[Federal Register Volume 89, Number 110 (Thursday, June 6, 2024)]
[Rules and Regulations]
[Pages 48266-48269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12252]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 125 and 128

RIN 3245-AI10


Eliminating Self-Certification for Service-Disabled Veteran-Owned 
Small Businesses

AGENCY: U.S. Small Business Administration.

ACTION: Direct final rule.

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[[Page 48267]]

SUMMARY: This direct final rule contains amendments to the regulations 
governing the U.S. Small Business Administration's (SBA) Veteran Small 
Business Certification (VetCert) Program. The SBA is revising its 
regulations to implement a provision in the National Defense 
Authorization Act for Fiscal Year 2024 (NDAA 2024), which eliminates 
self-certification for service-disabled veteran-owned small businesses 
that are awarded Federal Government contracts or subcontracts that 
count towards agency or subcontracting goals This direct final rule 
amends SBA's regulations to carry out the changes made by NDAA 2024.

DATES: This rule is effective August 5, 2024 without further action, 
unless adverse comment is received no later than July 8, 2024. If 
significant adverse comment is received, SBA will publish a timely 
withdrawal of the rule in the Federal Register.

ADDRESSES: You may submit comments, identified by RIN 3245-AI10 or 
Docket No. SBA-2024-0003, 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): Donna 
Fudge, Office of Government Contracting and Business Development, 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 Donna Fudge 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: Donna Fudge, U.S. Small Business 
Administration, Office of Government Contracting and Business 
Development, 409 Third Street SW, 8th Floor, Washington, DC 20416; 
(202) 205-6353; [email protected]. This phone number may also be 
reached by individuals who are deaf or hard of hearing, or who have 
speech disabilities, through the Federal Communications Commission's 
TTY-Based Telecommunications Relay Service teletype service at 711.

SUPPLEMENTARY INFORMATION:

I. Background

    In order to be awarded a Service-Disabled Veteran-Owned Small 
Businesses (SDVOSB) set-aside or sole source contract, firms must be 
certified by SBA through the Veteran Small Business Certification 
(VetCert) Program. Currently, firms that do not seek SDVOSB set-aside 
or sole source contracts but that meet the VetCert Program eligibility 
requirements may self-certify their SDVOSB status, receive prime 
contract or subcontract awards that are not SDVOSB set-aside or sole 
source contracts, and be counted toward an agency's SDVOSB small 
business goals or a prime contractor's subcontracting goal for SDVOSB 
awards.
    Section 864 of the National Defense Authorization Act for Fiscal 
Year 2024 (Pub. L. 118-31) (December 22, 2023) amends the SDVOSB 
requirements so that, effective October 1, 2024, each prime contract 
award and subcontract award counted for the purpose of meeting the 
goals for participation by SDVOSBs in procurement contracts for Federal 
agencies or Federal prime contractors shall be entered into with firms 
certified by VetCert under section 36 of the Small Business Act (15 
U.S.C. 657f). Section 864 also creates a grace period so that firms 
that file an application for certification with SBA by December 22, 
2024, may continue to self-certify for such Federal Government 
contracts and subcontracts until SBA makes a final decision. SDVOSBs 
that do not file an application for certification with SBA by December 
22, 2024, or are not certified by SBA's VetCert program and do not file 
an application by the deadline, will not be eligible to self-certify 
for such Federal Government contracts or subcontracts after December 
22, 2024. NDAA 2024 requires SBA to promulgate regulations implementing 
this change within 180 days of enactment.
    With this direct final rule, SBA amends the introductory sentence 
of 13 CFR 125.3(a) to require SDVOSB certification for subcontracting 
assistance. This rule also corrects the existing text to remove 
``certified'' from ``certified small business concerns owned and 
controlled by socially and economically disadvantaged individuals.'' 
The Small Disadvantaged Businesses designation is self-certification 
and ``certified'' was included in error. To implement the statutory 
language of section 864 of the NDAA 2024, SBA is amending parts 125 and 
128 of its regulations to eliminate self-certification in the VetCert 
program for SDVOSB concerns seeking a Federal Government contract or 
subcontract that will count towards an agency's SDVOSB goals or a prime 
contractor's SDVOSB subcontracting goals.

II. Justification for Direct Final Rule

    In general, SBA publishes a rule for public comment before issuing 
a final rule in accordance with the Administrative Procedure Act. 5 
U.S.C. 553. The Administrative Procedure Act provides an exception to 
this standard rulemaking process, however, where an agency finds good 
cause to adopt a rule without prior public participation. 5 U.S.C. 
553(b)(B). The good cause requirement is satisfied when prior public 
participation is impracticable, unnecessary, or contrary to the public 
interest.
    SBA is publishing this rule as a direct final rule because public 
participation is unnecessary. SBA views this as a non-controversial 
administrative action that is limited to implementing the provisions of 
NDAA 2024 eliminating self-certification for SDVOSBs. These provisions 
are mandated by statute, and SBA does not have the authority to alter 
them in response to comment. Additionally, a 60-day notice and comment 
period would jeopardize SBA's obligation to meet section 864's deadline 
to promulgate regulations within 180 days of enactment.
    This rule will be effective on the date shown in the DATES section 
unless SBA receives significant adverse comment on or before the 
deadline for comments. Significant adverse comments are comments that 
provide strong justifications for why the rule should not be adopted or 
for changing the rule. SBA does not expect to receive any significant 
adverse comments because it is adopting mandatory statutory changes. If 
SBA receives any significant adverse comments, it will publish a 
document in the Federal Register withdrawing this rule before the 
effective date. If SBA receives no significant adverse comments, the 
rule will be effective 60 days after publication without further 
notice.
    As such, this rule is being implemented as a direct final rule.

III. Compliance With Executive Orders 12866, 13563, 12988, 13132, and 
13175, the Paperwork Reduction Act (44 U.S.C. Ch. 35), and the 
Regulatory Flexibility Act (5 U.S.C. 601-612)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
direct final rule is not a significant regulatory action for the 
purposes of Executive Order 12866. This direct final rule

[[Page 48268]]

implements specific statutory provisions in section 864 of the NDAA 
2024.

Expected Impact

    Under the existing system, the burden of SDVOSB compliance for 
goaling purposes is placed upon the awarding contracting officer. Under 
this direct final rule, this burden is placed upon SBA. The contracting 
officer's responsibilities would be reduced to confirming that the 
applying firm is, in fact, a certified SDVOSB in SBA's certification 
database. This reduced responsibility to verify eligibility at contract 
award may result in a minor cost savings to the contracting agencies.
    While current participants in the VetCert Program would have no 
additional costs associated with this direct final rule, SBA 
anticipates costs associated with self-certified SDVOSBs currently 
seeking prime contracts or subcontracting with the Federal Government. 
SBA estimates that as many as 20,408 self-certified SDVOSBs could apply 
for certification. To obtain this estimate, SBA reviewed firms actively 
registered as SDVOSBs in SAM but not already certified by VetCert. SBA 
believes that the number of firms listed in SAM is the most recent and 
reliable data to estimate participation and total costs for the 
purposes of this regulatory impact study. While it is not anticipated 
that every firm self-certified in SAM will apply for certification, SAM 
self-certification serves as what SBA would consider the maximum number 
of firms that would likely seek certification. SBA anticipates that 
only 70% of those firms will apply for certification, or 14,285 firms.
    SBA estimates that an applicant's cost burden to apply for 
eligibility for this program would require 2 total hours at a cost 
burden of $250.96 per applicant. Hourly cost to the participant is 
based on the estimated manager's salary of $125.48/hour (based on the 
median hourly wage of $62.74 for construction managers, according to 
the BLS 2023 Occupational Outlook Handbook, plus 100% for benefits and 
overhead). Based on an estimate of 2 hours to complete an application 
and an hourly cost of $125.48, the initial total cost burden will be 
$3,584,963. Applicants would be required to apply for recertification 
at the end of the three-year eligibility period. SBA estimates that 
applicants will incur an additional 1 hour or $125.48 to complete 
recertification. Assuming all firms that apply for initial 
certification also apply for recertification at the end of each three-
year eligibility period, the total cost burden would increase by 
$1,792,481 every three years. SBA does not expect that all firms will 
recertify but includes this estimate as an abundance of caution.
    This regulation benefits the SDVOSB community by reducing the 
ambiguity and uncertainty for contracting officers in the process of 
Federal contract goaling and subcontracting that previously relied on 
self-certification. As SBA is implementing statutorily mandated 
requirements, there are no alternatives to this rulemaking.

Executive Order 13563

    Executive Order 13563, Improving Regulation and Regulatory Review 
(January 18, 2011), requires agencies to adopt regulations through a 
process that involves public participation, and to the extent feasible, 
base regulations on the open exchange of information and perspectives 
from affected stakeholders and the public as a whole. SBA has developed 
this rule in a manner consistent with these requirements, and the 
public will have the opportunity to provide comments following the 
publication of this rule.

Executive Order 12988

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

Executive Order 13132

    This direct final rule does not have federalism implications as 
defined in Executive Order 13132. It will not have substantial direct 
effects on the States, on the relationship between the National 
Government and the States, or on the distribution of power and 
responsibilities among the various levels of government, as specified 
in the Executive order. As such it does not warrant the preparation of 
a federalism assessment.

Executive Order 13175

    This direct final rule does not have Tribal implications under 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments, because it does not have a substantial direct effect on 
one or more Indian tribes, on the relationship between the Federal 
Government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal Government and Indian tribes.

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

    Subtitle E of the Small Business Regulatory Enforcement Fairness 
Act of 1996, also known as the Congressional Review Act, 5 U.S.C. 801 
et seq., provides that before a 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 
rulemaking and other required information to the U.S. Senate, the U.S. 
House of Representatives, and the Comptroller General of the United 
States. This rulemaking has been reviewed and determined not to meet 
the criteria set forth in 5 U.S.C. 804(2).

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

    To carry out its statutory mandate to certify SDVOSB firms, SBA 
collects information from SDVOSB applicants or participants through an 
online application system. This collection of information will require 
submission or retention of documents that support the applicant's 
certification and continued eligibility.
    As discussed above, this direct final rule will implement the 
statutory requirement for small business concerns to be certified by 
SBA in order to be counted toward an agency's or prime contractor's 
goal for SDVOSB awards. As a result of these changes, the direct final 
rule eliminates SDVOSB self-certification. SBA anticipates that these 
changes will impact self-certified firms; however, SBA believes that 
this impact will be minimal as the information to be collected is 
already held by applicants during the ordinary course of business, was 
previously required for self-certification, and would require minimum 
preparation prior to submission. SBA will seek approval of this updated 
information collection separately from this rulemaking.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small nonprofit enterprises, and small local 
governments. Pursuant to the RFA, when an agency issues a rulemaking, 
the agency must prepare a regulatory flexibility analysis which 
describes the impact of the rule on small entities. However, the RFA 
requires such analysis only where notice and comment rulemaking is 
required. As discussed above, SBA has found good

[[Page 48269]]

cause that notice and public comment are impracticable, unnecessary, or 
contrary to the public interest. Accordingly, SBA is not required to 
conduct a regulatory flexibility analysis and is publishing this rule 
as a direct final rule without advance notice and public comment to 
implement NDAA 2024.

List of Subjects

13 CFR Part 125

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

13 CFR Part 128

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

    Accordingly, for the reasons stated in the preamble, SBA amends 13 
CFR parts 125 and 128 as follows:

PART 125--GOVERNMENT CONTRACTING PROGRAMS

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

    Authority: 15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657f, 
657q, 657r, and 657s; 38 U.S.C. 501 and 8127.


0
2. Amend Sec.  125.3 by revising the first sentence of the introductory 
text of paragraph (a) and paragraph (c)(1)(xi) to read as follows:


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

    (a) General. The purpose of the subcontracting assistance program 
is to provide the maximum practicable subcontracting opportunities for 
small business concerns, including small business concerns owned and 
controlled by veterans, certified small business concerns owned and 
controlled by service-disabled veterans, certified HUBZone small 
business concerns, small business concerns owned and controlled by 
socially and economically disadvantaged individuals, and small business 
concerns owned and controlled by women. * * *
* * * * *
    (c) * * *
    (1) * * *
    (xi) The prime contractor must provide a written statement of the 
types of records it will maintain to demonstrate procedures which have 
been adopted to ensure subcontractors at all tiers comply with the 
requirements and goals set forth in the subcontracting plan established 
in accordance with paragraph (c)(1)(x) of this section, including the 
establishment of source lists of small business concerns, small 
business concerns owned and controlled by veterans, certified small 
business concerns owned and controlled by service-disabled veterans, 
certified HUBZone small business concerns, small business concerns 
owned and controlled by socially and economically disadvantaged 
individuals, and small business concerns owned and controlled by women; 
the efforts to identify and award subcontracts to such small business 
concerns; and size or socioeconomic certifications or representations 
received in connection with each subcontract;
* * * * *

PART 128--VETERAN SMALL BUSINESS CERTIFICATION PROGRAM

0
3. The authority citation for part 128 continues to read as follows:

    Authority: 15 U.S.C. 632(q), 634(b)(6), 644, 645, 657f, 657f-1.


0
4. Amend Sec.  128.200 by revising paragraph (c)(2) to read as follows:


Sec.  128.200  What are the requirements a concern must meet to qualify 
as a VOSB or SDVOSB?

* * * * *
    (c) * * *
    (2) A concern must be certified pursuant to Sec.  128.300 to 
receive a prime contract that is to be counted by a Federal agency for 
the purposes of meeting participation goals for SDVOSBs or to receive a 
subcontract from a Federal prime contractor for the purpose of meeting 
subcontracting goals for SBVOSBs in Federal procurement contracts. Any 
small business concern that submits a complete certification 
application to SBA on or before December 22, 2024, shall be eligible to 
self-certify for a Federal prime or subcontract that counts towards 
SDVOSB goaling purposes or SDVOSB subcontracting goals, respectively, 
until SBA declines or approves the concern's application. Any small 
business concern that does not submit a complete SDVOSB certification 
application to SBA on or before December 22, 2024, will no longer be 
eligible to self-certify for a Federal prime or subcontract that counts 
towards SDVOSB goaling purposes or SDVOSB subcontracting goals, 
respectively.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2024-12252 Filed 6-5-24; 8:45 am]
BILLING CODE 8026-09-P