, HUBZone and WOSB/EDWOSB contracts, the SDVO/
HUBZone/WOSB/EDWOSB prime contractor together with any similarly 
situated entities must meet the applicable limitation on subcontracting 
(or must perform a certain portion of the contract). If a subcontractor 
is intended to perform primary and vital aspects of the contract, the 
subcontractor may be determined to be an ostensible subcontractor under 
proposed Sec.  121.103(h)(3), and the prime contractor and its 
ostensible subcontractor would be treated as a joint venture. However, 
if the ostensible subcontractor qualifies independently as a small 
business, a size protest would not find the arrangement ineligible for 
any small business contract. To address that situation, the current 
regulations for the SDVO program (in Sec. Sec.  125.18(f) and 
125.29(c)), the HUBZone program (in Sec. Sec.  126.601(d) and 
126.801(a)(1)) and the WOSB program (in Sec. Sec.  127.504(g) and 
127.602(a)) prohibit a non-similarly situated subcontractor from 
performing primary and vital requirements of a contract and permit a 
SDVO/HUBZone/WOSB/EDWOSB status protest where an interested party 
believes that will occur. The proposed rule would add a paragraph to 
each of the SDVO/HUBZone/WOSB/EDWOSB status protest provisions to 
clarify that any protests relating to whether a non-similarly situated 
subcontractor will perform primary and vital aspects of the contract 
will be reviewed by the SBA Government Contracting Area Office serving 
the geographic area in which the principal office of the SDVO/HUBZone/
WOSB/EDWOSB business is located. SBA's Government Contracting Area 
Offices are the offices that decide size protests and render formal 
size determinations. They are the offices with the expertise to decide 
ostensible subcontractor issues. Thus, for example, if a status protest 
filed in connection with a WOSB contract alleges that the apparent 
successful offeror should not qualify as a WOSB because (1) the husband 
of the firm's owner actually controls the business, and (2) a non-WOSB 
subcontractor will perform primary and vital requirements of the 
contract, SBA's WOSB staff in the Office of Government Contracting will 
review

[[Page 55659]]

the control issue and refer the ostensible subcontractor issue to the 
appropriate SBA Government Contracting Area Office. The SBA Government 
Contracting Area Office would determine whether the proposed 
subcontractor should be considered an ostensible subcontractor and send 
that determination to the Director of Government Contracting, who then 
would issue one WOSB status determination addressing both the 
ostensible subcontractor and control issues. The same would be true for 
SDVO status protests and HUBZone status protests (except that in the 
HUBZone context the Director of the Office of HUBZones would issue the 
HUBZone status determination). To accomplish this, the proposed rule 
would add clarifying language in Sec. Sec.  125.28(e) (for SDVO), 
126.801(e)(2) (for HUBZone), and 127.603(d) (for WOSB/EDWOSB).

Section 126.503(c)

    The proposed rule would Sec.  126.503 by adding a new paragraph (c) 
to specifically authorize SBA to initiate decertification proceedings 
if after admission to the HUBZone program SBA discovers that false 
information has been knowingly submitted by a certified HUBZone small 
business concern. SBA believes that this is currently permitted under 
the HUBZone regulations, but proposes to add this provision to 
eliminate any doubt.

Section 126.601(d)

    The proposed rule would amend Sec.  126.601(d) to clarify how the 
ostensible subcontractor rule may affect a concern's eligibility for a 
HUBZone contract. Where a subcontractor that is not a certified HUBZone 
small business will perform the primary and vital requirements of a 
HUBZone contract, or where a HUBZone prime contractor is unduly reliant 
on one or more small businesses that are not HUBZone-certified to 
perform the HUBZone contract, the prime contractor would not be 
eligible for award of that HUBZone contract.

Section 126.616(a)(1)

    The proposed rule would amend Sec.  126.616(a) to clarify that a 
HUBZone joint venture should be registered in the System for Award 
Management (SAM) (or successor system) and identified as a HUBZone 
joint venture, with the HUBZone-certified joint venture partner 
identified. SBA has received numerous questions from HUBZone firms and 
contracting officers expressing confusion about how to determine 
whether an entity qualifies as a HUBZone joint venture and thus is 
eligible to submit an offer for a HUBZone contract. Part of the 
confusion stems from the fact that there is no way for an entity to be 
designated as a HUBZone joint venture in SBA's DSBS database; this 
certification can only be made in SAM. In addition, the process for 
self-certifying as a HUBZone joint venture in SAM is apparently unclear 
because such certification does not appear in the same section as the 
other socioeconomic self-certifications. Since it is not known when 
these systems might be updated to clear up this confusion, SBA is 
proposing to amend Sec.  126.616(a) by adding a new paragraph (a)(1) to 
help HUBZone firms and contracting officers understand how to determine 
whether an entity may be eligible to submit an offer as a HUBZone joint 
venture.

Section 126.801

    The proposed rule would amend Sec.  126.801(b) to clarify the bases 
on which a HUBZone protest may be filed, which include: (i) the 
protested concern did not meet the HUBZone eligibility requirements set 
forth in Sec.  126.200 at the time the concern applied for HUBZone 
certification or on the anniversary date of such certification; (ii) 
the protested joint venture does not meet the requirements set forth in 
Sec.  126.616; (iii) the protested concern, as a HUBZone prime 
contractor, is unduly reliant on one or more small subcontractors that 
are not HUBZone-certified, or subcontractors that are not HUBZone-
certified will perform the primary and vital requirements of the 
contract; and/or (iv) the protested concern, on the anniversary date of 
its initial HUBZone certification, failed to attempt to maintain 
compliance with the 35% HUBZone residence requirement. The proposed 
rule also would amend Sec.  126.801(d)(1), addressing timeliness for 
HUBZone protests.
    The proposed rule would add a new paragraph (d)(1)(i) to clarify 
the timeliness rules for protests relating to orders or agreements that 
are set-aside for certified HUBZone small business concerns where the 
underlying multiple award contract was not itself set-aside or reserved 
for certified HUBZone small business concerns. Specifically, a protest 
challenging the HUBZone status of an apparent successful offeror for 
such an order or agreement will be considered timely if it is submitted 
within 5 business days of notification of the identity of the apparent 
successful offeror for the order or agreement. The proposed rule also 
would add a new paragraph (d)(1)(ii) to clarify that where a 
contracting officer requires recertification in connection with a 
specific order under a multiple award contract that itself was set-
aside or reserved for certified HUBZone small business concerns, a 
protest challenging the HUBZone status of an apparent successful 
offeror will be considered timely if it is submitted within five 
business days of notification of the identity of the apparent 
successful offeror for the order.

Section 127.102

    SBA proposes to amend the definition of WOSB to clarify that the 
definition applies to any certification as to a concern's status as a 
WOSB, not solely to those certifications relating to a WOSB contract. 
SBA has received inquiries as to whether this definition applies to a 
firm that certifies as a WOSB for goaling purposes on an unrestricted 
procurement. It has always been SBA's intent to apply that definition 
to all instances where a concern certifies as a WOSB, and this proposed 
rule merely clarifies that intent.

Section 127.200

    Section 127.200 specifies the requirements a concern must meet to 
qualify as an EDWOSB or WOSB. In order to qualify as an EDWOSB, an 
entity must be a small business. Section 127.200(a)(1) requires a 
concern to be a small business for its primary industry classification 
to qualify as an EDWOSB, while Sec.  127.200(b)(1) merely states that a 
concern must be a small business to qualify as a WOSB. In terms of 
demonstrating that an applicant for either WOSB or EDWOSB certification 
qualifies as a small business, the proposed rule would provide that the 
applicant must demonstrate that it qualifies as small under the size 
standard corresponding to any NAICS code under which it currently 
conducts business activities. SBA believes that this standard makes 
more sense than requiring an applicant to qualify as small under the 
size standard corresponding to its primary industry classification. In 
order to be eligible for a specific WOSB/EDWOSB contract, a firm must 
qualify as small under the size standard corresponding to the NAICS 
code assigned to that contract. Whether a firm qualifies as small under 
its primary industry classification is not relevant to that 
determination (unless the size standard for the firm's primary industry 
classification is that same as that for the NAICS code assigned to the 
contract, but even then, the only relevant size standard is that 
corresponding to the NAICS code

[[Page 55660]]

assigned to the contract). SBA believes that a firm that does not 
qualify as small under its primary industry classification should not 
be precluded from seeking and being awarded WOSB/EDWOSB contracts if it 
qualifies as small for those contracts. SBA believes that the 
certification process should ensure that an applicant is owned and 
controlled by one or more women and that it could qualify as a small 
business for a WOSB/EDWOSB set-aside contract. As such, SBA believes 
that requiring an applicant to demonstrate that it qualifies as small 
for any industry under which it currently conducts business is more 
appropriate than requiring it to demonstrate that it qualifies as small 
under its primary industry classification. Finally, SBA believes that 
it is important to align the WOSB/EDWOSB eligibility requirements with 
the eligibility requirements for veteran-owned small business (VOSB) 
concerns and service-disabled veteran-owned small business (SDVOSB) 
concerns wherever possible. SBA is also proposing that a VOSB or SDVOSB 
must be small under the size standard corresponding to any NAICS code 
under which it currently conducts business activities in a separate 
rulemaking.

Section 127.201(b)

    Section 127.201 sets forth the requirements for control of a WOSB 
or EDWOSB. Paragraph (b) specifies that one or more women or 
economically disadvantaged women must unconditionally own the concern 
seeking WOSB or EDWOSB status. The proposed rule would clarify that 
this requirement was not meant to preclude a condition that can be 
given effect only after the death or incapacity of the woman owner. 
This change would make the WOSB unconditional ownership requirement the 
same as that for eligibility for the 8(a) BD program.

Section 127.202(c)

    Section 127.202 sets forth the requirements for control of a WOSB 
or EDWOSB. The current regulatory language has caused confusion as to 
whether a woman or economically-disadvantaged woman claiming to control 
a WOSB or EDWOSB can engage in employment other than that for the WOSB 
or EDWOSB. The current regulations provide that the woman or 
economically-disadvantaged woman who holds the highest officer position 
may not engage in outside employment that prevents her from devoting 
sufficient time and attention to the daily affairs of the concern to 
control its management and daily business operations. The regulations 
also provide that such individual must manage the business concern on a 
full-time basis and devote full-time to it during the normal working 
hours of business concerns in the same or similar line of business. 
Taking the two provisions together, a woman or economically-
disadvantaged woman can engage in outside employment, but only if such 
employment occurs outside the normal working hours of business concerns 
in the same or similar line of business and does not prevent her from 
devoting sufficient time and attention to control the concern's 
management and daily business operations. SBA believes that this 
requirement is overly restrictive. SBA is charged with determining 
whether a business concern is owned and controlled by one or more women 
or economically-disadvantaged women. If a woman starts a small business 
that she alone operates, SBA does not believe that it makes sense to 
conclude that she does not control the business simply because she 
operates it outside the normal hours of similar businesses. Whether the 
business can win and perform government contracts is a different 
question, and not one contemplated by SBA's regulations. Where a woman 
is the sole individual involved in operating a specific business, there 
is no question that she controls the business, regardless of how many 
hours she devotes to the business.
    This rule proposes to revise the limitations on outside activities. 
Per Sec.  127.202(a), a woman or economically-disadvantaged woman must 
demonstrate that she controls the long-term planning and daily 
operations of the business. The proposed rule would continue to provide 
that a woman or economically-disadvantaged woman cannot engage in 
outside activities that prevent her from devoting sufficient time and 
attention to the business concern to control its management and daily 
operations. Where a woman claiming to control a business concern 
devotes fewer hours to the business than its normal hours of operation, 
the proposed rule would impose a rebuttable presumption that she does 
not control the business concern. This is not meant to imply that a 
specific individual must be present at the business premises all hours 
that the business is open, particularly if the business is open more 
than a normal workday (e.g., where the business is open 24 hours and 
has multiple shifts). In such instances the woman would merely be 
required to provide evidence that she has ultimate managerial and 
supervisory control over both the long-term decision making and day-to-
day management and administration of the business.

Section 127.400

    Section 127.400 describes how a concern maintains its certification 
as a WOSB or EDWOSB. This rule proposes to amend Sec.  127.400 by 
omitting Sec.  127.400(a), which requires a certified concern to 
annually represent to SBA that it meets all program eligibility 
requirements, and replacing it with Sec.  127.400(b), which states that 
a certified concern must undergo a program examination at least every 
three years to maintain program eligibility. SBA believes that these 
program examinations, in conjunction with other eligibility assessments 
like material change reviews, status protests, third-party certifier 
compliance reviews, and program audits, will sufficiently capture 
eligibility information. The proposed rule would also amend the 
examples to Sec.  127.400 to reflect the proposed change and provide 
additional clarity to small businesses.
    SBA believes small businesses will further benefit from the 
proposed change because it will align the WOSB Program regulations with 
the continuing eligibility requirements for veteran-owned small 
business concerns outlined in 13 CFR 128.306. The WOSB Program permits 
veteran owned-certified small business concerns to submit evidence of 
their veteran-owned certification, along with documentation 
demonstrating that the firms are 51% owned and controlled by one or 
more women, to support their applications for WOSB Program 
certification. Going forward, the reverse will also be true. SBA 
believes that when there is reciprocity between programs, small 
businesses benefit from as much consistency as practicable. Regulatory 
alignment reduces confusion, ambiguity, and administrative burden for 
firms that are eligible for more than one program.

Compliance With Executive Orders 12866, 12988, 13132, 13563, the 
Congressional Review Act (5 U.S.C. 801-808), 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) anticipates that this 
proposed rule will be a significant regulatory action and, therefore, 
was subject to review under section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. Accordingly, 
the next section contains SBA's Regulatory Impact Analysis.

[[Page 55661]]

Regulatory Impact Analysis
1. Is there a need for the regulatory action?
    This action proposes to implement a statutory enactment--the NDAA 
FY22--as well as codify a federal court decision into regulation, and 
revise SBA guidelines on 8(a) BD program eligibility, 8(a) BD program 
participation, and subcontracting plan compliance. With respect to the 
8(a) BD program, this action is needed to clarify several policies that 
SBA already has put in place and to apply existing regulations to new 
scenarios, such as the recently created SBA mentor-
prot[eacute]g[eacute] program. This action also is needed to integrate 
section 863 of NDAA FY22 into SBA regulations and to adopt the holding 
of a recent federal court decision.
2. What is the baseline, and the incremental benefits and costs of this 
regulatory action?
    SBA has determined that this proposed rule includes eight proposals 
that are associated with incremental benefits or incremental costs. 
Outside of the following eight proposals, the other changes would 
merely clarify existing policy, modify language to avoid confusion, or 
adopt interpretations already issued by SBA's Office of Hearings and 
Appeals or through SBA casework.
    a. Require a firm to update SAM within two days and notify certain 
contracting officers if the firm is found ineligible through size 
determination, SDVO Small Business Concern (SBC) protests, HUBZone 
protests, or WOSB Program protests.
    SBA would amend Sec. Sec.  125.30(g)(4) and 127.405(c) to provide 
that a firm found ineligible through a final program protest must 
update SAM.gov within two days with its new status and notify agencies 
with which it has pending offers that are affected by the status 
change. This requirement already exists in SBA's regulations for size 
protests.
    The change extends the requirement to the SDVO SBC and WOSB 
programs. SBA has determined that this proposed change would impose 
costs on the business associated with its notification of contracting 
agencies of the adverse decision. The number of adverse protest 
decisions in the SDVOSBC and WOSB programs is less than five per year. 
For each such protest, the ineligible business is estimated to be 
required to notify two agencies. The notification does not take any 
particular form, so SBA estimates that each notification would take 15 
minutes. Thus, the total cost of this change would be 2.5 hours across 
all firms. At a project-manager-equivalent level, the total cost is 
less than $280 annually.\1\
---------------------------------------------------------------------------

    \1\ From 2.5 hours saved valued at the median wage of $55.41 for 
General and Operations Managers, according to the Bureau of Labor 
Statistics (BLS) General and Operations Managers (bls.gov) 
(retrieved April 12, 2022), plus 100% for benefits and overhead.
---------------------------------------------------------------------------

    b. Prohibit nonmanufacturer rule waivers from specifically applying 
to a contract with a duration longer than five years, including 
options.
    SBA proposes to amend Sec.  121.1203 to restrict the grant of 
individual (i.e., contract-specific) nonmanufacturer rule waivers to 
contracts with durations of five years or less. In the prior fiscal 
year, SBA granted 24 individual waivers each year for contracts that 
exceed five years. The estimated total value for contracts covered by 
these waivers was $4.6 billion.
    The most probable effect of denying waivers for such contracts in 
the future is that the procuring agencies will choose not to set aside 
those contracts for small business resellers. Instead, the procuring 
agencies would solicit many of those contracts as full-and-open 
competitions. It is also possible, however, that the agencies could 
limit the duration of the contracts to five years in order to promote 
small-business opportunity through the use of a set-aside.
    Of those two possibilities, the first (a full-and-open 
solicitation) is an economic transfer of the reseller's markup from a 
small business reseller to what most likely would be an other-than-
small reseller. The second (limiting the contract to five years) 
creates possible benefits at the sixth year for newly established 
domestic small-business manufacturers. Under the current policy, those 
manufacturers might be overlooked by the agency and its contractors 
(i.e., resellers) because the ongoing contract does not require the 
contractor to purchase from a domestic small-business manufacturer.
    SBA estimates that, in a quarter of the cases in which an agency 
would otherwise seek a waiver for a contract exceeding five years, the 
agencies would choose to limit the contract (and thus the effect of the 
waiver) to five years. This amounts to six contracts, with a total 
value of $1.2 billion. Assuming that these contracts are ten years in 
length and agencies would recompete the contracts in the five final 
years, the potential recompeted value is $575 million, unadjusted for 
inflation. However, it is unknown whether domestic small-business 
manufacturers would be available to supply the resellers at the point 
of recompetition--five years after the initial award. Thus, although 
this change results in potential more opportunities for small business 
manufacturers in years six and beyond, the benefits of the additional 
opportunities are not quantifiable because of lack of information about 
the domestic small-business manufacturing base in the future.
    c. Require information from 8(a) applicants about the terms and 
restrictions of a retirement account only at the request of SBA, 
instead of in every instance.
    SBA proposes to amend Sec.  124.104(c)(2)(ii) to eliminate the 
prior requirement that 8(a) applicants must provide the terms and 
conditions of retirement accounts in order to have the values of those 
accounts excluded from the owner's net worth. SBA would require the 
applicant to submit documentation of a retirement account only upon 
SBA's request.
    SBA processes approximately 600 8(a) applications from individual-
owned firms per year. Based on sampling, SBA found that 70 percent of 
those applications disclosed retirement accounts to SBA. Thus, this 
regulatory change will reduce the documentation burden for about 420 
8(a) applicants per year. SBA estimates the existing burden to be 20 
minutes per applicant, and the benefit of the proposed rule's 
cancellation of the documentation requirement therefore to be about 
$15,500 per year.\2\
---------------------------------------------------------------------------

    \2\ From 20 minutes of time saved by 420 applicants valued at 
the median wage of $55.41 for General and Operations Managers, 
according to the BLS General and Operations Managers (bls.gov) 
(retrieved April 12, 2022), plus 100% for benefits and overhead.
---------------------------------------------------------------------------

    d. Permit 8(a) applications to go forward where the firm or its 
affected principals can demonstrate that federal financial obligations 
have been settled and discharged or forgiven by the Federal Government.
    Section 124.108(e) of the proposed rule states that an applicant 
will not be denied eligibility to the 8(a) program on the basis that 
the applicant's prior federal financial obligations have been settled 
and either discharged or forgiven by the Federal Government. In rare 
cases, SBA has denied 8(a) eligibility based on prior federal financial 
obligations, even though the government has discharged the obligation. 
SBA internal data shows that SBA rejects approximately two applications 
per year on this basis. SBA estimates that the average financial 
obligation in those cases is $10,000. Therefore, this proposed change 
results in an estimated annual benefit to future 8(a) applications of 
$20,000, from an

[[Page 55662]]

average of two applicants annually with obligations of $10,000 each.
    e. Delete bank fees from the list of exclusions in the 
subcontracting base.
    SBA would amend Sec.  125.3(a)(1)(iii) to delete bank fees from the 
list of costs excludable from the subcontracting base when a contractor 
seeks to comply with a subcontracting plan. After reviewing Federal 
Deposit Insurance Corporation (FDIC) and Federal Reserve data, SBA 
estimates that the average bank fee expense per account holder is $300 
per year. The number of contractors that hold a subcontracting plan is 
5,500. Thus, the total amount to be added to the subcontracting base 
across all contractors is $1.65 million.
    The benefit to small-business subcontractors of the amendment would 
be additional dollars subcontracted to small business. Assuming that 
the total level of small-business subcontracting stays consistent at 
32%, contractors would spend $525,000 of the added amount with small 
businesses. However, 18% of economy-wide spending on banking services 
is spent with banks that qualify as small businesses. Assuming 
contractor spending approximates economy-wide spending, this equates to 
$297,000 of the current spending on bank fees through contractors with 
subcontracting plans. Thus, after subtracting the amount already spent 
with small-business banks, new spending with small business 
subcontractors would be $228,000 annually.
    The proposed rule would pose a cost to contractors to track their 
spending on bank fees in order to include them in the subcontracting 
base. This may require updating vendor management systems. To determine 
a cost per contractor for this change, SBA reviewed the Paperwork 
Reduction Act Supporting Statement for the FAR's Subcontracting Plan 
forms, under OMB Control No. 9000-0007. Considering the burdens 
estimated in the Supporting Statement, SBA estimates that the average 
cost of this change would come to $100 per contractor annually. The 
cost therefore amounts to $550,000 across all contractors with 
subcontracting plans.
    The total regulatory impact is therefore a net cost of $322,000 
annually. The benefits accrue to small business subcontractors, whereas 
the cost is borne by other-than-small prime contractors with 
subcontracting plans.
    f. Require businesses to include indirect costs in their 
subcontracting plans.
    Section 125.3(c)(1)(iv) would require contractors with individual 
subcontracting plans to report indirect costs in their individual 
subcontracting reports (ISRs). Contractors already are required to 
report indirect costs in their summary subcontracting reports (SSRs). 
Thus, the only cost associated with the proposed change would be the 
cost of allocating indirect costs to the ISRs. To determine a cost per 
contractor for this change, SBA reviewed the Paperwork Reduction Act 
Supporting Statement for the FAR's Subcontracting Plan forms, under OMB 
Control No. 9000-0007. Considering the burdens estimated in the 
Supporting Statement, SBA estimates the cost to be $50 per contractor 
with an ISR.\3\ In FY20, 4,389 contractors submitted an ISR. Thus, the 
aggregate cost of this proposed change amounts to $220,000 annually.
---------------------------------------------------------------------------

    \3\ This number is based on results from OMB's ICR Agency 
Submission, available at View Information Collection Request (ICR) 
Package (reginfo.gov). Retrieved April 12, 2022.
---------------------------------------------------------------------------

    There may be a benefit to the change because agencies use the ISR 
to evaluate a contractor's compliance with its subcontracting plan. 
Thus, by including more indirect costs in the base subcontracting 
value, contractors will have the incentive to subcontract more to small 
businesses in order to meet small business goals in their 
subcontracting plans. This effect may be short-lived because 
contractors can compensate by negotiating lower subcontracting goals. 
Thus, SBA cannot quantify the potential benefit for this change.
    g. Require agencies to assign a negative past performance rating to 
a small-business contract awardee where the contracting officer 
determined that the small business failed to meet required limitations 
on subcontracting.
    SBA proposes to require that, where a contracting officer 
determines that at the conclusion of contract performance a small 
business contractor fails to satisfy the limitations on subcontracting 
for a particular contract, that contractor would receive a negative 
past-performance rating for that contract for the appropriate factor or 
subfactor in accordance with FAR 42.1503. SBA determines that this 
change does not have any incremental cost or incremental benefit. 
Agencies already are required to submit past performance ratings. 
Though a negative rating might affect a firm's ability to obtain a 
contract in the future, there is no way to gauge the impact on the 
firm's odds, and, regardless, the end result would likely be only a 
transfer in the contract award from the noncompliant firm to a firm 
without a negative past-performance rating. This change therefore does 
not present a net cost nor net benefit.
3. What are the alternatives to this rule?
    The alternative to the proposed rule would be to keep SBA's 
processes and procedures as currently stated in the Code of Federal 
Regulations. However, because so much of this proposed rule codifies 
practices and interpretations already in place, using the alternative 
would impose an information-search cost on 8(a) BD participants in 
particular and small business contractors in general. Many of the 
clarifications in this proposed rule already have been applied at the 
case level but are not widely known. This proposed rule makes those 
clarifications known to the public.
    Additionally, this proposed rule implements section 863 of NDAA 
FY22, regarding changes to SAM.gov after an adverse SBA status 
decision. There is no alternative to implementing this statutory 
requirement.
Summary of Costs and Cost Savings
    SBA calculates $262,000 in annual aggregate benefits, and 
approximately $770,500 in annual aggregate costs, with many costs and 
benefits uncertain. SBA calculates the net annual cost of the proposed 
rule to be $500,000.

Executive Order 12988

    This action meets applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.

Executive Order 13132

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

Executive Order 13563

    Executive Order 13563, Improving Regulation and Regulatory Review, 
directs agencies to, among other things: (a) afford the public a 
meaningful opportunity to comment through the internet on proposed 
regulations, with a comment period that should generally consist of not 
less than 60 days; (b) provide for an ``open exchange'' of information 
among government officials, experts, stakeholders, and the

[[Page 55663]]

public; and (c) seek the views of those who are likely to be affected 
by the rulemaking, even before issuing a notice of proposed rulemaking. 
As far as practicable or relevant, SBA considered these requirements in 
developing this proposed rule, as discussed below.
    1. Did the agency use the best available techniques to quantify 
anticipated present and future costs when responding to Executive Order 
12866 (e.g., identifying changing future compliance costs that might 
result from technological innovation or anticipated behavioral 
changes)?
    To the extent possible, the agency utilized the most recent data 
available in the Federal Procurement Data System--Next Generation, 
DSBS, and SAM.
    Public participation: Did the agency: (a) afford the public a 
meaningful opportunity to comment through the internet on any proposed 
regulation, with a comment period that should generally consist of not 
less than 60 days; (b) provide for an ``open exchange'' of information 
among government officials, experts, stakeholders, and the public; (c) 
provide timely online access to the rulemaking docket on 
Regulations.gov; and (d) seek the views of those who are likely to be 
affected by rulemaking, even before issuing a notice of proposed 
rulemaking?
    The proposed rule will have a 60-day comment period and will be 
posted on www.regulations.gov to allow the public to comment 
meaningfully on its provisions. SBA has also discussed some of the 
proposals in this rule with stakeholders at various small business on-
line procurement conferences.
    Flexibility: Did the agency identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public?
    The proposed rule is intended to eliminate confusion in its 
existing regulations and reduce unnecessary burdens on small business.

Congressional Review Act (5 U.S.C. 801-808)

    The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally provides that before a ``major rule'' may take effect, the 
agency promulgating the rule must submit a rule report, which includes 
a copy of the rule, to each House of the Congress and to the 
Comptroller General of the United States. SBA will submit a report 
containing this proposed rule and other required information to the 
U.S. Senate, the U.S. House of Representatives, and 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(2).

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

    This rule does not impose additional reporting or recordkeeping 
requirements under the Paperwork Reduction Act, 44 U.S.C. chapter 35.
    In 2019, SBA revised its regulations to give contracting officers 
discretion to request information demonstrating compliance with the 
limitations on subcontracting requirements. See 84 FR 65647 (Nov. 29, 
2019). In conjunction with this revision, SBA requested an Information 
Collection Review by OMB (Limitations on Subcontracting Reporting, OMB 
Control Number 3245-0400). OMB approved the Information Collection. The 
proposed rule would not alter the contracting officer's discretion to 
require a contractor to demonstrate its compliance with the limitations 
on subcontracting at any time during performance and upon completion of 
a contract. It merely provides consequences where a contracting 
officer, utilizing his or her discretion, determines that a contractor 
did not meet the applicable limitation of subcontracting requirement. 
The estimated number of respondents, burden hours, and costs remain the 
same as that identified by SBA in the previous Information Collection. 
As such, SBA believes this provision is covered by its existing 
Information Collection, Limitations on Subcontracting Reporting.

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

    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, section 
605 of the RFA allows an agency to certify a rule, in lieu of preparing 
an analysis if the rulemaking is not expected to have a significant 
economic impact on a substantial number of small entities.
    The RFA defines ``small entity'' to include small businesses, small 
organizations, and small governmental jurisdictions. This proposed rule 
involves requirements for participation in SBA's 8(a) Business 
Development (BD) Program. Some BD Participants are owned by Tribes, 
ANCs, NHOs, or CDCs. As such, the proposed rule relates to various 
small entities. The number of entities affected by the proposed rule 
includes all Participants in SBA's 8(a) BD program. For reference, SBA 
Business Opportunity Specialists assisted over 11,000 entities in 2020.
    This proposed rule implements a statutory enactment and a federal 
court decision and codifies practices and interpretations already in 
place for Participants. In doing so, it adds reporting requirements but 
these requirements relate to information collected in the normal course 
of business. SBA therefore expects the collection costs to be de 
minimis and the costs of reporting to be minimal. Moreover, the 
reporting requirements, such as the requirement that contractors report 
indirect costs in their individual subcontracting reports (ISRs), will 
not fall on small entities. Some of the proposed rule's changes, such 
as that to documentation for retirement plans, reduce reporting 
requirements for small entities that are Participants. Additionally, 
the proposed rule's clarification of practices and interpretations 
decreases uncertainty for Participants. Therefore, SBA does not believe 
the proposed rule would have a disparate impact on small entities or 
would impose any additional significant costs on them. For the reasons 
discussed, SBA certifies that this proposed rule does not have a 
significant economic impact on a substantial number of small entities.

List of Subjects

13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Small businesses.

13 CFR Part 124

    Administrative practice and procedure, Government procurement, 
Government property, Small businesses.

13 CFR Part 125

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

13 CFR Part 126

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

[[Page 55664]]

13 CFR Part 127

    Government contracts, Reporting and recordkeeping requirements, 
Small businesses.

    Accordingly, for the reasons stated in the preamble, SBA proposes 
to amend 13 CFR parts 121, 124, 125, 126, and 127 as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 is revised to read as follows:

    Authority:  15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, 694a(9), 
and 9012.

0
2. Amend Sec.  121.103 by:
0
a. Revising paragraph (h) introductory text and the third sentence of 
Example 2 to paragraph (h) introductory text;
0
b. Redesignating paragraphs (h)(1) through (4) as paragraphs (h)(2) 
through (5), respectively;
0
c. Adding a new paragraph (h)(1);
0
d. Revising newly redesignated paragraphs (h)(3) and (4); and
0
e. Adding paragraph (i).
    The revisions and additions read as follows:


Sec.  121.103   How does SBA determine affiliation?

* * * * *
    (h) Affiliation based on joint ventures. A joint venture is an 
association of individuals and/or concerns with interests in any degree 
or proportion intending to engage in and carry out business ventures 
for joint profit over a two-year period, for which purpose they combine 
their efforts, property, money, skill, or knowledge, but not on a 
continuing or permanent basis for conducting business generally. This 
means that a specific joint venture generally may not be awarded 
contracts beyond a two-year period, starting from the date of the award 
of the first contract, without the partners to the joint venture being 
deemed affiliated for the joint venture. However, a joint venture may 
be issued an order under a previously awarded contract beyond the two-
year period. Once a joint venture receives a contract, it may submit 
additional offers for a period of two years from the date of that first 
award. An individual joint venture may be awarded one or more contracts 
after that two-year period as long as it submitted an offer prior to 
the end of that two-year period. SBA will find joint venture partners 
to be affiliated, and thus will aggregate their receipts and/or 
employees in determining the size of the joint venture for all small 
business programs, where the joint venture submits an offer after two 
years from the date of the first award. The same two (or more) entities 
may create additional joint ventures, and each new joint venture may 
submit offers for a period of two years from the date of the first 
contract to the joint venture without the partners to the joint venture 
being deemed affiliates. At some point, however, such a longstanding 
inter-relationship or contractual dependence between the same joint 
venture partners may lead to a finding of general affiliation between 
and among them. SBA may also determine that the relationship between a 
prime contractor and its subcontractor is a joint venture pursuant to 
paragraph (h)(3) of this section. For purposes of this paragraph (h), 
contract refers to prime contracts, novations of prime contracts, and 
any subcontract in which the joint venture is treated as a similarly 
situated entity as the term is defined in part 125 of this chapter.
* * * * *
    Example 2 to paragraph (h) introductory text. * * * On March 19, 
year 3, XY receives its fifth contract. * * *
* * * * *
    (1) Form of joint venture. A joint venture: must be in writing; 
must do business under its own name and be identified as a joint 
venture in the System for Award Management (SAM) for the award of a 
prime contract or agreement; and may be in the form of a formal or 
informal partnership or exist as a separate limited liability company 
or other separate legal entity.
    (i) If a joint venture exists as a formal separate legal entity, it 
cannot not be populated with individuals intended to perform contracts 
awarded to the joint venture for any contract or agreement which is set 
aside or reserved for small business, unless all parties to the joint 
venture are similarly situated as that term is defined in part 125 of 
this chapter (i.e., the joint venture may have its own separate 
employees to perform administrative functions, including one or more 
Facility Security Officer(s), but may not have its own separate 
employees to perform contracts awarded to the joint venture).
    (ii) A populated joint venture that is not comprised entirely of 
similarly situated entities will be ineligible for any contract or 
agreement which is set aside or reserved for small business.
    (iii) In determining the size of a populated joint venture, SBA 
will aggregate the revenues or employees of all partners to the joint 
venture.
* * * * *
    (3) Ostensible subcontractors. A contractor and its ostensible 
subcontractor are treated as joint venturers for size determination 
purposes. An ostensible subcontractor is a subcontractor that is not a 
similarly situated entity, as that term is defined in Sec.  125.1 of 
this chapter, and performs primary and vital requirements of a 
contract, or of an order, or is a subcontractor upon which the prime 
contractor is unusually reliant. As long as each concern is small under 
the size standard corresponding to the NAICS code assigned to the 
contract (or the prime contractor is small if the subcontractor is the 
SBA-approved mentor to the prime contractor), the arrangement will 
qualify as a small business.
    (i) All aspects of the relationship between the prime and 
subcontractor are considered, including, but not limited to, the terms 
of the proposal (such as contract management, transfer of the 
subcontractor's incumbent managers, technical responsibilities, and the 
percentage of subcontracted work), agreements between the prime and 
subcontractor (such as bonding assistance or the teaming agreement), 
whether the subcontractor is the incumbent contractor and is ineligible 
to submit a proposal because it exceeds the applicable size standard 
for that solicitation, and whether the prime contractor relies on the 
subcontractor's experience because it lacks relevance experience of its 
own.
    (ii) In a general construction contract, the primary and vital 
requirements of the contract are the management and oversight of the 
project, not the actual construction or specialty trade construction 
work performed.
    (4) Receipts/employees attributable to joint venture partners. For 
size purposes, a concern must include in its receipts its proportionate 
share of joint venture receipts. Proportionate receipts do not include 
proceeds from transactions between the concern and its joint ventures 
(e.g., subcontracts from a joint venture entity to joint venture 
partners) already accounted for in the concern's tax return. In 
determining the number of employees, a concern must include in its 
total number of employees its proportionate share of joint venture 
employees. For the calculation of receipts, the appropriate 
proportionate share is the same percentage of receipts or employees as 
the joint venture partner's percentage share of the work performed by 
the joint venture. For a populated joint venture (where work is 
performed by the joint venture entity itself and not by the individual 
joint venture partners) the appropriate share is the same percentage as 
the joint venture partner's percentage ownership

[[Page 55665]]

share in the joint venture. For the calculation of employees, the 
appropriate share is the same percentage of employees as the joint 
venture partner's percentage ownership share in the joint venture, 
after first subtracting any joint venture employee already accounted 
for in one of the partner's employee counts.
    Example 1 to paragraph (h)(4). Joint Venture AB is awarded a 
contract for $10M. The joint venture will perform 50% of the work, with 
A performing $2M (40% of the 50%, or 20% of the total value of the 
contract) and B performing $3M (60% of the 50% or 30% of the total 
value of the contract). Since A will perform 40% of the work done by 
the joint venture, its share of the revenues for the entire contract is 
40%, which means that the receipts from the contract awarded to Joint 
Venture AB that must be included in A's receipts for size purposes are 
$4M. A must add $4M to its receipts for size purposes, unless its 
receipts already account for the $4M in transactions between A and 
Joint Venture AB.
* * * * *
    (i) Affiliation based on franchise and license agreements. The 
restraints imposed on a franchisee or licensee by its franchise or 
license agreement relating to standardized quality, advertising, 
accounting format and other similar provisions, generally will not be 
considered in determining whether the franchisor or licensor is 
affiliated with the franchisee or licensee provided the franchisee or 
licensee has the right to profit from its efforts and bears the risk of 
loss commensurate with ownership. Affiliation may arise, however, 
through other means, such as common ownership, common management or 
excessive restrictions upon the sale of the franchise interest.
0
3. Amend Sec.  121.404 by:
0
a. Revising paragraphs (a)(1)(i)(B), (a)(1)(ii)(B), and (a)(1)(iv);
0
b. Removing the reference ``Sec.  121.103(h)(2)'' in paragraph (d) and 
adding in its place ``Sec.  121.103(h)(3)'';
0
c. Revising the first sentence in paragraph (g)(2)(i) and the second 
sentence in paragraph (g)(2)(iii);
0
d. Removing the reference ``Sec.  121.103(h)(4)'' in paragraph (g)(5) 
and adding in its place ``Sec.  121.103(h)(3)''; and
0
e. Adding paragraph (g)(6).
    The revisions and addition read as follows:


Sec.  121.404   When is the size status of a business concern 
determined?

    (a) * * *
    (1) * * *
    (i) * * *
    (B) Set-aside Multiple Award Contracts. Except as set forth in 
Sec.  124.503(i)(1)(iv) of this chapter for sole source 8(a) orders, 
for a Multiple Award Contract that is set aside or reserved for small 
business (i.e., small business set-aside, 8(a) small business, service-
disabled veteran-owned small business, HUBZone small business, or 
women-owned small business), if a business concern (including a joint 
venture) is small at the time of offer and contract-level 
recertification for the Multiple Award Contract, it is small for each 
order or Blanket Purchase Agreement issued against the contract, unless 
a contracting officer requests a size recertification for a specific 
order or Blanket Purchase Agreement.
    (ii) * * *
    (B) Set-aside Multiple Award Contracts. Except as set forth in 
Sec.  124.503(i)(1)(iv) of this chapter for sole source 8(a) orders, 
for a Multiple Award Contract that is set aside or reserved for small 
business (i.e., small business set-aside, 8(a) small business, service-
disabled veteran-owned small business, HUBZone small business, or 
women-owned small business), if a business concern (including a joint 
venture) is small at the time of offer and contract-level 
recertification for discrete categories on the Multiple Award Contract, 
it is small for each order or Agreement issued against any of those 
categories, unless a contracting officer requests a size 
recertification for a specific order or Blanket Purchase.
* * * * *
    (iv) Multiple award contract where price not required. For a 
Multiple Award Contract, where concerns are not required to submit 
price as part of the offer for the contract, size for the contract will 
be determined as of the date of initial offer, which may not include 
price. Size for set-aside orders will be determined in accordance with 
paragraph (a)(1)(i)(A) or (B) or (a)(1)(ii)(A) or (B) of this section, 
as appropriate.
* * * * *
    (g) * * *
    (2)(i) In the case of a merger, acquisition, or sale which results 
in a change in controlling interest under Sec.  121.103, where contract 
novation is not required, the contractor must, within 30 days of the 
transaction becoming final, recertify its small business size status to 
the procuring agency, or inform the procuring agency that it is other 
than small. * * *
* * * * *
    (iii) * * * If the merger, sale, or acquisition (including 
agreements in principle) occurs within 180 days of the date of an offer 
relating to the award of a contract, order, or agreement and the 
offeror is unable to recertify as small, it will not be eligible as a 
small business to receive the award of the contract, order, or 
agreement. * * *
* * * * *
    (6) Where a joint venture must recertify its small business size 
status under paragraph (g) of this section, the joint venture can 
recertify as small where all parties to the joint venture qualify as 
small at the time of recertification, or the prot[eacute]g[eacute] 
small business in a still active mentor-prot[eacute]g[eacute] joint 
venture qualifies as small at the time of recertification. A joint 
venture can recertify as small even though the date of recertification 
occurs more than two years after the joint venture received its first 
contract award (i.e., recertification is not considered a new contract 
award under Sec.  121.103(h)).
* * * * *
0
4. Amend Sec.  121.411 by revising paragraph (c) to read as follows:


Sec.  121.411   What are the size procedures for SBA's Section 8(d) 
Subcontracting Program?

* * * * *
    (c) Notice of awardee. Upon determination of the successful 
subcontract offeror for a competitive subcontract over the simplified 
acquisition threshold, but prior to award, the prime contractor must 
inform each unsuccessful subcontract offeror in writing of the name and 
location of the apparent successful offeror.
* * * * *
0
5. Amend Sec.  121.507 by adding paragraph (d) to read as follows:


Sec.  121.507   What are the size standards and other requirements for 
the purchase of Government-owned timber (other than Special Salvage 
Timber)?

* * * * *
    (d) The Director of Government Contracting (D/GC) may waive one or 
more of the requirements set forth in paragraphs (a)(3) and (4) of this 
section in limited circumstances where conditions make the 
requirement(s) impractical or prohibitive. A request for waiver must be 
made to the D/GC and contain facts, arguments, and any appropriate 
supporting documentation as to why a waiver should be granted.
0
6. Amend Sec.  121.702 in paragraph (c)(7) by revising the first 
sentence and adding a sentence following the first sentence to read as 
follows:


Sec.  121.702   What size and eligibility standards are applicable to 
the SBIR and STTR programs?

* * * * *

[[Page 55666]]

    (c) * * *
    (7) * * * A concern and its ostensible subcontractor are treated as 
joint venturers. As such, they are affiliates for size determination 
purposes and must meet the ownership and control requirements 
applicable to joint ventures. * * *
* * * * *
0
6. Amend Sec.  121.1001 by revising paragraphs (a)(6)(i), (a)(8)(i), 
(a)(9)(i), (b)(2)(ii) introductory text, and (b)(2)(ii)(A) and (C) to 
read as follows:


Sec.  121.1001   Who may initiate a size protest or request a formal 
size determination?

    (a) * * *
    (6) * * *
    (i) Any offeror for a specific HUBZone set-aside contract that the 
contracting officer has not eliminated from consideration for any 
procurement-related reason, such as non-responsiveness, technical 
unacceptability, or outside of the competitive range;
* * * * *
    (8) * * *
    (i) Any offeror for a specific service-disabled veteran-owned small 
business set-aside contract that the contracting officer has not 
eliminated from consideration for any procurement-related reason, such 
as non-responsiveness, technical unacceptability, or outside of the 
competitive range;
* * * * *
    (9) * * *
    (i) Any offeror for a specific contract set aside for WOSBs or 
WOSBs owned by one or more women who are economically disadvantaged 
(EDWOSB) that the contracting officer has not eliminated from 
consideration for any procurement-related reason, such as non-
responsiveness, technical unacceptability or outside of the competitive 
range;
* * * * *
    (b) * * *
    (2) * * *
    (ii) Concerning individual sole source 8(a) contract awards and 
competitive 8(a) contract awards where SBA cannot verify the 
eligibility of the apparent successful offeror because SBA finds the 
concern to be other than small, the following entities may request a 
formal size determination:
    (A) The Participant nominated for award of the particular sole 
source contract, or found to be ineligible for a competitive 8(a) 
contract due to its size;
* * * * *
    (C) The SBA District Director in the district office that services 
the Participant, the Associate Administrator for Business Development, 
or the Associate General Counsel for Procurement Law.
* * * * *
0
7. Amend Sec.  121.1004 by:
0
a. Revising paragraph (a)(1);
0
b. Adding the words ``without a reserve'' at the end of paragraph 
(a)(2)(iii); and
0
c. Adding paragraphs (f) and (g).
    The revision and addition read as follows:


Sec.  121.1004   What time limits apply to size protests?

    (a) * * *
    (1) Sealed bids or sales (including protests on partial set-asides 
and reserves of Multiple Award Contracts and set-asides of orders 
against Multiple Award Contracts). (i) A protest must be received by 
the contracting officer prior to the close of business on the 5th day, 
exclusive of Saturdays, Sundays, and legal holidays, after bid opening 
for:
    (A) The contract;
    (B) An order issued against a Multiple Award Contract if the 
contracting officer requested a new size certification in connection 
with that order; or
    (C) Except for orders or Blanket Purchase Agreements issued under 
any Federal Supply Schedule contract, an order or Blanket Purchase 
Agreement set aside for small business (i.e., small business set-aside, 
8(a) small business, service-disabled veteran-owned small business, 
HUBZone small business, or women-owned small business) where the 
underlying Multiple Award Contract was awarded on an unrestricted 
basis.
    (ii) Where the identified low bidder is determined to be ineligible 
for award, a protest of any other identified low bidder must be 
received prior to the close of business on the 5th day, exclusive of 
Saturdays, Sundays, and legal holidays, after the contracting officer 
has notified interested parties of the identity of that low bidder.
* * * * *
    (f) Apparent successful offeror. A party with standing, as set 
forth in Sec.  121.1001(a), may file a protest only against an apparent 
successful offeror or an offeror in line to receive an award.
    (g) GAO corrective action. SBA will dismiss any size protest 
relating to an initial apparent successful offeror where an agency 
decides to reevaluate offers as a corrective action in response to a 
protest before the Government Accountability Office (GAO). When the 
apparent successful offeror is announced after reevaluation, interested 
parties will again have the opportunity to protest the size of the new 
or same apparent successful offeror within five business days after 
such notification.
0
8. Amend Sec.  121.1009 by revising paragraphs (a)(1) and (3) and 
(g)(5) to read as follows:


Sec.  121.1009   What are the procedures for making the size 
determination?

    (a) * * *
    (1) After receipt of a protest or a request for a formal size 
determination:
    (i) If no protest is pending before GAO, the SBA Area Office will 
issue a formal size determination within 15 business days, if possible;
    (ii) If a protest is pending before GAO, the SBA Area Office will 
place the size determination case in suspense. Once GAO issues a 
decision, the SBA the Area Office will recommence the size 
determination process and issue a formal size determination within 15 
business days of the GAO decision, if possible.
* * * * *
    (3) If SBA does not issue its determination in accordance with 
paragraph (a)(1) of this section (or request an extension that is 
granted), the contracting officer may award the contract if he or she 
determines in writing that there is an immediate need to award the 
contract and that waiting until SBA makes its determination will be 
disadvantageous to the Government. Notwithstanding such a 
determination, the provisions of paragraph (g) of this section apply to 
the procurement in question.
* * * * *
    (g) * * *
    (5) A concern determined to be other than small under a particular 
size standard is ineligible for any procurement or any assistance 
authorized by the Small Business Act or the Small Business Investment 
Act of 1958 which requires the same or a lower size standard, unless 
SBA recertifies the concern to be small pursuant to Sec.  121.1010 or 
OHA reverses the adverse size determination. After an adverse size 
determination, a concern cannot self-certify as small under the same or 
lower size standard unless it is first recertified as small by SBA. If 
a concern does so, it may be in violation of criminal laws, including 
section 16(d) of the Small Business Act, 15 U.S.C. 645(d). If the 
concern has already certified itself as small under the same or a 
smaller size standard on a pending procurement or on an application for 
SBA assistance, the concern must immediately inform the contracting 
officer or responsible official of the adverse size determination.
    (i) Not later than two days after the date on which SBA issues a 
final size determination finding a business concern to be other than 
small, such

[[Page 55667]]

concern must update its size status in the System for Award Management 
(or any successor system).
    (ii) If a business concern fails to update its size status in the 
System for Award Management (or any successor system) in response to an 
adverse size determination, SBA will make such update within two days 
of the business's failure to do so.
* * * * *
0
9. Amend Sec.  121.1203 by:
0
a. Redesignating paragraph (d) as paragraph (g);
0
b. Adding a new paragraph (d) and paragraphs (e) and (f); and
0
c. In newly redesignated paragraph (g)(2), removing ``(d)(1)'' and 
adding ``(g)(1)'' in its place.
    The additions read as follows:


Sec.  121.1203   When will a waiver of the Nonmanufacturer Rule be 
granted for an individual contract?

* * * * *
    (d) Applicability of individual waiver. An individual waiver 
applies only to the contract for which it is granted and does not apply 
to modifications outside the scope of the contract or other procurement 
actions (e.g., follow-on or bridge contracts).
    (e) Long term contracts. SBA will not grant an individual waiver in 
connection with a long-term contract (i.e., a contract with a duration 
of longer than five years, including options).
    (f) Multiple item procurements. For a multiple item procurement, a 
waiver must be sought and granted for each item for which the procuring 
agency believes no small business manufacturer or processor can 
reasonably be expected to offer a product meeting the specifications of 
the solicitation. SBA's waiver applies only to the specific item(s) 
identified, not to the entire contract.
* * * * *
0
10. Amend Sec.  121.1204 by:
0
a. Revising paragraphs (b)(1)(i) and (ii);
0
b. Adding a sentence after the first sentence in paragraph (b)(1)(iii);
0
c. Redesignating paragraphs (b)(2) and (3) as paragraphs (b)(3) and 
(4), respectively;
0
d. Adding a new paragraph (b)(2);
0
e. Revising newly redesignated paragraph (b)(4); and
0
f. Adding paragraph (b)(5).
    The revisions and additions read as follows:


Sec.  121.1204   What are the procedures for requesting and granting 
waivers?

* * * * *
    (b) * * *
    (1) * * *
    (i) A definitive statement of each specific item sought to be 
waived and justification as to why the specific item is required;
    (ii) The proposed solicitation number, NAICS code, dollar amount of 
the procurement, dollar amount of the item(s) for which a waiver is 
sought, and a brief statement of the procurement history;
    (iii) * * * For a multiple item procurement, a contracting officer 
must determine that no small business manufacturer or processor 
reasonably can be expected to offer each item for which a waiver is 
sought. * * *
* * * * *
    (2) Unless an agency has justified a brand-name acquisition, the 
market research conducted to support the waiver request should be 
tailored to attract the attention of potential small business 
manufacturers or processors, not resellers or distributors.
* * * * *
    (4) SBA will examine the contracting officer's determination and 
any other information it deems necessary to make an informed decision 
on the individual waiver request.
    (i) If SBA's research verifies that no small business manufacturers 
or processors exist for the item, the Director, Office of Government 
Contracting will grant an individual, one-time waiver.
    (ii) If a small business manufacturer or processor is found for the 
product in question, the Director, Office of Government Contracting 
will deny the request.
    (iii) Where an agency requests a waiver for multiple items, SBA may 
grant a waiver for all items requested, deny a waiver for all items 
requested, or grant a waiver for some but not all of the items 
requested. SBA's determination will specifically identify the items for 
which a waiver is granted, and the procuring agency must then identify 
the specific items for which the waiver applies in its solicitation.
    (iv) The Director, Office of Government Contracting's decision to 
grant or deny a waiver request represents the final agency decision by 
SBA.
    (5) A nonmanufacturer rule waiver for a specific solicitation 
expires one year after SBA's determination to grant the waiver. This 
means that contract award must occur within one year of the date SBA 
granted the waiver. Where a contract is not awarded within one year, 
the procuring agency must come back to SBA with revised market research 
requesting that the waiver (or waivers in the case of a multiple item 
procurement) be extended.


Sec.  121.1205   [Amended]

0
11. Amend Sec.  121.1205 by removing ``http://www.sba.gov/aboutsba/sbaprograms/gc/programs/gc_waivers_nonmanufacturer.html'' and adding in 
its place ``https://www.sba.gov/document/support-non-manufacturer-rule-class-waiver-list''.

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

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

    Authority:  15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d), 644, 42 
U.S.C. 9815; and Pub. L. 99-661, 100 Stat. 3816; Sec. 1207, Pub. L. 
100-656, 102 Stat. 3853; Pub. L. 101-37, 103 Stat. 70; Pub. L. 101-
574, 104 Stat. 2814; Sec. 8021, Pub. L. 108-87, 117 Stat. 1054; and 
Sec. 330, Pub. L. 116-260.

0
13. Amend Sec.  124.102 by revising paragraph (c) to read as follows:


Sec.  124.102   What size business is eligible to participate in the 
8(a) BD program?

* * * * *
    (c) A concern whose application is denied due to size by 8(a) BD 
program officials may request a formal size determination with the SBA 
Government Contracting Area Office serving the geographic area in which 
the principal office of the business is located under part 121 of this 
chapter. Where the SBA Government Contracting Area Office determines 
that an applicant qualifies as a small business concern for the size 
standard corresponding to its primary NAICS code:
    (1) The Associate Administrator for Business Development (AA/BD) 
will certify the concern as eligible to participate in the 8(a) BD 
program if size was the only reason for decline; or
    (2) The concern may reapply for participation in the 8(a) BD 
program at any point after 90 days from the AA/BD's decline if size was 
not the only reason for decline. In such a case, the AA/BD will accept 
the size determination as conclusive of the concern's small business 
status, provided the applicant concern has not completed an additional 
fiscal year in the intervening period and SBA believes that the 
additional fiscal year changes the applicant's size.


Sec.  124.103   [Amended]

0
14. Amend Sec.  124.103 by removing the words ``physical handicap'' in 
paragraph (c)(2)(i) and adding in their place the words ``identifiable 
disability''.
0
15. Amend Sec.  124.104 by:
0
a. Revising the second sentence of paragraph (c)(2)(ii);

[[Page 55668]]

0
b. Removing paragraph (c)(2)(iii); and
0
c. Redesignating paragraph (c)(2)(iv) as paragraph (c)(2)(iii).
    The revision reads as follows:


Sec.  124.104   Who is economically disadvantaged?

* * * * *
    (c) * * *
    (2) * * *
    (ii) * * * In order to properly assess whether funds invested in a 
retirement account may be excluded from an individual's net worth, SBA 
may require the individual to provide information about the terms and 
restrictions of the account to SBA and certify that the retirement 
account is legitimate.
* * * * *
0
16. Amend Sec.  124.105 by:
0
a. Revising paragraphs (h)(2) and (i)(1); and
0
b. Adding a sentence after the first sentence in paragraph (i)(2).
    The revisions and addition read as follows:


Sec.  124.105   What does it mean to be unconditionally owned by one or 
more disadvantaged individuals?

* * * * *
    (h) * * *
    (2) A non-Participant concern in the same or similar line of 
business or a principal of such concern may generally not own more than 
a 10 percent interest in a Participant that is in the developmental 
stage or more than a 20 percent interest in a Participant in the 
transitional stage of the program, except that:
    (i) A former Participant in the same or similar line of business or 
a principal of such a former Participant (except those that have been 
terminated from 8(a) BD program participation pursuant to Sec. Sec.  
124.303 and 124.304) may have an equity ownership interest of up to 20 
percent in a current Participant in the developmental stage of the 
program or up to 30 percent in a transitional stage Participant; and
    (ii) A business concern approved by SBA to be a mentor pursuant to 
Sec.  125.9 of this chapter may own up to 40 percent of its 8(a) 
Participant prot[eacute]g[eacute] as set forth in Sec.  125.9(d)(2) of 
this chapter, whether or not that concern is in the same or similar 
line of business as the Participant.
    (i) * * *
    (1) Any Participant or former Participant that is performing one or 
more 8(a) contracts may substitute one disadvantaged individual or 
entity for another disadvantaged individual or entity without requiring 
the termination of those contracts or a request for waiver under Sec.  
124.515, as long as it receives SBA's approval prior to the change.
    (2) * * * In determining whether a non-disadvantaged individual 
involved in a change of ownership has more than a 20 percent interest 
in the concern, SBA will aggregate the interests of all immediate 
family members. * * *
* * * * *
0
17. Amend Sec.  124.107 by revising the introductory text to read as 
follows:


Sec.  124.107   What is potential for success?

    SBA must determine that with contract, financial, technical, and 
management support from the 8(a) BD program, the applicant concern is 
able to perform 8(a) contracts and possess reasonable prospects for 
success in competing in the private sector. To do so, the applicant 
concern must show that it has operated and received contracts (either 
in the private sector, at the state or local government level, or with 
the Federal Government) in its primary industry classification for at 
least two full years immediately prior to the date of its 8(a) BD 
application, unless a waiver for this requirement is granted pursuant 
to paragraph (b) of this section.
* * * * *
0
18. Amend Sec.  124.108 by adding a sentence at the end of paragraph 
(e) to read as follows:


Sec.  124.108   What other eligibility requirements apply for 
individuals or businesses?

* * * * *
    (e) * * * However, a firm will not be ineligible to participate in 
the 8(a) BD program if the firm or the affected principals can 
demonstrate that the financial obligations owed have been settled and 
discharged/forgiven by the Federal Government.
0
19. Amend Sec.  124.109 by revising the second sentence of paragraph 
(c)(1) and paragraph (c)(6)(i) to read as follows:


Sec.  124.109   Do Indian tribes and Alaska Native Corporations have 
any special rules for applying to and remaining eligible for the 8(a) 
BD program?

* * * * *
    (c) * * *
    (1) * * * Where an applicant or participating concern is owned by a 
federally recognized tribe, the concern's articles of incorporation, 
partnership agreement, limited liability company articles of 
organization, or other similar incorporating documents for tribally 
incorporated applicants must contain express sovereign immunity waiver 
language, or a ``sue and be sued'' clause which designates United 
States Federal Courts to be among the courts of competent jurisdiction 
for all matters relating to SBA's programs including, but not limited 
to, 8(a) BD program participation, loans, and contract performance. * * 
*
* * * * *
    (6) * * *
    (i) It has been in business for at least two years, as evidenced by 
income tax returns (individual or consolidated) or financial statements 
(either audited, reviewed or in-house as set-forth in Sec.  124.602) 
for each of the two previous tax years showing operating revenues in 
the primary industry in which the applicant seeks 8(a) BD 
certification; or
* * * * *
0
20. Amend Sec.  124.110 by:
0
a. Adding paragraph (d)(3);
0
b. Redesignating paragraphs (e) through (h) as paragraphs (f) through 
(i), respectively; and
0
c. Adding a new paragraph (e).
    The additions read as follows:


Sec.  124.110   Do Native Hawaiian Organizations (NHOs) have any 
special rules for applying to and remaining eligible for the 8(a) BD 
program?

* * * * *
    (d) * * *
    (3) The individuals responsible for the management and daily 
operations of an NHO-owned concern cannot manage more than two Program 
Participants at the same time.
    (i) An individual's officer position, membership on the board of 
directors, or position as a Native Hawaiian leader does not necessarily 
imply that the individual is responsible for the management and daily 
operations of a given concern. SBA looks beyond these corporate 
formalities and examines the totality of the information submitted by 
the applicant to determine which individual(s) manage the actual day-
to-day operations of the applicant concern.
    (ii) NHO officers, board members, and/or leaders may control a 
holding company overseeing several NHO-owned business concerns, 
provided they do not actually control the day-to-day management of more 
than two current 8(a) BD Program Participant firms.
    (iii) Because an individual may be responsible for the management 
and daily business operations of two NHO-owned concerns, the full-time 
devotion requirement (Sec.  124.106(a)) does not apply to NHO-owned 
applicants and Participants.
    (e) For corporate entities, an NHO must unconditionally own at 
least 51 percent of the voting stock and at least 51 percent of the 
aggregate of all classes of stock. For non-corporate entities, an NHO 
must unconditionally own at least a 51 percent interest.
* * * * *

[[Page 55669]]

Sec.  124.111   [Amended]

0
21. Amend Sec.  124.111 by removing the words ``SIC code'' in paragraph 
(d) introductory text and adding in their place the words ``NAICS 
code.''
0
22. Amend Sec.  124.204 by revising paragraph (a) to read as follows:


Sec.  124.204   How does SBA process applications for 8(a) BD program 
admission?

    (a) The AA/BD is authorized to approve or decline applications for 
admission to the 8(a) BD program.
    (1) Except as set forth in paragraph (a)(2) of this section, the 
Division of Program Certification and Eligibility (DPCE) will receive, 
review and evaluate all 8(a) BD applications.
    (2) Where an applicant answers on its electronic application that 
it is not a for-profit business (see Sec. Sec.  121.105 of this chapter 
and 124.104), that one or more of the individuals upon whom eligibility 
is based is not a United States citizen (see Sec.  124.104), that the 
applicant or one or more of the individuals upon whom eligibility is 
based has previously participated in the 8(a) BD program (see Sec.  
124.108(b)), or that the applicant is not an entity-owned business and 
has generated no revenues (see Sec.  124.107(a) and (b)(1)(iv)), its 
application will be closed automatically and it will be prevented from 
completing a full electronic application.
    (3) SBA will advise each program applicant within 15 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.
    (4) SBA will process an application for 8(a) BD program 
participation within 90 days of receipt of a complete application 
package by the DPCE. Incomplete packages will not be processed. Where 
during its screening or review SBA requests clarifying, revised or 
other information from the applicant, SBA's processing time for the 
application will be suspended pending the receipt of such information.
* * * * *
0
23. Amend Sec.  124.302 by:
0
a. Revising paragraph (b)(4);
0
b. Removing paragraph (b)(5); and
0
c. Redesignating paragraphs (b)(6) and (7) as paragraphs (b)(5) and 
(6), respectively.
    The revision reads as follows:


Sec.  124.302   What is graduation and what is early graduation?

* * * * *
    (b) * * *
    (4) Current ability to obtain bonding, where applicable;
* * * * *


Sec.  124.303   [Amended]

0
24. Amend Sec.  124.303 by removing ``Sec.  124.507'' in paragraph 
(a)(15) and adding in its place ``Sec.  124.509.''
0
25. Amend Sec.  124.304 by:
0
a. Revising paragraph (b); and
0
b. Removing ``Sec.  124.1010'' in paragraph (f)(3) and adding in its 
place ``Sec.  124.1002''.
    The revision reads as follows:


Sec.  124.304   What are the procedures for early graduation and 
termination?

* * * * *
    (b) Letter of Intent to Terminate or Graduate Early. (1) Except as 
set forth in paragraph (b)(2) of this section, when SBA believes that a 
Participant should be terminated or graduated prior to the expiration 
of its program term, SBA will notify the concern in writing. The Letter 
of Intent to Terminate or Graduate Early will set forth the specific 
facts and reasons for SBA's findings, and will notify the concern that 
it has 30 days from the date it receives the letter to submit a written 
response to SBA explaining why the proposed ground(s) should not 
justify termination or early graduation.
    (2) Where SBA obtains evidence that a Participant has ceased its 
operations, the AA/BD may immediately terminate a concern's 
participation in the 8(a) BD program by notifying the concern of its 
termination and right to appeal that decision to OHA.
* * * * *
0
26. Amend Sec.  124.402 by adding a sentence to the end of paragraph 
(b) to read as follows:


Sec.  124.402   How does a Participant develop a business plan?

* * * * *
    (b) * * * Where a sole source 8(a) requirement is offered to SBA on 
behalf of a Participant or a Participant is the apparent successful 
offeror for a competitive 8(a) requirement and SBA has not yet approved 
the Participant's business plan, SBA will approve the Participant's 
business plan as part of its eligibility determination prior to 
contract award.
* * * * *
0
27. Amend Sec.  124.403 by:
0
a. Adding two sentences after the first sentence in paragraph (a); and
0
b. Removing ``Sec.  124.507'' in paragraph (c)(1) and adding in its 
place ``Sec.  124.509''.
    The addition reads as follows:


Sec.  124.403  How is a business plan updated and modified?

    (a) * * * If there are no changes in a Participant's business plan, 
the Participant need not resubmit its business. A Participant must 
submit a new or modified business plan only if its business plan has 
changed from the previous year. * * *
* * * * *
0
28. Amend Sec.  124.501 by:
0
a. Revising paragraph (b), the introductory text to paragraph (g), the 
first sentence of paragraph (h), and the introductory text to paragraph 
(k);
0
b. Redesignating paragraph (k)(4) and (5) as paragraphs (k)(7) and (8), 
respectively; and
0
c. Adding new paragraphs (k)(4) and (5) and paragraphs (k)(6) and (9).
    The revisions and additions read as follows:


Sec.  124.501   What general provisions apply to the award of 8(a) 
contracts?

* * * * *
    (b) 8(a) contracts may either be sole source awards or awards won 
through competition with other Participants. In addition, for multiple 
award contracts not set aside for the 8(a) BD program, a procuring 
agency may award an 8(a) sole source order or set aside one or more 
specific orders to be competed only among eligible 8(a) Participants. 
Such an order may be awarded as an 8(a) award where the order was 
offered to and accepted by SBA as an 8(a) award and the order specifies 
that the limitations on subcontracting (Sec.  124.510) and/or non-
manufacturer rule (Sec.  121.406(b)) requirements apply as appropriate. 
A procuring activity cannot restrict an 8(a) competition (for either a 
contract or order) to require SBA socioeconomic certifications other 
than 8(a) certification (i.e., a competition cannot be limited only to 
business concerns that are both 8(a) and HUBZone, 8(a) and women-owned 
small business (WOSB), or 8(a) and service-disabled veteran-owned 
(SDVO) small business).
* * * * *
    (g) Before a Participant may be awarded either a sole source or 
competitive 8(a) contract, SBA must determine that the Participant is 
eligible for award. SBA will determine eligibility at the time of its 
acceptance of the underlying requirement into the 8(a) BD program for a 
sole source 8(a) contract, and after the apparent successful offeror is 
identified for a competitive 8(a) contract. Where a joint venture is 
the apparent successful offeror in connection with a competitive 8(a) 
procurement, SBA will determine whether the 8(a) partner to the joint

[[Page 55670]]

venture is eligible for award, but will not review the joint venture 
agreement to determine compliance with Sec.  124. 513 (see Sec.  
124.513(e)(1)). In any case in which an 8(a) Participant is determined 
to be ineligible, SBA will notify the 8(a) Participant of that 
determination. Eligibility is based on 8(a) BD program criteria, 
including whether the 8(a) Participant:
* * * * *
    (h) For a sole source 8(a) procurement, a concern must be a current 
Participant in the 8(a) BD program at the time of award and must 
qualify as small for the size standard corresponding to the NAICS code 
assigned to the contract or order on the date the contract or order is 
offered to the 8(a) BD program. * * *
* * * * *
    (k) In order to be awarded a sole source or competitive 8(a) 
construction contract, a Participant must have a bona fide place of 
business within the applicable geographic location determined by SBA. 
This will generally be the geographic area serviced by the SBA district 
office, a Metropolitan Statistical Area (MSA), a contiguous county 
(whether in the same or different state), or the geographical area 
serviced by a contiguous SBA district office to where the work will be 
performed. A Participant with a bona fide place of business within a 
state will be deemed eligible for a construction contract anywhere in 
that state (even if that state is serviced by more than one SBA 
district office). SBA may also determine that a Participant with a bona 
fide place of business in the geographic area served by one of several 
SBA district offices or another nearby area is eligible for the award 
of an 8(a) construction contract.
* * * * *
    (4) If a Participant is currently performing a contract in a 
specific state, it qualifies as having a bona fide place of business in 
that state for one or more additional contracts. The Participant may 
not use contract performance in one state to allow it to be eligible 
for an 8(a) contract in a contiguous state unless it officially 
establishes a bona fide place of business in the location in which it 
is currently performing a contract.
    (5) A Participant may establish a bona fide place of business 
through a full-time employee in a home office.
    (6) An individual designated as the full-time employee of the 
Participant seeking to establish a bona fide place of business in a 
specific geographic location need not be a resident of the state where 
he/she is conducting business.
* * * * *
    (9) For an 8(a) construction contract requiring work in multiple 
locations, a Participant is eligible if:
    (i) For a single award contract, the Participant has a bona fide 
place of business where a majority of the work is to be performed; and
    (ii) For a multiple award contract, the Participant has a bona fide 
place of business in any location where work is be performed.
* * * * *
0
29. Amend Sec.  124.502 by revising paragraph (a) to read as follows:


Sec.  124.502   How does an agency offer a procurement to SBA for award 
through the 8(a) BD program?

    (a) A procuring activity contracting officer indicates his or her 
formal intent to award a procurement requirement as an 8(a) contract by 
submitting a written offering letter to SBA.
    (1) Except as set forth in Sec.  124.503(a)(4)(ii) and (i)(1)(ii), 
a procuring activity contracting officer must submit an offering letter 
for each intended 8(a) procurement, including follow-on 8(a) contracts, 
competitive 8(a) orders issued under non-8(a) multiple award contracts, 
and sole source 8(a) orders issued under 8(a) multiple award contracts.
    (2) The procuring activity may transmit the offering letter to SBA 
by electronic mail, if available, or by facsimile transmission, as well 
as by mail or commercial delivery service.
* * * * *
0
30. Amend Sec.  124.503 by:
0
a. Revising the introductory text to paragraph (a) and paragraphs 
(a)(4)(ii) and (a)(5);
0
b. Adding two sentences to the end of paragraph (i)(1)(ii); and
0
c. Revising paragraphs (i)(1)(iv) and (i)(2)(ii).
    The revisions and additions read as follows:


Sec.  124.503   How does SBA accept a procurement for award through the 
8(a) BD program?

    (a) Acceptance of the requirement. Upon receipt of the procuring 
activity's offer of a procurement requirement, SBA will determine 
whether it will accept the requirement for the 8(a) BD program. SBA's 
decision whether to accept the requirement will be sent to the 
procuring activity in writing within 10 business days of receipt of the 
written offering letter if the contract is valued at more than the 
simplified acquisition threshold, and within two days of receipt of the 
offering letter if the contract is valued at or below the simplified 
acquisition threshold, unless SBA requests, and the procuring activity 
grants, an extension. SBA and the procuring activity may agree to a 
shorter timeframe for SBA's review under a Partnership Agreement 
delegating 8(a) contract execution functions to the agency. SBA is not 
required to accept any particular procurement offered to the 8(a) BD 
program.
* * * * *
    (4) * * *
    (ii) Where SBA has delegated its 8(a) contract execution functions 
to an agency through a signed Partnership Agreement, SBA may authorize 
the procuring activity to award an 8(a) contract below the simplified 
acquisition threshold without requiring an offer and acceptance of the 
requirement for the 8(a) BD program. However, the procuring activity 
must request SBA to determine the eligibility of the intended awardee 
prior to award. SBA shall review the 8(a) Participant's eligibility and 
issue an eligibility determination within two business days after a 
request from the procuring activity. If SBA does not respond within 
this timeframe, the procuring activity may assume the 8(a) Participant 
is eligible and proceed with award. The procuring activity shall 
provide a copy of the executed contract to the SBA servicing district 
office within fifteen business days of award.
    (5) Where SBA does not respond to an offering letter within the 
normal 10 business-day time period, the procuring activity may seek 
SBA's acceptance through the AA/BD. The procuring activity may assume 
that SBA accepts its offer for the 8(a) program if it does not receive 
a reply from the AA/BD within 5 business days of his or her receipt of 
the procuring activity request.
* * * * *
    (i) * * *
    (1) * * *
    (ii) * * * However, where the order includes work that was 
previously performed through another 8(a) contract, the procuring 
agency must notify SBA prior to issuing the order that it intends to 
procure such specified work through an order under an 8(a) Multiple 
Award Contract. Where that work is critical to the business development 
of a current Participant that previously performed the work through 
another 8(a) contract and that Participant is not a contract holder of 
the 8(a) Multiple Award Contract, SBA may request that the procuring 
agency fulfill the requirement through a

[[Page 55671]]

competition available to all 8(a) BD Program Participants.
* * * * *
    (iv) An agency may issue a sole source award against a Multiple 
Award Contract that has been set aside exclusively for 8(a) Program 
Participants, partially set-aside for 8(a) BD Program Participants or 
reserved solely for 8(a) Program Participants if the required dollar 
thresholds for sole source awards are met. Where an agency seeks to 
award an order on a sole source basis (i.e., to one particular 8(a) 
contract holder without competition among all 8(a) contract holders), 
the agency must offer and SBA must accept the order into the 8(a) 
program on behalf of the identified 8(a) contract holder.
    (A) To be eligible for the award of a sole source order, a concern 
must be a current Participant in the 8(a) BD program at the time of 
award of the order, qualify as small for the size standard 
corresponding to the NAICS code assigned to the order on the date the 
order is offered to the 8(a) BD program, and be in compliance with any 
applicable competitive business mix target established or remedial 
measure imposed by Sec.  124.509. Where the intended sole source 
recipient is a joint venture, the 8(a) managing partner to the joint 
venture is the concern whose eligibility is considered.
    (B) Where an agency seeks to issue a sole source order to a joint 
venture, the two-year restriction for joint venture awards set forth in 
Sec.  121.103(h) of this chapter does not apply and SBA will not review 
and approve the joint venture agreement as set forth in Sec.  
124.513(e)(1).
    (2) * * *
    (ii) The order must be either an 8(a) sole source award or be 
competed exclusively among only the 8(a) awardees of the underlying 
multiple award contract. Where an agency seeks to issue an 8(a) 
competitive order under a multiple award contract that was awarded 
under full and open competition or as a small business set-aside, all 
eligible 8(a) BD Participants who are contract holders of the 
underlying multiple award contract must have the opportunity to compete 
for the order. Where an agency seeks to issue an 8(a) competitive order 
under the Federal Supply Schedule, an agency can utilize the procedures 
set forth in FAR subpart 8.4 (48 CFR part 8, subpart 8.4) to award to 
an eligible 8(a) BD Participant. Where an agency seeks to issue an 8(a) 
sole source order under a multiple award contract that was awarded 
under full and open competition or as a small business set-aside, the 
identified 8(a) Participant that is a contract holder of the underlying 
multiple award contract must be an eligible Participant on the date of 
the issuance of the order;
* * * * *
0
31. Amend Sec.  124.504 by:
0
a. In paragraph (d)(1) introductory text:
0
i. Removing the word ``notify'' and adding in its place ``coordinate 
with'' wherever it appears;
0
ii. Removing the word ``SBA'' in the second sentence of paragraph 
(d)(1) introductory text and adding in its place the words ``the SBA 
District Office servicing the 8(a) incumbent firm and the SBA 
Procurement Center Representative assigned to the contracting activity 
initiating a non-8(a) procurement action''; and
0
iii. Adding a sentence following the second; and
0
b. Revising paragraph (d)(3).
    The addition and revision read as follows:


Sec.  124.504   What circumstances limit SBA's ability to accept a 
procurement for award as an 8(a) contract, and when can a requirement 
be released from the 8(a) BD program?

* * * * *
    (d) * * *
    (1) * * * Such notification must identify the scope and dollar 
value of any work previously performed through another 8(a) contract 
and the scope and dollar value of the contract determined to be new. * 
* *
* * * * *
    (3) SBA may release a requirement under this paragraph (d) only 
where the procuring activity agrees to procure the requirement as a 
small business, HUBZone, SDVO small business, or WOSB set-aside or 
otherwise identifies a procurement strategy that would emphasize or 
target small business participation.
* * * * *
0
32. Amend Sec.  124.506 by revising paragraph (b)(3) and adding two 
sentences to the end of paragraph (d) to read as follows:


Sec.  124.506   At what dollar threshold must an 8(a) procurement be 
competed among eligible Participants?

* * * * *
    (b) * * *
    (3) There is no requirement that a procurement must be competed 
whenever possible before it can be accepted on a sole source basis for 
a Tribally-owned or ANC-owned concern, or a concern owned by an NHO for 
DoD contracts. However, a current procurement requirement may not be 
removed from competition and awarded to a Tribally-owned, ANC-owned, or 
NHO-owned concern on a sole source basis (i.e., a procuring agency may 
not evidence its intent to fulfill a requirement as a competitive 8(a) 
procurement, through the issuance of a competitive 8(a) solicitation or 
otherwise, cancel the solicitation or change its public intent, and 
then procure the requirement as a sole source 8(a) procurement to an 
entity-owned Participant). A follow-on requirement to one that was 
previously awarded as a competitive 8(a) procurement may be offered, 
accepted and awarded on a sole source basis to a Tribally-owned or ANC-
owned concern, or a concern owned by an NHO for DoD contracts.
* * * * *
    (d) * * * The AA/BD may also accept a requirement that exceeds the 
applicable competitive threshold amount for a sole source 8(a) award if 
he or she determines that a FAR exception (48 CFR 6.302) to full and 
open competition exists (e.g., unusual and compelling urgency). An 
agency may not award an 8(a) sole source contract under this paragraph 
(d) for an amount exceeding $25,000,000, or $100,000,000 for an agency 
of the Department of Defense, unless the contracting officer justifies 
the use of a sole source contract in writing and has obtained the 
necessary approval under FAR 19.808-1 or the Defense Federal 
Acquisition Regulation Supplement (DFARS) at 48 CFR 219.808-1(a).
0
33. Amend Sec.  124.509 by adding paragraphs (d)(1)(i) and (ii) to read 
as follows:


Sec.  124.509   What are non-8(a) business activity targets?

* * * * *
    (d) * * *
    (1) * * *
    (i) SBA will determine whether the Participant made good faith 
efforts to attain the targeted non-8(a) revenues during the just 
completed program year. A Participant may establish that it made good 
faith efforts by demonstrating to SBA that:
    (A) It submitted offers for one or more non-8(a) procurements 
which, if awarded, would have given the Participant sufficient revenues 
to achieve the applicable non-8(a) business activity target during its 
just completed program year. In such a case, the Participant must 
provide copies of offers submitted in response to solicitations and 
documentary evidence of its projected revenues under these missed 
contract opportunities; or
    (B) Individual extenuating circumstances adversely impacted its

[[Page 55672]]

efforts to obtain non-8(a) revenues, including but not limited to: a 
reduction in government funding, continuing resolutions and budget 
uncertainties, increased competition driving prices down, or having one 
or more prime contractors award less work to the Participant than 
originally contemplated. Where available, supporting information and 
documentation must be included to show how such extenuating 
circumstances specifically prevented the Participant from attaining its 
targeted non-8(a) revenues during the just completed program year.
    (ii) The Participant bears the burden of establishing that it made 
good faith efforts to meet its non-8(a) business activity target. SBA's 
determination as to whether a Participant made good faith efforts is 
final and no appeal may be taken with respect to that decision.
* * * * *
0
34. Amend Sec.  124.513 by adding paragraph (a)(3) to read as follows:


Sec.  124.513   Under what circumstances can a joint venture be awarded 
an 8(a) contract?

    (a) * * *
    (3) A Program Participant cannot be a joint venture partner on more 
than one joint venture that submits an offer for a specific 8(a) 
contract.
* * * * *
0
35. Amend Sec.  124.515 by revising paragraph (c) to read as follows:


Sec.  124.515   Can a Participant change its ownership or control and 
continue to perform an 8(a) contract, and can it transfer performance 
to another firm?

* * * * *
    (c) The 8(a) contractor must request a waiver in writing prior to 
the change of ownership and control except in the case of death or 
incapacity. A request for waiver due to incapacity or death must be 
submitted within 60 calendar days after such occurrence.
    (1) The Participant seeking to change ownership or control must 
specify the grounds upon which it requests a waiver, and must 
demonstrate that the proposed transaction would meet such grounds.
    (2) If a Participant seeks a waiver based on the impairment of the 
agency's objectives under paragraph (b)(4) of this section, it must 
identify and provide a certification from the procuring agency relating 
to each 8(a) contract for which a waiver is sought.
* * * * *
0
36. Amend Sec.  124.521 by revising paragraph (e)(2) to read as 
follows:


Sec.  124.521   What are the requirements for representing 8(a) status, 
and what are the penalties for misrepresentation?

* * * * *
    (e) * * *
    (2) For the purposes of 8(a) contracts (including Multiple Award 
Contracts) with durations of more than five years (including options), 
a contracting officer must verify in SAM.gov (or successor system) 
whether a business concern continues to be an eligible 8(a) Participant 
no more than 120 days prior to the end of the fifth year of the 
contract, and no more than 120 days prior to exercising any option 
thereafter. Where a concern fails to qualify or will no longer qualify 
as an eligible 8(a) Participant at any point during the 120 days prior 
to the end of the fifth year of the contract, the option shall not be 
exercised.
* * * * *


Sec.  124.603   [Amended]

0
37. Amend Sec.  124.603 by removing the words ``graduates or is 
terminated from the program'' and adding in their place the words 
``leaves the 8(a) BD program (either through the expiration of the 
firm's program term, graduation, or termination)''.
0
38. Revise Sec.  124.604 to read as follows:


Sec.  124.604   Report of benefits for firms owned by Tribes, ANCs, 
NHOs, and CDCs.

    (a) Each entity having one or more Participants in the 8(a) BD 
program must establish a Community Benefits Plan that outlines the 
anticipated approach it expects to deliver to strengthen its Native or 
underserved community.
    (b) As part of its annual review submission (see Sec.  124.602), 
each Participant owned by a Tribe, ANC, NHO, or CDC must submit to SBA 
information showing how the Tribe, ANC, NHO, or CDC has provided 
benefits to the Tribal or native members and/or the Tribal, native, or 
other community due to the Tribe's/ANC's/NHO's/CDC's participation in 
the 8(a) BD program through one or more firms, whether the benefits 
provided meet the benefits target set forth in its Community Benefits 
Plan, and how the benefits provided directly impacted the native or 
underserved community. This data includes information relating to 
funding cultural programs, employment assistance, jobs, scholarships, 
internships, subsistence activities, and other services provided by the 
Tribe, ANC, NHO, or CDC to the affected community.
0
39. Add Sec.  124.1002 to read as follows:


Sec.  124.1002   Reviews and protests of SDB status.

    (a) SBA may initiate the review of SDB status on any firm that has 
represented itself to be an SDB on a prime contract (for goaling 
purposes or otherwise) or subcontract to a Federal prime contract 
whenever SBA receives credible information calling into question the 
SDB status of the firm.
    (b) Requests for an SBA review of SDB status may be forwarded to 
the Small Business Administration, Associate Administrator for Business 
Development (AA/BD), 409 Third Street SW, Washington, DC 20416.
    (c) The contracting officer or the SBA may protest the SDB status 
of a proposed subcontractor or subcontract awardee. Other interested 
parties may submit information to the contracting officer or the SBA in 
an effort to persuade the contracting officer or the SBA to initiate a 
protest. Such protests, in order to be considered timely, must be 
submitted to the SBA prior to completion of performance by the intended 
subcontractor.
    (1) SBA will request relevant information from the protested 
concern pertaining to:
    (i) The social and economic disadvantage of the individual(s) 
claiming to own and control the protested concern;
    (ii) The ownership and control of the protested concern; and
    (iii) The size of the protested concern.
    (2) The concern whose disadvantaged status is under consideration 
has the burden of establishing that it qualifies as an SDB.
    (3) Where SBA requests specific information and the concern does 
not submit it, SBA may draw adverse inferences against the concern.
    (4) SBA will base its SDB determination upon the record, including 
reasonable inferences from the record, and will state in writing the 
basis for its findings and conclusions.
    (d) Where SBA determines that a subcontractor does not qualify as 
an SDB, the prime contractor must not include subcontracts to that 
subcontractor as subcontracts to an SDB in its subcontracting reports, 
starting from the time that the protest was decided.

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
40. The authority citation for part 125 continues to read as follows:

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

0
41. Amend Sec.  125.1 by:

[[Page 55673]]

0
a. Revising the definition of ``Contract bundling, bundled requirement, 
bundled contract, or bundling'';
0
b. Removing the words ``commercial items'' from the definition of 
``Cost of materials'' and adding in their place the words ``commercial 
products'';
0
c. Adding definitions of ``Small business concerns owned and controlled 
by socially and economically disadvantaged individuals'' and ``Socially 
and economically disadvantaged individuals'' in alphabetical order; and
0
d. Revising the definition of ``Substantial bundling''.
    The revisions and additions read as follows:


Sec.  125.1   What definitions are important to SBA's Government 
Contracting Programs?

* * * * *
    Contract bundling, bundled requirement, bundled contract, or 
bundling means the consolidation of two or more procurement 
requirements for goods or services previously provided or performed 
under separate smaller contracts into a solicitation of offers for a 
single contract, a Multiple Award Contract, or Blanket Purchase 
Agreement that is likely to be unsuitable for award to a small business 
concern (but may be suitable for award to a small business with a Small 
Business Teaming Arrangement) due to:
    (1) The diversity, size, or specialized nature of the elements of 
the performance specified;
    (2) The aggregate dollar value of the anticipated award;
    (3) The geographical dispersion of the contract performance sites; 
or
    (4) Any combination of the factors described in paragraphs (1), 
(2), and (3) of this definition.
* * * * *
    Small business concerns owned and controlled by socially and 
economically disadvantaged individuals means, for both SBA's 
subcontracting assistance program in 15 U.S.C. 637(d) and for the goals 
described in 15 U.S.C. 644(g), a small business concern unconditionally 
and directly owned by and controlled by one or more socially and 
economically disadvantaged individuals.
    Socially and economically disadvantaged individuals, for both SBA's 
subcontracting assistance program in 15 U.S.C. 637(d) and for the goals 
described in 15 U.S.C. 644(g), means:
    (1) Individuals who meet the criteria for social disadvantage in 
Sec.  124.103(a) through (c) of this chapter and the criteria for 
economic disadvantage in Sec.  124.104(a) and (c) of this chapter;
    (2) Indian tribes and Alaska Native Corporations that satisfy the 
ownership, control, and disadvantage criteria in Sec.  124.109 of this 
chapter;
    (3) Native Hawaiian Organizations that satisfy the ownership, 
control, and disadvantage criteria in Sec.  124.110 of this chapter; or
    (4) Community Development Corporations that satisfy the ownership 
and control criteria in Sec.  124.111 of this chapter.
* * * * *
    Substantial bundling means any bundling that meets or exceeds the 
following dollar amounts (if the acquisition strategy contemplates 
multiple award contracts, orders placed under unrestricted multiple 
award contracts, or a Blanket Purchase Agreement issued against a GSA 
Schedule contract or a task or delivery order contract awarded by 
another agency, these thresholds apply to the cumulative estimated 
value of the Multiple Award Contracts, orders, or Blanket Purchase 
Agreement, including options):
    (1) $8.0 million or more for the Department of Defense;
    (2) $6.0 million or more for the National Aeronautics and Space 
Administration, the General Services Administration, and the Department 
of Energy; and
    (3) $2.5 million or more for all other agencies.
0
42. Amend Sec.  125.2 by adding a sentence after the second sentence in 
paragraph (d)(2)(ii) introductory text and revising paragraph (d)(3)(i) 
to read as follows:


Sec.  125.2   What are SBA's and the procuring agency's 
responsibilities when providing contracting assistance to small 
businesses?

* * * * *
    (d) * * *
    (2) * * *
    (ii) * * * This analysis must include quantification of the 
reduction or increase in price of the proposed bundled strategy as 
compared to the cumulative value of the separate contracts. * * *
* * * * *
    (3) * * *
    (i) The analysis for bundled requirements set forth in paragraphs 
(d)(2)(i) and (ii) of this section;
* * * * *
0
43. Amend Sec.  125.3 by:
0
a. Revising paragraph (a)(1)(i)(B);
0
b. Removing the words ``bank fees;'' from paragraph (a)(1)(iii);
0
c. Removing the words ``commercial item'' in paragraph (c)(1)(i) and 
adding in their place the words ``commercial product or commercial 
service'';
0
d. Revising paragraph (c)(1)(iv) and the first sentence of paragraph 
(c)(1)(viii);
0
e. Removing the words ``commercial items'' in paragraph (c)(1)(x) and 
adding in their place the words ``commercial products or commercial 
services''; and
0
f. Revising paragraph (c)(2).
    The revisions read as follows:


Sec.  125.3   What types of subcontracting assistance are available to 
small businesses?

    (a) * * *
    (1) * * *
    (i) * * *
    (B) Purchases from or sales to a corporation, company, joint 
venture, or subdivision that is an affiliate of the prime contractor or 
subcontractor are not included in the subcontracting base. Subcontracts 
by first-tier affiliates shall be treated as subcontracts of the prime.
* * * * *
    (c) * * *
    (1) * * *
    (iv) When developing an individual subcontracting plan (also called 
individual contract plan), the contractor must include indirect costs 
in its subcontracting goals. These costs must be included in the 
Individual Subcontract Report (ISR) in www.esrs.gov (eSRS) or 
Subcontract Reports for Individual Contracts (the paper SF-294, if 
authorized). These costs must also be included on a prorated basis in 
the Summary Subcontracting Report (SSR) in the eSRS system. A 
contractor authorized to use a commercial subcontracting plan must 
include all indirect costs in its subcontracting goals and in its SSR;
* * * * *
    (viii) The contractor must provide pre-award written notification 
to unsuccessful small business offerors on all competitive subcontracts 
over the simplified acquisition threshold (as defined in the FAR at 48 
CFR 2.101). * * *
* * * * *
    (2) A commercial plan, also referred to as an annual plan or 
company-wide plan, is the preferred type of subcontracting plan for 
contractors furnishing commercial products and commercial services. A 
commercial plan covers the offeror's fiscal year and applies to all of 
the commercial products and commercial services sold by either the 
entire company or a portion thereof (e.g., division, plant, or product 
line). Once approved, the plan remains in effect during the federal 
fiscal year for all Federal Government

[[Page 55674]]

contracts in effect during that period. The contracting officer of the 
agency that originally approved the commercial plan will exercise the 
functions of the contracting officer on behalf of all agencies that 
award contracts covered by the plan.
* * * * *
0
44. Amend Sec.  125.6 by:
0
a. Removing ``Sec.  121.103(h)(4)'' in paragraph (c) and adding in its 
place ``Sec.  121.103(h)(3)'';
0
b. In paragraph (d) introductory text:
0
i. Revising the first sentence; and
0
ii. Adding a sentence after the first sentence;
0
c. Redesignating paragraphs (e) through (g) as paragraphs (f) through 
(h), respectively; and
0
d. Adding a new paragraph (e).
    The revision and additions read as follows:


Sec.  125.6   What are the prime contractor's limitations on 
subcontracting?

* * * * *
    (d) * * * The period of time used to determine compliance for a 
total or partial set-aside contract will generally be the base term and 
then each subsequent option period. However, for a multi-agency set 
aside contract where more than one agency can issue orders under the 
contract, the ordering agency must use the period of performance for 
each order to determine compliance. * * *
* * * * *
    (e) Past performance evaluation. Where a contracting officer 
determines that a contractor has not met the applicable limitation on 
subcontracting requirement at the conclusion of contract performance, 
the contracting officer may not give a satisfactory or higher past 
performance rating for the appropriate factor or subfactor in 
accordance with the FAR at 48 CFR 42.1503.
* * * * *


Sec.  125.8   [Amended]

0
45. Amend Sec.  125.8 by:
0
a. Removing ``Sec.  121.103(h)(3)'' in paragraph (a) and adding in its 
place ``Sec.  121.103(h)(4)''; and
0
b. Removing ``paragraph (d)'' in paragraph (b)(2)(vii) wherever it 
appears and adding in its place ``paragraph (c)''.
0
46. Amend Sec.  125.9 by:
0
a. Revising paragraph (b)(3)(ii);
0
b. Redesignating paragraphs (e)(1)(ii) and (iii) as paragraphs 
(e)(1)(iii) and (iv), respectively; and
0
c. Adding a new paragraph (e)(1)(ii).
    The revision and addition read as follows:


Sec.  125.9   What are the rules governing SBA's small business mentor-
prot[eacute]g[eacute] program?

* * * * *
    (b) * * *
    (3) * * *
    (ii) A mentor (including in the aggregate a parent company and all 
of its subsidiaries) generally cannot have more than three 
prot[eacute]g[eacute]s at one time.
    (A) The first two mentor-prot[eacute]g[eacute] relationships 
approved by SBA between a specific mentor and a small business that has 
its principal office located in the Commonwealth of Puerto Rico do not 
count against the limit of three prot[eacute]g[eacute]s that a mentor 
can have at one time.
    (B) Where a mentor purchases another business entity that is also 
an SBA-approved mentor of one or more prot[eacute]g[eacute] small 
business concerns and the purchasing mentor commits to honoring the 
obligations under the seller's mentor-prot[eacute]g[eacute] 
agreement(s), that entity may have more than three 
prot[eacute]g[eacute]s. In such a case, the entity could not add 
another prot[eacute]g[eacute] until it fell below three in total.
* * * * *
    (e) * * *
    (1) * * *
    (ii) Identify the specific entity or entities that will provide 
assistance to or participate in joint ventures with the 
prot[eacute]g[eacute] where the mentor is a parent or subsidiary 
concern;
* * * * *
0
47. Amend Sec.  125.18 by:
0
a. Adding a sentence to the end of paragraph (b) introductory text; and
0
b. Removing ``Sec.  121.103(h)(4)'' in paragraph (f)(1) and adding in 
its place ``Sec.  121.103(h)(3)''.
    The addition reads as follows:


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

* * * * *
    (b) * * * ASDVO SBC cannot be a joint venture partner on more than 
one joint venture that submits an offer for a specific contract set-
aside or reserved for SDVOs.
* * * * *
0
48. Amend Sec.  125.22 by adding paragraph (d) to read as follows:


Sec.  125.22   When may a contracting officer set-aside a procurement 
for SDVO SBCs?

* * * * *
    (d) Restricting competition. A procuring activity cannot restrict 
an SDVO SBC competition (for either a contract or order) to require SBA 
socioeconomic certifications other than SDVO SBC certification (i.e., a 
competition cannot be limited only to business concerns that are both 
SDVO SBC and 8(a), SDVO SBC and HUBZone, or SDVO SBC and WOSB).
0
49. Amend Sec.  125.28 by adding a sentence to the end of paragraph 
(d)(2) and revising paragraph (e) to read as follows:


Sec.  125.28   What are the requirements for filing a service-disabled 
veteran-owned status protest?

* * * * *
    (d) * * *
    (2) * * * Where the identified low bidder is determined to be 
ineligible for award, a protest of any other identified low bidder must 
be received prior to the close of business on the 5th business day 
after the contracting officer has notified interested parties of the 
identity of that low bidder.
* * * * *
    (e) Referral to SBA. The contracting officer must forward to SBA 
any non-premature SDVO status protest received, notwithstanding whether 
he or she believes it is sufficiently specific or timely. The 
contracting officer must send all protests, along with a referral 
letter, directly to the Director, Office of Government Contracting, 
U.S. Small Business Administration, 409 Third Street SW, Washington, DC 
20416 or by fax to (202) 205-6390, marked Attn: Service-Disabled 
Veteran Status Protest.
    (1) The contracting officer's referral letter must include 
information pertaining to the solicitation that may be necessary for 
SBA to determine timeliness and standing, including: the solicitation 
number; the name, address, telephone number, and facsimile number of 
the contracting officer; whether the contract was sole source or set-
aside; whether the protester submitted an offer; whether the protested 
concern was the apparent successful offeror; when the protested concern 
submitted its offer (i.e., made the self-representation that it was a 
SDVO SBC); whether the procurement was conducted using sealed bid or 
negotiated procedures; the bid opening date, if applicable; when the 
protest was submitted to the contracting officer; when the protester 
received notification about the apparent successful offeror, if 
applicable; and whether a contract has been awarded.
    (2) Where a protestor alleges that an SDVO SBC is unduly reliant on 
one or more subcontractors that are not SDVO SBCs or a subcontractor 
that is not an SDVO SBC will perform primary and vital requirements of 
the contract, the D/GC or designee will refer the matter to the 
Government Contracting Area Office serving the geographic area in which 
the principal office of the SDVO SBC is

[[Page 55675]]

located for a determination as to whether the ostensible subcontractor 
rule has been met.
0
50. Amend Sec.  125.30 by revising paragraph (g)(4) to read as follows:


Sec.  125.30   How will SBA process an SDVO protest?

* * * * *
    (g) * * *
    (4) A concern found to be ineligible may not submit an offer as an 
SDVO SBC on a future procurement unless it demonstrates to SBA's 
satisfaction that it has overcome the reasons for its ineligibility set 
forth in the protest (e.g., it changes its ownership to satisfy the 
definition of an SDVO SBC set forth in Sec.  125.8) and SBA issues a 
decision to this effect. If a concern found to be ineligible submits an 
offer, it may be in violation of criminal laws, including section 16(d) 
of the Small Business Act, 15 U.S.C. 645(d). If the concern has already 
certified itself as an SDVO SBC on a pending procurement, the concern 
must immediately inform the contracting officer for the procuring 
agency of the adverse SDVO SBC determination.
    (i) Not later than two days after SBA's determination finding a 
concern ineligible as an SDVO SBC, such concern must update its SDVO 
SBC status in the System for Award Management (or any successor 
system).
    (ii) If a business concern fails to update its SDVO SBC status in 
the System for Award Management (or any successor system) in response 
to decertification, SBA will make such update within two days of the 
business's failure to do so.

PART 126--HUBZONE PROGRAM

0
51. 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; Pub. 
L. 111-240, 124 Stat. 2504.

0
52. Amend Sec.  126.306 by adding paragraphs (b)(1) and (2) to read as 
follows:


Sec.  126.306   How will SBA process an application for HUBZone 
certification?

* * * * *
    (b) * * *
    (1) If a concern submits inconsistent information that results in 
SBA's inability to determine the concern's compliance with any of the 
HUBZone eligibility requirements, SBA will decline the concern's 
application.
    (2) If, during the processing of an application, SBA determines 
that an applicant has knowingly submitted false information, regardless 
of whether correct information would cause SBA to deny the application, 
and regardless of whether correct information was given to SBA in 
accompanying documents, SBA will deny the application.
* * * * *
0
53. Amend Sec.  126.503 by revising paragraph (a)(2) and adding 
paragraphs (c) and (d) to read as follows:


Sec.  126.503   What happens if SBA is unable to verify a HUBZone small 
business concern's eligibility or determines that a concern is no 
longer eligible for the program?

    (a) * * *
    (2) SBA's decision. SBA will determine whether the HUBZone small 
business concern remains eligible for the program within 90 calendar 
days after receiving all requested information, when practicable. The 
D/HUB will provide written notice to the concern stating the basis for 
the determination.
    (i) If SBA finds that the concern is not eligible, the D/HUB will 
decertify the concern and remove its designation as a certified HUBZone 
small business concern in DSBS (or successor system) within four 
business days of the determination.
    (ii) If SBA finds that the concern is eligible, the concern will 
continue to be designated as a certified HUBZone small business concern 
in DSBS (or successor system).
* * * * *
    (c) Decertification due to submission of false information. If, 
after admission to the HUBZone program, SBA discovers that false 
information has been knowingly submitted by a certified HUBZone small 
business concern, SBA will propose the firm for decertification 
pursuant to the procedures described in paragraph (a) of this section.
    (d) Effect of decertification. Once SBA has decertified a concern, 
the concern cannot self-certify as a HUBZone small business concern. If 
a concern does so, it may be in violation of criminal laws, including 
section 16(d) of the Small Business Act, 15 U.S.C. 645(d). If the 
concern has already certified as a HUBZone small business on a pending 
procurement, the concern must immediately inform the contracting 
officer for the procuring agency of the adverse eligibility 
determination. A contracting officer shall not award a HUBZone contract 
to a concern that the D/HUB has determined is not an eligible HUBZone 
small business concern for the procurement in question.
0
54. Amend Sec.  126.601 by revising paragraph (d) to read as follows:


Sec.  126.601   What additional requirements must a certified HUBZone 
small business concern meet to submit an offer on a HUBZone contract?

* * * * *
    (d) Where a subcontractor that is not a certified HUBZone small 
business will perform the primary and vital requirements of a HUBZone 
contract, or where a HUBZone prime contractor is unduly reliant on one 
or more small businesses that are not HUBZone-certified to perform the 
HUBZone contract, the prime contractor is not eligible for award of 
that HUBZone contract.
    (1) When the subcontractor qualifies as small for the size standard 
assigned to the procurement, this issue may be grounds for a HUBZone 
status protest, as described in Sec.  126.801. When the subcontractor 
is alleged to be other than small for the size standard assigned to the 
procurement, this issue may be grounds for a size protest under the 
ostensible subcontractor rule, as described at Sec.  121.103(h)(3) of 
this chapter.
    (2) SBA will find that a prime HUBZone contractor is performing the 
primary and vital requirements of a contract or order, and is not 
unduly reliant on one or more subcontractors that are not HUBZone-
certified, where the prime contractor can demonstrate that it, together 
with any subcontractors that are certified HUBZone small business 
concerns, will meet the limitations on subcontracting provisions set 
forth in Sec.  125.6 of this chapter.
0
55. Add Sec.  126.609 to read as follows:


Sec.  126.609   Can a HUBZone competition be limited to small business 
concerns having additional socioeconomic certifications?

    A procuring activity cannot restrict a HUBZone competition (for 
either a contract or order) to require SBA socioeconomic certifications 
other than HUBZone certification (i.e., a competition cannot be limited 
only to business concerns that are both HUBZone and 8(a), HUBZone and 
WOSB, or HUBZone and SDVO).
0
56. Amend Sec.  126.616 by revising paragraph (a) to read as follows:


Sec.  126.616   What requirements must a joint venture satisfy to 
submit an offer and be eligible to perform on a HUBZone contract?

    (a) General. A certified HUBZone small business concern may enter 
into a joint venture agreement with one or more other small business 
concerns, or with an SBA-approved mentor authorized by Sec.  125.9 of 
this chapter, for the purpose of submitting an offer for a HUBZone 
contract.
    (1) The joint venture itself need not be a certified HUBZone small 
business

[[Page 55676]]

concern, but the joint venture should be designated as a HUBZone joint 
venture in SAM (or successor system) with the HUBZone-certified joint 
venture partner identified.
    (2) A certified HUBZone small business concern cannot be a joint 
venture partner on more than one joint venture that submits an offer 
for a specific contract set-aside or reserved for certified HUBZone 
small business concerns.
* * * * *


Sec.  126.618   [Amended]

0
57. Amend Sec.  126.618 by removing ``Sec.  121.103(h)(4)'' in 
paragraph (c)(2) and adding in its place ``Sec.  121.103(h)(3)''.
0
58. Amend Sec.  126.801 by:
0
a. Revising paragraph (b);
0
b. Adding paragraph (d) introductory text; and
0
c. Revising paragraphs (d)(1) and (2) and (e).
    The revisions and additions read as follows:


Sec.  126.801   How does an interested party file a HUBZone status 
protest?

* * * * *
    (b) Format and specificity. (1) Protests must be in writing and 
must state all specific grounds as to why the protestor believes the 
protested concern should not qualify as a certified HUBZone small 
business concern. Specifically, a protestor must explain why:
    (i) The protested concern did not meet the HUBZone eligibility 
requirements set forth in Sec.  126.200 at the time the concern applied 
for HUBZone certification or on the anniversary date of such 
certification;
    (ii) The protested joint venture does not meet the requirements set 
forth in Sec.  126.616;
    (iii) The protested concern, as a HUBZone prime contractor, is 
unduly reliant on one or more small subcontractors that are not 
HUBZone-certified, or subcontractors that are not HUBZone-certified 
will perform the primary and vital requirements of the contract; and/or
    (iv) The protested concern, on the anniversary date of its initial 
HUBZone certification, failed to attempt to maintain compliance with 
the 35% HUBZone residency requirement during the performance of a 
HUBZone contract.
    (2) Specificity requires more than conclusions of ineligibility. A 
protest merely asserting that the protested concern did not qualify as 
a HUBZone small business concern at the time of its initial 
certification or its most recent annual recertification, without 
setting forth specific facts or allegations, is insufficient and will 
be dismissed.
    (3) A protest asserting that a concern was not in compliance with 
the HUBZone principal office and/or 35% HUBZone residency requirements 
at the time of offer or award will be dismissed.
    (4) For a protest filed against a HUBZone joint venture, the 
protest must state all specific grounds as to why:
    (i) The HUBZone small business partner to the joint venture did not 
meet the HUBZone eligibility requirements set forth in Sec.  126.200 at 
the time the concern applied for certification or on the anniversary of 
such certification; and/or
    (ii) The protested HUBZone joint venture does not meet the 
requirements set forth in Sec.  126.616.
    (5) For a protest alleging that the prime contractor has an 
ostensible subcontractor, the protest must state all specific grounds 
as to why:
    (i) The protested concern is unduly reliant on one or more small 
subcontractors that are not HUBZone-certified; or
    (ii) One or more subcontractors that are not HUBZone-certified will 
perform the primary and vital requirements of the contract.
    (6) For a protest alleging that the protested concern failed to 
attempt to maintain compliance with the 35% HUBZone residency 
requirement during the performance of a HUBZone contract, the protest 
must state all specific grounds explaining why the protester believes 
the protested firm did not have at least 20% of its employees residing 
in a HUBZone on the anniversary of its HUBZone certification.
* * * * *
    (d) * * * A protest challenging the HUBZone status of an apparent 
successful offeror on a HUBZone contract must be timely, or it will be 
dismissed.
    (1) For negotiated acquisitions, an interested party must submit 
its protest by close of business on the fifth business day after 
notification by the contracting officer of the apparent successful 
offeror.
    (i) Except for an order or Blanket Purchase Agreement issued under 
a Federal Supply Schedule contact, for an order or Agreement that is 
set-aside for certified HUBZone small business concerns under a 
multiple award contract that was not itself set aside or reserved for 
certified HUBZone small business concerns, an interested party must 
submit its protest by close of business on the fifth business day after 
notification by the contracting officer of the intended awardee of the 
order or Agreement.
    (ii) Where a contracting officer has required offerors for a 
specific order under a multiple award HUBZone contract to recertify 
their HUBZone status, an interested party must submit its protest by 
close of business on the fifth business day after notification by the 
contracting officer of the intended awardee of the order.
    (2) For sealed bid acquisitions:
    (i) An interested party must submit its protest by close of 
business on the fifth business day after bid opening, or where the 
identified low bidder is determined to be ineligible for award, by 
close of business on the fifth business day after the contracting 
officer has notified interested parties of the identity of that low 
bidder; or
    (ii) If the price evaluation preference was not applied at the time 
of bid opening, an interested party must submit its protest by close of 
business on the fifth business day after the date of identification of 
the apparent successful low bidder.
* * * * *
    (e) Referral to SBA. The contracting officer must forward to SBA 
any non-premature HUBZone status protest received, notwithstanding 
whether he or she believes it is sufficiently specific or timely. The 
contracting officer must send the protest, along with a referral 
letter, to the D/HUB by email to [email protected].
    (1) The contracting officer's referral letter must include 
information pertaining to the solicitation that may be necessary for 
SBA to determine timeliness and standing, including the following:
    (i) The solicitation number;
    (ii) The name, address, telephone number, email address, and 
facsimile number of the contracting officer;
    (iii) The type of HUBZone contract at issue (i.e., HUBZone set-
aside; HUBZone sole source; full and open competition with a HUBZone 
price evaluation preference applied; reserve for HUBZone small business 
concerns under a Multiple Award Contract; or order set-aside for 
HUBZone small business concerns against a Multiple Award Contract);
    (iv) If the procurement was conducted using full and open 
competition with a HUBZone price evaluation preference, whether the 
protester's opportunity for award was affected by the preference;
    (v) If the procurement was a HUBZone set-aside, whether the 
protester submitted an offer;
    (vi) Whether the protested concern was the apparent successful 
offeror;
    (vii) Whether the procurement was conducted using sealed bid or 
negotiated procedures;

[[Page 55677]]

    (viii) If the procurement was conducted using sealed bid 
procedures, the bid opening date;
    (ix) The date the protester was notified of the apparent successful 
offeror;
    (x) The date the protest was submitted to the contracting officer;
    (xi) The date the protested concern submitted its initial offer or 
bid to the contracting activity; and
    (xii) Whether a contract has been awarded, and if applicable, the 
date of contract award and contract number.
    (2) Where a protestor alleges that a certified HUBZone small 
business concern is unduly reliant on one or more subcontractors that 
are not certified HUBZone small business concerns or a subcontractor 
that is not a certified HUBZone small business concern will perform 
primary and vital requirements of the contract, the D/HUB will refer 
the matter to the Government Contracting Area Office serving the 
geographic area in which the principal office of the certified HUBZone 
small business concern is located for a determination as to whether the 
ostensible subcontractor rule has been met.

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

0
59. 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
60. Amend Sec.  127.102 by removing the definition of ``WOSB'' and 
adding the definition of ``Women-Owned Small Business (WOSB)'' in 
alphabetical order to read as follows:


Sec.  127.102   What are the definitions of the terms used in this 
part?

* * * * *
    Women-Owned Small Business (WOSB) means a concern that is small 
pursuant to part 121 of this chapter, and that is at least 51 percent 
owned and controlled by one or more women who are citizens in 
accordance with Sec. Sec.  127.200, 127.201, and 127.202. This 
definition applies to any certification as to a concern's status as a 
WOSB, not solely to those certifications relating to a WOSB contract.
* * * * *
0
61. Amend Sec.  127.200 by revising paragraphs (a)(1) and (b)(1) to 
read as follows:


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

    (a) * * *
    (1) A small business as defined in part 121 of this chapter for the 
size standard corresponding to any NAICS code under which it currently 
conducts business activities; and
* * * * *
    (b) * * *
    (1) A small business as defined in part 121 of this chapter for the 
size standard corresponding to any NAICS code under which it currently 
conducts business activities; and
* * * * *
0
62. Amend Sec.  127.202 by revising the first sentence of paragraph (b) 
and paragraph (c) to read as follows:


Sec.  127.201   What are the requirements for ownership of an EDWOSB 
and WOSB?

* * * * *
    (b) * * * To be considered unconditional, the ownership must not be 
subject to any conditions, executory agreements, voting trusts, or 
other arrangements that cause or potentially cause ownership benefits 
to go to another (other than after death or incapacity). * * *
    (c) Limitation on outside obligations. The woman or economically-
disadvantaged woman who holds the highest officer position of the 
business concern may not engage in outside obligations that prevent her 
from devoting sufficient time and attention to the business concern to 
control its management and daily operations. Where a woman or 
economically disadvantaged woman claiming to control a business concern 
devotes fewer hours to the business than its normal hours of operation, 
there is a rebuttable presumption that she does not control the 
business concern. In such a case, the woman must provide evidence that 
she has ultimate managerial and supervisory control over both the long-
term decision making and day-to-day management and administration of 
the business.
* * * * *
0
63. Amend Sec.  127.202 by revising paragraph (c) to read as follows:


Sec.  127.202   What are the requirements for control of an EDWOSB or 
WOSB?

* * * * *
    (c) Limitation on outside obligations. The woman or economically-
disadvantaged woman who holds the highest officer position of the 
business concern may not engage in outside obligations that prevent her 
from devoting sufficient time and attention to the business concern to 
control its management and daily operations. Where a woman or 
economically disadvantaged woman claiming to control a business concern 
devotes fewer hours to the business than its normal hours of operation, 
there is a rebuttable presumption that she does not control the 
business concern. In such a case, the woman must provide evidence that 
she has ultimate managerial and supervisory control over both the long-
term decision making and day-to-day management and administration of 
the business.
* * * * *
0
64. Amend Sec.  127.304 by adding paragraphs (c)(1) and (2) to read as 
follows:


Sec.  127.304   How is an application for certification processed?

* * * * *
    (c) * * *
    (1) If a concern submits inconsistent information that results in 
SBA's inability to determine the concern's compliance with any of the 
WOSB or EDWOSB eligibility requirements, SBA will decline the concern's 
application.
    (2) If, during the processing of an application, SBA determines 
that an applicant has knowingly submitted false information, regardless 
of whether correct information would cause SBA to deny the application, 
and regardless of whether correct information was given to SBA in 
accompanying documents, SBA will deny the application.
* * * * *
0
65. Revise Sec.  127.400 to read as follows:


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

    Any concern seeking to remain a certified WOSB or EDWOSB must 
undergo a program examination every three years.
    (a) 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.
    Example 1 to paragraph (a). Concern A is certified by SBA to be 
eligible for the WOSB Program on March 31, 2023. Concern A is 
considered 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 March 30, 2026. On April 
22, 2025, after Concern A is identified as the apparent successful 
offeror on a WOSB set-aside contract, its status as an eligible WOSB is 
protested. On May 15, 2025, Concern A receives a positive determination 
from SBA confirming that it is an eligible WOSB. Concern A's new 
certification date is May 15, 2025.

[[Page 55678]]

Concern A is now considered 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 May 
14, 2028.
    (b) The concern must either request a program examination from SBA 
or notify SBA that it has requested a program examination from 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.
    Example 1 to paragraph (b). Concern B is certified by a third-party 
certifier to be eligible for the WOSB Program on July 20, 2023. Concern 
B is considered 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, 2026. 
Concern B must request a program examination from SBA, or notify SBA 
that it has requested a program examination from a third-party 
certifier, by June 20, 2026, to continue participating in the WOSB 
Program after July 19, 2026.
0
66. Amend Sec.  127.405 by redesignating paragraph (c) as paragraph (e) 
and adding paragraph (c) and paragraph (d) to read as follows:


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

* * * * *
    (c) Decertification in response to adverse protest decision. SBA 
will decertify a concern found to be ineligible during a WOSB/EDWOSB 
status protest.
    (d) Effect of decertification. Once SBA has decertified a concern, 
the concern cannot self-certify as a WOSB or EDWOSB, as applicable, for 
any WOSB or EDWOSB contract. If a concern does so, it may be in 
violation of criminal laws, including section 16(d) of the Small 
Business Act, 15 U.S.C. 645(d). If the concern has already certified 
itself as a WOSB or EDWOSB on a pending procurement, the concern must 
immediately inform the contracting officer for the procuring agency of 
its decertification.
    (1) Not later than two days after the date on which SBA decertifies 
a business concern, such concern must update its WOSB/EDWOSB status in 
the System for Award Management (or any successor system).
    (2) If a business concern fails to update its WOSB/EDWOSB status in 
the System for Award Management (or any successor system) in response 
to decertification, SBA will make such update within two days of the 
business's failure to do so.
* * * * *
0
67. Amend Sec.  127.503 by redesignating paragraphs (e) through (g) as 
paragraphs (f) through (h), respectively, and adding a new paragraph 
(e) 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?

* * * * *
    (e) Competitions requiring additional socioeconomic certifications. 
A procuring activity cannot restrict a WOSB or EDWOSB competition (for 
either a contract or order) to require SBA socioeconomic certifications 
other than WOSB/EDWOSB certification (i.e., a competition cannot be 
limited only to business concerns that are both WOSB/EDWOSB and 8(a), 
WOSB/EDWOSB and HUBZone, or WOSB/EDWOSB and service-disabled veteran 
owned (SDVO)).
* * * * *


Sec.  127.504   [Amended]

0
68. Amend Sec.  127.504 by removing ``Sec.  121.103(h)(2)'' in 
paragraph (g)(1) and adding in its place ``Sec.  121.103(h)(3)''.
0
69. Amend Sec.  127.506 by adding paragraph (a)(3) to read as follows:


Sec.  127.506   May a joint venture submit an offer on an EDWOSB or 
WOSB requirement?

* * * * *
    (a) * * *
    (3) A WOSB or EDWOSB cannot be a joint venture partner on more than 
one joint venture that submits an offer for a specific contract set-
aside or reserved for WOSBs or EDWOSBs.
* * * * *
0
70. Amend Sec.  127.603 by adding a sentence to the end of paragraph 
(c)(2) and revising paragraph (d) to read as follows:


Sec.  127.603   What are the requirements for filing an EDWOSB or WOSB 
status protest?

* * * * *
    (c) * * *
    (2) * * * Where the identified low bidder is determined to be 
ineligible for award, a protest of any other identified low bidder must 
be received prior to the close of business on the 5th business day 
after the contracting officer has notified interested parties of the 
identity of that low bidder.
* * * * *
    (d) Referral to SBA. The contracting officer must forward to SBA 
any WOSB or EDWOSB status protest received, notwithstanding whether he 
or she believes it is premature, sufficiently specific, or timely. The 
contracting officer must send all WOSB and EDWOSB status protests, 
along with a referral letter and documents, directly to the Director 
for Government Contracting, U.S. Small Business Administration, 409 
Third Street SW, Washington, DC 20416, or by fax to (202) 205-6390, 
Attn: Women-Owned Small Business Status Protest.
    (1) The contracting officer's referral letter must include 
information pertaining to the solicitation that may be necessary for 
SBA to determine timeliness and standing, including: the solicitation 
number; the name, address, telephone number, and facsimile number of 
the contracting officer; whether the protestor submitted an offer; 
whether the protested concern was the apparent successful offeror; when 
the protested concern submitted its offer; whether the procurement was 
conducted using sealed bid or negotiated procedures; the bid opening 
date, if applicable; when the protest was submitted to the contracting 
officer; when the protestor received notification about the apparent 
successful offeror, if applicable; and whether a contract has been 
awarded.
    (2) Where a protestor alleges that a WOSB/EDWOSB is unduly reliant 
on one or more subcontractors that are not WOSBs/EDWOSBs or a 
subcontractor that is not a WOSB/EDWOSB will perform primary and vital 
requirements of the contract, the D/GC or designee will refer the 
matter to the Government Contracting Area Office serving the geographic 
area in which the principal office of the SDVO small business concern 
(SBC) is located for a determination as to whether the ostensible 
subcontractor rule has been met.
    (3) The D/GC or designee will decide the merits of EDWOSB or WOSB 
status protests.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-18068 Filed 9-8-22; 8:45 am]
BILLING CODE 8026-03-P