[Federal Register Volume 75, Number 39 (Monday, March 1, 2010)]
[Proposed Rules]
[Pages 9129-9137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-3613]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 124, 125, 126, and 134

RIN 3245-AF65


Small Business, Small Disadvantaged Business, HUBZone, and 
Service-Disabled Veteran-Owned Protest and Appeal Regulations

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: The U.S. Small Business Administration (SBA or Agency) 
proposes to amend its regulations to clarify the effect, across all 
small business programs, of initial and appeal eligibility decisions on 
the procurement in question; increase the amount of time that SBA has 
to render formal size determinations; require that SBA's Office of 
Hearings and Appeals (OHA) issue a size appeal decision within 60 
calendar days of the close of the record, if possible; increase the 
amount of time that SBA has to file North American Industry 
Classification System (NAICS) code appeals; alter the NAICS code appeal 
procedures to comply with a Federal Court decision; clarify that 
contracting officers must reflect final agency eligibility decisions in 
federal procurement databases and goaling statistics; clarify how a 
contracting officer assigns a NAICS code and size standard to a 
multiple award procurement; and make other changes to size status 
protest and appeal rules.

DATES: Comments must be received on or before March 31, 2010.

ADDRESSES: You may submit comments, identified by RIN: 3245-AF65, by 
any of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Mail, for paper, disk, or CD/ROM submissions: Khem Sharma, 
Chief, Office of Size Standards, U.S. Small Business Administration, 
Office of Government Contracting, 409 Third Street, SW., Washington, DC 
20416.
    <bullet> Hand Delivery/Courier: Khem Sharma, Chief, Office of Size 
Standards, U.S. Small Business Administration, Office of Government 
Contracting, 409 Third Street, SW., Washington, DC 20416.
    SBA will post all comments on http://www.regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at http://www.Regulations.gov, please submit the 
information to Khem Sharma, Chief, Size Standards Division, U.S. Small 
Business Administration, Office of Government Contracting, 409 Third 
Street, SW., Washington, DC 20416, or send an e-mail to 
<a href="/cdn-cgi/l/email-protection#d9b2b1bcb4f7aab1b8abb4b899aabbb8f7beb6af"><span class="__cf_email__" data-cfemail="563d3e333b78253e37243b371625343778313920">[email protected]</span></a>. Highlight the information that you consider to be 
CBI and explain why you believe SBA should hold this information as 
confidential. SBA will review the information and make the final 
determination on whether it will publish the information or not.

FOR FURTHER INFORMATION CONTACT: Carl Jordan, Program Analyst, Size 
Standards Division, Office of Government Contracting, (202) 205-7189 or 
at <a href="/cdn-cgi/l/email-protection#54373526387a3e3b2630353a142736357a333b22"><span class="__cf_email__" data-cfemail="fd9e9c8f91d397928f999c93bd8e9f9cd39a928b">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: SBA is proposing to delete the reference to 
other factors to be considered when assigning a NAICS code to a 
procurement in 13 CFR 121.402. SBA's regulations currently provide that 
a contracting officer should consider the principal purpose of the 
product or service to be acquired, and that a procurement is usually 
classified according to the component which accounts for the greatest 
percentage of contact value. SBA's regulations further provide that 
contracting officers may consider previous Government procurement 
classifications of the same or similar products or services and which 
classification would best serve the purposes of the Small Business Act. 
SBA believes these additional factors are unnecessary. A repeated error 
is not persuasive evidence, especially since such classifications are 
almost never reviewed or challenged. As discussed above, SBA receives 
very few NAICS code appeals because of the short appeal timelines. 
Further, it is unclear how a contracting officer can determine which 
NAICS code and size standard can best serve the purposes of the Small 
Business Act. Thus, we are proposing to delete reference to prior 
government classifications and the purpose of the Small Business Act. 
Each solicitation should be classified based on the principal purpose 
of that particular solicitation, and the contracting officer only needs 
to make a reasonable choice.
    SBA is proposing to delete a provision in Sec.  121.404 that 
requires a concern to recertify its size where a solicitation is 
modified so that initial offers are no longer responsive. Generally, a 
firm must be small at the time of initial offer,

[[Page 9130]]

including price. This rule provides procuring agencies and offerors 
with finality with respect to eligibility. Some procurements may drag 
on for several years due to a variety of reasons, including protests, 
discussions, funding issues, and changes in requirements. Disqualifying 
an offeror based on whether a procuring agency's requirement changes 
during the course of a protracted procurement unfairly punishes both 
the procuring agency and offerors that have expended time and resources 
pursuing the procurement. Reasonable people may disagree about whether 
a solicitation has been modified so that initial offers are no longer 
responsive. For example, in Size Appeal of Continental Staffing, Inc., 
SBA No. SIZ-4808 (2006) the contracting officer did not request new 
size certifications and argued that its requirement had not changed so 
much that initial offers were no longer non-responsive. OHA disagreed 
and remanded, ordering the Area Office to determine the prospective 
awardee's size at the time of a revised offer submitted approximately 
five months after the initial offer, resulting in the firm being 
ineligible because a more recent year would be used to calculate the 
firm's size. In SBA's view, if a change in a requirement is drastic 
enough that all offers are non-responsive, the procuring agency will 
have to cancel the procurement and issue a new solicitation open to all 
potential offerors, not just offerors who responded to the now obsolete 
solicitation. Offerors would then have to submit size certifications 
along with their initial offer, including price, in response to the new 
solicitation. SBA recently finalized rules which require re-
certification after award to ensure that contracts are properly counted 
for goaling and statistical purposes. 13 CFR 404(g). In SBA's view, the 
procurement community is better served if there is a clear bright line 
for purposes of determining eligibility for award.
    SBA is proposing to amend Sec.  121.407 to address how a NAICS code 
and size standard should be assigned to a multiple award procurement. 
Agencies frequently acquire diverse goods and services from multiple 
vendors under contracts awarded pursuant to a single solicitation. 
SBA's regulations require the contracting officer to assign the single 
NAICS code to the procurement that best describes the principal purpose 
of the acquisition. 13 CFR 121.402. The fact that multiple contracts 
will be awarded under a solicitation does not alter this fundamental 
principle. Generally, if all awardees will be eligible to compete for 
orders, then, just like any other procurement, the solicitation should 
be assigned the single NAICS code that best describes the principal 
purpose of the acquisition. However, if a multiple award procurement is 
divided up into contract line item numbers (CLINs) or special item 
numbers (SINs), where only awardees under the CLIN or SIN will compete 
for orders, then each CLIN or SIN should be assigned the single NAICS 
code that best describes the principal purpose CLIN or SIN. This will 
ensure that firms that are actually small for the actual work receive 
the award, and ensure that procuring agencies only receive credit 
towards their goals for awards to firms that are small for the work to 
be performed.
    SBA is proposing to amend Sec.  121.1009 to provide SBA within 15 
business days to decide a size protest. SBA's regulations currently 
provide that SBA will issue a formal size determination within 10 
working days of its receipt of a size protest, ``if possible.'' 13 CFR 
121.1009(e). The Federal Acquisition Regulation (FAR) currently 
provides that a contracting officer should withhold award for 10 
business days after SBA's receipt of a size protest, after which time 
the contracting officer may proceed with award if ``further delay would 
be disadvantageous to the Government.'' FAR 19.302(h)(2). The FAR 
further provides that a contracting officer need not withhold award if 
he or she determines in writing that award must be made to protect the 
public interest. FAR 19.302(h)(1).
    Under current regulations, after SBA receives a size protest, it 
notifies the protested concern, and the protested concern is provided 3 
business days to respond to the protest and provide information to SBA. 
Thus, by the time the SBA receives the protested concern's information, 
SBA generally has approximately 5 business days to write a formal size 
determination. However, in some cases, protested concerns ask for 
additional time to submit the required information, such as tax returns 
or payroll records, corporate organization documentation, and forms 
detailing ownership interests in other concerns. In some cases, the 
concern's submission raises additional issues, leading the size 
specialist to request additional information from the protested 
concern. Moreover, to draft a decision, size specialists sometimes have 
to read and analyze voluminous documentation. For example, if a size 
protest involves allegations of undue or excessive reliance on a 
subcontractor, a size specialist must thoroughly analyze the protested 
concern's proposal and the solicitation to make a determination. 
Further, a size specialist also may have to conduct legal or other 
research before a decision can be drafted.
    SBA conducted a survey of its six Government Contracting Area 
Offices and found that, on average, the Area Offices issued size 
determinations more than 10 business days after receipt 29% of the 
time. SBA's regulations currently provide SBA with 15 business days to 
decide other status protests, such as SDB, SDVO, and HUBZone protests. 
13 CFR 124.1013(a), 125.27(d), 126.803(b). Formal size determinations 
are typically more complicated than other small business program 
eligibility determinations. Increasing the amount of time SBA has to 
make a size determination will also make SBA's regulations more 
consistent across all programs, which would be beneficial to all 
participants in the small business procurement community.
    SBA is proposing to amend Sec. Sec.  121.1009, 121.1013, 125.27 and 
126.803 to clarify the effect of protest or appeal decisions on the 
procurement in question and make the effect more consistent and 
coherent across small business programs. SBA's size, small 
disadvantaged business (SDB), Service-Disabled Veteran-Owned (SDVO) and 
Historically Underutilized Business Zone (HUBZone) regulations contain 
varied and sometimes inconsistent explanations on how the protest or 
appeal decision applies to the procurement in question. 13 CFR 
121.1004(c), 121.1009(g), 124.1013(h), 124.1014(f), 125.27(g), 
126.803(d), 126.805(g), 134.504.
    The purpose of the protest and appeal process is to assure that 
contracts are awarded to eligible concerns. However, the process must 
be balanced so that it does not impede the procuring agency's ability 
to accomplish its mission. SBA's size regulations currently provide 
that a timely filed protest applies to the procurement in question, 
even if filed after award. 13 CFR 121.1004(c). SBA's regulations 
further provide that a contracting officer may apply an appellate size 
decision received after award to the procurement in question, but is 
not required to do so. SBA's size regulations do not address how a 
formal size decision or appellate decision applies for goaling 
purposes, but other program regulations, such as the SDVO regulations, 
do address the effect of protest and appeal decisions for goaling 
purposes. 13 CFR 125.27(g). Over the last several years, the U.S. 
Government Accountability Office (GAO) has sustained bid protests, and 
in many cases recommended termination, where

[[Page 9131]]

a firm was found to be other than small and the decision was received 
after award. See Hydroid LLC, B-299072, Jan. 31, 2007, 2007 CPD ] 20; 
ALATEC Inc., B-298730, Dec. 4, 2006, 2006 CPD ] 191; Spectrum Security 
Services, Inc., B-297320.3, Dec. 29, 2005, 2005 CPD ] 227; Tiger 
Enterprises, Inc., B-293439, B-292815.3, Jan. 20, 2004, 2004 CPD ] 19; 
Adams Industrial, Inc., B-280186, Aug. 28, 1998, 98-2 CPD ] 56. In 
contrast, SBA's regulations specifically provide that a procuring 
agency need not terminate a contract based on an SDVO protest 
determination that is received after award. 13 CFR 125.27(g); see Major 
Contracting Services, Inc., B-400616, Nov. 20, 2008, 2008 CPD ] 214; 
Veteran Enterprise Technology Services, LLC, B-298201.2, Jul. 13, 2006, 
2006 CPD ] 108.
    SBA is proposing to specifically address how initial and appellate 
decisions apply to the procurement in question across all small 
business programs, including for goaling purposes. If the SBA issues an 
initial decision that a concern is eligible, the procuring agency may 
make an award based on that decision, notwithstanding an appeal or 
notice of an appeal. If the initial decision is overturned on appeal, 
the procuring agency must apply the decision to the procurement in 
question for goaling purposes. If the appellate decision is received by 
the contracting officer after award, the contracting officer may take 
some action, such as terminating the contract or not exercising 
options, but will not be required to do so. On the other hand, if the 
SBA issues an initial decision that a concern is ineligible, award 
should not be made to that concern, unless and until the decision is 
overturned on appeal. If award has made been, the procuring agency must 
take some action if the initial decision is not overturned on appeal, 
such as terminating the award or not exercising the next option. 
Further, the contracting officer must apply the final Agency decision 
to the procurement in question for goaling purposes.
    SBA is proposing to amend Sec.  121.1009 to clarify when it will 
reopen a size determination. Currently, SBA may reopen a size 
determination to correct an administrative error or clear mistake of 
fact, provided an appeal has not been filed. If an appeal has been 
filed, SBA may intervene in the case or request a remand. SBA is 
proposing to clarify that once the Agency issues a final decision it 
cannot reopen that decision at a later time. SBA's issuance of its 
final decision starts the clock for purposes of challenging the final 
agency decision in a court of law. If SBA could reopen a final agency 
decision then no decision could ever be considered final. Moreover, 
such an action would lead to due process challenges from the parties, 
who already litigated the matter and received a final agency decision. 
Thus, SBA is clarifying that if SBA issues a final agency decision and 
that decision is not timely challenged, that is the end of the matter.
    SBA is proposing to amend Sec.  121.1101(b), which prohibits a size 
appeal where the contract has been awarded and the issues raised in the 
appeal are contract-specific. SBA believes that an appellate decision 
should always apply for goaling purposes. In other words, if a firm 
that has been awarded a contract is found to be other than small, then 
SBA believes that the procuring agency should not be able to continue 
to take small business credit for purposes of its small business goals. 
Further, a contracting officer may take some action based on a negative 
appellate decision. Consequently, SBA is proposing that OHA accept all 
size appeals.
    SBA is proposing to amend Sec.  121.1103 to clarify that a NAICS 
appeal includes an appeal involving whether a procuring agency has 
assigned the correct corresponding size standard to a procurement. SBA 
is also proposing to increase the amount of time SBA has to file a 
NAICS code appeal. Currently, a NAICS code appeal must be filed within 
10 calendar days after issuance of the initial solicitation. This 10-
day time limit also applies to SBA. OHA receives very few NAICS code 
appeals. On average 10 NAICS code appeals are filed annually. SBA is 
proposing to amend its regulations to allow SBA to file a NAICS code 
appeal at any time before offers or bids are due. SBA occasionally 
receives notice of clearly inappropriate NAICS codes and size 
standards, but receives the notice well after the 10-day time limit. 
Size is a function of the work to be performed. A firm can be small in 
one industry but large in another. Legitimate small business concerns 
in the particular industry are harmed when a procurement is 
misclassified because they may not be able to successfully compete with 
a concern that is actually large for the work to be performed. Further, 
procurement misclassification degrades the Federal Government's 
procurement data, in terms of its small business prime contracting 
goals as well as the dollar value and contract action data for both the 
misclassified industry and the proper industry.
    SBA is also proposing to amend Sec.  121.1103 to require 
contracting officers to notify the public of the filing of a NAICS code 
appeal to ensure that all prospective offerors or bidders have an 
opportunity to submit evidence or arguments concerning the appropriate 
NAICS code and size standard. Under SBA's current regulations, if a 
NAICS code appeal is filed SBA's decision is final, even though 
prospective offerors other than the appellant may not have received 
notice of the appeal, and therefore may not have had an opportunity to 
be heard. In Advanced Systems Technology, Inc. v. U.S., 69 Fed. Cl. 474 
(2006) the U.S. Court of Federal Claims enjoined the procuring agency 
from proceeding with its acquisition after SBA issued a NAICS code 
appeal decision that a prospective offeror had not known about, and 
after SBA dismissed the prospective offeror's subsequent NAICS code 
appeal. This change will ensure prospective offerors are provided due 
process.
    SBA is proposing to amend Sec.  124.1013(d) to correct a 
typographical error. In addition, as discussed above SBA is proposing 
to amend Sec. Sec.  124.1013 and 124.1014 to make the effect of an SDB 
status and appeal determination consistent with other small business 
programs.
    As discussed above, SBA is proposing to amend Sec. Sec.  125.27, 
125.28 and 134.504 to make the effect of an SDVO status and appeal 
determination consistent with other small business programs. In 
addition, SBA is proposing to amend Sec.  125.27 to clarify that a firm 
found to be ineligible must demonstrate to SBA that it has overcome the 
reason the firm was found to be ineligible before it can represent 
itself as an SDVO SBC.
    As discussed above, SBA is proposing to amend Sec. Sec.  126.803 
and 126.805 to make the effect of a HUBZone status and appeal 
determination consistent with other small business programs.
    SBA is proposing to amend Sec.  134.304 to require that all size 
appeals be filed within 15 calendar days after receipt of the formal 
size determination. Currently, SBA's regulations require a size appeal 
to be filed within 15 calendar days if the procurement is ``pending,'' 
and 30 calendar days if the size appeal does not involve a ``pending'' 
procurement. The term ``pending'' is ambiguous and is therefore subject 
to interpretation, which in turn leads to litigation. It is SBA's view 
that 15 calendar days is sufficient for any party to file a size 
appeal.
    SBA is proposing to amend Sec.  134.316 to require OHA to issue 
size appeal decisions within 60 calendar days of the close of the 
record, if possible. Currently, there are no time limits applicable to 
rendering size appeal decisions. In a size appeal, the record

[[Page 9132]]

generally closes 15 calendar days after the Judge notifies the parties 
that an appeal has been received, but may be extended at the Judge's 
discretion. 13 CFR 134.309(b). Since an appellate decision may affect 
contract award or continued performance, appellate decisions need to be 
rendered in a timely fashion. SBA is also proposing to amend Sec.  
134.316 to require OHA to render a NAICS code appeal decision within 15 
calendar days of the close of the record, if possible, to minimize 
delay to the procurement. Currently, there are no time limits for 
rendering NAICS code appeal decisions.
    SBA is proposing to delete Sec.  134.504 and amend redesignated 
Sec.  134.513 because the effect of an SDVO status appellate 
determination is set forth in Sec.  125.27. SBA is proposing to amend 
redesignated Sec.  134.508 to clarify when OHA will dismiss an SDVO 
appeal. Finally, SBA is proposing to amend redesignated Sec.  134.514 
to make a change to the nomenclature.

Compliance With Executive Orders 12866, 12988, 13132, the Paperwork 
Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act 
(5. U.S.C. 601-612), Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
proposed rule is a significant regulatory action for purposes of 
Executive Order 12866. Accordingly, the next section contains SBA's 
Regulatory Impact Analysis. This is not a major rule, however, under 
the Congressional Review Act, 5 U.S.C. 800.

Regulatory Impact Analysis

    1. Is there a need for the regulatory action? SBA's mission is to 
aid and assist small businesses through a variety of financial, 
procurement, business development, and advocacy programs. To assist 
effectively the intended beneficiaries of these programs, SBA must 
establish distinct definitions of which businesses are deemed small 
businesses. The Small Business Act (15 U.S.C. 632(a)) delegates the 
responsibility for establishing small business definitions to SBA's 
Administrator. This act also provides SBA with the authority to 
determine which businesses are small businesses concerns (15 U.S.C. 
637(b)(1)(G)(6)). The supplementary information section of this 
proposed rule explains SBA's reasons for revising the size protest and 
appeal timeframes and application of final decisions on size and other 
small business status determinations. SBA believes that these changes 
are needed to provide clarity to procuring agencies and contractors.
    2. What are the potential benefits and costs of this regulatory 
action?
    SBA believes that more realistic timeframes for filing and 
rendering decisions on size and NAICS cases will improve the 
functioning of the size protest and size determination processes. Small 
businesses will have a sufficient time in which to raise size and NAICS 
classification issues and SBA will have more time, if needed, to 
prepare thorough decisions.
    The proposed provisions may have cost implications associated with 
delays to the contracting process. Contracting officers may have to 
wait an additional 5 days in some cases before SBA renders a size 
determination. However, contracting officers are already generally 
required to withhold award for 15 days for a HUBZone, SDB, or SDVO 
status protest. SBA believes that the potential costs associated with 
delays in the contracting process are relatively minor and are 
significantly outweighed by the benefits to the integrity of small 
business procurement programs and the intended beneficiaries.
    SBA recognizes that its proposal to assign a NAICS code to each 
line item of a multiple award contract will require reprogramming of 
the Federal Procurement Data System-NG (FPDS-NG). Although contracting 
officers may already be designating NAICS codes to task orders, FPDS-NG 
only records one NAICS code for the overall contract. However, 
revisions to FPDS-NG to incorporate NAICS codes by task order may have 
already begun in response to the November 15, 2006, recertification 
rule. SBA does not have an estimate of the costs but it believes that 
they will not be significant because this requirement affects only one 
field within the database, especially if reprogramming for this feature 
has already started. Nonetheless, SBA strongly believes the benefits of 
accurately reflecting small business awards for multiple award contract 
vehicles that now account for over $35 billion in federal contracting 
dollars annually greatly outweighs the programming costs associated 
with implementing this policy.
    3. What are the alternatives to this proposed rule?
    SBA considered as an alternative completing size determinations 
within 10 days of receiving all requested information from the 
protested concern. Although this would also achieve the objective of 
the proposal, it will create uncertainty as to when a size 
determination would actually be rendered. If the necessary information 
requested of a business is received within the 3-day period requested 
by SBA, a size determination would be completed within 13 days. 
However, if the protested concern submits incomplete information, the 
size determination period would vary depending on the circumstances. 
SBA believes a 15-day period is sufficient in most cases and provides a 
degree of certainty to contracting officers. It also reinforces the 
importance of promptly providing information to SBA.

Executive Order 12988

    For purposes of Executive Order 12988, SBA has drafted this 
proposed rule, to the extent practicable, in accordance with the 
standards set forth in section 3(a) and 3(b)(2) of that Order, to 
minimize litigation, eliminate ambiguity, and reduce burden. This rule 
has no preemptive or retroactive effect. Executive Order 13132
    This rule does not have federalism implications as defined in 
Executive Order 13132. It will not have substantial direct effects on 
the States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various layers of government, as specified in the order. As such it 
does not warrant the preparation of a Federalism Assessment.

Paperwork Reduction Act

    For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, 
SBA has determined that this rule, if adopted in final form, would not 
impose new reporting requirements and would not require new 
recordkeeping requirements. The proposed rule provides additional time 
in order for SBA to make its formal size determinations. The proposed 
rule will impose a 60-day timeframe for issuing size appeal decisions 
(from the date of close of the record) and a 15-day timeframe for 
issuing NAICS code appeals (from the date of the close of the record). 
The rule will also require that all size appeals be filed within 15 
calendar days.

Regulatory Flexibility Act

    SBA has determined that this proposed rule, if adopted in final 
form, could have a significant economic impact on a substantial number 
of small entities within the meaning of the Regulatory Flexibility Act 
(RFA), 5 U.S.C. 601-612. Therefore, SBA has prepared an Initial 
Regulatory Flexibility Act (IRFA) analysis addressing the proposed 
regulation.

IRFA

    When preparing a Regulatory Flexibility Analysis, an agency shall

[[Page 9133]]

address all of the following: The need for, and objectives of, the 
rule; the estimated number of small entities to which the rule may 
apply; the projected reporting, recordkeeping and other compliance 
requirements; steps taken to minimize the significant economic impact 
on small entities. This IRFA considers these points and the impact the 
proposed regulation concerning initial status determinations and appeal 
decisions may have on small entities.

a. Need for, and Objectives of, the Rule

    Under the Small Business Act, SBA is authorized to determine the 
size of a business entity. 15 U.S.C. 632. SBA's standards and 
definitions relating to formal size determinations and NAICS code 
designation for small business concerns are set forth in 13 CFR part 
121. The rules for procedures governing cases before OHA are set forth 
in 13 CFR part 134.
    SBA's regulations currently provide that SBA will issue a formal 
size determination within 10 working days of its receipt of a size 
protest, ``if possible.'' 13 CFR 121.1009(e). The FAR currently 
provides that a contracting officer should withhold award for 10 
business days after SBA's receipt of a size protest, after which time 
the contracting officer may proceed with award if ``further delay would 
be disadvantageous to the Government.'' FAR 19.302(h)(2). The FAR 
further provides that a contracting officer need not withhold award if 
he or she determines in writing that award must be made to protect the 
public interest. FAR 19.302(h)(1).
    After SBA receives a size protest it notifies the protested 
concern, and the protested concern is provided 3 business days to 
respond to the protest. Thus, SBA generally has only 5 business days to 
draft a formal size determination. In some cases protested concerns ask 
for additional time to submit the requested information. In other 
cases, the information submitted by the protested concern leads the 
size specialist to request additional information. Size specialists 
typically have to sift through voluminous documentation before reaching 
a decision.
    SBA's regulations provide SBA with 15 business days to decide other 
status protests, such as HUBZone, SDB and SDVO. 13 CFR 124.1013(a), 
125.27(d), 126.803(b). Increasing the amount of time SBA has to make a 
size determination will allow size specialists adequate time to perform 
a thorough review and draft a carefully constructed determination. 
Increasing the amount of time SBA has to render a formal size 
determination will also make SBA's regulations consistent and coherent 
across programs.
    SBA's regulations currently do not address the amount of time OHA 
has to render a decision in connection with a size or NAICS code 
appeal. SBA is proposing to amend its regulations to require OHA to 
issue size appeal decisions within 60 calendar days of the close of the 
record, if possible, and render NAICS code appeal decisions within 15 
calendar days of the close of record, if possible.
    The proposed rule will require the contracting officer to update 
federal procurement databases to reflect final agency status 
determinations.

b. Estimate of the Number of Small Entities to Which the Rule May Apply

    The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of entities that may be affected by 
the proposed rules, if adopted. The RFA defines ``small entity'' to 
include ``small businesses,'' ``small organizations,'' and ``small 
governmental jurisdictions.'' SBA's programs do not apply to ``small 
organizations'' or ``small governmental jurisdictions'' because they 
are non-profit or governmental entities and do not qualify as 
``business concerns'' within the meaning of SBA's regulations. SBA's 
programs apply only to for-profit business concerns. Therefore, the 
proposed regulation (like the regulation currently in effect) will not 
impact small organizations or small governmental jurisdictions.
    The proposed rule will not directly negatively affect any small 
business concern, since it is aimed at preventing other than small 
concerns from receiving or performing contracts set aside for small 
business concerns. The proposed rule will indirectly benefit small 
business concerns by preventing awards to ineligible concerns, or 
shortening the length of time other than small concerns perform small 
business set-aside contracts. SBA maintains an internal database of all 
size protest processed by the agency and the following table was 
constructed to illustrate the number of protest processed in the last 
five fiscal years.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                        Size protests                            FY 2002      FY 2003      FY 2004      FY 2005      FY 2006      FY 2007      FY 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Determinations Requested...............................          356          409          348          459          593          459          374
Cases Dismissed..............................................          110          101           95          122          139          110          121
Determined Small Business....................................          161          170          149          190          219          186          225
Determined Other Than Small..................................           85          122           71          115          163          117          123
Cases in Process/Other Determinations........................            0           16           33            0           72           46           43
--------------------------------------------------------------------------------------------------------------------------------------------------------

    There are more than 330,000 concerns listed as small business 
concerns in the Dynamic Small Business Search of the Central Contractor 
Registration database. In fiscal year 2008, there were over 8 million 
small business contract actions. SBA processes an average of 428 size 
protests each fiscal year resulting in approximately 43 percent being 
determined to be small and 27 percent determined to be other than 
small. The rest are dismissed on procedural grounds. Thus, the number 
of concerns affected by this rule, regardless of size, will be 
approximately 290 per year, which is statistically insignificant when 
compared to the number of small business concerns in the Federal 
Government marketplace (330,000) or the number of small business 
contract actions per year (8 million). The number of protests in other 
small business programs is significantly less than the numbers of size 
protests received.

c. Projected Reporting, Recordkeeping and Other Compliance Requirements

    This proposed rule would not impose a new information collection 
requirement on small businesses. SBA does not believe that this 
provision imposes any new record keeping requirements. This proposed 
rule will require contracting officers to update federal procurement 
databases to reflect final agency status decisions. Contracting 
officers should currently be updating these databases, and this rule 
will make it clear that this must be done.

[[Page 9134]]

d. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities

    This proposed rule should not result in a significant economic 
impact on small entities. This proposed rule will extend the timeframe 
SBA has for determining size of an entity resulting from a size 
protest. The addition of the 5 business days will allow SBA more time 
to adequately review the documentation needed to render a decision and 
will make SBA's regulations consistent across programs. The timeframe 
imposed on OHA for rendering decision resulting from appeals should 
minimize the economic impact on small entities by providing a decision 
in a timely manner.

e. Conclusion

    Based on the foregoing, SBA has determined that this proposed rule 
will not have a significant impact on a substantial number of small 
entities with the meaning of the RFA. SBA requests comments addressing 
any of the issues raised in this IRFA, including comments in the 
economic effect this rule could have on small entities.

List of Subjects in 13 CFR Parts 121, 124, 125, 126, and 134

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Loan programs--business, 
Individuals with disabilities, Reporting and recordkeeping 
requirements, Small businesses.

    For the reasons stated in the preamble, SBA proposes to amend parts 
121, 124, 125, 126, and 134 of title 13 of the Code of Federal 
Regulations as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

Subpart A--Size Eligibility Provisions and Standards

    1. The authority citation for part 121 is revised to read as 
follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 637, 644, 662(5) 
and 694a; Public Law 105-135, sec. 401 et seq., 111 Stat. 2592.


Sec.  121.402  [Amended]

    2. Amend Sec.  121.402(b) by removing the third sentence.


Sec.  121.404  [Amended]

    3. Amend paragraph 121.404(a) by removing the second sentence.
    4. Revise Sec.  121.407 to read as follows:


Sec.  121.407  What are the procedures for multiple award procurements?

    (a) Except as set forth in paragraphs (b) and (c) of this section, 
a solicitation to award multiple task or delivery order contracts 
should be assigned the single NAICS code and size standard which best 
describes the principal purpose of the acquisition (See Sec.  121.402).
    (b) A solicitation to award multiple task or delivery order 
contracts may be assigned more than one NAICS code or size standard if 
the solicitation is divided into contract line item numbers (CLINs) 
where orders will only be awarded or competed amongst concerns that 
have been awarded contracts for those CLINs. In such a case, the 
contracting officer must assign to each CLIN the single NAICS code and 
size standard that best describes the principal purpose of the goods or 
services acquired under that CLIN. (See Sec.  121.402). A concern must 
meet the applicable size standard to be eligible for award as a small 
business concern.
    (c) A solicitation to award multiple contracts for separate and 
distinct items, where a bidder may submit an offer on some or all of 
the items, may be assigned multiple NAICS codes and size standards. In 
such a case, the contracting officer must assign to each CLIN the 
single NAICS code and size standard that best describes the principal 
purpose of the item to be acquired under the CLIN. A concern must meet 
the applicable size standard to be eligible for award as a small 
business concern.
    5. Amend Sec.  121.1009 by revising paragraphs (a), (g)(1), (g)(2), 
(g)(3), and (h) to read as follows:


Sec.  121.1009  What are the procedures for making the size 
determination?

    (a) Time frame for making size determination. (1) After receipt of 
a protest or a request for a formal size determination, the Area Office 
will issue a formal size determination within 15 business days, if 
possible.
    (2) If SBA does not issue its determination within the 15-day 
period, the contracting officer must contact SBA to ascertain when SBA 
estimates that it will issue its decision, and may only award the 
contract if he or she determines in writing that there is an immediate 
need to award the contract and that waiting until SBA makes its 
determination will harm the public interest (see paragraph (g) of this 
section for the effect of a formal size determination or appellate 
decision).
    (3) The contracting officer may award the contract after receipt of 
a protest if the contracting officer determines in writing that an 
award must be made to prevent significant harm to the public interest 
(see paragraph (g) of this section for the effect of a formal size 
determination or appellate decision).
* * * * *
    (g) * * *
    (1) A contracting officer may award the contract to a protested 
concern after the Area Office either has determined that the protested 
concern is an eligible small business or has dismissed all protests 
against it. If OHA subsequently overturns the Area Office's 
determination or dismissal, the contracting officer may apply the OHA 
decision to the procurement in question.
    (2) A contracting officer may not award the contract to a protested 
concern that the Area Office has determined is not an eligible small 
business for the procurement in question.
    (i) If a contracting officer receives such a determination after 
contract award, and no OHA appeal has been filed, the contracting 
officer shall terminate the award.
    (ii) If a timely OHA appeal is filed after contract award, the 
contracting officer must consider whether performance can be suspended 
until an appellate decision is rendered.
    (iii) If OHA affirms the size determination finding the protested 
concern ineligible, the contracting officer shall either terminate the 
contract or not exercise the next option.
    (3) The contracting officer must update the Federal Procurement 
Data System and other procurement reporting databases to reflect the 
final agency size decision (the formal size determination if no appeal 
is filed or the appellate decision).
* * * * *
    (h) Limited reopening of size determinations. SBA may, in its sole 
discretion, reopen a formal size determination to correct an error or 
mistake, provided it is within the appeal period and no appeal has been 
filed with OHA. Once the agency has issued a final agency decision 
(either a formal size determination that is not timely appealed or an 
appellate decision), SBA cannot re-open the size determination.
    6. Amend Sec.  121.1101 by revising paragraph (b) to read as 
follows:


Sec.  121.1101  Are formal size determinations subject to appeal?

* * * * *
    (b) OHA will review all timely appeals of size determinations.
    6. Amend Sec.  121.1103 as follows:
    a. Revise the section heading;
    b. In paragraph (a), add a new sentence after the first sentence 
and before the second sentence;

[[Page 9135]]

    c. Revise paragraph (b)(1);
    d. Remove paragraphs (b)(4), and (b)(5); and
    e. Add new paragraph (c).


Sec.  121.1103  What are the procedures for appealing a NAICS code or 
size standard designation?

    (a) * * * A NAICS code appeal may include an appeal involving the 
applicable size standard, such as where more than one size standard 
corresponds to the selected NAICS code or there is a question as to the 
size standard in effect at the time the solicitation was issued or 
amended. * * *
    (b) * * *
    (1) An appeal from a contracting officer's NAICS code or size 
standard designation must be served and filed within 10 calendar days 
after the issuance of the solicitation or amendment affecting the NAICS 
code or size standard. However, SBA may file a NAICS code appeal at 
anytime before offers or bids are due. OHA will summarily dismiss an 
untimely NAICS code appeal.
* * * * *
    (c) Procedure after a NAICS code appeal is filed and served.
    (1) Upon receipt of the service copy of a NAICS code appeal, the 
contracting officer shall:
    (i) Stay the solicitation;
    (ii) Advise the public, by amendment to the solicitation or other 
method, of the existence of the NAICS code appeal and the procedures 
and deadline for interested parties to file and serve arguments 
concerning the appeal;
    (iii) Send a copy of the entire solicitation (including amendments) 
to OHA;
    (iv) File and serve any response to the appeal prior to the close 
of the record; and
    (v) Inform OHA of any amendments, actions or developments 
concerning the procurement in question.
    (2) Upon receipt of a NAICS code appeal, OHA shall:
    (i) Notify the appellant, the contracting officer, the SBA and any 
other known party of the date OHA received the appeal and the date the 
record will close; and
    (ii) Conduct the appeal in accordance with part 134 of this 
chapter.
    (3) Any interested party may file and serve its response to the 
NAICS code appeal.

PART 124--8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS 
STATUS DETERMINATIONS

    7. The authority citation for part 124 continues to read as 
follows:

    Authority: 15 U.S.C. 634(b)(6), 636(j), 637(a), 637(d) and Pub. 
L. 99-661, Pub. L. 100-656, sec. 1207, Pub. L. 100-656, Pub. L. 101-
37, Pub. L. 101-574, and 42 U.S.C. 9815.

Subpart B--Eligibility, Certification, and Protests Relating to 
Federal Small Disadvantaged Business Programs

    8. Amend Sec.  124.1013 as follows:
    a. Amend paragraph (a) by removing second sentence;
    b. Revise paragraph (b);
    c. Revise paragraph (d)(1);
    d. Revise paragraphs (h)(1) and (h)(2); and
    e. Add new paragraphs (h)(3) and (h)(4).


Sec.  124.1013  How does SBA make disadvantaged status determinations 
in considering an SDB protest?

* * * * *
    (b) Award of contract. (1) If SBA does not issue its determination 
within the 15-day period, the contracting officer must contact SBA to 
ascertain when SBA estimates that it will issue its decision, and may 
only award the contract if he or she determines in writing that there 
is an immediate need to award the contract and that waiting until SBA 
makes its determination will harm the public interest (see paragraph 
(h) of this section for the effect of an SDB status determination or 
appellate decision).
    (2) The contracting officer may award the contract after receipt of 
a protest if the contracting officer determines in writing that an 
award must be made to prevent significant harm to the public interest 
(see paragraph (h) of this section for the effect of an SDB status 
determination or appellate decision).
* * * * *
    (d) * * *
    (1) Except with respect to a concern which is a current Participant 
in SBA's 8(a) BD program and is authorized under Sec.  124.1013(b)(3) 
to submit an affidavit concerning it disadvantaged status, the 
disadvantaged status determination will be based on the protest record, 
including reasonable inferences therefrom, as supplied by the protested 
concern, SBA or others.
* * * * *
    (h) * * *
    (1) A contracting officer may award the contract to a protested 
concern after the DC/SDBCE either has determined that the protested 
concern is an eligible SDB or has dismissed all protests against it. If 
the AA/GC&BD subsequently overturns the initial determination or 
dismissal, the contracting officer may apply the appeal decision to the 
procurement in question.
    (2) A contracting officer may not award the contract to a protested 
concern that the DC/SDBCE has determined is not an eligible SDB for the 
procurement in question.
    (i) If a contracting officer receives such a determination after 
contract award, and no appeal has been filed, the contracting officer 
shall terminate the award.
    (ii) If a timely appeal is filed after contract award, the 
contracting officer must consider whether performance can be suspended 
until an appellate decision is rendered.
    (iii) If the AA/GC&BD affirms the initial determination finding 
that the protested concern ineligible, the contracting officer shall 
either terminate the contract or not exercise the next option.
    (3) The contracting officer must update the Federal Procurement 
Data System and other procurement reporting databases to reflect the 
final agency SDB decision (the decision of the AA/SDBCE if no appeal is 
filed or the decision of the AA/GC&BD).
    (4) A concern found to be ineligible is precluded from applying for 
SDB certification for 12 months from the date of the final agency 
decision (whether by the AA/SDBCE, without an appeal, or by the AA/
GC&BD on appeal). A concern found to be ineligible is also precluded 
from representing itself as an SDB for a subcontract unless it 
overcomes the reasons for the protest (e.g., it changes its ownership 
to satisfy the definition of an SDB set forth in Sec.  124.1002).


Sec.  124.1014  [Amended]

    9. Amend Sec.  124.1014 by removing paragraph (f) and redesignating 
paragraphs (g) through (i) as paragraphs (f) through (h).

PART 125--GOVERNMENT CONTRACTING PROGRAMS

    10. The authority citation for part 125 continues to read as 
follows:

    Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 637; 644 and 
657(f).

Subpart D--Protests Concerning SDVO SBCs

    11. Amend Sec.  125.27 by revising paragraphs (e) and (g) to read 
as follows:


Sec.  125.27  How will SBA process an SDVO protest?

* * * * *

[[Page 9136]]

    (e) Award of Contract. (1) If SBA does not issue its determination 
within the 15-day period, the contracting officer must contact SBA to 
ascertain when SBA estimates that it will issue its decision, and may 
only award the contract if he or she determines in writing that there 
is an immediate need to award the contract and that waiting until SBA 
makes its determination will harm the public interest (see paragraph 
(g) of this section for the effect of an SDVO status size determination 
or appellate decision).
    (2) The contracting officer may award the contract after receipt of 
a protest if the contracting officer determines in writing that an 
award must be made to prevent significant harm to the public interest 
(see paragraph (g) of this section for the effect of an SDVO status 
determination or appellate decision).
* * * * *
    (g) Effect of determination. (1) A contracting officer may award 
the contract to a protested concern after the Director, Office of 
Government Contracting (D/GC) either has determined that the protested 
concern is an eligible SDVO or has dismissed all protests against it. 
If OHA subsequently overturns the D/GC's determination or dismissal, 
the contracting officer may apply the OHA decision to the procurement 
in question.
    (2) A contracting officer may not award the contract to a protested 
concern that the D/GC has determined is not an eligible SDVO for the 
procurement in question.
    (i) If a contracting officer receives such a determination after 
contract award, and no OHA appeal has been filed, the contracting 
officer shall terminate the award.
    (ii) If a timely OHA appeal is filed after award, the contracting 
officer must consider whether performance can be suspended until an 
appellate decision is rendered.
    (iii) If OHA affirms the D/GC's determination finding the protested 
concern ineligible, the contracting officer shall either terminate the 
contract or not exercise the next option.
    (3) The contracting officer must update the Federal Procurement 
Data System and other procurement reporting databases to reflect the 
final agency decision (the D/GC's decision if no appeal is filed or 
OHA's decision).
    (4) A concern found to be ineligible may not submit an offer as an 
SDVO SBC on a future procurement unless it demonstrates to SBA's 
satisfaction that it has overcome the reasons for the protest (e.g., it 
changes its ownership to satisfy the definition of an SDVO SBC set 
forth in Sec.  125.8) and SBA issues a decision to this effect.
    12. Revise Sec.  125.28 to read as follows:


Sec.  125.28  What are the procedures for appealing an SDVO status 
protest?

    The protested concern, the protester, or the contracting officer 
may file an appeal of an SDVO status protest determination with OHA in 
accordance with part 134 of this chapter.

PART 126--HUBZONE PROGRAM

    13. The authority citation for part 126 continues to read as 
follows:

    Authority: 15 U.S.C. 632(a), 632(j), 632(p), and 657a.

Subpart H--Protests

    14. Amend Sec.  126.803 by revising paragraphs (b)(2) and (b)(3) 
and redesignating paragraph (d) as (d)(1) and adding new paragraphs 
(d)(2), (d)(3), (d)(4), and (d)(5) to read as follows:


Sec.  126.803  How will SBA process a HUBZone status protest?

* * * * *
    (b) * * *
    (2) If SBA does not issue its determination within the 15-day 
period, the contracting officer must contact SBA to ascertain when SBA 
estimates that it will issues its decision, and may only award the 
contract if he or she determines in writing that there is an immediate 
need to award the contract and that waiting until SBA makes its 
determination will harm the public interest (see paragraph (d) of this 
section for the effect of a HUBZone status determination or appellate 
decision).
    (3) The contracting officer may award the contract after receipt of 
a protest if the contracting officer determines in writing that an 
award must be made to prevent significant harm to the public interest 
(see paragraph (d) of this section for the effect of a HUBZone status 
determination or appellate decision).
* * * * *
    (d) * * *
    (2) A contracting officer may award the contract to a protested 
concern after the D/HUB either has determined that the protested 
concern is an eligible HUBZone or has dismissed all protests against 
it. If the AA/GC&BD subsequently overturns the initial determination or 
dismissal, the contracting officer may apply the appeal decision to the 
procurement in question.
    (3) A contracting officer may not award the contract to a protested 
concern that the D/HUB has determined is not an eligible HUBZone for 
the procurement in question.
    (i) If a contracting officer receives such a determination after 
contract award, and no appeal has been filed, the contracting officer 
shall terminate the award.
    (ii) If a timely appeal is filed after contract award, the 
contracting officer must consider whether performance can be suspended 
until an appellate decision is rendered.
    (iii) If the AA/GC&BD affirms the initial determination finding the 
protested concern ineligible, the contracting officer shall either 
terminate the contract or not exercise the next option.
    (4) The contracting officer must update the Federal Procurement 
Data System and other procurement reporting databases to reflect the 
final agency HUBZone decision (the D/HUB's decision if no appeal is 
filed or the decision of the AA/GC&BD).
    (5) A concern found to be ineligible is precluded from applying for 
HUBZone certification for 12 months from the date of the final agency 
decision (the D/HUB's decision if no appeal is filed or the decision of 
the AA/GC&BD).


Sec.  126.805  [Amended]

    15. Amend Sec.  126.805 by removing paragraph (g) and redesignating 
paragraph (h) as paragraph (g).

PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF 
HEARINGS AND APPEALS

    16. Authority citation for part 134 continues to read as follows:

    Authority:  5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 637(a), 
648(1), 656(i), and 687(c); E.O. 12549, 51 FR 6370, 3 CFR, 1986 
Comp., p. 189.

Subpart C--Rules of Practice for Appeals From Size Determinations 
and NAICS Code Designations

    17. Revise Sec.  134.304 to read as follows:


Sec.  134.304  Commencement of appeals from size determinations and 
NAICS code designations

    (a) Size appeals must be filed within 15 calendar days after 
receipt of the formal size determination.
    (b) NAICS code appeals must be filed within 10 calendar days after 
issuance of the solicitation, or amendment to the solicitation 
affecting the NAICS code or size standard. However, SBA may file a 
NAICS appeal at anytime before offers or bids are due.
    (c) An untimely appeal will be dismissed.
    18. Amend Sec.  134.316 by redesignating paragraphs (a), (b), (c), 
and (d) as paragraphs (c), (d), (e) and (f), respectively, and adding 
new paragraphs (a) and (b).

[[Page 9137]]

Sec.  134.316  The decision.

    (a) The Judge shall issue a size appeal decision, insofar as 
practicable, within 60 calendar days after close of the record.
    (b) The Judge shall issue a NAICS code appeal decision, insofar as 
practicable, within15 calendar days after close of the record.
* * * * *

Subpart E--Rules of Practice for Appeals From Service-Disabled 
Veteran Owned Small Business Concern Protests


Sec.  134.504  [Removed]

    19. Remove Sec.  134.504.
    Sec. Sec.  134.505 through 134.515 [Redesignated as Sec. Sec.  
134.504 through 134.514]
    20. Redesignate Sec. Sec.  134.505 through 134.515 as Sec. Sec.  
134.504 through 134.514, respectively.
    21. Amend newly redesignated Sec.  134.508 by revising paragraph 
(a) to read as follows:


Sec.  134.508  When will a Judge dismiss an appeal?

    (a) The Judge shall dismiss an appeal if:
    (1) The appeal is untimely filed pursuant to Sec.  134.503.
    (2) The matter has been decided or is the subject of an 
adjudication before a court of competent jurisdiction over such 
matters.
* * * * *


Sec.  134.513  [Amended]

    21. Amend newly redesignated Sec.  134.513 by removing the second 
sentence.


Sec.  134.514  [Amended]

    22. Amend newly redesignated Sec.  134.514(b) by removing the word 
``service'' in the second sentence and adding in its place the word 
``issuance''.

    Dated: October 21, 2009.
Karen Mills,
Administrator.
[FR Doc. 2010-3613 Filed 2-26-10; 8:45 am]
BILLING CODE 8025-01-P


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