[Federal Register Volume 68, Number 80 (Friday, April 25, 2003)]
[Proposed Rules]
[Pages 20350-20356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10286]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 68, No. 80 / Friday, April 25, 2003 /
Proposed Rules
[[Page 20350]]
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121 and 124
RIN 3245-AF06
Size for Purposes of the Multiple Award Schedule and Other
Multiple Award Contracts; Small Business Size Regulations; 8(a)
Business Development/Small Disadvantaged Business Status Determinations
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The U.S. Small Business Administration (SBA) proposes to amend
its regulations to address the time at which size is determined for
purposes of the General Services Administration's (GSA) Multiple Award
Schedule (MAS) Program, including the Federal Supply Schedule (FSS),
and other multiple award contracts, including Governmentwide
Acquisition Contracts and multi-agency contracts. SBA also proposes to
amend its 8(a) Business Development regulations to address when a
business concern may receive orders as an 8(a) program participant
under GSA's MAS Program, including the FSS, and other multiple award
contracts.
DATES: Comments must be received on or before June 24, 2003.
ADDRESSES: Written comments should be addressed to Linda G. Williams,
Associate Administrator, Office of Government Contracting, U.S. Small
Business Administration, 409 3rd Street, SW., Washington, DC 20416, or
by FAX to (202) 205-6390 or by e-mail to [email protected]. You
may also submit comments electronically to http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Dean Koppel, Assistant Administrator,
Office of Policy and Research, Office of Government Contracting, (202)
205-7322, [email protected].
SUPPLEMENTARY INFORMATION: The SBA's small business size regulations
(13 CFR part 121) are used to determine eligibility for all SBA and
Federal programs that require a concern to be a small business.
Currently, SBA's regulations provide that SBA determines the size of a
concern as of the date the concern submits a written self-certification
that it is small to the procuring agency as part of its initial offer,
including price. 13 CFR 121.404. Therefore, for a multiple award
schedule (MAS), Federal Supply Schedule (FSS), multiple award, or
Governmentwide Acquisition (GWAC) contract, size is determined as of
the date of a concern's initial offer, including price. If a concern is
small as of that date, agencies may place orders pursuant to the
original contract and consider these orders as awards to a ``small
business'' for the length of the MAS, FSS, multiple award contract or
GWAC.
This has led to skewed and, in SBA's view, misleading results. Such
contracts may have terms of five, ten, or twenty years, and can be
amended to incorporate goods and services with varying size standards,
and unlimited quantities. Therefore, orders to concerns receiving such
contracts would be considered to be awards to small business even
though a firm had grown to be large (either through natural growth or
by merger or acquisition) during the term of the contract, and even
though the firm is not (and may never have been) small with respect to
the size standard corresponding to the work to be performed under a
particular order.
For example, SBA has reviewed Federal Procurement Data System
(FPDS) statistics as they relate to four business concerns that
received contracts as small businesses under the GSA's MAS Program, but
which have become other than small since that time. These four business
concerns are continuing to receive orders issued pursuant to a MAS
contract in which each certified that they were small at the time of
the original MAS contract. In fiscal year 2000, these four business
concerns received over $190 million in such orders. Because these
concerns were considered small at the time of the original MAS
contract, each of these 1,313 contracting actions, valued at over $190
million, could be counted as awards to small businesses. The figures
for these same concerns in fiscal year 2001 are equally astounding--
1,271 contracting actions amounting to over $200 million in awards to
other than small businesses.
In addition, SBA's Office of Hearings and Appeals (OHA) recently
decided a size appeal relating to an order issued pursuant to the FSS.
In Size Appeals of SETA Corporation and Federal Emergency Management
Agency, SBA No. SIZ-4477 (2002) (OHA decisions are available at
www.sba.gov/oha/searchpage.html or by contacting OHA by e-mail at
[email protected] or by phone at 202-401-8200), OHA ruled that a request for
quotations (RFQ) issued pursuant to a FSS contract was a new small
business set-aside procurement. As such, OHA held that size should be
determined as of the date of the firm's submission of its certification
as an eligible small business with its price quotation in response to
the RFQ, and not at the date of the firm's offer in response to the
initial FSS solicitation.
Further, the U.S. General Accounting Office (GAO) weighed in on the
issue in a recent bid protest. In CMS Information Services, Inc., B-
290541 (Aug. 7, 2002) (available at http://www.gao.gov or contact the
Government Printing Office at 202-512-1530), the procuring agency
limited competition to small businesses and required businesses to
certify their size at the time they submitted their quotations. The
protester argued that this certification requirement was improper
because the offerors had each certified their size at the time they
submitted their initial offer to GSA for award of its FSS contract. GAO
ruled that when an agency limits competition to small business vendors
under a competitive RFQ issued pursuant to the FSS, the agency may
properly require firms to certify as to their small business size
status as of the time they submit their quotations.
In addition, GSA implemented a Federal Acquisition Regulation (FAR)
deviation requiring contractors operating under the MAS Program or any
other multiple award contract (such as the FAST program in GSA's
Federal Technology Service), to recertify that the concern qualifies as
a small business each time their contract is up for renewal. See GSA
News Release 9991 (November 15, 2002) (available at http://www.gsa.gov/Portal/newsreleases.jsp).
This evidence indicates that agencies may be counting orders issued
pursuant to a MAS or other multiple award
[[Page 20351]]
contract as awards to small businesses when, in reality, the order is
actually made to an entity other than a small business. As a result,
agencies, including GSA, are attempting to remedy the situation, as are
administrative tribunals such as OHA and GAO. Consequently, SBA is
proposing a regulation at 13 CFR 121.404(c) to specifically address
size as it relates to awards issued pursuant to multiple award
contracts, including specifically GSA's MAS Program.
Under the proposed rule, a firm that receives a MAS or other
multiple award contract must certify annually on the anniversary date
of the contract award that it continues to be a small business for a
specified size standard. A concern that is small at the time of the
initial offer for a MAS or other multiple award contract would be
considered small for one year from the date of its certification. The
concern would then have to re-certify its size each year, for the term
of the contract. Under the proposed rule, procuring agencies would then
publish a list of the re-certifications received, within 10 days of
receipt, on their agency's Web site, in the Federal Register, or
otherwise. The rule would permit any interested party to file a protest
with the contracting officer challenging the size of the concern
seeking re-certification. If the recertification is challenged, SBA
would then perform a formal size determination with respect to the
challenged firm. SBA specifically requests comments as to the best or
most expedient way to post these re-certifications so as to ensure that
interested parties may appropriately protest, but at the same time not
imposing an undue burden on procuring agencies or on the small business
concerns.
SBA also may review or request a formal size determination with
respect to any re-certification. However, once a firm is recertified,
the concern will be considered to be a small business with respect to
any order it receives with a North American Industry Classification
Code (NAICS) code having the same or higher size standard during that
one year period. Each order issued pursuant to the contract could then
be counted as an award to small business.
However, under the GAO decision in CMS cited above, a contracting
officer would have the discretion to ask for size certifications for
individual orders. This proposed rule does not seek to, and does not in
fact, change such discretion.
The proposed rule is based on SBA's view that receiving a multiple
award contract or getting on GSA's FSS is similar to being admitted to
SBA's 8(a) Business Development (BD) or HUBZone programs, and orders
issued under multiple award contracts or off the schedule are similar
to the actual award of an 8(a) BD or HUBZone contract. In the 8(a) BD
and HUBZone programs, a concern must be small (for its primary NAICS
code) at the time it is admitted to the program, and it must be small
for each 8(a) BD or HUBZone contract it is awarded. Although the
proposed rule would not require a firm to certify its status as (and in
fact be) a small business for each order it receives under a multiple
award contract (as an 8(a) or HUBZone concern must do for individual
contracts once admitted to either of those programs), its requirement
for annual certification makes size relevant for orders.
SBA also recognizes, however, that an order issued pursuant to a
multiple award contract is intended to be a simple, fast way to procure
needed goods and services. SBA does not seek to delay the procurement
process or make it more complicated.
SBA considered three other alternatives to the proposed rule. The
first alternative would require that for an agency to count an award
issued under a multiple award or schedule contract as an award to a
small business, the concern must be small as of the date of each order
(in addition to being small at the time of its self-certification for
the multiple award or schedule contract). The second alternative would
require a firm to re-certify its status as a small business at the time
of any option on the multiple award or schedule contract. SBA believes
that the first alternative might require size certifications too often
(and could delay the procurement process), and that the second
alternative would require them too infrequently (letting a firm that
has been purchased by a large business immediately after receiving its
multiple award or schedule contract, for example, to be considered a
small business for almost five years after becoming large). The third
alternative SBA considered is similar to that proposed, but would
require annual recertification or notification for a MAS or other
multiple award contract only where a firm's size status for the MAS or
other multiple award contract at issue has changed. While this
alternative would significantly reduce paperwork and have a minimal
effect on the procurement process, SBA was concerned about timely
compliance with such a requirement. For example, if a firm that has
grown to be other than small is seeking a substantial order as a small
business under a MAS or other multiple award contract, it might not
notify the contracting officer of its changed status until after it
received the order. SBA specifically requests comments on each of these
three alternatives.
SBA also proposes to amend 13 CFR 121.1004(a)(3), regarding time
limits for size protests in the case of multiple award and schedule
procurements, including FSS contracts. The proposed regulation would
authorize size protests challenging firms seeking re-certification of
their status as small businesses for a MAS or other multiple award
contract. In addition, it would specifically authorize size protests in
connection with orders issued under those contracts. Since time of size
for an order issued under a MAS or other multiple award contract is
determined as of the date the concern submits a written self-
certification that it is small to the procuring agency as part of its
initial offer, including price (during the one-year period immediately
following contract award) and as of the date the concern submits its
re-certification (for the one-year period after any re-certification),
a protest challenging the size of a concern for a specific order under
a MAS or other multiple award contract relates to the date of the
certification or re-certification, as applicable. Again, a contracting
officer can request size certifications in connection with a specific
order. In such a case, size would then be determined as of the date of
the certification in connection with the order. Absent such a request
by a contracting officer, the certification or re-certifcation date is
the date at which SBA would determine a concern's size for a specific
order.
SBA specifically requests comments on the appropriate time frame
within which to require size protests relating to such orders. SBA
recognizes that multiple award and schedule contracts are intended to
be a fast, easy way for an agency to meet its procurement needs.
However, SBA does not believe that a size protest would slow down the
process or delay performance. A size protest in this context most
probably would relate to whether an agency can count the award as an
award to small business. Whether an award counts or does not count as a
small business award has no bearing on whether the award can be made to
a particular firm, or whether that firm can perform the award. Thus,
the proposed rule would permit a protest to be made at any time prior
to the expiration of the underlying multiple award or schedule
contract.
Finally, the proposed rule would amend 13 CFR 124.503(h)(2) to
ensure that size eligibility for 8(a) multiple award contracts is
consistent with the
[[Page 20352]]
changes made to the size regulations generally by this rule. A concern
would be able to continue to receive orders as an 8(a) small business
under an 8(a) MAS contract (including the Federal Supply Schedule
(FSS)) or other multiple award contract (including a GWAC, with respect
to any orders issued pursuant to the MAS or other multiple award
contract having a NAICS code with the same or higher size standard as
the one(s) under which it qualified for a period of one year from the
date of its certification or re-certification as a small business.
Compliance With Executive Orders 12612, 12988, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
OMB has determined that this proposed rule constitutes a
significant regulatory action under Executive Order 12866.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
has determined that this rule, if adopted in final form, would impose a
new reporting requirement but not a new recordkeeping requirement. The
proposed rule provides that in order to be considered small for
purposes of an order issued pursuant to a multiple award or schedule
contract, a concern must qualify as small at the time it receives the
intial contract and annually. SBA does not believe that this
requirement imposes a new recordkeeping requirement. SBCs have always
been required to keep records pertaining to their size and to certify
as to their size status to receive Federal benefits. Firms have always
had to certify their size status with respect to new solicitations/
contracts. No new records would be required in order to meet this
change regarding multiple award contracts. In addition, these records
are those kept in the ordinary course of business, such as federal
income tax returns.
However, the proposed regulation would require business concerns to
certify annually as to their size, in addition to certifying at the
time of the intial MAS or other multiple award contract. Thus, the
proposed regulation imposes a new reporting requirement. SBA believes
that this additional certification would not be a burden to small
business. In fact, small businesses have contacted SBA requesting such
an additional certification in order to ensure that those receiving
awards as small businesses are in fact small. The following sets forth
further detail about this information collection request and
specifically requests comments on the issue.
A. Application
Title: Re-Certification of Size for Multiple Award Contracts.
Summary: This application, described in proposed 13 CFR
121.404(c)(i), would require each business concern that certifies as
small at the time of award for purposes of the General Services
Administration's Multiple Award Schedule Program, including the Federal
Supply Schedule, and other multiple award contracts, including
Governmentwide Acquisition Contracts and multi-agency contracts, to re-
certify once each year to the procuring agency's contracting officer
that it is still small for purposes of that contract and consequently
for any orders issued pursuant to the MAS or other multiple award
contract having a NAICS code with the same or higher size standard. The
application information provided to the contracting officers and
subsequently published on the agency's Web site, in the Federal
Register, or otherwise will allow all parties to determine whether a
business concern is small pursuant to SBA's size regulations.
Need and Purpose: Pursuant to SBA's current regulations, a
concern's size status is determined as of the date that it submits its
initial offer, including price, for MAS and other multiple award
contracts. If a concern is small as of that date, it is deemed to be
small for the life of the contract and all orders issued pursuant to
that contract. Contracts issued pursuant to some multiple award
schedules are being extended for ten or twenty years. Therefore, a
business concern that certified as small to receive a schedule contract
ten years ago may still be considered small for orders issued pursuant
to the same contract even if the business concern is clearly no longer
small. Agencies are then able to count these orders as awards to small
business even though the firm may have grown to be other than small or
has merged with or been acquired by a large business many years ago.
Unfortunately, this means that Federal agencies that meet their SBC
goals by counting awards to former SBCs do so at the expense of
legitimately defined SBCs. The information submitted in the re-
certification will help determine whether or not these business
concerns continue to be small and thus whether the orders issued
pursuant to the initial schedule or other multiple award contract may
be deemed an award to a small business concern.
Description of Respondents: All business concerns that certified as
small for the initial MAS or other multiple award contract will be
required to re-certify each year as to the concern's size pursuant to
this proposed rule. SBA estimates that approximately 6,000 SBCs receive
MAS or other multiple award contracts each year. SBA estimates the
burden of this collection of information as follows: A business concern
will re-certify annually as to its size for each MAS or other multiple
award contract it receives and to which it initially certified itself
as small. SBA estimates the time needed to complete this collection
will average at most a half hour. SBA estimates the cost to complete
this collection will be approximately $30 per hour. The total estimated
aggregated burden is 3,000 hours per annum costing an aggregated
$45,000 for the year.
SBA invites comments on: (1) Whether the proposed collection of
information is necessary for the proper performance of SBA's functions,
including whether the information will have a practical utility; (2)
the accuracy of SBA's estimate of the burden of the proposed collection
of information, including the validity of the methodology and
assumptions used; (3) ways to enhance the quality, utility, and clarity
of the information to be collected; and (4) ways to minimize the burden
of the collection on respondents, including through the use of
automated collection techniques, when appropriate, and other forms of
information technology.
Please send comments about this information collection request by
the closing date for this proposed rule to David Rostker, Office of
Management and Budget, Office of Information and Regulatory Affairs,
725 17th Street, NW., Washington, DC 20503 and to Linda Williams,
Associate Administrator for Government Contracting, Office of
Government Contracting and Business Development, U.S. Small Business
Administration, 409 Third Street, SW., Washington, DC 20416.
For purposes of Executive Order 12988, SBA has drafted this
proposed rule, to the extent practicable, in accordance with the
standards set forth in section 3 of that Order.
For purposes of Executive Order 13132, SBA has determined that this
proposed rule has no federalism implications warranting the preparation
of a Federalism Assessment.
SBA has determined that this proposed rule, if adopted in final
form, could have a significant economic impact on a substantial number
of small
[[Page 20353]]
entities within the meaning of the Regulatory Flexibility Act (RFA), 5
U.S.C. 601-612. Therefore, SBA has prepared an Initial Regulatory
Flexibility Act (IRFA) analysis addressing the proposed regulation.
B. IRFA
The RFA provides that when preparing a Regulatory Flexibility
Analysis, an agency shall address all of the following: the reasons,
objectives, and legal basis for the proposed rule; the kind and number
of small entities which may be affected; the projected recordkeeping,
reporting, and other compliance requirements of the proposed rule,
including an estimate of the classes of small entities which will be
subject to the requirement and the type of professional skills
necessary for preparation of the report or record; federal rules which
may duplicate, overlap, or conflict with the proposed rule; and any
significant alternatives to the proposed rule. This IRFA considers
these points and the impact the proposed regulation concerning multiple
award or schedule contracts may have on small entities.
(a) Reasons, Objectives and Legal Basis
Under the Small Business Act, SBA is authorized to specify detailed
definitions and standards by which an entity may be determined to be a
small business concern. 15 U.S.C. 632(a)(2). SBA's definitions and
standards relating to SBCs are set forth in 13 CFR part 121.
Pursuant to SBA's current regulations, a concern's size status is
determined as of the date that it submits its initial offer, including
price, for the MAS or other multiple award contract. If a concern is
small as of that date, it is deemed to be small for the life of the
contract and for all orders issued pursuant to that contract. It is our
understanding that contracts issued pursuant to some multiple award
schedules are being extended for ten or twenty years. This means that a
concern that certified as small to receive a schedule contract ten
years ago, could still be considered small for orders issued pursuant
to the same contract even if the business concern is clearly no longer
small. Agencies are then able to count these orders as awards to small
business even though the firm may have grown to be other than small or
has merged with or been acquired by a large business many years ago.
Unfortunately, this means that Federal agencies that meet their SBC
goals by counting awards to former SBCs do so at the expense of
legitimately defined SBCs. Agencies may not seek other procurement
opportunities with legitimate SBCs because they have met their SBC goal
through schedule orders to firms that are no longer small. As a result
of the increasing use of these schedules and other multiple award
contracts, SBA believes it is necessary to amend its regulations and
address these size eligibility issues for orders issued pursuant to MAS
and other multiple award contracts.
(b) Description and Estimate of the Number of Small Entities to Which
the Rule May Apply
The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA defines ``small
entity'' to include ``small businesses,'' ``small organizations,'' and
``small governmental jurisdictions.'' SBA's programs do not apply to
``small organizations'' or ``small governmental jurisdictions'' because
they are non-profit or governmental entities and do not qualify as
``business concerns'' within the meaning of SBA's regulations. SBA's
programs apply only to for-profit business concerns. Therefore, the
proposed regulation (like the regulation currently in effect) will not
impact small organizations or small governmental jurisdictions.
Small businesses that participate in federal government contracting
are the specific group of small entities affected most by this proposed
rule. While there is no precise estimate for the number of SBCs that
will be affected by this proposed rule, SBA has reasoned the following.
First, there are over 200,000 SBCs registered on PRO-Net. PRO-Net is a
database containing profiles of SBCs that includes information from
SBA's files and other available databases, as well as information
inputted by SBCs. Second, in 2001, SBA approved over 48,000 loans.
Thus, based on a simplistic review of PRO-Net, it may appear that the
proposed rule could affect, at a minimum, at least 250,000 SBCs. SBA
notes, however, that this rule would likely affect only those small
businesses having a MAS or other multiple award contract that were
small at the time of the initial schedule or multiple award contract,
and are no longer small. The number of SBCs awarded a MAS or other
multiple award contract are much less than the PRO-Net figure, and
those that have grown to be other than small since the award of their
MAS or other multiple award contract is even smaller than that.
Therefore, this rule will not impact all of the ``SBCs'' with MAS or
other multiple award contracts, but, as identified below, would impact
at least 6-12 businesses each year.
According to the Federal Procurement Data System (FPDS), in fiscal
year 2001, there were 241,581 orders issued pursuant to the FSS and
648,522 orders issued pursuant to other Federal schedules for prime
contract actions of $25,000 or less. (Federal Procurement Report,
Section III, Agency Views, http://www.fpdc.gov/fpdc/fpr.htm). Over $600
million of these FSS orders and over $180 million of the other Federal
schedule orders were reported as orders to SBCs. For contract actions
over $25,000, there were over 61,000 orders, or $13.8 billion in orders
issued pursuant to the FSS, and over 47,000 or $15 billion in orders
issued pursuant to MAS contracts. Id. For FSS contracts above $25,000,
approximately $4 billion was reported as awarded to 2,610 small
businesses. This means that the average of orders awarded to SBCs is
about $1.5 million (3,950,853,000/2610=1,513,737).
In addition to examining FPDS data, SBA has examined the growth
trends of businesses between the 1992 and 1997 Economic Censuses using
the 1992 and 1997 Special Tabulation of the Economic Census for SBA.
The data shows that the share of total businesses with 100 employees or
more (an approximate average employment size of all size standards)
increased by 0.2 percent. According to the Census data
(www.census.gov), the share of total businesses with 100 employees or
more increased by only 0.1 percent and according to SBA's Office of
Advocacy data (see www.sba.gov/advo/stats/us88_99.pdf), the increase
was 0.1 between 1992-1997 and about 0.15 percent between 1992-1999.
Applying these general trends to the 6,000 small businesses SBA
believes are participating in the GSA's MAS program, approximately 3 to
4 small businesses per year would outgrow their small business
classification. SBA, however, expects the actual number of businesses
that outgrow their small business classification would be two to three
times higher (6 to 12 business concerns) than this estimate, since
studies have shown businesses receiving Federal contracts tend to be
stronger businesses. Therefore, SBA expects 6 to 12 business concerns
each year that have a multiple award contract to become other than
small during the year. SBA expects the number of concerns affected the
first year to be greater because firms have not had to certify their
size status annually since being awarded a multiple award contract, and
firms may have received such contracts several years ago and
[[Page 20354]]
could not recertify their small business status today.
SBA welcomes comments on the potential number of small businesses
that would have to change their business designation and its
implications as a result of this proposed provision.
This proposed rule could have a significant economic impact on
SBCs. Using both the census and FPDS data discussed above, concerns
that grow and no longer qualify as SBCs (about 6-12 a year) attain over
$18 million a year in FSS awards (average of task order awards to SBCs
is $1.5 million). Therefore, this rule could result in a corresponding
increase in over $18 million in awards to those concerns that are
actually small, although such a result is unlikely.
As an example, SBA has researched four actual business concerns
that it believes are no longer small, and yet are still receiving
orders issued pursuant to a MAS contract where each business certified
itself as small on the original contract. The concerns, and the number
of schedule orders received, as well as the total value of the awards,
were obtained from FPDS data and are as follows:
----------------------------------------------------------------------------------------------------------------
FY2000 FY2001
Dollars ($000) Dollars ($000)
actions actions
----------------------------------------------------------------------------------------------------------------
Business 1............................. 1,019 154,321 902 124,063
Business 2............................. 88 8,043 55 6,073
Business 3............................. 28 18,217 0 0
Business 4............................. 178 16,235 314 77,360
----------------------------------------------------------------------------------------------------------------
SBA notes that it is difficult to access FPDS data with only a business
concern's name because concerns typically have many different
variations of their name (i.e., divisions, sections, etc). Therefore,
the total number of actions and dollar value may be higher for the four
concerns listed above.
SBA also notes that some could argue that this rule provides a
disincentive for contracting officers to select a small business.
Contracting officers may fear that there will be a size protest that
would ultimately slow down the contracting process.
SBA does not believe this rule would alter the decisions of
contracting officers in any way. First, the procuring activity will
select a concern for an order because it is the best value to the
Federal Government. Second, SBA does not believe that the activity will
refuse to issue the order, which results in the best value to the
Government, because the concern has to certify its size and may no
longer be small. SBA believes that the only consequence is that the
procuring activity will not be able to count the award as one to a SBC.
SBA believes that this is similar to how orders issued pursuant to
MAS contracts currently interact with the 8(a) BD program. Today, a
contracting officer can consider an offer from an 8(a) BD program
participant, a SBC, and a large business simultaneously. Under a
Memorandum of Understanding between SBA and the GSA, if the contracting
officer determines that the best value to the Government is the offer
submitted by the 8(a) BD participant, the order to that firm may be
counted as an 8(a) award and counted towards the agency's SDB goal. If
the best value to the Government is the offer from the large business,
the large business would receive the award and the order would not
count toward any small business goal. It is SBA's view that the same
would happen under the proposed rule where a schedule holder grows to
be other than small. In that case, if a firm that is no longer small
would provide the best value to the Government, SBA believes that the
firm would still get the MAS or FSS order, but, as with an award to any
other large business, the order could not count toward any small
business goal.
Therefore, if implemented, SBA believes this rule will ultimately
impact the data collected on orders issued to SBCs, rather than affect
the number of orders received by business concerns who have grown to be
other than small since they received a federal multiple award or
schedule contract.
(c) Additional Reporting or Record Keeping Requirements on Small
Businesses
This proposed rule would impose a new information collection
requirement on small businesses. However, the information collection is
the same as that small business concerns currently submit for
Government contracts to receive a preference or for an agency to count
the award as one to a small business.
SBA does not believe that this provision imposes any new
recordkeeping requirements. SBCs have always been required to keep
records pertaining to their size and to certify as to their size status
to receive Federal benefits. In addition, these records are those kept
in the ordinary course of businesses, such as federal income tax
returns.
(d) Relevant Federal Rules That May Duplicate, Overlap or Conflict With
This Rule
This rule does not duplicate, overlap, or conflict with any other
Federal rules. Under this proposed rule, SBCs would have to certify
that they are small at the time they receive the MAS or other multiple
award contract and then annually each year thereafter, so long as the
MAS or other multiple award contract is still in effect, in order for
the procuring activity to count the order as an award to a SBC. SBA
does not believe this rule conflicts with any FAR rule. For example,
according to FAR 19.804-6, separate offers and acceptances need not be
made for individual orders under MAS or FSS contracts for the 8(a) BD
Program. SBA's acceptance of the original multiple award or MAS
contract is valid for the term of the contract. The same is set forth
in 13 CFR 124.503(h) of SBA's regulations. The rule proposed does not
conflict with this FAR regulation, which addresses offer and acceptance
of a contract for the 8(a) BD Program.
In addition, typically, SBCs only certify their size on initial
contracts and not annually, and therefore the FAR will need to be
amended to address this rule, if promulgated as final. SBA does not
believe this rule conflicts with FAR rules addressing multiple award or
schedule orders and notes that SBA has exclusive statutory jurisdiction
in establishing size definitions and standards. It is important to
remember, however, that size eligibility generally, and in this case
size for purposes of a multiple award or schedule order, falls within
SBA's jurisdiction. The Small Business Act gives to SBA the exclusive
authority to determine when and under what circumstances a business
entity may be considered small.
(e) Alternatives That SBA Considered
SBA has proposed a new provision addressing orders issued pursuant
to MAS and other multiple award contracts. Currently, size is
determined
[[Page 20355]]
as of the date of a concern's initial offer on the MAS or other
multiple award contract, not for each order issued pursuant to that
contract. If a concern is small on that date, orders may be placed and
considered to be awards to ``small business'' for the length of the MAS
or other multiple award contracts. SBA understands that such contracts
may have terms of five, ten, or more years, and can be amended to
incorporate goods and services with varying size standards and
unlimited quantities. Orders to concerns issued pursuant to a MAS or
other multiple award contract would be deemed awards to small
businesses even if a concern had grown to be large many years ago and
even though the concern is not small with respect to the size standard
corresponding to the work to be performed under a particular task
order.
In determining how to address this issue, SBA considered first not
amending the current regulation. However, SBA believes that if it does
not address this issue, then awards will continue to be made to
concerns that are not small businesses, yet agencies will get credit
for making an award to a small business. SBA believes that this would
harm legitimate small business concerns by reducing the number of
opportunities and additional awards to them, either through the MAS
program or otherwise. In addition, SBA has been contacted by several
legitimate small businesses complaining that MAS orders are going to
firms clearly not small, but that such awards are being counted as
awards to small business. These businesses believe that their
opportunites of receiving orders are reduced because agencies can go to
large businesses and count the orders as awards to small businesses.
SBA also considered that, instead of determining size eligibility
annually for purposes of orders issued pursuant to a MAS or other
multiple award contract, it would determine size as of the date that a
firm certifies that it is small for a particular order. Although this
approach is appealing to SBA, SBA believes that some procuring agencies
would oppose it. They could argue that such an approach would delay the
procurement process, which is contrary to the intent of the MAS
program. SBA also considered a longer time period, such as five years
(one contract year plus four option years), in which the concern could
be considered small. SBA decided not to propose this approach because
it would not adequately address the perceived problem (i.e., awards to
other than small businesses would continue to be counted as small
business awards for too long a period of time and too often, since
agencies are increasingly using multiple award and schedule contracts).
SBA believes that a process which requires a concern to self-certify
annually that it continues to be small for orders issued pursuant to a
MAS or other multiple award contract represents little or no burden to
the SBC or to the procurement process.
SBA also proposes a rule regarding time limits for size protests in
the case of MAS procurements, including FSS contracts. The proposed
rule would specifically authorize protests in connection with awards
and orders issued under those contracts as well as multiple award
contracts. SBA proposes that a protest relating to an individual order
is timely so long as it is received anytime before the expiration of
the contract period. SBA considered the fact that multiple award and
schedule contracts are intended to be a fast and easy way for an agency
to contract. SBA does not believe that a size protest would slow down
the contracting process or delay performance because a size protest, in
this instance, would likely relate to whether an agency can count the
award as an award to a SBC, not to whether award can or should be made
to a particular business entity. SBA specifically requests comments as
to other options for these time limits.
(f) Conclusion
Based upon the foregoing, SBA has determined that this proposed
rule may have a significant impact on a substantial number of small
entities within the meaning of the RFA. SBA requests comments
addressing any of the issues raised in this IRFA, including comments on
the economic effect this rule could have on small entities.
List of Subjects
13 CFR Part 121
Administrative practice and procedure, Government procurement,
Government property, Grant programs--business, Loan programs--business,
Reporting and recordkeeping requirements, Small businesses.
13 CFR Part 124
Administrative practice and procedure, Minority businesses,
Reporting and recordkeeping requirements, Technical assistance.
For the reasons set forth in the preamble, SBA proposes to amend
parts 121 and 124 of Title 13 of the Code of Federal Regulations, as
follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
1. The authority citation for part 121 continues to read as
follows:
Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c) and
662(5) and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188.
2. In Sec. 121.404 add paragraph (c) to read as follows:
Sec. 121.404 When does SBA determine the size status of a business
concern?
* * * * *
(c) In order to be considered small for purposes of the General
Services Administration's Multiple Award Schedule (MAS) Program,
including the Federal Supply Schedule, and other multiple award
contracts, including Governmentwide Acquisition Contracts (GWAC) and
multi-agency contracts, a concern must qualify as small as of the date
it submits a written self-certification to the procuring agency as part
of its initial offer including price. The concern will be considered
small with respect to any orders issued under the MAS or other multiple
award contract having a NAICS code with the same or higher size
standard as the one(s) under which it qualified for a period of one
year from the date of its certification.
(1) A business concern awarded a MAS or other multiple award
contract must annually re-certify to the contracting officer on the
anniversary date of the contract award that it continues to qualify as
a small business for the contract. Contracting officers will publish a
list of the re-certifications received, within 10 days of receipt, on
their agency's website, and may also publish it in the Federal Register
or otherwise. SBA may review or request a formal size determination
with respect to that re-certification, and any interested party may
protest that re-certification pursuant to Sec. 121.1004(a)(3)(iii).
The business concern may be considered small with respect to any orders
issued pursuant to the MAS or other multiple award contract having a
NAICS code with the same or higher size standard as the one(s) under
which it re-certified for a period of one year from the date of its re-
certification.
(2) The contracting officer must assign an appropriate NAICS code
to each order issued under a MAS or other multiple award contract to
assist in determining whether a concern is small for a particular
order.
(3) Time of size for a specific order relates back to the date of
the initial written self-certification that it is small to the
procuring agency for the award of
[[Page 20356]]
the MAS or other multiple award contract (during the one-year period
immediately following contract award) and as of the date the concern
submits its re-certification (for the one-year period after any re-
certification).
3. Revise Sec. 121.1004(a)(3) to read as follows:
Sec. 121.1004 What time limits apply to size protests?
(a) * * *
(3) Multiple Award Contracts. (i) Except as set forth in paragraph
(a)(3)(ii) of this section, protests relating to the award of a MAS or
other multiple award contract are considered timely if they meet the
requirements of paragraphs (a)(1) or (a)(2) of this section.
(ii) Protests relating to the award of a contract under the General
Services Administration's MAS Program, including the Federal Supply
Schedule, are considered timely if received by the contracting officer
within 10 days of a concern being listed on the multiple award
schedule.
(iii) Protests relating to re-certifications issued pursuant to
Sec. 121.404(c) are considered timely if received by the contracting
officer within 10 days of a concern being listed on an agency's website
or published in the Federal Register or otherwise. Protests relating to
individual awards or orders issued pursuant to the MAS Program or other
multiple award contracts are considered timely if received by the
contracting officer at any time prior to the expiration of the contract
period (including renewals).
* * * * *
PART 124--8(A) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS
STATUS DETERMINATIONS
4. The authority citation for part 124 continues to read as
follows:
Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d) and Pub.
L. 99-661, Pub. L. 100-656, sec. 1207, Pub. L. 101-37, Pub. L. 101-
574, and 42 U.S.C. 9815.
5. Revise Sec. 124.503(h)(2) to read as follows:
Sec. 124.503 How does SBA accept a procurement for award through the
8(a) BD program?
* * * * *
(h) * * *
(2)(i) A concern can continue to receive orders as an 8(a) small
business under the General Services Administration's Multiple Award
Schedule (MAS) Program, including the Federal Supply Schedule, and
other multiple award contracts, including Governmentwide Acquisition
Contracts (GWACs) and multi-agency contracts, with respect to any
orders issued pursuant to the MAS or other multiple award contract
having a NAICS code with the same or higher size standard as the one(s)
under which it qualified for a period of one year from the date of its
certification or re-certification as a small business.
(ii) A concern can continue to receive orders under the MAS
Program, including the Federal Supply Schedule, and multiple award
contracts, including GWACs and multi-agency contracts, even after it no
longer meets the requirement of paragraph (h)(2)(i) of this section,
but such award will not count as an award to an 8(a) small business.
* * * * *
Dated: April 21, 2003.
Hector V. Barreto,
Administrator.
[FR Doc. 03-10286 Filed 4-24-03; 8:45 am]
BILLING CODE 8025-01-P