[Federal Register: May 24, 2004 (Volume 69, Number 100)]
[Rules and Regulations]
[Page 29411-29428]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my04-1]
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Rules and Regulations
Federal Register
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[[Page 29411]]
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 125, and 126
RIN 3245-AE66
Small Business Size Regulations; Government Contracting Programs;
HUBZone Program
AGENCY: Small Business Administration.
ACTION: Final rule.
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SUMMARY: This final rule amends the regulations governing the
Historically Underutilized Business Zone (HUBZone) Program. In
particular, this rule addresses statutory amendments made by the Small
Business Reauthorization Act of 2000, clarifies several regulations,
and makes some technical changes, including changes to Web site
addresses. In addition, this rule amends those size and government
contracting regulations that address subcontracting limitations.
DATES: This rule is effective June 23, 2004.
FOR FURTHER INFORMATION CONTACT: Michael McHale, Associate
Administrator for the HUBZone Program, (202) 205-8885 or by e-mail, at
hubzone@sba.gov.
SUPPLEMENTARY INFORMATION: On January 28, 2002, the U.S. Small Business
Administration (SBA or Agency) published in the Federal Register, 67 FR
8739, a proposed rule to amend its regulations governing the HUBZone
program. SBA had proposed regulations addressing amendments made to the
HUBZone Act by the Small Business Reauthorization Act of 2000
(Reauthorization Act), Public Law 106-554. Specifically, the
Reauthorization Act amended the eligibility requirements for small
business concerns (SBCs) owned by Tribal Governments or Community
Development Corporations (CDCs). Further, it amended the definition of
HUBZone to include ``redesignated areas,'' and added definitions for
the terms ``Indian Reservation'' and ``Alaska Native Corporation.''
This final rule addresses these statutory amendments, clarifies several
regulations, and makes some technical changes, including changes to Web
site addresses.
In addition, SBA has amended its regulations that address
subcontracting limitations. Specifically, SBA has consolidated all of
the subcontracting limitation requirements into one regulation, rather
than have them scattered throughout SBA's chapter of the Code of
Federal Regulations. In addition, SBA has clarified how to petition for
changes in the subcontracting limitation requirements.
Discussion of Comments on the Proposed Rule
The comment period for the proposed rule closed on February 27,
2002. SBA extended the comment period because it believed that affected
businesses needed more time to adequately respond. 67 FR 8739 (Feb. 26,
2002). The comment period was extended through March 29, 2002.
SBA received 977 comments on the proposed rule. The overwhelming
majority of the comments addressed the issue of the relationship of the
HUBZone Program to the 8(a) Business Development (8(a)BD) Program. This
issue is discussed below. The majority of the other comments supported
the proposed regulatory amendments. A few commenters recommended
modifications to several of the proposed amendments. SBA considered all
of the comments and recommendations in developing this final rule and
the rule includes changes based on some of the comments received.
Section-by-Section Analysis of Comments
In Sec. 121.406, SBA proposed amending paragraph (b), pertaining
to the application of the nonmanufacturer rule. Specifically, SBA
proposed permitting a nonmanufacturer to supply the product of any
domestic business, small or large, and still be considered small with
respect to any contract below the simplified acquisition threshold.
This change corresponded to a similar proposed change made in this rule
for the HUBZone Program in proposed Sec. 126.601(e)(2) (discussed
later in the preamble).
SBA received one comment on this proposed section. The commenter
stated that this proposed section could dilute the impact small
business programs have in fostering growth and opportunity for the
small business sector. This commenter believed that SBA should research
this issue further to determine the true impact of such a blanket
waiver for small business programs. SBA has determined that this issue
needs further evaluation. Consequently, SBA has decided not to amend
the rule at this time.
SBA received one comment on the proposed amendments to Sec. 125.6,
which added the subcontracting limitations for qualified HUBZone SBCs
(set forth in Sec. 126.700) so that all such subcontracting
limitations would be located in one place and easy for SBCs and
contracting officials to locate. In addition, SBA proposed language
explaining when it may use different subcontracting limitation
percentages. The commenter stated that SBA should use the term ``will
perform'' rather than ``spends'' when defining the subcontracting
limitations for qualified HUBZone SBCs. In response, SBA notes that the
statutory requirements for these limitations require that the qualified
HUBZone SBC ``expend'' a certain percentage of the cost of contract
performance or manufacturing costs on certain employees or in one or
more HUBZones. Therefore, SBA adopts the rule as proposed. However,
because of the change to Sec. 126.700 discussed below, this rule
changes the HUBZone prime contractor performance of work requirements
for construction to clarify that it is the prime HUBZone contractor,
and not the prime plus other HUBZone subcontractors, that must perform
15% (general construction) or 25% (special trade construction) of the
contract.
SBA received one comment concerning the definition of ``AA/HUB''
set forth in Sec. 126.103. This commenter stated that SBA should not
define the ``AA/HUB'' to mean the ``Associate Administrator for HUBZone
Empowerment Contracting'' because the program is titled the ``HUBZone
Program'' and not the ``HUBZone Empowerment Contracting Program.'' SBA
concurs and has not amended the current regulation, which defines ``AA/
HUB'' to mean the Associate Administrator for the HUBZone Program.
[[Page 29412]]
One commenter recommended that SBA place a definition for ``ANCSA''
in Sec. 126.103. This commenter believes that the term, which refers
to the Alaska Native Claims Settlement Act, is used several times in
the regulations and therefore a definition is needed to eliminate
confusion. Also, the commenter recommended referring to ANCSA as the
``Alaska Native Claims Settlement Act, as amended'' because the act has
been amended several times since its inception. SBA concurs with these
recommendations and has made those changes in this regulation.
SBA received one comment on the definition of ``Community
Development Corporation (CDC),'' set forth in Sec. 126.103. This
commenter stated that the definition of CDC should refer to ``part 1 of
subchapter A of the Community Economic Development Act of 1981'' and
not the open-ended reference proposed. SBA concurs and has amended the
final regulation accordingly.
SBA received several comments on the proposed definition for the
term ``employee.'' SBA proposed removing the current provision
concerning ``full-time equivalents'' and allowing persons employed on a
full-time or part-time basis to be considered employees of the concern.
In addition, SBA proposed allowing leased or temporary employees to be
counted as employees of the concern. The proposed definition also
stated that volunteers would not be counted as an employee of a HUBZone
SBC. The proposed rule defined a volunteer as a person who receives no
compensation for work performed. With this definition, SBA intended
that a person who receives food, housing, or other non-monetary
compensation in exchange for work performed would generally not be
considered a volunteer and could therefore be considered an employee of
the HUBZone SBC. SBA reiterated that it would use the ``totality of
circumstances'' to determine whether a person is an ``employee.''
SBA received several comments expressing concern over the proposed
definition. One commenter believed the proposed rule could cause a
large-scale shift of workers from full-time equivalents to leased or
part-time status with reduced benefits. Another commenter believed that
this change would weaken the nexus between participating firms and
HUBZone areas. In addition, one commenter expressed concern that
companies could intentionally exploit the change and hire temporary
employees only to gain HUBZone certification or to receive HUBZone
contracts. One commenter recommended that, to prevent such abuse, the
definition of employee should include a requirement that a certain
percentage of HUBZone employees must be paid the same as, or have the
same job classifications as, non-HUBZone employees. Another commenter
believed that an individual should be required to work a certain number
of hours before he or she is counted as an employee for purposes of the
35%, reasoning that a concern could get around the 35% requirement by
hiring various HUBZone residents to work one, two or some other number
of minimum hours per week.
One commenter stated that using the totality of circumstances to
determine whether part-time employees are bona fide employees and
allowing non-monetary compensation to be acceptable are invitations to
arbitrariness. Another commenter stated that the definition of
volunteer was too narrow.
In comparison, several commenters believe that the proposed rule
would create more job opportunities for HUBZone residents and agreed
that leased and temporary employees represent a substantial portion of
today's workforce. One commenter noted that several firms are using the
current exemption for leased and temporary employees to qualify for the
program by claiming only a few employees, when in reality they have
many employees, all of whom are leased and very few of whom live in a
HUBZone. One commenter agreed with the proposed rule, but suggested
that SBA expand the definition to allow employees of co-employer
arrangements to be treated as employees of a HUBZone SBC.
As a result of the numerous comments received and the issues
raised, SBA has decided not to implement this aspect of the proposed
rule. The Agency plans to issue an Advanced Notice of Proposed
Rulemaking (ANPRM) in the near future so that it can further examine
this issue and determine the best method for determining ``employees''
for HUBZone Program purposes.
SBA received one comment on the definition of ``HUBZone SBC.'' The
commenter suggested that SBA clarify that Alaska Native Corporations
(ANCs) or ANC-related entities must be small to be eligible for the
program. SBA concurs and has amended the regulation accordingly.
SBA also received comments on the definition of ``Indian
Reservation.'' One commenter was against any changes that would
increase Native American lands for HUBZone participation. Other
commenters expressed support for proposals that re-classified the
guidelines for determining Native American lands. One commenter stated
that the proposed regulations should include all formerly-held Indian
land in Oklahoma and not just reservations. The commenter believed that
this would benefit Oklahoma small businesses trying to participate in
the HUBZone Program by expanding the areas classified as HUBZones.
Another commenter recommended that SBA clarify the rule with respect to
Indian Reservations in Oklahoma and not ``bury'' it deep within a
subparagraph where it may be overlooked.
SBA has amended the definition of ``Indian Reservation'' so that
the paragraph concerning Oklahoma does not appear ``buried'' in the
definition. In addition, SBA notes that the definition of Indian
reservation for purposes of the HUBZone Program is statutory. The
regulation sets forth the statutory requirements. As stated in the
preamble to the proposed regulation, essentially, the statutory
definition of ``Indian Reservation'' for HUBZone Program purposes
includes federally-recognized Indian reservations, Indian communities
dependent on the Federal Government, and certain federal Indian
allotments (parcels of land created out of a diminished Indian
reservation and held in trust by the Federal Government for the benefit
of individual Indians). Pursuant to a decision by the U.S. Supreme
Court, Alaska v. Native Village of Venetie Tribal Government, 522 U.S.
520 (1998), the new statutory definition of ``Indian Reservation'' does
not include lands transferred to Alaskan Natives pursuant to ANCSA. In
the state of Oklahoma, an ``Indian Reservation'' includes a federally
recognized Indian reservation and trust land. SBA has been and intends
to continue working with the U.S. Department of the Interior, and
specifically the Bureau of Indian Affairs, to appropriately identify
these areas.
SBA received one comment suggesting that it cross-reference the
``attempt to maintain'' references in Sec. Sec. 126.200,
126.601(c)(4), and 126.602 to the definition of the term set forth in
Sec. 126.103 because SBCs may not realize that the phrase has been
defined in the regulations. SBA concurs and has made the changes in the
final rule and has also added a reference to the term in Sec.
126.401(b).
SBA received two comments concerning the eligibility, in general,
of SBCs. Both comments concerned ownership of a HUBZone SBC by U.S.
citizens. One commenter stated that the regulations should not preclude
ownership by non-U.S. citizens. SBA notes that this is a statutory
requirement and that the regulations follow the
[[Page 29413]]
statute. Another commenter favored allowing publicly held small
businesses to participate in the HUBZone Program because it would help
a greater number of small businesses. SBA notes that publicly-held
businesses have always been able to participate in the program, so long
as they meet the eligibility requirements.
SBA received three comments regarding the eligibility requirements
for Tribally-owned concerns. In the proposed rule, SBA amended Sec.
126.200 to establish eligibility requirements for such concerns because
Congress had changed these requirements with the enactment of the
Reauthorization Act. According to the Reauthorization Act, SBCs owned
by Indian Tribal Governments or tribal corporations must certify: (1)
That they are owned by an Indian Tribal Government, by a wholly-owned
tribal corporation, or owned in part by an Indian Tribal Government or
tribal corporation and in part by another SBC or U.S. citizens, and (2)
when the concern obtains a HUBZone contract, that at least 35% of its
employees engaged in performing that contract will reside within any
Indian reservation governed by one or more of the Indian Tribal
Government owners, or reside within any HUBZone adjoining any such
Indian reservation.
One commenter did not support requiring a Native American concern
to have 35% of its employees reside on or adjacent to the Indian
reservation during the performance of a contract. This commenter
believed that the requirement is too stringent and contradicts the
requirements for other HUBZone SBCs. SBA notes that this requirement is
statutory and the regulation states the same as the statute on this
point.
In addition, one commenter stated that SBA's regulations do not
clarify that Tribally-owned concerns must ``attempt to maintain'' the
relevant 35% employment requirement and must comply with the
limitations on subcontracting. SBA concurs with this comment and has
amended Sec. 126.200 to clarify that Tribally-owned concerns must
``attempt to maintain'' the 35% employment requirement during the
performance of a HUBZone contract. SBA believes, however, that the
regulations are clear that all qualified HUBZone SBCs must meet the
subcontracting limitations set forth in the statute and regulations,
and therefore it is unnecessary to amend the regulations with respect
to that issue.
As discussed above, the statutory amendments provide that an Indian
Tribal Government or tribal corporation may own a HUBZone SBC ``in
part'' with a SBC or U.S. citizens. For example, an SBC in which a
Tribal Government or tribal corporation owned 1% or less could qualify
for the program if the other owners were SBCs or U.S. citizens.
Further, there is no principal office eligibility requirement for such
applicants. Thus, SBA stated in its preamble that it was considering
whether or not to require a Tribal Government or tribal corporation own
at least 51% of the HUBZone SBC and specifically requested comments
addressing this proposal. In the proposed regulation, SBA proposed no
specific ownership interest by a Tribal Government or tribal
corporation.
SBA received two comments on this specific issue. One commenter
supported the proposal to amend the ownership percentage to either 51%
or 100% for tribally owned HUBZone SBCs because it will expand
opportunities for Native American firms. This commenter recommended
allowing only Native American, small and disadvantaged businesses
(SDBs) or SBCs owned by U.S. citizens to own the other part of the
HUBZone SBC. Another commenter disagreed with the proposal to require
51% ownership for tribally owned HUBZone SBCs. Although SBA proposed
the rule to reduce the possibility of ``fronting,'' this commenter
believes that Indian Tribes have additional restrictions (35% of the
employees must be performing on the HUBZone contract), which are more
stringent, and therefore the 51% requirement is unnecessary.
After further review of the issues and comments received, SBA
concurs that it is unnecessary to require 51% ownership for tribally-
owned HUBZone SBCs, for the reasons stated above. However, SBA believes
that it does not matter who owns the other ``part'' of the Tribally-
owned HUBZone SBC, so long as it is an SBC or U.S. citizens and the
HUBZone SBC meets the contract performance requirements. SBA believes
this will help Native American communities. Therefore, SBA retains the
rule as proposed.
SBA received one comment pertaining to Sec. 126.201, which
addresses ownership of a qualified HUBZone SBC. The commenter stated
that it was in favor of allowing certain types of Employee Stock Option
Plans (ESOPs) to participate in the HUBZone Program. However, the
commenter argued that some forms of ESOPs have corporate structures
that restrict shareholder rights. As a result of these restrictions,
such entities should be eligible to participate in the program and the
employees should not be considered to ``own or control'' the company.
Therefore, this commenter believed that the employees should not be
counted toward the 100% U.S. ownership requirement. The commenter
stated that, in the alternative, SBA should create a de minimus
exception for non-U.S. citizen ownership.
SBA notes that it agrees with the commenter as a matter of public
policy (SBA does not want to encourage or make incentives for firms to
discriminate in hiring based on national origin), but the Agency's
actions are constrained by the statute. The U.S. citizen ownership
requirement is statutory. With only certain statutory exceptions for
CDCs, ANCs, and Tribally-owned concerns, a HUBZone SBC must be owned
and controlled 100% by U.S. citizens. Therefore, SBA can not create a
de minimus exception to the statutory rule. Further, SBA has researched
the issue pertaining to ESOPs and reviewed the comment carefully. Under
an ESOP, employees may purchase or are awarded stock in the employing
firm. The stock held by most ESOPs are placed in trust. The employee
can vote its shares through a trustee or the trustee has the authority
to vote the shares. Both forms of ESOPs are variations of ownership of
a firm under a trust arrangement. SBA considers any person who has a
legal or equitable interest in the concern, or who owns stock, whether
voting or non-voting, to be an owner. Therefore, under either form of
ESOP, the stock trustees and the plan members must be regarded as the
owners of the firm's stock for purposes of the HUBZone Program. This
final rule adopts this regulation as proposed.
SBA received one comment on Sec. 126.205, which clarifies that all
SBCs, and not just 8(a) Participants, women-owned businesses, and SDBs,
may be qualified HUBZone SBCs, if they meet the HUBZone Program's
eligibility requirements. The commenter concurs with this re-draft but
recommends that SBA consider adding a statement that participation in
other SBA programs is not a requirement for participation in the
HUBZone Program. SBA concurs with this recommendation and has amended
this regulation accordingly.
SBA received one comment on Sec. 126.303, which addresses the
filing of a HUBZone application. The commenter stated that SBA should
clarify that applicants need only submit a written or an electronic
application. SBA concurs and has amended this regulation accordingly.
SBA received one comment on Sec. 126.304, which addresses what
concerns must submit with their application for certification into the
[[Page 29414]]
program. The commenter recommended that, with respect to determining
the location of Indian Reservations, SBA should clarify in the
regulations where the HUBZone maps referenced can be found. SBA concurs
and has added the Web site address for its HUBZone maps to the
regulations.
SBA received one comment on Sec. 126.306, which addresses how SBA
will process applications to the HUBZone Program. The commenter
recommended that SBA require applicants to notify SBA, prior to
certification, of all material changes that could affect eligibility so
that SBA could rely on the application materials as submitted. SBA
concurs with this recommendation, but has amended Sec. 126.304(a) and
not Sec. 126.306, accordingly. In addition, SBA notes that this
amendment does not preclude SBA from requesting additional information
or clarification of information.
SBA received one comment concerning Sec. 126.307, which concerns
the ``List'' of qualified HUBZone SBCs. The commenter recommended that
SBA clarify that it is necessary to run a search on Central Contractor
Registration (CCR) Dynamic Small Business Search (DSBS), (http://www.dsbs.sba.gov/dsbs/dsp_dsbs.cfm
) or its successor, if any, to find
qualified HUBZone SBCs because there is no ``List,'' per se, on that
Web site. SBA concurs and has amended the regulation accordingly.
SBA received one comment on Sec. 126.308, which addresses what
happens if SBA inadvertently omits a qualified HUBZone SBC from the
``List.'' The commenter stated that SBA should allow the qualified
HUBZone SBC to show the contracting officer (CO) SBA's certification
and that the concern must be on the ``List'' within 30 calendar days
thereafter. The commenter believed that this would provide more
flexibility to the process. SBA understands the commenter's concern.
However, the purpose of the List is to provide COs a quick and accurate
mechanism for finding qualified HUBZone SBCs. In those rare
circumstances when qualified HUBZone SBCs have been inadvertently
omitted from the ``List,'' SBA has quickly resolved the problem. For
these reasons, SBA has implemented this rule as proposed.
SBA received one comment on Sec. 126.401(b), which addresses
program examinations. The commenter did not agree with the proposal to
allow program exams in more than one location because it could be a
nuisance to SBCs. SBA notes that the purpose of that provision is to
ensure that all concerns certified into the HUBZone Program and
receiving the benefits of the program are eligible. If a SBC has more
than one office, it may be necessary to visit each office to determine
the principal office. However, reviews will occur in the fewest number
of offices needed to satisfy the purpose of the review. In performing a
program examination, SBA takes into account and attempts to reduce the
burden of the exam on the SBC. SBA will ensure that this process is
streamlined and not overly burdensome to HUBZone SBCs. This final rule
implements the regulation as proposed.
SBA received two comments on Sec. 126.403 which requested that
HUBZone SBCs submit updated financial information and information
relating to its number of employees to SBA. One commenter stated that
instead of requiring SBCs to report this information, SBA should verify
initial and continued eligibility of HUBZone SBCs as it pertains to
employment automatically by cross-referencing employee data with the
IRS using the IRS's Form 941 (Employer's Quarterly Federal Tax Return).
The commenter recommended SBA implement an automated system connected
to the IRS for financial data reporting instead of the proposed request
that SBA collect records and data from SBCs.
SBA plans to research this suggestion further. However, SBA
believes that if this recommendation can be implemented, it will take
time. In the meantime, SBA needs this information as soon as possible
in order to effectively gauge the success of the program.
Another commenter stated that this information request should be
mandatory so that the resulting data is reliable. SBA concurs with this
comment and agrees that the HUBZone SBC's response to the request for
updated financials and employee data should be mandatory and has
amended the final rule accordingly. However, because SBA has changed
this proposal from a voluntary to a mandatory one, at this time the
Agency requests comments on the effects implementing this requirement
will have on SBCs. In addition, in order to provide SBCs with
sufficient time to set up a recordkeeping system if necessary (although
SBA believes that all of this information is information generally
collected and retained by SBCs during the course of business) to meet
this requirement, or to understand what this requirement entails, SBA
does not plan to request this information in the near future.
SBA received two comments on Sec. 126.500, concerning SBA's
proposal to change the re-certification period from an annual re-
certification to every three years. One commenter stated that the
annual re-certification requirement is not a burden and that the 3-year
term will only increase the likelihood of a concern falling out of
compliance. In addition, the commenter suggested that HUBZone SBCs sign
a certification each time they submit a bid stating that they agree to
notify the SBA anytime there is a change in the business.
Another commenter supported the change as an administrative
convenience for the SBA and HUBZone SBCs. However, the commenter
recommended SBA amend this rule to provide a cross-reference to Sec.
126.501, which shows that qualified HUBZone SBCs have a continuing
obligation to notify SBA of material changes. In addition, this
commenter also recommended that SBA change the section heading to read:
``How does a qualified HUBZone SBC maintain HUBZone certification?''
SBA concurs with this commenter and has retained the three-year re-
certification period in this final regulation. SBA believes that
protests, program examinations, and the requirement that qualified
HUBZone SBCs notify SBA of a material change ensure that only qualified
HUBZone SBCs receive HUBZone contracts. In addition, SBA has amended
the section heading for Sec. 126.500.
In response to another comment, SBA does not believe that changing
the re-certification requirements from one to three years will increase
the likelihood of firms receiving benefits from the program that do not
in fact qualify as HUBZone SBCs. SBA believes that the more important
safeguard to prevent this from occurring is the protest mechanism tied
to each contract. Where a firm is the apparent successful offeror
because of its HUBZone status (either through the HUBZone price
evaluation preference or a HUBZone set aside), other affected firms may
challenge the firm's HUBZone status. SBA has found that the procurement
community is very able to police itself and stop abuse from occurring.
However, SBA notes that should the HUBZone Program Office develop
electronic on-line capability to efficiently process re-certification
actions in a timely manner and a risk assessment supports the need for
such a change, SBA will consider amending the regulation to require
annual re-certification.
SBA received only one comment on Sec. 125.501, which addresses a
qualified HUBZone SBC's ongoing obligations, such as notification to
SBA of any material changes. The commenter stated that SBA should
consider a cross-
[[Page 29415]]
reference to Sec. 126.200, to direct concerns to a more comprehensive
list of HUBZone Program eligibility requirements. SBA concurs with the
recommendation and has amended this regulation accordingly. However,
SBA notes that the eligibility requirements set forth in Sec. 126.200
do not provide a complete list of areas where notification of material
changes is necessary.
SBA received one comment on Sec. 126.503, which addresses de-
certification. The commenter suggested that the regulation should be
written in a more impartial tone. Although SBA believes that the
regulation as proposed is impartial, the Agency has amended the
regulation to clarify that it will notify the concern it is proposing
de-certification, the reasons for the proposed de-certification, and
that the concern must rebut each of the reasons SBA sets forth in the
letter.
In addition, with respect to Sec. 126.503, the commenter
recommended that SBA check for consistency with respect to who makes
the de-certification decision--the AA/HUB or designee, or the Deputy
AA/HUB or designee. SBA notes that the Deputy AA/HUB or designee may
propose the de-certification and the AA/HUB or designee makes the final
decision.
SBA received several comments on proposed Sec. 126.601. SBA
received one comment on proposed Sec. 126.601(b), which provided that
a qualified HUBZone SBC must be qualified at both bid submission and at
contract award. The commenter stated that the proposal is
counterproductive and inconsistent with 13 CFR 121.404, which provides
that the size of an SBC is determined as of the date of the initial
offer, with two exceptions. In addition, the commenter noted that
sometimes there is a lengthy time between bid submission and award and
this is out of the control of the HUBZone SBC.
SBA notes that a concern that is not a qualified HUBZone SBC at the
time it submits its initial offer can not submit an offer on a HUBZone
sole source or set-aside contract, or receive the benefits of the
HUBZone price evaluation preference. Although it is true that there may
be a lengthy time period between bid submission and award, SBA believes
that awarding a HUBZone contract to a concern that does not meet the
requirements of the program provides no help to the HUBZone community
or its residents. Therefore, SBA has decided to implement this rule as
proposed.
SBA received several comments on Sec. 126.601(e). SBA proposed
amending paragraph (e) and addressing confusion regarding the
nonmanufacturer rule. The statutory nonmanufacturer rule generally
requires a small business nonmanufacturer to supply the product of a
domestic small business manufacturer or processor in connection with an
8(a) or small business set aside supply contract. The SBA Administrator
may waive that requirement in certain cases.
The nonmanufacturer rule that currently applies to HUBZone
contracts requires a qualified HUBZone SBC nonmanufacturer to supply
the product of a qualified HUBZone SBC manufacturer, except that for
HUBZone contracts valued at or below $25,000, a qualified HUBZone SBC
may supply the end item of any domestic manufacturer, including a large
business. The proposed rule clarified that for purposes of a HUBZone
contract, there are no waivers of the nonmanufacturer rule. The
proposed rule provided, however, that for HUBZone contracts at or below
the simplified acquisition threshold (currently $100,000), a qualified
HUBZone SBC may supply the end item of any domestic manufacturer,
including a large business.
SBA received several comments supporting the need for a waiver
provision to the nonmanufacturer rule, similar to the one in the 8(a)BD
Program. One commenter stated that the proposed rule precluding waivers
would make it difficult for HUBZone SBCs to obtain contracts and argued
that since the rule is different from the one set forth in the 8(a)BD
Program, there is no real ``parity'' between the two programs. In
contrast, one commenter expressed support for the proposed rule
precluding waivers of the non-manufacturer rule for the HUBZone Program
because the program is intended to foster economic growth and job
creation in specific geographic areas and frequent waivers would remove
the program's incentives for manufacturers to start operations in
distressed areas.
SBA has reviewed these comments and believes that the program is
designed to assist HUBZones by assuring that individuals residing in
those areas are employed generally by a qualified HUBZone SBC and
specifically in connection with the performance of a HUBZone contract.
SBA believes that allowing a non-HUBZone manufacturer to be the firm
ultimately supplying the product for a HUBZone contract would be
contrary to the intent of the program. Therefore, this final rule
implements that part of the rule as proposed, in that there are no
waivers for the nonmanufacturer rule in the HUBZone Program.
In response to the proposal allowing HUBZone SBCs to supply the end
item of any business for acquisitions at or below the simplified
acquisition threshold, one commenter stated that it is inconsistent
with the ``job creation'' goals of the program. On a similar note, one
commenter expressed support for the current nonmanufacturer threshold
of $25,000 (where the HUBZone SBC can supply the product of any
business for contracts at or below $25,000), rather than the simplified
acquisition threshold of $100,000, because contracts below $100,000 are
not significant enough to entice manufacturers to move into HUBZone
areas due to the costs of setting up such an operation. This commenter
also believed that SBA should research this issue further to determine
the true impact of such a blanket waiver for acquisitions below the
simplified acquisition threshold on small business programs, especially
the HUBZone Program. SBA has decided not to implement that part of the
proposed rule permitting HUBZone SBCs to provide the end item of any
manufacturer or contractor at or below the simplified acquisition
threshold.
SBA received one comment on Sec. 126.603, which addresses the
marketing of HUBZone contracts. As proposed, the regulation referenced
only HUBZone set-asides. The commenter suggested that the regulation
refer to all HUBZone contract opportunities, which would include sole
source acquisitions, set asides, and full and open competition with a
price evaluation preference. SBA concurs and has amended this
regulation accordingly.
SBA received one comment supporting the proposal in Sec. 126.605
to allow HUBZone contracts for micropurchases. This final rule
implements the proposed regulation.
SBA received several comments concerning Sec. 126.605(b) and Sec.
126.606. Both provisions address the requirement that if an 8(a)
Participant is currently performing a requirement, or SBA has accepted
that requirement for performance under the authority of the 8(a)BD
Program, it cannot be available for a HUBZone contract unless SBA has
consented to release the procurement from the 8(a)BD Program. Several
commenters thought that SBA had deleted this provision from the
regulations and argued that the requirement should be put back in the
final regulation. SBA notes that the proposed regulation did not delete
the requirement. This final rule slightly amends the wording of Sec.
126.605(b) to clarify that only contracts being performed by 8(a)
Participants through the 8(a)BD Program are not available for award
through the HUBZone Program. SBA intended that result, and believes
[[Page 29416]]
that the current regulation provides for that result, but is clarifying
the regulation to ensure that it is not misconstrued.
Although SBA proposed amendments to Sec. 126.606, the proposal
provided that SBA may release a procurement requirement from the 8(a)BD
Program only when neither the incumbent nor any other 8(a) Participant
can perform the requirement. If no 8(a) Participant is available to
perform the requirement and SBA does not ``release'' it and allow it to
become available for HUBZone contracting, then the contracting officer
can issue the solicitation as a full and open competition. Thus, the
logical alternative is ``releasing'' the requirement. Even if the
requirement is ``released,'' if it is later offered to the 8(a)BD
Program or an 8(a) Participant performs on it, then Sec. 126.605 takes
effect and the requirement is no longer available for HUBZone
contracting. The regulation protects the 8(a)BD Program, yet provides
opportunities for qualified HUBZone SBCs, but only if an 8(a)
Participant is unavailable to perform the requirement.
SBA received over 900 comments on proposed Sec. 126.607, which
sought to clarify the interaction between the HUBZone and 8(a)BD
Programs. The proposed rule provided for parity between the two
programs by requiring a CO look first to the HUBZone and 8(a)BD
Programs in determining how to fulfill a particular procurement
requirement. In deciding which contracting vehicle to use, the proposed
rule required a CO to consider the contracting activity's progress in
fulfilling its HUBZone and 8(a) goals, as well as other pertinent
factors. The proposed rule directed the CO to exercise his/her
discretion on whether to offer the requirement to the 8(a)BD or HUBZone
Program.
SBA received 235 comments stating, generally, that the proposed
rule will reduce the number of contracts available to companies in the
8(a)BD Program and will hinder entrepreneurship in minority
communities. Several commenters were concerned with the proposed rule
because the 8(a)BD Program does not have statutory goals like the
HUBZone Program. The commenters believe that adopting this rule will be
harmful to the interests of businesses owned by socially and
economically disadvantaged individuals.
SBA received 732 comments in support of the proposed rule.
Commenters believed that parity is consistent with the HUBZone and 8(a)
statutes and that it is the only fair position. One commenter noted
that this will help the Native American community. Other commenters
noted that without parity the HUBZone Program cannot be effective. SBA
received some comments suggesting that SBA retain the parity rule, but
does not allow goaling to be the basis of determination for a CO. Some
commenters believed the ``other factors'' criteria would allow COs to
act arbitrarily, while others supported the requirement.
As a result of the numerous comments received, SBA has decided to
further examine the issues raised by the commentators and will not
amend the rule at this time.
SBA received two comments supporting the proposal to allow HUBZone
opportunities at or below the simplified acquisition threshold because
it would create more opportunities for HUBZone SBCs. SBA notes that the
proposed regulation merely clarified Sec. 126.608 by allowing HUBZone
contract opportunities ``at or below'' the simplified acquisition
threshold, as opposed to just below the simplified acquisition
threshold. This final regulation implements the rule as proposed.
SBA received two comments recommending that the Agency expand sole-
source-contracting opportunities for HUBZone SBCs, arguing that such
contracting opportunities should be the same as for the 8(a)BD Program
in order to achieve parity between two programs. SBA notes that the
requirements for sole source contracting opportunities for HUBZone SBCs
are set forth in the Small Business Act, and SBA therefore cannot
expand those opportunities beyond the statute's limits. This final
regulation implements the rule as proposed.
In the proposed rule, SBA amended Sec. 126.613 to conform to the
recent statutory amendments made by the Reauthorization Act, which
addressed calculating the price evaluation preference for purchases by
the Secretary of Agriculture of agricultural commodities. In addition,
SBA proposed to add more examples to Sec. 126.613, regarding the price
evaluation preference for a qualified HUBZone SBC in full and open
competition and to clarify that only qualified HUBZone SBCs should
benefit from the preference. SBA also proposed amending the current
example by correcting a mathematical error.
SBA received three comments on this proposed section. One commenter
stated that contracting officers are skirting the use of the price
evaluation preference by using an ``up-front'' budget ceiling to
eliminate any offer from consideration that exceeds a specific dollar
amount. Two commenters stated that the adoption of the price evaluation
preference/best value clarification language was long overdue. Further,
two commenters believed that the examples were incorrect.
SBA has reviewed the comments and the proposed regulation and has
concluded that the examples are correct. With respect to the ``up-
front'' budget ceiling, SBA notes that procuring activities may have to
abide by certain statutory fiscal limitations. However, in a similar
vein, SBA notes that if there is no statutory limit, an agency can not
reject, as unreasonably high, a bid which was low by virtue of the
application of the HUBZone price evaluation preference in order to make
award to a higher evaluated, but lower actual price bidder. The U.S.
General Accounting Office confirmed SBA's position (see AMI
Construction, B-286351, Dec. 27, 2000, at http://www.gao.gov), noting
that if a procuring activity could reject a HUBZone SBC's bid as
unreasonably high, and yet with the application of the price evaluation
preference the bid is the low bid in an Invitation for Bids, then the
purpose of the evaluation preference in 15 U.S.C. 657a(b)(3) would be
thwarted.
SBA received several comments on its proposal to amend Sec.
126.616 and allow for joint ventures comprised of only qualified
HUBZone SBCs. Several commenters stated that this amendment will limit
the opportunities available for HUBZone SBCs, it is not necessary as
limits to joint ventures already exist in Sec. 126.616(b)(1) and (2)
(relating to size), and any joint venture limitation should be the same
as for the 8(a)BD Program. One commenter supported the proposed
regulation, stating that it will protect the HUBZone Program from
becoming a tool for unqualified firms to use a ``front'' to get HUBZone
benefits.
SBA believes that allowing HUBZone contracts to go to qualified
HUBZone SBCs that joint venture with a non-HUBZone SBC will dilute the
benefits intended to go to the HUBZone area and residents. Therefore,
SBA has implemented this final rule as proposed.
SBA stated in the preamble to the proposed rule that it was
considering a new paragraph to Sec. 126.700, which would add an
additional contract performance requirement for construction HUBZone
contracts. Specifically, in the case of HUBZone construction contracts
(either general construction or specialty trade construction), SBA
considered requiring qualified HUBZone SBCs to perform at least 50% of
the contract, either at the
[[Page 29417]]
prime or subcontracting level. Such a provision would not affect the
prime performance of work requirements set forth in Sec. 125.6 (i.e.,
15% for general construction and 25% for specialty trade construction);
rather, it would be a new overall performance of work requirement for
HUBZone construction contracts. Thus, for general construction, if a
prime contractor will perform 15% of the contract, it would be required
to subcontract at least 35% of the contract to one or more other
qualified HUBZone SBCs. For a specialty trade construction contract, if
a prime contractor will perform 25% of the contract, it would be
required to subcontract at least 25% of the contract to one or more
other qualified HUBZone SBCs.
In addition, SBA also stated that it was considering several
alternatives that would attempt to encourage increased performance by
qualified HUBZone SBCs, but that would not adversely affect the HUBZone
Program. One alternative that SBA considered is requiring that HUBZone
SBCs perform at least 50% of a construction contract through prime or
subcontracting arrangements, but allowing the CO to waive this
requirement where he or she believes it cannot be met for a particular
procurement. Where a CO believed that the 50% requirement could be met,
it would continue to apply. Where a CO waived the 50% requirement, the
solicitation would have to specify that the 50% requirement does not
apply to the HUBZone procurement. The 15% or 25% prime contractor
performance of work requirement would continue to apply. As another
alternative, SBA considered imposing an evaluation factor in the award
of negotiated HUBZone set-asides relating to overall performance by
qualified HUBZone SBCs. SBA specifically requested comments on these
proposals, including whether the 50% requirement is one that could be
met by the affected concerns, and whether and to what extent an
evaluation factor could be used to make the requirement acceptable to
COs and the procurement community.
SBA received three comments in support of the idea, in general, to
add a contract performance requirement for construction HUBZone
contracts. Commenters believed it would further the job creation goal
of the program and reduce the chances of abusing the benefits offered
by the program by allowing non-HUBZone SBCs to perform the majority of
the work. In addition, commenters believed it was consistent with the
overall goal that 50% of contract costs be expended in HUBZones.
After review of the comments, SBA believes that an additional
contract performance requirement for construction contracts is
necessary because the HUBZone Program is intended to stimulate
historically underutilized business zones through job creation and
capital investment. Where a qualified HUBZone SBC is able to
subcontract up to 85% of a general construction contract or up to 75%
of a specialty trade construction contract to non-HUBZone SBCs (which
may be large businesses), SBA is concerned that it would not be meeting
the underlying Congressional purpose of the program. At the same time,
however, SBA does not want to impose a barrier that could dissuade COs
from using the HUBZone Program. Therefore, the final regulation at
Sec. 126.700 requires qualified HUBZone SBCs to perform at least 50%
of the contract either at the prime or subcontracting level. In
addition, the regulation will allow the CO to waive the requirement
where he or she determines that it can not be met by at least two
qualified HUBZone SBCs.
SBA proposed amending Sec. 126.801 to clarify that SBA does not
review protest issues concerning the conduct or administration of a
HUBZone contract. One commenter noted a typo in the proposed
regulation--the word ``not'' was missing. SBA concurs and has amended
the regulation accordingly. In addition, SBA has made a technical
amendment clarifying that for sealed bid acquisitions, an interested
party must submit its protest by close of business on the fifth
business day after bid opening, or if the price evaluation preference
was not applied at the time of bid opening, by close of business on the
fifth business day from the date of identification of the apparent
successful offeror.
Application of the Final Rule
As indicated above, this final rule is effective 30 days after the
date of publication in the Federal Register. To ensure that applicants
to and participants in the HUBZone Program are subject to the same
requirements, this final rule applies to all HUBZone applications
submitted on or after the effective date of this rule, to all pending
HUBZone applications, and to all currently certified HUBZone SBCs.
Compliance With Executive Orders 12866, 12988, and 13132, the Paperwork
Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5
U.S.C. 601-602)
OMB has determined that this rule constitutes a ``significant
regulatory action'' under Executive Order 12866. SBA prepared an
economic impact analysis relating to the rule when it was published as
a proposed rule in January. We noted in our analysis that implementing
the changes in the rule would provide significant benefits, including
(1) Increasing the base number of small businesses in the HUBZone
Program and increasing the viability and practicability of using the
HUBZone Program by Federal agencies; (2) greater administrative
efficiency and program integrity; and (3) greater contracting
efficiency for Federal agencies. We did not receive any comments on the
economic impact analysis that we published with the proposed rule. We
continue to believe that our analysis was accurate.
SBA has determined that this rule imposes additional reporting or
recordkeeping requirements under the Paperwork Reduction Act, 44
U.S.C., Chapter 35 and has submitted the requirement to OMB for review.
Section 126.403(b) requires a HUBZone SBC to submit updated financial
information and information relating to the number of its employees.
This information is needed to gauge the degree to which the HUBZone
Program has resulted in increased employment opportunities and an
increased level of investment in HUBZones. SBA received two comments on
this request for information. One commenter stated that instead of
requiring SBCs to report this information, SBA should verify initial
and continued eligibility of HUBZone SBCs as it pertains to employment
automatically by cross-referencing employee data with the IRS using the
IRS's Form 941 (Employer's Quarterly Federal Tax Return). The commenter
recommended SBA implement an automated system connected to the IRS for
financial data reporting instead of the proposed request that SBA
collect records and data from SBCs.
SBA plans to research this suggestion further. However, SBA
believes that if this recommendation can be implemented, it will take
time. In the meantime, SBA needs this information as soon as possible
in order to effectively gauge the success of the program.
Another commenter stated that this information request should be
mandatory so that the resulting data is
[[Page 29418]]
reliable. SBA concurs with this comment and agrees that the HUBZone
SBC's response to the request for updated financials and employee data
should be mandatory.
SBA has certified over ten thousand concerns into the HUBZone
Program. Each of these concerns could be subject to this request for
information. SBA estimates the burden of this collection of information
as follows. SBA requires updated financial information and information
relating to the number of employees from a qualified HUBZone SBC
annually. SBA estimates that the time needed for a HUBZone SBC to
complete this collection will average less than one-half hour. SBA
estimates that the cost to complete this collection will be
approximately $30 per hour. Thus, the estimated aggregated burden for
each qualified HUBZone SBC is 0.5 hours per annum costing an estimated
$15 for the year. Included in the estimate is the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing each
collection of information. SBA has submitted this information
collection package to OMB for review.
For purposes of Executive Order 12988, SBA has drafted this 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
rule has no federalism implications warranting the preparation of a
Federalism Assessment.
The Regulatory Flexibility Act (RFA) requires SBA to publish a
final analysis. According to the RFA, the analysis must include: a
statement of the need for and objective of the rule; a summary of
significant issues raised by public comments in response to the IRFA
and an assessment of issues and any changes made as a result; a
description of and estimate of the number of small entities to which
this rule applies; a description of the reporting, recordkeeping and
other compliance requirements and an estimate of the classes of small
entities subject to the requirements and type of professional skills
necessary for the preparation of the report or record; and a
description of the steps the agency has taken to minimize the
significant economic impact on small entities consistent with the
objectives of applicable statutes and why the agency selected the
alternative adopted in the rule.
1. Reason for and Objective of the Rule
The regulations address amendments made to the HUBZone Act by the
Reauthorization Act. Specifically, Congress amended the eligibility
requirements for SBCs owned by Indian Tribal Governments or tribal
corporations, or CDCs. Congress also amended the definition of HUBZone
to include ``redesignated areas,'' and added definitions for the terms
Indian Reservation and ANC. This regulation addresses those amendments.
The regulation also makes technical amendments, and clarifies
existing regulations. Some amendments address certain issues SBA has
become aware of while reviewing HUBZone applications.
It is important to remember that the HUBZone Program is a program
designed to assist community development through small businesses.
SBA's focus in implementing any of its small business programs is
always to keep the interests of small businesses in mind. Any
regulatory changes made must necessarily consider those interests. The
changes made in this final rule are meant to implement new statutory
provisions, to make the HUBZone regulations easier to read and
understand, to eliminate confusion regarding the intended meaning of
several provisions, and to close perceived loopholes that could
otherwise open the program to abuse.
2. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA and an Assessment of Issues and Any Changes Made as a
Result
SBA received two comments on its IRFA. One commenter stated that
SBA failed to propose regulatory alternatives that would minimize the
impact of this regulation on small firms. This commenter also believed
that SBA failed to comply with section 609(a) of the Regulatory
Flexibility Act, which requires agencies to assure that small
businesses have an opportunity to participate in rulemakings that will
considerably impact them.
With respect to the first comment, SBA notes that as the federal
agency charged with the responsibility of implementing small business
programs to ``further the interests of small business,'' it always
attempts to minimize any regulatory impact on small business in its own
regulations. In addition, the proposed rule cited several alternatives
under consideration for different provisions, and asked for public
comment on those alternatives, including ones on subcontracting
limitations and ownership by Indian Tribes. With respect to the second
comment, SBA notes that it extended the original comment period for the
rule because it believed that affected businesses needed more time to
adequately respond. 67 FR 8739 (Feb. 26, 2002). In addition, SBA
received over 900 comments on the rule. Therefore, SBA believes that
SBCs had an opportunity to participate in the rulemaking, and did in
fact participate in the process.
Another commenter stated that the IRFA failed to incorporate the
complete definition of ``small entities'' in its analysis. According to
the Regulatory Flexibility Act (RFA), ``small entities'' are small
businesses, ``small organizations'' (non-profits), and small
governmental jurisdictions. SBA's programs do not apply to ``small
organizations'' or ``small governmental jurisdictions;'' rather, under
SBA's size regulations, in order to be considered a small ``business
concern,'' a business entity must be organized for profit. In addition,
according to the Federal Procurement Data Center (FPDC), Javits Wagner
O'Day nonprofit agencies, education, non-profit and Historically Black
Colleges and Universities, and state and local governments received
over $15 billion in Federal government contracts in fiscal year (FY)
2001. In comparison, according to the same data, HUBZone SBCs received
far less-- about $700 million. Even though certain provisions of the
Reauthorization Act, such as the provisions on Indian Tribes, could
increase the pool of SBCs eligible for the program, SBA notes that the
majority of these concerns were eligible prior to the Reauthorization
Act's amendments. Further, the addition of CDC ownership by the
Reauthorization Act may also widen the pool of eligible applicants.
Although CDCs can now own a HUBZone SBC and there are more HUBZones as
a result of the redesignated areas, concerns still need to have a
principal office in a HUBZone. This means that some concerns need to
move into a HUBZone, which requires the expenditure of funds before any
benefit is received. As a result, SBA believes that the provisions of
this rule will not alter the pool of eligible small businesses by a
sufficient number to change the procurement strategy of a contracting
activity. Therefore, the proposed regulation will not impact ``small
organizations'' or ``small jurisdictions.''
One commenter also recommended SBA address how the rule will impact
service disabled veterans, women-owned small businesses, SDBs, 8(a)
Participants and other programs that are part of the 23% annual
procurement goal for SBCs. With respect to this
[[Page 29419]]
comment, SBA notes that prior to the enactment of the HUBZone Act, the
government-wide goal for small business participation was 20%. When
Congress enacted the HUBZone Act, it changed the government-wide
contracting goal from 20% to 23% to address participation by qualified
HUBZone SBCs. See Public Law 105-135, section 603(b)(1)(B). The HUBZone
Program was intended to add on to, not subtract from, other small
business programs. SBA's programs are not meant to compete against each
other. As further evidence that the HUBZone Program is not intended to
take away from other programs, the regulations provide that SBA will
not consent to releasing a requirement previously performed through the
8(a)BD Program to the HUBZone Program unless neither the incumbent nor
any other 8(a)BD participant can perform the requirement.
Further, in FY 2001, the Federal Government spent over $234 billion
dollars (see http://www.fpdc.gov). SBA believes that all SBCs, no
matter which program they participate in, can and should be receiving
their fair share of this $234 billion. In addition, SBA notes that the
statute and regulations now provide that qualified HUBZone SBCs can be
owned by CDCs and one or more SBCs, or Indian Tribes and one or more
SBCs. Therefore, SBCs, including SDBs and 8(a) Participants, can
participate in the HUBZone Program not only by becoming a qualified
HUBZone SBC, but also by acquiring ownership of a qualified HUBZone
SBC. Thus, SBA does not believe that this rule will negatively impact
other SBCs.
Another comment stated that it was not possible to ascertain from
the rule or IRFA the full impact of allowing SBCs owned by ESOPs to be
eligible for the program. This commenter believed that the proposed
regulation could create a cost/economic burden on SBCs by requiring
them to make a major decision to hire or not hire qualified employees
that are not United States citizens.
In response to this comment, SBA notes that the requirement for
ownership by United States citizens is a statutory requirement. The
HUBZone Act, the statute that creates the HUBZone Program, outlines the
eligibility requirements for SBCs. It requires 100% ownership by U. S.
citizens, ownership in part by Tribes or tribal-entities, or ownership
in part by CDCs. SBA has no choice but to implement the statute as
written. Any perceived ``burden'' is not one created by SBA's
regulations. In addition, SBA notes that it has received only a handful
of applications from concerns owned by ESOPs. After reviewing the
issue, SBA determined that a concern owned by an ESOP is owned and
controlled by the trustee of the ESOP and the employees. Consequently,
to meet the eligibility requirements of the statute, the employees
participating in the ESOP must be U.S. citizens. With respect to
whether or not a concern should hire or not hire an employee, SBA
believes those are decisions to be made solely by the concern. The
benefits of the program for concerns owned by an ESOP are the same as
for all other eligible concerns--the possibility of receiving a HUBZone
contract. This ``possibility'' was explained in the proposed rule at
Sec. 126.603. Further, according to FPDC data, this ``possibility''
amounted to approximately $700 million in contracts awarded to HUBZone
SBCs in FY 2001. Only the concern itself can weigh the benefit of
receiving a potential HUBZone contract to the benefit of hiring a
certain employee. These are everyday business decisions that are made
by all concerns, not just concerns wishing to participate in the
HUBZone Program.
This commenter also stated that SBA did not determine the costs
associated with keeping an accurate system to insure that all employees
of an ESOP are United States citizens or that corporations that are
HUBZone SBCs must maintain an accurate system to verify that all stock
holders are U.S. citizens. SBA did not discuss these costs because such
``systems'' are required of the business in the normal course of
business, and any costs are not costs associated with this rule. Every
time a concern hires an employee, the employee must complete a W-2
(IRS) tax form. These forms are maintained by the concern. The tax form
provides the information on the citizenship of each employee. With
respect to public companies, SBA notes that such companies have always
been eligible for the program.
Finally, this commenter stated that SBA did not provide economic
impact data on the proposed provisions expanding contract performance
requirements for construction HUBZone contracts. In response to this
comment, SBA provides the following information.
In FY 2001, the Federal Government spent over $16 billion in
construction (see http://www.fpdc.gov). It is not clear how much of that went
to HUBZone SBCs, although according to the same data, HUBZone SBCs
received between $600 million and $700 million in contracts total.
According to SBA's CCR/DSBS (http://dsbs.sba.gov/dsbs/dsp_dsbs.cfm),
there are 2,021 qualified HUBZone SBCs, which are engaged in
construction. The rule requiring qualified HUBZone SBCs to perform at
least 50% of the construction contract itself or through a subcontract
with other qualified HUBZone SBCs may increase the number of
subcontracts issued to such concerns. In addition, this could increase
the number of contracts ultimately awarded HUBZone SBCs in this area
because more concerns could be gaining experience through
subcontracting. Further, because there are over 2,000 qualified HUBZone
SBCs in this field, a prime HUBZone SBC should not have a problem
subcontracting to another HUBZone SBC to meet this requirement. In the
alternative, SBA's final regulation provides that COs may waive this
requirement if it can not be met.
3. Description of Reporting, Recordkeeping and Other Compliance
Requirements
The RFA requires a description of the reporting, recordkeeping and
other compliance requirements and an estimate of the classes of small
entities subject to the requirements and type of professional skills
necessary for the preparation of the report or record.
The rule authorizes SBA to request that a qualified HUBZone SBC
submit updated financial information and information relating to the
number of its employees. This information is needed to gauge the degree
to which the HUBZone Program has resulted in increased employment
opportunities and an increased level of investment in HUBZones. The
office manager of a concern should be able to provide this information.
In addition, because SBA has changed this proposal from a voluntary
to a mandatory one, at this time the Agency requests comments on the
affects implementing this requirement will have on SBCs. Further, in
order to provide SBCs with sufficient time to set up a recordkeeping
system if necessary (although SBA believes that all of this information
is information generally collected and retained by SBCs during the
course of business) to meet this requirement, or to understand what
this requirement entails, SBA does not plan to request this information
in the near future.
4. Minimizing Significant Economic Impact
The RFA requires a description of the steps the agency has taken to
minimize the significant economic impact on small entities consistent
with the objectives of applicable statutes and
[[Page 29420]]
why the agency selected the alternative adopted in the rule. SBA has
addressed this in the preamble.
List of Subjects
13 CFR Part 121
Government procurement, Government property, Grant programs--
business, Loan programs--business, Small businesses.
13 CFR Part 125
Government contracts, Government procurement, Reporting and
recordkeeping requirements, Small businesses, Technical assistance.
13 CFR Part 126
Administrative practice and procedure, Government procurement,
Reporting and recordkeeping requirements, Small businesses.
0
For the reasons set forth in the preamble, amend parts 121, 125 and 126
of title 13 of the Code of Federal Regulations as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. Revise the authority citation for 13 CFR part 121 to read as
follows:
Authority: 15 U.S.C. 632(a), 634(b)(6), 636(b), 637(a), 644(c)
and 662(5); Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188; Pub. L.
105-135 sec. 601 et seq., 111 Stat. 2592; Pub. L. 106-24, 113 Stat.
39.
0
2. Amend Sec. 121.1001 by revising paragraph (a)(6)(iv), and by adding
new paragraph (b)(7) to read as follows:
Sec. 121.1001 Who may initiate a size protest or request a formal
size determination?
(a) * * *
(6) * * *
(iv) The SBA Associate Administrator for the HUBZone Program, or
designee.
* * * * *
(b) * * *
(7) In connection with initial or continued eligibility for the
HUBZone program, the following may request a formal size determination:
(i) The applicant or qualified HUBZone concern; or
(ii) The Associate Administrator for the HUBZone program, or
designee.
PART 125--GOVERNMENT CONTRACTING PROGRAMS
0
3. The authority citation for 13 CFR part 125 continues to read as
follows:
Authority: 15 U.S.C. 634(b)(6), 637 and 644; 31 U.S.C. 9701,
9702.
0
4. In Sec. 125.6, redesignate paragraphs (c), (d), (e), (f), (g), and
(h) as paragraphs (e), (f), (g), (h), (i), and (j) respectively, and
add new paragraphs (c) and (d) to read as follows
Sec. 125.6 Prime contractor performance requirements (limitations on
subcontracting).
* * * * *
(c) A qualified HUBZone SBC prime contractor can subcontract part
of a HUBZone contract (as defined in Sec. 126.600 of this chapter)
provided:
(1) In the case of a contract for services (except construction),
the qualified HUBZone SBC spends at least 50% of the cost of the
contract performance incurred for personnel on the concern's employees
or on the employees of other qualified HUBZone SBCs;
(2) In the case of a contract for general construction, the
qualified HUBZone SBC spends at least 15% of the cost of contract
performance incurred for personnel on the concern's employees;
(3) In the case of a contract for construction by special trade
contractors, the qualified HUBZone SBC spends at least 25% of the cost
of contract performance incurred for personnel on the concern's
employees;
(4) In the case of a contract for procurement of supplies (other
than procurement from a regular dealer in such supplies), the qualified
HUBZone SBC spends at least 50% of the manufacturing cost (excluding
the cost of materials) on performing the contract in a HUBZone. One or
more qualified HUBZone SBCs may combine to meet this subcontracting
percentage requirement; and
(5) In the case of a contract for the procurement by the Secretary
of Agriculture of agricultural commodities, the qualified HUBZone SBC
may not purchase the commodity from a subcontractor if the
subcontractor will supply the commodity in substantially the final form
in which it is to be supplied to the Government.
(d) SBA may use different percentages if the Administrator
determines that such action is necessary to reflect conventional
industry practices among small business concerns that are below the
numerical size standard for businesses in that industry group.
Representatives of a national trade or industry group or any interested
SBC may request a change in subcontracting percentage requirements for
the categories defined by six digit industry codes in the North
American Industry Classification System (NAICS) pursuant to the
following procedures.
(1) Format of request. Requests from representatives of a trade or
industry group and interested SBCs should be in writing and sent or
delivered to the Associate Administrator of the Office of Government
Contracting, U.S. Small Business Administration, 409 3rd Street, SW.,
Washington, DC 20416. The requester must demonstrate to SBA that a
change in percentage is necessary to reflect conventional industry
practices among small business concerns that are below the numerical
size standard for businesses in that industry category, and must
support its request with information including, but not limited to:
(i) Information relative to the economic conditions and structure
of the entire national industry;
(ii) Market data, technical changes in the industry and industry
trends;
(iii) Specific reasons and justifications for the change in the
subcontracting percentage;
(iv) The effect such a change would have on the Federal procurement
process; and
(v) Information demonstrating how the proposed change would promote
the purposes of the small business, 8(a), SDB, woman-owned business, or
HUBZone programs.
(2) Notice to public. Upon an adequate preliminary showing to SBA,
SBA will publish in the Federal Register a notice of its receipt of a
request that it considers a change in the subcontracting percentage
requirements for a particular industry. The notice will identify the
group making the request, and give the public an opportunity to submit
information and arguments in both support and opposition.
(3) Comments. SBA will provide a period of not less than 30 days
for public comment in response to the Federal Register notice.
(4) Decision. SBA will render its decision after the close of the
comment period. If SBA decides against a change, SBA will publish
notice of its decision in the Federal Register. Concurrent with the
notice, SBA will advise the requester of its decision in writing. If
SBA decides in favor of a change, SBA will propose an appropriate
change to this part.
* * * * *
PART--126 HUBZONE PROGRAM
0
5. The authority citation for 13 CFR part 126 is revised to read as
follows:
Authority: 15 U.S.C. 632, and 15 U.S.C. 657a.
0
6-7. Amend Sec. 126.101 by revising paragraph (a) to read as set forth
below, removing paragraph (b), and redesignating current paragraph (c)
as paragraph (b).
[[Page 29421]]
Sec. 126.101 Which government departments or agencies are affected
directly by the HUBZone Program?
(a) The HUBZone Program applies to all federal departments or
agencies that employ one or more contracting officers.
* * * * *
0
8. Amend Sec. 126.103 as follows:
A. Remove the definitions for ``AA/8(a)BD'', ``HUBZone 8(a)
concern,'' and ``Women-owned business (WOB);''
B. Revise the definitions of ``HUBZone,'' ``HUBZone small business
concern (HUBZone SBC),'' ``Indian reservation,'' ``Lands within the
external boundaries of an Indian reservation,'' ``Person,'' ``Qualified
census tract,'' ``Qualified non-metropolitan county,'' and ``Small
disadvantaged business;''
C. Add the terms and definitions for ``AA/BD,'' ``ADA/GC&BD,''
``Agricultural commodity,'' ``ANCSA,'' ``Alaska Native Corporation,''
``Alaska Native Village,'' ``Attempt to maintain,'' ``Community
Development Corporation,'' ``Contracting Officer,'' ``Indian Tribal
Government,'' ``Redesignated area,'' and ``Small business concern''.
The revised and added terms read as follows:
Sec. 126.103 What definitions are important in the HUBZone Program?
* * * * *
AA/BD means SBA's Associate Administrator for the Office of
Business Development.
* * * * *
ADA/GC&BD means SBA's Associate Deputy Administrator for Government
Contracting and Business Development.
Agricultural commodity has the same meaning as in section 102 of
the Agricultural Trade Act of 1978 (7 U.S.C. 5602).
Alaska Native Corporation (ANC) has the same meaning as the term
``Native Corporation'' in section 3 of the ANCSA, 43 U.S.C. 1602.
Alaska Native Village has the same meaning as the term ``Native
village'' in section 3 of the ANCSA, 43 U.S.C. 1602.
ANCSA means the Alaska Native Claims Settlement Act, as amended.
Attempt to maintain means making substantive and documented efforts
such as written offers of employment, published advertisements seeking
employees, and attendance at job fairs.
* * * * *
Community Development Corporation (CDC) means a corporation that
has received financial assistance under Part 1 of Subchapter A of the
Community Economic Development Act of 1981, 42 U.S.C. 9805-9808.
* * * * *
Contracting Officer (CO) has the meaning given that term in 41
U.S.C. 423(f)(5), which defines a CO as a person who, by appointment in
accordance with applicable regulations, has the authority to enter into
a Federal agency procurement contract on behalf of the Government and
to make determinations and findings with respect to such a contract.
* * * * *
HUBZone means a historically underutilized business zone, which is
an area located within one or more qualified census tracts, qualified
non-metropolitan counties, lands within the external boundaries of an
Indian reservation, or redesignated areas.
HUBZone small business concern (HUBZone SBC) means an SBC that is
(1) Owned and controlled by 1 or more persons, each of whom is a
United States citizen;
(2) An ANC owned and controlled by Natives (as determined pursuant
to section 29(e)(1) of the ANCSA, 43 U.S.C. 1626(e)(1));
(3) A direct or indirect subsidiary corporation, joint venture, or
partnership of an ANC qualifying pursuant to section 29(e)(1) of the
ANCSA, 43 U.S.C. 1626(e)(1)), if that subsidiary, joint venture, or
partnership is owned and controlled by Natives (as determined pursuant
to section 29(e)(2) of the ANCSA, 43 U.S.C. 1626(e)(2));
(4) Wholly owned by one or more Indian Tribal Governments, or by a
corporation that is wholly owned by one or more Indian Tribal
Governments;
(5) Owned in part by one or more Indian Tribal Governments or in
part by a corporation that is wholly owned by one or more Indian Tribal
Governments, if all other owners are either United States citizens or
SBCs; or,
(6) Wholly owned by a CDC or owned in part by one or more CDCs, if
all other owners are either United States citizens or SBCs.
* * * * *
Indian reservation (1) Has the same meaning as the term ``Indian
country'' in 18 U.S.C. 1151, except that such term does not include:
(i) Any lands that are located within a State in which a tribe did
not exercise governmental jurisdiction as of December 21, 2000, unless
that tribe is recognized after that date by either an Act of Congress
or pursuant to regulations of the Secretary of the Interior for the
administrative recognition that an Indian group exists as an Indian
tribe (25 CFR part 83); and
(ii) Lands taken into trust or acquired by an Indian tribe after
December 21, 2000 if such lands are not located within the external
boundaries of an Indian reservation or former reservation or are not
contiguous to the lands held in trust or restricted status as of
December 21, 2000; and
(2) In the State of Oklahoma, means lands that:
(i) Are within the jurisdictional areas of an Oklahoma Indian tribe
(as determined by the Secretary of the Interior); and
(ii) Are recognized by the Secretary of the Interior as of December
21, 2000, as eligible for trust land status under 25 CFR part 151.
Indian Tribal Government means the governing body of any Indian
tribe, band, nation, pueblo, or other organized group or community
which is recognized as eligible for the special programs and services
provided by the United States to Indians because of their status as
Indians.
* * * * *
Lands within the external boundaries of an Indian reservation
include all lands within the perimeter of an Indian reservation,
whether tribally owned and governed or not. For example, land that is
individually owned and located within the perimeter of an Indian
reservation is ``lands within the external boundaries of an Indian
reservation.'' By contrast, an Indian-owned parcel of land that is
located outside the perimeter of an Indian reservation is not ``lands
within the external boundaries of an Indian reservation.''
* * * * *
Person means a natural person.
Qualified census tract has the meaning given that term in section
42(d)(5)(C)(ii) of the Internal Revenue Code of 1986.
* * * * *
Qualified non-metropolitan county means any county that was not
located in a metropolitan statistical area at the time of the most
recent census taken for purposes of selecting qualified census tracts
under section 42(d)(5)(C)(ii) of the Internal Revenue Code of 1986, and
in which:
(i) The median household income is less than 80% of the non-
metropolitan State median household income, based on the most recent
data available from the Bureau of the Census of the Department of
Commerce; or
(ii) The unemployment rate is not less than 140% of the Statewide
average unemployment rate for the State in which the county is located,
based on the most recent data available from the Secretary of Labor.
Redesignated area means any census tract or any non-metropolitan
county that ceases to be a qualified HUBZone,
[[Page 29422]]
except that such census tracts or non-metropolitan counties may be
``redesignated areas'' only for the 3-year period following the date on
which the census tract or non-metropolitan county ceased to be so
qualified. The date on which the census tract or non-metropolitan
county ceases to be qualified is the date that the official government
data, which affects the eligibility of the HUBZone, is released to the
public.
* * * * *
Small business concern (SBC) means a concern that, with its
affiliates, meets the size standard for its primary industry, pursuant
to part 121 of this chapter.
Small disadvantaged business (SDB) means a concern that is small
pursuant to part 121 of this chapter, is owned and controlled by one or
more socially and economically disadvantaged individuals, tribes, ANCs,
Native Hawaiian Organizations, or CDCs and has been certified pursuant
to subpart A or B, part 124 of this chapter.
* * * * *
0
9. Revise Sec. 126.200 to read as follows:
Sec. 126.200 What requirements must a concern meet to receive SBA
certification as a qualified HUBZone SBC?
(a) Concerns owned by Indian Tribal Governments.--(1) Ownership.
(i) The concern must be wholly owned by one or more Indian Tribal
Governments;
(ii) The concern must be wholly owned by a corporation that is
wholly owned by one or more Indian Tribal Governments;
(iii) The concern must be owned in part by one or more Indian
Tribal Governments and all other owners are either United States
citizens or SBCs; or
(iv) The concern must be owned in part by a corporation, which is
wholly owned by one or more Indian Tribal Governments, and all other
owners are either United States citizens or SBCs.
(2) Size. The concern, with its affiliates, must meet the size
standard corresponding to its primary industry classification as
defined in part 121 of this chapter.
(3) Employees. The concern must certify that when performing a
HUBZone contract, at least 35% of its employees engaged in performing
that contract will reside within any Indian reservation governed by one
or more of the Indian Tribal Government owners, or reside within any
HUBZone adjoining such Indian reservation and that it will ``attempt to
maintain'' (see Sec. 126.103) that percentage during the performance
of the contract. A HUBZone and Indian reservation are adjoining when
the two areas are next to and in contact with each other.
(b) Concerns owned by U.S. citizens, ANCs or CDCs--(1) Ownership.
(i) The concern must be 100% owned and controlled by persons who are
United States citizens;
Example: A concern that is a partnership is owned 99.9% by
persons who are U.S. citizens, and 0.1% by someone who is not. The
concern is not eligible because it is not 100% owned by U.S.
citizens;
(ii) The concern must be an ANC owned and controlled by Natives
(determined pursuant to section 29(e)(1) of the ANCSA); or a direct or
indirect subsidiary corporation, joint venture, or partnership of an
ANC qualifying pursuant to section 29(e)(1) of ANCSA, if that
subsidiary, joint venture, or partnership is owned and controlled by
Natives (determined pursuant to section 29(e)(2)) of the ANCSA); or
(iii) The concern must be wholly owned by a CDC, or owned in part
by one or more CDCs, if all other owners are either United States
citizens or SBCs;
(2) Size. The concern, together with its affiliates, must qualify
as a small business under the size standard corresponding to its
primary industry classification as defined in part 121 of this chapter.
(3) Principal office. The concern's principal office must be
located in a HUBZone.
(4) Employees. At least 35% of the concern's employees must reside
in a HUBZone. When determining the percentage of employees that reside
in a HUBZone, if the percentage results in a fraction, round up to the
nearest whole number;
Example 1: A concern has 25 employees, 35% or 8.75 employees
must reside in a HUBZone. Thus, 9 employees must reside in a
HUBZone.
Example 2: A concern has 95 employees, 35% or 33.25 employees
must reside in a HUBZone. Thus, 34 employees must reside in a
HUBZone.
(5) Contract Performance. The concern must represent, as provided
in the application, that it will ``attempt to maintain'' (see Sec.
126.103) having 35% of its employees reside in a HUBZone during the
performance of any HUBZone contract it receives.
(6) Subcontracting. The concern must represent, as provided in the
application, that it will ensure that it will comply with certain
contract performance requirements in connection with contracts awarded
to it as a qualified HUBZone SBC, as set forth in Sec. 126.700.
0
10. Revise Sec. 126.201 to read as follows:
Sec. 126.201 Who does SBA consider to own a HUBZone SBC?
An owner of a SBC seeking HUBZone certification or a qualified
HUBZone SBC is a person who owns any legal or equitable interest in
such SBC. If an Employee Stock Option Plan owns all or part of the
concern, SBA considers each stock trustee and plan member to be an
owner. If a trust owns all or part of the concern, SBA considers each
trustee and trust beneficiary to be an owner. In addition:
(a) Corporations. SBA considers any person who owns stock, whether
voting or non-voting, to be an owner. SBA considers options to purchase
stock and the right to convert debentures into voting stock to have
been exercised.
Example: U.S. citizens own all of the stock of a corporation. A
corporate officer, a non-U.S. citizen, owns no stock in the
corporation, but owns options to purchase stock in the corporation.
SBA will consider the options exercised and the individual to be an
owner. Thus, pursuant to Sec. 126.200, the corporation would not be
eligible to be a qualified HUBZone SBC because it is not 100% owned
and controlled by persons who are United States citizens.
(b) Partnerships. SBA considers all partners, whether general or
limited, to be owners in a partnership.
(c) Sole proprietorships. The proprietor is the owner.
(d) Limited liability companies. SBA considers each member to be an
owner of a limited liability company.
0
11. Revise Sec. 126.202 to read as follows:
Sec. 126.202 Who does SBA consider to control a HUBZone SBC?
Control means both the day-to-day management and long-term
decision-making authority for the HUBZone SBC. Many persons share
control of a concern, including each of those occupying the following
positions: officer, director, general partner, managing partner,
managing member and manager. In addition, key employees who possess
expertise or responsibilities related to the concern's primary economic
activity may share significant control of the concern. SBA will
consider the control potential of such key employees on a case by case
basis.
0
12. Revise Sec. 126.203(b) to read as follows:
Sec. 126.203 What size standards apply to HUBZone SBCs?
* * * * *
(b) At time of initial contract offer. A HUBZone SBC must be small
for the size standard corresponding to the NAICS code assigned to the
contract.
0
13. Revise Sec. 126.205 to read as follows:
[[Page 29423]]
Sec. 126.205 May participants in other SBA programs be certified as
qualified HUBZone SBCs?
Participants in other SBA programs may be certified as qualified
HUBZone SBCs if they meet all of the requirements set forth in this
part. Participation in other SBA Programs is not a requirement for
participation in the HUBZone Program.
0
14. Revise Sec. 126.207 to read as follows:
Sec. 126.207 May a qualified HUBZone SBC have offices or facilities
in another HUBZone or outside a HUBZone?
A qualified HUBZone SBC may have offices or facilities in another
HUBZone or even outside a HUBZone and still be a qualified HUBZone SBC.
However, in order to be certified as a qualified HUBZone SBC and if
required by Sec. 126.200, the concern's principal office must be
located in a HUBZone.
0
15. Revise Sec. 126.300 to read as follows:
Sec. 126.300 How may a concern be certified as a qualified HUBZone
SBC and what information will SBA consider?
A concern must apply to SBA for certification. SBA will consider
the information provided by the concern in order to determine whether
the concern qualifies. SBA, in its discretion, may rely solely upon the
information submitted to establish eligibility, may request additional
information, or may verify the information before making a
determination. SBA may draw an adverse inference and deny the
certification where a concern fails to cooperate with SBA or submit
information requested by SBA. If SBA determines that the concern is a
qualified HUBZone SBC, it will issue a certification to that effect and
add the concern to the List.
0
16. Revise Sec. 126.303 to read as follows:
Sec. 126.303 Where must a concern submit its application and
certification?
A concern seeking certification as a HUBZone SBC must submit either
an electronic application to SBA via https://eweb1.sba.gov/hubzone/internet/
or a written application to the AA/HUB, U.S. Small Business
Administration, 409 3rd Street, SW., Washington, DC 20416.
Certification pages must be validated electronically or signed by a
person authorized to represent the concern.
0
17. Revise Sec. 126.304 to read as follows:
Sec. 126.304 What must a concern submit to SBA?
(a) To be certified by SBA as a qualified HUBZone SBC, a concern
must submit a completed application and represent to SBA that it meets
the requirements set forth in Sec. 126.200. After submitting the
application, applicants must notify SBA of any material changes that
could affect its eligibility. The concern must also submit any
additional information required by SBA.
(b) Concerns applying for HUBZone status based on a location within
the external boundaries of an Indian reservation must use SBA's maps
(located at https://eweb1.sba.gov/hubzone/internet/) to verify that the
location is within the external boundaries of an Indian reservation.
If, however, SBA's maps indicate that the location is not within the
external boundaries of an Indian reservation and the concern disagrees,
then the concern must submit official documentation from the
appropriate Bureau of Indian Affairs (BIA) Land Titles and Records
Office with jurisdiction over the concern's area, confirming that it is
located within the external boundaries of an Indian reservation. BIA
lists the Land Titles and Records Offices and their jurisdiction in 25
CFR 150.4 and 150.5.
(c) If the concern was decertified for failure to notify SBA of a
material change affecting its eligibility pursuant to Sec. 126.501, it
must include with its application for certification a full explanation
of why it failed to notify SBA of the material change. If SBA is not
satisfied with the explanation provided, SBA may decline to certify the
concern.
0
18. Revise Sec. 126.306(b) to read as follows:
Sec. 126.306 How will SBA process the certification?
* * * * *
(b) SBA may request additional information or clarification of
information contained in an application submission at any time.
* * * * *
0
19. Revise Sec. 126.307 to read as follows:
Sec. 126.307 Where will SBA maintain the List of qualified HUBZone
SBCs?
Qualified HUBZone SBCs are identified by running a search on CCR/
DSBS (http://dsbs.sba.gov/dsbs/dsp_dsbs.cfm) and are listed on the
HUBZone Web page at https://eweb1.sba.gov/hubzone/internet/general/approved-firms.cfm.
In addition, requesters may obtain a copy of the
List by writing to the AA/HUB at U.S. Small Business Administration,
409 3rd Street, SW., Washington, DC 20416 or at hubzone@sba.gov.
0
20. Revise Sec. 126.308 to read as follows:
Sec. 126.308 What happens if SBA inadvertently omits a qualified
HUBZone SBC from the List?
A HUBZone SBC that has received SBA's notice of certification, but
is not on the List within 10 business days thereafter, should
immediately notify the AA/HUB in writing at U.S. Small Business
Administration, 409 Third Street, SW., Washington, DC 20416 or via e-
mail at hubzone@sba.gov. The concern must appear on the List to be
eligible for HUBZone contracts.
0
21. Revise Sec. 126.309 to read as follows:
Sec. 126.309 May a declined or decertified concern seek certification
at a later date?
A concern that SBA has declined or decertified may seek
certification no sooner than one year from the date of decline or
decertification if it believes that it has overcome all reasons for
decline or decertification through changed circumstances and is
currently eligible. See Sec. 126.304(c).
0
22. Revise Sec. 126.401 to read as follows:
Sec. 126.401 What is a program examination and what will SBA examine?
(a) General. A program examination is an investigation by SBA
officials, which verifies the accuracy of any certification made or
information provided as part of the HUBZone application process or in
connection with a HUBZone contract. Thus, examiners may verify that the
concern currently meets the program's eligibility requirements, and
that it met such requirements at the time of its application for
certification, its most recent recertification, or its certification in
connection with a HUBZone contract.
(b) Scope of review. Examiners may conduct the review, or parts of
the review, at one or all of the concern's offices. SBA will determine
the location of the examination. Examiners may review any information
related to the concern's eligibility requirements including, but not
limited to, documentation related to the location and ownership of the
concern, the employee percentage requirements, and the concern's
``attempt to maintain'' (see Sec. 126.103) this percentage. The
concern must document each employee's residence address through
employment records. The examiner also may review property tax, public
utility or postal records, and other relevant documents. The concern
must retain documentation demonstrating satisfaction of the employee
residence and other qualifying requirements for 6 years from date of
submission of the application and any recertifications issued to SBA.
0
23. Revise Sec. 126.402 to read as follows:
[[Page 29424]]
Sec. 126.402 When may SBA conduct program examinations?
SBA may conduct a program examination at any time after the concern
submits its application, during the processing of the application, and
at any time while the concern is certified as a qualified HUBZone SBC.
0
24. Revise Sec. 126.403 to read as follows:
Sec. 126.403 May SBA require additional information from a HUBZone
SBC?
(a) At the discretion of the AA/HUB, SBA has the right to require
that a HUBZone SBC submit additional information as part of the
certification process, or at any time thereafter. SBA may draw an
adverse inference from the failure of a HUBZone SBC to cooperate with a
program examination or provide requested information.
(b) In order to gauge the success of the program, SBA requires that
a HUBZone SBC submit updated financial information and information
relating to the number of its employees.
Sec. 126.404 [Removed]
0
25. Remove Sec. 126.404.
Sec. 126.405 [Removed]
0
26. Remove Sec. 126.405.
0
27. Revise Sec. 126.500 to read as follows:
Sec. 126.500 How does a qualified HUBZone SBC maintain HUBZone
certification?
Any qualified HUBZone SBC seeking to remain on the List must
recertify every three years to SBA that it remains a qualified HUBZone
SBC (See Sec. 126.501 for ongoing obligations). Concerns wishing to
remain in the program without any interruption must recertify their
continued eligibility to SBA within 30 calendar days after the third
anniversary of their date of certification and each subsequent three-
year period. Failure to do so will result in SBA initiating
decertification proceedings. Once decertified, the concern then would
have to submit a new application for certification pursuant to Sec.
126.309. The recertification to SBA must be in writing and must
represent that the circumstances relative to eligibility that existed
on the date of certification showing on the List have not materially
changed and that the concern meets any new eligibility requirements.
0
28. Revise Sec. 126.501 to read as follows:
Sec. 126.501 What are a qualified HUBZone SBC's ongoing obligations
to SBA?
A qualified HUBZone SBC must immediately notify SBA of any material
change that could affect its eligibility. Material change includes, but
is not limited to, a change in the ownership, business structure, or
principal office of the concern, or a failure to meet the 35% HUBZone
residency requirement (See Sec. 126.200 for certain eligibility
requirements). The notification must be in writing, and must be sent or
delivered to the AA/HUB to comply with this requirement. Failure of a
qualified HUBZone SBC to notify SBA of such a material change may
result in decertification and removal from the List pursuant to Sec.
126.504. In addition, SBA may seek the imposition of penalties under
Sec. 126.900. If the concern later becomes eligible for the program,
it must apply for certification pursuant to Sec. Sec. 126.300 through
126.306.
Sec. 126.503 [Redesignated as Sec. 126.504]
0
29. Redesignate current Sec. 126.503 as Sec. 126.504.
0
30. Add new Sec. 126.503 to read as follows:
Sec. 126.503 What happens if SBA is unable to verify a qualified
HUBZone SBC's eligibility or determines that the concern is no longer
eligible for the program?
If SBA is unable to verify a qualified HUBZone SBC's eligibility or
determines it is not eligible for the program, SBA may propose
decertification of the concern.
(a) Proposing Decertification. Except as set forth in paragraph (c)
of this section, the Deputy AA/HUB or designee will first notify the
qualified HUBZone SBC in writing that SBA is proposing to decertify it,
the reasons for the proposed de-certification, and that the SBC must
rebut each of the reasons SBA sets forth. The qualified HUBZone SBC
will have 30 calendar days from the date that it receives SBA's
notification to respond, in writing, to the AA/HUB or designee.
(b) SBA's Decision. The AA/HUB or designee will consider the
reasons for proposed decertification and the qualified HUBZone SBC's
response before making a written decision whether to decertify. The AA/
HUB may draw an adverse inference where a qualified HUBZone SBC fails
to cooperate with SBA or provide the information requested. The AA/
HUB's decision is the final agency decision.
(c) Decertifying Pursuant to a Protest. SBA may decertify a
qualified HUBZone SBC and remove its name from the List without first
proposing it for decertification if the AA/HUB upholds a protest
pursuant to Sec. 126.803 and the AA/HUB's decision is not overturned
pursuant to Sec. 126.805.
0
31. Revise Sec. 126.601 to read as follows:
Sec. 126.601 What additional requirements must a qualified HUBZone
SBC meet to bid on a contract?
(a) In order to submit an offer on a specific HUBZone contract, the
qualified HUBZone SBC, together with its affiliates, must be small
under the size standard corresponding to the NAICS code assigned to the
contract.
(b) A firm must be a qualified HUBZone SBC both at the time of its
initial offer and at the time of award in order to be eligible for a
HUBZone contract.
(c) At the time a qualified HUBZone SBC submits its initial offer,
and where applicable its final offer, on a specific HUBZone contract,
it must certify to the CO that:
(1) It is a qualified HUBZone SBC that appears on SBA's List;
(2) There has been no material change in its circumstances since
the date of certification shown on the List that could affect its
HUBZone eligibility;
(3) It is small under the NAICS code assigned to the procurement;
and
(4) If the qualified HUBZone SBC was certified pursuant to Sec.
126.200(b), it must represent that it will ``attempt to maintain'' (See
Sec. 126.103) the required percentage of employees who are HUBZone
residents during the performance of a HUBZone contract. If the
qualified HUBZone SBC was certified pursuant to Sec. 126.200(a), then
it must represent that at least 35% of its employees engaged in
performing the HUBZone contract reside within any Indian reservation
governed by one or more of its Indian Tribal Government owners or
reside within any HUBZone adjoining any such Indian reservation.
(d) If submitting an offer as a joint venture, each qualified
HUBZone SBC must make the certifications in paragraph (c) of this
section separately under its own name.
(e) A qualified HUBZone SBC may submit an offer on a HUBZone
contract for supplies as a nonmanufacturer if it meets the requirements
of the nonmanufacturer rule set forth at Sec. 121.406(b)(1) of this
chapter, and if the small manufacturer providing the end item for the
contact is also a qualified HUBZone SBC.
(1) There are no waivers to the nonmanufacturer rule for HUBZone
contracts.
(i) SBA will not issue contract-specific waivers as it does for
small business set-aside and 8(a) contracts under Sec.
121.406(b)(3)(i) of this chapter.
(ii) Class waivers issued under Sec. 121.406(b)(3)(ii) of this
chapter do not apply to HUBZone contracts.
(2) For HUBZone contracts at or below $25,000 in total value, a
qualified
[[Page 29425]]
HUBZone SBC may supply the end item of any manufacturer, including a
large business, so long as the product acquired is manufactured or
produced in the United States.
0
32. Revise Sec. 126.602 to read as follows:
Sec. 126.602 Must a qualified HUBZone SBC maintain the employee
residency percentage during contract performance?
Qualified HUBZone SBCs eligible for the program pursuant to Sec.
126.200(b) must ``attempt to maintain'' (See Sec. 126.103) the
required percentage of employees who reside in a HUBZone during the
performance of any contract awarded to the concern on the basis of its
HUBZone status. Qualified HUBZone SBCs eligible for the program
pursuant to Sec. 126.200(a) must have at least 35% of its employees
engaged in performing a HUBZone contract residing within any Indian
reservation governed by one or more of the concern's Indian Tribal
Government owners, or residing within any HUBZone adjoining any such
Indian reservation. To monitor compliance, SBA will conduct program
examinations, pursuant to Sec. Sec. 126.400 through 126.403, where
appropriate.
0
33. Amend Sec. 126.603 to read as follows:
Sec. 126.603 Does HUBZone certification guarantee receipt of HUBZone
contracts?
HUBZone certification does not guarantee that a qualified HUBZone
SBC will receive HUBZone contracts. Qualified HUBZone SBCs should
market their capabilities to appropriate contracting activities in
order to increase the prospect that the contracting activity will adopt
an acquisition strategy that includes HUBZone contract opportunities.
0
34. Amend Sec. 126.605 by removing paragraph (c) and revising
paragraph (b) to read as follows:
Sec. 126.605 What requirements are not available for HUBZone
contracts?
* * * * *
(b) An 8(a) participant currently is performing the requirement
through the 8(a)BD program or SBA has accepted the requirement for
award through the 8(a)BD program, unless SBA has consented to release
the requirement from the 8(a)BD program.
0
35. Revise Sec. 126.606 to read as follows:
Sec. 126.606 May a CO request that SBA release a requirement from the
8(a)BD program for award as a HUBZone contract?
A CO may request that SBA release an 8(a) requirement for award as
a HUBZone contract. However, SBA will grant its consent only where
neither the incumbent nor any other 8(a) participant can perform the
requirement. The request must be made to the AA/BD, who will make a
determination after consulting with the AA/HUB.
0
36. Revise Sec. 126.608 to read as follows:
Sec. 126.608 Are there HUBZone contract opportunities at or below the
simplified acquisition threshold or micropurchase threshold?
A CO may make a requirement available as a HUBZone set-aside if it
is at or below the simplified acquisition threshold. In addition, a CO
may award a requirement as a HUBZone contract to a qualified HUBZone
SBC at or below the micropurchase threshold.
0
37. Revise Sec. 126.610 to read as follows:
Sec. 126.610 May SBA appeal a contracting officer's decision not to
reserve a procurement for award as a HUBZone contract?
(a) The Administrator may appeal a CO's decision not to make a
particular requirement available for award as a HUBZone contract to the
Secretary of the department or head of the agency.
(b) An appeal is initiated by SBA's Procurement Center
Representative to the CO, and may be in response to information
supplied by the AA/HUB, his or her designee, or other interested
parties.
0
38. Revise Sec. 126.611(c) to read as follows:
Sec. 126.611 What is the process for such an appeal?
* * * * *
(c) Deadline for appeal. Within 15 business days of SBA's
notification to the CO, SBA must file its formal appeal with the
Secretary of the department or head of the agency, or the appeal will
be deemed withdrawn.
* * * * *
0
39. Revise Sec. 126.612 section heading and paragraphs (b)(1), (b)(2),
and (e) to read as follows:
Sec. 126.612 When may a CO award sole source contracts to qualified
HUBZone SBCs?
* * * * *
(b) * * *
(1) $5,000,000 for a requirement within the NAICS codes for
manufacturing; or
(2) $3,000,000 for a requirement within all other NAICS codes;
* * * * *
(e) In the estimation of the CO, contract award can be made at a
fair and reasonable price.
0
40. Revise Sec. 126.613 to read as follows:
Sec. 126.613 How does a price evaluation preference affect the bid of
a qualified HUBZone SBC in full and open competition?
(a)(1) Where a CO will award a contract on the basis of full and
open competition, the CO must deem the price offered by a qualified
HUBZone SBC to be lower than the price offered by another offeror
(other than another SBC) if the price offered by the qualified HUBZone
SBC is not more than 10% higher than the price offered by the otherwise
lowest, responsive, and responsible offeror. For a best value
procurement, the CO must apply the 10% preference to the otherwise
successful offer of a large business and then determine which offeror
represents the best value to the Government, in accordance with the
terms of the solicitation.
(2) Where, after considering the price evaluation adjustment, the
price offered by a qualified HUBZone SBC is equal to the price offered
by a large business (or, in a best value procurement, the total
evaluation points received by a qualified HUBZone SBC is equal to the
total evaluation points received by a large business), award shall be
made to the qualified HUBZone SBC.
Example 1: In a full and open competition, a qualified HUBZone
SBC submits an offer of $98, a non-HUBZone SBC submits an offer of
$95, and a large business submits an offer of $93. The lowest,
responsive, responsible offeror would be the large business.
However, the CO must apply the HUBZone price evaluation preference.
In this example, the qualified HUBZone SBC's offer is not more than
10% higher than the large business' offer and, consequently, the
qualified HUBZone SBC displaces the large business as the lowest,
responsive, and responsible offeror.
Example 2: In a full and open competition, a qualified HUBZone
SBC submits an offer of $103, a non-HUBZone SBC submits an offer of
$100, and a large business submits an offer of $93. The lowest,
responsive, responsible offeror would be from the large business.
The CO must then apply the HUBZone price evaluation preference. In
this example, the qualified HUBZone SBC's offer is more than 10%
higher than the large business' offer and, consequently, the
qualified HUBZone SBC does not displace the large business as the
lowest, responsive, and responsible offeror. In addition, the non-
HUBZone SBC's offer at $100 does not displace the large business'
offer because a price evaluation preference is not applied to change
an offer and benefit a non-HUBZone SBC.
Example 3: In a full and open competition, a qualified HUBZone
SBC submits an offer of $98 and a non-HUBZone SBC submits an offer
of $93. The CO would not apply the price evaluation preference in
this procurement because the lowest, responsive, responsible offeror
is a SBC.
[[Page 29426]]
(b)(1) For purchases by the Secretary of Agriculture of
agricultural commodities, the price evaluation preferences shall be:
(i) 10%, for the portion of a contract to be awarded that is not
greater than 25% of the total volume being procured for each commodity
in a single invitation for bids (IFB);
(ii) 5%, for the portion of a contract to be awarded that is
greater than 25%, but not greater than 40%, of the total volume being
procured for each commodity in a single IFB; and
(iii) Zero, for the portion of a contract to be awarded that is
greater than 40% of the total volume being procured for each commodity
in a single IFB.
(2) The 10% and 5% price evaluation preferences for agricultural
commodities apply to all offers from qualified HUBZone SBCs up to the
25% and 40% volume limits specified in paragraph (b)(1) of this
section. As such, more than one qualified HUBZone SBC may receive a
price evaluation preference for any given commodity in a single IFB.
Example: There is an IFB for 100,000 pounds of wheat. Bid 1
(from a large business) is $1/pound for 100,000 pounds of wheat. Bid
2 (from a HUBZone SBC) is $1.05/pound for 20,000 pounds of wheat.
Bid 3 (from a HUBZone SBC) is $1.04/pound for 20,000 pounds. Bid 3
receives a 10% price evaluation adjustment for 20,000 pounds, since
20,000 is less than 25% of 100,000 pounds. With the 10% price
evaluation adjustment, Bid 1 changes from $20,000 for the first
20,000 pounds to $22,000. Bid 3's price of $20,800 ($1.04 x 20,000)
is now lower than any other bid for 20,000 pounds. Thus, Bid 3 will
be accepted for the full 20,000 pounds. Bid 2 receives a 10% price
evaluation adjustment for that amount of its bid when added to the
volume in Bid 3 that does not exceed 25% of the total volume being
procured. Since 25,000 pounds is 25% of the total volume of wheat
under the IFB, and Bid 3 totaled 20,000 pounds, a 10% price
evaluation adjustment will be applied to the first 5,000 pounds of
Bid 2. With the price evaluation adjustment, the price for Bid 1, as
measured against Bid 2, for 5,000 pounds changes from $5,000 to
$5,500. Bid 2's price of $5,250 ($1.05 x 5,000) is lower than Bid 1
for 5,000 pounds. Bid 2 will then receive a 5% price evaluation
adjustment for the remaining 15,000 pounds, since the total volume
of Bids 3 and 2 receiving an adjustment does not exceed 40% of the
total volume of wheat under the IFB (i.e., 40,000 pounds). With the
5% price evaluation adjustment, Bid 1's price for the next 15,000
pounds changes from $15,000 to $15,750. Bid 2's price for that
15,000 pounds is also $15, 750 ($1.05 x 15,000). Because the
evaluation price for Bid 2 is not more than 10% higher than the
price offered by Bid 1, Bid 2's price is deemed to be lower than the
price offered by Bid 1. Since the evaluation price for both the
first 5,000 pounds (receiving a 10% price evaluation adjustment) and
the remaining 15,000 pounds (receiving a 5% price evaluation
adjustment) is less than Bid 1, Bid 2 will be accepted for the full
20,000 pounds.
(c) A contract awarded to a qualified HUBZone SBC under a
preference described in paragraph (b) of this section shall not be
counted toward the fulfillment of any requirement partially set aside
for competition restricted to SBCs.
0
41. Revise Sec. 126.614 to read as follows:
Sec. 126.614 How does a CO apply HUBZone and SDB price evaluation
preferences in full and open competition?
A CO may receive offers from both qualified HUBZone SBCs and SDB
concerns, or from concerns that qualify as both, during a full and open
competition. The CO must first apply the SDB price evaluation
preference described in 10 U.S.C. 2323 to all appropriate offerors. The
CO must then apply the HUBZone price evaluation preference as described
in Sec. 126.613 to all appropriate offerors. A concern that is both a
qualified HUBZone SBC and an SDB must receive the benefit of both the
HUBZone price evaluation preference described in Sec. 126.613 and the
SDB price evaluation preference described in 10 U.S.C. 2323 and the
Federal Acquisition Streamlining Act, section 7102(a)(1)(B), Public Law
103-355, in a full and open competition.
Example 1: In a full and open competition, a qualified HUBZone
SBC (but not an SDB) submits an offer of $102; an SDB (but not a
qualified HUBZone SBC) submits an offer of $107; and a large
business submits an offer of $93. The CO first applies the SDB price
evaluation preference and adds 10% to the qualified HUBZone SBC's
offer thereby making that offer $112.2, and to the large business's
offer thereby making that offer $102.3. As a result, the large
business is the lowest, responsive, and responsible offeror. Next,
the CO applies the HUBZone preference and, since the qualified
HUBZone SBC's offer is not more than 10% higher than the large
business's offer, the CO must deem the price offered by the
qualified HUBZone SBC to be lower than the price offered by the
large business.
Example 2: A qualified HUBZone SBC (but not an SDB) submits an
offer of $102; a qualified HUBZone SBC that is also an SDB submits
an offer of $105; an SDB (but not a qualified HUBZone SBC) submits
an offer of $107; a small business concern (but not a qualified
HUBZone SBC or an SDB) submits an offer of $100; and a large
business submits an offer of $93. The CO must first apply the SDB
price evaluation preference to establish the lowest, responsive, and
responsible offeror. Thus, the qualified HUBZone SBC's offer becomes
$112.2; the qualified HUBZone SBC/SDB's offer remains $105; the
SDB's offer remains $107; the small business concern's offer becomes
$110; and the large business's offer becomes $102.3. As a result of
the SDB price evaluation preference, the large business is the
lowest, responsive, and responsible offeror. Next, the CO must apply
the HUBZone price evaluation preference and if a qualified HUBZone
SBC's price is not more than 10% higher than the large business's
price, the CO must deem its price to be lower than the large
business's price. In this example, the qualified HUBZone price of
$112.2 is not more than 10% higher than the large business's price,
however, the qualified HUBZone/SDB's price of $105 is also not more
than 10% higher than the large business's price and is lower than
the qualified HUBZone SBC's price. Consequently, the CO must deem
the price of the qualified HUBZone/SDB as the lowest, responsive,
and responsible offeror.
0
42. Revise Sec. 126.616 to read as follows:
Sec. 126.616 What requirements must a joint venture satisfy to submit
an offer on a HUBZone contract?
A joint venture may submit an offer on a HUBZone contract if the
joint venture meets all of the following requirements:
(a) HUBZone joint venture. A qualified HUBZone SBC may enter into a
joint venture with another qualified HUBZone SBC for the purpose of
submitting an offer for a HUBZone contract. The joint venture itself
need not be certified as a qualified HUBZone SBC.
(b) Size of concerns. (1) A joint venture of two or more qualified
HUBZone SBCs may submit an offer for a HUBZone contract so long as each
concern is small under the size standard corresponding to the NAICS
code assigned to the contract and the HUBZone joint venture in the
aggregate may exceed the size standard provided the procurement meets
the following conditions:
(i) For a procurement having a revenue-based size standard, the
procurement exceeds half the size standard corresponding to the NAICS
code assigned to the contract; and
(ii) For a procurement having an employee-based size standard, the
procurement exceeds $10 million.
(2) For a procurement that does not exceed the applicable dollar
amount specified in paragraph (b)(1) of this section, a joint venture
of two or more qualified HUBZone SBCs may submit an offer for a HUBZone
contract so long as the qualified HUBZone SBCs in the aggregate are
small under the size standard corresponding to the NAICS code assigned
to the contract.
(c) Performance of work. The aggregate of the qualified HUBZone
SBCs to the joint venture, not each concern separately, must perform
the applicable percentage of work required by 13 CFR 125.6.
0
43. Add new Sec. 126.617 to Subpart F to read as follows:
[[Page 29427]]
Sec. 126.617 Who decides contract disputes arising between a
qualified HUBZone SBC and a contracting activity after the award of a
HUBZone contract?
For purposes of the Disputes Clause of a specific HUBZone contract,
the contracting activity will decide disputes arising between a
qualified HUBZone SBC and the contracting activity.
0
44. Add new Sec. 126.618 to Subpart F to read as follows:
Sec. 126.618 How does a HUBZone SBC's participation in a Mentor-
Prot[eacute]g[eacute] relationship affect its participation in the
HUBZone Program?
(a) Qualified HUBZone SBCs may enter into Mentor-
Prot[eacute]g[eacute] relationships in connection with other Federal
programs, provided that such relationships do not conflict with the
underlying HUBZone requirements.
(b) For purposes of determining whether an applicant to the HUBZone
Program or a HUBZone SBC qualifies as small under part 121 of this
chapter, SBA will not find affiliation between the applicant or
qualified HUBZone SBC and the firm that is its mentor in a Federally-
approved mentor-Prot[eacute]g[eacute] relationship (including a mentor
that is other than small) on the basis of the mentor-
Prot[eacute]g[eacute] agreement.
(c)(1) A qualified HUBZone SBC that is a prime contractor on a
HUBZone contract may team with and subcontract work to its mentor.
(i) The HUBZone SBC must meet the applicable performance of work
requirement set forth in Sec. 125.6(b) of this chapter.
(ii) SBA may find affiliation between a prime HUBZone contractor
and its mentor subcontractor where the mentor will perform primary and
vital requirements of the contract. See Sec. 121.103(f)(4) of this
chapter.
(2) A qualified HUBZone SBC may not joint venture with its mentor
on a HUBZone contract unless the mentor is also a qualified HUBZone
SBC.
0
45. Revise Sec. 126.700 to read as follows:
Sec. 126.700 What are the performance of work requirements for
HUBZone contracts?
(a) A qualified HUBZone SBC receiving a HUBZone contract for
general construction must perform at least 50% of the contract either
itself, or through subcontracts with other qualified HUBZone SBCs. A
contracting officer may waive this requirement for a particular
procurement after determining that at least two qualified HUBZone SBCs
can not meet the requirement. Where a waiver is granted, the qualified
HUBZone SBC must meet the performance of work requirements set forth in
Sec. 125.6(b) of this chapter.
(b) A qualified HUBZone SBC receiving a HUBZone contract for
specialty construction must perform at least 50% of the contract either
itself, or through subcontracts with other qualified HUBZone SBCs. A
contracting officer may waive this requirement for a particular
procurement after determining that it can not be met. Where a waiver is
granted, the qualified HUBZone SBC must meet the performance of work
requirements set forth in Sec. 125.6(b) of this chapter.
(c) A prime contractor receiving an award as a qualified HUBZone
SBC must meet the performance of work requirements set forth in Sec.
125.6(b) of this chapter.
0
46. Revise Sec. 126.702 to read as follows:
Sec. 126.702 How can the subcontracting percentage requirements be
changed?
SBA may change the required subcontracting percentage for a
specific industry if the Administrator determines that such action is
necessary to reflect conventional industry practices among SBCs that
are below the numerical size standard for businesses in that industry
group. The procedures for requesting changes in subcontracting
percentages are set forth in Sec. 125.6 of this chapter.
Sec. 126.703 [Removed]
0
47. Remove Sec. 126.703.
0
48. Revise Sec. 126.800(b) to read as follows:
Sec. 126.800 Who may protest the status of a qualified HUBZone SBC?
* * * * *
(b) For all other procurements. SBA, the CO, or any other
interested party may protest the apparent successful offeror's
qualified HUBZone SBC status.
0
49. Revise Sec. 126.801(a), (d)(1), (d)(2), and (e), redesignate
current paragraph (d)(3) as (d)(4) and add new paragraph (d)(3), to
read as follows:
Sec. 126.801 How does one file a HUBZone status protest?
(a) General. The protest procedures described in this part are
separate from those governing size protests and appeals. All protests
relating to whether a qualified HUBZone SBC is other than small for
purposes of any Federal program are subject to part 121 of this chapter
and must be filed in accordance with that part. If a protester protests
both the size of the HUBZone SBC and whether the concern meets the
HUBZone qualifying requirements set forth in Sec. 126.200, SBA will
process protests concurrently, under the procedures set forth in part
121 of this chapter and this part. SBA does not review issues
concerning the administration of a HUBZone contract.
* * * * *
(d) Timeliness. (1) For negotiated acquisitions, an interested
party must submit its protest by close of business on the fifth
business day after notification by the contracting officer of the
apparent successful offeror.
(2) For sealed bid acquisitions:
(i) An interested party must submit its protest by close of
business on the fifth business day after bid opening, or
(ii) If the price evaluation preference was not applied at the time
of bid opening, by close of business on the fifth business day from the
date of identification of the apparent successful offeror.
(3) Any protest submitted after the time limits is untimely, unless
it is from SBA or the CO.
* * * * *
(e) Referral to SBA. The CO must forward to SBA any non-premature
protest received, notwithstanding whether he or she believes it is
sufficiently specific or timely. The CO must send the protests, along
with a referral letter, to AA/HUB, U.S. Small Business Administration,
409 3rd Street, SW, Washington, DC 20416. The CO's referral letter must
include information pertaining to the solicitation that may be
necessary for SBA to determine timeliness and standing, including: the
solicitation number; the name, address, telephone number and facsimile
number of the CO; the type of HUBZone contract at issue; if the
procurement was conducted using full and open competition with a
HUBZone price evaluation preference, and whether the protester's
opportunity for award was affected by the preference; if the
procurement was a HUBZone set-aside, whether the protester submitted an
offer; whether the protested concern was the apparent successful
offeror; whether the procurement was conducted using sealed bid or
negotiated procedures; the bid opening date, if applicable; when the
protest was submitted to the CO; and whether a contract has been
awarded.
0
50. Revise Sec. 126.803(d) to read as follows:
Sec. 126.803 How will SBA process a HUBZone status protest?
* * * * *
(d) Effect of determination. The determination is effective
immediately and is final unless overturned on appeal by the ADA/GC&BD,
pursuant to Sec. 126.805. If SBA upholds the protest, SBA will
decertify the concern.
0
51. Revise paragraphs Sec. 126.805(a), (b), and (h) to read as
follows:
[[Page 29428]]
Sec. 126.805 What are the procedures for appeals of HUBZone status
determinations?
(a) Who may appeal. The protested HUBZone SBC, the protestor, or
the CO may file appeals of protest determinations with the ADA/GC&BD.
(b) Timeliness of appeal. The ADA/GC&BD must receive the appeal no
later than five business days after the date of receipt of the protest
determination. SBA will dismiss any appeal received after the five-day
period.
* * * * *
(h) Decision. The ADA/GC&BD will make a decision within five
business days of receipt of the appeal, if practicable, and will base
his or her decision only on the information and documentation in the
protest record as supplemented by the appeal. SBA will provide a copy
of the decision to the CO, the protestor, and the protested HUBZone
SBC, consistent with law. The ADA/GC&BD's decision is the final agency
decision.
0
52. Revise paragraph Sec. 126.900(b) to read as follows:
Sec. 126.900 What penalties may be imposed under this part?
* * * * *
(b) Civil penalties. Persons or concerns are subject to civil
penalties under the False Claims Act, 31 U.S.C. 3729-3733, and under
the Program Fraud Civil Remedies Act, 31 U.S.C. 3801-3812, and any
other applicable laws.
Dated: May 14, 2004.
Hector V. Barreto,
Administrator.
[FR Doc. 04-11579 Filed 5-21-04; 8:45 am]
BILLING CODE 8025-01-P