[Federal Register Volume 75, Number 39 (Monday, March 1, 2010)]
[Proposed Rules]
[Pages 9129-9137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-3613]
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 124, 125, 126, and 134
RIN 3245-AF65
Small Business, Small Disadvantaged Business, HUBZone, and
Service-Disabled Veteran-Owned Protest and Appeal Regulations
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The U.S. Small Business Administration (SBA or Agency)
proposes to amend its regulations to clarify the effect, across all
small business programs, of initial and appeal eligibility decisions on
the procurement in question; increase the amount of time that SBA has
to render formal size determinations; require that SBA's Office of
Hearings and Appeals (OHA) issue a size appeal decision within 60
calendar days of the close of the record, if possible; increase the
amount of time that SBA has to file North American Industry
Classification System (NAICS) code appeals; alter the NAICS code appeal
procedures to comply with a Federal Court decision; clarify that
contracting officers must reflect final agency eligibility decisions in
federal procurement databases and goaling statistics; clarify how a
contracting officer assigns a NAICS code and size standard to a
multiple award procurement; and make other changes to size status
protest and appeal rules.
DATES: Comments must be received on or before March 31, 2010.
ADDRESSES: You may submit comments, identified by RIN: 3245-AF65, by
any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail, for paper, disk, or CD/ROM submissions: Khem Sharma,
Chief, Office of Size Standards, U.S. Small Business Administration,
Office of Government Contracting, 409 Third Street, SW., Washington, DC
20416.
Hand Delivery/Courier: Khem Sharma, Chief, Office of Size
Standards, U.S. Small Business Administration, Office of Government
Contracting, 409 Third Street, SW., Washington, DC 20416.
SBA will post all comments on http://www.regulations.gov. If you
wish to submit confidential business information (CBI) as defined in
the User Notice at http://www.Regulations.gov, please submit the
information to Khem Sharma, Chief, Size Standards Division, U.S. Small
Business Administration, Office of Government Contracting, 409 Third
Street, SW., Washington, DC 20416, or send an e-mail to
[email protected]. Highlight the information that you consider to be
CBI and explain why you believe SBA should hold this information as
confidential. SBA will review the information and make the final
determination on whether it will publish the information or not.
FOR FURTHER INFORMATION CONTACT: Carl Jordan, Program Analyst, Size
Standards Division, Office of Government Contracting, (202) 205-7189 or
at [email protected].
SUPPLEMENTARY INFORMATION: SBA is proposing to delete the reference to
other factors to be considered when assigning a NAICS code to a
procurement in 13 CFR 121.402. SBA's regulations currently provide that
a contracting officer should consider the principal purpose of the
product or service to be acquired, and that a procurement is usually
classified according to the component which accounts for the greatest
percentage of contact value. SBA's regulations further provide that
contracting officers may consider previous Government procurement
classifications of the same or similar products or services and which
classification would best serve the purposes of the Small Business Act.
SBA believes these additional factors are unnecessary. A repeated error
is not persuasive evidence, especially since such classifications are
almost never reviewed or challenged. As discussed above, SBA receives
very few NAICS code appeals because of the short appeal timelines.
Further, it is unclear how a contracting officer can determine which
NAICS code and size standard can best serve the purposes of the Small
Business Act. Thus, we are proposing to delete reference to prior
government classifications and the purpose of the Small Business Act.
Each solicitation should be classified based on the principal purpose
of that particular solicitation, and the contracting officer only needs
to make a reasonable choice.
SBA is proposing to delete a provision in Sec. 121.404 that
requires a concern to recertify its size where a solicitation is
modified so that initial offers are no longer responsive. Generally, a
firm must be small at the time of initial offer,
[[Page 9130]]
including price. This rule provides procuring agencies and offerors
with finality with respect to eligibility. Some procurements may drag
on for several years due to a variety of reasons, including protests,
discussions, funding issues, and changes in requirements. Disqualifying
an offeror based on whether a procuring agency's requirement changes
during the course of a protracted procurement unfairly punishes both
the procuring agency and offerors that have expended time and resources
pursuing the procurement. Reasonable people may disagree about whether
a solicitation has been modified so that initial offers are no longer
responsive. For example, in Size Appeal of Continental Staffing, Inc.,
SBA No. SIZ-4808 (2006) the contracting officer did not request new
size certifications and argued that its requirement had not changed so
much that initial offers were no longer non-responsive. OHA disagreed
and remanded, ordering the Area Office to determine the prospective
awardee's size at the time of a revised offer submitted approximately
five months after the initial offer, resulting in the firm being
ineligible because a more recent year would be used to calculate the
firm's size. In SBA's view, if a change in a requirement is drastic
enough that all offers are non-responsive, the procuring agency will
have to cancel the procurement and issue a new solicitation open to all
potential offerors, not just offerors who responded to the now obsolete
solicitation. Offerors would then have to submit size certifications
along with their initial offer, including price, in response to the new
solicitation. SBA recently finalized rules which require re-
certification after award to ensure that contracts are properly counted
for goaling and statistical purposes. 13 CFR 404(g). In SBA's view, the
procurement community is better served if there is a clear bright line
for purposes of determining eligibility for award.
SBA is proposing to amend Sec. 121.407 to address how a NAICS code
and size standard should be assigned to a multiple award procurement.
Agencies frequently acquire diverse goods and services from multiple
vendors under contracts awarded pursuant to a single solicitation.
SBA's regulations require the contracting officer to assign the single
NAICS code to the procurement that best describes the principal purpose
of the acquisition. 13 CFR 121.402. The fact that multiple contracts
will be awarded under a solicitation does not alter this fundamental
principle. Generally, if all awardees will be eligible to compete for
orders, then, just like any other procurement, the solicitation should
be assigned the single NAICS code that best describes the principal
purpose of the acquisition. However, if a multiple award procurement is
divided up into contract line item numbers (CLINs) or special item
numbers (SINs), where only awardees under the CLIN or SIN will compete
for orders, then each CLIN or SIN should be assigned the single NAICS
code that best describes the principal purpose CLIN or SIN. This will
ensure that firms that are actually small for the actual work receive
the award, and ensure that procuring agencies only receive credit
towards their goals for awards to firms that are small for the work to
be performed.
SBA is proposing to amend Sec. 121.1009 to provide SBA within 15
business days to decide a size protest. SBA's regulations currently
provide that SBA will issue a formal size determination within 10
working days of its receipt of a size protest, ``if possible.'' 13 CFR
121.1009(e). The Federal Acquisition Regulation (FAR) currently
provides that a contracting officer should withhold award for 10
business days after SBA's receipt of a size protest, after which time
the contracting officer may proceed with award if ``further delay would
be disadvantageous to the Government.'' FAR 19.302(h)(2). The FAR
further provides that a contracting officer need not withhold award if
he or she determines in writing that award must be made to protect the
public interest. FAR 19.302(h)(1).
Under current regulations, after SBA receives a size protest, it
notifies the protested concern, and the protested concern is provided 3
business days to respond to the protest and provide information to SBA.
Thus, by the time the SBA receives the protested concern's information,
SBA generally has approximately 5 business days to write a formal size
determination. However, in some cases, protested concerns ask for
additional time to submit the required information, such as tax returns
or payroll records, corporate organization documentation, and forms
detailing ownership interests in other concerns. In some cases, the
concern's submission raises additional issues, leading the size
specialist to request additional information from the protested
concern. Moreover, to draft a decision, size specialists sometimes have
to read and analyze voluminous documentation. For example, if a size
protest involves allegations of undue or excessive reliance on a
subcontractor, a size specialist must thoroughly analyze the protested
concern's proposal and the solicitation to make a determination.
Further, a size specialist also may have to conduct legal or other
research before a decision can be drafted.
SBA conducted a survey of its six Government Contracting Area
Offices and found that, on average, the Area Offices issued size
determinations more than 10 business days after receipt 29% of the
time. SBA's regulations currently provide SBA with 15 business days to
decide other status protests, such as SDB, SDVO, and HUBZone protests.
13 CFR 124.1013(a), 125.27(d), 126.803(b). Formal size determinations
are typically more complicated than other small business program
eligibility determinations. Increasing the amount of time SBA has to
make a size determination will also make SBA's regulations more
consistent across all programs, which would be beneficial to all
participants in the small business procurement community.
SBA is proposing to amend Sec. Sec. 121.1009, 121.1013, 125.27 and
126.803 to clarify the effect of protest or appeal decisions on the
procurement in question and make the effect more consistent and
coherent across small business programs. SBA's size, small
disadvantaged business (SDB), Service-Disabled Veteran-Owned (SDVO) and
Historically Underutilized Business Zone (HUBZone) regulations contain
varied and sometimes inconsistent explanations on how the protest or
appeal decision applies to the procurement in question. 13 CFR
121.1004(c), 121.1009(g), 124.1013(h), 124.1014(f), 125.27(g),
126.803(d), 126.805(g), 134.504.
The purpose of the protest and appeal process is to assure that
contracts are awarded to eligible concerns. However, the process must
be balanced so that it does not impede the procuring agency's ability
to accomplish its mission. SBA's size regulations currently provide
that a timely filed protest applies to the procurement in question,
even if filed after award. 13 CFR 121.1004(c). SBA's regulations
further provide that a contracting officer may apply an appellate size
decision received after award to the procurement in question, but is
not required to do so. SBA's size regulations do not address how a
formal size decision or appellate decision applies for goaling
purposes, but other program regulations, such as the SDVO regulations,
do address the effect of protest and appeal decisions for goaling
purposes. 13 CFR 125.27(g). Over the last several years, the U.S.
Government Accountability Office (GAO) has sustained bid protests, and
in many cases recommended termination, where
[[Page 9131]]
a firm was found to be other than small and the decision was received
after award. See Hydroid LLC, B-299072, Jan. 31, 2007, 2007 CPD ] 20;
ALATEC Inc., B-298730, Dec. 4, 2006, 2006 CPD ] 191; Spectrum Security
Services, Inc., B-297320.3, Dec. 29, 2005, 2005 CPD ] 227; Tiger
Enterprises, Inc., B-293439, B-292815.3, Jan. 20, 2004, 2004 CPD ] 19;
Adams Industrial, Inc., B-280186, Aug. 28, 1998, 98-2 CPD ] 56. In
contrast, SBA's regulations specifically provide that a procuring
agency need not terminate a contract based on an SDVO protest
determination that is received after award. 13 CFR 125.27(g); see Major
Contracting Services, Inc., B-400616, Nov. 20, 2008, 2008 CPD ] 214;
Veteran Enterprise Technology Services, LLC, B-298201.2, Jul. 13, 2006,
2006 CPD ] 108.
SBA is proposing to specifically address how initial and appellate
decisions apply to the procurement in question across all small
business programs, including for goaling purposes. If the SBA issues an
initial decision that a concern is eligible, the procuring agency may
make an award based on that decision, notwithstanding an appeal or
notice of an appeal. If the initial decision is overturned on appeal,
the procuring agency must apply the decision to the procurement in
question for goaling purposes. If the appellate decision is received by
the contracting officer after award, the contracting officer may take
some action, such as terminating the contract or not exercising
options, but will not be required to do so. On the other hand, if the
SBA issues an initial decision that a concern is ineligible, award
should not be made to that concern, unless and until the decision is
overturned on appeal. If award has made been, the procuring agency must
take some action if the initial decision is not overturned on appeal,
such as terminating the award or not exercising the next option.
Further, the contracting officer must apply the final Agency decision
to the procurement in question for goaling purposes.
SBA is proposing to amend Sec. 121.1009 to clarify when it will
reopen a size determination. Currently, SBA may reopen a size
determination to correct an administrative error or clear mistake of
fact, provided an appeal has not been filed. If an appeal has been
filed, SBA may intervene in the case or request a remand. SBA is
proposing to clarify that once the Agency issues a final decision it
cannot reopen that decision at a later time. SBA's issuance of its
final decision starts the clock for purposes of challenging the final
agency decision in a court of law. If SBA could reopen a final agency
decision then no decision could ever be considered final. Moreover,
such an action would lead to due process challenges from the parties,
who already litigated the matter and received a final agency decision.
Thus, SBA is clarifying that if SBA issues a final agency decision and
that decision is not timely challenged, that is the end of the matter.
SBA is proposing to amend Sec. 121.1101(b), which prohibits a size
appeal where the contract has been awarded and the issues raised in the
appeal are contract-specific. SBA believes that an appellate decision
should always apply for goaling purposes. In other words, if a firm
that has been awarded a contract is found to be other than small, then
SBA believes that the procuring agency should not be able to continue
to take small business credit for purposes of its small business goals.
Further, a contracting officer may take some action based on a negative
appellate decision. Consequently, SBA is proposing that OHA accept all
size appeals.
SBA is proposing to amend Sec. 121.1103 to clarify that a NAICS
appeal includes an appeal involving whether a procuring agency has
assigned the correct corresponding size standard to a procurement. SBA
is also proposing to increase the amount of time SBA has to file a
NAICS code appeal. Currently, a NAICS code appeal must be filed within
10 calendar days after issuance of the initial solicitation. This 10-
day time limit also applies to SBA. OHA receives very few NAICS code
appeals. On average 10 NAICS code appeals are filed annually. SBA is
proposing to amend its regulations to allow SBA to file a NAICS code
appeal at any time before offers or bids are due. SBA occasionally
receives notice of clearly inappropriate NAICS codes and size
standards, but receives the notice well after the 10-day time limit.
Size is a function of the work to be performed. A firm can be small in
one industry but large in another. Legitimate small business concerns
in the particular industry are harmed when a procurement is
misclassified because they may not be able to successfully compete with
a concern that is actually large for the work to be performed. Further,
procurement misclassification degrades the Federal Government's
procurement data, in terms of its small business prime contracting
goals as well as the dollar value and contract action data for both the
misclassified industry and the proper industry.
SBA is also proposing to amend Sec. 121.1103 to require
contracting officers to notify the public of the filing of a NAICS code
appeal to ensure that all prospective offerors or bidders have an
opportunity to submit evidence or arguments concerning the appropriate
NAICS code and size standard. Under SBA's current regulations, if a
NAICS code appeal is filed SBA's decision is final, even though
prospective offerors other than the appellant may not have received
notice of the appeal, and therefore may not have had an opportunity to
be heard. In Advanced Systems Technology, Inc. v. U.S., 69 Fed. Cl. 474
(2006) the U.S. Court of Federal Claims enjoined the procuring agency
from proceeding with its acquisition after SBA issued a NAICS code
appeal decision that a prospective offeror had not known about, and
after SBA dismissed the prospective offeror's subsequent NAICS code
appeal. This change will ensure prospective offerors are provided due
process.
SBA is proposing to amend Sec. 124.1013(d) to correct a
typographical error. In addition, as discussed above SBA is proposing
to amend Sec. Sec. 124.1013 and 124.1014 to make the effect of an SDB
status and appeal determination consistent with other small business
programs.
As discussed above, SBA is proposing to amend Sec. Sec. 125.27,
125.28 and 134.504 to make the effect of an SDVO status and appeal
determination consistent with other small business programs. In
addition, SBA is proposing to amend Sec. 125.27 to clarify that a firm
found to be ineligible must demonstrate to SBA that it has overcome the
reason the firm was found to be ineligible before it can represent
itself as an SDVO SBC.
As discussed above, SBA is proposing to amend Sec. Sec. 126.803
and 126.805 to make the effect of a HUBZone status and appeal
determination consistent with other small business programs.
SBA is proposing to amend Sec. 134.304 to require that all size
appeals be filed within 15 calendar days after receipt of the formal
size determination. Currently, SBA's regulations require a size appeal
to be filed within 15 calendar days if the procurement is ``pending,''
and 30 calendar days if the size appeal does not involve a ``pending''
procurement. The term ``pending'' is ambiguous and is therefore subject
to interpretation, which in turn leads to litigation. It is SBA's view
that 15 calendar days is sufficient for any party to file a size
appeal.
SBA is proposing to amend Sec. 134.316 to require OHA to issue
size appeal decisions within 60 calendar days of the close of the
record, if possible. Currently, there are no time limits applicable to
rendering size appeal decisions. In a size appeal, the record
[[Page 9132]]
generally closes 15 calendar days after the Judge notifies the parties
that an appeal has been received, but may be extended at the Judge's
discretion. 13 CFR 134.309(b). Since an appellate decision may affect
contract award or continued performance, appellate decisions need to be
rendered in a timely fashion. SBA is also proposing to amend Sec.
134.316 to require OHA to render a NAICS code appeal decision within 15
calendar days of the close of the record, if possible, to minimize
delay to the procurement. Currently, there are no time limits for
rendering NAICS code appeal decisions.
SBA is proposing to delete Sec. 134.504 and amend redesignated
Sec. 134.513 because the effect of an SDVO status appellate
determination is set forth in Sec. 125.27. SBA is proposing to amend
redesignated Sec. 134.508 to clarify when OHA will dismiss an SDVO
appeal. Finally, SBA is proposing to amend redesignated Sec. 134.514
to make a change to the nomenclature.
Compliance With Executive Orders 12866, 12988, 13132, 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
proposed rule is a significant regulatory action for purposes of
Executive Order 12866. Accordingly, the next section contains SBA's
Regulatory Impact Analysis. This is not a major rule, however, under
the Congressional Review Act, 5 U.S.C. 800.
Regulatory Impact Analysis
1. Is there a need for the regulatory action? SBA's mission is to
aid and assist small businesses through a variety of financial,
procurement, business development, and advocacy programs. To assist
effectively the intended beneficiaries of these programs, SBA must
establish distinct definitions of which businesses are deemed small
businesses. The Small Business Act (15 U.S.C. 632(a)) delegates the
responsibility for establishing small business definitions to SBA's
Administrator. This act also provides SBA with the authority to
determine which businesses are small businesses concerns (15 U.S.C.
637(b)(1)(G)(6)). The supplementary information section of this
proposed rule explains SBA's reasons for revising the size protest and
appeal timeframes and application of final decisions on size and other
small business status determinations. SBA believes that these changes
are needed to provide clarity to procuring agencies and contractors.
2. What are the potential benefits and costs of this regulatory
action?
SBA believes that more realistic timeframes for filing and
rendering decisions on size and NAICS cases will improve the
functioning of the size protest and size determination processes. Small
businesses will have a sufficient time in which to raise size and NAICS
classification issues and SBA will have more time, if needed, to
prepare thorough decisions.
The proposed provisions may have cost implications associated with
delays to the contracting process. Contracting officers may have to
wait an additional 5 days in some cases before SBA renders a size
determination. However, contracting officers are already generally
required to withhold award for 15 days for a HUBZone, SDB, or SDVO
status protest. SBA believes that the potential costs associated with
delays in the contracting process are relatively minor and are
significantly outweighed by the benefits to the integrity of small
business procurement programs and the intended beneficiaries.
SBA recognizes that its proposal to assign a NAICS code to each
line item of a multiple award contract will require reprogramming of
the Federal Procurement Data System-NG (FPDS-NG). Although contracting
officers may already be designating NAICS codes to task orders, FPDS-NG
only records one NAICS code for the overall contract. However,
revisions to FPDS-NG to incorporate NAICS codes by task order may have
already begun in response to the November 15, 2006, recertification
rule. SBA does not have an estimate of the costs but it believes that
they will not be significant because this requirement affects only one
field within the database, especially if reprogramming for this feature
has already started. Nonetheless, SBA strongly believes the benefits of
accurately reflecting small business awards for multiple award contract
vehicles that now account for over $35 billion in federal contracting
dollars annually greatly outweighs the programming costs associated
with implementing this policy.
3. What are the alternatives to this proposed rule?
SBA considered as an alternative completing size determinations
within 10 days of receiving all requested information from the
protested concern. Although this would also achieve the objective of
the proposal, it will create uncertainty as to when a size
determination would actually be rendered. If the necessary information
requested of a business is received within the 3-day period requested
by SBA, a size determination would be completed within 13 days.
However, if the protested concern submits incomplete information, the
size determination period would vary depending on the circumstances.
SBA believes a 15-day period is sufficient in most cases and provides a
degree of certainty to contracting officers. It also reinforces the
importance of promptly providing information to SBA.
Executive Order 12988
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(a) and 3(b)(2) of that Order, to
minimize litigation, eliminate ambiguity, and reduce burden. This rule
has no preemptive or retroactive effect. Executive Order 13132
This rule does not have federalism implications as defined in
Executive Order 13132. It will not have substantial direct effects on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various layers of government, as specified in the order. As such it
does not warrant the preparation of a Federalism Assessment.
Paperwork Reduction Act
For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35,
SBA has determined that this rule, if adopted in final form, would not
impose new reporting requirements and would not require new
recordkeeping requirements. The proposed rule provides additional time
in order for SBA to make its formal size determinations. The proposed
rule will impose a 60-day timeframe for issuing size appeal decisions
(from the date of close of the record) and a 15-day timeframe for
issuing NAICS code appeals (from the date of the close of the record).
The rule will also require that all size appeals be filed within 15
calendar days.
Regulatory Flexibility Act
SBA has determined that this proposed rule, if adopted in final
form, could have a significant economic impact on a substantial number
of small 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.
IRFA
When preparing a Regulatory Flexibility Analysis, an agency shall
[[Page 9133]]
address all of the following: The need for, and objectives of, the
rule; the estimated number of small entities to which the rule may
apply; the projected reporting, recordkeeping and other compliance
requirements; steps taken to minimize the significant economic impact
on small entities. This IRFA considers these points and the impact the
proposed regulation concerning initial status determinations and appeal
decisions may have on small entities.
a. Need for, and Objectives of, the Rule
Under the Small Business Act, SBA is authorized to determine the
size of a business entity. 15 U.S.C. 632. SBA's standards and
definitions relating to formal size determinations and NAICS code
designation for small business concerns are set forth in 13 CFR part
121. The rules for procedures governing cases before OHA are set forth
in 13 CFR part 134.
SBA's regulations currently provide that SBA will issue a formal
size determination within 10 working days of its receipt of a size
protest, ``if possible.'' 13 CFR 121.1009(e). The FAR currently
provides that a contracting officer should withhold award for 10
business days after SBA's receipt of a size protest, after which time
the contracting officer may proceed with award if ``further delay would
be disadvantageous to the Government.'' FAR 19.302(h)(2). The FAR
further provides that a contracting officer need not withhold award if
he or she determines in writing that award must be made to protect the
public interest. FAR 19.302(h)(1).
After SBA receives a size protest it notifies the protested
concern, and the protested concern is provided 3 business days to
respond to the protest. Thus, SBA generally has only 5 business days to
draft a formal size determination. In some cases protested concerns ask
for additional time to submit the requested information. In other
cases, the information submitted by the protested concern leads the
size specialist to request additional information. Size specialists
typically have to sift through voluminous documentation before reaching
a decision.
SBA's regulations provide SBA with 15 business days to decide other
status protests, such as HUBZone, SDB and SDVO. 13 CFR 124.1013(a),
125.27(d), 126.803(b). Increasing the amount of time SBA has to make a
size determination will allow size specialists adequate time to perform
a thorough review and draft a carefully constructed determination.
Increasing the amount of time SBA has to render a formal size
determination will also make SBA's regulations consistent and coherent
across programs.
SBA's regulations currently do not address the amount of time OHA
has to render a decision in connection with a size or NAICS code
appeal. SBA is proposing to amend its regulations to require OHA to
issue size appeal decisions within 60 calendar days of the close of the
record, if possible, and render NAICS code appeal decisions within 15
calendar days of the close of record, if possible.
The proposed rule will require the contracting officer to update
federal procurement databases to reflect final agency status
determinations.
b. 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 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.
The proposed rule will not directly negatively affect any small
business concern, since it is aimed at preventing other than small
concerns from receiving or performing contracts set aside for small
business concerns. The proposed rule will indirectly benefit small
business concerns by preventing awards to ineligible concerns, or
shortening the length of time other than small concerns perform small
business set-aside contracts. SBA maintains an internal database of all
size protest processed by the agency and the following table was
constructed to illustrate the number of protest processed in the last
five fiscal years.
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Size protests FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
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Total Determinations Requested............................... 356 409 348 459 593 459 374
Cases Dismissed.............................................. 110 101 95 122 139 110 121
Determined Small Business.................................... 161 170 149 190 219 186 225
Determined Other Than Small.................................. 85 122 71 115 163 117 123
Cases in Process/Other Determinations........................ 0 16 33 0 72 46 43
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There are more than 330,000 concerns listed as small business
concerns in the Dynamic Small Business Search of the Central Contractor
Registration database. In fiscal year 2008, there were over 8 million
small business contract actions. SBA processes an average of 428 size
protests each fiscal year resulting in approximately 43 percent being
determined to be small and 27 percent determined to be other than
small. The rest are dismissed on procedural grounds. Thus, the number
of concerns affected by this rule, regardless of size, will be
approximately 290 per year, which is statistically insignificant when
compared to the number of small business concerns in the Federal
Government marketplace (330,000) or the number of small business
contract actions per year (8 million). The number of protests in other
small business programs is significantly less than the numbers of size
protests received.
c. Projected Reporting, Recordkeeping and Other Compliance Requirements
This proposed rule would not impose a new information collection
requirement on small businesses. SBA does not believe that this
provision imposes any new record keeping requirements. This proposed
rule will require contracting officers to update federal procurement
databases to reflect final agency status decisions. Contracting
officers should currently be updating these databases, and this rule
will make it clear that this must be done.
[[Page 9134]]
d. Steps Taken To Minimize the Significant Economic Impact on Small
Entities
This proposed rule should not result in a significant economic
impact on small entities. This proposed rule will extend the timeframe
SBA has for determining size of an entity resulting from a size
protest. The addition of the 5 business days will allow SBA more time
to adequately review the documentation needed to render a decision and
will make SBA's regulations consistent across programs. The timeframe
imposed on OHA for rendering decision resulting from appeals should
minimize the economic impact on small entities by providing a decision
in a timely manner.
e. Conclusion
Based on the foregoing, SBA has determined that this proposed rule
will not have a significant impact on a substantial number of small
entities with the meaning of the RFA. SBA requests comments addressing
any of the issues raised in this IRFA, including comments in the
economic effect this rule could have on small entities.
List of Subjects in 13 CFR Parts 121, 124, 125, 126, and 134
Administrative practice and procedure, Government procurement,
Government property, Grant programs--business, Loan programs--business,
Individuals with disabilities, Reporting and recordkeeping
requirements, Small businesses.
For the reasons stated in the preamble, SBA proposes to amend parts
121, 124, 125, 126, and 134 of title 13 of the Code of Federal
Regulations as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
Subpart A--Size Eligibility Provisions and Standards
1. The authority citation for part 121 is revised to read as
follows:
Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 637, 644, 662(5)
and 694a; Public Law 105-135, sec. 401 et seq., 111 Stat. 2592.
Sec. 121.402 [Amended]
2. Amend Sec. 121.402(b) by removing the third sentence.
Sec. 121.404 [Amended]
3. Amend paragraph 121.404(a) by removing the second sentence.
4. Revise Sec. 121.407 to read as follows:
Sec. 121.407 What are the procedures for multiple award procurements?
(a) Except as set forth in paragraphs (b) and (c) of this section,
a solicitation to award multiple task or delivery order contracts
should be assigned the single NAICS code and size standard which best
describes the principal purpose of the acquisition (See Sec. 121.402).
(b) A solicitation to award multiple task or delivery order
contracts may be assigned more than one NAICS code or size standard if
the solicitation is divided into contract line item numbers (CLINs)
where orders will only be awarded or competed amongst concerns that
have been awarded contracts for those CLINs. In such a case, the
contracting officer must assign to each CLIN the single NAICS code and
size standard that best describes the principal purpose of the goods or
services acquired under that CLIN. (See Sec. 121.402). A concern must
meet the applicable size standard to be eligible for award as a small
business concern.
(c) A solicitation to award multiple contracts for separate and
distinct items, where a bidder may submit an offer on some or all of
the items, may be assigned multiple NAICS codes and size standards. In
such a case, the contracting officer must assign to each CLIN the
single NAICS code and size standard that best describes the principal
purpose of the item to be acquired under the CLIN. A concern must meet
the applicable size standard to be eligible for award as a small
business concern.
5. Amend Sec. 121.1009 by revising paragraphs (a), (g)(1), (g)(2),
(g)(3), and (h) to read as follows:
Sec. 121.1009 What are the procedures for making the size
determination?
(a) Time frame for making size determination. (1) After receipt of
a protest or a request for a formal size determination, the Area Office
will issue a formal size determination within 15 business days, if
possible.
(2) If SBA does not issue its determination within the 15-day
period, the contracting officer must contact SBA to ascertain when SBA
estimates that it will issue its decision, and may only 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 harm the public interest (see paragraph (g) of this
section for the effect of a formal size determination or appellate
decision).
(3) The contracting officer may award the contract after receipt of
a protest if the contracting officer determines in writing that an
award must be made to prevent significant harm to the public interest
(see paragraph (g) of this section for the effect of a formal size
determination or appellate decision).
* * * * *
(g) * * *
(1) A contracting officer may award the contract to a protested
concern after the Area Office either has determined that the protested
concern is an eligible small business or has dismissed all protests
against it. If OHA subsequently overturns the Area Office's
determination or dismissal, the contracting officer may apply the OHA
decision to the procurement in question.
(2) A contracting officer may not award the contract to a protested
concern that the Area Office has determined is not an eligible small
business for the procurement in question.
(i) If a contracting officer receives such a determination after
contract award, and no OHA appeal has been filed, the contracting
officer shall terminate the award.
(ii) If a timely OHA appeal is filed after contract award, the
contracting officer must consider whether performance can be suspended
until an appellate decision is rendered.
(iii) If OHA affirms the size determination finding the protested
concern ineligible, the contracting officer shall either terminate the
contract or not exercise the next option.
(3) The contracting officer must update the Federal Procurement
Data System and other procurement reporting databases to reflect the
final agency size decision (the formal size determination if no appeal
is filed or the appellate decision).
* * * * *
(h) Limited reopening of size determinations. SBA may, in its sole
discretion, reopen a formal size determination to correct an error or
mistake, provided it is within the appeal period and no appeal has been
filed with OHA. Once the agency has issued a final agency decision
(either a formal size determination that is not timely appealed or an
appellate decision), SBA cannot re-open the size determination.
6. Amend Sec. 121.1101 by revising paragraph (b) to read as
follows:
Sec. 121.1101 Are formal size determinations subject to appeal?
* * * * *
(b) OHA will review all timely appeals of size determinations.
6. Amend Sec. 121.1103 as follows:
a. Revise the section heading;
b. In paragraph (a), add a new sentence after the first sentence
and before the second sentence;
[[Page 9135]]
c. Revise paragraph (b)(1);
d. Remove paragraphs (b)(4), and (b)(5); and
e. Add new paragraph (c).
Sec. 121.1103 What are the procedures for appealing a NAICS code or
size standard designation?
(a) * * * A NAICS code appeal may include an appeal involving the
applicable size standard, such as where more than one size standard
corresponds to the selected NAICS code or there is a question as to the
size standard in effect at the time the solicitation was issued or
amended. * * *
(b) * * *
(1) An appeal from a contracting officer's NAICS code or size
standard designation must be served and filed within 10 calendar days
after the issuance of the solicitation or amendment affecting the NAICS
code or size standard. However, SBA may file a NAICS code appeal at
anytime before offers or bids are due. OHA will summarily dismiss an
untimely NAICS code appeal.
* * * * *
(c) Procedure after a NAICS code appeal is filed and served.
(1) Upon receipt of the service copy of a NAICS code appeal, the
contracting officer shall:
(i) Stay the solicitation;
(ii) Advise the public, by amendment to the solicitation or other
method, of the existence of the NAICS code appeal and the procedures
and deadline for interested parties to file and serve arguments
concerning the appeal;
(iii) Send a copy of the entire solicitation (including amendments)
to OHA;
(iv) File and serve any response to the appeal prior to the close
of the record; and
(v) Inform OHA of any amendments, actions or developments
concerning the procurement in question.
(2) Upon receipt of a NAICS code appeal, OHA shall:
(i) Notify the appellant, the contracting officer, the SBA and any
other known party of the date OHA received the appeal and the date the
record will close; and
(ii) Conduct the appeal in accordance with part 134 of this
chapter.
(3) Any interested party may file and serve its response to the
NAICS code appeal.
PART 124--8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS
STATUS DETERMINATIONS
7. 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. 100-656, Pub. L. 101-
37, Pub. L. 101-574, and 42 U.S.C. 9815.
Subpart B--Eligibility, Certification, and Protests Relating to
Federal Small Disadvantaged Business Programs
8. Amend Sec. 124.1013 as follows:
a. Amend paragraph (a) by removing second sentence;
b. Revise paragraph (b);
c. Revise paragraph (d)(1);
d. Revise paragraphs (h)(1) and (h)(2); and
e. Add new paragraphs (h)(3) and (h)(4).
Sec. 124.1013 How does SBA make disadvantaged status determinations
in considering an SDB protest?
* * * * *
(b) Award of contract. (1) If SBA does not issue its determination
within the 15-day period, the contracting officer must contact SBA to
ascertain when SBA estimates that it will issue its decision, and may
only 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 harm the public interest (see paragraph
(h) of this section for the effect of an SDB status determination or
appellate decision).
(2) The contracting officer may award the contract after receipt of
a protest if the contracting officer determines in writing that an
award must be made to prevent significant harm to the public interest
(see paragraph (h) of this section for the effect of an SDB status
determination or appellate decision).
* * * * *
(d) * * *
(1) Except with respect to a concern which is a current Participant
in SBA's 8(a) BD program and is authorized under Sec. 124.1013(b)(3)
to submit an affidavit concerning it disadvantaged status, the
disadvantaged status determination will be based on the protest record,
including reasonable inferences therefrom, as supplied by the protested
concern, SBA or others.
* * * * *
(h) * * *
(1) A contracting officer may award the contract to a protested
concern after the DC/SDBCE either has determined that the protested
concern is an eligible SDB or has dismissed all protests against it. If
the AA/GC&BD subsequently overturns the initial determination or
dismissal, the contracting officer may apply the appeal decision to the
procurement in question.
(2) A contracting officer may not award the contract to a protested
concern that the DC/SDBCE has determined is not an eligible SDB for the
procurement in question.
(i) If a contracting officer receives such a determination after
contract award, and no appeal has been filed, the contracting officer
shall terminate the award.
(ii) If a timely appeal is filed after contract award, the
contracting officer must consider whether performance can be suspended
until an appellate decision is rendered.
(iii) If the AA/GC&BD affirms the initial determination finding
that the protested concern ineligible, the contracting officer shall
either terminate the contract or not exercise the next option.
(3) The contracting officer must update the Federal Procurement
Data System and other procurement reporting databases to reflect the
final agency SDB decision (the decision of the AA/SDBCE if no appeal is
filed or the decision of the AA/GC&BD).
(4) A concern found to be ineligible is precluded from applying for
SDB certification for 12 months from the date of the final agency
decision (whether by the AA/SDBCE, without an appeal, or by the AA/
GC&BD on appeal). A concern found to be ineligible is also precluded
from representing itself as an SDB for a subcontract unless it
overcomes the reasons for the protest (e.g., it changes its ownership
to satisfy the definition of an SDB set forth in Sec. 124.1002).
Sec. 124.1014 [Amended]
9. Amend Sec. 124.1014 by removing paragraph (f) and redesignating
paragraphs (g) through (i) as paragraphs (f) through (h).
PART 125--GOVERNMENT CONTRACTING PROGRAMS
10. The authority citation for part 125 continues to read as
follows:
Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 637; 644 and
657(f).
Subpart D--Protests Concerning SDVO SBCs
11. Amend Sec. 125.27 by revising paragraphs (e) and (g) to read
as follows:
Sec. 125.27 How will SBA process an SDVO protest?
* * * * *
[[Page 9136]]
(e) Award of Contract. (1) If SBA does not issue its determination
within the 15-day period, the contracting officer must contact SBA to
ascertain when SBA estimates that it will issue its decision, and may
only 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 harm the public interest (see paragraph
(g) of this section for the effect of an SDVO status size determination
or appellate decision).
(2) The contracting officer may award the contract after receipt of
a protest if the contracting officer determines in writing that an
award must be made to prevent significant harm to the public interest
(see paragraph (g) of this section for the effect of an SDVO status
determination or appellate decision).
* * * * *
(g) Effect of determination. (1) A contracting officer may award
the contract to a protested concern after the Director, Office of
Government Contracting (D/GC) either has determined that the protested
concern is an eligible SDVO or has dismissed all protests against it.
If OHA subsequently overturns the D/GC's determination or dismissal,
the contracting officer may apply the OHA decision to the procurement
in question.
(2) A contracting officer may not award the contract to a protested
concern that the D/GC has determined is not an eligible SDVO for the
procurement in question.
(i) If a contracting officer receives such a determination after
contract award, and no OHA appeal has been filed, the contracting
officer shall terminate the award.
(ii) If a timely OHA appeal is filed after award, the contracting
officer must consider whether performance can be suspended until an
appellate decision is rendered.
(iii) If OHA affirms the D/GC's determination finding the protested
concern ineligible, the contracting officer shall either terminate the
contract or not exercise the next option.
(3) The contracting officer must update the Federal Procurement
Data System and other procurement reporting databases to reflect the
final agency decision (the D/GC's decision if no appeal is filed or
OHA's decision).
(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 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.
12. Revise Sec. 125.28 to read as follows:
Sec. 125.28 What are the procedures for appealing an SDVO status
protest?
The protested concern, the protester, or the contracting officer
may file an appeal of an SDVO status protest determination with OHA in
accordance with part 134 of this chapter.
PART 126--HUBZONE PROGRAM
13. The authority citation for part 126 continues to read as
follows:
Authority: 15 U.S.C. 632(a), 632(j), 632(p), and 657a.
Subpart H--Protests
14. Amend Sec. 126.803 by revising paragraphs (b)(2) and (b)(3)
and redesignating paragraph (d) as (d)(1) and adding new paragraphs
(d)(2), (d)(3), (d)(4), and (d)(5) to read as follows:
Sec. 126.803 How will SBA process a HUBZone status protest?
* * * * *
(b) * * *
(2) If SBA does not issue its determination within the 15-day
period, the contracting officer must contact SBA to ascertain when SBA
estimates that it will issues its decision, and may only 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 harm the public interest (see paragraph (d) of this
section for the effect of a HUBZone status determination or appellate
decision).
(3) The contracting officer may award the contract after receipt of
a protest if the contracting officer determines in writing that an
award must be made to prevent significant harm to the public interest
(see paragraph (d) of this section for the effect of a HUBZone status
determination or appellate decision).
* * * * *
(d) * * *
(2) A contracting officer may award the contract to a protested
concern after the D/HUB either has determined that the protested
concern is an eligible HUBZone or has dismissed all protests against
it. If the AA/GC&BD subsequently overturns the initial determination or
dismissal, the contracting officer may apply the appeal decision to the
procurement in question.
(3) A contracting officer may not award the contract to a protested
concern that the D/HUB has determined is not an eligible HUBZone for
the procurement in question.
(i) If a contracting officer receives such a determination after
contract award, and no appeal has been filed, the contracting officer
shall terminate the award.
(ii) If a timely appeal is filed after contract award, the
contracting officer must consider whether performance can be suspended
until an appellate decision is rendered.
(iii) If the AA/GC&BD affirms the initial determination finding the
protested concern ineligible, the contracting officer shall either
terminate the contract or not exercise the next option.
(4) The contracting officer must update the Federal Procurement
Data System and other procurement reporting databases to reflect the
final agency HUBZone decision (the D/HUB's decision if no appeal is
filed or the decision of the AA/GC&BD).
(5) A concern found to be ineligible is precluded from applying for
HUBZone certification for 12 months from the date of the final agency
decision (the D/HUB's decision if no appeal is filed or the decision of
the AA/GC&BD).
Sec. 126.805 [Amended]
15. Amend Sec. 126.805 by removing paragraph (g) and redesignating
paragraph (h) as paragraph (g).
PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF
HEARINGS AND APPEALS
16. Authority citation for part 134 continues to read as follows:
Authority: 5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 637(a),
648(1), 656(i), and 687(c); E.O. 12549, 51 FR 6370, 3 CFR, 1986
Comp., p. 189.
Subpart C--Rules of Practice for Appeals From Size Determinations
and NAICS Code Designations
17. Revise Sec. 134.304 to read as follows:
Sec. 134.304 Commencement of appeals from size determinations and
NAICS code designations
(a) Size appeals must be filed within 15 calendar days after
receipt of the formal size determination.
(b) NAICS code appeals must be filed within 10 calendar days after
issuance of the solicitation, or amendment to the solicitation
affecting the NAICS code or size standard. However, SBA may file a
NAICS appeal at anytime before offers or bids are due.
(c) An untimely appeal will be dismissed.
18. Amend Sec. 134.316 by redesignating paragraphs (a), (b), (c),
and (d) as paragraphs (c), (d), (e) and (f), respectively, and adding
new paragraphs (a) and (b).
[[Page 9137]]
Sec. 134.316 The decision.
(a) The Judge shall issue a size appeal decision, insofar as
practicable, within 60 calendar days after close of the record.
(b) The Judge shall issue a NAICS code appeal decision, insofar as
practicable, within15 calendar days after close of the record.
* * * * *
Subpart E--Rules of Practice for Appeals From Service-Disabled
Veteran Owned Small Business Concern Protests
Sec. 134.504 [Removed]
19. Remove Sec. 134.504.
Sec. Sec. 134.505 through 134.515 [Redesignated as Sec. Sec.
134.504 through 134.514]
20. Redesignate Sec. Sec. 134.505 through 134.515 as Sec. Sec.
134.504 through 134.514, respectively.
21. Amend newly redesignated Sec. 134.508 by revising paragraph
(a) to read as follows:
Sec. 134.508 When will a Judge dismiss an appeal?
(a) The Judge shall dismiss an appeal if:
(1) The appeal is untimely filed pursuant to Sec. 134.503.
(2) The matter has been decided or is the subject of an
adjudication before a court of competent jurisdiction over such
matters.
* * * * *
Sec. 134.513 [Amended]
21. Amend newly redesignated Sec. 134.513 by removing the second
sentence.
Sec. 134.514 [Amended]
22. Amend newly redesignated Sec. 134.514(b) by removing the word
``service'' in the second sentence and adding in its place the word
``issuance''.
Dated: October 21, 2009.
Karen Mills,
Administrator.
[FR Doc. 2010-3613 Filed 2-26-10; 8:45 am]
BILLING CODE 8025-01-P