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rulemaking is required, the Regulatory as to clarify existing regulations. This Summary of Proposed Rule, Comments, Flexibility Act does not require an rule clarifies that contracting officers and SBA’s Responses initial or final regulatory flexibility have the authority to request I. National Defense Authorization Act 2 analysis. The Bureau has determined information in connection with a for Fiscal Year 2016, Public Law 114– that these corrections do not impose any contractor’s compliance with applicable 92, 129 Stat. 726, November 25, 2015 new or revise any existing limitations on subcontracting clauses; (NDAA of 2016) recordkeeping, reporting, or disclosure provides exclusions for purposes of requirements on covered entities or compliance with the limitations on Posting Notice of Substantial Bundling members of the public that would be subcontracting for certain contracts Section 863 of the NDAA of 2016 collections of information requiring performed outside of the United States, amended section 15(e)(3) of the Small OMB approval under the Paperwork for environmental remediation Business Act (15 U.S.C. 644(e)(3)) to 3 Reduction Act. contracts, and for information provide that if the head of a contracting II. Correction technology service acquisitions that agency determines that an acquisition require substantial cloud computing; plan involves a substantial bundling of In FR Doc. 2019–16300 appearing on requires a prime contractor with a contract requirements, the head of the page 37565 in the Federal Register of commercial subcontracting plan to contracting agency shall publish a Thursday, August 1, 2019, the following include indirect costs in its notice of such determination on a public correction is made: website within 7 days of making such subcontracting goals; establishes that determination. Section 863 also Supplement I to Part 1026—Official failure to provide timely subcontracting amended section 44(c)(2) of the Small Interpretations [Corrected] reports may constitute a material breach Business Act (15 U.S.C. 657q(c)(2)) to ■ 1. On page 37567, in the third column, of the contract; clarifies the provide that upon determining that a in Supplement I to part 1026, Section requirements for size and status consolidation of contract requirements 1026.32—Requirements for High-Cost recertification; and limits the scope of is necessary and justified, the Senior Mortgages, paragraph 32(a)(1)(ii), part Procurement Center Representative Procurement Executive (SPE) or Chief 1.vi., ‘‘For 2020, $21,980, reflecting a 2 (PCR) reviews of Department of Defense Acquisition Officer (CAO) shall publish percent increase in the CPI–U from June acquisitions performed outside of the a notice on a public website that such 2018 to June 2019, rounded to the United States and its territories. This determination has been made. An nearest whole dollar’’ is corrected to rule also authorizes agencies to receive agency may not issue the solicitation read ‘‘For 2020, $1,099, reflecting a 2 double credit for small business goaling any earlier than 7 days after publication percent increase in the CPI–U from June achievements as announced in SBA’s of the notice. The SPE or CAO must also 2018 to June 2019, rounded to the scorecard for local area small business publish the justification along with the nearest whole dollar.’’ set-asides in connection with a disaster. solicitation. The requirement may be Finally, SBA is removing the kit Dated: November 21, 2019. delegated. SBA proposed to amend assembler exception to the non- § 125.2(d) by adding new paragraphs Thomas Pahl, manufacturer rule. (d)(1)(v) and (d)(7) to implement these Policy Associate Director, Bureau of changes. Specifically, SBA proposed Consumer Financial Protection. DATES: This rule is effective on that the notice be published on the December 30, 2019. [FR Doc. 2019–25812 Filed 11–27–19; 8:45 am] contracting agency’s website. SBA BILLING CODE 4810–AM–P FOR FURTHER INFORMATION CONTACT: received three comments on these Brenda Fernandez, Office of Policy, proposed new paragraphs and all three Planning and Liaison, 409 Third Street supported the proposal to require public SMALL BUSINESS ADMINISTRATION SW, Washington, DC 20416; (202) 205– notification of a consolidation 7337; [email protected]. determination. Based on agency 13 CFR Parts 121, 124, 125, 126, 127, comments, SBA is adopting a final rule 129, and 134 SUPPLEMENTARY INFORMATION: that requires publication of the notice RIN 3245–AG86 Introduction on the Government Point of Entry website because this will be a more National Defense Authorization Acts of SBA published a proposed rule efficient and effective mechanism to 2016 and 2017, Recovery regarding these changes in the Federal notify the public. Notice provided Improvements for Small Entities After Register on December 4, 2018 (83 FR through one Government website, Disaster Act of 2015, and Other Small 62516), inviting the public to submit which already serves as the means for Business Government Contracting comments on or before February 4, most procurement-related notices, will 2019. SBA received extensive responses likely be viewed by a larger portion of AGENCY: U.S. Small Business on the proposed rule from 38 entities, the public than through an individual Administration. which comprised almost 250 specific agency website. ACTION: Final rule. comments. One commenter requested II. National Defense Authorization Act SUMMARY: The U.S. Small Business additional time to submit comments. for Fiscal Year 2017, Public Law 114– Administration (SBA or Agency) is SBA declined to provide an extension of 328, 130 Stat. 2000, December 23, 2016 amending its regulations to implement the comment period on grounds of (NDAA of 2017) several provisions of the National administrative efficiency, since this rule Procurement Center Representative Defense Authorization Acts (NDAA) of implements statutory requirements and Reviews 2016 and 2017 and the Recovery makes other changes of critical Improvements for Small Entities After importance to small businesses. SBA’s Section 1811 of the NDAA of 2017 Disaster Act of 2015 (RISE Act), as well discussion below summarizes the amended section 15(l) of the Small proposed rule, the comments related to Business Act (15 U.S.C. 644(l)) to 2 5 U.S.C. 603(a) and 604(a). each section of the proposed rule, and provide that PCRs may review any 3 44 U.S.C. 3501, et seq. SBA’s responses. acquisition, even those where the

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acquisition is set aside, partially set Act (22 U.S.C. 2762), is a humanitarian activities that would be considered a aside, or reserved for small business. operation as defined in 10 U.S.C. 401(e), failure to make a good faith effort to SBA’s current rules provide that PCRs is for a contingency operation as defined comply with a small business will review all acquisitions that are not in 10 U.S.C. 101(a)(13), is to be awarded subcontracting plan. Good faith effort set aside or reserved for small business. pursuant to an agreement with the considers a totality of the contractor’s These rules were intended to focus government of a foreign country in actions to provide the maximum limited resources on acquisitions that which Armed Forces of the United practicable opportunity to small were not already going to small States are deployed, or where both the businesses to participate as business, but were not intended to place of award and place of performance subcontractors (including those in the prohibit a PCR from reviewing any are outside of the United States and its socio-economic small business areas), acquisition as part of the PCR’s role as territories. SBA proposed to amend consistent with the information and an advocate for small business. SBA § 125.2(b)(1)(i) to implement these assurances provided in the proposed to amend § 125.2(b)(1)(i) to amendments. Under the proposed rule, subcontracting plan. A failure to exert provide that PCRs may review any PCRs would still be able to review good faith effort is predicated upon acquisition regardless of whether it is acquisitions awarded in the United evidence that an other than small set aside, partially set aside, or reserved States and its territories but performed Federal prime contractor, required to for small business or other outside of the United States and its have a subcontracting plan with socioeconomic categories. SBA believes territories, or awarded outside of the negotiated small business concern goals that this change will enable PCRs to United States and its territories for approved by a Federal contracting advocate for total set-asides or partial performance in the United States or its officer, has failed to attain these goals as set-asides when appropriate and territories, if the acquisition is not a outlined in the plan, and that this necessary. This provision merely gives foreign military sales, or in connection failure may be attributable to a lack of to the SBA PCR the authority to review with a contingency operation, good faith effort by the other than small set-aside actions where he or she deems humanitarian and civic assistance prime contractor. The term SBC for it appropriate. It is not the intent that provided in conjunction with military purposes of this rule includes all this will be done in every case. In fact, operations, or status of forces categories of small business, including SBA believes that such a review will not agreement. The proposed rule clarified small disadvantaged businesses, generally be done. Where a PCR seeks that SBA considers performance to be veteran-owned small businesses, to review a set-aside action, the PCR outside of the United States and its service-disabled veteran-owned small will notify the contracting officer. SBA territories if the acquisition is awarded businesses, women-owned small expects its review to generally be and performed or delivered outside of businesses, small businesses in limited to the issue presented, and SBA the United States and its territories. If historically underutilized business does not believe this will adversely the acquisition is awarded in the United zones, Historically Black Colleges and affect the acquisition timeline. SBA States and its territories or some Universities (HBCU/Minority received two comments on this performance or delivery occurs in the Institutions (MI)) (NASA only) and any proposed change. One supported the United States and its territories, SBA successor small business designations. change and one opposed it. The considers that to be performed in the A failure to exert good faith efforts must commenter who opposed the proposed United States and its territories. SBA take into account all actions, or lack rule based his opposition on the received one comment in support of the thereof, the contractor took to promote perception that PCRs favor 8(a) firms proposed change. SBA continues to subcontracting opportunities to small over other small businesses. SBA believe that the proposed language businesses to the extent agreed upon in deduced from this comment that the properly captures the intent of the the approved subcontracting plan. SBA commenter was concerned that a PCR statutory provision. As such, SBA also proposed to reorganize this section looking at all acquisitions will not adopts the proposed change in this final to reflect these new examples in assess whether a particular acquisition rule. § 125.3(d)(3)(ii). SBA received eight comments is appropriate for all of SBA’s Material Breach of Subcontracting Plan regarding the proposed changes to government contracting programs, but Section 1821 of the NDAA of 2017 clarify what good faith means. Six will instead default to assuming it amended section 8(d)(9) of the Small comments supported the proposed should be awarded to an 8(a) firm. SBA Business Act (15 U.S.C. 637(d)(9)) to change and two comments opposed it. disagrees that PCRs favor one small provide that it shall be a material breach The six comments in support expressed business program over another. PCRs of a contract or subcontract when the appreciation for SBA’s attempt to seek to ensure that contracting officers contractor or subcontractor with a implement the statutory requirement as consider all of SBA’s small business subcontracting plan fails to comply in clearly and thoroughly as possible. programs, and that the market research good faith with the requirement to Additionally, commenters noted that performed supports the contracting provide assurances that the offeror shall the proposed changes will provide officer’s decision to use a particular submit such periodic reports or greater protection to small businesses by program. This final rule adopts the cooperate in any studies or surveys as outlining explicitly what they can proposed change, as it clarifies SBA’s may be required by the Federal agency expect from a large business that is current position that PCRs may review or the Administration in order to making a good faith effort to comply any acquisition, which promotes more determine the extent of compliance by with a small business subcontracting awards to small businesses. the offeror with the subcontracting plan. plan. Commenters also noted that the Section 1811 of the NDAA of 2017 Such a breach may be considered in any proposed changes will help agencies also amended section 15(l) of the Small past performance evaluation of the hold large business prime contractors Business Act to limit the scope of PCR contractor. SBA proposed to revise accountable if they breach their small review of solicitations for contracts or § 125.3(d) to implement this provision. business subcontracting plans. orders by or for the Department of SBA also proposed revising § 125.3(d) The two commenters opposing the Defense if the acquisition is conducted to reflect Section 1821’s requirement proposed change expressed wariness pursuant to the Arms Control Export that SBA must provide examples of about holding contractors to a precise

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definition of good faith because other III. Recovery Improvements for Small that agencies will enter accurate data factors, besides those outlined in the Entities After Disaster Act of 2015, into the Federal Procurement Data proposed language, may affect a Public Law 114–88, 129 Stat. 686, System (FPDS). SBA will provide the contractor’s ability to meet its goals. November 25, 2015 (RISE Act) extra credit through the agency While SBA understands these concerns, Section 2108 of the RISE Act scorecard process. Local area set-aside Congress’s clear intent was that SBA authorizes SBA to establish contracting and small business contract implement a more robust and detailed preferences for small business concerns designations already exist in FPDS, and definition of compliance. SBA does not located in disaster areas and provide implementation has already occurred in intend, nor believe, that the expanded agencies with double credit for awards FY 2017. definition of good faith will be overly to small business concerns located in SBA received nine comments regarding the proposed addition of part burdensome for contractors. In addition, disaster areas. To implement the 129. Eight of the comments support the the examples set forth in the rule are not changes made by section 2108 of the proposed amendments. They supported intended to be inclusive. Factors beyond RISE Act, SBA proposed to add a new part 129 to title 13 of the Code of Congress’s intent to encourage small those identified in the rule may be business contracting in areas adversely considered in determining whether Federal Regulations. SBA will implement section 2105, ‘‘Use of affected by disasters and believed that good faith efforts were made. One SBA’s proposed part 129 accomplished commenter specifically expressed Federal surplus property in disaster areas,’’ in a separate rulemaking. Congress’s intent. One commenter concern that the examples would allow stated that it would be confusing to contractors to be found to have acted in Section 2108 of the RISE Act amends section 15 of the Small Business Act (15 discern which type of procurement goal bad faith without due process. SBA does U.S.C. 644) by adding a subsection (f), credit is subject to double credit, not believe the proposed changes put which authorizes procuring agencies to especially if the information provided in contractors at risk of specious or provide contracting preferences for the SBA Procurement Scorecard differs capricious findings of bad faith. small business concerns located in areas from that in the Federal Procurement Contractors have the opportunity to for which the President has declared a Database System (FPDS) or from the correct substantiated findings of major disaster, during the period of the information on https:// subcontracting compliance reviews, per declaration. Section 2108 provides that www.usaspending.gov, which tracks the new § 125.3(d)(3)(ii)(F). Further, this contracting preference shall be Federal procurement spending. While contractors retain their right to rebut available for small business concerns the amount of procurement goal credit and appeal determinations of non- located in disaster areas if the small for such awards will differ in the SBA compliance that would result in business will perform the work required Procurement Scorecard as compared to liquidated damages, a breach of contract under the contract in the disaster area. FPDS, the same contract identification finding, or an adverse past performance Under § 6.208 of Federal Acquisition information will be present. FPDS will assessment. Both commenters in Regulation (FAR), contracting officers identify those awards that are subject to opposition suggested that SBA use the may set aside solicitations to allow only double credit because they were FAR language on good faith rather than offerors residing or doing business in awarded to firms in a disaster area. Although SBA understands the drafting their own regulations. SBA’s the area affected by a major disaster. commenter’s concern that implementing proposed changes mirror the FAR’s Under existing FAR 26.202–1, such local area set-asides may be further set this double credit may be confusing, language but primarily seek to SBA believes that it is constrained by implement Congress’s intent. aside for small business concerns. SBA proposed to use the existing FAR the statue which requires this double SBA is making one change to the definitions to provide that an agency credit. As such, the final rule adopts proposed rule in response to a comment will receive credit for an ‘‘emergency part 129 as proposed. noting that § 125.3(d)(3)(ii)(H) response contract’’ awarded to a ‘‘local IV. Other Small Business Government incorrectly states that a failure of good firm’’ that qualifies as a small business Contracting Amendments faith may be found if a contractor does concern under the applicable size not get a contracting officer’s approval standard for a ‘‘Major disaster or Clarification That the Non- prior to changing small business emergency area.’’ FAR 26.201. Manufacturer 500 Employee Size subcontractors. Prime contractors must Section 2108 also provides that if an Standard Does Not Apply to provide contracting officers with a agency awards a contract to a small Information Technology Value Added written explanation of why they are business located in a disaster area Resellers changing a small business through a contracting preference, the On September 10, 2014, SBA subcontractor, but the regulations do not value of the contract shall be doubled proposed to eliminate the information require a contracting officer’s prior for purposes of determining compliance technology value added reseller approval. SBA has revised the with the small business contracting (ITVAR) exception to NAICS 541519, regulation to reflect this correction. goals described in section 15(g)(1)(A) of which had a size standard of 150 the Small Business Act. Proposed employees. 79 FR 53646. In the The rule renumbers current § 129.300 provided that agencies would proposed rule, SBA specifically noted § 125.3(d)(3)(i–iii) as § 125.3(d)(3)(i)(A– receive double credit for awarding a that elimination of the exception would C) to better organize this section for contract through the use of a local small result in these acquisitions, which are clarity and ease of understanding. The business or socioeconomic set-aside primarily for supplies, being subject to final rule includes examples of good authorized by § 129.200 (i.e., a set-aside the non-manufacturer rule (NMR), faith in the revised § 125.3(d)(3)(i), restricted to SBCs, 8(a) Business which has a size standard of 500 while examples of activities that would Development (BD) Program Participants, employees. As a result of public be considered a failure to make a good Women-Owned Small Business comment, SBA altered the language in faith effort are included in the revised (WOSB), Service-Disabled Veteran- the ITVAR exception (13 CFR 121.201, § 125.3(d)(3)(ii). Owned (SDVO) or HUBZone SBCs footnote 18) to make it clear that the located in a disaster area). SBA believes manufacturing performance or

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limitations on subcontracting subcontracting and NMR requirements business MACs will reduce the number requirements and the NMR apply to for each of the various types of small of offerors for the orders that are set- acquisitions under the ITVAR business contracts. The concerns aside for socioeconomic small business exception, but retained the 150 identified in the 2013 final rule have program participants. The comments in employee size standard. 81 FR 4436 since been addressed to enable fair and opposition also note that small (January 26, 2016). By definition, proper implementation of order set- businesses would be discouraged from contractors under the ITVAR exception asides. Specifically, on May 31, 2016, bidding on MACs because they would are non-manufacturers, and it would SBA published a final rule to have no way of knowing if any future make no sense for SBA to retain a 150- standardize the limitations on orders would be set aside for their employee size standard if concerns subcontracting and NMR requirements socioeconomic status. SBA believes could also qualify under the NMR 500 across socioeconomic programs. 81 FR these concerns should be assuaged by employee size standard. In a size appeal 34243. In addition, some agencies have the fact that the rule would not affect before the SBA Office of Hearings and pursued the strategy of allowing order already-awarded MACs, unless set- Appeals, a firm tried to argue that the set-asides against set-aside multiple asides were already contemplated in the size standard under the ITVAR award contracts (MACs), including solicitation. Going forward, small exception was the 500 employee non- notification and incorporation of the businesses would know at the time of manufacturer size standard. Size Appeal clause at FAR 52.219–13, and agencies offer what kind of set-asides, if any, of York Telecom Corporation, SBA No. have reported that they have not were available at the time of award and SIZ–5742 (May 18, 2016). The appeal encountered any industry concerns. In on future orders. SBA believes this type was denied. Id. In response, SBA connection with this rule, SBA of forecasting and notification to proposed to amend § 121.406(b)(1)(i) to requested comment on whether SBA offerors would also address the clarify that the NMR size standard of should allow agencies to set aside concerns of commenters opposed to the 500 employees does not apply to orders for a socioeconomic small proposed change because they do not acquisitions that have been assigned the business program (8(a), HUBZone, believe it is fair to the ‘‘original’’ small ITVAR NAICS code 541519 exception, SDVO, WOSB) under a MAC that was businesses that submit offers on a MAC. footnote 18. The size standard for any awarded under a total small business The rule would apply only to future acquisition under 541519, footnote 18, set-aside. Because SBA believes that a contracts and thus potential offerors is 150 employees for all offerors. SBA change is appropriate at this time, SBA will know in advance if it is worthwhile received six comments related to this proposed to remove the term ‘‘Full and to submit an offer. proposed amendment: Five supported Open’’ from § 125.2(e)(6) to specifically SBA received one comment the clarification and one opposed it. The afford discretion to an agency to set- requesting clarification on whether a commenter opposed to the change aside one or more particular orders for contracting officer can set aside orders suggested that SBA should increase the HUBZone SBCs, 8(a) BD SBCs, SDVO for a contract if the contract was not set size standard for NAICS code 541519 SBCs or WOSBs, as appropriate, where aside for small businesses. SBA’s from 150 to 500 employees because an the underlying MAC was initially set current regulation at § 125.2(e)(6)(i) increased number of ITVARs would aside for small business. Set-asides provides that contracting officers can lead to cost savings and a reduction of under multiple award set-aside ‘‘set-aside orders against Multiple the Federal deficit. SBA does not agree contracts may be implemented by Award Contracts that were competed on a full and open basis.’’ The proposed with this analysis and is adopting the agencies in different ways, including: rule revised this provision to say that amendment as proposed. SBA does not (1) Establishing set-asides to contracting officers can ‘‘set aside orders believe that a non-manufacturer with socioeconomic programs at the order against Multiple Award Contracts, close to 500 employees should be solicitation level under multiple award including contracts that were set aside considered small. small business set-aside contracts, and for small businesses.’’ SBA is adopting (2) establishing socioeconomic set-aside Setting Aside an Order Under a Multiple the amendment as proposed. Award Set-Aside Contract pools at the master contract solicitation SBA received one comment regarding On October 2, 2013, SBA published a level for a multiple award small the two alternative approaches final rule implementing 15 U.S.C. business set-aside contract. SBA discussed in the proposed rule for 644(r). 78 FR 61114. In that rule, SBA requested comments on any burden or implementing this change: Using small contemplated the set aside of orders for adverse impact associated with each of business pools or small business set- certain types of SBCs, such as HUBZone these two approaches. In addition, SBA asides at the order level. The commenter SBCs, 8(a) BD Program Participants, was specifically interested in whether supports both proposed approaches but SDVO SBCs, or WOSBs. 78 FR 61114, these two approaches could impact the notes that category management has a 61124. SBA noted that at the time, the ability for all types of small businesses negative impact on small businesses. No small business programs had major (e.g., 8(a), HUBZone, WOSB, SDVOSB) comments were received which identify differences with respect to the to compete and receive orders. any burdens associated with either application of the limitations on SBA received twenty-two comments approach. SBA is adopting the subcontracting and NMR requirements, regarding this proposed change. Twelve amendment as proposed. and therefore it would be difficult for of the comments support the proposed SBCs and agencies to determine the change and ten oppose the change. The Recertification of Size and Status rules that applied to a particular order. comments that oppose the proposed SBA’s rules require recertification of SBA was also concerned about the amendment note that it is unfair to the size and status for all long-term (over 5 possibility that SBCs could be deprived original small business awardees of a years) contracts. This includes of an opportunity to compete for orders MAC to allow socioeconomic small indefinite delivery contracts under under a set-aside contract if an agency business program set-asides under those which orders will be placed at a future repeatedly set aside orders for other contracts where it was not originally date and contracts that had not been set socioeconomic categories. Since that contemplated. Additionally, those who aside for small business but were time, SBA has attempted to harmonize oppose this proposed change note that awarded to a small business. Thus, SBA the application of the limitations on allowing such set-asides under small proposed to amend §§ 125.18(f),

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126.601(i), and 127.503(h) to clarify that worthy goal. Consistency better enables whose size is at issue. 13 CFR a concern must recertify its status on small businesses and contracting 121.106(a). ‘‘This includes employees full and open contracts. In addition, officers to understand and comply with obtained from a temporary employee SBA added a new paragraph to SBA’s requirements, ensuring that agency, professional employee §§ 124.521 and 124.1015 to reflect the eligible small businesses are equipped organization, or leasing concern.’’ Id. status eligibility and recertification to bid on contracts that have been Further, ‘‘SBA will consider the totality requirements for 8(a) participants and appropriately set aside. SBA is adopting of the circumstances, including criteria SDB concerns, which are already the proposed changes as final. used by the IRS for Federal income tax purposes, in determining whether present in the SDVO, HUBZone, and Indirect Costs in Commercial individuals are employees of a WOSB regulations. This change Subcontracting Plans provides greater consistency among the concern.’’ Id. In determining what it status recertification requirements for Other than small business concerns means to be employed on an ‘‘other’’ small business program contracts. One that have a commercial subcontracting basis, SBA issued Size Policy Statement result of these changes is that a prime plan report on performance through a No. 1. 51 FR 6099 (February 20, 1986). contractor relying on similarly situated summary subcontract report (SSR), and The Size Policy Statement sets forth 11 entities (an SDVOSB prime with an SBA’s rules currently require that a criteria SBA will consider in SDVOSB subcontractor, for example) to contractor using a commercial determining whether an individual meet the applicable performance subcontracting plan must include all should be treated as an employee. If an requirements may not count the indirect costs in its SSR. However, individual meets one or more of the subcontractor towards its performance SBA’s rules do not require contractors to criteria, he or she may be treated as an requirements if the subcontractor include indirect costs in their employee. Pursuant to this guidance, an recertifies as an entity other than that commercial subcontracting plan goals, individual contractor paid through a which it had previously certified. which leads to inconsistencies when 1099 may be properly treated as an comparing the SSR to the commercial employee for purposes of SBA’s SBA received 32 comments on the subcontracting plan. SBA proposed to proposed change to certification regulations (including SBA’s regulations revise § 125.3(c)(1)(iv) to require that governing performance of work or requirements. Twenty-five opposed, prime contractors with commercial limitations on subcontracting three supported, and four sought subcontracting plans must include requirements). The reason for such clarification. Many of the comments that indirect costs in the commercial treatment was to prevent a firm that opposed this provision expressed subcontracting plan goals. This will exceeded an applicable employee-based concerns that the requirement would be allow agencies to negotiate more size standard from ‘‘firing’’ a specific overly burdensome and would add realistic commercial subcontracting number of employees in order to get ‘‘complexities to an already difficult plans and monitor performance through below the size standard, but to then hire compliance system.’’ Several the SSR. SBA received one comment in them back or ‘‘subcontract’’ to them as commenters specifically disagreed with support of this change and is adopting independent contractors. SBA did not the proposed change to the 8(a) and SDB the proposed rule as final. want to encourage firms to attempt to certification requirements. One Subcontracting Compliance Reviews evade SBA’s size regulations. commenter noted it takes firms up to Historically, SBA has said that if an four years to demonstrate satisfactory SBA proposed revisions to the individual qualifies as an ‘‘employee’’ past performance and thus by the time nomenclature it uses regarding under part 121 of SBA’s regulations for they were eligible for a contract, they subcontracting compliance reviews in purposes of determining size, then SBA would not be able to perform on any order to better align title 13 of the CFR should consider that individual to be an options. Several others pointed out that with the FAR. Currently, the rating employee of the firm for the the 8(a) program is different from SBA’s terminology differs between SBA’s performance of work (or now limitations other government contracting programs. rating system under § 125.3(f)(3) (for an on subcontracting) requirements of 13 SBA recognizes these concerns but does SBA Compliance Review) and that used CFR 125.6 (or 124.510). It would not be not believe that this provision fails to pursuant to FAR 42.1503 (for a past equitable to say that a given individual acknowledge the unique features of the performance evaluation including small counts against a firm in determining 8(a) program. Congress intended that business subcontracting under FAR size (because he/she is considered an 8(a) program participation be limited to 52.219–9). SBA believes the difference ‘‘employee’’ of the firm) and then to say nine years. SBA already permits long- in terminology leads to confusion for that that same individual also counts term contracts to extend for up to five Government personnel and industry against the firm for the limitations on years past the completion of a partners attempting to ascertain the subcontracting requirements (because Participant’s program term in the 8(a) value of a rating. As such, in he/she is not considered an ‘‘employee’’ program. Allowing firms to work on § 125.3(f)(3), SBA proposed to revise the of the firm). Thus, for a contract that is options indefinitely would conflict with terms used to rate firms from assigned a NAICS code having an Congress’s clear desire for 8(a) ‘‘Outstanding,’’ ‘‘Highly Successful,’’ or employee-based size standard, an Participants to leave the program and go ‘‘Acceptable’’ to ‘‘Exceptional,’’ ‘‘Very independent contractor could be on to successfully and independently Good,’’ and ‘‘Satisfactory,’’ respectively. deemed an ‘‘employee’’ of the concern participate in the government SBA received three comments in for which he/she is doing work. If such contracting arena. Further, SBA did not support of this change and, therefore, is an individual is considered an contemplate the proposed rules as a adopting the proposed revisions as final. employee for size purposes, he/she forced attempt to bring the 8(a) program would also be considered an employee requirements into alignment with the Independent Contractors—Employees/ for limitations on subcontracting other programs, but rather as an Subcontractors purposes. opportunity to consider all the programs SBA’s size regulations provide that SBA’s regulation at 13 CFR 125.6(e)(3) holistically. SBA respectfully disagrees SBA considers ‘‘all individuals has caused some confusion as to how to with commenters who do not believe employed on a full-time, part-time, or properly treat independent contractors consistency between programs is a other basis’’ to be employees of the firm for purposes of the limitations on

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subcontracting provisions. That effort towards assessing whether an Management: Increased Use of Alaska provision provides that, ‘‘Work independent contractor counted as an Native Corporations’ Special 8(a) performed by an independent contractor employee or a subcontractor for a Provisions Calls for Tailored Oversight,’’ shall be considered a subcontract, and procurement. One commenter pointed GAO–06–399, April 2006; ‘‘8(a) may count toward meeting the out the difficulty for businesses Subcontracting Limitations: Continued applicable limitations on subcontracting performing contracts under both Noncompliance with Monitoring where the independent contractor employee-based and revenue-based Requirements Signals Need for qualifies as a similarly situated entity.’’ NAICS codes. SBA recognizes these Regulatory Change,’’ GAO–14–706, (Emphasis added). This provision was concerns and concludes that it would be September 2014; and ‘‘Federal meant to apply to service or needlessly time-consuming and difficult Contracting: Monitoring and Oversight construction contracts. For service for small businesses, especially those of Tribal 8(a) Firms Need Attention,’’ contracts, work performed by an performing under multiple NAICS GAO–12–84, January 2012. The type of independent contractor would be codes, to apply the rule consistently. information that small business prime considered a subcontract, so that a SBA agrees with the commenters who contractors may be requested to provide service contractor could not claim that pointed out that looking to § 121.106(a), to demonstrate compliance with the a non-similarly situated entity which lays out the analysis of whether limitations on subcontracting could be independent contractor should be an individual is an employee or a sub- copies of subcontracts for a particular considered an employee of the service contractor, makes sense for all NAICS procurement or an email that lists the contractor. For example, for a WOSB codes and contracts. As such, SBA has amount that the prime contractor has service contract, SBA did not want a revised the proposed rule to clarify that paid to its subcontractors for a WOSB prime contractor to pass contractors should apply the analysis in particular procurement and whether performance of the contract to one or § 121.106(a) to determine whether those subcontractors are similarly more independent contractors that independent contractors are employees situated entities. In addition, SBA would not themselves qualify as or subcontractors, and that in situations proposed to require information WOSBs. The provision identifies that an where the independent contractor is a demonstrating compliance with the independent contractor could qualify as subcontractor, their work may be applicable limitations on subcontracting a ‘‘similarly situated entity’’ and meet counted toward the applicable from all prime contractors performing the limitations on subcontracting that limitation on subcontracting if they are set-aside and sole source contracts way, but would not permit a service a similarly situated entity. awarded through SBA’s small business contractor to effectively avoid meeting programs when the prime contractor Limitation on Subcontracting the limitations on subcontracting by intends to rely on similarly situated Compliance claiming that independent contractors subcontractors to comply with the were in fact employees of the firm. Congress has expressed its strong limitations on subcontracting. 79 FR The proposed rule revised support for small business government 77955 (December 29, 2014). SBA did not § 125.6(e)(3) to clarify SBA’s intent contracting, and has provided agencies adopt such a requirement in the final regarding both contracts assigned a with numerous tools to set aside rule but indicated that it intended to NAICS code with an employee-based acquisitions for exclusive competition seek comment on this issue. 81 FR size standard and those assigned a among, or in some cases award contracts 34243 (May 31, 2016). NAICS code with a receipts-based size on a sole source basis to, SBCs, 8(a) BD SBA proposed adding new standard. Under the proposed rule, Program Participants, HUBZone SBCs, § 125.6(e)(4) to clarify that contracting where a contract is assigned a NAICS WOSBs, Economically Disadvantaged officers may request information code with an employee-based size Women-Owned (EDWOSB) SBCs, and regarding limitations on subcontracting standard, an independent contractor SDVO SBCs. 15 U.S.C. 631(a), 637(a), compliance, and to clarify that it is not would be deemed an employee of the (m), 644(a), (j), 657a, 657f. As a required for every contract. SBA firm under the terms of the Size Policy condition of these preferences, small requested comment on whether all Statement. Where a contract is assigned businesses are limited in their ability to small business prime contractors a NAICS code with a receipts-based size subcontract to other than small business performing set-aside or sole source standard, an independent contractor concerns, so that small businesses contracts should be required to could not be considered an employee of perform a certain percentage of the demonstrate compliance with the firm for which he or she is work. These limitations on limitations on subcontracting to the performing work, but, rather, would be subcontracting appear in solicitations contracting officer, and if so, how often deemed a subcontractor. In either case, and contract clauses for small business should this be required, such as as a subcontractor, an independent set-aside and sole-source awards. As annually or quarterly. contractor may be considered a with all contract administration, it is the SBA received 17 comments with a ‘‘similarly situated entity’’ and work responsibility of the contracting officer range of suggestions. Nine commenters performed by the independent to monitor compliance with the terms opposed regular mandatory reporting contractor would then count toward and conditions of a contract. (FAR requirements. Five comments supported meeting the applicable limitation on 1.602–2, including the limitations on a requirement that contractors must subcontracting. subcontracting clause). SBA proposed demonstrate limitations on SBA received thirteen comments on language to clarify that contracting subcontracting compliance annually. the proposed change. Ten opposed, two officers have the discretion to request One commenter thought compliance sought clarification, and one was information from contractors to should be demonstrated once per base supportive. The comments in demonstrate compliance with period. Another suggested once during opposition all expressed concern that limitations on subcontracting clauses. the base period, once during each the proposed rule was confusing, and The Government Accountability Office subsequent option period, and at that SBA’s intent was unclear and could (GAO) has noted in reports that completion. A third suggested that be viewed as contradictory. Several contracting officers have not been contracting officers should ask for pointed out that small businesses would monitoring compliance with the evidence of compliance if they believe need to devote unnecessary time and limitations on subcontracting. ‘‘Contract ‘‘there is reason for additional evidence

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to be submitted.’’ Comments about what services regarding a particular foreign from small business concerns, the type of evidence would suffice similarly country. These individuals are not placement of the content in the media ranged among several options. Two located in the United States, do not may require large payments to the other commenters suggested using the same reside in the United States, and are not than small business concerns, even type of evidence required for mentor- likely to be employees of a United States though that is not the principal purpose prote´ge´ joint venture performance of small business concern. SBA proposed of the acquisition. SBA proposed to work requirements. Two others to clarify how to determine whether exclude these media purchases from the suggested copies of subcontracting work performed by certain required limitations on subcontracting agreements or a list of subcontractors contractors should be considered. determination. paid that note which subcontractors are Specifically, SBA proposed that work In a prior rulemaking, SBA similarly situated. Several commenters, performed by an independent contractor determined that remote hosting on both those in favor of a mandatory under a contract that was awarded servers or networks, or cloud reporting rule and those opposed, pursuant to the Foreign Assistance Act computing, should be considered a thought if and when such evidence was of 1961 could be excluded from service and therefore the NMR would required, contracting officers should determining limitations on not apply. 13 CFR 121.1203(d)(3). Due have discretion to request the subcontracting compliance. 22 U.S.C. to the costs and scale involved, cloud documents they deem relevant. On 2151 et seq. SBA received one comment computing is generally provided by balance, SBA agrees that contracting on this provision. The commenter other than small business concerns. officers are best positioned to assess if, disagreed with the proposed language in SBA proposed to exclude cloud how, and when additional scrutiny of § 125.6(a)(1) because it allowed but did computing from the limitations on contractors’ limitations on not mandate that work performed by subcontracting calculation, where the subcontracting compliance would be individuals on contracts outside the small business concern will perform helpful. As such, the final rule does not United States pursuant to the Foreign other services that are the primary require limitations on subcontracting Assistance Act of 1961 could be purpose of the acquisition. Of course, compliance reporting but, rather, excluded from determining limitations where cloud computing itself is the indicates that contracting officers have on subcontracting compliance. The primary purpose of the procurement, the discretion to request demonstration commenter suggested using language the limitations on subcontracting could of compliance at any point during indicating that such exclusion is not be met by a small business, and, performance or upon completion of a mandatory. In addition, the commenter therefore, such a procurement should contract. The rule includes examples of noted that not all work performed not be set aside or reserved for small what documentation could adequately outside the United States for which business. Of the 17 comments received demonstrate compliance but is not some portion of local performance is regarding excluding direct costs to the intended to be an exhaustive list. required is done under the Foreign extent they are not the principal Assistance Act of 1961. SBA agrees that Exclusions From the Limitations on purpose of the acquisition, nearly all any work required to be done by local Subcontracting supported SBA’s intent behind the foreign contractors should be excluded SBA’s limitations on subcontracting proposed rule. Eleven commenters from any limitations on subcontracting regulations provide that for a set-aside supported the proposed language determination (i.e., should be excluded service contract, the prime contractor without additional change. Four from the ‘‘total value of the contract’’ in must agree that it will not pay more commenters supported the categories determining whether a small business than 50% of the amount paid from the SBA included in the proposed rule, but Government to firms that are not did not subcontract more than the opposed the rule on the basis that it was similarly situated. 13 CFR 125.6(a)(1). limitations on subcontracting not broad enough and requested that Unlike supply and construction percentage) and has changed the text of SBA exclude all other direct costs from contracts, where materials are excluded, § 125.6(a)(1) to reflect that. limitations on subcontracting no costs are specifically excluded under In the environmental remediation compliance calculations. SBA does not a service contract, other than for mixed industry (NAICS 562910), a large part of believe that all direct costs should be contracts where the non-service portion, the cost of the contract is tied to the excluded from the limitations on such as incidental supplies, are transportation and disposal of subcontracting determination. In excluded. SBA has received several hazardous, toxic, and radiological addition, SBA does not believe that the requests from industry for exclusions waste. According to some SBCs in this statutory language would support such related to specific types of contracts, industry that have contacted SBA, given a change. and one related to all industries. Some the fact that these services are highly Based on the positive feedback from have advocated that certain other direct regulated and capital intensive, these industry, the final rule at 125.6(a)(1) costs, such as airline tickets and hotel particular transportation services can adopts the language that specifies that costs, be excluded from the calculation generally be performed only by other the above-mentioned industries are of the amount paid under the contract. than small business concerns. For excluded from limitations on In addition, in certain types of contracts example, all the disposal facilities in the subcontracting compliance calculations. or industries, there are factors that may United States are large businesses, and The regulatory text provides that direct complicate compliance with the most railroads and shipping companies costs may be excluded to the extent they limitations on subcontracting, that transport hazardous waste are other are not the principal purpose of the potentially hindering agencies from than small business concerns. This rule acquisition and small business concerns setting aside acquisitions for small proposed to exclude transportation and do not provide the service, ‘‘such as’’ in business concerns. disposal services from the limitations on the four identified industries (airline For example, for certain contracts subcontracting compliance travel, work performed by a performed outside of the United States, determination where small business transportation or disposal entity under a contractors must use non-U.S. local concerns cannot provide the disposal or contract assigned the environmental organizations or independent transportation services. Similarly, where remediation NAICS code (562910), contractors to perform consulting the Government acquires media services cloud computing services, or mass

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media purchases). The regulatory text is are performing contracts in a manner entities would be overly burdensome. not meant to be inclusive. It allows a more consistent with a joint venture Again, SBA appreciates this concern, small business in another industry in a than a prime/sub relationship should but it does not outweigh SBA’s mandate similar situation to the four identified to follow the requirements of SBA’s to protect the interests of participants in also demonstrate that certain direct regulations regarding socioeconomic its Government contracting programs. costs should be excluded because they joint ventures. Another commenter recommended are not the principal purpose of the The performance of a set-aside or sole that instead of applying the ostensible acquisition and small business concerns source service contract by a small do not provide the service. business concern that is not eligible to subcontractor standard in this context, One commenter requested compete for the prime contract is SBA should merely require that the 8(a)/ clarification as to whether SBA contrary to the intent and purpose of the HUBZone/WOSB/SDVOSB contractor intended for only services to be statutory authorities for socioeconomic be able to demonstrate that it, together excluded. As discussed, supply and category set-aside and sole source with any similarly situated entity, will construction contracts already have procurements. Thus, SBA proposed meet the limitations on subcontracting industry-specific exclusions, so this language at §§ 124.503(c)(1)(v), provisions. SBA agrees that if the provision is intended to bridge a gap 124.507(b)(2), 125.18(f), 125.29(c), awardee together with similarly situated that SBA saw regarding service 126.601(i), 126.801(a), 127.504(c), and entities will meet the limitations on contracts. 127.602 to allow SBA to make a subcontracting provisions, SBA would determination concerning a small Subcontracting to a Small Business not have to look further to determine business program participant’s Under a Socioeconomic Program Set- who is doing the primary and vital parts overreliance on a non-similarly situated Aside of a contract. The final rule adopts the subcontractor as part of an eligibility or proposed language recognizing that In the context of socioeconomic set- status protest determination. SBA’s where a subcontractor that is not aside or sole-source service contracts, intent was to evaluate these contractor similarly situated performs primary and the ostensible subcontractor rule applies relationships under the established vital requirements of a set-aside or sole- when a small business is unduly reliant ostensible subcontractor test. If SBA source service contract or order, or on an other than small business finds that the subcontractor is an where a prime contractor is unduly subcontractor, or when the other than ostensible subcontractor, SBA will treat small subcontractor will perform reliant on a small business that is not the arrangement between the contractors similarly situated to perform the set- primary and vital parts of the contract. as a joint venture that does not comply aside service or sole-source contract or In such cases, assuming that an with the formal requirements necessary order, the prime contractor is not exception to joint venture affiliation to receive and perform the does not apply, SBA will treat the small socioeconomic program set-aside or eligible for award of an SDVO, WOSB, business prime contractor and its sole-source award as a joint venture. HUBZone or 8(a) contract. However, the subcontractor as joint venturers. If the SBA received 32 comments on the final rule also specifies that SBA will subcontractor is other than small, the proposed change to the rules on not find that a prime contractor is prime contractor is ineligible for award subcontracting to a small business unduly reliant on one or more non- due to this affiliation. SBA has become under a socioeconomic set-aside. similarly situated subcontracts where aware of service contract set-asides for Several commenters opposed the change the prime contractor can demonstrate the SDVO, HUBZone, 8(a) or WOSB because they believed that that it, together with any similarly programs where the prime contractor subcontracting to a small business, even situated entity, will meet the limitations subcontracts most or all of the actual if it is not a similarly situated entity, on subcontracting provisions set forth in performance to a small business that is still benefits the small business § 125.6. small for the applicable NAICS code but community. While SBA encourages Finally, one commenter not eligible to compete for award of the benefits that accrue to the small recommended a comparable change to prime contract and thus not a similarly business community as a whole, § 134.1003 with respect to protests of situated entity as that term is defined at Congress’s clear intent in authorizing SDVO eligibility for contracts awarded § 125.1. separate and distinct Government Under SBA’s joint venture rules, 13 by the Department of Veterans Affairs contracting programs was to bolster (VA). Specifically, the commenter CFR 121.103(h)(3)(i)), a joint venture specific socioeconomic groups’ ability believed that similar treatment should can qualify as small if each member of to successfully compete for and perform be afforded to a firm that was verified the joint venture is small. In the on Government contracts. SBA would as an SDVO small business by VA’s scenario described above, the size be subverting Congress’s intent if it regulation would not prevent the joint focused on rules that benefit the overall Center for Verification and Evaluation venture from being eligible for the small business community at the (CVE), received a VA contract that was contract (i.e., where both parties to a expense of the groups identified by restricted to CVE-verified SDVO small joint venture are small, the joint venture Congress as meriting focus. As such, business concerns, and then itself is small). There is no existing SBA continues to believe that it is subcontracted primary and vital regulatory mechanism for an constrained by statute to ensure that the portions of the contract to a non-CVE- unsuccessful offeror, the SBA, or a eligible prime contractor together with verified business concern, whether or contracting officer to protest a one or more other similarly situated not small. SBA agrees, and has added a socioeconomic set-aside or sole-source small businesses is performing the new paragraph to § 134.1003 that would award to a prime contractor that is primary and vital requirements of a authorize a protest challenging whether unduly reliant on a small, but not contract by meeting the applicable the prime contractor is unusually reliant similarly situated entity, subcontractor. limitation of subcontracting percentage. on a subcontractor that is not CVE The underlying premise that ostensible Other commenters protested on the verified, or a protest alleging that such subcontractors and their prime basis that requiring small business subcontractor is performing the primary contractors should be treated as joint prime contractors to ensure that their and vital requirements of a VA ventures is still SBA’s policy. Firms that subcontractors are similarly situated procurement contract.

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Kit Assemblers quantity (IDIQ) contracts. However, relationship, even when each firm is SBA proposed to remove specific § 121.404(a) also contains the individually small for the size standard rules related to kit assemblers and the parenthetical, ‘‘(or other formal associated with the procurement, would NMR, which are currently contained at response to the solicitation).’’ Some negate the purpose of § 121.103(h)(3)(i), 13 CFR 121.406(c). The existing kit parties have misread this to mean which explicitly provides an exception assembler rule requires that 50 percent formal responses that are after the initial to affiliation for such joint ventures. The purpose of the ostensible of the total value of the items in the kit offer, such as final proposal revisions. subcontractor rule is to treat the must be manufactured by small business The clear intent of SBA’s general rule is relationship between a prime contractor concerns, but excludes items to give both firms and the Government and its subcontractor as a joint venture manufactured by other than small certainty that size will be determined at the time of the initial response, where the subcontractor performs business concerns if the contracting including price. Offer covers bids and primary and vital work for the officer specifies the item for the kit. This proposals, and SBA recognizes that in procurement. SBA’s current joint rule has led to confusion concerning simplified acquisitions the initial venture rules do not aggregate the how to calculate total value, and response may be acceptance of the partners to a joint venture in whether a waiver of the non- Government’s offer. Thus, SBA determining the size of the joint manufacturer rule can or must be proposed adding a paragraph at venture, but rather permit a joint requested in order to supply items § 121.404(a)(1)(iv), to articulate an venture to qualify as small as long as manufactured by other than small exception to the general rule for when each partner to the joint venture is concerns. If the majority of items in a kit size is determined. When an agency individually small. Thus, a rule that are made by small business concerns, uses an IDIQ multiple award contract equates a prime-sub relationship to that then the acquisition can be set aside for that does not require offers for the of a joint venture because the small business without the need to contract to include price, size will be subcontractor is performing primary and request a waiver. If the majority of items determined on the date of initial offer vital work and then affiliates the two in a kit are not made by small business for the IDIQ contract, which may not parties (i.e., requiring them to aggregate concerns, then an individual or class include price. This proposed change their revenues or employees) is waiver of one or more of the items is reflects the statutory change found at inconsistent with the joint venture size necessary for the acquisition to be set section 825 of the National Defense rules themselves. The phrase ‘‘and aside for small business concerns for Authorization Act for Fiscal Year 2017, therefore affiliates’’ that SBA proposed acquisitions above the simplified 114 Public Law 328, (December 23, to delete was a holdover from previous acquisition threshold or for all other 2016), and section 876 of the John S. regulations that aggregated the receipts socioeconomic set-asides, regardless of McCain National Defense Authorization or employees of joint venture partners value. In connection with this rule, SBA Act for Fiscal Year 2019, 115 Public when determining whether a joint proposed to delete the kit assembler Law 232, (August 13, 2018). SBA also venture qualified as a small business. exception and instead apply the amended 121.404(g)(5) to reflect the When SBA changed its size regulations multiple item rule in § 121.406(e) to kit proposed change to 121.103(h)(4) to broaden the exclusion from affiliation assembler acquisitions. Like all other (removing ‘‘and therefore affiliates’’). for small business to allow two or more acquisitions, the NMR will not apply to SBA received 13 comments on the small businesses to joint venture for any small business set-asides with a value at proposed changes to § 121.404. Three of procurement without being affiliated or below the simplified acquisition these opposed the changes, but all three (i.e., the joint venture would be threshold. SBA received four comments referenced SBA’s current rule requiring considered small provided each of the on this proposed change, evenly split recertification at the time of a merger or joint venture partners individually between those opposed and those in acquisition at § 121.404(g)(2)(i). SBA did qualified as small and SBA would not support. The comments opposed did so not propose to revise that provision. Of aggregate the receipts or employees of because they believe kit assemblers the ten comments that pertained to the joint venture partners), SBA amended should be excluded from the limitations proposed changes, all ten were § 121.103(h)(3), but did not make a on subcontracting compliance supportive of the changes. Commenters correspondingly similar change in calculation, along with the other appreciated the clarification and believe § 121.103(h)(4). See 81 FR 34243, 34258 identified groups in the proposed rule at that the proposed language will reduce (May 31, 2016). § 125.6. The proposed rule did not confusion and uncertainty for small All 12 comments on § 121.103(h)(4) contemplate exclusions beyond those businesses. SBA is adopting the expressed confusion at the current already identified. The commenters proposed language as final. disconnect between the ostensible supporting the change believe that SBA proposed to amend subcontractor rule at § 121.103(h)(4) and applying the multiple item rule in § 121.103(h)(4) to clarify that when two the exception to affiliation for joint § 121.406(e) to kit assemblers makes or more small businesses either form a venture language at § 121.103(h)(3)(i). sense and makes a separate rule for kit joint venture or are treated as joint Commenters supported a clarification. assemblers unnecessary. The rule venturers due to their relationship as SBA believes removing ‘‘and therefore adopts the proposed language as final. prime and subcontractor, the joint affiliates’’ from § 121.103(h)(4) will clear venture exception to affiliation found at up this confusion and is adopting the Clarification on Size Determinations § 121.103(h)(3)(i) applies if both firms proposed change as final. SBA proposed to remove language are considered small for the size that has caused confusion on when size standard associated with the Clarification Where One Acceptable is determined. The general rule is that procurement. SBA proposed to remove Offer Is Received on a Set-Aside size is determined at the time of initial the phrase ‘‘and therefore affiliates’’ SBA proposed to add new offer including price, with the from the ostensible subcontractor rule at § 125.2(a)(2) to clarify that a contracting understanding that there are some § 121.103(h)(4) to clarify this point. To officer may make an award under a exceptions such as architecture and allow affiliation between firms that are small business or socioeconomic set- engineering procurements, and certain considered joint venturers because of aside where only one acceptable offer is unpriced indefinite delivery indefinite their ostensible subcontracting received. The decision to conduct a set-

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aside is grounded in the contracting Compliance With Executive Orders businesses to exclude certain costs from officer’s expectation based on market 12866, 13563, 12988, 13132, 13771, the the calculation of the limitations on research that he or she will obtain two Unfunded Mandates Reform Act of subcontracting. Without these changes, or more fair market price offers from 1995, the Paperwork Reduction Act (44 some agencies will not be able to set capable small business concerns. U.S.C. Ch. 35), and the Regulatory contracts aside for small business, Pursuant to the FAR, the contracting Flexibility Act (5 U.S.C. 601–612) because certain costs attributable to other than small concerns are too high. officer must perform market research Executive Order 12866 before issuing a solicitation to The changes to § 125.6 also help small The Office of Management and Budget businesses by clarifying the difference determine whether there are small (OMB) has determined that this rule is businesses (including 8(a), HUBZone, between an employee and an a ‘‘significant’’ regulatory action for independent contractor. The changes to SDVO SBCs, WOSBs) that can perform purposes of Executive Order 12866. The § 125.6 will impose some requirements the requirement. 48 CFR 10.001(a)(2); benefits to small business from this rule on small business concerns to 19.202–2. A contracting officer’s ‘‘rule far outweigh any associated costs. The demonstrate compliance with the of two’’ determination is prospective. rule makes several other changes limitations on subcontracting, but only Whether there appear to be at least two needed to clarify ambiguities in or to the extent the information is not small businesses that can perform a remedy perceived problems with the already in the possession of the procurement at a fair price is an analysis current regulations. These changes government. Contractors may have this that is done during acquisition planning should make SBA’s regulations easier information readily available since it and prior to the issuance of a for SBCs to use and understand. The pertains to contract performance and solicitation. As long as the market change to § 121.404 clarifies when size subcontracting of that performance. research leads a contracting officer to for a Government contract is These information requests are not conclude that the agency will receive determined, which will reduce mandatory, as the contracting officer acceptable offers from at least two small confusion for small business concerns. simply has the discretion to request business concerns and award will be The change to § 121.406 clarifies that such information. Contracting officers made at a fair market price, the ‘‘rule of the size standard for information already have the authority to request two’’ is satisfied, no matter how many technology value added resellers is 150 information on performance, and this employees, again to eliminate confusion offers are actually received or how many change simply clarifies that the among small business concerns. The offers remain after evaluations are authority exists. Finally, the benefits to changes to § 125.2(a) will benefit small conducted, a competitive range is small business concerns of this rule business by clarifying that a contracting substantially outweigh any minor costs established, or offerors are eliminated in officer can award a contract to a small some other fashion. imposed by the exercise of existing business under a set-aside if only one contracting authority. The addition of The FAR currently addresses small offer is received. The changes to part 129 implements section 2108 of the business set-asides below $150,000, and § 125.2(b) implement section 1811 of the RISE Act and benefits small businesses provides, ‘‘If the contracting officer NDAA of 2017 and govern what by providing agencies with an incentive receives only one acceptable offer from acquisitions PCRs can review and to set aside contracts for small business would not impact small business a responsible small business concern in concerns located in a disaster area. concerns. The changes to § 125.2(d) response to a set-aside, the contracting Accordingly, the next section contains implement section 863 of the NDAA of officer should make an award to that SBA’s Regulatory Impact Analysis. 2016 and direct contracting officers on firm.’’ FAR 19.502–2(a). There is no However, this is not a major rule under how to notify the public about reason this policy should not apply to the Congressional Review Act, 5 U.S.C. consolidation and substantial bundling all set-asides above or below $150,000. 801, et seq. and will not impact small business The contracting officer must determine concerns. The changes to § 125.2(e) Regulatory Impact Analysis that an offeror is responsible, and price authorize agencies to set aside orders for 1. Is there a need for the regulatory is fair and reasonable before awarding socioeconomic programs where the action? any contract. FAR 9.103(a); 9.104–1; contract was set aside for small business 14.408–2; and 15.304(c)(1). It would be and will benefit firms that qualify for The rule implements section 863 of inefficient and detrimental to the those set-asides. The changes to § 125.3 the National Defense Authorization Act Government and offerors to arbitrarily implement section 1821 of the NDAA of of 2016, Public Law 114–92, 129 Stat. prevent an award where a competition 2017 by providing examples of a failure 726 (15 U.S.C. 644(e)(3)); section 2108 was conducted but only one offer was to make a good faith effort to comply of the Recovery Improvements for Small received. Such a policy would with small business subcontracting Entities After Disaster Act of 2015 (RISE unreasonably prolong the procurement plans, and will benefit small businesses Act), Public Law 114–88, 129 Stat. 686 process, requiring a procuring agency to by providing such examples so that (15 U.S.C. 644(f)); and sections 1811 and cancel one solicitation and re-procure contracting officers can hold other than 1821 of the National Defense using another where only one small small prime contractors accountable for Authorization Act of 2017, Public Law business offer is received, and could failing to make a good faith effort to 114–328, 130 Stat. 2000 (15 U.S.C. cause contracting officers to limit the comply with their small business 637(d), 644(l)). In addition, it makes use of set-asides. SBA received no subcontracting plan. The changes to several other changes needed to clarify comments opposing this proposed § 125.3 also implement section 1821 by ambiguities in or remedy perceived change and adopts it as final in this rule. providing that the contracting officer problems with the current regulations. should evaluate whether an other than These changes should make SBA’s small business complied with the regulations easier to use and requirement to report on small business understand. With respect to contractors subcontracting plan performance. The demonstrating compliance with the changes to § 125.6(a) will benefit small limitations on subcontracting, for business concerns by allowing small decades the general rule has been that

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on a set-aside contract, a small business subcontracting is consistent with applicable limitations on subcontracting or socioeconomic small business must recommendations made by the U.S. clauses. Approximately 53,000 firms generally perform some of the work Government Accountability Office received approximately 185,000 sole- (services, construction, or (GAO) in several reports: ‘‘Contract source or set-aside awards in FY 2018. manufacturing). This helps ensure that Management: Increased Use of Alaska SBA is clarifying that a contracting the benefits of a small business set-aside Native Corporations’ Special 8(a) officer may request information contract flow to the recipients whom Provisions Calls for Tailored Oversight,’’ regarding compliance with prime Congress intends to help by creating the GAO–06–399, April 2006; ‘‘8(a) contractors’ limitations on set-aside authority. If performance of a Subcontracting Limitations: Continued subcontracting. In some cases, this set-aside contract is passed through to Noncompliance with Monitoring information may not be necessary based other than small business concerns, Requirements Signals Need for on the nature of the contract and the there may not be a need for set-asides Regulatory Change,’’ GAO–14–706, invoices submitted. SBA estimates that in the first place, and the Government September 2014; and ‘‘Federal less than ten percent of small business may be paying more for a good or Contracting: Monitoring and Oversight concerns and contracts will be subject to service without any value added. These of Tribal 8(a) Firms Need Attention,’’ a request for this information (5,300 limitations on subcontracting appear as GAO–12–84, January 2012. small business concerns and 18,500 a clause in a set-aside contract and help 2. What are the potential benefits and contracts), and compliance should take to ensure that the intended beneficiaries costs of this regulatory action? on average less than an hour. Small of set-aside contracts are receiving those businesses that do not issue benefits. The contracting officer is The majority of the changes in this subcontracts will not have anything to responsible for monitoring compliance rule will have de minimis costs and report. Small businesses may be able to with clauses in a contract. FAR 1.602. qualitative benefits that are difficult to easily report on any subcontracts, as Nothing in SBA’s regulations or the FAR quantity: Protecting the integrity of the information on subcontracting and prohibits a contracting officer from small business procurement system. The paying subcontractors is routinely requesting documents demonstrating rule will provide exceptions to the compiled as part of the normal compliance with the limitations on limitations on subcontracting in certain accounting procedures for any business subcontracting clause. It is SBA’s view service contracts where small concern. Accounting or contract that such authority exists, but that the businesses must use the services of management personnel should be able other than small subcontractors in authority is not clear or express. to determine whether the firm issued substantial amounts in order to fully Without clarifying the authority or any subcontracts in connection with the perform a set-aside service contract. process, some contracting officers prime contract. SBA estimates an This will help small business by making simply are not monitoring compliance. overall annual cost of approximately acquisitions available for small business The result is that there may be increased $815,110 for small businesses to provide set-asides that would not otherwise be fraud, waste, and abuse in the information on compliance with the available. Many of the other performance of contracts that are set limitations on subcontracting, as clarifications in this rule will benefit aside for small business concerns, requested by the contracting officer. The small businesses by reducing confusion because subcontractors that are not difference between this figure and the in the marketplace, but this benefit is $600,120 figure cited in the rule reflects eligible to receive the prime contract difficult to quantify. The provision may be performing more work than allowing agencies to receive double an adjustment in the hourly wage rate section 46 of the Small Business Act (15 credit toward their small business included as part of the calculation of the U.S.C. 657s), SBA regulations at 13 CFR procurement goals for awards to local overall annual cost. After adding 125.6, and FAR clause 52.219–14 small business concerns in the event of approximately 30% to the hourly wage permit. This type of fraud frustrates the a disaster is intended to benefit local rate to account for the cost of benefits, policy goals associated with awarding small businesses and provide SBA arrived at $815,110 as more contracts set aside for small business employment and revenue to concerns accurately reflecting the estimated concerns. located in an area devastated by a overall annual cost. In this rule, SBA clarifies that the disaster. While the authority for This rule will require an other than contracting officer may request contracting preferences for businesses small prime contractor with a information to demonstrate a located in a disaster area already exists commercial subcontracting plan to contractor’s compliance with the in FAR subpart 26.2, small businesses include indirect costs in its limitations on subcontracting clause. located in these areas may receive a subcontracting goals. Based on data SBA also clarifies that it is within the greater benefit under this rule due to the from the Electronic Subcontracting contracting officer’s discretion to incentive for the procuring agency to Reporting System (eSRS), in FY 2018, request such a showing of compliance, receive double credit toward its small approximately 1200 firms had because in some cases it will not be business procurement goals by utilizing commercial subcontracting plans. SBA necessary, such as when a small this authority. estimates that approximately 95% of business performs the contract itself We believe that, pursuant to FAR those 1200 firms include indirect costs without the use of subcontractors or 1.602–2, contracting officers already in their subcontracting goals. Thus, this when information regarding compliance possess the authority to request rule will impact approximately 60 firms. is already available to the Government. information from a contractor The burden will be de minimis, as the Through this rule, SBA intends to deter concerning compliance with a clause in accounting or contract manager will and reduce potential fraud, waste, and the contract at issue. In addition, on know the firm’s indirect costs. The abuse, due to noncompliance with the some contracts, compliance can already benefit of requiring that indirect costs be limitations on subcontracting. be reviewed or monitored by reviewing included in subcontracting goals where Additionally, clarifying a contracting invoices. This rule clarifies that a commercial subcontracting plan is officer’s authority to request that a small contracting officers have the authority to utilized, is that it will increase the small business concern demonstrate request information in connection with business subcontracting goal and thus compliance with the limitations on a contractor’s compliance with increase the amount of funds the prime

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contractor will subcontract to small procedure for purposes of multi-item 2. Public participation: Did the agency: business concerns. Increasing the value procurements. (a) Afford the public a meaningful and number of awards to small business opportunity to comment through the concerns provides financial benefits to 3. What are the alternatives to this rule? internet on any proposed regulation, those firms, who may hire more staff Many of the provisions contained in with a comment period that should and invest in more resources to support this rule are required to implement generally consist of not less than 60 the increased demand. Furthermore, statutory provisions, thus there are no days; (b) provide for an ‘‘open increasing the number and value of apparent alternatives for these exchange’’ of information among awards to small business concerns has government officials, experts, regulations. With respect to the macroeconomic and qualitative benefits stakeholders, and the public; (c) provide provision clarifying that contracting to the national economy because small timely online access to the rulemaking businesses are the foundation of the officers may request information on docket on Regulations.gov; and (d) seek country’s economic success. compliance with the limitations on the views of those who are likely to be This rule will establish that failure to subcontracting, SBA considered affected by rulemaking, even before provide timely subcontracting reports whether prime contractors should be issuing a notice of proposed may constitute a material breach of the required to provide this information on rulemaking? compliance with the limitations on contract. These reports are already SBA published a proposed rule with required by law at 13 CFR 125.3(a). This subcontracting on all set-aside or sole source contracts. However, SBA a 60-day comment period, and the rule will make failure to provide the proposed rulemaking was posted on believed that would unnecessarily report a material breach of the contract, www.regulations.gov to allow the public burden small businesses, if compliance which could subject other than small to comment meaningfully on its business concerns to liquidated is already readily apparent to the provisions. In addition, the proposed damages. SBA is not aware of any case contracting officer based on the type of rule was discussed with the Small where a firm has been subject to contract, invoicing, or observation. We Business Procurement Advisory liquidated damages for failure to comply estimate the alternative considered, Council, which consists of the Directors with a subcontracting plan. Thus, any having all small businesses provide of the Office of Small and costs will be de minimis. The benefit of information on compliance, would have Disadvantaged Business Utilization. this rule is that it will assist SBA and an annual cost of $1,867,040. SBA SBA also submitted the rule to multiple contracting officers with oversight of decided to clarify instead that the agencies with representatives on the prime contractor compliance with contracting officer has the discretion to FAR Acquisition Small Business Team subcontracting plans and should result request such information to the extent prior to submitting the rule to OMB for in increased compliance with such information is not already interagency review. SBA received subcontracting plans. available. This will enable the almost 250 specific comments to the This final rule requires recertification contracting officer to request this proposed rule, which SBA considered of status on full and open contracts. information as he or she sees fit, to in drafting this final rule. SBA intended for recertification to ensure that the benefits of the small occur whenever an agency receives 3. Flexibility: Did the agency identify business programs are flowing to the credit for an award towards it goals, and and consider regulatory approaches that intended recipients. this rule is merely a clarification that reduce burdens and maintain flexibility socioeconomic recertification is Executive Order 13563 and freedom of choice for the public? required on all contracts, including full Yes, this rule implements statutory and open contracts. We estimate that As far as practicable or relevant, SBA provisions and clarifies certain SBA approximately 150 firms a year recertify considered the requirements below in regulations, as requested by agencies on full and open contracts. This will developing this rule. and stakeholders. In addition, SBA only impact firms that are acquired, 1. Did the agency use the best available clarifies that contracting officers may merged, or where there is a novation or techniques to quantify anticipated request information from their the firm grows to be other than small on present and future costs when contractors to determine whether the a long-term contract. Agencies have contractor is complying with the goals for the award of prime contractor responding to E.O. 12866 (e.g., identifying changing future compliance limitations on subcontracting. This dollars to small and socioeconomic information may already be provided as costs that might result from concerns. The purpose of recertification part of invoicing under certain technological innovation or anticipated is to ensure that an agency does not contracts, and in any event, the receive small business credit for an behavioral changes)? information should be readily provided award to an other than small concern. To the extent possible, the Agency by the contractor, as it simply pertains This rule will limit the scope of PCR utilized the most recent data available to what extent the prime contractor is reviews of Department of Defense in the Federal Procurement Data subcontracting work under the contract. acquisitions performed outside of the Clarifying that the contracting officer United States and its territories. This System—Next Generation, System for Award Management and Electronic has the authority to request this applies to the Government and will not information, instead of requiring all Subcontracting Reporting System. impose costs or burdens on the public. small businesses to submit reports, This rule will remove the kit significantly reduces cost and burden. assembler exception to the non- manufacturer rule. This clarification Executive Order 12988 requires agencies to request a waiver of This action meets applicable the non-manufacturer rule for kits, in standards set forth in section 3(a) and accordance with existing regulations. 3(b)(2) of Executive Order 12988, Civil This will reduce confusion by having Justice Reform, to minimize litigation, only one non-manufacturer rule eliminate ambiguity, and reduce

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burden. This action does not have any Subcontracting’’ and has been assigned analysis (FRFA) addressing the impact retroactive or preemptive effect. OMB Control Number 3245–400. of the rule in accordance with section A summary description of the 603, title 5, of the United States Code. Executive Order 13132 reporting requirement, description of The FRFA examines the objectives and SBA has determined that this rule respondents, and estimate of the annual legal basis for this rule; the kind and will not have substantial direct effects burden is provided below. Included in number of small entities that may be on the States, on the relationship the estimate is the time for reviewing affected; the projected recordkeeping, between the national government and requirements, gathering and reporting, and other requirements; the States, or on the distribution of maintaining the data needed, and whether there are any Federal rules that power and responsibilities among the submitting the report to the contracting may duplicate, overlap, or conflict with various levels of government. officer. this final rule; and whether there are Title: Compliance with the Executive Order 13771 any significant alternatives to this final Limitations on Subcontracting. rule. This rule is expected to be an OMB Control Number: 3245–0400. Executive Order 13771 regulatory Summary Description of Compliance 1. What are the need for and objective action. Details on the estimated costs of Information: In order to show that it is of the rule? this rule can be found in the rule’s in compliance with the limitations on The rule implements section 863 of regulatory impact analysis. subcontracting terms that are included the National Defense Authorization Act of 2016, Public Law 114–92, 129 Stat. Unfunded Mandates Reform Act of 1995 in its set-aside or sole source contract, a small business concern may be 726 (15 U.S.C. 644(e)(3)); section 2108 This rule will not result in an required to submit certain information of the Recovery Improvements for Small unfunded mandate that will result in to the contracting officer. The specific Entities After Disaster Act of 2015 (RISE expenditures by State governments of information relevant to a particular Act), Public Law 114–88, 129 Stat. 686 $100 million or more (adjusted annually contract will be identified by the (15 U.S.C. 644(f)); and sections 1811 and for inflation since 1995). contracting officer but could include, 1821 of the National Defense Paperwork Reduction Act, 44 U.S.C. Ch. where applicable, identification of Authorization Act of 2017, Public Law 35 subcontractor, dollar amount of 114–328, 130 Stat. 2000 (15 U.S.C. subcontract, and costs to be excluded 637(d), 644(l)). In addition, the rule Small businesses, such as 8(a) BD from the limitations on subcontracting makes several other changes needed to Program Participants, HUBZone SBCs, calculation (e.g., for contracts for clarify ambiguities in or remedy WOSBs, Economically Disadvantaged supplies, materials). perceived problems with the current Women-Owned (EDWOSBCs), and Description of and Estimated Number regulations. These changes should make SDVO SBCs, are eligible to receive set- of Respondents: Small business SBA’s regulations easier to use and aside or sole source contracts. 15 U.S.C. concerns that are awarded set-aside or understand. The rule will make it easier 631(a), 637(a), (m), 644(a), (j), 657a, sole source contracts. Based on FPDS for agencies to award set-aside contracts 657f. As a condition of these data, SBA estimates that approximately to SBCs. Failure to promulgate this rule preferences, and to help ensure that 53,000 concerns receive approximately could result in a loss of set-aside small businesses actually perform a 185,000 small business sole source or opportunities for SBCs. certain percentage of the work on a set-aside awards in a fiscal year and that The change to § 121.404 clarifies contract, the recipients of set-aside or no more than ten percent (5,300) of when size for a Government contract is sole source contracts are limited in their concerns will be asked to provide determined, which will reduce ability to subcontract to other than small information on compliance with the confusion for small business concerns. business concerns by the limitations on limitations on subcontracting for no The change to § 121.406 clarifies that subcontracting clauses in the particular more than ten percent (18,500) of the the size standard for information contract. See, 48 CFR 52.219–3, 52.219– awards that have been received. technology value added resellers is 150 4, 52.219–7, 52.219–14, 52.219–18, Estimated Annual Responses: 18,500. employees, again to eliminate confusion 52.219–27, 52.219–29, 52.219–30. Estimated Response Time per among small business concerns. The Contracting officers are responsible for Respondent: 1 hour. changes to § 125.2(a) will benefit small ensuring contractor compliance with the Total Estimated Annual Hour Burden: business by clarifying that a contracting terms of a contract (FAR 1.602–2). This 18,500. officer can award a contract to a small rule will provide express authority for Estimated Costs Based on business under a set-aside if only one contracting officers to request Respondent’s Salary: $44.06/hour offer is received. The changes to information on contractors’ compliance (based on 2018 Median Pay for § 125.2(b) implement section 1811 of the with the limitations on subcontracting accountants and auditors, Bureau of NDAA 2017 and govern what requirements. SBA did not receive any Labor Statistics, plus an additional 30% acquisitions PCRs can review and comments on this information to account for cost of benefits, as would not impact small business collection. discussed in the Regulatory Impact concerns. The changes to § 125.2(d) SBA sought review and approval from Assessment). implement section 863 of the NDAA of OMB for this information collection, as Total Estimated Hour Annual Cost 2016 and direct contracting officers on discussed in the proposed rule. SBA Burden: 18,500 hours × $44.06/hour = how to notify the public about received a Notice of Office of $815,110. consolidation and substantial bundling Management and Budget Action on June and will not impact small business 10, 2019, certifying OMB pre-approval Regulatory Flexibility Act, 5 U.S.C. 601– concerns. The changes to § 125.2(e) of the information collection. SBA is not 612 authorize agencies to set aside orders for making any substantive changes to the Under the Regulatory Flexibility Act socioeconomic programs where the information collection described in the (RFA), this rule may have a significant contract was set aside for small business proposed rule and submitted to OMB. on a substantial number of small and will benefit firms that qualify for The information collection is titled businesses. Immediately below, SBA those set-asides. The changes to § 125.3 ‘‘Compliance with the Limitations on sets forth a final regulatory flexibility implement section 1821 of the NDAA of

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2017 by providing examples of a failure Business Set-Aside), and as will be 4. What are the relevant Federal rules to make a good faith effort to comply allowed when SBA’s rules on similarly which may duplicate, overlap or with small business subcontracting situated entities (13 CFR 125.6) are conflict with the rule? plans, and will benefit small businesses implemented in the FAR. The benefits by providing such examples so that that will flow to the intended We are not aware of any rules that contracting officers can hold other than beneficiaries of a socio-economic set- duplicate, overlap or conflict with this small prime contractors accountable for aside far outweigh any impact on firms rule. The FAR will have to be amended failing to make a good faith effort to that have no intention of performing the to implement portions of this rule. That comply with their small business contract or are not eligible to bid on that will be done through a separate subcontracting plan. The changes to contract. rulemaking. § 125.3 also implement section 1821 by 2. What are SBA’s description and 5. What alternatives will allow the providing that the contracting officer estimate of the number of small entities Agency to accomplish its regulatory should evaluate whether an other than to which the rule will apply? objectives while minimizing the impact small business complied with the on small entities? requirement to report on small business The rule will be applicable to all subcontracting plan performance. The small business concerns participating in Many of the changes are required to changes to § 125.6(a) will benefit small the Federal procurement market that implement statute and impose business concerns by allowing small seek to perform Government prime requirements on contracting personnel, businesses to exclude certain costs from contracts or to perform subcontracts agencies or other than small concerns, the calculation of the limitations on awarded by other than small concerns. and do not impact small business subcontracting. Without these changes, SBA estimates that there are concerns. Further, many of the changes some agencies will not be able to set approximately 320,000 firms identified will benefit small business concerns by contracts aside for small business, as small business concerns in the clarifying areas where there is confusion because certain costs attributable to Dynamic Small Business Search and by making it easier for agencies to other than small concerns are too high. database. set aside contracts and orders for small The changes to § 125.6 also help small 3. What are the projected reporting, business and small socioeconomic businesses by clarifying the difference recordkeeping, and other compliance concerns. As an alternative, SBA between an employee and an requirements of the rule and an estimate considered whether prime contractors independent contractor. The changes to of the classes of small entities which should be required to provide § 125.6 will impose some information will be subject to the requirements? information on compliance with the limitations on subcontracting on all set- production requirements on small The rule does not impose new aside or sole source contracts. However, business concerns, but only to the recordkeeping requirements. that may unnecessarily burden small extent the information is not already in Contractors already keep records on businesses, if compliance is already the possession of the Government. contract performance and readily apparent to the contracting Further, this information is readily subcontracting. Information may be officer based on the type of contract, available since it pertains to contract required, but only to the extent the performance and subcontracting of that information is not available through invoicing, or observation. performance. These reports are not invoices or existing progress reports. List of Subjects mandatory, as the contracting officer The rule clarifies that contracting simply has the discretion to request officers may request access to 13 CFR Part 121 such reports. Contracting officers information in connection with a Government procurement, already have the authority to request contractor’s compliance with applicable Government property, Grant programs— information demonstrating performance, limitations on subcontracting clauses. business, Individuals with disabilities, and this change simply clarifies that the Approximately 53,000 firms received Loan programs—business, Small authority exists. Finally, the benefits to sole source or set-aside awards in FY businesses. small business concerns of this rule 2018. SBA is clarifying that a substantially outweigh any minor costs contracting officer may request 13 CFR Part 124 imposed by the reporting authority. The information to ensure compliance with Administrative practice and addition of part 129 implements section the limitations on subcontracting clause, procedure, Government procurement, 2108 of the RISE Act and benefits small and in some cases this information may Government property, Small businesses. businesses by providing agencies with not be necessary based on the nature of an incentive to set aside contracts for the contract and the invoices submitted. 13 CFR Part 125 small business concerns located in a We estimate that less than ten percent disaster area. of contracts would be subject to a Government contracts, Government With respect to the limitation on request to provide this information procurement, Reporting and subcontracting to an ineligible small (18,500), and compliance should take recordkeeping requirements, Small business under a socioeconomic set- less than an hour for each of those businesses, Technical assistance. aside (the new 13 CFR 124.507(b)(2)(vi), contracts. Accounting or contract 13 CFR Part 126 125.29(c), 126.601(i), and 127.504(c)), management personnel should be able the rule will impact very few firms. The to determine whether the firm issued Administrative practice and vast majority of small business prime any subcontracts in connection with the procedure, Government procurement, contractors self-perform the required prime contract. We estimate an overall Reporting and recordkeeping percentage of work, or will subcontract annual cost of approximately $815,110. requirements, Small businesses. to a similarly situated entity, as is As discussed above in the Regulatory 13 CFR Part 127 allowed under FAR 52.219–3 (Notice of Impact Analysis, this figure differs from HUBZone Set-Aside or Sole Source the figure included in the IRFA to Government contracts, Reporting and Award), 52–219–27 (Notice of Service- reflect the increased hourly rate that is recordkeeping requirements, Small Disabled Veteran-Owned Small included as part of the cost analysis. businesses.

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13 CFR Part 129 The revision reads as follows: meet the limitations on subcontracting provisions set forth in § 124.510. Administrative practice and § 121.406 How does a small business procedure, Government contracts, concern qualify to provide manufactured * * * * * Government procurement, Small products or other supply items under a ■ 8. Amend § 124.521 by adding businesses. small business set-aside, service-disabled paragraph (e) to read as follows: veteran-owned small business, HUBZone, Accordingly, for the reasons stated in WOSB or EDWOSB, or 8(a) contract? § 124.521 What are the requirements for the preamble, SBA amends 13 CFR parts representing 8(a) status, and what are the 121, 124, 125, 126, and 127 and adds 13 * * * * * penalties for misrepresentation? (b) * * * CFR part 129 as follows: (1) * * * * * * * * (i) Does not exceed 500 employees (or (e) Recertification. (1) Generally, a PART 121—SMALL BUSINESS SIZE concern that is an eligible 8(a) REGULATIONS 150 employees for the Information Technology Value Added Reseller Participant at the time of initial offer or response, which includes price, for an ■ 1. The authority citation for part 121 exception to NAICS Code 541519, 8(a) contract, including a Multiple continues to read as follows: which is found at § 121.201, footnote 18); Award Contract, is considered an 8(a) Authority: 15 U.S.C. 632, 634(b)(6), 662, * * * * * Participant throughout the life of that and 694a(9). contract. For an indefinite delivery, ■ 2. Amend § 121.103 by revising the PART 124—8(a) BUSINESS indefinite quantity (IDIQ), Multiple first sentence of paragraph (h)(4) to read DEVELOPMENT/SMALL Award 8(a) Contract, where concerns as follows: DISADVANTAGED BUSINESS STATUS are not required to submit price as part DETERMINATIONS of the offer for the contract, a concern § 121.103 How does SBA determine that is an eligible 8(a) Participant at the affiliation? ■ 5. The authority citation for part 124 time of initial offer, which may not * * * * * continues to read as follows: include price, is considered an 8(a) (h) * * * Authority: 15 U.S.C. 634(b)(6), 636(j), Participant throughout the life of that (4) A contractor and its ostensible 637(a), 637(d), 644 and Pub. L. 99–661, Pub. contract. This means that if an 8(a) subcontractor are treated as joint L. 100–656, sec. 1207, Pub. L. 101–37, Pub. Participant is qualified at the time of venturers for size determination L. 101–574, section 8021, Pub. L. 108–87, initial offer for a Multiple Award 8(a) purposes. * * * and 42 U.S.C. 9815. Contract, then it will be considered an * * * * * ■ 6. Amend § 124.503 by revising 8(a) Participant for each order issued ■ 3. Amend § 121.404 by revising paragraphs (c)(1)(iii) and (iv) and adding against the contract, unless a contracting paragraph (a) introductory text, adding paragraph (c)(1)(v) to read as follows: officer requests a new 8(a) eligibility determination in connection with a paragraph (a)(1)(iv), and revising § 124.503 How does SBA accept a paragraph (g)(5) to read as follows: specific order. Where a concern later procurement for award through the 8(a) BD fails to qualify as an 8(a) Participant, the program? § 121.404 When is the size status of a procuring agency may exercise options business concern determined? * * * * * and still count the award as an award (c) * * * to a Small Disadvantaged Business (a) SBA determines the size status of (1) * * * a concern, including its affiliates, as of (SDB). (iii) The Participant is small for the (i) Where an 8(a) contract is novated the date the concern submits a written size standard corresponding to the self-certification that it is small to the to another business concern, or where NAICS code assigned to the requirement the concern performing the 8(a) contract procuring activity as part of its initial by the procuring activity contracting offer or response which includes price. is acquired by, acquires, or merges with officer; another concern and contract novation (1) * * * (iv) The Participant has submitted is not required, the concern must (iv) For an indefinite delivery, required financial statements to SBA; comply with the process outlined at indefinite quantity (IDIQ), Multiple and Award Contract, where concerns are not (v) The Participant can demonstrate §§ 124.105(i) and 124.515. (ii) Where an 8(a) Participant that was required to submit price as part of the that it, together with any similarly initially awarded a non-8(a) contract offer for the IDIQ contract, size will be situated entity, will meet the limitations that is subsequently novated to another determined as of the date of initial offer, on subcontracting provisions set forth in business concern, the concern that will which may not include price. § 124.510. continue performance on the contract * * * * * * * * * * must certify its SDB status to the (g) * * * ■ 7. Amend § 124.507 by: procuring agency, or inform the (5) If during contract performance a ■ a. Removing the word ‘‘and’’ at the procuring agency that it does not qualify subcontractor that is not a similarly end of paragraph (b)(2)(iv); as an SDB, within 30 days of the situated entity performs primary and ■ b. Removing the period at the end of novation approval. If the concern is not vital requirements of a contract, the paragraph (b)(2)(v) and adding in its an SDB, the agency can no longer count contractor and its ostensible place ‘‘; and’’; and the options or orders issued pursuant to subcontractor will be treated as joint ■ c. Adding paragraph (b)(2)(vi). the contract, from that point forward, venturers. See § 121.103(h)(4). The addition reads as follows: towards its SDB goals. * * * * * § 124.507 What procedures apply to (iii) Where an 8(a) Participant receives ■ 4. Amend § 121.406 by: competitive 8(a) procurements? a non-8(a) contract, and that Participant ■ a. Revising paragraph (b)(1)(i); * * * * * acquires, is acquired by, or merges with ■ b. Removing paragraph (c); and (b) * * * another concern and contract novation ■ c. Redesignating paragraphs (d) (2) * * * is not required, the concern must, through (f) as paragraphs (c) through (e) (vi) Can demonstrate that it, together within 30 days of the transaction respectively. with any similarly situated entity, will becoming final, recertify its SDB status

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to the procuring agency, or inform the concerns are not required to submit of contract award remain in effect procuring agency that it no longer price as part of their offer for the throughout the life of the contract. qualifies as an SDB. If the contractor is contract, a concern that represents itself (5) Where the contracting officer no longer a current 8(a) Participant, the and qualifies as an SDB at the time of explicitly requires concerns to recertify contractor is not eligible for orders initial offer, which may not include their status in response to a solicitation limited to 8(a) awardees. If the price, is considered an SDB throughout for an order, SBA will determine contractor is not an SDB, the agency can the life of that contract. This means that eligibility as of the date the concern no longer count the options or orders if an SDB is qualified at the time of submits its self-representation as part of issued pursuant to the contract, from initial offer for a Multiple Award its response to the solicitation for the that point forward, towards its SDB Contract, then it will be considered an order. goals. The agency and the contractor SDB for each order issued against the (6) A concern’s status may be must immediately revise all applicable contract, unless a contracting officer determined at the time of a response to Federal contract databases for which requests a new SDB certification in a solicitation for an Agreement and each they directly certify information to connection with a specific order. Where order issued pursuant to the Agreement. reflect the new status. a concern later fails to qualify as an (2) For the purposes of 8(a) contracts SDB, the procuring agency may exercise PART 125—GOVERNMENT (including Multiple Award Contracts) options and still count the award as an CONTRACTING PROGRAMS with durations of more than five years award to an SDB. However, the ■ 10. The authority citation for part 125 (including options), a contracting officer following exceptions apply: is revised to read as follows: must verify in DSBS whether a business (i) Where a contract is novated to concern continues to be an eligible 8(a) another business concern, the concern Authority: 15 U.S.C. 632(p), (q), 634(b)(6), Participant no more than 120 days prior that will continue performance on the 637, 644, 657(f), and 657r. to the end of the fifth year of the contract must certify its status as an ■ 11. Amend § 125.2 by: SDB to the procuring agency, or inform ■ a. Revising paragraph (a); contract, and no more than 120 days ■ the procuring agency that it does not b. In paragraph (b)(1)(i)(A): prior to exercising any option. Where a ■ qualify as an SDB, within 30 days of the i. Revising the second sentence; and concern fails to qualify as an eligible ■ ii. Adding a sentence at the end of the novation approval. If the concern is not 8(a) Participant during the 120 days paragraph; an SDB, the agency can no longer count prior to the end of the fifth year of the ■ c. Adding paragraph (d)(1)(v); contract, the option shall not be the options or orders issued pursuant to ■ d. Redesignating paragraph (d)(7) as exercised. the contract, from that point forward, paragraph (d)(8); (3) Recertification does not change the towards its SDB goals. ■ e. Adding new paragraph (d)(7); and terms and conditions of the contract. (ii) Where a concern that is ■ f. Revising the paragraph (e)(6) subject The limitations on subcontracting, performing a contract acquires, is heading and paragraph (e)(6)(i). nonmanufacturer and subcontracting acquired by, or merges with another The revisions and additions read as plan requirements in effect at the time concern and contract novation is not follows: of contract award remain in effect required, the concern must, within 30 throughout the life of the contract. days of the transaction becoming final, § 125.2 What are SBA’s and the procuring (4) Where the contracting officer recertify its SDB status to the procuring agency’s responsibilities when providing agency, or inform the procuring agency contracting assistance to small explicitly requires concerns to qualify as businesses? eligible 8(a) Participants in response to that it no longer qualifies as an SDB. If (a)(1) General. The objective of the a solicitation for an order, SBA will the contractor is not an SDB, the agency SBA’s contracting programs is to assist determine eligibility as of the date the can no longer count the options or small business concerns, including 8(a) concern submits its self-representation orders issued pursuant to the contract, BD Participants, HUBZone small as part of its response to the solicitation from that point forward, towards its business concerns, Service-Disabled for the order. SDB goals. The agency and the (5) A concern’s status will be contractor must immediately revise all Veteran-Owned Small Business determined at the time of a response to applicable Federal contract databases Concerns, Women-Owned Small a solicitation for a basic ordering for which they directly certify Businesses and Economically agreement (BOA), basic agreement (BA), information to reflect the new status. Disadvantaged Women-Owned Small or blanket purchase agreement (BPA) (2) For the purposes of contracts Businesses, in obtaining a fair share of and each order issued pursuant to the (including Multiple Award Contracts) Federal Government prime contracts, BOA, BA, or BPA. with durations of more than five years subcontracts, orders, and property sales. Therefore, these regulations apply to all ■ 9. Amend § 124.1015 by adding (including options), a contracting officer types of Federal Government contracts, paragraph (f) to read as follows: must request that a business concern recertify its SDB status no more than including Multiple Award Contracts, § 124.1015 What are the requirements for 120 days prior to the end of the fifth and contracts for architectural and representing SDB status, and what are the year of the contract, and no more than engineering services, research, penalties for misrepresentation? 120 days prior to exercising any option. development, test and evaluation. Small * * * * * (3) A business concern that did not business concerns must receive any (f) Recertification. (1) Generally, a certify itself as an SDB, either initially award (including orders, and orders concern that represents itself and or prior to an option being exercised, placed against Multiple Award qualifies as an SDB at the time of initial may recertify itself as an SDB for a Contracts) or contract, part of any such offer (or other formal response to a subsequent option period if it meets the award or contract, any contract for the solicitation), which includes price, eligibility requirements at that time. sale of Government property, or any including a Multiple Award Contract, is (4) Recertification does not change the contract resulting from a reverse considered an SDB throughout the life terms and conditions of the contract. auction, regardless of the place of of that contract. For an indefinite The limitations on subcontracting, performance, which SBA and the delivery indefinite quantity (IDIQ), nonmanufacturer and subcontracting procuring or disposal agency determine Multiple Award Contract, where plan requirements in effect at the time to be in the interest of:

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(i) Maintaining or mobilizing the designee) must publish in the GPE the The revisions and addition read as Nation’s full productive capacity; justification for the determination, follows: (ii) War or national defense programs; which shall include the information in (iii) Assuring that a fair proportion of paragraphs (d)(1)(i)(A) through (E) of § 125.3 What types of subcontracting assistance are available to small the total purchases and contracts for this section. businesses? property, services and construction for * * * * * * * * * * the Government in each industry (7) Notification to public of rationale category are placed with small business (c) * * * for substantial bundling. If the head of (1) * * * concerns; or a contracting agency determines that an (iv) * * * A contractor authorized to (iv) Assuring that a fair proportion of acquisition plan for a procurement use a commercial subcontracting plan the total sales of Government property involves a substantial bundling of must include all indirect costs in its is made to small business concerns. contract requirements, the head of a subcontracting goals and in its SSR; (2) One acceptable offer. If the contracting agency shall publish a * * * * * contracting officer receives only one notice on the GPE that such (d) * * * acceptable offer from a responsible determination has been made not later (3) Evaluating whether the prime small business concern in response to than 7 days after making such contractor made a good faith effort to any small or socioeconomic set-aside, determination. Any solicitation for a comply with its small business the contracting officer should make an procurement related to the acquisition award to that firm. subcontracting plan. plan may not be published earlier than (i) Evidence that a large business (b) * * * 7 days after such notice is published. (1) * * * prime contractor has made a good faith Along with the publication of the effort to comply with its subcontracting (i) * * * solicitation, the head of a contracting (A) * * * At the SBA’s discretion, plan or other subcontracting agency shall publish in the GPE a responsibilities includes supporting PCRs may review any acquisition to justification for the determination, determine whether a set-aside or sole- documentation that: which shall include the following (A) The contractor performed one or source award to a small business under information: more of the actions described in one of SBA’s programs is appropriate (i) The specific benefits anticipated to paragraph (b) of this section, as and to identify alternative strategies to be derived from the bundling of contract appropriate for the procurement; maximize the participation of small requirements and a determination that (B) Although the contractor may have businesses in the procurement. * * * such benefits justify the bundling; failed to achieve its goal in one Unless the contracting agency requests a (ii) An identification of any socioeconomic category, it over- review, PCRs will not review an alternative contracting approaches that achieved its goal by an equal or greater acquisition by or on behalf of the would involve a lesser degree of amount in one or more of the other Department of Defense if the acquisition bundling of contract requirements; categories; or is conducted for a foreign government (iii) An assessment of the specific (C) The contractor fulfilled all of the pursuant to section 22 of the Arms impediments to participation by small requirements of its subcontracting plan. Control Export Act (22 U.S.C. 2762), is business concerns as prime contractors (ii) Examples of activities reflective of humanitarian or civic assistance that result from the bundling of contract a failure to make a good faith effort to provided in conjunction with military requirements; and comply with a subcontracting plan (iv) The specific actions designed to operations as defined in 10 U.S.C. include, but are not limited, to: 401(e), is for a contingency operation as maximize participation of small (A) Failure to submit the acceptable defined in 10 U.S.C. 101(a)(13), is to be business concerns as subcontractors individual or summary subcontracting awarded pursuant to an agreement with (including suppliers) at various tiers reports in eSRS by the report due dates the government of a foreign country in under the contract or contracts that are or as provided by other agency which Armed Forces of the United awarded to meet the requirements. regulations within prescribed time States are deployed, or where both the * * * * * frames; place of award and place of performance (e) * * * (B) Failure to pay small business are entirely outside of the United States (6) Set-aside of orders against concern subcontractors in accordance and its territories. Multiple Award Contracts. (i) with the terms of the contract with the * * * * * Notwithstanding the fair opportunity prime; (d) * * * requirements set forth in 10 U.S.C. (C) Failure to designate and maintain (1) * * * 2304c and 41 U.S.C. 253j, the a company official to administer the (v) Not later than 7 days after making contracting officer has the authority to subcontracting program and monitor a determination that an acquisition set aside orders against Multiple Award and enforce compliance with the plan; strategy involving a consolidation of Contracts, including contracts that were (D) Failure to maintain records or contract requirements is necessary and set aside for small business. This otherwise demonstrate procedures justified under subparagraph (d)(1)(i) of includes order set-asides for 8(a) adopted to comply with the plan this section, the Senior Procurement Participants, HUBZone SBCs, SDVO including subcontracting flow-down Executive (SPE) or Chief Acquisition SBCs, and WOSBs (and where requirements; Officer (CAO), or designee, shall publish appropriate EDWOSBs). (E) Adoption of company policies or a notice on the Government Point of * * * * * documented procedures that have as Entry (GPE) that such determination has ■ 12. Amend § 125.3 by: their objectives the frustration of the been made. Any solicitation for a ■ a. Revising the last sentence of objectives of the plan; procurement related to the acquisition paragraph (c)(1)(iv); (F) Failure to correct substantiated strategy shall not be issued earlier than ■ b. Revising paragraph (d)(3); findings from federal subcontracting 7 days after such notice is published. ■ c. Adding paragraph (d)(11); and compliance reviews or participate in Along with the publication of the ■ d. Revising the first sentence of subcontracting plan management solicitation, the SPE or CAO (or paragraph (f)(3). training offered by the government;

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(G) Failure to conduct market research addition, work performed overseas on procurement, this issue may be grounds identifying potential small business awards made pursuant to the Foreign for an SDVO status protest, as described concern subcontractors through all Assistance Act of 1961 or work required in subpart D of this part. When the reasonable means including outreach, to be performed by a local contractor, is subcontractor is other than small, or industry days, or the use of federal excluded. alleged to be other than small for the database marketing systems such as * * * * * size standard assigned to the SBA’s Dynamic Small Business Search (c) * * * A prime contractor may no procurement, this issue may be grounds (DSBS) or SUBNet Systems or any longer count a similarly situated entity for a size protest subject to the successor federal systems; towards compliance with the limitations ostensible subcontractor rule, as (H) Failure to comply with regulations on subcontracting where the described at § 121.103(h)(4) of this requiring submission of a written subcontractor ceases to qualify as small chapter. explanation to the contracting officer to or under the relevant socioeconomic (2) SBA will find that a prime SDVO change small business concern status. contractor is performing the primary subcontractors that were used in * * * * * and vital requirements of a contract or preparing offers; or (e) * * * order and is not unduly reliant on one (I) Falsifying records of (3) For contracts where an or more non-similarly situated subcontracting awards to SBCs. independent contractor is not otherwise subcontracts where the prime contractor * * * * * treated as an employee of the concern can demonstrate that it, together with (11) Evaluating whether the contractor for which he/she is performing work for any similarly situated entity, will meet or subcontractor complied in good faith size purposes under § 121.106(a) of this the limitations on subcontracting with the requirement to provide chapter, work performed by the provisions set forth in § 125.6. periodic reports and cooperate in any independent contractor shall be ■ 15. Amend § 125.29 by adding studies or surveys as may be required by considered a subcontract. Such work paragraph (c) to read as follows: the Federal agency or the will count toward meeting the Administration in order to determine § 125.29 What are the grounds for filing an applicable limitation on subcontracting SDVO SBC protest? the extent of compliance by the where the independent contractor * * * * * contractor or subcontractor with the qualifies as a similarly situated entity. subcontracting plan. The contractor or (c) Ostensible subcontractor. In cases (4) Contracting officers may, at their where the prime contractor appears subcontractor’s failure to comply with discretion, require the contractor to this requirement in good faith shall be unduly reliant on a small, non-similarly demonstrate its compliance with the situated entity subcontractor or where a material breach of such contract or limitations on subcontracting at any subcontract and may be considered in the small non-similarly situated entity is time during performance and upon performing the primary and vital any past performance evaluation of the completion of a contract if the contractor. requirements of the contract, the information regarding such compliance Director, Office of Government * * * * * is not already available to the Contracting will consider a protest only (f) * * * contracting officer. Evidence of if the protester presents credible (3) Upon completion of the review compliance includes, but is not limited evidence of the alleged undue reliance and evaluation of a contractor’s to, invoices, copies of subcontracts, or a or credible evidence that the primary performance and efforts to achieve the list of the value of tasks performed. and vital requirements will be requirements in its subcontracting * * * * * performed by the subcontractor. plans, the contractor’s performance will ■ 14. Amend § 125.18 by: be assigned one of the following ratings: ■ a. In paragraph (e)(1)(i), removing the PART 126—HUBZONE PROGRAM Exceptional, Very Good, Satisfactory, phrase ‘‘an SDVO contract’’ and adding ■ Marginal or Unsatisfactory. * * * in its place the phrase ‘‘a contract’’; 16. The authority citation for part 126 * * * * * ■ b. In paragraph (e)(1)(ii), removing the is revised to read as follows: ■ 13. Amend § 125.6 by: phrase ‘‘an SDVO SBC contract’’ and Authority: 15 U.S.C. 632(a), 632(j), 632(p), ■ a. Adding two sentences at the end of adding in its place the phrase ‘‘a 644 and 657a; Pub. L. 111–240, 24 Stat. 2504. paragraph (a)(1); contract’’; and ■ 17. Amend § 126.601 by: ■ b. Adding a sentence at the end of ■ c. Adding paragraph (f). ■ a. In paragraph (h)(1)(i), removing the paragraph (c) introductory text; The addition reads as follows: phrase ‘‘HUBZone contract (or a ■ c. Revising paragraph (e)(3); and § 125.18 What requirements must an HUBZone contract awarded through full ■ d. Adding paragraph (e)(4). and open competition based on the The additions and revision read as SDVO SBC meet to submit an offer on a contract? HUBZone price evaluation preference)’’ follows: * * * * * and adding in its place the word § 125.6 What are the prime contractor’s (f) Ostensible subcontractor. Where a ‘‘contract’’; ■ b. In paragraph (h)(1)(ii), removing the limitations on subcontracting? subcontractor that is not similarly phrase ‘‘HUBZone contract’’ and adding (a) * * * situated performs primary and vital in its place the word ‘‘contract’’; and (1) * * * Other direct costs may be requirements of a set-aside or sole- ■ c. Adding paragraph (i). excluded to the extent they are not the source service contract or order, or The addition reads as follows: principal purpose of the acquisition and where a prime contractor is unduly small business concerns do not provide reliant on a small business that is not § 126.601 What additional requirements the service, such as airline travel, work similarly situated to perform the set- must a qualified HUBZone SBC meet to bid performed by a transportation or aside or sole source service contract or on a contract? disposal entity under a contract order, the prime contractor is not * * * * * assigned the environmental remediation eligible for award of an SDVO contract. (i) Ostensible subcontractor. Where a NAICS code (562910), cloud computing (1) When the subcontractor is small subcontractor that is not similarly services, or mass media purchases. In for the size standard assigned to the situated performs primary and vital

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requirements of a set-aside service situated performs primary and vital emergency response contract to a small contract, or where a prime contractor is requirements of a set-aside service business concern under this part? unduly reliant on a small business that contract, or where a prime contractor is 129.400 What are the applicable is not similarly situated to perform the unduly reliant on a small business that performance requirements? 129.500 What are the penalties of set-aside service contract, the prime is not similarly situated to perform the misrepresentation of size or status? contractor is not eligible for award of a set-aside service contract, the prime HUBZone contract. contractor is not eligible for award of a Authority: 15 U.S.C. 636(j)(13)(F)(ii), (1) When the subcontractor is small WOSB or EDWOSB contract. 644(f). for the size standard assigned to the (1) When the subcontractor is small § 129.100 What definitions are important in procurement, this issue may be grounds for the size standard assigned to the this part? for a HUBZone status protest, as procurement, this issue may be grounds For the purposes of this part: described in subpart H of this part. for a WOSB or EDWOSB status protest, Concern located in a disaster area is When the subcontractor is alleged to be as described in subpart F of this part. a firm that during the last twelve other than small for the size standard When the subcontractor is other than months— assigned to the procurement, this issue small or alleged to be other than small (1)(i) Had its main operating office in may be grounds for a size protest under for the size standard assigned to the the area; and the ostensible subcontractor rule, as procurement, this issue may be a ground (ii) Generated at least half of the firm’s described at § 121.103(h)(4) of this for a size protest, as described at gross revenues and employed at least chapter. § 121.103(h)(4) of this chapter. half of its permanent employees in the (2) SBA will find that a prime (2) SBA will find that a prime WOSB area. HUBZone contractor is performing the or EDWOSB contractor is performing (2) If the firm does not meet the primary and vital requirements of a the primary and vital requirements of a criteria in paragraph (1) of this contract or order and is not unduly contract or order and is not unduly definition, factors to be considered in reliant on one or more non-similarly reliant on one or more non-similarly determining whether a firm resides or situated subcontracts where the prime situated subcontracts where the prime primarily does business in the disaster contractor can demonstrate that it, contractor can demonstrate that it, area include— together with any similarly situated together with any similarly situated entity, will meet the limitations on (i) Physical location(s) of the firm’s entity, will meet the limitations on permanent office(s) and date any office subcontracting provisions set forth in subcontracting provisions set forth in § 125.6. in the disaster area(s) was established; § 125.6. (ii) Current state licenses; ■ 18. Amend § 126.801 by adding a new ■ 22. Amend § 127.602 by revising the (iii) Record of past work in the fourth sentence to paragraph (a) to read second sentence and adding a third disaster area(s) (e.g., how much and for as follows: sentence to read as follows: how long); § 126.801 How does one file a HUBZone (iv) Contractual history the firm has § 127.602 What are the grounds for filing status protest? had with subcontractors and/or an EDWOSB or WOSB status protest? (a) * * * SBA will also consider a suppliers in the disaster area; protest challenging whether a HUBZone * * * SBA will also consider a (v) Percentage of the firm’s gross prime contractor is unduly reliant on a protest challenging the status of a revenues attributable to work performed small, non-similarly situated entity concern as an EDWOSB or WOSB if the in the disaster area; subcontractor or if such subcontractor contracting officer has protested because (vi) Number of permanent employees performs the primary and vital the WOSB or EDWOSB apparent the firm employs in the disaster area; requirements of the contract. * * * successful offeror has failed to provide (vii) Membership in local and state all of the required documents, as set * * * * * organizations in the disaster area; and forth in § 127.300. In addition, when (viii) Other evidence that establishes PART 127—WOMEN-OWNED SMALL sufficient credible evidence is the firm resides or primarily does BUSINESS FEDERAL CONTRACT presented, SBA will consider a protest business in the disaster area. For PROGRAM challenging whether the prime example, sole proprietorships may contractor is unusually reliant on a submit utility bills and bank statements. ■ 19. The authority citation for part 127 small, non-similarly situated entity Disaster area means the area for continues to read as follows: subcontractor, as defined in § 125.1 of which the President has declared a this chapter, or a protest alleging that Authority: 15 U.S.C. 632, 634(b)(6), major disaster under section 401 of the 637(m), 644 and 657r. such subcontractor is performing the Robert T. Stafford Disaster Relief and primary and vital requirements of a set- Assistance Act (42 U.S.C. 5170), during § 127.503 [Amended] aside or sole-source WOSB or EDWOSB the period of the declaration. ■ 20. Amend § 127.503 by removing the contract. Emergency response contract means a phrase ‘‘WOSB/EDWOSB contract’’ ■ 23. Add part 129 to read as follows: contract with private entities that wherever it appears and adding in its supports assistance activities in a place the word ‘‘contract’’ in paragraphs PART 129—CONTRACTS FOR SMALL disaster area, such as debris cleanup, (h)(1)(i) and (ii). BUSINESSES LOCATED IN DISASTER distribution of supplies, or ■ 21. Amend § 127.504 by adding AREAS reconstruction. paragraph (c) to read as follows: Sec. § 129.200 What contracting preferences 129.100 What definitions are important in § 127.504 What additional requirements are available for small business concerns this part? must a concern satisfy to submit an offer located in disaster areas? 129.200 What contracting preferences are on an EDWOSB or WOSB requirement? available for small business concerns Contracting officers may set aside * * * * * located in disaster areas? solicitations for emergency response (c) Ostensible subcontractor. Where a 129.300 What small business goaling credit contracts to allow only small businesses subcontractor that is not similarly do agencies receive for awarding an located in the disaster area to compete.

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§ 129.300 What small business goaling subcontractor is performing the primary and 5 p.m., Monday through Friday, credit do agencies receive for awarding an and vital requirements of a VA except Federal holidays. emergency response contract to a small procurement contract. For service information identified in business concern under this part? * * * * * this final rule, contact International If an agency awards an emergency Aero Engines, LLC, 400 Main Street, response contract to a local small Dated: November 19, 2019. East Hartford, CT 06118, United States; business concern through the use of a Christopher Pilkerton, phone: (800) 565–0140; email: help24@ local area set-aside that is also set aside Acting Administrator. pw.utc.com; website: https:// under a small business or [FR Doc. 2019–25517 Filed 11–27–19; 8:45 am] fleetcare.pw.utc.com. You may view this socioeconomic set-aside (8(a), BILLING CODE 8025–01–P service information at the FAA, Engine HUBZone, SDVO, WOSB, EDWOSB), and Propeller Standards Branch, 1200 the value of the contract shall be District Avenue, Burlington, MA 01803. doubled for purposes of determining DEPARTMENT OF TRANSPORTATION For information on the availability of compliance with the goals for this material at the FAA, call 781–238– procurement contracts under section Federal Aviation Administration 7759. It is also available on the internet 15(g)(1)(A) of the Small Business Act at https://www.regulations.gov by (15 U.S.C. 644(g)(1)(A)). The procuring 14 CFR Part 39 searching for and locating Docket No. agency shall enter the actual contract FAA–2019–0995. [Docket No. FAA–2019–0995; Product value, not the doubled contract value in Identifier AD–2019–00113–E; Amendment Examining the AD Docket the required contract reporting systems, 39–21001; AD 2019–25–01] and appropriately code the contract You may examine the AD docket on action to receive the credit. SBA will RIN 2120–AA64 the internet at https:// provide the double credit as part of the www.regulations.gov by searching for Airworthiness Directives; International Scorecard process. and locating Docket No. FAA–2019– Aero Engines, LLC Turbofan Engines 0995; or in person at Docket Operations § 129.400 What are the applicable between 9 a.m. and 5 p.m., Monday performance requirements? AGENCY: Federal Aviation Administration (FAA), DOT. through Friday, except Federal holidays. The performance requirements of The AD docket contains this final rule, § 125.6 of this chapter apply to small ACTION: Final rule; request for the regulatory evaluation, any and socioeconomic set-asides under this comments. comments received, and other part. A similarly situated entity as that SUMMARY: The FAA is adopting a new information. The street address for the term is used in § 125.6 of this chapter airworthiness directive (AD) for certain Docket Operations is listed above. must qualify as a concern located in a International Aero Engines, LLC (IAE Comments will be available in the AD disaster area. LLC) PW1122G–JM, PW1124G–JM, docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: § 129.500 What are the penalties of PW1124G1–JM, PW1127G1–JM, misrepresentation of size or status? PW1127GA–JM, PW1127G–JM, Kevin M. Clark, Aerospace Engineer, ECO Branch, FAA, 1200 District The penalties relevant to the PW1129G–JM, PW1130G–JM, Avenue, Burlington, MA 01803; phone: particular size or socioeconomic status PW1133GA–JM, PW1133G–JM model (781) 238–7088; fax: 781–238–7199; representation under 13 CFR 121.108, turbofan engines. This AD requires email: [email protected]. 125.32, 126.900, and 127.700 are replacement of certain low-pressure SUPPLEMENTARY INFORMATION: applicable to set-asides under this part. turbine (LPT) 3rd-stage blades. This AD was prompted by multiple reports of Discussion PART 134—RULES OF PROCEDURE LPT 3rd-stage blade failures causing a GOVERNING CASES BEFORE THE reduction of engine thrust. The FAA is The FAA received reports of OFFICE OF HEARINGS AND APPEALS issuing this AD to address the unsafe approximately 21 failures of the affected condition on these products. LPT 3rd-stage blades from 2017 through ■ June 2019. These failures appear to be 24. The authority citation for part 134 DATES: This AD is effective December continues to read as follows: caused by impact damage occurring 16, 2019. when debris passes through the engine. Authority: 5 U.S.C. 504; 15 U.S.C. 632, The FAA must receive comments on The manufacturer has determined the 634(b)(6), 634(i), 637(a), 648(l), 656(i), and this AD by January 13, 2020. 687(c); 38 U.S.C. 8127(f); E.O. 12549, 51 FR need to replace any affected LPT 3rd- ADDRESSES: 6370, 3 CFR, 1986 Comp., p. 189. You may send comments, stage blades with LPT blades made of a Subpart J issued under 38 U.S.C. using the procedures found in 14 CFR different material that is more resistant 8127(f)(8)(B). 11.43 and 11.45, by any of the following to impact damage. Subpart K issued under 38 U.S.C. methods: In response to these events, the FAA 8127(f)(8)(A). • Federal eRulemaking Portal: Go to issued a Notice of Proposed Rulemaking ■ 25. Amend § 134.1003 by https://www.regulations.gov. Follow the (NPRM), Product Identifier 2019–NE– redesignating paragraph (c) as paragraph instructions for submitting comments. 31–AD (84 FR 64441, November 22, • Fax: 202–493–2251. 2019), proposing to adopt a new AD to (d) and by adding new paragraph (c) to • read as follows: Mail: U.S. Department of address LPT 3rd-stage blade failures on Transportation, Docket Operations, M– certain IAE LLC PW1122G–JM, § 134.1003 Grounds for filing a CVE 30, West Building Ground Floor, Room PW1124G–JM, PW1124G1–JM, Protest. W12–140, 1200 New Jersey Avenue SE, PW1127G1–JM, PW1127GA–JM, * * * * * Washington, DC 20590. PW1127G–JM, PW1129G–JM, (c) Unusual reliance. SBA will • Hand Delivery: U.S. Department of PW1130G–JM, PW1133GA–JM, consider a protest challenging whether Transportation, Docket Operations, M– PW1133G–JM model turbofan engines. the prime contractor is unusually reliant 30, West Building Ground Floor, Room This NPRM AD proposes removal from on a subcontractor that is not CVE W12–140, 1200 New Jersey Avenue SE, service of affected LPT 3rd-stage blades verified, or a protest alleging that such Washington, DC 20590, between 9 a.m. at the next engine shop visit.

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