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SMALL BUSINESS ADMINISTRATION program. 83 FR 54812. SBA had not on HUBZone small businesses to issued a comprehensive regulatory continually demonstrate that they meet 13 CFR Parts 115, 121, 125, 126, and amendment to the HUBZone program all eligibility requirements at the time of 127 since the program’s initial each offer and award for any HUBZone RIN 3245–AG38 implementation over twenty years ago. contract opportunity. SBA’s review of the HUBZone program SBA recognizes the challenge many Small Business HUBZone Program and in response to President Trump’s firms face in attempting to meet the Government Contracting Programs directive highlighted several areas that requirement that at least 35% of the needed revision. In order to address firm’s employees live in a HUBZone. AGENCY: U.S. Small Business these deficiencies, SBA proposed to Firms with a significant number of Administration. clarify and modify a number of the employees may have a hard time ACTION: Final rule. regulations implementing the program meeting this requirement because it is to reflect current policies, eliminate often difficult to find a large number of SUMMARY: The U.S. Small Business ambiguities in the regulations, and individuals living in a HUBZone who Administration (SBA or Agency) is reduce burdens on small businesses and possess the necessary qualifications. amending its regulations for the procuring agencies. Smaller firms also have a hard time Historically Underutilized Business The proposed rule initially called for meeting this requirement because the Zone (HUBZone) Program to reduce the a 60-day comment period, with loss of one employee could adversely regulatory burdens imposed on comments due by December 31, 2018. affect their HUBZone eligibility. If a HUBZone small business concerns and Due to the scope and significance of the certified HUBZone small business government agencies, implement new proposed changes, SBA subsequently receives a Federal contract (HUBZone or statutory provisions, and eliminate published a notice in the Federal otherwise), it often must hire additional ambiguities in the regulations. This Register on December 31, 2018 that employees to perform the contract, thus comprehensive revision to the extended the comment period to jeopardizing its status as a certified HUBZone Program clarifies current February 14, 2019. 83 FR 67701. HUBZone small business if it no longer HUBZone Program policies and In addition, SBA proposed to meets the requirement that at least 35% procedures and makes changes that will implement section 1701(i) of the of its employees reside in a HUBZone. benefit the small business community National Defense Authorization Act for This would make it ineligible for any by making the HUBZone Program more Fiscal Year 2018 (NDAA 2018), Public future HUBZone contracts. The 35% efficient and effective. The rule is Law 115–91, 131 Stat. 1283 (December HUBZone residency requirement can intended to make it easier for small 12, 2017), which by amending the also make it hard for service contractors business concerns to understand and definition of ‘‘HUBZone small business to perform contracts in other locations. comply with the program’s concern,’’ allows certain certified For example, if a firm wins a contract requirements and to make the HUBZone HUBZone small business concerns to in another state, it would most likely program a more attractive avenue for maintain their HUBZone status until need to hire additional employees from procuring agencies. 2021. In addition, based on comments that state. If there is no HUBZone near DATES: This rule is effective on received, SBA is implementing sections that location, the firm would have to December 26, 2019. 1701(b), 1701(c), and parts of section hire non-HUBZone residents to perform 1701(h) of the NDAA 2018 that are the contract, which would most likely FOR FURTHER INFORMATION CONTACT: effective January 1, 2020, as discussed make it ineligible for future HUBZone Brenda Fernandez, Office of further below. contracts. Government Contracting, 202–205–7337 A challenge HUBZone participants To alleviate these problems, or [email protected]. have faced over the last two decades is § 126.500(a) of the final rule requires SUPPLEMENTARY INFORMATION: understanding the definitions of key only annual recertification rather than components of the program Background immediate recertification at the time of requirements. HUBZones change based every offer for a HUBZone contract On January 30, 2017, President Trump on economic data. Once certified, it is award. This reduced burden on certified issued Executive Order 13771 directing unrealistic to expect a business concern HUBZone small businesses will allow a federal departments and agencies to or its employees to relocate in order to firm to remain eligible for future reduce regulatory burdens and control attempt to maintain the concern’s HUBZone contracts for an entire year, regulatory costs. In response to this HUBZone status if the area where the without requiring it to demonstrate that directive, SBA initiated a review of all business is located or employees reside it continues to meet all HUBZone of its regulations to determine which loses its HUBZone status. The proposed eligibility requirements at the time it might be revised or eliminated. This rule detailed changes to help the submits an offer for each additional final rule implements revisions to the HUBZone program achieve its intended HUBZone opportunity. A concern HUBZone program. The HUBZone results: Investment and continued would represent that it is a certified program was established pursuant to the employment in distressed communities. HUBZone small business concern at the HUBZone Act of 1997 (HUBZone Act), First, the rule proposed to treat an time of each offer, but its eligibility Title VI of the Small Business individual as a HUBZone resident if that would relate back to the date of its Reauthorization Act of 1997, Public Law individual worked for the firm and certification or recertification, not to the 105–135, enacted December 2, 1997. resided in a HUBZone at the time the date of the offer. The concern would be The stated purpose of the HUBZone concern was certified or recertified as a required to come into compliance with program is to provide for Federal HUBZone small business concern and the 35% HUBZone residency contracting assistance to HUBZone he or she continues to work for that requirement again at the time of its small business concerns. 15 U.S.C. same firm, even if the area where the annual recertification in order to 657a(a). individual lives no longer qualifies as a continue to be eligible for additional On October 31, 2018, SBA published HUBZone or the individual has moved HUBZone contracts after the one-year in the Federal Register a comprehensive to a non-HUBZone area. Second, the certification period. SBA also requested proposal to amend the HUBZone rule proposed to eliminate the burden comments on whether seasonal

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employees can or should be counted such as written offers of employment, also maintains the proposed and still maintain the integrity of the published advertisements seeking consequences for firms that do not meet HUBZone eligibility requirements. employees, and attendance at job fairs.’’ the standard. SBA believes that it is SBA received extensive responses to 13 CFR 126.103. important that firms adhere to the the proposed rule from 98 commenters, SBA believes that it would be helpful requirements. The attempt to maintain which comprised about 370 specific to have clearer guidelines that would standard is already an exception to the comments. SBA addresses each allow firms to adequately plan and general 35% residency requirement, and proposed amendment below, including ensure that they are in fact maintaining SBA believes that a situation in which the disposition of any comments. compliance and continued eligibility. a firm that does not meet this relaxed SBA proposed to amend this definition standard and faces little or no II. Section-by-Section Analysis and by adding that falling below 20% consequence would not further SBA’s Comments Received HUBZone residency during the goal of ensuring firms meet the 1. Definitions performance of a HUBZone contract requirements of the program. would be deemed a failure to attempt to Two comments supported the change The proposed rule revised, added, or maintain compliance with the statutory but requested clarity as to what it means eliminated several definitions set forth 35% HUBZone residency requirement. to attempt to maintain in relation to in 13 CFR 126.103 in order to remove In such a case, SBA would propose that recertification, continued eligibility, and ambiguities and make the HUBZone the concern be decertified from the the change made in § 126.501 providing program easier for firms to use. HUBZone program. SBA requested that certification lasts for one year. SBA proposed to delete the comments on how best to look at this These commenters raised concerns definitions of ‘‘Alaska Native Village’’ 20% minimum requirement, specifically about firms merely hiring several and ‘‘ANCSA’’ (i.e., Alaska Native as to whether a different percentage is employees immediately before an Claims Settlement Act) and incorporate also reasonable and would accomplish upcoming recertification date, those terms in an amended definition of the objectives of the HUBZone program employing those individuals for a short ‘‘Alaska Native Corporation (ANC)’’ to while not unduly burdening firms time to meet the 20% threshold, but make the regulations more readable. performing HUBZone contracts. only for a small window of time right SBA received several comments that did SBA received 20 comments on the before recertification. SBA agrees with not oppose the proposed change but proposed change. Several commenters this commenter and has provided clarity asked SBA to be careful about conflating opposed the changes and preferred the on this issue in other sections of this or confusing terms such as ANCSA, current language because of the final rule. Specifically, SBA makes clear Alaska Native Village, and Alaskan flexibility of the current standard. One that the 20% threshold is the floor only Native Corporation. SBA does not commenter said the current flexible for firms performing HUBZone believe it has incorrectly merged or standard was better for firms with a very contracts, and if a concern falls below eliminated any terms in the revised low total number of employees. The that threshold during the year, it will be definition, but SBA will continue to be remaining commenters supported SBA’s decertified according to the standards in careful when defining these terms and change. One commenter supported the § 126.602(d). SBA also made clear that other related terms. change to a fixed percentage but thought firms have an affirmative duty to notify SBA proposed to amend the 15% would be better. Another SBA if they fall below the 20% attempt definition of ‘‘attempt to maintain’’ to commenter supported the change to a to maintain standard in § 126.501(a)(2). clarify what happens if a HUBZone fixed percentage but thought 25% SBA proposed eliminating the small business concern’s HUBZone would be better. SBA received five definition of ‘‘county unemployment residency percentage drops significantly comments that supported the change to rate’’ as a separate definition and below the 35% employee HUBZone a fixed percentage but expressed incorporating it into the definition of residency requirement. The Small concerns about the inflexibility this ‘‘qualified non-metropolitan county Business Act provides that a HUBZone would create and the consequence of (QNMC)’’ and amending the definition small business concern must ‘‘attempt decertification. These commenters of ‘‘D/HUB’’ to make clear that this term to maintain’’ compliance with the 35% recommended several alternatives, refers to the Director of SBA’s Office of residency requirement during the including establishing a rebuttable HUBZone. SBA received no comments performance of a HUBZone contract. 15 presumption and not decertifying firms on these changes to the proposed rule. U.S.C. 632(p)(5)(A)(i)(II). As noted in that do not meet the requirements. One SBA proposed to amend the the proposed rule, this statutory commenter effectively recommended definition of ‘‘decertify’’ to clarify that requirement seeks to ensure that funds changing the 35% residency the decertification procedures described from HUBZone contracts flow to requirement to a 20% requirement in part 126 also apply to firms that HUBZone areas and the residents of where participants would only need to voluntarily withdraw from the those areas, while at the same time show demonstrable efforts if they fell HUBZone program, and not solely to recognizing that a HUBZone small below 20%. situations where SBA initiates a business may need to hire additional After considering the comments, SBA decertification action. SBA received employees in order to meet the terms of is adopting the change implementing a three comments on the proposed a contract. Under the ‘‘attempt to 20% floor within the definition of changes to the definition of ‘‘decertify.’’ maintain’’ requirement, when hiring ‘‘attempt to maintain’’. SBA believes All three comments supported the additional employees to perform on a that it is important to remember the change. As such, SBA is adopting the HUBZone contract, the HUBZone small goals of the HUBZone program: To definition as proposed. business must make efforts to hire provide capital infusion into and hire The proposed rule also sought to HUBZone residents in order to try to individuals living in distressed areas. amend the definition of the term maintain compliance with the 35% SBA believes that allowing any number ‘‘employee.’’ This term is crucial to the HUBZone residency requirement. The below 20% would not properly capture HUBZone program since the HUBZone current regulation provides that the intent of the program. In addition, eligibility requirements for a small ‘‘attempt to maintain’’ means ‘‘making most commenters agreed that 20% was business are to have at least 35% of its substantive and documented efforts a reasonable standard. The final rule employees residing in a HUBZone and

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to have a principal office located in a and leased employees, individuals received sometime in the future. SBA HUBZone. The proposed rule intended obtained through a union agreement, does not treat individuals receiving to clarify how SBA determines whether and those co-employed through a deferred compensation as employees for an individual worked ‘‘a minimum of 40 professional employer organization HUBZone purposes because such hours per month.’’ The proposed rule (PEO) agreement, or if SBA should individuals are not receiving a present explained that an individual is count only full-time employees or full- economic benefit from working for the considered an employee for HUBZone time equivalents. SBA received 30 firm, which is not consistent with the program purposes if he or she works at comments on this issue, with 18 purpose of the HUBZone program. The least 40 hours during the four-week commenters in favor of continuing to Court of Federal Claims has found this period immediately prior to the relevant use a broad definition of ‘‘employee’’ policy to be reasonable. In Aeolus date of consideration, which is either and 12 in favor of a narrower approach Systems, LLC v. United States, 79 Fed. the date the concern submits its that would count only full-time Cl. 1, 9 (2007), the Court held that: ‘‘(1) HUBZone application to SBA or the employees or full-time equivalents. the concept of deferred compensation is date of recertification. Per the proposed After reviewing the comments, SBA will contrary to the program’s goal of rule, SBA will review a firm’s payroll retain the definition of ‘‘employees’’ increasing gainful employment in records for the most recently completed that includes temporary and leased HUBZones, and (2) the identification of pay periods that account for the four- employees, individuals obtained non-owner individuals who work for week period immediately prior to the through a union agreement, and those deferred compensation as ‘employees’ date of application or date of employed through a PEO agreement. As would open up the HUBZone program recertification in order to determine discussed above, the purpose of the to potential abuse.’’ SBA received three which individuals meet this definition. program is to increase employment comments in support of continuing to If the firm has weekly pay periods, then opportunities for individuals residing in exclude individuals who receive SBA will review the payroll records for HUBZones. A more inclusive definition deferred compensation from the the most recently completed last four of ‘‘employee’’ allows a wider group of definition of ‘‘employee.’’ Thus, the pay periods. If the firm has two-week people to apply for positions at final rule will continue to exclude pay periods, then SBA will review the HUBZone firms and thus gives the firms individuals who receive deferred payroll records for the last two most more opportunities to find employees compensation from the definition of recently completed pay periods. If the who fit their needs. ‘‘employee.’’ payroll records demonstrate that an The proposed definition of In addition, the proposed definition individual worked forty or more hours ‘‘employee’’ also clarified that all clarified that individuals who receive during that four-week period, he or she owners of a HUBZone applicant or in-kind compensation are not would be considered an employee of the HUBZone small business who work at considered volunteers and will be concern. Most commenters favored this least 40 hours per month will be considered employees, as long as such proposed clarification, and SBA has considered employees, regardless of in-kind compensation is commensurate finalized it in this rule. whether they receive compensation. SBA also sought comments on This is SBA’s current policy, and it is with the work performed by the whether it should revise the intended to prevent a firm owner from individual. This means that an requirement from 40 hours per month to being able to circumvent the HUBZone individual who works 40 hours per 20 hours per week, due to concerns that rules by not paying himself a salary to month but receives in-kind the 40 hours per month standard may be remove himself from the employee compensation equaling the value of only insufficient to stimulate employment in count. SBA believes that any time an 10 hours would generally not be HUBZones. SBA received 35 comments owner works at least 40 hours per considered an employee. These opposing this possible change to the month for the concern, he or she should clarifications were intended to address definition of ‘‘employee.’’ Of these, 20 be counted as an employee. The confusion about what SBA considers in- commenters cited concerns about the proposed rule also included a provision kind compensation and whether administrative and financial burdens on that if the sole owner of a firm works someone who receives in-kind HUBZone firms and the restrictions it less than 40 hours during the four-week compensation should be considered an would place on firms’ ability to hire period immediately prior to the relevant employee. In general, in-kind certain groups of potential employees date of review but has not hired another compensation is non-monetary such as students, working parents, individual to direct the actions of the compensation, or anything other than interns, individuals with more than one concern’s employees, then that owner cash, wages, salary or other monetary job, or individuals who are otherwise will be considered an employee. All five benefit received in exchange for work unable to work for a firm 20 hours or comments received on this issue favored performed. An example of in-kind more per week. One of the purposes of this change. The proposed change is compensation is housing received in the HUBZone program is to provide adopted as final. exchange for work performed. SBA meaningful employment opportunities The proposed definition of generally treats individuals receiving in- for residents of HUBZone areas. After ‘‘employee’’ also clarified SBA’s kind compensation as employees reviewing the comments, SBA agrees existing rule that individuals who do because they are receiving an economic that changing the requirement to 20 not receive compensation and those benefit from working for the firm, which hours per week would hinder, rather who receive deferred compensation are is consistent with the purposes of the than encourage, firms’ efforts to hire and not considered employees (other than HUBZone program. In a previous retain HUBZone-resident employees. owners who work at least 40 hours per proposed rule amending the definition Therefore, SBA will retain the existing month, as described above). As SBA’s of ‘‘employee’’ to provide that requirement that an ‘‘employee’’ is an current rules provide, such individuals volunteers are not considered individual who works at least 40 hours are considered volunteers, and employees, SBA explained: ‘‘SBA per month. volunteers are not considered intends the term compensation to be SBA also sought comments on employees. Deferred compensation read broadly and to be more than wages. whether the definition of ‘‘employee’’ means compensation that is not Thus, a person who receives food, should continue to include temporary received at the time it is earned but is housing, or other non-monetary

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compensation in exchange for work communities where individuals have employed through an agreement with a performed would not be considered a increased employment opportunities, third-party business that specializes in volunteer under this regulation. SBA while also allowing firms flexibility to providing HUBZone resident employees believes that allowing volunteers to be offer benefits such as housing that could to prospective HUBZone small business counted as employees would not fulfill make them more competitive to concerns for the specific purpose of the purpose of the HUBZone Act—job qualified individuals. achieving and maintaining HUBZone creation and economic growth in The proposed definition of eligibility. Under such an arrangement, underutilized communities.’’ 67 FR ‘‘employee’’ clarified that independent one individual could work 10 hours per 3826 (January 28, 2002). contractors who receive compensation month for four separate businesses and SBA requested comments on whether through Internal Revenue Service (IRS) be counted as a HUBZone resident it is reasonable to continue treating in- Form 1099 generally are not considered employee for each of those businesses. kind compensation this way, and on employees, where such individuals SBA requested public input on whether how to measure whether in-kind would not be considered employees for such an arrangement is consistent with compensation is commensurate with size purposes under SBA’s Size Policy the purposes of the HUBZone program work performed. Of the eight comments Statement No. 1. 51 FR 6099 (February and how such arrangements could be received on this issue, half supported a 20, 1986). SBA believes that it does not structured in order to be consistent with definition of ‘‘employee’’ that includes make sense to find an individual who the goals of the program. SBA received commensurate in-kind compensation receives a Form 1099 to be an employee two comments in favor of allowing firms of a firm when determining the and half opposed this definition. The to count individuals employed through concern’s size, but to then not consider former noted that they supported this third-party businesses as employees and that same individual to be an employee element of the definition, as long as the one comment opposed. One commenter when determining compliance with in-kind compensation offered financial noted that these arrangements help HUBZone eligibility rules. If an value to the employee because that HUBZone firms connect with potential independent contractor meets the would in turn benefit the HUBZone employees who may not otherwise be employee test under SBA Size Policy area. For example, one commenter familiar with the program or its benefits. Statement No. 1, then that individual supported in-kind compensation in the By connecting HUBZone firms with should also be considered an employee form of housing for the employee. eligible employees, third-party for HUBZone eligibility purposes. If an Another supported in-kind businesses serve the program goal of individual is truly acting as an increasing employment opportunities compensation as long as it was independent contractor, that individual equivalent to the minimum wage. The for individuals in HUBZones. Another is acting as a subcontractor, not an commenter noted that an applicant commenters who opposed the proposed employee. Such an individual does not regulation expressed concern about the seeking HUBZone status (or one already receive the same benefits as an in the program) may not need a full-time difficulty of ensuring in-kind employee and is also not under the compensation complies with all employee, and that concern should not same control as an employee. be burdened with employing someone relevant labor and tax laws and were SBA received four comments in favor beyond its needs. Thus, arrangements concerned that it would be too of counting independent contractors as allowing one individual to be counted subjective. In response to these employees for HUBZone purposes if as a HUBZone employee for more than concerns, SBA has revised the they are considered employees for size one concern provides flexibility to firms definition to provide that ‘‘in-kind purposes, and three comments opposed to meet their needs and provides the compensation commensurate with the to counting them as employees under opportunity for an individual to be fully work performed’’ means compensation any circumstances (including for size that is of demonstrable financial value purposes). It is beyond the scope of this employed where they otherwise might to the individual and compliant with rulemaking to consider whether not be. SBA has considered all the relevant laws. In general, a firm would independent contractors should be comments received and is not changing be able to meet this standard by treated as employees for size purposes. the current policy allowing these providing documentation such as: Thus, SBA did not consider those arrangements where the arrangement Employment agreements for any comments in finalizing this rule. SBA appears legitimate and the HUBZone individuals receiving in-kind proposed including similar treatment applicant (or participant) shows that the compensation, showing the employment for HUBZone eligibility because there is individuals being hired through the relationship between the individuals value in ensuring uniformity and third-party business are doing legitimate and the firm, including the terms of consistency among its programs where work. employment, work requirements, and possible. More importantly, SBA SBA proposed to revise the definition form of compensation for work believes having one definition for size of ‘‘HUBZone small business concern’’ performed; records showing that the standards and another for HUBZone to remove ambiguities in the regulation. individuals worked the required eligibility will lead to confusion and Currently, the definition of this term is minimum of 40 hours per month at the ultimately make it more difficult for copied directly from the Small Business time of evaluation (e.g., signed firms to comply with SBA’s regulations. Act and addresses only the ownership timesheets, job logs, etc.); As noted above, SBA intends for these and control requirements. SBA documentation showing the value of the revisions to clarify participants’ and proposed to revise the definition to state in-kind compensation; and applicants’ understanding of the that ‘‘HUBZone small business concern documentation showing that the firm is program requirements. As such, the or certified HUBZone small business reporting and withholding appropriate final rule adopts the language noting concern’’ means a small business taxes from the compensation provided. that an independent contractor concern that meets the requirements SBA notes that this is not a change in considered an ‘‘employee’’ for size described in § 126.200 and that SBA has policy, but a clarification of what SBA regulations is also an employee for certified as eligible for federal currently requires. SBA believes this HUBZone purposes. contracting assistance under the fulfills the public policy aim of SBA requested comments on how HUBZone program. In addition, SBA facilitating the advantages that accrue to SBA should treat individuals who are proposed to replace the term ‘‘qualified

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HUBZone SBC’’ through the regulations employees of the concern other than utilizing the most recent data from the with the term ‘‘certified HUBZone small those employees who work at job-sites. Local Area Unemployment Statistics business concern’’ (or ‘‘HUBZone small In addition, SBA proposed to clarify report, which is annually produced by business concern’’) to make the that a concern must demonstrate that it the Department of Labor’s Bureau of regulations more clear, since firms must conducts business at a location in order Labor Statistics. The proposed apply to SBA and be certified as for that location to be considered its definition explains that a DDA is an area HUBZone small business concerns principal office. SBA believes HUBZone defined by the Department of Housing before they are can qualify to receive the firms should provide evidence that and Urban Development that is within benefits of the HUBZone program. business is being conducted at the Alaska, Hawaii, or any territory or In addition, SBA proposed to location to ensure the purposes of the possession of the United States outside implement section 1701(i) of the NDAA HUBZone Program are being fulfilled. A the 48 contiguous states. DDAs may be 2018 in the amended definition of firm that simply owns or leases a HUBZones if they are also ‘‘HUBZone small business concern.’’ In building but conducts no business there nonmetropolitan counties. The enacting section 1701(i), Congress is not fulfilling the purposes of the proposed rule noted that it has been intended for small businesses located in program. Finally, SBA proposed to add including qualified non-metropolitan expiring redesignated areas to retain clarifying language and examples to the counties that are DDAs in its program their HUBZone eligibility until the date definition of principal office, to since the statutory authority was on which SBA updates the HUBZone illustrate how the agency treats enacted, but had not yet amended the maps in accordance with the broader situations in which employees work at term qualified non-metropolitan county changes described in section 1701. In multiple locations. SBA received three to include DDAs. SBA received a other words, firms that were certified comments supporting these proposed comment noting that section 1701 of the HUBZone small business concerns as of changes. SBA also received two 2018 NDAA amends this definition the date of enactment of the NDAA 2018 comments asking if SBA intended for effective January 1, 2020, and suggesting (December 12, 2017), and that had ‘‘job-site’’ to refer only to firms whose that SBA amend this definition to reflect principal offices located in redesignated primary industry classification is this change. The statutory amendment areas set to expire prior to January 1, construction. The final rule clarifies that does not make a substantive change but 2020, shall remain certified HUBZone ‘‘job-site’’ refers to locations where work adds a reference to the HUBZone maps, small business concerns until SBA is performed for all service or corrects a reference to the Internal updates the HUBZone maps after the construction contracts. Revenue Code, and clarifies that 2020 decennial census, so long as all SBA proposed to amend the qualified nonmetropolitan counties are other HUBZone eligibility requirements definition of ‘‘qualified base closure designated based on a 5-year average of described in § 126.200 are met. This area’’ to remove ambiguities in the the available data. SBA agrees with this means that in order to continue to be regulation and to be consistent with comment and has amended this considered a certified HUBZone small SBA’s interpretation of the statutory definition accordingly. business concern, the firm must: text. SBA received a comment noting Continue to meet the HUBZone that section 1701 of the 2018 NDAA The proposed rule also amended the ownership and control requirements; amends this definition effective January definition of ‘‘reside.’’ This term is used continue to meet the 35% HUBZone 1, 2020, and suggesting that SBA amend when analyzing whether an employee residency requirement; and maintain its this definition to reflect this change. should be considered a HUBZone principal office in the redesignated area The statutory amendment does not resident for purposes of determining a or another qualified HUBZone. SBA make a substantive change but clarifies firm’s compliance with the 35% notes that to implement this change, that ‘‘qualified base closure areas’’ are HUBZone residency requirement. SBA SBA will ‘‘freeze’’ the HUBZone maps base closure areas that are treated as proposed to remove the reference to with respect to qualified census tracts, HUBZones for at least eight years. SBA primary residence, to eliminate the qualified non-metropolitan counties, agrees with this comment and has requirement that an individual and redesignated areas. As a result, for revised this definition accordingly. demonstrate the intent to live all redesignated areas in existence on SBA proposed to amend the somewhere indefinitely, and to provide December 12, 2017, the expiration of definition of ‘‘qualified census tract’’ to clarifying examples. SBA proposed to their HUBZone treatment has been make the regulation more readable. The remove the reference to primary extended until December 31, 2021. SBA proposed definition described the residence because many individuals do selected this date because SBA criteria used to define this term in the not have primary residences as the term estimates that the HUBZone maps will Internal Revenue Code, rather than is traditionally defined. SBA proposed have been updated to incorporate the simply cross-referencing it as the to remove the requirement to prove results of the 2020 census and to reflect regulation currently does. SBA received intent to live somewhere indefinitely the broad changes mandated by section a comment noting that section 1701 of because SBA does not have a reasonably 1701 by that time, and selecting a the 2018 NDAA amends this definition reliable method of enforcing this specific date provides stability to effective January 1, 2020, and suggesting requirement. In the alternative, SBA program participants. SBA did not that SBA amend this definition to reflect proposed that ‘‘reside’’ means to live at receive any comments on the proposed this change. The statutory amendment a location full-time and for at least 180 definition of ‘‘HUBZone small business does not make a substantive change but days immediately prior to the date of concern’’ and is implementing the simply adds a reference to the HUBZone application or date of recertification, as changes as proposed. maps. SBA agrees with this comment applicable. The definition also makes SBA proposed to amend the and has amended this definition clear that to determine an individual’s definition of ‘‘principal office’’ to accordingly. residence, SBA will first look to an eliminate ambiguities in the regulation. SBA proposed to amend the individual’s address as identified on his Specifically, SBA proposed to make definition of ‘‘qualified non- or her driver’s license or voter’s more clear that when determining metropolitan county’’ to include registration card, which is SBA’s current whether a concern’s principal office is Difficult Development Areas (DDAs) and long-standing policy. Where such located in a HUBZone, SBA counts all and to reflect SBA’s current policy of documentation is not available, SBA

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will require other specific proof of § 126.200(d)(3) to require that an area where the individual lives no residency, such as deeds or leases, or individual must live in a HUBZone for longer qualifies as a HUBZone or the utility bills. Additionally, this rule also at least 180 days after certification in individual has moved to a non- proposed examples to add clarity to order for that individual to be counted HUBZone area—this provision would these revisions. SBA specifically as a resident of a HUBZone beyond the have meaning only with respect to firms requested comments on these proposed first year after certification. The same that have employees performing changes. rule will apply to new HUBZone overseas contracts and are applying to SBA received 36 comments on the resident employees at the time of the HUBZone program for the first time. proposal that ‘‘reside’’ requires that an recertification—meaning that an An individual who already qualified as individual live in a place for at least 180 individual who is being considered a a HUBZone resident for a certified days before certification. Of these HUBZone resident employee for the first HUBZone small business would comments, 24 opposed the proposed time at the time of recertification must continue to be treated as a resident of changes, 9 supported them as proposed, have lived in a HUBZone for at least 180 a HUBZone for HUBZone program and 3 supported SBA’s intent behind days prior to the date of recertification eligibility purposes as long as he or she the proposed changes but suggested to be counted towards the 35% continued to work for the same certified alternate language to convey that intent. requirement, and then must continue to HUBZone small business. Of the comments opposed, most live in a HUBZone at least 180 days SBA received six comments in favor expressed concern that the 180-day after recertification in order to count as of considering the U.S. address of requirement would further limit the a HUBZone resident employee individuals working on overseas pool of eligible employees for HUBZone thereafter. Consequently, as long as an contracts as their addresses for firms. Several commenters suggested individual lived in a HUBZone for at HUBZone residency purposes and one shorter timeframes, including 90 days or least 180 days prior to certification (or comment opposed to this change. SBA 30 days. SBA understands these recertification, as applicable), he or she also received three comments suggesting concerns but believes that a shorter will count as a HUBZone employee for that SBA not consider the address of timeframe, or no timeframe at all, would that entire HUBZone program year, even employees working on overseas allow firms seeking HUBZone status to if the individual moves out of a contracts at all as long as they resided circumvent the intent of the program by HUBZone within 180 days of in HUBZones at the time of certification. encouraging individuals to move into a certification or recertification. However, As discussed below, that is exactly what HUBZone designated area shortly before if an individual moves out of a the change at § 126.200(d)(3) will the concern applies for certification and HUBZone within 180 days of accomplish. As such, SBA is adopting then move out of that area immediately certification (or recertification, as the rule as proposed. after the concern is certified, yet still be applicable), that person will not be SBA also proposed changes to or the counted as a HUBZone employee. That considered a HUBZone employee in elimination of the following definitions: clearly would not serve the purpose of subsequent years. Non-metropolitan county, redesignated the HUBZone program, which is to In addition, the proposed rule area, median household income, promote capital infusion into HUBZone metropolitan statistical area, primary areas and to employ individuals living acknowledged that more small businesses are performing contracts industry classification, small in HUBZones. This aim is best achieved disadvantaged business (SDB), and by counting as employees individuals overseas and are faced with the problem of how to treat those employees who statewide average unemployment rate. who have long-term connections in an SBA did not receive any comments area. However, SBA agrees with reside in a HUBZone when in the United States or its territories, but are regarding these definitions and is comments noting that a residency adopting the changes as proposed. requirement that is defined too narrowly temporarily residing overseas to perform may constrain firms’ ability to attract a contract. SBA proposed that it will 2. Eligibility Requirements consider the residence located in the and hire qualified employees, such as Section 126.200 students. SBA notes that this rule does United States as an employee’s not intend to prohibit students from residence, if the employee is working SBA proposed to reorganize § 126.200 counting as HUBZone employees if they overseas for the period of a contract. to make the section more readable and reside in a HUBZone area for at least SBA believes that as long as that to make the HUBZone eligibility 180 days. employee can provide documents requirements clearer. SBA received one Several commenters raised concerns showing he or she is paying rent or comment on proposed § 126.200(a), that the proposed rule did not require owns a home in a HUBZone, then the which addressed the ownership any specified period of HUBZone employee should be counted as a requirements for HUBZone small residency after certification and HUBZone resident in determining business concerns. The commenter believed some period of residence after whether the small business meets the requested that SBA make clear that certification should be required in order 35% HUBZone residency requirement. firms owned by tribes and Native to reduce the likelihood of firms trying Because of the change in Hawaiian Organizations (NHOs) need to circumvent the residency § 126.200(d)(3), discussed below— not be structured as corporations to be requirements. SBA believes that the which treats an individual as a eligible for the HUBZone program but regulation requiring an individual to HUBZone resident if that individual can take any legal form. SBA believes demonstrate an intent to continue to resided in a HUBZone at the time his or this is clear in the regulations. Proposed reside in a HUBZone indefinitely has her employer was certified into the §§ 126.200(a)(3) and 126.200(a)(6) been hard to enforce. As such, SBA does HUBZone program or at the time he or provided that in order to be eligible for not believe it would be helpful to keep she first worked for the certified HUBZone certification, a ‘‘concern must that requirement. SBA does agree, HUBZone small business concern (i.e., be . . . [a]t least 51% owned by one or however, that some post-certification the individual was hired after the firm more Indian Tribal Governments or by residency requirement should be was certified into the HUBZone a corporation that is wholly owned by imposed. As discussed further below, program), so long as he or she continues one or more Indian Tribal SBA has revised proposed to work for that same firm, even if the Governments’’ or ‘‘[a]t least 51% owned

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by one or more NHO[s], or by a considered to be in a HUBZone for at arrangements rise to the level of a corporation that is wholly owned by one least a known, specified amount of time. significant investment in a HUBZone or more NHO[s].’’ The current HUBZone The commenter believes that firms area that would warrant this exception. regulations define ‘‘concern’’ to mean ‘‘a would otherwise be hesitant to expend Similarly, SBA does not believe that the firm which satisfies the requirements in the substantial resources necessary to exception should apply to subleases, §§ 121.105(a) and (b) of this title.’’ move into a HUBZone if there is which also do not create a significant Section 121.105(b) provides: ‘‘A uncertainty as to how long such status investment in a HUBZone area. business concern may be in the legal would last. The commenter points to the Proposed § 126.200(d) addressed the form of an individual proprietorship, possibility that a firm could move into 35% HUBZone residency requirement, partnership, limited liability company, a qualified HUBZone area one year, and SBA received numerous comments corporation, joint venture, association, have the area lose its HUBZone status in response to this paragraph. In trust or cooperative.’’ SBA has the next year, and then get an additional proposed § 126.200(d)(1), SBA proposed implemented this paragraph as three years of HUBZone eligibility to change how SBA requires a firm to proposed. through the area’s redesignated status. meet the 35% residency requirement In proposed § 126.200(b), which The commenter argues that that is not when the calculation results in a addresses the size requirements for enough time for a firm to recoup its fraction. Previously, when the HUBZone small business concerns, SBA moving costs, and, thus, firms would calculation of 35% of a concern’s total clarified that in order to remain eligible choose not to relocate into a HUBZone employees resulted in a fraction, SBA as a certified HUBZone small business area. Another commenter noted that would round up to the nearest whole number. For example, under the current concern, a firm must qualify as small even if a small business concern located under the size standard corresponding rule, if a firm has 6 total employees, in an area that lost its HUBZone status to one or more NAICS codes in which since 35% of 6 is 2.1, then SBA would were willing to relocate its principal it does business. This clarification was round 2.1 up to 3 and require the firm office to another qualified HUBZone, its meant to prevent firms that have grown to employ 3 HUBZone residents to meet existing employees might be unable or to be other than small in all industries the 35% HUBZone residency unwilling to relocate with the business. from remaining in the HUBZone requirement. Under the proposed rule, SBA agrees with the commenters that program. SBA did not receive any SBA would round to the nearest whole establishing a principal office in a comments on this paragraph and it has number, rather than rounding up in HUBZone can be a significant been adopted as proposed. every instance. This means that if 35% In proposed § 126.200(c), which investment for any business, especially of a firm’s employees equates to X plus addresses the principal office small businesses, and that by providing .49 or less, SBA would round down to requirement, SBA proposed to replace more certainty regarding a firm’s X and not up to the next whole number. the word ‘‘adjoining’’ with the word eligibility for the program will further Thus, in the example above, SBA would ‘‘adjacent’’ as it was used to describe the programmatic purpose of round 2.1 down to 2 and would require HUBZones neighboring Indian encouraging firms to invest in these the firm to employ only 2 HUBZone reservations, because SBA believes this areas for the long term. In response to residents. SBA received 11 comments in term is more accurate. SBA did not the comments, the final rule provides support of the proposed change and one receive any comments on this change that a concern that owns or makes a opposed. The commenter who opposed and will adopt the provision as long-term investment (i.e., a lease of at the change argued that firms should be proposed. SBA did, however, receive least 10 years) in a principal office in an allowed to round up to meet the several comments recommending area that qualifies as a HUBZone at the requirement. SBA believes that this changes to the principal office time of its initial certification will be commenter misinterpreted SBA’s intent requirement that would take into deemed to have its principal office because the new rule will provide more account long-term investment in a located in a HUBZone for at least 10 flexibility and allow an even greater qualified HUBZone area. Two years from the date of that certification number of firms to meet the 35% commenters recommended that SBA as long as the firm maintains the long- residency requirement. Moreover, a rule adopt a provision similar to that term lease or continues to own the that mirrors the common usage of proposed for HUBZone residency, property upon which the principal rounding will reduce confusion for meaning that if a concern makes a office designation was made. This participants and applicants. This final substantial investment to establish a means that in the example cited by the rule adopts this change as proposed. principal office in a qualified HUBZone commenter above, the firm’s principal In order to provide stability and area and that area loses its HUBZone office would be deemed to be located in certainty for program participants, in status, the concern should be deemed to a HUBZone for 10 years from the date proposed § 126.200(d)(3), SBA proposed continue to have its principal office of its certification even though the area’s that an employee that resides in a located in a HUBZone for some redesignated status would have ended HUBZone at the time of a HUBZone extended period of time. One of the after five years. In order to be eligible for small business concern’s certification or commenters suggested that such period a HUBZone contract, the firm would recertification shall continue to count as of time should be for at least ten years still have to meet the 35% HUBZone a HUBZone employee as long as the or for the length of a long-term lease. residency requirement and continue to individual remains an employee of the They argue that with such a change, qualify as a small business concern firm, even if the employee moves to a firms would make more permanent under the size standard corresponding location that is not in a qualified investments and more substantial to the NAICS code assigned to the HUBZone area or the area where the leasehold improvements in a HUBZone, contract. The final rule also provides employee’s residence is located ceases which would benefit the community at that this change would not apply to to be qualified as a HUBZone. Under large. Another commenter suggested leases of office space that are shared this change, a certified HUBZone small that any firm that has moved its with one or more other concerns or business concern would have to principal office into a qualified individuals, or to other co-working maintain records of the employee’s HUBZone area should be able to have arrangements. SBA does not believe that original HUBZone address, as well as that principal office location be ‘‘virtual offices’’ or co-working records of the individual’s continued

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and uninterrupted employment by the HUBZone small business concern, but counted as employees of the HUBZone HUBZone small business concern, for who moved out of the HUBZone prior applicant/participant when determining the duration of the firm’s participation to the change specified in this final rule. the concern’s compliance with the in the HUBZone program. The commenter asked for clarification principal office and 35% percent SBA received 21 comments in support as to whether such an employee, who HUBZone residency requirements. The of the proposed change, two partially lost his or her status as a HUBZone proposed changes to § 126.204 clarified supporting the proposed change, four employee when he or she moved out of that where there is evidence that a opposed, and two requesting a HUBZone but is still employed by the HUBZone applicant/participant and its clarification. The comments in support certified HUBZone small business affiliate are intertwined and acting as of the proposed change agreed with concern, would once again count as a one, SBA will count the employees of SBA’s intent, which is to avoid HUBZone employee under this final one as employees of the other. Further, penalizing successful HUBZone firms rule. The new regulatory language of the proposed rule stated the HUBZone with employees who, as a result of the § 126.200(d)(3) specifies that an applicant or concern must demonstrate firm’s success, have increased flexibility employee who resides in a HUBZone at to SBA a clear line of fracture between in deciding where to live. The the time of certification or it and any affiliate in order for SBA to unsupportive comments noted that the recertification shall continue to count as not count the affiliate’s employees when change would enable firms to maintain a HUBZone resident employee as long determining the concern’s principal their HUBZone status even if they are as the individual continues to live in the office or compliance with the 35% no longer benefiting the communities in HUBZone for at least 180 days after residency requirement. This has always which they are located by providing certification. There are three been SBA’s policy and SBA merely employment opportunities to residents. requirements in this provision. First, the sought to eliminate ambiguities in the SBA recognizes this legitimate concern, individual must live in a HUBZone at regulation. but believes it would be more harmful the time he or she is counted as a When looking at the totality of to the public policy goals of the program HUBZone resident in order to qualify a circumstances to determine whether for firms to be punished by their own firm as a certified HUBZone small individuals are employees of a concern, success by requiring them to either fire business concern. Second, the SBA will review all information, employees who have moved out of a individual must continue to live in a including criteria used by the Internal HUBZone, or to have to seek out and HUBZone for at least 180 days after the Revenue Service (IRS) for Federal hire additional employees who certification. Third, the individual must income tax purposes and those set forth currently live in HUBZones, regardless continuously work for the certified in SBA’s Size Policy Statement No. 1. of their staffing needs. In addition, a HUBZone small business concern. In This means that SBA will consider the HUBZone concern would always be the case questioned in the comment, the employees of an affiliate firm as required to maintain its principal office individual lived in a HUBZone at the employees of the HUBZone small in a HUBZone, which would support time he or she was counted as a business if there is no clear line of increased economic activity in the HUBZone resident to qualify a firm as fracture between the business concerns HUBZone. In response to the change a certified HUBZone small business made to the term ‘‘reside,’’ the final rule concern. That individual has continued in question, the employees are in fact also makes a change to § 126.200(d) to to work for the certified HUBZone small shared, or there is evidence of require an employee to continue to live business concern since its certification. intentional subterfuge. When in a HUBZone for at least 180 days after Thus, as long as the individual determining whether there is a clear line certification (or recertification if that continued to live in a HUBZone for at of fracture, SBA will review, among was the first time that the individual’s least 180 days after the certification other criteria, whether the firms operate HUBZone residency was used to qualify date, that individual would count today in the same or similar line of business; the concern). Then, as long as he or she as a HUBZone employee. It would not operate in the same geographic location; continuously remains an employee of matter that for some certain amount of share office space or equipment; share the concern, even if the employee time the individual did not count as a any employees; share or have similar subsequently moves to a location that is HUBZone employee. websites or email addresses; share not in a HUBZone or the area in which SBA proposed to clarify in telephone lines or facsimile machines; the employee’s residence is located no § 126.200(g) that the concern and its have entered into agreements together longer qualifies as a HUBZone, he or she owners cannot have an active exclusion (e.g., subcontracting, teaming, joint will continue to count as a HUBZone in the System for Award Management venture, or leasing agreements) or employee for that concern. However, if and be certified into the program. SBA otherwise use each other’s services; an individual moves out of a HUBZone, believes that this logically follows from share customers; have similar names; or the area where he or she lives loses a debarred or suspended status, but have key employees participating in its status as a HUBZone within 180 amended the regulations for clarity each other’s business decisions; or have days, the individual will not count as a nevertheless. Debarred and suspended hired each other’s former employees. HUBZone employee at the time the firm entities are ineligible for Federal Conversely, SBA would not treat the seeks recertification. Similarly, if an contracting assistance and would thus employees of one company as individual has a break in employment not receive any benefits from being employees of another for HUBZone by the HUBZone firm, he or she will not certified as a HUBZone small business program purposes if the two firms count as a HUBZone employee upon concern. SBA received one comment in would not be considered affiliates for reemployment unless the individual has support of this change and is adopting size purposes. SBA will look at the resided in a HUBZone for at least 180 the rule as proposed. totality of circumstances to determine days prior to the date the firm seeks whether it would be reasonable to treat recertification. Section 126.204 the employees of one concern as Finally, one commenter asked for SBA proposed changes to § 126.204 in employees of another for HUBZone clarification regarding an employee who order to clarify that a HUBZone small program purposes only where SBA first lived in a HUBZone at the time he or business concern may have affiliates, determines that the two firms should be she was employed by a certified but the affiliate’s employees may be considered affiliates for size purposes.

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SBA received seven comments on this SBA has also added an example to SBA proposed to require that the proposed change. All seven comments § 126.204, which refers to the definition application and any supporting supported SBA’s proposed amendment of ‘‘employee’’ laid out in § 126.103. documentation must be submitted by a person authorized to represent the clarifying that employees of affiliates are Section 126.205, Section 126.206, concern. SBA did not receive any considered employees of a HUBZone Section 126.207 participant or applicant if there is no comments regarding this section and is clear line of fracture between the two. In § 126.205, SBA proposed to delete adopting the proposed changes as final. Several of the comments requested the statement that ‘‘Participation in other SBA Programs is not a Section 126.304 clarifying examples. One commenter requirement for participation in the SBA proposed several changes to was concerned that any contact between HUBZone Program.’’ SBA believes that § 126.304. The proposed rule clarified a parent company or one or more sister this language is unnecessary and may that an applicant must submit a companies could cause SBA to aggregate merely confuse prospective HUBZone completed application and all the employees of those concerns in small businesses. documents and a representation that it determining whether 35% of the In § 126.206, SBA proposed to replace meets the program’s requirements as of concern’s employees reside in a the term ‘‘non-manufacturers’’ with the date of the application and that the HUBZone. That was not SBA’s intent. In ‘‘nonmanufacturers’’ to be consistent information provided and any response, SBA has clarified that with SBA’s regulations at § 121.406(b). subsequent information provided is minimal business activity between the SBA proposed to amend the title and complete, true and accurate. The rule concern and its affiliate and the use of text of § 126.207 to clarify that a also proposed to require that the common back office or administrative HUBZone small business concern may representation be electronically signed services between parent and/or sister have multiple offices, as long as the by a person who is authorized to concerns will not result in an affiliate’s firm’s principal office is located in a represent the concern. SBA believes that employees being counted as employees HUBZone, and to clarify that a different this should either an owner or officer of of the HUBZone applicant or HUBZone rule applies to concerns owned by the applicant, and not an administrative small business concern. Several Indian Tribal Governments. employee acting on behalf of an officer. Further, SBA proposed to clarify that commenters requested additional SBA did not receive any comments in after an application has been submitted, clarification on how SBA would treat response to the proposed changes to §§ 126.205, 126.206, and 126.207. the applicant must immediately notify the employees of sister companies for SBA of any changes that could affect its entity-owned companies. These Therefore, SBA is adopting the proposed changes as final. eligibility. The applicant would have to comments recommended that SBA state provide information and documents to that there would be a presumption that 3. Certification support the changes. the employees of sister-owned The HUBZone program is a Finally, SBA proposed to clarify that companies of entities should not be certification program. In other words, a if an applicant believes that an area is counted. SBA does not believe that such small business concern must submit an a HUBZone but SBA’s website is not a presumption is needed. This section application and supporting documents showing the area to be a qualified clarifies when employees ‘‘of an to SBA in order for SBA to determine HUBZone, the applicant must note this affiliate’’ should be counted as eligibility and certify the company into on the application. Further, the employees of the applicant or HUBZone the program. SBA proposed several applicant must provide documents small business concern. Under clarifications to its certification process. demonstrating why it believes that the § 121.103(b)(2)(ii) of SBA’s size area meets the statutory criteria of a Section 126.300 regulations, business concerns owned HUBZone. It cannot merely assert that it and controlled by Indian Tribes, ANCs, SBA proposed to divide § 126.300 believes the area is underutilized and NHOs, or CDCs are not considered to be into several paragraphs to make it should be a HUBZone; it must show that affiliated with other concerns owned by clearer and more readable, to move the the area meets the statutory criteria. these entities because of their common discussion of the adverse inference rule SBA received four comments to the ownership, common management, or to § 126.306, and to clarify that SBA changes proposed to § 126.304. One common administrative services. may conduct site visits, conduct commenter disagreed with requiring electronic signatures, believing that not Affiliation may be found for other independent research, and review all small businesses have the capability reasons. Thus, if the interconnections additional information (such as tax and to e-sign. SBA agrees. The final rule between sister companies of a tribe, property records, public utility records, postal records, and other relevant merely requires that an authorized ANC, NHO or CDC are merely based on representative of the concern submit the common ownership, management or information). SBA received no comments on § 126.300 and is adopting application and supporting performance of administrative services, the proposed changes as final. documentation. SBA will accept the firms would not be considered electronic signatures but will not affiliates and would not be aggregated Section 126.303 require them. In addition, a commenter for HUBZone eligibility purposes. It is SBA proposed to revise § 126.303 to noted that while proposed § 126.304(a) only where affiliation exists between update the instructions for submitting required representations to be made entity-owned sister companies that SBA electronic applications. The proposed only by an owner of the applicant, the might count employees of a sister rule clarified that an applicant must supplementary information to the company as employees of the HUBZone submit a completed application and all proposed rule noted that the person applicant/participant when determining documents and a representation that it making representations on behalf of a the concern’s compliance with the meets the program’s requirements as of concern should either be an owner or principal office and 35% percent the date of the application and that the officer of the applicant, and not an HUBZone residency requirements, and information provided and any administrative employee acting on then only if there is not a clear line of subsequent information provided is behalf of an officer. The commenter fracture between the business concerns. complete, true and accurate. Further, supported the flexibility provided for in

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the supplementary information. In as of the date it submitted its reconsideration when it receives a response to the comment, the final rule application and up until the time the D/ determination denying admission to the authorizes either an owner or officer to HUB issues a decision. SBA cannot HUBZone program. SBA proposed this represent the concern. certify a business into the program that change in order to make the HUBZone SBA received one comment on does not meet the eligibility program more consistent with the 8(a) § 126.304(c). The commenter did not requirements at that time. BD program, where a firm that is think a concern should have to wait 90 SBA received three comments. The declined admission may request days to resubmit its application. This first comment suggested that reconsideration of that decision and requirement however is not new. The applications should be processed within have an opportunity to demonstrate its proposed regulation moved the thirty days of SBA receiving a complete eligibility within 45 days of the decline requirement to a new section for clarity application submission. The second decision rather than having to wait a and consistency. The current comment noted that the 2018 NDAA year to reapply. SBA received three requirement can be found in § 126.309. requires applications to be processed in comments regarding this section. One This provision is consistent with other 60 days, starting January 1, 2020, and commenter supported the changes to proposed sections of the regulations that suggested that the rule be changed to be § 126.309 as proposed. One commenter require concerns that are found consistent with this upcoming statutory believed that the 15-day timeframe set ineligible to wait 90 days before requirement. SBA agrees with this forth in the proposed rule for submitting submitting a new application for the second comment and has made this a request for reconsideration was program. As such, the final rule does change to the rule. The third comment insufficient and recommended not shorten the 90-day time period to discussed issues with the current extending the amount of time to submit reapply for HUBZone certification after application process that are beyond the a request for reconsideration. One initially being declined. scope of this rulemaking. commenter thought that a SBA did not receive any comments to proposed § 126.304(d), which Section 126.307 reconsideration process that in effect authorized an applicant to represent SBA proposed to amend § 126.307 to amounted to allowing a concern to that it believes that an area is a qualified make a general reference to the website submit a totally revised application HUBZone where SBA’s website is not where SBA identifies where firms are contradicted the provision requiring showing the area as such. This rule listed as certified HUBZone small applicants to wait 90 days before adopts the proposed language as final. business concerns so that the regulation submitting a new application. If SBA SBA received one comment on itself does not have to be updated every were to proceed with authorizing § 126.304(e), which required concerns to time a change in the website location reconsideration, SBA agrees with the retain records demonstrating their occurs. The proposed rule deleted the commenter that the 15-day timeframe eligibility for six years. The commenter reference to the ability of requesters to should be lengthened. Since SBA allows believed this requirement was overly obtain a copy of the list of certified a concern to submit a new application burdensome. However, this is not a new HUBZone small business concerns by after 90 days from the date of the requirement. SBA moved the writing to the D/HUB at SBA. An decline decision, it would not make requirement and simplified the wording interested party may find all firms that sense to extend the reconsideration to provide more clarity. The are certified HUBZone small business process to that extent. With 15 days requirement to maintain these records concerns by searching the Dynamic being too short and 90 days not making for six years is currently in § 126.401(b). Small Business Search (DSBS) system, sense with the ability to reapply at that Given that this is not a new and can verify a specific concern’s point, SBA would have to determine requirement, SBA is adopting the rule as HUBZone certification. SBA believes some point in between to be the proposed. that the availability of this search appropriate amount of time. In response to the comments and upon further Section 126.306 function makes written requests an outdated and inefficient way of consideration, SBA believes that a SBA proposed several changes to obtaining current information about reconsideration process is not needed. § 126.306. SBA proposed to clarify that certified HUBZone small business Unlike the 8(a) BD program, where a the agency must receive all required concerns. SBA did not receive any concern must wait one year from the information, supporting documents, and comments on this change and will adopt date of a final decline decision to a completed HUBZone representation the rule as proposed. reapply to the program, a concern can before it will begin processing a reapply to the HUBZone program 90 concern’s application and that SBA will Section 126.308 calendar days after the date of decline. make a final decision within 90 SBA proposed to amend § 126.308 to Thus, a reconsideration process that calendar days after receipt of a complete clarify that certified HUBZone small allows changes to overcome deficiencies package, whenever practicable. SBA business concerns cannot ‘‘opt out’’ of in an application in a shortened proposed to clarify that the burden of being publicly displayed in the DSBS timeframe becomes redundant. The proof to demonstrate eligibility is on the system. All certified HUBZone small current HUBZone application process applicant concern and if the concern business concerns appear in DSBS as does not authorize reconsideration, and does not provide requested information certified HUBZone small business SBA has not been inundated with within the allotted time provided by concerns, and those not so appearing recommendations calling for a SBA, or if it submits incomplete will not be eligible for HUBZone reconsideration process. SBA merely information, SBA may presume that contracts. SBA did not receive any sought to make applying to the disclosure of the missing information comments on this change and will be HUBZone program consistent with that would adversely affect the business adopting the rule as proposed. for the 8(a) BD program. Upon further concern and demonstrate a lack of review, SBA believes that is not eligibility in the area or areas to which Section 126.309 necessary in this instance. Allowing a the information relates and decline the SBA proposed to revise § 126.309 to concern to reapply for the HUBZone applicant. Finally, SBA proposed to add a new provision permitting a firm program 90 days after a decline decision clarify that an applicant must be eligible to submit a formal request for appears to be a reasonable and

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appropriate amount of time. As such, documentation related to the concern’s process, a majority of commenters the final rule does not adopt the ownership and principal office, favored the change. Several commenters proposed reconsideration process. compliance with the 35% HUBZone believed that the current process of residency requirement, and the 4. Program Examinations requiring recertification by SBA every concern’s ‘‘attempt to maintain’’ 35% of three years should be retained and one As part of SBA’s oversight its employees from a HUBZone during commenter recommended responsibilities for the HUBZone the performance of a HUBZone contract. recertification every five years. program, SBA monitors certified SBA did not receive any comments on SBA does not seek to impose HUBZone small business concerns, and this section and is adopting the unnecessary burdens on certified verifies information submitted by proposed language as final. HUBZone applicants, by conducting HUBZone small business concerns. program examinations. Section 126.404 However, SBA takes seriously its responsibility to ensure that only Section 126.401 SBA proposed to add a new § 126.404 to provide the procedures and possible eligible concerns remain as certified SBA proposed to revise § 126.401 to outcomes of a program examination. HUBZone small business concerns. In clarify what a program examination is. Whether a concern is applying to the response to comments received from The proposed rule provided that a HUBZone program for the first time, is both small business concerns and program examination is a review by undergoing recertification, or is subject procuring agencies, SBA agrees that a SBA that verifies the accuracy of any to a program examination for another full document review recertification certification made or information reason, SBA’s program examination can process is not needed annually. Such a provided as part of the HUBZone result in a decision finding the concern process could be burdensome on small application or recertification process. either to be eligible to participate in the businesses, difficult for SBA to timely SBA did not receive any comments on program (either for the first time or to accomplish, and, therefore, could be this provision and is adopting § 126.401 be able to continue in the program), or inefficient for procuring agencies as proposed. not eligible to participate in the program seeking to make awards through the Section 126.402 (which would result in a disapproval of HUBZone program. The final rule keeps an application or the decertification of SBA did not receive any comments on the requirement that certified HUBZone a HUBZone concern). SBA received a the minor proposed wording change to small business concerns must annually comment noting that section 1701(h) of § 126.402. However, SBA did receive represent that they continue to meet all the 2018 NDAA requires that starting numerous comments on §§ 126.500 and HUBZone eligibility criteria. However, January 1, 2020, firms found ineligible 126.501 concerning the lack of clarity SBA will accept the representation as a result of a program examination be regarding the burden on participants without requiring the certified given 30 days to provide documentation during the recertification process. In HUBZone small business concern to showing that they are in fact eligible. order to provide more clarity, SBA has submit any supporting information or During this time, firms cannot compete made changes to § 126.402 related to documentation unless SBA has reason for or be awarded HUBZone contracts. program examinations and when to question the concern’s recertification. If after the 30-day period, the firm has program examinations may be part of If at the time of its recertification the not demonstrated its HUBZone the recertification process. SBA is certified HUBZone small business eligibility, it shall be decertified. SBA adding new language to § 126.402 to concern is not currently performing a agrees with this comment and makes provide clarity as to when a program these changes to the final rule. HUBZone contract, its recertification examination will be initiated. The new means that at least 35% of its employees language specifically references 5. Maintaining HUBZone Status continue to reside in a HUBZone and § 126.500 and the recertification Section 126.500 the principal office of the concern process. The final rule also provides continues to be located in a HUBZone. that SBA will conduct program SBA proposed to amend § 126.500 to If at the time of its recertification the examinations when determined to be require HUBZone small business certified HUBZone small business necessary during recertification. In concerns to recertify annually to SBA concern is currently performing a order to provide additional clarity, the that they continue to meet all HUBZone HUBZone contract, its recertification eligibility requirements, instead of final rule also incorporates language means that at least 20% of its employees requiring them to undergo a similar to that contained in § 124.112(c) continue to reside in a HUBZone and recertification by SBA every three years for the 8(a) BD program into § 126.402. the principal office of the concern as required prior to the proposed Specifically, the final rule provides that continues to be located in a HUBZone. SBA will examine a certified HUBZone change. The proposed rule also provided that when a concern fails to This requirement is no different or any small business concern’s eligibility for more burdensome than the current continued participation in the program submit its annual recertification to SBA, requirement that concerns must upon the receipt of specific and credible SBA will start proceedings to decertify annually certify their size status in the information alleging that a certified the concern. System for Award Management (SAM). HUBZone small business concern no SBA received 24 comments in SBA will then require a full document longer meets the eligibility requirements response to this proposed change. for continued program eligibility. Although many commenters supported review recertification, or program the change, a majority thought that examination, every three years, which is Section 126.403 recertification on an annual basis would the same as currently required. SBA SBA proposed to revise § 126.403 to be burdensome for certified HUBZone believes this approach balances the clarify what SBA will review during a small business concerns if need to not impose unnecessary program examination. The rule stated recertification entailed a full burdens while promoting program that SBA would be able to review any programmatic review of concerns each integrity and ensuring only eligible information related to the concern’s year. If, however, recertification firms remain as certified HUBZone HUBZone eligibility, including required some sort of less exhaustive small business concerns.

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Section 126.501 by, or merges with another business small business concern could lose its SBA proposed to amend § 126.501 to entity or fails to attempt to maintain the designation in DSBS as a certified provide that once certified, a HUBZone minimum employee HUBZone HUBZone small business concern, small business concern will remain residency requirement (see § 126.103) including if it has: (1) Been decertified eligible for HUBZone contract awards where the concern is performing a as a result of a protest; (2) been for one year from the date of HUBZone contract. Either case will then decertified as a result of the procedures certification (as long as the concern trigger a program examination to set forth in the regulations; or (3) qualifies as small for the size standard determine whether the concern submitted a voluntary withdrawal corresponding to the NAICS code continues to be eligible to participate in agreement to SBA. assigned to any such contract). On the the HUBZone program. SBA did not receive any comments on this section. On further consideration, one-year anniversary of the firm’s Section 126.502 SBA believes that some clarification is HUBZone certification, the firm would Proposed § 126.502 provided that be required to recertify to SBA that it needed. As proposed, § 126.504(c) there is no limit to the length of time a provided that after a concern has been continues to meet the HUBZone concern may remain qualified as a eligibility requirements or voluntarily removed as a certified HUBZone small certified HUBZone small business business concern in DSBS (or successor withdraw from the HUBZone program. concern in DSBS (or successor system) SBA received 19 comments on system), it is ineligible for the HUBZone so long as it continues to comply with proposed § 126.501. Of the comments, program and may not submit an offer on all eligibility requirements. SBA did not 16 supported the change. One comment, or be an awarded a HUBZone contract. receive any comments on this section while supportive, was also concerned When SBA’s regulations required a and is adopting § 126.502 as proposed. about the burden that could be caused concern to be an eligible HUBZone by requiring a full re-application Section 126.503 small business both at the time of offer process each year for recertification. and time of award, it made sense to say SBA proposed to amend § 126.503 to that as soon as a concern was decertified This comment also recommended provide the procedures for program keeping the certification good for a year, it would be ineligible for any future decertification and certain program HUBZone contract. However, under the and only doing a full application-type examinations. The proposed rule also certification every three years. SBA proposed rule and now this final rule, authorized SBA to propose where a concern is certified as of a believes it has addressed the concerns decertification of a HUBZone small raised by this comment in changes made particular date, it remains eligible to business concern that is performing one submit offers for HUBZone contracts for to § 126.500, discussed above. The final or more HUBZone contracts if SBA rule has made some clarifications to a year, and if an award occurs after that determines that the concern no longer one-year period, the concern would still § 126.501 to take into account the has at least 20% of its employees living changes made by this rule to § 126.500. be eligible for the award even if it could in a HUBZone. not recertify its status as an eligible SBA received two comments that SBA received several comments on opposed the changes generally. The HUBZone for the following year. Thus, this section. One comment supported as long as the concern was eligible at the commenters believed that the change the proposed change. One commenter could lead to issues with employees time of its offer (and eligibility relates recommended that firms found back to the date of its certification or being fired near the time of ineligible pursuant to a HUBZone status recertification or concerns generally not recertification), it could be awarded a protest should not be decertified. SBA HUBZone contract even if it no longer meeting the eligibility requirements does not agree with this comment. It is throughout the year. The comments appears as a certified HUBZone small important for concerns’ certifications business concern on DSBS on the date either requested the change not be and recertifications to be accurate. If a adopted, or that additional regulations of award. However, if SBA determines concern is found to not meet the that the concern’s recertification was be added to allow additional eligibility requirements at the time of its opportunities for SBA to review a invalid (i.e., based on a protest or certification or recertification, SBA program examination SBA determines concern’s eligibility, possibly a protest believes it should be decertified from mechanism. SBA does not believe these that the concern did not qualify as a the program. The concern will be HUBZone small business concern on the changes are needed to this section. As allowed to reenter the program by re noted above, the final rule has amended date of its recertification), the concern applying at a later date. will be ineligible for the award of any § 126.402 to provide that SBA will One comment recommended that the HUBZone contract for which it examine a certified HUBZone small regulation should provide a specific previously certified its HUBZone status. business concern’s eligibility for amount of time for a concern proposed continued participation in the program for decertification to respond to SBA 6. Contractual Assistance upon the receipt of specific and credible instead of merely stating that the Section 126.601 information alleging that a certified concern must respond to the notice of HUBZone small business concern no proposed decertification within the SBA proposed to revise § 126.601 to longer meets the eligibility requirements timeframe specified in the notice. SBA remove the discussion of the for continued program eligibility. In agrees and has amended this section to acquisition-related dollar thresholds in addition, SBA can perform a program require a response to SBA within 30 paragraph (a) because this does not examination with respect to a concern’s days from the date it receives the letter. relate to additional requirements a continued eligibility at any time SBA This 30-day response time is the same certified HUBZone small business deems it to be warranted. as that set forth in the 8(a) BD program concern must meet in order to submit an In order to clarify SBA’s intent in for a concern to respond to a notice of offer on a HUBZone contract. In response to some of the concerns raised proposed termination. addition, SBA proposed to move the by the commenters, the final rule adds discussion of compliance with the language requiring a certified HUBZone Section 126.504 limitations on subcontracting for small business concern to timely notify SBA proposed to amend § 126.504 to multiple award contracts currently in SBA if the concern acquires, is acquired reflect the various ways that a HUBZone paragraph § 126.601(g) to proposed

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§ 126.700, which specifically addresses concern must maintain at least 20% of SBA did not receive any comments on the limitations on subcontracting its employees residing in a HUBZone this section and is adopting § 126.700 as requirements for HUBZone contracts. only while preforming that task order. proposed. Finally, SBA proposed to move the Section 126.619 7. Protests discussion of recertification currently in paragraph § 126.601(h) to proposed new SBA proposed to move the discussion Section 126.800 § 126.619, which includes the of recertification currently in paragraph The proposed rule amended § 126.800 requirement for firms to recertify their § 126.601(h) to proposed new § 126.619. by changing the phrase ‘‘qualified HUBZone status for HUBZone set-aside The proposed rule required an offeror to HUBZone SBC’’ to ‘‘certified HUBZone orders and Blanket Purchase be a certified HUBZone small business small business concern’’ throughout the Agreements. SBA received one concern at the time it submits an offer section. SBA received no comments in comment in support of these changes for an order issued against a MAC where response to the proposed changes. The and adopts § 126.601 as proposed. the order is set-aside for HUBZone small business concerns and the underlying final rule makes minor, non-substantive Section 126.602 MAC was not a HUBZone contract. SBA edits to the wording of the section for SBA proposed to amend § 126.602 to received one comment on § 126.619. clarity. be consistent with the proposed change The commenter believed that orders or Section 126.801 requiring certified HUBZone small Blanket Purchase Agreements issued businesses to demonstrate their under any General Services SBA proposed to amend § 126.801 to eligibility at the time of initial Administration Federal Supply clarify how a HUBZone status protest certification and annual recertification Schedule (FSS) contract should be should be filed and referred to SBA. only. Under the proposed regulation, excluded from this requirement. The Among other clarifications, SBA certified HUBZone small business commenter argued that the FSS program proposed to clarify that HUBZone status concerns would no longer be required to has a successful track record of protests may be filed against HUBZone meet the 35% HUBZone residency increasing small business opportunities joint ventures. For consistency requirement at all times while certified under current ordering procedures and purposes, SBA proposed to also make in the program. This means that they no was concerned that changing those these clarifications for Service-Disabled longer would have to meet this procedures could have an adverse effect Veteran-Owned (SDVO) small business requirement at the time of offer and time on small business. The final rule adopts joint ventures and Women-Owned of award for a HUBZone contract. this recommendation to exclude orders Small Business (WOSB) joint ventures However, HUBZone small businesses and Blanket Purchase Agreements by amending §§ 125.28(b) and 127.602. would continue to have to ‘‘attempt to issued under any FSS contract at this SBA did not receive any comments on maintain’’ compliance with this time. Under this requirement, an offeror these amendments. In addition, SBA requirement during the performance of must be identified as a certified received a comment suggesting that SBA a HUBZone contract. HUBZone small business concern in clarify that it dismisses protests that are In order to be consistent with the SAM at the time it submits an offer for moot or not filed by an interested party. changes made to § 126.500 in response an order issued against a MAC where SBA agrees with this commenter and to comments, the final rule makes the order is set-aside for HUBZone small has amended § 126.804, which similar corresponding changes to business concerns and the underlying addresses this issue more specifically. § 126.602. The final rule clarifies that a MAC was not a HUBZone contract, Section 126.803 certified HUBZone small business except for FSS contracts. Being a concern that has received a HUBZone certified HUBZone small business at the SBA proposed to amend § 126.803 to contract must have at least 20% of its time of offer for an order merely means specify the date at which a protested employees residing in a HUBZone that the concern has been certified or concern’s eligibility will be determined, during the performance of any recertified within a year of that offer and in light of the changes contained in HUBZone contract and at the time of its is identified in SAM as a certified § 126.501 providing that once certified, annual recertification. HUBZone small business concern. a HUBZone small business concern will SBA received two comments on Specifically, time of eligibility for the remain eligible for HUBZone contract § 126.602. One commenter order relates back to the certification or awards for one year from the date of recommended that SBA clarify recertification date, not to the date of certification. Proposed § 126.803(a) § 126.602(b) regarding how the attempt the offer for the order. The final rule provided that SBA will determine the to maintain requirement should be also adds language at the end of eligibility of a concern subject to a applied to indefinite delivery, indefinite paragraph (a)(5) to clarify that a HUBZone status protest as of the date of quantity contracts, including multiple procuring agency may not count options its initial certification or its most recent award contracts. SBA believes the as an award to a HUBZone small recertification, whichever is later in regulatory language is clear. If the base business concern where the concern has time. This means that if a concern is contract is set aside or reserved been found ineligible for the award of certified on January 1, and the concern exclusively for eligible HUBZone small the contract pursuant to a HUBZone submits an offer on June 1 of the same business concerns, then the certified status protest pursuant to § 126.803. year and its status is protested, SBA will HUBZone small business concern must determine the concern’s eligibility as of maintain at least 20% of its employees Section 126.700 January 1. After the firm completes its residing in a HUBZone throughout the As noted above, SBA proposed to annual recertification, any subsequent full contract. However, if the concern is move the discussion of compliance with protests during that year will relate back performing an order that was set aside the limitations on subcontracting for to its eligibility as of the date its of or reserved for HUBZone small business multiple award contracts currently in recertification. SBA did not receive any concerns on a contract that was not paragraph § 126.601(g) to proposed comments on this change and adopts it itself set aside or reserved for HUBZone § 126.700, which specifically addresses as final in this rule. small business concerns, then the the limitations on subcontracting SBA also proposed to amend certified HUBZone small business requirements for HUBZone contracts § 126.803 to state that a concern that is

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the subject of a HUBZone protest must decades is the lack of stability and from the current process is to require submit responsive information within predictability for program participants certified HUBZone small business three days of receiving notification of a and procuring agencies. This rule concerns to annually represent to SBA timely and specific protest. The current attempts to make it easier for small that they continue to meet all HUBZone rule is that a concern must submit such business concerns to understand and eligibility criteria. As such, we estimate information within five days. SBA comply with the program’s that the burden imposed by this change received twelve comments on the requirements and to make the HUBZone will be cut in half from that proposed. proposed change, all of which opposed program a more attractive avenue for Instead of 3,800 hours, SBA estimates a it. In response to the comments, SBA procuring agencies. In addition, this burden of 1,900 hours with an estimated has revised this provision in the final rule implements section 1701(i) of the annual cost of $83,714. rule to reflect that concerns will NDAA 2018, which allows certain The final rule also provides that continue to have five business days to certified HUBZone small business HUBZone small business concerns will respond to protests. concerns to maintain their HUBZone not have to represent or certify that they In addition, SBA proposed to update status until 2021, and section 1701(h) of are eligible at the time of offer and all instructions contained in the the NDAA 2018, which provides that award for every HUBZone contract, HUBZone regulations related to HUBZone application decisions will be which are the current program submission of information and made within 60 days and that firms requirements. Under current rules, a documentation to SBA to specify that found ineligible under a program HUBZone small business concern must such submissions must be completed examination will have 30 days to be eligible both at the time of offer and electronically. The appropriate email provide documentation demonstrating award of a HUBZone contract. Based on addresses have been added and updated their eligibility. Federal Procurement Data System where necessary, and mailing addresses (FPDS) data, approximately 2,100 new 2. What are the potential benefits and HUBZone contracts are awarded each and fax numbers have been removed. costs of this regulatory action? This change is intended to reduce the fiscal year. We estimate it takes paperwork burden on program The rule addresses or clarifies issues, approximately 1 hour for a firm to applicants and participants. There were which will provide clarity to small determine it is eligible at the time of no comments on these proposed businesses and contracting personnel. offer and approximately 1 hour for a changes and SBA adopts them as final SBA believes that improved clarity will firm to determine it is eligible at the in this rule. necessarily alleviate burdens on small time of award. Thus, this proposed rule business and make it easier to will reduce burden on HUBZone small Section 126.804 participate in the program. business concerns by approximately As discussed above, in response to a The proposed rule sought to 4,200 hours for an estimated annual comment received, SBA has revised implement a formal request for savings of $185,052. § 126.804 to clarify that SBA will reconsideration process with an SBA has amended the definition of dismiss any HUBZone status protest associated annual cost of about $500. the term ‘‘employee’’ such that an that is premature, untimely, unspecific, Because this final rule is not adopting employee who resides in a HUBZone at moot, or not filed by an interested party. a reconsideration process, that cost will the time of a HUBZone concern’s This is simply a clarification of SBA’s no longer be borne by small businesses certification or recertification shall current policy. and has been removed from this impact continue to count as a HUBZone analysis. employee as long as the individual Compliance With Executive Orders SBA initially proposed to require remains an employee of the firm, even 12866, 13563, 12988, 13132, 13175, and HUBZone small business concerns to if the employee moves to a location that 13771, the Paperwork Reduction Act recertify annually to SBA that they is not in a qualified HUBZone area or (44 U.S.C. Ch. 35), and the Regulatory continue to meet all the HUBZone the area where the employee’s residence Flexibility Act (5 U.S.C. 601–612) eligibility requirements, instead of is located is redesignated and no longer Executive Order 12866 requiring them to undergo a qualifies as a HUBZone. This will recertification by SBA every three years. greatly reduce burden on certified The Office of Management and Budget There are approximately 5,000 firms in HUBZone small business concerns, as (OMB) has determined that this final the HUBZone program. Under SBA’s they will not have to continuously track rule is a significant regulatory action for current rules, firms must recertify every whether their employees still reside in purposes of Executive Order 12866. three years. Approximately 1,200 firms a HUBZone or seek to employ new Accordingly, the next section contains recertify each year based on HUBZone individuals if the location that one or SBA’s Regulatory Impact Analysis. data, and we estimate it takes more current employees reside loses its However, this is not a major rule under approximately 1 hour to recertify (OMB HUBZone status. We estimate that it the Congressional Review Act, 5 U.S.C. Control #3245–0320). Consequently, the takes 1 hour to determine eligibility and 801, et seq. proposed changes would have increased that this proposed change will save Regulatory Impact Analysis the annual hourly burden for HUBZone approximately 0.5 hours because once a firms by 3,800 hours or an estimated HUBZone employee is hired, the firm 1. Is there a need for the regulatory annual cost of $167,428. Instead of will never again have to examine where action? 1,200 firms recertifying annually, all that employee resides. Thus, this SBA is making several changes to 5,000 would have to recertify annually. proposed rule should reduce the hourly clarify its regulations. Through the However, in response to comments, the burden on approximately 5,000 years, SBA has spoken with small final rule merely requires a HUBZone small business concerns by business representatives and has recertification without a full document 2,500 hours annually for an estimated determined that several regulations production and review every year and annual savings of $110,150. needed further refinement so that they only requires a full document The largest benefit of this final rule are easier to understand and implement. production and review recertification for HUBZone entities is that the In addition, the major challenge with process every three years. Thus, the flexibility provided for the residency the HUBZone program over the last two only additional burden in this final rule requirement will allow many HUBZone

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entities to maintain their certification MAC was not a HUBZone contract, 3. What are the alternatives to this final even if they do not meet the 35% except for orders or Blanket Purchase rule? residency rule. As long as an employee Agreements issued under any FSS is a resident of a HUBZone when they contracts. Being identified as a SBA considered alternatives to each begin their employment, they will count HUBZone small business concern in of the significant changes made by this toward the requirement even if they SAM at the time of offer for the order rule. Instead of requiring a one-time move out of a HUBZone. The average will be considered a recertification of certification that would allow a concern annual value of federal prime HUBZone status. Since a firm’s to seek and be eligible for HUBZone contracting dollars awarded to HUBZone status in SAM is updated by contracts for a year, SBA considered the HUBZone certified entities from 2012 to SBA and not the firm, the firm will not status quo, where a firm must be eligible 2017 was $6.9 billion. There are need to submit an additional at the time of offer and time of award, approximately 5,000 HUBZone certified certification or any other additional and requiring certifications at time of firms each year, resulting in documentation with its offer or take any offer only, but eligibility would be fluid approximately $1.4 million in federal other action. Thus, SBA believes that and could change from contract prime contracting dollars per HUBZone this requirement imposes no additional opportunity to contract opportunity (as certified firm annually. For the same burden on a small business contract is done for the other small business or years, 62 HUBZone firms, on average, holder. socioeconomic set aside contract decertified per year as they no longer The added burden to ordering programs). SBA proposed a formal met the 35% residency requirement. agencies includes the act of checking a annual recertification process but has Assuming these entities would stay firm’s HUBZone status in SAM at the changed that in this final rule to merely certified given the new rules, this would time of order award. Since ordering require a recertification without a full transfer $85,973,333 from HUBZone agencies are already familiar with entities who would be decertified due to document production and review. A checking SAM information, such as to formal annual recertification process the residency requirement to a certified ensure that an order awardee is not HUBZone entity or a non-HUBZone could be unnecessarily burdensome on debarred, suspended, or proposed for entity. The flexibilities in this rule certified HUBZone small business debarment, this verification is de create distributional effects in favor of concerns. This does not change the minimis. SBA recognizes, however, that HUBZone entities but do not affect total current requirement that a full an agency’s market research for the resources available to society. Given document production and review order level may be impacted where the that the primary objectives of the recertification process is required every agency intends to issue a HUBZone set- HUBZone program are job creation and three years. SBA also considered aside order off an unrestricted vehicle. increased capital investment in whether eligibility or protest decisions The ordering agency may need to distressed communities, these should be appealed to the Office of identify MAC-eligible vendors and then distributional effects are desired and Hearings and Appeals. SBA decided find their status in SAM. This is should be noted although they are not against pursuing this change because of particularly the case where the agency included in the estimate of benefits for the added cost to certified HUBZone the purposes of this analysis. is applying the Rule of Two and verifying that there are at least two small business concerns and the added This rule also clarifies SBA’s position delay to the procurement process that with respect to HUBZone status HUBZone small business concerns to set aside the order. could dissuade procuring agencies from certifications on task orders under using the HUBZone program. MACs. Currently, HUBZone status FPDS–NG indicates that, in Fiscal certifications at the order level are not Years 2014 to 2018, agencies set aside Summary of Costs and Cost Savings required unless the contracting officer, for HUBZone small business concerns in his or her discretion, requests a an average of about 11 orders per year Table 1: Summary of Incremental recertification in connection with a off unrestricted MACs, excluding orders Costs and Cost Savings, below, sets out specific order. This rule requires that an under FSS contracts. The annual cost of the estimated net incremental cost/(cost offeror be identified as a certified additional market research efforts for saving) associated with this final rule. HUBZone small business concern in applicable set-aside orders under MACs, Table 2: Detailed Breakdown of SAM at the time it submits an offer for therefore, is calculated as 11 orders × 10 Incremental Costs and Cost Savings, an order issued against a MAC where minutes (0.16 hours) per order × $44.06 below, provides a detailed explanation the order is set-aside for HUBZone small cost per hour. This amounts to an of the annual cost/(cost saving) business concerns and the underlying annual government burden of about $78. estimates associated with this final rule.

TABLE 1—SUMMARY OF INCREMENTAL COSTS AND COST SAVINGS

Annual cost/(cost Item No. Regulatory action item saving) estimate

1 ...... Annual representation of continued eligibility ...... $83,714 2 ...... Removing requirement to present eligibility at award ...... (185,052) 3 ...... Change to employee count eligibility ...... (110,150) 4 ...... Change to residency requirements ...... * 85,973,333 5 ...... Additional Government market research to identify qualified sources for set-aside orders ...... 78

Estimated Net Incremental Cost/(Cost Saving) ...... (211,410) * (Transfer).

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TABLE 2—DETAILED BREAKDOWN OF INCREMENTAL COSTS AND COST SAVINGS

Annual cost/(cost Item No. Regulatory action item details saving) estimate breakdown

1 ...... Regulatory change: SBA will require certified HUBZone small business concerns to annually represent their continued eligi- bility. The rule would continue to require certified HUBZone small business concerns to undergo a full document recertifi- cation review by SBA every three years. Estimated number of impacted entities: There are approximately 5,000 firms in the HUBZone program, and under the rule all 3,800 entities. these firms will need to represent their continued eligibility each year. However, since 1,200 firms recertify each year cur- rently, the incremental increase in recertifications is 3,800 firms annually. Estimated average impact * (labor hour): SBA estimates that it takes the average participating firm about 0.5 hour to com- 0.5 hour. plete its annual representation of continued eligibility. 2018 Median Pay ** (per hour + 30% for benefits): Most HUBZone firms use an accountant or someone with similar skills for $44.06. this task.

Estimated Cost/(Cost Saving) ...... $83,714. 2 ...... Regulatory change: Under current rules, a HUBZone firm must be eligible at the time of offer and award of a HUBZone con- tract. This rule provides that firms will not have to represent or certify that they are eligible at the time of offer and award for every contract, which are the current program requirements. Estimated number of occurrences: Approximately 2,100 new HUBZone contracts are awarded each fiscal year and each firm 4,200 certifications. will need to certify twice per each contract. Estimated average impact * (labor hour): SBA estimates that it takes the average participating firm about 1 hour to complete 1 hour. the recertification process. 2018 Median Pay ** (per hour + 30% for benefits): Most HUBZone firms use an accountant or someone with similar skills for $44.06. this task.

Estimated Cost/(Cost Saving) ...... ($185,052). 3 ...... Regulatory change: SBA is changing the eligibility requirements to provide that an individual employee who resides in a HUBZone at the time of a HUBZone small business concern’s certification or recertification shall continue to count as a HUBZone employee as long as the individual remains an employee of the firm, even if the employee moves to a location that is not in a qualified HUBZone area or the area where the employee’s residence is located is redesignated and no longer qualifies as a HUBZone. This will greatly reduce burden on firms, as they will not have to continually track whether their employees still reside in a HUBZone. Estimated number of impacted entities: SBA estimates that approximately 5,000 firms participate in the HUBZone program. All 5,000 entities. participating firms will be impacted by this change. Estimated average impact * (labor hour): SBA estimates that it would take 1 hour to determine eligibility but this proposed 0.50 hours. change will save 0.5 hours, because once a HUBZone employee is hired the firm will never have to check residency for that employee. 2018 Median Pay ** (per hour + 30% for benefits): Most HUBZone firms use an accountant or someone with similar skills for $44.06. this task.

Estimated Cost/(Cost Saving) ...... ($110,150). 4 ...... Regulatory change: SBA is changing the eligibility requirements to provide that an individual employee who resides in a HUBZone at the time of a HUBZone small business concern’s certification or recertification shall continue to count as a HUBZone employee as long as the individual remains an employee of the firm, even if the employee moves to a location that is not in a qualified HUBZone area or the area where the employee’s residence is located is redesignated and no longer qualifies as a HUBZone. Further, the requirement to maintain certification is being lowered from 35% to 20%, which will provide HUBZone entities with greater flexibility to maintain their certification and stay in the program. Estimated number of impacted entities: SBA estimates that approximately 62 firms are decertified from the HUBZone program 62 entities. annually due to no longer meeting the 35% residency requirement. Estimated average impact *: HUBZone entities are awarded an average of $6.9 million per year. Assuming 5,000 entities, this $1,386,667. is $1,386,667 per entity.

Estimated Transfer ...... $85,973,333. 5 ...... Regulatory change: SBA is changing the HUBZone recertification requirements to provide a firm must be a certified HUBZone small business concern at the time of offer for set-aside orders and Blanket Purchase Agreements issued against unre- stricted Multiple Award Contracts, except for Federal Supply Schedule contracts. This change impacts the market research required by ordering activities to determine if a set-aside order for HUBZone small business concerns may be pursued. Estimated number of impact entities: Approximately 11 HUBZone set-aside orders are issued annually on Multiple Award 11 orders. Contracts that are not set aside in the same category, other than on the Federal Supply Schedule. Estimated average impact: SBA estimates that ordering activities applying the Rule of Two will spend an average of 10 addi- 0.16 hours. tional minutes to locate contractors awarded MACs and looking up the current HUBZone status for each of the contractors in SAM to determine if a set-aside order can be pursued. 2017 Median Pay (per hour): Contracting officers typically perform the market research for the acquisition plan ...... $44.06.

Estimated Cost/(Cost Saving) ...... $78.

Estimated Net Annual Impact ...... ($211,410) * This estimate is based on HUBZone and FPDS data, as well as best professional judgment. ** Source: Bureau of Labor Statistics, Accountants and Auditors.

Table 3 displays the savings and costs those years (Item 1 in Table 2) and there TABLE 3—SCHEDULE OF COSTS/ of the rules in effect during the first 3 are no additional costs in year 1, since (SAVINGS) OVER 3 YEAR HORIZON years. Savings would be the same for all the requirement to certify eligibility into years and is the sum of Items 2 and 3 the program and undergo a full Savings Costs in Table 2 above. Additional costs will document recertification review by SBA be incurred in year 2 and year 3 as every three years has not changed. This Year 1 ...... ($295,202) $78 HUBZone entities will now have to pattern would continue into perpetuity. Year 2 ...... (295,202) 83,792 represent their continued eligibility in Year 3 ...... (295,202) 83,792

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TABLE 4—ANNUALIZED SAVINGS IN SBA also submitted the rule to multiple tribally-owned and Alaska Native PERPETUITY WITH 7% DISCOUNT agencies with representatives on the Corporation (ANC)-owned firms RATE, 2016 DOLLARS FAR Small Business Subcommittee participating in the HUBZone program. prior to submitting the rule to the Office SBA took these discussions into account Estimate of Management and Budget for in drafting the proposed rule. interagency review. SBA has also Executive Order 13771 Annualized Savings ...... ($283,306) discussed some of the proposals in this Annualized Costs ...... 51,804 rule with stakeholders at various small This rule is an Executive Order 13771 business procurement conferences, and deregulatory action. Details on the Annualized Net Savings .... (231,502) received written comments on suggested estimated cost savings of this rule can changes to the HUBZone Program be found in this rule’s Regulatory Executive Order 13563 regulations generally in response to Impact Analysis. By making eligibility This executive order directs agencies SBA’s regulatory reform initiative requirements more flexible and by to, among other things: (a) Afford the implementing Executive Order 13771. reducing the amount of recording public a meaningful opportunity to SBA received extensive responses to the keeping required for participation in the comment through the internet on proposed rule from 98 commenters, program, the rule will result in proposed regulations, with a comment which comprised about 370 specific annualized savings of $231,502 period that should generally consist of comments. discounted to perpetuity using a 7% not less than 60 days; (b) provide for an 3. Flexibility: Did the agency identify discount rate in 2016 dollars and a net ‘‘open exchange’’ of information among and consider regulatory approaches that present value of $3,307,169. government officials, experts, reduce burdens and maintain flexibility Paperwork Reduction Act, 44 U.S.C. Ch. stakeholders, and the public; and (c) and freedom of choice for the public? 35 seek the views of those who are likely The rule is intended to make it easier to be affected by the rulemaking, even for firms to apply for, or participate in, For the purposes of the Paperwork before issuing a notice of proposed the HUBZone program, as well as for Reduction Act, SBA has determined that rulemaking. As far as practicable or procuring agencies to utilize the this rule will impose new government- relevant, SBA considered these program. wide reporting requirements on requirements in developing this rule, as HUBZone small business concerns. The discussed below. Executive Order 12988 rule requires that certified HUBZone 1. Did the agency use the best This action meets applicable small business concerns maintain available techniques to quantify standards set forth in section 3(a) and records demonstrating the home address anticipated present and future costs 3(b)(2) of Executive Order 12988, Civil of employees who resided in a when responding to Executive Order Justice Reform, to minimize litigation, HUBZone at the time of the concern’s 12866 (e.g., identifying changing future eliminate ambiguity, and reduce certification or recertification, as well as compliance costs that might result from burden. This action does not have any records of the employee’s continued technological innovation or anticipated retroactive or preemptive effect. employment with the firm. SBA behavioral changes)? believes allowing a HUBZone small To the extent possible, the agency Executive Order 13132 business concern to continue employing utilized the most recent data available SBA has determined that this rule individuals who once lived in in the Federal Procurement Data will not have substantial direct effects HUBZones is consistent with the System—Next Generation, DSBS and on the States, on the relationship purpose of the HUBZone program of SAM. between the national government and increasing employment and would 2. Public participation: Did the the States, or on the distribution of provide greater opportunities for agency: (a) Afford the public a power and responsibilities among the certified HUBZone small business meaningful opportunity to comment various levels of government. Therefore, concerns to be eligible for and receive through the internet on any proposed for the purposes of Executive Order HUBZone contracts. Further, this will regulation, with a comment period that 13132, SBA has determined that this reduce burden as the firm will not have should generally consist of not less than rule has no federalism implications to continually determine whether the 60 days; (b) provide for an ‘‘open warranting preparation of a federalism employee that resided in a HUBZone at exchange’’ of information among assessment. the time of certification continues to government officials, experts, reside in a HUBZone in connection with Executive Order 13175 stakeholders, and the public; (c) provide the offer and offer of each contract or timely online access to the rulemaking As part of the proposed rulemaking future recertifications. The requirement docket on Regulations.gov; and (d) seek process, SBA held tribal consultations to maintain records is included in the the views of those who are likely to be with tribal governments in Anchorage, existing information collection for the affected by rulemaking, even before Alaska, Albuquerque, New Mexico, and HUBZone program (OMB Control issuing a notice of proposed Oklahoma City, Oklahoma to provide #3245–0320). rulemaking? interested tribal representatives with an SBA published a proposed rule with opportunity to discuss their views on Regulatory Flexibility Act, 5 U.S.C. 601– a 60-day comment period, and the various HUBZone-related issues. SBA 612 proposed rulemaking was posted on considers tribal consultation meetings a According to the Regulatory www.regulations.gov to allow the public valuable component of its deliberations Flexibility Act (RFA), 5 U.S.C. 601, to comment meaningfully on its and believes that these tribal when an agency issues a rulemaking, it provisions. In addition, the proposed consultation meetings allowed for must prepare a regulatory flexibility rule was discussed with the Small constructive dialogue with the Tribal analysis to address the impact of the Business Procurement Advisory community, Tribal Leaders, Tribal rule on small entities. However, section Council, which consists of the Directors Elders, elected members of Alaska 605 of the RFA allows an agency to of the Office of Small and Native Villages or their appointed certify a rule, in lieu of preparing an Disadvantaged Business Utilization. representatives, and principals of analysis, if the rulemaking is not

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expected to have a significant economic place the phrase ‘‘certified HUBZone (b) Format and specificity. (1) Protests impact on a substantial number of small small business concern’’. must be in writing and must specify all entities. the grounds upon which the protest is While this final rule is expected to PART 121—SMALL BUSINESS SIZE based. A protest merely asserting that impact a substantial number of small REGULATIONS the protested concern is not an eligible entities as all HUBZone entities are SDVO SBC, without setting forth ■ 3. The authority citation for part 121 small, the impact is not expected to be specific facts or allegations, is continues to read as follows: significant. As detailed in the insufficient. Regulatory Impact Analysis, there will Authority: 15 U.S.C. 632, 634(b)(6), 662, (i) Example to paragraph (b)(1): A be an annualized savings of $231,502 to and 694a(9). protester submits a protest stating that all HUBZone entities, or approximately § 121.404 [Amended] the apparent successful offeror is not $33 per HUBZone entity, which owned by a service-disabled veteran. ■ qualifies as de minimis savings for each 4. Amend § 121.404(g)(4) by removing The protest does not state any basis for entity. the phrase ‘‘HUBZone SBCs’’ and this assertion. The protest allegation is Accordingly, the Administrator of the adding in its place the phrase ‘‘certified insufficient. SBA hereby certifies that this rule will HUBZone small business concerns’’. (ii) [Reserved] not have a significant economic impact § 121.1001 [Amended] (2) For a protest filed against a SDVO on a substantial number of small SBC joint venture, the protest must state ■ 5. Amend § 121.1001 as follows: entities. all specific grounds for why— ■ a. In paragraph (a)(6)(ii), remove the (i) The SDVO SBC partner to the joint List of Subjects phrase ‘‘qualified HUBZone SBC’’ and venture did not meet the SDVO SBC add in its place the phrase ‘‘certified 13 CFR Part 115 eligibility requirements set forth in HUBZone small business concern’’; and subpart B of part 125; and/or Claims, Reporting and recordkeeping ■ b. In paragraph (b)(8)(i), remove the (ii) The protested SDVO SBC joint requirements, Small businesses, Surety phrase ‘‘qualified HUBZone business venture did not meet the requirements bonds. concern’’ and add in its place the phrase set forth in § 125.18. ‘‘certified HUBZone small business 13 CFR Part 121 * * * * * concern’’. Administrative practice and PART 126—HUBZONE PROGRAM procedure, Government procurement, PART 125—GOVERNMENT Government property, Grant programs— CONTRACTING PROGRAMS ■ 12. The authority citation for part 126 business, Individuals with disabilities, continues to read as follows: ■ Loan programs—business, Small 6. The authority citation for part 125 is revised to read as follows: Authority: 15 U.S.C. 632(a), 632(j), 632(p), businesses. 644 and 657a. Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 13 CFR Part 125 637; 644; 657f; 657q; 657r; and 657s. § 126.101 [Amended] Government contracts, Government § 125.1 [Amended] ■ 13. Amend § 126.101(b) by removing procurement, Reporting and the phrase ‘‘qualified HUBZone SBCs’’ ■ recordkeeping requirements, Small 7. In § 125.1, amend the definition of wherever it appears and adding in its businesses, Technical assistance, ‘‘Similarly situated entity’’ by removing place the phrase ‘‘certified HUBZone Veterans. the phrase ‘‘qualified HUBZone small small business concerns’’. business concern’’ and adding in its 13 CFR Part 126 ■ 14. Amend § 126.103 as follows: place the phrase ‘‘certified HUBZone ■ a. Revise the definition of ‘‘Alaska Administrative practice and small business concern’’. Native Corporation (ANC)’’; procedure, Government procurement, § 125.2 [Amended] ■ b. Remove the definitions of ‘‘Alaska Penalties, Reporting and recordkeeping Native Village’’ and ‘‘ANCSA’’; ■ requirements, Small businesses. 8. Amend § 125.2(c)(1)(i) by removing ■ c. Revise the definitions of ‘‘Attempt the phrase ‘‘qualified HUBZone small 13 CFR Part 127 to maintain’’ and ‘‘Certify’’; business concerns’’ and adding in its ■ d. Remove the definitions of ‘‘County Government contracts, Reporting and place the phrase ‘‘certified HUBZone unemployment rate’’ and ‘‘De-certify’’; recordkeeping requirements, Small small business concerns’’. ■ e. Revise the definition of ‘‘D/HUB’’; businesses. ■ f. Add a definition in alphabetical § 125.3 [Amended] For the reasons set forth in the order for ‘‘Decertify’’; preamble, SBA amends 13 CFR parts ■ 9. Amend § 125.3(c)(1)(xi) by ■ g. Add a definition in alphabetical 115, 121, 125, 126, and 127 as set forth removing the phrase ‘‘qualified order for ‘‘Dynamic Small Business below: HUBZone small business concerns’’ and Search (DSBS)’’; adding in its place the phrase ‘‘certified ■ h. Revise the definition of PART 115—SURETY BOND HUBZone small business concerns’’. ‘‘Employee’’; GUARANTEE ■ i. Remove the definition of ‘‘HUBZone § 125.6 [Amended] small business concern (HUBZone ■ 1. The authority citation for part 115 ■ 10. Amend § 125.6 by removing SBC)’’; continues to read as follows: paragraph (d) and redesignating ■ j. Add a definition in alphabetical Authority: 5 U.S.C. app 3; 15 U.S.C. 687b, paragraphs (e) through (h) as paragraphs order for ‘‘HUBZone small business 687c, 694a, 694b note; and Pub. L. 110–246, (d) through (g), respectively. concern or certified HUBZone small Sec. 12079, 122 Stat. 1651. ■ 11. Revise § 125.28(b) to read as business concern’’; follows: ■ k. Revise the definition of ‘‘Interested § 115.31 [Amended] party’’; ■ 2. Amend § 115.31(a)(2) by removing § 125.28 How does one file a service ■ l. Remove the definitions of ‘‘List’’, the phrase ‘‘qualified HUBZone small disabled veteran-owned status protest? ‘‘Medium household income’’, and business concern’’ and adding in its * * * * * ‘‘Metropolitan statistical area’’;

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■ m. Add in alphabetical order a business contractors for upcoming (iii) Independent contractors that definition for ‘‘Primary industry contracts. The information a business receive payment via IRS Form 1099 and classification or primary industry’’; provides when registering in the System are not considered employees under ■ n. Revise the definitions of ‘‘Principal for Award Management (SAM) is used SBA’s Size Policy Statement No. 1; and office’’, ‘‘Qualified base closure area’’, to populate DSBS. For HUBZone (iv) Subcontractors. ‘‘Qualified census tract’’, and ‘‘Qualified Program purposes, a concern’s DSBS (3) Employees of an affiliate may be disaster area’’; profile will indicate whether it is a considered employees, if the totality of ■ o. Remove the definition of ‘‘Qualified certified HUBZone small business the circumstances shows that there is no HUBZone SBC’’; concern, and if so, the date it was clear line of fracture between the ■ p. Revise the definitions of ‘‘Qualified certified or recertified. HUBZone applicant (or certified non-metropolitan county’’, Employee means all individuals HUBZone small business concern) and ‘‘Redesignated area’’, and ‘‘Reside’’; and employed on a full-time, part-time, or its affiliate(s) (see § 126.204). ■ q. Remove the definitions of ‘‘Small other basis, so long as that individual * * * * * disadvantaged business (SDB)’’ and works a minimum of 40 hours during HUBZone small business concern or ‘‘Statewide average unemployment the four-week period immediately prior certified HUBZone small business rate’’. to the relevant date of review, which is concern means a small business concern The revisions and additions to read as either the date the concern submits its that meets the requirements described follows: HUBZone application to SBA or the in § 126.200 and that SBA has certified § 126.103 What definitions are important in date of recertification. SBA will review as eligible for federal contracting the HUBZone Program? a concern’s payroll records for the most assistance under the HUBZone program. * * * * * recently completed pay periods that A concern that was a certified HUBZone Alaska Native Corporation (ANC) has account for the four-week period small business concern as of December the same meaning as the term ‘‘Native immediately prior to the date of 12, 2017, and that had its principal Corporation’’ in section 3 of the Alaska application or date of recertification in office located in a redesignated area set Native Claims Settlement Act (ANCSA), order to determine which individuals to expire prior to January 1, 2020, shall 43 U.S.C. 1602. meet this definition. To determine if an remain a certified HUBZone small Attempt to maintain means making individual is an employee, SBA reviews business concern until December 31, substantive and documented efforts, the totality of circumstances, including 2021, so long as all other HUBZone such as written offers of employment, criteria used by the Internal Revenue eligibility requirements are met. published advertisements seeking Service (IRS) for Federal income tax * * * * * employees, and attendance at job fairs purposes and the factors set forth in Interested party means any concern and applies only to concerns during the SBA’s Size Policy Statement No. 1 (51 that submits an offer for a specific performance of any HUBZone contract. FR 6099, February 20, 1986). HUBZone set-aside contract (including A certified HUBZone small business (1) In general, the following are Multiple Award Contracts) or order, any concern that has less than 20% of its considered employees: concern that submitted an offer in full total employees residing in a HUBZone (i) Individuals obtained from a and open competition and its during the performance of a HUBZone temporary employee agency, leasing opportunity for award will be affected contract has failed to attempt to concern, or through a union agreement, by a price evaluation preference given a maintain the HUBZone residency or co-employed pursuant to a qualified HUBZone small business requirement. professional employer organization concern, any concern that submitted an * * * * * agreement; offer in a full and open competition and Certify means the process by which (ii) An individual who has an its opportunity for award will be SBA determines that a concern is ownership interest in the concern and affected by a reserve of an award given qualified for the HUBZone program and who works for the concern a minimum to a qualified HUBZone small business eligible to be designated by SBA as a of 40 hours during the four-week period concern, the contracting activity’s certified HUBZone small business immediately prior to the relevant date of contracting officer, or SBA. concern in the Dynamic Small Business review, whether or not the individual * * * * * Search (DSBS) system (or successor receives compensation; Primary industry classification or system). (iii) The sole owner of a concern who primary industry means the six-digit * * * * * works less than 40 hours during the North American Industry Classification D/HUB means the Director of SBA’s four-week period immediately prior to System (NAICS) code designation which Office of HUBZone. the relevant date of review, but who has best describes the primary business Decertify means the process by which not hired another individual to direct activity of the HUBZone applicant or SBA determines that a concern no the actions of the concern’s employees; certified HUBZone small business longer qualifies as a HUBZone small (iv) Individuals who receive in-kind concern. SBA utilizes § 121.107 of this business concern and removes that compensation commensurate with work chapter in determining a concern’s concern as a certified HUBZone small performed. Such compensation must primary industry classification. business concern from DSBS (or provide a demonstrable financial value Principal office means the location successor system), or the process by to the individual and must be compliant where the greatest number of the which SBA removes a concern as a with all relevant federal and state laws. concern’s employees at any one location certified HUBZone small business (2) In general, the following are not perform their work. concern from DSBS (or successor considered employees: (1) If an employee works at multiple system) after receiving a request to (i) Individuals who are not owners locations, then the employee will be voluntarily withdraw from the and receive no compensation (including deemed to work at the location where HUBZone program. no in-kind compensation) for work the employee spends more than 50% of Dynamic Small Business Search performed; his or her time. If an employee does not (DSBS) means the database that (ii) Individuals who receive deferred spend more than 50% of his or her time government agencies use to find small compensation for work performed; at any one location and at least one of

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those locations is a non-HUBZone the Administrator designates the base accessible online tool that depicts location, then the employee will be closure area as a HUBZone and ending HUBZones, and beginning— deemed to work at a non-HUBZone on the date on which the base closure (i) In the case of a major disaster, on location. area ceases to be a qualified census tract the date on which the President (2) In order for a location to be or a qualified nonmetropolitan county declared the major disaster for the area considered the principal office, the in accordance with the online tool in which the census tract or concern must conduct business at this prepared by the Administrator. nonmetropolitan county, as applicable, location. Qualified census tract. (1) Qualified is located; or (3) For those concerns whose census tract means a census tract which (ii) In the case of a catastrophic ‘‘primary industry classification’’ is is designated by the Secretary of incident, on the date on which the services or construction (see § 121.201 Housing and Urban Development, and catastrophic incident occurred in the of this chapter), the determination of for the most recent year for which area in which the census tract or principal office excludes the concern’s census data are available on household nonmetropolitan county, as applicable, employees who perform more than 50% income in such tract, either in which 50 is located. of their work at job-site locations to percent or more of the households have Qualified non-metropolitan county fulfill specific contract obligations. If all an income which is less than 60 percent means any county that was not located of a concern’s employees perform more of the area median gross income for in a metropolitan statistical area (as than 50% of their work at job sites, the such year or which has a poverty rate defined by the Bureau of the Census, concern does not comply with the of at least 25 percent. See 26 U.S.C. United States Department of Commerce, principal office requirement. 42(d)(5)(B)(ii)(I). in its publications on the Census of (2) The portion of a metropolitan Population, Social and Economic (i) Example 1: A business concern whose primary industry is construction has a total statistical area (as defined by the Bureau Characteristics) at the time of the most of 78 employees, including the owners. The of the Census, United States Department recent census taken for purposes of business concern has one office (Office A), of Commerce, in its publications on the selecting qualified census tracts under which is located in a HUBZone, with 3 Census of Population, Social and section 26 U.S.C. 42(d)(5)(B)(ii), and in employees working at that location. The Economic Characteristics) which may be which: business concern also has a job-site for a designated as ‘‘qualified census tracts’’ (1) The median household income is current contract, where 75 employees shall not exceed an area having 20 less than 80% of the State median perform more than 50% of their work. The percent of the population of such household income, based on a 5-year 75 job-site employees are excluded for metropolitan statistical area. See 26 average of the available data from the purposes of determining principal office. Since the remaining 3 employees all work at U.S.C. 42(d)(5)(B)(ii)(II). This paragraph Bureau of the Census of the Department Office A, Office A is the concern’s principal does not apply to any metropolitan of Commerce; office. Since Office A is in a HUBZone, the statistical area in the Commonwealth of (2) The unemployment rate is not less business concern complies with the principal Puerto Rico until December 22, 2027, or than 140% of the average office requirement. the date on which the Financial unemployment rate for the United (ii) Example 2: A business concern whose Oversight and Management Board for States or for the State in which such primary industry is services has a total of 4 the Commonwealth of Puerto Rico county is located, whichever is less, employees, including the owner. The created by the Puerto Rico Oversight, based on a 5-year average of the data business concern has one office located in a Management, and Economic Stability available from the Local Area HUBZone (Office A), where 2 employees perform more than 50% of their work, and Act (PROMESA) (Pub. L. 114–187, June Unemployment Statistics report, a second office not located in a HUBZone 30, 2016) ceases to exist, whichever produced by the Department of Labor’s (Office B), where 2 employees perform more event occurs first. Bureau of Labor Statistics; or than 50% of their work. Since there is not (3) Qualified census tracts are (3) There is located a Difficult one location where the greatest number of the reflected in a publicly accessible online Development Area within Alaska, concern’s employees at any one location tool that depicts HUBZones and will be Hawaii, or any territory or possession of perform their work, the business concern updated every 5 years. the United States outside the 48 would not have a principal office in a Qualified disaster area. (1) Qualified contiguous States. A Difficult HUBZone. disaster area means any census tract or Development Area (DDA) is an area (iii) Example 3: A business concern whose nonmetropolitan county located in an primary industry is services has a total of 6 designated by the Secretary of the employees, including the owner. Five of the area where a major disaster declared by Department of Housing and Urban employees perform all of their work at job- the President under section 401 of the Development, in accordance with sites fulfilling specific contract obligations. Robert T. Stafford Disaster Relief and section 26 U.S.C. 42(d)(5)(B)(iii), with The business concern’s owner performs 45% Emergency Assistance Act (42 U.S.C. high construction, land, and utility costs of her work at job-sites, and 55% of her work 5170) has occurred or an area in which relative to its area median gross income. at an office located in a HUBZone (Office A) a catastrophic incident has occurred if (4) Qualified non-metropolitan conducting tasks such as writing proposals, such census tract or nonmetropolitan counties are reflected in a publicly generating payroll, and responding to emails. county ceased to be a qualified census accessible online tool that depicts Office A would be considered the principal office of the concern since it is the only tract or qualified nonmetropolitan HUBZones and will be updated every 5 location where any employees of the concern county during the period beginning 5 years. work that is not a job site and the 1 years before the date on which the Redesignated area means any census individual working there spends more than President declared the major disaster or tract that ceases to be a ‘‘qualified 50% of her time at Office A. Since Office A the catastrophic incident occurred. census tract’’ or any non-metropolitan is located in a HUBZone, the small business (2) A census tract or nonmetropolitan county that ceases to be a ‘‘qualified concern would meet the principal office county shall be considered to be a non-metropolitan county.’’ A requirement. qualified disaster area only for the redesignated area generally shall be Qualified base closure area means a period of time ending on the date the treated as a HUBZone for a period of base closure area that is treated by SBA area ceases to be a qualified census tract three years, starting from the date on as a HUBZone for a period of at least 8 or a qualified nonmetropolitan county, which the area ceased to be a qualified years, beginning on the date on which in accordance with the publicly census tract or a qualified non-

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metropolitan county. The date on which § 126.200 What requirements must a are shared with one or more other the census tract or non-metropolitan concern meet to be eligible as a certified concerns or individuals. county ceases to be qualified is the date HUBZone small business concern? (2) A concern that is owned in whole on which the official government data (a) Ownership. In order to be eligible or in part by one or more Indian Tribal affecting the eligibility of the HUBZone for HUBZone certification and to remain Governments (or by a corporation that is is released to the public. However, an certified, a small business concern must wholly owned by Indian Tribal area that was a redesignated area on or be owned in accordance with this Governments) must either: after December 12, 2017 shall remain a paragraph. The concern must be: (i) Maintain a principal office located redesignated area until December 31, (1) At least 51% owned and in a HUBZone and ensure that at least 2021. controlled by one or more individuals 35% of its employees reside in a who are United States citizens; HUBZone as provided in paragraph Reside means to live at a location full- (2) An ANC or at least 51% owned by (d)(1) of this section; or time and for at least 180 days an ANC or a wholly-owned business (ii) Certify that when performing a immediately prior to the date of entity of an ANC; HUBZone contract, at least 35% of its application (or date of recertification (3) At least 51% owned by one or employees engaged in performing that where the individual is being treated as more Indian Tribal Governments, or by contract will reside within any Indian a HUBZone resident for the first time). a corporation that is wholly owned by reservation governed by one or more of (1) To determine residence, SBA will one or more Indian Tribal Governments; the Indian Tribal Government owners, first look to an individual’s address (4) At least 51% owned by one or or reside within any HUBZone adjacent identified on his or her driver’s license more CDCs; to such Indian reservation. or voter’s registration card. Where such (5) A small agricultural cooperative (d) Employees. (1) In order to be documentation is not available, SBA organized or incorporated in the United eligible for HUBZone certification, at will require other specific proof of States, or at least 51% owned by one or least 35% of a concern’s employees residency, such as deeds, leases, or more small agricultural cooperatives must reside in a HUBZone. When utility bills. Where the documentation organized or incorporated in the United determining the percentage of provided does not demonstrate 180 days States; or employees that reside in a HUBZone, if of residency, SBA will require a signed (6) At least 51% owned by one or the percentage results in a fraction, SBA statement attesting to an individual’s more NHOs, or by a corporation that is rounds to the nearest whole number. dates of residency. wholly owned by one or more NHOs. (i) Example 1 to paragraph (d)(1): A (2) For HUBZone purposes, SBA will (b) Size. (1) An applicant concern, concern has 25 employees; 35% of 25, or 8.75, employees must reside in a HUBZone. consider individuals temporarily together with its affiliates, must qualify as a small business concern under the The number 8.75 rounded to the nearest residing overseas in connection with the whole number is 9. Thus, 9 employees must performance of a contract to reside at size standard corresponding to its reside in a HUBZone. their U.S. residence. primary industry classification as (ii) Example 2 to paragraph (d)(1): A defined in part 121 of this chapter. concern has 95 employees; 35% of 95, or (i) Example 1: A person possesses the deed (2) In order to remain eligible as a 33.25, employees must reside in a HUBZone. to a residential property and pays utilities certified HUBZone small business The number 33.25 rounded to the nearest and property taxes for that property. concern, a concern must qualify as whole number is 33. Thus, 33 employees However, the person does not live at this small under the size standard must reside in a HUBZone. property, but instead rents out this property corresponding to one or more NAICS (2) If the concern is owned in whole to another individual. For HUBZone codes in which it does business. or in part by one or more Indian Tribal purposes, the person does not reside at the (3) If the concern is a small address listed on the deed. Governments (or by a corporation that is agricultural cooperative, in determining (ii) Example 2: A person moves into an wholly owned by one or more Indian size, the small agricultural cooperative apartment under a month-to-month lease and Tribal Governments), see paragraph is treated as a ‘‘business concern’’ and lives in that apartment full-time. SBA would (c)(2) of this section. its member shareholders are not consider the person to reside at the address (3) An employee who resides in a listed on the lease if the person can show that considered affiliated with the HUBZone at the time of certification (or he or she has lived at that address for at least cooperative by virtue of their time of recertification where the 180 days immediately prior to the date of membership in the cooperative. individual is being treated as a application or date of recertification. (c) Principal office. In order to be HUBZone resident for the first time) (iii) Example 3: A person is working eligible for HUBZone certification, a shall continue to count as a HUBZone overseas on a contract for the small business concern’s principal office must be resident employee if the individual and is therefore temporarily living abroad. located in a HUBZone, except for continues to live in the HUBZone for at The employee can provide documents concerns owned in whole or in part by least 180 days immediately after showing he is paying rent for an apartment one or more Indian Tribal Governments. certification (or recertification) and located in a HUBZone. That person is (1) A concern that owns or makes a remains an employee of the concern, deemed to reside in a HUBZone. long-term investment (i.e., a lease of at even if the employee subsequently * * * * * least 10 years) in a principal office in an moves to a location that is not in a area that qualifies as a HUBZone at the HUBZone or the area in which the Subpart B—Requirements To Be a time of its initial certification will be employee’s residence is located no Certified HUBZone Small Business deemed to have its principal office longer qualifies as a HUBZone. The Concern located in a HUBZone for at least 10 certified HUBZone small business years from the date of that certification concern must maintain records of the as long as the firm maintains the long- employee’s original HUBZone address, ■ 15. Revise the heading for subpart B term lease or continues to own the as well as records of the individual’s to read as set forth above. property upon which the principal continued and uninterrupted ■ 16. Revise § 126.200 to read as office designation was made. This does employment by the HUBZone small follows: not apply to leases of office space that business concern, for the duration of the

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concern’s participation in the HUBZone § 126.204 May a HUBZone small business HUBZone program purposes. In order to be program. concern have affiliates? eligible for the HUBZone program, at least 35% of the combined employees of A and B (i) Example to paragraph (d)(3): As part of (a) A HUBZone small business concern may have affiliates, provided must reside in a HUBZone. its application for HUBZone certification, a (ii) [Reserved] concern provides documentation showing that the aggregate size of the concern that 35% of its employees have lived in a together with all of its affiliates is small ■ 20. Revise § 126.205 to read as HUBZone for more than 180 days. SBA as defined in part 121 of this title, follows: certifies the concern as a certified HUBZone except as otherwise provided for small small business concern. Within 180 after agricultural cooperatives in § 126.103. § 126.205 May participants in other SBA being certified, an individual critical to the (b) Employees of affiliates are not programs be certified as HUBZone small concern’s meeting the 35% residency automatically considered employees of business concerns? requirement moves out of the HUBZone area. a HUBZone applicant or HUBZone Participants in other SBA programs That individual will continue to be treated as small business concern solely on the may be certified as HUBZone small a HUBZone resident during the first year business concerns if they meet all of the after the concern’s certification; however, at basis of affiliation. the time of the firm’s recertification, that (c) The employees of an affiliate may requirements set forth in this part. individual will not be counted as a resident be counted as employees of a HUBZone ■ 21. Revise § 126.206 to read as of a HUBZone. applicant or HUBZone small business follows: concern for purposes of determining (ii) [Reserved] compliance with the HUBZone § 126.206 May nonmanufacturers be (e) Attempt to maintain. (1) At the program’s principal office and 35% certified as HUBZone small business concerns? time of application, a concern must residency requirements in certain certify that it will ‘‘attempt to maintain’’ circumstances. In determining whether Nonmanufacturers (referred to in the (see § 126.103) having at least 35% of its individuals should be counted as HUBZone Act of 1997 as ‘‘regular employees reside in a HUBZone during employees of a HUBZone applicant or dealers’’) may be certified as HUBZone the performance of any HUBZone HUBZone small business concern, SBA small business concerns if they meet all contract it receives. will consider all information, including of the requirements set forth in (2) If the concern is owned in whole criteria used by the IRS for Federal § 126.200. For purposes of this part, a or in part by one or more Indian Tribal income tax purposes and those set forth ‘‘nonmanufacturer’’ is defined in Governments (or by a corporation that is in SBA’s Size Policy Statement No. 1. § 121.406(b) of this chapter. wholly owned by one or more Indian Employees of the concern’s affiliate will ■ 22. Revise § 126.207 to read as Tribal Governments), the concern must not be counted as the concern’s follows: certify that it will ‘‘attempt to maintain’’ employees if there is a clear line of § 126.207 Do all of the offices or facilities (see § 126.103) the applicable fracture between the concern and its employment percentage described in of a certified HUBZone small business affiliate. concern have to be located in a HUBZone? paragraph (c)(2) of this section during (1) SBA generally will find that there A HUBZone small business concern the performance of any HUBZone is a clear line of fracture where the may have offices or facilities in multiple contract it receives. concern demonstrates that it does not HUBZones or even outside a HUBZone. (f) Subcontracting. At the time of share employees, facilities, or However, in order to be certified as a application, an applicant concern must equipment with the affiliate; has HUBZone small business concern, the certify that it will comply with the different customers or lines of business concern’s principal office must be applicable limitations on subcontracting (or is distinctly segregated located in a HUBZone (except see requirements in connection with any geographically); and does not receive § 126.200(c)(2) for concerns owned by procurement that it receives as a significant contracts or financial Indian Tribal Governments). certified HUBZone small business assistance from the affiliate. concern (see §§ 126.5 and 126.700). (2) The use of common administrative ■ 23. Revise § 126.300 to read as (g) Suspension and Debarment. In services between parent and/or sister follows: order to be eligible for HUBZone concerns by itself will not result in an § 126.300 How may a concern be certified certification and to remain certified, the affiliate’s employees being counted as as a HUBZone small business concern? employees of the HUBZone applicant or concern and any of its owners must not (a) A concern must apply to SBA for HUBZone small business concern. have an active exclusion in the System HUBZone certification. SBA will for Award Management, available at (3) Minimal business activity between the concern and its affiliate will not consider the information provided by www.SAM.gov, at the time of the concern in order to determine application. result in an affiliate’s employees being counted as employees of the HUBZone whether the concern qualifies. (b) SBA, at its discretion, may rely § 126.202 [Amended] applicant or HUBZone small business solely upon the information submitted, concern. ■ 17. Amend § 126.202 by removing the may request additional information, phrase ‘‘Many persons share control’’ (i) Example to paragraph (c): X owns 100% may conduct independent research, or and adding in its place the phrase of Company A and 51% of Company B. may verify the information before ‘‘Many persons may share control’’. Based on X’s common ownership of A and B, the two companies are affiliated under making an eligibility determination. § 126.203 [Amended] SBA’s size regulations. SBA will look at the (c) If SBA determines that a concern totality of circumstances to determine meets the eligibility requirements of a ■ 18. Amend § 126.203(a) by removing whether it would be reasonable to treat the HUBZone small business concern, it the phrase ‘‘qualified HUBZone SBC’’ employees of B as employees of A for will notify the concern and designate and adding in its place the phrase HUBZone program purposes. If both the concern as a certified HUBZone ‘‘certified HUBZone small business companies do construction work and share small business concern in DSBS (or concern’’. office space and equipment, then SBA would successor system). find that there is not a clear line of fracture ■ 19. Revise § 126.204 to read as between the two concerns and would treat ■ 24. Revise § 126.303 to read as follows: the employees of B as employees of A for follows:

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§ 126.303 Where must a concern submit showing qualified HUBZones) to verify as of the date it submitted its its application for certification? that the location of the concern’s application and at the time the D/HUB A concern seeking certification as a principal office and the residences of at issues a decision. An applicant must HUBZone small business concern must least 35% of the concern’s employees inform SBA of any changes to its submit an electronic application to are within HUBZones. If SBA’s website circumstances that occur after its SBA’s HUBZone Program Office via indicates that a particular location is not application and before its certification SBA’s web page at www.SBA.gov. The within a HUBZone and the applicant that may affect its eligibility. SBA will application and any supporting disagrees, then the applicant must note consider such changed circumstances in documentation must be submitted by a this on the application and submit determining whether to certify the person authorized to represent the relevant documents showing why the concern. concern. applicant believes the area meets the (e) If SBA approves the application, it ■ 25. Revise § 126.304 to read as statutory criteria of a HUBZone. SBA will send a written notice to the concern follows: will determine whether the location is and designate the concern as a certified within a HUBZone using available HUBZone small business concern in § 126.304 What must a concern submit to methods (e.g., by contacting Bureau of DSBS (or successor system) as described SBA in order to be certified as a HUBZone Indian Affairs for Indian reservations or small business concern? in § 126.307. Department of Defense for BRACs). (f) If SBA denies the application, it (a) General. To be certified by SBA as (e) Record maintenance. HUBZone will send a written notice to the concern a HUBZone small business concern, a small business concerns must retain and state the specific reasons for denial. concern must submit a completed documentation demonstrating (g) SBA will presume that notice of its application and all documents satisfaction of all qualifying decision was provided to an applicant if requested by SBA. The concern must requirements for 6 years from date of SBA sends a communication to the also represent to SBA that it meets the submission of all initial and continuing concern at a mailing address, email requirements set forth in § 126.200 and eligibility actions as required by this address, or fax number provided in the that all of the information provided as part. In addition, HUBZone small concern’s profile in the System for of the date of the application (and any business concerns must retain Award Management (or successor subsequent information provided) is documentation as required in system). complete, true and accurate. The § 126.200(d)(3). ■ representation must be signed by an 28. Revise § 126.307 to read as owner or officer of the applicant. § 126.305 [Removed and Reserved] follows: (b) Supporting documents. (1) SBA ■ 26. Remove and reserve § 126.305. § 126.307 Where is there a list of certified may request documents to verify that ■ 27. Revise § 126.306 to read as HUBZone small business concerns? the applicant meets the HUBZone follows: SBA designates concerns as certified program’s eligibility requirements. The HUBZone small business concerns in documents must show that the concern § 126.306 How will SBA process an DSBS (or successor system). meets the program’s requirements at the application for HUBZone certification? ■ 29. Revise § 126.308 to read as time it submits its application to SBA. (a) The D/HUB or designee is follows: (2) The concern must document authorized to approve or decline compliance with the requirements listed applications for HUBZone certification. § 126.308 What happens if a HUBZone in § 126.200, including but not limited SBA will receive and review all small business concern receives notice of to employment records and applications and request supporting its certification but it does not appear in documentation showing the address of documents. SBA must receive all DSBS as a certified HUBZone small each HUBZone resident employee. required information, supporting business concern? Records sufficient to demonstrate documents, and a completed HUBZone (a) A certified HUBZone small HUBZone residency include copies of representation before it will begin business concern that has received driver’s licenses and voter registration processing a concern’s application. SBA SBA’s notice of certification, but does cards; only where such documentation will not process incomplete packages. not appear in DSBS (or successor is unavailable will SBA accept SBA will make its determination within system) as a certified HUBZone small alternative documentation (such as 60 calendar days after receipt of a business concern within 10 business copies of leases, deeds, and/or utility complete package. days, should immediately notify the bills) accompanied by signed statements (b) The burden of proof to D/HUB via email at [email protected]. explaining why the alternative demonstrate eligibility is on the (b) A certified HUBZone small documentation is being provided. applicant concern. If a concern does not business concern that has received (c) Changes after submission of provide requested information within SBA’s notice of certification must application. After submitting an the allotted time provided by SBA, or if appear as a certified HUBZone small application, a concern applying for it submits incomplete information, SBA business concern in DSBS (or successor HUBZone certification must may draw an adverse inference and system) in order to be eligible for immediately notify SBA of any changes presume that the information that the HUBZone contracts (i.e., it cannot ‘‘opt that could affect its eligibility and applicant failed to provide would out’’ of a public display in the System provide information and documents to demonstrate ineligibility and deny for Award Management (SAM.gov) or verify the changes. If the changed certification on this basis. DSBS (or successor systems)). information indicates that the concern is (c) SBA’s decision will be based on ■ 30. Revise § 126.401 to read as not eligible, the applicant will be given the facts set forth in the application, any follows: the option to withdraw its application, information received in response to or SBA will decline certification and the SBA’s request for clarification, any § 126.401 What is a program examination? concern must wait 90 days to reapply. independent research conducted by A program examination is an (d) HUBZone areas. Concerns SBA, and any changed circumstances. investigation by SBA officials, which applying for HUBZone status must use (d) In order to be certified into the verifies the accuracy of any certification SBA’s website (e.g., maps or other tools program, the applicant must be eligible made or information provided as part of

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the HUBZone application or provide would demonstrate ineligibility, means that at least 35% of its employees recertification process. Examiners may and decertify (or deny certification) on continue to reside in a HUBZone and verify that the concern met the this basis. the principal office of the concern program’s eligibility requirements at the (c) The concern must retain continues to be located in a HUBZone. time of its certification or, if applicable, documentation provided in the course (2) If at the time of its recertification at the time of its most recent of a program examination for 6 years the certified HUBZone small business recertification. from the date of submission. concern is currently performing a ■ 31. Revise § 126.402 to read as ■ 33. Add § 126.404 to subpart D to read HUBZone contract, its representation follows: as follows: means that at least 20% of its employees continue to reside in a HUBZone and § 126.402 When will SBA conduct program § 126.404 What are the possible outcomes the principal office of the concern examinations? of a program examination and when will continues to be located in a HUBZone. (a) SBA may conduct a program SBA make its determination? (3) Except as provided in paragraph examination at any time after the (a) Timing. SBA will make its (b) of this section, unless SBA has concern submits its application, during determination within 90 calendar days reason to question the concern’s the processing of the application, and at after SBA receives all requested representation of its continued any time while the concern is a certified information, when practicable. eligibility, SBA will accept the HUBZone small business concern. (b) Program examinations on certified representation without requiring the (b) SBA will conduct program HUBZone small business concerns. If certified HUBZone small business examinations periodically as part of the the program examination was concern to submit any supporting recertification process set forth in conducted on a certified HUBZone information or documentation. § 126.500. small business concern— (4) The concern’s recertification must (c) Upon receipt of specific and (1) And the D/HUB (or designee) be submitted within 30 days of the credible information alleging that a determines that the concern is eligible, anniversary date of its original certified HUBZone small business SBA will send a written notice to the HUBZone certification. The date of concern no longer meets the eligibility HUBZone small business concern and HUBZone certification is the date requirements for continued program continue to designate the concern as a specified in the concern’s certification eligibility, SBA will examine the certified HUBZone small business letter. If the business fails to recertify, concern’s eligibility for continued concern in DSBS (or successor system). SBA may propose the concern for participation in the program. (2) And the D/HUB (or designee) decertification pursuant to § 126.503. ■ 32. Revise § 126.403 to read as determines that the concern is not (b) SBA will conduct a program follows: eligible, the concern will have 30 days examination of each certified HUBZone to submit documentation showing that small business concern pursuant to it is eligible. During the 30-day period, § 126.403 at least once every three years § 126.403 What will SBA review during a such concern may not compete for or be to ensure continued program eligibility. program examination? awarded a HUBZone contract. If such Specifically, SBA will conduct a (a) SBA may conduct a program concern fails to demonstrate its program examination as part of the examination, or parts of an examination, eligibility by the last day of the 30-day recertification process three years after at one or more of the concern’s offices. period, the concern will be decertified. the concern’s initial HUBZone SBA will determine the location and (c) Program examinations on certification (whether by SBA or a third- scope of the examination and may applicants. If the program examination party certifier) or three years after the review any information related to the was conducted on an applicant to the date of the concern’s last program concern’s HUBZone eligibility HUBZone program— examination, whichever date is later. including, but not limited to, (1) And the D/HUB (or designee) (1) Example: Concern A is certified by SBA documentation related to the location determines that the concern is eligible, and ownership of the concern, to be eligible for the HUBZone program on SBA will send a written certification September 27, 2020. During that year, compliance with the 35% HUBZone notice to the concern and designate the Concern A does not receive a HUBZone residency requirement, and the concern as a certified HUBZone small contract. Concern A must recertify its concern’s ‘‘attempt to maintain’’ (see business concern in DSBS (or successor eligibility to SBA between August 27, 2021 § 126.103) this percentage. system). and September 26, 2021. Concern A must (b) SBA may require that a HUBZone (2) And the D/HUB (or designee) represent that at least 35% of its employees small business concern (or applicant) determines that the concern is continue to reside in a HUBZone and that its submit additional information as part of ineligible, SBA will send a written principal office continues to be located in a HUBZone. Concern A will continue to be a the program examination. If SBA decline notice to the concern. requests additional information, SBA certified HUBZone small business concern ■ 34. Revise § 126.500 to read as that is eligible to receive HUBZone contracts will presume that written notice of the follows: (as long as it is small for the size standard request was provided when SBA sends corresponding to the NAICS code assigned to such request to the concern at a mailing § 126.500 How does a concern maintain the contract) through September 26, 2022. On address, email address or fax number HUBZone certification? June 28, 2022, Concern A is awarded a provided in the concern’s profile in the (a) Any concern seeking to remain a HUBZone contract. Concern A must recertify Dynamic Small Business Search (DSBS) certified HUBZone small business its eligibility to SBA between August 27, or the System for Award Management concern in DSBS (or successor system) 2022 and September 26, 2022. Because (SAM) (or successor systems). SBA may must annually represent to SBA that it Concern A is performing a HUBZone draw an adverse inference from a continues to meet all HUBZone contract, Concern A must represent that at least 20% of its employees continue to reside concern’s failure to cooperate with a eligibility criteria (see § 126.200). in a HUBZone and that its principal office program examination or provide (1) If at the time of its recertification continues to be located in a HUBZone. requested information and assume that the certified HUBZone small business Concern A will continue to be a certified the information that the HUBZone small concern is not currently performing a HUBZone small business concern that is business concern (or applicant) failed to HUBZone contract, its representation eligible to receive HUBZone contracts (as

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long as it is small for the size standard through the program examination HUBZone small business concern that is corresponding to the NAICS code assigned to process when deemed appropriate and performing one or more HUBZone the contract) through September 26, 2023. will do so every three years pursuant to contracts no longer has at least 20% of Concern A must recertify its eligibility to § 126.500. its employees living in a HUBZone, SBA SBA between August 27, 2023 and (1) If SBA determines that the concern will propose the concern for September 26, 2023. Because three years have elapsed since its application and is no longer eligible at the time of its decertification based on the concern’s original certification, SBA will conduct a recertification, SBA will propose the failure to attempt to maintain program examination of Concern A at that HUBZone small business concern for compliance with the HUBZone time. In addition to its representation that it decertification pursuant to § 126.503. residency requirement. continues to be eligible as a certified (2) If SBA determines that the concern (i) Notice of proposed decertification. HUBZone small business concern, Concern A continues to be eligible, SBA will notify SBA will notify the HUBZone small must provide additional information as the concern of this determination. In business concern in writing that SBA is requested by SBA to demonstrate that it such case, the concern will: proposing to decertify it and state the continues to meet all the eligibility (i) Continue to be designated as a reasons for the proposed decertification. requirements of the HUBZone Program. The notice of proposed decertification (2) [Reserved] certified HUBZone small business concern in DSBS (or successor system); will notify the concern that it has 30 ■ 35. Revise § 126.501 to read as and days from the date it receives the letter follows: (ii) Be treated as an eligible HUBZone to submit a written response to SBA small business concern for all HUBZone explaining why the proposed ground(s) § 126.501 How long does HUBZone should not justify decertification. SBA certification last? contracts for which the concern qualifies as small for a period of one will consider that written notice was (a) One-year certification. Once SBA year from the date of the recertification. provided if SBA sends the notice of certifies a concern as eligible to (d) Voluntary withdrawal. A proposed decertification to the concern participate in the HUBZone program, HUBZone small business concern may at a mailing address, email address, or the concern will be treated as a certified request to voluntarily withdraw from fax number provided in the concern’s HUBZone small business concern the HUBZone program at any time. profile in the System for Award eligible for all HUBZone contracts for Once SBA concurs, SBA will decertify Management (SAM.gov) or the Dynamic which the concern qualifies as small, for the concern and no longer designate it Small Business Search (DSBS) (or a period of one year from the date of its as a certified HUBZone small business successor systems). initial certification or recertification, concern in DSBS (or successor system). (ii) Response to notice of proposed unless the concern acquires, is acquired The concern may apply again for decertification. The HUBZone small by, or merges with another firm during certification at any point ninety (90) business concern must submit a written that one-year period, or the concern is calendar days after the date of response to the notice of proposed performing a HUBZone contract and decertification. At that point, the decertification within the timeframe fails to attempt to maintain the concern would have to demonstrate that specified in the notice. In this response, minimum employee HUBZone it meets all HUBZone eligibility the HUBZone small business concern residency requirement (see § 126.103). requirements. must rebut each of the reasons set forth (1) A certified HUBZone small ■ by SBA in the notice of proposed business concern that acquires, is 36. Revise § 126.502 to read as decertification, and where appropriate, acquired by, or merges with another follows: the rebuttal must include documents business entity must notify SBA within § 126.502 Is there a limit to the length of showing that the concern is eligible for 30 days of the transaction becoming time a concern may be a certified HUBZone the HUBZone program as of the date final. The concern must then small business concern? specified in the notice. demonstrate to SBA that it continues to There is no limit to the length of time (iii) Adverse inference. If a HUBZone meet the HUBZone eligibility a concern may remain designated as a small business concern fails to requirements in order for it to remain certified HUBZone small business cooperate with SBA or fails to provide eligible as a certified HUBZone small concern in DSBS (or successor system) the information requested, the D/HUB business concern. so long as it continues to comply with may draw an adverse inference and (2) A certified HUBZone small the provisions of §§ 126.200, 126.500, assume that the information that the business concern that is performing a and 126.501. concern failed to provide would HUBZone contract and fails to attempt demonstrate ineligibility. ■ 37. Revise § 126.503 to read as to maintain the minimum employee (2) SBA’s decision. SBA will follows: HUBZone residency requirement (see determine whether the HUBZone small § 126.103) must notify SBA within 30 § 126.503 What happens if SBA is unable business concern remains eligible for days of such occurrence. A concern that to verify a HUBZone small business the program within 90 calendar days cannot meet the requirement may concern’s eligibility or determines that a after receiving all requested voluntarily withdraw from the program, concern is no longer eligible for the information, when practicable. The or it will be removed by SBA pursuant program? D/HUB will provide written notice to to program decertification procedures. (a) Proposed decertification—(1) the concern stating the basis for the (b) Annual recertification. On the General. If SBA is unable to verify a determination. If SBA finds that the annual anniversary of a concern’s certified HUBZone small business concern is not eligible, the D/HUB will certification or recertification, the concern’s eligibility or has information decertify the concern and remove its concern must recertify that it is fully indicating that a concern was not designation as a certified HUBZone compliant with all HUBZone eligibility eligible for the program at the time of small business concern in DSBS (or requirements (see § 126.200), or it can certification or recertification, SBA may successor system). If SBA finds that the request to voluntarily withdraw from propose decertification of the concern. concern is eligible, the concern will the HUBZone program. In addition, if during the one-year continue to be designated as a certified (c) Review of recertification. SBA may period of time after certification or HUBZone small business concern in review the concern’s recertification recertification SBA believes that a DSBS (or successor system).

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(b) Decertification pursuant to a § 126.600 [Amended] a HUBZone contract must have at least protest. The procedures described in ■ 40. Amend § 126.600 as follows: 35% of its employees residing within a paragraph (a) of this section do not ■ a. In the introductory text, remove the HUBZone at the time of certification apply to HUBZone status protests. If the phrase ‘‘qualified HUBZone SBC’’ and and annual recertification. Such a D/HUB sustains a protest pursuant to add in its place the phrase ‘‘certified concern need not meet the 35% § 126.803, SBA will decertify the HUBZone small business concern’’; HUBZone residency requirement at all HUBZone small business concern ■ b. In paragraph (a), (b), and (c), times while certified in the program. A immediately and change the concern’s remove the phrase ‘‘qualified HUBZone certified HUBZone small business status in DSBS (or successor system) to SBCs’’ and add in its place the phrase concern that has received a HUBZone reflect that it no longer qualifies as a ‘‘certified HUBZone small business contract must ‘‘attempt to maintain’’ certified HUBZone small business concerns’’; (see § 126.103) having 35% of its concern without first proposing it for ■ c. In paragraphs (d) and (e), remove employees residing in a HUBZone decertification. the phrase ‘‘HUBZone SBCs’’ and add in during the performance of any ■ 38. Revise § 126.504 to read as its place the phrase ‘‘certified HUBZone HUBZone contract awarded to the follows: small business concerns’’; and concern on the basis of its HUBZone ■ d. In paragraph (e), remove the word status. Such a concern must have at § 126.504 When will SBA remove the ‘‘against’’ and add in its place the word least 20% of its employees residing designation of a concern in DSBS (or ‘‘under’’ and remove the phrase ‘‘, within a HUBZone at the time of its successor system) as a certified HUBZone which had been’’ and add in its place annual recertification. small business concern? the phrase ‘‘that was’’. (b) For orders under indefinite (a) SBA will remove the designation ■ 41. Revise § 126.601 to read as delivery, indefinite quantity contracts, of a concern in DSBS (or successor follows: including orders under multiple award system) as a certified HUBZone small contracts, a certified HUBZone small business concern if the concern has: § 126.601 What additional requirements business concern must ‘‘attempt to must a certified HUBZone small business maintain’’ the HUBZone residency (1) Been decertified as a result of a concern meet to submit an offer on a HUBZone status protest pursuant to HUBZone contract? requirement during the performance of each order that is set aside for HUBZone § 126.803; (a) Only certified HUBZone small (2) Been decertified as a result of the small business concerns. business concerns are eligible to submit (c) A certified HUBZone small procedures set forth in § 126.503; or offers for a HUBZone contract or to business concern eligible for the (3) Voluntarily withdrawn from the receive a price evaluation preference program pursuant to § 126.200(a) must HUBZone program pursuant to under § 126.613. have at least 35% of its employees (b) At the time a certified HUBZone § 126.501(b). engaged in performing a HUBZone small business concern submits its (b) SBA will remove the designation contract residing within any Indian initial offer (including price) on a of a concern in DSBS (or successor reservation governed by one or more of specific HUBZone contract, it must system) as a certified HUBZone small the concern’s Indian Tribal Government certify to the contracting officer that it: business concern as soon as the D/HUB owners, or residing within any issues a decision decertifying the (1) Is a certified HUBZone small business concern in DSBS (or successor HUBZone adjoining any such Indian concern from the program. reservation. (c) After a concern has been removed system); (2) Is small, together with its affiliates, (d) A certified HUBZone small as a certified HUBZone small business business concern that has less than 20% concern in DSBS (or successor system), at the time of its offer under the size standard corresponding to the NAICS of its total employees residing in a it is ineligible for the HUBZone program HUBZone during the performance of a and may not submit an offer for a code assigned to the procurement; (3) Will ‘‘attempt to maintain’’ having HUBZone contract has failed to attempt HUBZone contract. at least 35% of its employees residing in to maintain the HUBZone residency (1) As long as the concern was eligible a HUBZone during the performance of requirement. Such failure will result in at the time of its offer (and eligibility the contract, as set forth in § 126.200(e); proposed decertification pursuant to relates back to the date of its and § 126.503. certification or recertification), it could (4) Will comply with the applicable § 126.603 [Amended] be awarded a HUBZone contract even if limitations on subcontracting during it no longer appears as a certified ■ 43. Amend § 126.603 as follows: performance of the contract, as set forth ■ HUBZone small business concern on in § 125.6 of this chapter and a. Remove the phrase ‘‘qualified DSBS on the date of award. §§ 126.200(f) and 126.700. HUBZone SBC’’ and add in its place the (2) If SBA determines that the (c) A certified HUBZone small phrase ‘‘certified HUBZone small concern’s recertification was invalid business concern’’; and business concern may submit an offer ■ (i.e., based on a protest or program on a HUBZone contract for supplies as b. Remove the phrase ‘‘qualified examination SBA determines that the a nonmanufacturer if it meets the HUBZone SBCs’’ and add in its place concern did not qualify as a HUBZone requirements of the nonmanufacturer the phrase ‘‘certified HUBZone small small business concern on the date of its rule set forth at § 121.406 of this business concerns’’. recertification), the concern will be chapter. ■ 44. Amend § 126.607 as follows: ■ a. In the section heading, remove the ineligible for the award of any HUBZone ■ 42. Revise § 126.602 to read as phrase ‘‘qualified HUBZone SBCs’’ and contract for which it previously certified follows: its HUBZone status. add in its place the phrase ‘‘certified § 126.602 Must a certified HUBZone small HUBZone small business concerns’’; Subpart F—Contracting With Certified business concern maintain the employee ■ b. In paragraph (c) introductory text, HUBZone Small Business Concerns residency percentage during contract remove the phrase ‘‘qualified HUBZone performance? SBCs’’ and add in its place the phrase ■ 39. Revise the heading of subpart F to (a) A certified HUBZone small ‘‘certified HUBZone small business read as set forth above. business concern that has not received concerns’’; and

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■ c. In paragraph (c)(1), remove the ■ ii. Remove the phrase ‘‘qualified ■ h. Revise paragraph (e). phrase ‘‘SBA’s list of qualified HUBZone SBC’’ wherever it appears and The revisions read as follows: HUBZone SBCs’’ and add in its place add in its place the phrase ‘‘certified the phrase ‘‘the list of certified HUBZone small business concern’’; § 126.616 What requirements must a joint ■ venture satisfy to submit an offer and be HUBZone small business concerns iii. Remove the phrase ‘‘non- eligible to perform on a HUBZone contract? contained in DSBS (or successor HUBZone SBC’’ wherever it appears and system)’’. add in its place the phrase ‘‘non- (a) General. A certified HUBZone HUBZone small business concern’’; small business concern may enter into § 126.608 [Amended] ■ iv. In newly designated paragraph a joint venture agreement with one or ■ 45. Amend § 126.608 as follows: (a)(2)(ii) (Example 2), remove the phrase more other small business concerns, or ■ a. Remove the phrase ‘‘HUBZone set- ‘‘non-HUBZone SBC’s’’ and add in its with an approved mentor authorized by aside’’ and add in its place the phrase place the phrase ‘‘non-HUBZone small § 125.9 of this chapter (or, if also an 8(a) ‘‘HUBZone set-aside or sole source business concern’s’’; BD Participant, with an approved award’’; ■ v. In the second and third sentences mentor authorized by § 124.520 of this ■ b. Remove the phrase ‘‘qualified in newly designated paragraph (a)(2)(iv) chapter), for the purpose of submitting HUBZone SBC’’ and add in its place the (Example 4), remove the phrase an offer for a HUBZone contract. The phrase ‘‘certified HUBZone small ‘‘HUBZone SBC’’ wherever it appears joint venture itself need not be a business concern’’. and add in its place the phrase certified HUBZone small business concern. § 126.611 [Amended] ‘‘HUBZone small business concern’’; ■ vi. In the third sentence in newly * * * * * ■ 46. Amend the § 126.611 heading by designated paragraph (a)(2)(iv) (Example (e) Certification of compliance—(1) At removing the phrase ‘‘such an appeal’’ 4), remove the phrase ‘‘HUBZone SBCs’’ time of offer. If submitting an offer as a and adding in its place the phrase ‘‘an and add in its place the phrase joint venture for a HUBZone contract, at appeal of a contracting officer’s decision ‘‘certified HUBZone small business the time of initial offer (and if not to issue a procurement as a concerns’’; applicable, final offer), each certified HUBZone contract’’. ■ d. In paragraph (b)(2): HUBZone small business concern joint ■ venture partner must make the § 126.612 [Amended] i. Remove the phrase ‘‘qualified HUBZone SBCs’’ and add in its place following certifications to the ■ 47. Amend § 126.612 as follows: the phrase ‘‘certified HUBZone small contracting officer separately under its ■ a. In the introductory text, remove the business concerns’’; own name: phrase ‘‘qualified HUBZone SBC’’ ■ ii. Remove the phrase ‘‘qualified (i) It is a certified HUBZone small wherever it appears and add in its place HUBZone SBC’’ and add in its place the business concern that appears in DSBS the phrase ‘‘HUBZone small business phrase ‘‘certified HUBZone small (or successor system) as a certified concern’’; business concern’’; HUBZone small business concern and it ■ b. In paragraph (c), remove the phrase ■ iii. Designate the ‘‘Example’’ met the eligibility requirements in ‘‘qualified HUBZone SBCs’’ and add in paragraph as paragraph (b)(2)(i) and add § 126.200 at the time of its initial its place the phrase ‘‘HUBZone small a reserved paragraph (b)(2)(ii); and certification or, if applicable, at the time business concerns’’; and ■ e. In paragraph (d): of its most recent recertification; ■ c. In paragraph (d), remove the phrase ■ i. Remove the phrase ‘‘qualified (ii) It, together with its affiliates, is ‘‘qualified HUBZone SBC’’ wherever it HUBZone SBC’’ and add in its place the small under the size standard appears and add in its place the phrase phrase ‘‘certified HUBZone small corresponding to the NAICS code ‘‘HUBZone small business concern’’ business concern’’; assigned to the procurement; § 126.613 [Amended] ■ ii. Remove the phrase ‘‘SBCs’’ and add (iii) It will ‘‘attempt to maintain’’ having at least 35% of its employees ■ in its place the phrase ‘‘small business 48. Amend § 126.613 as follows: concerns’’. residing in a HUBZone during ■ a. In the section heading, remove the ■ 49. Amend § 126.616 as follows: performance of the contract; and phrase ‘‘qualified HUBZone SBC’’ and (iv) It will comply with the applicable add in its place the phrase ‘‘certified ■ a. Revise the section heading; ■ b. Revise paragraph (a); limitations on subcontracting during HUBZone small business concern’’; performance of the contract, as set forth ■ b. In paragraph (a)(1): ■ c. In paragraphs (b)(1), (d)(1), and in § 125.6 of this chapter and ■ i. Remove the phrase ‘‘qualified (d)(2) introductory text, remove the §§ 126.200(f) and 126.700. HUBZone SBC’’ wherever it appears and phrase ‘‘qualified HUBZone SBC’’ add in its place the phrase ‘‘certified wherever it appears and add in its place (2) Prior to performance. Prior to the HUBZone small business concern’’; the phrase ‘‘certified HUBZone small performance of any HUBZone contract ■ ii. Remove the phrase ‘‘another SBC’’ business concern’’; as a joint venture, the HUBZone small and add in its place the phrase ‘‘another ■ e. In paragraph (c) introductory text, business concern partner to the joint small business concern’’; remove ‘‘SBC’’ and add in its place venture must submit a written ■ iii. In the final sentence, remove the ‘‘small business concern’’; certification to the contracting officer phrase ‘‘HUBZone SBC’’ and add in its ■ f. In paragraphs (c)(2) through (4), and SBA, signed by an authorized place the phrase ‘‘certified HUBZone (c)(9) and (10), (d)(2), (e), (g), and (i) official of each partner to the joint small business concern’’; remove the phrase ‘‘HUBZone SBC’’ venture, stating the following: ■ iv. In the final sentence, remove the wherever it appears’’ and add in its (i) The parties have entered into a phrase ‘‘HUBZone SBCs’’ and add in its place the phrase ‘‘certified HUBZone joint venture agreement that fully place the phrase ‘‘HUBZone small small business concern’’; complies with paragraph (c) of this business concerns’’; ■ g. In paragraphs (c)(7), (i), (j)(2), and section; and ■ c. In paragraph (a)(2): (k), remove the phrase ‘‘performance of (ii) The parties will perform the ■ i. Designate the paragraphs that are work’’ wherever it appears and add in contract in compliance with the joint Examples 1 through 4 as paragraphs its place the phrase ‘‘limitations on venture agreement. (a)(2)(i) through (iv), respectively; subcontracting’’; and * * * * *

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§ 126.617 [Amended] HUBZone small business concern at the longer qualifies as small for the size ■ 50. Amend § 126.617 as follows: time it submits its offer for the order. standard corresponding to NAICS code ■ a. In the section heading, remove the (3) Where a HUBZone contract is assigned to the contract, the agency can phrase ‘‘qualified HUBZone SBC’’ and novated to another business concern, no longer count the options or orders add in its place the phrase ‘‘certified the concern that will continue issued pursuant to the contract, from HUBZone small business concern’’; performance on the contract must that point forward, towards its ■ b. Remove the phrase ‘‘qualified certify its status as a certified HUBZone HUBZone goals. HUBZone SBC’’ and add in its place the small business concern to the procuring (2) A concern that did not certify itself phrase ‘‘certified HUBZone small agency, or inform the procuring agency as a HUBZone small business concern, business concern’’. that it is not a certified HUBZone small either initially or prior to an option business concern, within 30 days of the being exercised, may recertify itself as a § 126.618 [Amended] novation approval. If the concern is not HUBZone small business concern for a ■ 51. Amend § 126.618 as follows: a certified HUBZone small business subsequent option period if it meets the ■ a. In the section heading, remove the concern, the agency can no longer count eligibility requirements at that time. phrase ‘‘HUBZone SBC’s’’ and add in its any work performed under the contract, (3) Recertification does not change the place the phrase ‘‘certified HUBZone including any options or orders issued terms and conditions of the contract. small business concern’s’’; pursuant to the contract, from that point The limitations on subcontracting, ■ b. In paragraph (a), remove the phrase forward towards its HUBZone goals. nonmanufacturer and subcontracting ‘‘the underlying HUBZone (4) Where a concern that is plan requirements in effect at the time requirements’’ and add in its place the performing a HUBZone contract of contract award remain in effect phrase ‘‘the HUBZone requirements acquires, is acquired by, or merges with throughout the life of the contract. described in § 126.200’’; another concern and contract novation (4) Where the contracting officer ■ c. In paragraphs (a) through (c), is not required, the concern must, explicitly requires concerns to recertify remove the phrase ‘‘qualified HUBZone within 30 days of the transaction their status in response to a solicitation SBC’’ wherever it appears and add in its becoming final, recertify its status as a for an order, SBA will determine place the phrase ‘‘certified HUBZone certified HUBZone small business eligibility as of the date of the concern’s small business concern’’; concern to the procuring agency, or initial certification or, if applicable, its ■ d. In paragraphs (b) and (c)(1), remove inform the procuring agency that it no most recent recertification. the phrase ‘‘HUBZone SBC’’ wherever it longer qualifies as a HUBZone small (c) Except for Blanket Purchase appears and add in its place the phrase business concern. If the contractor is Agreements under Federal Supply ‘‘certified HUBZone small business unable to recertify its status as a Schedule contracts, a concern’s status concern’’; HUBZone small business concern, the will be determined at the time of ■ e. In paragraph (c)(1), remove the agency can no longer count the options submission of its initial response to a phrase ‘‘performance of work’’ and add or orders issued pursuant to the solicitation for an Agreement (including in its place the phrase ‘‘limitations on contract, from that point forward, Blanket Purchase Agreements (BPAs), subcontracting’’. towards its HUBZone goals. The agency Basic Agreements, Basic Ordering ■ 52. Add § 126.619 to subpart F to read must immediately revise all applicable Agreements, or any other Agreement as follows: Federal contract databases to reflect the that a contracting officer sets aside or new status. reserves awards for certified HUBZone § 126.619 When must a certified HUBZone (5) Where a concern is decertified small business concerns) and each order small business concern recertify its status after the award of a HUBZone contract, issued pursuant to the Agreement. for a HUBZone contract? the procuring agency may exercise ■ 53. Revise § 126.700 to read as (a) A concern that is a certified options and still count the award as an follows: HUBZone small business concern at the award to a HUBZone small business time of initial offer (including a concern, except where recertification is § 126.700 What are the limitations on Multiple Award Contract) is generally required or requested under this section, subcontracting requirements for HUBZone considered a HUBZone small business or where the concern has been found to contracts? concern throughout the life of that be ineligible for award pursuant to a (a) Other than Multiple Award contract. HUBZone status protest pursuant to Contracts. For other than a Multiple (1) If a concern is a certified HUBZone § 126.803. Award Contract, a prime contractor small business concern at the time of (b) For the purposes of contracts receiving an award as a certified initial offer for a HUBZone Multiple (including Multiple Award Contracts) HUBZone small business concern must Award Contract, then it will be with durations of more than five years meet the limitations on subcontracting considered a certified HUBZone small (including options), a contracting officer requirements set forth in § 125.6 of this business concern for each order issued must request that a business concern chapter. against the contract, unless a contracting recertify its status as a HUBZone small (b) Multiple Award Contracts—(1) officer requests a new HUBZone business concern no more than 120 days Total Set-Aside Contracts. For a certification in connection with a prior to the end of the fifth year of the Multiple Award Contract that is totally specific order (see paragraph (b)(4) of contract, and no more than 120 days set aside for certified HUBZone small this section). prior to exercising any option. business concerns, a certified HUBZone (2) Except for orders under Federal (1) If the concern cannot recertify that small business concern must comply Supply Schedule contracts, where the it qualifies as a HUBZone small with the applicable limitations on underlying Multiple Award Contract is business concern, the agency can no subcontracting (see § 126.5), or if not a HUBZone contract and a procuring longer count the options or orders applicable, the nonmanufacturer rule agency is setting aside an order for the issued pursuant to the contract, from (see § 121.406 of this chapter), during HUBZone program, a concern must be a that point forward, towards its the base term and during each certified HUBZone small business HUBZone goals. This means that if the subsequent option period. However, the concern and appear in DSBS (or concern either no longer meets the contracting officer, at his or her successor system) as a certified HUBZone eligibility requirements or no discretion, may also require the concern

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to comply with the limitations on ■ 55. Amend § 126.801 by revising the set forth in § 126.616 at the time the subcontracting or the nonmanufacturer section heading, paragraphs (a), (b), and joint venture submitted an offer for a rule for each individual order awarded (c)(3), and the second and third HUBZone contract. under the Multiple Award Contract. sentences in paragraph (e), and by (c) * * * (2) Partial Set-Aside Contracts. For adding paragraphs (e)(1) through (12) to (3) Protestors may submit their Multiple Award Contracts that are read as follows: protests by email to [email protected]. partially set aside for certified HUBZone § 126.801 How does an interested party file * * * * * small business concerns, paragraph a HUBZone status protest? (e) * * * The contracting officer must (b)(1) of this section applies to the set- send the protest, along with a referral (a) General. (1) A HUBZone status aside portion of the contract. For orders letter, to the D/HUB by email to protest is the process by which an awarded under the non-set-aside [email protected]. The contracting interested party may challenge the portion of a Multiple Award Contract, a officer’s referral letter must include HUBZone status of an apparent certified HUBZone small business information pertaining to the successful offeror on a HUBZone concern need not comply with any solicitation that may be necessary for contract, including a HUBZone joint limitations on subcontracting or SBA to determine timeliness and venture submitting an offer under nonmanufacturer rule requirements. standing, including the following: § 126.616. (3) Orders Set Aside for certified (2) The protest procedures described (1) The solicitation number; HUBZone small business concerns. For in this part are separate from those (2) The name, address, telephone each individual order that is set aside governing size protests and appeals. All number, email address, and facsimile for certified HUBZone small business protests relating to whether a certified number of the contracting officer; concerns under a Multiple Award HUBZone small business concern is (3) The type of HUBZone contract at Contract that is not itself set aside for other than small for purposes of any issue (i.e., HUBZone set-aside; certified HUBZone small business Federal program are subject to part 121 HUBZone sole source; full and open concerns, a certified HUBZone small of this chapter and must be filed in competition with a HUBZone price business concern must comply with the accordance with that part. If a protester evaluation preference applied; reserve applicable limitations on subcontracting protests both the size of the HUBZone for HUBZone small business concerns (see § 125.6 of this chapter), or if small business concern and whether the under a Multiple Award Contract; or applicable, the nonmanufacturer rule concern meets the HUBZone eligibility order set-aside for HUBZone small (see § 121.406 of this chapter), in the requirements set forth in § 126.200, SBA business concerns against a Multiple performance of such order. will process the protests concurrently, Award Contract); (4) Reserves. For an order that is set under the procedures set forth in part (4) If the procurement was conducted aside for certified HUBZone small 121 of this chapter and this part. using full and open competition with a business concerns against a Multiple (3) SBA does not review issues HUBZone price evaluation preference, Award Contract with a HUBZone concerning the administration of a whether the protester’s opportunity for reserve, a certified HUBZone small HUBZone contract. award was affected by the preference; business concern must comply with the (b) Format and specificity. (1) Protests (5) If the procurement was a applicable limitations on subcontracting must be in writing and must state all HUBZone set-aside, whether the (see § 125.6 of this chapter), or if specific grounds for why the protested protester submitted an offer; applicable, the nonmanufacturer rule concern did not meet the HUBZone (6) Whether the protested concern (see § 121.406 of this chapter), in the eligibility requirements set forth in was the apparent successful offeror; performance of such order. However, § 126.200 at the time the concern (7) Whether the procurement was the certified HUBZone small business applied for certification or at the time conducted using sealed bid or concern does not have to comply with SBA last recertified the concern as a negotiated procedures; the limitations on subcontracting or the HUBZone small business concern. A (8) The bid opening date, if nonmanufacturer rule for any order protest merely asserting that the applicable; issued against the Multiple Award protested concern did not qualify as a (9) The date the protester was notified Contract if the order is competed HUBZone small business concern at the of the apparent successful offeror; amongst certified HUBZone small time of certification or recertification, (10) The date the protest was business concerns and one or more without setting forth specific facts or submitted to the contracting officer; other-than-small business concerns. allegations, is insufficient. A protest (11) The date the protested concern ■ 54. Revise § 126.800 to read as asserting that a concern was not in submitted its initial offer or bid to the follows: compliance with the HUBZone contracting activity; and eligibility requirements at the time of (12) Whether a contract has been § 126.800 Who may protest the status of a offer or award will be dismissed. awarded, and if applicable, the date of certified HUBZone small business concern? (2) For a protest filed against a contract award and contract number. (a) For sole source procurements. SBA HUBZone joint venture, the protest § 126.802 [Amended] or the contracting officer may protest must state all specific grounds for the proposed awardee’s status as a why— ■ 56. Amend § 126.802 by removing the certified HUBZone small business (i) The HUBZone small business phrase ‘‘has qualified HUBZone status’’ concern. concern partner to the joint venture did and adding in its place the phrase (b) For all other procurements, not meet the HUBZone eligibility ‘‘qualifies as a certified HUBZone small including Multiple Award Contracts (see requirements set forth in § 126.200 at business concern’’. § 125.1 of this chapter). SBA, the the time the concern applied for ■ 57. Amend § 126.803 by: contracting officer, or any other certification or at the time SBA last ■ a. Revising the section heading; interested party may protest the recertified the concern as a HUBZone ■ b. Redesignating paragraphs (a) apparent successful offeror’s status as a small business concern; and/or through (d) as paragraphs (b) through certified HUBZone small business (ii) The protested HUBZone joint (e), respectively; concern. venture did not meet the requirements ■ c. Adding new paragraph (a); and

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■ d. Revising newly redesignated successor system). A contracting officer apply the appeal decision to the paragraphs (b)(2), (c), and (e). shall not award a contract to a protested procurement in question. The revisions and addition read as concern that the D/HUB has determined (3) A concern found to be ineligible is follows: is not an eligible HUBZone small precluded from applying for HUBZone business concern for the procurement in certification for ninety (90) calendar § 126.803 How will SBA process a question. days from the date of the final agency HUBZone status protest and what are the possible outcomes? (i) No appeal filed. If a contracting decision (the D/HUB’s decision if no officer receives a determination appeal is filed, or the decision of the (a) Date at which eligibility sustaining a protest after contract award, AA/GCBD if the protest is appealed). determined. SBA will determine the and no appeal has been filed, the ■ eligibility of a concern subject to a 58. Revise § 126.804 to read as contracting officer shall terminate the HUBZone status protest as of the date of follows: award. its initial certification or, if applicable, § 126.804 Will SBA decide all HUBZone its most recent recertification. (ii) Appeal filed. (A) If a timely appeal is filed after contract award, the status protests? (b) * * * SBA will decide all protests not (2) If SBA determines the protest is contracting officer must consider dismissed on the basis that they are timely and sufficiently specific, SBA whether performance can be suspended premature, untimely, non-specific, will notify the protested concern of the until an appellate decision is rendered. moot, or not filed by an interested party. protest and the identity of the protestor. (B) If the AA/GCBD affirms the initial determination finding the protested The protested concern must submit PART 127—WOMEN-OWNED SMALL concern ineligible, the contracting information responsive to the protest BUSINESS FEDERAL CONTRACT officer shall either terminate the within 5 business days of the date of PROGRAM receipt of the protest. contract or not exercise the next option. (c) Time period for determination. (1) (iii) Update FPDS–NG. Where the ■ 59. The authority citation for part 127 SBA will determine the HUBZone status contract was awarded to a concern that continues to read as follows: of the protested concern within 15 is found not to qualify as a HUBZone small business concern, the contracting Authority: 15 U.S.C. 632, 634(b)(6), business days after receipt of a complete 637(m), 644 and 657r. protest referral. officer must update the Federal (2) If SBA does not issue its Procurement Data System-Next ■ 60. Amend § 127.602 by redesignating determination within 15 business days Generation (FPDS–NG) and other the text of § 127.602 as paragraph (a) (or request an extension that is granted), procurement reporting databases to and adding paragraph (b). the contracting officer may award the reflect the final agency HUBZone The addition reads as follows: decision (i.e., the D/HUB’s decision if contract if he or she determines in § 127.602 What are the grounds for filing writing that there is an immediate need no appeal is filed, or the decision of the an EDWOSB or WOSB status protest? AA/GCBD if the protest is appealed). to award the contract and that waiting * * * * * (2) Protest dismissed or denied. If the until SBA makes its determination will (b) For a protest filed against an D/HUB denies or dismisses the protest, be disadvantageous to the Government. EDWOSB or WOSB joint venture, the the contracting officer may award the Notwithstanding such a determination, protest must state all specific grounds contract to the protested concern. the provisions of paragraph (e) of this for why— (i) No appeal filed. If a contracting section apply to the procurement in (1) The EDOWSB or WOSB partner to officer receives a determination question. the joint venture did not meet the dismissing or denying a protest and no * * * * * EDWOSB or WOSB eligibility appeal has been filed, the contracting (e) Effect of determination. The requirements set forth in § 127.200; and/ officer may: determination is effective immediately or and is final unless overturned on appeal (A) Award the contract to the (2) The protested EDWOSB or WOSB by the AA/GC&BD, or designee, protested concern if it has not yet been joint venture did not meet the pursuant to § 126.805. awarded; or requirements set forth in § 127.506. (1) Protest sustained. If the D/HUB (B) Authorize contract performance to finds the protested concern ineligible proceed if the contract has been Dated: November 12, 2019. and sustains the protest, SBA will awarded. Christopher M. Pilkerton, decertify the concern and remove its (ii) Appeal filed. If the AA/GCBD Acting Administrator. designation as a certified HUBZone overturns the initial determination or [FR Doc. 2019–24915 Filed 11–25–19; 8:45 am] small business concern in DSBS (or dismissal, the contracting officer may BILLING CODE 8025–01–P

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