6618 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 

SMALL BUSINESS ADMINISTRATION 

13 CFR Parts 121, 124, 125, 126, 127, 

134 

RIN 3245–AG24 

Small Business Mentor Prote ́ge ́

Program; Small Business Size 

Regulations; Government Contracting 

Programs; 8(a) Business Development/ 

Small Disadvantaged Business Status 

Determinations; HUBZone Program; 

Women-Owned Small Business 

Federal Contract Program; Rules of 

Procedure Governing Cases Before the 

Office of Hearings and Appeals 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Proposed rule. 

SUMMARY: The U.S. Small Business 

Administration (SBA or Agency) is 

proposing to amend its regulations to 

implement provisions of the Small 

Business Jobs Act of 2010 and the 

National Defense Authorization Act for 

Fiscal Year 2013. Based on authorities 

provided in these two statutes, the 

proposed rule would establish a 

Government-wide mentor-prote ́ge ́

program for all small business concerns, 

consistent with SBA’s mentor-prote ́ge ́

program for Participants in SBA’s 8(a) 

Business Development (BD) program. 

The proposed rule would also make 

minor changes to the mentor-prote ́ge ́

provisions for the 8(a) Business 

Development program in order to make 

the mentor-prote ́ge ́ rules for each of the 

programs as consistent as possible. The 

proposed rule would amend the current 

joint venture provisions to clarify the 

conditions for creating and operating 

joint venture partnerships, including the 

effect of such partnerships on any 

mentor-prote ́ge ́ relationships. Finally, 

the proposed rule would make several 

additional changes to current size, 8(a) 

Office of Hearings and Appeals or 

HUBZone regulations, concerning 

among other things, ownership and 

control, changes in primary industry, 

standards of review and interested party 

status for some appeals. 

DATES: Comments must be received on 

or before April 6, 2015. 

ADDRESSES: You may submit comments, 

identified by RIN: 3245–AG24, by any of 

the following methods: (1) Federal 

eRulemaking Portal, available at 

www.regulations.gov, follow the 

instructions for submitting comments; 

or (2) Mail/Hand Delivery/Courier: 

Brenda Fernandez, U.S. Small Business 

Administration, Office of Government 

Contracting, 409 3rd Street SW., 8th 

Floor, Washington, DC 20416. SBA will 

not accept comments to this proposed 

rule submitted by email. 

FOR FURTHER INFORMATION CONTACT: 

Brenda Fernandez, U.S. Small Business 

Administration, Office of Government 

Contracting, 409 3rd Street SW., 8th 

Floor, Washington, DC 20416; (202) 

205–7337; brenda.fernandez@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On September 27, 2010, the President 

signed into law the Small Business Jobs 

Act of 2010 (Jobs Act), Public Law 111– 

240, which was designed to protect the 

interests of small businesses and 

increase opportunities in the Federal 

marketplace. In April 2010, prior to the 

enactment of the Jobs Act, President 

Obama established an Interagency Task 

Force on Federal Contracting 

Opportunities for Small Businesses in 

order to coordinate executive 

departments’ and agencies’ efforts 

towards ensuring that all small 

businesses have a fair chance to 

participate in Federal contracting 

opportunities. The task force was 

ordered to produce proposals and 

recommendations for: (i) Using 

innovative strategies, such as teaming, 

to increase opportunities for small 

business contractors and utilizing and 

expanding mentorship programs, such 

as the mentor-prote ́ge ́ program; (ii) 

removing barriers to participation by 

small businesses in the Federal 

marketplace by unbundling large 

projects, improving training of Federal 

acquisition officials with respect to 

strategies for increasing small business 

contracting opportunities, and utilizing 

new technologies to enhance the 

effectiveness and efficiency of Federal 

program managers, acquisition officials, 

and the Directors of Offices of Small 

Business Programs and Offices of Small 

and Disadvantaged Business Utilization, 

their managers, and procurement center 

representatives in identifying and 

providing access to these opportunities; 

(iii) expanding outreach strategies to 

match small businesses, including firms 

located in HUBZones and firms owned 

and controlled by women, minorities, 

socially and economically 

disadvantaged individuals, and servicedisabled veterans, with contracting and 

subcontracting opportunities; and (iv) 

establishing policies, including revision 

or clarification of existing legislation, 

regulations, or policies, that are 

necessary or appropriate to effectuate 

these objectives. 

In September 2010, the task force 

issued a preliminary report and 

announced three priority objectives for 

assisting small businesses in Federal 

contracting,: stronger rules; a better 

equipped, informed and accountable 

acquisition work force; and improved 

outreach and better use of technology 

and data. Among other 

recommendations, the task force 

determined that mentor-prote ́ge ́

programs should be promoted through a 

new government-wide framework to 

give small businesses the opportunity to 

develop their capabilities with the 

assistance of experienced businesses in 

an expanded Federal procurement 

arena. 

With the enactment of the Jobs Act, 

Congress recognized that mentorprote ́ge ́ programs serve an important 

business development function for 

small business and authorized SBA to 

establish separate mentor-prote ́ge ́

programs for the Service-Disabled 

Veteran-Owned Small Business Concern 

(SDVO SBC) Program, the HUBZone 

Program, and the Women-Owned Small 

Business (WOSB) Program, each 

modeled on SBA’s existing mentorprote ́ge ́ program available to 8(a) 

Business Development (BD) program 

participants. See section 1347(b)(3) of 

the Jobs Act. 

On January 2, 2013, the President 

signed into law the National Defense 

Authorization Act for Fiscal Year 2013 

(NDAA), Public Law 112–239. Section 

1641 of the NDAA authorized SBA to 

establish a mentor-prote ́ge ́ program for 

all small business concerns. This 

section further provides that a small 

business mentor-prote ́ge ́ program must 

be identical to the 8(a) BD mentorprote ́ge ́ program, except that SBA may 

modify the program to the extent 

necessary, given the types of small 

business concerns to be included as 

prote ́ge ́s. Section 1641 also provides 

that a Federal department or agency 

could not carry out its own agency 

specific mentor-prote ́ge ́ program for 

small businesses unless the head of the 

department or agency submitted a plan 

for such a program to SBA and received 

the SBA Administrator’s approval of the 

plan. Finally, section 1641 requires the 

head of each Federal department or 

agency carrying out an agency-specific 

mentor-prote ́ge ́ program to report 

annually to SBA the participants in its 

mentor-prote ́ge ́ program, the assistance 

provided to small businesses through 

the program, and the progress of prote ́ge ́

firms to compete for Federal prime 

contracts and subcontracts. 

Instead of implementing four new 

separate small business mentor-prote ́ge ́

programs (i.e., having a separate mentorprote ́ge ́ program for SDVO SBCs, 

HUBZone SBCs, WOSB concerns, and 

all other small business concerns, in 

addition to the current mentor-prote ́ge ́


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Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 6619 

program for 8(a) BD Participants), this 

rule proposes to implement one 

additional mentor-prote ́ge ́ program for 

all small businesses since the other 

three types of small businesses (SDVO, 

HUBZone and women-owned) would be 

necessarily included within any mentorprote ́ge ́ program targeting all small 

business concerns. Approved mentorprote ́ge ́ relationships would then be 

able to seek to perform joint ventures for 

any contracts for which the prote ́ge ́ firm 

qualifies as eligible (e.g., women-owned 

set aside where the prote ́ge ́ firm 

qualifies as a WOSB concern). Although 

the NDAA language authorizing a 

mentor-prote ́ge ́ program for all small 

businesses could to be read as 

specifically authorizing a fifth separate 

mentor-prote ́ge ́ program for certain 

types of small businesses (i.e., one for 

small businesses not already covered by 

SBA’s current 8(a) BD mentor-prote ́ge ́

program and not previously contained 

in the Jobs Act provisions authorizing 

mentor-prote ́ge ́ programs for HUBZone, 

SDVO or women-owned small 

businesses), SBA believes that having 

five separate small business mentorprote ́ge ́ programs could become 

confusing to the public and procuring 

agencies and hard to implement by 

SBA. 

Currently, the mentor-prote ́ge ́

program available to firms participating 

in the 8(a) BD program is used as a 

business development tool in which 

mentors provide diverse types of 

business assistance to eligible 8(a) BD 

prote ́ge ́s. This assistance may include, 

among other things, technical and/or 

management assistance; financial 

assistance in the form of equity 

investments and/or loans; subcontracts; 

and/or assistance in performing Federal 

prime contracts through joint venture 

arrangements. The explicit purpose of 

the 8(a) BD mentor-prote ́ge ́ relationship 

is to enhance the capabilities of prote ́ge ́s 

and to improve their ability to 

successfully compete for both 

government and commercial contracts. 

Similarly, the proposed mentor-prote ́ge ́

program for all small business concerns 

is designed to require approved mentors 

to provide assistance to prote ́ge ́ firms in 

order to enhance the capabilities of 

prote ́ge ́s, to assist prote ́ge ́s with meeting 

their business goals, and to improve the 

ability of prote ́ge ́s to compete for 

contracts. 

Instead of providing one mentorprote ́ge ́ program for all small business 

concerns, SBA also considered 

authorizing separate mentor-prote ́ge ́

programs for each of the specific types 

of small businesses (i.e., to have five 

separate mentor-prote ́ge ́ programs, 

including the current one for 8(a) BD 

program). SBA believes that it should 

not make a difference which way the 

regulations are written. In either 

approach, a mentor-prote ́ge ́ relationship 

will be able to perform any small 

business contract through a joint 

venture for which the prote ́ge ́ firm is 

qualified to perform. SBA proposed one 

program for all small businesses because 

SBA believed it would be easier for the 

small business and acquisition 

communities to use and understand. 

However, SBA specifically requests 

comments as to whether SBA should 

finalize one small business mentorprote ́ge ́ program, as proposed, or, rather, 

five separate mentor-prote ́ge ́ programs 

for the various small business entities. 

In addition, the rule would revise the 

joint venture provisions contained in 

§ 125.15(b) (for SDVO SBCs, and which 

would now be contained in proposed 

§ 125.18(b)), § 126.616 (for HUBZone 

SBCs), and § 127.506 (for WOSB and 

EDOSB concerns) to more fully align 

those requirements to the requirements 

of the 8(a) BD program. The proposed 

rule would also add a new § 125.8 to 

specify requirements for joint ventures 

between small business prote ́ge ́ firms 

and their mentors. The rule would also 

make several additional changes to 

current size, 8(a) BD and HUBZone 

regulations that are needed to clarify 

certain provisions or correct 

interpretations of the regulations that 

were inconsistent with SBA’s intent. 

These changes are set forth more fully 

below. 

II. Proposed Changes 

Definition of Joint Venture (13 CFR 

121.103(h)). 

This rule proposes to amend 

§ 121.103(h) regarding the definition of 

what constitutes a joint venture for all 

of SBA’s programs. Currently, the rule 

recognizes that a joint venture may be 

an informal arrangement that exists 

between two (or more) parties through 

a written document, or may be a formal 

written arrangement existing as a 

separate legal entity. The current 

language has caused some confusion as 

to what an informal joint venture 

arrangement means. The proposed rule 

attempts to clarify SBA’s intent. As with 

the current regulation, the proposed rule 

explicitly requires that any joint venture 

be in writing. SBA never meant that an 

informal joint venture arrangement 

could exist without a formal written 

document setting forth the 

responsibilities of all parties to the joint 

venture. SBA merely intended to 

recognize that a joint venture need not 

be established as a limited liability 

company or other formal separate legal 

entity. The proposed rule attempts to 

clarify that distinction. In all instances 

where two (or more) parties execute a 

written document setting forth their 

responsibilities as joint venture 

partners, it is SBA’s view that the 

parties have formed a partnership. It 

may not be a formal partnership, but the 

responsibilities of the parties are as 

partners. The proposed rule specifies 

that a joint venture may be a formal or 

informal partnership or exist as a 

separate limited liability company or 

other separate legal entity. However, 

regardless of form, the joint venture 

must be reduced to a written agreement. 

In addition, the proposed rule would 

specify that if a joint venture exists as 

a formal separate legal entity, it may not 

be populated with individuals intended 

to perform contracts awarded to the 

joint venture. This is a change from the 

current regulation which allows a 

separate legal entity joint venture to be 

unpopulated, to be populated with 

administrative personnel only, or to be 

populated with its own separate 

employees that are intended to perform 

contracts awarded to the joint venture. 

In the mentor-prote ́ge ́ joint venture 

context, if SBA continued to allow 

populated joint ventures, SBA is 

concerned that it will be difficult to 

definitively determine that a small 

prote ́ge ́ firm directly benefits from, and 

in fact controls, a joint venture with a 

large business mentor where that joint 

venture formed a limited liability 

company that hired its own employees 

to perform contracts for the joint 

venture. SBA believes that the benefits 

received by a prote ́ge ́ from a joint 

venture are more readily identifiable 

where the work done on behalf of the 

joint venture is performed by the 

prote ́ge ́ and the mentor separately. In 

such a case, it is much easier to 

determine that the prote ́ge ́ firm 

performed at least 40% of all work done 

by the joint venture, performed more 

than merely ministerial or 

administrative work, and otherwise 

gained experience that could be used to 

perform a future contract 

independently. Thus, the rule proposes 

to allow a separate legal entity joint 

venture to have its own separate 

employees to perform administrative 

functions, but not to have its own 

separate employees to perform contracts 

awarded to the joint venture. 

SBA also requests comments 

regarding whether SBA should require 

all joint ventures formed under mentorprote ́ge ́ agreements to be formed as 

separate legal entities. SBA believes that 

such a requirement would significantly 

enhance SBA’s ability to monitor and 


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6620 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 

track awards to mentor-prote ́ge ́ joint 

ventures. 

HUBZone Joint Ventures (13 CFR 

126.616) 

The HUBZone program is a 

community growth and development 

program in which businesses are 

incentivized to establish principal office 

locations in, and employ individuals 

from, areas of chronically high 

unemployment and/or low income in 

order to stimulate economic 

development. To further this purpose, 

the HUBZone program regulations 

currently permit a joint venture only 

between a HUBZone SBC and another 

HUBZone SBC. Joint ventures are not 

permitted with any non-HUBZone SBC. 

In authorizing a mentor-prote ́ge ́

relationship for HUBZone qualified 

SBCs, SBA considered whether this 

policy should be re-visited for joint 

ventures between HUBZone prote ́ge ́

firms and their SBA-approved mentors. 

SBA believes that if it continued to 

require that joint ventures in the 

HUBZone program could be between 

only two or more HUBZone qualified 

SBCs, then the business development 

assistance sought to be provided 

through the mentor-prote ́ge ́ program to 

HUBZone SBCs would be minimal. 

Large businesses and non-HUBZone 

small businesses would not be 

encouraged to participate in mentorprote ́ge ́ relationships with HUBZone 

SBCs and HUBZone SBCs would not 

significantly benefit from such a 

program. For this reason, this rule 

proposes to allow joint ventures for 

HUBZone contracts between a 

HUBZone prote ́ge ́ firm and its mentor. 

Under the proposed rule, the 

HUBZone program would be consistent 

with the other small business programs 

and would allow a joint venture 

between a qualified HUBZone SBC and 

one or more other SBCs. As with the 

other small business programs, the 

HUBZone SBC would be required to be 

the project manager and otherwise 

control the performance of a HUBZone 

joint venture contract. The joint venture 

would be required to perform the 

specified percentage of work of the 

contract, and the HUBZone firm would 

be required to perform at least 40% of 

the work done by the joint venture. SBA 

specifically requests comments as to 

whether allowing a joint venture 

between a HUBZone firm and a nonHUBZone firm (other than the HUBZone 

firm’s mentor) makes sense in light of 

the purposes of the HUBZone program. 

SBA requests comments on whether 

the purposes of the HUBZone program 

would be appropriately served by 

allowing non-HUBZone firms to act as 

mentors and joint venture with prote ́ge ́

HUBZone firms, and whether SBA 

should allow any joint ventures with 

non-HUBZone firms. 

Joint Venture Certifications and 

Performance of Work Reports (13 CFR 

125.8, 125.18, 126.616, 127.506) 

The proposed rule would require all 

partners to a joint venture agreement 

that perform a SDVO, HUBZone, 

WOSB/EDWOSB, or small business setaside contract to certify to the 

contracting officer and SBA prior to 

performing any such contract that it will 

perform the contract in compliance with 

the joint venture regulations and with 

the joint venture agreement. In addition, 

the parties to the joint venture are 

required to report to the contracting 

officer and to SBA how they are meeting 

or have met the applicable performance 

of work requirements for each SDVO/

HUBZone/WOSB/EDWOSB or small 

business set-aside contract they perform 

as a joint venture. Specifically, the joint 

venture must annually submit a report 

to the relevant contracting officer and to 

SBA certifying compliance with the 

regulations and joint venture agreement, 

and explaining how the performance of 

work requirements are being met, and 

once the contract is completed, a report 

certifying compliance and explaining 

how the performance of work 

requirements were met for the contract 

(see proposed § 125.8(h) for joint 

ventures between small business 

prote ́ge ́s and their SBA-approved 

mentors, proposed § 125.18(b)(8) for 

SDVO SBCs, proposed § 126.616(i) for 

HUBZone SBCs, and proposed 

§ 127.506(j) for WOSBs/EDWOSBs). For 

SDVO SBCs, HUBZone SBCs, and 

WOSBs/EDWOSBs, this requirement 

would apply to all joint ventures. 

SBA believes that joint ventures 

permitted by SBA’s regulations must 

benefit small businesses, and must not 

be used as vehicles to allow companies 

to fraudulently or improperly benefit 

from SBA contracting programs. The 

required certifications will help to 

ensure accountability within these 

programs, and assist the Government’s 

ability to deter wrongdoing through 

criminal and civil fraud prosecutions as 

well as other administrative remedies 

such as suspension and debarment. In 

this regard, the proposed rule would 

specify that the Government may 

consider the failure to comply with the 

joint venture regulations or to submit 

the required certifications and reports to 

be a ground for suspension or 

debarment. 

Tracking Joint Venture Awards 

SBA also believes that it is important 

to be able to track awards to the joint 

ventures permitted by SBA’s 

regulations, and is considering various 

methods of tracking awards. Possible 

approaches include: requiring all joint 

ventures permitted by these regulations 

to include in their names ‘‘small 

business joint venture,’’ and if a mentorprote ́ge ́ joint venture to include in their 

names ‘‘mentor-prote ́ge ́ small business 

joint venture;’’ requiring contracting 

officers to identify awards as going to 

small business joint ventures or to 

mentor-prote ́ge ́ small business joint 

ventures; requiring SBCs to amend their 

System for Award Management (SAM) 

entries to specify that they have formed 

a joint venture; requiring each joint 

venture to get a separate DUNS number; 

or a combination of all of these actions. 

Ensuring that governmental agencies 

and members of the public can track 

joint venture awards will promote 

transparency and accountability, and 

thereby deter fraudulent or improper 

conduct, and promote compliance with 

SBA’s regulations. SBA seeks comments 

from interested parties on how best to 

accomplish this and whether these 

alternatives should be implemented in a 

final rule. 

Applications for SBA’s Small Business 

Mentor-Prote ́ge ́ Program (13 CFR 125.9) 

As noted above, SBA has proposed 

implementing one universal small 

business mentor-prote ́ge ́ program 

instead of a separate mentor-prote ́ge ́

program for each type of small business 

(i.e., HUBZone, SDVO, WOSB, and 

small business). In addition, the 

proposed rule would continue to 

authorize SBA’s separate mentorprote ́ge ́ program for eligible 8(a) BD 

Program Participants. A small business 

seeking a mentor-prote ́ge ́ relationship 

would be required to submit 

information to SBA in accordance with 

this proposed rule. SBA’s Director of 

Government Contracting (D/GC) would 

review and either approve or decline 

small business mentor-prote ́ge ́

agreements. SBA’s Associate 

Administrator for BD (AA/BD) would 

continue to review and approve or 

decline mentor-prote ́ge ́ relationships in 

the 8(a) BD program. An eligible 8(a) BD 

Program Participant could choose to 

seek SBA’s approval of a mentor-prote ́ge ́

relationship through the 8(a) BD 

program, or could seek a small business 

mentor-prote ́ge ́ relationship through 

SBA’s D/GC. As noted above, SBA is 

considering having one office review 

and either approve or decline all 

mentor-prote ́ge ́ agreements to ensure 


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consistency in the process, and 

specifically seeks comments as to 

whether that approach should be 

implemented. 

SBA is uncertain of the number of 

various small businesses that will seek 

a mentor-prote ́ge ́ relationship through 

SBA once these regulations are 

finalized. If the number of firms seeking 

SBA to approve their mentor-prote ́ge ́

relationships becomes unwieldy, SBA 

may institute certain ‘‘open’’ and 

‘‘closed’’ periods for the receipt of 

further mentor-prote ́ge ́ applications. In 

such a case, SBA would then accept 

mentor-prote ́ge ́ applications only in 

‘‘open’’ periods. 

Mentors (13 CFR 124.520 and 125.9) 

Under the proposed small business 

mentor-prote ́ge ́ program, any for-profit 

business concern that demonstrates a 

commitment and the ability to assist 

small business concerns may be 

approved to act as a mentor and receive 

the benefits of the mentor-prote ́ge ́

relationship. Pursuant to the authority 

contained in the NDAA, SBA is 

attempting to make the small business 

mentor-prote ́ge ́ program identical to the 

8(a) mentor-prote ́ge ́ program. 

Specifically, section 45(a)(2) of the 

Small Business Act, 15 U.S.C. 

657r(a)(2), which was added by section 

1641 of the NDAA, requires the mentorprote ́ge ́ program for small businesses to 

be ‘‘identical to the [8(a)] mentorprote ́ge ́ program . . . as in effect on the 

date of enactment of this section. . . ’’ 

Although the current rules for the 8(a) 

mentor-prote ́ge ́ program allow nonprofit entities to act as mentors, this rule 

proposes to not allow non-profit 

mentors (i.e., to require mentors to be 

for-profit business concerns) for the 

small business mentor-prote ́ge ́ program 

due to the definition of the term mentor 

contained in the NDAA. In this regard, 

section 1641 of the NDAA added section 

45(d)(1) of the Small Business Act, 15 

U.S.C. 657r(d)(1), which defines the 

term mentor to be ‘‘a for-profit business 

concern of any size.’’ These two 

provisions of the NDAA are in conflict. 

The small business mentor-prote ́ge ́

program cannot be ‘‘identical’’ to the 

current 8(a) mentor-prote ́ge ́ program 

while at the same time excluding nonprofit entities from being mentors. 

Because the NDAA definition may be 

read to apply only to the small business 

mentor-prote ́ge ́ program, and not the 

8(a) BD mentor-prote ́ge ́ program (or to 

mentor-prote ́ge ́ programs for SDVOs, 

HUBZone SBCs, or WOSBs if SBA had 

chosen to implement separate mentorprote ́ge ́ programs under the Jobs Act 

authority), SBA could have prohibited 

non-profit mentors only in the small 

business mentor-prote ́ge ́ program. SBA 

has not done that in this proposed rule 

because SBA seeks to have as much 

consistency between the various 

programs as possible. As such, this rule 

proposes not to allow non-profit 

mentors in any mentor-prote ́ge ́ program, 

including the 8(a) mentor-prote ́ge ́

program. For the 8(a) mentor-prote ́ge ́

program, this definition requires, and 

this rule proposes, a change to the 

current 8(a) regulations. See proposed 

§ 124.520(b)(2). 

Generally, a mentor participating in 

any SBA-approved mentor-prote ́ge ́

program will have no more than one 

prote ́ge ́ at a time. However, SBA may 

authorize a concern to mentor more 

than one prote ́ge ́ at a time where it can 

demonstrate that the additional mentorprote ́ge ́ relationship will not adversely 

affect the development of either prote ́ge ́

firm (e.g., the second firm may not be 

a competitor of the first firm). Under no 

circumstances will a mentor be 

permitted to have more than three 

prote ́ge ́s in the aggregate at one time 

under either of the mentor-prote ́ge ́

programs authorized by § 124.520 or 

§ 125.9. A mentor may choose to have: 

up to three prote ́ge ́s in the 8(a) BD 

program; or up to three prote ́ge ́s in the 

small business program; or one or more 

prote ́ge ́s in one program and one or 

more in another program, but no more 

than three prote ́ge ́s in the aggregate. In 

proposing this limitation, SBA did not 

believe it was good policy to allow one 

large business mentor to conceivably 

have up to three prote ́ge ́s in each of the 

two programs, or a total of possibly six 

prote ́ge ́ firms. If that were allowed, large 

businesses might benefit more from 

small business programs than the 

intended beneficiaries, the small 

business proteges. In reviewing a 

mentor-prote ́ge ́ agreement where a 

mentor has more than one prote ́ge ́, SBA 

will determine whether the mentor has 

demonstrated that its prote ́ge ́s will not 

compete against each other. 

In addition, consistent with the 8(a) 

mentor-prote ́ge ́ program, a prote ́ge ́ in 

the small business mentor-prote ́ge ́

program may not become a mentor and 

retain its prote ́ge ́ status. The prote ́ge ́

must terminate the mentor-prote ́ge ́

agreement with its mentor before it will 

be approved as a mentor to another 

small business concern. SBA requests 

comments regarding whether this policy 

makes sense in the small business 

mentor-prote ́ge ́ program, whether it 

continues to make sense in the 8(a) 

mentor-prote ́ge ́ program, or whether a 

firm should be permitted to be both a 

prote ́ge ́ and mentor in both programs in 

appropriate circumstances. 

Prote ́ge ́ s (13 CFR 124.520 and 125.9) 

Currently, in order to qualify as a 

prote ́ge ́ for the 8(a) BD mentor-prote ́ge ́

program, an 8(a) Program Participant 

must: have a size that is less than half 

the size standard corresponding to its 

primary NAICS code; or be in the 

developmental stage of its 8(a) program 

participation; or not have received an 

8(a) contract. There is no doubt that the 

second and third reasons permitting a 

firm to qualify as a prote ́ge ́ in the 8(a) 

BD mentor-prote ́ge ́ program (i.e., the 

firm must be in the developmental stage 

of its 8(a) participation, or the firm has 

not received an 8(a) contract) do not 

apply to a separately authorized small 

business mentor-prote ́ge ́ program. As 

such, SBA immediately eliminated 

those bases from consideration as 

criteria to qualify a prote ́ge ́ for the small 

business mentor-prote ́ge ́ program. The 

question then becomes whether these 

criteria continue to make sense in the 

8(a) BD program. The 8(a) BD mentorprote ́ge ́ program was designed to be an 

additional tool to assist in the business 

development of 8(a) BD Program 

Participants. Although it is true that the 

three types of firms identified as eligible 

to qualify as a prote ́ge ́ in the 8(a) BD 

mentor-prote ́ge ́ program would be the 

firms in most need of business 

development assistance, SBA questions 

whether 8(a) BD Participants that do not 

meet one of those three criteria could 

also substantially benefit from 

participating as a prote ́ge ́ in a mentorprote ́ge ́ program. A Participant may 

have a size that slightly exceeds onehalf the size standard corresponding to 

its primary NAICS code, be in its first 

year of the transitional stage of program 

participation, and have received one 

small 8(a) contract. Currently, that firm 

would be ineligible to be a prote ́ge ́ in 

the 8(a) BD program, even though it 

could substantially benefit from the 

assistance provided by a mentor and 

might not otherwise be able to advance 

its business development beyond its 

current level. And, considering that an 

8(a) BD Participant that was not in the 

developmental stage of program 

participation or had received an 8(a) 

contract could nevertheless qualify as a 

prote ́ge ́ under the small business 

mentor-prote ́ge ́ program, SBA believes 

that it makes sense to have consistent 

rules between the mentor-prote ́ge ́

programs and, therefore, is proposing to 

eliminate those restrictions on 

qualifying as a prote ́ge ́ for the 8(a) BD 

mentor-prote ́ge ́ program as well. 

SBA then considered whether the 

final restriction to qualify as a prote ́ge ́

for the 8(a) BD mentor-prote ́ge ́ program 

(i.e., the requirement that a firm be less 


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6622 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 

than half the size standard 

corresponding to its primary NAICS 

code) continues to make sense in the 

8(a) BD program, whether it makes 

sense for the new small business 

mentor-prote ́ge ́ program, and if not, 

what, if any, restriction should be 

imposed in its place. SBA recognizes 

that many small businesses may need 

some specific form of business 

development assistance, and that a 

mentor-prote ́ge ́ program may be the best 

vehicle for the small business to obtain 

such assistance. In addition, many small 

businesses may lack the tools necessary 

to advance to the next level. As such, 

this rule proposes to allow any firm that 

qualifies as a small business for the size 

standard corresponding to its primary 

NAICS code to also qualify as a prote ́ge ́

in either the small business or 8(a) BD 

mentor-prote ́ge ́ program. In the 8(a) BD 

program, however, the firm would also 

have to demonstrate how the business 

development assistance to be received 

through its proposed mentor-prote ́ge ́

relationship would advance the goals 

and objectives set forth in its business 

plan. 

Although SBA has proposed to 

eliminate the less than half the size 

standard requirement from the 8(a) BD 

mentor-prote ́ge ́ program and not apply 

it to the small business mentor-prote ́ge ́

program, SBA specifically requests 

comments as to whether the focus of a 

mentor-prote ́ge ́ program should be 

restricted to smaller firms or whether, as 

proposed, the benefits of a mentorprote ́ge ́ program should be open to any 

firm that qualifies as small. 

A prote ́ge ́ participating in either of the 

mentor-prote ́ge ́ programs generally will 

have no more than one mentor at a time. 

However, a prote ́ge ́ may have two 

mentors where the two relationships 

will not compete or otherwise conflict 

with each other and the prote ́ge ́

demonstrates that the second 

relationship pertains to an unrelated, 

secondary NAICS code, or the first 

mentor does not possess the specific 

expertise that is the subject of the 

mentor-prote ́ge ́ agreement with the 

second mentor. SBA asks for comments 

regarding whether there should be a 

maximum of two mentors per prote ́ge ́ or 

another maximum. 

SBA wants to ensure that only firms 

that truly qualify as small businesses 

under their primary NAICS code 

participate as prote ́ge ́s in the small 

business mentor-prote ́ge ́ program. 

Unlike the 8(a) BD program (where 

firms apply and SBA affirmatively 

certifies firms as eligible to participate 

in the program), there is no formal 

process by which a firm is certified as 

a ‘‘small’’ business. Status as a small 

business is based on a firm’s selfcertification, and SBA understands that 

some firms may in good faith believe 

that they qualify as small but may not 

fully understand all of the affiliation 

issues required to be considered small. 

To ensure that only qualified firms 

participate as prote ́ge ́ firms, the 

proposed rule would require that SBA 

verify that a firm qualifies as a small 

business before approving that firm to 

act as a prote ́ge ́ in a small business 

mentor-prote ́ge ́ relationship. See 

proposed § 125.9(c)(1). Only those firms 

that are affirmatively determined to be 

small businesses and have not received 

a negative determination from SBA 

pursuant to a size protest may qualify as 

a prote ́ge ́. SBA proposes that this 

affirmative determination may take 

place either as part of a firm’s request 

for participation in the small business 

mentor-prote ́ge ́ program, or as part of a 

size protest determination prior to that 

time. Where SBA previously found a 

firm to qualify as small as part of a 

formal size determination or size 

appeal, the firm would be required to 

certify that there has been no change in 

its small business status since that 

determination. In addition, for the two 

self-certification programs (SDVO and 

WOSB), SBA may examine status 

eligibility as part of its prote ́ge ́ approval 

process. 

Mentor-Prote ́ge ́ Programs of Other 

Departments and Agencies (13 CFR 

125.10) 

As noted above, section 1641 of the 

NDAA provided that a Federal 

department or agency cannot carry out 

its own agency specific mentor-prote ́ge ́

program for small businesses unless the 

head of the department or agency 

submitted a plan for such a program to 

SBA and received the SBA 

Administrator’s approval of the plan. 

The NDAA specifically excluded the 

Department of Defense’s mentor-prote ́ge ́

program, but included all other current 

mentor-prote ́ge ́ programs of other 

agencies. Under its provisions, a 

department or agency that is currently 

conducting a mentor-prote ́ge ́ program 

(except the Department of Defense) may 

continue to operate that program for one 

year but must then go through the SBA 

approval process in order for the 

program to continue after one year. 

Thus, in order to continue to operate 

any current mentor-prote ́ge ́ program 

beyond one year after SBA’s mentorprote ́ge ́ regulations are final, each 

department or agency would be required 

to obtain the SBA Administrator’s 

approval. These statutory provisions are 

proposed to be implemented in new 

§ 125.10 of SBA’s regulations. 

Finally, proposed § 125.10(d) would 

implement statutory reporting 

requirements imposed on each Federal 

department or agency that has its own 

mentor-prote ́ge ́ program. Specifically, 

the head of each Federal department or 

agency carrying out an agency-specific 

mentor-prote ́ge ́ program would be 

required to report annually to SBA the 

participants in its mentor-prote ́ge ́

program (broken out by various small 

business categories), the assistance 

provided to small businesses through 

the program, and the progress of prote ́ge ́

firms to compete for Federal prime 

contracts and subcontracts. These 

proposed changes may require 

corresponding revisions to agency 

contract reporting systems and the 

Government’s contract reporting system, 

FPDS–NG. 

Because the SBA’s 8(a) BD and small 

business mentor-prote ́ge ́ programs will 

apply to all Government small business 

contracts, and thus to all Federal 

departments and agencies, conceivably 

other agency-specific mentor-prote ́ge ́

programs for small business would not 

be needed. For example, SBA notes that 

the Department of Veterans Affairs (VA) 

has separate Veteran-Owned Small 

Business (VOSB) and Service-Disabled 

Veteran-Owned Small Business 

(SDVOSB) mentor-prote ́ge ́ programs. 

Although this proposed rule would 

establish a government-wide small 

business mentor-prote ́ge ́ program, it 

would not establish mentor-prote ́ge ́

programs specific to either VOSBs or 

SDVOSBs. The question becomes 

whether either of those separate mentorprote ́ge ́ programs would be necessary 

after SBA’s small business mentorprote ́ge ́ program is established. A VOSB 

or SDVOSB could obtain a small 

business mentor-prote ́ge ́ relationship 

through SBA and then participate in 

programs specific to VA if VA 

determined that the firm did indeed 

qualify as a VOSB or an SDVOSB under 

VA’s rules. SBA requests comments as 

to whether the VA’s VOSB and SDVO 

mentor-prote ́ge ́ programs should 

continue after the one-year grace period 

expires. 

SBA also specifically requests 

comments on whether there would be a 

continuing need for other small 

business mentor-prote ́ge ́ programs once 

SBA’s various mentor-prote ́ge ́ programs 

are implemented. SBA understands that 

many of the agency-specific mentorprote ́ge ́ programs incentivize mentors to 

utilize their prote ́ge ́s as subcontractors. 

For instance, some agencies provide 

additional evaluation points to a large 

business submitting an offer on an 

unrestricted procurement where the 

business has an active mentor-prote ́ge ́


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agreement, where the business has used 

the prote ́ge ́ firm as a subcontractor 

previously, or where the mentor and 

prote ́ge ́ are submitting an offer as a joint 

venture. In addition, some mentorprote ́ge ́ programs give additional credit 

to a large business mentor toward its 

subcontracting plan goals when the 

mentor uses the prote ́ge ́ as a 

subcontractor on the mentor’s prime 

contract(s) with the given agency. SBA’s 

mentor-prote ́ge ́ programs assume more 

of a prime contractor role for prote ́ge ́s, 

but would also encourage subcontracts 

from mentors to prote ́ge ́s as part of the 

developmental assistance that prote ́ge ́s 

receive from their mentors. Because one 

or more mentor-prote ́ge ́ programs of 

other agencies ultimately may not be 

continued after SBA’s various mentorprote ́ge ́ programs are finalized, SBA 

requests comments as to whether the 

subcontracting incentives authorized by 

mentor-prote ́ge ́ programs of other 

agencies should specifically be 

incorporated into SBA’s mentor-prote ́ge ́

programs. 

Benefits of Mentor-Prote ́ge ́ Relationships 

(13 CFR 124.520 and 125.9) 

As with the 8(a) BD program, under 

the proposed small business mentorprote ́ge ́ program, a prote ́ge ́ may joint 

venture with its SBA-approved mentor 

and qualify as a small business for any 

Federal government contract or 

subcontract, provided the prote ́ge ́

qualifies as small for the size standard 

corresponding to the NAICS code 

assigned to the procurement. In revising 

its 8(a) regulations in 2011, SBA 

considered allowing the exclusion from 

affiliation between a prote ́ge ́ and its 

mentor to apply only to 8(a) contracts. 

Comments to SBA’s proposed 8(a) rule 

argued that 8(a) prote ́ge ́ firms receive 

important developmental benefits in 

performing non-8(a) contracts and that 

many of these benefits would be missed 

if a prote ́ge ́ could not joint venture with 

a large business mentor. SBA agreed and 

decided to continue to allow the 

exclusion from affiliation for all 

contracts so that a joint venture between 

a prote ́ge ́ in the 8(a) BD program and its 

mentor equally qualifies as small for 

8(a) and non-8(a) contracts so long as 

the prote ́ge ́ qualifies as small. That same 

rationale has been applied in this 

proposed rule to the small business 

mentor-prote ́ge ́ program. This means 

that a joint venture between a prote ́ge ́

and its approved mentor in the small 

business mentor-prote ́ge ́ program would 

be deemed to be a small business 

concern for any Federal contract or 

subcontract. It does not mean that such 

a joint venture affirmatively qualifies for 

any other small business program. For 

example, a joint venture between a 

small business prote ́ge ́ firm and its SBAapproved mentor would be deemed a 

small business concern for any Federal 

contract or subcontract for which the 

prote ́ge ́ qualified as small, but the joint 

venture would not qualify for a contract 

reserved or set-aside for eligible 8(a) BD, 

HUBZone SBCs, SDVO SBCs or WOSBs/ 

EDWOSBs unless the prote ́ge ́ firm met 

those program-specific requirements as 

well. 

Consistent with the 8(a) BD program, 

the proposed rule would permit a 

mentor to a small business to own an 

equity interest of up to 40% in the 

prote ́ge ́ firm in order to raise capital for 

the prote ́ge ́ firm. See proposed 

§ 125.9(d)(2). SBA requests comments 

on whether this 40% ownership interest 

should be a temporary interest, being 

authorized only as long as the mentorprote ́ge ́ relationship exists, or whether it 

should be able to survive the 

termination of the mentor-prote ́ge ́

relationship. Although the proposed 

rule allows the ownership interest to 

survive the termination of a mentorprote ́ge ́ relationship, SBA is concerned 

that such a rule may allow far-reaching 

influence by large businesses that act as 

mentors and enable them to receive 

long-term benefits from programs 

designed to assist only small businesses. 

Written Mentor-Prote ́ge ́ Agreement (13 

CFR 124.520 and 125.9) 

The proposed rule requires that all 

mentor-prote ́ge ́ agreements be in 

writing, identifying specifically the 

benefits intended to be derived by the 

projected prote ́ge ́ firms. Under the 

proposed rule, SBA must approve any 

mentor-prote ́ge ́ agreement prior to the 

firms receiving any benefits through the 

mentor-prote ́ge ́ program. SBA will not 

approve the agreement if SBA 

determines that the assistance to be 

provided is not sufficient to promote 

any real developmental gains to the 

prote ́ge ́, or if SBA determines that the 

agreement is merely a vehicle to enable 

the mentor to receive small business 

contracts. The proposed rule would also 

require a firm seeking approval to be a 

prote ́ge ́ in either the 8(a) BD or small 

business mentor-prote ́ge ́ programs to 

identify any other mentor-prote ́ge ́

relationship it has through another 

federal agency or SBA and provide a 

copy of each such mentor-prote ́ge ́

agreement to SBA. The mentor-prote ́ge ́

agreement submitted to SBA for 

approval must identify how the 

assistance to be provided by the 

proposed mentor is different from 

assistance provided to the prote ́ge ́

through another mentor-prote ́ge ́

relationship, either with the same or a 

different mentor. For example, if a firm 

is a prote ́ge ́ in a mentor-prote ́ge ́

relationship approved by another 

agency and seeks to enter a mentorprote ́ge ́ relationship with the same 

mentor firm through one of SBA’s 

programs, it cannot merely duplicate the 

same mentor-prote ́ge ́ agreement. It must 

demonstrate that the assistance to be 

provided to the prote ́ge ́ firm is different 

and in addition to the assistance 

provided to the firm through the other 

mentor-prote ́ge ́ relationship. 

SBA requests comments regarding 

whether SBA should consider limiting 

its review and approval of mentorprote ́ge ́ agreements to a certain 

timeframe each year (i.e., allow 

submissions of agreements only during 

certain specified months), or allow 

submissions of agreements at any time, 

but limit the number of mentor-prote ́ge ́

agreements it will review and/or 

approve each year. 

The proposed rule also provides that 

SBA will review a mentor-prote ́ge ́

relationship annually to determine 

whether to approve its continuation for 

another year. SBA will evaluate the 

relationship and determine whether the 

mentor provided the agreed-upon 

business development assistance, and 

whether the assistance provided appears 

to be worthwhile. SBA proposes to limit 

the duration of a mentor-prote ́ge ́

agreement to three years. The proposed 

rule also permits a prote ́ge ́ to have one 

three-year mentor-prote ́ge ́ agreement 

with one entity and one three-year 

mentor-prote ́ge ́ agreement with another 

entity, or two three-year mentor-prote ́ge ́

agreements (successive or otherwise) 

with the same entity. SBA invites 

comments regarding whether three years 

is an appropriate length of time and 

whether SBA should allow a mentor 

and prote ́ge ́ to enter into an additional 

mentor-prote ́ge ́ agreement upon the 

expiration of the original agreement. 

In addition, SBA proposes to add 

clarifying language not currently 

contained in the 8(a) mentor-prote ́ge ́

regulations authorizing the continuation 

of a mentor-prote ́ge ́ relationship where 

control or ownership of the mentor 

changes during the term of the mentorprote ́ge ́ agreement. Specifically, the 

proposed rule would provide (for the 

8(a) BD and small business mentorprote ́ge ́ programs) that if control of the 

mentor changes (through a stock sale or 

otherwise), the previously approved 

mentor-prote ́ge ́ relationship may 

continue provided that, after the change 

in control, the mentor expresses in 

writing to SBA that it acknowledges the 

mentor-prote ́ge ́ agreement and that it 

continues its commitment to fulfill its 

obligations under the agreement. This is 


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current SBA policy for the 8(a) BD 

program, but SBA believes that setting 

it forth in the regulatory text would 

eliminate any confusion. 

Size of 8(a) Joint Venture (13 CFR 

124.513) 

The proposed rule would amend 

§ 124.513 to clarify that interested 

parties may protest the size of an SBAapproved 8(a) joint venture that is the 

apparent successful offeror for a 

competitive 8(a) contract. This change 

alters the rule expressed in Size Appeal 

of Goel Services, Inc. and Grunley/Goel 

Joint Venture D LLC, SBA No. SIZ–5320 

(2012), which concluded that the size of 

an SBA-approved 8(a) joint venture 

could not be protested because SBA 

had, in effect, determined the joint 

venture to qualify as small when it 

approved the joint venture pursuant to 

§ 124.513(e). Approval of a joint venture 

by its Office of Business Development 

should not immunize the awardee of an 

8(a) competitive contract from a size 

protest. This revision would make clear 

that unsuccessful offerors on a 

competitive 8(a) set aside contract may 

challenge the size of an apparently 

successful joint venture offeror. 

Establishing Social Disadvantage for the 

8(a) BD Program (13 CFR 124.103) 

The proposed rule would amend 

§ 124.103(c) to clarify that an individual 

claiming social disadvantage must 

present a combination of facts and 

evidence which by itself establishes that 

the individual has suffered social 

disadvantage that has negatively 

impacted his or her entry into or 

advancement in the business world. 

This change would alter the rule 

expressed in several SBA OHA 

decisions that allowed an individual to 

establish social disadvantage despite the 

record lacking sufficient evidence 

supporting a discriminatory basis for the 

alleged misconduct. See Matter of 

Tootle Construction, LLC, SBA No. 

BDP–420 (2012), StretegyGen Co., SBA 

No. BDPE–460 (2012). SBA believes that 

the burden of establishing eligibility for 

the 8(a) BD program is on the applicant. 

Absent any facts or statements as to the 

qualifications of the individual claiming 

social disadvantage or those of another 

individual offered as evidence of 

discrimination in a statement, it is no 

more likely that an action or inaction 

was based on discriminatory conduct 

than it was based on a legitimate 

alternative reason. The individual 

claiming social disadvantage bears the 

burden of making his or her claims of 

social disadvantage more likely than 

possible non-discriminatory reasons for 

the same outcomes by providing 

additional facts. 

As such, the proposed rule clarifies 

that SBA may disregard a claim of social 

disadvantage where a legitimate 

alternative ground for an adverse action 

exists and the individual has not 

presented evidence that would render 

his/her claim any more likely than the 

alternative ground. It is the 

responsibility of the applicant to 

establish all aspects of eligibility. A 

statement that a male co-worker 

received higher compensation or was 

promoted over a woman does not 

amount to an incident of social 

disadvantage by itself. 

In addition, when SBA asks for 

evidence corroborating an individual’s 

claims of social disadvantage, what SBA 

is really requesting is for the individual 

to provide additional facts to make his 

or her claims of discriminatory conduct 

more likely than possible nondiscriminatory reasons for the same 

outcomes. Because SBA usually has no 

way to verify the statements made by an 

individual claiming social disadvantage, 

and SBA recognizes that documentary 

evidence is often not available to 

support the statements, it is vitally 

important that the narrative contain 

sufficient detail (i.e., names, dates, 

location or other specific details) in 

order to be credible. To constitute 

sufficient detail to establish social 

disadvantage, the description of the 

individual’s claims of discriminatory 

conduct must generally include: (1) 

when and where the discrimination 

occurred; (2) who committed the 

discrimination; (3) how the 

discrimination took place; and (4) how 

the individual was adversely affected by 

such acts. See Ace Technical, SBA No. 

SDBA–178, at 4–5 (2008) (citing Matter 

of Seacoast Asphalt Servs., Inc., SBA 

No. SDBA–151, at 8 (2001)). 

In addition, SBA maintains that it 

needs the discretion to request 

corroborating evidence in certain 

circumstances. Such requests do not 

raise the evidentiary burden placed on 

an 8(a) applicant above the 

preponderance of the evidence 

standard. SBA is not seeking definitive 

proof, but rather additional facts to 

support the claim that a negative 

outcome (e.g., failure to receive a 

promotion or needed training) was 

based on discriminatory conduct 

instead of one or more legitimate nondiscriminatory reasons. SBA expects an 

individual claiming social disadvantage 

to provide the level of detail consistent 

with someone with first-hand 

knowledge of the discriminatory 

conduct claimed. The proposed rule 

would add language to the regulations 

to specifically recognize SBA’s right to 

seek corroborating evidence where 

appropriate. 

Finally, the proposed rule would 

clarify that each instance of alleged 

discriminatory conduct must be 

accompanied by a description of the 

negative impact of the conduct on the 

individual’s entry into or advancement 

in the business world in order for it to 

constitute an instance of social 

disadvantage. This clarification would 

alter the rule expressed in Matter of 

Bartkowski Life Safety Corp., SBA No. 

BDPE–516 (2014), in which OHA ruled 

that ‘‘a petitioner’s claims can each be 

offered as evidence of social 

disadvantage, negative impact, or both.’’ 

SBA maintains that each claim of 

discriminatory conduct or bias 

experienced by an individual must also 

include negative impact on the 

individual’s entry into or advancement 

in the business world in order for it to 

constitute an instance of social 

disadvantage within the meaning of 

SBA’s regulations. This proposed 

change clarifies that point. 

Substantial Unfair Competitive 

Advantage Within an Industry Category 

(13 CFR 124.109, 124.110, and 124.111) 

Pursuant to section 7(j)(10)(J)(ii)(II) of 

the Small Business Act, 15 U.S.C. 

636(j)(10)(J)(ii)(II), ‘‘[i]n determining the 

size of a small business concern owned 

by a socially and economically 

disadvantaged Indian tribe (or a wholly 

owned business entity of such tribe) [for 

purposes of 8(a) BD program entry and 

8(a) BD contract award], each firm’s size 

shall be independently determined 

without regard to its affiliation with the 

tribe, any entity of the tribal 

government, or any other business 

enterprise owned by the tribe, unless 

the Administrator determines that one 

or more such tribally owned business 

concerns have obtained, or are likely to 

obtain, a substantial unfair competitive 

advantage within an industry category.’’ 

For purposes of the 8(a) BD program, the 

term ‘‘Indian tribe’’ includes any Alaska 

Native village or regional or village 

corporation (within the meaning of the 

Alaska Native Claims Settlement Act). 

15 U.S.C. 637(a)(13). SBA’s regulations 

have extended this broad exclusion 

from affiliation to the other entityowned firms authorized to participate in 

the 8(a) BD program (i.e., firms owned 

by Native Hawaiian Organizations 

(NHOs) and Community Development 

Corporations (CDCs)). See §§ 124.109(a), 

124.109(c)(2)(iii), 124.110(b), and 

124.111(c). This proposed rule will 

provide guidance as to how SBA will 

determine whether a firm has obtained 

or is likely to obtain ‘‘a substantial 


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Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 6625 

unfair competitive advantage within an 

industry category.’’ 

First, in determining how best to 

define the term ‘‘industry category,’’ 

SBA considered how it has defined 

other similar terms in its regulations. In 

this regard, § 124.3 defines ‘‘primary 

industry classification’’ to mean ‘‘the six 

digit North American Industry 

Classification System (NAICS) code 

designation which best describes the 

primary business activity of the 8(a) BD 

applicant or Participant.’’ Further, 

§ 124.109(c)(3)(ii) defines the ‘‘same 

primary NAICS code’’ to mean the six 

digit NAICS code having the same 

corresponding size standard. SBA 

believes that it makes sense to apply 

this same limitation when defining an 

industry category. Thus, the proposed 

rule would provide that an entityowned business concern is not subject 

to the broad exemption to affiliation set 

forth in 13 CFR part 124 where one or 

more entity-owned firms are found to 

have obtained, or are likely to obtain, a 

substantial unfair competitive advantage 

in a particular NAICS code with a 

particular size standard. 

In addition, SBA believes that entityowned concerns may be found affiliated 

only if they have obtained, or are likely 

to obtain, a substantial unfair 

competitive advantage within a 

particular industry category on a 

national scale. Because NAICS codes 

and their associated size standards are 

established on a national basis, it is 

reasonable to conclude that Congress 

intended SBA to look at ‘‘an industry 

category’’ nationally to determine 

whether a particular firm has obtained 

or is likely to obtain a substantial unfair 

competitive advantage. In making this 

assessment, SBA will consider a firm’s 

percentage share of the national market 

and other relevant factors to determine 

whether a firm is dominant in a specific 

six-digit NAICS code with a particular 

size standard. SBA anticipates that it 

will review Federal Procurement Data 

System data to compare the firm’s share 

of the industry as compared to overall 

small business participation in that 

industry to determine whether there is 

a an unfair competitive advantage. The 

proposed rule does not contemplate a 

finding of affiliation where an entityowned concern appears to have 

obtained an unfair competitive 

advantage in a local market, but remains 

competitive, but not dominant, on a 

national basis. 

Management of Tribally-Owned 8(a) 

Program Participants (13 CFR 124.109) 

The proposed rule would add 

language to § 124.109(c)(4) specifying 

that the individuals responsible for the 

management and daily operations of a 

tribally-owned concern cannot manage 

more than two Program Participants at 

the same time. This language is taken 

directly from section 7(j)(11)(B)(iii)(II) of 

the Small Business Act (15 U.S.C. 

636(j)(11)(B)(iii)(II)), but did not also 

appear in SBA’s 8(a) BD regulations. 

SBA believes it is necessary to 

incorporate this provision into the 

regulations to more fully apprise 

tribally-owned 8(a) applicants and 

Participants of the control requirements 

applicable to them. 

Native Hawaiian Organizations (NHOs) 

(13 CFR 124.110) 

The proposed rule would add 

language to § 124.110(d) to clarify the 

control requirements applicable to 

NHO-owned firms for 8(a) BD program 

participation. Specifically, the rule 

would clarify that the members or 

directors of an NHO need not have the 

technical expertise or possess a required 

license to be found to control an 

applicant or Participant owned by the 

NHO. Rather, the NHO, through its 

members and directors, must merely 

have managerial experience of the 

extent and complexity needed to run the 

concern. As with individually owned 

8(a) applicants and Participants, 

individual NHO members may be 

required to demonstrate more specific 

industry-related experience in 

appropriate circumstances to ensure 

that the NHO in fact controls the dayto-day operations of the firm. This 

would be particularly true where a nondisadvantaged owner (or former owner) 

who has experience related to the 

industry is actively involved in the dayto-day management of the firm. 

Proposed § 124.110(g) would clarify 

that an NHO-owned firm’s eligibility for 

8(a) BD participation is separate and 

distinct from the eligibility of individual 

members, directors or managers. As 

such, an individual Hawaiian Native 

who previously qualified his or her own 

business for 8(a) BD participation could 

be counted as a Native Hawaiian for 

NHO eligibility and could use his or her 

individual economic disadvantage to 

help qualify the NHO as economically 

disadvantage even if he or she 

previously used his or her 

disadvantaged status to qualify an 

individually-owned 8(a) applicant or 

Participant. 

Finally, although the rule does not 

propose to change the way in which 

SBA determines whether an NHO is 

economically disadvantaged, SBA 

specifically requests comments 

regarding whether an alternative 

approach is more suitable. Section 

8(a)(4)(A) of the Small Business Act, 15 

U.S.C. 637(a)(4)(A), requires that an 

NHO be economically disadvantaged in 

order to establish 8(a) eligibility for a 

concern owned by the NHO. Neither the 

statute nor its legislative history provide 

any guidance on how to determine 

whether an NHO is economically 

disadvantaged. Currently, 

§ 124.110(c)(1) provides that in 

determining whether an NHO is 

economically disadvantaged, SBA will 

look at the individual economic status 

of the NHO’s members. The NHO must 

establish that a majority of its members 

qualify as economically disadvantaged 

under the rules that apply to individuals 

as set forth in § 124.104. SBA has 

received several inquiries from NHOs 

asking if this is the most sensible 

approach to establishing economic 

disadvantage. They have recommended 

that NHOs establish economic 

disadvantage in the same way that tribes 

currently do so for the 8(a) BD program: 

that is, by providing information 

relating to members, including the tribal 

unemployment rate, the per capita 

income of tribal members, and the 

percentage of tribal members below the 

poverty level. SBA asks for specific 

comments as to whether SBA should 

adopt for NHOs the same criteria used 

for determining whether a tribe is 

economically disadvantaged. One of the 

concerns SBA has in adopting such an 

approach is how to define the 

community for an NHO that would 

correspond to the tribal population for 

a specific tribe. Would the same Native 

Hawaiian community be used to 

establish the economic disadvantage of 

each NHO? If so, would that diminish 

the entire economic disadvantage 

requirement for NHOs? After reviewing 

comments received in response to this 

issue, SBA will determine how best to 

proceed in a final rule. 

Change in Primary Industry 

Classification (13 CFR 124.112) 

On February 11, 2011, SBA published 

a final rule in the Federal Register 

implementing comprehensive revisions 

to its 8(a) BD program. 76 FR 8221. 

Included within these revisions was an 

amendment to the definition of the term 

‘‘primary industry classification’’ and 

provisions authorizing an 8(a) 

Participant to change its primary 

industry classification where it can 

demonstrate to SBA that the majority of 

its total revenues during a three-year 

period have evolved from one NAICS 

code to another. The supplementary 

information to that final rule stated that 

it was not SBA’s intent that SBA would 

be able to change a firm’s primary 

NAICS code on its own. 76 FR 8221. At 

that time, SBA did not recognize a need 


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to require a Participant to change the 

primary industry classification 

contained in its business plan. SBA’s 

views have changed. In the context of an 

entity-owned Participant, SBA believes 

that it needs to have to ability to change 

the Participant’s primary industry 

classification in appropriate 

circumstances. An entity-owned 

applicant to the 8(a) BD program (i.e., 

one owned by an Indian tribe, Alaska 

Native Corporation (ANC), Native 

Hawaiian Organization (NHO), or 

Community Development Corporation 

(CDC)) cannot own more than 49% of 

another firm which, either at the time of 

application or within the previous two 

years, has been participating in the 8(a) 

BD program under the same primary 

NAICS code as the applicant. As such, 

an entity-owned applicant must select a 

primary business classification (as 

represented by a six digit NAICS code) 

that is different from the primary 

business classification of any other 

Participant owned by that same entity. 

After being certified to participate in the 

8(a) BD program, however, there is no 

current requirement that the newly 

admitted Participant actually perform 

most, or any, work in the six digit 

NAICS code selected as its primary 

business classification in its application. 

SBA believes that this inconsistency 

could permit a firm to circumvent the 

intent of SBA’s regulations by selecting 

a primary business classification that is 

different from the primary business 

classification of any other Participant 

owned by that same entity merely to get 

admitted to the 8(a) BD program, and 

then performing the majority, or even 

all, of its work in the identical primary 

NAICS code as another Participant 

owned by the entity. In order to make 

the regulations more consistent, this 

rule proposes to allow SBA to change 

the primary industry classification 

contained in a Participant’s business 

plan where the greatest portion of the 

Participant’s total revenues during a 

three-year period have evolved from one 

NAICS code to another. See proposed 

§ 124.112(e). The proposed language is 

not intended to imply that revenues 

from its primary NAICS code must 

account for at least 50% of the firm’s 

total revenues, but rather that revenues 

from its primary NAICS code must 

exceed revenues generated from any 

other NAICS code. The proposed 

language also provides discretion to 

SBA in deciding whether to change a 

Participant’s primary industry 

classification because SBA recognizes 

that whether the greatest portion of a 

firm’s revenues is derived from one 

NAICS code, as opposed to one or more 

other NAICS codes, is a snapshot in 

time that is ever changing. The 

proposed rule would require SBA to 

notify the Participant of its intent to 

change the Participant’s primary 

industry classification and afford the 

Participant the opportunity to submit 

information explaining why such a 

change would be inappropriate. Where 

the Participant provides information 

demonstrating that it has received one 

or more additional contracts in its 

primary NAICS code since the end of its 

most recently completed fiscal year, and 

such revenue would cause the revenue 

from its primary NAICS code to exceed 

the revenue generated from any other 

NAICS code, SBA would not change the 

Participant’s primary industry 

classification. Where the revenue 

generated under its primary NAICS code 

is close to but less than the revenue 

generated under another NAICS code, 

the Participant can demonstrate that it 

has made good faith efforts to obtain 

contracts in its primary NAICS code. 

For example, where a Participant details 

contract opportunities under its primary 

NAICS code that it submitted offers for 

in the last year, but was not successful 

in winning, and its concrete plans to 

continue to seek additional 

opportunities in that NAICS code, SBA 

may not change the Participant’s 

primary industry classification. SBA 

requests comments on whether a change 

in primary industry should instead be 

automatic, based on FPDS data. 

8(a) BD Program Suspensions (13 CFR 

124.305) 

SBA is also proposing to add two 

additional bases for allowing a 

Participant to elect to be suspended 

from 8(a) BD program participation: 

where the Participant’s principal office 

is located in an area declared a major 

disaster area or where there is a lapse in 

Federal appropriations. 

President Obama signed an Executive 

Order on December 7, 2012 creating the 

Hurricane Sandy Rebuilding Task Force. 

The President charged the Task Force 

with identifying and working to remove 

obstacles to rebuilding while taking into 

account existing and future risks and 

promoting the long-term sustainability 

of communities. The Final Task Force 

Implementation Plan made 69 

recommendations to implement an 

effective Rebuilding Strategy, including 

several relating to small business. In 

particular, the Task Force recommended 

authorizing 8(a) BD program 

suspensions for Participants located in 

major disaster areas. The Task Force 

specifically recommended that, upon 

the request of a certified 8(a) firm in a 

major declared disaster area, SBA will 

suspend the eligibility of the firm for up 

to a one year period while they recover 

from the disaster to ensure they are able 

to take full advantage of the 8(a) BD 

program, rather than being impacted by 

lack of capacity or contracting 

opportunities due to disaster-induced 

disruptions. During such a suspension, 

a Participant would not be eligible for 

8(a) BD Program benefits, including setasides, however, but would not ‘‘lose 

time’’ in its program term due to the 

extenuating circumstances wrought by a 

disaster. This rule proposes to 

implement that recommendation into 

SBA’s 8(a) BD regulations. 

In addition, SBA proposes to allow a 

firm-initiated suspension where there is 

a lapse in Federal appropriations that 

could adversely affect a Participant’s 

ability to be awarded one or more 8(a) 

contracts. The need for such a 

suspension was brought to light during 

the Government shutdown at the 

beginning of fiscal year 2014. During the 

lapse of federal appropriations at the 

end of fiscal year 2013, several Program 

Participants’ term of participation in the 

8(a) program ended, and they were 

unable to finalize 8(a) contracts because 

there was no funding during the 

shutdown and they were no longer in 

the 8(a) BD program (because their term 

of program participation had ended) by 

the time the shutdown ended and 

appropriations were available. 

Therefore, this rule proposes to allow a 

Participant to elect to suspend its 

participation in the 8(a) BD program 

where: Federal appropriations for one or 

more federal departments or agencies 

have expired without being extended 

via continuing resolution or other 

means and no new appropriations have 

been enacted (i.e., during a lapse in 

appropriations); SBA has previously 

accepted an offer for a sole source 8(a) 

award on behalf of the Participant; and 

award of the 8(a) sole source contract is 

pending. A Participant could not elect a 

partial suspension of 8(a) BD program 

benefits; if it elects to be suspended 

during a lapse in Federal 

appropriations, the Participant would be 

ineligible to receive any new 8(a) BD 

program benefits during the suspension. 

For example, if Department X was 

funded during a partial Government 

shutdown but Agency Y was not, a 

Participant could not elect to be 

suspended for purposes of executing 

8(a) contracts with Agency Y, but not be 

suspended for purposes of executing 

8(a) contracts with Department X. The 

suspension would start immediately 

upon the date requested by a Participant 

and would last the length of the lapse 

in Federal appropriations. However, 


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once the Government is fully funded 

and the suspension is lifted, the 

contracts from both Department X and 

Agency Y could be finalized. 

Benefits Reporting Requirement (13 CFR 

124.602) 

The proposed rule amends the time 

frame for the reporting of benefits for 

entity-owned Participants in the 8(a) BD 

program. SBA’s current regulations 

require an entity-owned Participant to 

report benefits as part of its annual 

review submission. See § 124.604. SBA 

believes it is more appropriate that this 

information be submitted as part of a 

Participant’s submission of its annual 

financial statements pursuant to 

§ 124.602. SBA wants to make clear that 

benefits reporting should not be tied to 

continued eligibility, as may be 

assumed where such reporting is part of 

SBA’s annual review analysis. In 

response to comments to the proposed 

rule which initially placed benefits 

reporting in the continued eligibility 

section of SBA’s regulations (§ 124.112), 

see 74 FR 55694 (Oct. 28, 2009), SBA 

moved the benefits reporting 

requirement to a new section (§ 124.604) 

under miscellaneous reporting 

requirements contained in SBA’s 8(a) 

BD regulations to evidence SBA’s intent 

that benefits reporting not be considered 

a part of continued eligibility. 76 FR 

8221 (Feb. 11, 2011). Although SBA 

changed the place in the regulations 

where the benefits reporting 

requirement appeared, it still collected 

that information with other information 

relating to a firm’s annual review and 

believed that a perception could still 

exist that benefits reporting was, 

nevertheless, somehow tied to 

continued 8(a) BD eligibility. In order to 

further clarify SBA’s intent and 

eliminate any doubt that benefits 

reporting is not in any way tied to 

continued 8(a) BD eligibility for any 

entity-owned Program Participant, this 

proposed rule changes the timing of 

benefits reporting from the time of a 

Participant’s annual review submission 

to the time of a Participant’s annual 

financial statement submission. In 

addition, SBA believes that the data 

collected by certain Participants in 

preparing their financial statements 

submissions may help them report some 

of the benefits that flow to the native or 

other community. The regulatory 

change will continue to require the 

submission of the data on an annual 

basis but within 120 days after the close 

of the concern’s fiscal year instead of as 

part of the annual submission. 

Reverse Auctions (13 CFR 125.2 and 

125.5) 

SBA is also proposing to amend 

§§ 125.2(a) and 125.5(a)(1) to address 

reverse auctions. Specifically, SBA is 

proposing to reinforce the principle that 

all of SBA’s regulations, including those 

relating to set-asides and referrals for a 

Certificate of Competency, apply to 

reverse auctions. With a reverse auction, 

the Government is buying a product or 

service, but the businesses are bidding 

against each other, which tends to drive 

the price down (hence the name reverse 

auction). In a reverse auction, the 

bidders actually get to see all of the 

other bidders’ prices and can ‘‘outbid’’ 

them by offering a lower price. 

Although SBA believes that the small 

business rules apply to reverse auctions, 

the proposed rule is intended to make 

it clear to contracting officials that there 

are no exceptions to SBA’s small 

business regulations for reverse 

auctions. Thus, the ‘‘rule of two,’’ which 

directs whether a small business setaside is appropriate, applies equally to 

reverse auctions as it does to regular 

procurement actions. 

Processing Applications for HUBZone 

Certification (13 CFR 126.306) 

SBA is proposing to amend § 126.306, 

which addresses how SBA processes 

HUBZone applications. SBA is 

clarifying that the burden to prove 

eligibility is on the small business 

applying for certification into the 

program. Finally, SBA is proposing to 

amend the regulation to state that SBA 

will process the application within 90 

days, if practicable, to more accurately 

reflect the amount of time it takes to 

process a HUBZone application along 

with all of the documents needed to 

verify eligibility and to make that 

process consistent with the 8(a) BD 

application process. 

Reconsideration of Decisions of SBA’s 

OHA (13 CFR 134.227) 

The proposed rule would add 

clarifying language to § 134.227(c) to 

permit SBA to file a request for 

reconsideration in an OHA proceeding 

in which it has not previously 

participated. This provision alters the 

rule expressed in Size Appeal of Goel 

Services, Inc. and Grunley/Goel JVD 

LLC, SBA No. SIZ–5356 (2012), which 

held SBA could not request 

reconsideration where SBA did not 

appear as a party in the original appeal. 

Administrative Record in 8(a) Appeals 

(13 CFR 134.406) 

The proposed rule incorporates 

language from a line of OHA cases 

regarding SBA 8(a) decisions and the 

administrative record. In reviewing 8(a) 

cases on appeal, SBA’s regulations 

require the Administrative Law Judge to 

review SBA’s decision to determine 

whether the Agency’s determination is 

arbitrary, capricious, or contrary to law. 

As long as the Agency’s determination 

is reasonable, the Administrative Law 

Judge must uphold it on appeal. OHA 

cases have stated that so long as SBA’s 

path of reasoning may reasonably be 

discerned, OHA will uphold a decision 

of less than ideal clarity. See, e.g., 

Matter of Alloy Specialties, Inc., No. 

SDBA–108 at 6 (1999). The proposed 

rule would include this language in the 

regulatory text of § 134.406 in order to 

more fully apprise the public how OHA 

must review an 8(a) case on appeal. 

Compliance With Executive Orders 

12866, 13563, 12988, and 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. 

Regulatory Impact Analysis 

1. Is there a need for the regulatory 

action? 

The proposed regulations implement 

section 1347(b)(3) of the Small Business 

Jobs Act of 2010, Public Law 111–240, 

124 Stat. 2504, which authorizes the 

Agency to establish mentor-prote ́ge ́

programs for SDVO SBCs, HUBZone 

SBCs, and WOSB concerns, modeled on 

the Agency’s mentor-prote ́ge ́ program 

for small business concerns 

participating in programs under section 

8(a) of the Small Business Act (15 U.S.C. 

637(a)). In addition, the proposed rule 

implements section 1641 of the NDAA, 

Public Law 112–239, which authorized 

SBA to establish a mentor-prote ́ge ́

program for all small business concerns. 

SBA is also updating its rules to clarify 

areas where small business concerns 

may have been confused or where 

OHA’s interpretations of SBA rules do 

not conform to SBA’s interpretation or 

intent. 

2. What are the alternatives to this rule? 

As noted above in the supplementary 

information, this rule proposes to 

implement the Jobs Act and NDAA 

authorities by creating one new mentorprote ́ge ́ program for which any small 


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business could participate instead of 

implementing four new separate small 

business mentor-prote ́ge ́ programs (i.e., 

having a separate mentor-prote ́ge ́

program for SDVO SBCs, HUBZone 

SBCs, WOSB concerns, and all other 

small business concerns, in addition to 

the current mentor-prote ́ge ́ program for 

8(a) BD Participants). SBA proposed one 

program for all small businesses because 

SBA believed it would be easier for the 

small business and acquisition 

communities to use and understand. 

The statutory authority for this rule 

specifically mandates that the new 

mentor-prote ́ge ́ programs be modeled on 

the existing mentor-prote ́ge ́ program for 

small business concerns participating in 

the 8(a) BD program. Thus, to the extent 

practicable, SBA attempted to adopt the 

regulations governing the 8(a) mentorprote ́ge ́ program in establishing the 

mentor-prote ́ge ́ program for SBCs. 

3. What are the potential benefits and 

costs of this regulatory action? 

The proposed regulatory action would 

enhance the ability of small business 

concerns to obtain larger prime 

contracts that would be normally out of 

the reach of these businesses. The 

proposed small business mentor-prote ́ge ́

program would allow all small 

businesses to tap into the expertise and 

capital of larger firms, which in turn 

would help small business concerns 

become more knowledgeable, stable, 

and competitive in the Federal 

procurement arena. 

SBA estimates that under the 

proposed rule, approximately 2,000 

SBCs, could become active in the 

proposed mentor-prote ́ge ́ program, and 

prote ́ge ́ firms may obtain Federal 

contracts totaling possibly $2 billion per 

year. SBA notes that these estimates 

represent an extrapolation from data on 

the percentage of 8(a) BD program 

participants with signed mentor-prote ́ge ́

agreements and joint venture 

agreements, and are based on the dollars 

awarded to SBCs in FY 2012 according 

to data retrieved from the Federal 

Procurement Data System—Next 

Generation (FPDS–NG). With SBCs able 

to compete for larger contracts and thus 

a greater number of contracts in general, 

Federal agencies may choose to set aside 

more contracts for competition among 

small businesses, SDVO SBCs, 

HUBZone SBCs, and WOSB concerns, 

rather than using full and open 

competition. The movement from 

unrestricted to set-aside contracting 

might result in competition among 

fewer total bidders, although there will 

be more small businesses eligible to 

submit offers. The added competition 

for many of these procurements could 

result in lower prices to the Government 

for procurements reserved for SBCs, 

HUBZone SBCs, WOSB concerns, and 

SDVO SBCs, although SBA cannot 

quantify this benefit. To the extent that 

more than two thousand SBCs could 

become active in the proposed mentorprote ́ge ́ program, this might entail some 

additional administrative costs to the 

Federal Government associated with 

additional bidders for Federal small 

business procurement opportunities. 

The proposed mentor-prote ́ge ́

program may have some distributional 

effects among large and small 

businesses. Although SBA cannot 

estimate with certainty the actual 

outcome of the gains and losses among 

small and large businesses, it can 

identify several probable impacts. There 

may be a transfer of some Federal 

contracts from large businesses to SBC 

prote ́ge ́s. Large businesses may have 

fewer Federal prime contract 

opportunities as Federal agencies decide 

to set aside more Federal contracts for 

SBCs, SDVO SBCs, HUBZone SBCs, and 

WOSB concerns. In addition, some 

Federal contracts may be awarded to 

HUBZone prote ́ge ́s instead of large 

businesses since these firms may be 

eligible for an evaluation adjustment for 

contracts when they compete on a full 

and open basis. This transfer may be 

offset by a greater number of contracts 

being set aside for small businesses, 

SDVO SBCs, HUBZone SBCs, and 

WOSB concerns. SBA cannot estimate 

the potential distributional impacts of 

these transfers with any degree of 

precision. 

The proposed mentor-prote ́ge ́

program is consistent with SBA’s 

statutory mandate to assist small 

businesses, and this regulatory action 

promotes the Administration’s 

objectives. One of SBA’s goals in 

support of the Administration’s 

objectives is to help individual small 

businesses, including SDVO SBCs, 

HUBZone SBCs, and WOSB concerns, 

succeed through fair and equitable 

access to capital and credit, Federal 

contracts, and management and 

technical assistance. 

Executive Order 13563 

A description of the need for this 

regulatory action and the benefits and 

costs associated with this action, 

including possible distributional 

impacts that relate to Executive Order 

13563, is included above in the 

Regulatory Impact Analysis under 

Executive Order 12866 

In an effort to engage interested 

parties in this action, SBA met with 

representatives from various agencies to 

obtain their feedback on SBA’s 

proposed mentor-prote ́ge ́ program. For 

example, SBA participated in a 

government-wide meeting involving 

Office of Small and Disadvantaged 

Business Utilization (OSDBU) 

representatives responsible for mentorprote ́ge ́ programs in their respective 

agencies. It was generally agreed upon 

that SBA’s proposed mentor-prote ́ge ́

program would complement the already 

existing Federal programs due in part to 

the differing incentives offered to the 

mentors under the various programs. 

SBA also presented proposed small 

business mentor-prote ́ge ́ programs to 

businesses in thirteen cities in the U.S. 

and sought their input as part of the Jobs 

Act tours. In developing this proposed 

rule, SBA considered all input, 

suggestions, recommendations, and 

relevant information obtained from 

industry groups, individual businesses, 

and Federal agencies. 

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 sections 3(a) and 3(b)(2) of that 

Executive Order, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. This rule has no preemptive or 

retroactive effect. 

Executive Order 13132 

For the purpose of Executive Order 

13132, SBA has determined that this 

proposed rule 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 

levels of government. Therefore, SBA 

has determined that this proposed rule 

has no federalism implications 

warranting preparation of a federalism 

assessment. 

Paperwork Reduction Act 

For purposes of the Paperwork 

Reduction Act, 44 U.S.C. Chapter 35, 

SBA has determined that this proposed 

rule would impose new reporting 

requirements. These proposed 

collections of information include the 

following: (1) Information necessary for 

SBA to evaluate the success of a mentorprote ́ge ́ relationship; (2) information 

necessary for SBA to determine whether 

a prospective mentor possesses a good 

financial condition (i.e., whether the 

mentor is capable of carrying out its 

responsibilities to assist the prote ́ge ́ firm 

under the proposed mentor-prote ́ge ́

agreement); (3) information necessary 

for SBA to evaluate compliance with 


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performance of work requirements; and 

(4) information detailing the proposed 

relationship between the mentor and 

prote ́ge ́. 

Finally, the proposed rule also 

amends an existing information 

collection (SBA Form 1450, 8(a) Annual 

Update—OMB Control Number 3245– 

0205) by making a minor change to the 

benefits reporting schedule from the 

time of an 8(a) Participant’s annual 

review submission to when the 

Participant submits its financial 

statement as required by § 124.602; 

specifically, within 120 days after the 

close of the Participant’s fiscal year. 

There are no substantive changes to the 

information to be submitted. 

The title, summary of each 

information collection, description of 

respondents, and an estimate of the 

reporting burden are discussed below. 

Included in the estimate is the time for 

reviewing instructions, searching 

existing data needed, and completing 

and reviewing each collection of 

information. 

1. Title and Description: Mentorprote ́ge ́ annual report [Form number to 

be determined]. Prote ́ge ́s participating 

in the proposed small business mentorprote ́ge ́ program would be required to 

submit to SBA annual reports on their 

mentor-prote ́ge ́ relationships. The 

information to be included in these 

annual reports is the same type of 

information that is currently required of 

prote ́ge ́s participating in SBA’s 8(a) 

Business Development program, and as 

such would be modeled on the mentorprote ́ge ́ annual reporting requirements 

in Attachment B of SBA Form 1450 

(OMB Control Number 3245–0205). 

Such information includes 

identification of the technical, 

management and/or financial assistance 

provided by mentors to prote ́ge ́s; and a 

description of how that assistance has 

impacted the development of the 

prote ́ge ́s. 

Need and Purpose: This information 

collection is necessary for SBA to, 

among other things, evaluate whether 

and to what extent the prote ́ge ́s are 

benefiting from the relationship and 

determine whether to approve the 

continuation of the mentor-prote ́ge ́

agreement or take other actions as 

necessary to protect against fraud, 

waste, or abuse in SBA’s mentor-prote ́ge ́

programs. 

OMB Control Number: New 

Collection. 

Description of and Estimated Number 

of Respondents: This information will 

be collected from small business 

prote ́ge ́s pursuant to proposed 

§ 125.9(g). SBA estimates this number to 

be 2,000. 

Estimated Response Time: 2 hours. 

Total Estimated Annual Hour Burden: 

4,000. 

2. Title and Description: Mentor 

financial information [Form number to 

be determined]. The proposed rule 

requires concerns seeking to benefit 

from the proposed small business 

mentor-prote ́ge ́ program as mentors to 

submit to SBA information to 

demonstrate that they possess a good 

financial condition, including either 

copies of Federal tax returns or audited 

financial statements, or, if applicable, 

filings required by the Securities and 

Exchange Commission. 

Need and Purpose: The information 

requested is necessary for SBA to 

determine whether prospective mentors 

are in good financial condition and 

capable of providing assistance to 

prote ́ge ́s and enhance their ability to 

successfully compete for Federal 

contracts. SBA believes that any 

additional burden imposed by this 

requirement would be minimal since 

the firms would maintain the 

information in their general course of 

business. 

OMB Control Number: New 

Collection. 

Description of and Estimated Number 

of Respondents: Pursuant to proposed 

§ 125.9(b)(2), this information will be 

collected from concerns seeking to 

benefit as mentors from SBA’s mentorprote ́ge ́ programs under proposed 

§ 125.9. SBA estimates this number to 

be 600. 

Estimated Response Time: 1 hour. 

Total Estimated Annual Hour Burden: 

600. 

3. Title and Description: Joint venture 

performance of work report [Form 

number to be determined]. The 

proposed rule imposes a requirement on 

SBC joint venture partners to submit to 

SBA annually performance of work 

reports demonstrating their compliance 

with performance of work requirements. 

SBA requests comments addressing 

possible formats with which the 

information should be transmitted to 

SBA. 

Need and Purpose: This requirement 

will greatly enhance SBA’s ability to 

monitor compliance with performance 

of work requirements in its effort to 

reduce fraud, waste, and abuse. SBA 

believes that any additional burden 

imposed by this recordkeeping 

requirement would be minimal because 

firms are already required to track their 

compliance with the performance of 

work requirements. 

OMB Control Number: New 

Collection. 

Description and Estimated Number of 

Respondents: This information will be 

collected from SBC, SDVO SBC, 

HUBZone SBC, and WOSB joint venture 

partners under proposed § 125.8(h), 

§ 125.18(b), proposed § 126.616(i), and 

proposed § 127.506(j). SBA estimates 

this number to be 2,000. 

Estimated Response Time: 1 hour. 

Total Estimated Annual Hour Burden: 

2,000. 

4. Title and Description: Mentorprote ́ge ́ agreement [no SBA form 

number]. As proposed, the agreement 

between a mentor and prote ́ge ́ would 

include an assessment of the prote ́ge ́’s 

needs and goals; a description of the 

how the mentor intends to assist prote ́ge ́

in meeting its goals; and the timeline for 

delivery of such assistance. 

Need and Purpose: The agreement 

must be submitted to SBA for review 

and approval, to help the Agency to 

determine whether the proposed 

assistance would enhance the 

development of the prote ́ge ́ and not 

merely further the interest of the 

mentor. The information would also be 

beneficial to SBA’s efforts to reduce 

fraud, waste, and abuse in federal 

contracting programs. 

OMB Control Number: New 

Collection. 

Description and Estimated Number of 

Respondents: This information will be 

collected from small business prote ́ge ́s 

pursuant to proposed § 125.9(e). SBA 

estimates this number to be 2,000. 

Estimated Response Time: 1 hour. 

Total Estimated Annual Hour Burden: 

2,000. 

SBA requests comments on how these 

requirements could best be 

implemented without imposing an 

undue burden on firms that wish to 

participate in SBA’s small business 

mentor-prote ́ge ́ program. In addition, 

SBA invites comments on: (1) Whether 

the proposed collection of information 

is necessary for the proper performance 

of SBA’s functions, including whether 

the information will have a practical 

utility; (2) the accuracy of SBA’s 

estimate of the burden of the proposed 

collection of information, including the 

validity of the methodology and 

assumptions used; (3) ways to enhance 

the quality, utility, and clarity of the 

information to be collected; and (4) 

ways to minimize the burden of the 

collection of information on 

respondents, including through the use 

of automated collection techniques, 

when appropriate, and other forms of 

information technology. 

Regulatory Flexibility Act 5 U.S.C., 601– 

612 

Under the Regulatory Flexibility Act 

(RFA), this proposed rule may have a 

significant impact on a substantial 


rljohnson on DSK3VPTVN1PROD with PROPOSALS3
6630 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 

number of small businesses. 

Immediately below, SBA sets forth an 

initial regulatory flexibility analysis 

(IRFA) addressing the impact of the 

proposed rule in accordance with 

section 603, Title 5, of the United States 

Code. The IRFA examines the objectives 

and legal basis for this proposed rule; 

the kind and number of small entities 

that may be affected; the projected 

recordkeeping, reporting, and other 

requirements; whether there are any 

Federal rules that may duplicate, 

overlap, or conflict with this proposed 

rule; and whether there are any 

significant alternatives to this proposed 

rule. 

1. What are the need for and objective 

of the rule? 

This proposed regulatory action 

would implement section 1347(b)(3) of 

the Small Business Jobs Act of 2010, 

Public Law 111–240, and section 1641 

of the National Defense Authorization 

Act for Fiscal Year 2013 (NDAA), Public 

Law 112–239. As discussed above, the 

Small Business Jobs Act tasked the 

Agency with establishing mentorprote ́ge ́ programs for SDVO SBCs, 

HUBZone SBCs, and WOSB concerns, 

modeled on the Agency’s mentorprote ́ge ́ program for small business 

concerns participating in programs 

under section 8(a) of the Small Business 

Act (13 U.S.C. 637(a)), commonly 

known as the 8(a) Business 

Development program. Similarly, 

section 1641 of NDAA authorized SBA 

to establish a mentor-prote ́ge ́ program 

for all small business concerns that is 

identical to the 8(a) BD mentor-prote ́ge ́

program, except that SBA may modify 

the program to the extent necessary 

given the types of small business 

concerns included as prote ́ge ́s. 

2. What are SBA’s description and 

estimate of the number of small entities 

to which the rule will apply? 

If the proposed rule is adopted in its 

present form, the rule would be 

applicable to all small business 

concerns participating in the Federal 

procurement market that seek to form 

mentor/prote ́ge ́ relationships. SBA 

estimates this number to be between 

twenty and thirty thousand, which 

represents between five and nine 

percent of total firms in the small 

business community, based on the 

number of small business concerns 

listed in the Dynamic Small Business 

Search database. 

3. What are the projected reporting, 

recordkeeping, and other compliance 

requirements of the rule and an estimate 

of the classes of small entities which 

will be subject to the requirements? 

The proposed rule imposes the 

following reporting and recordkeeping 

requirements: (1) Information necessary 

for SBA to evaluate the success of a 

mentor-prote ́ge ́ relationship; (2) 

information necessary for SBA to 

determine whether a prospective mentor 

possesses a good financial condition; 

and (3) information necessary for SBA 

to evaluate compliance with 

performance of work requirements. 

SDVO SBC, HUBZone SBC, and WOSB 

joint venture partners would be required 

to submit to SBA performance of work 

reports demonstrating their compliance 

with performance of work requirements. 

SBA estimates this number to be 

approximately 2,000. 

The Paperwork Reduction Act 

requirements are addressed further 

above. SBA welcomes any comments on 

the requirements described. 

4. What are the relevant Federal rules 

which may duplicate, overlap or 

conflict with the rule? 

Thirteen Federal agencies, including 

SBA, currently offer mentor-prote ́ge ́

programs aimed at assisting small 

businesses to gain the technical and 

business skills necessary to successfully 

compete in the Federal procurement 

market. While the mentor-prote ́ge ́

programs offered by other agencies 

share SBA’s goal of increasing the 

participation of small businesses in 

Government contracts, the other Federal 

mentor-prote ́ge ́ programs are structured 

differently than SBA’s proposed mentorprote ́ge ́ programs, particularly in terms 

of the incentives offered to mentors. For 

example, some agencies offer additional 

points to a bidder who has a signed 

mentor-prote ́ge ́ agreement in place, 

while other agencies offer the benefit of 

reimbursing mentors for certain costs 

associated with prote ́ge ́s’ business 

development. SBA, as the agency 

authorized to determine small business 

size status, is uniquely qualified to offer 

mentor-prote ́ge ́ program participants the 

distinctive benefit of an exclusion from 

affiliation. Thus, SBA believes that the 

small business mentor-prote ́ge ́ program 

proposed by this rule would 

complement rather than duplicate, 

overlap or conflict with the existing 

Federal mentor-prote ́ge ́ programs by 

offering to small businesses an 

additional and unique avenue through 

which to enhance their Federal 

procurement capabilities. 

5. What alternatives will allow the 

Agency to accomplish its regulatory 

objectives while minimizing the impact 

on small entities? 

Section 1347(b)(3) of the Jobs Act 

authorizes SBA to establish mentorprote ́ge ́ programs for SDVO SBCs, 

HUBZone SBCs, and WOSB concerns, 

modeled on the Agency’s mentorprote ́ge ́ program for small business 

concerns participating in the 8(a) BD 

program. Section 1641 of the NDAA 

authorized SBA to establish a mentorprote ́ge ́ program for all small business 

concerns. An alternative to 

implementing one small business 

mentor-prote ́ge ́ program would be to 

implement the various mentor-prote ́ge ́

programs separately in each of the 

specific substantive area regulations 

(i.e., SDVO, HUBZone, WOSB, 8(a), and 

small business). 

List of Subjects 

13 CFR Part 121 

Administrative practice and 

procedure, Government procurement, 

Government property, Individuals with 

disabilities, Loan programs—business, 

Reporting and recordkeeping 

requirements, Small businesses. 

13 CFR Part 124 

Administrative practice and 

procedures, Government procurement, 

Hawaiian natives, Indians—business 

and finance, Minority businesses, 

Reporting and recordkeeping 

requirements, Tribally-owned concerns, 

Technical assistance. 

13 CFR Part 125 

Government contracts, Government 

procurement, Reporting and 

recordkeeping requirements, Small 

businesses, Technical assistance. 

13 CFR Part 126 

Administrative practice and 

procedure, Government procurement, 

Penalties, Reporting and recordkeeping 

requirements, Small businesses. 

13 CFR Part 127 

Government procurement, Reporting 

and recordkeeping requirements, Small 

businesses. 

13 CFR Part 134 

Administrative practice and 

procedure, Organization and functions 

(Government agencies). 

For the reasons set forth in the 

preamble, SBA proposes to amend 13 

CFR parts 121, 124, 125, 126, 127, and 

134 as follows: 


rljohnson on DSK3VPTVN1PROD with PROPOSALS3
Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 6631 

PART 121—SMALL BUSINESS SIZE 

REGULATIONS 

■ 1. The authority citation for 13 CFR 

part 121 continues to read as follows: 

Authority: 15 U.S.C. 632, 634(b)(6), 636(b), 

662, and 694a(9). 

■ 2. Amend § 121.103 by revising 

paragraphs (b)(2)(ii), (b)(6), the last two 

sentences of the introductory text of 

paragraph (h), and paragraph (h)(3)(ii) to 

read as follows. 

§ 121.103 How does SBA determine 

affiliation? 

* * * * * 

(b) * * * 

(2) * * * 

(ii) Business concerns owned and 

controlled by Indian Tribes, ANCs, 

NHOs, CDCs, or wholly-owned entities 

of Indian Tribes, ANCs, NHOs, or CDCs 

are not considered to be affiliated with 

other concerns owned by these entities 

because of their common ownership or 

common management. In addition, 

affiliation will not be found based upon 

the performance of common 

administrative services so long as 

adequate payment is provided for those 

services. Affiliation may be found for 

other reasons. 

(A) Common administrative services 

which are subject to the exception to 

affiliation include, bookkeeping, 

payroll, recruiting, other human 

resource support, cleaning services, and 

other duties which are otherwise 

unrelated to contract performance or 

management and can be reasonably 

pooled or otherwise performed by a 

holding company or parent entity 

without interfering with the control of 

the subject firm. 

(B) Contract administration services 

include both services that could be 

considered ‘‘common administrative 

services’’ under the exception to 

affiliation and those that could not. 

(1) Contract administration services 

that encompass actual and direct day-today oversight and control of the 

performance of a contract/project are 

not shared common administrative 

services, and would include tasks or 

functions such as negotiating directly 

with the government agency regarding 

proposal terms, contract terms, scope 

and modifications, project scheduling, 

hiring and firing of employees, and 

overall responsibility for the day-to-day 

and overall project and contract 

completion. 

(2) Contract administration services 

that are administrative in nature may 

constitute administrative services that 

can be shared, and would fall within the 

exception to affiliation. These 

administrative services include tasks 

such as record retention not related to 

a specific contract (e.g., employee time 

and attendance records), maintenance of 

databases for awarded contracts, 

monitoring for regulatory compliance, 

template development, and assisting 

accounting with invoice preparation as 

needed. 

(C) Business development may 

include both services that could be 

considered ‘‘common administrative 

services’’ under the exception to 

affiliation and those that could not. 

Efforts at the holding company or parent 

level to identify possible procurement 

opportunities for specific subsidiary 

companies may properly be considered 

‘‘common administrative services’’ 

under the exception to affiliation. 

However, at some point the opportunity 

identified by the holding company’s or 

parent entity’s business development 

efforts becomes concrete enough to 

assign to a subsidiary and at that point 

the subsidiary must be involved in the 

business development efforts for such 

opportunity. At the proposal or bid 

preparation stage of business 

development, the appropriate subsidiary 

company for the opportunity has been 

identified and a representative of that 

company must be involved in preparing 

an appropriate offer. This does not mean 

to imply that one or more 

representatives of a holding company or 

parent entity cannot also be involved in 

preparing an offer. They may be 

involved in assisting with preparing the 

generic part of an offer, but the specific 

subsidiary that intends to ultimately 

perform the contract must control the 

technical and contract specific portions 

of preparing an offer. In addition, once 

award is made, employee assignments 

and the logistics for contract 

performance must be controlled by the 

specific subsidiary company and should 

not be performed at a holding company 

or parent entity level. 

* * * * * 

(6) A firm that has an SBA-approved 

mentor-prote ́ge ́ agreement authorized 

under § 124.520 or § 125.9 of this 

chapter is not affiliated with its mentor 

firm solely because the prote ́ge ́ firm 

receives assistance from the mentor 

under the agreement. Similarly, a 

prote ́ge ́ firm is not affiliated with its 

mentor solely because the prote ́ge ́ firm 

receives assistance from the mentor 

under a federal mentor-prote ́ge ́ program 

where an exception to affiliation is 

specifically authorized by statute or by 

SBA under the procedures set forth in 

§ 121.903. Affiliation may be found in 

either case for other reasons as set forth 

in this section. 

* * * * * 

(h) * * * For purposes of this 

provision and in order to facilitate 

tracking of the number of contract 

awards made to a joint venture, a joint 

venture: must be in writing and must do 

business under its own name; may be in 

the form of a formal or informal 

partnership or exist as a separate limited 

liability company or other separate legal 

entity; and, if it exists as a formal 

separate legal entity, may not be 

populated with individuals intended to 

perform contracts awarded to the joint 

venture (i.e., the joint venture may have 

its own separate employees to perform 

administrative functions, but may not 

have its own separate employees to 

perform contracts awarded to the joint 

venture). SBA may also determine that 

the relationship between a prime 

contractor and its subcontractor is a 

joint venture, and that affiliation 

between the two exists, pursuant to 

paragraph (h)(5) of this section. 

* * * * * 

(3) * * * 

(ii) Two firms approved by SBA to be 

a mentor and prote ́ge ́ under § 125.9 of 

this chapter may joint venture as a small 

business for any Federal government 

prime contract or subcontract, provided 

the prote ́ge ́ qualifies as small for the size 

standard corresponding to the NAICS 

code assigned to the procurement, and 

the joint venture meets the requirements 

of § 125.18(b)(2) and (3), § 126.616(c) 

and (d), or § 127.506(c) and (d) of this 

chapter, as appropriate. 

* * * * * 

§ 121.406 [Amended] 

■ 3. Amend § 121.406(b)(5) introductory 

text by removing the phrase ‘‘paragraph 

(b)(1)(iii)’’ and adding in its place the 

phrase ‘‘paragraph (b)(1)(iv).’’ 

■ 4. Amend § 121.1001 by redesignating 

paragraph (b)(10) as paragraph (b)(11) 

and by adding a new paragraph (b)(10) 

to read as follows: 

§ 121.1001 Who may initiate a size protest 

or request a formal size determination? 

* * * * * 

(b) * * * 

(10) A firm seeking to establish a 

mentor-prote ́ge ́ relationship pursuant to 

§ 125.9 of this chapter (based on its 

status as a small business for its primary 

NAICS code) may request a formal size 

determination in order to verify its 

eligibility as a prote ́ge ́ firm. 

* * * * * 


rljohnson on DSK3VPTVN1PROD with PROPOSALS3
6632 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 

PART 124—8(a) BUSINESS 

DEVELOPMENT/SMALL 

DISADVANTAGED BUSINESS STATUS 

DETERMINATIONS 

■ 5. The authority citation for part 124 

continues to read as follows: 

Authority: 15 U.S.C. 634(b)(6), 636(j), 

637(a), and 637(d); Pub. L. 99–661; Pub. L. 

100–656, sec. 1207; Pub. L. 101–37; Pub. L. 

101–574, section 8021; Pub. L. 108–87; and 

42 U.S.C. 9815. 

■ 6. Amend § 124.103 as follows: 

■ a. Add a sentence at the end of 

paragraph (c)(1); 

■ b. Revise paragraph (c)(2)(ii); 

■ c. Redesignate paragraph (c)(2)(iii) as 

(c)(2)(iv); 

■ d. Add a new paragraph (c)(2)(iii); 

■ e. Revise the introductory text of 

newly redesignated paragraph (c)(2)(iv); 

and 

■ d. Add paragraphs (c)(3) through (6). 

The additions and revisions read as 

follows: 

§ 124.103 Who is socially disadvantaged? 

* * * * * 

(c) * * * (1) * * * Such individual 

should present corroborating evidence 

to support his or her claim(s) of social 

disadvantage where readily available. 

(2) * * * 

(ii) The individual’s social 

disadvantage must be rooted in 

treatment which he or she has 

experienced in American society, not in 

other countries; 

(iii) The individual’s social 

disadvantage must be chronic and 

substantial, not fleeting or insignificant; 

and 

(iv) The individual’s social 

disadvantage must have negatively 

impacted on his or her entry into or 

advancement in the business world. 

SBA will consider any relevant 

evidence in assessing this element, 

including experiences relating to 

education, employment and business 

history (including experiences relating 

to both the applicant firm and any other 

previous firm owned and/or controlled 

by the individual), where applicable. 

* * * * * 

(3) An individual claiming social 

disadvantage must present facts and 

evidence that by themselves establish 

that the individual has suffered social 

disadvantage that has negatively 

impacted his or her entry into or 

advancement in the business world. 

(i) Each instance of alleged 

discriminatory conduct must be 

accompanied by a negative impact on 

the individual’s entry into or 

advancement in the business world in 

order for it to constitute an instance of 

social disadvantage. 

(ii) SBA may disregard a claim of 

social disadvantage where a legitimate 

alternative ground for an adverse 

employment action or other perceived 

adverse action exists and the individual 

has not presented evidence that would 

render his/her claim any more likely 

than the alternative ground. 

Example 1 to paragraph (c)(3)(ii). A 

woman who is not a member of a designated 

group attempts to establish her individual 

social disadvantage based on gender. She 

certifies that while working for company X, 

she received less compensation than her 

male counterpart. Without additional facts, 

that claim is insufficient to establish an 

incident of gender bias that could lead to a 

finding of social disadvantage. Without 

additional facts, it is no more likely that the 

individual claiming disadvantage was paid 

less than her male counterpart because he 

had superior qualifications or because he had 

greater responsibilities in his employment 

position. She must identify her qualifications 

(education, experience, years of employment, 

supervisory functions) as being equal or 

superior to that of her male counterpart in 

order for SBA to consider that particular 

incident may be the result of discriminatory 

conduct. 

Example 2 to paragraph (c)(3)(ii). A 

woman who is not a member of a designated 

group attempts to establish her individual 

social disadvantage based on gender. She 

certifies that while working for company Y, 

she was not permitted to attend a 

professional development conference, even 

though male employees were allowed to 

attend similar conferences in the past. 

Without additional facts, that claim is 

insufficient to establish an incident of gender 

bias that could lead to a finding of social 

disadvantage. It is no more likely that she 

was not permitted to attend the conference 

based on gender bias than based on nondiscriminatory reasons. She must identify 

that she was in the same professional 

position and level as the male employees 

who were permitted to attend similar 

conferences in the past, and she must 

identify that funding for training or 

professional development was available at 

the time she requested to attend the 

conference. 

(iii) SBA may disregard a claim of 

social disadvantage where an individual 

presents evidence of discriminatory 

conduct, but fails to connect the 

discriminatory conduct to consequences 

that negatively impact his or her entry 

into or advancement in the business 

world. 

Example to paragraph (c)(3)(iii). A woman 

who is not a member of a designated group 

attempts to establish her individual social 

disadvantage based on gender. She provides 

instances where one or more male business 

clients utter derogatory statements about her 

because she is a woman. After each instance, 

however, she acknowledges that the clients 

gave her contracts or otherwise continued to 

do business with her. Despite suffering 

discriminatory conduct, this individual has 

not established social disadvantage because 

the discriminatory conduct did not have an 

adverse effect on her business. 

(4) SBA may request an applicant to 

provide additional facts to support his 

or her claim of social disadvantage to 

substantiate that a negative outcome 

was based on discriminatory conduct 

instead of one or more legitimate nondiscriminatory reasons. 

(5) SBA will discount or disbelieve 

statements made by an individual 

seeking to establish his or her 

individual social disadvantage where 

such statements are inconsistent with 

other evidence contained in the record. 

(6) In determining whether an 

individual claiming social disadvantage 

meets the requirements set forth in 

paragraph (c) of this section, SBA will 

determine whether: 

(i) Each specific claim establishes an 

incident of bias or discriminatory 

conduct; 

(ii) Each incident of bias or 

discriminatory conduct negatively 

impacted the individual’s entry into or 

advancement in the business world; and 

(iii) In the totality, the incidents of 

bias or discriminatory conduct that 

negatively impacted the individual’s 

entry into or advancement in the 

business world establish chronic and 

substantial social disadvantage. 

* * * * * 

■ 7. Amend § 124.105 by revising the 

introductory text of paragraph (h)(2) to 

read as follows: 

§ 124.105 What does it mean to be 

unconditionally owned by one or more 

disadvantaged individuals? 

* * * * * 

(h) * * * 

(2) A non-Participant concern in the 

same or similar line of business or a 

principal of such concern may not own 

more than a 10 percent interest in a 

Participant that is in the developmental 

stage or more than a 20 percent interest 

in a Participant in the transitional stage 

of the program, except that a former 

Participant in the same or similar line 

of business or a principal of such a 

former Participant (except those that 

have been terminated from 8(a) BD 

program participation pursuant to 

§§ 124.303 and 124.304) may have an 

equity ownership interest of up to 20 

percent in a current Participant in the 

developmental stage of the program or 

up to 30 percent in a transitional stage 

Participant. 

* * * * * 

§ 124.108 [Amended] 

■ 8. Amend § 124.108 by removing ‘‘10 

percent’’ in paragraph (a)(4) and adding 

in its place ‘‘20 percent.’’ 


rljohnson on DSK3VPTVN1PROD with PROPOSALS3
Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 6633 

■ 9. Amend § 124.109 by adding 

paragraphs (c)(2)(iv) and (c)(4)(iii) to 

read as follows: 

§ 124.109 Do Indian tribes and Alaska 

Native Corporations have any special rules 

for applying to the 8(a) BD program? 

* * * * * 

(c) * * * 

(2) * * * 

(iv) In determining whether a triballyowned concern has obtained, or is likely 

to obtain, a substantial unfair 

competitive advantage within an 

industry category, SBA will examine the 

firm’s participation in the relevant six 

digit NAICS code nationally as 

compared to the overall small business 

share of that industry. 

(A) SBA will consider the firm’s 

percentage share of the national market 

and other relevant factors to determine 

whether the firm is dominant in a 

specific six-digit NAICS code with a 

particular size standard. 

(B) SBA does not contemplate a 

finding of affiliation where a triballyowned concern appears to have 

obtained an unfair competitive 

advantage in a local market, but remains 

competitive, but not dominant, on a 

national basis. 

* * * * * 

(4) * * * 

(iii) The individuals responsible for 

the management and daily operations of 

a tribally-owned concern cannot manage 

more than two Program Participants at 

the same time. 

(A) An individual’s officer position, 

membership on the board of directors or 

position as a tribal leader does not 

necessarily imply that the individual is 

responsible for the management and 

daily operations of a given concern. 

SBA looks beyond these corporate 

formalities and examines the totality of 

the information submitted by the 

applicant to determine which 

individual(s) manage the actual day-today operations of the applicant concern. 

(B) Officers, board members, and/or 

tribal leaders may control a holding 

company overseeing several triballyowned or ANC-owned companies, 

provided they do not actually control 

the day-to-day management of more 

than two current 8(a) BD Program 

Participant firms. 

* * * * * 

■ 10. Amend § 124.110 as follows: 

■ a. Add a sentence to the end of the 

introductory text of paragraph (b); 

■ b. Add paragraphs (b)(1) and (2); 

■ c. Revise paragraph (d); 

■ d. Redesignate paragraph (g) as 

paragraph (h); and 

■ e. Add a new paragraph (g). 

The additions and revisions read as 

follows: 

§ 124.110 Do Native Hawaiian 

Organizations have any special rules for 

applying to the 8(a) BD program? 

* * * * * 

(b) * * * In determining whether an 

NHO-owned concern has obtained, or is 

likely to obtain, a substantial unfair 

competitive advantage within an 

industry category, SBA will examine the 

firm’s participation in the relevant six 

digit NAICS code nationally. 

(1) SBA will consider the firm’s 

percentage share of the national market 

and other relevant factors to determine 

whether the firm is dominant in a 

specific six-digit NAICS code with a 

particular size standard. 

(2) SBA does not contemplate a 

finding of affiliation where an NHOowned concern appears to have 

obtained an unfair competitive 

advantage in a local market, but remains 

competitive, but not dominant, on a 

national basis. 

* * * * * 

(d) An NHO must control the 

applicant or Participant firm. To 

establish that it is controlled by an 

NHO, an applicant or Participant must 

demonstrate that the NHO controls its 

board of directors, managing members, 

managers or managing partners. 

(1) The NHO need not possess the 

technical expertise necessary to run the 

NHO-owned applicant or Participant 

firm. The NHO must have managerial 

experience of the extent and complexity 

needed to run the concern. Management 

experience need not be related to the 

same or similar industry as the primary 

industry classification of the applicant 

or Participant. 

(2) An individual responsible for the 

day-to-day management of an NHOowned firm need not establish personal 

social and economic disadvantage. 

* * * * * 

(g) An NHO-owned firm’s eligibility 

for 8(a) BD participation is separate and 

distinct from the individual eligibility of 

the NHO’s members, directors, or 

managers. 

(1) The eligibility of an NHO-owned 

concern is not affected by the former 

8(a) BD participation of one or more of 

the NHO’s individual members. 

(2) In determining whether an NHO is 

economically disadvantaged, SBA may 

consider the individual economic status 

of an NHO member or director even if 

the member or director previously used 

his or her disadvantaged status to 

qualify an individually owned 8(a) 

applicant or Participant. 

* * * * * 

■ 11. Amend § 124.111 by adding a 

sentence to the end of the introductory 

text of paragraph (c), and by adding 

paragraphs (c)(1) and (2) to read as 

follows: 

§ 124.111 Do Community Development 

Corporations (CDCs) have any special rules 

for applying to the 8(a) BD program? 

* * * * * 

(c) * * * In determining whether a 

CDC-owned concern has obtained, or is 

likely to obtain, a substantial unfair 

competitive advantage within an 

industry category, SBA will examine the 

firm’s participation in the relevant six 

digit NAICS code nationally. 

(1) SBA will consider the firm’s 

percentage share of the national market 

and other relevant factors to determine 

whether the firm is dominant in a 

specific six-digit NAICS code with a 

particular size standard. 

(2) SBA does not contemplate a 

finding of affiliation where a CDCowned concern appears to have 

obtained an unfair competitive 

advantage in a local market, but remains 

competitive, but not dominant, on a 

national basis. 

* * * * * 

■ 12. Amend § 124.112 by designating 

the text of paragraph (e) as paragraph 

(e)(1), and adding paragraph (e)(2) to 

read as follows: 

§ 124.112 What criteria must a business 

meet to remain eligible to participate in the 

8(a) BD program? 

* * * * * 

(e) Change in primary industry 

classification. (1) * * * 

(2) SBA may change the primary 

industry classification contained in a 

Participant’s business plan where the 

greatest portion of the Participant’s total 

revenues during a three-year period 

have evolved from one NAICS code to 

another. As part of its annual review, 

SBA will consider whether the primary 

NAICS code contained in a Participant’s 

business plan continues to be 

appropriate. 

(i) Where SBA believes that the 

primary industry classification 

contained in a Participant’s business 

plan does not match the Participant’s 

actual revenues over the Participant’s 

most recently completed three fiscal 

years, SBA may notify the Participant of 

its intent to change the Participant’s 

primary industry classification. 

(ii) A Participant may challenge SBA’s 

intent to change its primary industry 

classification by demonstrating why it 

believes the primary industry 

classification contained in its business 

plan continues to be appropriate, 

despite an increase in revenues in a 

secondary NAICS code beyond those 


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received in its designated primary 

industry classification. 

* * * * * 

■ 13. Amend § 124.305 by removing the 

‘‘.’’ at the end of paragraph (h)(1)(ii) and 

adding in its place ‘‘; or’’, adding 

paragraphs (h)(1)(iii) and (h)(1)(iv), 

designating paragraph (h)(5) as (h)(6) 

and adding a new paragraph (h)(5) to 

read as follows: 

§ 124.305 What is suspension and how is 

a Participant suspended from the 8(a) BD 

program? 

* * * * * 

(h)(1) * * * 

(iii) A Participant has a principal 

place of business located in a Federally 

declared disaster area and elects to 

suspend its participation in the 8(a) BD 

program for a period of up to one-year 

from the date of the disaster declaration 

to allow the firm to recover from the 

disaster and take full advantage of the 

program. A Participant that elects to be 

suspended may request that the 

suspension be lifted prior to the end 

date of the original request; or 

(iv) Federal appropriations for one or 

more federal departments or agencies 

have lapsed, SBA has previously 

accepted an offer for a sole source 8(a) 

award on behalf of the Participant, 

award is pending, and the Participant 

elects to suspend its participation in the 

8(a) BD program during the lapse in 

federal appropriations. 

* * * * * 

(5) Where a Participant is suspended 

pursuant to (h)(1)(iv) of this section, the 

Participant must notify SBA when the 

lapse in appropriation ends so that SBA 

can immediately lift the suspension. 

When the suspension is lift, the length 

of the suspension will be added to the 

concern’s program term. 

* * * * * 

■ 14. Amend § 124.501 by revising the 

first sentence of paragraph (a) and by 

adding two sentences to the end of 

paragraph (b) to read as follows: 

§ 124.501 What general provisions apply 

to the award of 8(a) contracts? 

(a) Pursuant to section 8(a) of the 

Small Business Act, SBA is authorized 

to enter into all types of contracts with 

other Federal agencies regardless of the 

place of performance, including 

contracts to furnish equipment, 

supplies, services, leased real property, 

or materials to them or to perform 

construction work for them, and to 

contract the performance of these 

contracts to qualified Participants. 

* * * 

(b) * * * In addition, for multiple 

award contracts not set-aside for the 8(a) 

BD program, a procuring agency may 

set-aside specific orders to be competed 

only among eligible 8(a) Participants, 

regardless of the place of performance. 

Such an order may be awarded as an 

8(a) award where the order was offered 

to and accepted by SBA as an 8(a) award 

and the order specifies that the 

performance of work and/or nonmanufacturer rule requirements apply 

as appropriate. 

* * * * * 

■ 15. Amend § 124.513 as follows: 

■ a. Add paragraph (b)(4); 

■ b. Revise paragraphs (c)(2), (d) and 

(e)(1); 

■ c. Add paragraphs (e)(2)(iii) and (e)(3); 

■ d. Redesignate paragraphs (f), (g), (h) 

and (i) as paragraphs (g), (h), (i) and (k), 

respectively; 

■ e. Add new paragraph (f); 

■ f. Revise newly redesignated 

paragraphs (g) and (i); and 

■ g. Add paragraph (j) and (l). 

The additions and revisions read as 

follows: 

§ 124.513 Under what circumstances can a 

joint venture be awarded an 8(a) contract? 

* * * * * 

(b) * * * 

(4) SBA approval of a joint venture 

agreement pursuant to paragraph (e) of 

this section does not equate to a formal 

size determination. As such, despite 

SBA’s approval of a joint venture, the 

size status of a joint venture that is the 

apparent successful offeror for a 

competitive 8(a) contract may be 

protested pursuant to § 121.1001(a)(2) of 

this chapter. See § 124.517(b). 

(c) * * * 

(2) Designating an 8(a) Participant as 

the managing venturer of the joint 

venture and an employee of an 8(a) 

Participant as the project manager 

responsible for performance of the 

contract. 

* * * * * 

(d) Performance of work. (1) For any 

8(a) contract, including those between a 

prote ́ge ́ and a mentor authorized by 

§ 124.520, the joint venture must 

perform the applicable percentage of 

work required by § 124.510 of this 

chapter. 

(2) The 8(a) partner(s) to the joint 

venture must perform at least 40% of 

the work performed by the joint venture. 

(i) The work performed by the 8(a) 

partner(s) to a joint venture must be 

more than administrative or ministerial 

functions so that the 8(a) partners gain 

substantive experience. 

(ii) The amount of work done by the 

partners will be aggregated and the work 

done by the 8(a) partner(s) must be at 

least 40% of the total done by all 

partners. In determining the amount of 

work done by a non-8(a) partner, all 

work done by the non-8(a) partner and 

any of its affiliates at any subcontracting 

tier will be counted. 

(e) * * * (1) SBA must approve a joint 

venture agreement prior to the award of 

an 8(a) contract on behalf of the joint 

venture. A Participant may submit a 

joint venture agreement to SBA for 

approval at any time, whether or not in 

connection with a specific 8(a) 

procurement. 

(2) * * * 

(iii) If a second or third contract to be 

awarded a joint venture is not an 8(a) 

contract, the Participant would not have 

to submit an addendum setting forth 

contract performance for the non-8(a) 

contract(s) to SBA for approval. 

(3) Where a joint venture has been 

established and approved by SBA 

without a corresponding specific 8(a) 

contract award (including where a joint 

venture is established in connection 

with a blanket purchase agreement 

(BPA), basic agreement (BA), or basic 

ordering agreement (BOA)), the 

Participant must submit an addendum 

to the joint venture agreement, setting 

forth the performance requirements, to 

SBA for approval for each of the three 

8(a) contracts authorized to be awarded 

to the joint venture. In the case of a 

BPA, BA or BOA, each order issued 

under the agreement would count as a 

separate contract award, and SBA 

would need to approve the addendum 

for each order prior to award of the 

order to the joint venture. 

(f) Past performance. When evaluating 

the past performance of an entity 

submitting an offer for an 8(a) contract 

as a joint venture approved by SBA 

pursuant to this section, a procuring 

activity must consider work done 

individually by each partner to the joint 

venture as well as any work done by the 

joint venture itself previously. 

(g) Contract execution. Where SBA 

has approved a joint venture, the 

procuring activity will execute an 8(a) 

contract in the name of the joint venture 

entity or the 8(a) Participant, but in 

either case will identify the award as 

one to an 8(a) joint venture or an 8(a) 

mentor-prote ́ge ́ joint venture, as 

appropriate. 

* * * * * 

(i) Inspection of records. The joint 

venture partners must allow SBA’s 

authorized representatives, including 

representatives authorized by the SBA 

Inspector General, during normal 

business hours, access to its files to 

inspect and copy all records and 

documents. 

(j) Certification of compliance. Prior 

to the performance of any 8(a) contract 

by a joint venture, the 8(a) BD 


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Participant to the joint venture must 

submit a written certification to the 

contracting officer and SBA, signed by 

an authorized official of each partner to 

the joint venture, stating as follows: 

(i) The parties have entered into a 

joint venture agreement that fully 

complies with paragraph (c) of this 

section; 

(ii) The parties will perform the 

contract in compliance with the joint 

venture agreement and with the 

performance of work requirements set 

forth in paragraph (d) of this section. 

(iii) The parties have obtained SBA’s 

approval of the joint venture agreement 

and any addendum to that agreement 

and that there have been no 

modifications to the agreement that SBA 

has not approved. 

* * * * * 

(l) Basis for suspension or debarment. 

The Government may consider the 

following as a ground for suspension or 

debarment as a willful violation of a 

regulatory provision or requirement 

applicable to a public agreement or 

transaction: 

(1) Failure to enter a joint venture 

agreement that complies with paragraph 

(c) of this section; 

(2) Failure to perform a contract in 

accordance with the joint venture 

agreement or performance of work 

requirements in paragraph (d) of this 

section; or 

(3) Failure to submit the certification 

required by paragraph (e) of this section 

or comply with paragraph (i) of this 

section. 

■ 16. Amend § 124.520 as follows: 

■ a. Remove the words ‘‘or non-profit 

entity’’ from the first sentence of the 

introductory text of paragraph (b) and 

from the second sentence of paragraph 

(b)(2); 

■ b. Revise the last sentence of 

paragraph (b)(2); 

■ c. Revise paragraph (c)(1); 

■ d. Revise paragraph (d)(1)(iii); 

■ e. Redesignate paragraphs (e)(2) 

through(e)(5) as paragraphs (e)(3) 

through (e)(6), respectively; and 

■ f. Add a new paragraph (e)(2) and add 

paragraphs (e)(7), and (e)(8). 

The revisions and additions read as 

follows: 

§ 124.520 What are the rules governing 

SBA’s 8(a) mentor-prote ́ge ́ program? 

* * * * * 

(b) * * * 

(2) * * * Under no circumstances 

will a mentor be permitted to have more 

than three prote ́ge ́s at one time in the 

aggregate under the mentor-prote ́ge ́

programs authorized by §§ 124.520 and 

125.9 of this chapter. 

* * * * * 

* * * * * 

(c) * * * (1) In order to initially 

qualify as a prote ́ge ́ firm, a concern 

must: 

(i) Qualify as small for the size 

standard corresponding to its primary 

NAICS code; and 

(ii) Demonstrate how the business 

development assistance to be received 

through its proposed mentor-prote ́ge ́

relationship would advance the goals 

and objectives set forth in its business 

plan. 

* * * * * 

(d) * * * 

(1) * * * 

(iii) Once a prote ́ge ́ firm graduates or 

otherwise leaves the 8(a) BD program or 

grows to be other than small for its 

primary NAICS code, it will not be 

eligible for any further 8(a) contracting 

benefits from its 8(a) BD mentor-prote ́ge ́

relationship. Leaving the 8(a) BD 

program, growing to be other than small 

for its primary NAICS code, or 

terminating the mentor-prote ́ge ́

relationship while a prote ́ge ́ is still in 

the program, does not, however, 

generally affect contracts previously 

awarded to a joint venture between the 

prote ́ge ́ and its mentor. A prote ́ge ́ firm 

that graduates or otherwise leaves the 

8(a) BD program but continues to 

qualify as a small business may transfer 

its 8(a) mentor-prote ́ge ́ relationship to a 

small business mentor-prote ́ge ́

relationship. 

(A) A joint venture between a prote ́ge ́

firm that continues to qualify as small 

and its mentor may certify its status as 

small for any Government contract or 

subcontract so long as the prote ́ge ́ (and/ 

or the joint venture) has not been 

determined to be other than small for 

the size standard corresponding to the 

procurement at issue (or any lessor size 

standard). 

(B) Where the prote ́ge ́ firm no longer 

qualifies as small, the receipts and/or 

employees of the prote ́ge ́ and mentor 

would generally be aggregated in 

determining the size of any joint venture 

between the mentor and prote ́ge ́ after 

that date. 

(C) Except for contracts with 

durations of more than five years 

(including options), a contract awarded 

to a joint venture between a prote ́ge ́ and 

a mentor as a small business continues 

to qualify as an award to small business 

for the life of that contract and the joint 

venture remains obligated to continue 

performance on that contract. 

(D) For contracts with durations of 

more than five years (including 

options), where size re-certification is 

required no more than 120 days prior to 

the end of the fifth year of the contract 

and no more than 120 days prior to 

exercising any option thereafter, once 

the prote ́ge ́ firm no longer qualifies as 

small for its primary NAICS code, the 

joint venture must aggregate the 

receipts/employees of the partners to 

the joint venture in determining 

whether it continues to qualify as and 

can re-certify itself to be a small 

business under the size standard 

corresponding to the NAICS code 

assigned to that contract. The rules set 

forth in § 121.404(g)(3) of this chapter 

apply in such circumstances. 

* * * * * 

(e) * * * 

(2) A firm seeking SBA’s approval to 

be a prote ́ge ́ must identify any other 

mentor-prote ́ge ́ relationship it has 

through another federal agency or SBA 

and provide a copy of each such 

mentor-prote ́ge ́ agreement to SBA. The 

8(a) BD mentor-prote ́ge ́ agreement must 

identify how the assistance to be 

provided by the proposed mentor is 

different from assistance provided to the 

prote ́ge ́ through another mentor-prote ́ge ́

relationship, either with the same or a 

different mentor. 

* * * * * 

(7) If control of the mentor changes 

(through a stock sale or otherwise), the 

previously approved mentor-prote ́ge ́

relationship may continue provided 

that, after the change in control, the 

mentor expresses in writing to SBA that 

it acknowledges the mentor-prote ́ge ́

agreement and certifies that it will 

continue to abide by its terms. 

(8) SBA may terminate the mentorprote ́ge ́ agreement at any time if it 

determines that the prote ́ge ́ is not 

benefiting from the relationship or that 

the parties are not complying with any 

term or condition of the mentor prote ́ge ́

agreement. In the event SBA terminates 

the relationship, the mentor-prote ́ge ́

joint venture is obligated to complete 

any previously awarded contracts 

unless the procuring agency issues a 

stop work order. 

* * * * * 

§ 124.604 [Amended] 

■ 17. Amend § 124.604 by removing the 

phrase ‘‘annual review submission’’ and 

adding in its place the phrase ‘‘annual 

financial statement submission (see 

§ 124.602)’’ in the first sentence. 

§ 124.520 [Amended] 

■ 18. Amend § 124.1002 by removing 

paragraph (b)(4). 


rljohnson on DSK3VPTVN1PROD with PROPOSALS3
6636 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 

PART 125—GOVERNMENT 

CONTRACTING PROGRAMS 

■ 19. The authority citation for part 125 

is revised to read as follows: 

Authority: 15 U.S.C. 632(p), (q); 634(b)(6); 

637; 644; 657f; 657r; Pub. L. 111–240, 124 

Stat. 2504. 

■ 20. Amend § 125.2 by revising the 

third sentence of the introductory text to 

paragraph (a) to read as follows: 

§ 125.2 What are SBA’s and the procuring 

agency’s responsibilities when providing 

contracting assistance to small 

businesses? 

(a) General. * * * Small business 

concerns must receive any award 

(including orders, and orders placed 

against Multiple Award Contracts) or 

contract, part of any such award or 

contract, any contract for the sale of 

Government property, or any contract 

resulting from a reverse auction, 

regardless of the place of performance, 

which SBA and the procuring or 

disposal agency determine to be in the 

interest of: * * * 

* * * * * 

■ 21. Amend § 125.5 by revising the 

second and third sentences of paragraph 

(a)(1) to read as follows: 

§ 125.5 What is the Certificate of 

Competency Program? 

(a) General. (1) * * * A COC is a 

written instrument issued by SBA to a 

Government contracting officer, 

certifying that one or more named small 

business concerns possess the 

responsibility to perform a specific 

Government procurement (or sale) 

contract, including any contract 

deriving from a reverse auction. The 

COC Program is applicable to all 

Government procurement actions, 

including Multiple Award Contracts 

and orders placed against Multiple 

Award Contracts, where the contracting 

officer has used any issues of capacity 

or credit (responsibility) to determine 

suitability for an award. * * * 

* * * * * 

§ 125.6 [Amended] 

■ 22. Amend § 125.6 by removing 

‘‘§ 125.15’’ from the introductory text of 

paragraph (b) and adding in its place 

‘‘§ 125.18’’, and by removing 

‘‘§ 125.15(b)(3)’’ from paragraph (b)(5) 

and adding in its place ‘‘§ 125.18(b)(3)’’. 

§§ 125.8 through 125.30 [Redesignated as 

§§ 125.11 through 125.33] 

■ 23. Amend part 125 by redesignating 

§§ 125.8 through 125.30 as §§ 125.11 

through 125.33, respectively. 

■ 24. Add new §§ 125.8, 125.9 and 

125.10 to the undesignated sections 

preceding Subpart A to read as follows: 

§ 125.8 What requirements must a joint 

venture satisfy to submit an offer for a 

procurement or sale set aside or reserved 

for small business? 

(a) General. A joint venture may 

qualify as a small business as long as the 

partners to the joint venture in the 

aggregate meet the applicable size 

standard or qualify as small under one 

of the exceptions to affiliation set forth 

in § 121.103(h)(3) of this chapter. 

(b) Contents of joint venture 

agreement. (1) A joint venture 

agreement between two or more entities 

that individually qualify as small need 

not be in any specific form or contain 

any specific conditions in order for the 

joint venture to qualify as a small 

business. 

(2) Any joint venture agreement to 

perform a contract set aside or reserved 

for small business between a prote ́ge ́

small business and a mentor authorized 

by § 125.9 or § 124.520 of this chapter 

must contain a provision: 

(i) Setting forth the purpose of the 

joint venture; 

(ii) Designating a small business as 

the managing venturer of the joint 

venture, and an employee of the small 

business managing venturer as the 

project manager responsible for 

performance of the contract; 

(iii) Stating that with respect to a 

separate legal entity joint venture, the 

small business must own at least 51% 

of the joint venture entity; 

(iv) Stating that the small business 

must receive profits from the joint 

venture commensurate with the work 

performed by the small business, or in 

the case of a separate legal entity joint 

venture, commensurate with their 

ownership interests in the joint venture; 

(v) Providing for the establishment 

and administration of a special bank 

account in the name of the joint venture. 

This account must require the signature 

of all parties to the joint venture or 

designees for withdrawal purposes. All 

payments due the joint venture for 

performance on a contract set aside or 

reserved for small business will be 

deposited in the special account; all 

expenses incurred under the contract 

will be paid from the account as well; 

(vi) Itemizing all major equipment, 

facilities, and other resources to be 

furnished by each party to the joint 

venture, with a detailed schedule of cost 

or value of each; 

(vii) Specifying the responsibilities of 

the parties with regard to negotiation of 

the contract, source of labor, and 

contract performance, including ways 

that the parties to the joint venture will 

ensure that the joint venture and the 

small business partner to the joint 

venture will meet the performance of 

work requirements set forth in 

paragraph (c) of this section; 

(viii) Obligating all parties to the joint 

venture to ensure performance of a 

contract set aside or reserved for small 

business and to complete performance 

despite the withdrawal of any member; 

(ix) Designating that accounting and 

other administrative records relating to 

the joint venture be kept in the office of 

the small business managing venturer, 

unless approval to keep them elsewhere 

is granted by the District Director or his/ 

her designee upon written request; 

(x) Requiring that the final original 

records be retained by the small 

business managing venturer upon 

completion of any contract set aside or 

reserved for small business that was 

performed by the joint venture; 

(xi) Stating that quarterly financial 

statements showing cumulative contract 

receipts and expenditures (including 

salaries of the joint venture’s principals) 

must be submitted to SBA not later than 

45 days after each operating quarter of 

the joint venture; and 

(xii) Stating that a project-end profit 

and loss statement, including a 

statement of final profit distribution, 

must be submitted to SBA no later than 

90 days after completion of the contract. 

(c) Performance of work. (1) For any 

contract set aside or reserved for small 

business that is to be performed by a 

joint venture between a small business 

prote ́ge ́ and its SBA-approved mentor 

authorized by § 125.9, the joint venture 

must perform the applicable percentage 

of work required by § 125.6, and the 

small business partner to the joint 

venture must perform at least 40% of 

the work performed by the joint venture. 

(2) The work performed by the small 

business partner to a joint venture must 

be more than administrative or 

ministerial functions so that it gains 

substantive experience. 

(3) The amount of work done by the 

partners will be aggregated and the work 

done by the small business prote ́ge ́

partner must be at least 40% of the total 

done by the partners. In determining the 

amount of work done by a mentor 

participating in a joint venture with a 

small business prote ́ge ́, all work done by 

the mentor and any of its affiliates at 

any subcontracting tier will be counted. 

(d) Certification of compliance. Prior 

to the performance of any contract set 

aside or reserved for small business by 

a joint venture between a prote ́ge ́ small 

business and a mentor authorized by 

§ 125.9, the small business partner to 

the joint venture must submit a written 

certification to the contracting officer 

and SBA, signed by an authorized 

official of each partner to the joint 

venture, stating as follows: 


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(i) The parties have entered into a 

joint venture agreement that fully 

complies with paragraph (b) of this 

section; 

(ii) The parties will perform the 

contract in compliance with the joint 

venture agreement and with the 

performance of work requirements set 

forth in paragraph (c) of this section. 

(e) Past performance. When 

evaluating the past performance of an 

entity submitting an offer for a contract 

set aside or reserved for small business 

as a joint venture established pursuant 

to this section, a procuring activity must 

consider work done individually by 

each partner to the joint venture as well 

as any work done by the joint venture 

itself previously. 

(f) Contract execution. The procuring 

activity will execute a contract set aside 

or reserved for small business in the 

name of the joint venture entity or a 

small business partner to the joint 

venture, but in either case will identify 

the award as one to a small business 

joint venture or a small business 

mentor-prote ́ge ́ joint venture, as 

appropriate. 

(g) Inspection of records. The joint 

venture partners must allow SBA’s 

authorized representatives, including 

representatives authorized by the SBA 

Inspector General, during normal 

business hours, access to its files to 

inspect and copy all records and 

documents. 

(h) Performance of work reports. In 

connection with any contract set aside 

or reserved for small business that is 

awarded to a joint venture between a 

prote ́ge ́ small business and a mentor 

authorized by § 125.9, the small 

business partner must describe how it is 

meeting or has met the applicable 

performance of work requirements for 

each contract set aside or reserved for 

small business that it performs as a joint 

venture. 

(1) The small business partner to the 

joint venture must annually submit a 

report to the relevant contracting officer 

and to the SBA, signed by an authorized 

official of each partner to the joint 

venture, explaining how the 

performance of work requirements are 

being met for each contract set aside or 

reserved for small business that is 

performed during the year. 

(2) At the completion of every 

contract set aside or reserved for small 

business that is awarded to a joint 

venture between a prote ́ge ́ small 

business and a mentor authorized by 

§ 125.9, the small business partner to 

the joint venture must submit a report 

to the relevant contracting officer and to 

the SBA, signed by an authorized 

official of each partner to the joint 

venture, explaining how and certifying 

that the performance of work 

requirements were met for the contract, 

and further certifying that the contract 

was performed in accordance with the 

provisions of the joint venture 

agreement that are required under 

paragraph (b) of this section. 

(i) Basis for suspension or debarment. 

For any joint venture between a prote ́ge ́

small business and a mentor authorized 

by § 125.9, the Government may 

consider the following as a ground for 

suspension or debarment as a willful 

violation of a regulatory provision or 

requirement applicable to a public 

agreement or transaction: 

(1) Failure to enter a joint venture 

agreement that complies with paragraph 

(b) of this section; 

(2) Failure to perform a contract in 

accordance with the joint venture 

agreement or performance of work 

requirements in paragraph (c) of this 

section; or 

(3) Failure to submit the certification 

required by paragraph (d) of this section 

or comply with paragraph (g) of this 

section. 

(j) Any person with information 

concerning a joint venture’s compliance 

with the performance of work 

requirements may report that 

information to SBA and/or the SBA 

Office of Inspector General. 

§ 125.9 What are the rules governing 

SBA’s small business mentor-prote ́ge ́

program? 

(a) General. The small business 

mentor-prote ́ge ́ program is designed to 

enhance the capabilities of prote ́ge ́ firms 

by requiring approved mentors to 

provide business development 

assistance to prote ́ge ́ firms and to 

improve the prote ́ge ́ firms’ ability to 

successfully compete for federal 

contracts. This assistance may include 

technical and/or management 

assistance; financial assistance in the 

form of equity investments and/or loans; 

subcontracts; and/or assistance in 

performing prime contracts with the 

Government through joint venture 

arrangements. Mentors are encouraged 

to provide assistance relating to the 

performance of contracts set-aside or 

reserved for small business so that 

prote ́ge ́ firms may more fully develop 

their capabilities. 

(b) Mentors. Any concern that 

demonstrates a commitment and the 

ability to assist small business concerns 

may act as a mentor and receive benefits 

as set forth in this section. This includes 

other than small businesses. 

(1) In order to qualify as a mentor, a 

concern must demonstrate that it: 

(i) Possesses a good financial 

condition; 

(ii) Possesses good character; 

(iii) Does not appear on the federal list 

of debarred or suspended contractors; 

and 

(iv) Can impart value to a prote ́ge ́ firm 

due to lessons learned and practical 

experience gained or through its 

knowledge of general business 

operations and government contracting. 

(2) In order to demonstrate that it 

possesses a good financial condition, a 

firm seeking to be a mentor must submit 

to the SBA copies of the federal tax 

returns it submitted to the IRS, or 

audited financial statements, including 

any notes, or in the case of publicly 

traded concerns, the filings required by 

the Securities and Exchange 

Commission (SEC), for the past three 

years. 

(3) Once approved, a mentor must 

annually certify that it continues to 

possess good character and a favorable 

financial position. 

(4) Generally, a mentor will have no 

more than one prote ́ge ́ at a time. 

However, the Director of Government 

Contracting (D/GC), or designee, may 

authorize a concern to mentor more 

than one prote ́ge ́ at a time where it can 

demonstrate that the additional mentorprote ́ge ́ relationship will not adversely 

affect the development of either prote ́ge ́

firm (e.g., the second firm may not be 

a competitor of the first firm). Under no 

circumstances will a mentor be 

permitted to have more than three 

prote ́ge ́s at one time in the aggregate 

under the mentor-prote ́ge ́ programs 

authorized by §§ 124.520 and 125.9 of 

this chapter. 

(c) Prote ́ge ́s. (1) In order to initially 

qualify as a prote ́ge ́ firm, a concern must 

qualify as small for the size standard 

corresponding to its primary NAICS 

code. SBA will verify that a firm 

qualifies as a small business under its 

primary NAICS code before approving 

that firm to act as a prote ́ge ́. This 

verification may take place either as part 

of a firm’s request for participation in 

the small business mentor-prote ́ge ́

program, or as part of a size protest 

determination relating to the size 

standard corresponding to the NAICS 

code for its primary NAICS code prior 

to that time. 

(i) Where SBA has previously found 

the firm to qualify as small pursuant to 

a size protest relating to the size 

standard corresponding to the NAICS 

code for its primary NAICS code (or 

with respect to a size standard that is 

smaller than that associated with its 

primary NAICS code), the firm must 

certify that there has been no change in 

its size status since that determination. 


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(ii) Where SBA has not previously 

found the firm to qualify as small 

pursuant to a size protest relating to the 

size standard corresponding to the 

NAICS code for its primary NAICS code 

(or with respect to a size standard that 

is smaller than that associated with its 

primary NAICS code), the firm must 

request a formal size determination 

pursuant to § 121.1001(b)(10) of this 

chapter. 

(2) A prote ́ge ́ firm may generally have 

only one mentor at a time. The D/GC, 

or designee, may approve a second 

mentor for a particular prote ́ge ́ firm 

where the second relationship will not 

compete or otherwise conflict with the 

assistance set forth in the first mentorprote ́ge ́ relationship and: 

(i) The second relationship pertains to 

an unrelated NAICS code; or 

(ii) The prote ́ge ́ firm is seeking to 

acquire a specific expertise that the first 

mentor does not possess. 

(3) A prote ́ge ́ may not become a 

mentor and retain its prote ́ge ́ status. The 

prote ́ge ́ must terminate the mentorprote ́ge ́ agreement with its mentor 

before it will be approved as a mentor 

to another small business concern. 

(4) SBA may examine the Service 

Disabled Veteran Owned status or 

Women Owned Small Business status of 

an applicant concern that claims such 

status in any Federal procurement 

database. 

(d) Benefits. (1) A prote ́ge ́ and mentor 

may joint venture as a small business for 

any government prime contract or 

subcontract, provided the prote ́ge ́

qualifies as small for the procurement. 

Such a joint venture may seek any type 

of small business contract (i.e., small 

business set-aside, 8(a), HUBZone, 

SDVO, or WOSB/EDWOSB) for which 

the prote ́ge ́ firm qualifies. 

(i) SBA must approve the mentorprote ́ge ́ agreement before the two firms 

may submit an offer as a joint venture 

on a particular government prime 

contract or subcontract in order for the 

joint venture to receive the exclusion 

from affiliation. 

(ii) In order to receive the exclusion 

from affiliation, the joint venture must 

meet the requirements set forth in 

§ 125.8(b)(2), (c) and (d). 

(iii) Once a prote ́ge ́ firm no longer 

qualifies as a small business for the size 

standard corresponding to its primary 

NAICS code, it will not be eligible for 

any further contracting benefits from its 

mentor-prote ́ge ́ relationship. However, a 

change in the prote ́ge ́’s size status does 

not generally affect contracts previously 

awarded to a joint venture between the 

prote ́ge ́ and its mentor. 

(A) Except for contracts with 

durations of more than five years 

(including options), a contract awarded 

to a joint venture between a prote ́ge ́ and 

a mentor as a small business continues 

to qualify as an award to small business 

for the life of that contract and the joint 

venture remains obligated to continue 

performance on that contract. 

(B) For contracts with durations of 

more than five years (including 

options), where size re-certification is 

required under § 121.404(g)(3) of this 

chapter no more than 120 days prior to 

the end of the fifth year of the contract 

and no more than 120 days prior to 

exercising any option thereafter, once 

the prote ́ge ́ no longer qualifies as small 

for the size standard corresponding to 

its primary NAICS code, the joint 

venture must aggregate the receipts/

employees of the partners to the joint 

venture in determining whether it 

continues to qualify as and can recertify itself to be a small business 

under the size standard corresponding 

to the NAICS code assigned to that 

contract. The rules set forth in 

§ 121.404(g)(3) of this chapter apply in 

such circumstances. 

(2) In order to raise capital, the 

prote ́ge ́ firm may agree to sell or 

otherwise convey to the mentor an 

equity interest of up to 40% in the 

prote ́ge ́ firm. 

(3) Notwithstanding the mentorprote ́ge ́ relationship, a prote ́ge ́ firm may 

qualify for other assistance as a small 

business, including SBA financial 

assistance. 

(4) No determination of affiliation or 

control may be found between a prote ́ge ́

firm and its mentor based solely on the 

mentor-prote ́ge ́ agreement or any 

assistance provided pursuant to the 

agreement. However, affiliation may be 

found for other reasons set forth in 

§ 121.103 of this chapter. 

(e) Written agreement. (1) The mentor 

and prote ́ge ́ firms must enter a written 

agreement setting forth an assessment of 

the prote ́ge ́’s needs and providing a 

detailed description and timeline for the 

delivery of the assistance the mentor 

commits to provide to address those 

needs (e.g., management and/or 

technical assistance, loans and/or equity 

investments, cooperation on joint 

venture projects, or subcontracts under 

prime contracts being performed by the 

mentor). The mentor-prote ́ge ́ agreement 

must: 

(i) Address how the assistance to be 

provided through the agreement will 

help the prote ́ge ́ firm meet its goals as 

defined in its business plan; 

(ii) Establish a single point of contact 

in the mentor concern who is 

responsible for managing and 

implementing the mentor-prote ́ge ́

agreement; and 

(iii) Provide that the mentor will 

provide such assistance to the prote ́ge ́

firm for at least one year. 

(2) A firm seeking SBA’s approval to 

be a prote ́ge ́ must identify any other 

mentor-prote ́ge ́ relationship it has 

through another federal agency or SBA 

and provide a copy of each such 

mentor-prote ́ge ́ agreement to SBA. The 

small business mentor-prote ́ge ́

agreement must identify how the 

assistance to be provided by the 

proposed mentor is different from 

assistance provided to the prote ́ge ́

through another mentor-prote ́ge ́

relationship, either with the same or a 

different mentor. 

(3) The written agreement must be 

approved by the D/GC or designee. The 

agreement will not be approved if SBA 

determines that the assistance to be 

provided is not sufficient to promote 

any real developmental gains to the 

prote ́ge ́, or if SBA determines that the 

agreement is merely a vehicle to enable 

the mentor to receive small business 

contracts. 

(4) The agreement must provide that 

either the prote ́ge ́ or the mentor may 

terminate the agreement with 30 days 

advance notice to the other party to the 

mentor-prote ́ge ́ relationship and to SBA. 

(5) SBA will review the mentorprote ́ge ́ relationship annually to 

determine whether to approve its 

continuation for another year. The term 

of a mentor-prote ́ge ́ agreement may not 

exceed three years. A prote ́ge ́ may have 

one three-year mentor-prote ́ge ́

agreement with one entity and one 

three-year mentor-prote ́ge ́ agreement 

with another entity, or two three-year 

mentor-prote ́ge ́ agreements (successive 

or otherwise) with the same entity. 

(6) SBA must approve all changes to 

a mentor-prote ́ge ́ agreement in advance, 

and any changes made to the agreement 

must be provided in writing. If the 

parties to the mentor-prote ́ge ́

relationship change the mentor-prote ́ge ́

agreement without prior approval by 

SBA, SBA shall terminate the mentorprote ́ge ́ relationship and may also 

propose suspension or debarment of one 

or both of the firms pursuant to 

paragraph (h) of this section where 

appropriate. 

(7) If control of the mentor changes 

(through a stock sale or otherwise), the 

previously approved mentor-prote ́ge ́

relationship may continue provided 

that, after the change in control, the 

mentor expresses in writing to SBA that 

it acknowledges the mentor-prote ́ge ́

agreement and certifies that it will 

continue to abide by its terms. 

(8) SBA may terminate the mentorprote ́ge ́ agreement at any time if it 

determines that the prote ́ge ́ is not 


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benefiting from the relationship or that 

the parties are not complying with any 

term or condition of the mentor prote ́ge ́

agreement. In the event SBA terminates 

the relationship, the mentor-prote ́ge ́

joint venture is obligated to complete 

any previously awarded contracts 

unless the procuring agency issues a 

stop work order. 

(f) Decision to decline mentor-prote ́ge ́

relationship. (1) Where SBA declines to 

approve a specific mentor-prote ́ge ́

agreement, the prote ́ge ́ may request the 

D/GC to reconsider the Agency’s initial 

decline decision by filing a request for 

reconsideration within 45 calendar days 

of receiving notice that its mentorprote ́ge ́ agreement was declined. The 

prote ́ge ́ may revise the proposed 

mentor-prote ́ge ́ agreement and provide 

any additional information and 

documentation pertinent to overcoming 

the reason(s) for the initial decline. 

(2) The D/GC, or designee, will issue 

a written decision within 45 calendar 

days of receipt of the prote ́ge ́’s request. 

The D/GC may approve the mentorprote ́ge ́ agreement, deny it on the same 

grounds as the original decision, or 

deny it on other grounds. 

(3) If the D/GC declines the mentorprote ́ge ́ agreement solely on issues not 

raised in the initial decline, the prote ́ge ́

can ask for reconsideration as if it were 

an initial decline. 

(4) If SBA’s final decision is to decline 

a specific mentor-prote ́ge ́ agreement, the 

small business concern seeking to be a 

prote ́ge ́ cannot attempt to enter into 

another mentor-prote ́ge ́ relationship 

with the same mentor for a period of 60 

calendar days from the date of the final 

decision. The small business concern 

may, however, submit another proposed 

mentor-prote ́ge ́ agreement with a 

different proposed mentor at any time 

after the SBA’s final decline decision. 

(g) Evaluating the mentor-prote ́ge ́

relationship. (1) Within 30 days of the 

anniversary of SBA’s approval of the 

mentor-prote ́ge ́ agreement, the prote ́ge ́

must report to SBA for the preceding 

year: 

(i) All technical and/or management 

assistance provided by the mentor to the 

prote ́ge ́; 

(ii) All loans to and/or equity 

investments made by the mentor in the 

prote ́ge ́; 

(iii) All subcontracts awarded to the 

prote ́ge ́ by the mentor, and the value of 

each subcontract; 

(iv) All federal contracts awarded to 

the mentor-prote ́ge ́ relationship as a 

joint venture (designating each as a 

small business set-aside, small business 

reserve, or unrestricted procurement), 

the value of each contract, and the 

percentage of the contract performed 

and the percentage of revenue accruing 

to each party to the joint venture; and 

(v) A narrative describing the success 

such assistance has had in addressing 

the developmental needs of the prote ́ge ́

and addressing any problems 

encountered. 

(2) The prote ́ge ́ must report the 

mentoring services it receives by 

category and hours. 

(3) The prote ́ge ́ must annually certify 

to SBA whether there has been any 

change in the terms of the agreement. 

(4) SBA will review the prote ́ge ́’s 

report on the mentor-prote ́ge ́

relationship, and may decide not to 

approve continuation of the agreement 

if it finds that the mentor has not 

provided the assistance set forth in the 

mentor-prote ́ge ́ agreement or that the 

assistance has not resulted in any 

material benefits or developmental gains 

to the prote ́ge ́. 

(h) Consequences of not providing 

assistance set forth in the mentorprote ́ge ́ agreement. (1) Where SBA 

determines that a mentor has not 

provided to the prote ́ge ́ firm the 

business development assistance set 

forth in its mentor-prote ́ge ́ agreement, 

SBA will notify the mentor of such 

determination and afford the mentor an 

opportunity to respond. The mentor 

must respond within 30 days of the 

notification, explaining why it has not 

provided the agreed upon assistance 

and setting forth a definitive plan as to 

when it will provide such assistance. If 

the mentor fails to respond, does not 

supply adequate reasons for its failure to 

provide the agreed upon assistance, or 

does not set forth a definite plan to 

provide the assistance: 

(i) SBA will terminate the mentorprote ́ge ́ agreement; 

(ii) The firm will be ineligible to again 

act as a mentor for a period of two years 

from the date SBA terminates the 

mentor-prote ́ge ́ agreement; and 

(iii) SBA may recommend to the 

relevant procuring agency to issue a 

stop work order for each federal contract 

for which the mentor and prote ́ge ́ are 

performing as a small business joint 

venture in order to encourage the 

mentor to comply with its mentorprote ́ge ́ agreement. Where a prote ́ge ́ firm 

is able to independently complete 

performance of any such contract, SBA 

may recommend to the procuring 

agency to authorize a substitution of the 

prote ́ge ́ firm for the joint venture. 

(2) SBA may consider a mentor’s 

failure to comply with the terms and 

conditions of an SBA-approved mentorprote ́ge ́ agreement as a basis for 

debarment on the grounds, including 

but not limited to, that the mentor has 

not complied with the terms of a public 

agreement under 2 CFR 180.800(b). 

§ 125.10 Mentor-Prote ́ge ́ programs of 

other agencies. 

(a) Except as provided in paragraph 

(c) of this section, a Federal department 

or agency may not carry out a mentorprote ́ge ́ program for small business 

unless the head of the department or 

agency submits a plan to the SBA 

Administrator for the program and the 

SBA Administrator approves the plan. 

Before starting a new mentor prote ́ge ́

program, the head of a department or 

agency must submit a plan to the SBA 

Administrator. Within one year of the 

effective date of this section, the head of 

a department or agency must submit a 

plan to the SBA for any previously 

existing mentor-prote ́ge ́ program that 

the department or agency seeks to 

continue. 

(b) The SBA Administrator will 

approve or disapprove a plan submitted 

under paragraph (a) of this section based 

on whether the proposed program: 

(1) Will assist prote ́ge ́s to compete for 

Federal prime contracts and 

subcontracts; and 

(2) Complies with the provisions set 

forth in §§ 125.9 and 124.520 of this 

chapter, as applicable. 

(c) Paragraph (a) of this section does 

not apply to: 

(1) Any mentor-prote ́ge ́ program of 

the Department of Defense; 

(2) Any mentoring assistance 

provided under a Small Business 

Innovation Research Program or a Small 

Business Technology Transfer Program; 

and 

(3) A mentor-prote ́ge ́ program 

operated by a Department or agency on 

January 2, 2013, for a period of one year 

after the effective date of this section. 

(d) The head of each Federal 

department or agency carrying out an 

agency-specific mentor-prote ́ge ́ program 

must report annually to SBA: 

(1) The participants (both prote ́ge ́

firms and their approved mentors) in its 

mentor-prote ́ge ́ program. This includes 

identifying the number of participants 

that are: 

(i) Small business concerns; 

(ii) Small business concerns owned 

and controlled by service-disabled 

veterans; 

(iii) Small business concerns owned 

and controlled by socially and 

economically disadvantaged 

individuals; 

(iv) Small business concerns owned 

and controlled by Indian tribes, Alaska 

Native Corporations, native Hawaiian 

Organizations, and Community 

Development Corporations; and 

(v) Small business concerns owned 

and controlled by women; 


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(2) The assistance provided to small 

businesses through the program; and 

(3) The progress of prote ́ge ́ firms 

under the program to compete for 

Federal prime contracts and 

subcontracts. 

■ 25. Amend newly redesignated 

§ 125.18 by adding paragraph (b)(1)(iii), 

revising paragraphs (b)(2) through (6), 

and adding paragraphs (b)(7) through 

(10) to read as follows: 

§ 125.18 What requirements must an 

SDVO SBC meet to submit an offer on a 

contract? 

* * * * * 

(b) * * * 

(1) * * * 

(iii) A joint venture between a prote ́ge ́

firm that qualifies as an SDVO SBC and 

its SBA-approved mentor (see §§ 125.9 

and 124.520 of this chapter) will be 

deemed small provided the prote ́ge ́

qualifies as small for the size standard 

corresponding to the NAICS code 

assigned to the SDVO procurement. 

(2) Contents of joint venture 

agreement. Every joint venture 

agreement to perform an SDVO contract, 

including those between a prote ́ge ́ firm 

that qualifies as an SDVO SBC and its 

SBA-approved mentor (see §§ 125.9 and 

124.520 of this chapter) must contain a 

provision: 

(i) Setting forth the purpose of the 

joint venture; 

(ii) Designating an SDVO SBC as the 

managing venturer of the joint venture, 

and an employee of the SDVO SBC 

managing venturer as the project 

manager responsible for performance of 

the contract; 

(iii) Stating that with respect to a 

separate legal entity joint venture, the 

SDVO SBC must own at least 51% of the 

joint venture entity; 

(iv) Stating that the SDVO SBC must 

receive profits from the joint venture 

commensurate with the work performed 

by the SDVO SBC, or in the case of a 

separate legal entity joint venture, 

commensurate with their ownership 

interests in the joint venture; 

(v) Providing for the establishment 

and administration of a special bank 

account in the name of the joint venture. 

This account must require the signature 

of all parties to the joint venture or 

designees for withdrawal purposes. All 

payments due the joint venture for 

performance on an SDVO contract will 

be deposited in the special account; all 

expenses incurred under the contract 

will be paid from the account as well; 

(vi) Itemizing all major equipment, 

facilities, and other resources to be 

furnished by each party to the joint 

venture, with a detailed schedule of cost 

or value of each; 

(vii) Specifying the responsibilities of 

the parties with regard to negotiation of 

the contract, source of labor, and 

contract performance, including ways 

that the parties to the joint venture will 

ensure that the joint venture and the 

SDVO SBC partner to the joint venture 

will meet the performance of work 

requirements set forth in paragraph 

(b)(3) of this section; 

(viii) Obligating all parties to the joint 

venture to ensure performance of the 

SDVO contract and to complete 

performance despite the withdrawal of 

any member; 

(ix) Designating that accounting and 

other administrative records relating to 

the joint venture be kept in the office of 

the SDVO SBC managing venturer, 

unless approval to keep them elsewhere 

is granted by the District Director or his/ 

her designee upon written request; 

(x) Requiring that the final original 

records be retained by the SDVO SBC 

managing venturer upon completion of 

the SDVO contract performed by the 

joint venture; 

(xi) Stating that quarterly financial 

statements showing cumulative contract 

receipts and expenditures (including 

salaries of the joint venture’s principals) 

must be submitted to SBA not later than 

45 days after each operating quarter of 

the joint venture; and 

(xii) Stating that a project-end profit 

and loss statement, including a 

statement of final profit distribution, 

must be submitted to SBA no later than 

90 days after completion of the contract. 

(3) Performance of work. (i) For any 

SDVO contract, including those between 

a prote ́ge ́ and a mentor authorized by 

§ 125.9 or § 124.520 of this chapter, the 

joint venture must perform the 

applicable percentage of work required 

by § 125.6. 

(ii) The SDVO SBC partner(s) to the 

joint venture must perform at least 40% 

of the work performed by the joint 

venture. 

(A) The work performed by the SDVO 

SBC partner(s) to a joint venture must be 

more than administrative or ministerial 

functions so that they gain substantive 

experience. 

(B) The amount of work done by the 

partners will be aggregated and the work 

done by the SDVO SBC partner(s) must 

be at least 40% of the total done by all 

partners. In determining the amount of 

work done by a non-SDVO SBC partner, 

all work done by the non-SDVO SBC 

partner and any of its affiliates at any 

subcontracting tier will be counted. 

(4) Certification of Compliance. Prior 

to the performance of any SDVO 

contract as a joint venture, the SDVO 

SBC partner to the joint venture must 

submit a written certification to the 

contracting officer and SBA, signed by 

an authorized official of each partner to 

the joint venture, stating as follows: 

(i) The parties have entered into a 

joint venture agreement that fully 

complies with paragraph (b)(2) of this 

section; 

(ii) The parties will perform the 

contract in compliance with the joint 

venture agreement and with the 

performance of work requirements set 

forth in paragraph (b)(3) of this section. 

(5) Past performance. When 

evaluating the past performance of an 

entity submitting an offer for an SDVO 

contract as a joint venture established 

pursuant to this section, a procuring 

activity must consider work done 

individually by each partner to the joint 

venture as well as any work done by the 

joint venture itself previously. 

(6) Contract execution. The procuring 

activity will execute an SDVO contract 

in the name of the joint venture entity 

or the SDVO SBC, but in either case will 

identify the award as one to an SDVO 

joint venture or an SDVO mentorprote ́ge ́ joint venture, as appropriate. 

(7) Inspection of records. The joint 

venture partners must allow SBA’s 

authorized representatives, including 

representatives authorized by the SBA 

Inspector General, during normal 

business hours, access to its files to 

inspect and copy all records and 

documents. 

(8) Performance of work reports. An 

SDVO SBC partner to a joint venture 

must describe how it is meeting or has 

met the applicable performance of work 

requirements for each SDVO contract it 

performs as a joint venture. 

(i) The SDVO SBC partner to the joint 

venture must annually submit a report 

to the relevant contracting officer and to 

the SBA, signed by an authorized 

official of each partner to the joint 

venture, explaining how and certifying 

that the performance of work 

requirements are being met. 

(ii) At the completion of every SDVO 

contract awarded to a joint venture, the 

SDVO SBC partner to the joint venture 

must submit a report to the relevant 

contracting officer and to the SBA, 

signed by an authorized official of each 

partner to the joint venture, explaining 

how and certifying that the performance 

of work requirements were met for the 

contract, and further certifying that the 

contract was performed in accordance 

with the provisions of the joint venture 

agreement that are required under 

paragraph (b)(2) of this section. 

(9) Basis for suspension or debarment. 

The Government may consider the 

following as a ground for suspension or 

debarment as a willful violation of a 

regulatory provision or requirement 


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Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 6641 

applicable to a public agreement or 

transaction: 

(i) Failure to enter a joint venture 

agreement that complies with paragraph 

(b)(2) of this section; 

(ii) Failure to perform a contract in 

accordance with the joint venture 

agreement or performance of work 

requirements in paragraph (b)(3) of this 

section; or 

(iii) Failure to submit the certification 

required by paragraph (b)(4) of this 

section or comply with paragraph (b)(7) 

of this section. 

(10) Any person with information 

concerning a joint venture’s compliance 

with the performance of work 

requirements may report that 

information to SBA and/or the SBA 

Office of Inspector General. 

§ 125.22 [Amended] 

■ 26. Amend newly redesignated 

§ 125.22 by adding the phrase 

‘‘, regardless of the place of 

performance,’’ in the first sentence of 

paragraphs (b)(1) and (b)(2)(i) after the 

words ‘‘for small business concerns’’ 

and before the words ‘‘when there is a 

reasonable expectation’’. 

PART 126—HUBZONE PROGRAM 

■ 27. The authority citation for part 126 

is revised to read as follows: 

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

and 657a; Pub. L. 111–240, 24 Stat. 2504. 

■ 28. Amend § 126.306 as follows: 

■ a. Revise paragraphs (a) and (b); 

■ b. Redesignate paragraphs (c) and (d) 

as paragraphs (f) and (g), respectively; 

and 

■ c. Add new paragraphs (c) and (d) and 

add paragraph (e). 

The revisions and additions read as 

follows: 

§ 126.306 How will SBA process the 

certification? 

(a) The D/HUB or designee is 

authorized to approve or decline 

applications for certification. SBA will 

receive and review all applications and 

request supporting documents. SBA 

must receive all required information, 

supporting documents, and completed 

HUBZone representation before it will 

begin processing a concern’s 

application. SBA will not process 

incomplete packages. SBA will make its 

determination within ninety (90) 

calendar days after receipt of a complete 

package whenever practicable. The 

decision of the D/HUB or designee is the 

final agency decision. 

(b) SBA may request additional 

information or clarification of 

information contained in an application 

or document submission at any time. 

(c) The burden of proof to 

demonstrate eligibility is on the 

applicant concern. If a concern does not 

provide requested information within 

the allotted time provided by SBA, or if 

it submits incomplete information, SBA 

may presume that disclosure of the 

missing information would adversely 

affect the business concern or 

demonstrate a lack of eligibility in the 

area or areas to which the information 

relates. 

(d) The applicant must be eligible as 

of the date it submitted its application 

and up until and at the time the D/HUB 

issues a decision. The decision will be 

based on the facts set forth in the 

application, any information received in 

response to SBA’s request for 

clarification, and any changed 

circumstances since the date of 

application. 

(e) Any changed circumstance 

occurring after it has submitted an 

application will be considered and may 

constitute grounds for decline. After 

submitting the application and signed 

representation, an applicant must notify 

SBA of any changes that could affect its 

eligibility. The D/HUB may propose for 

decertification any HUBZone SBC that 

failed to inform SBA of any changed 

circumstances that affected its eligibility 

for the program during the processing of 

the application. 

■ 29. Amend § 126.600 by revising the 

introductory text to read as follows: 

§ 126.600 What are HUBZone contracts? 

HUBZone contracts are contracts 

awarded to a qualified HUBZone SBC, 

regardless of the place of performance, 

through any of the following 

procurement methods: 

* * * * * 

■ 30. Revise § 126.615 to read as 

follows: 

§ 126.615 May a large business participate 

on a HUBZone contract? 

Except as provided in § 126.618(d), a 

large business may not participate as a 

prime contractor on a HUBZone award, 

but may participate as a subcontractor to 

an otherwise qualified HUBZone SBC, 

subject to the contract performance 

requirements set forth in § 126.700. 

■ 31. Revise § 126.616 to read as 

follows: 

§ 126.616 What requirements must a joint 

venture satisfy to submit an offer on a 

HUBZone contract? 

(a) General. A qualified HUBZone 

SBC may enter into a joint venture 

agreement with one or more other SBCs, 

or with an approved mentor authorized 

by § 125.9 of this chapter (or, if also an 

8(a) BD Participant, with an approved 

mentor authorized by § 124.520 of this 

chapter), for the purpose of submitting 

an offer for a HUBZone contract. The 

joint venture itself need not be certified 

as a qualified HUBZone SBC. 

(b) Size. (1) A joint venture of at least 

one qualified HUBZone SBC and one or 

more other business concerns may 

submit an offer as a small business for 

a HUBZone contract so long as the firms 

in the aggregate are small under the size 

standard corresponding to the NAICS 

code assigned to the contract, unless the 

contract qualifies under the exception in 

§ 121.103(h)(3) of this chapter. If the 

contract qualifies under the exception in 

§ 121.103(h)(3) of this chapter, each firm 

must be small under the size standard 

corresponding to the NAICS code 

assigned to the contract. 

(2) A joint venture between a prote ́ge ́

firm and its SBA-approved mentor (see 

§ 125.9 of this chapter) will be deemed 

small provided the prote ́ge ́ qualifies as 

small for the size standard 

corresponding to the NAICS code 

assigned to the HUBZone contract. 

(c) Contents of joint venture 

agreement. Any joint venture agreement 

to perform a HUBZone contract between 

a prote ́ge ́ and a mentor authorized by 

§ 125.9 of this chapter must contain a 

provision: 

(1) Setting forth the purpose of the 

joint venture; 

(2) Designating a HUBZone SBC as the 

managing venturer of the joint venture, 

and an employee of the HUBZone SBC 

managing venturer as the project 

manager responsible for performance of 

the contract; 

(3) Stating that with respect to a 

separate legal entity joint venture, the 

HUBZone SBC must own at least 51% 

of the joint venture entity; 

(4) Stating that the HUBZone SBC 

must receive profits from the joint 

venture commensurate with the work 

performed by the HUBZone SBC, or in 

the case of a separate legal entity joint 

venture, commensurate with their 

ownership interests in the joint venture; 

(5) Providing for the establishment 

and administration of a special bank 

account in the name of the joint venture. 

This account must require the signature 

of all parties to the joint venture or 

designees for withdrawal purposes. All 

payments due the joint venture for 

performance on a HUBZone contract 

will be deposited in the special account; 

all expenses incurred under the contract 

will be paid from the account as well; 

(6) Itemizing all major equipment, 

facilities, and other resources to be 

furnished by each party to the joint 

venture, with a detailed schedule of cost 

or value of each; 


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(7) Specifying the responsibilities of 

the parties with regard to negotiation of 

the contract, source of labor, and 

contract performance, including ways 

that the parties to the joint venture will 

ensure that the joint venture and the 

HUBZone SBC partner to the joint 

venture will meet the performance of 

work requirements set forth in 

paragraph (d) of this section; 

(8) Obligating all parties to the joint 

venture to ensure performance of the 

HUBZone contract and to complete 

performance despite the withdrawal of 

any member; 

(9) Designating that accounting and 

other administrative records relating to 

the joint venture be kept in the office of 

the HUBZone SBC managing venturer, 

unless approval to keep them elsewhere 

is granted by the District Director or his/ 

her designee upon written request; 

(10) Requiring that the final original 

records be retained by the HUBZone 

SBC managing venturer upon 

completion of the HUBZone contract 

performed by the joint venture; 

(11) Stating that quarterly financial 

statements showing cumulative contract 

receipts and expenditures (including 

salaries of the joint venture’s principals) 

must be submitted to SBA not later than 

45 days after each operating quarter of 

the joint venture; and 

(12) Stating that a project-end profit 

and loss statement, including a 

statement of final profit distribution, 

must be submitted to SBA no later than 

90 days after completion of the contract. 

(d) Performance of work. (1) For any 

HUBZone contract to be performed by a 

joint venture between a qualified 

HUBZone SBC and another qualified 

HUBZone SBC, the aggregate of the 

qualified HUBZone SBCs to the joint 

venture, not each concern separately, 

must perform the applicable percentage 

of work required by § 125.6 of this 

chapter. 

(2) For any HUBZone contract to be 

performed by a joint venture between a 

qualified HUBZone prote ́ge ́ and its SBAapproved mentor authorized by § 125.9 

or § 124.520 of this chapter, the joint 

venture must perform the applicable 

percentage of work required by § 125.6 

of this chapter, and the HUBZone SBC 

partner to the joint venture must 

perform at least 40% of the work 

performed by the joint venture. 

(i) The work performed by the 

HUBZone SBC partner to a joint venture 

must be more than administrative or 

ministerial functions so that it gains 

substantive experience. 

(ii) The amount of work done by the 

partners will be aggregated and the work 

done by the HUBZone prote ́ge ́ partner 

must be at least 40% of the total done 

by the partners. In determining the 

amount of work done by a mentor 

participating in a joint venture with a 

HUBZone qualified prote ́ge ́, all work 

done by the mentor and any of its 

affiliates at any subcontracting tier will 

be counted. 

(e) Certification of compliance. Prior 

to the performance of any HUBZone 

contract as a joint venture, the 

HUBZone SBC partner to the joint 

venture must submit a written 

certification to the contracting officer 

and SBA, signed by an authorized 

official of each partner to the joint 

venture, stating as follows: 

(i) The parties have entered into a 

joint venture agreement that fully 

complies with paragraph (c) of this 

section; 

(ii) The parties will perform the 

contract in compliance with the joint 

venture agreement and with the 

performance of work requirements set 

forth in paragraph (d) of this section. 

(f) Past performance. When evaluating 

the past performance of an entity 

submitting an offer for a HUBZone 

contract as a joint venture established 

pursuant to this section, a procuring 

activity must consider work done 

individually by each partner to the joint 

venture as well as any work done by the 

joint venture itself previously. 

(g) Contract execution. The procuring 

activity will execute a HUBZone 

contract in the name of the joint venture 

entity or the HUBZone SBC, but in 

either case will identify the award as 

one to a HUBZone joint venture or a 

HUBZone mentor-prote ́ge ́ joint venture, 

as appropriate. 

(h) Inspection of records. The joint 

venture partners must allow SBA’s 

authorized representatives, including 

representatives authorized by the SBA 

Inspector General, during normal 

business hours, access to its files to 

inspect and copy all records and 

documents. 

(i) Performance of work reports. The 

HUBZone SBC partner to a joint venture 

must describe how it is meeting or has 

met the applicable performance of work 

requirements for each HUBZone 

contract it performs as a joint venture. 

(1) The HUBZone SBC partner to the 

joint venture must annually submit a 

report to the relevant contracting officer 

and to the SBA, signed by an authorized 

official of each partner to the joint 

venture, explaining how the 

performance of work requirements are 

being met for each HUBZone contract 

performed during the year. 

(2) At the completion of every 

HUBZone contract awarded to a joint 

venture, the HUBZone SBC partner to 

the joint venture must submit a report 

to the relevant contracting officer and to 

the SBA, signed by an authorized 

official of each partner to the joint 

venture, explaining how and certifying 

that the performance of work 

requirements were met for the contract, 

and further certifying that the contract 

was performed in accordance with the 

provisions of the joint venture 

agreement that are required under 

paragraph (c) of this section. 

(j) Basis for suspension or debarment. 

The Government may consider the 

following as a ground for suspension or 

debarment as a willful violation of a 

regulatory provision or requirement 

applicable to a public agreement or 

transaction: 

(1) Failure to enter a joint venture 

agreement that complies with paragraph 

(c) of this section; 

(2) Failure to perform a contract in 

accordance with the joint venture 

agreement or performance of work 

requirements in paragraph (d) of this 

section; or 

(3) Failure to submit the certification 

required by paragraph (e) of this section 

or comply with paragraph (h) of this 

section. 

(k) Any person with information 

concerning a joint venture’s compliance 

with the performance of work 

requirements may report that 

information to SBA and/or the SBA 

Office of Inspector General. 

■ 32. Revise § 126.618 to read as 

follows: 

§ 126.618 How does a HUBZone SBC’s 

participation in a Mentor-Prote ́ge ́

relationship affect its participation in the 

HUBZone Program? 

(a) A qualified HUBZone SBC may 

enter into a mentor-prote ́ge ́ relationship 

under § 125.9 of this chapter (or, if also 

an 8(a) BD Participant, under § 124.520 

of this chapter) or in connection with a 

mentor-prote ́ge ́ program of another 

agency, provided that such relationships 

do not conflict with the underlying 

HUBZone requirements. 

(b) For purposes of determining 

whether an applicant to the HUBZone 

Program or a HUBZone SBC qualifies as 

small under part 121 of this chapter, 

SBA will not find affiliation between 

the applicant or qualified HUBZone 

SBC and the firm that is its mentor in 

an SBA or other Federally-approved 

mentor-prote ́ge ́ relationship (including a 

mentor that is other than small) on the 

basis of the mentor-prote ́ge ́ agreement or 

the assistance provided to the prote ́ge ́

firm under the agreement. As such, SBA 

will not consider the employees of the 

mentor in determining whether the 

applicant or qualified HUBZone SBC 

meets (or continues to meet) the 35% 


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Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 6643 

HUBZone residency requirement, or in 

determining the size of the applicant or 

qualified HUBZone SBC for any 

employee-based size standard. 

(c) A qualified HUBZone SBC that is 

a prime contractor on a HUBZone 

contract may subcontract work to its 

mentor. 

(1) The HUBZone SBC must meet the 

applicable performance of work 

requirements set forth in § 125.6(c) of 

this chapter. 

(2) SBA may find affiliation between 

a prime HUBZone contractor and its 

mentor subcontractor where the mentor 

will perform primary and vital 

requirements of the contract. See 

§ 121.103(h)(4) of this chapter. 

(d) A qualified HUBZone SBC that has 

an SBA-approved mentor-prote ́ge ́

relationship pursuant to § 125.9 or 

§ 124.520 of this chapter may joint 

venture with its mentor (whether or not 

the mentor is small) on a HUBZone 

contract. 

(1) A joint venture between a 

qualified HUBZone SBC and its SBAapproved mentor will qualify as a small 

business provided the prote ́ge ́

individually qualifies as small for the 

size standard corresponding to the 

NAICS code assigned to the 

procurement, and the joint venture 

meets the requirements of § 126.616(c) 

and (d). 

(2) A qualified HUBZone SBC may 

not joint venture with any mentor that 

has not been approved by SBA pursuant 

to § 125.9 or § 124.520 of this chapter 

unless the mentor is also a qualified 

HUBZone SBC. 

PART 127—WOMEN-OWNED SMALL 

BUSINESS FEDERAL CONTRACT 

PROGRAM 

■ 33. The authority citation for part 127 

is revised to read as follows: 

Authority: 15 U.S.C. 632, 634(b)(6), 

637(m), and 644; Pub. L. 111–240, 24 Stat. 

2504. 

§ 127.500 [Amended] 

■ 34. Amend § 127.500 by adding the 

words ‘‘, regardless of the place of 

performance’’ to the end of the sentence. 

■ 35. Amend § 127.506 as follows: 

■ a. Revise the section introductory text 

and paragraphs (a), add an italic subject 

head to paragraph (c), and revise 

paragraphs (c)(2) and (3); 

■ b. Redesignate paragraph (c)(4) as 

(c)(7) and paragraph (c)(5) as (c)(10) 

respectively; 

■ c. Add new paragraphs (c)(4) and 

(c)(5) and add paragraph (c)(6); 

■ d. Revise newly redesignated 

paragraph (c)(7); 

■ e. Add paragraphs (c)(8), (c)(9), 

(c)(11), and (c)(12); 

■ f. Revise paragraphs (d), (e) and (f); 

and 

■ g. Add paragraphs (g), (h), (i), (j), (k) 

and (l). 

The revisions and additions read as 

follows: 

§ 127.506 May a joint venture submit an 

offer on an EDWOSB or WOSB 

requirement? 

A joint venture, including those 

between a prote ́ge ́ and a mentor under 

§ 125.9 of this chapter (or, if also an 8(a) 

BD Participant, under § 124.520 of this 

chapter), may submit an offer on an 

EDWOSB or WOSB contract if the joint 

venture meets all of the following 

requirements: 

(a)(1) A joint venture of at least one 

EDWOSB or WOSB and one or more 

other business concerns may submit an 

offer as a small business for a EDWOSB 

or WOSB contract so long as the firms 

in the aggregate are small under the size 

standard corresponding to the NAICS 

code assigned to the contract, unless the 

contract qualifies under the exception in 

121.103(h)(3). If the contract qualifies 

under the exception in 121.103(h)(3), 

each firm must be small under the size 

standard corresponding to the NAICS 

code assigned to the contract. 

(2) A joint venture between a prote ́ge ́

firm and its SBA-approved mentor (see 

§ 125.9 and § 124.520 of this chapter) 

will be deemed small provided the 

prote ́ge ́ qualifies as small for the size 

standard corresponding to the NAICS 

code assigned to the EDWOSB or WOSB 

procurement. 

* * * * * 

(c) Contents of joint venture 

agreement. * * * 

(1) * * * 

(2) Designating a WOSB as the 

managing venturer of the joint venture, 

and an employee of the WOSB 

managing venturer as the project 

manager responsible for performance of 

the contract; 

(3) Stating that with respect to a 

separate legal entity joint venture, the 

WOSB must own at least 51% of the 

joint venture entity; 

(4) Stating that the WOSB must 

receive profits from the joint venture 

commensurate with the work performed 

by the WOSB, or in the case of a 

separate legal entity joint venture, 

commensurate with their ownership 

interests in the joint venture; 

(5) Providing for the establishment 

and administration of a special bank 

account in the name of the joint venture. 

This account must require the signature 

of all parties to the joint venture or 

designees for withdrawal purposes. All 

payments due the joint venture for 

performance on a WOSB or EDWOSB 

contract will be deposited in the special 

account; all expenses incurred under 

the contract will be paid from the 

account as well; 

(6) Itemizing all major equipment, 

facilities, and other resources to be 

furnished by each party to the joint 

venture, with a detailed schedule of cost 

or value of each; 

(7) Specifying the responsibilities of 

the parties with regard to negotiation of 

the contract, source of labor, and 

contract performance, including ways 

that the parties to the joint venture will 

ensure that the joint venture and the 

WOSB partner to the joint venture will 

meet the performance of work 

requirements set forth in paragraph (d) 

of this section; 

(8) Obligating all parties to the joint 

venture to ensure performance of the 

WOSB contract and to complete 

performance despite the withdrawal of 

any member; 

(9) Designating that accounting and 

other administrative records relating to 

the joint venture be kept in the office of 

the WOSB managing venturer, unless 

approval to keep them elsewhere is 

granted by the District Director or his/ 

her designee upon written request; 

(10) Requiring that the final original 

records be retained by the WOSB 

managing venturer upon completion of 

the EDWOSB or WOSB contract 

performed by the joint venture; 

(11) Stating that quarterly financial 

statements showing cumulative contract 

receipts and expenditures (including 

salaries of the joint venture’s principals) 

must be submitted to SBA not later than 

45 days after each operating quarter of 

the joint venture; and 

(12) Stating that a project-end profit 

and loss statement, including a 

statement of final profit distribution, 

must be submitted to SBA no later than 

90 days after completion of the contract. 

(d) Performance of work. (1) For any 

EDWOSB or WOSB contract, the joint 

venture (including one between a 

prote ́ge ́ and a mentor authorized by 

§ 125.9 or § 124.520 of this chapter) 

must perform the applicable percentage 

of work required by § 125.6 of this 

chapter. 

(2) The WOSB partner(s) to the joint 

venture must perform at least 40% of 

the work performed by the joint venture. 

(i) The work performed by the WOSB 

partner(s) to a joint venture must be 

more than administrative or ministerial 

functions so that they gain substantive 

experience. 

(ii) The amount of work done by the 

partners will be aggregated and the work 

done by the WOSB partner(s) must be at 

least 40% of the total done by all 

partners. In determining the amount of 


rljohnson on DSK3VPTVN1PROD with PROPOSALS3
6644 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Proposed Rules 

work done by the non-WOSB partner, 

all work done by the non-WOSB partner 

and any of its affiliates at any 

subcontracting tier will be counted. 

(e) Certification of compliance. Prior 

to the performance of any WOSB or 

EDWOSB contract as a joint venture, the 

WOSB or EDWOSB SBC partner to the 

joint venture must submit a written 

certification to the contracting officer 

and SBA, signed by an authorized 

official of each partner to the joint 

venture, stating as follows: 

(i) The parties have entered into a 

joint venture agreement that fully 

complies with paragraph (c) of this 

section; 

(ii) The parties will perform the 

contract in compliance with the joint 

venture agreement and with the 

performance of work requirements set 

forth in paragraph (d) of this section. 

(f) Past performance. When evaluating 

the past performance of an entity 

submitting an offer for a WOSB or 

EDWOSB contract as a joint venture 

established pursuant to this section, a 

procuring activity must consider work 

done individually by each partner to the 

joint venture as well as any work done 

by the joint venture itself previously. 

(g) Contract execution. The procuring 

activity will execute a WOSB or 

EDWOSB contract in the name of the 

joint venture entity or the WOSB or 

EDWOSB SBC, but in either case will 

identify the award as one to a WOSB or 

ESWOSB joint venture or a WOSB or 

EDWOSB mentor-prote ́ge ́ joint venture, 

as appropriate. 

(h) Submission of joint venture 

agreement. The WOSB or EDWOSB 

must provide a copy of the joint venture 

agreement to the contracting officer. 

(i) Inspection of records. The joint 

venture partners must allow SBA’s 

authorized representatives, including 

representatives authorized by the SBA 

Inspector General, during normal 

business hours, access to its files to 

inspect and copy all records and 

documents. 

(j) Performance of work reports. The 

WOSB or EDWOSB SBC partner to a 

joint venture must describe how it is 

meeting or has met the applicable 

performance of work requirements for 

each WOSB or EDWOSB contract it 

performs as a joint venture. 

(1) The WOSB or EDWOSB SBC 

partner to the joint venture must 

annually submit a report to the relevant 

contracting officer and to the SBA, 

signed by an authorized official of each 

partner to the joint venture, explaining 

how the performance of work 

requirements are being met for each 

WOSB or EDWOSB contract performed 

during the year. 

(2) At the completion of every WOSB 

or EDWOSB contract awarded to a joint 

venture, the WOSB or EDWOSB SBC 

partner to the joint venture must submit 

a report to the relevant contracting 

officer and to the SBA, signed by an 

authorized official of each partner to the 

joint venture, explaining how and 

certifying that the performance of work 

requirements were met for the contract, 

and further certifying that the contract 

was performed in accordance with the 

provisions of the joint venture 

agreement that are required under 

paragraph (c) of this section. 

(k) Basis for suspension or debarment. 

The Government may consider the 

following as a ground for suspension or 

debarment as a willful violation of a 

regulatory provision or requirement 

applicable to a public agreement or 

transaction: 

(1) Failure to enter a joint venture 

agreement that complies with paragraph 

(c) of this section; 

(2) Failure to perform a contract in 

accordance with the joint venture 

agreement or performance of work 

requirements in paragraph (d) of this 

section; or 

(3) Failure to submit the certification 

required by paragraph (e) or comply 

with paragraph (i) of this section. 

(l) Any person with information 

concerning a joint venture’s compliance 

with the performance of work 

requirements may report that 

information to SBA and/or the SBA 

Office of Inspector General. 

PART 134—RULES OF PROCEDURE 

GOVERNING CASES BEFORE THE 

OFFICE OF HEARINGS AND APPEALS 

■ 36. The 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(l), 656(i), and 687(c); 

E.O. 12549, 51 FR 6370, 3 CFR, 1986 Comp., 

p. 189. 

■ 37. Amend § 134.227 by revising 

paragraph (c) to read as follows: 

§ 134.227 Finality of decisions. 

* * * * * 

(c) Reconsideration. Except as 

otherwise provided by statute, the 

applicable program regulations in this 

chapter, or this part 134, an initial or 

final decision of the Judge may be 

reconsidered. Any party in interest, 

including SBA where SBA did not 

appear as a party during the proceeding 

that led to the issuance of the Judge’s 

decision, may request reconsideration 

by filing with the Judge and serving a 

petition for reconsideration within 20 

days after service of the written 

decision, upon a clear showing of an 

error of fact or law material to the 

decision. The Judge also may reconsider 

a decision on his or her own initiative. 

■ 38. Amend § 134.406 by revising 

paragraph (b) to read as follows: 

§ 134.406 Review of the administrative 

record. 

* * * * * 

(b) Except in suspension appeals, the 

Administrative Law Judge’s review is 

limited to determining whether the 

Agency’s determination is arbitrary, 

capricious, or contrary to law. As long 

as the Agency’s determination is not 

arbitrary, capricious or contrary to law, 

the Administrative Law Judge must 

uphold it on appeal. 

(1) The Administrative Law Judge 

must consider whether the decision was 

based on a consideration of the relevant 

factors and whether there has been a 

clear error of judgment. 

(2) If the SBA’s path of reasoning may 

reasonably be discerned, the 

Administrative Law Judge will uphold a 

decision of less than ideal clarity. 

* * * * * 

§ 134.501 [Amended] 

■ 39. Amend § 134.501 by removing 

‘‘§ 125.26’’ from paragraph (a), and by 

adding ‘‘§ 125.29’’ in its place. 

§ 134.515 [Amended] 

■ 40. Amend § 134.515 by removing ‘‘13 

CFR 125.28’’ from paragraph (a), and by 

adding ‘‘§ 125.31 of this chapter’’ in its 

place. 

Dated: December 19, 2014. 

Maria Contreras-Sweet, 

Administrator. 

[FR Doc. 2015–01548 Filed 2–4–15; 8:45 am] 

BILLING CODE 8025–01–P 


rljohnson on DSK3VPTVN1PROD with PROPOSALS3