[Federal Register: November 22, 2002 (Volume 67, Number 226)]
[Proposed Rules]
[Page 70339-70352]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no02-20]
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SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121 and 134
RIN: 3245-AE92
Small Business Size Regulations; Rules of Procedure Governing
Cases Before the Office of Hearings and Appeals
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The Small Business Administration (SBA) proposes to amend its
small business size regulations and the regulations applying to appeals
of size determinations. The proposed rule would amend the definitions
of affiliation, annual receipts, and employees. It would also make
procedural and technical changes to cover new programs such as SBA's
HUBZone program and the government-wide Small Disadvantaged Business
program. The proposed rule would codify several long-standing
precedents of SBA's Office of Hearings and Appeals and would clarify
the jurisdiction of that office.
DATES: Comments must be received on or before January 21, 2003.
ADDRESSES: Written comments should be addressed to John W. Klein,
Associate General Counsel for Procurement Law, Small Business
Administration, 409 3rd Street, SW., Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: Laura M. Eyester, Office of General
Counsel, (202) 619-1801.
SUPPLEMENTARY INFORMATION: SBA's small business size regulations (13
CFR part 121) are used to determine eligibility for all SBA and Federal
programs that require an entity to be a small business concern. In the
past, to be considered small, concerns were required to qualify under a
particular size standard that corresponded to a four-digit Standard
Industrial Classification (SIC) code. Effective October 1, 2000, to be
considered small, concerns are required to qualify under a particular
size standard that corresponds to the six-digit North American
Industrial Classification System (NAICS) code. SBA published its final
rule setting forth the various NAICS codes and corresponding size
standards at 65 FR 30836 (May 15, 2000). SBA published a technical
correction to the final at 65 FR 53533 (September 5, 2000). That final
rule changed all references to SIC codes in part 121 to NAICS codes.
This proposed rule would not change any size standards currently
corresponding to specific NAICS codes.
With a few exceptions, SBA size standards are based on either
average annual receipts or number of employees, depending on the
industry. When measuring a concern's size, the receipts or employees of
affiliated concerns are included. The proposed rule would modify the
definitions of affiliation, annual receipts, and number of employees.
The proposed changes to part 134 would clarify the jurisdiction of
SBA's Office of Hearings and Appeals (OHA) and make certain technical
amendments.
Section-by-Section Analysis
SBA proposes to amend Sec. 121.102 by adding a new paragraph (d)
that would recognize that there currently exists an internal Size
Policy Board at SBA that is responsible for making recommendations to
the Administrator
[[Page 70340]]
on size standards, other size eligibility requirements, and size
protest procedures. In addition, SBA proposes to amend Sec. 121.103 to
specifically incorporate into the definition of ``affiliation'' certain
provisions that were previously contained in the regulations. Because
there may have been some confusion regarding the more generalized
affiliation language when SBA amended its regulations in 1996, SBA
believes it is necessary to again specifically state other bases of
possible affiliation in the regulations. The section would be revised
to state that control may be affirmative or negative, provide an
example of negative control, state that control may be exercised
indirectly through a third party, and state that affiliation may be
found under the totality of the circumstances even though no single
factor is sufficient to constitute affiliation. These three changes
codify long-standing OHA rulings. See, e.g., Size Appeal of Jensco
Marine, Inc., SBA No. SIZ-4330 (1998); Size Appeal of National Welders,
SBA No. SIZ-4315 (1998); Size Appeal of First American Tax Valuation,
Inc., SBA No. SIZ-4206 (1996); and Size Appeal of Field Support
Services, Inc., SBA No. SIZ-4176 (1996). (OHA decisions cited in this
preamble can be located at www.sba.gov/oha/searchpage.html or by
contacting OHA by e-mail at oha@sba.gov or by phone at 202-401-8200.)
This proposed rule would change the title of Sec. 121.103(b) from
``Exclusion from affiliation coverage'' to ``Exceptions to affiliation
coverage'' for clarity. In addition, the proposed rule would amend
Sec. 121.103(b)(2) to clarify the exception to affiliation for Indian
tribes (including Alaska Native Corporations), Community Development
Corporations (CDCs) or Native Hawaiian Organizations (NHOs).
Specifically, the proposed rule would specify that the exception
applies whether the tribe, CDC or NHO owns the concern whose size is at
issue directly, or through another entity, which is wholly-owned by the
tribe, CDC or NHO. The proposed rule would also provide that
affiliation could not be found among several tribally, ANC, CDC or NOH-
owned concerns based on common management. This is an extension of the
current regulation, which precludes affiliation based solely on common
ownership. SBA believes that this change is particularly needed in the
context of tribally-owned concerns where tribal board members often are
also board members of tribally-owned concerns. SBA specifically asks
for comments as to whether this exception from affiliation goes far
enough, or whether SBA should provide the same exception to affiliation
as that contained for the 8(a) program in Sec. 124.109(c)(2)(iii). SBA
notes, however, that the exception to affiliation for the 8(a) program
is statutorily based, while the general exception contained in Sec.
121.103(b)(2) is not.
The proposed rule would also add language to both Sec.
121.103(b)(2) and (b)(6) to clarify that SBA may find affiliation other
than through common ownership or common management, and with respect to
approved mentor/protege relationships, other than on the basis of the
mentor/protege agreement. This is not a change in policy, but a
clarification of existing policy.
SBA proposes two changes to Sec. 121.103(c). Section 121.103(c)(1)
would be amended by adding the word ``voting'' to clarify that only
voting stock is considered in determining affiliation. In addition, SBA
proposes adding a sentence to Sec. 121.103(c)(2) stating that the
presumption of control may be rebutted by showing that control does not
in fact exist. For example, in Size Appeal of Tri-Fuels, Inc., SBA No.
SIZ-3563 (1992), OHA held that the presumption that minority
shareholders owning substantially equal blocks of stock each control a
firm was rebutted where a shareholder's agreement specified that each
of the shareholders could appoint one of five directors. The proposed
rule would also add a new Sec. 121.103(c)(3), which would provide that
where a concern's voting stock is widely held and no single block of
stock is large as compared with all other stock holdings, SBA will deem
the concern's Board of Directors and its Chief Executive Officer (CEO)
or President to have the power to control the concern in the absence of
evidence to the contrary. In the absence of evidence to the contrary,
SBA will find control in such circumstances to rest with the Board of
Directors and with the highest ranking officer of the concern (either
its CEO or President) because control of the concern must rest
somewhere.
Section 121.103(d) discusses affiliation, which arises under stock
options, convertible debentures, and agreements to merge. SBA gives
present effect to all such arrangements in determining affiliation. SBA
proposes to amend the section by setting forth exceptions to this
``present effect'' rule that have been developed by OHA rulings. See,
e.g., Size Appeal of Consolidated Industries, Inc., SBA No. SIZ-4235
(1997). One proposed exception would not give present effect to
agreements to open or continue negotiations towards the possibility of
a merger or a sale of stock at some later date. Another proposed
exception would not give present effect to options, debentures, and
agreements that are subject to conditions that are incapable of
fulfillment, speculative, conjectural, remote, or unenforceable under
state or Federal law.
Section 121.103(e) covers control through common management and
would be amended to clarify that affiliation arises when an officer,
director, managing member, or partner controls two concerns. Section
121.103(f) would expand the current regulation at Sec. 121.103(a)(3)
covering the concept of ``identity of interest.'' The concept is that
two or more persons with an identity of interest, such as members of
the same family or with common investments in more than one concern,
may be treated as a single party for size determination purposes. See,
Size Appeal of Golden Bear Arborists, SBA No. SIZ-1899 (1984). Although
this provision was deleted as a separate basis for affiliation from
part 121 in 1996, when SBA streamlined its regulations, see, 13 CFR
121.401(d) (1995), the concept remained under the ``General Principles
of Affiliation,'' and OHA continues to use the identity of interest
concept in ruling on affiliation issues. See, e.g., Size Appeal of
Lyons Security Service, Inc., SBA No. SIZ-4264 (1997). SBA believes
that for purposes of clarity this rule should be explicitly set forth
as a separate basis for finding affiliation in the size regulations.
SBA also proposes to add Sec. 121.103(g), ``Affiliation based on
the newly organized concern rule.'' This proposed section provides that
affiliation may arise where former officers, directors, stockholders,
managing members (in a limited liability corporation) or key employees
of one concern organize a new concern in the same or related industry
and serve as its officers, directors, stockholders, managing members or
key employees, and the first concern will provide contractual,
financial, or other assistance to the new concern. This provision also
previously appeared in SBA's size regulations, and SBA believes that it
is appropriate to add it back to the regulations as a separate basis
for finding affiliation. SBA notes that even after the regulatory
change removing the newly organized concern concept as a separate basis
for finding affiliation, OHA has continued to use it from the general
principles of affiliation contained in the regulations to find
affiliation. See, e.g., Size Appeal of Lyons Security Service, Inc.,
supra; Size
[[Page 70341]]
Appeal of Frontier Applied Sciences, Inc., SBA No. SIZ-4316 (1998).
SBA proposes to redesignate the joint venture regulation currently
at Sec. 121.103(f) to Sec. 121.103(h), clarify it, and define its key
terms. SBA receives numerous inquiries concerning the definition of the
terms ``joint venture'' and ``teaming arrangement.'' Therefore, SBA
proposes to add definitions of these terms in its regulations. SBA is
using the definitions of these terms as set forth in parts 9 and 19 of
the Federal Acquisition Regulation (FAR), title 48 of the Code of
Federal Regulations, for consistency in the government contracting
field. In addition, in Sec. 121.103(h)(5), SBA proposes to add
language clarifying that for size purposes a concern must include in
its revenues its proportionate share of joint venture receipts, or in
its total number of employees its proportionate share of joint venture
employees. A concern that was found to be affiliated through the
``ostensible subcontractor'' rule cannot, however, claim that because
SBA found there to be a joint venture in effect for a particular
contract it can exclude the receipts/employees of its subcontractor
(i.e., the ostensible subcontractor), which SBA deemed to be a joint
venturer. SBA will exclude the proportionate share of receipts/
employees only of true joint venture partners.
SBA is considering another change to the joint venture regulation,
as well. SBA's regulations allow joint ventures to be considered small
for larger procurements when certain requirements are met. See Sec.
121.103(f)(3). In general, SBA regards joint ventures as short term
relationships, which enable two or more concerns to enter into a
business relationship to perform a specific contract. SBA is
considering adopting a rule that would allow two or more small
businesses to form a joint venture relationship that would go beyond a
specific contract and still afford them the exclusion from affilation
(if the other requirements are met). In other words, the joint venture
could be an ongoing relationship that would allow the concerns to seek
out several different larger contract opportunities and still get an
exclusion from affiliation without requiring the entities to form a
separate joint venture for each contract opportunity. SBA is
specifically requesting comments on this proposal.
SBA proposes several changes to Sec. 121.104, which pertain to how
the annual receipts of a concern are calculated. On January 31, 1996,
SBA amended its size regulations to simplify the method by which it
determines average annual receipts (aar). Under the current
regulations, SBA bases its calculation of a concern's aar solely on
information contained in the concern's Federal income tax returns over
its last three completed fiscal years. 61 FR 3280 (January 31, 1996).
Previously, SBA could rely either on a concern's regular books of
account or Federal income tax returns to determine a concern's aar.
That policy change was made by SBA in an effort to simplify its size
regulations by using the information a business concern reports to the
Internal Revenue Service (IRS) for tax purposes to determine the annual
receipts of a concern. The 1996 revisions also deleted SBA's
requirement that a concern whose small business size status had been
protested had to restate its receipts based on the accrual method of
accounting if its books of account or tax returns were prepared using a
different method of accounting. Since 1996, a number of issues have
arisen concerning that revision and SBA now believes the public would
benefit from additional regulatory guidance on these matters. In
addition, OHA has rendered several significant rulings relating to the
calculation of annual receipts and SBA believes these rulings should be
codified in SBA's size regulations so the public is aware of them.
Thus, SBA is proposing to modify its definition of receipts in
Sec. 121.104(a)(1). This modification would identify the items on a
Federal tax return that are to be used to calculate receipts.
Currently, the regulation states that receipts consist of ``total
income'' and ``gross income'' plus the ``cost of goods sold.'' Although
these terms as defined by the IRS include income from all sources, SBA
has received comments from some businesses stating that certain types
of income not explicitly specified in the regulations could be excluded
in determining receipts. To eliminate any such misinterpretation, SBA
is proposing to remove the words ``total income'' and ``gross income''
and add in their place ``gross receipts,'' ``gross sales,'' and ``other
income.'' This change in terminology merely lists the items on a
Federal tax return that comprise all or part of total or gross income.
In addition, SBA is proposing a revision to the definition of receipts
to include interest, dividends, rents and royalties received by
partnerships, S corporations, and sole proprietorships. For
corporations, income from these sources is included in total income as
reported on IRS Form 1120. However, for partnerships and S
corporations, these items are reported separately from total income on
Schedule K of IRS Form 1165 and 1120S, respectively, and on Schedule C
or S of IRS Form 1040 for sole proprietorships. Business entities such
as limited liability corporations (LLCs) can elect the tax entity
(partnership, corporation, or disregarded entity) that best suits their
need. This is often referred to as ``check the box.'' See 26 CFR
301.7701-3 (located at http://www.access.gpo.gov/nara/cfr/cfr-
retrieve.html#page1) and IRS Form 8832 (located at http://www.irs.gov/
forms--pubs/forms.html). To be consistent with the corporate tax
return, and to continue SBA's long-standing policy of including income
from all sources in its definition of receipts, SBA proposes to revise
Sec. 121.104(a)(1) to specifically include these sources of income in
the definition of receipts.
SBA also proposes to expand its exclusion of receipts received by
an agent for another. The existing regulation allows this exclusion
only for agents specifically identified in the regulation, such as a
travel agent. While the proposed regulation would continue to list
those agency-type business entities for which amounts collected for
another would be excluded, it would also permit SBA to find a similar
agent-type situation to be equally excluded. SBA's concern is that this
provision be applied consistently. Thus, SBA would exclude amounts
collected for another only when a specific type of business (or
industry) deomonstrates that that is the practice in the industry. SBA
would not exclude amounts based on specific facts of one business
entity. This revision will eliminate the need to conduct a separate
study and rulemaking to expand the list of agents that can exclude
amounts they receive for another and apply a general principle in the
case of agents.
Finally, SBA would also clarify this section to state that the only
exclusions from the definition are those specifically provided for in
the section and that all other items, such as subcontractor costs,
reimbursements for purchases a contractor makes at a customer's
request, and employee-based costs such as payroll taxes, may not be
excluded from receipts. See, e.g., Size Appeal of Uniband, Inc., SBA
No. SIZ-4326 (1998); Size Appeal of Aliron International, Inc., SBA No.
SIZ-4317 (1998).
Proposed Sec. 121.104(a)(1) would provide that the Federal income
tax return and any amendments filed with the IRS on or before the date
of self-certification must be used to determine the size status of a
concern, and that SBA will not consider tax returns or
[[Page 70342]]
amendments filed with the IRS after the initiation of a size
determination. This proposed change would preclude a concern that is
the subject of a size protest from providing revised Federal tax
returns to SBA while a size determination or appeal is pending. If SBA
were to accept amended tax returns prepared after initiation of a size
determination, SBA would constantly be re-evaluating cases that had
already been completed or that were substantially prepared. This would
invariably lead to delays in the size determination process and, in the
case of pending procurements, delays in contract award. A business
concern is expected to base its small business self-certification on
information existing at that time. This rule is in accord with OHA
rulings that size status must be based on documents in existence and
available as of the date of self-certification. See, e.g., Size Appeal
of MTB Investments, Inc., SBA No. SIZ-4239 (1997); Size Appeals of J.L.
Associates, Inc. and HLJ Management Group, Inc., SBA No. SIZ-3102
(1988). Where a concern is determined to be other than small, but
legitimately erred in reporting its income on its Federal tax returns,
it could subsequently request recertification as a small business from
SBA based on amendments filed with the IRS. SBA then would be able to
conduct a review of the amended returns without delaying the size
determination or the Federal procurement process.
Proposed Sec. 121.104(a)(2) would cover situations where a concern
has not filed a Federal income tax return for one or more of its most
recently completed three fiscal years. This proposed regulation is
intended to codify OHA's ruling in Size Appeal of Troy Systems, Inc.,
SBA No. SIZ-4296 (1998). In that appeal, a concern had not filed a
Federal income tax return for its most recently completed fiscal year
at the time it self-certified as small. The appellant argued that
because the tax return was not available, it did not have to submit any
information for that year. OHA rejected that argument. The proposed
rule provides that in such a situation, SBA may use any other
information that is available, such as an audited financial statement
or affidavit from the concern's accountant or chief financial officer.
Section 121.104(b)(3) is the formula SBA uses to determine annual
receipts when the concern has a ``short year'' (as defined by the IRS)
as one of the years within the period of measurement. The proposed rule
would not change the substance of the formula. It would merely clarify
the language for ease of use.
Section 121.104(d) applies to the annual receipts of a concern's
affiliates and requires the inclusion of an affiliate's receipts during
the entire period of measurement, not just the period after affiliation
arose. This rule has existed for many years and SBA proposes to simply
clarify the language.
Section 121.106 addresses how SBA counts a concern's number of
employees. SBA proposes to amend Sec. 121.106(a) to clarify that SBA
may utilize the same criteria used by the IRS for Federal income tax
purposes in determining whether individuals are employees. See, e.g.,
IRS Publication 15A, ``Employer's Supplemental Tax Guide'' (located at
http://www.irs.gov/forms--pubs/forms.html), which provides guidance on
whether a person is a common-law employee, a statutory employee, a
statutory nonemployee, or an independent contractor. In addition, SBA's
proposed amendment states that it considers ``leased'' employees to be
employees of the concern. The proposed rule continues to direct SBA to
consider the totality of the circumstances when determining whether
certain individuals are to be considered employees of the concern in
question. This ``totality of the circumstances'' language stems from
SBA Size Policy Statement No. 1, published in the Federal Register on
February 20, 1986, 51 FR 6099, and that Size Policy Statement continues
to have effect.
Further, SBA proposes to amend Sec. 121.106(b)(4) by explicitly
describing how employees of affiliates and former affiliates are
treated, rather than simply referring to the manner in which annual
receipts of affiliates and former affiliates are treated in Sec.
121.104.
SBA also proposes to revise Footnote 14 to the Table of Small
Business Size Standards by NAICS Industry in Sec. 121.201.
Specifically, the proposed revisions to Footnote 14(b) adds language to
clarify that a Federal procurement involving a range of environmental
services to restore a contaminated environment does not need to include
remedial action as one of three activities to be classified under this
size standard. SBA has learned that some Federal agencies have
interpreted this footnote to require remedial action to be part of the
procurement before it will classify the procurement under
``Environmental Remediation Services.'' This was not the intention of
SBA when it established the size standard. SBA intended this size
standard to apply to large scale, multi-disciplined procurements
involving environmental remediation. To be classified under
Environmental Remediation Services, a procurement must satisfy two
requirements. First, the general purpose of the procurement is to
restore a contaminated environment. Second, the procurement requires
tasks to be performed in a range of activities which can be classified
in three or more NAICS industries, or sub-industries which have
separate size standards, and that no industry or sub-industry accounts
for 50 percent or more of the procurement. The statement ``the general
purpose of the procurement must be to restore a contaminated
environment'' was intended to mean that the procurement would be
associated with environment remediation by performing a range of
activities that would contribute to the eventual cleanup of a site. To
clarify SBA's intent, the footnote is revised by stating ``the general
purpose of the procurement must be to restore or directly support the
restoration of a contaminated environment * * *.'' Also, added is a
list of activities usually associated with environmental remediation
and related activities. This language makes clear that a procurement
involving several activities, all in separate NAICS codes, that
directly contribute to the eventual cleanup of a contaminated
environment can be classified under this size standard, even though
another procurement would be awarded to perform the actual cleanup.
SBA proposes to eliminate the existing dual size standard that
currently applies to applicants for SBA financial assistance (Sec.
121.301(a)), and replace it with a single size standard requirement.
Under the current regulation, an applicant for financial or disaster
assistance must be small under two size standards. An applicant, along
with its affiliates, must be small for the size standard for the
industry in which the applicant alone is primarily engaged, and for the
industry in which the applicant along with its affiliates is primarily
engaged. Since most applicants are small businesses well below SBA's
size standards, they generally do not have extensive affiliation
relationships with other business concerns. Thus, SBA believes a dual
size standard requirement is not needed for these programs. SBA also
believes that the wording of the dual size standard is not clear, and
has caused confusion as to its proper application. For these reasons,
SBA is proposing a single size standard requirement in which a business
concern eligible for financial and disaster assistance is a concern
that, combined with its affiliates, does not
[[Page 70343]]
exceed the size standard of the primary industry of the applicant
concern alone.
Section 121.301(d)(1), which contains the size standard for surety
bond guarantee assistance, would be amended by adding the words
``together with its affiliates'' to make it clear that the receipts of
all affiliates must be included. This change is for clarity purposes
only, as SBA always includes the receipts or employees of a concern's
affiliates when determining the concern's size. SBA also proposes to
revise Sec. 121.301(e) to state that an applicant for financial
assistance must use all of the assistance within a labor surplus area
(LSA) in order to obtain the benefit of the 25% size standard
differential. The current regulation does not clearly provide what
percentage of work must be performed in an LSA. It has always been
SBA's intent to require 100% of the assistance be used in an LSA in
order to get the size differential, but a recent case has raised the
question as to whether the regulation could be read to permit less than
100% of the assistance to be used in an LSA. This proposed change would
clarify SBA's position in this regard.
Section 121.302 addresses when SBA determines the size status of an
applicant for SBA financial assistance. The section would be amended to
include a provision for financial assistance from a Small Business
Investment Company (SBIC) licensee and from a New Markets Venture
Capital Company.
Section 121.401, covering what procurement programs are subject to
size determinations, would be amended for plain language purposes.
The proposed rule would amend the section heading for Sec. 121.402
to read ``What size standards are applicable to Federal Government
Contracting programs?'' In addition, SBA proposes to amend Sec.
121.402(a) to state that a contracting officer (CO) must use the size
standard in effect at the time the solicitation is issued. If SBA
amends a size standard and it becomes effective after the solicitation
is issued, then the CO would not be required to amend the solicitation
and use the new size standard. However, the proposed regulation does
note that if the size standard is amended and becomes effective before
the date initial offers are due, the CO may modify the solicitation and
use the new size standard. This has been a long-standing policy of
SBA's, and SBA believes it should be specifically set forth in the
regulations for clarity purposes.
Section 121.404 would be amended to add additional exceptions to
the general rule that the size status of a concern is determined as of
the date the concern submits a written self-certification that it is
small to the procuring agency as part of its initial offer including
price. Proposed Sec. 121.404(a)(1) would provide that a concern
applying to be certified as a Participant in SBA's 8(a) Business
Development (8(a) BD) program, as a small disadvantaged business (SDB),
or as a HUBZone small business must qualify as small as of the date of
certification by SBA. This is not a change in SBA policy. SBA currently
requires a concern to be small at the date of certification for these
programs, but those regulatory requirements are contained in the
program specific regulations only. The proposed rule would simply add
those requirements to the size regulations as well. When requiring an
8(a) BD, HUBZone, or SDB applicant to be small for ``its primary
industry classification,'' the concern's primary industry
classification is determined by looking solely at the applicant concern
(i.e., by excluding its affiliates), but the size of the concern is
determined by including the receipts or employees of all affiliates.
Another new exception would apply to the case where a solicitation
is modified so that initial offers are no longer responsive to the
solicitation. In such a case, proposed Sec. 121.404(a)(4) would
provide that a concern must recertify that it is small at the time it
submits a responsive offer which includes price to the modified
solicitation. SBA believes that this makes sense and flows from
existing SBA policy. If a solicitation changes drastically so that a
previous offer would no longer be responsive, it is in effect a new
solicitation. As such, a firm must certify its status as a small
business with respect to the new solicitation.
The proposed rule would also add an exception for the
subcontracting program. Under proposed Sec. 121.404(a)(5), for
subcontracting purposes, a concern must qualify as small as of the date
that it certifies that it is small for the subcontract. The date of
offers for or the award of the prime contract are not relevant to
whether a concern is small for a subcontract. In addition, the
applicable size standard would be the size standard in effect at the
time the concern self-certifies that it is small for the subcontract,
not the size standard that may have been in effect when the prime
contract was awarded or otherwise.
The proposed rule would add a final exception applying to two-step
sealed bidding under subpart 14.5 of the FAR, 48 CFR. Under two-step
sealed bidding, the proposed rule would require that a concern must
qualify as small as of the date that it certifies that it is small as
part of its step one proposal. SBA believes that it makes sense to
establish size as of the date of the step one proposal in order to give
certainty early on in the process who is and who is not eligible for
such an award.
Proposed Sec. 121.404(b) would specify that a concern that
qualified as a small business at the time it receives a contract is
considered to be a small business throughout the life of that contract.
This is not a change in policy, but merely puts into the regulations
SBA's long-standing position on this issue. Proposed Sec. 121.404(c)
covers the case where an existing contract is ``renewed'' by a
procuring activity. SBA believes that the renewal of an existing
contract is a term that is imprecisely used. Renewal should refer to a
follow-on contract. In that case, the date at which size is determined
is set by the general rule specified in Sec. 121.404(a) (i.e., the
date that the concern submits a written self-certification that it is
small to the procuring agency for the renewal contract). Sometimes the
term ``renewal'' is incorrectly used where a procuring agency exercises
an option. In that case, there is no new contracting action. The
authority for the option relates back to the original contract. As set
forth in proposed Sec. 121.404(b), mentioned above, as long as a
concern qualified as a small business at the time it receives a
contract, it is considered to be a small business throughout the life
of that contract. Therefore, a concern that was small at the time of
award would always be considered a small business for purposes of any
options relating to that contract. Proposed Sec. 121.404(b) would
specifically provide that where a concern grows to be other than small,
the procuring agency may exercise options and still count the award as
an award to a small business. SBA is, however, considering a rule which
would place a limit on the amount of time a concern would be deemed a
small business. Specifically, SBA is considering a separate rule making
that would permit a procuring agency to treat a concern as a small
business for no more than 5 years from the date of award.
Section 121.406(b)(1)(ii) would be amended to delete the
requirement that a nonmanufacturer must normally sell the items being
supplied to the general public. This rule was based on provisions of
the Walsh-Healey Public Contracts Act, which permitted Federal
acquisitions of supplies only from manufacturers or ``regular
dealers.'' One of the requirements for being a regular dealer was to
sell items to the general
[[Page 70344]]
public. These provisions of the Walsh-Healey Act were repealed by the
Federal Acquisition and Streamlining Act of 1994. SBA believes that
requiring a firm to sell to the general public is overly restrictive. A
firm may be a legitimate, viable business selling exclusively to
government entities. SBA does not believe that a firm that sells only
to the government should be excluded from being considered a small
business just because it does not generally sell items to the general
public. Therefore, so long as a firm normally sells the type of item
either to public or private entities, it may qualify as a small
business nonmanufacturer under SBA's size regulations. The proposed
rule would also change the provision to require the concern to normally
sell the same ``type of item.'' The current regulation simply states
that a concern must sell ``the items'' being supplied. SBA believes
that the current provision could be read to be overly restrictive.
Under the proposed rule, a firm would not need to have a track record
of selling the exact item, but only items of the same type.
The proposed rule would also add clarifying language to Sec.
121.406(b)(2) to explain what a firm that makes changes to an item and
then resells it must do in order to qualify as an eligible small
business manufacturer. The current regulation states that firms that
perform only minimal operations upon the item being procured do not
qualify as manufacturers. The proposed rule adds language, which states
that ``[f]irms that add substances, parts, or components to an existing
end-item to modify its performance will not be considered the end-item
manufacturer where those identical modifications can be performed by
and are available from the manufacturer of the existing end item.'' If
a firm adds something to an item that the manufacturer of that existing
item does not provide, the firm will be considered the manufacturer of
the ultimate end item (i.e., the item plus the addition). For example,
if firm A manufactures a saw, the Government wants to purchase a saw
with a safety switch, and firm B adds a safety switch to the saw, firm
B, and not firm A, will be considered the manufacturer of the end item
(i.e., saw with safety switch) provided firm A does not itself make or
provide a saw with safety switch. Similarly, a firm that merely
installs a video card that the manufacturer of a computer could have
installed will not be considered the manufacturer of computer.
Currently, under Sec. 121.410, a business concern is small for
purposes of a subcontract awarded by a Federal prime contractor if: (a)
For subcontracts of $10,000 or less, the concern bidding on the
subcontract has 500 or fewer employees averaged over each pay period of
the previous year, or, (b) for subcontracts of more than $10,000, the
concern bidding on the subcontract is no larger than the size standard
corresponding to the NAICS industry that best represents the scope of
work of the subcontract.
This rule proposes to eliminate the 500-employee size standard
provision for subcontracts of less than $10,000 and require that the
size standard of the NAICS industry that best matches the purpose of
the subcontract be used. This change merely adopts the size standard
policy now in effect for subcontracts of $10,000 or greater.
SBA is proposing this change for two reasons. First, this proposed
change makes the size standards requirements consistent for all prime
Federal contracts and for subcontracts awarded by prime contractors.
Under this policy, the small business status would not change depending
on the size of a subcontract or whether the contract was awarded as a
Federal prime contract or as a subcontract of a Federal prime contract.
SBA is also concerned about inconsistencies of two-tiered
subcontracting size standards. A prime contractor awarding a
subcontract classified in a NAICS industry with a receipt-based size
standard (primarily in the construction and service industries) will
have a higher size standard associated with subcontracts of less than
$10,000 than the size standard for the same type of subcontract but
valued over $10,000. For example, a subcontract for analytical testing
services falls under NAICS code 541620, Environmental Consulting
Services, and SBA has established a size standard for this industry of
$6 million in average annual receipts. If the value of the subcontract
is more than $10,000, a small business is defined as one with $6
million or less in average annual receipts. A firm of this size has
about 60 to 70 employees. Yet, under the current regulations, a
subcontract of less than $10,000 allows firms of up to 500 employees to
qualify as small businesses. SBA believes that one size standard should
apply to the same type of subcontracts, regardless of their value.
Second, the two-tiered size standard based on the size of the
subcontract is not widely known or followed by prime contractors and
small businesses. SBA believes establishing a policy of having a
consistent size standard requirement at the prime and subcontracting
level is more desirable than retaining and educating the prime
contractors and subcontractors about two-tiered size standards. Most
prime contractors verify the status of their small business
subcontractors based on the size standard of the subcontractor's
primary NAICS industry or based on the size standard of the prime
contract. These methods for ascertaining the small business status of a
subcontractor lead to an incorrect small business determination in many
cases, since the subcontractor must be small based on the industry of
the subcontract, which is not necessarily the same as the primary
industry of the subcontractor or the industry of the prime contract.
SBA believes that the proposed change reflects how most prime
contractors have been administratively determining the small business
status of their subcontractors. Enforcing the current two-tiered size
standard regulation would in essence subject prime contractors to a
different size standard requirement than generally being followed.
Thus, change should have little if any impact.
SBA invites comments to the elimination of the two-tiered
subcontracting size standards requirement. SBA also welcomes
suggestions on other approaches to size standards for the
Subcontracting Program. Alternative size standards should address how
they would be an improvement over the current and proposed
subcontracting size standards and how they best protect the interests
of small business.
Section 121.411 would be amended by deleting the words
``Procurement Automated Source System (PASS)'' and substituting the
words ``Procurement Marketing & Access Network (PRO-Net).'' PASS no
longer exists and has been replaced by PRO-Net. PRO-Net is an online
database of information on thousands of small businesses. PRO-Net
serves as a search engine for contracting officers, a marketing tool
for small companies, and a ``link'' to procuring opportunities and
other important information.
Sections 121.601 through 121.604 would be changed by removing all
references to ``Minority Enterprise Development'' and ``MED'' and
substituting ``8(a) Business Development'' and ``8(a) BD.'' SBA no
longer uses the former terms.
The proposed rule would amend Sec. 121.702(a) to recognize that
for purposes of the SBIR program a joint venture is permitted where
each entity to the venture is at least 51 percent owned and controlled
by one or more individuals who are citizens of, or permanent resident
aliens in, the United States. The current requirement does
[[Page 70345]]
not contain such an exception for joint ventures, and requires 51
percent direct ownership by individuals who are U.S. citizens or
permanent resident aliens in every case. This change is being made to
make the size regulations consistent with a recent change made to the
SBIR Policy Directive.
SBA proposes to amend Sec. 121.1001 entitled ``Who may initiate a
size protest or request a formal size determination?'' Section
121.1001(a)(1)(i) presently allows ``any offeror'' to file a size
protest in connection with a particular procurement or sale. The
purpose of the proposed regulation is to give standing to those
concerns whose successful challenge would enable them to compete for
award. This section would be changed to provide that ``any offeror whom
the contracting officer has not eliminated for reasons unrelated to
size'' may file a protest. An offeror that has been eliminated for
reasons unrelated to size would not be able to compete for award if the
protest were successful, and, thus, should not have standing to
question another firm's size status. This change would codify long-
standing OHA precedent on this issue. See, e.g., Size Appeal of Arcata
Associates, Inc., SBA No. SIZ-3377 (1990).
The proposed rule would amend Sec. 121.1001(a)(5)(iii) applying to
protests under the SDB program to delete the reference to the Associate
Administrator (AA) for MED, and substitute the SBA Associate
Administrator for 8(a) Business Development. Section
121.1001(a)(6)(iv), applying to protests under the HUBZone program,
would be changed to delete the reference to the AA for Government
Contracting and substitute SBA's AA for the HUBZone program. Section
121.1001(a)(7)(3), applying to any unrestricted Government procurement
in which status as a small business may be beneficial, would be changed
by deleting the reference to the AA for MED and substituting the SBA AA
for 8(a) BD.
The proposed rule would add new paragraphs (b)(7), (b)(8) and
(b)(9) to Sec. 121.1001 to authorize SBA program personnel to request
formal size determinations regarding a firm's status as small for SDB
certification, HUBZone certification, and being listed as a small
business on PRO-Net, respectively.
SBA proposes to add a new Sec. 121.1004(a)(4) to cover instances
where notification of contract award is posted on the Internet, as
authorized under Simplified Acquisition Procedures (SAP). In such
cases, SBA proposes that a size protest must be made to the contracting
officer within five business days after the electronic posting. SBA
also proposes to add a new Sec. 121.1004(a)(5) that would provide that
where no written notification is required, either prior to or at the
time of award, a protest will be considered timely if filed within five
days after receipt of verbal notification from the contracting officer
or other agency representative. Under SAP, there is no requirement for
the contracting officer to provide either pre-award or award
notification to unsuccessful offerors. Consequently, the date of verbal
notification or date of posting on the internet will be considered the
start of the 5-day period allotted for a timely size protest. There may
be other instances where there is no notice provided (e.g., award of a
task order under a schedule contract), and this provision would apply
there as well.
SBA proposes to amend Sec. 121.1007 containing the requirement
that a size protest must allege specific facts by restoring the six
examples that were formerly found at Sec. 121.1604(a) (1995). SBA has
received comments that these examples were helpful in determining
whether or not a particular protest satisfies the specificity
requirement.
The proposed rule would amend Sec. 121.1008, describing what
occurs after SBA receives a size protest or request for formal size
determination. The proposed rule would require the SBA Government
Contracting Area Director to notify SBA's AA/8(a) BD, if a protest
involves the size status of a concern that SBA has certified as a small
disadvantaged business, and notify the appropriate SBA district office,
if a protest pertains to the apparent successful offeror on a
requirement that has been reserved for competition among eligible 8(a)
Participants. Section 121.1008(d) would be amended by adding a sentence
requiring a concern whose size status is at issue to furnish
information about its alleged affiliates to SBA, notwithstanding any
third party claims of privacy or confidentiality, because SBA does not
disclose information obtained in the course of a size determination
except as permitted by Federal law. This is intended to codify several
OHA rulings. See, e.g., Size Appeal of Donovan Travel, Inc., d/b/a
Carlson Wagonlit Travel, SBA No. SIZ-4270 (1997); Size Appeal of
Quantrad Sensor, Inc., SBA No. SIZ-4255 (1997).
The proposed rule would add clarifying language to Sec.
121.1009(b), ``Basis for determination.'' Section 121.1009(g),
``Results of an SBA Size Determination,'' would be amended by making it
clear that contract award may be made based on a formal size
determination by a SBA Government Contracting Area Director. It would
also be amended to provide that an OHA decision on appeal will apply to
the pending acquisition or sale if the decision is received before
award. OHA decisions received after contract award will not apply to
that acquisition or sale unless the contracting officer agrees to apply
the OHA decision to that acquisition or sale.
The proposed rule would amend Sec. 121.1101 by adding a new second
paragraph providing that OHA will not review a formal size
determination where the contract has been awarded and the issues raised
in a petition for review are contract specific, such as compliance with
the nonmanufacturer rule or joint venture/ostensible subcontractor
rule. This change would conform the size appeal regulation to the re-
certification regulation at Sec. 121.1010(b) and codify long-standing
OHA rulings. See, e.g., Size Appeal of Lightcom International, Inc.,
SBA No. SIZ-4118 (1995).
Currently, Sec. 121.1103 simply states that the procedures for
NAICS code appeals are contained in section 19.303 of the Federal
Acquisition Regulation (FAR), 48 CFR 19.303. SBA proposes to amend this
section by setting forth in detail the specific procedures for NAICS
code appeals rather than referring the reader to the FAR. The
procedures set forth do not differ from those currently in the FAR.
Section 121.1205 would be amended by stating that a list of classes
of products for which waivers of the Nonmanufacturer Rule have been
granted may be obtained on SBA's Web site at www.sba.gov/GC/
approved.html.
13 CFR part 134 contains rules of procedure governing cases before
OHA, including size appeals and former SIC (now NAICS) code appeals.
SBA is proposing several amendments to part 134, mainly to conform to
the changes being proposed for part 121.
13 CFR 134.102 sets forth OHA's jurisdiction. The proposed rule
would amend paragraph (k) to authorize an affected party to appeal a
determination by the SBA Government Contracting Area Office as to
whether two or more concerns are affiliated for purposes of SBA's
financial assistance programs, or other programs for which an
affiliation determination was requested. SBA financial assistance
personnel may seek assistance from a Government Contracting Area Office
in determining whether a loan applicant is affiliated with one or more
other business entities. This may not be a ``formal size
determination'' in the normal sense because the concerns even if
affiliated may still qualify as small. However, this
[[Page 70346]]
determination is necessary in order to determine whether the borrower,
including the borrower's affiliates, has exceeded the $750,000 loan
limit amount set forth in Sec. 120.151 of this chapter. If the Area
Office finds affiliation such that the borrower is determined to be
ineligible to receive additional loan amounts, the firm may not
currently appeal that determination to OHA as it is not a ``formal size
determination.'' This change would permit such an appeal.
Section 134.314 would be amended by adding a provision that the
appellant has the burden of proof, by a preponderance of the evidence,
in both size and NAICS code designations. This provision was formerly
in the size regulations (see Sec. 121.1707 (1995)), and since its
deletion from the regulations, OHA has adopted this premise in its
rulings. See, e.g., Size Appeal of Rebmar, Inc., SBA No. SIZ-4173
(1996); SIC Appeal of The Scientific Consulting Group, Inc., SBA No.
SIZ-4186 (1996). SBA believes that it is appropriate to restore the
provision to the regulations.
Finally, SBA proposes amending Sec. 134.316(a) to state that an
OHA judge will decline to decide substantive issues not properly raised
on appeal, or which are abandoned, or have become moot. This would
codify OHA precedent. See e.g., Size Appeal of Lightcom International
Inc., SBA No. SIZ-4118 (1995), Size Appeal of Infotec Development,
Inc., SBA No. SIZ-4197 (1996).
Compliance With Executive Orders 12612, 12988, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
OMB has determined that this proposed rule does not constitute a
``significant regulatory action'' under Executive Order 12866. This
rule would clarify SBA's procedural and definitional size rules. As
such, the rule would have no effect on the amount or dollar value of
any Federal contract requirements or of any financial assistance
provided through SBA. Therefore, the rule is not likely to have an
annual economic effect of $100 million or more, result in a major
increase in costs or prices, or have a significant adverse effect on
competition or the United States economy. In addition, the proposed
rule does not create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency, materially alter the
budgetary impact of entitlements, grants, user fees, loan programs or
the rights and obligations of such recipients, nor raise novel legal or
policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this rule, if adopted in final form, would not impose
new reporting or record keeping requirements.
For purposes of Executive Order 12988, SBA has drafted this
proposed rule, to the extent practicable, in accordance with the
standards set forth in section 3 of that Order.
For purposes of Executive Order 13132, SBA has determined that this
proposed rule has no federalism implications warranting the preparation
of a Federalism Assessment.
SBA has determined that this proposed rule, if adopted in final
form, will not have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act (RFA), 5 U.S.C. 601-612. Although the rule amends
several definitions concerning the size of a business concern, the
majority of these amendments are clarification of current policy.
List of Subjects
13 CFR Part 121
Administrative practice and procedure, Government procurement,
Government property, Grant programs--business, Loan programs--business,
Small businesses.
13 CFR Part 134
Administrative practice and procedure, Organization and functions
(Government agencies).
For the reasons set forth in the supplementary information, SBA
proposes to amend parts 121 and 134 of Title 13, Code of Federal
Regulations, as follows:
PART 121
1. The authority citation for 13 CFR part 121 continues to read as
follows:
Authority: 15 U.S.C. 632(a), 634(b)(6), 637(a), 644(c) and
662(5) and Sec. 304, Pub. L. 103-403, 108 Stat. 4175, 4188.
2. Amend Sec. 121.102 by adding a new paragraph (e) to read as
follows:
Sec. 121.102 How does SBA establish size standards?
* * * * *
(e) SBA's Size Policy Board considers and makes recommendations to
the Administrator relating to improvements in SBA regulations,
procedures, and policy concerning size matters, including size
standards.
3. Amend Sec. 121.103 as follows:
a. Revising the heading;
b. Revising (a)(1), (3), (4), and adding new paragraphs (a)(5) and
(a)(6);
c. Revising the heading of paragraph (b);
d. Revising paragraph (b)(2);
e. Adding a new sentence to the end of paragraph (b)(6);
f. Revising paragraphs (c), (d), and (e);
g. Redesignating paragraph (f) as paragraph (h), and amending newly
redesignated paragraph (h) by revising the introductory text, (h)(1),
(h)(2), (h)(3), heading, (h)(3)(i), introductory text, (h)(3)(i)(B)(1),
(h)(3)(ii), and (h)(4);
h. Redesignating paragraph (g) as (i); and
i. Adding new paragraphs (f) and (g).
The revisions and additions read as follows:
Sec. 121.103 How does SBA determine affiliation?
(a) General Principles of Affiliation. (1) Concerns and entities
are affiliates of each other when one controls or has the power to
control the other, or a third party or parties controls or has the
power to control both. It does not matter whether control is exercised,
so long as the power to control exists.
(2) * * *
(3) Control may be affirmative or negative. Negative control
includes, but is not limited to, instances where a minority shareholder
has the ability, under the concern's charter, by-laws, or shareholder's
agreement, to prevent a quorum or otherwise block action by the board
of directors or shareholders.
(4) Affiliation may be found where an individual, concern, or
entity exercises control indirectly through a third party.
(5) In determining whether affiliation exists, SBA will consider
the totality of the circumstances, and may find affiliation even though
no single factor is sufficient to constitute affiliation.
(6) In determining the concern's size, SBA counts the receipts,
employees, or other measure of size of the concern whose size is at
issue and all of its domestic and foreign affiliates, regardless of
whether the affiliates are organized for profit.
(b) Exceptions to affiliation coverage. (1) * * *
(2) Business concerns owned and controlled by Indian Tribes, Alaska
Regional or Village Corporations organized pursuant to the Alaska
Native Claims Settlement Act (43 U.S.C. 1601), Native Hawaiian
Organizations (NHOs), Community Development Corporations (CDCs)
authorized by 42 U.S.C. 9805, or wholly-owned entities of Indian
Tribes, ANCs, NHOs, or CDCs are not considered affiliates of such
entities, or with other concerns owned by these
[[Page 70347]]
entities because of their common ownership or common management.
Affiliation may be found for other reasons.
* * * * *
(6) * * * Affiliation may be found for other reasons.
(c) Affiliation based on stock ownership. (1) A person (including
any individual, concern or other entity) that owns, or has the power to
control, 50 percent or more of a concern's voting stock, or a block of
voting stock which is large compared to other outstanding blocks of
voting stock, controls or has the power to control the concern.
(2) If two or more persons (including any individual, concern or
other entity) each owns, controls, or has the power to control less
than 50 percent of a concern's voting stock, and such minority holdings
are equal or approximately equal in size, and the aggregate of these
minority holdings is large as compared with any other stock holding,
SBA presumes that each such person controls or has the power to control
the concern whose size is at issue. This presumption may be rebutted by
a showing that such control or power to control does not in fact exist.
(3) If a concern's voting stock is widely held and no single block
of stock is large as compared with all other stock holdings, the
concern's Board of Directors and CEO or President will be deemed to
have the power to control the concern in the absence of evidence to the
contrary.
(d) Affiliation arising under stock options, convertible
debentures, and agreements to merge. (1) In determining size, SBA
considers stock options, convertible debentures, and agreements to
merge (including agreements in principle) to have a present effect on
the power to control a concern. SBA treats such options, debentures,
and agreements as though the rights granted have been exercised.
(2) Agreements to open or continue negotiations towards the
possibility of a merger or a sale of stock at some later date are not
considered ``agreements in principle'' and are thus not given present
effect.
(3) Options, debentures, and agreements that are subject to
conditions precedent which are incapable of fulfillment, speculative,
conjectural, remote, or unenforceable under state or Federal law are
not given present effect.
(4) An individual or concern that controls one or more other
concerns cannot use options, debentures, or agreements to appear to
terminate such control before actually doing so.
(e) Affiliation based on common management. Affiliation arises
where one or more officers, directors, managing members, or partners
who control the board of directors and/or management of one concern
also control the board of directors or management of one or more other
concerns.
(f) Affiliation based on identity of interest. Affiliation may
arise among two or more persons with an identity of interest.
Individuals or firms that have identical or substantially identical
business or economic interests (such as family members, individuals or
firms with common investments, or firms that are economically dependent
through contractual or other relationships) may be treated as one party
with such interests aggregated. Where SBA determines that such
interests should be aggregated, an individual or firm may rebut that
determination with evidence showing that the interests deemed to be one
are in fact separate.
(g) Affiliation based on the newly organized concern rule.
Affiliation may arise where former officers, directors, principal
stockholders, managing members, or key employees of one concern
organize a new concern in the same or related industry or field of
operation, and serve as the new concern's officers, directors,
principal stockholders, managing members, or key employees, and the one
concern is furnishing or will furnish the new concern with contracts,
financial or technical assistance, indemnification on bid or
performance bonds, and/or other facilities, whether for a fee or
otherwise. A concern may rebut such an affiliation determination by
demonstrating a clear line of fracture between the two concerns.
(h) Affiliation based on joint ventures or teaming arrangements. A
joint venture is an association of individuals and/or concerns with
interests in any degree or proportion by way of contract, express or
implied, consorting to engage in and carry out a single specific
business venture for joint profit, for which purpose they combine their
efforts, property, money, skill, or knowledge, but not on a continuing
or permanent basis for conducting business generally. A joint venture
is viewed as a business entity in determining power to control its
management. A teaming arrangement for affiliation purposes is one in
which two or more companies form a partnership or joint venture to act
as a potential prime contractor. Affiliation may also be found between
a potential prime contractor and its intended subcontractor pursuant to
paragraph (h)(4) of this section.
(1) Parties to a joint venture or teaming arrangement are
affiliates if any one of them seeks SBA financial assistance for use in
connection with the joint venture or teaming arrangement.
(2) Except as provided in paragraph (h)(3) of this section,
concerns submitting offers on a particular procurement or property sale
as joint venturers or teaming arrangement partners are affiliated with
each other with regard to the performance of that contract.
(3) Exception to affiliation for certain joint ventures and teaming
arrangements. (i) A joint venture or teaming arrangement of two or more
business concerns may submit an offer as a small business for a Federal
procurement without regard to affiliation under paragraph (h) of this
section so long as each concern is small under the size standard
corresponding to the NAICS code assigned to the contract, provided:
(A) * * *
(B) * * *
(1) For a procurement having a receipts based size standard, the
dollar value of the procurement, including options, exceeds half the
size standard corresponding to the NAICS code assigned to the contract;
or
* * * * *
(ii) A joint venture or teaming arrangement of at least one 8(a)
Participant and one or more other business concerns may submit an offer
for a competitive 8(a) procurement without regard to affiliation under
paragraph (h) of this section so long as the requirements of Sec.
124.513(b)(1) of this chapter are met.
(iii) * * *
(4) A contractor and its ostensible subcontractor are treated as
joint venturers, and therefore affiliates, for size determination
purposes. An ostensible subcontractor is a subcontractor that performs
primary and vital requirements of a contract, or of an order under a
multiple award schedule contract, or a subcontractor upon which the
prime contractor is unusually reliant. All aspects of the relationship
between the prime and subcontractor are considered, including, but not
limited to, the terms of the proposal (such as contract management,
technical responsibilities, and the percentage of subcontracted work),
agreements between the prime and subcontractor (such as bonding
assistance), and whether the subcontractor is the incumbent contractor
and is ineligible to submit a proposal because it exceeds the
applicable size standard for that solicitation.
[[Page 70348]]
(5) For size purposes, a concern must include in its receipts its
proportionate share of joint venture receipts, and in its total number
of employees its proportionate share of joint venture employees.
* * * * *
4. Revise Sec. 121.104 to read as follows:
Sec. 121.104 How does SBA calculate annual receipts?
(a) Receipts means gross receipts, gross sales, interest,
dividends, rents, royalties and other income as these terms are defined
and reported on Internal Revenue Service (IRS) tax return forms (such
as Form 1120 for corporations; Form 1120S and Schedule K for S
corporations; Form 1120, Form 1065 or Form 1040 for LLCs; Form 1065 and
Schedule K for partnerships; Form 1040, Schedule F for farms; Form
1040, Schedule C for other sole proprietorships). Receipts do not
include net capital gains or losses; taxes collected for and remitted
to a taxing authority if included in gross or total income, such as
sales or other taxes collected from customers and excluding taxes
levied on the concern or its employees; proceeds from transactions
between a concern and its domestic or foreign affiliates; and amounts
received in trust as an agent on behalf of another, in which the agent
does not have a claim of right to such monies and the amounts do not
increase the agent's asset base (such as a travel agent, real estate
agent, advertising agent, conference management service provider,
freight forwarder or customs broker). For size determination purposes,
the only exclusions from receipts are those specifically provided for
in this paragraph. All other items, such as subcontractor costs,
reimbursements for purchases a contractor makes at a customer's
request, and employee-based costs such as payroll taxes, may not be
excluded from receipts.
(1) The Federal income tax return and any amendments filed with the
IRS on or before the date of self-certification must be used to
determine the size status of a concern. SBA will not use tax returns or
amendments filed with the IRS after the initiation of a size
determination.
(2) When a concern has not filed a Federal income tax return with
the IRS for a fiscal year which must be included in the period of
measurement, SBA will calculate the concern's annual receipts for that
year using any other available information, such as the concern's
regular books of account, audited financial statements, or information
contained in an affidavit by a person with personal knowledge of the
facts.
(b) Completed fiscal year means a taxable year including any short
year. ``Taxable year'' and ``short year'' have the meanings attributed
to them by the IRS.
(c) Period of measurement. (1) Annual receipts of a concern that
has been in business for three or more completed fiscal years means the
total receipts of the concern over its most recently completed three
fiscal years divided by three.
(2) Annual receipts of a concern which has been in business for
less than three complete fiscal years means the total receipts for the
period the concern has been in business divided by the number of weeks
in business, multiplied by 52.
(3) Where a concern has been in business three or more complete
fiscal years but has a short year as one of the years within its period
of measurement, annual receipts means the total receipts for the short
year and the two full fiscal years divided by the total number of weeks
in the short year and the two full fiscal years, multiplied by 52.
(d) Annual receipts of affiliates. (1) If a concern has acquired an
affiliate or been acquired as an affiliate during the applicable period
of measurement or before the date on which it self-certified as small,
the annual receipts used in determining size status includes the
receipts of the acquired or acquiring concern. Furthermore, this
aggregation applies for the entire period of measurement, not just the
period after the affiliation arose. Receipts are determined for the
concern and its affiliates in accordance with paragraph (c) of this
section even though this may result in using a different period of
measurement to calculate an affiliate's annual receipts.
(2) The annual receipts of a former affiliate are not included if
affiliation ceased before the date used for determining size. This
exclusion of annual receipts of a former affiliate applies during the
entire period of measurement, rather than only for the period after
which affiliation ceased.
5. Revise Sec. 121.106(a) and (b)(4) to read as follows:
Sec. 121.106 How does SBA calculate number of employees?
(a) In determining a concern's number of employees, SBA counts all
individuals employed on a full-time, part-time, or other basis. This
includes employees obtained from a temporary employee agency,
professional employee organization or leasing concern. SBA will
consider the totality of the circumstances, including criteria used by
the IRS for Federal income tax purposes, in determining whether
individuals are employees of a concern. Volunteers (i.e., individuals
who receive no compensation, including no in-kind compensation, for
work performed) are not considered employees.
(b) * * *
(4)(i) If a concern has acquired an affiliate or been acquired as
an affiliate during the applicable period of measurement or before the
date on which it self-certified as small, the employees counted in
determining size status include the employees of the acquired or
acquiring concern. Furthermore, this aggregation applies for the entire
period of measurement, not just the period after the affiliation arose.
(ii) The employees of a former affiliate are not counted if
affiliation ceased before the date used for determining size. This
exclusion of employees of a former affiliate applies during the entire
period of measurement, rather than only for the period after which
affiliation ceased.
6. In Sec. 121.201, revise paragraph (b) of footnote 14 to the
Table of Small Business Size Standards by NAICS Industry to read as
follows:
Sec. 121.201 What size standards has SBA identified by North American
Industry Classification System codes?
* * * * *
Footnotes
* * * * *
14. NAICS 562910--Environmental Remediation Services:
(a) * * *
(b) For purposes of classifying a Government procurement as
Environmental Remediation Services, the general purpose of the
procurement must be to restore or directly support the restoration
of a contaminated environment (such as, preliminary assessment, site
inspection, testing, remedial investigation, feasibility studies,
remedial design, remediation services, containment, removal of
contaminated materials, storage of contaminated materials or
security and site closeouts) and also the procurement must be
composed of activities in three or more separate industries with
separate NAICS codes or, in some instances (e.g., engineering),
smaller sub-components of NAICS codes with separate, distinct size
standards. These activities may include, but are not limited to,
separate activities in industries such as: Heavy Construction;
Special Trade Construction; Engineering Services; Architectural
Services; Management Consulting Services; Hazardous and Other Waste
Collection; Remediation Services, Testing Laboratories; and Research
and Development in the Physical, Engineering and Life Sciences. If
any activity in the procurement can be identified with a
[[Page 70349]]
separate NAICS code, or component of a code with a separate distinct
size standard, and that industry accounts for 50 percent or more of
the value of the entire procurement, then the proper size standard
is the one for that particular industry, and not the Environmental
Remediation Service size standard.
* * * * *
7. Amend Sec. 121.301 by revising paragraphs (a), (d)(1) and
(e) to read as follows:
Sec. 121.301 What size standards are applicable to financial
assistance programs?
(a) For Business Loans and Disaster Loans (other than physical
disaster loans), an applicant, including its affiliates, must not
exceed the size standard for the industry in which the applicant is
primarily engaged.
* * * * *
(d) * * *
(1) Any construction (general or special trade) concern or concern
performing a contract for services is small if, together with its
affiliates, its average annual receipts does not exceed $6.0 million.
* * * * *
(e) The applicable size standards for purposes of SBA's financial
assistance programs, excluding the Surety Bond Guarantee assistance
program, are increased by 25% whenever the applicant agrees to use all
of the financial assistance within a labor surplus area. Labor surplus
areas are listed monthly in the Department of Labor publication ``Area
Trends in Employment and Unemployment.''
8. Amend Sec. 121.302 by revising paragraph (a), redesignating
paragraph (d) as paragraph (e), revising newly redesignated paragraph
(e), and adding the following new paragraph (d) to read as follows:
Sec. 121.302 When does SBA determine the size status of an applicant?
(a) The size status of an applicant for SBA financial assistance is
determined as of the date the application for financial assistance is
accepted for processing by SBA, except for the Preferred Lenders
program, the Disaster Loan program, the SBIC program, and the New
Markets Venture Capital program.
* * * * *
(d) For financial assistance from an SBIC licensee or a New Markets
Venture Capital Company, size is determined as of the date a concern's
application is accepted for processing by the SBIC or the New Markets
Venture Capital Company.
(e) Changes in size after the applicable date when size is
determined will not disqualify an applicant for assistance.
9. Revise the heading of Sec. 121.305 to read as follows:
Sec. 121.305 What size eligibility requirements exist for obtaining
financial assistance relating to particular procurements?
* * * * *
10. Revise Sec. 121.401 to read as follows:
Sec. 121.401 What procurement programs are subject to size
determinations?
The rules set forth in Sec. Sec. 121.401 through 121.413 apply to
all Federal procurement programs for which status as a small business
is required or advantageous, including the small business set-aside
program, SBA's Certificate of Competency program, the Very Small
Business program, SBA's 8(a) Business Development program, SBA's
HUBZone program, the Small Business Subcontracting program, and the
Federal Small Disadvantaged Business (SDB) program.
11. Amend Sec. 121.402 by revising the heading and paragraph (a),
and by adding a new sentence to the end of paragraph (b) to read as
follows:
Sec. 121.402 What size standards are applicable to Federal Government
Contracting programs?
(a) A concern must not exceed the size standard for the NAICS code
specified in the solicitation. The contracting officer must specify the
size standard in effect on the date the solicitation is issued. If SBA
amends the size standard and it becomes effective before the date
initial offers (including price) are due, the contracting officer may
amend the solicitation and use the new size standard.
(b) * * * Procurements for supplies must be classified under the
appropriate manufacturing NAICS code, not under the wholesale trade
NAICS code.
* * * * *
12. Revise Sec. 121.404 to read as follows:
Sec. 121.404 When does SBA determine the size status of a business
concern?
(a) SBA determines the size status of a concern, including its
affiliates, as of the date the concern submits a written self-
certification that it is small to the procuring activity as part of its
initial offer (or other formal response to a solicitation) which
includes price. The following are the only exceptions to this rule:
(1) A concern applying to be certified as a Participant in SBA's
8(a) Business Development program (under part 124, subpart A, of this
chapter), as a small disadvantaged business (under part 124, subpart B,
of this chapter), or as a HUBZone small business (under part 126 of
this chapter) must qualify as a small business for its primary industry
classification as of the date of certification by SBA.
(2) The size status of an applicant for a Certificate of Competency
(COC) relating to an unrestricted procurement is determined as of the
date of the concern's application for the COC.
(3) Size status for purposes of compliance with the nonmanufacturer
rule set forth in Sec. 121.406(b)(1) and the ostensible subcontractor
rule set forth in Sec. 121.103(f)(4) is determined as of the date of
the best and final offer.
(4) Where a solicitation is modified so that initial offers are no
longer responsive to the solicitation, a concern must recertify that it
is a small business at the time it submits a responsive offer, which
includes price to the modified solicitation.
(5) For subcontracting purposes, a concern must qualify as small as
of the date that it certifies that it is small for the subcontract. The
applicable size standard is that set forth in Sec. 121.410 that is in
effect at the time the concern self-certifies that it is small for the
subcontract.
(6) For purposes of two-step sealed bidding under subpart 14.5 of
the FAR, 48 CFR, a concern must qualify as small as of the date that it
certifies that it is small as part of its step one proposal.
(b) A concern that qualified as a small business at the time it
receives a contract is considered to be a small business throughout the
life of that contract. Where a concern grows to be other than small,
the procuring agency may exercise options and still count the award as
an award to a small business.
(c) A follow-on or renewal contract is a new contracting action. As
such, size is determined as of the date the concern submits a written
self-certification that it is small to the procuring agency as part of
its initial offer including price for the follow-on or renewal
contract.
13. Amend Sec. 121.406 by revising paragraph (b)(1)(ii) and by
adding a new sentence in paragraph (b)(2) after the fifth sentence to
read as follows:
Sec. 121.406 How does a small business concern qualify to provide
manufactured products under small business set-aside or 8(a) contracts?
* * * * *
(b) Nonmanufacturers. (1) * * *
(ii) Is primarily engaged in the retail or wholesale trade and
normally sells the type of item being supplied; and
* * * * *
(2) * * * Firms that add substances, parts, or components to an
existing end-item to modify its performance will not
[[Page 70350]]
be considered the end-item manufacturer where those identical
modifications can be performed by and are available from the
manufacturer of the existing end item. * * *
* * * * *
14. Revise Sec. 121.410 to read as follows:
Sec. 121.410 What are the size standards for SBA's Section 8(d)
Subcontracting Program?
For subcontracting purposes pursuant to sections 8(d) of the Small
Business Act, a concern is small for subcontracts which relate to
Government procurements if it does not exceed the size standard for the
NAICS code that best describes the product or service being acquired by
the subcontract. However, subcontracts for engineering services awarded
under the National Energy Policy Act of 1982 have the same size
standard as Military and Aerospace Equipment and Military Weapons under
NAICS 541213.
15. In Sec. 121.411(a), remove the words ``Procurement Automated
Source System (PASS)'' and add the words ``Procurement Marketing &
Access Network (PRO-Net).''
16. The undesignated center heading before Sec. 121.601 is revised
to read as follows:
SIZE ELIGIBILITY REQUIREMENTS FOR THE 8(A) BUSINESS DEVELOPMENT PROGRAM
17. Revise Sec. 121.601 to read as follows:
Sec. 121.601 What is a small business for purposes of admission to
SBA's 8(a) Business Development program?
An applicant must not exceed the size standard corresponding to its
primary industry classification in order to qualify for admission to
SBA's 8(a) Business Development Program.
Sec. 121.602 [Amended]
18. In Sec. 121.602 replace the acronym ``MED'' in the heading and
the text with the words ``8(a) BD.''
Sec. 121.603 [Amended]
19. In Sec. 121.603 replace the acronym ``MED'' in the heading and
in paragraphs (a), (b) and (d) with the words ``8(a) BD.''
Sec. 121.604 [Amended]
20. In Sec. 121.604 replace the acronym ``MED'' in the heading and
the text with the words ``8(a) BD.''
21. Section 121.702(a) is revised to read as follows:
Sec. 121.702 What size standards are applicable to the SBIR program?
* * * * *
(a) is at least 51 percent owned and controlled by one or more
individuals who are citizens of, or permanent resident aliens in, the
United States, except in the case of a joint venture, where each entity
to the venture must be 51 percent owned and controlled by one or more
individuals who are citizens of, or permanent resident aliens in, the
United States;
* * * * *
22. Amend Sec. 121.1001 by revising paragraphs (a)(1), (a)(2)(i),
(a)(5)(i) and (iii), (a)(6)(i) and (iv), and (a)(7), introductory text,
and (a)(7)(iii), and by adding new paragraphs (b)(1)(iii), (b)(7),
(b)(8), and (b)(9) as follows:
Sec. 121.1001 Who may initiate a size protest or request a formal
size determination?
(a) Size Status Protests. (1) For SBA's Small Business Set-Aside
Program, including the Property Sales Program, or any instance in which
a procurement or order has been restricted to small business or a
particular group of small business, the following entities may file a
size protest in connection with a particular procurement, sale or
order:
(i) Any offeror whom the contracting officer has not eliminated for
reasons unrelated to size;
* * * * *
(2) * * *
(i) Any offeror whom the contracting officer has not eliminated for
reasons unrelated to size;
* * * * *
(5) * * *
(i) Any offeror for the specific SDB requirement whom the
contracting officer has not eliminated for reasons unrelated to size;
(ii) * * *
(iii) The responsible SBA Area Director for Government Contracting,
the SBA Associate Administrator for Government Contracting, or the SBA
Associate Administrator for 8(a) Business Development;
(6) * * *
(i) Any concern that submits an offer for a specific HUBZone set-
aside procurement that the contracting officer has not eliminated for
reasons unrelated to size;
* * * * *
(iv) The SBA Associate Administrator for the HUBZone Program, or
designee.
(7) For any unrestricted Government procurement in which status as
a small business may be beneficial, including, but not limited to, the
award of a contract to a small business where there are tie bids, the
opportunity to seek a Certificate of Competency by a small business,
and SDB or HUBZone price evaluation preferences, the following entities
may protest in connection with a particular procurement:
* * * * *
(iii) The responsible SBA Area Director for Government Contracting,
the SBA Associate Administrator for Government Contracting, or the SBA
Associate Administrator for 8(a) Business Development.
(b) * * * (1) * * *
(iii) The SBA Associate Administrator for Investment or designee
may request a formal size determination for any purpose relating to the
Small Business Investment Company (SBIC) program (see part 107 of this
chapter). A formal size determination includes a request to determine
whether or not affiliation exists between two or more entities for any
purpose relating to the SBIC program.
* * * * *
(7) In connection with initial or continued eligibility for the
Small Disadvantaged Business (SDB) program, the following may request a
formal size determination:
(i) The applicant or SDB concern; or
(ii) The Assistant Administrator of the Division of Program
Certification and Eligibility or the Associate Administrator for
8(a)BD.
(8) In connection with initial or continued eligibility for the
HUBZone program, the following may request a formal size determination:
(i) The applicant or HUBZone concern; or
(ii) The Associate Administrator for the HUBZone program, or
designee.
(9) For purposes of validating that firms listed in SBA's PRO-Net
database are small, the Government Contracting Area Director may
initiate a formal size determination when sufficient information exists
that calls into question a firm's small business status. The current
date will be used to determine size, and SBA will remove from the
database any firm found to be other than small.
23. In Sec. 121.1004 add new paragraphs (a)(4) and (a)(5) to read
as follows:
Sec. 121.1004 What time limits apply to size protests?
(a) * * *
(4) Electronic notification of award. Where notification of award
is made electronically, such as posting on the Internet under
Simplified Acquisition Procedures, a protest must be received by the
contracting officer before close of business on the fifth day,
exclusive of Saturdays, Sundays, and legal holidays, after the
electronic posting.
(5) No notice of award. Where there is no requirement for written
pre-award notice or notice of award, or where the
[[Page 70351]]
contracting officer has failed to provide written notification of
award, the 5-day protest period will commence upon oral notification by
the contracting officer or authorized representative of the identity of
the apparent successful offeror.
* * * * *
24. Revise the first sentence of Sec. 121.1005 to read as follows:
Sec. 121.1005 How must a protest be filed with the contracting
officer?
A protest must be delivered to the contracting officer by hand,
telegram, mail, FAX, Federal Express or other overnight delivery
service, e-mail, or telephone. * * *
25. Amend Sec. 121.1007 by adding the following examples after
paragraph (c):
Sec. 121.1007 Must a protest of size status relate to a particular
procurement and be specific?
* * * * *
Example 1: An allegation that concern X is large because it
employs more than 500 employees (where 500 employees is the
applicable size standard) without setting forth a basis for the
allegation is unspecific.
Example 2: An allegation that concern X is large because it
exceeds the 500 employee size standard (where 500 employees is the
applicable size standard) because a higher employment figure was
published in publication Y is sufficiently specific.
Example 3: An allegation that concern X is affiliated with
concern Y without setting forth any basis for the allegation is
unspecific.
Example 4: An allegation that concern X is affiliated with
concern Y because Mr. A is the majority shareholder in both concerns
is sufficiently specific.
Example 5: An allegation that concern X has revenues in excess
of $5 million (where $5 million is the applicable size standard)
without setting forth a basis for the allegation is unspecific.
Example 6: An allegation that concern X exceeds the size
standard (where the applicable size standard is $5 million) because
it received Government contracts in excess of $5 million last year
is sufficiently specific.
26. In Sec. 121.1008, revise the heading and paragraphs (a) and
(d) to read as follows:
Sec. 121.1008 What occurs after SBA receives a size protest or
request for a formal size determination?
(a) When SBA receives a size protest, the SBA Area Director for
Government Contracting, or designee, will notify the contracting
officer, the protested concern, and the protestor that the protest has
been received. If the protest pertains to a requirement involving SBA's
HUBZone program, the Area Director will also notify the AA/HUB of the
protest. If the protest pertains to a requirement involving SBA's SBIR
Program, the Area Director will also notify the Assistant Administrator
for Technology. If the protest involves the size status of a concern
that SBA has certified as a small disadvantaged business (SDB) (see
part 124, subpart B of this chapter) the Area Director will notify
SBA's AA/8(a) BD. If the protest pertains to a requirement that has
been reserved for competition among concerns that participate in SBA's
8(a) BD Program, the Area Director will notify the SBA district office
servicing the 8(a) concern whose size status has been protested. SBA
will provide a copy of the protest to the protested concern together
with SBA Form 355, Application for Small Business Size Determination,
by certified mail, return receipt requested, or by any overnight
delivery service that provides proof of receipt. SBA will ask the
protested concern to complete the form and respond to the allegations
in the protest.
* * * * *
(d) If a concern whose size status is at issue fails to submit a
completed SBA Form 355, responses to the allegations of the protest, or
other requested information within the time allowed by SBA, or if it
submits incomplete information, SBA may presume that disclosure of the
information required by the form or other missing information would
demonstrate that the concern is other than a small business. A concern
whose size status is at issue must furnish information about its
alleged affiliates to SBA, despite any third party claims of privacy or
confidentiality, because SBA will not disclose information obtained in
the course of a size determination except as permitted by Federal law.
27. In Sec. 121.1009 revise paragraphs (b) and (g) to read as
follows:
Sec. 121.1009 What are the procedures for making the size
determination?
* * * * *
(b) Basis for determination. The size determination will be based
primarily on the information supplied by the protestor or the entity
requesting the size determination and that provided by the concern
whose size status is at issue. The determination, however, may also be
based on grounds not raised in the protest or request for size
determination. SBA may use other information and may make requests for
additional information to the protestor, the concern whose size status
is at issue and any alleged affiliates, or other parties.
* * * * *
(g) Results of an SBA size determination. (1) A formal size
determination becomes effective immediately and remains in full force
and effect unless and until reversed by OHA.
(2) A contracting officer may award a contract based on SBA's
formal size determination.
(3) If the formal size determination is appealed to OHA, the OHA
decision on appeal will apply to the pending procurement or sale if the
decision is received before award. OHA decisions received after
contract award will not apply to that procurement or sale, but will
have future effect, unless the contracting officer agrees to apply the
OHA decision to the procurement or sale.
(4) Once SBA has determined that a concern is other than small for
purposes of a particular procurement, the concern cannot later become
eligible for the procurement by reducing its size.
(5) A concern determined to be other than small under a particular
size standard is ineligible for any procurement or any assistance
authorized by the Small Business Act or the Small Business Investment
Act of 1958 which requires the same or a lower size standard, unless
SBA recertifies the concern to be small pursuant to Sec. 121.1010 or
OHA reverses the adverse size determination. After an adverse size
determination, a concern cannot self-certify as small under the same or
lower size standard unless it is first recertified as small by SBA. If
a concern does so, it may be in violation of criminal laws, including
section 16(d) of the Small Business Act, 15 U.S.C. 645(d). If the
concern has already certified itself as small on a pending procurement
or on an application for SBA assistance, the concern must immediately
inform the officials responsible for the pending procurement or
requested assistance of the adverse size determination.
* * * * *
28. Revise Sec. 121.1101 to read as follows:
Sec. 121.1101 Are formal size determinations subject to appeal?
(a) Appeals from formal size determinations may be made to OHA.
Unless an appeal is made to OHA, the size determination made by a SBA
Government Contracting Area Office or Disaster Area Office is the final
decision of the agency. The procedures for appealing a formal size
determination to OHA are set forth in part 134 of this chapter. The OHA
appeal is an administrative remedy that must be exhausted before
judicial review of a formal size determination may be sought in a
court.
(b) OHA will not review a formal size determination where the
contract has been awarded and the issue(s) raised in
[[Page 70352]]
a petition for review are contract specific, such as compliance with
the nonmanufacturer rule (see Sec. 121.406(b)), or joint venture or
ostensible subcontractor rule (see Sec. 121.103(h)).
29. Revise Sec. 121.1103 to read as follows:
Sec. 121.1103 What are the procedures for appealing a NAICS code
designation?
(a) Any interested party adversely affected by a NAICS code
designation may appeal the designation to OHA. The only exception is
that, for a sole source contract reserved under SBA's 8(a) Business
Development program (see part 124 of this chapter), only SBA's
Associate Administrator for 8(a) Business Development may appeal the
NAICS code designation.
(b) The contracting officer's determination of the applicable NAICS
code is final unless appealed as follows:
(1) An appeal from a contracting officer's NAICS code designation
and applicable size standard must be served and filed within 10
calendar days after the issuance of the initial solicitation. OHA will
summarily dismiss an untimely NAICS code appeal.
(2)(i) The appeal petition must be in writing and must be sent to
the Office of Hearings & Appeals, U.S. Small Business Administration,
409 3rd Street, SW., Suite 5900, Washington, DC 20416.
(ii) There is no required format for a NAICS code appeal, but an
appeal must include the following information: the solicitation or
contract number; the name, address, and telephone number of the
contracting officer; a full and specific statement as to why the NAICS
code designation is erroneous, and argument in support thereof; and the
name, address and telephone number of the appellant or its attorney.
(3) The appellant must serve the appeal petition upon the
contracting officer who assigned the NAICS code to the acquisition and
SBA's Office of General Counsel, Associate General Counsel for
Procurement Law, 409 3rd Street, SW., Washington, DC 20416.
(4) Upon receipt of a NAICS code appeal, OHA will notify the
contracting officer by notice and order of the date OHA received the
appeal, the docket number, and the Judge assigned to the case. The
contracting officer's response to the appeal must include argument and
supporting evidence (see part 134, subpart C, of this chapter) and must
be received by OHA within 10 calendar days from the date of the
docketing notice and order, unless otherwise specified by the Judge.
Upon receipt of OHA's docketing notice and order, the contracting
officer must immediately send to OHA a copy of the solicitation
relating to the NAICS code appeal.
(5) After close of the record, OHA will issue a decision and inform
all interested parties, including the appellant and contracting
officer. If OHA's decision is received by the contracting officer
before the date offers are due, the solicitation must be amended if the
contracting officer's designation of the NAICS code is reversed. If
OHA's decision is received by the contracting officer after the due
date of initial offers, the decision will not apply to the pending
procurement, but will apply to future solicitations for the same
products or services.
30. Revise Sec. 121.1205 to read as follows:
Sec. 121.1205 How is a list of previously granted class waivers
obtained?
A list of classes of products for which waivers of the
Nonmanufacturer Rule have been granted is maintained in SBA's website
at www.sba.gov/GC/approved.html. A list of such waivers may also be
obtained by contacting the Office of Government Contracting, U.S. Small
Business Administration, 409 3rd Street, SW., Washington, DC 20416, or
the nearest SBA Government Contracting Area Office.
PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF
HEARINGS AND APPEALS
31. The authority citation for 13 CFR part 134 continues to read as
follows:
Authority: 5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), and 637(a).
32. Revise Sec. 134.102(k) to read as follows:
Sec. 134.102 Jurisdiction of OHA.
* * * * *
(k) Appeals from size determinations and NAICS code designations
under part 121 of this chapter. ``Size determinations'' include
decisions by Government Contracting Area Directors that determine
whether two or more concerns are affiliated for purposes of SBA's
financial assistance programs, or other programs for which an
appropriate SBA official requested an affiliation determination;
* * * * *
33. In Sec. 134.314, revise the heading and add the following
sentence at the end to read as follows:
Sec. 134.314 Standard of review and burden of proof.
* * * The appellant has the burden of proof, by a preponderance of
the evidence, in both size and NAICS code appeals.
34. Amend Sec. 134.316(a) by adding the following sentence at the
end to read as follows:
Sec. 134.316 The decision.
(a) * * * The Judge will not decide substantive issues raised for
the first time on appeal, or which have been abandoned or become moot.
* * * * *
Dated: November 8, 2002.
Hector V. Barreto,
Administrator.
[FR Doc. 02-29272 Filed 11-21-02; 8:45 am]
BILLING CODE 8025-01-P